Edgar Filing: US BANCORP \DE\

e10vq

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from (not applicable)

Commission file number 1-6880

U.S. BANCORP

(Exact name of registrant as specified in its charter)


Delaware		41-0255900
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

800 Nicollet Mall

Minneapolis, Minnesota 55402

(Address of principal executive offices, including zip code)

651-466-3000

(Registrant’s telephone number, including area code)

(not applicable)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

þ YES o NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

þ YES o NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer þ		Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o YES þ NO

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class Common Stock, $.01 Par Value		Outstanding as of April 30, 2010 1,916,894,222 shares

Table of Contents and Form 10-Q Cross Reference Index


Part I — Financial Information
1) Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 2)
a) Overview		3
b) Statement of Income Analysis		3
c) Balance Sheet Analysis		5
d) Non-Regulatory Capital Ratios		22
e) Critical Accounting Policies		23
f) Controls and Procedures (Item 4)		23
2) Quantitative and Qualitative Disclosures About Market Risk/Corporate Risk Profile (Item 3)
a) Overview		7
b) Credit Risk Management		8
c) Residual Value Risk Management		16
d) Operational Risk Management		16
e) Interest Rate Risk Management		16
f) Market Risk Management		17
g) Liquidity Risk Management		18
h) Capital Management		18
3) Line of Business Financial Review		19
4) Financial Statements (Item 1)		24
Part II — Other Information
1) Risk Factors (Item 1A)		52
2) Unregistered Sales of Equity Securities and Use of Proceeds (Item 2)		52
4) Exhibits (Item 6)		52
5) Signature		53
6) Exhibits		54
EX-12
EX-31.1
EX-31.2
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995.

This quarterly report on Form 10-Q contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date made. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. Global and domestic economies could fail to recover from the recent economic downturn or could experience another severe contraction, which could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities. Global financial markets could experience a recurrence of significant turbulence, which could reduce the availability of funding to certain financial institutions and lead to a tightening of credit, a reduction of business activity, and increased market volatility. Stress in the commercial real estate markets, as well as a delay or failure of recovery in the residential real estate markets, could cause additional credit losses and deterioration in asset values. In addition, U.S. Bancorp’s business and financial performance could be impacted as the financial industry restructures in the current environment, by increased regulation of financial institutions or other effects of recently enacted or future legislation, and by changes in the competitive landscape. U.S. Bancorp’s results could also be adversely affected by continued deterioration in general business and economic conditions; changes in interest rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of securities held in its investment securities portfolio; legal and regulatory developments; increased competition from both banks and non-banks; changes in customer behavior and preferences; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, legal risk, and regulatory and compliance risk.

For discussion of these and other risks that may cause actual results to differ from expectations, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2009, on file with the Securities and Exchange Commission, including the sections entitled “Risk Factors” and “Corporate Risk Profile” contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. Forward-looking statements speak only as of the date they are made, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.


U.S. Bancorp	1

Table 1 Selected Financial Data


	Three Months Ended
	March 31,
							Percent
(Dollars and Shares in Millions, Except Per Share Data)	2010			2009			Change
Condensed Income Statement
Net interest income (taxable-equivalent basis) (a)	$	2,403		$	2,095			14.7	%
Noninterest income		1,952			1,986			(1.7	)
Securities gains (losses), net		(34	)		(198	)		82.8

Total net revenue		4,321			3,883			11.3
Noninterest expense		2,136			1,871			14.2
Provision for credit losses		1,310			1,318			(.6	)

Income before taxes		875			694			26.1
Taxable-equivalent adjustment		51			48			6.3
Applicable income taxes		161			101			59.4

Net income		663			545			21.7
Net (income) loss attributable to noncontrolling interests		6			(16	)			*

Net income attributable to U.S. Bancorp	$	669		$	529			26.5

Net income applicable to U.S. Bancorp common shareholders	$	648		$	419			54.7

Per Common Share
Earnings per share	$	.34		$	.24			41.7	%
Diluted earnings per share		.34			.24			41.7
Dividends declared per share		.05			.05			–
Book value per share		13.16			10.96			20.1
Market value per share		25.88			14.61			77.1
Average common shares outstanding		1,910			1,754			8.9
Average diluted common shares outstanding		1,919			1,760			9.0
Financial Ratios
Return on average assets		.96	%		.81	%
Return on average common equity		10.5			9.0
Net interest margin (taxable-equivalent basis) (a)		3.90			3.59
Efficiency ratio (b)		49.0			45.8
Average Balances
Loans	$	192,878		$	185,705			3.9	%
Loans held for sale		3,932			5,191			(24.3	)
Investment securities		46,211			42,321			9.2
Earning assets		248,828			235,314			5.7
Assets		281,722			266,237			5.8
Noninterest-bearing deposits		38,000			36,020			5.5
Deposits		182,531			160,528			13.7
Short-term borrowings		32,551			32,217			1.0
Long-term debt		32,456			37,784			(14.1	)
Total U.S. Bancorp shareholders’ equity		26,414			26,819			(1.5	)


		March 31, 2010			December 31, 2009


Period End Balances
Loans	$	191,153		$	194,755			(1.8	)%
Allowance for credit losses		5,439			5,264			3.3
Investment securities		46,913			44,768			4.8
Assets		282,428			281,176			.4
Deposits		184,039			183,242			.4
Long-term debt		32,399			32,580			(.6	)
Total U.S. Bancorp shareholders’ equity		26,709			25,963			2.9
Capital ratios
Tier 1 capital		9.9	%		9.6	%
Total risk-based capital		13.2			12.9
Leverage		8.6			8.5
Tier 1 common equity to risk-weighted assets (c)		7.1			6.8
Tangible common equity to tangible assets (c)		5.6			5.3
Tangible common equity to risk-weighted assets (c)		6.5			6.1


*		Not meaningful.


(a)		Presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent.
(b)		Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding net securities gains (losses).
(c)		See Non-Regulatory Capital Ratios on page 22.


2	U.S. Bancorp

Management’s Discussion and Analysis

OVERVIEW

Earnings Summary U.S. Bancorp and its subsidiaries (the “Company”) reported net income attributable to U.S. Bancorp of $669 million for the first quarter of 2010 or $.34 per diluted common share, compared with $529 million, or $.24 per diluted common share for the first quarter of 2009. Return on average assets and return on average common equity were .96 percent and 10.5 percent, respectively, for the first quarter of 2010, compared with .81 percent and 9.0 percent, respectively, for the first quarter of 2009. The Company continued to strengthen its allowance for credit losses in the first quarter of 2010 by recording $175 million of provision for credit losses in excess of net charge-offs. Also impacting the first quarter of 2010 were $34 million of net securities losses. The first quarter of 2009 also included several significant items, including $530 million of provision for credit losses in excess of net charge-offs, $198 million of net securities losses and a $92 million gain from a corporate real estate transaction.

Total net revenue, on a taxable-equivalent basis, for the first quarter of 2010 was $438 million (11.3 percent) higher than the first quarter of 2009, reflecting a 14.7 percent increase in net interest income and a 7.3 percent increase in total noninterest income. The increase in net interest income over a year ago was largely the result of growth in average earning assets and an increase in lower cost core deposit funding. Noninterest income increased over a year ago, principally due to higher payments-related and commercial products revenue and a decrease in net securities losses, partially offset by the $92 million corporate real estate gain in the first quarter of 2009.

Total noninterest expense in the first quarter of 2010 was $265 million (14.2 percent) higher than the first quarter of 2009, primarily due to the impact of acquisitions, higher Federal Deposit Insurance Corporation (“FDIC”) deposit insurance expense and costs related to affordable housing and other tax-advantaged projects.

The provision for credit losses for the first quarter of 2010 was $1.3 billion, approximately the same as the first quarter of 2009. Net charge-offs in the first quarter of 2010 were $1.1 billion, compared with net charge-offs of $788 million in the first quarter of 2009. The provision for credit losses exceeded net charge-offs by $175 million in the first quarter of 2010, compared with $530 million in the first quarter of 2009. Refer to “Corporate Risk Profile” for further information on the provision for credit losses, net charge-offs, nonperforming assets and factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.

STATEMENT OF INCOME ANALYSIS

Net Interest Income Net interest income, on a taxable-equivalent basis, was $2.4 billion in the first quarter of 2010, compared with $2.1 billion in the first quarter of 2009. The $308 million (14.7 percent) increase was primarily the result of growth in average earning assets and an increase in lower cost core deposit funding. Average earning assets were $13.5 billion (5.7 percent) higher in the first quarter of 2010, compared with the first quarter of 2009, driven by an increase of $7.2 billion (3.9 percent) in average loans and $3.9 billion (9.2 percent) in average investment securities. Average deposits increased $22.0 billion (13.7 percent) in the first quarter of 2010 over the same period of the prior year. The net interest margin in the first quarter of 2010 was 3.90 percent, compared with 3.59 percent for the first quarter of 2009. Refer to the “Consolidated Daily Average Balance Sheet and Related Yields and Rates” tables for further information on net interest income.

