U.S. Bancorp

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P R O V E N   P E R F O R M A N C E

Building

momentum

U . S .   B A N C O R P  2010  A n n u a l   R e p o r t

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2 0 1 0   R E V E N U E

B U S I N E S S   S C O P E

C O R P O R A T E   I

Consumer and Small Business Banking

43%

Our commitment to outstanding customer service, plus more 
than 3,000 convenient banking offi ces throughout 25 states 
and great online access make us the bank of choice for millions 
of customers. U.S. Bank supports the individuals, families and 
businesses of our nation with quality products and services.

Regional 

Consumer & Business Banking 
& Wealth Management

Wholesale Banking and Commercial Real Estate

U.S. Bank is helping to drive a recovering economy through 
wide-ranging fi nancial services and capital access for large and 
middle market businesses, fi nancial institutions, public sector 
clients, builders and developers of companies and communities 
and corporate America.

20%

National 

Wholesale Banking & Trust Services

9%

28%

International 

Payments

Wealth Management and Securities Services

Our Wealth Management advisors guide our clients in 
building, managing and protecting the wealth they’ve earned. 
Our Securities Services business is a top-tier provider of 
Corporate Trust services and serves businesses, fi nancial 
institutions, government entities and other clients with a full 
menu of services and industry-leading capabilities.

Payment Services

We offer merchant processing and card issuance for a wide 
variety of cards, companies, government agencies and agent 
banks. Our subsidiary Elavon is a leading global provider of 
merchant acquiring services, providing integrated payment 
processing to more than a million merchants through relationships 
with fi nancial institutions, associations and other partners. 

Sustainability

This annual report was printed at Hennegan, a company committed 
to sustaining a healthy and safe environment by exceeding regulatory 
and environmental requirements as defi ned by local, state and federal 
government. Their environmental initiatives focus on:

•  Reducing volatile organic compound emissions, energy and water use.

•  Recycling chemical and paper waste.

•  Sourcing environmentally preferable products.

The paper utilized in this annual report is certifi ed by SmartWood, a program 
of the Rainforest Alliance, to the FSC® standards and contains a minimum 
of 10% post-consumer recycled paper fi bers. The narrative and fi nancial 
sections contain 30% post-consumer recycled paper fi bers.

U . S .   B A N C O R P   A T   A   G L A N C E

Ranking  

Asset size 

Deposits 

Loans 

Customers 

Bank branches 

ATMs 

U.S. Bank is 5th largest 
U.S. commercial bank

Payment services and 
merchant processing 

International

$308 billion

$204 billion

$197 billion

17 million

3,031

5,310

Wholesale banking 
and trust services 

Consumer and 
business banking 

NYSE symbol 

At year end December 31, 2010

National

Regional

USB 

 Executive Offi ces
U.S. Bancorp
800 Nicollet Mall
Minneapolis, MN 5

Common Stock Tr

and Registrar
BNY Mellon Share
our transfer agent a
paying agent and d
plan administrator,
shareholder records
Inquiries related to 
stock transfers, cha
lost stock certificate
and dividend paym
to the transfer agen

BNY Mellon Share
P.O. Box 358015
Pittsburgh, PA 152
Phone: 888-778-13
201-680-6578 (inte
Internet: bnymellon

For Registered or C
BNY Mellon Share
500 Ross St., 6th F
Pittsburgh, PA 152

Telephone represen
weekdays from 8:0
Central Time, and a
is available 24 hour
week. Specifi c infor
account is available
internet site by click
ServiceDirect® link.

Independent Audi
Ernst & Young LLP
independent audito
financial statements

Common Stock Li
U.S. Bancorp comm
traded on the New 
under the ticker sym

 U.S. Bank, Member FDIC

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Proven performance

Building momentum

In 2010, U.S. Bancorp continued to distinguish itself from its peers.  

Throughout the economic downturn, we held fast to the core fundamentals  

of our company with a clear focus on the future. Strong capital generation,  

diversified businesses, quality earnings, prudent risk management and  

investments in our company have positioned us to maximize the benefits  

of an economic recovery.

Please see explanation on Page 17 regarding the  
risks and uncertainties that may affect the accuracy  
of forward-looking statements.

C O R P O R A T E   P R O F I L E

U.S. Bancorp is a diversified financial services holding company and the parent company of U.S. Bank National Association, the 

fifth-largest commercial bank in the nation. U.S. Bancorp is known for its strong financial performance, prudent risk management, 

quality products and services and its focus on customer service. U.S. Bancorp supports the communities it serves through 

financial services, economic development initiatives, grants, sponsorships and employee volunteerism. U.S. Bancorp has been 

recognized as one of the safest, most respected and most trusted banking companies in the world. The company offers regional 

consumer and business banking and wealth management services, national wholesale and trust services, and international 

payments services to more than 17 million customers. Headquartered in Minneapolis, U.S. Bancorp was founded in 1863 under 

national Charter #24 and currently employs more than 61,000 people. 

Visit U.S. Bancorp online at usbank.com

U.S. BANCORP 

1

S E L E C T E D   F I N A N C I A L   H I G H L I G H T S

NET  I NCOME
(Dollars in Millions)

5,000

2,500

1
5
7

,

4

4
2
3

,

4

7
1
3

,

3

6
4
9

,

2

5
0
2

,

2

DIL UTED E ARNINGS 
PER C OMMON SHARE
(In Dollars)

DIVIDENDS DECLARED 
PER COMMON SHARE
(In Dollars)

5000

3.00

3.0

2.00

1
6

.

2

2
4

.

2

2500

1.50

1
6

.

1

3
7

.

1

7
9

.

0
0
7

.

1

5
2
6

.

1

1.5

1.00

0
9
3

.

1

0
0
2

.

0
0
2

.

06

07

08

09

10

06

07

08

09

10

06

07

08

09

10

0

0

0.0

0

RET U RN  ON  
AVE RA GE ASSET S
(In Percents)

3
2

.

2

3
9

.

1

RET UR N ON AVERAGE 
COMMON EQUITY
(In Percents)

2.4

25

25.0

100

5

.

3
2

3

.

1
2

DIVIDEND PAYOUT RATIO
(In Percents)

9

.

4
0
1

1.2

12.5

1
2

.

1

6
1

.

1

2
8

.

9

.

3
1

7

.

2
1

2

.

8

12.5

50

3

.

6
6

7

.

2
5

06

07

08

09

10

06

07

08

09

10

06

07

08

0.0

0

0.0

0

6

.

0
2

09

.

5
1
1

10

NET  I N TEREST MA RGIN 
(TAXABLE-EQUIVALENT BASIS)
(In Percents)

5
6

.

3

7
4

.

3

6
6

.

3

7
6

.

3

8
8

.

3

EFFICIENCY RATIO (a)
(In Percents)

TIER 1 CAPITAL
(In Percents)

2

.

9
4

9

.

6
4

4

.

8
4

4

.

5
4

5

.

1
5

4

2

0

60

30

0

6

.

0
1

5

.

0
1

6

.

9

8

.

8

3

.

8

60

12

30

0

6

0

06

07

08

09

10

06

07

08

09

10

06

07

08

09

10

0

2.4

1.2

0

4.00

2.00

0

AVERAGE ASSETS
(Dollars in Millions)

AVERAGE SHAREHOLDERS’ 
EQUITY
(Dollars in Millions)

TOTAL RISKED-BASED 
CAPITAL
(In Percents)

300,000

300000

30,000

30000

15

0
0
4

,

4
4
2

2
1
5

,

3
1
2

1
2
6

,

3
2
2

150,000

1
6
8

,

5
8
2

0
6
3

,

8
6
2

150000

15,000

0
1
7

,

0
2

7
9
9

,

0
2

0
7
5

,

2
2

9
4
0

,

8
2

7
0
3

,

6
2

3

.

4
1

9

.

2
1

3

.

3
1

6

.

2
1

2

.

2
1

15000

7.5

0

0

0

0

0

06

07

08

09

10

06

07

08

09

10

06

07

08

09

10

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

2 

U.S. BANCORP

2

1

0

100

50

0

12

6

0

15.0

7.5

0.0

 
 
 
 
 
 
 
 
 
 
 
 
F I N A N C I A L S Um mA R y

Year Ended December 31 
(Dollars and Shares in Millions, Except Per Share Data) 

2010  

2009 

2008  

2010 
v 2009 

2009 
v 2008

Total net revenue (taxable-equivalent basis)  ...............................  

$  18,148  

$  16,668  

$  14,677  

8.9% 

13.6%

Noninterest expense  ...................................................................  

Provision for credit losses  ...........................................................  

Income taxes and taxable-equivalent adjustments ......................  

 9,383  

 4,356  

 1,144  

  Net income  ..............................................................................  

 3,265  

  Net income attributable to noncontrolling interests .................  

 52  

8,281  

 5,557  

 593  

 2,237  

 (32) 

 7,348  

 3,096  

 1,221  

 3,012  

 (66) 

  Net income attributable to U.S. Bancorp .................................  

$    3,317  

$    2,205  

$    2,946  

13.3  

(21.6) 

92.9  

46.0  

*  

50.4  

12.7

79.5

(51.4)

(25.7)

51.5

(25.2)

  Net income applicable to U.S. Bancorp  

  common shareholders..........................................................  

$    3,332  

$    1,803  

$    2,819  

84.8 

(36.0)

Per Common Share

Earnings per share .......................................................................  

$      1.74  

Diluted earnings per share ...........................................................  

$      1.73  

Dividends declared per share .......................................................  

$.20  

Book value per share ....................................................................  

$    14.36  

Market value per share .................................................................  

$    26.97  

Average common shares outstanding ..........................................  

Average diluted common shares outstanding ..............................  

 1,912  

 1,921  

$.97  

$.97  

$.20  

$    12.79  

$    22.51  

1,851  

1,859  

$      1.62  

$      1.61  

$      1.70  

$    10.47  

$    25.01  

 1,742  

1,756  

79.4% 

78.4  

— 

12.3  

19.8  

3.3  

3.3  

(40.1)%

(39.8)

(88.2)

22.2

(10.0)

6.3

5.9

Financial Ratios

Return on average assets.............................................................  

1.16% 

.82% 

1.21%

Return on average common equity ..............................................  

Net interest margin (taxable-equivalent basis) .............................  

Efficiency ratio (a) ...........................................................................  

12.7  

3.88  

51.5  

8.2  

3.67  

48.4  

13.9

3.66

46.9

Average Balances

Loans ............................................................................................  

$193,022  

$185,805  

$165,552  

3.9% 

Investment securities ...................................................................  

47,763  

Earning assets ..............................................................................  

252,042  

Assets ...........................................................................................  

285,861  

Deposits .......................................................................................  

184,721  

Total U.S. Bancorp shareholders’ equity ......................................  

28,049  

42,809  

237,287  

268,360  

167,801  

26,307  

42,850  

215,046  

244,400  

136,184  

22,570  

11.6  

6.2  

6.5  

10.1  

6.6  

12.2%

(.1)

10.3

9.8

23.2

16.6

Period End Balances

Loans ............................................................................................  

$197,061  

$194,755  

$184,955  

1.2% 

5.3%

Allowance for credit losses ..........................................................  

Investment securities ...................................................................  

5,531  

52,978  

Assets ...........................................................................................  

307,786  

Deposits .......................................................................................  

204,252  

Total U.S. Bancorp shareholders’ equity ......................................  

29,519  

5,264  

44,768  

281,176  

183,242  

25,963  

3,639  

39,521  

265,912  

159,350  

26,300  

5.1  

18.3  

9.5  

11.5  

13.7  

44.7

13.3

5.7

15.0

(1.3)

Capital ratios

  Tier 1 capital  ............................................................................  

  Total risk-based capital  ...........................................................  

  Leverage ...................................................................................  

  Tier 1 common equity to risk-weighted assets (b) .....................  

  Tangible common equity to tangible assets (b) ..........................  

  Tangible common equity to risk-weighted assets (b) .................  

10.5% 

13.3  

9.1  

7.8  

6.0  

7.2  

9.6% 

12.9  

8.5  

6.8  

5.3  

6.1  

10.6%

14.3

9.8

5.1

3.3

3.7

  *  Not meaningful 
(a) Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding net securities gains (losses). 
(b) See Non-Regulatory Capital Ratios on page 60.

U.S. BANCORP 

3

 
 
 
 
F E L L Ow  S H A R E H O L D E R S

always

Building

Differentiating U.S. Bancorp 

Growth and investment 

In 2010, U.S. Bancorp continued to differentiate itself  

Over the past two years, we’ve expanded our banking 

from its peer banks through its industry leading financial 

franchise through FDIC-assisted bank acquisitions and other 

performance, prudent risk profile, balance sheet and business 

branch purchases in California, Arizona, Nevada, Chicago 

line growth, and ongoing investments in the company’s 

and, most recently, New Mexico, which represented our 

franchise and future. Thanks to our low-risk operating 

expansion into the 25th contiguous state in our retail 

model, strong balance sheet and diversified businesses,  

footprint. These are all attractive markets and each acquisi-

U.S. Bancorp has been profitable every single quarter  

tion reflected our strategy of accretive, market fill-in and 

during the past three years spanning this recession. In fact, 

expansion to add density and relevant market share to our 

we have further differentiated ourselves by being the only 

franchise. Other business expansion efforts are highlighted 

bank in our peer group to have generated a profit every 

in the following pages, including our growth in corporate 

quarter for the past 20 years. U.S. Bancorp, again, ended  

banking, high-grade bond sales, corporate trust, and 

the year as one of the strongest — if not the strongest 

payments portfolios, among others. In fact, since 2007, we 

— banks in the industry. 

We have made good strategic use of our historic strength  

as a conservatively managed, efficient, solid performer  

to also successfully evolve and transform our company  

into a growth-oriented organization. 

Throughout this difficult economic cycle, we have remained 

focused on what’s fundamental — and what’s right for  

our shareholders, our customers, our employees and our 

communities. We are building on our strengths and building 

for the future.

L OAN S AND  DEPOSIT S
(Dollars in Billions)

220

204204
204

197

195

1831831831838383
183

185

1591591591595959
159

160

144

154

1113113111
13113111
131

125125252555
125

100

06

07

08

09

10

• Loans
• Deposits

Ending balances

4 

U.S. BANCORP

30,000

15,000

0

have acquired five corporate trust operations and numerous 

payments businesses and portfolios. Our capital generation 

capabilities and fundamental strength have allowed us to 

take advantage of these attractive acquisition opportunities, 

as competitors were distracted by internal issues or choosing 

to divest. 

As the country emerges from the worst of the downturn  

and begins to recover, you will see the results from our 

recent strategic investments accelerate. We will continue  

to pursue strategic acquisition opportunities that meet or 

exceed our stringent financial criteria. This is an organiza-

tion focused on sustainable, repeatable and consistent 

organic growth and any acquisition will simply represent  

AVERAGE SHAREHOLDERS’ 
EQUITY
(Dollars in Millions)

an “opportunity not missed.” 

30000

Financial performance 

7
0
3

,

9
4
0

,

8
2

0
1
7

0
2

7
9
9

0
2

0
7
5

,

2
2

Net income for the year rose 50 percent to $3.3 billion, or 

6
2

,

$1.73 per diluted share, from $2.2 billion the year before. 

15000

,

Our performance was driven by record revenue and declin-

ing credit costs, and once again, we were an industry leader 

in return on assets, return on common equity and efficiency, 
06
all the while continuing to improve our top-of-class cus-

07

08

09

10

0

tomer service. At year end, credit-loss provisions declined for 

the fifth consecutive quarter, and loans had risen to a record 

$197 billion. These results reflected the benefits of our 

D I V I D E N D S   D E C L A R E D  
P E R   C O M M O N   S H A R E
(Dollars in Millions)

2.00

0

3

5

.

1

0
3
2

.

1

1.00

0
2
0

.

1

5

7

8

.

0

06

07

08

10

0

0

2

.

09

 
 
 
 
always

diversified business model, recent investments, deeper 

proved to be harmful to all banks, customers, shareholders 

customer relationships and overall financial strength. 

and communities. It is now clear that strong banks, including 

Continued challenges 

Despite these positive results, U.S. Bancorp and the industry 

still face challenges in loan demand which, though showing 

some welcome signs of recovery, remains muted. Credit-

worthy businesses are applying for credit lines, but many are 

not actively utilizing them. Commercial utilization levels  

are at historic lows, and only a continuing and robust 

recovery will allow that to change. 

Capital and liquidity positions 

We continued to generate significant capital in 2010, ending 

the year with a Tier 1 common equity ratio of 7.8 percent 

and a Tier 1 capital ratio of 10.5 percent, both measures 

significantly higher than the regulatory levels required to be 

considered “well-capitalized.” Our ability to generate capital 

each and every quarter, and the significant growth we have 

experienced in deposits over the past few years have provided 

us with the capacity to fund and grow our balance sheet. 

Further, the strength of our capital and liquidity has been 

recognized by the rating agencies, as our debt ratings continue 

to place us among the highest-rated banks in the country.

Our role in the recovery 

The financial services industry is no longer in a crisis 

situation; many banks are doing well, and the economy is 

slowly recovering. As one of America’s strongest banks,  

we are proud to be an industry leader, providing guidance  

on public messaging and communicating on behalf of our 

industry with regulators and legislators. 

It is now time for America’s banking industry to be heard.  

A healthy and vibrant banking industry is essential to drive 

the economy forward and help our country recover from  

this recession. When the intensity of the economic downturn 

became clear several years ago, and as some financial compa-

nies’ role in the downturn became known, the entire industry 

lost a great deal of respect and its reputation suffered. This 

U.S. Bancorp, are critically important to the recovery and must 

have a voice in the direction of industry regulation. U.S. Bancorp 

will continue to work with the administration, legislators, 

the regulators — and our peer banks — to make it clear to 

all that the banking industry holds the key to accelerating the 

economic recovery. Importantly, however, we must continue 

to highlight the consequences of excessive regulation that 

could be injurious, rather than supportive, of a full recovery. 

Richard K. Davis 

Chairman, President and  

Chief Executive Officer

U.S. BANCORP 

5

Financial reform and USB 

from institutions whose investment banking, brokerage, 

That being said, U.S. Bancorp is well-positioned to manage 

insurance and other businesses are more volatile and 

the uncertainty of industry regulatory reform and its impact 

exposed to economic forces more than U.S. Bancorp. 

on the economic recovery. While our earnings have, and  

will be, negatively affected by many of these actions — our 

strength and stability will be emboldened. We began this 

recession in a relative “position of strength” and we are 

positioned to emerge in the recovery even stronger. 

Although we are defined as a large financial services  

company, we are still, essentially, an uncomplicated, (even 

“old-fashioned”) bank. Our lower-risk business model and 

focus on consumer and commercial banking, credit cards, 

quality home mortgages and fee businesses differentiate us 

Regardless of the regulatory outcomes, our operating model 

and growth strategies are proven and sound. We are headed 

in exactly the right direction even if regulatory, legislative 

and economic headwinds cause us to take a little longer to 

get there. 

Investing in our employees 

Perhaps the most important investment we’ve made in  

the past couple of years has been our investment in our 

employees and our efforts to increase an already-high level 

U . S .   B A N C O R P  mA N A G I N G   C Om mI T T E E  (left to right)

Richard C. Hartnack, Vice Chairman, Consumer and Small Business Banking  

Richard K. Davis, Chairman, President and Chief Executive Officer  

Jeffry H. von Gillern, Vice Chairman, Technology and Operations Services  

Joseph C. Hoesley, Vice Chairman, Commercial Real Estate  

Pamela A. Joseph, Vice Chairman, Payment Services  

P.W. (Bill) Parker, Executive Vice President and Chief Credit Officer  

Richard J. Hidy, Executive Vice President and Chief Risk Officer  

Terrance R. Dolan, Vice Chairman, Wealth Management and  

Richard B. Payne, Vice Chairman, Wholesale Banking  

  Securities Services 

Howell (Mac) McCullough, III, Executive Vice President, Chief Strategy Officer  

Jennie P. Carlson, Executive Vice President, Human Resources  

Andrew Cecere, Vice Chairman and Chief Financial Officer  

Lee R. Mitau, Executive Vice President and General Counsel

6 

U.S. BANCORP

of employee engagement. Some may consider such an 

investment secondary to technology or geography; however, 

we believe that employees are THE key to our success. Our 

strategy is to create the most engaged employee partners, 

who will inspire and deliver an industry-leading customer 

experience, optimizing our earnings potential — which,  

in turn, will favorably impact the communities we serve.  

It all begins with great employees! 

Rewarding our shareholders 

While the 19.8 percent increase in our share price in 2010  

was a very positive reflection of our performance, raising  

the dividend remains a top priority for me, our management 

team and board of directors. Our strong capital position  

and ability to generate capital each quarter through solid 

operating earnings, even under the most severe economic 

conditions, gives us confidence in our ability to increase our 

dividend in 2011. In January, we submitted information to 

the regulators for their assessment of our capital position,  

a precursor to obtaining permission to raise our dividend. 

We believe our shareholders deserve to be rewarded for the 

investment they have made in this company and for the 

loyalty, confidence and patience they have shown over the 

past several years.

As we begin the new year, U.S. Bank is “Positioned to Win” 

and eager to continue our support to the country’s economic 

recovery. We are proud to be bankers and respectful of the 

key role we play in helping to make dreams come true. 

Sincerely, 

20,000

16,000

12,000

3.00

1.50

REVENUE 
(Dollars in Billions)

18,148

16,668

13,742

14,060

14,677

06

07

08

09

10

RETURN ON AVERAGE  ASSET S
(In Percents)

2.23

1.93

1.38

1.06

11.2.211
1.21

0

0606
06

0707
07

0.33

0808
08

• U.S. Bancorp
• Peer Median

00..8282
0.82

0.41

0909
09

1.16
11..1616

0.63

10
10

RETURN ON AVERAGE COMMON EQUITY
(In Percents)

20 000

16 000

12 000

3. 0

1. 5

0. 0

30

23.5

21.3

13.5

11.6

30

15

0

0606
06

0707
07

• U.S. Bancorp
• Peer Median

13.9

3.8

0808
08

8.2
8.8.22

1.9

0909
09

12.7
1212..77

15

5.0

10
10

0

Richard K. Davis 

Chairman, President and Chief Executive Officer

February 28, 2011

Peer Banks: Bank of America, BB&T,  
Fifth Third Bancorp, JPMorgan Chase,  
KeyCorp, PNC Financial Services Group,  
Regions Financial, SunTrust Banks,  
U.S. Bancorp and Wells Fargo & Company

U.S. BANCORP 

7

AVERAGE SHAREHOLDERS’ 

EQUITY

(Dollars in Millions)

30,000

9

4

0

,

8

2

7

0

3

,

6

2

15,000

0

1

7

,

0

2

7

9

9

,

0

2

0

7

5

,

2

2

0

06

07

08

09

10

AVERAGE SHAREHOLDERS’ 

EQUITY

(Dollars in Millions)

9

4

0

,

8

2

7

0

3

,

6

2

0

1

7

,

0

2

7

9

9

,

0

2

0

7

5

,

2

2

30,000

15,000

06

07

08

09

10

AVERAGE SHAREHOLDERS’ 

EQUITY

(Dollars in Millions)

9

4

0

,

8

2

7

0

3

,

6

2

0

1

7

,

0

2

7

9

9

,

0

2

0

7

5

,

2

2

30,000

15,000

06

07

08

09

10

0

0

3. 0

1. 5

0. 0

30

15

0

 
 
 
 
 
 
 
 
P R OvE N P E R F O RmA N C E

U.S. Bancorp’s ability to withstand the worst of the 

within our balance sheet and fee income businesses and 

economic downturn was earned by years of adhering to 

on-going profitability. 

prudent credit standards, building a diversified mix of 

businesses, balancing efficient operations with investments 

for the future, and profitably growing our franchise. 

Over the past ten years, our company has continued to  

build on its prudent, conservative, cost-conscious heritage  

to emerge as an even stronger company that outperforms  

Our disciplined actions throughout this cycle have served 

its peer group, grows core revenue, increases market share 

to preserve the strong foundation we have established,  

and generates capital at industry-leading levels.

and the rewards of this disciplined approach can be seen in 

our improving credit quality and the growing momentum 

We are committed to enhancing the customer 

experience and claiming the industry’s number  

U.S. Bancorp’s consistent underwriting standards and  

credit process and our actions to effectively manage credit 

risk have served us well throughout the years, and never 

more so than during the last two. In the latter part of  

2010, we enjoyed the priceless legacy of a conservative  

credit culture, reporting continued improvement in the 

company’s asset quality as net charge-offs, non-performing 

assets and delinquencies declined. Having credit costs  

under control positioned the company to be among the  

first banks to rebound in terms of growth.

As one of only three banks in our peer group to have been 

profitable every single quarter for the past three years,  

our operating model has proved strong and sustainable.  

Our performance, as measured by return on average assets, 

return on average equity, and efficiency, is consistently at  

the top of our peer group.

Our balance sheet is strong. We continue to generate  

a significant amount of capital each quarter and year, and  

we are confident that we can meet or exceed all future 

capital requirements, whether dictated by our own growing 

operations, the U.S. regulatory authorities, or the new  

one position in customer service. Building deeper 

Basel III international capital guidelines.

relationships with our customers is one of the  

key ways we build satisfaction and loyalty while 

discovering new ways to better meet the needs  

of our customers.

Most importantly, U.S. Bancorp is built on a foundation  

of doing the right thing for our shareholders, our customers, 

our employees and our communities.

8 

U.S. BANCORP

Building

on a strong  
foundation

mA I N T A I N I N G   O U R   S T R E N G T H ,   S A F E Ty  A N D   S T A B I L I Ty

U.S. Bank’s diverse revenue streams and low-cost deposit base differentiate us from 

many banks. They are ongoing strengths, and have been especially beneficial during the 

economic downturn. Also, both will help offset pressure on future earnings resulting 

from recent legislation and regulation restricting banking activities which impacted our 

2010 revenue by more than $415 million. U.S. Bank’s position of strength makes us more 

than able to manage the financial fallout of these new regulations.

U.S. BANCORP 

9

P R OvE N P E R F O RmA N C E

U.S. Bancorp works to build strong market positions in all 

sixth-largest in the nation in originations and in servicing. 

of our businesses and to grow deposit market share in our 

Our home mortgage origination market share has grown 

25-state branch footprint. As we grow the scope and scale of 

400 percent since 2007, while adhering to our prudent risk 

our businesses, we are able to compete even more effectively. 

management policies. 

U.S. Bank has expanded profitably through organic growth 

and through strategic acquisitions during the past two years. 

Acquisitions of smaller banks, corporate trust businesses, 

card portfolios, and payment processing providers and 

portfolios are already contributing, or have the potential  

to augment, capital generation and revenue growth. 

In our Wealth Management and Securities Services business, 

we have made strategic acquisitions that build market share 

and capabilities, including international alliances which allow 

us to service clients’ global needs. U.S. Bank has successfully 

completed 18 corporate trust acquisitions over the past  

20 years and we are ranked in the top three in the areas of 

In Consumer Banking, we have opened new traditional 

Municipal Trustee, Corporate Trustee and Structured Trustee. 

branches, on-site and in-store branches and made some 

We are also in the top three as a third-party provider of 

low-risk acquisitions in selected high-growth markets. In 

mutual funds services. Our December 30 acquisition of the 

particular, recent acquisitions added new scale to current  

domestic and European-based securitization trust adminis-

key markets in California, Arizona and around Chicago,  

tration businesses of Bank of America, N.A., solidified  

and we entered the state of New Mexico with 35 branches, 

U.S. Bank’s position as a top-tier corporate trust provider. 

giving us top-three deposit market share in that state. Our 

objective is to achieve and maintain top-three market share 

or higher in key markets over time. We are the nation’s 

fourth-largest branch network overall and number one in 

in-store branches. Our mortgage banking division is now 

While our Payments 

business continues to 

build scale throughout 

the world, our newest 

travel and rewards card, 

FlexPerks, has become 

the most successful card 

issuance program in the 

industry and has received 

A single international processing platform and rapid 

expansion via acquisitions, strategic alliances and joint 

ventures has moved our Payment Services business to the 

forefront of global payments, and this scale allows us to 

leverage our substantial technology investments. Our 

payments subsidiary Elavon is a top-five domestic merchant 

acquirer and a top-ten global merchant acquirer. In addition 

to building our domestic business, notably providing 

payments services to other banks, we continue to expand 

internationally with a continued focus on Western Europe, 

and new operations in Mexico and Brazil.

We are expanding our lower-risk capital markets activities  

to better meet the needs of our clients and prospects, as well 

international recognition 

as to build scale in this growing business.

for its rewards structure, 

roll-out marketing and 

Building relevant scale profitably across all our lines of business 

phenomenal growth rate.

has been a successful strategy for us. We have executed the 

strategy in ways that benefit the profitability and capabilities 

of our businesses, our financial performance and the quality 

of products and services we offer our customers.

10 

U.S. BANCORP

Building

relevant scale

G R OwI N G   O U R   C OmP A Ny  T H R O U G H   S C A L E ,   S K I L L   A N D   S E R

vI C E 

In Corporate Banking and Commercial Real Estate, we are expanding low-risk  

capital markets activities to better serve clients and to build scale in this business. 

Additionally, we have enhanced foreign exchange services, restructured our customer 

derivative business and added high grade fixed income and municipal bond capabilities. 

Specialized corporate banking and capital markets offices are now in New York, 

Charlotte, Los Angeles and Chicago, among others.

U.S. BANCORP 

11

P R OvE N P E R F O RmA N C E

Our technology investments are designed to give us an 

cross-channel experience that deepens customer relationships 

industry leadership position with the capability to effectively 

through sales, self-service and retention capabilities.

manage risk, operate more efficiently, communicate more 

easily, deliver quality products and services and improve 

multichannel delivery.

We are building an online and mobile platform that helps 

customers understand their financial situation and take action 

when necessary. This customer advocacy includes alert services 

Every line of business is dependent upon our ability to support, 

notifying customers when they need to pay bills or when 

deliver and interact with our customers on a day-to-day, 

they may be low on funds. It includes showing customers  

even minute-to-minute basis. Here are just a few of the most 

we know and value them by offering tailored services and 

impactful investments in technology in the past year.

solutions and streamlined account opening processes. 

With more than 30 million “hits” a month, our online 

With more than 18 billion smart phone apps downloaded 

banking is a delivery channel that must meet customer 

through 2010, it’s clear that mobile banking apps and other 

demand for ease, simplicity and responsiveness. We are 

innovative mobile systems are the delivery channels of the 

investing $130 million to deliver a superior online and 

future. U.S. Bank has become a leader in product innova-

tion, and we have implemented or are piloting a variety of 

banking and payments emerging technologies, including 

support for mobile phone wallets and contactless payment 

technologies. Mobile wallets and contactless payments are 

rapidly moving from the experimental and trial stage to 

broad commercial acceptance.

In our branches, we are making franchise-wide technology 

investments that will immediately elevate the customer 

experience. Our bankers have faster, easier access to infor-

mation and transactions, allowing them to focus on customer 

service and understanding customer needs. Where in the  

past it might have taken up to 30 “clicks” to complete an 

application or account opening, now it can take as few as two. 

Technological improvements in 2010 included the addition 

Investments in technology are evident at the branch level, 

of e-signature pads for Consumer Lending to allow online 

a reflection of our goal to make banking at U.S. Bank 

easy and to build deeper customer relationships. We  

are investing nearly $300 million in new hardware and 

software to serve our consumer and small business 

customers better.

electronic signatures, eliminating repeated in-person visits.

Other major investments in technology include a new 

Business Center in Kansas, our Home Mortgage origination 

platform, Call Center telephony and distribution channel 

integration. We invested $856 million in our franchise in 

2010, including technology enhancements.

12 

U.S. BANCORP

Building

for the future through investments  

in technology

L E A D I N G   T H E  w A y  I N   I N T E R N E T   A N D  mO B I L E   B A N K I N G  

Internet and mobile channel usage continues to grow dramatically, and U.S. Bank  

is building new capabilities to meet customer needs. The key driver of our investment 

priorities is listening to our customers to understand how internet and mobile 

capabilities make it easier to do business with U.S. Bank. Our focus is on building  

a seamless experience across our channels to serve customers wherever and however 

they want to do business.

U.S. BANCORP 

13

P R OvE N P E R F O RmA N C E

At U.S. Bank, providing an outstanding customer experience 

In the face of new regulations under legislation following  

is a company priority and is as essential as our financial 

the economic crisis, U.S. Bank has taken the lead in offering 

performance is to the success of our company. 

our customers choices about how they want to structure 

Employees are recognized and rewarded for providing 

superlative customer service, just as they are for achieving 

financial and operational goals. 

We follow up on our customers’ experience with us through 

regular surveys, and we track the results to achieve continu-

ous improvement. Our employees are trained and equipped 

to assure excellent service, and our quality products and 

services meet the needs of individuals, families, businesses 

and communities.

their accounts. We responded to the call for more clarity 

with clear, understandable disclosures and other changes 

that both met new regulatory requirements and benefitted 

our customers.

U.S. Bank was at the forefront of our industry in  

supporting thoughtful, customer-focused financial reforms. 

Our proactive steps to make banking more transparent 

increased our reputation as a bank of integrity and  

customer service, while our stability and strength created  

a measurable flight to quality as new customers chose  

As we focused on our customers and our communities, 

U.S. Bank as their financial partner. Customers rank  

customers gravitated to U.S. Bank — and they still do. 

U.S. Bank highly in overall satisfaction, quality and value 

according to the American Customer Satisfaction Index 

(ACSI) research conducted in the third quarter of 2010.  

Our overall satisfaction score once again exceeded the 

industry average and the other four largest banks in the 

country. In customer loyalty, U.S. Bank scored significantly 

higher than the bank industry average. 

U.S. Bank also had strong showings in recently released  

J.D. Power and Associates Customer Satisfaction Studies  

on home mortgage servicing and credit card customer 

satisfaction. U.S. Bank owned the lead among traditional 

bank credit card issuers and was rated third overall in the 

J.D. Power and Associates Customer Satisfaction study. 

Additionally, U.S. Bank Home Mortgage placed third in  

the J.D. Power and Associates 2010 Primary Mortgage 

The most prestigious of U.S. Bank’s many service  

recognition programs for employees is our “Circle of 

Service Excellence.” Employees are nominated by 

Servicer Study. 

co-workers or customers for specific examples of 

outstanding service and winners receive both public 

recognition and financial compensation.

14 

U.S. BANCORP

Building

satisfaction  
and loyalty

B A N K I N G   O N   O U T S T A N D I N G   S E R vI C E   A N D   C U S T OmE R   E X P E R I E N C E  

U.S. Bank has kept its focus on its customers — and the employees who serve them — 

throughout the economic downturn. While other banks may have been distracted by 

critical financial and capital issues, U.S. Bank continued its initiatives to claim the  

lead position in customer experience. We have the service policies and practices in place 

to support our employees and their continuous efforts to make the customer experience 

at U.S. Bank exceptional.

U.S. BANCORP 

15

Building

communities

U.S. Bank serves hundreds of communities, large and small, 

billions of dollars nationwide in hundreds of transactions  

across our 25-state footprint. From major metropolitan 

to bring revitalization to our communities.

areas to small towns, these communities play a vital role  

in our success, and in return, we are proud to play a vital 

role in their economic and community development  

through grants, sponsorships, financial services, employee 

volunteerism and other programs.

In 2010 U.S. Bancorp donated $38 million to strengthen  

our communities. These U.S. Bancorp Foundation grants 

and Community Affairs contributions, plus financial  

support of community initiatives and nonprofit sponsorships 

supported arts and culture, education, economic develop-

Our Community Development Corporation is one of the 

ment and local United Way campaigns across our franchise. 

nation’s largest tax credit investors and provides innovative 

Through our partnerships with universities, we are helping 

financing solutions to help communities create affordable 

create new curricula that will provide financial education  

housing projects, preserve historic buildings and districts  

in our communities.

and fund renewable energy projects. We have invested 

Employee volunteer efforts are encouraged and rewarded. 

Every employee receives eight hours of paid time off each 

year to volunteer at a nonprofit organization of their  

choice, and senior managers lead by example in supporting 

volunteerism. Our Five Star Volunteer Award honors our 

most remarkable employee volunteers and contributes  

to the organizations they designate. This year U.S. Bank  

is recognizing 138 employees located in 28 states across  

the country, chosen from 418 nominations submitted by 

employees, co-workers and nonprofit organizations. 

To assure that we fully understand the economic and  

social needs of our communities, we invite business and 

community leaders to join our local U.S. Bank Advisory 

Boards. We currently have 141 boards and more than  

1,000 board members who serve as additional ears and eyes 

U.S. Bank contributes to the strength and vitality  

in the community and provide valuable insights and advice 

of our communities through the U.S. Bancorp 

Foundation, local sponsorships, Community Affairs 

Corporate Giving Program, through quality financial 

services and by company support and encouragement 

of our employees’ superb volunteer efforts and 

community leadership.

as the bank’s ambassadors, advisors and advocates.

We take U.S. Bank’s responsibility as a driver of the  

economy very seriously, and we value the positive difference 

we are able to make in the lives of our customers and  

our communities.

16 

U.S. BANCORP

Proven performance

Building momentum

There are no limits on our opportunities to succeed.  

Financials

Our business model, operating philosophy and financial 

strength all withstood the severe disruptions of the past 

two years, and U.S. Bancorp is in a perfect position  

to grow even stronger in a recovering economy.

  18   Management’s Discussion  

and Analysis

  65   Reports of Management and  
Independent Accountants

  68   Consolidated Financial  

Statements

  72   Notes to Consolidated  

Financial Statements

 125   Five-year Consolidated  
Financial Statements

 127   Quarterly Consolidated  

Financial Data

See the following pages for a complete report of our 

 130  Supplemental Financial Data

financial results and the policies and procedures that 

produced them.

 131  Company Information

 139  Executive Officers

 141  Directors

Inside Back Cover 

  Corporate Information

FO R w A R D- LO O K I N G  ST A T EmE N T S

The following information appears in accordance with the Private Securities Litigation Reform Act of 1995: 

This report contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about 
beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, 
management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future 
plans and prospects of U.S. Bancorp. 

Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from  
those anticipated, including deterioration in general business and economic conditions; a recurrence of turbulence in the financial markets; changes in 
interest rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of 
securities held in its investment securities portfolio; legal and regulatory developments, increased competition from both banks and non-banks; changes 
in customer behavior and preferences; effects of mergers and acquisitions and related integration, effects of critical accounting policies and judgments; 
and management’s ability to effectively manage credits risk, residual value risk, market risk, operational risk, interest rate risk and liquidity risk. Such 
statements speak only as of the date hereof, and the company undertakes no obligation to update them in light of new information or future events.

Important factors could cause actual results to differ materially from those anticipated, including the risks discussed in the Management’s Discussion and 
Analysis section that follows, as well as the risks discussed in detail in the “Risk Factors” section on pages 131–138 of this report. However, factors other 
than these also could adversely affect our results, and the reader should not consider these factors to be a complete set of all potential risks or uncertainties.

U.S. BANCORP 

17

 
Management’s Discussion and Analysis

O V E R V I E W

The financial performance of U.S. Bancorp and its
subsidiaries (the “Company”) in 2010 reflected the strength
and quality of its business lines, prudent risk management
and recent investments. In 2010, the Company achieved
record total net revenue, increased its capital, experienced
lower credit costs, and grew both its balance sheet and fee-
based businesses. Though business and consumer customers
continue to be affected by the tepid economic conditions and
high unemployment levels in the United States, the
Company’s comparative financial strength and enhanced
product offerings attracted a significant number of new
customer relationships in 2010, resulting in loan growth and
significant increases in deposits as the Company continues to
benefit from a “flight-to-quality” by customers. Additionally,
in 2010 the Company invested opportunistically in
businesses and products that strengthened its presence and
ability to serve customers. Weakness in domestic real estate
markets, both residential and commercial, continued to
affect the Company’s loan portfolios, though the Company’s
credit costs have declined since late 2009.

Despite significant legislative and regulatory challenges,
and an economic environment which continues to adversely
impact the banking industry, the Company earned
$3.3 billion in 2010, an increase of 50.4 percent over 2009.
Growth in total net revenue of $1.5 billion (8.9 percent) was
attributable to an increase in net interest income, the result
of higher earning assets and expanded net interest margin.
Noninterest income grew year-over-year as increases in
payments-related revenue and other fee-based businesses
were partially offset by expected decreases from recent
legislative actions and current economic conditions. The
Company’s total net charge-offs and nonperforming assets
both peaked in the first quarter of 2010, and declined
throughout the remainder of the year. Additionally, the
Company continued its focus on effectively managing its
cost structure while making investments to increase revenue,
improve efficiency and enhance customer service, with an
efficiency ratio (the ratio of noninterest expense to taxable-
equivalent net revenue, excluding net securities gains and
losses) in 2010 of 51.5 percent, one of the lowest in the
industry.

The Company’s capital position remained strong and
grew during 2010, with a Tier 1 (using Basel I definition)
common equity to risk-weighted assets ratio of 7.8 percent
and a Tier 1 capital ratio of 10.5 percent at December 31,
2010. In addition, at December 31, 2010, the Company’s
total risk-based capital ratio was 13.3 percent, and its

18

U.S. BANCORP

tangible common equity to risk-weighted assets ratio was
7.2 percent (refer to “Non-Regulatory Capital Ratios” for
further information on the calculation of the Tier 1 common
equity to risk-weighted assets and tangible common equity
to risk-weighted assets ratios). On January 7, 2011, the
Company submitted its plan to the Federal Reserve System
requesting regulatory approval to increase its dividend, and
expects to receive feedback from the Federal Reserve System
late in the first quarter of 2011. Credit rating organizations
rate the Company’s debt among the highest of its large
domestic banking peers. This comparative financial strength
provides the Company with favorable funding costs, and the
ability to attract new customers, leading to growth in loans
and deposits.

In 2010, the Company grew its loan portfolio and
significantly increased deposits. Average loans and deposits
increased $7.2 billion (3.9 percent) and $16.9 billion
(10.1 percent), respectively, over 2009, including the impact
of a Federal Deposit Insurance Corporation (“FDIC”)
assisted transaction in the fourth quarter of 2009. Average
loan growth reflected increases in residential mortgages,
retail loans and commercial real estate loans, offset by a
decline in commercial loans, the result of lower utilization of
available commitments.

The Company’s provision for credit losses decreased
$1.2 billion (21.6 percent) in 2010, compared with 2009.
Real estate markets continue to experience stress, and the
Company had 8 percent higher net charge-offs in 2010 than
in 2009. However, net charge-offs began to decline in early
2010 and the Company’s net charge-offs in the fourth
quarter of 2010 were 16 percent lower than the fourth
quarter of 2009. The Company recorded a provision in
excess of net charge-offs of $200 million in the first six
months of 2010, but improving credit trends and risk profile
of the Company’s loan portfolio resulted in the Company
recording a provision that was less than net charge-offs by
$25 million in the fourth quarter of 2010.

In January, 2011, U.S. federal banking regulators
communicated to the Company the preliminary results of an
interagency examination of the Company’s policies,
procedures, and internal controls related to residential
mortgage foreclosure practices. This examination was part
of a review by the regulators of the foreclosure practices of
14 large mortgage servicers. As a result of the review, the
Company expects the regulators will require the Company
to address certain aspects of its foreclosure processes,
including developing plans related to control procedures and
monitoring of loss mitigation and foreclosure activities, and
taking certain other remedial actions. Though the Company

Table 1 S E L E C T E D F I N A N C I A L D A T A

Year ended December 31
(Dollars and Shares in Millions, Except Per Share Data)

Condensed Income Statement
Net interest income (taxable-equivalent basis) (a) . . . . . . . . . .
Noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities gains (losses), net . . . . . . . . . . . . . . . . . . . . . . .

Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noninterest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . .

Income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxable-equivalent adjustment . . . . . . . . . . . . . . . . . . . . . .
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (income) loss attributable to noncontrolling interests . . .

2010

2009

2008

2007

2006

$ 9,788
8,438
(78)

$ 8,716
8,403
(451)

$ 7,866
7,789
(978)

$ 6,764
7,281
15

$ 6,790
6,938
14

18,148
9,383
4,356

4,409
209
935

3,265
52

16,668
8,281
5,557

2,830
198
395

2,237
(32)

14,677
7,348
3,096

4,233
134
1,087

3,012
(66)

14,060
6,907
792

6,361
75
1,883

4,403
(79)

13,742
6,229
544

6,969
49
2,112

4,808
(57)

Net income attributable to U.S. Bancorp . . . . . . . . . . . . .

$ 3,317

$ 2,205

$ 2,946

$ 4,324

$ 4,751

Net income applicable to U.S. Bancorp common

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,332

$ 1,803

$ 2,819

$ 4,258

$ 4,696

Per Common Share
Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . .
Dividends declared per share . . . . . . . . . . . . . . . . . . . . . .
Book value per share . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market value per share. . . . . . . . . . . . . . . . . . . . . . . . . . .
Average common shares outstanding . . . . . . . . . . . . . . . . .
Average diluted common shares outstanding . . . . . . . . . . . .

1.74
$
1.73
$
$
.200
$ 14.36
$ 26.97
1,912
1,921

.97
$
.97
$
$
.200
$ 12.79
$ 22.51
1,851
1,859

1.62
$
$
1.61
$ 1.700
$ 10.47
$ 25.01
1,742
1,756

2.45
$
$
2.42
$ 1.625
$ 11.60
$ 31.74
1,735
1,756

2.64
$
$
2.61
$ 1.390
$ 11.44
$ 36.19
1,778
1,803

Financial Ratios
Return on average assets . . . . . . . . . . . . . . . . . . . . . . . . .
Return on average common equity . . . . . . . . . . . . . . . . . . .
Net interest margin (taxable-equivalent basis) (a) . . . . . . . . . .
Efficiency ratio (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Average Balances
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noninterest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total U.S. Bancorp shareholders’ equity . . . . . . . . . . . . . . .

Period End Balances
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total U.S. Bancorp shareholders’ equity . . . . . . . . . . . . . . .
Capital ratios

Tier 1 capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total risk-based capital . . . . . . . . . . . . . . . . . . . . . . . . .
Leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tier 1 common equity to risk-weighted assets (c) . . . . . . . .
Tangible common equity to tangible assets (c) . . . . . . . . . .
Tangible common equity to risk-weighted assets (c) . . . . . .

1.16%
12.7
3.88
51.5

.82%
8.2
3.67
48.4

1.21%
13.9
3.66
46.9

1.93%
21.3
3.47
49.2

2.23%
23.5
3.65
45.4

$193,022
5,616
47,763
252,042
285,861
40,162
184,721
33,719
30,835
28,049

$197,061
5,531
52,978
307,786
204,252
31,537
29,519

$185,805
5,820
42,809
237,287
268,360
37,856
167,801
29,149
36,520
26,307

$194,755
5,264
44,768
281,176
183,242
32,580
25,963

$165,552
3,914
42,850
215,046
244,400
28,739
136,184
38,237
39,250
22,570

$184,955
3,639
39,521
265,912
159,350
38,359
26,300

$147,348
4,298
41,313
194,683
223,621
27,364
121,075
28,925
44,560
20,997

$153,827
2,260
43,116
237,615
131,445
43,440
21,046

$140,601
3,663
39,961
186,231
213,512
28,755
120,589
24,422
40,357
20,710

$143,597
2,256
40,117
219,232
124,882
37,602
21,197

10.5%
13.3
9.1
7.8
6.0
7.2

9.6%

12.9
8.5
6.8
5.3
6.1

10.6%
14.3
9.8
5.1
3.3
3.7

8.3%

8.8%

12.2
7.9
5.6
4.8
5.1

12.6
8.2
6.0
5.2
5.6

(a) Presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent.
(b) Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding net securities gains (losses).
(c) See Non-Regulatory Capital Ratios on page 60.

U.S. BANCORP

19

believes its policies, procedures and internal controls related
to foreclosure practices materially follow established
safeguards and legal requirements, the Company intends to
comply with the expected requirements of the regulators in
all respects. The Company does not believe those
requirements will materially affect its financial position,
results of operations, or ability to conduct normal business
activities. In addition, the Company expects monetary
penalties may be assessed but does not know the amount of
any such penalties.

The Company’s financial strength, business model, credit

culture and focus on efficiency have enabled it to deliver
consistently profitable financial performance while operating
in a very turbulent environment. Given the current economic
environment, the Company will continue to focus on
managing credit losses and operating costs, while also utilizing
its financial strength to grow market share and profitability.
Despite the expectation of significant impacts to the industry
from recently enacted legislation, the Company believes it is
well positioned for long-term growth in earnings per common
share and an industry-leading return on common equity. The
Company intends to achieve these financial objectives by
providing high-quality customer service, ensuring regulatory
compliance, continuing to carefully manage costs and, where
appropriate, strategically investing in businesses that diversify
and generate revenues, enhance the Company’s distribution
network and expand its product offerings.

Earnings Summary The Company reported net income
attributable to U.S. Bancorp of $3.3 billion in 2010, or
$1.73 per diluted common share, compared with
$2.2 billion, or $.97 per diluted common share, in 2009.
Return on average assets and return on average common
equity were 1.16 percent and 12.7 percent, respectively, in
2010, compared with .82 percent and 8.2 percent,
respectively, in 2009. Diluted earnings per common share for
2010 included a non-recurring $.05 benefit related to an
exchange of newly issued perpetual preferred stock for
outstanding income trust securities (“ITS exchange”), net of
related debt extinguishment costs. Also impacting 2010 were
$175 million of provision for credit losses in excess of net
charge-offs, net securities losses of $78 million, and a
$103 million gain ($41 million after tax) resulting from the
exchange of the Company’s long-term asset management
business for an equity interest in Nuveen Investments and
cash consideration (“Nuveen Gain”). The results for 2009
included $1.7 billion of provision for credit losses in excess
of net charge-offs, net securities losses of $451 million, a
$123 million FDIC special assessment, a $92 million gain

20

U.S. BANCORP

from a corporate real estate transaction and a reduction to
earnings per share from the recognition of $154 million of
unaccreted preferred stock discount as a result of the
redemption of preferred stock previously issued to the
U.S. Department of the Treasury.

Total net revenue, on a taxable-equivalent basis, for

2010 was $1.5 billion (8.9 percent) higher than 2009,
reflecting a 12.3 percent increase in net interest income and
a 5.1 percent increase in total noninterest income. Net
interest income increased in 2010 as a result of an increase
in average earning assets and continued growth in low cost
core deposit funding. Noninterest income increased
principally due to higher payments-related and commercial
products revenue and a decrease in net securities losses,
partially offset by lower deposit service charges, trust and
investment management fees and mortgage banking revenue.
Total noninterest expense in 2010 increased $1.1 billion

(13.3 percent), compared with 2009, primarily due to the
impact of acquisitions, higher total compensation and
employee benefits expense and costs related to investments
in affordable housing and other tax-advantaged projects,
partially offset by lower FDIC deposit insurance expense due
to the special assessment in 2009.

Acquisitions In 2009, the Company acquired the banking
operations of First Bank of Oak Park Corporation (“FBOP”)
in an FDIC assisted transaction, and in 2008 the Company
acquired the banking operations of Downey Savings and Loan
Association, F.A. and PFF Bank and Trust (“Downey” and
“PFF”, respectively) in FDIC assisted transactions. Through
these acquisitions, the Company increased its deposit base and
branch franchise. In total, the Company acquired
approximately $35 billion of assets in these acquisitions, most
of which are covered under loss sharing agreements with the
FDIC (“covered” assets). Under the terms of the loss sharing
agreements, the FDIC will reimburse the Company for most
of the losses on the covered assets.

In 2010, the Company acquired the securitization trust

administration business of Bank of America, N.A. This
transaction included the acquisition of $1.1 trillion of assets
under administration and provided the Company with
approximately $8 billion of deposits as of December 31, 2010.
In January 2011, the Company acquired the banking

operations of First Community Bank of New Mexico
(“FCB”) from the FDIC. The FCB transaction did not
include a loss sharing agreement. The Company acquired 38
branch locations and approximately $2.1 billion in assets,
assumed approximately $1.8 billion in liabilities, and
received approximately $412 million in cash from the FDIC.

Table 2 A N A LY S I S O F N E T I N T E R E S T I N C O M E ( a )

(Dollars in Millions)

2010

2009

2008

2010
v 2009

2009
v 2008

Components of Net Interest Income

Income on earning assets (taxable-equivalent basis). . . . .
Expense on interest-bearing liabilities (taxable-equivalent

$ 12,375

$ 11,748

$ 12,630

$

627

$ (882)

basis) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,587

Net interest income (taxable-equivalent basis) . . . . . . . . . . .

$ 9,788

Net interest income, as reported . . . . . . . . . . . . . . . . . . . .

$ 9,579

3,032

$ 8,716

$ 8,518

4,764

$ 7,866

$ 7,732

(445)

(1,732)

$ 1,072

$ 1,061

$

$

850

786

Average Yields and Rates Paid

Earning assets yield (taxable-equivalent basis) . . . . . . . .
Rate paid on interest-bearing liabilities (taxable-equivalent
basis) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross interest margin (taxable-equivalent basis) . . . . . . . . .

Net interest margin (taxable-equivalent basis) . . . . . . . . . . .

Average Balances

4.91%

4.95%

5.87%

(.04)%

(.92)%

1.24

3.67%

3.88%

1.55

3.40%

3.67%

2.58

3.29%

3.66%

(.31)

.27%

.21%

(1.03)%

.11%

.01%

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-bearing liabilities . . . . . . . . . . . . . . . . . . . . . . .
Net free funds (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 47,763
193,022
252,042
209,113
42,929

$ 42,809
185,805
237,287
195,614
41,673

$ 42,850
165,552
215,046
184,932
30,114

$ 4,954
7,217
14,755
13,499
1,256

$

(41)
20,253
22,241
10,682
11,559

(a) Interest and rates are presented on a fully taxable-equivalent basis utilizing a federal tax rate of 35 percent.
(b) Represents noninterest-bearing deposits, other noninterest-bearing liabilities and equity, allowance for loan losses and unrealized gain (loss) on available-for-sale securities

less non-earning assets.

S T A T E M E N T O F I N C O M E A N A LY S I S

Net Interest Income Net interest income, on a taxable-
equivalent basis, was $9.8 billion in 2010, compared with
$8.7 billion in 2009 and $7.9 billion in 2008. The
$1.1 billion (12.3 percent) increase in net interest income in
2010, compared with 2009, was primarily the result of
continued growth in lower cost core deposit funding and
increases in average earning assets. Average earning assets
were $14.8 billion (6.2 percent) higher in 2010, compared
with 2009, driven by increases in average loans and
investment securities. Average deposits increased $16.9
billion (10.1 percent) in 2010, compared with 2009. The net
interest margin in 2010 was 3.88 percent, compared with
3.67 percent in 2009 and 3.66 percent in 2008. The increase
in net interest margin was principally due to the impact of
favorable funding rates, the result of the increase in deposits
and improved credit spreads. Refer to the “Interest Rate
Risk Management” section for further information on the
sensitivity of the Company’s net interest income to changes
in interest rates.

Average total loans were $193.0 billion in 2010,
compared with $185.8 billion in 2009. The $7.2 billion
(3.9 percent) increase was driven by growth in residential
mortgages, retail loans, commercial real estate loans and
acquisition-related covered loans, partially offset by a
$5.8 billion (11.0 percent) decline in commercial loans,

which was principally the result of lower utilization of
available commitments by customers. Residential mortgage
growth of $3.2 billion (13.2 percent) reflected increased
origination and refinancing activity throughout most of
2009 and the second half of 2010 as a result of market
interest rate declines. Average retail loans increased
$2.1 billion (3.3 percent) year-over-year, driven by increases
in credit card and installment (primarily automobile) loans.
Average credit card balances for 2010 were $1.5 billion
(9.8 percent) higher than 2009, reflecting growth in existing
portfolios and portfolio purchases during 2009 and the
second quarter of 2010. Growth in average commercial real
estate balances of $518 million (1.5 percent) reflected the
impact of new business activity, partially offset by customer
debt deleveraging. Average covered loans were $19.9 billion
in 2010, compared with $12.7 billion in 2009, reflecting the
FBOP acquisition in the fourth quarter of 2009.

Average investment securities in 2010 were $5.0 billion
(11.6 percent) higher than 2009, primarily due to purchases
of U.S. government agency-backed securities and the
consolidation of $.6 billion of held-to-maturity securities
held in a variable interest entity (“VIE”) due to the adoption
of new authoritative accounting guidance effective
January 1, 2010.

Average total deposits for 2010 were $16.9 billion

(10.1 percent) higher than 2009. Of this increase,

U.S. BANCORP

21

Table 3 N E T I N T E R E S T I N C O M E — C H A N G E S D U E T O R A T E A N D V O L U M E ( a )

(Dollars in Millions)

Increase (Decrease) in
Interest Income

2010 v 2009

2009 v 2008

Volume

Yield/Rate

Total

Volume

Yield/Rate

Total

$(212)
(21)

$

(7)
(31)

$

(2)
111

$ (388)
(61)

$ (390)
50

Investment securities . . . . . . . . . . . . . . . . . .
Loans held for sale . . . . . . . . . . . . . . . . . . .
Loans

$ 205
(10)

Commercial loans . . . . . . . . . . . . . . . . . .
Commercial real estate . . . . . . . . . . . . . . .
Residential mortgage . . . . . . . . . . . . . . . .
Retail loans . . . . . . . . . . . . . . . . . . . . . .

Total loans, excluding covered loans . . . . . .
Covered loans . . . . . . . . . . . . . . . . . . . .

Total loans . . . . . . . . . . . . . . . . . . . . .
Other earning assets . . . . . . . . . . . . . . . . . .

Total earning assets . . . . . . . . . . . . . . .

Interest Expense

Interest-bearing deposits

Interest checking . . . . . . . . . . . . . . . . . . .
Money market accounts . . . . . . . . . . . . . .
Savings accounts . . . . . . . . . . . . . . . . . .
Time certificates of deposit less than

$100,000 . . . . . . . . . . . . . . . . . . . . . .
Time deposits greater than $100,000 . . . . .

Total interest-bearing deposits . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . .

Total interest-bearing liabilities . . . . . . . . .

(228)
22
182
137

113
327

440
89

724

7
36
42

(32)
(46)

7
86
(199)

(106)

131
55
(126)
10

70
80

150
(14)

(97)

(8)
(49)
8

(126)
(106)

(281)
(81)
23

(339)

(97)
77
56
147

183
407

590
75

627

(1)
(13)
50

(158)
(152)

(274)
5
(176)

(445)

(74)
150
75
480

631
534

1,165
7

1,281

46
69
24

149
(5)

283
(272)
(121)

(110)

(554)
(468)
(114)
(489)

(1,625)
(17)

(1,642)
(72)

(2,163)

(219)
(254)
27

(160)
(356)

(962)
(321)
(339)

(628)
(318)
(39)
(9)

(994)
517

(477)
(65)

(882)

(173)
(185)
51

(11)
(361)

(679)
(593)
(460)

(1,622)

$ (541)

(1,732)

$ 850

Increase (decrease) in net interest income . . . .

$ 830

$ 242

$1,072

$1,391

(a) This table shows the components of the change in net interest income by volume and rate on a taxable-equivalent basis utilizing a tax rate of 35 percent. This table does
not take into account the level of noninterest-bearing funding, nor does it fully reflect changes in the mix of assets and liabilities. The change in interest not solely due to
changes in volume or rates has been allocated on a pro-rata basis to volume and yield/rate.

