US Bank 2008 Annual Report Download - page 56

balance sheet structure in an effort to minimize these risks
and ensure compliance with the requirements of the
structures. The Company uses its credit risk management
processes to evaluate the credit quality of underlying assets
and regularly forecasts cash flows to evaluate any potential
impairment of retained interests. Also, regulatory guidelines
require consideration of asset securitizations in the
determination of risk-based capital ratios. The Company
does not rely significantly on off-balance sheet arrangements
for liquidity or capital resources.
The Company sponsors an off-balance sheet conduit to
which it transferred high-grade investment securities, initially
funded by the issuance of commercial paper. These
investment securities include primarily (i) private label asset-
backed securities, which are guaranteed by third-party
insurers, and (ii) collateralized mortgage obligations. The
conduit held assets of $.8 billion at December 31, 2008, and
$1.2 billion at December 31, 2007. In March 2008, the
conduit ceased issuing commercial paper and began to draw
upon a Company-provided liquidity facility to replace
outstanding commercial paper as it matured. The draws
upon the liquidity facility resulted in the conduit becoming a
non-qualifying special purpose entity. However, the
Company is not the primary beneficiary and, therefore, does
not consolidate the conduit. At December 31, 2008, the
amount advanced to the conduit under the liquidity facility
was $.9 billion, which is recorded on the Company’s balance
sheet in commercial loans. Proceeds from the conduit’s
investment securities, including any guarantee payments, will
be used to repay draws on the liquidity facility. The
Company believes there is sufficient collateral to repay all of
the liquidity facility advances.
Capital Management The Company is committed to
managing capital for maximum shareholder benefit and
maintaining strong protection for depositors and creditors.
The Company continually assesses its business risks and
capital position. The Company also manages its capital to
exceed regulatory capital requirements for well-capitalized
bank holding companies. To achieve these capital goals, the
Company employs a variety of capital management tools,
including dividends, common share repurchases, and the
issuance of subordinated debt and other capital instruments.
At December 31, 2008, the Company’s tangible
common equity divided by tangible assets was 3.2 percent
(4.5 percent excluding accumulated other comprehensive
income (loss)).
On November 14, 2008, the Company issued
6.6 million shares of cumulative perpetual preferred stock
and related warrants to the United States Treasury under the
Capital Purchase Program of the Emergency Economic
Stabilization Act of 2008, for which it received total
proceeds of $6.6 billion in cash. Under the program, the
cumulative perpetual preferred stock’s dividend rate is
5 percent per annum for five years, increasing to 9 percent
per annum, thereafter, if the cumulative perpetual preferred
shares are not redeemed by the Company. In addition to the
cumulative perpetual preferred stock, the United States
Treasury received warrants entitling it to purchase, during
the next ten years, approximately 33 million shares of
common stock of the Company, at a price per common
share of $30.29. Participation in this program restricts the
54 U.S. BANCORP
Table 21 REGULATORY CAPITAL RATIOS
At December 31 (Dollars in Millions) 2008 2007
U.S. Bancorp
Tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,426 $17,539
As a percent of risk-weighted assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.6% 8.3%
As a percent of adjusted quarterly average assets (leverage ratio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.8% 7.9%
Total risk-based capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,897 $25,925
As a percent of risk-weighted assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.3% 12.2%
Bank Subsidiaries
U.S. Bank National Association
Tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6% 6.5%
Total risk-based capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.5 10.4
Leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 6.2
U.S. Bank National Association ND
Tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.3% 13.3%
Total risk-based capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.8 16.8
Leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.6 11.7
Bank Regulatory Capital Requirements Minimum
Well-
Capitalized
Tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.0% 6.0%
Total risk-based capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.0 10.0
Leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.0 5.0