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, 2004

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

651-466-3000

(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 12 months, and (2) has been subject to such filing requirements for the past 90 days.

YES   X  NO        

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES   X  NO        

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

Class Common Stock, $.01 Par Value		Outstanding as of April 30, 2004 1,895,339,832 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				7
		d)		Accounting Changes				29
		e)		Critical Accounting Policies				29
		f)		Controls and Procedures (Item 4)				31
2)	Quantitative and Qualitative Disclosures About Market Risk / Corporate Risk Profile (Item 3)
		a)		Overview				9
		b)		Credit Risk Management				10
		c)		Residual Risk Management				16
		d)		Operational Risk Management				16
		e)		Interest Rate Risk Management				17
		f)		Market Risk Management				20
		g)		Liquidity Risk Management				20
		h)		Capital Management				22
3)	Line of Business Financial Review							23
4)	Financial Statements (Item 1)							32
Part II — Other Information
1)	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities (Item 2)							48
2)	Submission of Matters to a Vote of Security Holders (Item 4)							48
3)	Exhibits and Reports on Form 8-K (Item 6)							48
4)	Signature							49
5)	Exhibit 12 — Computation of Ratio of Earnings to Fixed Charges							50
6)	Exhibit 31.1 — Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) Under the Securities Exchange Act of 1934							51
7)	Exhibit 31.2 — Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) Under the Securities Exchange Act of 1934							52
8)	Exhibit 32 — Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002							53

Forward-Looking Statements

U.S. Bancorp	1

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Table 1		Selected Financial Data

			Three Months Ended
			March 31,
											Percent
(Dollars and Shares in Millions, Except Per Share Data)			2004				2003				Change
Condensed Income Statement
Net interest income (taxable-equivalent basis) (a)			$	1,779.0			$	1,776.7				.1	%
Noninterest income				1,318.3				1,225.4				7.6
Securities gains, net				—				140.7				*
	Total net revenue			3,097.3				3,142.8				(1.4	)
Noninterest expense				1,454.9				1,454.6				—
Provision for credit losses				235.0				335.0				(29.9	)
	Income from continuing operations before taxes			1,407.4				1,353.2				4.0
Taxable-equivalent adjustment				7.2				7.3				(1.4	)
Applicable income taxes				391.8				461.8				(15.2	)
	Income from continuing operations			1,008.4				884.1				14.1
Discontinued operations (after-tax)				—				.7				*
	Net income		$	1,008.4			$	884.8				14.0
Per Common Share
Earnings per share from continuing operations			$	.53			$	.46				15.2	%
Diluted earnings per share from continuing operations				.52				.46				13.0
Earnings per share				.53				.46				15.2
Diluted earnings per share				.52				.46				13.0
Dividends declared per share				.240				.205				17.1
Book value per share				10.23				9.83				4.1
Market value per share				27.65				18.98				45.7
Average shares outstanding				1,915.4				1,919.0				(.2	)
Average diluted shares outstanding				1,941.1				1,925.6				.8
Financial Ratios
Return on average assets				2.14	%			1.95	%
Return on average equity				20.7				19.1
Net interest margin (taxable-equivalent basis)				4.29				4.59
Efficiency ratio (b)				47.0				48.5
Average Balances
Loans			$	118,810			$	116,311				2.1	%
Loans held for sale				1,445				4,041				(64.2	)
Investment securities				44,744				34,220				30.8
Earning assets				166,359				156,126				6.6
Assets				189,663				183,677				3.3
Noninterest-bearing deposits				29,025				32,824				(11.6	)
Deposits				116,019				115,815				.2
Short-term borrowings				13,419				9,209				45.7
Long-term debt and junior subordinated debentures				34,553				32,469				6.4
Total shareholders’ equity				19,584				18,808				4.1
			March  31, 2004				December  31, 2003
Period End Balances
Loans			$	119,883			$	118,235				1.4	%
Allowance for credit losses				2,370				2,369				—
Investment securities				45,405				43,334				4.8
Assets				192,093				189,286				1.5
Deposits				118,964				119,052				(.1	)
Long-term debt and junior subordinated debentures				33,568				33,816				(.7	)
Total shareholders’ equity				19,452				19,242				1.1
Regulatory capital ratios
	Tangible common equity			6.4	%			6.5	%
	Tier 1 capital			8.9				9.1
	Total risk-based capital			13.3				13.6
	Leverage			8.0				8.0

*		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.

2	U.S. Bancorp

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Management’s Discussion and Analysis" -->

OVERVIEW

Earnings SummaryU.S. Bancorp and its subsidiaries (the “Company”) reported net income of $1,008.4 million for the first quarter of 2004, or $.52 per diluted share, compared with $884.8 million, or $.46 per diluted share, for the first quarter of 2003. Return on average assets and return on average equity were 2.14 percent and 20.7 percent, respectively, for the first quarter of 2004, compared with returns of 1.95 percent and 19.1 percent, respectively, for the first quarter of 2003. The Company’s results for the first quarter of 2004 improved over the first quarter of 2003, primarily due to growth in fee-based products and services, as well as controlled operating expenses and lower credit costs. Operating expenses reflected a reduction in pre-tax merger and restructuring-related items of $17.6 million ($11.5 million on an after-tax basis), compared with the first quarter of 2003. The $17.6 million decline in pre-tax merger and restructuring-related charges was primarily due to the completion of integration activities associated with the acquisition of NOVA Corporation (“NOVA”) and other smaller acquisitions. Included in the current quarter was a $90.0 million reduction in income tax expense related to the resolution of federal tax examinations covering substantially all of the Company’s legal entities for the years 1995 through 1999. The first quarter of 2004 also included the recognition of $109.3 million ($71.7 million on an after-tax basis) of mortgage servicing rights (“MSR”) impairment, driven by declining interest rates and related prepayments, and a $35.4 million expense ($23.2 million on an after-tax basis) associated with the prepayment of a portion of the Company’s long-term debt. The Company recognized no securities gains in the quarter to offset MSR impairment.

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STATEMENT OF INCOME ANALYSIS

Net Interest IncomeFirst quarter of 2004 net interest income, on a taxable-equivalent basis, of $1,779.0 million was essentially flat, compared with $1,776.7 million in the first quarter of 2003. Average earning assets in the first quarter of 2004 increased $10.2 billion (6.6 percent) over the first quarter of 2003. The increase in average earning assets in the first quarter of 2004, compared with the first quarter of 2003, was primarily driven by increases in investment securities, residential mortgages and retail loans, partially offset by a decline in commercial loans and loans held for sale related to mortgage banking activities. The net interest margin for the first quarter of 2004 was 4.29 percent, compared with 4.59 percent for the first quarter of 2003. The year-over-year decline in the net interest margin for the first quarter of 2004 primarily reflected growth in lower-yielding investment securities as a percent of total earning assets, changes in loan mix, lower fees related to prepayments and late payment charges and a decline in the margin benefit from net free funds due to lower interest rates. In addition, the net interest margin declined year-over-year as a result of consolidating high credit quality, low margin loans from the Stellar commercial loan conduit onto the Company’s balance sheet beginning in the third quarter of 2003.

Table 2		Analysis of Net Interest Income

			Three Months Ended
			March 31,
(Dollars in Millions)			2004				2003				Change
Components of net interest income
	Income on earning assets (taxable-equivalent basis) (a)		$	2,265.3			$	2,338.5			$	(73.2	)
	Expense on interest-bearing liabilities			486.3				561.8				(75.5	)
Net interest income (taxable-equivalent basis)			$	1,779.0			$	1,776.7			$	2.3
Net interest income, as reported			$	1,771.8			$	1,769.4			$	2.4
Average yields and rates paid
	Earning assets yield (taxable-equivalent basis)			5.47	%			6.05	%			(.58	)%
	Rate paid on interest-bearing liabilities			1.45				1.82				(.37	)
Gross interest margin (taxable-equivalent basis)				4.02	%			4.23	%			(.21	)%
Net interest margin (taxable-equivalent basis)				4.29	%			4.59	%			(.30	)%
Average balances
	Investment securities		$	44,744			$	34,220			$	10,524
	Loans			118,810				116,311				2,499
	Earning assets			166,359				156,126				10,233
	Interest-bearing liabilities			134,966				124,669				10,297
	Net free funds (b)			31,393				31,457				(64	)

(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 loan losses, unrealized gain (loss) on available-for-sale securities, non-earning assets, other noninterest-bearing liabilities and equity.

4	U.S. Bancorp

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Provision for Credit LossesThe provision for credit losses was $235.0 million and $335.0 million for the first quarter of 2004 and 2003, respectively, a year-over-year decrease of $100.0 million (29.9 percent). The decline from a year ago was primarily the result of lower nonperforming assets and retail and commercial losses, the result of an improving credit risk profile and collection efforts. 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.

Noninterest IncomeNoninterest income during the first quarter of 2004 was $1,318.3 million, a decrease of $47.8 million (3.5 percent) from the first quarter of 2003. The decline in noninterest income in the first quarter of 2004, compared with the first quarter of 2003, was driven by a $140.7 million reduction in gains on the sale of securities, partially offset by increases in most other categories of noninterest income.

