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U.S. Bancorp Reports Record Net Income for the Second Quarter 2004
     EARNINGS SUMMARY                                                 Table 1
     ($ in millions, except per-share data)
                                       Percent Percent
                                        Change  Change
                                         2Q04    2Q04
                  2Q       1Q       2Q    vs      vs     YTD      YTD  Percent
                 2004     2004     2003  1Q04    2Q03    2004     2003  Change
     Income
      from
      continuing
      operations,
      net      $1,036.9 $1,008.4  $915.0  2.8    13.3  $2,045.3 $1,799.1  13.7
     Net
      income    1,036.9  1,008.4   919.9  2.8    12.7   2,045.3  1,804.7  13.3

     Earnings
      per share
      from
      continuing
      operations
      (diluted)    0.54     0.52    0.47  3.8    14.9      1.06     0.93  14.0
     Earnings
      per share
      (diluted)    0.54     0.52    0.48  3.8    12.5      1.06     0.94  12.8

     Return on
      average
      assets (%)   2.19     2.14    1.97                   2.16     1.96
     Return on
      average
      equity(%)    21.9     20.7    19.0                   21.3     19.0
     Efficiency
      ratio (%)    38.6     47.0    50.6                   42.7     49.5

     Dividends
      declared
      per share   $0.24    $0.24  $0.205   --    17.1     $0.48    $0.41  17.1
     Book value
      per share
      (period-end) 9.91    10.23   10.14 (3.1)   (2.3)
     Net interest
      margin (%)   4.28     4.29    4.52                   4.28     4.56

MINNEAPOLIS, July 20 /PRNewswire-FirstCall/ -- U.S. Bancorp (NYSE: USB) today reported net income of $1,036.9 million for the second quarter of 2004, compared with $919.9 million for the second quarter of 2003. Net income of $.54 per diluted share in the second quarter of 2004 was higher than the same period of 2003 by $.06 (12.5 percent). Return on average assets and return on average equity were 2.19 percent and 21.9 percent, respectively, for the second quarter of 2004, compared with returns of 1.97 percent and 19.0 percent, respectively, for the second quarter of 2003.

U.S. Bancorp Chairman, President and Chief Executive Officer Jerry A. Grundhofer said, "Our second quarter results represent the high-quality earnings that we are committed to produce for our shareholders. We saw very strong growth in our fee-based products and services, with the majority of categories displaying double-digit growth over both the previous year and the first quarter of 2004 on an annualized basis. The net interest margin was stable and earning assets were flat, compared with the first quarter of 2004, as loan growth was funded through reductions in investment securities. Credit quality continues to show improvement, with the net charge-off ratio reaching 0.68 percent in the quarter and nonperforming assets declining 13.0 percent from March 31, 2004. In keeping with our target of returning 80 percent or more of earnings to our shareholders, we paid out 97 percent of earnings during the second quarter in the form of dividends and share repurchases. The products and services we now offer our customers are among the best in the industry and, along with our people and growing markets, are exactly what we need to drive organic growth."

The Company's results for the second quarter of 2004 improved over the same period of 2003, primarily due to growth in fee-based products and services and a lower provision for credit losses. Included in the current quarter were losses on the sale of securities of ($171.7) million, a net reduction of $384.8 million from securities gains realized in the second quarter of 2003. The current quarter also included a $171.1 million reparation of mortgage servicing rights ("MSR"), a $367.4 million favorable variance over the second quarter of 2003. Since the end of the first quarter of 2004, the yield on 10-year Treasury Notes increased 75 basis points to 4.58 percent. The yield on 30-year Fannie Mae commitments rose 70 basis points during the same timeframe. Driven by the rise in longer-term interest rates, the mortgage industry experienced a decline in refinancing activities, resulting in lower prepayments.

Total net revenue on a taxable-equivalent basis for the second quarter of 2004 was $250.4 million (7.7 percent) lower than the second quarter of 2003, primarily reflecting the $384.8 million net reduction in gains (losses) on the sale of securities. Favorable revenue growth in all fee-based products and services categories partially offset the reduction in securities gains.

Total noninterest expense in the second quarter of 2004 was lower than the second quarter of 2003, primarily reflecting the $367.4 million favorable change in the valuation of mortgage servicing rights caused by rising interest rates from late first quarter 2004. Also contributing to the positive variance in expense year-over-year was a $10.8 million reduction in merger and restructuring-related charges. These positive variances were partially offset by higher incentive-based compensation, employee benefits, insurance, and other operating expense.

Provision for credit losses for the second quarter of 2004 was $204.5 million, a decrease of $118.5 million (36.7 percent) from the second quarter of 2003. Net charge-offs in the second quarter of 2004 were $204.5 million, compared with the first quarter of 2004 net charge-offs of $233.9 million and the second quarter of 2003 net charge-offs of $322.9 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 $910.9 million at June 30, 2004, from $1,046.6 million at March 31, 2004 (13.0 percent), and $1,359.7 million at June 30, 2003 (33.0 percent). The ratio of the allowance for credit losses to nonperforming loans was 299 percent at June 30, 2004, compared with 258 percent at March 31, 2004, and 194 percent at June 30, 2003.

On December 31, 2003, the Company completed the spin-off of Piper Jaffray Companies (NYSE: PJC). 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 Companies have been segregated and accounted for in the Company's financial statements as discontinued operations. Net income in the second quarter of 2003 included after-tax income from the discontinued operations of Piper Jaffray Companies of $4.9 million, or $.01 per diluted share.


     INCOME STATEMENT HIGHLIGHTS                                   Table 2
     (Taxable-equivalent basis, $ in millions, except per-share data)

                                                         Percent    Percent
                                                          Change     Change
                       2Q         1Q          2Q         2Q04 vs    2Q04 vs
                      2004       2004        2003          1Q04       2Q03
     Net interest
      income        $1,779.4   $1,779.0    $1,798.6          --       (1.1)
     Noninterest
      income         1,241.7    1,318.3     1,472.9        (5.8)     (15.7)
       Total net
        revenue      3,021.1    3,097.3     3,271.5        (2.5)      (7.7)
     Noninterest
      expense        1,232.6    1,454.9     1,546.6       (15.3)     (20.3)
     Provision for
      credit losses    204.5      235.0       323.0       (13.0)     (36.7)
     Income from
      continuing
      operations
      before income
      taxes          1,584.0    1,407.4     1,401.9        12.5       13.0
     Taxable-
      equivalent
      adjustment         7.0        7.2         6.7        (2.8)       4.5
     Applicable
      income taxes     540.1      391.8       480.2        37.9       12.5
     Income from
      continuing
      operations     1,036.9    1,008.4       915.0         2.8       13.3
     Income from
      discontinued
      operations
      (after-tax)         --         --         4.9          nm         nm
     Net income     $1,036.9   $1,008.4      $919.9         2.8       12.7

     Diluted earnings
      per share:
       Income from
        continuing
        operations     $0.54      $0.52       $0.47         3.8       14.9
       Discontinued
        operations        --         --        0.01          nm         nm
       Net income      $0.54      $0.52       $0.48         3.8       12.5


