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): July 17, 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 July 17, 2007, U.S. Bancorp (the “Company”) issued a press release discussing quarter ended June 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 July 17, 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: July 17, 2007

EX-99.1 2 c16770exv99w1.htm PRESS RELEASE

	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 SECOND QUARTER OF 2007

EARNINGS SUMMARY	Table 1
($ in millions, except per-share data)							Percent			Percent
							Change			Change
	2Q		1Q		2Q		2Q07 vs			2Q07 vs			YTD		YTD		Percent
	2007		2007		2006		1Q07			2Q06			2007		2006		Change
Net income	$	1,156	$	1,130	$	1,201		2.3			(3.7	)	$	2,286	$	2,354		(2.9	)
Diluted earnings per common share		.65		.63		.66		3.2			(1.5	)		1.27		1.29		(1.6	)
Return on average assets (%)		2.09		2.09		2.27								2.09		2.25
Return on average common equity (%)		23.0		22.4		24.3								22.7		23.8
Net interest margin (%)		3.44		3.51		3.68								3.47		3.74
Efficiency ratio (%)		46.8		46.0		44.4								46.4		44.6
Tangible efficiency ratio (%)(a)		44.1		43.2		41.8								43.7		42.1
Dividends declared per common share	$	.40	$	.40	$	.33		—			21.2		$	.80	$	.66		21.2
Book value per common share (period-end)		11.19		11.37		10.89		(1.6	)		2.8

(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, July 17, 2007 — U.S. Bancorp (NYSE: USB) today reported net income of $1,156 million for the second quarter of 2007, compared with $1,201 million for the second quarter of 2006. Diluted earnings per common share of $.65 in the second quarter of 2007 were lower 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 23.0 percent, respectively, for the second quarter of 2007, compared with returns of 2.27 percent and 24.3 percent, respectively, for the second quarter of 2006.

     U.S. Bancorp President and Chief Executive Officer Richard K. Davis said, “The Company’s second quarter results were, as expected, seasonally strong. Earnings per diluted common share for the second quarter were $0.65, which was 3.2 percent higher than the earnings per diluted common share of $0.63 in the first quarter of 2007, although slightly below the earnings per diluted common share of $0.66 reported in the

U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 2

second quarter of 2006. The seasonally strong results reflected growth in all fee income categories, modest balance sheet expansion and strong credit quality. The Company’s profitability metrics remained solid with return on average assets of 2.09 percent and return on average common equity of 23.0 percent.

     “One of the main highlights of our second quarter results was the seasonally strong growth in fee income. The Payment Services group posted double digit growth in fees on both a year-over-year and linked quarter basis, while noninterest income related to trust and investment management and treasury management also posted strong growth. The momentum we are seeing in these fee-based businesses is a direct result of the investments we have made over the past number of years. Focused on building our expertise in payments and processing, we expect to continue to capitalize on opportunities to invest more going forward.

     “The Company’s efficiency ratio of 46.8 percent in the second quarter, although higher than the second quarter of 2006 and the previous quarter, remains among the best in the industry. Increases in noninterest expense in the current quarter reflected continuing investments in our fee-based business lines and banking franchise, as well as a number of distinct business event-driven activities. Our disciplined approach to expense control has not changed and will continue to be a focus and hallmark for this Company. As our second quarter results demonstrate, our efficiency allows us to continue to invest and support the growth of our businesses, while maintaining our industry-leading profitability.

     “Another highlight of our second quarter results was the Company’s continuing strong credit quality metrics. Nonperforming assets declined once again this quarter, while net charge-offs, as expected, increased modestly to .53 percent of average loans outstanding from .50 percent in the first quarter of this year. As we grow our balance sheet, we will continue to maintain our prudent approach to credit which is, given the current economic environment, even more important and challenging today than it has been in the recent past.

     “The banking industry as a whole is operating under a challenging economic environment. We have not been immune to those challenges, but our second quarter results further support my belief that our Company is well positioned to produce a consistent, predictable and repeatable earnings stream going forward. As a Company, we are focused on the future and the opportunity to grow to better serve our customers, communities and shareholders.”

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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 3

     The Company’s results for the second quarter of 2007 declined over the same period of 2006. Strong fee-based revenue growth in Payment Services and Wealth Management were muted somewhat by a $35 million gain in the second quarter of 2006 from the initial public offering of a card association. The year-over-year results also reflected an expected increase in credit costs and lower net interest income from a year ago. On a linked quarter basis, net income increased $26 million, or $.02 per diluted common share, reflecting continued strength in fee-based revenue partially offset by higher credit costs and operating expenses.

     Total net revenue on a taxable-equivalent basis for the second quarter of 2007 was $3,505 million, $53 million (1.5 percent) higher than the second quarter of 2006, primarily reflecting a 5.7 percent increase in noninterest income partially offset by a 2.8 percent decline in net interest income from a year ago. Noninterest income growth was driven primarily by organic business growth of 7.8 percent offset somewhat by the impact in the second quarter of 2006 of a $35 million gain from the initial public offering of a card association. On a linked quarter basis, total net revenue increased $143 million (4.3 percent), primarily reflecting organic growth and seasonally higher transaction volumes in several revenue categories.

     Total noninterest expense in the second quarter of 2007 was $1,640 million, $110 million (7.2 percent) higher than the second quarter of 2006, principally due to investments in business initiatives, higher operating and business integration costs associated with recent acquisitions, costs related to tax-advantaged investments and an increase in merchant airline processing primarily due to sales volumes and recent business expansion with a major airline. Growth in expenses from a year ago was partially offset by a debt prepayment charge recorded in the second quarter of 2006. On a linked quarter basis, total noninterest expense increased by $95 million (6.1 percent), reflecting the timing of marketing and business development programs, costs associated with business initiatives, including the pan-European Payment Systems expansion and incremental merchant airline processing, and higher credit-related costs for other real estate owned and collection activities. These increases on a linked quarter basis were partially offset by lower employee benefits costs which are seasonally higher in the first quarter of the year.

