U.S. Bank downsizes mortgages in bid to boost fees, deposits

• Key insight: Home loans amounted to about 28% of U.S. Bancorp's total loans on Sept. 30, down from 30% at year end 2025.
• Expert quote: "Where you get fee revenue, you get deep relationships, you get sticky deposits. That's where we want to extend our balance sheet." — CEO Gunjan Kedia

U.S. Bancorp is growing its loans, and as that expansion unfolds, the composition of its portfolio is changing.

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The $703-billion-asset superregional is leaning into commercial real estate, commercial-and-industrial and credit-card loans, viewing those sectors as prime avenues for driving increased deposits and fee income. And as it does so, the relative contribution made by its mortgage-lending operation is expected to shrink over time. The bank's executives also indicated Thursday that auto lending will not be as big an emphasis.

"When we started the year, I believe residential mortgage loans were in the 30% area in terms of loan mix," Chief Financial Officer John Stern told analysts on a call discussing U.S. Bancorp's third-quarter results. "We do see that coming down, more because of the growth in the other categories. We do anticipate mortgages will probably be in the mid-twenties at some point."

U.S. Bancorp, the parent company of U.S. Bank, held $116.8 billion of mortgage loans on Sept. 30. That total amounted to 28% of the Minneapolis-based company's $415.2 billion of total loans. Home loans made up just under 30% of total loans at Dec. 31, 2025.

Card loans, C&I loans and CRE loans give U.S. Bancorp better opportunities to capture fees and deposits, along with spread income, CEO Gunjan Kedia said on the conference call.

"Where you get fee revenue, you get deep relationships, you get sticky deposits. That's where we want to extend our balance sheet," Kedia said.

Stern echoed that point in an interview with American Banker. "We think [the card-C&I-CRE emphasis] is a good usage of the balance sheet," he said. "It can be levered into deposit gathering, as well as fee categories."

Both Kedia and Stern emphasized that U.S. Bancorp has no plans to exit mortgage or auto lending.

"It doesn't mean we give up on mortgage or auto, or anything like that," Stern said in the interview. "We still offer those products. We still think they're an important part of the consumer's life cycle, but it's clear where our focus is."

Another bank's approach

Memphis-based First Horizon Corp.'s pursuit of a similar strategy is taking a more dramatic shape. On Thursday, the $84.3 billion-asset bank announced plans to sell $4.5 billion in consumer mortgages and deploy the capital into higher-yielding loan types, including CRE and C&I loans.

"The intent there was mainly to create capacity on our balance sheet to fund continued growth and investing in longer, deeper relationship opportunities that we see in the marketplace," Bryan Jordan, First Horizon's chairman and CEO, told analysts.

Jordan termed the mortgages First Horizon is selling "essentially non-relationship portfolio assets."

Due to the loan sale, which is expected to close in the fourth quarter, First Horizon reported a third-quarter loss of $94 million. But Jordan said the loan sale would be accretive going forward, as First Horizon converts the proceeds into higher-earning assets.

Third-quarter results

For its part, U.S. Bancorp reported net income totaling $2.2 billion for the quarter ended Sept. 30, up 10% from the same period last year. The company reported record quarterly revenue of $8 billion, driven in large part by a 13% year-over-year increase in fee income, which totaled $3.48 billion. Net interest income increased, too, though at a less-robust 5.6% clip.

Loans totaled $415.2 billion on Sept. 30, up 8.6% from a year earlier. Deposits of $531.7 billion were up 1%.

Capital-markets revenue of $640 million spiked 69% from the third quarter of 2025, boosted by the first full quarter of results from San Francisco-based investment bank BTIG, which U.S. Bancorp acquired June 1.

Credit-card loans totaled $40 billion on Sept. 30, more than an 11% year-over-year increase, reflecting the impact of a new partnership with Amazon. U.S. Bancorp began issuing Amazon's small-business credit cards in May.

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Credit quality remained solid. Nonperforming loans totaled $1.28 billion on Sept. 30, down 20% from the same time last year. Third-quarter net chargeoffs of $523 million amounted to 0.51% of average loans, down from 0.56% for the third quarter of 2025.
While the company is keeping a watchful eye on asset quality, especially in the wake of the recent interest-rate hike, it hasn't detected any signs of deterioration in either commercial lending or consumer lending, Stern said on the conference call.

Jefferies analyst David Chiaverini described U.S. Bancorp's numbers as "solid." Gerard Cassidy, who covers the bank for RBC Capital Markets, described them as "strong."

Investors appeared to be in a similar frame of mind. Shares in U.S. Bancorp were trading up more than 2% at $57.54 on Thursday afternoon.