US Bank 2008 Annual Report Download - page 94

The following table provides the components of the
Company’s regulatory capital:
(Dollars in Millions) 2008 2007
December 31
Tier 1 Capital
Common shareholders’ equity . . . . . . $ 18,369 $ 20,046
Qualifying preferred stock . . . . . . . . . 7,931 1,000
Qualifying trust preferred securities . . 4,024 4,024
Minority interests . . . . . . . . . . . . . . . 693 695
Less intangible assets
Goodwill . . . . . . . . . . . . . . . . . . (8,153) (7,534)
Other disallowed intangible
assets . . . . . . . . . . . . . . . . . (1,479) (1,421)
Other (a) . . . . . . . . . . . . . . . . . . . . 3,041 729
Total Tier 1 Capital . . . . . . . . . 24,426 17,539
Tier 2 Capital
Allowance for credit losses . . . . . . . . 2,892 2,260
Eligible subordinated debt . . . . . . . . . 5,579 6,126
Other . . . . . . . . . . . . . . . . . . . . . . – –
Total Tier 2 capital . . . . . . . . . 8,471 8,386
Total Risk Based Capital . . . . . $ 32,897 $ 25,925
Risk-Weighted Assets ........... $230,627 $212,592
(a) Includes the impact of items included in other comprehensive income (loss), such as
unrealized gains (losses) on available-for-sale securities, accumulated net gains on cash
flow hedges, pension liability adjustments, etc.
Minority interests principally represent preferred stock of
consolidated subsidiaries. During 2006, the Company’s
primary banking subsidiary formed USB Realty Corp., a real
estate investment trust, for the purpose of issuing
5,000 shares of Fixed-to-Floating Rate Exchangeable Non-
cumulative Perpetual Series A Preferred Stock with a
liquidation preference of $100,000 per share (“Series A
Preferred Securities”) to third party investors, and investing
the proceeds in certain assets, consisting predominately of
mortgage-backed securities from the Company. Dividends on
the Series A Preferred Securities, if declared, will accrue and
be payable quarterly, in arrears, at a rate per annum of
6.091 percent from December 22, 2006 to, but excluding,
January 15, 2012. After January 15, 2012, the rate will be
equal to three-month LIBOR for the related dividend period
plus 1.147 percent. If USB Realty Corp. has not declared a
dividend on the Series A Preferred Securities before the
dividend payment date for any dividend period, such
dividend shall not be cumulative and shall cease to accrue
and be payable, and USB Realty Corp. will have no
obligation to pay dividends accrued for such dividend
period, whether or not dividends on the Series A Preferred
Securities are declared for any future dividend period.
The Series A Preferred Securities will be redeemable, in
whole or in part, at the option of USB Realty Corp. on the
dividend payment date occurring in January 2012 and each
fifth anniversary thereafter, or in whole but not in part, at
the option of USB Realty Corp. on any dividend date before
or after January 2012 that is not a five-year date. Any
redemption will be subject to the approval of the Office of
the Comptroller of the Currency.
Note 16 EARNINGS PER SHARE
The components of earnings per share were:
(Dollars and Shares in Millions, Except Per Share Data) 2008 2007 2006
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,946 $4,324 $4,751
Preferred dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (119) (60) (48)
Accretion of preferred stock discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) – –
Net income applicable to common equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,823 $4,264 $4,703
Average common shares outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,742 1,735 1,778
Net effect of the exercise and assumed purchase of stock awards and conversion of outstanding
convertible notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 23 26
Average diluted common shares outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,757 1,758 1,804
Earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.62 $ 2.46 $ 2.64
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.61 $ 2.43 $ 2.61
For the years ended December 31, 2008, 2007 and 2006,
options and warrants to purchase 67 million, 13 million and
1 million shares, respectively, were outstanding but not
included in the computation of diluted earnings per share
because they were antidilutive. Convertible senior debentures
that could potentially be converted into shares of the
Company’s common stock pursuant to specified formulas,
were not included in the computation of diluted earnings per
share to the extent the conversions were antidilutive.
Note 17 EMPLOYEE BENEFITS
Employee Investment Plan The Company has a defined
contribution retirement savings plan which allows qualified
employees to make contributions up to 75 percent of their
annual compensation, subject to Internal Revenue Service
limits, through salary deductions under Section 401(k) of the
Internal Revenue Code. Employee contributions are invested,
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