US Bank 2007 Annual Report Download - page 105

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, 2007, were
approximately $12.7 billion with a weighted-average term of
approximately 23 months. The estimated fair value of
standby letters of credit was $90 million at December 31,
2007.
The contract or notional amounts of commitments to extend
credit and letters of credit at December 31, 2007, were as
follows:
(Dollars in Millions)
Less Than
One Year
After
One Year Total
Commitments to extend credit
Commercial . . .......... $16,031 $43,636 $59,667
Corporate and purchasing
cards(a) . . .......... 11,364 – 11,364
Consumer credit cards . . . . . 54,363 – 54,363
Other consumer . . ....... 3,220 15,313 18,533
Letters of credit
Standby . .............. 6,633 6,021 12,654
Commercial . . .......... 298 57 355
(a) Primarily cancelable at the Company’s discretion.
LEASE COMMITMENTS
Rental expense for operating leases amounted to
$207 million in 2007, $193 million in 2006 and $192 million
in 2005. 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, 2007:
(Dollars in Millions)
Capitalized
Leases
Operating
Leases
2008 . . . . . . . . . . . . . . . . . . . . $11 $ 168
2009 . . . . . . . . . . . . . . . . . . . . 10 156
2010 . . . . . . . . . . . . . . . . . . . . 10 141
2011 . . . . . . . . . . . . . . . . . . . . 9 121
2012 . . . . . . . . . . . . . . . . . . . . 9 105
Thereafter . . . . . . . . . . . . . . . . . 34 358
Total minimum lease payments . . . $83 $1,049
Less amount representing
interest . . . . . . . . . . . . . . . . . 29
Present value of net minimum
lease payments . . . . . . . . . . . $54
GUARANTEES
Guarantees are contingent commitments issued by the
Company to customers or other third-parties. The
Company’s guarantees primarily include parent guarantees
related to subsidiaries’ third-party borrowing arrangements;
third-party performance guarantees inherent in the
Company’s business operations, such as indemnified
securities lending programs and merchant charge-back
guarantees; indemnification or buy-back provisions related
to certain asset sales; and contingent consideration
arrangements related to acquisitions. For certain guarantees,
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
subsidiaries’ borrowing arrangements, primarily representing
guaranteed operating or capital lease payments or other debt
obligations with maturity dates extending through 2013.
The maximum potential future payments guaranteed by the
Company under these arrangements were approximately
$331 million at December 31, 2007. The Company’s
recorded liabilities as of December 31, 2007, included
$1 million representing outstanding amounts owed to these
third-parties and required to be recorded on the Company’s
balance sheet in accordance with accounting principles
generally accepted in the United States.
Commitments from Securities Lending The Company
participates in securities lending activities by acting as the
customer’s agent involving the loan of securities. The
Company indemnifies customers for the difference between
the market value of the securities lent and the market value
of the collateral received. Cash collateralizes these
transactions. The maximum potential future payments
guaranteed by the Company under these arrangements were
approximately $13.9 billion at December 31, 2007, and
represented the market value of the securities lent to third-
parties. At December 31, 2007, the Company held assets
with a market value of $14.3 billion as collateral for these
arrangements.
Assets Sales The Company has provided guarantees to
certain third-parties in connection with the sale of certain
assets, primarily loan portfolios and low-income housing tax
credits. These guarantees are generally in the form of asset
buy-back or make-whole provisions that are triggered upon
a credit event or a change in the tax-qualifying status of the
related projects, as applicable, and remain in effect until the
loans are collected or final tax credits are realized,
respectively. The maximum potential future payments
guaranteed by the Company under these arrangements were
approximately $500 million at December 31, 2007, and
represented the proceeds or the guaranteed portion received
from the buyer in these transactions where the buy-back or
make-whole provisions have not yet expired. Recourse
available to the Company includes guarantees from the
Small Business Administration (for SBA loans sold), recourse
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