8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 16, 2007

U.S. BANCORP
(Exact name of registrant as specified in its charter)

1-6880
(Commission File Number)

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

800 Nicollet Mall
Minneapolis, Minnesota 55402
(Address of principal executive offices and zip code)

(651) 466-3000
(Registrant’s telephone number, including area code)

(not applicable)
(Former name or former address, if changed since last report)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 Under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
	ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
SIGNATURES
Press Release

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

     On October 16, 2007, U.S. Bancorp (the “Company”) issued a press release discussing quarter ended September 30, 2007 results. The press release is included as Exhibit 99.1 hereto and is incorporated herein by reference. The information included in the press release is considered to be “furnished” under the Securities Exchange Act of 1934. The press release contains forward-looking statements regarding the Company and includes a cautionary statement identifying important factors that could cause actual results to differ materially from those anticipated.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(c) Exhibits.

     99.1 Press Release issued by U.S. Bancorp on October 16, 2007, deemed “furnished” under the Securities Exchange Act of 1934.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

U.S. BANCORP

By /s/ Terrance R. Dolan
Terrance R. Dolan
Executive Vice President and
Controller

     DATE: October 16, 2007

EX-99.1 2 c19345exv99w1.htm PRESS RELEASE

Exhibit 99.1

	News Release
	Contacts:
	Steve Dale	Judith T. Murphy
	Media Relations	Investor Relations
	(612) 303-0784	(612) 303-0783

U.S. BANCORP REPORTS NET INCOME
FOR THE THIRD QUARTER OF 2007

EARNINGS SUMMARY																Table 1
($ in millions, except per-share data)							Percent		Percent
							Change		Change
	3Q		2Q		3Q		3Q07 vs		3Q07 vs			YTD		YTD		Percent
	2007		2007		2006		2Q07		3Q06			2007		2006		Change
Net income	$	1,176	$	1,156	$	1,203		1.7		(2.2	)	$	3,462	$	3,557		(2.7	)
Diluted earnings per common share		.67		.65		.66		3.1		1.5			1.94		1.95		(.5	)
Return on average assets (%)		2.09		2.09		2.23							2.09		2.24
Return on average common equity (%)		23.3		23.0		23.6							22.9		23.7
Net interest margin (%)		3.44		3.44		3.56							3.46		3.68
Efficiency ratio (%)		46.2		46.8		45.0							46.3		44.7
Tangible efficiency ratio (%) (a)		43.6		44.1		42.4							43.6		42.2
Dividends declared per common share	$	.40	$	.40	$	.33		—		21.2		$	1.20	$	.99		21.2
Book value per common share (period-end)		11.46		11.19		11.30		2.4		1.4

(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 and intangible amortization.

     MINNEAPOLIS, October 16, 2007 — U.S. Bancorp (NYSE: USB) today reported net income of $1,176 million for the third quarter of 2007, compared with $1,203 million for the third quarter of 2006. Diluted earnings per common share of $.67 in the third quarter of 2007 were higher than the same period of 2006 by 1.5 percent, or $.01 per diluted common share. Return on average assets and return on average common equity were 2.09 percent and 23.3 percent, respectively, for the third quarter of 2007, compared with returns of 2.23 percent and 23.6 percent, respectively, for the third quarter of 2006.

     U.S. Bancorp President and Chief Executive Officer Richard K. Davis said, “Despite the very challenging economic environment, our Company’s earnings remained solid, reflecting our core financial strength and emphasis on creating a business model that provides consistent and sustainable results. Our earnings per diluted common share of $.67 were higher than both the same quarter of 2006 and the prior quarter of 2007 by $.01 and $.02, respectively. Our profitability metrics remain among the best in the industry with return on average assets of 2.09 percent and return on average common equity of 23.3 percent.

U.S. Bancorp Reports Third Quarter 2007 Results
October 16, 2007
Page 2

We were able to return 74 percent of our earnings to common shareholders in the form of dividends and buybacks during the quarter, which brought our year-to-date return of earnings to common shareholders to 117 percent.

     “The net interest margin in the third quarter of 3.44 percent was equal to the prior quarter, resulting in an increase in net interest income on both a linked quarter and year-over-year basis. This is an important turning point for us, as a stable net interest margin is a key component of our long-term growth assumptions.

     “Once again, our fee-based businesses exhibited excellent momentum year-over-year with Payment Services and Wealth Management and Securities Services recording increases in fee revenue of 11 percent and 9 percent, respectively. In addition, mortgage banking revenue, commercial products revenue and treasury management fees also showed very favorable increases over the third quarter of 2006. Although normal third quarter seasonality resulted in somewhat muted growth in total net revenue over the second quarter of 2007, we were able to achieve positive operating leverage on a linked quarter basis.

     “Our credit quality statistics, once again, demonstrated our prudent approach to risk management. Net charge-offs were .54 percent of average loans outstanding, compared with .53 percent in the previous quarter. As expected, total nonperforming assets did increase, reflecting stress in the mortgage banking and homebuilding industries. Looking ahead, we would expect that the continuing pressures felt by both businesses and consumers related to the residential mortgage and homebuilding industries will lead to somewhat higher net charge-offs and nonperforming assets. These increases should, however, be very manageable for our Company.

     “Going forward, we will continue to capitalize on our core financial strength, including our profitability, efficiency, prudent credit culture, capital management and customer service, while selectively investing for growth in our businesses. We are not immune to the challenges presented to us by the current environment, but our results for the quarter and year-to-date support my belief that our Company is well-positioned to produce a consistent, predictable and repeatable earnings stream for the benefit of our customers, communities, employees and shareholders.”

     The Company’s net income for the third quarter of 2007 declined from the same period of 2006 as strong fee-based revenue growth in Payment Services and Wealth Management and Securities Services was offset by higher operating expenses and an expected increase in credit costs. In addition, the third quarter of 2006 included a $32 million gain on the sale of equity interests in a card association. Diluted earnings per common share increased year-over-year by $.01 (1.5 percent). On a linked quarter basis, net income

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U.S. Bancorp Reports Third Quarter 2007 Results
October 16, 2007
Page 3

increased $20 million, or $.02 per diluted common share, reflecting growth in net interest income and credit card and payment processing revenue and lower noninterest expense, partially offset by seasonally lower treasury management and trust and investment management fees and somewhat higher credit costs.

     Total net revenue on a taxable-equivalent basis for the third quarter of 2007 was $3,529 million, $108 million (3.2 percent) higher than the third quarter of 2006, primarily reflecting a 5.5 percent increase in noninterest income. Net interest income also increased slightly from a year ago driven by growth in earning assets. Noninterest income growth was driven primarily by organic business growth in fee-based revenue. This growth in noninterest income was muted somewhat by adverse market conditions experienced during the third quarter of 2007. These market factors reduced trading and other revenue by approximately $21 million from a year ago. Additionally, the third quarter of 2006 included a $32 million gain from the sale of equity interests in a card association. On a linked quarter basis, total net revenue increased $24 million (.7 percent) due to growth in net interest income and credit card and payment processing revenues offset by seasonally lower treasury management and trust and investment management fees and the adverse impact of market conditions in the third quarter of 2007.

