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U.S. Bancorp Reports Net Income for the First Quarter of 2008

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

 EARNINGS SUMMARY                                              Table 1
----------------------------------------------------------------------
 ($ in millions, except per-share
  data)                                                Percent Percent
                                                        Change  Change
                                       1Q    4Q     1Q 1Q08 vs 1Q08 vs
                                     2008  2007   2007    4Q07    1Q07
                                   -----------------------------------

 Net income                        $1,090  $942 $1,130   15.7    (3.5)
 Diluted earnings per common share    .62   .53    .63   17.0    (1.6)

 Return on average assets (%)        1.85  1.63   2.09
 Return on average common equity
  (%)                                21.3  18.3   22.4
 Net interest margin (%)             3.55  3.51   3.51
 Efficiency ratio (%)                43.5  55.1   46.4
 Tangible efficiency ratio (%) (a)   41.4  52.5   43.6

 Dividends declared per common
  share                             $.425 $.425  $.400     --     6.3
 Book value per common share
  (period-end)                      11.55 11.60  11.37    (.4)    1.6

 (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 $1,090 million for the first quarter of 2008, compared with $1,130 million for the first quarter of 2007. Diluted earnings per common share of $.62 in the first quarter of 2008 were slightly lower than the same period of 2007 by 1.6 percent, or $.01 per diluted common share. Return on average assets and return on average common equity were 1.85 percent and 21.3 percent, respectively, for the first quarter of 2008, compared with returns of 2.09 percent and 22.4 percent, respectively, for the first quarter of 2007. Several significant items were reflected in the Company's quarterly results, including a $492 million gain related to the Visa Inc. initial public offering that occurred in March of 2008 ("Visa Gain") and $253 million of impairment charges on structured investment securities purchased in the fourth quarter of 2007 from certain money market funds managed by an affiliate. The Company's results also included incremental provision for credit losses of $192 million, reflecting continuing stress in the residential real estate markets and related industries, in addition to the continued growth of the consumer loan portfolios. The quarter also included the adoption of a new accounting standard which resulted in a $62 million reduction to pretax income. In addition, the Company recorded a $25 million contribution to the U.S. Bancorp Foundation and accrued $22 million for certain litigation matters. These items taken together had an approximate impact of ($.02) per diluted common share. The fourth quarter of 2007 results also were affected by two significant items, the pretax charges of $215 million for the Company's proportionate share of a contingent obligation to indemnify Visa Inc. for certain litigation matters ("Visa Litigation 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.

U.S. Bancorp Chairman, President and Chief Executive Officer Richard K. Davis said, "Our Company's first quarter results reflected the disciplined approach we have taken toward managing credit and operating risk, while prudently investing for growth. Although the quarter included a number of significant items, the net impact to diluted earnings per share was small and our core operating results were solid.

"Our fundamental revenue growth was strong year-over-year and on a linked quarter basis. Net interest income increased 9.8 percent over the same quarter of last year and 3.8 percent over the prior quarter, reflecting growth in earning assets and a slightly higher net interest margin of 3.55 percent. Although fee income is seasonally the lowest in the first quarter of each year - 2008 being no exception - on a year-over-year basis the business lines continued to show strong growth in a number of fee categories, including payments, treasury management, commercial products and mortgage banking.

"In addition to the favorable trends in net interest income and fees, average loans and deposits showed very positive growth rates over the first and fourth quarters of 2007, reflecting the business lines' continued success in executing a number of growth initiatives, expanding current customer relationships and attracting new customers.

"As expected, net charge-offs and nonperforming assets increased in the first quarter at manageable levels for our Company. Declining home prices in many of our markets, in addition to stress in the residential home building and mortgage-related industries, are expected to continue through the balance of the year. Given our Company's overall credit risk profile, however, we anticipate that expected increases in net charge-offs and nonperforming assets in the near term will continue to be manageable.

"Our capital position is strong and the Company remains well-capitalized. As we indicated last quarter, we suspended our stock buyback for the majority of the first quarter in order to reach our target Tier 1 capital ratio of 8.5 percent, after having dropped slightly below that level on December 31, 2007. At March 31, 2008, the Company's Tier 1 capital ratio was slightly above target at 8.6 percent.

"At the end of March, we announced that our lead bank, U.S. Bank National Association, had entered into a definitive agreement to purchase Mellon 1st Business Bank in California. This acquisition will more than double our deposit market share in the attractive, growing Los Angeles area, as well as significantly expand our middle market customer base. Mellon 1st Business Bank is an excellent example of the type of acquisition we continue to seek - acquisitions that serve to strengthen our presence in the faster growing markets within our footprint.

"With the first quarter of 2008 successfully behind us, I am confident that our Company will continue to perform and prosper, despite the current economic environment. Our management team and employees are focused on business growth initiatives and opportunities to deepen current client relationships and acquire new customers. In other words, we are "open for business" and look forward to maintaining and reinforcing our position as one of the leaders in the financial services industry. Our Company will continue to invest in our products and services, our communities, and our employees, while focusing on our responsibilities to produce consistent, predictable and repeatable results for our shareholders. "

The Company's net income for the first quarter of 2008 decreased by $40 million (3.5 percent) from the same period of 2007. The reduction in net income year-over-year was the result of a 14.4 percent growth in operating income (income before provision and taxes), offset by an increase in the provision for credit losses. On a linked quarter basis, net income increased $148 million (15.7 percent) principally due to the favorable variance that resulted from the Visa Litigation Charge and valuation losses recorded in the fourth quarter of 2007. This positive variance was partially offset by the net unfavorable impact of the significant items recorded in the current quarter.

Total net revenue on a taxable-equivalent basis for the first quarter of 2008 was $3,874 million, $485 million (14.3 percent) higher than the first quarter of 2007, reflecting a 9.8 percent increase in net interest income and an 18.6 percent increase in noninterest income. Net interest income increased over a year ago driven by growth in earning assets and improving net interest margins. The growth in noninterest income included organic growth in operating fee revenues of 7.3 percent. On a linked quarter basis, total net revenue on a taxable equivalent basis increased $300 million (8.4 percent), reflecting strong growth in net interest income of 3.8 percent, as well as a 12.9 percent increase in noninterest income. The increase in noninterest income reflected the net favorable impact of the Visa Gain, the structured investment securities impairment, and the adoption of a new accounting standard in the current quarter and valuation losses recorded in the fourth quarter of 2007, offset somewhat by seasonally lower fees in several noninterest income categories.

Total noninterest expense in the first quarter of 2008 was $1,796 million, $224 million (14.2 percent) higher than the first quarter of 2007, and $172 million (8.7 percent) lower than the prior quarter. The increase, year-over-year, was principally due to higher costs associated with business initiatives designed to expand the Company's geographical presence and strengthen customer relationships, including investments in relationship managers, branch initiatives and payment services businesses. The increase in operating expenses also included higher credit collection costs, the impact of a new accounting standard, litigation, a charitable contribution and incremental costs associated with tax-advantaged projects.

