U.S. Bancorp - 10-Q quarterly report FY

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UNITED STATES

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

For the quarterly period ended March 31, 2003

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

For the transition period from (not applicable)

Commission file number 1-6880

U.S. BANCORP

Delaware (State or other jurisdiction of incorporation or organization)		41-0255900 (I.R.S. Employer Identification Number)

800 Nicollet Mall

612-973-1111

(not applicable)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months, and (2) has been subject to such filing requirements for the past 90 days.

YES   X  NO        

     Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.

Class Common Stock, $.01 Par Value		Outstanding as of April 30, 2003 1,919,731,447 shares

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Management’s Discussion and Analysis
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Shareholders’ Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Consolidated Daily Average Balance Sheet and Related Yields and Rates (a)
Part II -- Other Information
Corporate Information

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Table of Contents and Form 10-Q Cross Reference Index

Part I — Financial Information
1) Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 2)
	a)		Overview		3
	b)		Statement of Income Analysis		4
	c)		Balance Sheet Analysis		8
	d)		Accounting Changes		25
	e)		Critical Accounting Policies		25
	f)		Controls and Procedures (Item 4)		27
2) Quantitative and Qualitative Disclosures About Market Risk / Corporate Risk Profile (Item 3)
	a)		Overview		9
	b)		Credit Risk Management		9
	c)		Residual Risk Management		12
	d)		Operational Risk Management		14
	e)		Interest Rate Risk Management		14
	f)		Market Risk Management		17
	g)		Liquidity Risk Management		17
	h)		Capital Management		20
3) Line of Business Financial Review					20
4) Financial Statements (Item 1)					28
Part II — Other Information
1) Submission of Matters to a Vote of Security Holders (Item 4)					45
2) Exhibits and Reports on Form 8-K (Item 6)					45
3) Signature					46
4) Section 302 CEO and CFO Certifications					47
5) Exhibit 12 — Computation of Ratio of Earnings to Fixed Charges					49
6) Exhibit 99.1 — Section 906 CEO Certification					50
7) Exhibit 99.2 — Section 906 CFO Certification					51

Forward-Looking Statements

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Table 1		Selected Financial Data

			Three Months Ended
			March 31,
											Percent
(Dollars and Shares in Millions, Except Per Share Data)			2003				2002				Change
Condensed Income Statement
Net interest income (taxable-equivalent basis) (a)			$	1,783.8			$	1,670.4				6.8	%
Noninterest income				1,382.2				1,288.9				7.2
Securities gains, net				140.7				44.1				*
	Total net revenue			3,306.7				3,003.4				10.1
Noninterest expense				1,574.1				1,442.9				9.1
Provision for credit losses				335.0				335.0				—
	Income before taxes and cumulative effect of change in accounting principles			1,397.6				1,225.5				14.0
Taxable-equivalent adjustment				8.3				9.1				(8.8	)
Income taxes				478.1				423.2				13.0
Income before cumulative effect of change in accounting principles				911.2				793.2				14.9
Cumulative effect of change in accounting principles (after-tax)				—				(37.2	)			*
	Net income		$	911.2			$	756.0				20.5
Per Common Share
Earnings per share before cumulative effect of change in accounting principles			$	.47			$	.41				14.6	%
Diluted earnings per share before cumulative effect of change in accounting principles				.47				.41				14.6
Earnings per share				.47				.39				20.5
Diluted earnings per share				.47				.39				20.5
Dividends declared per share				.205				.195				5.1
Book value per share, period end				9.65				8.30				16.3
Market value per share, period end				18.98				22.57				(15.9	)
Average shares outstanding				1,919.0				1,919.8				—
Average diluted shares outstanding				1,926.6				1,930.1				(.2	)
Financial Ratios
Return on average assets				2.01	%			1.83	%
Return on average equity				20.0				19.0
Net interest margin (taxable-equivalent basis)				4.56				4.62
Efficiency ratio (b)				49.7				48.8
Average Balances
Loans			$	116,312			$	113,708				2.3	%
Loans held for sale				4,041				2,354				71.7
Investment securities				34,220				26,626				28.5
Earning assets				157,751				145,937				8.1
Assets				183,677				167,772				9.5
Noninterest-bearing deposits				32,824				27,485				19.4
Deposits				115,815				102,012				13.5
Short-term borrowings				10,071				14,564				(30.9	)
Long-term debt				29,703				26,450				12.3
Total shareholders’ equity				18,470				16,159				14.3
			March  31, 2003				December 31, 2002
Period End Balances
Loans			$	117,172			$	116,251				.8	%
Allowance for credit losses				2,409				2,422				(.5	)
Investment securities				30,451				28,488				6.9
Assets				182,231				180,027				1.2
Deposits				115,221				115,534				(.3	)
Long-term debt				32,068				28,588				12.2
Total shareholders’ equity				18,520				18,101				2.3
Regulatory capital ratios
	Tangible common equity			5.8	%			5.6	%
	Tier 1 capital			8.0				7.8
	Total risk-based capital			12.4				12.2
	Leverage			7.4				7.5

*		Not meaningful.
(a)		Interest and rates are presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent.
(b)		Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net.

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Management’s Discussion and Analysis" -->

OVERVIEW

Earnings SummaryU.S. Bancorp and its subsidiaries (the “Company”) reported net income of $911.2 million for the first quarter of 2003, or $.47 per diluted share, compared with $756.0 million, or $.39 per diluted share, for the first quarter of 2002. Return on average assets and return on average equity were 2.01 percent and 20.0 percent, respectively, for the first quarter of 2003, compared with returns of 1.83 percent and 19.0 percent, respectively, for the first quarter of 2002. The Company’s results for the first quarter of 2003 improved over the first quarter of 2002, primarily due to strong growth in consumer banking and payment services revenue, offset somewhat by lower investment banking activity. Notable favorable items in the first quarter of 2003 included gains on the sale of securities of $140.7 million, an increase of $96.6 million over the first quarter of 2002. Offsetting these favorable items was the recognition of $120.9 million of mortgage servicing rights (“MSR”) impairment, driven by lower interest rates and related prepayments. Net income for the first quarter of 2003 also included after-tax merger and restructuring-related items of $11.5 million ($17.6 million on a pre-tax basis), compared with after-tax merger and restructuring-related items of $48.4 million ($74.2 million on a pre-tax basis) for the first quarter of 2002. The $56.6 million decline in merger and restructuring-related expenses was primarily due to the completion of integration activities associated with the merger of Firstar Corporation (“Firstar”) and the former U.S. Bancorp (“USBM”). During the first quarter of 2002, the Company recognized an after-tax goodwill impairment charge of $37.2 million primarily related to the purchase of a transportation leasing company in 1998 by the equipment leasing business. This change was recognized as a “cumulative effect of change in accounting principles” in the income statement. Refer to the “Merger and Restructuring-Related Items” and “Accounting Changes” sections for further discussion on merger and restructuring-related items and the earnings impact of changes in accounting principles.

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Acquisition and Divestiture ActivityThe following transactions were accounted for as purchases from the date of completion. On December 31, 2002, the Company acquired the corporate trust business of State Street Bank and Trust Company in a cash transaction. The transaction represented total assets acquired of $682 million and total liabilities assumed of $39 million at the closing date.

Planned Spin-Off of Capital Markets BusinessOn February 19, 2003, the Company announced that its Board of Directors approved a plan to effect a spin-off of its capital markets business unit, including the investment banking and brokerage activities primarily conducted by its wholly-owned subsidiary, U.S. Bancorp Piper Jaffray Inc. In 2002, the capital markets business unit had average assets of $3.0 billion, generated revenues of $736.5 million (5.8 percent of total consolidated revenues) and contributed $.7 million of net income representing less than 1 percent of the Company’s consolidated net income.

STATEMENT OF INCOME ANALYSIS

Net Interest IncomeThe first quarter of 2003 net interest income, on a taxable-equivalent basis, was $1,783.8 million, compared with $1,670.4 million for the first quarter of 2002, which represented a $113.4 million (6.8 percent) increase from a year ago. The increase in net interest income was driven by an $11.8 billion increase in average earning assets, growth in net free funds and favorable changes in the Company’s funding mix. This is offset somewhat by lower yields on investment securities and the repricing of other earning assets relative to interest-bearing liabilities given the current interest rate environment. The increase in average earning assets year-over-year was primarily driven by increases in investment securities, loans held for sale and retail loans, partially offset by a decline in commercial loans. Also contributing to the year-over-year increase in net interest income were recent acquisitions, including Leader, State Street Corporate Trust and Bay View, which accounted for approximately $24.8 million of the increase in net interest income during the first quarter of 2003. The net interest margin for the first quarter of 2003 was 4.56 percent, compared with 4.62 percent for the first quarter of 2002. The decline in the net interest margin reflected growth in lower yield investment securities as a percent of total earning assets.

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Provision for Credit LossesThe provision for credit losses was $335.0 million for the first quarter of 2003 and 2002. Refer to the “Corporate Risk Profile” section for further information on the provision for credit losses, net charge-offs, nonperforming assets and other factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.

Table 2		Analysis of Net Interest Income

			Three Months Ended
			March 31,
(Dollars in Millions)			2003				2002				Change
Components of net interest income
	Income on earning assets (taxable-equivalent basis) (a)		$	2,351.0			$	2,371.7			$	(20.7	)
	Expense on interest-bearing liabilities			567.2				701.3				(134.1	)
Net interest income (taxable-equivalent basis)			$	1,783.8			$	1,670.4			$	113.4
Net interest income, as reported			$	1,775.5			$	1,661.3			$	114.2
Average yields and rates paid
	Earning assets yield (taxable-equivalent basis)			6.02	%			6.57	%			(.55	)%
	Rate paid on interest-bearing liabilities			1.83				2.40				(.57	)
Gross interest margin (taxable-equivalent basis)				4.19	%			4.17	%			.02	%
Net interest margin (taxable-equivalent basis)				4.56	%			4.62	%			(.06	)%
Average balances
	Investment securities		$	34,220			$	26,626			$	7,594
	Loans			116,312				113,708				2,604
	Earning assets			157,751				145,937				11,814
	Interest-bearing liabilities			125,746				118,379				7,367
	Net free funds (b)			32,005				27,558				4,447

(a)		Interest and rates are presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent.
(b)		Represents noninterest-bearing deposits, allowance for credit losses, unrealized gain (loss) on available-for-sale securities, non-earning assets, other noninterest-bearing liabilities and equity.

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Noninterest IncomeNoninterest income during the first quarter of 2003 was $1,522.9 million, an increase of $189.9 million (14.2 percent) from the first quarter of 2002. Included in noninterest income during the first quarter of 2003 were net securities gains of $140.7 million, compared with net securities gains of $44.1 million for the first quarter of 2002, a year-over-year increase of $96.6 million.

Table 3		Noninterest Income

			Three Months Ended
			March 31,
											Percent
(Dollars in Millions)			2003				2002				Change
Credit and debit card revenue			$	127.4			$	109.3				16.6	%
Corporate payment products revenue				86.0				75.2				14.4
ATM processing services				36.9				30.9				19.4
Merchant processing services				127.3				133.6				(4.7	)
Trust and investment management fees				230.3				224.3				2.7
Deposit service charges				168.7				155.7				8.3
Cash management fees				112.0				104.2				7.5
Commercial products revenue				104.2				122.2				(14.7	)
Mortgage banking revenue				95.4				52.0				83.5
Trading account profits and commissions				60.9				49.9				22.0
Investment products fees and commissions				100.3				111.1				(9.7	)
Investment banking revenue				37.6				53.2				(29.3	)
Securities gains, net				140.7				44.1				*
Other				95.2				67.3				41.5
	Total noninterest income		$	1,522.9			$	1,333.0				14.2	%

*		Not meaningful

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Noninterest ExpenseFirst quarter of 2003 noninterest expense was $1,574.1 million, an increase of $131.2 million (9.1 percent) from the first quarter of 2002. During the first quarter of 2003, noninterest expense included $17.6 million of merger and restructuring-related charges, compared with $74.2 million for the first quarter of 2002, a decrease of $56.6 million.

