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Executives

Richard Davis - Chairman, Chief Executive Officer, President, Chairman of Executive Committee and Member of Risk Management Committee

Andrew Cecere - Vice Chairman and Chief Financial Officer

P. Parker - Chief Credit Officer and Executive Vice President

Judith Murphy - Senior Vice President, Director of Investor Relations and Analyst

Analysts

Matthew Burnell - Wells Fargo Securities, LLC

Ed Najarian - ISI Group Inc.

John McDonald - Sanford C. Bernstein & Co., Inc.

Brian Foran - Nomura Securities Co. Ltd.

Nancy Bush - NAB Research

Christoph Kotowski - Oppenheimer & Co. Inc.

Michael Mayo - Credit Agricole Securities (USA) Inc.

Matthew O'Connor - Deutsche Bank AG

U.S. Bancorp (USB) Q1 2011 Earnings Call April 19, 2011 8:00 AM ET

Operator

Welcome to the U.S. Bancorp's First Quarter 2011 Earnings Conference Call. Following a review of the results by Richard Davis, Chairman, President and Chief Executive Officer; and Andy Cecere, U.S. Bancorp's Vice Chairman and Chief Financial Officer, there will be a formal question-and-answer session. [Operator Instructions] I will now turn the call over to Judy Murphy, Director of Investor Relations for U.S. Bancorp.

Judith Murphy

Thank you, Deshante. Good morning to everyone who has joined our call. Richard Davis, Andy Cecere and Bill Parker are here with me today to review U.S. Bancorp's first quarter 2011 results, and to answer your questions. Richard and Andy will be referencing a slide presentation during their prepared remarks. A copy of the slide presentation, as well as our earnings release and supplemental analyst schedules are available on our website at www.usbank.com.

I would like to remind you that any forward-looking statements made during today's call are subject to risks and uncertainty. Factors that could materially change our current forward-looking assumptions are described on Page 2 of today's presentation in our press release and in our Form 10-K and subsequent reports on file with the SEC.

I will now turn the call over to Richard.

Richard Davis

Thank you, Judy. Good morning, everyone, and thank you for joining us. I'd like to begin on Page 3 of the presentation, and point out a few highlights from our first quarter results. U.S. Bank reported net income of $1.046 billion for the first quarter of 2011 or $0.52 per diluted common share. Our earnings were $0.18 higher than the same quarter of last year, and $0.03 higher than the fourth quarter of 2010. Included in this quarter's results was a gain related to the acquisition of the First Community Bank of New Mexico that positively impacted earnings per diluted common share by $0.02.

We achieved total net revenue of $4.5 billion this quarter, which represented a 4.6% increase over the same quarter of 2010, with a 4.3% decline from the prior quarter, which primarily reflected our company's normal first quarter seasonality.

Total average loans grew year-over-year by 2.4% or 2.1% excluding acquisitions. Importantly, for the third quarter in a row, we achieved linked quarter loan growth as total loans grew by 1.1% over the fourth quarter or 0.7% adjusted for acquisitions. Deposit growth was exceptionally strong this quarter, with average low-cost deposit balances increasing by 15.3% year-over-year, and 6.7% linked quarter.

Excluding acquisitions, the year-over-year growth rate was a strong 10.2%, and a linked quarter growth was 2.1%. As expected, credit quality improved as net charge-offs declined by 14.1% and non-performing assets, excluding covered assets of the First Community Bank of New Mexico acquisition, which you may recall that not include a loss share agreement, declined by 4.7% from the fourth quarter.

Further, this improvement in our credit quality supported a reduction in the allowance for credit losses, and the company recorded a provision for credit losses that was $15 million less than the net charge-offs in the first quarter. Our company continues to generate significant capital each quarter, and our capital position remains strong, with the Tier 1 common and Tier 1 capital ratios increasing to 8.2% and 10.8% respectively at quarter's end.

Slide 4 displays our consistent performance metrics over the past 5 quarters. Return on average assets in the first quarter was 1.38%, and return on average common equity was 14.5%. The 5 quarter trends of our net interest margin and efficiency ratio are shown in the graph on the right-hand side of Slide 4. As expected, this quarter's net interest margin of 3.69% was lower than the same quarter last year and the prior quarter, and Andy will discuss the factors that led to this change in a few minutes. Our first quarter efficiency ratio was 51.1%, lower than the prior quarter, but above the same quarter of last year. We remain the best among our peers in terms of efficiency, and see this ratio continuing to average in the low 50s, reflecting both revenue growth and cost associated with ongoing investments, as well as the impact of recent legislative and regulatory actions on our revenue and on our expense.

Turning to Slide 5, as I previously noted, our capital position remains strong and continues to grow. In fact, our Tier 1 common ratio under Basel III guidelines at March 31 was 7.7%, well above the 7% Basel III level required in 2019.

Turning to Slide 6. We were pleased to announce the long anticipated increase in our dividend on March 18 after receiving word from the regulators that they did not object to our proposed increase or other capital actions. We announced a 150% increase in our dividend, raising the annual rate from $0.20 to $0.50. In addition, the Board of Directors authorized the $50 million share repurchase program. We believe the ability to buy back stock is important, allowing flexibility and returning capital to shareholders over time. In 2011, however, buybacks are not expected to be meaningful until the final Basel III guidelines are established later this year.

Moving to Slide 7. Average total loans outstanding increased by $4.7 billion or 2.4% year-over-year. And in total, new loan originations, excluding mortgage production plus new and renewed commitments were over $35 billion this quarter compared with approximately $27 billion in the first quarter of last year, representing a 28% increase in new activity. Importantly, total corporate and commercial commitments outstanding increased by 9.6% year-over-year, and 2.3%, linked quarter, positioning us to quickly fulfill our customers' lending needs as confidence returns and recovery takes a firm hold.

Total average deposits increased by $21.8 billion or 11.9% over the same quarter of last year. As you can see from the slide, a portion of that increase came from acquisitions, most notably the December acquisition of the Securitization Trust business. Total average deposits grew by $14 billion on a linked quarter basis or 7.4%, primarily due to higher corporate trust balances, which included the impact of the Securitization Trust business, as well as growth in Consumer and Small Business Banking and the Wholesale and Commercial Real Estate business lines.

Turning to Slide 8. The company reported total net revenue in the first quarter of $4.5 billion. The increase in revenue year-over-year was driven by earning asset growth, strength in our Fee businesses, organic growth initiatives and acquisitions, and tempered somewhat by the impact of recent legislative actions. This was a record first quarter in terms of total revenue for our company, demonstrating the positive impact that the investments we have made over the past few years are having on our results.

