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. For more information regarding the fair value hierarchy and how the Bancorp measures fair value, see Note 1.

The following tables summarize assets and liabilities measured at fair value on a recurring basis, including residential mortgage loans held for sale for which the Bancorp has elected the fair value option as of:

	Fair Value Measurements Using
December 31, 2011 ($ in millions)		Level 1	Level 2	Level 3	Total Fair Value
Assets:
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

	Fair Value Measurements Using
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

(a) Excludes FHLB and FRB restricted stock totaling $497 and $345, respectively, at December 31, 2011, $524 and $344, respectively, at December 31, 2010.

(b) Includes residential mortgage loans originated as held for sale and subsequently transferred to held for investment.

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. Residential mortgage loans held for sale that are reclassified to held for investment are transferred from Level 2 to Level 3 of the fair value hierarchy as described below. It is the Bancorp's policy to value any transfers between levels of the fair value hierarchy based on end of period fair values.

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. 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 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. Trading securities classified as Level 3 consist of auction rate securities. Due to the illiquidity in the market for these types of securities at December 31, 2011 and 2010, the Bancorp measured fair value using a discount rate based on the assumed holding period.

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 mortgage-backed securities market rates and observable discount rates. For residential mortgage loans reclassified from held for sale to held for investment, the fair value estimation is based on mortgage-backed securities prices and a credit component that is based on internally developed loss rate models. Therefore, these loans are classified within Level 3 of the valuation hierarchy.

Exchange-traded derivatives valued using quoted prices and certain over-the-counter derivatives valued using active bids are classified within Level 1 of the valuation hierarchy. Most derivative contracts are valued using discounted cash flow or other models that incorporate current market interest rates, credit spreads assigned to the derivative counterparties and other market parameters and, therefore, are classified within Level 2 of the valuation hierarchy. Such derivatives include basic and structured interest rate swaps and options. Derivatives that are valued based upon models with significant unobservable market parameters are classified within Level 3 of the valuation hierarchy. At December 31, 2011 and 2010, derivatives classified as Level 3, which are valued using an option-pricing model containing unobservable inputs, consisted primarily of warrants and put rights associated with the sale of the processing business to Advent International and a total return swap associated with the Bancorp's sale of Visa, Inc. Class B shares. Level 3 derivatives also include interest rate lock commitments, which utilize internally generated loan closing rate assumptions as a significant unobservable input in the valuation process.

In connection with the sale of the processing business, the Bancorp provided Advent International with certain put options that are exercisable in the event of certain circumstances. In addition, the associated warrants allow the Bancorp to purchase an incremental 10% nonvoting interest in Vantiv Holding, LLC under certain defined conditions involving change of control. The fair values of the warrants and put options are calculated applying Black-Scholes option valuation models using probability weighted scenarios. The assumptions utilized in the models are summarized in the following table as of December 31:

	2011							2010
	Warrants				Put Options (b)			Warrants				Put Options
Expected term (years)	7.5	-	17.5			2.0		8.5	-	18.5		0.5	-	3.0
Expected volatility^(a)	35.4	-	35.5	%		31.5	%	36.0	-	37.0	%	25.6	-	44.6	%
Risk free rate	1.57	-	2.88	%		0.31	%	3.06	-	4.18	%	0.23	-	1.05	%
Expected dividend rate			0	%		0	%			0	%			0	%

Under the terms of the total return swap, the Bancorp will make or receive payments based on subsequent changes in the conversion rate of the Visa, Inc. Class B shares into Class A shares. The fair value of the total return swap was calculated using a discounted cash flow model based on unobservable inputs consisting of management's estimate of the probability of certain litigation scenarios, timing of litigation settlements and payments related to the swap.

The net fair value of the interest rate lock commitments at December 31, 2011 was $33 million. Immediate decreases in current interest rates of 25 bps and 50 bps would result in increases in the fair value of the interest rate lock commitments of approximately $16 million and $28 million, respectively. Immediate increases of current interest rates of 25 bps and 50 bps would result in decreases in the fair value of the interest rate lock commitments of approximately $20 million and $45 million, respectively. The decrease in fair value of interest rate lock commitments due to immediate 10% and 20% adverse changes in the assumed loan closing rates would be approximately $4 million and $7 million, respectively, and the increase in fair value due to immediate 10% and 20% favorable changes in the assumed loan closing rates would be approximately $3 million and $6 million, respectively. These sensitivities are hypothetical and should be used with caution, as changes in fair value based on a variation in assumptions typically cannot be extrapolated because the relationship of the change in assumptions to the change in fair value may not be linear.