Provision for credit losses for the first quarter of 2008 was $485 million, an increase of $260 million over the fourth quarter of 2007 and $308 million over the first quarter of 2007. The increase in the provision for credit losses from a year ago reflected continuing stress in the residential real estate markets, including homebuilding and related supplier industries, driven by declining home prices in several geographic regions. It also reflected the continued growth of the consumer loan portfolios. Net charge-offs in the first quarter of 2008 were $293 million, compared with net charge-offs of $225 million in the fourth quarter of 2007 and $177 million in the first quarter of 2007. Total nonperforming assets were $845 million at March 31, 2008, compared with $690 million at December 31, 2007, and $582 million at March 31, 2007. Nonperforming assets increased $155 million (22.5 percent) during the first quarter of 2008 over the fourth quarter of 2007, as a result of stress in residential home construction and related industries, an increase in foreclosed properties and the impact of the economic slowdown on other commercial customers. The ratio of the allowance for credit losses to nonperforming loans was 358 percent at March 31, 2008, compared with 406 percent at December 31, 2007, and 498 percent at March 31, 2007.

 INCOME STATEMENT HIGHLIGHTS                                   Table 2
----------------------------------------------------------------------
 (Taxable-equivalent basis, $ in
  millions, except per-share                           Percent Percent
  data)                                                 Change  Change
                                      1Q     4Q     1Q 1Q08 vs 1Q08 vs
                                    2008   2007   2007    4Q07    1Q07
                                  ------------------------------------

 Net interest income              $1,830 $1,763 $1,666    3.8     9.8
 Noninterest income                2,044  1,811  1,723   12.9    18.6
                                  --------------------
    Total net revenue              3,874  3,574  3,389    8.4    14.3
 Noninterest expense               1,796  1,968  1,572   (8.7)   14.2
                                  --------------------
 Income before provision and
  taxes                            2,078  1,606  1,817   29.4    14.4
 Provision for credit losses         485    225    177   nm      nm
                                  --------------------
 Income before taxes               1,593  1,381  1,640   15.4    (2.9)
 Taxable-equivalent adjustment        27     22     17   22.7    58.8
 Applicable income taxes             476    417    493   14.1    (3.4)
                                  --------------------
 Net income                       $1,090   $942 $1,130   15.7    (3.5)
                                  --------------------
 Net income applicable to common
  equity                          $1,078   $927 $1,115   16.3    (3.3)
                                  --------------------
 Diluted earnings per common
  share                             $.62   $.53   $.63   17.0    (1.6)
                                  --------------------

Net Interest Income

First quarter net interest income on a taxable-equivalent basis was $1,830 million, compared with $1,666 million in the first quarter of 2007, an increase of $164 million (9.8 percent). The increase was due to strong growth in average earning assets as well as an improving net interest margin from a year ago. Average earning assets for the period increased over the first quarter of 2007 by $15.9 billion (8.3 percent), primarily driven by an increase of $10.5 billion (7.3 percent) in average loans and $3.0 billion (7.4 percent) in investment securities. During the first quarter of 2008, the net interest margin increased to 3.55 percent compared with 3.51 percent in the first quarter of 2007. The improvement in the net interest margin was due to several factors, including growth in higher spread assets, the benefit of the Company's current asset/liability position in a declining interest rate environment and related asset/liability re-pricing dynamics. Also, short-term funding rates were marginally lower due to market volatility and changing liquidity in the overnight fed fund markets given current market conditions. In addition, the Company's net interest margin benefited by an increase in yield-related loan fees.

Net interest income in the first quarter of 2008 increased by $67 million (3.8 percent) over the fourth quarter of 2007. This favorable variance was due to growth in average earning assets of $6.7 billion (3.3 percent) and an increase in the net interest margin from 3.51 percent in the fourth quarter of 2007 to 3.55 percent in the current quarter. Given the current rate environment and yield curve, the Company expects the net interest margin to remain relatively stable during 2008.

 NET INTEREST INCOME                                           Table 3
----------------------------------------------------------------------
 (Taxable-equivalent
  basis, $ in millions)
                                                       Change   Change
                                1Q       4Q       1Q  1Q08 vs  1Q08 vs
                              2008     2007     2007     4Q07     1Q07
                          --------------------------------------------
 Components of net
  interest income
   Income on earning
    assets                 $3,258   $3,431   $3,223   $(173)     $35
   Expense on interest-
    bearing liabilities     1,428    1,668    1,557    (240)    (129)
                          --------------------------------------------
 Net interest income       $1,830   $1,763   $1,666     $67     $164
                          --------------------------------------------

 Average yields and rates
  paid
   Earning assets yield      6.32%    6.81%    6.81%   (.49)%   (.49)%
   Rate paid on interest-
    bearing liabilities      3.20     3.83     3.88    (.63)    (.68)
                          --------------------------------------------
 Gross interest margin       3.12%    2.98%    2.93%    .14%     .19%
                          --------------------------------------------
 Net interest margin         3.55%    3.51%    3.51%    .04%     .04%
                          --------------------------------------------

 Average balances
   Investment securities  $43,891  $42,525  $40,879  $1,366   $3,012
   Loans                  155,232  151,451  144,693   3,781   10,539
   Earning assets         207,014  200,307  191,135   6,707   15,879
   Interest-bearing
    liabilities           179,451  172,999  162,682   6,452   16,769
   Net free funds (a)      27,563   27,308   28,453     255     (890)

 (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 Percent
                                                        Change  Change
                                  1Q       4Q       1Q 1Q08 vs 1Q08 vs
                                2008     2007     2007    4Q07    1Q07
                            ------------------------------------------

 Commercial                  $45,471  $43,649  $41,470    4.2     9.6
 Lease financing               6,238    5,978    5,549    4.3    12.4
                            --------------------------
       Total commercial       51,709   49,627   47,019    4.2    10.0

 Commercial mortgages         20,337   19,775   19,672    2.8     3.4
 Construction and
  development                  9,199    8,983    8,960    2.4     2.7
                            --------------------------
       Total commercial real
        estate                29,536   28,758   28,632    2.7     3.2

 Residential mortgages        22,978   22,670   21,569    1.4     6.5

 Credit card                  11,049   10,621    8,635    4.0    28.0
 Retail leasing                5,802    6,123    6,845   (5.2)  (15.2)
 Home equity and second
  mortgages                   16,527   16,343   15,555    1.1     6.2
 Other retail                 17,631   17,309   16,438    1.9     7.3
                            --------------------------
       Total retail           51,009   50,396   47,473    1.2     7.4
                            --------------------------

 Total loans                $155,232 $151,451 $144,693    2.5     7.3
                            --------------------------

Average loans for the first quarter of 2008 were $10.5 billion (7.3 percent) higher than the first quarter of 2007, driven by growth in a majority of the loan categories. This included growth in average total commercial loans of $4.7 billion (10.0 percent), total retail loans of $3.5 billion (7.4 percent), residential mortgages of $1.4 billion (6.5 percent), and total commercial real estate loans of $904 million (3.2 percent). Average loans for the first quarter of 2008 were higher than the fourth quarter of 2007 by $3.8 billion (2.5 percent), again reflecting growth in a majority of the loan categories. Total commercial loans grew $2.1 billion (4.2 percent) in the first quarter of 2008 over the fourth quarter of 2007, driven by growth in corporate and commercial banking balances as business customers utilize bank credit facilities, rather than the capital markets, to fund business growth and liquidity requirements. Total commercial real estate loans also increased over the fourth quarter of 2007, primarily reflecting changing market conditions that have limited borrower access to the capital markets. Consumer lending continues to experience strong growth in installment products, home equity lines and credit card balances. This growth was offset somewhat by lower retail leasing balances.

