US Bank 2005 Annual Report Download - page 77

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The minimum future lease payments to be received from sales-type and direct financing leases were as follows at
December 31, 2005:
(Dollars in Millions)
2006 ************************************************************************************************************************ $2,489
2007 ************************************************************************************************************************ 3,084
2008 ************************************************************************************************************************ 3,844
2009 ************************************************************************************************************************ 2,319
2010 ************************************************************************************************************************ 1,067
Thereafter ******************************************************************************************************************** 220
financial statements. The conduit held assets of $3.8 billion
ACCOUNTING FOR TRANSFERS AND
at December 31, 2005, and $5.7 billion at December 31,
SERVICING OF FINANCIAL ASSETS
2004. These investment securities include primarily
AND EXTINGUISHMENTS OF
(i) private label asset-backed securities, which are insurance
LIABILITIES
‘‘wrapped’’ by AAA/Aaa-rated monoline insurance
Financial Asset Sales companies and (ii) government agency mortgage-backed
securities and collateralized mortgage obligations. The
When the Company sells financial assets, it may retain
conduit had commercial paper liabilities of $3.8 billion at
interest-only strips, servicing rights, residual rights to a cash
December 31, 2005, and $5.7 billion at December 31,
reserve account, and/or other retained interests in the sold
2004. The Company benefits by transferring the investment
financial assets. The gain or loss on sale depends in part on
securities into a conduit that provides diversification of
the previous carrying amount of the financial assets
funding sources in a capital-efficient manner and the
involved in the transfer and is allocated between the assets
generation of income.
sold and the retained interests based on their relative fair
The Company provides a liquidity facility to the
values at the date of transfer. Quoted market prices are
conduit. Utilization of the liquidity facility would be
used to determine retained interest fair values when readily
triggered if the conduit is unable to, or does not, issue
available. Since quotes are generally not available for
commercial paper to fund its assets. A liability for the
retained interests, the Company estimates fair value based
estimate of the potential risk of loss the Company has as
on the present value of future expected cash flows using
the liquidity facility provider is recorded on the balance
management’s best estimates of the key assumptions
sheet in other liabilities. The liability is adjusted downward
including credit losses, prepayment speeds, forward yield
over time as the underlying assets pay down with the offset
curves, and discount rates commensurate with the risks
recognized as other noninterest income. The liability for the
involved. Retained interests and liabilities are recorded at
liquidity facility was $20 million at December 31, 2005,
fair value using a discounted cash flow methodology at
and $32 million at December 31, 2004. In addition, the
inception and are evaluated at least quarterly thereafter.
Company recorded at fair value its retained residual interest
Conduits and Securitization The Company sponsors an off- in the investment securities conduit of $28 million at
balance sheet conduit, a qualified special purpose entity December 31, 2005, and $57 million at December 31,
(‘‘QSPE’’), to which it transferred high-grade investment 2004. The Company recorded $17 million from the conduit
securities, funded by the issuance of commercial paper. during 2005 and $25 million during 2004, for revenues
Because QSPE’s are exempt from consolidation under the related to the conduit including fees for servicing,
provisions of Financial Interpretation No. 46, management, administration and accretion income from
‘‘Consolidation of Variable Interest Entities (‘‘FIN 46’’), the retained interests.
Company does not consolidate the conduit structure in its
U.S. BANCORP 75
Note 9