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U.S. Bancorp Reports 19.2 Percent Increase in Net Income for Fourth Quarter 2003

Company Adopts 'Fair Value' Method of Accounting for Stock-Based Compensation. Fourth Quarter EPS From Continuing Operations Reduced by $.02 Per Diluted Share and Full Year EPS From Continuing Operations Reduced by $.06 Per Diluted Share

     EARNINGS SUMMARY                                                  Table 1

     ($ in millions, except per-share data)               Percent     Percent
                                                           Change      Change
                     4Q            3Q           4Q        4Q03 vs     4Q03 vs
                    2003          2003         2002         3Q03        4Q02

    Income from
     continuing
     operations
     before
     cumulative
     effect of
     accounting
     change, net   $970.3       $940.7       $858.6         3.1        13.0
    Net income      977.0        950.9        819.7         2.7        19.2

    Earnings per
     share from
     continuing
     operations
     before
     cumulative
     effect of
     accounting
     change
     (diluted)       0.50         0.48         0.45         4.2        11.1
    Earnings per
     share
     (diluted)       0.50         0.49         0.43         2.0        16.3


    Return on
     average
     assets (%)      2.05         1.98         1.83
    Return on
     average
     equity(%)       19.4         19.5         17.8
    Efficiency
     ratio (%)       43.1         40.3         48.8


    Dividends
     declared per
     share         $0.240       $0.205       $0.195        17.1        23.1
    Book value
     per share
     (period-end)   10.01        10.26         9.62        (2.4)        4.1
    Net interest
     margin (%)      4.42         4.43         4.65


                                     Full            Full
                                     Year            Year          Percent
                                     2003            2002           Change

    Income from continuing
     operations before
     cumulative effect of
     accounting change, net        $3,710.1        $3,228.0          14.9
    Net income                      3,732.6         3,168.1          17.8

    Earnings per share from
     continuing operations
     before cumulative effect
     of accounting change (diluted)    1.92            1.68          14.3
    Earnings per share (diluted)       1.93            1.65          17.0


    Return on average assets (%)       1.99            1.84
    Return on average equity(%)        19.2            18.3
    Efficiency ratio (%)               45.6            48.8


    Dividends declared per share     $0.855           $0.78           9.6
    Book value per share
     (period-end)
    Net interest margin (%)            4.49            4.65


MINNEAPOLIS, Jan. 20 /PRNewswire-FirstCall/ -- U.S. Bancorp (NYSE: USB) today reported net income of $977.0 million for the fourth quarter of 2003, compared with $819.7 million for the fourth quarter of 2002. Net income of $.50 per diluted share in the fourth quarter of 2003 was higher than the same period of 2002 by $.07 (16.3 percent). Return on average assets and return on average equity were 2.05 percent and 19.4 percent, respectively, for the fourth quarter of 2003, compared with returns of 1.83 percent and 17.8 percent, respectively, for the fourth quarter of 2002. Net income in the fourth quarter of 2003 included after-tax merger and restructuring-related items of ($5.0) million, which had an immaterial impact on earnings per share, compared with ($69.9) million, or ($.03) per diluted share, in the fourth quarter of 2002.

U.S. Bancorp Chairman, President and Chief Executive Officer Jerry A. Grundhofer said, "2003 concluded a 5-year period dominated by transformational acquisitions and their resulting integration activities. Due to the dedication and support of our exceptional employees, we now have a company that is uniquely positioned to achieve consistent earnings growth as a result of our balanced business mix, advantaged scale, reduced risk profile, low-cost leadership position and emphasis on customer service.

"Specific to 2003, we achieved our earnings objectives, despite the soft economy, increasing net income by 17.8 percent while producing industry-leading returns on assets and equity of 1.99 percent and 19.2 percent, respectively. In addition, we completed the spin-off of Piper Jaffray to our shareholders, a company with a market value of approximately $880 million, increased our cash dividend twice during the year resulting in a increase of 23.1 percent from the rate paid in the fourth quarter of 2002 and announced our intention to return 80 percent of earnings to shareholders through dividends or share repurchases.

"Looking forward to 2004, we see business conditions improving, as evidenced by the significant improvements we saw in the fourth quarter of 2003 in credit quality, as well as improving trends in our fiduciary and payments businesses. In this improving environment, we intend to achieve our stated long-term earnings per share growth goal of 10 percent, while continuing to make the investments that are necessary to ensure top line growth.

"In closing, I would like to thank all of our employees for their hard work and commitment in making 2003 a year of significant progress. Their focus on service quality, expanding existing customer relationships and acquiring new customer relationships was apparent in 2003 and will be critical to achieving our objectives in the future."

The Company's results for the fourth quarter of 2003 improved over the same period of 2002, primarily due to growth in net interest income and fee based products and services, as well as controlled operating expense and lower credit costs. Net income from continuing operations was $970.3 million, or $.50 per diluted share, for the fourth quarter of 2003, compared with $858.6 million, or $.45 per diluted share for the fourth quarter of 2002, representing an 11.1 percent annual growth rate.

Total net revenue on a taxable-equivalent basis for the fourth quarter of 2003 was $37.7 million (1.2 percent) lower than the fourth quarter of 2002, which primarily reflected the net reduction in securities gains (losses) of $106.3 million, in addition to an unfavorable variance in commercial products revenue and lower year-over-year gains from the sale of assets. Otherwise, favorable revenue growth occurred in net interest income, payment systems revenue, cash management fees, trust and investment management fees, and mortgage banking revenue. Acquisitions, including the 57 branches of Bay View Bank in California and the corporate trust business of State Street Bank and Trust Company ("State Street Corporate Trust"), contributed approximately $33.0 million of additional net revenue year-over-year.

Total noninterest expense in the fourth quarter of 2003 was lower than the fourth quarter of 2002 by $144.2 million (9.7 percent), primarily reflecting a $99.7 million reduction in merger and restructuring-related charges, a $54.1 million favorable change in the recognition of mortgage servicing rights ("MSR") impairment and cost savings from completed merger and restructuring- related activities. These positive variances were partially offset by expense increases due to acquisitions, which accounted for approximately $16.0 million of expense growth year-over-year.

Provision for credit losses for the fourth quarter of 2003 was $286.0 million, a decrease of $63.0 million (18.1 percent) from the fourth quarter of 2002. Net charge-offs in the fourth quarter of 2003 were $285.1 million, compared with the third quarter of 2003 net charge-offs of $309.9 million and the fourth quarter of 2002 net charge-offs of $378.5 million. The decline in losses from a year ago was primarily the result of an improving credit risk profile and collection efforts. Total nonperforming assets declined to $1,148.1 million at December 31, 2003, from $1,318.3 million at September 30, 2003 (12.9 percent), and $1,373.5 million at December 31, 2002 (16.4 percent). The ratio of the allowance for credit losses to nonperforming loans was 232 percent at December 31, 2003, compared with 202 percent at September 30, 2003, and 196 percent at December 31, 2002.

On December 31, 2003, the Company announced that it had completed the spin-off of Piper Jaffray Companies (NYSE: PJC). The Company distributed one share of Piper Jaffray Companies common stock for every 100 shares of U.S. Bancorp common stock held by shareholders of record as of 5:00 p.m., EST, on December 22, 2003, by means of a special dividend. In connection with the spin-off, accounting rules require that the financial statements be restated for all prior periods. As such, historical financial results related to Piper Jaffray have been segregated and accounted for in the Company's financial statements as discontinued operations. Net income in the fourth quarter of 2003 included after-tax income from the discontinued operations of Piper Jaffray Companies of $6.7 million, which had an immaterial impact on diluted earnings per share. This compared with an after-tax loss of ($38.9) million, or ($.02) per diluted share, in the fourth quarter of 2002. For the full year 2003, net income included after-tax income from discontinued operations of $22.5 million, or $.01 per diluted share, compared with an after-tax loss of ($22.7) million, or ($.01) per diluted share, for the full year 2002.