                             YTD             YTD           Percent
                            2004            2003           Change
     Net interest
      income              $3,558.4        $3,575.3          (0.5)
     Noninterest
      income               2,560.0         2,839.0          (9.8)
       Total net
        revenue            6,118.4         6,414.3          (4.6)
     Noninterest
      expense              2,687.5         3,001.2         (10.5)
     Provision for
      credit losses          439.5           658.0         (33.2)
     Income from
      continuing
      operations
      before income
      taxes                2,991.4         2,755.1           8.6
     Taxable-
      equivalent
      adjustment              14.2            14.0           1.4
     Applicable
      income taxes           931.9           942.0          (1.1)
     Income from
      continuing
      operations           2,045.3         1,799.1          13.7
     Income from
      discontinued
      operations
      (after-tax)               --             5.6            nm
     Net income           $2,045.3        $1,804.7          13.3

     Diluted earnings
      per share:
       Income from
        continuing
        operations           $1.06           $0.93          14.0
       Discontinued
        operations              --            0.01            nm
       Net income            $1.06           $0.94          12.8


    Net Interest Income

Second quarter net interest income on a taxable-equivalent basis was $1,779.4 million, compared with $1,798.6 million recorded in the second quarter of 2003. Average earning assets for the period increased over the second quarter of 2003 by $7.6 billion (4.7 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 second quarter of 2004 was 4.28 percent, compared with 4.29 percent in the first quarter of 2004 and 4.52 percent in the second quarter of 2003. The decline in the net interest margin in the second quarter of 2004 from the second quarter of 2003 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 high credit quality, low margin loans from Stellar Funding Group, Inc., a commercial loan conduit, onto the Company's balance sheet during the third quarter of 2003.


     NET INTEREST INCOME                                           Table 3
     (Taxable-equivalent basis; $ in millions)

                                                         Change     Change
                       2Q         1Q          2Q         2Q04 vs    2Q04 vs
                      2004       2004        2003         1Q04       2Q03
     Components of
      net interest
      income
       Income on
        earning
        assets      $2,243.2   $2,265.3    $2,334.5      $(22.1)    $(91.3)
       Expense on
        interest-
        bearing
        liabilities    463.8      486.3      535.9        (22.5)     (72.1)
     Net interest
      income        $1,779.4   $1,779.0   $1,798.6         $0.4     $(19.2)

     Average yields
      and rates paid
       Earning
        assets
        yield           5.39%      5.47%      5.87%       (0.08)%    (0.48)%
       Rate paid on
        interest-
        bearing
        liabilities     1.38       1.45       1.68        (0.07)     (0.30)
     Gross interest
      margin            4.01%      4.02%      4.19%       (0.01)%    (0.18)%
     Net interest
      margin            4.28%      4.29%      4.52%       (0.01)%    (0.24)%

     Average balances
       Investment
        securities   $42,489    $44,744    $36,142      $(2,255)    $6,347
       Loans         121,161    118,810    117,803        2,351      3,358
       Earning
        assets       166,990    166,359    159,425          631      7,565
       Interest-
        bearing
        liabilities  134,819    134,966    127,552         (147)     7,267
       Net free
        funds*        32,171     31,393     31,873          778        298


                             YTD             YTD
                            2004            2003          Change
     Components of
      net interest
      income
       Income on
        earning
        assets            $4,508.5        $4,673.0       $(164.5)
       Expense on
        interest-
        bearing
        liabilities          950.1         1,097.7        (147.6)
     Net interest
      income              $3,558.4        $3,575.3        $(16.9)

     Average yields
      and rates paid
       Earning assets
        yield                 5.43%           5.96%        (0.53)%
       Rate paid on
        interest-bearing
        liabilities           1.42            1.75         (0.33)
     Gross interest
      margin                  4.01%           4.21%        (0.20)%
     Net interest
      margin                  4.28%           4.56%        (0.28)%

     Average balances
       Investment
        securities         $43,617         $35,187        $8,430
       Loans               119,985         117,061         2,924
       Earning assets      166,674         157,784         8,890
       Interest-bearing
        liabilities        134,893         126,119         8,774
       Net free funds*      31,781          31,665           116


     *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
                        2Q         1Q          2Q        2Q04 vs    2Q04 vs
                       2004       2004        2003         1Q04       2Q03

     Commercial      $34,484    $33,629     $36,581         2.5       (5.7)
     Lease financing   4,846      4,902       5,121        (1.1)      (5.4)
       Total
        commercial    39,330     38,531      41,702         2.1       (5.7)

     Commercial
      mortgages       20,477     20,554      20,105        (0.4)       1.9
     Construction
      and development  6,639      6,556       6,984         1.3       (4.9)
         Total
          commercial
          real estate 27,116     27,110      27,089          --        0.1

     Residential
      mortgages       14,052     13,610      11,012         3.2       27.6

     Credit card       5,989      5,878       5,388         1.9       11.2
     Retail leasing    6,484      6,192       5,762         4.7       12.5
     Home equity
      and second
      mortgages       13,775     13,376      13,316         3.0        3.4
     Other retail     14,415     14,113      13,534         2.1        6.5

       Total retail   40,663     39,559      38,000         2.8        7.0

     Total loans    $121,161   $118,810    $117,803         2.0        2.9


                              YTD             YTD          Percent
                             2004            2003           Change

     Commercial            $34,057         $36,460          (6.6)
     Lease financing         4,873           5,186          (6.0)
       Total commercial     38,930          41,646          (6.5)

     Commercial
      mortgages             20,515          20,173           1.7
     Construction
      and development        6,598           6,764          (2.5)
         Total commercial
          real estate       27,113          26,937           0.7

     Residential
      mortgages             13,831          10,570          30.9

     Credit card             5,933           5,389          10.1
     Retail leasing          6,338           5,756          10.1
     Home equity and
      second mortgages      13,575          13,392           1.4
     Other retail           14,265          13,371           6.7
       Total retail         40,111          37,908           5.8

     Total loans          $119,985        $117,061           2.5

Average loans for the second quarter of 2004 were $3.4 billion (2.9 percent) higher than the second quarter of 2003, primarily due to growth in average residential mortgages of $3.0 billion (27.6 percent) and retail loans of $2.7 billion (7.0 percent) year-over-year. Total commercial loans declined by $2.4 billion (5.7 percent), while total commercial real estate loans increased by $27 million (.1 percent). Although the consolidation of loans from the Stellar commercial loan conduit had a positive impact on average loan balances year-over-year, soft economic conditions throughout much of 2003 led to the overall decrease in total commercial loans. Average loans for the second quarter of 2004 were higher than the first quarter of 2004 by $2.4 billion (2.0 percent), reflecting growth in commercial loans, residential mortgages and retail loans.

    Average investment securities in the second quarter of 2004 were
$6.3 billion (17.6 percent) higher than the second quarter of 2003, reflecting
the reinvestment of proceeds from declining commercial loan balances and
deposit growth from a year ago.  Investment securities at June 30, 2004, were
$4.7 billion higher than at June 30, 2003, but $5.1 billion lower than the
balance at March 31, 2004.  During the second quarter of 2004, the Company
continued to reposition its investment portfolio as part of its
asset/liability management activities by acquiring principally floating and
shorter-term fixed-rate securities and selling fixed-rate mortgage-backed
securities.