     Total noninterest expense in the third quarter of 2007 was $1,628 million, $90 million (5.9 percent) higher than the third quarter of 2006, principally due to higher operating costs from investments in personnel, branches, customer service initiatives, marketing, business integration costs related to acquisitions, costs related to tax-advantaged investments and an increase in credit-related costs for other real estate owned and collection activities. On a linked quarter basis, total noninterest expense decreased by $12 million (.7 percent) primarily due to a reduction in incentives and seasonally lower employee benefits expense and lower operating costs related to merchant airline processing.

     Provision for credit losses for the third quarter of 2007 was $199 million, an increase of $8 million (4.2 percent) from the second quarter of 2007 and $64 million higher than the third quarter of 2006. The increase in the provision for credit losses from a year ago reflected growth in credit card accounts and higher commercial loan losses at this stage of the business cycle. In addition, the provision for credit losses in the third quarter of 2006 partially reflected the favorable residual impact on net charge-offs, principally for credit cards and other retail charge-offs, resulting from changes in bankruptcy laws in the fourth quarter of 2005. Net charge-offs in the third quarter of 2007 were $199 million, compared with the second quarter of 2007 net charge-offs of $191 million and the third quarter of 2006 net charge-offs of $135 million. Nonperforming assets increased $76 million (13.5 percent) during the third quarter of 2007. This increase

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U.S. Bancorp Reports Third Quarter 2007 Results
October 16, 2007
Page 4

reflected stress in the mortgage lending and homebuilding industries and was primarily due to two mortgage banking customers that declared bankruptcy during the quarter and continued stress in construction lending. Total nonperforming assets were $641 million at September 30, 2007, compared with $565 million at June 30, 2007, and $575 million at September 30, 2006. The ratio of the allowance for credit losses to nonperforming loans was 441 percent at September 30, 2007, compared with 503 percent at June 30, 2007, and 476 percent at September 30, 2006.

INCOME STATEMENT HIGHLIGHTS																	Table 2
(Taxable-equivalent basis, $ in millions,							Percent			Percent
except per-share data)							Change			Change
	3Q		2Q		3Q		3Q07 vs			3Q07 vs			YTD		YTD		Percent
	2007		2007		2006		2Q07			3Q06			2007		2006		Change
Net interest income	$	1,685	$	1,650	$	1,673		2.1			.7		$	5,001	$	5,095		(1.8	)
Noninterest income		1,844		1,855		1,748		(.6	)		5.5			5,395		5,117		5.4
Total net revenue		3,529		3,505		3,421		.7			3.2			10,396		10,212		1.8
Noninterest expense		1,628		1,640		1,538		(.7	)		5.9			4,813		4,568		5.4
Income before provision and taxes		1,901		1,865		1,883		1.9			1.0			5,583		5,644		(1.1	)
Provision for credit losses		199		191		135		4.2			47.4			567		375		51.2
Income before taxes		1,702		1,674		1,748		1.7			(2.6	)		5,016		5,269		(4.8	)
Taxable-equivalent adjustment		18		18		13		—			38.5			53		34		55.9
Applicable income taxes		508		500		532		1.6			(4.5	)		1,501		1,678		(10.5	)
Net income	$	1,176	$	1,156	$	1,203		1.7			(2.2	)	$	3,462	$	3,557		(2.7	)
Net income applicable to common equity	$	1,161	$	1,141	$	1,187		1.8			(2.2	)	$	3,417	$	3,524		(3.0	)
Diluted earnings per common share	$	.67	$	.65	$	.66		3.1			1.5		$	1.94	$	1.95		(.5	)

Net Interest Income

     Third quarter net interest income on a taxable-equivalent basis was $1,685 million, compared with $1,673 million in the third quarter of 2006, an increase of $12 million from a year ago. Average earning assets for the period increased over the third quarter of 2006 by $7.7 billion (4.1 percent), primarily driven by an increase of $6.0 billion (4.3 percent) in average loans. The positive impact to net interest income from the growth in earning assets was partially offset by a lower net interest margin. The net interest margin in the third quarter of 2007 was 3.44 percent, compared with 3.56 percent in the third quarter of 2006, reflecting the competitive environment and the impact of a flat yield curve during the past several quarters. Since the third quarter of 2006, credit spreads have tightened by approximately 5 basis points across most lending products due to competitive loan pricing. In addition, funding costs have increased as rates paid on

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U.S. Bancorp Reports Third Quarter 2007 Results
October 16, 2007
Page 5

interest-bearing deposits have risen and the Company’s funding mix continues to shift toward higher cost deposits and other funding sources. Net interest margin was also impacted by a decline in net free funds due to a decline in noninterest-bearing deposits, investment in bank-owned life insurance, share repurchases and the impact of acquisitions. An increase in loan fees from a year ago partially offset these factors.

     Net interest income in the third quarter of 2007 increased from the second quarter of 2007 by $35 million (2.1 percent). Net interest income increased due to average earning assets growth of $2.6 billion while the net interest margin remained unchanged from the second quarter of 2007, at 3.44 percent. As expected, the tightening of credit spreads and changes in the deposit and other funding mix have moderated. Additionally, market expectations regarding interest rates have changed somewhat in light of recent liquidity disruptions in the capital markets and the Federal Reserve Bank’s decrease in short-term interest rates. Considering these factors, the Company continues to expect that the net interest margin will remain relatively stable throughout the remainder of the year consistent with previous management guidance.

NET INTEREST INCOME																						Table 3
(Taxable-equivalent basis; $ in millions)
										Change			Change
	3Q			2Q			3Q			3Q07 vs			3Q07 vs			YTD			YTD
	2007			2007			2006			2Q07			3Q06			2007			2006			Change
Components of net interest income
Income on earning assets	$	3,379		$	3,276		$	3,175		$	103		$	204		$	9,878		$	9,115		$	763
Expense on interest-bearing liabilities		1,694			1,626			1,502			68			192			4,877			4,020			857
Net interest income	$	1,685		$	1,650		$	1,673		$	35		$	12		$	5,001		$	5,095		$	(94	)
Average yields and rates paid
Earning assets yield		6.90	%		6.83	%		6.74	%		.07	%		.16	%		6.85	%		6.58	%		.27	%
Rate paid on interest-bearing liabilities		4.01			3.95			3.79			.06			.22			3.95			3.45			.50
Gross interest margin		2.89	%		2.88	%		2.95	%		.01	%		(.06	)%		2.90	%		3.13	%		(.23	)%
Net interest margin		3.44	%		3.44	%		3.56	%		—	%		(.12	)%		3.46	%		3.68	%		(.22	)%
Average balances
Investment securities	$	41,128		$	40,704		$	39,806		$	424		$	1,322		$	40,904		$	39,858		$	1,046
Loans		147,517			145,653			141,491			1,864			6,026			145,965			139,561			6,404
Earning assets		194,886			192,301			187,190			2,585			7,696			192,788			185,075			7,713
Interest-bearing liabilities		167,805			165,177			157,248			2,628			10,557			165,240			155,650			9,590
Net free funds (a)		27,081			27,124			29,942			(43	)		(2,861	)		27,548			29,425			(1,877	)

(a) 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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U.S. Bancorp Reports Third Quarter 2007 Results
October 16, 2007
Page 6

