US BANCORP \DE\, 10-Q, 2000-11-13

US BANCORP \DE\
10-Q, 2000-11-13
NATIONAL COMMERCIAL BANKS

Previous: FIRST FINANCIAL BANKSHARES INC, 10-Q, 2000-11-13

Next: US BANCORP DE, 10-Q, EX-27, 2000-11-13

<PAGE> 1

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------------------------

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000

[ ] 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)

<TABLE>
<S> <C>
DELAWARE 41-0255900
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>

U.S. BANK PLACE
601 SECOND AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55402-4302
(Address of principal executive offices and Zip Code)

612-973-1111
(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 twelve months and (2) has been subject to such filing
requirements for the past 90 days.

YES X NO _____

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

<TABLE>
<S> <C>
Class Outstanding as of October 31, 2000
Common Stock, $1.25 Par Value 751,560,810 shares
</TABLE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2

FINANCIAL SUMMARY

<TABLE>
<CAPTION>
September 30 December 31
2000 1999
-------------------------
<S> <C> <C> <C> <C>
PERIOD END
Loans....................................................... $ 68,266 $ 62,885
Allowance for credit losses................................. 1,059 995
Assets...................................................... 86,349 81,530
Total shareholders' equity.................................. 8,142 7,638
Tangible common equity to total assets***................... 6.5% 6.5%
Tier 1 capital ratio........................................ 6.7 6.8
Total risk-based capital ratio.............................. 10.7 11.1
Leverage ratio.............................................. 7.3 7.4
-------------------------------------------------------------------------------------------------
</TABLE>

*Calculated by adding amortization of goodwill and other intangible assets to
operating earnings (net income excluding merger-related charges and
available-for-sale securities transactions) and net income, respectively.
**Without investment banking and brokerage activity.
***Defined as common equity less goodwill as a percentage of total assets less
goodwill.

TABLE OF CONTENTS AND FORM 10-Q CROSS-REFERENCE INDEX

<TABLE>
<S> <C>
PART I -- FINANCIAL INFORMATION
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Item 2)....................... 2
Quantitative and Qualitative Disclosures About Market Risk
(Item 3)................................................. 14
Financial Statements (Item 1)............................... 17
PART II -- OTHER INFORMATION
Exhibits and Reports on Form 8-K (Item 6)................... 30
Signature................................................... 30
Exhibit 12 -- Computation of Ratio of Earnings to Fixed
Charges.................................................. 31
</TABLE>

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements. Statements that are not
historical or current facts, including statements about beliefs and
expectations, are forward-looking statements. These forward-looking statements
cover, among other things, anticipated future expenses and revenues, the future
prospects of the Company's consumer banking business and estimated spending on
growth initiatives. 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 elsewhere in this Form 10-Q and in the Company's other reports on file
with the SEC: (i) the Company's investments in its consumer banking, payment
systems and wealth management businesses and in its Internet development could
require additional incremental spending, and might not produce expected deposit
and loan growth and anticipated contributions to Company earnings; (ii) general
economic or industry conditions could be less favorable than expected, resulting
in a deterioration in credit quality, a change in the allowance for credit
losses, or a reduced demand for credit or fee-based products and services; (iii)
changes in the domestic interest rate environment could reduce net interest
income and could increase credit losses; (iv) the conditions of the securities
markets could change, adversely affecting revenues from capital markets
businesses, the value or credit quality of the Company's on-balance sheet and
off-balance sheet assets, or the availability and terms of funding necessary to
meet the Company's liquidity needs; (v) changes in the extensive laws,
regulations and policies governing financial services companies could alter the
Company's business environment or affect operations; (vi) 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; (vii) 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 such as the Internet, or bank regulatory reform; and
(viii) acquisitions may not produce revenue enhancements or cost savings at
levels or within time frames originally anticipated, or may result in unforeseen
integration difficulties. Forward-looking statements speak only as of the date
they are made, and the Company undertakes no obligation to update them in light
of new information or future events.

U.S. Bancorp 1
<PAGE> 3

MANAGEMENT'S DISCUSSION AND ANALYSIS

OVERVIEW

EARNINGS SUMMARY U.S. Bancorp (the "Company") reported third quarter of 2000
operating earnings (net income excluding merger-related charges and available-
for-sale securities transactions) of $410.9 million, compared with $409.0
million for the third quarter of 1999. On a diluted share basis, operating
earnings were $.55 in the third quarter of 2000, compared with $.56 in the third
quarter of 1999, a decrease of 2 percent. Operating earnings on a cash basis
increased to $.63 per diluted share in the third quarter of 2000, compared with
$.62 per diluted share in the third quarter of 1999, an increase of 2 percent.
Return on average assets and return on average common equity, excluding merger-
related charges and available-for-sale securities transactions, were 1.92
percent and 20.4 percent, respectively, in the third quarter of 2000, compared
with returns of 2.09 percent and 24.6 percent, respectively, in the third
quarter of 1999. The reduction in the Company's return on average common equity
from the third quarter of 1999 reflects the impact of recent acquisitions, which
were accounted for using the purchase method of accounting. Excluding merger-
related charges, the efficiency ratio (the ratio of expenses to revenues) was
51.7 percent in the third quarter of 2000, compared with 49.2 percent in the
third quarter of 1999. The banking efficiency ratio (the ratio of expenses to
revenues without the impact of investment banking and brokerage activity),
before merger-related charges, was 43.1 percent in the third quarter of 2000,
compared with 42.3 percent in the third quarter of 1999.

Total revenue on a taxable-equivalent basis, before available-for-sale
securities transactions, grew by $148.0 million, or 9 percent, over the third
quarter of 1999. The increase in total revenue was driven by core loan growth,
credit card fee revenue, investment banking and brokerage activity and
acquisitions. Excluding the impact of acquisitions and divestitures, total
revenue on a taxable-equivalent basis, before available-for-sale securities
transactions, in the third quarter of 2000 would have been approximately 7
percent higher than the third quarter of 1999. Offsetting the growth in total
revenue were increases in noninterest expense, before merger-related charges, of
$117.0 million and provision for credit losses of $31.0 million over the third
quarter of 1999. The growth in noninterest expense was primarily due to
acquisitions, investment banking and brokerage activity and additional
investments in sales, service quality and technology. In addition to the growth
in the Company's ongoing technology investment in Internet-related products and
services, the third quarter of 2000 included approximately $10.8 million of
Internet infrastructure-related expense. Relative to the second quarter of 2000,
total revenue growth was 2 percent (7 percent on an annualized basis). On the
same basis, noninterest expense increased 1 percent (approximately 4 percent
annualized).

Net charge-offs in the third quarter of 2000 were $172.9 million, compared
with second quarter of 2000 net charge-offs of $163.2 million and the third
quarter of 1999 net charge-offs of $141.8 million. A portion of the increase in
net charge-offs over the third quarter of 1999 was due to an expected increase
in losses on the growing credit-scored small business lending portfolio. The
increase in net charge-offs over the second quarter of 2000 was also partially
due to higher losses on the credit-scored small business lending portfolio, as
well as an increase in consumer fraud losses. The provision for credit losses of
$173.0 million in the third quarter of 2000 approximated net charge-offs for the
period. Nonperforming assets increased from $404.4 million at June 30, 2000, to
$425.3 million at September 30, 2000, due to one commercial credit. The ratio of
allowance for credit losses to nonperforming loans was 272 percent at September
30, 2000, compared with 285 percent at June 30, 2000, and 321 percent at
December 31, 1999.

Net income was $401.3 million in the third quarter of 2000, or $.54 per
diluted share, compared with $396.4 million, or $.54 per diluted share, in the
third quarter of 1999. Return on average assets and return on average common
equity were 1.88 percent and 19.9 percent, respectively, in the third quarter of
2000, compared with returns of 2.02 percent and 23.9 percent in the third
quarter of 1999. Net income reflects merger-related charges and
available-for-sale securities transactions of $9.6 million ($14.7 million on a
pre-tax basis) in the third quarter of 2000 and $12.6 million ($20.2 million on
a pre-tax basis) in the third quarter of 1999.

Operating earnings in the first nine months of 2000 were $1.20 billion
compared with $1.16 billion in the

2 U.S. Bancorp
<PAGE> 4

TABLE 1
SUMMARY OF CONSOLIDATED INCOME

<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------------------------------------
(Taxable-equivalent Basis; September 30 September 30 September 30 September 30
Dollars In Millions, Except Per Share Data) 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONDENSED INCOME STATEMENT
Interest income............................................. $1,737.8 $1,462.1 $4,990.5 $4,220.4
Interest expense............................................ 854.8 617.1 2,365.4 1,758.7
---------------------------------------------------------------
Net interest income...................................... 883.0 845.0 2,625.1 2,461.7
Provision for credit losses................................. 173.0 142.0 490.0 385.0
---------------------------------------------------------------
Net interest income after provision for credit losses.... 710.0 703.0 2,135.1 2,076.7
Available-for-sale securities gains (losses)................ 1.0 (3.4) 1.0 (3.4)
Other noninterest income.................................... 826.0 716.0 2,423.1 1,998.2
Merger-related charges...................................... 15.7 16.8 43.8 34.7
Other noninterest expense................................... 884.4 767.4 2,648.9 2,221.1
---------------------------------------------------------------
Income before income taxes............................... 636.9 631.4 1,866.5 1,815.7
Taxable-equivalent adjustment............................... 17.5 10.3 51.9 31.7
Income taxes................................................ 218.1 224.7 641.2 646.5
---------------------------------------------------------------
Net income............................................... $ 401.3 $ 396.4 $1,173.4 $1,137.5
---------------------------------------------------------------
FINANCIAL RATIOS
Return on average assets.................................... 1.88% 2.02% 1.87% 1.99%
Return on average common equity............................. 19.9 23.9 19.9 24.0
Net interest margin (taxable-equivalent basis).............. 4.64 4.84 4.73 4.84
Efficiency ratio............................................ 52.7 50.2 53.3 50.6
Efficiency ratio before merger-related charges.............. 51.7 49.2 52.5 49.8
Banking efficiency ratio before merger-related charges*..... 43.1 42.3 44.3 42.7
---------------------------------------------------------------
PER COMMON SHARE
Earnings per share.......................................... $ .54 $ .55 $ 1.58 $ 1.57
Diluted earnings per share.................................. .54 .54 1.57 1.56
Dividends paid.............................................. .215 .195 .645 .585
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*Without investment banking and brokerage activity.

first nine months of 1999. On a diluted per share basis,
operating earnings were $1.61 in the first nine months of 2000, compared with
$1.59 in the first nine months of 1999, an increase of 1 percent. On a diluted
per share basis, cash operating earnings were $1.84 in the first nine months of
2000, compared with $1.75 in the first nine months of 1999, an increase of 5
percent. Year-to-date return on average assets and return on average common
equity, excluding merger-related charges and available-for-sale securities
transactions, were 1.92 percent and 20.4 percent, respectively, compared with
returns of 2.04 percent and 24.5 percent, respectively, in the first nine months
of 1999. Excluding merger-related charges, the efficiency ratio was 52.5 percent
in the first nine months of 2000, compared with 49.8 percent in the first nine
months of 1999. On a similar basis, the banking efficiency ratio was 44.3
percent in the first nine months of 2000, compared with 42.7 percent in the
first nine months of 1999.

Net income in the first nine months of 2000 was $1.17 billion, or $1.57 per
diluted share, compared with $1.14 billion, or $1.56 per diluted share, in the
first nine months of 1999. Return on average assets and return on average common
equity were 1.87 percent and 19.9 percent, respectively, in the first nine
months of 2000, compared with returns of 1.99 percent and 24.0 percent,
respectively, in the same period of 1999. Net income reflects merger-related
charges and available-for-sale securities transactions of $27.7 million ($42.8
million on a pre-tax basis) in the first nine months of 2000, compared with
$23.9 million ($38.1 million on a pre-tax basis) in the first nine months of
1999.

ACQUISITION AND DIVESTITURE ACTIVITY Operating results in the first nine months
of 2000 reflect purchase and divestiture transactions from or to the date of
completion.