     Provision for credit losses for the second quarter of 2007 was $191 million, an increase of $14 million from the first quarter of 2007 and $66 million higher than the second quarter of 2006. The increase in the provision for credit losses from a year ago reflected expected losses from strong growth in credit card accounts. Also, the provision for credit losses in the second quarter of 2006 partially reflected the favorable residual impact on net charge-offs, principally for credit cards and other retail charge-offs, due to changes in

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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 4

bankruptcy laws in the fourth quarter of 2005. Net charge-offs in the second quarter of 2007 were $191 million, compared with the first quarter of 2007 net charge-offs of $177 million and the second quarter of 2006 net charge-offs of $125 million. The Company’s credit quality continues to be strong as nonperforming assets declined $17 million (2.9 percent) during the second quarter of 2007. Total nonperforming assets were $565 million at June 30, 2007, compared with $582 million at March 31, 2007, and $550 million at June 30, 2006. The ratio of the allowance for credit losses to nonperforming loans was 503 percent at June 30, 2007, compared with 498 percent at March 31, 2007, and 500 percent at June 30, 2006.

INCOME STATEMENT HIGHLIGHTS	Table 2
(Taxable-equivalent basis, $ in millions,							Percent			Percent
except per-share data)							Change			Change
	2Q		1Q		2Q		2Q07 vs			2Q07 vs			YTD		YTD		Percent
	2007		2007		2006		1Q07			2Q06			2007		2006		Change
Net interest income	$1,650		$1,666		$1,697			(1.0	)		(2.8	)	$3,316		$3,422			(3.1	)
Noninterest income		1,855		1,696		1,755		9.4			5.7			3,551		3,369		5.4
Total net revenue		3,505		3,362		3,452		4.3			1.5			6,867		6,791		1.1
Noninterest expense		1,640		1,545		1,530		6.1			7.2			3,185		3,030		5.1
Income before provision and taxes		1,865		1,817		1,922		2.6			(3.0	)		3,682		3,761		(2.1	)
Provision for credit losses		191		177		125		7.9			52.8			368		240		53.3
Income before taxes		1,674		1,640		1,797		2.1			(6.8	)		3,314		3,521		(5.9	)
Taxable-equivalent adjustment		18		17		11		5.9			63.6			35		21		66.7
Applicable income taxes		500		493		585		1.4			(14.5	)		993		1,146		(13.4	)
Net income	$1,156		$1,130		$1,201			2.3			(3.7	)	$2,286		$2,354			(2.9	)
Net income applicable to common equity	$1,141		$1,115		$1,184			2.3			(3.6	)	$2,256		$2,337			(3.5	)
Diluted earnings per common share	$    .65		$    .63		$    .66			3.2			(1.5	)	$  1.27		$  1.29			(1.6	)

Net Interest Income

     Second quarter net interest income on a taxable-equivalent basis was $1,650 million, compared with $1,697 million in the second quarter of 2006. Average earning assets for the period increased over the second quarter of 2006 by $7.4 billion (4.0 percent), primarily driven by an increase of $6.3 billion (4.5 percent) in total average loans. The positive impact to net interest income from the growth in earning assets was more than offset by a lower net interest margin. The net interest margin in the second quarter of 2007 was 3.44 percent, compared with 3.68 percent in the second quarter of 2006, reflecting the competitive environment and the impact of the flat yield curve during the past several quarters. Since the second quarter of 2006, credit spreads have tightened by approximately 9 basis points across most lending products due to

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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 5

competitive loan pricing. In addition, funding costs have increased as rates paid on interest-bearing deposits have risen and the funding mix continues to shift toward higher cost deposits and other funding sources. An increase in loan fees partially offset these factors.

     Net interest income in the second quarter of 2007 decreased from the first quarter of 2007 by $16 million (1.0 percent). Net interest income generated by growth in average earning assets of $1.2 billion was more than offset by the impact on net interest margin of tighter credit spreads, higher funding costs and specific management actions in the first quarter of 2007. During the second quarter of 2007, the net interest margin was 3.44 percent, compared with 3.51 percent for the first quarter of 2007, a decline of 7 basis points. Competitive pricing was a factor in the decline as credit spreads narrowed slightly, while expected changes in the mix of deposits, other funding sources and net free funds, including the residual impact of investments in bank-owned life insurance products during the mid-first quarter of 2007, also contributed to the unfavorable variance. In the latter half of the second quarter of 2007, the tightening of credit spreads and changes in the deposit and other funding mix have moderated. Given these factors, and that the impact of the bank-owned life insurance investment is fully incorporated into the net interest margin, the Company anticipates the net interest margin to remain relatively stable throughout the remainder of the year. This is consistent with previous management guidance.

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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 6

NET INTEREST INCOME	Table 3
(Taxable-equivalent basis; $ in millions)
										Change			Change
	2Q			1Q			2Q			2Q07 vs			2Q07 vs			YTD			YTD
	2007			2007			2006			1Q07			2Q06			2007			2006			Change
Components of net interest income
Income on earning assets	$	3,276		$	3,223		$	3,037		$	53		$	239		$	6,499		$	5,940		$	559
Expense on interest-bearing liabilities		1,626			1,557			1,340			69			286			3,183			2,518			665
Net interest income	$	1,650		$	1,666		$	1,697		$	(16	)	$	(47	)	$	3,316		$	3,422		$	(106	)
Average yields and rates paid
Earning assets yield		6.83	%		6.81	%		6.58	%		.02	%		.25	%		6.82	%		6.49	%		.33	%
Rate paid on interest-bearing liabilities		3.95			3.88			3.45			.07			.50			3.91			3.28			.63
Gross interest margin		2.88	%		2.93	%		3.13	%		(.05	)%		(.25	)%		2.91	%		3.21	%		(.30	)%
Net interest margin		3.44	%		3.51	%		3.68	%		(.07	)%		(.24	)%		3.47	%		3.74	%		(.27	)%
Average balances
Investment securities	$	40,704		$	40,879		$	40,087		$	(175	)	$	617		$	40,791		$	39,885		$	906
Loans		145,653			144,693			139,370			960			6,283			145,176			138,579			6,597
Earning assets		192,301			191,135			184,890			1,166			7,411			191,721			184,000			7,721
Interest-bearing liabilities		165,177			162,682			155,755			2,495			9,422			163,937			154,838			9,099
Net free funds (a)		27,124			28,453			29,135			(1,329	)		(2,011	)		27,784			29,162			(1,378	)

(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 Second Quarter 2007 Results
July 17, 2007
Page 7

