US BANCORP \DE\, 10-Q/A, 2001-01-10

US BANCORP \DE\
10-Q/A, 2001-01-10
NATIONAL COMMERCIAL BANKS

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

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

FORM 10-Q/A

<TABLE>
<S> <C> <C>
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>

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 April 30, 2000
Common Stock, $1.25 Par Value 751,832,861 shares
</TABLE>

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<PAGE> 2
FINANCIAL SUMMARY

<TABLE>
<CAPTION>
Three Months Ended
------------------------------
March 31 March 31
(Dollars in Millions, Except Per Share Data) 2000 1999
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income before merger-related charges and available-for-sale
securities transactions $ 387.6 $ 368.6
Merger-related charges and available-for-sale securities
transactions (8.6) (1.8)
----------- -----------
Net income $ 379.0 $ 366.8
----------- -----------

PER COMMON SHARE
Earnings per share $ .51 $ .51
Diluted earnings per share .51 .50
Dividends paid .215 .195
Common shareholders' equity 10.34 8.50

FINANCIAL RATIOS
Return on average assets 1.86% 1.98%
Return on average common equity 19.8 24.4
Efficiency ratio 54.3 50.6
Net interest margin (taxable-equivalent basis) 4.81 4.82
----------- -----------

SELECTED FINANCIAL RATIOS BEFORE MERGER-RELATED CHARGES AND
AVAILABLE-FOR-SALE SECURITIES TRANSACTIONS
Return on average assets 1.91% 1.99%
Return on average common equity 20.3 24.6
Efficiency ratio 53.6 50.4
Banking efficiency ratio* 45.3 43.3
----------- -----------
</TABLE>

<TABLE>
<CAPTION>
March 31 December 31
2000 1999
------------------------------
<S> <C> <C>
PERIOD END
Loans $ 64,897 $ 62,885
Allowance for credit losses 1,011 995
Assets 83,072 81,530
Total shareholders' equity 7,745 7,638
Tangible common equity to total assets** 6.4% 6.5%
Tier 1 capital ratio 6.6 6.8
Total risk-based capital ratio 10.9 11.1
Leverage ratio 7.2 7.4
--------------------------------------------------------------------------------------------------------
</TABLE>

* 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/A 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)................................................... 11
Financial Statements (Item 1)............................... 14
PART II -- OTHER INFORMATION
Changes in Securities (Item 2).............................. 25
Submission of Matters to a Vote of Security Holders (Item
4)......................................................... 25
Exhibits and Reports on Form 8-K (Item 6)................... 25
Signature................................................... 25
Exhibit 12 -- Computation of Ratio of Earnings to Fixed
Charges.................................................... 26
</TABLE>

FORWARD-LOOKING STATEMENTS

This Form 10-Q/A contains forward-looking statements. Statements that are
not historical or current facts, including statements about beliefs and
expectations, are forward-looking statements. Forward-looking statements involve
inherent risks and uncertainties, and important factors could cause actual
results to differ materially from those anticipated, including the following:
(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 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; (iv) the conditions of the securities markets
could change, adversely affecting revenues from capital markets businesses 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 net income of $379.0
million in the first quarter of 2000, or $.51 per diluted share, compared with
$366.8 million, or $.50 per diluted share, in the first quarter of 1999. Return
on average assets and return on average common equity were 1.86 percent and 19.8
percent, respectively, in the first quarter of 2000, compared with returns of
1.98 percent and 24.4 percent in the first quarter of 1999. Net income reflects
merger-related charges and available-for-sale securities transactions of $8.6
million ($13.4 million on a pre-tax basis) in the first quarter of 2000 compared
with a decrease of $1.8 million ($2.9 million on a pre-tax basis) in the first
quarter of 1999.

The Company reported first quarter 2000 operating earnings (net income
excluding merger-related charges and available-for-sale securities transactions)
of $387.6 million, up 5.2 percent from the first quarter of 1999 operating
earnings of $368.6 million. On a diluted share basis, operating earnings were
$.52 in the first quarter of 2000, compared with $.51 in the first quarter of
1999, an increase of 2 percent. Operating earnings on a cash basis were $.59 per
diluted share in the first quarter of 2000, compared with $.56 per diluted share
in the first quarter of 1999, an increase of 5 percent. Return on average assets
and return on average common equity, excluding merger-related charges and
available-for-sale securities transactions, were 1.91 percent and 20.3 percent,
respectively, in the first quarter of 2000, compared with returns of 1.99
percent and 24.6 percent, respectively, in the first quarter of 1999. The
reduction in the Company's return on average common equity from the first
quarter of 1999 reflects the impact of recent acquisitions, which were accounted
for using the purchase method. Excluding merger-related charges and
available-for-sale securities transactions, the efficiency ratio (the ratio of
expenses to revenues) was 53.6 percent in the first quarter of 2000, compared
with 50.4 percent in the first quarter of 1999. The change in the efficiency
ratio was related to expenditures for customer-related initiatives and growth in
capital markets business. The banking efficiency ratio (the ratio of expenses to
revenues without the impact of investment banking and brokerage activity) before
merger-related charges and available-for-sale securities transactions, was 45.3
percent in the first quarter of 2000, compared with 43.3 percent in the first
quarter of 1999.

Total revenue on a taxable-equivalent basis, before available-for-sale
securities transactions, grew by $238.3 million, or 17 percent, over the first
quarter of 1999. The increase in total revenue was driven by core loan growth,
investment banking and brokerage activity and credit card fee revenue. Several
acquisitions made during 1999 also contributed to the growth in revenue.
Excluding the impact of acquisitions and portfolio divestitures, total revenue
on a taxable-equivalent basis, before available-for-sale securities
transactions, in the first quarter of 2000 would have been approximately 13
percent higher than the first quarter of 1999. Offsetting the growth in total
revenue were increases in noninterest expense, before merger-related charges, of
$172.0 million and provision for credit losses of $37.0 million over the first
quarter of 1999. The growth in noninterest expense was primarily due to an
increase in expense related to investment banking and brokerage revenue growth,
acquisitions, and additional investments in sales and service and technology. In
addition to the growth in the Company's ongoing technology spending on
Internet-related products and services, the first quarter of 2000 included
approximately $9.0 million of Internet infrastructure-related expense, which was
offset in noninterest income by a $10.8 million gain on the sale of a building.

The Company analyzes its performance based on amounts determined in
accordance with generally accepted accounting principles, as well as on an
operating basis before merger-related charges and available-for-sale securities
transactions referred to in this analysis as "operating earnings". Operating
earnings and related per share amounts are presented as supplementary
information in this analysis to enhance the readers' understanding of, and
highlight trends in, its core financial results including the non-recurring
effects of discreet business acquisitions and other transactions. The Company
has included these additional disclosures of operations before merger-related
charges to meet the requests of analysts, investors and other readers that
require additional information related to the comparability of the Company's
performance without the effect of these items. Operating earnings and related
per share information should not be viewed as a substitute for net income and
earnings per share as determined in accordance with generally accepted
accounting principles. Merger-related charges and other items excluded from net
income to derive operating earnings may be significant, and may not be
comparable to other companies.

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

On January 14, 2000, the Company acquired Peninsula Bank of San Diego, which
had 11 branches in San Diego county and total assets of $456 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

2 U.S. Bancorp
<PAGE> 4

TABLE 1
SUMMARY OF CONSOLIDATED INCOME

<TABLE>
<CAPTION>
Three Months Ended
--------------------
(Taxable-Equivalent Basis; March 31 March 31
Dollars In Millions, Except Per Share Data) 2000 1999
<S> <C> <C>
------------------------------------------------------------------------------------
CONDENSED INCOME STATEMENT
Interest income............................................. $1,580.5 $1,362.7
Interest expense............................................ 718.2 569.3
-----------------
Net interest income...................................... 862.3 793.4
Provision for credit losses................................. 154.0 117.0
-----------------
Net interest income after provision for credit losses.... 708.3 676.4
Available-for-sale securities losses........................ (.3) --
Other noninterest income.................................... 795.7 626.3
Merger-related charges...................................... 13.1 2.9
Other noninterest expense................................... 887.9 715.9
-----------------
Income before income taxes............................... 602.7 583.9
Taxable-equivalent adjustment............................... 16.9 10.7
Income taxes................................................ 206.8 206.4
-----------------
Net income............................................... $ 379.0 $ 366.8
-----------------
FINANCIAL RATIOS
Return on average assets.................................... 1.86% 1.98%
Return on average common equity............................. 19.8 24.4
Net interest margin (taxable-equivalent basis).............. 4.81 4.82
Efficiency ratio............................................ 54.3 50.6
Efficiency ratio before merger-related charges.............. 53.6 50.4
Banking efficiency ratio before merger-related charges*..... 45.3 43.3
-----------------
PER COMMON SHARE
Earnings per share.......................................... $ .51 $ .51
Diluted earnings per share.................................. .51 .50
Dividends paid.............................................. .215 .195
------------------------------------------------------------------------------------
</TABLE>

*Without investment banking and brokerage activity.

