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 September 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 October 31, 2004 1,867,157,587 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
Form of Executive Officer Stock Option Agreement
Form of Executive Officer Stock Option Agreement with Annual Vesting
Form of Executive Officer Restricted Stock Award Agreement
Form of Director Stock Option Agreement
Form of Director Restricted Stock Unit Agreement
Form of Executive Officer Restricted Stock Unit Agreement
Restricted Stock Unit Award Agreement
Amendment No.2 of Employment Agreement

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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		32
				e)		Critical Accounting Policies		32
				f)		Controls and Procedures (Item 4)		34
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		17
				d)		Operational Risk Management		17
				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)		Unregistered Sales of Equity Securities and Use of Proceeds (Item 2)						54
2)		Exhibits (Item 6)						54
3)		Signature						55
4)		Exhibits						56

Forward-Looking Statements

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Table 1		Selected Financial Data

			Three Months Ended												Nine Months Ended
			September 30,												September 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)			$	1,781.7			$	1,825.5				(2.4	)%		$	5,340.1			$	5,400.8				(1.1	)%
Noninterest income				1,436.7				1,286.3				11.7				4,168.4				3,771.5				10.5
Securities gains (losses), net				87.3				(108.9	)			*				(84.4	)			244.9				*
	Total net revenue			3,305.7				3,002.9				10.1				9,424.1				9,417.2				.1
Noninterest expense				1,519.0				1,253.3				21.2				4,206.5				4,254.5				(1.1	)
Provision for credit losses				165.1				310.0				(46.7	)			604.6				968.0				(37.5	)
	Income from continuing operations before taxes			1,621.6				1,439.6				12.6				4,613.0				4,194.7				10.0
Taxable-equivalent adjustment				7.1				7.0				1.4				21.3				21.0				1.4
Applicable income taxes				549.0				491.9				11.6				1,480.9				1,433.9				3.3
	Income from continuing operations			1,065.5				940.7				13.3				3,110.8				2,739.8				13.5
Discontinued operations (after-tax)				—				10.2				*				—				15.8				*
	Net income		$	1,065.5			$	950.9				12.1			$	3,110.8			$	2,755.6				12.9
Per Common Share
Earnings per share from continuing operations			$	.57			$	.49				16.3	%		$	1.64			$	1.43				14.7	%
Diluted earnings per share from continuing operations				.56				.48				16.7				1.62				1.42				14.1
Earnings per share				.57				.49				16.3				1.64				1.43				14.7
Diluted earnings per share				.56				.49				14.3				1.62				1.43				13.3
Dividends declared per share				.240				.205				17.1				.720				.615				17.1
Book value per share				10.48				10.26				2.1
Market value per share				28.90				23.99				20.5
Average common shares outstanding				1,877.0				1,926.0				(2.5	)			1,894.6				1,922.4				(1.4	)
Average common diluted shares outstanding				1,903.7				1,939.8				(1.9	)			1,919.4				1,932.4				(.7	)
Financial Ratios
Return on average assets				2.21	%			1.98	%							2.18	%			1.97	%
Return on average equity				21.9				19.5								21.5				19.2
Net interest margin (taxable-equivalent basis)				4.22				4.43								4.26				4.51
Efficiency ratio (b)				47.2				40.3								44.2				46.4
Average Balances
Loans			$	122,906			$	119,982				2.4	%		$	120,966			$	118,045				2.5	%
Loans held for sale				1,405				4,460				(68.5	)			1,611				4,078				(60.5	)
Investment securities				42,502				37,777				12.5				43,243				36,059				19.9
Earning assets				168,187				163,865				2.6				167,182				159,832				4.6
Assets				191,585				190,241				.7				190,563				187,015				1.9
Noninterest-bearing deposits				29,791				31,907				(6.6	)			29,807				32,412				(8.0	)
Deposits				115,316				117,956				(2.2	)			116,147				116,649				(.4	)
Short-term borrowings				15,382				11,850				29.8				14,706				10,024				46.7
Long-term debt and junior subordinated debentures				35,199				33,794				4.2				34,254				33,737				1.5
Total shareholders’ equity				19,387				19,360				.1				19,338				19,202				.7
			September 30, 2004				December 31, 2003
Period End Balances
Loans			$	124,826			$	118,235				5.6	%
Allowance for loan losses				2,184				2,184				—
Investment securities				39,654				43,334				(8.5	)
Assets				192,844				189,471				1.8
Deposits				115,567				119,052				(2.9	)
Long-term debt and junior subordinated debentures				38,004				33,816				12.4
Total shareholders’ equity				19,600				19,242				1.9
Regulatory capital ratios
	Tangible common equity			6.4	%			6.5	%
	Tier 1 capital			8.7				9.1
	Total risk-based capital			12.7				13.6
	Leverage			7.9				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 $1,065.5 million for the third quarter of 2004, or $.56 per diluted share, compared with $950.9 million, or $.49 per diluted share, for the third quarter of 2003. Return on average assets and return on average equity were 2.21 percent and 21.9 percent, respectively, for the third quarter of 2004, compared with returns of 1.98 percent and 19.5 percent, respectively, for the third quarter of 2003. The Company’s results for the third quarter of 2004 improved over the third quarter of 2003, primarily due to lower credit costs and growth in fee-based products and services. Included in the third quarter of 2004 were net gains on the sale of securities of $87.3 million, a net increase of $196.2 million over net securities losses realized in the third quarter of 2003. The third quarter of 2004 also included the recognition of $86.7 million of mortgage servicing rights (“MSR”) impairment, a $195.2 million unfavorable variance over the third quarter of 2003. Operating expenses for the third quarter of 2004 also reflected a reduction in pre-tax merger and restructuring-related items of $10.2 million ($6.7 million on an after-tax basis), compared with the third quarter of 2003. The $10.2 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 IncomeIn the third quarter of 2004 net interest income, on a taxable-equivalent basis, was $1,781.7 million, compared with $1,825.5 million in the third quarter of 2003, which represented a $43.8 million (2.4 percent) decrease from 2003. Net interest income for the first nine months of 2004, on a taxable equivalent basis, was $5,340.1 million, compared with $5,400.8 million for the first nine months of 2003, which represented a $60.7 million (1.1 percent) decrease from a year ago. The decline in net interest income for the third quarter and first nine months reflected modest growth in average earning assets, more than offset by lower net interest margins. Average earning assets in the third quarter and first nine months of 2004 increased $4.3 billion (2.6 percent) and $7.4 billion (4.6 percent), respectively, over the comparable periods of 2003. The increase in average earning assets for the third quarter and first nine months of 2004, compared with the same periods of 2003, was primarily driven by increases in investment securities, retail loans and residential mortgages, partially offset by a decline in commercial loans and loans held for sale related to mortgage banking activities. The net interest margin for the third quarter and first nine months of 2004 was 4.22 percent and 4.26 percent, respectively, compared with 4.43 percent and 4.51 percent for the comparable periods of 2003. The year-over-year decline in the net interest margin primarily reflected tighter credit spreads, a modest increase in the percent of total earning assets funded by wholesale sources of funding and higher rates paid on wholesale funding due to the impact of rising rates. The shift toward wholesale funding reflects, in part, asset/liability decisions to issue longer-term fixed-rate borrowings. In addition, the net interest margin declined for the first nine months of 2004 as a result of consolidating high credit quality, low margin loans from

Table 2		Analysis of Net Interest Income

			Three Months Ended												Nine Months Ended
			September 30,												September 30,
(Dollars in Millions)			2004				2003				Change				2004				2003				Change
Components of net interest income
	Income on earning assets (taxable-equivalent basis) (a)		$	2,309.9			$	2,318.3			$	(8.4	)		$	6,818.4			$	6,991.3			$	(172.9	)
	Expense on interest-bearing liabilities			528.2				492.8				35.4				1,478.3				1,590.5				(112.2	)
Net interest income (taxable-equivalent basis)			$	1,781.7			$	1,825.5			$	(43.8	)		$	5,340.1			$	5,400.8			$	(60.7	)
Net interest income, as reported			$	1,774.6			$	1,818.5			$	(43.9	)		$	5,318.8			$	5,379.8			$	(61.0	)
Average yields and rates paid
	Earning assets yield (taxable-equivalent basis)			5.47	%			5.63	%			(.16	)%			5.44	%			5.84	%			(.40	)%
	Rate paid on interest-bearing liabilities			1.55				1.49				.06				1.46				1.66				(.20	)
Gross interest margin (taxable-equivalent basis)				3.92	%			4.14	%			(.22	)%			3.98	%			4.18	%			(.20	)%
Net interest margin (taxable-equivalent basis)				4.22	%			4.43	%			(.21	)%			4.26	%			4.51	%			(.25	)%
Average balances
	Investment securities		$	42,502			$	37,777			$	4,725			$	43,243			$	36,059			$	7,184
	Loans			122,906				119,982				2,924				120,966				118,045				2,921
	Earning assets			168,187				163,865				4,322				167,182				159,832				7,350
	Interest-bearing liabilities			136,106				131,693				4,413				135,300				127,998				7,302
	Net free funds (b)			32,081				32,172				(91	)			31,882				31,834				48

(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 $165.1 million and $310.0 million for the third quarter of 2004 and 2003, respectively, a year-over-year decrease of $144.9 million (46.7 percent). For the first nine months of 2004 and 2003, the provision for credit losses was $604.6 million and $968.0 million, respectively, a decrease of $363.4 million (37.5 percent). The decline from a year ago was primarily the result of lower nonperforming assets and lower retail and commercial loan losses, which were the result of an improving credit risk profile due to more favorable economic conditions, collection efforts and higher commercial loan recoveries. Refer to the “Corporate Risk Profile” section for further information on the provision for credit losses, net charge-offs, nonperforming assets and other factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.

