US Bank 2013 Annual Report Download - page 57

TABLE 20 Debt Ratings
Moody’s
Standard &
Poor’s Fitch
Dominion
Bond
Rating Service
U.S. Bancorp
Short-term borrowings .......................................................... F1+ R-1 (middle)
Senior debt and medium-term notes ........................................... A1 A+ AA- AA
Subordinated debt ............................................................. A2 A A+ AA (low)
Preferred stock ................................................................. Baa1 BBB+ BBB A
Commercial paper ............................................................. P-1 A-1 F1+ R-1 (middle)
U.S. Bank National Association
Short-term time deposits ....................................................... P-1 A-1+ F1+ R-1 (high)
Long-term time deposits ....................................................... Aa3 AA- AA AA (high)
Bank notes ..................................................................... Aa3/P-1 AA-/A-1+ AA-/F1+ AA (high)
Subordinated debt ............................................................. A1 A+ A+ AA
Senior unsecured debt ......................................................... Aa3 AA- AA- AA (high)
Commercial paper ............................................................. P-1 A-1+ F1+ R-1 (high)
national market retail and institutional savings certificates and
short-term and medium-term notes. The Company also
maintains a significant correspondent banking network and
relationships. Accordingly, the Company has access to
national federal funds, funding through repurchase
agreements and sources of stable, regionally-based
certificates of deposit and commercial paper.
The Company regularly projects its funding needs under
various stress scenarios and maintains contingency plans
consistent with the Company’s access to diversified sources
of contingent funding. The Company maintains a substantial
level of total available liquidity in the form of on-balance sheet
and off-balance sheet funding sources. These include cash at
the Federal Reserve Bank, unencumbered liquid assets, and
capacity to borrow at the Federal Home Loan Bank (“FHLB”)
and the Federal Reserve Bank’s Discount Window.
Unencumbered liquid assets in the Company’s available-for-
sale and held-to-maturity investment portfolios provide asset
liquidity through the Company’s ability to sell the securities or
pledge and borrow against them. At December 31, 2013, the
fair value of unencumbered available-for-sale and held-to-
maturity investment securities totaled $61.7 billion, compared
with $54.1 billion at December 31, 2012. Refer to Table 13 and
“Balance Sheet Analysis” for further information on investment
securities maturities and trends. Asset liquidity is further
enhanced by the Company’s ability to pledge loans to access
secured borrowing facilities through the FHLB and Federal
Reserve Bank. At December 31, 2013, the Company could
have borrowed an additional $69.7 billion at the FHLB and
Federal Reserve Bank based on collateral available for
additional borrowings.
The Company’s diversified deposit base provides a
sizeable source of relatively stable and low-cost funding,
while reducing the Company’s reliance on the wholesale
markets. Total deposits were $262.1 billion at December 31,
2013, compared with $249.2 billion at December 31, 2012.
Refer to Table 14 and “Balance Sheet Analysis” for further
information on the Company’s deposit trends.
Additional funding is provided by long-term debt and
short-term borrowings. Long-term debt was $20.0 billion at
December 31, 2013, and is an important funding source
because of its multi-year borrowing structure. Refer to Note
12 of the Notes to Consolidated Financial Statements for
information on the terms and maturities of the Company’s
long-term debt issuances and “Balance Sheet Analysis” for
discussion on long-term debt trends. Short-term borrowings
were $27.6 billion at December 31, 2013, and supplement
the Company’s other funding sources. Refer to Note 11 of
the Notes to Consolidated Financial Statements and
“Balance Sheet Analysis” for information on the terms and
trends of the Company’s short-term borrowings.
The Company’s ability to raise negotiated funding at
competitive prices is influenced by rating agencies’ views of
the Company’s credit quality, liquidity, capital and earnings.
Table 20 details the rating agencies’ most recent
assessments.
In addition to assessing liquidity risk on a consolidated
basis, the Company monitors the parent company’s liquidity.
The parent company’s routine funding requirements consist
primarily of operating expenses, dividends paid to
shareholders, debt service, repurchases of common stock
and funds used for acquisitions. The parent company
obtains funding to meet its obligations from dividends
collected from its subsidiaries and the issuance of debt
securities. The Company maintains sufficient funding to meet
expected parent company obligations, without access to the
wholesale funding markets or dividends from subsidiaries,
for 12 months when forecasted payments of common stock
dividends are included and 24 months assuming dividends
were reduced to zero. The parent company currently has
available funds considerably greater than the amounts
required to satisfy these conditions.
U.S. BANCORP 55