US Bank 2012 Annual Report Download - page 136

Fair Value Option
The following table summarizes the differences between the aggregate fair value carrying amount of MLHFS for which the fair
value option has been elected and the aggregate unpaid principal amount that the Company is contractually obligated to receive
at maturity as of December 31:
2012 2011
(Dollars in Millions)
Fair Value
Carrying
Amount
Aggregate
Unpaid
Principal
Carrying
Amount Over
(Under) Unpaid
Principal
Fair Value
Carrying
Amount
Aggregate
Unpaid
Principal
Carrying
Amount Over
(Under) Unpaid
Principal
Total loans .................................. $7,957 $7,588 $369 $6,925 $6,635 $290
Nonaccrual loans ........................... 8 13 (5) 10 15 (5)
Loans 90 days or more past due ........... 2 3 (1) 3 4 (1)
Disclosures about Fair Value of Financial Instruments
The following table summarizes the estimated fair value for
financial instruments as of December 31, 2012 and 2011, and
includes financial instruments that are not accounted for at
fair value. In accordance with disclosure guidance related to
fair values of financial instruments, the Company did not
include assets and liabilities that are not financial instruments,
such as the value of goodwill, long-term relationships with
deposit, credit card, merchant processing and trust customers,
other purchased intangibles, premises and equipment, deferred
taxes and other liabilities. Additionally, in accordance with
the disclosure guidance, insurance contracts and investments
accounted for under the equity method are excluded.
The estimated fair values of the Company’s financial instruments as of December 31, are shown in the table below:
2012 2011
Carrying
Amount
Fair Value Carrying
Amount
Fair
Value(Dollars in Millions) Level 1 Level 2 Level 3 Total
Financial Assets
Cash and due from banks ........................... $ 8,252 $8,252 $ – $ – $ 8,252 $ 13,962 $ 13,962
Federal funds sold and securities purchased under
resale agreements ................................ 437 – 437 – 437 64 64
Investment securities held-to-maturity .............. 34,389 2,984 31,845 123 34,952 18,877 19,216
Mortgages held for sale (a) .......................... – – – – – 3 3
Other loans held for sale ............................ 19 – – 19 19 228 228
Loans ................................................ 218,905 – – 220,494 220,494 205,082 206,646
Other financial instruments .......................... 7,367 – 1,228 6,157 7,385 6,095 6,140
Financial Liabilities
Deposits ............................................. 249,183 – 249,594 – 249,594 230,885 231,184
Short-term borrowings (b) ........................... 25,901 – 25,917 – 25,917 29,855 29,835
Long-term debt ...................................... 25,516 – 26,205 – 26,205 31,953 32,664
(a) Balance excludes mortgages held for sale for which the fair value option under applicable accounting guidance was elected.
(b) 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, 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 $415 million and $381
million at December 31, 2012 and 2011, respectively. The
carrying value of other guarantees was $452 million and $359
million at December 31, 2012 and 2011, respectively.
NOTE 21 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.
132 U.S. BANCORP