Average investment securities in the first quarter of 2008 were $3.0 billion (7.4 percent) higher than the first quarter of 2007. The increase was driven by the purchase in the fourth quarter of 2007 of structured investment securities from certain money market funds managed by an affiliate and an increase in tax exempt municipal securities, partially offset by a reduction in mortgage-backed securities. Average investment securities grew by $1.4 billion (3.2 percent) over the fourth quarter of 2007 principally related to the timing of purchasing the structured investments in late fourth quarter of 2007.

 AVERAGE DEPOSITS                                              Table 5
----------------------------------------------------------------------
 ($ in millions)                                       Percent Percent
                                                        Change  Change
                                  1Q       4Q       1Q 1Q08 vs 1Q08 vs
                                2008     2007     2007    4Q07    1Q07
                            ------------------------------------------

 Noninterest-bearing
  deposits                   $27,119  $26,869  $27,677     .9    (2.0)
 Interest-bearing deposits
    Interest checking         30,303   27,458   25,076   10.4    20.8
    Money market savings      25,590   25,996   25,712   (1.6)    (.5)
    Savings accounts           5,134    5,100    5,401     .7    (4.9)
                            --------------------------
          Total of savings
           deposits           61,027   58,554   56,189    4.2     8.6
    Time certificates of
     deposit less than
     $100,000                 13,607   14,539   14,775   (6.4)   (7.9)
    Time deposits greater
     than $100,000            29,105   25,461   22,087   14.3    31.8
                            --------------------------
          Total interest-
           bearing deposits  103,739   98,554   93,051    5.3    11.5
                            --------------------------
 Total deposits             $130,858 $125,423 $120,728    4.3     8.4
                            --------------------------

Average noninterest-bearing deposits for the first quarter of 2008 decreased modestly, $558 million (2.0 percent), from the first quarter of 2007. Average total savings deposits increased year-over-year by $4.8 billion (8.6 percent) due to a $5.2 billion increase (20.8 percent) in interest checking balances driven by higher balances from broker dealer, government and institutional trust customers. This increase was partially offset by a decline of $267 million (4.9 percent) in average savings accounts and $122 million (.5 percent) in average money market savings, primarily within Consumer Banking. Average time certificates of deposit less than $100,000 were lower in the first quarter of 2008 than in the first quarter of 2007 by $1.2 billion (7.9 percent) while time deposits greater than $100,000 increased by $7.0 billion (31.8 percent) over the same period, reflecting the Company's funding and pricing decisions and competition for these deposits by other financial institutions that have more limited access to the wholesale funding sources given the current market environment.

Average noninterest-bearing deposits for the first quarter of 2008 remained relatively flat compared with the fourth quarter of 2007. Total average savings deposits increased $2.5 billion (4.2 percent) from the fourth quarter of 2007, primarily due to higher broker dealer, institutional trust and government banking balances. Average time certificates less than $100,000 declined by $932 million (6.4 percent) from the prior quarter reflecting competition for these funding sources given current market conditions. Average time deposits greater than $100,000 increased by $3.6 billion (14.3 percent) over the prior quarter, primarily in government and wholesale time deposits.

 NONINTEREST INCOME                                            Table 6
----------------------------------------------------------------------
 ($ in millions)                                       Percent Percent
                                                        Change  Change
                                      1Q     4Q     1Q 1Q08 vs 1Q08 vs
                                    2008   2007   2007    4Q07    1Q07
                                 -------------------------------------

 Credit and debit card revenue     $248    $285   $206  (13.0)    20.4
 Corporate payment products
  revenue                           164     166    147   (1.2)    11.6
 ATM processing services             84      84     77     --      9.1
 Merchant processing services       271     281    252   (3.6)     7.5
 Trust and investment management
  fees                              335     344    322   (2.6)     4.0
 Deposit service charges            257     277    247   (7.2)     4.0
 Treasury management fees           124     117    111    6.0     11.7
 Commercial products revenue        112     121    100   (7.4)    12.0
 Mortgage banking revenue           105      48     67   nm       56.7
 Investment products fees and
  commissions                        36      38     34   (5.3)     5.9
 Securities gains (losses), net    (251)      4      1   nm      nm
 Other                              559      46    159   nm      nm
                                 ---------------------

 Total noninterest income        $2,044  $1,811 $1,723   12.9     18.6
                                 ---------------------

Noninterest Income

First quarter noninterest income was $2,044 million, an increase of $321 million (18.6 percent) over the same quarter of 2007 and $233 million (12.9 percent) higher than the fourth quarter of 2007. The increase in noninterest income over the first quarter of 2007 was driven by strong organic fee-based revenue growth of 7.3 percent and the Visa Gain in the first quarter of 2008. The Visa Gain represented $339 million of cash proceeds received for Class B shares redeemed in March, 2008 and $153 million related to the Company's proportionate share of stock redeemed to fund an escrow account for the settlement of Visa Inc. litigation matters. In addition, noninterest income was impacted by the adoption of Statement of Financial Accounting Standard No. 157 "Fair Value Measurements" ("SFAS 157") which decreased trading revenue, as it requires consideration of the primary market and nonperformance risk when determining the fair value of customer derivatives. The standard also increased mortgage production gains as it no longer allows the deferral of compensation expense related to the closing of mortgage loans held for sale. The adoption of SFAS 157 reduced trading revenue by $62 million and increased mortgage banking revenue by $19 million.