Effective January 8, 2004, the Company elected to adopt the "fair value" method of accounting for stock-based compensation. This resulted in the Company recognizing compensation expense for the estimated fair value of all employee stock options granted, modified or settled in fiscal years beginning after December 15, 1994. The company has implemented this accounting change utilizing the "retroactive restatement method," which requires all financial statement periods to be restated for all stock-based compensation. Consequently, the financial results for the fourth quarter of 2003, full year 2003 and all respective prior periods have been restated to reflect this change in accounting. The impact of this change on diluted earnings per share from continuing operations for fourth quarter of 2003 and fourth quarter of 2002 was ($.02) and ($.01), respectively. In addition, the impact on diluted earnings per share from continuing operations for full year 2003 and 2002 was ($.06) and ($.05), respectively, due to this change. The impact of this change on diluted earnings per share for the fourth quarter of 2003 and 2002 was ($.01) and ($.02), respectively, and ($.06) per diluted share for both full year 2003 and 2002.

     INCOME STATEMENT HIGHLIGHTS                                       Table 2

     (Taxable-equivalent basis, $ in millions,            Percent     Percent
      except per-share data)                               Change      Change
                     4Q           3Q           4Q         4Q03 vs     4Q03 vs
                    2003         2003         2002          3Q03        4Q02

    Net interest
     income      $1,816.7     $1,825.5     $1,765.3        (0.5)        2.9
    Noninterest
     income       1,296.6      1,177.4      1,385.7        10.1        (6.4)
      Total net
       revenue    3,113.3      3,002.9      3,151.0         3.7        (1.2)
    Noninterest
     expense      1,342.4      1,253.3      1,486.6         7.1        (9.7)
    Provision
     for credit
     losses         286.0        310.0        349.0        (7.7)      (18.1)
    Income from
     continuing
     operations
     before income
     taxes and
     cumulative
     effect of
     accounting
     change       1,484.9      1,439.6      1,315.4         3.1        12.9
    Taxable-
     equivalent
     adjustment       7.2          7.0          7.7         2.9        (6.5)
    Applicable
     income taxes   507.4        491.9        449.1         3.2        13.0
    Income from
     continuing
     operations
     before
     cumulative
     effect of
     accounting
     change         970.3        940.7        858.6         3.1        13.0
    Income (loss)
     from
     discontinued
     operations
     (after-tax)      6.7         10.2        (38.9)         nm          nm
    Cumulative
     effect of
     accounting
     change
     (after-tax)       --           --           --          nm          nm
    Net income     $977.0       $950.9       $819.7         2.7        19.2

    Diluted
     earnings
     per share:
      Income from
       continuing
       operations
       before
       cumulative
       effect of
       accounting
       change       $0.50        $0.48        $0.45         4.2        11.1
      Discontinued
       operations      --         0.01        (0.02)         nm          nm
      Cumulative
       effect of
       accounting
       change          --           --           --          nm          nm
        Net
         income     $0.50        $0.49        $0.43         2.0        16.3


                                     Full            Full
                                     Year            Year           Percent
                                     2003            2002            Change

    Net interest income            $7,217.5        $6,847.2           5.4
    Noninterest income              5,313.0         5,210.7           2.0
      Total net revenue            12,530.5        12,057.9           3.9
    Noninterest expense             5,596.9         5,740.5          (2.5)
    Provision for credit losses     1,254.0         1,349.0          (7.0)
    Income from continuing
     operations before income
     taxes and cumulative
     effect of accounting change    5,679.6         4,968.4          14.3
    Taxable-equivalent adjustment      28.2            32.9         (14.3)
    Applicable income taxes         1,941.3         1,707.5          13.7
    Income from continuing
     operations before cumulative
     effect of accounting change    3,710.1         3,228.0          14.9
    Income (loss) from
     discontinued operations
     (after-tax)                       22.5           (22.7)           nm
    Cumulative effect of
     accounting change (after-tax)       --           (37.2)           nm
    Net income                     $3,732.6        $3,168.1          17.8

    Diluted earnings per share:
      Income from continuing
       operations before
       cumulative effect of
       accounting change              $1.92           $1.68          14.3
      Discontinued operations          0.01           (0.01)           nm
      Cumulative effect of
       accounting change                 --           (0.02)           nm
        Net income                    $1.93           $1.65          17.0


    Net Interest Income

Fourth quarter net interest income on a taxable-equivalent basis was $1,816.7 million, compared with $1,765.3 million recorded in the fourth quarter of 2002. Average earning assets for the period increased over the fourth quarter of 2002 by $12.6 billion (8.3 percent), primarily driven by increases in investment securities, residential mortgages, and retail loans, partially offset by a decline in commercial loans and loans held for sale related to mortgage banking activities. The net interest margin in the fourth quarter of 2003 was 4.42 percent, compared with 4.43 percent in the third quarter of 2003 and 4.65 percent in the fourth quarter of 2002. The decline in the net interest margin in the fourth quarter of 2003 from the fourth quarter of 2002 primarily reflected growth in lower-yielding investment securities as a percent of total earning assets, a change in loan mix, and a decline in the margin benefit from net free funds due to lower interest rates. In addition, the net interest margin declined year-over-year as a result of consolidating loans from Stellar Funding Group, Inc., a commercial loan conduit, onto the Company's balance sheet during the third quarter of 2003. The slight decline in the net interest margin in the fourth quarter of 2003 from the third quarter of 2003 also reflected a similar change in earning asset mix.

     NET INTEREST INCOME                                               Table 3

     (Taxable-equivalent basis; $ in millions)
                                                             Change    Change
                               4Q        3Q        4Q        4Q03 vs   4Q03 vs
                              2003      2003      2002        3Q03      4Q02

    Components of net
     interest income
      Income on earning
       assets               $2,294.9  $2,318.3  $2,389.1    $(23.4)   $(94.2)
      Expense on
       interest-bearing
       liabilities             478.2     492.8     623.8     (14.6)   (145.6)
    Net interest income     $1,816.7  $1,825.5  $1,765.3     $(8.8)    $51.4

    Average yields and
     rates paid
      Earning assets yield      5.58%     5.63%     6.29%    (0.05)%   (0.71)%
      Rate paid on
       interest-bearing
       liabilities              1.44      1.49      2.05     (0.05)    (0.61)
    Gross interest margin       4.14%     4.14%     4.24%       -- %   (0.10)%
    Net interest margin         4.42%     4.43%     4.65%    (0.01)%   (0.23)%

    Average balances
      Investment securities  $40,774   $37,777   $30,399    $2,997   $10,375
      Loans                  119,300   119,982   115,405      (682)    3,895
      Earning assets         163,705   163,865   151,099      (160)   12,606
      Interest-bearing
       liabilities           131,990   131,693   120,682       297    11,308
      Net free funds*         31,715    32,172    30,417      (457)    1,298

     *  Represents noninterest-bearing deposits, allowance for credit losses,
        unrealized gain (loss) on available-for-sale securities, non-earning
        assets, other non-interest bearing liabilities and equity.


