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 June 30, 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 July 31, 2004 1,879,282,790 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)
Consolidated Daily Average Balance Sheet and Related Yields and Rates (a)
Part II -- Other Information
Corporate Information
Amendment of Employment Agreement-Jerry A. Grundhofer

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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		5
				c)		Balance Sheet Analysis		9
				d)		Accounting Changes		31
				e)		Critical Accounting Policies		31
				f)		Controls and Procedures (Item 4)		33
2)		Quantitative and Qualitative Disclosures About Market Risk / Corporate Risk Profile (Item 3)
				a)		Overview		11
				b)		Credit Risk Management		11
				c)		Residual Risk Management		16
				d)		Operational Risk Management		16
				e)		Interest Rate Risk Management		18
				f)		Market Risk Management		21
				g)		Liquidity Risk Management		21
				h)		Capital Management		23
3)		Line of Business Financial Review						24
4)		Financial Statements (Item 1)						36
Part II — Other Information
1)		Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities (Item 2)						54
2)		Submission of Matters to a Vote of Security Holders (Item 4)						54
3)		Exhibits and Reports on Form 8-K (Item 6)						54
4)		Signature						55
5)		Exhibits						56

Forward-Looking Statements

U.S. Bancorp	1

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Table 1		Selected Financial Data

			Three Months Ended												Six Months Ended
			June 30,												June 30,
											Percent												Percent
(Dollars and Shares in Millions, Except Per Share Data)			2004				2003				Change				2004				2003				Change
Condensed Income Statement
Net interest income (taxable-equivalent basis) (a)			$	1,779.4			$	1,798.6				(1.1	)%		$	3,558.4			$	3,575.3				(.5	)%
Noninterest income				1,413.4				1,259.8				12.2				2,731.7				2,485.2				9.9
Securities gains (losses), net				(171.7	)			213.1				*				(171.7	)			353.8				*
	Total net revenue			3,021.1				3,271.5				(7.7	)			6,118.4				6,414.3				(4.6	)
Noninterest expense				1,232.6				1,546.6				(20.3	)			2,687.5				3,001.2				(10.5	)
Provision for credit losses				204.5				323.0				(36.7	)			439.5				658.0				(33.2	)
	Income from continuing operations before taxes			1,584.0				1,401.9				13.0				2,991.4				2,755.1				8.6
Taxable-equivalent adjustment				7.0				6.7				4.5				14.2				14.0				1.4
Applicable income taxes				540.1				480.2				12.5				931.9				942.0				(1.1	)
	Income from continuing operations			1,036.9				915.0				13.3				2,045.3				1,799.1				13.7
Discontinued operations (after-tax)				—				4.9				*				—				5.6				*
	Net income		$	1,036.9			$	919.9				12.7			$	2,045.3			$	1,804.7				13.3
Per Common Share
Earnings per share from continuing operations			$	.55			$	.48				14.6	%		$	1.07			$	.94				13.8	%
Diluted earnings per share from continuing operations				.54				.47				14.9				1.06				.93				14.0
Earnings per share				.55				.48				14.6				1.07				.94				13.8
Diluted earnings per share				.54				.48				12.5				1.06				.94				12.8
Dividends declared per share				.240				.205				17.1				.480				.410				17.1
Book value per share				9.91				10.14				(2.3	)
Market value per share				27.56				24.50				12.5
Average common shares outstanding				1,891.6				1,922.3				(1.6	)			1,903.5				1,920.6				(.9	)
Average common diluted shares outstanding				1,913.4				1,931.6				(.9	)			1,927.3				1,928.6				(.1	)
Financial Ratios
Return on average assets				2.19	%			1.97	%							2.16	%			1.96	%
Return on average equity				21.9				19.0								21.3				19.0
Net interest margin (taxable-equivalent basis)				4.28				4.52								4.28				4.56
Efficiency ratio (b)				38.6				50.6								42.7				49.5
Average Balances
Loans			$	121,161			$	117,803				2.9	%		$	119,985			$	117,061				2.5	%
Loans held for sale				1,987				3,728				(46.7	)			1,716				3,884				(55.8	)
Investment securities				42,489				36,142				17.6				43,617				35,187				24.0
Earning assets				166,990				159,425				4.7				166,674				157,784				5.6
Assets				190,430				187,055				1.8				190,046				185,375				2.5
Noninterest-bearing deposits				30,607				32,515				(5.9	)			29,815				32,669				(8.7	)
Deposits				117,116				116,151				.8				116,567				115,984				.5
Short-term borrowings				15,310				8,982				70.5				14,365				9,096				57.9
Long-term debt and junior subordinated debentures				30,354				32,273				(5.9	)			31,140				30,888				.8
Total shareholders’ equity				19,043				19,435				(2.0	)			19,314				19,122				1.0
			June 30, 2004				December 31, 2003
Period End Balances
Loans			$	122,830			$	118,235				3.9	%
Allowance for loan losses				2,244				2,369				(5.3	)
Investment securities				40,285				43,334				(7.0	)
Assets				190,230				189,286				.5
Deposits				119,927				119,052				.7
Long-term debt and junior subordinated debentures				33,665				33,816				(.4	)
Total shareholders’ equity				18,675				19,242				(2.9	)
Regulatory capital ratios
	Tangible common equity			6.3	%			6.5	%
	Tier 1 capital			8.7				9.1
	Total risk-based capital			12.9				13.6
	Leverage			7.8				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.

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Management’s Discussion and Analysis" -->

OVERVIEW

Earnings SummaryU.S. Bancorp and its subsidiaries (the “Company”) reported net income of $1,036.9 million for the second quarter of 2004, or $.54 per diluted share, compared with $919.9 million, or $.48 per diluted share, for the second quarter of 2003. Return on average assets and return on average equity were 2.19 percent and 21.9 percent, respectively, for the second quarter of 2004, compared with returns of 1.97 percent and 19.0 percent, respectively, for the second quarter of 2003. The Company’s results for the second quarter of 2004 improved over the second quarter of 2003, primarily due to growth in fee-based products and services, as well as lower credit costs and controlled operating expenses. Included in the second quarter of 2004 were net losses on the sale of securities of $171.7 million, a net reduction of $384.8 million from net securities gains realized in the second quarter of 2003. The second quarter of 2004 also included a $171.1 million reparation of mortgage servicing rights (“MSR”), a $367.4 million favorable variance over the second quarter of 2003. Changes in interest rates relative to the end of the first quarter of 2004 drove the realization of the MSR reparation during the second quarter of 2004. The Company’s interest rate risk management practice of utilizing its securities portfolio to offset the impact of changes in MSR valuation was the primary factor in deciding to sell lower-yielding securities. Operating expenses for the second quarter of 2004 also reflected a reduction in pre-tax merger and restructuring-related items of $10.8 million ($7.2 million on an after-tax basis), compared with the second quarter of 2003. The $10.8 million decline in pre-tax merger and restructuring-related charges was primarily due to the completion in 2003 of integration activities associated with the acquisition of NOVA Corporation (“NOVA”) and other smaller acquisitions.

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STATEMENT OF INCOME ANALYSIS

Net Interest IncomeThe second quarter of 2004 net interest income, on a taxable-equivalent basis, was $1,779.4 million, compared with $1,798.6 million in the second quarter of 2003, which represented a $19.2 million (1.1 percent) decrease from 2003. Net interest income for the first six months of 2004, on a taxable equivalent basis, was $3,558.4 million, compared with $3,575.3 million for the first six months of 2003, which represented a $16.9 million (.5 percent) decrease from a year ago. Average earning assets in the second quarter and first six months of 2004 increased $7.6 billion (4.7 percent) and $8.9 billion (5.6 percent), respectively, over the comparable periods of 2003. The increase in average earning assets for the second quarter and first six months of 2004, compared with the same periods 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 both the second quarter and first six months of 2004 was 4.28 percent, compared with 4.52 percent and 4.56 percent, respectively, for the comparable periods of 2003. The year-over-year decline in the net interest margin for the second quarter and first six months of 2004 primarily reflected growth in lower-yielding investment securities as a percent of total earning assets, effects of loan

Table 2		Analysis of Net Interest Income

			Three Months Ended												Six Months Ended
			June 30,												June 30,
(Dollars in Millions)			2004				2003				Change				2004				2003				Change
Components of net interest income
	Income on earning assets (taxable-equivalent basis) (a)		$	2,243.2			$	2,334.5			$	(91.3	)		$	4,508.5			$	4,673.0			$	(164.5	)
	Expense on interest-bearing liabilities			463.8				535.9				(72.1	)			950.1				1,097.7				(147.6	)
Net interest income (taxable-equivalent basis)			$	1,779.4			$	1,798.6			$	(19.2	)		$	3,558.4			$	3,575.3			$	(16.9	)
Net interest income, as reported			$	1,772.4			$	1,791.9			$	(19.5	)		$	3,544.2			$	3,561.3			$	(17.1	)
Average yields and rates paid
	Earning assets yield (taxable-equivalent basis)			5.39	%			5.87	%			(.48	)%			5.43	%			5.96	%			(.53	)%
	Rate paid on interest-bearing liabilities			1.38				1.68				(.30	)			1.42				1.75				(.33	)
Gross interest margin (taxable-equivalent basis)				4.01	%			4.19	%			(.18	)%			4.01	%			4.21	%			(.20	)%
Net interest margin (taxable-equivalent basis)				4.28	%			4.52	%			(.24	)%			4.28	%			4.56	%			(.28	)%
Average balances
	Investment securities		$	42,489			$	36,142			$	6,347			$	43,617			$	35,187			$	8,430
	Loans			121,161				117,803				3,358				119,985				117,061				2,924
	Earning assets			166,990				159,425				7,565				166,674				157,784				8,890
	Interest-bearing liabilities			134,819				127,552				7,267				134,893				126,119				8,774
	Net free funds (b)			32,171				31,873				298				31,781				31,665				116

(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.

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Provision for Credit LossesThe provision for credit losses was $204.5 million and $323.0 million for the second quarter of 2004 and 2003, respectively, a year-over-year decrease of $118.5 million (36.7 percent). For the first six months of 2004 and 2003, the provision for credit losses was $439.5 million and $658.0 million, respectively, a decrease of $218.5 million (33.2 percent). The decline from a year ago was primarily the result of lower nonperforming assets and lower retail and commercial losses, the result of an improving credit risk profile due to more favorable economic conditions 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

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Noninterest IncomeNoninterest income during the second quarter of 2004 was $1,241.7 million, a decrease of $231.2 million (15.7 percent) from the second quarter of 2003. Noninterest income during the first six months of 2004 was $2,560.0 million, compared with $2,839.0 million for the first six months of 2003, which represented a decrease of $279.0 million (9.8 percent). The decline in noninterest income during the second quarter and first six months of 2004 was driven by a net reduction in gains (losses) on the sale of securities of $384.8 million and $525.5 million, respectively, partially offset by strong growth in fee-based revenue experienced in all other categories of noninterest income.

