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U.S. Bancorp Reports Net Income for the Fourth Quarter of 2007

MINNEAPOLIS--(BUSINESS WIRE)--Jan. 15, 2008--U.S. Bancorp (NYSE: USB):

EARNINGS SUMMARY                                               Table 1
----------------------------------------------------------------------
($ in millions, except per-
 share data)                       Percent Percent
                                    Change  Change  Full  Full
                  4Q     3Q     4Q 4Q07 vs 4Q07 vs  Year  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.

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 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 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 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 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, except
 per-share data)                  Percent Percent
                                   Change  Change  Full   Full
                 4Q     3Q     4Q 4Q07 vs 4Q07 vs  Year   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.

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
                                           4Q      3Q      4Q 4Q07 vs
                                         2007    2007    2006    3Q07
                                     ---------------------------------
Components of net interest income
  Income on earning assets            $3,431  $3,379  $3,236    $52
  Expense on interest-bearing
   liabilities                         1,668   1,694   1,541    (26)
                                     ---------------------------------
Net interest income                   $1,763  $1,685  $1,695    $78
                                     ---------------------------------

Average yields and rates paid
  Earning assets yield                  6.81%   6.90%   6.79%  (.09)%
  Rate paid on interest-bearing
   liabilities                          3.83    4.01    3.84   (.18)
                                     ---------------------------------
Gross interest margin                   2.98%   2.89%   2.95%   .09%
                                     ---------------------------------
Net interest margin                     3.51%   3.44%   3.56%   .07%
                                     ---------------------------------

Average balances
  Investment securities              $42,525 $41,128 $40,266 $1,397
  Loans                              151,451 147,517 143,686  3,934
  Earning assets                     200,307 194,886 189,660  5,421
  Interest-bearing liabilities       172,999 167,805 159,469  5,194
  Net free funds (a)                  27,308  27,081  30,191    227

(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.

NET INTEREST INCOME                                            Table 3
----------------------------------------------------------------------
(Taxable-equivalent basis; $ in
 millions)
                                    Change
                                   4Q07 vs Full Year Full Year
                                      4Q06      2007      2006  Change
                                 -------------------------------------
Components of net interest income
  Income on earning assets          $195    $13,309   $12,351   $958
  Expense on interest-bearing
   liabilities                       127      6,545     5,561    984
                                 -------------------------------------
Net interest income                  $68     $6,764    $6,790   $(26)
                                 -------------------------------------

Average yields and rates paid
  Earning assets yield               .02%      6.84%     6.63%   .21%
  Rate paid on interest-bearing
   liabilities                      (.01)      3.91      3.55    .36
                                 -------------------------------------
Gross interest margin                .03%      2.93%     3.08%  (.15)%
                                 -------------------------------------
Net interest margin                 (.05)%     3.47%     3.65%  (.18)%
                                 -------------------------------------

Average balances
  Investment securities           $2,259    $41,313   $39,961 $1,352
  Loans                            7,765    147,348   140,601  6,747
  Earning assets                  10,647    194,683   186,231  8,452
  Interest-bearing liabilities    13,530    167,196   156,613 10,583
  Net free funds (a)              (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.
AVERAGE LOANS                                                  Table 4
----------------------------------------------------------------------
($ in millions)                                               Percent
                                                               Change
                                         4Q       3Q       4Q 4Q07 vs
                                       2007     2007     2006    3Q07
                                   -----------------------------------

Commercial                          $43,649  $41,648  $41,264    4.8
Lease financing                       5,978    5,742    5,394    4.1
                                   --------------------------
      Total commercial               49,627   47,390   46,658    4.7

Commercial mortgages                 19,775   19,592   19,897     .9
Construction and development          8,983    8,870    9,029    1.3
                                   --------------------------
      Total commercial real estate   28,758   28,462   28,926    1.0

Residential mortgages                22,670   22,258   21,235    1.9

Credit card                          10,621    9,895    8,242    7.3
Retail leasing                        6,123    6,424    7,015   (4.7)
Home equity and second mortgages     16,343   16,048   15,444    1.8
Other retail                         17,309   17,040   16,166    1.6
                                   --------------------------
      Total retail                   50,396   49,407   46,867    2.0
                                   --------------------------

Total loans                        $151,451 $147,517 $143,686    2.7
                                   --------------------------

AVERAGE LOANS                                                  Table 4
----------------------------------------------------------------------
($ in millions)                    Percent
                                    Change
                                   4Q07 vs Full Year Full Year Percent
                                      4Q06      2007      2006  Change
                                  ------------------------------------

Commercial                            5.8    $42,087   $40,199    4.7
Lease financing                      10.8      5,725     5,241    9.2
                                           -------------------
      Total commercial                6.4     47,812    45,440    5.2

