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Slide 1: News Release Contact: Steve Dale Media Relations (612) 303-0784 Judith T. Murphy Investor Relations (612) 303-0783 U.S. BANCORP REPORTS RECORD NET INCOME FOR THE THIRD QUARTER OF 2005 EARNINGS SUMMARY ($ in millions, except per-share data) 3Q 2005 2Q 2005 3Q 2004 Percent Change 3Q05 vs 2Q05 Percent Change 3Q05 vs 3Q04 Table 1 YTD 2005 YTD 2004 Percent Change Net income Earnings per share (diluted) Return on average assets (%) Return on average equity (%) Efficiency ratio (%) Tangible efficiency ratio (%)* Dividends declared per share Book value per share (period-end) Net interest margin (%) $1,154 0.62 2.23 22.8 43.8 40.0 $0.30 10.93 3.95 $1,121 0.60 2.23 22.7 48.3 42.8 $0.30 10.88 3.99 $1,066 0.56 2.21 21.9 47.2 40.6 $0.24 10.48 4.22 2.9 3.3 8.3 10.7 $3,346 1.80 2.22 22.5 44.6 40.8 $3,111 1.62 2.18 21.5 44.2 40.1 $0.72 4.26 7.6 11.1 -0.5 25.0 4.3 $0.90 4.00 25.0 * Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net and intangible amortization. MINNEAPOLIS, October 18, 2005 – U.S. Bancorp (NYSE: USB) today reported net income of $1,154 million for the third quarter of 2005, compared with $1,066 million for the third quarter of 2004. Net income of $.62 per diluted share in the third quarter of 2005 was higher than the same period of 2004 by $.06 (10.7 percent). Return on average assets and return on average equity were 2.23 percent and 22.8 percent, respectively, for the third quarter of 2005, compared with returns of 2.21 percent and 21.9 percent, respectively, for the third quarter of 2004. U.S. Bancorp Chairman and Chief Executive Officer Jerry A. Grundhofer said, “Our third quarter results were solid. Once again, we achieved record profitability, with earnings per diluted share increasing by 10.7 percent over the third quarter of 2004. We maintained our industry leading performance metrics of 2.23 percent return on assets and 22.8 percent return on equity and created
Slide 2: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 2 positive operating leverage over the same quarter of 2004 and the second quarter of 2005. In today’s economic environment the low cost provider has a distinct advantage and we certainly demonstrated that we have that advantage in our industry with a tangible efficiency ratio of 40 percent in the third quarter. Finally, we returned 87 percent of our earnings in the quarter to our shareholders through dividends and share buybacks. “Average loans outstanding in the third quarter rose by a healthy 10.1 percent year-overyear and at an annualized growth rate of 12.4 percent over the second quarter of 2005. Net interest income increased slightly over the same quarter of 2004, despite a decline in the net interest margin. Net interest income increased at an annualized rate of 6.8 percent over the second quarter of 2005. Our fee-based businesses continued to grow, increasing by 9.7 percent over the third quarter of 2004. Fee income growth was led by our payment services-related businesses and deposit service charges, which grew year-over-year by 15.6 percent and 18.3 percent, respectively. “Credit quality remained stable again this quarter with total net charge-offs at just .46 percent of total average loans. In addition, nonperforming assets at the end of the quarter remained steady at $613 million. This is a direct result of our continuing commitment to reduce the overall risk profile of our Company. “We are delivering on our promise to maintain industry leading returns, while producing stable, high-quality revenue and earnings. We will continue to invest in distribution and scale to provide future growth opportunities, while striving to continuously improve our customer service. Further, since we began the current buyback program in the fourth quarter of 2003, we have returned 102 percent of our earnings to our shareholders, and we expect to continue to return a minimum of 80 percent going forward.” The Company’s results for the third quarter of 2005 improved over the same period of 2004, as net income rose by $88 million (8.3 percent), primarily due to growth in fee-based products and services and reduced credit costs. During the third quarter of 2005, the Company recognized $3 million of reparation in its mortgage servicing rights (“MSR”) asset, compared with an $87 million impairment charge in the third quarter of 2004, due to changing longer-term interest rates. Total net revenue on a taxable-equivalent basis for the third quarter of 2005 was $61 million (1.8 percent) higher than the third quarter of 2004, primarily reflecting 9.7 percent growth in fee-based revenue across the majority of fee categories and expansion in payment processing businesses. This (MORE)
Slide 3: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 3 was partially offset by an $87 million unfavorable variance in securities gains (losses) due to gains recognized in the third quarter of 2004. Total noninterest expense in the third quarter of 2005 was $45 million (3.0 percent) lower than the third quarter of 2004, primarily reflecting the $90 million favorable change in the valuation of mortgage servicing rights, offset somewhat by incremental costs related to expanding the payment processing businesses and investments in in-store branches, affordable housing projects and other business initiatives. Provision for credit losses for the third quarter of 2005 was $145 million, a decrease of $21 million (12.7 percent) from the third 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 third quarter of 2005 were $156 million, compared with the second quarter of 2005 net charge-offs of $144 million and the third quarter of 2004 net charge-offs of $166 million. Net charge-offs in the third quarter of 2005 included a $12 million charge-off of a leveraged lease of a single airline entering bankruptcy during the quarter. This airline exposure was specifically considered in the Company’s allowance for credit losses in prior periods and reflects the continuing weakness in the airline and transportation industries. Total nonperforming assets were $613 million at September 30, 2005, relatively flat compared with $610 million at June 30, 2005, and a $192 million (23.9 percent) decline compared with $805 million at September 30, 2004. The ratio of the allowance for credit losses to nonperforming loans was 438 percent at September 30, 2005, compared with 441 percent at June 30, 2005, and 337 percent at September 30, 2004. (MORE)
Slide 4: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 4 INCOME STATEMENT HIGHLIGHTS (Taxable-equivalent basis, $ in millions, except per-share data) 3Q 2005 Net interest income Noninterest income Total net revenue Noninterest expense Income before provision and income taxes Provision for credit losses Income before income taxes Taxable-equivalent adjustment Applicable income taxes Net income Diluted earnings per share $1,791 1,576 3,367 1,473 1,894 145 1,749 9 586 $1,154 $0.62 2Q 2005 $1,761 1,541 3,302 1,595 1,707 144 1,563 7 435 $1,121 $0.60 3Q 2004 $1,782 1,524 3,306 1,518 1,788 166 1,622 7 549 $1,066 $0.56 Percent Change 3Q05 vs 2Q05 1.7 2.3 2.0 (7.6) 11.0 0.7 11.9 28.6 34.7 2.9 3.3 Percent Change 3Q05 vs 3Q04 0.5 3.4 1.8 (3.0) 5.9 (12.7) 7.8 28.6 6.7 8.3 10.7 Table 2 YTD 2005 $5,303 4,499 9,802 4,399 5,403 461 4,942 23 1,573 $3,346 $1.80 YTD 2004 $5,340 4,084 9,424 4,206 5,218 605 4,613 21 1,481 $3,111 $1.62 Percent Change (0.7) 10.2 4.0 4.6 3.5 (23.8) 7.1 9.5 6.2 7.6 11.1 Net Interest Income Third quarter net interest income on a taxable-equivalent basis was $1,791 million, compared with $1,782 million recorded in the third quarter of 2004. Average earning assets for the period increased over the third quarter of 2004 by $12.3 billion (7.3 percent), primarily driven by a $4.2 billion (28.6 percent) increase in residential mortgages, a $3.9 billion (10.0 percent) increase in total commercial loans and a $3.3 billion (7.8 percent) increase in total retail loans. The positive impact to net interest income from the growth in earning assets was offset somewhat by a lower net interest margin. The net interest margin in the third quarter of 2005 was 3.95 percent, compared with 4.22 percent in the third 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 third quarter of 2004, credit spreads have tightened by approximately 19 basis points across most lending products due to competitive pricing, growth in corporate payment card balances and a change in mix due to growth in lower-spread, fixed-rate credit products. The net interest margin also declined due to funding incremental growth with higher cost wholesale funding and asset/liability decisions designed to minimize the Company’s rate sensitivity position, including a 55 percent reduction in the net receive fixed swap position (MORE)
Slide 5: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 5 since September 30, 2004. Increases in the margin benefit of deposits and net free funds helped to partially offset these factors. Net interest income in the third quarter of 2005 was higher than the second quarter of 2005 by $30 million (1.7 percent). Average earning assets grew quarter-over-quarter by $3.7 billion (2.1 percent). Growth in most loan categories drove the increase in average earning assets over the prior quarter. The positive impact to net interest income from the growth in earning assets and day basis was partially offset by a lower net interest margin. The net interest margin in the third quarter of 2005 was 4 basis points lower than the net interest margin of 3.99 percent recorded in the second quarter of 2005. The decline in the net interest margin from the second quarter of 2005 reflected tighter credit spreads (3 basis points) due to increased competition, in addition to growth in corporate payment card balances and changes in loan mix. Higher short-term rates and funding a higher percentage of earning asset growth with wholesale funding also contributed to the margin reduction. This was partially offset by the higher margin benefit of deposits and net free funds and loan fees. (MORE)