$12.0 billion related to deposits assumed in the FBOP
acquisition. Excluding deposits from acquisitions, 2010
average total deposits increased $6.8 billion (4.1 percent)
over 2009. Average noninterest-bearing deposits in 2010
were $2.3 billion (6.1 percent) higher than 2009, primarily
due to growth in Consumer and Small Business Banking and
Wholesale Banking and Commercial Real Estate balances.
Average total savings deposits were $19.0 billion
(23.2 percent) higher in 2010, compared with 2009, due to
an increase in savings account balances of $7.8 billion
(59.5 percent) resulting from continued strong participation
in a product offered by Consumer and Small Business
Banking, higher money market savings balances of
$7.9 billion (24.8 percent) from higher corporate trust and
Consumer and Small Business Banking balances, and higher
interest checking account balances of $3.3 billion
(9.0 percent) resulting from increases in Consumer and
Small Business Banking and institutional trust accounts.

22

U.S. BANCORP

Average time certificates of deposit less than $100,000 were
lower in 2010 by $1.3 billion (7.0 percent), compared with
2009, reflecting the net impact of balances assumed in the
FBOP acquisition, more than offset by expected run-off of
balances assumed in the PFF and Downey acquisitions and
lower renewals given the current interest rate environment.
Average time deposits greater than $100,000 were
$3.1 billion (10.3 percent) lower in 2010, compared with
2009, reflecting the net impact of acquisitions, more than
offset by a decrease in required overall wholesale funding.
Time deposits greater than $100,000 are managed as an
alternative to other funding sources, such as wholesale
borrowing, based largely on relative pricing.

The $.8 billion (10.8 percent) increase in net interest
income in 2009, compared with 2008, was attributable to
growth in average earning assets and lower cost core deposit

funding. The $22.2 billion (10.3 percent) increase in average
earning assets in 2009 over 2008 was principally a result of
growth in total average loans, including originated and
acquired loans, and loans held for sale.

Average total loans increased $20.3 billion

(12.2 percent) in 2009, compared with 2008, driven by new
loan originations, acquisitions and portfolio purchases.
Average covered loans increased $11.4 billion, due to the
timing of the Downey, PFF and FBOP acquisitions. Average
retail loans increased $6.5 billion (11.6 percent), driven by
increases in credit card, home equity and student loans,
reflecting both growth in existing portfolios and portfolio
purchases during 2009.

Average investment securities in 2009 were essentially
unchanged from 2008, as security purchases offset maturities
and sales. In 2009, the composition of the Company’s
investment portfolio shifted to a larger proportion in
U.S. Treasury, agency and agency mortgage-backed
securities, compared with 2008.

Average noninterest-bearing deposits in 2009 were
$9.1 billion (31.7 percent) higher than 2008. The increase
reflected higher business demand deposit balances, partially
offset by lower trust demand deposits. Average total savings
products increased $18.4 billion (29.0 percent) in 2009,
compared with 2008, principally as a result of a $7.2 billion
increase in savings accounts from higher Consumer and Small
Business Banking balances, a $5.7 billion (18.4 percent)
increase in interest checking balances from higher government
and consumer banking customer balances and acquisitions, and
a $5.5 billion (20.9 percent) increase in money market savings
balances from higher broker-dealer, corporate trust and
institutional trust customer balances and acquisitions. Average
time certificates of deposit less than $100,000 increased
$4.3 billion (31.6 percent) primarily due to acquisitions.
Average time deposits greater than $100,000 decreased
$.2 billion (.7 percent) in 2009, compared with 2008.

Provision for Credit Losses The provision for credit losses
reflects changes in the credit quality of the entire portfolio of
loans, and is maintained at a level considered appropriate by
management for probable and estimable incurred losses,
based on factors discussed in the “Analysis and
Determination of Allowance for Credit Losses” section.

In 2010, the provision for credit losses was $4.4 billion,

compared with $5.6 billion and $3.1 billion in 2009 and
2008, respectively. The provision for credit losses exceeded
net charge-offs by $175 million in 2010, $1.7 billion in
2009 and $1.3 billion in 2008. The $1.2 billion decrease in
provision for credit losses in 2010, compared with 2009,

reflected improving credit trends and the underlying risk
profile of the loan portfolio as economic conditions
continued to stabilize. Accruing loans ninety days or more
past due decreased by $431 million (excluding covered
loans) from December 31, 2009 to December 31, 2010,
reflecting a moderation in the level of stress in economic
conditions during 2010. Delinquencies in most major loan
categories began to decrease in the third quarter of 2010.
Nonperforming assets decreased $553 million (excluding
covered assets) from December 31, 2009 to December 31,
2010, principally in the construction and land development
portfolios, as the Company continued to resolve and reduce
exposure to these assets. However, net charge-offs increased
$313 million (8.1 percent) over 2009, as borrowers still
impacted by weak economic conditions and real estate
markets defaulted on loans.

The $2.5 billion increase in the provision for credit
losses in 2009, compared with 2008 and the increase in the
allowance for credit losses from December 31, 2008 to
December 31, 2009 reflected deterioration in economic
conditions during most of 2009 and the corresponding
impact on the commercial, commercial real estate and
consumer loan portfolios. It also reflected stress in the
residential real estate markets. Nonperforming assets
increased $1.9 billion (excluding covered assets) from
December 31, 2008 to December 31, 2009. The increase
was driven primarily by stress in residential home
construction and related industries, deterioration in the
residential mortgage portfolio, as well as an increase in
foreclosed properties and the impact of the economic
slowdown on commercial and consumer customers. Net
charge-offs increased $2.1 billion in 2009, compared with
2008, primarily due to economic factors affecting the
residential housing markets, including homebuilding and
related industries, commercial real estate properties, and
credit card and other consumer and commercial loans, as the
economy weakened and unemployment increased during the
period.

Refer to “Corporate Risk Profile” for further

information on the provision for credit losses, net charge-
offs, nonperforming assets and other factors considered by
the Company in assessing the credit quality of the loan
portfolio and establishing the allowance for credit losses.

Noninterest Income Noninterest income in 2010 was
$8.4 billion, compared with $8.0 billion in 2009 and
$6.8 billion in 2008. The $408 million (5.1 percent) increase
in 2010 over 2009, was due to higher payments-related
revenues of 6.3 percent, principally due to increased

U.S. BANCORP

23

Table 4 N O N I N T E R E S T I N C O M E

(Dollars in Millions)

2010

2009

2008

2010
v 2009

2009
v 2008

Credit and debit card revenue . . . . . . . . . . . . . . . . . . . . . . . .
Corporate payment products revenue. . . . . . . . . . . . . . . . . . .
Merchant processing services . . . . . . . . . . . . . . . . . . . . . . . .
ATM processing services . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust and investment management fees . . . . . . . . . . . . . . . . .
Deposit service charges. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury management fees. . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial products revenue . . . . . . . . . . . . . . . . . . . . . . .
Mortgage banking revenue . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment products fees and commissions . . . . . . . . . . . . . . .
Securities gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,091
710
1,253
423
1,080
710
555
771
1,003
111
(78)
731

Total noninterest income. . . . . . . . . . . . . . . . . . . . . . . . . .

$8,360

$1,055
669
1,148
410
1,168
970
552
615
1,035
109
(451)
672

$7,952

$1,039
671
1,151
366
1,314
1,081
517
492
270
147
(978)
741

$6,811

3.4%
6.1
9.1
3.2
(7.5)
(26.8)
.5
25.4
(3.1)
1.8
82.7
8.8

5.1%

1.5%
(.3)
(.3)
12.0
(11.1)
(10.3)
6.8
25.0
*
(25.9)
53.9
(9.3)

16.8%

* Not meaningful

transaction volumes and business expansion; an increase in
commercial products revenue of 25.4 percent, attributable to
higher standby letters of credit fees, commercial loan and
syndication fees and other capital markets revenue; a
decrease in net securities losses of 82.7 percent, primarily
due to lower impairments in the current year; and an
increase in other income. The increase in other income of
8.8 percent, reflected the Nuveen Gain, higher 2010 gains
related to the Company’s investment in Visa Inc. and higher
retail lease residual valuation income, partially offset by the
$92 million gain on a corporate real estate transaction in
2009, a payments-related contract termination gain that
occurred in 2009 and lower customer derivative revenue.
Mortgage banking revenue decreased 3.1 percent, principally
due to lower origination and sales revenue and an
unfavorable net change in the valuation of mortgage
servicing rights (“MSRs”) and related economic hedging
activities, partially offset by higher servicing income. Deposit
service charges decreased 26.8 percent as a result of
Company-initiated and regulatory revisions to overdraft fee
policies, partially offset by core account growth. Trust and
investment management fees declined 7.5 percent because
low interest rates negatively impacted money market
investment fees and money market fund balances declined as
a result of customers migrating balances from money market
funds to deposits.

The $1.2 billion (16.8 percent) increase in noninterest

income in 2009 over 2008 was principally due to a
$765 million increase in mortgage banking revenue, the result
of strong mortgage loan production, as the Company gained
market share and low interest rates drove refinancing, and an
increase in the valuation of MSRs net of related economic
hedging instruments. Other increases in noninterest income

24

U.S. BANCORP

included higher ATM processing services of 12.0 percent,
related to growth in transaction volumes and business
expansion, higher treasury management fees of 6.8 percent,
resulting from increased new business activity and pricing, and
a 25.0 percent increase in commercial products revenue due to
higher letters of credit, capital markets and other commercial
loan fees. Net securities losses in 2009 were 53.9 percent lower
than 2008. Other income decreased 9.3 percent due to higher
gains in 2008 related to the Company’s ownership position in
Visa Inc., partially offset by the gain from a corporate real
estate transaction and the payments-related contract
termination gain. Deposit service charges decreased
10.3 percent primarily due to a decrease in the number of
transaction-related fees, which more than offset account
growth. Trust and investment management fees declined
11.1 percent, reflecting lower assets under management
account volume and the impact of low interest rates on money
market investment fees. Investment product fees and
commissions declined 25.9 percent due to lower sales levels in
2009, compared with 2008.

The Company expects recently enacted legislation will
have a negative impact on noninterest income, principally
related to debit interchange fee revenue, in future years.

Noninterest Expense Noninterest expense in 2010 was
$9.4 billion, compared with $8.3 billion in 2009 and
$7.3 billion in 2008. The Company’s efficiency ratio was
51.5 percent in 2010, compared with 48.4 percent in 2009.
The $1.1 billion (13.3 percent) increase in noninterest
expense in 2010 over 2009 was principally due to
acquisitions, increased total compensation and employee
benefits expense and higher costs related to investments in
affordable housing and other tax-advantaged projects. Total

Table 5 N O N I N T E R E S T E X P E N S E

(Dollars in Millions)

Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net occupancy and equipment . . . . . . . . . . . . . . . . . . . . . . .
Professional services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and business development . . . . . . . . . . . . . . . . . . .
Technology and communications . . . . . . . . . . . . . . . . . . . . . .
Postage, printing and supplies . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2010

$3,779
694
919
306
360
744
301
367
1,913

Total noninterest expense . . . . . . . . . . . . . . . . . . . . . . . . .

$9,383

2009

$3,135
574
836
255
378
673
288
387
1,755

$8,281

2008

$3,039
515
781
240
310
598
294
355
1,216

$7,348

Efficiency ratio (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

51.5%

48.4%

46.9%

2010
v 2009

20.5%
20.9
9.9
20.0
(4.8)
10.5
4.5
(5.2)
9.0

13.3%

2009
v 2008

3.2%

11.5
7.0
6.3
21.9
12.5
(2.0)
9.0
44.3

12.7%

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

compensation and employee benefits expense increased
20.6 percent, reflecting acquisitions, branch expansion and
other initiatives, the elimination of a five percent cost
reduction program that was in effect during 2009, higher
incentive compensation costs related to the Company’s
improved financial results, merit increases, and increased
pension costs associated with previous declines in the value
of pension assets. Net occupancy and equipment expense
and professional services expense increased 9.9 percent and
20.0 percent, respectively, principally due to acquisitions and
other business initiatives. Technology and communications
expense increased 10.5 percent as a result of business
initiatives and volume increases across various business lines.
Postage, printing and supplies expense increased 4.5 percent,
principally due to payments-related business initiatives.
Other expense increased 9.0 percent, reflecting higher costs
related to investments in affordable housing and other tax-
advantaged projects, which reduce the Company’s income
tax expense, and higher other real estate owned (“OREO”)
costs, partially offset by the $123 million FDIC special
assessment in 2009. Marketing and business development
expense decreased 4.8 percent, largely due to payments-
related initiatives during 2009. Other intangibles expense
decreased 5.2 percent due to the declining level or
completion of scheduled amortization of certain intangibles.

The $933 million (12.7 percent) increase in noninterest

expense in 2009, compared with 2008, was principally due to
the impact of acquisitions, higher ongoing FDIC deposit
insurance expense and the $123 million special assessment in
2009, costs related to affordable housing and other tax-
advantaged investments, and marketing and business
development expense. Compensation expense increased
3.2 percent primarily due to acquisitions, partially offset by
reductions from cost containment efforts. Employee benefits

expense increased 11.5 percent primarily due to increased
pension costs associated with previous declines in the value of
pension assets. Net occupancy and equipment expense, and
professional services expense increased 7.0 percent and
6.3 percent, respectively, primarily due to acquisitions, as well
as branch-based and other business expansion initiatives.
Marketing and business development expense increased
21.9 percent, principally due to costs related to the
introduction of new credit card products and advertising
related to the Company’s national branding strategy, while
technology and business communications expense increased
12.5 percent, primarily due to business expansion initiatives.
Other intangibles expense increased 9.0 percent due to
acquisitions. Other expense increased 44.3 percent due to
higher FDIC deposit insurance expense, including the
$123 million special assessment in 2009. Other expense also
reflected increased costs related to investments in affordable
housing and other tax-advantaged projects, higher merchant
processing expenses, growth in mortgage servicing expenses
and costs associated with OREO.

The Company expects recently enacted legislation will

increase deposit insurance expense in future years.

Pension Plans Because of the long-term nature of pension
plans, the related accounting is complex and can be
impacted by several factors, including investment funding
policies, accounting methods, and actuarial assumptions.

The Company’s pension accounting reflects the long-term

nature of the benefit obligations and the investment horizon
of plan assets. Amounts recorded in the financial statements
reflect actuarial assumptions about participant benefits and
plan asset returns. Changes in actuarial assumptions, and
differences in actual plan experience compared with actuarial
assumptions, are deferred and recognized in expense in future
periods. Differences related to participant benefits are

U.S. BANCORP

25

Table 6 L O A N P O R T F O L I O D I S T R I B U T I O N

At December 31 (Dollars in Millions)

Amount

Percent
of Total

Amount

Percent
of Total

Amount

Percent
of Total

Amount

Percent
of Total

Amount

Percent
of Total

2010

2009

2008

2007

2006

Commercial
Commercial
Lease financing . . . . . . . . . . . . .

. . . . . . . . . . . . . . . $ 42,272
6,126

21.5% $ 42,255
6,537

3.1

21.7% $ 49,759
6,859

3.4

26.9% $ 44,832
6,242

3.7

29.1% $ 40,640
5,550

4.1

28.3%
3.9

Total commercial
Commercial Real Estate

. . . . . . . . . .

48,398

24.6

48,792

25.1

56,618

30.6

51,074

33.2

46,190

32.2

Commercial mortgages . . . . . . . .
Construction and development . . .

27,254
7,441

Total commercial real estate . . .

34,695

Residential Mortgages

Residential mortgages . . . . . . . . .
Home equity loans, first liens . . . .

24,315
6,417

Total residential mortgages . . . .

30,732

Retail

Credit card . . . . . . . . . . . . . . . .
Retail leasing . . . . . . . . . . . . . . .
Home equity and second

16,803
4,569

13.8
3.8

17.6

12.3
3.3

15.6

8.5
2.3

25,306
8,787

34,093

20,581
5,475

26,056

16,814
4,568

13.0
4.5

17.5

10.6
2.8

13.4

8.6
2.3

23,434
9,779

33,213

18,232
5,348

12.7
5.3

18.0

9.9
2.9

23,580

12.8

13,520
5,126

7.3
2.8

20,146
9,061

29,207

17,099
5,683

22,782

10,956
5,969

13.1
5.9

19.0

11.1
3.7

14.8

7.1
3.9

19,711
8,934

28,645

15,316
5,969

21,285

8,670
6,960

13.7
6.2

19.9

10.7
4.1

14.8

6.0
4.9

mortgages . . . . . . . . . . . . . .

18,940

9.6

19,439

10.0

19,177

10.4

16,441

10.7

15,523

10.8

Other retail

Revolving credit . . . . . . . . . . .
. . . . . . . . . . . . . .
Installment
Automobile . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . .
Student

3,472
5,459
10,897
5,054

Total other retail

. . . . . . . . .

24,882

Total retail . . . . . . . . . . . . . . .

65,194

Total loans, excluding covered

loans . . . . . . . . . . . . . . . .
Covered loans . . . . . . . . . . . .

179,019
18,042

1.8
2.8
5.5
2.5

12.6

33.0

90.8
9.2

3,506
5,455
9,544
4,629

23,134

63,955

172,896
21,859

1.8
2.8
4.9
2.4

11.9

32.8

88.8
11.2

3,205
5,525
9,212
4,603

22,545

60,368

173,779
11,176

1.7
3.0
5.0
2.5

12.2

32.6

94.0
6.0

2,731
5,246
8,970
451

17,398

50,764

1.8
3.4
5.8
.3

11.3

33.0

2,563
4,478
8,693
590

16,324

47,477

1.8
3.1
6.1
.4

11.4

33.1

153,827
–

100.0
–

143,597
–

100.0
–

Total loans. . . . . . . . . . . . . . . $197,061

100.0% $194,755

100.0% $184,955

100.0% $153,827

100.0% $143,597

100.0%

Because of the complexity of forecasting pension plan
activities, the accounting methods utilized for pension plans,
the Company’s ability to respond to factors affecting the
plans and the hypothetical nature of actuarial assumptions,
actual pension expense will differ from these amounts.
Refer to Note 17 of the Notes to the Consolidated

Financial Statements for further information on the
Company’s pension plan funding practices, investment
policies and asset allocation strategies, and accounting
policies for pension plans.

recognized over the future service period of the employees.
Differences related to the expected return on plan assets are
included in expense over an approximately twelve-year
period.

The Company expects pension expense to increase
$111 million in 2011, primarily driven by a $34 million
increase related to utilizing a lower discount rate, a
$29 million increase related to the amortization of
unrecognized actuarial losses from prior years, a $6 million
increase related to lower expected returns on plan assets and
a $42 million increase related to amortization of other
actuarial losses, including changes in assumptions based on
actuarial review of past experience and compensation levels.
If performance of plan assets equals the actuarially-assumed
long-term rate of return (“LTROR”), the cumulative asset
return difference of $255 million at December 31, 2010 will
incrementally increase pension expense $34 million in 2012
and $47 million in 2013, and incrementally decrease pension
expense $18 million in 2014 and $5 million in 2015.

26

U.S. BANCORP

Table 7 C O M M E R C I A L L O A N S B Y I N D U S T R Y G R O U P A N D G E O G R A P H Y,

E X C L U D I N G C O V E R E D L O A N S

(Dollars in Millions)

December 31, 2010

December 31, 2009

Loans

Percent

Loans

Percent

Industry Group
Consumer products and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,599
5,785
Financial services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,744
Healthcare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,696
Capital goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,543
Commercial services and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,539
Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,489
Property management and development . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,438
Consumer staples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,926
Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,788
Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,738
Paper and forestry products, mining and basic materials . . . . . . . . . . . . . . . . . .
1,712
Private investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,543
Information technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,858
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15.7%
12.0
7.7
7.7
7.3
5.3
5.1
5.0
4.0
3.7
3.6
3.5
3.2
16.2

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,398

100.0%

Geography
California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,588
1,974
Colorado . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,457
Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,993
Minnesota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,020
Missouri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,464
Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,508
Oregon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,259
Washington . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,144
Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,465
Iowa, Kansas, Nebraska, North Dakota, South Dakota . . . . . . . . . . . . . . . . . . .
2,798
Arkansas, Indiana, Kentucky, Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,069
Idaho, Montana, Wyoming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,741
Arizona, Nevada, Utah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total banking region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outside the Company’s banking region . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33,480
14,918

11.5%
4.1
5.1
8.2
4.2
5.1
3.1
4.7
4.4
7.2
5.8
2.2
3.6

69.2
30.8

$ 8,197
5,123
2,000
3,806
3,757
3,415
2,586
1,659
1,708
1,122
1,952
1,757
878
10,832

$48,792

$ 6,685
1,903
3,611
3,757
1,708
2,196
1,610
2,196
2,098
3,123
1,805
1,073
2,000

33,765
15,027

16.8%
10.5
4.1
7.8
7.7
7.0
5.3
3.4
3.5
2.3
4.0
3.6
1.8
22.2

100.0%

13.7%
3.9
7.4
7.7
3.5
4.5
3.3
4.5
4.3
6.4
3.7
2.2
4.1

69.2
30.8

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,398

100.0%

$48,792

100.0%

The following table shows an analysis of hypothetical
changes in the LTROR and discount rate:

LTROR (Dollars in Millions)

Down 100
Basis Points

Up 100
Basis Points

Incremental benefit (expense)
. . . . . .
Percent of 2010 net income . . . . . . .

$ (25)

(.47)%

$ 25

.47%

over 2009 primarily reflected the marginal impact of higher
pre-tax earnings year-over-year and the 2010 Nuveen Gain.
For further information on income taxes, refer to
Note 19 of the Notes to Consolidated Financial Statements.

Discount Rate (Dollars in Millions)

Down 100
Basis Points

Up 100
Basis Points

B A L A N C E S H E E T A N A LY S I S

Incremental benefit (expense)
. . . . . .
Percent of 2010 net income . . . . . . .

$ (77)

(1.44)%

$ 66

1.23%

Income Tax Expense The provision for income taxes was
$935 million (an effective rate of 22.3 percent) in 2010,
compared with $395 million (an effective rate of
15.0 percent) in 2009 and $1.1 billion (an effective rate of
26.5 percent) in 2008. The increase in the effective tax rate

Average earning assets were $252.0 billion in 2010,
compared with $237.3 billion in 2009. The increase in
average earning assets of $14.7 billion (6.2 percent) was due
to growth in total average loans of $7.2 billion (3.9 percent)
and investment securities of $5.0 billion (11.6 percent).

For average balance information, refer to Consolidated

Daily Average Balance Sheet and Related Yields and Rates
on pages 128 and 129.

U.S. BANCORP

27

Table 8 C O M M E R C I A L R E A L E S T A T E B Y P R O P E R T Y T Y P E A N D G E O G R A P H Y,

E X C L U D I N G C O V E R E D L O A N S

(Dollars in Millions)

December 31, 2010

December 31, 2009

Loans

Percent

Loans

Percent

Property Type
Business owner occupied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,416
Commercial property

Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Homebuilders

Condominiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multi-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hotel/motel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Health care facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,530
3,783
4,288
3,551

463
1,144
6,130
2,134
256

32.9%

$10,944

32.1%

4.4
10.9
12.4
10.2

1.3
3.3
17.7
6.2
.7

1,500
3,580
4,500
3,614

614
1,704
5,625
1,807
205

4.4
10.5
13.2
10.6

1.8
5.0
16.5
5.3
.6

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34,695

100.0%

$34,093

100.0%

Geography
California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,515
1,524
Colorado . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,248
Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,805
Minnesota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,558
Missouri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,402
Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,809
Oregon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,488
Washington . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,724
Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,205
Iowa, Kansas, Nebraska, North Dakota, South Dakota . . . . . . . . . . . . . . . . . . .
1,634
Arkansas, Indiana, Kentucky, Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,185
Idaho, Montana, Wyoming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,868
Arizona, Nevada, Utah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total banking region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outside the Company’s banking region . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

29,965
4,730

21.6%
4.4
3.6
5.2
4.5
4.0
5.2
10.1
5.0
6.4
4.7
3.4
8.3

86.4
13.6

$ 7,432
1,568
1,227
1,739
1,568
1,364
1,773
3,307
1,568
2,216
1,602
1,227
3,034

29,625
4,468

21.8%
4.6
3.6
5.1
4.6
4.0
5.2
9.7
4.6
6.5
4.7
3.6
8.9

86.9
13.1

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34,695

100.0%

$34,093

100.0%

Loans The Company’s loan portfolio was $197.1 billion at
December 31, 2010, an increase of $2.3 billion (1.2 percent)
from December 31, 2009. The increase was driven by
growth in residential mortgages of $4.7 billion
(17.9 percent), retail loans of $1.2 billion (1.9 percent) and
commercial real estate loans of $.6 billion (1.8 percent),
partially offset by decreases in commercial loans of
$.4 billion (.8 percent) and acquisition-related covered loans
of $3.8 billion (17.5 percent). Table 6 provides a summary
of the loan distribution by product type, while Table 10
provides a summary of the selected loan maturity
distribution by loan category. Average total loans increased
$7.2 billion (3.9 percent) in 2010, compared with 2009. The
increase was due to growth in most major loan categories in
2010.

Commercial Commercial loans, including lease financing,
decreased $394 million (.8 percent) as of December 31,
2010, compared with December 31, 2009. Average

28

U.S. BANCORP

commercial loans decreased $5.8 billion (11.0 percent) in
2010, compared with 2009. These decreases were primarily
due to lower utilization by customers of available
commitments, partially offset by new loan commitments.
Table 7 provides a summary of commercial loans by
industry and geographical locations.

Commercial Real Estate The Company’s portfolio of
commercial real estate loans, which includes commercial
mortgages and construction loans, increased $602 million
(1.8 percent) at December 31, 2010, compared with
December 31, 2009. Average commercial real estate loans
increased $518 million (1.5 percent) in 2010, compared with
2009. The growth principally reflected the impact of new
business activity, partially offset by customer debt
deleveraging. Table 8 provides a summary of commercial real
estate by property type and geographical location. The
collateral for $4.5 billion of commercial real estate loans

Table 9 R E S I D E N T I A L M O R T G A G E S A N D R E T A I L L O A N S B Y G E O G R A P H Y,

E X C L U D I N G C O V E R E D L O A N S

(Dollars in Millions)

December 31, 2010

December 31, 2009

Loans

Percent

Loans

Percent

Residential Mortgages
California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,339
1,947
Colorado . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,123
Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,457
Minnesota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,643
Missouri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,824
Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,246
Oregon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,726
Washington . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,171
Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,522
Iowa, Kansas, Nebraska, North Dakota, South Dakota . . . . . . . . . . . . . . . . . . .
2,431
Arkansas, Indiana, Kentucky, Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . .
688
Idaho, Montana, Wyoming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,857
Arizona, Nevada, Utah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total banking region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outside the Company’s banking region . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23,974
6,758

10.9%
6.3
6.9
8.0
5.4
5.9
4.1
5.6
3.8
5.0
7.9
2.2
6.0

78.0
22.0

$ 2,487
1,755
1,676
2,216
1,467
1,682
1,065
1,414
1,067
1,393
1,947
601
1,657

20,427
5,629

9.5%
6.7
6.4
8.5
5.6
6.5
4.1
5.4
4.1
5.4
7.5
2.3
6.4

78.4
21.6

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $30,732

100.0%

$26,056

100.0%

Retail Loans
California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,656
2,984
Colorado . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,037
Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,940
Minnesota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,725
Missouri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,974
Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,592
Oregon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,029
Washington . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,926
Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,277
Iowa, Kansas, Nebraska, North Dakota, South Dakota . . . . . . . . . . . . . . . . . . .
4,110
Arkansas, Indiana, Kentucky, Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,606
Idaho, Montana, Wyoming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,774
Arizona, Nevada, Utah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total banking region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outside the Company’s banking region . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46,630
18,564

11.7%
4.6
4.6
9.1
4.2
6.1
4.0
4.6
4.5
5.0
6.3
2.5
4.3

71.5
28.5

$ 8,442
3,390
3,262
6,396
2,942
3,837
2,878
3,262
2,878
3,581
4,285
1,791
3,006

49,950
14,005

13.2%
5.3
5.1
10.0
4.6
6.0
4.5
5.1
4.5
5.6
6.7
2.8
4.7

78.1
21.9

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $65,194

100.0%

$63,955

100.0%

included in covered loans at December 31, 2010 was in
California, compared with $4.7 billion at December 31, 2009.

The Company classifies loans as construction until the

completion of the construction phase. Following
construction, if a loan is retained, the loan is reclassified to
the commercial mortgage category. In 2010, approximately
$995 million of construction loans were reclassified to the
commercial mortgage loan category for bridge financing
after completion of the construction phase. At December 31,
2010, $270 million of tax-exempt industrial development
loans were secured by real estate. The Company’s
commercial real estate mortgages and construction loans had
unfunded commitments of $6.5 billion and $6.1 billion at
December 31, 2010 and 2009, respectively.

The Company also finances the operations of real estate
developers and other entities with operations related to real
estate. These loans are not secured directly by real estate and
are subject to terms and conditions similar to commercial
loans. These loans were included in the commercial loan
category and totaled $1.7 billion at December 31, 2010.

Residential Mortgages Residential mortgages held in the
loan portfolio at December 31, 2010, increased $4.7 billion
(17.9 percent) over December 31, 2009. Average residential
mortgages increased $3.2 billion (13.2 percent) in 2010,
compared with 2009. The growth reflected increased
origination and refinancing activity in the second half of
2010 as a result of the low interest rate environment. Most

U.S. BANCORP

29

Table 10 S E L E C T E D L O A N M A T U R I T Y D I S T R I B U T I O N

December 31, 2010 (Dollars in Millions)

One Year
or Less

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,697
10,684
Commercial real estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,728
Residential mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,679
Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,814
Covered loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $63,602

Total of loans due after one year with

Predetermined interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Over One
Through
Five Years

$25,625
17,252
3,608
24,303
4,445

$75,233

Over Five
Years

$ 2,076
6,759
25,396
15,212
8,783

$58,226

Total

$ 48,398
34,695
30,732
65,194
18,042

$197,061

$ 61,855
71,604

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

Retail Total retail loans outstanding, which include credit
card, retail leasing, home equity and second mortgages and
other retail loans, increased $1.2 billion (1.9 percent) at
December 31, 2010, compared with December 31, 2009. The
increase was primarily driven by higher installment (primarily
automobile) and federally-guaranteed student loans, partially
offset by lower credit card and home equity balances. Average
retail loans increased $2.1 billion (3.3 percent) in 2010,
compared with 2009, as a result of current year growth and
credit card portfolio purchases in 2009 and 2010.

Of the total retail loans and residential mortgages

outstanding, excluding covered assets, at December 31, 2010,
approximately 73.6 percent were to customers located in the
Company’s primary banking region. Table 9 provides a
geographic summary of residential mortgages and retail loans
outstanding as of December 31, 2010 and 2009. The
collateral for $5.2 billion of residential mortgages and retail
loans included in covered loans at December 31, 2010 was in
California, compared with $6.6 billion at December 31, 2009.

Loans Held for Sale Loans held for sale, consisting primarily
of residential mortgages to be sold in the secondary market,
were $8.4 billion at December 31, 2010, compared with
$4.8 billion at December 31, 2009. The increase in loans
held for sale was principally due to a higher level of
mortgage loan origination and refinancing activity in the
second half of 2010.

Investment Securities The Company uses its investment
securities portfolio for several purposes. The portfolio serves
as a vehicle to manage enterprise interest rate risk, provides
liquidity, including the ability to meet proposed regulatory
requirements, generates interest and dividend income from
the investment of excess funds depending on loan demand
and is used as collateral for public deposits and wholesale
funding sources. While the Company intends to hold its

30

U.S. BANCORP

investment securities indefinitely, it may sell available-for-
sale securities in response to structural changes in the
balance sheet and related interest rate risk and to meet
liquidity requirements, among other factors.

At December 31, 2010, investment securities totaled
$53.0 billion, compared with $44.8 billion at December 31,
2009. The $8.2 billion (18.3 percent) increase reflected
$7.3 billion of net investment purchases, the consolidation of
$.6 billion of held-to-maturity securities held in a VIE due to
the adoption of new authoritative accounting guidance
effective January 1, 2010, and a $.3 billion favorable change
in net unrealized gains (losses) on available-for-sale securities.
Average investment securities were $47.8 billion in 2010,

compared with $42.8 billion in 2009. The weighted-average
yield of the available-for-sale portfolio was 3.41 percent at
December 31, 2010, compared with 4.00 percent at
December 31, 2009. The average maturity of the
available-for-sale portfolio was 7.4 years at December 31,
2010, compared with 7.1 years at December 31, 2009.
Investment securities by type are shown in Table 11.

The Company conducts a regular assessment of its
investment portfolio to determine whether any securities are
other-than-temporarily impaired. At December 31, 2010, the
Company’s net unrealized loss on available-for-sale securities
was $346 million, compared with $635 million at
December 31, 2009. The favorable change in net unrealized
gains (losses) was primarily due to increases in the fair value
of agency and certain non-agency mortgage-backed securities,
partially offset by decreases in the fair value of obligations of
state and political subdivisions securities as a result of market
interest rate increases near the end of 2010. Unrealized losses
on available-for-sale securities in an unrealized loss position
totaled $1.2 billion at December 31, 2010, compared with
$1.3 billion at December 31, 2009. When assessing unrealized
losses for other-than-temporary impairment, the Company
considers the nature of the investment, the financial condition
of the issuer, the extent and duration of unrealized loss,

Table 11 I N V E S T M E N T S E C U R I T I E S

December 31, 2010 (Dollars in Millions)

U.S. Treasury and Agencies

Available-for-Sale

Held-to-Maturity

Amortized
Cost

Fair
Value

Weighted-
Average
Maturity in
Years

Weighted-
Average
Yield (e)

Amortized
Cost

Fair
Value

Weighted-
Average
Maturity in
Years

Weighted-
Average
Yield (e)

Maturing in one year or less . . . . . . . . . . . . . . . . $
Maturing after one year through five years . . . . . . .
Maturing after five years through ten years . . . . . .
Maturing after ten years . . . . . . . . . . . . . . . . . .

836
1,671
33
19
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,559

$

838
1,646
35
18
$ 2,537

Mortgage-Backed Securities (a)

Maturing in one year or less . . . . . . . . . . . . . . . . $
Maturing after one year through five years . . . . . . .
Maturing after five years through ten years . . . . . .
Maturing after ten years . . . . . . . . . . . . . . . . . .

695
19,023
17,451
2,625

$

696
19,310
17,421
2,573

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $39,794

$40,000

Asset-Backed Securities (a)

Maturing in one year or less . . . . . . . . . . . . . . . . $
Maturing after one year through five years . . . . . . .
Maturing after five years through ten years . . . . . .
Maturing after ten years . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

3
348
326
236

913

Obligations of State and Political

Subdivisions (b) (c)
Maturing in one year or less . . . . . . . . . . . . . . . . $
Maturing after one year through five years . . . . . . .
Maturing after five years through ten years . . . . . .
Maturing after ten years . . . . . . . . . . . . . . . . . .

4
835
836
5,160

$

$

$

11
357
337
239

944

4
831
819
4,763

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,835

$ 6,417

Other Debt Securities

Maturing in one year or less . . . . . . . . . . . . . . . . $
Maturing after one year through five years . . . . . . .
Maturing after five years through ten years . . . . . .
Maturing after ten years . . . . . . . . . . . . . . . . . .

6
92
31
1,306
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,435

$

6
82
29
1,136
$ 1,253

Other Investments . . . . . . . . . . . . . . . . . . . . . $
Total investment securities (d)

. . . . . . . . . . . . . . . . $51,855

319

$

358

$51,509

.5
2.7
6.9
12.3
2.1

.6
3.6
6.0
12.6

5.2

.4
4.0
7.0
10.5

6.7

.1
3.8
6.4
20.9

17.1

.9
1.4
6.8
31.4
28.8

18.0

7.4

–
2.05% $
103
1.21
–
4.86
3.66
62
1.55% $ 165

2.11% $
3.18
2.80
1.44

–
206
554
100

$

–
102
–
62
$ 164

$

–
199
552
100

2.88% $ 860

$ 851

17.33% $ 100
69
79
36

8.30
4.04
2.38

5.28% $ 284

6.48% $
5.94
6.70
6.83

6.71% $

–
6
6
15

27

–
1.39% $
15
6.61
118
6.33
4.11
–
4.30% $ 133

$ 100
69
71
31

$ 271

$

$

–
7
6
14

27

$

–
12
94
–
$ 106

4.14% $

–

$

–

3.41% $1,469

$1,419

–
3.3
–
11.1
6.2

–
3.7
6.1
13.6

6.4

.3
2.4
6.1
23.6

5.4

.7
3.9
6.3
16.1

11.0

–
2.5
7.8
–
7.2

–

6.3

–%

.88
–
1.75
1.21%

–%

2.15
3.10
1.27

2.66%

.59%

1.05
.91
.79

.81%

6.99%
8.09
6.46
5.52

6.32%

–%

1.24
1.14
–
1.15%

–%

2.07%

(a) Information related to asset and mortgage-backed securities included above is presented based upon weighted-average maturities anticipating future prepayments.
(b) Information related to obligations of state and political subdivisions is presented based upon yield to first optional call date if the security is purchased at a premium, yield to

maturity if purchased at par or a discount.

(c) Maturity calculations for obligations of state and political subdivisions are based on the first optional call date for securities with a fair value above par and contractual

maturity for securities with a fair value equal to or below par.

(d) The weighted-average maturity of the available-for-sale investment securities was 7.1 years at December 31, 2009, with a corresponding weighted-average yield of

4.00 percent. The weighted-average maturity of the held-to-maturity investment securities was 8.4 years at December 31, 2009, with a corresponding weighted-average
yield of 5.10 percent.

(e) Average yields are presented on a fully-taxable equivalent basis under a tax rate of 35 percent. Yields on available-for-sale and held-to-maturity securities are computed

based on historical cost balances. Average yield and maturity calculations exclude equity securities that have no stated yield or maturity.

December 31 (Dollars in Millions)

U.S. Treasury and agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations of state and political subdivisions . . . . . . . . . . . . . . . . . .
Other debt securities and investments . . . . . . . . . . . . . . . . . . . . . . .

Total investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2010

2009

Amortized
Cost

$ 2,724
40,654
1,197
6,862
1,887

$53,324

Percent
of Total

5.1%

76.2
2.3
12.9
3.5

100.0%

Amortized
Cost

$ 3,415
32,289
559
6,854
2,286

$45,403

Percent
of Total

7.5%

71.1
1.2
15.1
5.1

100.0%

U.S. BANCORP

31

Time certificates of deposit less than

$100,000 . . . . . . . . . . . . . . . .
Time deposits greater than $100,000
Domestic . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . .

Table 12 D E P O S I T S

The composition of deposits was as follows:

December 31 (Dollars in Millions)

Amount

Percent
of Total

Amount

Percent
of Total

Amount

Percent
of Total

Amount

Percent
of Total

Amount

Percent
of Total

2010

2009

2008

2007

2006

Noninterest-bearing deposits . . . . . . $ 45,314
Interest-bearing deposits

Interest checking . . . . . . . . . . . .
Money market savings . . . . . . . .
Savings accounts . . . . . . . . . . . .

43,183
46,855
24,260

Total of savings deposits . . . . .

114,298

22.2% $ 38,186

20.8% $ 37,494

23.5% $ 33,334

25.4% $ 32,128

25.7%

21.2
22.9
11.9

56.0

38,436
40,848
16,885

96,169

21.0
22.3
9.2

52.5

32,254
26,137
9,070

67,461

20.2
16.4
5.7

42.3

28,996
24,301
5,001

58,298

22.1
18.5
3.8

44.4

24,937
26,220
5,314

56,471

20.0
21.0
4.2

45.2

15,083

7.4

18,966

10.4

18,425

11.7

14,160

10.8

13,859

11.1

Total interest-bearing deposits . .

158,938

77.8

145,056

79.2

121,856

12,330
17,227

6.0
8.4

16,858
13,063

9.2
7.1

20,791
15,179

13.0
9.5

76.5

15,351
10,302

98,111

11.7
7.8

74.6

14,868
7,556

92,754

11.9
6.1

74.3

Total deposits . . . . . . . . . . . . . . $204,252

100.0% $183,242

100.0% $159,350

100.0% $131,445

100.0% $124,882

100.0%

The maturity of time deposits was as follows:

December 31, 2010 (Dollars in Millions)

Certificates
Less Than $100,000

Time Deposits
Greater Than
$100,000

Three months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Three months through six months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Six months through one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,790
1,597
3,095
4,239
1,704
1,546
1,107
5

$15,083

$19,625
1,309
1,609
2,745
1,239
1,359
1,367
304

$29,557

Total

$21,415
2,906
4,704
6,984
2,943
2,905
2,474
309

$44,640

expected cash flows of underlying collateral or assets and
market conditions. At December 31, 2010, the Company
had no plans to sell securities with unrealized losses and
believes it is more likely than not it would not be required to
sell such securities before recovery of their amortized cost.

There is limited market activity for structured

investment-related and non-agency mortgage-backed
securities held by the Company. As a result, the Company
estimates the fair value of these securities using estimates of
expected cash flows, discount rates and management’s
assessment of various other market factors, which are
judgmental in nature. The Company recorded $91 million of
impairment charges in earnings during 2010, predominately
on non-agency mortgage-backed and structured investment-
related securities. These impairment charges were due to
changes in expected cash flows resulting from increases in
defaults in the underlying mortgage pools and regulatory
actions in the first quarter of 2010 related to an insurer of
some of the securities. Further adverse changes in market

conditions may result in additional impairment charges in
future periods.

During 2009, the Company recognized impairment
charges in earnings of $223 million related to perpetual
preferred securities, primarily issued by financial institutions,
and $363 million on non-agency mortgage-backed and
structured investment-related securities.

Refer to Notes 5 and 21 in the Notes to Consolidated
Financial Statements for further information on investment
securities.

Deposits Total deposits were $204.3 billion at
December 31, 2010, compared with $183.2 billion at
December 31, 2009. The $21.0 billion (11.5 percent)
increase in total deposits reflected organic growth in core
deposits and balances from the securitization trust
administration acquisition in the fourth quarter of 2010.
Average total deposits increased $16.9 billion (10.1 percent)
over 2009, reflecting increases in noninterest-bearing and

32

U.S. BANCORP

savings account balances, partially offset by a decrease in
interest-bearing time deposits.

Noninterest-bearing deposits at December 31, 2010,
increased $7.1 billion (18.7 percent) over December 31,
2009. Average noninterest-bearing deposits increased
$2.3 billion (6.1 percent) in 2010, compared with 2009. The
increase was due primarily to growth in Wholesale Banking
and Commercial Real Estate, Consumer and Small Business
Banking and corporate trust balances.

Interest-bearing savings deposits increased $18.1 billion

(18.9 percent) at December 31, 2010, compared with
December 31, 2009. Excluding acquisitions, interest-bearing
savings deposits increased $11.8 billion (12.3 percent) at
December 31, 2010, compared with December 31, 2009.
The increase in these deposit balances was related to
increases in all major savings deposit categories. The
$7.4 billion (43.7 percent) increase in savings account
balances reflected growth in Consumer and Small Business
Banking balances. The $6.0 billion (14.7 percent) increase in
money market savings account balances principally reflected
acquisition-related growth in corporate trust balances. The
$4.7 billion (12.4 percent) increase in interest checking
account balances was due primarily to higher broker-dealer
balances. Average interest-bearing savings deposits in 2010
increased $19.0 billion (23.2 percent), compared with 2009,
driven by higher money market savings account balances of
$7.9 billion (24.8 percent), savings account balances of
$7.8 billion (59.5 percent) and interest checking account
balances of $3.3 billion (9.0 percent).

Interest-bearing time deposits at December 31, 2010,

decreased $4.2 billion (8.7 percent), compared with
December 31, 2009, driven by decreases in both time
certificates of deposit less than $100,000 and time deposits
greater than $100,000. Excluding the trust administration
acquisition, interest-bearing time deposits decreased
$6.1 billion (12.4 percent) at December 31, 2010, compared
with December 31, 2009. Time certificates of deposit less
than $100,000 decreased $3.9 billion (20.5 percent) at
December 31, 2010, compared with December 31, 2009, as a
result of expected decreases in acquired certificates of deposit
and decreases in Consumer and Small Business Banking
balances. Average time certificates of deposit less than
$100,000 in 2010 decreased $1.3 billion (7.0 percent),
compared with 2009, reflecting maturities and lower renewals
given the current interest rate environment. Time deposits
greater than $100,000 decreased $364 million (1.2 percent) at
December 31, 2010, compared with December 31, 2009.
Average time deposits greater than $100,000 in 2010
decreased $3.1 billion (10.3 percent), compared with 2009.

Time deposits greater than $100,000 are managed as an
alternative to other funding sources, such as wholesale
borrowing, based largely on relative pricing.

During 2010, the Dodd-Frank Wall Street Reform and
Consumer Protection Act was signed into law, resulting in a
permanent increase in the statutory standard maximum
deposit insurance amount for domestic deposits to $250,000
per depositor. Domestic time deposits greater than $250,000
were $5.4 billion at December 31, 2010, compared with
$7.1 billion at December 31, 2009.

Borrowings The Company utilizes both short-term and long-
term borrowings as part of its asset/liability management
and funding strategies. Short-term borrowings, which
include federal funds purchased, commercial paper,
repurchase agreements, borrowings secured by high-grade
assets and other short-term borrowings, were $32.6 billion
at December 31, 2010, compared with $31.3 billion at
December 31, 2009. The $1.3 billion (4.0 percent) increase
in short-term borrowings reflected wholesale funding
associated with the Company’s asset growth and asset/
liability management activities.

Long-term debt was $31.5 billion at December 31,
2010, compared with $32.6 billion at December 31, 2009,
reflecting a $2.6 billion net decrease in Federal Home Loan
Bank advances, $5.7 billion of medium-term note maturities
and repayments and the extinguishment of $.6 billion of
junior subordinated debentures in connection with the ITS
exchange, partially offset by $5.7 billion of medium-term
note and subordinated debt issuances and the consolidation
of $2.3 billion of long-term debt related to certain VIEs at
December 31, 2010. Refer to Note 13 of the Notes to
Consolidated Financial Statements for additional
information regarding long-term debt and the “Liquidity
Risk Management” section for discussion of liquidity
management of the Company.

C O R P O R A T E R I S K P R O F I L E

Overview Managing risks is an essential part of successfully
operating a financial services company. The most prominent
risk exposures are credit, residual value, operational, interest
rate, market and liquidity risk. Credit risk is the risk of not
collecting the interest and/or the principal balance of a loan,
investment or derivative contract when it is due. Residual
value risk is the potential reduction in the end-of-term value
of leased assets. Operational risk includes risks related to
fraud, legal and compliance, processing errors, technology,
breaches of internal controls and business continuation and
disaster recovery. Interest rate risk is the potential reduction

U.S. BANCORP

33

of net interest income as a result of changes in interest rates,
which can affect the re-pricing of assets and liabilities
differently. Market risk arises from fluctuations in interest
rates, foreign exchange rates, and security prices that may
result in changes in the values of financial instruments, such
as trading and available-for-sale securities and derivatives that
are accounted for on a fair value basis. Liquidity risk is the
possible inability to fund obligations to depositors, investors
or borrowers. In addition, corporate strategic decisions, as
well as the risks described above, could give rise to reputation
risk. Reputation risk is the risk that negative publicity or
press, whether true or not, could result in costly litigation or
cause a decline in the Company’s stock value, customer base,
funding sources or revenue.

Credit Risk Management The Company’s strategy for credit
risk management includes well-defined, centralized credit
policies, uniform underwriting criteria, and ongoing risk
monitoring and review processes for all commercial and
consumer credit exposures. The strategy also emphasizes
diversification on a geographic, industry and customer level,
regular credit examinations and management reviews of
loans exhibiting deterioration of credit quality. The credit
risk management strategy also includes a credit risk
assessment process, independent of business line managers,
that performs assessments of compliance with commercial
and consumer credit policies, risk ratings, and other critical
credit information. The Company strives to identify
potential problem loans early, record any necessary charge-
offs promptly and maintain appropriate reserve levels for
probable incurred loan losses. Commercial banking
operations rely on prudent credit policies and procedures
and individual lender and business line manager
accountability. Lenders are assigned lending authority based
on their level of experience and customer service
requirements. Credit officers reporting to an independent
credit administration function have higher levels of lending
authority and support the business units in their credit
decision process. Loan decisions are documented with
respect to the borrower’s business, purpose of the loan,
evaluation of the repayment source and the associated risks,
evaluation of collateral, covenants and monitoring
requirements, and risk rating rationale. The Company
classifies commercial loans by credit quality ratings that it
defines, including: pass, special mention and classified, and
utilizes a credit risk rating system to measure the credit
quality of individual commercial loans. This risk rating
system includes estimates about the likelihood of default by
borrowers and the severity of loss in the event of default.
The Company uses the risk rating system for on-going

34

U.S. BANCORP

management of the portfolio, regulatory reporting,
determining the frequency of review of the credit exposures,
and evaluation and determination of the specific allowance
for commercial credit losses. The Company regularly
forecasts potential changes in risk ratings, nonperforming
status and potential for loss and the estimated impact on the
allowance for credit losses. The Company classifies loans by
the same credit quality ratings in its retail banking
operations, primarily driven by delinquency status. In
addition, standard credit scoring systems are used to assess
credit risks of consumer, small business and small-ticket
leasing customers and to price products accordingly. The
Company conducts the underwriting and collections of its
retail products in loan underwriting and servicing centers
specializing in certain retail products. Forecasts of
delinquency levels, bankruptcies and losses in conjunction
with projection of estimated losses by delinquency categories
and vintage information are regularly prepared and are used
to evaluate underwriting and collection and determine the
specific allowance for credit losses for these products.
Because business processes and credit risks associated with
unfunded credit commitments are essentially the same as for
loans, the Company utilizes similar processes to estimate its
liability for unfunded credit commitments. The Company
also engages in non-lending activities that may give rise to
credit risk, including interest rate swap and option contracts
for balance sheet hedging purposes, foreign exchange
transactions, deposit overdrafts and interest rate swap
contracts for customers, and settlement risk, including
Automated Clearing House transactions, and the processing
of credit card transactions for merchants. These activities are
also subject to credit review, analysis and approval
processes.

Economic and Other Factors In evaluating its credit risk, the
Company considers changes, if any, in underwriting
activities, the loan portfolio composition (including product
mix and geographic, industry or customer-specific
concentrations), trends in loan performance, the level of
allowance coverage relative to similar banking institutions
and macroeconomic factors, such as changes in
unemployment rates, gross domestic product and consumer
bankruptcy filings.

Beginning in late 2007, financial markets suffered
significant disruptions, leading to and exacerbated by
declining real estate values and subsequent economic
challenges, both domestically and globally. Median home
prices, which peaked in 2006, declined across most domestic
markets with severe price reductions in California and some
parts of the Southwest, Northeast and Southeast regions.

The decline in residential home values has had a significant
adverse impact on residential mortgage loans. Residential
mortgage delinquencies, which increased dramatically in
2007 for sub-prime borrowers, also increased throughout
2008 and 2009 for other classes of borrowers. High
unemployment levels throughout 2009 and 2010 further
increased losses in prime-based residential portfolios and
credit cards.

Economic conditions began to stabilize in late 2009 and

throughout 2010, though unemployment and under-
employment continue to be elevated, consumer confidence
and spending remain lower, and many borrowers continue to
have difficulty meeting their commitments. Credit costs
peaked for the Company in late 2009 and trended
downward thereafter, but remain at elevated levels. The
Company recorded provision for credit losses in excess of
net charge-offs during 2010, 2009 and 2008 of
$175 million, $1.7 billion and $1.3 billion, respectively, as
the result of these economic and environmental factors. The
decrease in the provision for credit losses in excess of net
charge-offs for 2010, compared with 2009, reflected the
stabilization of economic conditions throughout 2010 and
the improving underlying risk profile of the loan portfolio.

Credit Diversification The Company manages its credit risk,
in part, through diversification of its loan portfolio and limit
setting by product type criteria and concentrations. As part
of its normal business activities, the Company offers a broad
array of traditional commercial lending products and
specialized products such as asset-based lending, commercial
lease financing, agricultural credit, warehouse mortgage
lending, commercial real estate, health care and
correspondent banking. The Company also offers an array
of retail lending products, including residential mortgages,
credit cards, retail leases, home equity, revolving credit,
lending to students and other consumer loans. These retail
credit products are primarily offered through the branch
office network, home mortgage and loan production offices,
indirect distribution channels, such as automobile dealers,
and a consumer finance division. The Company monitors
and manages the portfolio diversification by industry,
customer and geography. Table 6 provides information with
respect to the overall product diversification and changes in
the mix during 2010.

The commercial portfolio reflects the Company’s focus on

serving small business customers, middle market and larger
corporate businesses throughout its Consumer and Small
Business Banking markets, as well as large national customers.
The commercial loan portfolio is diversified among various
industries with somewhat higher concentrations in consumer

products and services, financial services, healthcare, commercial
services and supplies, capital goods (including manufacturing
and commercial construction-related businesses), property
management and development and agricultural industries.
Additionally, the commercial portfolio is diversified across the
Company’s geographical markets with 69.2 percent of total
commercial loans, excluding covered loans, within the
Company’s Consumer and Small Business Banking markets.
Credit relationships outside of the Company’s Consumer and
Small Business Banking markets are reflected within the
corporate banking, mortgage banking, auto dealer and leasing
businesses focusing on large national customers and specifically
targeted industries. Loans to mortgage banking customers are
primarily warehouse lines which are collateralized with the
underlying mortgages. The Company regularly monitors its
mortgage collateral position to manage its risk exposure. Table
7 provides a summary of significant industry groups and
geographical locations of commercial loans outstanding at
December 31, 2010 and 2009.

The commercial real estate portfolio reflects the

Company’s focus on serving business owners within its
geographic footprint as well as regional and national
investment-based real estate owners and builders. At
December 31, 2010, the Company had commercial real estate
loans of $34.7 billion, or 17.6 percent of total loans,
compared with $34.1 billion at December 31, 2009. Within
commercial real estate loans, different property types have
varying degrees of credit risk. Table 8 provides a summary of
the significant property types and geographical locations of
commercial real estate loans outstanding at December 31,
2010 and 2009. At December 31, 2010, approximately
32.9 percent of the commercial real estate loan portfolio
represented business owner-occupied properties that tend to
exhibit credit risk characteristics similar to the middle market
commercial loan portfolio. Generally, the investment-based
real estate mortgages are diversified among various property
types with somewhat higher concentrations in office and retail
properties. During 2010, the Company continued to reduce
its level of exposure to homebuilders, given the stress in the
homebuilding industry sector. From a geographical
perspective, the Company’s commercial real estate portfolio is
generally well diversified. However, at December 31, 2010,
21.6 percent of the Company’s commercial real estate
portfolio, excluding covered assets, was secured by collateral
in California, which has experienced higher delinquency levels
and credit quality deterioration due to excess home inventory
levels and declining valuations. During 2010, the Company
recorded $845 million of net charge-offs in the total
commercial real estate portfolio. Included in commercial real

U.S. BANCORP

35

Residential mortgages represent an important financial

product for consumer customers of the Company and are
originated through the Company’s branches, loan production
offices, a wholesale network of originators and the consumer
finance division. With respect to residential mortgages
originated through these channels, the Company may either
retain the loans on its balance sheet or sell its interest in the
balances into the secondary market while retaining the
servicing rights and customer relationships. Utilizing the
secondary markets enables the Company to effectively reduce
its credit and other asset/liability risks. For residential
mortgages that are retained in the Company’s portfolio and for
home equity and second mortgages, credit risk is also
diversified by geography and managed by adherence to
loan-to-value and borrower credit criteria during the
underwriting process.

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

Only Amortizing

Percent
of Total

Interest

Total

Consumer Finance

Less than or equal to 80% . . . $1,393
494
Over 80% through 90% . . . . .
457
Over 90% through 100% . . . .
–
Over 100% . . . . . . . . . . . . .

$ 4,772 $ 6,165
2,850
2,369
147

2,356
1,912
147

53.5%
24.7
20.5
1.3

Total . . . . . . . . . . . . . . $2,344

$ 9,187 $11,531

100.0%

Other Retail

Less than or equal to 80% . . . $1,911
56
Over 80% through 90% . . . . .
71
Over 90% through 100% . . . .
–
Over 100% . . . . . . . . . . . . .

$15,870 $17,781
712
708
–

656
637
–

92.6%
3.7
3.7
–

Total . . . . . . . . . . . . . . $2,038

$17,163 $19,201

100.0%

Total Company

Less than or equal to 80% . . . $3,304
550
Over 80% through 90% . . . . .
528
Over 90% through 100% . . . .
–
Over 100% . . . . . . . . . . . . .

$20,642 $23,946
3,562
3,077
147

3,012
2,549
147

77.9%
11.6
10.0
.5

Total . . . . . . . . . . . . . . $4,382

$26,350 $30,732

100.0%

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

estate at year-end 2010 was approximately $1.2 billion in
loans related to land held for development and $1.8 billion of
loans related to residential and commercial acquisition and
development properties. These loans are subject to quarterly
monitoring for changes in local market conditions due to a
higher credit risk profile. The commercial real estate portfolio
is diversified across the Company’s geographical markets with
86.4 percent of total commercial real estate loans outstanding
at December 31, 2010, within the Company’s Consumer and
Small Business Banking markets.

The assets acquired from the FDIC assisted acquisitions

of Downey, PFF and FBOP included nonperforming loans
and other loans with characteristics indicative of a high
credit risk profile, including a substantial concentration in
California, loans with negative-amortization payment
options, and homebuilder and other construction finance
loans. Because most of these loans are covered under loss
sharing agreements with the FDIC, the Company’s financial
exposure to losses from these assets is substantially reduced.
To the extent actual losses exceed the Company’s estimates
at acquisition, the Company’s financial risk would only be
its share of those losses under the loss sharing agreements.
The Company’s retail lending business utilizes several
distinct business processes and channels to originate retail
credit, including traditional branch lending, indirect lending,
portfolio acquisitions and a consumer finance division. Each
distinct underwriting and origination activity manages
unique credit risk characteristics and prices its loan
production commensurate with the differing risk profiles.
Within Consumer and Small Business Banking, the consumer
finance division specializes in serving channel-specific and
alternative lending markets in residential mortgages, home
equity and installment loan financing. The consumer finance
division manages loans originated through a broker
network, correspondent relationships and U.S. Bank branch
offices. Generally, loans managed by the Company’s
consumer finance division exhibit higher credit risk
characteristics, but are priced commensurate with the
differing risk profile.

36

U.S. BANCORP

Home equity and second mortgages
(Dollars in Millions)

Lines

Loans

Total

Percent
of Total

defined as sub-prime borrowers, compared with $.6 billion
at December 31, 2009.

Consumer Finance (a)

Less than or equal to 80% . . . . $ 1,059 $ 197 $ 1,256
588
Over 80% through 90% . . . . . .
565
Over 90% through 100% . . . . .
117
Over 100% . . . . . . . . . . . . . .