Table 3		Noninterest Income

			Three Months Ended												Six Months Ended
			June 30,												June 30,
											Percent												Percent
(Dollars in Millions)			2004				2003				Change				2004				2003				Change
Credit and debit card revenue			$	158.8			$	142.3				11.6	%		$	300.6			$	269.7				11.5	%
Corporate payment products revenue				102.7				90.9				13.0				197.5				176.9				11.6
ATM processing services				44.9				41.9				7.2				87.1				84.3				3.3
Merchant processing services				165.1				141.8				16.4				306.2				269.1				13.8
Trust and investment management fees				251.7				238.9				5.4				500.3				467.5				7.0
Deposit service charges				202.1				179.0				12.9				387.3				342.2				13.2
Treasury management fees				121.5				111.8				8.7				239.0				223.8				6.8
Commercial products revenue				107.4				100.0				7.4				217.8				204.2				6.7
Mortgage banking revenue				109.9				90.3				21.7				204.1				185.7				9.9
Investment products fees and commissions				42.2				38.1				10.8				81.5				73.2				11.3
Securities gains (losses), net				(171.7	)			213.1				*				(171.7	)			353.8				*
Other				107.1				84.8				26.3				210.3				188.6				11.5
	Total noninterest income		$	1,241.7			$	1,472.9				(15.7	)%		$	2,560.0			$	2,839.0				(9.8	)%

*		Not meaningful

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Noninterest ExpenseSecond quarter of 2004 noninterest expense was $1,232.6 million, a decrease of $314.0 million (20.3 percent) from the second quarter of 2003. For the first six months of 2004, noninterest expense was $2,687.5 million, a reduction of $313.7 million (10.5 percent) from the first six months of 2003. The year-over-year decline in noninterest expense during the second quarter and first six months of 2004, was primarily due to the favorable change in MSR valuations and the reduction in merger and restructuring-related charges. The year-over-year decrease in MSR impairment for the second quarter and first six months of 2004 of $367.4 million and $379.0 million, respectively, was driven by changes in valuations in each reporting period 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 MSR to future changes in interest rates. The favorable variance in merger and restructuring-related charges in the second quarter and first six months of 2004 of $10.8 million and $28.4 million, respectively, was primarily due to the completion of integration activities associated with NOVA and other smaller acquisitions in 2003. Partially offsetting these favorable variances in the second quarter and first six months of 2004, were increases in compensation, employee benefits, professional services and other expense. Compensation expense increased during the second quarter and first six months of 2004, compared with the same periods of 2003, primarily due to an increase in salaries, performance-based incentives and stock-based compensation, offset somewhat by lower contract labor costs. Employee benefits increased primarily as a result of higher pension expense, training, education and recruitment costs and payroll taxes. Pension and retirement expense increased by $5.5 million and $7.3 million, during the second quarter and first six months of 2004, respectively, compared with the same periods of 2003. Professional services rose year-over-

Table 4		Noninterest Expense

			Three Months Ended												Six Months Ended
			June 30,												June 30,
											Percent												Percent
(Dollars in Millions)			2004				2003				Change				2004				2003				Change
Compensation			$	572.6			$	547.6				4.6	%		$	1,108.4			$	1,093.6				1.4	%
Employee benefits				91.2				79.6				14.6				191.4				171.3				11.7
Net occupancy and equipment				153.4				159.5				(3.8	)			309.1				320.8				(3.6	)
Professional services				34.7				32.9				5.5				67.1				59.3				13.2
Marketing and business development				48.7				51.1				(4.7	)			84.0				80.9				3.8
Technology and communications				102.4				104.1				(1.6	)			204.1				209.0				(2.3	)
Postage, printing and supplies				60.5				61.8				(2.1	)			122.1				122.2				(.1	)
Other intangibles				(47.6	)			312.3				*				178.5				547.4				(67.4	)
Merger and restructuring-related charges				—				10.8				*				—				28.4				*
Other				216.7				186.9				15.9				422.8				368.3				14.8
	Total noninterest expense		$	1,232.6			$	1,546.6				(20.3	)%		$	2,687.5			$	3,001.2				(10.5	)%
Efficiency ratio (a)				38.6	%			50.6	%							42.7	%			49.5	%

*		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 $540.1 million (an effective rate of 34.2 percent) for the second quarter of 2004 and $931.9 million (an effective rate of 31.3 percent) for the first six months of 2004, compared with $480.2 million (an effective rate of 34.4 percent) and $942.0 million (an effective rate of 34.4 percent) for the same periods of 2003. The improvement in the effective tax rate in the first six months of 2004 primarily reflected a $90.0 million reduction in income tax expense in the first quarter of 2004 related to the resolution of federal tax examinations covering substantially all of the Company’s legal entities for the years 1995 through 1999.

BALANCE SHEET ANALYSIS

Loans The Company’s total loan portfolio was $122.8 billion at June 30, 2004, compared with $118.2 billion at December 31, 2003, an increase of $4.6 billion (3.9 percent). The increase in total loans was driven by growth in retail loans, commercial loans and residential mortgages. Commercial loans, including lease financing, totaled $40.1 billion at June 30, 2004, compared with $38.5 billion at December 31, 2003, an increase of $1,539 million (4.0 percent). The increase in commercial loans was driven by increased utilization under lines of credit and fundings under discretionary facilities by commercial customers and increases in corporate card balances. The Company’s portfolio of commercial real estate loans, which includes commercial mortgages and construction loans, was $27.2 billion at both June 30, 2004 and December 31, 2003.

    Residential mortgages held in the loan portfolio were $14.4 billion at June 30, 2004, compared with $13.5 billion at December 31, 2003, an increase of $.9 billion (6.9 percent). The increase in residential mortgages was primarily the result of decisions to retain a greater portion of the consumer finance and traditional branch floating-rate loan production.

    Total retail loans outstanding, which include credit card, retail leasing, home equity and second mortgages and other retail loans, were $41.2 billion at June 30, 2004, compared with $39.0 billion at December 31, 2003. The $2.2 billion (5.6 percent) increase was driven by an increase in home equity lines of credit, credit card receivables, and automobile loans and leases. This growth was partially offset by a slight decrease in student loans.

Loans Held for SaleLoans held for sale, consisting of residential mortgages to be sold in the secondary markets, were $1,383 million at June 30, 2004, compared with $1,433 million at December 31, 2003. The slight decrease of $50 million (3.5 percent) was primarily due to the timing of loan originations and sales during the first six months of 2004. Mortgage loan production is highly correlated to changes in interest rates with declines in balances during a period of rising interest rates.

Investment SecuritiesAt June 30, 2004, investment securities, both available-for-sale and held-to-maturity, totaled $40.3 billion, compared with $43.3 billion at December 31, 2003. The $3.0 billion (7.0 percent) decrease primarily reflected the sale of $3.8 billion of lower-yielding fixed-rate securities, along with maturities and prepayments across the investment portfolio, partially offset by purchases of primarily floating-rate securities. At June 30, 2004, approximately 29.5 percent of the investment securities portfolio represented adjustable-rate financial instruments, compared with 22.2 percent as of December 31, 2003. Adjustable-rate financial instruments include variable-rate collateralized mortgage obligations, mortgage-backed securities, agency securities, adjustable-rate money market sweep accounts and asset-backed securities.

Deposits Total deposits were $119.9 billion at June 30, 2004, compared with $119.1 billion at December 31, 2003, an increase of $875 million (.7 percent). The increase in total deposits was primarily the result of increases in time deposits greater than $100,000 and noninterest-bearing deposits, partially offset by decreases in savings products and time certificates of deposit less than $100,000. Noninterest-bearing deposits were $32.8 billion at June 30, 2004, compared with $32.5 billion at December 31, 2003, an increase of $.3 billion (1.0 percent), primarily due to seasonality of corporate trust deposits.

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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
June 30, 2004 (Dollars in Millions)				Cost				Value				Years				Yield				Cost				Value				Years				Yield
U.S. Treasury and agencies
	Maturing in one year or less			$	46			$	46				.55				2.77	%		$	—			$	—				—				—	%
	Maturing after one year through five years				176				181				2.13				4.47				—				—				—				—
	Maturing after five years through ten years				1,736				1,715				9.82				3.56				—				—				—				—
	Maturing after ten years				1,150				1,095				19.00				2.55				—				—				—				—
		Total		$	3,108			$	3,037				12.64				3.23	%		$	—			$	—				—				—	%
Mortgage-backed securities
	Maturing in one year or less			$	888			$	887				.64				3.33	%		$	—			$	—				—				—	%
	Maturing after one year through five years				17,450				17,086				3.78				4.39				12				12				3.06				5.30
	Maturing after five years through ten years				16,899				16,266				6.82				4.33				—				—				—				—
	Maturing after ten years				1,562				1,544				13.95				2.79				—				—				—				—
		Total		$	36,799			$	35,783				5.53				4.27	%		$	12			$	12				3.06				5.30	%
Asset-backed securities
	Maturing in one year or less			$	23			$	22				.23				4.71	%		$	—			$	—				—				—	%
	Maturing after one year through five years				119				120				1.99				5.69				—				—				—				—
	Maturing after five years through ten years				—				—				—				—				—				—				—				—
	Maturing after ten years				—				—				—				—				—				—				—				—
		Total		$	142			$	142				1.71				5.54	%		$	—			$	—				—				—	%
Obligations of state and political subdivisions
	Maturing in one year or less			$	127			$	129				.48				7.47	%		$	11			$	11				.48				5.58	%
	Maturing after one year through five years				121				126				2.53				7.25				36				38				2.78				6.54
	Maturing after five years through ten years				12				13				6.01				7.76				25				26				6.93				6.46
	Maturing after ten years				—				—				—				—				41				41				14.24				6.46
		Total		$	260			$	268				1.69				7.38	%		$	113			$	116				7.63				6.40	%
Other debt securities:
	Maturing in one year or less			$	2			$	2				.48				6.47	%		$	—			$	—				—				—	%
	Maturing after one year through five years				116				116				2.43				10.29				—				—				—				—
	Maturing after five years through ten years				6				5				5.87				2.17				—				—				—				—
	Maturing after ten years				499				493				22.83				1.98				—				—				—				—
		Total		$	623			$	616				18.81				3.55	%		$	—			$	—				—				—	%
Other investments				$	309			$	314				—				—	%		$	—			$	—				—				—	%
Total investment securities				$	41,241			$	40,160				6.24				4.21	%		$	125			$	128				7.19				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.