     AVERAGE DEPOSITS                                             Table 5
     ($ in millions)

                                                         Percent    Percent
                                                         Change     Change
                        2Q         1Q          2Q        2Q04 vs    2Q04 vs
                       2004       2004        2003        1Q04        2Q03

    Noninterest-
     bearing
     deposits        $30,607    $29,025     $32,515         5.5       (5.9)
    Interest-bearing
     deposits
      Interest
       checking       20,739     20,948      18,090        (1.0)      14.6
      Money market
       accounts       34,242     34,397      31,134        (0.5)      10.0
      Savings
       accounts        5,936      5,898       5,614         0.6        5.7
        Savings
         products     60,917     61,243      54,838        (0.5)       11.1
      Time
       certificates
       of deposit
       less than
       $100,000       13,021     13,618      15,790        (4.4)      (17.5)
      Time deposits
       greater than
       $100,000       12,571     12,133      13,008         3.6        (3.4)
        Total
         interest-
         bearing
         deposits     86,509     86,994      83,636        (0.6)        3.4
     Total deposits $117,116   $116,019    $116,151         0.9         0.8


                             YTD             YTD          Percent
                            2004            2003           Change
     Noninterest-
      bearing
      deposits             $29,815         $32,669          (8.7)
     Interest-
      bearing
      deposits
       Interest
        checking            20,844          17,814          17.0
       Money market
        accounts            34,320          29,915          14.7
       Savings
        accounts             5,917           5,444           8.7
         Savings
          products          61,081          53,173          14.9
       Time
        certificates
        of deposit
        less than
        $100,000            13,319          16,500         (19.3)
       Time deposits
        greater than
        $100,000            12,352          13,642          (9.5)
         Total
          interest-
          bearing
          deposits          86,752          83,315           4.1
     Total deposits       $116,567        $115,984           0.5

Average noninterest-bearing deposits for the second quarter of 2004 were lower than the second quarter of 2003 by $1.9 billion (5.9 percent). The change was primarily due to lower deposits associated with mortgage banking activities and a decline in Federal government deposits related to their decision in the third quarter of 2003 to pay for treasury management services rather than maintain compensating balances. Average interest-bearing deposits increased by $2.9 billion (3.4 percent) over the second quarter of 2003, 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 for the second quarter of 2004 were $1.6 billion (5.5 percent) higher than the first quarter of 2004, primarily reflecting seasonality of corporate and individual tax filings. Average interest-bearing deposits were slightly lower than the first quarter of 2004 (.6 percent), primarily due to decreases in savings products and time certificates of deposit less than $100,000, partially offset by an increase in time deposits greater than $100,000. Noninterest-bearing deposits at June 30, 2004, were lower than at June 30, 2003, by $11.7 billion (26.3 percent), but were $1.7 billion (5.5 percent) higher than at March 31, 2004.


     NONINTEREST INCOME                                           Table 6
     ($ in millions)

                                                         Percent    Percent
                                                          Change     Change
                        2Q         1Q          2Q        2Q04 vs    2Q04 vs
                       2004       2004        2003         1Q04       2Q03

     Credit and
      debit card
      revenue         $158.8     $141.8      $142.3        12.0       11.6
     Corporate
      payment
      products
      revenue          102.7       94.8        90.9         8.3       13.0
     ATM processing
      services          44.9       42.2        41.9         6.4        7.2
     Merchant
      processing
      services         165.1      141.1       141.8        17.0       16.4
     Trust and
      investment
      management fees  251.7      248.6       238.9         1.2        5.4
     Deposit
      service
      charges          202.1      185.2       179.0         9.1       12.9
     Treasury
      management fees  121.5      117.5       111.8         3.4        8.7
     Commercial
      products
      revenue          107.4      110.4       100.0        (2.7)       7.4
     Mortgage
      banking
      revenue          109.9       94.2        90.3        16.7       21.7
     Investment
      products
      fees and
      commissions       42.2       39.3        38.1         7.4       10.8
     Securities
      gains (losses),
      net             (171.7)        --       213.1          nm         nm
     Other             107.1      103.2        84.8         3.8       26.3

     Total
      noninterest
      income        $1,241.7   $1,318.3    $1,472.9        (5.8)     (15.7)


                              YTD             YTD         Percent
                             2004            2003          Change
     Credit and
      debit card
      revenue               $300.6          $269.7          11.5
     Corporate
      payment
      products
      revenue                197.5           176.9          11.6
     ATM processing
      services                87.1            84.3           3.3
     Merchant
      processing
      services               306.2           269.1          13.8
     Trust and
      investment
      management
      fees                   500.3           467.5           7.0
     Deposit
      service
      charges                387.3           342.2          13.2
     Treasury
      management
      fees                   239.0           223.8           6.8
     Commercial
      products
      revenue                217.8           204.2           6.7
     Mortgage
      banking
      revenue                204.1           185.7           9.9
     Investment
      products
      fees and
      commissions             81.5            73.2          11.3
     Securities
      gains (losses),
      net                   (171.7)          353.8            nm
     Other                   210.3           188.6          11.5

     Total
      noninterest
      income              $2,560.0        $2,839.0          (9.8)


    Noninterest Income

Second quarter noninterest income was $1,241.7 million, a decrease of $231.2 million (15.7 percent) from the same quarter of 2003, and a $76.6 million (5.8 percent) decrease from the first quarter of 2004. The decline in noninterest income from the second quarter of 2003 was driven by a net reduction in gains (losses) on the sale of securities of $384.8 million. The net reduction in gains (losses) on the sales of securities year-over-year was partially offset by increases in all other categories of noninterest income. Credit and debit card revenue and corporate payment products revenue were higher in the second quarter of 2004 than the second quarter of 2003 by $16.5 million (11.6 percent) and $11.8 million (13.0 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 in August 2003. The year-over-year impact of the VISA settlement on credit and debit card revenue was approximately $7.4 million. This change in the interchange rate, in addition to higher customer loyalty rewards expenses, however, were 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 second quarter of 2004 than the same quarter of 2003 by $23.3 million (16.4 percent), reflecting an increase in transaction volume and the purchase of two European merchant acquiring businesses, which accounted for approximately $7.1 million of the increase. The favorable variance in trust and investment management fees of $12.8 million (5.4 percent) in the second quarter of 2004 over the same period of 2003 was principally driven by higher equity market valuations year-over-year, as well as net new account growth. Deposit service charges were higher year-over-year by $23.1 million (12.9 percent) due to account growth and revenue enhancement initiatives. Treasury management fees grew by $9.7 million (8.7 percent) in the second quarter of 2004 over the same period of 2003. The increase in treasury management fees year-over-year was partially 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. Commercial products revenue increased by $7.4 million (7.4 percent) over the second quarter of 2003, primarily due to leasing fees and international product revenue. The favorable variance year-over-year in mortgage banking revenue of $19.6 million (21.7 percent) was primarily due to higher origination and sales and loan servicing revenue. The $4.1 million (10.8 percent) increase in investment products fees and commissions reflected higher sales activity in the Consumer Banking business line. Other income was higher year-over-year by $22.3 million (26.3 percent), primarily due to higher income from equity investments relative to the same quarter of 2003.