On September 28, 2000, the Company acquired Lyon Financial Services, Inc., a
wholly owned subsidiary of the privately held Schwan's Sales Enterprises Inc. in
Marshall, Minnesota. Lyon Financial specializes in small-ticket lease
transactions and has $1.3 billion in assets.

U.S. Bancorp 3
<PAGE> 5

TABLE 2
LINE OF BUSINESS FINANCIAL PERFORMANCE

<TABLE>
<CAPTION>
Wholesale Consumer
Banking Banking
----------------------------------------------------------------------------
For the Three Months Ended September 30 Percent Percent
(Dollars in Millions) 2000 1999 Change 2000 1999 Change
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CONDENSED INCOME STATEMENT
Net interest income
(taxable-equivalent basis)................... $ 416.3 $ 366.2 13.7% $ 341.8 $ 335.3 1.9%
Provision for credit losses..................... 31.5 26.8 17.5 52.2 58.9 (11.4)
Noninterest income.............................. 116.8 99.5 17.4 131.3 137.9 (4.8)
Noninterest expense............................. 221.8 187.6 18.2 224.0 208.4 7.5
Goodwill and other intangible assets expense.... 23.1 16.4 40.9 15.1 11.0 37.3
Income taxes and taxable-equivalent
adjustment................................... 95.0 86.9 9.3 67.3 72.1 (6.7)
---------------------- ----------------------
Income before merger-related charges and
available-for-sale securities transactions... $ 161.7 $ 148.0 9.3 $ 114.5 $ 122.8 (6.8)
---------------------- ----------------------
Net merger-related charges and
available-for-sale
securities transactions (after-tax)*.........
Net income......................................
AVERAGE BALANCE SHEET DATA
Loans........................................... $ 41,981 $ 35,768 17.4 $ 11,200 $ 12,873 (13.0)
Assets.......................................... 46,193 39,194 17.9 12,735 14,023 (9.2)
Deposits........................................ 11,803 10,845 8.8 31,289 29,902 4.6
Common equity................................... 4,877 3,764 29.6 1,246 1,141 9.2
---------------------- ----------------------
Return on average assets........................ 1.39% 1.50% 3.58% 3.47%
Return on average common equity ("ROCE")........ 13.2 15.6 36.6 42.7
Efficiency ratio................................ 45.9 43.8 50.5 46.4
Efficiency ratio on a cash basis**.............. 41.6 40.3 47.3 44.0
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
Wholesale Consumer
Banking Banking
----------------------------------------------------------------------------
For the Nine Months Ended September 30 Percent Percent
(Dollars in Millions) 2000 1999 Change 2000 1999 Change
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CONDENSED INCOME STATEMENT
Net interest income
(taxable-equivalent basis).................. $1,232.4 $1,071.8 15.0% $1,014.3 $ 987.7 2.7%
Provision for credit losses.................... 92.8 78.3 18.5 151.1 156.8 (3.6)
Noninterest income............................. 353.3 309.8 14.0 378.2 353.5 7.0
Noninterest expense............................ 641.9 562.2 14.2 663.8 623.0 6.5
Goodwill and other intangible assets expense... 69.1 47.6 45.2 45.5 32.2 41.3
Income taxes and taxable-equivalent
adjustment.................................. 289.3 256.6 12.7 196.9 195.8 .6
---------------------- ----------------------
Income before merger-related charges and
available-for-sale securities
transactions................................ $ 492.6 $ 436.9 12.7 $ 335.2 $ 333.4 .5
---------------------- ----------------------
Net merger-related charges and
available-for-sale securities transactions
(after-tax)*................................
Net income.....................................
AVERAGE BALANCE SHEET DATA
Loans.......................................... $ 41,241 $ 34,862 18.3 $ 10,858 $ 12,846 (15.5)
Assets......................................... 45,363 38,148 18.9 12,408 13,989 (11.3)
Deposits....................................... 11,640 10,808 7.7 31,080 30,461 2.0
Common equity.................................. 4,797 3,590 33.6 1,227 1,142 7.4
---------------------- ----------------------
Return on average assets....................... 1.45% 1.53% 3.61% 3.19%
Return on average common equity ("ROCE")....... 13.7 16.3 36.5 39.0
Efficiency ratio............................... 44.8 44.1 50.9 48.9
Efficiency ratio on a cash basis**............. 40.5 40.7 47.7 46.5
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*Merger-related charges and available-for-sale securities transactions are not
allocated to the business lines. All ratios are calculated without the effect
of merger-related charges and available-for-sale securities transactions.
**Calculated by excluding the amortization of goodwill and other intangibles.
***Not meaningful.

4 U.S. Bancorp
<PAGE> 6

<TABLE>
<CAPTION>
Payment Wealth Management and Corporate Consolidated
Systems Capital Markets Support Company
-----------------------------------------------------------------------------------------------------------------------------
Percent Percent Percent
2000 1999 Change 2000 1999 Change 2000 1999 2000 1999 Change
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 91.7 $ 94.3 (2.8%) $ 49.4 $ 42.9 15.2% ($ 16.2) $ 6.3 $ 883.0 $ 845.0 4.5%
83.9 73.9 13.5 1.5 1.2 25.0 3.9 (18.8) 173.0 142.0 21.8
208.5 168.7 23.6 335.9 278.9 20.4 33.5 31.0 826.0 716.0 15.4
110.7 91.7 20.7 302.8 244.7 23.7 (33.8) (6.6) 825.5 725.8 13.7
14.6 10.0 46.0 6.1 4.2 45.2 -- -- 58.9 41.6 41.6
33.7 32.3 4.3 27.7 26.5 4.5 17.0 24.8 240.7 242.6 (.8)
------------------- ------------------- -------------------- ---------------------
$ 57.3 $ 55.1 4.0 $ 47.2 $ 45.2 4.4 $ 30.2 $ 37.9 410.9 409.0 .5
------------------- ------------------- --------------------
(9.6) (12.6) ***
---------------------
$ 401.3 $ 396.4 1.2
---------------------
$ 9,001 $8,011 12.4 $ 3,061 $2,422 26.4 $ 1,990 $ 2,275 $ 67,233 $ 61,349 9.6
9,644 8,647 11.5 7,083 5,793 22.3 9,453 10,043 85,108 77,700 9.5
165 141 17.0 3,821 3,326 14.9 3,834 3,502 50,912 47,716 6.7
1,024 802 27.7 1,317 1,176 12.0 (432) (295) 8,032 6,588 21.9
------------------- ------------------- -------------------- ---------------------
2.36% 2.53% 2.65% 3.10% 1.92% 2.09%
22.3 27.3 14.3 15.2 20.4 24.6
41.7 38.7 80.2 77.3 51.7 49.2
36.9 34.9 78.6 76.0 48.3 46.5
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
Payment Wealth Management and Corporate Consolidated
Systems Capital Markets Support Company
-----------------------------------------------------------------------------------------------------------------------------
Percent Percent Percent
2000 1999 Change 2000 1999 Change 2000 1999 2000 1999 Change
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 273.8 $264.1 3.7% $ 144.9 $122.1 18.7% ($ 40.3) $ 16.0 $ 2,625.1 $2,461.7 6.6%
240.5 227.9 5.5 4.2 3.3 27.3 1.4 (81.3) 490.0 385.0 27.3
572.8 446.4 28.3 1,057.6 845.7 25.1 61.2 42.8 2,423.1 1,998.2 21.3
308.4 248.1 24.3 918.1 723.9 26.8 (57.2) (52.1) 2,475.0 2,105.1 17.6
41.0 24.2 69.4 18.3 12.0 52.5 -- -- 173.9 116.0 49.9
95.0 77.8 22.1 96.9 84.6 14.5 30.1 77.6 708.2 692.4 2.3
------------------- ------------------- -------------------- ---------------------
$ 161.7 $132.5 22.0 $ 165.0 $144.0 14.6 $ 46.6 $ 114.6 1,201.1 1,161.4 3.4
------------------- ------------------- --------------------
(27.7) (23.9) ***
---------------------
$ 1,173.4 $1,137.5 3.2
---------------------
$ 8,566 $7,859 9.0 $ 2,933 $2,276 28.9 $ 2,054 $ 2,416 $ 65,652 $ 60,259 8.9
9,175 8,357 9.8 6,915 5,475 26.3 9,799 10,334 83,660 76,303 9.6
125 97 28.9 3,729 3,244 15.0 3,766 3,162 50,340 47,772 5.4
934 709 31.7 1,307 1,147 13.9 (393) (257) 7,872 6,331 24.3
------------------- ------------------- -------------------- ---------------------
2.35% 2.12% 3.19% 3.52% 1.92% 2.04%
23.1 25.0 16.9 16.8 20.4 24.5
41.3 38.3 77.9 76.0 52.5 49.8
36.4 34.9 76.3 74.8 49.0 47.2
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

U.S. Bancorp 5
<PAGE> 7

On April 7, 2000, the Company acquired Oliver-Allen Corporation, Inc., a
privately held information technology leasing company with total assets of $280
million. On January 14, 2000, the Company acquired Peninsula Bank of San Diego,
which had 11 branches in San Diego county and total assets of $491 million. On
November 15, 1999, the Company completed the acquisition of Western Bancorp.
Western Bancorp had $2.5 billion in total assets with 31 branches in southern
California in Los Angeles, Orange and San Diego counties. The purchase price of
approximately $932 million was allocated to assets acquired and liabilities
assumed based on their fair market values at the date of acquisition. On
September 17, 1999, the Company completed its acquisition of the investment
banking division of The John Nuveen Company, which became part of the U.S.
Bancorp Piper Jaffray Fixed Income Capital Markets division. On September 13,
1999, the Company completed its acquisition of Voyager Fleet Systems Inc., which
is now part of the Payment Systems business unit. On July 15, 1999, the Company
completed its acquisition of the San Diego-based Bank of Commerce, one of the
nation's largest U.S. Small Business Administration ("SBA") lenders. On June 30,
1999, the Company completed its acquisition of Mellon Network Services'
electronic funds transfer processing unit. These transactions were all accounted
for as purchase acquisitions.

With respect to divestiture transactions, the Company completed the sale of
28 branches in Kansas and Iowa on September 24, 1999, with aggregate deposits of
$364 million. On September 23, 1999, the Company sold $1.8 billion of indirect
automobile loans and is in the process of exiting this business.

On October 13, 2000, the Company acquired Scripps Financial Corporation of
San Diego, which has ten branches in San Diego county and total assets of $650
million.

On October 4, 2000, the Company announced that it had signed a definitive
agreement to be acquired by Firstar Corporation of Milwaukee, Wisconsin in a
tax-free exchange of shares. U.S. Bancorp shareholders will receive 1.265 shares
of the combined company stock for every share of U.S. Bancorp stock. Pending all
regulatory and shareholder approvals, the transaction is expected to close in
the first quarter of 2001 and be accounted for as a pooling-of-interests.

LINE OF BUSINESS FINANCIAL REVIEW

Within the Company, financial performance is measured by major lines of
business, which include: Wholesale Banking, Consumer Banking, Payment Systems,
Wealth Management and Capital Markets, and Corporate Support. These segments are
determined based on the products and services provided to respond effectively to
the needs of a diverse customer base. Business line results are derived from the
Company's business unit profitability reporting system. Designations,
assignments and allocations may change from time to time as management
accounting systems are enhanced or product lines change. During 2000 certain
organization and methodology changes were made and 1999 results are presented on
a consistent basis.

WHOLESALE BANKING Wholesale Banking includes lending, treasury management,
corporate trust and other financial services to middle market, large corporate
and public sector clients. The business line contributed operating earnings of
$161.7 million in the third quarter of 2000, an increase of 9 percent over the
third quarter of 1999, and $492.6 million in the first nine months of 2000, a 13
percent increase over the same period of 1999. Strong revenue growth, primarily
due to core loan growth and bank acquisitions, was partially offset by an
increase in provision for credit losses and higher noninterest expense. Return
on average assets was 1.39 percent in the third quarter of 2000 and 1.45 percent
in the first nine months of 2000, compared with 1.50 percent and 1.53 percent
for the same periods of 1999. Return on average common equity was 13.2 percent
in the third quarter of 2000 and 13.7 percent in the first nine months of 2000,
compared with 15.6 percent and 16.3 percent for the same periods of 1999.