			June 30, 2004								December 31, 2003
			Amortized				Percent				Amortized				Percent
(Dollars in Millions)			Cost				of Total				Cost				of Total
U.S. Treasury and agencies			$	3,108				7.5	%		$	1,634				3.7	%
Mortgage-backed securities				36,811				89.0				40,243				92.3
Asset-backed securities				142				.3				250				.6
Obligations of states and political subdivisions				373				.9				473				1.1
Other securities and investments				932				2.3				993				2.3
	Total investment securities		$	41,366				100.0	%		$	43,593				100.0	%

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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 $11.6 billion at June 30, 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 $.7 billion (6.8 percent) in short-term borrowings reflected the impact of funding earning assets. Long-term debt was $31.0 billion at June 30, 2004, a decrease of $.2 billion (.6 percent), compared with $31.2 billion at December 31, 2003. The decrease in long-term debt during the first six months of 2004 was primarily driven by maturities of $3.3 billion, and prepayments of $2.2 billion of Federal Home Loan Bank (“FHLB”) advances. The first six months of 2004 also included the issuance of $5.5 billion of bank notes. The prepayment of FHLB advances during the first quarter of 2004 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.

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

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Table 6		Nonperforming Assets (a)

					June 30,				December 31,
(Dollars in Millions)					2004				2003
Commercial
	Commercial				$	415.7			$	623.5
	Lease financing					111.0				113.3
		Total commercial				526.7				736.8
Commercial real estate
	Commercial mortgages					163.8				177.6
	Construction and development					41.3				39.9
		Total commercial real estate				205.1				217.5
Residential mortgages						41.7				40.5
Retail
	Retail leasing					.1				.4
	Other retail					18.3				24.8
		Total retail				18.4				25.2
			Total nonperforming loans			791.9				1,020.0
Other real estate						70.0				72.6
Other assets						49.0				55.5
			Total nonperforming assets		$	910.9			$	1,148.1
Restructured loans accruing interest (b)					$	4.2			$	18.0
Accruing loans 90 days or more past due (c)					$	293.2			$	329.4
Nonperforming loans to total loans						.64	%			.86	%
Nonperforming assets to total loans plus other real estate						.74	%			.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					366.8				24.1				390.9
		Advances on loans					25.8				—				25.8
			Total additions				392.6				24.1				416.7
	Reductions in nonperforming assets
		Paydowns, payoffs					(287.7	)			(17.4	)			(305.1	)
		Net sales					(73.6	)			—				(73.6	)
		Return to performing status					(55.6	)			(10.4	)			(66.0	)
		Charge-offs (d)					(204.5	)			(4.7	)			(209.2	)
			Total reductions				(621.4	)			(32.5	)			(653.9	)
				Net reductions in nonperforming assets			(228.8	)			(8.4	)			(237.2	)
Balance June 30, 2004						$	853.6			$	57.3			$	910.9

(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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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 June 30, 2004, total nonperforming assets were $910.9 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 .74 percent at June 30, 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 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 effect of the economy on highly leveraged enterprise-value refinancings. Given the Company’s ongoing efforts to reduce the overall risk profile of the organization and with continued strength in the economy, nonperforming assets are expected to continue to trend lower during the remainder of 2004.

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

					June 30,				December 31,
90 days or more past due excluding nonperforming loans					2004				2003
Commercial
	Commercial					.06	%			.06	%
	Lease financing					.02				.04
		Total commercial				.05				.06
Commercial real estate
	Commercial mortgages					.01				.02
	Construction and development					.01				.03
		Total commercial real estate				.01				.02
Residential mortgages						.50				.61
Retail
	Credit card					1.78				1.68
	Retail leasing					.10				.14
	Other retail					.29				.41
		Total retail				.48				.56
			Total loans			.24	%			.28	%

			June 30,				December 31,
90 days or more past due including nonperforming loans			2004				2003
Commercial				1.37	%			1.97	%
Commercial real estate				.76				.82
Residential mortgages				.79				.91
Retail				.52				.62
	Total loans			.88	%			1.14	%

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The following table provides summary delinquency information for residential mortgages and retail loans:

													As a Percent of Ending
					Amount								Loan Balances
					June 30,				December 31,				June 30,				December 31,
(Dollars in millions)					2004				2003				2004				2003
Residential Mortgages
		30-89 days			$	95.7			$	102.9				.67	%			.76	%
		90 days or more				72.5				82.5				.50				.61
		Nonperforming				41.7				40.5				.29				.30
			Total		$	209.9			$	225.9				1.46	%			1.68	%
Retail
	Credit Card
		30-89 days			$	133.2			$	150.9				2.19	%			2.54	%
		90 days or more				108.3				99.5				1.78				1.68
		Nonperforming				—				—				—				—
			Total		$	241.5			$	250.4				3.97	%			4.22	%
	Retail Leasing
		30-89 days			$	64.2			$	78.8				.97	%			1.31	%
		90 days or more				6.5				8.2				.10				.14
		Nonperforming				.1				.4				—				.01
			Total		$	70.8			$	87.4				1.07	%			1.45	%
	Other Retail
		30-89 days			$	249.1			$	311.9				.88	%			1.15	%
		90 days or more				82.5				110.2				.29				.41
		Nonperforming				18.3				24.8				.06				.09
			Total		$	349.9			$	446.9				1.23	%			1.65	%

Analysis of Net Loan Charge-offs Total loan net charge-offs were $204.5 million and $438.4 million during the second quarter and first six months of 2004, respectively, compared with net charge-offs of $322.9 million and $656.7 million, respectively, for the same periods of 2003. The ratio of total loan net charge-offs to average loans in the second quarter and first six months of 2004 was .68 percent and .73 percent, respectively, compared with 1.10 percent and 1.13 percent, respectively, for the same periods of 2003. The overall level of net charge-offs in the second quarter and first six months of 2004 reflected the Company’s ongoing efforts to reduce the overall risk profile of the organization, improved economic conditions, refinancings by customers and higher asset valuations. Net charge-offs are expected to continue to trend modestly lower throughout 2004.

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The following table provides an analysis of net charge-offs as a percentage of average loans outstanding managed by the consumer finance division, compared with traditional branch-related loans:

			Three Months Ended June 30																Six Months Ended June 30
			Average Loan								Percent of								Average Loan								Percent of
			Balance								Average Loans								Balance								Average Loans
(Dollars in Millions)			2004				2003				2004				2003				2004				2003				2004				2003
Consumer finance (a)
	Residential mortgages		$	4,410			$	3,282				.47	%			.51	%		$	4,294			$	3,133				.44	%			.50	%
	Home equity and second mortgages			2,264				2,417				2.31				2.37				2,219				2,483				2.35				2.36
	Other retail			415				352				4.72				4.43				409				334				4.85				4.46
Traditional branch
	Residential mortgages		$	9,642			$	7,730				.09	%			.12	%		$	9,537			$	7,437				.11	%			.13	%
	Home equity and second mortgages			11,511				10,899				.25				.35				11,356				10,909				.24				.37
	Other retail			14,000				13,182				1.22				1.52				13,856				13,037				1.25				1.57
Total Company
	Residential mortgages		$	14,052			$	11,012				.21	%			.24	%		$	13,831			$	10,570				.21	%			.24	%
	Home equity and second mortgages			13,775				13,316				.59				.72				13,575				13,392				.59				.74
	Other retail			14,415				13,534				1.32				1.59				14,265				13,371				1.35				1.64

(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

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

					Three Months Ended								Six Months Ended
					June 30,								June 30,
					2004				2003				2004				2003
Commercial
	Commercial					.42	%			1.35	%			.53	%			1.44	%
	Lease financing					1.57				2.11				1.66				1.94
		Total commercial				.56				1.44				.67				1.50
Commercial real estate
	Commercial mortgages					.04				.19				.06				.12
	Construction and development					.04				.14				.16				.10
		Total commercial real estate				.04				.17				.09				.12
Residential mortgages						.21				.24				.21				.24
Retail
	Credit card					4.21				4.80				4.27				4.98
	Retail leasing					.61				.88				.66				.93
	Home equity and second mortgages					.59				.72				.59				.74
	Other retail					1.32				1.59				1.35				1.64
		Total retail				1.39				1.63				1.42				1.69
			Total loans			.68	%			1.10	%			.73	%			1.13	%

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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

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Table 9		Summary of Allowance for Credit Losses

						Three Months Ended								Six Months Ended
						June 30,								June 30,
(Dollars in Millions)						2004				2003				2004				2003
Balance at beginning of period						$	2,369.7			$	2,408.5			$	2,368.6			$	2,422.0
Charge-offs
	Commercial
		Commercial					65.9				134.2				148.3				283.2
		Lease financing					28.0				39.3				60.5				79.8
			Total commercial				93.9				173.5				208.8				363.0
	Commercial real estate
		Commercial mortgages					4.8				12.5				13.9				18.2
		Construction and development					1.4				3.0				6.3				5.1
			Total commercial real estate				6.2				15.5				20.2				23.3
	Residential mortgages						8.2				7.1				16.6				14.1
	Retail
		Credit card					70.5				71.4				141.2				146.2
		Retail leasing					11.8				14.4				24.7				29.7
		Home equity and second mortgages					23.5				26.8				45.9				54.6
		Other retail					60.2				66.9				121.7				137.3
			Total retail				166.0				179.5				333.5				367.8
				Total charge-offs			274.3				375.6				579.1				768.2
Recoveries
	Commercial
		Commercial					30.2				11.3				59.0				22.4
		Lease financing					9.1				12.4				20.3				29.9
			Total commercial				39.3				23.7				79.3				52.3
	Commercial real estate
		Commercial mortgages					3.0				3.2				7.5				6.0
		Construction and development					.7				.5				.9				1.6
			Total commercial real estate				3.7				3.7				8.4				7.6
	Residential mortgages						.9				.6				2.0				1.7
	Retail
		Credit card					7.8				6.9				15.1				13.0
		Retail leasing					2.0				1.8				3.9				3.2
		Home equity and second mortgages					3.3				2.9				6.2				5.3
		Other retail					12.8				13.1				25.8				28.4
			Total retail				25.9				24.7				51.0				49.9
				Total recoveries			69.8				52.7				140.7				111.5
Net Charge-offs
	Commercial
		Commercial					35.7				122.9				89.3				260.8
		Lease financing					18.9				26.9				40.2				49.9
			Total commercial				54.6				149.8				129.5				310.7
	Commercial real estate
		Commercial mortgages					1.8				9.3				6.4				12.2
		Construction and development					.7				2.5				5.4				3.5
			Total commercial real estate				2.5				11.8				11.8				15.7
	Residential mortgages						7.3				6.5				14.6				12.4
	Retail
		Credit card					62.7				64.5				126.1				133.2
		Retail leasing					9.8				12.6				20.8				26.5
		Home equity and second mortgages					20.2				23.9				39.7				49.3
		Other retail					47.4				53.8				95.9				108.9
			Total retail				140.1				154.8				282.5				317.9
				Total net charge-offs			204.5				322.9				438.4				656.7
Provision for credit losses							204.5				323.0				439.5				658.0
Acquisitions and other changes							—				(41.0	)			—				(55.7	)
Balance at end of period						$	2,369.7			$	2,367.6			$	2,369.7			$	2,367.6
Components
	Allowance for loan losses					$	2,244.4			$	2,266.2			$	2,244.4			$	2,266.2
	Liability for unfunded credit commitments (a)						125.3				101.4				125.3				101.4
		Total allowance for credit losses				$	2,369.7			$	2,367.6			$	2,369.7			$	2,367.6
Allowance for credit losses as a percentage of
	Period-end loans						1.93	%			1.98	%
	Nonperforming loans						299				194
	Nonperforming assets						260				174
	Annualized net charge-offs						288				183

