Fifth Third Bank 2012 Annual Report Download - page 149

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
147 Fifth Third Bancorp
Fair Value Measurements Using
December 31, 2011 ($ in millions) Level 1(c) Level 2(c) Level 3 Total Fair Value
A
ssets:
Available-for-sale securities:
U.S. Treasury and Government agencies $ 171 - - 171
U.S. Government sponsored agencies - 1,962 - 1,962
Obligations of states and political subdivisions - 101 - 101
Agency mortgage-backed securities - 10,284 - 10,284
Other bonds, notes and debentures - 1,812 - 1,812
Other securities(a) 185 5 - 190
Available-for-sale securities(a) 356 14,164 - 14,520
Trading securities:
Obligations of states and political subdivisions - 8 1 9
Agency mortgage-backed securities - 11 - 11
Other bonds, notes and debentures - 13 - 13
Other securities 144 - - 144
Trading securities 144 32 1 177
Residential mortgage loans held for sale - 2,751 - 2,751
Residential mortgage loans(b) - - 65 65
Derivative assets:
Interest rate contracts 8 1,773 34 1,815
Foreign exchange contracts - 294 - 294
Equity contracts - - 113 113
Commodity contracts - 134 - 134
Derivative assets 8 2,201 147 2,356
Total assets $ 508 19,148 213 19,869
Liabilities:
Derivative liabilities
Interest rate contracts $ 54 802 2 858
Foreign exchange contracts - 275 - 275
Equity contracts - - 81 81
Commodity contracts - 130 - 130
Derivative liabilities 54 1,207 83 1,344
Short positions 2 4 - 6
Total liabilities $ 56 1,211 83 1,350
(a) Excludes FHLB and FRB restricted stock totaling
$497
and
$347
, respectively, at
December 31, 2012
and $497 and $345, respectively, at December 31, 2011.
(b) Includes residential mortgage loans originated as held for sale and subsequently transferred to held for investment.
(c) During the years ended December 31, 2012 and 2011, no assets or liabilities were transferred between Level 1 and Level 2.
The following is a description of the valuation methodologies used
for significant instruments measured at fair value, as well as the
general classification of such instruments pursuant to the valuation
hierarchy.
Available-for-sale and trading securities
Where quoted prices are available in an active market, securities are
classified within Level 1 of the valuation hierarchy. Level 1 securities
include government bonds and exchange traded equities. If quoted
market prices are not available, then fair values are estimated using
pricing models, quoted prices of securities with similar
characteristics, or discounted cash flows. Examples of such
instruments, which are classified within Level 2 of the valuation
hierarchy, include agency and non-agency mortgage-backed
securities, other asset-backed securities, obligations of U.S.
Government sponsored agencies, and corporate and municipal
bonds. Corporate bonds are included in other bonds, notes and
debentures in the previous table. Agency mortgage-backed
securities, obligations of U.S. Government sponsored agencies, and
corporate and municipal bonds are generally valued using a market
approach based on observable prices of securities with similar
characteristics.
Non-agency mortgage-backed securities and other asset-backed
securities, which are included in other bonds, notes and debentures,
are generally valued using an income approach based on discounted
cash flows, incorporating prepayment speeds, performance of
underlying collateral and specific tranche-level attributes. In certain
cases where there is limited activity or less transparency around
inputs to the valuation, securities are classified within Level 3 of the
valuation hierarchy.
Residential mortgage loans held for sale
For residential mortgage loans held for sale, fair value is estimated
based upon mortgage-backed securities prices and spreads to those
prices or, for certain ARM loans, DCF models that may incorporate
the anticipated portfolio composition, credit spreads of asset-backed
securities with similar collateral and market conditions. The
anticipated portfolio composition includes the effect of interest rate
spreads and discount rates due to loan characteristics such as the
state in which the loan was originated, the loan amount and the
ARM margin. Residential mortgage loans held for sale that are
valued based on mortgage backed securities prices are classified
within Level 2 of the valuation hierarchy as the valuation is based on
external pricing for similar instruments. ARM loans classified as