Table 3		Noninterest Income

			Three Months Ended
			March 31,
											Percent
(Dollars in Millions)			2004				2003				Change
Credit and debit card revenue			$	141.8			$	127.4				11.3	%
Corporate payment products revenue				94.8				86.0				10.2
ATM processing services				42.2				42.4				(.5	)
Merchant processing services				141.1				127.3				10.8
Trust and investment management fees				248.6				228.6				8.7
Deposit service charges				185.2				163.2				13.5
Treasury management fees				117.5				112.0				4.9
Commercial products revenue				110.4				104.2				6.0
Mortgage banking revenue				94.2				95.4				(1.3	)
Investment products fees and commissions				39.3				35.1				12.0
Securities gains, net				—				140.7				*
Other				103.2				103.8				(.6	)
	Total noninterest income		$	1,318.3			$	1,366.1				(3.5	)%

*		Not meaningful

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Noninterest ExpenseFirst quarter of 2004 noninterest expense of $1,454.9 million was essentially flat, compared with $1,454.6 million in the first quarter of 2003. During the first quarter of 2004, noninterest expense included a favorable variance in merger and restructuring-related charges of $17.6 million, compared with the first quarter of 2003, primarily due to the completion of integration activities associated with NOVA and other smaller acquisitions in 2003. Additionally, other intangible expense decreased by $9.0 million (3.8 percent) year-over-year, driven by an $11.6 million favorable variance in MSR impairment in the first quarter of 2004, compared with the first quarter of 2003. The year-over-year change in the amount of MSR impairment recognized by the Company was caused by changes in valuations in each quarter reflecting fluctuations in mortgage interest rates and related prepayment speeds from refinancing activities. Refer to Note 6 of the Notes to Consolidated Financial Statements for a sensitivity analysis on the fair value of MSRs to future changes in interest rates. Offsetting these favorable variances in the first quarter

Table 4		Noninterest Expense

			Three Months Ended
			March 31,
											Percent
(Dollars in Millions)			2004				2003				Change
Compensation			$	535.8			$	546.0				(1.9	)%
Employee benefits				100.2				91.7				9.3
Net occupancy and equipment				155.7				161.3				(3.5	)
Professional services				32.4				26.4				22.7
Marketing and business development				35.3				29.8				18.5
Technology and communications				101.7				104.9				(3.1	)
Postage, printing and supplies				61.6				60.4				2.0
Other intangibles				226.1				235.1				(3.8	)
Merger and restructuring-related charges				—				17.6				*
Other				206.1				181.4				13.6
	Total noninterest expense		$	1,454.9			$	1,454.6				—	%
Efficiency ratio (a)				47.0	%			48.5	%

*		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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Income Tax ExpenseThe provision for income taxes was $391.8 million (an effective rate of 28.0 percent) for the first quarter of 2004, compared with $461.8 million (an effective rate of 34.3 percent) for the same period of 2003. The improvement in the effective tax rate in the first quarter of 2004 primarily reflected a $90.0 million reduction in income tax expense related to the resolution of federal tax examinations covering substantially all of the Company’s legal entities for the years 1995 through 1999. The Company anticipates that the effective tax rate for the remainder of 2004 will approximate 34.0 percent of pretax earnings.

BALANCE SHEET ANALYSIS

Loans The Company’s total loan portfolio was $119.9 billion at March 31, 2004, compared with $118.2 billion at December 31, 2003, an increase of $1.7 billion (1.4 percent). The increase in total loans was driven by growth in retail loans, commercial loans and residential mortgages. Commercial loans, including lease financing, totaled $39.0 billion at March 31, 2004, compared with $38.5 billion at December 31, 2003, an increase of $.5 billion (1.2 percent). The increase in commercial loans was driven by increased utilization under lines of credit and new fundings under corporate cards. The Company’s portfolio of commercial real estate loans, which includes commercial mortgages and construction loans, was $27.2 billion at both March 31, 2004, and December 31, 2003.

Loans Held for SaleAt March 31, 2004, loans held for sale, consisting of residential mortgages to be sold in the secondary markets, were $1.6 billion, compared with $1.4 billion at December 31, 2003. The $.2 billion (14.7 percent) increase was primarily due to stronger mortgage banking activities caused by a mid-quarter decline in interest rates and the timing of loan originations and sales in the first quarter of 2004.

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Investment SecuritiesAt March 31, 2004, investment securities, both available-for-sale and held-to-maturity, totaled $45.4 billion, compared with $43.3 billion at December 31, 2003. The $2.1 billion (4.8 percent) increase primarily reflected purchases of floating-rate securities and shorter-term fixed-rate securities as part

Table 5		Investment Securities

				Available-for-Sale																Held-to-Maturity
												Weighted																Weighted
												Average				Weighted												Average				Weighted
				Amortized				Fair				Maturity in				Average				Amortized				Fair				Maturity in				Average
March 31, 2004 (Dollars in Millions)				Cost				Value				Years				Yield				Cost				Value				Years				Yield
U.S. Treasury and agencies
	Maturing in one year or less			$	48			$	49				.62				2.77	%		$	—			$	—				—				—	%
	Maturing after one year through five years				182				191				2.31				4.45				—				—				—				—
	Maturing after five years through ten years				233				226				8.86				3.93				—				—				—				—
	Maturing after ten years				1,150				1,111				19.22				2.32				—				—				—				—
		Total		$	1,613			$	1,577				15.26				2.81	%		$	—			$	—				—				—	%
Mortgage-backed securities
	Maturing in one year or less			$	2,608			$	2,618				.51				3.18	%		$	—			$	—				—				—	%
	Maturing after one year through five years				26,742				26,983				3.36				4.19				13				13				3.08				5.30
	Maturing after five years through ten years				12,174				12,156				5.89				4.60				—				—				—				—
	Maturing after ten years				458				462				13.73				3.15				—				—				—				—
		Total		$	41,982			$	42,219				4.03				4.24	%		$	13			$	13				3.08				5.30	%
Asset-backed securities
	Maturing in one year or less			$	56			$	57				.45				4.72	%		$	—			$	—				—				—	%
	Maturing after one year through five years				138				139				2.43				5.79				—				—				—				—
	Maturing after five years through ten years				—				—				—				—				—				—				—				—
	Maturing after ten years				—				—				—				—				—				—				—				—
		Total		$	194			$	196				1.86				5.48	%		$	—			$	—				—				—	%
Obligations of states and political subdivisions
	Maturing in one year or less			$	135			$	137				.50				7.46	%		$	14			$	15				.37				5.66	%
	Maturing after one year through five years				145				153				2.46				7.31				39				42				2.91				6.59
	Maturing after five years through ten years				16				18				5.89				7.53				27				29				6.17				6.45
	Maturing after ten years				—				—				—				—				44				46				10.71				6.46
		Total		$	296			$	308				1.75				7.39	%		$	124			$	132				6.08				6.41	%
Other debt securities
	Maturing in one year or less			$	3			$	3				.26				3.09	%		$	—			$	—				—				—	%
	Maturing after one year through five years				121				121				2.47				10.41				—				—				—				—
	Maturing after five years through ten years				8				8				5.83				3.24				—				—				—				—
	Maturing after ten years				498				491				23.15				1.88				—				—				—				—
		Total		$	630			$	623				18.86				3.55	%		$	—			$	—				—				—	%
Other investments				$	335			$	345				—				—	%		$	—			$	—				—				—	%
Total investment securities				$	45,050			$	45,268				4.62				4.20	%		$	137			$	145				5.79				6.30	%

Note:

Information related to asset and mortgage-backed securities included above is presented based upon weighted average maturities anticipating future prepayments. Average yields are presented on a fully-taxable equivalent basis. Yields on available-for-sale and held-to-maturity securities are computed based on historical cost balances. Average yield and maturity calculations exclude equity securities that have no stated yield or maturity.

The weighted average maturity of the available-for-sale investment securities was 4.62 years at March 31, 2004, compared with 5.12 years at December 31, 2003. The corresponding weighted average yields were 4.20% and 4.27%, respectively. The weighted average maturity of the held-to-maturity investment securities was 5.79 years at March 31, 2004, compared with 6.16 years at December 31, 2003. The corresponding weighted averaged yields were 6.30% and 6.05%, respectively.

			March 31, 2004								December 31, 2003
			Amortized				Percent				Amortized				Percent
(Dollars in Millions)			Cost				of Total				Cost				of Total
U.S. Treasury and agencies			$	1,613				3.6	%		$	1,634				3.7	%
Mortgage-backed securities				41,995				93.0				40,243				92.3
Asset-backed securities				194				.4				250				.6
Obligations of states and political subdivisions				420				.9				473				1.1
Other securities and investments				965				2.1				993				2.3
	Total investment securities		$	45,187				100.0	%		$	43,593				100.0	%

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Deposits Total deposits were $119.0 billion at March 31, 2004, compared with $119.1 billion at December 31, 2003, a decrease of $88 million (.1 percent). The decrease in total deposits was primarily the result of declines in noninterest-bearing deposits and time deposits less than $100,000, partially offset by increases in time certificates of deposit greater than $100,000 and savings products. Noninterest-bearing deposits were $31.1 billion at March 31, 2004, compared with $32.5 billion at December 31, 2003, a decrease of $1.4 billion (4.3 percent), primarily due to seasonality of corporate trust deposits.

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 $13.4 billion at March 31, 2004, compared with $10.9 billion at December 31, 2003. Short-term funding is managed to levels deemed appropriate given alternative funding sources. The increase of $2,581 million (23.8 percent) in short-term borrowings reflected the impact of funding earning assets. Long-term debt was $30.9 billion at March 31, 2004, compared with $31.2 billion at December 31, 2003. The $364 million (1.2 percent) decrease in long-term debt was driven by maturities of $2.2 billion, and prepayments of $2.2 billion of Federal Home Loan Banks (“FHLB”) advances, during the first quarter of 2004. The maturities and prepayments of long-term debt were partially offset by the issuance of $4.0 billion of bank notes during the first quarter of 2004. The prepayment of FHLB advances and the issuance of predominantly fixed-rate funding was done in connection with asset/liability management activities. 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 risk. 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, breaches of internal controls and business continuation and disaster recovery risk. 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.

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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 necessary charge-offs promptly and maintain adequate reserve levels for probable loan losses inherent in the portfolio. Commercial banking operations rely on a strong credit culture that combines prudent credit policies and individual lender accountability. Lenders are assigned lending grades based on their level of experience and customer service requirements. Lending grades represent the level of approval authority for the amount of credit exposure and level of risk. Credit officers reporting independently to Credit Administration have higher levels of lending grades and support the business units in their credit decision process. Loan decisions are documented as to the borrower’s business, purpose of the loan, evaluation of the repayment source and the associated risks, evaluation of collateral, covenants and monitoring requirements, and risk rating rationale. The Company utilizes a credit risk rating system to measure the credit quality of individual commercial loan transactions. The Company uses the risk rating system for regulatory reporting, determining the frequency of review of the credit exposures, and evaluation and determination of the adequacy of the allowance for credit losses. The Company regularly forecasts potential changes in risk ratings, nonperforming status and potential for loss and the estimated impact on the allowance for credit losses. In the Company’s retail banking operations, standard credit scoring systems are used to assess credit risks of consumer, small business and small-ticket leasing customers and to price these products accordingly. The Company conducts the underwriting and collections of its retail products in loan underwriting and servicing centers specializing in certain retail products. Forecasts of delinquency levels, bankruptcies and losses in conjunction with projection of estimated losses by delinquency categories and vintage information are regularly prepared and are used to evaluate underwriting and collection and determine the adequacy of the allowance for credit losses for these products. The Company also engages in non-lending activities that may give rise to credit risk, including interest rate swap contracts for balance sheet hedging purposes, foreign exchange transactions and interest rate swap contracts for customers, and settlement risk, including Automated Clearing House transactions, and the processing of credit card transactions for merchants. These activities are also subject to credit review, analysis and approval processes.