(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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decisions or their implementation, and customer attrition due to potential negative publicity.

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

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Sensitivity of Net Interest Income and Rate Sensitive Income:

		June 30, 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			(.19)	%			(.11)	%			*	%			(.30)	%			1.30	%			.19%				*	%			(.02	)%
Rate sensitive income			(.16)	%			(.28)	%			*	%			(.81)	%			.74	%			.01%				*	%			(.54	)%

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

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 June 30, 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 3.7 percent decrease in the market value of equity at June 30, 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 .9 percent increase at June 30, 2004, and a 1.3 percent increase at December 31, 2003. At June 30, 2004, and December 31, 2003, the Company was within its policy guidelines.

Use of Derivatives to Manage Interest Rate and Foreign Currency Risk In the ordinary course of business, the Company enters into derivative transactions to manage its interest rate, prepayment, and foreign currency risks (“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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Market Risk ManagementIn addition to interest rate risk, the Company is exposed to other forms of market risk as a consequence of conducting normal trading activities. Business activities that contribute to market risk include, among other things, proprietary trading and foreign exchange positions. Value at Risk (“VaR”) is a key measure of market risk for the Company. Theoretically, VaR represents the maximum amount that the Company has placed at risk of loss, with a ninety-ninth percentile degree of confidence, to adverse market movements in the course of its risk taking activities.

Liquidity Risk ManagementALPC establishes policies, as well as analyzes and manages liquidity, to ensure that adequate funds are available to meet normal operating requirements in addition to unexpected customer demands for funds, such as high levels of deposit withdrawals or loan demand, in a timely and cost-effective manner. The most important factor in the preservation of liquidity is maintaining public confidence that facilitates the retention and growth of a large, stable supply of core deposits and wholesale

Table 10		Derivative Positions

													Weighted-
													Average
													Remaining
					Notional				Fair				Maturity
June 30, 2004 (Dollars in Millions)					Amount				Value				In Years
Asset and Liability Management Positions
	Interest rate contracts
		Receive fixed/pay floating swaps			$	19,793			$	258				5.33
		Pay fixed/receive floating swaps				5,775				39				1.58
		Futures and forwards				2,700				3				.15
		Options
			Written			1,199				5				.20
	Equity contracts					49				2				4.75
Customer-related Positions
	Interest rate contracts
		Receive fixed/pay floating swaps			$	6,259			$	41				4.58
		Pay fixed/receive floating swaps				6,259				(8	)			4.58
		Options
			Purchased			846				11				3.58
			Written			846				(11	)			3.58
	Risk participation agreements (a)
		Purchased				125				—				7.75
		Written				69				—				2.79
	Foreign exchange rate contracts
		Forwards, spots and swaps
			Buy			2,075				50				.72
			Sell			2,023				(44	)			.73
		Options
			Purchased			5				—				.24
			Written			5				—				.24

(a)		At June 30, 2004, the credit equivalent amount was $1 million and $6 million for purchased and written risk participation agreements, respectively.

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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. The Company has targeted returning 80 percent of earnings to our shareholders through a combination of dividends and share repurchases. In keeping with this target, the Company returned 97 percent of earnings and 118 percent of earnings during the second quarter and first six months of 2004, respectively. Total shareholders’ equity was $18.7 billion at June 30, 2004, compared with $19.2 billion at December 31, 2003. The decrease was the result of corporate earnings offset by share repurchases, dividends and changes in other comprehensive income principally reflecting changes in securities valuations from year-end.

Table 11		Capital Ratios

			June 30,				December 31,
(Dollars in Millions)			2004				2003
Tangible common equity			$	11,526			$	11,858
	As a percent of tangible assets			6.3	%			6.5	%
Tier 1 capital			$	14,294			$	14,623
	As a percent of risk-weighted assets			8.7	%			9.1	%
	As a percent of adjusted quarterly average assets (leverage ratio)			7.8	%			8.0	%
Total risk-based capital			$	21,255			$	21,710
	As a percent of risk-weighted assets			12.9	%			13.6	%

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		Number				Average				Remaining Shares
		of Shares				Price Paid				Available to be
Time Period		Purchased (a)				per Share				Purchased
April			6,795,105			$	26.39				101,379,092
May			7,547,284				26.56				93,831,808
June			6,440,523				28.23				87,391,285
Total			20,782,912			$	27.03				87,391,285

(a)		All shares purchased during the second 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. These allocated expenses are reported as net shared services expense. 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 $265.7 million of the Company’s operating earnings for the second quarter of 2004 and $515.6 million for the first six months of

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Table 12		Line of Business Financial Performance

			Wholesale												Consumer
			Banking												Banking
											Percent												Percent
Three Months Ended June 30 (Dollars in Millions)			2004				2003				Change				2004				2003				Change
Condensed Income Statement
Net interest income (taxable-equivalent basis)			$	399.3			$	419.8				(4.9	)%		$	900.4			$	891.9				1.0	%
Noninterest income				189.4				190.5				(.6	)			462.0				390.7				18.2
Securities gains (losses), net				—				—				*				(171.1	)			196.3				*
	Total net revenue			588.7				610.3				(3.5	)			1,191.3				1,478.9				(19.4	)
Noninterest expense				157.8				163.1				(3.2	)			585.7				598.7				(2.2	)
Other intangibles				4.6				4.9				(6.1	)			(108.0	)			250.5				*
	Total noninterest expense			162.4				168.0				(3.3	)			477.7				849.2				(43.7	)
Operating earnings before provision and income taxes				426.3				442.3				(3.6	)			713.6				629.7				13.3
Provision for credit losses				8.6				111.4				(92.3	)			93.4				105.9				(11.8	)
Operating earnings before income taxes				417.7				330.9				26.2				620.2				523.8				18.4
Income taxes and taxable-equivalent adjustment				152.0				120.4				26.2				225.7				190.6				18.4
Operating earnings			$	265.7			$	210.5				26.2			$	394.5			$	333.2				18.4
Merger and restructuring-related items (after-tax)
Discontinued operations (after-tax)
Net income
Average Balance Sheet Data
Commercial			$	26,670			$	28,417				(6.1	)%		$	7,796			$	8,390				(7.1	)%
Commercial real estate				15,833				16,387				(3.4	)			10,532				9,896				6.4
Residential mortgages				69				120				(42.5	)			13,677				10,638				28.6
Retail				49				51				(3.9	)			30,903				28,983				6.6
	Total loans			42,621				44,975				(5.2	)			62,908				57,907				8.6
Goodwill				1,225				1,228				(.2	)			2,243				2,242				—
Other intangible assets				90				109				(17.4	)			1,058				900				17.6
Assets				49,335				52,187				(5.5	)			71,161				67,640				5.2
Noninterest-bearing deposits				13,266				15,517				(14.5	)			14,192				13,639				4.1
Savings products				10,754				9,809				9.6				42,204				39,801				6.0
Time deposits				6,247				3,592				73.9				15,934				18,983				(16.1	)
	Total deposits			30,267				28,918				4.7				72,330				72,423				(.1	)
Shareholders’ equity				4,986				5,118				(2.6	)			6,100				5,861				4.1

			Wholesale												Consumer
			Banking												Banking
											Percent												Percent
Six Months Ended June 30 (Dollars in Millions)			2004				2003				Change				2004				2003				Change
Condensed Income Statement
Net interest income (taxable-equivalent basis)			$	794.3			$	844.7				(6.0	)%		$	1,781.0			$	1,767.8				.7	%
Noninterest income				380.4				387.5				(1.8	)			879.0				771.5				13.9
Securities gains (losses), net				.9				—				*				(171.1	)			302.1				*
	Total net revenue			1,175.6				1,232.2				(4.6	)			2,488.9				2,841.4				(12.4	)
Noninterest expense				313.0				330.8				(5.4	)			1,159.7				1,184.0				(2.1	)
Other intangibles				9.4				9.8				(4.1	)			62.3				424.0				(85.3	)
	Total noninterest expense			322.4				340.6				(5.3	)			1,222.0				1,608.0				(24.0	)
Operating earnings before provision and income taxes				853.2				891.6				(4.3	)			1,266.9				1,233.4				2.7
Provision for credit losses				42.6				226.3				(81.2	)			200.5				217.3				(7.7	)
Operating earnings before income taxes				810.6				665.3				21.8				1,066.4				1,016.1				5.0
Income taxes and taxable-equivalent adjustment				295.0				242.1				21.9				388.1				369.7				5.0
Operating earnings			$	515.6			$	423.2				21.8			$	678.3			$	646.4				4.9
Merger and restructuring-related items (after-tax)
Discontinued operations (after-tax)
Net income
Average Balance Sheet Data
Commercial			$	26,383			$	28,403				(7.1	)%		$	7,804			$	8,389				(7.0	)%
Commercial real estate				15,899				16,344				(2.7	)			10,458				9,785				6.9
Residential mortgages				69				137				(49.6	)			13,463				10,189				32.1
Retail				50				54				(7.4	)			30,442				28,852				5.5
	Total loans			42,401				44,938				(5.6	)			62,167				57,215				8.7
Goodwill				1,225				1,229				(.3	)			2,243				2,242				—
Other intangible assets				92				112				(17.9	)			1,022				956				6.9
Assets				48,891				52,112				(6.2	)			70,040				67,243				4.2
Noninterest-bearing deposits				12,942				15,875				(18.5	)			13,864				13,489				2.8
Savings products				11,097				9,135				21.5				42,054				39,088				7.6
Time deposits				5,878				3,542				66.0				16,188				19,662				(17.7	)
	Total deposits			29,917				28,552				4.8				72,106				72,239				(.2	)
Shareholders’ equity				5,069				5,047				.4				6,192				5,745				7.8