440
328
52

148
237
65

49.7%
23.3
22.4
4.6

The following table provides further information on the
loan-to-values of home equity and second mortgages
specifically for the consumer finance division at
December 31, 2010:

Total. . . . . . . . . . . . . . . $ 1,879 $ 647 $ 2,526

100.0%

(Dollars in Millions)

Lines

Loans

Total

Percent
of Total

Other Retail

Less than or equal to 80% . . . . $11,623 $1,202 $12,825
2,501
Over 80% through 90% . . . . . .
1,024
Over 90% through 100% . . . . .
64
Over 100% . . . . . . . . . . . . . .

2,054
665
39

447
359
25

78.1%
15.2
6.3
.4

Total. . . . . . . . . . . . . . . $14,381 $2,033 $16,414

100.0%

Total Company

Less than or equal to 80% . . . . $12,682 $1,399 $14,081
3,089
Over 80% through 90% . . . . . .
1,589
Over 90% through 100% . . . . .
181
Over 100% . . . . . . . . . . . . . .

2,494
993
91

595
596
90

74.3%
16.3
8.4
1.0

Total. . . . . . . . . . . . . . . $16,260 $2,680 $18,940

100.0%

(a) Consumer finance category includes credit originated and managed by the

consumer finance division, as well as the majority of home equity and second
mortgages with a loan-to-value greater than 100 percent that were originated
in the branches.

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

Within the consumer finance division at December 31,

2010, approximately $2.1 billion of residential mortgages
were to customers that may be defined as sub-prime
borrowers based on credit scores from independent credit
rating agencies at loan origination, compared with
$2.5 billion at December 31, 2009.

The following table provides further information on the
loan-to-values of residential mortgages specifically for the
consumer finance division at December 31, 2010:

(Dollars in Millions)

Only Amortizing

Total

Interest

Percent of
Division

Sub-Prime Borrowers

Less than or equal to 80% . . . $
Over 80% through 90% . . . . .
Over 90% through 100% . . . .
Over 100% . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . $

Other Borrowers

5
3
13
–

21

$ 958 $
489
612
49

963
492
625
49

8.4%
4.3
5.4
.4

$2,108 $ 2,129

18.5%

Less than or equal to 80% . . . $1,388
491
Over 80% through 90% . . . . .
444
Over 90% through 100% . . . .
–
Over 100% . . . . . . . . . . . . .

$3,814 $ 5,202
2,358
1,744
98

1,867
1,300
98

Total . . . . . . . . . . . . . . $2,323

$7,079 $ 9,402

45.1%
20.5
15.1
.8

81.5%

Total Consumer Finance . . $2,344

$9,187 $11,531

100.0%

In addition to residential mortgages, at December 31,
2010, the consumer finance division had $.5 billion of home
equity and second mortgage loans to customers that may be

Sub-Prime Borrowers

Less than or equal to 80% . . . . . . . $
Over 80% through 90% . . . . . . . .
Over 90% through 100% . . . . . . . .
Over 100% . . . . . . . . . . . . . . . .

64 $117 $ 181
127
84
43
151
144
7
86
52
34

7.2%
5.0
6.0
3.4

Total . . . . . . . . . . . . . . . . . $ 148 $397 $ 545

21.6%

Other Borrowers

Less than or equal to 80% . . . . . . . $ 995 $ 80 $1,075
461
Over 80% through 90% . . . . . . . .
414
Over 90% through 100% . . . . . . . .
31
Over 100% . . . . . . . . . . . . . . . .

397
321
18

64
93
13

42.6%
18.2
16.4
1.2

Total . . . . . . . . . . . . . . . . . $1,731 $250 $1,981

78.4%

Total Consumer Finance . . . . . $1,879 $647 $2,526

100.0%

The total amount of residential mortgage, home equity

and second mortgage loans, other than covered loans, to
customers that may be defined as sub-prime borrowers
represented only .9 percent of total assets at December 31,
2010, compared with 1.1 percent at December 31, 2009.
Covered loans include $1.6 billion in loans with
negative-amortization payment options at December 31,
2010, compared with $2.2 billion at December 31, 2009.
Other than covered loans, the Company does not have any
residential mortgages with payment schedules that would
cause balances to increase over time.

The retail loan portfolio principally reflects the
Company’s focus on consumers within its geographical
footprint of branches and certain niche lending activities that
are nationally focused. Within the Company’s retail loan
portfolio, approximately 76.0 percent of the credit card
balances relate to cards originated through the bank
branches or co-branded and affinity programs that generally
experience better credit quality performance than portfolios
generated through other channels.

Table 9 provides a geographical summary of the

residential mortgage and retail loan portfolios.

Loan Delinquencies Trends in delinquency ratios are an
indicator, among other considerations, of credit risk within
the Company’s loan portfolios. The entire balance of an
account is considered delinquent if the minimum payment
contractually required to be made is not received by the
specified date on the billing statement. The Company

U.S. BANCORP

37

Table 13 DELINQUENT LOAN RATIOS AS A PERCENT OF EN DING LOAN BALANCES

At December 31
90 days or more past due excluding nonperforming loans

Commercial

2010

2009

2008

2007

2006

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease financing . . . . . . . . . . . . . . . . . . . . . . . . .

.15%
.02

.25%
–

.15%
–

.08%
–

.06%
–

Total commercial . . . . . . . . . . . . . . . . . . . . . . .

.13

Commercial Real Estate

Commercial mortgages. . . . . . . . . . . . . . . . . . . . .
Construction and development . . . . . . . . . . . . . . . .

Total commercial real estate . . . . . . . . . . . . . . . .
Residential Mortgages . . . . . . . . . . . . . . . . . .
Retail

Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail leasing . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other retail

Total retail

. . . . . . . . . . . . . . . . . . . . . . . . . . .

Total loans, excluding covered loans . . . . . . . . .

–
.01

–
1.63

1.86
.05
.49

.81

.61

Covered Loans . . . . . . . . . . . . . . . . . . . . . . . .

6.04

Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.11%

At December 31
90 days or more past due including nonperforming loans

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate. . . . . . . . . . . . . . . . . . . . . . .
Residential mortgages (a) . . . . . . . . . . . . . . . . . . . . .
Retail (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2010

1.37%
3.73
3.70
1.26

Total loans, excluding covered loans . . . . . . . . . . . . . .

2.19

Covered loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.94

Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.17%

.22

–
.07

.02
2.80

2.59
.11
.57

1.07

.88

3.59

1.19%

2009

2.25%
5.22
4.59
1.39

2.87

9.76

3.64%

.13

–
.36

.11
1.55

2.20
.16
.45

.82

.56

5.25

.84%

2008

.82%

3.34
2.44
.97

1.57

8.55

2.00%

.07

.02
.02

.02
.86

1.94
.10
.37

.68

.38

–

.38%

2007

.43%

1.02
1.10
.73

.74

–

.74%

.05

.01
.01

.01
.42

1.75
.03
.24

.49

.24

–

.24%

2006

.57%
.53
.59
.59

.57

–

.57%

(a) Delinquent loan ratios exclude loans purchased from Government National Mortgage Association (“GNMA”) mortgage pools whose repayments are insured by the Federal Housing

Administration or guaranteed by the Department of Veterans Affairs. Including the guaranteed amounts, the ratio of residential mortgages 90 days or more past due including
nonperforming loans was 12.28 percent, 12.86 percent, 6.95 percent, 3.78 percent, and 3.08 percent at December 31, 2010, 2009, 2008, 2007 and 2006, respectively.

(b) Beginning in 2008, delinquent loan ratios exclude student loans that are guaranteed by the federal government. Including the guaranteed amounts, the ratio of retail loans

90 days or more past due including nonperforming loans was 1.60 percent, 1.57 percent, and 1.10 percent at December 31, 2010, 2009, and 2008, respectively.

measures delinquencies, both including and excluding
nonperforming loans, to enable comparability with other
companies. Delinquent loans purchased from Government
National Mortgage Association (“GNMA”) mortgage pools,
for which repayments of principal and interest are insured
by the Federal Housing Administration or guaranteed by the
Department of Veterans Affairs, are excluded from
delinquency statistics. In addition, in certain situations, a
retail customer’s account may be re-aged to remove it from
delinquent status. Generally, the purpose of re-aging
accounts is to assist customers who have recently overcome
temporary financial difficulties, and have demonstrated both
the ability and willingness to resume regular payments. To
qualify for re-aging, the account must have been open for at
least nine months and cannot have been re-aged during the
preceding 365 days. An account may not be re-aged more
than two times in a five-year period. To qualify for re-aging,
the customer must also have made three regular minimum
monthly payments within the last 90 days. In addition, the
Company may re-age the retail account of a customer who
has experienced longer-term financial difficulties and apply

38

U.S. BANCORP

modified, concessionary terms and conditions to the
account. Such additional re-ages are limited to one in a five-
year period and must meet the qualifications for re-aging
described above. All re-aging strategies must be
independently approved by the Company’s credit
administration function. Commercial loans are not subject to
re-aging policies.

Accruing loans 90 days or more past due totaled
$2.2 billion ($1.1 billion excluding covered loans) at
December 31, 2010, compared with $2.3 billion
($1.5 billion excluding covered loans) at December 31,
2009, and $1.6 billion ($967 million excluding covered
loans) at December 31, 2008. The $431 million
(28.3 percent) decrease, excluding covered loans, reflected a
moderation in the level of stress in economic conditions
during 2010. These loans are not included in nonperforming
assets and continue to accrue interest because they are
adequately secured by collateral, are in the process of
collection and are reasonably expected to result in
repayment or restoration to current status, or are managed
in homogeneous portfolios with specified charge-off

timeframes adhering to regulatory guidelines. The ratio of
accruing loans 90 days or more past due to total loans was
1.11 percent (.61 percent excluding covered loans) at
December 31, 2010, compared with 1.19 percent
(.88 percent excluding covered loans) at December 31, 2009,
and .84 percent (.56 percent excluding covered loans) at
December 31, 2008.

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

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

Consumer
Finance (a)

Other Retail

December 31

2010

2009

2010

2009

Residential mortgages

30-89 days . . . . . . . . . . . . 2.38% 3.99%
90 days or more . . . . . . . . . 2.26
Nonperforming . . . . . . . . . . 2.99

4.00
3.04

.95% 1.30%

1.24
1.52

2.02
.98

Total . . . . . . . . . . . . . . 7.63% 11.03% 3.71% 4.30%

December 31
(Dollars in Millions)

Residential mortgages

Amount

As a Percent of
Ending
Loan Balances

2010

2009

2010

2009

30-89 days . . . . . . . . . . $ 456
500
90 days or more . . . . . .
636
Nonperforming . . . . . . .

$ 615
729
467

1.48% 2.36%
1.63
2.07

2.80
1.79

Total . . . . . . . . . . . . $1,592

$1,811

5.18% 6.95%

Retail

Credit card

30-89 days . . . . . . . . . . $ 269
313
90 days or more . . . . . .
228
Nonperforming . . . . . . .

$ 400
435
142

1.60% 2.38%
1.86
1.36

2.59
.84

Total . . . . . . . . . . . . $ 810

$ 977

4.82% 5.81%

Retail leasing

30-89 days . . . . . . . . . . $
90 days or more . . . . . .
Nonperforming . . . . . . .

Total . . . . . . . . . . . . $

Home equity and second

17
2
–

19

$

$

34
5
–

39

.37% .74%
.05
–

.11
–

.42% .85%

mortgages
30-89 days . . . . . . . . . . $ 175
148
90 days or more . . . . . .
36
Nonperforming . . . . . . .

$ 181
152
32

.93% .93%
.78
.19

.78
.17

Total . . . . . . . . . . . . $ 359

$ 365

1.90% 1.88%

Other retail

30-89 days . . . . . . . . . . $ 212
66
90 days or more . . . . . .
29
Nonperforming . . . . . . .

$ 256
92
30

.85% 1.10%
.26
.12

.40
.13

Total . . . . . . . . . . . . $ 307

$ 378

1.23% 1.63%

Retail

Credit card

30-89 days . . . . . . . . . . . .
90 days or more . . . . . . . . .
Nonperforming . . . . . . . . . .

Total . . . . . . . . . . . . . .

Retail leasing

30-89 days . . . . . . . . . . . .
90 days or more . . . . . . . . .
Nonperforming . . . . . . . . . .

Total . . . . . . . . . . . . . .

Home equity and second

–%
–
–

–%

–%
–
–

–%

–% 1.60% 2.38%
–
–

1.86
1.36

2.59
.84

–% 4.82% 5.81%

–%
–
–

–%

.37% .74%
.05
–

.11
–

.42% .85%

mortgages
30-89 days . . . . . . . . . . . . 1.98% 2.54%
90 days or more . . . . . . . . . 1.82
.20
Nonperforming . . . . . . . . . .

2.02
.20

.76% .70%
.62
.19

.60
.16

Total . . . . . . . . . . . . . . 4.00% 4.76% 1.57% 1.46%

Other retail

30-89 days . . . . . . . . . . . . 4.42% 5.17%
90 days or more . . . . . . . . .
Nonperforming . . . . . . . . . .

1.17
.16

.68
–

.77% 1.00%
.25
.12

.37
.13

Total . . . . . . . . . . . . . . 5.10% 6.50% 1.14% 1.50%

(a) Consumer finance category includes credit originated and managed by the

consumer finance division, as well as the majority of home equity and second
mortgages with a loan-to-value greater than 100 percent that were originated
in the branches.

Within the consumer finance division at December 31,
2010, approximately $412 million and $75 million of these
delinquent and nonperforming residential mortgages and other
retail loans, respectively, were to customers that may be defined
as sub-prime borrowers, compared with $557 million and
$98 million, respectively at December 31, 2009.

U.S. BANCORP

39

The following table provides summary delinquency
information for covered loans:

December 31
(Dollars in Millions)

Amount

As a Percent of
Ending
Loan Balances

2010

2009

2010

2009

30-89 days . . . . . . . . . . . $ 757
1,090
90 days or more . . . . . . . .
1,244
Nonperforming . . . . . . . . .

$1,195
784
1,350

4.19% 5.46%
6.04
6.90

3.59
6.18

Total

. . . . . . . . . . . . . $3,091

$3,329

17.13% 15.23%

Restructured Loans In certain circumstances, the Company
may modify the terms of a loan to maximize the collection
of amounts due when a borrower is experiencing financial
difficulties or is expected to experience difficulties in the
near-term. In most cases the modification is either a
concessionary reduction in interest rate, extension of the
maturity date or reduction in the principal balance that
would otherwise not be considered. Concessionary
modifications are classified as troubled debt restructurings
(“TDRs”) unless the modification is short-term, or results in
only an insignificant delay or shortfall in the payments to be
received. TDRs accrue interest if the borrower complies with
the revised terms and conditions and has demonstrated
repayment performance at a level commensurate with the
modified terms over several payment cycles.

Short-Term Modifications The Company makes short-term
modifications to assist borrowers experiencing temporary
hardships. Consumer programs include short-term interest
rate reductions (three months or less for residential
mortgages and twelve months or less for credit cards),
deferrals of up to three past due payments, and the ability to
return to current status if the borrower makes required
payments during the short-term modification period. At
December 31, 2010, loans modified under these programs,
excluding loans purchased from GNMA mortgage pools
whose repayments are insured by the Federal Housing
Administration or guaranteed by the Department of Veterans
Affairs, represented less than 1.0 percent of total residential
mortgage loan balances and 1.9 percent of credit card
receivable balances. Because these changes have an
insignificant impact on the economic return on the loan, the
Company does not consider loans modified under these
hardship programs to be TDRs. The Company determines
applicable allowances for loan losses for these loans in a
manner consistent with other homogeneous loan portfolios.

The Company may also modify commercial loans on a
short-term basis, with the most common modification being an
extension of the maturity date of twelve months or less. Such
extensions generally are used when the maturity date is

40

U.S. BANCORP

imminent and the borrower is experiencing some level of
financial stress but the Company believes the borrower will
ultimately pay all contractual amounts owed. These extended
loans represented approximately 1.1 percent of total
commercial and commercial real estate loan balances at
December 31, 2010. Because interest is charged during the
extension period (at the original contractual rate or, in many
cases, a higher rate), the extension has an insignificant impact
on the economic return on the loan. Therefore, the Company
does not consider such extensions to be TDRs. The Company
determines the applicable allowance for loan losses on these
loans in a manner consistent with other commercial loans.

Troubled Debt Restructurings Many of the Company’s
TDRs are determined on a case-by-case basis in connection
with ongoing loan collection processes. However, the
Company has also implemented certain restructuring
programs that may result in TDRs. The consumer finance
division has a mortgage loan restructuring program where
certain qualifying borrowers facing an interest rate reset who
are current in their repayment status, are allowed to retain
the lower of their existing interest rate or the market interest
rate as of their interest reset date. The Company also
participates in the U.S. Department of the Treasury Home
Affordable Modification Program (“HAMP”). HAMP gives
qualifying homeowners an opportunity to refinance into
more affordable monthly payments, with the
U.S. Department of the Treasury compensating the Company
for a portion of the reduction in monthly amounts due from
borrowers participating in this program. Both the consumer
finance division modification program and the HAMP
program require the customer to complete a trial period,
where the loan modification is contingent on the customer
satisfactorily completing the trial period and the loan
documents are not modified until that time. The Company
reports loans that are modified following the satisfactory
completion of the trial period as TDRs. Loans in the pre-
modification trial phase represented less than 1.0 percent of
residential mortgage loan balances at December 31, 2010.

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

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

The following table provides a summary of TDRs by loan type, including the delinquency status for TDRs that continue to
accrue interest and TDRs included in nonperforming assets (excluding covered loans):

December 31, 2010
(Dollars in Millions)

As a Percent of Performing TDRs

Performing
TDRs

30-89 Days
Past Due

90 Days or more
Past Due

Nonperforming
TDRs

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgages (a)
Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other retail

$

77
15
1,804
224
87

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,207

6.7%
–
6.7
10.9
9.9

7.2%

2.8%
–
6.3
7.7
6.0

6.3%

$ 62(b)
199(b)
153
228(c)
27

$669

Total
TDRs

$ 139
214
1,957
452
114

$2,876

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

Veterans Affairs, and loans in the trial period under HAMP or the Company’s program where a legal modification of the loan is contingent on the customer successfully
completing the trial modification period.

(b) Primarily represents loans less than six months from the modification date that have not met the performance period required to return to accrual status (generally six

months) and, for commercial, small business credit cards with a modified rate equal to 0 percent.

(c) Represents consumer credit cards with a modified rate equal to 0 percent.

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

December 31
(Dollars in Millions)

Amount

As a Percent of
Ending
Loan Balances

2010

2009

2010

2009

Commercial . . . . . . . . . . . $
Commercial real estate. . . .
Residential mortgages (a) . .
Credit card . . . . . . . . . . .
. . . . . . . . . . .
Other retail

77
15
1,804
224
87

$

35
110
1,354
221
74

.16% .07%
.04
5.87
1.33
.18

.32
5.20
1.31
.16

Total . . . . . . . . . . . . . . $2,207

$1,794

1.12% .92%

(a) Excludes loans purchased from GNMA mortgage pools whose repayments are

insured by the Federal Housing Administration or guaranteed by the
Department of Veterans Affairs, and loans in the trial period under HAMP or the
Company’s program where a legal modification of the loan is contingent on the
customer successfully completing the trial modification period.

TDRs, excluding covered loans, that are performing in

accordance with modified terms were $413 million higher at
December 31, 2010, than at December 31, 2009, primarily
reflecting loan modifications for certain residential mortgage
and consumer credit card customers in light of current
economic conditions. The Company continues to work with
customers to modify loans for borrowers who are having
financial difficulties, including those acquired through FDIC-
assisted bank acquisitions, but expects the overall level of
loan modifications to moderate during the first quarter of
2011.

Nonperforming Assets The level of nonperforming assets
represents another indicator of the potential for future credit
losses. Nonperforming assets include nonaccrual loans,
restructured loans not performing in accordance with
modified terms, other real estate and other nonperforming
assets owned by the Company. Interest payments collected

from assets on nonaccrual status are typically applied
against the principal balance and not recorded as income.

At December 31, 2010, total nonperforming assets were

$5.0 billion, compared with $5.9 billion at December 31,
2009 and $2.6 billion at December 31, 2008. Excluding
covered assets, nonperforming assets were $3.4 billion at
December 31, 2010, compared with $3.9 billion at
December 31, 2009 and $2.0 billion at December 31, 2008.
The $553 million (14.2 percent) decrease in nonperforming
assets, excluding covered assets, from December 31, 2009 to
December 31, 2010, was principally in the construction and
land development portfolios, as the Company continued to
resolve and reduce the exposure to these assets. There was
also an improvement in other commercial portfolios,
reflecting the stabilizing economy. However, stress continued
in the residential mortgage portfolio and foreclosed
properties increased due to the overall duration of the
economic slowdown. Nonperforming covered assets at
December 31, 2010 were $1.7 billion, compared with
$2.0 billion at December 31, 2009 and $643 million at
December 31, 2008. These assets are covered by loss sharing
agreements with the FDIC that substantially reduce the risk
of credit losses to the Company. In addition, the majority of
the nonperforming covered assets were considered credit-
impaired at acquisition and recorded at their estimated fair
value at acquisition. The ratio of total nonperforming assets
to total loans and other real estate was 2.55 percent
(1.87 percent excluding covered assets) at December 31,
2010, compared with 3.02 percent (2.25 percent excluding
covered assets) at December 31, 2009 and 1.42 percent
(1.14 percent excluding covered assets) at December 31,
2008.

U.S. BANCORP

41

Table 14 N O N P E R F O R M I N G A S S E T S ( a )

At December 31 (Dollars in Millions)

2010

2009

2008

2007

2006

Commercial
Commercial
Lease financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 519
78

Total commercial

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

597

Commercial Real Estate

Commercial mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
Construction and development

Total commercial real estate . . . . . . . . . . . . . . . . . . . . . . . .
Residential Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail

Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total nonperforming loans, excluding covered loans . . . . . . . .
Covered Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total nonperforming loans . . . . . . . . . . . . . . . . . . . . . . . .
Other Real Estate (b)(c) . . . . . . . . . . . . . . . . . . . . . . . . . .
Covered Other Real Estate (c) . . . . . . . . . . . . . . . . . . . . .
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

545
748

1,293
636

228
–
65

293

2,819
1,244

4,063
511
453
21

Total nonperforming assets . . . . . . . . . . . . . . . . . . . . . . . $5,048

Total nonperforming assets, excluding covered assets . . . . . . $3,351

Excluding covered assets:

Accruing loans 90 days or more past due . . . . . . . . . . . . . . . . $1,094
Nonperforming loans to total loans . . . . . . . . . . . . . . . . . . . .
Nonperforming assets to total loans plus other real estate (b) . . . .

1.57%
1.87%

Including covered assets:

Accruing loans 90 days or more past due . . . . . . . . . . . . . . . . $2,184
Nonperforming loans to total loans . . . . . . . . . . . . . . . . . . . .
Nonperforming assets to total loans plus other real estate (b) . . . .

2.06%
2.55%

Net interest foregone on nonperforming loans . . . . . . . . . . . . . . . . . $ 123

$ 866
125

991

581
1,192

1,773
467

142
–
62

204

3,435
1,350

4,785
437
653
32

$5,907

$3,904

$1,525

1.99%
2.25%

$2,309

2.46%
3.02%

$ 169

$ 290
102

392

294
780

1,074
210

67
–
25

92

1,768
369

2,137
190
274
23

$2,624

$1,981

$ 967

1.02%
1.14%

$1,554

1.16%
1.42%
80

$

$128
53

181

84
209

293
54

14
–
15

29

557
–

557
111
–
22

$690

$690

$584

.36%
.45%

$584

.36%
.45%

$ 41

Changes in Nonperforming Assets

(Dollars in Millions)

Commercial and
Commercial
Real Estate

Retail and
Residential
Mortgages (e)

$196
40

236

112
38

150
36

31
–
17

48

470
–

470
95
–
22

$587

$587

$349

.33%
.41%

$349

.33%
.41%

$ 39

Total

Balance December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4,727

$1,180

$ 5,907

Additions to nonperforming assets

New nonaccrual loans and foreclosed properties . . . . . . . . . . . . . . . . . . . . . . . .
Advances on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reductions in nonperforming assets

Paydowns, payoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return to performing status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge-offs (d)

Total reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net additions to (reductions in) nonperforming assets . . . . . . . . . . . . . . .

3,654
193

3,847

(2,254)
(616)
(529)
(1,579)

(4,978)

(1,131)

1,112
–

1,112

(191)
(378)
(39)
(232)

(840)

272

4,766
193

4,959

(2,445)
(994)
(568)
(1,811)

(5,818)

(859)

Balance December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,596

$1,452

$ 5,048

(a) Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due.
(b) Excludes $575 million, $359 million, $209 million, $102 million and $83 million at December 31, 2010, 2009, 2008, 2007 and 2006, respectively, of foreclosed GNMA loans

which continue to accrue interest.

(c) Includes equity investments in entities whose only assets are other real estate owned.
(d) Charge-offs exclude actions for certain card products and loan sales that were not classified as nonperforming at the time the charge-off occurred.
(e) Residential mortgage information excludes changes related to residential mortgages serviced by others.

42

U.S. BANCORP

Table 15 NET CHARGE-OFFS AS A PERCENT OF AVERAGE L OANS OUTSTANDIN G

Year Ended December 31

Commercial

2010

2009

2008

2007

2006

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease financing . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total commercial . . . . . . . . . . . . . . . . . . . . . . . . .

1.80%
1.47

1.76

1.60%
2.82

1.75

Commercial Real Estate

Commercial mortgages . . . . . . . . . . . . . . . . . . . . . .
Construction and development. . . . . . . . . . . . . . . . . .

Total commercial real estate . . . . . . . . . . . . . . . . . .
Residential Mortgages . . . . . . . . . . . . . . . . . . . . . .
Retail

Credit card (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and second mortgages . . . . . . . . . . . . . .
Other retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total retail. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total loans, excluding covered loans . . . . . . . . . . .
Covered Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.23
6.32

2.47
1.97

7.32
.27
1.72
1.68

3.03

2.41
.09

.42
5.35

1.82
2.00

6.90
.74
1.75
1.85

2.95

2.23
.09

.53%

1.36

.63

.15
1.48

.55
1.01

4.73
.65
1.01
1.39

1.92

1.10
.38

.24%
.61

.15%
.46

.29

.06
.11

.08
.28

3.34
.25
.46
.96

1.17

.54
–

.18

.01
.01

.01
.19

2.88
.20
.33
.85

.92

.39
–

Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.17%

2.08%

1.10%

.54%

.39%

(a) Net charge-offs as a percent of average loans outstanding, excluding portfolio purchases where the acquired loans were recorded at fair value at the purchase date,

were 7.99 percent and 7.14 percent for the years ended December 31, 2010 and 2009, respectively.

The Company expects nonperforming assets, excluding
covered assets and assets acquired in the January 2011 FCB
transaction, to trend lower in the first quarter of 2011.
Other real estate, excluding covered assets, was
$511 million at December 31, 2010, compared with
$437 million at December 31, 2009, and was primarily
related to foreclosed properties that previously secured loan
balances. The increase in other real estate assets reflected
continuing stress in residential construction and related
supplier industries.

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

December 31
(Dollars in Millions)

Residential

Amount

As a Percent of Ending
Loan Balances

2010

2009

2010

2009

Minnesota . . . . . . . . . $ 28
21
California . . . . . . . . . .
16
Illinois . . . . . . . . . . . .
11
Nevada . . . . . . . . . . .
10
. . . . . . . . . .
Missouri
132
All other states . . . . .

Total residential . . . .

218

Commercial

Nevada . . . . . . . . . . .
Oregon . . . . . . . . . . .
California . . . . . . . . . .
Virginia . . . . . . . . . . .
Ohio . . . . . . . . . . . . .
All other states . . . . . .

Total commercial . . .

58
26
23
22
20
144

293

$ 27
15
8
3
7
113

173

73
28
43
8
–
112

264

.53%
.34
.57
1.49
.39
.41

.44

3.93
.74
.18
3.41
.48
.24

.35

.49%
.27
.29
.37
.26
.40

.38

3.57
.81
.30
1.21
–
.19

.32

Total OREO . . . . . . $511

$437

.29%

.25%

U.S. BANCORP

43

Analysis of Loan Net Charge-Offs Total loan net charge-offs
were $4.2 billion in 2010, compared with $3.9 billion in
2009 and $1.8 billion in 2008. The ratio of total loan net
charge-offs to average loans was 2.17 percent in 2010,
compared with 2.08 percent in 2009 and 1.10 percent in
2008. The increase in total net charge-offs in 2010,
compared with 2009, and the increase in 2009, compared
with 2008, was driven by the weakening economy and rising
unemployment affecting the residential housing markets,
including homebuilding and related industries, commercial
real estate properties and credit card and other consumer
and commercial loans. Total net charge-offs peaked for the
Company in the first quarter of 2010 and have since trended
lower as the economy has begun to stabilize. The Company
expects the level of net charge-offs to continue to trend
lower in the first quarter of 2011.

Commercial and commercial real estate loan net charge-

offs for 2010 were $1.7 billion (2.06 percent of average
loans outstanding), compared with $1.5 billion (1.78 percent
of average loans outstanding) in 2009 and $514 million
(.60 percent of average loans outstanding) in 2008. The
increase in net charge-offs in 2010, compared with 2009 and
the increase in 2009, compared with 2008, reflected the
weakening economy and rising unemployment throughout
most of 2009, affecting the residential housing markets,
including homebuilding and related industries, commercial
real estate properties and other commercial loans.

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

Year Ended December 31
(Dollars in Millions)

Consumer Finance (a)

Average Loans

Percent of
Average Loans

2010

2009

2010

2009

Residential mortgages . . $10,739 $ 9,973
Home equity and second
mortgages . . . . . . . .
Other retail. . . . . . . . . .

2,457
571

2,479
603

Other Retail

Residential mortgages . . $16,965 $14,508
Home equity and second
mortgages . . . . . . . .
Other retail. . . . . . . . . .

16,806
23,393

16,878
22,285

Total Company

Residential mortgages . . $27,704 $24,481
Home equity and second
mortgages . . . . . . . .
Other retail. . . . . . . . . .

19,285
23,996

19,335
22,856

3.63% 3.80%

5.28
3.65

6.43
5.78

.92% .76%

1.19
1.62

1.07
1.75

1.97% 2.00%

1.72
1.68

1.75
1.85

(a) Consumer finance category included credit originated and managed by the

consumer finance division, as well as the majority of home equity and second
mortgages with a loan-to-value greater than 100 percent that were originated
in the branches.

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

Year Ended December 31
(Dollars in Millions)

Average Loans

Percent of
Average Loans

2010

2009

2010

2009

Residential mortgage loan net charge-offs for 2010 were

Residential mortgages

$546 million (1.97 percent of average loans outstanding),
compared with $489 million (2.00 percent of average loans
outstanding) in 2009 and $234 million (1.01 percent of
average loans outstanding) in 2008. Retail loan net charge-
offs for 2010 were $1.9 billion (3.03 percent of average
loans outstanding), compared with $1.8 billion (2.95 percent
of average loans outstanding) in 2009 and $1.1 billion
(1.92 percent of average loans outstanding) in 2008. The
retail loan net charge-offs percentage was impacted by credit
card portfolio purchases recorded at fair value beginning in
the second quarter of 2009. The increases in residential
mortgage and retail loan net charge-offs in 2010, compared
with 2009 and the increases in 2009, compared with 2008,
reflected the adverse impact of economic conditions on
consumers, as higher unemployment levels increased losses
in the prime-based residential mortgage and credit card
portfolios.

Sub-prime borrowers . . . $ 2,300 $ 2,674
7,299
Other borrowers . . . . . .

8,439

6.39% 6.02%
2.88

2.99

Total . . . . . . . . . . . $10,739 $ 9,973

3.63% 3.80%

Home equity and

second mortgages
Sub-prime borrowers . . . $
Other borrowers . . . . . .

575 $

1,904

670
1,787

10.26% 11.79%

3.78

4.42

Total . . . . . . . . . . . $ 2,479 $ 2,457

5.28% 6.43%

Analysis and Determination of the Allowance for Credit

Losses The allowance for credit losses reserves for probable
and estimable losses incurred in the Company’s loan and
lease portfolio, and includes certain amounts that do not
represent loss exposure to the Company because those losses
are recoverable under loss sharing agreements with the
FDIC. Management evaluates the allowance each quarter to
ensure it appropriately reserves for incurred losses. The
evaluation of each element and the overall allowance is
based on a continuing assessment of problem loans, recent
loss experience and other factors, including regulatory
guidance and economic conditions. Because business
processes and credit risks associated with unfunded credit

44

U.S. BANCORP

commitments are essentially the same as for loans, the
Company utilizes similar processes to estimate its liability
for unfunded credit commitments, which is included in other
liabilities in the Consolidated Balance Sheet. Both the
allowance for loan losses and the liability for unfunded
credit commitments are included in the Company’s analysis
of credit losses and reported reserve ratios.

At December 31, 2010, the allowance for credit losses was

$5.5 billion (2.81 percent of total loans and 3.03 percent of
loans excluding covered loans), compared with an allowance of
$5.3 billion (2.70 percent of total loans and 3.04 percent of
loans excluding covered loans) at December 31, 2009, and
$3.6 billion (1.97 percent of total loans and 2.09 percent of
loans excluding covered loans) at December 31, 2008. During
2010, the Company increased the allowance for credit losses by
$92 million to reflect covered loan losses reimbursable by the
FDIC. The ratio of the allowance for credit losses to
nonperforming loans was 136 percent (192 percent excluding
covered loans) at December 31, 2010, compared with
110 percent (153 percent excluding covered loans) at
December 31, 2009 and 170 percent (206 percent excluding
covered loans) at December 31, 2008. The ratio of the
allowance for credit losses to annual loan net charge-offs at
December 31, 2010, was 132 percent, compared with
136 percent and 200 percent at December 31, 2009 and 2008,
respectively. Management determined the allowance for credit
losses was appropriate at December 31, 2010.

Several factors were taken into consideration in
evaluating the allowance for credit losses at December 31,
2010, including the risk profile of the portfolios, loan net
charge-offs during the period, the level of nonperforming
assets, accruing loans 90 days or more past due, delinquency
ratios and changes in TDR loan balances. Management also
considered the uncertainty related to certain industry sectors,
and the extent of credit exposure to specific borrowers within
the portfolio. In addition, concentration risks associated with
commercial real estate and the mix of loans, including credit
cards, loans originated through the consumer finance division
and residential mortgage balances, and their relative credit
risks, were evaluated. Finally, the Company considered
current economic conditions that might impact the portfolio.
Management determines the allowance that is required for
specific loan categories based on relative risk characteristics of
the loan portfolio. On an ongoing basis, management
evaluates its methods for determining the allowance for each
element of the portfolio and makes enhancements considered
appropriate. Table 17 shows the amount of the allowance for
credit losses by portfolio category.

Regardless of the extent of the Company’s analysis of

customer performance, portfolio trends or risk management
processes, certain incurred but undetected losses are
probable within the loan portfolios. This is due to several
factors, including inherent delays in obtaining information
regarding a customer’s financial condition or changes in its
unique business conditions, the judgmental nature of
individual loan evaluations, collateral assessments and the
interpretation of economic trends. Volatility of economic or
customer-specific conditions affecting the identification and
estimation of losses from larger non-homogeneous credits
and the sensitivity of assumptions utilized to establish
allowances for homogeneous groups of loans, loan portfolio
concentrations, and additional subjective considerations are
among other factors. Because of these subjective factors, the
process utilized to determine each element of the allowance
for credit losses by specific loan category has some
imprecision. As a result, the Company estimates a range of
incurred losses in the portfolio based on statistical analyses
and management judgment. A statistical analysis attempts to
measure the extent of imprecision and other uncertainty by
determining the volatility of losses over time, across loan
categories. Also, management judgmentally considers loan
concentrations, risks associated with specific industries, the
stage of the business cycle, economic conditions and other
qualitative factors. Beginning in 2007, the Company
assigned this element of the allowance to each portfolio type
to better reflect the Company’s risk in the specific portfolios.
In years prior to 2007, this element of the allowance was
separately categorized as “available for other factors”.

The allowance recorded for commercial and commercial

real estate loans is based, in part, on a regular review of
individual credit relationships. The Company’s risk rating
process is an integral component of the methodology utilized to
determine these elements of the allowance for credit losses. An
allowance for credit losses is established for pools of
commercial and commercial real estate loans and unfunded
commitments based on the risk ratings assigned. An analysis of
the migration of commercial and commercial real estate loans
and actual loss experience is conducted quarterly to assess the
exposure for credits with similar risk characteristics. In addition
to its risk rating process, the Company separately analyzes the
carrying value of impaired loans to determine whether the
carrying value is less than or equal to the appraised collateral
value or the present value of expected cash flows. Based on this
analysis, an allowance for credit losses may be specifically
established for impaired loans. The allowance established for
commercial and commercial real estate loan portfolios,
including impaired commercial and commercial real estate

U.S. BANCORP

45

Table 16 S U M M A R Y O F A L L O W A N C E F O R C R E D I T L O S S E S
(Dollars in Millions)

2009

2010

2008

2007

2006

Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge-Offs
Commercial

Commercial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total commercial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial real estate

Commercial mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail

Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and second mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Covered loans (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recoveries
Commercial

Commercial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total commercial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial real estate

Commercial mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail

Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and second mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Covered loans (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net Charge-Offs

Commercial

Commercial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total commercial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial real estate

Commercial mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail

Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and second mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Covered loans (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change for credit losses to be reimbursed by the FDIC . . . . . . . . . . . . . . . . . .
Acquisitions and other changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,264

$3,639

$2,260

$2,256

$2,251

784
134

918

333
538

871
554

1,270
25
348
490

2,133

20

4,496

48
43

91

13
13

26
8

70
13
17
88

188

2

315

736
91

827

320
525

845
546

1,200
12
331
402

1,945

18

4,181

4,356
92
–

769
227

996

103
516

619
493

1,093
47
347
504

1,991

12

4,111

30
40

70

2
3

5
4

62
11
9
81

163

1

243

739
187

926

101
513

614
489

1,031
36
338
423

1,828

11

3,868

5,557
–
(64)

282
113

395

34
139

173
236

630
41
185
344

1,200

5

2,009

27
26

53

1
–

1
2

65
6
7
56

134

–

190

255
87

342

33
139

172
234

565
35
178
288

1,066

5

1,819

3,096
–
102

154
63

217

16
10

26
63

389
23
82
232

726

–

1,032

52
28

80

4
–

4
2

69
7
8
70

154

–

240

102
35

137

12
10

22
61

320
16
74
162

572

–

792

792
–
4

121
51

172

11
1

12
43

256
25
62
193

536

–

763

61
27

88

8
–

8
2

36
11
12
62

121

–

219

60
24

84

3
1

4
41

220
14
50
131

415

–

544

544
–
5

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,531

$5,264

$3,639

$2,260

$2,256

Components

Allowance for loan losses, excluding losses to be reimbursed by the FDIC . . . . . . . .
Allowance for credit losses to be reimbursed by the FDIC . . . . . . . . . . . . . . . . .
Liability for unfunded credit commitments . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Allowance for Credit Losses as a Percentage of

Period-end loans, excluding covered loans . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonperforming loans, excluding covered loans . . . . . . . . . . . . . . . . . . . . . . . .
Nonperforming assets, excluding covered assets . . . . . . . . . . . . . . . . . . . . . .
Net charge-offs, excluding covered loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
Period-end loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonperforming loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonperforming assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,218
92
221

$5,531

$5,079
–
185

$5,264

$3,514
–
125

$3,639

$2,058
–
202

$2,260

$2,022
–
234

$2,256

3.03%
192
162
130
2.81%
136
110
132

3.04%
153
135
136
2.70%
110
89
136

2.09%
206
184
201
1.97%
170
139
200

1.47%
406
328
285
1.47%
406
328
285

1.57%
480
384
415
1.57%
480
384
415

Note: At December 31, 2010, $2.2 billion of the total allowance for credit losses related to incurred losses on retail loans.
(a) Relates to covered loan charge-offs and recoveries not reimbursable by the FDIC.

46

U.S. BANCORP

Table 17 E L E M E N T S O F T H E A L L O W A N C E F O R C R E D I T L O S S E S

December 31 (Dollars in Millions)

2010

2009

2008

2007

2006

2010

2009

2008

2007

2006

Allowance Amount

Allowance as a Percent of Loans

Commercial

Commercial . . . . . . . . . . . . . . . . . . . $ 992
112
Lease financing . . . . . . . . . . . . . . . .

$1,026
182

$ 782
208

$ 860
146

$ 665
90

2.35% 2.43% 1.57% 1.92% 1.64%
3.03
1.83

2.34

2.78

1.62

Total commercial . . . . . . . . . . . . . .

1,104

1,208

990

1,006

755

2.28

2.48

1.75

1.97

1.63

Commercial Real Estate

Commercial mortgages . . . . . . . . . . .
. . . . . .
Construction and development

Total commercial real estate . . . . . .
Residential Mortgage . . . . . . . . . . .
Retail

Credit card . . . . . . . . . . . . . . . . . . .
Retail leasing . . . . . . . . . . . . . . . . . .
Home equity and second mortgages . .
Other retail. . . . . . . . . . . . . . . . . . . .

Total retail . . . . . . . . . . . . . . . . . .
Covered loans . . . . . . . . . . . . . . . . .

Total allocated allowance . . . . . . . .
Available for other factors . . . . . . . .

929
362

1,291
820

1,395
11
411
385

2,202
114

5,531
–

548
453

1,001
672

1,495
30
374
467

2,366
17

5,264
–

258
191

449
524

926
49
255
372

1,602
74

3,639
–

150
108

258
131

487
17
114
247

865
–

126
74

200
58

298
15
52
177

542
–

2,260
–

1,555
701

3.41
4.86

3.72
2.67

8.30
.24
2.17
1.55

3.38
.63

2.81
–

2.17
5.16

2.94
2.58

8.89
.66
1.92
2.02

3.70
.08

2.70
–

1.10
1.95

1.35
2.22

6.85
.96
1.33
1.65

2.65
.66

1.97
–

.74
1.19

.88
.58

4.45
.28
.69
1.42

1.70
–

1.47
–

.64
.83

.70
.27

3.44
.22
.33
1.08

1.14
–

1.08
.49

Total allowance . . . . . . . . . . . . . . . . . . $5,531

$5,264

$3,639

$2,260

$2,256

2.81% 2.70% 1.97% 1.47% 1.57%

loans, was $2.4 billion at December 31, 2010, compared
with $2.2 billion at December 31, 2009, and $1.4 billion at
December 31, 2008. The increase in the allowance for
commercial and commercial real estate loans of
$186 million at December 31, 2010, compared with
December 31, 2009, reflected continuing stress in
commercial real estate and residential housing, especially
residential homebuilding and related industry sectors, along
with the impact of the current economic conditions on the
commercial loan portfolios.

The allowance recorded for the residential mortgages and

retail loan portfolios is based on an analysis of product mix,
credit scoring and risk composition of the portfolio, loss and
bankruptcy experiences, economic conditions and historical
and expected delinquency and charge-off statistics for each
homogenous group of loans. Based on this information and
analysis, an allowance was established approximating a twelve-
month estimate of net charge-offs. For homogenous loans
modified under a TDR, an allowance was established for any
impairment to the recorded investment in the loan. The
allowance established for residential mortgages was
$820 million at December 31, 2010, compared with
$672 million and $524 million at December 31, 2009 and
2008, respectively. The increase in the allowance for the
residential mortgage portfolio in 2010 reflected continued stress
in the portfolio, due to continued declining valuations in the
underlying properties securing those loans. The allowance
established for retail loans was $2.2 billion at December 31,

2010, compared with $2.4 billion and $1.6 billion at
December 31, 2009 and 2008, respectively. The decrease in the
allowance for the retail portfolio in 2010 reflected a
moderation in the level of stress in economic conditions
throughout 2010.

The evaluation of the adequacy of the allowance for

credit losses for purchased non-impaired loans acquired on
or after January 1, 2009 considers credit discounts recorded
as a part of the initial determination of the fair value of the
loans. For these loans, no allowance for credit losses is
recorded at the purchase date. Credit discounts representing
the principal losses expected over the life of the loans are a
component of the initial fair value. Subsequent to the
purchase date, the methods utilized to estimate the required
allowance for credit losses for these loans is similar to
originated loans; however, the Company records a provision
for credit losses only when the required allowance, net of
any expected reimbursement under any loss sharing
agreements with the FDIC, exceeds any remaining credit
discounts.

The evaluation of the adequacy of the allowance for

credit losses for purchased impaired loans considers the
expected cash flows to be collected from the borrower.
These loans are initially recorded at fair value and therefore
no allowance for credit losses is recorded at the purchase
date. Subsequent to the purchase date, the expected cash

U.S. BANCORP

47

flows of the impaired loans are subject to evaluation.
Decreases in the present value of expected cash flows are
recognized by recording an allowance for credit losses.

Although the Company determines the amount of each

element of the allowance separately and considers this
process to be an important credit management tool, the
entire allowance for credit losses is available for the entire
loan portfolio. The actual amount of losses incurred can
vary significantly from the estimated amounts.

Residual Value Risk Management The Company manages its
risk to changes in the residual value of leased assets through
disciplined residual valuation setting at the inception of a
lease, diversification of its leased assets, regular residual
asset valuation reviews and monitoring of residual value
gains or losses upon the disposition of assets. Commercial
lease originations are subject to the same well-defined
underwriting standards referred to in the “Credit Risk
Management” section which includes an evaluation of the
residual value risk. Retail lease residual value risk is
mitigated further by originating longer-term vehicle leases
and effective end-of-term marketing of off-lease vehicles.

Included in the retail leasing portfolio was

approximately $2.9 billion of retail leasing residuals at
December 31, 2010, unchanged from December 31, 2009.
The Company monitors concentrations of leases by
manufacturer and vehicle “make and model.” As of
December 31, 2010, vehicle lease residuals related to sport
utility vehicles were 48.2 percent of the portfolio while
upscale and mid-range vehicle classes represented
approximately 22.4 percent and 14.2 percent of the
portfolio, respectively. At year-end 2010, the largest vehicle-
type concentration represented approximately 5 percent of
the aggregate residual value of the vehicles in the portfolio.

Because retail residual valuations tend to be less volatile

for longer-term leases, relative to the estimated residual at
inception of the lease, the Company actively manages lease
origination production to achieve a longer-term portfolio. At
December 31, 2010, the weighted-average origination term
of the portfolio was 44 months, compared with 45 months
at December 31, 2009. In 2008, sales of used vehicles
softened from prior years, due to the overall weakening of
the economy. As a result, the Company’s portfolio
experienced deterioration in residual values in 2008 in all
categories; most notably sport utility vehicles and luxury
models, as a result of higher fuel prices and weak economic
conditions. Used vehicle prices increased substantially during
2009, as sales of vehicles were affected by the financial
condition of the automobile manufacturers and various
government programs and involvement with the

48

U.S. BANCORP

manufacturers. The used vehicle market continued to
recover in 2010, and reached record high levels as a higher
percentage of consumers purchased used, instead of new,
vehicles due to uncertainty about the economy.

At December 31, 2010, the commercial leasing portfolio

had $661 million of residuals, compared with $701 million
at December 31, 2009. At year-end 2010, lease residuals
related to trucks and other transportation equipment were
31.7 percent of the total residual portfolio. Business and
office equipment represented 20.8 percent of the aggregate
portfolio, while railcars represented 12.3 percent. No other
concentrations of more than 10 percent existed at
December 31, 2010.

Operational Risk Management Operational risk represents the
risk of loss resulting from the Company’s operations,
including, but not limited to, the risk of fraud by employees
or persons outside the Company, the execution of
unauthorized transactions by employees, errors relating to
transaction processing and technology, breaches of the
internal control system and compliance requirements, and
business continuation and disaster recovery. This risk of loss
also includes the potential legal actions that could arise as a
result of an operational deficiency or as a result of
noncompliance with applicable regulatory standards, adverse
business decisions or their implementation, and customer
attrition due to potential negative publicity.

The Company operates in many different businesses in

diverse markets and relies on the ability of its employees and
systems to process a high number of transactions. Operational
risk is inherent in all business activities, and the management of
this risk is important to the achievement of the Company’s
objectives. In the event of a breakdown in the internal control
system, improper operation of systems or improper employees’
actions, the Company could suffer financial loss, face
regulatory action and suffer damage to its reputation.

The Company manages operational risk through a risk

management framework and its internal control processes.
Within this framework, the Risk Management Committee of
the Company’s Board of Directors provides oversight and
assesses the most significant operational risks facing the
Company within its business lines. Under the guidance of the
Risk Management Committee, enterprise risk management
personnel establish policies and interact with business lines to
monitor significant operating risks on a regular basis. Business
lines have direct and primary responsibility and accountability
for identifying, controlling, and monitoring operational risks
embedded in their business activities. Business managers
maintain a system of controls with the objective of providing
proper transaction authorization and execution, proper system

operations, safeguarding of assets from misuse or theft, and
ensuring the reliability of financial and other data. Business
managers ensure that the controls are appropriate and are
implemented as designed.

Each business line within the Company has designated

risk managers. These risk managers are responsible for,
among other things, coordinating the completion of ongoing
risk assessments and ensuring that operational risk
management is integrated into business decision-making
activities. The Company’s internal audit function validates
the system of internal controls through regular and ongoing
risk-based audit procedures and reports on the effectiveness
of internal controls to executive management and the Audit
Committee of the Board of Directors. Management also
provides various operational risk related reporting to the
Risk Management Committee of the Board of Directors.

Customer-related business conditions may also increase
operational risk, or the level of operational losses in certain
transaction processing business units, including merchant
processing activities. Ongoing risk monitoring of customer
activities and their financial condition and operational
processes serve to mitigate customer-related operational risk.
Refer to Note 22 of the Notes to Consolidated Financial
Statements for further discussion on merchant processing.
Business continuation and disaster recovery planning is also
critical to effectively managing operational risks. Each
business unit of the Company is required to develop,
maintain and test these plans at least annually to ensure that
recovery activities, if needed, can support mission critical
functions, including technology, networks and data centers
supporting customer applications and business operations.
While the Company believes that it has designed
effective methods to minimize operational risks, there is no
absolute assurance that business disruption or operational
losses would not occur in the event of a disaster. On an
ongoing basis, management makes process changes and
investments to enhance its systems of internal controls and
business continuity and disaster recovery plans.

Interest Rate Risk Management In the banking industry,
changes in interest rates are a significant risk that can
impact earnings, market valuations and safety and soundness
of an entity. To minimize the volatility of net interest income

and the market value of assets and liabilities, the Company
manages its exposure to changes in interest rates through
asset and liability management activities within guidelines
established by its Asset Liability Committee (“ALCO”) and
approved by the Board of Directors. The ALCO has the
responsibility for approving and ensuring compliance with
the ALCO management policies, including interest rate risk
exposure. The Company uses net interest income simulation
analysis and market value of equity modeling for measuring
and analyzing consolidated interest rate risk.

Net Interest Income Simulation Analysis One of the primary
tools used to measure interest rate risk and the effect of
interest rate changes on net interest income is simulation
analysis. The monthly analysis 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. Through this simulation, management
estimates the impact on net interest income of a 200 basis
point (“bps”) upward or downward gradual change of
market interest rates over a one-year period. The simulation
also estimates the effect of immediate and sustained parallel
shifts in the yield curve of 50 bps as well as the effect of
immediate and sustained flattening or steepening of the yield
curve. This simulation includes assumptions about how the
balance sheet is likely to be affected by changes in loan and
deposit growth. Assumptions are made to project interest
rates for new loans and deposits based on historical analysis,
management’s outlook and re-pricing strategies. These
assumptions are validated on a periodic basis. A sensitivity
analysis is provided for key variables of the simulation. The
results are reviewed by the ALCO monthly and are used to
guide asset/liability management strategies.

The table below summarizes the projected impact to net
interest income over the next 12 months of various potential
interest rate changes. The Company manages its interest rate
risk position by holding assets on the balance sheet with desired
interest rate risk characteristics, implementing certain pricing
strategies for loans and deposits and through the selection of
derivatives and various funding and investment portfolio
strategies. The Company manages the overall interest rate risk
profile within policy limits. The ALCO policy limits the

S E N S I T I V I T Y O F N E T I N T E R E S T I N C O M E

December 31, 2010

December 31, 2009

Down 50 bps
Immediate

Up 50 bps
Immediate

Down 200
bps
Gradual*

Up 200 bps
Gradual

Down 50 bps
Immediate

Up 50 bps
Immediate

Down 200
bps
Gradual*

Up 200 bps
Gradual

Net interest income . . . . . . . . . . . . . . .

*

1.64%

*

3.14%

*

.43%

*

1.00%

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

U.S. BANCORP

49

estimated change in net interest income in a gradual 200 bps
rate change scenario to a 4.0 percent decline of forecasted net
interest income over the next 12 months. At December 31,
2010 and 2009, the Company was within this policy.

Market Value of Equity Modeling The Company also
manages interest rate sensitivity by utilizing market value of
equity modeling, which measures the degree to which the
market values of the Company’s assets and liabilities and
off-balance sheet instruments will change given a change in
interest rates. Management measures the impact of changes
in market interest rates under a number of scenarios,
including immediate and sustained parallel shifts, and
flattening or steepening of the yield curve. The ALCO policy
limits the change in the market value of equity in a 200 bps
parallel rate shock to a 15.0 percent decline. A 200 bps
increase would have resulted in a 3.6 percent decrease in the
market value of equity at December 31, 2010, compared
with a 4.3 percent decrease at December 31, 2009. A
200 bps decrease, where possible given current rates, would
have resulted in a 5.2 percent decrease in the market value
of equity at December 31, 2010, compared with a
2.8 percent decrease at December 31, 2009.

The valuation analysis is dependent upon certain key
assumptions about the nature of assets and liabilities with
non-contractual maturities. Management estimates the
average life and rate characteristics of asset and liability
accounts based upon historical analysis and management’s
expectation of rate behavior. These assumptions are validated
on a periodic basis. A sensitivity analysis of key variables of
the valuation analysis is provided to the ALCO monthly and
is used to guide asset/liability management strategies.

Use of Derivatives to Manage Interest Rate and Other Risks

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

(cid:129) To convert fixed-rate debt, issued to finance the Company,

from fixed-rate payments to floating-rate payments;

(cid:129) To convert the cash flows associated with floating-rate
debt, issued to finance the Company, from floating-rate
payments to fixed-rate payments; and

(cid:129) To mitigate changes in value of the Company’s mortgage
origination pipeline, funded mortgage loans held for sale
and MSRs.

50

U.S. BANCORP

To manage these risks, the Company may enter into

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

The Company does not designate all of the derivatives

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

Additionally, the Company uses forward commitments

to sell residential mortgage loans at specified prices to
economically hedge the interest rate risk in its residential
mortgage loan production activities. At December 31, 2010,
the Company had $15.1 billion of forward commitments to
sell mortgage loans hedging $8.1 billion of mortgage loans
held for sale and $9.6 billion of unfunded mortgage loan
commitments. The forward commitments to sell and the
unfunded mortgage loan commitments are considered
derivatives under the accounting guidance related to
accounting for derivative instruments and hedge activities,
and the Company has elected the fair value option for the
mortgage loans held for sale.

Derivatives are subject to credit risk associated with

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

For additional information on derivatives and hedging

activities, refer to Note 20 in the Notes to Consolidated
Financial Statements.

Table 18 D E B T R A T I N G S

U.S. Bancorp

Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior debt and medium-term notes . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

U.S. Bank National Association

Short-term time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior unsecured debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Moody’s

Standard &
Poor’s

Aa3
A1
A3
P-1

P-1
Aa2
Aa2/P-1
Aa3
Aa2
P-1

A+
A
BBB+
A-1

A-1+
AA-
AA-/A-1+
A+
AA-
A-1+

Fitch

F1+
AA-
A+
A
F1+

F1+
AA
AA-/F1+
A+
AA-
F1+

Dominion
Bond
Rating Service

R-1 (middle)
AA
AA (low)
A
R-1 (middle)

R-1 (high)
AA (high)
AA (high)
AA
AA (high)
R-1 (high)

Market Risk Management In addition to interest rate risk,
the Company is exposed to other forms of market risk,
principally related to trading activities which support
customers’ strategies to manage their own foreign currency,
interest rate risks and funding activities. The ALCO
established the Market Risk Committee (“MRC”), which
oversees market risk management. The MRC monitors and
reviews the Company’s trading positions and establishes
policies for market risk management, including exposure
limits for each portfolio. The Company also manages market
risk of non-trading business activities, including its MSRs
and loans held for sale. The Company uses a Value at Risk
(“VaR”) approach to measure general market risk.
Theoretically, VaR represents the amount the Company has
at risk of loss to adverse market movements over a 1-day
time horizon. The Company measures VaR at the ninety-
ninth percentile using distributions derived from past market
data. On average, the Company expects the one day VaR to
be exceeded two to three times per year. The Company
monitors the effectiveness of its risk program by back-testing
the performance of its VaR models, regularly updating the
historical data used by the VaR models and stress testing.
The Company’s trading VaR did not exceed $5 million
during 2010 and $4 million during 2009.

Liquidity Risk Management The ALCO establishes policies
and guidelines, as well as analyzes and manages liquidity, to
ensure adequate funds are available to meet normal
operating requirements, and unexpected customer demands
for funds, such as high levels of deposit withdrawals or loan
demand, in a timely and cost-effective manner. Liquidity
management is viewed from long-term and short-term
perspectives, including various stress scenarios, as well as
from an asset and liability perspective. Management

monitors liquidity through a regular review of maturity
profiles, funding sources, and loan and deposit forecasts to
minimize funding risk.

Since 2008, the financial markets have been challenging
for many financial institutions. As a result of these financial
market conditions, many banks experienced liquidity
constraints, substantially increased pricing to retain deposits
or utilized the Federal Reserve System discount window to
secure adequate funding. The Company’s profitable
operations, sound credit quality and strong capital position
have enabled it to develop a large and reliable base of core
deposit funding within its market areas and in domestic and
global capital markets. This has allowed the Company to
maintain a strong liquidity position, as depositors and
investors in the wholesale funding markets seek stable
financial institutions.

The ALCO reviews the Company’s ability to meet
funding requirements due to adverse business or market
events. The Company regularly projects its liquidity position
under various stress scenarios and maintains contingency
plans that reflect its access to diversified funding sources.
Historically, a significant amount of the Company’s available
liquidity has been provided by its ability, through its
subsidiaries, to borrow against its assets at various Federal
Home Loan Banks (“FHLB”) and the Federal Reserve System.
In response to recent regulatory proposals, the Company has
begun to acquire U.S. Government and agency securities as an
additional source of available liquidity. The Company expects
to continue to increase its U.S. Government and agency
securities holdings to meet these liquidity objectives. The
Company’s liquidity policies require diversification of
wholesale funding sources to avoid maturity, name and
market concentrations. The Company maintains a Grand

U.S. BANCORP

51

Table 19 C O N T R A C T U A L O B L I G A T I O N S

December 31, 2010 (Dollars in Millions)

Contractual Obligations (a)

Payments Due By Period

One Year
or Less

Over One
Through
Three Years

Over Three
Through
Five Years

. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt (b)(c)
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit obligations (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,949
199
182
40

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,370

$10,369
367
213
81

$11,030

$7,345
266
119
85

$7,815

Over Five
Years

$11,874
455
34
220

$12,583

Total

$31,537
1,287
548
426

$33,798

(a) Unrecognized tax positions of $532 million at December 31, 2010, are excluded as the Company cannot make a reasonably reliable estimate of the period of cash

settlement with the respective taxing authority.

