<PAGE>













                                     USBANK
                                       SERVICE GUARANTEED [GRAPHIC]

                                        
                         This changes banking forever.
                                   2001 ANNUAL REPORT AND FORM 10-K

























                                        usbancorp(R)
                                          Five Star Service Guaranteed [GRAPHIC]

<PAGE>




            Contents


<Table>
<Caption>
<S>     <C> <C>
            The New U.S. Bancorp

         1  Delivering Five Star
            Service Guaranteed

         2  Graphs of Selected
            Financial Highlights

         3  Financial Summary

         5  Letter to Shareholders

         6  Growing Diversified Businesses

         8  Providing Convenient Access

        10  Building the Best Bank
            in America

        12  Capitalizing on Growth
            Opportunities

        14  Providing Local Market
            Leadership and Community
            Support


            Financial Section

        16  Management's Discussion
            and Analysis

        48  Responsibility for
            Financial Statements

        48  Report of Independent
            Accountants
           
        49  Consolidated Financial
            Statements

        53  Notes to Consolidated
            Financial Statements

        84  Five-Year Consolidated
            Financial Statements

        88  Quarterly Consolidated
            Financial Data

        89  Supplemental Financial Data

        90  Annual Report on Form 10-K

        94  Executive Officers

        96  Directors

    Inside
back cover  Corporation Information

Back cover  Corporate Profile
</Table>


<PAGE>
DELIVERING

Five Star Service Guaranteed
This changes banking forever. Guaranteed customer service by every business line
and every employee for every transaction, every day. Our exclusive Five Star
Service Guarantee puts customer needs first and foremost.

     Outstanding customer service is so fundamental to the way we do business
that our employees wear lapel pins with the inscription "Service Guaranteed" as
a visible symbol of our commitment to customers. A replica of that pin is on the
cover of this report, signifying its importance to U.S. Bank(R).

     In 1996, we created the original Five Star Service Guarantee for all of our
customers who bank in a branch office. Our goal: to bring customers the highest
level of service they have ever experienced from a financial institution. Since
then, our pursuit of excellence has expanded to every line of business and
department at U.S. Bank. Each one has its own set of Five Star Service
Guarantees -- more than 80 guarantees in all, delivered by all business lines
throughout our organization.

     This means that every employee is working every day not just to meet
customer needs, but to exceed them. And, if anyone at U.S. Bank fails to keep
any of our guarantees, we pay the customer for the inconvenience.

     We recognize that our service is what differentiates U.S. Bank from our
competition. Product features and rates may be similar among banks, but
guaranteed, outstanding service makes U.S. Bank unique. We say that some banks
talk about great service, but only U.S. Bank guarantees it.

Circle of Service Excellence

     Our Five Star Service Guarantee is built on the outstanding efforts of our
employees and their commitment and contribution to delivering the highest level
of quality service for our customers.

     Each quarter we choose a select few employees who exemplify outstanding
service for induction into the Circle of Service Excellence. We honor them at a
luncheon hosted by U.S. Bancorp executives and at a Board of Directors meeting.
We prominently display their portraits at our Five Star Halls of Fame, located
in seven major markets. Stock options and local recognition are among the other
ways we reward these top performers. We invite you to nominate an outstanding
employee for our Circle of Service Excellence using the attached self-addressed,
postage-paid nomination form.


                                                                  U.S. Bancorp 1

<PAGE>

NET INCOME
(In millions of dollars)


<TABLE>
<CAPTION>
       Operating Earnings(a)             Net Income
<S>    <C>                               <C>
97        2,123.9                           1,599.3
98        2,519.3                           2,123.9    
99        2,799.0                           2,381.8
00        3,106.9                           2,875.6    
01        2,550.8                           1,706.5
</TABLE>

       



DILUTED EARNINGS PER COMMON SHARE
(In dollars)


<TABLE>
<CAPTION>
      Diluted Earnings Per Common Share      Diluted Earnings Per Common Share
            (Operating Basis)(a)
<S>   <C>                                    <C>
97               1.13                                      .85
98               1.30                                     1.10       
99               1.45                                     1.23
00               1.62                                     1.50
01               1.32                                      .88
</TABLE>

                                 
DIVIDENDS DECLARED PER COMMON SHARE (b)
(In dollars)


<TABLE>
<S>                     <C>
97                      .27
98                      .33
99                      .46
00                      .65
01                      .75
</TABLE>


RETURN ON AVERAGE ASSETS
(In percents)



<TABLE>
<CAPTION>
      Return on Average Assets            Return on Average  
       (Operating Basis)(a)                    Assets     
<S>   <C>                                 <C>
97              1.64                            1.24
98              1.76                            1.49
99              1.86                            1.59
00              1.96                            1.81
01              1.54                            1.03
</TABLE>


RETURN ON AVERAGE COMMON EQUITY
(In percents)


<TABLE>
<CAPTION>
     Return on Average Common Equity         Return on Average Common Equity
          (Operating Basis)(a)
<S>  <C>                                     <C>
97              19.5                                    14.7
98              20.3                                    17.2
99              21.2                                    18.0
00              21.6                                    20.0
01              15.7                                    10.5
</TABLE>


DIVIDEND PAYOUT RATIO
(In percents)



<TABLE>
<CAPTION>
      Dividend Payout Ratio                     Dividend Payout Ratio
      (Operating Basis)(a)
<S>   <C>                                       <C>
97              23.8                                    31.6
98              25.3                                    29.9
99              31.7                                    37.3
00              40.1                                    43.4
01              57.0                                    85.2
</TABLE>


NET INTEREST MARGIN
(In percents)

<TABLE>
<S>     <C>
97      4.72
98      4.44
99      4.44
00      4.36
01      4.45
</TABLE>


EFFICIENCY RATIO
(In percents)


<TABLE>
<CAPTION>
          Efficiency Ratio       Efficiency Ratio
        (Operating Basis)(a)
<S>     <C>                      <C> 
97              52.2                    59.9
98              52.2                    58.3
99              50.5                    55.7
00              48.8                    51.9
01              49.5                    57.5
</TABLE>


BANKING EFFICIENCY RATIO (c)
(In percents)

<TABLE>
<CAPTION>
         Banking Efficiency Ratio            Banking Efficiency Ratio
          (Operating Basis)(a)
<S>      <C>                                 <C>
97              51.7                                    59.5
98              49.7                                    56.1
99              46.3                                    52.1
00              43.5                                    46.8
01              45.2                                    52.5
</TABLE>

      
AVERAGE ASSETS
(In millions of dollars)

<TABLE>
<S>     <C>
97      129,493
98      142,887
99      150,167
00      158,481
01      165,944
</TABLE>


AVERAGE SHAREHOLDERS' EQUITY
(In millions of dollars)


<TABLE>
<S>     <C>   
97      10,882
98      12,383
99      13,221
00      14,365
01      16,201
</TABLE>


AVERAGE EQUITY TO AVERAGE ASSETS
(In percents)

<TABLE>
<S>             <C>
97              8.40
98              8.67
99              8.80
00              9.06
01              9.76
</TABLE>



 
2 U.S. Bancorp

<PAGE>
                                

FINANCIAL SUMMARY


<TABLE>
<CAPTION>
                                                                                                      Percent Change  Percent Change
(Dollars in Millions, Except Per Share Data)                     2001           2000         1999          2001            2000  
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>           <C>           <C>         <C>             <C>
Operating earnings (a)......................................  $ 2,550.8     $ 3,106.9     $ 2,799.0        (17.9)%          11.0%
Merger and restructuring-related items (after-tax)..........     (844.3)       (231.3)       (417.2)                    
                                                              --------------------------------------  
  Net income................................................  $ 1,706.5     $ 2,875.6     $ 2,381.8        (40.7)           20.7
                                                              --------------------------------------  
PER COMMON SHARE                                                                                                        
Earnings per share..........................................  $     .89     $    1.51     $    1.25        (41.1)%          20.8%
Diluted earnings per share..................................        .88          1.50          1.23        (41.3)           22.0
Dividends declared per share (b)............................        .75           .65           .46         15.4            41.3
Book value per share........................................       8.43          7.97          7.23          5.8            10.2
Market value per share......................................      20.93         23.25         21.13        (10.0)           10.0
                                                                                                                        
FINANCIAL RATIOS                                                                                                        
Return on average assets....................................       1.03%         1.81%         1.59%                    
Return on average equity....................................       10.5          20.0          18.0                     
Net interest margin (taxable-equivalent basis)..............       4.45          4.36          4.44                     
Efficiency ratio............................................       57.5          51.9          55.7                     
                                                                                                                        
FINANCIAL RATIOS EXCLUDING MERGER AND                                                                                   
  RESTRUCTURING-RELATED ITEMS (A)                                                                                         
Return on average assets....................................       1.54%         1.96%         1.86%                    
Return on average equity....................................       15.7          21.6          21.2                     
Efficiency ratio............................................       49.5          48.8          50.5                     
Banking efficiency ratio (c)................................       45.2          43.5          46.3                     
                                                                                                                        
AVERAGE BALANCES                                                                                                        
Loans.......................................................  $ 118,177     $ 118,317     $ 109,638          (.1)%           7.9%
Earning assets..............................................    145,165       140,606       133,757          3.2             5.1
Assets......................................................    165,944       158,481       150,167          4.7             5.5
Deposits....................................................    104,956       103,426        99,920          1.5             3.5
Total shareholders' equity..................................     16,201        14,365        13,221         12.8             8.7
                                                                                                                        
PERIOD END BALANCES                                                                                                     
Loans.......................................................  $ 114,405     $ 122,365      $113,229         (6.5)%           8.1%
Allowance for credit losses.................................      2,457         1,787         1,710         37.5             4.5
Assets......................................................    171,390       164,921       154,318          3.9             6.9
Deposits....................................................    105,219       109,535       103,417         (3.9)            5.9
Total shareholders' equity..................................     16,461        15,168        13,947          8.5             8.8
Regulatory capital ratios                                                                                               
  Tangible common equity....................................        5.7%          6.3%          6.7%                   
  Tier 1 capital............................................        7.7           7.2           7.4                    
  Total risk-based capital..................................       11.7          10.6          11.0                      
  Leverage..................................................        7.7           7.4           7.5                      
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


(a)  The Company analyzes its performance on a net income basis in accordance
     with accounting principles generally accepted in the United States, as well
     as on an operating basis before merger and restructuring-related items
     referred to as "operating earnings." Operating earnings are presented as
     supplemental information to enhance the reader's understanding of, and
     highlight trends in, the Company's financial results excluding the impact
     of merger and restructuring-related items of specific business acquisitions
     and restructuring activities. Operating earnings should not be viewed as a
     substitute for net income and earnings per share as determined in
     accordance with accounting principles generally accepted in the United
     States. Merger and restructuring-related items excluded from net income to
     derive operating earnings may be significant and may not be comparable to
     other companies.

(b)  Dividends per share have not been restated for the 2001 merger of Firstar
     and the former U.S. Bancorp ("USBM").

(c)  Without investment banking and brokerage activity.

FORWARD-LOOKING STATEMENTS 

This Annual Report and Form 10-K contains forward-looking statements. Statements
that are not historical or current facts, including statements about beliefs and
expectations, are forward-looking statements. Forward-looking statements involve
inherent risks and uncertainties, and important factors could cause actual
results to differ materially from those anticipated, including the following, in
addition to those contained in the Company's reports on file with the SEC: (i)
general economic or industry conditions could be less favorable than expected,
resulting in a deterioration in credit quality, a change in the allowance for
credit losses, or a reduced demand for credit or fee-based products and
services; (ii) the Company could encounter unforeseen complications in
connection with the ongoing integration of the products, operations and
information systems of Firstar with USBM that could adversely affect the
Company's operations or customer relationships; (iii) changes in the domestic
interest rate environment could reduce net interest income and could increase
credit losses; (iv) the conditions of the securities markets could change,
adversely affecting revenues from capital markets businesses, the value or
credit quality of the Company's assets, or the availability and terms of funding
necessary to meet the Company's liquidity needs; (v) changes in the extensive
laws, regulations and policies governing financial services companies could
alter the Company's business environment or affect operations; (vi) the
potential need to adapt to industry changes in information technology systems,
on which the Company is highly dependent, could present operational issues or
require significant capital spending; (vii) competitive pressures could
intensify and affect the Company's profitability, including as a result of
continued industry consolidation, the increased availability of financial
services from non-banks, technological developments, or bank regulatory reform;
(viii) acquisitions may not produce revenue enhancements or cost savings at
levels or within time frames originally anticipated, or may result in unforeseen
integration difficulties; and (ix) capital investments in the Company's
businesses may not produce expected growth in earnings anticipated at the time
of the expenditure. Forward-looking statements speak only as of the date they
are made, and the Company undertakes no obligation to update them in light of
new information or future events.

                                                                  U.S. Bancorp 3
                             


<PAGE>

                             [U.S. BANCORP PICTURE]







4 U.S. Bancorp


<PAGE>

DEAR FELLOW SHAREHOLDERS:

     We are pleased to tell you that the seamless integration of Firstar and
U.S. Bancorp proceeds on schedule to be completed by the end of the third
quarter of 2002. We continue to successfully convert major systems and products
to single operating platforms with virtually no customer disruption. The
integration process has been thoughtful and intentional. We have worked very
diligently to blend the best practices, people and products of both
organizations.

     Your corporation ended 2001 with strong fourth quarter performance,
highlighted by revenue momentum, margin improvement and a companywide focus on
customer service quality. We are committed to seeing these trends continue
through 2002.

     The year 2001 brought unprecedented challenges for our country and our
company. During the third quarter, we took action to increase our reserves for
potential loan losses and to strengthen our balance sheet. While we were
disappointed in the resulting adverse effect on earnings, U.S. Bancorp now ranks
among the top of our peer group in the strength of our credit reserves. We
prudently recognized the economic slowdown and our inability to predict its
length or the timing of a genuine recovery.

     For a company that prides itself on consistent earnings, our third quarter
action was not an easy step to take. However, it helped us accomplish one of our
primary objectives: having a balance sheet and a risk profile among the
strongest in the industry. We have positioned ourselves to manage through the
current economic cycle. Our credit quality remained stable in the fourth
quarter, but we are prepared for the likelihood that nonperforming loans and
charge-offs will increase throughout 2002.

     Providing outstanding service to all customers, backed by our exclusive
Five Star Service Guarantee, is an ongoing priority at U.S. Bancorp, as is
selling more of our products and services. You can read more about our Five Star
Service Guarantee at the front of this report. Our operating revenue growth in
the fourth quarter is a sure sign that our sales and service culture is taking
effect.

     Although our combined franchise has yet to fulfill all of its potential, we
are off to a strong start on a solid foundation. The success of our integration
to date and the benefits of the merger became evident in our year-end results.
We operate in stable, moderately growing and fast-growing markets, and we have a
multi-tiered and comprehensive distribution system throughout those markets. Our
scope and scale make us a low-cost provider with significant competitive
advantages. We have a proven track record and skilled professionals who are the
best in the industry running our businesses.

     We assure you that, as always, our highest priority is to increase the
value of your investment in U.S. Bancorp. It is the reason we come to work each
day.


Sincerely,

/s/ Jerry A. Grundhofer
Jerry A. Grundhofer
President and Chief Executive Officer

/s/ John F. Grundhofer 
John F. Grundhofer 
Chairman


February 22, 2002


U.S. Bancorp is well positioned to capitalize on growth opportunities.


                                                                  U.S. Bancorp 5

<PAGE>

GROWING DIVERSIFIED BUSINESSES

Each U. S. Bancorp business line focuses on unique customer segments, enabling
us to best meet the needs of our broad customer base.


*   Treasury and Corporate Support contributed (1.0)% of 2001 operating income.
    Operating income represents pretax earnings before the provision for credit
    losses and merger and restructuring-related items.

**  Assets are as of December 31, 2001 and reflect U.S. Bancorp Asset
    Management, Inc. and its affiliated private asset management group within
    U.S. Bank National Association. Investment products, including shares of
    mutual funds, are not obligations of, or guaranteed by, any bank, including
    U.S. Bank or any U.S. Bancorp affiliate, nor are they insured by the Federal
    Deposit Insurance Corporation, the Federal Reserve Board or any other
    agency. An investment in such products involves investment risk, including
    possible loss of principal.

[PICTURE]

Consumer Banking

Delivers comprehensive financial products and services to the broad consumer and
small business markets through 2,147 banking offices, telesales and telephone
customer service, online banking, direct mail and 4,904 automated teller
machines (ATMs) 

[PICTURE]

Wholesale Banking 

Offers relationship-based lending, depository, treasury management, foreign
exchange, international banking, leasing and other financial services primarily
to middle market, large corporate, financial institution and public sector
clients

[PICTURE]

Payment Services 

Includes consumer and business credit and debit cards, corporate and purchasing
card services, consumer lines of credit, ATM processing and merchant processing 

[PICTURE]

Private Client, Trust and Asset Management 

Provides a comprehensive array of private banking, personal, corporate and
institutional trust, investment management, financial advisory, mutual fund and
asset management services to affluent individuals, businesses, institutions and
mutual funds

[PICTURE]

Capital Markets 

Under the U.S. Bancorp Piper Jaffray(R) brand, provides financial advisory and
securities brokerage services, mutual funds, annuities and insurance products to
individuals and businesses; for corporate and public sector clients, engages in
equity and fixed income trading activities and investment banking and
underwriting services
                 

<PAGE>
KEY BUSINESS UNITS [Consumer Banking]

- Community Banking serves smaller and non-urban markets

- Metropolitan Banking serves larger urban and high-growth markets

- In-Store Banking complements traditional branches with accessible facilities
  in supermarkets, convenience stores and other locations

- Small Business Banking provides comprehensive financial solutions to
  businesses with annual revenue up to $5 million

- Consumer Lending provides student loans and serves consumers purchasing or
  leasing vehicles or marine equipment through franchised dealers

- Consumer Finance serves customers outside the traditional bank credit profile

- Home Mortgage Lending originates, purchases, sells and services residential 
  mortgage loans

- Retail Brokerage and Insurance provides mutual funds, variable and fixed
  annuities, general securities and discount brokerage

STRENGTHS AND SUCCESSES 

- Segmented business model 

- Strong sales culture 

- Top 3 small business lender

- Top 3 Small Business Administration bank lender 

- Top 4 bank branch network  

- Top 7 home equity lender 

- Top 8 consumer lender

CONTRIBUTION TO 
2001 U.S. BANCORP 
OPERATING INCOME*

     37.5%
    [GRAPH]

KEY BUSINESS UNITS [Wholesale Banking]

- Commercial Banking serves middle market clients with annual sales between $5
  million and $250 million, and clients in the commercial real estate,
  commercial vehicle dealership and energy industries

- Corporate Banking serves clients with annual sales greater than $250 million,
  those with specialized lending, equipment finance and leasing needs, companies
  in diverse specialty industries (such as agribusiness, health care, mortgage
  banking and media/communications), correspondent banks, government entities,
  and all wholesale clients in our headquarters market

- Treasury Management provides comprehensive cash management solutions to
  business clients, facilitating their deposits and the collection of funds,
  payments, and information to assist in the management and optimization of
  their cash position

STRENGTHS AND SUCCESSES

- Strong distribution system

- Comprehensive product set

- Relationship manager tenure and expertise

- Leading depository bank for federal, state and
  municipal governments

- Top 5 bank-owned leasing company

- Top 7 treasury management provider

CONTRIBUTION TO 
2001 U.S. BANCORP
OPERATING INCOME*

     32.1%
    [GRAPH]

KEY BUSINESS UNITS [Payment Services]

- Corporate Payment Systems provides Visa(R) corporate and purchasing cards and
  other payment solutions to companies with annual sales greater than $50
  million, as well as federal, state and local governments

- Card Services provides credit and debit card products to consumer and small
  business customers of U.S. Bancorp, correspondent financial institutions and
  co-brand partners

- NOVA Information Systems, Inc. specializes in integrated credit and debit card
  payment processing services, related software application products and 
  value-added services for more than 650,000 U.S. merchant locations

- Transaction Services specializes in ATM processing, supporting U.S. Bank ATMs
  and facilitating electronic transactions for other financial institutions and
  corporations through ATMs, debit cards, two proprietary regional networks and
  a network gateway

STRENGTHS AND SUCCESSES

- Industry-leading products

- Proprietary technology

- Operational economies of scale

- No. 1 Visa commercial card issuer

- Top 2 universal fleet card provider 

- Top 3 bank-owned ATM network 

- Top 3 merchant processor 

- Top 6 Visa and MasterCard(R) issuer

CONTRIBUTION TO 
2001 U.S. BANCORP
OPERATING INCOME*

     18.9%
    [GRAPH]

KEY BUSINESS UNITS [Private Client, Trust and Asset Management]

- Private Client Group fulfills private banking, personal trust and investment
  management needs for affluent clients and has $79 billion in assets under
  administration

- Corporate Trust Services provides trustee services for more than $650 billion
  in municipal, corporate, asset-backed and international bonds

- Institutional Trust and Custody provides retirement, investment and custodian
  services to institutional clients

- Fund Services provides transfer agent, fund accounting, fund administration/
  compliance and distribution to mutual fund complexes

- U.S. Bancorp Asset Management, Inc., with more than $121 billion** in assets 
  under management, advises the $54 billion** First American(R) family of mutual
  funds and provides customized portfolio management for individuals, 
  corporations, endowments, foundations, pension funds, public entities and 
  labor unions

STRENGTHS AND SUCCESSES

- Creative, needs-based solutions

- Leading technology and operational economies of scale

- Breadth of asset management products 

- Top 2 municipal trustee 

- Top 3 transfer agent 

- Top 5 bank-affiliated U.S. mutual fund family 

- Top 6 among banks in record keeping assets 

CONTRIBUTION TO 
2001 U.S. BANCORP
OPERATING INCOME*

     10.7%
    [GRAPH]

KEY BUSINESS UNITS {Capital Markets]

- Private Advisory Services helps affluent clients meet their financial goals
  through a network of 123 brokerage offices

- Equity Capital Markets provides research, trading, sales and equity investment
  banking activities, including public offerings and advisory services for
  mergers and acquisitions, with niches in communications, consumer, health
  care, financial institutions, industrial growth and technology

- Fixed Income Capital Markets provides financing and investment expertise to
  public finance issuers, corporate debt issuers and institutional investors

STRENGTHS AND SUCCESSES

- Strong retail distribution network

- "Middle Market Mergers & Acquisitions Bank of the Year," Mergers & 
   Acquisitions magazine, February 2001

- Top-performing equity bookrunner for lead-managed IPOs and follow-on offerings

- Record year for Fixed Income Capital Markets

- Leading manager of fixed income new issuance, underwriting $11.5 billion in
  agency securities and $6.3 billion in municipal bonds

CONTRIBUTION TO 
2001 U.S. BANCORP
OPERATING INCOME*

     1.8%
   [GRAPH]

                                                                  U.S. Bancorp 7

<PAGE>

PROVIDING
CONVENIENT ACCESS

                                   [PICTURE]

Our customers can choose the easiest way to bank, whether in person, by
telephone, via ATM or online.

CUTTING-EDGE
DELIVERY TECHNOLOGIES            
                     
     24-Hour Banking: Our Consumer Banking customer service call centers handled
126,207,713 inbound inquiries in 2001, including 99,783,801 served by our
interactive voice response system.

     ATM Banking: 4,904 leading-edge terminals are available around the clock
throughout our 24-state banking region.

     Internet Banking: 1,155,733 consumer and small business customers are
registered to conduct most transactions and inquiries at the click of a mouse.
                 


8 U.S. Bancorp

<PAGE>

     Consumer and business customers alike increasingly use technology to access
their accounts with us. They also frequent our extensive network of bank
branches and specialized offices, which remain the foundation of our commanding
presence in many of the highest growth, most diversified markets in the United
States. Wherever customers interact with us, they can count on consistent,
leading-edge service.

BRANCH BANKING

     Our Community and Metropolitan Banking branches deliver all the products
and services U.S. Bank has to offer. In our larger markets, branch staff act as
concierges, connecting customers with experts across the company for specialized
services. Nontraditional branch locations bring banking directly to where our
customers live, work, study and shop inside retirement centers, workplaces and
corporate sites, colleges and universities, and grocery and convenience stores.
These dynamic locations feature special products, services and hours geared to
the unique needs of local customers. Additionally, many specialized offices
within and beyond our 24-state region serve unique customer segments such as
brokerage, home mortgage and trust.

TELEPHONE BANKING

     Using 24-Hour Banking, consumers have anytime, anywhere access to their
accounts by telephone, including Spanish language options. Dedicated call
centers provide expertise to various business customer segments and others with
specialized needs. Our telesales efforts offer customers new products and
services to meet more of their financial needs while generating revenue growth
for the company. Consumer Banking alone handled 1,402,849 inbound and outbound
telesales calls in 2001.

ATM BANKING

     Our ATM network is great in number as well as functionality. We are
upgrading approximately 1,500 branch terminals to Super ATMs, bringing the total
number of Super ATMs to 3,444. These state-of-the-art ATMs enable customers not
only to access funds, check balances and make deposits, but also to obtain
statements, order checks, request check copies, purchase stamps and phone
minutes... and more. Updated ATMs feature the new bright and colorful U.S. Bank
look--signaling the best ATM service available.

INTERNET BANKING

     We offer comprehensive, fast, secure online service on all accounts across
all business lines. Consumers enjoy the latest Internet banking capabilities
available on www.usbank.com or www.firstar.com, where they can learn about
products, open deposit accounts in real time, apply for loans and lines of
credit, access account information, pay bills and more.

     Businesses and investors also benefit from increasingly sophisticated,
specialized online tools. For example, we offer advanced capabilities to deliver
check images to commercial customers via the Internet. Our Customer Automation
Reporting Environment (C.A.R.E.) provides Internet access for corporate and
purchasing card customers, merchants and government clients, who can generate
customized reports at any time. And we recently became the first institution to
offer complete Web-based reporting and processing for money market instrument
issuers. It's all part of "e-enabling" our customers and employees with the
latest technology.

RELATIONSHIP BANKING

     Relationships, complemented by comprehensive products and services, drive
several of our key businesses, including Wholesale Banking, Private Client,
Trust and Asset Management, and U.S. Bancorp Piper Jaffray. Clients of these
businesses not only want quick, convenient access to conduct transactions, they
also need expert advice and support. We offer both. Clients always have access
to an experienced relationship manager--an ambassador who can help fulfill
their day-to-day needs or direct them, as needed, to appropriate specialists
across our organization in areas as diverse as asset management, investment
banking and leasing.

                BRANCH BANKING AND SPECIALIZED SERVICES/OFFICES

                                     [MAP]


Branch Banking        Specialized Services/Offices

/ / 2,147 branch      - Commercial Banking              - Hong Kong
    banking offices   - Consumer Banking                - Canada
    in 24 states      - Corporate Banking               - Buenos Aires
                      - Payment Services                - Cayman Islands
    All Firstar       - Private Client, Trust and       - London
    locations will      Asset Management                - Tel Aviv
    operate as        - Technology and Operations
    U.S. Bank           Services
    by mid-2002       - U.S. Bancorp Piper Jaffray
       

                                                                  U.S. Bancorp 9

<PAGE>


BUILDING THE 
BEST BANK IN AMERICA

DISCIPLINED. DETAILED. DELIBERATE.

THE ONGOING INTEGRATION OF FIRSTAR AND U.S. BANK IS SEAMLESSLY CREATING ONE
FINANCIAL POWERHOUSE, UNITED BY A SINGLE BRAND.

STRUCTURE AND PROCESS

     Every week for more than a year, corporate and line-of-business leaders
from across U.S. Bancorp have been gathering to execute our comprehensive plan
to integrate Firstar and U.S. Bank. They are united by a common goal: to ensure
a flawless, cost-effective integration for the benefit of customers,
shareholders and employees. Their stellar track record--years of experience
executing dozens of successful mergers--produces outstanding results.

     The integration has been a textbook example of careful planning and smooth
execution. Thorough preparation, employee training, systems testing and customer
communication has ensured success. A series of systems conversions is bringing
all our markets together on common operating and delivery platforms. Together we
are equipped to handle increased capacity, enhanced functionality, and
high-quality, consistent service wherever customers interact with us.


                                   [PICTURE]

10 U.S. Bancorp

<PAGE>

QUALITY CONTROL AND MONITORING

     Exacting quality control and monitoring--before and after conversion
events--ensure that our conversions proceed smoothly. Command centers track any
issues so that customer service continues uninterrupted. 

     Branch employee "ambassadors" with expert knowledge of our combined
products, systems and processes are on location at newly converted branches and
other front-office operations after conversion. They provide ongoing training
and support for employees and ensure that customers experience business as
usual. "Mystery shoppers" measure service levels before and after conversion
events.

KEY ACCOMPLISHMENTS

     During the past year, we have worked diligently to combine our two
predecessor organizations into an even stronger company. Together, we have
created a better way to do business.

     We have established a new, efficient organizational structure. We have
developed common employee benefits, programs and policies, including incentives
that drive employees to generate revenue while fulfilling customers' needs. We
have selected the best products and services from our combined resources-- or,
through expanded capabilities, created new ones.

     Along the way, we have invested in cutting-edge, fully automated
infrastructure that lays a solid foundation for growth. In migrating to new,
cost-effective network technology, we have established greater connectivity
between our front and back offices. We have e-enabled employees and customers to
access information and conduct transactions with unprecedented accuracy and
efficiency. Gone are closed-end, self-contained processing systems. Evolving is
a dedicated open Internet protocol network that supports more than 300 million
transactions a month and is backed by the Five Star Service Guarantee--testament
to our confidence in our systems and staff.

COMPLETING THE INTEGRATION

     Our entire organization has embraced our exclusive Five Star Service
Guarantee. Soon we'll be completely united under one strong brand--the new U.S.
Bank.

     Starting in January and continuing through July 2002, the distinctive new
red, white and blue U.S. Bank signs are rising market-by-market. All locations,
including our ATM network, are in the process of displaying the updated
identity, which promises "Five Star Service Guaranteed." In addition, all
advertising and marketing materials, business supplies and customer documents
reinforce our new brand.

     After final systems conversions in the third quarter of 2002, all customers
will have convenient access to our new, improved product and service offerings
wherever we operate. They will be able to make deposits and conduct other
transactions at any of our branches across 24 states.

     Including our specialized businesses, the new U.S. Bank brand is
recognizable from coast to coast. When customers see the U.S. Bank name, they
can expect familiar faces, convenient access, top-quality solutions and
unmatched service excellence--guaranteed!


INTEGRATION HIGHLIGHTS


<Table>
<Caption>
<S>          <C>      <C>                        <C>                         <C>                  <C>
                      3Q01                               
                      o U.S. Bancorp closes acquisition of NOVA 
                        Corporation
                      o U.S. Bancorp closes acquisition of 20 Southern        1Q02
                        California branches from Pacific Century Bank         o Name change begins in selected markets
1Q01                  o Commercial loan centers consolidate                   o Integration of major deposit-related systems
o Firstar and         o Firstar Funds merge into First American Funds(R)        begins in selected markets
  U.S. Bancorp                      |                                         o Major trust systems convert to
  join forces                       |                                           common platform
  |                                 |                                           |
  |                                 |                                           |
----------------------------------------------------------------------------------------------------------------------------------
               |                                        |                                    |                 |
               |                                        |                                    |                 |
    2Q01                                           4Q01                                      |        3Q02
    o First American Asset Management              o Branded credit cards merge              |        o Name change and deposit
      and FIRMCO merge into U.S. Bancorp             onto common platform                    |          integrations to be completed
      Asset Management, Inc.                       o Consumer loans convert to               |        o Teller and personal banker
    o Mortgage loans convert to common               common platform                         |          system upgrades to be
      platform                                     o Five Star Service Guarantee             |          completed
                                                     promotion launches across all           |
                                                     business lines                         2Q02
                                                   o Human Resources systems                o Teller and personal banker system
                                                     convert to common platform               upgrades begin in selected markets
                                                                                            o Name change and deposit integrations
                                                                                              continue in selected markets
</Table>


               
                                                                 U.S. Bancorp 11

<PAGE>

CAPITALIZING
ON GROWTH OPPORTUNITIES

     The combination of Firstar and U.S. Bancorp has created a larger, stronger
company with a solid foundation for growth. We will grow by using strategic cost
advantage to gain market share, emphasizing customer service and investing in
higher-growth businesses.

     Our future begins with our basic banking operations. We already rank among
the top three commercial banks in 50 metropolitan areas based on deposits. We
are penetrating all our markets even further with our expanded, improved set of
high-quality products--backed everywhere by our Five Star Service Guarantee.

     Consumers enjoy expanded access through 2,147 branches and 4,904 ATMs in 24
states, plus state-of-the-art telephone and Internet banking channels.
Businesses also benefit from our expanded geographic reach and technology
investments.

                                   [PICTURE]

Outstanding products. High-growth markets. Flourishing businesses. Convenient,
efficient delivery. U.S. Bancorp is positioned to soar.

12 U.S. Bancorp

<PAGE>

National retailers, in particular, are benefiting from enhanced depository and
treasury management products accessible through common accounts across the
region, including the expansion of our cash vault capabilities to new markets.
Trust customers benefit from our greater economies of scale and state-of-the-art
products and systems.

     We continually strive to serve customers across business lines, gaining
more of their business. In 2001, for example, U.S. Bancorp Piper Jaffray Fixed
Income Capital Markets had a record year in corporate debt issuance, managing 35
issues with a par amount of more than $19 billion, including preferred stock and
note issues for U.S. Bancorp. Meanwhile, customers deposited more than $490
million into U.S. Bancorp Piper Jaffray Prime Accounts(SM) and other brokerage
accounts through U.S. Bank branches and ATMs--up over 134 percent from a year
earlier. When the integration is completed, investors will have access to their
brokerage accounts at all of our bank branches.

     Ultimately, our growth depends on our people. We have created a sales
culture driven by customer needs and rewarded by incentives for outstanding,
measurable performance. Every employee, from the front line to the back office,
is eligible for incentives to strengthen existing customer relationships, build
new ones, and provide outstanding guaranteed service to all customers, whether
external or internal.

HISPANIC INITIATIVE TAPS SUCCESS

     The U.S. Hispanic community numbers more than 35 million consumers with
$450 billion in spending and investment power. Approximately 1.2 million
Hispanic businesses have $200 billion in revenues. It's a remarkable success
story--and opportunity.

     Our Hispanic Initiative, launched in 2001, is our coordinated program to be
an outstanding bank, responsive business partner and superior employer in key
markets. It focuses on more than 300 branches serving communities with large
Hispanic populations, both English- and Spanish-speaking. More than ever before,
we are hiring additional Hispanic employees who reflect the diversity of their
local communities and who communicate more effectively with customers. Our
employees are visible community leaders who have strong relationships with
Hispanic individuals, businesses and community organizations.

     Our ATMs and 24-Hour Banking system feature expanded Spanish language
options. Additionally, we have telephone customer service representatives who
speak Spanish and other foreign languages. We also are displaying more signs and
materials in Spanish.

     We offer many programs that help meet the needs of various segments of
Hispanic customers. To help first-time borrowers, we created the Credit Builder
Secured Loan. We also accept identification issued by the Consulate of Mexico,
issue the Visa(R) Payroll Card and offer a low-cost money transfer program.

     Our Hispanic Initiative extends to partnerships with Hispanic Chambers of
Commerce and other organizations, and to community service. Free seminars, for
example, cover topics ranging from the basics of banking in the United States
(especially geared to Spanish-speaking immigrants) to first-time home ownership.
Hispanic customers know they can turn to U.S. Bank to turn their American Dream
into reality.

PAYMENT SERVICES: GROWTH ENGINE

     Payment Services represents one of our greatest growth opportunities. We
continue to build our core commercial and consumer card businesses while
investing in other industry-leading, payment-related businesses.

     PowerTrack(R), our innovative online payment processing and transaction
tracking system, has seemingly unlimited potential. First introduced to the
freight industry, this single-source information center provides powerful
control for the logistics process. On the Internet or via a private network,
shipment information is stored as a single electronic document that is instantly
available to both shipper and carrier. By eliminating manual reconciliation of
invoices and freight bills, companies can save significantly on each
transaction. With expansion into other industries, PowerTrack delivers the
future--faster, more accurate payments and exceptional analytical reporting
tools for better management decisions. The result is more efficiency and control
for both buyer and seller.

     In 2001 we closed on our purchase of NOVA Corporation, now known as NOVA
Information Systems, Inc., a wholly owned subsidiary of U.S. Bancorp. This
merchant payment processor ranks as the third-largest in the United States,
serving 650,000 businesses of all sizes. Merchants benefit from our
industry-leading product offerings, including electronic check processing, a
variety of Web-enabled tools, and a full array of point-of-sale applications in
addition to credit card and debit card processing.

     Within our Transaction Services division, Elan Financial Services serves
more than 3,000 financial institutions through a complete range of products and
services including credit card issuing, and ATM, debit card and merchant
processing. Elan also provides full-service support and management tools that
are offered uniquely through a single source. The suite of products enables
small- to mid-sized financial institution clients to compete effectively with
larger institutions. Elan leverages these unique capabilities to also provide
ATM driving and deployment, and debit gateway services to large corporate
clients.

                                                                 U.S. Bancorp 13

<PAGE>

                                   [PICTURE]

Providing Local Market Leadership and Community Support




14 U.S. Bancorp

<PAGE>

Local management. Local decisions. Local involvement. At U.S. Bancorp, we are
deeply rooted in the communities we serve, and we recognize that the best
solutions come most often from those who are closest to the market.

LOCAL MARKET LEADERSHIP

     U.S. Bank markets are segmented into Metropolitan Banking in large urban
areas and Community Banking in smaller urban and non-urban locales. U.S. Bank
maximizes its ability to serve our Metropolitan Banking markets through the
independent management of our major lines of business. In Community Banking
markets, however, all lines of business are offered and marketed through branch
offices. In every market, large or small, our local management teams make the
decisions that most directly affect their customers. Local autonomy in resource
allocation, community affairs, pricing and business development enhances local
market control.

LOCAL BANK BOARDS

     The best decisions and the best customer service come from knowing our
markets and our customers. To enhance our own management's understanding of
local economies, critical issues, business and public affairs, we have
established local bank boards throughout our markets. The boards include local
business and civic leaders in addition to U.S. Bank executives. The perspective
of these board members is invaluable.

COMMUNITY INVOLVEMENT

     At U.S. Bancorp, community is more than a location. Community is the
corporate spirit of accepting the role as a facilitator for the people,
businesses and nonprofit organizations in our markets to achieve their financial
goals and enrich their lives.

     To that end, we provide both corporate and local leadership on issues of
community importance; we tailor our products and services to our communities'
diverse needs; our local managers are visible and involved in community
organizations and economic development efforts; and we encourage and support our
employees' ongoing volunteer efforts. We believe that our success depends on the
vitality of the communities we serve, and we bring together many resources to
help make possible economic, educational and cultural development.

U.S. BANCORP FOUNDATION
2001 Charitable Contributions 
by Program Area

   [GRAPH]


- 32% United Way & Human Services  

- 28% Economic Opportunity  

- 18% Arts & Culture  

- 16% Education

- 5%  Employee Matching Gifts

- 1%  Miscellaneous

     Through the U.S. Bancorp Foundation, we contribute millions of dollars back
to the communities in which we do business through charitable grants to
nonprofit organizations. We provide critical financing for revitalization
efforts, job programs and affordable housing. We sponsor the United Way at
generous levels to meet critical human service needs. We sponsor a wide variety
of amateur and professional artistic groups; professional, college and high
school sporting events and teams; and neighborhood and civic events. From the
smallest towns to the largest cities, U.S. Bancorp is an integral part of the
fabric of every hometown.

DEVELOPMENT NETWORK

     The U.S. Bancorp Development Network comprises 35 geographically based
employee chapters with a common mission--to promote the personal and
professional development of our employees, to provide networking opportunities
within our organization and to offer a framework for involvement in community
service. Individual Development Network chapters recruit public school tutors
and mentors from our employee base, raise funds for many charitable causes and
community efforts, participate in various walkathons and races, assist elderly
residents with simple home repairs and maintenance, build Habitat for Humanity
homes, and become involved in other community services.



                                                                 U.S. Bancorp 15



<PAGE>
 
Management's Discussion and Analysis
 
OVERVIEW
 
U.S. Bancorp and its subsidiaries ("the Company") compose the organization
created by the acquisition by Firstar Corporation ("Firstar") of the former U.S.
Bancorp of Minneapolis, Minnesota ("USBM"). The merger was completed on February
27, 2001, as a pooling-of-interests, and accordingly all financial information
has been restated to include the historical information of both companies. Each
share of Firstar stock was exchanged for one share of the Company's common stock
while each share of USBM stock was exchanged for 1.265 shares of the Company's
common stock. The new Company retained the U.S. Bancorp name.
 
EARNINGS SUMMARY The Company reported net income of $1.7 billion in 2001, or
$.88 per diluted share, compared with $2.9 billion, or $1.50 per diluted share,
in 2000. Return on average assets and return on average common equity were 1.03
percent and 10.5 percent in 2001, compared with returns of 1.81 percent and 20.0
percent in 2000. The year-over-year decline in earnings per diluted share and
return on average assets was primarily due to a decline in capital markets
activities, merger and restructuring-related items and a higher provision for
credit losses which reflected deterioration in economic conditions and credit
quality relative to a year ago. The reduction in the Company's return on average
common equity also reflected the impact of recent acquisitions, which were
accounted for using the purchase method. Net income included after-tax merger
and restructuring-related items of $844.3 million ($1.3 billion on a pre-tax
basis) in 2001 compared with $231.3 million ($348.7 million on a pre-tax basis)
in 2000. Merger and restructuring-related items, on a pre-tax basis, included a
$62.2 million gain on the sale of branches, $847.2 million of noninterest
expenses and $382.2 million of provision for credit losses associated with the
merger of Firstar and USBM. Merger and restructuring-related items also included
$50.7 million of expense for restructuring operations of U.S. Bancorp Piper
Jaffray, and $48.5 million related to the acquisition of NOVA Corporation
("NOVA") and other recent acquisitions. The efficiency ratio (the ratio of
expenses to revenues) increased to 57.5 percent in 2001 compared with 51.9
percent in 2000 primarily due to the impact of merger and restructuring-related
items. Refer to page 22 for further discussion of merger and
restructuring-related items.
 
    The Company had operating earnings (net income excluding merger and
restructuring-related items) of $2.6 billion in 2001, or $1.32 per diluted
share, compared with $3.1 billion, or $1.62 per diluted share in 2000. Operating
earnings on a "cash basis" (calculated by adding amortization of goodwill and
other intangible assets to operating earnings) was $1.59 per diluted share in
2001, compared with $1.82 per diluted share in 2000. Return on average assets
and return on average common equity, excluding merger-related items, were 1.54
percent and 15.7 percent in 2001, compared with returns of 1.96 percent and 21.6
percent in 2000. Operating earnings in 2001 reflected total net revenue growth
on a taxable-equivalent basis, excluding merger-related gains, of 6.7 percent,
offset by growth in noninterest expenses, excluding merger and
restructuring-related charges, of 5.4 percent. On an operating basis, the
efficiency ratio was 49.5 percent in 2001, compared with 48.8 percent in 2000.
The banking efficiency ratio (the ratio of expenses to revenues without the
impact of investment banking and brokerage activity) before merger and
restructuring-related charges was 45.2 percent in 2001, compared with 43.5
percent in 2000. The increase in the banking efficiency ratio was primarily due
to the impact of recent acquisitions including NOVA.
 
    Net income and operating earnings for 2001 included a number of significant
items. During 2001, the provision for credit losses was $2.5 billion, an
increase of $1.7 billion from a year ago. The change was due to an increased
level of nonperforming assets and charge-offs, deterioration in specific credit
portfolios, merger-related portfolio restructurings and specific actions taken
by management to accelerate the Company's workout strategy for nonperforming
assets. Results for 2001 also reflect the impairment of retail leasing residuals
due to sluggish pre-owned car markets, recognition of mortgage servicing rights
("MSR") impairment during the declining rate environment and asset write-downs
of commercial leasing partnerships and repossessed tractor/trailer property.
These asset impairments were partially offset by gains related to sales of
buildings and investment securities.
 
    The Company analyzes its performance on a net income basis determined in
accordance with accounting principles generally accepted in the United States,
as well as on an operating basis before merger-related charges referred to in
this analysis as "operating earnings". Operating earnings and related
discussions are presented as supplementary information in this analysis to
enhance the readers' understanding of, and highlight trends in, the Company's
core financial results excluding the non-recurring
 
U.S. Bancorp
      16

<PAGE>
 
effects of discrete business acquisitions and restructuring activities.
Operating earnings should not be viewed as a substitute for net income and
earnings per share as determined in accordance with accounting principles
generally accepted in the United States. Merger and restructuring-related items
excluded from net income to derive operating earnings may be significant and may
not be comparable to other companies.
 
TABLE 1 Selected Financial Data
 

<Table>
<Caption>
Year Ended December 31
(Dollars and Shares in Millions, Except Per Share Data)           2001         2000        1999        1998        1997
<S>                                                          <C>          <C>         <C>         <C>         <C>
-----------------------------------------------------------------------------------------------------------------------
CONDENSED INCOME STATEMENT
Interest income (taxable-equivalent basis).................  $11,139.5    $12,157.9   $10,723.0   $10,535.9   $ 9,921.8
Interest expense...........................................    4,674.8      6,022.9     4,790.3     4,859.7     4,389.8
                                                             ----------------------------------------------------------
   Net interest income.....................................    6,464.7      6,135.0     5,932.7     5,676.2     5,532.0
Securities gains, net......................................      329.1          8.1        13.2        29.1         7.3
Noninterest income(a)......................................    4,968.1      4,875.1     4,231.7     3,572.8     2,711.3
                                                             ----------------------------------------------------------
   Total net revenue.......................................   11,761.9     11,018.2    10,177.6     9,278.1     8,250.6
Noninterest expense(a).....................................    5,658.8      5,368.3     5,128.5     4,829.6     4,306.7
Provision for credit losses(a).............................    2,146.6        828.0       638.5       453.4       619.6
                                                             ----------------------------------------------------------
   Income before taxes and merger and restructuring-related
   items...................................................    3,956.5      4,821.9     4,410.6     3,995.1     3,324.3
Taxable-equivalent adjustment..............................       55.9         85.4        96.3       111.2       121.1
Income taxes...............................................    1,349.8      1,629.6     1,515.3     1,364.6     1,079.3
                                                             ----------------------------------------------------------
Operating earnings(a)......................................    2,550.8      3,106.9     2,799.0     2,519.3     2,123.9
Merger and restructuring-related items (after-tax).........     (844.3)      (231.3)     (417.2)     (386.4)     (524.6)
                                                             ----------------------------------------------------------
   Net income in accordance with GAAP......................  $ 1,706.5    $ 2,875.6   $ 2,381.8   $ 2,132.9   $ 1,599.3
                                                             ----------------------------------------------------------
PER COMMON SHARE
Earnings per share.........................................  $     .89    $    1.51   $    1.25   $    1.12   $     .86
Diluted earnings per share.................................        .88         1.50        1.23        1.10         .85
Dividends declared per share(b)............................        .75          .65         .46         .33         .27
Average shares outstanding.................................    1,927.9      1,906.0     1,907.8     1,898.8     1,841.0
Average diluted shares outstanding.........................    1,939.5      1,918.5     1,930.0     1,930.5     1,872.2
FINANCIAL RATIOS
Return on average assets...................................       1.03%        1.81%       1.59%       1.49%       1.24%
Return on average equity...................................       10.5         20.0        18.0        17.2        14.7
Net interest margin (taxable-equivalent basis).............       4.45         4.36        4.44        4.44        4.72
Efficiency ratio...........................................       57.5         51.9        55.7        58.3        59.9
FINANCIAL RATIOS EXCLUDING MERGER AND RESTRUCTURING-RELATED
   ITEMS(A)
Return on average assets...................................       1.54%        1.96%       1.86%       1.76%       1.64%
Return on average equity...................................       15.7         21.6        21.2        20.3        19.5
Efficiency ratio...........................................       49.5         48.8        50.5        52.2        52.2
Banking efficiency ratio(c)................................       45.2         43.5        46.3        49.7        51.7
AVERAGE BALANCE SHEET
Loans......................................................  $ 118,177    $ 118,317   $ 109,638   $ 102,451   $  95,149
Loans held for sale........................................      1,911        1,303       1,450       1,264         549
Investment securities......................................     21,916       17,311      19,271      21,114      19,123
Earning assets.............................................    145,165      140,606     133,757     127,738     117,173
Assets.....................................................    165,944      158,481     150,167     142,887     129,493
Noninterest-bearing deposits...............................     25,109       23,820      23,556      23,011      20,984
Deposits...................................................    104,956      103,426      99,920      98,940      93,322
Short-term borrowings......................................     12,980       12,586      11,707      11,102      11,791
Long-term debt.............................................     24,608       22,410      20,248      15,732       9,481
Total shareholders' equity.................................     16,201       14,365      13,221      12,383      10,882
YEAR-END BALANCE SHEET
Loans......................................................  $ 114,405    $ 122,365   $ 113,229   $ 106,958   $  99,029
Investment securities......................................     26,608       17,642      17,449      20,965      20,442
Assets.....................................................    171,390      164,921     154,318     150,714     137,488
Deposits...................................................    105,219      109,535     103,417     104,346      98,323
Long-term debt.............................................     25,716       21,876      21,027      18,679      13,181
Total shareholders' equity.................................     16,461       15,168      13,947      12,574      11,402
-----------------------------------------------------------------------------------------------------------------------
</Table>

 
(a) The Company analyzes its performance on a net income basis in accordance
    with accounting principles generally accepted in the United States, as well
    as on an operating basis before merger and restructuring-related items
    referred to as "operating earnings." Operating earnings are presented as
    supplemental information to enhance the readers' understanding of, and
    highlight trends in, the Company's financial results excluding the impact of
    merger and restructuring-related items of specific business acquisitions and
    restructuring activities. Operating earnings should not be viewed as a
    substitute for net income and earnings per share as determined in accordance
    with accounting principles generally accepted in the United States. Merger
    and restructuring-related items excluded from net income to derive operating
    earnings may be significant and may not be comparable to other companies.
 
(b) Dividends per share have not been restated for the 2001 merger of Firstar
    and USBM.
 
(c) Without investment banking and brokerage activity.
 
                                                                    U.S. Bancorp
                                                                         17

<PAGE>
 
ACQUISITION AND DIVESTITURE ACTIVITY In addition to restating all prior periods
to reflect the merger of Firstar and USBM, operating results for 2001 reflect
the following transactions accounted for as purchases from the date of
completion. On July 24, 2001, the Company acquired NOVA, the nation's third
largest merchant processing service provider, in a stock and cash transaction
valued at approximately $2.1 billion. On September 7, 2001, the Company acquired
Pacific Century Bank in a cash transaction. The acquisition included 20 branches
located in Southern California with approximately $712 million in deposits and
$570 million in loans. On October 13, 2000, the Company acquired Scripps
Financial Corporation of San Diego, which had 10 branches in San Diego County
and total assets of $650 million. On September 28, 2000, the Company acquired
Lyon Financial Services, Inc., a wholly owned subsidiary of the privately held
Schwan's Sales Enterprises Inc. in Marshall, Minnesota. Lyon Financial
specializes in small-ticket lease transactions and had $1.3 billion in assets.
On April 7, 2000, the Company acquired Oliver-Allen Corporation, Inc., a
privately held information technology equipment leasing company with total
assets of $280 million. On January 14, 2000, the Company acquired Peninsula Bank
of San Diego, which had 11 branches in San Diego County and total assets of $491
million. In addition to these business combinations, the Company purchased 41
branches in Tennessee from First Union National Bank on December 8, 2000,
representing approximately $450 million in assets and $1.8 billion in deposits.
 
    On September 20, 1999, Firstar and Mercantile Bancorporation, Inc.
("Mercantile") merged in a pooling-of-interests transaction and accordingly all
financial information has been restated to include the historical information of
both companies. Each share of Mercantile stock was exchanged for 2.091 shares of
Firstar common stock. Refer to Note 3 and Note 4 of the Notes to Consolidated
Financial Statements for additional information regarding business combinations.
 
    On January 18, 2002, the Company announced a definitive agreement to acquire
The Leader Mortgage Company, LLC ("Leader"), a wholly owned subsidiary of First
Defiance Financial Corporation, in a cash transaction. Leader specializes in
acquiring servicing of loans originated for state and local housing authorities.
Leader had $506 million in assets at December 31, 2001. In 2001, it had $2.1
billion in mortgage production and an $8.6 billion servicing portfolio at
December 31, 2001. The transaction is expected to close in the second quarter of
2002.
 
STATEMENT OF INCOME ANALYSIS
 
NET INTEREST INCOME Net interest income on a taxable-equivalent basis was $6.5
billion in 2001, compared with $6.1 billion in 2000 and $5.9 billion in 1999.
The 5.4 percent increase in 2001 as compared with 2000 was due to improving net
interest margin and growth in average earning assets. The net interest margin in
2001 was 4.45 percent, compared with 4.36 percent in 2000. The improvement in
the net interest margin was due to the funding benefit of the declining rate
environment and improved spreads due to product re-pricing dynamics and loan
conduit activities. This was offset somewhat by the first quarter 2001 sales of
the high loan-to-value ("LTV") home equity portfolios and lower yields on the
investment portfolio. Average earning assets for 2001 increased $4.6 billion
(3.2 percent) over 2000. The increase was primarily driven by increases in the
investment portfolio, core retail loan growth and the impact of acquisitions.
This growth was partially offset by a $2.7 billion decline in lower margin
residential mortgages and a $2.2 billion
 
TABLE 2 Reconciliation of Operating Earnings(a) to Net Income in Accordance with
        GAAP
 

<Table>
<Caption>
Year Ended December 31 (Dollars in Millions)                      2001        2000        1999        1998        1997
<S>                                                          <C>          <C>         <C>         <C>         <C>
----------------------------------------------------------------------------------------------------------------------
Operating earnings.........................................  $ 2,550.8    $3,106.9    $2,799.0    $2,519.3    $2,123.9
Merger and restructuring-related items
   Gains on the sale of branches...........................       62.2          --          --        48.1          --
   Integration, conversion and other charges...............     (946.4)     (348.7)     (355.1)     (593.8)     (633.0)
   Securities losses to restructure portfolio..............         --          --      (177.7)         --          --
   Provision for credit losses(b)..........................     (382.2)         --        (7.5)      (37.9)      (20.3)
                                                             ---------------------------------------------------------
   Pretax impact...........................................   (1,266.4)     (348.7)     (540.3)     (583.6)     (653.3)
   Applicable tax benefit..................................      422.1       117.4       123.1       197.2       128.7
                                                             ---------------------------------------------------------
Net income in accordance with GAAP.........................  $ 1,706.5    $2,875.6    $2,381.8    $2,132.9    $1,599.3
----------------------------------------------------------------------------------------------------------------------
</Table>

 
(a) The Company analyzes its performance on a net income basis in accordance
    with accounting principles generally accepted in the United States, as well
    as on an operating basis before merger and restructuring-related items
    referred to as "operating earnings." Operating earnings are presented as
    supplemental information to enhance the readers' understanding of, and
    highlight trends in, the Company's financial results excluding the impact of
    merger and restructuring-related items of specific business acquisitions and
    restructuring activities. Operating earnings should not be viewed as a
    substitute for net income and earnings per share as determined in accordance
    with accounting principles generally accepted in the United States. Merger
    and restructuring-related items excluded from net income to derive operating
    earnings may be significant and may not be comparable to other companies.
 
(b) Provision for credit losses in 2001 includes losses of $201.3 million on the
    disposition of an unsecured small business credit line portfolio, losses of
    $76.6 million on the sales of high loan-to-value home equity and indirect
    automobile loan portfolios, $90.0 million of charges to align credit
    policies and risk management practices, and $14.3 million to restructure a
    co-branding credit card relationship.
 
U.S. Bancorp
      18

<PAGE>
 
reduction related to transfers of short-term, high credit quality, low margin
commercial loans to Stellar Funding Group, Inc. ("loan conduit").
 
    Average investment securities were $4.6 billion (26.6 percent) higher in
2001 compared with 2000, reflecting net purchases of securities.
 
    Average interest-bearing deposits increased $241 million (.3 percent) from
2000. Growth in average interest checking and money market deposits was more
than offset by reductions in the average balances of higher cost time
certificates of deposit less than $100,000. The decline in time certificates of
deposit less than $100,000 reflects funding decisions toward more favorably
priced wholesale funding sources given the interest rate environment during
2001.
 
    Average net free funds increased $1.2 billion from a year ago including an
increase in noninterest-bearing deposits of $1.3 billion (5.4 percent) compared
with 2000.
 
    Net interest income on a taxable-equivalent basis increased $202.3 million
(3.4 percent) in 2000 compared with 1999. The increase was primarily due to
growth in earning assets offset somewhat by a declining net interest margin.
Average earning assets increased $6.8 billion (5.1 percent) in 2000, primarily
due to strong core loan growth and acquisitions partially offset by reductions
in residential mortgages and securities. Average loans for 2000 were up $8.7
billion (7.9 percent) from 1999, reflecting growth in commercial loans, retail
loans, and acquisitions, offset by reductions in residential mortgage loans.
Average investment securities were $2.0 billion (10.2 percent) lower in 2000
compared with 1999, reflecting both maturities and sales of securities. Average
interest-bearing deposits increased $3.2 billion (4.2 percent) from 1999. This
increase in interest-bearing deposits was primarily due to a $4.2 billion
increase (48.8 percent) in time deposits greater than $100,000 reflecting the
rising interest rate environment during 2000. Average net free funds increased
$566 million in 2000 including an increase in noninterest-bearing deposits of
$264 million (1.1 percent) compared with 1999. The net interest margin declined
from 4.44 percent in 1999 to 4.36 percent in 2000, as lagging deposit growth in
2000 relative to total earning assets increased the Company's incremental cost
of funding. Refer to the Consolidated Daily Average Balance Sheet and Related
Yields and Rates on pages 86 and 87 for further interest margin detail.
 
PROVISION FOR CREDIT LOSSES The provision for credit losses is recorded to bring
the allowance for credit losses to a level deemed appropriate by management
based on factors discussed in "Analysis and Determination of Allowance for
Credit Losses" on pages 34 through 36. During 2001, the provision for credit
losses was $2,528.8 million, compared with $828.0 million in 2000 and $646.0
million in 1999.
 
    Included in the provision for credit losses for 2001 was a merger and
restructuring-related provision of $382.2 million. The merger and
restructuring-related provision consisted of: a $201.3 million provision for
losses related to the disposition of an unsecured small business product; a
$90.0 million charge to align risk management practices, align charge-off
policies and expedite the transition out of a specific segment of the healthcare
industry not meeting the risk appetite of the Company; a $76.6 million provision
for losses related to the sales of high LTV home equity loans and the indirect
automobile loan portfolio of USBM; and a $14.3 million charge related
 
TABLE 3 Analysis of Net Interest Income
 

<Table>
<Caption>
                                                                                                              2001           2000
(Dollars in Millions)                                            2001            2000            1999       v 2000         v 1999
<S>                                                         <C>          <C>             <C>             <C>             <C>
---------------------------------------------------------------------------------------------------------------------------------
Components of net interest income
   Income on earning assets..........................       $11,139.5    $   12,157.9    $   10,723.0    $(1,018.4)      $1,434.9
   Expenses on interest bearing liabilities..........         4,674.8         6,022.9         4,790.3     (1,348.1)       1,232.6
                                                            ---------------------------------------------------------------------
Net interest income (taxable-equivalent basis).......       $ 6,464.7    $    6,135.0    $    5,932.7    $   329.7       $  202.3
                                                            ---------------------------------------------------------------------
Net interest income, as reported.....................       $ 6,408.8    $    6,049.6    $    5,836.4    $   359.2       $  213.2
                                                            ---------------------------------------------------------------------
Average yields and rates paid (taxable-equivalent
 basis)
   Earning assets yield..............................            7.67%           8.65%           8.02%        (.98)%          .63%
   Rate paid on interest-bearing liabilities.........            3.92            5.19            4.37        (1.27)           .82
                                                            ---------------------------------------------------------------------
Gross interest margin................................            3.75%           3.46%           3.65%         .29%          (.19)%
                                                            ---------------------------------------------------------------------
Net interest margin..................................            4.45%           4.36%           4.44%         .09%          (.08)%
                                                            ---------------------------------------------------------------------
Average balances
   Investment securities.............................       $  21,916    $     17,311    $     19,271    $   4,605       $ (1,960)
   Loans.............................................         118,177         118,317         109,638         (140)         8,679
   Earning assets....................................         145,165         140,606         133,757        4,559          6,849
   Interest-bearing liabilities......................         119,390         116,002         109,719        3,388          6,283
   Net free funds(a).................................          25,775          24,604          24,038        1,171            566
---------------------------------------------------------------------------------------------------------------------------------
</Table>

 
(a) Represents noninterest-bearing deposits, allowance for credit losses,
    non-earning assets, other liabilities and equity.
 
                                                                    U.S. Bancorp
                                                                         19

<PAGE>
 
to the restructuring of a co-branding credit card relationship. Refer to Note 4
of the Notes to Consolidated Financial Statements for further information on
merger and restructuring-related items.
 
    The provision for credit losses in 2001, excluding merger and
restructuring-related items, was $2,146.6 million, an increase of $1,318.6
million over 2000. The increase was primarily due to a $160.0 million charge
during the first quarter of 2001 in connection with an accelerated loan workout
strategy and a $1,025.0 million incremental provision recognized in the third
quarter of 2001. The third quarter incremental provision for credit losses was
taken after extensive reviews of the Company's commercial portfolio in light of
declining economic conditions and company-specific trends. This action
recognized an increasing probability that the economic slowdown already
occurring had accelerated and may be more prolonged than previously anticipated.
Given the continuing economic stress in various industry sectors, increasing
unemployment and trends in consumer delinquencies and charge-offs, the Company
may experience higher levels of nonperforming loans and volatility in net
charge-offs during the next several quarters.
 
    Refer to "Corporate Risk Profile" on pages 29 through 36, for further
information on the 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 2001 was $5.4 billion, compared with
$4.9 billion in 2000 and $4.2 billion in 1999. The increase of $476.2 million
(9.8 percent) in 2001 compared with 2000 included $62.2 million of merger and
restructuring-related gains in connection with the required sale of 14 branches
associated with the merger of Firstar and USBM. Refer to Note 4 of the Notes to
Consolidated Financial Statements for further information on merger and
restructuring-related items. Excluding merger and restructuring-related gains,
noninterest income was $5.3 billion in 2001, an increase of $414.0 million (8.5
percent) from 2000. Credit card fee revenue increased $12.5 million (1.6
percent) in 2001 compared to revenue growth of $113.6 million
 
TABLE 4 Net Interest Income -- Changes Due to Rate and Volume
 

<Table>
<Caption>
                                                              2001 v 2000                                 2000 v 1999
                                                   ------------------------------------------------------------------------------
(Dollars in Millions)                               Volume    Yield/Rate        Total           Volume    Yield/Rate        Total
<S>                                                <C>        <C>           <C>                <C>        <C>           <C>
---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in
   Interest income
      Commercial loans......................       $    .9    ( $ 615.6)    ($  614.7)         $ 511.1     $ 457.8      $   968.9
      Commercial real estate................           3.6       (297.9)       (294.3)           249.2       116.0          365.2
      Residential mortgages.................        (204.6)        (5.1)       (209.7)          (233.3)        3.0         (230.3)
      Retail loans..........................         254.4       (247.1)          7.3            202.0       130.0          332.0
                                                   ------------------------------------------------------------------------------
         Total loans........................          54.3     (1,165.7)     (1,111.4)           729.0       706.8        1,435.8
      Loans held for sale...................          47.7         (2.9)         44.8            (10.5)        8.7           (1.8)
      Investment securities.................         314.1       (190.5)        123.6           (128.2)       71.9          (56.3)
      Money market investments..............         (12.7)       (14.6)        (27.3)            (6.3)       15.3            9.0
      Trading securities....................           (.6)         2.3           1.7             11.3        (1.5)           9.8
      Other earning assets..................         (22.1)       (27.7)        (49.8)            18.7        19.7           38.4
                                                   ------------------------------------------------------------------------------
         Total..............................         380.7     (1,399.1)     (1,018.4)           614.0       820.9        1,434.9
   Interest expense
      Interest checking.....................          19.2        (86.0)        (66.8)             2.5        36.9           39.4
      Money market accounts.................          94.7       (383.7)       (289.0)             9.0       148.8          157.8
      Savings accounts......................          (6.7)       (24.8)        (31.5)           (17.5)      (20.4)         (37.9)
      Time certificates of deposit less than
         $100,000...........................        (142.9)       (74.0)       (216.9)           (21.9)      157.6          135.7
      Time deposits greater than $100,000...           9.2       (195.7)       (186.5)           225.6       128.2          353.8
                                                   ------------------------------------------------------------------------------
         Total interest-bearing deposits....         (26.5)      (764.2)       (790.7)           197.7       451.1          648.8
      Short-term borrowings.................          24.5       (272.1)       (247.6)            43.7       155.6          199.3
      Long-term debt........................         148.1       (495.8)       (347.7)           120.3       263.2          383.5
      Company obligated mandatorily
         redeemable preferred securities....          44.4         (6.5)         37.9               --         1.0            1.0
                                                   ------------------------------------------------------------------------------
         Total..............................         190.5     (1,538.6)     (1,348.1)           361.7       870.9        1,232.6
                                                   ------------------------------------------------------------------------------
      Increase (decrease) in net interest
         income.............................       $ 190.2    $   139.5     $   329.7          $ 252.3     ($ 50.0)     $   202.3
---------------------------------------------------------------------------------------------------------------------------------
</Table>

 
This table shows the components of the change in net interest income by volume
and rate on a taxable-equivalent basis. The effect of changes in rates on volume
changes is allocated based on the percentage relationship of changes in volume
and changes in rate. 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.
 
U.S. Bancorp
      20

<PAGE>
 
(17.5 percent) in 2000 reflecting slower growth in corporate, purchasing and
retail card transaction volumes during the year. Corporate card transaction
volumes declined somewhat in late 2001 principally due to slower economic
conditions and declining business travel since the events of September 11, 2001.
Merchant and ATM processing revenue increased $198.5 million, or 86.2 percent,
principally due to the NOVA acquisition. Deposit service charges, commercial
product revenue, cash management fees, and mortgage banking revenue also
improved in 2001 compared with 2000 by $109.5 million (19.9 percent), $81.5
million (26.8 percent), $54.9 million (18.8 percent), and $44.1 million (23.2
percent), respectively. The increase in deposit service charges was primarily
due to the alignment and re-design of products and features following the merger
of Firstar and USBM. The increase in commercial product revenue and cash
management fees was primarily driven by the growth in core business, loan
conduit activities and product enhancements. Mortgage banking revenue increased
in 2001 compared with 2000 due to increased origination and sales fees and loan
servicing revenue, partially offset by a decrease in gains on the sale of
servicing rights. Trust and investment management fees declined $31.8 million
(3.4 percent) and capital markets-related revenue declined $145.4 million (13.4
percent) reflecting softness in equity capital markets since late 2000. Included
in noninterest income for 2001 was $329.1 million of gains on the sale of
investment securities and principal-only residuals compared with $8.1 million of
similar gains in 2000. Other income declined $179.9 million from a year ago,
primarily reflecting a $125.0 million decline in the level of earnings from
equity investments compared with 2000 and a $40.0 million impairment of retail
leasing residuals in 2001. The decline in other income for 2001 also reflected a
decline in building-related gains of $42.5 million from 2000.
 
