What is the significance of U.S. Bancorp redeeming its preferred stock?

The redemption of $6.6 billion in senior preferred stock signifies that U.S. Bancorp has met the conditions to repay the capital it received under the government's Capital Purchase Program. This is generally viewed as a positive development, demonstrating the company's financial strength and ability to operate without direct government capital support, and allowing for greater financial flexibility.

How will this redemption affect U.S. Bancorp's short-term earnings?

While the redemption is a positive long-term step, it will have a negative impact on U.S. Bancorp's second-quarter earnings. The accounting treatment of the redemption, along with a recent FDIC special assessment, is expected to reduce earnings per diluted common share by approximately 15 cents in the second quarter of 2009.

What is the FDIC special assessment mentioned in the filing?

The filing briefly mentions a 'recently announced Federal Deposit Insurance Corporation special assessment on insured depository institutions.' This refers to a one-time assessment levied by the FDIC on insured banks to cover costs associated with resolving failed financial institutions during the financial crisis. This assessment is a factor contributing to the earnings reduction for U.S. Bancorp in Q2 2009.

When is the expected date for the redemption of the preferred stock?

The filing indicates that U.S. Bancorp received approval to redeem the preferred stock on or around June 9, 2009. The actual redemption date is not explicitly stated in this 8-K filing, but the approval signifies that the process is underway or imminent.

US BANCORP \DE\ 8-K SEC Disclosure

Summary

U.S. Bancorp (USB) has announced a significant development related to its capital structure and future earnings. On June 9, 2009, the company disclosed that it received approval from the U.S. Department of the Treasury to redeem its $6.6 billion in senior preferred stock, originally issued under the Capital Purchase Program (CPP) of the Emergency Economic Stabilization Act of 2008. This redemption marks a positive step for the company, indicating improved financial standing and a move away from government-mandated capital injections. However, investors should note the immediate financial impact of this redemption. U.S. Bancorp also announced that the accounting implications of this preferred stock redemption, combined with a recently levied FDIC special assessment on insured institutions, are expected to reduce second-quarter earnings per diluted common share by approximately 15 cents. While the redemption is a long-term positive, the short-term earnings hit is a key factor to consider.

Key Highlights

1U.S. Bancorp received U.S. Department of the Treasury approval to redeem $6.6 billion in senior preferred stock.
2The redemption is related to the Capital Purchase Program (CPP) established under the Emergency Economic Stabilization Act of 2008.
3The redemption signals a move towards exiting government support and strengthening the company's capital position.
4The accounting impact of the redemption will reduce second-quarter earnings per diluted common share.
5A recently announced FDIC special assessment will also contribute to the reduction in second-quarter earnings.
6The combined impact of the redemption and FDIC assessment is an estimated 15-cent reduction in Q2 2009 diluted EPS.
7A press release dated June 9, 2009, provides further details on these matters.

US BANCORP \DE\ 8-K Report, Corporate Update (Jun 10, 2009)

Summary

Key Highlights

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