US Bank 2015 Annual Report Download - page 141
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Please find page 141 of the 2015 US Bank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.-
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The significant unobservable inputs used in the fair value
measurement of the Company’s derivative commitments to
purchase and originate mortgage loans are the percentage of
commitments that actually become a closed loan and the
MSR value that is inherent in the underlying loan value. A
significant increase in the rate of loans that close would result
in a larger derivative asset or liability. A significant increase in
the inherent MSR value would result in an increase in the
derivative asset or a reduction in the derivative liability.
Expected loan close rates and the inherent MSR values are
directly impacted by changes in market rates and will
generally move in the same direction as interest rates.
The following table shows the significant valuation assumption ranges for the Company’s derivative commitments to purchase and
originate mortgage loans at December 31, 2015:
Minimum Maximum Average
Expected loan close rate ................................................................... 9% 100% 79%
Inherent MSR value (basis points per loan) ..................................................... 30 196 120
The significant unobservable input used in the fair value
measurement of certain of the Company’s asset/liability and
customer-related derivatives is the credit valuation adjustment
related to the risk of counterparty nonperformance. A
significant increase in the credit valuation adjustment would
result in a lower fair value measurement. A significant
decrease in the credit valuation adjustment would result in a
higher fair value measurement. The credit valuation
adjustment is impacted by changes in the Company’s
assessment of the counterparty’s credit position. At
December 31, 2015, the minimum, maximum and average
credit valuation adjustment as a percentage of the derivative
contract fair value prior to adjustment was 0 percent, 98
percent and 5 percent, respectively.
The significant unobservable inputs used in the fair value
measurement of the Visa swaps are management’s estimate
of the probability of certain litigation scenarios, and the timing
of the resolution of the related litigation loss estimates in
excess, or shortfall, of the Company’s proportional share of
escrow funds. An increase in the loss estimate or a delay in
the resolution of the related litigation would result in an
increase in the derivative liability. A decrease in the loss
estimate or an acceleration of the resolution of the related
litigation would result in a decrease in the derivative liability.
—139 —