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. On April 7, 2000, the Company acquired Oliver-Allen Corporation, a
privately-held information technology leasing company. 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.

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

U.S. Bancorp 3
<PAGE> 5

TABLE 2
LINE OF BUSINESS FINANCIAL PERFORMANCE

<TABLE>
<CAPTION>
Wholesale Consumer
Banking Banking
---------------------------------------------------------------------------
For the Three Months Ended March 31 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).... $ 403.6 $ 346.5 16.5% $ 330.5 $ 323.3 2.2%
Provision for credit losses....................... 29.9 25.3 18.2 73.1 70.1 4.3
Noninterest income................................ 103.4 104.2 (.8) 117.6 103.7 13.4
Noninterest expense............................... 203.5 181.0 12.4 220.3 213.3 3.3
Goodwill and other intangible assets expense...... 21.7 15.5 40.0 12.1 9.2 31.5
Income taxes and taxable-equivalent adjustment.... 93.4 85.1 9.8 52.9 50.0 5.8
---------------------- ---------------------
Income before merger-related charges and
available-for-sale securities transactions....... $ 158.5 $ 143.8 10.2 $ 89.7 $ 84.4 6.3
---------------------- ---------------------
Net merger-related charges and available-for-sale
securities transactions (after-tax)*.............
Net income........................................
AVERAGE BALANCE SHEET DATA
Loans............................................. $ 39,580 $ 33,946 16.6 $11,169 $ 12,814 (12.8)
Assets............................................ 43,086 37,262 15.6 12,359 13,995 (11.7)
Deposits.......................................... 11,966 10,934 9.4 30,399 31,039 (2.1)
Common equity..................................... 4,021 3,548 13.3 987 1,165 (15.3)
---------------------- ---------------------
Return on average assets.......................... 1.48% 1.57% 2.92% 2.45%
Return on average common equity ("ROCE").......... 15.9 16.4 36.6 29.4
Efficiency ratio.................................. 44.4 43.6 51.9 52.1
Efficiency ratio on a cash basis**................ 40.1 40.2 49.2 50.0
---------------------------------------------------------------------------------------------------------------------------------
</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 goodwill and other intangibles and the related
amortization.
***Not meaningful.

public sector clients. Operating earnings increased 10 percent to $158.5 million
in the first quarter of 2000, compared with $143.8 million in the first quarter
of 1999. Return on average assets was 1.48 percent in the first quarter of 2000,
compared with 1.57 percent in the first quarter of the prior year, and return on
average common equity was 15.9 percent in the first quarter of 2000, compared
with 16.4 percent in the same period of 1999.

Strong growth in net interest income was primarily due to core loan growth
and the impact of bank acquisitions. Average loan balances increased 17 percent
in the first quarter of 2000, compared with the first quarter of 1999. This
growth includes the impact of the following acquisitions: Bank of Commerce
acquired in July 1999, Western Bancorp acquired in November 1999, Peninsula Bank
of San Diego acquired in January 2000. Excluding these bank acquisitions,
average loan balances increased 10 percent in the first quarter of 1999.

Noninterest income was relatively flat reflecting a downturn in the high
yield investment banking sector and the timing of gains related to remarketing
activities within the leasing division. Noninterest income from the high yield
investment banking sector decreased $3.1 million or 29 percent in the first
quarter of 2000, compared with the first quarter of 1999. Noninterest income
from leasing activities decreased $5.7 million or 60 percent in the first
quarter of 2000, compared with the first quarter of 1999. These decreases were
offset by growth in Wholesale Banking's core business activities.

Noninterest expense (excluding amortization of intangible assets) increased
to $203.5 million in the first quarter of 2000, compared with $181.0 million in
first quarter 1999. The increase was primarily due to acquisitions, which added
incremental noninterest expense of $11.9 million in the first quarter of 2000,
and growth in Wholesale Banking's business activities. Goodwill and other
intangible assets expense increased $6.2 million or 40% in the first quarter of
2000, compared with the first quarter of 1999 primarily due to the acquisitions
of Bank of Commerce in July 1999, Western Bancorp in November 1999, and
Peninsula Bank of San Diego in January 2000. The efficiency ratio increased to
44.4 percent, compared with 43.6 percent a year ago.

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"). Operating
earnings increased 6 percent to $89.7 million in the first quarter of 2000,
compared with $84.4 million in the same quarter of 1999. Return on average
assets increased to 2.92 percent in the first quarter of 2000 from 2.45 percent
in the same quarter a year ago.

Total revenue grew $21.1 million or 5 percent compared with the first
quarter of 1999, reflecting the increased value of deposits in a rising interest
rate environment, growth in fee income and the impact of acquisitions. Deposit
service charges and debit card fees increased $ 6.4 million or 8 percent over
the first quarter of 1999. The growth was partially offset by planned reductions
in revenue related to the indirect automobile portfolio. Total revenue from the
indirect automobile portfolio decreased $15.4 million or 56 percent as compared
with the first quarter of 1999. Average balances for the indirect automobile
loan portfolio decreased $2,610.1 million or 73 percent for the same period, due
to the September 1999 sale of $1.8 billion of indirect automobile loans and the
continued run off of the remaining portfolio.

Noninterest expense (excluding amortization of intangible assets) increased
3 percent to $220.3 million in the first quarter 2000, compared with $213.3
million in the first quarter 1999. The Company is currently investing in a
number of customer service initiatives and enhanced technology designed to
improve the earnings growth of the Consumer Banking business line. These
initiatives include incremental investment in technology and processes, and the
hiring of additional sales and customer service employees. 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.
Goodwill and other intangible asset expense increased $2.9 million or 32 percent
for the first quarter of 2000 primarily due to the acquisition of Bank of
Commerce in July 1999, Western Bancorp in November 1999, and Peninsula Bank of
San Diego in January 2000.

4 U.S. Bancorp
<PAGE> 6

<TABLE>
<CAPTION>
Wealth Management and Corporate Consolidated
Payment 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>
$ 94.9 $ 82.0 15.7% $ 45.0 $ 40.7 10.6% $ (11.7) $ .9 $ 862.3 $ 793.4 8.7%
46.5 52.6 (11.6) 1.3 1.0 30.0 3.2 (32.0) 154.0 117.0 31.6
177.3 139.9 26.7 399.1 273.0 46.2 (1.7) 5.5 795.7 626.3 27.0
101.7 83.2 22.2 326.1 227.3 43.5 (20.3) (26.7) 831.3 678.1 22.6
12.9 6.5 98.5 9.9 6.6 50.0 -- -- 56.6 37.8 49.7
41.2 29.6 39.2 39.6 29.3 35.2 1.4 24.2 228.5 218.2 4.7
------------------- ------------------- ------------------- -------------------
$ 69.9 $ 50.0 39.8 $ 67.2 $ 49.5 35.8 $ 2.3 $ 40.9 387.6 368.6 5.2
------------------- ------------------- -------------------
(8.6) (1.8) ***
-------------------
$ 379.0 $ 366.8 3.3
-------------------
$ 8,185 $ 7,668 6.7 $ 2,740 $ 2,107 30.0 $ 2,035 $ 2,546 $ 63,709 $ 59,081 7.8
8,721 8,103 7.6 6,612 5,198 27.2 10,993 10,549 81,771 75,107 8.9
77 52 48.1 3,436 2,964 15.9 3,825 2,631 49,703 47,620 4.4
826 656 25.9 1,254 1,118 12.2 609 (399) 7,697 6,088 26.4
------------------- ------------------- ------------------- -------------------
3.22% 2.50% 4.09% 3.86% 1.91% 1.99%
34.0 30.9 21.6 18.0 20.3 24.6
42.1 40.4 75.7 74.6 53.6 50.4
37.4 37.5 73.4 72.5 50.1 47.8
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

PAYMENT SYSTEMS Payment Systems includes consumer and business credit cards,
corporate and purchasing card services, card-accessed secured and unsecured
lines of credit, ATM processing and merchant processing. Operating earnings
increased 40 percent to $69.9 million in the first quarter of 2000, compared
with $50.0 million in the same quarter of 1999. First quarter return on average
assets was 3.22 percent, compared with 2.50 percent in the first quarter of
1999. Return on average common equity was 34.0 percent in the first quarter of
2000, compared with 30.9 percent in the same quarter of 1999.

Net interest income increased 16 percent to $94.9 million in the first
quarter of 2000, compared with $82.0 million in the same quarter a year ago. The
change reflects core growth in loan balances of 6.7 percent and the benefit of
pricing enhancements implemented in 1999. Despite growth in loans, the provision
declined to $46.5 million in the first quarter of 2000, compared with $52.6
million in the first quarter of 1999. This improvement reflects lower net
charge-offs in the credit card portfolio compared to a year ago.

