US Bank 2008 Annual Report Download - page 92

annum equal to the greater of three-month LIBOR plus
.60 percent, or 3.50 percent on the Series B Preferred Stock,
and 7.875 percent per annum on the Series D Preferred
Stock. Both series are redeemable at the Company’s option,
subject to the prior approval of the Federal Reserve Board,
at a redemption price equal to $25,000 per share, plus any
declared and unpaid dividends, without accumulation of any
undeclared dividends, with the redemption option beginning
April 15, 2011 for the Series B Preferred Stock and April 15,
2013 for the Series D Preferred Stock. In connection with
the issuance of each series, the Company also entered into
replacement capital covenants, which restrict the Company’s
rights to redeem or repurchase each series. Except in certain
limited circumstances, neither series will have any voting
rights.
On November 14, 2008, the Company issued
6.6 million shares of cumulative perpetual preferred stock to
the United States Treasury under the Capital Purchase
Program of the Emergency Economic Stabilization Act of
2008 (the “Series E Preferred Stock”) for proceeds of
$6.6 billion. Dividends on the Series E Preferred Stock will
accrue and be payable quarterly at a rate of 5 percent per
annum for five years. The rate will increase to 9 percent per
annum, thereafter, if shares of the Series E Preferred Stock
are not redeemed by the Company. Under its original terms,
the Series E Preferred Stock could be redeemed three years
following the date of issuance, or earlier if the Company
raised replacement regulatory capital. The American
Recovery and Reinvestment Act of 2009 (“ARRA”) requires
the United States Treasury, subject to consultation with
appropriate banking regulators, to permit participants in the
Capital Purchase Program to repay any amounts previously
received without regard to whether the recipient has
replaced such funds from any other source or to any waiting
period. All redemptions of the Series E Preferred Stock shall
be at 100 percent of the issue price, plus any accrued and
unpaid dividends. The Series E Preferred Stock is non-voting,
other than for class voting rights on any authorization or
issuance of senior ranking shares, any amendment to its
rights, or any merger, exchange or similar transaction which
would adversely affect its rights.
For as long as the Series E Preferred Stock is
outstanding, no dividends may be declared or paid on junior
preferred shares, preferred shares ranking equal to the
Series E Preferred Stock, or common shares, nor may the
Company repurchase or redeem any such shares, unless all
accrued and unpaid dividends for all past dividend periods
on the Series E Preferred Stock are fully paid. The consent of
the United States Treasury is required for any increase in the
quarterly dividends per share of the Company’s common
stock or for any share repurchases of junior preferred or
common shares, until the shorter of the third anniversary
date of the Series E Preferred Stock issuance or the date the
Series E Preferred Stock is redeemed in whole. Participation
in this program also subjects the Company to certain
restrictions with respect to the compensation of certain
executives.
In conjunction with the Series E Preferred Stock
issuance, the United States Treasury received warrants
entitling it to purchase 33 million shares of the Company’s
common stock at a price of $30.29 per common share. The
warrants were exercisable at issuance and expire on
November 13, 2018. The Company allocated $172 million
of the proceeds from the Series E Preferred Stock issuance to
the warrants. The resulting discount on the Series E
Preferred Stock is being accreted over five years and
reported as a reduction of income applicable to common
equity over that period. ARRA requires the United States
Treasury to liquidate these warrants if the Company repays
amounts received under the Capital Purchase Program.
During 2008, 2007 and 2006, the Company
repurchased shares of its common stock under various
authorizations approved by its Board of Directors. As of
December 31, 2008, the Company had approximately
20 million shares that may yet be purchased under the
current Board of Director approved authorization, in
connection with the administration of its employee benefit
plans in the ordinary course of business solely to the extent
permitted under the Capital Purchase Program of the
Emergency Economic Stabilization Act of 2008.
The following table summarizes the Company’s common stock repurchased in each of the last three years:
(Dollars and Shares in Millions) Shares Value
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 $ 91
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 2,011
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 2,817
90 U.S. BANCORP