    Noninterest income in 2000 increased $638.3 million (15.0 percent) compared
with 1999. The increase was driven by a $165.5 million (18.0 percent) increase
in capital markets-related revenue, credit card fee revenue growth of $113.6
million (17.5 percent), increased commercial product revenue of $88.7 million
(41.1 percent), increased service charges on deposit accounts of $53.9 million
(10.8 percent), gains of $55.0 million on the disposal of the Company's
ownership in office buildings in Portland, Boise and Minneapolis, merchant and
ATM processing revenue growth of $40.7 million (21.5 percent), due in part to
the acquisition of the Mellon Network Services processing business, increased
insurance product revenue of $40.0 million (38.0 percent), growth in trust and
investment management revenue of $39.1 million (4.4 percent), and revenues
associated with equity investments, partially offset by a $20.0 million gain on
the sale of branches in Kansas and Iowa completed in 1999.
 
NONINTEREST EXPENSE Noninterest expense in 2001 was $6.6 billion compared with
$5.7 billion in both 2000 and 1999. Noninterest expense included merger and
restructuring-related charges of $946.4 million in 2001, compared with $348.7
million in 2000 and $532.8 million in 1999. Excluding merger and
restructuring-related charges, noninterest expense on an operating basis was
$5.7 billion in 2001, compared with $5.4 billion in 2000 and $5.1 billion in
1999. The increase in 2001 noninterest expense, on an operating basis, of $290.5
million (5.4 percent) was primarily the result of recent acquisitions, including
NOVA, Scripps Financial Corporation, Pacific Century Bank, Lyon Financial
Services, Inc. and 41 branches in Tennessee representing an aggregate increase
of
 
TABLE 5 Noninterest Income
 

<Table>
<Caption>
(Dollars in Millions)                                                   2001        2000        1999
<S>                                                                <C>          <C>         <C>
----------------------------------------------------------------------------------------------------
Credit card fee revenue.....................................       $   774.3    $  761.8    $  648.2
Merchant and ATM processing revenue.........................           428.8       230.3       189.6
Trust and investment management fees........................           894.4       926.2       887.1
Deposit service charges.....................................           660.6       551.1       497.2
Cash management fees........................................           347.3       292.4       280.6
Mortgage banking revenue....................................           234.0       189.9       190.4
Trading account profits and commissions.....................           221.6       258.4       222.4
Investment products fees and commissions....................           460.1       466.6       450.8
Investment banking revenue..................................           258.2       360.3       246.6
Insurance product revenue...................................           145.4       145.3       105.3
Commercial product revenue..................................           385.9       304.4       215.7
Retail product revenue......................................            18.1        69.1        78.0
Securities gains, net.......................................           329.1         8.1        13.2
Other.......................................................           139.4       319.3       219.8
                                                                   ---------------------------------
   Total operating noninterest income.......................         5,297.2     4,883.2     4,244.9
Merger and restructuring-related gains......................            62.2          --          --
                                                                   ---------------------------------
   Total noninterest income.................................       $ 5,359.4    $4,883.2    $4,244.9
----------------------------------------------------------------------------------------------------
</Table>

 
                                                                    U.S. Bancorp
                                                                         21

<PAGE>
 
approximately $241.7 million. In addition to the impact of acquisitions,
noninterest expense increased over 2000 due to recognition of mortgage servicing
rights ("MSR") impairments of $60.8 million related to increasing mortgage
prepayments during the declining rate environment, and asset write-downs of
$52.6 million related to commercial leasing partnerships and repossessed
tractor/trailer property. These increases were partially offset by a reduction
in expenses related to capital markets activity of $108.0 million and cost
savings related to merger and restructuring-related activities.
 
    The increase in 2000 noninterest expenses, on an operating basis, of $239.8
million (4.7 percent) was primarily attributed to growth in expenses related to
investment banking and brokerage activity of $228.6 million, the impact of
purchase acquisitions and divestitures of $175.9 million and planned spending on
service-quality technology and other customer service initiatives of USBM. These
increases were somewhat offset by cost savings related to the integration of
Mercantile.
 
    The efficiency ratio before merger-related charges increased slightly to
49.5 percent in 2001 compared with 48.8 percent in 2000 and 50.5 percent in
1999. The banking efficiency ratio before merger-related charges was 45.2
percent for 2001, compared with 43.5 percent in 2000 and 46.3 percent in 1999.
Both the efficiency ratio and the banking efficiency ratio increased in 2001
primarily due to the NOVA acquisition. The improved banking efficiency ratio in
2000 compared with 1999 reflects the results of integrating acquired banking
businesses.
 
MERGER AND RESTRUCTURING-RELATED ITEMS The Company incurred merger and
restructuring-related items in each of the last three years in conjunction with
its acquisitions. In 2001, merger and restructuring-related items included in
pretax earnings were $1,266.4 million, including $382.2 million in the provision
for credit losses, a $62.2 million gain on the required sale of branches and
$946.4 million of noninterest expense. The total merger and
restructuring-related items consisted of $1,167.2 million related to the Firstar
and USBM merger, $50.7 million of restructuring expenses for U.S. Bancorp Piper
Jaffray and $48.5 million related to NOVA and other acquisitions. With respect
to the Firstar and USBM merger, the $1,167.2 million of merger and
restructuring-related items included $268.2 million for severance and
employee-related costs and $477.6 million of charges to exit business lines and
products, sell credit portfolios or otherwise realign business practices in the
new Company. The Company also incurred $208.1 million of systems conversion and
business integration costs, $48.7 million for lease cancellation and other
building-related costs, $226.8 million for transaction costs, funding a
charitable foundation to reaffirm a commitment to its markets and other costs,
and a $62.2 million gain related to the required sale of branches. Total merger
and restructuring-related items associated with the Firstar and USBM merger are
expected to reach
 
TABLE 6 Noninterest Expense
 

<Table>
<Caption>
(Dollars in Millions)                                                  2001        2000        1999
<S>                                                                <C>         <C>         <C>
---------------------------------------------------------------------------------------------------
Salaries....................................................       $2,347.1    $2,427.1    $2,355.3
Employee benefits...........................................          366.2       399.8       410.1
Net occupancy...............................................          417.9       396.9       371.8
Furniture and equipment.....................................          305.5       308.2       307.9
Professional services.......................................          123.8       109.0        95.7
Advertising and marketing...................................          121.6       122.1       124.1
Travel and entertainment....................................           90.6       107.0        88.4
Software....................................................          136.1       111.9        72.2
Data processing.............................................           80.0       149.7       133.7
Communication...............................................          181.4       138.8       123.4
Postage.....................................................          179.8       174.5       170.7
Printing....................................................           77.9        86.5        90.7
Goodwill....................................................          251.1       235.0       175.8
Other intangible assets.....................................          278.4       157.3       154.0
Other.......................................................          701.4       444.5       454.7
                                                                   --------------------------------
   Total operating noninterest expense......................        5,658.8     5,368.3     5,128.5
Merger and restructuring-related charges....................          946.4       348.7       532.8
                                                                   --------------------------------
   Total noninterest expense................................       $6,605.2    $5,717.0    $5,661.3
                                                                   --------------------------------
Efficiency ratio(a).........................................           57.5%       51.9%       55.7%
Efficiency ratio, before merger and restructuring-related
   items....................................................           49.5        48.8        50.5
Banking efficiency ratio, before merger and
   restructuring-related items(b)...........................           45.2        43.5        46.3
---------------------------------------------------------------------------------------------------
</Table>

 
(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
 
(b) Without investment banking and brokerage activity.
 
U.S. Bancorp
      22

<PAGE>
 
$1.4 billion with integration activities substantively being completed in the
third quarter of 2002.
 
    In response to significant changes in the securities markets during 2001,
including increased volatility, changes in equity valuations and the
increasingly competitive environment for the industry, U.S. Bancorp Piper
Jaffray restructured it operations. The restructuring is expected to improve the
operating efficiency of the business by removing excess capacity from its
product distribution network and by implementing more effective business
processes. These restructuring activities were completed in 2001.
 
    In 2000, merger and restructuring-related items included noninterest
expenses consisting of $227.0 million related to the merger of Firstar and
Mercantile, $52.6 million related to the merger of Firstar and Star Banc and
$69.1 million primarily related to other acquisitions of USBM. Included in
merger and restructuring-related items were $59.4 for severance and
employee-related costs, $193.5 million for systems conversions, $47.3 million
for lease cancellations and other building-related costs and $48.5 million of
other business integration costs.
 
    In 1999, merger and restructuring-related items included noninterest
expenses consisting of $417.0 million related to the merger of Firstar and
Mercantile, $95.9 million related to the merger of Firstar and Star Banc and
$27.4 million primarily related to other acquisitions by USBM. Included in
merger and restructuring-related items were $149.6 for severance and
employee-related costs, $132.5 million for systems conversions, $177.7 million
related to the restructuring of Mercantile's securities portfolio, $6.2 million
for lease cancellations and other building-related costs and $66.8 million to
fund charitable foundations and other business integration costs.
 
    Refer to Note 3 and Note 4 of the Notes to Consolidated Financial Statements
for further information on these acquired businesses and merger and
restructuring-related items.
 
INCOME TAX EXPENSE The provision for income taxes was $927.7 million in 2001,
compared with $1,512.2 million in 2000 and $1,392.2 million in 1999. The
Company's effective tax rate was 35.2 percent in 2001, compared with 34.5
percent in 2000 and 36.9 percent in 1999. The effective tax rate increased in
2001 compared with 2000 primarily due to a decline in tax-exempt interest
related to sales of investment securities, the impact of unitary state tax
apportionment factors on the Company, non-deductible merger-related costs and
the acquisition of NOVA.
 
    At December 31, 2001, the Company's net deferred tax liability was $573.2
million, compared with $512.8 million at December 31, 2000. For further
information on income
 
TABLE 7 Loan Portfolio Distribution

<Table>
<Caption>
                                                2001                      2000                      1999
                                       --------------------------------------------------------------------------
                                                      Percent                   Percent                   Percent
At December 31 (Dollars in Millions)     Amount      of Total      Amount      of Total      Amount      of Total
<S>                                    <C>           <C>         <C>           <C>         <C>           <C>
-----------------------------------------------------------------------------------------------------------------
COMMERCIAL
   Commercial........................  $ 40,472          35.4%   $ 47,041          38.5%   $ 42,021          37.1%
   Lease financing...................     5,858           5.1       5,776           4.7       3,835           3.4
                                       --------------------------------------------------------------------------
         Total commercial............    46,330          40.5      52,817          43.2      45,856          40.5
COMMERCIAL REAL ESTATE
   Commercial mortgages..............    18,765          16.4      19,466          15.9      18,636          16.5
   Construction and development......     6,608           5.8       6,977           5.7       6,506           5.7
                                       --------------------------------------------------------------------------
         Total commercial real
            estate...................    25,373          22.2      26,443          21.6      25,142          22.2
RESIDENTIAL MORTGAGES................     5,746           5.0       7,753           6.3      11,395          10.1
RETAIL
   Credit card.......................     5,889           5.1       6,012           4.9       5,004           4.4
   Retail leasing....................     4,906           4.3       4,153           3.4       2,123           1.9
   Other retail
      Home equity and second
         mortgage....................    14,318          12.5      13,600          11.1           *             *
      Revolving credit...............     2,673           2.3       2,750           2.2           *             *
      Installment....................     2,292           2.0       2,186           1.8           *             *
      Automobile.....................     5,660           5.0       5,609           4.6           *             *
      Student........................     1,218           1.1       1,042            .9           *             *
                                       --------------------------------------------------------------------------
            Total other retail.......    26,161          22.9      25,187          20.6      23,709          20.9
                                       --------------------------------------------------------------------------
         Total retail................    36,956          32.3      35,352          28.9      30,836          27.2
                                       --------------------------------------------------------------------------
            Total loans..............  $114,405         100.0%   $122,365         100.0%   $113,229         100.0%
-----------------------------------------------------------------------------------------------------------------
 
<Caption>
                                              1998                    1997
                                       --------------------------------------------
                                                   Percent                  Percent
At December 31 (Dollars in Millions)     Amount   of Total     Amount      of Total
<S>                                    <C>        <C>         <C>          <C>
-----------------------------------------------------------------------------------
COMMERCIAL
   Commercial........................  $ 37,777       35.3%   $33,662          34.0%
   Lease financing...................     3,291        3.1      2,667           2.7
                                       --------------------------------------------
         Total commercial............    41,068       38.4     36,329          36.7
COMMERCIAL REAL ESTATE
   Commercial mortgages..............    16,602       15.5     15,739          15.9
   Construction and development......     5,206        4.9      4,059           4.1
                                       --------------------------------------------
         Total commercial real
            estate...................    21,808       20.4     19,798          20.0
RESIDENTIAL MORTGAGES................    13,980       13.1     15,892          16.0
RETAIL
   Credit card.......................     4,856        4.5      4,993           5.1
   Retail leasing....................     1,621        1.5      1,087           1.1
   Other retail
      Home equity and second
         mortgage....................         *          *          *             *
      Revolving credit...............         *          *          *             *
      Installment....................         *          *          *             *
      Automobile.....................         *          *          *             *
      Student........................         *          *          *             *
                                       --------------------------------------------
            Total other retail.......    23,625       22.1     20,930          21.1
                                       --------------------------------------------
         Total retail................    30,102       28.1     27,010          27.3
                                       --------------------------------------------
            Total loans..............  $106,958      100.0%   $99,029         100.0%
-----------------------------------------------------------------------------------
</Table>

 
*Information not available
 
                                                                    U.S. Bancorp
                                                                         23

<PAGE>
 
taxes, refer to Note 19 of the Notes to Consolidated Financial Statements.
 
BALANCE SHEET ANALYSIS
 
Average earning assets were $145.2 billion in 2001 compared with $140.6 billion
in 2000. The increase of $4.6 billion (3.2 percent) was primarily driven by
increases in the investment portfolio, core retail loan growth, and the impact
of acquisitions. This growth was partially offset by a $2.7 billion decline in
lower margin residential mortgages and a $2.2 billion reduction related to
transfers of short-term, high credit quality, low margin commercial loans to the
loan conduit. The increase was funded with an increase in average
interest-bearing liabilities of $3.4 billion consisting principally of more
favorably priced long-term wholesale funds and an increase in net free funds of
$1.2 billion including an increase in average noninterest-bearing deposits of
$1.3 billion.
 
    For average balance information, refer to Consolidated Daily Average Balance
Sheet and Related Yields and Rates on pages 86 and 87.
 
LOANS The Company's loan portfolio decreased $8.0 billion to $114.4 billion at
December 31, 2001, from $122.4 billion at December 31, 2000. The change in loans
outstanding was impacted by several management actions, including the sale of
high LTV home equity and indirect automobile portfolios, the transfer of a
discontinued unsecured small business product to loans held for sale, branch
divestitures required by the merger of Firstar and USBM, and transfers of
short-term, high credit quality, low margin commercial loans to the loan
conduit. In addition, the Company continued its business strategy to reduce the
lower margin residential mortgage portfolio. Average total loans decreased less
than one percent to $118.2 billion in 2001 compared with $118.3 billion in 2000.
Excluding residential mortgages, average loans for 2001 were $2.6 billion (2.4
percent) higher than 2000. Average loans on a core basis (excluding loan conduit
activities, transfer of loans to held for sale and residential mortgages)
increased by $4.6 billion (4.3 percent) relative to the prior year.
 
    The Company's loan portfolio inherently has credit risk, which may
ultimately result in loan charge-offs. The Company manages this risk through
stringent, centralized credit policies and review procedures, as well as
diversification along geographic and customer lines. Refer to "Corporate Risk
Profile" on pages 29 through 36, for a more detailed discussion of the
management of credit risk including the allowance for credit losses.
 
COMMERCIAL Commercial loans, including lease financing, totaled $46.3 billion at
December 31, 2001, down $6.5 billion (12.3 percent) from year-end 2000. The
decline in commercial loans reflected tighter credit underwriting throughout
2001, slower economic growth, the Company's transfer of approximately $3.7
billion of short-term, high credit quality, low margin commercial loans into the
loan conduit and the transfer of $680 million in unsecured small business
product to loans held for sale. This was offset somewhat by core growth in
equipment lease financing and bank acquisitions. Average commercial loans in
2001 were flat compared with 2000. On a core basis (without loan conduit
activities and transfers to loans held for sale), average commercial loans
increased by 2.1 percent from a year ago.
 
    The Company offers a broad array of traditional commercial lending products
and specialized products such as asset-based lending, lease financing,
agricultural credit and correspondent banking. The Company monitors and manages
the portfolio diversification by industry, customer and geography. The
commercial portfolio reflects the Company's focus of serving small business
customers, middle market and larger corporate businesses throughout its 24 state
banking region and national customers within certain niche industry groups.
 
    Table 9 provides a summary of the significant industry groups and geographic
locations of commercial loans outstanding at December 31, 2001 and 2000. The
commercial loan portfolio is diversified among various industries with somewhat
higher concentrations in consumer products and services, capital goods
(including manufacturing and commercial construction-related
 
TABLE 8 Selected Loan Maturity Distribution
 

<Table>
<Caption>
                                                                                 Over One
                                                                   One Year       Through    Over Five
At December 31, 2001 (Dollars in Millions)                          or Less    Five Years        Years       Total
<S>                                                                <C>         <C>           <C>          <C>
------------------------------------------------------------------------------------------------------------------
Commercial..................................................       $ 25,761     $ 17,896     $  2,673     $ 46,330
Commercial real estate......................................          7,256       12,238        5,879       25,373
Residential mortgages.......................................            495          954        4,297        5,746
Retail......................................................         13,452       13,417       10,087       36,956
                                                                   -----------------------------------------------
      Total loans...........................................       $ 46,964     $ 44,505     $ 22,936     $114,405
Total of loans due after one year with
 Predetermined interest rates...............................                                              $ 37,420
 Floating interest rates....................................                                              $ 30,021
------------------------------------------------------------------------------------------------------------------
</Table>

 
U.S. Bancorp
      24

<PAGE>
 
businesses), and consumer staples industries. Additionally, the commercial
portfolio is diversified across the Company's geographical markets with 81.7
percent of total commercial loans within the 24 state banking region. Credit
relationships outside of the Company's banking region are typically niche
businesses including the mortgage banking and the leasing businesses. The
mortgage banking sector represented approximately 3.0 percent of commercial
loans at December 31, 2001, compared with 1.8 percent at December 31, 2000.
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.
 
    The Company provides financing to enable customers to grow their businesses
through acquisitions of existing businesses, buyouts or other recapitalizations.
Such leveraged financings approximated $3.9 billion in loans outstanding at
December 31, 2001, compared with approximately $4.9 billion outstanding at
December 31, 2000. The decline was primarily due to tighter credit underwriting,
payoffs and the Company's aggressive workout strategies during 2001. During a
business cycle with slower economic growth, businesses with leveraged capital
structures may experience insufficient cash flows to service their debt. The
Company manages its exposure to leveraged financings by maintaining strong
underwriting standards, portfolio diversification and effectively managing the
relationship with the customer either directly or through reputable financial
intermediaries. At inception of the credit relationship, the Company's
underwriting standards require the businesses to have acceptable capital levels
and demonstrated sufficient cash flows to support debt service of the loans. The
Company's portfolio of leveraged financings is included in Table 9 and is
diversified among industry groups similar to the total commercial loan
portfolio.
 
COMMERCIAL REAL ESTATE The Company's portfolio of commercial real estate
mortgages and construction loans declined to $25.4 billion at December 31, 2001,
compared with $26.4 billion at December 31, 2000. Commercial mortgages
outstanding decreased to $18.8 billion at
 
TABLE 9 Commercial Loan Exposure by Industry Group and Geography
 

<Table>
<Caption>
                                                                    December 31, 2001       December 31, 2000
                                                                   --------------------------------------------
INDUSTRY GROUP(Dollars in Millions)                                 Loans       Percent     Loans       Percent
<S>                                                                <C>          <C>        <C>          <C>
---------------------------------------------------------------------------------------------------------------
Consumer products and services..............................       $ 8,591        18.5%    $ 9,791        18.4%
Capital goods...............................................         6,270        13.5       6,984        13.2
Consumer staples............................................         4,638        10.0       5,427        10.3
Financials..................................................         4,291         9.3       5,438        10.3
Agriculture.................................................         3,340         7.2       4,177         7.9
Transportation..............................................         2,544         5.5       2,775         5.3
Paper and forestry products, mining and basic materials.....         1,931         4.2       2,249         4.3
Private investors...........................................         1,803         3.9       2,405         4.6
Healthcare..................................................         1,424         3.1       1,631         3.1
Mortgage banking............................................         1,400         3.0         961         1.8
Technology..................................................         1,094         2.4       1,223         2.3
Energy......................................................           405          .9         742         1.4
Other.......................................................         8,599        18.5       9,014        17.1
                                                                   --------------------------------------------
   Total....................................................       $46,330       100.0%    $52,817       100.0%
---------------------------------------------------------------------------------------------------------------
GEOGRAPHY
---------------------------------------------------------------------------------------------------------------
California..................................................       $ 3,969         8.6%    $ 3,174         6.0%
Colorado....................................................         2,008         4.3       2,661         5.0
Illinois....................................................         2,339         5.0       3,336         6.3
Minnesota...................................................         6,511        14.1       8,724        16.5
Missouri....................................................         2,104         4.5       2,163         4.1
Ohio........................................................         2,896         6.3       2,269         4.3
Oregon......................................................         2,014         4.3       2,769         5.2
Washington..................................................         3,882         8.4       4,860         9.2
Wisconsin...................................................         3,115         6.7       3,153         6.0
Iowa, Kansas, Nebraska, North Dakota, South Dakota..........         5,059        10.9       4,547         8.6
Arkansas, Indiana, Kentucky, Tennessee......................         1,897         4.1       2,230         4.2
Idaho, Montana, Wyoming.....................................         1,014         2.2       1,316         2.5
Arizona, Nevada, Utah.......................................         1,057         2.3       1,460         2.8
                                                                   --------------------------------------------
      Total banking region..................................        37,865        81.7      42,662        80.8
Outside the Company's banking region........................         8,465        18.3      10,155        19.2
                                                                   --------------------------------------------
   Total....................................................       $46,330       100.0%    $52,817       100.0%
---------------------------------------------------------------------------------------------------------------
</Table>

 
                                                                    U.S. Bancorp
                                                                         25

<PAGE>
 
December 31, 2001, compared with $19.5 billion at December 31, 2000. Real estate
construction and development loans at December 31, 2001, totaled $6.6 billion
compared with $7.0 billion at year-end 2000. Average commercial real estate
loans were $26.1 billion in 2001; essentially flat compared with a year ago.
 
    Table 10 provides a summary of commercial real estate exposures by property
type and geographic location. The Company maintains the real estate construction
designation until the project is producing sufficient cash flow to service
traditional mortgage financing, at which time, if retained, the loan is
transferred to the commercial mortgage portfolio. Approximately $601 million of
construction loans were transferred to the commercial mortgage portfolio in
2001.
 
    At year-end 2001, real estate secured $207 million of tax-exempt industrial
development loans. The Company's commercial real estate mortgages and
construction loans had unfunded commitments of $6.0 billion at December 31,
2001.
 
    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 $1.4 billion at December 31, 2001.
 
RESIDENTIAL MORTGAGES Residential mortgages, held in the loan portfolio,
decreased to $5.7 billion at December 31, 2001, from $7.8 billion at December
31, 2000. The decline reflected management's decision to reduce these lower
yielding loans and the related adverse prepayment risk by selling most
single-family residential real estate loan originations into the secondary
market.
 
RETAIL Total retail loans outstanding, which includes credit card, retail
leasing, home equity, and other retail loans, increased $1.6 billion (4.5
percent) to $37.0 billion at December 31, 2001, from $35.4 billion at December
31, 2000. This increase was primarily related to growth in retail leases of $753
million, and home equity lines and loans of $718 million. This growth was
tempered somewhat by
 
TABLE 10 Commercial Real Estate Exposure by Property Type and Geography
 

<Table>
<Caption>
                                                                    December 31, 2001       December 31, 2000
                                                                   --------------------------------------------
PROPERTY TYPE (Dollars in Millions)                                 Loans       Percent     Loans       Percent
<S>                                                                <C>          <C>        <C>          <C>
---------------------------------------------------------------------------------------------------------------
Business owner occupied.....................................       $ 5,159        20.3%    $ 6,245        23.6%
Multi-family................................................         2,842        11.2       3,908        14.8
Commercial property
   Industrial...............................................         1,995         7.9       1,923         7.3
   Office...................................................         2,948        11.6       2,761        10.4
   Retail...................................................         2,704        10.7       2,537         9.6
   Other....................................................         1,949         7.7       2,755        10.4
Homebuilders................................................         1,417         5.6       1,521         5.8
Hotel/motel.................................................         1,985         7.8       1,916         7.2
Healthcare facilities.......................................         1,183         4,7       1,084         4.1
Other.......................................................         3,191        12.5       1,793         6.8
                                                                   --------------------------------------------
   Total....................................................       $25,373       100.0%    $26,443       100.0%
---------------------------------------------------------------------------------------------------------------
GEOGRAPHY
---------------------------------------------------------------------------------------------------------------
California..................................................       $ 3,399        13.4%    $ 3,255        12.3%
Colorado....................................................           840         3.3         855         3.2
Illinois....................................................         1,581         6.2         836         3.2
Minnesota...................................................         1,401         5.5       1,088         4.1
Missouri....................................................         2,439         9.6       2,842        10.7
Ohio........................................................         2,274         9.0       2,425         9.2
Oregon......................................................         1,427         5.6       1,638         6.2
Washington..................................................         2,671        10.5       2,937        11.1
Wisconsin...................................................         2,128         8.4       2,113         8.0
Iowa, Kansas, Nebraska, North Dakota, South Dakota..........         2,016         8.0       2,982        11.3
Arkansas, Indiana, Kentucky, Tennessee......................         2,055         8.1       1,798         6.8
Idaho, Montana, Wyoming.....................................           690         2.7         573         2.2
Arizona, Nevada, Utah.......................................         1,182         4.7       1,264         4.8
                                                                   --------------------------------------------
      Total banking region..................................        24,103        95.0      24,606        93.1
Outside the Company's banking region........................         1,270         5.0       1,837         6.9
                                                                   --------------------------------------------
   Total....................................................       $25,373       100.0%    $26,443       100.0%
---------------------------------------------------------------------------------------------------------------
</Table>

 
U.S. Bancorp
      26

<PAGE>
 
portfolio sales of $1.3 billion related to the high LTV home equity portfolio
and indirect automobile loans completed in the first quarter of 2001. Average
retail loans increased $2.5 billion (7.7 percent) to $35.2 billion in 2001. On a
core basis, average retail loans increased 12.2 percent from a year ago with
growth in most retail loan categories. Of the total retail loans and residential
mortgages outstanding, approximately 93 percent are to customers located in the
Company's banking region.
 
LOANS HELD FOR SALE At December 31, 2001, loans held for sale ("LHFS"), which
consisted primarily of residential mortgage loans to be sold in the secondary
markets, were $2.8 billion compared with $764 million at December 31, 2000. The
increase reflected the surge in residential mortgage production volume in 2001
due to declining interest rates. Residential mortgage production increased to
$15.6 billion in 2001 compared with $6.7 billion in 2000.
 
SECURITIES The Company uses its investment securities portfolio for several
purposes. It serves as a vehicle to manage interest rate and prepayment risk,
generates interest and dividend income from the investment of excess funds
depending on loan demand, provides liquidity to meet liquidity requirements and
is used as collateral for public deposits and wholesale funding sources.
 
    At December 31, 2001, investment securities of $26.6 billion consisted of
securities available-for-sale ($26.3 billion) and held-to-maturity ($.3
billion), compared with total investment securities of $17.6 billion at December
31, 2000. During the year, management realigned the portfolio to hedge against
interest rate changes and the
 
TABLE 11 Investment Securities

<Table>
<Caption>
                                                              Available-for-Sale
                                                --------------------------------------------------
                                                                           Weighted
                                                                            Average    Weighted
                                                Amortized       Fair    Maturity in     Average
December 31, 2001 (Dollars in Millions)              Cost      Value          Years       Yield
<S>                                             <C>          <C>        <C>            <C>
-----------------------------------------------------------------------------------------------
U.S. Treasuries and agencies
   Maturing in one year or less..........        $   105     $   106         .37         4.29%
   Maturing after one year through five
      years..............................            290         298        2.35         4.74
   Maturing after five years through ten
      years..............................             44          45        5.83         4.86
   Maturing after ten years..............             --          --          --           --
                                                -----------------------------------------------
         Total...........................        $   439     $   449        2.22         4.64
                                                -----------------------------------------------
Mortgage and asset-backed securities
   Maturing in one year or less..........        $    40     $    40         .61         5.59
   Maturing after one year through five
      years..............................         13,626      13,704        3.90         5.91
   Maturing after five years through ten
      years..............................          8,786       8,718        5.84         5.44
   Maturing after ten years..............          1,576       1,566       14.57         3.37
                                                -----------------------------------------------
         Total...........................        $24,028     $24,028        5.30         5.57
                                                -----------------------------------------------
Obligations of states and political subdivisions
   Maturing in one year or less..........        $   185     $   187         .46         7.26
   Maturing after one year through five
      years..............................            384         393        2.79         7.33
   Maturing after five years through ten
      years..............................            228         231        7.00         7.01
   Maturing after ten years..............             80          80       16.05         8.68
                                                -----------------------------------------------
         Total...........................        $   877     $   891        4.60         7.35
                                                -----------------------------------------------
Other debt securities
   Maturing in one year or less..........        $   137     $   138         .53         2.84
   Maturing after one year through five
      years..............................             69          70        1.93         6.11
   Maturing after five years through ten
      years..............................              7           6        6.46         8.03
   Maturing after ten years..............            262         235       25.35         3.03
                                                -----------------------------------------------
         Total...........................        $   475     $   449       14.51         3.49
                                                -----------------------------------------------
Other investments........................        $   475     $   492          --           --
                                                -----------------------------------------------
Total investment securities..............        $26,294     $26,309        5.40         5.58%
-----------------------------------------------------------------------------------------------
 
<Caption>
                                                         Held-to-Maturity
                                           --------------------------------------------
                                                                   Weighted
                                                                    Average    Weighted
                                             Amortized  Fair    Maturity in     Average
December 31, 2001 (Dollars in Millions)           Cost Value          Years       Yield
<S>                                        <C>         <C>      <C>            <C>
---------------------------------------------------------------------------------------
U.S. Treasuries and agencies
   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...........................  $        -- $ --           --           --
                                           --------------------------------------------
Mortgage and asset-backed securities
   Maturing in one year or less..........  $        -- $ --           --           --
   Maturing after one year through five
      years..............................           28   28         4.05         7.67
   Maturing after five years through ten
      years..............................           --   --           --           --
   Maturing after ten years..............           --   --           --           --
                                           --------------------------------------------
         Total...........................  $        28 $ 28         4.05         7.67
                                           --------------------------------------------
Obligations of states and political subdi
   Maturing in one year or less..........  $        83 $ 84          .54         4.30
   Maturing after one year through five
      years..............................           67   69         3.11         6.31
   Maturing after five years through ten
      years..............................           64   67         7.74         6.58
   Maturing after ten years..............           57   58        15.04         6.87
                                           --------------------------------------------
         Total...........................  $       271 $278         5.91         5.87
                                           --------------------------------------------
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..............           --   --           --           --
                                           --------------------------------------------
         Total...........................  $        -- $ --           --           --
                                           --------------------------------------------
Other investments........................  $        -- $ --           --           --
                                           --------------------------------------------
Total investment securities..............  $       299 $306         5.74         6.04%
-------------------------------------------------------------------------------------
</Table>

 
Note: Information related to asset-backed securities included above is presented
      based upon weighted average maturities anticipating future prepayments.
      Average yields are presented on a fully-taxable equivalent basis. Yields
      on available-for-sale securities are computed based on historical cost
      balances.
 

<Table>
<Caption>
                                                                            2001                                 2000
                                                                 ----------------------------------------------------------------
                                                                 Amortized           Percent          Amortized           Percent
At December 31 (Dollars in Millions)                                  Cost          of Total               Cost          of Total
<S>                                                              <C>                <C>               <C>                <C>
---------------------------------------------------------------------------------------------------------------------------------
U.S. Treasuries and agencies..............................        $   439               1.7%           $ 1,600               9.1%
Asset-backed securities
   Collateralized mortgage obligations....................         15,178              57.1              6,264              35.8
   Mortgage-backed securities.............................          8,878              33.4              5,572              31.9
                                                                 ----------------------------------------------------------------
      Total asset-backed securities.......................         24,056              90.5             11,836              67.7
Obligations of states and political subdivisions..........          1,148               4.3              2,586              14.8
Other securities and investments..........................            950               3.5              1,472               8.4
                                                                 ----------------------------------------------------------------
   Total investment securities............................        $26,593             100.0%           $17,494             100.0%
---------------------------------------------------------------------------------------------------------------------------------
</Table>

 
                                                                    U.S. Bancorp
                                                                         27

<PAGE>
 
impact of prepayments in the mortgage servicing rights portfolio. The Company
purchased $32.3 billion and sold $19.2 billion of investment securities during
the realignment process and generated $329.1 million in securities gains in the
declining interest rate environment.
 
    The weighted-average yield of the available-for-sale portfolio was 5.58
percent at December 31, 2001, compared with 7.23 percent at December 31, 2000.
The average maturity of the available-for-sale portfolio dropped to 5.4 years at
December 31, 2001, down from 9.5 years at December 31, 2000. The relative mix of
the type of investment securities maintained in the portfolio is provided in
Table 11. The change in investment portfolio mix reflected sales of tax-exempt
municipal securities which were replaced by collateralized mortgage obligations.
At December 31, 2001, the investment portfolio included a $15 million net
unrealized gain, compared with a net unrealized gain of $148 million at December
31, 2000.
 
DEPOSITS Total deposits were $105.2 billion at December 31, 2001, down $4.3
billion (3.9 percent) from $109.5 billion at year-end 2000. The decline since
December 31, 2000, was primarily due to the required sale of 14 branches related
to the merger of Firstar and USBM as well as management's funding decisions to
reduce higher cost time deposits greater than $100,000.
 
    Noninterest-bearing deposits were $31.2 billion at December 31, 2001,
compared with $26.6 billion at December 31, 2000. Average noninterest-bearing
deposits increased to $25.1 billion in 2001 compared with $23.8 billion in 2000.
The increase in noninterest-bearing deposits was primarily attributable to
business demand accounts that maintain compensating balances with the Company
and to bank acquisitions. Core interest-bearing deposits, including savings
accounts, interest checking and money market accounts, increased $2.3 billion
(5.5 percent) from a year ago. Average core interest-bearing deposits increased
$2.6 billion (6.4 percent) during
 
TABLE 12 Deposits
 
The composition of deposits was as follows:
 

<Table>
<Caption>
December 31 (Dollars in Millions)                                  2001        2000        1999        1998        1997
<S>                                                            <C>         <C>         <C>         <C>         <C>
-----------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits............................       $ 31,212    $ 26,633    $ 26,350    $ 27,479    $ 24,062
Interest-bearing deposits
   Savings accounts.....................................          4,637       4,516       5,445       6,352       6,414
   Interest checking....................................         15,251      13,982      13,141      13,385      12,212
   Money market accounts................................         24,835      23,899      22,751      22,086      18,672
                                                               --------------------------------------------------------
      Subtotal..........................................         44,723      42,397      41,337      41,823      37,298
Time certificates of deposit less than $100,000.........         20,724      25,780      25,394      27,935      29,548
Time deposits greater than $100,000
   Domestic.............................................          7,286      11,221       9,348       6,261       6,622
   Foreign..............................................          1,274       3,504         988         848         793
                                                               --------------------------------------------------------
      Total deposits....................................       $105,219    $109,535    $103,417    $104,346    $ 98,323
-----------------------------------------------------------------------------------------------------------------------
 
Percent of total deposits                                          2001        2000        1999        1998        1997
-----------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits............................           29.7%       24.3%       25.5%       26.3%       24.5%
Interest-bearing deposits
   Savings accounts.....................................            4.4         4.1         5.3         6.1         6.5
   Interest checking....................................           14.5        12.8        12.7        12.8        12.4
   Money market accounts................................           23.6        21.8        22.0        21.2        19.0
                                                               --------------------------------------------------------
      Subtotal..........................................           42.5        38.7        40.0        40.1        37.9
Time certificates of deposit less than $100,000.........           19.7        23.5        24.5        26.8        30.1
Time deposits greater than $100,000
   Domestic.............................................            6.9        10.3         9.0         6.0         6.7
   Foreign..............................................            1.2         3.2         1.0          .8          .8
                                                               --------------------------------------------------------
      Total deposits....................................          100.0%      100.0%      100.0%      100.0%      100.0%
-----------------------------------------------------------------------------------------------------------------------
</Table>

 
The maturity of time deposits greater than $100,000 was as follows:
 

<Table>
<Caption>
December 31 (Dollars in Millions)                                   2001
<S>                                                                <C>
-------------------------------------------------------------------------
Three months or less........................................       $4,060
Over three months through six months........................        1,903
Over six months through twelve months.......................        1,200
Over twelve months..........................................        1,397
                                                                   ------
   Total....................................................       $8,560
-------------------------------------------------------------------------
</Table>

 
U.S. Bancorp
      28

<PAGE>
 
2001. The downturn in equity capital markets in 2001 and the current interest
rate environment have prompted many customers to increase their liquidity in
accessible deposits. Time certificates of deposit less than $100,000 declined
$5.1 billion (19.6 percent) during the year. Large denomination deposits, both
domestic and foreign, decreased $6.2 billion (41.9 percent). These deposits are
largely viewed as purchased funds and are managed to levels deemed appropriate
given alternative funding sources. Average time certificates of deposit less
than $100,000 declined $2.5 billion (9.8 percent) and average large denomination
deposits were essentially flat compared with 2000. The decline in average time
certificates of deposit less than $100,000 reflected the net impact of bank
acquisitions and branch divestitures and management's pricing decisions to
change the mix of funding toward lower rate wholesale funding sources.
 
    Table 12 provides a summary of total deposits by type of deposit.
 
BORROWINGS The Company utilizes both short-term and long-term borrowings to fund
growth of earning assets in excess of deposit growth. Short-term borrowings,
which include federal funds purchased, securities sold under agreements to
repurchase and other short-term borrowings, were $14.7 billion at December 31,
2001, up $2.8 billion (24.0 percent) from $11.8 billion at year-end 2000. Short-
term funding is managed to levels deemed appropriate given alternative funding
sources.
 
    Long-term debt was $25.7 billion at December 31, 2001, up from $21.9 billion
at December 31, 2000. The increase in long-term funding reflects favorable
funding costs during the declining rate environment relative to rate reductions
for shorter-term borrowings or large denomination deposits. During 2001, the
Company issued $1.1 billion of senior contingent convertible debt as well as
$1.5 billion of "Company-obligated Mandatorily Redeemable Preferred Securities
of Subsidiary Trusts Holding Solely the Junior Subordinated Debentures of the
Parent Company" commonly referred to as "Trust Preferred Securities". The
Company's subsidiary U.S. Bank National Association issued $1.5 billion of
fixed-rate subordinated notes. In addition, the Company's bank subsidiaries
obtained $5.3 billion of long-term Federal Home Loan Bank advances in 2001.
Refer to "Liquidity Risk Management" on pages 38 through 40 for discussion of
liquidity management of the Company.
 
CORPORATE RISK PROFILE
 
OVERVIEW Managing risks is an essential part of successfully operating a
financial services company. The most prominent risk exposures are credit,
interest rate, market and liquidity. The Company also has exposure related to
changes in residual valuations and ongoing operational activities. Credit risk
is the risk of not collecting interest and/or the principal balance of a loan or
investment when it is due. Interest rate risk is the potential reduction of net
interest income as a result of changes in interest rates. Rate movements can
affect the repricing of assets and liabilities differently, as well as their
market value. Market risk arises from fluctuations in interest rates, foreign
exchange rates, and equity prices that may result in changes in the values of
financial instruments, such as trading account and available-for-sale securities
that are accounted for on a mark-to-market basis. Liquidity risk is the possible
inability to fund obligations to depositors, investors and borrowers. Residual
risk is the potential reduction in the "end-of-term" value of leased assets or
the residual cash flows related to asset securitization and other off-balance
sheet structures. Operational risk represents the possibility that transactions
are processed erroneously and that material errors are not detected by the
systems of internal accounting controls.
 
CREDIT RISK MANAGEMENT The Company's strategy for credit risk management
includes stringent, centralized credit policies and uniform underwriting
criteria for all loans, including specialized lending categories such as
mortgage banking, energy, commercial real estate and real estate construction,
leveraged financing and consumer credit. The strategy also emphasizes
diversification on a geographic, industry and customer level, regular credit
examinations, and quarterly management reviews of large loans and loans
experiencing deterioration of credit quality. The Company strives to identify
potential problem loans early, take any necessary charge-offs promptly, and
maintain adequate reserve levels. Commercial banking operations rely on a strong
credit culture that combines prudent credit policies and individual lender
accountability. In addition, the commercial lenders generally focus on middle
market companies within their regions or niche national markets. The Company
utilizes a credit risk rating system in order to measure the credit quality of
individual commercial loan transactions and regularly forecasts potential
changes in risk ratings and nonperforming status. The risk rating system is
intended to identify and measure the credit quality of lending relationships. In
the Company's retail banking operations, standard credit scoring systems are
used to assess consumer credit risks and to price consumer products accordingly.
The Company also engages in non-lending activities that may give rise to credit
risk, including interest rate swap contracts for customers or balance sheet
hedging purposes, foreign exchange transactions, and the processing of credit
card transactions for merchants. These activities are subject to the similar
credit review, analysis and approval processes as those applied to commercial
loans.
 
                                                                    U.S. Bancorp
                                                                         29

<PAGE>
 
    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, and macroeconomic factors. Generally, the domestic economy has
experienced slower growth since late 2000. Accordingly, the Company began to
re-evaluate underwriting activities to tighten credit availability to certain
types of lending, industries and customers. Additionally, in connection with the
merger of Firstar and USBM, the Company has continued to integrate underwriting
standards throughout the organization. Core loan growth for the Company was 4.3
percent in 2001 with the majority of this growth in retail lending.
 
    During 2001, corporate earnings growth rates continued to weaken and credit
quality indicators among certain industry sectors have continued to deteriorate.
Large corporate and middle market commercial businesses announced or continued
to implement restructuring activities in an effort to improve operating margins.
The stagnant economic growth is evidenced by the Federal Reserve Board's ("FRB")
recent actions during late 2000 and 2001 to stimulate economic growth through a
series of interest rate reductions. In response to declining economic
conditions, company-specific portfolio trends, and the Firstar/USBM merger, the
Company undertook an extensive review of its commercial and consumer loan
portfolios in early 2001. As a result of this review, the Company initiated
several actions during the first six months of 2001 including aligning the risk
management practices and charge-off policies of the companies and restructuring
and disposing of certain portfolios that did not align with the credit risk
profile of the combined company. Credit portfolio restructuring activities
included a specific segment of the Company's healthcare portfolio, selling
certain consumer loan portfolios of USBM, renegotiating a credit card co-
branding relationship and discontinuing an unsecured small business product that
did not align with the product offerings of the combined company. The Company
also implemented accelerated loan workout strategies for certain commercial
credits. By the end of the second quarter of 2001, economic stimulus by the FRB
as well as management's actions appeared to have reduced the rate of credit
quality deterioration. However, world events during the third quarter of 2001
had a profound impact on consumer confidence and related spending, governmental
priorities and business activities. As a result of these events, the Company
expected the economic slowdown to accelerate or be more prolonged than
originally estimated by management. Since September 11, 2001, the FRB has
reduced the discount rate four times in an effort to stabilize the financial
markets and economic growth. Accordingly, the Company conducted an additional
review of its credit portfolios and recognized the need to address the impact
that these events are expected to have on its credit portfolios. In response to
this evaluation, the Company increased the provision for credit losses
approximately $1,025.0 million in the third quarter of 2001 beyond expected
levels.
 
CREDIT DIVERSIFICATION Tables 7, 9 and 10 provide information with respect to
the overall diversification of the credit portfolio and changes in mix during
2001. Certain industry segments, including transportation, manufacturing, and
technology sectors have experienced economic stress in 2001. At December 31,
2001, the transportation sector represented 5.5 percent of the total commercial
loan portfolio. It has been impacted by reduced airline travel, slower economic
activity and higher fuel costs that adversely impacted trucking businesses. At
year-end 2001, the Company's transportation portfolio consisted of airline and
airfreight businesses (28.8 percent of the sector), trucking businesses (53.2
percent) and railroad and shipping. Capital goods represented 13.5 percent of
the total commercial portfolio at December 31, 2001. Included in this sector
were approximately 29.2 percent of loans to diversified manufacturing businesses
while engineering and construction equipment and machinery businesses were 30.7
percent and 22.8 percent, respectively, of the capital goods portfolio.
Manufacturing production levels and inventory reductions caused some
deterioration in these portfolios during late 2000 and 2001. During 2001, the
technology sector was adversely impacted by lower capital investments by
businesses over the past twelve to eighteen months. At December 31, 2001, the
technology industry represented only 2.4 percent of the commercial loan
portfolio.
 
    Since mid-2000, the agriculture and paper and forestry products sectors have
been stressed. However, these sectors have improved relative to a year ago. At
December 31, 2001, the Company's agricultural portfolio was diversified with
36.9 percent of agricultural loans to livestock producers, 27.3 percent to crop
producers, 20.3 percent to food processors and 15.5 percent to wholesalers of
agricultural products. Volatility in crop prices continues to adversely affect
the cash flows of crop producers. Food processors and wholesalers have been less
negatively affected by commodity pricing and a rebound in livestock prices in
2001 has improved the credit exposure within this sector. At December 31, 2001,
loans to paper and forestry products businesses represented 2.2 percent of the
commercial loan portfolio. The industry continues to be adversely impacted by
foreign supplies and over-capacity within the industry; however, workout
strategies continue to reduce the credit exposure to this industry.
 
U.S. Bancorp
      30

<PAGE>
 
ANALYSIS OF NET CHARGE-OFFS Net charge-offs increased $721.1 million to $1,546.5
million in 2001, compared with $825.4 million in 2000 and $672.6 million in
1999. The ratio of total net charge-offs to average loans was 1.31 percent in
2001, compared with .70 percent in 2000 and .61 percent in 1999. The increase in
2001 net charge-offs was due to deterioration in economic conditions affecting
the commercial loan portfolio, actions taken by the Company during 2001, and an
increase in credit card net charge-offs. Also included in 2001 net charge-offs
were $90.0 million of write-offs to conform risk management practices, align
charge-off policies and expedite the transition out of a specific segment of the
healthcare portfolio not meeting the risk profile of the Company.
 
    Commercial and commercial real estate loan net charge-offs for 2001 were
$884.6 million, compared with $289.2 million in 2000 and $179.3 million in 1999.
Approximately $313.2 million of the increase in charge-offs reflected several
factors including: a large cattle fraud, recent collateral deterioration
specific to transportation equipment caused by the impact of higher fuel prices
and the economy, further deterioration in the manufacturing, communications and
technology sectors and specific management decisions to accelerate its workout
strategy for certain borrowers. Commercial and commercial real estate net
charge-offs for 2001 also included $255.0 million in merger and
restructuring-related charge-offs and charge-offs associated with the
accelerated loan workout strategy announced in the first quarter of 2001. The
increase in commercial loan net charge-offs in 2000 included higher losses on a
growing portfolio of small business products, growth in the corporate card
portfolio, credit losses related to acquired leasing businesses and lower levels
of recoveries compared with 1999.
 
    Retail loan net charge-offs in 2001 were $649.3 million, compared with
$523.8 million in 2000 and $478.5 million in 1999. The ratio of retail loan net
charge-offs to average loans in 2001 was 1.85 percent, up from 1.60 percent in
2000 and 1.57 percent in 1999. The increase in retail loan net charge-offs in
2001 was primarily due to higher bankruptcies and consumer delinquencies
reflecting the continuing downturn in economic conditions.
 
TABLE 13 Net Charge-offs as a Percentage of Average Loans Outstanding
 

<Table>
<Caption>
Year Ended December 31                                             2001    2000    1999    1998    1997
<S>                                                                <C>     <C>     <C>     <C>     <C>
-------------------------------------------------------------------------------------------------------
COMMERCIAL
   Commercial...............................................       1.62%    .56%    .41%      *%      *%
   Lease financing..........................................       1.95     .46     .24       *       *
                                                                   ------------------------------------
      Total commercial......................................       1.66     .55     .40     .31     .50
COMMERCIAL REAL ESTATE
   Commercial mortgages.....................................        .21     .03     .02       *       *
   Construction and development.............................        .17     .11     .03       *       *
                                                                   ------------------------------------
      Total commercial real estate..........................        .20     .05     .02    (.04)   (.05)
RESIDENTIAL MORTGAGES.......................................        .18     .13     .12     .08     .06
RETAIL
   Credit card..............................................       4.80    4.18    4.00    4.02    4.57
   Retail leasing...........................................        .65     .41     .28       *       *
   Other retail.............................................       1.40    1.23    1.19       *       *
                                                                   ------------------------------------
      Total retail..........................................       1.85    1.60    1.57    1.51    1.65
                                                                   ------------------------------------
         Total loans........................................       1.31%    .70%    .61%    .53%    .63%
-------------------------------------------------------------------------------------------------------
</Table>

 
*Information not available
 
ANALYSIS OF NONPERFORMING ASSETS Nonperforming assets include nonaccrual loans,
restructured loans, other real estate and other nonperforming assets owned by
the Company. Interest payments are typically applied against the principal
balance and not recorded as income.
 
    At December 31, 2001, nonperforming assets totaled $1,120.0 million,
compared with $867.0 million at year-end 2000 and $588.5 million at year-end
1999. The $253.0 million increase in nonperforming assets from December 31, 2000
reflects an increase of $190.0 million of nonperforming commercial and
commercial real estate loans, a $22.2 million increase in nonperforming
residential mortgages and a $23.8 million increase in nonperforming retail
loans. The increase in nonperforming commercial loans was primarily due to:
merger and restructuring-related and risk management actions taken during the
year; loans being written down to secondary market valuations and placed on
nonperforming status; and continuing stress in sectors of the economy. The
increase was partially offset by the disposition of nonperforming loans
identified as part of the Company's accelerated workout programs and commercial
charge-offs taken during 2001. Certain industry sectors, including agriculture,
have stabilized or improved from a year ago. The increase in nonperforming
residential mortgages and retail loans generally reflects changes in portfolio
delinquencies and the national trends in
 
                                                                    U.S. Bancorp
                                                                         31

<PAGE>
 
unemployment and personal bankruptcies during 2001. The ratio of nonperforming
assets to loans plus other real estate was .98 percent at December 31, 2001,
compared with .71 percent at year-end 2000 and .52 percent at year-end 1999.
Given the continued economic stress in various industry sectors, the Company may
experience higher levels of nonperforming assets during the next several
quarters.
 
    Accruing loans 90 days or more past due totaled $462.9 million at December
31, 2001, compared with $385.2 million at December 31, 2000, and $248.6 million
at December 31, 1999. These loans are not included in nonperforming assets and
continue to accrue interest because they are secured by collateral and/or are in
the process of collection and are reasonably expected to result
 
TABLE 14 Nonperforming Assets(a)
 

<Table>
<Caption>
                                                                                 At December 31,
                                                 --------------------------------------------------------------------------------
(Dollars in Millions)                                2001              2000              1999              1998              1997
<S>                                              <C>               <C>               <C>               <C>               <C>
---------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL
   Commercial.............................       $  526.6          $  470.4          $  219.0          $  230.4          $  263.9
   Lease financing........................          180.8              70.5              31.5              17.7               9.8
                                                 --------------------------------------------------------------------------------
      Total commercial....................          707.4             540.9             250.5             248.1             273.7
COMMERCIAL REAL ESTATE
   Commercial mortgages...................          131.3             105.5             138.2              86.9              94.9
   Construction and development...........           35.9              38.2              31.6              28.4              19.5
                                                 --------------------------------------------------------------------------------
      Total commercial real estate........          167.2             143.7             169.8             115.3             114.4
RESIDENTIAL MORTGAGES.....................           79.1              56.9              72.8              98.7              95.0
RETAIL
   Credit card............................             --               8.8               5.0               2.6                 *
   Retail leasing.........................            6.5                --                .4                .5                .5
   Other retail...........................           41.1              15.0              21.1              30.4              17.1
                                                 --------------------------------------------------------------------------------
      Total retail........................           47.6              23.8              26.5              33.5              17.6
                                                 --------------------------------------------------------------------------------
         Total nonperforming loans........        1,001.3             765.3             519.6             495.6             500.7
OTHER REAL ESTATE.........................           43.8              61.1              40.0              35.1              57.0
OTHER ASSETS..............................           74.9              40.6              28.9              16.9              17.4
                                                 --------------------------------------------------------------------------------
         Total nonperforming assets.......       $1,120.0          $  867.0          $  588.5          $  547.6          $  575.1
                                                 --------------------------------------------------------------------------------
Accruing loans 90 days or more past
 due(b)...................................       $  462.9          $  385.2          $  248.6          $  252.9          $  213.7
Nonperforming loans to total loans........            .88%              .63%              .46%              .46%              .51%
Nonperforming assets to total loans plus
   other real estate......................            .98               .71               .52               .51               .58
Net interest lost on nonperforming
 loans....................................       $   63.0          $   50.8          $   29.5          $   21.3          $   32.1
                                                 --------------------------------------------------------------------------------
</Table>

 
Delinquent Loan Ratios(c)
 

<Table>
<Caption>
                                                                                 At December 31,
                                                 --------------------------------------------------------------------------------
90 days or more past due                             2001              2000              1999              1998              1997
<S>                                              <C>               <C>               <C>               <C>               <C>
---------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL
   Commercial.............................           1.44%             1.11%              .57%              .69%                *%
   Lease financing........................           3.53              1.24               .82               .57                 *
                                                 --------------------------------------------------------------------------------
      Total commercial....................           1.71              1.13               .59               .68               .84
COMMERCIAL REAL ESTATE
   Commercial mortgages...................            .73               .61               .82               .59                 *
   Construction and development...........            .56               .57               .53               .60                 *
                                                 --------------------------------------------------------------------------------
      Total commercial real estate........            .68               .60               .74               .59               .67
RESIDENTIAL MORTGAGES.....................           2.44              1.49              1.11              1.26               .89
RETAIL
   Credit card............................           2.18              1.85              1.33              1.07                 *
   Retail leasing.........................            .24               .20               .14               .13                 *
   Other retail...........................            .84               .64               .47               .47                 *
                                                 --------------------------------------------------------------------------------
      Total retail........................            .98               .79               .59               .55               .50
                                                 --------------------------------------------------------------------------------
         Total............................           1.28%              .94%              .68%              .70%              .72%
---------------------------------------------------------------------------------------------------------------------------------
</Table>

 
(a) Throughout this document, nonperforming assets and related ratios do not
    include accruing loans 90 days or more past due.
 
(b) These loans are not included in nonperforming assets and continue to accrue
    interest because they are secured by collateral and/or are in the process of
    collection and are reasonably expected to result in repayment or restoration
    to current status.
 
(c) Ratios include nonperforming loans and are expressed as a percentage of
    ending loan balances.
 
 * Information not available
 
U.S. Bancorp
      32

<PAGE>
 
TABLE 15 Summary of Allowance for Credit Losses
 

<Table>
<Caption>
(Dollars in Millions)                                               2001        2000        1999        1998        1997
------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>         <C>         <C>         <C>         <C>
Balance at beginning of year.............................       $1,786.9    $1,710.3    $1,705.7    $1,665.8    $1,600.1
CHARGE-OFFS
   Commercial
      Commercial.........................................          779.0       319.8       250.1           *           *
      Lease financing....................................          144.4        27.9        12.4           *           *
                                                                --------------------------------------------------------
         Total commercial................................          923.4       347.7       262.5       202.3       232.8
   Commercial real estate
      Commercial mortgages...............................           49.5        15.8        19.1           *           *
      Construction and development.......................           12.6        10.3         2.6           *           *
                                                                --------------------------------------------------------
         Total commercial real estate....................           62.1        26.1        21.7        23.6        27.3
   Residential mortgages.................................           15.8        13.7        16.2        14.4        11.1
   Retail
      Credit card........................................          294.1       235.8       220.2       223.9       258.3
      Retail leasing.....................................           34.2        14.8         6.2           *           *
      Other retail.......................................          441.8       379.5       376.0           *           *
                                                                --------------------------------------------------------
         Total retail....................................          770.1       630.1       602.4       533.4       522.4
                                                                --------------------------------------------------------
            Total charge-offs............................        1,771.4     1,017.6       902.8       773.7       793.6
RECOVERIES
   Commercial
      Commercial.........................................           60.6        64.0        84.8           *           *
      Lease financing....................................           30.4         7.2         4.0           *           *
                                                                --------------------------------------------------------
         Total commercial................................           91.0        71.2        88.8        81.9        59.3
   Commercial real estate
      Commercial mortgages...............................            9.1        10.8        15.1           *           *
      Construction and development.......................             .8         2.6         1.0           *           *
                                                                --------------------------------------------------------
         Total commercial real estate....................            9.9        13.4        16.1        31.0        37.7
   Residential mortgages.................................            3.2         1.3         1.4         3.0         2.5
   Retail
      Credit card........................................           23.4        27.5        34.6        36.9        38.3
      Retail leasing.....................................            4.5         2.0         1.1           *           *
      Other retail.......................................           92.9        76.8        88.2           *           *
                                                                --------------------------------------------------------
         Total retail....................................          120.8       106.3       123.9       112.6        93.1
                                                                --------------------------------------------------------
            Total recoveries.............................          224.9       192.2       230.2       228.5       192.6
NET CHARGE-OFFS
   Commercial
      Commercial.........................................          718.4       255.8       165.3           *           *
      Lease financing....................................          114.0        20.7         8.4           *           *
                                                                --------------------------------------------------------
         Total commercial................................          832.4       276.5       173.7       120.4       173.5
   Commercial real estate
      Commercial mortgages...............................           40.4         5.0         4.0           *           *
      Construction and development.......................           11.8         7.7         1.6           *           *
                                                                --------------------------------------------------------
         Total commercial real estate....................           52.2        12.7         5.6        (7.4)      (10.4)
   Residential mortgages.................................           12.6        12.4        14.8        11.4         8.6
   Retail
      Credit card........................................          270.7       208.3       185.6       187.0       220.0
      Retail leasing.....................................           29.7        12.8         5.1           *           *
      Other retail.......................................          348.9       302.7       287.8           *           *
                                                                --------------------------------------------------------
         Total retail....................................          649.3       523.8       478.5       420.8       429.3
                                                                --------------------------------------------------------
            Total net charge-offs........................        1,546.5       825.4       672.6       545.2       601.0
                                                                --------------------------------------------------------
Provision for credit losses..............................        2,528.8       828.0       646.0       491.3       639.9
Losses from loan sales/transfers.........................         (329.3)         --          --          --          --
Acquisitions and other changes...........................           17.4        74.0        31.2        93.8        26.8
                                                                --------------------------------------------------------
Balance at end of year...................................       $2,457.3    $1,786.9    $1,710.3    $1,705.7    $1,665.8
                                                                --------------------------------------------------------
Allowance as a percentage of:
   Period-end loans......................................           2.15%       1.46%       1.51%       1.59%       1.68%
   Nonperforming loans...................................            245         233         329         344         333
   Nonperforming assets..................................            219         206         291         312         290
   Net charge-offs.......................................            159         216         254         313         277
------------------------------------------------------------------------------------------------------------------------
</Table>

 
*Information not available
 
                                                                    U.S. Bancorp
                                                                         33

<PAGE>
 
in repayment or restoration to current status. Retail loans 30 days to 89 days
or more past due were 3.11 percent of the total retail portfolio at December 31,
2001, compared with 2.82 percent of the total retail portfolio at December 31,
2000. Retail loans 90 days or more past due totaled .98 percent of the total
retail loan portfolio at December 31, 2001, compared with .79 percent of the
total retail loan portfolio at December 31, 2000, and .59 percent at December
31, 1999. The increase in retail loan delinquencies was primarily related to the
credit card, home equity and revolving credit line portfolios and reflects the
economic slowdown and unemployment trends during 2001.
 
ANALYSIS AND DETERMINATION OF ALLOWANCE FOR CREDIT LOSSES The allowance for
credit losses provides coverage for probable losses inherent in the Company's
loan portfolio. Management evaluates the allowance each quarter to determine
that it is adequate to cover inherent losses. The evaluation of each element and
the overall allowance is based on a continuing assessment of problem loans and
related off-balance sheet items, recent loss experience, and other factors,
including regulatory guidance and economic conditions. Management has determined
that the allowance for credit losses is adequate.
 
    At December 31, 2001, the allowance was $2.5 billion (2.15 percent of
loans). This compares with an allowance of $1.8 billion (1.46 percent of loans),
at year-end 2000, and $1.7 billion (1.51 percent of loans), at December 31,
1999. The ratio of the allowance for credit losses to nonperforming loans was
245 percent at December 31, 2001, compared with 233 percent at year-end 2000 and
329 percent at year-end 1999. The ratio of the allowance for credit losses to
net charge-offs was 159 percent at December 31, 2001, compared with 216 percent
at year-end 2000 and 254 percent at year-end 1999. The Company considers
historical charge-off levels in addition to existing conditions, among other
factors, when establishing the allowance for credit losses.
 
    Several factors impacted the allowance for credit losses during 2001,
including merger and restructuring-related credit actions and management's
extensive review of the commercial loan portfolio in light of current economic
conditions. The level of the allowance was also impacted by risk rating changes
by regulators of shared national credits agented by other banks,
Company-specific portfolio trends discussed previously, and the transfer of the
unsecured small business product portfolio to loans held for sale. The increase
in the allowance for credit losses reflects the impact of changes in the economy
since December 31, 2000, and related deterioration in certain sectors of the
Company's credit portfolio. It also reflects management's recognition that the
current economic slowdown has accelerated and may be more prolonged as a result
of world events occurring in the third quarter of 2001.
 
    Management determines the amount of allowance that is required for certain
loan categories based on relative risk characteristics of the loan portfolio.
Table 16 shows the amount of the allowance for credit losses by loan category.
During 2001, the Company, in connection with the merger of Firstar and USBM,
conformed its methodology for determining specific allowances for the elements
of the loan portfolio. While both predecessor companies utilized credit risk
rating processes, migration analysis and historical loss experience to determine
each element of its allowance for credit losses, Firstar specifically determined
its commercial allowance based on its net loss experience, while USBM utilized
its gross loss experience. Although diversity exists in practice, the Company
has adopted a net loss experience methodology in determining the allowance for
commercial credit losses. Adopting the net loss experience methodology is based,
in part, on regulatory guidelines promulgated with respect to evaluating the
allowance for credit losses. In addition to adopting a net loss experience
method, the Company enhanced its commercial migration methods for higher quality
commercial loan categories to better differentiate historical loss factors
within those categories. Also, given the current business cycle, historical loss
factors utilized in determining the allowance for commercial loans were weighted
to reflect the adverse impact of recent losses. Table 16 shows the determination
of each element of the allowance for credit losses on a consistent basis for
2001 and 2000. Due to the Company's inability to gather historical loss data on
a combined basis for 1997 through 1999, the methodologies and amounts assigned
to each element of the loan portfolio for these years have not been conformed.
 
    The allowance recorded for commercial loans is based on a quarterly review
of individual credit relationships. The Company's regular risk rating process is
an integral component of the methodology utilized in determining the allowance
for credit losses. An analysis of the migration of commercial and commercial
real estate loans and actual loss experience throughout the business cycle is
also conducted quarterly to assess reserves established for credits with similar
risk characteristics. An allowance is established for pools of commercial and
commercial real estate loans based on the risk ratings assigned. The amount is
supported by the results of the migration analysis that considers historical
loss experience by risk rating, as well as current and historical economic
conditions and industry risk factors. 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
 
U.S. Bancorp
      34

<PAGE>
 
for impaired loans. The allowance established for commercial and commercial real
estate loan portfolios, including impaired commercial and commercial real estate
loans, increased $931.7 million to $1,428.6 million in 2001. The change
reflected higher levels of nonperforming loans, increased loss severity
reflected in the historical migration, increasing sector risk in certain
industries and deterioration in credit risk ratings from a year ago.
 
    The allowance recorded for retail 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 category or group of
loans. Based on this information and analysis, an allowance is established
approximating a rolling twelve-month estimate of net charge-offs. The allowance
for retail loans increased $58.3 million to $711.1 million in 2001. The increase
primarily reflected the continuing downturn in economic conditions.
 