*		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
$	87.7			$	76.0				15.4	%		$	141.5			$	144.8				(2.3	)%		$	250.5			$	266.1				(5.9	)%		$	1,779.4			$	1,798.6				(1.1	)%
	253.9				241.4				5.2				463.8				405.4				14.4				44.3				31.8				39.3				1,413.4				1,259.8				12.2
	—				—				—				—				—				—				(.6	)			16.8				*				(171.7	)			213.1				*
	341.6				317.4				7.6				605.3				550.2				10.0				294.2				314.7				(6.5	)			3,021.1				3,271.5				(7.7	)
	146.4				146.0				.3				193.3				181.0				6.8				197.0				134.7				46.3				1,280.2				1,223.5				4.6
	15.0				16.6				(9.6	)			39.3				38.9				1.0				1.5				1.4				7.1				(47.6	)			312.3				*
	161.4				162.6				(.7	)			232.6				219.9				5.8				198.5				136.1				45.8				1,232.6				1,535.8				(19.7	)
	180.2				154.8				16.4				372.7				330.3				12.8				95.7				178.6				(46.4	)			1,788.5				1,735.7				3.0
	8.8				1.5				*				94.8				104.9				(9.6	)			(1.1	)			(.7	)			57.1				204.5				323.0				(36.7	)
	171.4				153.3				11.8				277.9				225.4				23.3				96.8				179.3				(46.0	)			1,584.0				1,412.7				12.1
	62.4				55.8				11.8				101.1				82.0				23.3				5.9				41.7				(85.9	)			547.1				490.5				11.5
$	109.0			$	97.5				11.8			$	176.8			$	143.4				23.3			$	90.9			$	137.6				(33.9	)			1,036.9				922.2				12.4
																																					—				(7.2	)
																																					—				4.9
																																				$	1,036.9			$	919.9
$	1,645			$	1,839				(10.5	)%		$	3,039			$	2,903				4.7	%		$	180			$	153				17.6	%		$	39,330			$	41,702				(5.7	)%
	604				586				3.1				—				—				—				147				220				(33.2	)			27,116				27,089				.1
	297				241				23.2				—				—				—				9				13				(30.8	)			14,052				11,012				27.6
	2,208				1,933				14.2				7,454				6,981				6.8				49				52				(5.8	)			40,663				38,000				7.0
	4,754				4,599				3.4				10,493				9,884				6.2				385				438				(12.1	)			121,161				117,803				2.9
	813				741				9.7				1,823				1,814				.5				—				306				*				6,104				6,331				(3.6	)
	342				406				(15.8	)			763				669				14.1				8				13				(38.5	)			2,261				2,097				7.8
	6,471				6,367				1.6				13,405				13,066				2.6				50,058				47,795				4.7				190,430				187,055				1.8
	3,250				3,056				6.3				109				337				(67.7	)			(210	)			(34	)			*				30,607				32,515				(5.9	)
	7,930				5,216				52.0				10				10				—				19				2				*				60,917				54,838				11.1
	499				443				12.6				—				—				—				2,912				5,780				(49.6	)			25,592				28,798				(11.1	)
	11,679				8,715				34.0				119				347				(65.7	)			2,721				5,748				(52.7	)			117,116				116,151				.8
	2,239				1,993				12.3				3,109				2,986				4.1				2,609				3,477				(25.0	)			19,043				19,435				(2.0	)

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
$	170.6			$	151.0				13.0	%		$	290.2			$	304.7				(4.8	)%		$	522.3			$	507.1				3.0	%		$	3,558.4			$	3,575.3				(.5	)%
	503.7				468.9				7.4				874.9				777.4				12.5				93.7				79.9				17.3				2,731.7				2,485.2				9.9
	—				—				—				—				—				—				(1.5	)			51.7				*				(171.7	)			353.8				*
	674.3				619.9				8.8				1,165.1				1,082.1				7.7				614.5				638.7				(3.8	)			6,118.4				6,414.3				(4.6	)
	290.3				293.5				(1.1	)			373.0				356.7				4.6				373.0				260.4				43.2				2,509.0				2,425.4				3.4
	30.0				33.1				(9.4	)			73.9				77.6				(4.8	)			2.9				2.9				—				178.5				547.4				(67.4	)
	320.3				326.6				(1.9	)			446.9				434.3				2.9				375.9				263.3				42.8				2,687.5				2,972.8				(9.6	)
	354.0				293.3				20.7				718.2				647.8				10.9				238.6				375.4				(36.4	)			3,430.9				3,441.5				(.3	)
	9.7				1.9				*				187.4				213.3				(12.1	)			(.7	)			(.8	)			(12.5	)			439.5				658.0				(33.2	)
	344.3				291.4				18.2				530.8				434.5				22.2				239.3				376.2				(36.4	)			2,991.4				2,783.5				7.5
	125.3				106.1				18.1				193.1				158.1				22.1				(55.4	)			89.7				*				946.1				965.7				(2.0	)
$	219.0			$	185.3				18.2			$	337.7			$	276.4				22.2			$	294.7			$	286.5				2.9				2,045.3				1,817.8				12.5
																																					—				(18.7	)
																																					—				5.6
																																				$	2,045.3			$	1,804.7
$	1,654			$	1,812				(8.7	)%		$	2,934			$	2,823				3.9	%		$	155			$	219				(29.2	)%		$	38,930			$	41,646				(6.5	)%
	601				578				4.0				—				—				—				155				230				(32.6	)			27,113				26,937				.7
	288				231				24.7				—				—				—				11				13				(15.4	)			13,831				10,570				30.9
	2,159				1,948				10.8				7,414				7,004				5.9				46				50				(8.0	)			40,111				37,908				5.8
	4,702				4,569				2.9				10,348				9,827				5.3				367				512				(28.3	)			119,985				117,061				2.5
	791				740				6.9				1,819				1,813				.3				—				306				*				6,078				6,330				(4.0	)
	350				417				(16.1	)			706				685				3.1				9				14				(35.7	)			2,179				2,184				(.2	)
	6,437				6,336				1.6				13,239				13,058				1.4				51,439				46,626				10.3				190,046				185,375				2.5
	3,124				2,886				8.2				112				407				(72.5	)			(227	)			12				*				29,815				32,669				(8.7	)
	7,901				4,933				60.2				11				9				22.2				18				8				*				61,081				53,173				14.9
	479				434				10.4				—				—				—				3,126				6,504				(51.9	)			25,671				30,142				(14.8	)
	11,504				8,253				39.4				123				416				(70.4	)			2,917				6,524				(55.3	)			116,567				115,984				.5
	2,181				1,973				10.5				3,067				2,987				2.7				2,805				3,370				(16.8	)			19,314				19,122				1.0

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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. 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 $394.5 million of the Company’s operating earnings for the second quarter of 2004 and $678.3 million for the first six months of 2004, an increase of $61.3 million (18.4 percent) and $31.9 million (4.9 percent), respectively, compared with the same periods of 2003. While the retail banking business grew operating earnings by 22.4 percent in the second quarter of 2004 and 21.2 percent in the first six months of 2004, the contribution of the mortgage banking business declined 3.4 percent and 90.4 percent, respectively, compared with the same periods of 2003. The decrease in operating earnings within the mortgage banking business for the second quarter and first six months of 2004, compared with 2003, was primarily the result of a decline in net interest income resulting from lower loans held for sale balances as mortgage production has declined. Also, operating results include an increase in noninterest expense associated with increased amortization of mortgage servicing rights resulting from growth in the servicing portfolio from a year ago.

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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 $109.0 million of the Company’s operating earnings for the second quarter of 2004 and $219.0 for the first six months of 2004, increases of 11.8 percent and 18.2 percent, respectively, compared with the same periods of 2003. The period-over-period increases for the second quarter of 2004 and first six months of 2004 were attributable to growth in total net revenue (7.6 percent and 8.8 percent, respectively) and a reduction in noninterest expense (.7 percent and 1.9 percent, respectively), partially offset by an increase in provision for credit losses.

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Payment Servicesincludes consumer and business credit cards, debit cards, corporate and purchasing card services, consumer lines of credit, ATM processing and merchant processing. Payment Services contributed $176.8 million of the Company’s operating earnings for the second quarter of 2004 and $337.7 million for the first six months of 2004, a 23.3 percent and 22.2 percent increase, respectively, over the same periods of 2003. The increases were due to growth in total net revenue and reductions in provision for credit losses, partially offset by increases in total noninterest expense.

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. Operational expenses incurred by Treasury and Corporate Support on behalf of the other business lines are allocated back primarily based on customer transaction volume and account activities to the appropriate business unit and are identified as net shared services expense. Treasury and Corporate Support recorded operating earnings of

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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

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

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

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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 June 30, 2004, to immediate 25 and 50 basis point adverse changes in interest rates would be approximately $50 million and $119 million, respectively. An upward movement in interest rates at June 30, 2004, of 25 and 50 basis points would increase the value of the MSRs by approximately $86 million and $133 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.