Fee-based noninterest income increased $37.4 million to $177.3 million in
the first quarter of 2000, compared with $139.9 million in the first quarter of
1999. The increase reflects growth in credit card revenues and data processing
fees related to ATM processing activities. Corporate and retail card product
fees increased $31.6 million or 27 percent over the first quarter of 1999. Data
processing fees related to ATM processing activities increased $13.4 million or
86 percent over the first quarter of 1999 primarily due to the acquisition of
Mellon Network Services' electronic funds transfer processing unit in June 1999.

Noninterest expense (excluding amortization of intangible assets) was $101.7
million in the first quarter 2000, compared with $83.2 million in first quarter
1999. The increase was primarily due to the Mellon Network Services acquisition,
which added incremental direct expense of approximately $9.5 million in the
first quarter of 2000, and expenditures supporting Internet initiatives designed
to leverage the Company's electronic processing capabilities. Goodwill and other
intangible assets expense increased $6.4 million or 99 percent for the first
quarter of 2000 primarily due to the acquisition of Mellon Network Services'
electronic funds transfer processing unit in June 1999.

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. Operating earnings increased 36
percent to $67.2 million in the first quarter of 2000, compared with $49.5
million in the first quarter of 1999. First quarter return on average

U.S. Bancorp 5
<PAGE> 7

TABLE 3
ANALYSIS OF NET INTEREST INCOME

<TABLE>
<CAPTION>
Three Months Ended
--------------------
March 31 March 31
(Dollars In Millions) 2000 1999
<S> <C> <C>
------------------------------------------------------------------------------------
Net interest income, as reported............................ $845.4 $782.7
Taxable-equivalent adjustment............................ 16.9 10.7
----------------
Net interest income (taxable-equivalent basis).............. $862.3 $793.4
----------------
Average yields and weighted average rates
(taxable-equivalent basis)
Earning assets yield..................................... 8.81% 8.28%
Rate paid on interest-bearing liabilities................ 5.05 4.35
----------------
Gross interest margin....................................... 3.76% 3.93%
----------------
Net interest margin......................................... 4.81% 4.82%
----------------
Net interest margin without taxable-equivalent increments... 4.71% 4.76%
------------------------------------------------------------------------------------
</TABLE>

common equity was 21.6 percent, compared with 18.0 percent in the first quarter
of 1999.

The business line's positive results were primarily due to increases in
mutual fund fees and equity commissions, investment banking, trading profits,
and growth in loans and deposits in its Private Financial Services. Total
revenue increased by $130.4 million or 42 percent in the first quarter of 2000,
compared with the first quarter of 1999. Mutual fund fees and equity commissions
increased $25.7 million or 34 percent in the first quarter of 2000, compared
with the first quarter of 1999, and investment banking and trading profits
increased $93.5 million or 120 percent for the same period. Average loan
balances in Private Financial Services increased $493.9 million or 24 percent
over the first quarter 1999 while average deposit balances increased $318.5
million or 12 percent during the same period. The efficiency ratio was 75.7
percent in the first quarter of 2000, compared with 74.6 percent in the first
quarter of 1999.

CORPORATE SUPPORT Corporate Support includes the net effect of support units
after internal revenue and expense allocations, balance sheet management and
other corporate activities. The variance in operating earnings in the first
quarter of 2000 from the first quarter of 1999 primarily reflects the change in
the provision for credit losses from a year ago and residual allocations. The
variance also reflects the reduction in net interest income due to planned
declines in the residential real estate portfolio, the impact of contingency
cash related to the millennium computer change (Y2K) and the effect of a rising
rate environment.

STATEMENT OF INCOME ANALYSIS

NET INTEREST INCOME First quarter net interest income on a taxable-equivalent
basis was $862.3 million, compared with $793.4 million in the first quarter of
1999. Net interest margin on a taxable-equivalent basis remained relatively flat
at 4.81 percent in the first quarter of 2000, as compared with 4.82 percent in
the first quarter of 1999. Average earning assets for the quarter increased $5.4
billion (8 percent) from the first quarter of 1999, primarily driven by core
commercial, home equity and second mortgage loan growth and bank acquisitions,
partially offset by reductions in securities, indirect automobile loans and
residential mortgage loans.

Average loans were up $4.6 billion (8 percent) from the first quarter of
1999. Excluding indirect automobile and residential mortgage loans, average
loans for the first quarter of 2000 were higher by approximately $7.4 billion
(14 percent) than the first quarter of 1999. Without the bank acquisitions,
average loans, excluding indirect automobile and residential mortgage loans,
were approximately 9 percent higher than the first quarter of 1999. The decline
in indirect automobile

TABLE 4
NONINTEREST INCOME

6 U.S. Bancorp

<PAGE> 8

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.

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.
The residential portfolio continued its expected decline decreasing by $392
million (13 percent) from the first quarter of 1999. Average available-for-sale
securities were $324 million (6 percent) lower in the first quarter of 2000,
compared with the same quarter of 1999, primarily reflecting maturities and
sales of securities.

PROVISION FOR CREDIT LOSSES The provision for credit losses was $154.0 million
in the first quarter of 2000, compared with $117.0 million in the same quarter
of 1999. The provision for credit losses is recorded to bring the allowance for
credit losses to a level deemed appropriate by management. Refer to "Corporate
Risk Profile" for further information on factors considered by the Company in
assessing the credit quality of the loan portfolio and establishing the
allowance for credit losses.

NONINTEREST INCOME Excluding available-for-sale securities transactions, first
quarter 2000 noninterest income was $795.7 million, an increase of $169.4
million (27 percent), from the first quarter of 1999. Investment banking
revenue, trading account profits and commissions and investment products fees
and commissions were significantly higher, due to growth in Wealth Management
and Capital Markets. Credit card fee revenue was higher year over year by $32.7
million (26 percent) reflecting continued growth in corporate and retail card
product fees, as well as merchant and ATM processing-related revenue. Service
charges on deposit accounts increased 5 percent to $109.0 million for the first
quarter of 2000. The increase in other income in the first quarter of 2000
included a $10.8 million gain on the sale of a building.

NONINTEREST EXPENSE Excluding merger-related charges, first quarter 2000
noninterest expense was $887.9 million, an increase of $172.0 million (24
percent) from the first quarter of 1999. Approximately $99 million of the
increase in expense quarter-over-quarter was due to the growth in investment
banking and brokerage activities. The remaining increase was primarily the
result of acquisitions and investments in sales and service and technology. In
addition to on-going investments in Internet-related products and services, the
first quarter of 2000 included approximately $9.0 million of incremental
spending on Internet infrastructure-related initiatives.

The banking efficiency ratio before merger-related charges was 45.3 percent
for the first quarter of 2000, compared with 43.3 percent in the first quarter
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

U.S. Bancorp 7
<PAGE> 9

its products and services over the Internet. The expenditures associated with
these initiatives are expected to result in a higher rate of expense growth in
2000 and, as with any such investment, the anticipated benefits are subject to a
number of uncertainties.

Noninterest expense included merger-related charges of $13.1 million in the
first quarter of 2000, compared to $2.9 million in the first quarter of 1999.
These merger-related charges related to the integration of the Company's various
acquisitions including Western Bancorp and Peninsula Bank of San Diego. These
merger-related charges are primarily system conversion and integration costs
associated with consolidating redundant operations.

INCOME TAX EXPENSE The provision for income taxes was $206.8 million (an
effective rate of 35.3 percent) in the first quarter of 2000, compared with
$206.4 million (an effective rate of 36.0 percent) in the same quarter of 1999.

BALANCE SHEET ANALYSIS

LOANS The Company's loan portfolio was $64.9 billion at March 31, 2000, compared
with $62.9 billion at December 31, 1999. Commercial loans totaled $45.1 billion
at March 31, 2000, up $2.2 billion (5 percent) from December 31, 1999. The
increase was primarily attributable to continued growth in core commercial and
commercial real estate loans and bank acquisitions. Total consumer loan
outstandings were $19.8 billion at March 31, 2000, compared with $19.9 billion
at December 31, 1999. Excluding indirect automobile loans and residential
mortgage loans, consumer loans were $16.6 billion at March 31, 2000, and
December 31, 1999.

SECURITIES At March 31, 2000, available-for-sale securities totaled $4.7
billion, compared with $4.9 billion at December 31, 1999, primarily reflecting
maturities and sales of securities.

DEPOSITS Noninterest-bearing deposits were $14.7 billion at March 31, 2000,
compared with $16.1 billion at December 31, 1999. The decrease was primarily due
to seasonality of corporate trust and other business deposits. Interest-bearing
deposits totaled $36.3 billion at March 31, 2000, compared with $35.5 billion at
December 31, 1999. The increase in interest-bearing deposit balances was
primarily due to the acquisition of Peninsula Bank of San Diego, as well as
increases in money market indexed products and consumer savings certificates.

BORROWINGS Short-term borrowings, which include federal funds purchased,
securities sold under agreements to repurchase and other short-term borrowings,
increased to $3.3 billion at March 31, 2000, compared with $2.3 billion at
December 31, 1999. The increase reflected low short-term borrowing levels at
December 31, 1999, primarily due to the Company's Y2K liquidity planning.

