American Express 2015 Annual Report Download - page 162

NOTE 22
EARNINGS PER COMMON SHARE (EPS)
The computations of basic and diluted EPS for the years ended December 31 were as follows:
(Millions, except per share amounts) 2015 2014 2013
Numerator:
Basic and diluted:
Net income ................................................................ $ 5,163 $5,885 $5,359
Preferred dividends ......................................................... (62) ——
Net income available to common shareholders ................................. 5,101 5,885 5,359
Earnings allocated to participating share awards (a) .............................. (38) (46) (47)
Net income attributable to common shareholders ............................... $5,063 $5,839 $ 5,312
Denominator: (a)
Basic: Weighted-average common stock ......................................... 999 1,045 1,082
Add: Weighted-average stock options (b) ......................................... 467
Diluted ...................................................................... 1,003 1,051 1,089
Basic EPS ..................................................................... $ 5.07 $ 5.58 $ 4.91
Diluted EPS .................................................................... $ 5.05 $ 5.56 $ 4.88
(a) The Company’s unvested restricted stock awards, which include the right to receive non-forfeitable dividends or dividend equivalents, are
considered participating securities. Calculations of EPS under the two-class method exclude from the numerator any dividends paid or owed on
participating securities and any undistributed earnings considered to be attributable to participating securities. The related participating
securities are similarly excluded from the denominator.
(b) The dilutive effect of unexercised stock options excludes from the computation of EPS 0.5 million, 0.2 million and 0.1 million of options for the
years ended December 31, 2015, 2014 and 2013, respectively, because inclusion of the options would have been anti-dilutive.
For the years ended December 31, 2015, 2014 and 2013, the Company met specified performance measures
related to the $750 million of Subordinated Debentures issued in 2006, and maturing in 2036. If the performance
measures were not achieved in any given quarter, the Company would be required to issue common shares and apply
the proceeds to make interest payments.
NOTE 23
REGULATORY MATTERS AND CAPITAL ADEQUACY
The Company is supervised and regulated by the Federal Reserve and is subject to the Federal Reserve’s
requirements for risk-based capital and leverage ratios. The Company’s two U.S. bank operating subsidiaries,
American Express Centurion Bank (Centurion Bank) and American Express Bank, FSB (FSB) (together, the Banks),
are subject to supervision and regulation, including similar regulatory capital requirements by the Federal Deposit
Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), respectively.
Under the risk-based capital guidelines of the Federal Reserve, the Company is required to maintain minimum
ratios of Common Equity Tier 1 (CET1), Tier 1 and Total (Tier 1 plus Tier 2) capital to risk-weighted assets, as well as a
minimum leverage ratio (Tier 1 capital to average adjusted on-balance sheet assets).
Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional,
discretionary actions by regulators, that, if undertaken, could have a direct material effect on the Company’s and the
Banks’ operating activities.
As of December 31, 2015 and 2014, the Company and the Banks met all capital requirements to which each was
subject and maintained regulatory capital ratios in excess of those required to qualify as well capitalized.
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