Company: USB-PA
Filing Date: 2025-11-05
Form Type: 10-Q
Source: 0000036104-25-000064
Chunk: 224

Company: US BANCORP \DE\
Filing Date: 2025-11-05
Form: 10-Q
Chunk 224
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 timing differences and better matches changes in fair value of these assets with changes in the value of the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting.

Time Deposits The Company elects the fair value option to account for certain time deposits that are hedged with derivatives that do not qualify for hedge accounting. Electing to measure these time deposits at fair value reduces certain timing differences and better matches changes in fair value of these deposits with changes in the value of the derivative instruments used to economically hedge them. The time deposits measured at fair value are valued using a discounted cash flow model that utilizes market observable inputs and are classified within Level 2. Included in interest expense on deposits were net losses of $ 7million and $ 13million for the three months ended September 30, 2025 and 2024, respectively, and net losses of $ 6million and $ 2million for the nine months ended September 30, 2025 and 2024, respectively, from the changes in fair value of time deposits under fair value option accounting guidance.

Long-term Debt The Company elects the fair value option to account for certain structured notes that are hedged with derivatives that do not qualify for hedge accounting. Electing to measure these structured notes at fair value reduces certain timing differences and better matches changes in fair value of these notes with changes in the value of the derivative instruments used to economically hedge them. The structured notes measured at fair value are valued using a discounted cash flow model that utilizes market observable inputs and are classified within Level 2. The discount rate used in the discounted cash flow model incorporates the impact of the Company’s credit spread, which is based on observable spreads in the secondary bond market. Changes in fair value

| U.S. Bancorp |     | 65 |

attributable to instrument specific credit risk are recorded as debit valuation adjustments (“DVA”) in other comprehensive income (loss) with all other changes in fair value recorded in interest expense. Included in other comprehensive income (loss) and interest expense on long-term debt were net DVA losses of $ 5million and $ 1million, respectively, for the three months ended September 30, 2025, and net DVA losses of $ 8million and net gains of $ 1million, respectively, for the nine months ended September 30, 2025, from the changes in the fair value of structured notes under fair value option account guidance.

Mortgage Servicing Rights MSRs are valued