US Bank 2011 Annual Report Download - page 57

guarantee obligation to indemnify Visa Inc. for potential
losses arising from antitrust lawsuits challenging the practices
of Visa U.S.A. Inc., MasterCard International, the Company
and several other Visa U.S.A. Inc. member banks (the “Visa
Litigation”). The indemnification by the Company and other
Visa U.S.A. Inc. member banks has no maximum amount.
Refer to Note 22 in the Notes to Consolidated Financial
Statements for further details regarding guarantees, other
commitments, and contingent liabilities, including maximum
potential future payments and current carrying amounts.
Capital Management The Company is committed to
managing capital to maintain strong protection for depositors
and creditors and for maximum shareholder benefit. 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, non-cumulative perpetual
preferred stock, common stock and other capital instruments.
The Company repurchased approximately 22 million
shares of its common stock in 2011, compared with
approximately 1 million shares in 2010. The average price
paid for the shares repurchased in 2011 was $24.71 per share,
compared with $23.88 per share in 2010. As of December 31,
2011, the Company had approximately 29 million shares that
may yet be purchased under the current Board of Directors
approved authorization. For a more complete analysis of
activities impacting shareholders’ equity and capital
management programs, refer to Note 15 of the Notes to
Consolidated Financial Statements.
Total U.S. Bancorp shareholders’ equity was $34.0 billion
at December 31, 2011, compared with $29.5 billion at
December 31, 2010. The increase was primarily the result of
corporate earnings, the issuance of $.7 billion of
non-cumulative perpetual preferred stock to extinguish certain
junior subordinated debentures and changes in unrealized
gains and losses on available-for-sale investment securities
included in other comprehensive income, partially offset by
dividends and common share repurchases.
Banking regulators define minimum capital requirements
for banks and financial services holding companies. These
requirements are expressed in the form of a minimum Tier 1
capital ratio, total risk-based capital ratio, and Tier 1 leverage
ratio. The minimum required level for these ratios is 4.0
percent, 8.0 percent, and 4.0 percent, respectively. The
Company targets its regulatory capital levels, at both the bank
and bank holding company level, to exceed the “well-
capitalized” threshold for these ratios of 6.0 percent,
10.0 percent, and 5.0 percent, respectively. The most recent
notification from the Office of the Comptroller of the
Currency categorized each of the Company’s banks as “well-
capitalized”, under the FDIC Improvement Act prompt
corrective action provisions that are applicable to all banks.
There are no conditions or events since that notification that
management believes have changed the risk-based category of
any covered subsidiary banks.
As an approved mortgage seller and servicer, U.S. Bank
National Association, through its mortgage banking division,
is required to maintain various levels of shareholders’ equity,
as specified by various agencies, including the United States
Department of Housing and Urban Development,
TABLE 22 Regulatory Capital Ratios
At December 31 (Dollars in Millions) 2011 2010
U.S. Bancorp
Tier 1 capital ................................................................................................... $29,173 $25,947
As a percent of risk-weighted assets ........................................................................ 10.8% 10.5%
As a percent of adjusted quarterly average assets (leverage ratio) .......................................... 9.1% 9.1%
Total risk-based capital ........................................................................................ $36,067 $33,033
As a percent of risk-weighted assets ........................................................................ 13.3% 13.3%
Bank Subsidiaries
U.S. Bank National Association
Tier 1 capital .............................................................................................. 9.6% 9.0%
Total risk-based capital ................................................................................... 12.5 12.4
Leverage .................................................................................................. 8.1 7.7
U.S. Bank National Association ND
Tier 1 capital .............................................................................................. 13.4% 14.1%
Total risk-based capital ................................................................................... 16.4 17.2
Leverage .................................................................................................. 12.9 13.7
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
U.S. BANCORP 55