CONTROLS AND PROCEDURES

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Consolidated Balance Sheet" -->

					June 30,				December 31,
(Dollars in Millions)					2004				2003
					(Unaudited)
Assets
Cash and due from banks					$	7,476			$	8,630
Investment securities
	Held-to-maturity (fair value $128 and $161, respectively)					125				152
	Available-for-sale					40,160				43,182
Loans held for sale						1,383				1,433
Loans
	Commercial					40,065				38,526
	Commercial real estate					27,204				27,242
	Residential mortgages					14,380				13,457
	Retail					41,181				39,010
		Total loans				122,830				118,235
			Less allowance for loan losses			(2,244	)			(2,369	)
			Net loans			120,586				115,866
Premises and equipment						1,893				1,957
Customers’ liability on acceptances						169				121
Goodwill						6,226				6,025
Other intangible assets						2,475				2,124
Other assets						9,737				9,796
		Total assets			$	190,230			$	189,286
Liabilities and Shareholders’ Equity
Deposits
	Noninterest-bearing				$	32,786			$	32,470
	Interest-bearing					71,314				74,749
	Time deposits greater than $100,000					15,827				11,833
		Total deposits				119,927				119,052
Short-term borrowings						11,592				10,850
Long-term debt						31,013				31,215
Junior subordinated debentures						2,652				2,601
Acceptances outstanding						169				121
Other liabilities						6,202				6,205
		Total liabilities				171,555				170,044
Shareholders’ equity
	Common stock, par value $0.01 a share — authorized: 4,000,000,000 shares issued: 06/30/04 and 12/31/03 — 1,972,643,007 shares					20				20
	Capital surplus					5,860				5,851
	Retained earnings					15,644				14,508
	Less cost of common stock in treasury: 06/30/04 — 88,527,451 shares; 12/31/03 — 49,722,856 shares					(2,316	)			(1,205	)
	Other comprehensive income					(533	)			68
		Total shareholders’ equity				18,675				19,242
		Total liabilities and shareholders’ equity			$	190,230			$	189,286

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Consolidated Statement of Income" -->

				Three Months Ended								Six Months Ended
				June 30,								June 30,
(Dollars and shares in Millions, Except Per Share Data)
(Unaudited)				2004				2003				2004				2003
Interest Income
Loans				$	1,740.0			$	1,821.0			$	3,487.0			$	3,657.7
Loans held for sale					27.3				51.8				47.2				111.4
Investment securities
	Taxable				438.7				422.4				902.7				818.5
	Non-taxable				4.7				7.5				10.0				16.4
Other interest income					25.5				25.1				47.4				55.0
		Total interest income			2,236.2				2,327.8				4,494.3				4,659.0
Interest Expense
Deposits					205.3				288.5				432.3				595.1
Short-term borrowings					58.9				38.9				108.8				78.4
Long-term debt					174.8				184.0				360.7				368.3
Junior subordinated debentures					24.8				24.5				48.3				55.9
		Total interest expense			463.8				535.9				950.1				1,097.7
Net interest income					1,772.4				1,791.9				3,544.2				3,561.3
Provision for credit losses					204.5				323.0				439.5				658.0
Net interest income after provision for credit losses					1,567.9				1,468.9				3,104.7				2,903.3
Noninterest Income
Credit and debit card revenue					158.8				142.3				300.6				269.7
Corporate payment products revenue					102.7				90.9				197.5				176.9
ATM processing services					44.9				41.9				87.1				84.3
Merchant processing services					165.1				141.8				306.2				269.1
Trust and investment management fees					251.7				238.9				500.3				467.5
Deposit service charges					202.1				179.0				387.3				342.2
Treasury management fees					121.5				111.8				239.0				223.8
Commercial products revenue					107.4				100.0				217.8				204.2
Mortgage banking revenue					109.9				90.3				204.1				185.7
Investment products fees and commissions					42.2				38.1				81.5				73.2
Securities gains (losses), net					(171.7	)			213.1				(171.7	)			353.8
Other					107.1				84.8				210.3				188.6
		Total noninterest income			1,241.7				1,472.9				2,560.0				2,839.0
Noninterest Expense
Compensation					572.6				547.6				1,108.4				1,093.6
Employee benefits					91.2				79.6				191.4				171.3
Net occupancy and equipment					153.4				159.5				309.1				320.8
Professional services					34.7				32.9				67.1				59.3
Marketing and business development					48.7				51.1				84.0				80.9
Technology and communications					102.4				104.1				204.1				209.0
Postage, printing and supplies					60.5				61.8				122.1				122.2
Other intangibles					(47.6	)			312.3				178.5				547.4
Merger and restructuring-related charges					—				10.8				—				28.4
Other					216.7				186.9				422.8				368.3
		Total noninterest expense			1,232.6				1,546.6				2,687.5				3,001.2
Income from continuing operations before income taxes					1,577.0				1,395.2				2,977.2				2,741.1
Applicable income taxes					540.1				480.2				931.9				942.0
Income from continuing operations					1,036.9				915.0				2,045.3				1,799.1
Income from discontinued operations (after-tax)					—				4.9				—				5.6
Net income				$	1,036.9			$	919.9			$	2,045.3			$	1,804.7
Earnings Per Share
	Income from continuing operations			$	.55			$	.48			$	1.07			$	.94
	Discontinued operations				—				—				—				—
	Net income			$	.55			$	.48			$	1.07			$	.94
Diluted Earnings Per Share
	Income from continuing operations			$	.54			$	.47			$	1.06			$	.93
	Discontinued operations				—				.01				—				.01
	Net income			$	.54			$	.48			$	1.06			$	.94
Dividends declared per share				$	.240			$	.205			$	.480			$	.410
Average common shares outstanding					1,891.6				1,922.3				1,903.5				1,920.6
Average diluted common shares outstanding					1,913.4				1,931.6				1,927.3				1,928.6

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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																1,805												1,805
Unrealized gain on securities available for sale																								157				157
Unrealized loss on derivatives																								(222	)			(222	)
Foreign currency translation adjustment																								17				17
Realized gain on derivatives																								188				188
Reclassification adjustment for gains realized in net income																								(379	)			(379	)
Income taxes																								91				91
	Total comprehensive income																											1,657
Cash dividends declared on common stock																(788	)											(788	)
Issuance of common and treasury stock				8,249,225								(46	)							190								144
Stock option and restricted stock grants												72																72
Shares reserved to meet deferred compensation obligations				(678,976	)							10								(10	)							—
Balance June 30, 2003				1,924,526,809			$	20			$	5,835			$	14,122			$	(1,092	)		$	636			$	19,521
Balance December 31, 2003				1,922,920,151			$	20			$	5,851			$	14,508			$	(1,205	)		$	68			$	19,242
Net income																2,045												2,045
Unrealized loss on securities available for sale																								(990	)			(990	)
Unrealized loss on derivatives																								(125	)			(125	)
Realized gain on derivatives																								3				3
Reclassification adjustment for losses realized in net income																								143				143
Income taxes																								368				368
	Total comprehensive income																											1,444
Cash dividends declared on common stock																(909	)											(909	)
Issuance of common and treasury stock				16,564,323								(58	)							418								360
Purchase of treasury stock				(54,607,715	)															(1,509	)							(1,509	)
Stock option and restricted stock grants												51																51
Shares reserved to meet deferred compensation obligations				(761,203	)							16								(20	)							(4	)
Balance June 30, 2004				1,884,115,556			$	20			$	5,860			$	15,644			$	(2,316	)		$	(533	)		$	18,675

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Consolidated Statement of Cash Flows" -->

			Six Months Ended
			June 30,
(Dollars in Millions)
(Unaudited)			2004				2003
Operating Activities
	Net cash provided by (used in) operating activities		$	2,587.5			$	3,540.9
Investing Activities
Proceeds from sales of available-for-sale investment securities				4,644.3				11,855.0
Proceeds from maturities of investment securities				5,660.6				9,661.9
Purchases of investment securities				(7,917.6	)			(28,826.1	)
Net (increase) decrease in loans outstanding				(4,753.6	)			(4,658.8	)
Proceeds from sales of loans				918.5				1,141.2
Purchases of loans				(1,188.8	)			(239.5	)
Proceeds from sales of premises and equipment				38.0				20.6
Purchases of premises and equipment				(63.3	)			(555.2	)
Acquisitions, net of cash acquired				(301.6	)			—
Other, net				(210.5	)			(158.9	)
	Net cash provided by (used in) investing activities			(3,174.0	)			(11,759.8	)
Financing Activities
Net increase (decrease) in deposits				875.2				10,793.4
Net increase (decrease) in short-term borrowings				742.7				(419.6	)
Principal payments on long-term debt				(5,459.0	)			(4,797.9	)
Proceeds from issuance of long-term debt				5,450.6				7,448.8
Redemption of Company-obligated mandatorily redeemable preferred securities				—				(350.0	)
Proceeds from issuance of common stock				314.2				126.7
Repurchase of common stock				(1,591.0	)			—
Cash dividends paid				(919.0	)			(767.2	)
	Net cash provided by (used in) financing activities			(586.3	)			12,034.2
	Change in cash and cash equivalents			(1,172.8	)			3,815.3
Cash and cash equivalents at beginning of period				8,782.2				11,192.1
	Cash and cash equivalents at end of period		$	7,609.4			$	15,007.4

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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 and is 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 adoption of SAB 105 did not have a material impact on the Company’s financial statements.

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 second quarter and first six months of 2003:

			Three Months Ended				Six Months Ended
(Dollars in Millions)			June 30, 2003				June 30, 2003
Revenue			$	207.1			$	374.3
Noninterest expense				197.8				364.0
Income from discontinued operations				9.3				10.3
Costs of disposal				1.8				2.1
Income taxes				2.6				2.6
	Discontinued operations, net of tax		$	4.9			$	5.6

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

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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:

				June 30, 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			$	12			$	—			$	—			$	12			$	14			$	—			$	—			$	14
	Obligations of state and political subdivisions				113				7				(4	)			116				138				11				(2	)			147
		Total held-to-maturity securities		$	125			$	7			$	(4	)		$	128			$	152			$	11			$	(2	)		$	161
Available-for-sale (b)
	U.S. Treasury and agencies			$	3,108			$	6			$	(77	)		$	3,037			$	1,634			$	10			$	(69	)		$	1,575
	Mortgage-backed securities				36,799				77				(1,093	)			35,783				40,229				203				(407	)			40,025
	Asset-backed securities				142				1				(1	)			142				250				5				(3	)			252
	Obligations of state and political subdivisions				260				8				—				268				335				13				—				348
	Other securities and investments				932				10				(12	)			930				993				9				(20	)			982
		Total available-for-sale securities		$	41,241			$	102			$	(1,183	)		$	40,160			$	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.

The fair value of available-for-sale securities shown above includes securities totaling $3.2 billion with unrealized losses of $239.3 million which have been in an unrealized loss position for greater than 12 months. All principal and interest payments are expected to be collected given the high credit quality of the U.S. government agency debt securities and bank holding company issuers and the Company’s ability and intent to hold the securities until such time as the value recovers or maturity. All other available-for-sale securities with unrealized losses have an aggregate fair value of $30.7 billion and have been in an unrealized loss position for less than 12 months and represent both fixed-rate securities and floating-rate securities containing caps with temporary impairment resulting from increases in interest rates since the purchase of the securities.

