US Bank 2005 Annual Report Download - page 97

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Loan Commitments, Letters of Credit and Guarantees The
other short-term funds borrowed are at floating rates or
fair value of commitments, letters of credit and guarantees
have short-term maturities. Their par value is assumed to
represents the estimated costs to terminate or otherwise
approximate their fair value.
settle the obligations with a third-party. Residential
Long-term Debt The estimated fair value of medium-term mortgage commitments are actively traded and the fair
notes, bank notes, and subordinated debt was determined value is estimated using available market quotes. Other loan
by using discounted cash flow analysis based on high-grade commitments, letters of credit and guarantees are not
corporate bond yield curves. Floating rate debt is assumed actively traded. Substantially all loan commitments have
to be equal to par value. Capital trust and other long-term floating rates and do not expose the Company to interest
debt instruments were valued using market quotes. rate risk assuming no premium or discount was ascribed to
Interest Rate Swaps, Equity Contracts and Options The loan commitments because funding could occur at market
interest rate options and swap cash flows were estimated rates. The Company estimates the fair value of loan
using a third-party pricing model and discounted based on commitments, letters of credit and guarantees based on the
appropriate LIBOR, eurodollar futures, swap, treasury note related amount of unamortized deferred commitment fees
yield curves and equity market prices. adjusted for the probable losses for these arrangements.
The estimated fair values of the Company’s financial instruments at December 31 are shown in the table below.
2005 2004
Carrying Fair Carrying Fair
(Dollars in Millions) Amount Value Amount Value
Financial Assets
Cash and cash equivalents ************************************************************* $ 8,202 $ 8,202 $ 6,537 $ 6,537
Investment securities ****************************************************************** 39,768 39,772 41,481 41,486
Loans held for sale ******************************************************************** 1,686 1,686 1,439 1,439
Loans ******************************************************************************* 135,765 134,614 124,235 124,611
Total financial assets**************************************************************** 185,421 $184,274 173,692 $174,073
Nonfinancial assets ************************************************************* 24,044 21,412
Total assets***************************************************************** $209,465 $195,104
Financial Liabilities
Deposits ***************************************************************************** $124,709 $124,532 $120,741 $120,788
Short-term borrowings ***************************************************************** 20,200 20,201 13,084 13,084
Long-term debt *********************************************************************** 37,069 37,114 34,739 35,160
Total financial liabilities ************************************************************** 181,978 $181,847 168,564 $169,032
Nonfinancial liabilities ************************************************************ 7,401 7,001
Shareholders’ equity ************************************************************ 20,086 19,539
Total liabilities and shareholders’ equity ***************************************** $209,465 $195,104
Derivative Positions
Asset and liability management positions
Interest rate swaps***************************************************************** $ 57 $ 57 $ 435 $ 435
Futures and forwards *************************************************************** (15) (15) (4) (4)
Foreign exchange contracts ********************************************************* 18 18 (12) (12)
Options*************************************************************************** 3311
Equity contracts ******************************************************************* 3344
Customer related positions
Interest rate contracts ************************************************************** 53 53 36 36
Foreign exchange contracts ********************************************************* 4444
The fair value of unfunded commitments, standby letters of credit and other guarantees is approximately equal to their
carrying value. The carrying value of unfunded commitments and standby letters of credit was $276 million. The carrying
value of other guarantees was $79 million.
U.S. BANCORP 95