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Analysis of Nonperforming Assets Nonperforming assets represent a key indicator, among other considerations, of the potential for future credit losses. Nonperforming assets include nonaccrual loans, restructured loans not performing in accordance with modified terms and other real estate and other nonperforming assets owned by the Company. Interest payments on nonperforming assets are typically applied against the principal balance and not recorded as income. At March 31, 2004, total nonperforming assets were $1,046.6 million, compared with $1,148.1 million at December 31, 2003. The ratio of total nonperforming assets to total loans and other real estate decreased to .87 percent at March 31, 2004, compared with .97 percent at December 31, 2003. The improvement in credit quality has been broad-based across most industry categories reflecting continued improvement in economic conditions. While nonperforming assets levels have declined, the relative

Table 6		Nonperforming Assets (a)

					March 31,				December 31,
(Dollars in Millions)					2004				2003
Commercial
	Commercial				$	510.7			$	623.5
	Lease financing					115.6				113.3
		Total commercial				626.3				736.8
Commercial real estate
	Commercial mortgages					184.9				177.6
	Construction and development					43.6				39.9
		Total commercial real estate				228.5				217.5
Residential mortgages						42.1				40.5
Retail
	Retail leasing					.3				.4
	Other retail					20.1				24.8
		Total retail				20.4				25.2
			Total nonperforming loans			917.3				1,020.0
Other real estate						76.0				72.6
Other assets						53.3				55.5
			Total nonperforming assets		$	1,046.6			$	1,148.1
Restructured loans accruing interest (b)					$	—			$	18.0
Accruing loans 90 days or more past due (c)					$	319.2			$	329.4
Nonperforming loans to total loans						.77	%			.86	%
Nonperforming assets to total loans plus other real estate						.87	%			.97	%

Changes in Nonperforming Assets

						Commercial and				Retail and
						Commercial				Residential
(Dollars in Millions)						Real Estate				Mortgages (e)				Total
Balance December 31, 2003						$	1,082.4			$	65.7			$	1,148.1
	Additions to nonperforming assets
		New nonaccrual loans and foreclosed properties					232.6				13.8				246.4
		Advances on loans					11.1				—				11.1
			Total additions				243.7				13.8				257.5
	Reductions in nonperforming assets
		Paydowns, payoffs					(158.5	)			(3.6	)			(162.1	)
		Net sales					(36.4	)			—				(36.4	)
		Return to performing status					(34.6	)			(6.9	)			(41.5	)
		Charge-offs (d)					(116.4	)			(2.6	)			(119.0	)
			Total reductions				(345.9	)			(13.1	)			(359.0	)
				Net additions to (reductions in) nonperforming assets			(102.2	)			.7				(101.5	)
Balance March 31, 2004						$	980.2			$	66.4			$	1,046.6

(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 adequately secured by collateral and/or are in the process of collection and are reasonably expected to result in repayment or restoration to current status.
(d)		Charge-offs exclude actions for certain card products and loan sales that were not classified as nonperforming at the time the charge-off occurred.
(e)		Residential mortgage information excludes changes related to residential mortgages serviced by others.

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level of nonperforming assets reflects the general impact of soft economic conditions since late 2000, continued economic stress in the transportation sector, and the more pronounced affect of the economy on highly leveraged enterprise-value refinancings. Given the Company’s ongoing efforts to reduce the overall risk profile of the organization, nonperforming assets are expected to continue to trend lower during the remainder of 2004.

													As a Percent of Ending
					Amount								Loan Balances
					March 31,				December 31,				March 31,				December 31,
(Dollars in Millions)					2004				2003				2004				2003
Residential Mortgages
		30-89 days			$	80.4			$	102.9				.59	%			.76	%
		90 days or more				76.6				82.5				.56				.61
		Nonperforming				42.1				40.5				.31				.30
			Total		$	199.1			$	225.9				1.45	%			1.68	%
Retail Loans
	Credit Card
		30-89 days			$	132.7			$	150.9				2.28	%			2.54	%
		90 days or more				106.7				99.5				1.83				1.68
		Nonperforming				—				—				—				—
			Total		$	239.4			$	250.4				4.12	%			4.22	%
	Retail Leasing
		30-89 days			$	64.1			$	78.8				1.01	%			1.31	%
		90 days or more				6.7				8.2				.11				.14
		Nonperforming				.3				.4				—				.01
			Total		$	71.1			$	87.4				1.12	%			1.45	%
	Other Retail
		30-89 days			$	249.8			$	311.9				.90	%			1.15	%
		90 days or more				101.1				110.2				.36				.41
		Nonperforming				20.1				24.8				.07				.09
			Total		$	371.0			$	446.9				1.34	%			1.65	%

Table 7		Delinquent Loan Ratios as a Percent of Ending Loan Balances

					March 31,				December 31,
90 days or more past due excluding nonperforming loans					2004				2003
Commercial
	Commercial					.07	%			.06	%
	Lease financing					.01				.04
		Total commercial				.06				.06
Commercial real estate
	Commercial mortgages					—				.02
	Construction and development					.04				.03
		Total commercial real estate				.01				.02
Residential mortgages						.56				.61
Retail
	Credit card					1.83				1.68
	Retail leasing					.11				.14
	Other retail					.36				.41
		Total retail				.54				.56
			Total loans			.27	%			.28	%
					March 31,				December 31,
90 days or more past due excluding nonperforming loans					2004				2003
Commercial						1.67	%			1.97	%
Commercial real estate						.85				.82
Residential mortgages						.87				.91
Retail						.59				.62
	Total loans					1.03	%			1.14	%

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Analysis of Net Loan Charge-offs Total loan net charge-offs were $233.9 million during the first quarter of 2004, compared with net charge-offs of $333.8 million for the same period of 2003. The ratio of total loan net charge-offs to average loans in the first quarter of 2004 was ..79 percent, compared with 1.16 percent for the same period of 2003. The overall level of net charge-offs in the first quarter of 2004 reflected the Company’s ongoing efforts to reduce the overall risk profile of the organization. Net charge-offs are expected to continue to trend modestly lower throughout 2004.

Table 8		Net Charge-offs as a Percent of Average Loans Outstanding

					Three Months Ended
					March 31,
					2004				2003
Commercial
	Commercial					.64	%			1.54	%
	Lease financing					1.75				1.78
		Total commercial				.78				1.57
Commercial real estate
	Commercial mortgages					.09				.06
	Construction and development					.29				.06
		Total commercial real estate				.14				.06
Residential mortgages						.22				.24
Retail
	Credit card					4.34				5.17
	Retail leasing					.71				.98
	Home equity and second mortgages					.59				.76
	Other retail					1.38				1.69
		Total retail				1.45				1.75
			Total loans			.79	%			1.16	%

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			Average								Percent of
			Loan Balance								Average Loans
Three Months Ended March 31
(Dollars in Millions)			2004				2003				2004				2003
Consumer Finance (a)
	Residential mortgages		$	4,178			$	2,985				.42	%			.48	%
	Home equity and second mortgages			2,174				2,549				2.39				2.35
	Other retail			402				316				4.99				4.49
Traditional Branch
	Residential mortgages		$	9,432			$	7,139				.13	%			.13	%
	Home equity and second mortgages			11,202				10,921				.24				.39
	Other retail			13,711				12,889				1.28				1.62
Total Company
	Residential mortgages		$	13,610			$	10,124				.22	%			.24	%
	Home equity and second mortgages			13,376				13,470				.59				.76
	Other retail			14,113				13,205				1.38				1.69

(a)		Consumer finance category included credit originated and managed by USBCF, as well as home equity loans and second mortgage loans with a loan-to-value greater than 100 percent that were originated in the branches.

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.

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Table 9		Summary of Allowance for Credit Losses

						Three Months Ended
						March 31,
(Dollars in Millions)						2004				2003
Balance at beginning of period						$	2,368.6			$	2,422.0
Charge-offs
	Commercial
		Commercial					82.4				149.0
		Lease financing					32.5				40.5
			Total commercial				114.9				189.5
	Commercial real estate
		Commercial mortgages					9.1				5.7
		Construction and development					4.9				2.1
			Total commercial real estate				14.0				7.8
	Residential mortgages						8.4				7.0
	Retail
		Credit card					70.7				74.8
		Retail leasing					12.9				15.3
		Home equity and second mortgages					22.4				27.8
		Other retail					61.5				70.4
			Total retail				167.5				188.3
				Total charge-offs			304.8				392.6
Recoveries
	Commercial
		Commercial					28.8				11.1
		Lease financing					11.2				17.5
			Total commercial				40.0				28.6
	Commercial real estate
		Commercial mortgages					4.5				2.8
		Construction and development					.2				1.1
			Total commercial real estate				4.7				3.9
	Residential mortgages						1.1				1.1
	Retail
		Credit card					7.3				6.1
		Retail leasing					1.9				1.4
		Home equity and second mortgages					2.9				2.4
		Other retail					13.0				15.3
			Total retail				25.1				25.2
				Total recoveries			70.9				58.8
Net Charge-offs
	Commercial
		Commercial					53.6				137.9
		Lease financing					21.3				23.0
			Total commercial				74.9				160.9
	Commercial real estate
		Commercial mortgages					4.6				2.9
		Construction and development					4.7				1.0
			Total commercial real estate				9.3				3.9
	Residential mortgages						7.3				5.9
	Retail
		Credit card					63.4				68.7
		Retail leasing					11.0				13.9
		Home equity and second mortgages					19.5				25.4
		Other retail					48.5				55.1
			Total retail				142.4				163.1
				Total net charge-offs			233.9				333.8
Provision for credit losses							235.0				335.0
Acquisitions and other changes							—				(14.7	)
Balance at end of period						$	2,369.7			$	2,408.5
Components
	Allowance for loan losses					$	2,238.3			$	2,295.0
	Liability for unfunded credit commitments (a)						131.4				113.5
		Total allowance for credit losses				$	2,369.7			$	2,408.5
Allowance for credit losses as a percentage of
	Period-end loans						1.98	%			2.06	%
	Nonperforming loans						258				194
	Nonperforming assets						226				177
	Annualized net charge-offs						252				178

(a)		During the first quarter of 2004, the Company reclassified the portion of its allowance for credit losses related to commercial off-balance sheet loan commitments and letters of credit to a separate liability account.