AVERAGE LOANS	Table 4
($ in millions)							Percent			Percent
							Change			Change
	2Q		1Q		2Q		2Q07 vs			2Q07 vs			YTD		YTD		Percent
	2007		2007		2006		1Q07			2Q06			2007		2006		Change
Commercial	$	41,572	$	41,470	$	39,871		.2			4.3		$	41,515	$	39,362		5.5
Lease financing		5,625		5,549		5,199		1.4			8.2			5,588		5,139		8.7
Total commercial		47,197		47,019		45,070		.4			4.7			47,103		44,501		5.8
Commercial mortgages		19,562		19,672		20,195		(.6	)		(3.1	)		19,617		20,231		(3.0	)
Construction and development		8,941		8,960		8,600		(.2	)		4.0			8,956		8,475		5.7
Total commercial real estate		28,503		28,632		28,795		(.5	)		(1.0	)		28,573		28,706		(.5	)
Residential mortgages		21,831		21,569		20,868		1.2			4.6			21,700		20,927		3.7
Credit card		9,120		8,635		7,360		5.6			23.9			8,879		7,241		22.6
Retail leasing		6,662		6,845		7,115		(2.7	)		(6.4	)		6,753		7,182		(6.0	)
Home equity and second mortgages		15,735		15,555		15,035		1.2			4.7			15,646		14,985		4.4
Other retail		16,605		16,438		15,127		1.0			9.8			16,522		15,037		9.9
Total retail		48,122		47,473		44,637		1.4			7.8			47,800		44,445		7.5
Total loans	$	145,653	$	144,693	$	139,370		.7			4.5		$	145,176	$	138,579		4.8

     Average loans for the second quarter of 2007 were $6.3 billion (4.5 percent) higher than the second quarter of 2006, driven by growth in average total retail loans of $3.5 billion (7.8 percent), total commercial loans of $2.1 billion (4.7 percent), and residential mortgages of $963 million (4.6 percent), partially offset by a decline in total commercial real estate loans of $292 million (1.0 percent). Average loans for the second quarter of 2007 were higher than the first quarter of 2007 by $1.0 billion (.7 percent), primarily reflecting growth in total retail loans, driven by growth in average credit card balances. Residential mortgages and total commercial loans also grew modestly in the second quarter of 2007 compared with the first quarter of 2007. Total commercial real estate declined slightly from the first quarter of 2007, reflecting customer refinancings given liquidity available in the financial markets, a decision to reduce condominium construction financing in selected markets and a slowdown in residential homebuilding.

     Average investment securities in the second quarter of 2007 were $617 million (1.5 percent) higher than the second 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 Second Quarter 2007 Results
July 17, 2007
Page 8

AVERAGE DEPOSITS	Table 5
($ in millions)							Percent			Percent
							Change			Change
	2Q		1Q		2Q		2Q07 vs			2Q07 vs			YTD		YTD		Percent
	2007		2007		2006		1Q07			2Q06			2007		2006		Change
Noninterest-bearing deposits	$	27,977	$	27,677	$	28,949		1.1			(3.4	)	$	27,828	$	28,893		(3.7	)
Interest-bearing deposits
Interest checking		25,858		25,076		23,333		3.1			10.8			25,470		23,238		9.6
Money market savings		24,603		25,712		26,981		(4.3	)		(8.8	)		25,154		27,178		(7.4	)
Savings accounts		5,443		5,401		5,720		.8			(4.8	)		5,422		5,705		(5.0	)
Total of savings deposits		55,904		56,189		56,034		(.5	)		(.2	)		56,046		56,121		(.1	)
Time certificates of deposit less than $100,000		14,716		14,775		13,689		(.4	)		7.5			14,745		13,598		8.4
Time deposits greater than $100,000		20,378		22,087		22,561		(7.7	)		(9.7	)		21,228		22,089		(3.9	)
Total interest-bearing deposits		90,998		93,051		92,284		(2.2	)		(1.4	)		92,019		91,808		.2
Total deposits	$	118,975	$	120,728	$	121,233		(1.5	)		(1.9	)	$	119,847	$	120,701		(.7	)

     Average noninterest-bearing deposits for the second quarter of 2007 decreased $972 million (3.4 percent) compared with the second quarter of 2006, reflecting a decline in business demand deposits within most business lines as these customers reduced excess liquidity to fund business growth. The decline in business demand account balances was partially offset by higher corporate trust deposits.

     Average total savings deposits remained relatively flat year-over-year as an increase of $2.5 billion (10.8 percent) in interest checking balances due to higher broker dealer, government and institutional trust balances was offset by a decline of $2.7 billion (8.1 percent) in average money market and savings balances primarily within Consumer Banking. The overall decrease in average money market savings balances year-over-year was primarily 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 second quarter of 2007 than in the second quarter of 2006 by $1.0 billion (7.5 percent) and time deposits greater than $100,000 declined by $2.2 billion (9.7 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.

     Average noninterest-bearing deposits for the second quarter of 2007 had an increase of $300 million (1.1 percent) compared with the first quarter of 2007, primarily due to a seasonal increase in government

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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 9

demand deposits. Total average savings deposits had a slight decrease of $285 million (.5 percent) from the first quarter of 2007. Average time deposits greater than $100,000 decreased $1.7 billion (7.7 percent) from the prior quarter. This change in average time deposits greater than $100,000 reflected asset/liability funding decisions and included a reduction of higher cost time deposits with government agencies, broker dealers and other business customers offset by favorable growth in personal certificates of deposits and lower cost foreign deposits.