Slide 6: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 6 NET INTEREST INCOME (Taxable-equivalent basis; $ in millions) Change 3Q 2005 Components of net interest income Income on earning assets Expense on interest-bearing liabilities Net interest income $2,727 936 $1,791 $2,572 811 $1,761 $2,310 528 $1,782 $155 125 $30 $417 408 $9 $7,741 2,438 $5,303 $6,818 1,478 $5,340 2Q 2005 3Q 2004 3Q05 vs 2Q05 Change 3Q05 vs 3Q04 YTD 2005 YTD 2004 Table 3 Percent Change $923 960 $(37) Average yields and rates paid Earning assets yield Rate paid on interest-bearing liabilities Gross interest margin Net interest margin 6.01% 2.49 3.52% 3.95% 5.83% 2.23 3.60% 3.99% 5.47% 1.55 3.92% 4.22% 0.18% 0.26 (0.08%) (0.04%) 0.54% 0.94 (0.40%) (0.27%) 5.85% 2.23 3.62% 4.00% 5.44% 1.46 3.98% 4.26% 0.41% 0.77 (0.36%) (0.26%) Average balances Investment securities Loans Earning assets Interest-bearing liabilities Net free funds* $41,782 135,283 180,452 149,431 31,021 $42,341 131,275 176,730 146,070 30,660 $42,502 122,906 168,187 136,106 32,081 $(559) 4,008 3,722 3,361 361 $(720) 12,377 12,265 13,325 (1,060) $42,308 131,432 176,851 145,878 30,973 $43,243 120,966 167,182 135,300 31,882 $(935) 10,466 9,669 10,578 (909) * Represents noninterest-bearing deposits, allowance for loan losses, unrealized gain (loss) on available-for-sale securities, non-earning assets, other noninterest-bearing liabilities and equity. (MORE)
Slide 7: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 7 AVERAGE LOANS ($ in millions) 3Q 2005 Commercial Lease financing Total commercial Commercial mortgages Construction and development Total commercial real estate Residential mortgages Credit card Retail leasing Home equity and second mortgages Other retail Total retail Total loans $38,343 4,908 43,251 20,341 7,852 28,193 18,741 6,684 7,467 14,984 15,963 45,098 $135,283 2Q 2005 $37,595 4,922 42,517 20,156 7,426 27,582 17,198 6,527 7,314 15,003 15,134 43,978 $131,275 3Q 2004 $34,457 4,860 39,317 20,231 6,963 27,194 14,569 6,145 6,842 14,288 14,551 41,826 $122,906 Percent Change 3Q05 vs 2Q05 2.0 (0.3) 1.7 0.9 5.7 2.2 9.0 2.4 2.1 (0.1) 5.5 2.5 3.1 Percent Change 3Q05 vs 3Q04 11.3 1.0 10.0 0.5 12.8 3.7 28.6 8.8 9.1 4.9 9.7 7.8 10.1 YTD 2005 $37,348 4,915 42,263 20,255 7,507 27,762 17,266 6,544 7,328 14,944 15,325 44,141 $131,432 YTD 2004 $34,191 4,869 39,060 20,420 6,720 27,140 14,079 6,005 6,507 13,815 14,360 40,687 $120,966 Table 4 Percent Change 9.2 0.9 8.2 (0.8) 11.7 2.3 22.6 9.0 12.6 8.2 6.7 8.5 8.7 Average loans for the third quarter of 2005 were $12.4 billion (10.1 percent) higher than the third quarter of 2004, driven by growth in average residential mortgages of $4.2 billion (28.6 percent) total commercial loans of $3.9 billion (10.0 percent) and total retail loans of $3.3 billion (7.8 percent). Total commercial real estate loans also increased year-over-year by $1.0 billion (3.7 percent). Average loans for the third quarter of 2005 were higher than the second quarter of 2005 by $4.0 billion (3.1 percent), reflecting growth in substantially all loan categories. Average investment securities in the third quarter of 2005 were $720 million (1.7 percent) lower than in the third quarter of 2004. Investment securities at September 30, 2005, were $1.9 billion higher than at September 30, 2004, but $783 million lower than the balance at June 30, 2005. The changes in the balance of the investment securities portfolio from a year ago principally reflected the net impact of repositioning the investment portfolio during 2004 as part of asset/liability risk management decisions to acquire variable-rate and shorter-term fixed-rate securities to minimize the Company’s rate sensitivity position. The decline from second quarter of (MORE)
Slide 8: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 8 2005 primarily represented maturities and prepayments with the proceeds being utilized to partially fund loan growth. During the third quarter of 2005, the Company maintained a mix of approximately 41 percent variable-rate securities. AVERAGE DEPOSITS ($ in millions) 3Q 2005 Noninterest-bearing deposits Interest-bearing deposits Interest checking Money market accounts Savings accounts Savings products Time certificates of deposit less than $100,000 Time deposits greater than $100,000 Total interest-bearing deposits Total deposits 13,263 21,262 91,550 $120,984 13,152 20,459 92,084 $121,232 12,869 14,535 85,525 $115,316 0.8 3.9 (0.6) (0.2) 3.1 46.3 7.0 4.9 13,132 20,133 91,549 $120,552 13,168 13,085 86,340 $116,147 22,508 28,740 5,777 57,025 23,024 29,563 5,886 58,473 20,413 31,854 5,854 58,121 (2.2) (2.8) (1.9) (2.5) 10.3 (9.8) (1.3) (1.9) 22,891 29,517 5,876 58,284 20,699 33,492 5,896 60,087 $29,434 2Q 2005 $29,148 3Q 2004 $29,791 Percent Change 3Q05 vs 2Q05 1.0 Percent Change 3Q05 vs 3Q04 (1.2) YTD 2005 $29,003 YTD 2004 $29,807 Table 5 Percent Change (2.7) 10.6 (11.9) (0.3) (3.0) (0.3) 53.9 6.0 3.8 Average noninterest-bearing deposits for the third quarter of 2005 were lower than the third quarter of 2004 by $357 million (1.2 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 third quarter of 2005, excluding the migration of certain high-value customers to Silver Elite Checking, were higher by approximately $120 million (1.0 percent) over the same quarter of 2004, as net new checking accounts continue to grow. Average noninterest-bearing deposits in other areas, including commercial banking and Private Client, Trust and Asset Management, also increased year-over-year. These favorable variances were offset somewhat by expected declines in average noninterest-bearing deposits in corporate banking as these customers utilize their excess liquidity. (MORE)
Slide 9: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 9 Average total savings products declined year-over-year by $1.1 billion (1.9 percent), due to reductions in average money market account balances and savings accounts, partially offset by higher interest checking balances. Average branch-based interest checking deposits increased by $2.3 billion (15.2 percent) over the same quarter of 2004 due to strong new account growth, as well as the $1.3 billion migration of the Silver Elite Checking product. This positive variance in branchbased interest checking account deposits was partially offset by reductions in other areas, principally corporate banking. Average money market account balances declined by $3.1 billion (9.8 percent) year-over-year, with the largest decline in the branches. The overall decrease in average money market account balances year-over-year was the result of the Company’s deposit pricing decisions. A portion of the money market balances have migrated to time deposits greater than $100,000 as rates increased on the time deposit products. Average time certificates of deposit less than $100,000 were higher in the third quarter of 2005 than the third quarter of 2004 by $394 million (3.1 percent). The Company experienced year-overyear growth in average time deposits greater than $100,000 of $6.7 billion (46.3 percent), most notably in corporate banking, as customers migrated balances to higher rate deposits. Average noninterest-bearing deposits for the third quarter of 2005 were $286 million (1.0 percent) higher than the second quarter of 2005. Average savings products declined by $1.4 billion (2.5 percent) in the current quarter from the second quarter of 2005. Average interest checking deposits declined $516 million (2.2 percent) primarily due to lower balances from corporate banking customers. Average money market account balances declined by $823 million (2.8 percent) reflecting customers’ preference for higher yielding products. Time certificates of deposit less than $100,000 increased modestly from the second quarter of 2005, while time deposits greater than $100,000 rose by $803 million (3.9 percent), primarily due to the migration of corporate banking customer balances to these products. (MORE)
Slide 10: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 10 NONINTEREST INCOME ($ in millions) 3Q 2005 Credit and debit card revenue Corporate payment products revenue ATM processing services Merchant processing services Trust and investment management fees Deposit service charges Treasury management fees Commercial products revenue Mortgage banking revenue Investment products fees and commissions Securities gains (losses), net Other Total noninterest income $185 135 64 200 251 246 109 103 111 37 1 134 $1,576 2Q 2005 $177 120 57 198 253 234 117 100 110 39 1 135 $1,541 3Q 2004 $164 108 45 188 240 208 118 106 97 37 88 125 $1,524 Percent Change 3Q05 vs 2Q05 4.5 12.5 12.3 1.0 (0.8) 5.1 (6.8) 3.0 0.9 (5.1) -(0.7) 2.3 Percent Change 3Q05 vs 3Q04 12.8 25.0 42.2 6.4 4.6 18.3 (7.6) (2.8) 14.4 -(98.9) 7.2 3.4 Table 6 YTD 2005 $516 362 168 576 751 690 333 299 323 115 (57) 423 $4,499 YTD 2004 $465 306 132 494 740 595 357 324 301 119 (84) 335 $4,084 Percent Change 11.0 18.3 27.3 16.6 1.5 16.0 (6.7) (7.7) 7.3 (3.4) 32.1 26.3 10.2 Noninterest Income Third quarter noninterest income was $1,576 million, an increase of $52 million (3.4 percent) from the same quarter of 2004, and $35 million (2.3 percent) higher than the second quarter of 2005. The increase in noninterest income over the third quarter of 2004 was driven by favorable variances in the majority of fee income categories, partially offset by an $87 million reduction in securities gains (losses). Credit and debit card revenue and corporate payment products revenue were both higher in the third quarter of 2005 than the third quarter of 2004 by $21 million and $27 million, or 12.8 percent and 25.0 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 $19 million (42.2 percent) in the third quarter of 2005 than the same quarter of the prior year, primarily due to the expansion of the ATM business in May of 2005. Merchant processing services revenue was higher in the third quarter of 2005 than the same quarter of 2004 by $12 million (6.4 percent), reflecting an increase in sales volume, new business and higher equipment fees. Trust and investment management fees were higher by $11 million (4.6 percent) year-over-year, primarily due to (MORE)
