Shareholder letter

Moving confidently into the future

The global pandemic that took center stage during the past two years changed a lot of things about life, business and the way we think about what is most important to us. We discovered new ways of working, strengthened our reliance on technology, and gained a greater appreciation for the power of relationships and goodwill to get us through the tough times.

At U.S. Bancorp, we focused in 2021 on being flexible, resilient and responsible. We emphasized keeping our people healthy and safe while operating our business effectively for the greater good of our customers, communities and shareholders. We took steps to help our customers weather the pandemic and prioritized our efforts to meet the greatest needs, while continuing to transform our business to meet the next wave of expectations.

The second year of the global pandemic was extraordinary by any measure. I am proud of what our company and our nearly 70,000 employees achieved in providing meaningful assistance to our customers and our broader communities. We drew upon our strengths, focused on our opportunities, and were realistic about the challenges we faced. We partnered with a national nonprofit to issue an innovative bond designed for targeted and measurable racial equity results. We introduced the U.S. Bank Access Commitment^TM as part of our ongoing effort to advance diversity, equity and inclusion across our footprint, in our communities and throughout our company. We announced companywide commitments to address the impacts of climate change on our business, customers and communities. At the same time, we recognized we needed to do more, faster.

2021 was a transition year in many respects. As local economies continued to recover from pandemic-related shutdowns, and employment conditions improved throughout the year, our businesses benefitted from increased consumer and business activity. By mid-year, sales volumes in each of our three payments businesses – credit and debit card, merchant acquiring and corporate payments systems – were above 2019 levels for the first time since the beginning of the pandemic. Our mortgage business saw strong demand for housing and favorable refinancing rates for our customers. Likewise, our trust and investment management business gained from new account growth and improving market conditions.

We continued to serve our consumer and business banking customers through our branch network and state-of-the-art digital distribution systems. We saw strong deposit inflows throughout the year, and in the fourth quarter, demand for loans picked up meaningfully, supported by improving consumer and business sentiment. Additionally, credit costs – which were a headwind in 2020 – shifted to a tailwind as the economic outlook improved and loan losses reached historically low levels.

As we head into 2022, we will build upon our diverse mix of profitable businesses, strong culture, efficient operating platform, best-in-class financial and risk disciplines and growing leadership position in digital banking.

We invested for the future, relying on our well-established innovation infrastructure to “build” when that made sense and to “buy” when that was the most efficient use of capital. For example, we acquired Bento Technologies, a fintech company that provides payment and expense management services to small business, and TravelBank, an all-in-one expense and travel management company serving emerging middle-market companies. In the fourth quarter, we closed on the acquisition of PFM Asset Management, which increased our assets under management in our Wealth Management and Investment Services business to more than $400 billion and enhanced our position in a niche area within the money market world. We also became one of the first banks in the country to announce new cryptocurrency custody services for institutional investment managers.

The cyclical recovery continues as the country moves toward a post-pandemic “new normal,” but it is our strategic growth opportunities we are most excited about. We continue to believe we are well-positioned to deliver superior growth and industry-leading returns on equity during the next several years given our business mix, comprehensive and holistic payments and banking solutions, and expansive distribution model supported by digital capabilities.

As we head into 2022, we will build upon our diverse mix of profitable businesses, strong culture, efficient operating platform, best-in-class financial and risk disciplines and growing leadership position in digital banking. The environment is such that we are reconsidering traditional banking products and challenging ourselves to create ways to help our customers achieve their financial goals. We are seeking new opportunities to add value to our clients, as we navigate a world with new competition and changing expectations.

We will continue to make investments in technology modernization, digital transformation and a unified banking and payments ecosystem – weaving together the best of both banking and payments to create a comprehensive offering. Through all this, we will strive for simplicity in everything we do. We will remain focused on expense management and delivering efficiency and effectiveness. At the same time, we will emphasize acquiring new customers and deepening relationships with our current client base.

We will focus on adding value for our customers and making the necessary investments to ensure long-term success – and we will do it simply, efficiently and effectively.

Similarly, we are pushing ahead with ambitious growth plans, including the acquisition of MUFG Union Bank, pending regulatory approval. We are always looking for ways to be more agile, to build scale and to adapt to changing customer behaviors and expectations. This acquisition would allow us to do that. MUFG Union Bank is a terrific company with talented people, loyal customers and an excellent reputation for community service and corporate social responsibility in the markets they serve in California, Oregon and Washington. We believe the combination of U.S. Bank and MUFG Union Bank creates benefits for all stakeholders, employees, customers and the communities we serve. That doesn’t happen often, and we have a lot to look forward to because of it. This acquisition is good for U.S. Bank because it increases scale and allows us to deepen and expand our footprint in California and throughout the West Coast. These markets are growing, and we are committed to their success. It’s good for consumers and businesses, because we are creating a more effective competitor – one who will improve the customer experience and access with leading digital tools, enhanced technology and a broader product set. It’s good for communities, because we will continue to serve every market, and we will do so with a particular focus on low- and moderate-income communities. And it’s good for employees. We will retain MUFG Union Bank and U.S. Bank front-line branch employees in California, and the combined company will be a stronger employer across the West Coast for years to come. We value the markets, the culture and the similarities that will enable us to hit the ground running from day one.

Our goals are straightforward. We will focus on adding value for our customers and making the necessary investments to ensure long-term success – and we will do it simply, efficiently and effectively. We are taking advantage of opportunities on many fronts to further establish ourselves as a leader in the financial services industry. We are well-positioned to make the right moves to accelerate our growth, and we have a strong team to make it possible.

I can confidently say we have a bright future ahead of us. Thank you for investing in us and joining us as we move forward together.

Sincerely,

Andy Cecere