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U.S. Bancorp Reports Record Net Income for the First Quarter of 2005

MINNEAPOLIS, Apr 19, 2005 (BUSINESS WIRE) -- U.S. Bancorp (NYSE:USB):

EARNINGS SUMMARY                                               Table 1
----------------------------------------------------------------------
($ in millions, except per-share data)                 Percent Percent
                                                       Change  Change
                                    1Q     4Q     1Q   1Q05 vs 1Q05 vs
                                   2005   2004   2004   4Q04    1Q04
                                  ------------------------------------

Net income                        $1,071 $1,056 $1,008    1.4     6.3
Earnings per share (diluted)        0.57   0.56   0.52    1.8     9.6

Return on average assets (%)        2.21   2.16   2.14
Return on average equity(%)         21.9   21.2   20.7
Efficiency ratio (%)                41.7   48.5   47.0

Dividends declared per share       $0.30  $0.30  $0.24     --    25.0
Book value per share (period-end)  10.43  10.52  10.23   (0.9)    2.0
Net interest margin (%)             4.08   4.20   4.29

U.S. Bancorp (NYSE:USB) today reported net income of $1,071 million for the first quarter of 2005, compared with $1,008 million for the first quarter of 2004. Net income of $.57 per diluted share in the first quarter of 2005 was higher than the same period of 2004 by $.05 (9.6 percent). Return on average assets and return on average equity were 2.21 percent and 21.9 percent, respectively, for the first quarter of 2005, compared with returns of 2.14 percent and 20.7 percent, respectively, for the first quarter of 2004.

U.S. Bancorp Chairman and Chief Executive Officer Jerry A. Grundhofer said, "Once again, I am pleased to announce record earnings for the first quarter of 2005, along with industry-leading returns on equity and assets. In addition, we returned 108 percent of earnings to our shareholders during the quarter in the form of dividends and share repurchases. Growth in our fee-based businesses, as well as continued improvement in credit quality, were the primary drivers of the Company's earnings' growth year-over-year. Fee revenue, excluding the impact of securities losses, grew by over 9 percent, with the payment services categories increasing over 15 percent, driven primarily by investments in the businesses and improvements in the economy. Deposit service charges increased by over 13 percent, driven primarily by increases in net new checking accounts. Commercial loan growth gained momentum as the quarter progressed, with period-end commercial loan outstandings increasing an annualized 16.1 percent from December 31, 2004. As we enter the second quarter, historically our strongest in producing linked-quarter revenue growth, we expect to achieve our target of 10 percent earnings per share growth for the full year 2005.

"Although average commercial loan balances continued to show encouraging trends this quarter, growing 7.3 percent year-over-year and at an annualized rate of 8.4 percent over the fourth quarter of 2004, loan pricing remains competitive. Tighter credit spreads accounted for 6 of the 12 basis points drop in our net interest margin between the fourth quarter of 2004 and the current quarter. We will continue to compete aggressively on loan pricing, but will remain disciplined on credit structure. Our low-cost position in the industry and extensive fee-based product and service offerings that can be used to penetrate commercial relationships, give us pricing advantages over our competitors. We are confident that this approach to the market will allow us to best capitalize on the strengths of our franchise.

"As many already know, customer service has been, and continues to be, an important focus in this Company. Customer service is our brand and we believe it distinguishes us from our competition. We have been measuring the results of our efforts for just over three years, and I am pleased to report that we have significantly increased the number of retail customers that we define as loyal customers based on their satisfaction with our service, the likelihood that they will remain with the Company and the likelihood that they will recommend U.S. Bank to their friends and relatives.

"Looking ahead, we will continue to enhance this great franchise through growth initiatives designed specifically to increase our market penetration, introduce new products and services and expand our market presence, all the while remaining focused on providing great customer service and improving customer loyalty.

"Finally, I want to thank all 51,000 of our employees for their hard work and dedication, and would like to recognize the nearly 24,000 employees that have been with our Company for five years or longer. We took time this past month to honor these employees for their contributions, as we believe that loyal and experienced employees provide the type of service that attracts and retains loyal customers."

The Company's results for the first quarter of 2005 improved over the same period of 2004, as net income rose by $63 million (6.3 percent), primarily due to lower credit costs and growth in fee-based products and services. During the first quarter of 2005, the Company recognized a $54 million reparation of its mortgage servicing rights ("MSR") asset, reflecting rising longer-term interest rates in 2005, compared with the recognition of $109 million of MSR impairment in the first quarter of 2004. The yield on both 10-year Treasury Notes and 30-year Fannie Mae commitments increased approximately 26 to 34 basis points. The Company sold certain investment securities during the first quarter of 2005, resulting in net securities losses of $59 million. The Company realized no securities gains or losses in the first quarter of 2004. Also included in the first quarter of 2004 results was a $35 million expense charge related to the prepayment of certain debt and a $90 million reduction in income tax expense related to the resolution of federal tax examinations.

Total net revenue on a taxable-equivalent basis for the first quarter of 2005 was $36 million (1.2 percent) higher than the first quarter of 2004, primarily reflecting 9.3 percent growth in fee-based revenue across the majority of fee categories. The expansion of the Company's merchant acquiring business in Europe accounted for approximately 1.9 percent of the change in fee-based revenue year-over-year. Fee based revenue growth was offset somewhat by the unfavorable variances in securities gains (losses) and net interest income.

Total noninterest expense in the first quarter of 2005 was $124 million (8.5 percent) lower than the first quarter of 2004, primarily reflecting the $163 million favorable change in the valuation of mortgage servicing rights and the $35 million debt prepayment expense that was taken in the first quarter of 2004. The expansion of the Company's merchant acquiring business in Europe added approximately $31 million of expense. In addition, expenses reflected incremental investments in in-store branches, middle-market and community bankers, marketing initiatives and higher pension costs from a year ago.

Provision for credit losses for the first quarter of 2005 was $172 million, a decrease of $63 million (26.8 percent) from the first quarter of 2004. The decrease in the provision for credit losses year-over-year reflected a decrease in total net charge-offs. Net charge-offs in the first quarter of 2005 were $172 million, compared with the fourth quarter of 2004 net charge-offs of $163 million and the first quarter of 2004 net charge-offs of $234 million. The decline in losses from a year ago was primarily the result of declining levels of stressed and nonperforming loans, continuing collection efforts and improving economic conditions. Total nonperforming assets declined to $665 million at March 31, 2005, from $748 million at December 31, 2004 (11.1 percent), and $1,047 million at March 31, 2004 (36.5 percent). The ratio of the allowance for credit losses to nonperforming loans was 404 percent at March 31, 2005, compared with 355 percent at December 31, 2004, and 258 percent at March 31, 2004.