Turning to Slide 9 and credit quality. First quarter total net charge-offs of $805 million were 14.1% lower than the fourth quarter of 2010. Non-performing assets, excluding covered assets and assets acquired through the recent First Community Bank of New Mexico transaction decreased by $159 million or 4.7%. As you can see from the charts, this represents the fourth consecutive quarter of declining net charge-offs and non-performing assets, giving us further confidence that these trends will continue.

On Slide 10, the graph on the left shows continued improvement in the early and late stage delinquencies, excluding covered assets in the first quarter. On the right-hand side of Slide 10, the trends in criticized assets again gives us another indication that we have reached the inflection point in credit quality. Accordingly, we expect the level of both net charge-offs and non-performing assets, excluding covered assets, to trend lower in the second quarter of 2011.

Turning to Slide 11, you can see that for the second time since this credit cycle began, we recorded a provision for credit losses less than the total net charge-off. Specifically, we released $50 million of reserves. This compares with the provision for credit losses that was less than charge-offs by $25 million in the fourth quarter, while an incremental provision equal to approximately 15% of net charge-offs or $175 million was recorded in the first quarter of last year. The reserve release was primarily driven by the improvement in credit quality of the commercial and retail loan portfolios.

Before turning the call over to Andy, I want to make a few comments about the recent interagency review of foreclosure policies and practices. Let me say first that our company sets a very high standard for fair and ethical business practices. We are a relatively small participant in the mortgage servicing market, approximately 2% and have long been committed to sound modification and foreclosure practices. Any recommendations by our regulators for improvements to our processes are, however, taken very seriously, and we are committed to working with the regulators to quickly resolve any outstanding issues. We have always regarded foreclosures as a last resort as we make every attempt to keep our customers in their houses through home retention programs. In fact, our home retention programs in 2010 outpaced new foreclosures by 50%. Moreover, our 60-day re-default rate, a measure of loan modification effectiveness, is significantly lower than industry average.

I would also note that we continue to have sufficient financial staffing and managerial resources to ensure the proper administration of our foreclosure processes. As this was confirmed by the fact that no resource deficiency was cited by the regulators in the recent horizontal review. We will continue to support our customers during these challenging economic times, and we stand ready to assist them. I'll now turn the call over to Andy.

Andrew Cecere

Thanks, Richard. I will just take a few minutes to provide you with more details about the results. I turn your attention to Slide 12, which gives a full view of our first quarter 2011 results compared to the fourth quarter and first quarter of 2010. Earnings per diluted common share of $0.52 were 52.9% higher in the first quarter of 2010, and 6.1% higher in the prior quarter. The key drivers of the company's first quarter earnings are detailed on Slide 13. The $377 million or 56.4% increase in net income year-over-year was primarily the result of $198 million or 4.6% increase in net revenue, and a $555 million decrease in the provision for credit losses, which include a $225 million favorable change in excess provision expense, as we move from building reserves to releasing reserves. These favorable changes in total net revenue and the provision were partially offset by $178 million or 8.3% increase in non-interest expense year-over-year. Net income was $72 million or 7.4% higher on a linked-quarter basis. A $171 million or 6.9% decrease in total expense and a favorable variance of $157 million in the provision for loan losses more than offset the 4.3% decrease in total net revenue quarter-over-quarter.

A summary of the significant items that impact the comparison over our first quarter results to prior periods are detailed on Slide 14. The significant items called out for the first quarter of 2011 were $46 million bargain purchase gain related to the recent purchase of First Community Bank from the FDIC, $5 million in net securities losses, and a $50 million reserve release. The fourth quarter of 2010 included a gain of $103 million equal to $41 million after-tax related to the exchange of the long-term Asset Management business of FAF Advisors for an equity interest in Nuveen Investments, net securities losses of $14 million, and a $25 million reserve release. The two significant items impacting the first quarter of 2010 are also highlighted on Slide 14, and include a $34 million of security losses and $175 million incremental provision expense.

Turning to Slide 15. Net interest income increased year-over-year by $104 million or 4.3%, primarily due to a $25.1 billion or 10.1% increase in average earning assets, and the benefit of strong growth in low-cost deposits. The increase in average earning assets was driven by expected growth in the securities portfolio and a higher cash position of the fed reserve, as well as growth in average loans and loans held for sale.

The net interest margin of 3.69% was lower than the net interest margin in the same quarter of last year, primarily due to the expected increase and lower yield in investment securities as the company brought more liquidity on balance sheet in addition to an exceptional and unexpected growth in deposits, which led to higher than anticipated cash position at the Federal Reserve. On a linked-quarter basis, net interest income was higher by $8 million, the result of a $14.1 billion increase in average earning assets, offset by a 14 basis point decline in net interest margin. The net interest margin was lower than the prior quarter, again, due to the expected growth in lower yielding investment securities and the higher cash position at the fed. Assuming the current rate environment and yield curve, we expect that the net interest margin will decline in the second quarter by amounts similar to the decline we experienced in the last two quarters as we continue to add to our securities portfolio. I would emphasize, however, that the anticipated reduction in net interest margin will continue to be neutral to net interest income and the bottom line as the decline in net interest margin is offset by an increase in average earning assets.

Slide 16 provides you with more detail on the change in average total loans outstandings. Average total loans grew by $4.7 billion or 2.4% year-over-year. Excluding acquisitions, average total loans increased by 2.1%. And as you can see from the chart on the left, this increase was principally driven by strong growth in residential mortgages, and a 3% increase in commercial loans, which was the first year-over-year growth in average commercial loans since the second quarter of 2009. Importantly, commercial lending and commitments grew year-over-year.

On a linked-quarter basis, the 1.1% increase in average loans outstandings were 0.7%, excluding acquisitions, was driven by increases in commercial, commercial real estate and residential real estate lending, reflecting a continued, modest demand for new loans. Average consumer loans decreased slightly on a linked-quarter basis as the decline in average credit card, home equity and second mortgages and other retail lending were slightly offset by growth in auto leasing and lending, where we continue to experience incremental growth each quarter.

Moving to Slide 17, you can see that the growth in total low-cost core deposits over the last five quarters. Average total deposits grew by $21.8 billion or 11.9% year-over-year. Significantly, low-cost deposits, non-interest bearing, interest checking, money market and savings grew by 15.3%. On a linked-quarter basis, average deposits increased by 7.4%, while average low-cost deposits increased by 6.7%, principally due to corporate trust and the recent acquisition, as well as growth in Wholesale Banking, Commercial Real Estate and the Consumer and Small Business Banking business lines.