Slide 11: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 11 improved equity market conditions and account growth. Deposit service charges were higher yearover-year by $38 million (18.3 percent) due to account growth and transaction-related fees. Mortgage banking revenue was higher in the third quarter of 2005 than the same quarter of 2004 by $14 million (14.4 percent), due to higher production volumes and increased servicing income. Other income was higher by $9 million (7.2 percent), primarily due to higher income from equity and other insurance investments relative to the same quarter of 2004. Partially offsetting these positive variances, year-over-year, were reductions in treasury management fees and commercial products revenue, which declined by $9 million (7.6 percent) and $3 million (2.8 percent), respectively. The decrease in treasury management fees was primarily due to higher earnings credit on customers’ compensating balances relative to a year ago, reflecting rising interest rates. Commercial products revenue declined due to reductions in loan fees and international product revenue. Noninterest income was higher in the third quarter of 2005 than the second quarter of 2005 by $35 million (2.3 percent), due to increases in a majority of the fee income categories. Credit and debit card revenue and corporate payment products revenue rose by $8 million (4.5 percent) and $15 million (12.5 percent), respectively, reflecting higher sales volumes. ATM processing services revenue increased by $7 million (12.3 percent) primarily due to the acquisition of a processing business in the second quarter of 2005. Deposit service charges were higher by $12 million (5.1 percent) in the third quarter of 2005 compared with the second quarter of 2005, reflecting higher transaction-related fees and net new account growth. Offsetting these favorable variances was a decrease in treasury management fees from the second quarter of 2005. The $8 million (6.8 percent) decline in treasury management fees reflected seasonal tax-related processing revenue in the second quarter of 2005. (MORE)
Slide 12: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 12 NONINTEREST EXPENSE ($ in millions) 3Q 2005 Compensation Employee benefits Net occupancy and equipment Professional services Marketing and business development Technology and communications Postage, printing and supplies Other intangibles Debt prepayment Other Total noninterest expense $603 106 162 44 61 118 64 125 -190 $1,473 2Q 2005 $612 108 159 39 67 113 63 181 54 199 $1,595 3Q 2004 $564 100 159 37 61 110 61 210 5 211 $1,518 Percent Change 3Q05 vs 2Q05 (1.5) (1.9) 1.9 12.8 (9.0) 4.4 1.6 (30.9) nm (4.5) (7.6) Percent Change 3Q05 vs 3Q04 6.9 6.0 1.9 18.9 -7.3 4.9 (40.5) nm (10.0) (3.0) Table 7 YTD 2005 $1,782 330 475 119 171 337 190 377 54 564 $4,399 YTD 2004 $1,673 291 468 104 145 314 183 389 42 597 $4,206 Percent Change 6.5 13.4 1.5 14.4 17.9 7.3 3.8 (3.1) 28.6 (5.5) 4.6 Noninterest Expense Third quarter noninterest expense totaled $1,473 million, a decrease of $45 million (3.0 percent) from the same quarter of 2004 and a $122 million (7.6 percent) decrease from the second quarter of 2005. The decrease in expense year-over-year was primarily driven by the $90 million favorable change in the valuation of mortgage servicing rights. Compensation expense was higher year-overyear by $39 million (6.9 percent), principally due to business expansion, including in-store branches, the Company’s payment processing businesses, and other growth initiatives. Employee benefits increased year-over-year by $6 million (6.0 percent), primarily as a result of higher payroll taxes. Professional services expense increased $7 million (18.9 percent) due to increases in legal, and other professional services related to business initiatives, technology development, and the integration of specific payment processing businesses. Technology and communications expense rose by $8 million (7.3 percent), reflecting technology investments that increased software expense, in addition to outside data processing expense. Other expense declined in the third quarter from the same quarter of 2004 by $21 million (10.0 percent), primarily due to lower litigation costs, operating losses and business integration costs related to payment processing businesses relative to a year ago. (MORE)
Slide 13: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 13 Noninterest expense in the third quarter of 2005 was lower than the second quarter of 2005 by $122 million (7.6 percent). The decrease in noninterest expense in the third quarter of 2005 from the second quarter of 2005 was primarily driven by a $56 million favorable change in the MSR valuation quarter-over-quarter, as well as a $54 million charge taken in connection with the Company’s tender offer for certain debt securities in the second quarter of 2005. In addition, compensation expense was lower than the second quarter of 2005 by $9 million (1.5 percent), primarily due to lower incentives and stock-based compensation costs. Marketing and business development expense declined $6 million (9.0 percent) reflecting the timing of marketing programs and a decline in charitable contributions. Other expense declined in the third quarter from the second quarter of 2005 by $9 million (4.5 percent), primarily due to a reduction in write-downs associated with certain co-branding and lease arrangements recorded in the second quarter of 2005. Partially offsetting these favorable changes in noninterest expense were higher occupancy costs, professional services expense and technology costs. Professional services expense increased by $5 million (12.8 percent) as compared to the second quarter of 2005 due to integration and other business initiatives. Technology and communications expense rose by $5 million (4.4 percent) relative to the prior quarter primarily due to processing costs associated with recent acquisitions and business investments. (MORE)
Slide 14: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 14 ALLOWANCE FOR CREDIT LOSSES ($ in millions) 3Q 2005 Balance, beginning of period Net charge-offs Commercial Lease financing Total commercial Commercial mortgages Construction and development Total commercial real estate Residential mortgages Credit card Retail leasing Home equity and second mortgages Other retail Total retail Total net charge-offs Provision for credit losses Acquisitions and other changes Balance, end of period Components Allowance for loan losses Liability for unfunded credit commitments Total allowance for credit losses Gross charge-offs Gross recoveries Net charge-offs to average loans (%) Allowance as a percentage of: Period-end loans Nonperforming loans Nonperforming assets $2,269 2Q 2005 $2,269 1Q 2005 $2,269 4Q 2004 $2,370 Table 8 3Q 2004 $2,370 7 16 23 2 (2) -9 63 5 14 42 124 156 145 -$2,258 9 6 15 1 (3) (2) 8 64 5 16 38 123 144 144 -$2,269 14 13 27 4 2 6 9 65 8 17 40 130 172 172 -$2,269 8 10 18 9 1 10 8 61 9 18 39 127 163 64 (2) $2,269 2 19 21 3 3 6 7 65 9 18 40 132 166 166 -$2,370 $2,055 203 $2,258 $229 $73 0.46 $2,082 187 $2,269 $222 $78 0.44 $2,082 187 $2,269 $231 $59 0.55 $2,080 189 $2,269 $235 $72 0.52 $2,184 186 $2,370 $260 $94 0.54 1.65 438 368 1.70 441 372 1.76 404 341 1.80 355 303 1.90 337 294 (MORE)
Slide 15: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 15 Credit Quality The allowance for credit losses was $2,258 million at September 30, 2005, compared with $2,269 million at June 30, 2005, and $2,370 million at September 30, 2004. The ratio of the allowance for credit losses to period-end loans was 1.65 percent at September 30, 2005, compared with 1.70 percent at June 30, 2005, and 1.90 percent at September 30, 2004. The ratio of the allowance for credit losses to nonperforming loans was 438 percent at September 30, 2005, compared with 441 percent at June 30, 2005, and 337 percent at September 30, 2004. Total net charge-offs in the third quarter of 2005 were $156 million, compared with the second quarter of 2005 net charge-offs of $144 million and the third quarter of 2004 net charge-offs of $166 million. Commercial and commercial real estate loan net charge-offs were $23 million for the third quarter of 2005, or .13 percent of average loans outstanding, compared with $13 million, or .07 percent of average loans outstanding, in the second quarter of 2005 and $27 million, or .16 percent of average loans outstanding, in the third quarter of 2004. The increase in net charge-offs reflected a $12 million charge-off of a leveraged lease of a single airline entering bankruptcy during the quarter. Retail loan net charge-offs of $124 million in the third quarter of 2005 were virtually flat as compared to the $123 million in the second quarter of 2005 and $8 million (6.1 percent) lower than the third quarter of 2004. Retail loan net charge-offs as a percent of average loans outstanding were 1.09 percent in the third quarter of 2005, compared with 1.12 percent and 1.26 percent in the second quarter of 2005 and third quarter of 2004, respectively. Lower levels of retail loan net charge-offs principally reflected the Company’s ongoing improvement in collection efforts and risk management. (MORE)
Slide 16: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 16 CREDIT RATIOS (Percent) 3Q 2005 2Q 2005 0.10 0.49 0.14 0.02 (0.16) (0.03) 0.19 3.93 0.27 0.43 1.01 1.12 0.44 1Q 2005 0.16 1.07 0.27 0.08 0.11 0.09 0.23 4.11 0.45 0.46 1.09 1.22 0.55 4Q 2004 0.09 0.82 0.18 0.18 0.05 0.14 0.21 3.82 0.51 0.49 1.06 1.18 0.52 Table 9 3Q 2004 0.02 1.56 0.21 0.06 0.17 0.09 0.19 4.21 0.52 0.50 1.09 1.26 0.54 Net charge-offs ratios* Commercial Lease financing Total commercial Commercial mortgages Construction and development Total commercial real estate Residential mortgages Credit card Retail leasing Home equity and second mortgages Other retail Total retail Total net charge-offs 0.07 1.29 0.21 0.04 (0.10) -0.19 3.74 0.27 0.37 1.04 1.09 0.46 Delinquent loan ratios - 90 days or more past due excluding nonperforming loans** Commercial 0.04 0.05 0.06 0.05 Commercial real estate 0.01 0.01 0.02 -Residential mortgages 0.30 0.32 0.41 0.46 Retail 0.41 0.40 0.43 0.47 Total loans 0.19 0.19 0.22 0.23 Delinquent loan ratios - 90 days or more past due including nonperforming loans** Commercial 0.74 0.74 0.84 0.99 Commercial real estate 0.57 0.59 0.68 0.73 Residential mortgages 0.53 0.55 0.66 0.74 Retail 0.43 0.43 0.47 0.51 Total loans 0.57 0.58 0.66 0.74 * annualized and calculated on average loan balances ** ratios are expressed as a percent of ending loan balances 0.05 0.01 0.46 0.47 0.23 1.14 0.75 0.77 0.51 0.80 (MORE)