Net interest income increased 14 percent in the third quarter and 15 percent
in the first nine months of 2000, compared with the same periods of 1999. Strong
growth in net interest income was primarily due to core commercial loan growth
and bank acquisitions. The increase in the provision for credit losses of 18
percent for the third quarter and 19 percent for the first nine months of 2000
also reflected growth in the loan portfolio. Noninterest income increased 17
percent in the third quarter and 14 percent in the first nine months of 2000,
compared with the same periods of the prior year. The increase in noninterest
income was primarily due to leasing activities, the timing of ongoing sales of
SBA loans and acquisitions. Noninterest expense (including amortization of
intangible assets) increased 20 percent in the third quarter and 17 percent in
the first nine months of 2000, compared with the same periods of 1999. The
increase in noninterest expense was primarily due to acquisitions and SBA
lending activities. The efficiency ratio on a cash basis was

6 U.S. Bancorp
<PAGE> 8

41.6 percent in the third quarter and 40.5 percent in the first nine months of
2000, compared with 40.3 percent and 40.7 percent in the same periods of 1999.

CONSUMER BANKING Consumer Banking delivers products and services to the broad
consumer market and small-businesses through branch offices, telemarketing,
online services, direct mail and automated teller machines ("ATMs"). The
business line contributed operating earnings of $114.5 million during the third
quarter of 2000, a 7 percent decrease from the third quarter of 1999, and $335.2
million for the first nine months of 2000, a slight increase compared with the
same period of 1999. Third quarter and year-to-date return on average assets
improved to 3.58 percent and 3.61 percent, respectively, compared with 3.47
percent and 3.19 percent in the same periods of the prior year. Return on
average common equity was 36.6 percent for the third quarter and 36.5 percent
for the first nine months of 2000, compared with 42.7 percent and 39.0 percent
in the same periods of 1999.

Total revenue in the third quarter of 2000 was essentially equal to total
revenue in the third quarter of 1999, primarily due to the expected reduction in
the indirect automobile portfolio, a gain from the sale of student loans in the
third quarter of 1999 and a third quarter of 2000 loss on the Company's equity
investment in New Century Financial Corporation accounted for under the equity
method based on New Century's reported earnings. After consideration of the
timing of revenues derived from student loan sales and the loss associated with
New Century, the growth in revenue would have approximated prior quarters'
revenue growth. For the first nine months of 2000 total revenue improved 4
percent over the same period in 1999. A reduction in the business line's
provision for credit losses, primarily due to improved deposit fraud management
and the divestiture of the indirect automobile portfolio, was more than offset
by an increase in noninterest expense. Noninterest expense (including intangible
expense) increased 9 percent for the third quarter of 2000 and 8 percent the
first nine months of 2000 compared with the same periods of 1999. The Company is
currently investing in a number of customer service quality initiatives and
enhanced technology designed to improve the earnings growth of the Consumer
Banking business line. As with any investment, successful achievement of the
anticipated deposit and loan growth and related contribution to earnings is
subject to a number of uncertainties.

PAYMENT SYSTEMS Payment Systems includes consumer and business credit cards,
corporate and purchasing card services, consumer lines of credit, ATM processing
and merchant processing. The business line contributed operating earnings of
$57.3 million in the third quarter of 2000, an increase of 4 percent over the
third quarter of 1999, and $161.7 million for the first nine months of 2000,
representing a 22 percent increase over the same period of 1999. Third quarter
and year-to-date return on average assets were 2.36 percent and 2.35 percent,
respectively, compared with 2.53 percent and 2.12 percent in the same periods of
the prior year. Return on average common equity was 22.3 percent and 23.1
percent in the third quarter and first nine months of 2000, respectively,
compared with 27.3 percent and 25.0 percent in the same periods of 1999.

Total revenue increased 14 percent and 19 percent over the third quarter and
first nine months of 1999, respectively. Strong growth in corporate and retail
card product fees and ATM processing-related revenue was partially offset by a
slight reduction in net interest income, reflecting the growth in the business
line's noninterest-bearing corporate-card loans. Payment Systems' revenue growth
was partially offset by increases in provision for credit losses and noninterest
expense over the third quarter and first nine months of 1999, reflecting
continued growth in investments in key strategic co-brand partnerships, new
products and technology, as well as transaction volume.

WEALTH MANAGEMENT AND CAPITAL MARKETS Wealth Management and Capital Markets
engages in equity and fixed income trading activities, offers investment banking
and underwriting services for corporate and public sector customers and provides
securities, mutual funds, annuities and insurance products to consumers and
regionally-based businesses through a network of banking centers and brokerage
offices. It also offers institutional trust, investment management services, and
private banking and personal trust services. The business line contributed
operating earnings of $47.2 million in the third quarter of 2000, an increase of
4 percent compared with the third quarter of 1999, and $165.0 million for the
first nine months of 2000, a 15 percent increase over the first nine months of
1999. Return on average common equity for the third quarter of 2000 decreased to
14.3 percent, compared with 15.2 percent in the third quarter of the prior year.
The return on average common equity improved slightly to 16.9 percent from 16.8
percent in the first nine months of 2000 compared with the same period of 1999.

During the third quarter of 2000, total revenue grew by 20 percent over the
third quarter of 1999 and 24 percent over the first nine months of 1999
primarily due to increases in investment banking, trading account profits and
commissions, trust fees and growth in loans and deposits in Private Financial
Services. Offsetting the

U.S. Bancorp 7
<PAGE> 9

TABLE 3
ANALYSIS OF NET INTEREST INCOME

positive impact of revenue growth, noninterest expense (including amortization
of intangible assets) increased 24 percent in the third quarter and 27 percent
in the first nine months of 2000, compared with the same periods of 1999. The
increases were primarily due to the increase in investment banking and brokerage
activity, office expansion and other growth initiatives.

CORPORATE SUPPORT Corporate Support includes the net effect of support units
after internal revenue and expense allocations, treasury and other corporate
activities. Operating earnings in the third quarter declined $7.7 million and
$68 million during the first nine months of 2000 as compared with the same
periods of 1999. The reductions primarily reflect the change in the residual
allocations associated with provision for credit losses, planned declines in the
residential real estate portfolio, noninterest expenses from operational
activities and the effect of a rising rate environment.

STATEMENT OF INCOME ANALYSIS

NET INTEREST INCOME Third quarter net interest income on a taxable-equivalent
basis was $883.0 million compared with $845.0 million in the third quarter of
1999. Year-to-date net interest income on a taxable-equivalent basis was $2.63
billion, compared with $2.46 billion in the first nine months of 1999. For the
third quarter and on a year-to-date basis, average earning assets increased 9
percent compared with the same periods of 1999. The increase was primarily
driven by core commercial and home equity and second mortgage loan growth and
acquisitions, partially offset by reductions in securities, indirect automobile
loans and residential mortgage loans. The net interest margin decreased from
4.84 percent in both the third quarter and first nine months of 1999 to 4.64
percent and 4.73 percent in the third quarter and first nine months of 2000. The
decrease reflects lagging core deposit growth relative to the growth in total
earning assets which has increased the Company's incremental cost of funding.

Average loans for the third quarter and first nine months of 2000 increased
10 percent and 9 percent, respectively, compared with the same periods of the
prior year. Excluding indirect automobile and residential mortgage loans,
average loans for both the third quarter and first nine months of 2000 were
higher by approximately $8.05 billion (14 percent) and $7.91 billion (14
percent), respectively, than the third quarter and first nine months of 1999.
The decline in indirect automobile loans reflects a $1.8 billion loan sale
completed in the third quarter of 1999. The Company is in the process of exiting
this business. Without acquisitions, average loans, excluding indirect
automobile and residential mortgage loans, were higher than the third quarter
and first nine months of 1999 by 10 percent for both periods. Average
available-for-sale securities for the third quarter and first nine months of
2000 decreased by $659 million and $454 million, respectively, from the third
quarter and first nine months of 1999, reflecting both maturities and sales of
securities.

PROVISION FOR CREDIT LOSSES In the third quarter of 2000, the provision for
credit losses was $173.0 million, an increase of $31 million (22 percent) from
$142.0 million in the same quarter of 1999. The provision for credit losses in
the first nine months of 2000 was $490.0 million, an increase of $105 million
(27 percent) from $385.0 million in the same period of 1999. Third quarter and
year-to-date net charge-offs totaled $172.9 million and $490.1 million,
respectively, up from $141.8 million and $421.7 million in the same periods of
1999. The increase in net charge-offs during 2000 was primarily due to
commercial loan charge-offs including the growing credit-scored small business

8 U.S. Bancorp
<PAGE> 10

TABLE 4
NONINTEREST INCOME

lending portfolio. On a year-to-date basis, this increase was partially offset
by lower consumer loan charge-offs. Refer to "Corporate Risk Management" for
further information on credit quality.

NONINTEREST INCOME Third quarter 2000 noninterest income was $827.0 million, an
increase of $114.4 million (16 percent) from the third quarter of 1999.
Noninterest income in the first nine months of 2000 was $2.42 billion, an
increase of $429.3 million (22 percent) from $1.99 billion in the first nine
months of 1999. Noninterest income in the third quarter of 2000 included net
gains from available-for-sale securities transactions of $1.0 million as
compared with net losses of $3.4 million in the same period of 1999. Excluding
the impact of acquisitions and divestitures, noninterest income, before
available-for-sale securities transactions, in the third quarter and first nine
months of 2000 would have been approximately 14 percent higher than the third
quarter of 1999 and 19 percent higher than the first nine months of 1999.

Credit card fee revenue was higher for the third quarter and first nine
months of 2000 by $31.5 million (20 percent) and $92.6 million (21 percent),
respectively, reflecting continued growth in corporate and retail card product
fees, ATM processing-related revenue and acquisitions. Investment banking
revenue was higher in the third quarter and first nine months of 2000 compared
with the same periods of 1999 by $37.2 million (62 percent) and $107.5 million
(69 percent), respectively, due to strong equity capital markets activity at
U.S. Bancorp Piper Jaffray. Other income increased by $23.2 million, or 16
percent, over the third quarter of 1999 and $128.8 million, or 39 percent, over
the first nine months of 1999. The increases reflect the impact of acquisitions,
U.S. Bancorp Piper Jaffray managed account fees, revenues associated with equity
investments, and the timing of sales of SBA loans, partially offset by the third
quarter of 1999 gain-on-sale of branches in Kansas and Iowa. Year-to-date
results also reflect the second quarter $35 million gain on the disposal of the
Company's ownership interests in a Portland office building, and a $10.8 million
first quarter gain on the sale of a Boise building.

NONINTEREST EXPENSE Third quarter 2000 noninterest expense, before
merger-related charges, totaled $884.4 million, an increase of $117.0 million
(15 percent) from $767.4 million in the third quarter of 1999. Year-to-date
noninterest expense, before merger-related charges, was $2.65 billion, an
increase of $427.8 million (19 percent) from $2.22 billion in the first nine
months of 1999. The increase in noninterest expense over the third quarter and
first nine months of 1999 was primarily the result of acquisitions, the increase
in investment banking and brokerage activity and the Company's continuing
investment in sales, service quality and technology. In addition to ongoing
investments in Internet-related products and services, the third quarter and
first nine months of 2000 included approximately $10.8 million and $31.0
million, respectively, of incremental spending on Internet
infrastructure-related initiatives. As with any such investment, the anticipated
benefits are subject to a number of uncertainties.

The banking efficiency ratio, excluding merger-related charges, was 43.1
percent and 44.3 percent for the third quarter and first nine months of 2000,
respectively, compared with 42.3 percent and 42.7 percent for the same periods
of 1999. The overall efficiency ratio increased slightly due to the planned
investments in Internet technology and other customer-related initiatives. The
Company has accelerated the development of its capabilities to deliver its
products and services over the Internet.

Third quarter of 2000 noninterest expense was $900.1 million, compared with
$784.2 million in the third quarter of 1999. Year-to-date noninterest expense

U.S. Bancorp 9
<PAGE> 11

TABLE 5
NONINTEREST EXPENSE

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

**Without investment banking and brokerage activity.

was $2.69 billion, compared with $2.26 billion in the first nine months of 1999.
Noninterest expense in the third quarter and first nine months of 2000 included
nonrecurring merger-related charges of $15.7 million and $43.8 million, compared
with merger-related charges of $16.8 million and $34.7 million in the third
quarter and first nine months of 1999. The merger-related charges incurred in
2000 were related to the integration of the Company's various acquisitions,
including Mellon Network Services, Western Bancorp and Peninsula Bank of San
Diego.

