-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FalSXLMmSeM2UIjgawJDCl3PPAksF/XAwCywT+1p1z44UL+mkMjGGIrM2/85onV1 7Pah2EhJk8eqq0JqRhLQyQ== 0000950124-08-000143.txt : 20080115 0000950124-08-000143.hdr.sgml : 20080115 20080115082942 ACCESSION NUMBER: 0000950124-08-000143 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20080115 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20080115 DATE AS OF CHANGE: 20080115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: US BANCORP \DE\ CENTRAL INDEX KEY: 0000036104 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 410255900 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06880 FILM NUMBER: 08529972 BUSINESS ADDRESS: STREET 1: U.S.BANCORP STREET 2: 800 NICOLLET MALL CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: (651)466-3000 MAIL ADDRESS: STREET 1: U.S.BANCORP STREET 2: 800 NICOLLET MALL CITY: MINNEAPOLIS STATE: MN ZIP: 55402 FORMER COMPANY: FORMER CONFORMED NAME: FIRST BANK SYSTEM INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FIRST BANK STOCK CORP DATE OF NAME CHANGE: 19720317 8-K 1 c22980e8vk.htm CURRENT REPORT DATED JANUARY 15, 2008 e8vk
Table of Contents

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): January 15, 2008

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))

 

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
SIGNATURES
Press Release issued on January 15, 2008

Table of Contents

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

     On January 15, 2008, U.S. Bancorp (the “Company”) issued a press release reporting quarter ended December 31, 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 “filed” 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 January 15, 2008, deemed “filed” 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: January 15, 2008

EX-99.1 2 c22980exv99w1.htm PRESS RELEASE ISSUED ON JANUARY 15, 2008 exv99w1

 

Exhibit 99.1
         
(U.S. BANCORP LOGO)
  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 FOURTH QUARTER OF 2007

                                                                 
EARNINGS SUMMARY                                                           Table 1  
 
($ in millions, except per-share data)                           Percent     Percent                    
                            Change     Change                    
    4Q     3Q     4Q     4Q07 vs     4Q07 vs     Full Year     Full Year     Percent  
    2007     2007     2006     3Q07     4Q06     2007     2006     Change  
     
Net income
   $ 942     $ 1,096     $ 1,194       (14.1 )     (21.1 )   $ 4,324     $ 4,751       (9.0 )
Diluted earnings per common share
     .53       .62       .66       (14.5 )     (19.7 )     2.43       2.61       (6.9 )
 
                                                                
Return on average assets (%)
     1.63       1.95       2.18                       1.93       2.23          
Return on average common equity (%)
     18.3       21.7       23.2                       21.3       23.6          
Net interest margin (%)
     3.51       3.44       3.56                       3.47       3.65          
Efficiency ratio (%)
     54.7       49.5       47.2                       49.3       45.4          
Tangible efficiency ratio (%) (a)
     52.1       46.8       44.5                       46.6       42.8          
 
                                                                
Dividends declared per common share
   $ .425     $ .40     $ .40       6.3       6.3     $ 1.625     $ 1.39       16.9  
Book value per common share (period-end)
     11.60       11.41       11.44       1.7       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, January 15, 2008 — U.S. Bancorp (NYSE: USB) today reported net income of $942 million for the fourth quarter of 2007, compared with $1,194 million for the fourth quarter of 2006. Diluted earnings per common share of $.53 in the fourth quarter of 2007 were lower than the same period of 2006 by 19.7 percent, or $.13 per diluted common share. Return on average assets and return on average common equity were 1.63 percent and 18.3 percent, respectively, for the fourth quarter of 2007, compared with returns of 2.18 percent and 23.2 percent, respectively, for the fourth quarter of 2006. Several significant items impacted the Company’s quarterly results, including the previously announced pretax charges of $215 million for the Company’s proportionate share of a contingent obligation to indemnify Visa Inc. for certain litigation matters (“Visa Charge”) and $107 million for valuation losses related to securities purchased from certain money market funds managed by an affiliate. The cumulative impact of these charges in the fourth quarter of 2007 was approximately $.13 per diluted common share. The Company’s results for the third quarter of 2007 included a $115 million charge for the Company’s proportionate share of

 