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recent improvements. Finally, the Company considered the improving, but somewhat mixed, economic trends, including improving corporate earnings, changes in unemployment rates, the level of bankruptcies and general economic indicators.

Residual Risk ManagementThe Company manages its risk to changes in the residual value of leased assets through disciplined residual valuation setting 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-lease vehicles. Also, to reduce the financial risk of potential changes in vehicle residual values, the Company maintains residual value insurance. The catastrophic insurance maintained by the Company provides for the potential recovery of losses on individual vehicle sales in an amount equal to the difference between: (a) 105 percent or 110 percent of the average wholesale auction price for the vehicle at the time of sale and (b) the vehicle residual value specified by the Automotive Lease Guide (an authoritative industry source) at the inception of the lease. The potential recovery is calculated for each individual vehicle sold in a particular policy year and is reduced by any gains realized on vehicles sold during the same period. The Company will receive claim proceeds under this insurance program if, in the aggregate, there is a net loss for such period. In addition, the Company obtains separate residual value insurance for all vehicles at lease inception where end of lease term settlement is based solely on the residual value of the individual leased vehicles. Under this program, the potential recovery is computed for each individual vehicle sold and does not allow the insurance carrier to offset individually determined losses with gains from other leases. This individual vehicle coverage is included in the calculation of minimum lease payments when making the capital lease assessment. To reduce the risk associated with collecting insurance claims, the Company monitors the financial viability of the insurance carrier based on insurance industry ratings and available financial information.

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, breaches of the internal control system and compliance requirements and business continuation and disaster recovery. 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.

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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 and Market Value of Equity Modeling for measuring and analyzing consolidated interest rate risk.

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.

Sensitivity of Net Interest Income and Rate Sensitive Income:

		March 31, 2004																December 31, 2003
		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			.39	%			.20%				*	%			.14	%			1.30	%			.19%				*	%			(.02	)%
Rate sensitive income			.05	%			.03%				*	%			(.38	)%			.74	%			.01%				*	%			(.54	)%

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

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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 market value of equity assuming interest rates at March 31, 2004. Given the low level of current interest rates, the down 200 basis point scenario cannot be computed. The up 200 basis point scenario resulted in a 1.4 percent decrease in the market value of equity at March 31, 2004, compared with a 3.1 percent decrease at December 31, 2003. ALPC reviews other down rate scenarios to evaluate the impact of falling interest rates. The down 100 basis point scenario resulted in a .1 percent increase at March 31, 2004, and a 1.3 percent increase at December 31, 2003. At March 31, 2004, and December 31, 2003, the Company was within its policy guidelines.

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 customers. The Company minimizes its market and liquidity risks by taking similar offsetting positions.

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Table 10		Derivative Positions

													Weighted-
													Average
													Remaining
					Notional				Fair				Maturity
March 31, 2004 (Dollars in Millions)					Amount				Value				In Years
Asset and Liability Management Positions
	Interest rate contracts
	Receive fixed/pay floating swaps				$	19,493			$	813				4.75
	Pay fixed/receive floating swaps					4,525				(43	)			1.83
	Futures and forwards					3,772				(5	)			.16
	Options
	Written					2,300				(3	)			.19
	Equity contracts					3				—				1.67
Customer-related Positions
	Interest rate contracts
	Receive fixed/pay floating swaps				$	6,039			$	229				4.42
	Pay fixed/receive floating swaps					6,039				(196	)			4.42
	Options
	Purchased					448				9				3.33
	Written					448				(9	)			3.33
	Risk participation agreements (a)
	Purchased					127				—				7.79
	Written					64				—				2.89
	Foreign exchange rate contracts
	Forwards, spots and swaps
	Buy					2,055				87				.43
	Sell					2,065				(79	)			.41
	Options
	Purchased					5				—				.24
	Written					5				—				.24

(a)		At March 31, 2004, the credit equivalent amount was $1 million and $5 million for purchased and written risk participation agreements, respectively.

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Market Risk Management In 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, 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 Management ALPC 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 long-term and short-term perspectives, 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 Arrangements Off-balance sheet arrangements include any contractual arrangement to which an unconsolidated entity is a party, under which the Company has an obligation to provide credit or liquidity enhancements or market risk support. Off-balance sheet arrangements include certain defined guarantees, asset securitization trusts and conduits. Off-balance sheet arrangements also include any obligation under a variable interest held by an unconsolidated entity that provides financing, liquidity, credit enhancement or market risk support.

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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 $19.5 billion at March 31, 2004, compared with $19.2 billion at December 31, 2003. The increase was the result of corporate earnings offset primarily by share repurchases and dividends.

Table 11		Capital Ratios

			March 31,				December 31,
(Dollars in Millions)			2004				2003
Tangible common equity			$	11,732			$	11,858
	As a percent of tangible assets			6.4	%			6.5	%
Tier 1 capital			$	14,499			$	14,623
	As a percent of risk-weighted assets			8.9	%			9.1	%
	As a percent of adjusted quarterly average assets (leverage ratio)			8.0	%			8.0	%
Total risk-based capital			$	21,559			$	21,710
	As a percent of risk-weighted assets			13.3	%			13.6	%

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		Number				Average				Remaining Shares
		of Shares				Price Paid				Available to be
Time Period		Purchased (a)				per Share				Purchased
January			6,770,000			$	28.28				135,229,000
February			11,379,803				27.92				123,849,197
March			15,675,000				28.08				108,174,197
Total			33,824,803			$	28.06				108,174,197

(a)		All shares purchased during the first quarter of 2004 were purchased under the publicly announced December 16, 2003 repurchase authorization.

LINE OF BUSINESS FINANCIAL REVIEW

    Within the Company, financial performance is measured by major lines of business, which include Wholesale Banking, Consumer Banking, Private Client, Trust and Asset Management, Payment Services and Treasury and Corporate Support. These operating segments are components of the Company about which financial information is available and is evaluated regularly in deciding how to allocate resources and assess performance.

Basis for Financial PresentationBusiness line results are derived from the Company’s business unit profitability reporting systems by specifically attributing managed balance sheet assets, deposits and other liabilities and their related income or expense. Funds transfer-pricing methodologies are utilized to allocate a cost of funds used or credit for funds provided to all business line assets and liabilities using a matched funding concept. Also, the business unit is allocated the taxable-equivalent benefit of tax-exempt products. Noninterest income and expenses directly managed by each business line, including fees, service charges, salaries and benefits, and other direct costs are accounted for within each segment’s financial results in a manner similar to the consolidated financial statements. Occupancy costs are allocated based on utilization of facilities by the lines of business. Noninterest expenses incurred by centrally managed operations or business lines that directly support another business line’s operations are charged to the applicable business line based on its utilization of those services primarily measured by the volume of customer activities. Certain corporate activities that do not directly support the operations of the lines of business are not charged to the lines of business. Goodwill and other intangible assets are assigned to the lines of business based on the mix of business of the acquired entity. The provision for credit losses within the Wholesale Banking, Consumer Banking, Private Client, Trust and Asset Management and Payment Services lines of business is based on net charge-offs, while Treasury and Corporate Support reflects the residual component of the Company’s total consolidated provision for credit losses determined in accordance with accounting principles generally accepted in the United States. Income taxes are assessed to each line of business at a standard tax rate with the residual tax expense or benefit to arrive at the consolidated effective tax rate included in Treasury and Corporate Support. Merger and restructuring-related charges, discontinued operations and cumulative effects of changes in accounting principles are not identified by or allocated to lines of business. Within the Company, capital levels are evaluated and managed centrally; however, capital is allocated to the operating segments to support evaluation of business performance. Capital allocations to the business lines are based on the amount of goodwill and other intangibles, the extent of off-balance sheet managed assets and lending commitments and the ratio of on-balance sheet assets relative to the total Company. Certain lines of business, such as trust and asset management, have no significant balance sheet components. For these business units, capital is allocated taking into consideration fiduciary and operational risk, capital levels of independent organizations operating similar businesses, and regulatory requirements.

Wholesale Bankingoffers lending, depository, treasury management and other financial services to middle market, large corporate and public sector clients. Wholesale Banking contributed $264.7 million of the Company’s operating earnings in the first quarter of

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Table 12		Line of Business Financial Performance

				Wholesale												Consumer
				Banking												Banking
												Percent												Percent
Three Months Ended March 31 (Dollars in Millions)				2004				2003				Change				2004				2003				Change
Condensed Income Statement
Net interest income (taxable-equivalent basis)				$	418.8			$	442.4				(5.3	)%		$	920.2			$	916.2				.4	%
Noninterest income					191.2				197.9				(3.4	)			416.7				379.8				9.7
Securities gains (losses), net					.9				—				*				—				105.8				*
	Total net revenue				610.9				640.3				(4.6	)			1,336.9				1,401.8				(4.6	)
Noninterest expense					156.0				165.2				(5.6	)			554.5				567.5				(2.3	)
Other intangibles					4.8				4.9				(2.0	)			170.3				173.5				(1.8	)
	Total noninterest expense				160.8				170.1				(5.5	)			724.8				741.0				(2.2	)
		Operating income (loss)			450.1				470.2				(4.3	)			612.1				660.8				(7.4	)
Provision for credit losses					34.0				114.9				(70.4	)			107.1				111.4				(3.9	)
Operating earnings (loss), before income taxes					416.1				355.3				17.1				505.0				549.4				(8.1	)
Income taxes and taxable-equivalent adjustment					151.4				129.3				17.1				183.8				199.9				(8.1	)
Operating earnings (loss)				$	264.7			$	226.0				17.1			$	321.2			$	349.5				(8.1	)
Merger and restructuring-related items (after-tax)
Discontinued operations (after-tax)
Net income
Average Balance Sheet Data
Commercial				$	26,229			$	28,541				(8.1	)%		$	7,699			$	8,241				(6.6	)%
Commercial real estate					15,990				16,358				(2.2	)			10,363				9,630				7.6
Residential mortgages					70				165				(57.6	)			13,250				9,725				36.2
Retail					56				63				(11.1	)			29,979				28,715				4.4
	Total loans				42,345				45,127				(6.2	)			61,291				56,311				8.8
Goodwill					1,225				1,229				(.3	)			2,243				2,242				—
Other intangible assets					95				114				(16.7	)			986				979				.7
Assets					48,588				52,156				(6.8	)			68,786				66,711				3.1
Noninterest-bearing deposits					12,587				16,207				(22.3	)			13,568				13,353				1.6
Savings products					10,499				7,616				37.9				42,872				39,219				9.3
Time deposits					5,433				3,430				58.4				16,515				20,408				(19.1	)
	Total deposits				28,519				27,253				4.6				72,955				72,980				—
Shareholders’ equity					5,160				4,985				3.5				6,273				5,617				11.7