NONINTEREST INCOME	Table 6
($ in millions)							Percent		Percent
							Change		Change
	2Q		1Q		2Q		2Q07 vs		2Q07 vs			YTD		YTD		Percent
	2007		2007		2006		1Q07		2Q06			2007		2006		Change
Credit and debit card revenue	$	228	$	205	$	202		11.2		12.9		$	433	$	384		12.8
Corporate payment products revenue		157		145		139		8.3		12.9			302		266		13.5
ATM processing services		62		59		61		5.1		1.6			121		120		.8
Merchant processing services		285		250		253		14.0		12.6			535		466		14.8
Trust and investment management fees		342		322		314		6.2		8.9			664		611		8.7
Deposit service charges		272		243		264		11.9		3.0			515		496		3.8
Treasury management fees		126		111		116		13.5		8.6			237		223		6.3
Commercial products revenue		105		100		107		5.0		(1.9	)		205		211		(2.8	)
Mortgage banking revenue		68		67		75		1.5		(9.3	)		135		99		36.4
Investment products fees and commissions		38		34		42		11.8		(9.5	)		72		80		(10.0	)
Securities gains (losses), net		3		1		3	nm			—			4		3		33.3
Other		169		159		179		6.3		(5.6	)		328		410		(20.0	)
Total noninterest income	$	1,855	$	1,696	$	1,755		9.4		5.7		$	3,551	$	3,369		5.4

Noninterest Income

     Second quarter noninterest income was $1,855 million, an increase of $100 million (5.7 percent) from the same quarter of 2006 and $159 million (9.4 percent) higher than the first quarter of 2007. The increase in noninterest income over the second quarter of 2006 was driven by organic growth of 7.8 percent offset somewhat by a $35 million gain on the initial public offering of a card association recorded in the second quarter of 2006.

     Credit and debit card revenue and corporate payment products revenue were higher in the second quarter of 2007 than the second quarter of 2006 by $26 million (12.9 percent) and $18 million (12.9 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. The corporate payment

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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 10

products revenue growth reflected organic growth in sales volumes and card usage and an acquired business. Merchant processing services revenue was higher in the second quarter of 2007 than the same quarter a year ago by $32 million (12.6 percent), primarily reflecting an increase in customers and sales volumes. Trust and investment management fees increased by $28 million (8.9 percent) year-over-year due to core account growth and favorable market conditions. Deposit service charges grew year-over-year by $8 million (3.0 percent) primarily due to increased transaction-related fees and the impact of continued growth in net new checking accounts. Treasury management fees increased by $10 million (8.6 percent) due to higher transaction volumes, customer growth and pricing changes. These favorable changes in fee-based revenue were partially offset by a decline in other income of $10 million (5.6 percent) compared with the second quarter of 2006. The reduction in other income reflects the gain recognized in the second quarter of 2006 related to the initial public offering of a card association. This was partially offset by an increase in revenue from investment in a bank-owned life insurance program. In addition, revenue from equity investments was somewhat higher in the second quarter of 2007 as compared with the same period of 2006. Mortgage banking revenue declined year-over-year by $7 million (9.3 percent). Growth in both production gains and servicing income was more than offset by an adverse change in the valuation of mortgage servicing rights (“MSR”) and corresponding MSR economic hedges due to changes in interest rates late in the second quarter of 2007.

     Noninterest income was higher by $159 million (9.4 percent) in the second quarter of 2007 compared with the first quarter of 2007. Credit and debit card revenue increased $23 million (11.2 percent) and corporate payment products revenue increased $12 million (8.3 percent), primarily reflecting seasonally higher sales volumes and account growth. Merchant processing services revenue increased by $35 million (14.0 percent) compared with the first quarter of 2007 due to higher sales volumes and pricing initiatives. Trust and investment management fees and treasury management fees increased over the first quarter of 2007 by $20 million (6.2 percent) and $15 million (13.5 percent), respectively, due to seasonally higher tax filing fees and tax receipt processing volumes. Deposit service charges grew by $29 million (11.9 percent) due to higher transaction-related fees and net new accounts. In addition to fee-based revenue increases, other income increased by $10 million due primarily to increased revenue from the incremental investment in a bank-owned life insurance program during the first quarter of 2007.

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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 11

NONINTEREST EXPENSE	Table 7
($ in millions)							Percent			Percent
							Change			Change
	2Q		1Q		2Q		2Q07 vs			2Q07 vs			YTD		YTD		Percent
	2007		2007		2006		1Q07			2Q06			2007		2006		Change
Compensation	$	659	$	635	$	627		3.8			5.1		$	1,294	$	1,260		2.7
Employee benefits		123		133		123		(7.5	)		—			256		256		—
Net occupancy and equipment		171		165		161		3.6			6.2			336		326		3.1
Professional services		59		47		41		25.5			43.9			106		76		39.5
Marketing and business development		64		48		58		33.3			10.3			112		98		14.3
Technology and communications		126		125		127		.8			(.8	)		251		244		2.9
Postage, printing and supplies		71		69		66		2.9			7.6			140		132		6.1
Other intangibles		95		94		89		1.1			6.7			189		174		8.6
Debt prepayment		—		—		11		—		nm				—		11	nm
Other		272		229		227		18.8			19.8			501		453		10.6
Total noninterest expense	$	1,640	$	1,545	$	1,530		6.1			7.2		$	3,185	$	3,030		5.1

Noninterest Expense

     Second quarter noninterest expense totaled $1,640 million, an increase of $110 million (7.2 percent) from the same quarter of 2006 and $95 million (6.1 percent) more than the first quarter of 2007. Compensation expense increased by $32 million (5.1 percent) as compared with the same period of 2006 due to ongoing bank operations and acquired businesses. Net occupancy and equipment expense increased $10 million (6.2 percent) from the second quarter of 2006 primarily due to acquisitions and branch-based business initiatives. Professional services expense increased by $18 million (43.9 percent) due to revenue enhancing business initiatives and higher legal costs associated with litigation and establishment of a bank charter in Ireland to support pan-European payment processing. Marketing and business development expense increased $6 million (10.3 percent) year-over-year due to the timing of customer promotions, solicitations and advertising activities. Postage, printing and supplies increased by $5 million (7.6 percent) from the second quarter of 2006 due to changes in postage rates and increases in customer-related operations. The increase in other intangibles expense of $6 million (6.7 percent) from the same period of 2006 reflected the impact of recent acquisitions in Consumer Banking, Wealth Management and Payment Services. Other expense increased by $45 million (19.8 percent) compared with the prior year, due to an increase in the Company’s merchant airline processing driven by volumes and the impact of the recent signing of a contract with a major airline. The change in other expense also reflected an increase in the costs related to tax-advantaged investments, integration expenses related to recent acquisitions and higher credit-

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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 12

related costs for other real estate owned and loan collection activities. These expense increases were partially offset by an $11 million debt prepayment charge recorded in the second quarter of 2006.