U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 2
Visa’s settlement with American Express, while the fourth quarter of 2006 included a $52 million gain related to the sale of a 401(k) recordkeeping business, a $22 million debt prepayment charge and a reduction in tax liabilities related to the resolution of various income tax examinations.
     U.S. Bancorp Chairman, President and Chief Executive Officer Richard K. Davis said, “During the fourth quarter, our Company, as well as our peers in the financial services industry, continued to operate in a very challenging economic environment. Given those challenges, I am especially proud of our Company’s fourth quarter results. Our diluted earnings per common share of $.53 were lower than the same quarter of 2006 and the prior quarter, but included two previously announced significant items that reduced the quarter’s earnings per diluted common share by 13 cents. Without these two items, core earnings per diluted share were favorable to the prior year’s fourth quarter and very comparable to the third quarter of 2007.
     “The Company produced strong core revenue growth in the fourth quarter on both a year-over-year and linked quarter basis. This growth was driven by our fee-based businesses, including payments and trust and investment management, but it also benefited from an increase in net interest income. Net interest income on a taxable equivalent basis was higher than the fourth quarter of last year by 4.0 percent and grew by 4.6 percent over the prior quarter. The net interest margin in the fourth quarter was 3.51 percent compared with 3.44 percent in the third quarter. As we have indicated in the past, a stable margin and the positive impact it has on our net interest income, is a critical component of our long-term revenue growth objectives.
     “Another notable success this quarter was the strong growth in both average loans and average deposits. This balance sheet growth, in addition to the strong results in a number of fee categories, demonstrates that the investments we are making in our revenue and growth initiatives are beginning to show results.
     “Our Company’s credit quality remains sound. Both net charge-offs and nonperforming assets increased during the fourth quarter, but the growth was moderate and as expected. We will not be immune to the current stress in the residential real estate markets and mortgage-related industries, but given the Company’s overall credit risk profile, increases in net charge-offs and nonperforming assets in the coming year will be manageable.
     “We remain well-capitalized. The prudent management of our business and a continued focus on maintaining a strong capital position has enabled our Company to consistently pay and increase dividends, as well as repurchase common shares. During 2007, we returned 111 percent of earnings to shareholders in the form of dividends and share buybacks. Further, in December, the Board of Directors approved a 6.25 percent increase in the dividend rate on our common stock. In fact, U.S. Bancorp, through its predecessor
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 3
companies, has increased its dividend for the past 36 years and, as of today, will have paid a dividend for the past 145 consecutive years.
     “Last week, across all of the Company’s markets, our employees gathered to celebrate our future. The message conveyed by our management team was clear; in an industry such as ours, it is the people that make a company great. I would like to take this opportunity to recognize and thank all of our employees for their outstanding contributions to the success of this Company. This past year has not been “business as usual” for anyone in the financial services industry. We continue to manage through this environment because our employees remain focused on providing high quality products and services to meet the needs of our customers.
     “December marked my first year anniversary as CEO of U.S. Bancorp. I am very pleased with the continued progress we have been making to prepare our Company for the future. Our fourth quarter and full year 2007 results were strong and serve to validate my belief that we are well-positioned to produce a consistent, predictable and repeatable earnings stream going forward for the benefit of our customers, communities, employees and shareholders.”
     The Company’s net income for the fourth quarter of 2007 declined from the same period of 2006. Included in year-over-year results was total net revenue growth of 3.4 percent driven by a 4.0 percent increase in net interest income and 2.8 percent growth in fee-based revenue categories, offset somewhat by higher operating expenses due to investments in business initiatives and increasing credit costs. Growth in ongoing banking operations was offset by net losses from recognizing the Visa Charge and the money market securities valuations. Also, the fourth quarter of 2006 included a gain on the sale of the Company’s 401(k) recordkeeping business. On a linked quarter basis, net income decreased principally due to the Visa Charge and money market securities valuation losses. After considering these factors, organic revenue growth, including the net adverse impact of changes in interest rates on mortgage servicing rights, was 3.3 percent (13.2 percent annualized). In addition, noninterest expense increased on a linked quarter basis due to investments in branch hiring, consumer and commercial business initiatives, the acquisition of a payment services business and increasing credit costs that reflected higher levels of net charge-offs and nonperforming loans.
     Total net revenue on a taxable-equivalent basis for the fourth quarter of 2007 was $3,540 million, $116 million (3.4 percent) higher than the fourth quarter of 2006, reflecting a 4.0 percent increase in net interest income and a 2.8 percent increase in noninterest income. Net interest income increased from a year ago
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 4
driven by growth in earning assets, somewhat higher credit spreads, an increase in yield-related loan fees and lower funding rates. Noninterest income growth was driven primarily by organic growth in fee-based revenue of 12.3 percent, muted somewhat by the $107 million market valuation losses recorded in the fourth quarter of 2007 and a $52 million gain recognized in the fourth quarter of 2006 related to the Company’s sale of a 401(k) recordkeeping business. On a linked quarter basis, total net revenue on a taxable equivalent basis increased slightly (.3 percent). The Company had strong growth in net interest income of 4.6 percent (18.4 percent on an annualized basis), as well as higher credit and debit card revenue, trust and investment management fees and commercial products revenue. This growth was partially offset by seasonally lower corporate payment and merchant processing revenues, and the net adverse impact of changes in interest rates on mortgage servicing rights. This organic revenue growth of 3.3 percent (13.2 percent on an annualized basis) was reduced by $107 million of valuation losses on certain money market securities purchased in the fourth quarter of 2007.
     Total noninterest expense in the fourth quarter of 2007 was $1,934 million, $322 million (20.0 percent) higher than the fourth quarter of 2006, principally due to the $215 million Visa Charge recognized in the fourth quarter of 2007. The remaining increase in noninterest expense represented higher operating costs from investments in personnel, bank branches, customer service initiatives, acquired businesses and an increase in credit-related costs for other real estate owned and collection activities. On a linked quarter basis, total noninterest expense increased by $191 million (11.0 percent) primarily due to the net increase of $100 million from the third quarter of 2007 for the Company’s proportionate share of certain Visa litigation matters, seasonally higher professional services, and higher operations costs from business development initiatives, investments in personnel and branches and an acquired payment services business.
     Provision for credit losses for the fourth quarter of 2007 was $225 million, an increase of $26 million (13.1 percent) from the third quarter of 2007 and $56 million (33.1 percent) from the fourth quarter of 2006. The increase in the provision for credit losses from a year ago reflected growth in credit card accounts, increasing retail loan delinquencies and higher commercial losses. Net charge-offs in the fourth quarter of 2007 were $225 million, compared with net charge-offs of $199 million in the third quarter of 2007 and $169 million in the fourth quarter of 2006. Total nonperforming assets were $690 million at December 31, 2007, compared with $641 million at September 30, 2007, and $587 million at December 31, 2006. Nonperforming assets increased $49 million (7.6 percent) during the fourth quarter of 2007 compared with the third quarter of 2007. This increase reflected continued stress in mortgage-related lending, including
(MORE)

 

U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 5
construction lending and homebuilding industries. The ratio of the allowance for credit losses to nonperforming loans was 406 percent at December 31, 2007, compared with 441 percent at September 30, 2007, and 480 percent at December 31, 2006.

                                                                 
INCOME STATEMENT HIGHLIGHTS                                                           Table 2  
 
(Taxable-equivalent basis, $ in millions,                           Percent     Percent                    
except per-share data)
                           Change     Change                    
    4Q     3Q     4Q     4Q07 vs     4Q07 vs     Full Year     Full Year     Percent  
    2007     2007     2006     3Q07     4Q06     2007     2006     Change  
     
Net interest income
   $ 1,763     $ 1,685     $ 1,695       4.6       4.0     $ 6,764     $ 6,790       (.4 )
Noninterest income
     1,777       1,844       1,729       (3.6 )     2.8       7,172       6,846       4.8  
                                 
Total net revenue
     3,540       3,529       3,424       .3       3.4       13,936       13,636       2.2  
Noninterest expense
     1,934       1,743       1,612       11.0       20.0       6,862       6,180       11.0  
                                 
Income before provision and taxes
     1,606       1,786       1,812       (10.1 )     (11.4 )     7,074       7,456       (5.1 )
Provision for credit losses
     225       199       169       13.1       33.1       792       544       45.6  
                                 
Income before taxes
     1,381       1,587       1,643       (13.0 )     (15.9 )     6,282       6,912       (9.1 )
Taxable-equivalent adjustment
     22       18       15       22.2       46.7       75       49       53.1  
Applicable income taxes
     417       473       434       (11.8 )     (3.9 )     1,883       2,112       (10.8 )
                                 
Net income
   $ 942     $ 1,096     $ 1,194       (14.1 )     (21.1 )   $ 4,324     $ 4,751       (9.0 )
                                 
Net income applicable to common equity
   $ 927     $ 1,081     $ 1,179       (14.2 )     (21.4 )   $ 4,264     $ 4,703       (9.3 )
                                 
Diluted earnings per common share
   $ .53     $ .62     $ .66       (14.5 )     (19.7 )   $ 2.43     $ 2.61       (6.9 )
                                 
Net Interest Income
     Fourth quarter net interest income on a taxable-equivalent basis was $1,763 million, compared with $1,695 million in the fourth quarter of 2006, an increase of $68 million (4.0 percent). Average earning assets for the period increased over the fourth quarter of 2006 by $10.6 billion (5.6 percent), primarily driven by an increase of $7.8 billion (5.4 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 fourth quarter of 2007 was 3.51 percent, compared with 3.56 percent in the fourth quarter of 2006, reflecting the competitive environment in early 2007 and declining net free funds relative to a year ago. The reduction in net free funds was primarily due to a decline in noninterest-bearing deposits, an investment in bank-owned life insurance, share repurchases through mid-third quarter of 2007 and the impact of acquisitions. An increase in loan fees from a year ago and improved wholesale funding rates partially offset these factors.
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 6
     Net interest income in the fourth quarter of 2007 increased by $78 million or 4.6 percent (18.4 percent annualized) from the third quarter of 2007. Net interest income increased due to growth in average earning assets of $5.4 billion (2.8 percent) and an improving net interest margin which increased to 3.51 percent from 3.44 percent in the third quarter of 2007. This improvement in the net interest margin was due to several factors including the margin benefit of the Company’s current asset/liability position in a declining interest rate environment and related asset/liability re-pricing dynamics. In addition, the Company’s net interest margin benefited by an increase in net free funds due to lower share repurchases in the fourth quarter of 2007 and higher yield-related loan fees. Short-term funding rates were also lower due to the Company’s ability to obtain improved rates in the current volatile market and increasing liquidity in the overnight fed fund markets given current market conditions. At this time, the Company continues to expect its net interest margin to stabilize in the mid 3.40’s range due to the expected mix of balance sheet growth and as funding and liquidity in the overnight markets normalizes.