Noninterest IncomeNoninterest income during the third quarter of 2004 was $1,524.0 million, an increase of $346.6 million (29.4 percent) from the third quarter of 2003. Noninterest income during the first nine months of 2004 was $4,084.0 million, compared with $4,016.4 million for the first nine months of 2003, which represented an increase of $67.6 million

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Table 3		Noninterest Income

			Three Months Ended												Nine Months Ended
			September 30,												September 30,
											Percent												Percent
(Dollars in Millions)			2004				2003				Change				2004				2003				Change
Credit and debit card revenue			$	164.3			$	137.6				19.4	%		$	464.9			$	407.3				14.1	%
Corporate payment products revenue				108.5				95.7				13.4				306.0				272.6				12.3
ATM processing services				45.2				41.3				9.4				132.3				125.6				5.3
Merchant processing services				187.5				146.3				28.2				493.7				415.4				18.8
Trust and investment management fees				240.2				239.8				.2				740.5				707.3				4.7
Deposit service charges				207.4				187.0				10.9				594.7				529.2				12.4
Treasury management fees				117.9				126.2				(6.6	)			356.9				350.0				2.0
Commercial products revenue				106.7				97.8				9.1				324.5				302.0				7.5
Mortgage banking revenue				97.2				89.5				8.6				301.3				275.2				9.5
Investment products fees and commissions				37.1				35.5				4.5				118.6				108.7				9.1
Securities gains (losses), net				87.3				(108.9	)			*				(84.4	)			244.9				*
Other				124.7				89.6				39.2				335.0				278.2				20.4
	Total noninterest income		$	1,524.0			$	1,177.4				29.4	%		$	4,084.0			$	4,016.4				1.7	%

*		Not meaningful

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Noninterest ExpenseThird quarter of 2004 noninterest expense was $1,519.0 million, an increase of $265.7 million (21.2 percent) from the third quarter of 2003. For the first nine months of 2004, noninterest expense was $4,206.5 million, a reduction of $48.0 million (1.1 percent) from the first nine months of 2003. The year-over-year increase during the third quarter was primarily due to the unfavorable change in MSR valuations of $195.2 million, while the year-over-year decrease during the first nine months was primarily due to the favorable change in MSR valuations of $183.8 million. 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 third quarter and first nine months of 2004 of $10.2 million and $38.6 million, respectively, was primarily due to the completion of integration activities associated with NOVA and other smaller acquisitions in 2003. Included in these variances in the third quarter and first nine months of 2004, were increases in compensation, employee benefits, marketing and business development, technology and communications and operating expenses related to the expansion of the Company’s merchant acquiring business in Europe, including certain business integration costs. During the third quarter of 2004, expenses related to the expansion of the Company’s merchant acquiring business in Europe accounted for approximately $29 million of the year-over-year increase, including $6 million of business integration costs. Compensation expense increased during the third quarter and first nine months of 2004, compared with the same periods of 2003, due to an increase in salaries, primarily due to in-store branch expansion, and performance-based incentives. Employee benefits increased primarily as a result of higher pension expense and higher payroll taxes. Pension and retirement expense increased by $14.7 million and $22.0 million, during the third quarter and first nine months of 2004, respectively, compared with the same periods of 2003. Marketing and business development expense increased by $12.0 million (24.7 percent) in the third quarter of 2004 and $15.1 million (11.7 percent) in the first nine months of 2004, compared with the same periods of 2003, reflecting the increase and timing of marketing campaigns. Technology and communications expense was higher year-over-year by $7.7 million (7.5 percent) and $2.8 million (.9 percent), during the third quarter and first nine months of 2004, respectively, primarily due to outsourcing certain institutional trust participant record-keeping functions and capital expenditures for imaging and other electronic payment initiatives. Other expense increased $16.8 million (8.4 percent) and $71.3 million (12.6 percent) in the third quarter and first nine months of 2004, respectively, compared with the same periods of 2003. The year-over-year increase during the first nine months of 2004

Table 4		Noninterest Expense

			Three Months Ended												Nine Months Ended
			September 30,												September 30,
											Percent												Percent
(Dollars in Millions)			2004				2003				Change				2004				2003				Change
Compensation			$	564.6			$	543.8				3.8	%		$	1,673.0			$	1,637.4				2.2	%
Employee benefits				100.0				75.8				31.9				291.4				247.1				17.9
Net occupancy and equipment				159.2				161.3				(1.3	)			468.3				482.1				(2.9	)
Professional services				37.2				39.9				(6.8	)			104.3				99.2				5.1
Marketing and business development				60.6				48.6				24.7				144.6				129.5				11.7
Technology and communications				109.8				102.1				7.5				313.9				311.1				.9
Postage, printing and supplies				61.4				61.6				(.3	)			183.5				183.8				(.2	)
Other intangibles				210.2				10.8				*				388.7				558.2				(30.4	)
Merger and restructuring-related charges				—				10.2				*				—				38.6				*
Other				216.0				199.2				8.4				638.8				567.5				12.6
	Total noninterest expense		$	1,519.0			$	1,253.3				21.2	%		$	4,206.5			$	4,254.5				(1.1	)%
Efficiency ratio (a)				47.2	%			40.3	%							44.2	%			46.4	%

*		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 $549.0 million (an effective rate of 34.0 percent) for the third quarter of 2004 and $1,480.9 million (an effective rate of 32.3 percent) for the first nine months of 2004, compared with $491.9 million (an effective rate of 34.3 percent) and $1,433.9 million (an effective rate of 34.4 percent) for the same periods of 2003. The improvement in the effective tax rate in the first nine 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 $124.8 billion at September 30, 2004, compared with $118.2 billion at December 31, 2003, an increase of $6.6 billion (5.6 percent). The increase in total loans was driven by growth in retail loans, commercial loans and residential mortgages. Commercial loans, including lease financing, totaled $40.2 billion at September 30, 2004, compared with $38.5 billion at December 31, 2003, an increase of $1.6 billion (4.2 percent). The increase in commercial loans was driven by new customer relationships, increased utilization under lines of credit 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 $27.4 billion at September 30, 2004, compared with $27.2 billion at December 31, 2003.

Loans Held for SaleLoans held for sale, consisting primarily of residential mortgages to be sold in the secondary markets, were $1,372 million at September 30, 2004, compared with $1,433 million at December 31, 2003. The decrease of $61 million (4.3 percent) was primarily due to the timing of loan originations and sales during the first nine 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 September 30, 2004, investment securities, both available-for-sale and held-to-maturity, totaled $39.7 billion, compared with $43.3 billion at December 31, 2003. The $3.7 billion (8.5 percent) decrease primarily reflected the sale of $6.4 billion of fixed-rate securities, along with maturities and prepayments, partially offset by purchases of primarily floating-rate securities. At September 30, 2004, approximately 35.9 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 accounts and asset-backed securities.

Deposits Total deposits were $115.6 billion at September 30, 2004, compared with $119.1 billion at December 31, 2003, a decrease of $3.5 billion (2.9 percent). The decrease in total deposits was primarily the result of decreases in noninterest-bearing deposits, interest checking, money market accounts and time certificates of deposit less than $100,000, partially offset by increases in time deposits greater than $100,000.

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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,

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
September 30, 2004 (Dollars in Millions)				Cost				Value				Years				Yield				Cost				Value				Years				Yield
U.S. Treasury and agencies
	Maturing in one year or less			$	64			$	64				.55				3.35	%		$	—			$	—				—				—	%
	Maturing after one year through five years				160				165				2.13				4.52				—				—				—				—
	Maturing after five years through ten years				229				223				8.52				4.01				—				—				—				—
	Maturing after ten years				1,150				1,114				18.76				3.07				—				—				—				—
		Total		$	1,603			$	1,566				14.91				3.36	%		$	—			$	—				—				—	%
Mortgage-backed securities
	Maturing in one year or less			$	1,842			$	1,851				.60				3.46	%		$	—			$	—				—				—	%
	Maturing after one year through five years				20,711				20,713				3.66				4.27				12				12				3.07				5.30
	Maturing after five years through ten years				13,509				13,429				6.34				4.57				—				—				—				—
	Maturing after ten years				694				703				15.04				2.78				—				—				—				—
		Total		$	36,756			$	36,696				4.71				4.31	%		$	12			$	12				3.07				5.30	%
Asset-backed securities
	Maturing in one year or less			$	47			$	48				.83				5.61	%		$	—			$	—				—				—	%
	Maturing after one year through five years				37				37				2.25				5.36				—				—				—				—
	Maturing after five years through ten years				—				—				—				—				—				—				—				—
	Maturing after ten years				—				—				—				—				—				—				—				—
		Total		$	84			$	85				1.46				5.50	%		$	—			$	—				—				—	%
Obligations of state and political subdivisions
	Maturing in one year or less			$	118			$	120				.34				7.49	%		$	10			$	10				.32				5.85	%
	Maturing after one year through five years				120				126				2.45				7.26				37				39				2.72				6.49
	Maturing after five years through ten years				10				10				6.00				8.04				22				24				7.06				6.43
	Maturing after ten years				—				—				—				—				39				41				14.00				6.55
		Total		$	248			$	256				1.58				7.40	%		$	108			$	114				7.42				6.44	%
Other debt securities:
	Maturing in one year or less			$	3			$	4				.58				8.87	%		$	—			$	—				—				—	%
	Maturing after one year through five years				111				111				2.33				10.05				—				—				—				—
	Maturing after five years through ten years				5				5				5.63				2.73				—				—				—				—
	Maturing after ten years				499				492				22.60				2.46				—				—				—				—
		Total		$	618			$	612				18.70				3.86	%		$	—			$	—				—				—	%
Other investments				$	317			$	319				—				—	%		$	—			$	—				—				—	%
Total investment securities				$	39,626			$	39,534				5.32				4.29	%		$	120			$	126				7.00				6.33	%

Note:

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

The weighted-average maturity of the available-for-sale investment securities was 5.32 years at September 30, 2004, compared with 5.12 years at December 31, 2003. The corresponding weighted-average yields were 4.29% and 4.27%, respectively. The weighted-average maturity of the held-to-maturity investment securities was 7.00 years at September 30, 2004, compared with 6.16 years at December 31, 2003. The corresponding weighted-averaged yields were 6.33% and 6.05%, respectively.