                                    Full             Full
                                    Year             Year
                                    2003             2002         Change


    Components of net
     interest income
      Income on earning assets     $9,286.2        $9,526.8      $(240.6)
      Expense on
       interest-bearing
       liabilities                  2,068.7         2,679.6       (610.9)
    Net interest income            $7,217.5        $6,847.2       $370.3

    Average yields and rates paid
      Earning assets yield             5.77%           6.46%       (0.69)%
      Rate paid on
       interest-bearing
       liabilities                     1.60            2.26        (0.66)
    Gross interest margin              4.17%           4.20%       (0.03)%
    Net interest margin                4.49%           4.65%       (0.16)%

    Average balances
      Investment securities         $37,248         $28,829       $8,419
      Loans                         118,362         114,453        3,909
      Earning assets                160,808         147,410       13,398
      Interest-bearing
       liabilities                  129,004         118,697       10,307
      Net free funds*                31,804          28,713        3,091

     *  Represents noninterest-bearing deposits, allowance for credit losses,
        unrealized gain (loss) on available-for-sale securities, non-earning
        assets, other non-interest bearing liabilities and equity.


     AVERAGE LOANS                                                     Table 4

     ($ in millions)                                       Percent   Percent
                                                            Change    Change
                         4Q           3Q         4Q        4Q03 vs   4Q03 vs
                        2003         2003       2002        3Q03      4Q02

    Commercial        $35,080     $36,958    $36,880       (5.1)     (4.9)
    Lease financing     4,959       5,022      5,413       (1.3)     (8.4)
      Total
       commercial      40,039      41,980     42,293       (4.6)     (5.3)

    Commercial
     mortgages         20,230      20,089     20,056        0.7       0.9
    Construction
     and development    7,060       7,308      6,587       (3.4)      7.2
      Total commercial
       real estate     27,290      27,397     26,643       (0.4)      2.4

    Residential
     mortgages         13,374      12,234      8,966        9.3      49.2

    Credit card         5,713       5,606      5,662        1.9       0.9
    Retail leasing      5,895       5,806      5,626        1.5       4.8
    Home equity and
     second mortgages  13,084      13,093     13,651       (0.1)     (4.2)
    Other retail       13,905      13,866     12,564        0.3      10.7
      Total retail     38,597      38,371     37,503        0.6       2.9

    Total loans      $119,300    $119,982   $115,405       (0.6)      3.4


                                      Full            Full
                                      Year            Year         Percent
                                      2003            2002          Change

    Commercial                      $36,238         $38,244          (5.2)
    Lease financing                   5,088           5,573          (8.7)
      Total commercial               41,326          43,817          (5.7)

    Commercial mortgages             20,166          19,212           5.0
    Construction and development      6,976           6,511           7.1
      Total commercial real estate   27,142          25,723           5.5

    Residential mortgages            11,696           8,412          39.0

    Credit card                       5,525           5,633          (1.9)
    Retail leasing                    5,804           5,389           7.7
    Home equity and
     second mortgages                13,239          13,232           0.1
    Other retail                     13,630          12,247          11.3
      Total retail                   38,198          36,501           4.6

    Total loans                    $118,362        $114,453           3.4


Average loans for the fourth quarter of 2003 were $3.9 billion (3.4 percent) higher than the fourth quarter of 2002, primarily due to growth in average residential mortgages of $4.4 billion (49.2 percent) and retail loans of $1.1 billion (2.9 percent) year-over-year. Total commercial loans declined by $2.3 billion (5.3 percent), while total commercial real estate loans increased by $647 million (2.4 percent). Although the consolidation of loans from the Stellar commercial loan conduit had a positive impact on average loan balances year-over-year, current credit markets and soft economic conditions throughout much of 2003 led to the overall decrease in total commercial loans. Average loans for the fourth quarter of 2003 were lower than the third quarter of 2003 by $682 million (.6 percent), reflecting reductions in commercial and commercial real estate loans, partially offset by growth in both residential mortgages and retail loans.

Average investment securities in the fourth quarter of 2003 were $10.4 billion (34.1 percent) higher than the fourth quarter of 2002, reflecting the reinvestment of proceeds from loan sales, declines in commercial loan balances and additional deposits assumed in connection with the Bay View Bank branch acquisition. Investment securities at December 31, 2003, were $14.8 billion higher than at December 31, 2002, and $8.3 billion higher than the balance at September 30, 2003. The increase from the third quarter primarily reflects the timing of securities sales late in the third quarter. During the fourth quarter of 2003, the Company continued to acquire floating-rate securities and shorter-term fixed-rate securities as part of its asset/liability management activities.

     AVERAGE DEPOSITS                                                  Table 5

     ($ in millions)                                       Percent Percent
                                                            Change  Change
                        4Q           3Q          4Q        4Q03 vs 4Q03 vs
                       2003         2003        2002        3Q03    4Q02

    Noninterest-
     bearing
     deposits        $29,647     $31,907     $31,220       (7.1)   (5.0)
    Interest-
     bearing
     deposits
      Interest
       checking       20,595      20,148      16,505        2.2    24.8
      Money market
       accounts       35,351      33,980      27,238        4.0    29.8
      Savings
       accounts        5,708       5,846       5,011       (2.4)   13.9
        Savings
         products     61,654      59,974      48,754        2.8    26.5
      Time
       certificates
       of deposit
       less than
       $100,000       14,182      14,824      18,334       (4.3)  (22.6)
      Time deposits
       greater than
       $100,000       10,786      11,251      12,709       (4.1)  (15.1)
        Total
         interest-
         bearing
         deposits     86,622      86,049      79,797        0.7     8.6
    Total deposits  $116,269    $117,956    $111,017       (1.4)    4.7


                                      Full            Full
                                      Year            Year         Percent
                                      2003            2002          Change

    Noninterest-bearing deposits    $31,715         $28,715          10.4
    Interest-bearing deposits
      Interest checking              19,104          15,631          22.2
      Money market accounts          32,310          25,237          28.0
      Savings accounts                5,612           4,928          13.9
        Savings products             57,026          45,796          24.5
      Time certificates of
       deposit less than $100,000    15,493          19,283         (19.7)
      Time deposits greater
       than $100,000                 12,319          11,330           8.7
        Total interest-bearing
         deposits                    84,838          76,409          11.0
    Total deposits                 $116,553        $105,124          10.9


Average noninterest-bearing deposits in the fourth quarter of 2003 were lower than the fourth quarter of 2002 by $1.6 billion (5.0 percent). The change is primarily due to lower mortgage banking activities and a decline in Federal government deposits related to their decision in the third quarter to pay for treasury management services rather than maintain compensating balances. Average interest-bearing deposits increased by $6.8 billion (8.6 percent) over the fourth quarter of 2002. Approximately $1.7 billion of the increase in average interest-bearing deposits was due to acquisitions, while the remaining $5.1 billion of growth was driven by increases in savings products balances, partially offset by decreases in time certificates of deposit less than $100,000 and time deposits greater than $100,000.

Average noninterest-bearing deposits in the fourth quarter of 2003 were $2.3 billion (7.1 percent) lower than the third quarter of 2003 due to lower government-related deposits, while average interest-bearing deposits were slightly higher (.7 percent). Noninterest-bearing deposits at December 31, 2003, were essentially flat compared to September 30, 2003, and $2.6 billion (7.5 percent) lower than at December 31, 2002.