Long-term debt was $17.3 billion at March 31, 2000, up from $16.6 billion at
December 31, 1999. To fund core asset growth during the first quarter of 2000,
the Company issued $1.1 billion of debt with an average original maturity of 2.0
years under its medium-term and bank note programs.

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. The Company utilizes a credit risk
rating system in order to measure the credit quality of individual commercial
loan transactions. The risk rating system is intended to identify and measure
the credit quality of lending transactions. 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 56 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
$154.0 million in the first quarter of 2000, compared with $139.6 million in the
first quarter of 1999. The increase in net charge-offs was primarily due to
commercial loan charge-offs, the growing small business lending portfolio and
an expected increase in losses on several consumer loan portfolios purchased in
late 1998. This is offset somewhat by lower net charge-offs on credit card
portfolios. The ratio of total net charge-offs to average loans was relatively
flat at .97 percent in the first quarter of 2000, compared with .96 percent in
the

8 U.S. Bancorp
<PAGE> 10

TABLE 6
SUMMARY OF ALLOWANCE FOR CREDIT LOSSES

<TABLE>
<CAPTION>
Three Months Ended
--------------------
March 31 March 31
(Dollars in Millions) 2000 1999
<S> <C> <C>
------------------------------------------------------------------------------------
Balance at beginning of period.............................. $ 995.4 $1,000.9
CHARGE-OFFS
Commercial
Commercial............................................ 56.3 43.5
Real estate
Commercial mortgage................................ 1.0 .3
Construction....................................... -- .2
-----------------
Total commercial................................... 57.3 44.0
Consumer
Credit card........................................... 42.1 55.1
Other................................................. 83.9 81.2
-----------------
Subtotal........................................... 126.0 136.3
Residential mortgage.................................. 2.5 1.0
-----------------
Total consumer..................................... 128.5 137.3
-----------------
Total........................................... 185.8 181.3
RECOVERIES
Commercial
Commercial............................................ 10.7 18.4
Real estate
Commercial mortgage................................ 1.5 1.7
Construction....................................... .3 --
-----------------
Total commercial................................... 12.5 20.1
Consumer
Credit card........................................... 3.0 4.8
Other................................................. 16.1 16.6
-----------------
Subtotal........................................... 19.1 21.4
Residential mortgage.................................. .2 .2
-----------------
Total consumer..................................... 19.3 21.6
-----------------
Total........................................... 31.8 41.7
NET CHARGE-OFFS
Commercial
Commercial............................................ 45.6 25.1
Real estate
Commercial mortgage................................ (.5) (1.4)
Construction....................................... (.3) .2
-----------------
Total commercial................................... 44.8 23.9
Consumer
Credit card........................................... 39.1 50.3
Other................................................. 67.8 64.6
-----------------
Subtotal........................................... 106.9 114.9
Residential mortgage.................................. 2.3 .8
-----------------
Total consumer..................................... 109.2 115.7
-----------------
Total........................................... 154.0 139.6
Provision charged to operating expense...................... 154.0 117.0
Acquisitions and other changes.............................. 15.7 4.2
-----------------
Balance at end of period.................................... $1,011.1 $ 982.5
-----------------
Allowance as a percentage of:
Period-end loans......................................... 1.56% 1.65%
Nonperforming loans...................................... 310 324
Nonperforming assets..................................... 276 302
Annualized net charge-offs............................... 163 174
------------------------------------------------------------------------------------
</TABLE>

U.S. Bancorp 9
<PAGE> 11

TABLE 7
DELINQUENT LOAN RATIOS*

<TABLE>
<CAPTION>
March 31 December 31
90 days or more past due 2000 1999
<S> <C> <C>
---------------------------------------------------------------------------------------
COMMERCIAL
Commercial............................................... .65% .59%
Real estate
Commercial mortgage................................... .68 .84
Construction.......................................... .59 .59
-------------------
Total commercial...................................... .65 .65
CONSUMER
Credit card.............................................. 1.11 .96
Other.................................................... .59 .57
-------------------
Subtotal.............................................. .71 .67
Residential mortgage..................................... 1.69 1.57
-------------------
Total consumer........................................ .84 .79
-------------------
Total.............................................. .71% .69%
---------------------------------------------------------------------------------------
</TABLE>

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

first quarter of 1999. Commercial loan net charge-offs were $44.8 million for
the first quarter of 2000, or .41 percent of average loans outstanding, compared
with $23.9 million, or .26 percent of average loans outstanding, in the first
quarter of 1999. Net charge-offs in the first quarter of 2000 included expected
higher losses on a growing portfolio of scored small business and commercial
payment systems products. Commercial loan net charge-offs, excluding net
charge-offs of scored small business and commercial payment systems products,
were $27.3 million, or .26 percent of average loans outstanding.

Consumer loan net charge-offs of $109.2 million were less than $115.7
million in the same period of 1999 and $10.2 million more than the fourth
quarter of 1999. The increase from the prior quarter reflected expected
increases in net charge-offs on acquired portfolios and seasonally higher losses
on credit cards, partially offset by a reduction in net charge-offs related to
fraud. The decline in net charge-offs from a year ago reflects the reduction in
fraud-related losses and improving trends in the credit card portfolios.
Consumer loan net charge-offs as a percent of average loans outstanding were
2.22 percent in the first quarter of 2000, compared with 2.01 percent and 2.17
percent in the fourth quarter and first quarter of 1999, respectively.

The allowance for credit losses provides coverage for probable losses
inherit in the Company's loan portfolio. Management evaluates the allowance
each quarter to determine that it is adequate to cover inherent losses. The
evaluation of each element and the overall allowance is based on continuing
assessment of problem loans and related off-balance sheet items, recent loss
experience, and other factors, including regulatory guidance and economic
conditions.

The allowance for credit losses was $1,011.1 million at March 31, 2000,
higher than the allowance for credit losses of $995.4 million at December 31,
1999, due to additions for acquisitions. The ratio of allowance for credit
losses to

TABLE 8
NET CHARGE-OFFS AS A PERCENTAGE OF AVERAGE LOANS OUTSTANDING

<TABLE>
<CAPTION>
Three Months Ended
--------------------
March 31 March 31
2000 1999
<S> <C> <C>
------------------------------------------------------------------------------------
COMMERCIAL
Commercial............................................... .62% .39%
Real estate
Commercial mortgage................................... (.02) (.07)
Construction.......................................... (.03) .02
----------------
Total commercial...................................... .41 .26
CONSUMER
Credit card.............................................. 3.84 5.08
Other.................................................... 2.09 1.80
----------------
Subtotal.............................................. 2.51 2.51
Residential mortgage..................................... .35 .11
----------------
Total consumer........................................ 2.22 2.17
----------------
Total.............................................. .97% .96%
------------------------------------------------------------------------------------
</TABLE>

10 U.S. Bancorp
<PAGE> 12

TABLE 9
NONPERFORMING ASSETS*

<TABLE>
<CAPTION>
March 31 December 31
(Dollars in Millions) 2000 1999
<S> <C> <C>
---------------------------------------------------------------------------------------
COMMERCIAL
Commercial............................................... $ 186.7 $ 161.2
Real estate
Commercial mortgage................................... 68.0 78.9
Construction.......................................... 25.8 25.3
-------------------
Total commercial...................................... 280.5 265.4
CONSUMER
Residential mortgage..................................... 38.0 36.0
Other.................................................... 7.9 8.6
-------------------
Total consumer........................................ 45.9 44.6
-------------------
Total nonperforming loans....................... 326.4 310.0
OTHER REAL ESTATE........................................... 23.8 20.7
OTHER NONPERFORMING ASSETS.................................. 16.4 16.8
-------------------
Total nonperforming assets...................... $ 366.6 $ 347.5
-------------------
Accruing loans 90 days or more past due**................... $ 133.4 $ 125.8
Nonperforming loans to total loans.......................... .50% .49%
Nonperforming assets to total loans plus other real
estate..................................................... .56 .55
---------------------------------------------------------------------------------------
</TABLE>

*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.

nonperforming loans was 310 percent at March 31, 2000, down slightly from the
ratio of 321 percent at December 31, 1999. Management has determined that the
allowance for credit losses is adequate.

NONPERFORMING ASSETS Nonperforming assets include nonaccrual loans, restructured
loans, other real estate and other nonperforming assets owned by the Company.
Nonperforming assets at March 31, 2000, totaled $366.6 million, compared with
$347.5 million at December 31, 1999. The ratio of nonperforming assets to loans
and other real estate was .56 percent at March 31, 2000, compared with .55
percent at December 31, 1999.