Credit and debit card revenue, corporate payment products revenue and ATM processing services were higher in the first quarter of 2008 than the first quarter of 2007 by $42 million (20.4 percent), $17 million (11.6 percent) and $7 million (9.1 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 over a year ago. Corporate payment products revenue growth reflected organic growth in sales volumes and card usage. The ATM processing services increase was also due to growth in transaction volumes. Merchant processing services revenue was higher in the first quarter of 2008 than the same quarter of a year ago by $19 million (7.5 percent), primarily reflecting an increase in the number of merchants, higher sales volumes and business expansion. Trust and investment management fees increased $13 million (4.0 percent) year-over-year due to core account growth, partially offset by unfavorable equity market conditions. Deposit service charges grew year-over-year by $10 million (4.0 percent), driven by increased transaction-related fees and the impact of continued growth in net new checking accounts. This growth rate was muted somewhat as deposit account-related revenue, traditionally reflected in this fee category, continued to migrate to yield-related loan fees as customers utilized new consumer products. Treasury management fees increased $13 million (11.7 percent) due to higher customer transaction volumes and the favorable impact of declining rates on the customer earnings credit. Commercial products revenue increased $12 million (12.0 percent) year-over-year due to higher syndication and other commercial loan fees, foreign exchange and commercial leasing revenue. Mortgage banking revenue increased $38 million (56.7 percent) due to an increase in mortgage servicing income and production gains, including $19 million from the adoption of SFAS 157. These favorable impacts to mortgage banking revenue were partially offset by the unfavorable net change in the valuation of mortgage servicing rights ("MSRs") and related economic hedging activities. Other income was higher year-over-year due to the Visa Gain, partially offset by lower retail lease revenue due to higher end-of-term losses and a $62 million unfavorable impact to trading income upon adoption of SFAS 157 related to the valuation of certain derivatives. Securities gains (losses) were lower year-over-year by $252 million due to an impairment of certain structured investment securities recognized in the first quarter of 2008.

Noninterest income was higher by $233 million (12.9 percent) in the first quarter of 2008 than the fourth quarter of 2007, reflecting the impact of the Visa Gain and the adoption of SFAS 157, partially offset by seasonally lower fee-based revenue within the core banking operations and the securities losses. Other income increased by $513 million, representing the $492 million Visa Gain in the first quarter of 2008 and the valuation losses of $107 million recognized in the fourth quarter of 2007, partially offset by lower trading income due primarily to the adoption of SFAS 157 in January 2008. Treasury management revenue increased by $7 million (6.0 percent) on a linked quarter basis due to seasonally higher government lock box activity and the favorable impact of declining rates on customer earnings credits. Mortgage banking revenue increased by $57 million from the fourth quarter of 2007 due to higher production gains including the impact of adopting SFAS 157, higher servicing income and a favorable change in the valuation of MSRs and related economic hedging activities. Partially offsetting these favorable increases were seasonal declines in several fee categories. Credit and debit card revenue decreased $37 million (13.0 percent) primarily driven by seasonally lower customer transaction volumes and the positive impact in the fourth quarter of 2007 from renegotiating an association contract. Merchant processing services declined $10 million (3.6 percent) on a linked quarter basis due to seasonally lower volumes and lower interchange rates due to the mix of transactions and lower customer transaction volumes in certain European markets, partially offset by a recent acquisition. Trust and investment management fees were lower by $9 million (2.6 percent) than the fourth quarter of 2007 due primarily to the unfavorable impact of equity markets, partially offset by account growth. Deposit service charges were $20 million (7.2 percent) lower on a linked quarter basis due primarily to seasonally lower post-holiday customer transaction volumes and the impact of customer tax refunds. Commercial products revenue decreased from the fourth quarter of 2007 by $9 million (7.4 percent) due to lower syndication fees and foreign exchange revenue. In addition, net securities gains (losses) decreased $255 million on a linked quarter basis due to the impairment recognized in the first quarter of 2008 on structured investment securities purchased last quarter from certain money market funds managed by an affiliate.

 NONINTEREST EXPENSE                                           Table 7
----------------------------------------------------------------------
 ($ in millions)                                       Percent Percent
                                                        Change  Change
                                      1Q     4Q     1Q 1Q08 vs 1Q08 vs
                                    2008   2007   2007    4Q07    1Q07
                                  ------------------------------------

 Compensation                       $745   $690   $635    8.0    17.3
 Employee benefits                   137    119    133   15.1     3.0
 Net occupancy and equipment         190    188    177    1.1     7.3
 Professional services                47     71     47  (33.8)     --
 Marketing and business
  development                         79     69     52   14.5    51.9
 Technology and communications       140    148    135   (5.4)    3.7
 Postage, printing and supplies       71     73     69   (2.7)    2.9
 Other intangibles                    87     93     94   (6.5)   (7.4)
 Other                               300    517    230  (42.0)   30.4
                                  --------------------

 Total noninterest expense        $1,796 $1,968 $1,572   (8.7)   14.2
                                  --------------------

Noninterest Expense

First quarter noninterest expense totaled $1,796 million, an increase of $224 million (14.2 percent) over the same quarter of 2007 and a decrease of $172 million (8.7 percent) from the fourth quarter of 2007. Compensation expense increased $110 million (17.3 percent) from the same period of 2007 due to growth in ongoing bank operations, acquired businesses and other bank initiatives and the $19 million impact from the adoption of SFAS 157. Under this new accounting standard, compensation expense is no longer deferred for origination of mortgage loans held for sale. Employee benefits expense increased $4 million (3.0 percent) year-over-year as higher medical costs were partially offset by lower pension costs. Net occupancy and equipment expense increased $13 million (7.3 percent) over the first quarter of 2007 primarily due to rental cost escalation, acquisitions and branch-based business initiatives. Marketing and business development expense increased $27 million (51.9 percent) primarily due to $25 million recognized in the current quarter for a charitable contribution to the Company's foundation intended to support community-based programs within our geographical markets. Other intangibles expense decreased by $7 million (7.4 percent) primarily reflecting the timing and relative size of recent acquisitions. Other expense increased $70 million (30.4 percent) year-over-year, due primarily to investments in tax-advantaged projects, higher litigation costs and credit-related costs for other real estate owned and loan collection activities.

Noninterest expense in the first quarter of 2008 was lower than the fourth quarter of 2007 by $172 million (8.7 percent). Professional services expense declined $24 million (33.8 percent) on a linked quarter basis due to the timing of legal costs and other consulting projects. Technology and communications expense declined $8 million (5.4 percent) due to usage credits. Other intangibles expense declined by $6 million (6.5 percent) primarily reflecting the timing and relative size of recent acquisitions. Other expense decreased by $217 million (42.0 percent) on a linked quarter basis, primarily due to the $215 million Visa Litigation Charge recorded in the fourth quarter of 2007. These decreases were partially offset by increased compensation, employee benefits and marketing and business development expenses. Compensation expense increased $55 million (8.0 percent) due to continued focus on business operations and expansion, the timing of merit increases and the impact of adopting SFAS 157 for mortgage loans held for sale. Employee benefits expense increased $18 million (15.1 percent) on a linked quarter due to seasonally higher payroll taxes and 401(k) expense offset by lower pension expense. Marketing and business development expense increased $10 million (14.5 percent) over the fourth quarter of 2007 due to a $25 million charitable contribution, partially offset by the timing of marketing programs and seasonally lower travel expenses.