     NONINTEREST INCOME                                                Table 6

     ($ in millions)                                       Percent   Percent
                                                            Change    Change
                        4Q            3Q          4Q       4Q03 vs   4Q03 vs
                       2003          2003        2002        3Q03      4Q02

    Credit and
     debit card
     revenue          $153.4        $137.6      $143.7      11.5       6.8
    Corporate
     payment
     products
     revenue            88.7          95.7        80.4      (7.3)     10.3
    ATM
     processing
     services           40.3          41.3        41.7      (2.4)     (3.4)
    Merchant
     processing
     services          146.0         146.3       142.0      (0.2)      2.8
    Trust and
     investment
     management
     fees              246.6         239.8       213.6       2.8      15.4
    Deposit
     service
     charges           186.6         187.0       186.4      (0.2)      0.1
    Cash management
     fees              116.3         126.2       102.6      (7.8)     13.4
    Commercial
     products
     revenue            98.5          97.8       108.3       0.7      (9.0)
    Mortgage
     banking
     revenue            91.9          89.5        88.4       2.7       4.0
    Investment
     products
     fees and
     commissions        36.2          35.5        35.0       2.0       3.4
    Securities
     gains
     (losses),
     net                (0.1)       (108.9)      106.2     (99.9)       nm
    Other               92.2          89.6       137.4       2.9     (32.9)

    Total
     noninterest
     income         $1,296.6      $1,177.4    $1,385.7      10.1      (6.4)


                                      Full            Full
                                      Year            Year          Percent
                                      2003            2002           Change

    Credit and debit card revenue    $560.7          $517.0           8.5
    Corporate payment
     products revenue                 361.3           325.7          10.9
    ATM processing services           165.9           160.6           3.3
    Merchant processing services      561.4           567.3          (1.0)
    Trust and investment
     management fees                  953.9           892.1           6.9
    Deposit service charges           715.8           690.3           3.7
    Cash management fees              466.3           416.9          11.8
    Commercial products revenue       400.5           479.2         (16.4)
    Mortgage banking revenue          367.1           330.2          11.2
    Investment products fees
     and commissions                  144.9           132.7           9.2
    Securities gains (losses), net    244.8           299.9         (18.4)
    Other                             370.4           398.8          (7.1)

    Total noninterest income       $5,313.0        $5,210.7           2.0


    Noninterest Income

Fourth quarter noninterest income was $1,296.6 million, a decrease of $89.1 million (6.4 percent) from the same quarter of 2002, and a $119.2 million (10.1 percent) increase over the third quarter of 2003. The decline in noninterest income from the fourth quarter of 2002 was driven by a net reduction in gains (losses) on the sale of securities, other income and commercial products revenue, partially offset by increases in payment services revenue, cash management fees, trust and investment management fees, mortgage banking revenue, and the effects of acquisitions, including the branches of Bay View Bank and State Street Corporate Trust, which contributed approximately $24.3 million in additional noninterest income in the fourth quarter of 2003. Credit and debit card revenue and corporate payment products revenue were higher in the fourth quarter of 2003 than the fourth quarter of 2002 by $9.7 million (6.8 percent) and $8.3 million (10.3 percent), respectively. Although credit and debit card revenue grew year-over-year, the growth was somewhat muted due to the impact of the settlement of the antitrust litigation brought against VISA USA and Mastercard by Wal-Mart Stores, Inc., Sears Roebuck & Co. and other retailers, which lowered the interchange rate on signature debit transactions beginning August 1, 2003. The year-over-year impact of the VISA settlement on credit and debit card revenue was approximately $12.6 million. This change in the interchange rate, in addition to higher customer loyalty rewards expenses, however, was more than offset by increases in transaction volumes and other rate adjustments. The corporate payment products revenue growth reflected growth in sales and card usage. Merchant processing services revenue was higher in the fourth quarter of 2003 than the same quarter of 2002 by $4.0 million (2.8 percent), due to an increase in transaction volume, which was partially offset by lower processing spreads resulting from changes in the mix of merchants. The favorable variance in trust and investment management fees of $33.0 million (15.4 percent) in the fourth quarter of 2003 over the same period of 2002 was principally driven by the acquisition of State Street Corporate Trust, which contributed approximately $21.1 million in fees during the fourth quarter of 2003. In addition, trust and investment management fees benefited from higher equity market valuations and account growth year-over-year. Cash management fees grew by $13.7 million (13.4 percent) in the fourth quarter of 2003 over the same period of 2002. The increase in cash management fees year-over-year was primarily driven by a change during the third quarter of 2003 in the Federal government's payment methodology for treasury management services from compensating balances, reflected in net interest income, to fees. Mortgage banking revenue increased by $3.5 million (4.0 percent) over the same period of 2002 due to higher loan servicing revenue, which was slightly offset by a decline in origination and sales revenue. Offsetting these favorable variances were declines in other income and commercial products revenue year-over-year. Other income declined primarily due to a $46.5 million gain on the sale of a co-branded credit card portfolio recorded in the fourth quarter of 2002. Commercial products revenue declined by $9.8 million (9.0 percent) year-over-year, principally reflecting lower commercial loan conduit servicing fees, which resulted, in part, from unwinding the Stellar commercial loan conduit.

Noninterest income increased in the fourth quarter of 2003 by $119.2 million (10.1 percent) over the third quarter of 2003, primarily due to the net favorable change in gains (losses) on the sale of securities of $108.8 million and increases in credit and debit card revenue and trust and investment management fees. These favorable variances were partially offset by lower corporate payment product fees and cash management fees. Credit and debit card revenue in the fourth quarter was seasonally higher than the third quarter of 2003. The VISA USA settlement had a slight negative impact of $4.9 million, as the reduced interchange rates became effective August 1, 2003. Trust and investment management fees increased by $6.8 million (2.8 percent) over the third quarter of 2003 due to the impact of improving equity market valuations, annual fees and core account growth. Corporate payment products fees were seasonally lower than the third quarter of 2003, primarily due to the government purchasing card sales volumes, while cash management fees declined from the prior quarter due to lower fees from government-related sources.

     NONINTEREST EXPENSE                                               Table 7

     ($ in millions)                                      Percent  Percent
                                                           Change   Change
                           4Q          3Q         4Q      4Q03 vs  4Q03 vs
                          2003        2003       2002       3Q03     4Q02

    Salaries            $539.4     $543.8     $545.1      (0.8)    (1.0)
    Employee benefits     81.3       75.8       83.0       7.3     (2.0)
    Net occupancy         91.9       93.9       96.1      (2.1)    (4.4)
    Furniture and
     equipment            69.7       67.4       71.6       3.4     (2.7)
    Communication         37.8       38.5       38.5      (1.8)    (1.8)
    Postage               43.2       43.9       41.7      (1.6)     3.6
    Other intangible
     assets              124.2       10.8      156.7        nm    (20.7)
    Merger and
     restructuring-
     related charges       7.6       10.2      107.3     (25.5)   (92.9)
    Other                347.3      369.0      346.6      (5.9)     0.2

    Total noninterest
     expense          $1,342.4   $1,253.3   $1,486.6       7.1     (9.7)


                                      Full            Full
                                      Year            Year          Percent
                                      2003            2002           Change

    Salaries                       $2,176.8        $2,167.5           0.4
    Employee benefits                 328.4           317.5           3.4
    Net occupancy                     372.6           375.9          (0.9)
    Furniture and equipment           271.1           282.8          (4.1)
    Communication                     157.2           145.7           7.9
    Postage                           175.8           172.4           2.0
    Other intangible assets           682.4           553.0          23.4
    Merger and
     restructuring-related charges     46.2           321.2         (85.6)
    Other                           1,386.4         1,404.5          (1.3)

    Total noninterest expense      $5,596.9        $5,740.5          (2.5)


    Noninterest Expense

Fourth quarter noninterest expense totaled $1,342.4 million, a decrease of $144.2 million (9.7 percent) from the fourth quarter of 2002. The decline in expense year-over-year was primarily due to a $99.7 million reduction in merger and restructuring-related charges, the favorable change in MSR impairment of $54.1 million and cost savings from merger and restructuring-related activities. These positive variances were partially offset by the impact of recent acquisitions, including the branches of Bay View Bank and State Street Corporate Trust. The acquisitions contributed approximately $16.0 million of expense growth to the quarter.

