Company: USB-PA
Filing Date: 2025-05-06
Form Type: 10-Q
Source: 0000036104-25-000028
Chunk: 146

Company: US BANCORP \DE\
Filing Date: 2025-05-06
Form: 10-Q
Chunk 146
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 the next 12 months of various potential interest rate changes. The sensitivity of the projected impact to net interest income over the next 12 months is dependent on balance sheet growth, product mix, customer behavior, deposit pricing and funding decisions. From December 31, 2024 to March 31, 2025, interest rate sensitivity to higher and lower rates was largely unchanged. As of March 31, 2025, the Company continues to be asset sensitive to a parallel upward move in interest rates with most of that impact coming from the long end of the yield curve. Net interest income simulation incorporates rate-sensitive deposit behavior that could result in changes in both projected deposit balances and mix under the various interest rate scenarios. Higher rate scenarios result in disintermediation of bank deposits and a mix shift into higher yielding deposits. Conversely, in lower rate scenarios, the analysis assumes that deposits will shift into lower yielding products. While the Company utilizes models and assumptions based on historical information and expected behaviors, actual outcomes could vary significantly. For larger interest rate shock scenarios, mortgage assets and deposits are expected to behave in a non-linear manner resulting in varying impacts to net interest income in those scenarios.

Use of Derivatives to Manage Interest Rate and Other Risks To manage the sensitivity of earnings and capital to interest rate, prepayment, credit, price and foreign currency fluctuations (asset and liability management positions), the Company enters into derivative transactions. The Company uses derivatives for asset and liability management purposes primarily in the following ways:

• To convert fixed-rate debt and available-for-sale investment securities from fixed-rate payments to floating-rate payments;

• To convert floating-rate loans and debt from floating-rate payments to fixed-rate payments;

• To mitigate changes in value of the Company’s unfunded mortgage loan commitments, funded MLHFS and MSRs;

• To mitigate remeasurement volatility of foreign currency denominated balances; and

• To mitigate the volatility of the Company’s net investment in foreign operations driven by fluctuations in foreign currency exchange rates.

In addition, the Company enters into interest rate, foreign exchange and commodity derivative contracts to support the business requirements of its customers (customer-related positions). The Company minimizes the market, funding and liquidity risks of customer-related positions by either entering into similar offsetting positions with broker-dealers, or on a portfolio basis by entering into other derivative or non-derivative financial instruments that partially or fully offset the exposure from these customer-related positions. The Company may enter into derivative contracts that are either exchange-traded, centrally cleared through clearinghouses or over-the