INCOME TAX EXPENSE The provision for income taxes was $218.1 million (an
effective rate of 35.2 percent) in the third quarter and $641.2 million (an
effective rate of 35.3 percent) in the first nine months of 2000, compared with
$224.7 million (an effective rate of 36.2 percent) and $646.5 million (an
effective rate of 36.2 percent) in the same periods of 1999.

BALANCE SHEET ANALYSIS

LOANS The Company's loan portfolio was $68.3 billion at September 30, 2000,
compared with $62.9 billion at December 31, 1999. Commercial loans totaled $48.4
billion at September 30, 2000, up $5.4 billion (13 percent) from December 31,
1999. The increase was primarily attributable to continued growth in core
commercial loans and acquisitions. Total consumer outstandings were $19.9
billion both at September 30, 2000 and at December 31, 1999. Excluding indirect
automobile loans and residential mortgage loans, consumer loans were $17.0
billion at September 30, 2000, and $16.6 billion at December 31, 1999.

SECURITIES At September 30, 2000, available-for-sale securities totaled $4.4
billion, compared with $4.9 billion at December 31, 1999, reflecting both
maturities and sales of securities.

DEPOSITS Noninterest-bearing deposits were $14.5 billion at September 30, 2000,
compared with $16.1 billion at December 31, 1999. The decrease was primarily due
to seasonality of business deposits. The decline was offset by an increase in
interest-bearing deposits which totaled $36.8 billion at September 30, 2000,
compared with $35.5 billion at December 31, 1999.

BORROWINGS Short-term borrowings, which include federal funds purchased,
securities sold under agreements to repurchase and other short-term borrowings,
increased to $3.4 billion at September 30, 2000, compared with $2.3 billion at
December 31, 1999, primarily due to increased federal funds purchased.

Long-term debt was $19.4 billion at September 30, 2000, up from $16.6
billion at December 31, 1999. The Company issued $4.8 billion of debt with an
average original maturity of 1.9 years under its medium-term and bank note
programs to fund core asset growth and replace wholesale funding maturities
during 2000. In

10 U.S. Bancorp
<PAGE> 12

TABLE 6
NET CHARGE-OFFS AS A PERCENTAGE OF AVERAGE LOANS OUTSTANDING

addition, Federal Home Loan Bank advances, net of maturities, increased by $309
million during 2000.

CORPORATE RISK PROFILE

CREDIT MANAGEMENT The Company's strategy for credit risk management includes
stringent, centralized credit policies, and uniform underwriting criteria for
all loans including specialized lending categories such as mortgage banking,
real estate construction and consumer credit. The strategy also emphasizes
diversification on both a geographic and customer level, regular credit
examinations, and quarterly management reviews of large loans and loans
experiencing deterioration of credit quality. The Company strives to identify
potential problem loans early, take any necessary charge-offs promptly and
maintain strong reserve levels. Commercial banking operations rely on a strong
credit culture that combines prudent credit policies and individual lender
accountability. In addition, the commercial lenders generally focus on middle
market companies within their regions. In the Company's retail banking
operations, standard credit scoring systems are used to assess consumer credit
risks and to price consumer products accordingly.

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, and macroeconomic factors.
Generally, the domestic economy of the nation is considered strong, though
financial markets have been volatile. Approximately 55 percent of the Company's
loan portfolio consists of credit to businesses and consumers in Minnesota,
Oregon, Washington and California.

NET CHARGE-OFFS AND ALLOWANCE FOR CREDIT LOSSES Net loan charge-offs totaled
$172.9 million and $490.1 million in the third quarter and first nine months of
2000, respectively, compared with $141.8 million and $421.7 million in the same
periods of 1999. The ratio of total net charge-offs to average loans was 1.02
percent and 1.00 percent in the third quarter and first nine months of 2000,
respectively, compared with .92 and .94 percent in the same periods in 1999.
Commercial loan net charge-offs were $63.9 million and $166.2 million in the
third quarter and first nine months of 2000, respectively, compared with $32.7
million and $86.5 million in the same periods of 1999. The increase reflects the
impact of acquisitions, the current economic conditions and growth in small
business and corporate payment systems portfolios. Excluding net charge-offs of
credit-scored small business and corporate payment systems products, commercial
loan net charge-offs were $36.4 million, or .33 percent of the associated
average loans outstanding, compared with $34.4 million, or .32 percent on the
same basis, in the second quarter of 2000.

Consumer loan net charge-offs for the quarter and year-to-date were $109.0
million and $323.9 million, respectively, compared with $109.1 million and
$335.2 million for the same periods of 1999. Consumer loan net charge-offs as a
percent of average loans

U.S. Bancorp 11
<PAGE> 13

TABLE 7
SUMMARY OF ALLOWANCE FOR CREDIT LOSSES

<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------------------------------------
September 30 September 30 September 30 September 30
(Dollars in Millions) 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of period.............................. $1,039.4 $ 968.2 $ 995.4 $1,000.9
CHARGE-OFFS
Commercial
Commercial............................................ 62.2 35.4 179.3 126.2
Real estate
Commercial mortgage................................ .4 6.5 2.1 7.1
Construction....................................... 5.1 .2 5.2 .6
Lease financing....................................... 3.6 3.4 10.3 6.0
---------------------------------------------------------------
Total commercial................................... 71.3 45.5 196.9 139.9
Consumer
Credit card........................................... 50.7 40.5 144.4 146.9
Other................................................. 74.2 88.6 229.9 250.7
---------------------------------------------------------------
Subtotal........................................... 124.9 129.1 374.3 397.6
Residential mortgage.................................. .8 .9 4.3 2.7
---------------------------------------------------------------
Total consumer..................................... 125.7 130.0 378.6 400.3
---------------------------------------------------------------
Total........................................... 197.0 175.5 575.5 540.2
RECOVERIES
Commercial
Commercial............................................ 6.7 11.5 21.8 46.1
Real estate
Commercial mortgage................................ .3 1.0 6.0 5.4
Construction....................................... .2 -- 1.9 .1
Lease financing....................................... .2 .3 1.0 1.8
---------------------------------------------------------------
Total commercial................................... 7.4 12.8 30.7 53.4
Consumer
Credit card........................................... 3.2 5.1 10.0 14.6
Other................................................. 12.9 15.7 43.7 50.0
---------------------------------------------------------------
Subtotal........................................... 16.1 20.8 53.7 64.6
Residential mortgage.................................. .6 .1 1.0 .5
---------------------------------------------------------------
Total consumer..................................... 16.7 20.9 54.7 65.1
---------------------------------------------------------------
Total........................................... 24.1 33.7 85.4 118.5
NET CHARGE-OFFS
Commercial
Commercial............................................ 55.5 23.9 157.5 80.1
Real estate
Commercial mortgage................................ .1 5.5 (3.9) 1.7
Construction....................................... 4.9 .2 3.3 .5
Lease financing....................................... 3.4 3.1 9.3 4.2
---------------------------------------------------------------
Total commercial................................... 63.9 32.7 166.2 86.5
Consumer
Credit card........................................... 47.5 35.4 134.4 132.3
Other................................................. 61.3 72.9 186.2 200.7
---------------------------------------------------------------
Subtotal........................................... 108.8 108.3 320.6 333.0
Residential mortgage.................................. .2 .8 3.3 2.2
---------------------------------------------------------------
Total consumer..................................... 109.0 109.1 323.9 335.2
---------------------------------------------------------------
Total........................................... 172.9 141.8 490.1 421.7
Provision charged to operating expense...................... 173.0 142.0 490.0 385.0
Acquisitions and other changes.............................. 19.5 (2.1) 63.7 2.1
---------------------------------------------------------------
Balance at end of period.................................... $1,059.0 $ 966.3 $1,059.0 $ 966.3
---------------------------------------------------------------
Allowance as a percentage of:
Period-end loans......................................... 1.55% 1.60%
Nonperforming loans...................................... 272 327
Nonperforming assets..................................... 249 297
Annualized net charge-offs............................... 154 172
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

12 U.S. Bancorp
<PAGE> 14

TABLE 8
DELINQUENT LOAN RATIOS*

<TABLE>
<CAPTION>
September 30 December 31
90 days or more past due 2000 1999
-------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL
Commercial............................................... .79% .57%
Real estate
Commercial mortgage................................... .70 .84
Construction.......................................... .68 .59
Lease financing.......................................... 1.07 .81
---------------------------
Total commercial...................................... .78 .65
CONSUMER
Credit card.............................................. 1.16 .96
Other.................................................... .60 .57
---------------------------
Subtotal.............................................. .74 .67
Residential mortgage..................................... 1.56 1.57
---------------------------
Total consumer........................................ .84 .79
---------------------------
Total........................................... .80% .69%
-------------------------------------------------------------------------------------------
</TABLE>

*Ratios include nonperforming loans and are expressed as a percent of ending
loan balances.

TABLE 9
NONPERFORMING ASSETS*

*Throughout this document, nonperforming assets and related ratios do not
include accruing loans 90 days or more past due.
**These loans are not included in nonperforming assets and continue to accrue
interest because they are secured by collateral and/or are in the process of
collection and are reasonably expected to result in repayment or restoration
to current status.

outstanding were 2.18 in both the third quarter and first nine months of 2000,
compared with 2.03 and 2.09 for the same periods of 1999.
The allowance for credit losses increased to $1,059.0 million at September
30, 2000, from $995.4 million at December 31, 1999, due to additions related to
bank acquisitions and portfolio purchases. As a percentage of nonperforming
loans, the allowance was 272 percent at September 30, 2000, compared with 285
percent at June 30, 2000 and 321 percent at December 31, 1999.

NONPERFORMING ASSETS Nonperforming assets include nonaccrual loans, restructured
loans, other real estate and other nonperforming assets owned by the Company.
Nonperforming assets at September 30, 2000, totaled $425.3 million, compared
with $347.5 million at December 31, 1999. The ratio of nonperforming assets to
loans and other real estate was

U.S. Bancorp 13
<PAGE> 15

TABLE 10
INTEREST RATE SWAP HEDGING PORTFOLIO NOTIONAL BALANCES AND YIELDS BY
MATURITY DATE

<TABLE>
<CAPTION>
At September 30, 2000 (Dollars in Millions)
-------------------------------------------------------------------------------------------------------------------
Weighted Weighted
Average Average
Notional Interest Rate Interest Rate
Maturity Date Amount Received Paid
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2000........................................................ $ 10 6.23% 6.62%
2001........................................................ 290 6.56 6.62
2002........................................................ 545 6.22 6.62
2003........................................................ 2,318 6.20 6.71
2004........................................................ 1,475 6.60 6.63
Thereafter.................................................. 2,610 6.42 6.62
------
Total....................................................... $7,248 6.38% 6.65%
-------------------------------------------------------------------------------------------------------------------
</TABLE>

*At September 30, 2000, the Company received fixed-rate interest and paid
variable-rate interest on substantially all swaps in its hedging portfolio.

.62 percent at September 30, 2000, compared with .60 percent at June 30, 2000
and .55 percent at December 31, 1999.

Accruing loans 90 days or more past due at September 30, 2000, totaled
$155.8 million, compared with $125.8 million at December 31, 1999. These loans
are not included in nonperforming assets and continue to accrue interest because
they are secured by collateral and/or are in the process of collection and are
reasonably expected to result in repayment or restoration to current status.
Consumer loans 30 days or more past due increased to 2.72 percent of the
portfolio at September 30, 2000, compared with 2.58 percent at June 30, 2000,
and 2.65 percent at December 31, 1999. The percentage of consumer loans 90 days
or more past due of the total consumer loan portfolio was .84 percent at
September 30, 2000, compared with .80 percent at June 30, 2000, and .79 percent
at December 31, 1999.