			September 30, 2004								December 31, 2003
			Amortized				Percent				Amortized				Percent
(Dollars in Millions)			Cost				of Total				Cost				of Total
U.S. Treasury and agencies			$	1,603				4.0	%		$	1,634				3.7	%
Mortgage-backed securities				36,768				92.5				40,243				92.3
Asset-backed securities				84				.2				250				.6
Obligations of state and political subdivisions				356				.9				473				1.1
Other securities and investments				935				2.4				993				2.3
	Total investment securities		$	39,746				100.0	%		$	43,593				100.0	%

10	U.S. Bancorp

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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 credit risk management strategy also includes a credit risk assessment process completely independent of Company management that performs assessments of compliance with commercial and consumer credit policies, risk ratings, and other critical credit information. The Company strives to identify potential problem loans early, take any necessary charge-offs promptly and maintain adequate reserve levels for probable loan losses inherent in the portfolio. Commercial banking operations rely on a strong credit culture that combines prudent credit policies and individual lender accountability. Lenders are assigned lending grades based on their level of experience and customer service requirements. Lending grades represent the level of approval authority for the amount of credit exposure and level of risk. Credit officers reporting independently to Credit Administration have higher levels of lending grades and support the business units in their credit decision process. Loan decisions are documented as to the borrower’s business, purpose of the loan, evaluation of the repayment source and the associated risks, evaluation of collateral, covenants and monitoring requirements, and risk rating rationale. The Company utilizes a credit risk rating system to measure the credit quality of individual commercial loan transactions. The Company uses the risk rating system for regulatory reporting, determining the frequency of review of the credit exposures, and evaluation and determination of the adequacy of the allowance for credit losses. The Company regularly forecasts potential changes in risk ratings, nonperforming status and potential for loss and the estimated impact on the allowance for credit losses. In the Company’s retail banking operations, standard credit scoring systems are used to assess credit risks of consumer, small business and small-ticket leasing customers and to price these products accordingly. The Company conducts the underwriting and collections of its retail products in loan underwriting and servicing centers specializing in certain retail products. Forecasts of delinquency levels, bankruptcies and losses in conjunction with projection of estimated losses by delinquency categories and vintage information are regularly prepared

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Table 6		Nonperforming Assets (a)

					September 30,				December 31,
(Dollars in Millions)					2004				2003
Commercial
	Commercial				$	347.7			$	623.5
	Lease financing					91.3				113.3
		Total commercial				439.0				736.8
Commercial real estate
	Commercial mortgages					165.7				177.6
	Construction and development					35.3				39.9
		Total commercial real estate				201.0				217.5
Residential mortgages						45.3				40.5
Retail
	Retail leasing					.1				.4
	Other retail					17.1				24.8
		Total retail				17.2				25.2
			Total nonperforming loans			702.5				1,020.0
Other real estate						68.7				72.6
Other assets						33.4				55.5
			Total nonperforming assets		$	804.6			$	1,148.1
Restructured loans accruing interest (b)					$	3.7			$	18.0
Accruing loans 90 days or more past due					$	291.8			$	329.4
Nonperforming loans to total loans						.56	%			.86	%
Nonperforming assets to total loans plus other real estate						.64	%			.97	%

Changes in Nonperforming Assets

						Commercial and				Retail and
						Commercial				Residential
(Dollars in Millions)						Real Estate				Mortgages (d)				Total
Balance December 31, 2003						$	1,082.4			$	65.7			$	1,148.1
	Additions to nonperforming assets
		New nonaccrual loans and foreclosed properties					513.4				35.1				548.5
		Advances on loans					30.2				—				30.2
			Total additions				543.6				35.1				578.7
	Reductions in nonperforming assets
		Paydowns, payoffs					(404.3	)			(20.8	)			(425.1	)
		Net sales					(110.7	)			—				(110.7	)
		Return to performing status					(78.8	)			(13.5	)			(92.3	)
		Charge-offs (c)					(287.4	)			(6.7	)			(294.1	)
			Total reductions				(881.2	)			(41.0	)			(922.2	)
				Net reductions in nonperforming assets			(337.6	)			(5.9	)			(343.5	)
Balance September 30, 2004						$	744.8			$	59.8			$	804.6

(a)		Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due.
(b)		Nonaccrual restructured loans are included in the respective nonperforming loan categories and excluded from restructured loans accruing interest.
(c)		Charge-offs exclude actions for certain card products and loan sales that were not classified as nonperforming at the time the charge-off occurred.
(d)		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 September 30, 2004, total nonperforming assets were $804.6 million, compared with $1,148.1 million at December 31, 2003. The ratio of total nonperforming assets to total loans and other real estate decreased to .64 percent at September 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 are expected to continue to decline slightly during the next few quarters, the ongoing level of nonperforming assets is expected to stabilize in mid-2005.

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

					September 30,				December 31,
90 days or more past due excluding nonperforming loans					2004				2003
Commercial
	Commercial					.06	%			.06	%
	Lease financing					—				.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						.46				.61
Retail
	Credit card					1.76				1.68
	Retail leasing					.08				.14
	Other retail					.29				.41
		Total retail				.47				.56
			Total loans			.23	%			.28	%

			September 30,				December 31,
90 days or more past due including nonperforming loans			2004				2003
Commercial				1.14	%			1.97	%
Commercial real estate				.75				.82
Residential mortgages				.77				.91
Retail				.51				.62
	Total loans			.80	%			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
					September 30,				December 31,				September 30,				December 31,
(Dollars in Millions)					2004				2003				2004				2003
Residential Mortgages
		30-89 days			$	100.6			$	102.9				.68	%			.76	%
		90 days or more				68.2				82.5				.46				.61
		Nonperforming				45.3				40.5				.31				.30
			Total		$	214.1			$	225.9				1.45	%			1.68	%
Retail
	Credit Card
		30-89 days			$	134.9			$	150.9				2.17	%			2.54	%
		90 days or more				109.4				99.5				1.76				1.68
		Nonperforming				—				—				—				—
			Total		$	244.3			$	250.4				3.93	%			4.22	%
	Retail Leasing
		30-89 days			$	66.0			$	78.8				.95	%			1.31	%
		90 days or more				5.9				8.2				.08				.14
		Nonperforming				.1				.4				—				.01
			Total		$	72.0			$	87.4				1.03	%			1.45	%
	Other Retail
		30-89 days			$	251.7			$	311.9				.86	%			1.15	%
		90 days or more				84.6				110.2				.29				.41
		Nonperforming				17.1				24.8				.06				.09
			Total		$	353.4			$	446.9				1.21	%			1.65	%

Analysis of Net Loan Charge-offs Total loan net charge-offs were $165.1 million and $603.5 million during the third quarter and first nine months of 2004, respectively, compared with net charge-offs of $309.9 million and $966.6 million, respectively, for the same periods of 2003. The ratio of total loan net charge-offs to average loans in the third quarter and first nine months of 2004 was .53 percent and .67 percent, respectively, compared with 1.02 percent and 1.09 percent, respectively, for the same periods of 2003. The overall level of net charge-offs in the third quarter and first nine months of 2004 reflected the Company’s ongoing efforts to reduce the overall risk profile of the organization, improved economic conditions, higher commercial loan recoveries in the third quarter of 2004, refinancings by customers and higher asset valuations. Net charge-offs are expected to increase modestly as commercial loan recoveries return to more normal levels in future periods.

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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 September 30,																Nine Months Ended September 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		$	4,708			$	3,669				.46	%			.40	%		$	4,432			$	3,312				.45	%			.46	%
	Home equity and second mortgages			2,527				2,259				1.93				2.50				2,322				2,408				2.20				2.40
	Other retail			426				379				4.42				4.52				414				349				4.70				4.48
Traditional Branch
	Residential mortgages		$	9,861			$	8,565				.05	%			.17	%		$	9,647			$	7,819				.09	%			.14	%
	Home equity and second mortgages			11,761				10,834				.22				.33				11,493				10,883				.23				.36
	Other retail			14,125				13,487				.99				1.47				13,946				13,189				1.16				1.54
Total Company
	Residential mortgages		$	14,569			$	12,234				.18	%			.24	%		$	14,079			$	11,131				.20	%			.24	%
	Home equity and second mortgages			14,288				13,093				.52				.70				13,815				13,291				.56				.73
	Other retail			14,551				13,866				1.09				1.55				14,360				13,538				1.26				1.61

(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.

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

					Three Months Ended								Nine Months Ended
					September 30,								September 30,
					2004				2003				2004				2003
Commercial
	Commercial					.03	%			1.33	%			.36	%			1.40	%
	Lease financing					1.49				1.52				1.60				1.80
		Total commercial				.21				1.35				.51				1.45
Commercial real estate
	Commercial mortgages					.05				.12				.06				.12
	Construction and development					.14				.25				.16				.16
		Total commercial real estate				.08				.15				.08				.13
Residential mortgages						.18				.24				.20				.24
Retail
	Credit card					4.16				4.20				4.24				4.71
	Retail leasing					.56				.83				.62				.90
	Home equity and second mortgages					.52				.70				.56				.73
	Other retail					1.09				1.55				1.26				1.61
		Total retail				1.26				1.54				1.36				1.64
			Total loans			.53	%			1.02	%			.67	%			1.09	%

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Table 9		Summary of Allowance for Credit Losses