Accruing loans 90 days or more past due at March 31, 2000, totaled $133.4
million, compared with $125.8 million at December 31, 1999. These loans are not
included in nonperforming assets because they are expected to be returned to
current status. Consumer loans 30 days or more past due decreased to 2.57
percent of the portfolio at March 31, 2000, compared with 2.65 percent at
December 31, 1999. The percentage of consumer loans 90 days or more past due of
the total consumer loan portfolio totaled .84 percent at March 31, 2000,
compared with .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

U.S. Bancorp 11
<PAGE> 13

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

<TABLE>
<CAPTION>
At March 31, 2000 (Dollars in Millions)
-------------------------------------------------------------------------------------------------------------------
Weighted Weighted
Average Average
Notional Interest Rate Interest Rate
Maturity Date Amount Received Paid
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------
2000........................................................ $ 155 6.39% 6.41%
2001........................................................ 290 6.56 6.05
2002........................................................ 545 6.22 5.98
2003........................................................ 2,662 6.06 6.26
2004........................................................ 1,475 6.60 6.02
Thereafter.................................................. 2,305 6.28 6.02
-----
Total....................................................... $7,432 6.27% 6.11%
-------------------------------------------------------------------------------------------------------------------
</TABLE>

*At March 31, 2000, the Company received fixed-rate interest and paid
variable-rate interest on substantially all swaps in its hedging portfolio.

interest income over the second 12 months given a 1 percent change in interest
rates. At March 31, 2000, forecasted net interest income for the next 12 months
would decrease $7 million from an immediate 100 basis point upward parallel
shift in rates and increase $4 million from a downward shift of similar
magnitude. Forecasted net interest income for the second 12 months would
decrease $10 million from an immediate 100 basis point upward parallel shift in
rates and increase $3 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 instruments. ALCO also calculates the
sensitivity of the simulation results to changes in key assumptions, such as
core deposit repricings 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 interest rate swaps and, to a lesser
degree, interest rate caps and floors.

In the first quarter of 2000, the Company added $500 million of pay fixed
interest rate swaps and terminated $674 million of receive fixed interest rate
swaps to reduce its interest rate 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
March 31, 2000, the Company received and made payments on $7.4 billion notional
amount of interest rate swap agreements. These swaps had a weighted average
interest rate received of 6.27 percent and a weighted average interest rate paid
of 6.11 percent. The remaining maturities of these agreements ranged from 1
month to 15 years with an average remaining maturity of 4.6 years. Swaps
increased net interest income for the quarters ended March 31, 2000, and 1999 by
$1.7 million and $17.4 million, respectively.

The Company also purchases interest rate caps and floors 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 March 31, 2000. To hedge against

12 U.S. Bancorp
<PAGE> 14

TABLE 11
CAPITAL RATIOS

<TABLE>
<CAPTION>
March 31 December 31
(Dollars in Millions) 2000 1999
<S> <C> <C>
---------------------------------------------------------------------------------------
Tangible common equity*..................................... $ 5,161 $ 5,134
As a percent of assets................................... 6.4% 6.5%
Tier 1 capital.............................................. $ 5,675 $ 5,631
As a percent of risk-adjusted assets..................... 6.6% 6.8%
Total risk-based capital.................................... $ 9,311 $ 9,281
As a percent of risk-adjusted assets..................... 10.9% 11.1%
Leverage ratio.............................................. 7.2 7.4
---------------------------------------------------------------------------------------
</TABLE>

*Defined as common equity less goodwill.

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 March 31, 2000, all of
which were LIBOR-indexed, was $500 million. The impact of caps and floors on net
interest income was not significant for the quarters ended March 31, 2000, and
1999.

MARKET RISK MANAGEMENT Market valuation 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 valuation risk limits are established
subject to approval by the Company's Board of Directors. The Company's VaR limit
was $40 million at March 31, 2000. The estimate of 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
$16.5 million at March 31, 2000.

CAPITAL MANAGEMENT At March 31, 2000, tangible common equity (common equity less
goodwill) was $5.2 billion, or 6.4 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 6.6 percent and 10.9 percent at March 31, 2000, compared
with 6.8 percent and 11.1 percent at December 31, 1999. The March 31, 2000
leverage ratio was 7.2 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
March 31, 2000. The purpose of these share repurchase programs is to ensure that
appropriate capital levels are maintained. Shares acquired under the programs
may be used for; 1) dividend reinvestment programs; 2) employee stock purchase
and option programs; and 3) business acquisitions. During the first quarter of
2000, the Company repurchased 10.0 million shares under these programs for a
total dollar value of $205.3 million. On January 14, 2000, the Company issued
4.0 million shares related to the acquisition of Peninsula Bank of San Diego.

ACCOUNTING CHANGES

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Statement of
Financial Accounting Standards No. ("SFAS") 133, "Accounting for Derivative
Instruments and Hedging Activities," establishes 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. The adoption
of SFAS 133 is not expected to have a material impact on the Company.

U.S. Bancorp 13
<PAGE> 15

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
March 31 December 31
(Dollars in Millions) 2000 1999
---------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 3,602 $ 4,036
Federal funds sold.......................................... 131 713
Securities purchased under agreements to resell............. 427 324
Trading account securities.................................. 684 617
Available-for-sale securities............................... 4,704 4,871
Loans....................................................... 64,897 62,885
Less allowance for credit losses......................... 1,011 995
--------------------
Net loans................................................ 63,886 61,890
Premises and equipment...................................... 867 862
Interest receivable......................................... 471 433
Customers' liability on acceptances......................... 104 152
Goodwill and other intangible assets........................ 3,158 3,066
Other assets................................................ 5,038 4,566
--------------------
Total assets.......................................... $ 83,072 $ 81,530
--------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing...................................... $ 14,723 $ 16,050
Interest-bearing......................................... 36,292 35,480
--------------------
Total deposits........................................ 51,015 51,530
Federal funds purchased..................................... 1,640 297
Securities sold under agreements to repurchase.............. 1,004 1,235
Other short-term funds borrowed............................. 629 724
Long-term debt.............................................. 17,267 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..................................... 104 152
Other liabilities........................................... 2,718 2,441
--------------------
Total liabilities..................................... 75,327 73,892
Shareholders' equity
Common stock, par value $1.25 a share -- authorized
1,500,000,000 shares; issued: 3/31/00 -- 758,194,161
shares; 12/31/99 -- 754,368,668 shares................. 948 943
Capital surplus.......................................... 1,461 1,399
Retained earnings........................................ 5,607 5,389
Accumulated other comprehensive income................... (83) (62)
Less cost of common stock in treasury:
3/31/00 -- 9,181,673 shares; 12/31/99 -- 1,038,456
shares.................................................. (188) (31)
--------------------
Total shareholders' equity............................ 7,745 7,638
--------------------
Total liabilities and shareholders' equity............ $ 83,072 $ 81,530
---------------------------------------------------------------------------------------
</TABLE>

14 U.S. Bancorp
<PAGE> 16

CONSOLIDATED STATEMENT OF INCOME

<TABLE>
<CAPTION>
Three Months Ended
-------------------
(Dollars in Millions, Except Per Share Data) March 31 March 31
(Unaudited) 2000 1999
---------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Loans....................................................... $1,426.9 $1,238.5
Securities
Taxable.................................................. 60.3 64.6
Exempt from federal income taxes......................... 14.0 14.7
Other interest income....................................... 62.4 34.2
-----------------
Total interest income................................. 1,563.6 1,352.0
INTEREST EXPENSE
Deposits.................................................... 372.9 311.6
Federal funds purchased and repurchase agreements........... 43.8 39.4
Other short-term funds borrowed............................. 13.6 12.9
Long-term debt.............................................. 268.6 186.1
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely the junior
subordinated debentures of the parent company............ 19.3 19.3
-----------------
Total interest expense................................ 718.2 569.3
-----------------
Net interest income......................................... 845.4 782.7
Provision for credit losses................................. 154.0 117.0
-----------------
Net interest income after provision for credit losses....... 691.4 665.7
NONINTEREST INCOME
Credit card fee revenue..................................... 159.5 126.8
Trust and investment management fees........................ 117.1 117.2
Investment products fees and commissions.................... 116.2 88.6
Service charges on deposit accounts......................... 109.0 103.4
Investment banking revenue.................................. 94.0 36.2
Trading account profits and commissions..................... 83.6 51.5
Available-for-sale securities losses........................ (.3) --
Other....................................................... 116.3 102.6
-----------------
Total noninterest income.............................. 795.4 626.3
NONINTEREST EXPENSE
Salaries.................................................... 432.1 354.1
Employee benefits........................................... 76.1 70.0
Net occupancy............................................... 57.1 50.0
Furniture and equipment..................................... 41.1 38.1
Goodwill and other intangible assets........................ 56.6 37.8
Merger-related charges...................................... 13.1 2.9
Other....................................................... 224.9 165.9
-----------------
Total noninterest expense............................. 901.0 718.8
-----------------
Income before income taxes.................................. 585.8 573.2
Applicable income taxes..................................... 206.8 206.4
-----------------
Net income.................................................. $ 379.0 $ 366.8
-----------------
Earnings per share.......................................... $ .51 $ .51
Diluted earnings per share.................................. $ .51 $ .50
---------------------------------------------------------------------------------
</TABLE>