Noninterest expense in the fourth quarter of 2003 was higher than the third quarter of 2003 by $89.1 million (7.1 percent). The unfavorable variance was primarily due to the MSR repairment ($108.5 million) taken in the third quarter of 2003. No expense was recorded in the fourth quarter of 2003 related to changes in MSR valuations. Partially offsetting this negative variance was other expense, which was $21.7 million (5.9 percent) lower than the prior quarter, primarily reflecting a decline in tax-related liabilities and merchant processing expenses.

     ALLOWANCE FOR CREDIT LOSSES                                       Table 8

     ($ in millions)    4Q          3Q          2Q         1Q         4Q
                       2003        2003        2003       2003       2002

    Balance,
     beginning
     of period      $2,367.7    $2,367.6    $2,408.5   $2,422.0   $2,460.5

    Net charge-offs
      Commercial       100.9       123.9       122.9      137.9      136.7
      Lease financing   14.9        19.2        26.9       23.0       58.2
        Total
         commercial    115.8       143.1       149.8      160.9      194.9
      Commercial
       mortgages        10.0         5.9         9.3        2.9       13.5
      Construction
       and development   2.9         4.6         2.5        1.0       (0.9)
        Total
         commercial
         real estate    12.9        10.5        11.8        3.9       12.6

    Residential
     mortgages           7.2         7.3         6.5        5.9        6.6

    Credit card         62.3        59.3        64.5       68.7       69.1
    Retail leasing      11.3        12.2        12.6       13.9       10.7
    Home equity and
     second mortgages   20.4        23.2        23.9       25.4       24.4
    Other retail        55.2        54.3        53.8       55.1       60.2
      Total retail     149.2       149.0       154.8      163.1      164.4
        Total net
         charge-offs   285.1       309.9       322.9      333.8      378.5

    Provision for
     credit losses     286.0       310.0       323.0      335.0      349.0
    Acquisitions and
     other changes        --          --       (41.0)     (14.7)      (9.0)

    Balance, end
     of period      $2,368.6    $2,367.7    $2,367.6   $2,408.5   $2,422.0

    Net charge-offs
     to average
     loans (%)          0.95        1.02        1.10       1.16       1.30

    Allowance as a
     percentage of:
      Period-end loans  2.00        1.98        1.98       2.06       2.08
      Nonperforming
       loans             232         202         194        194        196
      Nonperforming
       assets            206         180         174        177        176


    Credit Quality

The allowance for credit losses was $2,368.6 million at December 31, 2003, compared with the allowance for credit losses of $2,367.7 million at September 30, 2003, and $2,422.0 million at December 31, 2002. The ratio of the allowance for credit losses to nonperforming loans was 232 percent at December 31, 2003, compared with 202 percent at September 30, 2003, and 196 percent at December 31, 2002. The ratio of the allowance for credit losses to period-end loans was 2.00 percent at December 31, 2003, compared with 1.98 percent at September 30, 2003, and 2.08 percent at December 31, 2002. Total net charge-offs in the fourth quarter of 2003 were $285.1 million, compared with the third quarter of 2003 net charge-offs of $309.9 million and the fourth quarter of 2002 net charge-offs of $378.5 million.

Commercial and commercial real estate loan net charge-offs were $128.7 million for the fourth quarter of 2003, or .76 percent of average loans outstanding, compared with $153.6 million, or .88 percent of average loans outstanding, in the third quarter of 2003 and $207.5 million, or 1.19 percent of average loans outstanding, in the fourth quarter of 2002. The decline in net charge-offs was broad-based across most industries within the commercial loan portfolio.

Retail loan net charge-offs of $149.2 million in the fourth quarter of 2003 were essentially flat to the third quarter of 2003 and $15.2 million (9.2 percent) lower than the fourth quarter of 2002. Retail loan net charge-offs as a percent of average loans outstanding were 1.53 percent in the fourth quarter of 2003, compared with 1.54 percent and 1.74 percent in the third quarter of 2003 and fourth quarter of 2002, respectively. Lower levels of retail loan net charges-offs principally reflected the Company's improvement in ongoing collection efforts and risk management.

     CREDIT RATIOS                                                     Table 9

     (Percent)               4Q        3Q         2Q        1Q        4Q
                            2003      2003       2003      2003      2002
    Net charge-offs
     ratios*
      Commercial           1.14       1.33      1.35      1.54     1.47
      Lease financing      1.19       1.52      2.11      1.78     4.27
        Total commercial   1.15       1.35      1.44      1.57     1.83

      Commercial
       mortgages           0.20       0.12      0.19      0.06     0.27
      Construction and
       development         0.16       0.25      0.14      0.06    (0.05)
        Total commercial
         real estate       0.19       0.15      0.17      0.06     0.19

      Residential
       mortgages           0.21       0.24      0.24      0.24     0.29

      Credit card          4.33       4.20      4.80      5.17     4.84
      Retail leasing       0.76       0.83      0.88      0.98     0.75
      Home equity and
       second mortgages    0.62       0.70      0.72      0.76     0.71
      Other retail         1.57       1.55      1.59      1.69     1.90
        Total retail       1.53       1.54      1.63      1.75     1.74

    Total net charge-offs  0.95       1.02      1.10      1.16     1.30

    Delinquent loan
     ratios - 90 days or
     more past due
     excluding
     nonperforming loans**
      Commercial           0.06       0.11      0.09      0.10     0.14
      Commercial real
       estate              0.02       0.01      0.02      0.03     0.04
      Residential
       mortgages           0.61       0.63      0.65      0.82     0.90
      Retail               0.56       0.57      0.63      0.71     0.72
    Total loans            0.28       0.29      0.30      0.34     0.37

    Delinquent loan
     ratios - 90 days or
     more past due
     including
     nonperforming loans**
      Commercial           1.97       2.31      2.27      2.33     2.35
      Commercial real
       estate              0.82       0.75      0.82      0.85     0.90
      Residential
       mortgages           0.91       0.98      1.13      1.37     1.44
      Retail               0.62       0.63      0.70      0.77     0.79
    Total loans            1.14       1.27      1.32      1.40     1.43

     *  annualized and calculated on average loan balances
     ** ratios are expressed as a percent of ending loan balances


The overall level of net charge-offs in the fourth quarter of 2003 continued to reflect current economic conditions. Due to the Company's ongoing efforts to reduce the overall risk profile of the organization, net charge-offs are expected to continue to trend lower.

