US Bank 2008 Annual Report Download - page 106

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The following table summarizes the balances of assets and liabilities measured at fair value on a recurring basis:
December 31, 2008 (Dollars in Millions) Level 1 Level 2 Level 3
FIN 39
Netting (a) Total
Investment securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $474 $37,150 $1,844 $ – $39,468
Mortgage loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 2,728 – – 2,728
Mortgage servicing rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – 1,194 – 1,194
Other assets (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 814 1,744 (151) 2,407
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $474 $40,692 $4,782 $ (151) $45,797
Derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ – $ 3,127 $ 46 $(1,251) $ 1,922
(a) Financial Accounting Standards Board Interpretation No. 39 (“FIN 39”), “Offsetting of Amounts Related to Certain Contracts”, permits the netting of derivative receivables and derivative
payables when a legally enforceable master netting agreement exists between the Company and a derivative counterparty. A master netting agreement is an agreement between two
counterparties who have multiple derivative contracts with each other that provide for the net settlement of contracts through a single payment, in a single currency, in the event of default on
or termination of any one contract.
(b) Represents primarily derivative receivables and trading securities.
The table below presents the changes in fair value for all assets and liabilities measured at fair value on a recurring basis using
significant unobservable inputs (Level 3). Level 3 instruments presented in the table include SIV-related investments, certain
non-agency mortgage-backed securities, certain trust-preferred securities investments, MSRs and derivatives:
Year Ended December 31, 2008 (Dollars in Millions)
Investment
Securities
Available-for-Sale
Mortgage
Servicing
Rights
Net Other
Assets and
Liabilities
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,923 $1,462 $ 338
Net gains (losses) included in net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (781)(a) (835)(b) 1,296(c)
Net gains (losses) included in other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . (74) – –
Purchases, sales, principal payments, issuances and settlements . . . . . . . . . . . . . . . . . . . . . . (887) 567 58
Transfers into Level 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663 – 6
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,844 $1,194 $1,698
Net change in unrealized gains (losses) relating to assets still held at December 31, 2008 . . . . . . . $ (397) $ (835)(b) $ (92)(d)
(a) Included in securities gains (losses)
(b) Included in mortgage banking revenue.
(c) Approximately $1,129 million included in other noninterest income and $167 million included in mortgage banking revenue.
(d) Approximately $1 million included in other noninterest income and $(93) million included in mortgage banking revenue.
The Company may also be required periodically to measure certain other financial assets at fair value on a nonrecurring
basis. These measurements of fair value usually result from the application of lower-of-cost-or-market accounting or impairment
write-downs of individual assets. The following table summarizes the adjusted carrying values and the level of valuation
assumptions for assets measured at fair value on a nonrecurring basis:
(Dollars in Millions) Level 1 Level 2 Level 3 Total
Total Losses
Recognized For
Year Ended
December 31, 2008
Carrying Value at
December 31, 2008
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $– $ 12 $– $ 12 $ 7
Loans (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 117 – 117 100
Other real estate owned (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 66 – 66 71
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – 1 1 1
(a) Represents carrying value and related write-downs of loans for which adjustments are based on the appraised value of the collateral, excluding loans fully charged-off.
(b) Represents the fair value and related losses of foreclosed properties that were remeasured at fair value subsequent to initial acquisition.
FAIR VALUE OPTION
The following table summarizes the differences between the aggregate fair value of MLHFS for which the fair value option has
been elected and the aggregate unpaid principal amount the Company is contractually obligated to receive at maturity:
December 31, 2008 (Dollars in Millions)
Fair Value
Carrying
Amount
Aggregate
Unpaid
Principal
Excess of
Carrying
Amount Over
(Under) Unpaid
Principal
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,728 $2,649 $79
Loans 90 days or more past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 13 (2)
104 U.S. BANCORP