*		Not meaningful

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Private Client, Trust												Payment												Treasury and												Consolidated
and Asset Management												Services												Corporate Support												Company
								Percent												Percent												Percent												Percent
2004				2003				Change				2004				2003				Change				2004				2003				Change				2004				2003				Change
$	102.5			$	87.0				17.8	%		$	148.8			$	160.1				(7.1	)%		$	188.7			$	171.0				10.4	%		$	1,779.0			$	1,776.7				.1	%
	249.7				227.5				9.8				411.1				372.0				10.5				49.6				48.2				2.9				1,318.3				1,225.4				7.6
	—				—				—				—				—				—				(.9	)			34.9				*				—				140.7				*
	352.2				314.5				12.0				559.9				532.1				5.2				237.4				254.1				(6.6	)			3,097.3				3,142.8				(1.4	)
	141.7				143.5				(1.3	)			180.4				176.1				2.4				196.2				149.6				31.1				1,228.8				1,201.9				2.2
	15.0				16.5				(9.1	)			34.6				38.7				(10.6	)			1.4				1.5				(6.7	)			226.1				235.1				(3.8	)
	156.7				160.0				(2.1	)			215.0				214.8				.1				197.6				151.1				30.8				1,454.9				1,437.0				1.2
	195.5				154.5				26.5				344.9				317.3				8.7				39.8				103.0				(61.4	)			1,642.4				1,705.8				(3.7	)
	.9				.4				*				92.6				108.4				(14.6	)			.4				(.1	)			*				235.0				335.0				(29.9	)
	194.6				154.1				26.3				252.3				208.9				20.8				39.4				103.1				(61.8	)			1,407.4				1,370.8				2.7
	70.8				56.1				26.2				91.8				76.0				20.8				(98.8	)			13.9				*				399.0				475.2				(16.0	)
$	123.8			$	98.0				26.3			$	160.5			$	132.9				20.8			$	138.2			$	89.2				54.9				1,008.4				895.6				12.6
																																					—				(11.5	)
																																					—				.7
																																				$	1,008.4			$	884.8
$	1,634			$	1,760				(7.2	)%		$	2,828			$	2,741				3.2	%		$	141			$	307				(54.1	)%		$	38,531			$	41,590				(7.4	)%
	595				555				7.2				—				—				—				162				240				(32.5	)			27,110				26,783				1.2
	277				219				26.5				—				—				—				13				15				(13.3	)			13,610				10,124				34.4
	2,107				1,962				7.4				7,375				7,026				5.0				42				48				(12.5	)			39,559				37,814				4.6
	4,613				4,496				2.6				10,203				9,767				4.5				358				610				(41.3	)			118,810				116,311				2.1
	769				738				4.2				1,815				1,813				.1				—				306				*				6,052				6,328				(4.4	)
	357				427				(16.4	)			649				702				(7.5	)			9				49				(81.6	)			2,096				2,271				(7.7	)
	6,366				6,263				1.6				13,052				13,015				.3				52,871				45,532				16.1				189,663				183,677				3.3
	3,000				2,712				10.6				109				476				(77.1	)			(239	)			76				*				29,025				32,824				(11.6	)
	7,845				4,632				69.4				11				9				22.2				16				15				6.7				61,243				51,491				18.9
	463				428				8.2				—				—				—				3,340				7,234				(53.8	)			25,751				31,500				(18.3	)
	11,308				7,772				45.5				120				485				(75.3	)			3,117				7,325				(57.4	)			116,019				115,815				.2
	2,123				1,952				8.8				3,025				2,989				1.2				3,003				3,265				(8.0	)			19,584				18,808				4.1

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$959.1 million at March 31, 2003. Nonperforming assets as a percentage of end-of-period loans were 1.44 percent, 1.76 percent and 2.11 percent as of March 31, 2004, December 31, 2003, and March 31, 2003, respectively. While nonperforming asset levels continue to be elevated relative to the 1990’s, significant improvement in credit quality has been achieved with broad-based reductions across most industry sectors. The Company expects further improvements in nonperforming asset levels through 2004. Refer to the “Corporate Risk Profile” section for further information on factors impacting the credit quality of the loan portfolios.

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, branch ATM banking, small business banking, including lending guaranteed by the Small Business Administration, small-ticket leasing, consumer lending, mortgage banking, workplace banking, student banking, 24-hour banking and investment product and insurance sales. Consumer Banking contributed $321.2 million of the Company’s operating earnings for the first quarter of 2004, a decrease of $28.3 million (8.1 percent) compared with the first quarter of 2003. While the retail banking business grew net operating earnings by 18.6 percent from a year ago, the contribution of the mortgage banking business declined from the first quarter of 2003. The decrease in the mortgage banking business was primarily the result of a reduction in gains on the sale of securities of $105.8 million from sales occurring in the first quarter of 2003 that, generally, are utilized by the Company to offset MSR impairment. While the mortgage banking business recognized a $109.3 million MSR impairment in the first quarter of 2004, the Company decided not to sell higher yielding securities to offset the impairment within the mortgage banking business. For the Consumer Banking business, as a whole, the unfavorable variance in securities gains was partially offset by favorable growth in net interest income and fee-based revenues and lower noninterest expenses and credit losses.

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Private Client, Trust and Asset Managementprovides trust, private banking, financial advisory, investment management and mutual fund and alternative investment product services through five businesses: Private Client Group, Corporate Trust, Asset Management, Institutional Trust and Custody and Fund Services, LLC. Private Client, Trust and Asset Management contributed $123.8 million of the Company’s operating earnings in the first quarter of 2004, an increase of 26.3 percent, compared with the first quarter of 2003. The increase was attributable to growth in total net revenue (12.0 percent) and lower noninterest expense.

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 $160.5 million of the Company’s operating earnings in the first quarter of 2004, a 20.8 percent increase over the first quarter of 2003. The increase was due to growth in total net revenue (5.2 percent), essentially flat noninterest expense and a reduction in provision for credit losses (14.6 percent).

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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 the residual aggregate of expenses associated with business activities managed on a corporate basis, including enterprise-wide operations and administrative support functions. Treasury and Corporate Support recorded operating earnings of $138.2 million in the first quarter of 2004, an increase of $49.0 million (54.9 percent), compared with the first quarter of 2003.

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ACCOUNTING CHANGES

    Note 2 of the Notes to Consolidated Financial Statements discusses new accounting policies adopted by the Company during 2004 and 2003 and the expected impact of accounting policies recently issued 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 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 the Company’s financial statements. 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 Losses The 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 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 carrying value is greater than fair 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, 2004, to immediate 25 and 50 basis point adverse changes in interest rates would be approximately $107 million and $152 million, respectively. An upward movement in interest rates at March 31, 2004, of 25 and 50 basis points would increase the value of the MSRs by approximately $101 million and $143 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 Statement of Financial Accounting Standards No. 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 impairment 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 Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon this evaluation, the principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

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Consolidated Balance Sheet" -->

					March 31,				December 31,
(Dollars in Millions)					2004				2003
					(Unaudited)
Assets
Cash and due from banks					$	7,177			$	8,630
Investment securities
	Held-to-maturity (fair value $145 and $161, respectively)					137				152
	Available-for-sale					45,268				43,182
Loans held for sale						1,644				1,433
Loans
	Commercial					39,006				38,526
	Commercial real estate					27,215				27,242
	Residential mortgages					13,717				13,457
	Retail					39,945				39,010
		Total loans				119,883				118,235
			Less allowance for loan losses			(2,238	)			(2,369	)
			Net loans			117,645				115,866
Premises and equipment						1,924				1,957
Customers’ liability on acceptances						148				121
Goodwill						6,095				6,025
Other intangible assets						2,025				2,124
Other assets						10,030				9,796
		Total assets			$	192,093			$	189,286
Liabilities and Shareholders’ Equity
Deposits
	Noninterest-bearing				$	31,086			$	32,470
	Interest-bearing					74,262				74,749
	Time deposits greater than $100,000					13,616				11,833
		Total deposits				118,964				119,052
Short-term borrowings						13,431				10,850
Long-term debt						30,851				31,215
Junior subordinated debentures						2,717				2,601
Acceptances outstanding						148				121
Other liabilities						6,530				6,205
		Total liabilities				172,641				170,044
Shareholders’ equity
	Common stock, par value $0.01 a share — authorized: 4,000,000,000 shares issued: 3/31/04 and 12/31/03 — 1,972,643,007 shares					20				20
	Capital surplus					5,832				5,851
	Retained earnings					15,059				14,508
	Less cost of common stock in treasury: 3/31/04 — 71,475,817 shares; 12/31/03 — 49,722,856 shares					(1,853	)			(1,205	)
	Other comprehensive income					394				68
		Total shareholders’ equity				19,452				19,242
		Total liabilities and shareholders’ equity			$	192,093			$	189,286

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Consolidated Statement of Income" -->