Noninterest income was lower in the second quarter of 2004 than the first quarter of 2004 by $76.6 million (5.8 percent), primarily due to the net reduction in gains (losses) on the sale of securities of $171.7 million. This unfavorable variance was partially offset by growth in the majority of other noninterest income categories. Credit and debit card revenue, corporate payment products revenue and ATM processing services increased quarter-over-quarter by $17.0 million (12.0 percent), $7.9 million (8.3 percent) and $2.7 million (6.4 percent), respectively, driven by seasonally higher transaction volumes. Merchant processing services revenue rose by $24.0 million (17.0 percent) over the first quarter of 2004 due to seasonality, higher same store sales and the purchase of two European merchant acquiring businesses. Trust and investment management fees were higher in the second quarter of 2004 than the first quarter of 2004 by $3.1 million (1.2 percent) due to tax preparation fees and net new account growth. Deposit service charges were higher in the second quarter by $16.9 million (9.1 percent) than the first quarter, primarily due to pricing enhancements and an increase in transaction-related fees. Treasury management fees increased by $4.0 million (3.4 percent) quarter-over-quarter, primarily due to federal tax receipts processing. Mortgage banking revenue was higher in the second quarter of 2004 than the first quarter of 2004 by $15.7 million (16.7 percent) due to increased origination and sales and loan servicing revenue. Investment products fees and commissions and other income increased by $2.9 million (7.4 percent) and $3.9 million (3.8 percent), respectively. Higher investment product sales in Consumer Banking led to the improvement in investment products fees and commissions, while higher revenue from equity investments relative to the first quarter of 2004 was the primary reason for the favorable variance in other income.


     NONINTEREST EXPENSE                                           Table 7
     ($ in millions)

                                                          Percent    Percent
                                                          Change     Change
                        2Q         1Q          2Q         2Q04 vs    2Q04 vs
                       2004       2004        2003         1Q04       2Q03

     Compensation     $572.6     $535.8      $547.6         6.9        4.6
     Employee
      benefits          91.2      100.2        79.6        (9.0)      14.6
     Net occupancy
      and equipment    153.4      155.7       159.5        (1.5)      (3.8)
     Professional
      services          34.7       32.4        32.9         7.1        5.5
     Marketing and
      business
      development       48.7       35.3        51.1        38.0       (4.7)
     Technology and
      communications   102.4      101.7       104.1         0.7       (1.6)
     Postage,
      printing and
      supplies          60.5       61.6        61.8        (1.8)      (2.1)
     Other
      intangibles      (47.6)     226.1       312.3          nm         nm
     Merger and
      restructuring-
      related charges     --         --        10.8          nm         nm
     Other             216.7      206.1       186.9         5.1       15.9

     Total
      noninterest
      expense       $1,232.6   $1,454.9    $1,546.6       (15.3)     (20.3)


                              YTD             YTD         Percent
                             2004            2003          Change

     Compensation         $1,108.4        $1,093.6           1.4
     Employee
      benefits               191.4           171.3          11.7
     Net occupancy
      and equipment          309.1           320.8          (3.6)
     Professional
      services                67.1            59.3          13.2
     Marketing and
      business
      development             84.0            80.9           3.8
     Technology and
      communications         204.1           209.0          (2.3)
     Postage,
      printing and
      supplies               122.1           122.2          (0.1)
     Other
      intangibles            178.5           547.4         (67.4)
     Merger and
      restructuring-
      related charges           --            28.4            nm
     Other                   422.8           368.3          14.8

     Total
      noninterest
      expense             $2,687.5        $3,001.2         (10.5)


    Noninterest Expense

Second quarter noninterest expense totaled $1,232.6 million, a decrease of $314.0 million (20.3 percent) from the same quarter of 2003 and a $222.3 million (15.3 percent) decrease from the first quarter of 2004. The decline in expense year-over-year was primarily driven by the favorable change in MSR intangible valuations of $367.4 million and a $10.8 million reduction in merger and restructuring-related charges, offset by increases in compensation, employee benefits, professional services, and other expense. Compensation expense was higher year-over-year due to an increase in salaries, performance-based incentives and stock-based compensation, offset somewhat by lower contract labor costs. Employee benefits increased year-over-year by $11.6 million (14.6 percent), primarily as a result of higher pension expense, training, education and recruitment costs and payroll taxes. Professional services were higher than the same period of 2003 by $1.8 million (5.5 percent), while other expense rose by $29.8 million (15.9 percent), primarily due to higher charge-back exposure associated with the Company's airline merchant processing portfolio, insurance, higher deposit fraud losses and processing expenses associated with the growth in payment services revenue.

Noninterest expense in the second quarter of 2004 was lower than the first quarter of 2004 by $222.3 million (15.3 percent). The decline in noninterest expense from the first quarter of 2004 was primarily due to the favorable change in MSR intangible valuations of $280.4 million, partially offset by increases in compensation, professional services, marketing and business development, technology and communication and other expense. The $36.8 million (6.9 percent) increase in compensation expense quarter-over- quarter was primarily due to higher performance-based incentives, resulting from mortgage banking and product sales production, as well as stock-based compensation costs. The unfavorable variance in marketing and business development of $13.4 million (38.0 percent) quarter-over-quarter was primarily due to the timing of promotional programs and brand advertising. Other expense grew by $10.6 million (5.1 percent) over the first quarter of 2004, the result of higher merchant acquiring costs, higher mortgage loan expenses and slightly higher deposit fraud losses, offset by a charge taken in the first quarter of 2004 related to prepaying a portion of the Company's debt.


     ALLOWANCE FOR CREDIT LOSSES                                   Table 8
     ($ in millions)
                       2Q         1Q          4Q          3Q          2Q
                      2004       2004        2003        2003        2003

    Balance, beginning
     of period      $2,369.7   $2,368.6    $2,367.7    $2,367.6    $2,408.5

    Net charge-offs
      Commercial        35.7       53.6       100.9       123.9       122.9
      Lease financing   18.9       21.3        14.9        19.2        26.9
        Total
         commercial     54.6       74.9       115.8       143.1       149.8
      Commercial
       mortgages         1.8        4.6        10.0         5.9         9.3
      Construction and
       development       0.7        4.7         2.9         4.6         2.5
        Total commercial
         real estate     2.5        9.3        12.9        10.5        11.8

     Residential
      mortgages          7.3        7.3         7.2         7.3         6.5

     Credit card        62.7       63.4        62.3        59.3        64.5
     Retail leasing      9.8       11.0        11.3        12.2        12.6
     Home equity and
      second mortgages  20.2       19.5        20.4        23.2        23.9
     Other retail       47.4       48.5        55.2        54.3        53.8
       Total retail    140.1      142.4       149.2       149.0       154.8
         Total net
          charge-offs  204.5      233.9       285.1       309.9       322.9

     Provision for
      credit losses    204.5      235.0       286.0       310.0       323.0
     Acquisitions and
      other changes       --         --          --          --       (41.0)

     Balance, end of
      period        $2,369.7   $2,369.7    $2,368.6    $2,367.7    $2,367.6

    Components
      Allowance for
       loan losses  $2,244.4   $2,238.3    $2,235.0    $2,241.2    $2,266.2
      Liability for
       unfounded
       credit
       commitments*    125.3      131.4       133.6       126.5       101.4
        Total allowance
         for credit
         losses     $2,369.7   $2,369.7    $2,368.6    $2,367.7    $2,367.6

     Gross
      charge-offs     $274.3     $304.8      $352.3      $373.6      $375.6
     Gross
      recoveries       $69.8      $70.9       $67.2       $63.7       $52.7

     Net charge-offs
      to average
      loans (%)         0.68       0.79       0.95         1.02        1.10

     Allowance as a
      percentage of:

       Period-end
        loans           1.93       1.98       2.00        1.98         1.98
       Nonperforming
        loans            299        258        232         202          194
       Nonperforming
        assets           260        226        206         180          174


    * During the first quarter of 2004, the Company reclassified the portion
      of its allowance for credit losses related to commercial off-balance
      sheet loan commitments and letters of credit to a separate liability
      account.


