US Bank 2006 Annual Report Download - page 116

companies owned by U.S. Bancorp to better satisfy the hazardous or toxic substances or chemical releases at a
Company’s customer needs. Laws that restrict the ability of property. The costs associated with investigation or
the companies owned by U.S. Bancorp to share information remediation activities could be substantial. In addition, if
about customers could negatively affect the Company’s the Company is the owner or former owner of a
revenue and profit. contaminated site, it may be subject to common law claims
by third parties based on damages and costs resulting from
The Company’s business could suffer if the Company fails environmental contamination emanating from the property.
to attract and retain skilled people. The Company’s success If the Company becomes subject to significant
depends, in large part, on its ability to attract and retain environmental liabilities, its financial condition and results
key people. Competition for the best people in most of operations could be adversely affected.
activities the Company engages in can be intense. The
Company may not be able to hire the best people or to A natural disaster could harm the Company’s business.
keep them. Natural disasters could harm the Company’s operations
through interference with communications, including the
The Company relies on other companies to provide key interruption or loss of the Company’s websites, which
components of the Company’s business infrastructure. would prevent the Company from gathering deposits,
Third party vendors provide key components of the originating loans and processing and controlling its flow of
Company’s business infrastructure such as internet business, as well as through the destruction of facilities and
connections, network access and mutual fund distribution. the Company’s operational, financial and management
While the Company has selected these third party vendors information systems.
carefully, it does not control their actions. Any problems
caused by these third parties, including as a result of their The Company faces systems failure risks as well as
not providing the Company their services for any reason or security risks, including ‘‘hacking’’ and ‘‘identity theft.’’
their performing their services poorly, could adversely affect The computer systems and network infrastructure the
the Company’s ability to deliver products and services to Company and others use could be vulnerable to unforeseen
the Company’s customers and otherwise to conduct its problems. These problems may arise in both our internally
business. Replacing these third party vendors could also developed systems and the systems of our third-party service
entail significant delay and expense. providers. Our operations are dependent upon our ability to
protect computer equipment against damage from fire,
Significant legal actions could subject the Company to power loss or telecommunication failure. Any damage or
substantial uninsured liabilities. The Company is from failure that causes an interruption in our operations could
time to time subject to claims related to its operations. adversely affect our business and financial results. In
These claims and legal actions, including supervisory actions addition, our computer systems and network infrastructure
by the Company’s regulators, could involve large monetary present security risks, and could be susceptible to hacking
claims and significant defense costs. To protect itself from or identity theft.
the cost of these claims, the Company maintains insurance
coverage in amounts and with deductibles that it believes The Company relies on dividends from its subsidiaries for
are appropriate for its operations. However, the Company’s its liquidity needs. The Company is a separate and distinct
insurance coverage may not cover all claims against the legal entity from its bank subsidiaries and non-bank
Company or continue to be available to the Company at a subsidiaries. The Company receives substantially all of its
reasonable cost. As a result, the Company may be exposed cash from dividends paid by its subsidiaries. These
to substantial uninsured liabilities, which could adversely dividends are the principal source of funds to pay dividends
affect the Company’s results of operations and financial on the Company’s stock and interest and principal on its
condition. debt. Various federal and state laws and regulations limit
the amount of dividends that our bank subsidiaries and
The Company is exposed to risk of environmental liability certain of our non-bank subsidiaries may pay to the
when it takes title to properties. In the course of the Company. Also, the Company’s right to participate in a
Company’s business, the Company may foreclose on and distribution of assets upon a subsidiary’s liquidation or
take title to real estate. As a result, the Company could be reorganization is subject to prior claims of the subsidiary’s
subject to environmental liabilities with respect to these creditors.
properties. The Company may be held liable to a
governmental entity or to third parties for property damage, The Company has non-banking businesses that are subject
personal injury, investigation and clean-up costs incurred by to various risks and uncertainties. The Company is a
these parties in connection with environmental diversified financial services company, and the Company’s
contamination or may be required to investigate or clean up business model is based on a mix of businesses that provide
114 U.S. BANCORP