Pension PlansBecause of the long-term nature of pension plan operations and liabilities, the accounting for pensions is complex and can be impacted by several factors, including accounting methods, investment and funding policies and the plan’s actuarial assumptions. The Company’s pension accounting policies comply with the Statement of Financial Accounting Standards No. 87, “Employer’s Accounting for Pension Plans” (“SFAS 87”), and reflect the long-term nature of benefit obligations and the investment horizon of plan assets. The Company has an established process for evaluating the plans, their performance and significant plan assumptions, including the assumed discount rate and the long-term rate of return (“LTROR”). At least annually, an independent consultant is engaged to assist U.S. Bancorp’s Compensation Committee in evaluating plan objectives, investment policies considering its long-term investment time horizon and asset allocation strategies, funding policies and significant plan assumptions. Refer to the Company’s 2002 Annual Report on Form 10-K for a detailed discussion relating to the Company’s pension plan policies.

Table 4		Noninterest Expense

			Three Months Ended
			March 31,
											Percent
(Dollars in Millions)			2003				2002				Change
Compensation and related benefits			$	711.0			$	684.7				3.8	%
Net occupancy and equipment				175.6				177.0				(.8	)
Professional services				29.0				27.5				5.5
Marketing and business development				36.3				41.6				(12.7	)
Technology and communications				118.4				109.2				8.4
Postage, printing and supplies				64.1				67.3				(4.8	)
Intangibles				235.1				80.2				*
Merger and restructuring-related charges				17.6				74.2				(76.3	)
Other				187.0				181.2				3.2
	Total noninterest expense		$	1,574.1			$	1,442.9				9.1	%
Efficiency ratio (a)				49.7	%			48.8	%

*		Not meaningful
(a)		Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net.

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		Combined or Weighted Plan
		Assumptions
						Preliminary				As Reported
		2003				2003				2002
Expected long-term return on plan assets (a)			8.9	%			9.9	%			10.9	%
Discount rate in determining benefit obligations			6.8				6.8				7.2
Rate of increase in future compensation			3.5				3.5				3.5

(a)		The weighted rates for 2002 represent a blended rate utilizing the original 2002 assumption of 11.9 percent for the first six months of 2002 and the 2003 preliminary rate of 9.9 percent for the second six months of 2002. The preliminary rates for 2003 represented the most recent information available at the re-measurement date.

Merger and Restructuring-Related ItemsNoninterest expense in the first quarter of 2003 included merger and restructuring-related items of $17.6 million, compared with $74.2 million for the first quarter of 2002. For the first quarter of 2003, total merger and restructuring-related items included $17.6 million of expenses primarily representing system conversions associated with the acquisition of NOVA and other smaller acquisitions. For the first quarter of 2002, merger and restructuring-related items included $64.4 million of expenses associated with the Firstar/ USBM merger and $9.8 million associated with NOVA and other smaller acquisitions.

Income Tax ExpenseThe provision for income taxes was $478.1 million (an effective rate of 34.4 percent) for the first quarter of 2003, compared with $423.2 million (an effective rate of 34.8 percent) for the first quarter of 2002.

BALANCE SHEET ANALYSIS

Loans The Company’s total loan portfolio was $117.2 billion at March 31, 2003, compared with $116.3 billion at December 31, 2002, an increase of $.9 billion (.8 percent). The increase in total loans was driven by growth in retail loans and residential mortgages. Commercial loans, including lease financing, totaled $42.0 billion at March 31, 2003, compared with $41.9 billion at December 31, 2002, an increase of $67 million (.2 percent). The Company’s portfolio of commercial real estate loans, which includes commercial mortgages and construction loans, was $26.9 billion at March 31, 2003, unchanged from December 31, 2002.

Loans Held for SaleAt March 31, 2003, loans held for sale, consisting primarily of residential mortgages to be sold in the secondary markets, were $3.1 billion, compared with $4.2 billion at December 31, 2002. The $1.1 billion (25.4 percent) decrease was the result of timing differences between loan originations and sales in the first quarter of 2003. On average, loans held for sale increased $.2 billion in the first quarter of 2003, compared with the fourth quarter of 2002 due to increased refinancing activity during the first quarter of 2003 given the declining interest rates for residential mortgage loans.

Investment SecuritiesAt March 31, 2003, investment securities, both available-for-sale and held-to-maturity, totaled $30.5 billion, compared with $28.5 billion at December 31, 2002. The $2.0 billion (6.9 percent) increase reflected the reinvestment of proceeds from loan sales and average deposit growth, partially offset

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Deposits Total deposits were $115.2 billion at March 31, 2003, compared with $115.5 billion at December 31, 2002, a decrease of $.3 billion (.3 percent). The decrease in total deposits was the result of a decline in noninterest-bearing deposits and a decline in higher cost time certificates of deposit less than $100,000, partially offset by an increase in savings deposits. Noninterest-bearing deposits were $34.5 billion at March 31, 2003, compared with $35.1 billion at December 31, 2002, a decrease of $.6 billion (1.8 percent). Interest-bearing deposits totaled $80.8 billion at March 31, 2003, compared with $80.4 billion at December 31, 2002, an increase of $.4 billion (.4 percent). The increase in interest-bearing deposits was primarily driven by increases in money market accounts of $1.8 billion (6.5 percent), along with increases in savings accounts of $.5 billion (9.4 percent) and interest checking $.3 billion (1.5 percent). These increases were partially offset by a decline in time deposits greater than $100,000 (3.0 percent) and a decline in higher cost time certificates of deposits less than $100,000 (10.2 percent). The increase in money market accounts was the result of slightly higher interest rates on high-impact money market products, the continued desire by customers to maintain liquidity, specific deposit gathering initiatives and the State Street Corporate Trust acquisition which contributed approximately $560 million of the increase during the first quarter of 2003. The decline in time certificates of deposits less than $100,000 reflected a shift in product mix towards savings products and funding decisions toward more favorably priced wholesale funding sources given the current interest rate environment.

Borrowings The Company utilizes both short-term and long-term borrowings to fund growth of earning assets in excess of deposit growth. Short-term borrowings, which include federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings, were $6.6 billion at March 31, 2003, compared with $7.8 billion at December 31, 2002. Short-term funding is managed to levels deemed appropriate given alternative funding sources. The decrease of $1.2 billion (15.8 percent) in short-term borrowings reflected the impact of funding earning assets through growth in deposits and a shift toward longer-term funding sources. Long-term debt was $32.1 billion at March 31, 2003, compared with $28.6 billion at December 31, 2002. The $3.5 billion (12.2 percent) increase in long-term debt was driven by the issuance of $4.7 billion of medium-term notes and bank notes during the first quarter of 2003. The issuance of long-term debt was partially offset by maturities of $1.2 billion during the first quarter of 2003. Refer to the “Liquidity Risk Management” section for discussion of liquidity management of the Company.

CORPORATE RISK PROFILE

Overview Managing risks is an essential part of successfully operating a financial services company. The most prominent risk exposures are credit, residual, operational, interest rate, market and liquidity. Credit risk is the risk of not collecting the interest and/or the principal balance of a loan or investment when it is due. Residual risk is the potential reduction in the end-of-term value of leased assets or the residual cash flows related to asset securitization and other off-balance sheet structures. Operational risk includes risks related to fraud, legal and compliance risk, processing errors, technology and breaches of internal controls. Interest rate risk is the potential reduction of net interest income as a result of changes in interest rates. Rate movements can affect the repricing of assets and liabilities differently, as well as their market value. Market risk arises from fluctuations in interest rates, foreign exchange rates, and equity prices that may result in changes in the values of financial instruments, such as trading and available-for-sale securities that are accounted for on a mark-to-market basis. Liquidity risk is the possible inability to fund obligations to depositors, investors or borrowers. In addition, corporate strategic decisions, as well as the risks described above, could give rise to reputation risk. Reputation risk is the risk that negative publicity or press, whether true or not, could result in costly litigation or cause a decline in the Company’s stock value, customer base or revenue.

Credit Risk ManagementThe Company’s strategy for credit risk management includes well-defined, centralized credit policies, uniform underwriting criteria, and ongoing risk monitoring and review processes for all commercial and consumer credit exposures. The strategy also emphasizes diversification on a geographic, industry and customer level, regular credit examinations and management reviews of loans experiencing deterioration of credit quality. The Company strives to identify potential problem loans early, take any

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Analysis of Net Loan Charge-offsTotal loan net charge-offs were $333.8 million for the first quarter of 2003, compared with $335.0 million for the first quarter of 2002, a decrease of $1.2 million. The ratio of total loan net charge-offs to average loans was 1.16 percent in the first quarter of 2003, compared with 1.19 percent in the first quarter of 2002. The level of loan net charge-offs during the first quarter of 2003 reflected current economic conditions and weakness in the communications, transportation and manufacturing sectors, as well as the impact of the economy on highly leveraged enterprise value financings. However, assuming no further deterioration in the economy, the Company expects net charge-offs to trend lower.

Table 5		Net Charge-offs as a Percent of Average Loans Outstanding

					Three Months Ended
					March 31,
					2003				2002
Commercial
	Commercial					1.54	%			1.23	%
	Lease financing					1.78				2.27
		Total commercial				1.57				1.36
Commercial real estate
	Commercial mortgages					.06				.19
	Construction and development					.06				.12
		Total commercial real estate				.06				.17
Residential mortgages						.24				.14
Retail
	Credit card					5.17				4.82
	Retail leasing					.98				.84
	Home equity and second mortgages					.76				.85
	Other retail					1.69				2.21
		Total retail				1.75				1.95
			Total loans			1.16	%			1.19	%

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Analysis of Nonperforming Assets Nonperforming assets include nonaccrual loans, restructured loans not performing in accordance with modified terms, other

Table 6		Nonperforming Assets (a)

					March 31,				December 31,
(Dollars in Millions)					2003				2002
Commercial
	Commercial				$	808.4			$	760.4
	Lease financing					129.4				166.7
		Total commercial				937.8				927.1
Commercial real estate
	Commercial mortgages					174.6				174.6
	Construction and development					46.1				57.5
		Total commercial real estate				220.7				232.1
Residential mortgages						57.4				52.0
Retail
	Retail leasing					.1				1.0
	Other retail					23.8				25.1
		Total retail				23.9				26.1
			Total nonperforming loans			1,239.8				1,237.3
Other real estate						66.2				59.5
Other assets						56.6				76.7
			Total nonperforming assets		$	1,362.6			$	1,373.5
Restructured loans accruing interest (b)					$	—			$	1.4
Accruing loans 90 days or more past due (c)					$	403.5			$	426.4
Nonperforming loans to total loans						1.06	%			1.06	%
Nonperforming assets to total loans plus other real estate						1.16	%			1.18	%

Delinquent Loan Ratios

(as a percent of ending loan balances)					March 31,				December 31,
90 days or more past due excluding nonperforming loans					2003				2002
Commercial
	Commercial					.10	%			.14	%
	Lease financing					.08				.10
		Total commercial				.10				.14
Commercial real estate
	Commercial mortgages					.02				.03
	Construction and development					.05				.07
		Total commercial real estate				.03				.04
Residential mortgages						.82				.90
Retail
	Credit card					2.21				2.09
	Retail leasing					.18				.19
	Other retail					.51				.54
		Total retail				.71				.72
			Total loans			.34	%			.37	%

			March 31,				December 31,
90 days or more past due including nonperforming loans			2003				2002
Commercial				2.33	%			2.35	%
Commercial real estate				.85				.90
Residential mortgages				1.37				1.44
Retail				.77				.79
	Total loans			1.40	%			1.43	%

(a)		Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due.
(b)		Nonaccrual restructured loans are included in the respective nonperforming loan categories and excluded from restructured loans accruing interest.
(c)		These loans are not included in nonperforming assets and continue to accrue interest because they are secured by collateral and/or are in the process of collection and are reasonably expected to result in repayment or restoration to current status.