Slide 17: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 17 ASSET QUALITY ($ in millions) Sep 30 2005 Nonperforming loans Commercial Lease financing Total commercial Commercial mortgages Construction and development Commercial real estate Residential mortgages Retail Total nonperforming loans Other real estate Other nonperforming assets Total nonperforming assets* Accruing loans 90 days or more past due Nonperforming assets to loans plus ORE (%) *does not include accruing loans 90 days or more past due Table 10 Jun 30 2005 $238 60 298 140 21 161 42 13 514 68 28 $610 $258 Mar 31 2005 $254 70 324 159 21 180 41 16 561 66 38 $665 $285 Dec 31 2004 $289 91 380 175 25 200 43 17 640 72 36 $748 $294 Sep 30 2004 $348 91 439 166 35 201 46 17 703 69 33 $805 $292 $265 35 300 144 16 160 44 12 516 68 29 $613 $265 0.45 0.46 0.52 0.59 0.64 Nonperforming assets at September 30, 2005, totaled $613 million, compared with $610 million at June 30, 2005, and $805 million at September 30, 2004. The ratio of nonperforming assets to loans and other real estate was .45 percent at September 30, 2005, compared with .46 percent at June 30, 2005, and .64 percent at September 30, 2004. (MORE)
Slide 18: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 18 CAPITAL POSITION ($ in millions) Sep 30 2005 Total shareholders' equity Tier 1 capital Total risk-based capital Common equity to assets Tangible common equity to assets Tier 1 capital ratio Total risk-based capital ratio Leverage ratio $19,864 15,180 23,283 9.6 6.2 8.4 12.8 7.7 % Jun 30 2005 $19,901 14,564 22,362 9.8 6.1 8.1 12.5 7.5 % Mar 31 2005 $19,208 14,943 23,099 9.7 6.2 8.6 13.3 7.9 % Dec 31 2004 $19,539 14,720 23,352 10.0 6.4 8.6 13.1 7.9 % Table 11 Sep 30 2004 $19,600 14,589 21,428 10.2 6.4 8.7 12.7 7.9 % Total shareholders’ equity was $19.9 billion at September 30, 2005, compared with $19.6 billion at September 30, 2004. The increase was the result of corporate earnings offset by share buybacks and dividends. Tangible common equity to assets was 6.2 percent at September 30, 2005, compared with 6.1 percent at June 30, 2005, and 6.4 percent at September 30, 2004. The Tier 1 capital ratio was 8.4 percent at September 30, 2005, compared with 8.1 percent at June 30, 2005, and 8.7 percent at September 30, 2004. The total risk-based capital ratio was 12.8 percent at September 30, 2005, compared with 12.5 percent at June 30, 2005, and 12.7 percent at September 30, 2004. The leverage ratio was 7.7 percent at September 30, 2005, compared with 7.5 percent at June 30, 2005, and 7.9 percent at September 30, 2004. All regulatory ratios continue to be in excess of stated “well capitalized” requirements. (MORE)
Slide 19: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 19 COMMON SHARES (Millions) 3Q 2005 Beginning shares outstanding Shares issued for stock option and stock purchase plans, acquisitions and other corporate purposes Shares repurchased Ending shares outstanding 1,829 2Q 2005 1,842 1Q 2005 1,858 4Q 2004 1,871 Table 12 3Q 2004 1,884 5 (16) 1,818 4 (17) 1,829 4 (20) 1,842 7 (20) 1,858 6 (19) 1,871 On December 21, 2004, the Board of Directors of U.S. Bancorp approved an authorization to repurchase up to 150 million shares of outstanding common stock during the following 24 months. This repurchase program replaced the Company’s previous program. During the third quarter of 2005, the Company repurchased 16 million shares of common stock. As of September 30, 2005, there were approximately 92 million shares remaining to be repurchased under the current authorization. (MORE)
Slide 20: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 20 LINE OF BUSINESS FINANCIAL PERFORMANCE* ($ in millions) Net Income 3Q Business Line Wholesale Banking Consumer Banking Private Client, Trust and Asset Management Payment Services Treasury and Corporate Support Consolidated Company * preliminary data Table 13 Percent Change 3Q 2004 $249 384 96 165 172 $1,066 3Q05 vs 2Q05 (2.6) 4.2 5.1 13.7 (9.8) 2.9 3Q05 vs 3Q04 4.0 23.2 28.1 25.5 (46.5) 8.3 YTD 2005 $781 1,333 352 554 326 $3,346 YTD 2004 $716 1,085 292 475 543 $3,111 Percent Change 9.1 22.9 20.5 16.6 (40.0) 7.6 3Q 2005 Earnings Composition 22 41 11 18 8 100 % % 2Q 2005 $266 454 117 182 102 $1,121 2005 $259 473 123 207 92 $1,154 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, number of employees or other relevant factors. These allocated expenses are reported as net shared services expense within noninterest expense. Designations, assignments and allocations change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to 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. (MORE)
Slide 21: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 21 Wholesale Banking offers lending, depository, treasury management and other financial services to middle market, large corporate and public sector clients. Wholesale Banking contributed $259 million of the Company’s net income in the third quarter of 2005, a 4.0 percent increase over the same period of 2004 and a 2.6 percent decrease from the second quarter of 2005. The increase in Wholesale Banking’s third quarter 2005 contribution over the same quarter of 2004 was primarily the result of favorable variances in total net revenue (3.2 percent) and total noninterest expense (1.9 percent). Partly offsetting these positive variances was a reduction in net recoveries (66.7 percent) reflected in the provision for credit losses. The favorable variance in total net revenue year-over-year was primarily the result of growth in net interest income (5.9 percent), as the business line’s noninterest income declined slightly. The increase in net interest income was driven by growth in average loans and deposits outstanding and wider deposit spreads, partially offset by tighter credit spreads. Total noninterest income declined $4 million year-over-year, as a decline in treasury management fees (6.1 percent) was somewhat offset by higher commercial products revenue and other revenue relative to the third quarter of 2004. The decrease in treasury management fees was primarily due to higher earnings credit on customers’ compensating balances relative to a year ago, reflecting rising interest rates. Wholesale Banking’s favorable variance in total noninterest expense year-over-year was the result of lower net shared services and other noninterest expense, partially offset by an increase in compensation and employee benefits. Net recoveries of $4 million in the current quarter, compared with net recoveries of $12 million in the third quarter of 2004, drove the unfavorable variance in the provision for credit losses year-overyear. The decrease in Wholesale Banking’s contribution to net income in the third quarter of 2005 from the second quarter of 2005 was the result of unfavorable variances in total net revenue (1.1 percent) and the provision for credit losses, partially offset by a decrease in total noninterest expense (3.8 percent). Total net revenue was lower on a linked quarter basis primarily due to tightening credit spreads, partially offset by the benefit from wider deposit spreads. The decrease in noninterest income on a linked quarter basis was primarily due to a decrease in treasury management fees (8.3 percent), which reflected seasonal tax-related processing revenue in the second quarter of 2005, and a decline in income related to equity investments. The decrease in total noninterest expense was principally due to lower net shared services expense related to transaction volumes for the seasonal tax receipt processing activities and other expense. Net recoveries of $4 million in the third quarter of 2005, compared with net recoveries of $16 million in the second (MORE)
Slide 22: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 22 quarter of 2005, drove the unfavorable variance in the provision for credit losses quarter-overquarter. Consumer Banking delivers products and services through banking offices, telephone servicing and sales, on-line services, direct mail and ATMs. It encompasses community banking, metropolitan banking, in-store banking, small business banking, including lending guaranteed by the Small Business Administration, small-ticket leasing, consumer lending, mortgage banking, consumer finance, workplace banking, student banking, 24-hour banking, and investment product and insurance sales. Consumer Banking contributed $473 million of the Company’s net income in the third quarter of 2005, a 23.2 percent increase over the same period of 2004 and a 4.2 percent increase over the prior quarter. The favorable increase year-over-year was the result of higher total net revenue (10.4 percent) and lower provision for credit losses (18.2 percent), partially offset by an increase in total noninterest expense (3.0 percent). Total net revenue was higher than the same quarter of 2004 due to increases in both net interest income (9.8 percent) and noninterest income (11.5 percent). Net interest income was higher year-over-year due to wider deposit spreads. Net interest income generated by growth in average loan balances was substantially offset by lower spreads on those assets given the competitive lending environment. Noninterest income improved in the third quarter of 2005 over the same period of 2004, principally due to growth in deposit service charges (18.4 percent) and mortgage banking revenue (14.3 percent). Total noninterest expense in the third quarter of 2005 was higher than the same quarter of 2004, primarily due to an increase in compensation and employee benefits (6.5 percent), the result of the Company’s in-store branch expansion, other hiring initiatives and production-based incentives. A year-over-year reduction in net charge-offs (18.2 percent) drove the positive variance in the business line’s provision for credit losses. The increase in Consumer Banking’s contribution in the third quarter of 2005 over the prior quarter was the net result of favorable variances in total net revenue (3.0 percent), partly offset by an increase in total noninterest expense (1.5 percent) and provision for credit losses (5.9 percent). Net interest income was higher quarter-over-quarter largely due to increases in average loans outstanding and deposit spreads relative to the prior quarter, which were partly offset by lower credit spreads. Noninterest income was higher (4.6 percent) than the prior quarter primarily due to growth in deposit service charges and other revenue. The unfavorable variance in total noninterest expense quarter-over-quarter was driven by an increase in marketing and business development (MORE)
