Fellow Shareholders:

U.S. Bancorp remains true to its core strengths — serving our customers and supporting our communities, engaging our employees and helping our country. We reward our shareholders by ensuring that the Company remains strong, prudently managed and profitable.

Another record year

We achieved record net income of $5.8 billion for the year 2013 or $3.00 per diluted common share, representing a 5.6 percent increase over 2012. Our profitability measures were, once again, industry-leading, including a return on average assets of 1.65 percent, a return on average common equity of 15.8 percent and an efficiency ratio of 52.4 percent, placing us at the top of our peer group. Importantly, we returned $4 billion, or 71%, of earnings to you, our shareholders, through dividends and share buybacks — well within our goal of returning between 60 to 80 percent of earnings each year. I am particularly proud to have achieved these results during a year that was marked by continued slow economic growth, a significant pullback in mortgage activity and ongoing regulatory and legislative change and uncertainty. Our results clearly demonstrate the benefits we derive from our diverse mix of businesses and conservative risk profile.

Credit quality continues to be strong. Total net charge-offs declined by 30.1 percent from 2012, while total nonperforming assets decreased year-over-year by 23.7 percent (13.2 percent excluding covered assets). The improvement in both net charge-offs and nonperforming assets, as well as the overall quality of our loan portfolio, allowed us to release $125 million of reserves for credit losses in 2013. Our Company, as well as the industry, is expected to continue to benefit from a relatively stable credit environment as the economy steadily improves.

We continue to generate significant capital each quarter through our earnings. Total U.S. Bancorp shareholders’ equity was $41.1 billion at December 31, 2013, compared with $39.0 billion at December 31, 2012. Our capital ratios exceeded both regulatory requirements and our own target levels. We submitted our 2014 Comprehensive Capital Plan to the Federal Reserve in early January of this year, and are awaiting regulatory approval to, once again, raise our dividend and continue our stock buyback program.

Heightened focus on regulation and compliance

2013 was another year of increased federal banking regulation – with more expected to come in 2014.

As new regulations are finalized and become effective, we respond quickly and seek to understand any impacts beyond the initial rulings. Compliance has become a top priority for our industry and, as a result, for every leader and employee at U.S. Bancorp. Compliance is a foundation for trust — and banking is a business of trust. Every bank must have a wellrun compliance function — and we have one. Our systems, people and policies are in place to protect the Company, our customers and, consequently, our shareholders. We have chosen to be active, vocal and visible within the industry and play a leading role in coordinating with bank regulators about the possible outcomes and, importantly, the unintended consequences of regulatory over-reach.

We continue our focus on protecting our customers’ accounts from fraud and cyber attacks. Threats to our Bank’s data and customer information are persistent and increasing, and we utilize a wide range of sophisticated fraud detection and prevention tools to keep our Company and our customers safe. U.S. Bank has also taken the lead to develop a comprehensive and collaborative approach to defending against cyber attacks on the financial services industry.

The banking industry will face more challenges in the coming year and beyond, but banking remains crucial to the recovery and, ultimately, the soundness of the nation’s economy. Dealing directly and effectively with regulation is something all banks must do for the sake of their customers, employees, shareholders and the country. We take that responsibility very seriously. We manage this company, not just for the benefit of our reputation and the value we can return to shareholders, but for the financial well-being of all of our constituents.

To further strengthen our focus on risk and compliance, we recently promoted P.W. “Bill” Parker to the position of Vice Chairman and Chief Risk Officer, overseeing all risk and compliance functions at U.S. Bancorp. Bill was previously Chief Credit Officer for U.S. Bancorp, an area he will continue to oversee in his new role. We already enjoy a well-deserved reputation as a leader among banks for our operating, credit and risk profile, and Bill’s leadership in his expanded role will serve to enhance that standing. Richard J. Hidy, who previously held the role of Chief Risk Officer, retires from U.S. Bancorp in March after 20 years of significant contributions to U.S. Bancorp and as a leader in building our risk management reputation. We wish Rich all the best as he begins this new chapter in his life.

What’s ahead?

U.S. Bancorp is in an enviable position. We are in the businesses we want to be in, and we do not face the need to divest of any businesses due to regulatory or profitability constraints. We continue to enjoy the benefits of the “flight to quality” as customers recognize our exceptional products and services, our superior financial performance and industry-leading debt ratings — all signs of an outstanding banking franchise. Our prudent management culture, a disciplined attention to measuring every aspect of our business and a commitment to aligning expenses with revenue have resulted in a balance sheet that is strong and growing, along with a mix of business that is well diversified and a franchise performance that is consistent, predictable and repeatable. We resist the temptation to enter businesses we don’t understand; we don’t follow irrational players in the market and we remain steadfastly diligent in evaluating potential acquisitions that could only extend our success.