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Analysis and Determination of the Allowance for Credit Losses The allowance for credit losses provides coverage for probable and estimable losses inherent in the Company’s loan and lease portfolio. Management evaluates the allowance each quarter to determine that it is adequate to cover inherent losses. The evaluation of each element and the overall allowance is based on a continuing assessment of problem loans and related off-balance sheet items, recent loss experience and other factors, including regulatory guidance and economic conditions.

Residual Risk ManagementThe Company manages its risk to changes in the value of lease residual assets through disciplined residual setting and valuation at the inception of a lease, diversification of its leased assets, regular asset valuation reviews and monitoring of residual value gains or losses upon the disposition of assets. Commercial lease originations are subject to the same well-defined underwriting standards referred to in the “Credit Risk Management” section which includes an evaluation of the residual risk. Retail lease residual risk is mitigated further by originating longer-term vehicle leases and effective end-of-term marketing of off-

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Table 7		Summary of Allowance for Credit Losses

						Three Months Ended
						March 31,
(Dollars in Millions)						2003				2002
Balance at beginning of period						$	2,422.0			$	2,457.3
Charge-offs
	Commercial
		Commercial					149.0				131.0
		Lease financing					40.5				42.0
			Total commercial				189.5				173.0
	Commercial real estate
		Commercial mortgages					5.7				10.0
		Construction and development					2.1				2.0
			Total commercial real estate				7.8				12.0
	Residential mortgages						7.0				4.1
	Retail
		Credit card					74.8				72.9
		Retail leasing					15.3				11.7
		Home equity and second mortgages					27.8				27.8
		Other retail					70.4				84.2
			Total retail				188.3				196.6
				Total charge-offs			392.6				385.7
Recoveries
	Commercial
		Commercial					11.1				10.5
		Lease financing					17.5				9.9
			Total commercial				28.6				20.4
	Commercial real estate
		Commercial mortgages					2.8				1.2
		Construction and development					1.1				.1
			Total commercial real estate				3.9				1.3
	Residential mortgages						1.1				1.4
	Retail
		Credit card					6.1				5.9
		Retail leasing					1.4				1.2
		Home equity and second mortgages					2.4				1.7
		Other retail					15.3				18.8
			Total retail				25.2				27.6
				Total recoveries			58.8				50.7
Net Charge-offs
	Commercial
		Commercial					137.9				120.5
		Lease financing					23.0				32.1
			Total commercial				160.9				152.6
	Commercial real estate
		Commercial mortgages					2.9				8.8
		Construction and development					1.0				1.9
			Total commercial real estate				3.9				10.7
	Residential mortgages						5.9				2.7
	Retail
		Credit card					68.7				67.0
		Retail leasing					13.9				10.5
		Home equity and second mortgages					25.4				26.1
		Other retail					55.1				65.4
			Total retail				163.1				169.0
				Total net charge-offs			333.8				335.0
Provision for credit losses							335.0				335.0
Acquisitions and other changes							(14.7	)			4.2
Balance at end of period (a)						$	2,408.5			$	2,461.5
Allowance as a percentage of
	Period-end loans						2.06	%			2.15	%
	Nonperforming loans						194				250
	Nonperforming assets						177				222
	Annualized net charge-offs						178				181

(a)		The allowance for credit losses includes credit loss liability related to off-balance sheet commitments. At March 31, 2003, the allowance for credit losses included an estimated $113.5 million credit loss liability related to the Company’s $57.0 billion of commercial off-balance sheet loan commitments and letters of credit.

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Operational Risk ManagementOperational risk represents the risk of loss resulting from the Company’s operations, including, but not limited to, the risk of fraud by employees or persons outside the Company, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology, and breaches of the internal control system and compliance requirements. This risk of loss also includes the potential legal actions that could arise as a result of an operational deficiency or as a result of noncompliance with applicable regulatory standards, adverse business decisions or their implementation, and customer attrition due to potential negative publicity.

Interest Rate Risk ManagementIn the banking industry, a significant risk exists related to changes in interest rates. To minimize the volatility of net interest income and of the market value of assets and liabilities, the Company manages its exposure to changes in interest rates through asset and liability management activities within guidelines established by its Asset Liability Policy Committee (“ALPC”) and approved by the Board of Directors. ALPC has the responsibility for approving and ensuring compliance with ALPC management policies, including interest rate risk exposure. The Company uses Net Interest Income Simulation Analysis

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Net Interest Income Simulation Analysis One of the primary tools used to measure interest rate risk and the effect of interest rate changes on rate sensitive income and net interest income is simulation analysis. The monthly analysis incorporates substantially all of the Company’s assets and liabilities and off-balance sheet instruments, together with forecasted changes in the balance sheet and assumptions that reflect the current interest rate environment. Through these simulations, management estimates the impact on interest rate sensitive income of a 300 basis point upward or downward gradual change of market interest rates over a one year period. The simulations also estimate the effect of immediate and sustained parallel shifts in the yield curve of 50 basis points as well as the effect of immediate and sustained flattening or steepening of the yield curve. These simulations include assumptions about how the balance sheet is likely to be affected by changes in loan and deposit growth. Assumptions are made to project interest rates for new loans and deposits based on historical analysis, management’s outlook and repricing strategies. These assumptions are validated on a periodic basis. A sensitivity analysis is provided for key variables of the simulation. The results are reviewed by ALPC monthly and are used to guide hedging strategies. ALPC policy guidelines limit the estimated change in interest rate sensitive income to 5.0 percent of forecasted interest rate sensitive income over the succeeding 12 months.

Market Value of Equity Modeling The Company also utilizes the market value of equity as a measurement tool in managing interest rate sensitivity. The market value of equity measures the degree to which the market values of the Company’s assets and liabilities and off-balance sheet instruments will change given a change in interest rates. ALPC guidelines limit the change in market value of equity in a 200 basis point parallel rate shock to 15 percent of the base case. Given the low level of current interest rates, the down 200 basis point scenario cannot be computed. The up 200 basis point scenario was a 3.15 percent decrease at March 31, 2003, compared with a 2.5 percent decrease at December 31, 2002. ALPC reviews other down rate scenarios to evaluate the impact of falling interest rates. The down 100 basis point scenario was a .38 percent decrease at March 31, 2003, and a 1.0 percent decrease at December 31, 2002. The overall sensitivity was relatively neutral.

Use of Derivatives to Manage Interest Rate Risk In the ordinary course of business, the Company enters into derivative transactions to manage its interest rate and prepayment risk (“asset and liability management positions”) and to accommodate the business requirements of its customers (“customer-related positions”). To manage its interest rate risk, the Company may enter into interest rate swap agreements and interest rate options such as caps and floors. Interest rate swaps involve the exchange of fixed-rate and variable-rate payments without the exchange of the underlying notional amount on which the interest payments are calculated. Interest rate caps protect against rising interest rates while interest rate floors protect against declining interest rates. In connection with its mortgage banking operations, the Company enters into forward commitments to sell mortgage loans related to fixed-rate mortgage loans held for sale and fixed-rate mortgage loan commitments. The Company also acts as a seller and buyer of interest rate contracts and foreign exchange rate contracts on behalf of

Sensitivity of Net Interest Income and Rate Sensitive Income:

		March 31, 2003																December 31, 2002
		Down 50				Up 50				Down 300				Up 300				Down 50				Up 50				Down 300				Up 300
		Immediate				Immediate				Gradual				Gradual				Immediate				Immediate				Gradual				Gradual
Net interest income			.20	%			(.57	)%			*	%			(2.49	)%			.08	%			(.34	)%			*	%			(1.91	)%
Rate sensitive income			.31	%			(.77	)%			*	%			(2.59	)%			.20	%			(.55	)%			*	%			(2.57	)%

*		Given the current level of interest rates, a downward 300 basis point scenario cannot be computed.

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Table 8		Derivative Positions

													Weighted-
													Average
													Remaining
					Notional				Fair				Maturity
March 31, 2003 (Dollars in Millions)						Amount				Value			In Years
Asset and Liability Management Positions
	Interest rate contracts
		Receive fixed/pay floating swaps			$	20,573			$	1,347				4.92
		Pay fixed/receive floating swaps				5,640				(115	)			1.33
		Futures and forwards				6,371				(55	)			.16
		Options
			Written			3,602				18				.20
	Equity contracts					5				—				2.67
Customer-related Positions
	Interest rate contracts
		Receive fixed/pay floating swaps			$	4,648			$	231				4.50
		Pay fixed/receive floating swaps				4,648				(205	)			4.50
		Basis swaps				1				—				1.42
		Options
			Purchased			406				4				1.58
			Written			392				(4	)			1.67
	Foreign exchange rate contracts
		Forwards, spots and swaps
			Buy			3,182				263				.51
			Sell			3,200				(261	)			.51
		Options
			Purchased			154				6				.47
			Written			154				(7	)			.47

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Market Risk ManagementIn addition to interest rate risk, the Company is exposed to other forms of market risk as a consequence of conducting normal trading activities. Business activities that contribute to market risk include, among other things, market making, underwriting, proprietary trading and foreign exchange positions. Value at Risk (“VaR”) is a key measure of market risk for the Company. Theoretically, VaR represents the maximum amount that the Company has placed at risk of loss, with a ninety-ninth percentile degree of confidence, to adverse market movements in the course of its risk taking activities.

Liquidity Risk ManagementALPC establishes policies, as well as analyzes and manages liquidity, to ensure that adequate funds are available to meet normal operating requirements in addition to unexpected customer demands for funds, such as high levels of deposit withdrawals or loan demand, in a timely and cost-effective manner. The most important factor in the preservation of liquidity is maintaining public confidence that facilitates the retention and growth of a large, stable supply of core deposits and wholesale funds. Ultimately, public confidence is generated through profitable operations, sound credit quality and a strong capital position. The Company’s performance in these areas has enabled it to develop a large and reliable base of core funding within its market areas and in domestic and global capital markets. Liquidity management is viewed from a long-term and short-term perspective, as well as from an asset and liability perspective. Management monitors liquidity through a regular review of maturity profiles, funding sources, and loan and deposit forecasts to minimize funding risk.

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Off-Balance Sheet ArrangementsAsset securitization and conduits represent a source of funding for the Company through off-balance sheet structures. The Company sponsors two off-balance sheet conduits to which it has transferred high-grade assets: a commercial loan conduit and an investment securities conduit. These conduits are funded by issuing commercial paper. The commercial loan conduit holds primarily high credit quality commercial loans and held assets of $2.9 billion at March 31, 2003, and $4.2 billion at December 31, 2002. The investment securities conduit holds high-grade investment securities and held assets of $8.9 billion at March 31, 2003, and $9.5 billion at December 31, 2002. These investment securities include primarily (i) private label asset-backed securities, which are insurance “wrapped” by AAA/Aaa-rated mono-line insurance companies and (ii) government agency mortgage-backed securities and collateralized mortgage obligations. The commercial loan conduit had commercial paper liabilities of $2.9 billion at March 31, 2003, and $4.2 billion at December 31, 2002. The investment securities conduit had commercial paper liabilities of $8.9 billion at March 31, 2003, and $9.5 billion at December 31, 2002. The Company benefits by selling commercial loans and investment securities to conduits that provide diversification of funding sources in a capital-efficient manner and generate income.

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Capital ManagementThe Company is committed to managing capital for maximum shareholder benefit and maintaining strong protection for depositors and creditors. Total shareholders’ equity was $18.5 billion at March 31, 2003, compared with $18.1 billion at December 31, 2002. The increase was primarily the result of corporate earnings offset by dividends.