     Noninterest expense in the second quarter of 2007 was higher than the first quarter of 2007 by $95 million (6.1 percent). Compensation expense increased $24 million (3.8 percent) primarily due to seasonal increases in merit-based compensation and higher production-based commissions and incentives. Professional services increased $12 million (25.5 percent) from the first quarter of 2007 due to higher legal costs associated with business initiatives, litigation and the establishment of the bank in Ireland to support pan-European payment processing. Marketing and business development expense increased $16 million (33.3 percent) due to the timing of customer promotions, solicitations and advertising activities within the Consumer Banking and Payment Services business lines. Other expense increased $43 million (18.8 percent) compared with the first quarter of 2007. This increase was driven by higher costs for the Company’s merchant airline processing due to seasonally higher ticket sales volumes and the incremental business of a major airline, higher costs associated with tax-advantaged investments and increased expenses related to other real estate owned and loan collection efforts. These increases were partially offset by employee benefits expense which declined $10 million (7.5 percent) compared with the first quarter of 2007 due to a normal seasonal decline in payroll tax expense.

Provision for Income Taxes

     The provision for income taxes for the second 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 33.2 percent (effective tax rate of 32.8 percent) in the second quarter of 2006 and 31.1 percent (effective tax rate of 30.4 percent) in the first 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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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 13

ALLOWANCE FOR CREDIT LOSSES									Table 8
($ in millions)	2Q		1Q		4Q		3Q		2Q
	2007		2007		2006		2006		2006
Balance, beginning of period	$2,260		$2,256		$2,256		$2,251		$2,251
Net charge-offs
Commercial		21		32		24		18		13
Lease financing		8		3		7		3		7
Total commercial		29		35		31		21		20
Commercial mortgages		7		1		2		—		(1	)
Construction and development		2		—		—		—		1
Total commercial real estate		9		1		2		—		—
Residential mortgages		15		12		12		11		11
Credit card		81		74		68		56		50
Retail leasing		4		3		4		4		2
Home equity and second mortgages		16		16		13		12		13
Other retail		37		36		39		31		29
Total retail		138		129		124		103		94
Total net charge-offs		191		177		169		135		125
Provision for credit losses		191		177		169		135		125
Acquisitions and other changes		—		4		—		5		—
Balance, end of period	$2,260		$2,260		$2,256		$2,256		$2,251
Components
Allowance for loan losses	$2,028		$2,027		$2,022		$2,034		$2,039
Liability for unfunded credit commitments		232		233		234		222		212
Total allowance for credit losses	$2,260		$2,260		$2,256		$2,256		$2,251
Gross charge-offs	$   252		$   237		$   217		$   195		$   176
Gross recoveries	$     61		$     60		$     48		$     60		$     51
Allowance for credit losses as a percentage of
Period-end loans		1.55		1.56		1.57		1.58		1.61
Nonperforming loans		503		498		480		476		500
Nonperforming assets		400		388		384		392		409

Credit Quality

     The overall credit quality of the Company continued to be strong during the second quarter of 2007. The allowance for credit losses was $2,260 million at June 30, 2007 and at March 31, 2007, and was $2,251 million at June 30, 2006. The ratio of the allowance for credit losses to period-end loans was 1.55 percent at June 30, 2007, compared with 1.56 percent at March 31, 2007, and 1.61 percent at June 30, 2006. The ratio of the allowance for credit losses to nonperforming loans was 503 percent at June 30, 2007, compared with 498 percent at March 31, 2007, and 500 percent at June 30, 2006. Total net charge-offs in the second quarter of 2007 were $191 million, compared with the first quarter of 2007 net charge-offs of $177 million and the

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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 14

second quarter of 2006 net charge-offs of $125 million. The expected increase in total net charge-offs from a year ago was due primarily to an anticipated increase in consumer charge-offs, specifically related to credit cards. 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 $38 million in the second quarter of 2007 (.20 percent of average loans outstanding) compared with $36 million (.19 percent of average loans outstanding) in the first quarter of 2007 and $20 million (.11 percent of average loans outstanding) in the second quarter of 2006. The Company expects commercial and commercial real estate net charge-offs to continue to increase somewhat over the next several quarters due to slightly higher gross charge-offs and lower loan recoveries.

     Retail loan net charge-offs were $138 million in the second quarter of 2007 compared with $129 million in the first quarter of 2007 and $94 million in the second quarter of 2006. Retail loan net charge-offs increased as compared with the first quarter of 2007 and from the second quarter of 2006, reflecting higher levels of credit card losses in the current period due to growth in customer accounts and lower credit card charge-offs in prior periods related to the impact of the bankruptcy legislation changes that occurred in the fourth quarter of 2005. Retail loan net charge-offs as a percent of average loans outstanding were 1.15 percent in the second quarter of 2007, compared with 1.10 percent and .84 percent in the first quarter of 2007 and second quarter of 2006, respectively. In addition to the impact of bankruptcy laws, the 31 basis point increase in retail net charge-offs from the second quarter of 2006 reflected the impact on retail customers of implementing minimum balance payment requirements during the past several quarters. The Company anticipates slightly higher delinquencies in the retail portfolios and that net charge-offs will continue to increase modestly during 2007.

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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 15

CREDIT RATIOS									Table 9
(Percent)	2Q		1Q		4Q		3Q		2Q
	2007		2007		2006		2006		2006
Net charge-offs ratios (a)
Commercial		.20		.31		.23		.18		.13
Lease financing		.57		.22		.51		.23		.54
Total commercial		.25		.30		.26		.18		.18
Commercial mortgages		.14		.02		.04		—		(.02	)
Construction and development		.09		—		—		—		.05
Total commercial real estate		.13		.01		.03		—		—
Residential mortgages		.28		.23		.22		.21		.21
Credit card		3.56		3.48		3.27		2.85		2.72
Retail leasing		.24		.18		.23		.22		.11
Home equity and second mortgages		.41		.42		.33		.31		.35
Other retail		.89		.89		.96		.79		.77
Total retail		1.15		1.10		1.05		.90		.84
Total net charge-offs		.53		.50		.47		.38		.36
Delinquent loan ratios - 90 days or more past due excluding nonperforming loans (b)
Commercial		.07		.07		.05		.06		.05
Commercial real estate		—		.04		.01		.01		—
Residential mortgages		.50		.46		.45		.36		.30
Retail		.48		.54		.48		.41		.39
Total loans		.26		.27		.24		.21		.19
Delinquent loan ratios - 90 days or more past due including nonperforming loans (b)
Commercial		.44		.46		.57		.55		.58
Commercial real estate		.69		.69		.53		.54		.40
Residential mortgages		.69		.63		.62		.53		.49
Retail		.55		.63		.58		.52		.52
Total loans		.57		.59		.57		.54		.51

