What was the primary driver for the increase in the provision for credit losses?

The increase in the provision for credit losses was primarily driven by growth in credit card accounts and higher commercial loan losses. The company also noted a favorable residual impact on net charge-offs in the prior year's third quarter due to changes in bankruptcy laws.

How did noninterest income perform in the third quarter?

Noninterest income saw a strong increase of 5.5%, reaching $1.844 billion. This growth was primarily attributed to strong organic fee-based revenue growth in areas like credit and debit card revenue, corporate payment products, merchant processing services, and trust and investment management fees. This was partially offset by adverse market conditions affecting trading revenue and a gain on the sale of equity interests in a cardholder association in the prior year's quarter.

What factors contributed to the rise in noninterest expense?

Noninterest expense increased by 5.9% due to higher operating costs. These included investments in personnel, branches, customer service initiatives, marketing, business integration costs related to acquisitions, costs associated with tax-advantaged investments, and an increase in credit-related costs for other real estate owned and collection activities.

What is the company's exposure to sub-prime borrowers?

As of September 30, 2007, the residential and home equity and second mortgage portfolios included approximately $3.2 billion and $0.9 billion, respectively, of loans to customers that may be defined as sub-prime borrowers. Together, these balances represented 2.8% of the Company's total loans outstanding.

US BANCORP \DE\ 10-Q Quarterly Report Q3 FY2007

Summary

US BancORP (USB) reported a slight decrease in net income for the third quarter of 2007 compared to the same period in 2006, with net income at $1,176 million, or $0.67 per diluted share. This decline was influenced by a significant increase in the provision for credit losses, up 47.4% year-over-year, driven by growth in credit card accounts and higher commercial loan losses. Despite the increased credit costs, the company demonstrated resilience with a 3.2% increase in total net revenue, largely fueled by a 5.5% rise in noninterest income. Growth in credit and debit card revenue, corporate payment products, and merchant processing services were key drivers. However, total noninterest expense also rose by 5.9%, attributed to investments in personnel, branches, customer service initiatives, and integration costs from acquisitions. The company's balance sheet remains solid, with total assets growing 4.4% year-over-year, though deposits saw a slight decrease.

Key Highlights

1Net income for Q3 2007 was $1.176 billion, a slight decrease from $1.203 billion in Q3 2006.
2Diluted EPS remained flat at $0.67 for Q3 2007 compared to $0.66 in Q3 2006.
3Provision for credit losses increased significantly by 47.4% in Q3 2007, indicating rising credit costs.
4Total net revenue grew by 3.2% to $3.529 billion, driven by a 5.5% increase in noninterest income.
5Noninterest expense increased by 5.9% to $1.628 billion, impacting profitability.
6Total assets grew by 4.4% to $227.6 billion as of September 30, 2007.
7Dividends declared per share increased by 21.2% to $0.40 in Q3 2007.

US BANCORP \DE\ Quarterly Report for Q3 Ended Sep 30, 2007

Summary

Key Highlights

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