A perpetual preferred stock issued by U.S. Bancorp more than fifteen years ago is still trading at a steep discount to its original face value, even though the company has had the legal right to redeem it since April 2011. The security, US Bancorp's Series A 7.189% non-cumulative perpetual preferred (USB-P-A, also quoted as USB-A or USBprA), carries a $1,000 liquidation preference but was recently priced at $764.00, a discount of roughly 23.6%, or $236 per share, to par. The issue first stood out in data tracked on Preferred Stock AI, a Madison Labs research site, which lists the security's current yield at 7.31%.
What the discount reflects, mechanically, is straightforward: the security's payout has not been fixed at 7.189% since its call date arrived nearly a decade and a half ago. According to the security's terms, the coupon was fixed only through April 15, 2011; after that, the dividend resets quarterly to the greater of three-month LIBOR plus 1.02% or a 3.50% floor. That means every dividend paid since 2011 has been a floating amount tied to a benchmark that U.S. regulators phased out of new use starting in 2021 and that ceased publication for most U.S. dollar tenors in mid-2023. The dividend history disclosed alongside the security shows exactly the kind of variability that formula produces, with per-share payments ranging from roughly $12.52 to $17.06 over the periods listed, rather than a static quarterly figure.
For income-focused investors, the combination of characteristics on this issue is unusual enough to warrant attention, without implying any judgment on the security's suitability. It is callable immediately: the listing shows "callable now" with no yield-to-call calculation available, since redemption could occur at any point at the issuer's discretion. It is non-cumulative, meaning any dividend U.S. Bancorp chose to skip would not need to be made up later. And its rate-reset mechanism is built around a rate index that, in its original quoted form, no longer trades in active markets, raising practical questions about how the coupon is actually being calculated today under LIBOR transition rules that direct legacy contracts toward replacement, SOFR-based benchmarks.
By way of background, the preferred was issued in June 2010, in the aftermath of the financial crisis, when large U.S. banks were raising regulatory capital through hybrid instruments that combined a fixed initial coupon with a floating-rate structure meant to adjust with prevailing short-term rates after an initial call window. U.S. Bancorp offered 1,250,000 shares at the time. Fifteen years on, the bank's other outstanding preferred series (including 5.150%, 5.500%, 3.750%, 4.000% and 4.500% coupon issues) carry materially lower stated rates, consistent with the broader decline in benchmark yields that followed the 2008-2009 crisis and the subsequent rate cycles.
The current $764.00 price sits within the issue's own 52-week range of $748.52 to $841.32, and its 23.6% discount to par compares with an average discount of 15.7% across the broader category of 76 similar preferred issues tracked in the same dataset, indicating this particular security trades further below face value than many of its peers. U.S. Bancorp's common shares, by contrast, changed hands near $58.94, within a 52-week range of $42.55 to $61.19, underscoring that the preferred and common lines have moved along different paths even though they share the same underlying credit.
Broader market conditions on the day this pricing was captured showed declines across a range of asset classes, from megacap technology and software names to bitcoin and other digital assets, a reminder that preferred securities can move somewhat independently of both equity and credit swings given their fixed-income-like structure and sensitivity to interest-rate expectations rather than daily headline flow.
Looking ahead, market participants who track legacy LIBOR-linked preferred stocks are likely to keep watching two separate questions: whether U.S. Bancorp exercises its long-standing option to call the Series A preferred, and how the floating-rate calculation is being administered now that the original benchmark no longer exists in its quoted form. Neither outcome can be predicted from the available data, and any decision to redeem, or not to redeem, rests entirely with the issuer under the terms of the original prospectus, which is filed with the SEC as a 424B5.