(b) In the banking industry, interest-bearing obligations are principally utilized to fund interest-bearing assets. As such, interest charges on related contractual obligations were

excluded from reported amounts as the potential cash outflows would have corresponding cash inflows from interest-bearing assets.

(c) Includes obligations under capital leases.
(d) Amounts only include obligations related to the unfunded non-qualified pension plans and post-retirement medical plan.

Cayman branch for issuing eurodollar time deposits. In
addition, the Company establishes relationships with dealers
to issue national market retail and institutional savings
certificates and short-term and medium-term bank notes. The
Company’s subsidiary banks also have significant
correspondent banking networks and relationships.
Accordingly, the Company has access to national fed funds,
funding through repurchase agreements and sources of stable,
regionally-based certificates of deposit and commercial paper.
The Company’s ability to raise negotiated funding at

competitive prices is influenced by rating agencies’ views of
the Company’s credit quality, liquidity, capital and earnings.
Table 18 details the rating agencies’ most recent assessments.
The parent company’s routine funding requirements
consist primarily of operating expenses, dividends paid to
shareholders, debt service, repurchases of common stock and
funds used for acquisitions. The parent company obtains
funding to meet its obligations from dividends collected
from its subsidiaries and the issuance of debt securities.

Under United States Securities and Exchange Commission

rules, the parent company is classified as a “well-known
seasoned issuer,” which allows it to file a registration
statement that does not have a limit on issuance capacity.
“Well-known seasoned issuers” generally include those
companies with outstanding common securities with a market
value of at least $700 million held by non-affiliated parties or
those companies that have issued at least $1 billion in
aggregate principal amount of non-convertible securities,
other than common equity, in the last three years. However,
the parent company’s ability to issue debt and other securities
under a registration statement filed with the United States
Securities and Exchange Commission under these rules is
limited by the debt issuance authority granted by the
Company’s Board of Directors and/or the ALCO policy.

52

U.S. BANCORP

At December 31, 2010, parent company long-term debt
outstanding was $13.0 billion, compared with $14.5 billion
at December 31, 2009. The $1.5 billion decrease was
primarily due to repayments and maturities of $5.2 billion
of medium-term notes and the extinguishment of $.6 billion
of junior subordinated debentures in connection with the
ITS exchange, partially offset by $4.2 billion of medium-
term note issuances. As of December 31, 2010, there was
$3 million of parent company debt scheduled to mature in
2011. Future debt obligations may be met through medium-
term note and capital security issuances and dividends from
subsidiaries, as well as from parent company cash and cash
equivalents.

Federal banking laws regulate the amount of dividends

that may be paid by banking subsidiaries without prior
approval. The amount of dividends available to the parent
company from its banking subsidiaries after meeting the
regulatory capital requirements for well-capitalized banks
was approximately $5.8 billion at December 31, 2010. For
further information, see Note 23 of the Notes to
Consolidated Financial Statements.

Off-Balance Sheet Arrangements Off-balance sheet
arrangements include any contractual arrangement to which
an unconsolidated entity is a party, under which the Company
has an obligation to provide credit or liquidity enhancements
or market risk support. Off-balance sheet arrangements also
include any obligation under a variable interest held by an
unconsolidated entity that provides financing, liquidity, credit
enhancement or market risk support.

In the ordinary course of business, the Company enters

into an array of commitments to extend credit, letters of
credit and various forms of guarantees that may be
considered off-balance sheet arrangements. The nature and
extent of these arrangements are described in Note 22 of the

Table 20 R E G U L A T O R Y C A P I T A L R A T I O S

At December 31 (Dollars in Millions)

2010

2009

U.S. Bancorp
Tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,947

As a percent of risk-weighted assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As a percent of adjusted quarterly average assets (leverage ratio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.5%
9.1%

$22,610

9.6%
8.5%

Total risk-based capital

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $33,033

$30,458

As a percent of risk-weighted assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13.3%

12.9%

Bank Subsidiaries

U.S. Bank National Association

Tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total risk-based capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

U.S. Bank National Association ND

Tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total risk-based capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Bank Regulatory Capital Requirements

Tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total risk-based capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9.0%

12.4
7.7

14.1%
17.2
13.7

7.2%

11.2
6.3

13.2%
16.5
12.8

Minimum

Well-
Capitalized

4.0%
8.0

4.0

6.0%

10.0

5.0

Notes to Consolidated Financial Statements. The Company
has not significantly utilized asset securitizations or conduits
as a source of funding.

Capital Management The Company is committed to managing
capital to maintain strong protection for depositors and
creditors and for maximum shareholder benefit. The Company
continually assesses its business risks and capital position. The
Company also manages its capital to exceed regulatory capital
requirements for well-capitalized bank holding companies. To
achieve these capital goals, the Company employs a variety of
capital management tools, including dividends, common share
repurchases, and the issuance of subordinated debt, common
stock and other capital instruments.

The Company repurchased approximately 1 million

shares of its common stock in 2010, compared with an
immaterial amount in 2009, related to employee stock plan
activity under various authorizations approved by its Board
of Directors. The average price paid for the shares
repurchased in 2010 was $23.88 per share, compared with
$14.02 per share in 2009. As of December 31, 2010, the
Company had approximately 20 million shares that may yet
be purchased under the current Board of Director approved
authorization. For a more complete analysis of activities
impacting shareholders’ equity and capital management
programs, refer to Note 15 of the Notes to Consolidated
Financial Statements.

Total U.S. Bancorp shareholders’ equity was
$29.5 billion at December 31, 2010, compared with
$26.0 billion at December 31, 2009. The increase was
primarily the result of corporate earnings, the issuance of
$.4 billion of perpetual preferred stock in connection with
the ITS exchange, and changes in unrealized gains and losses
on available-for-sale investment securities included in other
comprehensive income, partially offset by dividends.
Banking regulators define minimum capital
requirements for banks and financial services holding
companies. These requirements are expressed in the form of
a minimum Tier 1 capital ratio, total risk-based capital
ratio, and Tier 1 leverage ratio. The minimum required level
for these ratios is 4.0 percent, 8.0 percent, and 4.0 percent,
respectively. The Company targets its regulatory capital
levels, at both the bank and bank holding company level, to
exceed the “well-capitalized” threshold for these ratios of
6.0 percent, 10.0 percent, and 5.0 percent, respectively. The
most recent notification from the Office of the Comptroller
of the Currency categorized each of the Company’s banks as
“well-capitalized”, under the FDIC Improvement Act
prompt corrective action provisions applicable to all banks.
There are no conditions or events since that notification that
management believes have changed the risk-based category
of any covered subsidiary banks.

As an approved mortgage seller and servicer, U.S. Bank

National Association, through its mortgage banking division,
is required to maintain various levels of shareholders’ equity,

U.S. BANCORP

53

as specified by various agencies, including the United States
Department of Housing and Urban Development,
Government National Mortgage Association, Federal Home
Loan Mortgage Corporation and the Federal National
Mortgage Association. At December 31, 2010, U.S. Bank
National Association met these requirements.

Table 20 provides a summary of capital ratios as of
December 31, 2010 and 2009, including Tier 1 and total risk-
based capital ratios, as defined by the regulatory agencies.

The Company believes certain capital ratios in addition to

regulatory capital ratios are useful in evaluating its capital
adequacy. The Company’s Tier 1 common (using Basel
I definition) and tangible common equity, as a percent of risk-
weighted assets, were 7.8 percent and 7.2 percent, respectively,
at December 31, 2010, compared with 6.8 percent and
6.1 percent, respectively, at December 31, 2009. The Company’s
tangible common equity divided by tangible assets was
6.0 percent at December 31, 2010, compared with 5.3 percent
at December 31, 2009. Refer to “Non-Regulatory Capital
Ratios” for further information regarding the calculation of
these measures.

Table 21 F O U R T H Q U A R T E R R E S U L T S

(Dollars and Shares in Millions, Except Per Share Data)

F O U R T H Q U A R T E R S U M M A R Y

The Company reported net income attributable to U.S. Bancorp
of $974 million for the fourth quarter of 2010, or $.49 per
diluted common share, compared with $602 million, or $.30
per diluted common share, for the fourth quarter of 2009.
Return on average assets and return on average common equity
were 1.31 percent and 13.7 percent, respectively, for the fourth
quarter of 2010, compared with returns of .86 percent and
9.6 percent, respectively, for the fourth quarter of 2009.
Included in the fourth quarter 2010 results was the
$103 million ($41 million after tax) Nuveen Gain, a provision
for credit losses less than net charge-offs by $25 million and net
securities losses of $14 million. Significant items in the fourth
quarter of 2009 that impact the comparison of results included
a provision for credit losses in excess of net charge-offs of
$278 million and net securities losses of $158 million.

Total net revenue, on a taxable-equivalent basis for the

fourth quarter of 2010, was $345 million (7.9 percent) higher
than the fourth quarter of 2009, reflecting a 5.9 percent
increase in net interest income and a 10.2 percent increase in
total noninterest income. The increase in net interest income
from 2009 was largely the result of an increase in average
earning assets and continued growth in lower cost core

Three Months Ended
December 31

2010

2009

Condensed Income Statement
Net interest income (taxable-equivalent basis) (a)
Noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,499
2,236
(14)

Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noninterest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Taxable-equivalent adjustment

Income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,721
2,485
912

1,324
53
315

956
18

Net income attributable to U.S. Bancorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 974

Net income applicable to U.S. Bancorp common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 951

Per Common Share
Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .50
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .49
Dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .05
1,914
Average common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,922
Average diluted common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial Ratios
Return on average assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on average common equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest margin (taxable-equivalent basis) (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Efficiency ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.31%
13.7
3.83
52.5

(a) Interest and rates are presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent.

$2,360
2,174
(158)

4,376
2,228
1,388

760
50
108

602
–

$ 602

$ 580

$ .30
$ .30
$ .05
1,908
1,917

.86%
9.6
3.83
49.1

54

U.S. BANCORP

deposit funding. Noninterest income increased over a year
ago, primarily due to higher payments-related revenue,
commercial products revenue, mortgage banking revenue,
other income and lower securities losses.

Fourth quarter 2010 net interest income, on a taxable-

equivalent basis was $2.5 billion, compared with $2.4 billion
in the fourth quarter of 2009. The $139 million (5.9 percent)
increase was principally the result of growth in average
earning assets. Average earning assets for the fourth quarter of
2010 increased over the fourth quarter of 2009 by
$14.5 billion (5.9 percent), driven by increases of $3.8 billion
(2.0 percent) in average loans and $5.6 billion (12.8 percent)
in average investment securities. The net interest margin in
the fourth quarter of 2010 was 3.83 percent, unchanged from
the fourth quarter of 2009, as the impact of favorable funding
rates was offset by a reduction in the yield on residential
mortgages and investment securities.

Noninterest income in the fourth quarter of 2010 was
$2.2 billion, compared with $2.0 billion in the same period
of 2009, an increase of $206 million (10.2 percent). The
increase was due to higher payments-related revenues of
$38 million (5.1 percent), largely due to increased
transaction volumes and business expansion, an increase in
commercial products revenue of $23 million (12.4 percent),
attributable to higher standby letters of credit fees,
commercial loan and syndication fees and other capital
markets revenue. Additionally, mortgage banking revenue
was higher than the fourth quarter of 2009 by $32 million
(14.7 percent), driven by higher origination and sales and
servicing revenue, partially offset by a lower net valuation of
MSRs. Total noninterest income was also favorably
impacted by a decrease in net securities losses of
$144 million (91.1 percent). Other income increased
$50 million (20.4 percent), principally due to the fourth
quarter 2010 Nuveen Gain and a gain related to the
Company’s investment in Visa Inc., partially offset by the
fourth quarter 2009 payments-related contract termination
gain, lower customer derivative revenue and lower retail
lease residual valuation income. Offsetting these positive
variances was a decrease of deposit service charges of
$94 million (39.5 percent) as a result of revised overdraft fee
policies, partially offset by core account growth.

Noninterest expense was $2.5 billion in the fourth
quarter of 2010, an increase of $257 million (11.5 percent)
from the fourth quarter of 2009. The increase was
principally due to the impact of acquisitions and increased
total compensation and employee benefits expense. Total
compensation and employee benefits expense increased
$209 million (21.7 percent), reflecting acquisitions, branch

expansion and other business initiatives, higher incentive
compensation costs related to the Company’s improved
financial results and merit increases. Net occupancy and
equipment expense increased $23 million (10.7 percent),
principally due to acquisitions and other business expansion
and technology initiatives. Professional services expense was
$16 million (19.8 percent) higher, due to technology-related
projects and other projects across multiple business lines.
Postage, printing and supplies expense increased $8 million
(11.4 percent), principally due to payments-related business
initiatives. Other expense increased $17 million
(3.4 percent), largely due to costs associated with OREO,
acquisition integration, insurance and litigation matters.
Other intangibles expense decreased $18 million
(16.8 percent) due to the declining level or completion of
scheduled amortization of certain intangibles.

The provision for credit losses for the fourth quarter of

2010 was $912 million, a decrease of $476 million
(34.3 percent) from the same period of 2009. Net charge-
offs decreased $173 million (15.6 percent) in the fourth
quarter of 2010, compared with the fourth quarter of 2009,
principally due to improvement in the commercial, credit
card and other retail portfolios. The provision for credit
losses was $25 million lower than net charge-offs in the
fourth quarter of 2010, but exceeded net charge-offs by
$278 million in the fourth quarter of 2009.

The provision for income taxes for the fourth quarter of

2010 resulted in an effective tax rate of 24.8 percent,
compared with an effective tax rate of 15.2 percent in the
fourth quarter of 2009. The increase in the effective rate for
the fourth quarter of 2010, compared with the same period
of the prior year, principally reflected the marginal impact of
higher pre-tax earnings year-over-year and the Nuveen Gain
in the fourth quarter of 2010.

L I N E O F B U S I N E S S F I N A N C I A L
R E V I E W

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

Basis for Financial Presentation Business line results are
derived from the Company’s business unit profitability
reporting systems by specifically attributing managed

U.S. BANCORP

55

balance sheet assets, deposits and other liabilities and their
related income or expense. Goodwill and other intangible
assets are assigned to the lines of business based on the mix
of business of the acquired entity. Within the Company,
capital levels are evaluated and managed centrally; however,
capital is allocated to the operating segments to support
evaluation of business performance. Business lines are
allocated capital on a risk-adjusted basis considering
economic and regulatory capital requirements. Generally, the
determination of the amount of capital allocated to each
business line includes credit and operational capital
allocations following a Basel II regulatory framework.
Interest income and expense is determined based on the

assets and liabilities managed by the business line. Because
funding and asset liability management is a central function,
funds transfer-pricing methodologies are utilized to allocate
a cost of funds used or credit for funds provided to all
business line assets and liabilities, respectively, using a
matched funding concept. Also, each business unit is
allocated the taxable-equivalent benefit of tax-exempt
products. The residual effect on net interest income of
asset/liability management activities is included in Treasury
and Corporate Support. Noninterest income and expenses
directly managed by each business line, including fees,
service charges, salaries and benefits, and other direct
revenues and costs are accounted for within each segment’s

Table 22 L I N E O F B U S I N E S S F I N A N C I A L P E R F O R M A N C E

Year Ended December 31
(Dollars in Millions)

Wholesale Banking and
Commercial Real Estate

Consumer and Small
Business Banking

2010

2009

Percent
Change

2010

2009

Percent
Change

Condensed Income Statement
Net interest income (taxable-equivalent basis) . . . . . . . . . . . . . . . . . . . . $ 2,089
1,151
Noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)
Securities gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,997
984
(3)

4.6% $ 4,309
2,738
–

17.0
66.7

$ 4,009
2,962
–

7.5%
(7.6)
–

Total net revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noninterest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total noninterest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income before provision and income taxes . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes and taxable-equivalent adjustment. . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (income) loss attributable to noncontrolling interests . . . . . . . . . . . . .

Net income attributable to U.S. Bancorp . . . . . . . . . . . . . . . . . . . . . . . $

3,239
1,261
16

1,277

1,962
1,322

640
233

407
1

408

2,978
1,093
25

1,118

1,860
1,632

228
84

144
–

144

$

8.8
15.4
(36.0)

14.2

5.5
(19.0)

*
*

*
*

*

7,047
4,179
97

4,276

2,771
1,620

1,151
419

732
(3)

$

729

$

6,971
3,616
95

3,711

3,260
1,877

1,383
505

878
–

878

1.1
15.6
2.1

15.2

(15.0)
(13.7)

(16.8)
(17.0)

(16.6)
*

(17.0)

Average Balance Sheet
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34,193
21,744
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
69
Residential mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33
Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total loans, excluding covered loans . . . . . . . . . . . . . . . . . . . . . . . .
Covered loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noninterest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest checking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total U.S. Bancorp shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . .

56,039
1,966

58,005
1,607
69
63,187
18,279
11,295
10,114
11,426

51,114
5,477

$39,415
21,504
81
53

(13.2)% $ 6,402
11,638
27,256
44,996

1.1
(14.8)
(37.7)

$ 6,604
11,430
23,993
44,402

(3.1)%
1.8
13.6
1.3

61,053
317

61,370
1,506
90
66,238
17,451
11,840
9,261
13,044

51,596
4,940

(8.2)
*

(5.5)
6.7
(23.3)
(4.6)
4.7
(4.6)
9.2
(12.4)

(.9)
10.9

90,292
9,534

99,826
3,538
1,907
114,272
15,540
23,772
35,894
25,816

101,022
8,513

86,429
10,124

96,553
3,240
1,677
110,203
14,249
21,017
27,061
26,648

88,975
7,400

4.5
(5.8)

3.4
9.2
13.7
3.7
9.1
13.1
32.6
(3.1)

13.5
15.0

* Not meaningful

56

U.S. BANCORP

financial results in a manner similar to the consolidated
financial statements. Occupancy costs are allocated based on
utilization of facilities by the lines of business. Generally,
operating losses are charged to the line of business when the
loss event is realized in a manner similar to a loan charge-
off. Noninterest expenses incurred by centrally managed
operations or business lines that directly support another
business line’s operations are charged to the applicable
business line based on its utilization of those services,
primarily measured by the volume of customer activities,
number of employees or other relevant factors. These
allocated expenses are reported as net shared services
expense within noninterest expense. Certain activities that

do not directly support the operations of the lines of
business or for which the lines of business are not considered
financially accountable in evaluating their performance are
not charged to the lines of business. The income or expenses
associated with these corporate activities is reported within
the Treasury and Corporate Support line of business. Income
taxes are assessed to each line of business at a standard tax
rate with the residual tax expense or benefit to arrive at the
consolidated effective tax rate included in Treasury and
Corporate Support.

Wealth Management and
Securities Services

Payment
Services

Treasury and
Corporate Support

Consolidated
Company

2010

2009

Percent
Change

2010

2009

Percent
Change

2010

2009

Percent
Change

2010

2009

Percent
Change

$

320
1,101
–

1,421
1,000
53

1,053

368
22

346
126

220
–

220

$

$

302
1,187
–

1,489
867
68

935

554
29

525
191

334
–

334

$

6.0% $ 1,339
3,152
(7.2)
–
–

$ 1,170
3,006
–

14.4% $ 1,731
296
(77)

4.9
–

$ 1,238
264
(448)

39.8% $ 9,788
8,438
12.1
(78)
82.8

$ 8,716
8,403
(451)

12.3%
.4
82.7

(4.6)
15.3
(22.1)

12.6

(33.6)
(24.1)

(34.1)
(34.0)

(34.1)
–

(34.1)

4,491
1,695
201

1,896

2,595
1,334

1,261
458

803
(30)

4,176
1,508
199

1,707

2,469
1,994

475
172

303
(25)

7.5
12.4
1.0

11.1

5.1
(33.1)

*
*

*
(20.0)

1,950
881
–

881

1,069
58

1,011
(92)

1,103
84

1,054
810
–

810

244
25

219
(359)

578
(7)

85.0
8.8
–

8.8

*
*

*
74.4

90.8
*

18,148
9,016
367

9,383

8,765
4,356

4,409
1,144

3,265
52

16,668
7,894
387

8,281

8,387
5,557

2,830
593

2,237
(32)

$

773

$

278

*

$ 1,187

$

571

*

$ 3,317

$ 2,205

8.9
14.2
(5.2)

13.3

4.5
(21.6)

55.8
92.9

46.0
*

50.4

$ 1,040
581
372
1,640

$ 1,188
570
387
1,537

(12.5)% $ 5,212
–
–
17,406

1.9
(3.9)
6.7

$ 4,677
–
–
16,017

3,633
14

3,647
1,516
201
5,860
5,501
4,983
14,327
6,146

30,957
2,109

3,682
–

3,682
1,513
258
5,988
5,308
3,914
8,397
5,904

23,523
2,061

(1.3)
*

(1.0)
.2
(22.1)
(2.1)
3.6
27.3
70.6
4.1

31.6
2.3

22,618
–

22,618
2,348
943
27,309
634
119
23
1

777
5,310

20,694
–

20,694
2,354
935
24,864
539
84
19
1

643
4,772

–
–
8.7

9.3
–

9.3
(.3)
.9
9.8
17.6
41.7
21.1
–

20.8
11.3

11.4% $

181
306
7
14

$

943
247
20
14

(80.8)% $ 47,028
34,269
23.9
27,704
(65.0)
64,089
–

$ 52,827
33,751
24,481
62,023

(11.0)%
1.5
13.2
3.3

508
8,418

8,926
–
7
75,233
208
15
224
404

851
6,640

1,224
2,282

3,506
(1)
5
61,067
309
11
166
2,578

3,064
7,134

(58.5)
*

*
*
40.0
23.2
(32.7)
36.4
34.9
(84.3)

(72.2)
(6.9)

173,090
19,932

193,022
9,009
3,127
285,861
40,162
40,184
60,582
43,793

184,721
28,049

173,082
12,723

185,805
8,612
2,965
268,360
37,856
36,866
44,904
48,175

167,801
26,307

–
56.7

3.9
4.6
5.5
6.5
6.1
9.0
34.9
(9.1)

10.1
6.6

U.S. BANCORP

57

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

Wholesale Banking and Commercial Real Estate Wholesale
Banking and Commercial Real Estate offers lending,
equipment finance and small-ticket leasing, depository,
treasury management, capital markets, foreign exchange,
international trade services and other financial services to
middle market, large corporate, commercial real estate,
financial institution and public sector clients. Wholesale
Banking and Commercial Real Estate contributed
$408 million of the Company’s net income in 2010, or an
increase of $264 million compared with 2009. The increase
was primarily driven by higher net revenue and lower
provision for credit losses expense, partially offset by higher
noninterest expense.

Total net revenue increased $261 million (8.8 percent)

in 2010, compared with 2009. Net interest income, on a
taxable-equivalent basis, increased $92 million (4.6 percent)
in 2010, compared with 2009, driven by improved spreads
on loans, partially offset by a decrease in total average loans
and the impact of declining rates on the margin benefit of
deposits. Total noninterest income increased $169 million
(17.2 percent) in 2010, compared with 2009. The increase
was mainly due to strong growth in commercial products
revenue, including standby letters of credit, commercial loan
and capital markets fees and higher equity investment
income, partially offset by lower commercial leasing
revenue.

Total noninterest expense increased $159 million
(14.2 percent) in 2010, compared with 2009, primarily due
to higher total compensation and employee benefits expense
and increased costs related to OREO. The provision for
credit losses decreased $310 million (19.0 percent) in 2010,
compared with 2009. The favorable change was primarily
due to a decrease in the reserve allocation, partially offset by
higher net charge-offs. Nonperforming assets were
$1.7 billion at December 31, 2010, compared with
$2.6 billion at December 31, 2009. Nonperforming assets as
a percentage of period-end loans were 2.97 percent at
December 31, 2010, compared with 4.44 percent at
December 31, 2009. Refer to the “Corporate Risk Profile”

58

U.S. BANCORP

section for further information on factors impacting the
credit quality of the loan portfolios.

Consumer and Small Business Banking Consumer and
Small Business Banking delivers products and services
through banking offices, telephone servicing and sales, on-
line services, direct mail and ATM processing. It
encompasses community banking, metropolitan banking, in-
store banking, small business banking, consumer lending,
mortgage banking, consumer finance, workplace banking,
student banking and 24-hour banking. Consumer and Small
Business Banking contributed $729 million of the
Company’s net income in 2010, or a decrease of
$149 million (17.0 percent), compared with 2009. Within
Consumer and Small Business Banking, the retail banking
division contributed $162 million of the total net income in
2010, or a decrease of $163 million (50.2 percent) from the
prior year. Mortgage banking contributed $567 million of
the business line’s net income in 2010, or an increase of
$14 million (2.5 percent) over the prior year.

Total net revenue increased $76 million (1.1 percent) in

2010, compared with 2009. Net interest income, on a
taxable-equivalent basis, increased $300 million
(7.5 percent) in 2010, compared with 2009. The
year-over-year increase in net interest income was due to
improved loan spreads, higher deposit volumes and loan
fees, partially offset by a decline in the margin benefit of
deposits. Total noninterest income decreased $224 million
(7.6 percent) in 2010, compared with 2009. The
year-over-year decrease in total noninterest income was
driven by lower deposit service charges, principally due to
the impact of Company-initiated and regulatory revisions to
overdraft fee policies and lower overdraft incidences, and
lower mortgage origination and sales revenue. These
decreases were partially offset by improvement in retail lease
end-of-term results and higher ATM processing servicing
fees.

Total noninterest expense increased $565 million
(15.2 percent) in 2010, compared with 2009. The increase
reflected higher total compensation and employee benefits
expense, higher processing costs and net occupancy and
equipment expenses related to business expansion, including
the impact of the FBOP acquisition.

The provision for credit losses decreased $257 million

(13.7 percent) in 2010, compared with 2009, as stress
within the installment and other consumer loan portfolios
moderated. As a percentage of average loans outstanding,
net charge-offs decreased to 1.48 percent in 2010, compared
with 1.50 percent in 2009. Nonperforming assets were

$1.4 billion at December 31, 2010, compared with
$1.3 billion at December 31, 2009. Nonperforming assets as
a percentage of period-end loans were 1.34 percent at
December 31, 2010, compared with 1.35 percent at
December 31, 2009. Refer to the “Corporate Risk Profile”
section for further information on factors impacting the
credit quality of the loan portfolios.

Wealth Management and Securities Services Wealth
Management and Securities Services provides private
banking, financial advisory services, investment
management, retail brokerage services, insurance, trust,
custody and fund servicing through five businesses: Wealth
Management, Corporate Trust Services, U.S. Bancorp Asset
Management, Institutional Trust & Custody and
Fund Services. Wealth Management and Securities Services
contributed $220 million of the Company’s net income in
2010, a decrease of $114 million (34.1 percent), compared
with 2009.

Total net revenue decreased $68 million (4.6 percent) in

2010, compared with 2009, driven by adverse capital
markets. Net interest income, on a taxable-equivalent basis,
increased $18 million (6.0 percent) in 2010, compared with
2009. The increase in net interest income was primarily due
to higher deposit volumes as customers migrated from
money market funds to deposit products, partially offset by
a decline in the related margin benefit. Noninterest income
decreased $86 million (7.2 percent) in 2010, compared with
2009, as low interest rates negatively impacted money
market investment fees and lower money market fund
balances led to a decline in account-level fees.

Total noninterest expense increased $118 million

(12.6 percent) in 2010, compared with 2009. The increase in
noninterest expense was primarily due to higher total
compensation, employee benefits expense and FDIC
insurance assessments.

Payment Services Payment Services includes consumer and
business credit cards, stored-value cards, debit cards,
corporate and purchasing card services, consumer lines of
credit and merchant processing. Payment Services
contributed $773 million of the Company’s net income in
2010, or an increase of $495 million compared with 2009.
The increase was primarily due to an increase in total net
revenue and a decrease in the provision for credit losses,
partially offset by higher noninterest expense.

Total net revenue increased $315 million (7.5 percent)

in 2010, compared with 2009. Net interest income, on a
taxable-equivalent basis, increased $169 million
(14.4 percent) in 2010, compared with 2009, primarily due

to strong growth in credit card loan balances and improved
loan spreads, partially offset by the cost of rebates on the
government card program, as well as reduced loan fees from
the implementation of the Credit Card Accountability,
Responsibility and Disclosure Act of 2009 beginning in the
second quarter of 2010. Noninterest income increased
$146 million (4.9 percent) in 2010, compared with 2009,
driven by higher transaction volumes across all products,
partially offset by a fourth quarter of 2009 contract
termination gain.

Total noninterest expense increased $189 million
(11.1 percent) in 2010, compared with 2009, due to higher
total compensation, employee benefits and professional
services expense, partially offset by lower marketing and
business development expense.

The provision for credit losses decreased $660 million
(33.1 percent) in 2010, compared with 2009, primarily due
to a reduction in the reserve allocation, as the level of stress
in economic conditions moderated. As a percentage of
average loans outstanding, net charge-offs were 6.31 percent
in 2010, compared with 6.16 percent in 2009.

Treasury and Corporate Support Treasury and Corporate
Support includes the Company’s investment portfolios, most
covered commercial and commercial real estate loans and
related OREO, funding, capital management, asset
securitization, interest rate risk management, the net effect
of transfer pricing related to average balances and the
residual aggregate of expenses associated with corporate
activities that are managed on a consolidated basis. Treasury
and Corporate Support recorded net income of $1.2 billion
in 2010, compared with $571 million in 2009.

Total net revenue increased $896 million (85.0 percent)

in 2010, compared with 2009. Net interest income, on a
taxable-equivalent basis, increased $493 million
(39.8 percent) in 2010, compared with 2009, reflecting the
impact of the FBOP acquisition, the current interest rate
environment, wholesale funding decisions and the
Company’s asset/liability position. Total noninterest income
increased $403 million in 2010, compared with 2009,
primarily due to lower net securities losses, the 2010 Nuveen
Gain and higher gains on the Company’s investment in Visa
Inc., partially offset by a gain on a corporate real estate
transaction recognized in the first quarter of 2009.

Total noninterest expense increased $71 million

(8.8 percent) in 2010, compared with 2009. The increase in
noninterest expense was driven by higher total compensation
and employee benefits expense, increased costs related to
affordable housing and other tax advantaged projects and

U.S. BANCORP

59

higher litigation-related expenses, partially offset by the
FDIC special assessment in 2009.

Income taxes are assessed to each line of business at a

managerial tax rate of 36.4 percent with the residual tax
expense or benefit to arrive at the consolidated effective tax
rate included in Treasury and Corporate Support.

N O N - R E G U L A T O R Y C A P I T A L R A T I O S

In addition to capital ratios defined by banking regulators,
the Company considers various other measures when
evaluating capital utilization and adequacy, including:

(cid:129) Tangible common equity to tangible assets,

(cid:129) Tier 1 common equity to risk-weighted assets, and

(cid:129) Tangible common equity to risk-weighted assets.

These non-regulatory capital ratios are viewed by
management as useful additional methods of reflecting the
level of capital available to withstand unexpected market
conditions. Additionally, presentation of these ratios allows

readers to compare the Company’s capitalization to other
financial services companies. These ratios differ from capital
ratios defined by banking regulators principally in that the
numerator excludes trust preferred securities and preferred
stock, the nature and extent of which varies among different
financial services companies. These ratios are not defined in
generally accepted accounting principles (“GAAP”) or
federal banking regulations. As a result, these non-regulatory
capital ratios disclosed by the Company may be considered
non-GAAP financial measures.

Because there are no standardized definitions for these

non-regulatory capital ratios, the Company’s calculation
methods may differ from those used by other financial
services companies. Also, there may be limits in the
usefulness of these measures to investors. As a result, the
Company encourages readers to consider the consolidated
financial statements and other financial information
contained in this report in their entirety, and not to rely on
any single financial measure.

The following table shows the Company’s calculation of the non-regulatory capital ratios:

December 31 (Dollars in Millions)

2010

2009

2008

2007

2006

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,322
(1,930)
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(803)
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8,337)
Goodwill (net of deferred tax liability) . . . . . . . . . . . . . . . . . . .
(1,376)
Intangible assets, other than mortgage servicing rights . . . . . . .

$ 26,661
(1,500)
(698)
(8,482)
(1,657)

$ 27,033
(7,931)
(733)
(8,153)
(1,640)

$ 21,826
(1,000)
(780)
(7,534)
(1,581)

$ 21,919
(1,000)
(722)
(7,423)
(1,800)

Tangible common equity (a) . . . . . . . . . . . . . . . . . . . . . . .

17,876

14,324

8,576

10,931

10,974

Tier 1 capital, determined in accordance with prescribed

regulatory requirements . . . . . . . . . . . . . . . . . . . . . . . . .
Trust preferred securities . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests, less preferred stock not eligible for

25,947
(3,949)
(1,930)

Tier 1 capital

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(692)

Tier 1 common equity (b) . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill (net of deferred tax liability) . . . . . . . . . . . . . . . . . . .
Intangible assets, other than mortgage servicing rights . . . . . . .

Tangible assets (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-weighted assets, determined in accordance with

19,376
307,786
(8,337)
(1,376)

298,073

22,610
(4,524)
(1,500)

(692)

15,894
281,176
(8,482)
(1,657)

271,037

24,426
(4,024)
(7,931)

(693)

11,778
265,912
(8,153)
(1,640)

256,119

17,539
(4,024)
(1,000)

(695)

11,820
237,615
(7,534)
(1,581)

228,500

17,036
(3,639)
(1,000)

(694)

11,703
219,232
(7,423)
(1,800)

210,009

prescribed regulatory requirements (d) . . . . . . . . . . . . . .

247,619

235,233

230,628

212,592

194,659

Ratios
Tangible common equity to tangible assets (a)/(c) . . . . . . . . . .
Tier 1 common equity to risk-weighted assets (b)/(d) . . . . . . . .
. . . . . .
Tangible common equity to risk-weighted assets (a)/(d)

6.0%
7.8
7.2

5.3%
6.8
6.1

3.3%
5.1
3.7

4.8%
5.6
5.1

5.2%
6.0
5.6

Note: Tier 1 capital and Tier 1 common equity amounts are presented using qualifying capital elements as specified in current regulatory guidance (“Basel I”) and do not reflect
adjustments for changes to those elements proposed in December 2010.

60

U.S. BANCORP

A C C O U N T I N G C H A N G E S

Note 2 of the Notes to Consolidated Financial Statements
discusses accounting standards adopted in 2010, as well as
accounting standards recently issued but not yet required to
be adopted and the expected impact of these changes in
accounting standards. To the extent the adoption of new
accounting standards materially affects the Company’s
financial condition or results of operations, the impacts are
discussed in the applicable section(s) of the Management’s
Discussion and Analysis and the Notes to Consolidated
Financial Statements.

C R I T I C A L A C C O U N T I N G P O L I C I E S

The accounting and reporting policies of the Company
comply with accounting principles generally accepted in the
United States and conform to general practices within the
banking industry. The preparation of financial statements in
conformity with GAAP requires management to make
estimates and assumptions. The Company’s financial
position and results of operations can be affected by these
estimates and assumptions, which are integral to
understanding the Company’s financial statements. Critical
accounting policies are those policies management believes
are the most important to the portrayal of the Company’s
financial condition and results, and require management to
make estimates that are difficult, subjective or complex.
Most accounting policies are not considered by management
to be critical accounting policies. Several factors are
considered in determining whether or not a policy is critical
in the preparation of financial statements. These factors
include, among other things, whether the estimates are
significant to the financial statements, the nature of the
estimates, the ability to readily validate the estimates with
other information (including third-parties sources or
available prices), and sensitivity of the estimates to changes
in economic conditions and whether alternative accounting
methods may be utilized under GAAP. Management has
discussed the development and the selection of critical
accounting policies with the Company’s Audit Committee.
Significant accounting policies are discussed in Note 1

of the Notes to Consolidated Financial Statements. Those
policies considered to be critical accounting policies are
described below.

Allowance for Credit Losses The allowance for credit losses
is established to provide for probable losses incurred in the
Company’s credit portfolio. The methods utilized to estimate
the allowance for credit losses, key assumptions and
quantitative and qualitative information considered by

management in determining the adequacy of the allowance
for credit losses are discussed in the “Credit Risk
Management” section.

Management’s evaluation of the adequacy of the
allowance for credit losses is often the most critical of
accounting estimates for a banking institution. It is an
inherently subjective process impacted by many factors as
discussed throughout the Management’s Discussion and
Analysis section of the Annual Report. Although risk
management practices, methodologies and other tools are
utilized to determine each element of the allowance, degrees
of imprecision exist in these measurement tools due in part
to subjective judgments involved and an inherent lagging of
credit quality measurements relative to the stage of the
business cycle. Even determining the stage of the business
cycle is highly subjective. As discussed in the “Analysis and
Determination of Allowance for Credit Losses” section,
management considers the effect of imprecision and many
other factors in determining the allowance for credit losses.
If not considered, incurred losses in the portfolio related to
imprecision and other subjective factors could have a
dramatic adverse impact on the liquidity and financial
viability of a bank.

Given the many subjective factors affecting the credit
portfolio, changes in the allowance for credit losses may not
directly coincide with changes in the risk ratings of the
credit portfolio reflected in the risk rating process. This is in
part due to the timing of the risk rating process in relation
to changes in the business cycle, the exposure and mix of
loans within risk rating categories, levels of nonperforming
loans and the timing of charge-offs and recoveries. For
example, the amount of loans within specific risk ratings
may change, providing a leading indicator of improving
credit quality, while nonperforming loans and net charge-
offs continue at elevated levels. Also, inherent loss ratios,
determined through migration analysis and historical loss
performance over the estimated business cycle of a loan,
may not change to the same degree as net charge-offs.
Because risk ratings and inherent loss ratios primarily drive
the allowance specifically allocated to commercial loans, the
amount of the allowance for commercial and commercial
real estate loans might decline; however, the degree of
change differs somewhat from the level of changes in
nonperforming loans and net charge-offs. Also, management
would maintain an adequate allowance for credit losses by
increasing the allowance during periods of economic
uncertainty or changes in the business cycle.

Some factors considered in determining the adequacy of

the allowance for credit losses are quantifiable while other

U.S. BANCORP

61

factors require qualitative judgment. Management conducts
an analysis with respect to the accuracy of risk ratings and
the volatility of inherent losses, and utilizes this analysis
along with qualitative factors, including uncertainty in the
economy from changes in unemployment rates, the level of
bankruptcies and concentration risks, including risks
associated with the weakened housing market and highly
leveraged enterprise-value credits, in determining the overall
level of the allowance for credit losses. The Company’s
determination of the allowance for commercial and
commercial real estate loans is sensitive to the assigned
credit risk ratings and inherent loss rates at December 31,
2010. In the event that 10 percent of loans within these
portfolios experienced downgrades of two risk categories,
the allowance for commercial and commercial real estate
would increase by approximately $319 million at
December 31, 2010. In the event that inherent loss or
estimated loss rates for these portfolios increased by
10 percent, the allowance determined for commercial and
commercial real estate would increase by approximately
$198 million at December 31, 2010. The Company’s
determination of the allowance for residential and retail
loans is sensitive to changes in estimated loss rates. In the
event that estimated loss rates increased by 10 percent, the
allowance for residential mortgages and retail loans would
increase by approximately $274 million at December 31,
2010. Because several quantitative and qualitative factors
are considered in determining the allowance for credit losses,
these sensitivity analyses do not necessarily reflect the nature
and extent of future changes in the allowance for credit
losses. They are intended to provide insights into the impact
of adverse changes in risk rating and inherent losses and do
not imply any expectation of future deterioration in the risk
rating or loss rates. Given current processes employed by the
Company, management believes the risk ratings and inherent
loss rates currently assigned are appropriate. It is possible
that others, given the same information, may at any point in
time reach different reasonable conclusions that could be
significant to the Company’s financial statements. Refer to
the “Analysis and Determination of the Allowance for
Credit Losses” section for further information.

Fair Value Estimates A portion of the Company’s assets and
liabilities are carried at fair value on the Consolidated
Balance Sheet, with changes in fair value recorded either
through earnings or other comprehensive income (loss) in
accordance with applicable accounting principles generally
accepted in the United States. These include all of the
Company’s available-for-sale securities, derivatives and other

62

U.S. BANCORP

trading instruments, MSRs and certain mortgage loans held
for sale. The estimation of fair value also affects other loans
held for sale, which are recorded at the lower-of-cost-or-fair
value. The determination of fair value is important for
certain other assets that are periodically evaluated for
impairment using fair value estimates, including goodwill
and other intangible assets, assets acquired in business
combinations, impaired loans, OREO and other repossessed
assets.

Fair value is generally defined as the exit price at which

an asset or liability could be exchanged in a current
transaction between willing, unrelated parties, other than in
a forced or liquidation sale. Fair value is based on quoted
market prices in an active market, or if market prices are
not available, is estimated using models employing
techniques such as matrix pricing or discounting expected
cash flows. The significant assumptions used in the models,
which include assumptions for interest rates, discount rates,
prepayments and credit losses, are independently verified
against observable market data where possible. Where
observable market data is not available, the estimate of fair
value becomes more subjective and involves a high degree of
judgment. In this circumstance, fair value is estimated based
on management’s judgment regarding the value that market
participants would assign to the asset or liability. This
valuation process takes into consideration factors such as
market illiquidity. Imprecision in estimating these factors can
impact the amount recorded on the balance sheet for a
particular asset or liability with related impacts to earnings
or other comprehensive income (loss).

When available, trading and available-for-sale securities
are valued based on quoted market prices. However, certain
securities are traded less actively and therefore, may not be
able to be valued based on quoted market prices. The
determination of fair value may require benchmarking to
similar instruments or performing a discounted cash flow
analysis using estimates of future cash flows and
prepayment, interest and default rates. An example is non-
agency residential mortgage-backed securities. For more
information on investment securities, refer to Note 5 of the
Notes to Consolidated Financial Statements.

As few derivative contracts are listed on an exchange,

the majority of the Company’s derivative positions are
valued using valuation techniques that use readily observable
market parameters. Certain derivatives, however, must be
valued using techniques that include unobservable
parameters. For these instruments, the significant
assumptions must be estimated and therefore, are subject to
judgment. These instruments are normally traded less

actively. Note 20 of the Notes to Consolidated Financial
Statements provides a summary of the Company’s derivative
positions.

Refer to Note 21 of the Notes to Consolidated
Financial Statements for additional information regarding
estimations of fair value.

Purchased Loans and Related Indemnification Assets In
accordance with applicable authoritative accounting
guidance effective for the Company beginning January 1,
2009, all purchased loans and related indemnification assets
are recorded at fair value at date of purchase. The initial
valuation of these loans and the related indemnification
assets requires management to make subjective judgments
concerning estimates about how the acquired loans will
perform in the future using valuation methods including
discounted cash flow analysis and independent third-party
appraisals. Factors that may significantly affect the initial
valuation include, among others, market-based and industry
data related to expected changes in interest rates,
assumptions related to probability and severity of credit
losses, estimated timing of credit losses including the
foreclosure and liquidation of collateral, expected
prepayment rates, required or anticipated loan
modifications, unfunded loan commitments, the specific
terms and provisions of any loss sharing agreements, and
specific industry and market conditions that may impact
discount rates and independent third-party appraisals.

On an ongoing basis, the accounting for purchased
loans and related indemnification assets follows applicable
authoritative accounting guidance for purchased non-
impaired loans and purchased impaired loans. Refer to
Note 1 and Note 6 of the Notes to Consolidated Financial
Statements for additional information. In addition, refer to
the “Analysis and Determination of the Allowance for
Credit Losses” section for information on the determination
of the required allowance for credit losses, if any, for these
loans.

Mortgage Servicing Rights MSRs are capitalized as separate
assets when loans are sold and servicing is retained or may
be purchased from others. MSRs are initially recorded at fair
value and remeasured at each subsequent reporting date.
Because MSRs do not trade in an active market with readily
observable prices, the Company determines the fair value by
estimating the present value of the asset’s future cash flows
utilizing market-based prepayment rates, discount rates, and
other assumptions validated through comparison to trade
information, industry surveys and independent third-party
valuations. Changes in the fair value of MSRs are recorded

in earnings during the period in which they occur. Risks
inherent in the MSRs’ valuation include higher than
expected prepayment rates and/or delayed receipt of cash
flows. The Company may utilize derivatives, including
interest rate swaps, forward commitments to buy residential
mortgage loans, and futures and options contracts, to
mitigate the valuation risk. The estimated sensitivity to
changes in interest rates of the fair value of the MSRs
portfolio and the related derivative instruments at
December 31, 2010, to an immediate 25 and 50 bps
downward movement in interest rates would be a decrease
of approximately $5 million and an increase of
approximately $6 million, respectively. An upward
movement in interest rates at December 31, 2010, of 25 and
50 bps would increase the value of the MSRs and related
derivative instruments by approximately $5 million and
$1 million, respectively. Refer to Note 10 of the Notes to
Consolidated Financial Statements for additional
information regarding MSRs.

Goodwill and Other Intangibles The Company records all
assets and liabilities acquired in purchase acquisitions,
including goodwill and other intangibles, at fair value.
Goodwill and indefinite-lived assets are not amortized but
are subject, at a minimum, to annual tests for impairment.
In certain situations, interim impairment tests may be
required if events occur or circumstances change that would
more likely than not reduce the fair value of a reporting
segment below its carrying amount. Other intangible assets
are amortized over their estimated useful lives using straight-
line and accelerated methods and are subject to impairment
if events or circumstances indicate a possible inability to
realize the carrying amount.

The initial recognition of goodwill and other intangible

assets and subsequent impairment analysis require
management to make subjective judgments concerning
estimates of how the acquired assets will perform in the
future using valuation methods including discounted cash
flow analysis. Additionally, estimated cash flows may extend
beyond ten years and, by their nature, are difficult to
determine over an extended timeframe. Events and factors
that may significantly affect the estimates include, among
others, competitive forces, customer behaviors and attrition,
changes in revenue growth trends, cost structures,
technology, changes in discount rates and specific industry
and market conditions. In determining the reasonableness of
cash flow estimates, the Company reviews historical
performance of the underlying assets or similar assets in an

U.S. BANCORP

63

effort to assess and validate assumptions utilized in its
estimates.

In assessing the fair value of reporting units, the
Company may consider the stage of the current business
cycle and potential changes in market conditions in
estimating the timing and extent of future cash flows. Also,
management often utilizes other information to validate the
reasonableness of its valuations, including public market
comparables, and multiples of recent mergers and
acquisitions of similar businesses. Valuation multiples may
be based on revenue, price-to-earnings and tangible capital
ratios of comparable public companies and business
segments. These multiples may be adjusted to consider
competitive differences, including size, operating leverage
and other factors. The carrying amount of a reporting unit is
determined based on the capital required to support the
reporting unit’s activities, including its tangible and
intangible assets. The determination of a reporting unit’s
capital allocation requires management judgment and
considers many factors, including the regulatory capital
regulations and capital characteristics of comparable public
companies in relevant industry sectors. In certain
circumstances, management will engage a third-party to
independently validate its assessment of the fair value of its
reporting units.

The Company’s annual assessment of potential goodwill

impairment was completed during the second quarter of
2010. Based on the results of this assessment, no goodwill
impairment was recognized. Because of current economic
conditions the Company continues to monitor goodwill and
other intangible assets for impairment indicators throughout
the year. The Company does not expect recent legislation
will result in goodwill impairment.

Income Taxes The Company estimates income tax expense
based on amounts expected to be owed to various tax
jurisdictions. Currently, the Company files tax returns in
approximately 222 federal, state and local domestic
jurisdictions and 13 foreign jurisdictions. The estimated
income tax expense is reported in the Consolidated
Statement of Income. Accrued taxes represent the net
estimated amount due to or to be received from taxing
jurisdictions either currently or in the future and are
reported in other assets or other liabilities on the
Consolidated Balance Sheet. In estimating accrued taxes, the

Company assesses the relative merits and risks of the
appropriate tax treatment considering statutory, judicial and
regulatory guidance in the context of the tax position.
Because of the complexity of tax laws and regulations,
interpretation can be difficult and subject to legal judgment
given specific facts and circumstances. It is possible that
others, given the same information, may at any point in time
reach different reasonable conclusions regarding the
estimated amounts of accrued taxes.

Changes in the estimate of accrued taxes occur
periodically due to changes in tax rates, interpretations of
tax laws, the status of examinations being conducted by
various taxing authorities, and newly enacted statutory,
judicial and regulatory guidance that impacts the relative
merits and risks of tax positions. These changes, when they
occur, affect accrued taxes and can be significant to the
operating results of the Company. Refer to Note 19 of the
Notes to Consolidated Financial Statements for additional
information regarding income taxes.

C O N T R O L S A N D P R O C E D U R E S

Under the supervision and with the participation of the
Company’s management, including its principal executive
officer and principal financial officer, the Company has
evaluated the effectiveness of the design and operation of its
disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934 (the “Exchange Act”)). Based upon this
evaluation, the principal executive officer and principal
financial officer have concluded that, as of the end of the
period covered by this report, the Company’s disclosure
controls and procedures were effective.

During the most recently completed fiscal quarter, there
was no change made in the Company’s internal controls over
financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) that has materially
affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting.

The annual report of the Company’s management on

internal control over financial reporting is provided on
page 65. The attestation report of Ernst & Young LLP, the
Company’s independent accountants, regarding the
Company’s internal control over financial reporting is
provided on page 67.

64

U.S. BANCORP

Report of Management

Responsibility for the financial statements and other information presented throughout this Annual Report rests with the
management of U.S. Bancorp. The Company believes the consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States and present the substance of transactions based on the
circumstances and management’s best estimates and judgment.

In meeting its responsibilities for the reliability of the financial statements, management is responsible for establishing and
maintaining an adequate system of internal control over financial reporting as defined by Rules 13a-15(f) and 15d-15(f) under
the Securities Exchange Act of 1934. The Company’s system of internal control is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of publicly filed financial statements in accordance with
accounting principles generally accepted in the United States.

To test compliance, the Company carries out an extensive audit program. This program includes a review for compliance with
written policies and procedures and a comprehensive review of the adequacy and effectiveness of the system of internal control.
Although control procedures are designed and tested, it must be recognized that there are limits inherent in all systems of
internal control and, therefore, errors and irregularities may nevertheless occur. Also, estimates and judgments are required to
assess and balance the relative cost and expected benefits of the controls. Projection of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

The Board of Directors of the Company has an Audit Committee composed of directors who are independent of U.S. Bancorp.
The committee meets periodically with management, the internal auditors and the independent accountants to consider audit
results and to discuss internal accounting control, auditing and financial reporting matters.

Management assessed the effectiveness of the Company’s system of internal control over financial reporting as of December 31,
2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in its Internal Control-Integrated Framework. Based on our assessment and those criteria, management
believes the Company designed and maintained effective internal control over financial reporting as of December 31, 2010.

The Company’s independent accountants, Ernst & Young LLP, have been engaged to render an independent professional
opinion on the financial statements and issue an attestation report on the Company’s internal control over financial reporting.
Their opinion on the financial statements appearing on page 66 and their attestation on internal control over financial reporting
appearing on page 67 are based on procedures conducted in accordance with auditing standards of the Public Company
Accounting Oversight Board (United States).

U.S. BANCORP

65

Report of Independent Registered Public Accounting Firm
on the Consolidated Financial Statements

The Board of Directors and Shareholders of U.S. Bancorp:

We have audited the accompanying consolidated balance sheets of U.S. Bancorp as of December 31, 2010 and 2009, and the
related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended
December 31, 2010. These financial statements are the responsibility of U.S. Bancorp’s management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial
position of U.S. Bancorp at December 31, 2010 and 2009, and the consolidated results of its operations and its cash flows for
each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting
principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
U.S. Bancorp’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal
Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated February 28, 2011 expressed an unqualified opinion thereon.

Minneapolis, Minnesota
February 28, 2011

66

U.S. BANCORP

Report of Independent Registered Public Accounting Firm
on Internal Control Over Financial Reporting

The Board of Directors and Shareholders of U.S. Bancorp:

We have audited U.S. Bancorp’s internal control over financial reporting as of December 31, 2010, based on criteria established
in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). U.S. Bancorp’s management is responsible for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying Report of Management. Our responsibility is to express an opinion on U.S. Bancorp’s internal control over
financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, U.S. Bancorp maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2010, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of U.S. Bancorp as of December 31, 2010 and 2009, and the related consolidated statements of
income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2010 and our report
dated February 28, 2011 expressed an unqualified opinion thereon.

Minneapolis, Minnesota
February 28, 2011

U.S. BANCORP

67

U.S. Bancorp
Consolidated Balance Sheet

At December 31 (Dollars in Millions)

2010

2009

Assets
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,487
Investment securities

Held-to-maturity (fair value $1,419 and $48, respectively). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held for sale (included $8,100 and $4,327 of mortgage loans carried at fair value, respectively) . . . . . . . . . .
Loans

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail

1,469
51,509
8,371

48,398
34,695
30,732
65,194

Total loans, excluding covered loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Covered loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

179,019
18,042

Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

197,061
(5,310)

Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

191,751
2,487
8,954
3,213
25,545

$ 6,206

47
44,721
4,772

48,792
34,093
26,056
63,955

172,896
21,859

194,755
(5,079)

189,676
2,263
9,011
3,406
21,074

Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $307,786

$281,176

Liabilities and Shareholders’ Equity
Deposits

Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,314
129,381
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,557
Time deposits greater than $100,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

204,252
32,557
31,537
9,118

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

277,464

$ 38,186
115,135
29,921

183,242
31,312
32,580
7,381

254,515

Shareholders’ equity

Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock, par value $0.01 a share — authorized: 4,000,000,000 shares;

issued: 2010 and 2009 — 2,125,725,742 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less cost of common stock in treasury: 2010 — 204,822,330 shares; 2009 — 212,786,937 shares. . . . . . . . . .
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total U.S. Bancorp shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21
8,294
27,005
(6,262)
(1,469)

29,519
803

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

30,322

21
8,319
24,116
(6,509)
(1,484)

25,963
698

26,661

1,930

1,500

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $307,786

$281,176

See Notes to Consolidated Financial Statements.

68

U.S. BANCORP

U.S. Bancorp
Consolidated Statement of Income

Year Ended December 31 (Dollars and Shares in Millions, Except Per Share Data)

2010

2009

2008

Interest Income
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,145
246
Loans held for sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,601
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
166
Other interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,158

$ 9,564
277
1,606
91

11,538

$10,051
227
1,984
156

12,418

Interest Expense
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net interest income after provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noninterest Income
Credit and debit card revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate payment products revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merchant processing services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ATM processing services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust and investment management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposit service charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial products revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage banking revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment products fees and commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities gains (losses), net

Realized gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other-than-temporary impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portion of other-than-temporary impairment recognized in other comprehensive income . . . . . . .

Total securities gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other

928
548
1,103

2,579

9,579
4,356

5,223

1,091
710
1,253
423
1,080
710
555
771
1,003
111

13
(157)
66

(78)
731

Total noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,360

Noninterest Expense
Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net occupancy and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and business development
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technology and communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Postage, printing and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

Total noninterest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (income) loss attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,779
694
919
306
360
744
301
367
1,913

9,383

4,200
935

3,265
52

1,202
539
1,279

3,020

8,518
5,557

2,961

1,055
669
1,148
410
1,168
970
552
615
1,035
109

147
(1,000)
402

(451)
672

7,952

3,135
574
836
255
378
673
288
387
1,755

8,281

2,632
395

2,237
(32)

1,881
1,066
1,739

4,686

7,732
3,096

4,636

1,039
671
1,151
366
1,314
1,081
517
492
270
147

42
(1,020)
–

(978)
741

6,811

3,039
515
781
240
310
598
294
355
1,216

7,348

4,099
1,087

3,012
(66)

Net income attributable to U.S. Bancorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,317

Net income applicable to U.S. Bancorp common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,332

Earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.74
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.73
.20
Dividends declared per common share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,912
Average common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,921
Average diluted common shares outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,205

$ 1,803

$
$
$

.97
.97
.20
1,851
1,859

$ 2,946

$ 2,819

$ 1.62
$ 1.61
$ 1.70
1,742
1,756

See Notes to Consolidated Financial Statements.

U.S. BANCORP

69

U.S. Bancorp
Consolidated Statement of Shareholders’ Equity

(Dollars and Shares in Millions)

Balance December 31, 2007 . . . . . . . . . . . .
Change in accounting principle . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in unrealized gains and losses on securities

available-for-sale . . . . . . . . . . . . . . . . . . . . .
Unrealized loss on derivative hedges . . . . . . . . . . .
Realized loss on derivative hedges . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . .
Reclassification for realized losses . . . . . . . . . . . . .
Change in retirement obligation. . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . .

Total comprehensive income (loss) . . . . . . . . .
Preferred stock dividends and discount accretion . . . .
Common stock dividends . . . . . . . . . . . . . . . . . .
Issuance of preferred stock and related warrant . . . . .
Issuance of common and treasury stock . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . . . . . .
Net other changes in noncontrolling interests . . . . . . .
Stock option and restricted stock grants . . . . . . . . .
Shares reserved to meet deferred compensation

obligations . . . . . . . . . . . . . . . . . . . . . . . . .

U.S. Bancorp Shareholders

Common
Shares
Outstanding

Preferred
Stock

Common
Stock

Capital
Surplus

Retained
Earnings

Treasury
Stock

Other
Comprehensive
Income (Loss)

Total
U.S. Bancorp
Shareholders’
Equity

Noncontrolling
Interests

Total
Equity

1,728

$ 1,000

$20 $5,749 $22,693 $(7,480)

(4)
2,946

(123)
(2,971)

163
(83)

1

917
(91)

(5)

4

6,927

29
(2)

$ (936)
3

(2,729)
(722)
(15)
(117)
1,020
(1,362)
1,495

$21,046
(1)
2,946

$ 780 $21,826
(1)
3,012

66

(2,729)
(722)
(15)
(117)
1,020
(1,362)
1,495

516
(119)
(2,971)
7,090
834
(91)
–
1

(5)

(2,729)
(722)
(15)
(117)
1,020
(1,362)
1,495

582
(119)
(2,971)
7,090
834
(91)
(113)
1

(5)

66

(113)

Balance December 31, 2008 . . . . . . . . . . . .

1,755

$ 7,931

$20 $5,830 $22,541 $(6,659)

$(3,363)

$26,300

$ 733 $27,033

Change in accounting principle . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in unrealized gains and losses on securities

available-for-sale . . . . . . . . . . . . . . . . . . . . .

Other-than-temporary impairment not recognized in

earnings on securities available-for-sale . . . . . . .
Unrealized gain on derivative hedges . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . .
Reclassification for realized losses . . . . . . . . . . . . .
Change in retirement obligation. . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . .

Total comprehensive income (loss) . . . . . . . . .
Redemption of preferred stock . . . . . . . . . . . . . . .
Repurchase of common stock warrant
. . . . . . . . . .
Preferred stock dividends and discount accretion . . . .
Common stock dividends . . . . . . . . . . . . . . . . . .
Issuance of common and treasury stock . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . . . . . .
Distributions to noncontrolling interests . . . . . . . . . .
Net other changes in noncontrolling interests . . . . . . .
Stock option and restricted stock grants . . . . . . . . .

141
2,205

(6,599)

168

(139)

(396)
(375)

158

1

2,553

154
(4)

75

(141)

2,359

(402)
516
40
456
290
(1,239)

–
2,205

2,359

(402)
516
40
456
290
(1,239)

4,225
(6,599)
(139)
(228)
(375)
2,708
(4)
–
–
75

32

32

(62)
(5)

–
2,237

2,359

(402)
516
40
456
290
(1,239)

4,257
(6,599)
(139)
(228)
(375)
2,708
(4)
(62)
(5)
75

Balance December 31, 2009 . . . . . . . . . . . .

1,913

$ 1,500

$21 $8,319 $24,116 $(6,509)

$(1,484)

$25,963

$ 698 $26,661

Change in accounting principle . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . .
Changes in unrealized gains and losses on securities

available-for-sale . . . . . . . . . . . . . . . . . . . . .

Other-than-temporary impairment not recognized in

earnings on securities available-for-sale . . . . . . . .
Unrealized loss on derivative hedges . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . .
Reclassification for realized gains . . . . . . . . . . . . . .
Change in retirement obligation. . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . .

Total comprehensive income (loss) . . . . . . . . .
Preferred stock dividends . . . . . . . . . . . . . . . . . .
Common stock dividends . . . . . . . . . . . . . . . . . .
Issuance of preferred stock . . . . . . . . . . . . . . . . .
Issuance of common and treasury stock . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . . . . . .
Distributions to noncontrolling interests . . . . . . . . . .
Net other changes in noncontrolling interests . . . . . . .
Stock option and restricted stock grants . . . . . . . . .

(72)
3,317

430

9
(1)

(89)
(385)
118

263
(16)

10
(134)

99

(1)

433

(66)
(145)
24
(75)
(150)
(5)

(73)
3,317

433

(66)
(145)
24
(75)
(150)
(5)

3,333
(89)
(385)
558
129
(16)
–
–
99

(16)
(52)

(89)
3,265

433

(66)
(145)
24
(75)
(150)
(5)

3,281
(89)
(385)
558
129
(16)
(76)
249
99

(52)

(76)
249

Balance December 31, 2010 . . . . . . . . . . . .

1,921

$ 1,930

$21 $8,294 $27,005 $(6,262)

$(1,469)

$29,519

$ 803 $30,322

See Notes to Consolidated Financial Statements.

70

U.S. BANCORP

U.S. Bancorp
Consolidated Statement of Cash Flows

Year Ended December 31 (Dollars in Millions)

2010

2009

2008

Operating Activities
Net income attributable to U.S. Bancorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,317
Adjustments to reconcile net income to net cash provided by operating activities

Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization of premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sales of securities and other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans originated for sale in the secondary market, net of repayments . . . . . . . . . . . . . . . . . . .
Proceeds from sales of loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,356
229
367
(370)
(2,023)
(53,025)
50,895
1,495

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,241

Investing Activities
Proceeds from sales of available-for-sale investment securities . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from maturities of held-to-maturity investment securities . . . . . . . . . . . . . . . . . . . . . .
Proceeds from maturities of available-for-sale investment securities . . . . . . . . . . . . . . . . . . . . . .
Purchases of held-to-maturity investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of available-for-sale investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in loans outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,212
167
16,068
(1,010)
(24,025)
(6,322)
1,829
(4,278)
923
(936)

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(16,372)

Financing Activities
Net increase in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments or redemption of long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees paid on exchange of income trust securities for perpetual preferred stock . . . . . . . . . . . . . .
Proceeds from issuance of preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemption of preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends paid on preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends paid on common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20,527
592
7,044
(8,394)
(4)
–
119
–
–
(89)
(383)

Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19,412

Change in cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and due from banks at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,281
6,206

$ 2,205

$ 2,946

5,557
220
387
(545)
(1,571)
(52,720)
51,915
2,152

7,600

5,784
11
7,307
(5)
(15,119)
(106)
2,741
(4,332)
3,074
(74)

(719)

7,949
(4,448)
6,040
(11,740)
–
–
2,703
(6,599)
(139)
(275)
(1,025)

(7,534)

(653)
6,859

3,096
218
355
(1,045)
(804)
(32,563)
32,440
664

5,307

2,134
22
5,700
(1)
(6,074)
(14,776)
123
(3,577)
1,483
(1,353)

(16,319)

13,139
(891)
8,534
(16,546)
–
7,090
688
–
–
(68)
(2,959)

8,987

(2,025)
8,884

Cash and due from banks at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,487

$ 6,206

$ 6,859

Supplemental Cash Flow Disclosures
Cash paid for income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cash paid for interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net noncash transfers to foreclosed property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions

424
2,631
1,384

Assets (sold) acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Liabilities sold (assumed) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(14)
(907)

$

344
3,153
600

$ 17,212
(17,870)

$ 1,965
4,891
307

$ 19,474
(18,824)

Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

(921)

$

(658)

$

650

See Notes to Consolidated Financial Statements.

U.S. BANCORP

71

Notes to Consolidated Financial Statements

Note 1 S I G N I F I C A N T A C C O U N T I N G

P O L I C I E S

U.S. Bancorp is a multi-state financial services holding
company headquartered in Minneapolis, Minnesota.
U.S. Bancorp and its subsidiaries (the “Company”) provide a
full range of financial services, including lending and
depository services through banking offices principally in the
Midwest and West regions of the United States. The
Company also engages in credit card, merchant, and ATM
processing, mortgage banking, insurance, trust and
investment management, brokerage, and leasing activities
principally in domestic markets.

Basis of Presentation The consolidated financial statements
include the accounts of the Company and its subsidiaries
and all variable interest entities (“VIEs”) for which the
Company has both the power to direct the activities of the
VIE that most significantly impact the VIE’s economic
performance, and the obligation to absorb losses or right to
receive benefits of the VIE that could potentially be
significant to the VIE. Consolidation eliminates all
significant intercompany accounts and transactions. Certain
items in prior periods have been reclassified to conform to
the current presentation.

Uses of Estimates The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions
that affect the amounts reported in the financial statements
and accompanying notes. Actual experience could differ
from those estimates.

B U S I N E S S S E G M E N T S

Within the Company, financial performance is measured by
major lines of business based on the products and services
provided to customers through its distribution channels. The
Company has five reportable operating segments:

Wholesale Banking and Commercial Real Estate Wholesale
Banking and Commercial Real Estate offers lending,
equipment finance and small-ticket leasing, depository,
treasury management, capital markets, foreign exchange,
international trade services and other financial services to
middle market, large corporate, commercial real estate,
financial institution and public sector clients.

Consumer and Small Business Banking Consumer and
Small Business Banking delivers products and services
through banking offices, telephone servicing and sales, on-

72

U.S. BANCORP

line services, direct mail and ATM processing. It
encompasses community banking, metropolitan banking, in-
store banking, small business banking, consumer lending,
mortgage banking, consumer finance, workplace banking,
student banking and 24-hour banking.

Wealth Management and Securities Services Wealth
Management and Securities Services provides private
banking, financial advisory services, investment
management, retail brokerage services, insurance, trust,
custody and mutual fund servicing through five businesses:
Wealth Management, Corporate Trust Services, U.S. Bancorp
Asset Management, Institutional Trust & Custody and
Fund Services.

Payment Services Payment Services includes consumer and
business credit cards, stored-value cards, debit cards,
corporate and purchasing card services, consumer lines of
credit and merchant processing.

Treasury and Corporate Support Treasury and Corporate
Support includes the Company’s investment portfolios,
covered commercial and commercial real estate credit-
impaired loans and related other real estate (“OREO”),
funding, capital management, asset securitization, interest
rate risk management, the net effect of transfer pricing
related to average balances and the residual aggregate of
those expenses associated with corporate activities that are
managed on a consolidated basis.

Segment Results 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
allocate funding costs and benefits, expenses and other
financial elements to each line of business. For details of
these methodologies and segment results, see “Basis for
Financial Presentation” and Table 22 “Line of Business
Financial Performance” included in Management’s
Discussion and Analysis which is incorporated by reference
into these Notes to Consolidated Financial Statements.

S E C U R I T I E S

Realized gains or losses on securities are determined on a
trade date basis based on the specific amortized cost of the
investments sold.

Trading Securities Debt and equity securities held for resale
are classified as trading securities and reported at fair value.

Changes in fair value and realized gains or losses are
reported in noninterest income.

a discount related to evidence of credit deterioration since
date of origination.

Available-for-sale Securities These securities are not trading
securities but may be sold before maturity in response to
changes in the Company’s interest rate risk profile, funding
needs, demand for collateralized deposits by public entities
or other reasons. Available-for-sale securities are carried at
fair value with unrealized net gains or losses reported within
other comprehensive income (loss) in shareholders’ equity.
Declines in fair value related to other-than-temporary
impairment, if any, are reported in noninterest income.

Held-to-maturity Securities Debt securities for which the
Company has the positive intent and ability to hold to
maturity are reported at historical cost adjusted for
amortization of premiums and accretion of discounts.
Declines in fair value related to other-than-temporary
impairment, if any, are reported in noninterest income.

Securities Purchased Under Agreements to Resell and

Securities Sold Under Agreements to Repurchase Securities
purchased under agreements to resell and securities sold under
agreements to repurchase are accounted for as collateralized
financing transactions and are recorded at the amounts at
which the securities were acquired or sold, plus accrued
interest. The fair value of collateral received is continually
monitored and additional collateral is obtained or requested to
be returned to the Company as deemed appropriate.

E Q U I T Y I N V E S T M E N T S I N
O P E R A T I N G E N T I T I E S

Equity investments in public entities in which the Company’s
ownership is less than 20 percent are accounted for as
available-for-sale securities and are carried at fair value.
Similar investments in private entities are accounted for using
the cost method. Investments in entities where the Company
has a significant influence (generally between 20 percent and
50 percent ownership) but does not control the entity are
accounted for using the equity method. Investments in limited
partnerships and limited liability companies where the
Company’s ownership interest is greater than 5 percent are
accounted for using the equity method. All equity investments
are evaluated for impairment at least annually and more
frequently if certain criteria are met.

L O A N S

The Company’s accounting methods for loans differ
depending on whether the loans are originated or purchased,
and for purchased loans, whether the loans were acquired at

Originated Loans Held for Investment Loans the Company
originates are reported at the principal amount outstanding,
net of unearned income, net deferred loan fees or costs, and
any direct principal charge-offs. Interest income is accrued
on the unpaid principal balances as earned. Loan and
commitment fees and certain direct loan origination costs
are deferred and recognized over the life of the loan and/or
commitment period as yield adjustments.

Purchased Loans All purchased loans (non-impaired and
impaired) acquired on or after January 1, 2009 are initially
measured at fair value as of the acquisition date in
accordance with applicable authoritative accounting
guidance. Credit discounts are included in the determination
of fair value. An allowance for credit losses is not recorded
at the acquisition date for loans purchased on or after
January 1, 2009. In accordance with applicable authoritative
accounting guidance, purchased non-impaired loans acquired
in a business combination prior to January 1, 2009 were
generally recorded at the predecessor’s carrying value
including an allowance for credit losses.

In determining the acquisition date fair value of

purchased impaired loans, and in subsequent accounting, the
Company generally aggregates purchased consumer loans
and certain smaller balance commercial loans into pools of
loans with common risk characteristics, while accounting for
larger balance commercial loans individually. Expected cash
flows at the purchase date in excess of the fair value of loans
are recorded as interest income over the life of the loans if
the timing and amount of the future cash flows is reasonably
estimable. Subsequent to the purchase date, increases in cash
flows over those expected at the purchase date are
recognized as interest income prospectively. The present
value of any decreases in expected cash flows after the
purchase date is recognized by recording an allowance for
credit losses. Revolving loans, including lines of credit and
credit cards loans, and leases are excluded from purchased
impaired loans accounting.

For purchased loans acquired on or after January 1, 2009

that are not deemed impaired at acquisition, credit discounts
representing the principal losses expected over the life of the
loan are a component of the initial fair value. Subsequent to
the purchase date, the methods utilized to estimate the required
allowance for credit losses for these loans is similar to
originated loans; however, the Company records a provision
for credit losses only when the required allowance exceeds any
remaining credit discounts. The remaining differences between

U.S. BANCORP

73

the purchase price and the unpaid principal balance at the date
of acquisition are recorded in interest income over the life of
the loans.

Covered Assets Loans covered under loss sharing or similar
credit protection agreements with the Federal Deposit
Insurance Corporation (“FDIC”) are reported in loans along
with the related indemnification asset. Foreclosed real estate
covered under similar agreements is recorded in other assets.
In accordance with applicable authoritative accounting
guidance effective for the Company beginning January 1,
2009, all purchased loans and related indemnification assets
are recorded at fair value at date of purchase.

Commitments to Extend Credit Unfunded residential
mortgage loan commitments entered into in connection with
mortgage banking activities intended to be held for sale are
considered derivatives and recorded on the balance sheet at
fair value with changes in fair value recorded in income. All
other unfunded loan commitments are generally related to
providing credit facilities to customers of the Company and
are not considered derivatives. For loans purchased on or
after January 1, 2009, the fair value of the unfunded credit
commitments is considered in the determination of the fair
value of the loans recorded at the date of acquisition.
Reserves for credit exposure on all other unfunded credit
commitments are recorded in other liabilities.

Credit Quality The quality of the Company’s loan portfolios
is assessed as a function of net credit losses, levels of
nonperforming assets and delinquencies, and credit quality
ratings as defined by the Company. The Company classifies
its loan portfolios by these credit quality ratings on a
quarterly basis. These ratings include: pass, special mention
and classified, and are an important part of the Company’s
overall credit risk management process and evaluation of the
allowance for credit losses. Loans with a pass rating
represent those not classified on the Company’s rating scale
for problem credits, as minimal credit risk has been
identified. Special mention loans are those that have a
potential weakness deserving management’s close attention.
Classified loans are those where a well-defined weakness has
been identified that may put full collection of contractual
cash flows at risk. It is possible that others, given the same
information, may reach different reasonable conclusions
regarding the credit quality rating classification of specific
loans.

Allowance for Credit Losses The allowance for credit losses
reserves for probable and estimable losses incurred in the
Company’s loan and lease portfolio and includes certain

74

U.S. BANCORP

amounts that do not represent loss exposure to the
Company because those losses are recoverable under loss
sharing agreements with the FDIC. Management evaluates
the allowance each quarter to ensure it appropriately
reserves for incurred losses. Several factors are taken into
consideration in evaluating the allowance for credit losses,
including the risk profile of the portfolios, loan net charge-
offs during the period, the level of nonperforming assets,
accruing loans 90 days or more past due, delinquency ratios
and changes in loan balances classified as troubled debt
restructurings (“TDRs”). Management also considers the
uncertainty related to certain industry sectors, and the extent
of credit exposure to specific borrowers within the portfolio.
In addition, concentration risks associated with commercial
real estate and the mix of loans, including credit cards, loans
originated through the consumer finance division and
residential mortgage balances, and their relative credit risks,
are evaluated. Finally, the Company considers current
economic conditions that might impact the portfolio. This
evaluation is inherently subjective as it requires estimates,
including amounts of future cash collections expected on
nonaccrual loans, which may be susceptible to significant
change. The allowance for credit losses relating to originated
loans that have become impaired is based on expected cash
flows discounted using the original effective interest rate, the
observable market price, or the fair value of the collateral
for certain collateral-dependent loans. To the extent credit
deterioration occurs on purchased loans after the date of
acquisition, the Company records an allowance for credit
losses.

The Company determines the amount of the allowance

required for certain sectors based on relative risk
characteristics of the loan portfolio. The allowance recorded
for commercial loans is generally based on quarterly reviews
of individual credit relationships and an analysis of the
migration of commercial loans and actual loss experience.
The allowance recorded for homogeneous commercial and
consumer loans is based on an analysis of product mix, risk
characteristics of the portfolio, bankruptcy experiences, and
historical losses, adjusted for current trends, for each
homogenous category or group of loans. The allowance is
increased through provisions charged to operating earnings
and reduced by net charge-offs.

The Company also assesses the credit risk associated
with off-balance sheet loan commitments, letters of credit,
and derivatives. Credit risk associated with derivatives is
reflected in the fair values recorded for those positions. The
liability for off-balance sheet credit exposure related to loan
commitments and other credit guarantees is included in

other liabilities. Because business processes and credit risks
associated with unfunded credit commitments are essentially
the same as for loans, the Company utilizes similar processes
to estimate its liability for unfunded credit commitments.

Nonaccrual Loans and Loan Charge-Offs Generally,
commercial loans (including impaired loans) are placed on
nonaccrual status when the collection of interest or principal
has become 90 days past due or is otherwise considered
doubtful. When a loan is placed on nonaccrual status,
unpaid accrued interest is reversed. Future interest payments
are generally applied against principal. Commercial loans
are generally fully or partially charged down to the fair
value of collateral securing the loan, less costs to sell, when
the loan is deemed to be uncollectible, repayment is deemed
beyond reasonable time frames, the borrower has filed for
bankruptcy, or the loan is unsecured and greater than six
months past due. Loans secured by 1-4 family properties are
generally charged down to fair value, less costs to sell, at
180 days past due, and placed on nonaccrual status in
instances where a partial charge-off occurs. Revolving
consumer lines and credit cards are charged off at 180 days
past due and closed-end consumer loans, other than loans
secured by 1-4 family properties, are charged off at 120 days
past due and are, therefore, generally not placed on
nonaccrual status. Certain retail customers having financial
difficulties may have the terms of their credit card and other
loan agreements modified to require only principal payments
and, as such, are reported as nonaccrual.

Generally, purchased impaired loans are considered
accruing loans. However, the timing and amount of future
cash flows for some loans is not reasonably estimable. Those
loans are classified as nonaccrual loans and interest income
is not recognized until the timing and amount of the future
cash flows can be reasonably estimated.

Restructured Loans In certain circumstances, the Company
may modify the terms of a loan to maximize the collection
of amounts due when a borrower is experiencing financial
difficulties or is expected to experience difficulties in the
near-term. In most cases the modification is either a
concessionary reduction in interest rate, extension of the
maturity date or reduction in the principal balance that
would otherwise not be considered. Concessionary
modifications are classified as TDRs unless the modification
is short-term, or results in only an insignificant delay or
shortfall in the payments to be received. Many of the
Company’s TDRs are determined on a case-by-case basis in
connection with ongoing loan collection processes. However,
the Company has also implemented certain restructuring

programs that may result in TDRs. The consumer finance
division has a mortgage loan restructuring program where
certain qualifying borrowers facing an interest rate reset who
are current in their repayment status, are allowed to retain
the lower of their existing interest rate or the market interest
rate as of their interest reset date. The Company also
participates in the U.S. Department of the Treasury Home
Affordable Modification Program (“HAMP”). HAMP gives
qualifying homeowners an opportunity to refinance into
more affordable monthly payments, with the
U.S. Department of the Treasury compensating the Company
for a portion of the reduction in monthly amounts due from
borrowers participating in this program. For credit card loan
agreements, such modifications may include canceling the
customer’s available line of credit on the credit card,
reducing the interest rate on the card, and placing the
customer on a fixed payment plan not exceeding 60 months.
The allowance for credit losses on TDRs is determined by
discounting the restructured cash flows at the original
effective rate of the loan before modification. Loans
restructured at a rate equal to or greater than that of a new
loan with comparable risk at the time the loan agreement is
modified are excluded from TDR disclosures in years
subsequent to the restructuring if the borrowers are in
compliance with the modified terms.

Generally, a nonaccrual loan that is restructured
remains on nonaccrual for a period of six months after the
restructuring date to demonstrate the borrower can meet the
restructured terms. However, performance prior to the
restructuring, or significant events that coincide with the
restructuring, are considered in assessing whether the
borrower can meet the new terms and in rare circumstances
may result in the loan being returned to accrual status at the
time of restructuring or after a shorter performance period.
If the borrower’s ability to meet the revised payment
schedule is not reasonably assured, the loan remains
classified as a nonaccrual loan.

Impaired Loans A loan is considered to be impaired when,
based on current information and events, it is probable the
Company will be unable to collect all amounts due (both
interest and principal) according to the contractual terms of
the loan agreement.

Impaired loans include certain nonaccrual commercial

loans and loans for which a charge-off has been recorded
based upon the fair value of the underlying collateral.
Impaired loans also include loans that have been modified as
TDRs as a concession to borrowers experiencing financial
difficulties. Interest income is recognized on impaired loans

U.S. BANCORP

75

under the modified terms and conditions if the borrower has
demonstrated repayment performance at a level
commensurate with the modified terms over several payment
cycles. Purchased credit impaired loans are not reported as
impaired loans as long as they continue to perform at least
as well as expected at acquisition.

Leases The Company’s lease portfolio consists of both direct
financing and leveraged leases. The net investment in direct
financing leases is the sum of all minimum lease payments
and estimated residual values, less unearned income.
Unearned income is recorded in interest income over the
terms of the leases to produce a level yield.

The investment in leveraged leases is the sum of all lease

payments, less nonrecourse debt payments, plus estimated
residual values, less unearned income. Income from
leveraged leases is recognized over the term of the leases
based on the unrecovered equity investment.

Residual values on leased assets are reviewed regularly
for other-than-temporary impairment. Residual valuations
for retail automobile leases are based on independent
assessments of expected used car sale prices at the
end-of-term. Impairment tests are conducted based on these
valuations considering the probability of the lessee returning
the asset to the Company, re-marketing efforts, insurance
coverage and ancillary fees and costs. Valuations for
commercial leases are based upon external or internal
management appraisals. When there is impairment of the
Company’s interest in the residual value of a leased asset,
the carrying value is reduced to the estimated fair value with
the writedown recognized in the current period.

Other Real Estate OREO is included in other assets, and is
property acquired through foreclosure or other proceedings
on defaulted loans. OREO is initially recorded at fair value,
less estimated selling costs. OREO is evaluated regularly and
any decreases in value along with holding costs, such as
taxes and insurance, are reported in noninterest expense.

L O A N S H E L D F O R S A L E

Loans held for sale (“LHFS”) represent mortgage loan
originations intended to be sold in the secondary market and
other loans that management has an active plan to sell.
LHFS are carried at the lower-of-cost-or-fair value as
determined on an aggregate basis by type of loan with the
exception of loans for which the Company has elected fair
value accounting, which are carried at fair value. The credit
component of any writedowns upon the transfer of loans to
LHFS is reflected in loan charge-offs.

76

U.S. BANCORP

Where an election is made to subsequently carry the

LHFS at fair value, any further decreases or subsequent
increases in fair value are recognized in noninterest income.
Where an election is made to subsequently carry LHFS at
lower-of-cost-or-fair value, any further decreases are
recognized in noninterest income and increases in fair value
are not recognized until the loans are sold.

D E R I V A T I V E F I N A N C I A L
I N S T R U M E N T S

In the ordinary course of business, the Company enters into
derivative transactions to manage its interest rate,
prepayment, credit, price and foreign currency risk and to
accommodate the business requirements of its customers.
Derivative instruments are reported in other assets or other
liabilities at fair value. Changes in a derivative’s fair value
are recognized currently in earnings unless specific hedge
accounting criteria are met.

All derivative instruments that qualify and are

designated for hedge accounting are recorded at fair value
and classified either as a hedge of the fair value of a
recognized asset or liability (“fair value hedge”), a hedge of
the variability of cash flows to be received or paid related to
a recognized asset or liability or a forecasted transaction
(“cash flow hedge”), or a hedge of the volatility of an
investment in foreign operations driven by changes in
foreign currency exchange rates (“net investment hedge”).
Changes in the fair value of a derivative that is highly
effective and designated as a fair value hedge, and the
offsetting changes in the fair value of the hedged item, are
recorded in income. Effective changes in the fair value of a
derivative designated as a cash flow hedge are recorded in
accumulated other comprehensive income (loss) until cash
flows of the hedged item are recognized in income. Any
change in fair value resulting from hedge ineffectiveness is
immediately recorded in noninterest income. The Company
performs an assessment, both at the inception of a hedge
and, at a minimum, on a quarterly basis thereafter, to
determine whether derivatives designated as hedging
instruments are highly effective in offsetting changes in the
value of the hedged items.

If a derivative designated as a cash flow hedge is
terminated or ceases to be highly effective, the gain or loss
in accumulated other comprehensive income (loss) is
amortized to earnings over the period the forecasted hedged
transactions impact earnings. If a hedged forecasted
transaction is no longer probable, hedge accounting is ceased
and any gain or loss included in accumulated other

comprehensive income (loss) is reported in earnings
immediately.

R E V E N U E R E C O G N I T I O N

The Company recognizes revenue as it is earned based on
contractual terms, as transactions occur, or as services are
provided and collectibility is reasonably assured. In certain
circumstances, noninterest income is reported net of
associated expenses that are directly related to variable
volume-based sales or revenue sharing arrangements or
when the Company acts on an agency basis for others.
Certain specific policies include the following:

Credit and Debit Card Revenue Credit and debit card
revenue includes interchange income from credit and debit
cards, annual fees, and other transaction and account
management fees. Interchange income is a fee paid by a
merchant bank to the card-issuing bank through the
interchange network. Interchange fees are set by the credit
card companies and are based on cardholder purchase
volumes. The Company records interchange income as
transactions occur. Transaction and account management
fees are recognized as transactions occur or services are
provided, except for annual fees, which are recognized over
the applicable period. Volume-related payments to partners
and credit card companies and expenses for rewards
programs are also recorded within credit and debit card
revenue. Payments to partners and expenses related to
rewards programs are recorded when earned by the partner
or customer.

Merchant Processing Services Merchant processing services
revenue consists principally of transaction and account
management fees charged to merchants for the electronic
processing of transactions, net of interchange fees paid to
the credit card issuing bank, card company assessments, and
revenue sharing amounts, and is recognized at the time the
merchant’s transactions are processed or other services are
performed. The Company may enter into revenue sharing
agreements with referral partners or in connection with
purchases of merchant contracts from sellers. The revenue
sharing amounts are determined primarily on sales volume
processed or revenue generated for a particular group of
merchants. Merchant processing revenue also includes
revenues related to point-of-sale equipment recorded as sales
when the equipment is shipped or as earned for equipment
rentals.

Trust and Investment Management Fees Trust and
investment management fees are recognized over the period

in which services are performed and are based on a
percentage of the fair value of the assets under management
or administration, fixed based on account type, or
transaction-based fees.

Deposit Service Charges Service charges on deposit
accounts are primarily monthly fees based on minimum
balances or transaction-based fees. These fees are recognized
as earned or as transactions occur and services are provided.

O T H E R S I G N I F I C A N T P O L I C I E S

Intangible Assets The price paid over the net fair value of
acquired businesses (“goodwill”) is not amortized. Other
intangible assets are amortized over their estimated useful
lives, using straight-line and accelerated methods. The
recoverability of goodwill and other intangible assets is
evaluated annually, at a minimum, or on an interim basis if
events or circumstances indicate a possible inability to
realize the carrying amount. The evaluation includes
assessing the estimated fair value of the intangible asset
based on market prices for similar assets, where available,
and the present value of the estimated future cash flows
associated with the intangible asset.

Income Taxes Deferred taxes are recorded to reflect the tax
consequences on future years of differences between the tax
basis of assets and liabilities and their financial reporting
carrying amounts.

Mortgage Servicing Rights Mortgage servicing rights
(“MSRs”) are capitalized as separate assets when loans are
sold and servicing is retained or if they are purchased from
others. MSRs are recorded at fair value. The Company
determines the fair value by estimating the present value of
the asset’s future cash flows utilizing market-based
prepayment rates, discount rates, and other assumptions
validated through comparison to trade information, industry
surveys and independent third-party valuations. Changes in
the fair value of MSRs are recorded in earnings during the
period in which they occur. Risks inherent in the MSRs
valuation include higher than expected prepayment rates
and/or delayed receipt of cash flows. The Company utilizes
futures, forwards and options to mitigate MSR valuation
risk. Fair value changes related to the MSRs and the futures,
forwards and options, as well as servicing and other related
fees, are recorded in mortgage banking revenue.

Pensions For purposes of its retirement plans, the Company
utilizes its fiscal year-end as the measurement date. At the
measurement date, plan assets are determined based on fair
value, generally representing observable market prices. The

U.S. BANCORP

77

actuarial cost method used to compute the pension liabilities
and related expense is the projected unit credit method. The
projected benefit obligation is principally determined based
on the present value of projected benefit distributions at an
assumed discount rate. The discount rate utilized is based on
the investment yield of high quality corporate bonds
available in the marketplace with maturities equal to
projected cash flows of future benefit payments as of the
measurement date. Periodic pension expense (or income)
includes service costs, interest costs based on the assumed
discount rate, the expected return on plan assets based on an
actuarially derived market-related value and amortization of
actuarial gains and losses. Pension accounting reflects the
long-term nature of benefit obligations and the investment
horizon of plan assets, and can have the effect of reducing
earnings volatility related to short-term changes in interest
rates and market valuations. Actuarial gains and losses
include the impact of plan amendments and various
unrecognized gains and losses which are deferred and
amortized over the future service periods of active
employees. The market-related value utilized to determine
the expected return on plan assets is based on fair value
adjusted for the difference between expected returns and
actual performance of plan assets. The unrealized difference
between actual experience and expected returns is included
in expense over a twelve-year period. The overfunded or
underfunded status of the plans is recorded as an asset or
liability on the balance sheet, with changes in that status
recognized through other comprehensive income (loss).

Premises and Equipment Premises and equipment are stated
at cost less accumulated depreciation and depreciated
primarily on a straight-line basis over the estimated life of
the assets. Estimated useful lives range up to 40 years for
newly constructed buildings and from 3 to 20 years for
furniture and equipment.

Capitalized leases, less accumulated amortization, are

included in premises and equipment. Capitalized lease
obligations are included in long-term debt. Capitalized leases
are amortized on a straight-line basis over the lease term and
the amortization is included in depreciation expense.

Stock-Based Compensation The Company grants stock-
based awards, including restricted stock, restricted stock
units and options to purchase common stock of the
Company. Stock option grants are for a fixed number of
shares to employees and directors with an exercise price
equal to the fair value of the shares at the date of grant.
Stock-based compensation for awards is recognized in the
Company’s results of operations on a straight-line basis over

78

U.S. BANCORP

the vesting period. The Company immediately recognizes
compensation cost of awards to employees that meet
retirement status, despite their continued active employment.
The amortization of stock-based compensation reflects
estimated forfeitures adjusted for actual forfeiture
experience. As compensation expense is recognized, a
deferred tax asset is recorded that represents an estimate of
the future tax deduction from exercise or release of
restrictions. At the time stock-based awards are exercised,
cancelled, expire, or restrictions are released, the Company
may be required to recognize an adjustment to tax expense,
depending on the market price of the Company’s common
stock at that time.

Per Share Calculations Earnings per common share is
calculated by dividing net income applicable to U.S. Bancorp
common shareholders by the weighted average number of
common shares outstanding. Diluted earnings per common
share is calculated by adjusting income and outstanding
shares, assuming conversion of all potentially dilutive
securities.

Note 2 A C C O U N T I N G C H A N G E S

Accounting for Transfers of Financial Assets Effective
January 1, 2010, the Company adopted accounting guidance
issued by the Financial Accounting Standards Board
(“FASB”) related to transfers of financial assets. This
guidance removes the concept of qualifying special-purpose
entities and the exception for guaranteed mortgage
securitizations when a transferor had not surrendered
control over the transferred financial assets. In addition, the
guidance provides clarification of the requirements for
isolation and limitations on sale accounting for portions of
financial assets. The guidance also requires additional
disclosure about transfers of financial assets and a
transferor’s continuing involvement with transferred assets.
The adoption of this guidance was not significant to the
Company’s financial statements.

Variable Interest Entities Effective January 1, 2010, the
Company adopted accounting guidance issued by the FASB
related to VIEs. Generally, a VIE is an entity with
insufficient equity requiring additional subordinated
financial support, or an entity in which equity investors as a
group, either (i) lack the power through voting or other
similar rights, to direct the activities of the entity that most
significantly impact its performance, (ii) lack the obligation
to absorb the expected losses of the entity or (iii) lack the
right to receive the expected residual returns of the entity.

The new guidance replaces the previous quantitative-based
risks and rewards calculation for determining whether an
entity must consolidate a VIE with an assessment of whether
the entity has both (i) the power to direct the activities of
the VIE that most significantly impact the VIE’s economic
performance and (ii) the obligation to absorb losses of the
VIE or the right to receive benefits from the VIE that could
potentially be significant to the VIE. This guidance requires
reconsideration of whether an entity is a VIE upon
occurrence of certain events, as well as ongoing assessments
of whether a variable interest holder is the primary
beneficiary of a VIE. The Company consolidated
approximately $1.6 billion of assets of previously
unconsolidated entities, and deconsolidated approximately
$84 million of assets of previously consolidated entities upon
adoption of this guidance. Additionally, the adoption of this
guidance reduced total equity by $89 million.

Note 3 B U S I N E S S C O M B I N A T I O N S
A N D D I V E S T I T U R E S

In 2009, the Company acquired the banking operations of
First Bank of Oak Park Corporation (“FBOP”) in an FDIC
assisted transaction, and in 2008 the Company acquired the
banking operations of Downey Savings and Loan
Association, F.A. and PFF Bank and Trust (“Downey” and
“PFF”, respectively) in FDIC assisted transactions. Through
these acquisitions, the Company increased its deposit base
and branch franchise. The Company acquired approximately

$18.0 billion of assets in the FBOP acquisition and
approximately $17.4 billion of assets in the Downey and
PFF acquisitions, most of which are covered under loss
sharing agreements with the FDIC. Under the terms of the
loss sharing agreements, the FDIC will reimburse the
Company for most of the losses on the covered assets.

In 2010, the Company acquired the securitization trust

administration business of Bank of America, N.A. This
transaction included the acquisition of $1.1 trillion of assets
under administration and provided the Company with
approximately $8 billion of deposits as of December 31,
2010.

During 2010, the Company exchanged the long-term

asset management business of U.S. Bancorp Asset
Management (formerly FAF Advisors, Inc.), an affiliate of
the Company, for cash consideration and a 9.5 percent
equity interest in Nuveen Investments. The Company
recorded a $103 million gain ($41 million after tax) related
to this transaction. The Company will retain all other
products and services previously offered by U.S. Bancorp
Asset Management.

Note 4 R E S T R I C T I O N S O N C A S H A N D

D U E F R O M B A N K S

The Federal Reserve Bank requires bank subsidiaries to
maintain minimum average reserve balances. The amount of
those reserve balances were approximately $1.2 billion at
December 31, 2010 and 2009.

U.S. BANCORP

79

Note 5 I N V E S T M E N T S E C U R I T I E S

The amortized cost, other-than-temporary impairment recorded in other comprehensive income (loss), gross unrealized holding
gains and losses, and fair value of held-to-maturity and available-for-sale securities at December 31 were as follows:

2010

Unrealized Losses

2009

Unrealized Losses

Amortized
Cost

Unrealized
Gains

Other-than-
Temporary

Other

Fair
Value

Amortized
Cost

Unrealized
Gains

Other-than-
Temporary

Other

Fair
Value

(Dollars in Millions)

Held-to-maturity (a)

U.S. Treasury and agencies . . . . . . . .
Mortgage-backed securities

Residential

Agency . . . . . . . . . . . . . . . .
Non-agency

Non-prime . . . . . . . . . . . . .

Commercial

Non-agency . . . . . . . . . . . . .

Asset-backed securities
Collateralized debt

obligations/Collaterized loan
obligations . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .

Other

Obligations of state and political

subdivisions . . . . . . . . . . . . . . .
Obligations of foreign governments . . .
Other debt securities . . . . . . . . . . . .

Available-for-sale (b)

U.S. Treasury and agencies . . . . . . . .
Mortgage-backed securities

Residential

Agency . . . . . . . . . . . . . . . .
Non-agency

Prime (c) . . . . . . . . . . . . . .
Non-prime . . . . . . . . . . . . .

Commercial

Agency . . . . . . . . . . . . . . . .
Non-agency . . . . . . . . . . . . .

Asset-backed securities
Collateralized debt

obligations/Collaterized loan
obligations . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .

Other

Obligations of state and political

subdivisions . . . . . . . . . . . . . . .
Obligations of foreign governments . . .
Corporate debt securities . . . . . . . . .
Perpetual preferred securities . . . . . . .
. . . . . . . . . . .
Other investments (d)

$

165

$

–

$

847

3

10

157
127

27
7
126

–

–

–

13
–

1
–
–

–

–

–

–

–
(1)

–
–
–

$ (1)

$

164

$

(4)

–

(5)

(18)
(7)

(1)
–
(27)

843

3

5

152
119

27
7
99

–

4

–

–

–
–

32
–
11

47

Total held-to-maturity . . . . . . . .

$ 1,469

$ 14

$ (1)

$ (63)

$ 1,419

$

$

–

$

–

–

–

–
–

2
–
–

$ 2

–

–

–

–

–
–

–
–
–

–

–

–

$

$

–

–

–

–

–
–

(1)
–
–

$ (1)

$

–

4

–

–

–
–

33
–
11

48

$ (21)

$ 3,404

(47)

29,595

$

$

$ 2,559

$ 6

$

37,144

718

–

–

$ (28)

$ 2,537

$ 3,415

$ 10

(159)

37,703

29,147

495

1,216
1,193

194
47

204
709

6,835
6
1,109
456
183

12
15

5
3

23
23

3
–
–
41
17

(86)
(243)

–
–

(2)
(3)

–
–
–
–
–

(39)
(18)

(2)
–

(1)
(9)

(421)
–
(151)
(49)
(1)

1,103
947

197
50

224
720

6,417
6
958
448
199

1,624
1,359

141
14

199
360

6,822
6
1,179
483
607

8
11

6
–

11
12

30
–
–
30
9

(110)
(297)

(93)
(105)

1,429
968

–
(1)

(5)
(5)

–
–
–
–
–

–
–

147
13

–
(10)

(159)
–
(301)
(90)
(13)

205
357

6,693
6
878
423
603

Total available-for-sale . . . . . .

$51,855

$866

$(334)

$(878)

$51,509

$45,356

$622

$(418)

$(839)

$44,721

(a) Held-to-maturity securities are carried at historical cost adjusted for amortization of premiums and accretion of discounts and credit-related other-than-temporary

impairment.

(b) Available-for-sale securities are carried at fair value with unrealized net gains or losses reported within accumulated other comprehensive income (loss) in shareholders’

equity.

(c) Prime securities are those designated as such by the issuer or those with underlying asset characteristics and/or credit enhancements consistent with securities

designated as prime.

(d) Includes securities covered under loss shaing agreements with the FDIC with a fair value of $231 million at December 31, 2009. No securities were covered under loss

sharing agreements at December 31, 2010.

The weighted-average maturity of the available-for-sale

investment securities was 7.4 years at December 31, 2010,
compared with 7.1 years at December 31, 2009. The
corresponding weighted-average yields were 3.41 percent
and 4.00 percent, respectively. The weighted-average
maturity of the held-to-maturity investment securities was
6.3 years at December 31, 2010, and 8.4 years at

80

U.S. BANCORP

December 31, 2009. The corresponding weighted-average
yields were 2.07 percent and 5.10 percent, respectively.

For amortized cost, fair value and yield by maturity
date of held-to-maturity and available-for-sale securities
outstanding at December 31, 2010, refer to Table 11
included in Management’s Discussion and Analysis which is

incorporated by reference into these Notes to Consolidated
Financial Statements.

Securities carried at $28.0 billion at December 31,

2010, and $37.4 billion at December 31, 2009, were
pledged to secure public, private and trust deposits,
repurchase agreements and for other purposes required by

law. Included in these amounts were securities sold under
agreements to repurchase where the buyer/lender has the
right to sell or pledge the securities and which were
collateralized by securities with a carrying amount of
$9.3 billion at December 31, 2010, and $8.9 billion at
December 31, 2009.

The following table provides information about the amount of interest income from taxable and non-taxable investment securities:

Year Ended December 31 (Dollars in Millions)

2010

2009

2008

Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,292
309

$1,295
311

$1,666
318

Total interest income from investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,601

$1,606

$1,984

The following table provides information about the amount of gross gains and losses realized through the sales of
available-for-sale investment securities:

Year Ended December 31 (Dollars in Millions)

Realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2010

$21
(8)

Net realized gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$13

Income tax (benefit) on realized gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 5

2009

$150
(3)

$147

$ 56

2008

$43
(1)

$42

$16

In 2007, the Company purchased certain structured

Some of the SIV-related securities evidenced credit

investment securities (“SIVs”) from certain money market
funds managed by an affiliate of the Company. Subsequent to
the initial purchase, the Company exchanged its interest in
the SIVs for a pro-rata portion of the underlying investment
securities according to the applicable restructuring
agreements. The SIVs and the investment securities received
are collectively referred to as “SIV-related securities.”

deterioration at the time of acquisition by the Company.
Investment securities with evidence of credit deterioration at
acquisition had an unpaid principal balance and fair value of
$485 million and $173 million, respectively, at
December 31, 2010, and $1.2 billion and $483 million,
respectively, at December 31, 2009. Changes in the
accretable balance for these securities were as follows:

Year Ended December 31 (Dollars in Millions)

2010

Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 292
–

Impact of other-than-temporary impairment accounting change . . . . . . . . . . . . . . . . . . . . . . . .

Adjusted balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals (b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

292
66
(219)
(29)
29

2009

$ 349
(124)

225
127
–
(6)
(54)

2008

$ 105
–

105
261
(286)
(15)
284

Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 139

$ 292

$ 349

(a) Primarily resulted from the exchange of certain SIVs for the underlying investment securities.
(b) Primarily resulted from the sale of securities covered under loss sharing agreements with the FDIC and the exchange of certain SIVs for the underlying investment securities.
(c) Primarily represents changes in projected future cash flows on certain investment securities.

The Company conducts a regular assessment of its
investment securities with unrealized losses to determine
whether securities are other-than-temporarily impaired
considering, among other factors, the nature of the
securities, credit ratings or financial condition of the issuer,
the extent and duration of the unrealized loss, expected cash
flows of underlying collateral, market conditions and

whether the Company intends to sell or it is more likely than
not the Company will be required to sell the securities. To
determine whether perpetual preferred securities are
other-than-temporarily impaired, the Company considers the
issuers’ credit ratings, historical financial performance and
strength, the ability to sustain earnings, and other factors
such as market presence and management experience.

U.S. BANCORP

81

The following table summarizes other-than-temporary impairment by investment category:

Year Ended December 31 (Dollars in Millions)

Held-to-maturity

Asset-backed securities

Losses
Recorded in
Earnings

2010

Other
Gains
(Losses)

Losses
Recorded in
Earnings

Total

2009

Other
Gains
(Losses)

Total

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total held-to-maturity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (2)

$ (2)

$ –

$ –

$ (2)

$ (2)

$

$

–

–

$

$

–

–

$

$

–

–

Available-for-sale

Mortgage-backed securities

Residential

Non-agency
Prime (a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-prime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial

$ (5)
(63)

$(10)
(60)

$ (15)
(123)

$ (13)
(151)

$(182)
(304)

$ (195)
(455)

Non-agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Asset-backed securities

Collateralized debt obligations/Collaterized loan obligations . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Perpetual preferred securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

–

(6)
(13)
–
(1)
(1)

–

(1)
4
–
–
1

–

(7)
(9)
–
(1)
–

(1)

(17)
(186)
(7)
(223)
–

(1)

(3)
88
–
–
–

(2)

(20)
(98)
(7)
(223)
–

Total available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(89)

$(66)

$(155)

$(598)

$(402)

$(1,000)

(a) Prime securities are those designated as such by the issuer or those with underlying asset characteristics and/or credit enhancements consistent with securities

designated as prime.

The Company determined the other-than-temporary impairment recorded in earnings for securities other than perpetual
preferred securities by estimating the future cash flows of each individual security, using market information where available,
and discounting the cash flows at the original effective rate of the security. Other-than-temporary impairment recorded in other
comprehensive income (loss) was measured as the difference between that discounted amount and the fair value of each
security. The following table includes the ranges for principal assumptions used at December 31, 2010 for those
available-for-sale non-agency mortgage-backed securities determined to be other-than-temporarily impaired:

Prime

Non-Prime

Minimum

Maximum

Average

Minimum

Maximum

Average

Estimated lifetime prepayment rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lifetime probability of default rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lifetime loss severity rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4%
3
40

14%
9
55

13%
3
41

1%
1
37

12%
20
71

6%
8
55

Changes in the credit losses on non-agency mortgage-backed securities, including SIV-related securities, and other debt securities
are summarized as follows:

Year Ended December 31 (Dollars in Millions)

Balance at beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit losses on securities not previously considered other-than-temporarily impaired . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases in expected cash flows on securities for which other-than-temporary impairment was previously recognized . . . . .
Increases in expected cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit losses on security sales and securities expected to be sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2010

2009

$335
19
72
(26)
(60)
–
18

$ 299
94
148
(49)
(30)
(127)
–

Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$358

$ 335

82

U.S. BANCORP

At December 31, 2010, certain investment securities had a fair value below amortized cost. The following table shows the gross
unrealized losses and fair value of the Company’s investments with unrealized losses, aggregated by investment category and
length of time the individual securities have been in continuous unrealized loss positions, at December 31, 2010:

(Dollars in Millions)

Held-to-maturity

Less Than 12 Months

12 Months or Greater

Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

U.S. Treasury and agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities

$

102

$ (1)

$

Residential

Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-agency

Non-prime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial

Non-agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Asset-backed securities

Collateralized debt obligations/Collaterized loan obligations . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations of state and political subdivisions . . . . . . . . . . . . . . . . . . . . .
Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

516

(4)

–

–

5
–
2
–

–

–

–
–
–
–

–

–

3

4

70
16
9
99

$

–

$

102

$

(1)

–

–

(5)

(18)
(8)
(1)
(27)

516

3

4

75
16
11
99

(4)

–

(5)

(18)
(8)
(1)
(27)

(64)

Total held-to-maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

625

$ (5)

$ 201

$ (59)

$

826

$

Available-for-sale

U.S. Treasury and agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities

Residential

Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-agency

Prime (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-prime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial

Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Asset-backed securities

Collateralized debt obligations/Collaterized loan obligations . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations of state and political subdivisions . . . . . . . . . . . . . . . . . . . . .
Obligations of foreign governments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Perpetual preferred securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,549

$ (28)

$

–

$

–

$ 1,549

$

(28)

11,540

(159)

23
79

91
3

18
113
4,980
6
15
71
–

–
(8)

(2)
–

(1)
(1)
(271)
–
–
(3)
–

11

933
737

–
3

11
25
1,040
–
937
251
4

–

11,551

(159)

(125)
(253)

–
–

(2)
(11)
(150)
–
(151)
(46)
(1)

956
816

91
6

29
138
6,020
6
952
322
4

(125)
(261)

(2)
–

(3)
(12)
(421)
–
(151)
(49)
(1)

Total available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$18,488

$(473)

$3,952

$(739)

$22,440

$(1,212)

(a) Prime securities are those designated as such by the issuer or those with underlying asset characteristics and/or credit enhancements consistent with securities

designated as prime.

The Company does not consider these unrealized losses
to be credit-related. These unrealized losses primarily relate
to changes in interest rates and market spreads subsequent
to purchase. A substantial portion of securities that have
unrealized losses are either corporate debt, obligations of
state and political subdivisions or mortgage-backed securities
issued with high investment grade credit ratings. In general,

the issuers of the investment securities are contractually
prohibited from prepayment at less than par, and the
Company did not pay significant purchase premiums for
these securities. At December 31, 2010, the Company had
no plans to sell securities with unrealized losses and believes
it is more likely than not it would not be required to sell
such securities before recovery of their amortized cost.

U.S. BANCORP

83

Note 6 L O A N S A N D A L L O W A N C E F O R C R E D I T L O S S E S

The composition of the loan portfolio at December 31 was as follows:

(Dollars in Millions)

Commercial

2010

2009

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 42,272
6,126

$ 42,255
6,537

Total commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

48,398

48,792

Commercial Real Estate

Commercial mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27,254
7,441

25,306
8,787

Total commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34,695

34,093

Residential Mortgages

Residential mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity loans, first liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24,315
6,417

20,581
5,475

Total residential mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

30,732

26,056

Retail

Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity and second mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other retail

Revolving credit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Installment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Automobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Student . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16,803
4,569
18,940

3,472
5,459
10,897
5,054

16,814
4,568
19,439

3,506
5,455
9,544
4,629

Total other retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24,882

23,134

Total retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

65,194

63,955

Total loans, excluding covered loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Covered Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

179,019
18,042

172,896
21,859

Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$197,061

$194,755

The Company had loans of $62.8 billion at

December 31, 2010, and $55.6 billion at December 31,
2009, pledged at the Federal Home Loan Bank, and loans of
$44.6 billion at December 31, 2010, and $44.2 billion at
December 31, 2009, pledged at the Federal Reserve Bank.

The Company primarily lends to borrowers in the states

in which it has Consumer and Small Business Banking
offices. Collateral for commercial loans may include
marketable securities, accounts receivable, inventory and
equipment. For details of the Company’s commercial
portfolio by industry group and geography as of
December 31, 2010 and 2009, see Table 7 included in
Management’s Discussion and Analysis which is
incorporated by reference into these Notes to Consolidated
Financial Statements.

For detail of the Company’s commercial real estate

portfolio by property type and geography as of
December 31, 2010 and 2009, see Table 8 included in

Management’s Discussion and Analysis which is
incorporated by reference into these Notes to Consolidated
Financial Statements. Such loans are collateralized by the
related property.

Originated loans are presented net of unearned interest
and deferred fees and costs, which amounted to $1.3 billion
at December 31, 2010 and 2009, respectively. In accordance
with applicable authoritative accounting guidance effective
for the Company January 1, 2009, all purchased loans and
related indemnification assets are recorded at fair value at
the date of purchase. The Company evaluates purchased
loans for impairment in accordance with applicable
authoritative accounting guidance. Purchased loans with
evidence of credit deterioration since origination for which it
is probable that all contractually required payments will not
be collected are considered impaired (“purchased impaired
loans”). All other purchased loans are considered
nonimpaired (“purchased nonimpaired loans”).

84

U.S. BANCORP

Covered assets represent loans and other assets acquired from the FDIC subject to loss sharing agreements and included
expected reimbursements from the FDIC of approximately $3.1 billion at December 31, 2010, and $3.9 billion at
December 31, 2009. The carrying amount of covered assets consisted of purchased impaired loans, purchased nonimpaired
loans, and other assets as shown in the following table:

2010

2009

December 31 (Dollars in Millions)

Purchased
impaired
loans

Purchased
nonimpaired
loans

Commercial loans . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate loans . . . . . . . . . . . . . .
Residential mortgage loans . . . . . . . . . . . . . . . .
Retail loans . . . . . . . . . . . . . . . . . . . . . . . . . .
Losses reimbursable by the FDIC . . . . . . . . . . . .

Covered loans. . . . . . . . . . . . . . . . . . . . . . .
Foreclosed real estate . . . . . . . . . . . . . . . . . . .

$

70
2,254
3,819
–
–

6,143
–

$ 260
5,952
1,620
930
–

8,762
–

Other
assets

$

–
–
–
–
3,137

3,137
453

$

Total

330
8,206
5,439
930
3,137

18,042
453

Purchased
impaired
loans

Purchased
nonimpaired
loans

$

86
3,035
4,712
30
–

7,863
–

$

443
6,724
1,918
978
–

10,063
–

Other
assets

$

–
–
–
–
3,933

3,933
653

$

Total

529
9,759
6,630
1,008
3,933

21,859
653

Total covered assets . . . . . . . . . . . . . . . . . .

$6,143

$8,762

$3,590

$18,495

$7,863

$10,063

$4,586

$22,512

At December 31, 2010, $.5 billion of the purchased
impaired loans included in covered loans were classified as
nonperforming assets, compared with $1.1 billion at
December 31, 2009, because the expected cash flows are
primarily based on the liquidation of underlying collateral
and the timing and amount of the cash flows could not be
reasonably estimated. Interest income is recognized on other
purchased impaired loans in covered loans through accretion

of the difference between the carrying amount of those loans
and their expected cash flows. The initial determination of
the fair value of the purchased loans includes the impact of
expected credit losses and, therefore, no allowance for credit
losses is recorded at the purchase date. To the extent credit
deterioration occurs after the date of acquisition, the
Company records an allowance for credit losses.

Changes in the accretable balance for purchased impaired loans for the Downey, PFF and FBOP transactions were as follows:

Year Ended December 31 (Dollars in Millions)

2010

2009

2008

Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,845
–
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(421)
Accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(27)
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
536
Reclassifications (to)/from nonaccretable difference (a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(43)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,719
356
(358)
(56)
384
(200)

$

–
2,774
(55)
–
–
–

Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,890

$2,845

$2,719

(a) Primarily relates to improvements in expected credit performance and changes in variable rates.

U.S. BANCORP

85

The allowance for credit losses reserves for probable and estimatable losses incurred in the Company’s loan and lease portfolio
and includes certain amounts related to purchased loans that do not represent loss exposure to the Company, because those
losses are recoverable under loss sharing agreements with the FDIC. Activity in the allowance for credit losses was as follows:

(Dollars in Millions)

Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add

2010

2009

2008

$5,264

$3,639

$2,260

Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,356

5,557

3,096

Deduct

Loans charged off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less recoveries of loans charged off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net loans charged off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change for credit losses to be reimbursed by the FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions and other changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,496
(315)

4,181
92
–

4,111
(243)

3,868
–
(64)

2,009
(190)

1,819
–
102

Balance at end of year

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,531

$5,264

$3,639

Components

Allowance for loan losses, excluding losses to be reimbursed by the FDIC . . . . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses to be reimbursed by the FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liability for unfunded credit commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,218
92
221

$5,079
–
185

$3,514
–
125

Total allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,531

$5,264

$3,639

Additional detail of the allowance for credit losses and related loan balances, by portfolio type, for the year ended
December 31, 2010, was as follows:

(Dollars in Millions)

Allowance for credit losses:

Balance at beginning of year . . . . . . . . . . . . .
Add

Provision for credit losses . . . . . . . . . . . . . .

Deduct

Loans charged off
. . . . . . . . . . . . . . . . . .
Less recoveries of loans charged off. . . . . . .

Net loans charged off . . . . . . . . . . . . . . . .

Net change for credit losses to be reimbursed

by the FDIC . . . . . . . . . . . . . . . . . . . . . . .

Commercial
Real
Estate

Commercial

Residential
Mortgages

Credit
Card

Other
Retail

Total
Loans,
Excluding
Covered Loans

Covered
Loans

Total
Loans

$ 1,208

$ 1,001

$

672 $ 1,495 $

871

$ 5,247 $

723

918
(91)

827

–

1,135

694

1,100

681

871
(26)

845

–

554
(8)

546

–

1,270
(70)

1,200

863
(118)

745

–

–

4,333

4,476
(313)

4,163

–

17

23

20
(2)

18

92

$ 5,264

4,356

4,496
(315)

4,181

92

Balance at end of year . . . . . . . . . . . . . . . . .

$ 1,104

$ 1,291

Allowance balance at end of year related to:
Loans individually evaluated for impairment (a) . .
TDRs collectively evaluated for impairment . . . .
Other loans collectively evaluated for

impairment . . . . . . . . . . . . . . . . . . . . . . .
Loans acquired with deteriorated credit quality . .

$

$

38
–

55
–

1,066
–

1,235
1

Total allowance for credit losses . . . . . . . . .

$ 1,104

$ 1,291

Loan balance at end of year:

Loans individually evaluated for impairment (a) . .
TDRs collectively evaluated for impairment . . . .
Other loans collectively evaluated for

impairment . . . . . . . . . . . . . . . . . . . . . . .
Loans acquired with deteriorated credit quality . .

$

295
–

$

801
–

$

$

$

$

820 $ 1,395 $

807

$ 5,417 $

114

$ 5,531

– $

– $

320

500
–

223

1,172
–

820 $ 1,395 $

– $

– $

1,957

452

–
30

777
–

807

–
114

$

93 $

573

4,750
1

–
–

28
86

$

93
573

4,778
87

$ 5,417 $

114

$ 5,531

$ 1,096 $
2,523

–
–

$ 1,096
2,523

48,103
–

33,834
60

28,775
–

16,351
–

48,277
–

175,340
60

11,899
6,143

187,239
6,203

Total loans . . . . . . . . . . . . . . . . . . . . . . .

$48,398

$34,695

$30,732 $16,803 $48,391

$179,019 $18,042 (b) $197,061

(a) Represents commercial and commercial real estate loans that are greater than $5 million and are classified as nonperforming or TDRs.
(b) Includes expected reimbursements from the FDIC under loss sharing agreements.

86

U.S. BANCORP

Credit Quality The quality of the Company’s loan portfolios is assessed as a function of net credit losses, levels of
nonperforming assets and delinquencies, and credit quality ratings as defined by the Company. These credit quality ratings are
an important part of the Company’s overall credit risk management process and evaluation of its allowance for credit losses.

The following table provides a summary of loans by portfolio type, including the delinquency status of those loans that
continue to accrue interest, and those loans that are nonperforming:

December 31, 2010 (Dollars in Millions)

Accruing

Current

30-89 Days
Past Due

90 Days or
More Past Due

Nonperforming

Total

Commercial
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 47,412
32,986
29,140
15,993
47,706

Total loans, excluding covered loans . . . . . . . . . . . . . . . . . . . . . . . . .
Covered loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

173,237
14,951

$ 325
415
456
269
404

1,869
757

$

64
1
500
313
216

1,094
1,090

$ 597
1,293
636
228
65

2,819
1,244

$ 48,398
34,695
30,732
16,803
48,391

179,019
18,042

Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $188,188

$2,626

$2,184

$4,063

$197,061

loans,
Total nonperforming assets
restructured loans not performing in accordance with
modified terms, other real estate and other nonperforming
assets owned by the Company. For details of the Company’s

include nonaccrual

nonperforming assets as of December 31, 2010 and 2009, see
Table 14 included in Management’s Discussion and Analysis
which is incorporated by reference into these Notes to
Consolidated Financial Statements.

The following table lists information related to nonperforming loans as of December 31:

(Dollars in Millions)

2010

2009

Loans on nonaccrual status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,150
669
Restructured loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,943
492

Total nonperforming loans, excluding covered loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Covered nonperforming loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,819
1,244

3,435
1,350

Total nonperforming loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,063

$4,785

Interest income that would have been recognized at original contractual terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 176
53
Amount recognized as interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 468
299

Forgone revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 123

$ 169

The Company classifies its loan portfolios using internal credit quality ratings, as discussed in the Company’s significant
accounting policies in Note 1. The following table provides a summary of loans by portfolio type and the Company’s internal
credit quality rating:

December 31, 2010 (Dollars in Millions)

Pass

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44,595
28,155
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,355
Residential mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,262
Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47,906
Other retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total loans, excluding covered loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Covered loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

166,273
17,073

Special
Mention

$1,545
1,540
29
–
70

3,184
283

Criticized

Classified (a)

$ 2,258
5,000
1,348
541
415

9,562
686

Total
Criticized

$ 3,803
6,540
1,377
541
485

12,746
969

Total

$ 48,398
34,695
30,732
16,803
48,391

179,019
18,042

Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $183,346

$3,467

$10,248

$13,715

$197,061

Total outstanding commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $370,031

$4,923

$11,576

$16,499

$386,530

(a) Classified rating on consumer loans is primarily based on delinquency status.

