US Bank 2015 Annual Report Download - page 110

Interest income is recognized on purchased impaired loans
through accretion of the difference between the carrying amount
of those loans and their expected cash flows. The initial
determination of the fair value of the purchased loans includes
the impact of expected credit losses and, therefore, no
allowance for credit losses is recorded at the purchase date. To
the extent credit deterioration occurs after the date of
acquisition, the Company records an allowance for credit losses.
NOTE 7 LEASES
The components of the net investment in sales-type and direct financing leases at December 31 were as follows:
(Dollars in Millions) 2015 2014
Aggregate future minimum lease payments to be received .................................................. $10,257 $11,173
Unguaranteed residual values accruing to the lessor’s benefit ................................................ 766 695
Unearned income ................................................................................... (887) (1,004)
Initial direct costs .................................................................................... 204 202
Total net investment in sales-type and direct financing leases(a) ............................................. $10,340 $11,066
(a) The accumulated allowance for uncollectible minimum lease payments was $66 million and $65 million at December 31, 2015 and 2014, respectively.
The minimum future lease payments to be received from sales-type and direct financing leases were as follows at December 31, 2015:
(Dollars in Millions)
2016 ........................................................................................................... $3,772
2017 ........................................................................................................... 3,207
2018 ........................................................................................................... 1,880
2019 ........................................................................................................... 756
2020 ........................................................................................................... 307
Thereafter ....................................................................................................... 335
NOTE 8 ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND VARIABLE INTEREST ENTITIES
The Company transfers financial assets in the normal course of
business. The majority of the Company’s financial asset
transfers are residential mortgage loan sales primarily to
government-sponsored enterprises (“GSEs”), transfers of tax-
advantaged investments, commercial loan sales through
participation agreements, and other individual or portfolio loan
and securities sales. In accordance with the accounting
guidance for asset transfers, the Company considers any
ongoing involvement with transferred assets in determining
whether the assets can be derecognized from the balance
sheet. Guarantees provided to certain third parties in connection
with the transfer of assets are further discussed in Note 23.
For loans sold under participation agreements, the Company
also considers whether the terms of the loan participation
agreement meet the accounting definition of a participating
interest. With the exception of servicing and certain
performance-based guarantees, the Company’s continuing
involvement with financial assets sold is minimal and generally
limited to market customary representation and warranty
clauses. Any gain or loss on sale depends on the previous
carrying amount of the transferred financial assets, the
consideration received, and any liabilities incurred in exchange
for the transferred assets. Upon transfer, any servicing assets
and other interests that continue to be held by the Company are
initially recognized at fair value. For further information on MSRs,
refer to Note 10. On a limited basis, the Company may acquire
and package high-grade corporate bonds for select corporate
customers, in which the Company generally has no continuing
involvement with these transactions. Additionally, the Company
is an authorized GNMA issuer and issues GNMA securities on a
regular basis. The Company has no other asset securitizations
or similar asset-backed financing arrangements that are off-
balance sheet.
The Company is involved in various entities that are
considered to be VIEs. The Company’s investments in VIEs
are primarily related to investments promoting affordable
housing, community development and renewable energy
sources. Some of these tax-advantaged investments support
the Company’s regulatory compliance with the Community
Reinvestment Act. The Company’s investments in these
entities generate a return primarily through the realization of
federal and state income tax credits, and other tax benefits,
such as tax deductions from operating losses of the
investments, over specified time periods. These tax credits
are recognized as a reduction of tax expense or, for
investments qualifying as investment tax credits, as a
reduction to the related investment asset. The Company
recognized federal and state income tax credits related to its
affordable housing and other tax-advantaged investments in
tax expense of $733 million, $773 million and $758 million for
the years ended December 31, 2015, 2014 and 2013,
respectively. The Company also recognized $1.2 billion, $937
million and $780 million of investment tax credits for the years
ended December 31, 2015, 2014 and 2013, respectively.
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