    Regardless of the extent of the Company's analysis of customer performance,
portfolio trends or risk management processes, certain inherent but undetected
losses are probable within the loan portfolio. This is due to several factors
including inherent delays in obtaining information regarding a customer's
financial condition or changes in their 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 for larger
non-homogeneous credits and the sensitivity of assumptions utilized to establish
allowances for homogenous groups of loans are among other factors. For each of
these factors, the estimated inherent loss is recorded as an unallocated
allowance. The Company estimates a range of inherent losses related to the
existence of these exposures and for the risk in concentrations to specific
borrowers, financings of highly leveraged transactions, products or industries.
The estimates are based upon the Company's evaluation of imprecision risk
associated with the commercial and retail allowance levels and the estimated
impact of the current economic environment on portfolio segments or
concentrations. The unallocated allowance decreased to $301.5 million at
December 31, 2001, from $627.6 million at December 31, 2000. The change in
unallocated allowance reflects deterioration in credit quality during 2001.
Although the Company determines the amount of each element of the allowance
separately and this process is 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 recorded
amounts. The Company's methodology includes several factors intended to minimize
the differences in recorded and actual losses. These factors allow the Company
to adjust its estimate of losses based on the most recent information available.
Refer to Note 1 of the Notes to Consolidated
 
TABLE 16 Elements of the Allowance for Credit Losses(a)

 

<Table>
<Caption>
                                                             Allowance Amount
                                         --------------------------------------------------------
December 31 (Dollars in Millions)            2001        2000        1999        1998        1997
<S>                                      <C>         <C>         <C>         <C>         <C>
-------------------------------------------------------------------------------------------------
COMMERCIAL
   Commercial.....................       $1,068.1    $  418.8    $  408.3    $  343.7    $  370.5
   Lease financing................          107.5        17.7        20.2        21.5        16.4
                                         --------------------------------------------------------
      Total commercial............        1,175.6       436.5       428.5       365.2       386.9
COMMERCIAL REAL ESTATE
   Commercial mortgages...........          176.6        42.7       110.4       105.2       105.6
   Construction and development...           76.4        17.7        22.5        25.9        27.7
                                         --------------------------------------------------------
      Total commercial real
       estate.....................          253.0        60.4       132.9       131.1       133.3
RESIDENTIAL MORTGAGES.............           16.1         9.6        18.6        27.2        36.9
RETAIL
   Credit card....................          295.2       265.6       320.8       304.3       217.4
   Retail leasing.................           38.7        27.2        18.6         6.5         4.9
   Other retail...................          377.2       360.0       389.2       365.6       257.9
                                         --------------------------------------------------------
      Total retail................          711.1       652.8       728.6       676.4       480.2
                                         --------------------------------------------------------
      Total allocated allowance...        2,155.8     1,159.3     1,308.6     1,199.9     1,037.3
      Unallocated portion.........          301.5       627.6       401.7       505.8       628.5
                                         --------------------------------------------------------
Total allowance...................       $2,457.3    $1,786.9    $1,710.3    $1,705.7    $1,665.8
-------------------------------------------------------------------------------------------------
 
<Caption>
                                                 Allowance as a Percent of Total Loans
                                         ----------------------------------------------------
December 31                              2001         2000       1999         1998       1997
<S>                                      <C>          <C>        <C>          <C>        <C>
---------------------------------------------------------------------------------------------
COMMERCIAL
   Commercial.....................       2.64%       .90%        .97%        .91%        1.10%
   Lease financing................       1.84        .29         .53         .65          .61
                                         ----------------------------------------------------
      Total commercial............       2.54        .83         .93         .89         1.06
COMMERCIAL REAL ESTATE
   Commercial mortgages...........        .94        .22         .59         .63          .67
   Construction and development...       1.16        .25         .35         .50          .68
                                         ----------------------------------------------------
      Total commercial real
       estate.....................       1.00        .23         .53         .60          .67
RESIDENTIAL MORTGAGES.............        .28        .12         .16         .19          .23
RETAIL
   Credit card....................       5.01       3.95        6.41        6.27         4.35
   Retail leasing.................        .79        .65         .88         .40          .45
   Other retail...................       1.44       1.47        1.64        1.55         1.23
                                         ----------------------------------------------------
      Total retail................       1.92       1.85        2.36        2.25         1.78
                                         ----------------------------------------------------
      Total allocated allowance...       1.89        .95        1.16        1.12         1.05
      Unallocated portion.........        .26        .51         .35         .47          .63
                                         ----------------------------------------------------
Total allowance...................       2.15%      1.46%       1.51%       1.59%        1.68%
---------------------------------------------------------------------------------------------
</Table>

 
(a) During 2001, the Company changed its methodology for determining the
    specific allowance for elements of the loan portfolio. Table 16 has been
    restated for 2000. Due to the Company's inability to gather historical loss
    data on a combined basis for 1997 through 1999, the methodologies and
    amounts assigned to each element of the loan portfolio for these years have
    not been conformed. Utilizing the prior methods the total assigned allowance
    for 2000 was $1,397.3 million and the unallocated portion was $389.6
    million. Refer to paragraph four in the section captioned "Analysis and
    Determination of Allowance for Credit Losses" on page 34.
 
                                                                    U.S. Bancorp
                                                                         35

<PAGE>
 
Financial Statements for accounting policies related to the allowance for credit
losses.
 
RESIDUAL RISK MANAGEMENT The Company manages its risk to changes in the value of
lease residual assets through disciplined residual setting and valuation at the
inception of a lease, diversification of its vehicles, a focus on longer term
vehicle leases, effective end-of-term marketing of off-leased vehicles, regular
asset valuation reviews and monitoring of residual value gains or losses upon
the disposition of assets. To reduce the financial impact of potential changes
in vehicle residuals, the Company maintains residual value risk insurance. Also,
equipment lease originations are subject to the same stringent underwriting
standards referred to in the segment captioned "Credit Risk Management".
 
    Included in the retail leasing portfolio was approximately $2.8 billion of
retail leasing residuals at December 31, 2001, compared with $2.4 billion at
December 31, 2000. The Company monitors concentrations of leases by
manufacturer, vehicle "make" and vehicle type. At year-end 2001, no vehicle-type
concentration exceeded five percent of the aggregate portfolio. Because retail
residual valuations tend to be less volatile for longer-term leases, relative to
the estimated residual at inception of the lease, management actively manages
lease origination production to achieve a longer-term portfolio. At December 31,
2001, the weighted-average term of the portfolio was 51 months. Since 1998, the
used vehicle market has experienced a decline in used car prices. Several
factors have contributed to this deflationary cycle. Aggressive leasing programs
by automobile manufacturers and competitors within the banking industry included
a marketing focus on monthly lease payments, enhanced residuals at lease
inception, shorter-term leases and low mileage leases. These practices have
created a cyclical oversupply of certain off-lease vehicles. Recently,
automobile manufacturers and others have retreated from these marketing programs
or begun to exit the leasing business. Another factor impacting the used vehicle
market has been the trend in new vehicle prices that decreased in the late
1990's. This trend has been driven by surplus automobile manufacturing capacity
and related production and highly competitive Internet sales programs.
Recessionary factors are expected to moderate new car production during the next
several quarters. Also, many Internet marketers failed or transformed into
distribution channels of dealers rather than direct competitors. These recent
trends are expected to abate the deflationary pricing pressures of the past few
years. In response to factors impacting used vehicle prices, the Company
recognized a retail lease impairment of $40.0 million in 2001. Given the current
economic environment, it is difficult to assess the timing and degree of changes
in residual values that may impact financial results over the next several
quarters.
 
    At December 31, 2001, the commercial leasing portfolio had $984.6 million of
residuals. At year-end 2001, lease residuals related to railcars were 16.2
percent. Trucks and other transportation equipment represented 30.2 percent of
the aggregate portfolio while aircraft and manufacturing were 14.9 percent and
12.7 percent, respectively. No other significant concentrations of more than 10
percent existed at December 31, 2001. During 2001, reduced airline travel and
higher fuel costs adversely impacted aircraft and transportation equipment lease
residual values. Although impairment of equipment lease residuals was not
significant in 2001, continuing economic stress in certain industries may
further impact used equipment values into next year.
 
INTEREST RATE RISK MANAGEMENT In the banking industry, a major risk exposure is
changing interest rates. To minimize the volatility of net interest income and
exposure to economic losses, the Company manages its exposure to changes in
interest rates through asset and liability management activities within
guidelines established by its Asset Liability Policy Committee ("ALPC") and
approved by the Board of Directors. ALPC has the responsibility for approving
and ensuring compliance with asset/liability management policies, including
interest rate risk exposure, off-balance sheet activity and the investment
portfolio. The Company uses three methods for measuring and analyzing
consolidated interest rate risk: Net Interest Income Simulation Analysis, Market
Value of Equity Modeling and Repricing Mismatch Analysis.
 
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 and net interest margin 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 these simulations, management estimates the impact on net interest
income of a 300 basis point upward or downward gradual change of market interest
rates over a one year period. The simulations also estimate the effect of
immediate and sustained parallel shifts in the yield curve of 50 basis points as
well as the effect of immediate and sustained flattening or steepening of the
yield curve. These simulations include assumptions about how the balance sheet
is likely to change with changes in loan and deposit growth. Assumptions are
made to project rates for new loans and deposits based on historical analysis,
management's outlook and repricing strategies. Loan prepayment and other options
risks are developed
 
U.S. Bancorp
      36

<PAGE>
 
from industry estimates of prepayment speeds. Because the results of these
simulations can be significantly influenced by assumptions utilized, management
evaluates the sensitivity of the simulation's results to changes in key
assumptions.
 
    The results from the simulation are reviewed by ALPC monthly and are used to
guide hedging strategies. ALPC policy guidelines limit the estimated change in
net interest income to 5.0 percent of forecasted net interest income over the
succeeding 12 months. In simulations as of December 31, 2001, the interest rate
risk position of the Company was relatively neutral as the impact of a downward
movement in rates or an upward movement in rates of 300 basis points over a
twelve month period resulted in less than 1.0 percent change in net interest
income. At December 31, 2001, the Company was well within policy guidelines.
 
MARKET VALUE OF EQUITY MODELING The Company also utilizes the market value of
equity as a measurement tool in managing interest rate sensitivity. The market
value of equity 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. ALPC guidelines limit the change in market value of
equity in a 200 basis point parallel rate shock to 15 percent of the base case.
Given the low level of rates currently the down 200 basis point scenario cannot
be computed. ALPC reviews other down rate scenarios to evaluate the impact of
falling rates.
 
    The valuation analysis is dependent upon certain key assumptions about the
nature of indeterminate maturity of assets and liabilities. Management estimates
the average life and rate characteristics of asset and liability accounts based
upon historical analysis and management's expectation of rate behavior. The
results of the valuation analysis as of December 31, 2001, were well within
policy guidelines.
 
REPRICING MISMATCH ANALYSIS The Company also evaluates its interest rate
sensitivity position to maintain a balance between the amounts of
interest-bearing assets and interest-bearing liabilities which are expected to
mature or reprice at any point in time. While a traditional repricing mismatch
analysis ("gap analysis") provides a snapshot of interest rate risk, it does not
take into consideration that assets and liabilities with similar repricing
characteristics may not reprice at the same time or to the same degree. Also, it
does not necessarily predict the impact of changes in general levels of interest
rates on net interest income.
 
TABLE 17 Derivative Positions
ASSET AND LIABILITY MANAGEMENT POSITIONS

 

<Table>
<Caption>
 
                                                                           Maturing
 
December 31, 2001                             -------------------------------------------------------------------
(Dollars in Millions)                          2002       2003       2004       2005       2006        Thereafter     Total
<S>                                           <C>        <C>        <C>        <C>        <C>          <C>           <C>
----------------------------------------------------------------------------------------------------------------------------
Receive fixed/pay floating swaps
   Notional amount..........................  $ 3,295    $ 1,625    $ 3,223    $ 1,861    $   875       $ 5,240      $16,119
   Weighted-average
      Receive rate..........................     4.57%      6.04%      5.06%      6.05%      5.73%         6.68%        5.74%
      Pay rate..............................     2.00       1.97       2.10       2.14       2.11          2.07         2.06
Pay fixed/receive floating swaps
   Notional amount..........................  $   500    $   962    $   500    $    --    $    --       $    --      $ 1,962
   Weighted-average
      Receive rate..........................     1.79%      1.90%      1.87%        --%        --%           --%        1.86%
      Pay rate..............................     2.08       4.24       3.98         --         --            --         3.62
Basis swaps.................................  $ 1,000    $    --    $    --    $    --    $    --       $    --      $ 1,000
Future and forwards.........................    4,087         --         --         --         --            --        4,087
Options.....................................       --         --         --         --         45            --           45
----------------------------------------------------------------------------------------------------------------------------
 
<Caption>
                                                         Weighted-
                                                          Average
                                                         Remaining
December 31, 2001                              Fair      Maturity
(Dollars in Millions)                          Value     in Years
<S>                                           <C>        <C>
-------------------------------------------------------------------
Receive fixed/pay floating swaps
   Notional amount..........................  $ 329.6        6.30
   Weighted-average
      Receive rate..........................
      Pay rate..............................
Pay fixed/receive floating swaps
   Notional amount..........................  $  (2.1)       1.74
   Weighted-average
      Receive rate..........................
      Pay rate..............................
Basis swaps.................................  $    .2        0.69
Future and forwards.........................     71.7          --
Options.....................................       --         4.9
-------------------------------------------------------------------
</Table>

 
CUSTOMER INTERMEDIATED POSITIONS

<Table>
<Caption>
 
                                                                           Maturing
 
December 31, 2001                             -------------------------------------------------------------------
(Dollars in Millions)                          2002       2003       2004       2005       2006        Thereafter     Total
<S>                                           <C>        <C>        <C>        <C>        <C>          <C>           <C>
----------------------------------------------------------------------------------------------------------------------------
Receive fixed/pay floating swaps
   Notional amount..........................  $   218    $   408    $   386    $   276    $   424       $   425      $ 2,137
Pay fixed/receive floating swaps
   Notional amount..........................      217        409        386        276        424           425        2,137
Basis swaps.................................       --         --          2         --         --            --            2
Options.....................................      514        615         78         --         --             4        1,211
Foreign exchange contracts
   Purchase.................................    1,810         26         --         --         --            --        1,836
   Sell.....................................    1,801         26         --         --         --            --        1,827
----------------------------------------------------------------------------------------------------------------------------
 
<Caption>
                                                         Weighted-
                                                          Average
                                                         Remaining
December 31, 2001                              Fair      Maturity
(Dollars in Millions)                          Value     In Years
<S>                                           <C>        <C>
-------------------------------------------------------------------
Receive fixed/pay floating swaps
   Notional amount..........................  $  63.5        3.83
Pay fixed/receive floating swaps
   Notional amount..........................    (53.4)       3.83
Basis swaps.................................       --        2.67
Options.....................................       --        1.29
Foreign exchange contracts
   Purchase.................................     60.0         .25
   Sell.....................................    (58.0)        .25
-------------------------------------------------------------------
</Table>

 
                                                                    U.S. Bancorp
                                                                         37

<PAGE>
 
USE OF DERIVATIVES TO MANAGE MARKET AND INTEREST RATE RISK In the ordinary
course of business, the Company enters into derivative transactions to manage
its market and prepayment risks and to accommodate the business requirements of
its customers. By their nature, derivative instruments are subject to market
risk. The Company does not utilize derivative instruments for speculative
purposes. To manage its interest rate risk, the Company may enter into interest
rate swap agreements and, to a lesser degree, basis swaps, and interest rate
options such as caps and floors. Interest rate swaps involve the exchange of
fixed-and variable-rate payments without the exchange of the underlying notional
amount on which the interest payments are calculated. Interest rate caps protect
against rising interest rates while interest rate floors protect against falling
interest rates. In connection with its mortgage banking business, the Company
may enter into forward commitments, futures and options to hedge interest rate
risk of fixed-rate mortgage loans held for sale and unfunded commitments. All
interest rate derivatives that qualify for hedge accounting are recorded at fair
value as other assets or liabilities on the balance sheet and designated as
either "fair value" or "cash flow" hedges. The Company performs an assessment,
both at the inception of the hedge and quarterly thereafter, to determine
whether these derivatives are highly effective in offsetting changes in the
value of the hedged items. Hedge ineffectiveness for both cash flow and fair
value hedges is immediately recorded in noninterest income.
 
    The Company also enters into derivative contracts to accommodate the
business requirements of its customers. Customer intermediated transactions may
include interest rate derivatives and foreign exchange forward contracts and
options. Foreign exchange-based forward contracts provide for the delayed
delivery of a purchase or sale of foreign currency. Generally, the Company
enters into offsetting derivative positions to mitigate its market risk
associated with customer-based contracts. Intermediated interest rate swaps,
foreign exchange contracts and all other derivative contracts that do not
qualify for hedge accounting are recorded at fair value and resulting gains or
losses are recorded in trading account profits and commissions. Derivative
instruments are subject to credit risk associated with counterparties to the
derivative contracts. Credit risk associated with derivatives is measured based
on the replacement cost should the counterparties with contracts in a gain
position to the Company fail to perform under the terms of the contracts. The
Company manages this risk through diversification of its derivative positions
among dealers, primarily commercial banks, broker-dealers and corporations, with
established relationships and requiring collateral to support credit exposures
in excess of established guidelines. To minimize the risk, the Company enters
into legally enforceable master netting agreements, which permit the close out
and netting of transactions with the same counterparty upon the occurrence of
certain events. Also, a portion of the derivative activity involves
exchange-traded instruments. Because exchange-traded instruments conform to
standard terms and are subject to policies set by the exchange involved,
including counterparty approval, margin requirements and security deposit
requirements, the credit risk is substantively reduced.
 
    Table 17 summarizes information on derivative positions as of December 31,
2001.
 
MARKET RISK MANAGEMENT In addition to interest rate risk and market risk
associated with derivatives, the Company is exposed to other forms of market
risk as a consequence of conducting normal business activities. Business
activities that contribute to market risk include, among other things, market
making, underwriting, proprietary trading and foreign exchange positions. Value
at Risk ("VaR") is a key measure of market risk for the Company. VaR represents
the maximum amount that the Company has placed at risk of loss, with a
ninety-nine percent degree of confidence, in the course of its risk taking
activities. Its purpose is to describe the amount of earnings at risk due to
potential losses from adverse market movements.
 
    VaR modeling on trading activities is subject to certain limitations.
Additionally, it should be recognized that there are assumptions and estimates
associated with VaR modeling and actual results could differ from these
assumptions and estimates. The Company mitigates these uncertainties through
regular monitoring of trading activities by management and other risk management
practices including stop-loss limits and position limits. A stress-test model is
used to provide management with a perspective on market events that a VaR model
does not capture. In each case, the historical worst performance of each asset
class is observed and applied to current trading positions.
 
    ALPC establishes market risk limits subject to approval by the Company's
Board of Directors. The Company's VaR limit was $40.0 million at December 31,
2001. The market risk inherent in the Company's customer-based derivative
trading, mortgage banking pipeline, broker-dealer activities, including
equities, fixed income, high yield securities and foreign exchange, as estimated
by the VaR analysis, was $10.9 million at December 31, 2001.
 
LIQUIDITY RISK MANAGEMENT ALPC establishes policies, as well as analyzes and
manages liquidity, to ensure that adequate funds are available to meet normal
operating requirements in addition to unexpected customer demands for funds,
such as high levels of deposit withdrawals or loan demand, in a timely and
cost-effective manner. The most important factor in the preservation of
liquidity is
 
U.S. Bancorp
      38

<PAGE>
 
maintaining public confidence that facilitates the retention and growth of a
large, stable supply of core deposits and wholesale funds. Ultimately, public
confidence is generated through profitable operations, sound credit quality and
a strong capital position. The Company's performance in these areas has enabled
it to develop a large and reliable base of core funding within its market areas
and in domestic and global capital markets. Liquidity management is viewed from
a long-term and short-term perspective, as well as from an asset and liability
perspective. Management monitors liquidity through a regular review of maturity
profiles, yield and rate behaviors, and loan and deposit forecasts to minimize
funding risk.
 
    The Company maintains strategic liquidity and contingency plans that are
subject to the availability of asset liquidity in the balance sheet. ALPC
periodically reviews the Company's ability to meet funding deficiencies due to
adverse business events. These funding needs are then matched with specific
asset-based sources to ensure sufficient funds are available. Also, strategic
liquidity policies require diversification of wholesale funding sources to avoid
concentrations in any one market source. Subsidiary banks are members of various
Federal Home Loan Banks that provide a source of funding through FHLB advances.
The Company maintains a Grand Cayman office for issuing eurodollar certificates
of deposit. The Company also establishes relationships with dealers to issue
national market retail and institutional savings certificates and short-and
medium-term bank notes. Also, the Company's subsidiary banks have significant
correspondent banking networks and corporate accounts. Accordingly, it has
access to national fed funds, funding through repurchase agreements and sources
of more stable regionally based certificates of deposit.
 
    Asset securitization and conduits represent another source of funding the
Company's growth through off-balance sheet structures. The Company has two
off-balance sheet conduits that hold high-grade assets. The conduits, which are
funded by issuing commercial paper, held average assets of $14.8 billion
including short-term participations in commercial loans, commercial paper and
investment securities. The Company provides liquidity facilities to both
conduits and credit enhancement to the loan conduit that may be triggered by
certain events. Based on the current performance of each structure the Company
does not anticipate these triggers will occur in the foreseeable future.
Included in noninterest income was $132.7 million of revenue related to these
conduits in 2001 including fees for servicing activities and liquidity
facilities and credit enhancements.
 
    In November 2001, the Company established a $738 million securitization
structure related to an unsecured small business credit product that was being
discontinued. Additionally, the Company previously created asset-backed
securitizations to fund the noninterest-bearing corporate card loan portfolio
and indirect automobile loans. The corporate card securitization held $403
million in average assets in 2001 and is scheduled to be liquidated in February
2002. The indirect automobile securitization held $655 million of average assets
in 2001. The Company provided credit enhancements in the form of subordination
and reserve accounts at the inception of the transactions. The Company's risk,
primarily for losses in the underlying assets, is considered in determining the
fair value of the Company's retained interests in these securitizations. The
Company recognized income from residual interests and servicing fees for these
securitizations of $15.5 million in 2001. Refer to Note 8 of the Notes to
Consolidated Financial Statements for further information on these off-balance
sheet structures.
 
    With respect to real estate and certain equipment, the Company enters into
capital or operating leases to meet its business requirements. Certain operating
lease arrangements involve third party lessors that acquire these business
assets through leveraged financing structures commonly referred to as "synthetic
leases". At December 31, 2001, synthetic lease structures held real estate
assets of $372.7 million and equipment of $41.6 million. The Company provides
guarantees to the lender in the event of default by the leveraged financing
structures or in the event that the Company does not exercise its option to
purchase the property at the end of the lease term and the fair value of the
assets is less than the purchase price. The Company's minimum lease obligations
for capital and operating arrangements, including those related to synthetic
leases, are disclosed in Note 22 of the Notes to Consolidated Financial
Statements.
 
    Credit, liquidity, operational and legal structural risks exist due to the
nature and complexity of asset securitizations and other off-balance sheet
structures. ALPC regularly monitors the performance of each off-balance sheet
structure in an effort to minimize these risks and ensure compliance with the
requirements of the structures. The Company utilizes its credit risk management
systems to evaluate credit quality of underlying assets and regularly forecasts
cash flows to evaluate any potential impairment of retained interests. Also,
regulatory guidelines require consideration of asset securitizations in the
determination of risk-based capital ratios.
 
    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. The debt ratings noted in Table 18 reflect the rating
agencies' recognition of the strong, consistent financial performance of the
Company and quality of the balance sheet.
 
                                                                    U.S. Bancorp
                                                                         39

<PAGE>
 
    The parent company's routine funding requirements consist primarily of
operating expenses, dividends to shareholders, debt service 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.
Subsidiary management fees fund operating expenses, while shareholder dividends
and debt service are satisfied primarily through dividends from its
subsidiaries.
 
    At December 31, 2001, parent company long-term debt outstanding was $6.1
billion, compared with $6.6 billion at December 31, 2000. In 2001, the parent
company issued $1.1 billion of senior contingent convertible debt, offset by
$1.6 billion of maturities and other repayments of long-term debt. Total parent
company debt maturing in 2002 is $1.5 billion. These debt obligations are
expected to be met through medium-term note issuances and dividends from
subsidiaries, as well as from the approximately $3.2 billion of parent company
cash and cash equivalents at December 31, 2001. 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 was $1.2 billion at December 31, 2001. For further
information, see Note 23 of the Notes to Consolidated Financial Statements.
 
CAPITAL MANAGEMENT
 
The Company is committed to managing capital for maximum shareholder benefit and
maintaining strong protection for depositors and creditors. Total shareholders'
equity was $16.5 billion at December 31, 2001, compared with $15.2 billion at
December 31, 2000. The increase was primarily the result of corporate earnings
and the issuance of stock in connection with the NOVA acquisition, offset by
dividend payments, merger and restructuring-related items and share repurchases.
 
    On February 27, 2001, the Company increased its dividend rate per common
share 15.4 percent from $.1625 per quarter to $.1875 per quarter. Excluding
merger and restructuring-related charges, the dividend payout ratio for 2001
increased to 57.0 percent compared with payout ratios of 40.1 percent in 2000
and 31.7 percent in 1999.
 
    Management has established financial objectives which provide a framework to
monitor future capital needs. The Company's dividend policy is influenced by the
belief that most shareholders are interested in long-term performance as well as
current dividend yields. The current dividend payout level is considered
reasonable given the Company's present cash flow position, level of earnings and
the strength of its subsidiary banks' capital ratios. Future dividends will be
determined based on results of operations, growth expectations, financial
condition, regulatory constraints and other factors deemed relevant by the Board
of Directors.
 
    On July 17, 2001, the Company's Board of Directors authorized the repurchase
of up to 56.4 million shares of the Company's common stock in connection with
the July 24, 2001, acquisition of NOVA. During 2001, the Company repurchased
19.7 million shares of common stock in both public and private transactions in
connection with this authorization. The Company had forward contracts to
purchase 26.7 million shares within this authorization. These contracts were
settled in January 2002. On December 18, 2001, the Board of Directors approved
an authorization to repurchase an additional 100 million shares of common stock
through 2003.
 
    On February 16, 2000, the Board of Directors of USBM authorized the
repurchase of up to $2.5 billion of its common stock over a two year period
ending March 31, 2002. On April 11, 2000, Firstar's Board of Directors approved
a common stock repurchase program of 100 million shares. The stock repurchase
programs of both Firstar and USBM were rescinded on October 4, 2000, and January
17, 2001, respectively, in connection with the planned merger of the formerly
separate companies. For a complete analysis of activities impacting
shareholders' equity
 
TABLE 18 Debt Ratings
 

<Table>
<Caption>
                                                                              Standard &
At December 31, 2001                                               Moody's         Poors       Fitch
<S>                                                                <C>        <C>           <C>
----------------------------------------------------------------------------------------------------
U.S. BANCORP
   Short-term borrowings....................................                                      F1
   Senior debt and medium-term notes........................            A1          A             A+
   Subordinated debt........................................            A2         A-              A
   Preferred stock..........................................            A3       BBB+              A
   Commercial paper.........................................           P-1        A-1             F1
U.S. BANK NATIONAL ASSOCIATION
   Short-term time deposits.................................           P-1        A-1            F1+
   Long-term time deposits..................................           Aa3         A+            AA-
   Bank notes...............................................       Aa3/P-1     A+/A-1         A+/F1+
   Subordinated debt........................................            A1          A              A
----------------------------------------------------------------------------------------------------
</Table>

 
U.S. Bancorp
      40

<PAGE>
 
and capital management programs, refer to Note 15 of the Notes to Consolidated
Financial Statements.
 
    Banking regulators define minimum capital requirements for banks and
financial services holding companies. Additionally, credit rating agencies
evaluate capital adequacy including tangible common equity as a percentage of
tangible assets. The Company manages various capital ratios to maintain
appropriate capital levels in accordance with Board-approved capital guidelines.
At December 31, 2001, tangible common equity was $9.4 billion (5.7 percent of
tangible assets), compared with 6.3 percent at year-end 2000. The decline in the
tangible common equity ratio was primarily due to the acquisition of NOVA during
the third quarter of 2001. As of December 31, 2001, tier 1 and total risk-based
capital ratios were 7.7 percent and 11.7 percent, respectively, well above the
minimum regulatory requirements of 4.0 percent for tier 1 and 8.0 percent for
total risk-based capital. This compared to tier 1 and total risk-based capital
ratios of 7.2 percent and 10.6 percent at December 31, 2000. The improvement in
the total risk-based capital ratio during 2001 primarily reflected changes in
the mix of investment securities in addition to the issuance of Trust Preferred
Securities. Regulatory authorities have also established a minimum "leverage"
ratio of 4.0 percent, which is defined as tier 1 equity to average quarterly
assets. For the fourth quarter of 2001, the Company's leverage ratio improved to
7.7 percent compared with 7.4 percent in the fourth quarter of a year ago.
 
    With respect to each of its banking subsidiaries, the Company intends to
maintain sufficient capital to be "well capitalized" as defined by the
regulatory agencies. The "well capitalized" category requires tier 1 and total
risk-based capital ratios of at least 6.0 percent and 10.0 percent,
respectively, and a minimum leverage ratio of 5.0 percent. All banking
subsidiaries are considered "well capitalized" at December 31, 2001.
 
    Table 19 provides a summary of tier 1 and total risk-based capital ratios as
of December 31, 2001 and 2000, as defined by the regulatory agencies.
 
FOURTH QUARTER SUMMARY
 
In the fourth quarter of 2001, the Company had net income of $695.4 million
($.36 per diluted share), compared with $768.7 million ($.40 per diluted share)
in the fourth quarter of 2000. The Company reported operating earnings (net
income excluding merger and restructuring-related items) of $785.2 million ($.40
per diluted share) in the fourth quarter of 2001, compared with operating
earnings of $824.2 million ($.43 per diluted share) in the fourth quarter of
2000. Fourth quarter net interest income on a taxable-equivalent basis increased
$122.6 million to $1,684.8 million, compared with the fourth quarter of
 
TABLE 19 Regulatory Capital Ratios
 

<Table>
<Caption>
At December 31 (Dollars in Millions)                                     2001            2000
<S>                                                                <C>            <C>
---------------------------------------------------------------------------------------------
U.S. BANCORP
Tangible common equity......................................       $    9,374     $    10,045
   As a percent of tangible assets..........................              5.7%            6.3%
Tier 1 capital..............................................       $   12,488     $    11,602
   As a percent of risk-weighted assets.....................              7.7%            7.2%
   As a percent of adjusted quarterly average assets
    (leverage ratio)........................................              7.7%            7.4%
Total risk-based capital....................................       $   19,148     $    17,038
   As a percent of risk-weighted assets.....................             11.7%           10.6%
BANK SUBSIDIARIES(A)
   U.S. BANK NATIONAL ASSOCIATION
      Tier 1 capital........................................              7.5%            7.3%
      Total risk-based capital..............................             11.8            11.2
      Leverage..............................................              7.7             7.9
   U.S. BANK NATIONAL ASSOCIATION ND
      Tier 1 capital........................................             18.1%           10.3%
      Total risk-based capital..............................             23.1            15.6
      Leverage..............................................             17.9            10.2
   U.S. BANK NATIONAL ASSOCIATION MT
      Tier 1 capital........................................             19.4%           14.9%
      Total risk-based capital..............................             20.5            17.6
      Leverage..............................................             14.0            12.0
 
                                                                                        Well-
BANK REGULATORY CAPITAL REQUIREMENTS                                  Minimum     Capitalized
                                                                   --------------------------
   Tier 1 capital...........................................              4.0%            6.0%
   Total risk-based capital.................................              8.0            10.0
   Leverage.................................................              4.0             5.0
---------------------------------------------------------------------------------------------
</Table>

 
(a) These balances and ratios were prepared in accordance with regulatory
    accounting principles as disclosed in the subsidiaries' regulatory reports.
 
                                                                    U.S. Bancorp
                                                                         41

<PAGE>
 
2000, primarily reflecting increased earning assets driven by increases in the
investment portfolio, core retail loan growth and acquisitions, partially offset
by a $4.3 billion reduction in loans related to transfers of short-term, high
credit quality, low margin commercial loans to the loan conduit, a $2.8 billion
decline in residential mortgage loans, and the sale of indirect automobile and
high LTV home equity loans in the first quarter of 2001. The net interest margin
on a taxable-equivalent basis increased in the fourth quarter of 2001 to 4.60
percent, compared with 4.33 percent in the fourth quarter of 2000, reflecting
funding benefits during the declining rate environment, a more favorable funding
mix and improving loan spreads, partially offset by lower yields on the
investment portfolio.
 
    The provision for credit losses increased to $265.8 million in the fourth
quarter of 2001, compared with $229.5 million in the fourth quarter of 2000. The
increase was the result of higher charge-offs from a year ago due to
deterioration in economic conditions and credit quality in the loan portfolio.
 
    Noninterest income increased $58.7 million from the same quarter a year ago,
to $1,323.6 million. Credit card fee revenue declined quarter over quarter by
$18.6 million (8.8 percent) reflecting lower corporate card transaction volumes.
Merchant and ATM processing revenue increased $116.0 million principally due to
the acquisition of NOVA. Deposit service charges, cash management fees,
commercial product revenue and mortgage banking revenue improved in the fourth
quarter of 2001 from a year ago. The
 
TABLE 20 Fourth Quarter Summary
 

<Table>
<Caption>
                                                                    Three Months Ended
                                                                       December 31,
                                                                   --------------------
(Dollars in Millions, Except Per Share Data)                           2001        2000
<S>                                                                <C>         <C>
---------------------------------------------------------------------------------------
CONDENSED INCOME STATEMENT
Interest income (taxable-equivalent basis)..................       $2,529.3    $3,179.7
Interest expense............................................          844.5     1,617.5
                                                                   --------------------
   Net interest income......................................        1,684.8     1,562.2
Securities gains, net.......................................           22.0         7.0
Noninterest income..........................................        1,301.6     1,257.9
                                                                   --------------------
   Total net revenue........................................        3,008.4     2,827.1
Noninterest expense(a)......................................        1,503.9     1,347.8
Provision for credit losses.................................          265.8       229.5
                                                                   --------------------
   Income before taxes and merger and restructuring-related
    items...................................................        1,238.7     1,249.8
Taxable-equivalent adjustment...............................            9.9        20.7
Income taxes................................................          443.6       404.9
                                                                   --------------------
Operating earnings(a).......................................          785.2       824.2
Merger and restructuring-related items (after-tax)..........          (89.8)      (55.5)
                                                                   --------------------
   Net income in accordance with GAAP.......................       $  695.4    $  768.7
                                                                   --------------------
PER COMMON SHARE
Earnings per share..........................................       $    .36    $    .41
Diluted earnings per share..................................            .36         .40
Dividends declared per share(b).............................          .1875       .1625

FINANCIAL RATIOS
Return on average assets....................................           1.64%       1.89%
Return on average equity....................................           16.5        20.7
Net interest margin (taxable-equivalent basis)..............           4.60        4.33
Efficiency ratio............................................           55.1        50.8

FINANCIAL RATIOS EXCLUDING MERGER AND RESTRUCTURING-RELATED
   ITEMS(A)
Return on average assets....................................           1.85%       2.02%
Return on average equity....................................           18.6        22.2
Efficiency ratio............................................           50.4        47.8
Banking efficiency ratio(c).................................           46.6        41.9
---------------------------------------------------------------------------------------
</Table>

 
(a) The Company analyzes its performance on a net income basis in accordance
    with accounting principles generally accepted in the United States, as well
    as on an operating basis before merger and restructuring-related items
    referred to as "operating earnings." Operating earnings are presented as
    supplemental information to enhance the readers' understanding of, and
    highlight trends in, the Company's financial results excluding the impact of
    merger and restructuring-related items of specific business acquisitions and
    restructuring activities. Operating earnings should not be viewed as a
    substitute for net income and earnings per share as determined in accordance
    with accounting principles generally accepted in the United States. Merger
    and restructuring-related items excluded from net income to derive operating
    earnings may be significant and may not be comparable to other companies.
 
(b) Dividends per share have not been restated for the 2001 merger of Firstar
    and USBM.
 
(c) Without investment banking and brokerage activity.
 
U.S. Bancorp
      42

<PAGE>
 
improvements reflected core business growth, product enhancements, loan conduit
activities and strong mortgage originations. Capital markets-related revenue
declined $31.6 million (12.0 percent) reflecting softness in equity capital
markets since late 2000. Other income declined $99.6 million from the same
quarter a year ago primarily due to a $10.0 million retail lease residual
impairment recognized in the fourth quarter of 2001 and a decline in the level
of equity investment earnings.
 
    Fourth quarter noninterest expense totaled $1,644.5 million in the fourth
quarter of 2001 compared with $1,431.9 million in the fourth quarter of 2000.
Excluding merger-related charges, noninterest expense totaled $1,503.9 million,
an increase of $156.1 million (11.6 percent) from the fourth quarter of 2000.
Approximately $100 million of the increase was the result of acquisitions. In
addition to the impact of acquisitions, noninterest expenses were higher due to
recognizing a $27.3 million MSR impairment in the fourth quarter of 2001 and
increases due to core business growth, offset somewhat by a reduction in
expenses related to capital markets activities.
 
LINE OF BUSINESS FINANCIAL REVIEW
 
Operating segments are components of the Company about which financial
information is available and is evaluated regularly in deciding how to allocate
resources and assess performance. Prior to the merger of Firstar and USBM, the
Company operated its business units separately in 2000 and 1999 and the basis of
financial presentation differed significantly. Accordingly, the presentation of
comparative business line results for 1999 is not practicable at this time.
 
    At the date of the merger of Firstar and USBM, the Company reorganized into
the following operating segments: Wholesale Banking, Consumer Banking, Private
Client, Trust and Asset Management, Payment Services, Capital Markets, and
Treasury and Corporate Support. Units providing central support and other
corporate activities are reported as part of Treasury and Corporate Support and
allocated as appropriate. For detailed descriptions of these operating segments
see "BUSINESS SEGMENTS" in Note 1 of the Notes to Consolidated Financial
Statements.
 
BASIS OF FINANCIAL PRESENTATION Business line results are derived from the
Company's business unit profitability reporting system by specifically
attributing managed balance sheet assets, deposits and other liabilities and
their related interest income or expense. Funds transfer pricing methodologies
are utilized to allocate a cost for funds used or credit for funds provided to
all business line assets and liabilities using a matched funding concept. Also,
the business unit is allocated the taxable-equivalent benefit of tax-exempt
products. The provision for credit losses recorded by each operating segment was
primarily based on the net charge-offs of each line of business. The difference
between the provision for credit losses determined in accordance with accounting
principles generally accepted in the United States recognized by the Company on
a consolidated basis and the provision recorded by the business lines is
recorded 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 expenses are accounted for within each
segment's financial results in a manner similar to the consolidated financial
statements. Noninterest expenses incurred by centrally managed operations or a
business line that directly supports another business line's operations are not
charged to the applicable business line. 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. Merger and restructuring-related items are not identified by or
allocated to lines of business. Because capital levels are evaluated and managed
centrally, capital is not allocated to the business units. Designations,
assignments and allocations may change from time to time as management
accounting systems are enhanced or product lines change. During 2001, certain
organization and methodology changes were made to reflect the merger. All
results for 2001 and 2000 have been restated to present consistent methodologies
for all business lines.
 
WHOLESALE BANKING offers lending, depository, treasury management and other
financial services to middle market, large corporate and public sector clients.
Wholesale Banking contributed $1,364.4 million of the Company's pre-tax income
in 2001, compared with $1,667.3 million in 2000, a decrease of $302.9 million
(18.2 percent). The decline was primarily driven by an increase in the provision
for credit losses and certain asset write-downs taken by the business line. The
line of business generated operating income of $1,956.8 million in 2001 and
$1,827.8 million in 2000, a 7.1 percent increase. Total net revenue grew by
$175.9 million (8.0 percent) in 2001. Net interest income on a
taxable-equivalent basis increased 4.7 percent for the year primarily due to
core deposit growth, as well as the impact of banking and equipment finance
leasing acquisitions. The increase is offset somewhat by the transfer of
short-term, high credit quality, low margin commercial loans to the loan conduit
and the impact of declining rates on the funding benefit of deposits.
Noninterest income increased 19.4 percent in 2001 reflecting revenue related to
the leasing acquisitions, core growth in syndication and cash management-related
fees and growth in securitization fee
 
                                                                    U.S. Bancorp
                                                                         43

<PAGE>
 
income related to the loan conduit. Net fee income growth included a $6.0
million impairment of commercial leasing residuals and lower earnings of
approximately $33.4 million from relationship-based equity investments managed
by the line of business. Offsetting the net growth in revenue was an increase in
noninterest expenses of $46.9 million (12.9 percent), primarily due to bank and
lease acquisitions, planned growth in targeted markets and certain asset
write-downs. Included in expenses during the year were asset write-downs of
commercial leasing partnerships of $38.4 million and repossessed tractor/trailer
and other related property of $14.0 million. Cost savings from business
integration activities during 2001 substantively offset the core and
acquisition-related expense growth. Additionally, the provision for credit
losses increased $431.9 million during 2001. The increase reflected increasing
net charge-offs due to the deterioration in credit quality reflected by an
increase in nonperforming commercial loans. Refer to "Corporate Risk Profile" on
pages 29 through 36 for further information on factors impacting the credit
quality of the loan portfolios.
 
CONSUMER BANKING delivers products and services to the broad consumer market and
small businesses through banking offices, telemarketing, on-line services,
direct mail and automated teller machines ("ATMs"). It encompasses community
banking, metropolitan banking, small business banking, consumer lending,
mortgage banking and investment product sales. Consumer Banking contributed
$1,866.4 million of the Company's pre-tax income in 2001 compared with $2,039.4
million in 2000, a decrease of 8.5 percent. The decline was driven by the impact
of declining rates on the funding benefit of deposits, an increase in the
provision for credit losses, banking acquisitions and certain asset write-downs
taken by the Company. The line of business generated operating income of
$2,287.7 million in 2001, a decline of 4.2 percent from 2000. Total net revenue
grew by 1.3 percent during 2001, or $53.9 million over 2000. Fee-based revenue
growth was strong, increasing by 19.0 percent over 2000, while net interest
income declined 4.7 percent. The decline in net interest income reflected the
impact of declining interest rates on the funding benefit of consumer deposits.
It also reflects the sale of approximately $1.3 billion of high LTV home equity
and indirect automobile loans in the first quarter of 2001, and the divestiture
of branches with $771.0 million of deposits during the second quarter of 2001 in
connection with the merger of Firstar and USBM.
 
TABLE 21 Line of Business Financial Performance
 

<Table>
<Caption>
                                                                        Wholesale                        Consumer
                                                                         Banking                          Banking
                                                              --------------------------------------------------------------
                                                                                    Percent                          Percent
Year Ended December 31 (Dollars in Millions)                      2001       2000    Change        2001       2000    Change
<S>                                                           <C>        <C>        <C>        <C>        <C>        <C>
----------------------------------------------------------------------------------------------------------------------------
CONDENSED INCOME STATEMENT
Net interest income (taxable-equivalent basis)..............  $1,774.4   $1,695.0     4.7%     $2,895.1   $3,039.3     (4.7%)
Noninterest income..........................................     594.2      497.7    19.4       1,242.6    1,044.5     19.0
                                                              -------------------              -------------------
   Total net revenue........................................   2,368.6    2,192.7     8.0       4,137.7    4,083.8      1.3
Noninterest expense.........................................     397.9      355.6    11.9       1,685.3    1,628.7      3.5
Other intangible amortization...............................       1.4        1.3     7.7         150.4       62.3        *
Goodwill amortization.......................................      12.5        8.0    56.3          14.3        4.4        *
                                                              -------------------              -------------------
   Total noninterest expense................................     411.8      364.9    12.9       1,850.0    1,695.4      9.1
                                                              -------------------              -------------------
      Operating income......................................   1,956.8    1,827.8     7.1       2,287.7    2,388.4     (4.2)
Provision for credit losses.................................     592.4      160.5       *         421.3      349.0     20.7
                                                              -------------------              -------------------
Income before income taxes..................................   1,364.4    1,667.3   (18.2)      1,866.4    2,039.4     (8.5)
Income taxes and taxable-equivalent adjustment..............     496.5      606.8   (18.2)        679.2      742.1     (8.5)
                                                              -------------------              -------------------
Operating earnings, before merger and restructuring-related
   items....................................................  $  867.9   $1,060.5   (18.2)     $1,187.2   $1,297.3     (8.5)
                                                              -------------------              -------------------
Merger and restructuring-related items (after-tax)(a).......
Net income..................................................
 
AVERAGE BALANCE SHEET DATA
Loans.......................................................  $ 54,036   $ 55,106    (1.9)     $ 43,017   $ 42,306      1.7
Assets......................................................    60,174     60,296     (.2)       49,919     47,943      4.1
Noninterest-bearing deposits................................    10,687      9,434    13.3        11,999     11,935       .5
Interest-bearing deposits...................................     6,536      4,938    32.4        61,358     62,266     (1.5)
                                                              -------------------              -------------------
   Total deposits...........................................  $ 17,223   $ 14,372    19.8      $ 73,357   $ 74,201     (1.1)
----------------------------------------------------------------------------------------------------------------------------
</Table>

 
(a) Merger and restructuring-related items are not allocated to the business
    lines.
 
 *  Not meaningful.
 
U.S. Bancorp
      44

<PAGE>
 
The decline was partially offset by a funding benefit of deposits related to the
acquisition of 41 branches in Tennessee. Growth in fee-based revenue was
primarily attributed to an increase in retail deposit and cash management fees,
mortgage banking originations, the alignment and redesign of products and
features in connection with the merger of Firstar and USBM, and fee revenue
related to the Tennessee branch acquisition. Fee income growth for 2001 was
tempered somewhat by the recognition of an impairment of retail leasing
residuals of $40.0 million during the third and fourth quarters. Consumer
Banking results reflect an increase in noninterest expense of $154.6 million
(9.1 percent) primarily related to impairments of MSRs of $60.8 million and the
Tennessee branch acquisition. Additionally, the provision for credit losses
increased $72.3 million (20.7 percent) during the year. The increase reflects
deterioration in asset quality, higher consumer bankruptcies and economic trends
impacting the business unit's loan and retail leasing portfolios.
 
PRIVATE CLIENT, TRUST AND ASSET MANAGEMENT provides mutual fund processing
services, trust, private banking and financial advisory services through four
businesses, including: the Private Client Group, Corporate Trust Services,
Institutional Trust and Custody, and Fund Services. The business segment also
offers investment management services to several client segments including
mutual funds, institutional customers, and private asset management. Private
Client, Trust and Asset Management contributed $641.3 million of the Company's
pre-tax income in 2001 compared with $649.2 million in 2000, a 1.2 percent
decline. Growth in net interest income during 2001 compared with 2000, was
driven by core loan and deposit growth partially offset by the impact of
declining rates on the funding benefit of deposits. Noninterest income declined
3.5 percent during 2001 compared with a year ago primarily due to trust and
investment management fees being adversely affected by the current capital
markets conditions. Noninterest expense decreased 2.3 percent ($11.1 million) in
2001. Cost savings related to integration activities primarily drove the decline
in noninterest expense.
 
PAYMENT SERVICES includes consumer and business credit cards, corporate and
purchasing card services, consumer lines of credit, ATM processing and merchant
processing. Payment Services contributed $724.3 million of the Company's pre-tax
income in 2001 compared with $708.6 million in 2000, a 2.2 percent increase. The
business unit's financial results were, in part, impacted by an increase in the
provision for credit losses and the NOVA acquisition

 

<Table>
<Caption>
        Private Client, Trust                   Payment                         Capital
        and Asset Management                   Services                         Markets
-------------------------------------------------------------------------------------------------
                          Percent                          Percent                        Percent
        2001       2000    Change        2001       2000    Change      2001       2000    Change
<S> <C>        <C>        <C>        <C>        <C>        <C>        <C>      <C>        <C>
-------------------------------------------------------------------------------------------------
    $  244.4   $  223.6     9.3%     $  459.6   $  428.6      7.2%    $ 17.8   $   24.9    (28.5)%
       876.3      908.1    (3.5)      1,289.0    1,080.6     19.3      831.2    1,097.6    (24.3)
    -------------------              -------------------              -----------------
     1,120.7    1,131.7    (1.0)      1,748.6    1,509.2     15.9      849.0    1,122.5    (24.4)
       448.2      459.4    (2.4)        525.2      412.8     27.2      738.2      907.4    (18.6)
        20.8       20.7      .5          55.4       23.8        *         --         .1       --
          .4         .4      --          11.9       11.4      4.4         .1         .7    (85.7)
    -------------------              -------------------              -----------------
       469.4      480.5    (2.3)        592.5      448.0     32.3      738.3      908.2    (18.7)
    -------------------              -------------------              -----------------
       651.3      651.2      --       1,156.1    1,061.2      8.9      110.7      214.3    (48.3)
        10.0        2.0       *         431.8      352.6     22.5       17.6         --        *
    -------------------              -------------------              -----------------
       641.3      649.2    (1.2)        724.3      708.6      2.2       93.1      214.3    (56.6)
       233.4      236.2    (1.2)        263.6      257.9      2.2       33.9       78.0    (56.5)
    -------------------              -------------------              -----------------
    $  407.9   $  413.0    (1.2)     $  460.7   $  450.7      2.2     $ 59.2   $  136.3    (56.6)
    -------------------              -------------------              -----------------
    $  4,370   $  3,794    15.2      $  9,972   $  9,531      4.6     $  483   $    263     83.7
       5,424      5,130     5.7        12,142     10,652     14.0      3,478      3,394      2.5
       2,134      2,119      .7           168        188    (10.6)       174        154     13.0
       4,916      4,722     4.1            --         --       --         --         --       --
    -------------------              -------------------              -----------------
    $  7,050   $  6,841     3.1      $    168   $    188    (10.6)    $  174   $    154     13.0
-------------------------------------------------------------------------------------------------
 
<Caption>
             Treasury and                        Consolidated
           Corporate Support                        Company
---  ------------------------------------------------------------------
                           Percent                              Percent
         2001       2000    Change           2001        2000    Change
<S>  <C>        <C>        <C>          <C>         <C>         <C>
     $1,073.4   $  723.6     48.3%      $ 6,464.7   $ 6,135.0      5.4%
        463.9      254.7     82.1         5,297.2     4,883.2      8.5
     -------------------                ---------------------
      1,537.3      978.3     57.1        11,761.9    11,018.2      6.7
      1,334.5    1,212.1     10.1         5,129.3     4,976.0      3.1
         50.4       49.1      2.6           278.4       157.3     77.0
        211.9      210.1       .9           251.1       235.0      6.9
     -------------------                ---------------------
      1,596.8    1,471.3      8.5         5,658.8     5,368.3      5.4
     -------------------                ---------------------
        (59.5)    (493.0)   (87.9)        6,103.1     5,649.9      8.0
        673.5      (36.1)       *         2,146.6       828.0        *
     -------------------                ---------------------
       (733.0)    (456.9)    60.4         3,956.5     4,821.9    (17.9)
       (300.9)    (206.0)    46.1         1,405.7     1,715.0    (18.0)
     -------------------                ---------------------
     $ (432.1)  $ (250.9)    72.2         2,550.8     3,106.9    (17.9)
     -------------------                ---------------------
                                           (844.3)     (231.3)
                                        ---------------------
                                        $ 1,706.5   $ 2,875.6
                                        ---------------------
     $  6,299   $  7,317    (13.9)      $ 118,177   $ 118,317      (.1)
       34,807     31,066     12.0         165,944     158,481      4.7
          (53)       (10)       *          25,109      23,820      5.4
        7,037      7,680     (8.4)         79,847      79,606       .3
     -------------------                ---------------------
     $  6,984   $  7,670     (8.9)      $ 104,956   $ 103,426      1.5
--------------------------------------------------------------------------------
</Table>

 
                                                                    U.S. Bancorp
                                                                         45

<PAGE>
 
completed during the third quarter of 2001. The line of business generated
operating income of $1,156.1 million in 2001, an 8.9 percent increase compared
with 2000. Total net revenue growth was 15.9 percent, or $239.4 million,
compared with 2000 including the impact of the NOVA acquisition of $134.3
million. Excluding the NOVA acquisitions, total net revenue growth was
approximately 7.0 percent. Total net revenue growth was partially offset by
increased in noninterest expense of 32.3 percent, primarily driven by the NOVA
acquisition. Excluding the impact of the NOVA acquisition, noninterest expenses
for the business line were essentially flat relative to a year ago.
Additionally, the provision for credit losses increased $79.2 million (22.5
percent) in 2001. The increase in provision reflects deterioration in
delinquencies, higher bankruptcies and credit losses in the credit card
portfolio and the economic slowdown impacting consumers.
 
CAPITAL MARKETS engages in equity and fixed income trading activities, offers
investment banking and underwriting services for corporate and public sector
customers and provides financial advisory services and securities, mutual funds,
annuities and insurance products to consumers and regionally based businesses
through a network of brokerage offices. Capital Markets contributed $93.1
million of the Company's pre-tax income in 2001, compared with $214.3 million in
2000, a decrease of 56.6 percent. The unfavorable variance in pre-tax income
from 2000 was due to significant decreases in fees related to trading,
investment product fees and commissions and investment banking revenues
reflecting the recent adverse capital markets conditions. In response to
significant changes in the securities markets including increased volatility,
changes in equity valuations, a slowdown in the market for new and secondary
issuances of equity and the increasingly competitive environment for the
industry, U.S. Bancorp Piper Jaffray restructured its operations during 2001.
Additionally, in June 2001, the Company decided to discontinue its U.S. Bancorp
Libra operations, a business unit that specialized in underwriting and trading
high-yield debt and mezzanine securities. These restructuring activities are
expected to improve operating efficiency of the business unit by removing excess
capacity from the product distribution system and brokerage operations.
 
TREASURY AND CORPORATE SUPPORT includes the Company's investment and residential
mortgage portfolios, funding, capital management and asset securitization
activities, interest rate risk management, the net effect of transfer pricing
related to loan and deposit balances, and the change in residual allocations
associated with the provision for loan losses. It also includes business
activities managed on a corporate basis, including income and expense of
enterprise-wide operations and administrative support functions. Treasury and
Corporate Support recorded a pre-tax loss of $733.0 million in 2001, compared to
a loss of $456.9 million in 2000. The incremental loss was driven by an increase
in the provision for credit losses, lower earnings from equity investments and
non-recurring gains from the disposal of office buildings in 2000. During 2001,
total net revenue was $1,537.3 million compared with $978.3 million a year ago.
The $559.0 million increase was primarily due to an increase in average
investment securities and the residual benefit of declining interest rates given
the Company's interest rate risk management position. Also included in 2001 were
approximately $289.8 million of securities gains compared with $8.1 million in
2000, offset somewhat by lower earnings from equity investments of $78.0 million
and gains from the disposal of office buildings in 2000. Noninterest expenses
were $1,596.8 million in 2001 compared with $1,471.3 million for the same period
of 2000. The increase was primarily related to core business operations and
higher costs related to increased affordable housing projects. Provision for
credit losses for this business unit represents the residual aggregate of the
credit losses allocated to the reportable business units (based on net
charge-offs for the accounting period) and the Company's recorded provision
determined in accordance with generally accepted accounting principles in the
United States. Provision for credit losses for the year ended December 31, 2001,
was $673.5 million compared with a net recovery of $36.1 million in 2000. The
change in the provision reflects the Company's decision in the third quarter of
2001 to increase the allowance for credit losses in light of recent events,
declining economic conditions and deterioration in the credit quality of the
loan portfolio from a year ago. Refer to "Corporate Risk Profile" for further
information on provision for credit losses, nonperforming assets and factors
considered by the Company in assessing the credit quality of the loan portfolio
and establishing the allowance for credit losses.
 
ACCOUNTING CHANGES
 
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities," as amended, establishes accounting and
reporting standards for all derivative instruments and criteria for designation
and effectiveness of hedging activities. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities on the balance sheet
and measure those instruments at fair value. The changes in the fair value of
the derivatives are recognized currently in earnings unless specific hedge
accounting criteria are met. If the derivative qualifies as a hedge, the
accounting treatment varies based on the type of risk being hedged. On
 
U.S. Bancorp
      46

<PAGE>
 
January 1, 2001, the Company adopted SFAS 133. Transition adjustments related to
adoption resulted in an after-tax loss of approximately $4.1 million recorded in
net income and an after-tax increase of $5.2 million to other comprehensive
income. The transition adjustments related to adoption were not material to the
Company's financial statements, and as such, were not separately reported in the
consolidated statement of income.
 
ACCOUNTING FOR BUSINESS COMBINATIONS AND GOODWILL AND OTHER INTANGIBLE ASSETS In
June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations" and
Statement of Financial Accounting Standard No. 142 ("SFAS 142"), "Goodwill and
Other Intangible Assets". SFAS 141 mandates the purchase method of accounting be
used for all business combinations initiated after June 30, 2001, and
establishes specific criteria for the recognition of intangible assets
separately from goodwill. SFAS 142 addresses the accounting for goodwill and
intangible assets subsequent to their acquisition. The Company is required to
adopt SFAS 142 on January 1, 2002. The most significant changes made by SFAS 142
are that goodwill and indefinite lived intangible assets will no longer be
amortized and will be tested for impairment at least annually, thereafter. Any
impairment charges from the initial impairment test at the time of adoption
would be recognized as a "cumulative effect of change in accounting principles"
in the income statement. The amortization provisions of SFAS 142 apply to
goodwill and intangible assets acquired after June 30, 2001. With respect to
goodwill and intangible assets acquired prior to July 1, 2001, the amortization
provisions of SFAS 142 are effective upon adoption of SFAS 142.
 
    The Company will apply the amortization provisions of SFAS 142 during the
first quarter of 2002. Management anticipates that applying the provisions of
SFAS 141 to recent acquisitions and the provisions of SFAS 142 to purchase
acquisitions completed prior to July 1, 2001, will increase after-tax income for
the year ending December 31, 2002, by approximately $200 to $210 million, or
$.10 per diluted share. This considers the application of SFAS 142's definition
of a business and the impact of reclassifying certain assets from goodwill to
intangibles and changes in estimated useful lives of certain intangible assets.
The Company has not yet fully determined the impact on earnings of impairments
related to goodwill and indefinite lived intangible assets under the new
guidelines required by SFAS 142. Any material impairment charge resulting from
these transitional accounting rules will be reflected as a "cumulative effect of
a change in accounting principles" in the first quarter of 2002. Because banking
regulations exclude 100 percent of goodwill from the determination of capital
adequacy, the impact of any impairment on the Company's capital adequacy will
not be significant.
 
                                                                    U.S. Bancorp
                                                                         47

<PAGE>
 
Responsibility for Financial
 
Statements of U.S. Bancorp
 
    Responsibility for the financial statements and other information presented
throughout the Annual Report on Form 10-K rests with the management of U.S.
Bancorp. The Company believes that the consolidated financial statements have
been prepared in conformity with accounting principles generally accepted in the
United States and present fairly the substance of transactions based on the
circumstances and management's best estimates and judgment. All financial
information throughout the Annual Report on Form 10-K is consistent with that in
the financial statements.
 
In meeting its responsibilities for the reliability of the financial statements,
the Company depends on its system of internal controls. The system is designed
to provide reasonable assurance that assets are safeguarded and transactions are
executed in accordance with the appropriate corporate authorization and recorded
properly to permit the preparation of the financial statements. 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 internal control
systems. Although control procedures are designed and tested, it must be
recognized that there are limits inherent in all systems of internal accounting
control and, as such, 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. The Company believes that its system of
internal controls provides reasonable assurance that errors or irregularities
that could be material to the financial statements are prevented or would be
detected within a timely period by employees in the normal course of performing
their assigned functions.
 
The Board of Directors of the Company has an Audit Committee composed of
directors who are not officers or employees 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.
 
The Company's independent accountants, PricewaterhouseCoopers LLP, have been
engaged to render an independent professional opinion on the financial
statements and to assist in carrying out certain aspects of the audit program
described above. Their opinion on the financial statements is based on
procedures conducted in accordance with auditing standards generally accepted in
the United States and forms the basis for their report as to the fair
presentation, in the financial statements, of the Company's financial position,
operating results and cash flows.
 

<Table>
<S>                         <C>
 
/s/ Jerry A. Grundhofer     /s/ David M. Moffett
Jerry A. Grundhofer         David M. Moffett
President and               Vice Chairman and
Chief Executive Officer     Chief Financial Officer
</Table>

 

Report of Independent Accountants
 
To the Shareholders and Board of Directors of U.S. Bancorp:
 
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of U.S. Bancorp and its
subsidiaries at December 31, 2001 and 2000, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2001, in conformity with accounting principles generally accepted in the
United States of America. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
 
/s/ PricewaterhouseCoopers, LLP
 
Minneapolis, Minnesota
 
January 15, 2002

 
U.S. Bancorp
      48

<PAGE>
 
Consolidated Balance Sheet
 

<Table>
<Caption>
At December 31 (Dollars in Millions)                                   2001        2000
---------------------------------------------------------------------------------------
<S>                                                                <C>         <C>
ASSETS
Cash and due from banks.....................................       $  9,120    $  8,475
Money market investments....................................            625         657
Trading account securities..................................            982         753
Investment securities
   Held-to-maturity (fair value $306 and $257,
     respectively)..........................................            299         252
   Available-for-sale.......................................         26,309      17,390
Loans held for sale.........................................          2,820         764
Loans
   Commercial...............................................         46,330      52,817
   Commercial real estate...................................         25,373      26,443
   Residential mortgages....................................          5,746       7,753
   Retail...................................................         36,956      35,352
                                                                   --------------------
      Total loans...........................................        114,405     122,365
         Less allowance for credit losses...................          2,457       1,787
                                                                   --------------------
         Net loans..........................................        111,948     120,578
Premises and equipment......................................          1,741       1,836
Customers' liability on acceptances.........................            178         183
Goodwill....................................................          5,488       4,312
Other intangible assets.....................................          1,924         997
Other assets................................................          9,956       8,724
                                                                   --------------------
      Total assets..........................................       $171,390    $164,921
                                                                   --------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
   Noninterest-bearing......................................       $ 31,212    $ 26,633
   Interest-bearing.........................................         65,447      68,177
   Time certificates of deposit greater than $100,000.......          8,560      14,725
                                                                   --------------------
      Total deposits........................................        105,219     109,535
Short-term borrowings.......................................         14,670      11,833
Long-term debt..............................................         25,716      21,876
Company-obligated mandatorily redeemable preferred
   securities of subsidiary trusts holding solely the junior
   subordinated debentures of the parent company............          2,826       1,400
Acceptances outstanding.....................................            178         183
Other liabilities...........................................          6,320       4,926
                                                                   --------------------
      Total liabilities.....................................        154,929     149,753
Shareholders' equity
   Common stock, par value $0.01 a share
      authorized: 2001 -- 4,000,000,000 shares;
     2000 -- 2,000,000,000 shares
      issued: 2001 -- 1,972,777,763 shares;
     2000 -- 1,943,541,593 shares...........................             20          19
   Capital surplus..........................................          4,906       4,276
   Retained earnings........................................         11,918      11,658
   Less cost of common stock in treasury: 2001 -- 21,068,251
     shares; 2000 -- 41,458,159 shares......................           (478)       (880)
   Other comprehensive income...............................             95          95
                                                                   --------------------
      Total shareholders' equity............................         16,461      15,168
                                                                   --------------------
      Total liabilities and shareholders' equity............       $171,390    $164,921
---------------------------------------------------------------------------------------
</Table>

 
See Notes to Consolidated Financial Statements.
 
                                                                    U.S. Bancorp
                                                                         49

<PAGE>
 
Consolidated Statement of Income
 

<Table>
<Caption>
Year Ended December 31 (Dollars and Shares in Millions, Except Per Share Data)            2001          2000        1999
------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>          <C>           <C>
INTEREST INCOME
Loans................................................................                $ 9,455.4    $ 10,562.5    $9,122.7
Loans held for sale..................................................                    146.9         102.1       103.9
Investment securities
   Taxable...........................................................                  1,206.1       1,008.3     1,047.1
   Non-taxable.......................................................                     89.5         140.6       150.1
Money market investments.............................................                     26.6          53.9        44.9
Trading securities...................................................                     57.5          53.7        45.0
Other interest income................................................                    101.6         151.4       113.0
                                                                                     -----------------------------------
      Total interest income..........................................                 11,083.6      12,072.5    10,626.7
INTEREST EXPENSE
Deposits.............................................................                  2,828.1       3,618.8     2,970.0
Short-term borrowings................................................                    534.1         781.7       582.4
Long-term debt.......................................................                  1,162.7       1,510.4     1,126.9
Company-obligated mandatorily redeemable preferred securities of subsidiary
 trusts holding solely the junior subordinated debentures of the parent
 company.............................................................                    149.9         112.0       111.0
                                                                                     -----------------------------------
      Total interest expense.........................................                  4,674.8       6,022.9     4,790.3
                                                                                     -----------------------------------
Net interest income..................................................                  6,408.8       6,049.6     5,836.4
Provision for credit losses..........................................                  2,528.8         828.0       646.0
                                                                                     -----------------------------------
Net interest income after provision for credit losses................                  3,880.0       5,221.6     5,190.4
NONINTEREST INCOME
Credit card fee revenue..............................................                    774.3         761.8       648.2
Merchant and ATM processing revenue..................................                    428.8         230.3       189.6
Trust and investment management fees.................................                    894.4         926.2       887.1
Deposit service charges..............................................                    660.6         551.1       497.2
Cash management fees.................................................                    347.3         292.4       280.6
Mortgage banking revenue.............................................                    234.0         189.9       190.4
Trading account profits and commissions..............................                    221.6         258.4       222.4
Investment products fees and commissions.............................                    460.1         466.6       450.8
Investment banking revenue...........................................                    258.2         360.3       246.6
Commercial product revenue...........................................                    385.9         304.4       215.7
Securities gains, net................................................                    329.1           8.1        13.2
Merger and restructuring-related gains...............................                     62.2            --          --
Other................................................................                    302.9         533.7       403.1
                                                                                     -----------------------------------
      Total noninterest income.......................................                  5,359.4       4,883.2     4,244.9
NONINTEREST EXPENSE
Salaries.............................................................                  2,347.1       2,427.1     2,355.3
Employee benefits....................................................                    366.2         399.8       410.1
Net occupancy........................................................                    417.9         396.9       371.8
Furniture and equipment..............................................                    305.5         308.2       307.9
Communication........................................................                    181.4         138.8       123.4
Postage..............................................................                    179.8         174.5       170.7
Goodwill.............................................................                    251.1         235.0       175.8
Other intangible assets..............................................                    278.4         157.3       154.0
Merger and restructuring-related charges.............................                    946.4         348.7       532.8
Other................................................................                  1,331.4       1,130.7     1,059.5
                                                                                     -----------------------------------
      Total noninterest expense......................................                  6,605.2       5,717.0     5,661.3
                                                                                     -----------------------------------
Income before income taxes...........................................                  2,634.2       4,387.8     3,774.0
Applicable income taxes..............................................                    927.7       1,512.2     1,392.2
                                                                                     -----------------------------------
Net income...........................................................                $ 1,706.5    $  2,875.6    $2,381.8
                                                                                     -----------------------------------
Earnings per share...................................................                $     .89    $     1.51    $   1.25
Diluted earnings per share...........................................                $     .88    $     1.50    $   1.23
                                                                                     -----------------------------------
Average common shares................................................                  1,927.9       1,906.0     1,907.8
Average diluted common shares........................................                  1,939.5       1,918.5     1,930.0
------------------------------------------------------------------------------------------------------------------------
</Table>

 
See Notes to Consolidated Financial Statements.
 