Provision for Income Taxes

The provision for income taxes for the first quarter of 2008 resulted in a tax rate on a taxable equivalent basis of 31.6 percent (effective tax rate of 30.4 percent) compared with 31.1 percent (effective tax rate of 30.4 percent) in the first quarter of 2007 and 31.8 percent (effective tax rate of 30.7 percent) in the fourth quarter of 2007.

 ALLOWANCE FOR CREDIT LOSSES                                   Table 8
----------------------------------------------------------------------
 ($ in millions)                       1Q     4Q     3Q     2Q      1Q
                                     2008   2007   2007   2007    2007
                                  ------------------------------------

 Balance, beginning of period     $2,260  $2,260 $2,260 $2,260  $2,256

 Net charge-offs
     Commercial                       39      23     26     21      32
     Lease financing                  16      13     11      8       3
                                  ------------------------------------
          Total commercial            55      36     37     29      35
     Commercial mortgages              4       3      1      7       1
     Construction and development      8       7      1      2      --
                                  ------------------------------------
         Total commercial real
          estate                      12      10      2      9       1

     Residential mortgages            26      17     17     15      12

     Credit card                     108      88     77     81      74
     Retail leasing                    7       6      3      4       3
     Home equity and second
      mortgages                       30      22     20     16      16
     Other retail                     55      46     43     37      36
                                  ------------------------------------
          Total retail               200     162    143    138     129
                                  ------------------------------------
             Total net charge-offs   293     225    199    191     177
 Provision for credit losses         485     225    199    191     177
 Acquisitions and other changes      (17)     --     --     --       4
                                  ------------------------------------
 Balance, end of period           $2,435  $2,260 $2,260 $2,260  $2,260
                                  ------------------------------------

 Components
    Allowance for loan losses     $2,251  $2,058 $2,041 $2,028  $2,027
    Liability for unfunded credit
     commitments                     184     202    219    232     233
                                  ------------------------------------
             Total allowance for
              credit losses       $2,435  $2,260 $2,260 $2,260  $2,260
                                  ------------------------------------

 Gross charge-offs                  $348    $287   $256   $252    $237
 Gross recoveries                    $55     $62    $57    $61     $60

 Allowance for credit losses as a
  percentage of
    Period-end loans                1.54    1.47   1.52   1.55    1.56
    Nonperforming loans              358     406    441    503     498
    Nonperforming assets             288     328    353    400     388

Credit Quality

During the first quarter of 2008, credit losses and nonperforming assets continued to trend higher. The allowance for credit losses was $2,435 million at March 31, 2008, compared with $2,260 million at December 31, 2007, and at March 31, 2007. The increase in the allowance for credit losses was primarily due to continued stress in the residential housing market, homebuilding and related industry sectors, in addition to the growth of the credit card and other consumer loan portfolios. This stress is being reflected in higher delinquencies, nonperforming asset levels and net charge-offs relative to a year ago and the fourth quarter of 2007. Total net charge-offs in the first quarter of 2008 were $293 million, compared with the fourth quarter of 2007 net charge-offs of $225 million and the first quarter of 2007 net charge-offs of $177 million. The increase in total net charge-offs of 65.5 percent from a year ago was driven by the factors previously noted.

Commercial and commercial real estate loan net charge-offs increased to $67 million in the first quarter of 2008 (.33 percent of average loans outstanding) compared with $46 million (.23 percent of average loans outstanding) in the fourth quarter of 2007 and $36 million (.19 percent of average loans outstanding) in the first quarter of 2007. This increasing trend in commercial and commercial real estate net charge-offs reflected anticipated increases in nonperforming loans and delinquencies within the portfolios, especially residential homebuilding and related industry sectors. Given the continuing stress in the homebuilding and related industries, as well as the potential impact of the economic downturn on other commercial customers, the Company expects commercial and commercial real estate net charge-offs to continue to increase moderately over the next several quarters.

Total retail loan net charge-offs were $200 million (1.58 percent of average loans outstanding) in the first quarter of 2008 compared with $162 million (1.28 percent of average loans outstanding) in the fourth quarter of 2007 and $129 million (1.10 percent of average loans outstanding) in the first quarter of 2007. The Company anticipates higher delinquency levels in the retail portfolios and that retail net charge-offs will continue to increase, but remain in a manageable range during 2008.

The ratio of the allowance for credit losses to period-end loans was 1.54 percent at March 31, 2008, compared with 1.47 percent at December 31, 2007, and 1.56 percent at March 31, 2007. The ratio of the allowance for credit losses to nonperforming loans was 358 percent at March 31, 2008, compared with 406 percent at December 31, 2007, and 498 percent at March 31, 2007.

 CREDIT RATIOS                                                 Table 9
----------------------------------------------------------------------
 (Percent)                                   1Q   4Q   3Q   2Q      1Q
                                           2008 2007 2007 2007    2007
                                           ---------------------------
 Net charge-offs ratios (a)
    Commercial                              .34  .21  .25  .20     .31
    Lease financing                        1.03  .86  .76  .57     .22
       Total commercial                     .43  .29  .31  .25     .30

    Commercial mortgages                    .08  .06  .02  .14     .02
    Construction and development            .35  .31  .04  .09      --
       Total commercial real estate         .16  .14  .03  .13     .01

    Residential mortgages                   .46  .30  .30  .28     .23

    Credit card                            3.93 3.29 3.09 3.56    3.48
    Retail leasing                          .49  .39  .19  .24     .18
    Home equity and second mortgages        .73  .53  .49  .41     .42
    Other retail                           1.25 1.05 1.00  .89     .89
       Total retail                        1.58 1.28 1.15 1.15    1.10

 Total net charge-offs                      .76  .59  .54  .53     .50

 Delinquent loan ratios - 90 days or more past due excluding
  nonperforming loans (b)
    Commercial                              .09  .07  .07  .07     .07
    Commercial real estate                  .13  .02  .04   --     .04
    Residential mortgages                   .98  .86  .58  .46     .42
    Retail                                  .69  .68  .55  .50     .56
 Total loans                                .43  .38  .30  .26     .27

 Delinquent loan ratios - 90 days or more past due including
  nonperforming loans (b)
    Commercial                              .60  .43  .51  .44     .46
    Commercial real estate                 1.18 1.02  .83  .69     .69
    Residential mortgages                  1.24 1.10  .79  .65     .59
    Retail                                  .77  .73  .61  .58     .65
 Total loans                                .86  .74  .65  .57     .59

 (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)
                                  Mar 31 Dec 31 Sep 30 Jun 30   Mar 31
                                    2008   2007   2007   2007     2007
                                  ------------------------------------
 Nonperforming loans
    Commercial                      $201   $128   $161   $128     $147
    Lease financing                   64     53     46     44       41
                                  ------------------------------------
       Total commercial              265    181    207    172      188
    Commercial mortgages             102     84     73     90      114
    Construction and development     212    209    153    107       71
                                  ------------------------------------
       Total commercial real
        estate                       314    293    226    197      185
    Residential mortgages             59     54     48     41       38
    Retail                            42     29     32     39       43
                                  ------------------------------------
 Total nonperforming loans           680    557    513    449      454