INTEREST RATE RISK MANAGEMENT The Company's policy is to maintain a low interest
rate risk position. The Company limits the exposure of net interest income
associated with interest rate movements through asset/liability management
strategies. The Company's Asset and Liability Management Committee ("ALCO") uses
three methods for measuring and managing consolidated interest rate risk: Net
Interest Income Simulation Modeling, Market Value Simulation Modeling, and
Repricing Mismatch Analysis.

NET INTEREST INCOME SIMULATION MODELING: The Company uses a net interest income
simulation model to estimate near-term (next 24 months) risk due to changes in
interest rates. The model, which is updated monthly, incorporates substantially
all of the Company's assets and liabilities and off-balance sheet instruments,
together with forecasted changes in the balance sheet and assumptions that
reflect the current interest rate environment. ALCO uses the model to simulate
the effect of immediate and sustained parallel shifts in the yield curve of 1
percent, 2 percent and 3 percent, as well as the effect of immediate and
sustained flattening or steepening of the yield curve. ALCO also calculates the
sensitivity of the simulation results to changes in key assumptions, such as the
Prime/LIBOR spread or core deposit repricing. The results from the simulation
are reviewed by ALCO monthly and are used to guide ALCO's hedging strategies.
ALCO guidelines, approved by the Company's Board of Directors, limit the
estimated change in net interest income to 1.5 percent of forecasted net
interest income over the succeeding 12 months and 3 percent of forecasted net
interest income over the second 12 months given a 1 percent change in interest
rates. At September 30, 2000, forecasted net interest income for the next 12
months would decrease $16 million from an immediate 100 basis point upward
parallel shift in rates and would increase $20 million from a downward shift of
similar magnitude. Forecasted net interest income for the second 12 months would
decrease $15 million from an immediate 100 basis point upward parallel shift in
rates and would increase $6 million from a downward shift of similar magnitude.

MARKET VALUE SIMULATION MODELING: The net interest income simulation model is
somewhat limited by its dependence upon accurate forecasts of future business
activity and the resulting effect on balance sheet assets and liabilities. As a
result, its usefulness is greatly diminished for periods beyond one or two
years. To better measure all interest rate risk, both short-term and long-term,
the Company uses a market value simulation model. This model estimates the
effect of 1 percent, 2 percent and 3 percent rate shocks on the present value of
substantially all future cash flows of the Company's outstanding assets,
liabilities and off-balance sheet

14 U.S. Bancorp
<PAGE> 16

instruments. ALCO also calculates the sensitivity of the simulation results to
changes in key assumptions, such as core deposit repricing and core deposit
life. The amount of market value risk is subject to a limit, approved by the
Company's Board of Directors, of .5 percent of assets for an immediate 100 basis
point rate shock. The Company's market value risk position continues to be
substantially lower than its limits.

REPRICING MISMATCH ANALYSIS: A traditional gap analysis provides a static
measurement of the relationship between the amounts of interest rate sensitive
assets and liabilities repricing in a given time period. While the analysis
provides a useful snapshot of interest rate risk, it does not capture all
aspects of interest rate risk. As a result, ALCO uses the repricing mismatch
analysis primarily for managing intermediate-term interest rate risk and has
established limits, approved by the Company's Board of Directors, for the two-
to three-year gap position of 5 percent of assets.

USE OF DERIVATIVES TO MANAGE INTEREST RATE RISK: While each of the interest rate
risk measurements has limitations, taken together they represent a comprehensive
view of the magnitude of the Company's interest rate risk over various time
intervals. The Company manages its interest rate risk by entering into
off-balance sheet transactions, primarily receive fixed interest rate swaps and,
to a lesser degree, basis swaps and interest rate caps and floors.

During the third quarter of 2000, the Company added $60 million of receive
fixed interest rate swaps. In the first nine months of 2000, the Company added
$245 million of receive fixed interest rate swaps and $500 million of pay fixed
interest rate swaps and terminated $674 million of receive fixed interest rate
swaps to reduce interest income at risk. Interest rate swap agreements involve
the exchange of fixed- and variable-rate payments without the exchange of the
underlying notional amount on which the interest payments are calculated. As of
September 30, 2000, the Company received and made payments on $7.2 billion
notional amount of interest rate swap agreements. These swaps had a weighted
average interest rate received of 6.38 percent and a weighted average interest
rate paid of 6.65 percent. The remaining maturity of these agreements ranges
from 1 month to 14.8 years with an average remaining maturity of 4.4 years. For
the quarter and nine months ended September 30, 2000, interest rate swap
agreements decreased net interest income by $7.8 million and $9.6 million,
respectively, and for the quarter and nine months ended September 30, 1999,
interest rate swap agreements increased net interest income by $15.2 million and
$52.3 million, respectively.

The Company also purchases interest rate caps, floors and basis swaps to
minimize the impact of fluctuating interest rates on earnings. To hedge against
rising interest rates, the Company uses interest rate caps. Counterparties to
these interest rate cap agreements pay the Company based on the notional amount
and the difference between current rates and strike rates. There were no caps
outstanding at September 30, 2000. To hedge against falling interest rates, the
Company uses interest rate floors. Like caps, counterparties to interest rate
floor agreements pay the Company based on the notional amount and the difference
between current rates and strike rates. The total notional amount of floor
agreements purchased as of September 30, 2000, all of which were LIBOR-indexed,
was $500 million. Basis swaps help the Company reduce the monthly interest
income at risk related to mismatches in underlying repricing indices of
financial instruments. During the third quarter of 2000, the Company entered
into $1.0 billion of basis swaps where the Company receives 3 month LIBOR and
pays 1 month LIBOR. The impact of basis swaps, caps and floors on net interest
income was not significant for the nine months ended September 30, 2000, and
1999.

MARKET RISK MANAGEMENT Market risk is subject to regular monitoring by
management. The Company uses a value-at-risk ("VaR") model to measure and manage
market risk in its broker/dealer activities. The VaR model uses an estimate of
volatility appropriate to each instrument and a ninety-ninth percentile adverse
move in the underlying markets. Market risk limits are established subject to
approval by the Company's Board of Directors. The Company's VaR limit was $40
million at September 30, 2000. The market valuation risk inherent in its
broker/dealer activities, including equities, fixed income, high yield
securities and foreign exchange, as estimated by the VaR analysis, was $15.5
million at September 30, 2000.

In addition to the VaR analysis, the Company imposes stop loss limits and
position limits. A stress-test model is used to provide management with
perspective on market events that a VaR model does not capture. In each case,
the historical worst performance of each asset class is observed and applied to
current trading positions.

U.S. Bancorp 15
<PAGE> 17

TABLE 11
CAPITAL RATIOS

Total risk-based capital.................................... $ 9,476 $ 9,281
As a percent of risk-adjusted assets..................... 10.7% 11.1%
Leverage ratio.............................................. 7.3 7.4
-------------------------------------------------------------------------------------------
</TABLE>

*Defined as common equity less goodwill.

CAPITAL MANAGEMENT At September 30, 2000, tangible common equity (common equity
less goodwill) was $5.4 billion, or 6.5 percent of assets, compared with $5.1
billion, or 6.5 percent, at December 31, 1999. Tier 1 and total risk-based
capital ratios were 6.7 percent and 10.7 percent at September 30, 2000, compared
with 6.8 percent and 11.1 percent at December 31, 1999. The September 30, 2000,
leverage ratio was 7.3 percent, compared with 7.4 percent at December 31, 1999.

On February 16, 2000, the Company announced a share repurchase program of up
to $2.5 billion of common stock over the period ending March 31, 2002. The new
share repurchase program replaced a program that was scheduled to expire on
March 31, 2000. During the first nine months of 2000, the Company repurchased
20.2 million shares under these programs for a total dollar value of $432.2
million.

ACCOUNTING CHANGES

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Statement of
Financial Accounting Standards No. ("SFAS") 133, "Accounting for Derivative
Instruments and Hedging Activities," and SFAS 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities - an Amendment to FASB
Statement No. 133," establish accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. In certain defined
conditions, a derivative may be specifically designated as a hedge for a
particular exposure. The accounting for changes in the fair value of the
derivative depends on the intended use of the derivative and the resulting
designation. The effective date has been deferred for one year with the issuance
of SFAS 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No. 133," which
amended SFAS 133. SFAS 133, as amended, is effective for all fiscal years
beginning after June 15, 2000, with earlier application permitted. We have
evaluated the impact of the adoption of SFAS 133 and have determined, based on
current market information, that it will not have a material impact on the
Company.

ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS
OF LIABILITIES SFAS 140, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities", established accounting and reporting
standards for sales and servicing of financial assets, securitization
transactions and the extinguishment of liabilities. The statement replaced SFAS
125 and provided clarification of issues related to qualified special purpose
entities and additional disclosures about securitizations and the residual
interests retained. SFAS 140 is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after March 31,
2001. The additional disclosures are required in financial statements for fiscal
years ending after December 15, 2000. The adoption of SFAS 140 is not expected
to have a material impact on the Company.

16 U.S. Bancorp
<PAGE> 18

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
September 30 December 31
(Dollars in Millions) 2000 1999
-------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 3,666 $ 4,036
Federal funds sold.......................................... 110 713
Securities purchased under agreements to resell............. 449 324
Trading account securities.................................. 693 617
Available-for-sale securities............................... 4,446 4,871
Loans....................................................... 68,266 62,885
Less allowance for credit losses......................... 1,059 995
---------------------------
Net loans................................................ 67,207 61,890
Premises and equipment...................................... 860 862
Interest receivable......................................... 540 433
Customers' liability on acceptances......................... 214 152
Goodwill and other intangible assets........................ 3,254 3,066
Other assets................................................ 4,910 4,566
---------------------------
Total assets.......................................... $ 86,349 $ 81,530
---------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing...................................... $ 14,544 $ 16,050
Interest-bearing......................................... 30,351 29,671
Time certificates of deposit greater than $100,000....... 6,497 5,809
---------------------------
Total deposits........................................ 51,392 51,530
Federal funds purchased..................................... 1,324 297
Securities sold under agreements to repurchase.............. 1,084 1,235
Other short-term funds borrowed............................. 944 724
Long-term debt.............................................. 19,400 16,563
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely the junior
subordinated debentures of the parent company............ 950 950
Acceptances outstanding..................................... 214 152
Other liabilities........................................... 2,899 2,441
---------------------------
Total liabilities..................................... 78,207 73,892
Shareholders' equity
Common stock, par value $1.25 a share -- authorized
1,500,000,000 shares; issued: 9/30/00 -- 758,194,161
shares; 12/31/99 -- 754,368,668 shares................. 948 943
Capital surplus.......................................... 1,465 1,399
Retained earnings........................................ 6,080 5,389
Accumulated other comprehensive income................... (33) (62)
Less cost of common stock in treasury:
9/30/00 -- 14,799,833 shares; 12/31/99 -- 1,038,456
shares................................................. (318) (31)
---------------------------
Total shareholders' equity............................ 8,142 7,638
---------------------------
Total liabilities and shareholders' equity............ $ 86,349 $ 81,530
-------------------------------------------------------------------------------------------
</TABLE>