Slide 23: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 23 expense. A 5.9 percent increase in net charge-offs quarter-over-quarter drove the unfavorable variance in the provision for credit losses. 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. Private Client, Trust and Asset Management contributed $123 million of the Company’s net income in the third quarter of 2005, 28.1 percent higher than the same period of 2004 and 5.1 percent higher than the prior quarter of 2005. The increase in the business line’s contribution in the third quarter of 2005 over the same quarter of 2004 was the result of favorable variances in total net revenue (11.9 percent). Total noninterest expense remained relatively flat year-over-year. Net interest income was favorably impacted year-over-year by wider deposit spreads and growth in deposit balances. Noninterest income increased by 7.0 percent from the same quarter of 2004, primarily due to improved equity market conditions and account growth. The business line’s contribution in the third quarter of 2005 increased 5.1 percent as compared with the prior quarter, with total net revenue slightly higher (1.6 percent) and total noninterest expense and provision for credit losses remaining relatively flat. 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 $207 million of the Company’s net income in the third quarter of 2005, a 25.5 percent increase over the same period of 2004 and a 13.7 percent increase over the second quarter of 2005. The increase in Payment Services’ contribution in the third quarter of 2005 over the same period of 2004 was the result of higher total net revenue (14.8 percent) and a slightly lower provision for credit losses (2.2 percent), partially offset by an increase in total noninterest expense (11.0 percent). The increase in total net revenue year-over-year was due to growth in total noninterest income (16.3 percent) and net interest income (9.6 percent), reflecting growth in higher yielding retail loan balances, offset by increases in corporate card balances and rebates. The increase in noninterest income was principally the result of growth in credit and debit card revenue (13.5 percent), corporate payment products revenue (25.0 percent), ATM processing services revenue (63.3 percent) and merchant processing services revenue (6.4 percent). All categories benefited from higher transaction volumes, rate changes and business expansion initiatives. The growth in total noninterest expense year-over-year primarily reflected an increase in processing (MORE)
Slide 24: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 24 expense related to the business line’s revenue growth, including costs associated with smaller Payment Services acquisitions. The increase in Payment Services’ contribution in the third quarter of 2005 over the prior quarter was primarily due to seasonally strong growth in total net revenue (7.4 percent), and lower provision for credit losses (4.3 percent), partly offset by higher total noninterest expense (5.0 percent). Net interest income increased 13.8 percent quarter-over-quarter, and fee-based revenue rose by 5.9 percent due to seasonally higher retail and corporate credit card sales volumes, ATM processing services revenue and merchant processing fees. The unfavorable variance in total noninterest expense from the prior quarter was primarily due to personnel and other costs to support ongoing business expansion and marketing programs. Treasury and Corporate Support includes the Company’s investment portfolios, funding, capital management and asset securitization activities, interest rate risk management, the net effect of transfer pricing related to average balances and the residual aggregate of those expenses associated with corporate activities that are managed on a consolidated basis. In addition, changes in MSR valuations primarily due to interest rates are managed at a corporate level and, as such, reported within this business unit. 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 $92 million in the third quarter of 2005, compared with net income of $172 million in the third quarter of 2004 and $102 million in the second quarter of 2005. The change in net income in the current quarter from the same quarter of 2004 was the net result of the unfavorable change in net interest income (60.5 percent) reflecting the Company’s asset/liability management decisions, including higher-cost fixed funding and repositioning of the Company for changes in the interest rate environment, and the $86 million unfavorable change in net securities gains (losses), partially offset by favorable variances in the MSR valuation ($90 million) and debt prepayment expense ($5 million). Net income in the third quarter of 2005 was lower than net income in the second quarter of 2005, the result of the $94 million tax benefit realized in the second quarter of 2005, offset by a favorable MSR valuation ($56 million) and the second quarter of 2005 debt prepayment expense ($54 million). Total net interest income declined quarter-over-quarter, primarily due to the continuing asset/liability management decisions of the Company. (MORE)
Slide 25: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 25 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 REVIEW THE FINANCIAL RESULTS IN A PRE-RECORDED CALL ON TUESDAY, OCTOBER 18, 2005. The call will be available by telephone or on the internet. The prerecorded call will be available from approximately 7:00 a.m. (CDT) on Tuesday, October 18th through Tuesday, October 25th at 11:00 p.m. (CDT). To access the recorded call, please dial 800-938-1601. Participants calling from outside the United States, please call 402-220-1546. Find the recorded call via the internet at usbank.com. Minneapolis-based U.S. Bancorp (“USB”), with $207 billion in assets, is the 6th largest financial holding company in the United States. The Company operates 2,396 banking offices and 4,986 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. (MORE)
Slide 26: U.S. Bancorp Reports Third Quarter 2005 Results October 18, 2005 Page 26 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 feebased 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. ### (MORE)
Slide 27: U.S. Bancorp Consolidated Statement of Income (Dollars and Shares in Millions, Except Per Share Data) (Unaudited) Interest Income Loans Loans held for sale Investment securities Other interest income Total interest income Interest Expense Deposits Short-term borrowings Long-term debt Total interest expense Net interest income Provision for credit losses Net interest income after provision for credit losses Noninterest Income Credit and debit card revenue Corporate payment products revenue ATM processing services Merchant processing services Trust and investment management fees Deposit service charges Treasury management fees Commercial products revenue Mortgage banking revenue Investment products fees and commissions Securities gains (losses), net Other Total noninterest income Noninterest Expense Compensation Employee benefits Net occupancy and equipment Professional services Marketing and business development Technology and communications Postage, printing and supplies Other intangibles Debt prepayment Other Total noninterest expense Income before income taxes Applicable income taxes Net income Earnings per share Diluted earnings per share Dividends declared per share Average common shares outstanding Average diluted common shares outstanding Three Months Ended September 30, 2005 2004 $2,167 30 492 29 2,718 414 205 317 936 1,782 145 1,637 185 135 64 200 251 246 109 103 111 37 1 134 1,576 603 106 162 44 61 118 64 125 -190 1,473 1,740 586 $1,154 $.63 $.62 $.30 1,823 1,849 $1,803 21 453 26 2,303 222 74 232 528 1,775 166 1,609 164 108 45 188 240 208 118 106 97 37 88 125 1,524 564 100 159 37 61 110 61 210 5 211 1,518 1,615 549 $1,066 $.57 $.56 $.24 1,877 1,904 Nine Months Ended September 30, 2005 2004 $6,105 75 1,454 84 7,718 1,083 460 895 2,438 5,280 461 4,819 516 362 168 576 751 690 333 299 323 115 (57) 423 4,499 1,782 330 475 119 171 337 190 377 54 564 4,399 4,919 1,573 $3,346 $1.82 $1.80 $.90 1,836 1,862 $5,290 68 1,366 73 6,797 654 183 641 1,478 5,319 605 4,714 465 306 132 494 740 595 357 324 301 119 (84) 335 4,084 1,673 291 468 104 145 314 183 389 42 597 4,206 4,592 1,481 $3,111 $1.64 $1.62 $.72 1,895 1,919 Page 27
Slide 28: U.S. Bancorp Consolidated Ending Balance Sheet (Dollars in Millions) Assets Cash and due from banks Investment securities Held-to-maturity Available-for-sale Loans held for sale Loans Commercial Commercial real estate Residential mortgages Retail Total loans Less allowance for loan losses Net loans Premises and equipment Customers' liability on acceptances Goodwill Other intangible assets Other assets Total assets Liabilities and Shareholders' Equity Deposits Noninterest-bearing Interest-bearing Time deposits greater than $100,000 Total deposits Short-term borrowings Long-term debt Acceptances outstanding Other liabilities Total liabilities Shareholders' equity Common stock Capital surplus Retained earnings Less treasury stock Other comprehensive income Total shareholders' equity Total liabilities and shareholders' equity September 30, 2005 (Unaudited) $6,918 114 41,402 1,695 43,237 28,521 19,469 45,400 136,627 (2,055) 134,572 1,850 85 6,372 2,586 11,301 $206,895 December 31, 2004 $6,336 127 41,354 1,439 40,173 27,585 15,367 43,190 126,315 (2,080) 124,235 1,890 95 6,241 2,387 11,000 $195,104 September 30, 2004 (Unaudited) $6,969 120 39,534 1,372 40,151 27,414 14,741 42,520 124,826 (2,184) 122,642 1,894 146 6,226 2,419 11,522 $192,844 $30,871 69,478 20,446 120,795 23,061 36,257 85 6,833 187,031 20 5,913 18,457 (4,318) (208) 19,864 $206,895 $30,756 71,936 18,049 120,741 13,084 34,739 95 6,906 175,565 20 5,902 16,758 (3,125) (16) 19,539 $195,104 $31,585 70,011 13,971 115,567 12,648 38,004 146 6,879 173,244 20 5,868 16,260 (2,710) 162 19,600 $192,844 Page 28
Slide 29: Supplemental Analyst Schedules 3Q 2005
