US Bank 2015 Annual Report Download - page 161

take title to real estate. As a result, the Company could be
subject to environmental liabilities with respect to these
properties. The Company may be held liable to a
governmental entity or to third parties for property damage,
personal injury, investigation and clean-up costs incurred by
these parties in connection with environmental contamination
or may be required to investigate or clean up hazardous or
toxic substances or chemical releases at a property. The
costs associated with investigation or remediation activities
could be substantial. In addition, if the Company is the owner
or former owner of a contaminated site, it may be subject to
common law claims by third parties based on damages and
costs resulting from environmental contamination emanating
from the property. If the Company becomes subject to
significant environmental liabilities, its financial condition and
results of operations could be adversely affected.
ECONOMIC AND MARKET CONDITIONS RISK
Deterioration in business and economic conditions
could adversely affect the financial services industry,
and a reversal or slowing of the current economic
recovery could adversely affect the Company’s lending
business and the value of loans and debt securities it
holds The Company’s business activities and earnings are
affected by general business conditions in the United States
and abroad, including factors such as the level and volatility of
short-term and long-term interest rates, inflation, home prices,
unemployment and under-employment levels, bankruptcies,
household income, consumer spending, fluctuations in both
debt and equity capital markets, liquidity of the global financial
markets, the availability and cost of capital and credit, investor
sentiment and confidence in the financial markets, and the
strength of the domestic and global economies in which the
Company operates. The deterioration of any of these
conditions can adversely affect the Company’s consumer and
commercial businesses and securities portfolios, its level of
charge-offs and provision for credit losses, its capital levels
and liquidity, and its results of operations.
Given the high percentage of the Company’s assets
represented directly or indirectly by loans, and the importance
of lending to its overall business, weak economic conditions
are likely to have a negative impact on the Company’s
business and results of operations. A reversal or slowing of
the current economic recovery or another severe contraction
could adversely impact loan utilization rates as well as
delinquencies, defaults and customer ability to meet
obligations under the loans. The value to the Company of
other assets such as investment securities, most of which are
debt securities or other financial instruments supported by
loans, similarly would be negatively impacted by widespread
decreases in credit quality resulting from a weakening of the
economy. Downward valuation of debt securities could also
negatively impact the Company’s capital position.
Stress in the commercial real estate markets, or a downturn
in the residential real estate markets, could cause credit losses
and deterioration in asset values for the Company and other
financial institutions. A downturninusedautopricesfromits
current levels could result in increased credit losses and
impairment of residual lease values for the Company.
Additionally, the current environment of heightened scrutiny of
financial institutions, as well as a continued focus on the pace
and sustainability of the economic recovery, has resulted in
increased public awareness of and sensitivity to banking fees
and practices.
Any further deterioration in global economic conditions,
including those related to recent disruptions in Europe and
China, could slow the recovery of the domestic economy or
negatively impact the Company’s borrowers or other
counterparties that have direct or indirect exposure to these
regions. Such global disruptions can undermine investor
confidence, cause a contraction of available credit, or create
market volatility, any of which could have significant adverse
effects on the Company’s businesses, results of operations,
financial condition and liquidity, even if the Company’s direct
exposure to the affected region is limited. The continued
depression of commodity prices, inclusive of energy prices,
for an extended period of time, as well as other negative
domestic market developments, may erode consumer
confidence levels and cause adverse changes in payment
patterns, leading to increases in delinquencies and default
rates in certain industries, or regions. Such developments
could increase the Company’s loan charge-offs and provision
for credit losses. Any future economic deterioration that
affects household or corporate incomes and the continuing
concern regarding the possibility of a return to recessionary
conditions could also result in reduced demand for credit or
fee-based products and services.
Improvements in economic indicators
disproportionately affecting the financial services
industry may lag improvements in the general economy
Should the moderate recovery of the United States economy
continue, the improvement of certain economic indicators,
such as real estate asset values, may nevertheless continue
to lag behind the overall economy, which can affect certain
industries, such as real estate and financial services, more
significantly. Should real estate asset values fail to recover for
an extended period of time, the Company could be adversely
affected.
Changes in interest rates could reduce the Company’s
net interest income The Company’s earnings are
dependent to a large degree on net interest income, which is
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