     ASSET QUALITY                                                    Table 10

     ($ in millions)
                        Dec 31     Sep 30     Jun 30     Mar 31    Dec 31
                         2003       2003       2003       2003      2002
    Nonperforming loans
      Commercial        $623.5     $793.9     $795.2     $808.4    $760.4
      Lease financing    113.3      111.6      126.6      129.4     166.7
        Total
         commercial      736.8      905.5      921.8      937.8     927.1
      Commercial
       mortgages         177.6      161.5      182.0      174.6     174.6
      Construction and
       development        39.9       40.2       35.3       46.1      57.5
        Total commercial
         real estate     217.5      201.7      217.3      220.7     232.1
      Residential
       mortgages          40.5       46.1       56.0       57.4      52.0
      Retail              25.2       21.6       24.2       23.9      26.1
    Total
     nonperforming
     loans             1,020.0    1,174.9    1,219.3    1,239.8   1,237.3

    Other real estate     72.6       70.4       71.5       66.2      59.5
    Other
     nonperforming
     assets               55.5       73.0       68.9       56.6      76.7

    Total
     nonperforming
     assets*          $1,148.1   $1,318.3   $1,359.7   $1,362.6  $1,373.5

    Accruing loans
     90 days or more
     past due           $329.4     $352.4     $360.7     $403.5    $426.4

    Nonperforming
     assets to loans
     plus ORE (%)         0.97       1.10       1.14       1.16      1.18

     * does not include accruing loans 90 days or more past due


Nonperforming assets at December 31, 2003, totaled $1,148.1 million, compared with $1,318.3 million at September 30, 2003, and $1,373.5 million at December 31, 2002. The ratio of nonperforming assets to loans and other real estate was .97 percent at December 31, 2003, compared with 1.10 percent at September 30, 2003, and 1.18 percent at December 31, 2002. Given the Company's ongoing efforts to reduce the overall risk profile of the organization, nonperforming assets are expected to continue to trend lower.

     CAPITAL POSITION                                                 Table 11

     ($ in millions)      Dec 31    Sep 30     Jun 30    Mar 31    Dec 31
                           2003      2003       2003      2003      2002

    Total shareholders'
     equity              $19,242   $19,771   $19,521   $18,862  $18,436
    Tier 1 capital        14,623    14,589    13,950    13,215   12,941
    Total risk-based
     capital              21,703    21,859    21,392    20,242   20,088

    Common equity
     to assets              10.2%     10.5%     10.0%     10.4%    10.2%
    Tangible common
     equity to assets        6.5       6.6       6.0       6.0      5.7
    Tier 1 capital ratio     9.2       9.0       8.5       8.2      8.0
    Total risk-based
     capital ratio          13.6      13.5      13.0      12.6     12.4
    Leverage ratio           8.0       8.0       7.8       7.6      7.7


Total shareholders' equity was $19.2 billion at December 31 2003, compared with $18.4 billion at December 31, 2002. The increase was the result of corporate earnings offset primarily by dividends, including the special dividend of $685 million related to the spin-off of Piper Jaffray Companies.

Tangible common equity to assets was 6.5 percent at December 31, 2003, compared with 6.6 percent at September 30, 2003, and 5.7 percent at December 31, 2002. The Tier 1 capital ratio was 9.2 percent at December 31, 2003, compared with 9.0 percent at September 30, 2003, and 8.0 percent at December 31, 2002. The total risk-based capital ratio was 13.6 percent at December 31, 2003, compared with 13.5 percent at September 30, 2003, and 12.4 percent at December 31, 2002. The leverage ratio was 8.0 percent at December 31, 2003, compared with 8.0 percent at September 30, 2003, and 7.7 percent at December 31, 2002. All regulatory ratios continue to be in excess of stated "well capitalized" requirements.

     COMMON SHARES                                                    Table 12

     (Millions)          4Q          3Q          2Q          1Q         4Q
                        2003        2003        2003        2003       2002

    Beginning shares
     outstanding      1,927.4     1,924.5     1,919.0    1,917.0    1,914.7

    Shares issued
     for stock option
     and stock
     purchase plans,
     acquisitions
     and other
     corporate
     purposes            10.5         2.9         5.5        2.0        2.3
    Shares
     repurchased        (15.0)         --          --         --         --
    Ending shares
     outstanding      1,922.9     1,927.4     1,924.5    1,919.0    1,917.0


On December 16, 2003, the board of directors of U.S. Bancorp approved an authorization to repurchase 150 million shares of outstanding common stock over the next 24 months. This repurchase program replaced the Company's previous program, which was set to expire in December 2003. During the fourth quarter of 2003, the Company repurchased 15.0 million shares of common stock in both open market and privately negotiated transactions under these authorizations. As of December 31, 2003, there were approximately 142 million shares remaining to be repurchased under the current authorization.

     LINE OF BUSINESS FINANCIAL PERFORMANCE*                          Table 13

     ($ in millions)
                            Net Operating Earnings**         Percent Change
                        4Q           3Q           4Q       4Q03 vs   4Q03 vs
    Business Line      2003         2003         2002       3Q03      4Q02

    Wholesale
     Banking         $307.2       $308.7       $262.1      (0.5)     17.2
    Consumer
     Banking          419.8        440.8        390.5      (4.8)      7.5
    Private Client,
     Trust and
     Asset
     Management       134.5        129.8        111.3       3.6      20.8
    Payment
     Services         196.6        189.0        214.2       4.0      (8.2)
    Treasury and
     Corporate
     Support          (82.8)      (120.9)       (49.6)     31.5     (66.9)

    Consolidated
     Company         $975.3       $947.4       $928.5       2.9       5.0

     *  preliminary data
     ** earnings before merger and restructuring-related items, discontinued
        operations and cumulative effect of change in accounting principles


                                Full          Full                 4Q 2003
                                Year          Year      Percent    Earnings
                                2003          2002       Change   Composition

    Wholesale Banking        $1,195.3      $1,115.7       7.1        31%
    Consumer Banking          1,688.4       1,521.0      11.0        43
    Private Client, Trust
     and Asset Management       506.5         456.7      10.9        14
    Payment Services            732.8         704.6       4.0        20
    Treasury and
     Corporate Support         (382.5)       (360.7)     (6.0)       (8)

    Consolidated Company     $3,740.5      $3,437.3       8.8       100%

     *  preliminary data
     ** earnings before merger and restructuring-related items, discontinued
        operations and cumulative effect of change in accounting principles


    Lines of Business

Within the Company, financial performance is measured by major lines of business which include Wholesale Banking, Consumer Banking, Private Client, Trust and Asset Management, Payment Services, and Treasury and Corporate Support. Business line results are derived from the Company's business unit profitability reporting systems. Designations, assignments and allocations may 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 our diverse customer base. During 2003, certain organization and methodology changes were made and, accordingly, results for 2003 and 2002 have been restated and presented on a comparable basis.

Wholesale Banking offers lending, depository, treasury management and other financial services to middle market, large corporate and public sector clients. Wholesale Banking contributed $307.2 million of the Company's operating earnings in the fourth quarter of 2003, a 17.2 percent increase over the same period of 2002, but slightly less than the third quarter of 2003. The increase in Wholesale Banking's fourth quarter 2003 contribution over the fourth quarter of 2002 was the result of essentially flat net revenue, lower noninterest expense (8.4 percent), and a favorable variance in the provision for credit losses (45.6 percent). Total net revenue in the fourth quarter of 2003 was essentially flat to the fourth quarter of 2002, the net effect of an unfavorable variance in net interest income (1.3 percent) and higher noninterest income (3.8 percent). The decrease in net interest income was primarily due to declines in average total loans outstanding (3.7 percent), partially offset by increases in average total deposits (20.4 percent). Higher cash management fees (20.0 percent) primarily drove Wholesale Banking's favorable variance in noninterest income year-over-year. The increase in cash management fees was principally driven by a change during the third quarter of 2003 in the Federal government's payment methodology for treasury management services from compensating balances to fees. Wholesale Banking's favorable variance in noninterest expense year-over-year was driven by a decrease in other expense, the result of lower loan workout-related expense relative to the fourth quarter of 2002. The slight decrease in Wholesale Banking's contribution to operating earnings in the fourth quarter of 2003 from the third quarter of 2003 was the net result of an unfavorable variance in net revenue (3.7 percent) and higher noninterest expense (6.2 percent), offset by a favorable reduction in the provision for credit losses (26.8 percent). Net revenue in the fourth quarter of 2003 was lower than the previous quarter due to decreases in both net interest income (3.1 percent) and noninterest income (5.1 percent). The change in net interest income reflected reductions from the prior quarter in the business line's average loans outstanding and average deposits, while declines in cash management fees and commercial products revenue led to the unfavorable variance in noninterest income quarter to quarter. The increase in noninterest expense was principally due to higher legal and professional expenses. Lower net charge-offs from improving credit quality drove the favorable variance in provision for credit losses.