    Credit Quality

The allowance for credit losses was $2,369.7 million at June 30, 2004, equal to the allowance for credit losses at March 31, 2004, and essentially equal to the allowance for credit losses of $2,367.6 million at June 30, 2003. The ratio of the allowance for credit losses to period-end loans was 1.93 percent at June 30, 2004, compared with 1.98 percent at both March 31, 2004, and June 30, 2003. The ratio of the allowance for credit losses to nonperforming loans was 299 percent at June 30, 2004, compared with 258 percent at March 31, 2004, and 194 percent at June 30, 2003. Total net charge-offs in the second quarter of 2004 were $204.5 million, compared with the first quarter of 2004 net charge-offs of $233.9 million and the second quarter of 2003 net charge-offs of $322.9 million.

Commercial and commercial real estate loan net charge-offs were $57.1 million for the second quarter of 2004, or .35 percent of average loans outstanding, compared with $84.2 million, or .52 percent of average loans outstanding, in the first quarter of 2004 and $161.6 million, or .94 percent of average loans outstanding, in the second quarter of 2003. The decline in net charge-offs continues to be broad-based across most industries within the commercial loan portfolio.

Retail loan net charge-offs of $140.1 million in the second quarter of 2004 were $2.3 million (1.6 percent) lower than the first quarter of 2004 and $14.7 million (9.5 percent) lower than the second quarter of 2003. Retail loan net charge-offs as a percent of average loans outstanding were 1.39 percent in the second quarter of 2004, compared with 1.45 percent and 1.63 percent in the first quarter of 2004 and second quarter of 2003, respectively. Lower levels of retail loan net charge-offs principally reflected the Company's improvement in ongoing collection efforts and risk management.


     CREDIT RATIOS                                                 Table 9
     (Percent)
                         2Q         1Q         4Q          3Q          2Q
                        2004       2004       2003        2003        2003
     Net charge-offs
      ratios*
       Commercial       0.42       0.64       1.14        1.33        1.35
       Lease financing  1.57       1.75       1.19        1.52        2.11
         Total
          commercial    0.56       0.78       1.15        1.35        1.44

       Commercial
        mortgages       0.04       0.09       0.20        0.12        0.19
       Construction and
        development     0.04       0.29       0.16        0.25        0.14
         Total
          commercial
          real estate   0.04       0.14       0.19        0.15        0.17

       Residential
        mortgages       0.21       0.22       0.21        0.24        0.24

       Credit card      4.21       4.34       4.33        4.20        4.80
       Retail leasing   0.61       0.71       0.76        0.83        0.88
       Home equity and
        second
        mortgages       0.59       0.59       0.62        0.70        0.72
       Other retail     1.32       1.38       1.57        1.55        1.59
         Total retail   1.39       1.45       1.53        1.54        1.63

     Total net
      charge-offs       0.68       0.79       0.95        1.02        1.10

     Delinquent loan ratios - 90 days or more past due excluding nonperforming
      loans**
       Commercial       0.05       0.06       0.06        0.11        0.09
       Commercial
        real estate     0.01       0.01       0.02        0.01        0.02
       Residential
        mortgages       0.50       0.56       0.61        0.63        0.65
       Retail           0.48       0.54       0.56        0.57        0.63
     Total loans        0.24       0.27       0.28        0.29        0.30

     Delinquent loan ratios - 90 days or more past due including nonperforming
      loans**
       Commercial       1.37       1.67       1.97        2.31        2.27
       Commercial
        real estate     0.76       0.85       0.82        0.75        0.82
       Residential
        mortgages       0.79       0.87       0.91        0.98        1.13
       Retail           0.52       0.59       0.62        0.63        0.70
     Total loans        0.88       1.03       1.14        1.27        1.32

     *  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 second quarter of 2004
reflected the Company's ongoing efforts to reduce the overall risk profile of
the organization.  Net charge-offs are expected to continue to trend modestly
lower.


     ASSET QUALITY                                                Table 10
     ($ in millions)
                      Jun 30     Mar 31     Dec 31      Sep 30      Jun 30
                       2004       2004       2003        2003        2003
     Nonperforming
      loans
       Commercial     $415.7     $510.7     $623.5      $793.9      $795.2
       Lease
        financing      111.0      115.6      113.3       111.6       126.6
         Total
          commercial   526.7      626.3      736.8       905.5       921.8
       Commercial
        mortgages      163.8      184.9      177.6       161.5       182.0
       Construction
        and
        development     41.3       43.6       39.9        40.2        35.3
         Commercial
          real estate  205.1      228.5      217.5       201.7       217.3
       Residential
        mortgages       41.7       42.1       40.5        46.1        56.0
       Retail           18.4       20.4       25.2        21.6        24.2
     Total nonperforming
      loans            791.9      917.3    1,020.0     1,174.9     1,219.3

     Other real estate  70.0       76.0       72.6        70.4        71.5

     Other nonperforming
      assets            49.0       53.3       55.5        73.0        68.9

     Total nonperforming
      assets*         $910.9   $1,046.6   $1,148.1    $1,318.3    $1,359.7

     Accruing loans
      90 days or more
      past due        $293.2     $319.2     $329.4      $352.4      $360.7

     Nonperforming
      assets to loans
      plus ORE (%)      0.74       0.87       0.97        1.10        1.14

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

Nonperforming assets at June 30, 2004, totaled $910.9 million, compared with $1,046.6 million at March 31, 2004, and $1,359.7 million at June 30, 2003. The ratio of nonperforming assets to loans and other real estate was .74 percent at June 30, 2004, compared with .87 percent at March 31, 2004, and 1.14 percent at June 30, 2003. 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)
                      Jun 30     Mar 31     Dec 31      Sep 30      Jun 30
                       2004       2004       2003        2003        2003
     Total
      shareholders'
      equity         $18,675    $19,452    $19,242     $19,771     $19,521
     Tier 1 capital   14,294     14,499     14,623      14,589      13,950
     Total risk-based
      capital         21,255     21,559     21,710      21,859      21,392

     Common equity to
      assets             9.8%      10.1%      10.2%       10.5%       10.0%
     Tangible common
      equity to assets   6.3        6.4        6.5         6.6         6.0
     Tier 1 capital
      ratio              8.7        8.9        9.1         9.0         8.5
     Total risk-based
      capital ratio     12.9       13.3       13.6        13.5        13.0
     Leverage ratio      7.8        8.0        8.0         8.0         7.8

Total shareholders' equity was $18.7 billion at June 30, 2004, compared with $19.5 billion at June 30, 2003. The decrease was the result of corporate earnings offset by dividends, including the special dividend of $685 million related to the spin-off of Piper Jaffray Companies, share buybacks and the change in other comprehensive income, principally reflecting changes in securities valuations from a year ago.