The following tables are a reconciliation of assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
			Residential	Interest Rate	Equity
For the year ended December 31, 2011		Trading	Mortgage	Derivatives,	Derivatives,		Total
($ in millions)		Securities	Loans	Net^(a)	Net^(a)		Fair Value
Beginning balance	$	6	46	2	53	$	107
Total gains or losses (realized/unrealized):
Included in earnings		-	4	205	(43)		166
Purchases		-	-	-	2		2
Sales		(5)	-	-	-		(5)
Settlements		-	(9)	(175)	20		(164)
Transfers into Level 3^(b)		-	24	-	-		24
Ending balance	$	1	65	32	32	$	130
The amount of total gains or losses for the period
included in earnings attributable to the change in
unrealized gains or losses relating to assets
still held at December 31, 2011^(c)	$	-	4	32	(43)	$	(7)

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
		Residual		Residential	Interest Rate	Equity
For the year ended December 31, 2010		Interests in	Trading	Mortgage	Derivatives,	Derivatives,		Total
($ in millions)		Securitizations	Securities	Loans	Net^(a)	Net^(a)		Fair Value
Beginning balance	$	174	13	26	(2)	11	$	222
Total gains or losses (realized/unrealized):
Included in earnings		-	3	-	187	(14)		176
Purchases, sales, issuances, and settlements, net		(174)^(d)	(10)	(6)	(183)	56		(317)
Transfers into Level 3^(b)		-	-	26	-	-		26
Ending balance	$	-	6	46	2	53	$	107
The amount of total gains or losses for the period
included in earnings attributable to the change in
unrealized gains or losses relating to assets
still held at December 31, 2010^(c)	$	-	-	-	60	(14)	$	46

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
		Residual		Residential
For the year ended December 31, 2009		Interests in	Trading	Mortgage	Derivatives,		Total
($ in millions)		Securitizations	Securities	Loans	Net^(e)		Fair Value
Beginning balance	$	146	-	7	24	$	177
Total gains or losses (realized/unrealized):
Included in earnings		10	(4)	(2)	145		149
Included in other comprehensive income		3	-	-	-		3
Purchases, sales, issuances, and settlements, net		15	17	(8)	(160)		(136)
Transfers into Level 3^(b)		-	-	29	-		29
Ending balance	$	174	13	26	9	$	222
The amount of total gains or losses for the period
included in earnings attributable to the change in
unrealized gains or losses relating to assets
still held at December 31, 2009^(c)	$	6	(4)	(2)	16	$	16

(a) Net interest rate derivatives include derivative assets and liabilities of $34 and $2, respectively, as of December 31, 2011 and $13 and $11, respectively, as of December 31, 2010. Net equity derivatives include derivative assets and liabilities of $113 and $81, respectively, as of December 31, 2011, and $81 and $28, respectively, as of December 31, 2010.

(b) Includes residential mortgage loans held for sale that were transferred to held for investment.

(d) Due to a change in U.S. GAAP adopted by the Bancorp on January 1, 2010, all residual interests in securitizations were eliminated concurrent with the consolidation of the related VIEs.

(e) Net derivatives include derivative assets and liabilities of $84 and $75, respectively, at December 31, 2009.

The total gains and losses included in earnings for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) were recorded in the Consolidated Statements of Income as follows:

The total gains and losses included in earnings attributable to changes in unrealized gains and losses related to Level 3 assets and liabilities still held at December 31, 2011, 2010 and 2009 were recorded in the Consolidated Statements of Income as follows:

Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. The following tables represent those assets that were subject to fair value adjustments during the years ended December 31, 2011 and 2010 and still held as of the end of the period, and the related losses from fair value adjustments on assets sold during the period as well as assets still held as of the end of the period.

