"Our deposits continue to grow at amazing levels and, much as I like that, those deposits need to start getting used," chief executive Richard Davis said in a conference call after posting the results.

The average level of deposits in the quarter at the bank rose 11.1 percent from a year earlier to $239 billion, while loans increased 7.3 percent to $217 billion. Deposit inflows quickened in the last three months. Compared with the second quarter, deposits soared at an annualized rate of about 14 percent, nearly three times as fast as loans.

Banks throughout the industry say weak customer demand for money and low interest rates are holding down the profitability of loans, known as net interest margin. U.S. Bancorp said its net interest margin narrowed to 3.59 percent from 3.65 percent a year earlier.

The Minneapolis-based lender is the fifth largest commercial bank in the United States.

Chief Financial Officer Andy Cecere expects the margin to fall another few hundredths of a percentage point in the fourth quarter as debt securities in the bank's portfolio mature and leave the company with more cash to be invested at lower rates.

Still, the bank delivered a 14 percent increase in profits for common shareholders from a year earlier as the bank racked up fees from a surge in home loan refinancing. The bank also benefited from lower costs for bad loans and from operating leverage as expense grew less than revenues.

Analysts expect mortgage lending volume to continue to rise after the Federal Reserve said in September it would buy up to $40 billion of mortgage bonds every month until the labor market improved materially.

Cecere said in an interview that he expects the wave of mortgage refinancing to continue in "the next few quarters" if interest rates stay at current levels.

JPMorgan Chase & Co and Wells Fargo & Co both posted record quarterly profits last week on the back of the improving mortgage market.

U.S. Bancorp said net income for common shareholders was $1.40 billion, or 74 cents per share, up from $1.24 billion, or 64 cents per share, a year earlier.

Fitch Ratings commented later that the bank delivered "a very strong" 1.7 percent return on assets.

The bank has been bulking up its mortgage business at a time when large lenders such as Bank of America Corp have been pulling back.

Mortgage banking revenue rose for the fourth straight quarter, more than doubling to $519 million.

Cecere said the bank is mindful that the refinancing wave will end.

"We are trying to make sure we are hiring in conjunction with our projections and not over hire," Cecere said.

U.S. Bancorp shares rose 1.8 percent to close at $34.20 on the New York Stock Exchange on Wednesday.