AVERAGE LOANS																	Table 4
($ in millions)							Percent			Percent
							Change			Change
	3Q		2Q		3Q		3Q07 vs			3Q07 vs			YTD		YTD		Percent
	2007		2007		2006		2Q07			3Q06			2007		2006		Change
Commercial	$	41,648	$	41,572	$	40,781		.2			2.1		$	41,560	$	39,840		4.3
Lease financing		5,742		5,625		5,287		2.1			8.6			5,640		5,189		8.7
Total commercial		47,390		47,197		46,068		.4			2.9			47,200		45,029		4.8
Commercial mortgages		19,592		19,562		19,941		.2			(1.8	)		19,608		20,133		(2.6	)
Construction and development		8,870		8,941		8,760		(.8	)		1.3			8,928		8,571		4.2
Total commercial real estate		28,462		28,503		28,701		(.1	)		(.8	)		28,536		28,704		(.6	)
Residential mortgages		22,258		21,831		21,118		2.0			5.4			21,888		20,992		4.3
Credit card		9,895		9,120		7,800		8.5			26.9			9,221		7,429		24.1
Retail leasing		6,424		6,662		7,069		(3.6	)		(9.1	)		6,643		7,144		(7.0	)
Home equity and second mortgages		16,048		15,735		15,166		2.0			5.8			15,781		15,047		4.9
Other retail		17,040		16,605		15,569		2.6			9.4			16,696		15,216		9.7
Total retail		49,407		48,122		45,604		2.7			8.3			48,341		44,836		7.8
Total loans	$	147,517	$	145,653	$	141,491		1.3			4.3		$	145,965	$	139,561		4.6

     Average loans for the third quarter of 2007 were $6.0 billion (4.3 percent) higher than the third quarter of 2006, driven by growth in average total retail loans of $3.8 billion (8.3 percent), total commercial loans of $1.3 billion (2.9 percent), and residential mortgages of $1.1 billion (5.4 percent), partially offset by a decline in total commercial real estate loans of $239 million (.8 percent). Average loans for the third quarter of 2007 were higher than the second quarter of 2007 by $1.9 billion (1.3 percent), primarily reflecting growth in residential mortgages and total retail loans, driven by growth in average credit card balances and installment loans. Total commercial loans also grew modestly in the third quarter of 2007 compared with the second quarter of 2007. Total commercial real estate loans declined slightly from the second quarter of 2007, reflecting customer refinancing, a management decision to reduce condominium construction financing in selected markets and a slowdown in residential homebuilding impacting construction lending.

     Average investment securities in the third quarter of 2007 were $1.3 billion (3.3 percent) higher than the third quarter of 2006 driven primarily by an increase in the municipal securities portfolio, partially offset by a reduction in mortgage-backed assets.

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U.S. Bancorp Reports Third Quarter 2007 Results
October 16, 2007
Page 7

AVERAGE DEPOSITS																	Table 5
($ in millions)							Percent			Percent
							Change			Change
	3Q		2Q		3Q		3Q07 vs			3Q07 vs			YTD		YTD		Percent
	2007		2007		2006		2Q07			3Q06			2007		2006		Change
Noninterest-bearing deposits	$	26,947	$	27,977	$	28,220		(3.7	)		(4.5	)	$	27,531	$	28,666		(4.0	)
Interest-bearing deposits
Interest checking		26,052		25,858		23,595		.8			10.4			25,666		23,358		9.9
Money market savings		25,018		24,603		26,116		1.7			(4.2	)		25,108		26,820		(6.4	)
Savings accounts		5,283		5,443		5,598		(2.9	)		(5.6	)		5,375		5,669		(5.2	)
Total savings deposits		56,353		55,904		55,309		.8			1.9			56,149		55,847		.5
Time certificates of deposit less than $100,000		14,590		14,716		13,867		(.9	)		5.2			14,693		13,688		7.3
Time deposits greater than $100,000		21,255		20,378		22,579		4.3			(5.9	)		21,237		22,255		(4.6	)
Total interest-bearing deposits		92,198		90,998		91,755		1.3			.5			92,079		91,790		.3
Total deposits	$	119,145	$	118,975	$	119,975		.1			(.7	)	$	119,610	$	120,456		(.7	)

     Average noninterest-bearing deposits for the third quarter of 2007 decreased $1.3 billion (4.5 percent) compared with the third quarter of 2006, reflecting a decline in business demand deposits within most business lines as customers utilized deposit balances to fund business growth and meet other liquidity requirements.

     Average total savings deposits increased year-over-year by $1.0 billion (1.9 percent) as a $2.5 billion increase (10.4 percent) in interest checking balances due to higher broker dealer, government and institutional trust balances was partially offset by a decline of $1.4 billion (4.5 percent) in average money market and savings balances, primarily within Consumer Banking. The overall decrease in average money market and savings balances year-over-year was principally the result of the Company’s deposit pricing decisions for money market products in relation to other fixed-rate deposit products offered. A portion of branch-based money market savings accounts have migrated to fixed-rate time certificates to take advantage of higher interest rates for these products.

     Average time certificates of deposit less than $100,000 were higher in the third quarter of 2007 than in the third quarter of 2006 by $723 million (5.2 percent) and time deposits greater than $100,000 declined by $1.3 billion (5.9 percent) over the same period, reflecting Company funding decisions. The year-over-year growth in time certificates less than $100,000 was due to consumer-based time deposits, reflecting customer migration to higher rate deposit products.

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U.S. Bancorp Reports Third Quarter 2007 Results
October 16, 2007
Page 8

     Average noninterest-bearing deposits for the third quarter of 2007 decreased $1.0 billion (3.7 percent) compared with the second quarter of 2007, primarily due to a seasonal decrease in government banking demand deposits. Total average savings deposits had a slight increase of $449 million (.8 percent) from the second quarter of 2007. Average time deposits greater than $100,000 increased $877 million (4.3 percent) from the prior quarter. This change in average time deposits greater than $100,000 was primarily in government deposits.

NONINTEREST INCOME																	Table 6
($ in millions)							Percent			Percent
							Change			Change
	3Q		2Q		3Q		3Q07 vs			3Q07 vs			YTD		YTD		Percent
	2007		2007		2006		2Q07			3Q06			2007		2006		Change
Credit and debit card revenue	$	235	$	228	$	206		3.1			14.1		$	668	$	590		13.2
Corporate payment products revenue		164		157		150		4.5			9.3			466		416		12.0
ATM processing services		62		62		63		—			(1.6	)		183		183		—
Merchant processing services		287		285		253		.7			13.4			822		719		14.3
Trust and investment management fees		331		342		305		(3.2	)		8.5			995		916		8.6
Deposit service charges		271		272		268		(.4	)		1.1			786		764		2.9
Treasury management fees		118		126		111		(6.3	)		6.3			355		334		6.3
Commercial products revenue		107		105		100		1.9			7.0			312		311		.3
Mortgage banking revenue		76		68		68		11.8			11.8			211		167		26.3
Investment products fees and commissions		36		38		34		(5.3	)		5.9			108		114		(5.3	)
Securities gains (losses), net		7		3		—	nm			nm				11		3	nm
Other		150		169		190		(11.2	)		(21.1	)		478		600		(20.3	)
Total noninterest income	$	1,844	$	1,855	$	1,748		(.6	)		5.5		$	5,395	$	5,117		5.4

Noninterest Income

     Third quarter noninterest income was $1,844 million, an increase of $96 million (5.5 percent) from the same quarter of 2006 and $11 million (.6 percent) lower than the second quarter of 2007. The increase in noninterest income over the third quarter of 2006 was driven by strong organic fee-based revenue growth, offset somewhat by market conditions in the third quarter of 2007 adversely impacting valuations for certain trading securities and loans held for sale within a commercial real estate joint venture. Additionally, the third quarter of 2006 included a $32 million gain on the sale of equity interests in a card association.