		Fair Value Measurements Using				Total Losses
($ in millions)		Level 1	Level 2	Level 3	Total	2011
Commercial loans held for sale^(a)	$	-	-	27	27	(67)
Commercial and industrial loans		-	-	101	101	(328)
Commercial mortgage loans		-	-	85	85	(124)
Commercial construction loans		-	-	55	55	(60)
MSRs		-	-	681	681	(242)
OREO property		-	-	224	224	(171)
Total	$	-	-	1,173	1,173	(992)

		Fair Value Measurements Using				Total Losses
($ in millions)		Level 1	Level 2	Level 3	Total	2010
Commercial loans held for sale^(a)	$	120	-	770	890	(448)
Commercial and industrial loans		-	-	272	272	(470)
Commercial mortgage loans		-	-	234	234	(207)
Commercial construction loans		-	-	109	109	(159)
Residential mortgage loans		-	-	3	3	(6)
Other consumer loans		-	71	10	81	(12)
MSRs		-	-	822	822	(36)
OREO property		-	-	527	527	(264)
Total	$	120	71	2,747	2,938	(1,602)

During 2011, the Bancorp transferred $143 million of commercial loans from the portfolio to loans held for sale that upon transfer were measured at fair value. These loans had fair value adjustments totaling $31 million and were based on discounted cash flow models incorporating appraisals of the underlying collateral, as well as assumptions about investor return requirements and amounts and timing of expected cash flows, and were therefore, classified within Level 3 of the valuation hierarchy. Additionally, during 2011, existing commercial loans held for sale with a fair value of $48 million were further adjusted using the same methodology as loans transferred to held for sale. Therefore, these loans were classified within Level 3 of the valuation hierarchy.

During 2011 and 2010, the Bancorp recorded nonrecurring impairment adjustments to certain commercial and industrial, commercial mortgage and commercial construction loans held for investment. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and were classified within Level 3 of the valuation hierarchy. In cases where the carrying value exceeds the fair value, an impairment loss is recognized. The fair values and recognized impairment losses are reflected in the previous table.

During 2011, the Bancorp recognized temporary impairments in certain classes of the MSR portfolio in which the carrying value was adjusted to fair value as of December 31, 2011. MSRs do not trade in an active, open market with readily observable prices. While sales of MSRs do occur, the precise terms and conditions typically are not readily available. Accordingly, the Bancorp estimates the fair value of MSRs using discounted cash flow models with certain unobservable inputs, primarily prepayment speed assumptions, resulting in a classification within Level 3 of the valuation hierarchy. Refer to Note 12 for further information on the Bancorp's MSRs.

During the 2011 and 2010, the Bancorp recorded nonrecurring adjustments to certain commercial and residential real estate properties classified as OREO and measured at the lower of carrying amount or fair value, less costs to sell. Nonrecurring losses included in the above table are primarily due to declines in real estate values of the OREO properties. These losses include $100 million in losses, recorded as charge-offs, on new OREO properties transferred from loans during the period and $71 million in losses, recorded in other noninterest income, attributable to fair value adjustments on OREO properties subsequent to their transfer from loans. Such fair value amounts are generally based on appraisals of the property values, resulting in a classification within Level 3 of the valuation hierarchy. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized. The previous tables reflect the fair value measurements of the properties before deducting the estimated costs to sell.

The Bancorp elected to measure certain residential mortgage loans held for sale under the fair value option as allowed under U.S. GAAP. Management's intent to sell residential mortgage loans classified as held for sale may change over time due to such factors as changes in the overall liquidity in markets or changes in characteristics specific to certain loans held for sale. Consequently, these loans may be reclassified to loans held for investment and maintained in the Bancorp's loan portfolio. In such cases, the loans will continue to be measured at fair value. Residential loans with fair values of $24 million and $26 million were transferred to the Bancorp's portfolio during 2011 and 2010, respectively. The net impact related to fair value adjustments on these loans was a gain of $4 million during 2011. Fair value adjustments on residential mortgage loans transferred to the Bancorp's portfolio during 2010 were immaterial.

Fair value changes included in earnings for instruments held at December 31, 2011 and 2010 for which the fair value option was elected included gains of $123 million and $25 million, respectively. Additionally, fair value changes included in earnings for instruments for which the fair value option was elected but are no longer held by the Bancorp at December 31, 2011 and 2010 included gains of $168 million and $171 million during 2011 and 2010, respectively. These gains are reported in mortgage banking net revenue in the Consolidated Statements of Income.

Valuation adjustments related to instrument-specific credit risk for residential mortgage loans measured at fair value negatively impacted the fair value of those loans by $3 million at December 31, 2011 and $5 million at December 31, 2010. Interest on residential mortgage loans measured at fair value is accrued as it is earned using the effective interest method and is reported as interest income in the Consolidated Statements of Income.

