US Bank 2006 Annual Report Download - page 99

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other short-term funds borrowed are at floating rates or Loan Commitments, Letters of Credit and Guarantees The
have short-term maturities. Their par value is assumed to fair value of commitments, letters of credit and guarantees
approximate their fair value. represents the estimated costs to terminate or otherwise
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.
2006 2005
Carrying Fair Carrying Fair
(Dollars in Millions) Amount Value Amount Value
FINANCIAL ASSETS
Cash and cash equivalents ****************************************************************** $ 8,805 $ 8,805 $ 8,202 $ 8,202
Investment securities *********************************************************************** 40,117 40,122 39,768 39,772
Loans held for sale ************************************************************************ 3,256 3,256 3,030 3,030
Loans *********************************************************************************** 141,575 140,188 134,421 133,270
Total financial assets ******************************************************************** 193,753 $192,371 185,421 $184,274
Nonfinancial assets ****************************************************************** 25,479 24,044
Total assets ********************************************************************* $219,232 $209,465
FINANCIAL LIABILITIES
Deposits ********************************************************************************* $124,882 $124,762 $124,709 $124,532
Short-term borrowings********************************************************************** 26,933 26,948 20,200 20,201
Long-term debt *************************************************************************** 37,602 37,766 37,069 37,114
Total financial liabilities ****************************************************************** 189,417 $189,476 181,978 $181,847
Nonfinancial liabilities **************************************************************** 8,618 7,401
Shareholders’ equity ***************************************************************** 21,197 20,086
Total liabilities and shareholders’ equity*********************************************** $219,232 $209,465
DERIVATIVE POSITIONS
Asset and liability management positions
Interest rate swaps ********************************************************************* $53$53$57$57
Futures and forwards ******************************************************************* 3 3 (15) (15)
Foreign exchange contracts*************************************************************** 15 15 18 18
Options******************************************************************************* (1) (1) 3 3
Equity contracts ************************************************************************ 4433
Credit default swaps ******************************************************************** (1) (1) – –
Customer related positions
Interest rate contracts ******************************************************************* 58 58 53 53
Foreign exchange contracts*************************************************************** 9944
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 $261 million. The carrying
value of other guarantees was $75 million.
U.S. BANCORP 97