American Express 2015 Annual Report Download - page 163

The following table presents the regulatory capital ratios for the Company and the Banks:
(Millions, except percentages) CET1
capital Tier 1 capital Total capital
CET1
capital
ratio
Tier 1
capital
ratio
Total
capital
ratio
Tier 1
leverage
ratio
December 31, 2015: (a)
American Express Company .................... $16,747 $18,265 $20,551 12.4% 13.5% 15.2% 11.7%
American Express Centurion Bank ............... 6,013 6,013 6,460 16.9 16.9 18.2 17.7
American Express Bank, FSB .................... 6,927 6,927 7,601 13.7 13.7 15.1 13.2
December 31, 2014: (a)
American Express Company .................... $17,525 $ 18,176 $20,801 13.1% 13.6% 15.6% 11.8%
American Express Centurion Bank ............... 6,174 6,174 6,584 18.8 18.8 20.1 18.7
American Express Bank, FSB .................... 6,722 6,722 7,604 14.2 14.2 16.0 15.1
Well-capitalized ratios (b) ......................... 6.5%(c) 8.0% 10.0% 5.0%(d)
Minimum capital ratios (b) ......................... 4.5% 6.0% 8.0% 4.0%
(a) Beginning in 2015, as a Basel III Advanced Approaches institution, capital ratios are reported using Basel III capital definitions, inclusive of
transition provisions, and risk-weighted assets using the Basel III Standardized Approaches. As of December 31, 2014, capital ratios were
reported using Basel III capital definitions, inclusive of transition provisions and Basel I risk-weighted assets.
(b) As defined by the regulations issued by the Federal Reserve, OCC and FDIC for the year ended December 31, 2015.
(c) Beginning January 1, 2015, Basel III CET1 well-capitalized ratios became relevant capital measures under the prompt and corrective action
requirements defined by the regulations for Advanced Approaches institutions.
(d) 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, 2015, the aggregate amount of net assets of subsidiaries that are restricted to be
transferred to the Company was approximately $11.3 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 preferred and 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 statute 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.
BANKS’ DIVIDEND RESTRICTIONS
In the years ended December 31, 2015 and 2014, Centurion Bank paid dividends from retained earnings to its
parent of $2.0 billion and $1.9 billion, respectively, and FSB paid dividends from retained earnings to its parent of $2.2
billion and $2.1 billion, respectively.
The Banks are subject to statutory and regulatory limitations on their ability to pay dividends. The total amount of
dividends that 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, 2015 and 2014, the Banks’ retained
earnings, in the aggregate, available for the payment of dividends were $3.2 billion and $3.6 billion, respectively. In
determining the dividends to pay their 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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