Total average loans for the first quarter of 2010 were $7.2 billion (3.9 percent) higher than the first quarter of 2009, driven by growth in residential mortgages, retail loans and acquired loans covered by loss sharing agreements with the FDIC. Residential mortgages increased $2.5 billion (10.4 percent), reflecting an increase in activity throughout most of 2009 as a result of market interest rate declines, including an increase in government agency-guaranteed mortgages. Average retail loans increased $2.7 billion (4.4 percent) year-over-year, driven by increases in credit card, home equity and other retail (primarily auto) loans. Average credit card balances were $2.8 billion (20.4 percent) higher, reflecting both growth in existing portfolios and portfolio purchases of $1.6 billion during 2009. Average home equity and other retail loans increased 1.0 percent and 1.5 percent, respectively. Average commercial real estate balances increased $753 million (2.3 percent), reflecting the impact of new business activity, partially offset by lower utilization of existing commitments. Average commercial loans


U.S. Bancorp	3

Table 2 Noninterest Income


	Three Months Ended
	March 31,
							Percent
(Dollars in Millions)	2010			2009			Change
Credit and debit card revenue	$	258		$	256			.8	%
Corporate payment products revenue		168			154			9.1
Merchant processing services		292			258			13.2
ATM processing services		105			102			2.9
Trust and investment management fees		264			294			(10.2	)
Deposit service charges		207			226			(8.4	)
Treasury management fees		137			137			–
Commercial products revenue		161			129			24.8
Mortgage banking revenue		200			233			(14.2	)
Investment products fees and commissions		25			28			(10.7	)
Securities gains (losses), net		(34	)		(198	)		82.8
Other		135			169			(20.1	)

Total noninterest income	$	1,918		$	1,788			7.3	%

decreased $8.9 billion (15.8 percent) year-over-year principally due to lower utilization of existing commitments and reduced demand for new loans. Assets acquired in FDIC assisted transactions that are covered by loss sharing agreements with the FDIC (“covered assets” or “covered loans”) relate to the 2008 acquisitions of the banking operations of Downey Savings and Loan Association, F.A. and PFF Bank and Trust (“Downey” and “PFF”, respectively) and the 2009 acquisition of the banking operations of First Bank of Oak Park Corporation (“FBOP”). Average covered loans were $21.4 billion in the first quarter of 2010, compared with $11.3 billion in the first quarter of 2009.

Average investment securities in the first quarter of 2010 were $3.9 billion (9.2 percent) higher than the first quarter of 2009, due primarily to purchases of U.S. government agency-related securities and the consolidation of $.6 billion of held-to-maturity securities held in a variable interest entity (“VIE”) due to the adoption of new authoritative accounting guidance effective January 1, 2010. As a result, the composition of the Company’s investment portfolio shifted to a larger proportion in U.S. Treasury, agency and agency mortgage-backed securities, compared with a year ago.

Average total deposits for the first quarter of 2010 were $22.0 billion (13.7 percent) higher than the first quarter of 2009. Excluding deposits from acquisitions, average total deposits increased $7.2 billion (4.5 percent) over the first quarter of 2009. Noninterest-bearing deposits for the first quarter of 2010 were $2.0 billion (5.5 percent) higher than the first quarter of 2009, primarily due to growth in the Consumer and Wholesale Banking business lines and the impact of acquisitions. Average total savings deposits were $28.6 billion (40.7 percent) higher in the first quarter of 2010 than the first quarter of 2009, the result of growth in Consumer Banking, broker-dealer and institutional trust customers and the impact of acquisitions. Average time certificates of deposit less than $100,000 were higher in the first quarter of 2010 by $203 million (1.1 percent), as acquisition-related growth was partially offset by a decrease in Consumer Banking balances. Average time deposits greater than $100,000 were $8.8 billion (24.4 percent) lower in the first quarter of 2010, compared with the first quarter of 2009, reflecting a decrease in overall wholesale funding requirements.

Provision for Credit Losses The provision for credit losses for the first quarter of 2010 decreased $8 million (.6 percent) from the first quarter of 2009. Net charge-offs increased $347 million (44.0 percent) as borrowers defaulted on loans impacted by weak real estate markets and economic conditions. However, overall the loan portfolio experienced a decrease in the rate of credit quality deterioration, with delinquencies declining in all major loan categories compared to the previous quarter. As a result, the Company recorded provision for credit losses in excess of net charge-offs of $175 million in the first quarter of 2010, compared with $530 million in the first quarter of 2009. Refer to “Corporate Risk Profile” for further information on the provision for credit losses, net charge-offs, nonperforming assets and factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.

Noninterest Income Noninterest income in the first quarter of 2010 was $1.9 billion, compared with $1.8 billion in the first quarter of 2009, an increase of $130 million (7.3 percent). The increase in noninterest income included a favorable variance in net securities losses of $164 million. The increase in noninterest income was also due to higher fee-based payments-related income of $50 million (7.5 percent) and an increase in commercial products revenue of $32 million (24.8 percent), which was attributable to higher standby letters of credit, capital markets and other commercial


4	U.S. Bancorp

Table 3 Noninterest Expense


	Three Months Ended
	March 31,
							Percent
(Dollars in Millions)	2010			2009			Change
Compensation	$	861		$	786			9.5	%
Employee benefits		180			155			16.1
Net occupancy and equipment		227			211			7.6
Professional services		58			52			11.5
Marketing and business development		60			56			7.1
Technology and communications		185			155			19.4
Postage, printing and supplies		74			74			–
Other intangibles		97			91			6.6
Other		394			291			35.4

Total noninterest expense	$	2,136		$	1,871			14.2	%

Efficiency ratio (a)		49.0	%		45.8	%


(a)		Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding net securities gains (losses).

loan fees. Trust and investment management fees declined $30 million (10.2 percent) as low interest rates negatively impacted money market investment fees. Deposit service charges decreased $19 million (8.4 percent) as a result of lower overdraft incidences and the impact of revised overdraft fee policies. Mortgage banking revenue declined $33 million (14.2 percent) principally due to lower loan production, partially offset by higher servicing income and a favorable net change in the valuation of mortgage servicing rights (“MSRs”) and related economic hedging activities. Other income decreased $34 million (20.1 percent), the net result of the gain on a corporate real estate transaction that occurred in the first quarter of 2009 and lower retail lease residual valuation losses and improved equity investment income in the first quarter of 2010.

Noninterest Expense Noninterest expense in the first quarter of 2010 was $2.1 billion, compared with $1.9 billion in the first quarter of 2009, an increase of $265 million (14.2 percent). The increase in noninterest expense over a year ago was principally due to acquisitions, higher FDIC deposit insurance expense and costs related to investments in affordable housing and other tax-advantaged projects. Compensation expense increased $75 million (9.5 percent) primarily reflecting acquisitions. Employee benefits expense increased $25 million (16.1 percent), a result of acquisitions and increased pension costs associated with previous declines in the value of pension assets. Net occupancy and equipment expense increased $16 million (7.6 percent), while professional services expense increased $6 million (11.5 percent), principally due to acquisitions and other business initiatives. Technology and communications expense increased $30 million (19.4 percent), as a result of payments-related initiatives and acquisitions. Other expense increased $103 million (35.4 percent) year-over-year due to higher FDIC deposit insurance expense, costs related to investments in affordable housing and other tax-advantaged projects, higher merchant processing expense, growth in mortgage servicing expense and costs associated with other real estate owned (“OREO”).

Income Tax Expense The provision for income taxes was $161 million (an effective rate of 19.5 percent) for the first quarter of 2010, compared with $101 million (an effective rate of 15.6 percent) for the first quarter of 2009. The increase in the effective tax rate for the first quarter of 2010, compared with the same period of the prior year, principally reflected the marginal impact of higher pre-tax earnings year-over-year. For further information on income taxes, refer to Note 9 of the Notes to Consolidated Financial Statements.

BALANCE SHEET ANALYSIS

Loans The Company’s total loan portfolio was $191.2 billion at March 31, 2010, compared with $194.8 billion at December 31, 2009, a decrease of $3.6 billion (1.8 percent). The decrease was driven primarily by lower commercial, retail and covered loans. The $2.5 billion (5.1 percent) decrease in commercial loans was primarily driven by lower capital spending and economic conditions impacting loan demand by business customers. The decrease was also due to the consolidation of a VIE and the elimination of a related loan balance, the result of the adoption of new authoritative accounting guidance effective January 1, 2010.

Commercial real estate loans increased $114 million (.3 percent) at March 31, 2010, compared with December 31, 2009, reflecting the impact of new business activity, partially offset by lower utilization of existing commitments.