Slide 18 presents in more detail the changes in non-interest income on a year-over-year and linked-quarter basis. Non-interest income in the first quarter of 2011 was $94 million or 4.9% higher than the first quarter of 2010. This variance was driven by growth in payments in commercial product revenue and a favorable change in net securities losses in the First Community Bank gain. These favorable variance were partially offset by lower deposit service charges, which reflect the legislative and bank developed pricing changes. On a linked-quarter basis, non-interest income was lower by $210 million or 9.5%. This unfavorable variance was primarily the result of seasonally lower payments revenue, a reduction in trust and investment management fees, the net result of the sale of our long-time Asset Management business to Nuveen, partially offset by the December purchase of a Securitization Trust Administration business, and lower Mortgage Banking revenue, which declined by $51 million, primarily due to reduction in application volume, partially offset by a favorable change in the MSR valuation, and an unfavorable change related to a few significant items, which are detailed in the chart at the bottom of Slide 18.

Slide 19 highlights non-interest expense, which was higher year-over-year by $178 million or 8.3%. The majority of the increase can be attributed to higher benefits expense due to increase in pension cost and higher staffing levels, higher compensation driven by incentives and commissions, additional staffing for branch expansion and business line initiatives and merit increases, and an increase in professional services, marketing and business development expense on occupancy, primarily related to investments, projects and other business line expansion activities. Slightly offsetting these increases was a reduction in other intangible expense before run-off.

On a linked-quarter basis, non-interest expense was lower by $171 million or 6.9% due to lower compensation expense, specifically related to incentives and commissions, seasonally lower professional services and marketing and business development expense, and seasonally lower investments in affordable housing and other tax-advantage projects. Offsetting these favorable variances was an increase in benefits expense attributed to the higher pension cost and a seasonal increase in payroll taxes. Finally, the tax rate on a tax-equivalent basis was 29% in the first quarter of 2011 compared with 27.8% in the fourth quarter of 2010, and 24.2% in the first quarter of 2010.

Slide 20 provides updated detail on the company's mortgage purchase related expense, and the reserve for expected losses on repurchases and make-whole payments. Our company's conservative credit and underwriting culture, as well as our very disciplined loan origination processes has resulted in lower mortgage repurchase volumes and expense relative to our peers. Recall that we did not participate in the private placement securitization market. Our company originates conforming loans, about 95% of which are sold to the GSEs. During the current environment, we expect mortgage repurchase activity to remain slightly elevated over the next few quarters before beginning to moderate downward, with quarterly repurchase expense of $50 million to $70 million per quarter. I will now turn the call back to Richard.

Richard Davis

Thanks, Andy. To conclude our formal remarks, I'll turn your attention to Slide 21. Our annual meeting is scheduled for later today in St. Louis, and I look forward to reviewing our 2010 results with our shareholders, and demonstrating how our strong performance over the last year and the last 3 years and finally, the last 5 years, places us at the top of our peer group, and confirms the strength of our company's financial position and diversified business model. More importantly, I will talk about the future and the momentum we've created by continuing to invest through this cycle, including investments in our core branch banking footprint, and in technology to enhance productivity and service, investments in new products and services and in our global presence.

We are well prepared to adapt to the changing legislative, regulatory and economic environment. We are also prepared to lend our voice and our energy to defend reasonable rules and policies that protect the safety and soundness of the banking industry, while protecting the investment of our shareholders. We are now looking forward toward the future. We have a clear focus and a clear mission, and we're ready to embrace the opportunities ahead, opportunities to serve our customers, further improve current processes, deepen our franchise, and build upon our reputation as a trusted provider of financial products and services. U.S. Bank is positioned to continue to perform and to win for our customers, for our employees, our communities and most importantly, for our shareholders.

That concludes our formal remarks. Andy, Bill and I would be now happy to take questions from our audience.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of John McDonald with Sanford Bernstein.

John McDonald - Sanford C. Bernstein & Co., Inc.

Andy, was wondering if you could just repeat the guidance about the process of moving liquidity onto the balance sheet, the amount of securities that you'll be adding should look similar to this quarter, do you say? And then the impact on the upticks of the net interest margin, could you just repeat that?

Andrew Cecere

Sure, I'd be happy to, John. So let me first re-highlight what occurred in the first quarter. We increased our securities portfolio by about $6 billion as we expected to do and as we talked about last quarter. In addition, as you probably noticed, a tremendous amount of liquidity in the marketplace and our customers, both wholesale and retail, have tremendously increased their deposit balances with U.S. Bank, which resulted in a long cash position of about $7 billion at the fed this quarter. Those 2 things resulted in our decline in net interest margin, about half and half. As we go into the second quarter, I would expect us to continue to build our securities portfolio in the neighborhood of about $5 billion plus or minus, which will impact margin again in that 8 to 10 basis points category. I do not expect a continuation or an increase in the long cash position but at the same time, I don't expect it to moderate much. So going forward, I would expect a decline, low 360, right around 360 range for margin in the second quarter.

Richard Davis

And John, this is Richard. As a reminder, everybody, I appreciate you leading with that question. I think last quarter, we may have confused some folks by talking about the NIM [net interest margin] coming down, but not reminding that the total balance sheet grows. So these activities are neutral, if not, slightly positive to our net interest income, and it's important that you know we're not harming the company's earnings by doing -- taking these actions to improve our liquidity.

John McDonald - Sanford C. Bernstein & Co., Inc.

Right. We see that, right? We see that in this quarter's result, right, and NII growth.

Andrew Cecere

Yes, we did. And Andy, in spite of the fact that there were 2 fewer days in the first quarter versus the fourth, which costs us about $30 million. So yes, our margin income continues to grow, even though net interest margin rate declines.

John McDonald - Sanford C. Bernstein & Co., Inc.

Okay. And what would be the duration of this process, Andy, will it extend beyond the second quarter?

Andrew Cecere

The securities purchases, we expect to continue on through the remainder of this year. John, again, as we build on-balance sheet liquidity in conjunction with the LCR [liquidity coverage ratio] ratio.

John McDonald - Sanford C. Bernstein & Co., Inc.

So that dynamic, neutral to NII [net interest income], but impacting the optics of the NIM, should continue through the third and fourth quarters?

Andrew Cecere

Correct.

John McDonald - Sanford C. Bernstein & Co., Inc.

Okay. And could you give us some broader thoughts, it sounds like on the Commercial side, you've got a little bit better loan demand in a way you were on utilization, and just your sense of where we are on the loan growth recovery curve here?