 Other real estate                   141    111    113    103      113
 Other nonperforming assets           24     22     15     13       15
                                  ------------------------------------

 Total nonperforming assets (a)     $845   $690   $641   $565     $582
                                  ------------------------------------

 Accruing loans 90 days or more
  past due                          $676   $584   $451   $376     $397
                                  ------------------------------------

 Restructured loans that continue
  to accrue interest                $695   $551   $468   $435     $411
                                  ------------------------------------

 Nonperforming assets to loans
  plus ORE (%)                       .53    .45    .43    .39      .40

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

Nonperforming assets at March 31, 2008, totaled $845 million, compared with $690 million at December 31, 2007, and $582 million at March 31, 2007. The ratio of nonperforming assets to loans and other real estate was .53 percent at March 31, 2008, compared with .45 percent at December 31, 2007, and .40 percent at March 31, 2007. The increase in nonperforming assets of 45.2 percent from a year ago was driven primarily by the residential construction portfolio, an increase in foreclosed residential properties and the impact of the economic slowdown on other commercial customers. The Company expects nonperforming assets to increase moderately over the next several quarters due to general economic conditions and continued stress in the residential mortgage portfolio and residential construction industry. Accruing loans 90 days or more past due increased to $676 million at March 31, 2008, compared with $584 million at December 31, 2007, and $397 million at March 31, 2007. Similar to nonperforming assets, the increase in delinquent loans that continue to accrue interest was primarily related to residential mortgages, credit cards and home equity loans. Restructured loans that continue to accrue interest have also increased from the first quarter of 2007 and the fourth quarter of 2007, 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 and certain borrowers take advantage of the Company's mortgage loan restructuring programs.

 CAPITAL POSITION                                             Table 11
----------------------------------------------------------------------
 ($ in millions)           Mar 31   Dec 31   Sep 30   Jun 30   Mar 31
                             2008     2007     2007     2007     2007
                          -------------------------------------------

 Total shareholders'
  equity                  $21,572  $21,046  $20,686  $20,330  $20,800
 Tier 1 capital            18,543   17,539   17,288   16,876   16,917
 Total risk-based capital  27,207   25,925   25,820   25,709   25,826

 Tier 1 capital ratio         8.6%     8.3%     8.5%     8.5%     8.6%
 Total risk-based capital
  ratio                      12.6     12.2     12.7     13.0     13.1
 Leverage ratio               8.1      7.9      8.0      7.9      8.0
 Common equity to assets      8.3      8.4      8.6      8.7      8.9
 Tangible common equity to
  assets                      5.3      5.1      5.3      5.2      5.3

Total shareholders' equity was $21.6 billion at March 31, 2008, compared with $21.0 billion at December 31, 2007, and $20.8 billion at March 31, 2007. The Tier 1 capital ratio was 8.6 percent at March 31, 2008, compared with 8.3 percent at December 31, 2007, and 8.6 percent at March 31, 2007. The total risk-based capital ratio was 12.6 percent at March 31, 2008, compared with 12.2 percent at December 31, 2007, and 13.1 percent at March 31, 2007. The leverage ratio was 8.1 percent at March 31, 2008, compared with 7.9 percent at December 31, 2007, and 8.0 percent at March 31, 2007. Tangible common equity to assets was 5.3 percent at March 31, 2008, compared with 5.1 percent at December 31, 2007, and 5.3 percent at March 31, 2007. All regulatory ratios continue to be in excess of stated "well-capitalized" requirements.

 COMMON SHARES                                                Table 12
----------------------------------------------------------------------
 (Millions)                            1Q    4Q     3Q     2Q       1Q
                                     2008  2007   2007   2007     2007
                                   -----------------------------------

 Beginning shares outstanding      1,728  1,725 1,728  1,742    1,765
 Shares issued for stock option and
  stock purchase plans,
  acquisitions and other corporate
  purposes                            12      3     3      4       11
 Shares repurchased                   (2)    --    (6)   (18)     (34)
                                   -----------------------------------
 Ending shares outstanding         1,738  1,728 1,725  1,728    1,742
                                   -----------------------------------

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 March 31, 2008, there were approximately 62 million shares remaining to be repurchased under the 2006 authorization.

 LINE OF BUSINESS FINANCIAL PERFORMANCE (a)                   Table 13
----------------------------------------------------------------------
 ($ in millions)
                       Net Income         Percent Change      1Q 2008
                      -----------------------------------
                          1Q    4Q     1Q 1Q08 vs 1Q08 vs    Earnings
 Business Line          2008  2007   2007    4Q07    1Q07 Composition
                      ------------------------------------------------

 Wholesale Banking      $255 $280    $272   (8.9)   (6.3)          23%
 Consumer Banking        367  411     434  (10.7)  (15.4)          34
 Wealth Management &
  Securities Services    157  101     154   55.4     1.9           14
 Payment Services        289  319     231   (9.4)   25.1           27
 Treasury and
  Corporate Support       22 (169)     39   nm     (43.6)           2
                      -------------------                 -----------

 Consolidated Company $1,090 $942  $1,130   15.7    (3.5)         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 2008, certain organization and methodology changes were made and, accordingly, prior period results were 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 $255 million of the Company's net income in the first quarter of 2008, a 6.3 percent decrease from the same period of 2007 and an 8.9 percent decrease from the fourth quarter of 2007. Stronger net interest income during the current quarter was offset by a reduction in noninterest income due to capital market conditions, the incremental cost of further investments in the wholesale banking business and higher credit costs. Net interest income increased $34 million, year-over-year, due to strong growth in earning assets and deposit balances and improved credit spreads, partially offset by a decrease in the margin benefit of deposits. The decline in noninterest income was primarily due to market-related valuation losses within a commercial real estate business and lower earnings from equity investments, offset somewhat by growth in treasury management fees, commercial leasing and foreign exchange revenue. Total noninterest expense increased by $10 million over a year ago, primarily due to higher compensation and employee benefits expense related to merit increases, expanding the business line's national corporate banking presence, investments to enhance customer relationship management, and other business initiatives. The provision for credit losses increased $22 million due to continued credit deterioration in the homebuilding and commercial home supplier industries.

Wholesale Banking's contribution to net income in the first quarter of 2008 was $25 million (8.9 percent) lower than the fourth quarter of 2007 due to a $17 million increase in the provision for credit losses due to higher net charge-offs and an unfavorable variance in total net revenue (3.3 percent). Total net revenue was lower on a linked quarter basis due primarily to a decrease in total noninterest income. Net interest income improved slightly as growth in average loans and interest-bearing deposit balances was offset by the lower margin benefit of deposits. Total noninterest income decreased on a linked quarter basis due to a decline in other revenue from a commercial real estate business and other equity investments, partially offset by higher treasury management and commercial product revenue. Total noninterest expense remained relatively flat, as an increase in compensation and employee benefits expense was offset by seasonally lower travel and entertainment expense and a decline in net shared services expense.

