US Bank 2014 Annual Report Download - page 145

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, 2014, 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 .................. $24,161 $89,108 $113,269
Corporate and purchasing
cards(a) ..................... 21,301 – 21,301
Residential mortgages ........ 70 14 84
Retail credit cards(a) ........... 78,578 190 78,768
Other retail .................... 12,217 19,276 31,493
Covered ....................... – 667 667
Federal funds ................. 5,258 – 5,258
(a) Primarily cancelable at the Company’s discretion.
Lease Commitments Rental expense for operating leases
totaled $326 million in 2014, $311 million in 2013 and
$295 million in 2012. 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, 2014:
(Dollars in Millions)
Capitalized
Leases
Operating
Leases
2015..................................... $13 $ 265
2016..................................... 12 238
2017..................................... 10 206
2018..................................... 10 166
2019..................................... 8 134
Thereafter .............................. 34 503
Total minimum lease payments ......... 87 $1,512
Less amount representing interest...... 31
Present value of net minimum lease
payments ............................. $56
OTHER GUARANTEES AND CONTINGENT LIABILITIES
The following table is a summary of other guarantees and
contingent liabilities of the Company at December 31, 2014:
(Dollars in Millions)
Collateral
Held
Carrying
Amount
Maximum
Potential
Future
Payments
Standby letters of credit ......... $ – $ 58 $14,838
Third party borrowing
arrangements ................ ––10
Securities lending
indemnifications .............. 4,649 – 4,514
Asset sales ...................... – 145 4,271
Merchant processing ............ 522 58 89,652
Contingent consideration
arrangements ................ –2 2
Tender option bond program
guarantee .................... 2,870 – 2,719
Minimum revenue guarantees ... –6 6
Other ............................ – – 502
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 issues 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 nonperformance, the Company’s credit loss
exposure is the same as 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, 2014,
were approximately $14.8 billion with a weighted-average
term of approximately 21 months. The estimated fair value of
standby letters of credit was approximately $58 million at
December 31, 2014.
The contract or notional amount of letters of credit at
December 31, 2014, were as follows:
Term
(Dollars in Millions)
Less Than
One Year
Greater
Than
One Year Total
Standby ..................... $6,757 $8,081 $14,838
Commercial ................ 354 53 407
U.S. BANCORP The power of potential
143