(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 Second Quarter 2007 Results
July 17, 2007
Page 16

ASSET QUALITY									Table 10
($ in millions)
	Jun 30		Mar 31		Dec 31		Sep 30		Jun 30
	2007		2007		2006		2006		2006
Nonperforming loans
Commercial	$	128	$	147	$	196	$	192	$	203
Lease financing		44		41		40		39		38
Total commercial		172		188		236		231		241
Commercial mortgages		90		114		112		114		88
Construction and development		107		71		38		40		25
Total commercial real estate		197		185		150		154		113
Residential mortgages		41		38		36		36		39
Retail		39		43		48		53		57
Total nonperforming loans		449		454		470		474		450
Other real estate		103		113		95		79		77
Other nonperforming assets		13		15		22		22		23
Total nonperforming assets (a)	$	565	$	582	$	587	$	575	$	550
Accruing loans 90 days or more past due	$	376	$	397	$	349	$	295	$	264
Restructured loans that continue to accrue interest	$	435	$	411	$	405	$	369	$	370
Nonperforming assets to loans plus ORE (%)		.39		.40		.41		.40		.39

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

     Nonperforming assets at June 30, 2007, totaled $565 million, compared with $582 million at March 31, 2007, and $550 million at June 30, 2006. The ratio of nonperforming assets to loans and other real estate was .39 percent at June 30, 2007, compared with .40 percent at March 31, 2007, and .39 percent at June 30, 2006. Restructured loans that continue to accrue interest have increased from the second quarter of 2006, reflecting the impact of implementing higher minimum balance payment requirements for retail customers and restructuring for residential mortgage customers in light of economic conditions. The Company expects nonperforming assets to remain relatively stable or increase modestly over the next several quarters.

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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 17

CAPITAL POSITION													Table 11
($ in millions)	Jun 30			Mar 31			Dec 31			Sep 30			Jun 30
	2007			2007			2006			2006			2006
Total shareholders’ equity	$	20,330		$	20,800		$	21,197		$	20,926		$	20,415
Tier 1 capital		16,876			16,917			17,036			17,042			16,841
Total risk-based capital		25,709			25,826			24,495			25,011			24,893
Tier 1 capital ratio		8.5	%		8.6	%		8.8	%		8.8	%		8.9	%
Total risk-based capital ratio		13.0			13.1			12.6			13.0			13.1
Leverage ratio		7.9			8.0			8.2			8.3			8.2
Common equity to assets		8.7			8.9			9.2			9.2			9.1
Tangible common equity to assets		5.2			5.3			5.5			5.4			5.6

     Total shareholders’ equity was $20.3 billion at June 30, 2007, compared with $20.8 billion at March 31, 2007, and $20.4 billion at June 30, 2006.

     The Tier 1 capital ratio was 8.5 percent at June 30, 2007, compared with 8.6 percent at March 31, 2007, and 8.9 percent at June 30, 2006. The total risk-based capital ratio was 13.0 percent at June 30, 2007, compared with 13.1 percent at March 31, 2007, and at June 30, 2006. The leverage ratio was 7.9 percent at June 30, 2007, compared with 8.0 percent at March 31, 2007, and 8.2 percent at June 30, 2006. Tangible common equity to assets was 5.2 percent at June 30, 2007, compared with 5.3 percent at March 31, 2007, and 5.6 percent at June 30, 2006. All regulatory ratios continue to be in excess of stated “well-capitalized” requirements.

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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 18

COMMON SHARES													Table 12
(Millions)	2Q			1Q			4Q			3Q			2Q
	2007			2007			2006			2006			2006
Beginning shares outstanding		1,742			1,765			1,763			1,783			1,783
Shares issued for stock option and stock purchase plans, acquisitions and other corporate purposes		4			11			12			10			9
Shares repurchased		(18	)		(34	)		(10	)		(30	)		(9	)
Ending shares outstanding		1,728			1,742			1,765			1,763			1,783

     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 second quarter of 2007, the Company repurchased 18 million shares of common stock. As of June 30, 2007, there were approximately 70 million shares remaining to be repurchased under the current authorization.

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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 19

LINE OF BUSINESS FINANCIAL PERFORMANCE (a)																				Table 13
($ in millions)
	Net Income							Percent Change												2Q 2007
	2Q			1Q		2Q		2Q07 vs		2Q07 vs			YTD		YTD		Percent			Earnings
Business Line	2007			2007		2006		1Q07		2Q06			2007		2006		Change			Composition
Wholesale Banking	$	278		$	275	$	305		1.1		(8.9	)	$	553	$	612		(9.6	)		24	%
Consumer Banking		456			435		488		4.8		(6.6	)		891		901		(1.1	)		39
Wealth Management		169			153		149		10.5		13.4			322		286		12.6			15
Payment Services		259			230		253		12.6		2.4			489		478		2.3			22
Treasury and Corporate Support		(6	)		37		6	nm		nm				31		77		(59.7	)		—
Consolidated Company	$	1,156		$	1,130	$	1,201		2.3		(3.7	)	$	2,286	$	2,354		(2.9	)		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, 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 $278 million of the Company’s net income in the second quarter of 2007, an 8.9 percent decrease from the same period of 2006 and a 1.1 percent increase as compared with the first quarter of 2007.

