US Bank 2013 Annual Report Download - page 60

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 its 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.
On June 18, 2013, the Company announced its Board of
Directors had approved an 18 percent increase in the
Company’s dividend rate per common share, from $.195 per
quarter to $.23 per quarter.
The Company repurchased approximately 65 million
shares of its common stock in 2013, compared with
approximately 59 million shares in 2012. The average price
paid for the shares repurchased in 2013 was $35.55 per
share, compared with $31.78 per share in 2012. As of
December 31, 2013, the approximate dollar value of shares
that may yet be purchased by the Company under the current
Board of Directors approved authorization was $488 million.
For a more complete analysis of activities impacting
shareholders’ equity and capital management programs, refer
to Note 14 of the Notes to Consolidated Financial Statements.
Total U.S. Bancorp shareholders’ equity was
$41.1 billion at December 31, 2013, compared with
$39.0 billion at December 31, 2012. The increase was
primarily the result of corporate earnings, partially offset by
dividends and common share repurchases.
As of December 31, 2013, the regulatory capital
requirements effective for the Company follow the Capital
Accord of the Basel Committee on Banking Supervision
(“Basel I”). Under Basel I, 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 the
Company’s bank subsidiary 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 its covered subsidiary
bank.
In June 2012, U.S. banking regulators proposed
regulatory enhancements to the regulatory capital
requirements for U.S. banks, which implement aspects of
Basel III and the Dodd-Frank Act, such as redefining the
regulatory capital elements and minimum capital ratios,
introducing regulatory capital buffers above those
minimums, revising the rules for calculating risk-weighted
assets and introducing a new common equity tier 1 ratio. In
October 2013, U.S. banking regulators approved final
regulatory capital rule enhancements, effective for the
Company beginning January 1, 2014, that are largely
consistent with the June 2012 proposals.
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,
Government National Mortgage Association, Federal Home
Loan Mortgage Corporation and the Federal National
Mortgage Association. At December 31, 2013, U.S. Bank
National Association met these requirements.
Table 22 provides a summary of regulatory capital ratios
defined by banking regulators under the FDIC Improvement
Act prompt corrective action provisions applicable to all
banks in effect at December 31, 2013 and 2012, including
Tier 1 and total risk-based capital ratios.
The Company believes certain capital ratios in addition to
regulatory capital ratios defined by banking regulators under
the FDIC Improvement Act prompt corrective action provisions
are useful in evaluating its capital adequacy. The Company’s
Tier 1 common equity (using Basel I definition) and tangible
common equity, as a percent of risk-weighted assets, were 9.4
percent and 9.1 percent, respectively, at December 31, 2013,
compared with 9.0 percent and 8.6 percent, respectively, at
December 31, 2012. The Company’s tangible common equity
divided by tangible assets was 7.7 percent at December 31,
2013, compared with 7.2 percent at December 31, 2012. The
Company’s estimated common equity tier 1 to risk-weighted
assets ratio using final rules for the Basel III standardized
approach was 8.8 percent at December 31, 2013. Refer to
“Non-GAAP Financial Measures” for further information
regarding the calculation of these ratios.
58 U.S. BANCORP