U.S. Bancorp
      50

<PAGE>
 
Consolidated Statement of Shareholders' Equity

 

<Table>
<Caption>
                                              Common
                                              Shares Common      Capital      Retained
(Dollars in Millions)                    Outstanding  Stock      Surplus      Earnings
--------------------------------------------------------------------------------------
<S>                                    <C>           <C>       <C>          <C>
BALANCE DECEMBER 31, 1998..........    1,903,461,698 $ 19.3    $ 4,338.7    $  8,758.4
Net income.........................                                            2,381.8
Unrealized loss on securities
 available for sale................
Reclassification adjustment for
 losses realized in net income.....
Income taxes.......................
      Total comprehensive income...
Cash dividends declared on common
 stock.............................                                           (1,090.8)
Issuance of common stock and
 treasury shares...................       69,705,239     .2        213.8
Purchase of treasury stock.........      (44,636,116)
Retirement of treasury stock.......                     (.1)      (343.8)
Shares reserved to meet deferred
 compensation obligations..........          (21,643)                2.1
Amortization of restricted stock...                                 47.8
                                       -----------------------------------------------
BALANCE DECEMBER 31, 1999..........    1,928,509,178 $ 19.4    $ 4,258.6    $ 10,049.4
--------------------------------------------------------------------------------------
Net income.........................                                            2,875.6
Unrealized gain on securities
 available for sale................
Foreign currency translation
 adjustment........................
Reclassification adjustment for
 gains realized in net income......
Income taxes.......................
      Total comprehensive income...
Cash dividends declared on common
 stock.............................                                           (1,267.0)
Issuance of common stock and
 treasury shares...................       32,652,574               (35.0)
Purchase of treasury stock.........      (58,633,923)
Shares reserved to meet deferred
 compensation obligations..........         (444,395)                8.5
Amortization of restricted stock...                                 43.5
                                       -----------------------------------------------
BALANCE DECEMBER 31, 2000..........    1,902,083,434 $ 19.4    $ 4,275.6    $ 11,658.0
--------------------------------------------------------------------------------------
Net income.........................                                            1,706.5
Unrealized gain on securities
 available for sale................
Unrealized gain on derivatives.....
Foreign currency translation
 adjustment........................
Realized gain on derivatives.......
Reclassification adjustment for
 gains realized in net income......
Income taxes.......................
      Total comprehensive income...
Cash dividends declared on common
 stock.............................                                           (1,446.5)
Issuance of common stock and
 treasury shares...................       69,502,689     .7      1,383.7
Purchase of treasury stock.........      (19,743,672)
Retirement of treasury stock.......                     (.4)      (823.2)
Shares reserved to meet deferred
 compensation obligations..........         (132,939)                3.0
Amortization of restricted stock...                                 67.1
                                       -----------------------------------------------
BALANCE DECEMBER 31, 2001..........    1,951,709,512 $ 19.7    $ 4,906.2    $ 11,918.0
--------------------------------------------------------------------------------------
 
<Caption>
                                                         Other         Total
                                        Treasury Comprehensive Shareholders'
(Dollars in Millions)                      Stock        Income        Equity
----------------------------------------------------------------------------
<S>                                  <C>         <C>           <C>
BALANCE DECEMBER 31, 1998..........  $    (755.4)   $   212.9   $  12,573.9
Net income.........................                                 2,381.8
Unrealized loss on securities
 available for sale................                   (743.9)        (743.9)
Reclassification adjustment for
 losses realized in net income.....                    163.9          163.9
Income taxes.......................                    210.5          210.5
                                                                   --------
      Total comprehensive income...                                 2,012.3
Cash dividends declared on common
 stock.............................                                (1,090.8)
Issuance of common stock and
 treasury shares...................      1,377.0                    1,591.0
Purchase of treasury stock.........     (1,187.9)                  (1,187.9)
Retirement of treasury stock.......        344.0                         .1
Shares reserved to meet deferred
 compensation obligations..........         (2.0)                        .1
Amortization of restricted stock...                                    47.8
                                     ---------------------------------------
BALANCE DECEMBER 31, 1999..........  $    (224.3)   $  (156.6)  $  13,946.5
----------------------------------------------------------------------------
Net income.........................                                 2,875.6
Unrealized gain on securities
 available for sale................                    436.0          436.0
Foreign currency translation
 adjustment........................                      (.5)           (.5)
Reclassification adjustment for
 gains realized in net income......                    (41.6)         (41.6)
Income taxes.......................                   (141.8)        (141.8)
                                                                   --------
      Total comprehensive income...                                 3,127.7
Cash dividends declared on common
 stock.............................                                (1,267.0)
Issuance of common stock and
 treasury shares...................        534.9                      499.9
Purchase of treasury stock.........     (1,182.2)                  (1,182.2)
Shares reserved to meet deferred
 compensation obligations..........         (8.5)                        --
Amortization of restricted stock...                                    43.5
                                     ---------------------------------------
BALANCE DECEMBER 31, 2000..........  $    (880.1)   $    95.5   $  15,168.4
----------------------------------------------------------------------------
Net income.........................                                 1,706.5
Unrealized gain on securities
 available for sale................                    194.5          194.5
Unrealized gain on derivatives.....                    106.0          106.0
Foreign currency translation
 adjustment........................                     (4.0)          (4.0)
Realized gain on derivatives.......                     42.4           42.4
Reclassification adjustment for
 gains realized in net income......                   (333.1)        (333.1)
Income taxes.......................                     (5.9)          (5.9)
                                                                   --------
      Total comprehensive income...                                 1,706.4
Cash dividends declared on common
 stock.............................                                (1,446.5)
Issuance of common stock and
 treasury shares...................         49.3                    1,433.7
Purchase of treasury stock.........       (467.9)                    (467.9)
Retirement of treasury stock.......        823.6                         --
Shares reserved to meet deferred
 compensation obligations..........         (3.0)                        --
Amortization of restricted stock...                                    67.1
                                     ---------------------------------------
BALANCE DECEMBER 31, 2001..........  $    (478.1)   $    95.4   $  16,461.2
----------------------------------------------------------------------------
</Table>

 
See Notes to Consolidated Financial Statements.
 
                                                                    U.S. Bancorp
                                                                         51

<PAGE>
 
Consolidated Statement of Cash Flows
 

<Table>
<Caption>
Year Ended December 31 (Dollars in Millions)                             2001          2000         1999
--------------------------------------------------------------------------------------------------------
<S>                                                                <C>           <C>           <C>
OPERATING ACTIVITIES
Net income..................................................       $  1,706.5    $  2,875.6    $ 2,381.8
Adjustments to reconcile net income to net cash provided by
 operating activities
   Provision for credit losses..............................          2,528.8         828.0        646.0
   Depreciation and amortization of premises and
    equipment...............................................            284.0         262.6        270.6
   Amortization of goodwill and other intangibles...........            529.5         392.3        329.8
   Provision for deferred income taxes......................           (184.0)        357.1        252.9
   Net (increase) decrease in trading securities............           (229.1)       (135.6)        65.6
   (Gain) loss on sale of securities and other assets,
    net.....................................................           (428.7)        (47.3)       149.9
   Mortgage loans originated for sale in the secondary
    market..................................................        (15,500.2)     (5,563.3)    (6,117.1)
   Proceeds from sales of mortgage loans....................         13,483.0       5,475.0      7,229.3
   Other assets and liabilities, net........................             (7.9)         (1.8)      (242.2)
                                                                   -------------------------------------
      Net cash provided by operating activities.............          2,181.9       4,442.6      4,966.6
INVESTING ACTIVITIES
Securities
   Sales....................................................         19,240.2      10,194.0      6,819.7
   Maturities...............................................          4,572.2       2,127.7      5,290.7
   Purchases................................................        (32,278.6)    (12,161.3)    (9,135.8)
Loans
   Sales and securitization.................................          7,387.9       6,655.8      5,013.7
   Purchases................................................            (87.5)       (688.4)      (254.6)
Net increase in loans outstanding...........................         (1,126.5)    (13,511.0)    (9,880.0)
Proceeds from sales of premises and equipment...............            166.3         212.9         64.2
Purchases of premises and equipment.........................           (299.2)       (382.8)      (289.0)
Acquisitions, net of cash acquired..........................           (741.4)        904.4        241.9
Divestitures of branches....................................           (340.0)        (78.2)      (469.0)
Other, net..................................................           (143.9)       (289.1)      (961.3)
                                                                   -------------------------------------
      Net cash used in investing activities.................         (3,650.5)     (7,016.0)    (3,559.5)
FINANCING ACTIVITIES
Net change in
   Deposits.................................................         (4,258.1)      3,403.7     (3,034.9)
   Short-term borrowings....................................          5,244.3         702.1        544.9
Principal payments on long-term debt........................        (10,539.6)     (5,277.5)    (5,706.1)
Proceeds from long-term debt issuance.......................         11,702.3       5,862.7      8,067.5
Proceeds from issuance of Company-obligated mandatorily
 redeemable preferred securities of subsidiary trusts
 holding solely the junior subordinated debentures of the
 parent company.............................................          1,500.0            --           --
Proceeds from issuance of common stock......................            136.4         210.0        275.5
Repurchase of common stock..................................           (467.9)     (1,182.2)    (1,187.9)
Cash dividends paid.........................................         (1,235.1)     (1,271.3)    (1,029.7)
                                                                   -------------------------------------
      Net cash provided by (used in) financing activities...          2,082.3       2,447.5     (2,070.7)
                                                                   -------------------------------------
      Change in cash and cash equivalents...................            613.7        (125.9)      (663.6)
Cash and cash equivalents at beginning of year..............          9,131.6       9,257.5      9,921.1
                                                                   -------------------------------------
      Cash and cash equivalents at end of year..............       $  9,745.3    $  9,131.6    $ 9,257.5
--------------------------------------------------------------------------------------------------------
</Table>

 
See Notes to Consolidated Financial Statements.
 
U.S. Bancorp
      52

<PAGE>
 

Notes to Consolidated Financial Statements
 
NOTE 1 Significant Accounting Policies
 
U.S. Bancorp and its subsidiaries (the "Company") compose the organization
created by the acquisition by Firstar Corporation ("Firstar") of the former U.S.
Bancorp ("USBM"). The new Company retained the U.S. Bancorp name. The Company is
a multi-state financial services holding company headquartered in Minneapolis,
Minnesota. The Company provides a full range of financial services including
lending and depository services through banking offices principally in 24
states. The Company also engages in credit card, merchant, and ATM processing,
mortgage banking, insurance, trust and investment management, brokerage, leasing
and investment banking activities principally in domestic markets.
 
BASIS OF PRESENTATION The consolidated financial statements include the accounts
of the Company and its subsidiaries. The 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.
 
BUSINESS SEGMENTS
 
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 six reportable operating segments:
 
    Wholesale Banking offers lending, depository, treasury management and other
financial services to middle market, large corporate and public sector clients.
 
    Consumer Banking delivers products and services to the broad consumer market
and small businesses through banking offices, telemarketing, on-line services,
direct mail and automated teller machines ("ATMs"). It encompasses community
banking, metropolitan banking, small business banking, consumer lending,
mortgage banking, and investment product sales.
 
    Private Client, Trust and Asset Management provides mutual fund processing
services, trust, private banking and financial advisory services through four
businesses including: the Private Client Group, Corporate Trust Services,
Institutional Trust and Custody and Fund Services. The business segment also
offers investment management services to several client segments including
mutual funds, institutional customers, and private asset management.
 
    Payment Services includes consumer and business credit cards, corporate and
purchasing card services, consumer lines of credit, ATM processing and merchant
processing.
 
    Capital Markets engages in equity and fixed income trading activities,
offers investment banking and underwriting services for corporate and public
sector customers and provides financial advisory services and securities, mutual
funds, annuities and insurance products to consumers and regionally based
businesses through a network of brokerage offices.
 
    Treasury and Corporate Support includes the Company's investment and
residential mortgage portfolios, funding, capital management and asset
securitization activities, interest rate risk management, the net effect of
transfer pricing related to loan and deposit balances, and the change in
residual allocations associated with the provision for loan losses. It also
includes business activities managed on a corporate basis, including income and
expense of enterprise-wide operations and administrative support functions.
 
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 establish
methodologies 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" on page 43 and Table
21 "Line of Business Financial Performance" included in Management's Discussion
and Analysis which is incorporated by reference into these Notes to Consolidated
Financial Statements.
 
SECURITIES
 
TRADING ACCOUNT SECURITIES Debt and equity securities held for resale are
classified as trading account securities and reported at fair value. Realized
and unrealized gains or losses are determined on a trade date basis and reported
in noninterest income.
 
AVAILABLE-FOR-SALE SECURITIES These securities are not trading account
securities but may be sold before maturity in response to changes in the
Company's interest rate risk
 
                                                                    U.S. Bancorp
                                                                         53

<PAGE>
 
profile or demand for collateralized deposits by public entities.
Available-for-sale securities are carried at fair value with unrealized net
gains or losses reported within other comprehensive income in shareholders'
equity. When sold, the amortized cost of the specific securities is used to
compute the gain or loss.
 
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.
 
LOANS
 
Loans are reported net of unearned income. Interest income is accrued on the
unpaid principal balances as earned. Loan and commitment fees are deferred and
recognized over the life of the loan and/or commitment period as yield
adjustments.
 
ALLOWANCE FOR CREDIT LOSSES Management determines the adequacy of the allowance
for credit losses based on evaluations of the loan portfolio, recent loss
experience, and other pertinent factors, including economic conditions. This
evaluation is inherently subjective as it requires estimates, including amounts
of future cash collections expected on nonaccrual loans, that may be susceptible
to significant change. The allowance for credit losses relating to impaired
loans is based on the loan's observable market price, the collateral for certain
collateral-dependent loans, or the discounted cash flows using the loan's
effective interest rate.
 
    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 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
consumer loans is based on an analysis of product mix, risk characteristics of
the portfolio, fraud loss and 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.
 
NONACCRUAL LOANS 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 interest is reversed. Future interest
payments are generally applied against principal. Revolving consumer lines and
credit cards are charged off by 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, not placed on nonaccrual status.
 
IMPAIRED LOANS A loan is considered to be impaired when, based on current
information and events, it is probable that the Company will be unable to
collect all amounts due (both interest and principal) according to the
contractual terms of the loan agreement.
 
LEASES The Company engages in both direct and leveraged lease financing. 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 added to
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.
 
LOANS HELD FOR SALE 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
market value as determined on an aggregate basis by type of loan. In the event
management decides to sell loans receivable, the loans are transferred at the
lower of cost or fair value. Any credit-related loss at the time of transfer is
recorded as a reduction in the allowance for credit losses. Subsequent decreases
in fair value are recognized in noninterest income.
 
OTHER REAL ESTATE Other real estate ("ORE"), which is included in other assets,
is property acquired through foreclosure or other proceedings. ORE is carried at
the lower of cost or fair value, less estimated selling costs. The property is
evaluated regularly and any decreases in the carrying amount are included in
noninterest expense.
 
DERIVATIVE FINANCIAL INSTRUMENTS
 
In the ordinary course of business, the Company enters into derivative
transactions to manage its market and prepayment risks and to accommodate the
business requirements of its customers. All derivative instruments are recorded
as either assets or liabilities at fair value. Subsequent changes in a
derivative's fair value are recognized currently in earnings unless specific
hedge accounting criteria are met.
 
    All derivative instruments that qualify for specific 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) or as 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).
 
U.S. Bancorp
      54

<PAGE>
 
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. Changes in the fair value of a
derivative that is highly effective and designated as a cash flow hedge are
recognized in other comprehensive income until income from the cash flows of the
hedged item are recognized. The Company performs an assessment, both at the
inception of the hedge and on a quarterly basis thereafter, to determine whether
these derivatives are highly effective in offsetting changes in the value of the
hedged items. Any change in fair value resulting from hedge ineffectiveness is
immediately recorded in noninterest income.
 
    If a derivative designated as a hedge is terminated or ceases to be highly
effective, the gain or loss is amortized to earnings over the remaining life of
the hedged asset or liability (fair value hedge) or over the same period(s) that
the forecasted hedged transactions impact earnings (cash flow hedge). If the
hedged item is disposed of, or the forecasted transaction is no longer probable,
the derivative is recorded at fair value with any resulting gain or loss
included in the gain or loss from the disposition of the hedged item or, in the
case of a forecasted transaction that is no longer probable, included in
earnings immediately.
 
OTHER SIGNIFICANT POLICIES
 
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.
 
    Capital leases, less accumulated amortization, are included in premises and
equipment. The 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.
 
MORTGAGE SERVICING RIGHTS Mortgage servicing rights associated with loans
originated and sold, where servicing is retained, are capitalized and included
in other intangible assets in the consolidated balance sheet. The value of these
capitalized servicing rights is amortized in proportion to, and over the period
of, estimated net servicing revenue and recorded in noninterest expense as
amortization of intangible assets. The carrying value of these rights is
periodically reviewed for impairment based on fair value. For purposes of
measuring impairment, the servicing rights are stratified based on the
underlying loan type and note rate and compared to a valuation prepared based on
a discounted cash flow methodology, utilizing current prepayment speeds and
discount rates. Impairment is recognized through a valuation allowance for each
impaired stratum and recorded as amortization of intangible assets.
 
INTANGIBLE ASSETS For all purchase acquisitions completed prior to July 1, 2001,
the price paid over the net fair value of the acquired businesses ("goodwill")
is amortized over periods ranging up to 25 years. For purchase acquisitions
completed subsequent to June 30, 2001, goodwill is not amortized. Other
intangible assets are amortized over their estimated useful lives, which range
from seven to fifteen years, using straight-line and accelerated methods. The
recoverability of goodwill and other intangible assets is evaluated 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 bases of assets and liabilities and
the financial reporting amounts at each year-end.
 
STATEMENT OF CASH FLOWS For purposes of reporting cash flows, cash and cash
equivalents include cash and money market investments, defined as
interest-bearing amounts due from banks, federal funds sold and securities
purchased under agreements to resell.
 
STOCK-BASED COMPENSATION The Company grants stock options 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. The Company accounts for stock option grants
in accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," ("APB 25") and accordingly recognizes no
compensation expense for the stock option grants.
 
PER SHARE CALCULATIONS Earnings per share is calculated by dividing net income
(less preferred stock dividends) by the weighted average number of common shares
outstanding during the year. Diluted earnings per share is calculated by
adjusting income and outstanding shares, assuming conversion of all potentially
dilutive securities, using the treasury stock method. All per share amounts have
been restated for stock splits.
 
                                                                    U.S. Bancorp
                                                                         55

<PAGE>
 
NOTE 2 Accounting Changes
 
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities," as amended, establishes accounting and
reporting standards for all derivative instruments and criteria for designation
and effectiveness of hedging activities. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities on the balance sheet
and measure those instruments at fair value. The changes in the fair value of
the derivatives are recognized currently in earnings unless specific hedge
accounting criteria are met. If the derivative qualifies as a hedge, the
accounting treatment varies based on the type of risk being hedged. On January
1, 2001, the Company adopted SFAS 133. Transition adjustments related to
adoption resulted in an after-tax loss of approximately $4.1 million recorded in
net income and an after-tax increase of $5.2 million recorded in other
comprehensive income. The transition adjustments related to adoption were not
material to the Company's financial statements, and as such, were not separately
reported in the consolidated statement of income.
 
ACCOUNTING FOR BUSINESS COMBINATIONS AND GOODWILL AND OTHER INTANGIBLE ASSETS In
June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations" and
Statement of Financial Accounting Standard No. 142 ("SFAS 142"), "Goodwill and
Other Intangible Assets." SFAS 141 mandates the purchase method of accounting be
used for all business combinations initiated after June 30, 2001, and
establishes specific criteria for the recognition of intangible assets
separately from goodwill. SFAS 142 addresses the accounting for goodwill and
intangible assets subsequent to their acquisition. The Company is required to
adopt SFAS 142 on January 1, 2002. The most significant changes made by SFAS 142
are that goodwill and indefinite lived intangible assets will no longer be
amortized and will be tested for impairment at least annually, thereafter. Any
impairment charges from the initial impairment test at the date of adoption
would be recognized as a "cumulative effect of change in accounting principles"
in the income statement. The amortization provisions of SFAS 142 apply to
goodwill and intangible assets acquired after June 30, 2001. With respect to
goodwill and intangible assets acquired prior to July 1, 2001, the amortization
provisions of SFAS 142 are effective upon adoption of SFAS 142.
 
    The Company will apply the amortization provisions of SFAS 142 during the
first quarter of 2002. Management anticipates that applying the provisions of
SFAS 141 to recent acquisitions and the provisions of SFAS 142 to purchase
acquisitions completed prior to July 1, 2001, will increase after-tax income for
the year ending December 31, 2002, by approximately $200 to $210 million, or
$.10 per diluted share. This considers the application of SFAS 142's definition
of a business and the impact of reclassifying certain assets from goodwill to
intangibles and changes in estimated useful lives of certain intangible assets.
The Company has not yet fully determined the impact on earnings of impairments
related to goodwill and indefinite lived intangible assets under the new
guidelines required by SFAS 142. Any material impairment charge resulting from
these transitional accounting rules will be reflected as a "cumulative effect of
a change in accounting principles" in the first quarter of 2002. Because banking
regulations exclude 100 percent of goodwill from the determination of capital
adequacy, the impact of any impairment on the Company's capital adequacy will
not be significant.
 
U.S. Bancorp
      56

<PAGE>
 
NOTE 3 Business Combinations
 
On February 27, 2001, Firstar and USBM merged in a pooling-of-interests
transaction and accordingly all financial information has been restated to
include the historical information of both companies. Each share of Firstar
stock was exchanged for one share of the Company's common stock while each share
of USBM stock was exchanged for 1.265 shares of the Company's common stock. The
new Company retained the U.S. Bancorp name.
 
    On September 20, 1999, Firstar and Mercantile Bancorporation, Inc.,
("Mercantile") merged in a pooling-of-interests transaction and accordingly all
financial information has been restated to include the historical information of
both companies. Each share of Mercantile stock was exchanged for 2.091 shares of
Firstar common stock.
 
    On July 24, 2001, the Company acquired NOVA Corporation ("NOVA"), a merchant
processor, in a stock and cash transaction valued at approximately $2.1 billion.
The transaction, representing total assets acquired of $2.9 billion and total
liabilities assumed of $773 million, was accounted for as a purchase. Included
in total assets are merchant contracts and other intangibles of $650 million and
the excess of the purchase price over the fair value of identifiable net assets
("goodwill") of $1.6 billion.
 
    In addition to these mergers, the Company has completed several strategic
acquisitions to enhance its presence in certain growth markets and businesses.
The following table summarizes acquisitions by the Company and its acquirees
completed since January 1, 1999, treating Firstar as the original acquiring
company:

<Table>
<Caption>
                                                                                         Goodwill
                                                                                        and Other    Cash Paid/
(Dollars and Shares in Millions)                      Date      Assets    Deposits    Intangibles    (Received)    Shares Issued
--------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>               <C>         <C>         <C>            <C>           <C>
Pacific Century Bank..................      September 2001    $    570    $    712      $    138      $    (40)            --
NOVA Corporation......................           July 2001         949          --         1,932           842           56.9
U.S. Bancorp..........................       February 2001      86,602      51,335            --            --          952.4
First Union branches..................       December 2000         450       1,779           347        (1,123)            --
Scripps Financial Corporation.........        October 2000         650         618           113            --            9.4
Lyon Financial Services, Inc..........      September 2000       1,289          --           124           307             --
Oliver-Allen Corporation..............          April 2000         280          --            34            --            3.6
Peninsula Bank........................        January 2000         491         452            71            --            5.1
Western Bancorp.......................       November 1999       2,508       2,105           773            --           35.1
Mercantile Bancorporation.............      September 1999      35,520      24,334            --            --          331.8
Voyager Fleet Systems, Inc............      September 1999          43          --            25            27             --
Bank of Commerce......................           July 1999         638         529           269            --           11.8
Mellon Network Services' Electronic
 Funds Transfer Processing Unit.......           June 1999          --          --            78           170             --
Libra Investments, Inc................        January 1999          33          --             4            --            1.3
--------------------------------------------------------------------------------------------------------------------------------
 
<Caption>
 
                                        Accounting
(Dollars and Shares in Millions)            Method
--------------------------------------
<S>                                     <C>
Pacific Century Bank..................   Purchase
NOVA Corporation......................   Purchase
U.S. Bancorp..........................    Pooling
First Union branches..................   Purchase
Scripps Financial Corporation.........   Purchase
Lyon Financial Services, Inc..........   Purchase
Oliver-Allen Corporation..............   Purchase
Peninsula Bank........................   Purchase
Western Bancorp.......................   Purchase
Mercantile Bancorporation.............    Pooling
Voyager Fleet Systems, Inc............   Purchase
Bank of Commerce......................   Purchase
Mellon Network Services' Electronic
 Funds Transfer Processing Unit.......   Purchase
Libra Investments, Inc................   Purchase
--------------------------------------
</Table>

 
Separate results of operations as originally reported on a condensed basis of
Firstar and USBM, for the period prior to the merger, were as follows:
 

<Table>
<Caption>
                                          Year Ended December 31
                                          ----------------------
(Dollars in Millions)                          2000         1999
----------------------------------------------------------------
<S>                                       <C>          <C>
NET INTEREST INCOME
   Firstar.........................       $  2,699     $  2,643
   USBM............................          3,471        3,261
                                          ----------------------
      Total........................       $  6,170     $  5,904
                                          ----------------------
NET INCOME
   Firstar.........................       $  1,284     $    875
   USBM............................          1,592        1,507
                                          ----------------------
      Total........................       $  2,876     $  2,382
                                          ----------------------
TOTAL ASSETS AT YEAR END
   Firstar.........................       $ 77,585     $ 72,788
   USBM............................         87,336       81,530
                                          ----------------------
      Total........................       $164,921     $154,318
----------------------------------------------------------------
</Table>

 
    On January 18, 2002, the Company announced a definitive agreement to acquire
The Leader Mortgage Company, LLC ("Leader"), a wholly owned subsidiary of First
Defiance Financial Corporation, in a cash transaction. Leader specializes in
acquiring servicing of loans originated for state and local housing authorities.
Leader had $506 million in assets at December 31, 2001. In 2001, it had $2.1
billion in mortgage production and an $8.6 billion servicing portfolio at
December 31, 2001. The transaction is expected to close in the second quarter of
2002.
 
                                                                    U.S. Bancorp
                                                                         57

<PAGE>
 
NOTE 4 Merger and Restructuring-related Items
 
The Company recorded in pre-tax earnings merger and restructuring-related items
of $1,266.4 million, $348.7 million and $540.3 million in 2001, 2000, and 1999,
respectively. In 2001, merger-related items were primarily incurred in
connection with the merger of Firstar and USBM, the NOVA acquisition and the
Company's various other acquisitions noted below and in Note 3 -- Business
Combinations. In response to significant changes in the securities markets
during 2001, including increased volatility, declines in equity valuations and
the increasingly competitive environment for the industry, the Company also
incurred a charge to restructure its subsidiary, U.S. Bancorp PiperJaffray, Inc.
("Piper Restructuring"). The components of the merger and restructuring-related
items are shown below:
 

<Table>
<Caption>
                                                                       Piper
(Dollars in Millions)                         USBM     NOVA    Restructuring    Mercantile    Firstar(a)    Other(b)        Total
---------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>          <C>      <C>              <C>           <C>           <C>         <C>
2001
Severance and employee-related.........  $   268.2    $23.3        $28.8          $ 13.2        $  1.3       $  3.3     $   338.1
Systems conversions and integration....      208.1      1.6           --             7.3            .7         18.0         235.7
Asset write-downs and lease
   terminations........................      130.4     34.7         11.9             (.3)           .4          5.6         182.7
Charitable contributions...............       76.0       --           --              --            --           --          76.0
Balance sheet restructurings...........      457.6       --           --              --            --           --         457.6
Branch sale gain.......................      (62.2)      --           --              --            --           --         (62.2)
Branch consolidations..................       20.0       --           --              --            --           --          20.0
Other merger-related charges...........       69.1     24.2         10.0             2.5            .8          1.5         108.1
                                         ----------------------------------------------------------------------------------------
Total 2001.............................  $ 1,167.2    $83.8        $50.7          $ 22.7        $  3.2       $ 28.4     $ 1,356.0
                                         ----------------------------------------------------------------------------------------
Provision for credit losses............  $   382.2    $  --        $  --          $   --        $   --       $   --     $   382.2
Noninterest income.....................      (62.2)      --           --              --            --           --         (62.2)
Noninterest expense....................      847.2      1.6         50.7            22.7           3.2         21.0         946.4
                                         ----------------------------------------------------------------------------------------
   Merger-related items................    1,167.2      1.6         50.7            22.7           3.2         21.0       1,266.4
Balance sheet recognition..............         --     82.2           --              --            --          7.4          89.6
                                         ----------------------------------------------------------------------------------------
 Merger-related items -- 2001..........  $ 1,167.2    $83.8        $50.7          $ 22.7        $  3.2       $ 28.4     $ 1,356.0
                                         ----------------------------------------------------------------------------------------
2000
Severance and employee-related.........                                           $ 43.0        $ 16.3       $   .1     $    59.4
Systems conversions....................                                            115.2          19.0         59.3         193.5
Asset write-downs and lease
   terminations........................                                             42.7           4.6           --          47.3
Charitable contributions...............                                               --            --          2.5           2.5
Other merger-related charges...........                                             26.1          12.7          7.2          46.0
                                                                                -------------------------------------------------
Total 2000.............................                                           $227.0        $ 52.6       $ 69.1     $   348.7
                                                                                -------------------------------------------------
1999
Severance and employee-related.........                                           $131.0        $ 10.6       $  8.0     $   149.6
Systems conversions....................                                             19.5          78.9         34.1         132.5
Asset write-downs and lease
   terminations........................                                               .2           4.4          1.6           6.2
Charitable contributions...............                                             35.0            --           --          35.0
Securities losses to restructure
   portfolio...........................                                            177.7            --           --         177.7
Provision for credit losses............                                              7.5            --           --           7.5
Other merger-related charges...........                                             46.1           2.0        (16.3)         31.8
                                                                                -------------------------------------------------
Total 1999.............................                                           $417.0        $ 95.9       $ 27.4     $   540.3
---------------------------------------------------------------------------------------------------------------------------------
</Table>

 
(a) Represents the 1998 acquisition of the former Firstar Corporation by Star
    Banc. Star Banc was renamed Firstar Corporation.
 
(b) In 2001, "Other" includes merger and restructuring-related items pertaining
    to the First Union branch acquisition and the Pacific Century Bank
    acquisition.
 
    The Company determines merger and restructuring-related charges and related
accruals based on its integration strategy and formulated plans. These plans are
established as of the acquisition date and regularly evaluated during the
integration process.
 
    Severance and employee-related charges include the cost of severance, other
benefits and outplacement costs associated with the termination of employees
primarily in branch offices and centralized corporate support and data
processing functions. The severance amounts are determined based on the
Company's existing severance pay programs and are paid out over a benefit period
of up to two years from the time of termination. The total number of employees
included in severance amounts were approximately 2,820 for USBM, 2,400 for
Mercantile, 2,000 for Firstar, 160 for NOVA, 300 for the Piper Restructuring and
520 for all other acquisitions. Severance and employee-related costs are
included in the determination of goodwill for groups of acquired employees
identified at closing to be severed. Severance and employee-related costs are
recorded
 
U.S. Bancorp
      58

<PAGE>
 
as incurred for groups of employees not specifically identified at the time of
closing or acquired in business combinations accounted for as "poolings".
 
    Systems conversion and integration costs are recorded as incurred and are
associated with the preparation and mailing of numerous customer communications
for the acquisitions and conversion of customer accounts, printing and
distribution of training materials and policy and procedure manuals, outside
consulting fees, and other expenses related to systems conversions and the
integration of acquired branches and operations.
 
    Asset writedowns and lease terminations represent lease termination costs
and impairment of assets for redundant office space, branches that will be
vacated and equipment disposed of as part of the integration plan. These costs
are recognized in the accounting period that contract terminations occur or the
asset becomes impaired and is abandoned.
 
    In connection with certain mergers, the Company has made charitable
contributions to reaffirm a commitment to its market or as part of specific
conditions necessary to achieve regulatory approval. These contributions were
funded up front and represent costs that would not have been incurred had the
merger not occurred. Charitable contributions are charged to merger and
restructuring expenses or considered in determining the acquisition cost at the
applicable closing date.
 
    Balance sheet restructurings primarily represent gains or losses incurred by
the Company related to the disposal of certain businesses, products, or customer
and business relationships that no longer align with the long-term strategy of
the Company. It may also include charges to realign risk management practices
related to certain credit portfolios. In connection with the merger of Firstar
and USBM, balance sheet restructuring charges of $457.6 million were comprised
of a $201.3 million provision associated with the Company's integration of
certain small business products and management's decision to discontinue an
unsecured small business product of USBM; $90.0 million of charge-offs to align
risk management practices, align charge-off policies and to expedite the
Company's transition out of a specific segment of the healthcare industry; and
$76.6 million of losses related to the sales of two higher credit risk retail
loan portfolios of USBM. Also, the amount included $89.7 million related to the
Company's decision to discontinue a high-yield investment banking business, to
restructure a co-branding credit card relationship of USBM, and for the planned
disposition of certain equity investments that no longer align with the long-
term strategy of the Company. The alignment of risk management practices
included a write-down of several large commercial loans originally held
separately by both Firstar and USBM, primarily to allow the Company to exit or
reduce these credits to conform with the credit exposure policy of the combined
entity.
 
    Other merger-related expenses of $108.1 million primarily included $69.1
million and $24.2 million of investment banking fees, legal fees and stock
registration fees associated with the merger of Firstar and USBM and the
acquisition of NOVA Corporation, respectively. Also, it included $10.0 million
of goodwill impairment related to the Piper Restructuring and $4.8 million of
other costs.
 
The following table presents a summary of activity with respect to the merger
and restructuring-related accruals:
 

<Table>
<Caption>
                                                                            Piper
(Dollars in Millions)                             USBM      NOVA    Restructuring    Mercantile    Firstar    Other(a)      Total
---------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>          <C>       <C>              <C>           <C>        <C>         <C>
Balance at December 31, 1998...........      $      --    $   --       $   --         $    --      $ 125.2    $ 227.3     $ 352.5
   Provision charged to operating
      expense..........................             --        --           --           417.0         95.9       27.4       540.3
   Additions related to purchase
      acquisitions.....................             --        --           --              --           --       70.2        70.2
   Cash outlays........................             --        --           --          (182.8)      (176.5)    (148.5)     (507.8)
   Noncash write-downs and other.......             --        --           --           (35.3)       (44.6)     (60.6)     (140.5)
   Securities losses to restructure
      portfolio........................             --        --           --          (177.7)          --         --      (177.7)
   Transfer of tax liability(b)........             --        --           --              --           --      (33.8)      (33.8)
                                             ------------------------------------------------------------------------------------
Balance at December 31, 1999...........             --        --           --            21.2           --       82.0       103.2
   Provision charged to operating
      expense..........................             --        --           --           227.0         52.6       69.1       348.7
   Additions related to purchase
      acquisition......................             --        --           --              --           --       46.0        46.0
   Cash outlays........................             --        --           --          (197.9)       (52.6)    (117.1)     (367.6)
   Noncash write-downs and other.......             --        --           --           (50.3)          --      (30.2)      (80.5)
                                             ------------------------------------------------------------------------------------
Balance at December 31, 2000...........             --        --           --              --           --       49.8        49.8
   Provision charged to operating
      expense..........................        1,167.2       1.6         50.7            22.7          3.2       21.0     1,266.4
   Additions related to purchase
      acquisitions.....................             --      82.2           --              --           --        7.4        89.6
   Cash outlays........................         (532.5)    (32.4)       (22.3)          (23.8)        (3.2)     (50.6)     (664.8)
   Noncash write-downs and other.......         (510.4)     (3.0)       (10.3)            1.1           --      (13.0)     (535.6)
                                             ------------------------------------------------------------------------------------
Balance at December 31, 2001...........      $   124.3    $ 48.4       $ 18.1         $    --      $    --    $  14.6     $ 205.4
---------------------------------------------------------------------------------------------------------------------------------
</Table>

 
(a) "Other" includes the 1997 acquisition of the former U.S. Bancorp of
    Portland, Oregon by First Bank System, Inc. ("FBS"). FBS was renamed U.S.
    Bancorp. "Other" also includes the 1998 acquisition of Piper Jaffray, Inc.,
    the 1999 acquisitions of Libra Investments, Inc., Bank of Commerce, and
    Western Bancorp, and the 2000 acquisitions of Peninsula Bank, Oliver-Allen
    Corporation, Lyon Financial Services, Inc., Scripps Financial Corporation
    and 41 branches acquired from First Union. Refer to Note 3 for further
    information.
 
(b) The liability relates to certain severance-related items.
 
                                                                    U.S. Bancorp
                                                                         59

<PAGE>
 
    The adequacy of the accrued liabilities is reviewed regularly taking into
consideration actual and projected payments. Adjustments are made to increase or
decrease these accruals as needed. Reversals of expenses can
reflect a lower utilization of benefits by affected staff, changes in initial
assumptions as a result of subsequent mergers and alterations of business plans.
 
The following table presents a summary of activity with respect to the merger of
Firstar and USBM:
 

<Table>
<Caption>
                                Severance                          Lease                          Systems
                                      and                   Cancellation           Balance    Conversions
                                Employee-     Investment     and Related             Sheet            and
(Dollars in Millions)             related    Banker Fees       Writeoffs    Restructurings    Integration    Other(a)       Total
---------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>          <C>            <C>             <C>               <C>            <C>         <C>
Balance at December 31,
 2000.....................       $    --       $   --          $   --          $    --          $    --       $   --     $     --
   Provision charged to
      operating expense...         268.2         66.2            48.7            457.6            208.1        118.4      1,167.2
   Cash outlays...........        (175.6)       (65.7)           (5.2)              --           (208.1)       (77.9)      (532.5)
   Non-cash write-downs
      and other...........          (4.3)          .3           (10.4)          (455.5)              --        (40.5)      (510.4)
                                -------------------------------------------------------------------------------------------------
Balance at December 31,
 2001.....................       $  88.3       $   .8          $ 33.1          $   2.1          $    --       $   --     $  124.3
---------------------------------------------------------------------------------------------------------------------------------
</Table>

 
(a) Other accruable merger and restructuring-related items included charitable
    contributions of $76.0 million, a branch sale gain of ($62.2) million, $20.0
    million to consolidate and rationalize the branch network, capitalized
    software impairments of $81.7 million, and other charges of $2.9 million.
 
The components of the merger and restructuring-related accruals for all
acquisitions were as follows:
 

<Table>
<Caption>
                                            December 31
                                            ------------
(Dollars in Millions)                         2001  2000
--------------------------------------------------------
<S>                                         <C>    <C>
Severance............................       $106.3 $13.8
Other employee-related costs.........          4.7   6.8
Lease termination and facility
 costs...............................         64.3   8.4
Contracts and system write-offs......         18.3   7.4
Other................................         11.8  13.4
                                            ------------
   Total.............................       $205.4 $49.8
--------------------------------------------------------
</Table>

 
The merger and restructuring-related accrual by significant acquisition or
business restructuring was as follows:
 

<Table>
<Caption>
                                            December 31
                                            ------------
(Dollars in Millions)                         2001  2000
--------------------------------------------------------
<S>                                         <C>    <C>
USBM.................................       $124.3 $  --
NOVA.................................         48.4    --
Piper Jaffray Companies, Inc. .......         20.8  15.0
Pacific Century Bank.................          3.1    --
Lyon Financial Services, Inc. .......          1.0   2.7
Western Bancorp......................           --   5.1
Scripps Financial Corporation........           --   4.6
Bank of Commerce.....................           --   4.1
Peninsula Bank.......................           --   3.0
Other acquisitions...................          7.8  15.3
                                            ------------
   Total.............................       $205.4 $49.8
--------------------------------------------------------
</Table>

 
    In connection with the merger of Firstar and USBM, management estimates the
Company will incur pre-tax merger-related charges of approximately $271.1
million in 2002. These are currently estimated to include $14.0 million in
employee-related costs, $170.9 million for conversions of systems and
consolidation of operations, $57.8 million in occupancy and equipment charges
(elimination of duplicate facilities and write-off of equipment) and $28.4
million in other merger-related costs (including legal fees, balance sheet
restructuring charges and other costs).
 
    With respect to the NOVA acquisition, the Company expects to incur
approximately $68.3 million of merger-related charges through 2003. The Piper
Restructuring was substantially completed by December 31, 2001. In addition, the
Company anticipates an additional $15.1 million of merger-related expenses in
2002 as a result of other acquisitions.
 
NOTE 5 Restrictions on Cash and Due from Banks
 
Bank subsidiaries are required to maintain minimum average reserve balances with
the Federal Reserve Bank. The amount of those reserve balances was approximately
$916 million at December 31, 2001.
 
U.S. Bancorp
      60

<PAGE>
 
NOTE 6 Investment Securities
 
The detail of the amortized cost, gross unrealized holding gains and losses, and
fair value of held-to-maturity and available-for-sale securities at December 31
was as follows:

 

<Table>
<Caption>
                                                                    2001
                                               -------------------------------------------------
                                                              Gross         Gross
                                                         Unrealized    Unrealized
                                               Amortized    Holding       Holding        Fair
(Dollars in Millions)                               Cost      Gains        Losses       Value
---------------------------------------------------------------------------------------------
<S>                                            <C>       <C>           <C>           <C>
Held-to-maturity
   Asset-backed securities..............       $      28  $     --      $     --     $     28
   Obligations of state and political
      subdivisions......................             271         9            (2)         278
                                               ----------------------------------------------
   Total held-to-maturity securities....       $     299  $      9      $     (2)    $    306
---------------------------------------------------------------------------------------------
Available-for-sale
   U.S. Treasuries and agencies.........       $     439  $     10      $     --     $    449
   Asset-backed securities..............          24,028       114          (114)      24,028
   Obligations of state and political
      subdivisions......................             877        16            (2)         891
   Other................................             950        35           (44)         941
                                               ----------------------------------------------
     Total available-for-sale
       securities.......................       $  26,294  $    175      $   (160)    $ 26,309
---------------------------------------------------------------------------------------------
 
<Caption>
                                                               2000
                                          ----------------------------------------------
                                                         Gross         Gross
                                                    Unrealized    Unrealized
                                          Amortized    Holding       Holding        Fair
(Dollars in Millions)                          Cost      Gains        Losses       Value
----------------------------------------------------------------------------------------
<S>                                       <C>       <C>           <C>           <C>
Held-to-maturity
   Asset-backed securities..............  $      36  $     --      $     --     $     36
   Obligations of state and political
      subdivisions......................        216         5            --          221
                                          ----------------------------------------------
   Total held-to-maturity securities....  $     252  $      5      $     --     $    257
----------------------------------------------------------------------------------------
Available-for-sale
   U.S. Treasuries and agencies.........  $   1,600  $     27      $     (3)    $  1,624
   Asset-backed securities..............     11,800       128           (35)      11,893
   Obligations of state and political
      subdivisions......................      2,370        41            (2)       2,409
   Other................................      1,472        21           (29)       1,464
                                          ----------------------------------------------
     Total available-for-sale
       securities.......................  $  17,242  $    217      $    (69)    $ 17,390
----------------------------------------------------------------------------------------
</Table>

 
    Securities carried at $18.1 billion at December 31, 2001, and $13.3 billion
at December 31, 2000, were pledged to secure public, private and trust deposits
and for other purposes required by law. Securities sold under agreements to
repurchase were collateralized by securities and securities purchased under
agreements to resell with an amortized cost of $3.0 billion and $1.0 billion at
December 31, 2001, and 2000, respectively.
 
The following table provides information as to the amount of gross gains and
losses realized through the sales of available-for-sale investment securities.
 

<Table>
<Caption>
(Dollars in Millions)                                                  2001        2000        1999
---------------------------------------------------------------------------------------------------
<S>                                                                <C>         <C>         <C>
Gross realized gains........................................       $  333.1    $   23.1    $   31.1
Gross realized losses(a)....................................           (4.0)      (15.0)     (195.6)
                                                                   --------------------------------
   Net realized gains (losses)..............................       $  329.1    $    8.1    $ (164.5)
                                                                   --------------------------------
Income tax (benefit) on realized gains (losses).............       $  115.2    $    2.8    $  (57.9)
---------------------------------------------------------------------------------------------------
</Table>

 
(a) Included in the gross realized losses for 1999 is $177.7 million related to
    the Mercantile balance sheet restructuring. These losses were included in
    merger and restructuring-related expense.
 
    For amortized cost, fair value and yield by maturity date of
held-to-maturity and available-for-sale securities outstanding as of December
31, 2001, see Table 11 included in Management's Discussion and Analysis which is
incorporated by reference into these Notes to Consolidated Financial Statements.
 
                                                                    U.S. Bancorp
                                                                         61

<PAGE>
 
NOTE 7 Loans and Allowance for Credit Losses
 
The composition of the loan portfolio at December 31 was as follows:
 

<Table>
<Caption>
(Dollars in Millions)                                                  2001        2000
---------------------------------------------------------------------------------------
<S>                                                                <C>         <C>
COMMERCIAL
   Commercial...............................................       $ 40,472    $ 47,041
   Lease financing..........................................          5,858       5,776
                                                                   --------------------
      Total commercial......................................         46,330      52,817
COMMERCIAL REAL ESTATE
   Commercial mortgages.....................................         18,765      19,466
   Construction and development.............................          6,608       6,977
                                                                   --------------------
      Total commercial real estate..........................         25,373      26,443
RESIDENTIAL MORTGAGES.......................................          5,746       7,753
RETAIL
   Credit card..............................................          5,889       6,012
   Retail leasing...........................................          4,906       4,153
   Other retail
      Home equity and second mortgage.......................         14,318      13,600
      Revolving credit......................................          2,673       2,750
      Installment...........................................          2,292       2,186
      Automobile............................................          5,660       5,609
      Student...............................................          1,218       1,042
                                                                   --------------------
         Total other retail.................................         26,161      25,187
                                                                   --------------------
      Total retail..........................................         36,956      35,352
                                                                   --------------------
         Total loans........................................       $114,405    $122,365
---------------------------------------------------------------------------------------
</Table>

 
    Loans are presented net of unearned interest which amounted to $1.6 billion
and $1.7 billion at December 31, 2001 and 2000, respectively. The Company had
loans of $28.0 billion at December 31, 2001, and $7.8 billion at December 31,
2000, pledged at the Federal Home Loan Bank. Loans of $7.2 billion at December
31, 2001, and $3.6 billion at December 31, 2000, were pledged at the Federal
Reserve Bank.
 
    The Company primarily lends to borrowers in the 24 states where it has
banking offices. Collateral for commercial loans may include marketable
securities, accounts receivable, inventory and equipment. For detail
of the Company's commercial portfolio by industry type and geography as of
December 31, 2001, and 2000, see Table 9 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, 2001, and 2000, see Table 10 included in
M
anagement's Discussion and Analysis which is incorporated by reference into
these Notes to Consolidated Financial Statements. Such loans are collateralized
by the related property.
 
The following table lists information related to nonperforming loans as of
December 31:
 

<Table>
<Caption>
(Dollars in Millions)                                                  2001        2000
---------------------------------------------------------------------------------------
<S>                                                                <C>         <C>
Loans on nonaccrual status..................................       $1,001.3    $  765.3
Renegotiated loans..........................................             --          --
                                                                   --------------------
Total nonperforming loans...................................       $1,001.3    $  765.3
---------------------------------------------------------------------------------------
Interest income that would have been recognized at original
   contractual terms........................................       $  109.2    $   72.2
Amount recognized as interest income........................           46.2        21.4
                                                                   --------------------
Forgone revenue.............................................       $   63.0    $   50.8
---------------------------------------------------------------------------------------
</Table>

 
U.S. Bancorp
      62

<PAGE>
 
Activity in the allowance for credit losses was as follows:
 

<Table>
<Caption>
(Dollars in Millions)                                                  2001        2000        1999
---------------------------------------------------------------------------------------------------
<S>                                                                <C>         <C>         <C>
Balance at beginning of year................................       $1,786.9    $1,710.3    $1,705.7
Add
   Provision charged to operating expense(a)................        2,528.8       828.0       646.0
Deduct
   Loans charged off........................................        1,771.4     1,017.6       902.8
   Less recoveries of loans charged off.....................          224.9       192.2       230.2
                                                                   --------------------------------
   Net loans charged off....................................        1,546.5       825.4       672.6
Losses from loan sales/transfers............................         (329.3)         --          --
Acquisitions and other changes..............................           17.4        74.0        31.2
                                                                   --------------------------------
Balance at end of year......................................       $2,457.3    $1,786.9    $1,710.3
---------------------------------------------------------------------------------------------------
</Table>

 
(a) In 2001, $382.2 million of the provision for credit losses was incurred in
    connection with the merger of Firstar and USBM.
 
A portion of the allowance for credit losses is allocated to loans deemed
impaired. All impaired loans are included in non-performing assets. A summary of
these loans and their related allowance for loan losses is as follows:
 

<Table>
<Caption>
                                                        2001                       2000                       1999
                                               -----------------------------------------------------------------------------
                                                 Recorded    Valuation      Recorded    Valuation      Recorded    Valuation
(Dollars in Millions)                          Investment    Allowance    Investment    Allowance    Investment    Allowance
----------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>           <C>          <C>           <C>          <C>           <C>
Impaired Loans
   Valuation allowance required.........        $    694     $    125      $    487     $     57      $    257     $      8
   No valuation allowance required......              --           --           127           --           132           --
                                               -----------------------------------------------------------------------------
Total impaired loans....................        $    694     $    125      $    614     $     57      $    389     $      8
                                               -----------------------------------------------------------------------------
Average balance of impaired loans during
 the year...............................        $    780                   $    526                   $    408
Interest income recognized on impaired
 loans during the year..................            25.0                        7.8                        3.3
----------------------------------------------------------------------------------------------------------------------------
</Table>

 
    Commitments to lend additional funds to customers whose loans were
classified as nonaccrual or renegotiated at December 31, 2001, totaled $82.5
million. During 2001 there were no loans that were restructured at market
interest rates and returned to a fully performing status.
 
NOTE 8 Accounting for Transfers and Servicing of Financial Assets and
       Extinguishments of Liabilities
 
RECEIVABLE SALES
 
When the Company sells receivables, it may retain interest-only strips,
servicing rights, a cash reserve account, and/or other interests in the
receivables. The gain or loss on sale of the receivables depends in part on the
previous carrying amount of the financial assets involved in the transfer, and
is allocated between the assets sold and the retained interests based on their
relative fair values at the date of transfer. Market prices are used to
determine retained interest fair values when readily available. However, quotes
are generally not available for retained interests, so the Company generally
estimates fair value based on the present value of future expected cash flows
using management's best estimates of the key assumptions--credit losses,
prepayment speeds, forward yield curves, and discount rates commensurate with
the risks involved. Retained interests are valued at inception and updated
quarterly using a discounted cash flow methodology.
 
    On November 16, 2001, the Company sold $737.8 million of unsecured small
business receivables. The transaction generated a loss on sale of $64.7 million.
The Company retained interest-only strips, a cash collateral reserve, and
subordinated securities. Key assumptions used in measuring retained interests at
the date of securitization are consistent with those presented in the table
below captioned "Residual Economic Assumptions and Adverse Changes." These
products are similar in nature to revolving credit card receivables. Each month
new advances on these accounts are sold. The proceeds from these sales are
netted against the cash collected for the month. The net cash collected is
distributed accordingly to pay down the outstanding securities. The Company
receives a fee to continue to service the receivables. Since the Company
receives adequate compensation relative to current market servicing prices, no
servicing asset or liability regarding this securitization is recognized.
 
    During 2001 and 2000, the Company administered a loan conduit which holds
short-term participations in commercial loans originated by the Company. These
loans totaled $5.9 billion at December 31, 2001 and included net sales of
originated loans to the loan conduit of
 
                                                                    U.S. Bancorp
                                                                         63

<PAGE>
 
approximately $3.7 billion during 2001. The Company received fee revenue of
$57.6 million and $18.0 million from the loan conduit in 2001 and 2000,
respectively. Under a credit enhancement agreement with the conduit, the Company
would be required to make payments to the conduit in specified amounts if the
conduit experiences payment defaults on its loans. No credit enhancements were
needed during 2001 or 2000. In addition, the Company maintains a reserve to
reflect its obligation to provide credit enhancements to the conduit.
    For the years ended December 31, 2001 and 2000, the Company sold $147.5
million and $255.7 million of the U.S. government guaranteed portions of loans
originated under Small Business Administration (SBA) programs, recognizing a
pre-tax gain on sale of $6.3 million and $10.6 million, respectively. The SBA
covers losses occurring on these guaranteed portions. Although the Company
retains no credit recourse relating to these sales, it does continue to own a
portion of the non-guaranteed elements of the loans. The Company continues to
service the loans and is required under the SBA programs to retain specified
yield amounts. A portion of the yield is recognized as servicing fee income as
it occurs and the remainder is capitalized as a servicing asset, and included in
the gain on sale calculation.
 
SERVICING ASSET POSITION
 

<Table>
<Caption>
                                             2001         2000
(Dollars in Millions)                   SBA Loans    SBA Loans
--------------------------------------------------------------
<S>                                     <C>          <C>
Servicing assets at beginning of
 year............................          $6.9        $ 4.3
Servicing assets recognized
   during the year...............           2.8          4.0
Amortization.....................          (2.2)        (1.4)
                                        ----------------------
Servicing assets at end of
 year............................          $7.5        $ 6.9
--------------------------------------------------------------
</Table>

 
    No valuation allowances were required during 2001 or 2000 on servicing
assets. Servicing assets are reported in aggregate but measured on a transaction
specific basis. Market values were determined using discounted cash flows,
utilizing the assumptions noted in the table below.
 
Key economic assumptions used in valuing servicing assets at the date of sale
resulting from sales completed during 2001 and 2000 were as follows:
 

<Table>
<Caption>
                                              2001            2000
(Dollars in Millions)                 SBA Loans(a)    SBA Loans(a)
------------------------------------------------------------------
<S>                                   <C>             <C>
Fair value of assets
   recognized..................               $9.1            $7.9
Prepayment speed(b)............             21 CPR          21 CPR
Weighted-average life
 (years).......................                3.7             3.9
Expected credit losses.........                 NA              NA
Discount rate..................                 12%             12%
Variable returns to
 transferees...................                 NA              NA
------------------------------------------------------------------
</Table>

 
(a) All were adjustable rate loans based on the Wall Street Journal prime rate.
 
(b) The Company used a prepayment vector based on loan seasoning for valuation.
    The given speed was the effective prepayment speed that yields the same
    weighted-average life calculated using the prepayment vector.
 
    The Company also established a securitization trust which held credit card
receivables originated by the Company. This trust was terminated in December
2000. At termination, $509 million of credit card receivables were transferred
from the trust to the Company in exchange for the seller's certificates held by
the Company. In 2000, $665 million of proceeds from collections of credit card
receivables were reinvested in the trust. The Company received $18.0 million in
servicing fee revenue from the trust in 2000 and recorded a $2.2 million gain
upon the termination of the trust.
 
U.S. Bancorp
      64

<PAGE>
 
RESIDUAL ECONOMIC ASSUMPTIONS AND ADVERSE CHANGES
 
The Company has retained interests on the following asset sales: $1.8 billion
sale of indirect automobile loans on September 24, 1999; $420 million sale of
corporate and purchasing card receivables on February 27, 1997; $737.8 million
sale of unsecured small business receivables on November 16, 2001; and sales of
SBA loans since 1988. At December 31, 2001, key economic assumptions and the
sensitivity of the current fair value of residual cash flows to immediate 10
percent and 20 percent adverse changes in those assumptions were as follows:
 

<Table>
<Caption>
                                                                     Indirect                     Corporate         Unsecured
                                                                   Automobile         SBA              Card    Small Business
At December 31, 2001 (Dollars in Millions)                              Loans    Loans(a)    Receivables(b)       Receivables
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>           <C>         <C>               <C>
Carrying amount/fair value of retained interests............           $23.1        $ 3.2       $    4.3          $  232.7
Weighted-average life (in years)............................             0.7          3.7            0.1               0.8
PREPAYMENT SPEED ASSUMPTION (ANNUAL)(C)(D)(E)...............         1.5 ABS       21 CPR             --               6.0%
   Impact on fair value of 10% adverse change...............           $(0.7)       $(0.2)      $     --          $   (3.1)
   Impact on fair value of 20% adverse change...............            (1.5)        (0.4)            --              (4.7)
EXPECTED CREDIT LOSSES (ANNUAL).............................             2.8%          --%            --%             13.5%
   Impact on fair value of 10% adverse change...............           $(0.7)        $ --       $     --          $   (8.7)
   Impact on fair value of 20% adverse change...............            (1.4)          --             --             (16.8)
RESIDUAL CASH FLOWS DISCOUNT RATE (ANNUAL)..................            12.0%        12.0%            --%             11.0%
   Impact on fair value of 10% adverse change...............           $(0.2)       $(0.1)      $     --          $   (2.6)
   Impact on fair value of 20% adverse change...............            (0.4)        (0.2)            --              (5.2)
INTEREST RATES ON VARIABLE AND ADJUSTABLE CONTRACTS.........              NA           NA             NA              10.5%
   Impact on fair value of 10% adverse change...............              NA           NA             NA          $   (6.7)
   Impact on fair value of 20% adverse change...............              NA           NA             NA             (12.9)
-----------------------------------------------------------------------------------------------------------------------------
</Table>

 
(a) Credit losses are covered by the appropriate SBA loan program and are not
    included in retained interests. Principal reductions caused by defaults are
    included in the prepayment assumption.
 
(b) Residual interest is effectively a single period receivable that is paid and
    renewed each month during the revolving period. Therefore, no assumptions
    are used in its estimate. Losses are recognized in the period they occur.
 
(c) The Company uses prepayment vectors based on loan seasoning for valuation.
    The given speed is the effective prepayment speed that yields the same
    weighted-average life calculated using the prepayment vector.
 
(d) ABS = absolute prepayment rate and is the auto industry's standard measure
    of prepayment speed. CPR = constant prepayment rate.
 
(e) Monthly repayment rate on small business lines of credit.
 
These sensitivities are hypothetical and should be used with caution. As the
figures indicate, changes in fair value based on a 10 percent variation in
assumptions generally cannot be extrapolated because the relationship of the
change in the assumptions to the change in fair value may not be linear. Also,
in this table the effect of a variation in a particular assumption on the fair
value of the retained interest is calculated without changing any other
assumption; in reality, changes in one factor may result in changes in another
(for example, increases in market interest rates may result in lower prepayments
and increased credit losses), which might magnify or counteract the
sensitivities.
 
The table below summarizes certain cash flows received from and paid to conduit
or structured entities for the loan sales described above:
 

<Table>
<Caption>
Year Ended December 31 (Dollars in Millions)                            2001         2000
-----------------------------------------------------------------------------------------
<S>                                                                <C>          <C>
Proceeds from new sales(a)..................................       $70,209.4    $37,911.6
Proceeds from existing securitizations(b)...................         6,969.9      8,042.7
Reinvestment in existing securitizations(b).................        (6,547.8)    (7,972.9)
Servicing and other fees received...........................            73.9         52.9
Other cash flows received on retained interests(c)..........            29.9         34.2
Purchases of delinquent or foreclosed assets................              --           --
-----------------------------------------------------------------------------------------
</Table>

 
(a) Gross proceeds from commercial loan sales were $69.5 billion for 2001. The
    net cash flows for these sales were $3.7 billion. For 2000, gross commercial
    loan sale proceeds were $37.6 billion, with net cash flows of ($30.3)
    million.
 
(b) The corporate card and unsecured small business receivables securitizations
    are revolving transactions where proceeds are reinvested until their legal
    terminations. The indirect automobile and SBA loan sales are amortizing
    transactions where the cash flow is used to pay off investors.
 
(c) This amount represents total cash flows received from retained interests by
    the transferor other than servicing fees. Other cash flows include, for
    example, all cash flows from interest-only strips and cash above the minimum
    required level in cash collateral accounts.
 
                                                                    U.S. Bancorp
                                                                         65

<PAGE>
 
Quantitative information relating to loan sales and managed assets was as
follows:
 


<Table>
<Caption>
                                                               At December 31
                                             --------------------------------------------------
                                                    Total                 Principal Amount
                                              Principal Balance       90 Days or More Past Due
                                             --------------------------------------------------
Asset Type (Dollars in Millions)                 2001        2000           2001           2000
-----------------------------------------------------------------------------------------------
<S>                                          <C>         <C>         <C>            <C>
COMMERCIAL
   Commercial.........................        $47,867    $ 49,982     $    590       $    525
   Lease financing....................          5,858       5,776          207             72
                                             --------------------------------------------------
      Total commercial................         53,725      55,758          797            597
COMMERCIAL REAL ESTATE
   Commercial mortgages...............         18,765      19,466          136            118
   Construction and development.......          6,608       6,977           37             40
                                             --------------------------------------------------
      Total commercial real estate....         25,373      26,443          173            158
RESIDENTIAL MORTGAGES.................          5,746       7,753          140            116
RETAIL
   Credit card........................          5,889       6,012          128            111
   Retail leasing.....................          4,906       4,153           12              8
   Other retail.......................         26,593      26,100          224            165
                                             --------------------------------------------------
      Total retail....................         37,388      36,265          364            285
                                             --------------------------------------------------
         Total managed loans..........       $122,232    $126,219     $  1,474       $  1,155
Less:
   Loans sold or securitized..........          7,827       3,854
                                             --------------------
         Total loans held.............       $114,405    $122,365
                                             --------------------
SOLD OR SECURITIZED ASSETS
   Commercial loans...................         $5,868    $  2,003     $     --       $     --
   Indirect automobile loans(a).......            432         913            4              3
   Guaranteed SBA loans(b)............            582         518            2             --
   Corporate card receivables(b)......            214         420            1              1
   Credit card receivables............             --          --           --             --
   Unsecured small business
    receivables(b)....................            731          --            4             --
                                             --------------------------------------------------
      Total securitized assets........         $7,827    $  3,854     $     11       $      4
-----------------------------------------------------------------------------------------------
 
<Caption>
                                                   Year Ended December 31
                                        --------------------------------------------
 
                                          Average Balance        Net Credit Losses
                                        --------------------------------------------
Asset Type (Dollars in Millions)            2001        2000        2001        2000
------------------------------------------------------------------------------------
<S>                                     <C>         <C>         <C>         <C>
COMMERCIAL
   Commercial.........................  $ 49,672    $ 48,403    $    724    $    259
   Lease financing....................     5,852       4,512         114          21
                                        --------------------------------------------
      Total commercial................    55,524      52,915         838         280
COMMERCIAL REAL ESTATE
   Commercial mortgages...............    19,004      19,158          40           5
   Construction and development.......     7,077       6,882          12           8
                                        --------------------------------------------
      Total commercial real estate....    26,081      26,040          52          13
RESIDENTIAL MORTGAGES.................     6,868       9,578          13          12
RETAIL
   Credit card........................     5,645       5,490         271         238
   Retail leasing.....................     4,553       3,139          30          13
   Other retail.......................    25,613      25,729         360         319
                                        --------------------------------------------
      Total retail....................    35,811      34,358         661         570
                                        --------------------------------------------
         Total managed loans..........  $124,284    $122,891    $  1,564    $    875
Less:
   Loans sold or securitized..........     6,107       4,574
                                        --------------------
         Total loans held.............  $118,177    $118,317
                                        --------------------
SOLD OR SECURITIZED ASSETS
   Commercial loans...................  $  4,298    $  2,073    $     --    $     --
   Indirect automobile loans(a).......       655       1,213          11          16
   Guaranteed SBA loans(b)............       629         360          --          --
   Corporate card receivables(b)......       403         420           3           3
   Credit card receivables............        --         508          --          30
   Unsecured small business
    receivables(b)....................       122          --           3          --
                                        --------------------------------------------
      Total securitized assets........  $  6,107    $  4,574    $     17    $     49
------------------------------------------------------------------------------------
</Table>

 
(a) Reported in "other retail" loans.
 
(b) Reported in "commercial" loans.
 
NOTE 9 Premises and Equipment
 
Premises and equipment at December 31 consisted of the following:
 

<Table>
<Caption>
(Dollars in Millions)                                                  2001        2000
---------------------------------------------------------------------------------------
<S>                                                                <C>         <C>
Land........................................................       $    274    $    276
Buildings and improvements..................................          1,854       1,786
Furniture, fixtures and equipment...........................          2,012       1,888
Capitalized building and equipment leases...................            173         171
Construction in progress....................................              8          48
                                                                   --------------------
                                                                      4,321       4,169
Less accumulated depreciation and amortization..............          2,580       2,333
                                                                   --------------------
   Total....................................................       $  1,741    $  1,836
---------------------------------------------------------------------------------------
</Table>

 
U.S. Bancorp
      66

<PAGE>
 
NOTE 10 Mortgage Servicing Rights
 
Changes in capitalized mortgage servicing rights are summarized as follows:
 

<Table>
<Caption>
                                                                    Year Ended December 31,
                                                                   ------------------------
(Dollars in Millions)                                                    2001          2000
-------------------------------------------------------------------------------------------
<S>                                                                <C>           <C>
Balance at beginning of year................................        $    229      $    213
Rights purchased............................................              25            16
Rights capitalized..........................................             315           137
Amortization................................................             (45)          (35)
Rights sold.................................................            (103)         (101)
Impairment..................................................             (61)           (1)
                                                                   ------------------------
Balance at end of year......................................        $    360      $    229
-------------------------------------------------------------------------------------------
</Table>

 
    The fair value of capitalized mortgage servicing rights was $360 million at
December 31, 2001, and $245 million at December 31, 2000. At December 31, 2001,
the reduction in the current fair value of mortgage servicing rights to
immediate 25 and 50 basis point adverse interest rate changes would be
approximately $32 million and $63 million, respectively. The Company has
purchased principal-only securities that act as a partial economic hedge to this
possible adverse interest rate change. The Company serviced $22.0 billion and
$17.0 billion of mortgage loans for other investors as of December 31, 2001 and
2000, respectively.
 