Consumer Banking delivers products and services to the broad consumer market and small businesses through banking offices, telemarketing, on-line services, direct mail and automated teller machines ("ATMs"). It encompasses community banking, metropolitan banking, small business banking, consumer lending, mortgage banking, workplace banking, student banking, 24-hour banking, and investment product and insurance sales. Consumer Banking contributed $419.8 million of the Company's operating earnings in the fourth quarter of 2003, a 7.5 percent increase over the same period of 2002, but a 4.8 percent decline from the third quarter of 2003. The increase in Consumer Banking's fourth quarter 2003 contribution over the fourth quarter of 2002 was the result of lower noninterest expense (7.6 percent) and provision for credit losses (16.5 percent), partially offset by an unfavorable variance in net revenue (1.3 percent). Net interest income improved year-over-year (1.8 percent), the result of increases in average loans and average deposits, as well as the acquisition of the Bay View Bank branches in California. Noninterest income also improved in the fourth quarter of 2003 over the same period of 2002, primarily due to positive changes in mortgage banking revenue and investment products fees and commissions. Offsetting the favorable variances in net interest income and noninterest income was a net reduction in gains (losses) on the sale of securities of $38.3 million. Noninterest expense in the fourth quarter of 2003 was lower than the fourth quarter of 2002 (7.6 percent), mainly due to the change in MSR valuation, partly offset by the impact of the acquisition of the Bay View Bank branches. The decline in Consumer Banking's contribution in the fourth quarter of 2003 from the third quarter of 2003 was primarily the result of a decrease in net interest income (2.7 percent). Variances in noninterest income and noninterest expense were largely offsetting due to the change in MSR valuation and the net reduction in gains (losses) on sale of securities, respectively, quarter to quarter.

Private Client, Trust and Asset Management provides trust, private banking, financial advisory, investment management and mutual fund processing services through five businesses: Private Client Group, Corporate Trust, Asset Management, Institutional Trust and Custody, and Custody and Fund Services, LLC. Private Client, Trust and Asset Management contributed $134.5 million of the Company's operating earnings in the fourth quarter of 2003, 20.8 percent higher than the same period of 2002 and 3.6 percent higher than the third quarter of 2003. The favorable variance in the business line's contribution in the fourth quarter of 2003 over the fourth quarter of 2002 was the result of a favorable variance in net revenue (18.4 percent), partly offset by an unfavorable variance in noninterest expense of (16.9 percent). The increase in net revenue was primarily due to the acquisition of State Street Corporate Trust, which added approximately $30.5 million of net revenue in the fourth quarter of 2003, and increases due to higher equity market valuations and core account growth. Higher total deposit balances (48.2 percent) favorably impacted net interest income year-over-year. The unfavorable variance in expense was, also, primarily due to the acquisition of State Street Corporate Trust, partly offset by business line cost savings year-over-year. The increase in the business line's contribution (3.6 percent) in the fourth quarter of 2003 over the prior quarter of 2003 was the result of higher net revenue (1.4 percent), lower noninterest expense (1.0 percent) and a $1.3 million decrease in the provision for credit losses. The increase in net interest income from the third quarter of 2003 to the fourth quarter of 2003 was primarily driven by an increase in average total deposits (4.7 percent), while noninterest income benefited from higher equity market valuations, annual fees and core customer growth.

Payment Services includes consumer and business credit cards, corporate and purchasing card services, consumer lines of credit, ATM processing, merchant processing, and debit cards. Payment Services contributed $196.6 million of the Company's operating earnings in the fourth quarter of 2003, an 8.2 percent decrease from the same period of 2002, but a 4.0 percent increase over the third quarter of 2003. The decline in Payment Services' contribution in the fourth quarter of 2003 from the same period of 2002 was the result of lower net revenue (7.2 percent), partially offset by a decline in noninterest expense (5.8 percent) and a lower provision for credit losses (6.3 percent). The reduction in net revenue year-over-year was primarily due to lower net interest income (12.2 percent), which reflected lower spreads on retail credit cards and a reduction in loan fees relative to the prior year's quarter, in addition to a reduction in other revenue. Other revenue decreased due to gains of $46.5 million on the sale of a co-branded credit card loan portfolio that was completed in the fourth quarter of 2002. Partially offsetting these declines were growth in credit and debit card revenue (6.7 percent), corporate payment products revenue (10.3 percent) and merchant processing services revenue (2.8 percent). Although credit and debit card revenue was negatively impacted in the fourth quarter of 2003 by the VISA debit card settlement and higher customer loyalty rewards expenses, increases in transaction volumes and other rate adjustments more than offset these detrimental changes. Noninterest expense declined (5.8 percent) in the fourth quarter of 2003 from the fourth quarter of 2002, primarily due to savings from the completion of systems integration activity. The increase in Payment Services' contribution in the fourth quarter of 2003 over the previous quarter was primarily due to seasonally higher net revenue from retail credit and debit card products, partially offset by seasonally lower corporate payment products revenue and higher provision for credit losses.

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 business activities managed on a corporate basis, including enterprise-wide operations and administrative support functions. Treasury and Corporate Support recorded an operating loss of ($82.8) million in the fourth quarter of 2003, compared with operating losses of ($49.6) million in the fourth quarter of 2002 and ($120.9) million in the third quarter of 2003. The increase in the loss year-over-year was largely the result of a decrease in net revenue (10.6 percent) and a $29.6 million increase in provision for credit losses relative to the fourth quarter of 2002. The decline in net revenue from the fourth quarter of 2002 was primarily due to a net reduction in gains (losses) on the sale of securities. The decrease in the business line's loss in the fourth quarter of 2003 from the third quarter of 2003 was the result of favorable variances in net revenue (18.5 percent) and noninterest expense (5.0 percent).

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.

CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, JERRY A. GRUNDHOFER, AND VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER, DAVID M. MOFFETT, WILL HOST A CONFERENCE CALL TO REVIEW THE FINANCIAL RESULTS ON TUESDAY, January 20, 2004, AT 1:00 p.m. (CST). To access the conference call, please dial 800-245-3043 and ask for the U.S. Bancorp earnings conference call. Participants calling from outside the United States, please call 785-832-2422. For those unable to participate during the live call, a recording of the call will be available approximately one hour after the conference call ends on Tuesday, January 20, 2004, and will run through Tuesday, January 27, 2004, at 11:00 p.m. (CST). To access the recorded message dial 888-566-0152. If calling from outside the United States, please dial 402-220-9186.

Minneapolis-based U.S. Bancorp ("USB"), with $189 billion in assets, is the 8th largest financial services holding company in the United States. The company operates 2,243 banking offices and 4,425 ATMs, and provides a comprehensive line of banking, brokerage, insurance, investment, mortgage, trust and payment services products to consumers, businesses and institutions. U.S. Bancorp is the parent company of U.S. Bank. Visit U.S. Bancorp on the web at usbank.com .