INCOME STATEMENT HIGHLIGHTS                                    Table 2
----------------------------------------------------------------------
(Taxable-equivalent basis, $ in
 millions, except per-share data)                      Percent Percent
                                                       Change  Change
                                    1Q     4Q     1Q   1Q05 vs 1Q05 vs
                                    2005   2004   2004  4Q04    1Q04
                                  ------------------------------------

Net interest income               $1,751 $1,800 $1,779   (2.7)   (1.6)
Noninterest income                 1,382  1,435  1,318   (3.7)    4.9
                                  ---------------------
Total net revenue                  3,133  3,235  3,097   (3.2)    1.2
Noninterest expense                1,331  1,579  1,455  (15.7)   (8.5)
                                  ---------------------
Income before provision and income
 taxes                             1,802  1,656  1,642    8.8     9.7
Provision for credit losses          172     64    235     nm   (26.8)
                                  ---------------------
Income before income taxes         1,630  1,592  1,407    2.4    15.8
Taxable-equivalent adjustment          7      8      7  (12.5)     --
Applicable income taxes              552    528    392    4.5    40.8
                                  ---------------------
Net income                        $1,071 $1,056 $1,008    1.4     6.3
                                  =====================

Diluted earnings per share         $0.57  $0.56  $0.52    1.8     9.6
                                  =====================

Net Interest Income

First quarter net interest income on a taxable-equivalent basis was $1,751 million, compared with $1,779 million recorded in the first quarter of 2004. Average earning assets for the period increased over the first quarter of 2004 by $6.9 billion (4.2 percent), primarily driven by a $3.8 billion (9.5 percent) increase in retail loans and a $2.5 billion (7.3 percent) increase in commercial loans, partially offset by a $1.9 billion (4.3 percent) decline in investment securities. The growth in earning assets contributed approximately $83 million of net interest income year-over-year. The positive impact of the growth in earning assets was more than offset by an unfavorable rate variance, which reduced net interest income by approximately $102 million. A reduction in the number of days in the first quarter of 2005 relative to the first quarter of 2004 and a slight decline in loan fees accounted for the remainder of the variance.

Net interest income in the first quarter of 2005 was lower than the fourth quarter of 2004 by $49 million (2.7 percent). Average earning assets grew quarter-over-quarter by $2.4 billion (1.4 percent). Growth in most loan categories, including a 2.0 percent increase in total commercial loans and increases in residential mortgages, retail loans and investment securities, drove the increase in average earning assets over the prior quarter. The growth in earning assets contributed approximately $24 million of additional net interest income quarter-over-quarter. The positive impact of the growth in earning assets was more than offset by an unfavorable rate variance, which reduced net interest income by approximately $52 million. Net interest income also declined by approximately $21 million due to fewer days in the first quarter of 2005 relative to the fourth quarter of 2004.

The net interest margin in the first quarter of 2005 was 4.08 percent, compared with 4.29 percent in the first quarter of 2004. The decline in the net interest margin reflected the current lending environment, asset/liability management decisions and the impact of changes in the yield curve from a year ago. Since the first quarter of 2004, credit spreads have tightened by approximately 14 basis points across most lending products due to competitive pricing and a higher proportion of lower spread credit products. The net interest margin also declined due to higher short-term rates and asset/liability decisions designed to maintain a neutral rate risk position, including a 40 percent reduction in the net receive fixed swap position between March 31, 2004, and March 31, 2005. Lower prepayment fees also contributed to the year-over-year decline. Increases in the value of deposits and net free funds helped to partially offset these factors. The net interest margin in the first quarter of 2005 was 12 basis points lower than the net interest margin of 4.20 percent recorded in the fourth quarter of 2004. The decline in the net interest margin from the fourth quarter of 2004 reflected tighter credit spreads (6 basis points), due to increased competition, and changes in loan mix. Lower interest recoveries, higher short-term rates, asset/liability actions designed to maintain a neutral rate risk position and lower loan fees, partially offset by the higher value of deposits and net free funds, accounted for the remainder of the reduction.

NET INTEREST INCOME                                           Table 3
----------------------------------------------------------------------
(Taxable-equivalent basis;
 $ in millions)
                                                     Change   Change
                             1Q       4Q       1Q    1Q05 vs 1Q05 vs
                            2005     2004     2004    4Q04     1Q04
                          -------------------------------------------
Components of net interest
 income
    Income on earning
     assets                $2,442   $2,397   $2,265     $45     $177
    Expense on interest-
     bearing liabilities      691      597      486      94      205
                          -------------------------------------------
Net interest income        $1,751   $1,800   $1,779    $(49)    $(28)
                          ===========================================

Average yields and rates
 paid
    Earning assets yield     5.69 %   5.59 %   5.47 %  0.10 %   0.22 %
    Rate paid on interest-
     bearing liabilities     1.97     1.72     1.45    0.25     0.52
                          -------------------------------------------
Gross interest margin        3.72 %   3.87 %   4.02 % (0.15)%  (0.30)%
                          -------------------------------------------
Net interest margin          4.08 %   4.20 %   4.29 % (0.12)%  (0.21)%
                          ===========================================

Average balances
    Investment securities $42,813  $42,315  $44,744    $498  $(1,931)
    Loans                 127,654  125,639  118,810   2,015    8,844
    Earning assets        173,294  170,924  166,359   2,370    6,935
    Interest-bearing
     liabilities          142,052  138,303  134,966   3,749    7,086
    Net free funds(a)      31,242   32,621   31,393  (1,379)    (151)

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


AVERAGE LOANS                                                  Table 4
----------------------------------------------------------------------
($ in millions)                                        Percent Percent
                                                       Change  Change
                               1Q       4Q       1Q    1Q05 vs 1Q05 vs
                              2005     2004     2004    4Q04    1Q04
                            ------------------------------------------

Commercial                   $36,083  $35,348  $33,629    2.1     7.3
Lease financing                4,914    4,855    4,902    1.2     0.2
                            ---------------------------
      Total commercial        40,997   40,203   38,531    2.0     6.4

Commercial mortgages          20,268   20,286   20,554   (0.1)   (1.4)
Construction and development   7,236    7,360    6,556   (1.7)   10.4
                            ---------------------------
      Total commercial real
       estate                 27,504   27,646   27,110   (0.5)    1.5

Residential mortgages         15,827   15,044   13,610    5.2    16.3

Credit card                    6,417    6,347    5,878    1.1     9.2
Retail leasing                 7,198    7,087    6,192    1.6    16.2
Home equity and second
 mortgages                    14,844   14,711   13,376    0.9    11.0
Other retail                  14,867   14,601   14,113    1.8     5.3
                            ---------------------------
      Total retail            43,326   42,746   39,559    1.4     9.5
                            ---------------------------

Total loans                 $127,654 $125,639 $118,810    1.6     7.4
                            ===========================

Average loans for the first quarter of 2005 were $8.8 billion (7.4 percent) higher than the first quarter of 2004, driven by growth in average retail loans of $3.8 billion (9.5 percent), residential mortgages of $2.2 billion (16.3 percent) and total commercial loans of $2.5 billion (6.4 percent). Total commercial real estate loans also increased slightly year-over-year by $394 million (1.5 percent) relative to the first quarter of 2004. Average loans for the first quarter of 2005 were higher than the fourth quarter of 2004 by $2.0 billion (1.6 percent), reflecting growth in substantially all loan categories.