U.S. BANCORP

87

A loan is considered to be impaired when, based on current events or information, it is probable the Company will be unable to
collect all amounts due per the contractual terms of the loan agreement. Impaired loans include certain nonaccrual commercial
loans, loans for which a charge-off has been recorded based upon the fair value of the underlying collateral and loans modified
as TDRs. Nonaccrual commercial lease financing loans of $78 million, $125 million and $102 million at December 31, 2010,
2009 and 2008, respectively, were excluded from impaired loans as commercial lease financing loans are accounted for under
authoritative accounting guidance for leases, and are excluded from the definition of an impaired loan under loan impairment
guidance. A summary of impaired loans, excluding covered loans, was as follows:

(Dollars in Millions)

Commercial and commercial real estate loans:

Period-end recorded investment

2010

2009

2008

Recorded
Investment

Valuation
Allowance

Recorded
Investment

Valuation
Allowance

Recorded
Investment

Valuation
Allowance

Nonaccrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructured accruing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,812
92

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,904

Average recorded investment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments to lend additional funds . . . . . . . . . . . . . . . . . . . . .

$2,294
10
97

Residential mortgages and retail loans:
Period-end recorded investment

Nonaccrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructured accruing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 929
2,115

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,044

Average recorded investment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,865
89

$172
5

$177

$112
472

$584

$2,639
145

$2,784

$2,559
7
289

$ 671
1,649

$2,320

$2,148
106

$203
2

$205

$ 72
339

$411

$1,364
152

$1,516

$ 992
5
107

$ 302
1,072

$1,374

$ 993
67

$104
10

$114

$ 29
208

$237

Note: At December 31, 2010, all impaired loans had an associated allowance. At December 31, 2009 and 2008, all impaired loans, except for certain impaired commercial and
commercial real estate loans had an associated allowance. Impaired loan balances with no associated allowance at December 31, 2009 and 2008, were $1.0 billion and $514 million,
respectively.

Additional detail of impaired loans by portfolio type, excluding covered loans, for the year ended December 31, 2010, was as
follows:

(Dollars in Millions)

Commercial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Period-end
Recorded
Investment

$ 596
1,308
2,440
452
152

Unpaid
Principal
Balance

$1,631
2,659
2,877
798
189

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,948

$8,154

Valuation
Allowance

Average
Recorded
Investment

Interest
Income
Recognized

$ 59
118
334
218
32

$761

$ 693
1,601
2,297
418
150

$5,159

$ 8
2
72
11
6

$99

Net gains on the sale of loans of $574 million,
$710 million and $220 million for the years ended
December 31, 2010, 2009 and 2008, respectively, were
included in noninterest income, primarily in mortgage
banking revenue.

The Company has an equity interest in a joint venture

that is accounted for utilizing the equity method. The
principal activities of this entity are to lend to entities that

develop land, and construct and sell residential homes. The
Company provides a warehousing line to this joint venture.
Warehousing advances to this joint venture are repaid when
the sale of loans is completed or the real estate is
permanently refinanced by others. At December 31, 2010
and 2009, the Company had $825 million and $890 million,
respectively, of outstanding advances to this joint venture.
These advances are included in commercial real estate loans.

88

U.S. BANCORP

Note 7 L E A S E S

The components of the net investment in sales-type and direct financing leases at December 31 were as follows:

(Dollars in Millions)

2010

2009

Aggregate future minimum lease payments to be received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,294
334
Unguaranteed residual values accruing to the lessor’s benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,402)
Unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
189
Initial direct costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$11,797
322
(1,539)
218

Total net investment in sales-type and direct financing leases (a)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,415

$10,798

(a) The accumulated allowance for uncollectible minimum lease payments was $118 million and $198 million at December 31, 2010 and 2009, respectively.

The minimum future lease payments to be received from sales-type and direct financing leases were as follows at December 31,
2010:

(Dollars in Millions)

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,166
2,967
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,701
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,733
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
455
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
272
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 8 A C C O U N T I N G F O R T R A N S F E R S A N D S E R V I C I N G O F F I N A N C I A L

A S S E T S A N D V A R I A B L E I N T E R E S T E N T I T I E S

The Company sells financial assets in the normal course of
business. The majority of the Company’s financial asset sales
are residential mortgage loan sales primarily to government-
sponsored enterprises through established programs, the sale
or syndication of tax-advantaged investments, commercial
loan sales through participation agreements, and other
individual or portfolio loan and securities sales. In accordance
with the accounting guidance for asset transfers, the
Company considers any ongoing involvement with transferred
assets in determining whether the assets can be derecognized
from the balance sheet. For loans sold under participation
agreements, the Company also considers the terms of the loan
participation agreement and whether they meet the definition
of a participating interest and thus qualify for derecognition.
With the exception of servicing and certain performance-
based guarantees, the Company’s continuing involvement with
financial assets sold is minimal and generally limited to
market customary representation and warranty clauses. The
guarantees provided to certain third-parties in connection
with the sale or syndication of certain assets, primarily loan
portfolios and tax-advantaged investments, are further
discussed in Note 22. When the Company sells financial
assets, it may retain servicing rights and/or other interests in
the transferred financial assets. The gain or loss on sale
depends on the previous carrying amount of the transferred
financial assets and the consideration received and any

liabilities incurred in exchange for the transferred assets.
Upon transfer, any servicing assets and other interests that
continue to be held by the Company are initially recognized
at fair value. For further information on MSRs, refer to
Note 10. The Company has no asset securitizations or similar
asset-backed financing arrangements that are off-balance
sheet.

The Company is involved in various entities that are

considered to be VIEs. The Company’s investments in VIEs
primarily represent private investment funds or partnerships
that make equity investments, provide debt financing or
support community-based investments in affordable housing
development entities that provide capital for communities
located in low-income districts and for historic rehabilitation
projects that may enable the Company to ensure regulatory
compliance with the Community Reinvestment Act. In
addition, the Company sponsors entities to which it transfers
tax-advantaged investments. The Company’s investments in
these entities are designed to generate a return primarily
through the realization of federal and state income tax credits
over specified time periods. The Company realized federal
and state income tax credits related to these investments of
$713 million, $685 million and $556 million for the years
ended December 31, 2010, 2009 and 2008, respectively. The
Company amortizes its investments in these entities as the tax
credits are realized. Tax credit amortization expense is

U.S. BANCORP

89

recorded in tax expense for investments meeting certain
characteristics, and in other noninterest expense for other
investments. Amortization expense recorded in tax expense
was $228 million, $265 million and $213 million, and in
other noninterest expense was $546 million, $436 million and
$311 million for the years ended December 31, 2010, 2009
and 2008, respectively.

As a result of adopting new accounting guidance, the

Company consolidated certain community development and
tax-advantaged investment entities on January 1, 2010 that
it had not previously consolidated. The consolidation of
these VIEs increased assets and liabilities by approximately
$1.0 billion. The equity impact of consolidating these VIEs
was a $9 million decrease, which represented the recognition
of noncontrolling interests in the consolidated VIEs. At
December 31, 2010, approximately $3.5 billion of the
Company’s assets and liabilities related to community
development and tax-advantaged investment VIEs. The
majority of the assets of these consolidated VIEs are
reported in other assets, and the liabilities are reported in
long-term debt on the consolidated balance sheet. The assets
of a particular VIE are the primary source of funds to settle
its obligations. The creditors of the VIEs do not have
recourse to the general credit of the Company. The
Company’s exposure to the consolidated VIEs is generally
limited to the carrying value of its variable interests plus any
related tax credits previously recognized.

The Company also deconsolidated certain community

development and tax-advantaged investment entities as a
result of adopting the new accounting guidance, principally
because the Company did not have power to direct the
activities that most significantly impact the VIEs. The
deconsolidation of these VIEs resulted in an $84 million
decrease in assets and $77 million decrease in liabilities. The
deconsolidation also resulted in a $7 million decrease to
equity, which was principally the removal of the
noncontrolling interests in these VIEs.

In addition, the Company sponsors a conduit to which

it previously transferred high-grade investment securities.
Under accounting rules effective prior to January 1, 2010,
the Company was not the primary beneficiary of the conduit
as it did not absorb the majority of the conduit’s expected
losses or residual returns. Under the new accounting

guidance, the Company consolidated the conduit on
January 1, 2010, because of its ability to manage the
activities of the conduit. Consolidation of the conduit
increased held-to-maturity investment securities $.6 billion,
decreased loans $.7 billion, and reduced retained earnings
$73 million. At December 31, 2010, $.4 billion of the
held-to-maturity investment securities on the Company’s
consolidated balance sheet related to the conduit.

The Company also sponsors a municipal bond securities

tender option bond program. The Company controls the
activities of the program’s entities, is entitled to the residual
returns and provides credit, liquidity and remarketing
arrangements to the program. As a result, the Company has
consolidated the program’s entities since its inception. At
December 31, 2010, and December 31, 2009, $5.6 billion of
available-for-sale securities and $5.7 billion of short-term
borrowings on the consolidated balance sheet were related
to the tender option bond program.

The Company is not required to consolidate other VIEs

in which it has concluded it does not have a controlling
financial interest, and thus is not the primary beneficiary. In
such cases, the Company does not have both the power to
direct the entities’ most significant activities and the
obligation to absorb losses or right to receive benefits that
could potentially be significant to the VIEs. The Company’s
investments in unconsolidated VIEs ranged from less than
$1 million to $41 million, with an aggregate amount of
approximately $2.0 billion at December 31, 2010, and from
less than $1 million to $63 million, with an aggregate
amount of $2.4 billion at December 31, 2009. The
Company’s investments in these unconsolidated VIEs
generally are carried in other assets on the balance sheet.
While the Company believes potential losses from these
investments are remote, the Company’s maximum exposure
to these unconsolidated VIEs, including any tax
implications, was approximately $5.0 billion at
December 31, 2010, compared with $4.7 billion at
December 31, 2009. This maximum exposure is determined
by assuming a scenario where the separate investments
within the individual private funds were to become
worthless, and the community-based business and housing
projects and related tax credits completely failed and did not
meet certain government compliance requirements.

90

U.S. BANCORP

Note 9 P R E M I S E S A N D E Q U I P M E N T

Premises and equipment at December 31 consisted of the following:

(Dollars in Millions)

2010

2009

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures and equipment
Capitalized building and equipment leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 516
3,073
2,791
88
50

6,518
(4,031)

$ 460
2,923
2,643
82
21

6,129
(3,866)

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,487

$ 2,263

Note 10 M O R T G A G E S E R V I C I N G R I G H T S

The Company serviced $173.9 billion of residential mortgage
loans for others at December 31, 2010, and $150.8 billion at
December 31, 2009. The net impact included in mortgage
banking revenue of assumption changes on the fair value of
MSRs and fair value changes of derivatives used to economically
hedge MSR value changes was a net gain of $139 million for
the year ended December 31, 2010, compared with a net gain

of $147 million and a net loss of $122 million for the years
ended December 31, 2009 and 2008, respectively. Loan
servicing fees, not including valuation changes, included in
mortgage banking revenue, were $600 million, $512 million and
$404 million for the years ended December 31, 2010, 2009 and
2008, respectively.

Changes in fair value of capitalized MSRs are summarized as follows:

Year Ended December 31 (Dollars in Millions)

2010

2009

2008

Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rights purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rights capitalized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in fair value of MSRs

$1,749
65
639

Due to change in valuation assumptions (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other changes in fair value (b)

(249)
(367)

$1,194
101
848

(15)
(379)

$1,462
52
515

(592)
(243)

Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,837

$1,749

$1,194

(a) Principally reflects changes in discount rates and prepayment speed assumptions, primarily arising from interest rate changes.
(b) Primarily represents changes due to collection/realization of expected cash flows over time (decay).

The estimated sensitivity to changes in interest rates of the fair value of the MSRs portfolio and the related derivative
instruments at December 31, 2010, was as follows:

(Dollars in Millions)

Down Scenario

Up Scenario

50 bps

25 bps

25 bps

50 bps

Net fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$6

$(5)

$5

$1

The fair value of MSRs and their sensitivity to changes

in interest rates is influenced by the mix of the servicing
portfolio and characteristics of each segment of the
portfolio. The Company’s servicing portfolio consists of the
distinct portfolios of government-insured mortgages,
conventional mortgages, and Mortgage Revenue Bond
Programs (“MRBP”). The servicing portfolios are
predominantly comprised of fixed-rate agency loans with

limited adjustable-rate or jumbo mortgage loans. The MRBP
division specializes in servicing loans made under state and
local housing authority programs. These programs provide
mortgages to low-income and moderate-income borrowers
and are generally government-insured programs with a
favorable rate subsidy, down payment and/or closing cost
assistance.

U.S. BANCORP

91

A summary of the Company’s MSRs and related characteristics by portfolio as of December 31 was as follows:

(Dollars in Millions)

MRBP

Government

Conventional

Total

MRBP

Government

Conventional

Total

2010

2009

Servicing portfolio. . . . . . . . . . . . . . . $12,646
166
Fair market value . . . . . . . . . . . . . . . $
Value (bps) (a) . . . . . . . . . . . . . . . . .
131
Weighted-average servicing fees

(bps)

. . . . . . . . . . . . . . . . . . . . .
Multiple (value/servicing fees) . . . . . . .
Weighted-average note rate . . . . . . . .
. . . . . . . . . . . . . . . . .
Age (in years)
Expected prepayment (constant

prepayment rate)

. . . . . . . . . . . . .
Expected life (in years). . . . . . . . . . . .
Discount rate . . . . . . . . . . . . . . . . .

40
3.28
5.75%
4.1

12.3%
6.7
11.9%

$28,880
342
$
118

$132,393
$ 1,329
100

$173,919
$ 1,837
106

$11,915
173
$
145

$21,819
293
$
134

$117,049
$ 1,283
110

$150,783
$ 1,749
116

38
3.11
5.35%
2.2

17.2%
5.1
11.4%

30
3.33
5.27%
2.7

16.2%
5.3
10.3%

32
3.31
5.32%
2.7

16.1%
5.4
10.6%

40
3.63
5.94%
3.8

12.4%
6.5
11.5%

41
3.27
5.68%
2.1

18.8%
4.8
11.3%

32
3.44
5.56%
2.5

16.6%
5.3
10.5%

34
3.41
5.61%
2.5

16.6%
5.3
10.7%

(a) Value is calculated as fair market value divided by the servicing portfolio.

Note 11 I N T A N G I B L E A S S E T S

Intangible assets consisted of the following:

December 31 (Dollars in Millions)

Estimated
Life (a)

Amortization
Method (b)

Balance

2010

2009

Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9 years/8 years
Merchant processing contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 years/5 years
Mortgage servicing rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 years/6 years
9 years/5 years
Other identified intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c)
SL/AC
SL/AC
(c)
SL/AC
SL/AC

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 8,954
421
283
1,837
200
472

$12,167

$ 9,011
473
383
1,749
222
579

$12,417

(a) Estimated life represents the amortization period for assets subject to the straight line method and the weighted average or life of the underlying cash flows
amortization period for intangibles subject to accelerated methods. If more than one amortization method is used for a category, the estimated life for each
method is calculated and reported separately.
(b) Amortization methods: SL = straight line method

(c) Goodwill is evaluated for impairment, but not amortized. Mortgage servicing rights are recorded at fair value, and are not amortized.

AC = accelerated methods generally based on cash flows

Aggregate amortization expense consisted of the following:

Year Ended December 31 (Dollars in Millions)

Merchant processing contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core deposit benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other identified intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2010

2009

2008

$102
102
49
114

$367

$117
103
62
105

$387

$136
67
68
84

$355

The estimated amortization expense for the next five years is as follows:

(Dollars in Millions)

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $291
243
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
200
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
152
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
118
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

92

U.S. BANCORP

The following table reflects the changes in the carrying value of goodwill for the years ended December 31, 2010 and 2009:

(Dollars in Millions)

Wholesale Banking and
Commercial Real Estate

Consumer and Small
Business Banking

Wealth Management and
Securities Services

Payment
Services

Treasury and
Corporate Support

Consolidated
Company

Balance at December 31, 2008. . . .
Goodwill acquired . . . . . . . . . .
. . . . . . . . . . . . . . . .
Other (a)

Balance at December 31, 2009. . . .
Goodwill acquired . . . . . . . . . .
. . . . . . . . . . . . . . . .
Disposal
. . . . . . . . . . . . . . . .
Other (a)

Balance at December 31, 2010. . . .

$1,475
130
–

$1,605
–
–
–

$1,605

$3,283
243
–

$3,526
9
–
–

$3,535

(a) Other changes in goodwill include the effect of foreign exchange translation.

$1,512
3
–

$1,515
5
(57)
–

$2,301
46
18

$2,365
–
–
(14)

$1,463

$2,351

$–
–
–

$–
–
–
–

$–

$8,571
422
18

$9,011
14
(57)
(14)

$8,954

Note 12 S H O R T- T E R M B O R R O W I N G S ( a )

The following table is a summary of short-term borrowings for the last three years:

(Dollars in Millions)

At year-end

2010

2009

2008

Amount

Rate

Amount

Rate

Amount

Rate

Federal funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . .
Commercial paper
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

776
9,261
15,885
6,635

.17% $ 1,329
8,866
14,608
6,509

2.70
.20
.59

.11% $ 2,369
9,493
10,061
12,060

2.82
.17
.48

.17%

2.65
.22
1.87

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,557

.99% $31,312

.98% $33,983

1.48%

Average for the year

Federal funds purchased (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,180
9,211
Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . .
15,349
Commercial paper
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,979
Other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.09% $ 2,457
8,915
10,924
6,853

2.75
.20
.75

8.22% $ 3,834
11,982
2.84
10,532
.32
11,889
.89

5.19%
3.07
1.91
3.16

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $33,719

1.65% $29,149

1.89% $38,237

2.99%

Maximum month-end balance

Federal funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,034
9,261
Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . .
15,981
Commercial paper
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,700
Other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6,352
9,154
14,608
9,550

$ 9,681
15,198
11,440
17,642

(a) Interest and rates are presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent.
(b) Average federal funds purchased rates include compensation expense for corporate card and corporate trust balances.

U.S. BANCORP

93

Note 13 L O N G - T E R M D E B T

Long-term debt (debt with original maturities of more than one year) at December 31 consisted of the following:

(Dollars in Millions)

Rate Type

Rate (a)

Maturity Date

2010

2009

U.S. Bancorp (Parent Company)
Subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible senior debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Medium-term notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Junior subordinated debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized lease obligations, mortgage indebtedness and other (b) . . . . . .

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Subsidiaries
Subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Federal Home Loan Bank advances . . . . . . . . . . . . . . . . . . . . . . . . . .

Bank notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capitalized lease obligations, mortgage indebtedness and other (b) . . . . . .

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fixed
Floating
Floating
Floating
Floating
Fixed
Floating
Fixed

Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Floating
Fixed
Floating
Fixed
Floating

7.50%
–%
–%
–%
–%

2026
2035
2035
2036
2037
1.125%-4.20% 2012-2015
2012
5.54%-10.20% 2031-2067

.66%

6.375%
6.30%
4.95%
4.80%
3.80%
4.375%
3.778%
.57%

2011
2014
2014
2015
2015
2017
2020
2014
.50%-8.25% 2011-2026
.30%-.98% 2012-2017
2012
.04%-.51% 2012-2048

5.92%

$

199
–
10
64
21
8,280
500
3,985
(22)

$

199
24
447
64
21
4,880
4,435
4,559
(91)

13,037

14,538

1,500
963
1,000
500
–
1,348
500
550
4,101
4,332
125
1,157
2,424

1,500
963
1,000
500
369
1,348
–
550
4,234
6,833
199
213
333

18,500

18,042

$31,537

$32,580

(a) Weighted-average interest rates of medium-term notes, Federal Home Loan Bank advances and bank notes were 2.26 percent, 2.30 percent and .98 percent,

respectively.

(b) Other includes debt related to consolidated community development and tax-advantaged investment VIEs, debt issuance fees, and unrealized gains and losses and

deferred amounts relating to derivative instruments.

Convertible senior debentures issued by the Company
pay interest on a quarterly basis until a specified period of
time (five or nine years prior to the applicable maturity
date). After this date, the Company will not pay interest on
the debentures prior to maturity. On the maturity date or on
any earlier redemption date, the holder will receive the
original principal plus accrued interest. The debentures are
convertible at any time on or prior to the maturity date. If
the convertible senior debentures are converted, holders of
the debentures will generally receive cash up to the accreted
principal amount of the debentures plus, if the market price
of the Company’s stock exceeds the conversion price in
effect on the date of conversion, a number of shares of the
Company’s common stock, or an equivalent amount of cash
at the Company’s option, as determined in accordance with
specified terms. The convertible senior debentures are
callable by the Company and putable by the investors at a

94

U.S. BANCORP

price equal to 100 percent of the accreted principal amount
plus accrued and unpaid interest. During 2010, investors
elected to put debentures with a principal amount of
$461 million back to the company. At December 31, 2010,
the weighted average conversion price per share for all
convertible issuances was $42.33.

During 2010, the Company redeemed $575 million of

fixed-rate junior subordinated debentures issued to a wholly-
owned trust formed for the purpose of issuing redeemable
Income Trust Securities (“ITS”) to third-party investors.
During 2009, the Company issued $501 million of fixed-rate
junior subordinated debentures to a separately formed
wholly-owned trust for the purpose of issuing Company-
obligated mandatorily redeemable preferred securities at an
interest rate of 6.625 percent. Refer to Note 14, “Junior
Subordinated Debentures” for further information on the
nature and terms of these debentures. There were no

issuances of junior subordinated debentures in 2010. There
were no redemptions of junior subordinated debentures in
2009.

borrowed an additional $18.7 billion and $17.3 billion at
December 31, 2010 and 2009, respectively, based on
collateral available (residential and commercial mortgages).

The Company has an arrangement with the Federal

Home Loan Bank whereby the Company could have

Maturities of long-term debt outstanding at December 31, 2010, were:

(Dollars in Millions)

Parent
Company

Consolidated

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3
2,653
2,847
1,498
1,746
4,290

$ 1,949
7,018
3,351
4,295
3,050
11,874

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,037

$31,537

Note 14 J U N I O R S U B O R D I N A T E D D E B E N T U R E S

As of December 31, 2010, the Company sponsored, and
wholly owned 100 percent of the common equity of, ten
unconsolidated trusts that were formed for the purpose of
issuing Company-obligated mandatorily redeemable
preferred securities (“Trust Preferred Securities”) to third-
party investors and investing the proceeds from the sale of
the Trust Preferred Securities solely in junior subordinated
debt securities of the Company (the “Debentures”). The
Debentures held by the trusts, which totaled $4 billion, are
the sole assets of each trust. The Company’s obligations
under the Debentures and related documents, taken together,
constitute a full and unconditional guarantee by the
Company of the obligations of the trusts. The guarantee
covers the distributions and payments on liquidation or
redemption of the Trust Preferred Securities, but only to the
extent of funds held by the trusts. The Company has the
right to redeem the Debentures in whole or in part, on or
after specific dates, at a redemption price specified in the
indentures plus any accrued but unpaid interest to the
redemption date. The Company used the proceeds from the
sales of the Debentures for general corporate purposes.

In connection with the formation of USB Capital IX,

the trust issued redeemable ITS to third-party investors,
investing the proceeds in Debentures issued by the Company
and entered into stock purchase contracts to purchase
preferred stock to be issued by the Company in the future.
During 2010, the Company exchanged depositary shares
representing an ownership interest in the Company’s
Series A Non-Cumulative Perpetual Preferred Stock
(“Series A Preferred Stock”) for a portion of the ITS issued
by USB Capital IX, redeemed $575 million of the
Debentures and cancelled a pro-rata portion of the stock
purchase contracts. The Company is required to make
contract payments on the remaining stock purchase
contracts of .65 percent, payable semi-annually, through a
specified stock purchase date expected to be April 15, 2011.
Subsequent to December 31, 2010, the remaining
Debentures were sold to third-party investors to generate
cash proceeds to be used to purchase the Company’s
Series A Preferred Stock pursuant to the stock purchase
contracts.

U.S. BANCORP

95

The following table is a summary of the Debentures included in long-term debt as of December 31, 2010:

Issuance Trust (Dollars in Millions)

Issuance Date

Securities
Amount

Debentures
Amount

Rate Type

Rate

Maturity Date

USB Capital XIII . . . . . . . . . . . December 2009
February 2007
USB Capital XII
. . . . . . . . . . .
August 2006
USB Capital XI . . . . . . . . . . . .
April 2006
USB Capital X . . . . . . . . . . . .
USB Capital IX . . . . . . . . . . . .
March 2006
USB Capital VIII . . . . . . . . . . . December 2005
August 2005
USB Capital VII
. . . . . . . . . . .
March 2005
USB Capital VI . . . . . . . . . . . .
March 2001
. . .
Vail Banks Statutory Trust II
February 2001
Vail Banks Statutory Trust I . . . .

$ 500
535
765
500
675
375
300
275
7
17

$ 501
536
766
501
676
387
309
284
8
17

Total . . . . . . . . . . . . . . . . .

$3,949

$3,985

Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed

6.63
6.30
6.60
6.50
5.54
6.35
5.88
5.75
10.18
10.20

December 2039
February 2067
September 2066
April 2066
April 2042
December 2065
August 2035
March 2035
June 2031
February 2031

Earliest
Redemption Date

December 15, 2014
February 15, 2012
September 15, 2011
April 12, 2011
April 15, 2015
December 29, 2010
August 15, 2010
March 9, 2010
June 8, 2011
February 22, 2011

Note 15 S H A R E H O L D E R S ’ E Q U I T Y

At December 31, 2010 and 2009, the Company had
authority to issue 4 billion shares of common stock and
50 million shares of preferred stock. The Company had
1.9 billion shares of common stock outstanding at
December 31, 2010 and 2009, and had 162 million shares

reserved for future issuances, primarily under stock option
plans and shares that may be issued in connection with the
Company’s convertible senior debentures, at December 31,
2010.

The number of shares issued and outstanding and the carrying amount of each outstanding series of the Company’s preferred
stock was as follows:

December 31 (Dollars in Millions)

Shares Issued
and Outstanding

Liquidation
Preference

Discount

Carrying
Amount

Shares Issued
and Outstanding

Liquidation
Preference

Discount

2010

2009

Series A . . . . . . . . . . . . . . . . . . . . . . . . .
Series B . . . . . . . . . . . . . . . . . . . . . . . . .
Series D . . . . . . . . . . . . . . . . . . . . . . . . .

5,746
40,000
20,000

$ 575
1,000
500

$145
–
–

$ 430
1,000
500

–
40,000
20,000

$

–
1,000
500

Total preferred stock (a) . . . . . . . . . . . . .

65,746

$2,075

$145

$1,930

60,000

$1,500

$–
–
–

$–

(a) The par value of all shares issued and outstanding at December 31, 2010 and 2009, was $1.00 a share.

Carrying
Amount

$

–
1,000
500

$1,500

The depositary shares issued by the Company in

exchange for the USB Capital IX ITS represent an ownership
interest in 5,746 shares of Series A Preferred Stock and have
a liquidation preference of $100,000 per share. The Series A
Preferred Stock has no stated maturity and will not be
subject to any sinking fund or other obligation of the
Company. Dividends, if declared, will accrue and be payable
semi-annually, in arrears, at a rate per annum equal to
7.189 percent through a specified stock purchase date for
the remaining untendered ITS expected to be April 15, 2011,
and thereafter, payable quarterly, at a rate per annum equal
to the greater of three-month LIBOR plus 1.02 percent or
3.50 percent. The Series A Preferred Stock is redeemable at
the Company’s option subsequent to the stock purchase
date, subject to prior approval by the Federal Reserve Board.

On November 14, 2008, the Company issued
6.6 million shares of Series E Fixed Rate Cumulative
Perpetual Preferred Stock (the “Series E Preferred Stock”)

96

U.S. BANCORP

and a warrant to purchase 33 million shares of the
Company’s common stock, at a price of $30.29 per common
share, to the U.S. Department of the Treasury under the
Capital Purchase Program of the Emergency Economic
Stabilization Act of 2008 for proceeds of $6.6 billion. The
Company allocated $172 million of the proceeds to the
warrant, with the resulting discount on the Series E
Preferred Stock being accreted over five years and reported
as a reduction to income applicable to common equity over
that period. On June 17, 2009, the Company redeemed the
Series E Preferred Stock. The Company included in its
computation of earnings per diluted common share for the
year ended December 31, 2009 the impact of a deemed
dividend of $154 million, representing the unaccreted
preferred stock discount remaining on the redemption date.
On July 15, 2009, the Company repurchased the warrant
from the U.S. Department of the Treasury for $139 million.

On March 27, 2006, the Company issued depositary
shares representing an ownership interest in 40,000 shares of
Series B Non-Cumulative Perpetual Preferred Stock with a
liquidation preference of $25,000 per share (the “Series B
Preferred Stock”), and on March 17, 2008, the Company
issued depositary shares representing an ownership interest
in 20,000 shares of Series D Non-Cumulative Perpetual
Preferred Stock with a liquidation preference of $25,000 per
share (the “Series D Preferred Stock”). The Series B
Preferred Stock and Series D Preferred Stock have no stated
maturity and will not be subject to any sinking fund or other
obligation of the Company. Dividends, if declared, will
accrue and be payable quarterly, in arrears, at a rate per

annum equal to the greater of three-month LIBOR plus
.60 percent, or 3.50 percent on the Series B Preferred Stock,
and 7.875 percent per annum on the Series D Preferred
Stock. Both series are redeemable at the Company’s option,
on or after specific dates, subject to the prior approval of the
Federal Reserve Board.

During 2010, 2009 and 2008, the Company
repurchased shares of its common stock under various
authorizations approved by its Board of Directors. As of
December 31, 2010, the Company had approximately
20 million shares that may yet be purchased under the
current Board of Director approved authorization.

The following table summarizes the Company’s common stock repurchased in each of the last three years:

(Dollars and Shares in Millions)

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares

1
–
2

Value

$16
4
91

U.S. BANCORP

97

Shareholders’ equity is affected by transactions and valuations of asset and liability positions that require adjustments to
accumulated other comprehensive income (loss). The reconciliation of the transactions affecting accumulated other
comprehensive income (loss) included in shareholders’ equity for the years ended December 31, is as follows:

(Dollars in Millions)

Transactions

Pre-tax

Tax-effect

Net-of-tax

Balances
Net-of-Tax

2010
Changes in unrealized gains and losses on securities available-for-sale . . . . . . . . . . . . . . .
Other-than-temporary impairment not recognized in earnings on securities

available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss on derivative hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized loss on derivative hedges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification for realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in retirement obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 432

$ (163)

$ 269

$ (213)

(66)
(145)
24
–
(75)
(150)

25
56
(10)
–
29
58

(41)
(89)
14
–
(46)
(92)

–
(408)
(39)
(6)
–
(803)

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

20

$

(5)

$

15

$(1,469)

2009
Changes in unrealized gains and losses on securities available-for-sale . . . . . . . . . . . . . . .
Other-than-temporary impairment not recognized in earnings on securities

available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on derivative hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized loss on derivative hedges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification for realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in retirement obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,131

$ (810)

$ 1,321

$ (393)

(402)
516
40
–
456
290

153
(196)
(15)
–
(173)
(111)

(249)
320
25
–
283
179

–
(319)
(53)
(8)
–
(711)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,031

$(1,152)

$ 1,879

$(1,484)

2008
Changes in unrealized gains and losses on securities available-for-sale . . . . . . . . . . . . . . .
Unrealized loss on derivative hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized loss on derivative hedges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification for realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in retirement obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(2,729)
(722)
(117)
(15)
1,020
(1,357)

$ 1,037
274
45
6
(388)
519

$(1,692)
(448)
(72)
(9)
632
(838)

$(1,745)
(639)
(78)
(11)
–
(890)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(3,920)

$ 1,493

$(2,427)

$(3,363)

Regulatory Capital The measures used to assess capital by
bank regulatory agencies include two principal risk-based
ratios, Tier 1 and total risk-based capital. Tier 1 capital is
considered core capital and includes common shareholders’
equity plus qualifying preferred stock, trust preferred
securities and noncontrolling interests in consolidated
subsidiaries (subject to certain limitations), and is adjusted
for the aggregate impact of certain items included in other
comprehensive income (loss). Total risk-based capital
includes Tier 1 capital and other items such as subordinated
debt and the allowance for credit losses. Both measures are
stated as a percentage of risk-adjusted assets, which are
measured based on their perceived credit risk and include

certain off-balance sheet exposures, such as unfunded loan
commitments, letters of credit, and derivative contracts. The
Company is also subject to a leverage ratio requirement, a
non risk-based asset ratio, which is defined as Tier 1 capital
as a percentage of average assets adjusted for goodwill and
other non-qualifying intangibles and other assets.

For a summary of the regulatory capital requirements
and the actual ratios as of December 31, 2010 and 2009, for
the Company and its bank subsidiaries, see Table 20
included in Management’s Discussion and Analysis, which is
incorporated by reference into these Notes to Consolidated
Financial Statements.

98

U.S. BANCORP

The following table provides the components of the
Company’s regulatory capital:

(Dollars in Millions)

Tier 1 Capital

December 31

2010

2009

Common shareholders’ equity . . . . . .
Qualifying preferred stock . . . . . . . . .
Qualifying trust preferred securities . . .
Noncontrolling interests, less preferred

$ 27,589
1,930
3,949

$ 24,463
1,500
4,524

stock not eligible for Tier 1 capital . . .

692

692

Less intangible assets

Goodwill (net of deferred tax

liability) . . . . . . . . . . . . . . . . . .
Other disallowed intangible assets . .
Other (a). . . . . . . . . . . . . . . . . . . . .

(8,337)
(1,097)
1,221

(8,482)
(1,322)
1,235

Total Tier 1 Capital

. . . . . . . . . .

25,947

22,610

Tier 2 Capital

Eligible portion of allowance for credit

losses . . . . . . . . . . . . . . . . . . . .
Eligible subordinated debt . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .

Total Tier 2 Capital

. . . . . . . . . .

3,125
3,943
18

7,086

2,969
4,874
5

7,848

Total Risk Based Capital . . . . . . .

$ 33,033

$ 30,458

Risk-Weighted Assets . . . . . . . . . . . . .

$247,619

$235,233

(a) Includes the impact of items included in other comprehensive income (loss),

such as unrealized gains (losses) on available-for-sale securities, accumulated
net gains on cash flow hedges, pension liability adjustments, etc.

Noncontrolling interests principally represent preferred

stock of consolidated subsidiaries. During 2006, the
Company’s primary banking subsidiary formed USB Realty
Corp., a real estate investment trust, for the purpose of

Note 16 E A R N I N G S P E R S H A R E

The components of earnings per share were:

(Dollars and Shares in Millions, Except Per Share Data)

issuing 5,000 shares of Fixed-to-Floating Rate Exchangeable
Non-cumulative Perpetual Series A Preferred Stock with a
liquidation preference of $100,000 per share (“Series A
Preferred Securities”) to third-party investors, and investing
the proceeds in certain assets, consisting predominately of
mortgage-backed securities from the Company. Dividends on
the Series A Preferred Securities, if declared, will accrue and
be payable quarterly, in arrears, at a rate per annum of
6.091 percent from December 22, 2006 to, but excluding,
January 15, 2012. After January 15, 2012, the rate will be
equal to three-month LIBOR for the related dividend period
plus 1.147 percent. If USB Realty Corp. has not declared a
dividend on the Series A Preferred Securities before the
dividend payment date for any dividend period, such
dividend shall not be cumulative and shall cease to accrue
and be payable, and USB Realty Corp. will have no
obligation to pay dividends accrued for such dividend
period, whether or not dividends on the Series A Preferred
Securities are declared for any future dividend period.

The Series A Preferred Securities will be redeemable, in
whole or in part, at the option of USB Realty Corp. on the
dividend payment date occurring in January 2012 and each
fifth anniversary thereafter, or in whole but not in part, at
the option of USB Realty Corp. on any dividend date before
or after January 2012 that is not a five-year date. Any
redemption will be subject to the approval of the Office of
the Comptroller of the Currency.

2010

2009

2008

Net income attributable to U.S. Bancorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity portion of gain on ITS exchange transaction, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion of preferred stock discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deemed dividend on preferred stock redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings allocated to participating stock awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,317
(89)
118
–
–
(14)

$2,205
(228)
–
(14)
(154)
(6)

$2,946
(119)
–
(4)
–
(4)

Net income applicable to U.S. Bancorp common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,332

$1,803

$2,819

Average common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net effect of the exercise and assumed purchase of stock awards and conversion of outstanding

1,912

1,851

1,742

convertible notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

Average diluted common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,921

Earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1.74
$ 1.73

8

1,859

$ .97
$ .97

14

1,756

$ 1.62
$ 1.61

Options and warrants outstanding at December 31,
2010, 2009 and 2008, to purchase 56 million, 70 million

and 67 million common shares, respectively, were not
included in the computation of diluted earnings per share for

U.S. BANCORP

99

the years ended December 31, 2010, 2009 and 2008,
respectively, because they were antidilutive. Convertible
senior debentures that could potentially be converted into
shares of the Company’s common stock pursuant to
specified formulas, were not included in the computation of
diluted earnings per share because they were antidilutive.

Note 17 E M P L O Y E E B E N E F I T S

Employee Retirement Savings Plan The Company has a
defined contribution retirement savings plan that covers
substantially all its employees. Qualified employees are
allowed to contribute up to 75 percent of their annual
compensation, subject to Internal Revenue Service limits,
through salary deductions under Section 401(k) of the
Internal Revenue Code. Employee contributions are invested,
at the employees’ direction, among a variety of investment
alternatives. Employee contributions are 100 percent
matched by the Company, up to four percent of an
employee’s eligible annual compensation. The Company’s
matching contribution vests immediately. Although the
matching contribution is initially invested in the Company’s
common stock, an employee can reinvest the matching
contribution among various investment alternatives. Total
expense was $96 million, $78 million and $76 million in
2010, 2009 and 2008, respectively.

Pension Plans The Company has qualified noncontributory
defined benefit pension plans that provide benefits to
substantially all its employees. Pension benefits are provided
to eligible employees based on years of service, multiplied by
a percentage of their final average pay. As a result of plan
mergers, pension benefits may also be provided using two
cash balance benefit formulas where only investment or
interest credits continue to be credited to participants’
accounts. Employees become vested upon completing five
years of vesting service. Effective January 1, 2010, the
Company established a new cash balance formula for certain
current and all future eligible employees. Participants receive
annual pay credits based on eligible pay multiplied by a
percentage determined by their age and years of service.
Participants also receive an annual interest credit. This new
plan formula resulted in a $35 million reduction of the 2009
projected benefit obligation.

In general, the Company’s qualified pension plans’
objectives include maintaining a funded status sufficient to
meet participant benefit obligations over time while reducing
long-term funding requirements and pension costs. The

100

U.S. BANCORP

Company has an established process for evaluating all the
plans, their performance and significant plan assumptions,
including the assumed discount rate and the long-term rate
of return (“LTROR”). Annually, the Company’s
Compensation and Human Resources Committee (the
“Committee”), assisted by outside consultants, evaluates
plan objectives, funding policies and plan investment policies
considering its long-term investment time horizon and asset
allocation strategies. The process also evaluates significant
plan assumptions. Although plan assumptions are
established annually, the Company may update its analysis
on an interim basis in order to be responsive to significant
events that occur during the year, such as plan mergers and
amendments.

The Company’s funding policy is to contribute amounts

to its plans sufficient to meet the minimum funding
requirements of the Employee Retirement Income Security
Act of 1974, as amended by the Pension Protection Act, plus
such additional amounts as the Company determines to be
appropriate. The Company made no contributions to the
qualified pension plans in 2010 or 2009, and anticipates no
contributions in 2011. Any contributions made to the
qualified plans are invested in accordance with established
investment policies and asset allocation strategies.

In addition to the funded qualified pension plans, the
Company maintains non-qualified plans that are unfunded
and provide benefits to certain employees. The assumptions
used in computing the present value of the accumulated
benefit obligation, the projected benefit obligation and net
pension expense are substantially consistent with those
assumptions used for the funded qualified plans. In 2011,
the Company expects to contribute $24 million to its non-
qualified pension plans which equals the expected benefit
payments.

Postretirement Welfare Plan In addition to providing
pension benefits, the Company provides health care and
death benefits to certain retired employees. Generally, all
active employees may become eligible for retiree health care
benefits by meeting defined age and service requirements.
The Company may also subsidize the cost of coverage for
employees meeting certain age and service requirements. The
medical plan contains other cost-sharing features such as
deductibles and coinsurance. The estimated cost of these
retiree benefit payments is accrued during the employees’
active service. In 2011, the Company expects to make no
contributions to its postretirement welfare plan.

The following table summarizes the changes in benefit obligations and plan assets for the years ended December 31, and the
funded status and amounts recognized in the consolidated balance sheet at December 31 for the retirement plans:

(Dollars in Millions)

Change In Projected Benefit Obligation

Pension Plans

Postretirement Welfare Plan

2010

2009

2010

2009

Benefit obligation at beginning of measurement period . . . . . . . . . . . . . . . . $ 2,496
93
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
155
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
Plan amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
309
Actuarial loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(124)
Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
Federal subsidy on benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Benefit obligation at end of measurement period (a)

. . . . . . . . . . . . . . . . . . $ 2,929

Change In Fair Value Of Plan Assets

Fair value at beginning of measurement period . . . . . . . . . . . . . . . . . . . . . . $ 2,089
321
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(124)
Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair value at end of measurement period . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,305

Funded (Unfunded) Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (624)

Components Of The Consolidated Balance Sheet

Noncurrent benefit asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current benefit liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent benefit liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6
(24)
(606)

Recognized amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (624)

Accumulated Other Comprehensive Income (Loss), Pretax

Net actuarial gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,398)
35
Net prior service credit (cost)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
Net transition asset (obligation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recognized amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,363)

$ 2,368
80
152
–
(35)
49
(118)
–

$ 2,496

$ 1,699
489
19
–
(118)

$ 2,089

$ (407)

$

5
(21)
(391)

$ (407)

$(1,259)
47
–

$(1,212)

$186
7
11
11
–
(11)
(25)
2

$181

$144
–
1
11
(25)

$131

$ (50)

$

–
–
(50)

$ (50)

$ 63
1
(1)

$ 63

$176
6
11
10
–
6
(26)
3

$186

$158
1
1
10
(26)

$144

$ (42)

$

–
–
(42)

$ (42)

$ 62
2
(2)

$ 62

(a) At December 31, 2010 and 2009, the accumulated benefit obligation for all pension plans was $2.7 billion and $2.4 billion, respectively.

The following table provides information for pension plans with benefit obligations in excess of plan assets at December 31:
(Dollars in Millions)

2010

2009

Pension Plans with Projected Benefit Obligations in Excess of Plan Assets

Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,895
2,265

Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets

Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,698
2,265

$2,464
2,052

2,349
2,052

U.S. BANCORP

101

The following table sets forth the components of net periodic benefit cost and other amounts recognized in accumulated other
comprehensive income (loss) for the years ended December 31 for the retirement plans:

Pension Plans

Postretirement Welfare Plan

(Dollars in Millions)

2010

2009

2008

2010

2009

2008

$

76
141
(224)

(6)
32

19

Components Of Net Periodic Benefit Cost

Service cost
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . .
Prior service cost (credit) and transition obligation (asset)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 93
155
(215)

amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss (gain) amortization . . . . . . . . . . . . . . . . . . .

(12)
64

$ 80
152
(215)

(6)
49

Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . $ 85

$ 60

$

Other Changes In Plan Assets And Benefit

Obligations Recognized In Other Comprehensive
Income (Loss)
Net actuarial gain (loss) arising during the year . . . . . . . . . . $(203)
64
Net actuarial loss (gain) amortized during the year . . . . . . . .
Net prior service credit (cost) arising during the year . . . . . .
–
Net prior service cost (credit) and transition obligation (asset)
amortized during the year . . . . . . . . . . . . . . . . . . . . . .

(12)

$ 230
49
35

$(1,419)
32
–

(6)

(6)

Total recognized in other comprehensive income (loss)

. . . . . . $(151)

$ 308

$(1,393)

Total recognized in net periodic benefit cost and other

comprehensive income (loss) (a)(b) . . . . . . . . . . . . . . . . . . $(236)

$ 248

$(1,412)

$ 7
11
(5)

–
(5)

$ 8

$ 6
(5)
–

–

$ 1

$ (7)

$ 6
11
(5)

–
(7)

$ 5

$(11)
(7)
–

–

$(18)

$(23)

$ 6
12
(6)

–
(4)

$ 8

$35
(4)
–

–

$31

$23

(a) The pretax estimated actuarial

loss (gain) and prior service cost (credit) for the pension plans that will be amortized from accumulated other comprehensive income (loss)

into net periodic benefit cost in 2011 are $125 million and $(9) million, respectively.

(b) The pretax estimated actuarial

loss (gain) for the postretirement welfare plan that will be amortized from accumulated other comprehensive income (loss) into net periodic

benefit cost in 2011 is $(6) million.

The following table sets forth weighted average assumptions used to determine the projected benefit obligations at
December 31:

(Dollars in Millions)

Pension Plans

Postretirement Welfare Plan

2010

2009

2010

2009

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discount rate (a)
Rate of compensation increase (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.7%
4.0

6.2%
3.0

Health care cost trend rate for the next year (c)

Prior to age 65 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
After age 65 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Effect on accumulated postretirement benefit obligation

One percent increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One percent decrease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.9%
*

8.0%

14.0

5.6%
*

8.0%

14.0

$ 10
(9)

$

8
(8)

(a) For 2010, the discount rates were developed using Towers Watson’s cash flow matching bond model with a modified duration for the qualified pension plans, non-qualified
pension plans and postretirement welfare plan of 14.0, 11.0 and 7.7 years, respectively. For 2009, the discount rates were developed using Towers Watson’s cash flow
matching bond model with a modified duration for the qualified pension plans, non-qualified pension plans and postretirement welfare plan of 13.4, 10.5 and 8.2 years,
respectively.

(b) Determined on a liability weighted basis.
(c) The pre-65 and post-65 rates are assumed to decrease gradually to 5.5 percent by 2017 and 6.0 percent by 2015, respectively, and remain at these levels thereafter.
* Not applicable

102

U.S. BANCORP

The following table sets forth weighted average assumptions used to determine net periodic benefit cost for the years ended
December 31:

(Dollars in Millions)

2010

2009

2008

2010

2009

2008

Pension Plans

Postretirement Welfare Plan

Discount rate (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets (b) . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase (c)

6.2%
8.5
3.0

6.4%
8.5
3.0

6.3%
8.9
3.2

5.6%
3.5
*

6.3%
3.5
*

Health care cost trend rate (d)

Prior to age 65 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
After age 65 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Effect on total of service cost and interest cost

One percent increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One percent decrease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.1%
3.5
*

8.0%
9.0

8.0%

14.0

7.0%

21.0

$

–
–

$

1
(1)

$ 1
(1)

(a) See footnote (a) in previous table (weighted average assumptions used to determine the projected benefit obligations).
(b) With the help of an independent pension consultant, a range of potential expected rates of return, economic conditions, historical performance relative to assumed rates
of return and asset allocation, and peer group LTROR information are used in developing the plan assumptions for its expected long-term rates of return on plan assets.
The Company determined its 2010 expected long-term rates of return reflect current economic conditions and plan assets.

(c) Determined on a liability weighted basis.
(d) The pre-65 and post-65 rates are assumed to decrease gradually to 5.5 percent by 2017 and 6.0 percent by 2015, respectively, and remain at these levels thereafter.
* Not applicable

Investment Policies and Asset Allocation In establishing its
investment policies and asset allocation strategies, the Company
considers expected returns and the volatility associated with
different strategies. An independent consultant performs
modeling that projects numerous outcomes using a broad range
of possible scenarios, including a mix of possible rates of
inflation and economic growth. Starting with current economic
information, the model bases its projections on past relationships
between inflation, fixed income rates and equity returns when
these types of economic conditions have existed over the
previous 30 years, both in the U.S. and in foreign countries.

Generally, based on historical performance of the various

investment asset classes, investments in equities have
outperformed other investment classes but are subject to higher
volatility. While an asset allocation including debt securities
and other assets generally has lower volatility and may provide
protection in a declining interest rate environment, it limits the
pension plans’ long-term up-side potential. Given the pension
plans’ investment horizon and the financial viability of the
Company to meet its funding objectives, the Committee has
determined that an asset allocation strategy investing
principally in equities diversified among various domestic
equity categories and international equities is appropriate. The
target asset allocation for the Company’s qualified pension
plans is 55 percent domestic large cap equities, 19 percent
domestic mid cap equities, 6 percent domestic small cap
equities and 20 percent international equities.

At December 31, 2010 and 2009, plan assets of the
qualified pension plans included mutual funds that have
asset management arrangements with related parties totaling
$512 million and $1.1 billion, respectively.

Under a contractual agreement with U.S. Bancorp Asset
Management, Inc., an affiliate of the Company, certain plan
assets are lent to qualified borrowers on a short-term basis
in exchange for investment fee income. These borrowers
collateralize the loaned securities with either cash or non-
cash securities. Cash collateral held at December 31, 2010
and 2009 totaled $232 million and $121 million,
respectively, with corresponding obligations to return the
cash collateral of $240 million and $131 million,
respectively.

Per authoritative accounting guidance, the Company

groups plan assets into a three-level hierarchy for valuation
techniques used to measure their fair value based on whether
the valuation inputs are observable or unobservable. Refer
to Note 21 for further discussion on these levels.

The assets of the qualified pension plans and

postretirement welfare plan include investments in equity
securities and mutual funds whose fair values are determined
based on quoted market prices and classified within Level 1 of
the fair value hierarchy. The qualified pension plans also invest
a majority of securities purchased with cash collateral from its
securities lending arrangement in a money market mutual fund
whose fair value is determined based on quoted prices in
markets that are not active and therefore is classified as
Level 2. Additionally, the qualified pension plans have
investments in limited partnership interests and debt securities
whose fair values are determined by the Company by analyzing
the limited partnerships’ audited financial statements and by
averaging the prices obtained from independent pricing
services, respectively. These securities are categorized as
Level 3.

U.S. BANCORP

103

The following table summarizes the plans’ investment assets measured at fair value at December 31:

(Dollars in Millions)

Level 1

Domestic equity securities

Large cap . . . . . . . . . . . . . . . . . $1,174
373
Mid cap . . . . . . . . . . . . . . . . . . .
142
Small cap . . . . . . . . . . . . . . . . . .
537
International equity securities . . . . . . .
–
Debt securities . . . . . . . . . . . . . . . .
51
Real estate . . . . . . . . . . . . . . . . . .
–
Money market mutual fund . . . . . . . .
30
Cash and cash equivalents . . . . . . . .
–
Other . . . . . . . . . . . . . . . . . . . . . .

2010

Level 2

$

–
–
–
–
–
–
224
–
–

Total . . . . . . . . . . . . . . . . . . . . . $2,307

$224

Pension Plans

Level 3

Level 1

2009

Level 2

Level 3

Postretirement
Welfare Plan

2010

Level 1

2009

Level 1

$ –
–
–
–
8
–
–
–
6

$14

$1,056
397
126
442
–
40
–
22
–

$2,083

$

–
–
–
–
17
–
97
–
–

$114

$ –
–
–
–
7
–
–
–
6

$13

$

–
–
–
–
–
–
–
131
–

$

–
–
–
–
–
–
–
144
–

$131

$144

The following table summarizes the changes in fair value for all plan investment assets measured at fair value using significant
unobservable inputs (Level 3) for the years ended December 31:

(Dollars in Millions)

2010

Debt
Securities

Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains (losses) relating to assets still held at end of year . . . . . . . . .
Purchases, sales, principal payments, issuances, and settlements . . . . . . . . .
Transfers into level 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7
3
(2)
–

$ 8

2009

Debt
Securities

$ –
1
(3)
9

$ 7

Other

$ 9
(3)
–
–

$ 6

Other

$6
–
–
–

$6

The following benefit payments are expected to be paid from the retirement plans for the years ended December 31:

(Dollars in Millions)

Pension
Plans

Postretirement
Welfare Plan (a)

Medicare
Part D Subsidy

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 – 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$148
143
149
156
162
917

$ 16
17
19
20
21
104

$2
2
3
3
3
–

(a) Net of retiree contributions and before Medicare Part D subsidy.

Note 18 S T O C K - B A S E D C O M P E N S A T I O N

As part of its employee and director compensation programs, the
Company may grant certain stock awards under the provisions of
the existing stock compensation plans, including plans assumed in
acquisitions. The plans provide for grants of options to purchase
shares of common stock at a fixed price equal to the fair value of
the underlying stock at the date of grant. Option grants are
generally exercisable up to ten years from the date of grant. In
addition, the plans provide for grants of shares of common stock
or stock units that are subject to restriction on transfer prior to

vesting. Most stock and unit awards vest over three to five years
and are subject to forfeiture if certain vesting requirements are not
met. Stock incentive plans of acquired companies are generally
terminated at the merger closing dates. Option holders under such
plans receive the Company’s common stock, or options to buy the
Company’s stock, based on the conversion terms of the various
merger agreements. At December 31, 2010, there were 69 million
shares (subject to adjustment for forfeitures) available for grant
under various plans.

104

U.S. BANCORP

S T O C K O P T I O N A W A R D S

The following is a summary of stock options outstanding and exercised under various stock options plans of the Company:

Year Ended December 31

Stock
Options/Shares

Weighted-Average
Exercise Price

Weighted-Average
Remaining
Contractual Term

Aggregate
Intrinsic Value
(In millions)

2010
Number outstanding at beginning of period. . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number outstanding at end of period (b)
. . . . . . . . . . . . . . . . . .
Exercisable at end of period. . . . . . . . . . . . . . . . . . . . . . . . . . .
2009
Number outstanding at beginning of period. . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number outstanding at end of period (b)
. . . . . . . . . . . . . . . . . .
Exercisable at end of period. . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
Number outstanding at beginning of period. . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

88,379,469
5,417,631
(5,769,586)
(2,404,809)

85,622,705
57,542,065

82,293,011
14,316,237
(1,085,328)
(7,144,451)

88,379,469
50,538,048

91,211,464
22,464,085
(28,528,238)
(2,854,300)

Number outstanding at end of period (b)
. . . . . . . . . . . . . . . . . .
Exercisable at end of period. . . . . . . . . . . . . . . . . . . . . . . . . . .

82,293,011
43,787,801

$26.49
23.98
19.38
27.03

$26.80
$28.28

$29.08
12.04
19.98
28.33

$26.49
$27.52

$27.22
32.19
25.27
31.94

$29.08
$26.11

5.5
4.4

6.1
4.5

6.0
4.0

$ 15
$ (76)

$(352)
$(253)

$(335)
$ (48)

(a) Options cancelled includes both non-vested (i.e., forfeitures) and vested options.
(b) Outstanding options include stock-based awards that may be forfeited in future periods. The impact of the estimated forfeitures is reflected in compensation expense.

Stock-based compensation expense is based on the estimated fair value of the award at the date of grant or modification. The
fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model, requiring the
use of subjective assumptions. Because employee stock options have characteristics that differ from those of traded options,
including vesting provisions and trading limitations that impact their liquidity, the determined value used to measure
compensation expense may vary from their actual fair value. The following table includes the weighted average estimated fair
value and assumptions utilized by the Company for newly issued grants:

Estimated fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock volatility factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life of options (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2010

$8.36

2.5%
3.0%
.47
5.5

2009

$3.39

1.8%
4.2%
.44
5.5

2008

$3.55

3.4%
4.8%
.19
5.0

Expected stock volatility is based on several factors including the historical volatility of the Company’s stock, implied
volatility determined from traded options and other factors. The Company uses historical data to estimate option exercises and
employee terminations to estimate the expected life of options. The risk-free interest rate for the expected life of the options is
based on the U.S. Treasury yield curve in effect on the date of grant. The expected dividend yield is based on the Company’s
expected dividend yield over the life of the options.

The following summarizes certain stock option activity of the Company:

(Dollars in Millions)

Fair value of options vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intrinsic value of options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash received from options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit realized from options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2010

$ 61
35
112
13

2009

$74
3
22
1

2008

$ 67
262
651
99

U.S. BANCORP

105

To satisfy option exercises, the Company predominantly uses treasury stock.

Additional information regarding stock options outstanding as of December 31, 2010, is as follows:

Outstanding Options

Exercisable Options

Range of Exercise Prices

Shares

$11.02 – $15.00 . . . . . . . . . . . . . . . . . . . . . 11,778,734
$15.01 – $20.00 . . . . . . . . . . . . . . . . . . . . .
3,951,661
$20.01 – $25.00 . . . . . . . . . . . . . . . . . . . . . 15,288,993
$25.01 – $30.00 . . . . . . . . . . . . . . . . . . . . . 14,970,270
$30.01 – $35.00 . . . . . . . . . . . . . . . . . . . . . 29,593,767
$35.01 – $36.25 . . . . . . . . . . . . . . . . . . . . . 10,039,280

85,622,705

Weighted-
Average
Remaining
Contractual
Life (Years)

8.1
1.5
3.9
4.4
6.2
5.9

5.5

Weighted-
Average
Exercise
Price

$11.43
19.03
22.68
29.23
31.71
36.06

$26.80

Shares

2,304,680
3,730,778
10,205,513
14,331,081
19,341,817
7,628,196

57,542,065

Weighted-
Average
Exercise
Price

$11.54
19.11
22.11
29.37
31.44
36.06

$28.28

R E S T R I C T E D S T O C K A N D U N I T A W A R D S

A summary of the status of the Company’s restricted shares of stock is presented below:

2010

2009

2008

Year Ended December 31

Shares

Nonvested Shares
Outstanding at beginning of period . . . . .
Granted . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . .
Cancelled . . . . . . . . . . . . . . . . . . . .

6,788,203
4,398,660
(1,862,228)
(513,608)

Outstanding at end of period . . . . . . . . .

8,811,027 (a)

Weighted-
Average Grant-
Date Fair Value

Weighted-
Average Grant-
Date Fair Value

Shares

Weighted-
Average Grant-
Date Fair Value

Shares

$16.68
24.05
18.71
20.00

$19.74

2,420,535
5,435,363
(869,898)
(197,797)

6,788,203

$32.42
12.09
31.84
16.52

$16.68

2,368,085
1,132,239
(958,729)
(121,060)

2,420,535

$31.45
32.24
29.78
32.69

$32.42

(a) Includes maximum number of shares to be received by participants under awards that are based on the achievement of certain future performance criteria by the

Company.