Richard Davis

This is Richard, John. It's still measured slow and slightly positive. But there's nothing remarkable about it. I think we have seen the economy slow a bit in the second half of the first quarter when we last had a chance in the public forum to talk to all of you, things are actually not quite as positive as we thought they would be at the middle of the quarter. You'll recall that in those 6 or 8 weeks since we last talked, a lot has happened. The GDP [gross domestic product] has come down from 3 to 3.5, to more of a forecasted 2 to 2.5, the supply-chain disruptions in Japan, oil prices and just continued confidence not being quiet where it needs to be, hasn't stopped things. It hasn't reversed things, but it hasn't created any additional momentum even with the seasonality included. So what we're seeing is actually our commitments are up 2%, linked quarter, for the Wholesale business, but our usage is still down even 1% from there. So we have people that were continuing to bank, that are ready to use their line, but they're demonstrating that even when they have the availability of credit, they're not using it. And likewise, as we've talked in times before, the first measure of our customers using their confidence to grow and to invest in things would be their use of their own demand deposits, and they're not using those either. As Andy said, we're at record high levels, so we'll see the demand deposits continue to be high until they start to use it, then the line of credit will be used and then eventually, new loan originations will be more robust. So for us, it's slow, steady, measured, slightly positive but not strong by any means. And I do think it's fragile, so it's something we have to watch very closely in the second quarter, while we expect seasonality and all kinds of other normal things to occur, and we'll know that in a couple of weeks whether or not we're off to a decent 2011.

John McDonald - Sanford C. Bernstein & Co., Inc.

Okay. And then just a question on capital deployment. You mentioned that your Basel III numbers are already ahead of where you need to be in 2019, yet you've got a conservative approach on the buybacks. Is that a regulatory preference, Richard, or just a U.S. Bank being conservative kind of preference?

Richard Davis

Yes, it's a regulatory preference, because I might actually be more aggressive. The fact is that during the capital assessment plan, as you know, was a pass/fail test, and you didn't really get feedback along the way. So we made it very clear that we aren't going to take any risks to impair our ability to move first and forward with some dividend action and eventually, buybacks. So in our 1-year forward, 2-year forward capital assessment plan for which the first year, they used as the assessment for capital actions, we stayed below the 30%, as you know, forward year, for dividends, and we placed a number in there based on a buffer for capital, and a time for you to pun [ph] which would begin our buybacks. All of which were very conservative, all of which were regulatory driven. Each of which are still positive toward the shareholders, but not where we want it to be eventually, and were left to our own devices, it would've been more aggressive.

John McDonald - Sanford C. Bernstein & Co., Inc.

Okay. Thank you.

Richard Davis

Thanks, John.

Operator

Your next question comes from the line of Ed Najarian with ISI Group.

Ed Najarian - ISI Group Inc.

Actually, John asked two of my questions, but let me just ask you a little more detail in terms of the securities buying. Can you give us a sense of -- obviously, you're going to end the year with a heck of a lot more investment securities than you started the year, and you're even buying in 4Q as well. How can we get a sense that this is going to be match funded, and we're not going to be taking on more interest rate risk as rates rise with a much larger securities portfolio, is it real short duration? Is it floating? What are you buying? It seems like a lot of it's funded with deposits, which could actually go away if rates start rising. So just trying to get a sense of that a little bit.

Andrew Cecere

Sure, Ed. This is Andy, so it is match funded. We're not taking any additional interest rate risk. One of the ways you'll see that is from our interest rate risk position that we'll publish in the Q every quarter, but I can assure you that we are not taking additional interest rate risk. About half of it's floating. Half of it's fixed. It's a duration less than two years, and we are being very careful about what we're putting on with the intention of not taking additional interest rate risk. And as you mentioned, we will probably end the year of somewhere in the neighborhood of 70 or so in our securities portfolio.

Ed Najarian - ISI Group Inc.

Okay. And no duration extension or anything in a rising rate environment or...

Andrew Cecere

We're staying very short on these purchases just for the purpose that you mentioned, which is to keep it interest rate risk neutral.

Ed Najarian - ISI Group Inc.

Okay. And then I guess just a quick follow-up, I guess, to John's question with respect to the buyback. I mean, it seems like given where your Basel III Tier 1 common ratio is at 7.7%, and with some stock price weakness of late, with all the banks, it would be a great time to be buying the stock. And clearly, even if the Basel standards come in higher than we think or the systemic risk buffer is higher than we think, you guys are building capital very rapidly. So I think, Richard, what you're saying is you feel like your hands are a little tied based on what you ask for and how you ask for it within the capital planning process? Is that what you're saying in terms of the buyback?

Richard Davis

Well, no, we have permission to proceed with the buyback. So my hands aren't tied. My level of amount and speed might have been different. But the fact is, you already mentioned it, we're also waiting for the SIFI buffer, which might be -- for systemically important financial institutions, some number yet to be developed but what I understand, will be known in the next couple of months. That will help inform all of us what -- on top of the 7% we all need to hold, what will be the SIFI buffer. And then U.S. Bank intends to hold the buffer, a small buffer above that just for the vagaries of the denominator in the movement of some of the balance sheet. So that number for us is at this point, a guesstimate in our plan. And with that guesstimate, which we won't disclose, but we will be able to move forward with buybacks, we also are kind of sitting to see where that number comes in to see how well we guesstimated that number. I think in a couple of months, we'll have much more clarity around that, Ed, and we will be able to move forward. I would love very much to take some of that capital that we're building and use for that purpose for as long as we patiently waited to get to this point. I'm not going to take any actions until I have all the final facts, and that's probably just a quarter away, at which point that will be more clear on our timing and our amount.

Ed Najarian - ISI Group Inc.

Okay. But I guess it sort of begs the question, given how fast you're building capital, even if that SIFI buffer is bigger than you suspect and bigger than maybe we're all suspecting, it seems like USB is already pretty forward in the lead, and would be building capital faster. So doesn't seem like you would be required to be at that level right away. You could build into that SIFI buffer, yet the market might be giving you an opportunity to buy back stock at a nice price currently. So just wondering why you're not sort of taking advantage of that.

Richard Davis

Okay, I understand, so the clarity that you may think we have, we don't. So while your argument and your logic make sense, the test was pass/fail. There was no sense of, let me ask you this or can we try that. And so it's not so much waiting for the SIFI buffer. It's the fact that the test was a 1-year test, forward view, all or nothing, in or out. And at this point, that's all the information we have. Now as we have learned more, especially with the SIFI buffer, we'll be going back in, asking for permissions to adjust, perhaps, what we put in the first round, but until which time we have that idea, you're right on all accounts, we're growing capital quite well. We can get to a point where we can set whatever level we want to be at and from that point, we can buy back stock or do other actions, capital actions that will keep it at that number or above. But Ed, as long and patiently as we waited to get to this point, 2.5 years, I want to get it right. I don't want to take any risks, and I don't want to push any levels of test when we haven't been given those permissions. So I don't think we're far off from that. I think it won't change though. We're building capital strongly, and won't change our options and our ability to move quickly, and are prepared to. But I think we're just one step from getting a little more clarification on the final part of the test.

