US Bank 2012 Annual Report Download - page 137

Using proceeds from its IPO and through reductions to
the conversion ratio applicable to the Class B shares held by
Visa U.S.A. member banks, Visa Inc. has funded an escrow
account for the benefit of member financial institutions to
fund their indemnification obligations associated with the
Visa Litigation. The receivable related to the escrow account
is classified in other liabilities as a direct offset to the related
Visa Litigation contingent liability. On October 19, 2012,
Visa signed a settlement agreement to resolve class action
claims associated with the multi-district interchange litigation,
the largest of the remaining Visa Litigation matters. The
settlement has not yet been finally approved by the court, is
not yet binding, and has been challenged by some class
members. At December 31, 2012, the carrying amount of the
Company’s liability related to the Visa Litigation matters, net
of its share of the escrow fundings, was $65 million and
included the Company’s estimate of its share of the temporary
reduction in interchange rates specified in the settlement
agreement. The remaining Class B shares held by the
Company will be eligible for conversion to Class A shares,
and thereby become marketable, upon settlement of the Visa
Litigation. These shares are excluded from the Company’s
financial instruments disclosures included in Note 20.
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, 2012, 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 ......................................................... $23,486 $73,183 $96,669
Corporate and purchasing cards (a) ............................................................. 19,737 — 19,737
Residential mortgages ........................................................................... 224 8 232
Retail credit cards (a) ............................................................................ 65,207 408 65,615
Other retail ....................................................................................... 9,947 16,628 26,575
Covered ......................................................................................... 59 828 887
(a) Primarily cancelable at the Company’s discretion.
Lease Commitments Rental expense for operating leases totaled $295 million in 2012, $291 million in 2011 and $277 million in
2010. 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, 2012:
(Dollars in Millions)
Capitalized
Leases
Operating
Leases
2013 ....................................................................................................................... $10 $ 232
2014 ....................................................................................................................... 9 208
2015 ....................................................................................................................... 7 173
2016 ....................................................................................................................... 7 139
2017 ....................................................................................................................... 5 114
Thereafter .................................................................................................................. 25 432
Total minimum lease payments ............................................................................................ 63 $1,298
Less amount representing interest ......................................................................................... 24
Present value of net minimum lease payments ............................................................................ $39
U.S. BANCORP 133