This morning, U.S. Bancorp (USB) reported first-quarter EPS of $1.16, vs. $0.99 last year, which was $0.04 above expectations. Loan growth, higher interest margins and better results from the company’s investment management division all contributed to the higher earnings. It’s also important to note that the company achieved these results even after increasing its provision for credit losses from $112 million to $427 million, as the company tried to get in front of losses it expects with management anticipating a mild recession later in the year.

The conference call focused primarily on the recent issues impacting the banking industry. While the company’s deposits dropped $20 billion in the quarter, withdrawals have stabilized, and the company does not expect a significant drop from the 3.10% net interest margin it earned in the quarter for the remainder of the year. Since the company paid a higher rate on deposits (average 2.0% in the quarter), I think it can keep margins stable. As for loan losses, a much higher unemployment rate is built into the company’s current provision, so I believe it can avoid a significant surprise in loan losses. As I recently mentioned in my recommendation, the company’s exposure to commercial real estate is limited.

USB for now is locked in a trading range of $34 to $36. However, I believe the worst of the industry news is behind the company. After this solid earnings report, and with a yield of over 5%, I expect the stock to move meaningfully higher by year end. USB is a buy below $37. My target is $42.