				Three Months Ended
				March 31,
(Dollars and Shares in Millions, Except Per Share Data)				2004				2003
Interest Income
Loans				$	1,747.0			$	1,836.7
Loans held for sale					19.9				59.6
Investment securities
	Taxable				464.0				396.1
	Non-taxable				5.3				8.9
Other interest income					21.9				29.9
		Total interest income			2,258.1				2,331.2
Interest Expense
Deposits					227.0				306.6
Short-term borrowings					49.9				39.5
Long-term debt					185.9				184.3
Junior subordinated debentures					23.5				31.4
		Total interest expense			486.3				561.8
Net interest income					1,771.8				1,769.4
Provision for credit losses					235.0				335.0
Net interest income after provision for credit losses					1,536.8				1,434.4
Noninterest Income
Credit and debit card revenue					141.8				127.4
Corporate payment products revenue					94.8				86.0
ATM processing services					42.2				42.4
Merchant processing services					141.1				127.3
Trust and investment management fees					248.6				228.6
Deposit service charges					185.2				163.2
Treasury management fees					117.5				112.0
Commercial products revenue					110.4				104.2
Mortgage banking revenue					94.2				95.4
Investment products fees and commissions					39.3				35.1
Securities gains, net					—				140.7
Other					103.2				103.8
		Total noninterest income			1,318.3				1,366.1
Noninterest Expense
Compensation					535.8				546.0
Employee benefits					100.2				91.7
Net occupancy and equipment					155.7				161.3
Professional services					32.4				26.4
Marketing and business development					35.3				29.8
Technology and communications					101.7				104.9
Postage, printing and supplies					61.6				60.4
Other intangibles					226.1				235.1
Merger and restructuring-related charges					—				17.6
Other					206.1				181.4
		Total noninterest expense			1,454.9				1,454.6
Income from continuing operations before income taxes					1,400.2				1,345.9
Applicable income taxes					391.8				461.8
Income from continuing operations					1,008.4				884.1
	Income from discontinued operations (after-tax)				—				.7
Net income				$	1,008.4			$	884.8
Earnings Per Share
	Income from continuing operations			$	.53			$	.46
	Discontinued operations				—				—
	Net income			$	.53			$	.46
Diluted Earnings Per Share
	Income from continuing operations			$	.52			$	.46
	Discontinued operations				—				—
	Net income			$	.52			$	.46
Dividends declared per share				$	.240			$	.205
Average common shares outstanding					1,915.4				1,919.0
Average diluted common shares outstanding					1,941.1				1,925.6

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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				Equity
Balance December 31, 2002				1,916,956,560			$	20			$	5,799			$	13,105			$	(1,272	)		$	784			$	18,436
Net income																885												885
Unrealized loss on securities available for sale																								(97	)			(97	)
Unrealized loss on derivatives																								(169	)			(169	)
Foreign currency translation adjustment																								6				6
Realized gain on derivatives																								188				188
Reclassification adjustment for gains realized in net income																								(153	)			(153	)
Income taxes																								86				86
	Total comprehensive income																											746
Cash dividends declared on common stock																(394	)											(394	)
Issuance of common and treasury stock				2,492,344								(21	)							58								37
Stock option and restricted stock grants												37																37
Shares reserved to meet deferred compensation obligations				(398,944	)							8								(8	)							—
Balance March 31, 2003				1,919,049,960			$	20			$	5,823			$	13,596			$	(1,222	)		$	645			$	18,862
Balance December 31, 2003				1,922,920,151			$	20			$	5,851			$	14,508			$	(1,205	)		$	68			$	19,242
Net income																1,008												1,008
Unrealized gain on securities available for sale																								484				484
Unrealized gain on derivatives																								53				53
Foreign currency translation adjustment																								(2	)			(2	)
Realized gain on derivatives																								3				3
Reclassification adjustment for gains realized in net income																								(12	)			(12	)
Income taxes																								(200	)			(200	)
	Total comprehensive income																											1,334
Cash dividends declared on common stock																(457	)											(457	)
Issuance of common and treasury stock				12,514,253								(40	)							311								271
Purchase of treasury stock				(33,824,803	)															(947	)							(947	)
Stock option and restricted stock grants												12																12
Shares reserved to meet deferred compensation obligations				(442,411	)							9								(12	)							(3	)
Balance March 31, 2004				1,901,167,190			$	20			$	5,832			$	15,059			$	(1,853	)		$	394			$	19,452

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Consolidated Statement of Cash Flows" -->

			Three Months Ended
			March 31,
(Dollars in Millions)
(Unaudited)			2004				2003
Operating Activities
	Net cash provided by (used in) operating activities		$	1,239.5			$	2,391.5
Investing Activities
Proceeds from sales of available-for-sale investment securities				335.2				3,579.5
Proceeds from maturities of investment securities				1,974.2				4,576.3
Purchases of investment securities				(3,913.5	)			(12,787.3	)
Net (increase) decrease in loans outstanding				(1,748.6	)			(1,566.5	)
Proceeds from sales of loans				458.5				617.7
Purchases of loans				(598.0	)			(211.2	)
Proceeds from sales of premises and equipment				7.4				11.5
Purchases of premises and equipment				(31.1	)			(36.9	)
Other, net				(117.8	)			(2.0	)
	Net cash provided by (used in) investing activities			(3,633.7	)			(5,818.9	)
Financing Activities
Net increase (decrease) in deposits				(88.6	)			(312.8	)
Net increase (decrease) in short-term borrowings				2,581.6				(1,230.6	)
Principal payments on long-term debt				(4,389.8	)			(1,214.3	)
Proceeds from issuance of long-term debt				3,950.6				4,698.8
Proceeds from issuance of common stock				230.7				31.8
Repurchase of common stock				(965.6	)			—
Cash dividends paid				(462.3	)			(373.8	)
	Net cash provided by (used in) financing activities			856.6				1,599.1
	Change in cash and cash equivalents			(1,537.6	)			(1,828.3	)
Cash and cash equivalents at beginning of period				8,782.2				11,192.1
	Cash and cash equivalents at end of period		$	7,244.6			$	9,363.8

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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 notes 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. For further information, refer to the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. Certain amounts in prior periods have been reclassified to conform to the current presentation.

Note 2		Accounting Changes

Loan Commitments On March 9, 2004, the Securities and Exchange Commission Staff issued Staff Accounting Bulletin No. 105 (“SAB 105”), “Application of Accounting Principles to Loan Commitments,” which provides guidance regarding loan commitments accounted for as derivative instruments effective for commitments entered into after March 31, 2004. The guidance clarifies that expected future cash flows related to the servicing of the loan may be recognized only when the servicing asset has been contractually separated from the underlying loan by sale with servicing retained. The Company is currently assessing the impact of this guidance on its financial statements.

Variable Interest Entities In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (revised December 2003) (“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. The interpretation requires the consolidation of entities in which an enterprise absorbs a majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. 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 Financial Accounting Standards No. 140 (“SFAS 140”), “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities,” are not required to be consolidated under the provisions of FIN 46. The Company adopted the provisions of FIN 46, as revised, as of March 31, 2004.

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Note 3		Discontinued Operations

On December 31, 2003, the Company completed the distribution of all of the outstanding shares of common stock of Piper Jaffray Companies to its shareholders. This non-cash distribution was tax-free to the Company, its shareholders and Piper Jaffray Companies. In connection with the December 31, 2003 distribution, the results of Piper Jaffray Companies for 2003 are reported in the Company’s Consolidated Statement of Income separately as discontinued operations.

The following table represents the condensed results of operations for discontinued operations for the first quarter of 2003:

Three Months Ended (Dollars in Millions)				March 31, 2003
Revenues			$	167.2
Noninterest expense				166.2
Income from discontinued operations				1.0
Costs of disposal				.3
Income taxes				—
	Discontinued operations, net of tax		$	.7

Following the distribution, the Company’s wholly-owned subsidiary, USB Holdings, Inc. holds a $180 million subordinated debt facility with Piper Jaffray & Co., a broker-dealer subsidiary of Piper Jaffray Companies. In addition, the Company provides an indemnification in an amount up to $17.5 million with respect to certain specified liabilities primarily resulting from third-party claims relating to research analyst independence and from certain regulatory investigations, as defined in the separation and distribution agreement entered into with Piper Jaffray Companies at the time of the distribution.

Note 4		Investment Securities

The detail of the amortized cost, gross unrealized holding gains and losses, and fair value of held-to-maturity and available-for-sale securities was as follows:

				March 31, 2004																December 31, 2003
								Gross				Gross												Gross				Gross
								Unrealized				Unrealized												Unrealized				Unrealized
				Amortized				Holding				Holding				Fair				Amortized				Holding				Holding				Fair
(Dollars in Millions)				Cost				Gains				Losses				Value				Cost				Gains				Losses				Value
Held-to-maturity (a)
	Mortgage-backed securities			$	13			$	—			$	—			$	13			$	14			$	—			$	—			$	14
	Obligations of state and political subdivisions				124				11				(3	)			132				138				11				(2	)			147
		Total held-to-maturity securities		$	137			$	11			$	(3	)		$	145			$	152			$	11			$	(2	)		$	161
Available-for-sale (b)
	U.S. Treasury and agencies			$	1,613			$	11			$	(47	)		$	1,577			$	1,634			$	10			$	(69	)		$	1,575
	Mortgage-backed securities				41,982				387				(150	)			42,219				40,229				203				(407	)			40,025
	Asset-backed securities				194				4				(2	)			196				250				5				(3	)			252
	Obligations of states and political subdivisions				296				12				—				308				335				13				—				348
	Other securities and investments				965				15				(12	)			968				993				9				(20	)			982
		Total available-for-sale securities		$	45,050			$	429			$	(211	)		$	45,268			$	43,441			$	240			$	(499	)		$	43,182

(a)		Held-to-maturity securities are carried at historical cost adjusted for amortization of premiums and accretion of discounts.
(b)		Available-for-sale securities are carried at fair value with unrealized net gains or losses reported within other comprehensive income in shareholders’ equity.

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    The fair value of available-for-sale investments shown above includes investments totaling $266.8 million with unrealized losses of $10.1 million which have been in an unrealized loss position for greater than 12 months. The investments primarily represent 43 trust preferred securities from 13 bank issuers. All principal and interest payments are expected to be collected given the high credit quality of the bank holding company issuers and the Company’s ability and intent to hold the investments until such time as the value recovers or maturity. All other available-for-sale investments with unrealized losses have an aggregate fair value of $11.8 billion and have been in an unrealized loss position for less than 12 months and primarily represent fixed-rate investments with temporary impairment resulting from increases in interest rates since the purchase of the investments. The Company has the ability to hold these investments until such time as the value recovers or maturity.

The following table provides information as to the amount of gross gains and losses realized through the sales of available-for-sale investment securities.