Slide 30: U.S. Bancorp Income Statement Highlights Financial Results and Ratios Three Months Ended September 30, June 30, September 30, 2005 2005 2004 $1,791 $1,761 $1,782 1,576 1,541 1,524 3,367 3,302 3,306 1,473 1,595 1,518 1,894 1,707 1,788 145 144 166 1,749 1,563 1,622 9 7 7 586 435 549 $1,154 $1,121 $1,066 $.62 $1.82 3.95 % 6.38 2.49 2.23 22.8 43.8 40.0 $.60 $1.78 3.99 % 6.21 2.23 2.23 22.7 48.3 42.8 $.56 $1.69 4.22 % 5.86 1.55 2.21 21.9 47.2 40.6 Percent Change v. September 30, 2005 June 30, September 30, 2005 2004 1.7 % .5 % 2.3 3.4 2.0 1.8 (7.6) (3.0) 11.0 5.9 .7 (12.7) 11.9 7.8 28.6 28.6 34.7 6.7 2.9 8.3 3.3 2.2 10.7 7.7 (Dollars and Shares in Millions, Except Per Share Data) (Unaudited) Net interest income (taxable-equivalent basis) Noninterest income Total net revenue Noninterest expense Income before provision and income taxes Provision for credit losses Income before income taxes Taxable-equivalent adjustment Applicable income taxes Net income Diluted earnings per share Revenue per diluted share* Financial Ratios Net interest margin** Interest yield on average loans** Rate paid on interest-bearing liabilities Return on average assets Return on average equity Efficiency ratio*** Tangible efficiency ratio**** * Computed as the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net divided by average diluted common shares outstanding ** On a taxable-equivalent basis *** Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net **** Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net and intangible amortization Page 30
Slide 31: U.S. Bancorp Income Statement Highlights Financial Results and Ratios Nine Months Ended September 30, September 30, 2005 2004 $5,303 $5,340 4,499 4,084 9,802 9,424 4,399 4,206 5,403 5,218 461 605 4,942 4,613 23 21 1,573 1,481 $3,346 $3,111 $1.80 $5.29 4.00 % 6.23 2.23 2.22 22.5 44.6 40.8 $1.62 $4.95 4.26 % 5.86 1.46 2.18 21.5 44.2 40.1 (Dollars and Shares in Millions, Except Per Share Data) (Unaudited) Net interest income (taxable-equivalent basis) Noninterest income Total net revenue Noninterest expense Income before provision and income taxes Provision for credit losses Income before income taxes Taxable-equivalent adjustment Applicable income taxes Net income Diluted earnings per share Revenue per diluted share* Financial Ratios Net interest margin** Interest yield on average loans** Rate paid on interest-bearing liabilities Return on average assets Return on average equity Efficiency ratio*** Tangible efficiency ratio**** * Percent Change (.7) % 10.2 4.0 4.6 3.5 (23.8) 7.1 9.5 6.2 7.6 11.1 6.9 Computed as the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net divided by average diluted common shares outstanding ** On a taxable-equivalent basis *** Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net **** Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net and intangible amortization Page 31
Slide 32: U.S. Bancorp Quarterly Consolidated Statement of Income (Dollars and Shares in Millions, Except Per Share Data) (Unaudited) Interest Income Loans Loans held for sale Investment securities Other interest income Total interest income Interest Expense Deposits Short-term borrowings Long-term debt Total interest expense Net interest income Provision for credit losses Net interest income after provision for credit losses Noninterest Income Credit and debit card revenue Corporate payment products revenue ATM processing services Merchant processing services Trust and investment management fees Deposit service charges Treasury management fees Commercial products revenue Mortgage banking revenue Investment products fees and commissions Securities gains (losses), net Other Total noninterest income Noninterest Expense Compensation Employee benefits Net occupancy and equipment Professional services Marketing and business development Technology and communications Postage, printing and supplies Other intangibles Debt prepayment Other Total noninterest expense Income before income taxes Applicable income taxes Net income Earnings per share Diluted earnings per share Dividends declared per share Average common shares outstanding Average diluted common shares outstanding September 30, 2005 $2,167 30 492 29 2,718 414 205 317 936 1,782 145 1,637 185 135 64 200 251 246 109 103 111 37 1 134 1,576 603 106 162 44 61 118 64 125 -190 1,473 1,740 586 $1,154 $.63 $.62 $.30 1,823 1,849 June 30, 2005 $2,027 24 486 28 2,565 361 143 307 811 1,754 144 1,610 177 120 57 198 253 234 117 100 110 39 1 135 1,541 612 108 159 39 67 113 63 181 54 199 1,595 1,556 435 $1,121 $.61 $.60 $.30 1,833 1,857 Three Months Ended March 31, December 31, 2005 2004 $1,911 21 476 27 2,435 308 112 271 691 1,744 172 1,572 154 107 47 178 247 210 107 96 102 39 (59) 154 1,382 567 116 154 36 43 106 63 71 -175 1,331 1,623 552 $1,071 $.58 $.57 $.30 1,852 1,880 $1,878 23 461 27 2,389 250 80 267 597 1,792 64 1,728 184 101 43 181 241 212 110 108 96 37 (21) 143 1,435 579 98 163 45 49 116 65 161 113 190 1,579 1,584 528 $1,056 $.57 $.56 $.30 1,865 1,894 September 30, 2004 $1,803 21 453 26 2,303 222 74 232 528 1,775 166 1,609 164 108 45 188 240 208 118 106 97 37 88 125 1,524 564 100 159 37 61 110 61 210 5 211 1,518 1,615 549 $1,066 $.57 $.56 $.24 1,877 1,904 4.22 % 5.86 1.55 2.21 21.9 47.2 40.6 Financial Ratios Net interest margin* 3.95 % 3.99 % 4.08 % 4.20 % Interest yield on average loans* 6.38 6.21 6.08 5.97 Rate paid on interest-bearing liabilities 2.49 2.23 1.97 1.72 Return on average assets 2.23 2.23 2.21 2.16 Return on average equity 22.8 22.7 21.9 21.2 Efficiency ratio** 43.8 48.3 41.7 48.5 Tangible efficiency ratio*** 40.0 42.8 39.5 43.6 * On a taxable-equivalent basis ** Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net *** Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net and intangible amortization Page 32
Slide 33: U.S. Bancorp Consolidated Ending Balance Sheet (Dollars in Millions) Assets Cash and due from banks Investment securities Held-to-maturity Available-for-sale Loans held for sale Loans Commercial Commercial real estate Residential mortgages Retail Total loans Less allowance for loan losses Net loans Premises and equipment Customers' liability on acceptances Goodwill Other intangible assets Other assets Total assets Liabilities and Shareholders' Equity Deposits Noninterest-bearing Interest-bearing Time deposits greater than $100,000 Total deposits Short-term borrowings Long-term debt Acceptances outstanding Other liabilities Total liabilities Shareholders' equity Common stock Capital surplus Retained earnings Less treasury stock Other comprehensive income Total shareholders' equity Total liabilities and shareholders' equity September 30, 2005 (Unaudited) $6,918 114 41,402 1,695 43,237 28,521 19,469 45,400 136,627 (2,055) 134,572 1,850 85 6,372 2,586 11,301 $206,895 June 30, 2005 (Unaudited) $6,442 116 42,183 1,734 43,180 27,743 17,966 44,555 133,444 (2,082) 131,362 1,864 95 6,372 2,584 11,229 $203,981 March 31, 2005 (Unaudited) $5,881 121 42,982 1,635 41,540 27,363 16,572 43,430 128,905 (2,082) 126,823 1,877 91 6,277 2,533 10,246 $198,466 December 31, 2004 $6,336 127 41,354 1,439 40,173 27,585 15,367 43,190 126,315 (2,080) 124,235 1,890 95 6,241 2,387 11,000 $195,104 September 30, 2004 (Unaudited) $6,969 120 39,534 1,372 40,151 27,414 14,741 42,520 124,826 (2,184) 122,642 1,894 146 6,226 2,419 11,522 $192,844 $30,871 69,478 20,446 120,795 23,061 36,257 85 6,833 187,031 20 5,913 18,457 (4,318) (208) 19,864 $206,895 $33,401 69,690 18,732 121,823 20,434 34,788 95 6,940 184,080 20 5,903 17,849 (3,984) 113 19,901 $203,981 $28,880 71,751 19,087 119,718 14,273 38,071 91 7,105 179,258 20 5,889 17,276 (3,590) (387) 19,208 $198,466 $30,756 71,936 18,049 120,741 13,084 34,739 95 6,906 175,565 20 5,902 16,758 (3,125) (16) 19,539 $195,104 $31,585 70,011 13,971 115,567 12,648 38,004 146 6,879 173,244 20 5,868 16,260 (2,710) 162 19,600 $192,844 Page 33
Slide 34: U.S. Bancorp Consolidated Quarterly Average Balance Sheet (Dollars in Millions, Unaudited) Assets Investment securities Loans held for sale Loans Commercial Commercial Lease financing Total commercial Commercial real estate Commercial mortgages Construction and development Total commercial real estate Residential mortgages Retail Credit card Retail leasing Home equity and second mortgages Other retail Total retail Total loans Other earning assets Total earning assets Allowance for loan losses Unrealized gain (loss) on available-for-sale securities Other assets Total assets Liabilities and Shareholders' Equity Noninterest-bearing deposits Interest-bearing deposits Interest checking Money market accounts Savings accounts Time certificates of deposit less than $100,000 Time deposits greater than $100,000 Total interest-bearing deposits Short-term borrowings Long-term debt Total interest-bearing liabilities Other liabilities Shareholders' equity Total liabilities and shareholders' equity September 30, 2005 $41,782 2,038 June 30, 2005 $42,341 1,697 March 31, 2005 $42,813 1,429 December 31, 2004 $42,315 1,598 September 30, 2004 $42,502 1,405 38,343 4,908 43,251 20,341 7,852 28,193 18,741 6,684 7,467 14,984 15,963 45,098 135,283 1,349 180,452 (2,109) (258) 27,582 $205,667 37,595 4,922 42,517 20,156 7,426 27,582 17,198 6,527 7,314 15,003 15,134 43,978 131,275 1,417 176,730 (2,125) (224) 27,437 $201,818 36,083 4,914 40,997 20,268 7,236 27,504 15,827 6,417 7,198 14,844 14,867 43,326 127,654 1,398 173,294 (2,114) (261) 26,016 $196,935 35,348 4,855 40,203 20,286 7,360 27,646 15,044 6,347 7,087 14,711 14,601 42,746 125,639 1,372 170,924 (2,207) (150) 26,093 $194,660 34,457 4,860 39,317 20,231 6,963 27,194 14,569 6,145 6,842 14,288 14,551 41,826 122,906 1,374 168,187 (2,287) (492) 26,177 $191,585 $29,434 22,508 28,740 5,777 13,263 21,262 91,550 22,248 35,633 149,431 6,696 20,106 $205,667 $29,148 23,024 29,563 5,886 13,152 20,459 92,084 17,013 36,973 146,070 6,780 19,820 $201,818 $28,417 23,146 30,264 5,968 12,978 18,650 91,006 15,606 35,440 142,052 6,663 19,803 $196,935 $29,841 21,630 30,955 5,776 12,794 15,448 86,603 14,020 37,680 138,303 6,696 19,820 $194,660 $29,791 20,413 31,854 5,854 12,869 14,535 85,525 15,382 35,199 136,106 6,301 19,387 $191,585 Page 34