LINE OF BUSINESS FINANCIAL REVIEW

Wholesale Bankingoffers lending, depository, treasury management and other financial services to middle market, large corporate and public sector clients. Wholesale Banking contributed $308.8 million of the Company’s net operating earnings in the first quarter of 2003, a 20.2 percent decrease from the first quarter of 2002. The significant decrease in operating earnings in the first quarter of 2003, compared with the same quarter of a year ago, was primarily driven by a higher provision for credit losses.

Table 9		Capital Ratios

			March 31,				December 31,
(Dollars in Millions)			2003				2002
Tangible common equity			$	10,106			$	9,489
	As a percent of tangible assets			5.8	%			5.6	%
Tier 1 capital			$	12,873			$	12,606
	As a percent of risk-weighted assets			8.0	%			7.8	%
	As a percent of adjusted quarterly average assets (leverage ratio)			7.4	%			7.5	%
Total risk-based capital			$	19,900			$	19,753
	As a percent of risk-weighted assets			12.4	%			12.2	%

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Consumer Bankingdelivers products and services to the broad consumer market and small businesses through banking offices, telemarketing, on-line services, direct mail and automated teller machines (“ATMs”). It encompasses community banking, metropolitan banking, small business banking, consumer lending, mortgage banking, workplace banking, student banking, 24-hour banking and investment product and insurance sales. Consumer Banking contributed $381.8 million of the Company’s net operating earnings in the first quarter of 2003 and $326.1 million in the first quarter of 2002, a 17.1 percent increase.

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Private Client, Trust and Asset Managementprovides mutual fund processing services, trust, private banking and financial advisory services through four businesses, including: the Private Client Group, Corporate Trust, Institutional Trust and Custody and Fund Services, LLC. The business segment also offers investment management services to several client segments, including mutual funds, institutional customers and private asset management. Private Client, Trust and Asset Management contributed $116.5 million of the Company’s net operating earnings in the first quarter of 2003, an increase of 3.0 percent, compared with the same quarter of a year ago.

Table 10		Line of Business Financial Performance

				Wholesale												Consumer												Private Client, Trust
				Banking												Banking												and Asset Management
												Percent												Percent												Percent
For the Three Months Ended March 31 (Dollars in Millions)				2003				2002				Change				2003				2002				Change				2003				2002				Change
Condensed Income Statement
Net interest income (taxable-equivalent basis)				$	507.8			$	484.3				4.9	%		$	849.7			$	782.8				8.5	%		$	90.1			$	78.5				14.8	%
Noninterest income					198.3				181.2				9.4				456.6				298.0				53.2				225.6				222.5				1.4
	Total net revenue				706.1				665.5				6.1				1,306.3				1,080.8				20.9				315.7				301.0				4.9
Noninterest expense					97.3				92.0				5.8				420.5				419.3				.3				115.6				111.9				3.3
Other intangible amortization					4.9				5.2				(5.8	)			173.5				28.5				*				16.5				7.6				*
	Total noninterest expense				102.2				97.2				5.1				594.0				447.8				32.6				132.1				119.5				10.5
		Operating income			603.9				568.3				6.3				712.3				633.0				12.5				183.6				181.5				1.2
Provision for credit losses					118.5				(40.0	)			*				112.1				120.3				(6.8	)			.4				3.7				(89.2	)
Income before income taxes					485.4				608.3				(20.2	)			600.2				512.7				17.1				183.2				177.8				3.0
Income taxes and taxable-equivalent adjustment					176.6				221.4				(20.2	)			218.4				186.6				17.0				66.7				64.7				3.1
Operating earnings (loss), before merger and restructuring- related items and cumulative effect of change in accounting principles				$	308.8			$	386.9				(20.2	)		$	381.8			$	326.1				17.1			$	116.5			$	113.1				3.0
Merger and restructuring-related items (after-tax)
Cumulative effect of change in accounting principles (after-tax)
Net income
Average Balance Sheet Data
Commercial				$	30,180			$	32,894				(8.3	)%		$	6,572			$	7,695				(14.6	)%		$	1,790			$	1,823				(1.8	)%
Commercial real estate					16,408				15,687				4.6				9,540				8,701				9.6				574				593				(3.2	)
Residential mortgages					173				144				20.1				9,670				7,601				27.2				265				212				25.0
Retail					66				182				(63.7	)			28,511				25,726				10.8				2,163				1,927				12.2
	Total loans				46,827				48,907				(4.3	)			54,293				49,723				9.2				4,792				4,555				5.2
Goodwill					1,334				1,380				(3.3	)			2,138				1,698				25.9				738				287				*
Other intangible assets					114				135				(15.6	)			979				784				24.9				427				233				83.3
Assets					53,918				55,686				(3.2	)			64,420				58,127				10.8				6,554				5,798				13.0
Noninterest-bearing deposits					16,159				12,235				32.1				13,428				12,436				8.0				2,719				2,316				17.4
Savings products					7,561				4,807				57.3				39,037				35,325				10.5				4,869				4,285				13.6
Time deposits					3,433				2,270				51.2				20,353				23,775				(14.4	)			480				456				5.3
	Total deposits				27,153				19,312				40.6				72,818				71,536				1.8				8,068				7,057				14.3
Shareholders’ equity				$	5,299			$	5,298				—			$	5,458			$	4,477				21.9			$	2,083			$	1,346				54.8

*		Not meaningful

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Payment Servicesincludes consumer and business credit cards, corporate and purchasing card services, consumer lines of credit, ATM processing, merchant processing and debit cards. Payment Services contributed $170.3 million of the Company’s net operating earnings in the first quarter of 2003, a 22.4 percent increase over the first quarter of 2002.

Payment												Capital												Treasury and												Consolidated
Services												Markets												Corporate Support												Company
								Percent												Percent												Percent												Percent
2003				2002				Change				2003				2002				Change				2003				2002				Change				2003				2002				Change
$	168.7			$	170.2				(.9	)%		$	6.3			$	7.8				(19.2	)%		$	161.2			$	146.8				9.8	%		$	1,783.8			$	1,670.4				6.8	%
	392.7				364.6				7.7				164.1				171.2				(4.1	)			85.6				95.5				(10.4	)			1,522.9				1,333.0				14.2
	561.4				534.8				5.0				170.4				179.0				(4.8	)			246.8				242.3				1.9				3,306.7				3,003.4				10.1
	147.6				162.8				(9.3	)			163.2				162.8				.2				377.2				339.7				11.0				1,321.4				1,288.5				2.6
	38.7				38.6				.3				—				—				—				1.5				.3				*				235.1				80.2				*
	186.3				201.4				(7.5	)			163.2				162.8				.2				378.7				340.0				11.4				1,556.5				1,368.7				13.7
	375.1				333.4				12.5				7.2				16.2				(55.6	)			(131.9	)			(97.7	)			(35.0	)			1,750.2				1,634.7				7.1
	107.4				114.7				(6.4	)			—				—				—				(3.4	)			136.3				*				335.0				335.0				—
	267.7				218.7				22.4				7.2				16.2				(55.6	)			(128.5	)			(234.0	)			45.1				1,415.2				1,299.7				8.9
	97.4				79.6				22.4				2.6				5.9				(55.9	)			(69.2	)			(100.1	)			30.9				492.5				458.1				7.5
$	170.3			$	139.1				22.4			$	4.6			$	10.3				(55.3	)		$	(59.3	)		$	(133.9	)			55.7				922.7				841.6				9.6
																																					(11.5	)			(48.4	)
																																					—				(37.2	)
																																				$	911.2			$	756.0
$	2,741			$	2,709				1.2	%		$	117			$	227				(48.5	)%		$	191			$	33				*	%		$	41,591			$	45,381				(8.4	)%
	—				—				—				—				—				—				261				205				27.3				26,783				25,186				6.3
	—				—				—				—				—				—				16				5				*				10,124				7,962				27.2
	7,026				7,312				(3.9	)			—				—				—				48				32				50.0				37,814				35,179				7.5
	9,767				10,021				(2.5	)			117				227				(48.5	)			516				275				87.6				116,312				113,708				2.3
	1,812				1,821				(.5	)			306				306				—				—				—				—				6,328				5,492				15.2
	702				799				(12.1	)			—				—				—				49				6				*				2,271				1,957				16.0
	13,288				13,234				.4				2,506				3,156				(20.6	)			42,991				31,771				35.3				183,677				167,772				9.5
	416				265				57.0				70				214				(67.3	)			32				19				68.4				32,824				27,485				19.4
	9				7				28.6				—				—				—				15				298				(95.0	)			51,491				44,722				15.1
	—				—				—				—				—				—				7,234				3,304				*				31,500				29,805				5.7
	425				272				56.3				70				214				(67.3	)			7,281				3,621				*				115,815				102,012				13.5
$	3,151			$	3,183				(1.0	)		$	624			$	636				(1.9	)		$	1,855			$	1,219				52.2			$	18,470			$	16,159				14.3

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Capital Marketsengages in equity and fixed income trading activities, offers investment banking and underwriting services for corporate and public sector customers and provides financial advisory services and securities, mutual funds, annuities and insurance products to consumers and regionally based businesses through a network of brokerage offices. Capital Markets contributed $4.6 million of the Company’s net operating earnings in the first quarter of 2003, a 55.3 percent decline, compared with the same quarter of a year ago. Total net revenue was $170.4 million in the first quarter of 2003, compared with $179.0 million in first quarter of 2002. Net interest income decreased $1.5 million, primarily due to lower average balances in the trading account and money market investment portfolios in addition to the decline in the funding benefit on noninterest-bearing deposits due to a reduction in average balances. The $7.1 million reduction in noninterest income was due to a decline in investment product fees and commissions and investment banking revenues, reflecting the continued adverse capital markets conditions partially offset by an increase in trading account profits and commissions and lower mark-to-market valuation adjustments. Capital markets activities continued to experience weak sales volumes and lower levels of investment banking and merger and acquisition transactions. Management anticipates continued softness in sales activities and related revenue growth throughout the next several quarters. Noninterest expense was essentially flat quarter over prior year quarter.

Treasury and Corporate Supportincludes the Company’s investment portfolios, funding, capital management and asset securitization activities, interest rate risk management, the net effect of transfer pricing related to average balances and business activities managed on a corporate basis, including enterprise-wide operations and administrative support functions. Treasury and Corporate Support recorded an operating loss of $59.3 million in the first quarter of 2003, a 55.7 percent improvement, compared with the same quarter of a year ago.

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ACCOUNTING CHANGES

    Note 2 of the Notes to Consolidated Financial Statements discusses new accounting policies adopted by the Company during 2003 and 2002 and the expected impact of accounting policies recently issued or proposed but not yet required to be adopted. To the extent the adoption of new accounting standards affects the Company’s financial condition, results of operations or liquidity, the impacts are discussed in the applicable section(s) of the Management’s Discussion and Analysis and the Notes to Consolidated Financial Statements.

CRITICAL ACCOUNTING POLICIES

    The accounting and reporting policies of the Company comply with accounting principles generally accepted in the United States and conform to general practices within the banking industry. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. The financial position and results of operations can be affected by these estimates and assumptions, which are integral to understanding reported results. Critical accounting policies are those policies that management believes are the most important to the portrayal of the Company’s financial condition and results, and require management to make estimates that are difficult, subjective or complex. Most accounting policies are not considered by management to be critical accounting policies. Several factors are considered in determining whether or not a policy is critical in the preparation of financial statements. These factors include, among other things, whether the estimates are significant to the financial statements, the nature of the estimates, the ability to readily validate the estimates with other information including third parties or available prices, and sensitivity of the estimates to changes in economic conditions and whether alternative accounting methods may be utilized under generally accepted accounting principles. Management has discussed the development and the selection of critical accounting policies with the Company’s Audit Committee.

Allowance for Credit LossesThe allowance for credit losses is established to provide for probable losses inherent in the Company’s credit portfolio. The methods utilized to estimate the allowance for credit losses, key assumptions and quantitative and qualitative information considered by management in determining the adequacy of the allowance for credit losses are discussed in the “Credit Risk Management” section.