Residential mortgages held in the loan portfolio increased $464 million (1.8 percent) at March 31, 2010, compared with December 31, 2009, reflecting an increase in government agency-guaranteed mortgages


U.S. Bancorp	5

Table 4 Investment Securities


	Available-for-Sale									Held-to-Maturity
					Weighted-									Weighted-
					Average		Weighted-							Average		Weighted-
	Amortized		Fair		Maturity in		Average			Amortized		Fair		Maturity in		Average
March 31, 2010 (Dollars in Millions)	Cost		Value		Years		Yield (d)			Cost		Value		Years		Yield (d)
U.S. Treasury and Agencies
Maturing in one year or less	$	1,227	$	1,233		.3		2.41	%	$	–	$	–		–		–	%
Maturing after one year through five years		85		87		2.3		3.27			–		–		–		–
Maturing after five years through ten years		34		34		7.5		4.79			–		–		–		–
Maturing after ten years		1,201		1,196		14.1		1.87			64		64		11.6		1.73

Total	$	2,547	$	2,550		7.0		2.21	%	$	64	$	64		11.6		1.73	%

Mortgage-Backed Securities (a)
Maturing in one year or less	$	477	$	476		.7		1.99	%	$	–	$	–		–		–	%
Maturing after one year through five years		17,850		18,143		3.3		3.31			15		8		2.7		1.92
Maturing after five years through ten years		14,231		14,157		6.5		3.44			4		4		6.1		.74
Maturing after ten years		1,717		1,584		11.9		1.79			–		–		–		–

Total	$	34,275	$	34,360		5.0		3.27	%	$	19	$	12		3.5		1.68	%

Asset-Backed Securities (a)
Maturing in one year or less	$	1	$	–		.5		11.90	%	$	68	$	55		.4		.94	%
Maturing after one year through five years		386		382		3.0		7.19			195		191		2.0		.76
Maturing after five years through ten years		291		303		7.5		4.33			90		77		7.7		.77
Maturing after ten years		99		98		11.4		3.54			17		10		21.7		.74

Total	$	777	$	783		5.7		5.65	%	$	370	$	333		4.0		.79	%

Obligations of State and Political
Subdivisions (b)
Maturing in one year or less	$	136	$	136		.5		1.26	%	$	2	$	1		.6		7.90	%
Maturing after one year through five years		579		580		4.3		6.87			5		6		3.7		7.76
Maturing after five years through ten years		4,200		4,183		6.5		6.77			9		10		6.6		6.95
Maturing after ten years		1,934		1,825		21.8		6.86			15		15		16.8		5.56

Total	$	6,849	$	6,724		10.5		6.69	%	$	31	$	32		10.9		6.45	%

Other Debt Securities
Maturing in one year or less	$	6	$	6		.7		.89	%	$	4	$	4		.3		.84	%
Maturing after one year through five years		67		59		2.1		6.34			17		10		3.2		1.14
Maturing after five years through ten years		56		54		7.3		6.35			88		75		7.8		1.14
Maturing after ten years		1,402		1,158		32.3		4.29			32		11		10.6		.99

Total	$	1,531	$	1,277		29.9		4.44	%	$	141	$	100		7.7		1.09	%

Other Investments	$	564	$	594		12.8		8.13	%	$	–	$	–		–		–	%

Total investment securities (c)	$	46,543	$	46,288		6.9		3.85	%	$	625	$	541		5.9		1.26	%


(a)		Information related to asset and mortgage-backed securities included above is presented based upon weighted-average maturities anticipating future prepayments.


(b)		Information related to obligations of state and political subdivisions is presented based upon yield to first optional call date if the security is purchased at a premium, yield to maturity if purchased at par or a discount.
(c)		The weighted-average maturity of the available-for-sale investment securities was 7.1 years at December 31, 2009, with a corresponding weighted-average yield of 4.00 percent. The weighted-average maturity of the held-to-maturity investment securities was 8.4 years at December 31, 2009, with a corresponding weighted-average yield of 5.10 percent.
(d)		Average yields are presented on a fully-taxable equivalent basis under a tax rate of 35 percent. Yields on available-for-sale and held-to-maturity securities are computed based on historical cost balances. Average yield and maturity calculations exclude equity securities that have no stated yield or maturity.


	March 31, 2010					December 31, 2009
	Amortized		Percent			Amortized		Percent
(Dollars in Millions)	Cost		of Total			Cost		of Total
U.S. Treasury and agencies	$	2,611		5.5	%	$	3,415		7.5	%
Mortgage-backed securities		34,294		72.7			32,289		71.1
Asset-backed securities		1,147		2.4			559		1.2
Obligations of state and political subdivisions		6,880		14.6			6,854		15.1
Other debt securities and investments		2,236		4.8			2,286		5.1

Total investment securities	$	47,168		100.0	%	$	45,403		100.0	%

during the first quarter of 2010. Most loans retained in the portfolio are to customers with prime or near-prime credit characteristics at the date of origination.

Total retail loans outstanding, which include credit card, retail leasing, home equity and second mortgages and other retail loans, decreased $764 million (1.2 percent) at March 31, 2010, compared with December 31, 2009. The decrease was primarily driven by lower credit card, home equity and retail leasing balances, partially offset by higher installment and student loan balances.

Loans Held for Sale Loans held for sale, consisting primarily of residential mortgages were $3.9 billion at March 31, 2010, compared with $4.8 billion at December 31, 2009. The decrease in loans held for sale


6	U.S. Bancorp

was principally due to a decline in mortgage loan origination activity as compared with late 2009 as a result of increasing interest rates.

Investment Securities Investment securities totaled $46.9 billion at March 31, 2010, compared with $44.8 billion at December 31, 2009. The $2.1 billion (4.8 percent) increase reflected $1.2 billion of net investment purchases, the consolidation of $.6 billion of held-to-maturity securities held in a VIE due to the adoption of new authoritative accounting guidance effective January 1, 2010, and a $.4 billion decrease in net unrealized losses on available-for-sale securities. At March 31, 2010, adjustable-rate financial instruments comprised 47 percent of the investment securities portfolio.

The Company conducts a regular assessment of its investment portfolio to determine whether any securities are other-than-temporarily impaired. At March 31, 2010, the Company’s net unrealized loss on available-for-sale securities was $255 million, compared with a net unrealized loss of $635 million at December 31, 2009. The decrease in net unrealized losses was primarily due to increases in the fair value of agency mortgage-backed securities. When assessing impairment, the Company considers the nature of the investment, the financial condition of the issuer, the extent and duration of unrealized loss, expected cash flows of underlying collateral or assets and market conditions. At March 31, 2010, the Company had no plans to sell securities with unrealized losses and believes it is more likely than not it would not be required to sell such securities before recovery of their amortized cost.

There is limited market activity for structured investment related and non-agency mortgage-backed securities held by the Company. As a result, the Company estimates the fair value of these securities using estimates of expected cash flows, discount rates and management’s assessment of various other market factors, which are judgmental in nature. The Company recorded $46 million of impairment charges in earnings during the first quarter of 2010, predominately on non-agency mortgage-backed and structured investment related securities. These impairment charges were due to changes in expected cash flows resulting from continuing increases in defaults in the underlying mortgage pools and regulatory actions related to an insurer of some of the securities. Further adverse changes in market conditions may result in additional impairment charges in future periods. Refer to Notes 3 and 11 in the Notes to Consolidated Financial Statements for further information on investment securities.

Deposits Total deposits were $184.0 billion at March 31, 2010, compared with $183.2 billion at December 31, 2009, an increase of $.8 billion (.4 percent). The increase in total deposits was primarily the result of increases in savings accounts, interest checking and noninterest-bearing deposit accounts, offset by decreases in time certificates of deposit. Savings account balances increased $2.4 billion (14.5 percent) due primarily to continued strong participation in a savings product offered by Consumer Banking beginning in 2008. Interest checking balances increased $1.6 billion (4.1 percent) due to higher broker-dealer balances. Noninterest-bearing deposits increased $.7 billion (1.9 percent) due primarily to increases in corporate and commercial banking balances, partially offset by a decrease in corporate trust balances. Time certificates of deposit less than $100,000 decreased $1.5 billion (7.7 percent), and time deposits greater than $100,000 decreased $2.7 billion (9.1 percent), reflecting the Company’s funding and pricing decisions. Time deposits greater than $100,000 are managed as an alternative to other funding sources, such as wholesale borrowing, based largely on relative pricing.

Borrowings The Company utilizes both short-term and long-term borrowings to fund growth of assets in excess of deposit growth. Short-term borrowings, which include federal funds purchased, commercial paper, repurchase agreements, borrowings secured by high-grade assets and other short-term borrowings, were $31.2 billion at March 31, 2010, compared with $31.3 billion at December 31, 2009.

Long-term debt was $32.4 billion at March 31, 2010, compared with $32.6 billion at December 31, 2009, reflecting a $1.1 billion net decrease in Federal Home Loan Bank advances and $1.0 billion of medium-term note maturities and repayments, partially offset by $.8 billion of medium-term note issuances and the consolidation of $1.0 billion of long-term debt related to certain VIEs in the first quarter of 2010. Refer to the “Liquidity Risk Management” section for discussion of liquidity management of the Company.