Forward-Looking Statements

This press release contains forward-looking statements. 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 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 the following, in addition to those contained in the Company's reports on file with the SEC: (i) general economic or industry conditions could be less favorable than expected, resulting in a deterioration in credit quality, a change in the allowance for credit losses, or a reduced demand for credit or fee-based products and services; (ii) changes in the domestic interest rate environment could reduce net interest income and could increase credit losses; (iii) inflation, changes in securities market conditions and monetary fluctuations could adversely affect the value or credit quality of the Company's assets, or the availability and terms of funding necessary to meet the Company's liquidity needs; (iv) changes in the extensive laws, regulations and policies governing financial services companies could alter the Company's business environment or affect operations; (v) the potential need to adapt to industry changes in information technology systems, on which the Company is highly dependent, could present operational issues or require significant capital spending; (vi) competitive pressures could intensify and affect the Company's profitability, including as a result of continued industry consolidation, the increased availability of financial services from non-banks, technological developments, or bank regulatory reform; (vii) changes in consumer spending and savings habits could adversely affect the Company's results of operations; (viii) changes in the financial performance and condition of the Company's borrowers could negatively affect repayment of such borrowers' loans; (ix) acquisitions may not produce revenue enhancements or cost savings at levels or within time frames originally anticipated, or may result in unforeseen integration difficulties; (x) capital investments in the Company's businesses may not produce expected growth in earnings anticipated at the time of the expenditure; and (xi) acts or threats of terrorism, and/or political and military actions taken by the U.S. or other governments in response to acts or threats of terrorism or otherwise could adversely affect general economic or industry conditions. 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)                           2003      2002      2003      2002
    Interest Income
    Loans                              $1,796.0  $1,913.6  $7,272.0  $7,743.0
    Loans held for sale                    31.3      57.5     202.2     170.6
    Investment securities
         Taxable                          432.5     372.1   1,654.6   1,438.2
         Non-taxable                        6.3      10.3      29.4      46.1
    Other interest income                  21.6      27.9      99.8      96.0
              Total interest income     2,287.7   2,381.4   9,258.0   9,493.9

    Interest Expense
    Deposits                              245.1     343.7   1,096.6   1,485.3
    Short-term borrowings                  43.5      41.6     166.8     222.9
    Long-term debt                        166.0     205.3     702.2     834.8
    Company-obligated mandatorily
     redeemable preferred securities
     of subsidiary trusts holding
     solely the junior subordinated
     debentures of the parent company      23.6      33.2     103.1     136.6
              Total interest expense      478.2     623.8   2,068.7   2,679.6
    Net interest income                 1,809.5   1,757.6   7,189.3   6,814.3
    Provision for credit losses           286.0     349.0   1,254.0   1,349.0
    Net interest income after
     provision for credit losses        1,523.5   1,408.6   5,935.3   5,465.3

    Noninterest Income
    Credit and debit card revenue         153.4     143.7     560.7     517.0
    Corporate payment products revenue     88.7      80.4     361.3     325.7
    ATM processing services                40.3      41.7     165.9     160.6
    Merchant processing services          146.0     142.0     561.4     567.3
    Trust and investment management
     fees                                 246.6     213.6     953.9     892.1
    Deposit service charges               186.6     186.4     715.8     690.3
    Cash management fees                  116.3     102.6     466.3     416.9
    Commercial products revenue            98.5     108.3     400.5     479.2
    Mortgage banking revenue               91.9      88.4     367.1     330.2
    Investment products fees and
     commissions                           36.2      35.0     144.9     132.7
    Securities gains (losses), net          (.1)    106.2     244.8     299.9
    Other                                  92.2     137.4     370.4     398.8
              Total noninterest income  1,296.6   1,385.7   5,313.0   5,210.7

    Noninterest Expense
    Salaries                              539.4     545.1   2,176.8   2,167.5
    Employee benefits                      81.3      83.0     328.4     317.5
    Net occupancy                          91.9      96.1     372.6     375.9
    Furniture and equipment                69.7      71.6     271.1     282.8
    Communication                          37.8      38.5     157.2     145.7
    Postage                                43.2      41.7     175.8     172.4
    Other intangible assets               124.2     156.7     682.4     553.0
    Merger and restructuring-related
     charges                                7.6     107.3      46.2     321.2
    Other                                 347.3     346.6   1,386.4   1,404.5
              Total noninterest
               expense                  1,342.4   1,486.6   5,596.9   5,740.5

    Income from continuing operations
     before income taxes and
     cumulative effect of
     accounting change                  1,477.7   1,307.7   5,651.4   4,935.5
    Applicable income taxes               507.4     449.1   1,941.3   1,707.5

    Income from continuing operations
     before cumulative effect of
     accounting change                    970.3     858.6   3,710.1   3,228.0
    Income (loss) from discontinued
     operations (after-tax)                 6.7     (38.9)     22.5     (22.7)
    Cumulative effect of accounting
     change (after-tax)                      --        --        --     (37.2)
    Net income                           $977.0    $819.7  $3,732.6  $3,168.1

    Earnings Per Share
         Income from continuing
          operations before cumulative
          effect of accounting change      $.50      $.45     $1.93     $1.68
         Discontinued operations            .01      (.02)      .01      (.01)
         Cumulative effect of
          accounting change                  --        --        --      (.02)
         Net income                        $.51      $.43     $1.94     $1.65

    Diluted Earnings Per Share
         Income from continuing
          operations before cumulative
          effect of accounting change      $.50      $.45     $1.92     $1.68
         Discontinued operations             --      (.02)      .01      (.01)
         Cumulative effect of
          accounting change                  --        --        --      (.02)
         Net income                        $.50      $.43     $1.93     $1.65

    Dividends declared per share          $.240     $.195     $.855     $.780
    Average common shares               1,927.3   1,916.2   1,923.7   1,916.0
    Average diluted common shares       1,950.8   1,923.6   1,936.2   1,924.8


     U.S. Bancorp
     Consolidated Ending Balance Sheet

                                                  December 31,    December 31,
    (Dollars in Millions)                             2003             2002
    Assets
    Cash and due from banks                          $8,630           $10,758
    Investment securities
        Held-to-maturity                                152               233
        Available-for-sale                           43,182            28,255
    Loans held for sale                               1,433             4,159
    Loans
        Commercial                                   38,526            41,944
        Commercial real estate                       27,242            26,867
        Residential mortgages                        13,457             9,746
        Retail                                       39,010            37,694
          Total loans                               118,235           116,251
            Less allowance for credit
             losses                                  (2,369)           (2,422)
            Net loans                               115,866           113,829
    Premises and equipment                            1,957             1,697
    Customers' liability on acceptances                 121               140
    Goodwill                                          6,025             6,325
    Other intangible assets                           2,124             2,321
    Other assets                                      9,796            12,310
            Total assets                           $189,286          $180,027

    Liabilities and Shareholders' Equity
    Deposits
        Noninterest-bearing                         $32,470           $35,106
        Interest-bearing                             74,749            68,214
        Time deposits greater than
         $100,000                                    11,833            12,214
            Total deposits                          119,052           115,534
    Short-term borrowings                            10,850             7,806
    Long-term debt                                   31,215            28,588
    Company-obligated mandatorily
     redeemable preferred securities of
     subsidiary trusts holding solely the
     junior subordinated debentures of the
     parent company                                   2,601             2,994
    Acceptances outstanding                             121               140
    Other liabilities                                 6,205             6,529
            Total liabilities                       170,044           161,591
    Shareholders' equity
        Common stock                                     20                20
        Capital surplus                               5,851             5,799
        Retained earnings                            14,508            13,105
        Less treasury stock                          (1,205)           (1,272)
        Other comprehensive income                       68               784
            Total shareholders' equity               19,242            18,436
            Total liabilities and
             shareholders' equity                  $189,286          $180,027

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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