Ed Najarian - ISI Group Inc.

Okay. And then just one last quick one, Andy, if you don't get the kind of deposit growth you anticipate over the next few quarters, will you still be buying a significant amount of additional securities, or is that sort of predicated on the idea that you're going to continue to get this kind of deposit growth?

Andrew Cecere

No, that's two independent events, Ed. We continue to buy securities. Our deposit growth has been phenomenal the last quarter and really, that's led to our long cash position, which is separate and distinct from the security purchase. So we will buy securities, regardless, and our liquidity is sufficient, overly strong, in fact, to accommodate that.

Ed Najarian - ISI Group Inc.

Okay. Thank you very much.

Richard Davis

Sure, Ed.

Operator

Your next question comes from the line of Chris Kotowski with Oppenheimer & Co.

Christoph Kotowski - Oppenheimer & Co. Inc.

I had some of the same questions. But I was wondering about on your Wealth Management disclosure on Page 11 of the services, is that drop in Wealth Management revenues? Is that purely the Nuveen transaction?

Andrew Cecere

It is. Chris, it's 100%, over 100% from the Nuveen transaction with a little bit of core growth, and some addition from the Bank of America Corporate Trust acquisition, but the whole decline is due to Nuveen.

Christoph Kotowski - Oppenheimer & Co. Inc.

Okay. And then on the slide with the non-performers, 9 in the conference call, do I read that, the FCB acquisition added $287 million to your non-performing base or your decline in the NPAs [non-performing asset] would've been $287 million without it?

Richard Davis

The decline without it was 4.7%. So adding the $287 million then put us up. So we did add $287 million of non-performing assets from the acquisition.

Christoph Kotowski - Oppenheimer & Co. Inc.

Okay, so that was the add. Okay, and then I guess just in general, can you talk if there's a geographic pattern to the recovery that you're experiencing, or are the trends that we see here in aggregate, are they kind of broadly dispersed through all the geographies that you operate in?

Richard Davis

Yes. I was going to say first and then I'll have Bill answer it. Geography isn't so much noteworthy in this recovery. It's more product type and customer type. Things like add continue to be strong but it depends on whether the consumer products or entertainment and gaming, whether these are companies that are looking for consumer-derived products that start higher up in the food chain. So for us, it's more product type and keeping Commercial Real Estate off to the side, which I'll have Bill talk about. Geography for us, and we're a national company, isn't really very noteworthy, but we are seeing product types. And as you might know, Chris, the strong companies are really showing themselves because they position themselves earlier in this recession to be ready. As a matter of fact, they got themselves ready. They are loan worthy and still in many cases, they're not taking actions because they're still not to that point. So they're ready to move, but they're just on the precipice of having the confidence to do it. So geography is the one thing we don't really see in the evidence, but we see a number of other things that I'll have Bill talk about it.

P. Parker

Yes, I mean, the one area geography is coming into plays on real estate and the coastal regions with the exception on Florida, are stronger. I mean, especially California, the closer to the coast you are, the stronger the markets are, both residential and commercial. Some of the East Coast markets are stronger, too, but that's pretty much limited to the real estate markets as opposed to just sort of general economic activity. And then the one property type that is pretty strong now is the Multi-Family, and I think that's a reflection of how the residential markets are somewhat stalled.

Christoph Kotowski - Oppenheimer & Co. Inc.

Okay. Thank you.

P. Parker

Thanks, Chris.

Operator

Your next question comes from the line of Matt O'Connor with Deutsche Bank.

Matthew O'Connor - Deutsche Bank AG

Just a few clarification questions here. I guess the first is if we look at your credit card spending volumes year-over-year, maybe I missed it, but do you disclose that still?

Richard Davis

We can in terms of same-store sales?

Andrew Cecere

So Matt, our same-store sales numbers, which is a key driver of our merchant or acquire activity, same-store sales were up 4.6% year-over-year here in the first quarter, which is down from the fourth quarter, which was about 5.5%, 5.4%, but up from a year ago, which was just about 3.5%. So we're seeing -- as Richard described, the economy overall, that's what we're seeing in spend, better than last year, but down a bit from the fourth quarter of this year.

Richard Davis

And Matt, I'll say that the same-store sales of that 4.6, a high percentage of that is T&E is up, in quarter 1, by corporate spend, particularly. Retail is up about 3%. So it's a little of in between those two. So we're seeing the companies, particularly airlines and hotels, being the higher percentage of T&E spend in quarter 1. Based on our portfolio, that's what's driving a good percentage of that. And not unlike I said earlier, the second half of the quarter seems to be slowing from what we thought we might be seeing as a trend in the first half. It's not coming to a screeching halt. It's just starting to taper down a bit as people move into quarter 2.

Christoph Kotowski - Oppenheimer & Co. Inc.

Okay, and then just separately, with credit continuing to improve, unlike other banks, you have not drawn down your loan loss reserves as much. And I'm wondering if there's more drawdown or the pace of drawdown will accelerate the next couple of quarters versus what we saw in the first quarter.

Richard Davis

Well, I'll tell you what, based on what you saw the first quarter, if we continue to see the improvement that we're seeing, we will continue to release reserves at levels probably equal to, if not, slightly higher than you just saw. But as I said, like a year ago, if that's the case, then we just didn't do a very good job going on the way up, because we simply didn't know when this thing would peak and when it would come back down. Let me also say, however, that once we get to a place where credit quality accelerates like a roller coaster does at the end of the fall, this credit quality is going to get to a point that's better than sustainable. I mean when you think about most things that have been originating any risky credits at all on the last couple of years, by the time the current customers are either recovered or gone, our credit quality across the board is going to be excessively positive and it will be here, too. But my point in telling you this is there will be a certain level that we'll set for ourselves no matter what the rule set may be, but our loan loss provisions will remain high enough to account for over the cycle kind of losses not at any one point exactly to the number that you see, because I do not want to have loan loss reserves back down to low unsustainable levels when things get so good. I want to have them available for when we get to the point over the cycle that I think will be more normalized. And we said for this company, that we think it's probably about 1% charge-offs annualized over the long cycle for this company. We're 1.65 right now. So we're still on our way to 1. I think we'll pass through 1, and we'll eventually come back to it. And so later in future quarters, while we'll do some reserve releases, it won't be lockstep exactly with the performance of the portfolio, because that's not going to be sustainable over the long run.

