US Bank 2004 Annual Report Download - page 102
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Please find page 102 of the 2004 US Bank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.The contract or notional amounts of commitments to
Guarantees and Contingent
extend credit and letters of credit at December 31, 2004,
Liabilities
were as follows:
COMMITMENTS TO EXTEND CREDIT
Less Than After
(Dollars in Millions) One Year (a) One Year Total
Commitments to extend credit are legally binding and
Commitments to extend credit
generally have fixed expiration dates or other termination Commercial ************* $ 23,453 $33,771 $57,224
clauses. The contractual amount represents the Company’s Corporate and purchasing
cards**************** 12,941 25 12,966
exposure to credit loss, in the event of default by the Consumer credit cards**** 28,074 — 28,074
borrower. The Company manages this credit risk by using Other consumer ********* 2,100 11,355 13,455
the same credit policies it applies to loans. Collateral is Letters of credit
Standby **************** 5,083 5,515 10,598
obtained to secure commitments based on management’s Commercial ************* 327 36 363
credit assessment of the borrower. The collateral may
(a) Discretionary facilities are included in less than one year.
include marketable securities, receivables, inventory,
equipment and real estate. Since the Company expects many
LEASE COMMITMENTS
of the commitments to expire without being drawn, total
commitment amounts do not necessarily represent the Rental expense for operating leases amounted to
Company’s future liquidity requirements. In addition, the $184.6 million in 2004, $205.0 million in 2003 and
commitments include consumer credit lines that are $201.5 million in 2002. Future minimum payments, net of
cancelable upon notification to the consumer. sublease rentals, under capitalized leases and noncancelable
operating leases with initial or remaining terms of one year
LETTERS OF CREDIT or more, consisted of the following at December 31, 2004:
Capitalized Operating
Standby letters of credit are commitments the Company (Dollars in Millions) Leases Leases
issues to guarantee the performance of a customer to a 2005 **************************** $ 7.9 $ 197.9
third-party. The guarantees frequently support public and 2006 **************************** 7.4 183.7
private borrowing arrangements, including commercial 2007 **************************** 6.6 167.6
paper issuances, bond financings and other similar 2008 **************************** 6.2 146.6
2009 **************************** 6.1 125.8
transactions. The Company issues commercial letters of
Thereafter ************************ 32.4 596.0
credit on behalf of customers to ensure payment or
Total minimum lease payments ****** 66.6 $1,417.6
collection in connection with trade transactions. In the
Less amount representing interest *** 24.6
event of a customer’s nonperformance, the Company’s
Present value of net minimum lease
credit loss exposure is the same as in any extension of payments ********************** $42.0
credit, up to the letter’s contractual amount. Management
assesses the borrower’s credit to determine the necessary
collateral, which may include marketable securities, GUARANTEES
receivables, inventory, equipment and real estate. Since the Guarantees are contingent commitments issued by the
conditions requiring the Company to fund letters of credit Company to customers or other third-parties. The
may not occur, the Company expects its liquidity Company’s guarantees primarily include parent guarantees
requirements to be less than the total outstanding related to subsidiaries’ third-party borrowing arrangements;
commitments. The maximum potential future payments third-party performance guarantees inherent in the
guaranteed by the Company under standby letter of credit Company’s business operations such as indemnified
arrangements at December 31, 2004, were approximately securities lending programs and merchant charge-back
$10.6 billion with a weighted-average term of guarantees; indemnification or buy-back provisions related
approximately 22 months. The estimated fair value of to certain asset sales; and contingent consideration
standby letters of credit was approximately $75.5 million at arrangements related to acquisitions. For certain guarantees,
December 31, 2004. the Company has recorded a liability related to the
potential obligation, or has access to collateral to support
the guarantee or through the exercise of other recourse
provisions can offset some or all of the maximum potential
future payments made under these guarantees.
Third-Party Borrowing Arrangements The Company
provides guarantees to third-parties as a part of certain
100 U.S. BANCORP
Note 24