NOTE 11 Intangible Assets
 
The following is a summary of intangible assets as of December 31, which are
included in the consolidated balance sheet:
 

<Table>
<Caption>
(Dollars in Millions)                                                  2001        2000
---------------------------------------------------------------------------------------
<S>                                                                <C>         <C>
Goodwill....................................................       $  5,488    $  4,312
Core deposit benefits.......................................            530         374
Merchant processing contracts...............................            680          17
Mortgage servicing rights...................................            360         229
Other identified intangibles................................            354         377
                                                                   --------------------
   Total intangible assets..................................       $  7,412    $  5,309
---------------------------------------------------------------------------------------
</Table>

 
NOTE 12 Short-Term Borrowings
 
The following table is a summary of short-term borrowings for the last three
years:
 

<Table>
<Caption>
                                                                     2001                     2000                     1999
                                                                -----------------------------------------------------------------
(Dollars in Millions)                                            Amount    Rate           Amount    Rate           Amount    Rate
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>        <C>           <C>        <C>           <C>        <C>
At year-end
   Federal funds purchased...............................       $ 1,146    1.1%          $ 2,849    5.8%          $ 5,489    4.7%
   Securities sold under agreements to repurchase........         3,001    1.1             3,347    4.6             3,174    3.8
   Commercial paper......................................           452    1.9               223    6.4               170    4.7
   Treasury, tax and loan notes..........................         4,038    1.3               776    5.2               619    5.0
   Other short-term borrowings...........................         6,033    2.5             4,638    6.1             1,106    5.6
                                                                -----------------------------------------------------------------
      Total..............................................       $14,670    1.8%          $11,833    5.6%          $10,558    4.6%
---------------------------------------------------------------------------------------------------------------------------------
Average for the year
   Federal funds purchased...............................       $ 4,997    5.0%          $ 5,690    6.2%          $ 5,898    5.0%
   Securities sold under agreements to repurchase........         2,657    2.9             3,028    4.8             3,128    4.0
   Commercial paper......................................           390    3.9               215    6.3               370    5.1
   Treasury, tax and loan notes..........................         1,321    3.5               912    6.1               577    4.5
   Other short-term borrowings...........................         3,615    4.0             2,741    7.7             1,734    6.9
                                                                -----------------------------------------------------------------
      Total..............................................       $12,980    4.1%          $12,586    6.2%          $11,707    5.0%
---------------------------------------------------------------------------------------------------------------------------------
Maximum month-end balance
   Federal funds purchased...............................       $ 7,829                  $ 7,807                  $ 7,080
   Securities sold under agreements to repurchase........         3,001                    3,415                    3,278
   Commercial paper......................................           590                      300                      397
   Treasury, tax and loan notes..........................         6,618                    3,578                    1,435
   Other short-term borrowings...........................         7,149                    4,920                    4,945
---------------------------------------------------------------------------------------------------------------------------------
</Table>

 
                                                                    U.S. Bancorp
                                                                         67

<PAGE>
 
NOTE 13 Long-Term Debt
 
Long-term debt (debt with original maturities of more than one year) at December
31 consisted of the following:
 

<Table>
<Caption>
(Dollars in Millions)                                                  2001        2000
---------------------------------------------------------------------------------------
<S>                                                                <C>         <C>
U.S. BANCORP (Parent Company)
Fixed-rate subordinated notes
   7.625% due 2002..........................................       $    150    $    150
   8.125% due 2002..........................................            150         150
   7.00% due 2003...........................................            150         150
   6.625% due 2003..........................................            100         100
   7.25% due 2003...........................................             32          32
   8.00% due 2004...........................................             73         125
   7.625% due 2005..........................................            121         150
   6.75% due 2005...........................................            191         300
   6.875% due 2007..........................................            250         250
   7.30% due 2007...........................................            200         200
   7.50% due 2026...........................................            200         200
Senior contingent convertible debt 1.50% due 2021...........          1,100          --
Medium-term notes...........................................          3,215       4,634
Capitalized lease obligations, mortgage indebtedness and
   other....................................................            142         122
                                                                   --------------------
      Subtotal..............................................          6,074       6,563
SUBSIDIARIES
Fixed-rate subordinated notes
   6.00% due 2003...........................................             79         100
   6.375% due 2004..........................................             75          75
   6.375% due 2004..........................................            150         150
   7.55% due 2004...........................................            100         100
   8.35% due 2004...........................................            100         100
   7.30% due 2005...........................................            100         100
   6.875% due 2006..........................................            125         125
   6.625% due 2006..........................................            100         100
   6.50% due 2008...........................................            300         300
   6.30% due 2008...........................................            300         300
   5.70% due 2008...........................................            400         400
   7.125% due 2009..........................................            500         500
   7.80% due 2010...........................................            300         300
   6.375% due 2011..........................................          1,500          --
Federal Home Loan Bank advances.............................          7,196       2,753
Bank notes..................................................          7,550       9,300
Euro medium-term notes due 2004.............................            400         400
Capitalized lease obligations, mortgage indebtedness and
   other....................................................            367         210
                                                                   --------------------
      Total.................................................       $ 25,716    $ 21,876
---------------------------------------------------------------------------------------
</Table>

 
    In August 2001, the Company issued $1.1 billion of senior contingent
convertible debt due August 6, 2021. The interest rate is 1.50% per annum. The
debt would be convertible into the Company's stock only if the Company's stock
price increases to the contractual strike price. The convertible strike price
decreases over the term of the bond. The notes are callable in August 2003 and
putable in August 2002 and on specified dates thereafter.
 
    In July 2001, the Company's subsidiary U.S. Bank National Association issued
$1.5 billion of fixed-rate subordinated notes due August 1, 2011. The interest
rate is 6.375% per annum.
 
    Medium-term notes ("MTNs") outstanding at December 31, 2001, mature from
January 2002 through December 2004. The MTNs bear fixed or floating interest
rates ranging from 2.01 percent to 7.50 percent. The weighted-average interest
rate of MTNs at December 31, 2001, was 3.85 percent.
 
    Federal Home Loan Bank ("FHLB") advances outstanding at December 31, 2001,
mature from February 2002 through October 2026. The advances bear fixed or
floating interest rates ranging from 0.50 percent to 8.25 percent. The Company
has an arrangement with the FHLB whereby based on collateral available
(residential and commercial mortgages), the Company could have borrowed an
additional $10.6 billion at December 31, 2001. The weighted-average interest
rate of FHLB advances at December 31, 2001, was 3.36 percent.
 
    Bank notes outstanding at December 31, 2001, mature from January 2002
through November 2005. The Bank notes bear fixed or floating interest rates
ranging from 1.79 percent to 6.30 percent. The weighted-average interest
 
U.S. Bancorp
      68

<PAGE>
 
rate of Bank notes at December 31, 2001, was 2.69 percent. Euro medium-term
notes outstanding at December 31, 2001, bear floating rate interest at
three-month LIBOR plus .15 percent. The interest rate at December 31, 2001, was
2.58 percent.
 
Maturities of long-term debt outstanding at December 31, 2001, were:
 

<Table>
<Caption>
                                                         Parent
(Dollars in Millions)                  Consolidated     Company
---------------------------------------------------------------
<S>                                    <C>             <C>
2002............................         $  6,789      $  1,465
2003............................            3,970         1,545
2004............................            5,529           916
2005............................            3,533           336
2006............................              242             3
Thereafter......................            5,653         1,809
                                       ------------------------
Total...........................         $ 25,716      $  6,074
---------------------------------------------------------------
</Table>

 
NOTE 14 Company-obligated Mandatorily Redeemable Preferred Securities of
        Subsidiary Trusts Holding Solely the Junior Subordinated Debentures of
        the Parent Company
 
    The Company has issued $2.9 billion of company-obligated mandatorily
redeemable preferred securities of subsidiary trusts holding solely the junior
subordinated debentures of the parent company ("Trust Preferred Securities")
through nine separate issuances by nine wholly owned subsidiary grantor trusts
("Trusts"). The Trust Preferred Securities accrue and pay distributions
periodically at specified rates as provided in the indentures. The Trusts used
the net proceeds from the offerings to purchase a like amount of junior
subordinated deferrable interest debentures (the "Debentures") of the Company.
The Debentures are the sole assets of the Trusts and are eliminated, along with
the related income statement effects, in the consolidated financial statements.
 
    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 Trust Preferred Securities are mandatorily redeemable upon the maturity
of the Debentures, or upon earlier redemption as provided in the indentures. The
Company has the right to redeem retail 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 has the right to
redeem institutional Debentures in whole, (but not 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 Trust Preferred
Securities are redeemable in whole or in part in 2003, 2006 and 2007 in the
amounts of $350 million, $2,250 million and $300 million, respectively.
 
    The Trust Preferred Securities qualify as tier I capital of the Company for
regulatory capital purposes. The Company used the proceeds from the sales of the
Debentures for general corporate purposes.
 
The following table is a summary of the Trust Preferred Securities as of
December 31, 2001:
 

<Table>
<Caption>
                                                            Trust
                                                        Preferred
                                           Issuance    Securities    Debentures        Rate     Rate at    Maturity    Redemption
Issuance Trust (Dollars in Millions)           Date        Amount        Amount     Type(a)    12/31/01        Date       Date(b)
---------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>         <C>           <C>           <C>         <C>         <C>         <C>
RETAIL
   USB Capital V...................        12/2001      $    300      $    309        Fixed        7.25%    12/2031    12/07/2006
   USB Capital IV..................        11/2001           500           515        Fixed        7.35%    11/2031    11/01/2006
   USB Capital III.................        05/2001           700           722        Fixed        7.75%    05/2031    05/04/2006
   USB Capital II..................        03/1998           350           361        Fixed        7.20%    04/2028    04/01/2003
INSTITUTIONAL
   Star Capital I..................        06/1997           150           155     Variable        2.64%    06/2027    06/15/2007
   Mercantile Capital Trust I......        02/1997           150           155     Variable        3.08%    02/2027    02/01/2007
   USB Capital I...................        12/1996           300           309        Fixed        8.27%    12/2026    12/15/2006
   Firstar Capital Trust I.........        12/1996           150           155        Fixed        8.32%    12/2026    12/15/2006
   FBS Capital I...................        11/1996           300           309        Fixed        8.09%    11/2026    11/15/2006
---------------------------------------------------------------------------------------------------------------------------------
</Table>

 
(a) The variable rate Trust Preferred Securities re-price quarterly.
 
(b) Earliest date of redemption.
 
                                                                    U.S. Bancorp
                                                                         69

<PAGE>
 
NOTE 15 Shareholders' Equity
 
At December 31, 2001 and 2000, the Company had authority to issue 4 billion and
2 billion shares of common stock, respectively, and 10 million shares of
preferred stock. The Company had 1,951.7 million and 1,902.1 million shares of
common stock outstanding at December 31, 2001 and 2000, respectively. At
December 31, 2001, the Company had 279.1 million shares of common stock reserved
for future issuances. These shares are primarily reserved for stock option
plans, dividend reinvestment plans and deferred compensation plans. In
connection with the merger of Firstar and USBM, the number of authorized common
shares for U.S. Bancorp was increased from 2 billion to 4 billion effective
February 27, 2001. Additionally, the par value of the Company's common stock was
reduced from $1.25 per share to $.01 per share.
 
    The Company has a Preferred Share Purchase Rights Plan intended to preserve
the long-term value of the Company by discouraging a hostile takeover of the
Company. Under the plan, each share of common stock carries a right to purchase
one one-thousandth of a share of preferred stock. The rights become exercisable
in certain limited circumstances involving a potential business combination
transaction or an acquisition of shares of the Company and are exercisable at a
price of $100 per right, subject to adjustment. Following certain other events,
each right entitles its holder to purchase for $100 an amount of common stock of
the Company, or, in certain circumstances, securities of the acquirer, having a
then-current market value of twice the exercise price of the right. The dilutive
effect of the rights on the acquiring company is intended to encourage it to
negotiate with the Company's Board of Directors prior to attempting a takeover.
If the Board of Directors believes a proposed acquisition is in the best
interests of the Company and its shareholders, the Board may amend the plan or
redeem the rights for a nominal amount in order to permit the acquisition to be
completed without interference from the plan. Until a right is exercised, the
holder of a right has no rights as a shareholder of the Company. The rights
expire on February 27, 2011.
 
    The Company issued 57.2 million and 18.2 million shares of common stock with
an aggregate value of $1.9 billion and $298 million in connection with purchase
acquisitions during 2001 and 2000, respectively.
 
    On February 16, 2000, USBM's Board of Directors authorized the repurchase of
up to $2.5 billion of its common stock over a two-year period ending March 31,
2002. This USBM repurchase program replaced a program that was scheduled to
expire on March 31, 2000. On April 11, 2000, Firstar's Board of Directors
approved a common stock repurchase program of 100 million shares. The stock
repurchase programs of Firstar and USBM were rescinded on October 4, 2000, and
January 17, 2001, respectively, in connection with the planned merger of the
formerly separate companies. On July 17, 2001, the Company's Board of Directors
authorized the repurchase of up to 56.4 million shares of the Company's common
stock to replace shares issued in connection with the July 24, 2001 acquisition
of NOVA Corporation. The stock repurchase authorization will expire on July 23,
2003. Under this program the Company has repurchased 19.7 million shares for
$467.9 million in 2001. The Company had forward contracts to purchase 26.7
million shares within this authorization. These contracts were settled in
January of 2002. On December 18, 2001, the Board of Directors approved an
authorization to repurchase an additional 100 million shares of outstanding
common stock over the following 24 months.
 
The following table summarizes the Company's common stock repurchased in each of
the last three years:
 

<Table>
<Caption>
(Dollars and Shares in Millions)            Shares       Value
--------------------------------------------------------------
<S>                                         <C>       <C>
2001.................................       19.7      $  467.9
2000.................................       58.6       1,182.2
1999.................................       44.6       1,187.9
--------------------------------------------------------------
</Table>

 
    USBM offered employees and directors an Employee Stock Purchase Plan
("ESPP") that permitted all eligible employees with at least one year of service
and directors to purchase common stock. In connection with the merger with
Firstar, the ESPP was terminated effective October 13, 2000.
 
    USBM's Dividend Reinvestment Plan providing for automatic reinvestment of
dividends and optional cash purchases was suspended on November 9, 2000,
following the announcement of the definitive agreement to merge with Firstar.
 
U.S. Bancorp
      70

<PAGE>
 
Shareholders' equity is affected by transactions and valuations of asset and
liability positions that require adjustments to Accumulated Other Comprehensive
Income. The reconciliation of transactions affecting Accumulated Other
Comprehensive Income included in shareholders' equity for the years ended
December 31, is as follows:
 

<Table>
<Caption>
(Dollars in Millions)                                               Pre-tax    Tax-effect    Net-of-tax
-------------------------------------------------------------------------------------------------------
<S>                                                                <C>         <C>           <C>
2001
Unrealized gain on securities available-for-sale............       $  194.5     $  (77.6)     $  116.9
Unrealized gain on derivatives..............................          106.0        (40.3)         65.7
Realized gain on derivatives................................           42.4        (16.1)         26.3
Reclassification adjustment for gains realized in net
   income...................................................         (333.1)       126.6        (206.5)
Foreign currency translation adjustments....................           (4.0)         1.5          (2.5)
                                                                   ------------------------------------
   Total....................................................       $    5.8     $   (5.9)     $    (.1)
                                                                   ------------------------------------
2000
Unrealized gain on securities available-for-sale............       $  436.0     $ (157.8)     $  278.2
Reclassification adjustment for gains realized in net
   income...................................................          (41.6)        15.8         (25.8)
Foreign currency translation adjustments....................            (.5)          .2           (.3)
                                                                   ------------------------------------
   Total....................................................       $  393.9     $ (141.8)     $  252.1
                                                                   ------------------------------------
1999
Unrealized loss on securities available-for-sale............       $ (743.9)    $  268.2      $ (475.7)
Reclassification adjustment for losses realized in net
   income...................................................          163.9        (57.7)        106.2
                                                                   ------------------------------------
   Total....................................................       $ (580.0)    $  210.5      $ (369.5)
-------------------------------------------------------------------------------------------------------
</Table>

 
NOTE 16 Earnings Per Share
 
The components of earnings per share were:
 

<Table>
<Caption>
(Dollars and Shares in Millions, Except Per Share Data)                2001        2000        1999
---------------------------------------------------------------------------------------------------
<S>                                                                <C>         <C>         <C>
Net income..................................................       $1,706.5    $2,875.6    $2,381.8
                                                                   --------------------------------
Weighted-average common shares outstanding..................        1,927.9     1,906.0     1,907.8
Net effect of the assumed purchase of stock based on the
 treasury stock method for options and stock plans..........           11.6        12.5        22.2
                                                                   --------------------------------
Dilutive common shares outstanding..........................        1,939.5     1,918.5     1,930.0
                                                                   --------------------------------
Earnings per share
 Basic......................................................       $    .89    $   1.51    $   1.25
 Diluted....................................................       $    .88    $   1.50    $   1.23
---------------------------------------------------------------------------------------------------
</Table>

 
NOTE 17 Employee Benefits
 
RETIREMENT PLANS Pension benefits are provided to substantially all employees
based on years of service and employees' compensation while employed with the
Company. Employees are fully vested after five years of service. 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, plus such additional amounts as the Company determines to be appropriate.
The actuarial cost method used to compute the pension liabilities and expense is
the projected unit credit method. Prior to their acquisition dates, employees of
certain acquired companies were covered by separate, noncontributory pension
plans that provided benefits based on years of service and compensation.
Generally, the Company merges plans of acquired companies into its existing
pension plans when it becomes practicable.
 
    As a result of the Firstar and USBM merger, the Company maintained two
different qualified pension plans, with three different pension benefit
structures during 2001: the former USBM's cash balance pension benefit
structure, a final average pay benefit structure for the former Firstar
organization, and a cash balance pension benefit structure related to the
Mercantile acquisition. The two pension plans were merged as of January 1, 2002,
under a new final average pay benefit structure; however, the benefit structure
of the new plan does not become effective for the Mercantile acquisition until
January 1, 2003. Under the new plan's benefit structure, a participant's future
retirement benefits are based on a participant's highest five-year average
annual compensation during his or her last 10 years before retirement or
termination from the Company. Generally, under the two previous cash balance
pension benefit structures the participants' earned retirement benefits were
based on their average compensation over their career. Retirement benefits under
the former Firstar benefit
 
                                                                    U.S. Bancorp
                                                                         71

<PAGE>
 
structure were earned based on final average pay and years of service, similar
to the new plan. Plan assets primarily consist of various equity mutual funds,
listed stocks and other miscellaneous assets.
 
    The Company also maintains several unfunded, non-qualified, supplemental
executive retirement programs that provide additional defined pension benefits
for senior managers and executive employees. Because all the non-qualified plans
are unfunded, the aggregate accumulated benefit obligations exceed the assets. A
supplemental executive retirement plan of USBM was frozen for substantially all
participants as of September 30, 2001, but with service credit running through
December 31, 2001. 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. The Company anticipates recognizing curtailment gains of
approximately $11.7 million in early 2002 in connection with changes to
non-qualified pension plans.
 
POST-RETIREMENT MEDICAL PLANS In addition to providing pension benefits, the
Company provides health care and death benefits to certain retired employees
through several retiree medical programs. As a result of the merger of USBM with
Firstar, there were three major retiree medical programs in place during 2001
with various terms and subsidy schedules. Effective January 1, 2002, the Company
adopted one retiree medical program for all future retirees. For certain
eligible employees, the provisions of the USBM retiree medical plan and the
Mercantile retiree medical plan will remain in place until December 31, 2002.
Generally, all 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.
 
Information presented in the four tables below reflects a measurement date of
September 30.
 
The following table sets forth the components of net periodic benefit cost for
the retirement plans:
 

<Table>
<Caption>
                                                                     Pension Plans                  Post-Retirement Medical Plans
                                                             --------------------------------------------------------------------
(Dollars in Millions)                                           2001       2000       1999             2001       2000       1999
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>        <C>        <C>              <C>        <C>        <C>
Components of net periodic benefit cost
   Service cost.......................................       $  61.0    $  65.4    $  70.1          $   2.1    $   2.0    $   3.8
   Interest cost......................................         118.7      117.3      107.1             17.9       16.3       16.5
   Expected return on plan assets.....................        (232.6)    (201.6)    (177.5)            (1.0)       (.6)       (.5)
   Net amortization and deferral......................         (10.7)     (13.2)       1.3               .2         .2        2.0
   Recognized actuarial loss..........................          (1.2)        .7        1.9              (.1)      (1.4)        .2
                                                             --------------------------------------------------------------------
Net periodic benefit cost.............................         (64.8)     (31.4)       2.9             19.1       16.5       22.0
   Curtailment and settlement (gain) loss.............            --      (17.0)      (6.2)              --       10.3         --
                                                             --------------------------------------------------------------------
Net periodic benefit cost after curtailment and
 settlement (gain) loss...............................       $ (64.8)     (48.4)   $  (3.3)         $  19.1    $  26.8    $  22.0
---------------------------------------------------------------------------------------------------------------------------------
</Table>

 
The following table sets forth the weighted average plan assumptions and other
data:
 

<Table>
<Caption>
                                                                            USBM                               Firstar
                                                                -----------------------------------------------------------------
(Dollars in Millions)                                              2001       2000       1999          2001       2000       1999
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>        <C>        <C>           <C>        <C>        <C>
Pension plan actuarial computations
   Discount rate in determining benefit obligations.........        7.5%       7.8%       7.5%          7.5%       8.0%       6.6%
   Expected long-term return on plan assets(b)..............       11.0        9.5        9.5          12.2       12.2       11.4
   Rate of increase in future compensation..................        3.5        5.6        5.6           3.5        4.0        4.1
Post-retirement medical plan actuarial computations
   Discount rate in determining benefit obligations.........        7.5%       7.8%       7.5%          7.5%       8.0%       6.8%
   Expected long-term return on plan assets.................        5.0        5.0        5.0             *          *          *
   Health care cost trend rate(a)
      Prior to age 65.......................................       10.5%       7.7%       7.0%         10.5%       7.5%       7.7%
      After age 65..........................................       13.0        7.7        5.5          13.0        7.5        7.7
Effect of one percent increase in health care cost trend
 rate
   Service and interest costs...............................    $   1.2    $   1.0    $   1.3       $    .4    $    .4    $    .4
   Accumulated post-retirement benefit obligation...........       13.1       13.1       12.4           6.0        5.2        4.0
Effect of one percent decrease in health care cost trend
 rate
   Service and interest costs...............................    $  (1.0)   $   (.9)   $  (1.0)      $   (.4)   $   (.4)   $   (.4)
   Accumulated post-retirement benefit obligation...........      (13.6)     (11.6)     (10.9)         (5.7)      (4.6)      (3.6)
---------------------------------------------------------------------------------------------------------------------------------
</Table>

 
 *  The Firstar plan had no assets as of December 31, 2001, 2000 and 1999.
 
(a) The pre-65 and post-65 rates are assumed to decrease gradually to 5.5% and
    6.0% respectively by 2011 and remain at these levels thereafter.
 
(b) In connection with the merger of Firstar and USBM, the asset management
    practices and investment strategies of the plan were conformed. At December
    31, 2001, the investment asset allocation was weighted toward equities and
    diversified by industry and companies with varying market capitalization
    levels.
 
U.S. Bancorp
      72

<PAGE>
 
The following table summarizes benefit obligation and plan asset activity for
the retirement plans:
 

<Table>
<Caption>
                                                                      Pension Plans              Post-Retirement Medical Plans
                                                                   ------------------------------------------------------------
(Dollars in Millions)                                                  2001        2000                   2001             2000
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>         <C>               <C>              <C>
CHANGE IN BENEFIT OBLIGATION
   Benefit obligation at beginning of measurement period....       $1,595.4    $1,580.3            $  244.1         $  225.0
   Service cost.............................................           61.0        65.4                 2.1              2.0
   Interest cost............................................          118.7       117.3                17.9             16.3
   Plan participants' contributions.........................             --          --                10.3              6.8
   Plan amendments..........................................            4.0          --                (2.4)              --
   Actuarial loss...........................................           47.7          .1                24.9             19.8
   Benefit payments.........................................         (170.4)     (111.7)              (31.8)           (25.8)
   Curtailments.............................................             --        (4.4)                 --               --
   Settlements..............................................             --       (51.6)                 --               --
                                                                   ------------------------------------------------------------
   Benefit obligation at end of measurement period..........       $1,656.4    $1,595.4            $  265.1         $  244.1
-------------------------------------------------------------------------------------------------------------------------------
CHANGE IN FAIR VALUE OF PLAN ASSETS
   Fair value at beginning of measurement period............       $2,283.2    $1,985.3            $   21.8         $   13.4
   Actual return on plan assets.............................         (531.8)      443.8                 1.8               .9
   Employer contributions...................................           30.1        16.3                33.3             26.5
   Plan participants' contributions.........................             --          --                10.3              6.8
   Acquisitions/divestitures................................             --         1.1                  --               --
   Settlements..............................................             --       (51.6)                 --               --
   Benefit payments.........................................         (170.4)     (111.7)              (31.8)           (25.8)
                                                                   ------------------------------------------------------------
   Fair value at end of measurement period..................       $1,611.1    $2,283.2            $   35.4         $   21.8
-------------------------------------------------------------------------------------------------------------------------------
FUNDED STATUS
   Funded status at end of measurement period...............       $  (45.3)   $  687.8            $ (229.7)        $ (222.3)
   Unrecognized transition (asset) obligation...............             --        (1.8)                8.1              9.0
   Unrecognized prior service cost..........................          (74.8)      (87.6)               (9.5)            (7.8)
   Unrecognized net (gain) loss.............................          473.2      (338.6)               16.6             (7.6)
   Fourth quarter contribution..............................            6.7         3.7                 5.7             15.9
                                                                   ------------------------------------------------------------
   Net amount recognized....................................       $  359.8    $  263.5            $ (208.8)        $ (212.8)
-------------------------------------------------------------------------------------------------------------------------------
COMPONENTS OF STATEMENT OF FINANCIAL POSITION
   Prepaid benefit cost.....................................       $  531.7    $  433.1            $     --         $     --
   Accrued benefit liability................................         (171.8)     (169.6)             (208.8)          (212.8)
                                                                   ------------------------------------------------------------
   Net amount recognized....................................       $  359.8    $  263.5            $ (208.8)        $ (212.8)
-------------------------------------------------------------------------------------------------------------------------------
</Table>

 
The following table provides information for pension plans with benefit
obligations in excess of plan assets:
 

<Table>
<Caption>
(Dollars in Millions)              2001        2000
---------------------------------------------------
<S>                            <C>         <C>
Benefit obligation............ $  227.5    $  216.5
Accumulated benefit
      obligation..............    220.6       193.9
Fair value of plan assets.....       --          --
---------------------------------------------------
</Table>

 
EMPLOYEE INVESTMENT PLAN The Company has defined contribution retirement savings
plans which allow qualified employees, at their option, to make contributions up
to certain percentages of pre-tax base salary 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 the first four percent of an employee's compensation. The Company's matching
contribution vests immediately; however, a participant must be employed on
December 31st to receive that year's matching contribution. Although the
matching contribution is initially invested in the Company's common stock,
effective in 2002 an employee will be allowed to reinvest the matching
contributions among various investment alternatives. Total expense was $53.7
million, $53.6 million and $57.3 million in 2001, 2000 and 1999, respectively.
 
NOTE 18 Stock Options and Compensation Plans
 
As part of its employee and director compensation programs, the Company may
grant certain stock awards under the provisions of the existing stock option and
compensation plans. The Company has stock options outstanding under various
plans at December 31, 2001, including plans assumed in acquisitions. The plans
provide for grants of options to purchase shares of common stock generally at
the stock's fair market value at the date of
 
                                                                    U.S. Bancorp
                                                                         73

<PAGE>
 
grant. In addition, the plans provide for grants of shares of common stock which
are subject to restriction on transfer and to forfeiture if certain vesting
requirements are not met.
 
    With respect to stock option and stock compensation plans, the Company has
elected to follow APB 25 in accounting for its employee stock incentive and
purchase plans. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized. On the date exercised, if
new shares are issued, the option proceeds equal to the par value of the shares
are credited to common stock and additional proceeds are credited to capital
surplus. If treasury shares are issued, the option proceeds equal to the average
treasury share price are credited to treasury stock and additional proceeds are
credited to capital surplus.
 
    Option grants are generally exercisable up to ten years from the date of
grant and vest over three to five years. Restricted shares vest over three to
seven years. Compensation expense for restricted stock is based on the market
price of the Company stock at the time of the grant and amortized on a
straight-line basis over the vesting period. Compensation expense related to the
restricted stock was $71.9 million, $43.4 million and $69.5 million in 2001,
2000 and 1999, respectively.
 
    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. The historical option information
presented below has been restated to reflect the options originally granted
under acquired companies' plans.
 
    At December 31, 2001, there were 64.4 million shares (subject to adjustment
for forfeitures) available for grant under various plans.
 
The following is a summary of stock options outstanding and exercised under
various stock option plans of the Company:


<Table>
<Caption>
                                             2001                                2000
                                  -----------------------------------------------------------------
                                                   Weighted-                           Weighted-
                                                     Average                             Average
                                                    Exercise                            Exercise
                                  Stock Options        Price          Stock Options        Price
------------------------------------------------------------------------------------------------
<S>                               <C>              <C>                <C>              <C>
STOCK OPTION PLANS
Number outstanding at
 beginning of year.........        153,396,226     $  22.80            153,163,030     $  22.74
   Granted.................         65,144,310        21.25             22,633,170        19.64
   Assumed/converted.......          8,669,285        16.40                447,341         6.85
   Exercised...............        (12,775,067)       13.44            (10,017,357)       11.02
   Cancelled...............        (12,824,489)       23.29            (12,829,958)       19.91
                                  --------------------------------------------------------------
Number outstanding at end
 of year...................        201,610,265     $  22.58            153,396,226     $  22.80
Exercisable at end of
 year......................        117,534,343     $  22.36             68,870,745     $  19.78
------------------------------------------------------------------------------------------------
RESTRICTED SHARE PLANS
Number outstanding at
 beginning of year.........          6,377,137                           4,212,954
   Granted.................          1,021,887                           4,110,440
   Assumed/converted.......            298,988                                  --
   Cancelled/vested........         (5,520,424)                         (1,946,257)
                                  --------------------------------------------------------------
Number outstanding at end
 of year...................          2,177,588                           6,377,137
------------------------------------------------------------------------------------------------
Weighted-average fair value
 of shares granted.........                        $   6.76                            $   6.32
------------------------------------------------------------------------------------------------
 
<Caption>
                                      1999
                             -----------------------
                                           Weighted-
                                             Average
                                            Exercise
                             Stock Options     Price
----------------------------------------------------
<S>                          <C>           <C>
STOCK OPTION PLANS
Number outstanding at
 beginning of year.........   107,405,102  $  17.97
   Granted.................    75,922,950     27.08
   Assumed/converted.......     1,210,738     16.58
   Exercised...............   (22,332,730)    13.03
   Cancelled...............    (9,043,030)    25.63
                             -----------------------
Number outstanding at end
 of year...................   153,163,030  $  22.74
Exercisable at end of
 year......................    70,527,758  $  18.00
----------------------------------------------------
RESTRICTED SHARE PLANS
Number outstanding at
 beginning of year.........     6,072,217
   Granted.................     1,379,808
   Assumed/converted.......            --
   Cancelled/vested........    (3,239,071)
                             -----------------------
Number outstanding at end
 of year...................     4,212,954
----------------------------------------------------
Weighted-average fair value
 of shares granted.........                $   7.20
----------------------------------------------------
</Table>

 
U.S. Bancorp
      74

<PAGE>
 
Additional information regarding options outstanding as of December 31, 2001, is
as follows:
 

<Table>
<Caption>
                                                                      Options Outstanding                 Exercisable Options
                                                            ----------------------------------------    ------------------------
                                                                              Weighted-
                                                                                Average    Weighted-                   Weighted-
                                                                              Remaining      Average                     Average
                                                                            Contractual     Exercise                    Exercise
Range of Exercise Prices                                         Shares    Life (Years)        Price         Shares        Price
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>            <C>             <C>          <C>            <C>
$1.44 -- $10.00......................................         7,679,415            2.7     $   5.99       7,649,800    $   5.98
$10.01 -- $15.00.....................................         8,966,154            5.3        11.78       7,366,306       11.76
$15.01 -- $20.00.....................................        51,659,341            8.7        18.63      16,774,997       17.59
$20.01 -- $25.00.....................................        65,876,786            8.2        22.84      23,274,436       22.90
$25.01 -- $30.00.....................................        60,157,207            7.0        28.16      55,353,547       28.25
$30.01 -- $35.00.....................................         6,386,174            6.4        32.51       6,230,069       32.51
$35.01 -- $37.20.....................................           885,188            6.5        35.78         885,188       35.78
                                                            --------------------------------------------------------------------
                                                            201,610,265            7.6     $  22.58     117,534,343    $  22.36
--------------------------------------------------------------------------------------------------------------------------------
</Table>

 
    Pro forma information regarding net income and earnings per share is
required under Statement of Financial Accounting Standard No. 123 ("SFAS 123"),
"Accounting and Disclosure of Stock-Based Compensation" and has been determined
as if the Company accounted for its employee stock option plans under the fair
value method of SFAS 123. The fair value of options was estimated at the grant
date using a Black-Scholes option pricing model. Option valuation models require
use of highly subjective assumptions. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, the existing models do not necessarily provide a
reliable single measure of the fair value of employee stock options.
 
    The pro forma disclosures include options granted in 2001, 2000, 1999 and
1998 and are not likely to be representative of the pro forma disclosures for
future years. The estimated fair value of the options is amortized to expense
over the options' respective vesting periods.
 

<Table>
<Caption>
                                                                   Year Ended December 31
                                                              --------------------------------
(Dollars in Millions, Except Per Share Data)                   2001(a)        2000        1999
----------------------------------------------------------------------------------------------
<S>                                                           <C>         <C>         <C>
Pro forma net income........................................  $1,478.9    $2,752.1    $2,240.5
Pro forma earnings per share................................
   Earnings per share.......................................  $    .77    $   1.44    $   1.17
   Diluted earnings per share...............................       .76        1.43        1.16
==============================================================================================
</Table>

 
(a) Pro forma earnings per share for 2001 was impacted by changes in control
    provisions that accelerated the vesting of stock options granted to USBM
    employees.
 

<Table>
<Caption>
                                                         U.S. Bancorp               Firstar                        USBM
                                                         ------------       -----------------------       -----------------------
Weighted-average assumptions in option valuation             2001               2000           1999           2000           1999
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>                <C>            <C>            <C>            <C>
Risk-free interest rates...............................         4.6%             5.4%           5.6%           6.1%           5.4%
Dividend yields........................................         3.0%             2.5%           2.0%           3.0%           3.5%
Stock volatility factor................................         .42              .37            .41            .37            .27
Expected life of options (in years)....................         4.5          2.5-5.5        2.5-5.5            4.7            6.1
---------------------------------------------------------------------------------------------------------------------------------
</Table>

 
                                                                    U.S. Bancorp
                                                                         75

<PAGE>
 
NOTE 19 Income Taxes
 
The components of income tax expense were:
 

<Table>
<Caption>
(Dollars in Millions)                                                  2001        2000        1999
---------------------------------------------------------------------------------------------------
<S>                                                                <C>         <C>         <C>
FEDERAL
Current.....................................................       $  979.9    $  996.1    $1,036.0
Deferred....................................................         (164.5)      324.5       219.5
                                                                   --------------------------------
   Federal income tax.......................................          815.4     1,320.6     1,255.5
STATE
Current.....................................................          131.8       159.0       103.3
Deferred....................................................          (19.5)       32.6        33.4
                                                                   --------------------------------
   State income tax.........................................          112.3       191.6       136.7
                                                                   --------------------------------
   Total income tax provision...............................       $  927.7    $1,512.2    $1,392.2
---------------------------------------------------------------------------------------------------
</Table>

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

<Table>
<Caption>
(Dollars in Millions)                                                  2001        2000        1999
---------------------------------------------------------------------------------------------------
<S>                                                                <C>         <C>         <C>
Tax at statutory rate (35%).................................       $  922.0    $1,535.8    $1,320.9
State income tax, at statutory rates, net of federal tax
   benefit..................................................           73.0       124.5        88.9
Tax effect of:
   Tax-exempt interest, net.................................          (38.9)      (56.0)      (60.3)
   Amortization of nondeductible goodwill...................           88.1        91.6        73.1
   Tax credits..............................................          (69.4)      (62.7)      (41.7)
   Nondeductible merger charges.............................           52.5         4.9        56.4
   Sale of preferred minority interest......................             --       (50.0)         --
   Other items..............................................          (99.6)      (75.9)      (45.1)
                                                                   --------------------------------
Applicable income taxes.....................................       $  927.7    $1,512.2    $1,392.2
---------------------------------------------------------------------------------------------------
</Table>

 
    Deferred income tax assets and liabilities reflect the tax effect of
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.
 
Significant components of the Company's deferred tax assets and liabilities as
of December 31 were as follows:
 

<Table>
<Caption>
(Dollars in Millions)                                                   2001        2000
----------------------------------------------------------------------------------------
<S>                                                                <C>          <C>
DEFERRED TAX ASSETS
Allowance for credit losses.................................       $ 1,043.9    $  637.0
Pension and post-retirement benefits........................            59.5        53.5
Real estate and other asset basis differences...............            32.6        31.9
State and federal operating loss carryforwards..............            24.4        25.0
Federal AMT credits and capital losses......................            22.0        22.0
Accrued severance, pension and retirement benefits..........             2.2        30.6
Charitable contributions....................................              --          .9
Other deferred tax assets, net..............................           234.0       196.0
                                                                   ---------------------
   Gross deferred tax assets................................         1,418.6       996.9
DEFERRED TAX LIABILITIES
Leasing activities..........................................        (1,642.5)   (1,218.1)
Accelerated depreciation....................................          (117.7)      (92.7)
Securities available-for-sale...............................           (59.7)      (52.2)
Deferred fees...............................................           (49.2)       35.0
Other investment basis differences..........................           (32.5)      (41.1)
Other deferred tax liabilities, net.........................           (73.6)     (124.0)
                                                                   ---------------------
   Gross deferred tax liabilities...........................        (1,975.2)   (1,493.1)
Valuation allowance.........................................           (16.6)      (16.6)
                                                                   ---------------------
NET DEFERRED TAX LIABILITY..................................       $  (573.2)   $ (512.8)
----------------------------------------------------------------------------------------
</Table>

 
U.S. Bancorp
      76

<PAGE>
 
    At December 31, 2001, for income tax purposes, the Company had federal net
operating loss carryforwards of $1.2 million available, which expire in years
2002 through 2009. A valuation allowance has been established to offset deferred
tax assets related to state net operating loss carryforwards totaling
approximately $437 million, which expire at various times within the next 15
years.
 
    Certain events covered by Internal Revenue Code section 593(e), which was
not repealed, 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,
2001, retained earnings included approximately $101.8 million of base year
reserves for which no deferred federal income tax liability has been recognized.
 
NOTE 20 Derivative and Other Off-Balance Sheet Instruments
 
In the normal course of business, the Company uses various derivative and other
off-balance sheet instruments to manage its interest rate risk and market risks
and accommodate the business requirements of its customers. These instruments
carry varying degrees of credit, interest rate, and market or liquidity risks.
 
DERIVATIVES
 
The Company requires the recognition of derivative instruments as either assets
or liabilities and the measurement of those instruments at fair value.
Subsequent changes in the derivatives' fair values are recognized currently in
earnings unless specific hedge accounting criteria are met.
 
FAIR VALUE HEDGES The Company's interest rate swaps designated as fair value
hedges of underlying fixed-rate debt and deposit obligations have a fair value
of $276.5 million and fair value hedges of Trust Preferred Securities have a
fair value of $(43.5) million at December 31, 2001. Each period the changes in
fair value of both the hedge instruments and the underlying debt obligations are
recorded as gains or losses in trading account profits and commissions. All fair
value hedges are intended to reduce the interest rate risk associated with the
underlying hedged item. The fair value hedge transactions were considered highly
effective for the year ended December 31, 2001, and the change in fair value of
the swaps attributed to hedge ineffectiveness was not material.
 
    The Company enters into forward commitments to sell groups of residential
mortgage loans that it originates or purchases as part of its mortgage banking
activities. The Company commits to sell the loans at specified prices in a
future period, typically within 90 days. The Company is exposed to interest rate
risk during the period between issuing a loan commitment and the sale of the
loan into the secondary market. Specific forward commitments are designated as a
hedge against changes in the fair value of fixed-rate mortgage loans held for
sale attributed to changes in interest rates. The fair value of these forward
commitments was $52.5 million at December 31, 2001. The change in fair value of
the forward commitments attributed to hedge ineffectiveness recorded in
noninterest income was $17.9 million for the year ended December 31, 2001.
 
CASH FLOW HEDGES The Company has interest rate swaps designated as cash flow
hedges linked to the cash flows of variable rate LIBOR loans and floating rate
debt. The swaps have a fair value of $106 million at December 31, 2001. The gain
will be reclassified from other comprehensive income into earnings during the
same period the forecasted transactions occur. The estimated amount of the gain
to be reclassified into earnings within the next 12 months is $64.4 million,
which includes cash flow hedges terminated early where the forecasted
transaction is still probable. The Company has determined that the occurrence of
the hedged forecasted transactions remains probable. The change in fair value of
the swaps attributed to hedge ineffectiveness was not material for the year
ended December 31, 2001.
 
OTHER DERIVATIVE ACTIVITY The Company acts as an intermediary for interest rate
swaps, caps, floors and foreign exchange contracts on behalf of its customers.
The Company minimizes its market and liquidity risks by taking offsetting
positions. The Company manages its credit risk, or potential risk of loss from
default by counterparties, through credit limit approval and monitoring
procedures. Market value changes on intermediated swaps and other derivatives
are recognized in income in the period of change. Gains or losses on
intermediated transactions were not significant for the year ended December 31,
2001.
 
    In addition, the Company enters into interest rate swaps and other
derivative contracts to protect against interest rate risk and credit risk that
do not meet the criteria to receive hedge accounting treatment. These
derivatives are recorded at fair value on the balance sheet as trading account
assets or liabilities and any changes in fair value are recorded in trading
profits/losses and commissions.
 
    The Company also enters into forward commitments to sell groups of
residential mortgage loans to protect against changes in the fair value of
fixed-rate mortgage loan commitments not yet funded. These forward commitment
 
                                                                    U.S. Bancorp
                                                                         77

<PAGE>
 
transactions and unfunded loan commitments are recorded on the balance sheet at
fair value and changes in fair value are recorded in income. The fair value of
the forward commitments and the loan commitments was $19.2 million and $(20.3)
million, respectively, at December 31, 2001.
 
    Futures and forward contracts are agreements for the delayed delivery of
securities or cash settlement money market instruments. The Company enters into
futures contracts to reduce market risk on its fixed income inventory positions.
The Company manages its credit risk on forward contracts, which arises from the
potential nonperformance by counterparties, through credit approval and limit
procedures.
 
OTHER OFF-BALANCE SHEET INSTRUMENTS
 
COMMITMENTS TO EXTEND CREDIT 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.
 
LETTERS OF CREDIT Standby letters of credit are conditional 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, real estate, accounts
receivable and inventory. 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.
 
Notional amounts of commitments to extend credit and letters of credit were as
follows:
 

<Table>
<Caption>
                                                                    Expiring          Expiring
                                                                   Less Than             After
December 31, 2001 (Dollars in Millions)                             One Year          One Year              Total
-----------------------------------------------------------------------------------------------------------------
<S>                                                                <C>                <C>               <C>
Commitments to extend credit
   Commercial...............................................       $ 14,969           $ 32,687          $  47,656
   Corporate and purchasing cards...........................         20,083              2,688             22,771
   Consumer credit cards....................................         19,059                 --             19,059
   Other consumer...........................................          6,254              5,836             12,090
Letters of credit
   Standby..................................................          3,691              4,054              7,745
   Commercial...............................................            406                 22                428
-----------------------------------------------------------------------------------------------------------------
</Table>

 
COMMITMENTS FROM SECURITIES LENDING The Company participates in securities
lending activities by acting as the customer's agent involving the loan or sale
of securities. The Company indemnifies customers for the difference between the
market value of the securities lent and the market value of the collateral
received. Cash collateralizes these transactions.
 
For further information on derivatives and other off-balance sheet instruments,
see Table 17 included in Management's Discussion and Analysis which is
incorporated by reference into these Notes to Consolidated Financial Statements.
 
NOTE 21 Fair Values of Financial Instruments
 
Due to the nature of its business and its customers' needs, the Company offers a
large number of financial instruments, most of which are not actively traded.
When market quotes are unavailable, valuation techniques including discounted
cash flow calculations and pricing models or services are used. The Company also
uses various aggregation methods and assumptions, such as the discount rate and
cash flow timing and amounts. As a result, the fair value estimates can neither
be substantiated by independent market comparisons, nor realized by the
immediate sale or settlement of the financial instrument. Also, the estimates
reflect a point in time and could change significantly based on changes in
economic factors, such as interest rates. Furthermore, the disclosure of certain
financial and nonfinancial assets and liabilities are not required. Finally, the
fair value disclosure is not intended to estimate a market value of the Company
as a whole. A summary of the Company's valuation techniques and assumptions
follows.
 
U.S. Bancorp
      78

<PAGE>
 
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.
 
SECURITIES Generally, trading account securities and investment securities were
valued using available market quotes. In some instances, for securities that are
not widely traded, market quotes for comparable securities were used.
 
LOANS The loan portfolio consists of both floating and fixed-rate loans, the
fair value of which was estimated using discounted cash flow analyses and other
valuation techniques. To calculate discounted cash flows, the loans were
aggregated into pools of similar types and expected repayment terms. 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.
 
DEPOSIT LIABILITIES The fair value of demand deposits, savings accounts and
certain money market deposits is equal to the amount payable on demand at
year-end. The fair value of fixed-rate certificates of deposit was estimated by
discounting the contractural cash flow using the discount rates implied by the
high-grade corporate bond yield curve.
 
SHORT-TERM BORROWINGS Federal funds purchased, securities sold under agreements
to repurchase and other short-term funds borrowed are at floating rates or have
short-term maturities. Their carrying value is assumed to approximate their fair
value.
 
LONG-TERM DEBT AND COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES
OF SUBSIDIARY TRUSTS HOLDING SOLELY THE JUNIOR SUBORDINATED DEBENTURES OF THE
PARENT COMPANY Estimated fair value for medium-term notes, Euro medium-term
notes, bank notes, Federal Home Loan Bank advances, capital lease obligations
and mortgage note obligations was determined using a discounted cash flow
analysis based on current market rates of similar maturity debt securities to
discounted cash flows. Other long-term debt instruments and company-obligated
mandatorily redeemable preferred securities of subsidiary trusts holding solely
the junior subordinated debentures of the parent company were valued using
available market quotes.
 
INTEREST RATE SWAPS AND OPTIONS The interest rate swap cash flows were estimated
using a third party pricing model and discounted based on appropriate LIBOR,
Eurodollar futures and swap yield curves.
 
LOAN COMMITMENTS, LETTERS OF CREDIT AND GUARANTEES The Company's commitments
have floating rates and do not expose the Company to interest rate risk, with
the exception of mortgage commitments. No premium or discount was ascribed to
the loan commitments because virtually all funding would be at current market
rates.
 
                                                                    U.S. Bancorp
                                                                         79

<PAGE>
 
The estimated fair values of the Company's financial instruments at December 31
are shown in the table below.
 

<Table>
<Caption>
                                                                         2001                         2000
                                                                   -----------------------------------------------
                                                                   Carrying     Fair          Carrying        Fair
(Dollars in Millions)                                                Amount    Value            Amount       Value
------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>      <C>               <C>         <C>
FINANCIAL ASSETS
   Cash and cash equivalents................................       $  9,745 $  9,745          $  9,132    $  9,132
   Trading account securities...............................            982      982               753         753
   Investment securities....................................         26,608   26,615            17,642      17,647
   Loans held for sale......................................          2,820    2,820               764         764
   Loans....................................................        111,948  112,236           120,578     121,139
                                                                   -----------------------------------------------
      Total financial assets................................        152,103 $152,398           148,869    $149,435
                                                                            --------                      --------
         Nonfinancial assets................................         19,287                     16,052
                                                                    -------                   --------
            Total assets....................................       $171,390                   $164,921
                                                                   --------                   --------
FINANCIAL LIABILITIES
   Deposits.................................................       $105,219 $105,561          $109,535    $109,593
   Short-term borrowings....................................         14,670   14,670            11,833      11,833
   Long-term debt...........................................         25,716   25,801            21,876      22,006
   Company-obligated mandatorily redeemable preferred
      securities of subsidiary trusts holding solely the
      junior subordinated debentures of the parent
      company...............................................          2,826    2,915             1,400       1,351
                                                                   -----------------------------------------------
      Total financial liabilities...........................        148,431 $148,947           144,644    $144,783
                                                                            --------                      --------
         Nonfinancial liabilities...........................          6,498                      5,109
         Shareholders' equity...............................         16,461                     15,168
                                                                    -------                   --------
            Total liabilities and shareholders' equity......       $171,390                   $164,921
                                                                   --------                   --------
DERIVATIVE POSITIONS
   Asset and liability management positions
         Interest rate swaps................................       $    339 $    339          $     --    $    107
         Forward commitments to sell residential
         mortgages..........................................             72       72               (14)        (14)
   Customer intermediated positions
         Interest rate contracts............................             10       10                 6           6
         Foreign exchange contracts.........................              2        2                 4           4
------------------------------------------------------------------------------------------------------------------
</Table>

 
NOTE 22 Commitments and Contingent Liabilities
 
Rental expense for operating leases amounted to $165.2 million in 2001, $219.3
million in 2000 and $193.8 million in 1999. 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, 2001:
 

<Table>
<Caption>
                                                                   Capitalized    Operating
(Dollars in Millions)                                                   Leases       Leases
-------------------------------------------------------------------------------------------
<S>                                                                <C>            <C>
2002........................................................        $   12.6      $  191.5
2003........................................................             9.0         164.4
2004........................................................             8.1         137.4
2005........................................................             6.9         113.6
2006........................................................             6.3          95.3
Thereafter..................................................            51.2         508.4
                                                                   ------------------------
Total minimum lease payments................................            94.1      $1,201.6
                                                                                  --------
Less amount representing interest...........................            38.4
                                                                    --------
Present value of net minimum lease payments.................        $   55.7
-------------------------------------------------------------------------------------------
</Table>

 
    Various legal proceedings are currently pending against the Company. Due to
their complex nature, it may be years before some matters are resolved. In the
opinion of management, the aggregate liability, if any, will not have a material
adverse effect on the Company's financial position, liquidity or results of
operations.
 
U.S. Bancorp
      80

<PAGE>
 
NOTE 23 U.S. Bancorp (Parent Company)
 
CONDENSED BALANCE SHEET
 

<Table>
<Caption>
December 31 (Dollars in Millions)                                     2001       2000
-------------------------------------------------------------------------------------
<S>                                                                <C>        <C>
ASSETS
Deposits with subsidiary banks, principally
 interest-bearing...........................................       $ 3,184    $ 1,714
Available-for-sale securities...............................           189        325
Investments in
   Bank affiliates..........................................        17,907     15,019
   Nonbank affiliates.......................................         1,291      1,059
Advances to
   Bank affiliates..........................................         1,214      1,971
   Nonbank affiliates.......................................           928      1,958
Other assets................................................         2,258      2,179
                                                                   ------------------
      Total assets..........................................       $26,971    $24,225
                                                                   ------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term funds borrowed...................................       $   452    $   224
Advances from subsidiaries..................................            69         97
Long-term debt..............................................         6,074      6,563
Junior subordinated debentures issued to subsidiary
 trusts.....................................................         2,990      1,443
Other liabilities...........................................           925        730
Shareholders' equity........................................        16,461     15,168
                                                                   ------------------
      Total liabilities and shareholders' equity............       $26,971    $24,225
-------------------------------------------------------------------------------------
</Table>

 
CONDENSED STATEMENT OF INCOME
 

<Table>
<Caption>
Year Ended December 31 (Dollars in Millions)                           2001        2000        1999
---------------------------------------------------------------------------------------------------
<S>                                                                <C>         <C>         <C>
INCOME
Dividends from subsidiaries (including $1,300.1, $3,010.5
   and $1,661.0 from bank subsidiaries).....................       $1,310.2    $3,027.8    $1,704.3
Interest from subsidiaries..................................          272.8       234.8       177.2
Service and management fees from subsidiaries...............          221.8       246.0       229.1
Other income................................................           21.0       217.0       202.0
                                                                   --------------------------------
      Total income..........................................        1,825.8     3,725.6     2,312.6
EXPENSES
Interest on short-term funds borrowed.......................           18.5        19.3        26.8
Interest on long-term debt..................................          318.5       441.7       296.4
Interest on junior subordinated debentures issued to
   subsidiary trusts........................................          141.7       111.3       110.3
Merger and restructuring-related charges....................           49.5        21.3       103.8
Other expenses..............................................          322.5       225.2       307.7
                                                                   --------------------------------
      Total expenses........................................          850.7       818.8       845.0
                                                                   --------------------------------
Income before income taxes and equity in undistributed
   income of subsidiaries...................................          975.1     2,906.8     1,467.6
Income tax credit...........................................         (102.4)      (34.0)      (36.9)
                                                                   --------------------------------
Income of parent company....................................        1,077.5     2,940.8     1,504.5
Equity (deficiency) in undistributed income of
 subsidiaries...............................................          629.0       (65.2)      877.3
                                                                   --------------------------------
      Net income............................................       $1,706.5    $2,875.6    $2,381.8
---------------------------------------------------------------------------------------------------
</Table>

 
                                                                    U.S. Bancorp
                                                                         81

<PAGE>
 
CONDENSED STATEMENT OF CASH FLOWS
 

<Table>
<Caption>
Year Ended December 31 (Dollars in Millions)                           2001        2000        1999
---------------------------------------------------------------------------------------------------
<S>                                                                <C>         <C>         <C>
OPERATING ACTIVITIES
Net income..................................................       $1,706.5    $2,875.6    $2,381.8
Adjustments to reconcile net income to net cash provided by
   operating activities
   (Equity) deficiency in undistributed income of
   subsidiaries.............................................         (629.0)       65.2      (877.3)
   (Gain) loss on sale of securities, net...................           (8.2)        4.1        (7.0)
   Depreciation and amortization of premises and
   equipment................................................            8.7        51.7        76.2
   Other, net...............................................           71.2      (391.1)       (3.2)
                                                                   --------------------------------
      Net cash provided by operating activities.............        1,149.2     2,605.5     1,570.5
INVESTING ACTIVITIES
Securities
   Sales and maturities.....................................          254.9        92.2       128.9
   Purchases................................................          (73.5)      (59.4)     (334.3)
Investments in subsidiaries.................................       (1,941.0)       (4.6)      (26.0)
Equity distributions from subsidiaries......................          600.0          --       145.0
Net decrease (increase) in advances to affiliates...........        1,759.6      (829.0)       58.1
Other, net..................................................           34.7      (113.7)     (421.3)
                                                                   --------------------------------
      Net cash provided by (used in) investing activities...          634.7      (914.5)     (449.6)
FINANCING ACTIVITIES
Net (decrease) increase in short-term advances from
   subsidiaries.............................................          (10.6)      (15.6)       62.6
Net increase (decrease )in short-term funds borrowed........          228.9        53.3       (11.5)
Net (decrease) increase in long-term debt...................         (512.8)    1,183.7       824.8
Proceeds from issuance of junior subordinated debentures to
   subsidiary trusts........................................        1,546.4          --          --
Proceeds from issuance of common stock......................          136.4       210.0       277.6
Repurchase of common stock..................................         (467.9)   (1,182.2)   (1,187.9)
Cash dividends paid.........................................       (1,235.1)   (1,271.3)   (1,029.7)
                                                                   --------------------------------
      Net cash used in financing activities.................         (314.7)   (1,022.1)   (1,064.1)
                                                                   --------------------------------
      Change in cash and cash equivalents...................        1,469.2       668.9        56.8
Cash and cash equivalents at beginning of year..............        1,714.4     1,045.5       988.7
                                                                   --------------------------------
      Cash and cash equivalents at end of year..............       $3,183.6    $1,714.4    $1,045.5
---------------------------------------------------------------------------------------------------
</Table>

 
    Transfer of funds (dividends, loans or advances) from bank subsidiaries to
the Company is restricted. Federal law prohibits loans unless they are secured
and generally limits any loan to the Company or individual affiliate to 10
percent of the bank's equity. In aggregate, loans to the Company and all
affiliates cannot exceed 20 percent of the bank's equity.
 
    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 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 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, 2001, was $1,183 million.
 
U.S. Bancorp
      82

<PAGE>
 
NOTE 24 Supplemental Disclosures to the Consolidated Financial Statements
 
CONSOLIDATED STATEMENT OF CASH FLOWS Listed below are supplemental disclosures
to the Consolidated Statement of Cash Flows:
 

<Table>
<Caption>
Year Ended December 31 (Dollars in Millions)                            2001         2000         1999
------------------------------------------------------------------------------------------------------
<S>                                                                <C>          <C>          <C>
Income taxes paid...........................................       $   658.1    $ 1,046.5    $   901.1
Interest paid...............................................         5,092.2      5,686.3      4,697.6
Net noncash transfers to foreclosed property................            59.9         94.3        102.9
                                                                   -----------------------------------
Acquisitions and divestitures
   Assets acquired..........................................       $ 1,150.8    $ 3,314.6    $ 4,229.3
   Liabilities assumed......................................          (509.0)    (3,755.9)    (2,610.0)
                                                                   -----------------------------------
      Net...................................................       $   641.8    $  (441.3)   $ 1,619.3
------------------------------------------------------------------------------------------------------
</Table>

 
MONEY MARKET INVESTMENTS are included with cash and due from banks as part of
cash and cash equivalents. Money market investments were comprised of the
following at December 31:
 

<Table>
<Caption>
(Dollars in Millions)                                                   2001               2000
-----------------------------------------------------------------------------------------------
<S>                                                                <C>                <C>
Interest-bearing deposits...................................       $     104          $      82
Federal funds sold..........................................             123                203
Securities purchased under agreements to resell.............             398                372
                                                                   ----------------------------
     Total money market investments.........................       $     625          $     657
-----------------------------------------------------------------------------------------------
</Table>

 
REGULATORY CAPITAL The measures used to assess capital include the capital
ratios established by bank regulatory agencies, including the specific ratios
for the "well capitalized" designation. For a description of the regulatory
capital requirements and the actual ratios as of December 31, 2001 and 2000, for
the Company and its bank subsidiaries, see Table 19 included in Management's
Discussion and Analysis which is incorporated by reference into these Notes to
Consolidated Financial Statements.
 
                                                                    U.S. Bancorp
                                                                         83

<PAGE>
 
Consolidated Balance Sheet -- Five-Year Summary
 

<Table>
<Caption>
                                                                                                                         % Change
December 31 (Dollars in Millions)                               2001        2000        1999        1998        1997    2000-2001
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>         <C>         <C>         <C>         <C>         <C>
ASSETS
Cash and due from banks..............................       $  9,120    $  8,475    $  7,324    $  8,882    $  7,972         7.6%
Money market investments.............................            625         657       1,934       1,039       1,411        (4.9)
Trading account securities...........................            982         753         617         666         268        30.4
Held-to-maturity securities..........................            299         252         194         233       2,942        18.7
Available-for-sale securities........................         26,309      17,390      17,255      20,732      17,500        51.3
Loans held for sale..................................          2,820         764         670       1,794         743           *
Loans
   Commercial........................................         46,330      52,817      45,856      41,068      36,329       (12.3)
   Commercial real estate............................         25,373      26,443      25,142      21,808      19,798        (4.0)
   Residential mortgages.............................          5,746       7,753      11,395      13,980      15,892       (25.9)
   Retail............................................         36,956      35,352      30,836      30,102      27,010         4.5
                                                            --------------------------------------------------------
      Total loans....................................        114,405     122,365     113,229     106,958      99,029        (6.5)
         Less allowance for credit losses............          2,457       1,787       1,710       1,706       1,666        37.5
                                                            --------------------------------------------------------
         Net loans...................................        111,948     120,578     111,519     105,252      97,363        (7.2)
Other assets.........................................         19,287      16,052      14,805      12,116       9,289        20.2
                                                            --------------------------------------------------------
      Total assets...................................       $171,390    $164,921    $154,318    $150,714    $137,488         3.9%
                                                            --------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
   Noninterest-bearing...............................       $ 31,212    $ 26,633    $ 26,350    $ 27,479    $ 24,062        17.2%
   Interest-bearing..................................         74,007      82,902      77,067      76,867      74,261       (10.7)
                                                            --------------------------------------------------------
      Total deposits.................................        105,219     109,535     103,417     104,346      98,323        (3.9)
Short-term borrowings................................         14,670      11,833      10,558      10,011      10,385        24.0
Long-term debt.......................................         25,716      21,876      21,027      18,679      13,181        17.6
Company-obligated mandatorily redeemable preferred
 securities..........................................          2,826       1,400       1,400       1,400       1,050           *
Other liabilities....................................          6,498       5,109       3,969       3,704       3,147        27.2
                                                            --------------------------------------------------------
      Total liabilities..............................        154,929     149,753     140,371     138,140     126,086         3.5
Shareholders' equity.................................         16,461      15,168      13,947      12,574      11,402         8.5
                                                            --------------------------------------------------------
      Total liabilities and shareholders' equity.....       $171,390    $164,921    $154,318    $150,714    $137,488         3.9%
---------------------------------------------------------------------------------------------------------------------------------
</Table>

 
*Not meaningful
 
U.S. Bancorp
      84

<PAGE>
 
Consolidated Statement of Income -- Five-Year Summary
 

<Table>
<Caption>
                                                                                                                         % Change
Year Ended December 31 (Dollars in Millions)                 2001           2000        1999        1998        1997    2000-2001
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>          <C>            <C>         <C>         <C>         <C>
INTEREST INCOME
Loans............................................       $ 9,455.4    $  10,562.5    $9,122.7    $8,818.3    $8,419.0       (10.5)%
Loans held for sale..............................           146.9          102.1       103.9        91.9        40.0        43.9
Investment securities
   Taxable.......................................         1,206.1        1,008.3     1,047.1     1,179.5     1,060.7        19.6
   Non-taxable...................................            89.5          140.6       150.1       158.2       158.0       (36.3)
Money market investments.........................            26.6           53.9        44.9        63.0        63.6       (50.6)
Trading securities...............................            57.5           53.7        45.0        25.6        16.8         7.1
Other interest income............................           101.6          151.4       113.0        88.2        42.6       (32.9)
                                                        ------------------------------------------------------------
      Total interest income......................        11,083.6       12,072.5    10,626.7    10,424.7     9,800.7        (8.2)
INTEREST EXPENSE
Deposits.........................................         2,828.1        3,618.8     2,970.0     3,234.7     3,084.2       (21.8)
Short-term borrowings............................           534.1          781.7       582.4       594.7       643.3       (31.7)
Long-term debt...................................         1,162.7        1,510.4     1,126.9       926.5       586.0       (23.0)
Company-obligated mandatorily redeemable
   preferred securities..........................           149.9          112.0       111.0       103.8        76.3        33.8
                                                        ------------------------------------------------------------
      Total interest expense.....................         4,674.8        6,022.9     4,790.3     4,859.7     4,389.8       (22.4)
                                                        ------------------------------------------------------------
Net interest income..............................         6,408.8        6,049.6     5,836.4     5,565.0     5,410.9         5.9
Provision for credit losses......................         2,528.8          828.0       646.0       491.3       639.9          **
                                                        ------------------------------------------------------------
Net interest income after provision for credit
   losses........................................         3,880.0        5,221.6     5,190.4     5,073.7     4,771.0       (25.7)
NONINTEREST INCOME
Credit card fee revenue..........................           774.3          761.8       648.2       748.0       611.8         1.6
Merchant and ATM processing revenue..............           428.8          230.3       189.6           *           *        86.2
Trust and investment management fees.............           894.4          926.2       887.1       788.3       686.1        (3.4)
Deposit service charges..........................           660.6          551.1       497.2       470.3       450.6        19.9
Cash management fees.............................           347.3          292.4       280.6       242.0       214.2        18.8
Mortgage banking revenue.........................           234.0          189.9       190.4       244.6       137.9        23.2
Trading account profits and commissions..........           221.6          258.4       222.4       130.3        44.8       (14.2)
Investment products fees and commissions.........           460.1          466.6       450.8       306.9       110.4        (1.4)
Investment banking revenue.......................           258.2          360.3       246.6       100.4          --       (28.3)
Commercial product revenue.......................           385.9          304.4       215.7       121.9        97.9        26.8
Securities gains, net............................           329.1            8.1        13.2        29.1         7.3          **
Merger and restructuring-related gains...........            62.2             --          --        48.1          --          **
Other............................................           302.9          533.7       403.1       420.1       357.6       (43.2)
                                                        ------------------------------------------------------------
      Total noninterest income...................         5,359.4        4,883.2     4,244.9     3,650.0     2,718.6         9.8
NONINTEREST EXPENSE
Salaries.........................................         2,347.1        2,427.1     2,355.3     2,196.7     1,892.0        (3.3)
Employee benefits................................           366.2          399.8       410.1       424.9       424.0        (8.4)
Net occupancy....................................           417.9          396.9       371.8       356.9       335.0         5.3
Furniture and equipment..........................           305.5          308.2       307.9       314.1       312.3         (.9)
Communication....................................           181.4          138.8       123.4       114.2           *        30.7
Postage..........................................           179.8          174.5       170.7       155.4       106.6         3.0
Goodwill.........................................           251.1          235.0       175.8       176.0       114.1         6.9
Other intangible assets..........................           278.4          157.3       154.0       125.8        93.3        77.0
Merger and restructuring-related charges.........           946.4          348.7       532.8       593.8       633.0          **
Other............................................         1,331.4        1,130.7     1,059.5       965.6     1,029.4        17.8
                                                        ------------------------------------------------------------
      Total noninterest expense..................         6,605.2        5,717.0     5,661.3     5,423.4     4,939.7        15.5
                                                        ------------------------------------------------------------
Income before income taxes.......................         2,634.2        4,387.8     3,774.0     3,300.3     2,549.9       (40.0)
Applicable income taxes..........................           927.7        1,512.2     1,392.2     1,167.4       950.6       (38.7)
                                                        ------------------------------------------------------------
Net income.......................................       $ 1,706.5    $   2,875.6    $2,381.8    $2,132.9    $1,599.3       (40.7)
                                                        ------------------------------------------------------------
Net income applicable to common equity...........       $ 1,706.5    $   2,875.6    $2,381.8    $2,132.8    $1,588.2       (40.7)%
---------------------------------------------------------------------------------------------------------------------------------
</Table>

 
 *Information not available
 
**Not meaningful
 
                                                                    U.S. Bancorp
                                                                         85

<PAGE>
 
Consolidated Daily Average Balance Sheet and Related Yields and Rates

<Table>
<Caption>
Year Ended December 31                                2001
----------------------------------------------------------------------------
                                                                      Yields
(Dollars in Millions)                 Balance     Interest         and Rates
----------------------------------------------------------------------------
<S>                                  <C>         <C>          <C>
ASSETS
Money market investments.........    $    712    $    26.6         3.74%
Trading account securities.......         771         59.3         7.69
Taxable securities...............      20,129      1,206.1         5.99
Non-taxable securities...........       1,787        128.9         7.21
Loans held for sale..............       1,911        146.9         7.69
Loans
      Commercial.................      50,072      3,642.5         7.31
      Commercial real estate.....      26,081      2,011.2         7.71
      Residential mortgages......       6,868        513.7         7.48
      Retail.....................      35,156      3,302.7         9.39
                                     ---------------------
         Total loans.............     118,177      9,470.1         8.01
                                     --------
Other earning assets.............       1,678        101.6         6.05
   Allowance for credit losses...       1,979
                                     ---------------------
         Total earning
          assets(a)..............     145,165     11,139.5         7.67
Other assets.....................      22,758
                                     --------
         Total assets............    $165,944
                                     --------
LIABILITIES AND SHAREHOLDERS'
   EQUITY
Noninterest-bearing deposits.....    $ 25,109
Interest-bearing deposits
   Interest checking.............      13,962        203.6         1.46
   Money market accounts.........      24,932        711.0         2.85
   Savings accounts..............       4,571         42.5          .93
   Time certificates of deposit
      less than $100,000.........      23,328      1,241.4         5.32
   Time deposits greater than
      $100,000...................      13,054        629.6         4.82
                                     ---------------------
         Total interest-bearing
          deposits...............      79,847      2,828.1         3.54
Short-term borrowings............      12,980        534.1         4.11
Long-term debt...................      24,608      1,162.7         4.72
Company-obligated mandatorily
   redeemable preferred
   securities....................       1,955        149.9         7.66
                                     ---------------------
         Total interest-bearing
          liabilities............     119,390      4,674.8         3.92
Other liabilities................       5,244
Shareholders' equity.............      16,201
                                     --------
         Total liabilities and
          shareholders' equity...    $165,944
                                     --------
Net interest income..............                $ 6,464.7
                                                 ---------
Gross interest margin............                                  3.75%
                                                              --------------
Gross interest margin without
   taxable-equivalent
   increments....................                                  3.71%
                                                              --------------
PERCENT OF EARNING ASSETS
Interest income..................                                  7.67%
Interest expense.................                                  3.22
                                                              --------------
Net interest margin..............                                  4.45
                                                              --------------
Net interest margin without
   taxable-equivalent
   increments....................                                  4.41%
----------------------------------------------------------------------------
 
<Caption>
Year Ended December 31                              2000
---------------------------------  --------------------------------------------
                                                                    Yields
(Dollars in Millions)               Balance     Interest         and Rates
<S>                                <C>         <C>          <C>            <C>
ASSETS
Money market investments.........  $    931    $    53.9         5.79%
Trading account securities.......       779         57.6         7.39
Taxable securities...............    14,567      1,008.3         6.92
Non-taxable securities...........     2,744        203.1         7.40
Loans held for sale..............     1,303        102.1         7.84
Loans
      Commercial.................    50,062      4,257.2         8.50
      Commercial real estate.....    26,040      2,305.5         8.85
      Residential mortgages......     9,578        723.4         7.55
      Retail.....................    32,637      3,295.4        10.10
                                   ---------------------
         Total loans.............   118,317     10,581.5         8.94
                                   --------
Other earning assets.............     1,965        151.4         7.70
   Allowance for credit losses...     1,781
                                   ---------------------
         Total earning
          assets(a)..............   140,606     12,157.9         8.65
Other assets.....................    19,656
                                   --------
         Total assets............  $158,481
                                   --------
LIABILITIES AND SHAREHOLDERS'
   EQUITY
Noninterest-bearing deposits.....  $ 23,820
Interest-bearing deposits
   Interest checking.............    13,035        270.4         2.07
   Money market accounts.........    22,774      1,000.0         4.39
   Savings accounts..............     5,027         74.0         1.47
   Time certificates of deposit
      less than $100,000.........    25,861      1,458.3         5.64
   Time deposits greater than
      $100,000...................    12,909        816.1         6.32
                                   ---------------------
         Total interest-bearing
          deposits...............    79,606      3,618.8         4.55
Short-term borrowings............    12,586        781.7         6.21
Long-term debt...................    22,410      1,510.4         6.74
Company-obligated mandatorily
   redeemable preferred
   securities....................     1,400        112.0         8.00
                                   ---------------------
         Total interest-bearing
          liabilities............   116,002      6,022.9         5.19
Other liabilities................     4,294
Shareholders' equity.............    14,365
                                   --------
         Total liabilities and
          shareholders' equity...  $158,481
                                   --------
Net interest income..............              $ 6,135.0
                                               ---------
Gross interest margin............                                3.46%
                                                            --------------
Gross interest margin without
   taxable-equivalent
   increments....................                                3.40%
                                                            --------------
PERCENT OF EARNING ASSETS
Interest income..................                                8.65%
Interest expense.................                                4.29
                                                            --------------
Net interest margin..............                                4.36
                                                            --------------
Net interest margin without
   taxable-equivalent
   increments....................                                4.30%
----------------------------------------------------------------------------
</Table>

 
   Interest and rates are presented on a fully taxable-equivalent basis under a
   tax rate of 35 percent.
 