Matthew O'Connor - Deutsche Bank AG

And then just lastly, if I may, as we look at the expense growth year-over-year of about 8%, there's obviously some deal impact. I think last quarter, you talked about a 5% to 6% expense growth as kind of a more normal run rate, and is that a fair growth rate year-over-year? And then going forward, is that what you're expecting as well?

Andrew Cecere

Yes. I think, Matt, that is a fair growth rate year-over-year. The other point here in the first quarter versus a year ago, we did have about a $50 million increase in pension expenses reset once a year when we reset our pension assumptions. And that's a factor in the first quarter which would remain more level throughout the year, accounting for payroll taxes and the like.

Matthew O'Connor - Deutsche Bank AG

Okay. All right. Thank you very much.

Operator

Your next question comes from the line of Brian Foran with Nomura.

Brian Foran - Nomura Securities Co. Ltd.

I guess on the outlook for pre-provision earnings growing this year relative to last, that you'd given on the last conference call, I mean, in light of 1Q, generally positive results and your comments about the go-forward deceleration in the economy. Are you more or less confident in the ability to grow pre-provision year-over-year?

Richard Davis

Again, I think what we said Brian was accounting for sort of the significant items, for example, the Nuveen gain, that we are confident, and that hasn't changed.

Brian Foran - Nomura Securities Co. Ltd.

And then on -- the other point you had given on last call was revenue recapture from reg reform. The ability to recapture about 50% of lost revenue. There, again, are you kind of more or less confident and maybe what are some of the products, is it mostly just about instilling fees on existing products, or is it more traction with alternative products like prepay cards and checking account advances and the like?

Richard Davis

You just gave me the answers. So yes, it's both. We're going to continue to look at our pricing schemes to make sure that they're fair and that they're market favored. We're going to continue to involve ourselves in some of these more innovative products, both card products and what we'll call mobile banking alternatives. And I think Brian, if anybody has followed us as you have, we're a different company. Now we don't sell 1 product anymore. We don't deal with 1 customer at a time on 1 product at a time. We are much more relationship focused. That's yielding amazing amount of benefits and during the recession, the flight to quality, which we don't use the term loosely, it has brought a number of customers and their entire relationship to our company during this transition. So those are the things, including the pricing and the product development, that give me reasonably that at least 50% of the lost revenue will be accomplished by these new changes. I'll add that this is pre-driven. We don't have it driven yet in our numbers. We've given you the sizing for what that could be. Being as close as anyone is to the activities under Durbin, it's still a 50-50 call, and whether or not we're going to end up having the kind of the severe loss of income that's currently proposed. And if that's the case, then we'll have to go back and evaluate our product sets and exactly how we'll be pricing for, what will now be the debit products that are currently part of our checking products. But unless and until that happens, we're going to wait and see. And we're just a few months away from getting a better sense of that. Because no matter what happens, by the deadline that the fed has in July, we'll know the answer one way or the other. And by the next time we all speak, we'll have a much better clarity on whether the Durbin amendment is a negative or a wait-and-see activity for this company, and we have not decided how we would recover those losses at this point.

Brian Foran - Nomura Securities Co. Ltd.

Okay. Thank you.

Operator

Your next question comes from the line of Mike Mayo with CLSA.

Michael Mayo - Credit Agricole Securities (USA) Inc.

Aside 2 columns, when it relates to loan growth, one, are your negative comment and some positive trend, I'm trying to reconcile the two. So you said the second half, the first quarter was weaker, loan utilization is still kind of flat, and record high corporate deposit means you don't have a lot of loan growth. On the other hand, you had, if I'm doing this correctly, 2.4% linked-quarter growth in commercial loans and also, when I outlook at loan syndication year-over-year, your deal volume has doubled. So is this all market share or market expansion, and none with the economy, or if you can reconcile those two?

Richard Davis

Yes, sure. This is Richard. First, it's not very good, because it's not good enough for us. We really expected ourselves to be growing at that 1.5% to 2%, linked quarter, that we had in quarter 4. So we're just disappointed that we're not keeping at that pace. We're still very pleased that it's positive at all. Let me remind you that when I talk about commercial credit commitments, they're up 2%, but they're not using them. So for me, it's a proxy. If I were an investor I'd say, "Gosh, if these deposits that you guys are growing are proxies for new customers, now these commitments that you're growing, whether they're being used or not, are proxies for future loan usage." That's what I want you to hear, but we don't have anything to show for it right now on the loan balance sheet. And so loan balance sheet growing on a adjusted 0.7 linked-quarter percent, that is wholly insufficient as far as I'm concerned, given the kind of money we have here that we can deploy back in the loan. But we're setting everything up for that moment when people finally decide to pull the string and use their lines of credit or use their own deposits or get a new loan. So intend to tell you that we're quite pleased with our performance against our peers in an environment where I think the overall loan growth is shrinking. I love the fact that we're positioning ourselves for a really good future when all of these starts to come around. But I'm not satisfied that 0.7% adjusted link loan growth is a very good outcome when we have this kind of earnings opportunity sitting under our nose. I will tell you however, there's no temptation, none, to change our underwriting criteria in order to adjust those outcomes, because that will be a mistake that we would live with many, many quarters and years from now. But as I've said before, we will take the permissions with good relationships to be a competitive on price, because we can afford to, and because relationships are easier to be more aggressive in pricing. And we will continue to do that, and that's part of what it means to protect customers and grow market share.

Michael Mayo - Credit Agricole Securities (USA) Inc.

Last quarter, you said you were going a little more out of footprint, can you give us a status of that?

Richard Davis

Yes, as I said, last quarter, I meant for the last year or so, we've been out of footprint. Our commercial real estate is now national. Our Corporate Banking is wholly national, and we're seeing a great deal of benefit from that. Maybe as much in the out of footprint, as we are in the in-footprint, because we've been invited into so many new relationships. I think our branding, our national advertising has brought people to think of us for the first time in the other 25 states. I know that our flight to quality, particularly, at the level of CFO and Controller of large companies has said I need another bank in my stable of partners. I want to bring you in, and see how you perform. So we're getting a lot of growth from new entrants and new relationships, which for us is long-term, very, very valuable because that will be some relationships we can count on that we didn't have a few years ago.

Michael Mayo - Credit Agricole Securities (USA) Inc.

