U.S. Bancorp is directing more new lending toward commercial real estate, commercial loans and credit cards as it seeks to grow fee income and deepen its deposit base. As those categories expand, mortgages are expected to decline from 28% of the bank’s loan portfolio to the mid-20% range, with Chief Financial Officer John Stern saying the share could eventually reach about 25%. Management stressed that the shift does not mean the bank is exiting mortgages or auto lending.
The $703 billion-asset bank held $116.8 billion in mortgage loans on September 30, equal to 28% of its total loan balance of $415.2 billion. Mortgages accounted for just under 30% of the portfolio at the end of 2025. Stern said during the third-quarter earnings call that the lower share would primarily reflect faster growth in other loan categories rather than a decision to withdraw from mortgage lending.
Commercial lending and cards target fees and deposits
Chief Executive Officer Gunjan Kedia said credit cards, commercial loans and commercial real estate lending can generate fee income, spread income and deposits. Fee-based businesses can also support deeper customer relationships and more stable deposit funding, she said, giving the bank a reason to allocate more balance-sheet capacity to those areas.
Stern said the mix should help expand both deposit relationships and fee-generating businesses. Management described mortgages and auto loans as important parts of consumer finance and said U.S. Bancorp would continue offering both products. The immediate growth priority, however, is increasingly focused on cards, commercial lending and commercial real estate.
First Horizon plans $4.5 billion mortgage sale
First Horizon, an $84.3 billion-asset bank, said the same day that it plans to sell $4.5 billion in consumer mortgages and redeploy the funds into higher-yielding categories, including commercial real estate and commercial loans. Chairman and Chief Executive Bryan Jordan said the transaction would free balance-sheet capacity for growth and for longer-term business opportunities built around deeper customer relationships. He described the mortgages being sold as largely stand-alone assets with limited relationship value.
The transaction is expected to close in the fourth quarter. First Horizon recorded a $94 million loss in the third quarter because of the loan sale. Jordan said redeploying the proceeds into higher-yielding assets should support subsequent results. Unlike First Horizon’s outright sale, U.S. Bancorp is describing a gradual change in loan mix and has not announced an exit from mortgage lending.
Fee income lifts U.S. Bancorp revenue to a record
U.S. Bancorp reported third-quarter net income of $2.2 billion for the period ended September 30, up 10% from a year earlier. Quarterly revenue reached a record $8 billion. Fee income rose 13% year over year to $3.48 billion, making it a key contributor to revenue growth, while net interest income increased at a more moderate pace of 5.6%.
Total loans stood at $415.2 billion at quarter-end, up 8.6% from a year earlier. Deposits rose 1% to $531.7 billion. Capital markets revenue reached $640 million, an annual increase of 69%, including the first full quarter of results from San Francisco investment bank BTIG, which U.S. Bancorp acquired on June 1.
Credit card balances reached $40 billion, up more than 11% year over year, reflecting the impact of the bank’s relationship with Amazon. U.S. Bancorp began issuing the Amazon Business Card in May.
Delinquencies and charge-offs improve
U.S. Bancorp’s third-quarter credit-quality indicators remained stable. Nonperforming loans were $1.28 billion as of September 30, down 20% from a year earlier. Net charge-offs were $523 million, or 0.51% of average loans, compared with 0.56% in the same period a year earlier. Stern said the bank continues to monitor credit quality but has not seen signs of deterioration in either commercial or consumer lending.
Analysts David Chiaverini and Gerard Cassidy described the quarter as solid and strong, respectively. U.S. Bancorp shares rose more than 2% Thursday afternoon to $57.54. The results show a bank expanding its loan book while placing greater emphasis on fee income and lending categories tied to stronger deposit relationships; the decline in the mortgage share is primarily the result of faster growth elsewhere in the portfolio.