U.S. Bancorp 17
<PAGE> 19

CONSOLIDATED STATEMENT OF INCOME

<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------------------------------------
(Dollars in Millions, Except Per Share Data) September 30 September 30 September 30 September 30
(Unaudited) 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans....................................................... $1,582.9 $1,333.3 $4,527.3 $3,844.0
Securities
Taxable.................................................. 56.7 64.2 175.5 188.6
Exempt from federal income taxes......................... 13.5 14.2 41.3 43.2
Other interest income....................................... 67.2 40.1 194.5 112.9
---------------------------------------------------------------
Total interest income................................. 1,720.3 1,451.8 4,938.6 4,188.7
INTEREST EXPENSE
Deposits.................................................... 442.0 318.7 1,217.1 939.1
Federal funds purchased and repurchase agreements........... 37.0 48.4 126.5 131.4
Other short-term funds borrowed............................. 12.9 12.9 41.5 37.9
Long-term debt.............................................. 343.5 217.8 922.3 592.3
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely the junior
subordinated debentures of the parent company............ 19.4 19.3 58.0 58.0
---------------------------------------------------------------
Total interest expense................................ 854.8 617.1 2,365.4 1,758.7
---------------------------------------------------------------
Net interest income......................................... 865.5 834.7 2,573.2 2,430.0
Provision for credit losses................................. 173.0 142.0 490.0 385.0
---------------------------------------------------------------
Net interest income after provision for credit losses....... 692.5 692.7 2,083.2 2,045.0
NONINTEREST INCOME
Credit card fee revenue..................................... 192.8 161.3 529.4 436.8
Trust and investment management fees........................ 119.9 113.8 354.0 343.2
Service charges on deposit accounts......................... 120.8 112.2 347.3 323.1
Investment products fees and commissions.................... 81.3 79.5 279.3 259.7
Investment banking revenue.................................. 97.3 60.1 264.1 156.6
Trading account profits and commissions..................... 50.0 48.4 191.8 150.4
Available-for-sale securities gains (losses)................ 1.0 (3.4) 1.0 (3.4)
Other....................................................... 163.9 140.7 457.2 328.4
---------------------------------------------------------------
Total noninterest income.............................. 827.0 712.6 2,424.1 1,994.8
NONINTEREST EXPENSE
Salaries.................................................... 417.5 352.4 1,263.7 1,063.2
Employee benefits........................................... 63.0 59.8 208.4 183.4
Net occupancy............................................... 59.5 51.9 171.8 151.8
Furniture and equipment..................................... 43.7 40.9 125.3 118.0
Goodwill and other intangible assets........................ 58.9 41.6 173.9 116.0
Merger-related charges...................................... 15.7 16.8 43.8 34.7
Other....................................................... 241.8 220.8 705.8 588.7
---------------------------------------------------------------
Total noninterest expense............................. 900.1 784.2 2,692.7 2,255.8
---------------------------------------------------------------
Income before income taxes.................................. 619.4 621.1 1,814.6 1,784.0
Applicable income taxes..................................... 218.1 224.7 641.2 646.5
---------------------------------------------------------------
Net income.................................................. $ 401.3 $ 396.4 $1,173.4 $1,137.5
---------------------------------------------------------------
Earnings per share.......................................... $ .54 $ .55 $ 1.58 $ 1.57
Diluted earnings per share.................................. $ .54 $ .54 $ 1.57 $ 1.56
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

18 U.S. Bancorp
<PAGE> 20

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
Accumulated
Other
(Dollars in Millions) Common Shares Common Capital Retained Comprehensive Treasury
(Unaudited) Outstanding* Stock Surplus Earnings Income Stock** Total
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1998............ 725,761,718 $931.0 $1,247.2 $4,455.8 $ 71.8 $(735.8) $5,970.0
Common dividends declared............ (426.0) (426.0)
Purchase of treasury stock........... (9,418,262) (310.6) (310.6)
Issuance of common stock
Acquisitions...................... 10,315,236 (33.0) 386.3 353.3
Dividend reinvestment............. 551,169 (2.9) 20.5 17.6
Stock option and stock purchase
plans.......................... 3,174,870 (49.7) 126.4 76.7
----------------------------------------------------------------------------------------
730,384,731 931.0 1,161.6 4,029.8 71.8 (513.2) 5,681.0
Comprehensive income
Net income........................... 1,137.5 1,137.5
Other comprehensive income
Change in net unrealized losses on
securities of $100.3 (net of $61.5
tax benefit) net of
reclassification adjustment for
losses included in net income of
$.6 (net of $.3 tax benefit)...... (99.7) (99.7)
--------
Total comprehensive
income................... 1,037.8
----------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 1999........... 730,384,731 $931.0 $1,161.6 $5,167.3 $(27.9) $(513.2) $6,718.8
---------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1999............ 753,330,212 $943.0 $1,398.8 $5,389.2 $(61.8) $ (31.5) $7,637.7
Common dividends declared............ (482.9) (482.9)
Purchase of treasury stock........... (20,248,002) (432.2) (432.2)
Issuance of common stock
Acquisitions...................... 6,969,658 4.0 55.7 86.3 146.0
Dividend reinvestment............. 894,599 (.4) 19.1 18.7
Stock option and stock purchase
plans.......................... 2,447,861 .7 10.7 40.5 51.9
----------------------------------------------------------------------------------------
743,394,328 947.7 1,464.8 4,906.3 (61.8) (317.8) 6,939.2
Comprehensive income
Net income........................... 1,173.4 1,173.4
Other comprehensive income
Change in net unrealized losses on
securities of $30.1 (net of $18.6
tax expense) net of
reclassification adjustment for
gains included in net income of
$.3 (net of $.2 tax expense)...... 29.8 29.8
Foreign currency translation
adjustments.................... (.8) (.8)
--------
Total comprehensive
income................... 1,202.4
----------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 2000........... 743,394,328 $947.7 $1,464.8 $6,079.7 $(32.8) $(317.8) $8,141.6
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*Defined as total common shares less common stock held in treasury.
**Ending treasury shares were 14,799,833 at September 30, 2000; 1,038,456 at
December 31, 1999; 14,413,126 at September 30, 1999; and 19,036,139 at
December 31, 1998.

U.S. Bancorp 19
<PAGE> 21

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
Nine Months Ended
----------------------------
(Dollars in Millions) September 30 September 30
(Unaudited) 2000 1999
--------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities................ $1,922.6 $1,900.5
----------------------------
INVESTING ACTIVITIES
Net cash (used) provided by:
Loans outstanding........................................ (4,323.4) (3,060.5)
Securities purchased under agreements to resell.......... (125.6) 128.7
Available-for-sale securities
Sales.................................................... 157.0 146.0
Maturities............................................... 503.3 1,154.5
Purchases................................................ (108.8) (916.6)
Proceeds from sales of other real estate.................... 19.2 25.9
Net purchases of bank premises and equipment................ (5.8) (69.3)
Sales of loans.............................................. 475.6 1,720.0
Purchases of loans.......................................... (592.9) (254.6)
Divestitures of branches.................................... -- (352.0)
Acquisitions, net of cash received.......................... (296.0) (220.5)
Cash and cash equivalents of acquired subsidiaries.......... 24.0 107.4
Other -- net................................................ (301.8) (339.9)
----------------------------
Net cash used by investing activities.................... (4,575.2) (1,930.9)
----------------------------
FINANCING ACTIVITIES
Net cash (used) provided by:
Deposits................................................. (591.1) (2,183.5)
Federal funds purchased and securities sold under
agreements to repurchase................................ 312.1 (1,026.0)
Short-term borrowings.................................... 219.8 246.9
Proceeds from long-term debt................................ 5,241.9 4,465.1
Principal payments on long-term debt........................ (2,658.6) (2,091.7)
Proceeds from dividend reinvestment, stock option and stock
purchase plans............................................. 70.6 94.3
Repurchase of common stock.................................. (432.2) (310.6)
Cash dividends.............................................. (482.9) (426.0)
----------------------------
Net cash provided (used) by financing activities......... 1,679.6 (1,231.5)
----------------------------
Change in cash and cash equivalents...................... (973.0) (1,261.9)
Cash and cash equivalents at beginning of period............ 4,748.8 4,855.3
----------------------------
Cash and cash equivalents at end of period............... $3,775.8 $3,593.4
--------------------------------------------------------------------------------------------
</TABLE>

20 U.S. Bancorp
<PAGE> 22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE A
BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and, therefore, do not include all
information and footnotes necessary for a complete presentation of financial
position, results of operations and cash flow activity required under accounting
principles generally accepted in the United States. In the opinion of management
of the Company, all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation of results have been made, and the Company
believes such presentation is adequate to make the information presented not
misleading. For further information, refer to the consolidated financial
statements and footnotes included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1999. Certain amounts in prior periods have been
reclassified to conform to the current presentation.

Accounting policies for the lines of business are generally the same as
those used in preparation of the consolidated financial statements with respect
to activities specifically attributable to each business line. However, the
preparation of business line results requires management to establish
methodologies to allocate funding costs and benefits, expenses and other
financial elements to each line of business. Table 2 "Line of Business Financial
Performance" on pages 4 through 8 provides details of segment results. This
information is incorporated by reference into these Notes to Consolidated
Financial Statements.

NOTE B
ACCOUNTING CHANGES

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities," and SFAS 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities -
an Amendment to FASB Statement No. 133," establish accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. In
certain defined conditions, a derivative may be specifically designated as a
hedge for a particular exposure. The accounting for changes in the fair value of
the derivative depends on the intended use of the derivative and the resulting
designation. The effective date has been deferred for one year with the issuance
of SFAS 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133," which amended SFAS
133. SFAS 133, as amended, is effective for all fiscal years beginning after
June 15, 2000, with earlier application permitted. We have evaluated the impact
of the adoption of SFAS 133 and have determined, based on current market
information, that it will not have a material impact on the Company.

U.S. Bancorp 21
<PAGE> 23

NOTE C
BUSINESS COMBINATIONS

FIRSTAR CORPORATION On October 4, 2000, the Company announced that it had signed
a definitive agreement to be acquired by Firstar Corporation of Milwaukee,
Wisconsin in a tax-free exchange of shares. U.S. Bancorp shareholders will
receive 1.265 shares of the combined company stock for every share of U.S.
Bancorp stock. On a proforma basis, the Firstar / U.S. Bancorp combination would
create the 8th largest bank holding company in the United States, with assets of
more than $160 billion, deposits of $107 billion, assets under management of
$145 billion and a market capitalization of approximately $40 billion. The
franchise will span 24 midwestern and western states with 2,200 branches.
Pending all regulatory and shareholder approvals, the transaction is expected to
close in the first quarter of 2001 and be accounted for as a
pooling-of-interests.

The following table summarizes acquisitions by the Company completed during the
past two years:

<TABLE>
<CAPTION>
Goodwill &
Intangibles Accounting
(Dollars in Millions) Date Assets Deposits Recorded Shares Issued Method
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Scripps Financial Corporation.................... 10/13/00 $ 650 $ 618 $113 7,435,591 Purchase
Lyon Financial Services, Inc..................... 9/28/00 1,289 -- 124 -- Purchase
Oliver-Allen Corporation......................... 4/7/00 280 -- 34 2,642,708 Purchase
Peninsula Bank................................... 1/14/00 491 452 71 4,041,568 Purchase
Western Bancorp.................................. 11/15/99 2,508 2,105 773 27,768,465 Purchase
Voyager Fleet Systems, Inc....................... 9/13/99 43 -- 25 -- Purchase
Bank of Commerce................................. 7/15/99 638 529 269 9,287,960 Purchase
Mellon Network Services' Electronic Funds
Transfer Processing Unit........................ 6/30/99 -- -- 78 -- Purchase
Libra Investments, Inc........................... 1/4/99 33 -- 4 1,027,276 Purchase
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE D
AVAILABLE-FOR-SALE SECURITIES

The detail of the amortized cost and fair value of available-for-sale securities
consisted of the following:

<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
---------------------------------------------------
Amortized Fair Amortized Fair
(Dollars in Millions) Cost Value Cost Value
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury............................................... $ 370 $ 368 $ 388 $ 381
U.S. agencies and other mortgage-backed..................... 2,642 2,598 2,971 2,906
Other U.S. agencies......................................... 167 171 195 196
State and political......................................... 1,078 1,084 1,132 1,135
Other....................................................... 239 225 288 253
---------------------------------------------------
Total.................................................... $4,496 $4,446 $4,974 $4,871
-------------------------------------------------------------------------------------------------------------------
</TABLE>

22 U.S. Bancorp
<PAGE> 24

NOTE E
LOANS

The composition of the loan portfolio was as follows:

*Loans held for sale were $698 at September 30, 2000, and $608 at December 31,
1999. This included residential mortgages held for sale and the student loan
portfolio that may be sold when the repayment periods begin.

At September 30, 2000, the Company had $348 million in loans considered
impaired under SFAS 114 included in its nonaccrual loans. The carrying value of
the impaired loans was less than or equal to the appraised collateral value or
the present value of expected future cash flows and, accordingly, no allowance
for credit losses was specifically allocated to impaired loans. For the quarter
ended September 30, 2000, the average recorded investment in impaired loans was
approximately $335 million. No interest income was recognized on impaired loans
during the quarter.