Average investment securities in the first quarter of 2005 were $1.9 billion (4.3 percent) lower than in the first quarter of 2004. The decline principally reflected the repositioning of the investment portfolio in mid-2004 as part of asset/liability risk management decisions to acquire variable rate and shorter-term fixed securities while selling more longer-term fixed rate mortgage-backed securities. Investment securities at March 31, 2005, were $2.3 billion lower than at March 31, 2004, but $1.6 billion higher than the balance at December 31, 2004. During the first quarter of 2005, the Company retained its mix of approximately 39 percent variable rate securities while investing in some principal-only and fixed-rate securities to economically hedge the MSR portfolio against a flattening yield curve.

AVERAGE DEPOSITS                                               Table 5
----------------------------------------------------------------------
($ in millions)                                        Percent Percent
                                                       Change  Change
                               1Q       4Q       1Q    1Q05 vs 1Q05 vs
                              2005     2004     2004    4Q04    1Q04
                            ------------------------------------------

Noninterest-bearing deposits $28,417  $29,841  $29,025   (4.8)   (2.1)
Interest-bearing deposits
    Interest checking         23,146   21,630   20,948    7.0    10.5
    Money market accounts     30,264   30,955   34,397   (2.2)  (12.0)
    Savings accounts           5,968    5,776    5,898    3.3     1.2
                            ---------------------------
       Savings products       59,378   58,361   61,243    1.7    (3.0)
    Time certificates of
     deposit less than
     $100,000                 12,978   12,794   13,618    1.4    (4.7)
    Time deposits greater
     than $100,000            18,650   15,448   12,133   20.7    53.7
                            ---------------------------
            Total interest-
             bearing
             deposits         91,006   86,603   86,994    5.1     4.6
                            ---------------------------
Total deposits              $119,423 $116,444 $116,019    2.6     2.9
                            ===========================

Average noninterest-bearing deposits for the first quarter of 2005 were lower than the first quarter of 2004 by $608 million (2.1 percent). The year-over-year change in the average balance of noninterest-bearing deposits was impacted by product changes in the Consumer Banking business line. In late 2004, the Company migrated approximately $1.3 billion of noninterest-bearing deposit balances to interest checking accounts as an enhancement to its Silver Elite Checking product. Average branch-based noninterest-bearing deposits in the first quarter of 2005, excluding the migration of certain high-value customers to Silver Elite Checking, were higher by approximately $599 million (5.4 percent) over the same quarter of 2004, as net new checking account growth continued to gain momentum. Average noninterest-bearing deposits in other areas, including commercial banking, private client, corporate trust, and mortgage, also increased year-over-year. These favorable variances were offset, however, by expected declines in average noninterest-bearing deposits in corporate banking as business customers utilize their excess liquidity.

Average total savings products declined year-over-year by $1.9 billion (3.0 percent), principally due to a reduction in average money market account balances, partially offset by higher interest checking and savings accounts balances. Average branch-based interest checking deposits increased by $2.6 billion (18.0 percent) over the same quarter of 2004, in part, due to the change in the Silver Elite Checking product, as well as new account growth. Average branch-based interest checking deposits, excluding Silver Elite Checking, were higher by approximately $1.3 billion (9.2 percent) year-over-year. This positive variance in branch-based interest checking account deposits was partially offset by reductions in other areas, including broker dealer and institutional trust. Average money market account balances declined by $4.1 billion (12.0 percent) year-over-year, with the largest declines in government banking, national corporate banking, and the branches. These reductions were partially offset by strong growth in corporate trust deposits. The overall decrease in average money market account balances year-over-year was the result of the Company's decision to lag deposit pricing, given modest loan growth and excess liquidity throughout 2004. A portion of the money market balances migrated to time deposits greater than $100,000 as rates increased on the time deposit products.

Average time certificates less than $100,000 were lower in the first quarter of 2005 than the first quarter of 2004 by $640 million (4.7 percent), as older, higher rate certificates continued to mature. This reduction was more than offset by an increase year-over-year of average time deposits greater than $100,000, most notably in corporate banking.

Average noninterest-bearing deposits for the first quarter of 2005 were $1.4 billion (4.8 percent) lower than the fourth quarter of 2004. Average noninterest-bearing deposits were somewhat impacted quarter-over-quarter by the change in the Silver Elite Checking product. Average branch-related products, excluding Silver Elite Checking, declined by approximately $212 million (1.8 percent) quarter-over-quarter. Average savings products were higher in the current quarter than the fourth quarter of 2004 by $1.0 billion (1.7 percent), primarily due to increases in interest checking, partially driven by the Silver Elite Checking product switch from noninterest- bearing accounts to interest checking accounts. Average branch-related interest checking balances, excluding Silver Elite Checking, rose by 2.4 percent in the first quarter of 2005 over the prior quarter. Average money market account balances declined by $691 million (2.2 percent) as the Company continued to lag deposit pricing. Time certificates of deposit less than $100,000 increased modestly from the fourth quarter of 2004, while time deposits greater than $100,000 rose by $3.2 billion (20.7 percent), primarily due to growth in foreign branch time deposits and corporate banking customer balances.

NONINTEREST INCOME                                             Table 6
----------------------------------------------------------------------
($ in millions)                                        Percent Percent
                                                       Change  Change
                                    1Q     4Q     1Q   1Q05 vs 1Q05 vs
                                   2005   2004   2004   4Q04    1Q04
                                  ------------------------------------

Credit and debit card revenue       $154   $184   $142  (16.3)    8.5
Corporate payment products revenue   107    101     95    5.9    12.6
ATM processing services               47     43     42    9.3    11.9
Merchant processing services         178    181    141   (1.7)   26.2
Trust and investment management
 fees                                247    241    249    2.5    (0.8)
Deposit service charges              210    212    185   (0.9)   13.5
Treasury management fees             107    110    118   (2.7)   (9.3)
Commercial products revenue           96    108    110  (11.1)  (12.7)
Mortgage banking revenue             102     96     94    6.3     8.5
Investment products fees and
 commissions                          39     37     39    5.4      --
Securities losses, net               (59)   (21)    --     nm      nm
Other                                154    143    103    7.7    49.5
                                  ---------------------

Total noninterest income          $1,382 $1,435 $1,318   (3.7)    4.9
                                  =====================

