Company: USB-PA
Filing Date: 2025-11-05
Form Type: 10-Q
Source: 0000036104-25-000064
Chunk: 32

Company: US BANCORP \DE\
Filing Date: 2025-11-05
Form: 10-Q
Item: Item 7
Chunk 32
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 to exhibit non-linear behavior, resulting in varying impacts to net interest income. In higher rate scenarios, the analysis anticipates deposit disintermediation and a mix shift into higher yielding products, along with reduced mortgage prepayments. Conversely, in lower rate scenarios, the analysis assumes that deposits will shift into lower yielding products, while mortgage paydowns accelerate. While the Company’s interest rate risk models incorporate historical data and expected customer behaviors, actual outcomes may differ significantly due to changes in macroeconomic conditions, competitive dynamics and customer preferences.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-counter. The Company does not utilize derivatives for speculative purposes. The Company does not designate all of the derivatives that it enters into for risk management purposes as accounting hedges because of the inefficiency of applying the associated accounting requirements and may instead elect fair value accounting for the related hedged items. In particular, the Company enters into interest rate swaps, swaptions, forward commitments to buy to-be-announced securities (“TBAs”), U.S. Treasury and Secured Overnight Financing Rate (“SOFR”) futures and options on U.S. Treasury futures to mitigate fluctuations in the value of its MSRs, but does not designate those derivatives as accounting hedges. Refer