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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 20

The decrease in Wholesale Banking’s second quarter of 2007 contribution from the same quarter of 2006 was the result of lower total net revenue (2.7 percent), higher total noninterest expense (4.8 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 partially offset by strong 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 and the margin benefit of deposits. Total noninterest income increased due to stronger treasury management fees driven by higher transaction volumes and higher equity investment revenue. This growth was partially offset by a decline in commercial products revenue related to capital markets fees. Total noninterest expense increased due to higher compensation and benefits expense due to increasing the number of relationship managers, production-based incentives and business growth initiatives. The unfavorable variance in the provision for credit losses was due to a $12 million increase in net charge-offs in the second 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 second quarter of 2007 compared with the first quarter of 2007 was $3 million (1.1 percent) higher due to a favorable variance in total net revenue (1.9 percent), partially offset by an increase in total noninterest expense. Total net revenue was higher on a linked quarter basis due to strong fee-based income principally related to seasonally higher treasury management fees from tax receipt processing. Total noninterest expense increased from the first quarter of 2007 due to an increase in net shared services expense due primarily to the increased processing expenses from tax receipt volumes and higher credit-related costs from other real estate owned. The provision for credit losses decreased on a linked quarter basis due to lower 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, workplace banking, student banking, and 24-hour banking. Consumer Banking contributed $456 million of the Company’s net income in the second quarter of 2007, a 6.6 percent decrease from the same period of 2006 and a 4.8 percent increase from the prior quarter. Within Consumer Banking, the retail banking division contributed $428 million of the total contribution, a 5.9 percent decrease for the division on a year-over-year basis and a 4.4 percent increase from the prior quarter. An increase in total net revenue for the

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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 21

retail banking division was offset by an expected increase in the provision for credit losses and increased total noninterest expense as compared with the same period of 2006. Total noninterest income for the retail banking division increased from a year ago due to growth in deposit service charges of 3.0 percent due to increased transaction-related fees and the impact of net new checking accounts and to an increase in other fee revenue. Total noninterest expense in the second quarter of 2007 increased 5.5 percent for the division compared with the same quarter of 2006. Compensation and employee benefits expense increased related to recent acquisitions, branch expansion, production-based incentives and other business initiatives. In addition, the line of business recognized higher costs for professional services caused by revenue enhancement initiatives, credit-related costs associated with other real estate owned and customer fraud losses, partially offset by a reduction in net shared services expense. The business line experienced a $22 million year-over-year increase in net charge-offs (40.0 percent), reflecting higher levels of retail charge-offs. Bankruptcies were generally lower in 2006 due to the lingering effects of changes in bankruptcy laws in late 2005. In the second quarter of 2007, the mortgage banking division’s contribution was $28 million, a decrease of $5 million from the same period of 2006. This division’s total net revenue decreased $4 million (4.2 percent) from a year ago primarily due to the impact of changes in the net MSR valuation and the related derivatives utilized for managing interest rate valuation risk. Changes in interest rates late in the second quarter had an adverse impact on these net MSR valuations. Total noninterest expense for the mortgage banking division increased $4 million (9.3 percent) from the second quarter of 2006 primarily due to higher production levels from a year ago and servicing costs associated with other real estate owned and foreclosures.

     The increase in Consumer Banking’s contribution of $21 million (4.8 percent) in the second quarter of 2007 from the first quarter of 2007 was principally due to higher fee-based revenue in the retail banking division. The retail banking division’s contribution increased by 4.4 percent on a linked quarter basis due to an increase in deposit service charges principally due to higher transaction-related fees. Total noninterest expense for the retail banking division on a linked quarter basis was essentially flat. The provision for credit losses for the quarter reflected an $8 million increase in net charge-offs relative to the first quarter of 2007, driven by commercial net charge-offs in the community banking sector and residential mortgages. The contribution of the mortgage banking division increased $3 million from the first quarter of 2007 driven by an increase in total net revenue that reflected an 18.7 percent increase in mortgage production gains and servicing income as compared with the prior quarter, partially offset by an unfavorable valuation change in MSR and the corresponding derivatives to economically hedge the servicing rights. Total noninterest

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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 22

expense of the mortgage banking division increased $2 million (4.4 percent) from the first quarter of 2007 driven by production processing levels.

     Wealth Management provides trust, private banking, financial advisory, investment management, retail brokerage services, insurance, custody and mutual fund servicing through six businesses: Private Client Group, Corporate Trust, U.S. Bancorp Investments and Insurance, FAF Advisors, Institutional Trust and Custody and Fund Services. Wealth Management contributed $169 million of the Company’s net income in the second quarter of 2007, a 13.4 percent increase over the same period of 2006 and a 10.5 percent increase from the first quarter of 2007. The growth in the business line’s contribution in the second 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 declined slightly (1.2 percent) from the same quarter of 2006 principally due to the benefit of cost savings from business integration activities.

     The increase in the business line’s contribution in the second quarter of 2007 as compared with the first quarter of 2007 was due to an increase in noninterest income driven by seasonally higher tax-related fees, core account growth and favorable equity market conditions.

     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 $259 million of the Company’s net income in the second quarter of 2007, a 2.4 percent increase over the same period of 2006 and a 12.6 percent increase from the first quarter of 2007. Strong growth in income before provision and income taxes of 10.0 percent from a year ago was partially offset by an expected increase in the provision for credit losses (55.4 percent). The increase in total net revenue year-over-year was due to growth in total noninterest income (12.1 percent) and net interest income (6.4 percent), reflecting growth in higher yielding retail loan balances, partially offset by the margin impact of growth in nonearning assets related to recent acquisitions and a declining yield on retail credit cards. All 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 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 $36

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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 23

million year-over-year reflecting portfolio growth, the impact of fully implementing minimum balance payment requirements and the favorable effects in the prior year of changes in bankruptcy laws.

     The increase in Payment Services’ contribution in the second quarter of 2007 from the first quarter of 2007 was due to higher total net revenue (8.7 percent), partially offset by a higher total noninterest expense (4.8 percent) and provision for credit losses (8.6 percent). Total net revenue was higher due to an 11.4 percent increase in total noninterest income, reflecting seasonally higher sales volumes, account growth and pricing initiatives. 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 collection costs and processing expenses related to incremental 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 a net loss of $6 million in the second quarter of 2007, compared with net income of $6 million in the second quarter of 2006 and $37 million in the first quarter of 2007. Net interest income decreased in the current quarter from the second quarter of 2006 by $18 million, reflecting the adverse impact of a flat yield curve and the mix of higher cost wholesale funding to support earning asset growth. Total noninterest income decreased $32 million due principally to the $35 million gain from the initial public offering of a card association in the second quarter of 2006. Total noninterest expense increased $24 million year-over-year reflecting an increase in costs related to tax-advantaged investments, guarantee liabilities associated with expanding the airline merchant business and conversion-related costs. These increases were partially offset by an $11 million debt prepayment charge recorded in the second quarter of 2006. The favorable change in income taxes, compared with a year ago, resulted from incremental investment in tax-exempt municipal securities, tax-advantaged investments and expansion of a bank-owned life insurance program.