Noninterest Income

First quarter noninterest income was $1,382 million, an increase of $64 million (4.9 percent) from the same quarter of 2004, but $53 million (3.7 percent) lower than the fourth quarter of 2004. The increase in noninterest income over the first quarter of 2004 was driven by favorable variances in the majority of fee income categories, slightly offset by a $59 million increase in losses on the sale of securities. Credit and debit card revenue and corporate payment products revenue were both higher in the first quarter of 2005 than the first quarter of 2004 by $12 million, or 8.5 percent and 12.6 percent, respectively. The growth in credit and debit card revenue was driven by higher transaction volumes and rate changes. The corporate payment products revenue growth reflected growth in sales, card usage, rate changes and the recent acquisition of a small fleet card business. ATM processing services revenue was higher by $5 million (11.9 percent) in the first quarter of 2005 than the same quarter of the prior year due to increases in transaction volumes and sales. Merchant processing services revenue was higher in the first quarter of 2005 than the same quarter of 2004 by $37 million (26.2 percent), reflecting an increase in same store sales volume, new business, higher equipment fees, and the recent expansion of the Company's merchant acquiring business in Europe. The recent European acquisitions accounted for approximately $26 million of the total increase. Deposit service charges were higher year-over-year by $25 million (13.5 percent) due to account growth, revenue enhancement initiatives and transaction-related fees. The favorable variance year-over-year in mortgage banking revenue of $8 million (8.5 percent) was primarily due to higher loan servicing revenue. Other income was higher by $51 million (49.5 percent), primarily due to higher income from equity investments relative to the same quarter of 2004. Partially offsetting these positive variances year-over-year were commercial products revenue, treasury management fees and trust and investment management fees, which declined by $14 million (12.7 percent), $11 million (9.3 percent), and $2 million (.8 percent), respectively. Commercial products revenue declined due to reductions in loan syndication fees and leasing revenues. The decrease in treasury management fees was primarily due to higher earnings credit on customers' compensating balances. Trust and investment management fees declined as revenues generated by favorable equity market valuations and core balance growth were more than offset by a change in the mix of fund balances and customers' migration from paying for services with fees to paying with compensating balances.

Noninterest income was lower in the first quarter of 2005 than the fourth quarter of 2004 by $53 million (3.7 percent), primarily due to a $38 million unfavorable change in gains (losses) on the sale of securities and seasonally lower credit and debit card revenue, merchant processing services revenue and deposit services charges, in addition to declines in commercial products revenue and treasury management fees. Credit and debit card revenue and merchant processing services declined by $30 million (16.3 percent) and $3 million (1.7 percent), respectively, reflecting seasonally lower consumer spending after the holidays. Deposit service charges were lower by $2 million (.9 percent) in the first quarter of 2005 compared with the fourth quarter of 2004, also reflecting the seasonality of transaction-related fees. Commercial products revenue was lower quarter-over-quarter due to reductions in loan syndication fees, leasing revenue and international product revenue, while treasury management fees were lower in the current quarter by $3 million (2.7 percent) than the prior quarter, primarily due to higher interest earnings credits being received by customers that are maintaining compensating balances and fewer business processing days. Offsetting these negative variances were increases in corporate payment products revenue, ATM processing services, trust and investment management fees, mortgage banking revenue, investment products fees and commissions and other income. Corporate payment products revenue was higher quarter-over-quarter by $6 million (5.9 percent), primarily due to stronger transaction volumes and the acquisition of a small fleet card business. ATM processing services revenue was higher than the prior quarter by $4 million (9.3 percent), primarily due to new ATM installs and one-time incentive payments. The $6 million (2.5 percent) increase in trust and investment management fees in the first quarter of 2005 over the prior quarter was primarily due to the impact of higher equity market valuations and core account growth. Mortgage banking revenue rose quarter-over-quarter by $6 million (6.3 percent), as a result of higher originations and sales. Investment products fees and commissions increased by $2 million (5.4 percent) quarter-over-quarter due to higher investment sales. Other income increased by $11 million (7.7 percent) in the first quarter of 2005 primarily due to higher revenue from equity investments relative to the fourth quarter of 2004.

NONINTEREST EXPENSE                                            Table 7
----------------------------------------------------------------------
($ in millions)                                        Percent Percent
                                                       Change  Change
                                    1Q     4Q     1Q   1Q05 vs 1Q05 vs
                                   2005   2004   2004   4Q04    1Q04
                                  ------------------------------------

Compensation                        $567   $579   $536   (2.1)    5.8
Employee benefits                    116     98    100   18.4    16.0
Net occupancy and equipment          154    163    156   (5.5)   (1.3)
Professional services                 36     45     32  (20.0)   12.5
Marketing and business development    43     49     35  (12.2)   22.9
Technology and communications        106    116    102   (8.6)    3.9
Postage, printing and supplies        63     65     62   (3.1)    1.6
Other intangibles                     71    161    226  (55.9)  (68.6)
Debt prepayment                       --    113     35     nm      nm
Other                                175    190    171   (7.9)    2.3
                                  ---------------------

Total noninterest expense         $1,331 $1,579 $1,455  (15.7)   (8.5)
                                  =====================

Noninterest Expense

First quarter noninterest expense totaled $1,331 million, a decrease of $124 million (8.5 percent) from the same quarter of 2004 and a $248 million (15.7 percent) decrease from the fourth quarter of 2004. The decrease in expense year-over-year was primarily driven by the $163 million favorable change in the valuation of mortgage servicing rights, as well as the decrease of $35 million in debt prepayment charges relative to the first quarter of 2004. Offsetting these favorable variances were increases in compensation, employee benefits, professional services, marketing and business development, technology and communications, postage, printing and supplies and other expense. Included in the first quarter of 2005 was approximately $31 million related to the recent European acquisitions completed during 2004. Compensation expense was higher year-over-year by $31 million (5.8 percent), principally due to business expansion of in-store branches, investments in commercial and community bankers, and the expansion of the Company's merchant acquiring business in Europe and other initiatives. Employee benefits increased year-over-year by $16 million (16.0 percent), primarily as a result of higher pension expense and payroll taxes. Professional services and marketing and business development were higher in the first quarter of 2005 than the first quarter of 2004 by $4 million (12.5 percent) and $8 million (22.9 percent), respectively, due to general growth in business activity and timing of marketing programs. Technology and communications expense rose by $4 million (3.9 percent), reflecting technology investments that increased software expense amortization, in addition to outside data processing. Other expense was higher in the first quarter than the same quarter of 2004 by $4 million (2.3 percent), primarily due to increases in loan-related expense, affordable housing operating costs and processing costs for payment services products, the result of increases in transaction volume year-over-year.

