US Bank 2008 Annual Report Download - page 108

The contract or notional amounts of commitments to extend
credit and letters of credit at December 31, 2008, were as
follows:
(Dollars in Millions)
Less Than
One Year
Greater Than
One Year Total
Te r m
Commitments to extend credit
Commercial .......... $18,983 $37,998 $56,981
Corporate and purchasing
cards (a) . . . ...... 14,489 – 14,489
Consumer credit cards . . . 57,619 – 57,619
Other consumer . ...... 3,450 16,172 19,622
Letters of credit
Standby ............ 7,477 8,621 16,098
Commercial .......... 244 76 320
(a) Primarily cancelable at the Company’s discretion.
LEASE COMMITMENTS
Rental expense for operating leases totaled $226 million in
2008, $207 million in 2007 and $193 million in 2006.
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, 2008:
(Dollars in Millions)
Capitalized
Leases
Operating
Leases
2009. . . . . . . . . . . . . . . . . . . . . . . . . . $10 $ 184
2010. . . . . . . . . . . . . . . . . . . . . . . . . . 10 170
2011. . . . . . . . . . . . . . . . . . . . . . . . . . 9 150
2012. . . . . . . . . . . . . . . . . . . . . . . . . . 9 135
2013. . . . . . . . . . . . . . . . . . . . . . . . . . 8 109
Thereafter . . . . . . . . . . . . . . . . . . . . . . 27 337
Total minimum lease payments . . . . . . . . $73 $1,085
Less amount representing interest . . . . . . 25
Present value of net minimum lease
payments . . . . . . . . . . . . . . . . . . . . . $48
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
$312 million at December 31, 2008.
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 $5.8 billion at December 31, 2008, and
represented the market value of the securities lent to third-
parties. At December 31, 2008, the Company held assets
with a market value of $6.0 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 $503 million at December 31, 2008, 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
against the correspondent that originated the loan or to the
private mortgage issuer, the right to collect payments from
the debtors, and/or the right to liquidate the underlying
collateral, if any, and retain the proceeds. Based on its
established loan-to-value guidelines, the Company believes
the recourse available is sufficient to recover future
payments, if any, under the loan buy-back guarantees.
Merchant Processing The Company, through its
subsidiaries, provides merchant processing services. Under
the rules of credit card associations, a merchant processor
retains a contingent liability for credit card transactions
processed. This contingent liability arises in the event of a
billing dispute between the merchant and a cardholder that
is ultimately resolved in the cardholder’s favor. In this
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