US Bank 2015 Annual Report Download - page 136

(Dollars in Millions)
Gross
Recognized
Liabilities
Gross Amounts
Offset on the
Consolidated
Balance Sheet(a)
Net Amounts
Presented on the
Consolidated
Balance Sheet
Gross Amounts Not Offset on
the Consolidated Balance Sheet
Net
Amount
Financial
Instruments(b)
Collateral
Pledged(c)
December 31, 2015
Derivative liabilities(d) ..................... $1,809 $(1,283) $ 526 $ (82) $ – $444
Repurchase agreements ................. 1,092 – 1,092 (102) (990) –
Total ............................... $2,901 $(1,283) $1,618 $(184) $(990) $444
December 31, 2014
Derivative liabilities(d) ..................... $1,847 $(1,317) $ 530 $ (58) $ – $472
Repurchase agreements ................. 948 – 948 (40) (908) –
Securities loaned ....................... 47 – 47 – (46) 1
Total ............................... $2,842 $(1,317) $1,525 $ (98) $(954) $473
(a) Includes $641 million and $705 million of cash collateral related receivables that were netted against derivative liabilities at December 31, 2015 and 2014, respectively.
(b) For derivative liabilities this includes any derivative asset fair values that could be offset in the event of counterparty default; for repurchase agreements this includes any reverse repurchase
agreement receivables that could be offset in the event of counterparty default; for securities loaned this includes any securities borrowed receivables that could be offset in the event of
counterparty default.
(c) Includes the fair value of securities pledged by the Company to the counterparty. These securities are included on the Consolidated Balance Sheet unless the Company defaults.
(d) Excludes $576 million and $342 million of derivative liabilities centrally cleared or otherwise not subject to netting arrangements at December 31, 2015 and 2014, respectively.
NOTE 22 FAIR VALUES OF ASSETS AND LIABILITIES
The Company uses fair value measurements for the initial
recording of certain assets and liabilities, periodic
remeasurement of certain assets and liabilities, and
disclosures. Derivatives, trading and available-for-sale
investment securities, MSRs and substantially all MLHFS are
recorded at fair value on a recurring basis. Additionally, from
time to time, the Company may be required to record at fair
value other assets on a nonrecurring basis, such as loans
held for sale, loans held for investment and certain other
assets. These nonrecurring fair value adjustments typically
involve application of lower-of-cost-or-fair value accounting or
impairment write-downs of individual assets.
Fair value is defined as the exchange price that would be
received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants
on the measurement date. A fair value measurement reflects
all of the assumptions that market participants would use in
pricing the asset or liability, including assumptions about the
risk inherent in a particular valuation technique, the effect of a
restriction on the sale or use of an asset and the risk of
nonperformance.
The Company groups its assets and liabilities measured
at fair value into a three-level hierarchy for valuation techniques
used to measure financial assets and financial liabilities at fair
value. This hierarchy is based on whether the valuation inputs
are observable or unobservable. These levels are:
– Level 1 — Quoted prices in active markets for identical
assets or liabilities. Level 1 includes U.S. Treasury securities,
as well as exchange-traded instruments, including certain
perpetual preferred and corporate debt securities.
– Level 2 — Observable inputs other than Level 1 prices, such
as quoted prices for similar assets or liabilities; quoted
prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
Level 2 includes debt securities that are traded less
frequently than exchange-traded instruments and which are
typically valued using third party pricing services; derivative
contracts and other assets and liabilities, including
securities, whose value is determined using a pricing model
with inputs that are observable in the market or can be
derived principally from or corroborated by observable
market data; and MLHFS whose values are determined
using quoted prices for similar assets or pricing models with
inputs that are observable in the market or can be
corroborated by observable market data.
– Level 3 — Unobservable inputs that are supported by little
or no market activity and that are significant to the fair value
of the assets or liabilities. Level 3 assets and liabilities
include financial instruments whose values are determined
using pricing models, discounted cash flow methodologies,
or similar techniques, as well as instruments for which the
determination of fair value requires significant management
judgment or estimation. This category includes MSRs,
certain debt securities and certain derivative contracts.
When the Company changes its valuation inputs for
measuring financial assets and financial liabilities at fair value,
either due to changes in current market conditions or other
factors, it may need to transfer those assets or liabilities to
another level in the hierarchy based on the new inputs used.
The Company recognizes these transfers at the end of the
reporting period in which the transfers occur. During the years
ended December 31, 2015, 2014 and 2013, there were no
transfers of financial assets or financial liabilities between the
hierarchy levels.
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