Noninterest expense in the first quarter of 2005 was lower than the fourth quarter of 2004 by $248 million (15.7 percent). The decrease in noninterest expense in the first quarter of 2005 from the fourth quarter of 2004 was primarily driven by the $113 million debt prepayment charge taken in the fourth quarter of 2004, as well as an $86 million favorable change in the valuation of mortgage servicing rights quarter-over-quarter. Favorable variances were also recorded in substantially all other expense categories. The decrease in compensation expense of $12 million (2.1 percent) in the first quarter from the prior quarter was primarily due to higher deferred compensation costs in the fourth quarter of 2004. The quarter-over-quarter decrease in net occupancy and equipment costs of $9 million (5.5 percent) primarily reflected lower depreciation and building maintenance services. Professional services expense, marketing and business development and technology and communications declined quarter-over-quarter by $9 million (20.0 percent), $6 million (12.2 percent) and $10 million (8.6 percent), respectively. The variance in professional services fees primarily reflected higher year-end activity in the fourth quarter of 2004 related to business activity, regulatory compliance, tax-related costs, and affordable housing, while lower marketing and business development reflected the timing of marketing programs. Technology and communications declined relative to the prior quarter due to a write-off of capitalized software replaced during the fourth quarter of 2004. The positive variance in postage, printing and supplies quarter-over-quarter primarily reflected the new account-related expense in the fourth quarter of 2004. Other expense was lower in the first quarter of 2005 than the fourth quarter of 2004, primarily due to lower fraud losses, loan expense and affordable housing operating costs. Offsetting these decreases in expense was an unfavorable change in employee benefits of $18 million (18.4 percent), primarily due to timing of payroll taxes and 401K expense.

ALLOWANCE FOR CREDIT LOSSES                                    Table 8
----------------------------------------------------------------------
($ in millions)                      1Q     4Q     3Q     2Q     1Q
                                    2005   2004   2004   2004   2004
                                   -----------------------------------

Balance, beginning of period       $2,269 $2,370 $2,370 $2,370 $2,369

Net charge-offs
    Commercial                         14      8      2     36     54
    Lease financing                    13     10     19     19     21
                                   -----------------------------------
         Total commercial              27     18     21     55     75
    Commercial mortgages                4      9      3      2      4
    Construction and development        2      1      3     --      5
                                   -----------------------------------
        Total commercial real
         estate                         6     10      6      2      9

    Residential mortgages               9      8      7      7      7

    Credit card                        65     61     65     63     63
    Retail leasing                      8      9      9     10     11
    Home equity and second
     mortgages                         17     18     18     20     20
    Other retail                       40     39     40     47     49
                                   -----------------------------------
         Total retail                 130    127    132    140    143
                                   -----------------------------------
            Total net charge-offs     172    163    166    204    234
Provision for credit losses           172     64    166    204    235
Acquisitions and other changes         --     (2)    --     --     --
                                   -----------------------------------
Balance, end of period             $2,269 $2,269 $2,370 $2,370 $2,370
                                   ===================================

Components
   Allowance for loan losses       $2,082 $2,080 $2,184 $2,190 $2,186
   Liability for unfunded credit
    commitments                       187    189    186    180    184
                                   -----------------------------------
            Total allowance for
             credit losses         $2,269 $2,269 $2,370 $2,370 $2,370
                                   ===================================

Gross charge-offs                    $231   $235   $260   $274   $305
Gross recoveries                      $59    $72    $94    $70    $71

Net charge-offs to average loans(%)  0.55   0.52   0.54   0.68   0.79

Allowance as a percentage of:
   Period-end loans                  1.76   1.80   1.90   1.93   1.98
   Nonperforming loans                404    355    337    299    258
   Nonperforming assets               341    303    294    260    226

Credit Quality

The allowance for credit losses was $2,269 million at March 31, 2005, equal to the allowance for credit losses at December 31, 2004, and lower than the allowance for credit losses of $2,370 million at March 31, 2004. The ratio of the allowance for credit losses to period-end loans was 1.76 percent at March 31, 2005, compared with 1.80 percent at December 31, 2004, and 1.98 percent at March 31, 2004. The ratio of the allowance for credit losses to nonperforming loans was 404 percent at March 31, 2005, compared with 355 percent at December 31, 2004, and 258 percent at March 31, 2004. Total net charge-offs in the first quarter of 2005 were $172 million, compared with the fourth quarter of 2004 net charge-offs of $163 million and the first quarter of 2004 net charge-offs of $234 million.

Commercial and commercial real estate loan net charge-offs were $33 million for the first quarter of 2005, or .20 percent of average loans outstanding, compared with $28 million, or .16 percent of average loans outstanding, in the fourth quarter of 2004 and $84 million, or .51 percent of average loans outstanding, in the first quarter of 2004. 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 $130 million in the first quarter of 2005 were $3 million (2.4 percent) higher than the fourth quarter of 2004 and $13 million (9.1 percent) lower than the first quarter of 2004. Retail loan net charge-offs as a percent of average loans outstanding were 1.22 percent in the first quarter of 2005, compared with 1.18 percent and 1.45 percent in the fourth quarter of 2004 and first quarter of 2004, respectively. Lower levels of retail loan net charge-offs principally reflected the Company's ongoing improvement in collection efforts and risk management.

CREDIT RATIOS                                               Table 9
-------------------------------------------------------------------
(Percent)                              1Q    4Q    3Q    2Q    1Q
                                      2005  2004  2004  2004  2004
                                      -----------------------------
Net charge-offs ratios(a)
   Commercial                         0.16  0.09  0.02  0.42  0.65
   Lease financing                    1.07  0.82  1.56  1.58  1.72
      Total commercial                0.27  0.18  0.21  0.56  0.78

   Commercial mortgages               0.08  0.18  0.06  0.04  0.08
   Construction and development       0.11  0.05  0.17    --  0.31
      Total commercial real estate    0.09  0.14  0.09  0.03  0.13

   Residential mortgages              0.23  0.21  0.19  0.20  0.21

   Credit card                        4.11  3.82  4.21  4.23  4.31
   Retail leasing                     0.45  0.51  0.52  0.62  0.71
   Home equity and second mortgages   0.46  0.49  0.50  0.58  0.60
   Other retail                       1.09  1.06  1.09  1.31  1.40
      Total retail                    1.22  1.18  1.26  1.38  1.45

Total net charge-offs                 0.55  0.52  0.54  0.68  0.79

Delinquent loan ratios - 90 days or
 more past due excluding nonperforming
 loans(b)
   Commercial                         0.06  0.05  0.05  0.05  0.06
   Commercial real estate             0.02    --  0.01  0.01  0.01
   Residential mortgages              0.41  0.46  0.46  0.50  0.56
   Retail                             0.43  0.47  0.47  0.48  0.54
Total loans                           0.22  0.23  0.23  0.24  0.27

Delinquent loan ratios - 90 days or
 more past due including nonperforming
 loans(b)
   Commercial                         0.84  0.99  1.14  1.37  1.67
   Commercial real estate             0.68  0.73  0.75  0.76  0.85
   Residential mortgages              0.66  0.74  0.77  0.79  0.87
   Retail                             0.47  0.51  0.51  0.52  0.59
Total loans                           0.66  0.74  0.80  0.88  1.03

(a) annualized and calculated on average loan balances
(b) ratios are expressed as a percent of ending loan balances

The overall level of net charge-offs in the first quarter of 2005 reflected the Company's ongoing efforts to reduce the overall risk profile of the organization.