2014 is beginning much like 2013 with corporations and consumers husbanding cash and foregoing discretionary spending and investments. Soon we will see consumers begin to spend rather than accumulate. We will also see corporations begin to invest, rather than stockpile. Eventually, we will expect to see spending and credit line utilization increase and deposits decrease as the recovery takes hold. However, for this current stage, deposits are still growing, an indication that a robust recovery has yet to begin. We’re not at the inflection point yet, but dialogue with our customers leads us to believe that the recovery will accelerate in the second half of this year. As I have said before, we are well-positioned to capitalize on the upturn. Until then, we will continue to prudently manage our Company — watching our expenses and keeping them aligned with revenue, maintaining and growing our market share and investing for the future.

Opportunity to grow

We are asked regularly about our interest in acquisitions — and our answer is always the same. We are interested in deepening our market share where we already have a branch network. Our recent agreement to acquire branches in Chicago, which doubles our presence in that great city, is a perfect example. We expect to be a net branch grower in the coming years. We like branches. Some of them might not be traditional branches but, rather, in-store or on-site branches in partnership with supermarkets, corporations, hospitals, colleges or other high-traffic locations. We are not interested in leap-frogging across states or acquiring a few branches in a state where we have no critical mass or presence. Additionally, we would like to continue to acquire corporate trust and payments-related portfolios and companies; acquisitions that increase competitive and operational scale in these high value businesses. I have referred to our acquisition focus as “one-offs.” By that I mean discrete, strategic acquisitions which are smaller, rather than transformational, that are priced correctly and enhance our franchise, capabilities and product set and, ultimately, make sense for our shareholders.

A strong team and a strong future

I am very proud of our record full year 2013 earnings and results. Our Company’s results are directly tied to the hard work and dedication of our 67,000 employees, and I want to take this opportunity to thank them for their contribution to our success.

U.S. Bancorp Board of Directors

U.S. Bancorp Board of Directors (left to right)

  • Doreen Woo Ho; President, San Francisco Port Commission
  • O’dell M. Owens, M.D., M.P.H.; President, Cincinnati State Technical and Community College
  • Patrick T. Stokes; former Chairman and Chief Executive Officer, Anheuser-Busch Companies, Inc.
  • David B. O’Maley; retired Chairman, President and Chief Executive Officer, Ohio National Financial Services, Inc.
  • Joel W. Johnson; retired Chairman and Chief Executive Officer, Hormel Foods Corporation
  • Victoria Buyniski Gluckman; retired Chairman and Chief Executive Officer, United Medical Resources, Inc.
  • Y. Marc Belton; Executive Vice President, Global Strategy, Growth and Marketing Innovation, General Mills, Inc.
  • Douglas M. Baker, Jr.; Chairman and Chief Executive Officer, Ecolab, Inc.
  • Richard K. Davis; Chairman, President and Chief Executive Officer, U.S. Bancorp
  • Craig D. Schnuck; former Chairman and Chief Executive Officer, Schnuck Markets, Inc.
  • Olivia F. Kirtley; Business consultant
  • Arthur D. Collins, Jr.; retired Chairman and Chief Executive Officer, Medtronic, Inc.
  • Jerry W. Levin; Chairman and Chief Executive Officer, Wilton Brands Inc., and Chairman and Chief Executive Officer, JW Levin Partners LLC
  • Roland A. Hernandez; Founding Principal and Chief Executive Officer, Hernandez Media Ventures
U.S. Bancorp Managing Committee

U.S. Bancorp Managing Committee (left to right)

  • James L. Chosy, Executive Vice President, General Counsel and Corporate Secretary
  • Michael S. LaFontaine, Executive Vice President and Chief Operational Risk Officer
  • P.W. (Bill) Parker, Vice Chairman and Chief Risk Officer
  • Jeffry H. von Gillern, Vice Chairman, Technology and Operations Services
  • Pamela A. Joseph, Vice Chairman, Payment Services
  • John R. Elmore, Vice Chairman, Community Banking and Branch Delivery
  • Richard K. Davis, Chairman, President and Chief Executive Officer
  • Howell D. (Mac) McCullough, III, Executive Vice President, Chief Strategy Officer
  • Richard B. Payne, Vice Chairman, Wholesale Banking
  • Terrance R. Dolan, Vice Chairman, Wealth Management and Securities Services
  • Jennie P. Carlson, Executive Vice President, Human Resources
  • Joseph C. Hoesley, Vice Chairman, Commercial Real Estate
  • Andrew Cecere, Vice Chairman and Chief Financial Officer
  • Mark G. Runkel, Executive Vice President and Chief Credit Officer
  • Kent V. Stone, Vice Chairman, Consumer Banking Sales and Support

As we look forward to the coming year, we are mindful of the strength of our company and how we, as a bank, remain an integral part of the growth and vibrancy of the nation’s economy, our communities and the customers we serve and support. We are focused on the future and confident in our ability to deliver outstanding products, service and results for the benefit of our customers, communities, employees and, ultimately, for you, our shareholders.

Sincerely,

Richard K. Davis

Richard K. Davis
Chairman, President and Chief Executive Officer

February 21, 2014

Richard K. Davis Performance vs. Peers since 2008