						Three Months Ended								Nine Months Ended
						September 30,								September 30,
(Dollars in Millions)						2004				2003				2004				2003
Balance at beginning of period						$	2,369.7			$	2,367.6			$	2,368.6			$	2,422.0
Charge-offs
	Commercial
		Commercial					55.9				146.6				204.2				429.8
		Lease financing					29.1				31.6				89.6				111.4
			Total commercial				85.0				178.2				293.8				541.2
	Commercial real estate
		Commercial mortgages					5.0				9.6				18.9				27.8
		Construction and development					3.6				4.7				9.9				9.8
			Total commercial real estate				8.6				14.3				28.8				37.6
	Residential mortgages						7.9				8.3				24.5				22.4
	Retail
		Credit card					71.5				67.7				212.7				213.9
		Retail leasing					12.3				14.0				37.0				43.7
		Home equity and second mortgages					22.1				26.4				68.0				81.0
		Other retail					52.1				64.7				173.8				202.0
			Total retail				158.0				172.8				491.5				540.6
				Total charge-offs			259.5				373.6				838.6				1,141.8
Recoveries
	Commercial
		Commercial					53.2				22.7				112.2				45.1
		Lease financing					10.9				12.4				31.2				42.3
			Total commercial				64.1				35.1				143.4				87.4
	Commercial real estate
		Commercial mortgages					2.3				3.7				9.8				9.7
		Construction and development					1.1				.1				2.0				1.7
			Total commercial real estate				3.4				3.8				11.8				11.4
	Residential mortgages						1.2				1.0				3.2				2.7
	Retail
		Credit card					7.2				8.4				22.3				21.4
		Retail leasing					2.7				1.8				6.6				5.0
		Home equity and second mortgages					3.4				3.2				9.6				8.5
		Other retail					12.4				10.4				38.2				38.8
			Total retail				25.7				23.8				76.7				73.7
				Total recoveries			94.4				63.7				235.1				175.2
Net Charge-offs
	Commercial
		Commercial					2.7				123.9				92.0				384.7
		Lease financing					18.2				19.2				58.4				69.1
			Total commercial				20.9				143.1				150.4				453.8
	Commercial real estate
		Commercial mortgages					2.7				5.9				9.1				18.1
		Construction and development					2.5				4.6				7.9				8.1
			Total commercial real estate				5.2				10.5				17.0				26.2
	Residential mortgages						6.7				7.3				21.3				19.7
	Retail
		Credit card					64.3				59.3				190.4				192.5
		Retail leasing					9.6				12.2				30.4				38.7
		Home equity and second mortgages					18.7				23.2				58.4				72.5
		Other retail					39.7				54.3				135.6				163.2
			Total retail				132.3				149.0				414.8				466.9
				Total net charge-offs			165.1				309.9				603.5				966.6
Provision for credit losses							165.1				310.0				604.6				968.0
Acquisitions and other changes							—				—				—				(55.7	)
Balance at end of period						$	2,369.7			$	2,367.7			$	2,369.7			$	2,367.7
Components
	Allowance for loan losses					$	2,184.0			$	2,184.0
	Liability for unfunded credit commitments (a)						185.7				183.7
		Total allowance for credit losses				$	2,369.7			$	2,367.7
Allowance for credit losses as a percentage of
	Period-end loans						1.90	%			1.98	%
	Nonperforming loans						337				202
	Nonperforming assets						295				180
	Annualized net charge-offs						361				193

(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. Amounts for periods presented in 2003 represent estimates.

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

Residual Risk ManagementThe Company manages its risk to changes in the 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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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:

		September 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			(.80)	%			.31	%			*	%			(.04)	%			1.30	%			.19%				*	%			(.02	)%
Rate sensitive income			(.69)	%			.13	%			*	%			(.56)	%			.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 September 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 1.9 percent decrease in the market value of equity at September 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 1.4 percent decrease at September 30, 2004, and a 1.3 percent increase at December 31, 2003. At September 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

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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

Table 10		Derivative Positions

													Weighted-
													Average
													Remaining
					Notional				Fair				Maturity
September 30, 2004 (Dollars in Millions)					Amount				Value				In Years
Asset and Liability Management Positions
	Interest rate contracts
		Receive fixed/pay floating swaps			$	19,520			$	536				5.33
		Pay fixed/receive floating swaps				8,275				10				1.33
		Futures and forwards				2,660				(14	)			.12
		Options
			Written			1,514				(1	)			.15
	Foreign exchange forward contracts					272				1				.08
	Equity contracts					48				1				4.55
Customer-related Positions
	Interest rate contracts
		Receive fixed/pay floating swaps			$	6,364			$	126				4.50
		Pay fixed/receive floating swaps				6,364				(93	)			4.50
		Options
			Purchased			882				9				3.33
			Written			882				(8	)			3.33
	Risk participation agreements (a)
		Purchased				138				—				7.36
		Written				72				—				2.86
	Foreign exchange rate contracts
		Forwards, spots and swaps
			Buy			2,151				59				.42
			Sell			2,110				(57	)			.43
		Options
			Purchased			3				—				.11
			Written			3				—				.11

(a)		At September 30, 2004, the credit equivalent amount was $1 million and $5 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 94 percent of earnings and 110 percent of earnings during the third quarter and first nine months of 2004, respectively. Total shareholders’ equity was $19.6 billion at September 30, 2004, compared with $19.2 billion at December 31, 2003. The increase was the result of corporate earnings offset by dividends and share repurchases.

Table 11		Capital Ratios

			September 30,				December 31,
(Dollars in Millions)			2004				2003
Tangible common equity			$	11,819			$	11,858
	As a percent of tangible assets			6.4	%			6.5	%
Tier 1 capital			$	14,589			$	14,623
	As a percent of risk-weighted assets			8.7	%			9.1	%
	As a percent of adjusted quarterly average assets (leverage ratio)			7.9	%			8.0	%
Total risk-based capital			$	21,428			$	21,710
	As a percent of risk-weighted assets			12.7	%			13.6	%

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		Number				Average				Remaining Shares
		of Shares				Price Paid				Available to be
Time Period		Purchased (a)				per Share				Purchased
July			6,335,701			$	28.14				81,055,584
August			7,321,514				28.72				73,734,070
September			5,802,388				29.13				67,931,682
Total			19,459,603			$	28.65				67,931,682

(a)		All shares purchased during the third 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. Certain expenses, including charges for potential litigation and liabilities for certain guarantees, are included in the line of business results upon final resolution. 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

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Wholesale Bankingoffers lending, depository, treasury management and other financial services to middle market, large corporate and public sector clients. Wholesale Banking contributed $278.0 million of the Company’s operating earnings for the third quarter of 2004 and $795.1 million for the first nine months of 2004, increases of $64.8 million (30.4 percent) and $157.8 million (24.8 percent), respectively, compared with the same periods of 2003. The increase in operating earnings in the third quarter of 2004 and the first nine months of 2004, compared with the same periods of 2003, was driven by reductions in the provision for credit losses and total noninterest expense, partially offset by a decline in total net revenue.

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Table 12		Line of Business Financial Performance

			Wholesale												Consumer
			Banking												Banking
											Percent												Percent
Three Months Ended September 30 (Dollars in Millions)			2004				2003				Change				2004				2003				Change
Condensed Income Statement
Net interest income (taxable-equivalent basis)			$	399.4			$	417.6				(4.4	)%		$	919.8			$	922.6				(.3	)%
Noninterest income				182.5				191.3				(4.6	)			462.7				392.1				18.0
Securities gains (losses), net				.6				—				*				86.9				(108.7	)			*
	Total net revenue			582.5				608.9				(4.3	)			1,469.4				1,206.0				21.8
Noninterest expense				153.6				164.6				(6.7	)			588.9				594.1				(.9	)
Other intangibles				4.5				4.8				(6.3	)			148.7				(52.0	)			*
	Total noninterest expense			158.1				169.4				(6.7	)			737.6				542.1				36.1
Operating earnings before provision and income taxes				424.4				439.5				(3.4	)			731.8				663.9				10.2
Provision for credit losses				(12.7	)			104.4				*				88.1				105.5				(16.5	)
Operating earnings before income taxes				437.1				335.1				30.4				643.7				558.4				15.3
Income taxes and taxable-equivalent adjustment				159.1				121.9				30.5				234.2				203.2				15.3
Operating earnings			$	278.0			$	213.2				30.4			$	409.5			$	355.2				15.3
Merger and restructuring-related items (after-tax)
Discontinued operations (after-tax)
Net income
Average Balance Sheet Data
Commercial			$	26,616			$	28,771				(7.5	)%		$	7,813			$	8,227				(5.0	)%
Commercial real estate				15,789				16,574				(4.7	)			10,668				10,090				5.7
Residential mortgages				77				102				(24.5	)			14,139				11,855				19.3
Retail				55				45				22.2				31,844				29,149				9.2
	Total loans			42,537				45,492				(6.5	)			64,464				59,321				8.7
Goodwill				1,225				1,225				—				2,243				2,243				—
Other intangible assets				85				104				(18.3	)			1,143				853				34.0
Assets				48,815				52,577				(7.2	)			72,243				70,264				2.8
Noninterest-bearing deposits				12,574				14,510				(13.3	)			14,242				14,169				.5
Savings products				8,563				12,709				(32.6	)			41,663				40,873				1.9
Time deposits				8,364				4,131				*				15,840				17,784				(10.9	)
	Total deposits			29,501				31,350				(5.9	)			71,745				72,826				(1.5	)
Shareholders’ equity				5,004				5,009				(.1	)			6,155				5,922				3.9

			Wholesale												Consumer
			Banking												Banking
											Percent												Percent
Nine Months Ended September 30 (Dollars in Millions)			2004				2003				Change				2004				2003				Change
Condensed Income Statement
Net interest income (taxable-equivalent basis)			$	1,194.9			$	1,264.1				(5.5	)%		$	2,679.8			$	2,686.1				(.2	)%
Noninterest income				563.9				579.4				(2.7	)			1,341.4				1,163.7				15.3
Securities gains (losses), net				1.5				—				*				(84.2	)			193.4				*
	Total net revenue			1,760.3				1,843.5				(4.5	)			3,937.0				4,043.2				(2.6	)
Noninterest expense				466.4				496.2				(6.0	)			1,750.5				1,777.5				(1.5	)
Other intangibles				13.9				14.6				(4.8	)			211.0				372.0				(43.3	)
	Total noninterest expense			480.3				510.8				(6.0	)			1,961.5				2,149.5				(8.7	)
Operating earnings before provision and income taxes				1,280.0				1,332.7				(4.0	)			1,975.5				1,893.7				4.3
Provision for credit losses				29.9				330.8				(91.0	)			288.6				322.7				(10.6	)
Operating earnings before income taxes				1,250.1				1,001.9				24.8				1,686.9				1,571.0				7.4
Income taxes and taxable-equivalent adjustment				455.0				364.6				24.8				613.8				571.7				7.4
Operating earnings			$	795.1			$	637.3				24.8			$	1,073.1			$	999.3				7.4
Merger and restructuring-related items (after-tax)
Discontinued operations (after-tax)
Net income
Average Balance Sheet Data
Commercial			$	26,485			$	28,543				(7.2	)%		$	7,780			$	8,318				(6.5	)%
Commercial real estate				15,865				16,419				(3.4	)			10,524				9,887				6.4
Residential mortgages				72				125				(42.4	)			13,690				10,750				27.3
Retail				52				51				2.0				30,913				28,953				6.8
	Total loans			42,474				45,138				(5.9	)			62,907				57,908				8.6
Goodwill				1,225				1,227				(.2	)			2,242				2,242				—
Other intangible assets				89				109				(18.3	)			1,063				922				15.3
Assets				48,934				52,296				(6.4	)			70,739				68,235				3.7
Noninterest-bearing deposits				12,831				15,422				(16.8	)			13,980				13,715				1.9
Savings products				10,266				10,346				(.8	)			41,878				39,657				5.6
Time deposits				6,729				3,742				79.8				16,028				19,012				(15.7	)
	Total deposits			29,826				29,510				1.1				71,886				72,384				(.7	)
Shareholders’ equity				5,047				5,034				.3				6,180				5,805				6.5