The following table summarizes the difference between the fair value and the principal balance for residential mortgage loans measured at fair value as of:

($ in millions)		Fair Value	Principal Balance	Difference
December 31, 2011
Residential mortgage loans measured at fair value	$	2,816	2,693	123
Past due loans of 90 days or more		4	5	(1)
Nonaccrual loans		-	-	-

December 31, 2010
Residential mortgage loans measured at fair value	$	1,938	1,913	25
Past due loans of 90 days or more		5	6	(1)
Nonaccrual loans		1	1	-

The following tables summarize the carrying amounts and estimated fair values for certain financial instruments, excluding financial instruments measured at fair value on a recurring basis.

		Net Carrying
As of December 31, 2011 ($ in millions)		Amount	Fair Value
Financial assets:
Cash and due from banks	$	2,663	2,663
Other securities		842	842
Held-to-maturity securities		322	322
Other short-term investments		1,781	1,781
Loans held for sale		203	203
Portfolio loans and leases:
Commercial and industrial loans		29,854	30,300
Commercial mortgage loans		9,697	8,870
Commercial construction loans		943	791
Commercial leases		3,451	3,237
Residential mortgage loans^(a)		10,380	9,978
Home equity		10,524	9,737
Automobile loans		11,784	11,747
Credit card		1,872	1,958
Other consumer loans and leases		329	346
Unallocated allowance for loan and lease losses		(136)	-
Total portfolio loans and leases, net^(a)		78,698	76,964
Financial liabilities:
Deposits		85,710	85,599
Federal funds purchased		346	346
Other short-term borrowings		3,239	3,239
Long-term debt		9,682	10,197

(a) Excludes $65 of residential mortgage loans measured at fair value on a recurring basis.

		Net Carrying
As of December 31, 2010 ($ in millions)		Amount	Fair Value
Financial assets:
Cash and due from banks	$	2,159	2,159
Other securities		868	868
Held-to-maturity securities		353	353
Other short-term investments		1,515	1,515
Loans held for sale		324	324
Portfolio loans and leases:
Commercial and industrial loans		26,068	27,322
Commercial mortgage loans		10,248	9,513
Commercial construction loans		1,890	1,471
Commercial leases		3,267	2,934
Residential mortgage loans^(a)		8,600	7,577
Home equity		11,248	9,366
Automobile loans		10,910	10,975
Credit card		1,738	1,786
Other consumer loans and leases		622	682
Unallocated allowance for loan and lease losses		(150)	-
Total portfolio loans and leases, net^(a)		74,441	71,626
Financial liabilities:
Deposits		81,648	81,860
Federal funds purchased		279	279
Other short-term borrowings		1,574	1,574
Long-term debt		9,558	9,921

(a) Excludes $46 of residential mortgage loans measured at fair value on a recurring basis.

Cash and due from banks, other securities, other short-term investments, deposits, federal funds purchased and other short-term borrowings

For financial instruments with a short-term or no stated maturity, prevailing market rates and limited credit risk, carrying amounts approximate fair value. Those financial instruments include cash and due from banks, FHLB and FRB restricted stock, other short-term investments, certain deposits (demand, interest checking, savings, money market and foreign office deposits), and federal funds purchased. Fair values for other time deposits, certificates of deposit $100,000 and over and other short-term borrowings were estimated using a discounted cash flow calculation that applied prevailing LIBOR/swap interest rates for the same maturities.

The Bancorp's held-to-maturity securities are primarily composed of instruments that provide income tax credits as the economic return on the investment. The fair value of these instruments is estimated based on current U.S. Treasury tax credit rates.

Fair values for commercial loans held for sale were valued based on executable bids when available, or on discounted cash flow models incorporating appraisals of the underlying collateral, as well as assumptions about investor return requirements and amounts and timing of expected cash flows. Fair values for other consumer loans held for sale are based on contractual values upon which the loans may be sold to a third party, and approximate their carrying value.

Fair values were estimated by discounting future cash flows using the current market rates of loans to borrowers with similar credit characteristics and similar remaining maturities.

Fair value of long-term debt was based on quoted market prices, when available, or a discounted cash flow calculation using LIBOR/swap interest rates and, in some cases, a spread for new issues for borrowings of similar terms.