US BANCORP \DE\ Quarterly Report for Q2 Ended Jun 30, 2008

Summary

US BancORP (USB) reported net income of $950 million for the second quarter of 2008, a decrease from $1,156 million in the prior year. Diluted earnings per share were $0.53, down from $0.65 year-over-year. This decline was primarily attributed to a significant increase in the provision for credit losses, driven by ongoing stress in residential real estate markets and broader economic conditions, alongside net securities losses primarily related to impairment charges on structured investment securities. Despite the net income decrease, total net revenue saw a 7.5% increase, largely due to a 15.6% rise in net interest income, benefiting from growth in earning assets and an improved net interest margin. Noninterest income experienced a modest increase, supported by growth in fee-based revenue categories like credit/debit cards and merchant processing, though partially offset by securities impairment charges. However, noninterest expenses rose by 9.9%, driven by investments in business initiatives and higher credit collection costs. The company's capital ratios remained strong, exceeding regulatory well-capitalized requirements.

Key Highlights

• 1Net income for Q2 2008 was $950 million, down 17.8% from $1,156 million in Q2 2007.
• 2Diluted EPS for Q2 2008 was $0.53, down 18.5% from $0.65 in Q2 2007.
• 3Provision for credit losses increased significantly by $405 million year-over-year, reflecting stress in residential real estate and broader economic impacts.
• 4Total net revenue increased 7.5% to $3.8 billion, driven by a 15.6% increase in net interest income.
• 5Noninterest expense rose 9.9% to $1.835 billion, due to investments in business initiatives and higher credit costs.
• 6The company's capital ratios (Tier 1 capital, total risk-based capital, leverage) remained strong and above regulatory requirements.

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