And can I just get a little more color on the syndicated loans? I mean I'm not sure if your logic is a perfect source. But that has your year-over-year syndicated loan volume having doubled, you're not alone. But it would be great to get some more color, how much of the syndicated loan deals translated into higher commercial loan balances?

P. Parker

Probably not a lot in the balances based on what we've seen in utilization. But clearly, we're much more actively involved in that market. We've built out the capital markets capabilities in our bank and with the national corporate strategy, we've been able to bring a much better product set to clients and new prospects. So it's been great for fee income generation, probably less so on loan balance but hopefully, that will come.

Richard Davis

And Mike, the one thing that we love our position as the fifth-largest commercial bank, there's a lot of reasons I love being there. But the one area we have to watch for is that we don't have the balance sheet size that the top 4 do, so we have to be very competitive as it relates to hold levels and syndication. What we have found is if you can get in at a very meaningful level, Tier 1 or Tier 2, with our capital markets capabilities and our other products like our single plan and other capabilities that we have in corporate cards, we've been invited in to other products that the level that Tier 1 typically enjoys. So the perfect spot for us is to be a competitive meaningful partner in a syndication to get the other business and develop a relationship depth that we've never had before we had all these capabilities. So you're right, to see us much more visible on the tables. You'll see our syndication activity much higher. What you can't see yet is how much other business is coming from that, which is what I promised you all based on the investments you permitted us to make in the last couple of years in the Corporate Banking and in the payment space.

Michael Mayo - Credit Agricole Securities (USA) Inc.

And then lastly, and I guess, I'll say the one CEO -- say it very clearly, the second half of the first quarter has gotten weaker. Is that simply you and your firm's macro analysis, or are you seeing something on the ground that's really weaker?

Richard Davis

Well, it's not a whole lot different then. Whatever we showed you today is the same assessment I'm using. So you can look at the same data and disagree. But the only thing you can't see is what I was thinking was in the middle of quarter 1. We saw trajectories in what we thought will be line and loan usage, and what we thought would be in deposit levels starting to be used for growth. And instead, based on our expectations, none of those happened at the same level. Loan and line usage wasn't as robust. Deposit levels were exceptionally higher. People are putting more away than we thought. And as I described at top of the call, I think you'd agree there was some worldwide unprecedented events that all came together in the second half of quarter 1, and I'm not surprised about the reaction by our customers. They're being very careful. They're being very safe, and that doesn't mean they're not going to eventually do it. It just means they're not doing it as fast as we have thought, so it's not gloom and doom. It's just based on our rather positive expectation. They're not quite as positive, but they're measured and they're slow, and they're predictable and for me, they're painlessly slow.

Michael Mayo - Credit Agricole Securities (USA) Inc.

All right. Thank you.

Operator

Your next question comes from the line of Nancy Bush with NAB Research, LLC.

Nancy Bush - NAB Research

Two questions here. Richard, could you just talk to us a little bit about the consent order from the fed, to the outside observers, it was a fairly broad brush assessment. And if you could just talk about your own situation, what they found and what you agreed with, or what you see as the deficiencies and what you've done to correct them.

Richard Davis

Thanks, Nancy. I appreciate the question. So the consent order, as you know, was the result of the 14 bank horizontal review last quarter 4. And in their findings, they discovered, what I'll call, a number of technical deficiencies in the way a bank's including -- we performed some of the perfected leans and some of the activities and modifications. I'm happy to report, as I hope you heard in my opening comments, that we were one of the very few, one of only two companies that were not found to be deficient in our resources applied toward modifications and foreclosures, which means we don't have a large staffing number to give you here on this call. In fact, parenthetically, we've added 48 people just to have a better point of contact. So it's not a financial issue for us. What it is though, is a case for us to -- the bar has raised on things like using attorneys and other states for the purpose of pursuing the foreclosure legalities. And in our case, we did not have them through the vendor program, which we actually didn't think we needed to. And so we will now put them through our vendor program and for us, it's going to be mostly formed well over a substance, but where we need to do a better job of documenting our activities, we will. Beyond that, for this company, it's really nothing more than that. As much as I'm respectful of it and we're going to do our level best to be the first out because I think our remedies are quite reasonable. But I will tell you as well that you won't hear us talk about another large amount of money put away for either litigation or for put backs. As Andy mentioned in his part of the call, we'll remind you that 95% of the loans we originate are either, I sensed all, they're Freddie or Fannie or the GSEs. The other 5% either comes through us keeping on balance sheet like some of our jumbo mortgages, or maybe a part of the acquisitions that we brought on, which are fully covered assets. So we don't have a large put back risk for those private securitizations that might be coming back towards us. And likewise, and somewhat connected, we don't have a large litigation. We don't have any litigation right now to speak of, so we have nothing probable or estimable to put in to any kind of reserves. So with 2% of the servicing market, even though we're the sixth largest, we see this as a very important activity to improve the quality of our foreclosure modifications. We actually -- we're not found to have any foreclosure that were incorrect, no fees incorrectly assessed. We simply didn't dot all the Is and crossed all the Ts with the new level of expectation, and we will do that going forward. So for me, it's a very important audit. And it has with it necessary steps for which we've created our special board committee, and we will pursue those with aggression, and we'll do it with respect. But I'm looking forward to getting past it, and I think you'll find very little to come from that finding as it relates to changes in our behaviors and certainly, not changes to our financials. And let me add, we're not part of the 5 companies that are apparently working with the attorneys generals on finalizing what will be the new mortgage foreclosure protocols, nor are we looking at how those final decisions on any kind of a penalty, to what money penalty may be. So we sit and wait, and are watching to see what comes from that, and we don't know exactly how that will affect our company. But assuming and the best or worst case, it's somehow equal to our market share. It's something that we can handle. It'll be a one-time event, and something we can explain to all of you very easily.

Nancy Bush - NAB Research

And I have a similar sort of big issue question. I'm sure you're familiar with the Jamie Dimon, Dick Durbin smack down that seems to be going on. And one of Senator Durbin's concerns or statements that I'm sort of sympathetic to is the banks are talking a lot about raising fees. And clearly, in some quarters, this is being seen as a "threat." If you have to recoup Durbin revenues, how are you going to present this to your customers, so that it is not seen that way? There just seems to be a sort of rising public anger about some of this stuff.

