December 11, 2008 – 1:21 pm

US Bancorp is treading water and trying to buy time, but profit fell another 47 percent in third quarter 2008 despite a raise in net income. Despite the profit drop, US Bancorp is still generating a profit… on paper at least.

U.S. Bancorp has been weathering the mortgage crisis much better than many of its peers. However, this marks the seventh straight quarter of profit declines for the bank.

U.S. Bancorp said its provision for credit losses increased by $549 million over the third quarter of last year, to $748 million. The bank attributes the increase to continued stress in its residential mortgage and residential homebuilding portfolios — with the bulk of losses coming from its $1.1 billion of residential construction loans in California.

The jump in loan loss reserves was motivated by a spike in writing down existing loans to zero.

Total net charge offs, or loans written off as unpaid, more than doubled to $498 million, from $199 million a year earlier.

It’s not only that loan loss reserves are up, but the level 3 waters are rising.

The bank raised no capital for the quarter, but is considering taking the billionaire handout if they are deemed to be in the in crowd. More on that in Q4.

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