     Net income in the second quarter of 2007 was lower than the first quarter of 2007 due to a decrease in total net revenue and an unfavorable variance in total noninterest expense, partially offset by a favorable change in income taxes. Net interest income decreased primarily due to the higher cost of wholesale funding and specific management decisions, including expanding the bank-owned life insurance program. Total noninterest expense increased by $57 million primarily due to seasonally higher incentive expense and

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U.S. Bancorp Reports Second Quarter 2007 Results
July 17, 2007
Page 24

professional services expenses related to the establishment of the bank in Ireland. In addition, costs associated with tax-advantaged investments, merchant airline liabilities and business conversions increased on a linked quarter basis. The residual tax benefits recognized by the Treasury and Corporate Support business line increased during the second quarter of 2007 primarily due to higher levels of tax credits related to tax-advantaged investments and the expansion of a bank-owned life insurance program.

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 Second Quarter 2007 Results
July 17, 2007
Page 25

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 1:00 P.M. (CDT) ON TUESDAY, JULY 17, 2007. The conference call will be available by telephone or on the internet. To access the conference call, please dial 800-896-8445 and ask for the U.S. Bancorp earnings conference call. Participants calling from outside the United States, please dial 785-830-1916. For those unable to participate during the live call, a recording of the call will be available approximately one hour after the conference call ends on Tuesday, July 17^th, and will run though Tuesday, July 24^th, at 11:00 p.m. (CDT). To access the recorded message dial 800-667-7085. If calling from outside the United States, please dial 402-220-0665 to access the recording. Find the recorded call via the internet at usbank.com.

Minneapolis-based U.S. Bancorp (“USB”), with $223 billion in assets, is the 6th largest financial holding company in the United States. The Company operates 2,499 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. U.S. Bancorp is the parent company of U.S. Bank. 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				Six Months Ended
(Dollars and Shares in Millions, Except Per Share Data)	June 30,				June 30,
(Unaudited)	2007		2006		2007		2006
Interest Income
Loans	$	2,616	$	2,425	$	5,194	$	4,732
Loans held for sale		70		57		129		108
Investment securities		516		500		1,032		990
Other interest income		34		36		68		79
Total interest income		3,236		3,018		6,423		5,909
Interest Expense
Deposits		663		578		1,338		1,081
Short-term borrowings		379		270		707		540
Long-term debt		562		484		1,097		887
Total interest expense		1,604		1,332		3,142		2,508
Net interest income		1,632		1,686		3,281		3,401
Provision for credit losses		191		125		368		240
Net interest income after provision for credit losses		1,441		1,561		2,913		3,161
Noninterest Income
Credit and debit card revenue		228		202		433		384
Corporate payment products revenue		157		139		302		266
ATM processing services		62		61		121		120
Merchant processing services		285		253		535		466
Trust and investment management fees		342		314		664		611
Deposit service charges		272		264		515		496
Treasury management fees		126		116		237		223
Commercial products revenue		105		107		205		211
Mortgage banking revenue		68		75		135		99
Investment products fees and commissions		38		42		72		80
Securities gains (losses), net		3		3		4		3
Other		169		179		328		410
Total noninterest income		1,855		1,755		3,551		3,369
Noninterest Expense
Compensation		659		627		1,294		1,260
Employee benefits		123		123		256		256
Net occupancy and equipment		171		161		336		326
Professional services		59		41		106		76
Marketing and business development		64		58		112		98
Technology and communications		126		127		251		244
Postage, printing and supplies		71		66		140		132
Other intangibles		95		89		189		174
Debt prepayment		—		11		—		11
Other		272		227		501		453
Total noninterest expense		1,640		1,530		3,185		3,030
Income before income taxes		1,656		1,786		3,279		3,500
Applicable income taxes		500		585		993		1,146
Net income	$	1,156	$	1,201	$	2,286	$	2,354
Net income applicable to common equity	$	1,141	$	1,184	$	2,256	$	2,337
Earnings per common share	$	.66	$	.66	$	1.29	$	1.30
Diluted earnings per common share	$	.65	$	.66	$	1.27	$	1.29
Dividends declared per common share	$	.40	$	.33	$	.80	$	.66
Average common shares outstanding		1,736		1,781		1,744		1,791
Average diluted common shares outstanding		1,760		1,805		1,770		1,816

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U.S. Bancorp
Consolidated Ending Balance Sheet

	June 30,			December 31,			June 30,
(Dollars in Millions)	2007			2006			2006
	(Unaudited)						(Unaudited)
Assets
Cash and due from banks	$	6,534		$	8,639		$	7,234
Investment securities
Held-to-maturity		81			87			98
Available-for-sale		39,433			40,030			38,364
Loans held for sale		4,552			3,256			3,992
Loans
Commercial		46,459			46,190			45,369
Commercial real estate		28,421			28,645			28,562
Residential mortgages		21,992			21,285			21,063
Retail		48,836			47,477			44,985
Total loans		145,708			143,597			139,979
Less allowance for loan losses		(2,028	)		(2,022	)		(2,039	)
Net loans		143,680			141,575			137,940
Premises and equipment		1,798			1,835			1,817
Goodwill		7,593			7,538			7,283
Other intangible assets		3,352			3,227			3,158
Other assets		15,507			13,045			13,519
Total assets	$	222,530		$	219,232		$	213,405
Liabilities and Shareholders’ Equity
Deposits
Noninterest-bearing	$	29,545		$	32,128		$	30,730
Interest-bearing		70,216			70,330			69,302
Time deposits greater than $100,000		19,941			22,424			22,687
Total deposits		119,702			124,882			122,719
Short-term borrowings		27,160			26,933			20,570
Long-term debt		45,946			37,602			41,952
Other liabilities		9,392			8,618			7,749
Total liabilities		202,200			198,035			192,990
Shareholders’ equity
Preferred stock		1,000			1,000			1,000
Common stock		20			20			20
Capital surplus		5,748			5,762			5,789
Retained earnings		22,110			21,242			20,164
Less treasury stock		(7,476	)		(6,091	)		(5,421	)
Other comprehensive income		(1,072	)		(736	)		(1,137	)
Total shareholders’ equity		20,330			21,197			20,415
Total liabilities and shareholders’ equity	$	222,530		$	219,232		$	213,405

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EX-99.1

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