CORPORATE RISK PROFILE

Overview Managing risks is an essential part of successfully operating a financial services company. The most prominent risk exposures are credit, residual value, operational, interest rate, market and liquidity risk. Credit risk is the risk of not collecting the interest and/or the principal balance of a loan, investment or derivative


U.S. Bancorp	7

contract when it is due. Residual value risk is the potential reduction in the end-of-term value of leased assets. Operational risk includes risks related to fraud, legal and compliance risk, processing errors, technology, breaches of internal controls and business continuation and disaster recovery risk. Interest rate risk is the potential reduction of net interest income as a result of changes in interest rates, which can affect the re-pricing of assets and liabilities differently. Market risk arises from fluctuations in interest rates, foreign exchange rates, and security prices that may result in changes in the values of financial instruments, such as trading and available-for-sale securities that are accounted for on a mark-to-market basis. Liquidity risk is the possible inability to fund obligations to depositors, investors or borrowers. In addition, corporate strategic decisions, as well as the risks described above, could give rise to reputation risk. Reputation risk is the risk that negative publicity or press, whether true or not, could result in costly litigation or cause a decline in the Company’s stock value, customer base, funding sources or revenue.

Credit Risk Management The Company’s strategy for credit risk management includes well-defined, centralized credit policies, uniform underwriting criteria, and ongoing risk monitoring and review processes for all commercial and consumer credit exposures. In evaluating its credit risk, the Company considers changes, if any, in underwriting activities, the loan portfolio composition (including product mix and geographic, industry or customer-specific concentrations), trends in loan performance, the level of allowance coverage relative to similar banking institutions and macroeconomic factors, such as changes in unemployment rates, gross domestic product and consumer bankruptcy filings. Refer to “Management’s Discussion and Analysis — Credit Risk Management” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, for a more detailed discussion on credit risk management processes.

The Company manages its credit risk, in part, through diversification of its loan portfolio and limit setting by product type criteria and concentrations. As part of its normal business activities, the Company offers a broad array of commercial and retail lending products. The Company’s retail lending business utilizes several distinct business processes and channels to originate retail credit, including traditional branch lending, indirect lending, portfolio acquisitions and a consumer finance division. Generally, loans managed by the Company’s consumer finance division exhibit higher credit risk characteristics, but are priced commensurate with the differing risk profile. With respect to residential mortgages originated through these channels, the Company may either retain the loans on its balance sheet or sell its interest in the balances into the secondary market while retaining the servicing rights and customer relationships. For residential mortgages that are retained in the Company’s portfolio and for home equity and second mortgages, credit risk is also diversified by geography and managed by adherence to loan-to-value and borrower credit criteria during the underwriting process.

The following tables provide summary information of the loan-to-values of residential mortgages and home equity and second mortgages by distribution channel and type at March 31, 2010 (excluding covered loans):


Residential mortgages	Interest						Percent
(Dollars in Millions)	Only		Amortizing		Total		of Total
Consumer Finance
Less than or equal to 80%	$	1,299	$	3,716	$	5,015		48.4	%
Over 80% through 90%		585		1,789		2,374		22.9
Over 90% through 100%		554		2,281		2,835		27.3
Over 100%		–		145		145		1.4

Total	$	2,438	$	7,931	$	10,369		100.0	%
Other Retail
Less than or equal to 80%	$	2,055	$	12,775	$	14,830		91.8	%
Over 80% through 90%		65		570		635		3.9
Over 90% through 100%		89		597		686		4.3
Over 100%		–		–		–		–

Total	$	2,209	$	13,942	$	16,151		100.0	%
Total Company
Less than or equal to 80%	$	3,354	$	16,491	$	19,845		74.8	%
Over 80% through 90%		650		2,359		3,009		11.3
Over 90% through 100%		643		2,878		3,521		13.3
Over 100%		–		145		145		.6

Total	$	4,647	$	21,873	$	26,520		100.0	%


Note:		Loan-to-values determined as of the date of origination and adjusted for cumulative principal payments, and consider mortgage insurance, as applicable.


Home equity and second mortgages							Percent
(Dollars in Millions)	Lines		Loans		Total		of Total
Consumer Finance (a)
Less than or equal to 80%	$	891	$	207	$	1,098		44.5	%
Over 80% through 90%		404		170		574		23.2
Over 90% through 100%		358		297		655		26.5
Over 100%		58		86		144		5.8

Total	$	1,711	$	760	$	2,471		100.0	%
Other Retail
Less than or equal to 80%	$	11,701	$	1,475	$	13,176		78.2	%
Over 80% through 90%		1,937		509		2,446		14.5
Over 90% through 100%		726		428		1,154		6.9
Over 100%		50		25		75		.4

Total	$	14,414	$	2,437	$	16,851		100.0	%
Total Company
Less than or equal to 80%	$	12,592	$	1,682	$	14,274		73.9	%
Over 80% through 90%		2,341		679		3,020		15.6
Over 90% through 100%		1,084		725		1,809		9.4
Over 100%		108		111		219		1.1

Total	$	16,125	$	3,197	$	19,322		100.0	%


(a)		Consumer finance category included credit originated and managed by the consumer finance division, as well as the majority of home equity and second mortgages with a loan-to-value greater than 100 percent that were originated in the branches.


Note:		Loan-to-values determined on original appraisal value of collateral and the current amortized loan balance, or maximum of current commitment or current balance on lines.


8	U.S. Bancorp

Within the consumer finance division, at March 31, 2010, approximately $2.4 billion of residential mortgages were to customers that may be defined as sub-prime borrowers based on credit scores from independent credit rating agencies at loan origination, compared with $2.5 billion at December 31, 2009.

The following table provides further information on residential mortgages for the consumer finance division at March 31, 2010:


	Interest						Percent of
(Dollars in Millions)	Only		Amortizing		Total		Division
Sub-Prime Borrowers
Less than or equal to 80%	$	6	$	1,024	$	1,030		9.9	%
Over 80% through 90%		3		554		557		5.4
Over 90% through 100%		14		739		753		7.3
Over 100%		–		62		62		.6

Total	$	23	$	2,379	$	2,402		23.2	%
Other Borrowers
Less than or equal to 80%	$	1,293	$	2,692	$	3,985		38.4	%
Over 80% through 90%		582		1,235		1,817		17.5
Over 90% through 100%		540		1,542		2,082		20.1
Over 100%		–		83		83		.8

Total	$	2,415	$	5,552	$	7,967		76.8	%

Total Consumer Finance	$	2,438	$	7,931	$	10,369		100.0	%

In addition to residential mortgages, at March 31, 2010, the consumer finance division had $.6 billion of home equity and second mortgage loans to customers that may be defined as sub-prime borrowers, unchanged from December 31, 2009.

The following table provides further information on home equity and second mortgages for the consumer finance division at March 31, 2010:


							Percent
(Dollars in Millions)	Lines		Loans		Total		of Total
Sub-Prime Borrowers
Less than or equal to 80%	$	39	$	123	$	162		6.6	%
Over 80% through 90%		43		104		147		5.9
Over 90% through 100%		6		182		188		7.6
Over 100%		38		65		103		4.2

Total	$	126	$	474	$	600		24.3	%
Other Borrowers
Less than or equal to 80%	$	852	$	84	$	936		37.9	%
Over 80% through 90%		361		66		427		17.3
Over 90% through 100%		352		115		467		18.9
Over 100%		20		21		41		1.6

Total	$	1,585	$	286	$	1,871		75.7	%

Total Consumer Finance	$	1,711	$	760	$	2,471		100.0	%

The total amount of residential mortgage, home equity and second mortgage loans, other than covered loans, to customers that may be defined as sub-prime borrowers represented only 1.1 percent of total assets at March 31, 2010 and December 31, 2009. Covered loans

Table 5 Delinquent Loan Ratios as a Percent of Ending Loan Balances


	March 31,			December 31,
90 days or more past due excluding nonperforming loans	2010			2009
Commercial
Commercial		.21	%		.25	%
Lease financing		–			–

Total commercial		.18			.22
Commercial Real Estate
Commercial mortgages		.01			–
Construction and development		.02			.07

Total commercial real estate		.01			.02
Residential Mortgages		2.26			2.80
Retail
Credit card		2.57			2.59
Retail leasing		.07			.11
Other retail		.51			.57

Total retail		1.00			1.07

Total loans, excluding covered loans		.78			.88

Covered Loans		3.90			3.59

Total loans		1.12	%		1.19	%


	March 31,			December 31,
90 days or more past due including nonperforming loans	2010			2009
Commercial		2.06	%		2.25	%
Commercial real estate		5.37			5.22
Residential mortgages (a)		4.33			4.59
Retail (b)		1.37			1.39

Total loans, excluding covered loans		2.82			2.87

Covered loans		11.19			9.76

Total loans		3.74	%		3.64	%


(a)		Delinquent loan ratios exclude loans purchased from Government National Mortgage Association (“GNMA”) mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. Including the guaranteed amounts, the ratio of residential mortgages 90 days or more past due including nonperforming loans was 12.86 percent at March 31, 2010 and at December 31, 2009.


(b)		Delinquent loan ratios exclude student loans that are guaranteed by the federal government. Including the guaranteed amounts, the ratio of retail loans 90 days or more past due including nonperforming loans was 1.55 percent at March 31, 2010, and 1.57 percent at December 31, 2009.