                                                                 
NET INTEREST INCOME                                                           Table 3  
 
(Taxable-equivalent basis; $ in millions)                                                      
                            Change     Change                    
    4Q     3Q     4Q     4Q07 vs     4Q07 vs     Full Year     Full Year        
    2007     2007     2006     3Q07     4Q06     2007     2006     Change  
     
Components of net interest income
                                                                
Income on earning assets
   $ 3,431     $ 3,379     $ 3,236     $ 52     $ 195     $ 13,309     $ 12,351     $ 958  
Expense on interest-bearing liabilities
     1,668       1,694       1,541       (26 )     127       6,545       5,561       984  
     
Net interest income
   $ 1,763     $ 1,685     $ 1,695     $ 78     $ 68     $ 6,764     $ 6,790     $ (26 )
     
 
                                                                
Average yields and rates paid
                                                                
Earning assets yield
     6.81 %     6.90 %     6.79 %     (.09 )%     .02 %     6.84 %     6.63 %     .21 %
Rate paid on interest-bearing liabilities
     3.83       4.01       3.84       (.18 )     (.01 )     3.91       3.55       .36  
     
Gross interest margin
     2.98 %     2.89 %     2.95 %     .09 %     .03 %     2.93 %     3.08 %     (.15 )%
     
Net interest margin
     3.51 %     3.44 %     3.56 %     .07 %     (.05 )%     3.47 %     3.65 %     (.18 )%
     
 
                                                                
Average balances
                                                                
Investment securities
   $ 42,525     $ 41,128     $ 40,266     $ 1,397     $ 2,259     $ 41,313     $ 39,961     $ 1,352  
Loans
     151,451       147,517       143,686       3,934       7,765       147,348       140,601       6,747  
Earning assets
     200,307       194,886       189,660       5,421       10,647       194,683       186,231       8,452  
Interest-bearing liabilities
     172,999       167,805       159,469       5,194       13,530       167,196       156,613       10,583  
Net free funds (a)
     27,308       27,081       30,191       227       (2,883 )     27,487       29,618       (2,131 )
(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 Fourth Quarter 2007 Results
January 15, 2008
Page 7

                                                                 
AVERAGE LOANS                                                           Table 4  
 
($ in millions)                                                      
                            Percent     Percent                    
                            Change     Change                    
    4Q     3Q     4Q     4Q07 vs     4Q07 vs     Full Year     Full Year     Percent  
    2007     2007     2006     3Q07     4Q06     2007     2006     Change  
     
Commercial
   $ 43,649     $ 41,648     $ 41,264       4.8       5.8     $ 42,087     $ 40,199       4.7  
Lease financing
     5,978       5,742       5,394       4.1       10.8       5,725       5,241       9.2  
                                 
Total commercial
     49,627       47,390       46,658       4.7       6.4       47,812       45,440       5.2  
 
Commercial mortgages
     19,775       19,592       19,897       .9       (.6 )     19,650       20,074       (2.1 )
Construction and development
     8,983       8,870       9,029       1.3       (.5 )     8,942       8,686       2.9  
                                 
Total commercial real estate
     28,758       28,462       28,926       1.0       (.6 )     28,592       28,760       (.6 )
 
Residential mortgages
     22,670       22,258       21,235       1.9       6.8       22,085       21,053       4.9  
 
Credit card
     10,621       9,895       8,242       7.3       28.9       9,574       7,634       25.4  
Retail leasing
     6,123       6,424       7,015       (4.7 )     (12.7 )     6,512       7,112       (8.4 )
Home equity and second mortgages
     16,343       16,048       15,444       1.8       5.8       15,923       15,146       5.1  
Other retail
     17,309       17,040       16,166       1.6       7.1       16,850       15,456       9.0  
                                 
Total retail
     50,396       49,407       46,867       2.0       7.5       48,859       45,348       7.7  
                                 
 
Total loans
   $ 151,451     $ 147,517     $ 143,686       2.7       5.4     $ 147,348     $ 140,601       4.8  
                                 
     Average loans for the fourth quarter of 2007 were $7.8 billion (5.4 percent) higher than the fourth quarter of 2006, driven by growth in average total retail loans of $3.5 billion (7.5 percent), total commercial loans of $3.0 billion (6.4 percent), and residential mortgages of $1.4 billion (6.8 percent), partially offset by a modest decline in total commercial real estate loans of $168 million (.6 percent). Average loans for the fourth quarter of 2007 were higher than the third quarter of 2007 by $3.9 billion (2.7 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 grew $2.2 billion (4.7 percent) in the fourth quarter of 2007 compared with the third quarter of 2007 driven by strong growth in national corporate banking balances and seasonally higher commercial leasing. Total commercial real estate loans also increased slightly from the third quarter of 2007, primarily reflecting changing market conditions that have limited borrower access to the capital markets.
     Average investment securities in the fourth quarter of 2007 were $2.3 billion (5.6 percent) higher than the fourth quarter of 2006 driven primarily by an increase in the municipal securities portfolio and the purchase in the fourth quarter of asset-backed securities from certain money market funds managed by an affiliate. This was partially offset by a reduction in mortgage-backed assets. Average investment securities
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 8
grew by $1.4 billion (3.4 percent) from the third quarter of 2007. The increase was primarily due to the purchase of approximately $3.0 billion of securities from certain money market funds managed by an affiliate of the Company.

                                                                 
AVERAGE DEPOSITS                                                           Table 5  
 
($ in millions)                           Percent     Percent                    
                            Change     Change                    
    4Q     3Q     4Q     4Q07 vs     4Q07 vs     Full Year     Full Year     Percent  
    2007     2007     2006     3Q07     4Q06     2007     2006     Change  
     
Noninterest-bearing deposits
   $ 26,869     $ 26,947     $ 29,020       (.3 )     (7.4 )   $ 27,364     $ 28,755       (4.8 )
Interest-bearing deposits
                                                                
Interest checking
     27,458       26,052       24,127       5.4       13.8       26,117       23,552       10.9  
Money market savings
     25,996       25,018       26,214       3.9       (.8 )     25,332       26,667       (5.0 )
Savings accounts
     5,100       5,283       5,392       (3.5 )     (5.4 )     5,306       5,599       (5.2 )
                                 
Total savings deposits
     58,554       56,353       55,733       3.9       5.1       56,755       55,818       1.7  
Time certificates of deposit less than $100,000
     14,539       14,590       13,974       (.3 )     4.0       14,654       13,761       6.5  
Time deposits greater than $100,000
     25,461       21,255       22,255       19.8       14.4       22,302       22,255       .2  
                                 