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Asset Impairment In the ordinary course of business, the Company evaluates the carrying value of its assets for potential impairment. Generally, potential impairment is determined based on a comparison of fair value to the carrying value. The determination of fair value can be highly subjective, especially for assets that are not actively traded or when market-based prices are not available. The Company estimates fair value based on the present value of estimated future cash flows. The initial valuation and subsequent impairment tests may require the use of significant management estimates. Additionally, determining the amount, if any, of an impairment may require an assessment of whether or not a decline in an asset’s estimated fair value below the recorded value is temporary in nature. While impairment assessments impact most asset categories, the following areas are considered to be critical accounting matters in relation to the financial statements.

Mortgage Servicing Rights Mortgage servicing rights (“MSRs”) are capitalized as separate assets when loans are sold and servicing is retained. The total cost of loans sold is allocated between the loans sold and the servicing assets retained based on their relative fair values. MSRs that are purchased from others are initially recorded at cost. The carrying value of the MSRs is amortized in proportion to and over the period of estimated net servicing revenue and recorded in noninterest expense as amortization of intangible assets. The carrying value of these assets is periodically reviewed for impairment using a lower of carrying value or fair value methodology. For purposes of measuring impairment, the servicing rights are stratified based on the underlying loan type and note rate and the carrying value for each stratum is compared to fair value based on a discounted cash flow analysis, utilizing current prepayment speeds and discount rates. Events that may significantly affect the estimates used are changes in interest rates and the related impact on mortgage loan prepayment speeds and the payment performance of the underlying loans. If the fair value is less than the carrying value, impairment is recognized through a valuation allowance for each impaired stratum and recorded as amortization of intangible assets. The reduction in the fair value of MSRs at March 31, 2003, to immediate 25 and 50 basis point adverse changes in interest rates would be approximately $69 million and $130 million, respectively. An upward movement in interest rates at March 31, 2003, of 25 and 50 basis points would increase the fair value of the MSRs by approximately $96 million and $173 million, respectively. Refer to Note 6 of the Notes to Consolidated Financial Statements for additional information regarding MSRs.

Goodwill and Other Intangibles The Company records all assets and liabilities acquired in purchase acquisitions, including goodwill and other intangibles, at fair value as required by the Statement of Financial Accounting Standards No. 141 (“SFAS 141”), “Goodwill and Other Intangible Assets.” Goodwill and indefinite-lived assets are no longer amortized but are subject, at a minimum, to annual tests for impairment. Under certain situations, interim impairments tests may be required if events occur or circumstances change that would more likely than not reduce the fair value of a reporting segment below its carrying amount. Other intangible assets are amortized over their estimated useful lives using straight-line and accelerated methods and are subject to impairment if events or circumstances indicate a possible inability to realize the carrying amount.

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CONTROLS AND PROCEDURES

    Under the supervision and with the participation of the Company’s management, including its principal executive officer and principal financial officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 15d-14(c) under the Securities Exchange Act of 1934) as of a date within 90 days prior to the filing date of this report. Based upon this evaluation, the principal executive officer and principal financial officer have concluded that, as of such date, the Company’s disclosure controls and procedures were effective in making them aware on a timely basis of the material information relating to the Company required to be included in the Company’s periodic filings with the Securities and Exchange Commission.

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Consolidated Balance Sheet" -->

					March 31,				December 31,
(Dollars in Millions)					2003				2002
					(Unaudited)
Assets
Cash and due from banks					$	8,910			$	10,758
Money market investments						454				434
Trading securities						1,300				898
Investment securities
	Held-to-maturity (fair value $229 and $240, respectively)					220				233
	Available-for-sale					30,231				28,255
Loans held for sale						3,102				4,159
Loans
	Commercial					42,011				41,944
	Commercial real estate					26,893				26,867
	Residential mortgages					10,329				9,746
	Retail					37,939				37,694
		Total loans				117,172				116,251
			Less allowance for credit losses			2,409				2,422
			Net loans			114,763				113,829
Premises and equipment						1,655				1,697
Customers’ liability on acceptances						140				140
Goodwill						6,332				6,325
Other intangible assets						2,181				2,321
Other assets						12,943				10,978
		Total assets			$	182,231			$	180,027
Liabilities and Shareholders’ Equity
Deposits
	Noninterest-bearing				$	34,459			$	35,106
	Interest-bearing					68,909				68,214
	Time deposits greater than $100,000					11,853				12,214
		Total deposits				115,221				115,534
Short-term borrowings						6,576				7,806
Long-term debt						32,068				28,588
Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely the junior subordinated debentures of the parent company						2,983				2,994
Acceptances outstanding						140				140
Other liabilities						6,723				6,864
		Total liabilities				163,711				161,926
Shareholders’ equity
	Common stock, par value $0.01 a share — authorized: 4,000,000,000 shares issued: 3/31/03 — 1,972,643,065 shares; 12/31/02 — 1,972,643,060 shares					20				20
	Capital surplus					4,841				4,850
	Retained earnings					14,236				13,719
	Less cost of common stock in treasury: 3/31/03 — 53,593,105 shares; 12/31/02 — 55,686,500 shares					(1,222	)			(1,272	)
	Other comprehensive income					645				784
		Total shareholders’ equity				18,520				18,101
		Total liabilities and shareholders’ equity			$	182,231			$	180,027

See Notes to Consolidated Financial Statements.

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Consolidated Statement of Income" -->

				Three Months Ended
				March 31,
(Dollars and Shares in Millions, Except Per Share Data)
(Unaudited)				2003				2002
Interest Income
Loans				$	1,836.8			$	1,931.9
Loans held for sale					59.6				39.2
Investment securities
	Taxable				396.1				347.8
	Non-taxable				8.9				13.2
Money market investments					4.0				3.3
Trading securities					8.0				8.2
Other interest income					29.3				19.0
		Total interest income			2,342.7				2,362.6
Interest Expense
Deposits					306.6				395.5
Short-term borrowings					43.4				78.9
Long-term debt					185.8				192.1
Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely the junior subordinated debentures of the parent company					31.4				34.8
		Total interest expense			567.2				701.3
Net interest income					1,775.5				1,661.3
Provision for credit losses					335.0				335.0
Net interest income after provision for credit losses					1,440.5				1,326.3
Noninterest Income
Credit and debit card revenue					127.4				109.3
Corporate payment products revenue					86.0				75.2
ATM processing services					36.9				30.9
Merchant processing services					127.3				133.6
Trust and investment management fees					230.3				224.3
Deposit service charges					168.7				155.7
Cash management fees					112.0				104.2
Commercial products revenue					104.2				122.2
Mortgage banking revenue					95.4				52.0
Trading account profits and commissions					60.9				49.9
Investment products fees and commissions					100.3				111.1
Investment banking revenue					37.6				53.2
Securities gains, net					140.7				44.1
Other					95.2				67.3
		Total noninterest income			1,522.9				1,333.0
Noninterest Expense
Salaries					601.8				588.3
Employee benefits					109.2				96.4
Net occupancy					102.2				100.1
Furniture and equipment					73.4				76.9
Capitalized software					37.3				38.4
Communication					51.2				45.7
Postage					45.4				46.6
Other intangible assets					235.1				80.2
Merger and restructuring-related charges					17.6				74.2
Other					300.9				296.1
		Total noninterest expense			1,574.1				1,442.9
Income before income taxes and cumulative effect of change in accounting principles					1,389.3				1,216.4
Applicable income taxes					478.1				423.2
Income before cumulative effect of change in accounting principles					911.2				793.2
Cumulative effect of change in accounting principles					—				(37.2	)
Net income				$	911.2			$	756.0
Earnings Per Share
	Income before cumulative effect of change in accounting principles			$	.47			$	.41
	Cumulative effect of change in accounting principles				—				(.02	)
	Net income			$	.47			$	.39
Diluted Earnings Per Share
	Income before cumulative effect of change in accounting principles			$	.47			$	.41
	Cumulative effect of change in accounting principles				—				(.02	)
	Net income			$	.47			$	.39
Dividends declared per share				$	.205			$	.195
Average common shares					1,919.0				1,919.8
Average diluted common shares					1,926.6				1,930.1

See Notes to Consolidated Financial Statements.

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Consolidated Statement of Shareholders’ Equity" -->

																							Other				Total
(Dollars in Millions)			Common Shares				Common				Capital				Retained				Treasury				Comprehensive				Shareholders’
(Unaudited)			Outstanding				Stock				Surplus				Earnings				Stock				Income (Loss)				Equity
Balance December 31, 2001				1,951,709,512			$	19.7			$	4,906.2			$	11,918.0			$	(478.1	)		$	95.4			$	16,461.2
Net income																756.0												756.0
Unrealized loss on securities available for sale																								(30.3	)			(30.3	)
Unrealized loss on derivatives																								(103.4	)			(103.4	)
Realized gain on derivatives																								.9				.9
Reclassification adjustment for gains realized in net income																								(30.6	)			(30.6	)
Income taxes																								62.1				62.1
	Total comprehensive income																											654.7
Cash dividends declared on common stock																(367.7	)											(367.7	)
Issuance of common and treasury stock				3,451,272								(19.5	)							81.5								62.0
Purchase of treasury stock				(40,014,685	)															(923.2	)							(923.2	)
Shares reserved to meet deferred compensation obligations				(30,722	)							1.8								(1.8	)							—
Amortization of restricted stock												5.2																5.2
Balance March 31, 2002				1,915,115,377			$	19.7			$	4,893.7			$	12,306.3			$	(1,321.6	)		$	(5.9	)		$	15,892.2
Balance December 31, 2002				1,916,956,560			$	19.7			$	4,850.4			$	13,718.6			$	(1,272.1	)		$	784.0			$	18,100.6
Net income																911.2												911.2
Unrealized loss on securities available for sale																								(96.9	)			(96.9	)
Unrealized loss on derivatives																								(169.2	)			(169.2	)
Foreign currency translation adjustment																								5.9				5.9
Realized gain on derivatives																								188.2				188.2
Reclassification adjustment for gains realized in net income																								(153.1	)			(153.1	)
Income taxes																								85.5				85.5
	Total comprehensive income																											771.6
Cash dividends declared on common stock																(393.4	)											(393.4	)
Issuance of common and treasury stock				2,492,344								(21.0	)							57.7								36.7
Shares reserved to meet deferred compensation obligations				(398,944	)							7.8								(7.8	)							—
Amortization of restricted stock												4.1																4.1
Balance March 31, 2003				1,919,049,960			$	19.7			$	4,841.3			$	14,236.4			$	(1,222.2	)		$	644.4			$	18,519.6

See Notes to Consolidated Financial Statements.

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Consolidated Statement of Cash Flows" -->

			Three Months Ended
			March 31,
(Dollars in Millions)
(Unaudited)			2003				2002
Operating Activities
	Net cash provided by (used in) operating activities		$	2,391.5			$	2,708.9
Investing Activities
Proceeds from sales of investment securities				3,579.5				3,862.9
Maturities of investment securities				4,576.3				1,667.3
Purchases of investment securities				(12,787.3	)			(3,719.1	)
Net (increase) decrease in loans outstanding (a)				(1,566.5	)			(1,008.6	)
Proceeds from sales of loans				617.7				437.3
Purchases of loans				(211.2	)			(.2	)
Proceeds from sales of premises and equipment				11.5				30.7
Purchases of premises and equipment				(36.9	)			(97.1	)
Other, net				(2.0	)			(40.1	)
	Net cash provided by (used in) investing activities			(5,818.9	)			1,133.1
Financing Activities
Net increase (decrease) in deposits				(312.8	)			(2,747.7	)
Net increase (decrease) in short-term borrowings				(1,230.6	)			(4,026.0	)
Principal payments on long-term debt				(1,214.3	)			(912.2	)
Proceeds from issuance of long-term debt				4,698.8				2,365.0
Proceeds from issuance of common stock				31.8				53.8
Repurchase of common stock				—				(923.2	)
Cash dividends paid				(373.8	)			(360.2	)
	Net cash provided by (used in) financing activities			1,599.1				(6,550.5	)
	Change in cash and cash equivalents			(1,828.3	)			(2,708.5	)
Cash and cash equivalents at beginning of period				11,192.1				9,745.3
	Cash and cash equivalents at end of period		$	9,363.8			$	7,036.8

See Notes to Consolidated Financial Statements.