     Credit and debit card revenue and corporate payment products revenue were higher in the third quarter of 2007 than the third quarter of 2006 by $29 million (14.1 percent) and $14 million (9.3 percent), respectively. The strong growth in credit and debit card revenue was primarily driven by an increase in

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U.S. Bancorp Reports Third Quarter 2007 Results
October 16, 2007
Page 9

customer accounts and higher customer transaction volumes from a year ago. The corporate payment products revenue growth reflected organic growth in sales volumes and card usage and an acquired business. Merchant processing services revenue was higher in the third quarter of 2007 than the same quarter a year ago by $34 million (13.4 percent), primarily reflecting an increase in customers and sales volumes. Trust and investment management fees increased $26 million (8.5 percent) year-over-year due to core account growth and favorable market conditions. Deposit service charges grew modestly year-over-year by $3 million (1.1 percent) driven by increased transaction-related fees and the impact of continued growth in net new checking accounts. Additionally, deposit account-related revenue, traditionally reflected in this fee category, continued to migrate to yield-related loan fees as customers utilize new consumer products. Treasury management fees increased $7 million (6.3 percent) due to higher customer transaction volumes, account growth and pricing enhancements. Commercial products revenue increased $7 million (7.0 percent) year-over-year due to higher foreign exchange and syndication fees and commercial leasing revenue. Mortgage banking revenue increased $8 million (11.8 percent) due to an increase in mortgage servicing income and production gains partially offset by a change in the valuation of mortgage servicing rights (“MSRs”) and related economic hedging activities. These favorable changes in fee-based revenue were partially offset by a decline in other income of $40 million (21.1 percent) compared with the third quarter of 2006. The reduction in other income reflected the $32 gain recognized in the third quarter of 2006 related to the sale of equity interests in a card association. The decline in other revenue also included market valuation losses of approximately $21 million, partially offset by an increase in revenue from investment in bank-owned life insurance programs. The third quarter of 2007 also included $7 million of net securities gains.

     Noninterest income was lower by $11 million (.6 percent) in the third quarter of 2007 compared with the second quarter of 2007. Trust and investment management fees and treasury management fees declined from the second quarter of 2007 by $11 million (3.2 percent) and $8 million (6.3 percent) respectively, due to seasonally higher tax filing fees and tax receipt processing volumes in the second quarter of 2007. In addition, other revenue declined by $19 million on a linked quarter basis, due primarily to capital markets conditions in the third quarter that resulted in valuation losses on certain trading securities and loans held for sale within a commercial real estate joint venture. Credit and debit card revenue increased $7 million (3.1 percent) due primarily to higher cash advance and other transactions fees. Corporate payment products revenue increased $7 million (4.5 percent), primarily reflecting seasonally higher sales volumes. Mortgage banking revenue increased $8 million (11.8 percent) as lower production gains were more than offset by a

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October 16, 2007
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favorable change in the valuation of MSRs and related economic hedging activities. In addition, net securities gains increased $4 million on a linked quarter basis.

NONINTEREST EXPENSE																	Table 7
($ in millions)							Percent			Percent
							Change			Change
	3Q		2Q		3Q		3Q07 vs			3Q07 vs			YTD		YTD		Percent
	2007		2007		2006		2Q07			3Q06			2007		2006		Change
Compensation	$	656	$	659	$	632		(.5	)		3.8		$	1,950	$	1,892		3.1
Employee benefits		119		123		123		(3.3	)		(3.3	)		375		379		(1.1	)
Net occupancy and equipment		175		171		168		2.3			4.2			511		494		3.4
Professional services		56		59		54		(5.1	)		3.7			162		130		24.6
Marketing and business development		66		64		58		3.1			13.8			178		156		14.1
Technology and communications		127		126		128		.8			(.8	)		378		372		1.6
Postage, printing and supplies		70		71		66		(1.4	)		6.1			210		198		6.1
Other intangibles		94		95		89		(1.1	)		5.6			283		263		7.6
Debt prepayment		—		—		—		—			—			—		11	nm
Other		265		272		220		(2.6	)		20.5			766		673		13.8
Total noninterest expense	$	1,628	$	1,640	$	1,538		(.7	)		5.9		$	4,813	$	4,568		5.4

Noninterest Expense

     Third quarter noninterest expense totaled $1,628 million, an increase of $90 million (5.9 percent) from the same quarter of 2006 and a decrease of $12 million (.7 percent) compared with the second quarter of 2007. Compensation expense increased $24 million (3.8 percent) compared with the same period of 2006 due to growth in ongoing bank operations and acquired businesses. Net occupancy and equipment expense increased $7 million (4.2 percent) from the third quarter of 2006 primarily due to acquisitions and branch-based business initiatives. Marketing and business development expense increased $8 million (13.8 percent) year-over-year due to the timing of customer promotions, solicitations and advertising activities. Postage, printing and supplies expense increased $4 million (6.1 percent) from the third quarter of 2006 due primarily to changes in postage rates. The increase in other intangibles expense of $5 million (5.6 percent) from the same period of 2006 reflected the impact of recent acquisitions in Consumer Banking, Wealth Management and Securities Services and Payment Services. Other expense increased $45 million (20.5 percent) compared with the prior year, due to costs related to affordable housing and other tax-advantaged investments, an increase in merchant processing expenses driven by transaction volumes, integration

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October 16, 2007
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expenses related to recent acquisitions and higher credit-related costs for other real estate owned and loan collection activities.

     Noninterest expense in the third quarter of 2007 was lower than the second quarter of 2007 by $12 million (.7 percent), primarily due to seasonal changes in employee benefits expense, lower incentives and lower business integration costs. These increases were partially offset by higher net occupancy and equipment expense driven by business investments and seasonally higher utilities expense.

Provision for Income Taxes

     The provision for income taxes for the third quarter of 2007 resulted in a tax rate on a taxable equivalent basis of 30.9 percent (effective tax rate of 30.2 percent) compared with 31.2 percent (effective tax rate of 30.7 percent) in the third quarter of 2006 and 30.9 percent (effective tax rate of 30.2 percent) in the second quarter of 2007. The reduction in the tax rate from the same quarter of the prior year primarily reflected investments in tax-exempt municipal securities and bank-owned life insurance, as well as incremental tax credits from affordable housing projects and other tax-advantaged investments.

