Fifth Third Bank 2011 Annual Report Download - page 130

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
128 Fifth Third Bancorp
Fair Value Measurements Using (a)
2010 ($ in millions) Level 1 Level 2 Level 3 Total Fair Value
Equity Securities:
Equity securities (Growth)(b) $ 58 - - $58
Equity securities (Value) 53 - - 53
Total equity securities 111 - - 111
Mutual and exchange traded funds:
Money market funds 6 - - 6
International funds 30 - - 30
Commodity funds 11 - - 11
Total mutual and exchange traded funds 47 - - 47
Debt securities:
U.S. Treasury obligations 7 - - 7
U.S. Government agencies (c) - 1 - 1
A
gency mortgage backed - 24 - 24
Non-agency mortgage backed - 6 - 6
Corporate bonds(d) - 1 - 1
Total debt securities 7 32 - 39
Total plan assets $ 165 32 - $197
a) For further information on fair value hierarchy levels, see Note 27.
b) Includes holdings in Bancorp common stock.
c) Includes debt securities issued by U.S. Government sponsored agencies.
d) Includes private label asset backed securities.
The following is a description of the valuation methodologies used
for instruments measured at fair value, as well as the general
classification of such instruments pursuant to the valuation
hierarchy.
Equity securities
The plan measures common stock using quoted prices which are
available in an active market and classifies these investments within
Level 1 of the valuation hierarchy.
Mutual and exchange traded funds
All of the plan’s mutual and exchange traded funds are publicly
traded. The plan measures the value of these investments using the
fund’s quoted prices that are available in an active market and
classifies these investments within Level 1 of the valuation
hierarchy.
Debt securities
For certain U.S. Treasury obligations and federal agency securities,
the plan measures the fair value based on quoted prices, which are
available in an active market and classifies these investments within
Level 1 of the valuation hierarchy. Where quoted prices are not
available, the plan measures the fair value of these investments
based on matrix pricing models that include the bid price, which
factors in the yield curve and other characteristics of the security
including the interest rate, prepayment speeds and length of
maturity. Therefore, these investments are classified within Level 2
of the valuation hierarchy.
Plan Assumptions
The plan assumptions are evaluated annually and are updated as
necessary. The discount rate assumption reflects the yield on a
portfolio of high quality fixed-income instruments that have a
similar duration to the plan’s liabilities. The expected long-term rate
of return assumption reflects the average return expected on the
assets invested to provide for the plan’s liabilities. In determining
the expected long-term rate of return, the Bancorp evaluated
actuarial and economic inputs, including long-term inflation rate
assumptions and broad equity and bond indices long-term return
projections, as well as actual long-term historical plan performance.
The following table summarizes the plan assumptions for the years ended December 31:
W
eighted Average Assumptions 2011 2010 2009
For measuring benefit obligations at year end:
Discount rate 4.27 % 5.39 5.88
Rate of compensation increase 5.00 5.00 5.00
Expected return on plan assets 8.25 8.25 8.50
For measuring net periodic benefit cost:
Discount rate 5.39 5.88 6.11
Rate of compensation increase 5.00 5.00 5.00
Expected return on plan assets 8.25 8.25 8.50