Total interest-bearing deposits
     98,554       92,198       91,962       6.9       7.2       93,711       91,834       2.0  
                                 
Total deposits
   $ 125,423     $ 119,145     $ 120,982       5.3       3.7     $ 121,075     $ 120,589       .4  
                                 
     Average noninterest-bearing deposits for the fourth quarter of 2007 decreased $2.2 billion (7.4 percent) compared with the fourth 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 $2.8 billion (5.1 percent) due to a $3.3 billion increase (13.8 percent) in interest checking balances from higher broker dealer, government and institutional trust balances, which was partially offset by a decline of $510 million (1.6 percent) in average money market and savings balances, primarily within Consumer Banking. The 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 fourth quarter of 2007 than in the fourth quarter of 2006 by $565 million (4.0 percent) and time deposits greater than $100,000 increased by $3.2 billion (14.4 percent) over the same period, reflecting Company funding decisions. The year-over-
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 9
year growth in time certificates less than $100,000 was due to consumer-based time deposits, reflecting customer migration to higher rate deposit products and pricing decisions for these products.
     Average noninterest-bearing deposits for the fourth quarter of 2007 remained relatively flat compared with the third quarter of 2007. Total average savings deposits increased $2.2 billion (3.9 percent) from the third quarter of 2007, primarily due to seasonally higher corporate and institutional trust balances and increases in broker dealer accounts. Average time deposits greater than $100,000 increased $4.2 billion (19.8 percent) from the prior quarter. This change in average time deposits greater than $100,000 was primarily in government and wholesale time deposits.

                                                                 
NONINTEREST INCOME                                                           Table 6  
 
($ in millions)                           Percent     Percent                    
                            Change     Change                    
    4Q     3Q     4Q     4Q07 vs     4Q07 vs     Full Year     Full Year     Percent  
    2007     2007     2006     3Q07     4Q06     2007     2006     Change  
     
Credit and debit card revenue
   $ 281     $ 235     $ 210       19.6       33.8     $ 949     $ 800       18.6  
Corporate payment products revenue
     165       164       141       .6       17.0       631       557       13.3  
ATM processing services
     62       62       60       —       3.3       245       243       .8  
Merchant processing services
     279       287       244       (2.8 )     14.3       1,101       963       14.3  
Trust and investment management fees
     344       331       319       3.9       7.8       1,339       1,235       8.4  
Deposit service charges
     272       271       259       .4       5.0       1,058       1,023       3.4  
Treasury management fees
     117       118       107       (.8 )     9.3       472       441       7.0  
Commercial products revenue
     121       107       104       13.1       16.3       433       415       4.3  
Mortgage banking revenue
     48       76       25       (36.8 )     92.0       259       192       34.9  
Investment products fees and commissions
     38       36       36       5.6       5.6       146       150       (2.7 )
Securities gains (losses), net
     4       7       11       (42.9 )     (63.6 )     15       14       7.1  
Other
     46       150       213       (69.3 )     (78.4 )     524       813       (35.5 )
                                 
 
                                                                
Total noninterest income
   $ 1,777     $ 1,844     $ 1,729       (3.6 )     2.8     $ 7,172     $ 6,846       4.8  
                                 
Noninterest Income
     Fourth quarter noninterest income was $1,777 million, an increase of $48 million (2.8 percent) from the same quarter of 2006 and $67 million (3.6 percent) lower than the third quarter of 2007. The increase in noninterest income over the fourth quarter of 2006 was driven by strong organic fee-based revenue growth, offset somewhat by the $107 million valuation losses related to securities purchased from certain money market funds managed by an affiliate and the $52 million gain on the sale of the 401(k) recordkeeping business recorded in the fourth quarter of 2006. After consideration of these factors, noninterest income grew by approximately 12.3 percent year-over-year.
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 10
     Credit and debit card revenue and corporate payment products revenue were higher in the fourth quarter of 2007 than the fourth quarter of 2006 by $71 million (33.8 percent) and $24 million (17.0 percent), respectively. The strong growth in credit and debit card revenue was primarily driven by an increase in customer accounts and higher customer transaction volumes from a year ago. Approximately 7.6 percent of the growth in card revenues was the result of the full year impact of a favorable rate change from renegotiating a contract with a card association. Corporate payment products revenue growth reflected organic growth in sales volumes and card usage and the impact of an acquired business. Merchant processing services revenue was higher in the fourth quarter of 2007 than the same quarter a year ago by $35 million (14.3 percent), primarily reflecting an increase in customers and sales volumes. Trust and investment management fees increased $25 million (7.8 percent) year-over-year due to core account growth and favorable equity market conditions. Deposit service charges grew year-over-year by $13 million (5.0 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 $10 million (9.3 percent) due to higher customer transaction volumes, account growth and pricing enhancements. Commercial products revenue increased $17 million (16.3 percent) year-over-year due to higher syndication fees and foreign exchange and commercial leasing revenue. Mortgage banking revenue increased $23 million (92.0 percent) due to an increase in mortgage servicing income and production gains. These favorable changes in fee-based revenue were partially offset by a decline in other income of $167 million (78.4 percent) compared with the fourth quarter of 2006. The decline in other income was primarily due to the $107 million in valuation losses related to securities purchased from certain money market funds managed by an affiliate and the $52 million gain on the sale of the Company’s 401(k) defined contribution recordkeeping business recorded in the fourth quarter of 2006. This decline was partially offset by increased revenue from investment in bank-owned life insurance programs. Securities gains (losses) were lower year-over-year by $7 million.
     Noninterest income was lower by $67 million (3.6 percent) in the fourth quarter of 2007 compared with the third quarter of 2007. Fee-based revenue growth of 2.2 percent (8.8 percent on an annualized basis) within the core banking operations was more than offset by $107 million of valuation losses from securities purchased from certain money market funds. During the fourth quarter, the Company experienced strong growth in several fee-based categories. Credit and debit card revenue increased $46 million (19.6 percent)
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 11
primarily driven by an increase in customer accounts and higher customer transaction volumes and the impact in the current quarter of the full year effect of renegotiating the card association processing contract. Trust and investment management fees and commercial products revenue increased from the third quarter of 2007 by $13 million (3.9 percent) and $14 million (13.1 percent) respectively. Trust and investment management fees were seasonally higher in the fourth quarter and also increased due to core account growth and improved market conditions on a linked quarter basis. The commercial products revenue increase was due primarily to higher syndication fees and improved commercial leasing and foreign exchange revenue. These favorable changes were offset somewhat by seasonally lower revenue in certain categories and the net adverse impact of changes in interest rates on mortgage servicing rights. Merchant processing revenue declined by $8 million (2.8 percent) on a linked quarter basis due primarily to seasonally lower volumes. Mortgage banking revenue was $28 million (36.8 percent) lower than the third quarter of 2007 as an unfavorable change in the valuation of mortgage servicing rights (“MSRs”) and related economic hedging activities was partially offset by higher servicing revenue and production gains. Other revenue was $104 million (69.3 percent) lower on a linked quarter basis reflecting the valuation losses. In addition, net securities gains decreased $3 million on a linked quarter basis.

