Can U.S. Bancorp (USB)’s Strengths Offset These Two Concerns?

When I came across U.S. Bancorp (NYSE:USB) last year, I couldn’t believe that I had been ignoring one of the best big banks in the country. The company’s loan and deposit growth matched up well to any of their peers, and their credit quality was good. I’ve kept up with the company through their earnings reports, and there are two concerns that have me worried for the stock’s future.

It’s hard to argue with this type of performance

U.S. Bancorp (NYSE:USB) has turned in admirable growth in deposits and loans, and has managed their credit quality well also. In a timeframe where what you hear most about the economy is “uncertainty,” there is nothing uncertain about the bank’s direction.

Deposits and loans are still the lifeblood of any bank, and by these two measures, U.S. Bancorp (NYSE:USB) is beating their competition. When it comes to deposit growth, their peer Wells Fargo & Co (NYSE:WFC) reported 6.36% growth, which was strong relative to other banks like BB&T Corporation (NYSE:BBT) at 4.7%, and SunTrust Banks, Inc. (NYSE:STI) at 1%. That being said, U.S. Bancorp (NYSE:USB) outshined them all by reporting deposit growth of 7.3%. Attracting deposits gives the bank a cheaper source of funds than borrowing to make loans.

Speaking of loans, U.S. Bancorp (NYSE:USB) reported average loan growth of 5.8%, which was just slightly better than BB&T’s loan growth of 5.3%. Wells Fargo & Co (NYSE:WFC) turned in respectable loan growth of 3.84%, whereas SunTrust Banks, Inc. (NYSE:STI) saw its loan balances decline by about 1%. As you can see, U.S. Bancorp (NYSE:USB) is anything but a one trick pony.

The bank’s balance of strong deposit and loan growth also allowed them to report a net interest margin that tied for second among their peers. BB&T Corporation (NYSE:BBT)’s net interest margin led the way at 3.78%, whereas Wells Fargo and (NYSE:WFC) U.S. Bank both reported margins of 3.48%. SunTrust again lagged its peers with a net interest margin of 3.33%.

Another way that U.S. Bank performed very well was in reference to their credit quality. The company’s non-performing loans represented 1.35% of the portfolio, but what was impressive was the rate of decline in non-performers. U.S. Bank’s non-performing loans decreased by 34.71%, which was second only to BB&T with a 37% decrease.

It’s true that SunTrust reported a 45% decline in non-performers, but the comparison isn’t quite fair, because SunTrust sold its Coca-Cola investment to help retire some of these problem assets. In contrast to the rest, Wells Fargo reported not only the highest non-performing loan percentage at 2.44%, but also the slowest decrease in these assets at 7.21%.