U.S. Bancorp	9

include $2.0 billion in loans with negative-amortization payment options at March 31, 2010, compared with $2.2 billion at December 31, 2009. Other than covered loans, the Company does not have any residential mortgages with payment schedules that would cause balances to increase over time.

Loan Delinquencies Trends in delinquency ratios are an indicator, among other considerations, of credit risk within the Company’s loan portfolios. The Company measures delinquencies, both including and excluding nonperforming loans, to enable comparability with other companies. Accruing loans 90 days or more past due totaled $2.0 billion ($1.3 billion excluding covered loans) at March 31, 2010, compared with $2.3 billion ($1.5 billion excluding covered loans) at December 31, 2009. The $204 million decrease, excluding covered loans, reflected a moderation in the level of stress in economic conditions in late 2009 and the first quarter of 2010. These loans are not included in nonperforming assets and continue to accrue interest because they are adequately secured by collateral, are in the process of collection and are reasonably expected to result in repayment or restoration to current status, or are managed in homogeneous portfolios with specified charge-off timeframes adhering to regulatory guidelines. The ratio of accruing loans 90 days or more past due to total loans was 1.12 percent (.78 percent excluding covered loans) at March 31, 2010, compared with 1.19 percent (.88 percent excluding covered loans) at December 31, 2009.

The following table provides summary delinquency information for residential mortgages and retail loans, excluding covered loans:


					As a Percent of Ending
	Amount				Loan Balances
	March 31,		December 31,		March 31,			December 31,
(Dollars in Millions)	2010		2009		2010			2009
Residential mortgages
30-89 days	$	520	$	615		1.96	%		2.36	%
90 days or more		599		729		2.26			2.80
Nonperforming		550		467		2.07			1.79

Total	$	1,669	$	1,811		6.29	%		6.95	%

Retail
Credit card
30-89 days	$	382	$	400		2.35	%		2.38	%
90 days or more		417		435		2.57			2.59
Nonperforming		165		142		1.02			.84

Total	$	964	$	977		5.94	%		5.81	%
Retail leasing
30-89 days	$	25	$	34		.56	%		.74	%
90 days or more		3		5		.07			.11
Nonperforming		–		–		–			–

Total	$	28	$	39		.63	%		.85	%
Home equity and second mortgages
30-89 days	$	164	$	181		.85	%		.93	%
90 days or more		133		152		.69			.78
Nonperforming		32		32		.16			.17

Total	$	329	$	365		1.70	%		1.88	%
Other retail
30-89 days	$	206	$	256		.89	%		1.10	%
90 days or more		82		92		.35			.40
Nonperforming		32		30		.14			.13

Total	$	320	$	378		1.38	%		1.63	%


10	U.S. Bancorp

The following table provides information on delinquent and nonperforming loans, excluding covered loans, as a percent of ending loan balances, by channel:


	Consumer Finance (a)						Other Retail
	March 31,			December 31,			March 31,			December 31,
	2010			2009			2010			2009
Residential mortgages
30-89 days		3.15	%		3.99	%		1.20	%		1.30	%
90 days or more		3.17			4.00			1.67			2.02
Nonperforming		3.21			3.04			1.35			.98

Total		9.53	%		11.03	%		4.22	%		4.30	%

Retail
Credit card
30-89 days		–	%		–	%		2.35	%		2.38	%
90 days or more		–			–			2.57			2.59
Nonperforming		–			–			1.02			.84

Total		–	%		–	%		5.94	%		5.81	%
Retail leasing
30-89 days		–	%		–	%		.56	%		.74	%
90 days or more		–			–			.07			.11
Nonperforming		–			–			–			–

Total		–	%		–	%		.63	%		.85	%
Home equity and second mortgages
30-89 days		2.03	%		2.54	%		.67	%		.70	%
90 days or more		1.78			2.02			.53			.60
Nonperforming		.16			.20			.17			.16

Total		3.97	%		4.76	%		1.37	%		1.46	%
Other retail
30-89 days		3.14	%		5.17	%		.83	%		1.00	%
90 days or more		.66			1.17			.34			.37
Nonperforming		–			.16			.14			.13

Total		3.80	%		6.50	%		1.31	%		1.50	%


(a)		Consumer finance category included credit originated and managed by the consumer finance division, as well as the majority of home equity and second mortgages with a loan-to-value greater than 100 percent that were originated in the branches.

Within the consumer finance division at March 31, 2010, approximately $476 million and $72 million of these delinquent and nonperforming residential mortgages and other retail loans, respectively, were with customers that may be defined as sub-prime borrowers, compared with $557 million and $98 million, respectively, at December 31, 2009.

The following table provides summary delinquency information for covered loans:


					As a Percent of
					Ending
	Amount				Loan Balances
	March 31,		December 31,		March 31,			December 31,
(Dollars in Millions)	2010		2009		2010			2009
30-89 days	$	742	$	1,195		3.55	%		5.46	%
90 days or more		817		784		3.90			3.59
Nonperforming		1,524		1,350		7.28			6.18

Total	$	3,083	$	3,329		14.73	%		15.23	%

Restructured Loans Accruing Interest In certain circumstances, the Company may modify the terms of a loan to maximize the collection of amounts due. In most cases, the modification is either a reduction in interest rate, extension of the maturity date or a reduction in the principal balance. Restructured loans accrue interest as long as the borrower complies with the revised terms and conditions and has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles.

Many of the Company’s loan restructurings occur on a case-by-case basis in connection with ongoing loan collection processes. However, the Company has also implemented certain restructuring programs. The consumer finance division has a mortgage loan restructuring program where certain qualifying borrowers facing an interest rate reset that are current in their repayment status, are allowed to retain the lower of their existing interest rate or the market interest rate as of their interest reset date. The Company also participates in the U.S. Department of the Treasury Home Affordable Modification Program (“HAMP”). HAMP gives qualifying homeowners an opportunity to refinance into more affordable monthly payments, with the U.S. Department of the Treasury compensating the Company for a portion of the reduction in monthly amounts due from borrowers participating in this program.

In addition, the Company has also modified certain mortgage loans according to provisions in FDIC assisted transaction loss sharing agreements. Losses associated with modifications on these loans, including the economic impact of interest rate reductions, are generally eligible for reimbursement under the loss sharing agreements.

Acquired loans restructured after acquisition are not considered restructured loans for purposes of the Company’s accounting and disclosure if the loans evidenced credit deterioration as of the acquisition date and are accounted for in pools.


U.S. Bancorp	11

The following table provides a summary of restructured loans, excluding covered loans, that are performing in accordance with modified terms, and therefore continue to accrue interest:


					As a Percent of
					Ending
	Amount				Loan Balances
	March 31,		December 31,		March 31,			December 31,
(Dollars in Millions)	2010		2009		2010			2009
Commercial	$	118	$	88		.25	%		.18	%
Commercial real estate		87		110		.25			.32
Residential mortgages (a)		1,560		1,354		5.88			5.20
Credit card		631		617		3.89			3.67
Other retail		120		109		.26			.23

Total	$	2,516	$	2,278		1.32	%		1.17	%


(a)		Excludes loans purchased from GNMA mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs.

Restructured loans, excluding covered loans, were $238 million higher at March 31, 2010 than at December 31, 2009, primarily reflecting loan modifications for certain residential mortgage and consumer credit card customers in light of current economic conditions. The Company continues to actively work with customers to modify loans for borrowers who are having financial difficulties, but expects increases in restructured loans to moderate.

Nonperforming Assets The level of nonperforming assets represents another indicator of the potential for future credit losses. At March 31, 2010, total nonperforming assets were $6.4 billion, compared with $5.9 billion at December 31, 2009. Excluding covered assets, nonperforming assets were $4.0 billion at March 31, 2010, compared with $3.9 billion at December 31, 2009. The $91 million (2.3 percent) increase in nonperforming assets, excluding covered assets, was driven primarily by the continued impact of unfavorable economic conditions, causing stress in the residential construction portfolio and related industries and the residential mortgage portfolio, as well as an increase in foreclosed properties and a negative impact on other commercial and consumer customers. Nonperforming covered assets at March 31, 2010 were $2.4 billion, compared with $2.0 billion at December 31, 2009. These assets are covered by loss sharing agreements with the FDIC that substantially reduce the risk of credit losses to the Company. In addition, the majority of the nonperforming covered assets were considered credit-impaired at acquisition and recorded at their estimated fair value at acquisition. The ratio of total nonperforming assets to total loans and other real estate was 3.31 percent (2.34 percent excluding covered assets) at March 31, 2010, compared with 3.02 percent (2.25 percent excluding covered assets) at December 31, 2009.

Included in nonperforming loans were restructured loans that are not accruing interest of $469 million at March 31, 2010, compared with $492 million at December 31, 2009.

Other real estate, excluding covered assets, was $482 million at March 31, 2010, compared with $437 million at December 31, 2009, and was primarily related to foreclosed properties that previously secured loan balances. The increase in other real estate assets reflected continuing stress in residential construction and related supplier industries.