Slide 35: U.S. Bancorp Consolidated Daily Average Balance Sheet and Related Yields and Rates (a) For the Three Months Ended September 30, 2005 September 30, 2004 Yields Yields Average and Average and Balances Interest Rates Balances Interest Rates $41,782 2,038 43,251 28,193 18,741 45,098 135,283 1,349 180,452 (2,109) (258) 27,582 $205,667 $494 30 642 463 261 808 2,174 29 2,727 4.73 % 5.80 5.89 6.52 5.54 7.11 6.38 8.56 6.01 $42,502 1,405 39,317 27,194 14,569 41,826 122,906 1,374 168,187 (2,287) (492) 26,177 $191,585 $29,791 34 94 4 101 181 414 205 317 936 .61 1.30 .24 3.01 3.37 1.79 3.66 3.54 2.49 20,413 31,854 5,854 12,869 14,535 85,525 15,382 35,199 136,106 6,301 19,387 $191,585 16 54 4 83 65 222 74 232 528 .31 .67 .25 2.57 1.79 1.03 1.93 2.63 1.55 $455 21 557 387 204 660 1,808 26 2,310 4.28 % 6.00 5.64 5.66 5.60 6.28 5.86 7.45 5.47 (Dollars in Millions, Unaudited) Assets Investment securities Loans held for sale Loans (b) Commercial Commercial real estate Residential mortgages Retail Total loans Other earning assets Total earning assets Allowance for loan losses Unrealized gain (loss) on available-for-sale securities Other assets Total assets % Change Average Balances (1.7) % 45.1 10.0 3.7 28.6 7.8 10.1 (1.8) 7.3 7.8 47.6 5.4 7.4 (1.2) 10.3 (9.8) (1.3) 3.1 46.3 7.0 44.6 1.2 9.8 6.3 3.7 7.4 % Liabilities and Shareholders' Equity Noninterest-bearing deposits $29,434 Interest-bearing deposits Interest checking 22,508 Money market accounts 28,740 Savings accounts 5,777 Time certificates of deposit less than $100,000 13,263 Time deposits greater than $100,000 21,262 Total interest-bearing deposits 91,550 Short-term borrowings 22,248 Long-term debt 35,633 Total interest-bearing liabilities 149,431 Other liabilities 6,696 Shareholders' equity 20,106 Total liabilities and shareholders' equity $205,667 Net interest income Gross interest margin Gross interest margin without taxable-equivalent increments Percent of Earning Assets Interest income Interest expense Net interest margin Net interest margin without taxable-equivalent increments $1,791 3.52 % 3.50 6.01 % 2.06 3.95 % 3.93 % $1,782 3.92 % 3.90 5.47 % 1.25 4.22 % 4.20 % (a) Interest and rates are presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent. (b) Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances. Page 35
Slide 36: U.S. Bancorp Consolidated Daily Average Balance Sheet and Related Yields and Rates (a) For the Three Months Ended September 30, 2005 June 30, 2005 Yields Yields Average and Average and Balances Interest Rates Balances Interest Rates $41,782 2,038 43,251 28,193 18,741 45,098 135,283 1,349 180,452 (2,109) (258) 27,582 $205,667 $494 30 642 463 261 808 2,174 29 2,727 4.73 % 5.80 5.89 6.52 5.54 7.11 6.38 8.56 6.01 $42,341 1,697 42,517 27,582 17,198 43,978 131,275 1,417 176,730 (2,125) (224) 27,437 $201,818 $29,148 34 94 4 101 181 414 205 317 936 .61 1.30 .24 3.01 3.37 1.79 3.66 3.54 2.49 23,024 29,563 5,886 13,152 20,459 92,084 17,013 36,973 146,070 6,780 19,820 $201,818 33 79 4 94 151 361 143 307 811 .57 1.07 .24 2.86 2.97 1.57 3.37 3.33 2.23 $488 24 614 437 239 742 2,032 28 2,572 4.61 % 5.71 5.79 6.36 5.56 6.77 6.21 7.94 5.83 (Dollars in Millions, Unaudited) Assets Investment securities Loans held for sale Loans (b) Commercial Commercial real estate Residential mortgages Retail Total loans Other earning assets Total earning assets Allowance for loan losses Unrealized gain (loss) on available-for-sale securities Other assets Total assets % Change Average Balances (1.3) % 20.1 1.7 2.2 9.0 2.5 3.1 (4.8) 2.1 .8 (15.2) .5 1.9 1.0 (2.2) (2.8) (1.9) .8 3.9 (.6) 30.8 (3.6) 2.3 (1.2) 1.4 1.9 % Liabilities and Shareholders' Equity Noninterest-bearing deposits $29,434 Interest-bearing deposits Interest checking 22,508 Money market accounts 28,740 Savings accounts 5,777 Time certificates of deposit less than $100,000 13,263 Time deposits greater than $100,000 21,262 Total interest-bearing deposits 91,550 Short-term borrowings 22,248 Long-term debt 35,633 Total interest-bearing liabilities 149,431 Other liabilities 6,696 Shareholders' equity 20,106 Total liabilities and shareholders' equity $205,667 Net interest income Gross interest margin Gross interest margin without taxable-equivalent increments Percent of Earning Assets Interest income Interest expense Net interest margin Net interest margin without taxable-equivalent increments $1,791 3.52 % 3.50 6.01 % 2.06 3.95 % 3.93 % $1,761 3.60 % 3.58 5.83 % 1.84 3.99 % 3.97 % (a) Interest and rates are presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent. (b) Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances. Page 36
Slide 37: U.S. Bancorp Consolidated Daily Average Balance Sheet and Related Yields and Rates (a) For the Nine Months Ended September 30, 2005 September 30, 2004 Yields Yields Average and Average and Balances Interest Rates Balances Interest Rates $42,308 1,723 42,263 27,762 17,266 44,141 131,432 1,388 176,851 (2,116) (247) 27,017 $201,505 $1,459 75 1,833 1,313 718 2,259 6,123 84 7,741 4.60 % 5.77 5.79 6.33 5.55 6.84 6.23 8.12 5.85 $43,243 1,611 39,060 27,140 14,079 40,687 120,966 1,362 167,182 (2,335) (412) 26,128 $190,563 $29,807 98 243 12 281 449 1,083 460 895 2,438 .58 1.10 .27 2.86 2.98 1.58 3.36 3.32 2.23 20,699 33,492 5,896 13,168 13,085 86,340 14,706 34,254 135,300 6,118 19,338 $190,563 49 178 12 257 158 654 183 641 1,478 .32 .71 .26 2.61 1.61 1.01 1.67 2.50 1.46 $1,373 68 1,644 1,134 601 1,925 5,304 73 6,818 4.23 % 5.65 5.62 5.58 5.70 6.32 5.86 7.18 5.44 (Dollars in Millions, Unaudited) Assets Investment securities Loans held for sale Loans (b) Commercial Commercial real estate Residential mortgages Retail Total loans Other earning assets Total earning assets Allowance for loan losses Unrealized gain (loss) on available-for-sale securities Other assets Total assets % Change Average Balances (2.2) % 7.0 8.2 2.3 22.6 8.5 8.7 1.9 5.8 9.4 40.0 3.4 5.7 (2.7) 10.6 (11.9) (.3) (.3) 53.9 6.0 24.5 5.1 7.8 9.7 3.0 5.7 % Liabilities and Shareholders' Equity Noninterest-bearing deposits $29,003 Interest-bearing deposits Interest checking 22,891 Money market accounts 29,517 Savings accounts 5,876 Time certificates of deposit less than $100,000 13,132 Time deposits greater than $100,000 20,133 Total interest-bearing deposits 91,549 Short-term borrowings 18,313 Long-term debt 36,016 Total interest-bearing liabilities 145,878 Other liabilities 6,713 Shareholders' equity 19,911 Total liabilities and shareholders' equity $201,505 Net interest income Gross interest margin Gross interest margin without taxable-equivalent increments Percent of Earning Assets Interest income Interest expense Net interest margin Net interest margin without taxable-equivalent increments $5,303 3.62 % 3.60 5.85 % 1.85 4.00 % 3.98 % $5,340 3.98 % 3.96 5.44 % 1.18 4.26 % 4.24 % (a) Interest and rates are presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent. (b) Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances. Page 37
Slide 38: U.S. Bancorp Loan Portfolio (Dollars in Millions, Unaudited) Commercial Commercial Lease financing Total commercial Commercial real estate Commercial mortgages Construction and development Total commercial real estate Residential mortgages Residential mortgages Home equity loans, first liens Total residential mortgages Retail Credit card Retail leasing Home equity and second mortgages Other retail Revolving credit Installment Automobile Student Total other retail Total retail Total loans September 30, 2005 Percent Amount of Total $38,319 4,918 43,237 20,467 8,054 28,521 13,586 5,883 19,469 6,638 7,468 14,920 2,523 3,498 8,146 2,207 16,374 45,400 $136,627 28.0 % 3.6 31.6 15.0 5.9 20.9 9.9 4.3 14.2 4.9 5.5 10.9 1.8 2.6 6.0 1.6 12.0 33.3 100.0 % June 30, 2005 Percent Amount of Total $38,210 4,970 43,180 20,154 7,589 27,743 12,075 5,891 17,966 6,561 7,431 15,076 2,544 3,319 7,630 1,994 15,487 44,555 $133,444 28.6 % 3.7 32.3 15.1 5.7 20.8 9.1 4.4 13.5 4.9 5.6 11.3 1.9 2.5 5.7 1.5 11.6 33.4 100.0 % March 31, 2005 Percent Amount of Total $36,623 4,917 41,540 20,134 7,229 27,363 10,747 5,825 16,572 6,276 7,253 14,867 2,480 3,006 7,445 2,103 15,034 43,430 $128,905 28.4 % 3.8 32.2 15.6 5.6 21.2 8.4 4.5 12.9 4.9 5.6 11.5 1.9 2.4 5.8 1.6 11.7 33.7 100.0 % December 31, 2004 Percent Amount of Total $35,210 4,963 40,173 20,315 7,270 27,585 9,722 5,645 15,367 6,603 7,166 14,851 2,541 2,767 7,419 1,843 14,570 43,190 $126,315 27.9 % 3.9 31.8 16.1 5.7 21.8 7.7 4.5 12.2 5.2 5.7 11.8 2.0 2.2 5.9 1.4 11.5 34.2 100.0 % September 30, 2004 Percent Amount of Total $35,286 4,865 40,151 20,232 7,182 27,414 8,955 5,786 14,741 6,216 7,004 14,548 2,555 2,790 7,481 1,926 14,752 42,520 $124,826 28.3 % 3.9 32.2 16.2 5.7 21.9 7.2 4.6 11.8 5.0 5.6 11.7 2.1 2.2 6.0 1.5 11.8 34.1 100.0 % Page 38
Slide 39: U.S. Bancorp Supplemental Financial Data (Dollars in Millions, Unaudited) Book value of intangibles Goodwill Merchant processing contracts Core deposit benefits Mortgage servicing rights Trust relationships Other identified intangibles Total September 30, 2005 $6,372 750 281 1,023 262 270 $8,958 June 30, 2005 $6,372 781 299 952 273 279 $8,956 March 31, 2005 $6,277 748 317 948 285 235 $8,810 December 31, 2004 $6,241 714 336 866 297 174 $8,628 September 30, 2004 $6,226 713 356 865 309 176 $8,645 September 30, 2005 Amortization of intangibles Merchant processing contracts Core deposit benefits Mortgage servicing rights Trust relationships Other identified intangibles Total Mortgage banking revenue Origination and sales Loan servicing Total mortgage banking revenue Mortgage production volume Mortgages serviced for others $35 18 46 12 14 $125 $39 72 $111 $6,831 $67,166 June 30, 2005 $34 19 103 11 14 $181 $40 70 $110 $5,618 $65,443 Three Months Ended March 31, December 31, 2005 2004 $33 19 (5) 12 12 $71 $35 67 $102 $4,505 $63,252 $39 20 78 12 12 $161 $28 68 $96 $4,409 $63,163 September 30, 2004 $32 20 134 13 11 $210 $30 67 $97 $4,024 $63,208 A summary of the Company's mortgage servicing rights and related characteristics by portfolio as of September 30, 2005, was as follows: (Dollars in Millions) Servicing portfolio Fair market value Value (bps) Weighted-average servicing fees (bps) Multiple (value/servicing fees) Weighted-average note rate Age (in years) Expected life (in years) Discount rate * MRBP represents mortgage revenue bond programs MRBP* $7,138 $120 168 43 3.91 6.10 % 3.8 6.0 10.1 % Government Conventional $9,289 $50,739 $149 $758 160 149 45 35 3.56 4.26 6.02 % 5.70 % 2.6 2.0 5.9 6.3 10.8 % 10.0 % Total $67,166 $1,027 153 37 4.14 5.79 % 2.3 6.2 10.1 % Page 39
