US Bank 2015 Annual Report Download - page 145

The estimated fair values of the Company’s financial instruments as of December 31, are shown in the table below:
2015 2014
Carrying
Amount
Fair Value Carrying
Amount
Fair Value
(Dollars in Millions) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Financial Assets
Cash and due from banks . . . $ 11,147 $11,147 $ – $ – $ 11,147 $ 10,654 $10,654 $ – $ – $ 10,654
Federal funds sold and
securities purchased under
resale agreements ....... 169 – 169 – 169 118 – 118 – 118
Investment securities held-to-
maturity ................ 43,590 2,275 41,138 80 43,493 44,974 1,928 43,124 88 45,140
Loans held for sale(a) ........ 74 – – 74 74 18 – – 18 18
Loans(b) .................. 256,899 – – 259,736 259,736 243,735 – – 245,424 245,424
Other financial instruments . . . 2,311 – 921 1,398 2,319 2,187 – 924 1,269 2,193
Financial Liabilities
Deposits ................. 300,400 – 300,225 – 300,225 282,733 – 282,708 – 282,708
Short-term borrowings(c) ..... 27,110 – 26,782 – 26,782 29,184 – 28,973 – 28,973
Long-term debt ............ 32,078 – 32,412 – 32,412 32,260 – 32,659 – 32,659
Other liabilities ............. 1,353 – – 1,353 1,353 1,231 – – 1,231 1,231
(a) Excludes mortgages held for sale for which the fair value option under applicable accounting guidance was elected.
(b) Excludes loans measured at fair value on a nonrecurring basis.
(c) Excludes the Company’s obligation on securities sold short required to be accounted for at fair value per applicable accounting guidance.
The fair value of unfunded commitments, deferred non-yield
related loan fees, standby letters of credit and other guarantees
is approximately equal to their carrying value. The carrying value
of unfunded commitments, deferred non-yield related loan fees
and standby letters of credit was $515 million and $413 million
at December 31, 2015 and 2014, respectively. The carrying
value of other guarantees was $184 million and $211 million at
December 31, 2015 and 2014, respectively.
NOTE 23 GUARANTEES AND CONTINGENT LIABILITIES
Visa Restructuring and Card Association Litigation The
Company’s payment services business issues and acquires
credit and debit card transactions through the Visa U.S.A. Inc.
card association or its affiliates (collectively “Visa”). In 2007,
Visa completed a restructuring and issued shares of Visa Inc.
common stock to its financial institution members in
contemplation of its initial public offering (“IPO”) completed in
the first quarter of 2008 (the “Visa Reorganization”). As a part
of the Visa Reorganization, the Company received its
proportionate number of shares of Visa Inc. common stock,
which were subsequently converted to Class B shares of Visa
Inc. (“Class B shares”). Visa U.S.A. Inc. (“Visa U.S.A.”) and
MasterCard International (collectively, the “Card Associations”)
are defendants in antitrust lawsuits challenging the practices
of the Card Associations (the “Visa Litigation”). Visa U.S.A.
member banks have a contingent obligation to indemnify Visa
Inc. under the Visa U.S.A. bylaws (which were modified at the
time of the restructuring in October 2007) for potential losses
arising from the Visa Litigation. The indemnification by the
Visa U.S.A. member banks has no specific maximum amount.
Using proceeds from its IPO and through reductions to the
conversion ratio applicable to the Class B shares held by Visa
U.S.A. member banks, Visa Inc. has funded an escrow
account for the benefit of member financial institutions to fund
their indemnification obligations associated with the Visa
Litigation. The receivable related to the escrow account is
classified in other liabilities as a direct offset to the related Visa
Litigation contingent liability. On October 19, 2012, Visa
signed a settlement agreement to resolve class action claims
associated with the multi-district interchange litigation, the
largest of the remaining Visa Litigation matters. The
settlement has been approved by the court, but has been
challenged by some class members and is being appealed. In
addition, a number of class members opted out of the
settlement and have filed actions against the Card
Associations. At December 31, 2015, the carrying amount of
the Company’s liability related to the Visa Litigation matters,
net of its share of the escrow fundings, was $19 million.
During 2015, the Company sold 2.5 million of its Class B
shares. These sales, and any previous sales of its Class B
shares, do not impact the Company’s liability for the Visa
Litigation matters or the receivable related to the escrow
account. The remaining 6.4 million Class B shares held by the
Company will be eligible for conversion to Class A shares of
Visa Inc., and thereby become marketable, upon final
settlement of the Visa Litigation. These shares are excluded
from the Company’s financial instruments disclosures
included in Note 22.
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