   Interest income and rates on loans include loan fees. Nonaccrual loans are
   included in average loan balances.
 
(a) Before deducting the allowance for credit losses and excluding the
    unrealized gain (loss) on available-for-sale securities.
 
U.S. Bancorp
      86

<PAGE>
 
Consolidated Daily Average Balance Sheet and Related Yields and Rates
 

<Table>
<Caption>
                        1999                                    1998                          2000-2001
------------------------------------------------------------------------------------------------------------------
                                   Yields                                  Yields                 % Change
            Balance Interest    and Rates           Balance Interest    and Rates          Average Balance
------------------------------------------------------------------------------------------------------------------
<S>        <C>      <C>         <C>                <C>      <C>         <C>                <C>                <C>
           $  1,082 $   44.9        4.15%          $  1,170 $   63.0        5.38%                 (23.5)%
                630     47.8        7.59                428     27.6        6.45                   (1.0)
             16,301  1,047.1        6.42             17,977  1,179.5        6.56                   38.2
              2,970    220.6        7.43              3,137    238.2        7.59                  (34.9)
              1,450    103.9        7.17              1,264     91.9        7.27                   46.7
             43,328  3,288.3        7.59             38,983  3,110.4        7.98                     --
             23,076  1,940.3        8.41             20,458  1,784.1        8.72                     .2
             12,680    953.7        7.52             15,160  1,170.5        7.72                  (28.3)
             30,554  2,963.4        9.70             27,850  2,782.5        9.99                    7.7
           -----------------                       -----------------
            109,638  9,145.7        8.34            102,451  8,847.5        8.64                    (.1)
           --------                                --------
              1,686    113.0        6.70              1,311     88.2        6.73                  (14.6)
              1,709                                   1,688                                        11.1
           -----------------                       -----------------
            133,757 10,723.0        8.02            127,738 10,535.9        8.25                    3.2
             18,119                                  16,837                                        15.8
           --------                                --------
           $150,167                                $142,887                                         4.7
           --------                                --------
           $ 23,556                                $ 23,011                                         5.4
             12,898    231.0        1.79             12,263    230.9        1.88                    7.1
             22,534    842.2        3.74             20,337    825.1        4.06                    9.5
              5,961    111.9        1.88              6,504    146.7        2.26                   (9.1)
             26,296  1,322.6        5.03             29,583  1,622.7        5.49                   (9.8)
              8,675    462.3        5.33              7,242    409.3        5.65                    1.1
           -----------------                       -----------------
             76,364  2,970.0        3.89             75,929  3,234.7        4.26                     .3
             11,707    582.4        4.97             11,102    594.7        5.36                    3.1
             20,248  1,126.9        5.57             15,732    926.5        5.89                    9.8
              1,400    111.0        7.93              1,314    103.8        7.90                   39.6
           -----------------                       -----------------
            109,719  4,790.3        4.37            104,077  4,859.7        4.67                    2.9
              3,671                                   3,416                                        22.1
             13,221                                  12,383                                        12.8
           --------                                --------
           $150,167                                $142,887                                        4.7%
           --------                                --------                                -----------------------
                    $5,932.7                                $5,676.2
                    --------                                --------
                                    3.65%                                   3.58%
                                ---------                               ---------
                                    3.57%                                   3.49%
                                ---------                               ---------
                                    8.02%                                   8.25%
                                    3.58                                    3.81
                                ---------                               ---------
                                    4.44                                    4.44
                                ---------                               ---------
                                    4.36%                                   4.36%
---------------------------------------------------------------------------------
</Table>

 
                                                                    U.S. Bancorp
                                                                         87

<PAGE>
 
Quarterly Consolidated Financial Data

 

<Table>
<Caption>
                                                                         2001
                                                 --------------------------------------------------------
                                                    First         Second          Third         Fourth
(Dollars in Millions, Except Per Share Data)      Quarter        Quarter        Quarter        Quarter
---------------------------------------------------------------------------------------------------------
<S>                                              <C>            <C>            <C>            <C>
INTEREST INCOME
Loans........................................    $2,660.9       $2,437.9       $2,285.6       $2,071.0
Loans held for sale..........................        16.6           25.9           53.9           50.5
Investment securities
   Taxable...................................       253.3          287.8          321.2          343.8
   Non-taxable...............................        31.2           27.8           15.9           14.6
Money market investments.....................         8.9            7.4            6.3            4.0
Trading securities...........................        15.9           14.1           11.2           16.3
Other interest income........................        32.0           26.1           24.3           19.2
                                                 -----------------------------------------------------
      Total interest income..................     3,018.8        2,827.0        2,718.4        2,519.4
INTEREST EXPENSE
Deposits.....................................       883.7          783.0          670.0          491.4
Short-term borrowings........................       186.2          124.4          122.9          100.6
Long-term debt...............................       365.7          315.0          276.7          205.3
Company-obligated mandatorily redeemable
   preferred securities......................        27.6           35.4           39.7           47.2
                                                 -----------------------------------------------------
      Total interest expense.................     1,463.2        1,257.8        1,109.3          844.5
                                                 -----------------------------------------------------
Net interest income..........................     1,555.6        1,569.2        1,609.1        1,674.9
Provision for credit losses..................       532.4          441.3        1,289.3          265.8
                                                 -----------------------------------------------------
Net interest income after provision for
   credit losses.............................     1,023.2        1,127.9          319.8        1,409.1
NONINTEREST INCOME
Credit card fee revenue......................       191.7          198.2          192.2          192.2
Merchant and ATM processing revenue..........        58.0           62.4          138.5          169.9
Trust and investment management fees.........       225.0          228.0          226.2          215.2
Deposit service charges......................       146.5          176.7          168.7          168.7
Cash management fees.........................        76.8           84.9           89.7           95.9
Mortgage banking revenue.....................        48.2           57.0           60.3           68.5
Trading account profits and commissions......        71.9           55.8           43.6           50.3
Investment products fees and commissions.....       125.7          114.2          108.0          112.2
Investment banking revenue...................        60.2           71.1           56.9           70.0
Commercial product revenue...................        76.1           93.8           96.2          119.8
Securities gains (losses), net...............       216.0           31.3           59.8           22.0
Merger and restructuring-related gains.......          --           62.2             --             --
Other........................................       104.8           91.0           68.2           38.9
                                                 -----------------------------------------------------
      Total noninterest income...............     1,400.9        1,326.6        1,308.3        1,323.6
NONINTEREST EXPENSE
Salaries.....................................       590.5          570.5          580.3          605.8
Employee benefits............................       108.1           90.7           85.4           82.0
Net occupancy................................       110.1          101.4          102.5          103.9
Furniture and equipment......................        76.9           74.9           74.9           78.8
Communication................................        38.7           50.3           49.4           43.0
Postage......................................        46.9           43.8           44.7           44.4
Goodwill.....................................        67.8           58.6           62.3           62.4
Other intangible assets......................        46.6           54.0           84.8           93.0
Merger and restructuring-related charges.....       404.2          252.8          148.8          140.6
Other........................................       308.7          297.7          334.4          390.6
                                                 -----------------------------------------------------
      Total noninterest expense..............     1,798.5        1,594.7        1,567.5        1,644.5
                                                 -----------------------------------------------------
Income before income taxes...................       625.6          859.8           60.6        1,088.2
Applicable income taxes......................       215.5          297.5           21.9          392.8
                                                 -----------------------------------------------------
Net income...................................    $  410.1       $  562.3       $   38.7       $  695.4
                                                 -----------------------------------------------------
Earnings per share...........................    $    .22       $    .30       $    .02       $    .36
Diluted earnings per share...................    $    .21       $    .29       $    .02       $    .36
------------------------------------------------------------------------------------------------------
 
<Caption>
                                                                      2000
                                               --------------------------------------------------
                                                  First      Second          Third         Fourth
(Dollars in Millions, Except Per Share Data)    Quarter     Quarter        Quarter        Quarter
---------------------------------------------  --------------------------------------------------
<S>                                            <C>         <C>            <C>            <C>
INTEREST INCOME
Loans........................................  $2,472.1    $2,591.8       $2,710.7       $2,787.9
Loans held for sale..........................      12.0        35.2           32.7           22.2
Investment securities
   Taxable...................................     251.0       255.6          250.4          251.3
   Non-taxable...............................      38.9        33.5           34.8           33.4
Money market investments.....................      13.6        15.0           14.5           10.8
Trading securities...........................      14.3        12.6           12.8           14.0
Other interest income........................      37.3        37.0           37.7           39.4
                                               --------------------------------------------------
      Total interest income..................   2,839.2     2,980.7        3,093.6        3,159.0
INTEREST EXPENSE
Deposits.....................................     813.2       875.9          954.0          975.7
Short-term borrowings........................     171.1       198.7          191.2          220.7
Long-term debt...............................     336.9       371.3          403.9          398.3
Company-obligated mandatorily redeemable
   preferred securities......................      28.4        29.3           31.5           22.8
                                               --------------------------------------------------
      Total interest expense.................   1,349.6     1,475.2        1,580.6        1,617.5
                                               --------------------------------------------------
Net interest income..........................   1,489.6     1,505.5        1,513.0        1,541.5
Provision for credit losses..................     183.2       201.3          214.0          229.5
                                               --------------------------------------------------
Net interest income after provision for
   credit losses.............................   1,306.4     1,304.2        1,299.0        1,312.0
NONINTEREST INCOME
Credit card fee revenue......................     161.4       187.4          202.2          210.8
Merchant and ATM processing revenue..........      57.5        59.9           59.0           53.9
Trust and investment management fees.........     230.9       230.4          231.1          233.8
Deposit service charges......................     123.4       138.0          144.3          145.4
Cash management fees.........................      71.8        74.1           74.7           71.8
Mortgage banking revenue.....................      42.7        48.1           44.7           54.4
Trading account profits and commissions......      85.3        59.8           50.9           62.4
Investment products fees and commissions.....     140.8       109.1          107.8          108.9
Investment banking revenue...................      94.0        72.9          100.6           92.8
Commercial product revenue...................      61.6        71.6           86.0           85.2
Securities gains (losses), net...............       (.3)         .3            1.1            7.0
Merger and restructuring-related gains.......        --          --             --             --
Other........................................     112.3       151.7          131.2          138.5
                                               --------------------------------------------------
      Total noninterest income...............   1,181.4     1,203.3        1,233.6        1,264.9
NONINTEREST EXPENSE
Salaries.....................................     629.6       601.4          602.4          593.7
Employee benefits............................     111.9       100.3           89.4           98.2
Net occupancy................................      97.2        95.7           99.8          104.2
Furniture and equipment......................      76.7        75.7           79.6           76.2
Communication................................      33.6        33.8           35.7           35.7
Postage......................................      44.6        42.6           43.1           44.2
Goodwill.....................................      56.5        57.8           58.5           62.2
Other intangible assets......................      39.3        39.0           39.2           39.8
Merger and restructuring-related charges.....      65.0        81.9          117.7           84.1
Other........................................     268.2       282.9          286.0          293.6
                                               --------------------------------------------------
      Total noninterest expense..............   1,422.6     1,411.1        1,451.4        1,431.9
                                               --------------------------------------------------
Income before income taxes...................   1,065.2     1,096.4        1,081.2        1,145.0
Applicable income taxes......................     378.4       386.6          370.9          376.3
                                               --------------------------------------------------
Net income...................................  $  686.8    $  709.8       $  710.3       $  768.7
                                               --------------------------------------------------
Earnings per share...........................  $    .36    $    .37       $    .37       $    .41
Diluted earnings per share...................  $    .36    $    .37       $    .37       $    .40
-------------------------------------------------------------------------------------------------
</Table>

 
U.S. Bancorp
      88

<PAGE>
 
Supplemental Financial Data
 

<Table>
<Caption>
EARNINGS PER SHARE SUMMARY                                       2001           2000           1999           1998           1997
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>         <C>            <C>            <C>            <C>
Earnings per share....................................            $89          $1.51          $1.25          $1.12           $.86
Diluted earnings per share............................            .88           1.50           1.23           1.10            .85
---------------------------------------------------------------------------------------------------------------------------------
RATIOS
---------------------------------------------------------------------------------------------------------------------------------
Return on average assets..............................           1.03%          1.81%          1.59%          1.49%          1.24%
Return on average equity..............................           10.5           20.0           18.0           17.2           14.7
Average total equity to average assets................            9.8            9.1            8.8            8.7            8.4
Dividends per share to net income per share...........           84.3           43.0           36.8           29.5           31.4
---------------------------------------------------------------------------------------------------------------------------------
OTHER STATISTICS (Shares in Millions)
---------------------------------------------------------------------------------------------------------------------------------
Common shares outstanding -- year end(a)..............        1,951.7        1,902.1        1,928.5        1,903.5        1,864.0
Average common shares outstanding and common stock
   equivalents
      Earnings per share..............................        1,927.9        1,906.0        1,907.8        1,898.8        1,841.0
      Diluted earnings per share......................        1,939.5        1,918.5        1,930.0        1,930.5        1,872.2
Number of shareholders -- year end(b).................         76,395         46,052         45,966         17,523         12,010
Common dividends declared (millions)..................       $1,446.5       $1,267.0       $1,090.8         $977.6         $801.9
---------------------------------------------------------------------------------------------------------------------------------
</Table>

 
(a) Defined as total common shares less common stock held in treasury.
 
(b) Based on number of common stock shareholders of record.
 
STOCK PRICE RANGE AND DIVIDENDS
 

<Table>
<Caption>
                                                          2001                                             2000
                                         ----------------------------------------------------------------------------------------
                                                Sales Price                                      Sales Price
                                         --------------------------    Dividends          --------------------------    Dividends
                                           High                 Low     Declared            High                 Low     Declared
---------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>       <C>       <C>       <C>                <C>       <C>       <C>       <C>
First quarter.....................       $26.06              $18.49     $.1875            $24.88              $16.38     $.1625
Second quarter....................        23.60               20.71      .1875             28.00               20.88      .1625
Third quarter.....................        25.24               18.25      .1875             25.00               19.25      .1625
Fourth quarter....................        22.95               16.50      .1875             24.31               15.38      .1625
Closing price -- December 31                        20.93                                            23.25
---------------------------------------------------------------------------------------------------------------------------------
</Table>

 
The common stock of U.S. Bancorp is traded on the New York Stock Exchange, under
the ticker symbol "USB."
 
                                                                    U.S. Bancorp
                                                                         89

<PAGE>
 
Annual Report on Form 10-K
 
Securities and Exchange Commission
Washington, D.C. 20549
 
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended December 31, 2001
 
Commission File Number 1-6880
 
U.S. BANCORP
Incorporated in the State of Delaware
IRS Employer Identification #41-0255900
Address: 225 South Sixth Street
Minneapolis, Minnesota 55402-4302
Telephone: (612) 973-1111
 
Securities registered pursuant to Section 12(b) of the Act (and listed on the
New York Stock Exchange): Common Stock, Par Value $.01. Prior to the merger of
U.S. Bancorp with Firstar Corporation, the par value of U.S. Bancorp common
stock was $1.25.
 
    Securities registered pursuant to section 12(g) of the Act: None.
 
    As of January 31, 2002, U.S. Bancorp had 1,918,425,072 shares of common
stock outstanding. The aggregate market value of common stock held by non-
affiliates as of January 31, 2002, was approximately $39.0 billion.
 
    U.S. Bancorp (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for the past 90 days.
 
    Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
contained in the registrant's definitive proxy statement incorporated by
reference in Part III of this Form 10-K and any amendment to this Form 10-K.
 
    This Annual Report and Form 10-K incorporates into a single document the
requirements of the accounting profession and the Securities and Exchange
Commission. Only those sections of the Annual Report referenced in the following
cross-reference index and the information under the caption "Forward-Looking
Statements" are incorporated in the Form 10-K.
 

<Table>
<Caption>
Index                                                          Page
-------------------------------------------------------------------
<S>         <C>
P
ART I

ITEM 1      Business
            General...........................................91-92
            Distribution of Assets, Liabilities and
               Stockholders' Equity; Interest Rates
               and Interest Differential...............18-20, 86-87
            Investment Portfolio..........................27-28, 61
            Loan Portfolio..................23-27, 29-36, 54, 62-63
            Summary of Loan Loss Experience..............29-36, 54,
               62-63
            Deposits..........................................28-29
            Return on Equity and Assets......................17, 88
            Short-Term Borrowings............................29, 67

ITEM 2      Properties...........................................92

ITEM 3      Legal Proceedings..................................none

ITEM 4      Submission of Matters to a Vote of
               Security Holders................................none

PART II

ITEM 5      Market for the Registrant's Common Equity
               and Related Stockholder Matters.....3, 40-41, 69-71,
               73-75, 89, 90

ITEM 6      Selected Financial Data..............................17

ITEM 7      Management's Discussion and Analysis of
               Financial Condition and Results of Operations..16-47

ITEM 7A     Quantitative and Qualitative Disclosures About
               Market Risk....................................36-40

ITEM 8      Financial Statements and Supplementary Data.......49-89

ITEM 9      Changes in and Disagreements with Accountants on
               Accounting and Financial Disclosure.............none

PART III

ITEM 10     Directors and Executive Officers of the Registrant..94-
               96*

ITEM 11     Executive Compensation................................*

ITEM 12     Security Ownership of Certain Beneficial Owners
               and Management.....................................*

ITEM 13     Certain Relationships and Related Transactions........*

PART IV

ITEM 14     Exhibits, Financial Statement Schedules and
               Reports on Form 8-K............................92-93
-------------------------------------------------------------------
</Table>

 
*U.S. Bancorp's definitive proxy statement for the 2002 Annual Meeting of
 Shareholders is incorporated herein by reference, other than the sections
 entitled "Report of the Compensation and Human Resources Committee on Executive
 Compensation" and "Comparative Stock Performance."
 
U.S. Bancorp
      90

<PAGE>
 
GENERAL U.S. Bancorp is a multi-state financial services holding company
headquartered in Minneapolis, Minnesota and was created by the acquisition by
Firstar Corporation of the former U.S. Bancorp of Minneapolis, Minnesota. The
merger was completed on February 27, 2001, and the combined company retained the
U.S. Bancorp name. 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 automated teller machine ("ATM")
processing, mortgage banking, insurance, brokerage, leasing and investment
banking.
 
    U.S. Bancorp's banking subsidiaries are engaged in the general banking
business, principally in domestic markets. The subsidiaries range in size from
$312 million to $108 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 non-bank 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 fiduciary services for individuals, estates,
foundations, business corporations and charitable organizations.
 
    Banking and investment services are provided through a network of 2,147
banking offices principally operating in 24 states in the Midwest and West. The
Company operates a network of 4,904 branded ATMs and provides 24-hour, seven
days-a-week telephone customer service. Mortgage banking services are provided
through banking offices and loan production offices throughout the Company's
markets.
 
    The Company is one of the largest providers of Visa(R) corporate and
purchasing card services and corporate trust services in the United States. Its
wholly owned subsidiary Nova Information Systems, Inc. provides merchant
processing services directly to merchants and through a network of banking
affiliations.
 
    U.S. Bancorp's other non-banking subsidiaries offer a variety of products
and services to the Company's customers. Its wholly-owned subsidiary U.S.
Bancorp Piper Jaffray Inc. engages in equity and fixed income trading activities
and offers investment banking and underwriting services to corporate and public
sector customers. This non-bank subsidiary also provides brokerage products,
including securities, mutual funds and annuities, and insurance products to
consumers and regionally based businesses through a network of 123 brokerage
offices.
 
    On a full-time equivalent basis, employment during 2001 averaged a total of
50,461 employees.
 
COMPETITION The commercial banking business is highly competitive. Subsidiary
banks compete with other commercial banks and with other financial institutions,
including savings and loan associations, mutual savings banks, finance
companies, mortgage banking companies, credit unions and investment companies.
In recent years, competition has increased from institutions not subject to the
same regulatory restrictions as domestic banks and bank holding companies.
 
GOVERNMENT POLICIES The operations of the Company's various operating units are
affected by state and federal legislative changes and by policies of various
regulatory authorities, including those of the numerous states in which they
operate, the United States and foreign governments. These policies include, for
example, statutory maximum legal lending rates, domestic monetary policies of
the Board of Governors of the Federal Reserve System, United States fiscal
policy, international currency regulations and monetary policies, and capital
adequacy and liquidity constraints imposed by bank regulatory agencies.
 
SUPERVISION AND REGULATION U.S. Bancorp is a registered bank holding company and
financial holding company under the Bank Holding Company Act of 1956 (the "Act")
and is subject to the supervision of, and regulation by, the Board of Governors
of the Federal Reserve System (the "Board").
 
    Under the Act, a financial holding company may engage in banking, managing
or controlling banks, furnishing or performing services for banks it controls,
and conducting other financial activities. U.S. Bancorp must obtain the prior
approval of the Board before acquiring more than 5 percent of the outstanding
shares of another bank or bank holding company, and must provide notice to, and
in some situations obtain the prior approval of, the Board in connection with
engaging in, or acquiring more than 5 percent of the outstanding shares of a
company engaged in, a new financial activity.
 
    Under the Act, as amended by the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (the "Interstate Act"), U.S. Bancorp may
acquire banks throughout the United States, subject only to state or
 
                                                                    U.S. Bancorp
                                                                         91

<PAGE>
 
federal deposit caps and state minimum age requirements. The Interstate Act
authorizes interstate branching by acquisition and consolidations in those
states that have not opted out of interstate branching.
 
    National banks are subject to the supervision of, and are examined by, the
Comptroller of the Currency. All subsidiary banks of the Company are members of
the Federal Deposit Insurance Corporation ("FDIC") and are subject to
examination by the FDIC. In practice, the primary federal regulator makes
regular examinations of each subsidiary bank subject to its regulatory review or
participates in joint examinations with other federal regulators. Areas subject
to regulation by federal authorities include the allowance for credit losses,
investments, loans, mergers, issuance of securities, payment of dividends,
establishment of branches and other aspects of operations.
 
PROPERTIES U.S. Bancorp and its significant subsidiaries occupy their
headquarter offices under long-term leases and are located in Minneapolis,
Minnesota and Cincinnati, Ohio. The Company also leases seven principal
freestanding operations centers in St. Paul, Portland, Nashville and Denver, and
owns five principal freestanding operations centers in Cincinnati, Kansas City,
St. Louis, Fargo and Milwaukee. At December 31, 2001, U.S. Bancorp's
subsidiaries owned and operated a total of 1,383 facilities and leased an
additional 1,388 facilities, all of which are well maintained. The Company
believes its current facilities are adequate to meet its needs. Additional
information with respect to premises and equipment is presented in Notes 9 and
22 of the Notes to Consolidated Financial Statements.
 
EXHIBITS
 

<Table>
<Caption>
              Financial Statements Filed                      Page
------------------------------------------------------------------
<S>                                                    <C>
U.S. Bancorp and Subsidiaries
   Consolidated Financial Statements..................          49
Notes to Consolidated Financial Statements............          53
Report of Independent Accountants.....................          48
</Table>

 
    Schedules to the consolidated financial statements required by Regulation
S-X are omitted since the required information is included in the footnotes or
is not applicable.
 
    During the three months ended December 31, 2001, the Company filed the
following Current Reports on Form 8-K:
 
    Form 8-K filed October 17, 2001, relating to third quarter 2001 and
anticipated full year 2001 earnings;
 
    Form 8-K filed October 31, 2001, announcing commencement of an underwritten
offering of trust preferred securities;
 
    Form 8-K filed December 6, 2001, announcing commencement of an underwritten
offering of trust preferred securities.
 
    The following Exhibit Index lists the Exhibits to the Annual Report on Form
10-K.
 

<Table>
<C>               <S>
    (1)3.1        Restated Certificate of Incorporation, as
                  amended. Filed as Exhibit 3.1 to Form 10-K
                  for the year ended December 31, 2000.
       3.2        Restated bylaws, as amended.
       4.1        [Pursuant to Item 601(b)(4)(iii)(A) of
                  Regulation S-K, copies of instruments
                  defining the rights of holders of
                  long-term debt are not filed. U.S. Bancorp
                  agrees to furnish a copy thereof to the
                  Securities and Exchange Commission upon
                  request.]
    (1)4.2        Warrant Agreement, dated as of October 2,
                  1995, between U.S. Bancorp and First
                  Chicago Trust Company of New York, as
                  Warrant Agent and Form of Warrant. Filed
                  as Exhibits 4.18 and 4.19 to Registration
                  Statement on Form S-3, File No. 33-61667.
   (2)10.1        U.S. Bancorp 2001 Stock Incentive Plan.
   (2)10.2        U.S. Bancorp Executive Incentive Plan.
(1)(2)10.3        U.S. Bancorp Executive Deferral Plan, as
                  amended. Filed as Exhibit 10.7 to Form
                  10-K for the year ended December 31, 1999.
   (2)10.4        Summary of Nonqualified Supplemental
                  Executive Retirement Plan, as amended, of
                  the former U.S. Bancorp.
(1)(2)10.5        1991 Performance and Equity Incentive Plan
                  of the former U.S. Bancorp. Filed as
                  Exhibit 10.13 to Form 10-K for the year
                  ended December 31, 1997.
(1)(2)10.6        Description of Retirement Benefits of
                  Joshua Green III. Filed as Exhibit 10.14
                  to Form 10-K for the year ended December
                  31, 1997.
(1)(2)10.7        Form of Director Indemnification Agreement
                  entered into with former directors of the
                  former U.S. Bancorp. Filed as Exhibit
                  10.15 to Form 10-K for the year ended
                  December 31, 1997.
(1)(2)10.8        U.S. Bancorp Independent Director
                  Retirement and Death Benefit Plan, as
                  amended. Filed as Exhibit 10.17 to Form
                  10-K for the year ended December 31, 1999.
(1)(2)10.9        U.S. Bancorp Deferred Compensation Plan
                  for Directors, as amended. Filed as
                  Exhibit 10.18 to Form 10-K for the year
                  ended December 31, 1999.
</Table>

 
U.S. Bancorp
      92

<PAGE>
 

<Table>
<S>          <C>
   (2)10.10  Summary of U.S. Bancorp Supplemental Executive
             Retirement Plan.
   (2)10.11  U.S. Bancorp Deferred Compensation Plan.
   (2)10.12  Form of Change in Control Agreement, effective
             November 16, 2001, between U.S. Bancorp and
             certain executive officers of U.S. Bancorp.
   (2)10.13  Employment Agreement with Jerry A. Grundhofer.
   (2)10.14  Employment Agreement with John F. Grundhofer.
      12     Statement re: Computation of Ratio of Earnings to
             Fixed Charges.
      21     Subsidiaries of the Registrant.
      23     Consent of PricewaterhouseCoopers LLP.
</Table>

 
(1) Exhibit has previously been filed with the Securities and Exchange
    Commission and is incorporated herein as an exhibit by reference.
 
(2) Management contracts or compensatory plans or arrangements required to be
    filed as an exhibit pursuant to Item 14(c) of Form 10-K.
 

SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on February
28, 2002, on its behalf by the undersigned thereunto duly authorized.
 
U.S. Bancorp
 
By: Jerry A. Grundhofer
 
President and Chief Executive Officer
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on February 28, 2002, by the following persons on behalf
of the registrant and in the capacities indicated.
 
JERRY A. GRUNDHOFER
President, Chief Executive Officer and Director
(principal executive officer)
 
DAVID M. MOFFETT
Vice Chairman and Chief Financial Officer
(principal financial officer)
 
TERRANCE R. DOLAN
Executive Vice President and Controller
(principal accounting officer)
 
JOHN F. GRUNDHOFER
Chairman
 
LINDA L. AHLERS
Director
 
VICTORIA BUYNISKI GLUCKMAN
Director
 
ARTHUR D. COLLINS, JR.
Director
 
PETER H. COORS
Director
 
JOHN C. DANNEMILLER
Director
 
JOSHUA GREEN III
Director
 
J.P. HAYDEN, JR.
Director
 
ROGER L. HOWE
Director
 
THOMAS H. JACOBSEN
Director
 
DELBERT W. JOHNSON
Director
 
JOEL W. JOHNSON
Director
 
JERRY W. LEVIN
Director
 
SHELDON B. LUBAR
Director
 
FRANK LYON, JR.
Director
 
DANIEL F. MCKEITHAN, JR.
Director
 
DAVID B. O'MALEY
Director
 
O'DELL M. OWENS, M.D., M.P.H.
Director
 
THOMAS E. PETRY
Director
 
RICHARD G. REITEN
Director
 
S. WALTER RICHEY
Director
 
WARREN R. STALEY
Director
 
PATRICK T. STOKES
Director
 
JOHN J. STOLLENWERK
Director
 
                                                                    U.S. Bancorp
                                                                         93

<PAGE>
 
EXECUTIVE OFFICERS
 
JERRY A. GRUNDHOFER
 
Mr. Grundhofer, 57, has served as President and Chief Executive Officer of U.S.
Bancorp and Chairman, President and Chief Executive Officer of U.S. Bank
National Association since the merger of Firstar Corporation and U.S. Bancorp in
February 2001. Prior to the merger, Mr. Grundhofer was President and Chief
Executive Officer of Firstar Corporation, having served as Chairman, President
and Chief Executive Officer of Star Banc Corporation from 1993 until its merger
with Firstar Corporation in 1998.
 
JENNIE P. CARLSON
 
Ms. Carlson, 41, has served as Executive Vice President, Human Resources 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, a predecessor company, as well as Senior Vice President from
1994 to 1999 and Executive Vice President from 1999 to 2001.
 
ANDREW CECERE
 
Mr. Cecere, 41, has served as Vice Chairman of U.S. Bancorp since the merger of
Firstar Corporation and U.S. Bancorp in February 2001. He assumed responsibility
for Private Client and Trust Services in February 2001 and U.S. Bancorp Asset
Management in November 2001. Previously, he had served as Chief Financial
Officer of U.S. Bancorp from May 2000 through February 2001. Additionally, he
served as Vice Chairman of U.S. Bank with responsibility for Commercial Services
from 1999 to 2001, having been a Senior Vice President of Finance since 1992.
 
WILLIAM L. CHENEVICH
 
Mr. Chenevich, 58, has served as Vice Chairman of U.S. Bancorp since the merger
of Firstar Corporation and U.S. Bancorp in February 2001, when he assumed
responsibility for Technology and Operations Services. Previously, he had served
as Vice Chairman of Technology and Operations Services of Firstar Corporation
from 1999 to 2001. Prior to joining Firstar he was Group Executive Vice
President at Visa International from 1994 to 1999.
 
RICHARD K. DAVIS
 
Mr. Davis, 44, has served as Vice Chairman of U.S. Bancorp since the merger of
Firstar Corporation and U.S. Bancorp in February 2001, when he assumed
responsibility for Consumer Banking and Payment Services. Previously, he had
been Vice Chairman of Consumer Banking of Firstar Corporation from 1998 until
2001 and Executive Vice President, Consumer Banking of Star Banc Corporation
from 1993 until its merger with Firstar Corporation in 1998.
 
ANDREW S. DUFF
 
Mr. Duff, 44, has served as Vice Chairman of U.S. Bancorp, responsible for
Private Advisory Services, Equity Capital Markets and Fixed Income Capital
Markets, since November 2001, and until that time as Vice Chairman responsible
for Wealth Management and Capital Markets since 1999. He has served as President
and Chief Executive Officer of U.S. Bancorp Piper Jaffray since January 2000.
Prior to that time, he had served as President of Piper Jaffray Inc., the
broker-dealer subsidiary of Piper Jaffray Companies, since January 1996.
 
U.S. Bancorp
      94

<PAGE>
 
EDWARD GRZEDZINSKI
 
Mr. Grzedzinski, 46, has served as Vice Chairman of U.S. Bancorp since July
2001. He is President and Chief Executive Officer of NOVA Information Systems,
which he co-founded in 1991 and which became a wholly owned subsidiary of U.S.
Bancorp in connection with the acquisition of NOVA Corporation in July 2001. Mr.
Grzedzinski served as Chairman of NOVA Corporation from 1995 until July 2001.
 
JOSEPH E. HASTEN
 
Mr. Hasten, 50, has served as Vice Chairman of U.S. Bancorp since the merger of
Firstar Corporation and U.S. Bancorp in February 2001, when he assumed
responsibility for Corporate Banking. Previously, he had been Vice Chairman of
Wholesale Banking of Firstar Corporation, after joining Mercantile
Bancorporation, a predecessor company, as President of its St. Louis bank and of
Corporate Banking in 1995.
 
J. ROBERT HOFFMANN
 
Mr. Hoffman, 56, has served as Executive Vice President and Chief Credit Officer
of U.S. Bancorp since 1990.
 
LEE R. MITAU
 
Mr. Mitau, 53, has served as Executive Vice President and General Counsel of
U.S. Bancorp since 1995. Mr. Mitau also serves as Corporate Secretary. Prior to
1995 he was a partner at the law firm of Dorsey & Whitney LLP.
 
DAVID M. MOFFETT
 
Mr. Moffett, 50, has served as Vice Chairman and Chief Financial Officer of U.S.
Bancorp since the merger of Firstar Corporation and U.S. Bancorp in February
2001. Prior to the merger, he was Vice Chairman and Chief Financial Officer of
Firstar Corporation, and had served as Chief Financial Officer of Star Banc
Corporation from 1993 until its merger with Firstar Corporation in 1998.
 
DANIEL M. QUINN
 
Mr. Quinn, 45, Vice Chairman of U.S. Bancorp, assumed responsibility for
Commercial Banking in April 1999 and for Regional Commercial Real Estate in
August 1999. Previously, he had been President of U.S. Bank in Colorado
(formerly Colorado National Bank) since 1996.
 
STEPHEN E. SMITH
 
Mr. Smith, 54, has served as Executive Vice President and Director of Human
Resources of U.S. Bancorp since the merger of Firstar Corporation and U.S.
Bancorp in February 2001. Prior to the merger, he was Executive Vice President
and Corporate Director of Human Resources of Firstar Corporation and Star Banc
Corporation, a predecessor company, since 1995, having served as Director of
Human Resources of Star Banc Corporation since 1993.
 
                                                                    U.S. Bancorp
                                                                         95

<PAGE>
 
DIRECTORS
 
JOHN F. GRUNDHOFER(1)
Chairman
U.S. Bancorp
 
JERRY A. GRUNDHOFER(1)
President and Chief Executive Officer
U.S. Bancorp
 
LINDA L. AHLERS(3,4)
President
Marshall Field's
Minneapolis, Minnesota
 
VICTORIA BUYNISKI GLUCKMAN(3,4)
President and Chief Executive Officer
United Medical Resources, Inc.
Cincinnati, Ohio
 
ARTHUR D. COLLINS, JR.(1,2,5)
President and Chief Executive Officer
Medtronic, Inc.
Minneapolis, Minnesota
 
PETER H. COORS(2,4,5)
Chairman
Coors Brewing Company
Golden, Colorado
 
JOHN C. DANNEMILLER(4,5)
Retired Chairman
Applied Industrial Technologies
Cleveland, Ohio
 
JOSHUA GREEN III(3,4)
Chairman and Chief Executive Officer
Joshua Green Corporation
Seattle, Washington
 
J.P. HAYDEN, JR.(1,2,5)
Chairman of the Executive Committee
The Midland Company
Amelia, Ohio
 
ROGER L. HOWE(1,2,3)
Chairman Emeritus
U.S. Precision Lens, Inc.
Cincinnati, Ohio
 
THOMAS H. JACOBSEN(4)
Former Chairman
Firstar Corporation
Milwaukee, Wisconsin
 
DELBERT W. JOHNSON(1,3,4)
Vice President
Safeguard Scientifics, Inc.
Wayne, Pennsylvania
 
JOEL W. JOHNSON(4,5)
Chairman, President and
Chief Executive Officer
Hormel Foods Corporation
Austin, Minnesota
 
JERRY W. LEVIN(2,5)
Chairman and Chief Executive Officer
Sunbeam Corporation
Boca Raton, Florida
 
SHELDON B. LUBAR(1,5)
Chairman
Lubar & Company
Milwaukee, Wisconsin
 
FRANK LYON, JR.(2,4)
President
Wingmead Farms
North Little Rock, Arkansas
 
DANIEL F. MCKEITHAN, JR.(1,3,5)
President and Chief Executive Officer
Tamarack Petroleum Company, Inc.
Milwaukee, Wisconsin
 
DAVID B. O'MALEY(1,2)
Chairman, President and
Chief Executive Officer
Ohio National Financial Services
Cincinnati, Ohio
 
O'DELL M. OWENS, M.D., M.P.H.(3,4)
Medical Director
United Healthcare
Cincinnati, Ohio
 
THOMAS E. PETRY(1,2,3)
Retired Chairman and
Chief Executive Officer
Eagle-Picher Industries, Inc.
Cincinnati, Ohio
 
RICHARD G. REITEN(1,2,3)
Chairman and Chief Executive Officer
Northwest Natural Gas Company
Portland, Oregon
 
S. WALTER RICHEY(1,2)
Former Chairman and
Chief Executive Officer
Meritex, Inc.
Roseville, Minnesota
 
WARREN R. STALEY(1,3)
Chairman and Chief Executive Officer
Cargill, Inc.
Minneapolis, Minnesota
 
PATRICK T. STOKES(1,5)
President and Chief Executive Officer
Anheuser-Busch, Inc.
St. Louis, Missouri
 
JOHN J. STOLLENWERK(2,3,4)
President and Chief Executive Officer
Allen-Edmonds Shoe Corporation
Port Washington, Wisconsin
 
1. Executive Committee
 
2. Compensation Committee
 
3. Audit Committee
 
4. Community Outreach and Fair Lending Committee
 
5. Governance Committee
 
U.S. Bancorp
      96

<PAGE>

Corporate Information




EXECUTIVE OFFICES
U.S. Bancorp
225 South Sixth Street
Minneapolis, Minnesota 55402

After June 2002
800 Nicollet Mall
Minneapolis, Minnesota 55402

COMMON STOCK TRANSFER AGENT AND REGISTRAR
U.S. Bank National Association, a subsidiary of U.S. Bancorp, acts as our 
transfer agent and registrar, dividend paying agent and dividend reinvestment 
plan agent, and maintains all shareholder records, stock transfers, changes of 
ownership, changes of address and dividend payment should be sent to the 
transfer agent at the following address:

U.S. Bank National Association
1555 North River Center Drive, Suite 301
Milwaukee, Wisconsin 53212
Phone: 800-637-7549
Fax:   414-905-5049
Internet: www.investorservice.usbank.com

INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP serves as the independent accountants of U.S. 
Bancorp.

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

DIVIDENDS AND DIVIDEND 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 prior 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:

U.S. Bank National Association
Dividend Reinvestment Department
1555 North River Center Drive, Suite 301
Milwaukee, Wisconsin 53212
Phone: 800-637-7549

INVESTMENT COMMUNITY CONTACTS
Howell D. McCullough
Senior Vice President, Investor Relations
howell.mccullough@usbank.com
Phone: 612-973-2261

Judith T. Murphy
Vice President, Investor Relations
judith.murphy@usbank.com
Phone: 612-973-2264

FINANCIAL INFORMATION
U.S. Bancorp news and financial results are available through our Web site and 
by mail.

WEB SITE. For information about U.S. Bancorp, including news and financial 
results and online annual reports, access our home page on the Internet at 
www.usbank.com.

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

U.S. Bancorp Investor Relations
225 South Sixth Street
Minneapolis, Minnesota 55402
Phone: 612-973-2263
corporaterelations@usbank.com

MEDIA REQUESTS
Steve Dale
Senior Vice President, Media Relations
Phone: 612-973-0898

OTHER BUSINESS INFORMATION
For product and service information, branch office and ATM locations, 
information about lines of business, account access, employment opportunities 
and more, visit www.usbank.com or www.firstar.com.

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/AFFIRMATIVE 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, rather than race, color, religion, nation origin or ancestry, sex,
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 subsidiaries, is an Equal Opportunity 
Employer and a Drug-Free Workplace.

[LOGO]
Equal        U.S. Bank and Firstar Bank
Housing      Members FDIC
LENDER

[RECYCLING   This report is printed on recycled paper containing
LOGO]        a minimum 10 percent post-consumer recycled waste.


<PAGE>










 [GRAPHIC]    Corporate Profile
                   U.S. Bancorp is a multi-state financial holding company with 
              headquarters in Minneapolis, Minnesota. The merger of Firstar 
              Corporation and the former U.S. Bancorp closed on February 27, 
              2001, making the new U.S. Bancorp the 8TH LARGEST financial 
              holding company in the United States, with total assets exceeding 
              $171 BILLION. We place NO. 41 in The Super 100, a Forbes magazine 
              composite ranking based on sales, profits, assets and market 
              value.
                   Through U.S. Bank, First Bank and other subsidiaries, U.S. 
              Bancorp serves more than 10 MILLION CUSTOMERS principally through 
              2,147 full-service branch offices in 24 STATES, additional 
              specialized offices across the country and in several foreign 
              countries, 4,904 ATMs, and Internet and telephone banking.
                   U.S. Bancorp and our subsidiaries provide a comprehensive 
              selection of premium financial products and services to 
              individuals, businesses, nonprofit organizations, institutions and
              government entities.
                   U.S. Bancorp, our subsidiary full-service banks and other 
              subsidiaries operate the following major lines of business: 
              Consumer Banking, Wholesale Banking, Payment Services, and Private
              Client, Trust and Asset Management. U.S. Bancorp Piper Jaffray 
              offers full securities brokerage, equity capital, fixed income 
              capital and individual investment services.
                   U.S. Bancorp is home of the exclusive FIVE STAR SERVICE 
              GUARANTEE, which assures customers of certain key banking 
              standards.


usbancorp(R)
  Five Star Service Guaranteed [GRAPHIC]

  U.S. Bancorp
  225 South Sixth Street
  Minneapolis, Minnesota 55402

  www.usbank.com
  www.firstar.com







<PAGE>

                                                                     EXHIBIT 3.2

                                    RESTATED
                                     BYLAWS
                                       OF
                                  U.S. BANCORP

                                   ARTICLE I.

                                     OFFICES

Section 1. Offices.

                  The registered office of the Corporation in the State of
Delaware shall be in the City of Wilmington, County of New Castle, State of
Delaware.

                  The Corporation shall have offices at such other places as the
Board of Directors may from time to time determine.

                                  ARTICLE II.

                                  STOCKHOLDERS

Section 1. Annual Meeting.

                  The annual meeting of the stockholders for the election of
Directors and for the transaction of such other business as may properly come
before the meeting shall be held on such date as the Board of Directors shall
each year fix. Each such annual meeting shall be held at such place, within or
without the State of Delaware, and hour as shall be determined by the Board of
Directors. The day, place and hour of such annual meeting shall be specified in
the notice of annual meeting.

                  The meeting may be adjourned from time to time and place to
place until its business is completed.

Section 2. Special Meeting.

                  Special meetings of stockholders may be called by the Board of
Directors or the Chief Executive Officer. The notice of such meeting shall state
the purpose of such meeting and no business shall be transacted thereat except
as stated
 in the notice thereof. Any such meeting may be held at such place
within or without the State of Delaware as may be fixed by the Board of
Directors or the Chief Executive Officer, and as may be stated in the notice of
such meeting.

Section 3. Notice of Meeting.

                  Notice of every meeting of the stockholders shall be given in
the manner prescribed by law.



<PAGE>

Section 4. Quorum.

                  Except as otherwise required by law, the Certificate of
Incorporation or these Bylaws, the holders of not less than one-third of the
shares entitled to vote at any meeting of the stockholders, present in person or
by proxy, shall constitute a quorum and the act of the majority of such quorum
shall be deemed the act of the stockholders.

                  If a quorum shall fail to attend any meeting, the chairman of
the meeting may adjourn the meeting to another place, date, or time.

Section 5. Qualification of Voters.

                  The Board of Directors may fix a day and hour not more than
sixty nor less than ten days prior to the day of holding any meeting of the
stockholders as the time as of which the stockholders entitled to notice of and
to vote at such meeting shall be determined. Only those persons who were holders
of record of voting stock at such time shall be entitled to notice of and to
vote at such meeting.

Section 6. Procedure.

                  The presiding officer at each meeting of stockholders shall
conclusively determine the order of business, all matters of procedure and
whether or not a proposal is proper business to be transacted at the meeting and
has been properly brought before the meeting.

                  The Board shall appoint two or more inspectors of election to
serve at every meeting of the stockholders at which Directors are to be elected.

Section 7. Nomination of Directors.

                  Only persons nominated in accordance with the following
procedures shall be eligible for election by stockholders as Directors.
Nominations of persons for election as Directors at a meeting of stockholders
called for the purpose of electing Directors may be made (a) by or at the
direction of the Board of Directors or (b) by any stockholder in the manner
herein provided. For a nomination to be properly made by a stockholder, the
stockholder must give written notice to the Secretary of the Corporation so as
to be received at the principal executive offices of the Corporation not less
than (i) with respect to an annual meeting of stockholders, 120 days in advance
of the date of the Corporation's proxy statement released to stockholders in
connection with the previous year's annual meeting of stockholders, except that
if no annual meeting was held in the previous year or the date of the annual
meeting has been changed by more than 30 days from the date contemplated at the
time of the previous year's proxy statement, such notice must be so received a
reasonable time before the solicitation is made, and (ii) with respect to a
special meeting of stockholders for the election of Directors, the close of
business on the seventh day following the date on which the notice of such
meeting is first given to stockholders. Each such notice shall set forth (a) the
name and address of the stockholder who intends to make the nomination and of
the person or persons to be nominated; (b) a representation that the stockholder
is a holder of record of stock of the Corporation entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (c) a description of all
arrangements or understandings 


                                      -2-

<PAGE>

between the stockholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations are to
be made by the stockholder; (d) such other Information regarding each nominee
proposed by such stockholder as would have been required to be included in a
proxy statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had each nominee been nominated, or intended to be nominated, by the
Board; and (e) the consent of each nominee to serve as a Director of the
Corporation if so elected.

Section 8. Business at Annual Meeting.

                  At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors; (b) otherwise properly brought before the meeting by or
at the direction of the Board of Directors; (c) in the case of a nomination for
Director, properly brought in accordance with the procedures set forth in
Section 7 of Article II hereof; or (d) otherwise properly brought before the
meeting by a stockholder entitled to vote at such meeting. For business other
than a nomination for Director to be properly brought before an annual meeting
by a stockholder, the stockholder must have given written notice to the
Secretary of the Corporation so as to be received at the principal executive
offices of the Corporation not less than 120 days in advance of the date of the
Corporation's proxy statement released to stockholders in connection with the
previous year's annual meeting of stockholders, except that if no annual meeting
was held in the previous year or the date of the annual meeting has been changed
by more than 30 days from the date contemplated at the time of the previous
year's proxy statement, such notice must be so received a reasonable time before
the solicitation is made. Each such notice shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (v) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting; (w) the name and address of
the stockholder proposing such business; (x) the class and number of shares of
the Corporation which are beneficially owned by the stockholder; (y) any
material interest of the stockholder in such business; and (z) such other
information regarding such business as would be required to be included in a
proxy statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had the matter been proposed by the Board of Directors.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
considered properly brought before an annual meeting by a stockholder unless it
is brought in accordance with the procedures set forth in this Section 8 of
Article II.

                                  ARTICLE III.

                                    DIRECTORS

Section 1. Number and Election.

                  The Board of Directors of the Corporation shall consist of
such number of Directors as are fixed from time to time by resolution of the
Board and within the requirements set forth in the Certificate of Incorporation.
Commencing with the annual election of Directors by the stockholders in 1986,
the Directors shall be divided into three classes: Class I, Class II 



                                      -3-

<PAGE>

and Class III, each such class, as nearly as possible, to have the same number
of Directors. The term of office of the initial Class I Directors shall expire
at the annual election of Directors by the stockholders in 1987, the term of
office of the initial Class II Directors shall expire at the annual election of
Directors by the stockholders in 1988, and the term of office of the initial
Class III Directors shall expire at the annual election of Directors by the
stockholders in 1989. At each annual election of Directors by the stockholders
held after 1985, the Directors chosen to succeed those whose terms have then
expired shall be identified as being of the same class as the Directors they
succeed and shall be elected by the stockholders for a term expiring at the
third succeeding annual election of Directors. In all cases, Directors shall
hold office until their respective successors are elected by the stockholders
and have qualified.

                  In the event that the holders of any class or series of stock
of the Corporation having a preference as to dividends or upon liquidation of
the Corporation shall be entitled, by a separate class vote, to elect Directors
as may be specified pursuant to Article Fourth of the Corporation's Restated
Certificate of Incorporation, then the provisions of such class or series of
stock with respect to their rights shall apply. The number of Directors that may
be elected by the holders of any such class or series of stock shall be in
addition to the number fixed pursuant to the preceding paragraph. Except as
otherwise expressly provided pursuant to Article Fourth of the Corporation's
Restated Certificate of Incorporation, the number of Directors that may be so
elected by the holders of any such class or series of stock shall be elected for
terms expiring at the next annual meeting of stockholders and without regard to
the classification of the remaining members of the Board of Directors and
vacancies among Directors so elected by the separate class vote of any such
class or series of stock shall be filled by the remaining Directors elected by
such class or series, or, if there are no such remaining Directors, by the
holders of such class or series in the same manner in which such class or series
initially elected a Director.

                  If at any meeting for the election of Directors, more than one
class of stock, voting separately as classes, shall be entitled to elect one or
more Directors and there shall be a quorum of only one such class of stock, that
class of stock shall be entitled to elect its quota of Directors notwithstanding
the absence of a quorum of the other class or classes of stock.

Section 2. Vacancies.

                  Vacancies and newly created directorships resulting from an
increase in the number of Directors shall be filled by a majority of the
Directors then in office, although less than a quorum, or by a sole remaining
Director, and such Directors so chosen shall hold office until the next election
of the class for which such Directors shall have been chosen, and until their
successors are elected and qualified.

Section 3. Regular Meetings.

                  Regular meetings of the Board shall be held at such times and
places as the Board may from time to time determine.


                                      -4-

<PAGE>

Section 4. Special Meetings.

                  Special meetings of the Board may be called at any time, at
any place and for any purpose by the Chairman of the Board, or the President, or
by any officer of the Corporation upon the request of a majority of the entire
Board.

Section 5. Notice of Meetings.

                  Notice of regular meetings of the Board need not be given.

                  Notice of every special meeting of the Board shall be given to
the Directors at their usual places of business, or at such other addresses as
shall have been furnished by them for the purpose. Such notice shall be given at
least twelve hours (three hours if meeting is to be conducted by conference
telephone) before the meeting by telephone or by being personally delivered,
mailed, or telegraphed. Such notice need not include a statement of the business
to be transacted at, or the purpose of, any such meeting.

Section 6. Quorum.

                  Except as may be otherwise provided by law or in these Bylaws,
the presence of one-third of the entire Board shall be necessary and sufficient
to constitute a quorum for the transaction of business at any meeting of the
Board, and the act of a majority of such quorum shall be deemed the act of the
Board.

                  Less than a quorum may adjourn any meeting of the Board from
time to time without notice.

Section 7. Participation in Meetings by Conference Telephone.

                  Members of the Board, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.

Section 8. Powers.

                  The business, property, and affairs of the Corporation shall
be managed by or under the direction of its Board of Directors, which shall have
and may exercise all the powers of the Corporation to do all such lawful acts
and things as are not by law, or by the Certificate of Incorporation, or by
these Bylaws, directed or required to be exercised or done by the stockholders.

Section 9. Compensation of Directors.

                  Directors shall receive such compensation for their services
as shall be determined by a majority of the entire Board provided that Directors
who are serving the Corporation as officers or employees and who receive
compensation for their services as such 



                                      -5-

<PAGE>

officers or employees shall not receive any salary or other compensation for
their services as Directors.

Section 10. Committees of the Board.

                  A majority of the entire Board of Directors may designate one
or more standing or temporary committees consisting of one or more Directors.
The Board may invest such committees with such powers and authority, subject to
the limitations of law and such conditions as it may see fit.

                                  ARTICLE IV.

                               EXECUTIVE COMMITTEE

Section 1. Election.

                  At any meeting of the Board, an Executive Committee, composed
of the Chairman of the Board, the President, and not less than three other
members, may be elected by a majority vote of the entire Board to serve until
the Board shall otherwise determine. Either the Chairman of the Board or the
President, whichever is the Chief Executive Officer, shall be the Chairman of
the Executive Committee, and the other shall be the Vice Chairman thereof,
unless the Board shall otherwise determine. Members of the Executive Committee
shall be members of the Board.

Section 2. Powers.

                  The Executive Committee shall have and may exercise all of the
powers of the Board of Directors when the Board is not in session, except that,
unless specifically authorized by the Board of Directors, it shall have no power
to (a) elect directors or officers; (b) alter, amend, or repeal these Bylaws or
any resolution of the Board of Directors relating to the Executive Committee;
(c) appoint any member of the Executive Committee; or (d) take any other action
which legally may be taken only by the Board.

Section 3. Rules.

                  The Executive Committee shall adopt such rules as it may see
fit with respect to the calling of its meetings, the procedure to be followed
thereat, and its functioning generally. Any action taken with the written
consent of all members of the Executive Committee shall be as valid and
effectual as though formally taken at a meeting of said Executive Committee.

Section 4. Vacancies.

                  Vacancies in the Executive Committee may be filled at any time
by a majority vote of the entire board.



                                      -6-

<PAGE>

                                   ARTICLE V.

                                    OFFICERS

Section 1. Number.

                  The officers of the Corporation shall be appointed or elected
by the Board of Directors. The officers shall be a Chairman of the Board, a
President, one or more Vice Chairmen, such number of Vice Presidents or other
officers as the Board may from time to time determine, a Secretary, a Treasurer,
and a Controller. The President shall be Chief Executive Officer unless the
Board shall determine otherwise. The Chairman of the Board shall preside at all
meetings of the Board and shall perform such other duties as may be assigned
from time to time by the Board. In the absence of the Chairman or if such office
shall be vacant, the President shall preside at all meetings of the Board. In
the absence of the Chairman of the Board and the President, any other Board
member designated by the Board may preside at all meetings of the stockholders
and of the Board. The Board of Directors may appoint or elect a person as a Vice
Chairman without regard to whether such person is a member of the Board of
Directors.

Section 2. Staff and Divisional Officers.

                  The Chief Executive Officer may appoint at his discretion such
persons to hold the title of staff vice president, divisional chairman,
divisional president, divisional vice president or other similar designation.
Such persons shall not be officers of the Corporation and shall retain such
title at the sole discretion of the Chief Executive Officer who may at his will
and from time to time make or revoke such designation.

Section 3. Terms of Office.

                  All officers, agents, and employees of the Corporation shall
hold their respective offices or positions at the pleasure of the Board of
Directors or the appropriate appointing authority and may be removed at any time
by such authority with or without cause.

Section 4. Duties.

                  The officers, agents, and employees shall perform the duties
and exercise the powers usually incident to the offices or positions held by
them respectively, and/or such other duties and powers as may be assigned to
them from time to time by the Board of Directors or the Chief Executive Officer.

                                  ARTICLE VI.

              INDEMNIFICATION OF DIRECTORS, OFFICERS, AND EMPLOYEES

Section 1. General.

                  The Corporation shall indemnify to the full extent permitted
by and in the manner permissible under the Delaware General Corporation Law, as
amended from time to time (but, in 



                                      -7-

<PAGE>

the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), any person made,
or threatened to be made, a party to any action, suit, or proceeding, whether
criminal, civil, administrative, or investigative, by reason of the fact that
such person (i) is or was a director, advisory director, or officer of the
Corporation or any predecessor of the Corporation, or (ii) is or was a director,
advisory director or officer of the Corporation or any predecessor of the
Corporation and served any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise as a director, advisory director,
officer, partner, trustee, employee or agent at the request of the Corporation
or any predecessor of the Corporation; provided, however, that except as
provided in Section 4 of this Article VI, the Corporation shall indemnify any
such person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors.

Section 2. Advancement of Expenses.

                  The right to indemnification conferred in this Article VI
shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance of
its final disposition, such advances to be paid by the Corporation within 20
days after the receipt by the Corporation of a statement or statements from the
claimant requesting such advance or advances from time to time; provided,
however, that if the General Corporation Law of the State of Delaware requires,
the payment of such expenses incurred by a director, advisory director or
officer in his or her capacity as a director, advisory director or officer (and
not in any other capacity in which service was or is rendered by such person
while a director, advisory director or officer, including, without limitation,
service to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of an
undertaking by or on behalf of such director, advisory director or officer, to
repay all amounts so advanced if it shall ultimately be determined that such
director, advisory director or officer is not entitled to be indemnified under
this Article VI or otherwise.

Section 3. Procedure for Indemnification.

                  To obtain indemnification under this Article VI, a claimant
shall submit to the Corporation a written request, including therein or
therewith such documentation and information as is reasonably available to the
claimant and is reasonably necessary to determine whether and to what extent the
claimant is entitled to indemnification. Upon written request by a claimant for
indemnification pursuant to the first sentence of this Section 3, a
determination, if required by applicable law, with respect to the claimant's
entitlement thereto shall be made as follows: (1) if requested by the claimant,
by Independent Counsel (as hereinafter defined), or (2) if no request is made by
the claimant for a determination by Independent Counsel, (i) by a majority vote
of the Disinterested Directors (as hereinafter defined), even though less than a
quorum, or by a majority vote of a committee of Disinterested Directors
designated by a majority vote of Disinterested Directors, even though less than
a quorum, or (ii) if there are no Disinterested Directors or if the
Disinterested Directors so direct, by Independent Counsel in a written opinion
to the Board of Directors, a copy of which shall be delivered to the claimant,
or (iii) if the Disinterested Directors so direct, by the stockholders of the
Corporation. In the event 



                                      -8-

<PAGE>

the determination of entitlement to indemnification is to be made by Independent
Counsel at the request of the claimant, the Independent Counsel shall be
selected by the Board of Directors unless there shall have occurred within two
years prior to the date of the commencement to the action, suit or proceeding
for which indemnification is claimed a "Change of Control of the Corporation" as
defined in the Firstar Corporation 1998 Executive Stock Incentive Plan, in which
case the Independent Counsel shall be selected by the claimant unless the
claimant shall request that such selection be made by the Board of Directors. If
it is so determined that the claimant is entitled to indemnification, payment to
the claimant shall be made within 10 days after such determination.

Section 4. Certain Remedies.

                  If a claim under Section 1 of this Article VI is not paid in
full by the Corporation within thirty days after a written claim pursuant to
Section 3 of this Article VI has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standard of
conduct which makes it permissible under the General Corporation Law of the
State of Delaware for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
Independent Counsel or stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the General Corporation Law of the State of Delaware, nor an actual
determination by the Corporation (including its Board of Directors, Independent
Counsel or stockholders) that the claimant has not met such applicable standard
of conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.

Section 5. Binding Effect.

                  If a determination shall have been made pursuant to Section 3
of this Article VI that the claimant is entitled to indemnification, the
Corporation shall be bound by such determination in any judicial proceeding
commenced pursuant to Section 4 of this Article VI.

Section 6. Validity of this Article VI.

                  The Corporation shall be precluded from asserting in any
judicial proceeding commenced pursuant to Section 4 of this Article VI that the
procedures and presumptions of this Article VI are not valid, binding and
enforceable and shall stipulate in such proceeding that the Corporation is bound
by all the provisions of this Article VI.

Section 7. Nonexclusivity, etc.

                  The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
in this Article VI shall not be exclusive 



                                      -9-

<PAGE>

of any other right which any person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, By-Laws, agreement, vote
of stockholders or Disinterested Directors or otherwise. No repeal or
modification of this Article VI shall in any way diminish or adversely affect
the rights of any present or former director, advisory director, officer,
employee or agent of the Corporation or any predecessor thereof hereunder in
respect of any occurrence or matter arising prior to any such repeal or
modification.

Section 8. Insurance.

                  The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the General Corporation Law of the State of Delaware. To the extent that
the Corporation maintains any policy or policies providing such insurance, each
such director or officer, and each such agent or employee to whom rights to
indemnification have been granted as provided in Section 9 of this Article VI,
shall be covered by such policy or policies in accordance with its or their
terms to the maximum extent of the coverage thereunder for any such director,
officer, employee or agent.

Section 9. Indemnification of Other Persons.

                  The Corporation may grant rights to indemnification, and
rights to be paid by the Corporation the expenses incurred in defending any
proceeding in advance of its final disposition, to any present or former
employee or agent of the Corporation or any predecessor of the Corporation to
the fullest extent of the provisions of this Article VI with respect to the
indemnification and advancement of expenses of directors, advisory directors and
officers of the Corporation.

Section 10. Severability.

                  If any provision or provisions of this Article VI shall be
held to be invalid, illegal or unenforceable for any reason whatsoever: (1) the
validity, legality and enforceability of the remaining provisions of this
Article VI (including, without limitation, each portion of any paragraph of this
Article VI containing any such provision held to be invalid, illegal or
unenforceable, that is not itself held to be invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby; and (2) to the fullest
extent possible, the provisions of this Article VI (including, without
limitation, each such portion of any paragraph of this Article VI containing any
such provision held to be invalid, illegal or unenforceable) shall be construed
so as to give effect to the intent manifested by the provision held invalid,
illegal or unenforceable.

Section 11. Certain Definitions.

                  For purposes of this Article VI:

                           (1) "Disinterested Director" means a director of the
                  Corporation who is not and was not a party to the matter in
                  respect of which indemnification is sought by the claimant.


                                      -10-

<PAGE>

                           (2) "Independent Counsel" means a law firm, a member
                  of a law firm, or an independent practitioner that is
                  experienced in matters of corporation law and shall include
                  any such person who, under the applicable standards of
                  professional conduct then prevailing, would not have a
                  conflict of interest in representing either the Corporation or
                  the claimant in an action to determine the claimant's rights
                  under this Article VI.

Section 12. Notices.

                  Any notice, request or other communication required or
permitted to be given to the Corporation under this Article VI shall be in
writing and either delivered in person or sent by telecopy, telex, telegram,
overnight mail or courier service, or certified or registered mail, postage
prepaid, return receipt requested, to the Secretary of the Corporation and shall
be effective only upon receipt by the Secretary.

                                  ARTICLE VII.

                                      STOCK

Section 1. Certificated or Uncertificated Shares.