The following table provides an analysis of OREO, excluding covered assets, as a percent of their related loan balances, including geographical location detail for residential (residential mortgage, home equity and second mortgage) and commercial (commercial and commercial real estate) loan balances:


					As a Percent of Ending
	Amount				Loan Balances
	March 31,		December 31,		March 31,			December 31,
(Dollars in Millions)	2010		2009		2010			2009
Residential
Minnesota	$	28	$	27		.52	%		.49	%
California		16		15		.28			.27
Illinois		10		8		.38			.29
Missouri		9		7		.34			.26
Colorado		8		7		.24			.20
All other states		128		109		.49			.43

Total residential		199		173		.43			.38
Commercial
Nevada		62		73		4.02			3.57
California		43		43		.31			.30
Oregon		30		28		.87			.81
Virginia		22		8		4.86			1.21
Arizona		17		24		1.88			1.79
All other states		109		88		.18			.14

Total commercial		283		264		.35			.32

Total OREO	$	482	$	437		.25	%		.22	%

The Company expects nonperforming assets, excluding covered assets, will remain relatively stable in the second quarter of 2010.

Analysis of Loan Net Charge-Offs Total net charge-offs were $1.1 billion for the first quarter of 2010, compared with $788 million for the first quarter of 2009. The ratio of total loan net charge-offs to average loans outstanding on an annualized basis for the first quarter of 2010 was 2.39 percent, compared with 1.72 percent for the first quarter of 2009. The year-over-year increase in total net charge-offs was driven by the weakening economy and rising unemployment throughout most of 2009 affecting the residential housing markets, including homebuilding and related industries, commercial real estate properties and credit costs associated with credit card and other consumer and commercial loans. The Company expects the level of net charge-offs will remain relatively stable in the second quarter of 2010.


12	U.S. Bancorp

Table 6 Nonperforming Assets (a)


	March 31,			December 31,
(Dollars in Millions)	2010			2009
Commercial
Commercial	$	758		$	866
Lease financing		113			125

Total commercial		871			991
Commercial Real Estate
Commercial mortgages		596			581
Construction and development		1,236			1,192

Total commercial real estate		1,832			1,773
Residential Mortgages		550			467
Retail
Credit card		165			142
Retail leasing		–			–
Other retail		64			62

Total retail		229			204

Total nonperforming loans, excluding covered assets		3,482			3,435
Covered Loans		1,524			1,350

Total nonperforming loans		5,006			4,785
Other Real Estate (b)		482			437
Covered Other Real Estate		861			653
Other Assets		31			32

Total nonperforming assets	$	6,380		$	5,907

Total nonperforming assets, excluding covered assets	$	3,995		$	3,904

Excluding covered assets:
Accruing loans 90 days or more past due	$	1,321		$	1,525
Nonperforming loans to total loans		2.05	%		1.99	%
Nonperforming assets to total loans plus other real estate (b)		2.34	%		2.25	%
Including covered assets:
Accruing loans 90 days or more past due	$	2,138		$	2,309
Nonperforming loans to total loans		2.62	%		2.46	%
Nonperforming assets to total loans plus other real estate (b)		3.31	%		3.02	%

Changes in Nonperforming Assets


	Commercial and			Retail and
	Commercial			Residential
(Dollars in Millions)	Real Estate			Mortgages (d)			Total
Balance December 31, 2009	$	4,727		$	1,180		$	5,907
Additions to nonperforming assets
New nonaccrual loans and foreclosed properties		1,336			400			1,736
Advances on loans		68			–			68

Total additions		1,404			400			1,804
Reductions in nonperforming assets
Paydowns, payoffs		(363	)		(45	)		(408	)
Net sales		(94	)		(123	)		(217	)
Return to performing status		(184	)		(3	)		(187	)
Charge-offs (c)		(454	)		(65	)		(519	)

Total reductions		(1,095	)		(236	)		(1,331	)

Net additions to nonperforming assets		309			164			473

Balance March 31, 2010	$	5,036		$	1,344		$	6,380


(a)		Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due.


(b)		Excludes $389 million and $359 million at March 31, 2010, and December 31, 2009, respectively, of foreclosed GNMA loans which continue to accrue interest.
(c)		Charge-offs exclude actions for certain card products and loan sales that were not classified as nonperforming at the time the charge-off occurred.
(d)		Residential mortgage information excludes changes related to residential mortgages serviced by others.


U.S. Bancorp	13

Table 7 Net Charge-offs as a Percent of Average Loans Outstanding


	Three Months Ended
	March 31,
	2010			2009
Commercial
Commercial		2.41	%		.92	%
Lease financing		2.14			3.29

Total commercial		2.38			1.21
Commercial Real Estate
Commercial mortgages		.73			.22
Construction and development		6.80			4.82

Total commercial real estate		2.28			1.58
Residential Mortgages		2.23			1.54
Retail
Credit card (a)		7.73			6.32
Retail leasing		.45			1.03
Home equity and second mortgages		1.88			1.48
Other retail		1.93			1.75

Total retail		3.30			2.62

Total loans, excluding covered loans		2.68			1.82
Covered Loans		.06			.21

Total loans		2.39	%		1.72	%


(a)		Net charge-offs as a percent of average loans outstanding, excluding portfolio purchases where the acquired loans were recorded at fair value at the purchase date, were 8.42 percent for the three months ended March 31, 2010.

Commercial and commercial real estate loan net charge-offs for the first quarter of 2010 were $469 million (2.34 percent of average loans outstanding on an annualized basis), compared with $297 million (1.35 percent of average loans outstanding on an annualized basis) for the first quarter of 2009. The year-over-year increase in net charge-offs reflected stress in commercial real estate and residential housing, especially homebuilding and related industry sectors, along with the impact of current economic conditions on the Company’s commercial loan portfolios.

Residential mortgage loan net charge-offs for the first quarter of 2010 were $145 million (2.23 percent of average loans outstanding on an annualized basis), compared with $91 million (1.54 percent of average loans outstanding on an annualized basis) for the first quarter of 2009. Retail loan net charge-offs for the first quarter of 2010 were $518 million (3.30 percent of average loans outstanding on an annualized basis), compared with $394 million (2.62 percent of average loans outstanding on an annualized basis) for the first quarter of 2009. The year-over-year increases in residential mortgage and retail loan net charge-offs reflected the continuing adverse impact of economic conditions on consumers, as rising unemployment levels increased losses in the prime-based residential mortgage and credit card portfolios.

The following table provides an analysis of net charge-offs as a percent of average loans outstanding managed by the consumer finance division, compared with other retail loans:


	Three Months Ended March 31
					Percent of
	Average Loans				Average Loans
(Dollars in Millions)	2010		2009		2010			2009
Consumer Finance (a)
Residential mortgages	$	10,341	$	9,898		4.16	%		2.99	%
Home equity and second mortgages		2,474		2,417		6.23			6.21
Other retail		602		525		4.72			7.72
Other Retail
Residential mortgages	$	16,067	$	14,017		.98	%		.52	%
Home equity and second mortgages		16,928		16,798		1.25			.80
Other retail		22,741		22,462		1.85			1.61
Total Company
Residential mortgages	$	26,408	$	23,915		2.23	%		1.54	%
Home equity and second mortgages		19,402		19,215		1.88			1.48
Other retail		23,343		22,987		1.93			1.75


(a)		Consumer finance category included credit originated and managed by the consumer finance division, as well as the majority of home equity and second mortgages with a loan-to-value greater than 100 percent that were originated in the branches.

The following table provides further information on net charge-offs as a percent of average loans outstanding for the consumer finance division:


	Three Months Ended March 31
					Percent of
	Average Loans				Average Loans
(Dollars in Millions)	2010		2009		2010			2009
Residential mortgages
Sub-prime borrowers	$	2,432	$	2,838		6.67	%		5.00	%
Other borrowers		7,909		7,060		3.38			2.18

Total	$	10,341	$	9,898		4.16	%		2.99	%
Home equity and second mortgages
Sub-prime borrowers	$	609	$	713		11.32	%		10.81	%
Other borrowers		1,865		1,704		4.57			4.28

Total	$	2,474	$	2,417		6.23	%		6.21	%


14	U.S. Bancorp

Table 8 Summary of Allowance for Credit Losses


	Three Months Ended
	March 31,
(Dollars in Millions)	2010			2009
Balance at beginning of period	$	5,264		$	3,639
Charge-offs
Commercial
Commercial		251			117
Lease financing		45			63

Total commercial		296			180
Commercial real estate
Commercial mortgages		47			14
Construction and development		151			117

Total commercial real estate		198			131
Residential mortgages		146			93
Retail
Credit card		328			225
Retail leasing		9			15
Home equity and second mortgages		94			72
Other retail		132			118

Total retail		563			430

Covered loans		3			6

Total charge-offs		1,206			840
Recoveries
Commercial
Commercial		8			5
Lease financing		11			8

Total commercial		19			13
Commercial real estate
Commercial mortgages		1			1
Construction and development		5			–

Total commercial real estate		6			1
Residential mortgages		1			2
Retail
Credit card		16			13
Retail leasing		4			2
Home equity and second mortgages		4			2
Other retail		21			19