                                                                 
NONINTEREST EXPENSE                                                           Table 7  
 
($ in millions)                           Percent     Percent                    
                            Change     Change                    
    4Q     3Q     4Q     4Q07 vs     4Q07 vs     Full Year     Full Year     Percent  
    2007     2007     2006     3Q07     4Q06     2007     2006     Change  
     
Compensation
   $ 690     $ 656     $ 621       5.2       11.1     $ 2,640     $ 2,513       5.1  
Employee benefits
     119       119       102       —       16.7       494       481       2.7  
Net occupancy and equipment
     175       175       166       —       5.4       686       660       3.9  
Professional services
     71       56       69       26.8       2.9       233       199       17.1  
Marketing and business development
     64       66       61       (3.0 )     4.9       242       217       11.5  
Technology and communications
     134       127       133       5.5       .8       512       505       1.4  
Postage, printing and supplies
     73       70       67       4.3       9.0       283       265       6.8  
Other intangibles
     93       94       92       (1.1 )     1.1       376       355       5.9  
Debt prepayment
     —       —       22       —     nm       —       33     nm  
Other
     515       380       279       35.5       84.6       1,396       952       46.6  
                                 
 
Total noninterest expense
   $ 1,934     $ 1,743     $ 1,612       11.0       20.0     $ 6,862     $ 6,180       11.0  
                                 
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 12
Noninterest Expense
     Fourth quarter noninterest expense totaled $1,934 million, an increase of $322 million (20.0 percent) from the same quarter of 2006 and an increase of $191 million (11.0 percent) compared with the third quarter of 2007. These increases included $215 million for the Visa Charge in the current quarter and $22 million of debt prepayment charges recorded in the fourth quarter of 2006. Compensation expense increased $69 million (11.1 percent) compared with the same period of 2006 due to growth in ongoing bank operations and acquired businesses. Employee benefits expense increased $17 million (16.7 percent) year-over-year as higher medical costs were partially offset by lower pension costs. Net occupancy and equipment expense increased $9 million (5.4 percent) from the fourth quarter of 2006 primarily due to acquisitions and branch-based business initiatives. Postage, printing and supplies expense increased $6 million (9.0 percent) from the fourth quarter of 2006 due primarily to changes in postage rates. Other expense increased $236 million (84.6 percent) year-over-year, due primarily to the Visa Charge and higher credit-related costs for other real estate owned and loan collection activities. These increases were partially offset by debt prepayment charges recorded in the fourth quarter of 2006.
     Noninterest expense in the fourth quarter of 2007 was higher than the third quarter of 2007 by $191 million (11.0 percent), primarily due to the impact of the $215 million Visa Charge partially offset by a $115 million charge recognized in the third quarter of 2007 in connection with Visa’s litigation settlement with American Express. In addition, compensation expense increased by $34 million (5.2 percent) due to continued focus on business operations, customer service and expansion. Professional services expense increased by $15 million (26.8 percent) due to various business initiatives and legal related costs.
Provision for Income Taxes
     The provision for income taxes for the fourth quarter of 2007 resulted in a tax rate on a taxable equivalent basis of 31.8 percent (effective tax rate of 30.7 percent) compared with 27.3 percent (effective tax rate of 26.7 percent) in the fourth quarter of 2006 and 30.9 percent (effective tax rate of 30.1 percent) in the third quarter of 2007. The lower tax rate in the fourth quarter of the prior year compared with the current quarter was primarily due to the resolution of federal income tax examinations for all years through 2004 and certain state tax examination during the fourth quarter of 2006, which reduced the Company’s tax liabilities.
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 13
The Company expects its effective tax rate for the foreseeable future to remain stable relative to the full year rate for 2007 of 30.3 percent.

                                         
ALLOWANCE FOR CREDIT LOSSES                                   Table 8  
 
($ in millions)   4Q     3Q     2Q     1Q     4Q  
    2007     2007     2007     2007     2006  
     
Balance, beginning of period
   $ 2,260     $ 2,260     $ 2,260     $ 2,256     $ 2,256  
 
                                        
Net charge-offs
                                        
Commercial
     23       26       21       32       24  
Lease financing
     13       11       8       3       7  
     
Total commercial
     36       37       29       35       31  
Commercial mortgages
     3       1       7       1       2  
Construction and development
     7       1       2       —       —  
     
Total commercial real estate
     10       2       9       1       2  
 
                                        
Residential mortgages
     17       17       15       12       12  
 
                                        
Credit card
     88       77       81       74       68  
Retail leasing
     6       3       4       3       4  
Home equity and second mortgages
     22       20       16       16       13  
Other retail
     46       43       37       36       39  
     
Total retail
     162       143       138       129       124  
     
Total net charge-offs
     225       199       191       177       169  
Provision for credit losses
     225       199       191       177       169  
Acquisitions and other changes
     —       —       —       4       —  
     
Balance, end of period
   $ 2,260     $ 2,260     $ 2,260     $ 2,260     $ 2,256  
     
 
                                        
Components
                                        
Allowance for loan losses
   $ 2,058     $ 2,041     $ 2,028     $ 2,027     $ 2,022  
Liability for unfunded credit commitments
     202       219       232       233       234  
     
Total allowance for credit losses
   $ 2,260     $ 2,260     $ 2,260     $ 2,260     $ 2,256  
     
 
                                        
Gross charge-offs
   $ 287     $ 256     $ 252     $ 237     $ 217  
Gross recoveries
   $ 62     $ 57     $ 61     $ 60     $ 48  
 
                                        
Allowance for credit losses as a percentage of
                                        
Period-end loans
     1.47       1.52       1.55       1.56       1.57  
Nonperforming loans
     406       441       503       498       480  
Nonperforming assets
     328       353       400       388       384  
Credit Quality
     During the fourth quarter of 2007, credit losses and nonperforming assets continued to trend higher. The allowance for credit losses was $2,260 million at December 31, 2007, and at September 30, 2007, compared with $2,256 million at December 31, 2006. Total net charge-offs in the fourth quarter of 2007 were $225 million, compared with the third quarter of 2007 net charge-offs of $199 million and the fourth
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 14
quarter of 2006 net charge-offs of $169 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.
     Commercial and commercial real estate loan net charge-offs increased to $46 million in the fourth quarter of 2007 (.23 percent of average loans outstanding) compared with $39 million (.20 percent of average loans outstanding) in the third quarter of 2007 and $33 million (.17 percent of average loans outstanding) in the fourth quarter of 2006. This increasing trend in commercial and commercial real estate net charge-offs reflected anticipated increases in nonperforming loans and delinquencies within the portfolios, especially homebuilding and related industry sectors. 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 $162 million (1.28 percent of average loans outstanding) in the fourth quarter of 2007 compared with $143 million (1.15 percent of average loans outstanding) in the third quarter of 2007 and $124 million (1.05 percent of average loans outstanding) in the fourth quarter of 2006. The trend in retail net charge-offs reflected the average growth in the credit card portfolio (28.9 percent) and somewhat higher delinquency ratios from a year ago. The Company anticipates higher delinquency levels in the retail portfolios and that the trend in retail net charge-offs will accelerate but remain in a manageable range during 2008.
     The ratio of the allowance for credit losses to period-end loans was 1.47 percent at December 31, 2007, compared with 1.52 percent at September 30, 2007, and 1.57 percent at December 31, 2006. The ratio of the allowance for credit losses to nonperforming loans was 406 percent at December 31, 2007, compared with 441 percent at September 30, 2007, and 480 percent at December 31, 2006.
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 15