The total fair value of shares vested was $44 million, $12 million, and $29 million for 2010, 2009 and 2008, respectively.
Stock-based compensation expense was $113 million, $89 million and $85 million for 2010, 2009 and 2008, respectively. On
an after-tax basis, stock-based compensation was $70 million, $55 million and $53 million for 2010, 2009, and 2008,
respectively. As of December 31, 2010, there was $162 million of total unrecognized compensation cost related to nonvested
share-based arrangements granted under the plans. That cost is expected to be recognized over a weighted-average period of
2.4 years as compensation expense.

Note 19 I N C O M E T A X E S

The components of income tax expense were:

(Dollars in Millions)

2010

2009

2008

Federal
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,105
(339)

Federal income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

766

State
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

State income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

200
(31)

169

$ 765
(499)

266

175
(46)

129

$1,832
(958)

874

300
(87)

213

Total income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 935

$ 395

$1,087

106

U.S. BANCORP

A reconciliation of expected income tax expense at the federal statutory rate of 35 percent to the Company’s applicable income
tax expense follows:

(Dollars in Millions)

Tax at statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income tax, at statutory rates, net of federal tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effect of

2010

$1,470
110

Tax credits, net of related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax-exempt income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(462)
(214)
18
13

2009

$ 921
84

(421)
(202)
(11)
24

2008

$1,435
138

(301)
(173)
(24)
12

Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 935

$ 395

$1,087

The tax effects of fair value adjustments on securities
available-for-sale, derivative instruments in cash flow hedges
and certain tax benefits related to stock options are recorded
directly to shareholders’ equity as part of other
comprehensive income (loss).

In preparing its tax returns, the Company is required to

interpret complex tax laws and regulations and utilize
income and cost allocation methods to determine its taxable
income. On an ongoing basis, the Company is subject to
examinations by federal, state and local government taxing
authorities that may give rise to differing interpretations of
these complex laws, regulations and methods. Due to the
nature of the examination process, it generally takes years
before these examinations are completed and matters are

resolved. Included in earnings for 2010, 2009 and 2008
were changes in income tax expense and associated liabilities
related to the resolution of various state income tax
examinations which cover varying years from 2001 through
2008 in different states. The resolution of these cycles was
the result of negotiations held between the Company and
representatives of various taxing authorities throughout the
examinations. Federal tax examinations for all years ending
through December 31, 2006, are completed and resolved.
During 2010, the Internal Revenue Service began its
examination of the Company’s tax returns for the years
ended December 31, 2007 and 2008. The years open to
examination by state and local government authorities vary
by jurisdiction.

A reconciliation of the changes in the federal, state and foreign unrecognized tax positions balances are summarized as follows:

Year Ended December 31 (Dollars in Millions)

Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions taken in prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions taken in the current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exam resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statute expirations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2010

$440
116
30
–
(54)

Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$532

2009

$283
31
145
(12)
(7)

$440

2008

$296
49
8
(63)
(7)

$283

The total amount of unrecognized tax positions that, if
recognized, would impact the effective income tax rate as of
December 31, 2010, 2009 and 2008, were $253 million,
$202 million and $187 million, respectively. The Company
classifies interest and penalties related to unrecognized tax
positions as a component of income tax expense. During the
years ended December 31, 2010, 2009 and 2008 the
Company recognized approximately $(6) million,
$13 million and $19 million, respectively, in interest and had
approximately $49 million accrued at December 31, 2010.
The ultimate deductibility is highly certain, however the
timing of deductibility is uncertain.

While certain examinations may be concluded, statutes
may lapse or other developments may occur, the Company
does not believe a significant increase or decrease in the
uncertain tax positions will occur over the next twelve
months.

Deferred income tax assets and liabilities reflect the tax

effect of estimated temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for the same items
for income tax reporting purposes.

U.S. BANCORP

107

The significant components of the Company’s net deferred tax asset (liability) as of December 31 were:

(Dollars in Millions)

2010

2009

Deferred Tax Assets
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities available-for-sale and financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal, state and foreign net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partnerships and other investment assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,100
393
317
201
113
52
429
284

Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,889

Deferred Tax Liabilities
Leasing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage servicing rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other deferred tax liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2,269)
(407)
(311)
(139)
(113)
(176)

(3,415)
(50)

$ 2,147
359
275
184
25
58
120
79

3,247

(2,319)
(280)
(394)
(129)
(71)
(188)

(3,381)
(56)

Net Deferred Tax Asset (Liability)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 424

$ (190)

The Company has established a valuation allowance to
offset deferred tax assets related to federal, state and foreign
net operating loss carryforwards which are subject to
various limitations under the respective income tax laws and
some of which may expire unused. The Company has
approximately $573 million of federal, state and foreign net
operating loss carryforwards which expire at various times
through 2024. Management has determined a valuation
reserve is not required for the remaining deferred tax assets
because it is more likely than not these assets could be
realized through carry back to taxable income in prior years,
future reversals of existing taxable temporary differences and
future taxable income.

Certain events covered by Internal Revenue Code
section 593(e) will trigger a recapture of base year reserves
of acquired thrift institutions. The base year reserves of
acquired thrift institutions would be recaptured if an entity
ceases to qualify as a bank for federal income tax purposes.
The base year reserves of thrift institutions also remain
subject to income tax penalty provisions that, in general,
require recapture upon certain stock redemptions of, and
excess distributions to, stockholders. At December 31, 2010,
retained earnings included approximately $102 million of
base year reserves for which no deferred federal income tax
liability has been recognized.

108

U.S. BANCORP

Note 20 D E R I V A T I V E I N S T R U M E N T S

The Company recognizes all derivatives in the consolidated
balance sheet at fair value as other assets or liabilities. On
the date the Company enters into a derivative contract, the
derivative is designated as either a hedge of the fair value of
a recognized asset or liability (“fair value hedge”); a hedge
of a forecasted transaction or the variability of cash flows to
be paid related to a recognized asset or liability (“cash flow
hedge”); a hedge of the volatility of an investment in foreign
operations driven by changes in foreign currency exchange
rates (“net investment hedge”); or a designation is not made
as it is a customer accommodation, an economic hedge for
asset/liability risk management purposes or another stand-
alone derivative created through the Company’s operations
(“free-standing derivative”).

Of the Company’s $47.0 billion of total notional
amount of asset and liability management positions at
December 31, 2010, $8.4 billion was designated as a fair
value, cash flow or net investment hedge. When a derivative
is designated as a fair value, cash flow or net investment
hedge, the Company performs an assessment, at inception
and, at a minimum, quarterly thereafter, to determine the
effectiveness of the derivative in offsetting changes in the
value or cash flows of the hedged item(s).

Fair Value Hedges These derivatives are primarily interest
rate swaps that hedge the change in fair value related to

interest rate changes of underlying fixed-rate debt and junior
subordinated debentures. Changes in the fair value of
derivatives designated as fair value hedges, and changes in
the fair value of the hedged items, are recorded in earnings.
All fair value hedges were highly effective for the year ended
December 31, 2010, and the change in fair value attributed
to hedge ineffectiveness was not material.

Cash Flow Hedges These derivatives are interest rate swaps
that are hedges of the forecasted cash flows from the
underlying variable-rate debt. Changes in the fair value of
derivatives designated as cash flow hedges are recorded in
other comprehensive income (loss) until expense from the
cash flows of the hedged items is realized. If a derivative
designated as a cash flow hedge is terminated or ceases to be
highly effective, the gain or loss in other comprehensive
income (loss) is amortized to earnings over the period the
forecasted hedged transactions impact earnings. If a hedged
forecasted transaction is no longer probable, hedge
accounting is ceased and any gain or loss included in other
comprehensive income (loss) is reported in earnings
immediately. At December 31, 2010, the Company had
$414 million (net-of-tax) of realized and unrealized losses on
derivatives classified as cash flow hedges recorded in other
comprehensive income (loss), compared with $327 million
(net-of-tax) at December 31, 2009. The estimated amount to
be reclassified from other comprehensive income (loss) into
earnings during the next 12 months is a loss of $133 million
(net-of-tax). This includes gains and losses related to hedges
that were terminated early for which the forecasted
transactions are still probable. All cash flow hedges were
highly effective for the year ended December 31, 2010, and
the change in fair value attributed to hedge ineffectiveness
was not material.

Net Investment Hedges The Company uses forward
commitments to sell specified amounts of certain foreign
currencies to hedge the volatility of its investment in foreign
operations driven by fluctuations in foreign currency
exchange rates. The net amount of related gains or losses
included in the cumulative translation adjustment for the
year ended December 31, 2010 was not material.

Other Derivative Positions The Company enters into free-
standing derivatives to mitigate interest rate risk and for
other risk management purposes. These derivatives include
forward commitments to sell residential mortgage loans,
which are used to economically hedge the interest rate risk
related to residential mortgage loans held for sale. The
Company also enters into U.S. Treasury futures, options on
U.S. Treasury futures contracts, interest rate swaps and
forward commitments to buy residential mortgage loans to
economically hedge the change in the fair value of the
Company’s residential MSRs. In addition, the Company acts
as a seller and buyer of interest rate derivatives and foreign
exchange contracts to accommodate its customers. To
mitigate the market and liquidity risk associated with these
customer accommodation derivatives, the Company enters
into similar offsetting positions. The Company also has
derivative contracts that are created through its operations,
including commitments to originate mortgage loans held-for-
sale and certain derivative financial guarantee contracts.

For additional information on the Company’s purpose
for entering into derivative transactions and its overall risk
management strategies, refer to “Management Discussion
and Analysis — Use of Derivatives to Manage Interest Rate
and Other Risks” which is incorporated by reference into
these Notes to Consolidated Financial Statements.

The following table provides information on the fair value of the Company’s derivative positions:

December 31, 2010

December 31, 2009

(Dollars in Millions)

Asset
Derivatives

Total fair value of derivative positions. . . . . . . . . . . . . . . . . . . . . . . .
Netting (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,799
(280)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,519

Liability
Derivatives

$ 2,174
(1,163)

$ 1,011

Asset
Derivatives

$1,582
(421)

$1,161

Liability
Derivatives

$1,854
(995)

$ 859

Note: The fair value of asset and liability derivatives are included in Other assets and Other liabilities on the Consolidated Balance Sheet, respectively.
(a) Represents netting of derivative asset and liability balances, and related collateral, with the same counterparty subject to master netting agreements.

Authoritative accounting guidance permits the netting of derivative receivables and payables when a legally enforceable master netting agreement exists
between the Company and a derivative counterparty. A master netting agreement is an agreement between two counterparties who have multiple derivative
contracts with each other that provide for the net settlement of contracts through a single payment, in a single currency, in the event of default on or
termination of any one contract. At December 31, 2010, the amount of cash and money market investments collateral posted by counterparties that was
netted against derivative assets was $55 million and the amount of cash collateral posted by the Company that was netted against derivative liabilities was
$936 million. At December 31, 2009, the amount of cash collateral posted by counterparties that was netted against derivative assets was $116 million and
the amount of cash collateral posted by the Company that was netted against derivative liabilities was $691 million.

U.S. BANCORP

109

The following table summarizes the asset and liability management derivative positions of the Company:

(Dollars in Millions)

December 31, 2010
Fair value hedges

Interest rate contracts

Asset Derivatives

Liability Derivatives

Notional
Value

Fair
Value

Weighted-Average
Remaining
Maturity
In Years

Notional
Value

Fair
Value

Weighted-Average
Remaining
Maturity
In Years

Receive fixed/pay floating swaps . . . . . . . . . . . . . . . . . . . . . $1,800
891

Foreign exchange cross-currency swaps . . . . . . . . . . . . . . . . .

$ 72
70

55.75
6.17

$

–
445

$

–
–

Cash flow hedges

Interest rate contracts

Pay fixed/receive floating swaps . . . . . . . . . . . . . . . . . . . . .

–

Net investment hedges

Foreign exchange forward contracts . . . . . . . . . . . . . . . . . . . .

512

Other economic hedges
Interest rate contracts

Futures and forwards

Buy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options

Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receive fixed/pay floating swaps . . . . . . . . . . . . . . . . . . . . .
Foreign exchange forward contracts . . . . . . . . . . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,879
9,082

1,600
6,321
2,250
158
61
650

–

3

20
207

–
23
3
1
3
2

December 31, 2009
Fair value hedges

Interest rate contracts

–

.08

.10
.07

.06
.07
10.22
.09
1.60
3.22

4,788

688

–

–

6,312
6,002

–
1,348
–
694
–
1,183

79
51

–
9
–
6
–
7

32
–

Receive fixed/pay floating swaps . . . . . . . . . . . . . . . . . . . . .
Foreign exchange cross-currency swaps . . . . . . . . . . . . . . . . .

3,235
1,864

70
272

32.71
6.81

1,950
–

Cash flow hedges

Interest rate contracts

Pay fixed/receive floating swaps . . . . . . . . . . . . . . . . . . . . .

–

Net investment hedges

Foreign exchange forward contracts . . . . . . . . . . . . . . . . . . . .

536

Other economic hedges
Interest rate contracts

Futures and forwards

Buy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options

Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange forward contracts . . . . . . . . . . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,250
7,533

5,250
2,546
113
27
863

–

15

6
91

–
9
1
2
2

–

.08

.07
.11

.06
.08
.08
1.58
3.68

8,363

556

–

–

9,862
1,260

–
594
293
29
1,261

190
3

–
2
2
1
1

110

U.S. BANCORP

–
6.17

5.03

–

.05
.09

–
.07
–
.09
–
2.71

20.52
–

3.58

–

.05
.06

–
.09
.08
.29
3.05

The following table summarizes the customer-related derivative positions of the Company:

(Dollars in Millions)

December 31, 2010
Interest rate contracts

Asset Derivatives

Liability Derivatives

Notional
Value

Fair
Value

Weighted-Average
Remaining
Maturity
In Years

Notional
Value

Fair
Value

Weighted-Average
Remaining
Maturity
In Years

Receive fixed/pay floating swaps . . . . . . . . . . . . . . . . . . . . . $15,730
Pay fixed/receive floating swaps . . . . . . . . . . . . . . . . . . . . .
1,315
Options

$956
24

Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,024
472

13
12

Foreign exchange rate contracts

Forwards, spots and swaps (a) . . . . . . . . . . . . . . . . . . . . . .
Options

7,772

384

Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

224
–

6
–

December 31, 2009
Interest rate contracts

Receive fixed/pay floating swaps . . . . . . . . . . . . . . . . . . . . .
Pay fixed/receive floating swaps . . . . . . . . . . . . . . . . . . . . .
Options

18,700
1,299

Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,841
477

854
24

20
12

Foreign exchange rate contracts

Forwards, spots and swaps (a) . . . . . . . . . . . . . . . . . . . . . .
Options

5,607

193

Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

311
–

11
–

(a) Reflects the net of long and short positions.

4.64
6.12

1.98
.26

.74

.40
–

4.46
7.36

1.68
.56

.46

.64
–

$ 1,294
15,769

$ 21
922

115
1,667

12
13

7,694

360

–
224

–
6

1,083
18,490

231
1,596

19
821

12
20

5,563

184

–
311

–
11

6.01
4.68

.36
2.35

.75

–
.40

7.00
4.45

.85
1.90

.45

–
.64

The table below shows the effective portion of the gains (losses) recognized in other comprehensive income (loss) and the gains
(losses) reclassified from other comprehensive income (loss) into earnings (net-of-tax):

Year Ended December 31 (Dollars in Millions)

2010

2009

2010

2009

Gains (Losses) Recognized in Other
Comprehensive Income (Loss)

Gains (Losses) Reclassified from
Other Comprehensive Income (Loss)
into Earnings

Asset and Liability Management Positions
Cash flow hedges

Interest rate contracts

Pay fixed/receive floating swaps (a) . . . . . . . . . . . . . . . . . . . . . . . $(235)

$114

$(148)

Net investment hedges

Foreign exchange forward contracts . . . . . . . . . . . . . . . . . . . . . . . .

(25)

(44)

–

Note: Ineffectiveness on cash flow and net investment hedges was not material for the year ended December 31, 2010.
(a) Gains (Losses) reclassified from other comprehensive income (loss) into interest income (expense) on long-term debt.

$(209)

–

U.S. BANCORP

111

The table below shows the gains (losses) recognized in earnings for fair value hedges, other economic hedges and the customer-
related positions:

Year Ended December 31 (Dollars in Millions)

Asset and Liability Management Positions
Fair value hedges (a)

Location of Gains (Losses)
Recognized in Earnings

Gains (Losses)
Recognized in Earnings

2010

2009

Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange cross-currency swaps. . . . . . . . . . . . . . . . . . . . . . . .

Other noninterest income
Other noninterest income

$ (31)
(193)

$ (27)
115

Other economic hedges
Interest rate contracts

Mortgage banking revenue
Futures and forwards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage banking revenue
Purchased and written options . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial products revenue
Foreign exchange forward contracts . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation expense
Credit contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other noninterest income/expense

Customer-Related Positions
Interest rate contracts

Receive fixed/pay floating swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pay fixed/receive floating swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased and written options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other noninterest income
Other noninterest income
Other noninterest income

Foreign exchange rate contracts

Forwards, spots and swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased and written options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial products revenue
Commercial products revenue

831
425
(16)
1
(6)

201
(196)
1

49
1

184
300
(46)
(22)
29

(658)
696
(1)

49
1

(a) Gains (Losses) on items hedged by interest rate contracts and foreign exchange forward contracts, included in noninterest income (expense), were

$35 million and $193 million for the year ended December 31, 2010, respectively, and $25 million and $(114) million for the year ended December 31, 2009,
respectively. The ineffective portion was immaterial for the years ended December 31, 2010 and 2009.

Derivatives are subject to credit risk associated with
counterparties to the derivative contracts. The Company
measures that credit risk based on its assessment of the
probability of counterparty default and includes that within
the fair value of the derivative. The Company manages
counterparty credit risk through diversification of its
derivative positions among various counterparties, by
entering into master netting agreements where possible and
by requiring collateral agreements which allow the Company
to call for immediate, full collateral coverage when credit-
rating thresholds are triggered by counterparties.

The Company’s collateral agreements are bilateral and,
therefore, contain provisions that require collateralization of

the Company’s net liability derivative positions. Required
collateral coverage is based on certain net liability thresholds
and contingent upon the Company’s credit rating from two
of the nationally recognized statistical rating organizations.
If the Company’s credit rating were to fall below credit
ratings thresholds established in the collateral agreements,
the counterparties to the derivatives could request immediate
full collateral coverage for derivatives in net liability
positions. The aggregate fair value of all derivatives under
collateral agreements that were in a net liability position at
December 31, 2010, was $1.4 billion. At December 31,
2010, the Company had $936 million of cash posted as
collateral against this net liability position.

112

U.S. BANCORP

Note 21 F A I R V A L U E S O F A S S E T S
A N D L I A B I L I T I E S

The Company uses fair value measurements for the initial
recording of certain assets and liabilities, periodic
remeasurement of certain assets and liabilities, and
disclosures. Derivatives, trading and available-for-sale
investment securities, certain mortgage loans held for sale
(“MLHFS”) and MSRs are recorded at fair value on a
recurring basis. Additionally, from time to time, the
Company may be required to record at fair value other
assets on a nonrecurring basis, such as loans held for sale,
loans held for investment and certain other assets. These
nonrecurring fair value adjustments typically involve
application of lower-of-cost-or-fair value accounting or
impairment write-downs of individual assets.

Fair value is defined as the exchange price that would
be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market
participants on the measurement date. A fair value
measurement reflects all of the assumptions that market
participants would use in pricing the asset or liability,
including assumptions about the risk inherent in a particular
valuation technique, the effect of a restriction on the sale or
use of an asset, and the risk of nonperformance.

The Company groups its assets and liabilities measured

at fair value into a three-level hierarchy for valuation
techniques used to measure financial assets and financial
liabilities at fair value. This hierarchy is based on whether
the valuation inputs are observable or unobservable. These
levels are:

(cid:129) Level 1 — Quoted prices in active markets for identical
assets or liabilities. Level 1 includes U.S. Treasury and
exchange-traded instruments.

(cid:129) Level 2 — Observable inputs other than Level 1 prices,
such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by
observable market data for substantially the full term of
the assets or liabilities. Level 2 includes debt securities
that are traded less frequently than exchange-traded
instruments and which are valued using third-party
pricing services; derivative contracts whose value is
determined using a pricing model with inputs that are
observable in the market or can be derived principally
from or corroborated by observable market data; and
MLHFS whose values are determined using quoted prices

for similar assets or pricing models with inputs that are
observable in the market or can be corroborated by
observable market data.

(cid:129) Level 3 — Unobservable inputs that are supported by

little or no market activity and that are significant to the
fair value of the assets or liabilities. Level 3 assets and
liabilities include financial instruments whose values are
determined using pricing models, discounted cash flow
methodologies, or similar techniques, as well as
instruments for which the determination of fair value
requires significant management judgment or estimation.
This category includes residential MSRs, certain debt
securities, including the Company’s SIV-related securities
and non-agency mortgaged-backed securities, and certain
derivative contracts.

When the Company changes its valuation inputs for
measuring financial assets and financial liabilities at fair
value, either due to changes in current market conditions or
other factors, it may need to transfer those assets or
liabilities to another level in the hierarchy based on the new
inputs used. The Company recognizes these transfers at the
end of the reporting period that the transfers occur. For the
years ended December 31, 2010 and 2009, there were no
significant transfers of financial assets or financial liabilities
between the hierarchy levels, except for the transfer of non-
agency mortgage-backed securities from Level 2 to Level 3
in the first quarter of 2009, as discussed below.

The following section describes the valuation

methodologies used by the Company to measure financial
assets and liabilities at fair value and for estimating fair
value for financial instruments not recorded at fair value as
required under disclosure guidance related to the fair value
of financial instruments. In addition, for financial assets and
liabilities measured at fair value, the following section
includes an indication of the level of the fair value hierarchy
in which the assets or liabilities are classified. Where
appropriate, the description includes information about the
valuation models and key inputs to those models.

Cash and Cash Equivalents The carrying value of cash,
amounts due from banks, federal funds sold and securities
purchased under resale agreements was assumed to
approximate fair value.

Investment Securities When available, quoted market prices
are used to determine the fair value of investment securities
and such items are classified within Level 1 of the fair value
hierarchy.

U.S. BANCORP

113

For other securities, the Company determines fair value
based on various sources and may apply matrix pricing with
observable prices for similar securities where a price for the
identical security is not observable. Prices are verified, where
possible, to prices of observable market trades as obtained
from independent sources. Securities measured at fair value
by such methods are classified within Level 2.

The fair value of securities for which there are no
market trades, or where trading is inactive as compared to
normal market activity, are classified within Level 3.
Securities classified within Level 3 include non-agency
mortgage-backed securities, non-agency commercial
mortgage-backed securities, asset-backed securities,
collateralized debt obligations and collateralized loan
obligations, certain corporate debt securities and SIV-related
securities. Beginning in the first quarter of 2009, due to the
limited number of trades of non-agency mortgage-backed
securities and lack of reliable evidence about transaction

prices, the Company determines the fair value of these
securities using a cash flow methodology and incorporating
observable market information, where available. The use of
a cash flow methodology resulted in the Company
transferring some non-agency mortgage-backed securities to
Level 3 in the first quarter of 2009. This transfer did not
impact earnings and was not significant to shareholders’
equity of the Company or the carrying amount of the
securities.

Cash flow methodologies and other market valuation
techniques involving management judgment use assumptions
regarding housing prices, interest rates and borrower
performance. Inputs are refined and updated to reflect
market developments. The primary valuation drivers of these
securities are the prepayment rates, default rates and default
severities associated with the underlying collateral, as well as
the discount rate used to calculate the present value of the
projected cash flows.

The following table shows the valuation assumption ranges for Level 3 available-for-sale non-agency mortgage-backed securities
at December 31, 2010:

Minimum

Prime (a)

Maximum

Average

Minimum

Maximum

Average

Non-prime

Estimated lifetime prepayment rates . . . . . . . . .
Lifetime probability of default rates. . . . . . . . . .
Lifetime loss severity rates . . . . . . . . . . . . . . .
Discount margin . . . . . . . . . . . . . . . . . . . . .

4%
–
16
3

28%
14
100
30

13%
1
41
6

1%
–
10
3

13%
20
88
40

6%
8
56
11

(a) Prime securities are those designated as such by the issuer or those with underlying asset characteristics and/or credit enhancements consistent with securities

designated as prime.

Certain mortgage loans held for sale MLHFS measured at
fair value, for which an active secondary market and readily
available market prices exist, are initially valued at the
transaction price and are subsequently valued by comparison
to instruments with similar collateral and risk profiles.
MLHFS are classified within Level 2. Included in mortgage
banking revenue was a $125 million net loss and a
$206 million net gain, for the years ended December 31,
2010 and 2009, respectively, from the changes to fair value
of these MLHFS under fair value option accounting
guidance. Changes in fair value due to instrument specific
credit risk were immaterial. The fair value of MLHFS was
$8.1 billion as of December 31, 2010, which exceeded the
unpaid principal balance by $66 million as of that date.
Interest income for MLHFS is measured based on
contractual interest rates and reported as interest income in
the Consolidated Statement of Income. Electing to measure
MLHFS at fair value reduces certain timing differences and
better matches changes in fair value of these assets with
changes in the value of the derivative instruments used to

114

U.S. BANCORP

economically hedge them without the burden of complying
with the requirements for hedge accounting.

Loans The loan portfolio includes adjustable and fixed-rate
loans, the fair value of which was estimated using
discounted cash flow analyses and other valuation
techniques. The expected cash flows of loans considered
historical prepayment experiences and estimated credit losses
for nonperforming loans and were discounted using current
rates offered to borrowers of similar credit characteristics.
Generally, loan fair values reflect Level 3 information.

Mortgage servicing rights MSRs are valued using a cash
flow methodology and third-party prices, if available.
Accordingly, MSRs are classified within Level 3. The
Company determines fair value by estimating the present
value of the asset’s future cash flows using market-based
prepayment rates, discount rates, and other assumptions
validated through comparison to trade information, industry
surveys, and independent third-party valuations. Risks
inherent in MSRs valuation include higher than expected
prepayment rates and/or delayed receipt of cash flows.

Derivatives Exchange-traded derivatives are measured at fair
value based on quoted market (i.e., exchange) prices.
Because prices are available for the identical instrument in
an active market, these fair values are classified within
Level 1 of the fair value hierarchy.

The majority of derivatives held by the Company are

executed over-the-counter and are valued using standard
cash flow, Black-Scholes and Monte Carlo valuation
techniques. The models incorporate inputs, depending on the
type of derivative, including interest rate curves, foreign
exchange rates and volatility. In addition, all derivative
values incorporate an assessment of the risk of counterparty
nonperformance, measured based on the Company’s
evaluation of credit risk as well as external assessments of
credit risk, where available. In its assessment of
nonperformance risk, the Company considers its ability to
net derivative positions under master netting agreements, as
well as collateral received or provided under collateral
support agreements. The majority of these derivatives are
classified within Level 2 of the fair value hierarchy as the
significant inputs to the models are observable. An exception
to the Level 2 classification is certain derivative transactions
for which the risk of nonperformance cannot be observed in
the market. These derivatives are classified within Level 3 of
the fair value hierarchy. In addition, commitments to sell,
purchase and originate mortgage loans that meet the
requirements of a derivative, are valued by pricing models
that include market observable and unobservable inputs.
Due to the significant unobservable inputs, these

commitments are classified within Level 3 of the fair value
hierarchy.

Deposit Liabilities The fair value of demand deposits,
savings accounts and certain money market deposits is equal
to the amount payable on demand. The fair value of fixed-
rate certificates of deposit was estimated by discounting the
contractual cash flow using current market rates.

Short-term Borrowings Federal funds purchased, securities
sold under agreements to repurchase, commercial paper and
other short-term funds borrowed have floating rates or
short-term maturities. The fair value of short-term
borrowings was determined by discounting contractual cash
flows using current market rates.

Long-term Debt The fair value for most long-term debt was
determined by discounting contractual cash flows using
current market rates. Junior subordinated debt instruments
were valued using market quotes.

Loan Commitments, Letters of Credit and Guarantees The
fair value of commitments, letters of credit and guarantees
represents the estimated costs to terminate or otherwise
settle the obligations with a third-party. The fair value of
residential mortgage commitments is estimated based on
observable and unobservable inputs. Other loan
commitments, letters of credit and guarantees are not
actively traded, and the Company estimates their fair value
based on the related amount of unamortized deferred
commitment fees adjusted for the probable losses for these
arrangements.

U.S. BANCORP

115

The following table summarizes the balances of assets and liabilities measured at fair value on a recurring basis:

(Dollars in Millions)

Level 1

Level 2

Level 3

Netting

Total

December 31, 2010

Available-for-sale securities

U.S. Treasury and agencies . . . . . . . . . . . . . . . . . . . . . . . . . $ 873

$ 1,664

$

$

–

–

Mortgage-backed securities

Residential

Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-agency

Prime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-prime . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial

Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Asset-backed securities

Collateralized debt obligations/Collateralized loan

obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations of state and political subdivisions. . . . . . . . . . . . .
Obligations of foreign governments . . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . .
Perpetual preferred securities . . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total available-for-sale . . . . . . . . . . . . . . . . . . . . . .
Mortgage loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage servicing rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

–

–
–

–
–

–
–
–
–
–
–
181

1,054
–
–
–
–

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,054

Derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

December 31, 2009

Available-for-sale securities

U.S. Treasury and agencies . . . . . . . . . . . . . . . . . . . . . . . . . $

Mortgage-backed securities

Residential

Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-agency

Prime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-prime . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial

Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Asset-backed securities

Collateralized debt obligations/Collateralized loan

obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations of state and political subdivisions. . . . . . . . . . . . .
Obligations of foreign governments . . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . .
Perpetual preferred securities . . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total available-for-sale . . . . . . . . . . . . . . . . . . . . . .
Mortgage loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage servicing rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

–
–

–

9

–

–
–

–
–

–
–
–
–
–
–
372

381
–
–
–
–

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 381

Derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

–
–

–

116

U.S. BANCORP

37,703

–
–

197
–

89
587
6,417
6
949
448
18

48,078
8,100
–
846
470

$57,494

$ 2,072
470

$ 2,542

29,595

–
–

147
–

107
–
6,693
6
868
423
–

41,234
4,327
–
713
247

$46,521

$ 1,800
256

$ 2,056

1,103
947

–
50

135
133
–
–
9
–
–

2,377
–
1,837
953
–

$5,167

$ 102
–

$ 102

1,429
968

–
13

98
357
–
–
10
–
231

3,106
–
1,749
869
–

$5,724

$

$

54
–

54

$ 3,395

$

$

–

–

–

–

–
–

–
–

–
–
–
–
–
–
–

–

–

–
–

–
–

–
–
–
–
–
–
–

–
–
–
(280)
–

$ (280)

$(1,163)
–

$(1,163)

–
–
–
(421)
–

$ (421)

$ (995)
–

$ (995)

$ 2,537

37,703

1,103
947

197
50

224
720
6,417
6
958
448
199

51,509
8,100
1,837
1,519
470

$63,435

$ 1,011
470

$ 1,481

$ 3,404

29,595

1,429
968

147
13

205
357
6,693
6
878
423
603

44,721
4,327
1,749
1,161
247

$52,205

$

859
256

$ 1,115

The following table presents the changes in fair value for all assets and liabilities measured at fair value on a recurring basis
using significant unobservable inputs (Level 3):

Beginning
of Period
Balance

Net Gains
(Losses)
Included in
Net Income

Net Gains
(Losses)
Included in
Other
Comprehensive
Income (Loss)

Purchases,
Sales, Principal
Payments,
Issuances and
Settlements

Transfers into
Level 3

End
of Period
Balance

Net Change in
Unrealized Gains
(Losses) Relating
to Assets
Still Held at
End of Period

Year Ended December 31 (Dollars in Millions)

2010

Available-for-sale securities

Mortgage-backed securities
Residential non-agency

Prime . . . . . . . . . . . . . . . . . . . . .
Non-prime . . . . . . . . . . . . . . . . . .
Commercial non-agency . . . . . . . . . .

$1,429
968
13

$

2
(47)
2

$ 82
146
3

$

$ (410)
(120)
32

Asset-backed securities
Collateralized debt

obligations/Collateralized loan
obligations . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . .

Total available-for-sale . . . . . . . . . .
Mortgage servicing rights . . . . . . . . . . . . .
Net derivative assets and liabilities . . . . . . .

98
357
10
231

3,106
1,749
815

2009

Available-for-sale securities

Mortgage-backed securities
Residential non-agency

7
2
(1)
5

(30) (a)
(616) (b)
243 (c)

–
11
–
10

252
–
–

30
(237)
–
(246)

(951)
704
(207)

–
–
–

–
–
–
–

–
–
–

$1,103
947
50

$

76
145
3

135
133
9
–

2,377
1,837
851

4
12
–
–

240
(616) (b)
(625) (d)

Prime . . . . . . . . . . . . . . . . . . . . .
Non-prime . . . . . . . . . . . . . . . . . .
Commercial non-agency . . . . . . . . . .

$ 183
1,022
17

$ (4)
(141)
(1)

$542
151
(1)

$(1,540)
(197)
(3)

$2,248
133
1

$1,429
968
13

$ 358
29
(1)

Asset-backed securities
Collateralized debt

obligations/Collateralized loan
obligations . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . .

Total available-for-sale . . . . . . . . . .
Mortgage servicing rights . . . . . . . . . . . . .
Net derivative assets and liabilities . . . . . . .

86
523
13
–

1,844
1,194
1,698

(3)
(180)
(3)
2

(330) (e)
(394) (b)
(755) (f)

2
101
–
(10)

785
–
–

9
(90)
–
(4)

(1,825)
949
(129)

4
3
–
243

2,632
–
1

98
357
10
231

3,106
1,749
815

3
3
–
(10)

382
(394) (b)
(1,328) (g)

(a) Approximately $(91) million included in securities gains (losses) and $61 million included in interest income.
(b) Included in mortgage banking revenue.
(c) Approximately $(552) million included in other noninterest income and $795 million included in mortgage banking revenue.
(d) Approximately $176 million included in other noninterest income and $(801) million included in mortgage banking revenue.
(e) Approximately $(361) million included in securities gains (losses) and $31 million included in interest income.
(f) Approximately $(1.4) billion included in other noninterest income and $611 million included in mortgage banking revenue.
(g) Approximately $(630) million included in other noninterest income and $(698) million included in mortgage banking revenue.

U.S. BANCORP

117

The Company is also required periodically to measure certain other financial assets at fair value on a nonrecurring basis. These
measurements of fair value usually result from the application of lower-of-cost-or-fair value accounting or write-downs of
individual assets. The following table summarizes the adjusted carrying values and the level of valuation assumptions for assets
measured at fair value on a nonrecurring basis at December 31:

2010

(Dollars in Millions)

Level 1

Level 2

Level 3

Loans held for sale (a)
. . . . . . . . . .
Loans (b) . . . . . . . . . . . . . . . . . . .
Other real estate owned (c) . . . . . . .
Other intangible assets . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . .

$–
–
–
–
–

$

–
404
812
–
4

$–
1
–
1
9

Total

$

–
405
812
1
13

Level 1

Level 2

Level 3

2009

$–
–
–
–
–

$276
235
183
–
–

$–
5
–
3
–

(a) Represents the carrying value of loans held for sale for which adjustments are based on what secondary markets are currently offering for portfolios with similar

characteristics.

(b) Represents the carrying value of loans for which adjustments are based on the appraised value of the collateral, excluding loans fully charged-off.
(c) Represents the fair value of foreclosed properties that were measured at fair value based on the appraisal value of the collateral subsequent to their initial acquisition.

The following table summarizes losses recognized related to nonrecurring fair value measurements of individual assets or
portfolios for the year ended December 31:

(Dollars in Millions)

2010

Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Loans (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other real estate owned (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

–
363
302
1
6

(a) Represents write-downs of loans which are based on the appraised value of the collateral, excluding loans fully charged-off.
(b) Represents related losses of foreclosed properties that were measured at fair value subsequent to their initial acquisition.

Total

$276
240
183
3
–

2009

$ 2
293
178
2
–

F A I R V A L U E O P T I O N

The following table summarizes the differences between the aggregate fair value carrying amount of MLHFS for which the fair
value option has been elected and the aggregate unpaid principal amount that the Company is contractually obligated to receive
at maturity:

December 31 (Dollars in Millions)

2010

2009

Fair Value
Carrying
Amount

Aggregate
Unpaid
Principal

Carrying
Amount Over
(Under) Unpaid
Principal

Fair Value
Carrying
Amount

Aggregate
Unpaid
Principal

Carrying
Amount Over
(Under) Unpaid
Principal

Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans 90 days or more past due . . . . . . . . . . . . . . . . . . . . . . . .

$8,100
11
6

$8,034
18
6

$66
(7)
–

$4,327
–
23

$4,264
–
30

$63
–
(7)

Disclosures about Fair Value of Financial Instruments The following table summarizes the estimated fair value for financial
instruments as of December 31, 2010 and 2009, and includes financial instruments that are not accounted for at fair value. In
accordance with disclosure guidance related to fair values of financial instruments, the Company did not include assets and
liabilities that are not financial instruments, such as the value of goodwill, long-term relationships with deposit, credit card,
merchant processing and trust customers, other purchased intangibles, premises and equipment, deferred taxes and other
liabilities.

118

U.S. BANCORP

The estimated fair values of the Company’s financial instruments are shown in the table below:

(Dollars in Millions)

Financial Assets

2010

2009

Carrying
Amount

Fair
Value

Carrying
Amount

Fair
Value

Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,487
1,469
Investment securities held-to-maturity . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Mortgages held for sale (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
267
Other loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
191,751
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial Liabilities

Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

204,252
32,557
31,537

$ 14,487
1,419
4
267
192,058

204,799
32,839
31,981

$ 6,206
47
29
416
189,676

183,242
31,312
32,580

$ 6,206
48
29
416
184,157

183,504
31,674
32,808

(a) Balance excludes mortgages held for sale for which the fair value option under applicable accounting guidance was elected.

The fair value of unfunded commitments, standby letters of credit and other guarantees is approximately equal to their

carrying value. The carrying value of unfunded commitments and standby letters of credit was $353 million and $356 million
at December 31, 2010 and 2009, respectively. The carrying value of other guarantees was $330 million and $285 million at
December 31, 2010 and 2009, respectively.

Note 22 G U A R A N T E E S A N D

C O N T I N G E N T L I A B I L I T I E S

C O M M I T M E N T S T O E X T E N D C R E D I T

Commitments to extend credit are legally binding and
generally have fixed expiration dates or other termination
clauses. The contractual amount represents the Company’s
exposure to credit loss, in the event of default by the
borrower. The Company manages this credit risk by using
the same credit policies it applies to loans. Collateral is
obtained to secure commitments based on management’s
credit assessment of the borrower. The collateral may include
marketable securities, receivables, inventory, equipment and
real estate. Since the Company expects many of the
commitments to expire without being drawn, total
commitment amounts do not necessarily represent the
Company’s future liquidity requirements. In addition, the
commitments include consumer credit lines that are
cancelable upon notification to the consumer.

L E T T E R S O F C R E D I T

Standby letters of credit are commitments the Company
issues to guarantee the performance of a customer to a third-
party. The guarantees frequently support public and private
borrowing arrangements, including commercial paper
issuances, bond financings and other similar transactions.
The Company issues commercial letters of credit on behalf
of customers to ensure payment or collection in connection
with trade transactions. In the event of a customer’s
nonperformance, the Company’s credit loss exposure is the

same as in any extension of credit, up to the letter’s
contractual amount. Management assesses the borrower’s
credit to determine the necessary collateral, which may
include marketable securities, receivables, inventory,
equipment and real estate. Since the conditions requiring the
Company to fund letters of credit may not occur, the
Company expects its liquidity requirements to be less than
the total outstanding commitments. The maximum potential
future payments guaranteed by the Company under standby
letter of credit arrangements at December 31, 2010, were
approximately $19.4 billion with a weighted-average term of
approximately 18 months. The estimated fair value of
standby letters of credit was approximately $105 million at
December 31, 2010.
The contract or notional amounts of unfunded commitments
to extend credit and letters of credit at December 31, 2010,
were as follows:

Term

Less Than
One Year

Greater Than
One Year

Total

(Dollars in Millions)

Commitments to extend credit

Commercial and commercial

real estate . . . . . . . . . . .

$19,991

$48,156

$68,147

Corporate and purchasing

cards (a) . . . . . . . . . . . .
Retail credit cards (a) . . . . . . .
Other retail . . . . . . . . . . . . .
Covered. . . . . . . . . . . . . . .

Letters of credit

Standby . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Commercial

15,571
58,901
9,452
99

9,361
366

(a) Primarily cancelable at the Company’s discretion.

–
–
16,171
1,264

10,037
100

15,571
58,901
25,623
1,363

19,398
466

U.S. BANCORP

119

L E A S E C O M M I T M E N T S

Rental expense for operating leases totaled $277 million in
2010, $253 million in 2009 and $234 million in 2008.
Future minimum payments, net of sublease rentals, under
capitalized leases and noncancelable operating leases with
initial or remaining terms of one year or more, consisted of
the following at December 31, 2010:

(Dollars in Millions)

Capitalized
Leases

Operating
Leases

2011 . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . .

Total minimum lease payments . . . . . . . . .

Less amount representing interest . . . . . . .

$ 8
7
7
5
4
16

$47

15

Present value of net minimum lease

payments . . . . . . . . . . . . . . . . . . . . .

$32

$ 199
187
180
151
115
455

$1,287

G U A R A N T E E S

Guarantees are contingent commitments issued by the
Company to customers or other third-parties. The
Company’s guarantees primarily include parent guarantees
related to subsidiaries’ third-party borrowing arrangements;
third-party performance guarantees inherent in the
Company’s business operations, such as indemnified
securities lending programs and merchant charge-back
guarantees; indemnification or buy-back provisions related to
certain asset sales; and contingent consideration
arrangements related to acquisitions. For certain guarantees,
the Company has recorded a liability related to the potential
obligation, or has access to collateral to support the
guarantee or through the exercise of other recourse
provisions can offset some or all of the maximum potential
future payments made under these guarantees.

Third-Party Borrowing Arrangements The Company
provides guarantees to third-parties as a part of certain
subsidiaries’ borrowing arrangements, primarily representing
guaranteed operating or capital lease payments or other debt
obligations with maturity dates extending through 2013. The
maximum potential future payments guaranteed by the
Company under these arrangements were approximately
$131 million at December 31, 2010.

Commitments from Securities Lending The Company
participates in securities lending activities by acting as the
customer’s agent involving the loan of securities. The
Company indemnifies customers for the difference between

120

U.S. BANCORP

the market value of the securities lent and the market value
of the collateral received. Cash collateralizes these
transactions. The maximum potential future payments
guaranteed by the Company under these arrangements were
approximately $7.8 billion at December 31, 2010, and
represented the market value of the securities lent to third-
parties. At December 31, 2010, the Company held assets
with a market value of $8.1 billion as collateral for these
arrangements.

Asset Sales The Company has provided guarantees to
certain third-parties in connection with the sale or
syndication of certain assets, primarily loan portfolios and
low-income housing tax credits. These guarantees are
generally in the form of asset buy-back or make-whole
provisions that are triggered upon a credit event or a change
in the tax-qualifying status of the related projects, as
applicable, and remain in effect until the loans are collected
or final tax credits are realized, respectively. The maximum
potential future payments guaranteed by the Company under
these arrangements were approximately $1.6 billion at
December 31, 2010, and represented the proceeds received
from the buyer or the guaranteed portion in these
transactions where the buy-back or make-whole provisions
have not yet expired. The maximum potential future
payments does not include loan sales where the Company
provides standard representations and warranties to the
buyer against losses related to loan underwriting
documentation. For these types of loan sales, the maximum
potential future payments are not readily determinable
because the Company’s obligation under these agreements
depends upon the occurrence of future events.

The Company regularly sells loans to government-
sponsored entities (“GSEs”) as part of its mortgage banking
activities. The Company provides customary representations
and warranties to the GSEs in conjunction with these sales.
These representations and warranties generally require the
Company to repurchase assets if it is subsequently
determined that a loan did not meet specified criteria, such
as a documentation deficiency or rescission of mortgage
insurance. If the Company is unable to cure or refute a
repurchase request, the Company is generally obligated to
repurchase the loan or otherwise reimburse the counterparty
for losses. At December 31, 2010, the Company had
reserved $180 million for potential losses from
representations and warranty obligations. The reserve is
based on the Company’s repurchase and loss trends, and
quantitative and qualitative factors that may result in
anticipated losses different from historical loss trends,

including loan vintage, underwriting characteristics and
macroeconomic trends.

Recourse available to the Company under asset sales
arrangements includes guarantees from the Small Business
Administration (for Small Business Administration loans
sold), recourse against the correspondent that originated the
loan or to the private mortgage issuer, the right to collect
payments from the debtors, and/or the right to liquidate the
underlying collateral, if any, and retain the proceeds. Based
on its established loan-to-value guidelines, the Company
believes the recourse available is sufficient to recover future
payments, if any, under the loan buy-back guarantees.

Merchant Processing The Company, through its
subsidiaries, provides merchant processing services. Under
the rules of credit card associations, a merchant processor
retains a contingent liability for credit card transactions
processed. This contingent liability arises in the event of a
billing dispute between the merchant and a cardholder that
is ultimately resolved in the cardholder’s favor. In this
situation, the transaction is “charged-back” to the merchant
and the disputed amount is credited or otherwise refunded to
the cardholder. If the Company is unable to collect this
amount from the merchant, it bears the loss for the amount
of the refund paid to the cardholder.

A cardholder, through its issuing bank, generally has

until the latter of up to four months after the date the
transaction is processed or the receipt of the product or
service to present a charge-back to the Company as the
merchant processor. The absolute maximum potential
liability is estimated to be the total volume of credit card
transactions that meet the associations’ requirements to be
valid charge-back transactions at any given time.
Management estimates that the maximum potential exposure
for charge-backs would approximate the total amount of
merchant transactions processed through the credit card
associations for the last four months. For the last four
months this amount totaled approximately $69.7 billion. In
most cases, this contingent liability is unlikely to arise, as
most products and services are delivered when purchased
and amounts are refunded when items are returned to
merchants. However, where the product or service is not
provided until a future date (“future delivery”), the potential
for this contingent liability increases. To mitigate this risk,
the Company may require the merchant to make an escrow
deposit, may place maximum volume limitations on future
delivery transactions processed by the merchant at any point
in time, or may require various credit enhancements
(including letters of credit and bank guarantees). Also,

merchant processing contracts may include event triggers to
provide the Company more financial and operational control
in the event of financial deterioration of the merchant.

The Company’s primary exposure to future delivery is
related to merchant processing for airline companies, where
it currently processes card transactions in the United States,
Canada and Europe for these merchants. In the event of
liquidation of these merchants, the Company could become
financially liable for refunding tickets purchased through the
credit card associations under the charge-back provisions.
Charge-back risk related to these merchants is evaluated in a
manner similar to credit risk assessments and, as such,
merchant processing contracts contain various provisions to
protect the Company in the event of default. At
December 31, 2010, the value of airline tickets purchased to
be delivered at a future date was $4.1 billion. The Company
held collateral of $377 million in escrow deposits, letters of
credit and indemnities from financial institutions, and liens
on various assets. With respect to future delivery risk for
other merchants, the Company held $31 million of merchant
escrow deposits as collateral. In addition to specific
collateral or other credit enhancements, the Company
maintains a liability for its implied guarantees associated
with future delivery. At December 31, 2010, the liability was
$57 million primarily related to these airline processing
arrangements.

In the normal course of business, the Company has

unresolved charge-backs. The Company assesses the
likelihood of its potential liability based on the extent and
nature of unresolved charge-backs and its historical loss
experience. At December 31, 2010, the Company had a
recorded liability for potential losses of $15 million.

Contingent Consideration Arrangements The Company has
contingent payment obligations related to certain business
combination transactions. Payments are guaranteed as long
as certain post-acquisition performance-based criteria are
met or customer relationships are maintained. At
December 31, 2010, the maximum potential future payments
required to be made by the Company under these
arrangements was approximately $5 million. If required, the
majority of these contingent payments are payable within the
next 12 months.

Minimum Revenue Guarantees In the normal course of
business, the Company may enter into revenue share
agreements with third-party business partners who generate
customer referrals or provide marketing or other services
related to the generation of revenue. In certain of these
agreements, the Company may guarantee that a minimum

U.S. BANCORP

121

amount of revenue share payments will be made to the third-
party over a specified period of time. At December 31, 2010,
the maximum potential future payments required to be made
by the Company under these agreements was $13 million.

Other Guarantees The Company has also made financial
performance guarantees related to the operations of its
subsidiaries. The maximum potential future payments
guaranteed by the Company under these arrangements were
approximately $8.1 billion at December 31, 2010.

O T H E R C O N T I N G E N T L I A B I L I T I E S

Visa Restructuring and Card Association Litigation The
Company’s payment services business issues and acquires
credit and debit card transactions through the Visa U.S.A.
Inc. card association or its affiliates (collectively “Visa”). In
2007, Visa completed a restructuring and issued shares of
Visa Inc. common stock to its financial institution members
in contemplation of its initial public offering (“IPO”)
completed in the first quarter of 2008 (the “Visa
Reorganization”). As a part of the Visa Reorganization, the
Company received its proportionate number of shares of
Visa Inc. common stock, which were subsequently converted
to Class B shares of Visa Inc. (“Class B shares”). In addition,
the Company and certain of its subsidiaries have been named
as defendants along with Visa U.S.A. Inc. (“Visa U.S.A.”)
and MasterCard International (collectively, the “Card
Associations”), as well as several other banks, in antitrust
lawsuits challenging the practices of the Card Associations
(the “Visa Litigation”). Visa U.S.A. member banks have a
contingent obligation to indemnify Visa Inc. under the Visa
U.S.A. bylaws (which were modified at the time of the
restructuring in October 2007) for potential losses arising
from the Visa Litigation. The indemnification by the Visa
U.S.A. member banks has no specific maximum amount. The
Company has also entered into judgment and loss sharing
agreements with Visa U.S.A. and certain other banks in
order to apportion financial responsibilities arising from any
potential adverse judgment or negotiated settlements related
to the Visa Litigation.

In 2007 and 2008, Visa announced settlement

agreements relating to certain of the Visa Litigation matters.
Visa U.S.A. member banks remain obligated to indemnify
Visa Inc. for potential losses arising from the remaining Visa
Litigation. Using proceeds from its initial IPO and through
subsequent reductions to the conversion ratio applicable to
the Class B shares held by Visa U.S.A. member banks, Visa
Inc. has established an escrow account for the benefit of

122

U.S. BANCORP

member financial institutions to fund the expenses of the
Visa Litigation, as well as the members’ proportionate share
of any judgments or settlements that may arise out of the
Visa Litigation. The receivable related to the escrow account
is classified in other liabilities as a direct offset to the related
Visa Litigation contingent liability, and will decline as
amounts are paid out of the escrow account. During the
third quarter of 2009 and the second and fourth quarters of
2010, Visa deposited additional funds into the escrow
account and further reduced the conversion ratio applicable
to the Class B shares. As a result, the Company recognized
gains of $39 million, $28 million and $44 million during the
third quarter of 2009 and second and fourth quarters of
2010, respectively, related to the effective repurchase of a
portion of its Class B shares.

At December 31, 2010, the carrying amount of the
Company’s liability related to the remaining Visa Litigation
matters, was $48 million. Class B shares are non-
transferable, except for transfers to other Visa U.S.A.
member banks. The remaining Class B shares held by the
Company will be eligible for conversion to Class A shares in
2011 or upon settlement of the Visa Litigation, whichever is
later.

Checking Account Overdraft Fee Litigation The Company
is a defendant in three separate cases primarily challenging
the Company’s daily ordering of debit transactions posted to
customer checking accounts for the period from 2003 to
2010. The plaintiffs have requested class action treatment,
however, no class has been certified. The court has denied a
motion by the Company to dismiss these cases. The
Company believes it has meritorious defenses against these
matters, including class certification. As these cases are in the
early stages and no damages have been specified, no specific
loss range or range of loss can be determined currently.

Other The Company is subject to various other litigation,
investigations and legal and administrative cases and
proceedings that arise in the ordinary course of its
businesses. Due to their complex nature, it may be years
before some matters are resolved. While it is impossible to
ascertain the ultimate resolution or range of financial
liability with respect to these contingent matters, the
Company believes that the aggregate amount of such
liabilities will not have a material adverse effect on the
financial condition, results of operations or cash flows of the
Company.

Note 23 U . S . B A N C O R P ( P A R E N T C O M P A N Y )

CONDENSED BALANCE SHEET

December 31 (Dollars in Millions)

2010

2009

Assets
Due from banks, principally interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in bank subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in nonbank subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances to bank subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances to nonbank subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6,722
1,454
29,452
1,239
1,500
1,171
1,429

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$42,967

Liabilities and Shareholders’ Equity
Short-term funds borrowed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

60
13,037
351
29,519

Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$42,967

$10,568
1,554
24,798
854
1,500
918
1,511

$41,703

$

842
14,538
360
25,963

$41,703

CONDENSED STATEMENT OF INCOME

Year Ended December 31 (Dollars in Millions)

2010

2009

2008

Income
Dividends from bank subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Dividends from nonbank subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest from subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Expense
Interest on short-term funds borrowed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

–
3
109
105

217

1
366
80

447

Income before income taxes and equity in undistributed income of subsidiaries . . . . . . . . . . . . . . .
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(230)
(70)

Income of parent company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in undistributed income of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(160)
3,477

Net income attributable to U.S. Bancorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,317

$ 625
94
82
(299)

502

3
332
44

379

123
(197)

320
1,885

$2,205

$1,935
6
125
(674)

1,392

24
409
45

478

914
(348)

1,262
1,684

$2,946

U.S. BANCORP

123

CONDENSED STATEMENT OF CASH FLOWS

Year Ended December 31 (Dollars in Millions)

2010

2009

2008

Operating Activities
Net income attributable to U.S. Bancorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating activities

$ 3,317

$ 2,205

$ 2,946

Equity in undistributed income of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3,477)
130

Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(30)

Investing Activities
Proceeds from sales and maturities of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity distributions from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in short-term advances to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term advances to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal collected on long-term advances to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

298
(63)
(1,750)
58
(253)
(300)
300
33

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,677)

Financing Activities
Net increase (decrease) in short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments or redemption of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees paid on exchange of income trust securities for perpetual preferred stock . . . . . . . . . . . . .
Proceeds from issuance of preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemption of preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends paid on preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends paid on common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(782)
4,250
(5,250)
(4)
–
119
–
–
(89)
(383)

Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2,139)

Change in cash and due from banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash and due from banks at beginning of year

(3,846)
10,568

(1,885)
703

1,023

395
(52)
(186)
58
(173)
(800)
–
(29)

(787)

(392)
5,031
(1,054)
–
–
2,703
(6,599)
(139)
(275)
(1,025)

(1,750)

(1,514)
12,082

(1,684)
466

1,728

1,408
(684)
(540)
61
(19)
(600)
–
(22)

(396)

86
3,784
(3,819)
–
7,090
688
–
–
(68)
(2,959)

4,802

6,134
5,948

Cash and due from banks at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6,722

$10,568

$12,082

Transfer of funds (dividends, loans or advances) from
bank subsidiaries to the Company is restricted. Federal law
requires loans to the Company or its affiliates to be secured
and generally limits loans to the Company or an individual
affiliate to 10 percent of each bank’s unimpaired capital and
surplus. In the aggregate, loans to the Company and all
affiliates cannot exceed 20 percent of each bank’s
unimpaired capital and surplus.

Dividend payments to the Company by its subsidiary

banks are subject to regulatory review and statutory
limitations and, in some instances, regulatory approval. The
approval of the Office of the Comptroller of the Currency is
required if total dividends by a national bank in any
calendar year exceed the bank’s net income for that year
combined with its retained net income for the preceding two
calendar years, or if the bank’s retained earnings are less
than zero. Furthermore, dividends are restricted by the

124

U.S. BANCORP

Comptroller of the Currency’s minimum capital constraints
for all national banks. Within these guidelines, all bank
subsidiaries have the ability to pay dividends without prior
regulatory approval. The amount of dividends available to
the parent company from the bank subsidiaries at
December 31, 2010, was approximately $5.8 billion.

Note 24 S U B S E Q U E N T E V E N T S

The Company has evaluated the impact of events that have
occurred subsequent to December 31, 2010 through the date
the consolidated financial statements were filed with the
United States Securities and Exchange Commission. Based
on this evaluation, the Company has determined none of
these events were required to be recognized or disclosed in
the consolidated financial statements and related notes.

U.S. Bancorp
Consolidated Balance Sheet — Five Year Summary (Unaudited)

December 31 (Dollars in Millions)

2010

2009

2008

2007

2006

Assets
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,487
1,469
Held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . . . . .
51,509
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . .
8,371
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
197,061
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,310)
Less allowance for loan losses. . . . . . . . . . . . . . . . . . . . .

$ 6,206
47
44,721
4,772
194,755
(5,079)

$ 6,859
53
39,468
3,210
184,955
(3,514)

$ 8,884
74
43,042
4,819
153,827
(2,058)

$ 8,639
87
40,030
3,256
143,597
(2,022)

Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

191,751
40,199

189,676
35,754

181,441
34,881

151,769
29,027

141,575
25,645

% Change
2010 v 2009

*%
*
15.2
75.4
1.2
(4.5)

1.1
12.4

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $307,786

$281,176

$265,912

$237,615

$219,232

9.5%

Liabilities and Shareholders’ Equity
Deposits

Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,314
158,938
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 38,186
145,056

$ 37,494
121,856

$ 33,334
98,111

$ 32,128
92,754

18.7%
9.6

Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total U.S. Bancorp shareholders’ equity . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . .

204,252
32,557
31,537
9,118

277,464
29,519
803

183,242
31,312
32,580
7,381

254,515
25,963
698

159,350
33,983
38,359
7,187

238,879
26,300
733

131,445
32,370
43,440
8,534

215,789
21,046
780

124,882
26,933
37,602
7,896

197,313
21,197
722

Total equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

30,322

26,661

27,033

21,826

21,919

11.5
4.0
(3.2)
23.5

9.0
13.7
15.0

13.7

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . $307,786

$281,176

$265,912

$237,615

$219,232

9.5%

* Not meaningful

U.S. BANCORP

125

U.S. Bancorp
Consolidated Statement of Income — Five-Year Summary (Unaudited)

Year Ended December 31 (Dollars in Millions)

2010

2009

2008

2007

2006

Interest Income
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,145
246
Loans held for sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,601
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
166
Other interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 9,564
277
1,606
91

$10,051
227
1,984
156

$10,627
277
2,095
137

$ 9,873
236
2,001
153

Total interest income . . . . . . . . . . . . . . . . . . . . . . . . .

12,158

11,538

12,418

13,136

12,263

% Change
2010 v 2009

6.1%

(11.2)
(.3)
82.4

5.4

Interest Expense
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total interest expense . . . . . . . . . . . . . . . . . . . . . . . .

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . .

Net interest income after provision for credit losses . . . . . . . . .