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 $367 million of the Company's net income in the first quarter of 2008, a 15.4 percent decrease from the same period of 2007 and a 10.7 percent decrease on a linked quarter basis. Within Consumer Banking, the retail banking division accounted for $320 million of the total contribution, a 21.8 percent decrease for the division on a year-over-year basis and an 18.2 percent decrease from the prior quarter. The decrease in the retail banking division was due to lower total net revenue, growth in total noninterest expense related to incremental business investments during the year and an increase in the provision for credit losses. Net interest income for the retail banking division declined year-over-year as an increase in average loan balances and yield related loan fees was more than offset by lower deposit balances and a decline in the margin benefit of deposits given the declining interest rate environment. Total noninterest income for the retail banking division decreased 2.2 percent from a year ago due to lower retail lease revenue related to higher end-of-term losses and declining student loan sales gains which were partially offset by growth in deposit service charges. Total noninterest expense in the first quarter of 2008 increased 7.0 percent for the division over the same quarter of 2007 reflecting branch expansion initiatives, bank acquisitions, geographical promotional activities and customer service initiatives. In addition, the division experienced higher credit-related costs associated with other real estate owned and foreclosures. The provision for credit losses for the retail banking division increased due to a $48 million year-over-year increase in net charge-offs (66.7 percent), reflecting portfolio growth and credit deterioration in residential mortgages, home equity and other installment and consumer loan portfolios from a year ago. In the first quarter of 2008, the mortgage banking division's contribution was $47 million, a $22 million increase from the same period of 2007. The division's total net revenue increased by $64 million (75.3 percent) over a year ago reflecting strong revenue growth from mortgage loan production. As a result of higher loan originations, net interest income increased $22 million as average mortgage loans held for sale increased $1.2 billion from a year ago. Total noninterest income for the division increased $42 million related to higher servicing income and stronger production gains, including $19 million from the adoption of SFAS 157. These favorable impacts to mortgage banking revenue were partially offset by an unfavorable net change in the valuation of MSRs and related economic hedging activities. Total noninterest expense for the mortgage banking division increased $30 million (66.7 percent) over the first quarter of 2007 primarily due to the impact of the adoption of SFAS 157 on compensation expense of $19 million, higher production levels from a year ago and servicing costs associated with other real estate owned and foreclosures.

Consumer Banking's contribution in the first quarter of 2008 decreased $44 million (10.7 percent) on a linked quarter basis compared with the fourth quarter of 2007. The retail banking division's contribution decreased 18.2 percent on a linked quarter basis driven by an increase in the provision for credit losses, along with a decline in total net revenue. Total net revenue for the retail banking division decreased $87 million (6.4 percent) due to lower net interest income and total noninterest income. Net interest income declined by 5.9 percent on a linked quarter basis, as the favorable impact of growth in average loan balances was more than offset by lower deposit balances and narrowing credit spreads due to increasing liquidity costs. The decline in total noninterest income was driven by seasonally lower deposit service charges and higher end-of-term residual losses on retail leases. Total noninterest expense for the retail banking division remained relatively flat on a linked quarter basis. An increase in compensation and employee benefits due to the timing of merit increases and other business initiatives was offset by lower fraud losses and the timing of marketing programs and processing costs. The provision for credit losses for the division reflected a $27 million increase in net charge-offs compared with the fourth quarter of 2007 reflecting higher consumer delinquencies within these portfolios. The contribution of the mortgage banking division increased $27 million over the fourth quarter of 2007 driven primarily by an increase in total net revenue related to higher loan production gains including the impact of adopting SFAS 157, higher servicing income and a favorable change in the valuation of MSRs and related economic hedging activities. Net interest income for the division also increased 32.1 percent on a linked quarter basis due to growth in loan production. Total noninterest expense of the mortgage banking division increased $22 million (41.5 percent) over the fourth quarter of 2007 driven by the impact of SFAS 157 and 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 $157 million of the Company's net income in the first quarter of 2008, a 1.9 percent increase from the same period of 2007 and a 55.4 percent increase over the fourth quarter of 2007. The increase in the business line's contribution in the first quarter of 2008 over the same quarter of 2007 was the result of core account growth, partially offset by unfavorable equity market conditions relative to a year ago. Total noninterest expense was 4.0 percent higher compared with the same quarter of 2007 primarily due to higher compensation and employee benefits and processing expense.

The increase in the business line's contribution in the first quarter of 2008 compared with the fourth quarter of 2007 was primarily due to market valuation losses of $107 million recorded in the fourth quarter of 2007. This increase was partially offset by seasonally lower trust and investment management fees. Investment management fees were also adversely impacted by unfavorable equity market conditions during the first quarter of 2008. Net interest income declined on a linked quarter basis by 9.0 percent due to somewhat lower average loan balances and the margin impact of declining interest rates on deposits. Noninterest expense decreased by 1.5 percent due primarily to the timing of marketing and professional services expense, partially offset by an increase in compensation and employee benefits expense.

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 are highly inter-related with banking products and services of the other lines of business and rely on access to the bank subsidiary's settlement network, lower cost funding available to the Company, cross-selling opportunities and operating efficiencies. Payment Services contributed $289 million of the Company's net income in the first quarter of 2008, a 25.1 percent increase over the same period of 2007 and a 9.4 percent decrease from the fourth quarter of 2007. Total net revenue increased year-over-year due to higher net interest income (49.1 percent) and total noninterest income (13.1 percent). Net interest income increased due to strong growth in higher yielding credit card balances and the timing of asset repricing in a declining rate environment. During the past year, all payment processing revenue categories benefited from account growth, higher transaction volumes and business expansion initiatives. Growth in total noninterest expense year-over-year primarily reflected new business initiatives, including costs associated with transaction processing and a recent acquisition, as well as higher collection costs. An increase in the provision for credit losses was driven by an increase in net charge-offs of $43 million year-over-year which reflected portfolio growth and higher delinquency rates from a year ago.