Commercial mortgages                  (.6)    19,650    20,074   (2.1)
Construction and development          (.5)     8,942     8,686    2.9
                                           -------------------
      Total commercial real estate    (.6)    28,592    28,760    (.6)

Residential mortgages                 6.8     22,085    21,053    4.9

Credit card                          28.9      9,574     7,634   25.4
Retail leasing                      (12.7)     6,512     7,112   (8.4)
Home equity and second mortgages      5.8     15,923    15,146    5.1
Other retail                          7.1     16,850    15,456    9.0
                                           -------------------
      Total retail                    7.5     48,859    45,348    7.7
                                           -------------------

Total loans                           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 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
                                                               Change
                                         4Q       3Q       4Q 4Q07 vs
                                       2007     2007     2006    3Q07
                                   -----------------------------------

Noninterest-bearing deposits        $26,869  $26,947  $29,020    (.3)
Interest-bearing deposits
   Interest checking                 27,458   26,052   24,127    5.4
   Money market savings              25,996   25,018   26,214    3.9
   Savings accounts                   5,100    5,283    5,392   (3.5)
                                   --------------------------
         Total savings deposits      58,554   56,353   55,733    3.9
   Time certificates of deposit
    less
      than $100,000                  14,539   14,590   13,974    (.3)
   Time deposits greater than
    $100,000                         25,461   21,255   22,255   19.8
                                   --------------------------
         Total interest-bearing
          deposits                   98,554   92,198   91,962    6.9
                                   --------------------------
Total deposits                     $125,423 $119,145 $120,982    5.3
                                   --------------------------

AVERAGE DEPOSITS                                               Table 5
----------------------------------------------------------------------
($ in millions)                    Percent
                                    Change
                                   4Q07 vs Full Year Full Year Percent
                                      4Q06      2007      2006  Change
                                  ------------------------------------

Noninterest-bearing deposits         (7.4)   $27,364   $28,755   (4.8)
Interest-bearing deposits
   Interest checking                 13.8     26,117    23,552   10.9
   Money market savings               (.8)    25,332    26,667   (5.0)
   Savings accounts                  (5.4)     5,306     5,599   (5.2)
                                           -------------------
         Total savings deposits       5.1     56,755    55,818    1.7
   Time certificates of deposit
    less
      than $100,000                   4.0     14,654    13,761    6.5
   Time deposits greater than
    $100,000                         14.4     22,302    22,255     .2
                                           -------------------
         Total interest-bearing
          deposits                    7.2     93,711    91,834    2.0
                                           -------------------
Total deposits                        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-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  Full   Full
                 4Q     3Q     4Q 4Q07 vs 4Q07 vs  Year   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.

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) 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)                    PercentPercent
                                    Change Change   Full   Full
                   4Q     3Q     4Q4Q07 vs4Q07 vs   Year   YearPercent
                 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
               --------------------               -------------

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. 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 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.

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
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.

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.

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.

LINE OF BUSINESS FINANCIAL PERFORMANCE (a)                   Table 13
---------------------------------------------------------------------
($ in millions)
                                     Net Income     Percent Change
                                 ------------------ --------------- -
                                    4Q     3Q    4Q 4Q07 vs 4Q07 vs
Business Line                     2007   2007  2006    3Q07    4Q06
                                 ------------------------------------

Wholesale Banking                $277   $265   $285    4.5    (2.8)
Consumer Banking                  405    452    418  (10.4)   (3.1)
Wealth Management &
   Securities Services            102    165    157  (38.2)  (35.0)
Payment Services                  310    276    237   12.3    30.8
Treasury and Corporate Support   (152)   (62)    97      nm      nm
                                 ------------------

Consolidated Company             $942 $1,096 $1,194  (14.1)  (21.1)
                                 ------------------

(a) preliminary data

LINE OF BUSINESS FINANCIAL PERFORMANCE (a)                       Table
                                                                    13
----------------------------------------------------------------------
($ in millions)
                                                              4Q 2007
                              Full Year Full Year Percent    Earnings
Business Line                      2007      2006  Change Composition
                             -----------------------------------------

Wholesale Banking               $1,093     $1,193   (8.4)         29 %
Consumer Banking                 1,746      1,791   (2.5)         43
Wealth Management &
   Securities Services             592        597    (.8)         11
Payment Services                 1,075        966   11.3          33
Treasury and Corporate
 Support                          (182)       204      nm        (16)
                             --------------------         -----------

Consolidated Company            $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 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, 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 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 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.

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.

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.

U.S. Bancorp
Consolidated Statement of Income

(Dollars and Shares in Millions,     Three Months Ended   Year Ended
 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
----------------------------------------------------------------------
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
----------------------------------------------------------------------

CONTACT: U.S. Bancorp
Media Relations
Steve Dale, 612-303-0784
or
Investor Relations
Judith T. Murphy, 612-303-0783

SOURCE: U.S. Bancorp

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding U.S. Bancorp's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.



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