U.S. Bancorp 15
<PAGE> 17

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............ (141.7) (141.7)
Purchase of treasury stock........... (1,397,940) (47.0) (47.0)
Issuance of common stock
Acquisitions...................... 1,027,276 (3.6) 40.0 36.4
Dividend reinvestment............. 168,650 (.4) 6.4 6.0
Stock option and stock purchase
plans.......................... 809,189 (30.2) 34.5 4.3
---------------------------------------------------------------------------------------
726,368,893 931.0 1,213.0 4,314.1 71.8 (701.9) 5,828.0
Comprehensive income
Net income........................... 366.8 366.8
Other comprehensive income
Change in unrealized gains on
securities of $29.2 (net of $11.1
tax expense)...................... (18.1) (18.1)
-------
Total comprehensive income..... 348.7
---------------------------------------------------------------------------------------
BALANCE MARCH 31, 1999............... 726,368,893 $931.0 $1,213.0 $4,680.9 $ 53.7 $(701.9) $6,176.7
---------------------------------------------------------------------------------------------------------------------------------
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............ (161.5) (161.5)
Purchase of treasury stock........... (10,025,000) (205.3) (205.3)
Issuance of common stock
Acquisitions...................... 4,326,950 4.0 62.0 32.3 98.3
Dividend reinvestment............. 340,012 (.7) 7.1 6.4
Stock option and stock purchase
plans............................ 1,040,314 .7 .8 9.9 11.4
---------------------------------------------------------------------------------------
749,012,488 947.7 1,460.9 5,227.7 (61.8) (187.5) 7,387.0
Comprehensive income
Net income........................... 379.0 379.0
Other comprehensive income
Change in unrealized losses on
securities of $21.5 (net of $13.1
tax benefit) net of
reclassification adjustment for
losses included in net income of
$.3 (net of $.1 tax benefit)...... (21.2) (21.2)
-------
Total comprehensive income..... 357.8
---------------------------------------------------------------------------------------
BALANCE MARCH 31, 2000............... 749,012,488 $947.7 $1,460.9 $5,606.7 $(83.0) $(187.5) $7,744.8
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*Defined as total common shares less common stock held in treasury.
**Ending treasury shares were 9,181,673 at March 31, 2000; 1,038,456 at
December 31, 1999; 18,428,964 at March 31, 1999; and 19,036,139 at
December 31, 1998.

16 U.S. Bancorp
<PAGE> 18

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
Three Months Ended
---------------------
(Dollars in Millions) March 31 March 31
(Unaudited) 2000 1999
-------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities................ $ 424.9 $ 611.6
------------------
INVESTING ACTIVITIES
Net cash (used) provided by:
Loans outstanding........................................ (1,583.5) (512.6)
Securities purchased under agreements to resell.......... (103.0) 14.6
Available-for-sale securities
Sales.................................................... 83.8 53.2
Maturities............................................... 180.1 455.1
Purchases................................................ (51.5) (217.4)
Proceeds from sales of other real estate.................... 5.6 7.8
Net purchases of bank premises and equipment................ (31.5) (30.1)
Purchases of loans.......................................... (189.7) (127.7)
Acquisitions, net of cash received.......................... -- (21.8)
Cash and cash equivalents of acquired subsidiaries.......... 67.0 3.6
Other - net................................................. (222.4) (192.5)
------------------
Net cash used by investing activities.................... (1,845.1) (567.8)
------------------
FINANCING ACTIVITIES
Net cash (used) provided by:
Deposits................................................. (967.6) (1,362.7)
Federal funds purchased and securities sold under
agreements to repurchase................................ 1,112.1 367.2
Short-term borrowings.................................... (95.5) 429.5
Proceeds from long-term debt................................ 1,107.0 300.0
Principal payments on long-term debt........................ (402.9) (307.2)
Proceeds from dividend reinvestment, stock option and stock
purchase plans............................................. 17.8 10.3
Repurchase of common stock.................................. (205.3) (47.0)
Cash dividends.............................................. (161.5) (141.7)
------------------
Net cash provided (used) by financing activities......... 404.1 (751.6)
------------------
Change in cash and cash equivalents...................... (1,016.1) (707.8)
Cash and cash equivalents at beginning of period............ 4,748.8 4,855.3
------------------
Cash and cash equivalents at end of period............... $ 3,732.7 $4,147.5
-------------------------------------------------------------------------------------
</TABLE>

U.S. Bancorp 17
<PAGE> 19

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 only 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 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 3 through
6 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," establishes
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 adoption permitted. The adoption of
SFAS 133 is not expected to have a material impact on the Company.

NOTE C
BUSINESS COMBINATIONS

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>
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 6/30/99 -- -- 78 -- Purchase
Funds Transfer Processing Unit
Libra Investments, Inc. 1/4/99 33 -- 4 1,027,276 Purchase
</TABLE>

18 U.S. Bancorp
<PAGE> 20

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>
March 31, 2000 December 31, 1999
---------------------------------------------------
Amortized Fair Amortized Fair
(Dollars in Millions) Cost Value Cost Value
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury............................................... $ 380 $ 373 $ 388 $ 381
U.S. agencies and other mortgage-backed..................... 2,863 2,765 2,971 2,906
Other U.S. agencies......................................... 190 191 195 196
State and political......................................... 1,109 1,109 1,132 1,135
Other....................................................... 304 266 288 253
--------------------------------------------------
Total...................................................... $4,846 $4,704 $4,974 $4,871
-------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE E
LOANS

The composition of the loan portfolio was as follows:

<TABLE>
<CAPTION>
March 31 December 31
(Dollars in Millions) 2000 1999
------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL:
Commercial............................................... $30,675 $28,863
Real estate
Commercial mortgage................................... 10,033 9,784
Construction.......................................... 4,414 4,322
--------------------------
Total commercial................................... 45,122 42,969
--------------------------
CONSUMER:
Home equity and second mortgage.......................... 8,802 8,681
Credit card.............................................. 4,096 4,313
Revolving credit......................................... 1,832 1,815
Installment.............................................. 1,193 1,245
Student.................................................. 677 563
--------------------------
Subtotal........................................... 16,600 16,617
Indirect automobile...................................... 543 638
Residential mortgage..................................... 2,632 2,661
--------------------------
Total consumer*.................................... 19,775 19,916
--------------------------
Total loans..................................... $64,897 $62,885
------------------------------------------------------------------------------------------
</TABLE>

*Loans held for sale were $740 at March 31, 2000, and $608 at December 31, 1999.
This included residential mortgages held for sale and the student loan
portfolio which may be sold when the repayment period begins.

At March 31, 2000, the Company had $281 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 March 31, 2000, the average recorded investment in impaired loans was
approximately $273 million. No interest income was recognized on impaired loans
during the quarter.

U.S. Bancorp 19
<PAGE> 21

NOTE F
LONG-TERM DEBT

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

<TABLE>
<CAPTION>
March 31 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
9.11%) -- maturities to October 2026....................... 1,997 1,998
Medium-term notes (5.98% to 7.50%) -- maturities to December
2004....................................................... 2,819 2,310
Bank notes (5.25% to 6.73%) -- maturities to November
2005....................................................... 8,909 8,459
Euro medium-term notes -- due April 13, 2004................ 400 400
Other....................................................... 192 196
----------------------
Total.................................................... $ 17,267 $ 16,563
----------------------------------------------------------------------------------------
</TABLE>

NOTE G
INCOME TAXES

The components of income tax expense were:

<TABLE>
<CAPTION>
Three Months Ended
--------------------
March 31 March 31
(Dollars in Millions) 2000 1999
------------------------------------------------------------------------------------
<S> <C> <C>
FEDERAL
Current tax................................................. $ 167.4 $ 154.2
Deferred tax provision...................................... 7.1 17.9
----------------
Federal income tax....................................... 174.5 172.1
STATE
Current tax................................................. 30.1 30.6
Deferred tax provision...................................... 2.2 3.7
----------------
State income tax......................................... 32.3 34.3
----------------
Total income tax provision............................... $ 206.8 $ 206.4
------------------------------------------------------------------------------------
</TABLE>

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

<TABLE>
<CAPTION>
Three Months Ended
--------------------
March 31 March 31
(Dollars in Millions) 2000 1999
------------------------------------------------------------------------------------
<S> <C> <C>
Tax at statutory rate (35%)................................. $ 205.0 $ 200.6
State income tax, at statutory rates, net of federal tax
benefit.................................................... 21.0 22.3
Tax effect of
Tax-exempt interest
Loans................................................. (1.9) (2.3)
Securities............................................ (6.0) (5.7)
Amortization of nondeductible goodwill................... 14.9 9.6
Tax credits and other items.............................. (26.2) (18.1)
----------------
Applicable income taxes..................................... $ 206.8 $ 206.4
------------------------------------------------------------------------------------
</TABLE>

The Company's net deferred tax asset was $124.3 million at March 31, 2000,
and $158.4 million at December 31, 1999.