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								Six Months Ended
			June 30,								June 30,
(Dollars in Millions)			2004				2003				2004				2003
Realized gains			$	.3			$	220.5			$	1.3			$	362.3
Realized losses				(172.0	)			(7.4	)			(173.0	)			(8.5	)
	Net realized gains (losses)		$	(171.7	)		$	213.1			$	(171.7	)		$	353.8
Income tax (benefit) on realized gains (losses)			$	(65.2	)		$	81.0			$	(65.2	)		$	134.4

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For amortized cost, fair value and yield by maturity date of held-to-maturity and available-for-sale securities outstanding at June 30, 2004, refer to Table 5 included in Management’s Discussion and Analysis which is incorporated by reference into these Notes to Consolidated Financial Statements.

Note 5		Loans

The composition of the loan portfolio was as follows:

					June 30, 2004								December 31, 2003
									Percent								Percent
(Dollars in Millions)					Amount				of Total				Amount				of Total
Commercial
	Commercial				$	35,170				28.6	%		$	33,536				28.4	%
	Lease financing					4,895				4.0				4,990				4.2
		Total commercial				40,065				32.6				38,526				32.6
Commercial real estate
	Commercial mortgages					20,382				16.6				20,624				17.4
	Construction and development					6,822				5.6				6,618				5.6
		Total commercial real estate				27,204				22.2				27,242				23.0
Residential mortgages
	Residential mortgages					8,420				6.9				7,332				6.2
	Home equity loans, first liens					5,960				4.8				6,125				5.2
		Total residential mortgages				14,380				11.7				13,457				11.4
Retail
	Credit card					6,079				4.9				5,933				5.0
	Retail leasing					6,640				5.4				6,029				5.1
	Home equity and second mortgages					14,017				11.4				13,210				11.2
	Other retail
		Revolving credit				2,544				2.1				2,540				2.1
		Installment				2,656				2.2				2,380				2.0
		Automobile				7,515				6.1				7,165				6.1
		Student				1,730				1.4				1,753				1.5
			Total other retail			14,445				11.8				13,838				11.7
		Total retail				41,181				33.5				39,010				33.0
			Total loans		$	122,830				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 June 30, 2004, and December 31, 2003, respectively.

Note 6		Mortgage Servicing Rights

The Company’s portfolio of residential mortgages serviced for others was $58.7 billion and $53.9 billion at June 30, 2004, and December 31, 2003, respectively.

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

			June 30,				December 31,
(Dollars in Millions)			2004				2003
Initial carrying value, net of amortization			$	954			$	830
Impairment valuation allowance				(91	)			(160	)
	Net carrying value		$	863			$	670

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Changes in capitalized mortgage servicing rights are summarized as follows:

			Six Months Ended				Year Ended
(Dollars in Millions)			June 30, 2004				December 31, 2003
Balance at beginning of period				$670			$	642
	Rights purchased			76				55
	Rights capitalized			148				338
	Amortization			(93	)			(156	)
	Rights sold			—				—
	Repairment (impairment) (a)			62				(209	)
Balance at end of period				$863			$	670

(a)		Mortgage servicing rights reparation of $171.1 million and impairment of $196.3 million were recognized during the second quarter of 2004 and 2003, respectively.

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

		June 30,				December 31,
(Dollars in Millions)		2004				2003
Fair value		$	863			$	670
Expected weighted-average life (in years)			7.0				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 June 30, 2004, was as follows:

		Down Scenario								Up Scenario
(Dollars in Millions)		50 bps				25 bps				25 bps				50 bps
Fair value		$	(119	)		$	(50	)			$86			$	133

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 the 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 June 30, 2004, was as follows:

(Dollars in Millions)		MRBP				Government				Conventional				Total
Servicing portfolio		$	7,696			$	8,872			$	42,107			$	58,675
Fair market value		$	116			$	159			$	588			$	863
Value (bps)			151				179				140				147
Weighted-average servicing fees (bps)			43				46				34				37
Multiple (value/servicing fees)			3.51				3.89				4.12				3.97
Weighted-average note rate			6.37	%			6.13	%			5.70	%			5.85	%
Age (in years)			3.5				2.0				1.4				1.8
Expected life (in years)			4.8				7.1				7.4				7.0
Discount rate			10.1	%			11.0	%			9.6	%			9.9	%

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Note 7		Intangible Assets

The following table reflects the changes in the carrying value of goodwill for the six months ended June 30, 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			—				—				103				97				200
	Other (a)			—				—				—				1				1
Balance at June 30, 2004			$	1,225			$	2,242			$	845			$	1,914			$	6,226

(a)		Other changes in goodwill include foreign exchange effects on non-dollar-denominated goodwill.

Intangible assets consisted of the following:

			Estimated				Amortization				June 30,				December 31,
(Dollars in Millions)			Life (a)				Method (b)				2004				2003
Goodwill				—				—			$	6,226			$	6,025
Merchant processing contracts				8 years				AC				751				552
Core deposit benefits				10 years/6 years				SL/AC				376				417
Mortgage servicing rights				7 years				AC				863				670
Trust relationships				15 years/9 years				SL/AC				322				311
Other identified intangibles				8 years/9 years				SL/AC				163				174
	Total										$	8,701			$	8,149

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

Aggregate amortization and impairment expense consisted of the following:

			Three Months Ended								Six Months Ended
			June 30,								June 30,
(Dollars in Millions)			2004				2003				2004				2003
Merchant processing contracts			$	32.4			$	32.5			$	60.2			$	64.7
Core deposit benefits				20.3				22.1				41.2				44.2
Mortgage servicing rights (a)				(123.6	)			233.5				30.9				390.2
Trust relationships				11.9				13.4				23.7				26.6
Other identified intangibles				11.4				10.8				22.5				21.7
	Total		$	(47.6	)		$	312.3			$	178.5			$	547.4

(a)		Includes mortgage servicing rights reparation of $171.1 million and impairment of $196.3 million for the three months ended June 30, 2004 and 2003, respectively, and reparation of $61.8 million and impairment of $317.2 million for the six months ended June 30, 2004 and 2003, respectively.

Below is the estimated amortization expense for the years ending:

(Dollars in Millions)
Remaining 2004		$	247.0
2005			430.3
2006			361.6
2007			309.6
2008			252.4

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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 June 30, 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

2.29

June 2027

June 15, 2007

Mercantile Capital Trust I

February 1997

150

155

Variable

2.03

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 June 30 2004, are recorded on the balance sheet at fair value. Carrying value includes a fair value adjustment of $27 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 June 30, 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 1,884.1 million and 1,922.9 million shares of common stock outstanding at June 30, 2004, and December 31, 2003, respectively.

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Note 10		Earnings Per Share

The components of earnings per share were:

				Three Months Ended								Six Months Ended
				June 30,								June 30,
(Dollars and Shares in Millions, Except Per Share Data)				2004				2003				2004				2003
Income from continuing operations				$	1,036.9			$	915.0			$	2,045.3			$	1,799.1
	Income from discontinued operations (after-tax)				—				4.9				—				5.6
		Net income		$	1,036.9			$	919.9			$	2,045.3			$	1,804.7
Average common shares outstanding					1,891.6				1,922.3				1,903.5				1,920.6
Net effect of the assumed purchase of stock based on the treasury stock method for options and stock plans					21.8				9.3				23.8				8.0
Average diluted common shares outstanding					1,913.4				1,931.6				1,927.3				1,928.6
Earnings per share
	Income from continuing operations			$	.55			$	.48			$	1.07			$	.94
	Discontinued operations				—				—				—				—
		Net income		$	.55			$	.48			$	1.07			$	.94
Diluted earnings per share
	Income from continuing operations			$	.54			$	.47			$	1.06			$	.93
	Discontinued operations				—				.01				—				.01
		Net income		$	.54			$	.48			$	1.06			$	.94

For the three months ended June 30, 2004 and 2003, options to purchase 40 million and 94 million shares, respectively, and 40 million and 98 million shares for the six months ended 2004 and 2003, 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:

			Three Months Ended								Six Months Ended
			June 30, 2004								June 30, 2004
							Post-								Post-
							Retirement								Retirement
			Pension				Medical				Pension				Medical
(Dollars in Millions)			Plans				Plans				Plans				Plans
Components of net periodic benefit cost (income)
	Service cost		$	14.7			$	1.0			$	29.3			$	1.9
	Interest cost			26.8				4.8				53.7				9.6
	Expected return on plan assets			(50.8	)			(.3	)			(101.6	)			(.7	)
	Net amortization and deferral			(1.6	)			(.1	)			(3.2	)			(.1	)
	Recognized actuarial loss			7.5				.9				15.1				1.8
Net periodic benefit cost (income)			$	(3.4	)		$	6.3			$	(6.7	)		$	12.5

The information for the components of the net periodic benefit cost (income) for the three and six months ended June 30, 2003, was not readily available.

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Note 12		Income Taxes

The components of income tax expense were:

			Three Months Ended								Six Months Ended
			June 30,								June 30,
(Dollars in Millions)			2004				2003				2004				2003
Federal
Current			$	418.0			$	382.1			$	696.1			$	740.4
Deferred				67.5				53.9				133.3				108.4
	Federal income tax			485.5				436.0				829.4				848.8
State
Current				42.4				31.6				78.1				66.6
Deferred				12.2				12.6				24.4				26.6
	State income tax			54.6				44.2				102.5				93.2
	Total income tax provision		$	540.1			$	480.2			$	931.9			$	942.0

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								Six Months Ended
			June 30,								June 30,
(Dollars in Millions)			2004				2003				2004				2003
Tax at statutory rate (35%)			$	551.9			$	488.3			$	1,042.0			$	959.4
State income tax, at statutory rates, net of federal tax benefit				35.5				29.2				66.6				62.1
Tax effect of
	Resolution of federal income tax examinations			—				—				(90.0	)			—
	Tax credits			(31.9	)			(27.2	)			(63.1	)			(53.8	)
	Tax-exempt interest, net			(5.5	)			(5.1	)			(10.9	)			(11.0	)
	Other items			(9.9	)			(5.0	)			(12.7	)			(14.7	)
Applicable income taxes			$	540.1			$	480.2			$	931.9			$	942.0

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.

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LETTERS OF CREDIT

Standby letters of credit are 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 June 30, 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 $76.6 million at June 30, 2004.

