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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2013

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and Liabilities Measured at Fair Value on a Recurring Basis
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
September 30, 2013 ($ in millions)		Level 1^(c)	Level 2^(c)	Level 3	Total Fair Value
Assets:
Available-for-sale securities:
U.S. Treasury and government agencies	$	26	-	-	26
U.S. Government sponsored agencies		-	1,653	-	1,653
Obligations of states and political subdivisions		-	205	-	205
Agency mortgage-backed securities		-	11,353	-	11,353
Other bonds, notes and debentures		-	3,839	-	3,839
Other securities^(a)		92	66	-	158
Available-for-sale securities^(a)		118	17,116	-	17,234

Trading securities:
U.S. Treasury and government agencies		1	-	-	1
U.S. Government sponsored agencies		-	20	-	20
Obligations of states and political subdivisions		-	20	1	21
Agency mortgage-backed securities		-	1	-	1
Other bonds, notes and debentures		-	9	-	9
Other securities		194	-	-	194
Trading securities		195	50	1	246

Residential mortgage loans held for sale		-	1,298	-	1,298
Residential mortgage loans^(b)		-	-	89	89
Derivative assets:
Interest rate contracts		12	936	25	973
Foreign exchange contracts		-	237	-	237
Equity contracts		-	-	293	293
Commodity contracts		9	74	-	83
Derivative assets		21	1,247	318	1,586
Total assets	$	334	19,711	408	20,453

Liabilities:
Derivative liabilities:
Interest rate contracts	$	44	428	4	476
Foreign exchange contracts		-	214	-	214
Equity contracts		-	-	35	35
Commodity contracts		14	68	-	82
Derivative liabilities		58	710	39	807

Short positions		17	2	-	19
Total liabilities	$	75	712	39	826


	Fair Value Measurements Using
December 31, 2012 ($ in millions)		Level 1^(c)	Level 2^(c)	Level 3	Total Fair Value
Assets:
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

Excludes FHLB and FRB restricted stock totaling $497 and $349, respectively, at September 30, 2013 and $497 and $347, respectively, at December 31, 2012.
Includes residential mortgage loans originated as held for sale and subsequently transferred to held for investment.
During the three and nine months ended September 30, 2013 and for the year ended December 31, 2012, no assets or liabilities were transferred between Level 1 and Level 2

Reconciliation of Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

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 three months ended September 30, 2013		Trading	Mortgage	Derivatives,	Derivatives,	Total
($ in millions)		Securities	Loans	Net^(a)	Net^(a)	Fair Value
Beginning balance	$	1	83	(30)	250		304
Total gains or losses (realized/unrealized):
Included in earnings		-	-	43	5		48
Purchases		-	-	(1)	-		(1)
Settlements		-	(5)	9	3		7
Transfers into Level 3^(b)		-	11	-	-		11
Ending balance	$	1	89	21	258		369
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 September 30, 2013^(c)	$	-	-	22	5		27


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
			Residential	Interest Rate	Equity
For the three months ended September 30, 2012		Trading	Mortgage	Derivatives,	Derivatives,	Total
($ in millions)		Securities	Loans	Net^(a)	Net^(a)	Fair Value
Beginning balance	$	1	76	54	184		315
Total gains or losses (realized/unrealized):
Included in earnings		-	1	163	(17)		147
Settlements		-	(5)	(118)	9		(114)
Transfers into Level 3^(b)		-	4	-	-		4
Ending balance	$	1	76	99	176		352
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 September 30, 2012^(c)	$	-	1	101	(17)		85

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
			Residential	Interest Rate	Equity
For the nine months ended September 30, 2013		Trading	Mortgage	Derivatives,	Derivatives,	Total
($ in millions)		Securities	Loans	Net^(a)	Net^(a)	Fair Value
Beginning balance	$	1	76	57	144		278
Total gains or losses (realized/unrealized):
Included in earnings		-	(1)	42	102		143
Purchases		-	-	(1)	-		(1)
Settlements		-	(12)	(77)	12		(77)
Transfers into Level 3^(b)		-	26	-	-		26
Ending balance	$	1	89	21	258		369
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 September 30, 2013^(c)	$	-	(1)	45	102		146


