Fifth Third Bank 2010 Annual Report Download - page 119

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fifth Third Bancorp 117
28. FAIR VALUE MEASUREMENTS
The Bancorp measures certain financial assets and liabilities at fair
value in accordance with U.S. GAAP, which defines fair value as
the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at
the measurement date. U.S. GAAP also establishes a fair value
hierarchy, which prioritizes the inputs to valuation techniques
used to measure fair value into three broad levels. The fair value
hierarchy gives the highest priority to quoted prices in active
markets for identical assets or liabilities (Level 1) and the lowest
priority to unobservable inputs (Level 3). A financial instrument’s
categorization within the fair value hierarchy is based upon the
lowest level of input that is significant to the instrument’s fair
value measurement. The three levels within the fair value
hierarchy are described as follows:
Level 1 – Quoted prices (unadjusted) in active markets for
identical assets or liabilities that the Bancorp has the ability
to access at the measurement date.
Level 2 – Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly. Level 2 inputs include: quoted prices
for similar assets or liabilities in active markets; quoted prices
for identical or similar assets or liabilities in markets that are
not active; inputs other than quoted prices that are
observable for the asset or liability; and inputs that are
derived principally from or corroborated by observable
market data by correlation or other means.
Level 3 – Unobservable inputs for the asset or liability for
which there is little, if any, market activity at the
measurement date. Unobservable inputs reflect the
Bancorp’s own assumptions about what market participants
would use to price the asset or liability. The inputs are
developed based on the best information available in the
circumstances, which might include the Bancorp’s own
financial data such as internally developed pricing models,
discounted cash flow methodologies, as well as instruments
for which the fair value determination requires significant
management judgment.
Assets and Liabilities Measured at Fair Value on a
Recurring Basis
The following tables summarize assets and liabilities measured at
fair value on a recurring basis, including financial instruments in
which the Bancorp has elected the fair value option.
Fair Value Measurements Using
As of December 31, 2010 ($ in millions) Level 1 Level 2 Level 3 Total Fair Value
Assets:
Available-for-sale securities:
U.S. Treasury and Government agencies $230 - - $230
U.S. Government sponsored agencies - 1,645 - 1,645
Obligations of states and political subdivisions - 172 - 172
Agency mortgage-backed securities - 10,973 - 10,973
Other bonds, notes and debentures - 1,342 - 1,342
Other securities (a) 180 4 - 184
Available-for-sale securities (a) 410 14,136 - 14,546
Trading securities:
U.S. Treasury and Government agencies 1 - - 1
Obligations of states and political subdivisions - 20 1 21
Agency mortgage-backed securities - 8 - 8
Other bonds, notes and debentures - 115 5 120
Other securities 47 97 - 144
Trading securities 48 240 6 294
Residential mortgage loans held for sale - 1,892 - 1,892
Residential mortgage loans (b) - - 46 46
Derivative assets:
Interest rate contracts 90 1,448 13 1,551
Foreign exchange contracts - 343 - 343
Equity contracts - - 81 81
Commodity contracts - 99 - 99
Derivative assets 90 1,890 94 2,074
Total assets $548 18,158 146 $18,852
Liabilities:
Derivative liabilities
Interest rate contracts 14 846 11 871
Foreign exchange contracts - 323 - 323
Equity contracts - - 28 28
Commodity contracts - 92 - 92
Derivative liabilities 14 1,261 39 1,314
Short positions 1 1 - 2
Total liabilities $15 1,262 39 $1,316