Fifth Third Bank 2013 Annual Report Download - page 158

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
156 Fifth Third Bancorp
Fair Value Measurements Using
December 31, 2012 ($ 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 $ 41 - - 41
U.S. Government sponsored agencies - 1,911 - 1,911
Obligations of states and political subdivisions - 212 - 212
Agency mortgage-backed securities - 8,730 - 8,730
Other bonds, notes and debentures - 3,277 - 3,277
Other securities(a) 79 113 - 192
Available-for-sale securities(a) 120 14,243 - 14,363
Trading securities:
U.S. Treasury and Government agencies 1 - - 1
U.S. Government sponsored agencies - 6 - 6
Obligations of states and political subdivisions - 16 1 17
Agency mortgage-backed securities - 7 - 7
Other bonds, notes and debentures - 15 - 15
Other securities 161 - - 161
Trading securities 162 44 1 207
Residential mortgage loans held for sale - 2,856 - 2,856
Residential mortgage loans(b) - - 76 76
Derivative assets:
Interest rate contracts 2 1,445 60 1,507
Foreign exchange contracts - 201 - 201
Equity contracts - - 177 177
Commodity contracts - 87 - 87
Derivative assets 2 1,733 237 1,972
Total assets $ 284 18,876 314 19,474
Liabilities:
Derivative liabilities:
Interest rate contracts $ 14 600 3 617
Foreign exchange contracts - 183 - 183
Equity contracts - - 33 33
Commodity contracts - 82 - 82
Derivative liabilities 14 865 36 915
Short positions 8 2 - 10
Total liabilities $ 22 867 36 925
(a) Excludes FHLB and FRB restricted stock totaling
$402
and
$349
, respectively, at
December 31, 2013
and $497 and $347, respectively, at December 31, 2012.
(b) Includes residential mortgage loans originated as held for sale and subsequently transferred to held for investment.
(c) During the years ended December 31, 2013 and 2012, 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
quoted prices of securities with similar characteristics, or pricing
models, such as 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.
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
held for sale are also classified within Level 2 of the valuation
hierarchy due to the use of observable inputs in the DCF model.
These observable inputs include interest rate spreads from agency