US Bank 2005 Annual Report Download - page 50

DEBT RATINGS
Standard &
Moody’s Poor’s Fitch
U.S. Bancorp
Short-term borrowings ****************************************************************** F1+
Senior debt and medium-term notes****************************************************** Aa2 AA– AA–
Subordinated debt ********************************************************************* Aa3 A+ A+
Preferred stock ************************************************************************ A1 A A+
Commercial paper********************************************************************** P-1 A-1+ F1+
U.S. Bank National Association
Short-term time deposits **************************************************************** P-1 A-1+ F1+
Long-term time deposits **************************************************************** Aa1 AA AA
Bank notes**************************************************************************** Aa1/P-1 AA/A-1+ AA–/F1+
Subordinated debt ********************************************************************* Aa2 AA– A+
Commercial paper********************************************************************** P-1 A-1+ F1+
Company’s ability to meet funding requirements due to collected from its subsidiaries and the issuance of debt
adverse business events. These funding needs are then securities.
matched with specific asset-based sources to ensure sufficient At December 31, 2005, parent company long-term debt
funds are available. Also, strategic liquidity policies require outstanding was $10.9 billion, compared with $6.9 billion
diversification of wholesale funding sources to avoid at December 31, 2004. The $4.0 billion increase was
concentrations in any one market source. Subsidiary banks primarily due to issuances of convertible senior debentures
are members of various Federal Home Loan Banks (‘‘FHLB’’) of $4.5 billion, medium-term notes of $.5 billion and junior
that provide a source of funding through FHLB advances. subordinated debentures of $1.0 billion, offset by long-term
The Company maintains a Grand Cayman branch for issuing debt maturities and repayments during 2005. Total parent
eurodollar time deposits. The Company also issues company debt scheduled to mature in 2006 is $626 million.
commercial paper through its Canadian branch. In addition, These debt obligations may be met through medium-term
the Company establishes relationships with dealers to issue note and capital security issuances and dividends from
national market retail and institutional savings certificates subsidiaries, as well as from parent company cash and cash
and short- and medium-term bank notes. The Company’s equivalents.
subsidiary banks also have significant correspondent banking Federal banking laws regulate the amount of dividends
networks and corporate accounts. Accordingly, the Company that may be paid by banking subsidiaries without prior
has access to national fed funds, funding through repurchase approval. The amount of dividends available to the parent
agreements and sources of more stable, regionally-based company from its banking subsidiaries after meeting the
certificates of deposit and commercial paper. regulatory capital requirements for well-capitalized banks
The Company’s ability to raise negotiated funding at was approximately $1.0 billion at December 31, 2005. For
competitive prices is influenced by rating agencies’ views of further information, see Note 24 of the Notes to
the Company’s credit quality, liquidity, capital and Consolidated Financial Statements.
earnings. On January 27, 2006, Standard & Poor’s Rating Refer to Table 20 for further information on significant
Services upgraded the Company’s credit ratings to contractual obligations at December 31, 2005.
AA–/A-1+. Standard & Poor’s also upgraded the Off-Balance Sheet Arrangements Off-balance sheet
Company’s primary banking subsidiaries to an AA long- arrangements include any contractual arrangement to which an
term debt rating. At January 27, 2006, the credit ratings unconsolidated entity is a party, under which the Company
outlook for the Company was considered ‘‘Stable’’ by has an obligation to provide credit or liquidity enhancements
Moody’s Investors Service, Standard & Poor’s and Fitch or market risk support. Off-balance sheet arrangements
Ratings. The debt ratings noted in Table 19, upgraded for include certain defined guarantees, asset securitization trusts
the Standard & Poor’s January of 2006 upgrade, reflect the and conduits. Off-balance sheet arrangements also include any
rating agencies’ recognition of the Company’s sector-leading obligation under a variable interest held by an unconsolidated
core earnings performance and lower credit risk profile. entity that provides financing, liquidity, credit enhancement or
The parent company’s routine funding requirements market risk support.
consist primarily of operating expenses, dividends to In the ordinary course of business, the Company enters
shareholders, debt service, repurchases of common stock into an array of commitments to extend credit, letters of
and funds used for acquisitions. The parent company credit and various forms of guarantees that may be
obtains funding to meet its obligations from dividends considered off-balance sheet arrangements. The nature and
48 U.S. BANCORP
Table 19