			Three Months Ended
			March 31,
(Dollars in Millions)			2004				2003
Realized gains			$	1.0			$	141.8
Realized losses				(1.0	)			(1.1	)
	Net realized gains		$	—			$	140.7
Income tax on net realized gains			$	—			$	53.5

For amortized cost, fair value and yield by maturity date of held-to-maturity and available-for-sale securities outstanding as of March 31, 2004, refer to Table 5 included in Management’s Discussion and Analysis which is incorporated by reference into these Notes to Consolidated Financial Statements.

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Note 5		Loans

The composition of the loan portfolio was as follows:

					March 31, 2004								December 31, 2003
									Percent								Percent
(Dollars in Millions)					Amount				of Total				Amount				of Total
Commercial
	Commercial				$	34,165				28.5	%		$	33,536				28.4	%
	Lease financing					4,841				4.0				4,990				4.2
		Total commercial				39,006				32.5				38,526				32.6
Commercial real estate
	Commercial mortgages					20,623				17.2				20,624				17.4
	Construction and development					6,592				5.5				6,618				5.6
		Total commercial real estate				27,215				22.7				27,242				23.0
Residential mortgages
	Residential mortgages					7,705				6.5				7,332				6.2
	Home equity loans, first liens					6,012				5.0				6,125				5.2
		Total residential mortgages				13,717				11.5				13,457				11.4
Retail
	Credit card					5,815				4.8				5,933				5.0
	Retail leasing					6,365				5.3				6,029				5.1
	Home equity and second mortgages					13,515				11.3				13,210				11.2
	Other retail
		Revolving credit				2,477				2.1				2,540				2.1
		Installment				2,441				2.0				2,380				2.0
		Automobile				7,425				6.2				7,165				6.1
		Student				1,907				1.6				1,753				1.5
			Total other retail			14,250				11.9				13,838				11.7
		Total retail				39,945				33.3				39,010				33.0
			Total loans		$	119,883				100.0	%		$	118,235				100.0	%

Loans are presented net of unearned interest and deferred fees and costs, which amounted to $1.4 billion and $1.5 billion at March 31, 2004, and December 31, 2003, respectively.

Note 6		Mortgage Servicing Rights

The Company’s portfolio of residential mortgages serviced for others was $57.7 billion and $53.9 billion at March 31, 2004, and December 31, 2003, respectively.

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

			March 31,				December 31,
(Dollars in Millions)			2004				2003
Initial carrying value, net of amortization			$	901			$	830
Impairment valuation allowance				(267	)			(160	)
	Net carrying value		$	634			$	670

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Changes in capitalized mortgage servicing rights are summarized as follows:

			Three Months Ended				Year Ended
(Dollars in Millions)			March 31, 2004				December 31, 2003
Balance at beginning of period			$	670			$	642
	Rights purchased			59				55
	Rights capitalized			59				338
	Amortization			(45	)			(156	)
	Rights sold			—				—
	Impairment			(109	)			(209	)
Balance at end of period			$	634			$	670

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)		2004				2003
Fair value		$	634			$	670
Expected weighted-average life (in years)			4.2				5.2
Discount rate			9.9	%			9.9	%

The estimated sensitivity of the fair value of the mortgage servicing rights portfolio to changes in interest rates at March 31, 2004, was as follows:

		Down Scenario								Up Scenario
(Dollars in Millions)		50 bps				25 bps				25 bps				50 bps
Fair value		$	(152	)		$	(107	)		$	101			$	143

The Company utilizes the investment securities portfolio as an economic hedge against possible adverse interest rate changes. The Company also, from time to time, purchases principal-only securities that act as a partial economic hedge. The Company is able to recognize reparations from increases in fair value of servicing rights when impairment reserves are released.

A summary of the Company’s mortgage servicing rights and related characteristics by portfolio as of March 31, 2004, is as follows:

						U.S. Bank Home Mortgage
		Leader
(Dollars in Millions)		Mortgage				Conventional				Government				Total
Servicing portfolio		$	7,956			$	40,678			$	9,033			$	57,667
Fair market value		$	131			$	386			$	117			$	634
Value (bps)			165				95				130				110
Weighted-average servicing fees (bps)			44				34				46				37
Multiple (value/servicing fees)			3.75				2.79				2.83				2.97
Weighted-average note rate			6.45	%			5.77	%			6.25	%			5.94	%
Age (in years)			3.4				1.3				1.9				1.7
Expected life (in years)			6.7				3.8				3.9				4.2
Discount rate			10.1	%			9.6	%			11.0	%			9.9	%

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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, 2004:

											Private Client,
			Wholesale				Consumer				Trust and Asset				Payment				Consolidated
(Dollars in Millions)			Banking				Banking				Management				Services				Company
Balance at December 31, 2003			$	1,225			$	2,242			$	742			$	1,816			$	6,025
	Goodwill acquired			—				—				70				—				70
	Disposal			—				—				—				—				—
Balance at March 31, 2004			$	1,225			$	2,242			$	812			$	1,816			$	6,095

Intangible assets consisted of the following:

			Estimated				Amortization				March 31,				December 31,
(Dollars in Millions)			Life (a)				Method (b)				2004				2003
Goodwill				—				—			$	6,095			$	6,025
Merchant processing contracts				8 years				AC				527				552
Core deposit benefits				10 years/6 years				SL/AC				396				417
Mortgage servicing rights				4 years				AC				634				670
Trust relationships				15 years/10 years				SL/AC				299				311
Other identified intangibles				8 years/9 years				SL/AC				169				174
	Total										$	8,120			$	8,149

Aggregate amortization and impairment expense consisted of the following:

			Three Months Ended
			March 31,
(Dollars in Millions)			2004				2003
Merchant processing contracts			$	27.8			$	32.2
Core deposit benefits				20.9				22.1
Mortgage servicing rights				154.5				156.7
Trust relationships				11.8				13.2
Other identified intangibles				11.1				10.9
	Total		$	226.1			$	235.1

Below is the estimated amortization expense for the years ending:

(Dollars in Millions)
Remaining 2004		$	362.0
2005			369.6
2006			300.2
2007			249.6
2008			196.8

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Note 8		Junior Subordinated Debentures Issued to Unconsolidated Subsidiary Trusts

The following table is a summary of the debt obligations relating to unconsolidated subsidiary trusts holding junior subordinated debentures of the Company as of March 31, 2004:

Trust

Preferred

Earliest

Issuance

Securities

Debentures

Rate

Redemption

Issuance Trust (Dollars in Millions)

Date

Amount

Amount (a)

Type (b)

Rate

Maturity Date

Date

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

Institutional

Star Capital I

June 1997

150

155

Variable

1.88

June 2027

June 15, 2007

Mercantile Capital Trust I

February 1997

150

155

Variable

1.98

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)		Junior subordinated debentures issued to unconsolidated subsidiary trusts that are designated in fair value hedges at March 31, 2004, are recorded on the balance sheet at fair value. Carrying value includes a fair value adjustment of $92 million related to hedges on certain junior subordinated debentures, as well as prepaid issuance fees of $(4) million.
(b)		The variable-rate Trust Preferred Securities and Debentures reprice quarterly based on three-month LIBOR.

Note 9		Shareholders’ Equity

At March 31, 2004, and December 31, 2003, the Company had authority to issue 4 billion shares of common stock and 10 million shares of preferred stock. The Company had 1,901.2 million and 1,922.9 million shares of common stock outstanding at March 31, 2004, and December 31, 2003, 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)				2004				2003
Income from continuing operations				$	1,008.4			$	884.1
	Income from discontinued operations (after-tax)				—				.7
		Net income		$	1,008.4			$	884.8
Average common shares outstanding					1,915.4				1,919.0
Net effect of the assumed purchase of stock based on the treasury stock method for options and stock plans					25.7				6.6
Average diluted common shares outstanding					1,941.1				1,925.6
Earnings per share
	Income from continuing operations			$	.53			$	.46
	Discontinued operations				—				—
		Net income		$	.53			$	.46
Diluted earnings per share
	Income from continuing operations			$	.52			$	.46
	Discontinued operations				—				—
		Net income		$	.52			$	.46

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For the three months ended March 31, 2004, and 2003, options to purchase 39 million and 143 million shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were antidilutive.

Note 11		Employee Benefits

Retirement Plans The following table sets forth the components of net periodic benefit cost (income) for the retirement plans for the three months ended March 31, 2004:

							Post-
							Retirement
			Pension				Medical
(Dollars in Millions)			Plans				Plans
Components of net periodic benefit cost (income)
	Service cost		$	14.6			$	.9
	Interest cost			26.9				4.8
	Expected return on plan assets			(50.8	)			(.4	)
	Net amortization and deferral			(1.6	)			—
	Recognized actuarial loss			7.6				.9
Net periodic benefit cost (income)			$	(3.3	)		$	6.2

The information for the components of the net periodic benefit cost (income) for the three months ended March 31, 2003, was not readily available.

Healthcare Postretirement Benefit PlansIn December 2003, the Medicare Prescription Drugs, Improvement and Modernization Act was signed into law. The Act introduces a prescription drug benefit under Medicare as well as a federal subsidy to sponsors of retiree health care plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. FASB Staff Position 106-1, “Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” permits deferring the accounting for the effects of the Act until authoritative guidance on accounting for the federal subsidy is issued. The Company has elected to defer accounting for the effects of this new law until the specific authoritative guidance is issued. We believe the impact of this new law will be immaterial to the Company’s financial statements.

Note 12		Income Taxes

The components of income tax expense were:

			Three Months Ended
			March 31,
(Dollars in Millions)			2004				2003
Federal
Current			$	278.1			$	358.3
Deferred				65.8				54.5
	Federal income tax			343.9				412.8
State
Current				35.7				35.0
Deferred				12.2				14.0
	State income tax			47.9				49.0
	Total income tax provision		$	391.8			$	461.8

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A reconciliation of expected income tax expense at the federal statutory rate of 35% to the Company’s applicable income tax expense follows:

			Three Months Ended
			March 31,
(Dollars in Millions)			2004				2003
Tax at statutory rate (35%)			$	490.1			$	471.1
State income tax, at statutory rates, net of federal tax benefit				31.1				32.9
Tax effect of
	Resolution of federal income tax examinations			(90.0	)			—
	Tax credits			(31.2	)			(26.6	)
	Tax-exempt interest, net			(5.4	)			(5.9	)
	Other items			(2.8	)			(9.7	)
Applicable income taxes			$	391.8			$	461.8

Included in the first quarter of 2004 was a reduction in income tax expense related to the resolution of federal income tax examinations covering substantially all of the Company’s legal entities for the years 1995 through 1999. The resolution of these cycles was the result of a series of negotiations held between the Company and representatives of the Internal Revenue Service at both the examination and appellate levels. The resolution of these matters and the taxing authorities’ acceptance of submitted claims and tax return adjustments resulted in the reduction of estimated income tax liabilities.