                                         
CREDIT RATIOS                                   Table 9  
(Percent)   4Q     3Q     2Q     1Q     4Q  
    2007     2007     2007     2007     2006  
     
Net charge-offs ratios (a)
                                        
Commercial
     .21       .25       .20       .31       .23  
Lease financing
     .86       .76       .57       .22       .51  
Total commercial
     .29       .31       .25       .30       .26  
 
                                        
Commercial mortgages
     .06       .02       .14       .02       .04  
Construction and development
     .31       .04       .09       —       —  
Total commercial real estate
     .14       .03       .13       .01       .03  
 
                                        
Residential mortgages
     .30       .30       .28       .23       .22  
 
                                        
Credit card
     3.29       3.09       3.56       3.48       3.27  
Retail leasing
     .39       .19       .24       .18       .23  
Home equity and second mortgages
     .53       .49       .41       .42       .33  
Other retail
     1.05       1.00       .89       .89       .96  
Total retail
     1.28       1.15       1.15       1.10       1.05  
 
                                        
Total net charge-offs
     .59       .54       .53       .50       .47  
 
                                        
Delinquent loan ratios - 90 days or more past due excluding nonperforming loans (b)                
Commercial
     .07       .07       .07       .07       .05  
Commercial real estate
     .02       .04       —       .04       .01  
Residential mortgages
     .86       .58       .46       .42       .42  
Retail
     .68       .55       .50       .56       .49  
Total loans
     .38       .30       .26       .27       .24  
 
                                        
Delinquent loan ratios - 90 days or more past due including nonperforming loans (b)                
Commercial
     .43       .51       .44       .46       .57  
Commercial real estate
     1.02       .83       .69       .69       .53  
Residential mortgages
     1.10       .79       .65       .59       .59  
Retail
     .73       .61       .58       .65       .59  
Total loans
     .74       .65       .57       .59       .57  
(a)   annualized and calculated on average loan balances
 
(b)   ratios are expressed as a percent of ending loan balances
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 16

                                         
ASSET QUALITY                                   Table 10  
 
($ in millions)                              
    Dec 31     Sep 30     Jun 30     Mar 31     Dec 31  
    2007     2007     2007     2007     2006  
     
Nonperforming loans
                                        
Commercial
   $ 128     $ 161     $ 128     $ 147     $ 196  
Lease financing
     53       46       44       41       40  
     
Total commercial
     181       207       172       188       236  
Commercial mortgages
     84       73       90       114       112  
Construction and development
     209       153       107       71       38  
     
Total commercial real estate
     293       226       197       185       150  
Residential mortgages
     54       48       41       38       36  
Retail
     29       32       39       43       48  
     
Total nonperforming loans
     557       513       449       454       470  
 
                                        
Other real estate
     111       113       103       113       95  
Other nonperforming assets
     22       15       13       15       22  
     
 
                                        
Total nonperforming assets (a)
   $ 690     $ 641     $ 565     $ 582     $ 587  
     
 
                                        
Accruing loans 90 days or more past due
   $ 584     $ 451     $ 376     $ 397     $ 349  
     
 
                                        
Restructured loans that continue to accrue interest
   $ 532     $ 468     $ 435     $ 411     $ 405  
     
Nonperforming assets to loans plus ORE (%)
     .45       .43       .39       .40       .41  
(a)   does not include accruing loans 90 days or more past due or restructured loans that continue to accrue interest
     Nonperforming assets at December 31, 2007, totaled $690 million, compared with $641 million at September 30, 2007, and $587 million at December 31, 2006. The ratio of nonperforming assets to loans and other real estate was .45 percent at December 31, 2007, compared with .43 percent at September 30, 2007, and .41 percent at December 31, 2006. The change in nonperforming assets reflected higher levels of nonperforming loans resulting from stress in residential construction. The Company expects nonperforming assets to increase moderately over the next several quarters due to continued stress in residential mortgages and residential construction. Accruing loans 90 days or more past due increased to $584 million at December 31, 2007, compared with $451 million at September 30, 2007, and $349 million at December 31, 2006. The increase was primarily related to residential mortgages, credit cards and home equity loans. Restructured loans that continue to accrue interest have increased from the fourth quarter of 2006, reflecting the impact of restructurings for certain residential mortgage customers in light of current economic conditions. The Company expects this trend to continue during 2008 as residential home valuations continue to decline.
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 17

                                         
CAPITAL POSITION                                   Table 11  
($ in millions)   Dec 31     Sep 30     Jun 30     Mar 31     Dec 31  
    2007     2007     2007     2007     2006  
     
Total shareholders’ equity
   $ 21,046     $ 20,686     $ 20,330     $ 20,800     $ 21,197  
Tier 1 capital
     17,539       17,288       16,876       16,917       17,036  
Total risk-based capital
     25,925       25,820       25,709       25,826       24,495  
 
                                        
Tier 1 capital ratio
     8.3 %     8.5 %     8.5 %     8.6 %     8.8 %
Total risk-based capital ratio
     12.2       12.7       13.0       13.1       12.6  
Leverage ratio
     7.9       8.0       7.9       8.0       8.2  
Common equity to assets
     8.4       8.6       8.7       8.9       9.2  
Tangible common equity to assets
     5.1       5.3       5.2       5.3       5.5  
     Total shareholders’ equity was $21.0 billion at December 31, 2007, compared with $20.7 billion at September 30, 2007, and $21.2 billion at December 31, 2006.
     The Tier 1 capital ratio was 8.3 percent at December 31, 2007, compared with 8.5 percent at September 30, 2007, and 8.8 percent at December 31, 2006. The total risk-based capital ratio was 12.2 percent at December 31, 2007, compared with 12.7 percent at September 30, 2007, and 12.6 percent at December 31, 2006. The leverage ratio was 7.9 percent at December 31, 2007, compared with 8.0 percent at September 30, 2007, and 8.2 percent at December 31, 2006. Tangible common equity to assets was 5.1 percent at December 31, 2007, compared with 5.3 percent at September 30, 2007, and 5.5 percent at December 31, 2006. All regulatory ratios continue to be in excess of stated “well-capitalized” requirements.
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 18

                                         
COMMON SHARES                                   Table 12  
 
(Millions)   4Q     3Q     2Q     1Q     4Q  
    2007     2007     2007     2007     2006  
     
Beginning shares outstanding
     1,725       1,728       1,742       1,765       1,763  
Shares issued for stock option and stock purchase plans, acquisitions and other corporate purposes
     3       3       4       11       12  
Shares repurchased
     —       (6 )     (18 )     (34 )     (10 )
     
Ending shares outstanding
     1,728       1,725       1,728       1,742       1,765  
     
     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. As of December 31, 2007, there were approximately 64 million shares remaining to be repurchased under the current authorization.
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 19

                                                                         
LINE OF BUSINESS FINANCIAL PERFORMANCE (a)                                                             Table 13  
($ in millions)                                          
    Net Income     Percent Change                             4Q 2007  
    4Q     3Q     4Q     4Q07 vs     4Q07 vs     Full Year     Full Year     Percent     Earnings  
Business Line   2007     2007     2006     3Q07     4Q06     2007     2006     Change     Composition  
     