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October 16, 2007
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ALLOWANCE FOR CREDIT LOSSES									Table 8
($ in millions)	3Q		2Q		1Q		4Q		3Q
	2007		2007		2007		2006		2006
Balance, beginning of period	$	2,260	$	2,260	$	2,256	$	2,256	$	2,251
Net charge-offs
Commercial		26		21		32		24		18
Lease financing		11		8		3		7		3
Total commercial		37		29		35		31		21
Commercial mortgages		1		7		1		2		—
Construction and development		1		2		—		—		—
Total commercial real estate		2		9		1		2		—
Residential mortgages		17		15		12		12		11
Credit card		77		81		74		68		56
Retail leasing		3		4		3		4		4
Home equity and second mortgages		20		16		16		13		12
Other retail		43		37		36		39		31
Total retail		143		138		129		124		103
Total net charge-offs		199		191		177		169		135
Provision for credit losses		199		191		177		169		135
Acquisitions and other changes		—		—		4		—		5
Balance, end of period	$	2,260	$	2,260	$	2,260	$	2,256	$	2,256
Components
Allowance for loan losses	$	2,041	$	2,028	$	2,027	$	2,022	$	2,034
Liability for unfunded credit commitments		219		232		233		234		222
Total allowance for credit losses	$	2,260	$	2,260	$	2,260	$	2,256	$	2,256
Gross charge-offs	$	256	$	252	$	237	$	217	$	195
Gross recoveries	$	57	$	61	$	60	$	48	$	60
Allowance for credit losses as a percentage of
Period-end loans		1.52		1.55		1.56		1.57		1.58
Nonperforming loans		441		503		498		480		476
Nonperforming assets		353		400		388		384		392

Credit Quality

     The overall credit quality of the Company continued to be strong during the third quarter of 2007. The allowance for credit losses was $2,260 million at September 30, 2007, and at June 30, 2007, and was $2,256 million at September 30, 2006. The ratio of the allowance for credit losses to period-end loans was 1.52 percent at September 30, 2007, compared with 1.55 percent at June 30, 2007, and 1.58 percent at September 30, 2006. The ratio of the allowance for credit losses to nonperforming loans was 441 percent at September 30, 2007, compared with 503 percent at June 30, 2007, and 476 percent at September 30, 2006. Total net charge-offs in the third quarter of 2007 were $199 million, compared with the second quarter of 2007 net

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October 16, 2007
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charge-offs of $191 million and the third quarter of 2006 net charge-offs of $135 million. The increase in total net charge-offs from a year ago was due primarily to an anticipated increase in consumer charge-offs, primarily related to credit cards, and somewhat higher commercial loan net charge-offs. Bankruptcy levels declined substantially in 2006 as a result of changes in bankruptcy legislation that went into effect in late 2005.

     Commercial and commercial real estate loan net charge-offs increased modestly to $39 million in the third quarter of 2007 (.20 percent of average loans outstanding) compared with $38 million (.20 percent of average loans outstanding) in the second quarter of 2007 and $21 million (.11 percent of average loans outstanding) in the third quarter of 2006. Given the continuing stress in the homebuilding industry, the Company expects commercial and commercial real estate net charge-offs to continue to increase moderately over the next several quarters.

     Retail loan net charge-offs were $143 million in the third quarter of 2007 compared with $138 million in the second quarter of 2007 and $103 million in the third quarter of 2006. The increase in retail loan net charge-offs is a reflection of the 8.3 percent growth in the portfolio, including 26.9 percent growth in average credit card balances from a year ago. While retail loan net charge-offs increased from the second quarter of 2007 and from the third quarter of 2006, retail loan net charge-offs as a percent of average loans outstanding remained at 1.15 percent in the third quarter of 2007, the same as in the second quarter of 2007. This compares with a net charge-off ratio of .90 in the third quarter of 2006, which reflected lower credit losses in 2006 due to the beneficial impact of bankruptcy law changes. The Company anticipates higher delinquencies in the retail portfolios and that retail net charge-offs will increase moderately over the next several quarters.

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October 16, 2007
Page 14

CREDIT RATIOS									Table 9
(Percent)	3Q		2Q		1Q		4Q		3Q
	2007		2007		2007		2006		2006
Net charge-offs ratios (a)
Commercial		.25		.20		.31		.23		.18
Lease financing		.76		.57		.22		.51		.23
Total commercial		.31		.25		.30		.26		.18
Commercial mortgages		.02		.14		.02		.04		—
Construction and development		.04		.09		—		—		—
Total commercial real estate		.03		.13		.01		.03		—
Residential mortgages		.30		.28		.23		.22		.21
Credit card		3.09		3.56		3.48		3.27		2.85
Retail leasing		.19		.24		.18		.23		.22
Home equity and second mortgages		.49		.41		.42		.33		.31
Other retail		1.00		.89		.89		.96		.79
Total retail		1.15		1.15		1.10		1.05		.90
Total net charge-offs		.54		.53		.50		.47		.38
Delinquent loan ratios - 90 days or more past due excluding nonperforming loans (b)
Commercial		.07		.07		.07		.05		.06
Commercial real estate		.04		—		.04		.01		.01
Residential mortgages		.64		.50		.46		.45		.36
Retail		.52		.48		.54		.48		.41
Total loans		.30		.26		.27		.24		.21
Delinquent loan ratios - 90 days or more past due including nonperforming loans (b)
Commercial		.51		.44		.46		.57		.55
Commercial real estate		.83		.69		.69		.53		.54
Residential mortgages		.86		.69		.63		.62		.53
Retail		.58		.55		.63		.58		.52
Total loans		.65		.57		.59		.57		.54

(a)	annualized and calculated on average loan balances
(b)	ratios are expressed as a percent of ending loan balances

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October 16, 2007
Page 15

ASSET QUALITY									Table 10
($ in millions)
	Sep 30		Jun 30		Mar 31		Dec 31		Sep 30
	2007		2007		2007		2006		2006
Nonperforming loans
Commercial	$	161	$	128	$	147	$	196	$	192
Lease financing		46		44		41		40		39
Total commercial		207		172		188		236		231
Commercial mortgages		73		90		114		112		114
Construction and development		153		107		71		38		40
Total commercial real estate		226		197		185		150		154
Residential mortgages		48		41		38		36		36
Retail		32		39		43		48		53
Total nonperforming loans		513		449		454		470		474
Other real estate		113		103		113		95		79
Other nonperforming assets		15		13		15		22		22
Total nonperforming assets (a)	$	641	$	565	$	582	$	587	$	575
Accruing loans 90 days or more past due	$	451	$	376	$	397	$	349	$	295
Restructured loans that continue to accrue interest	$	468	$	435	$	411	$	405	$	369
Nonperforming assets to loans plus ORE (%)		.43		.39		.40		.41		.40

(a) does not include accruing loans 90 days or more past due or restructured loans that continue to accrue interest

     Nonperforming assets at September 30, 2007, totaled $641 million, compared with $565 million at June 30, 2007, and $575 million at September 30, 2006. The ratio of nonperforming assets to loans and other real estate was .43 percent at September 30, 2007, compared with .39 percent at June 30, 2007, and .40 percent at September 30, 2006. The change in nonperforming assets reflects higher levels of nonperforming loans resulting from stress in the mortgage lending industry and an increase in other real estate assets primarily representing residential mortgage loan foreclosures. Accruing loans 90 days or more past due increased to $451 million at September 30, 2007, compared with $376 million at June 30, 2007, and $295 million at September 30, 2006. Restructured loans that continue to accrue interest have increased from the third quarter of 2006, reflecting the impact of restructurings for residential mortgage customers in light of current economic conditions. The Company expects nonperforming assets to increase modestly over the next several quarters due to continued stress in residential mortgages and residential construction.

