U.S. Bancorp Approved to Redeem $6.6 Billion of Preferred Stock from the U.S. Treasury Department

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MINNEAPOLIS -- June 9, 2009 -- U.S. Bancorp (NYSE:USB) announced today that it has received approval from the U.S. Treasury Department to redeem the $6.6 billion of preferred stock issued to the Treasury under the Capital Purchase Program of the Emergency Economic Stabilization Act of 2008. Upon completion of the redemption of the preferred stock, U.S. Bancorp will also give notice to the Treasury of its intent to repurchase the 10-year warrant issued in conjunction with the preferred stock, which entitles the Treasury to purchase shares of U.S. Bancorp common stock.

“Today’s approval to repay the TARP capital reaffirms the value and strength of U.S. Bancorp’s diversified business mix and on-going commitment to prudent risk management. We have successfully positioned the company to manage through this highly stressed environment, as well as to capitalize on future opportunities,” said Richard K. Davis, chairman, president and chief executive officer of U.S. Bancorp. “We have satisfied all of the requirements set by the U.S. Treasury and our regulators to gain approval to repay the TARP capital, including passing the Supervisory Capital Assessment Program, or ‘stress test,’ issuing senior unsecured, non-FDIC guaranteed debt, issuing new common equity and finally, submitting a comprehensive plan to maintain our historically strong capital levels. The repayment of the TARP capital will provide U.S. Bancorp with both independence and strategic flexibility, and we fully expect to continue to vigorously offer lending opportunities to our credit-worthy consumer, small business, corporate and institutional customers, invest for future growth and support the U.S. government’s overall efforts to stimulate the economy. Further, the funds we are now returning to the U.S. Treasury can be used to support other economic recovery efforts.”

Upon completion of this transaction and consistent with the accounting requirements for all Capital Purchase Program redemption transactions, U.S. Bancorp will include in its computation of earnings per diluted common share the impact of a deemed dividend of $153 million, representing the unaccreted preferred stock discount remaining on the transaction date. This one-time deemed dividend is in addition to the second quarter 2009 accretion of the preferred stock discount and accrued preferred dividends through the transaction date, together totaling approximately $90 million.

Additionally, on May 22, 2009, the board of directors of the Federal Deposit Insurance Corporation voted to levy a special assessment on insured depository institutions. The levy is equal to five basis points of the bank’s assets minus Tier 1 capital as of June 30, 2009. Accordingly, U.S. Bancorp expects to record a pre-tax charge of approximately $125 million in the second quarter of 2009 for this FDIC special assessment. This assessment will be the primary driver of an approximately $150 million increase in FDIC expense in the second quarter over the first quarter of 2009. Together, this increase in FDIC expense and the $153 million reduction in earnings available to common shareholders resulting from the redemption of TARP securities will reduce U.S. Bancorp second quarter earnings per diluted common share by about 15 cents.

Source: U.S. Bancorp