Tangible common equity to assets was 6.3 percent at June 30, 2004, compared with 6.4 percent at March 31, 2004, and 6.0 percent at June 30, 2003. The Tier 1 capital ratio was 8.7 percent at June 30, 2004, compared with 8.9 percent at March 31, 2004, and 8.5 percent at June 30, 2003. The total risk- based capital ratio was 12.9 percent at June 30, 2004, compared with 13.3 percent at March 31, 2004, and 13.0 percent at June 30, 2003. The leverage ratio was 7.8 percent at June 30, 2004, compared with 8.0 percent at March 31, 2004, and 7.8 percent at June 30, 2003. All regulatory ratios continue to be in excess of stated "well capitalized" requirements.


     COMMON SHARES                                               Table 12
     (Millions)
                        2Q         1Q          4Q          3Q         2Q
                       2004       2004        2003        2003       2003
     Beginning shares
      outstanding    1,901.2    1,922.9     1,927.4     1,924.5    1,919.0

     Shares issued
      for stock option
      and stock purchase
      plans, acquisitions
      and other corporate
      purposes           3.7       12.1        10.5         2.9        5.5
     Shares
      repurchased      (20.8)     (33.8)      (15.0)         --         --
     Ending shares
      outstanding    1,884.1    1,901.2     1,922.9     1,927.4    1,924.5

On December 16, 2003, the board of directors of U.S. Bancorp approved an authorization to repurchase 150 million shares of outstanding common stock during the following 24 months. During the second quarter of 2004, the Company repurchased 20.8 million shares of common stock. As of June 30, 2004, there were approximately 87 million shares remaining to be repurchased under the current authorization.


     LINE OF BUSINESS FINANCIAL PERFORMANCE*                       Table 13
     ($ in millions)

                          Operating Earnings**             Percent Change
                        2Q         1Q         2Q         2Q04 vs    2Q04 vs
     Business Line     2004       2004       2003          1Q04       2Q03

     Wholesale
      Banking         $265.7     $249.9     $210.5          6.3       26.2
     Consumer
      Banking***       394.5      283.8      333.2         39.0       18.4
     Private Client,
      Trust and
      Asset
      Management       109.0      110.0       97.5         (0.9)      11.8
     Payment
      Services         176.8      160.9      143.4          9.9       23.3
     Treasury and
      Corporate
      Support           90.9      203.8      137.6        (55.4)     (33.9)

     Consolidated
      Company       $1,036.9   $1,008.4     $922.2          2.8       12.4


                                                              2Q 2004
                        YTD          YTD        Percent      Earnings
     Business Line     2004         2003         Change    Composition

     Wholesale
      Banking         $515.6       $423.2         21.8          26%
     Consumer
      Banking***       678.3        646.4          4.9          38
     Private Client,
      Trust and
      Asset
      Management       219.0        185.3         18.2          10
     Payment
      Services         337.7        276.4         22.2          17
     Treasury and
      Corporate
      Support          294.7        286.5          2.9           9

     Consolidated
      Company       $2,045.3     $1,817.8         12.5         100%


     *   preliminary data
     **  earnings before merger and restructuring-related items and
         discontinued operations
     *** In 2Q04 Consumer Banking's retail banking business grew operating
         earnings by 22.4 percent and 8.8 percent over 2Q03 and 1Q04,
         respectively.  The Consumer Bank's mortgage banking business
         profitability declined slightly in 2Q04 from 2Q03, but significantly
         increased in 2Q04 over 1Q04 due to MSR impairment of $109.3 million,
         which the Company elected not to offset by realizing securities gains
         for the business line in 1Q04.


    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. 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. 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 2004, certain organization and methodology changes were made and, accordingly, prior period results have been restated and presented on a comparable basis.

Wholesale Banking offers lending, depository, treasury management and other financial services to middle market, large corporate and public sector clients. Wholesale Banking contributed $265.7 million of the Company's operating earnings in the second quarter of 2004, a 26.2 percent increase over the same period of 2003 and a 6.3 percent increase over the first quarter of 2004. The increase in Wholesale Banking's second quarter 2004 contribution over the second quarter of 2003 was primarily the result of favorable variances in the provision for credit losses (92.3 percent) and total noninterest expense (3.3 percent), partially offset by a decrease in total net revenue (3.5 percent). Total net revenue in the second quarter of 2004 was lower than in the second quarter of 2003, reflecting unfavorable variances in both net interest income (4.9 percent) and noninterest income (.6 percent). The decrease in net interest income was primarily due to a decline in average total loans outstanding (5.2 percent) and average noninterest bearing deposits (14.5 percent) due, in part, to lower deposits held by the Federal government. Although treasury management fees were higher (15.1 percent) year-over-year, the growth was more than offset by unfavorable variances in commercial products revenue (6.3 percent), primarily conduit servicing fees, and other revenue (32.7 percent). The increase in treasury 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 maintaining compensating deposit balances to paying fees. Wholesale Banking's favorable variance in total noninterest expense year-over-year was primarily driven by a decline in other expense (30.2 percent), the result of lower loan workout-related expense relative to the second quarter of 2003, partially offset by an increase in net shared services expense (5.9 percent), which is primarily driven by customer transaction volume and account activities. The decrease in the provision for credit losses year-over-year was the result of a reduction in net charge-offs, the result of improving credit quality. The increase in Wholesale Banking's contribution to operating earnings in the second quarter of 2004 over the first quarter of 2004 was the net result of favorable variances in the provision for credit losses (74.7 percent) and total net revenue (.3 percent), partially offset by higher total noninterest expense (1.5 percent). Total net revenue was slightly higher on a linked quarter basis, with a favorable variance in net interest income (1.1 percent), offset by an unfavorable variance in noninterest income (.8 percent). The change in net interest income reflected increases over the prior quarter in the business line's average total loans outstanding (1.0 percent) and average total deposits (2.4 percent). The unfavorable variance quarter-over-quarter in noninterest income was attributed to lower commercial products revenue, partially offset by higher treasury management fees and other revenue. The increase in noninterest expense was principally due to higher net shared services and loan-related expense, offset by lower compensation and employee benefits expense. 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, branch ATM banking, small business banking, including lending guaranteed by the Small Business Administration, small-ticket leasing, consumer lending, mortgage banking, workplace banking, student banking, 24-hour banking, and investment product and insurance sales. Consumer Banking contributed $394.5 million of the Company's operating earnings in the second quarter of 2004, an 18.4 percent increase over the same period of 2003 and a 39.0 percent increase over the first quarter of 2004. While the retail banking business segment grew operating earnings by 22.4 percent and 8.8 percent over the second quarter of 2003 and the first quarter of 2004, respectively, the contribution of the mortgage banking business declined slightly year-over-year (3.7 percent), but provided a significant part of the growth for Consumer Banking over the first quarter of 2004. The decrease in the mortgage banking business's contribution from the second quarter of 2003 was primarily the result of an increase in noninterest expense, excluding the change in MSR valuation, due to an increase in other intangible amortization, the result of the growing servicing portfolio. In the second quarter of 2004, as in the second quarter of 2003, net gains (losses) on securities in the mortgage banking business line were offset by the change in MSR valuation. The mortgage banking business line's contribution rose in the second quarter of 2004 over the first quarter of 2004, primarily due to a favorable change in the MSR valuation of $280.4 million, partially offset by the reduction in net gains (losses) on the sale of securities of $171.1 million. In the first quarter of 2004, the Company elected not to sell higher yielding securities to offset MSR impairment in the mortgage banking business. The mortgage banking business also benefited from growth in both net interest and noninterest income and lower noninterest expense relative to the first quarter of 2004.