Note 13		Guarantees and Contingent Liabilities

COMMITMENTS TO EXTEND CREDIT

Commitments to extend credit are legally binding and generally have fixed expiration dates or other termination clauses. The contractual amount represents the Company’s exposure to credit loss in the event of default by the borrower. The Company manages this credit risk by using the same credit policies it applies to loans. Collateral is obtained to secure commitments based on management’s credit assessment of the borrower. The collateral may include marketable securities, receivables, inventory, equipment and real estate. Since the Company expects many of the commitments to expire without being drawn, total commitment amounts do not necessarily represent the Company’s future liquidity requirements. In addition, the commitments include consumer credit lines that are cancelable upon notification to the consumer.

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, receivables, inventory, equipment and real estate. 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, 2004, were approximately $10.0 billion with a weighted average term of approximately 23 months. The estimated fair value of standby letters of credit was approximately $77.9 million at March 31, 2004.

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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-back guarantees; indemnification or buy-back provisions related to certain asset sales; 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 $125 million at March 31, 2004.

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 debt obligations with maturity dates extending through 2014. The maximum potential future payments guaranteed by the Company under these arrangements was approximately $1.5 billion at March 31, 2004. The Company’s recorded liabilities as of March 31, 2004, included $38.3 million representing outstanding amounts owed to these third-parties and required to be recorded on balance sheet in accordance with accounting principles generally accepted in the United States.

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 $12.4 billion at March 31, 2004, and represented the market value of the securities lent to third-parties. At March 31, 2004, the Company held assets with a market value of $12.8 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 were approximately $619.4 million at March 31, 2004, 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 against 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.

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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Other Guarantees The Company provides a liquidity facility to a Company-sponsored conduit, as more fully described in the “Off-Balance Sheet Arrangements” section within Management’s Discussion and Analysis. Although management believes a draw against this facility is remote, the maximum potential future payments guaranteed by the Company under this arrangement was approximately $7.0 billion at March 31, 2004. The recorded fair value of the Company’s liability for the liquidity facility was $43.0 million at March 31, 2004, and was recorded on the balance sheet in other liabilities.

OTHER CONTINGENT LIABILITIES

In connection with the spin-off of Piper Jaffray Companies, the Company has agreed to indemnify Piper Jaffray Companies against losses that may result from third-party claims relating to certain specified matters. The Company’s indemnification obligation related to these specified matters is capped at $17.5 million and can be terminated by the Company if there is a change in control event for Piper Jaffray Companies.

Note 14		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 InvestmentsMoney market investments are 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)			2004				2003
Interest-bearing deposits			$	6			$	4
Federal funds sold				61				109
Securities purchased under agreements to resell				—				39
	Total money market investments		$	67			$	152

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

				For the Three Months Ended March 31,
				2004												2003
												Yields												Yields				% Change
(Dollars in Millions)				Average								and				Average								and				Average
(Unaudited)				Balances				Interest				Rates				Balances				Interest				Rates				Balances
Assets
Taxable securities				$	44,307			$	464.0				4.19	%		$	33,508			$	396.1				4.73	%			32.2	%
Non-taxable securities					437				7.7				7.08				712				12.6				7.08				(38.6	)
Loans held for sale					1,445				19.9				5.52				4,041				59.6				5.90				(64.2	)
Loans (b)
	Commercial				38,531				545.3				5.69				41,590				588.4				5.72				(7.4	)
	Commercial real estate				27,110				374.0				5.55				26,783				400.5				6.07				1.2
	Residential mortgages				13,610				197.5				5.82				10,124				162.2				6.44				34.4
	Retail				39,559				634.9				6.46				37,814				689.1				7.39				4.6
		Total loans			118,810				1,751.7				5.93				116,311				1,840.2				6.41				2.1
Other earning assets					1,360				22.0				6.49				1,554				30.0				7.81				(12.5	)
		Total earning assets			166,359				2,265.3				5.47				156,126				2,338.5				6.05				6.6
Allowance for loan losses					(2,431	)											(2,506	)											(3.0	)
Unrealized gain (loss) on available-for-sale securities					(14	)											612												*
Other assets (c)					25,749												29,445												(12.6	)
		Total assets		$	189,663											$	183,677												3.3
Liabilities and Shareholders’ Equity
Noninterest-bearing deposits				$	29,025											$	32,824												(11.6	)
Interest-bearing deposits
	Interest checking				20,948				18.8				.36				17,536				22.5				.52				19.5
	Money market accounts				34,397				67.4				.79				28,683				75.5				1.07				19.9
	Savings accounts				5,898				4.5				.31				5,272				5.3				.41				11.9
	Time certificates of deposit less than $100,000				13,618				90.6				2.68				17,218				133.2				3.14				(20.9	)
	Time deposits greater than $100,000				12,133				45.7				1.51				14,282				70.1				1.99				(15.0	)
		Total interest-bearing deposits			86,994				227.0				1.05				82,991				306.6				1.50				4.8
Short-term borrowings					13,419				49.9				1.50				9,209				39.5				1.74				45.7
Long-term debt					31,927				185.9				2.34				29,488				184.3				2.53				8.3
Junior subordinated debentures					2,626				23.5				3.57				2,981				31.4				4.21				(11.9	)
		Total interest-bearing liabilities			134,966				486.3				1.45				124,669				561.8				1.82				8.3
Other liabilities (d)					6,088												7,376												(17.5	)
Shareholders’ equity					19,584												18,808												4.1
		Total liabilities and shareholders’ equity		$	189,663											$	183,677												3.3	%
Net interest income								$	1,779.0											$	1,776.7
Gross interest margin													4.02	%											4.23	%
Gross interest margin without taxable-equivalent increments													4.00												4.21
Percent of Earning Assets
Interest income													5.47	%											6.05	%
Interest expense													1.18												1.46
Net interest margin													4.29												4.59
Net interest margin without taxable-equivalent increments													4.27	%											4.57	%

*		Not meaningful
(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.
(c)		Includes approximately $1,625 million of earning assets from discontinued operations in first quarter 2003.
(d)		Includes approximately $1,077 million of interest-bearing liabilities from discontinued operations in first quarter 2003.

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Part II -- Other Information" -->

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities — Refer to the “Capital Management” section within Management’s Discussion and Analysis for information regarding shares repurchased by the Company during the first quarter of 2004.

Item 4. Submission of Matters to a Vote of Security Holders —The 2004 Annual Meeting of Shareholders of U.S. Bancorp was held Tuesday, April 20, 2004, at the Omni Los Angeles Hotel, Los Angeles, California. Jerry A. Grundhofer, Chairman, President and Chief Executive Officer, presided.

Summary of Matters Voted Upon by Shareholders

			Number of Shares
			For				Withheld
Election of Class III Directors:
	Vicki Buyniski Gluckman			1,175,061,256				457,839,306
	Arthur D. Collins, Jr.			1,261,513,246				371,387,316
	Jerry W. Levin			1,260,510,504				372,390,058
	Thomas E. Petry			1,196,401,787				436,498,775
	Richard G. Reiten			1,110,223,662				522,676,900
				For				Against				Abstain				Broker Non-Vote
Ratification of Independent Auditors				1,500,023,717				117,292,260				15,584,580				N/A
Proposal for Replacing Current System of Executive Compensation				157,270,702				1,171,101,668				34,326,539				270,201,654
Proposal for Shareholder Approval of Certain Supplemental Executive Retirement Benefits				488,314,955				839,461,319				34,911,574				270,212,715
Proposal for Elimination of Supermajority Voting				901,899,089				434,212,758				26,570,726				270,217,990

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

12		Computation of Ratio of Earnings to Fixed Charges.
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

	•	Form 8-K dated January 9, 2004, announcing the Company’s adoption of the “fair value” method of accounting for stock-based compensation.
	•	Form 8-K dated January 20, 2004, relating to fourth quarter 2003 earnings.
	•	Form 8-K dated April 20, 2004, relating to first quarter 2004 earnings.

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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)

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EXHIBIT 12

Computation of Ratio of Earnings to Fixed Charges

						Three Months Ended
(Dollars in Millions)						March 31, 2004
Earnings
1.		Net income				$	1,008.4
2.		Applicable income taxes					391.8
3.		Net income before taxes (1 + 2)				$	1,400.2
4.		Fixed charges:
		a.		Interest expense excluding interest on deposits		$	259.3
		b.		Portion of rents representative of interest and amortization of debt expense			17.1
		c.		Fixed charges excluding interest on deposits (4a + 4b)			276.4
		d.		Interest on deposits			227.0
		e.		Fixed charges including interest on deposits (4c + 4d)		$	503.4
5.		Amortization of interest capitalized				$	—
6.		Earnings excluding interest on deposits (3 + 4c + 5)					1,676.6
7.		Earnings including interest on deposits (3 + 4e + 5)					1,903.6
8.		Fixed charges excluding interest on deposits (4c)					276.4
9.		Fixed charges including interest on deposits (4e)					503.4
Ratio of Earnings to Fixed Charges
10.		Excluding interest on deposits (line 6/ line 8)					6.07
11.		Including interest on deposits (line 7/ line 9)					3.78

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EXHIBIT 31.1

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 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 report;
(3)	Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) for the registrant and have:

	(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
	(b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(c)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5)	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

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

Dated: May 10, 2004

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EXHIBIT 31.2

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 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 report;
(3)	Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) for the registrant and have:

	(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
	(b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(c)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5)	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

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

Dated: May 10, 2004

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EXHIBIT 32

CERTIFICATION PURSUANT TO

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

(1)	The Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 (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.

/s/ JERRY A. GRUNDHOFER Jerry A. Grundhofer Chief Executive Officer		/s/ DAVID M. MOFFETT David M. Moffett Chief Financial Officer

Dated: May 10, 2004

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Corporate Information" -->

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 ServiceDirect^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.

This report has been produced on recycled paper.