American Express 2011 Annual Report Download - page 101

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AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the regulatory capital ratios for the Company and the Banks:
(Millions, except percentages)
Tier 1
Capital
Total
capital
Tier 1 capital
ratio
Total capital
ratio
Tier 1
leverage ratio
December 31, 2011:
American Express Company $ 14,881 $ 17,271 12.3% 14.3% 10.2%
American Express Centurion Bank $ 6,029 $ 6,431 18.8% 20.1% 19.1%
American Express Bank, FSB $ 6,493 $ 7,363 17.4% 19.8% 18.4%(a)
December 31, 2010:
American Express Company $ 13,100 $ 15,528 11.1% 13.1% 9.3%
American Express Centurion Bank $ 5,771 $ 6,170 18.3% 19.5% 19.4%
American Express Bank, FSB $ 5,586 $ 6,424 16.3% 18.8% 16.1%(a)
Well-capitalized ratios(b) 6.0% 10.0% 5.0%(c)
Minimum capital ratios(b) 4.0% 8.0% 4.0%
(a) FSB leverage ratio represents Tier 1 core capital ratio (as defined by OCC regulations applicable to federal savings banks), calculated similarlytoTier1leverageratio.
(b) As defined by the regulations issued by the Federal Reserve, OCC and FDIC.
(c) Represents requirements for banking subsidiaries to be considered “well capitalized” pursuant to regulations issued under the Federal Deposit Insurance Corporation
Improvement Act. There is no “well capitalized” definition for the Tier 1 leverage ratio for a bank holding company.
RESTRICTED NET ASSETS OF SUBSIDIARIES
Certain of the Company’s subsidiaries are subject to restrictions
on the transfer of net assets under debt agreements and
regulatory requirements. These restrictions have not had any
effect on the Company’s shareholder dividend policy and
management does not anticipate any impact in the future.
Procedures exist to transfer net assets between the Company and
its subsidiaries, while ensuring compliance with the various
contractual and regulatory constraints. As of December 31, 2011,
the aggregate amount of net assets of subsidiaries that are
restricted to be transferred to American Express’ Parent
Company (Parent Company) was approximately $9.4 billion.
BANK HOLDING COMPANY DIVIDEND
RESTRICTIONS
The Company is limited in its ability to pay dividends by the
Federal Reserve which could prohibit a dividend that would be
considered an unsafe or unsound banking practice. It is the
policy of the Federal Reserve that bank holding companies
generally should pay dividends on common stock only out of net
income available to common shareholders generated over the
past year, and only if prospective earnings retention is consistent
with the organization’s current and expected future capital
needs, asset quality and overall financial condition. Moreover,
bank holding companies are required by statue to be a source of
strength to their insured depository institution subsidiaries and
should not maintain dividend levels that undermine their ability
to do so. On an annual basis, the Company is required to
develop and maintain a capital plan, which includes planned
dividends over a two-year horizon, and to submit the capital
plan to the Federal Reserve for approval.
BANKS’ DIVIDEND RESTRICTIONS
In the year ended December 31, 2011, Centurion Bank and FSB
paid dividends from retained earnings to its parent of $1.5
billion and $550 million, respectively. No dividends were paid in
2010 and 2009.
The Banks are subject to statutory and regulatory limitations
on their ability to pay dividends. The total amount of dividends
which may be paid at any date, subject to supervisory
considerations of the Banks’ regulators, is generally limited to
the retained earnings of the respective bank. As of December 31,
2011 and 2010, the Banks’ retained earnings, in the aggregate,
available for the payment of dividends were $4.6 billion and $3.6
billion, respectively. In determining the dividends to pay its
parent, the Banks must also consider the effects on applicable
risk-based capital and leverage ratio requirements, as well as
policy statements of the federal regulatory agencies. In addition,
the Banks’ banking regulators have authority to limit or prohibit
the payment of a dividend by the Banks under a number of
circumstances, including, if, in the banking regulator’s opinion,
payment of a dividend would constitute an unsafe or unsound
banking practice in light of the financial condition of the
banking organization.
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