                  The Board of Directors may authorize the issuance of stock
either in certificated or in uncertificated form. If shares are issued in
uncertificated form, each stockholder shall be entitled upon written request to
a stock certificate or certificates, representing and certifying the number and
kind of full shares held, signed as provided in Section 2 of this Article VII.
Certificates for shares of stock shall be in such form as the Board of Directors
may from time to time prescribe. The shares of the stock of the Corporation
shall be transferable on the books of the Corporation by the holder thereof in a
person or by his or her attorney upon surrender for cancellation of a
certificate or certificates for the same number of shares, or other evidence of
ownership if no certificates shall have been issued, with an assignment and
power of transfer endorsed thereon or attached thereto, duly executed, and with
such proof of the validity of the signature as the Corporation or its agents may
reasonably require.

Section 2. Signatures.

                  The certificates of stock shall be signed by the Chairman,
President, or a Vice President and by the Secretary or an Assistant Secretary,
provided that if such certificates are signed by a transfer agent or transfer
clerk and by a registrar, the signatures of such Chairman, President, Vice
President, Secretary, or Assistant Secretary may be facsimiles, engraved, or
printed.

Section 3. Replacement.

                  No certificate for shares of stock in the Corporation shall be
issued in place of any certificate alleged to have been lost, stolen, or
destroyed except upon production of such evidence of such loss, theft, or
destruction and upon delivery to the Corporation of a bond of 



                                      -11-

<PAGE>

indemnity in such amount, and upon such terms and secured by such surety as the
Board of Directors or the Executive Committee in its discretion may require.

                                 ARTICLE VIII.

                                  MISCELLANEOUS

Section 1. Seal.

                  The Corporation seal shall bear the name of the Corporation,
the date 1929 and the words "Corporate Seal, Delaware".

Section 2. Fiscal Year.

                  The fiscal year of the Corporation shall begin on the first
day of January in each year and shall end on the thirty-first day of December
following.

                                  ARTICLE IX.

                                   AMENDMENTS

Section 1.   

                  These Bylaws, or any of them, may from time to time be
supplemented, amended, or repealed (a) by a majority vote of the entire Board of
Directors or (b) at any annual or special meeting of the stockholders.

                                   ARTICLE X.

                                 EMERGENCY BYLAW

Section 1. Operative Event.

                  The Emergency Bylaw provided in this Article X shall be
operative during any emergency resulting from an attack on the United States,
any nuclear or atomic incident, or other event which creates a state of disaster
of sufficient severity to prevent the normal conduct and management of the
affairs and business of the Corporation, notwithstanding any different provision
in the preceding articles of the Bylaws or in the Certificate of Incorporation
of the Corporation or in the General Corporation Law of Delaware. To the extent
not inconsistent with this Emergency Bylaw, the Bylaws provided in the preceding
Articles shall remain in effect during such emergency and upon the termination
of such emergency the Emergency Bylaw shall cease to be operative unless and
until another such emergency shall occur.

Section 2. Notice of Meeting.

                  During any such emergency, any meeting of the Board of
Directors may be called by any officer of the Corporation or by any Director.
Notice shall be given by such person or by 



                                      -12-

<PAGE>

any officer of the Corporation. The notice shall specify the place of the
meeting, which shall be the head office of the Corporation at the time if
feasible and otherwise any other place specified in the notice. The notice shall
also specify the time of the meeting. Notice may be given only to such of the
Directors as it may be feasible to reach at the time and by such means as may be
feasible at the time, including publication or radio. If given by mail,
messenger, telephone, or telegram, the notice shall be addressed to the
Directors at their residences or business addresses, or such other places as the
person giving the notice shall deem most suitable. Notice shall be similarly
given, to the extent feasible, to the other persons serving as Directors
referred to in Section 3 below. Notice shall be given at least two days before
the meeting if feasible in the judgment of the person giving the notice and
otherwise on any shorter time he may deem necessary.

Section 3. Quorum.

                  During any such emergency, at any meeting of the Board of
Directors, a quorum shall consist of one-third of the number of Directors fixed
at the time pursuant to Article III of the Bylaws. If the Directors present at
any particular meeting shall be fewer than the number required for such quorum,
other persons present, to the number necessary to make up such quorum, shall be
deemed Directors for such particular meeting as determined by the following
Provisions and in the following order of priority:

                  (a) All Executive Vice Presidents of the Corporation in order
                  of their seniority of first election to such office, or if two
                  or more shall have been first elected to such office on the
                  same day, in the order of their seniority in age; and

                  (b) All Senior Vice Presidents of the Corporation in order of
                  their seniority of first election to such office, or if two or
                  more shall have been first elected to such office on the same
                  day, in the order of their seniority in age; and

                  (c) All Vice Presidents of the Corporation in order of their
                  seniority of first election to such office, or if two or more
                  shall have been first elected to such office on the same day,
                  in the order of their seniority in age; and

                  (d) Any other persons that are designated on a list that shall
                  have been approved by the Board of Directors before the
                  emergency, such persons to be taken in such order of priority
                  and subject to such conditions as may be provided in the
                  resolution approving the list.

Section 4. Lines of Management Succession.

                  The Board of Directors, during as well as before any such
emergency, may provide and from time to time modify lines of succession in the
event that during such an emergency any or all officers or agents of the
Corporation shall for any reason be rendered incapable of discharging their
duties.



                                      -13-

<PAGE>

Section 5. Office Relocation.

                  The Board of Directors, during as well as before any such
emergency, may, effective in the emergency, change the head office or designate
several alternative head offices or regional offices, or authorize the officers
to do so.

Section 6. Liability.

                  No officer, director, or employee acting in accordance with
this Emergency Bylaw shall be liable except for willful misconduct.

Section 7. Repeal or Amendment.

                  This Emergency Bylaw shall be subject to repeal or change by
further action of the Board of Directors or by action of the stockholders,
except that no such repeal or change shall modify the provisions of the next
preceding paragraph with regard to action or inaction prior to the time of such
repeal or change. Any such amendment of this Emergency Bylaw may make any
further or different provision that may be practical and necessary for the
circumstances of the emergency deems it to be in the best interest of the
Corporation to do so.





                                      -14-


<PAGE>
                                                                    EXHIBIT 10.1


                                  U.S. BANCORP
                            2001 STOCK INCENTIVE PLAN

SECTION 1. PURPOSE; ADOPTION.

         (a) Purpose. The purpose of the U.S. Bancorp 2001 Stock Incentive Plan
(the "Plan") is to aid in attracting and retaining employees, management
personnel and other personnel and members of the Board of Directors who are not
also employees ("Non-Employee Directors") of U.S. Bancorp (the "Company")
capable of assuring the future success of the Company, to offer such personnel
and Non-Employee Directors incentives to put forth maximum efforts for the
success of the Company's business and to afford such personnel and Non-Employee
Directors an opportunity to acquire a proprietary interest in the Company.

         (b) Adoption. The Company hereby adopts the Plan, subject to approval
by the stockholders of the Company. As so established and approved, the Plan
shall be known as the 2001 Stock Incentive Plan.

SECTION 2. DEFINITIONS.

         As used in the Plan, the following terms shall have the meanings set
forth below:

                  (a) "Affiliate" shall mean (i) any entity that, directly or
         indirectly through one or more intermediaries, is controlled by the
         Company and (ii) any entity in which the Company has a significant
         equity interest, as determined by the Committee.

                  (b) "Award" shall
 mean any Option, Stock Appreciation Right,
         Restricted Stock, Restricted Stock Unit, Performance Award or other
         Stock-Based Award granted under the Plan.

                  (c) "Award Agreement" shall mean any written agreement,
         contract or other instrument or document evidencing any Award granted
         under the Plan.

                  (d) "Change in Control" shall have the meaning ascribed to
         such term in any Award Agreement, and shall include phrases of similar
         meaning such as, by way of example but not limitation, "Full Change in
         Control" and "Partial Change in Control."

                  (e) "Code" shall mean the Internal Revenue Code of 1986, as
         amended from time to time, and any regulations promulgated thereunder.

                  (f) "Committee" shall mean a committee of the Board of
         Directors of the Company designated by such Board to administer the
         Plan and composed of not less than two directors.

                  (g) "Eligible Person" shall mean any employee, officer,
         director (including any Non-Employee Director), consultant (including,
         without limitation, any member of a regional advisory board of the
         Company or any Affiliate) or independent contractor providing services
         to the Company or any Affiliate who the Committee determines to be an
         Eligible Person.

                                       1

<PAGE>


                  (h) "Fair Market Value" shall mean, with respect to any
         property (including, without limitation, any Shares or other
         securities), the fair market value of such property determined by such
         methods or procedures as shall be established from time to time by the
         Committee.

                  Notwithstanding the foregoing, for purposes of the Plan, the
         Fair Market Value of Shares on a given date shall be, if the Shares
         are then traded on the New York Stock Exchange, the closing price of
         the Shares as reported on the New York Stock Exchange on such date or,
         if the New York Stock Exchange is not open for trading on that date, on
         the most recent preceding date when the New York Stock Exchange was
         open for trading.

                  (i) "Incentive Stock Option" shall mean an option granted
         under Section 6(a) of the Plan that is intended to meet the
         requirements of Section 422 of the Code or any successor provision.

                  (j) "Non-Qualified Stock Option" shall mean an option granted
         under Section 6(a) of the Plan that is not an incentive stock option.

                  (k) "Option" shall mean an Incentive Stock Option or a
         Non-Qualified Stock Option.

                  (l) "Other Stock-Based Award" shall mean any right granted
         under Section 6(e) of the Plan.

                  (m) "Participant" shall mean an Eligible Person designated to
         be granted an Award under the Plan.

                  (n) "Performance Award" shall mean any right granted under
         Section 6(d) of the Plan.

                  (o) "Person" shall mean any individual, corporation,
         partnership, association or trust.

                  (p) "Qualifying Termination" shall mean a termination of
         employment under circumstances that, in the judgment of the Committee,
         warrant acceleration of the exercisability of Options or the lapse of
         restrictions relating to Restricted Stock or Restricted Stock Units.
         Without limiting the generality of the foregoing, a Qualifying
         Termination may apply to large-scale terminations of employment
         relating to the disposition or divestiture of businesses or legal
         entities or similar circumstances.

                  (q) "Restricted Stock" shall mean any Share granted under
         Section 6(c) of the Plan.

                  (r) "Restricted Stock Unit" shall mean any unit granted under
         Section 6(c) of the Plan evidencing the right to receive a Share (or a
         cash payment equal to the Fair Market Value of a Share) at some future
         date.


                                       2

<PAGE>


                  (s) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the
         Securities and Exchange Commission under the Securities Exchange Act of
         1934.

                  (t) "Shares" shall mean shares of Common Stock, $.01 par
         value, of the Company or such other securities or property as may
         become subject to Awards pursuant to an adjustment made under Section
         7(c) of the Plan.

                  (u) "Stock Appreciation Right" shall mean any right granted
         under Section 6(b) of the Plan.

SECTION 3. ADMINISTRATION.

         (a) Power and Authority of the Committee. The Plan shall be
administered by the Committee. Subject to the terms of the Plan and applicable
law, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to each
Participant under the Plan; (iii) determine the number of Shares to be covered
by (or with respect to which payments, rights or other matters are to be
calculated in connection with) each Award; (iv) determine the terms and
conditions of any Award or Award Agreement; (v) amend the terms and conditions
of any Award or Award Agreement and accelerate the exercisability of Options or
the lapse of restrictions relating to Restricted Stock or Restricted Stock
Units; provided, however, that any such acceleration of exercisability or lapse
of restrictions shall be limited to accelerations relating to a Change in
Control, a Qualifying Termination, death or disability; (vi) determine whether,
to what extent and under what circumstances Awards may be exercised in cash,
Shares, other securities, other Awards or other property, or canceled, forfeited
or suspended; (vii) determine whether, to what extent and under what
circumstances cash, Shares, other securities, other Awards, other property and
other amounts payable with respect to an Award under the Plan shall be deferred
either automatically or at the election of the holder thereof or the Committee;
(viii) interpret and administer the Plan and any instrument or agreement
relating to, or Award made under, the Plan; (ix) establish, amend, suspend or
waive such rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and (x) make any other
determination and take any other action that the Committee deems necessary or
desirable for the administration of the Plan. Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations and
other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time and shall be
final, conclusive and binding upon any Participant, any holder or beneficiary of
any Award and any employee of the Company or any Affiliate.

         (b) Delegation. The Committee may delegate to one or more officers of
the Company or any Affiliate or a committee of such officers, but only to the
extent such officer or officers are also members of the Board of Directors of
the Company, the authority, subject to such terms and limitations as the
Committee shall determine, to grant Awards to Eligible Persons who are not
officers or directors of the Company for purposes of Section 16 of the
Securities Exchange Act of 1934, as amended. The Committee shall not delegate
its powers and duties under the Plan in any manner that would cause the Plan not
to comply with the requirements of Section 162(m) of the Code.


                                       3

<PAGE>


SECTION 4. SHARES AVAILABLE FOR AWARDS.

         (a) Shares Available. Subject to adjustment as provided in Section
7(c), the total number of Shares available for granting Awards under the Plan
shall be 100,000,000. Not more than 10,000,000 of such Shares, subject to
adjustment as provided in Section 7 (c) of the Plan, will be available for
granting any types of Awards other than Awards of Options or Stock Appreciation
Rights; provided, however, that any Shares covered by an Award that is not an
Option or Stock Appreciation Rights that are forfeited shall again be available
for purposes of the foregoing limitation. If any Shares covered by an Award or
to which an Award relates are not purchased or are forfeited, or if an Award
otherwise terminates without delivery of any Shares, then the number of Shares
counted against the aggregate number of Shares available under the Plan with
respect to such Award, to the extent of any such forfeiture or termination,
shall again be available for granting Awards under the Plan. In addition, if any
Shares are used by a Participant as full or partial payment to the Company of
the purchase price relating to an Award, whether by actual delivery or
attestation, or in connection with satisfaction of tax obligations relating to
an Award, whether by actual delivery, attestation or having shares withheld from
the Award, only the number of Shares issued net of the Shares tendered or
withheld shall be deemed delivered for purposes of determining the maximum
number of Shares available for granting of Awards under the Plan.

         (b) Accounting for Awards. For purposes of this Section 4, if an Award
entitles the holder thereof to receive or purchase Shares, the number of Shares
covered by such Award or to which such Award relates shall be counted on the
date of grant of such Award against the aggregate number of Shares available for
granting Awards under the Plan. Such Shares may again become available for
granting Awards under the Plan pursuant to the provisions of Section 4(a) of the
Plan, subject to the limitations set forth in Section 4(c) of the Plan.

         (c) Incentive Stock Options. Notwithstanding the foregoing, the number
of Shares available for granting Incentive Stock Options under the Plan shall
not exceed 100,000,000, subject to adjustment as provided in Section 7(c) of the
Plan and Section 422 or 424 of the Code or any successor provisions.

         (d) Award Limitations Under the Plan. No Eligible Person may be granted
any Award or Awards, the value of which Awards are based solely on an increase
in the value of the Shares after the date of grant of such Awards, for more than
5,000,000 Shares (subject to adjustment as provided in Section 7(c) of the
Plan), in the aggregate, in any calendar year beginning with the year commencing
January 1, 2001. The foregoing limitation specifically includes the grant of any
"qualified performance-based" Awards within the meaning of Section 162(m) of the
Code.

SECTION 5. ELIGIBILITY.

         Any Eligible Person, including any Eligible Person who is an officer or
director of the Company or any Affiliate, shall be eligible to be designated a
Participant; provided, however, that an Incentive Stock Option may be granted
only to full-time or part-time employees (which term as used herein includes,
without limitation, officers and directors who are also employees), and an
Incentive Stock Option shall not be granted to an employee of an Affiliate
unless the 


                                       4

<PAGE>


Affiliate is also a "subsidiary corporation" of the Company within the meaning
of Section 424(f) of the Code or any successor provision.

SECTION 6. AWARDS.

         (a) Options. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:

                  (i) Exercise Price. The purchase price per Share purchasable
         under an Option shall be determined by the Committee; provided,
         however, that such purchase price shall not be less than 100% of the
         Fair Market Value of a Share on the date of grant of such Option.

                  (ii) Option Term. The term of each Option shall be fixed by
         the Committee at the time of grant but in no event shall any Option
         have a term of more than 10 years.

                  (iii) Time and Method of Exercise. The Committee shall
         determine the time or times at which an Option may be exercised in
         whole or in part and the method or methods by which, and the form or
         forms (including, without limitation, cash, Shares previously owned by
         the Participant, other securities, other Awards or other property, or
         any combination thereof, having a Fair Market Value on the exercise
         date equal to the relevant exercise price) in which, payment of the
         exercise price with respect thereto may be made or deemed to have been
         made.

                  (iv) Reload Options. The Committee may grant "reload" Options,
         separately or together with another Option, pursuant to which, subject
         to the terms and conditions established by the Committee and any
         applicable requirements of Rule 16b-3 or any other applicable law, the
         Participant would be granted a new Option when the payment of the
         exercise price of a previously granted Option is made by the delivery
         of shares of the Company's Common Stock owned by the Participant
         pursuant to Section 6(a)(iii) hereof or the relevant provisions of
         another plan of the Company, and/or when shares of the Company's Common
         Stock are tendered or forfeited as payment of the amount to be withheld
         under applicable tax laws in connection with the exercise of an option,
         which new Option would be an option to purchase the number of Shares
         not exceeding the sum of (A) the number of shares of the Company's
         Common Stock provided as consideration upon the exercise of the
         previously granted Option to which such "reload" Option relates and (B)
         the number of shares of the Company's Common Stock tendered or
         forfeited as payment of the amount to be withheld under applicable tax
         laws in connection with the exercise of the Option to which such
         "reload" Option relates. "Reload" Options may be granted with respect
         to Options granted under this Plan or any other stock option plan of
         the Company or any of its Affiliates (which shall explicitly include
         plans assumed by the Company in connection with mergers, combinations
         and similar transactions). Such "reload" Options shall have a term that
         shall not extend beyond the term of the previously granted Option to
         which the "reload" Option relates and shall have a per share exercise
         price equal to the Fair Market Value as of the date of grant of the new
         Option. Any such 


                                       5

<PAGE>


         "reload" Options shall be subject to the availability of sufficient
         shares for grant under the Plan.

                  (v) Elective Deferral. The Committee may from time to time
         establish procedures pursuant to which a Participant may elect to
         defer, until a time or times later than the exercise of an Option,
         receipt of all or a portion of the Shares subject to such Option, all
         on such terms and conditions as the Committee shall determine. If any
         such deferrals are permitted, then a Participant who elects such
         deferral shall not have any rights as a stockholder with respect to
         such deferred Shares unless and until Shares actually are delivered to
         the Participant with respect thereto, except to the extent otherwise
         determined by the Committee.

         (b) Stock Appreciation Rights. The Committee is hereby authorized to
grant Stock Appreciation Rights to Participants subject to the terms of the Plan
and any applicable Award Agreement. A Stock Appreciation Right granted under the
Plan shall confer on the holder thereof a right to receive upon exercise thereof
the excess of (i) the Fair Market Value of one Share on the date of exercise
(or, if the Committee shall so determine, at any time during a specified period
before or after the date of exercise) over (ii) the grant price of the Stock
Appreciation Right as specified by the Committee, which price shall not be less
than 100% of the Fair Market Value of one Share on the date of grant of the
Stock Appreciation Right. Subject to the terms of the Plan and any applicable
Award Agreement, the grant price, term, methods of exercise, dates of exercise,
methods of settlement and any other terms and conditions of any Stock
Appreciation Right shall be as determined by the Committee. The Committee may
impose such conditions or restrictions on the exercise of any Stock Appreciation
Right as it may deem appropriate.

         (c) Restricted Stock and Restricted Stock Units. The Committee is
hereby authorized to grant Awards of Restricted Stock and Restricted Stock Units
to Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:

                  (i) Restrictions. Shares of Restricted Stock and Restricted
         Stock Units shall be subject to such restrictions as the Committee may
         impose (including, without limitation, any limitation on the right to
         vote a Share of Restricted Stock or the right to receive any dividend
         or other right or property with respect thereto), which restrictions
         may lapse separately or in combination at such time or times, in such
         installments or otherwise as the Committee may deem appropriate. Except
         as otherwise provided herein, Awards of Restricted Stock and Restricted
         Stock Units shall contain restrictions that lapse no sooner than three
         years following the date of grant or, in the case of Awards with
         performance-based vesting provisions, no sooner than one year following
         the date of grant; provided, however, that restrictions may lapse
         sooner than such dates as to portions of such Awards so long as
         restrictions as to the total number of Shares covered by such Awards do
         not lapse sooner than such dates; and provided, further, that such
         limitations shall not apply to Awards granted to new employees as part
         of initial terms of employment or Awards granted to new or existing
         employees in connection with the acquisition of businesses or assets by
         the Company.


                                       6

<PAGE>


                  (ii) Forfeiture; Delivery of Shares. Except as otherwise
         determined by the Committee, upon termination of employment (as
         determined under criteria established by the Committee) during the
         applicable restriction period, all Shares of Restricted Stock and all
         Restricted Stock Units at such time subject to restriction shall be
         forfeited and reacquired by the Company; provided, however, that the
         Committee may, when it finds that a waiver would be in the best
         interest of the Company, including, without limitation, in connection
         with Changes in Control, Qualifying Terminations, death or disability,
         waive in whole or in part any or all remaining restrictions with
         respect to Shares of Restricted Stock or Restricted Stock Units. In the
         case of Restricted Stock, Shares shall be issued at the time such
         Awards are granted and may be certificated or uncertificated. Shares
         representing Restricted Stock that is no longer subject to restrictions
         shall be delivered to the holder thereof promptly after the applicable
         restrictions lapse or are waived. In the case of Restricted Stock
         Units, no Shares shall be issued at the time such Awards are granted.
         Upon the lapse or waiver of restrictions and the restricted period
         relating to Restricted Stock Units evidencing the right to receive
         Shares, such Shares shall be issued and delivered to the holders of the
         Restricted Stock Units.

         (d) Performance Awards. The Committee is hereby authorized to grant
Performance Awards to Participants subject to the terms of the Plan and any
applicable Award Agreement. A Performance Award granted under the Plan (i) may
be denominated or payable in cash, Shares (including, without limitation,
Restricted Stock), other securities, other Awards or other property and (ii)
shall confer on the holder thereof the right to receive payments, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Committee shall establish. Subject to the terms of the Plan and
any applicable Award Agreement, the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance Award granted and the amount of any payment or transfer to be made
pursuant to any Performance Award shall be determined by the Committee.

         (e) Other Stock-Based Awards. The Committee is hereby authorized to
grant to Participants such other Awards that are denominated or payable in,
valued in whole or in part by reference to, or otherwise based on or related to,
Shares (including, without limitation, securities convertible into Shares), as
are deemed by the Committee to be consistent with the purpose of the Plan;
provided, however, that such grants must comply with applicable law. Subject to
the terms of the Plan and any applicable Award Agreement, the Committee shall
determine the terms and conditions of such Awards. Shares or other securities
delivered pursuant to a purchase right granted under this Section 6(e) shall be
purchased for such consideration, which may be paid by such method or methods
and in such form or forms (including without limitation, cash, Shares, other
securities, other Awards or other property or any combination thereof), as the
Committee shall determine, the value of which consideration, as established by
the Committee, shall not be less than 100% of the Fair Market Value of such
Shares or other securities as of the date such purchase right is granted.

         (f) General.

                  (i) Consideration for Awards. Awards may be granted for no
         cash consideration or for any cash or other consideration as may be
         determined by the Committee or required by applicable law.


                                       7

<PAGE>


                  (ii) Awards May Be Granted Separately or Together. Awards may,
         in the discretion of the Committee, be granted either alone or in
         addition to, in tandem with or in substitution for any other Award or
         any award granted under any plan of the Company or any Affiliate other
         than the Plan. Awards granted in addition to or in tandem with other
         Awards or in addition to or in tandem with awards granted under any
         such other plan of the Company or any Affiliate may be granted either
         at the same time as or at a different time from the grant of such other
         Awards or awards.

                  (iii) Forms of Payment Under Awards. Subject to the terms of
         the Plan and of any applicable Award Agreement, payments or transfers
         to be made by the Company or an Affiliate upon the grant, exercise or
         payment of an Award may be made in such form or forms as the Committee
         shall determine (including, without limitation, cash, Shares, other
         securities, other Awards or other property or any combination thereof),
         and may be made in a single payment or transfer, in installments or on
         a deferred basis, in each case in accordance with rules and procedures
         established by the Committee. Such rules and procedures may include,
         without limitation, provisions for the payment or crediting of
         reasonable interest on installment or deferred payments.

                  (iv) Limits on Transfer of Awards. No Award and no right under
         any such Award shall be transferable by a Participant otherwise than by
         will or by the laws of descent and distribution; provided, however,
         that, if so determined by the Committee, a Participant may, in the
         manner established by the Committee, designate a beneficiary or
         beneficiaries to exercise the rights of the Participant and receive any
         property distributable with respect to any Award upon the death of the
         Participant; and provided, further, that except in the case of an
         Incentive Stock Option, Awards may be transferable as specifically
         provided in any applicable Award Agreement or amendment thereto
         pursuant to terms determined by the Committee. Except as otherwise
         provided in any applicable Award Agreement or amendment thereto (other
         than an Award Agreement relating to an Incentive Stock Option),
         pursuant to terms determined by the Committee, each Award or right
         under any Award shall be exercisable during the Participant's lifetime
         only by the Participant or, if permissible under applicable law, by the
         Participant's guardian or legal representative. Except as otherwise
         provided in any applicable Award Agreement or amendment thereto (other
         than an Award Agreement relating to an Incentive Stock Option), no
         Award or right under any such Award may be pledged, alienated, attached
         or otherwise encumbered, and any purported pledge, alienation,
         attachment or encumbrance thereof shall be void and unenforceable
         against the Company or any Affiliate.

                  (v) Term of Awards. The term of each Award shall be for such
         period as may be determined by the Committee at the time of grant but
         in no event shall any Award have a term of more than 10 years.

                  (vi) Restrictions; Securities Exchange Listing. All
         certificates for Shares or other securities delivered under the Plan
         pursuant to any Award or the exercise thereof shall be subject to such
         stop transfer orders and other restrictions as the Committee may deem
         advisable under the Plan or the rules, regulations and other
         requirements of the Securities and Exchange Commission and any
         applicable federal or state securities laws, 


                                       8

<PAGE>


         and the Committee may cause a legend or legends to be placed on any
         such certificates to make appropriate reference to such restrictions.
         If the Shares or other securities are traded on a securities exchange,
         the Company shall not be required to deliver any Shares or other
         securities covered by an Award unless and until such Shares or other
         securities have been admitted for trading on such securities exchange.

SECTION 7. AMENDMENT AND TERMINATION; ADJUSTMENTS.

         Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:

                  (a) Amendments to the Plan. The Board of Directors of the
         Company may amend, alter, suspend, discontinue or terminate the Plan at
         any time and from time to time; provided, however, that,
         notwithstanding any other provision of the Plan or any Award Agreement,
         without the approval of the stockholders of the Company, no such
         amendment, alteration, suspension, discontinuation or termination shall
         be made that, absent such approval, would violate any rules or
         regulations of the New York Stock Exchange, any other securities
         exchange or the National Association of Securities Dealers, Inc. that
         are applicable to the Company.

                  (b) Amendments to Awards. Except as otherwise explicitly
         provided herein, the Committee may waive any conditions of or rights of
         the Company under any outstanding Award, prospectively or
         retroactively. The Committee may not amend, alter, suspend, discontinue
         or terminate any outstanding Award, prospectively or retroactively,
         without the consent of the Participant or holder or beneficiary
         thereof, except as otherwise herein provided. Except as provided in
         Section 7(c) hereof, no Option may be amended to reduce its initial
         exercise price and no Option shall be canceled and replaced with an
         Option or Options having a lower exercise price without the approval of
         the stockholders of the Company.

                  (c) Adjustments. In the event that any dividend or other
         distribution (whether in the form of cash, Shares, other securities or
         other property), recapitalization, stock split, reverse stock split,
         reorganization, merger, consolidation, split-up, spin-off, combination,
         repurchase or exchange of Shares or other securities of the Company or
         other similar corporate transaction or event affecting the Shares would
         be reasonably likely to result in the diminution or enlargement of any
         of the benefits or potential benefits intended to be made available
         under the Plan or under an Award (including, without limitation, the
         benefits or potential benefits of provisions relating to the term,
         vesting or exercisability of any Option, the availability of any Tandem
         Stock Appreciation rights or "reload" Option rights, if any, contained
         in any Option Award, and any Change in Control or similar provisions of
         any Award), the Committee shall, in such manner as it shall deem
         equitable or appropriate in order to prevent such diminution or
         enlargement of any such benefits or potential benefits, adjust any or
         all of (i) the number and type of Shares (or other securities or other
         property) which thereafter may be made the subject of Awards, (ii) the
         number and type of Shares (or other securities or other property)
         subject to outstanding Awards and (iii) the purchase or exercise price
         with 


                                       9

<PAGE>


         respect to any Award; provided, however, that the number of Shares
         covered by any Award or to which such Award relates shall always be a
         whole number.

                  (d) Correction of Defects, Omissions and Inconsistencies. The
         Committee may correct any defect, supply any omission or reconcile any
         inconsistency in the Plan or any Award in the manner and to the extent
         it shall deem desirable to carry the Plan into effect.

SECTION 8. INCOME TAX WITHHOLDING.

         In order to comply with all applicable federal, state or local income
tax laws or regulations, the Company may take such action as it deems
appropriate to ensure that all applicable federal, state or local payroll,
withholding, income or other taxes, which are the sole and absolute
responsibility of a Participant, are withheld or collected from such
Participant. In order to assist a Participant in paying all federal and state
taxes to be withheld or collected upon exercise or receipt of (or the lapse of
restrictions relating to) an Award, the Committee, in its discretion and subject
to such additional terms and conditions as it may adopt, may permit the
Participant to satisfy such tax obligation by (i) electing to have the Company
withhold a portion of the Shares otherwise to be delivered upon exercise or
receipt of (or the lapse of restrictions relating to) such Award with a Fair
Market Value equal to the amount of such taxes (but only to the extent of the
minimum amount required to be withheld under applicable laws or regulations) or
(ii) delivering to the Company Shares other than Shares issuable upon exercise
or receipt of (or the lapse of restrictions relating to) such Award with a Fair
Market Value equal to the amount of such taxes (but only to the extent of the
minimum amount required to be withheld under applicable laws or regulations).
The election, if any, must be made on or before the date that the amount of tax
to be withheld is determined.

SECTION 9. GENERAL PROVISIONS.

         (a) No Rights to Awards. No Eligible Person, Participant or other
Person shall have any claim to be granted any Award under the Plan, and there is
no obligation for uniformity of treatment of Eligible Persons, Participants or
holders or beneficiaries of Awards under the Plan. The terms and conditions of
Awards need not be the same with respect to different Participants.

         (b) Award Agreements. No Participant will have rights under an Award
granted to such Participant unless and until an Award Agreement shall have been
duly executed on behalf of the Company.

         (c) No Limit on Other Compensation Arrangements. Nothing contained in
the Plan shall prevent the Company or any Affiliate from adopting or continuing
in effect other or additional compensation arrangements, and such arrangements
may be either generally applicable or applicable only in specific cases.

         (d) No Right to Employment, etc. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ, or as
giving a Non-Employee Director the right to continue as a director, of the
Company or any Affiliate. In addition, the Company or an Affiliate may at any
time dismiss a Participant from employment, or terminate the term of a

                                       10

<PAGE>


Non-Employee Director, free from any liability or any claim under the Plan,
unless otherwise expressly provided in the Plan or in any Award Agreement.

         (e) Governing Law. The validity, construction and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Minnesota.

         (f) Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction
or would disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the purpose or intent of
the Plan or the Award, such provision shall be stricken as to such jurisdiction
or Award, and the remainder of the Plan or any such Award shall remain in full
force and effect.

         (g) No Trust or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant
or any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.

         (h) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash shall be paid in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.

         (i) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.

         (j) Section 16 Compliance. The Plan is intended to comply in all
respects with Rule 16b-3 or any successor provision, as in effect from time to
time, and in all events the Plan shall be construed in accordance with the
requirements of Rule 16b-3. If any Plan provision does not comply with Rule
16b-3 as hereafter amended or interpreted, the provision shall be deemed
inoperative. The Board of Directors, in its absolute discretion, may bifurcate
the Plan so as to restrict, limit or condition the use of any provision of the
Plan with respect to persons who are officers or directors subject to Section 16
of the Securities and Exchange Act of 1934, as amended, without so restricting,
limiting or conditioning the Plan with respect to other Participants.

SECTION 10. EFFECTIVE DATE OF THE PLAN.

         The Plan shall be effective as of the date of approval by the
stockholders of the Company in accordance with applicable law.


                                       11

<PAGE>


SECTION 11. TERM OF THE PLAN.

         New Awards shall be granted under the Plan only during a 10-year period
beginning on the effective date of the Plan. However, unless otherwise expressly
provided in the Plan or in an applicable Award Agreement, any Award theretofore
granted may extend beyond the end of such 10-year period, and the authority of
the Committee provided for hereunder with respect to the Plan and any Awards,
and the authority of the Board of Directors of the Company to amend the Plan,
shall extend beyond the end of such period.



                                       12


<PAGE>
                                                                    EXHIBIT 10.2

                                  U.S. BANCORP

                            EXECUTIVE INCENTIVE PLAN


         1. Establishment. On February 27, 2001, the Board of Directors of U.S.
BANCORP, upon recommendation by the Compensation Committee of the Board of
Directors, approved an executive incentive plan for executives as described
herein, which plan shall be know as the "U.S. BANCORP EXECUTIVE INCENTIVE PLAN."
This Plan shall be submitted for approval by the stockholders of U.S. Bancorp at
the 2001 Annual Meeting of Stockholders. This Plan shall be effective as of
January 1, 2001, subject to its approval by the stockholders, and no benefits
shall be issued pursuant thereto until after this Plan has been approved by the
stockholders.

         2. Purpose. The purpose of this Plan is to advance the interests of
U.S. Bancorp and its stockholders by attracting and retaining key employees, and
by stimulating the efforts of such employees to contribute to the continued
success and growth of the business of the Company.

         3. Definitions. When the following terms are used herein with initial
capital letters, they shall have the following meanings:

                  3.1. Base Salary. A Participant's annualized base salary, as
         determined by the Committee, as of the last day of a Performance
         Period.

                  3.2. Code. The Internal
 Revenue Code of 1986, as it may be
         amended from time to time, and any proposed, temporary or final
         Treasury Regulations promulgated thereunder.

                  3.3. Committee. The Compensation Committee of the Board of
         Directors of the Company designated by such Board to administer the
         Plan which shall consist of members appointed from time to time by the
         Board of Directors. Each member of the Committee shall be an "outside
         director" within the meaning of Section 162(m) of the Code.

                  3.4. Company. U.S. Bancorp, a Delaware corporation, and any of
         its subsidiaries or affiliates, whether now or hereafter established.

                  3.5. Earnings per Share or EPS. The Company's Earnings per
         Share shall be computed in accordance with generally accepted
         accounting principles, as in effect from time to time, as reported in
         the Company's consolidated financial statements for the applicable



<PAGE>


         Performance Period, adjusted in the same fashion that Operating
         Earnings are to be adjusted as provided in Section 3.7 hereof.

                  3.6. Maximum Award. A dollar amount equal to two-tenths of one
         percent (0.20%) of the Company's Operating Earnings for the Performance
         Period.

                  3.7. Operating Earnings. The Company's net income computed in
         accordance with generally accepted accounting principles as reported in
         the Company's consolidated financial statements for the applicable
         Performance Period, adjusted to eliminate (1) the cumulative effect of
         changes in generally accepted accounting principles; (2) gains and
         losses from discontinued operations; (3) extraordinary gains or losses;
         and (4) any other unusual or nonrecurring gains or losses which are
         separately identified and quantified in the Company's financial
         statements, including merger related charges.

                  3.8. Participant. Any executive officer of the Company who is
         also an "officer" within the meaning of Section 16(a) of the Securities
         Exchange Act of 1934 and who is designated by the Committee, as
         provided for herein, to participate with respect to a Performance
         Period as a Participant in this Plan. Directors of the Company who are
         not also employees of the Company are not eligible to participate in
         the Plan.

                  3.9. Performance Threshold. The pre-established, objective
         performance goals selected by the Committee with respect to each
         Performance Period and which shall be based solely on Earnings Per
         Share.

                  3.10. Performance Period. Each consecutive twelve-month period
         commencing on January 1 of each year during the term of this Plan and
         coinciding with the Company's fiscal year.

                  3.11. Plan. This U.S. BANCORP EXECUTIVE INCENTIVE PLAN.

                  3.12. Target Award. A percentage, which may be greater or less
         than 100%, as determined by the Committee with respect to each
         Performance Period.

         4. Administration.

                  4.1. Power and Authority of Committee. The Plan shall be
         administered by the Committee. The Committee shall have full power 


                                       2

<PAGE>


         and authority, subject to all the applicable provisions of the Plan and
         applicable law, to (a) establish, amend, suspend or waive such rules
         and regulations and appoint such agents as it deems necessary or
         advisable for the proper administration of the Plan, (b) construe,
         interpret and administer the plan and any instrument or agreement
         relating to the Plan, and (c) make all other determinations and take
         all other actions necessary or advisable for the administration of the
         Plan. Unless otherwise expressly provided in the Plan, each
         determination made and each action taken by the Committee pursuant to
         the Plan or any instrument or agreement relating to the Plan (x) shall
         be within the sole discretion of the Committee, (y) may be made at any
         time and (z) shall be final, binding and conclusive for all purposes on
         all persons, including, but not limited to, Participants and their
         legal representatives and beneficiaries, and employees of the Company.

                  4.2. Determinations made prior to each Performance Period. At
         any time ending on or before the 90th day of each Performance Period,
         the Committee shall:

                       (a)  designate all Participants and their Target Awards
                            for such Performance Period; and

                       (b)  establish one or more Performance Thresholds 
                            (including a minimum level of achievement), based
                            solely on EPS.

                  4.3. Certification. Following the close of each Performance
         Period and prior to payment of any amount of any Participant under the
         Plan, the Committee must certify in writing the Company's Operating
         Earnings and EPS for that Performance Period and certify as to the
         attainment of all other factors upon which any payments to a
         Participant for that Performance Period are to be based.

                  4.4. Stockholder Approval. The material terms of this Plan
         shall be disclosed to and approved by stockholders of the Company in
         accordance with Section 162(m) of the Code. No amount shall be paid to
         any Participant under this Plan unless such stockholder approval has
         been obtained.

         5. Incentive Payment.

                  5.1. Formula. Each Participant shall receive a bonus payment
         for each Performance Period in an amount not greater than:


                                       3

<PAGE>


                       (a)  the Participant's Base Pay for the Performance
                            Period, multiplied by

                       (b)  the Participant's Target Award for the Performance
                            Period;

         provided, however, that in the event that the Company's EPS for a
         Performance Period is equal to or in excess of a designated Performance
         Threshold for that Performance Period, then each Participant shall be
         entitled to a bonus payment for that Performance Period which is not
         greater than the Maximum Award for that Performance Period.

                  5.2. Limitations.

                           (a) Minimum EPS Achievement. In no event shall any
                  Participant receive any payment hereunder unless the Company's
                  EPS for a Performance Period is at least equal to a minimum
                  EPS as determined by the Committee for that Performance
                  Period.

                           (b) Discretionary Reduction. The Committee shall
                  retain sole and full discretion to reduce by any amount the
                  incentive payment otherwise payable to any Participant under
                  this Plan.

                           (c) Continued Employment. Except as otherwise
                  provided by the Committee, no incentive payment under this
                  Plan with respect to a Performance Period shall be paid or
                  owed to a Participant whose employment terminates prior to the
                  last day of such Performance Period.

                           (d) Maximum Payments. No Participant shall receive a
                  payment under this Plan for any Performance Period in excess
                  of the Maximum Award for that Performance Period.

         6. Benefit Payments.

                  6.1. Time and Form of Payments. Subject to any deferred
         compensation election pursuant to any such plans of the Company
         applicable hereto, benefits shall be paid to the Participant in cash
         and/or common stock of the Company as soon as administratively feasible
         upon the completion of a Performance Period, after the Committee has
         certified that the Company Performance Threshold has been attained,
         determined 


                                       4

<PAGE>


         the Maximum Award for that Performance Period and made the other
         certifications provided for in Section 4.3 hereof.

                  6.2. Nontransferability. Participants and beneficiaries shall
         not have the right to assign, encumber or otherwise anticipate the
         payments to be made under this Plan, and the benefits provided
         hereunder shall not be subject to seizure for payment of any debts or
         judgments against any Participant or any beneficiary.

                  6.3. Tax Withholding. In order to comply with all applicable
         federal or state income, social security, payroll, withholding or other
         tax laws or regulations, the Committee may establish such policy or
         policies as it deems appropriate with respect to such laws and
         regulations, including without limitation, the establishment of
         policies to ensure that all applicable federal or state income, social
         security, payroll, withholding or other taxes, which are the sole and
         absolute responsibility of the Participant, are withheld or collected
         from such Participant.

         7. Amendment and Termination; Adjustments. Except to the extent
prohibited by applicable law and unless otherwise expressly provided in the
Plan:

                  (a) Amendments to the Plan. The Committee may amend this Plan
         prospectively at any time and for any reason deemed sufficient by it
         without notice to any person affected by this Plan and may likewise
         terminate or curtail the benefits of this Plan both with regard to
         persons expecting to receive benefits hereunder in the future and
         persons already receiving benefits at the time of such action.

                  (b) Correction of Defects, Omissions and Inconsistencies. The
         Committee may correct any defect, supply any omission or reconcile any
         inconsistency in the Plan in the manner and to the extent it shall deem
         desirable to carry the Plan into effect.

         8. Miscellaneous.

                  8.1. Effective Date. This Plan shall be deemed effective,
         subject to stockholder approval, as of January 1, 2001.

                  8.2. Headings. Headings are given to the Sections and
         subsections of the Plan solely as a convenience to facilitate
         reference. Such headings shall not be deemed in any way material or
         relevant to the construction or interpretation of the Plan or any
         provision thereof.


                                       5

<PAGE>


                  8.3. Applicability to Successors. This Plan shall be binding
         upon and inure to the benefit of the Company and each Participant, the
         successors and assigns of the Company, and the beneficiaries, personal
         representatives and heirs of each Participant. If the Company becomes a
         party to any merger, consolidation or reorganization, this Plan shall
         remain in full force and effect as an obligation of the Company or its
         successors in interest.

                  8.4. Employment Rights and other Benefit Programs. The
         provisions of this Plan shall not give any Participant any right to be
         retained in the employment of the Company. In the absence of any
         specific agreement to the contrary, this Plan shall not affect any
         right of the Company, or of any affiliate of the Company, to terminate,
         with or without cause, any Participant's employment at any time. This
         Plan shall not replace any contract of employment, whether oral or
         written, between the Company and any Participant, but shall be
         considered a supplement thereto. This Plan is in addition to, and not
         in lieu of, any other employee benefit plan or program in which any
         Participant may be or become eligible to participate by reason of
         employment with the Company. No compensation or benefit awarded to or
         realized by any Participant under the Plan shall be included for the
         purpose of computing such Participant's compensation under any
         compensation-based retirement, disability, or similar plan of the
         Company unless required by law or otherwise provided by such other
         plan.

                  8.5. No Trust or Fund Created. This Plan shall not create or
         be construed to create a trust or separate fund of any kind or a
         fiduciary relationship between the Company or any affiliate and a
         Participant or any other person. To the extent that any person acquires
         a right to receive payments from the Company or any affiliate pursuant
         to this Plan, such right shall be no greater than the right of any
         unsecured general creditor of the Company or of any affiliate.

                  8.6. Governing Law. The validity, construction and effect of
         the Plan or any incentive payment payable under the Plan shall be
         determined in accordance with the laws of the State of Minnesota.

                  8.7. Severability. If any provision of the Plan is or becomes
         or is deemed to be invalid, illegal or unenforceable in any
         jurisdiction, such provision shall be construed or deemed amended to
         conform to applicable laws, or if it cannot be so construed or deemed
         amended without, in the determination of the Committee, materially
         altering the purpose or intent 


                                       6

<PAGE>


         of the Plan, such provision shall be stricken as to such jurisdiction,
         and the remainder of the Plan shall remain in full force and effect.

                  8.8. Qualified Performance-Based Compensation. All of the
         terms and conditions of the Plan shall be interpreted in such a fashion
         as to qualify all compensation paid hereunder as "qualified
         performance-based compensation" within the meaning of Section 162(m) of
         the Code.


                                       7


<PAGE>


                                                                    EXHIBIT 10.4


                                   SUMMARY OF
        NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN, AS AMENDED,
                           OF THE FORMER U.S. BANCORP

         U.S. Bancorp's Supplemental Executive Retirement Plan ("SERP") provides
additional pension benefits to certain executives who were employees of the
former U.S. Bancorp who have not less than five years of service at the time of
their termination of employment or death. The five years of service requirement
does not apply, however, under certain circumstances involving a change in
control of U.S. Bancorp, including termination of employment entitling the
executive to receive severance payments related to a change in control pursuant
to the change-in-control provisions of an employment contract, an individual
change-in-control severance agreement or the U.S. Bancorp Senior Management
Change in Control Severance Pay Plan.

         Participation in the SERP after September 30, 2001 is limited to
persons who qualified under the terms of the SERP in effect as of that date. The
SERP generally provides retirement benefits at age 65 equal to 55% of an
executive's "Final Average Compensation." Final Average Compensation is the
average base salary and annual incentive award during the executive's last
 three
years of employment. Executives receive credit of an additional five years of
service at age 60 and may receive retirement benefits after age 60 that are
equal to the actuarial equivalent present value of the retirement benefit that
would be payable at age 65. Payments under the SERP are reduced by other sources
of retirement income, including (i) tax-qualified pension benefits, (ii)
nonqualified retirement benefits that replace amounts that cannot be provided by
tax-qualified plans due to legislated limits on the compensation that may be
taken into account and on the maximum benefit, (iii) a portion of Social
Security benefits and (iv) estimated benefits provided by other employers.
Lesser benefits are available in the event of termination prior to age 65.

         The SERP provides for payment of benefits in the form of a single lump
sum or an annuity. Under certain circumstances in connection with a change in
control, a participant who has not yet begun to receive payment of benefits
under the SERP may elect to receive a distribution of the entire SERP benefit,
subject to a 5% forfeiture of benefits. After December 31, 2001, the benefits
payable under the SERP have been frozen for all but five participants. The
benefits payable to participants with frozen benefits will be the actuarial
equivalent of the benefit payable at age 65 that they had earned as of December
31, 2001. (Pay and service after that date will not affect the amount of their
benefit.)



<PAGE>

                                                                   EXHIBIT 10.10


       SUMMARY OF THE U.S. BANCORP SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

         U.S. Bancorp maintains a non-contributory, non-qualified retirement
plan that pays the additional pension benefits that would have been payable
under our current and prior qualified defined benefit pension plans if federal
limitations on defined benefit pension plan payments were not in effect.

         Some of U.S. Bancorp's executive officers are eligible for an
additional benefit that augments benefits under the U.S. Bancorp Pension Plan,
the replacement benefits under this non-qualified retirement plan and certain
other prior employer plans. The additional benefit ensures that eligible
executives receive upon retirement a guaranteed total retirement benefit based
on a percentage of the executive's final average compensation. For purposes of
this additional benefit, final average compensation includes annual base salary,
annual bonuses, and other compensation awards as determined by the Compensation
Committee of U.S. Bancorp's Board of Directors. Eligibility for these additional
benefits is determined by the Compensation Committee based on individual
performance and level of responsibility.

         The
 additional benefits paid to executive officers are reduced by the
amount of the benefits payable under U.S. Bancorp's qualified defined benefit
pension plans and the replacement benefits payable under this non-qualified
retirement plan. The additional benefits will be calculated as an annuity
commencing at age 65. The additional benefits also are subject to offsets for
Social Security benefits.





<PAGE>
                                                                   EXHIBIT 10.11








                               FIRSTAR CORPORATION

                           DEFERRED COMPENSATION PLAN

               (AS AMENDED AND RESTATED THROUGH DECEMBER 1, 1999)



<PAGE>

                              FIRSTAR CORPORATION

                           DEFERRED COMPENSATION PLAN

               (as amended and restated through December 1, 1999)


         Effective as of December 1, 1999, FIRSTAR CORPORATION (the
"Corporation") amends and completely restates the Firstar Corporation Deferred
Compensation Plan (formerly the Star Banc Corporation Deferred Compensation Plan
which was originally established in 1987). This Plan is maintained for the
benefit of the eligible officers, employees and Directors of the Corporation and
its affiliates.

         Section 1. Administration. The Administrator of the Plan shall be the
Compensation Committee of the Board of Directors of the Corporation, or such
officer(s), Director(s), or other Committee of the Corporation as may be
designated from time to time by the Compensation Committee. The Plan
Administrator shall have full power to administer the Plan; and all
determinations and actions of the Plan Administrator shall be binding and
conclusive on all parties unless arbitrary or capricious.

         Section 2. Participation. Any Director of the Corporation, any Director
(to include Advisory Board Member) of
 an affiliate who is designated by the Plan
Administrator, and any officer or employee of the Corporation or an affiliate



                                       2

<PAGE>

who is designated by the Plan Administrator, shall be eligible to elect to
become a Participant in the Plan; except that at any time and for any period the
Plan Administrator may exclude any such individual from participating in this
Plan (other than with respect to amounts already credited or elected to be
credited to his Deferred Compensation Account). A participant shall become a
former Participant upon separation from service (or termination as a Director)
with the Corporation or the affiliate and receipt of the benefits to which he is
entitled under the terms of this Plan.

         Section 3. Shares Subject to Plan. The shares which may be distributed
in accordance with this Plan are shares of the Corporation's authorized and
issued common stock, $0.01 par value. The aggregate number of such shares which
may be so distributed shall not exceed Nine Million (9,000,000) shares;
provided, however, that in the event of any changes in the Corporation's common
shares resulting from stock splits, stock dividends, combinations or exchanges
of shares or other similar capital adjustments, proportionate adjustments shall
automatically be deemed to have been made in the number of common shares
available for distribution under this Plan.

         Section 4. Annual Election. On or before December 31 preceding each
calendar year for which this Plan is in effect, each eligible officer, employee
and Director may elect, in writing, to become a Participant and defer payment to
him 


                                       3

<PAGE>

of any percentage of annual salary, Director's fees or incentive compensation
payments from the Corporation or the affiliate that will be earned by him the in
the following calendar year (the "Service Year") (with respect to any Service
Year, the subsequent year is a "Accumulation Year"); provided, however, that the
minimum allowable deferral amount for any Participant for any year shall be
$1,000.00. Such election shall be irrevocable; and the deferred portion of the
salary, fees or incentive compensation payments will not be paid to the
Participant until the time or times prescribed in Section 11 below. At the time
of making any such election, the Participant may further elect, in accordance
with procedures adopted by the Plan Administrator, to have the amount of such
deferral used to purchase common shares of the Corporation (a "Share Election"),
to be deemed invested in selected mutual funds (a "Mutual Funds Election") or to
be deemed invested with interest ("Cash Portion"). The Corporation or the
affiliate shall give notice of any Share Election made by each Participant
annually to Firstar Bank, N.A. (hereafter the "Trustee") as Trustee under a
Grantor Trust with the Corporation (hereafter the "Grantor Trust") used to
facilitate tracking investments under this Plan.

         Section 5. Remission of Funds to the Trustee for Share Elections. At
such time and from time to time as a Participant who has made a Share Election
is paid compensation by the Corporation or the affiliate, it shall remit the
Share Election deferral amount in cash to the Trustee who shall hold such funds
and 


                                       4

<PAGE>

invest them in common shares of the Corporation in accordance with the Grantor
Trust. All such common shares acquired by the Trustee shall be so acquired at a
price equal to 100% of the fair market value of the Corporation's shares on the
date of acquisition as determined by the Trustee consistent with its fiduciary
duties.

         Section 6. Cash Portion Accounts. The amount deferred for a Service
Year which is to be credited to the "Cash Portion" of an individual Deferred
Compensation Account shall be established within the books and records of the
Corporation or the affiliate and reflect such amounts deferred by the
Participant under the Plan. "Interest" shall be credited thereto for the period
of the Service Year on and after the "Date of Deferral" (i.e., the date such
amounts would have been paid out for the deferral). "Interest" shall also be
credited to the Cash Portion of a Participant's Deferred Compensation Account
for each Accumulation Year on the Cash Portion amount in the account at the
beginning of such year. No transfers of funds to the Trustee shall be made with
respect to such Cash Portion. The Plan Administrator may cause such "interest"
additions to be made on a proportionate basis during the Year with respect to
the account of a Participant whose participation in the Plan is then
terminating. The annual rate of "interest" for Service Years and Accumulation
Years shall be the rate equal to one-quarter of one percent (1/4%) over the
average bond equivalent yield to maturity on one-year United States Treasury
Bills in effect for the first 


                                       5

<PAGE>

five business days in the November immediately preceding such Years (as
published in the Wall Street Journal), unless an alternate rate is set by the
Plan Administrator for such "interest" for that Year at least thirty days before
the beginning of the Year.

         Section 7. Mutual Funds Accounts. The amount deferred for a Service
Year which is to be credited to the "Mutual Funds" Portion of an individual
Deferred Compensation Account shall be established within the books and records
of the Corporation or the affiliate and reflect such amounts deferred by the
Participant under the Plan. The Plan Administrator shall designate one or more
mutual funds from the mutual fund families known as Firstar Stellar Funds,
Firstar Funds and/or Mercantile Funds (or their successors) as the investment
vehicle(s) that may be used to determine the growth or loss to be credited to
the Mutual Funds Portion of an individual's Deferred Compensation Account and
may change such designations from time to time. "Growth/Loss" shall be credited
thereto for the period of the Service Year on and after the "Date of Deferral"
(i.e., the date such amounts would have been paid out for the deferral), and for
subsequent Accumulation Years. No transfers for funds to the Trustee shall be
made with respect to such Mutual Funds Portion.

         Section 8. Dividends and Capital Changes on Share Election Accounts.
(a) Amounts equal to dividends which would be paid by the Corporation with


                                       6

<PAGE>

respect to its shares held in a Share Election Account (but which are not paid
because such shares are treated as Treasury shares) shall, unless the
Participant directs otherwise as provided in (b) below, be paid over to the
Trustee which shall use such "dividends" to purchase additional shares of the
Corporation's common stock in accordance with the Grantor Trust. Shares held in
a Share Election Account shall be appropriately adjusted for all stock
dividends, stock splits or other capital changes.

         (b) A Participant may direct that cash dividends on common shares of
the Corporation allocated to his Share Election Account should be credited to
the Mutual Funds Portion or the Cash Portion of his Deferred Compensation
Account, and may change such election from time to time. The Plan Administrator
shall establish appropriate procedures relating to the timing of elections, and
changes or revocations thereof under this subsection.

         Section 9. Election to Convert to or from Common Shares. The Plan
Administrator may establish procedures under the Plan permitting a Participant
(upon satisfying such age and other requirements set by the Plan Administrator)
to elect to convert the Cash and/or Mutual Funds Portions (or parts thereof) of
his Deferred Compensation Account to common shares of the Corporation, and/or to
convert shares held in a Share Election Account to the Mutual Funds Portion or
the Cash Portion. In the case of a transfer into a Share Election 


                                       7

<PAGE>

Account, the Corporation or the affiliate shall transfer to the Trustee the
appropriate amount of funds to purchase shares of the Corporation's common stock
in accordance with the Grantor Trust. In the case of a transfer out of a Share
Election Account, the Trustee may be directed to remit the proceeds of the sale
of such shares to the Corporation or the affiliate.

         Section 10. Election to Transfer Funds. The Plan Administrator shall
establish procedures under the Plan permitting a Participant (upon satisfying
such age and other requirements set by the Plan Administrator) to elect to
transfer deferrals within the Mutual Funds Portion and between the Mutual Funds
Portion and the Cash Portion of his Deferred Compensation Account.

         Section 11. Distributions. (a) A Participant shall receive payment of
the amounts (cash and/or shares) credited to his Deferred Compensation Account
following his termination of service with the Corporation or the affiliate (or
its Board of Directors) and his attainment of at least age 55 (early retirement
age); except that if the service of a Participant with the Corporation or the
affiliate (or its Board of Directors) terminates before his 55th birthday, and
if either the Participant elects (with or without the consent of the Plan
Administrator) to receive the lump sum payment described in this sentence or the
Plan Administrator, in its sole discretion, determines that such lump-sum
payment shall be made to the Participant with or without his consent, then
within thirty 



                                       8

<PAGE>

(30) days after such election or determination there shall be paid in a lump sum
to the Participant, in full satisfaction of his rights under the Plan, the
amount (combined Cash Portion, Mutual Funds Portion and Share Portion) credited
to his Deferred Compensation Account, minus all "interest," "growth/loss" and
"dividend" additions thereto for the one-year period immediately preceding the
date of such lump sum payment, provided, however, that the Plan Administrator in
its sole discretion may waive all or part of such penalty in such cases as it
deems appropriate.

         (b) Other than for the lump sum payment with penalty as described in
(a) above, or the hardship distribution permitted in (e) below, all payments
under this Plan shall be on account of the Participant's retirement, and the
form of payment shall be in lump sum (if consented to by the Participant), or
annual installments over five-year, ten-year, fifteen-year or twenty-year
periods, as determined by the Plan Administrator in its sole and absolute
discretion. If an installment method is selected, "interest," "growth/loss"
and/or "dividend" additions shall continue to be made to the unpaid portion of
the Participant's Deferred Compensation Account until such payment is completed.

         (c) Payments under this Plan shall be made in kind, consisting of the
shares of the Corporation's common stock to be distributed by the Trustee
(except that cash shall be distributed in lieu of fractional shares based upon
the 



                                       9

<PAGE>

fair market value of the Corporation's common stock on the date of
distribution), cash held by the Trustee pending investment and cash for the Cash
and/or Mutual Funds Portions in a Participant's Deferred Compensation Account.

         (d) In the event a Participant dies before his Deferred Compensation
Account has been fully distributed, any undistributed portion of his Deferred
Compensation Account shall be paid to the beneficiary and in the manner he has
designated under this Plan on a form provided by, and delivered to, the Plan
Administrator, or if such beneficiary has not been properly designated or for
any reason payment cannot be made to such beneficiary, then payment shall be
made to the person or persons entitled to remaining benefits or other death
benefits which are or would have been payable with respect to him under the
Firstar Employee's Pension Plan. The determination of the Plan Administrator as
to who is a proper payee of benefits hereunder shall be conclusive on all
persons claiming under or through any Participant.

         (e) In the event a Participant, a former Participant, or a beneficiary
of a deceased Participant demonstrates to the satisfaction of the Plan
Administrator the existence of a serious financial hardship, the Plan
Administrator, in its sole and absolute discretion, may direct an immediate
payment of deferred amounts to such individual, with appropriate adjustment
(without penalty) being made to 



                                       10

<PAGE>

the Participant's or former or deceased Participant's Deferred Compensation
Account. 

         (f) The corporation or the affiliate shall withhold from any payments
under this Plan the amount of any taxes required to be withheld under federal,
state or local law, and shall withhold from the Participant's non-deferred
compensation such payroll taxes as may be due at the time the deferred
compensation was earned.

         Section 12. No Assignment. To the extent permitted by law, none of the
benefits payable hereunder shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any
attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber or
charge shall be void; nor shall benefits be subject to the claims of creditors
or others, nor to legal process.

         Section 13. Amendment and Termination. The Corporation reserves the
right, through action of its Board of Directors, from time to time to amend,
supplement, or terminate this Plan in any manner it chooses, except that no
amendment, supplement, or termination without the consent of a Participant shall
affect the payment to him of any amount credited to his Deferred Compensation
Account (or elected by him to be so credited) prior to the time he is given
written notice by the Plan Administrator of the adoption of such 



                                       11

<PAGE>

amendment, supplement, or termination; and in the event the Plan is terminated,
amounts credited to Deferred Compensation Accounts under the Plan will be
distributed as provided in Section 11 until the last Participant has received
distribution in full.

         IN WITNESS WHEREOF, FIRSTAR CORPORATION has caused this instrument to
be executed this 1st day of December 1999.

ATTEST:                                     FIRSTAR CORPORATION

                                            By  /s/ Stephen E. Smith            
------------------------------------           ---------------------------------




                                       12


<PAGE>
                                                                   EXHIBIT 10.12



                          EXECUTIVE SEVERANCE AGREEMENT


This Executive Severance Agreement (the "Agreement"), made as of the ___ day of
_______,200_, between U.S. Bancorp , a Delaware corporation ("USB") and its
Subsidiaries (individually and collectively the "Company"), and _________ (the
"Executive").


                                   WITNESSETH:


WHEREAS, the Company considers the recruitment and maintenance of sound and
vital management to be essential to protecting and enhancing its best interests
and those of its shareholders; and

WHEREAS, the Company recognizes that it is in an industry where there is a
strong potential for a change in control and that the potential for a change in
control may make it difficult to hire and retain strong management personnel;
and

WHEREAS, the Company recognizes that the possibility of a change in control of
USB may exist and that, in the event negotiations are commenced to bring about
such a change in control, uncertainty and questions may arise among management
that could result in the distraction or departure of management personnel to the
detriment of the Company and the shareholders; and

WHEREAS, the Company has determined that appropriate steps should be taken to
reinforce and encourage the Executive's continued attention and
 dedication as an
executive officer to his or her assigned duties without distraction in the face
of potentially disruptive circumstances arising from the possibility of a change
in control of USB;

NOW THEREFORE, the Company and the Executive agree as follows:

         1. Definitions

The following words and terms used in this Agreement shall have the following
meanings:

         1.1 "Change in Control." For the purpose of this Agreement, a "Change
         in Control" shall mean:

         (a) The acquisition by any Person (as defined in Sections 13(d)(3) and
         14(d)2 of the Exchange Act) of beneficial ownership (within the meaning
         of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of
         either (I) the then outstanding shares of Common Stock (the
         "Outstanding Company Common Stock") or (II) the combined voting power
         of the then outstanding voting securities of the Company entitled to
         vote generally in the election of directors (the "Outstanding Company
         Voting Securities"); 



<PAGE>

         provided, however, that for purposes of this subsection (a), the
         following acquisitions shall not constitute a Change in Control: (1)
         any acquisition directly from the Company, (2) any acquisition by the
         Company, (3) any acquisition by a subsidiary of the Company or any
         employee benefit plan (or related trust) sponsored or maintained by the
         Company or a subsidiary of the Company (a "Company Entity") or (4) any
         acquisition by any corporation pursuant to a transaction which complies
         with clauses (1), (2) or (3) of this subsection (a); or

         (b) Individuals who, as of this date, constitute the Company's Board of
         Directors (the "Incumbent Board") cease for any reason to constitute at
         least a majority of the Board of Directors (except as a result of the
         death, retirement or disability of one or more members of the Incumbent
         Board); provided, however, that any individual becoming a director
         subsequent to the date of this Agreement whose election, or nomination
         for election by the Company's shareholders, was approved by a vote of
         at least a majority of the directors then comprising the Incumbent
         Board shall be considered as though such individual were a member of
         the Incumbent Board, but excluding, for this purpose, (I) any such
         individual whose initial assumption of office occurs as a result of an
         actual or threatened election contest with respect to the election or
         removal of directors or other actual or threatened solicitation of
         proxies or consents by or on behalf of a Person other than the
         Incumbent Board, (II) any director designated by or on behalf of a
         Person who has entered into an agreement with the Company (or which is
         contemplating entering into an agreement) to effect a Business
         Combination (as defined in Section 1.1 subsection (c)) with one or more
         entities that are not Company Entities or (III) any director who serves
         in connection with the act of the Board of Directors of increasing the
         number of directors and filling vacancies in connection with, or in
         contemplation of, any such Business Combination; or

         (c) Consummation of a reorganization, merger or consolidation or sale
         or other disposition of all or substantially all of the assets of the
         Company (a "Business Combination"), in each case, unless, following
         such Business Combination, (I) all or substantially all of the
         individuals and entities who were the beneficial owners, respectively,
         of the Outstanding Company Common Stock and Outstanding Company Voting
         Securities immediately prior to such Business Combination beneficially
         own, directly or indirectly, more than 50% of, respectively, the then
         outstanding shares of common stock or the combined voting power of the
         then outstanding voting securities entitled to vote generally in the
         election of directors, as the case may be, of the corporation resulting
         from such Business Combination (including, without limitation, a
         corporation which as a result of such transaction owns the Company or
         all or substantially all of the Company's assets either directly or
         through one or more subsidiaries) in substantially the same proportions
         as their ownership, immediately prior to such Business Combination of
         the Outstanding Company Common Stock and Outstanding Company Voting
         Securities, as the case may be, (II) no Person (excluding any Company
         Entity or such corporation resulting from such Business Combination)
         beneficially owns, directly or indirectly, 35% or more of,
         respectively, the then outstanding shares of common stock of the
         corporation resulting from such Business Combination or the combined
         voting power of the then outstanding voting securities of such
         corporation except to the extent 


                                      -2-

<PAGE>

         that such ownership existed prior to the Business Combination and (III)
         at least a majority of the members of the board of directors of the
         corporation resulting from such Business Combination were members of
         the Incumbent Board at the time of the execution of the initial
         agreement, or of the action of the Board of Directors, providing for
         such Business Combination; or

         (d) Approval by the shareholders of the Company of a complete
         liquidation or dissolution of the Company.

         1.2 "Cause" means conviction for the commission of a felony or removal
         from office by order of the Comptroller of the Currency, Federal
         Reserve Board, or other appropriate agency.

         1.3 "Date of Termination" means the date the Executive's employment is
         terminated under this Agreement whether by the Company or by the
         Executive.

         1.4 "Disability" means leaving active employment and qualifying for and
         receiving disability benefits under the Company's long-term disability
         programs as in effect from time to time.

         1.5 "Effective Date" means the first date after the date of this
         Agreement on which a Change in Control occurs.

         1.6 "Employment Agreement" means an employment agreement, if any,
         between the Company and the Executive.