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October 16, 2007
Page 16

CAPITAL POSITION													Table 11
($ in millions)	Sep 30			Jun 30			Mar 31			Dec 31			Sep 30
	2007			2007			2007			2006			2006
Total shareholders’ equity	$	20,766		$	20,330		$	20,800		$	21,197		$	20,926
Tier 1 capital		17,368			16,876			16,917			17,036			17,042
Total risk-based capital		25,900			25,709			25,826			24,495			25,011
Tier 1 capital ratio		8.6	%		8.5	%		8.6	%		8.8	%		8.8	%
Total risk-based capital ratio		12.8			13.0			13.1			12.6			13.0
Leverage ratio		8.1			7.9			8.0			8.2			8.3
Common equity to assets		8.7			8.7			8.9			9.2			9.2
Tangible common equity to assets		5.3			5.2			5.3			5.5			5.4

     Total shareholders’ equity was $20.8 billion at September 30, 2007, compared with $20.3 billion at June 30, 2007, and $20.9 billion at September 30, 2006.

     The Tier 1 capital ratio was 8.6 percent at September 30, 2007, compared with 8.5 at June 30, 2007, and 8.8 percent at September 30, 2006. The total risk-based capital ratio was 12.8 percent at September 30, 2007, compared with 13.0 percent at June 30, 2007, and at September 30, 2006. The leverage ratio was 8.1 percent at September 30, 2007, compared with 7.9 percent at June 30, 2007, and 8.3 percent at September 30, 2006. Tangible common equity to assets was 5.3 percent at September 30, 2007, compared with 5.2 percent at June 30, 2007, and 5.4 percent at September 30, 2006. All regulatory ratios continue to be in excess of stated “well-capitalized” requirements.

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October 16, 2007
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COMMON SHARES													Table 12
(Millions)	3Q			2Q			1Q			4Q			3Q
	2007			2007			2007			2006			2006
Beginning shares outstanding		1,728			1,742			1,765			1,763			1,783
Shares issued for stock option and stock purchase plans, acquisitions and other corporate purposes		3			4			11			12			10
Shares repurchased		(6	)		(18	)		(34	)		(10	)		(30	)
Ending shares outstanding		1,725			1,728			1,742			1,765			1,763

     On August 3, 2006, the Company announced that the Board of Directors approved an authorization to repurchase 150 million shares of common stock through December 31, 2008. During the third quarter of 2007, the Company repurchased 6 million shares of common stock. As of September 30, 2007, there were approximately 64 million shares remaining to be repurchased under the current authorization.

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October 16, 2007
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LINE OF BUSINESS FINANCIAL PERFORMANCE (a)																					Table 13
($ in millions)
	Net Income							Percent Change													3Q 2007
	3Q		2Q			3Q		3Q07 vs			3Q07 vs			YTD		YTD		Percent			Earnings
Business Line	2007		2007			2006		2Q07			3Q06			2007		2006		Change			Composition
Wholesale Banking	$	265	$	278		$	298		(4.7	)		(11.1	)	$	817	$	907		(9.9	)		23	%
Consumer Banking		455		456			474		(.2	)		(4.0	)		1,343		1,375		(2.3	)		39
Wealth Management and Securities Services		165		171			148		(3.5	)		11.5			489		437		11.9			14
Payment Services		276		258			253		7.0			9.1			762		730		4.4			23
Treasury and Corporate Support		15		(7	)		30	nm				(50.0	)		51		108		(52.8	)		1
Consolidated Company	$	1,176	$	1,156		$	1,203		1.7			(2.2	)	$	3,462	$	3,557		(2.7	)		100	%

(a) preliminary data

Lines of Business

     Within the Company, financial performance is measured by major lines of business, which include Wholesale Banking, Consumer Banking, Wealth Management and Securities Services, 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. 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, number of employees or other relevant factors. These allocated expenses are reported as net shared services expense within noninterest expense. Designations, assignments and allocations change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to the Company’s diverse customer base. During 2007, certain organization and methodology changes were made and, accordingly, prior period results have been restated and presented on a comparable basis.

     Wholesale Banking offers lending, equipment finance and small-ticket leasing, depository, treasury management, capital markets, foreign exchange, international trade services and other financial services to middle market, large corporate, commercial real estate, and public sector clients. Wholesale Banking contributed $265 million of the Company’s net income in the third quarter of 2007, an 11.1 percent decrease from the same period of 2006 and a 4.7 percent decrease compared with the second quarter of 2007. The

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October 16, 2007
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decrease in Wholesale Banking’s third quarter of 2007 contribution from the same quarter of 2006 was the result of lower total net revenue (5.2 percent), higher total noninterest expense (5.3 percent) and an increase in the provision for credit losses from a year ago. The decline in total net revenue was due to lower net interest income and fee-based revenue. The decrease in net interest income was due to tighter credit spreads and a decline in average noninterest-bearing deposit balances as customers utilized their liquidity to fund business growth, partially offset by growth in average loan balances. Total noninterest income decreased due to market-related valuation losses, including trading securities and loans held for sale within a commercial real estate lending joint venture, and lower equity investment income, partially offset by stronger treasury management fees and commercial products revenue. Total noninterest expense increased due to higher compensation and benefits expense related to production-based incentives and business growth initiatives, including expanding the national corporate banking franchise and relationship management focus. Loan collection, lease residual and other related costs have also increased somewhat from a year ago. The unfavorable variance in the provision for credit losses was due to a $4 million increase in net charge-offs in the third quarter of 2007 compared with a year ago. The change in net charge-offs reflected fewer wholesale loan recoveries and an increase in gross charge-offs at this stage of the business cycle.

     Wholesale Banking’s contribution to net income in the third quarter of 2007 compared with the second quarter of 2007 was $13 million (4.7 percent) lower due to an unfavorable variance in total net revenue (4.3 percent), partially offset by a decrease in total noninterest expense and the provision for credit losses. Total net revenue was lower on a linked quarter basis due to seasonally higher fee-based income in the second quarter, principally related to treasury management fees from tax receipt processing, and the market-related valuation losses during the third quarter of 2007. These unfavorable variances were partially offset by an increase in commercial products revenue driven by stronger foreign currency fees, customer derivatives trading and loan syndication revenues. Total noninterest expense decreased from the second quarter of 2007 due to a decrease in tax receipt processing expenses that are seasonally higher in the second quarter of 2007. The provision for credit losses decreased on a linked quarter basis due to lower net charge-offs despite somewhat higher levels of nonperforming assets caused by stress in mortgage warehouse lending caused by recent liquidity disruption in the mortgage lending industry.