*		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
$	94.8			$	79.8				18.8	%		$	138.1			$	149.1				(7.4	)%		$	229.6			$	256.4				(10.5	)%		$	1,781.7			$	1,825.5				(2.4	)%
	240.1				241.8				(.7	)			496.0				409.3				21.2				55.4				51.8				6.9				1,436.7				1,286.3				11.7
	—				—				—				—				—				—				(.2	)			(.2	)			—				87.3				(108.9	)			*
	334.9				321.6				4.1				634.1				558.4				13.6				284.8				308.0				(7.5	)			3,305.7				3,002.9				10.1
	143.5				145.8				(1.6	)			214.0				178.9				19.6				208.8				148.9				40.2				1,308.8				1,232.3				6.2
	16.0				16.5				(3.0	)			39.6				39.8				(.5	)			1.4				1.7				(17.6	)			210.2				10.8				*
	159.5				162.3				(1.7	)			253.6				218.7				16.0				210.2				150.6				39.6				1,519.0				1,243.1				22.2
	175.4				159.3				10.1				380.5				339.7				12.0				74.6				157.4				(52.6	)			1,786.7				1,759.8				1.5
	1.2				3.2				(62.5	)			89.6				98.3				(8.9	)			(1.1	)			(1.4	)			(21.4	)			165.1				310.0				(46.7	)
	174.2				156.1				11.6				290.9				241.4				20.5				75.7				158.8				(52.3	)			1,621.6				1,449.8				11.8
	63.4				56.8				11.6				105.9				87.8				20.6				(6.5	)			32.7				*				556.1				502.4				10.7
$	110.8			$	99.3				11.6			$	185.0			$	153.6				20.4			$	82.2			$	126.1				(34.8	)			1,065.5				947.4				12.5
																																					—				(6.7	)
																																					—				10.2
																																				$	1,065.5			$	950.9
$	1,592			$	1,857				(14.3	)%		$	3,085			$	2,909				6.1	%		$	211			$	216				(2.3	)%		$	39,317			$	41,980				(6.3	)%
	610				567				7.6				—				—				—				127				166				(23.5	)			27,194				27,397				(.7	)
	344				265				29.8				—				—				—				9				12				(25.0	)			14,569				12,234				19.1
	2,278				1,960				16.2				7,590				7,169				5.9				59				48				22.9				41,826				38,371				9.0
	4,824				4,649				3.8				10,675				10,078				5.9				406				442				(8.1	)			122,906				119,982				2.4
	845				741				14.0				1,915				1,813				5.6				—				306				*				6,228				6,328				(1.6	)
	362				389				(6.9	)			855				671				27.4				7				12				(41.7	)			2,452				2,029				20.8
	6,580				6,464				1.8				14,081				13,667				3.0				49,866				47,269				5.5				191,585				190,241				.7
	3,127				3,223				(3.0	)			115				178				(35.4	)			(267	)			(173	)			54.3				29,791				31,907				(6.6	)
	7,854				6,390				22.9				12				10				20.0				29				(8	)			*				58,121				59,974				(3.1	)
	568				471				20.6				—				—				—				2,632				3,689				(28.7	)			27,404				26,075				5.1
	11,549				10,084				14.5				127				188				(32.4	)			2,394				3,508				(31.8	)			115,316				117,956				(2.2	)
	2,296				1,995				15.1				3,320				3,007				10.4				2,612				3,427				(23.8	)			19,387				19,360				.1

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
$	265.8			$	231.2				15.0	%		$	428.3			$	453.9				(5.6	)%		$	771.3			$	765.5				.8	%		$	5,340.1			$	5,400.8				(1.1	)%
	743.2				710.0				4.7				1,370.8				1,186.6				15.5				149.1				131.8				13.1				4,168.4				3,771.5				10.5
	—				—				—				—				—				—				(1.7	)			51.5				*				(84.4	)			244.9				*
	1,009.0				941.2				7.2				1,799.1				1,640.5				9.7				918.7				948.8				(3.2	)			9,424.1				9,417.2				.1
	433.2				439.0				(1.3	)			584.1				531.7				9.9				583.6				413.3				41.2				3,817.8				3,657.7				4.4
	46.1				49.6				(7.1	)			113.5				117.4				(3.3	)			4.2				4.6				(8.7	)			388.7				558.2				(30.4	)
	479.3				488.6				(1.9	)			697.6				649.1				7.5				587.8				417.9				40.7				4,206.5				4,215.9				(.2	)
	529.7				452.6				17.0				1,101.5				991.4				11.1				330.9				530.9				(37.7	)			5,217.6				5,201.3				.3
	10.9				5.1				*				277.0				311.6				(11.1	)			(1.8	)			(2.2	)			(18.2	)			604.6				968.0				(37.5	)
	518.8				447.5				15.9				824.5				679.8				21.3				332.7				533.1				(37.6	)			4,613.0				4,233.3				9.0
	188.8				162.8				16.0				300.0				247.3				21.3				(55.4	)			121.7				*				1,502.2				1,468.1				2.3
$	330.0			$	284.7				15.9			$	524.5			$	432.5				21.3			$	388.1			$	411.4				(5.7	)			3,110.8				2,765.2				12.5
																																					—				(25.4	)
																																					—				15.8
																																				$	3,110.8			$	2,755.6
$	1,637			$	1,828				(10.4	)%		$	2,985			$	2,852				4.7	%		$	173			$	217				(20.3	)%		$	39,060			$	41,758				(6.5	)%
	606				577				5.0				—				—				—				145				209				(30.6	)			27,140				27,092				.2
	307				243				26.3				—				—				—				10				13				(23.1	)			14,079				11,131				26.5
	2,197				1,951				12.6				7,473				7,059				5.9				52				50				4.0				40,687				38,064				6.9
	4,747				4,599				3.2				10,458				9,911				5.5				380				489				(22.3	)			120,966				118,045				2.5
	809				740				9.3				1,852				1,814				2.1				—				306				*				6,128				6,329				(3.2	)
	354				407				(13.0	)			756				680				11.2				8				13				(38.5	)			2,270				2,131				6.5
	6,491				6,383				1.7				13,523				13,262				2.0				50,876				46,839				8.6				190,563				187,015				1.9
	3,124				2,997				4.2				113				330				(65.8	)			(241	)			(52	)			*				29,807				32,412				(8.0	)
	7,911				5,450				45.2				11				9				22.2				21				3				*				60,087				55,465				8.3
	536				462				16.0				—				—				—				2,960				5,556				(46.7	)			26,253				28,772				(8.8	)
	11,571				8,909				29.9				124				339				(63.4	)			2,740				5,507				(50.2	)			116,147				116,649				(.4	)
	2,220				1,980				12.1				3,152				2,994				5.3				2,739				3,389				(19.2	)			19,338				19,202				.7

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Consumer Bankingdelivers products and services to the broad consumer market and small businesses through banking offices, telemarketing, on-line services, direct mail and automated teller machines (“ATMs”). It encompasses community banking, metropolitan banking, 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 $409.5 million of the Company’s operating earnings for the third quarter of 2004 and $1,073.1 million for the first nine months of 2004, an increase of $54.3 million (15.3 percent) and $73.8 million (7.4 percent), respectively, compared with the same periods of 2003. Within Consumer Banking, the retail banking business grew operating earnings by 26.2 percent in the third quarter of 2004 and 21.4 percent in the first nine months of 2004, offset somewhat by lower contribution from the mortgage banking business, compared with the same periods of 2003.

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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 $110.8 million of the Company’s operating earnings for the third quarter of 2004 and $330.0 million for the first nine months of 2004, increases of 11.6 percent and 15.9 percent, respectively, compared with the same periods of 2003. The period-over-period increases for the third quarter of 2004 and first nine months of 2004 were attributable to growth in total net revenue (4.1 percent and 7.2 percent, respectively) and a reduction in noninterest expense (1.7 percent and 1.9 percent, respectively), partially offset by an increase in the provision for credit losses for the first nine months of 2004.

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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 $185.0 million of the Company’s operating earnings for the third quarter of 2004 and $524.5 million for the first nine months of 2004, a 20.4 percent and 21.3 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.

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Treasury and Corporate Supportincludes the Company’s investment portfolios, funding, capital management and asset securitization activities, interest rate risk management, the net effect of transfer pricing related to average balances and the residual aggregate of expenses associated with business activities managed on a corporate basis, including enterprise-wide operations and administrative support functions. 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 $82.2 million for the third quarter of 2004 and $388.1 million for the first nine months of 2004, a decrease of $43.9 million (34.8 percent) and $23.3 million (5.7 percent), respectively, compared with the same periods of 2003.

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ACCOUNTING CHANGES

    Note 2 of the Notes to Consolidated Financial Statements discusses new accounting policies adopted by the Company during 2004 and the expected impact of accounting policies recently issued but not yet required to be adopted. To the extent the adoption of new accounting standards affects the Company’s financial condition, results of operations or liquidity, the impacts are discussed in the applicable section(s) of Management’s Discussion and Analysis and the Notes to Consolidated Financial Statements.

CRITICAL ACCOUNTING POLICIES

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

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

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

Mortgage Servicing Rights 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 September 30, 2004, to immediate 25 and 50 basis point adverse changes in interest rates would be approximately $115 million and $239 million, respectively. An upward movement in interest rates at September 30, 2004, of 25 and 50 basis points would increase the value of the MSRs by approximately $99 million and $172 million, respectively. Refer to Note 6 of the Notes to Consolidated Financial Statements for additional information regarding MSRs.