ASSET QUALITY                                                 Table 10
----------------------------------------------------------------------
($ in millions)
                               Mar 31  Dec 31  Sep 30  Jun 30  Mar 31
                                2005    2004    2004    2004    2004
                              ----------------------------------------
Nonperforming loans
   Commercial                    $254    $289    $348    $416    $511
   Lease financing                 70      91      91     111     116
                              ----------------------------------------
      Total commercial            324     380     439     527     627
   Commercial mortgages           159     175     166     164     185
   Construction and
    development                    21      25      35      41      44
                              ----------------------------------------
      Commercial real estate      180     200     201     205     229
   Residential mortgages           41      43      46      42      42
   Retail                          16      17      17      18      20
                              ----------------------------------------
Total nonperforming loans         561     640     703     792     918

Other real estate                  66      72      69      70      76
Other nonperforming assets         38      36      33      49      53
                              ----------------------------------------

Total nonperforming assets(a)    $665    $748    $805    $911  $1,047
                              ========================================

Accruing loans 90 days or more
 past due                        $285    $294    $292    $293    $319
                              ========================================

Nonperforming assets to loans
   plus ORE (%)                  0.52    0.59    0.64    0.74    0.87

(a) does not include accruing loans 90 days or more past due

Nonperforming assets at March 31, 2005, totaled $665 million, compared with $748 million at December 31, 2004, and $1,047 million at March 31, 2004. The ratio of nonperforming assets to loans and other real estate was .52 percent at March 31, 2005, compared with .59 percent at December 31, 2004, and .87 percent at March 31, 2004.

CAPITAL POSITION                                             Table 11
----------------------------------------------------------------------
($ in millions)           Mar 31   Dec 31   Sep 30   Jun 30   Mar 31
                          2005     2004     2004     2004     2004
                         --------------------------------------------

Total shareholders'
 equity                  $19,208  $19,539  $19,600  $18,675  $19,452
Tier 1 capital            14,943   14,720   14,589   14,294   14,499
Total risk-based capital  23,099   22,352   21,428   21,255   21,559

Common equity to assets      9.7 %   10.0 %   10.2 %    9.8 %   10.1 %
Tangible common equity to
 assets                      6.2      6.4      6.4      6.3      6.4
Tier 1 capital ratio         8.6      8.6      8.7      8.7      8.9
Total risk-based capital
 ratio                      13.3     13.1     12.7     12.9     13.3
Leverage ratio               7.9      7.9      7.9      7.8      8.0

Total shareholders' equity was $19.2 billion at March 31, 2005, compared with $19.5 billion at March 31, 2004. The decrease was the result of corporate earnings offset by share buybacks and dividends.

Tangible common equity to assets was 6.2 percent at March 31, 2005, compared with 6.4 percent at December 31, 2004, and at March 31, 2004. The Tier 1 capital ratio was 8.6 percent at March 31, 2005, and at December 31, 2004, compared with 8.9 percent at March 31, 2004. The total risk-based capital ratio was 13.3 percent at March 31, 2005, compared with 13.1 percent at December 31, 2004, and 13.3 percent at March 31, 2004. The leverage ratio was 7.9 percent at March 31, 2005, and at December 31, 2004, compared with 8.0 percent at March 31, 2004. All regulatory ratios continue to be in excess of stated "well capitalized" requirements.

COMMON SHARES                                                Table 12
---------------------------------------------------------------------
(Millions)                           1Q     4Q     3Q     2Q     1Q
                                    2005   2004   2004   2004   2004
                                   ----------------------------------

Beginning shares outstanding       1,858  1,871  1,884  1,901  1,923

Shares issued for stock option and
 stock purchase plans, acquisitions
 and other corporate purposes          4      7      6      4     12
Shares repurchased                   (20)   (20)   (19)   (21)   (34)
                                   ----------------------------------
Ending shares outstanding          1,842  1,858  1,871  1,884  1,901
                                   ==================================

On December 21, 2004, the Board of Directors of U.S. Bancorp approved an authorization to repurchase up to 150 million shares of outstanding common stock during the following 24 months. This repurchase program replaced the Company's previous program. During the first quarter of 2005, the Company repurchased 20 million shares of common stock under these authorizations. As of March 31, 2005, there were approximately 125 million shares remaining to be repurchased under the current authorization.

LINE OF BUSINESS FINANCIAL
 PERFORMANCE(a)                                               Table 13
----------------------------------------------------------------------
($ in millions)
                          Net Income        Percent Change   1Q 2005
                     --------------------- ----------------
                       1Q     4Q     1Q    1Q05 vs 1Q05 vs  Earnings
Business Line         2005   2004   2004     4Q04    1Q04  Composition
                     --------------------- ---------------------------

Wholesale Banking      $270   $284   $240     (4.9)   12.5        25 %
Consumer Banking        405    370    260      9.5    55.8        38
Private Client, Trust
 and Asset Management   114    102    104     11.8     9.6        11
Payment Services        164    181    152     (9.4)    7.9        15
Treasury and
 Corporate Support      118    119    252     (0.8)  (53.2)       11
                     ---------------------                 ----------

Consolidated Company $1,071 $1,056 $1,008      1.4     6.3       100 %
                     =====================                 ==========

(a) preliminary data

Lines of Business

Within the Company, financial performance is measured by major lines of business which include Wholesale Banking, Consumer Banking, 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. Noninterest expenses incurred by centrally managed operations or business lines that directly support another business line's operations are charged to the applicable business line based on its utilization of those services primarily measured by the volume of customer activities. These allocated expenses are reported as net shared services expense. 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 2005, 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 $270 million of the Company's net income in the first quarter of 2005, a 12.5 percent increase over the same period of 2004, but a 4.9 percent decrease from the fourth quarter of 2004. The increase in Wholesale Banking's first quarter 2005 contribution over the first quarter of 2004 was primarily the result of favorable variances in total net revenue (3.9 percent) and the provision for credit losses, which benefited from a $31 million decline in net charge-offs quarter-over-quarter. Offsetting these positive variances was an increase in total noninterest expense of 3.4 percent. Total net revenue in the first quarter of 2005 included positive changes in both net interest income (2.1 percent) and noninterest income (10.1 percent). The increase in net interest income was primarily due to an increase in average loans outstanding and wider deposit spreads, partially offset by tighter credit spreads. The increase in noninterest income was primarily the result of growth in other revenue related to equity investments, partially offset by reductions in commercial products revenue and treasury management fees. The decline in commercial products revenue (15.1 percent) was driven by lower loan syndication fees and leasing revenue, while treasury management fees were lower (10.7 percent) year-over-year due to higher earnings credit on customers' compensating balances. Wholesale Banking's unfavorable variance in total noninterest expense year-over-year was primarily the result of higher compensation and employee benefits and net shared services expense. The decrease in Wholesale Banking's contribution to net income in the first quarter of 2005 from the fourth quarter of 2004 was the result of unfavorable variances in total net revenue (3.5 percent) and the provision for credit losses, partially offset by a decline in total noninterest expense (5.6 percent). Total net revenue was lower on a linked quarter basis, with reductions in both net interest income (3.4 percent) and noninterest income (1.8 percent). The unfavorable variance quarter-over-quarter in net interest income was primarily attributed to tighter credit spreads, partially offset by wider deposit spreads and an increase in average loans outstanding. The decrease in noninterest income quarter-over-quarter was primarily due to unfavorable variances in commercial products revenue and treasury management fees, partially offset by an increase in other income. The decrease in total noninterest expense was principally due to lower net shared services and other expense, partially offset by higher compensation and employee benefits. Net charge-offs of $3 million in the first quarter of 2005, compared with net recoveries of $8 million in the fourth quarter of 2004, drove the unfavorable variance in the provision for credit losses from the prior quarter.