(a)		Includes $226.5 million of loans transferred to Stellar Funding Group, Inc. (the “loan conduit”) and $135.2 million of loans repurchased from the loan conduit during the three months ended March 31, 2003. System constraints make it impractical to collect information on the gross cash flows between the Company and the loan conduit for 2002.

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Notes to Consolidated Financial Statements" -->

Note 1		Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations and cash flow activity required in accordance with accounting principles generally accepted in the United States. In the opinion of management of U.S. Bancorp (the “Company”), all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of results for the interim periods have been made, and the Company believes such presentation is adequate to make the information presented not misleading. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. Certain amounts in prior periods have been reclassified to conform to the current presentation.

Note 2		Accounting Changes

Consolidation of Variable Interest EntitiesIn January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities” (“VIEs”), an interpretation of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to improve financial reporting of special purpose and other entities. In accordance with the interpretation, business enterprises that represent the primary beneficiary of another entity by retaining a controlling financial interest in that entity’s assets, liabilities and results of operating activities must consolidate the entity in its financial statements. Prior to the issuance of FIN 46, consolidation generally occurred when an enterprise controlled another entity through voting interests. Certain VIEs that are qualifying special purpose entities (“QSPEs”) subject to the reporting requirements of Statement of Accounting Standards No. 140 (“SFAS 140”), “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities,” will not be required to be consolidated under the provisions of FIN 46. The consolidation provisions of FIN 46 apply to VIEs created or entered into after January 31, 2003, and for pre-existing VIEs, in the first reporting period beginning after June 15, 2003. If applicable, transition rules allow the restatement of financial statements or prospective application with a cumulative effect adjustment. In addition, FIN 46 expands the disclosure requirements for the beneficiary of a significant or a majority of the variable interests to provide information regarding the nature, purpose and financial characteristics of the entities.

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Stock-Based CompensationIn December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 148 (“SFAS 148”), “Accounting for Stock-Based Compensation — Transition and Disclosure,” an amendment of Statement of Financial Accounting Standards No. 123, (“SFAS 123”) “Accounting for Stock-Based Compensation.” SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS 148 requires prominent disclosures in interim as well as annual financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported net income. SFAS 148 is effective for fiscal years ending after December 15, 2002. The Company plans to continue to account for stock-based employee compensation under the intrinsic based method and to provide disclosure of the impact of the fair value based method on reported income. Employee stock options have characteristics that are significantly different from those of traded options, including vesting provisions and trading limitations that impact their liquidity. Therefore, the existing option pricing models do not necessarily provide a reliable measure of the fair value of employee stock options. Refer to Note 11 of the Notes to Consolidated Financial Statements for proforma disclosure of the impact of stock options utilizing the Black-Scholes valuation method.

Guarantees In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” to clarify accounting and disclosure requirements relating to a guarantor’s issuance of certain types of guarantees. FIN 45 requires entities to disclose additional information about certain guarantees, or group of similar guarantees, even if the likelihood of the guarantor’s having to make any payments under the guarantee is remote. The disclosure provisions are effective for interim and annual financial statements for the first reporting period ending after December 15, 2002. For certain guarantees, the interpretation also requires that guarantors recognize a liability equal to the fair value of the guarantee upon its issuance. The Company adopted the initial recognition and measurement provision effective January 1, 2003, which did not have a material impact on the Company’s financial statements. Refer to Note 12 of the Notes to Consolidated Financial Statements for further information on guarantees.

Business Combinations and Goodwill and Other Intangible Assets In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 (“SFAS 141”), “Business Combinations,” and Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets.” SFAS 141 mandates that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, and established specific criteria for the recognition of intangible assets separately from goodwill. SFAS 142 addresses the accounting for goodwill and intangible assets subsequent to their acquisition. The Company adopted SFAS 142 on January 1, 2002. The most significant changes made by SFAS 142 are that goodwill and indefinite lived intangible assets are no longer amortized and are to be tested for impairment at least annually. The amortization provisions of SFAS 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, the amortization provisions of SFAS 142 were effective upon adoption of SFAS 142.

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Note 3		Business Combinations and Divestitures

On April 1, 2002, the Company acquired Cleveland-based The Leader Mortgage Company, LLC (“Leader”), a wholly-owned subsidiary of First Defiance Corp., in a cash transaction. The transaction represented total assets acquired of $531 million and total liabilities assumed of $446 million. Included in total assets were mortgage servicing rights and other intangibles of $173 million and goodwill of $18 million. Leader specializes in acquiring servicing of loans originated for state and local housing authorities.

The following table summarizes acquisitions by the Company completed since January 1, 2002:

(Dollars and Shares in Millions)		Date			Assets (a	)			Deposits			Goodwill and Other Intangibles			Cash Paid/ (Received	)			Shares Issued			Accounting Method
Corporate trust business of State Street Bank and Trust Company		December 2002		$	13			$	—			$667		$	643				—			Purchase
Bay View Bank branches		November 2002			362				3,305			483			(2,494	)			—			Purchase
The Leader Mortgage Company, LLC		April 2002			517				—			191			85				—			Purchase

(a)		Assets acquired do not include purchase accounting adjustments.

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Note 4		Merger and Restructuring-Related Items

The Company recorded pre-tax merger and restructuring-related items of $17.6 million in the first three months of 2003. In 2003, merger and restructuring-related items were primarily incurred in connection with the NOVA acquisition and the Company’s various other acquisitions. Refer to Note 3 of the Notes to Consolidated Financial Statements for additional information regarding business combinations.

The components of the merger and restructuring-related items are shown below:

		Three Months Ended
		March 31, 2003
										State
(Dollars in Millions)		NOVA				Bay View				Street				Other				Total
Severance and employee-related		$	.6			$	—			$	—			$	—			$	.6
Systems conversions and integration			8.4				4.2				2.1				2.1				16.8
Asset write-downs and lease terminations			—				.2				—				—				.2
Total		$	9.0			$	4.4			$	2.1			$	2.1			$	17.6

The following table presents a summary of activity with respect to the merger and restructuring-related accruals:

											State				Bay
(Dollars in Millions)			USBM				NOVA				Street				View				Other (a)				Total
Balance at December 31, 2002			$	18.6			$	15.1			$	7.8			$	5.8			$	4.8			$	52.1
	Provision charged to operating expense			—				9.0				2.1				4.4				2.1				17.6
	Additions related to purchase acquisitions			—				—				(1.4	)			—				—				(1.4	)
	Cash outlays			(10.6	)			(9.8	)			(2.3	)			(5.9	)			(2.2	)			(30.8	)
	Noncash write-downs and other			6.9				—				—				(1.7	)			—				5.2
Balance at March 31, 2003			$	14.9			$	14.3			$	6.2			$	2.6			$	4.7			$	42.7

(a)		“Other” primarily includes acquisitions by NOVA prior to the Company’s acquisition of NOVA.

    The adequacy of accrued liabilities is reviewed regularly taking into consideration actual and projected payments. Adjustments are made to increase or decrease the accruals as needed. Reversals of expenses can reflect a lower utilization of benefits by affected staff, changes in initial assumptions as a result of subsequent mergers and alterations of business plans.

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The components of the merger and restructuring-related accruals for all acquisitions were as follows:

			March 31,				December 31,
(Dollars in Millions)			2003				2002
Severance and employee-related costs			$	26.1			$	33.3
Lease termination and facility costs				15.4				17.2
Other				1.2				1.6
	Total		$	42.7			$	52.1

The merger and restructuring-related accrual by significant acquisition or business restructuring was as follows:

			March 31,				December 31,
(Dollars in Millions)			2003				2002
USBM			$	14.9			$	18.6
NOVA				14.3				15.1
State Street Corporate Trust				6.2				7.8
Bay View				2.6				5.8
Other acquisitions				4.7				4.8
	Total		$	42.7			$	52.1

Note 5		Loans

The composition of the loan portfolio was as follows:

					March 31, 2003								December 31, 2002
									Percent								Percent
(Dollars in Millions)					Amount				of Total				Amount				of Total
Commercial
	Commercial				$	36,820				31.4	%		$	36,584				31.5	%
	Lease financing					5,191				4.4				5,360				4.6
		Total commercial				42,011				35.8				41,944				36.1
Commercial real estate
	Commercial mortgages					20,275				17.3				20,325				17.5
	Construction and development					6,618				5.7				6,542				5.6
		Total commercial real estate				26,893				23.0				26,867				23.1
Residential mortgages						10,329				8.8				9,746				8.4
Retail
	Credit card					5,502				4.7				5,665				4.9
	Retail leasing					5,759				4.9				5,680				4.9
	Home equity and second mortgages					13,347				11.4				13,572				11.6
	Other retail
		Revolving credit				2,576				2.2				2,650				2.3
		Installment				2,146				1.8				2,258				1.9
		Automobile				6,947				6.0				6,343				5.5
		Student				1,662				1.4				1,526				1.3
			Total other retail			13,331				11.4				12,777				11.0
		Total retail				37,939				32.4				37,694				32.4
			Total loans		$	117,172				100.0	%		$	116,251				100.0	%

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Note 6		Mortgage Servicing Rights

The Company’s portfolio of residential mortgages serviced for others was $47.3 billion and $43.1 billion at March 31, 2003, and December 31, 2002, respectively.

The net carrying value of capitalized mortgage servicing rights was as follows:

		March 31,				December 31,
(Dollars in Millions)		2003				2002
Initial carrying value, net of amortization		$	910			$	849
Impairment valuation allowance			(328	)			(207	)
Net carrying value		$	582			$	642

Changes in capitalized mortgage servicing rights are summarized as follows:

		Three Months Ended				Year Ended
(Dollars in Millions)		March 31, 2003				December 31, 2002
Balance at beginning of period		$	642			$	360
Rights purchased			12				229
Rights capitalized			85				357
Amortization			(36	)			(94	)
Rights sold			—				(24	)
Impairment			(121	)			(186	)
Balance at end of period		$	582			$	642

The key economic assumptions used to estimate the value of the mortgage servicing rights portfolio were as follows:

		March 31,				December 31,
(Dollars in Millions)		2003				2002
Fair value		$	582			$	655
Expected weighted-average life (in years)			4.2				4.8
Discount rate			9.7	%			9.8	%

Sensitivity of fair value to changes in interest rates at March 31, 2003:

		Down Scenario								Up Scenario
(Dollars in Millions)		50 bps				25 bps				25 bps				50 bps
Fair value		$	(130	)		$	(69	)		$	96			$	173

		U.S. Bank Home Mortgage
										Leader
(Dollars in Millions)		Conventional				Government				Mortgage				Total
Servicing portfolio		$	29,602			$	8,671			$	8,989			$	47,262
Fair market value		$	297			$	119			$	166			$	582
Value (bps)			100				137				185				123
Weighted-average servicing fees (bps)			36				49				45				40
Multiple (value/servicing fees)			2.78				2.80				4.11				3.08
Weighted-average note rate			6.34	%			6.99	%			6.74	%			6.54	%
Age (in years)			1.5				2.3				3.2				2.0
Expected life (in years)			3.7				3.6				6.2				4.2
Discount rate			9.2	%			11.2	%			9.9	%			9.7	%

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Note 7		Intangible Assets

The following table reflects the changes in the carrying value of goodwill for the three months ended March 31, 2003:

										Private Client,
		Wholesale				Consumer				Trust and Asset				Payment				Capital				Consolidated
(Dollars in Millions)		Banking				Banking				Management				Services				Markets				Company
Balance at December 31, 2002		$	1,332			$	2,139			$	736			$	1,813			$	305			$	6,325
Reclass			2				(2	)			—				—				—				—
Goodwill acquired/adjustments			—				1				5				—				1				7
Balance at March 31, 2003		$	1,334			$	2,138			$	741			$	1,813			$	306			$	6,332

Amortizable intangible assets consisted of the following:

											March 31,				December 31,
			Estimated				Amortization				2003				2002
(Dollars in Millions)			Life (a)				Method (b)				Balance				Balance
Merchant processing contracts				8 years				AC			$	567			$	596
Core deposit benefits				10 years/6 years				SL/AC				483				505
Mortgage servicing rights				4 years				AC				582				642
Trust relationships				15 years/8 years				SL/AC				351				371
Other identified intangibles				9 years/8 years				SL/AC				198				207
	Total										$	2,181			$	2,321

(a)		Estimated life represents the amortization period for assets subject to the straight line method and the weighted-average amortization period for intangibles subject to accelerated methods. If more than one amortization method is used for a category, the estimated life for each method is calculated and reported separately.
(b)		Amortization methods: SL = straight line method

	AC = accelerated methods generally based on cash flows

Aggregate amortization expense consisted of the following:

			Three Months Ended
			March 31,
(Dollars in Millions)			2003				2002
Merchant processing contracts			$	32.2			$	31.8
Core deposit benefits				22.1				20.0
Mortgage servicing rights (a)				156.7				14.1
Trust relationships				13.2				4.8
Other identified intangibles				10.9				9.5
	Total		$	235.1			$	80.2

(a)		Includes mortgage servicing rights impairments of $120.9 million in the first quarter of 2003.