     Consumer Banking delivers products and services through banking offices, telephone servicing and sales, on-line services, direct mail and ATMs. It encompasses community banking, metropolitan banking, in-store banking, small business banking, consumer lending, mortgage banking, consumer finance,

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October 16, 2007
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workplace banking, student banking, and 24-hour banking. Consumer Banking contributed $455 million of the Company’s net income in the third quarter of 2007, a 4.0 percent decrease from the same period of 2006 and relatively flat on a linked quarter basis. Within Consumer Banking, the retail banking division contributed $420 million of the total contribution, a 5.2 percent decrease for the division on a year-over-year basis and a 2.1 percent decrease from the prior quarter. An increase in total net revenue for the retail banking division was offset by an increase in the provision for credit losses and growth in total noninterest expense compared with the same period of 2006. Net interest income for the retail banking division was flat year-over-year as an increase in yield-related loan fees was offset by narrowing loan spreads and lower deposit balances. Total noninterest income for the retail banking division increased 3.9 percent from a year ago due to growth in deposit service charges and other fee revenue, primarily due to insurance, asset sales and check cashing fees. Total noninterest expense in the third quarter of 2007 increased 3.0 percent for the division compared with the same quarter of 2006. Compensation and employee benefits expense increased related to recent acquisitions, branch expansion and other business investments. In addition, the line of business recognized higher costs for professional services related to revenue enhancement initiatives and credit-related costs associated with other real estate owned. The business line experienced a $33 million year-over-year increase in net charge-offs (56.9 percent), reflecting higher levels of retail charge-offs, driven by portfolio growth and stress in residential mortgages, home equity and other installment and consumer balances. Also, bankruptcies were generally lower in 2006 due to the lingering effects of changes in bankruptcy laws in late 2005. In the third quarter of 2007, the mortgage banking division’s contribution was $35 million, an increase of $4 million (12.9 percent) from the same period of 2006. This division’s total net revenue increased $14 million (15.2 percent) from a year ago due to an increase in noninterest income of $10 million (14.1 percent) primarily reflecting an increase in production gains and servicing income, partially offset by an adverse change in the net MSR valuation and the related derivatives utilized for managing interest rate valuation risk. In addition, the mortgage banking division increased net interest income by $4 million (19.0 percent) year-over-year driven by growth in loan production. Total noninterest expense for the mortgage banking division increased $8 million (18.6 percent) from the third quarter of 2006 primarily due to higher production levels from a year ago and servicing costs associated with other real estate owned and foreclosures.

     Consumer Banking’s contribution in the third quarter of 2007 was relatively flat compared with the second quarter of 2007 as an increase in the mortgage banking division was offset by a decline in the retail

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October 16, 2007
Page 21

banking division. The retail banking division’s contribution decreased by 2.1 percent on a linked quarter basis as an increase in noninterest expense and the provision for credit losses was partially offset by an increase in total net revenue. Total net revenue for the retail banking division increased $13 million (1.0 percent) due to increased net interest income related to higher loan balances and yield-related loan fees. Deposit service charges were relatively flat as customers utilized new consumer products where the benefit is recorded in yield-related loan fees. Total noninterest expense for the retail banking division increased 2.2% on a linked quarter basis primarily due to increased transaction processing expense and credit-related costs on other real estate owned. The provision for credit losses for the quarter reflected a $14 million increase in net charge-offs relative to the second quarter of 2007, driven primarily by retail net charge-offs. The contribution of the mortgage banking division increased $8 million from the second quarter of 2007 driven by an increase in total net revenue due to strong growth in net interest income related to loans held for sale balances and a favorable change in the valuation of MSRs including the impact of related economic hedging activities. Total noninterest expense of the mortgage banking division increased $4 million (8.5 percent) from the second quarter of 2007, driven by production processing levels.

     Wealth Management and Securities Services provides trust, private banking, financial advisory, investment management, retail brokerage services, insurance, custody and mutual fund servicing through five businesses: Wealth Management, Corporate Trust, FAF Advisors, Institutional Trust & Custody and Fund Services. Wealth Management and Securities Services contributed $165 million of the Company’s net income in the third quarter of 2007, an 11.5 percent increase over the same period of 2006 and a 3.5 percent decrease from the second quarter of 2007. The growth in the business line’s contribution in the third quarter of 2007 over the same quarter of 2006 was the result of core account fee growth and improved equity market conditions relative to a year ago. Net interest income was unfavorably impacted year-over-year by changes in deposit pricing and tightening credit spreads, partially offset by earnings from deposit growth. Total noninterest expense was flat compared with the same quarter of 2006.

     The decrease in the business line’s contribution in the third quarter of 2007 compared with the second quarter of 2007 was primarily due to the seasonal effect of higher tax-related fees in the second quarter of 2007.

     Payment Services includes consumer and business credit cards, stored-value cards, debit cards, corporate and purchasing card services, consumer lines of credit, ATM processing and merchant processing. Payment Services contributed $276 million of the Company’s net income in the third quarter of 2007, a 9.1

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U.S. Bancorp Reports Third Quarter 2007 Results
October 16, 2007
Page 22

percent increase over the same period of 2006 and a 7.0 percent increase from the second quarter of 2007. Strong growth in operating income of 13.1 percent from a year ago was partially offset by an expected increase in the provision for credit losses (35.1 percent). An increase in total net revenue year-over-year was due to higher total noninterest income (11.1 percent) and net interest income (12.8 percent), reflecting growth in higher yielding retail loan balances, partially offset by the margin impact of recent acquisitions and growth in corporate payment card balances. All payment processing revenue categories benefited from account growth, higher transaction volumes and business expansion initiatives. The growth in total noninterest expense year-over-year primarily reflected new business initiatives, including costs associated with marketing programs, transaction processing and acquisitions, as well as higher collection costs. The increase in the provision for credit losses was driven by an increase in net charge-offs of $26 million year-over-year reflecting portfolio growth and the favorable prior year effects of changes in bankruptcy laws in late 2005.

     The increase in Payment Services’ contribution in the third quarter of 2007 from the second quarter of 2007 was due to higher total net revenue (3.8 percent), partially offset by higher total noninterest expense (1.8 percent). The provision for credit losses remained relatively flat. Total net revenue was higher due to an 11.4 percent increase in net interest income, driven by strong growth in retail credit card balances and favorable loan yields, as well as a 2.0 percent increase in total noninterest income primarily from credit card fees and seasonally higher corporate payments transaction sales volumes. An increase in total noninterest expense was primarily due to the timing of marketing and professional services costs from retail payment systems and other business expansion initiatives. The increase also reflected slightly higher processing expenses related to merchant processing volumes.

     Treasury and Corporate Support includes 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 those expenses associated with corporate activities that are managed on a consolidated basis. Treasury and Corporate Support recorded net income of $15 million in the third quarter of 2007, compared with net income of $30 million in the third quarter of 2006 and a net loss of $7 million in the second quarter of 2007. Net interest income improved $17 million in the current quarter from the third quarter of 2006 reflecting an increase in asset rates and volumes, partially offset by the mix of higher cost wholesale funding to support earning assets growth. Total noninterest income decreased $27 million due principally to the $32 million gain from the sale of equity interests in a

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U.S. Bancorp Reports Third Quarter 2007 Results
October 16, 2007
Page 23

card association in the third quarter of 2006 partially offset by $7 million in net securities gains recorded in the current quarter. Total noninterest expense increased $18 million year-over-year primarily reflecting an increase in costs related to investments in affordable housing and other tax-advantaged projects.