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, 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 $405 million of the Company's net income in the first quarter of 2005, a 55.8 percent increase over the same period of 2004 and a 9.5 percent increase over the fourth quarter of 2004. During the first quarter, the retail banking business segment grew net income by 26.4 percent and 5.3 percent over the first quarter of 2004 and the fourth quarter of 2004, respectively. The contribution of the mortgage banking business also increased over the previous reporting periods. The increase in the mortgage banking business's contribution over the first quarter of 2004 was primarily the result of a reduction in total noninterest expense, driven by the $163 million favorable change in MSR valuation. Fee-based revenue related to mortgage production and servicing improved year-over-year by 7.4 percent. The increase in total noninterest expense, excluding the change in MSR valuation, was primarily due to an increase in other intangible amortization, the result of the growing servicing portfolio. The mortgage banking business line's contribution rose in the first quarter of 2005 over the previous quarter, primarily due to the favorable change in the MSR valuation net of offsetting securities gains (losses).

For the Consumer Banking business, as a whole, the favorable variance in MSR valuation year-over-year of $163 million was only partially offset by a $54 million unfavorable variance in gains (losses) on the sale of securities year-over-year. Total net revenue was higher than the same quarter of the 2004 by 4.3 percent, primarily due to increases in both net interest income (9.5 percent) and noninterest income (6.2 percent). Consumer Banking's results also benefited from a reduction in the provision for credit losses (25.9 percent), while total noninterest expense, excluding the change in MSR valuations, was higher (2.6 percent) than the first quarter of 2004. Net interest income was higher year-over-year as a result of higher deposit spreads. Noninterest income improved in the first quarter of 2005 over the same period of 2004, primarily due to growth in deposit service charges (13.6 percent) and mortgage banking revenue (7.4 percent). Total noninterest expense, excluding the change in MSR valuation, in the first quarter of 2005 was slightly higher than the first quarter of 2004, primarily due to an increase in compensation and employee benefits (3.4 percent) and net shared services. 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 first quarter of 2005 over the fourth quarter of 2004 was the net result of favorable variances in total noninterest expense (15.2 percent) and the provision for credit losses (8.0 percent), offset by an unfavorable variance in total net revenue (4.7 percent). A $54 million unfavorable change in securities gains (losses) was the primary driver of the decline in total net revenue. Net interest income was slightly lower quarter-over-quarter due to tighter credit spreads, partially offset by higher average loan balances and deposit spreads relative to the prior quarter. Noninterest income, excluding securities gains (losses), was lower than the prior quarter primarily due to other revenue. The favorable variance in total noninterest expense quarter-over-quarter was driven by the change in MSR valuation, lower net shared services expense and a reduction in other expense, primarily losses and loan-related expense. Offsetting these favorable variances in expense was an increase in compensation and employee benefits.

Private Client, Trust and Asset Management provides trust, private banking, financial advisory, investment management and mutual fund servicing 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 $114 million of the Company's net income earnings in the first quarter of 2005, 9.6 percent higher than the same period of 2004 and 11.8 percent higher than the fourth quarter of 2004. The increase in the business line's contribution in the first quarter of 2005 over the first quarter of 2004 was the result of favorable variances in total net revenue (6.3 percent), partially offset by an increase in total noninterest expense (3.5 percent). Net interest income was favorably impacted year-over-year by strong deposit growth and deposit spreads, while noninterest income was essentially equal to the same quarter of 2004, as gains from equity market valuations were more than offset by lower fees, partially due to a change in the mix of fund balances and customers' migration from paying for services with fees to paying with compensating balances. Total noninterest expense was slightly higher year-over-year due to a modest increase in compensation and employee benefits, net shared services expense and other expense. The increase in the business line's contribution (11.8 percent) in the first quarter of 2005 over the fourth quarter of 2004 was primarily the result of higher total net revenue (2.9 percent) and lower total noninterest expense (4.3 percent). Net interest income and noninterest income rose quarter-over-quarter by 4.0 percent and 2.4 percent, respectively. The increase in net interest income was primarily driven by growth in average deposits and favorable deposit spreads, while noninterest income increased due to equity market valuations and core account growth. Total noninterest expense was slightly lower in the first quarter due to net shared services expense and other expense, which reflected lower losses relative to the prior quarter. Partially offsetting these favorable variances was an increase quarter-over-quarter in incentive-based compensation and employee benefits.

Payment Services includes consumer and business credit cards, debit cards, corporate and purchasing card services, consumer lines of credit, ATM processing, and merchant processing. Payment Services contributed $164 million of the Company's net income in the first quarter of 2005, a 7.9 percent increase over the same period of 2004, but a 9.4 percent decrease from the fourth quarter of 2004. The increase in Payment Services' contribution in the first quarter of 2005 over the same period of 2004 was the result of higher total net revenue (11.1 percent) and a lower provision for credit losses (4.3 percent), partially offset by an increase in total noninterest expense (20.6 percent). The increase in total net revenue year-over-year was primarily due to growth in noninterest income (16.2 percent), partially offset by lower net interest income (3.4 percent), which primarily reflected higher corporate card balances and rebates. The increase in noninterest income was principally the result of growth in credit and debit card revenue (9.2 percent), corporate payment products revenue (12.6 percent), ATM processing services revenue (13.8 percent) and merchant processing services revenue (26.2 percent). All categories benefited from higher transaction volumes and some rate changes. The increase in merchant processing revenue also included approximately $26 million associated with the expansion of the Company's merchant acquiring business in Europe. The growth in total noninterest expense year-over-year primarily reflected an increase in processing expense related to the business line's revenue growth, including approximately $31 million associated with the European merchant acquiring business. The decrease in Payment Services' contribution in the first quarter of 2005 from the fourth quarter of 2004 was primarily due to lower total net revenue (4.0 percent) and a slightly higher provision for credit losses (3.5 percent). Net interest income decreased 1.4 percent, while fee-based revenue declined by 4.8 percent due to seasonally lower retail credit card sales volumes and merchant processing fees.