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 $145 million at June 30, 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 were approximately $1.6 billion at June 30, 2004. The Company’s recorded liabilities as of June 30, 2004, included $35.5 million representing outstanding amounts owed to these third-parties and required to be recorded on the Company’s 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 were approximately $19.2 billion at June 30, 2004, and represented the market value of the securities lent to third-parties. At June 30, 2004, the Company held assets with a market value of $19.6 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 $644.6 million at June 30, 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.

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Merchant ProcessingThe Company, through its subsidiaries NOVA Information Systems, Inc. and NOVA European Holdings Company, 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.

Other Guarantees The Company provides liquidity and credit enhancement facilities 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 these facilities is remote, the maximum potential future payments guaranteed by the Company under these arrangements were approximately $6.5 billion at June 30, 2004. The recorded fair value of the Company’s liability for the credit enhancement recourse obligation and liquidity facilities was $38.2 million at June 30, 2004, and was included 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

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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:

				Six Months Ended
				June 30,
(Dollars in Millions)				2004				2003
Acquisitions and divestitures
	Assets acquired			$	413.1			$	—
	Liabilities assumed				(110.6	)			—
		Net		$	302.5			$	—

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:

			June 30,				December 31,
(Dollars in Millions)			2004				2003
Interest-bearing deposits			$	6			$	4
Federal funds sold				127				109
Securities purchased under agreements to resell				—				39
	Total money market investments		$	133			$	152

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

				For the Three Months Ended June 30,
				2004												2003
												Yields												Yields				% Change
(Dollars in Millions)				Average								and				Average								and				Average
(Unaudited)				Balances				Interest				Rates				Balances				Interest				Rates				Balances
ASSETS
Taxable securities				$	42,102			$	438.7				4.17	%		$	35,517			$	422.4				4.76	%			18.5	%
Non-taxable securities					387				6.9				7.10				625				10.8				6.89				(38.1	)
Loans held for sale					1,987				27.3				5.49				3,728				51.8				5.56				(46.7	)
Loans (b)
	Commercial				39,330				542.3				5.54				41,702				584.5				5.62				(5.7	)
	Commercial real estate				27,116				372.7				5.53				27,089				400.5				5.93				.1
	Residential mortgages				14,052				199.5				5.69				11,012				172.3				6.27				27.6
	Retail				40,663				630.2				6.23				38,000				667.2				7.04				7.0
		Total loans			121,161				1,744.7				5.79				117,803				1,824.5				6.21				2.9
Other earning assets					1,353				25.6				7.61				1,752				25.0				5.74				(22.8	)
		Total earning assets			166,990				2,243.2				5.39				159,425				2,334.5				5.87				4.7
Allowance for loan losses					(2,289	)											(2,472	)											(7.4	)
Unrealized gain (loss) on available-for-sale securities					(729	)											694												*
Other assets (c)					26,458												29,408												(10.0	)
		Total assets		$	190,430											$	187,055												1.8
Liabilities and Shareholders’ Equity
Noninterest-bearing deposits				$	30,607											$	32,515												(5.9	)
Interest-bearing deposits
	Interest checking				20,739				14.5				.28				18,090				21.6				.48				14.6
	Money market accounts				34,242				56.8				.67				31,134				84.0				1.08				10.0
	Savings accounts				5,936				3.6				.24				5,614				6.0				.43				5.7
	Time certificates of deposit less than $100,000				13,021				83.5				2.58				15,790				115.0				2.92				(17.5	)
	Time deposits greater than $100,000				12,571				46.9				1.50				13,008				61.9				1.91				(3.4	)
		Total interest-bearing deposits			86,509				205.3				.95				83,636				288.5				1.38				3.4
Short-term borrowings					15,310				58.9				1.55				8,982				38.9				1.74				70.5
Long-term debt					30,354				174.8				2.31				32,273				184.0				2.28				(5.9	)
Junior subordinated debentures					2,646				24.8				3.76				2,661				24.5				3.69				(.6	)
		Total interest-bearing liabilities			134,819				463.8				1.38				127,552				535.9				1.68				5.7
Other liabilities (d)					5,961												7,553												(21.1	)
Shareholders’ equity					19,043												19,435												(2.0	)
		Total liabilities and shareholders’ equity		$	190,430											$	187,055												1.8	%
Net interest income								$	1,779.4											$	1,798.6
Gross interest margin													4.01	%											4.19	%
Gross interest margin without taxable-equivalent increments													3.99												4.17
Percent of Earning Assets
Interest income													5.39	%											5.87	%
Interest expense													1.11												1.35
Net interest margin													4.28	%											4.52	%
Net interest margin without taxable-equivalent increments													4.26	%											4.50	%

*		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 $1,434 million of earning assets from discontinued operations in second quarter 2003.
(d)		Includes approximately $1,112 million of interest-bearing liabilities from discontinued operations in second quarter 2003.

52	U.S. Bancorp

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

				For the Six Months Ended June 30,
				2004												2003
												Yields												Yields				% Change
(Dollars in Millions)				Average								and				Average								and				Average
(Unaudited)				Balances				Interest				Rates				Balances				Interest				Rates				Balances
ASSETS
Taxable securities				$	43,205			$	902.7				4.18	%		$	34,518			$	818.5				4.74	%			25.2	%
Non-taxable securities					412				14.6				7.09				669				23.4				6.99				(38.4	)
Loans held for sale					1,716				47.2				5.50				3,884				111.4				5.74				(55.8	)
Loans (b)
	Commercial				38,930				1,087.6				5.61				41,646				1,172.9				5.67				(6.5	)
	Commercial real estate				27,113				746.7				5.54				26,937				801.0				6.00				.7
	Residential mortgages				13,831				397.0				5.76				10,570				334.5				6.35				30.9
	Retail				40,111				1,265.1				6.34				37,908				1,356.3				7.22				5.8
		Total loans			119,985				3,496.4				5.86				117,061				3,664.7				6.31				2.5
Other earning assets					1,356				47.6				7.05				1,652				55.0				6.71				(17.9	)
		Total earning assets			166,674				4,508.5				5.43				157,784				4,673.0				5.96				5.6
Allowance for loan losses					(2,360	)											(2,489	)											(5.2	)
Unrealized gain (loss) on available-for-sale securities					(372	)											653												*
Other assets (c)					26,104												29,427												(11.3	)
		Total assets		$	190,046											$	185,375												2.5
Liabilities and Shareholders’ Equity
Noninterest-bearing deposits				$	29,815											$	32,669												(8.7	)
Interest-bearing deposits
	Interest checking				20,844				33.3				.32				17,814				44.1				.50				17.0
	Money market accounts				34,320				124.2				.73				29,915				159.5				1.07				14.7
	Savings accounts				5,917				8.1				.27				5,444				11.3				.42				8.7
	Time certificates of deposit less than $100,000				13,319				174.1				2.63				16,500				248.2				3.03				(19.3	)
	Time deposits greater than $100,000				12,352				92.6				1.51				13,642				132.0				1.95				(9.5	)
		Total interest-bearing deposits			86,752				432.3				1.00				83,315				595.1				1.44				4.1
Short-term borrowings					14,365				108.8				1.52				9,096				78.4				1.74				57.9
Long-term debt					31,140				360.7				2.33				30,888				368.3				2.40				.8
Junior subordinated debentures					2,636				48.3				3.67				2,820				55.9				3.97				(6.5	)
		Total interest-bearing liabilities			134,893				950.1				1.42				126,119				1,097.7				1.75				7.0
Other liabilities (d)					6,024												7,465												(19.3	)
Shareholders’ equity					19,314												19,122												1.0
		Total liabilities and shareholders’ equity		$	190,046											$	185,375												2.5	%
Net interest income								$	3,558.4											$	3,575.3
Gross interest margin													4.01	%											4.21	%
Gross interest margin without taxable-equivalent increments													3.99												4.19
Percent of Earning Assets
Interest income													5.43	%											5.96	%
Interest expense													1.15												1.40
Net interest margin													4.28	%											4.56	%
Net interest margin without taxable-equivalent increments													4.26	%											4.54	%

*		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 $1,530 million of earning assets from discontinued operations in 2003.
(d)		Includes approximately $1,094 million of interest-bearing liabilities from discontinued operations in 2003.

U.S. Bancorp	53

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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 in Part I for information regarding shares repurchased by the Company during the second quarter of 2004.

Item 4. Submission of Matters to a Vote of Security Holders —The information contained in Part II, Item 4 of the Company’s Form 10-Q for the quarterly period ended March 31, 2004 is incorporated herein by reference.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

10.1		Amendment of Employment Agreement with Jerry A. Grundhofer.
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 April 20, 2004, relating to first quarter 2004 earnings.
	•	Form 8-K dated July 20, 2004, relating to second quarter 2004 earnings.

54	U.S. Bancorp

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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)

U.S. Bancorp	55

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EXHIBIT 12

Computation of Ratio of Earnings to Fixed Charges

						Three Months Ended				Six Months Ended
(Dollars in Millions)						June 30, 2004				June 30, 2004
Earnings
1.		Net income				$	1,036.9			$	2,045.3
2.		Applicable income taxes					540.1				931.9
3.		Income before income taxes (1 + 2)				$	1,577.0			$	2,977.2
4.		Fixed charges:
		a.		Interest expense excluding interest on deposits		$	258.5			$	517.8
		b.		Portion of rents representative of interest and amortization of debt expense			17.2				34.3
		c.		Fixed charges excluding interest on deposits (4a + 4b)			275.7				552.1
		d.		Interest on deposits			205.3				432.3
		e.		Fixed charges including interest on deposits (4c + 4d)		$	481.0			$	984.4
5.		Amortization of interest capitalized				$	—			$	—
6.		Earnings excluding interest on deposits (3 + 4c + 5)					1,852.7				3,529.3
7.		Earnings including interest on deposits (3 + 4e + 5)					2,058.0				3,961.6
8.		Fixed charges excluding interest on deposits (4c)					275.7				552.1
9.		Fixed charges including interest on deposits (4e)					481.0				984.4
Ratio of Earnings to Fixed Charges
10.		Excluding interest on deposits (line 6/ line 8)					6.72				6.39
11.		Including interest on deposits (line 7/ line 9)					4.28				4.02

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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: August 9, 2004

U.S. Bancorp	57

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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: August 9, 2004

58	U.S. Bancorp

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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 June 30, 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		/s/ DAVID M. MOFFETT
Jerry A. Grundhofer		David M. Moffett
Chief Executive Officer		Chief Financial Officer

Dated: August 9, 2004

U.S. Bancorp	59

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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.