US Bank 2015 Annual Report Download - page 135

agency securities or residential agency mortgage-backed
securities. The securities loaned or borrowed typically are
corporate debt securities traded by the Company’s broker-
dealer. In general, the securities transferred can be sold,
repledged or otherwise used by the party in possession. No
restrictions exist on the use of cash collateral by either party.
Repurchase/reverse repurchase and securities loaned/
borrowed transactions expose the Company to counterparty
risk. The Company manages this risk by performing
assessments, independent of business line managers, and
establishing concentration limits on each counterparty.
Additionally, these transactions include collateral
arrangements that require the fair values of the underlying
securities to be determined daily, resulting in cash being
obtained or refunded to counterparties to maintain specified
collateral levels. At December 31, 2015, the Company had no
outstanding securities loaned transactions.
The following table summarizes the maturities by category of collateral pledged for repurchase agreements at December 31, 2015:
(Dollars in Millions)
Overnight and
Continuous
Less Than
30 Days Total
U.S. Treasury and agencies ............................................................. $122 $ – $ 122
Residential agency mortgage-backed securities ............................................. 802 168 970
Gross amount of recognized liabilities ................................................... $924 $168 $1,092
The Company executes its derivative, repurchase/reverse
repurchase and securities loaned/borrowed transactions
under the respective industry standard agreements. These
agreements include master netting arrangements that allow
for multiple contracts executed with the same counterparty to
be viewed as a single arrangement. This allows for net
settlement of a single amount on a daily basis. In the event of
default, the master netting arrangement provides for close-out
netting, which allows all of these positions with the defaulting
counterparty to be terminated and net settled with a single
payment amount.
The Company has elected to offset the assets and
liabilities under netting arrangements for the balance sheet
presentation of the majority of its derivative counterparties,
excluding centrally cleared derivative contracts due to current
uncertainty about the legal enforceability of netting
arrangements with the clearinghouses. The netting occurs at
the counterparty level, and includes all assets and liabilities
related to the derivative contracts, including those associated
with cash collateral received or delivered. The Company has
not elected to offset the assets and liabilities under netting
arrangements for the balance sheet presentation of
repurchase/reverse repurchase and securities loaned/
borrowed transactions.
The following tables provide information on the Company’s netting adjustments, and items not offset on the Consolidated Balance
Sheet but available for offset in the event of default:
(Dollars in Millions)
Gross
Recognized
Assets
Gross Amounts
Offset on the
Consolidated
Balance Sheet(a)
Net Amounts
Presented on the
Consolidated
Balance Sheet
Gross Amounts Not Offset on
the Consolidated Balance Sheet
Net
Amount
Financial
Instruments(b)
Collateral
Received(c)
December 31, 2015
Derivative assets(d) ..................... $1,879 $(807) $1,072 $ (82) $ – $ 990
Reverse repurchase agreements .......... 106 – 106 (102) (4) –
Securities borrowed .................... 772 – 772 – (753) 19
Total .............................. $2,757 $(807) $1,950 $(184) $(757) $1,009
December 31, 2014
Derivative assets(d) ..................... $1,847 $(870) $ 977 $ (58) $ – $ 919
Reverse repurchase agreements .......... 40 – 40 (40) – –
Securities borrowed .................... 638 – 638 – (620) 18
Total .............................. $2,525 $(870) $1,655 $ (98) $(620) $ 937
(a) Includes $165 million and $258 million of cash collateral related payables that were netted against derivative assets at December 31, 2015 and 2014, respectively.
(b) For derivative assets this includes any derivative liability fair values that could be offset in the event of counterparty default; for reverse repurchase agreements this includes any repurchase
agreement payables that could be offset in the event of counterparty default; for securities borrowed this includes any securities loaned payables that could be offset in the event of counterparty
default.
(c) Includes the fair value of securities received by the Company from the counterparty. These securities are not included on the Consolidated Balance Sheet unless the counterparty defaults.
(d) Excludes $368 million and $221 million of derivative assets centrally cleared or otherwise not subject to netting arrangements at December 31, 2015 and 2014, respectively.
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