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 to the appropriate business unit, primarily based on customer transaction volume and account activities, deposit balances and employee levels and are identified as net shared services expense. Treasury and Corporate Support recorded net income of $118 million in the first quarter of 2005, compared with net income of $252 million in the first quarter of 2004 and $119 million in the fourth quarter of 2004. The decrease in net income in the current quarter from the first quarter of 2004 was largely due to lower total net revenue (42.3 percent) and the $90 million tax benefit realized by the Company in the first quarter of 2004. Partially offsetting these unfavorable variances was total noninterest expense, which was lower year-over-year by 48.1 percent. The unfavorable change in net interest income (47.7 percent) year-over-year 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. Partially offsetting this negative variance was a favorable change in noninterest income in the first quarter of 2005 over the same quarter of 2004, primarily the result of other revenue related to income from equity investments. The decrease in total noninterest expense year-over-year was driven by a $35 million debt prepayment charge taken in the first quarter of 2004. Net income in the first quarter of 2005 was essentially equal to net income in the fourth quarter of 2004, the net result of unfavorable variances in net interest income (17.2 percent) and the provision for credit losses, offset by favorable variances in securities gains (losses) and total noninterest expense. Total net interest income declined quarter-over-quarter, primarily due to the continuing asset/liability management decisions of the Company, while noninterest income benefited quarter-over-quarter from equity investments. The decrease in total noninterest expense quarter-over-quarter primarily reflected the debt prepayment charge of $113 million taken in the fourth quarter of 2004. The unfavorable variance in the provision for credit losses was the result of the release of a portion of the allowance for credit losses in the fourth quarter of 2004.

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 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, April 19, 2005, AT 2:00 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, April 19, 2005, and will run through Tuesday, April 26, 2005, at 11:00 p.m. (CDT). To access the recorded message dial 800-753-5207. If calling from outside the United States, please dial 402-220-2156. After April 26th, a recording of the call will continue to be available by webcast on the U.S. Bancorp web site at usbank.com.

Minneapolis-based U.S. Bancorp ("USB"), with $198 billion in assets, is the 6th largest financial services holding company in the United States. The Company operates 2,377 banking offices and 4,654 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, Except Per       Three Months Ended
 Share Data)                                            March 31,
                                                 ---------------------
(Unaudited)                                            2005      2004
----------------------------------------------------------------------
Interest Income
Loans                                                $1,911    $1,747
Loans held for sale                                      21        20
Investment securities                                   476       469
Other interest income                                    27        22
                                                 ---------------------
        Total interest income                         2,435     2,258
Interest Expense
Deposits                                                308       227
Short-term borrowings                                   112        50
Long-term debt                                          271       209
                                                 ---------------------
        Total interest expense                          691       486
                                                 ---------------------
Net interest income                                   1,744     1,772
Provision for credit losses                             172       235
                                                 ---------------------
Net interest income after provision for credit
 losses                                               1,572     1,537
Noninterest Income
Credit and debit card revenue                           154       142
Corporate payment products revenue                      107        95
ATM processing services                                  47        42
Merchant processing services                            178       141
Trust and investment management fees                    247       249
Deposit service charges                                 210       185
Treasury management fees                                107       118
Commercial products revenue                              96       110
Mortgage banking revenue                                102        94
Investment products fees and commissions                 39        39
Securities losses, net                                  (59)       --
Other                                                   154       103
                                                 ---------------------
        Total noninterest income                      1,382     1,318
Noninterest Expense
Compensation                                            567       536
Employee benefits                                       116       100
Net occupancy and equipment                             154       156
Professional services                                    36        32
Marketing and business development                       43        35
Technology and communications                           106       102
Postage, printing and supplies                           63        62
Other intangibles                                        71       226
Debt prepayment                                          --        35
Other                                                   175       171
                                                 ---------------------
        Total noninterest expense                     1,331     1,455
                                                 ---------------------
Income before income taxes                            1,623     1,400
Applicable income taxes                                 552       392
                                                 ---------------------
Net income                                           $1,071    $1,008
                                                 =====================

Earnings per share                                     $.58      $.53
Diluted earnings per share                             $.57      $.52
Dividends declared per share                           $.30      $.24

Average common shares outstanding                     1,852     1,915
Average diluted common shares outstanding             1,880     1,941
======================================================================


U.S. Bancorp
Consolidated Ending Balance Sheet

                                     March 31, December 31,  March 31,
(Dollars in Millions)                     2005        2004       2004
----------------------------------------------------------------------
Assets                              (Unaudited)            (Unaudited)
Cash and due from banks                 $5,881      $6,336     $7,177
Investment securities
    Held-to-maturity                       121         127        137
    Available-for-sale                  42,982      41,354     45,268
Loans held for sale                      1,635       1,439      1,644
Loans
    Commercial                          41,540      40,173     39,006
    Commercial real estate              27,363      27,585     27,215
    Residential mortgages               16,572      15,367     13,717
    Retail                              43,430      43,190     39,945
                                    ----------------------------------
        Total loans                    128,905     126,315    119,883
            Less allowance for loan
             losses                     (2,082)     (2,080)    (2,186)
                                    ----------------------------------
            Net loans                  126,823     124,235    117,697
Premises and equipment                   1,877       1,890      1,924
Customers' liability on acceptances         91          95        148
Goodwill                                 6,277       6,241      6,095
Other intangible assets                  2,533       2,387      2,025
Other assets                            10,246      11,000     10,030
                                    ----------------------------------
            Total assets              $198,466    $195,104   $192,145
                                    ==================================

Liabilities and Shareholders' Equity
Deposits
    Noninterest-bearing                $28,880     $30,756    $31,086
    Interest-bearing                    71,751      71,936     74,262
    Time deposits greater than
     $100,000                           19,087      18,049     13,616
                                    ----------------------------------
        Total deposits                 119,718     120,741    118,964
Short-term borrowings                   14,273      13,084     13,431
Long-term debt                          38,071      34,739     33,568
Acceptances outstanding                     91          95        148
Other liabilities                        7,105       6,906      6,582
                                    ----------------------------------
        Total liabilities              179,258     175,565    172,693
Shareholders' equity
    Common stock                            20          20         20
    Capital surplus                      5,889       5,902      5,832
    Retained earnings                   17,276      16,758     15,059
    Less treasury stock                 (3,590)     (3,125)    (1,853)
    Other comprehensive income            (387)        (16)       394
                                    ----------------------------------
        Total shareholders' equity      19,208      19,539     19,452
                                    ----------------------------------
        Total liabilities and
         shareholders' equity         $198,466    $195,104   $192,145
======================================================================

SOURCE: U.S. Bancorp

U.S. Bancorp
Media Relations - Steve Dale, 612-303-0784
Investor Relations - H. D. McCullough, 612-303-0786
Investor Relations - Judith T. Murphy, 612-303-0783

"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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