Slide 40: U.S. Bancorp Line of Business Financial Performance * Three Months Ended (Dollars in Millions, Unaudited) Condensed Income Statement Net interest income (taxable-equivalent basis) Noninterest income Securities gains (losses), net Total net revenue Noninterest expense Other intangibles Total noninterest expense Income before provision and income taxes Provision for credit losses Income before income taxes Income taxes and taxable-equivalent adjustment Net income Average Balance Sheet Data Loans Other earning assets Goodwill Other intangible assets Assets Noninterest-bearing deposits Interest-bearing deposits Total deposits Shareholders' equity Wholesale Banking Sep 30, Sep 30, 2005 2004 $415 191 -606 199 4 203 403 (4) 407 148 $259 $44,995 228 1,225 68 50,683 12,182 21,830 34,012 5,101 $392 194 1 587 203 4 207 380 (12) 392 143 $249 $41,762 249 1,225 85 47,986 12,340 16,458 28,798 4,959 Percent Change 5.9 % (1.5) ** 3.2 (2.0) -(1.9) 6.1 66.7 3.8 3.5 4.0 7.7 % (8.4) -(20.0) 5.6 (1.3) 32.6 18.1 2.9 Consumer Banking Sep 30, Sep 30, 2005 2004 $1,020 545 -1,565 686 63 749 816 72 744 271 $473 $73,436 2,684 2,243 1,194 82,399 13,418 58,723 72,141 6,615 $929 489 -1,418 665 62 727 691 88 603 219 $384 $65,209 1,690 2,243 1,143 73,040 14,470 57,918 72,388 6,201 Percent Change 9.8 % 11.5 -10.4 3.2 1.6 3.0 18.1 (18.2) 23.4 23.7 23.2 12.6 58.8 -4.5 12.8 (7.3) 1.4 (.3) 6.7 % Private Client, Trust and Asset Management Sep 30, Sep 30, Percent 2005 2004 Change $116 260 -376 168 15 183 193 -193 70 $123 $4,946 11 843 301 6,683 3,654 9,485 13,139 2,111 $93 243 -336 169 16 185 151 -151 55 $96 $4,845 8 845 362 6,603 3,141 8,476 11,617 2,125 24.7 % 7.0 -11.9 (.6) (6.3) (1.1) 27.8 -27.8 27.3 28.1 2.1 % 37.5 (.2) (16.9) 1.2 16.3 11.9 13.1 (.7) Three Months Ended (Dollars in Millions, Unaudited) Condensed Income Statement Net interest income (taxable-equivalent basis) Noninterest income Securities gains (losses), net Total net revenue Noninterest expense Other intangibles Total noninterest expense Income before provision and income taxes Provision for credit losses Income before income taxes Income taxes and taxable-equivalent adjustment Net income Average Balance Sheet Data Loans Other earning assets Goodwill Other intangible assets Assets Noninterest-bearing deposits Interest-bearing deposits Total deposits Shareholders' equity * Preliminary data ** Not meaningful Payment Services Sep 30, Sep 30, 2005 2004 $148 579 -727 269 45 314 413 88 325 118 $207 $11,599 61 2,061 1,002 15,531 163 24 187 3,666 $135 498 -633 243 40 283 350 90 260 95 $165 $10,683 20 1,915 855 14,088 106 12 118 3,320 Percent Change 9.6 % 16.3 -14.8 10.7 12.5 11.0 18.0 (2.2) 25.0 24.2 25.5 8.6 ** 7.6 17.2 10.2 53.8 ** 58.5 10.4 % Treasury and Corporate Support Sep 30, Sep 30, Percent 2005 2004 Change $92 -1 93 26 (2) 24 69 (11) 80 (12) $92 $307 42,185 -2 50,371 17 1,488 1,505 2,613 $233 12 87 332 28 88 116 216 -216 44 $172 $407 43,314 -7 49,868 (266) 2,661 2,395 2,782 (60.5) % ** (98.9) (72.0) (7.1) ** (79.3) (68.1) ** (63.0) ** (46.5) Consolidated Company Sep 30, Sep 30, Percent 2005 2004 Change $1,791 1,575 1 3,367 1,348 125 1,473 1,894 145 1,749 595 $1,154 $1,782 1,436 88 3,306 1,308 210 1,518 1,788 166 1,622 556 $1,066 .5 % 9.7 (98.9) 1.8 3.1 (40.5) (3.0) 5.9 (12.7) 7.8 7.0 8.3 10.1 % (.2) 2.3 4.7 7.4 (1.2) 7.0 4.9 3.7 (24.6) % $135,283 $122,906 (2.6) 45,169 45,281 -6,372 6,228 (71.4) 2,567 2,452 1.0 205,667 191,585 ** (44.1) (37.2) (6.1) 29,434 91,550 120,984 20,106 29,791 85,525 115,316 19,387 Page 40
Slide 41: U.S. Bancorp Line of Business Financial Performance * Three Months Ended (Dollars in Millions, Unaudited) Condensed Income Statement Net interest income (taxable-equivalent basis) Noninterest income Securities gains (losses), net Total net revenue Noninterest expense Other intangibles Total noninterest expense Income before provision and income taxes Provision for credit losses Income before income taxes Income taxes and taxable-equivalent adjustment Net income Average Balance Sheet Data Loans Other earning assets Goodwill Other intangible assets Assets Noninterest-bearing deposits Interest-bearing deposits Total deposits Shareholders' equity Wholesale Banking Sep 30, Jun 30, 2005 2005 $415 191 -606 199 4 203 403 (4) 407 148 $259 $44,995 228 1,225 68 50,683 12,182 21,830 34,012 5,101 $409 204 -613 207 4 211 402 (16) 418 152 $266 $44,209 230 1,225 72 50,428 12,288 20,877 33,165 5,042 Percent Change 1.5 % (6.4) -(1.1) (3.9) -(3.8) .2 75.0 (2.6) (2.6) (2.6) 1.8 % (.9) -(5.6) .5 (.9) 4.6 2.6 1.2 Consumer Banking Sep 30, Jun 30, 2005 2005 $1,020 545 -1,565 686 63 749 816 72 744 271 $473 $73,436 2,684 2,243 1,194 82,399 13,418 58,723 72,141 6,615 $998 521 -1,519 674 64 738 781 68 713 259 $454 $70,459 2,370 2,243 1,169 78,974 13,122 59,018 72,140 6,455 Percent Change 2.2 % 4.6 -3.0 1.8 (1.6) 1.5 4.5 5.9 4.3 4.6 4.2 4.2 13.2 -2.1 4.3 2.3 (.5) -2.5 % Private Client, Trust and Asset Management Sep 30, Jun 30, Percent 2005 2005 Change $116 260 -376 168 15 183 193 -193 70 $123 $4,946 11 843 301 6,683 3,654 9,485 13,139 2,111 $111 259 -370 169 15 184 186 2 184 67 $117 $4,949 11 843 316 6,701 3,544 8,944 12,488 2,114 4.5 % .4 -1.6 (.6) -(.5) 3.8 ** 4.9 4.5 5.1 (.1) % --(4.7) (.3) 3.1 6.0 5.2 (.1) Three Months Ended (Dollars in Millions, Unaudited) Condensed Income Statement Net interest income (taxable-equivalent basis) Noninterest income Securities gains (losses), net Total net revenue Noninterest expense Other intangibles Total noninterest expense Income before provision and income taxes Provision for credit losses Income before income taxes Income taxes and taxable-equivalent adjustment Net income Average Balance Sheet Data Loans Other earning assets Goodwill Other intangible assets Assets Noninterest-bearing deposits Interest-bearing deposits Total deposits Shareholders' equity * Preliminary data ** Not meaningful Payment Services Sep 30, Jun 30, 2005 2005 $148 579 -727 269 45 314 413 88 325 118 $207 $11,599 61 2,061 1,002 15,531 163 24 187 3,666 $130 547 -677 256 43 299 378 92 286 104 $182 $11,344 68 2,030 972 15,214 134 16 150 3,592 Percent Change 13.8 % 5.9 -7.4 5.1 4.7 5.0 9.3 (4.3) 13.6 13.5 13.7 2.2 % (10.3) 1.5 3.1 2.1 21.6 50.0 24.7 2.1 Treasury and Corporate Support Sep 30, Jun 30, Percent 2005 2005 Change $92 -1 93 26 (2) 24 69 (11) 80 (12) $92 $307 42,185 -2 50,371 17 1,488 1,505 2,613 $113 9 1 123 108 55 163 (40) (2) (38) (140) $102 $314 42,776 -3 50,501 60 3,229 3,289 2,617 (18.6) % ** -(24.4) (75.9) ** (85.3) ** ** ** (91.4) (9.8) Consolidated Company Sep 30, Jun 30, Percent 2005 2005 Change $1,791 1,575 1 3,367 1,348 125 1,473 1,894 145 1,749 595 $1,154 $1,761 1,540 1 3,302 1,414 181 1,595 1,707 144 1,563 442 $1,121 1.7 % 2.3 -2.0 (4.7) (30.9) (7.6) 11.0 .7 11.9 34.6 2.9 3.1 % (.6) .5 1.4 1.9 1.0 (.6) (.2) 1.4 (2.2) % $135,283 $131,275 (1.4) 45,169 45,455 -6,372 6,341 (33.3) 2,567 2,532 (.3) 205,667 201,818 (71.7) (53.9) (54.2) (.2) 29,434 91,550 120,984 20,106 29,148 92,084 121,232 19,820 Page 41
Slide 42: U.S. Bancorp Line of Business Financial Performance * Nine Months Ended (Dollars in Millions, Unaudited) Condensed Income Statement Net interest income (taxable-equivalent basis) Noninterest income Securities gains (losses), net Total net revenue Noninterest expense Other intangibles Total noninterest expense Income before provision and income taxes Provision for credit losses Income before income taxes Income taxes and taxable-equivalent adjustment Net income Average Balance Sheet Data Loans Other earning assets Goodwill Other intangible assets Assets Noninterest-bearing deposits Interest-bearing deposits Total deposits Shareholders' equity Wholesale Banking Sep 30, Sep 30, 2005 2004 $1,220 608 (4) 1,824 602 12 614 1,210 (17) 1,227 446 $781 $44,200 228 1,225 72 50,142 12,134 20,863 32,997 5,078 $1,172 594 2 1,768 597 14 611 1,157 30 1,127 411 $716 $41,667 239 1,225 90 48,068 12,588 16,510 29,098 5,000 Percent Change 4.1 % 2.4 ** 3.2 .8 (14.3) .5 4.6 ** 8.9 8.5 9.1 6.1 % (4.6) -(20.0) 4.3 (3.6) 26.4 13.4 1.6 Consumer Banking Sep 30, Sep 30, 2005 2004 $2,978 1,533 -4,511 2,005 190 2,195 2,316 220 2,096 763 $1,333 $70,677 2,260 2,243 1,160 79,072 13,155 58,902 72,057 6,495 $2,707 1,420 -4,127 1,946 186 2,132 1,995 289 1,706 621 $1,085 $63,683 1,878 2,243 1,063 71,574 14,216 58,342 72,558 6,227 Percent Change 10.0 % 8.0 -9.3 3.0 2.2 3.0 16.1 (23.9) 22.9 22.9 22.9 11.0 20.3 -9.1 10.5 (7.5) 1.0 (.7) 4.3 % Private Client, Trust and Asset Management Sep 30, Sep 30, Percent 2005 2004 Change $331 772 -1,103 503 45 548 555 2 553 201 $352 $4,923 11 843 316 6,681 3,524 9,146 12,670 2,119 $262 753 -1,015 500 46 546 469 10 459 167 $292 $4,767 7 809 354 6,513 3,136 8,496 11,632 2,085 26.3 % 2.5 -8.7 .6 (2.2) .4 18.3 (80.0) 20.5 20.4 20.5 3.3 % 57.1 4.2 (10.7) 2.6 12.4 7.7 8.9 1.6 Nine Months Ended (Dollars in Millions, Unaudited) Condensed Income Statement Net interest income (taxable-equivalent basis) Noninterest income Securities gains (losses), net Total net revenue Noninterest expense Other intangibles Total noninterest expense Income before provision and income taxes Provision for credit losses Income before income taxes Income taxes and taxable-equivalent adjustment Net income Average Balance Sheet Data Loans Other earning assets Goodwill Other intangible assets Assets Noninterest-bearing deposits Interest-bearing deposits Total deposits Shareholders' equity * Preliminary data ** Not meaningful Payment Services Sep 30, Sep 30, 2005 2004 $419 1,612 -2,031 762 129 891 1,140 269 871 317 $554 $11,324 65 2,011 960 15,085 146 18 164 3,564 $420 1,379 -1,799 661 114 775 1,024 278 746 271 $475 $10,466 25 1,851 755 13,530 104 11 115 3,152 Percent Change (.2) % 16.9 -12.9 15.3 13.2 15.0 11.3 (3.2) 16.8 17.0 16.6 8.2 ** 8.6 27.2 11.5 40.4 63.6 42.6 13.1 % Treasury and Corporate Support Sep 30, Sep 30, Percent 2005 2004 Change $355 31 (53) 333 150 1 151 182 (13) 195 (131) $326 $308 42,855 -6 50,525 44 2,620 2,664 2,655 $779 22 (86) 715 113 29 142 573 (2) 575 32 $543 $383 44,067 -8 50,878 (237) 2,981 2,744 2,874 (54.4) % 40.9 38.4 (53.4) 32.7 (96.6) 6.3 (68.2) ** (66.1) ** (40.0) Consolidated Company Sep 30, Sep 30, Percent 2005 2004 Change $5,303 4,556 (57) 9,802 4,022 377 4,399 5,403 461 4,942 1,596 $3,346 $5,340 4,168 (84) 9,424 3,817 389 4,206 5,218 605 4,613 1,502 $3,111 (.7) % 9.3 32.1 4.0 5.4 (3.1) 4.6 3.5 (23.8) 7.1 6.3 7.6 8.7 % (1.7) 3.2 10.7 5.7 (2.7) 6.0 3.8 3.0 (19.6) % $131,432 $120,966 (2.8) 45,419 46,216 -6,322 6,128 (25.0) 2,514 2,270 (.7) 201,505 190,563 ** (12.1) (2.9) (7.6) 29,003 91,549 120,552 19,911 29,807 86,340 116,147 19,338 Page 42