US Bank 2015 Annual Report Download - page 146

Commitments to Extend Credit Commitments to extend
credit are legally binding and generally have fixed expiration
dates or other termination clauses. The contractual amount
represents the Company’s exposure to credit loss, in the
event of default by the borrower. The Company manages this
credit risk by using the same credit policies it applies to loans.
Collateral is obtained to secure commitments based on
management’s credit assessment of the borrower. The
collateral may include marketable securities, receivables,
inventory, equipment and real estate. Since the Company
expects many of the commitments to expire without being
drawn, total commitment amounts do not necessarily
represent the Company’s future liquidity requirements. In
addition, the commitments include consumer credit lines that
are cancelable upon notification to the consumer.
The contract or notional amounts of unfunded commitments
to extend credit at December 31, 2015, excluding those
commitments considered derivatives, were as follows:
Term
(Dollars in Millions)
Less Than
One Year
Greater Than
One Year Total
Commercial and
commercial real
estate loans ........ $25,917 $93,924 $119,841
Corporate and
purchasing card
loans(a) ............ 23,608 – 23,608
Residential
mortgages ......... 315 13 328
Retail credit card
loans(a) ............ 95,832 – 95,832
Other retail loans ..... 12,951 21,141 34,092
Covered loans ....... – 568 568
Other ............... 5,203 94 5,297
(a) Primarily cancelable at the Company’s discretion.
Lease Commitments Rental expense for operating leases
totaled $328 million in 2015, $326 million in 2014 and
$311 million in 2013. Future minimum payments, net of
sublease rentals, under capitalized leases and noncancelable
operating leases with initial or remaining terms of one year or
more, consisted of the following at December 31, 2015:
(Dollars in Millions)
Capitalized
Leases
Operating
Leases
2016 .............................. $ 14 $ 265
2017 .............................. 13 242
2018 .............................. 13 203
2019 .............................. 11 166
2020 .............................. 10 126
Thereafter .......................... 42 471
Total minimum lease payments ......... 103 $1,473
Less amount representing interest ....... 35
Present value of net minimum lease
payments ......................... $ 68
OTHER GUARANTEES AND CONTINGENT LIABILITIES
The following table is a summary of other guarantees and
contingent liabilities of the Company at December 31, 2015:
(Dollars in Millions)
Collateral
Held
Carrying
Amount
Maximum
Potential
Future
Payments
Standby letters of credit .... $ – $ 57 $13,020
Third party borrowing
arrangements ........... – – 8
Securities lending
indemnifications ......... 4,387 – 4,246
Asset sales ............... – 119 5,089
Merchant processing ....... 409 61 94,995
Contingent consideration
arrangements ........... – 2 2
Tender option bond program
guarantee .............. 2,254 – 2,183
Minimum revenue
guarantees ............. – 2 12
Other ................... – – 792
Letters of Credit Standby letters of credit are commitments
the Company issues to guarantee the performance of a
customer to a third party. The guarantees frequently support
public and private borrowing arrangements, including
commercial paper issuances, bond financings and other
similar transactions. The Company also issues and confirms
commercial letters of credit on behalf of customers to ensure
payment or collection in connection with trade transactions. In
the event of a customer’s or counterparty’s nonperformance,
the Company’s credit loss exposure is similar to that in any
extension of credit, up to the letter’s contractual amount.
Management assesses the borrower’s credit to determine the
necessary collateral, which may include marketable securities,
receivables, inventory, equipment and real estate. Since the
conditions requiring the Company to fund letters of credit may
not occur, the Company expects its liquidity requirements to
be less than the total outstanding commitments. The
maximum potential future payments guaranteed by the
Company under standby letter of credit arrangements at
December 31, 2015, were approximately $13.0 billion with a
weighted-average term of approximately 21 months. The
estimated fair value of standby letters of credit was
approximately $57 million at December 31, 2015.
The contract or notional amount of letters of credit at
December 31, 2015, were as follows:
Term
(Dollars in Millions)
Less Than
One Year
Greater
Than
One Year Total
Standby ................ $5,701 $7,319 $13,020
Commercial ............. 218 48 266
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