Noninterest Income
Credit and debit card revenue . . . . . . . . . . . . . . . . . . . . . .
Corporate payment products revenue . . . . . . . . . . . . . . . . .
Merchant processing services . . . . . . . . . . . . . . . . . . . . . .
ATM processing services . . . . . . . . . . . . . . . . . . . . . . . . . .
Trust and investment management fees . . . . . . . . . . . . . . . .
Deposit service charges . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury management fees . . . . . . . . . . . . . . . . . . . . . . . .
Commercial products revenue . . . . . . . . . . . . . . . . . . . . . .
Mortgage banking revenue . . . . . . . . . . . . . . . . . . . . . . . .
Investment products fees and commissions . . . . . . . . . . . . .
Securities gains (losses), net
. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

928
548
1,103

2,579

9,579
4,356

5,223

1,091
710
1,253
423
1,080
710
555
771
1,003
111
(78)
731

Total noninterest income . . . . . . . . . . . . . . . . . . . . . . .

8,360

Noninterest Expense
Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net occupancy and equipment . . . . . . . . . . . . . . . . . . . . . .
Professional services . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and business development
. . . . . . . . . . . . . . . . .
Technology and communications . . . . . . . . . . . . . . . . . . . .
Postage, printing and supplies . . . . . . . . . . . . . . . . . . . . . .
Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

Total noninterest expense . . . . . . . . . . . . . . . . . . . . . .

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . .
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (income) loss attributable to noncontrolling interests . . . . .

3,779
694
919
306
360
744
301
367
1,913

9,383

4,200
935

3,265
52

1,202
539
1,279

3,020

8,518
5,557

2,961

1,055
669
1,148
410
1,168
970
552
615
1,035
109
(451)
672

7,952

3,135
574
836
255
378
673
288
387
1,755

8,281

2,632
395

2,237
(32)

1,881
1,066
1,739

4,686

7,732
3,096

4,636

1,039
671
1,151
366
1,314
1,081
517
492
270
147
(978)
741

6,811

3,039
515
781
240
310
598
294
355
1,216

7,348

4,099
1,087

3,012
(66)

2,754
1,433
2,260

6,447

6,689
792

5,897

958
638
1,108
327
1,339
1,077
472
433
259
146
15
524

7,296

2,640
494
738
233
260
561
283
376
1,322

6,907

6,286
1,883

2,389
1,203
1,930

5,522

6,741
544

6,197

809
562
966
313
1,235
1,042
441
415
192
150
14
813

6,952

2,513
481
709
199
233
545
265
355
929

6,229

6,920
2,112

4,403
(79)

4,808
(57)

Net income attributable to U.S. Bancorp . . . . . . . . . . . . . . . $ 3,317

$ 2,205

$ 2,946

$ 4,324

$ 4,751

(22.8)
1.7
(13.8)

(14.6)

12.5
(21.6)

76.4

3.4
6.1
9.1
3.2
(7.5)
(26.8)
.5
25.4
(3.1)
1.8
82.7
8.8

5.1

20.5
20.9
9.9
20.0
(4.8)
10.5
4.5
(5.2)
9.0

13.3

59.6
*

46.0
*

50.4

Net income applicable to U.S. Bancorp common

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,332

$ 1,803

$ 2,819

$ 4,258

$ 4,696

84.8

* Not meaningful

126

U.S. BANCORP

U.S. Bancorp
Quarterly Consolidated Financial Data (Unaudited)

(Dollars in Millions, Except Per Share Data)

Interest Income
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Other interest income . . . . . . . . . . . . . . . . . . . . . . . . .

2010

2009

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

$2,505
44
410
34

$2,515
47
394
39

$2,560
71
400
46

$2,565
84
397
47

$2,350
63
434
20

$2,345
71
402
22

$2,373
87
374
23

$2,496
56
396
26

Total interest income . . . . . . . . . . . . . . . . . . . . . .

2,993

2,995

3,077

3,093

2,867

2,840

2,857

2,974

Interest Expense
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total interest expense . . . . . . . . . . . . . . . . . . . . . .

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . .

Net interest income after provision for credit losses . . . . . .

Noninterest Income
Credit and debit card revenue . . . . . . . . . . . . . . . . . . . .
Corporate payment products revenue . . . . . . . . . . . . . . .
Merchant processing services . . . . . . . . . . . . . . . . . . . .
ATM processing services . . . . . . . . . . . . . . . . . . . . . . .
Trust and investment management fees . . . . . . . . . . . . .
Deposit service charges . . . . . . . . . . . . . . . . . . . . . . . .
Treasury management fees . . . . . . . . . . . . . . . . . . . . . .
Commercial products revenue . . . . . . . . . . . . . . . . . . . .
Mortgage banking revenue . . . . . . . . . . . . . . . . . . . . . .
Investment products fees and commissions . . . . . . . . . . .
Securities gains (losses), net . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

236
128
277

641

2,352
1,310

1,042

229
137
272

638

2,357
1,139

1,218

231
149
273

653

2,424
995

1,429

232
134
281

647

2,446
912

1,534

258
168
292
105
264
207
137
161
200
25
(34)
135

266
178
320
108
267
199
145
205
243
30
(21)
170

274
191
318
105
267
160
139
197
310
27
(9)
131

293
173
323
105
282
144
134
208
250
29
(14)
295

324
143
353

820

2,047
1,318

729

256
154
258
102
294
226
137
129
233
28
(198)
169

314
131
341

786

2,054
1,395

659

299
138
313

750

2,107
1,456

651

259
168
278
104
304
250
142
144
308
27
(19)
90

267
181
300
103
293
256
141
157
276
27
(76)
168

265
127
272

664

2,310
1,388

922

273
166
312
101
277
238
132
185
218
27
(158)
245

Total noninterest income . . . . . . . . . . . . . . . . . . . .

1,918

2,110

2,110

2,222

1,788

2,055

2,093

2,016

Noninterest Expense
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net occupancy and equipment . . . . . . . . . . . . . . . . . . .
Professional services . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and business development . . . . . . . . . . . . . . .
Technology and communications . . . . . . . . . . . . . . . . . .
Postage, printing and supplies . . . . . . . . . . . . . . . . . . .
Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

861
180
227
58
60
185
74
97
394

946
172
226
73
86
186
75
91
522

Total noninterest expense . . . . . . . . . . . . . . . . . . .

2,136

2,377

Income before income taxes . . . . . . . . . . . . . . . . . . . . .
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (income) loss attributable to noncontrolling interests . . .

824
161

663
6

951
199

752
14

973
171
229
78
108
186
74
90
476

2,385

1,154
260

894
14

999
171
237
97
106
187
78
89
521

2,485

1,271
315

956
18

786
155
211
52
56
155
74
91
291

764
140
208
59
80
157
72
95
554

769
134
203
63
137
175
72
94
406

816
145
214
81
105
186
70
107
504

1,871

2,129

2,053

2,228

646
101

545
(16)

585
100

485
(14)

691
86

605
(2)

710
108

602
–

Net income attributable to U.S. Bancorp . . . . . . . . . . . . .

$ 669

$ 766

$ 908

$ 974

$ 529

$ 471

$ 603

$ 602

Net income applicable to U.S. Bancorp common

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 648

$ 862

$ 871

$ 951

$ 419

$ 221

$ 583

$ 580

Earnings per common share . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per common share . . . . . . . . . . . . . . . .

$ .34
$ .34

$ .45
$ .45

$ .46
$ .45

$ .50
$ .49

$ .24
$ .24

$ .12
$ .12

$ .31
$ .30

$ .30
$ .30

U.S. BANCORP

127

Average
Balances

Interest

Yields
and Rates

Average
Balances

Interest

Yields
and Rates

$ 47,763
5,616

$ 1,763
246

3.69% $ 42,809
5,820
4.37

$ 1,770
277

4.13%
4.76

U.S. Bancorp
Consolidated Daily Average Balance Sheet and

Year Ended December 31

2010

2009

(Dollars in Millions)

Assets
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans (b)

Commercial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total loans, excluding covered loans . . . . . . . . . . . . . .
Covered loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total earning assets . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain (loss) on available-for-sale securities . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

47,028
34,269
27,704
64,089

173,090
19,932

193,022
5,641

252,042
(5,399)
94
39,124

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$285,861

Liabilities and Shareholders’ Equity
Noninterest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . .
Interest-bearing deposits

Interest checking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money market savings . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time certificates of deposit less than $100,000 . . . . . . . . . .
Time deposits greater than $100,000 . . . . . . . . . . . . . . . . .

Total interest-bearing deposits . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total interest-bearing liabilities . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity

Preferred equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total U.S. Bancorp shareholders’ equity . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . .

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 40,162

40,184
39,679
20,903
16,628
27,165

144,559
33,719
30,835

209,113
7,787

1,742
26,307

28,049
750

28,799

1,977
1,530
1,436
4,272

9,215
985

10,200
166

12,375

77
132
121
303
295

928
556
1,103

2,587

4.20
4.46
5.18
6.67

5.32
4.94

5.28
2.94

4.91

.19
.33
.58
1.82
1.08

.64
1.65
3.58

1.24

2,074
1,453
1,380
4,125

9,032
578

9,610
91

11,748

78
145
71
461
447

1,202
551
1,279

3,032

52,827
33,751
24,481
62,023

173,082
12,723

185,805
2,853

237,287
(4,451)
(1,594)
37,118

$268,360

$ 37,856

36,866
31,795
13,109
17,879
30,296

129,945
29,149
36,520

195,614
7,869

4,445
21,862

26,307
714

27,021

Total liabilities and equity. . . . . . . . . . . . . . . . . . . . . .

$285,861

$268,360

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 9,788

$ 8,716

Gross interest margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross interest margin without taxable-equivalent

increments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Percent of Earning Assets
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net interest margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net interest margin without taxable-equivalent increments . . . . .

3.67%

3.59

4.91%
1.03

3.88%

3.80%

* Not meaningful
(a) Interest and rates are presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent.
(b) Interest income and rates on loans include loan fees. Nonaccrual

loans are included in average loan balances.

128

U.S. BANCORP

3.93
4.30
5.64
6.65

5.22
4.54

5.17
3.20

4.95

.21
.46
.54
2.58
1.48

.93
1.89
3.50

1.55

3.40%

3.32

4.95%
1.28

3.67%

3.59%

Related Yields And Rates (a) (Unaudited)

2008

2007

2006

Average
Balances

Interest

Yields
and Rates

Average
Balances

Interest

Yields
and Rates

Average
Balances

Interest

Yields
and Rates

2010 v 2009

% Change
Average
Balances

$ 42,850
3,914

$ 2,160
227

5.04% $ 41,313
4,298
5.80

$ 2,239
277

5.42% $ 39,961
3,663
6.44

$ 2,063
236

5.16%
6.45

11.6%
(3.5)

2,702
1,771
1,419
4,134

10,026
61

10,087
156

12,630

251
330
20
472
808

1,881
1,144
1,739

4,764

54,307
31,110
23,257
55,570

164,244
1,308

165,552
2,730

215,046
(2,527)
(2,068)
33,949

$244,400

$ 28,739

31,137
26,300
5,929
13,583
30,496

107,445
38,237
39,250

184,932
7,405

2,246
20,324

22,570
754

23,324

4.98
5.69
6.10
7.44

6.10
4.68

6.09
5.71

5.87

.81
1.25
.34
3.47
2.65

1.75
2.99
4.43

2.58

3,143
2,079
1,354
4,080

10,656
–

10,656
137

13,309

351
651
19
644
1,089

2,754
1,531
2,260

6,545

47,812
28,592
22,085
48,859

147,348
–

147,348
1,724

194,683
(2,042)
(874)
31,854

$223,621

$ 27,364

26,117
25,332
5,306
14,654
22,302

93,711
28,925
44,560

167,196
7,352

1,000
19,997

20,997
712

21,709

6.57
7.27
6.13
8.35

7.23
–

7.23
7.95

6.84

1.34
2.57
.35
4.40
4.88

2.94
5.29
5.07

3.91

2,969
2,104
1,224
3,602

9,899
–

9,899
153

12,351

233
569
19
524
1,044

2,389
1,242
1,930

5,561

45,440
28,760
21,053
45,348

140,601
–

140,601
2,006

186,231
(2,052)
(1,007)
30,340

$213,512

$ 28,755

23,552
26,667
5,599
13,761
22,255

91,834
24,422
40,357

156,613
7,202

767
19,943

20,710
232

20,942

$244,400

$223,621

$213,512

$ 7,866

$ 6,764

$ 6,790

3.29%

3.23

5.87%
2.21

3.66%

3.60%

2.93%

2.89

6.84%
3.37

3.47%

3.43%

6.53
7.32
5.81
7.94

7.04
–

7.04
7.64

6.63

.99
2.13
.35
3.81
4.69

2.60
5.08
4.78

3.55

3.08%

3.05

6.63%
2.98

3.65%

3.62%

(11.0)
1.5
13.2
3.3

–
56.7

3.9
97.7

6.2
(21.3)
*
5.4

6.5

6.1

9.0
24.8
59.5
(7.0)
(10.3)

11.2
15.7
(15.6)

6.9
(1.0)

(60.8)
20.3

6.6
5.0

6.6

6.5%

U.S. BANCORP

129

U.S. Bancorp
Supplemental Financial Data (Unaudited)

Earnings Per Common Share Summary

Earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . .
Dividends declared per common share . . . . . . . . . . . . . . . . . . .

2010

$ 1.74
1.73
.200

$

2009

.97
.97
.200

2008

2007

2006

$ 1.62
1.61
1.700

$ 2.45
2.42
1.625

$ 2.64
2.61
1.390

Ratios

Return on average assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on average common equity . . . . . . . . . . . . . . . . . . . . . .
Average total U.S. Bancorp shareholders’ equity to average

assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends per common share to net income per common share . . .

1.16%
12.7

9.8
11.5

.82%
8.2

9.8
20.6

1.21%
13.9

9.2
104.9

1.93%
21.3

9.4
66.3

2.23%
23.5

9.7
52.7

Other Statistics (Dollars and Shares in Millions)

Common shares outstanding (a) . . . . . . . . . . . . . . . . . . . . . . . .
Average common shares outstanding and common stock

equivalents
Earnings per common share. . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . .
Number of shareholders (b) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . .

1,921

1,913

1,755

1,728

1,765

1,912
1,921
55,371
385

$

1,851
1,859
58,610
375

$

1,742
1,756
61,611
$ 2,971

1,735
1,756
63,837
$ 2,813

1,778
1,803
66,313
$ 2,466

(a) Defined as total common shares less common stock held in treasury at December 31.
(b) Based on number of common stock shareholders of record at December 31.

S T O C K P R I C E R A N G E A N D D I V I D E N D S

2010

Sales Price

2009

Sales Price

High

Low

Closing
Price

Dividends
Declared

First quarter . . . . . . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . . . . . . .
Fourth quarter . . . . . . . . . . . . . . . . . . . .

$26.84
28.43
24.56
27.30

$22.53
22.06
20.44
21.58

$25.88
22.35
21.62
26.97

$.050
.050
.050
.050

High

Low

$25.43
21.92
23.49
25.59

$ 8.06
13.92
16.11
20.76

Closing
Price

Dividends
Declared

$14.61
17.92
21.86
22.51

$.050
.050
.050
.050

The common stock of U.S. Bancorp is traded on the New York Stock Exchange, under the ticker symbol “USB.” At
January 31, 2011, there were 55,191 holders of record of the Company’s common stock.

S T O C K P E R F O R M A N C E C H A R T

The following chart compares the cumulative total
shareholder return on the Company’s common stock during
the five years ended December 31, 2010, with the cumulative
total return on the Standard & Poor’s 500 Index, the
Standard & Poor’s 500 Commercial Bank Index (the “Old
Index”) and the KBW Bank Index. Historically, the
Company has used the Old Index to compare its relative
performance. Effective in 2010, the Company adopted the
KBW Bank Index as a replacement for the Old Index. The
Company believes the KBW Bank Index provides a more
appropriate comparison for assessing its relative performance.
The Old Index is market capitalization-weighted and at
December 31, 2010, one large constituent company and the
Company comprised more than 47 percent and 15 percent of
the Old Index, respectively, diminishing its appropriateness as
a comparison index. Comparatively, at December 31, 2010,
the KBW Bank Index was comprised of 24 companies with its
largest constituent company comprising approximately 8
percent of the index. The comparison assumes $100 was

130

U.S. BANCORP

invested on December 31, 2005, in the Company’s common
stock and in each of the foregoing indices and assumes the
reinvestment of all dividends. The comparisons in the graph
are based upon historical data and are not indicative of, nor
intended to forecast, future performance of the Company’s
common stock.

126 

117

116

116

100 

Total Return

122

116

91

89

150
150 

125
125 

100
100 

75
75 

50 
50

97

77

57

48

97

88

53

47

112

107

64

58

25
25 

2005

2006

2007

2008

2009

2010

USB

S&P 500

S&P 500 Commercial Bank Index

KBW Bank Index

Company Information

General Business Description U.S. Bancorp is a multi-state
financial services holding company headquartered in
Minneapolis, Minnesota. U.S. Bancorp was incorporated in
Delaware in 1929 and operates as a financial holding
company and a bank holding company under the Bank
Holding Company Act of 1956. U.S. Bancorp provides a full
range of financial services, including lending and depository
services, cash management, foreign exchange and trust and
investment management services. It also engages in credit
card services, merchant and ATM processing, mortgage
banking, insurance, brokerage and leasing.

U.S. Bancorp’s banking subsidiaries are engaged in the
general banking business, principally in domestic markets.
The subsidiaries range in size from $53 million to
$211 billion in deposits and provide a wide range of
products and services to individuals, businesses, institutional
organizations, governmental entities and other financial
institutions. Commercial and consumer lending services are
principally offered to customers within the Company’s
domestic markets, to domestic customers with foreign
operations and within certain niche national venues. Lending
services include traditional credit products as well as credit
card services, financing and import/export trade, asset-
backed lending, agricultural finance and other products.
Leasing products are offered through bank leasing
subsidiaries. Depository services include checking accounts,
savings accounts and time certificate contracts. Ancillary
services such as foreign exchange, treasury management and
receivable lock-box collection are provided to corporate
customers. U.S. Bancorp’s bank and trust subsidiaries
provide a full range of asset management and fiduciary
services for individuals, estates, foundations, business
corporations and charitable organizations.

U.S. Bancorp’s non-banking subsidiaries primarily offer

investment and insurance products to the Company’s
customers principally within its markets, and mutual fund
processing services to a broad range of mutual funds.

Banking and investment services are provided through a

network of 3,031 banking offices principally operating in
the Midwest and West regions of the United States. The
Company operates a network of 5,310 ATMs and provides
24-hour, seven day a week telephone customer service.
Mortgage banking services are provided through banking
offices and loan production offices throughout the
Company’s markets. Consumer lending products may be
originated through banking offices, indirect correspondents,
brokers or other lending sources, and a consumer finance
division. The Company is also one of the largest providers of
Visa» corporate and purchasing card services and corporate

trust services in the United States. A wholly-owned
subsidiary, Elavon, Inc. (“Elavon”), provides merchant
processing services directly to merchants and through a
network of banking affiliations. Affiliates of Elavon provide
similar merchant services in Canada and segments of
Europe. These foreign operations are not significant to the
Company.

On a full-time equivalent basis, as of December 31,

2010, U.S. Bancorp employed 60,584 people.

Risk Factors The following factors may adversely affect the
Company’s business, financial results or stock price.

Industry Risk Factors

Difficult business and economic conditions may continue to

adversely affect the financial services industry The
Company’s business activities and earnings are affected by
general business conditions in the United States and abroad.
In 2010, the domestic and global economies generally began
to stabilize from the dramatic downturn experienced in 2008
and 2009. The economic downturn resulted in negative
effects on the business, financial condition and results of
operations of financial institutions in the United States and
other countries. However, domestic and global economies
continue to remain unsteady and worsening of current
financial market conditions could materially and adversely
affect the Company’s business, financial condition, results of
operations, access to credit or the trading price of the
Company’s common stock. Dramatic declines in the housing
and commercial real estate markets over the past several
years, with falling real estate prices and increasing
foreclosures and unemployment, continue to negatively
impact the credit performance of real estate related loans
and have resulted in significant write-downs of asset values
by financial institutions. These write-downs have caused
many financial institutions to seek additional capital, to
reduce or eliminate dividends, to merge with larger and
stronger institutions and, in some cases, to fail. Market
developments may further erode consumer confidence levels
and may cause adverse changes in payment patterns, causing
increases in delinquencies and default rates, which may
impact the Company’s charge-offs and provision for credit
losses. Additional economic deterioration that affects
household and/or corporate incomes could also result in
reduced demand for credit or fee-based products and
services. A worsening of these conditions would likely
exacerbate the lingering effects of the difficult market
conditions experienced by the Company and others in the
financial services industry.

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The Company may be adversely affected by recently

passed and proposed legislation and rulemaking The
United States government and the Company’s regulators
have recently passed and proposed legislation and rules that
impact the Company, and the Company expects to continue
to face increased regulation. These laws and regulations may
affect the manner in which the Company does business and
the products and services that it provides, affect or restrict
the Company’s ability to compete in its current businesses or
its ability to enter into or acquire new businesses, reduce or
limit the Company’s revenue or impose additional fees,
assessments or taxes on the Company, intensify the
regulatory supervision of the Company and the financial
services industry, and adversely affect the Company’s
business operations or have other negative consequences.
The Dodd-Frank Wall Street Reform and Consumer
Protection Act was signed into law in 2010. This legislation,
among other things, establishes a Consumer Financial
Protection Bureau with broad authority to administer and
enforce a new federal regulatory framework of consumer
financial regulation, changes the base for deposit insurance
assessments, introduces regulatory rate-setting for
interchange fees charged to merchants for debit card
transactions, enhances the regulation of consumer mortgage
banking, limits the pre-emption of local laws applicable to
national banks, and excludes certain instruments currently
included in determining the Tier 1 regulatory capital ratio.
The capital instrument exclusion will be phased-in over a
three-year period beginning in 2013. As of December 31,
2010, the instruments subject to that exclusion increase the
Company’s Tier 1 capital ratio by 1.3 percent. Many of the
legislation’s provisions have extended implementation
periods and delayed effective dates and will require
rulemaking by various regulatory agencies. Accordingly, the
Company cannot currently quantify the ultimate impact of
this legislation and the related future rulemaking, but
expects that the legislation will have a detrimental impact on
revenues and expenses, require the Company to change
certain of its business practices, increase the Company’s
capital requirements and impose additional assessments and
costs on the Company, and otherwise adversely affect the
Company’s business.

Other changes in the laws, regulations and policies

governing financial services companies could alter the

Company’s business environment and adversely affect

operations The Board of Governors of the Federal Reserve
System regulates the supply of money and credit in the
United States. Its fiscal and monetary policies determine in a

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U.S. BANCORP

large part the Company’s cost of funds for lending and
investing and the return that can be earned on those loans
and investments, both of which affect the Company’s net
interest margin. Federal Reserve Board policies can also
materially affect the value of financial instruments that the
Company holds, such as debt securities and mortgage
servicing rights (“MSRs”). Its policies also can affect the
Company’s borrowers, potentially increasing the risk that
they may fail to repay their loans. Changes in policies of the
Federal Reserve Board are beyond the Company’s control
and can be difficult to predict.

The Company and its bank subsidiaries are heavily
regulated at the federal and state levels. This regulation is to
protect depositors, federal deposit insurance funds and the
banking system as a whole. Congress and state legislatures
and federal and state agencies continually review banking
laws, regulations and policies for possible changes. Changes
in statutes, regulations or policies could affect the Company
in substantial and unpredictable ways, including limiting the
types of financial services and products that the Company
offers and/or increasing the ability of non-banks to offer
competing financial services and products. The Company
cannot predict whether any of this potential legislation will
be enacted, and if enacted, the effect that it or any
regulations would have on the Company’s financial
condition or results of operations.

The Company could experience an unexpected inability to

obtain needed liquidity The Company’s liquidity could be
constrained by an unexpected inability to access the capital
markets due to a variety of market dislocations or
interruptions. If the Company is unable to meet its funding
needs on a timely basis, its business would be adversely
affected. The Company’s credit rating is important to its
liquidity. A reduction in the Company’s credit rating could
adversely affect its liquidity and competitive position,
increase its funding costs or limit its access to the capital
markets.

Loss of customer deposits could increase the Company’s

funding costs The Company relies on bank deposits to be a
low cost and stable source of funding. The Company
competes with banks and other financial services companies
for deposits. If the Company’s competitors raise the rates
they pay on deposits, the Company’s funding costs may
increase, either because the Company raises its rates to avoid
losing deposits or because the Company loses deposits and
must rely on more expensive sources of funding. Higher
funding costs could reduce the Company’s net interest
margin and net interest income.

The soundness of other financial institutions could

adversely affect the Company The Company’s ability to
engage in routine funding transactions could be adversely
affected by the actions and commercial soundness of other
financial institutions. Financial services institutions are
interrelated as a result of trading, clearing, counterparty or
other relationships. The Company has exposure to many
different counterparties, and the Company routinely
executes transactions with counterparties in the financial
industry, including brokers and dealers, commercial banks,
investment banks, mutual and hedge funds, and other
institutional clients. As a result, defaults by, or even rumors
or questions about, one or more financial services
institutions, or the financial services industry generally, could
lead to losses or defaults by the Company or by other
institutions. Many of these transactions expose the Company
to credit risk in the event of default of the Company’s
counterparty or client. In addition, the Company’s credit risk
may be exacerbated when the collateral held by the
Company cannot be realized upon or is liquidated at prices
not sufficient to recover the full amount of the financial
instrument exposure due the Company. There is no
assurance that any such losses would not materially and
adversely affect the Company’s results of operations.

The financial services industry is highly competitive, and

competitive pressures could intensify and adversely affect

the Company’s financial results The Company operates in a
highly competitive industry that could become even more
competitive as a result of legislative, regulatory and
technological changes, as well as continued industry
consolidation which may increase in connection with current
economic and market conditions. The Company competes
with other commercial banks, savings and loan associations,
mutual savings banks, finance companies, mortgage banking
companies, credit unions and investment companies. In
addition, technology has lowered barriers to entry and made
it possible for non-banks to offer products and services
traditionally provided by banks. Many of the Company’s
competitors have fewer regulatory constraints, and some
have lower cost structures. Also, the potential need to adapt
to industry changes in information technology systems, on
which the Company and financial services industry are
highly dependent, could present operational issues and
require capital spending.

The Company continually encounters technological change

The financial services industry is continually undergoing
rapid technological change with frequent introductions of
new technology-driven products and services. The effective

use of technology increases efficiency and enables financial
institutions to better serve customers and to reduce costs.
The Company’s future success depends, in part, upon its
ability to address customer needs by using technology to
provide products and services that will satisfy customer
demands, as well as to create additional efficiencies in the
Company’s operations. The Company may not be able to
effectively implement new technology-driven products and
services or be successful in marketing these products and
services to its customers. Failure to successfully keep pace
with technological change affecting the financial services
industry could negatively affect the Company’s revenue and
profit.

Improvements in economic indicators disproportionately

affecting the financial services industry may lag

improvements in the general economy Should the
stabilization of the U.S. economy lead to a general economic
recovery, the improvement of certain economic indicators,
such as unemployment and real estate asset values and rents,
may nevertheless continue to lag behind the overall
economy. These economic indicators typically affect certain
industries, such as real estate and financial services, more
significantly. Furthermore, financial services companies with
a substantial lending business, like the Company’s, are
dependent upon the ability of their borrowers to make debt
service payments on loans. Should unemployment or real
estate asset values fail to recover for an extended period of
time, the Company could be adversely affected.

Changes in consumer use of banks and changes in

consumer spending and saving habits could adversely

affect the Company’s financial results Technology and other
changes now allow many consumers to complete financial
transactions without using banks. For example, consumers
can pay bills and transfer funds directly without going
through a bank. This “disintermediation” could result in the
loss of fee income, as well as the loss of customer deposits
and income generated from those deposits. In addition,
changes in consumer spending and saving habits could
adversely affect the Company’s operations, and the
Company may be unable to timely develop competitive new
products and services in response to these changes that are
accepted by new and existing customers.

Changes in the domestic interest rate environment could

reduce the Company’s net interest income The operations of
financial institutions such as the Company are dependent to
a large degree on net interest income, which is the difference
between interest income from loans and investments and
interest expense on deposits and borrowings. An institution’s

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133

net interest income is significantly affected by market rates
of interest, which in turn are affected by prevailing economic
conditions, by the fiscal and monetary policies of the federal
government and by the policies of various regulatory
agencies. Like all financial institutions, the Company’s
balance sheet is affected by fluctuations in interest rates.
Volatility in interest rates can also result in the flow of funds
away from financial institutions into direct investments.
Direct investments, such as U.S. Government and corporate
securities and other investment vehicles (including mutual
funds) generally pay higher rates of return than financial
institutions, because of the absence of federal insurance
premiums and reserve requirements.

Acts or threats of terrorism and political or military actions

taken by the United States or other governments could

adversely affect general economic or industry conditions

Geopolitical conditions may also affect the Company’s
earnings. Acts or threats of terrorism and political or
military actions taken by the United States or other
governments in response to terrorism, or similar activity,
could adversely affect general economic or industry
conditions.

Company Risk Factors

The Company’s allowance for loan losses may not be

adequate to cover actual losses Like all financial institutions,
the Company maintains an allowance for loan losses to provide
for loan defaults and non-performance. The Company’s
allowance for loan losses is based on its historical loss
experience as well as an evaluation of the risks associated with
its loan portfolio, including the size and composition of the
loan portfolio, current economic conditions and geographic
concentrations within the portfolio. The stress on the United
States economy and the local economies in which the
Company does business may be greater or last longer than
expected, resulting in, among other things, greater than
expected deterioration in credit quality of the loan portfolio, or
in the value of collateral securing those loans. In addition, the
process the Company uses to estimate losses inherent in its
credit exposure requires difficult, subjective, and complex
judgments, including forecasts of economic conditions and how
these economic predictions might impair the ability of its
borrowers to repay their loans, which may no longer be
capable of accurate estimation which may, in turn, impact the
reliability of the process. Increases in the Company’s allowance
for loan losses may not be adequate to cover actual loan losses,
and future provisions for loan losses could continue to
materially and adversely affect its financial results.

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U.S. BANCORP

The Company may continue to suffer increased losses in

its loan portfolio despite its underwriting practices The
Company seeks to mitigate the risks inherent in its loan
portfolio by adhering to specific underwriting practices.
These practices generally include: analysis of a borrower’s
credit history, financial statements, tax returns and cash flow
projections; valuation of collateral based on reports of
independent appraisers; and verification of liquid assets.
Although the Company believes that its underwriting criteria
are, and historically have been, appropriate for the various
kinds of loans it makes, the Company has already incurred
high levels of losses on loans that have met these criteria,
and may continue to experience higher than expected losses
depending on economic factors and consumer behavior. In
addition, the Company’s ability to assess the
creditworthiness of its customers may be impaired if the
models and approaches it uses to select, manage, and
underwrite its customers become less predictive of future
behaviors. Finally, the Company may have higher credit risk,
or experience higher credit losses, to the extent its loans are
concentrated by loan type, industry segment, borrower type,
or location of the borrower or collateral. For example, the
Company’s credit risk and credit losses can increase if
borrowers who engage in similar activities are uniquely or
disproportionately affected by economic or market
conditions, or by regulation, such as regulation related to
climate change. Continued deterioration of real estate values
in states or regions where the Company has relatively larger
concentrations of residential or commercial real estate could
result in significantly higher credit costs.

The Company faces increased risk arising out of its

mortgage lending and servicing businesses Numerous
federal and state governmental, legislative and regulatory
authorities are investigating practices in the mortgage
lending and servicing industries. In addition to the
interagency examination by U.S. federal banking regulators,
the Company has received inquiries from other
governmental, legislative and regulatory authorities on this
topic, has cooperated, and continues to cooperate, with
these inquiries. These inquiries may lead to other
administrative, civil or criminal proceedings, possibly
resulting in remedies including fines, penalties, restitution, or
alterations in the Company’s business practices. Additionally,
reputational damage arising out of the enforcement action or
from other inquiries and industry-wide publicity could also
have an adverse effect upon the Company’s existing
mortgage business and could reduce future business
opportunities.

In addition to governmental or regulatory

investigations, the Company, like other companies with
residential mortgage origination and servicing operations,
faces the risk of class actions and other litigation arising out
of these operations. At this time, the Company cannot
predict the cost to or effect upon the Company from
governmental, legislative or regulatory actions or private
litigation or claims arising out of residential mortgage
lending and servicing practices, although such actions,
litigation and claims could, individually or in the aggregate,
result in significant expense.

Changes in interest rates can reduce the value of the

Company’s mortgage servicing rights and mortgages held-

for-sale, and can make its mortgage banking revenue

volatile from quarter to quarter, which can negatively affect

its earnings The Company has a portfolio of MSRs, which
is the right to service a mortgage loan for a fee. The
Company initially carries its MSRs using a fair value
measurement of the present value of the estimated future net
servicing income, which includes assumptions about the
likelihood of prepayment by borrowers. Changes in interest
rates can affect prepayment assumptions and thus fair value.
As interest rates fall, prepayments tend to increase as
borrowers refinance, and the fair value of MSR’s can
decrease, which in turn reduces the Company’s earnings.

An increase in interest rates tends to lead to a decrease

in demand for mortgage loans, reducing the Company’s
income from loan originations. Although revenue from the
Company’s MSRs may increase at the same time through
increases in fair value, this offsetting revenue effect, or
“natural hedge,” is not perfectly correlated in amount or
timing. The Company typically uses derivatives and other
instruments to hedge its mortgage banking interest rate risk,
but this hedging activity may not always be successful. The
Company could incur significant losses from its hedging
activities, and there may be periods where it elects not to
hedge its mortgage banking interest rate risk. As a result of
these factors, mortgage banking revenue can experience
significant volatility.

Maintaining or increasing the Company’s market share may

depend on lowering prices and market acceptance of new

products and services The Company’s success depends, in
part, on its ability to adapt its products and services to
evolving industry standards. There is increasing pressure to
provide products and services at lower prices. Lower prices
can reduce the Company’s net interest margin and revenues
from its fee-based products and services. In addition, the
widespread adoption of new technologies, including internet

services, could require the Company to make substantial
expenditures to modify or adapt the Company’s existing
products and services. Also, these and other capital
investments in the Company’s businesses may not produce
expected growth in earnings anticipated at the time of the
expenditure. The Company might not be successful in
introducing new products and services, achieving market
acceptance of its products and services, or developing and
maintaining loyal customers.

The Company relies on its employees, systems and certain

counterparties, and certain failures could materially

adversely affect its operations The Company operates in
many different businesses in diverse markets and relies on
the ability of its employees and systems to process a high
number of transactions. Operational risk is the risk of loss
resulting from the Company’s operations, including, but not
limited to, the risk of fraud by employees or persons outside
of the Company, the execution of unauthorized transactions
by employees, errors relating to transaction processing and
technology, breaches of the internal control system and
compliance requirements and business continuation and
disaster recovery. This risk of loss also includes the potential
legal actions that could arise as a result of an operational
deficiency or as a result of noncompliance with applicable
regulatory standards, adverse business decisions or their
implementation, and customer attrition due to potential
negative publicity. Third-parties with which the Company
does business could also be sources of operational risk to the
Company, including risks relating to breakdowns or failures
of those parties’ systems or employees. In the event of a
breakdown in the internal control system, improper
operation of systems or improper employee actions, the
Company could suffer financial loss, face regulatory action
and suffer damage to its reputation.

If personal, confidential or proprietary information of

customers or clients in the Company’s possession were to be
mishandled or misused, the Company could suffer significant
regulatory consequences, reputational damage and financial
loss. This mishandling or misuse could include, for example,
if the information were erroneously provided to parties who
are not permitted to have the information, either by fault of
the Company’s systems, employees, or counterparties, or
where the information is intercepted or otherwise
inappropriately taken by third-parties.

The change in residual value of leased assets may have an

adverse impact on the Company’s financial results The
Company engages in leasing activities and is subject to the
risk that the residual value of the property under lease will

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be less than the Company’s recorded asset value. Adverse
changes in the residual value of leased assets can have a
negative impact on the Company’s financial results. The risk
of changes in the realized value of the leased assets
compared to recorded residual values depends on many
factors outside of the Company’s control, including supply
and demand for the assets, condition of the assets at the end
of the lease term, and other economic factors.

Negative publicity could damage the Company’s reputation

and adversely impact its business and financial results

Reputation risk, or the risk to the Company’s earnings and
capital from negative publicity, is inherent in the Company’s
business. Negative publicity can result from the Company’s
actual or alleged conduct in any number of activities,
including lending practices, corporate governance and
acquisitions, and actions taken by government regulators
and community organizations in response to those activities.
Negative publicity can adversely affect the Company’s ability
to keep and attract customers, and can expose the Company
to litigation and regulatory action. Because most of the
Company’s businesses operate under the “U.S. Bank” brand,
actual or alleged conduct by one business can result in
negative publicity about other businesses the Company
operates. Although the Company takes steps to minimize
reputation risk in dealing with customers and other
constituencies, the Company, as a large diversified financial
services company with a high industry profile, is inherently
exposed to this risk.

judgments about matters that are uncertain. Materially
different amounts could be reported under different
conditions or using different assumptions or estimates. These
critical accounting policies include: the allowance for credit
losses; estimations of fair value; the valuation of purchased
loans and related indemnification assets; the valuation of
MSRs; the valuation of goodwill and other intangible assets;
and income taxes. Because of the uncertainty of estimates
involved in these matters, the Company may be required to
do one or more of the following: significantly increase the
allowance for credit losses and/or sustain credit losses that
are significantly higher than the reserve provided; recognize
significant impairment on its goodwill and other intangible
asset balances; or significantly increase its accrued taxes
liability. For more information, refer to “Critical Accounting
Policies” in this Annual Report.

Changes in accounting standards could materially impact

the Company’s financial statements From time to time, the
Financial Accounting Standards Board changes the financial
accounting and reporting standards that govern the
preparation of the Company’s financial statements. These
changes can be hard to predict and can materially impact
how the Company records and reports its financial condition
and results of operations. In some cases, the Company could
be required to apply a new or revised standard retroactively,
resulting in the Company’s restating prior period financial
statements.

Acquisitions may not produce revenue enhancements or

The Company’s reported financial results depend on

cost savings at levels or within timeframes originally

management’s selection of accounting methods and

anticipated and may result in unforeseen integration

certain assumptions and estimates The Company’s
accounting policies and methods are fundamental to how the
Company records and reports its financial condition and
results of operations. The Company’s management must
exercise judgment in selecting and applying many of these
accounting policies and methods so they comply with
generally accepted accounting principles and reflect
management’s judgment regarding the most appropriate
manner to report the Company’s financial condition and
results. In some cases, management must select the
accounting policy or method to apply from two or more
alternatives, any of which might be reasonable under the
circumstances, yet might result in the Company’s reporting
materially different results than would have been reported
under a different alternative.

Certain accounting policies are critical to presenting the

Company’s financial condition and results. They require
management to make difficult, subjective or complex

difficulties The Company regularly explores opportunities to
acquire financial services businesses or assets and may also
consider opportunities to acquire other banks or financial
institutions. The Company cannot predict the number, size
or timing of acquisitions.

Difficulty in integrating an acquired business or
company may cause the Company not to realize expected
revenue increases, cost savings, increases in geographic or
product presence, and/or other projected benefits from the
acquisition. The integration could result in higher than
expected deposit attrition (run-off), loss of key employees,
disruption of the Company’s business or the business of the
acquired company, or otherwise adversely affect the
Company’s ability to maintain relationships with customers
and employees or achieve the anticipated benefits of the
acquisition. Also, the negative effect of any divestitures
required by regulatory authorities in acquisitions or business
combinations may be greater than expected.

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The Company must generally receive federal regulatory

approval before it can acquire a bank or bank holding
company. In determining whether to approve a proposed
bank acquisition, federal bank regulators will consider,
among other factors, the effect of the acquisition on the
competition, financial condition, and future prospects. The
regulators also review current and projected capital ratios
and levels, the competence, experience, and integrity of
management and its record of compliance with laws and
regulations, the convenience and needs of the communities
to be served (including the acquiring institution’s record of
compliance under the Community Reinvestment Act) and
the effectiveness of the acquiring institution in combating
money laundering activities. In addition, the Company
cannot be certain when or if, or on what terms and
conditions, any required regulatory approvals will be
granted. The Company may be required to sell banks or
branches as a condition to receiving regulatory approval.

If new laws were enacted that restrict the ability of the

Company and its subsidiaries to share information about

customers, the Company’s financial results could be

negatively affected The Company’s business model depends
on sharing information among the family of companies
owned by U.S. Bancorp to better satisfy the Company’s
customer needs. Laws that restrict the ability of the
companies owned by U.S. Bancorp to share information
about customers could negatively affect the Company’s
revenue and profit.

The Company’s business could suffer if the Company fails

to attract and retain skilled people The Company’s success
depends, in large part, on its ability to attract and retain key
people. Competition for the best people in most activities the
Company engages in can be intense. The Company may not
be able to hire the best people or to keep them. Recent
strong scrutiny of compensation practices has resulted and
may continue to result in additional regulation and
legislation in this area as well as additional legislative and
regulatory initiatives, and there is no assurance that this will
not cause increased turnover or impede the Company’s
ability to retain and attract the highest caliber employees.

The Company relies on other companies to provide key

not providing the Company their services for any reason or
their performing their services poorly, could adversely affect
the Company’s ability to deliver products and services to the
Company’s customers and otherwise to conduct its business.
Replacing these third-party vendors could also entail
significant delay and expense.

Significant legal actions could subject the Company to

substantial uninsured liabilities The Company is from time
to time subject to claims related to its operations. These
claims and legal actions, including supervisory actions by the
Company’s regulators, could involve large monetary claims
and significant defense costs. To protect itself from the cost
of these claims, the Company maintains insurance coverage
in amounts and with deductibles that it believes are
appropriate for its operations. However, the Company’s
insurance coverage may not cover all claims against the
Company or continue to be available to the Company at a
reasonable cost. As a result, the Company may be exposed
to substantial uninsured liabilities, which could adversely
affect the Company’s results of operations and financial
condition.

The Company is exposed to risk of environmental liability

when it takes title to properties In the course of the
Company’s business, the Company may foreclose on and
take title to real estate. As a result, the Company could be
subject to environmental liabilities with respect to these
properties. The Company may be held liable to a
governmental entity or to third-parties for property damage,
personal injury, investigation and clean-up costs incurred by
these parties in connection with environmental
contamination or may be required to investigate or clean up
hazardous or toxic substances or chemical releases at a
property. The costs associated with investigation or
remediation activities could be substantial. In addition, if the
Company is the owner or former owner of a contaminated
site, it may be subject to common law claims by third-
parties based on damages and costs resulting from
environmental contamination emanating from the property.
If the Company becomes subject to significant
environmental liabilities, its financial condition and results
of operations could be adversely affected.

components of the Company’s business infrastructure

A natural disaster could harm the Company’s business

Third-party vendors provide key components of the
Company’s business infrastructure, such as internet
connections, network access and mutual fund distribution.
While the Company has selected these third-party vendors
carefully, it does not control their actions. Any problems
caused by these third-parties, including as a result of their

Natural disasters could harm the Company’s operations
through interference with communications, including the
interruption or loss of the Company’s websites, which could
prevent the Company from obtaining deposits, originating
loans and processing and controlling its flow of business, as
well as through the destruction of facilities and the

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Company’s operational, financial and management
information systems. Additionally, natural disasters may
significantly affect loan portfolios by damaging properties
pledged as collateral and by impairing the ability of certain
borrowers to repay their loans. The nature and level of
natural disasters cannot be predicted and may be
exacerbated by global climate change. The ultimate impact
of a natural disaster on future financial results is difficult to
predict and would be affected by a number of factors,
including the extent of damage to the Company’s assets or
the relevant collateral, the extent to which damaged
collateral is not covered by insurance, the extent to which
unemployment and other economic conditions caused by the
natural disaster adversely affect the ability of borrowers to
repay their loans, and the cost of collection and foreclosure
moratoriums, loan forbearances and other accommodations
granted to borrowers and other customers.

The Company faces systems failure risks as well as

security risks, including “hacking” and “identity theft” The
computer systems and network infrastructure the Company
and others use could be vulnerable to unforeseen problems.
These problems may arise in both the Company’s internally
developed systems and the systems of its third-party service
providers. The Company’s operations are dependent upon its
ability to protect computer equipment against damage from
fire, power loss or telecommunication failure. Any damage
or failure that causes an interruption in its operations could
adversely affect its business and financial results. In addition,
the Company’s computer systems and network infrastructure
present security risks, and could be susceptible to hacking or
identity theft.

The Company relies on dividends from its subsidiaries for its

liquidity needs The Company is a separate and distinct legal
entity from its bank subsidiaries and non-bank subsidiaries.
The Company receives substantially all of its cash from
dividends paid by its subsidiaries. These dividends are the
principal source of funds to pay dividends on the Company’s
stock and interest and principal on its debt. Various federal
and state laws and regulations limit the amount of dividends

that its bank subsidiaries and certain of its non-bank
subsidiaries may pay to the Company without regulatory
approval. Also, the Company’s right to participate in a
distribution of assets upon a subsidiary’s liquidation or
reorganization is subject to prior claims of the subsidiary’s
creditors, except to the extent that any of the Company’s
claims as a creditor of that subsidiary may be recognized.

The Company has non-banking businesses that are subject

to various risks and uncertainties The Company is a
diversified financial services company, and the Company’s
business model is based on a mix of businesses that provide
a broad range of products and services delivered through
multiple distribution channels. In addition to banking, the
Company provides payment services, investments, mortgages
and corporate and personal trust services. Although the
Company believes its diversity helps lessen the effect of
downturns in any one segment of its industry, it also means
the Company’s earnings could be subject to various specific
risks and uncertainties related to these non-banking
businesses.

The Company’s stock price can be volatile The Company’s
stock price can fluctuate widely in response to a variety of
factors, including: actual or anticipated variations in the
Company’s quarterly operating results; recommendations by
securities analysts; significant acquisitions or business
combinations; strategic partnerships, joint ventures or
capital commitments by or involving the Company or the
Company’s competitors; operating and stock price
performance of other companies that investors deem
comparable to the Company; new technology used or
services offered by the Company’s competitors; news reports
relating to trends, concerns and other issues in the financial
services industry; and changes in government regulations.
General market fluctuations, industry factors and general
economic and political conditions and events, as well as
interest rate changes, currency fluctuations, or unforeseen
events such as terrorist attacks could cause the Company’s
stock price to decrease regardless of the Company’s
operating results.

138

U.S. BANCORP

Executive Officers

Richard K. Davis

Terrance R. Dolan

Mr. Davis is Chairman, President and Chief Executive
Officer of U.S. Bancorp. Mr. Davis, 53, has served as
Chairman of U.S. Bancorp since December 2007, Chief
Executive Officer since December 2006 and President since
October 2004. He also served as Chief Operating Officer
from October 2004 until December 2006. From the time of
the merger of Firstar Corporation and U.S. Bancorp in
February 2001 until October 2004, Mr. Davis served as Vice
Chairman of U.S. Bancorp. From the time of the merger,
Mr. Davis was responsible for Consumer Banking, including
Retail Payment Solutions (card services), and he assumed
additional responsibility for Commercial Banking in 2003.
Mr. Davis has held management positions with the
Company since joining Star Banc Corporation, one of its
predecessors, in 1993 as Executive Vice President.

Jennie P. Carlson

Ms. Carlson is Executive Vice President, Human Resources,
of U.S. Bancorp. Ms. Carlson, 50, has served in this position
since January 2002. Until that time, she served as Executive
Vice President, Deputy General Counsel and Corporate
Secretary of U.S. Bancorp since the merger of Firstar
Corporation and U.S. Bancorp in February 2001. From 1995
until the merger, she was General Counsel and Secretary of
Firstar Corporation and Star Banc Corporation.

Andrew Cecere

Mr. Cecere is Vice Chairman and Chief Financial Officer of
U.S. Bancorp. Mr. Cecere, 50, has served in this position
since February 2007. Until that time, he served as Vice
Chairman, Wealth Management and Securities Services,
since the merger of Firstar Corporation and U.S. Bancorp in
February 2001. Previously, he had served as an executive
officer of the former U.S. Bancorp, including as Chief
Financial Officer from May 2000 through February 2001.

Mr. Dolan is Vice Chairman, Wealth Management and
Securities Services, of U.S. Bancorp. Mr. Dolan, 49, has
served in this position since July 2010. From September
1998 to July 2010, Mr. Dolan served as U.S. Bancorp’s
Controller. He additionally held the title of Executive Vice
President from January 2002 until June 2010 and Senior
Vice President from September 1998 until January 2002.

Richard C. Hartnack

Mr. Hartnack is Vice Chairman, Consumer and Small
Business Banking, of U.S. Bancorp. Mr. Hartnack, 65, has
served in this position since April 2005, when he joined
U.S. Bancorp. Prior to joining U.S. Bancorp, he served as
Vice Chairman of Union Bank of California from 1991 to
2005 with responsibility for Community Banking and
Investment Services.

Richard J. Hidy

Mr. Hidy is Executive Vice President and Chief Risk Officer
of U.S. Bancorp. Mr. Hidy, 48, has served in this position
since 2005. From 2003 until 2005, he served as Senior Vice
President and Deputy General Counsel of U.S. Bancorp,
having served as Senior Vice President and Associate General
Counsel of U.S. Bancorp and Firstar Corporation since
1999.

Joseph C. Hoesley

Mr. Hoesley is Vice Chairman, Commercial Real Estate, of
U.S. Bancorp. Mr. Hoesley, 56, has served in this position
since June 2006. From June 2002 until June 2006, he served
as Executive Vice President and National Group Head of
Commercial Real Estate at U.S. Bancorp, having previously
served as Senior Vice President and Group Head of
Commercial Real Estate since joining U.S. Bancorp in 1992.

U.S. BANCORP

139

Pamela A. Joseph

P.W. Parker

Ms. Joseph is Vice Chairman, Payment Services, of
U.S. Bancorp. Ms. Joseph, 52, has served in this position since
December 2004. Since November 2004, she has been
Chairman and Chief Executive Officer of Elavon Inc., a wholly
owned subsidiary of U.S. Bancorp. Prior to that time, she had
been President and Chief Operating Officer of Elavon Inc. since
February 2000.

Mr. Parker is Executive Vice President and Chief Credit Officer
of U.S. Bancorp. Mr. Parker, 54, has served in this position since
October 2007. From March 2005 until October 2007, he
served as Executive Vice President of Credit Portfolio
Management of U.S. Bancorp, having served as Senior Vice
President of Credit Portfolio Management of U.S. Bancorp
since January 2002.

Howell D. McCullough III

Richard B. Payne, Jr.

Mr. McCullough is Executive Vice President and Chief Strategy
Officer of U.S. Bancorp and Head of U.S. Bancorp’s Enterprise
Revenue Office. Mr. McCullough, 54, has served in these
positions since September 2007. From July 2005 until
September 2007, he served as Director of Strategy and
Acquisitions of the Payment Services business of U.S. Bancorp.
He also served as Chief Financial Officer of the Payment
Services business from October 2006 until September 2007.
From March 2001 until July 2005, he served as Senior Vice
President and Director of Investor Relations at U.S. Bancorp.

Mr. Payne is Vice Chairman, Wholesale Banking, of
U.S. Bancorp. Mr. Payne, 63, has served in this position since
November 2010, when he assumed the additional
responsibility for Commercial Banking at U.S. Bancorp. From
July 2006, when he joined U.S. Bancorp, until November 2010,
Mr. Payne served as Vice Chairman, Corporate Banking at
U.S. Bancorp. Prior to joining U.S. Bancorp, he served as
Executive Vice President for National City Corporation in
Cleveland, with responsibility for Capital Markets, from 2001
to 2006.

Lee R. Mitau

Jeffry H. von Gillern

Mr. Mitau is Executive Vice President and General Counsel of
U.S. Bancorp. Mr. Mitau, 62, has served in this position since
1995. Mr. Mitau also serves as Corporate Secretary. Prior to
1995 he was a partner at the law firm of Dorsey & Whitney LLP.

Mr. von Gillern is Vice Chairman, Technology and Operations
Services, of U.S. Bancorp. Mr. von Gillern, 45, has served in this
position since July 2010. From April 2001, when he joined
U.S. Bancorp, until July 2010, Mr. von Gillern served as
Executive Vice President of U.S. Bancorp, additionally serving
as Chief Information Officer from July 2007 until July 2010.

140

U.S. BANCORP

Directors

Richard K. Davis1,6
Chairman, President and Chief Executive Officer

U.S. Bancorp
Minneapolis, Minnesota

Douglas M. Baker, Jr.3,6
Chairman, President and Chief Executive Officer
Ecolab Inc.

(Cleaning and sanitizing products)

St. Paul, Minnesota

Y. Marc Belton3,4
Executive Vice President, Global Strategy,
Growth and Marketing Innovation

General Mills, Inc.

(Consumer food products)
Minneapolis, Minnesota

Victoria Buyniski Gluckman2,4
Retired Chairman and Chief Executive Officer

United Medical Resources, Inc.,

a wholly owned subsidiary of
UnitedHealth Group Incorporated

(Healthcare benefits administration)

Cincinnati, Ohio

Arthur D. Collins, Jr.1,2,5
Retired Chairman and Chief Executive Officer
Medtronic, Inc.

(Medical device and technology)

Chicago, Illinois

Joel W. Johnson3,6
Retired Chairman and Chief Executive Officer

Hormel Foods Corporation
(Consumer food products)

Scottsdale, Arizona

Olivia F. Kirtley 1,3,5
Business Consultant

(Consulting)
Louisville, Kentucky

1. Executive Committee
2. Compensation and Human Resources Committee
3. Audit Committee
4. Community Reinvestment and Public Policy Committee
5. Governance Committee
6. Risk Management Committee

Jerry W. Levin1,2,5
Chairman and Chief Executive Officer

Wilton Brands Inc.
(Consumer products) and

Chairman and Chief Executive Officer

JW Levin Partners LLC

(Private investment and advisory)
New York, New York

David B. O’Maley5,6
Executive Chairman and Retired President

and Chief Executive Officer

Ohio National Financial Services, Inc.
(Insurance)

Cincinnati, Ohio

O’dell M. Owens, M.D., M.P.H.1,3,4
President

Cincinnati State Technical and Community College
(Higher Education)

Cincinnati, Ohio

Richard G. Reiten2,3
Retired Chairman and Chief Executive Officer

Northwest Natural Gas Company
(Natural gas utility)

Portland, Oregon

Craig D. Schnuck4,6
Former Chairman and Chief Executive Officer

Schnuck Markets, Inc.

(Food retail)
St. Louis, Missouri

Patrick T. Stokes1,2,6
Former Chairman and Former Chief Executive Officer

Anheuser-Busch Companies, Inc.

(Consumer products)
St. Louis, Missouri

U.S. BANCORP

141

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C O R P O R A T E   I N F O R M A T I O N

 Executive Offi ces
U.S. Bancorp
800 Nicollet Mall
Minneapolis, MN 55402

Common Stock Transfer Agent 

and Registrar
BNY Mellon Shareowner Services acts as 
our transfer agent and registrar, dividend 
paying agent and dividend reinvestment 
plan administrator, and maintains all 
shareholder records for the corporation. 
Inquiries related to shareholder records, 
stock transfers, changes of ownership, 
lost stock certificates, changes of address 
and dividend payment should be directed 
to the transfer agent at:

BNY Mellon Shareowner Services
P.O. Box 358015
Pittsburgh, PA 15252-8015
Phone: 888-778-1311 or 
201-680-6578 (international calls)
Internet: bnymellon.com/shareowner

For Registered or Certified Mail:
BNY Mellon Shareowner Services
500 Ross St., 6th Floor
Pittsburgh, PA 15219

Telephone representatives are available 
weekdays from 8:00 a.m. to 6:00 p.m. 
Central Time, and automated support 
is available 24 hours a day, 7 days a 
week. Specifi c information about your 
account is available on BNY Mellon’s 
internet site by clicking on the Investor 
ServiceDirect® link.

Independent Auditor
Ernst & Young LLP serves as the 
independent auditor for U.S. Bancorp’s 
financial statements.

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.

 U.S. Bank, Member FDIC

Dividends and Reinvestment Plan
U.S. Bancorp currently pays quarterly 
dividends on our common stock on or 
about the 15th day of January, April, 
July and October, subject to approval by 
our Board of Directors. U.S. Bancorp 
shareholders can choose to participate 
in a plan that provides automatic 
reinvestment of dividends and/or optional 
cash purchase of additional shares of 
U.S. Bancorp common stock. For more 
information, please contact our transfer 
agent, BNY Mellon Shareowner Services.

Investor Relations Contacts
Judith T. Murphy
Executive Vice President
Corporate Investor and Public Relations
judith.murphy@usbank.com
Phone: 612-303-0783 or 866-775-9668

Financial Information
U.S. Bancorp news and financial results 
are available through our website and 
by mail.

Website For information about 
U.S. Bancorp, including news, financial 
results, annual reports and other 
documents filed with the Securities and 
Exchange Commission, access our home 
page on the internet at usbank.com, 
click on About U.S. Bank.

Mail At your request, we will mail to 
you our quarterly earnings, news 
releases, quarterly financial data 
reported on Form 10-Q, Form 10-K, 
and additional copies of our annual 
reports. Please contact:

U.S. Bancorp Investor Relations
800 Nicollet Mall
Minneapolis, MN 55402
investorrelations@usbank.com
Phone: 866-775-9668

Media Requests
Steven W. Dale
Senior Vice President, Media Relations
steve.dale@usbank.com
Phone: 612-303-0784

Privacy
U.S. Bancorp is committed to respecting the 
privacy of our customers and safeguarding 
the financial and personal information 
provided to us. To learn more about the 
U.S. Bancorp commitment to protecting 
privacy, visit usbank.com and click on 
Privacy Pledge.

Code of Ethics
U.S. Bancorp places the highest importance 
on honesty and integrity. Each year, every 
U.S. Bancorp employee certifies compliance 
with the letter and spirit of our Code of 
Ethics and Business Conduct, the guiding 
ethical standards of our organization. 
For details about our Code of Ethics 
and Business Conduct, visit usbank.com 
and click on About U.S. Bank.

Diversity
U.S. Bancorp and our subsidiaries are 
committed to developing and maintaining 
a workplace that reflects the diversity 
of the communities we serve. We support 
a work environment where individual 
differences are valued and respected and 
where each individual who shares the 
fundamental values of the company has an 
opportunity to contribute and grow based 
on individual merit.

Equal Employment Opportunity/

Affi rmative Action
U.S. Bancorp and our subsidiaries are 
committed to providing Equal Employment 
Opportunity to all employees and applicants 
for employment. In keeping with this 
commitment, employment decisions are 
made based upon performance, skill and 
abilities, not race, color, religion, national 
origin or ancestry, gender, age, disability, 
veteran status, sexual orientation or 
any other factors protected by law. The 
corporation complies with municipal, state 
and federal fair employment laws, including 
regulations applying to federal contractors.

U.S. Bancorp, including each of our subsid- 
iaries, is an Equal Opportunity Employer 
committed to creating a diverse workforce.

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U.S. Bancorp

800 Nicollet Mall

Minneapolis, MN 55402

usbank.com

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