Wholesale Banking
   $ 277     $ 265     $ 285       4.5       (2.8 )   $ 1,093     $ 1,193       (8.4 )     29 %
Consumer Banking
     405       452       418       (10.4 )     (3.1 )     1,746       1,791       (2.5 )     43  
Wealth Management & Securities Services
     102       165       157       (38.2 )     (35.0 )     592       597       (.8 )     11  
Payment Services
     310       276       237       12.3       30.8       1,075       966       11.3       33  
Treasury and Corporate Support
     (152 )     (62 )     97     nm   nm     (182 )     204     nm     (16 )
                                       
 
                                                                        
Consolidated Company
   $ 942     $ 1,096     $ 1,194       (14.1 )     (21.1 )   $ 4,324     $ 4,751       (9.0 )     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 & 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 $277 million of the Company’s net income in the fourth quarter of 2007, a 2.8 percent decrease from the same period of 2006 and a 4.5 percent increase compared with the third quarter of 2007. The decrease in Wholesale Banking’s fourth quarter of 2007 contribution from the same quarter of 2006 was the
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 20
result of higher total noninterest expense (4.3 percent) driven by investment in the business and an increase in the provision for credit losses from a year ago. This was partially offset by an increase in total net revenue (1.2 percent) primarily from a 6.6 percent growth in fee-based revenue. Net interest income was essentially flat as growth in average loan balances and the increased margin benefit of deposits was offset by lower credit spreads due to the higher cost of liquidity from a year ago. Total noninterest income increased due to higher commercial products and treasury management revenue. The growth in commercial products revenue was driven by higher loan syndication fees and commercial leasing and foreign exchange revenue. Treasury management fees increased due to higher customer transaction volumes, account growth and favorable pricing. These increases were partially offset by a decline in other revenue from a commercial real estate business. In addition, securities gains (losses) were lower due to gains recognized in the fourth quarter of 2006. 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 an increased focus on relationship management. 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 $10 million increase in net charge-offs in the fourth quarter of 2007 compared with a year ago. The change in net charge-offs reflected an increase in gross charge-offs at this stage of the business cycle.
     Wholesale Banking’s contribution to net income in the fourth quarter of 2007 compared with the third quarter of 2007 was $12 million (4.5 percent) higher due to a favorable variance in total net revenue (5.6 percent), partially offset by an increase in total noninterest expense and the provision for credit losses. Total net revenue was higher on a linked quarter basis with an increase in both net interest income and total noninterest income. Net interest income improved due to growth in average loans and interest-bearing deposit balances, partially offset by lower credit spreads due to higher liquidity costs. Total noninterest income increased on a linked quarter basis due primarily to higher commercial products revenue and market-related valuation losses recorded in the third quarter of 2007. Total noninterest expense increased from the third quarter of 2007 due to higher net shared services expense and credit related expenses. The provision for credit losses increased on a linked quarter basis due to higher net charge-offs.
     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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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 21
workplace banking, student banking, and 24-hour banking. Consumer Banking contributed $405 million of the Company’s net income in the fourth quarter of 2007, a 3.1 percent decrease from the same period of 2006 and a 10.4 percent decrease on a linked quarter basis. Within Consumer Banking, the retail banking division accounted for $386 million of the total contribution, a 7.4 percent decrease for the division on a year-over-year basis and a 7.7 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 relatively flat year-over-year as an increase in yield-related loan fees and average loan balances was offset by lower deposit balances and credit spreads due to higher liquidity costs. Total noninterest income for the retail banking division increased 4.7 percent from a year ago due primarily to growth in deposit service charges. Total noninterest expense in the fourth quarter of 2007 increased 7.0 percent for the division compared with the same quarter of 2006. Compensation and employee benefits expense increased due to acquisitions, branch expansion and other business investments. In addition, the line of business had higher credit-related costs associated with other real estate owned. The business line’s provision for credit losses increased due to a $20 million year-over-year increase in net charge-offs (27.4 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. In the fourth quarter of 2007, the mortgage banking division’s contribution was $19 million, an increase of $18 million from the same period of 2006. This division’s total net revenue increased $39 million (86.7 percent) from a year ago due to an increase in total noninterest income of $30 million primarily reflecting an increase in production gains and servicing income. In addition, the mortgage banking division’s net interest income increased by $9 million (50.0 percent) year-over-year driven by growth in loan production. Total noninterest expense for the mortgage banking division increased $11 million (25.6 percent) from the fourth 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 fourth quarter of 2007 decreased $47 million (10.4 percent) on a linked quarter basis compared with the third quarter of 2007. The retail banking division’s contribution decreased by 7.7 percent on a linked quarter basis with an increase in total noninterest expense and the provision for credit losses, along with a decline in total net revenue. Total net revenue for the retail banking division decreased $23 million (1.7 percent) due primarily to an increase in end-of-term residual losses on retail leases. Deposit service charges were relatively flat from the third quarter of 2007 primarily due to
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 22
seasonality. Total noninterest expense for the retail banking division increased 4.1 percent on a linked quarter basis, primarily due to increased transaction processing costs, customer fraud and credit-related costs on other real estate owned. The provision for credit losses for the quarter reflected a $2 million increase in net charge-offs compared with the third quarter of 2007. The contribution of the mortgage banking division decreased $15 million from the third quarter of 2007 driven primarily by a decrease in total net revenue due to an unfavorable change in the valuation of MSRs including the impact of related economic hedging activities. Total noninterest expense of the mortgage banking division increased $3 million (5.9 percent) from the third quarter of 2007 driven by production processing levels.
     Wealth Management & 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 & Securities Services contributed $102 million of the Company’s net income in the fourth quarter of 2007, a 35.0 percent decrease from the same period of 2006 and a 38.2 percent decrease from the third quarter of 2007. The decline in the business line’s contribution in the fourth quarter of 2007 from the same quarter of 2006 was the result of the $107 million valuation losses related to securities purchased from certain money market funds managed by FAF Advisors recorded this quarter, partially offset by an increase in core account growth and improved equity market conditions relative to a year ago. Net interest income was favorably impacted year-over-year by earnings from deposit growth. Total noninterest expense was 5.6 percent higher compared with the same quarter of 2006 related to processing and professional services expense.
     The decrease in the business line’s contribution in the fourth quarter of 2007 compared with the third quarter of 2007 was primarily due to the $107 million market valuation losses recorded in the fourth quarter of 2007, partially offset by seasonally higher fees, core account growth and improved market conditions. Noninterest expense also increased by 6.0 percent due primarily to the timing of marketing and professional services expenses.
     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 $310 million of the Company’s net income in the fourth quarter of 2007, a 30.8 percent increase over the same period of 2006 and a 12.3 percent increase over the third quarter of 2007. Total net revenue increased year-over-year due to higher total noninterest income (20.1 percent) and
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 23
net interest income (23.9 percent), reflecting growth in higher yielding retail loan balances, partially offset by the margin impact of merchant receivables and growth in corporate payment card balances. All payment processing revenue categories benefited from account growth, higher transaction volumes, business expansion initiatives and the impact in the current quarter of the full year effect of renegotiating a card association processing contract. Growth in total noninterest expense year-over-year primarily reflected new business initiatives, including costs associated with transaction processing and acquisitions, as well as higher collection costs. An increase in the provision for credit losses was driven by an increase in net charge-offs of $25 million year-over-year which reflected portfolio growth and somewhat higher delinquency rates from a year ago.
     The increase in Payment Services’ contribution in the fourth quarter of 2007 from the third quarter of 2007 was due to higher total net revenue (8.7 percent), partially offset by higher total noninterest expense (4.3 percent) and an increase in the provision for credit losses. Total net revenue was higher due to a 17.8 percent increase in net interest income, driven by strong growth in retail credit card balances and favorable loan yields, as well as a 6.4 percent increase in total noninterest income, primarily from credit and debit card fees, including the impact of the contract negotiation. An increase in total noninterest expense was primarily due to the timing of professional services costs, seasonally higher debit and prepaid card costs and other business expansion initiatives.
     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 a net loss of $152 million in the fourth quarter of 2007, compared with net income of $97 million in the fourth quarter of 2006 and a net loss of $62 million in the third quarter of 2007. Net interest income improved $8 million in the current quarter from the fourth quarter of 2006 reflecting higher rates on investment securities. Total noninterest income decreased $56 million due primarily to the $52 million gain on the sale of the Company’s 401(k) recordkeeping business recorded in the fourth quarter of 2006. Total noninterest expense increased $211 million year-over-year primarily reflecting the $215 million Visa Charge.
     Net income in the fourth quarter of 2007 was lower on a linked quarter basis due primarily to the impact of the $215 million Visa Charge, partially offset by a $115 million charge recognized in the third quarter of 2007 in connection with Visa’s litigation settlement with American Express.
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U.S. Bancorp Reports Fourth Quarter 2007 Results
January 15, 2008
Page 24
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 Fourth Quarter 2007 Results
January 15, 2008
Page 25
RICHARD K. DAVIS, CHAIRMAN, 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 NOON (CST) ON TUESDAY, JANUARY 15, 2008. 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 29540352. 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, January 15th, and will run through Tuesday, January 22nd, at 11:00 p.m. (CST). 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 29540352. Find the recorded call via the internet at usbank.com.
Minneapolis-based U.S. Bancorp (“USB”), with $238 billion in assets, is the parent company of U.S. Bank, 6th largest commercial bank in the United States. The Company operates 2,518 banking offices and 4,867 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       Year Ended  
(Dollars and Shares in Millions, Except Per Share Data)   December 31,       December 31,  
(Unaudited)   2007     2006       2007     2006  
       