Below is the estimated amortization expense for the years ending:

(Dollars in Millions)
Remaining 2003		$	350.6
2004			402.9
2005			343.0
2006			288.2
2007			247.8

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Note 8		Company-obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trusts Holding Solely the Junior Subordinated Debentures of the Parent Company

The following table is a summary of the Trust Preferred Securities as of March 31, 2003:

Trust

Preferred

Issuance

Securities

Debentures

Rate

Redemption

Issuance Trust (Dollars in Millions)

Date

Amount

Amount

Type (a)

Rate

Maturity Date

Date (b)

Retail

USB Capital V

December 2001

$

300

$

309

Fixed

7.25

%

December 2031

December 7, 2006

USB Capital IV

November 2001

500

515

Fixed

7.35

November 2031

November 1, 2006

USB Capital III

May 2001

700

722

Fixed

7.75

May 2031

May 4, 2006

USB Capital II (e)

April 1998

350

361

Fixed

7.20

April 2003

April 1, 2003

Institutional

Star Capital I

June 1997

150

155

Variable

2.02

(c)

June 2027

June 15, 2007

Mercantile Capital Trust I

February 1997

150

155

Variable

2.20

(d)

February 2027

February 1, 2007

USB Capital I

December 1996

300

309

Fixed

8.27

December 2026

December 15, 2006

Firstar Capital Trust I

December 1996

150

155

Fixed

8.32

December 2026

December 15, 2006

FBS Capital I

November 1996

300

309

Fixed

8.09

November 2026

November 15, 2006

(a)		The variable-rate Trust Preferred Securities reprice quarterly.
(b)		Earliest date of redemption.
(c)		Three-month LIBOR +76.5 basis points
(d)		Three-month LIBOR +85.0 basis points
(e)		On April 1, 2003, USB Capital II, a subsidiary company of U.S. Bancorp, redeemed 100 percent, or $350 million, of its 7.20 percent Trust Originated Preferred Securities.

Note 9		Shareholders’ Equity

At March 31, 2003, and December 31, 2002, the Company had authority to issue 4 billion shares of common stock and 10 million shares of preferred stock. The Company had 1,919.0 million and 1,917.0 million shares of common stock outstanding at March 31, 2003, and December 31, 2002, respectively.

Note 10		Earnings Per Share

The components of earnings per share were:

			Three Months Ended
			March 31,
(Dollars and Shares in Millions, Except Per Share Data)			2003				2002
Income before cumulative effect of change in accounting principles			$	911.2			$	793.2
Cumulative effect of change in accounting principles				—				(37.2	)
	Net income		$	911.2			$	756.0
Weighted-average common shares outstanding				1,919.0				1,919.8
Net effect of the assumed purchase of stock based on the treasury stock method for options and stock plans				7.6				10.3
	Weighted-average diluted common shares outstanding			1,926.6				1,930.1
Earnings per share
	Income before cumulative effect of change in accounting principles		$	.47			$	.41
	Cumulative effect of change in accounting principles			—				(.02	)
	Net income		$	.47			$	.39
Diluted earnings per share
	Income before cumulative effect of change in accounting principles		$	.47			$	.41
	Cumulative effect of change in accounting principles			—				(.02	)
	Net income		$	.47			$	.39

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Note 11		Stock-Based Compensation

The following table shows proforma compensation expense, net income and earnings per share adjusted as if the Company had applied the fair value recognition provisions of SFAS 123.

				Three Months Ended
				March 31,
(Dollars and Shares in Millions, Except Per Share Data)				2003				2002
Reported net income				$	911.2			$	756.0
	Stock-based compensation expense included in reported net income, net of tax				2.6				3.4
	Total stock-based compensation expense under the fair value method for all awards, net of tax				(30.6	)			(35.8	)
		Proforma net income		$	883.2			$	723.6
Earnings per share
	Reported net income			$	.47			$	.39
	Stock based-compensation, net of tax				(.01	)			(.01	)
		Proforma net income		$	.46			$	.38
Diluted earnings per share
	Reported net income			$	.47			$	.39
	Stock based-compensation, net of tax				(.01	)			(.02	)
		Proforma net income		$	.46			$	.37

Note 12		Guarantees and Contingent Liabilities

LETTERS OF CREDIT

Standby letters of credit are conditional commitments the Company issues to guarantee the performance of a customer to a third-party. The guarantees frequently support public and private borrowing arrangements, including commercial paper issuances, bond financings and other similar transactions. The Company issues commercial letters of credit on behalf of customers to ensure payment or collection in connection with trade transactions. In the event of a customer’s nonperformance, the Company’s credit loss exposure is the same as in any extension of credit, up to the letter’s contractual amount. Management assesses the borrower’s credit to determine the necessary collateral, which may include marketable securities, real estate, accounts receivable and inventory. Since the conditions requiring the Company to fund letters of credit may not occur, the Company expects its liquidity requirements to be less than the total outstanding commitments. The maximum potential future payments guaranteed by the Company under standby letter of credit arrangements at March 31, 2003, was approximately $9.5 billion with a weighted-average term of approximately 25 months. The estimated fair value of standby letters of credit was approximately $76 million at March 31, 2003.

GUARANTEES

Guarantees are contingent commitments issued by the Company to customers or other third parties. The Company’s guarantees primarily include parent guarantees related to subsidiaries’ third-party borrowing arrangements; third-party performance guarantees inherent in the Company’s business operations such as indemnified securities lending programs and merchant charge-backs guarantees; indemnification or buy-back provisions related to certain asset sales; synthetic lease guarantees; and contingent consideration arrangements related to acquisitions. For certain guarantees, the Company has recorded a liability related to the potential obligation, or has access to collateral to support the guarantee or through the exercise of other recourse provisions can offset some or all of the maximum potential future payments made under these guarantees. The estimated fair value of guarantees, other than standby letters of credit, was approximately $141 million at March 31, 2003.

Third-Party Borrowing ArrangementsThe Company provides guarantees to third-parties as a part of certain subsidiaries’ borrowing arrangements, primarily representing guaranteed operating or capital lease payments or other

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Commitments from Securities LendingThe Company participates in securities lending activities by acting as the customer’s agent involving the loan or sale of securities. The Company indemnifies customers for the difference between the market value of the securities lent and the market value of the collateral received. Cash collateralizes these transactions. The maximum potential future payments guaranteed by the Company under these arrangements was approximately $10.9 billion at March 31, 2003, and represented the market value of the securities lent to third parties. At March 31, 2003, the Company held assets with a market value of $11.3 billion as collateral for these arrangements.

Asset Sales The Company has provided guarantees to certain third parties in connection with the sale of certain assets, primarily loan portfolios and low income housing tax credits. These guarantees are generally in the form of asset buy-back or make-whole provisions that are triggered upon a credit event or a change in the tax-qualifying status of the related projects, as applicable, and remain in effect until the loans are collected or final tax credits are realized, respectively. The maximum potential future payments guaranteed by the Company under these arrangements was approximately $1.2 billion at March 31, 2003, and represented the total proceeds received from the buyer in these transactions where the buy-back or make-whole provisions have not yet expired. Recourse available to the Company includes guarantees from the Small Business Administration (for SBA loans sold), recourse to the correspondent that originated the loan or to the private mortgage issuer, the right to collect payments from the debtors, and/or the right to liquidate the underlying collateral, if any, and retain the proceeds. Based on its established loan-to-value guidelines, the Company believes the recourse available is sufficient to recover future payments, if any, under the loan buy back guarantees.

Synthetic LeasesCertain of the Company’s operating lease arrangements involve third party lessors that acquire business assets through leveraged financing structures commonly referred to as “synthetic leases.” The Company provides guarantees to the lender in the event of default by the leveraged financing structures or in the event that the Company does not exercise its option to purchase the property at the end of the lease term and the fair value of the assets is less than the purchase price. The maximum potential future payments guaranteed by the Company under these arrangements was approximately $409.6 million at March 31, 2003. Based on the estimated fair value of assets held by the structures, the liability for this guarantee was not significant at March 31, 2003. Refer to the “Off-Balance Sheet Arrangements” section within the Management’s Discussion and Analysis for further discussion of synthetic leases.

Merchant ProcessingThe Company, through its subsidiary, NOVA Information Systems, Inc., provides merchant processing services. Under the rules of credit card associations, a merchant processor retains a contingent liability for credit card transactions processed. This contingent liability arises in the event of a billing dispute between the merchant and a cardholder that is ultimately resolved in the cardholder’s favor. In this situation, the transaction is “charged back” to the merchant and the disputed amount is credited or otherwise refunded to the cardholder. If the Company is unable to collect this amount from the merchant, it bears the loss for the amount of the refund paid to the cardholder.

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Contingent Consideration ArrangementsThe Company has contingent payment obligations related to certain business combination transactions. Payments are guaranteed as long as certain post-acquisition performance-based criteria are met. At March 31, 2003, the maximum potential future payments guaranteed by the Company under these arrangements was approximately $76.2 million and primarily represented contingent payments related to the acquisition of the Corporate Trust business of State Street Bank on December 31, 2002, and are payable within 9 to 15 months.

Other Guarantees The Company provides liquidity and credit enhancement facilities to two Company-sponsored conduits, as more fully described in the “Off-Balance Sheet Arrangements” section within Management’s Discussion and Analysis. Although management believes a draw against these facilities is remote, the maximum potential future payments guaranteed by the Company under these arrangements was approximately $11.8 billion at March 31, 2003. The recorded fair value of the Company’s liability for the credit enhancement recourse obligation and liquidity facilities was $45.5 million at March 31, 2003, and was included in other liabilities.

OTHER CONTINGENT LIABILITIES

In connection with the industry-wide investigations of research analyst independence issues, the Company’s brokerage and investment banking business line established a $50.0 million liability for probable claims that, in part, included a settlement with certain governmental and regulatory agencies of $25.0 million for investment banking regulatory matters and $7.5 million for funding independent analyst research for its customers.

