U.S. Bancorp Earnings: What to Expect From This Under-the-Radar Bank

US Bancorp (USB 0.98%) will release its quarterly report on Wednesday, and investors aren't expecting a huge amount of growth from the super-regional Midwest-based bank. Yet even as Wells Fargo (WFC 1.42%), Bank of America (BAC 0.46%), and other large banking giants have gotten most of the attention from investors interested in the financial industry, US Bancorp stock has quietly climbed to new all-time record highs. Still, investors aren't sure whether the bank will be able to produce continuing earnings growth in light of new challenges for 2014.

It's easy to forget that US Bancorp is among the largest banks in the country, coming in at No. 5 in total bank deposits as of mid-2013. But because those deposits are only a quarter of what Wells Fargo commands and only a fifth of Bank of America's deposits, many dismiss US Bancorp as a relatively insignificant player in the industry. That's a big mistake, though, as the bank provides a useful picture of the health of the nation's heartland with its geographical focus on the Mississippi Basin as well as a growing presence in the American West. Let's take an early look at what's been happening with US Bancorp over the past quarter and what we're likely to see in its report.

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Stats on US Bancorp

Source: Yahoo! Finance.

Will US Bancorp earnings stay flat?
Analysts have had an uncanny ability to track US Bancorp earnings to the penny, and in recent months, they've cut their views, lopping $0.02 per share off their fourth-quarter estimates as well as their full-year 2014 projections. The stock, though, has kept soaring, with gains of 13% since mid-October.

US Bancorp's third-quarter earnings report showed the remarkable consistency that the bank has had in delivering predictable, dependable results despite changing conditions in the banking industry. Flat net income from year-ago levels reflected its ability to overcome a 17% drop in income from mortgage banking, which was relatively benign compared to bigger drops in mortgages at its rivals. Moreover, US Bancorp didn't resort to loan-loss reserve reductions to nearly the same extent that Wells Fargo did, as its huge efficiency ratios and returns on equity justified US Bancorp's premium valuation in many investors' eyes.

Part of US Bancorp's success has come from its emphasis on banking fundamentals. The company has largely focused on its retail lending and commercial loan portfolio, eschewing the trend among B of A, Wells, and other big banks to emphasize real-estate loans. That strategy served US Bancorp well during the financial crisis, and the bank continues to attract deposits from customers despite the extremely low rates it's having to pay.

Moreover, even though US Bancorp hasn't managed to escape some of the regulatory pitfalls that have plagued the banking industry in recent years, it has done a good job of minimizing their impact. For instance, US Bancorp settled with Freddie Mac last month, resolving mortgage-related claims for just $53 million. That compares to a similar settlement of more than $400 million for Bank of America, and overall, US Bancorp's legal liabilities have paled in comparison to the billions that B of A, JPMorgan Chase (JPM 1.87%), and other banks have had to pay.

In the US Bancorp earnings report, watch to see whether the bank is able to resist headwinds from falling mortgage refinancing activity and keep pulling value from its banking operations. Even if earnings don't grow, US Bancorp could continue to fare well if it outperforms B of A, Wells, and its other rivals.

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