Interest Income
                                  
Loans
   $ 2,730     $ 2,596       $ 10,627     $ 9,873  
Loans held for sale
     72       64         277       236  
Investment securities
     541       511         2,095       2,001  
Other interest income
     36       34         137       153  
           
Total interest income
     3,379       3,205         13,136       12,263  
Interest Expense
                                  
Deposits
     722       668         2,754       2,389  
Short-term borrowings
     352       342         1,433       1,203  
Long-term debt
     564       515         2,260       1,930  
           
Total interest expense
     1,638       1,525         6,447       5,522  
           
Net interest income
     1,741       1,680         6,689       6,741  
Provision for credit losses
     225       169         792       544  
           
Net interest income after provision for credit losses
     1,516       1,511         5,897       6,197  
Noninterest Income
                                  
Credit and debit card revenue
     281       210         949       800  
Corporate payment products revenue
     165       141         631       557  
ATM processing services
     62       60         245       243  
Merchant processing services
     279       244         1,101       963  
Trust and investment management fees
     344       319         1,339       1,235  
Deposit service charges
     272       259         1,058       1,023  
Treasury management fees
     117       107         472       441  
Commercial products revenue
     121       104         433       415  
Mortgage banking revenue
     48       25         259       192  
Investment products fees and commissions
     38       36         146       150  
Securities gains (losses), net
     4       11         15       14  
Other
     46       213         524       813  
           
Total noninterest income
     1,777       1,729         7,172       6,846  
Noninterest Expense
                                  
Compensation
     690       621         2,640       2,513  
Employee benefits
     119       102         494       481  
Net occupancy and equipment
     175       166         686       660  
Professional services
     71       69         233       199  
Marketing and business development
     64       61         242       217  
Technology and communications
     134       133         512       505  
Postage, printing and supplies
     73       67         283       265  
Other intangibles
     93       92         376       355  
Debt prepayment
     —       22         —       33  
Other
     515       279         1,396       952  
           
Total noninterest expense
     1,934       1,612         6,862       6,180  
           
Income before income taxes
     1,359       1,628         6,207       6,863  
Applicable income taxes
     417       434         1,883       2,112  
           
Net income
   $ 942     $ 1,194       $ 4,324     $ 4,751  
           
Net income applicable to common equity
   $ 927     $ 1,179       $ 4,264     $ 4,703  
           
Earnings per common share
   $ .54     $ .67       $ 2.46     $ 2.64  
Diluted earnings per common share
   $ .53     $ .66       $ 2.43     $ 2.61  
Dividends declared per common share
   $ .425     $ .40       $ 1.625     $ 1.39  
Average common shares outstanding
     1,726       1,761         1,735       1,778  
Average diluted common shares outstanding
     1,746       1,789         1,758       1,804  
       

Page 26

 

U.S. Bancorp
Consolidated Ending Balance Sheet
                 
    December 31,     December 31,  
(Dollars in Millions)   2007     2006  
 
Assets
                
Cash and due from banks
   $ 8,884     $ 8,639  
Investment securities
                
Held-to-maturity
     74       87  
Available-for-sale
     43,042       40,030  
Loans held for sale
     4,819       3,256  
Loans
                
Commercial
     51,074       46,190  
Commercial real estate
     29,207       28,645  
Residential mortgages
     22,782       21,285  
Retail
     50,764       47,477  
     
Total loans
     153,827       143,597  
Less allowance for loan losses
     (2,058 )     (2,022 )
     
Net loans
     151,769       141,575  
Premises and equipment
     1,779       1,835  
Goodwill
     7,647       7,538  
Other intangible assets
     3,043       3,227  
Other assets
     16,558       13,045  
     
Total assets
   $ 237,615     $ 219,232  
     
 
                
Liabilities and Shareholders’ Equity
                
Deposits
                
Noninterest-bearing
   $ 33,334     $ 32,128  
Interest-bearing
     72,458       70,330  
Time deposits greater than $100,000
     25,653       22,424  
     
Total deposits
     131,445       124,882  
Short-term borrowings
     32,370       26,933  
Long-term debt
     43,440       37,602  
Other liabilities
     9,314       8,618  
     
Total liabilities
     216,569       198,035  
Shareholders’ equity
                
Preferred stock
     1,000       1,000  
Common stock
     20       20  
Capital surplus
     5,749       5,762  
Retained earnings
     22,693       21,242  
Less treasury stock
     (7,480 )     (6,091 )
Other comprehensive income
     (936 )     (736 )
     
Total shareholders’ equity
     21,046       21,197  
     
Total liabilities and shareholders’ equity
   $ 237,615     $ 219,232  
 

Page 27

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