NOTE F
LONG-TERM DEBT

Long-term debt (debt with original maturities of more than one year) consisted
of the following:

<TABLE>
<CAPTION>
September 30 December 31
(Dollars in Millions) 2000 1999
----------------------------------------------------------------------------------------------
<S> <C> <C>
Fixed-rate subordinated notes (5.70% to 8.35%) -- maturities
to June 2026............................................... $ 2,850 $ 2,850
Step-up subordinated notes -- due August 15, 2005........... 100 100
Floating-rate notes -- due February 27, 2000................ -- 250
Federal Home Loan Bank advances (5.54% to
8.25%) -- maturities to October 2026....................... 2,307 1,998
Medium-term notes (6.00% to 7.50%) -- maturities to December
2004....................................................... 3,642 2,310
Bank notes (5.25% to 6.98%) -- maturities to November
2005....................................................... 9,662 8,459
Euro medium-term notes -- due April 13, 2004................ 400 400
Other....................................................... 439 196
------------------------------
Total.................................................... $ 19,400 $ 16,563
----------------------------------------------------------------------------------------------
</TABLE>

U.S. Bancorp 23
<PAGE> 25

NOTE G
INCOME TAXES

The components of income tax expense were:

The reconciliation between income tax expense and the amount computed by
applying the statutory federal income tax rate was as follows:

The Company's net deferred tax asset was $88.0 million at September 30,
2000, and $158.4 million at December 31, 1999.

NOTE H
MERGER AND INTEGRATION CHARGES

During 2000, the Company recorded $43.8 million of nonrecurring expense related
to the integration of the Company's various acquisitions. The following table
presents a summary of activity with respect to the Company's merger and
integration accrual:

<TABLE>
<CAPTION>
Nine Months Ended
(Dollars in Millions) September 30, 2000
-------------------------------------------------------------------
<S> <C>
Balance at December 31, 1999................. $ 71.9
Provision charged to operating expense,
net......................................... 43.8
Cash outlays................................. (74.6)
Additions related to purchase acquisitions... 39.1
Noncash writedowns and other................. (21.9)
------------------
Balance at September 30, 2000................ $ 58.3
-------------------------------------------------------------------
</TABLE>

The components of the merger and integration accrual were as follows:

<TABLE>
<CAPTION>
September 30 December 31
(Dollars in Millions) 2000 1999
--------------------------------------------------------------------
<S> <C> <C>
Severance............................ $ 20.6 $ 34.6
Other employee related costs......... 12.1 16.6
Lease terminations and facility
costs............................... 8.5 9.5
Contracts and system writeoffs....... 7.6 6.4
Other................................ 9.5 4.8
---------------------------
Total................................ $ 58.3 $ 71.9
--------------------------------------------------------------------
</TABLE>

Employee termination plans were developed in connection with the
acquisitions of Bank of Commerce, Western Bancorp, Peninsula Bank of San Diego,
and other acquisitions. The severance amounts are determined based on the
Company's existing severance pay programs under which benefits are paid out over
a period of up to two years from the time of termination. With respect to
completed acquisitions, additional merger-related charges of approximately $20.0
million on a pre-tax basis, are expected to be incurred in 2000.

24 U.S. Bancorp
<PAGE> 26

NOTE I
SHAREHOLDERS' EQUITY

The Company issued 6,969,658 shares of common stock with an aggregate value of
$146.0 million in conjunction with acquisitions during the nine months ended
September 30, 2000.

On February 16, 2000, the Company announced a share repurchase program of up
to $2.5 billion of common stock over the period ending March 31, 2002. The new
share repurchase program replaced a program that was scheduled to expire on
March 31, 2000. The shares will be repurchased in the open market or through
negotiated transactions. Under these programs, the Company has repurchased 20.2
million shares for $432.2 million during the nine months ended September 30,
2000.

NOTE J
EARNINGS PER SHARE

The components of earnings per share were:

U.S. Bancorp 25
<PAGE> 27

NOTE K
COMMITMENTS, CONTINGENT LIABILITIES AND OFF-BALANCE SHEET FINANCIAL
INSTRUMENTS

In the normal course of business, the Company uses various off-balance sheet
financial instruments to meet the needs of its customers and to manage its
interest rate and market risk. These instruments carry varying degrees of
credit, interest rate or liquidity risk. The contract or notional amounts of
these financial instruments were as follows:

<TABLE>
<CAPTION>
September 30 December 31
(Dollars in Millions) 2000 1999
----------------------------------------------------------------------------------------------
<S> <C> <C>
Commitments to extend credit
Commercial............................................... $27,553 $28,222
Corporate and purchasing cards........................... 20,561 18,503
Consumer credit cards.................................... 15,182 14,991
Other consumer........................................... 5,911 6,388
Letters of credit
Standby.................................................. 3,489 3,222
Commercial............................................... 417 317
Swap contracts
Interest rate hedges..................................... 7,248 7,743
Equity hedges............................................ 80 --
Basis swaps.............................................. 1,000 --
Intermediated............................................ 484 556
Options contracts
Hedge interest rate floors purchased..................... 500 500
Intermediated interest rate and foreign exchange caps and
floors purchased........................................ 358 453
Intermediated interest rate and foreign exchange caps and
floors written.......................................... 358 453
Futures and forward contracts............................... 71 34
Recourse on assets sold..................................... 82 117
Foreign currency commitments
Commitments to purchase.................................. 1,767 1,137
Commitments to sell...................................... 1,758 1,141
Commitments from securities lending......................... 730 717
----------------------------------------------------------------------------------------------
</TABLE>

The Company received fixed-rate interest and paid variable-rate interest on
substantially all swaps in its hedging portfolio as of September 30, 2000.
Activity for the nine months ended September 30, 2000, with respect to interest
rate swaps which the Company uses to hedge loans, deposits and long-term debt
was as follows:

<TABLE>
<CAPTION>
(Dollars in Millions)
------------------------------------------------------------------------
<S> <C>
Notional amount outstanding at December 31, 1999............ $ 7,743
Additions................................................... 745
Terminations................................................ (674)
Amortization................................................ (521)
Maturities.................................................. (45)
--------
Notional amount outstanding at September 30, 2000........... $ 7,248
------------------------------------------------------------------------
Weighted average interest rate paid......................... 6.65%
Weighted average interest rate received..................... 6.38
------------------------------------------------------------------------
</TABLE>

LIBOR-based interest rate floors totaling $500 million with an average
remaining maturity of 1.0 years and 1.7 years at September 30, 2000 and December
31, 1999, respectively, hedged floating rate commercial loans. The strike rate
on these LIBOR-based floors was 4.63 percent both at September 30, 2000, and
December 31, 1999.

Net unamortized deferred losses relating to swaps, options and futures were
$24.4 million at September 30, 2000.

26 U.S. Bancorp
<PAGE> 28

NOTE L
SUPPLEMENTAL DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF CASH FLOWS Listed below are supplemental disclosures
to the Consolidated Statement of Cash Flows.

<TABLE>
<CAPTION>
Nine Months Ended
-------------------------------
September 30 September 30
(Dollars in Millions) 2000 1999
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Income taxes paid........................................... $ 530.3 $ 429.5
Interest paid............................................... 2,169.4 1,708.8
Net noncash transfers to foreclosed property................ 19.5 26.7
Change in unrealized gain (loss) on available-for-sale
securities, net of taxes of $18.4 in 2000 and $61.2 in
1999....................................................... 29.8 (99.7)
-------------------------------
Cash acquisitions of businesses
Fair value of noncash assets acquired.................... $ 945.1 $ 250.3
Liabilities assumed...................................... (649.1) (29.8)
-------------------------------
Net................................................... $ 296.0 $ 220.5
-------------------------------
Stock acquisitions of businesses
Fair value of noncash assets acquired.................... $ 810.7 $ 798.2
Net cash acquired........................................ 24.0 107.4
Liabilities assumed...................................... (688.7) (552.3)
-------------------------------
Net value of common stock issued...................... $ 146.0 $ 353.3
-----------------------------------------------------------------------------------------------
</TABLE>

U.S. Bancorp 27
<PAGE> 29

CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND RELATED YIELDS AND RATES

<TABLE>
<CAPTION>
For the Three Months Ended September 30
2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Yields Yields % Change
(Dollars in Millions) and and Average
(Unaudited) Balance Interest Rates Balance Interest Rates Balance
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Available-for-sale securities
U.S. Treasury........................ $ 374 $ 5.3 5.64% $ 397 $ 5.6 5.60% (5.8)%
U.S. agencies and other
mortgage-backed................... 2,696 45.8 6.76 3,173 53.1 6.64 (15.0)
State and political.................. 1,081 20.2 7.43 1,118 21.4 7.59 (3.3)
U.S. agencies and other.............. 415 5.5 5.27 537 5.1 3.77 (22.7)
----------------- -------------------
Total available-for-sale
securities..................... 4,566 76.8 6.69 5,225 85.2 6.47 (12.6)
Unrealized loss on
available-for-sale
securities..................... (82) (36) **
------ -------
Net available-for-sale
securities..................... 4,484 5,189 (13.6)
Trading account securities.............. 866 13.9 6.39 659 10.5 6.32 31.4
Federal funds sold and resale
agreements........................... 614 9.5 6.16 501 5.6 4.43 22.6
Loans
Commercial
Commercial........................ 29,996 664.7 8.82 25,360 491.3 7.69 18.3
Real estate
Commercial mortgage............ 10,180 227.3 8.88 8,654 183.7 8.42 17.6
Construction................... 4,434 108.2 9.71 3,734 83.3 8.85 18.7
Lease financing................... 2,749 52.3 7.57 2,254 40.2 7.08 22.0
----------------- -------------------
Total commercial............... 47,359 1,052.5 8.84 40,002 798.5 7.92 18.4
Consumer
Home equity and second mortgage... 9,155 223.7 9.72 8,258 197.5 9.49 10.9
Credit card....................... 4,214 148.8 14.05 4,009 136.9 13.55 5.1
Other............................. 3,945 109.7 11.06 6,398 152.2 9.44 (38.3)
----------------- -------------------
Subtotal....................... 17,314 482.2 11.08 18,665 486.6 10.34 (7.2)
Residential mortgage.............. 2,560 50.6 7.86 2,682 51.1 7.56 (4.5)
----------------- -------------------
Total consumer................. 19,874 532.8 10.67 21,347 537.7 9.99 (6.9)
----------------- -------------------
Total loans.................... 67,233 1,585.3 9.38 61,349 1,336.2 8.64 9.6
Allowance for credit losses.......... 1,071 993 7.9
------ -------
Net loans......................... 66,162 60,356 9.6
Other earning assets.................... 2,434 52.3 8.55 1,537 24.6 6.35 58.4
----------------- -------------------
Total earning assets*.......... 75,713 1,737.8 9.13 69,271 1,462.1 8.37 9.3
Other assets............................ 10,548 9,458 11.5
------ -------
Total assets................... $85,108 $77,700 9.5%
------ -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits............ $14,158 $13,655 3.7%
Interest-bearing deposits
Interest checking.................... 6,382 39.6 2.47 6,028 28.2 1.86 5.9
Money market accounts................ 12,638 144.5 4.55 11,990 104.0 3.44 5.4
Other savings accounts............... 1,873 8.1 1.72 2,241 10.5 1.86 (16.4)
Savings certificates................. 9,454 144.0 6.06 9,432 117.8 4.96 .2
Certificates over $100,000........... 6,407 105.8 6.57 4,370 58.2 5.28 46.6
----------------- -------------------
Total interest-bearing
deposits...................... 36,754 442.0 4.78 34,061 318.7 3.71 7.9
Short-term borrowings................... 2,646 49.9 7.50 4,309 61.3 5.64 (38.6)
Long-term debt.......................... 19,592 343.5 6.97 15,733 217.8 5.49 24.5
Company-obligated mandatorily redeemable
preferred securities................. 950 19.4 8.12 950 19.3 8.06 --
----------------- -------------------
Total interest-bearing
liabilities................... 59,942 854.8 5.67 55,053 617.1 4.45 8.9
Other liabilities....................... 2,976 2,404 23.8
Common equity........................... 8,080 6,611 22.2
Accumulated other comprehensive
income............................... (48) (23) **
------ -------
Total liabilities and
shareholders' equity.......... $85,108 $77,700 9.5%
------ ------- ----------
Net interest income..................... $ 883.0 $ 845.0
------- -------
Gross interest margin................... 3.46% 3.92%
------ ------
Gross interest margin without
taxable-equivalent increments........ 3.37% 3.86%
------ ------
Net interest margin..................... 4.64% 4.84%
------ ------
Net interest margin without
taxable-equivalent increments........ 4.55% 4.78%
-------------------------------------------------------------------------------------------------------------
</TABLE>

Interest and rates are presented on a fully taxable-equivalent basis under a tax
rate of 35 percent.
Interest income and rates on loans include loan fees. Nonaccrual loans are
included in average loan balances.
*Before deducting the allowance for credit losses and excluding the unrealized
loss on available-for-sale securities.
**Not meaningful.