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

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CONTROLS AND PROCEDURES

    Under the supervision and with the participation of the Company’s management, including its principal executive officer and principal financial officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon this evaluation, the principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

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Consolidated Balance Sheet" -->

					September 30,				December 31,
(Dollars in Millions)					2004				2003
					(Unaudited)
Assets
Cash and due from banks					$	6,969			$	8,630
Investment securities
	Held-to-maturity (fair value $126 and $161, respectively)					120				152
	Available-for-sale					39,534				43,182
Loans held for sale						1,372				1,433
Loans
	Commercial					40,151				38,526
	Commercial real estate					27,414				27,242
	Residential mortgages					14,741				13,457
	Retail					42,520				39,010
		Total loans				124,826				118,235
			Less allowance for loan losses			(2,184	)			(2,184	)
			Net loans			122,642				116,051
Premises and equipment						1,894				1,957
Customers’ liability on acceptances						146				121
Goodwill						6,226				6,025
Other intangible assets						2,419				2,124
Other assets						11,522				9,796
		Total assets			$	192,844			$	189,471
Liabilities and Shareholders’ Equity
Deposits
	Noninterest-bearing				$	31,585			$	32,470
	Interest-bearing					70,011				74,749
	Time deposits greater than $100,000					13,971				11,833
		Total deposits				115,567				119,052
Short-term borrowings						12,648				10,850
Long-term debt						35,328				31,215
Junior subordinated debentures						2,676				2,601
Acceptances outstanding						146				121
Other liabilities						6,879				6,390
		Total liabilities				173,244				170,229
Shareholders’ equity
	Common stock, par value $0.01 a share — authorized: 4,000,000,000 shares issued: 09/30/04 and 12/31/03 — 1,972,643,007 shares					20				20
	Capital surplus					5,868				5,851
	Retained earnings					16,260				14,508
	Less cost of common stock in treasury: 09/30/04 — 101,801,460 shares; 12/31/03 — 49,722,856 shares					(2,710	)			(1,205	)
	Other comprehensive income					162				68
		Total shareholders’ equity				19,600				19,242
		Total liabilities and shareholders’ equity			$	192,844			$	189,471

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Consolidated Statement of Income" -->

				Three Months Ended								Nine Months Ended
				September 30,								September 30,
(Dollars and Shares in Millions, Except Per Share Data)
(Unaudited)				2004				2003				2004				2003
Interest Income
Loans				$	1,802.8			$	1,818.3			$	5,289.8			$	5,476.0
Loans held for sale					21.1				59.5				68.3				170.9
Investment securities
	Taxable				448.8				403.6				1,351.5				1,222.1
	Non-taxable				4.4				6.7				14.4				23.1
Other interest income					25.7				23.2				73.1				78.2
		Total interest income			2,302.8				2,311.3				6,797.1				6,970.3
Interest Expense
Deposits					221.4				256.4				653.7				851.5
Short-term borrowings					74.5				44.9				183.3				123.3
Long-term debt					205.3				167.9				566.0				536.2
Junior subordinated debentures					27.0				23.6				75.3				79.5
		Total interest expense			528.2				492.8				1,478.3				1,590.5
Net interest income					1,774.6				1,818.5				5,318.8				5,379.8
Provision for credit losses					165.1				310.0				604.6				968.0
Net interest income after provision for credit losses					1,609.5				1,508.5				4,714.2				4,411.8
Noninterest Income
Credit and debit card revenue					164.3				137.6				464.9				407.3
Corporate payment products revenue					108.5				95.7				306.0				272.6
ATM processing services					45.2				41.3				132.3				125.6
Merchant processing services					187.5				146.3				493.7				415.4
Trust and investment management fees					240.2				239.8				740.5				707.3
Deposit service charges					207.4				187.0				594.7				529.2
Treasury management fees					117.9				126.2				356.9				350.0
Commercial products revenue					106.7				97.8				324.5				302.0
Mortgage banking revenue					97.2				89.5				301.3				275.2
Investment products fees and commissions					37.1				35.5				118.6				108.7
Securities gains (losses), net					87.3				(108.9	)			(84.4	)			244.9
Other					124.7				89.6				335.0				278.2
		Total noninterest income			1,524.0				1,177.4				4,084.0				4,016.4
Noninterest Expense
Compensation					564.6				543.8				1,673.0				1,637.4
Employee benefits					100.0				75.8				291.4				247.1
Net occupancy and equipment					159.2				161.3				468.3				482.1
Professional services					37.2				39.9				104.3				99.2
Marketing and business development					60.6				48.6				144.6				129.5
Technology and communications					109.8				102.1				313.9				311.1
Postage, printing and supplies					61.4				61.6				183.5				183.8
Other intangibles					210.2				10.8				388.7				558.2
Merger and restructuring-related charges					—				10.2				—				38.6
Other					216.0				199.2				638.8				567.5
		Total noninterest expense			1,519.0				1,253.3				4,206.5				4,254.5
Income from continuing operations before income taxes					1,614.5				1,432.6				4,591.7				4,173.7
Applicable income taxes					549.0				491.9				1,480.9				1,433.9
Income from continuing operations					1,065.5				940.7				3,110.8				2,739.8
Income from discontinued operations (after-tax)					—				10.2				—				15.8
Net income				$	1,065.5			$	950.9			$	3,110.8			$	2,755.6
Earnings Per Share
	Income from continuing operations			$	.57			$	.49			$	1.64			$	1.43
	Discontinued operations				—				—				—				—
	Net income			$	.57			$	.49			$	1.64			$	1.43
Diluted Earnings Per Share
	Income from continuing operations			$	.56			$	.48			$	1.62			$	1.42
	Discontinued operations				—				.01				—				.01
	Net income			$	.56			$	.49			$	1.62			$	1.43
Dividends declared per share				$	.240			$	.205			$	.720			$	.615
Average common shares outstanding					1,877.0				1,926.0				1,894.6				1,922.4
Average diluted common shares outstanding					1,903.7				1,939.8				1,919.4				1,932.4

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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																2,756												2,756
Unrealized loss on securities available for sale																								(521	)			(521	)
Unrealized loss on derivatives																								(273	)			(273	)
Foreign currency translation adjustment																								17				17
Realized gain on derivatives																								199				199
Reclassification adjustment for gains realized in net income																								(279	)			(279	)
Income taxes																								325				325
	Total comprehensive income																											2,224
Cash dividends declared on common stock																(1,184	)											(1,184	)
Issuance of common and treasury stock				11,195,691								(52	)							258								206
Stock option and restricted stock grants												114																114
Shares reserved to meet deferred compensation obligations				(755,215	)							(8	)							(17	)							(25	)
Balance September 30, 2003				1,927,397,036				$20			$	5,853			$	14,677			$	(1,031	)			$252			$	19,771
Balance December 31, 2003				1,922,920,151				$20			$	5,851			$	14,508			$	(1,205	)			$68			$	19,242
Net income																3,111												3,111
Unrealized gain on securities available for sale																								82				82
Unrealized gain on derivatives																								32				32
Foreign currency translation adjustment																								(14	)			(14	)
Realized gain on derivatives																								17				17
Reclassification adjustment for losses realized in net income																								35				35
Income taxes																								(58	)			(58	)
	Total comprehensive income																											3,205
Cash dividends declared on common stock																(1,359	)											(1,359	)
Issuance of common and treasury stock				22,812,988								(73	)							583								510
Purchase of treasury stock				(74,067,318	)															(2,066	)							(2,066	)
Stock option and restricted stock grants												73																73
Shares reserved to meet deferred compensation obligations				(824,274	)							17								(22	)							(5	)
Balance September 30, 2004				1,870,841,547				$20			$	5,868			$	16,260			$	(2,710	)			$162			$	19,600

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Consolidated Statement of Cash Flows" -->

			Nine Months Ended
			September 30,
(Dollars in Millions)
(Unaudited)			2004				2003
Operating Activities
	Net cash provided by (used in) operating activities		$	4,257.3			$	4,534.9
Investing Activities
Proceeds from sales of available-for-sale investment securities				5,559.2				17,097.6
Proceeds from maturities of investment securities				9,322.8				15,873.1
Purchases of investment securities				(12,497.2	)			(40,018.8	)
Net (increase) decrease in loans outstanding				(6,545.3	)			(5,674.4	)
Proceeds from sales of loans				1,284.4				1,715.5
Purchases of loans				(1,800.4	)			(554.5	)
Proceeds from sales of premises and equipment				43.1				33.2
Purchases of premises and equipment				(129.3	)			(603.8	)
Acquisitions, net of cash acquired				(301.6	)			—
Other, net				(331.2	)			(192.9	)
	Net cash provided by (used in) investing activities			(5,395.5	)			(12,325.0	)
Financing Activities
Net increase (decrease) in deposits				(3,485.2	)			(490.9	)
Net increase (decrease) in short-term borrowings				1,798.0				5,057.3
Principal payments on long-term debt				(7,458.3	)			(5,362.0	)
Proceeds from issuance of long-term debt				11,674.4				8,449.5
Redemption of Company-obligated mandatorily redeemable preferred securities				—				(350.0	)
Proceeds from issuance of common stock				443.6				179.0
Repurchase of common stock				(2,115.0	)			—
Cash dividends paid				(1,371.2	)			(1,161.7	)
	Net cash provided by (used in) financing activities			(513.7	)			6,321.2
	Change in cash and cash equivalents			(1,651.9	)			(1,468.9	)
Cash and cash equivalents at beginning of period				8,782.2				11,192.1
	Cash and cash equivalents at end of period		$	7,130.3			$	9,723.2

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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 third quarter and first nine months of 2003:

			Three Months Ended					Nine Months Ended
(Dollars in Millions)			September 30, 2003					September 30, 2003
Revenue			$	210.6					$584.9
Noninterest expense				188.2					552.2
Income from discontinued operations				22.4					32.7
Costs of disposal				5.3					7.4
Income taxes				6.9					9.5
	Discontinued operations, net of tax		$	10.2					$  15.8

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:

				September 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				108				9				(3	)			114				138				11				(2	)			147
		Total held-to-maturity securities		$	120			$	9			$	(3	)		$	126			$	152			$	11			$	(2	)		$	161
Available-for-sale (b)
	U.S. Treasury and agencies			$	1,603			$	7			$	(44	)		$	1,566			$	1,634			$	10			$	(69	)		$	1,575
	Mortgage-backed securities				36,756				145				(205	)			36,696				40,229				203				(407	)			40,025
	Asset-backed securities				84				1				—				85				250				5				(3	)			252
	Obligations of state and political subdivisions				248				8				—				256				335				13				—				348
	Other securities and investments				935				9				(13	)			931				993				9				(20	)			982
		Total available-for-sale securities		$	39,626			$	170			$	(262	)		$	39,534			$	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 $6.8 billion with unrealized losses of $173.0 million which have been in an unrealized loss position for greater than 12 months. All principal and interest payments on available-for-sale debt securities in an unrealized loss position for greater than 12 months 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 $14.0 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								Nine Months Ended
			September 30,								September 30,
(Dollars in Millions)			2004				2003				2004				2003
Realized gains			$	87.8			$	.4			$	89.1			$	362.7
Realized losses				(.5	)			(109.3	)			(173.5	)			(117.8	)
	Net realized gains (losses)		$	87.3			$	(108.9	)		$	(84.4	)		$	244.9
Income tax (benefit) on realized gains (losses)			$	33.2			$	(41.4	)		$	(32.1	)		$	93.1

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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 September 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:

					September 30, 2004								December 31, 2003
									Percent								Percent
(Dollars in Millions)					Amount				of Total				Amount				of Total
Commercial
	Commercial				$	35,286				28.3	%		$	33,536				28.4	%
	Lease financing					4,865				3.9				4,990				4.2
		Total commercial				40,151				32.2				38,526				32.6
Commercial real estate
	Commercial mortgages					20,232				16.2				20,624				17.4
	Construction and development					7,182				5.7				6,618				5.6
		Total commercial real estate				27,414				21.9				27,242				23.0
Residential mortgages
	Residential mortgages					8,955				7.2				7,332				6.2
	Home equity loans, first liens					5,786				4.6				6,125				5.2
		Total residential mortgages				14,741				11.8				13,457				11.4
Retail
	Credit card					6,216				5.0				5,933				5.0
	Retail leasing					7,004				5.6				6,029				5.1
	Home equity and second mortgages					14,548				11.7				13,210				11.2
	Other retail
		Revolving credit				2,555				2.1				2,540				2.1
		Installment				2,790				2.2				2,380				2.0
		Automobile				7,481				6.0				7,165				6.1
		Student				1,926				1.5				1,753				1.5
			Total other retail			14,752				11.8				13,838				11.7
		Total retail				42,520				34.1				39,010				33.0
			Total loans		$	124,826				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 September 30, 2004, and December 31, 2003, respectively.

Note 6		Mortgage Servicing Rights

The Company’s portfolio of residential mortgages serviced for others was $63.2 billion and $53.9 billion at September 30, 2004, and December 31, 2003, respectively.

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

			September 30,				December 31,
(Dollars in Millions)			2004				2003
Initial carrying value, net of amortization			$	1,021			$	830
Impairment valuation allowance				(156	)			(160	)
	Net carrying value		$	865			$	670

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Changes in capitalized mortgage servicing rights are summarized as follows:

			Nine Months Ended				Year Ended
(Dollars in Millions)			September 30, 2004				December 31, 2003
Balance at beginning of period				$670			$	642
	Rights purchased			143				55
	Rights capitalized			217				338
	Amortization			(140	)			(156	)
	Rights sold			—				—
	Impairment (a)			(25	)			(209	)
Balance at end of period				$865			$	670

(a)		Mortgage servicing rights impairment of $86.7 million and reparation of $108.5 million were recognized during the third quarter of 2004 and 2003, respectively.

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

		September 30,				December 31,
(Dollars in Millions)		2004				2003
Fair value			$869				$670
Expected weighted-average life (in years)			5.7				5.2
Discount rate			9.5%				9.9%

The estimated sensitivity of the fair value of the mortgage servicing rights portfolio to changes in interest rates at September 30, 2004, was as follows:

		Down Scenario								Up Scenario
(Dollars in Millions)		50 bps				25 bps				25 bps				50 bps
Fair value		$	(239	)		$	(115	)			$99			$	172

The fair value of mortgage servicing rights and its sensitivity to changes in interest rates is influenced by the mix of the servicing portfolio and characteristics of each segment of the portfolio. In the current interest rate environment, mortgage loans originated as part of government agency and state loan programs tend to experience slower prepayment speeds and better cash flows than conventional mortgage loans. The Company’s servicing portfolio consists of the distinct portfolios of Mortgage Revenue Bond Programs (“MRBP”), government-related mortgages and conventional mortgages. The MRBP division specializes in servicing loans made under state and local housing authority programs. These programs provide mortgages to low and moderate income borrowers and are generally under government insured programs with down payment or closing cost assistance. The conventional and government servicing portfolios are predominantly comprised of fixed-rate agency loans (FNMA, FHLMC, GNMA, FHLB and various housing agencies) with limited adjustable-rate or jumbo mortgage loans.

A summary of the Company’s mortgage servicing rights and related characteristics by portfolio as of September 30, 2004, was as follows:

(Dollars in Millions)		MRBP				Government				Conventional				Total
Servicing portfolio		$	7,503			$	8,805			$	46,900			$	63,208
Fair market value		$	115			$	135			$	619			$	869
Value (bps)			153				153				132				137
Weighted-average servicing fees (bps)			43				46				33				36
Multiple (value/servicing fees)			3.56				3.33				4.00				3.81
Weighted-average note rate			6.30	%			6.06	%			5.71	%			5.83	%
Age (in years)			3.6				2.3				1.4				1.8
Expected life (in years)			6.0				5.4				5.7				5.7
Discount rate			10.0	%			10.9	%			9.1	%			9.5	%

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Note 7		Intangible Assets

The following table reflects the changes in the carrying value of goodwill for the nine months ended September 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 September 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				September 30,					December 31,
(Dollars in Millions)			Life (a)				Method (b)				2004					2003
Goodwill				—				—			$	6,226					$6,025
Merchant processing contracts				8 years				AC				713					552
Core deposit benefits				10 years/6 years				SL/AC				356					417
Mortgage servicing rights				6 years				AC				865					670
Trust relationships				15 years/9 years				SL/AC				309					311
Other identified intangibles				8 years/9 years				SL/AC				176					174
	Total										$	8,645					$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								Nine Months Ended
			September 30,								September 30,
(Dollars in Millions)			2004				2003				2004				2003
Merchant processing contracts			$	32.3			$	33.4			$	92.5			$	98.1
Core deposit benefits				19.8				22.0				61.0				66.2
Mortgage servicing rights (a)				133.5				(68.8	)			164.4				321.4
Trust relationships				12.9				13.3				36.6				39.9
Other identified intangibles				11.7				10.9				34.2				32.6
	Total		$	210.2			$	10.8			$	388.7			$	558.2

(a)		Includes mortgage servicing rights impairment of $86.7 million and reparation of $108.5 million for the three months ended September 30, 2004 and 2003, respectively, and impairment of $24.9 million and $208.7 million for the nine months ended September 30, 2004 and 2003, respectively.

Below is the estimated amortization expense for the years ending:

(Dollars in Millions)
Remaining		2004		$	124.8
		2005			446.2
		2006			375.4
		2007			322.3
		2008			264.1

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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 September 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

2.65

June 2027

June 15, 2007

Mercantile Capital Trust I

February 1997

150

155

Variable

2.54

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 September 30, 2004, are recorded on the balance sheet at fair value. Carrying value includes a fair value adjustment of $50 million related to hedges on certain junior subordinated debentures, as well as prepaid issuance fees of $(3) million.
(b)		The variable-rate Trust Preferred Securities and Debentures reprice quarterly based on three-month LIBOR.

Note 9		Shareholders’ Equity

At September 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 1,870.8 million and 1,922.9 million shares of common stock outstanding at September 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								Nine Months Ended
				September 30,								September 30,
(Dollars and Shares in Millions, Except Per Share Data)				2004				2003				2004				2003
Income from continuing operations				$	1,065.5			$	940.7			$	3,110.8			$	2,739.8
Income from discontinued operations (after-tax)					—				10.2				—				15.8
	Net income			$	1,065.5			$	950.9			$	3,110.8			$	2,755.6
Average common shares outstanding					1,877.0				1,926.0				1,894.6				1,922.4
Net effect of the assumed purchase of stock based on the treasury stock method for options and stock plans					26.7				13.8				24.8				10.0
Average diluted common shares outstanding					1,903.7				1,939.8				1,919.4				1,932.4
Earnings per share
	Income from continuing operations			$	.57			$	.49			$	1.64			$	1.43
	Discontinued operations				—				—				—				—
		Net income		$	.57			$	.49			$	1.64			$	1.43
Diluted earnings per share
	Income from continuing operations			$	.56			$	.48			$	1.62			$	1.42
	Discontinued operations				—				.01				—				.01
		Net income		$	.56			$	.49			$	1.62			$	1.43

For the three months ended September 30, 2004 and 2003, options to purchase 29 million and 56 million shares, respectively, and 38 million and 92 million shares for the nine 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								Nine Months Ended
			September 30, 2004								September 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			$	44.0			$	2.9
	Interest cost			27.6				4.1				81.3				13.7
	Expected return on plan assets			(50.7	)			(.3	)			(152.3	)			(1.0	)
	Net amortization and deferral			(1.5	)			—				(4.7	)			(.1	)
	Recognized actuarial loss			17.9				.3				33.0				2.1
Net periodic benefit cost (income)			$	8.0			$	5.1			$	1.3			$	17.6

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

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Note 12		Income Taxes

The components of income tax expense were:

			Three Months Ended								Nine Months Ended
			September 30,								September 30,
(Dollars in Millions)			2004				2003				2004				2003
Federal
Current			$	430.4			$	380.9			$	1,126.5			$	1,121.3
Deferred				63.0				57.2				196.3				165.6
	Federal income tax			493.4				438.1				1,322.8				1,286.9
State
Current				43.4				40.4				121.5				107.0
Deferred				12.2				13.4				36.6				40.0
	State income tax			55.6				53.8				158.1				147.0
	Total income tax provision		$	549.0			$	491.9			$	1,480.9			$	1,433.9