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Note 13		Supplemental Disclosures to the Consolidated Financial Statements

Consolidated Statement of Cash FlowsListed below are supplemental disclosures to the Consolidated Statement of Cash Flows:

Money Market Investmentsare included with cash and due from banks as part of cash and cash equivalents. Money market investments consisted of the following:

			March 31,				December 31,
(Dollars in Millions)			2003				2002
Interest-bearing deposits			$	194			$	102
Federal funds sold				46				61
Securities purchased under agreements to resell				214				271
	Total money market investments		$	454			$	434

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Consolidated Daily Average Balance Sheet and Related Yields and Rates (a)" -->

				For the Three Months Ended March 31,
				2003												2002
												Yields												Yields				% Change
(Dollars in Millions)				Average								and				Average								and				Average
(Unaudited)				Balances				Interest				Rates				Balances				Interest				Rates				Balances
Assets
Money market investments				$	578			$	4.0				2.82	%		$	713			$	3.3				1.90	%			(18.9	)%
Trading securities					936				9.1				3.87				904				8.5				3.76				3.5
Taxable securities					33,508				396.1				4.73				25,549				347.8				5.45				31.2
Non-taxable securities					712				12.6				7.08				1,077				18.7				6.94				(33.9	)
Loans held for sale					4,041				59.6				5.90				2,354				39.2				6.65				71.7
Loans (b)
	Commercial				41,591				588.5				5.72				45,381				670.2				6.01				(8.4	)
	Commercial real estate				26,783				400.5				6.07				25,186				407.2				6.56				6.3
	Residential mortgages				10,124				162.2				6.44				7,962				143.8				7.26				27.2
	Retail				37,814				689.1				7.39				35,179				714.0				8.23				7.5
		Total loans			116,312				1,840.3				6.41				113,708				1,935.2				6.89				2.3
Other earning assets					1,664				29.3				7.13				1,632				19.0				4.72				2.0
		Total earning assets			157,751				2,351.0				6.02				145,937				2,371.7				6.57				8.1
Allowance for credit losses					(2,506	)											(2,535	)											(1.1	)
Unrealized gain (loss) on available-for-sale securities					612												167												*
Other assets					27,820												24,203												14.9
		Total assets		$	183,677											$	167,772												9.5
Liabilities and Shareholders’ Equity
Noninterest-bearing deposits				$	32,824											$	27,485												19.4
Interest-bearing deposits
	Interest checking				17,536				22.5				.52				15,152				26.3				.70				15.7
	Money market accounts				28,683				75.5				1.07				24,797				75.6				1.24				15.7
	Savings accounts				5,272				5.3				.41				4,773				6.5				.55				10.5
	Time certificates of deposit less than $100,000				17,218				133.2				3.14				20,464				214.4				4.25				(15.9	)
	Time deposits greater than $100,000				14,282				70.1				1.99				9,341				72.7				3.16				52.9
		Total interest-bearing deposits			82,991				306.6				1.50				74,527				395.5				2.15				11.4
Short-term borrowings					10,071				43.4				1.75				14,564				78.9				2.20				(30.9	)
Long-term debt					29,703				185.8				2.53				26,450				192.1				2.94				12.3
Company-obligated mandatorily redeemable preferred securities					2,981				31.4				4.21				2,838				34.8				4.98				5.0
		Total interest-bearing liabilities			125,746				567.2				1.83				118,379				701.3				2.40				6.2
Other liabilities					6,637												5,749												15.4
Shareholders’ equity					18,470												16,159												14.3
		Total liabilities and shareholders’ equity		$	183,677											$	167,772												9.5 %
Net interest income								$	1,783.8											$	1,670.4
Gross interest margin													4.19	%											4.17	%
Gross interest margin without taxable-equivalent increments													4.17												4.14
Percent of Earning Assets
Interest income													6.02	%											6.57	%
Interest expense													1.46												1.95
Net interest margin													4.56												4.62
Net interest margin without taxable-equivalent increments													4.54	%											4.59	%

(a)		Interest and rates are presented on a fully taxable-equivalent basis under a tax rate of 35 percent.
(b)		Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances.
*		Not meaningful

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Part II -- Other Information" -->

Item 4. Submission of Matters to a Vote of Security Holders —The 2003 Annual Meeting of Shareholders of U.S. Bancorp was held Tuesday, April 15, 2003, at the Minneapolis Convention Center, Minneapolis, Minnesota. Jerry A. Grundhofer, Chairman, President and Chief Executive Officer, presented.

Summary of Matters Voted Upon by Shareholders

			Number of Shares
			For				Withheld
Election of Class II Directors:
	Peter H. Coors			1,154,645,292				440,955,542
	Jerry A. Grundhofer			1,215,785,087				379,815,747
	Patrick T. Stokes			1,215,710,471				379,890,363
	John J. Stollenwerk			1,158,830,160				436,770,674
				For				Against				Abstain				Broker Non-Vote
Ratification of Independent Auditors				1,487,179,638				95,527,406				12,987,940				N/A
Proposal for Reporting of Stock Option Expenses in Income Statement				737,937,132				493,404,613				56,974,317				307,284,773
Proposal for Shareholder Approval of Certain Supplemental Executive Retirement Benefits				650,587,990				609,979,180				27,723,684				307,309,981
Proposal for Elimination of Supermajority Voting				846,248,895				414,224,708				27,824,181				307,303,051

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

	12	Computation of Ratio of Earnings to Fixed Charges
	99.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, dated May 14, 2003.
	99.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, dated May 14, 2003.

(b) Reports on Form 8-K

	•	Form 8-K dated January 22, 2003, relating to the Company’s fourth quarter and full year 2002 financial results.
	•	Form 8-K dated February 19, 2003, announcing the planned spin-off of the Company’s capital markets business unit.
	•	Form 8-K dated March 6, 2003, relating to the change in the Company’s certifying accountants.
	•	Form 8-K dated April 15, 2003, relating to the Company’s first quarter, 2003 financial results.
	•	Form 8-K dated April 28, 2003, relating to U.S. Bancorp Piper Jaffray’s final settlement with Federal and State regulators resolving the research analyst inquiry.

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SIGNATURE

	U.S. BANCORP

	By:	/s/ TERRANCE R. DOLAN

	Terrance R. Dolan
	Executive Vice President and Controller
	(Chief Accounting Officer and Duly Authorized Officer)

46	U.S. Bancorp

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CERTIFICATION PURSUANT TO

I, Jerry A. Grundhofer, Chief Executive Officer of U.S. Bancorp, a Delaware corporation, certify that:

(1)	I have reviewed this quarterly report on Form 10-Q of U.S. Bancorp;
(2)	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
(3)	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
(4)	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

	(a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	(b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	(c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

(5)	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons fulfilling the equivalent function):

	(a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
	(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

(6)	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

	/s/ JERRY A. GRUNDHOFER
	Jerry A. Grundhofer
	Chief Executive Officer

Dated: May 14, 2003

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CERTIFICATION PURSUANT TO

I, David M. Moffett, Chief Financial Officer of U.S. Bancorp, a Delaware corporation, certify that:

(1)	I have reviewed this quarterly report on Form 10-Q of U.S. Bancorp;
(2)	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
(3)	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
(4)	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

	(a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	(b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	(c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

(5)	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons fulfilling the equivalent function):

	(a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
	(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

(6)	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

	/s/ DAVID M. MOFFETT
	David M. Moffett
	Chief Financial Officer

Dated: May 14, 2003

48	U.S. Bancorp

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EXHIBIT 12

Computation of Ratio of Earnings to Fixed Charges

			Three Months Ended
(Dollars in Millions)			March 31, 2003
Earnings
1.  Income before cumulative effect of change in accounting principles			$	911.2
2.  Applicable income taxes				478.1
3.  Income before income taxes and cumulative effect of change in accounting principles (1 + 2)			$	1,389.3
4.  Fixed charges:
	a.  Interest expense excluding interest on deposits		$	260.6
	b.  Portion of rents representative of interest and amortization of debt expense			19.3
	c.  Fixed charges excluding interest on deposits (4a + 4b)			279.9
	d.  Interest on deposits			306.6
	e.  Fixed charges including interest on deposits (4c + 4d)		$	586.5
5.  Amortization of interest capitalized			$	—
6.  Earnings excluding interest on deposits (3 + 4c + 5)				1,669.2
7.  Earnings including interest on deposits (3 + 4e + 5)				1,975.8
8.  Fixed charges excluding interest on deposits (4c)				279.9
9.  Fixed charges including interest on deposits (4e)				586.5
Ratio of Earnings to Fixed Charges
10.  Excluding interest on deposits (line 6/ line 8)				5.96
11.  Including interest on deposits (line 7/line 9)				3.37

U.S. Bancorp	49

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EXHIBIT 99.1

CERTIFICATION PURSUANT TO

         Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350), the undersigned, Chief Executive Officer of U.S. Bancorp, a Delaware corporation (the “Company”), does hereby certify that:

(1)	The Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (the “Form 10-Q”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 14, 2003		/s/ JERRY A. GRUNDHOFER ------------------------------------ Jerry A. Grundhofer Chief Executive Officer

         The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350) and is not being filed as part of the Form 10-Q or as a separate disclosure document.

         A signed original of this written statement required by section 906 has been provided to U.S. Bancorp and will be retained by U.S. Bancorp and furnished to the Securities and Exchange Commission or its staff upon request.

50	U.S. Bancorp

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EXHIBIT 99.2

CERTIFICATION PURSUANT TO

         Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350), the undersigned, Chief Financial Officer of U.S. Bancorp, a Delaware corporation (the “Company”), does hereby certify that:

(1)	The Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (the “Form 10-Q”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 14, 2003		/s/ DAVID M. MOFFETT ------------------------------------ David M. Moffett Chief Financial Officer

         The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350) and is not being filed as part of the Form 10-Q or as a separate disclosure document.

         A signed original of this written statement required by section 906 has been provided to U.S. Bancorp and will be retained by U.S. Bancorp and furnished to the Securities and Exchange Commission or its staff upon request.

U.S. Bancorp	51

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Executive Offices

U.S. Bancorp

Common Stock Transfer Agent and Registrar

Mellon Investor Services

For Registered or Certified Mail:

Telephone representatives are available weekdays from 8:00 a.m. to 6:00 p.m. Central Time, and automated support is available 24 hours a day, 7 days a week. Specific information about your account is available on Mellon’s Internet site by clicking on the “Investor ServicesDirect^SM” link.

Independent Auditors

Common Stock Listing and Trading

Dividends and Reinvestment Plan

Investment Community Contacts

Judith T. Murphy

Financial Information

Web site. For information about U.S. Bancorp, including news, financial results, annual reports and other documents filed with the Securities and Exchange Commission, access our home page on the Internet at usbank.com and click on Investor/ Shareholder Information.

Mail. At your request, we will mail to you our quarterly earnings news releases, quarterly financial data reported on Form 10-Q and additional copies of our annual reports. Please contact:

U.S. Bancorp Investor Relations

Media Requests

Privacy
U.S. Bancorp is committed to respecting the privacy of our customers and safeguarding the financial and personal information provided to us. To learn more about the U.S. Bancorp commitment to protecting privacy, visit usbank.com and click on Privacy Pledge.

Code of Ethics
U.S. Bancorp places the highest importance on honesty and integrity. Each year, every U.S. Bancorp employee certifies compliance with the letter and spirit of our Code of Ethics and Business Conduct, the guiding ethical standards of our organization. For details about our Code of Ethics and Business Conduct, visit usbank.com and click on About U.S. Bancorp, then Ethics at U.S. Bank.

Diversity
U.S. Bancorp and our subsidiaries are committed to developing and maintaining a workplace that reflects the diversity of the communities we serve. We support a work environment where individual differences are valued and respected and where each individual who shares the fundamental values of the company has an opportunity to contribute and grow based on individual merit.

Equal Employment Opportunity/Affirmative Action
U.S. Bancorp and our subsidiaries are committed to providing Equal Employment Opportunity to all employees and applicants for employment. In keeping with this commitment, employment decisions are made based upon performance, skills and abilities, rather than race, color, religion, national origin or ancestry, gender, age, disability, veteran status, sexual orientation or any other factors protected by law. The corporation complies with municipal, state and federal fair employment laws, including regulations applying to federal contractors.

U.S. Bancorp, including each of our subsidiaries, is an Equal Opportunity Employer committed to creating a diverse workforce.

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