     Net income in the third quarter of 2007 was higher than the second quarter of 2007 due primarily to a decrease in total noninterest expense. Total noninterest expense decreased by $27 million primarily due to lower personnel, operating and business integration expenses.

Additional schedules containing more detailed information about the Company’s business line results are available on the web at usbank.com or by calling Investor Relations at 612-303-0781.

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U.S. Bancorp Reports Third Quarter 2007 Results
October 16, 2007
Page 24

RICHARD K. DAVIS, PRESIDENT AND CHIEF EXECUTIVE OFFICER, AND ANDREW CECERE, VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER, WILL HOST A CONFERENCE CALL TO REVIEW THE FINANCIAL RESULTS AT 7:30 A.M. (CDT) ON TUESDAY, OCTOBER 16, 2007. The conference call will be available by telephone or on the internet. To access the conference call from locations within the United States and Canada, please dial 866-316-1409. Participants calling from outside the United States and Canada, please dial 706-634-9086. The conference ID number for all participants is 18740666. For those unable to participate during the live call, a recording of the call will be available approximately two hours after the conference call ends on Tuesday, October 16^th, and will run through Tuesday, October 23^rd, at 11:00 p.m. (CDT). To access the recorded message within the United States and Canada, dial 800-642-1687. If calling from outside the United States and Canada, please dial 706-645-9291 to access the recording. The conference ID is 18740666. Find the recorded call via the internet at usbank.com.

Minneapolis-based U.S. Bancorp (“USB”), with $228 billion in assets, is the parent company of U.S. Bank, 6th largest commercial bank in the United States. The Company operates 2,512 banking offices and 4,870 ATMs in 24 states, and provides a comprehensive line of banking, brokerage, insurance, investment, mortgage, trust and payment services products to consumers, businesses and institutions. Visit U.S. Bancorp on the web at usbank.com.

Forward-Looking Statements

The following information appears in accordance with the Private Securities Litigation Reform Act of 1995:

This press release contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements. These statements often include the words “may,” “could,” “would,” “should,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of the Company. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated, including changes in general business and economic conditions, changes in interest rates, legal and regulatory developments, increased competition from both banks and non-banks, changes in customer behavior and preferences, effects of mergers and acquisitions and related integration, effects of critical accounting policies and judgments, and management’s ability to effectively manage credit risk, market risk, operational risk, legal risk, and regulatory and compliance risk. For discussion of these and other risks that may cause actual results to differ from expectations, refer to our Annual Report on Form 10-K for the year ended December 31, 2006, on file with the Securities and Exchange Commission, including the sections entitled “Risk Factors” and “Corporate Risk Profile.” Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update them in light of new information or future events.

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U.S. Bancorp
Consolidated Statement of Income

	Three Months Ended				Nine Months Ended
(Dollars and Shares in Millions, Except Per Share Data)	September 30,				September 30,
(Unaudited)	2007		2006		2007		2006
Interest Income
Loans	$	2,703	$	2,545	$	7,897	$	7,277
Loans held for sale		76		64		205		172
Investment securities		522		500		1,554		1,490
Other interest income		33		40		101		119
Total interest income		3,334		3,149		9,757		9,058
Interest Expense
Deposits		694		640		2,032		1,721
Short-term borrowings		374		321		1,081		861
Long-term debt		599		528		1,696		1,415
Total interest expense		1,667		1,489		4,809		3,997
Net interest income		1,667		1,660		4,948		5,061
Provision for credit losses		199		135		567		375
Net interest income after provision for credit losses		1,468		1,525		4,381		4,686
Noninterest Income
Credit and debit card revenue		235		206		668		590
Corporate payment products revenue		164		150		466		416
ATM processing services		62		63		183		183
Merchant processing services		287		253		822		719
Trust and investment management fees		331		305		995		916
Deposit service charges		271		268		786		764
Treasury management fees		118		111		355		334
Commercial products revenue		107		100		312		311
Mortgage banking revenue		76		68		211		167
Investment products fees and commissions		36		34		108		114
Securities gains (losses), net		7		—		11		3
Other		150		190		478		600
Total noninterest income		1,844		1,748		5,395		5,117
Noninterest Expense
Compensation		656		632		1,950		1,892
Employee benefits		119		123		375		379
Net occupancy and equipment		175		168		511		494
Professional services		56		54		162		130
Marketing and business development		66		58		178		156
Technology and communications		127		128		378		372
Postage, printing and supplies		70		66		210		198
Other intangibles		94		89		283		263
Debt prepayment		—		—		—		11
Other		265		220		766		673
Total noninterest expense		1,628		1,538		4,813		4,568
Income before income taxes		1,684		1,735		4,963		5,235
Applicable income taxes		508		532		1,501		1,678
Net income	$	1,176	$	1,203	$	3,462	$	3,557
Net income applicable to common equity	$	1,161	$	1,187	$	3,417	$	3,524
Earnings per common share	$	.67	$	.67	$	1.97	$	1.98
Diluted earnings per common share	$	.67	$	.66	$	1.94	$	1.95
Dividends declared per common share	$	.40	$	.33	$	1.20	$	.99
Average common shares outstanding		1,725		1,771		1,737		1,784
Average diluted common shares outstanding		1,745		1,796		1,762		1,809

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U.S. Bancorp
Consolidated Ending Balance Sheet

	September 30,			December 31,			September 30,
(Dollars in Millions)	2007			2006			2006
	(Unaudited)						(Unaudited)
Assets
Cash and due from banks	$	6,636			$     8,639		$	6,355
Investment securities
Held-to-maturity		78			87			91
Available-for-sale		40,293			40,030			39,429
Loans held for sale		4,601			3,256			4,126
Loans
Commercial		48,012			46,190			46,594
Commercial real estate		28,517			28,645			28,973
Residential mortgages		22,563			21,285			21,215
Retail		49,947			47,477			46,149
Total loans		149,039			143,597			142,931
Less allowance for loan losses		(2,041	)		(2,022	)		(2,034	)
Net loans		146,998			141,575			140,897
Premises and equipment		1,779			1,835			1,835
Goodwill		7,604			7,538			7,444
Other intangible assets		3,150			3,227			3,171
Other assets		16,489			13,045			13,507
Total assets	$	227,628			$ 219,232		$	216,855
Liabilities and Shareholders’ Equity
Deposits
Noninterest-bearing	$	28,272			$   32,128		$	30,554
Interest-bearing		70,916			70,330			69,095
Time deposits greater than $100,000		23,560			22,424			21,312
Total deposits		122,748			124,882			120,961
Short-term borrowings		28,868			26,933			24,783
Long-term debt		45,241			37,602			41,230
Other liabilities		10,005			8,618			8,955
Total liabilities		206,862			198,035			195,929
Shareholders’ equity
Preferred stock		1,000			1,000			1,000
Common stock		20			20			20
Capital surplus		5,748			5,762			5,770
Retained earnings		22,580			21,242			20,770
Less treasury stock		(7,554	)		(6,091	)		(6,093	)
Other comprehensive income		(1,028	)		(736	)		(541	)
Total shareholders’ equity		20,766			21,197			20,926
Total liabilities and shareholders’ equity	$	227,628			$ 219,232		$	216,855

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EX-99.1

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