28 U.S. Bancorp
<PAGE> 30

CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND RELATED YIELDS AND RATES

<TABLE>
<CAPTION>
For the Nine Months Ended September 30
2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Yields Yields % Change
(Dollars in Millions) and and Average
(Unaudited) Balance Interest Rates Balance Interest Rates Balance
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Available-for-sale securities
U.S. Treasury........................ $ 379 $ 16.0 5.64% $ 438 $ 18.6 5.68% (13.5)%
U.S. agencies and other
mortgage-backed................... 2,806 142.6 6.79 3,180 156.1 6.56 (11.8)
State and political.................. 1,099 61.8 7.51 1,146 65.1 7.59 (4.1)
U.S. agencies and other.............. 456 16.2 4.75 430 13.0 4.04 6.0
----------------- -------------------
Total available-for-sale
securities..................... 4,740 236.6 6.67 5,194 252.8 6.51 (8.7)
Unrealized (loss) gain on
available-for-sale securities.. (121) 45 **
------ -------
Net available-for-sale
securities..................... 4,619 5,239 (11.8)
Trading account securities.............. 774 42.9 7.40 600 29.5 6.57 29.0
Federal funds sold and resale
agreements........................... 614 24.9 5.42 515 16.1 4.18 19.2
Loans
Commercial
Commercial........................ 28,733 1,848.7 8.59 24,598 1,389.8 7.55 16.8
Real estate
Commercial mortgage............ 10,086 662.7 8.78 8,427 532.0 8.44 19.7
Construction................... 4,407 315.7 9.57 3,529 232.2 8.80 24.9
Lease financing................... 2,569 142.9 7.43 2,243 120.3 7.17 14.5
----------------- -------------------
Total commercial............... 45,795 2,970.0 8.66 38,797 2,274.3 7.84 18.0
Consumer
Home equity and second mortgage... 8,945 647.2 9.66 7,852 554.2 9.44 13.9
Credit card....................... 4,164 434.9 13.95 4,003 387.8 12.95 4.0
Other............................. 4,145 330.2 10.64 6,773 473.0 9.34 (38.8)
----------------- -------------------
Subtotal....................... 17,254 1,412.3 10.93 18,628 1,415.0 10.16 (7.4)
Residential mortgage.............. 2,603 152.1 7.81 2,834 163.6 7.72 (8.2)
----------------- -------------------
Total consumer................. 19,857 1,564.4 10.52 21,462 1,578.6 9.83 (7.5)
----------------- -------------------
Total loans.................... 65,652 4,534.4 9.23 60,259 3,852.9 8.55 8.9
Allowance for credit losses.......... 1,049 994 5.5
------ -------
Net loans......................... 64,603 59,265 9.0
Other earning assets.................... 2,360 151.7 8.59 1,437 69.1 6.43 64.2
----------------- -------------------
Total earning assets*.......... 74,140 4,990.5 8.99 68,005 4,220.4 8.30 9.0
Other assets............................ 10,690 9,247 15.6
------ -------
Total assets................... $83,660 $76,303 9.6%
------ -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits............ $14,168 $13,585 4.3%
Interest-bearing deposits
Interest checking.................... 6,357 108.2 2.27 6,051 80.3 1.77 5.1
Money market accounts................ 12,550 399.6 4.25 12,100 310.7 3.43 3.7
Other savings accounts............... 1,979 26.1 1.76 2,244 30.0 1.79 (11.8)
Savings certificates................. 9,355 404.7 5.78 9,733 359.7 4.94 (3.9)
Certificates over $100,000........... 5,931 278.5 6.27 4,059 158.4 5.22 46.1
----------------- -------------------
Total interest-bearing
deposits.................... 36,172 1,217.1 4.49 34,187 939.1 3.67 5.8
Short-term borrowings................... 3,249 168.0 6.91 4,224 169.3 5.36 (23.1)
Long-term debt.......................... 18,438 922.3 6.68 14,712 592.3 5.38 25.3
Company-obligated mandatorily redeemable
preferred securities................. 950 58.0 8.16 950 58.0 8.16 --
----------------- -------------------
Total interest-bearing
liabilities................. 58,809 2,365.4 5.37 54,073 1,758.7 4.35 8.8
Other liabilities....................... 2,811 2,314 21.5
Common equity........................... 7,944 6,303 26.0
Accumulated other comprehensive
income............................... (72) 28 **
------ -------
Total liabilities and
shareholders' equity........ $83,660 $76,303 9.6%
------ ------- ----------
Net interest income..................... $2,625.1 $2,461.7
------- -------
Gross interest margin................... 3.62% 3.95%
------ ------
Gross interest margin without
taxable-equivalent increments........ 3.53% 3.89%
------ ------
Net interest margin..................... 4.73% 4.84%
------ ------
Net interest margin without
taxable-equivalent increments........ 4.64% 4.78%
-------------------------------------------------------------------------------------------------------------
</TABLE>

Interest and rates are presented on a fully taxable-equivalent basis under a tax
rate of 35 percent.
Interest income and rates on loans include loan fees. Nonaccrual loans are
included in average loan balances.
*Before deducting the allowance for credit losses and excluding the unrealized
(loss) gain on available-for-sale securities.
**Not meaningful.

U.S. Bancorp 29
<PAGE> 31

PART II -- OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) EXHIBITS

2 Agreement and Plan of Merger, dated October 3, 2000, by and between
Firstar Corporation and U.S. Bancorp; Amendment No. 1 to Agreement and
Plan of Merger, dated October 23, 2000, by and between Firstar
Corporation and U.S. Bancorp; and Stock Option Agreements, dated October
3, 2000, by and between Firstar Corporation and U.S. Bancorp. Filed as
Exhibits 2.1, 2.2, 2.3 and 2.4 to Registration Statement on Form S-4,
File No. 333-48532, and incorporated herein by reference.

12 Computation of Ratio of Earnings to Fixed Charges.

27 Article 9 Financial Data Schedule.*.

* Copies of this exhibit will be furnished upon request and payment of the
Company's reasonable expenses in furnishing the exhibit.

(B) REPORTS ON FORM 8-K

During the three months ended September 30, 2000, the Company filed the
following Current Reports on Form 8-K:

- Form 8-K dated July 20, 2000, relating to the announcement of the
Company's second quarter and anticipated full year 2000 earnings.

- Form 8-K dated August 22, 2000, relating to the announcement of changes in
the Company's management.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

U.S. BANCORP

By: /s/ TERRANCE R. DOLAN
------------------------------------------

Terrance R. Dolan

Senior Vice President and Controller

(Chief Accounting Officer and Duly
DATE: November 13, 2000 Authorized Officer)

30 U.S. Bancorp
<PAGE> 32

EXHIBIT 12

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
Three Nine
Months Months
Ended Ended
September 30 September 30
----------------------------
(Dollars in Millions) 2000 2000
--------------------------------------------------------------------------------------------
<S> <C> <C>
EARNINGS
1. Net income.............................................. $ 401.3 $1,173.4
2. Applicable income taxes................................. 218.1 641.2
----------------------------
3. Net income before taxes (1 + 2)......................... $ 619.4 $1,814.6
----------------------------
4. Fixed charges:
a. Interest expense excluding interest on deposits...... $ 412.8 $1,148.3
b. Portion of rents representative of interest and
amortization of debt expense......................... 13.4 41.2
----------------------------
c. Fixed charges excluding interest on deposits (4a +
4b).................................................. 426.2 1,189.5
d. Interest on deposits................................. 442.0 1,217.1
----------------------------
e. Fixed charges including interest on deposits (4c +
4d).................................................. $ 868.2 $2,406.6
----------------------------
5. Amortization of interest capitalized.................... $ -- $ --
6. Earnings excluding interest on deposits (3 + 4c + 5).... 1,045.6 3,004.1
7. Earnings including interest on deposits (3 + 4e + 5).... 1,487.6 4,221.2
8. Fixed charges excluding interest on deposits (4c)....... 426.2 1,189.5
9. Fixed charges including interest on deposits (4e)....... 868.2 2,406.6

RATIO OF EARNINGS TO FIXED CHARGES
10. Excluding interest on deposits (line 6/line 8).......... 2.45 2.53
11. Including interest on deposits (line 7/line 9).......... 1.71 1.75
--------------------------------------------------------------------------------------------
</TABLE>

U.S. Bancorp 31
<PAGE> 33

(This page has been left blank intentionally.)
<PAGE> 34

[US BANCORP LOGO(R)]
U.S. Bank Place
601 Second Avenue South
Minneapolis, Minnesota
55402-4302
www.usbank.com
--------------------
First Class
U.S. Postage
PAID
Permit No. 2440
Minneapolis, MN
--------------------

SHAREHOLDER INQUIRIES

COMMON STOCK TRANSFER AGENT AND REGISTRAR
First Chicago Trust Company of New York, a division of EquiServe, acts as
transfer agent and registrar and dividend paying agent for U.S. Bancorp and
maintains all shareholder records for the corporation. For information about
U.S. Bancorp stock, or if you have questions regarding your stock certificates
(including transfers), address or name changes, lost dividend checks, lost stock
certificates, or Form 1099s, please call First Chicago Trust's Shareholder
Services Center at (800) 446-2617. Representatives are available weekdays 8:30
a.m. to 7:00 p.m. Eastern time, and the interactive voice response system is
available 24 hours a day, seven days a week. The TDD telephone number for the
hearing impaired is (201) 222-4955.

First Chicago Trust Company of New York
C/O EquiServe
Mailing address: P.O. Box 2500
Jersey City, New Jersey 07303-2500.

Telephone: (201) 324-0498
Fax: (201) 222-4892
Internet address: www.equiserve.com
E-mail address: [email protected]

If you own shares in a book-entry or plan account maintained by First Chicago
Trust, you can access your account information on the Internet through First
Chicago Trust's Web site. To obtain a password that provides you secured access
to your account, please call First Chicago Trust toll free at (877) THE-WEB7
(outside North America call (201) 536-8071).

COMMON STOCK LISTING AND TRADING
U.S. Bancorp Common Stock is listed and traded on the New York Stock Exchange
under the ticker symbol USB.

DIVIDENDS
U.S. Bancorp currently pays quarterly dividends on its Common Stock on or about
the 15th of March, June, September and December, subject to prior Board
approval. Shareholders may choose to have dividends electronically deposited
directly into their bank accounts. For enrollment information, please call First
Chicago Trust at (800) 446-2617.

INVESTMENT COMMUNITY CONTACTS
John R. Danielson
Senior Vice President, Investor Relations
(612) 973-2261
[email protected]

Judith T. Murphy
Vice President, Investor Relations
(612) 973-2264
[email protected]

FINANCIAL INFORMATION
U.S. Bancorp news and financial results are available through the Company's Web
site, fax and mail.

Web site. For information about U.S. Bancorp, including news and financial
results, product information, and service locations, access our home page on the
Internet at www.usbank.com.

Fax. To access our fax-on-demand service, call (800) 758-5804. When asked, enter
U.S. Bancorp's extension number, "312402." Enter "1" for the most current new
release or "2" for a menu of news releases. Enter your fax and telephone numbers
as directed. The information will be faxed to you promptly.

Mail. At your request, we will mail to you our quarterly earnings news releases,
quarterly financial data on Form 10-Q and additional annual reports. To be added
to U.S. Bancorp's mailing list for quarterly earnings news releases, or to
request other information, please contact:

Investor Relations
U.S. Bancorp
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
(612) 973-2263
[email protected]