U.S. Bancorp reported lower but solid earnings in the third quarter given the challenging operating environment. Higher credit provisions and $411 million of securities losses, which included impairment charges on government-sponsored entity preferred stock and other nonagency mortgage-backed securities, negatively affected earnings in the quarter. Noninterest income was also lower in the quarter due to credit-related charges. These included higher retail lease residual expenses and net charge–offs ($86 million) due to higher credit card delinquency rates. Payment processing revenues were higher in the quarter, benefiting from account growth, higher transaction volumes, and business expansion. Although the credit cycle is proving to be extremely weak and long, U.S. Bancorp's level of nonperforming assets is quite moderate at 0.88% of related loans.