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								Nine Months Ended
			September 30,								September 30,
(Dollars in Millions)			2004				2003				2004				2003
Tax at statutory rate (35%)			$	565.1			$	501.4			$	1,607.1			$	1,460.8
State income tax, at statutory rates, net of federal tax benefit				36.2				36.6				102.8				98.7
Tax effect of
	Resolution of federal income tax examinations			—				—				(90.0	)			—
	Tax credits			(35.7	)			(27.1	)			(98.8	)			(80.9	)
	Tax-exempt interest, net			(5.3	)			(6.3	)			(16.2	)			(17.3	)
	Other items			(11.3	)			(12.7	)			(24.0	)			(27.4	)
Applicable income taxes			$	549.0			$	491.9			$	1,480.9			$	1,433.9

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 September 30, 2004, were approximately $10.3 billion with a weighted- average term of approximately 23 months. The estimated fair value of standby letters of credit was approximately $72.7 million at September 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 $133 million at September 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 2007. The maximum potential future payments guaranteed by the Company under these arrangements were approximately $1.4 billion at September 30, 2004. The Company’s recorded liabilities as of September 30, 2004, included $33.0 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 $17.3 billion at September 30, 2004, and represented the market value of the securities lent to third-parties. At September 30, 2004, the Company held assets with a market value of $17.9 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 $554.4 million at September 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 $6.1 billion at September 30, 2004. The recorded fair value of the Company’s liability for the credit enhancement recourse obligation and liquidity facilities was $35.3 million at September 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 terminated by the Company if there is a change in control event for Piper Jaffray Companies. Through

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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:

				Nine Months Ended
				September 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:

			September 30,					December 31,
(Dollars in Millions)			2004					2003
Interest-bearing deposits				$   6					$   4
Federal funds sold				155					109
Securities purchased under agreements to resell				—					39
Total money market investments				$161					$152

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

				For the Three Months Ended September 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				$	42,142			$	448.8				4.26	%		$	37,221			$	403.6				4.34	%			13.2	%
Non-taxable securities					360				6.4				7.11				556				9.7				7.00				(35.3	)
Loans held for sale					1,405				21.1				6.00				4,460				59.5				5.34				(68.5	)
Loans (b)
	Commercial				39,317				556.5				5.64				41,980				579.7				5.49				(6.3	)
	Commercial real estate				27,194				386.8				5.66				27,397				391.5				5.67				(.7	)
	Residential mortgages				14,569				204.5				5.60				12,234				181.5				5.91				19.1
	Retail				41,826				660.2				6.28				38,371				669.5				6.92				9.0
		Total loans			122,906				1,808.0				5.86				119,982				1,822.2				6.03				2.4
Other earning assets					1,374				25.6				7.45				1,646				23.3				5.60				(16.5	)
		Total earning assets			168,187				2,309.9				5.47				163,865				2,318.3				5.63				2.6
Allowance for loan losses					(2,287	)											(2,451	)											(6.7	)
Unrealized gain (loss) on available-for-sale securities					(492	)											(544	)											(9.6	)
Other assets (c)					26,177												29,371												(10.9	)
		Total assets		$	191,585											$	190,241												.7
Liabilities and Shareholders’ Equity
Noninterest-bearing deposits				$	29,791											$	31,907												(6.6	)
Interest-bearing deposits
	Interest checking				20,413				16.0				.31				20,148				20.3				.40				1.3
	Money market accounts				31,854				53.3				.67				33,980				78.9				.92				(6.3	)
	Savings accounts				5,854				3.6				.25				5,846				5.2				.36				.1
	Time certificates of deposit less than $100,000				12,869				83.1				2.57				14,824				105.1				2.81				(13.2	)
	Time deposits greater than $100,000				14,535				65.4				1.79				11,251				46.9				1.66				29.2
		Total interest-bearing deposits			85,525				221.4				1.03				86,049				256.4				1.18				(.6	)
Short-term borrowings					15,382				74.5				1.93				11,850				44.9				1.50				29.8
Long-term debt					32,525				205.3				2.51				31,218				167.9				2.14				4.2
Junior subordinated debentures					2,674				27.0				4.04				2,576				23.6				3.65				3.8
		Total interest-bearing liabilities			136,106				528.2				1.55				131,693				492.8				1.49				3.4
Other liabilities (d)					6,301												7,281												(13.5	)
Shareholders’ equity					19,387												19,360												.1
		Total liabilities and shareholders’ equity		$	191,585											$	190,241												.7	%
Net interest income								$	1,781.7											$	1,825.5
Gross interest margin													3.92	%											4.14	%
Gross interest margin without taxable-equivalent increments													3.90												4.12
Percent of Earning Assets
Interest income													5.47	%											5.63	%
Interest expense													1.25												1.20
Net interest margin													4.22	%											4.43	%
Net interest margin without taxable-equivalent increments													4.20	%											4.41	%

(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 $1,300 million of earning assets from discontinued operations in third quarter 2003.
(d)		Includes approximately $949 million of interest-bearing liabilities from discontinued operations in third quarter 2003.

52	U.S. Bancorp

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

				For the Nine Months Ended September 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				$	42,848			$	1,351.5				4.21	%		$	35,429			$	1,222.1				4.60	%			20.9	%
Non-taxable securities					395				21.0				7.10				630				33.1				7.00				(37.3	)
Loans held for sale					1,611				68.3				5.65				4,078				170.9				5.59				(60.5	)
Loans (b)
	Commercial				39,060				1,644.1				5.62				41,758				1,752.6				5.61				(6.5	)
	Commercial real estate				27,140				1,133.5				5.58				27,092				1,192.5				5.89				.2
	Residential mortgages				14,079				601.5				5.70				11,131				516.0				6.19				26.5
	Retail				40,687				1,925.3				6.32				38,064				2,025.8				7.12				6.9
		Total loans			120,966				5,304.4				5.86				118,045				5,486.9				6.21				2.5
Other earning assets					1,362				73.2				7.18				1,650				78.3				6.34				(17.5	)
		Total earning assets			167,182				6,818.4				5.44				159,832				6,991.3				5.84				4.6
Allowance for loan losses					(2,335	)											(2,476	)											(5.7	)
Unrealized gain (loss) on available-for-sale securities					(412	)											250												*
Other assets (c)					26,128												29,409												(11.2	)
		Total assets		$	190,563											$	187,015												1.9
Liabilities and Shareholders’ Equity
Noninterest-bearing deposits				$	29,807											$	32,412												(8.0	)
Interest-bearing deposits
	Interest checking				20,699				49.3				.32				18,601				64.4				.46				11.3
	Money market accounts				33,492				177.5				.71				31,285				238.4				1.02				7.1
	Savings accounts				5,896				11.7				.26				5,579				16.5				.40				5.7
	Time certificates of deposit less than $100,000				13,168				257.2				2.61				15,936				353.3				2.96				(17.4	)
	Time deposits greater than $100,000				13,085				158.0				1.61				12,836				178.9				1.86				1.9
		Total interest-bearing deposits			86,340				653.7				1.01				84,237				851.5				1.35				2.5
Short-term borrowings					14,706				183.3				1.67				10,024				123.3				1.64				46.7
Long-term debt					31,605				566.0				2.39				30,999				536.2				2.31				2.0
Junior subordinated debentures					2,649				75.3				3.79				2,738				79.5				3.87				(3.3	)
		Total interest-bearing liabilities			135,300				1,478.3				1.46				127,998				1,590.5				1.66				5.7
Other liabilities (d)					6,118												7,403												(17.4	)
Shareholders’ equity					19,338												19,202												.7
		Total liabilities and shareholders’ equity		$	190,563											$	187,015												1.9	%
Net interest income								$	5,340.1											$	5,400.8
Gross interest margin													3.98	%											4.18	%
Gross interest margin without taxable-equivalent increments													3.96												4.16
Percent of Earning Assets
Interest income													5.44	%											5.84	%
Interest expense													1.18												1.33
Net interest margin													4.26	%											4.51	%
Net interest margin without taxable-equivalent increments													4.24	%											4.49	%

*		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 $1,453 million of earning assets from discontinued operations in 2003.
(d)		Includes approximately $1,045 million of interest-bearing liabilities from discontinued operations in 2003.

U.S. Bancorp	53

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Part II -- Other Information" -->

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds —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 third quarter of 2004.

Item 6. Exhibits

10.1		Form of Executive Officer Stock Option Agreement with cliff and performance vesting under U.S. Bancorp 2001 Stock Incentive Plan.
10.2		Form of Executive Officer Stock Option Agreement with annual vesting under U.S. Bancorp 2001 Stock Incentive Plan.
10.3		Form of Executive Officer Restricted Stock Award Agreement under U.S. Bancorp 2001 Stock Incentive Plan.
10.4		Form of Director Stock Option Agreement under U.S. Bancorp 2001 Stock Incentive Plan.
10.5		Form of Director Restricted Stock Unit Agreement under U.S. Bancorp 2001 Stock Incentive Plan.
10.6		Form of Executive Officer Restricted Stock Unit Agreement under U.S. Bancorp 2001 Stock Incentive Plan.
10.7		Restricted Stock Unit Award Agreement with Jerry A. Grundhofer dated January 2, 2002.
10.8		Amendment No. 2 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.

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				Nine Months Ended
(Dollars in Millions)						September 30, 2004				September 30, 2004
Earnings
1.		Net income				$	1,065.5			$	3,110.8
2.		Applicable income taxes					549.0				1,480.9
3.		Income before income taxes (1 + 2)				$	1,614.5			$	4,591.7
4.		Fixed charges:
		a.		Interest expense excluding interest on deposits		$	306.8			$	824.6
		b.		Portion of rents representative of interest and amortization of debt expense			16.8				51.1
		c.		Fixed charges excluding interest on deposits (4a + 4b)			323.6				875.7
		d.		Interest on deposits			221.4				653.7
		e.		Fixed charges including interest on deposits (4c + 4d)		$	545.0			$	1,529.4
5.		Amortization of interest capitalized				$	—			$	—
6.		Earnings excluding interest on deposits (3 + 4c + 5)					1,938.1				5,467.4
7.		Earnings including interest on deposits (3 + 4e + 5)					2,159.5				6,121.1
8.		Fixed charges excluding interest on deposits (4c)					323.6				875.7
9.		Fixed charges including interest on deposits (4e)					545.0				1,529.4
Ratio of Earnings to Fixed Charges
10.		Excluding interest on deposits (line 6/ line 8)					5.99				6.24
11.		Including interest on deposits (line 7/ line 9)					3.96				4.00

56	U.S. Bancorp

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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: November 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: November 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 September 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: November 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.