For the Consumer Banking business, as a whole, the unfavorable variance in gains (losses) on the sale of securities was offset with the favorable variance in MSR valuation year-over-year. Excluding net gains (losses) on the sale of securities, total net revenue was higher than the same quarter of the 2003 by 6.2 percent, including increases in both net interest income (1.0 percent) and noninterest income (18.2 percent). Consumer Banking's results also benefited from a reduction in the provision for credit losses (11.8 percent) and a favorable variance in total noninterest expense, excluding the change in MSR valuations (.6 percent), over the second quarter of 2003. Net interest income improved year-over-year, the result of increases in average loans outstanding (8.6 percent) and a favorable change in the mix of average total deposits, partially offset by declines in the average balance of loans held for sale and in the business line's net interest margin. Noninterest income improved in the second quarter of 2004 over the same period of 2003, primarily due to growth in deposit service charges (13.1 percent), commercial products revenue (47.9 percent), mortgage banking revenue (20.9 percent), investment products fees and commissions (11.7 percent) and other revenue (89.0 percent). Other revenue was higher due to lower lease residual losses and gains on the sale of student loans relative to the second quarter of 2003. Total noninterest expense, excluding the change in MSR valuation (.6 percent), in the second quarter of 2004 was lower than the second quarter of 2003, mainly due to a favorable change in net shared services expense (12.4 percent). A reduction in net charge-offs year-over-year drove the positive variance in the business line's provision for credit losses.

The increase in Consumer Banking's contribution in the second quarter of 2004 over the first quarter of 2004 was primarily the result of a favorable change in the MSR valuation of $280.4 million, partially offset by the reduction in net gains (losses) on the sale of securities of $171.1 million. In the first quarter of 2004, the Company elected not to sell higher yielding securities to offset MSR impairment in the mortgage banking business segment. Excluding the impact of the change in MSR and net gains (losses) on the sale of securities, Consumer Banking's contribution for the current quarter rose by 11.7 percent over the first quarter of 2004. The increase was primarily due to an increase in total net revenue, excluding net gains (losses) on the sale of securities (5.0 percent), and a reduction in the provision for credit losses (12.8 percent). Offsetting these favorable variances were higher noninterest expense, excluding the change in MSR valuation (2.2 percent). The growth in noninterest income, excluding net gains (losses) on the sale of securities, quarter-over-quarter was driven by deposit service charges, commercial products revenue, mortgage banking revenue, investment products fees and commissions and other revenue. The unfavorable variance in noninterest expense, excluding the change in MSR valuation, quarter-over- quarter was primarily the result of higher net shared services expense and other expense.

Private Client, Trust and Asset Management provides trust, private banking, financial advisory, investment management and mutual fund and alternative investment product services through five businesses: Private Client Group, Corporate Trust, Asset Management, Institutional Trust, and Custody and Fund Services, LLC. Private Client, Trust and Asset Management contributed $109.0 million of the Company's operating earnings in the second quarter of 2004, 11.8 percent higher than the same period of 2003 and .9 percent lower than the first quarter of 2004. The favorable variance in the business line's contribution in the second quarter of 2004 over the second quarter of 2003 was the result of favorable variances in total net revenue (7.6 percent) and total noninterest expense (.7 percent), partially offset by a $7.3 million increase in the provision for credit losses. Higher average loans outstanding (3.4 percent) and total deposits (34.0 percent) favorably impacted net interest income year-over-year, while noninterest income benefited from higher trust and investment management fees due to improving equity market valuations and net new account growth. The slight decrease in the business line's contribution (.9 percent) in the second quarter of 2004 from the first quarter of 2004 was the result of higher total net revenue (2.7 percent), offset by higher total noninterest expense (1.6 percent) and a $7.9 million increase in the provision for credit losses, the result of higher net charge-offs in the second quarter of 2004. The increase in net interest income from the first quarter of 2004 to the second quarter of 2004 was primarily driven by an increase in average loans outstanding (2.2 percent) and total deposits (3.1 percent), while noninterest income benefited from tax preparation fees and net new account 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 $176.8 million of the Company's operating earnings in the second quarter of 2004, a 23.3 percent increase over the same period of 2003, and a 9.9 percent increase over the first quarter of 2004. The increase in Payment Services' contribution in the second quarter of 2004 from the same period of 2003 was the result of higher total net revenue (10.0 percent) and a lower provision for credit losses (9.6 percent), partially offset by an increase in total noninterest expense (5.8 percent). The increase in total net revenue year- over-year was primarily due to growth in noninterest income (14.4 percent), partially offset by lower net interest income (2.3 percent), which primarily reflected higher corporate card rebates and a reduction in late fees relative to the prior year's quarter. The increase in noninterest income was principally the result of growth in credit and debit card revenue (11.5 percent), corporate payment products revenue (13.0 percent), ATM processing service revenue (10.6 percent) and merchant processing services revenue (16.4 percent). Although credit and debit card revenue was negatively impacted in the second quarter of 2004 by the VISA debit card settlement and higher customer loyalty rewards expense, increases in transaction volumes and other rate adjustments more than offset these detrimental changes. The growth in total noninterest expense year-over-year primarily reflected an increase in processing expense related to the revenue growth. The increase in Payment Services' contribution in the second quarter of 2004 over the first quarter of 2004 was primarily due to seasonally strong total net revenue (8.1 percent), offset by a slight increase in the provision for credit losses (2.4 percent) and an increase in total noninterest expense (8.5 percent), the result of the increase in processing related expense.

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 expenses associated with business activities managed on a corporate basis, including enterprise-wide operations and administrative support functions. Operational expenses incurred by Treasury and Corporate Support on behalf of the other business lines are allocated back primarily based on customer transaction volume and account activities to the appropriate business unit and are identified as net shared services expense. Treasury and Corporate Support recorded operating earnings of $90.9 million in the second quarter of 2004, compared with operating earnings of $137.6 million in the second quarter of 2003 and $203.8 million in the first quarter of 2004. The decrease in operating earnings in the current quarter from the second quarter of 2003 was largely due to lower total net revenue (6.5 percent) and higher total noninterest expense (45.8 percent). Lower net revenue reflected the Company's asset/liability management decisions to invest in lower-yield floating-rate securities, higher-cost fixed funding and repositioning of the balance sheet for changes in the interest rate environment. The increase in total noninterest expense year-over-year reflected higher performance and stock- based compensation costs during 2004. The unfavorable variance in operating earnings in the second quarter of 2004 from the first quarter of 2004 was principally the net result of a $90.0 million credit in income tax expense and a $35.4 million charge associated with the prepayment of debt, both of which were recorded in the first quarter of 2004. In addition, total net revenue declined 8.1 percent quarter-over-quarter, primarily due to the reduction in the investment securities portfolio and continuing asset/liability management decisions of the Company.

Additional schedules containing more detailed information about the Company's business line results are available on the web at http://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, July 20, 2004, AT 1:00 p.m. (CDT). To access the conference call, please dial 800-540-0559 and ask for the U.S. Bancorp earnings conference call. Participants calling from outside the United States, please call 785-832-1508. For those unable to participate during the live call, a recording of the call will be available approximately one hour after the conference call ends on Tuesday, July 20, 2004, and will run through Tuesday, July 27, 2004, at 11:00 p.m. (CDT). To access the recorded message dial 888-567-0677. If calling from outside the United States, please dial 402-530-0419. After July 27th, a recording of the call will continue to be available by webcast on the U.S. Bancorp web site at http://usbank.com .

