US Bank 2014 Annual Report Download - page 66

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 17, 2014, the Company announced its Board of
Directors had approved a 6.5 percent increase in the
Company’s dividend rate per common share, from $.23 per
quarter to $.245 per quarter.
The Company repurchased approximately 54 million
shares of its common stock in 2014, compared with
approximately 65 million shares in 2013. The average price
paid for the shares repurchased in 2014 was $41.65 per
share, compared with $35.55 per share in 2013. As of
December 31, 2014, the approximate dollar value of shares
that may yet be purchased by the Company under the current
Board of Directors approved authorization was $520 million.
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
$43.5 billion at December 31, 2014, compared with
$41.1 billion at December 31, 2013. The increase was
primarily the result of corporate earnings 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.
Prior to 2014, the regulatory capital requirements
effective for the Company followed the Capital Accord of the
Basel Committee on Banking Supervision (“Basel I”).
Beginning January 1, 2014, the regulatory capital
requirements effective for the Company follow Basel III,
subject to certain transition provisions from Basel I over the
following four years to full implementation by January 1,
2018. Regulatory capital rule changes implemented under
Basel III include redefining the regulatory capital elements
and minimum capital ratios, introducing regulatory capital
buffers above those minimums, revising rules for risk-
weighted assets and requiring a new common equity tier 1
capital ratio. In addition, Basel III includes two
comprehensive methodologies for calculating risk-weighted
assets: a general standardized approach and more risk-
sensitive advanced approaches. As of April 1, 2014, the
Company exited its parallel run qualification period, resulting
in its capital adequacy now being evaluated against the Basel
III methodology that is most restrictive. Under Basel III,
banking regulators define minimum capital requirements for
banks and financial services holding companies. These
requirements are expressed in the form of a minimum
common equity tier 1 capital ratio, tier 1 capital ratio, total
risk-based capital ratio, and tier 1 leverage ratio. The
minimum required level for these ratios at December 31,
2014, was 4.0 percent, 5.5 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. At December 31, 2014, the minimum “well-
capitalized” threshold for the tier 1 capital ratio, total risk-
based capital ratio, and tier 1 leverage ratio was 6.0 percent,
10.0 percent, 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.
As an approved mortgage seller and servicer, U.S. Bank
National Association, through its mortgage banking division,
is required to maintain various levels of shareholder’s 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, 2014, U.S. Bank
National Association met these requirements.
Table 22 provides a summary of statutory regulatory
capital ratios in effect for the Company at December 31, 2014
and 2013.
During 2014, U.S. banking regulators approved a final
regulatory Supplementary Leverage Ratio (“SLR”)
requirement for banks calculating capital adequacy using
advanced approaches under Basel III. The SLR is defined as
tier 1 capital divided by total leverage exposure, which
includes both on- and off-balance sheet exposures. The
Company is required to calculate and report its SLR
beginning in the first quarter 2015; however, the Company is
not subject to the minimum SLR requirement until January 1,
2018. The Company believes it currently exceeds the
applicable minimum SLR requirement.
The Company believes certain capital ratios in addition
to statutory regulatory capital ratios are useful in evaluating
its capital adequacy. The Company’s tangible common equity,
as a percent of tangible assets and as a percent of risk-
weighted assets calculated under the standardized approach,
were 7.5 percent and 9.3 percent, respectively, at
December 31, 2014, compared with 7.7 percent and
9.1 percent, respectively, at December 31, 2013. The
Company’s common equity tier 1 to risk-weighted assets
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