         1.7 "Good Reason" means:

                  (a) A reduction by the Company in the Executive's base salary
                  as in effect immediately prior to the Change in Control or as
                  the same may be increased from time-to-time following the
                  Change in Control (unless such reduction is part of an
                  across-the-board uniformly applied reduction affecting all
                  senior executives of the Company); or

                  (b) A significant diminution in the Executive's position,
                  authority, duties or responsibilities as in effect immediately
                  prior to the Change of Control (excluding an isolated,
                  insubstantial or inadvertent action not taken in bad faith
                  that is remedied promptly by the Company after receiving
                  notice); provided, however, that a change of the individual to
                  whom the executive reports, in and of itself, would not
                  constitute diminution; and further provided, anything in this
                  Agreement to the contrary notwithstanding, if the Company's
                  Chief Executive Officer ("CEO") immediately prior to the
                  Change in Control remains CEO of the Company during the
                  Protected Period following the Change in Control, and if 50%
                  or more of the Company's Board of Directors during the
                  Protected Period following the Change in Control were members
                  of the Board of Directors 


                                      -3-


<PAGE>

                  immediately prior to the Change in Control, the Executive
                  shall not be able to terminate employment for Good Reason
                  based solely on the events described under this Section 1.7(b)
                  until at least one (1) year following the Change in Control
                  (although at such time a termination of employment by the
                  Executive for Good Reason under this Section 1.7(b) may be
                  based on events that occurred during the first year of the
                  Protected Period and any such events shall not be deemed to
                  have been agreed to or waived by the Executive); or

                  (c) A failure by the Company (I) to continue any cash bonus or
                  other incentive compensation plans in substantially the same
                  form and with the same opportunity levels as in effect
                  immediately prior to the Change in Control, or (II) to
                  continue the Executive as a participant in such plans on at
                  least the same basis as the Executive participated in
                  accordance with the plans immediately prior to the Change in
                  Control; or

                  (d) A requirement by the Company that the Executive relocate
                  from his/her personal place of residence immediately prior to
                  the Change in Control or, if the Executive is not required to
                  relocate, a change of the Executive's principal work location
                  from that immediately prior to the Change in Control which is
                  50 or more miles further away from his/her personal place of
                  residence (other than if the Company's CEO immediately prior
                  to the Change in Control remains CEO of the Company during the
                  Protected Period following the Change in Control, and if 50%
                  or more of the Company's Board of Directors during the
                  Protected Period following the Change in Control were members
                  of the Board of Directors immediately prior to the Change in
                  Control); or

                  (e) A significant reduction in the Executive's aggregate level
                  of coverage under the Company's welfare, retirement and other
                  employee benefit plans, as in effect immediately prior to the
                  Change in Control; or the Company's failure to provide the
                  Executive with the number of paid vacation days annually to
                  which he/she was entitled immediately prior to the Change in
                  Control; or

                  (f) An agreement between the Board of Directors of USB and the
                  Executive that employment should be terminated.

         For purposes of this Section 1.7, a reasonable and good faith
         determination of "Good Reason" made by the Executive shall be
         conclusive.

         1.8 "Protected Period" means the twenty-four (24) month period
         immediately following each and every Change in Control.

         1.9 "Termination Benefits" means those benefits described in Section 2
         of the Agreement.

         1.10 "Subsidiaries" means any and all companies at least fifty percent
         (50%) owned, directly or indirectly, by USB.



                                      -4-

<PAGE>

2. Benefits Upon Termination of Employment.

         2.1 General. If, during the Protected Period following each Change in
         Control, the Executive's employment is terminated either (i) by the
         Company (other than for Cause or Disability), or (ii) by the Executive
         for Good Reason, then the Executive (or his estate or personal
         representative), shall be entitled to the Termination Benefits provided
         in this Section 2.

         2.2 Base Salary and Bonus Through Date of Termination. The Company
         shall promptly pay the Executive his or her full base salary through
         the Date of Termination at the rate in effect at the time notice of
         termination is given. In addition, the Company shall promptly pay the
         amount of any bonus or incentive for the year in which the Date of
         Termination occurs (based on the target bonus for the Executive for the
         year) prorated to the Date of Termination (without application of any
         denial provisions based on unsatisfactory personal performance or any
         other reason). The Company shall also pay the Executive for any
         vacation earned but not taken with such payment being equal to the
         Executive's calculated daily base salary rate times the applicable days
         of such vacation.

         2.3 Severance Payment. The Company shall pay the Executive a severance
         payment equal to three (3) times the sum of: (a) the Executive's
         highest base salary, on an annualized basis, established by the Company
         during the last five years plus (b) the highest bonus earned by the
         Executive, with respect to any single year, over the last five (5)
         years. The severance payment shall be made in a lump-sum within thirty
         (30) days of the Date of Termination.

         2.4 Termination Which Does Not Require Payment Of Termination Benefits.
         No Termination Benefits need to be provided by the Company to the
         Executive under this Section 2 if the Executive's employment is
         terminated:

                           (a) By the Executive for any reason other than for
                           Good Reason;

                           (b) By the Company for Cause or Disability; or

                           (c) By death.


3. New Employment; Reduction of Termination Benefits.

The Termination Benefits provided under Section 2 shall not be treated as
damages, but rather shall be treated as severance compensation to which the
Executive is entitled. The Executive shall not be required to mitigate the
amount of any Termination Benefit provided under Section 2 by seeking other
employment or otherwise.



                                      -5-

<PAGE>

4. Certain Additional Payments by the Company.

         (a) Anything in this Agreement to the contrary notwithstanding, in the
         event it shall be determined that any payment or distribution by the
         Company to or for the benefit of the Executive (whether paid or payable
         or distributed or distributable pursuant to the terms of this Agreement
         or otherwise, but determined without regard to any additional payments
         required under this Section 4) (a "Payment") would be subject to the
         excise tax imposed by Section 4999 of the Internal Revenue Code of
         1986, as amended (the "Code"), or any interest or penalties are
         incurred by the Executive with respect to such excise tax (such excise
         tax, together with any such interest and penalties, are collectively
         referred to as the "Excise Tax"), then the Executive shall be entitled
         to receive an additional payment (a "Gross-Up Payment") in an amount
         such that after payment by the Executive of all taxes and any benefits
         that result from the deductibility by the Executive of such taxes
         (including, in each case, any interest or penalties imposed with
         respect to such taxes), including, without limitation, any income taxes
         (and any interest and penalties imposed on them) and Excise Tax imposed
         upon the Gross-Up Payment, the Executive retains an amount of the
         Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

         (b) Subject to the provisions of Section 4(c), all determinations
         required to be made under this Section 4, including whether and when a
         Gross-Up Payment is required and the amount of such Gross-Up Payment
         and the assumptions to be utilized in arriving at such determination,
         shall be made by the Company's independent accounting firm or such
         other certified nationally recognized public accounting firm as may be
         designated by the Company (the "Accounting Firm") which shall provide
         detailed supporting calculations both to the Company and the Executive
         within 15 business days of the receipt of notice from the Executive
         that there has been a Payment, or such earlier time as is requested by
         the Company. All fees and expenses of the Accounting Firm shall be
         borne solely by the Company. Any Gross-Up Payment, as determined
         pursuant to this Section 4, shall be paid by the Company to or for the
         benefit of the Executive within five days of the receipt of the
         Accounting Firm's determination. Any determination by the Accounting
         Firm shall be binding upon the Company and the Executive.
         Notwithstanding any other provision of this Section 4, the Company may
         withhold and pay over to the Internal Revenue Service, for the benefit
         of the Executive, all or any portion of the Gross-Up Payment that it
         determines in good faith it is required to withhold. Executive consents
         to such withholding. As a result of the uncertainty in the application
         of Section 4999 of the Code at the time of the initial determination by
         the Accounting Firm hereunder, it is possible that Gross-Up Payments
         which will not have been made by the Company should have been made
         ("Underpayment"), consistent with the calculations required to be made.
         In the event that the Company exhausts its remedies pursuant to Section
         4(c) and the Executive is required to make a payment of any Excise Tax,
         the Accounting Firm shall determine the amount of the Underpayment that
         has occurred and any such Underpayment shall be promptly paid by the
         Company to or for the benefit of the Executive.



                                      -6-

<PAGE>

         (c) The Executive shall notify the Company in writing of any claim by
         the Internal Revenue Service that, if successful, would require the
         payment by the Company of the Gross-Up Payment. Such notification shall
         be given as soon as practicable but no later than ten business days
         after the Executive is informed in writing of such claim and shall
         apprise the Company of the nature of such claim and the date on which
         such claim is requested to be paid. The Executive shall not pay such
         claim prior to the expiration of the 30-day period following the date
         on which it gives such notice to the Company (or such shorter period
         ending on the date that any payment of taxes with respect to such claim
         is due). If the Company notifies the Executive in writing prior to the
         expiration of such period that it desires to contest such claim, the
         Executive shall:

                  (i) give the Company any information reasonably requested by
                  the Company relating to such claim,

                  (ii) take such action in connection with contesting such claim
                  as the Company shall reasonably request in writing from time
                  to time, including, without limitation, accepting legal
                  representation with respect to such claim by an attorney
                  reasonably selected by the Company,

                  (iii) cooperate with the Company in good faith in order
                  effectively to contest such claim, and

                  (iv) permit the Company to participate in any proceedings
                  relating to such claim;

         provided, however, that the Company shall bear and pay directly all
         costs and expenses (including additional interest and penalties)
         incurred in connection with such contest and shall indemnify and hold
         the Executive harmless, on an after-tax basis, for any Excise Tax or
         income tax (including interest and penalties with respect thereto)
         imposed as a result of such representation and payment of costs and
         expenses. Without limitation on the foregoing provisions of this
         Section 4(c), the Company shall control all proceedings taken in
         connection with such contest and, at its sole option, may pursue or
         forgo any and all administrative appeals, proceedings, hearings and
         conferences with the taxing authority in respect of such claim and may,
         at its sole option, either direct the Executive to pay the tax claimed
         and sue for a refund or contest the claim in any permissible manner,
         and the Executive agrees to prosecute such contest to a determination
         before administrative tribunal, in a court of initial jurisdiction and
         in one or more appellate courts, as the Company shall determine;
         provided, however, that if the Company directs the Executive to pay
         such claim and sue for a refund, the Company shall advance the amount
         of such payment to the Executive, on an interest-free basis and shall
         indemnify and hold the Executive harmless, on an after-tax basis, from
         any Excise Tax or income tax (including interest or penalties with
         respect thereto) imposed with respect to such advance or with respect
         to any imputed income with respect to such advance; and further
         provided that any extension of the statute of limitations relating to
         payment of taxes for the taxable year of the Executive with respect to
         which such contested amount is claimed to be due is limited solely to
         such contested amount. Furthermore, the Company's control 



                                      -7-

<PAGE>

         of the contest shall be limited to issues with respect to which a
         Gross-Up Payment would be payable hereunder and the Executive shall be
         entitled to settle or contest, as the case may be, any other issue
         raised by the Internal Revenue Service or any other taxing authority.

         (d) If, after the receipt by the Executive of an amount advanced by the
         Company pursuant to Section 4(a) or 4(c), the Executive becomes
         entitled to receive any refund with respect to such claim, the
         Executive shall (subject to the Company's complying with the
         requirements of Section 4(c)) promptly pay to the Company the amount of
         such refund (together with any interest paid or credited thereon after
         taxes applicable thereto). If, after the receipt by the Executive of an
         amount advanced by the Company pursuant to Section 4(c), a
         determination is made that the Executive shall not be entitled to any
         refund with respect to such claim and the Company does not notify the
         Executive in writing of its intent to contest such denial of refund
         prior to the expiration of 30 days after such determination, then such
         advance shall be forgiven and shall not be required to be repaid and
         the amount of such advance shall offset the amount of Gross-Up Payment
         required to be paid.


5. Notice of Termination.

Any purported termination by the Company of the Executive's employment for Cause
or Disability or by the Executive for Good Reason shall be communicated by
notice of termination to the other party. A notice of termination shall include
the specific reason for termination relied upon and shall set forth in
reasonable detail, the facts and circumstances claimed to provide a basis for
termination of employment.

Any dispute by a party hereto regarding a notice of termination delivered to
such party must be conveyed to the other party within thirty (30) days after the
notice of termination is given. If the particulars of the dispute are not
conveyed within the thirty (30) day period, then the disputing party's claims
regarding the termination shall be deemed forever waived.


6. Successor; Binding Agreement.

USB will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of USB expressly to assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to perform
it if no such succession had taken place (the assumption shall be by agreement
in form and substance satisfactory to the Executive). Failure of USB to obtain
such agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the Executive, at his election, to
Termination Benefits from the Company in the same amount and on the same terms
as the Executive would be entitled to if he terminated his employment for Good
Reason, except that for purposes of implementing the foregoing, the date on
which any such election becomes effective shall be deemed the Date of
Termination. As used 


                                      -8-

<PAGE>

in this Agreement, "Company" shall mean the Company and any successor to its
business and/or assets as described above or which otherwise becomes bound by
all the terms and provision of this Agreement by operation of law.

In addition, as used in this Agreement, "USB" shall mean USB and any successor
to its business and/or assets as described above or which otherwise becomes
bound by all the terms and provision of this Agreement by operation of law.

This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amount would still be payable to him hereunder if he had continued
to live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to his designee or, if there is no
such designee, to his estate.

7. Miscellaneous.

         7.1 Notice. All notices, elections, waivers and all other
         communications provided for in this Agreement shall be in writing and
         shall be deemed to have been duly given when delivered or mailed by
         United States certified mail, return receipt requested, postage
         prepaid, to such address as either party may have furnished to the
         other in writing in accordance herewith, except that notices of change
         of address shall be effective only upon receipt.

         7.2 No Waiver. No provision of this Agreement may be modified, waived
         or discharged unless such waiver, modification or discharge is agreed
         to in writing signed by the Executive and the Chief Executive Officer
         of the Company. No waiver by either party at any time of any breach by
         the other party of, or compliance with, any condition or provision of
         this Agreement to be performed by such other party shall be deemed a
         waiver of similar or dissimilar provisions or conditions at the same or
         at any prior or subsequent time. No agreements or representations, oral
         or otherwise, express or implied, with respect to the subject matter
         hereof have been made by either party which are not set forth expressly
         in this Agreement.

         7.3 Indemnification. If litigation shall be brought to enforce or
         interpret any provision in this Agreement, the Company agrees to
         indemnify the Executive for his attorney's fees and disbursement
         incurred in such litigation, and agrees to pay prejudgment interest on
         any money judgment obtained by the Executive, calculated at the prime
         interest rate announced as such by the Wall Street Journal from
         time-to-time, from the earliest date that payment(s) to him should have
         been made under this Agreement. If the Wall Street Journal announces
         two or more rates as the prime rate, then the highest rate shall be
         used.

         7.4 Payment Obligations Absolute. The Company's obligation to pay the
         Executive the compensation and to make the arrangements provided shall
         be absolute and unconditional and shall not be affected by any
         circumstances, including, without limitation, any set-off,


                                      -9-

<PAGE>

         counterclaim, recoupment, defense or other right which the Company may
         have against the Executive or any third party. All amounts payable by
         the Company shall be paid without notice or demand. Each and every
         payment made by the Company shall be final and the Company will not
         seek, nor permit its subsidiaries, affiliates, successors or assigns to
         seek, to recover all or any part of such payment for any reason.

         7.5 Term of Agreement. The term of this Agreement shall continue for an
         initial period of three (3) years from the date of this Agreement. On
         each anniversary of this Agreement, the term shall be extended for an
         additional year unless prior to an anniversary date USB's Board of
         Directors cause a notice of nonrenewal to be sent to the Executive. Any
         Termination Benefits due pursuant to this Agreement shall continue to
         be an obligation of the Company and enforceable by the Executive until
         paid in full.

         7.6 Controlling Law. This Agreement shall be governed by and construed
         in accordance with the laws of the State of Minnesota.

         7.7 Interpretation of Agreement. In the event of any ambiguity,
         vagueness or other matter involving the interpretation or meaning of
         this Agreement, this Agreement shall be construed liberally so as to
         provide to the Executive the full benefits described in this Agreement.

         7.8 Severability. Each section, subsection or paragraph of this
         Agreement shall be deemed severable and if for any reason any portion
         of this Agreement is unenforceable, invalid or contrary to any existing
         or future law, such unenforceability or invalidity shall not affect the
         applicability or validity of any other portion of this Agreement.

         7.9 U.S. Dollars. All payments required to be made under this Agreement
         shall be made in United States Dollars.

         7.10 Employment Agreement. Any benefits provided to the Executive under
         this Agreement will, unless specifically stated otherwise in this
         Agreement, be in addition to and not in lieu of any benefits that may
         be provided the Executive under an Employment Agreement, if any, with
         the Company.

         Nothing in this Agreement is to be deemed to give the Company the right
         to take any action or engage in any omission with respect to the
         Executive at any time when any such action or omission is not
         permissible and proper under any Employment Agreement if then in force.
         Similarly, except as provided otherwise in this Agreement, nothing in
         this Agreement is to be deemed to give the Executive the right to take
         any action or engage in any omission with respect to the Company at any
         time when any such act or omission is not permissible and proper under
         any Employment Agreement if then in force.

         This Agreement shall continue in force so long as the Executive remains
         employed by the Company and shall not be affected by any termination of
         any Employment Agreement.




                                      -10-

<PAGE>

         7.11 Title and Captions. All section, subsection or paragraph titles or
captions contained in this Agreement are for convenience only and shall not be
deemed part of the text of this Agreement.


IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.

U.S. BANCORP, on
behalf of itself and each Subsidiary



_________________________________________
Stephen E. Smith
Executive Vice President - Human Resources

EXECUTIVE:

_________________________________________
Name





_________________________________________
Attest: By:









                                      -11-


<PAGE>
                                                                   EXHIBIT 10.13

                              EMPLOYMENT AGREEMENT

         AGREEMENT by and between U.S. Bancorp, a Delaware corporation (the
"Company") and Jerry A. Grundhofer (the "Executive"), is effective as of October
16, 2001.

         1. Certain Definitions. The "Effective Date" shall mean the first date
after the date hereof on which a Change of Control (as defined in Section 2)
occurs. Anything in this Agreement to the contrary notwithstanding, if a Change
of Control occurs and if the Executive's employment with the Company is
terminated prior to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of employment (i)
was at the request of a third party who has taken steps reasonably calculated to
effect a Change of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control, then for all purposes of this Agreement the
"Effective Date" shall mean the date immediately prior to the date of such
termination of employment.

         2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:

                  (a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")
 (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or
more of either (i) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or

                  (b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or

                  (c) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more 




<PAGE>

than 50% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 35% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or

                  (d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.

         3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the date hereof and ending on December 31, 2006 (the
"Employment Period").

         4. Terms of Employment.

                  (a) Position and Duties. (i) During the Employment Period, the
         Executive shall be President and Chief Executive Officer of the Company
         and, in such capacity, the Executive shall be responsible for the
         strategic direction and operations of the Company, and shall serve on
         the Company's Board of Directors and shall have such other duties,
         responsibilities and authorities as shall be consistent therewith. The
         Executive shall also be Chairman, President and Chief Executive Officer
         of U.S. Bank, N.A. and shall serve on its Board of Directors. In
         addition to the above, the Executive shall be elected Chairman of the
         Board of Directors of the Company effective upon the earlier of the
         retirement of the current Chairman or December 31, 2002.

                           (ii) During the Employment Period, and excluding any
         periods of vacation and sick leave to which the Executive is entitled,
         the Executive agrees to devote full attention and time during normal
         business hours to the business and affairs of the Company and to use
         the Executive's reasonable best efforts to perform faithfully and
         efficiently such responsibilities. During the Employment Period it
         shall not be a violation of this Agreement for the Executive to (A)
         serve on corporate, civic or charitable boards or committees, (B)
         deliver lectures, fulfill speaking engagements or teach at educational
         institutions and (C) manage personal investments, so long as such
         activities do not significantly interfere with the performance of the
         Executive's responsibilities as an employee of the Company in
         accordance with this Agreement. It is expressly understood 


                                       2

<PAGE>

         and agreed that to the extent that any such activities have been
         conducted by the Executive prior to the Effective Date, the continued
         conduct of such activities (or the conduct of activities similar in
         nature and scope thereto) subsequent to the Effective Date shall not
         thereafter be deemed to interfere with the performance of the
         Executive's responsibilities to the Company.

                  (b) Compensation. (i) Base Salary. During the Employment
         Period, the Executive shall receive an annual base salary ("Annual Base
         Salary") of $975,000 until adjusted following any review of the Annual
         Base Salary as hereinafter provided. The Annual Base Salary shall be
         paid in equal semi-monthly installments. During the Employment Period,
         the Annual Base Salary shall be reviewed by the Compensation Committee
         of the Company's Board of Directors (the "Committee") at least every 12
         months. Any increase in Annual Base Salary shall not serve to limit or
         reduce any other obligation to the Executive under this Agreement.
         Annual Base Salary shall not be reduced below $975,000 or after any
         such increase, and the term Annual Base Salary as utilized in this
         Agreement shall refer to Annual Base Salary as so increased.

                           (ii) Annual Bonus. In addition to Annual Base Salary,
         the Executive shall be awarded, for each fiscal year ending during the
         Employment Period, an annual bonus (the "Annual Bonus") pursuant to the
         U.S. Bancorp Executive Incentive Plan (or successor to such plan), pro
         rated in the case of a bonus for any year during which the Executive
         was employed for less than 12 months; provided, however, after the
         Effective Date, the Annual Bonus shall be no less than 175% of the
         Executive's Annual Base Salary ("Minimum Bonus"). Each such Annual
         Bonus shall be paid no later than the end of the third month of the
         fiscal year next following the fiscal year for which the Annual Bonus
         is awarded, unless the Executive shall elect to defer the receipt of
         such Annual Bonus. For each fiscal year during the Employment Period,
         the Executive's target bonus opportunity for achieving target
         performance levels with respect to corporate and individual objectives
         established by the Committee under the Company's then-applicable annual
         incentive plan shall be at least 175% of his then-current Annual Base
         Salary. During the Employment Period, the target Annual Bonus levels
         shall be reviewed at least every 12 months. Any increase in such level
         shall not serve to limit or reduce any other obligation to the
         Executive under this Agreement, and the target Annual Bonus levels
         shall not be lowered after any such increase and shall not be less than
         175% of the Executive's Annual Base Salary.

                           (iii) Restricted Stock Units. On or before January 2,
         2002, the Company shall grant the Executive an award of restricted
         stock units pursuant to the U.S. Bancorp 2001 Stock Incentive Plan
         ("Stock Plan") corresponding to such number of shares of common stock
         of the Company (the "Restricted Stock Units") as equals the quotient of
         (x) $5,600,000 divided by (y) the average New York Stock Exchange
         closing price of common stock of the Company during the sixty (60)
         trading day period ending on the day prior to such award date. To the
         extent that dividends are paid on common stock of the Company after the
         effective date of this Agreement (as first set forth above) and prior
         to the Distribution Date, the Executive shall be entitled to receive
         additional Restricted Stock Units on each dividend payment date of the
         Company (including any dividend declared prior to the Distribution Date
         and payable after such date, which shall be deemed paid on the
         Distribution Date) having a fair market value (based on the 




                                       3


<PAGE>

         closing price of the Company's common stock on such payment date) equal
         to the amount of dividends paid on common stock of the Company
         represented by the Restricted Stock Units, which additional Restricted
         Stock Units shall vest on the same basis as the award of Restricted
         Stock Units above. Such award shall vest on December 31, 2006, provided
         that the Executive is still employed by the Company on such date, and
         once vested shall be distributable in common stock of the Company on
         January 15 (the "Distribution Date") of the calendar year following the
         calendar year in which the Executive's employment with the Company and
         all affiliates shall terminate. The foregoing provisions of this
         Section 4(b)(iii) to the contrary notwithstanding, the Executive shall
         be allowed to elect, in writing, delivered to the Committee no later
         than the October 1 immediately preceding the Distribution Date, to
         surrender all or fewer than all of the Restricted Stock Units, if
         vested, effective on the Distribution Date in exchange for an
         additional benefit under the NQRP (as defined in Section 4(b)(v) below)
         commencing at age 62 (or earlier on an actuarially reduced basis to the
         extent so provided under the NQRP). The present value of such
         additional benefit on the Distribution Date shall be equal to the
         greater of (1) the product of (A) the number of Restricted Stock Units
         surrendered, multiplied by (B) the average closing price of the
         Company's common stock over the thirty (30) trading day period
         immediately preceding the Distribution Date or (2) such product
         determined by substituting the average closing price of the Company's
         common stock over the thirty (30) trading day period immediately
         preceding such October 1 (such greater product is the "Conversion
         Value"). The Conversion Value shall be converted to the normal form of
         annuity under the NQRP, using actuarial assumptions based on the FAS 87
         interest rate and mortality assumptions in effect on such October 1,
         and the annuity so converted from the Conversion Value shall be added
         to any benefit payable to the Executive under the NQRP (as further
         provided at Section 4(b)(v) below) at retirement.

                           (iv) Long-Term Incentive Plans. The Executive shall
         be eligible to participate throughout the Employment Period in such
         long-term incentive plans and programs of the Company ("Long Term
         Incentive Programs") as may be in effect from time to time. The
         Executive's level of incentive opportunity in such Long Term Incentive
         Programs shall be established by the Committee annually and shall be at
         a level and on terms and conditions consistent with participation by
         other peer executives of the Company.

                           (v) Incentive, Savings and Retirement Plans.

                                    A. During the Employment Period, the
         Executive shall be eligible to participate in all incentive, savings
         and retirement plans, practices, policies and programs applicable
         generally to other peer executives of the Company and its affiliated
         companies. The Executive shall participate in, and shall be fully
         vested in his benefit under the Firstar Corporation Non-Qualified
         Retirement Plan (or successor to such plan, the "NQRP") under which the
         Executive shall be given service credit for his service with Firstar
         Corporation, BankAmerica Corporation, Security Pacific Corporation and
         Wells Fargo N.A. (together, the "Prior Employers"), provided that the
         Company's obligation under the NQRP shall be offset by all other
         pension benefits of the Company to which the Executive may be or may
         become entitled (other than the additional benefit 



                                       4


<PAGE>

         provided at Section 4(b)(iii) above) and all pension benefits to which
         the Executive is entitled from the Prior Employers (including, but not
         limited to, Firstar Corporation's noncontributory defined benefit
         pension plan); provided further that after the Effective Date in no
         event shall such plans, practices, policies and programs provide the
         Executive with incentive opportunities (measured with respect to both
         regular and special incentive opportunities, to the extent, if any,
         that such distinction is applicable), savings opportunities and
         retirement benefit opportunities, in each case, less favorable, in the
         aggregate, than the most favorable of those provided by the Company and
         its affiliated companies for the Executive under such plans, practices,
         policies and programs as in effect at any time during the 120-day
         period immediately preceding the Effective Date or, if more favorable
         to the Executive, those provided generally at any time after the
         Effective Date to other peer executives of the Company and its
         affiliated companies, after taking into account the difference in age
         between the Executive and the peer executives.

                                    B. The provisions of the NQRP to the
         contrary notwithstanding, the Executive's benefit under the NQRP shall
         take into account the following:

                                             a. The formula for determining the
                  Executive's supplemental benefit under Appendix B-3 of the
                  NQRP shall be modified by adding one-twelfth of the Grant Date
                  Value to each month of the calendar year immediately preceding
                  the Distribution Date for the purpose of determining
                  Executive's Monthly Earnings thereunder, provided that the
                  Executive remains continuously employed by the Company through
                  December 31, 2006 unless the termination of the Executive's
                  employment prior to December 31, 2006 is by the Company
                  without Cause or due to the Executive's Disability or is by
                  the Executive for Good Reason or due to his death. The "Grant
                  Date Value" shall be $5,600,000;

                                             b. For purposes of determining the
                  Executive's supplemental pension benefit under the NQRP, the
                  amount of the Annual Bonus used in computing his Final Average
                  Monthly Earnings under such plan shall be the greater of (i)
                  the average during the applicable five year period of 175% of
                  the Executive's Annual Base Salary, or (ii) the average Annual
                  Bonus actually earned by the Executive during the applicable
                  five year period; provided that, if the Executive shall
                  terminate employment with the Company prior to December 31,
                  2006 for any reason, other than (1) a termination by the
                  Company without Cause, (2) due to his Disability, (3) a
                  termination by the Executive for Good Reason or (4) due to his
                  death, then the amount determined under clause (i) shall be
                  the average during the applicable five year period of 175% of
                  the Executive's Annual Base Salary per year for the calendar
                  years commencing 2002 through the date of such termination and
                  100% of the Executive's Annual Base Salary per year for
                  calendar years prior to 2002; and

 


                                       5


<PAGE>

                                            c. In the event that the Executive
                  receives severance benefits pursuant to Section 6(a)(i)(C),
                  the Executive shall not be entitled to commence his receipt of
                  any supplemental pension benefit hereunder until after the
                  expiration of the Severance Period (as defined in Section
                  6(a)(i)(C)) and determined without regard for any payment of
                  such severance in a lump sum; provided, that if such Severance
                  Period shall expire prior to the date that the Executive
                  attains age 62, then, the third sentence of Section 4(b)(iii)
                  to the contrary notwithstanding, such supplemental pension
                  benefit may begin immediately following the last day of such
                  Severance Period without the actuarial reduction otherwise
                  applicable under the NQRP for the commencement of such benefit
                  prior to age 62.

                  (vi) Welfare Benefit Plans. During the Employment Period, the
         Executive and/or the Executive's family, as the case may be, shall be
         eligible for participation in and shall receive all benefits under
         welfare benefit plans, practices, policies and programs provided by the
         Company and its affiliated companies including, without limitation,
         medical, prescription, dental, disability, salary continuance, employee
         life, group life, accidental death and travel accident insurance plans
         and programs) to the extent applicable generally to other peer
         executives of the Company and its affiliated companies, provided that
         after the Effective Date in no event shall such plans, practices,
         policies and programs provide the Executive with benefits which are
         less favorable, in the aggregate, than the most favorable of such
         plans, practices, policies and programs in effect for the Executive at
         any time during the 120-day period immediately preceding the Effective
         Date or, if more favorable to the Executive, those provided generally
         at any time after the Effective Date to other peer executives of the
         Company and its affiliated companies. For purposes of determining
         eligibility for retiree medical benefits provided by the Company, the
         Executive shall be treated as though he is at least age 55 and has at
         least 10 years of service with the Company.

                  (vii) Expenses. During the Employment Period, the Executive
         shall be entitled to receive prompt reimbursement for all reasonable
         business expenses incurred by the Executive.

                  (viii) Fringe Benefits. During the Employment Period, the
         Executive shall be entitled to fringe benefits, including, without
         limitation, tax and financial planning services, payment of club dues,
         and a monthly car allowance of $1,000, net to the Executive after
         giving effect to (x) all income taxes payable by Executive that are
         attributable to such allowance, and (y) any benefits that result from
         the deductibility by the Executive of any such taxes.

                  (ix) Vacation. During the Employment Period, the Executive
         shall be entitled to four weeks of paid vacation annually.

         5. Termination of Employment.

         (a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company 


                                       6


<PAGE>

determines in good faith that the Disability of the Executive has occurred
during the Employment Period (pursuant to the definition of Disability set forth
below), it may give to the Executive written notice in accordance with Section
12(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.

                  (b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:

                           (i) the willful and continued failure of the
         Executive to perform substantially the Executive's duties with the
         Company or one of its affiliates (other than any such failure resulting
         from incapacity due to physical or mental illness), after a written
         demand for substantial performance is delivered to the Executive by the
         Board which specifically identifies the manner in which the Board
         believes that the Executive has not substantially performed the
         Executive's duties, or

                           (ii) the willful engaging by the Executive in illegal
         conduct or gross misconduct which is materially and demonstrably
         injurious to the Company.

         For purposes of this provision, no act or failure to act, on the part
of the Executive, shall be considered "willful" unless it is done, or omitted to
be done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company. The cessation of employment
of the Executive shall not be deemed to be for Cause unless and until there
shall have been delivered to the Executive a copy of a resolution duly adopted
by the affirmative vote of a majority of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after reasonable notice
is provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the particulars thereof in
detail.

                  (c) Good Reason. The Executive's employment may be terminated
by the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean:

                           (i) the assignment to the Executive of any duties
         inconsistent with the Executive's position (including status, offices,
         titles and reporting requirements), authority, duties or
         responsibilities as contemplated by Section 4(a) of this Agreement, or
         any other action by the Company which results in a diminution in such
         position, 




                                       7


<PAGE>

         authority, duties or responsibilities; provided, however, that (subject
         to the election of the Executive as Chairman as provided at Section
         4(a)(i) hereof) any change in the Executive's position (including
         status, duties and titles), authority, duties or responsibilities, in
         accordance with normal succession planning by the Company's Board of
         Directors shall not constitute Good Reason if made with the Executive's
         consent;

                           (ii) any failure by the Company to comply with any of
         the provisions of Section 4(b) of this Agreement;

                           (iii) the Company's requiring the Executive to be
         based at any office or location after the Effective Date other than
         where the Executive was located immediately prior to the Effective Date
         other than in connection with a change of the Company's headquarters if
         the Executive is relocated to such headquarters, or, after the
         Effective Date, the Company's requiring the Executive to travel on
         Company business to a substantially greater extent than required
         immediately prior to the Effective Date;

                           (iv) any purported termination by the Company of the
         Executive's employment otherwise than as expressly permitted by this
         Agreement; or

                           (v) any failure by the Company to comply with and
         satisfy Section 11(c) of this Agreement.

         Notwithstanding the above, "Good Reason" shall exclude an isolated,
insubstantial and inadvertent action or failure to act not taken or occurring in
bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive.

         For purposes of this Section 5(c), any good faith determination of
"Good Reason" made by the Executive shall be conclusive.

                  (d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.

                  (e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or 



                                       8

<PAGE>

Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.

         6. Obligations of the Company upon Termination. (a) Good Reason; Other
Than for Cause, Death or Disability. If, during the Employment Period or on or
after the Effective Date, the Company shall terminate the Executive's employment
other than for Cause or Disability or the Executive shall terminate employment
for Good Reason:

                  (i) the Company shall pay to the Executive in a lump sum in
         cash within 30 days after the Date of Termination the aggregate of the
         following amounts:

                           A. the sum of (1) the Executive's Annual Base Salary
                  through the Date of Termination to the extent not theretofore
                  paid, (2) the product of (x) the higher of (I) the Minimum
                  Bonus and (II) the Annual Bonus paid or payable, including any
                  bonus or portion thereof which has been earned but deferred
                  (and annualized for any fiscal year consisting of less than
                  twelve full months or during which the Executive was employed
                  for less than twelve full months), for the most recently
                  completed fiscal year during the Employment Period, if any
                  (such higher amount being referred to as the "Highest Annual
                  Bonus") and (y) a fraction, the numerator of which is the
                  number of days in the current fiscal year through the Date of
                  Termination, and the denominator of which is 365 and (3) any
                  compensation previously deferred by the Executive (together
                  with any accrued interest or earnings thereon) and any accrued
                  vacation pay, in each case to the extent not theretofore paid
                  (the sum of the amounts described in clauses (1), (2), and (3)
                  shall be hereinafter referred to as the "Accrued
                  Obligations");

                           B. if the Date of Termination is on or after the
                  Effective Date, an amount equal to the difference between (a)
                  the actuarial equivalent of the benefit (utilizing actuarial
                  assumptions no less favorable to the Executive than those in
                  effect under the Company's qualified defined benefit
                  retirement plan (the "Retirement Plan") immediately prior to
                  the Effective Date) under the Retirement Plan and NQRP
                  combined which the Executive would receive if the Executive's
                  employment continued for three years after the Date of
                  Termination assuming for this purpose that all accrued
                  benefits are fully vested, and, assuming that the Executive's
                  compensation in each of the three years is that required by
                  Section 4(b)(i) and Section 4(b)(ii), and (b) the actuarial
                  equivalent of the Executive's actual benefit (paid or
                  payable), if any, under the Retirement Plan and the NQRP
                  combined as of the Date of Termination; and

                           C. an amount equal to the product of (a) 1/12,
                  multiplied by (b) the sum of (1) the Executive's Annual Base
                  Salary and (2) the Highest Annual Bonus, multiplied by (c) the
                  number of months remaining in the Employment Period (including
                  fractions thereof) but not more than thirty-six (36) months
                  ("Severance Period");




                                       9

<PAGE>

                           (ii) all stock options, restricted stock and other
         stock-based compensation (including, without limitation, the Restricted
         Stock Units) shall become immediately exercisable or vested, as the
         case may be;

                           (iii) for the number of months (including fractions
         thereof) remaining in the Employment Period, after the Executive's Date
         of Termination, or such longer period as may be provided by the terms
         of the appropriate plan, program, practice or policy, the Company shall
         continue benefits to the Executive and/or the Executive's family at
         least equal to those which would have been provided to them in
         accordance with the plans, programs, practices and policies described
         in Section 4(b)(vi) of this Agreement if the Executive's employment had
         not been terminated or, if more favorable to the Executive, as in
         effect generally at any time thereafter with respect to other peer
         executives of the Company and its affiliated companies and their
         families; provided, however, that if the Executive becomes reemployed
         with another employer and is eligible to receive medical or other
         welfare benefits under another employer provided plan, the medical and
         other welfare benefits described herein shall be secondary to those
         provided under such other plan during such applicable period of
         eligibility. For purposes of determining eligibility (but not the time
         of commencement of benefits) of the Executive for retiree benefits
         pursuant to such plans, practices, programs and policies, the Executive
         shall be considered to have remained employed until the last day of the
         Employment Period and to have retired on the last day of the Employment
         Period;

                           (iv) the Company shall, at its sole expense as
         incurred, provide the Executive with outplacement services the scope
         and provider of which shall be selected by the Executive in his sole
         discretion; and

                           (v) to the extent not theretofore paid or provided,
         the Company shall timely pay or provide to the Executive any other
         amounts or benefits required to be paid or provided or which the
         Executive is entitled to receive under any plan, program, policy or
         practice or contract or agreement of the Company and its affiliated
         companies (such other amounts and benefits shall be hereinafter
         referred to as the "Other Benefits").

                  (b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination. In
addition, the Restricted Stock Units shall become immediately vested and the
Executive's beneficiary under the NQRP shall have all rights of Executive to
surrender Restricted Stock Units for an additional benefit under the NQRP as set
forth at Section 4(b)(iii) hereof; provided, the thirtieth (30th) day after
Executive's death shall be substituted for "October 1" thereunder and the
"Distribution Date" shall be the ninetieth (90th) day after Executive's death.
With respect to the provision of Other Benefits after the Effective Date, the
term Other Benefits as utilized in this Section 6(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits provided by the
Company and affiliated companies to the estates and beneficiaries of peer
executives of the Company and such affiliated companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect 

                                       10



<PAGE>

with respect to other peer executives and their beneficiaries at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the Executive's beneficiaries, as in
effect on the date of the Executive's death with respect to other peer
executives of the Company and its affiliated companies and their beneficiaries.

                  (c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination. In addition, the Restricted
Stock Units shall become immediately vested. On the Disability Effective Date,
the Executive shall be deemed to have retired (as a Normal Retirement if
occurring on or after his Normal Retirement Date or as an Early Retirement if
occurring on or after his Early Retirement Date and prior to his Normal
Retirement Date, as the case may be (as such terms apply under the NQRP)) for
all purposes under the NQRP and the provision of any additional supplemental
retirement benefits under this Agreement; provided, (x) such benefits, other
than any additional benefits set forth at Section 4(b)(iii) hereof, shall be
reduced by any benefit payable to Executive from workers compensation, any
long-term disability plan sponsored by the Company and any other disability
benefit provided to Executive under this Agreement, and (y) if the Executive
recovers from his Disability prior to his Normal Retirement Date all such
benefits under the NQRP and under this Agreement, other than any additional
benefits set forth at Section 4(b)(iii) hereof, shall cease and shall thereafter
recommence in accordance with the applicable provisions of the NQRP (including,
without limitation, recommencement of such benefits upon Executive's early
retirement thereunder), except that the amount of such benefit shall be the
greater of the amount payable to Executive on the Disability Effective Date
under such form of benefit as may be elected by the Executive on the Disability
Effective Date (without regard for any reduction hereunder for workers
compensation and disability benefits) or the amount payable under such form of
benefit at such subsequent retirement date. With respect to the provision of
Other Benefits after the Effective Date, the term Other Benefits as utilized in
this Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and its affiliated companies and their families.

                  (d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (x) his Annual Base Salary through
the Date of Termination, (y) the amount of any compensation previously deferred
by the Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive 


                                       11


<PAGE>

in a lump sum in cash within 30 days of the Date of Termination. Upon a
termination of the Executive's employment for Cause by the Company or by the
Executive without Good Reason, the Executive shall forfeit all stock options,
Restricted Stock Units, and other stock-based compensation that are not vested
on the Date of Termination.

         7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.

         8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code"); provided that the Company shall have no such
obligation if it is determined by a court that the Company was not in breach of
the Agreement and that the Executive's claims were not made in good faith.

         9. Certain Additional Payments by the Company.


                  (a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes and any benefits that result from the deductibility by
the Executive of such taxes (including, in each case, any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect 


                                       12


<PAGE>

thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains
an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.

                  (b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by KPMG Peat Marwick or such other certified public accounting firm as may be
designated by the Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 9, shall be paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.

                  (c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:

                           (i) give the Company any information reasonably
         requested by the Company relating to such claim,

                           (ii) take such action in connection with contesting
         such claim as the Company shall reasonably request in writing from time
         to time, including, without limitation, accepting legal representation
         with respect to such claim by an attorney reasonably selected by the
         Company,

                           (iii) cooperate with the Company in good faith in
         order effectively to contest such claim, and



                                       13

<PAGE>

                           (iv) permit the Company to participate in any
         proceedings relating to such claim; provided, however, that the Company
         shall bear and pay directly all costs and expenses (including
         additional interest and penalties) incurred in connection with such
         contest and shall indemnify and hold the Executive harmless, on an
         after-tax basis, for any Excise Tax or income tax (including interest
         and penalties with respect thereto) imposed as a result of such
         representation and payment of costs and expenses. Without limitation on
         the foregoing provisions of this Section 9(c), the Company shall
         control all proceedings taken in connection with such contest and, at
         its sole option, may pursue or forgo any and all administrative
         appeals, proceedings, hearings and conferences with the taxing
         authority in respect of such claim and may, at its sole option, either
         direct the Executive to pay the tax claimed and sue for a refund or
         contest the claim in any permissible manner, and the Executive agrees
         to prosecute such contest to a determination before any administrative
         tribunal, in a court of initial jurisdiction and in one or more
         appellate courts, as the Company shall determine; provided, however,
         that if the Company directs the Executive to pay such claim and sue for
         a refund, the Company shall advance the amount of such payment to the
         Executive, on an interest-free basis and shall indemnify and hold the
         Executive harmless, on an after-tax basis from any Excise Tax or income
         tax (including interest or penalties with respect thereto) imposed with
         respect to such advance or with respect to any imputed income with
         respect to such advance; and further provided that any extension of the
         statute of limitations relating to payment of taxes for the taxable
         year of the Executive with respect to which such contested amount is
         claimed to be due is limited solely to such contested amount.
         Furthermore, the Company's control of the contest shall be limited to
         issues with respect to which a Gross-Up Payment would be payable
         hereunder and the Executive shall be entitled to settle or contest, as
         the case may be, any other issue raised by the Internal Revenue Service
         or any other taxing authority.

                  (d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(a) or 9(c), the Executive becomes
entitled to receive any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section 9(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
Section 9(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.

         10. Confidential Information; Covenant Not to Compete.

                  (a) Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without 


                                       14



<PAGE>

the prior written consent of the Company or as may otherwise be required by law
or legal process, communicate or divulge any such information, knowledge or data
to anyone other than the Company and those designated by it. Except as provided
at Section 10(c), in no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.

                  (b) Covenant Not to Compete.

                           A. Executive agrees that during the Employment Period
                  and for a period of three (3) years following his termination
                  of employment with the Company for any reason, he will not in
                  any way engage in conduct which is detrimental to the Company
                  or engage in, represent, furnish consulting services to, be
                  employed by, or have any interest in any "Financial Services
                  Company" (as hereinafter defined) within the United States;
                  provided, the Executive shall be permitted to continue to
                  serve as a member of the boards of directors of The Midland
                  Company and Ohio National Life Insurance Company. Further,
                  Executive shall not during the Employment Period and for a
                  period of three (3) years following his termination of
                  employment with the Company for any reason (1) induce or
                  attempt to induce any person or entity which is a customer of
                  the Company or any of its affiliates as of the date of
                  termination of Executive's employment to cease or reduce doing
                  business with the Company or any of its affiliates, or (2)
                  solicit or endeavor to cause any employee of the Company or
                  its affiliates to leave the employ of the Company or any of
                  its affiliates. Notwithstanding the foregoing, the Executive
                  shall not be prevented from owning up to three percent (3%) of
                  the outstanding stock of any publicly traded company which is
                  a Financial Services Company. 

                           B. As used herein, the term "Financial Services
                  Company" means any national or state chartered bank; any bank
                  holding company; any other institution that engages as its
                  principal activity in taking deposits or making loans; any
                  entity that engages in commercial or consumer secured and
                  unsecured lending, transaction processing, insurance,
                  investment services, security brokerage, or trust services; or
                  any affiliates of any such institutions.

                           C. Executive agrees that this covenant is reasonable
                  with respect to its duration, geographic area and scope, and
                  acknowledges that compliance with Section 10(b) is necessary
                  to protect the business and goodwill of the Company.

                  (c) Consequences of Violation. In the event that the Executive
violates either Section 10(a) or (b) above, the Executive agrees that he shall:

                           (i) forfeit all vested but undistributed Restricted
         Stock Units;

                           (ii) assign and tender to the Company, free and clear
         of all liens and encumbrances, that number of shares of common stock of
         the Company then owned directly or beneficially by the Executive equal
         to the number of such shares distributed to the Executive pursuant to
         the award of Restricted Stock Units;





                                       15


<PAGE>

                           (iii) pay cash to the Company an amount equal to the
         gross proceeds realized by the Executive upon the sale through the New
         York Stock Exchange, or if sold or otherwise disposed in any other
         manner (including, without limitation, a disposition without receipt of
         consideration such as by gift) the value (such value to be equal to the
         product of such number of shares multiplied by the average of the
         highest and lowest sale prices of the Company's common stock on the day
         of such sale or disposition (or if not traded on such day then the
         immediately preceding trading day)), of the difference between (A) all
         shares of common stock of the Company directly or beneficially owned by
         the Executive not to exceed the number of shares distributed to the
         Executive pursuant to the award of Restricted Stock Units, minus (B)
         the number of shares tendered to the Company pursuant to Section
         10(c)(ii), such sale or other disposition occurring during the one-year
         period immediately prior to the occurrence of the Executive's conduct
         which constitutes such violation; and

                           (iv) forfeit any unpaid enhanced supplemental
         retirement benefits provided to the Executive and shall pay cash to the
         Company in an amount equal to the sum of the supplemental retirement
         benefits paid to the Executive relating to the enhancements, in either
         or both cases:

                                    A. pursuant to the surrender of Restricted
                  Stock Units in consideration for an additional benefit under
                  the NQRP under Section 4(b)(iii), and

                                    B. under Section 4(b)(v)(B) of this
                  Agreement.

         All payments, assignments and tenders provided under this Section 10(c)
         shall be paid by the Executive to the Company within 60 days following
         notice of such violation from the Company.

         11. Successors. (a) This Agreement is personal to the Executive and,
without the prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.

                  (b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

                  (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.

         12. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Minnesota, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no 

                                       16



<PAGE>

force or effect. This Agreement may not be amended or modified otherwise than by
a written agreement executed by the parties hereto or their respective
successors and legal representatives.

                  (b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party, by registered or
certified mail, return receipt requested, postage prepaid, or by reputable
overnight courier, addressed as follows:

         If to the Executive:

                  Jerry A. Grundhofer
                  c/o Wachtell, Lipton, Rosen & Katz
                  51 W. 52 Street
                  New York, New York  10019
                  Attention:  Adam D. Chinn, Esq.

         If to the Company:

                  U.S. Bancorp
                  601 Second Avenue South
                  Minneapolis, Minnesota  55402-4302
                  Attention:  Director-Human Resources

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

                  (c) If any provision of this Agreement conflicts with any
other agreement, policy, plan, practice or other Company document, the
provisions of this Agreement will control. This Agreement supersedes any prior
agreement between the Executive and the Company (or its predecessor) with
respect to the subject matter contained herein and may be amended only by a
writing signed by the Executive and the Company.

                  (d) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability off any other
provision of this Agreement.

                  (e) The Company may withhold from any amounts payable under
this Agreement such federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.

                  (f) The Executive's or the Company's failure to insist upon
strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this
Agreement, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.



                                       17


<PAGE>



         13. No Prohibited Payments. Notwithstanding anything in this Agreement
to the contrary, the Company shall not make any payment to the Executive which,
according to the opinion of the Company's outside counsel, would violate Section
2523(k) of the Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer
Recovery Act of 1990 (codified at 12 U.S.C. 1828(k)), or any rules or
regulations promulgated thereunder.

         IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.



                                      JERRY A. GRUNDHOFER

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

                                      Date:
                                           ----------------------------------





                                      U.S. BANCORP

                                      Date:
                                           ----------------------------------
                                      By:
                                         ------------------------------------
                                           Thomas E. Petry
                                           Chairman, Compensation Committee

                                      Date:
                                           ----------------------------------

                                      By:
                                         ------------------------------------
                                           Stephen E. Smith
                                           Executive Vice President
                                            Human Resources

                                      Date:
                                           ----------------------------------





                                       18


<PAGE>
                                                                   EXHIBIT 10.14

                              EMPLOYMENT AGREEMENT


                  AGREEMENT by and between Firstar Corporation, a Wisconsin
corporation (the "Company") and John F. Grundhofer (the "Executive") dated as of
the 3rd day of October, 2000.

                  The Company has determined that it is in the best interests of
the Company and its shareholders to assure that U.S. Bancorp, a Delaware
corporation ("USB") will have the continued dedication of the Executive pending
the merger of the Company and USB (the "Merger") pursuant to the Agreement and
Plan of Merger dated as of October 3, 2000 and to provide the surviving
corporation after the Merger with continuity of management. Therefore, in order
to accomplish these objectives, the Board of Directors of the Company (the
"Board") has caused the Company to enter into this Agreement.

                  NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

                  1. Effective Date. The "Effective Date" shall mean the
effective date of the Merger.

                  2. Employment Period. The Company hereby agrees to employ the
Executive, and the Executive hereby agrees to enter into the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on December 31, 2002 (the
"Employment Period").

                  3. Terms of Employment.
 (a) Position and Duties. (i) (A)
During the Employment Period, the Executive shall serve as Chairman of the
Company and Co-Chairman of the Executive Committee of the Board with such
authority, duties and responsibilities as are commensurate with such position
and as may be consistent with such position and (B) the Executive's services
shall be performed in Minneapolis, Minnesota. The Executive shall serve on the
Board until the first annual stockholders' meeting following his 65th birthday.

                  (ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote substantially all of his attention and time during normal
business hours to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the Executive hereunder,
to use the Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period it shall not be
a violation of this Agreement for the Executive to (A) serve on corporate, civic
or charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and agreed that to
the extent that any such activities have been conducted by the Executive prior
to the Effective Date, the continued conduct of such activities (or the conduct
of activities similar in nature and scope thereto) 





<PAGE>

subsequent to the Effective Date shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Company.

                  (b) Compensation. (i) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary ("Annual Base Salary")
of no less than the annual base salary of the Chief Executive Officer of the
Company but in no event less than his current annual base salary. During the
Employment Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the
Effective Date and thereafter at least annually. Any increase in Annual Base
Salary shall not serve to limit or reduce any other obligation to the Executive
under this Agreement. Annual Base Salary shall not be reduced after any such
increase and the term Annual Base Salary as utilized in this Agreement shall
refer to Annual Base Salary as so increased. As used in this Agreement, the
terms "affiliated companies" and "affiliate" shall include any company
controlled by, controlling or under common control with the Company.

                           (ii) Annual Bonus. During the Employment Period, the
Executive shall receive an annual cash bonus ("Annual Bonus") in an amount such
that the sum of his Annual Base Salary and the Annual Bonus is equal to the sum
of the annual base salary and annual bonus of the Chief Executive Officer of the
Company with respect to the year in question, pro rated in the case of any
partial years during the Employment Period.

                           (iii) Incentive Awards. On the Effective Date, the
Company shall grant the Executive 100,000 shares of restricted stock (the
"Restricted Stock") and an option to acquire 2,400,000 shares of the Company's
common stock (the "Option") pursuant to the terms of the Company's stock
incentive plan. The Option will have an exercise price equal to the fair market
value of the stock subject thereto on the date of grant and shall remain
exercisable for a term of ten years, whether or not the Executive remains
employed by the Company. Except as otherwise provided herein, the Option and the
Restricted Stock shall vest in four equal installments on each of the first four
anniversaries of the Effective Date or, if earlier, upon a change of control of
the Company (as defined in the Company's stock incentive plan); provided,
however, that, if earlier, the Option and the Restricted Stock shall vest upon
the Executive's retirement but in no event earlier than the end of the
Employment Period.

                           (iv) Retirement Benefits. Commencing upon the
expiration of the Employment Period, the Executive shall be paid an annual
retirement benefit of $2,920,000 for his life less any benefit payable pursuant
to the Company's qualified or nonqualified retirement plans or any such plans of
USB (the "Retirement Benefit"). Upon the Executive's death, his current spouse,
should she survive the Executive, shall be paid an annual benefit of 50% of the
Retirement Benefit for her life. For purposes of Section 3(b)(iii) of this
Agreement, the Executive shall be considered to have retired upon the
commencement of the Retirement Benefit.

                           (v) Other Employee Benefit Plans. During the
Employment Period, except as otherwise expressly provided herein, the Executive
shall be entitled to participate in all employee benefit, welfare and other
plans, practices, policies and programs generally applicable to senior
executives of the Company on a basis no less favorable than that provided to
such 



                                      - 2 -

<PAGE>

senior executives. The Company shall continue to provide the Executive with the
long-term disability benefits as set forth in Section 4.05 of the Amended and
Restated Employment Agreement between USB and the Executive dated as of May 8,
2000 (the "Existing Agreement") and the life insurance set forth in Section 4.06
of the Existing Agreement and the payments provided pursuant to Section 4.12 of
the Existing Agreement. The Executive shall be provided with perquisites
(including security and use of corporate aircraft) on a basis no less favorable
than provided to him immediately prior to the Effective Date.

                           (vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the Company's policies.

                           (vii) Office and Support Staff. During the Employment
Period and for as long as he shall serve on the Company's Board of Directors,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments as provided generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies and shall be provided with secretarial and administrative assistance
and security on the same basis as provided to him immediately prior to the
Effective Date.

                           (viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the plans,
policies, programs and practices of the Company and its affiliated companies as
in effect with respect to the senior executives of the Company.

                  4. Termination of Employment. (a) Death or Disability. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 11(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Executive or the Executive's
legal representative.

                  (b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:

                           (i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the Company or
one of its affiliates (other than any such failure resulting from incapacity due
to physical or mental illness), after a written demand for 



                                      - 3 -


<PAGE>

substantial performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the manner in
which the Board or Chief Executive Officer believes that the Executive has not
substantially performed the Executive's duties, or

                           (ii) the willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and demonstrably injurious to
the Company, or

                           (iii) conviction of a felony or guilty or nolo
contendere plea by the Executive with respect thereto which impairs his ability
substantially to perform his duties with the Company.

For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than two-thirds of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in subparagraph (i), (ii) or (iii) above, and specifying
the particulars thereof in detail.

                  (c) Good Reason. The Executive's employment may be terminated
by the Executive for Good Reason. For purposes of the Agreement, "Good Reason"
shall mean in the absence of a written consent of the Executive:

                           (i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including status,
officers, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 3(a) of this Agreement, or any other
action by the Company which, in the Executive's reasonable judgment, results in
a diminution in such position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;

                           (ii) any failure by the Company to comply with any of
the provisions of section 3(b) of this agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;



                                     - 4 -


<PAGE>

                           (iii) the Company's requiring the Executive to be
based at any office or location more than 35 miles from that provided in Section
3(a)(i)(B) hereof;

                           (iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this Agreement;
or

                           (v) any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement.

For purposes of this Section 4(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.

                  (d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.

                  (e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein within 30 days of such notice, as the case may
be, (ii) if the Executive's employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.

                  5. Obligations of the Company upon Termination. (a) Good
Reason; Other Than for Cause, Death or Disability. If, during the Employment
Period, the Company shall terminate the Executive's employment other than for
Cause (including by reason of the Executive's death or Disability) or the
Executive shall terminate employment for Good Reason:

                           (i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the aggregate of the
following amounts:




                                     - 5 -


<PAGE>

                           A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore paid, and (2) the
product of (x) the highest annual bonus paid to the Executive for any of the
three years prior to the Date of Termination (the "Recent Annual Bonus") and (y)
a fraction, the numerator of which is the number of days in the fiscal year in
which the Date of Termination occurs through the Date of Termination, and the
denominator of which is 365, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1) and (2), shall be hereinafter
referred to as the "Accrued Obligations"); and

                           B. the amount equal to the product of (1) the number
of months and portions thereof from the Date of Termination until the end of the
Employment Period, divided by twelve and (2) the sum of (x) the Executive's
Annual Base Salary and (y) the Recent Annual Bonus; and

                           (ii) for the remainder of the Executive's life and
that of his current spouse, the Company shall continue to provide medical and
dental benefits to the Executive and his current spouse on the same basis such
benefits were provided to the Executive immediately prior to the Date of
Termination (collectively "Medical Benefits");

                           (iii) the Options and the Restricted Stock shall vest
immediately; and

                           (iv) to the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy or practice or contract or agreement of
the Company and its affiliated companies through the Date of Termination,
including without limitation the benefits provided under the Existing Agreement
pursuant to Section 3(b)(v) of this Agreement (such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits").

                  (b) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause or the Executive terminates his
employment without Good Reason during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive (w) his Annual Base Salary through the Date
of Termination, (x) payment of the Retirement Benefit, (y) provision of Medical
Benefits to the Executive and his spouse, and (z) Other Benefits, in each case
to the extent theretofore unpaid.

                  6. Non-exclusivity of Rights. Except as specifically provided,
nothing in this Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice provided by the
Company or any of its affiliated companies and for which the Executive may
qualify, nor, subject to Section 11(f), shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan,
policy, practice or program of or any contract or agreement with the Company or
any of its affiliated companies at or subsequent to the 


                                     - 6 -


<PAGE>

Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement.

                  7. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal revenue Code
of 1986, as amended (the "Code").

                  8. Certain Additional Payments by the Company.

                  (a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 8) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 8(a), if it shall be
determined that the Executive is entitled to a Gross-Up Payment, but that the
Payments do not exceed 110% of the greatest amount (the "Reduced Amount") that
could be paid to the Executive such that the receipt of Payments would not give
rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive
and the Payments, in the aggregate, shall be reduced to the Reduced Amount.

                  (b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by Price Waterhouse Coopers LLP or such other certified public accounting firm
reasonably acceptable to the Company as may be designated by the Executive 


                                     - 7 -



<PAGE>

(the "Accounting Firm") which shall provide detailed supporting calculations
both to the Company and the Executive within 15 business days of the receipt of
notice from the Executive that there has been a Payment, or such earlier time as
is requested by the Company. All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 8, shall be paid by the Company to the Executive within five days
of the later of (i) the due date for the payment of any Excise Tax, and (ii) the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 8(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
company to or for the benefit of the Executive.

                  (c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:

                           (i) give the Company any information reasonably
requested by the Company relating to such claim,

                           (ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company,

                           (iii) cooperate with the Company in good faith in
order effectively to contest such claim, and

                           (iv) permit the Company to participate in any
proceedings relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such 


                                     - 8 -



<PAGE>

representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 8(c), the Company shall control all
proceedings take in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

                  (d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 8(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 8(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.

                  9. Confidential Information; Noncompetition; Nonsolicitation.
(a) The Executive shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during the Executive's
employment by the Company or any of its affiliated companies and which shall not
be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.


                                     - 9 -


<PAGE>

                  (b) The Executive agrees that, during the actual term of the
Executive's employment hereunder and for a period of three (3) years following
the date on which the Executive's employment hereunder is actually terminated,
the Executive will not, without the written consent of the Company, engage in
any business of, or enter the employ of, or have any interest in, directly or
indirectly, any other person, firm, corporation or other entity engaged in
commercial banking or other principal business of the Company (with the
exception of any investment banking, investment management, underwriting or
equity and fixed income trading activities of the Company) with an office of
facility in any state in which the Company does business. Nothing herein shall
restrict the Executive from owning 5% or less of the outstanding securities of
any corporation or other entity whose securities are listed on any national
securities exchange or traded over-the-counter, if the Executive has no other
connection or relationship with the issuer of such securities.

                  (c) Upon termination of the Executive's employment for any
reason whatsoever, the Executive will not, for the remainder of the Employment
Period, if no termination had occurred (or, if longer, for the three year period
following such termination), (i) solicit or aid in soliciting as a customer or
client of banking or related financial services (including, without limitation,
trust, credit card and investment management services) any person, firm,
corporation, association or other entity (A) that was a customer or client of
the Company or any affiliate of the Company, and for which the Executive or
anyone under the Executive's direct supervision performed any services or with
which substantial business relations were maintained by the Company or any
affiliate of the company at any time during the five years prior to the
termination of the Employment Period (B) whose identity or particular needs the
Executive otherwise discovered as a result of his employment with the Company,
or (ii) solicit or aid in soliciting any employees of the Company or any
affiliate of the Company to leave their employment.

                  (d) In the event of a breach or threatened breach of this
Section 9, the Executive agrees that the Company shall be entitled to injunctive
relief in a court of appropriate jurisdiction to remedy any such breach or
threatened breach, the Executive acknowledges that damages would be inadequate
and insufficient.

                  (e) Any termination of the Executive's employment or of this
Agreement shall have no effect on the continuing operation of this Section 9. In
no event shall an asserted violation of the provisions of this Section 9
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.

                  10. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. The Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.

                  (b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.



                                     - 10 -


<PAGE>

                  (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this agreement, "Company" shall mean the company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.

                  11. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.

                  (b) all notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

                  If to the Executive:

                  At the most recent address on file for the Executive at the 
                  Company

                  If to the Company:

                  777 East Wisconsin Avenue
                  Milwaukee, Wisconsin  53202

                  Attention:  General Counsel

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

                  (c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

                  (d) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.

                  (e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 4(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.





                                     - 11 -





<PAGE>

                  (f) From and after the Effective Date this Agreement shall
supersede any other employment, severance or change of control agreement between
the parties with respect to the subject matter hereof, including, without
limitation, the Existing Agreement, except as expressly provided herein.

                  IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its Board of Directors,
the Company has caused these presents to be executed in its name on its behalf,
all as of the day and year first above written.


                                       /s/ John F. Grundhofer 
                                       -----------------------------------------
                                       JOHN F. GRUNDHOFER




                                       FIRSTAR CORPORATION

                                       By /s/ Stephen E. Smith
                                          --------------------------------------
                                          Stephen E. Smith
                                          Executive Vice President
                                          Human Resources



                                     - 12 -





<PAGE>
 
EXHIBIT 12
 
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
 

<Table>
<Caption>
Year Ended December 31 (Dollars in Millions)                        2001        2000        1999        1998        1997
------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>         <C>         <C>         <C>         <C>
EARNINGS
 1. Net income...........................................       $1,706.5    $2,875.6    $2,381.8    $2,132.9    $1,599.3
 2. Applicable income taxes..............................          927.7     1,512.2     1,392.2     1,167.4       950.6
                                                                --------------------------------------------------------
 3. Income before taxes (1 + 2)..........................       $2,634.2    $4,387.8    $3,774.0    $3,300.3    $2,549.9
                                                                ========================================================
 4. Fixed charges:
    a. Interest expense excluding interest on deposits...       $1,846.7    $2,404.1    $1,820.3    $1,625.0    $1,305.6
    b. Portion of rents representative of interest and
       amortization of debt expense......................           89.0        86.7        78.9        73.3        68.0
                                                                --------------------------------------------------------
    c. Fixed charges excluding interest on deposits (4a +
       4b)...............................................        1,935.7     2,490.8     1,899.2     1,698.3     1,373.6
    d. Interest on deposits..............................        2,828.1     3,618.8     2,970.0     3,234.7     3,084.2
                                                                --------------------------------------------------------
    e. Fixed charges including interest on deposits (4c +
       4d)...............................................       $4,763.8    $6,109.6    $4,869.2    $4,933.0    $4,457.8
                                                                ========================================================
 5. Amortization of interest capitalized.................       $     --    $     --    $     --    $     --    $     --
 6. Earnings excluding interest on deposits (3 + 4c +
    5)...................................................        4,569.9     6,878.6     5,673.2     4,998.6     3,923.5
 7. Earnings including interest on deposits (3 + 4e +
    5)...................................................        7,398.0    10,497.4     8,643.2     8,233.3     7,007.7
 8. Fixed charges excluding interest on deposits (4c)....        1,935.7     2,490.8     1,899.2     1,698.3     1,373.6
 9. Fixed charges including interest on deposits (4e)....        4,763.8     6,109.6     4,869.2     4,933.0     4,457.8
RATIO OF EARNINGS TO FIXED CHARGES
10. Excluding interest on deposits (line 6/line 8).......           2.36        2.76        2.99        2.94        2.86
11. Including
 interest on deposits (line 7/line 9).......           1.55        1.72        1.78        1.67        1.57
------------------------------------------------------------------------------------------------------------------------
</Table>

 
                                                                    U.S. Bancorp



<PAGE>
 
EXHIBIT 21
 
                          SUBSIDIARIES OF U.S. BANCORP
              (JURISDICTIONS OF ORGANIZATION SHOWN IN PARENTHESES)
 
U.S. Bank National Association (a nationally chartered banking
association) -- also conducts business under the name of
  Firstar Bank, National Association.
 
U.S. Bank Trust National Association (a nationally chartered banking
association)
 
U.S. Bank Trust National Association (a nationally chartered banking
association)
 
U.S. Bank National Association ND (a nationally chartered banking association)
 
U.S. Bank Trust Company, National Association (a nationally chartered banking
association)
 
U.S. Bank Trust National Association SD (a nationally chartered banking
association)
 
Elan Life Insurance Company (Arizona)
 
FBS Insurance Montana, Inc. (Montana)
 
Miami Valley Insurance Company (Arizona)
 
Mississippi Valley Life Insurance Company (Missouri)
 
U.S. Bancorp Insurance Company, Inc. (Vermont)
 
U.S. Bancorp Insurance Services, Inc. (Delaware)
 
U.S. Bancorp Insurance Services, LLC (Wisconsin)
 
U.S. Bancorp





<PAGE>
                                                                    Exhibit 23



                       CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (Nos. 333-32701; 333-67465; 333-32572; 333-65358;
333-72626 and 333-76322) and Form S-8 (Nos. 33-52835; 333-01421; 333-02623;
333-02621; 333-21291; 333-32653; 333-32635; 333-51627; 333-51635; 333-51641;
333-76887; 333-82691; 333-38846; 333-47968; 333-61667; 333-48532; 333-65774;
333-68450 and 333-74036) of U.S. Bancorp of our report dated January 15, 2002,
relating to the financial statements, which appears in this Annual Report on 
Form 10-K.

PricewaterhouseCoopers LLP


Minneapolis, Minnesota
February 28, 2002





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