Minneapolis-based U.S. Bancorp ("USB"), with $190 billion in assets, is the 6th largest financial services holding company in the United States. The company operates 2,315 banking offices and 4,565 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 http://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   Six Months Ended
    Except Per Share Data)                   June 30,            June 30,
    (Unaudited)                          2004      2003      2004      2003
    Interest Income
    Loans                              $1,740.0  $1,821.0  $3,487.0  $3,657.7
    Loans held for sale                    27.3      51.8      47.2     111.4
    Investment securities
        Taxable                           438.7     422.4     902.7     818.5
        Non-taxable                         4.7       7.5      10.0      16.4
    Other interest income                  25.5      25.1      47.4      55.0
            Total interest income       2,236.2   2,327.8   4,494.3   4,659.0
    Interest Expense
    Deposits                              205.3     288.5     432.3     595.1
    Short-term borrowings                  58.9      38.9     108.8      78.4
    Long-term debt                        174.8     184.0     360.7     368.3
    Junior subordinated debentures         24.8      24.5      48.3      55.9
            Total interest expense        463.8     535.9     950.1   1,097.7
    Net interest income                 1,772.4   1,791.9   3,544.2   3,561.3
    Provision for credit losses           204.5     323.0     439.5     658.0
    Net interest income after
     provision for credit losses        1,567.9   1,468.9   3,104.7   2,903.3
    Noninterest Income
    Credit and debit card revenue         158.8     142.3     300.6     269.7
    Corporate payment products revenue    102.7      90.9     197.5     176.9
    ATM processing services                44.9      41.9      87.1      84.3
    Merchant processing services          165.1     141.8     306.2     269.1
    Trust and investment management
     fees                                 251.7     238.9     500.3     467.5
    Deposit service charges               202.1     179.0     387.3     342.2
    Treasury management fees              121.5     111.8     239.0     223.8
    Commercial products revenue           107.4     100.0     217.8     204.2
    Mortgage banking revenue              109.9      90.3     204.1     185.7
    Investment products fees and
     commissions                           42.2      38.1      81.5      73.2
    Securities gains (losses), net       (171.7)    213.1    (171.7)    353.8
    Other                                 107.1      84.8     210.3     188.6
            Total noninterest income    1,241.7   1,472.9   2,560.0   2,839.0
    Noninterest Expense
    Compensation                          572.6     547.6   1,108.4   1,093.6
    Employee benefits                      91.2      79.6     191.4     171.3
    Net occupancy and equipment           153.4     159.5     309.1     320.8
    Professional services                  34.7      32.9      67.1      59.3
    Marketing and business development     48.7      51.1      84.0      80.9
    Technology and communications         102.4     104.1     204.1     209.0
    Postage, printing and supplies         60.5      61.8     122.1     122.2
    Other intangibles                     (47.6)    312.3     178.5     547.4
    Merger and restructuring-related
     charges                                --       10.8       --       28.4
    Other                                 216.7     186.9     422.8     368.3
            Total noninterest expense   1,232.6   1,546.6   2,687.5   3,001.2
    Income from continuing operations
     before income taxes                1,577.0   1,395.2   2,977.2   2,741.1
    Applicable income taxes               540.1     480.2     931.9     942.0
    Income from continuing operations   1,036.9     915.0   2,045.3   1,799.1
    Income from discontinued
     operations (after-tax)                 --        4.9       --        5.6
    Net income                         $1,036.9    $919.9  $2,045.3  $1,804.7

    Earnings Per Share
        Income from continuing
         operations                        $.55      $.48     $1.07      $.94
        Discontinued operations             --        --        --        --
        Net income                         $.55      $.48     $1.07      $.94

    Diluted Earnings Per Share
        Income from continuing
         operations                        $.54      $.47     $1.06      $.93
        Discontinued operations             --        .01       --        .01
        Net income                         $.54      $.48     $1.06      $.94

    Dividends declared per share          $.240     $.205     $.480     $.410

    Average common shares outstanding   1,891.6   1,922.3   1,903.5   1,920.6
    Average diluted common shares
     outstanding                        1,913.4   1,931.6   1,927.3   1,928.6


    U.S. Bancorp
    Consolidated Ending Balance Sheet

                                            June 30,  December 31,  June 30,
    (Dollars in Millions)                     2004        2003        2003
    Assets                                (Unaudited)             (Unaudited)
    Cash and due from banks                   $7,476      $8,630     $11,795
    Investment securities
        Held-to-maturity                         125         152         188
        Available-for-sale                    40,160      43,182      35,390
    Loans held for sale                        1,383       1,433       3,791
    Loans
        Commercial                            40,065      38,526      42,238
        Commercial real estate                27,204      27,242      27,259
        Residential mortgages                 14,380      13,457      11,712
        Retail                                41,181      39,010      38,214
            Total loans                      122,830     118,235     119,423
                Less allowance for loan
                 losses                       (2,244)     (2,369)     (2,368)
                Net loans                    120,586     115,866     117,055
    Premises and equipment                     1,893       1,957       2,064
    Customers' liability on acceptances          169         121         148
    Goodwill                                   6,226       6,025       6,329
    Other intangible assets                    2,475       2,124       1,984
    Other assets                               9,737       9,796      16,155
                Total assets                $190,230    $189,286    $194,899

    Liabilities and Shareholders' Equity
    Deposits
        Noninterest-bearing                  $32,786     $32,470     $44,465
        Interest-bearing                      71,314      74,749      72,315
        Time deposits greater than
         $100,000                             15,827      11,833       9,547
            Total deposits                   119,927     119,052     126,327
    Short-term borrowings                     11,592      10,850       7,387
    Long-term debt                            31,013      31,215      31,379
    Junior subordinated debentures             2,652       2,601       2,652
    Acceptances outstanding                      169         121         148
    Other liabilities                          6,202       6,205       7,485
            Total liabilities                171,555     170,044     175,378
    Shareholders' equity
        Common stock                              20          20          20
        Capital surplus                        5,860       5,851       5,836
        Retained earnings                     15,644      14,508      14,121
        Less treasury stock                   (2,316)     (1,205)     (1,092)
        Other comprehensive income              (533)         68         636
            Total shareholders' equity        18,675      19,242      19,521
            Total liabilities and
             shareholders' equity           $190,230    $189,286    $194,899
SOURCE  U.S. Bancorp
    -0-                             07/20/2004
    /CONTACT:  Media Relations, Steve Dale, +1-612-303-0784, or Investor
Relations, H.D. McCullough, +1-612-303-0786, or Judith T. Murphy,
+1-612-303-0783, all of U.S. Bancorp/
    /Company News On-Call:  http://www.prnewswire.com/comp/312402.html /
    /Web site:  http://www.usbank.com /
    (USB PJC)

CO:  U.S. Bancorp; Piper Jaffray Companies
ST:  Minnesota
IN:  FIN
SU:  ERN CCA

JK-CS 
-- CGTU006 --
5773 07/20/2004 08:30 EDT http://www.prnewswire.com
"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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