20 U.S. Bancorp
<PAGE> 22

NOTE H
MERGER AND INTEGRATION CHARGES

During the first quarter of 2000, the Company recorded $13.1 million of expense
related to the integration of the Company's various acquisitions. The Company
determines merger-related charges based on its integration strategy and
formulated plans. These plans are established as of the acquisition date and
regularly evaluated during the integration process. Severance charges include
the cost of severance, other benefits and outplacement costs associated with the
termination of employees primarily in branch offices and centralized corporate
support and data processing functions. The severance amounts are determined
based on the Company's existing severance pay programs and are paid out over a
benefit period of up to two years from the time of termination. The total number
of employees included in severance amounts were approximately 3,635 for U.S.
Bancorp ("USBC"), 75 for Piper Jaffray Companies Inc. ("Piper"), 175 for Western
Bancorp ("Western"), and 300 for other acquisitions. Premises and equipment
writedowns represent lease termination costs and impairment of assets for
redundant office space, equipment and branches that will be vacated and disposed
of as part of the integration plan. Systems conversions and other merger-related
expenses are recorded as incurred and are associated with the preparation and
mailing of numerous customer communications for the acquisitions and conversion
of customer accounts, printing and distribution of training materials and policy
and procedure manuals, outside consulting fees, and similar expenses relating to
the conversions and integration of acquired branches and operations. The
following table presents a summary of activity with respect to the Company's
significant acquisitions:

<TABLE>
<CAPTION>
Other**
(Dollars in Millions) USBC Piper Jaffray Western Acquisitions Total
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1999 $15.9 $17.5 $20.8 $17.7 $71.9
Provision charged to operating expense* -- 1.7 4.5 6.9 13.1
Additions related to purchase acquisitions -- -- 2.3 8.9 24.1
Cash outlays (5.4) (2.9) (10.7) (12.4) (31.4)
Noncash writedowns and other -- -- (.1) (.5) (.6)
----- ----- ----- ----- -----
Balance at March 31,2000 $10.5 $16.3 $16.8 $20.6 $64.2
===== ===== ===== ===== =====
</TABLE>

*Merger-related charges in operating expenses for other acquisitions for the
three months ending March 31, 2000, included $5.1 million for Mellon Network
Services, $3.1 million for Peninsula Bank of San Diego, $2.1 million related to
a division of John Nuveen Company and $5.3 million for other entities.

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

<TABLE>
<CAPTION>
March 31 December 31
(Dollars in Millions) 2000 1999
---------------------------------------------------------------
<S> <C> <C>
Severance $31.4 $34.6
Other employee related costs 14.5 16.6
Lease terminations and facility costs 8.3 9.5
Contracts and system writeoffs 7.0 6.4
Other 3.0 4.8
----- -----
Total $64.2 $71.9
</TABLE>

(Dollars in Millions)
---------------------------------------------------------------
<S> <C> <C>
USBC* $10.5 $15.9
Piper Jaffray 16.3 17.5
Western Bancorp 16.8 20.8
Peninsula Bank 6.8 --
Bank of Commerce 6.6 7.5
Zappco, Inc. 4.0 4.1
Northwest Bancshares, Inc. 3.1 3.5
Other acquisitions .1 2.6
----- -----
Total $64.2 $71.9
===== =====
</TABLE>

* The USBC accrual represented severance related amounts only. With respect to
completed acquisitions, additional merger-related charges of approximately $45
million on a pre-tax basis are expected to be incurred in 2000.

NOTE I
SHAREHOLDERS' EQUITY

The Company issued 4,326,950 shares of common stock with an aggregate value of
$98.3 million in conjunction with acquisitions during the three months ended
March 31, 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 51.3
million shares for $1.7 billion, including 10.0 million shares for $205.3
million in the first quarter of 2000.

NOTE J
EARNINGS PER SHARE

The components of earnings per share were:

<TABLE>
<CAPTION>
Three Months Ended
--------------------------
March 31 March 31
(Dollars in Millions, Except Per Share Data) 2000 1999
------------------------------------------------------------------------------------------
<S> <C> <C>
EARNINGS PER SHARE:
Net income to common stockholders........................... $379.0 $366.8
-----------------------
Average shares outstanding.................................. 748,339,548 722,637,379
-----------------------
Earnings per share.......................................... $ .51 $ .51
-----------------------
DILUTED EARNINGS PER SHARE:
Net income to common stockholders........................... $379.0 $366.8
-----------------------
Average shares outstanding.................................. 748,339,548 722,637,379
Net effect of the assumed purchase of stock under the stock
option and stock purchase plans -- based on the treasury
stock method using average market price.................. 1,803,414 5,664,720
-----------------------
Dilutive common shares outstanding.......................... 750,142,962 728,302,099
-----------------------
Diluted earnings per share.................................. $ .51 $ .50
------------------------------------------------------------------------------------------
</TABLE>

U.S. Bancorp 21
<PAGE> 23

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 manage its interest rate and market risk and to meet
the needs of its customers. These instruments carry varying degrees of credit,
interest rate and liquidity risk. The contract or notional amounts of these
financial instruments were as follows:

<TABLE>
<CAPTION>
March 31 December 31
(Dollars in Millions) 2000 1999
----------------------------------------------------------------------------------------
<S> <C> <C>
Commitments to extend credit
Commercial............................................... $27,224 $28,222
Corporate and purchasing cards........................... 18,515 18,503
Consumer credit cards.................................... 15,015 14,991
Other consumer........................................... 6,477 6,388
Letters of credit
Standby.................................................. 3,340 3,222
Commercial............................................... 362 317
Interest rate swap contracts
Hedges................................................... 7,432 7,743
Intermediated............................................ 506 556
Options contracts
Hedge interest rate floors purchased..................... 500 500
Intermediated interest rate and foreign exchange caps and
floors purchased........................................ 529 453
Intermediated interest rate and foreign exchange caps and
floors written.......................................... 529 453
Futures and forward contracts............................... 28 34
Recourse on assets sold..................................... 109 117
Foreign currency commitments
Commitments to purchase.................................. 1,400 1,137
Commitments to sell...................................... 1,420 1,141
Commitments from securities lending......................... 747 717
----------------------------------------------------------------------------------------
</TABLE>

The Company received fixed-rate interest and paid variable-rate interest on
substantially all swaps in its hedging portfolio as of March 31, 2000. Activity
for the three months ended March 31, 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................................................... 540
Terminations................................................ (674)
Amortization................................................ (177)
-----
Notional amount outstanding at March 31, 2000............... $ 7,432
----------------------------------------------------------------------
Weighted average interest rate paid......................... 6.11%
Weighted average interest rate received..................... 6.27
----------------------------------------------------------------------
</TABLE>

LIBOR-based interest rate floors totaling $500 million with an average
remaining maturity of 1.5 years at March 31, 2000, and $500 million with an
average remaining maturity of 1.7 years at December 31, 1999, hedged floating
rate commercial loans. The strike rate on these LIBOR-based floors was 4.63
percent at March 31, 2000, and December 31, 1999.

Net unamortized deferred losses relating to swaps, options and futures were
$31.3 million at March 31, 2000.

22 U.S. Bancorp
<PAGE> 24

NOTE L
SUPPLEMENTAL DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEET Time certificates of deposit in denominations of
$100,000 or more totaled $5,805 million and $5,809 million at March 31, 2000,
and December 31, 1999, respectively.

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

<TABLE>
<CAPTION>
Three Months Ended
-----------------------
March 31 March 31
(Dollars in Millions) 2000 1999
---------------------------------------------------------------------------------------
<S> <C> <C>
Income taxes paid........................................... $ 27.2 $ 13.5
Interest paid............................................... 667.4 546.1
Net noncash transfers to foreclosed property................ 8.3 5.3
Change in unrealized gain (loss) on available-for-sale
securities, net of taxes of $13.0 in 2000 and $11.1 in
1999....................................................... (21.2) (18.1)
-------------------
Cash acquisitions of businesses
Fair value of noncash assets acquired.................... $ -- $ 21.8
Liabilities assumed...................................... -- --
-------------------
Net................................................... $ -- $ 21.8
-------------------
Stock acquisitions of businesses
Fair value of noncash assets acquired.................... $ 499.2 $ 42.3
Net cash acquired........................................ 67.0 3.6
Liabilities assumed...................................... (467.9) (9.5)
-------------------
Net value of common stock issued...................... $ 98.3 $ 36.4
---------------------------------------------------------------------------------------
</TABLE>

U.S. Bancorp 23
<PAGE> 25

CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND RELATED YIELDS AND RATES

