Fifth Third Bank 2010 Annual Report Download - page 96

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
94 Fifth Third Bancorp
The following table reflects the notional amounts and fair values for all derivative instruments included in the Consolidated Balance Sheets as
of December 31:
2010 2009
Fair value Fair value
($ in millions)
Notional
Amount
Derivative
Assets
Derivative
Liabilities
Notional
Amount
Derivative
Assets
Derivative
Liabilities
Qualifying hedging instruments:
Fair value hedges:
Interest rate swaps related to long-term debt $4,355 $442 $ - $5,155 $275 $ -
Interest rate swaps related to time deposits ---
771 -6
Total fair value hedges 442 - 275 6
Cash flow hedges:
Interest rate floors related to C&I loans 1,500 153 - 1,500 162 -
Interest rate swaps related to C&I loans 3,000 8-
3,500 33 -
Interest rate caps related to long-term debt 1,500 4-
2,750 44 -
Interest rate swaps related to long-term debt 1,190 -31
- --
Total cash flow hedges 165 31 239 -
Total derivatives designated as qualifying hedging instruments 607 31 514 6
Derivatives not designated as qualifying hedging
instruments
Free-standing derivatives – risk management and other
business purposes:
Interest rate contracts related to MSRs 12,477 141 81
8,592 114 24
Forward contracts related to held for sale mortgage loans 6,389 90 14 3,633 33 2
Interest rate swaps related to long-term debt 173 3 1 410 4 2
Foreign exchange contracts for trading purposes 2,494 4 4 - - -
Put options associated with Processing Business Sale 769 - 8 667 - 9
Stock warrants associated with Processing Business Sale 175 79 - 152 75 -
Swap associated with the sale of Visa, Inc. Class B shares 363 - 18 522 - 55
Total free-standing derivatives – risk management and other
business purposes 317 126 226 92
Free-standing derivatives - customer accommodation:
Interest rate contracts for customers 26,817 701 735
28,628 719 753
Interest rate lock commitments 1,772 9 9
1,489 3 8
Commodity contracts 1,878 99 92
805 63 58
Foreign exchange contracts 17,998 339 319
10,997 206 169
Derivative instruments related to equity linked CDs 70 2 2
113 2 2
Total free-standing derivatives – customer accommodation 1,150 1,157 993 990
Total derivatives not designated as qualifying hedging
instruments 1,467 1,283 1,219 1,082
Total $2,074 $1,314 $1,733 $1,088
Fair Value Hedges
The Bancorp may enter into interest rate swaps to convert its
fixed-rate, long-term debt or time deposits to floating-rate.
Decisions to convert fixed-rate debt or time deposits to floating are
made primarily through consideration of the asset/liability mix of
the Bancorp, the desired asset/liability sensitivity and interest rate
levels. For the years ended December 31, 2010 and 2009, certain
interest rate swaps met the criteria required to qualify for the
shortcut method of accounting. Based on this shortcut method of
accounting treatment, no ineffectiveness is assumed. For interest
rate swaps that do not meet the shortcut requirements, an
assessment of hedge effectiveness was performed and such swaps
were accounted for using the “long-haul” method. The long-haul
method requires a quarterly assessment of hedge effectiveness and
measurement of ineffectiveness. For interest rate swaps accounted
for as a fair value hedge using the long-haul method,
ineffectiveness is the difference between the changes in the fair
value of the interest rate swap and changes in fair value of the
long-term debt attributable to the risk being hedged. The
ineffectiveness on interest rate swaps hedging long-term debt or
time deposits is reported within interest expense in the
Consolidated Statements of Income.