Richard Davis

Yes, Nancy, let me give you my sense. I'll add a step in between. Durbin, I think, his intention was good, and his intention was to make sure that customers aren't harmed by paying unnecessary fees of any type for any transaction and point-of-sale. I don't think he's trying to decide whether it was banks or merchants. He just wanted to go back to the consumers. Have the fed, in their first pass, provided an answer that was close to what would have been the cost of doing business for us to cover debit activities, including the stand-in for guarantees and the immediate credit and all the things you know, there will be a discussion here. Durbin's interpretation, as done by the Fed, would have been something we would have probably agreed that was fair and equitable, and we would've moved forward. But at $0.12, to be wholly 25%, 20%, 25% of what the real number is under anybody's measure, that was unexpected. And so I think what we're trying to say as much not to Durbin, as much as we are to the fed and those who will make the final decision, is go back, review all the facts, take the time to figure out what it really costs a bank to provide the kind of immediate credit and the transaction guarantee that occur for both the merchant and the consumer at the point-of-sale, let us give you some feedback on that, you make a final decision. And if after all that, the number is deemed to be whatever, and we think it's fair and equitable, even if it's not exactly the cost of doing business, I think that would change the outcome that we all feel. But should the fed decide to still come forward on July 21 with $0.12 for at least large banks, that will be still wholly insufficient for our shareholders. We're going to have to play that very delicate walk between taking care of our shareholders and taking care of our customers. And I will let our customers know that the cost of providing those guarantees have a value, and it will later show itself up in the form of a service charge or in many cases, customers can offset the service charge by the relationship value that they have in other things. I won't hesitate to make it a -- I won't make it a threat, but I won't make it a secret, and what will be sad about this is there'll be a number of customers on the edges, the less bank that will now become unbanked. And sadly, because of the way the rules are coming down, the unbanked will fall into an area that so far, with all the things that Dodd Frank wanted, silent to any activities of overseeing companies that are not part of the banking industry. So I worry about the unintended consequences, but we're not going to play threat. We're not going to put our customers in the middle of a dogfight. And I have actually quite a bit of confidence that somehow, between the congress and the fed, that $0.12 will be rendered to be a much more reasonable number, and any outcomes that we need to talk about here will be, in fact, invisible, and we'll just move forward.

Nancy Bush - NAB Research

Thank you.

Richard Davis

Yes.

Operator

Your next question comes from the line of Matt Burnell with Wells Fargo Securities.

Matthew Burnell - Wells Fargo Securities, LLC

Just a question on the Commercial lending and maybe, some trends that you're seeing in the Capital Markets business that you've alluded to a little bit earlier today. Middle market loans, in terms of average loan balances, were up quarter-over-quarter, and national corporate was up a little bit quarter-over-quarter from your supplement. I'm just curious if because of your position in some of these larger deals, you are continuing to see momentum in the capital market side of things, taking advantage of being able to bring some of these companies to market.

P. Parker

In terms of debt markets?

Matthew Burnell - Wells Fargo Securities, LLC

Correct.

P. Parker

Yes, well, I mean, we clearly are -- I mean, we, 2 or 3 years ago, we really didn't have much in the way of Capital Market activity. Now we've got a robust syndication desk along with high-grade underwriting platform, so two products that we just really, we're not strong at didn't even exist 2 to 3 years ago. So for our middle market customers, our end market middle market customers, that's a whole new product set that we're delivering. And for our national corporate platform, it gets back to being able to participate at higher levels and up-tiering in these national corporate markets.

Richard Davis

It's Richard. As you might guess, the timing was fortuitous and sometimes, it's good to be lucky than it is smart. But to build this during the down market and to now have companies that are starting to look for growth and eventually, in some cases, M&A activities and more sophisticated solutions, boy, to have it all on and ready to go at this time has been just perfectly suited for us. And as I mentioned earlier, becoming national now and not just being regional, we've invited ourselves in to providing just guidance and in many cases, the guidance alone, the way we've talked to the customers, the way we've connected with the CFOs and the CEOs has changed the way they feel about a bank that can be a partner and in many cases, we won the business just on the audition.

Matthew Burnell - Wells Fargo Securities, LLC

But in terms of the last couple of quarters, rather than the last 2 or 3 years, are you seeing an improvement in the momentum in that business, or has the market been relatively flat for that type of activity within U.S. Bank?

P. Parker

On the last couple of quarters, we've seen good demand in those spaces.

Richard Davis

But Matt, it's a little hard to tell because we're such a -- our base is so low, in other words, we're just going like crazy. We are adding people. We've got all kinds of new customers. It's a little bit of both. We're seeing the market receptive to this kind. As you see, the corporate bank, the corporate customers are more likely to be healthier and looking for opportunities, Capital Markets solution. But we're also growing like crazy just because we're invited to more conversations. So I'd say it's probably 50-50, half of us and a half of what's the market providing in terms of interest.

Matthew Burnell - Wells Fargo Securities, LLC

Richard, just a quick clarification on your comments in terms of the mortgage market, what's going on with some of the negotiations between the banks and other parties, presuming your comments related to market share were focused on any number of items, but I just want to clarify that your comments particularly related to potential principal reductions on home-equity loans or other mortgages, you think that that's going to be relatively less of an issue for you than for some of the other competitors?

Richard Davis

Matt, I'll tell you what, I don't even know if it's going to be principal reduction. I think that would be a big mistake by the way. That's absolutely, of all of the things to work on, that's not one of them. But let's just say that there's some superfund that's created by the larger banks in order to provide some relief for the foreclosure process, and to help kind of change the future outcome. I believe that we'll be part of that once and when those decisions are made. But at a 2% market share, and even something less than that, as it relates to the percentage of loans that are, for instance, say, foreclosed, I think the number will be -- no matter how big the pool is, I think there'll be a smaller number for us, something that's quite manageable. And for us, you'll see, we simply don't have -- in the DNA [ph] over the last few years, we don't have a lot of customers that were either underwritten or placed into harm based on some of our activities. So I think that the current actions that, as Nancy asked about the foreclosure review, we're all having independent reviews of the last couple of years of our modification or foreclosures. I think they will be deemed to be quite positive and quite good. If there's any remuneration, it will be small and if there's a large fund of money based on our market share and the quality of our findings, I think it will also be reasonable and something that we can isolate as a one-time event, explain it to all of you and move forward.

Matthew Burnell - Wells Fargo Securities, LLC

Okay. Thanks very much.

Operator

We've reached the allotted time for questions. Are there any closing remarks?

Judith Murphy

Yes, thank you, all, for listening to our first quarter 2011 conference call. If you do have any follow-up questions or need hard copies of the call presentation or press release, please give the Investor Relations Department a call. Thank you very much.

Richard Davis

Thanks, everybody.

P. Parker

Thank you.

Andrew Cecere

Thank you.

Operator

This concludes today's U.S. Bancorp First Quarter 2011 Earnings Conference Call. You may now disconnect.

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