<TABLE>
<CAPTION>
For the Three Months Ended March 31
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.......................... $ 384 $ 5.4 5.66% $ 482 $ 6.8 5.72% (20.3)%
U.S. agencies and other
mortgage-backed...................... 2,916 49.3 6.80 3,240 53.4 6.68 (10.0)
State and political.................... 1,117 21.0 7.56 1,177 22.2 7.65 (5.1)
U.S. agencies and other................ 490 5.3 4.35 332 4.1 5.01 47.6
----------------- -------------------
Total available-for-sale
securities......................... 4,907 81.0 6.64 5,231 86.5 6.71 (6.2)
Unrealized (loss) gain on
available-for-sale securities...... (142) 106 **
------ -------
Net available-for-sale securities.... 4,765 5,337 (10.7)
Trading account securities.............. 699 15.3 8.80 558 9.2 6.69 25.3
Federal funds sold and resale
agreements............................. 569 6.6 4.67 519 4.8 3.75 9.6
Loans
Commercial
Commercial........................... 29,564 603.2 8.21 26,018 479.9 7.48 13.6
Real estate
Commercial mortgage................ 10,014 214.6 8.62 8,234 173.5 8.55 21.6
Construction....................... 4,367 100.0 9.21 3,252 71.0 8.85 34.3
----------------- -------------------
Total commercial................... 43,945 917.8 8.40 37,504 724.4 7.83 17.2
Consumer
Home equity and second mortgage...... 8,744 209.1 9.62 7,484 174.4 9.45 16.8
Credit card.......................... 4,094 142.1 13.96 4,013 123.3 12.46 2.0
Other................................ 4,293 109.5 10.26 7,055 161.7 9.30 (39.1)
----------------- -------------------
Subtotal........................... 17,131 460.7 10.82 18,552 459.4 10.04 (7.7)
Residential mortgage................. 2,633 50.7 7.74 3,025 57.7 7.74 (13.0)
----------------- -------------------
Total consumer..................... 19,764 511.4 10.41 21,577 517.1 9.72 (8.4)
----------------- -------------------
Total loans........................ 63,709 1,429.2 9.02 59,081 1,241.5 8.52 7.8
Allowance for credit losses............ 1,029 998 3.1
------ -------
Net loans............................ 62,680 58,083 7.9
Other earning assets.................... 2,260 48.4 8.61 1,349 20.7 6.22 67.5
----------------- -------------------
Total earning assets*.............. 72,144 1,580.5 8.81 66,738 1,362.7 8.28 8.1
Other assets............................ 10,798 9,261 16.6
------ -------
Total assets....................... $81,771 $75,107 8.9%
------ -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits............ $14,094 $13,544 4.1%
Interest-bearing deposits
Interest checking...................... 6,210 32.3 2.09 6,026 25.5 1.72 3.1
Money market accounts.................. 12,588 124.8 3.99 12,180 105.8 3.52 3.3
Other savings accounts................. 2,096 9.4 1.80 2,281 10.0 1.78 (8.1)
Savings certificates................... 9,251 125.8 5.47 10,123 125.3 5.02 (8.6)
Certificates over $100,000............. 5,464 80.6 5.93 3,466 45.0 5.27 57.6
----------------- -------------------
Total interest-bearing deposits.... 35,609 372.9 4.21 34,076 311.6 3.71 4.5
Short-term borrowings................... 3,593 57.4 6.43 4,104 52.3 5.17 (12.5)
Long-term debt.......................... 17,082 268.6 6.32 13,967 186.1 5.40 22.3
Company-obligated mandatorily redeemable
preferred securities................... 950 19.3 8.17 950 19.3 8.24 --
----------------- -------------------
Total interest-bearing
liabilities...................... 57,234 718.2 5.05 53,097 569.3 4.35 7.8
Other liabilities....................... 2,746 2,378 15.5
Common equity........................... 7,783 6,022 29.2
Accumulated other comprehensive
income................................. (86) 66 **
------ -------
Total liabilities and shareholders'
equity........................... $81,771 $75,107 8.9%
------ ------- ----------
Net interest income..................... $ 862.3 $ 793.4
------- -------
Gross interest margin................... 3.76% 3.93%
------ ------
Gross interest margin without
taxable-equivalent increments.......... 3.67% 3.87%
------ ------
Net interest margin..................... 4.81% 4.82%
------ ------
Net interest margin without
taxable-equivalent increments.......... 4.71% 4.76%
-------------------------------------------------------------------------------------------------------------
</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.

24 U.S. Bancorp
<PAGE> 26

PART II -- OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES -- On April 7, 2000, the Company issued 2,642,708
shares of common stock with an aggregate value of $47.6 million as consideration
in connection with a merger transaction. These common shares were issued in a
private placement transaction exempt from registration under Section 4(2) of the
Securities Act of 1933.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -- The 2000 Annual
Meeting of Shareholders of U.S. Bancorp was held Wednesday, April 19, 2000, at
the Minneapolis Convention Center. John F. Grundhofer, Chairman and Chief
Executive Officer, presided.

The holders of 627,332,945 shares of common stock, 83.6 percent of the
750,624,900 outstanding shares entitled to vote as of the record date, were
represented at the meeting in person or by proxy. The candidates for election as
Class II Directors listed in the proxy statement were elected to serve
three-year terms expiring at the 2003 annual shareholders' meeting. The proposal
to approve the U.S. Bancorp Executive Incentive Plan was approved. The proposal
to ratify the appointment of Ernst & Young LLP as the Company's independent
auditors for the year ending December 31, 2000, was approved. The shareholder
proposal for the annual election of all Directors and the elimination of the
Company's classified Board of Directors, was not approved because it did not
receive the affirmative vote of the majority of shares present in person or
represented by proxy at the meeting and entitled to vote on the matter (broker
non-votes are not counted for purposes of calculating the vote and have no
affect on the outcome).

SUMMARY OF MATTERS VOTED UPON BY SHAREHOLDERS

<TABLE>
<CAPTION>
Number of Shares
------------------------------------------------------
For Withheld
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Election of Class II Directors:
Harry L. Bettis.......................................... 613,431,859 13,901,086
Peter H. Coors........................................... 612,475,398 14,857,547
Joshua Green III......................................... 612,180,419 15,152,526
Paul A. Redmond.......................................... 612,847,790 14,485,155
S. Walter Richey......................................... 612,661,339 14,671,606
For Against Abstain Non-Vote
----------------------------------------------------------------------------------------------------------------------

Other Matters:
Approval of Executive Incentive Plan........................ 546,167,238 71,570,066 9,595,641 0
Ratification of appointment of Ernst & Young LLP as
independent auditors....................................... 618,622,695 4,041,574 4,668,676 0
Proposal for the annual election of all Directors........... 266,276,695 245,368,197 23,418,567 92,269,486
----------------------------------------------------------------------------------------------------------------------
</TABLE>

For a copy of the meeting minutes, please write to the Office of the
Secretary, U.S. Bancorp, 601 Second Avenue South, Minneapolis, Minnesota
55402-4302.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) EXHIBITS

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 March 31, 2000, the Company filed no Current
Reports on Form 8-K.

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
Authorized Officer)
DATE: January 10, 2001

U.S. Bancorp 25
<PAGE> 27

EXHIBIT 12

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
Three
Months
Ended
March 31
--------
(Dollars in Millions) 2000
------------------------------------------------------------------------
<S> <C>
EARNINGS
1. Net income.............................................. $ 379.0
2. Applicable income taxes................................. 206.8
------
3. Net income before taxes (1 + 2)......................... $ 585.8
------
4. Fixed charges:
a. Interest expense excluding interest on deposits...... $ 345.3
b. Portion of rents representative of interest and
amortization of debt expense........................... 12.9
------
c. Fixed charges excluding interest on deposits (4a +
4b).................................................... 358.2
d. Interest on deposits................................. 372.9
------
e. Fixed charges including interest on deposits (4c +
4d).................................................... $ 731.1
------
5. Amortization of interest capitalized.................... $ --
6. Earnings excluding interest on deposits (3 + 4c + 5).... 944.0
7. Earnings including interest on deposits (3 + 4e + 5).... 1,316.9
8. Fixed charges excluding interest on deposits (4c)....... 358.2
9. Fixed charges including interest on deposits (4e)....... 731.1

RATIO OF EARNINGS TO FIXED CHARGES
10. Excluding interest on deposits (line 6/line 8).......... 2.64
11. Including interest on deposits (line 7/line 9).......... 1.80
------------------------------------------------------------------------
</TABLE>

26 U.S. Bancorp
<PAGE> 28

[US BANCORP LOGO(R)]
U.S. Bank Place
601 Second Avenue South
Minneapolis, Minnesota
55402-4302
www.usbank.com
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, dividend paying agent, and dividend reinvestment
plan 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 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.

DIVIDEND REINVESTMENT PLAN
U.S. Bancorp shareholders can take advantage of a plan that provides automatic
reinvestment of dividends and/or optional cash purchases of additional shares of
U.S. Bancorp Common Stock up to $60,000 per calendar year. For more information,
please contact First Chicago Trust Company of New York, c/o EquiServe P.O. Box
2598, Jersey City, New Jersey, 07303-2598, (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 news
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 report 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]