Total retail		45			36

Covered loans		–			–

Total recoveries		71			52
Net Charge-offs
Commercial
Commercial		243			112
Lease financing		34			55

Total commercial		277			167
Commercial real estate
Commercial mortgages		46			13
Construction and development		146			117

Total commercial real estate		192			130
Residential mortgages		145			91
Retail
Credit card		312			212
Retail leasing		5			13
Home equity and second mortgages		90			70
Other retail		111			99

Total retail		518			394

Covered loans		3			6

Total net charge-offs		1,135			788

Provision for credit losses		1,310			1,318
Acquisitions and other changes		–			(64	)

Balance at end of period	$	5,439		$	4,105

Components
Allowance for loan losses	$	5,235		$	3,947
Liability for unfunded credit commitments		204			158

Total allowance for credit losses	$	5,439		$	4,105

Allowance for credit losses as a percentage of
Period-end loans, excluding covered loans		3.20	%		2.37	%
Nonperforming loans, excluding covered loans		156			169
Nonperforming assets, excluding covered assets		136			152
Annualized net charge-offs, excluding covered loans		118			129
Period-end loans		2.85	%		2.23	%
Nonperforming loans		109			144
Nonperforming assets		85			120
Annualized net charge-offs		118			128


U.S. Bancorp	15

Analysis and Determination of the Allowance for Credit Losses The allowance for loan losses reserves for probable and estimable losses incurred in the Company’s loan and lease portfolio, and considers credit loss protection from loss sharing agreements with the FDIC. Management evaluates the allowance each quarter to ensure it appropriately reserves for incurred losses. Several factors were taken into consideration in evaluating the allowance for credit losses at March 31, 2010, including the risk profile of the portfolios, loan net charge-offs during the period, the level of nonperforming assets, accruing loans 90 days or more past due, delinquency ratios and changes in restructured loan balances. Management also considered the uncertainty related to certain industry sectors, and the extent of credit exposure to specific borrowers within the portfolio. In addition, concentration risks associated with commercial real estate and the mix of loans, including credit cards, loans originated through the consumer finance division and residential mortgage balances, and their relative credit risks, were evaluated. Finally, the Company considered current economic conditions that might impact the portfolio.

At March 31, 2010, the allowance for credit losses was $5.4 billion (2.85 percent of total loans and 3.20 percent of loans excluding covered loans), compared with an allowance of $5.3 billion (2.70 percent of total loans and 3.04 percent of loans excluding covered loans) at December 31, 2009. The ratio of the allowance for credit losses to nonperforming loans was 109 percent (156 percent excluding covered loans) at March 31, 2010, compared with 110 percent (153 percent excluding covered loans) at December 31, 2009. The ratio of the allowance for credit losses to annualized loan net charge-offs was 118 percent at March 31, 2010, compared with 136 percent of full year 2009 net charge-offs at December 31, 2009.

Residual Value Risk Management The Company manages its risk to changes in the residual value of leased assets through disciplined residual valuation setting at the inception of a lease, diversification of its leased assets, regular residual asset valuation reviews and monitoring of residual value gains or losses upon the disposition of assets. As of March 31, 2010, no significant change in the amount of residuals or concentration of the portfolios had occurred since December 31, 2009. Refer to “Management’s Discussion and Analysis — Residual Value Risk Management” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, for further discussion on residual value risk management.

Operational Risk Management The Company manages operational risk through a risk management framework and its internal control processes. Within this framework, the Risk Management Committee of the Company’s Board of Directors provides oversight and assesses the most significant operational risks facing the Company within its business lines. Under the guidance of the Risk Management Committee, enterprise risk management personnel establish policies and interact with business lines to monitor significant operating risks on a regular basis. Business lines have direct and primary responsibility and accountability for identifying, controlling, and monitoring operational risks embedded in their business activities. Refer to “Management’s Discussion and Analysis — Operational Risk Management” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, for further discussion on operational risk management.

Interest Rate Risk Management In the banking industry, changes in interest rates are a significant risk that can impact earnings, market valuations and the safety and soundness of an entity. To minimize the volatility of net interest income and the market value of assets and liabilities, the Company manages its exposure to changes in interest rates through asset and liability management activities within guidelines established by its Asset Liability Committee (“ALCO”) and approved by the Board of Directors. The ALCO has the responsibility for approving and ensuring compliance with the ALCO management policies, including interest rate risk exposure. The Company uses net interest income simulation analysis and market value of equity modeling for measuring and analyzing consolidated interest rate risk.

Net Interest Income Simulation Analysis Management estimates the impact on net interest income of changes in market interest rates under a number of scenarios, including gradual shifts, immediate and sustained parallel shifts, and flattening or steepening of the yield curve. The following table summarizes the projected impact to net interest income over the next 12 months of various potential interest rate changes. The ALCO policy limits the estimated change in net interest income in a gradual 200 basis point (“bps”) rate change scenario to a 4.0 percent decline of forecasted net interest income over the next 12 months. At March 31, 2010, and December 31, 2009, the Company was within policy. Refer to “Management’s Discussion and Analysis — Net Interest Income Simulation Analysis” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, for further discussion on net interest income simulation analysis.


U.S. Bancorp	16

Sensitivity of Net Interest Income

March 31, 2010

December 31, 2009

Down 50 bps

Up 50 bps

Down 200 bps

Up 200 bps

Down 50 bps

Up 50 bps

Down 200 bps

Up 200 bps

Immediate

Gradual*

Gradual

Immediate

Gradual*

Gradual

Net interest income

.68

1.33

.43

1.00

* Given the current level of interest rates, a downward rate scenario can not be computed.

Market Value of Equity Modeling The Company also manages interest rate sensitivity by utilizing market value of equity modeling, which measures the degree to which the market values of the Company’s assets and liabilities and off-balance sheet instruments will change given a change in interest rates. The ALCO policy limits the change in market value of equity in a 200 bps parallel rate shock to a 15.0 percent decline. A 200 bps increase would have resulted in a 3.3 percent decrease in the market value of equity at March 31, 2010, compared with a 4.3 percent decrease at December 31, 2009. A 200 bps decrease would have resulted in a 4.4 percent decrease in the market value of equity at March 31, 2010, compared with a 2.8 percent decrease at December 31, 2009. Refer to “Management’s Discussion and Analysis — Market Value of Equity Modeling” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, for further discussion on market value of equity modeling.

Use of Derivatives to Manage Interest Rate and Other Risks To reduce the sensitivity of earnings to interest rate, prepayment, credit, price and foreign currency fluctuations (“asset and liability management positions”), the Company enters into derivative transactions. The Company uses derivatives for asset and liability management purposes primarily in the following ways:


•	To convert fixed-rate debt, issued to finance the Company, from fixed-rate payments to floating-rate payments;
•	To convert the cash flows associated with floating-rate debt, issued to finance the Company, from floating-rate payments to fixed-rate payments; and
•	To mitigate changes in value of the Company’s mortgage origination pipeline, funded mortgage loans held for sale and MSRs.

To manage these risks, the Company may enter into exchange-traded and over-the-counter derivative contracts including interest rate swaps, swaptions, futures, forwards and options. In addition, the Company enters into interest rate and foreign exchange derivative contracts to accommodate the business requirements of its customers (“customer-related positions”). The Company minimizes the market and liquidity risks of customer-related positions by entering into similar offsetting positions with broker-dealers. The Company does not utilize derivatives for speculative purposes.

The Company does not designate all of the derivatives that it enters into for risk management purposes as accounting hedges because of the inefficiency of applying the accounting requirements. In particular, the Company enters into U.S. Treasury futures, options on U.S. Treasury futures contracts and forward commitments to buy residential mortgage loans to mitigate fluctuations in the value of its MSRs, but does not designate those derivatives as accounting hedges.

Additionally, the Company uses forward commitments to sell residential mortgage loans at specified prices to economically hedge the interest rate risk in its residential mortgage loan production activities. At March 31, 2010, the Company had $7.1 billion of forward commitments to sell mortgage loans hedging $3.6 billion of mortgage loans held for sale and $5.7 billion of unfunded mortgage loan commitments. The forward commitments to sell and the unfunded mortgage loan commitments are considered derivatives under the accounting guidance related to accounting for derivative instruments and hedge activities, and the Company has elected the fair value option for the mortgage loans held for sale.

Derivatives are subject to credit risk associated with counterparties to the contracts. Credit risk associated with derivatives is measured by the Company based on the probability of counterparty default. The Company manages the credit risk of its derivative positions by diversifying its positions among various counterparties, entering into master netting agreements with its counterparties, requiring collateral agreements with credit-rating thresholds and, in certain cases, though insignificant, transferring the counterparty credit risk related to interest rate swaps to third-parties through the use of risk participation agreements.

For additional information on derivatives and hedging activities, refer to Note 10 in the Notes to Consolidated Financial Statements.