The decrease in Payment Services' contribution in the first quarter of 2008 from the fourth quarter of 2007 was due to seasonally lower fee-based revenues and an increase in the provision for credit losses (21.8 percent) due to portfolio growth and changing economic conditions. Total net revenue was lower due to a 6.9 percent decrease in total noninterest income, partially offset by a 10.0 percent increase in net interest income in this declining rate environment. Total noninterest income declined due to seasonally lower credit and debit card revenue from lower customer transaction volumes after the holidays and the positive impact in the fourth quarter of 2007 from renegotiating an association contract. Merchant processing services also declined on a linked quarter basis due to seasonally lower transaction volumes and the impact of the mix of business on interchange rates. Net interest income increased due to strong growth in retail credit card balances and favorable credit spreads. The decrease in total noninterest expense was primarily due to the timing of marketing programs and seasonally lower debit and prepaid card costs, partially offset by an increase in compensation and employee benefits including the impact of 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 net income of $22 million in the first quarter of 2008, compared with net income of $39 million in the first quarter of 2007 and a net loss of $169 million in the fourth quarter of 2007. Net interest income increased $65 million in the current quarter over the first quarter of 2007 reflecting a steepening yield curve relative to the first quarter of 2007, wholesale funding decisions and the Company's asset/liability position. Total noninterest income increased $212 million primarily due to the net impact of the Visa Gain, offset by the structured investment securities impairment and the transition impact of adopting SFAS 157 during the first quarter of 2008. Total noninterest expense increased $95 million year-over-year primarily reflecting higher compensation and employee benefits expense, the $25 million charitable contribution made to the foundation and higher litigation costs, partially offset by a reduction in net shared services expense. The provision for credit losses increased $194 million driven by the incremental provision expense recorded this quarter which reflected deterioration in credit quality within the loan portfolios related to stress in the residential real estate markets, including homebuilding and related supplier industries, and the continued growth of the consumer loan portfolios.

Net income in the first quarter of 2008 was higher on a linked quarter basis due to the impact of the $215 million Visa Litigation Charge taken in the fourth quarter of 2007 and the $492 million Visa Gain recorded in the current quarter. These were partially offset by the incremental provision for credit losses, the structured investment securities impairment, the unfavorable impact of SFAS 157, a charitable contribution and additional litigation costs in the first quarter of 2008.

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 8:00 AM (CDT) ON TUESDAY, APRIL 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 39876056. 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, April 15th, and will run through Tuesday, April 22nd, at 11:00 p.m. (CDT). To access the recorded message within the United States and Canada, dial 800-642-1687. If calling from outside the United States and Canada, please dial 706-645-9291 to access the recording. The conference ID is 39876056. Find the recorded call via the internet at usbank.com.

Minneapolis-based U.S. Bancorp ("USB"), with $242 billion in assets, is the parent company of U.S. Bank, the 6th largest commercial bank in the United States. The Company operates 2,522 banking offices and 4,844 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, deterioration in the credit quality of our loan portfolios or in the value of the collateral securing those loans, deterioration in the value of securities held in our investment securities portfolio, 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, 2007, 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, Except Per Share   Three Months Ended
 Data)                                                  March 31,
                                                    ------------------
(Unaudited)                                                2008   2007
----------------------------------------------------------------------
Interest Income
Loans                                                   $2,560  $2,578
Loans held for sale                                         73      59
Investment securities                                      535     516
Other interest income                                       37      34
                                                    ------------------
        Total interest income                            3,205   3,187
Interest Expense
Deposits                                                   606     675
Short-term borrowings                                      322     328
Long-term debt                                             474     535
                                                    ------------------
        Total interest expense                           1,402   1,538
                                                    ------------------
Net interest income                                      1,803   1,649
Provision for credit losses                                485     177
                                                    ------------------
Net interest income after provision for credit
 losses                                                  1,318   1,472
Noninterest Income
Credit and debit card revenue                              248     206
Corporate payment products revenue                         164     147
ATM processing services                                     84      77
Merchant processing services                               271     252
Trust and investment management fees                       335     322
Deposit service charges                                    257     247
Treasury management fees                                   124     111
Commercial products revenue                                112     100
Mortgage banking revenue                                   105      67
Investment products fees and commissions                    36      34
Securities gains (losses), net                            (251)      1
Other                                                      559     159
                                                    ------------------
        Total noninterest income                         2,044   1,723
Noninterest Expense
Compensation                                               745     635
Employee benefits                                          137     133
Net occupancy and equipment                                190     177
Professional services                                       47      47
Marketing and business development                          79      52
Technology and communications                              140     135
Postage, printing and supplies                              71      69
Other intangibles                                           87      94
Other                                                      300     230
                                                    ------------------
        Total noninterest expense                        1,796   1,572
                                                    ------------------
Income before income taxes                               1,566   1,623
Applicable income taxes                                    476     493
                                                    ------------------
Net income                                              $1,090  $1,130
                                                    ------------------
Net income applicable to common equity                  $1,078  $1,115
                                                    ------------------

Earnings per common share                                 $.62    $.64
Diluted earnings per common share                         $.62    $.63
Dividends declared per common share                      $.425   $.400
Average common shares outstanding                        1,731   1,752
Average diluted common shares outstanding                1,749   1,780
----------------------------------------------------------------------
U.S. Bancorp
Consolidated Ending Balance Sheet

                                    March 31, December 31,   March 31,
(Dollars in Millions)                    2008         2007        2007
----------------------------------------------------------------------
Assets                            (Unaudited)              (Unaudited)
Cash and due from banks               $7,323       $8,884      $6,287
Investment securities
    Held-to-maturity                      72           74          83
    Available-for-sale                41,624       43,042      40,508
Loans held for sale                    5,241        4,819       4,075
Loans
    Commercial                        52,744       51,074      47,315
    Commercial real estate            29,969       29,207      28,530
    Residential mortgages             23,218       22,782      21,765
    Retail                            52,369       50,764      47,235
                                  ------------------------------------
        Total loans                  158,300      153,827     144,845
            Less allowance for
             loan losses              (2,251)      (2,058)     (2,027)
                                  ------------------------------------
            Net loans                156,049      151,769     142,818
Premises and equipment                 1,805        1,779       1,818
Goodwill                               7,685        7,647       7,585
Other intangible assets                2,962        3,043       3,215
Other assets                          19,020       16,558      15,059
                                  ------------------------------------
            Total assets            $241,781     $237,615    $221,448
                                  ------------------------------------

Liabilities and Shareholders'
 Equity
Deposits
    Noninterest-bearing              $32,870      $33,334     $28,666
    Interest-bearing                  76,895       72,458      70,557
    Time deposits greater than
     $100,000                         28,505       25,653      18,837
                                  ------------------------------------
        Total deposits               138,270      131,445     118,060
Short-term borrowings                 36,392       32,370      28,516
Long-term debt                        36,229       43,440      44,698
Other liabilities                      9,318        9,314       9,374
                                  ------------------------------------
        Total liabilities            220,209      216,569     200,648
Shareholders' equity
    Preferred stock                    1,500        1,000       1,000
    Common stock                          20           20          20
    Capital surplus                    5,677        5,749       5,745
    Retained earnings                 23,033       22,693      21,660
    Less treasury stock               (7,178)      (7,480)     (6,972)
    Other comprehensive income        (1,480)        (936)       (653)
                                  ------------------------------------
        Total shareholders' equity    21,572       21,046      20,800
                                  ------------------------------------
        Total liabilities and
         shareholders' equity       $241,781     $237,615    $221,448
----------------------------------------------------------------------

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