Market Risk Management In addition to interest rate risk, the Company is exposed to other forms of market risk related to its trading activities, which are principally customer-based, supporting their management of foreign currency, interest rate risks and funding activities. The


17	U.S. Bancorp

Table 9 Regulatory Capital Ratios


	March 31,			December 31,
(Dollars in Millions)	2010			2009
Tier 1 capital	$	23,278		$	22,610
As a percent of risk-weighted assets		9.9	%		9.6	%
As a percent of adjusted quarterly average assets (leverage ratio)		8.6	%		8.5	%
Total risk-based capital	$	30,858		$	30,458
As a percent of risk-weighted assets		13.2	%		12.9	%

Company also manages market risk of non-trading business activities, including its MSRs and loans held-for-sale. The Company uses a Value at Risk (“VaR”) approach to measure general market risk. Theoretically, VaR represents the amount the Company has at risk of loss to adverse market movements over a specified time horizon. The Company measures VaR at the ninety-ninth percentile using distributions derived from past market data. On average, the Company expects the one day VaR to be exceeded two to three times per year. The Company monitors the effectiveness of its risk program by back-testing the performance of its VaR models, regularly updating the historical data used by the VaR models and stress testing. As part of its market risk management approach, the Company sets and monitors VaR limits for each trading portfolio. The Company’s trading VaR did not exceed $5 million during the first quarter of 2010 and $1 million during the first quarter of 2009.

Liquidity Risk Management The ALCO establishes policies and guidelines, as well as analyzes and manages liquidity, to ensure adequate funds are available to meet normal operating requirements, and unexpected customer demands for funds in a timely and cost-effective manner. Liquidity management is viewed from long-term and short-term perspectives, including various stress scenarios, as well as from an asset and liability perspective. Management monitors liquidity through a regular review of maturity profiles, funding sources, and loan and deposit forecasts to minimize funding risk.

Since 2008, the financial markets have been challenging for many financial institutions. As a result of these financial market conditions, many banks experienced liquidity constraints, substantially increased pricing to retain deposits or utilized the Federal Reserve System discount window to secure adequate funding. The Company’s profitable operations, sound credit quality and strong capital position have enabled it to develop a large and reliable base of core deposit funding within its market areas and in domestic and global capital markets. This has allowed the Company to maintain a strong liquidity position, as depositors and investors in the wholesale funding markets seek stable financial institutions. Refer to “Management’s Discussion and Analysis — Liquidity Risk Management” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, for further discussion on liquidity risk management.

At March 31, 2010, parent company long-term debt outstanding was $14.4 billion, compared with $14.5 billion at December 31, 2009. The $.1 billion decrease was primarily due to repayments and maturities during the first quarter of 2010 of $1.0 billion of medium-term notes, partially offset by $.8 billion of medium-term note issuances. As of March 31, 2010, total parent company debt scheduled to mature in the remainder of 2010 was $3.8 billion.

Federal banking laws regulate the amount of dividends that may be paid by banking subsidiaries without prior approval. The amount of dividends available to the parent company from its banking subsidiaries after meeting the regulatory capital requirements for well-capitalized banks was approximately $3.3 billion at March 31, 2010.

Capital Management The Company is committed to managing capital to maintain strong protection for depositors and creditors and for maximum shareholder benefit. The Company also manages its capital to exceed regulatory capital requirements for well-capitalized bank holding companies. Table 9 provides a summary of regulatory capital ratios as of March 31, 2010, and December 31, 2009. All regulatory ratios exceeded regulatory “well-capitalized” requirements. Total U.S. Bancorp shareholders’ equity was $26.7 billion at March 31, 2010, compared with $26.0 billion at December 31, 2009. The increase was primarily the result of corporate earnings and changes in unrealized gains and losses on available-for-sale investment securities included in other comprehensive income, partially offset by dividends.

The Company believes certain capital ratios in addition to regulatory capital ratios are useful in evaluating its capital adequacy. The Company’s Tier 1 common and tangible common equity, as a percent of risk-weighted assets, were 7.1 percent and 6.5 percent, respectively, at March 31, 2010, compared with 6.8 percent and 6.1 percent, respectively, at December 31, 2009. The Company’s tangible common equity divided by tangible assets was 5.6 percent at March 31, 2010, compared with 5.3 percent at


18	U.S. Bancorp

December 31, 2009. Refer to “Non-Regulatory Capital Ratios” for further information regarding the calculation of these measures.

On December 9, 2008, the Company announced its Board of Directors had approved an authorization to repurchase 20 million shares of common stock through December 31, 2010. All shares repurchased during the first quarter of 2010 were repurchased under this authorization in connection with the administration of the Company’s employee benefit plans in the ordinary course of business. The following table provides a detailed analysis of all shares repurchased during the first quarter of 2010:


	Total Number				Maximum Number
	of Shares				of Shares that May
	Purchased as		Average		Yet Be Purchased
	Part of the		Price Paid		Under the
Time Period	Program		per Share		Program
January		8,098	$	24.99		19,687,636
February		538,079		23.56		19,149,557
March		74,040		24.91		19,075,517

Total		620,217	$	23.74		19,075,517

LINE OF BUSINESS FINANCIAL REVIEW

The Company’s major lines of business are Wholesale Banking, Consumer Banking, Wealth Management & Securities Services, Payment Services, and Treasury and Corporate Support. These operating segments are components of the Company about which financial information is prepared and is evaluated regularly by management in deciding how to allocate resources and assess performance.

Basis for Financial Presentation Business line results are derived from the Company’s business unit profitability reporting systems by specifically attributing managed balance sheet assets, deposits and other liabilities and their related income or expense. Refer to “Management’s Discussion and Analysis — Line of Business Financial Review” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, for further discussion on the business lines’ basis for financial presentation.

Designations, assignments and allocations change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to the Company’s diverse customer base. During 2010, certain organization and methodology changes were made and, accordingly, 2009 results were restated and presented on a comparable basis.

Wholesale Banking Wholesale Banking offers lending, equipment finance and small-ticket leasing, depository, treasury management, capital markets, foreign exchange, international trade services and other financial services to middle market, large corporate, commercial real estate, financial institution and public sector clients. Wholesale Banking contributed $9 million of the Company’s net income in the first quarter of 2010, or an increase of $7 million, compared with the first quarter of 2009. The increase was primarily driven by higher net revenue partially offset by higher noninterest expense.

Total net revenue increased $31 million (4.2 percent) in the first quarter of 2010, compared with the first quarter of 2009. Net interest income, on a taxable-equivalent basis, decreased $32 million (6.1 percent) in the first quarter of 2010, compared with the first quarter of 2009. This decrease was driven by a reduction in average loans as a result of lower utilization of existing commitments and reduced demand for new loans, as well as the impact of declining rates on the margin benefit from deposits, which were partially offset by improved spreads on loans and higher average deposit balances. Noninterest income increased $63 million (29.9 percent) in the first quarter of 2010, compared with the first quarter of 2009 due to higher equity investment income and strong growth in commercial products revenue, including standby letters of credit, commercial loan and capital markets fees.

Total noninterest expense increased $17 million (6.4 percent) in the first quarter of 2010, compared with the first quarter of 2009, primarily due to higher compensation and employee benefits, an increase in FDIC deposit insurance expense and increased costs related to OREO. The provision for credit losses increased $3 million (.6 percent) in the first quarter of 2010, compared with the first quarter of 2009. The unfavorable change was primarily due to an increase in net charge-offs, partially offset by a reduction in the reserve allocation. Nonperforming assets were $2.5 billion at March 31, 2010, $2.6 billion at December 31, 2009, and $1.8 billion at March 31, 2009. Nonperforming assets as a percentage of period-end loans were 4.43 percent at March 31, 2010, 4.42 percent at December 31, 2009, and 2.78 percent at March 31, 2009. Refer to the “Corporate Risk Profile” section for further information on factors impacting the credit quality of the loan portfolios.

Consumer Banking Consumer Banking delivers products and services through banking offices, telephone servicing and sales, on-line services, direct mail and ATM processing. It encompasses community banking, metropolitan banking, in-store banking, small business banking, consumer lending, mortgage banking, consumer finance, workplace banking, student banking and 24-hour banking. Consumer Banking contributed $197 million of the Company’s net income in the first quarter of 2010, or a decrease of $16 million (7.5 percent), compared with the first quarter of 2009.


19	U.S. Bancorp

Table 10 Line of Business Financial Performance


	Wholesale								Consumer
	Banking								Banking
Three Months Ended March 31						Percent							Percent
(Dollars in Millions)	2010		2009			Change			2010		2009		Change
Condensed Income Statement
Net interest income (taxable-equivalent basis)	$	489	$	521			(6.1	)%	$	987	$	979		.8	%
Noninterest income		274		214			28.0			653		655		(.3	)
Securities gains (losses), net		–		(3	)			*		–		–		–

Total net revenue		763		732			4.2			1,640		1,634		.4
Noninterest expense		279		260			7.3			941		864		8.9
Other intangibles		4		6			(33.3	)		17		23		(26.1	)

Total noninterest expense		283		266			6.4			958		887		8.0

Income before provision and income taxes		480		466			3.0			682		747		(8.7	)
Provision for credit losses		468		465			.6			373		412