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
			Residential	Interest Rate	Equity
For the nine months ended September 30, 2012		Trading	Mortgage	Derivatives,	Derivatives,	Total
($ in millions)		Securities	Loans	Net^(a)	Net^(a)	Fair Value
Beginning balance	$	1	65	32	32	$	130
Total gains or losses (realized/unrealized):
Included in earnings		-	-	338	57		395
Settlements		-	(10)	(271)	87		(194)
Transfers into Level 3^(b)		-	21	-	-		21
Ending balance	$	1	76	99	176	$	352
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 September 30, 2012^(c)	$	-	-	173	57	$	230

Net interest rate derivatives include derivative assets and liabilities of $25 and $4, respectively, as of September 30, 2013 and $102 and $3, respectively, as of September 30, 2012. Net equity derivatives include derivative assets and liabilities of $293 and $35, respectively, as of September 30, 2013, and $198 and $22, respectively, as of September 30, 2012.
Includes residential mortgage loans held for sale that were transferred to held for investment.
Includes interest income and expense.

Total Gains and Losses Included in Earnings for Assets and Liabilites Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

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 Condensed Consolidated Statements of Income as follows:

		For the three months		For the nine months
		ended September 30,		ended September 30,
($ in millions)		2013	2012	2013	2012
Mortgage banking net revenue	$	43	165	40	339
Corporate banking revenue		-	-	1	-
Other noninterest income		5	(18)	102	56
Total gains	$	48	147	143	395

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 September 30, 2013 and 2012 were recorded in the Condensed Consolidated Statements of Income as follows:

		For the three months		For the nine months
		ended September 30,		ended September 30,
($ in millions)		2013	2012	2013	2012
Mortgage banking net revenue	$	22	103	43	174
Corporate banking revenue		-	-	1	-
Other noninterest income		5	(18)	102	56
Total gains	$	27	85	146	230

Quantitative information about significant unobservable level 3 fair value measurement inputs

The following tables present information as of September 30, 2013 and 2012 about significant unobservable inputs related to the Bancorp’s material categories of Level 3 financial assets and liabilities measured on a recurring basis:

As of September 30, 2013 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Residential mortgage loans	$	89	Loss rate model	Interest rate risk factor	(19.9) - 12.2%	3.5%
				Credit risk factor	0 - 56.4%	3.3%
IRLCs, net		24	Discounted cash flow	Loan closing rates	3.1 - 97.2%	66.4%
Stock warrants associated with Vantiv		293	Black-Scholes option	Expected term (years)	2.00 - 15.8	5.1
Holding, LLC			valuation model	Expected volatility^(a)	21.0 - 33.4%	27.8%
				Expected dividend rate	-	-
Swap associated with the sale of Visa, Inc.		(35)	Discounted cash flow	Timing of the resolution	3/31/2014 -	NM
Class B shares				of the Covered Litigation	3/31/2017

As of September 30, 2012 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Residential mortgage loans	$	76	Loss rate model	Interest rate risk factor	(91.0) - 16.6%	6.5%
				Credit risk factor	2.3 - 68.4%	4.6%
IRLCs, net		102	Discounted cash flow	Loan closing rates	9.8 - 95.0%	60.1%
Stock warrants associated with Vantiv		197	Black-Scholes option	Expected term (years)	2.00 - 16.75	6.2
Holding, LLC			valuation model	Expected volatility^(a)	27.7 - 40.6%	34.2%
				Expected dividend rate	0	0
Swap associated with the sale of Visa, Inc.		(21)	Discounted cash flow	Timing of the resolution	6/30/13 -	NM
Class B shares				of the Covered Litigation	6/30/15

Based on historical and implied volatilities of comparable companies assuming similar expected terms.

The following tables present information as of September 30, 2013 and 2012 about significant unobservable inputs related to the Bancorp’s material categories of Level 3 financial assets and liabilities measured on a nonrecurring basis:

As of September 30, 2013 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Commercial loans held for sale	$	0	Appraised value	Appraised value	NM	NM
				Cost to sell	NM	10.0%
Commercial and industrial loans		431	Appraised value	Collateral value	NM	NM
Commercial mortgage loans		63	Appraised value	Collateral value	NM	NM
Commercial construction loans		3	Appraised value	Collateral value	NM	NM
Commercial leases		1	Appraised value	Collateral value	NM	NM
MSRs		915	Discounted cash flow	Prepayment speed	0 - 100%	(Fixed) 11.4% (Adjustable) 25.7%
				Discount rates	9.4 - 18.0%	(Fixed) 10.4% (Adjustable) 11.6%
OREO		109	Appraised value	Appraised value	NM	NM

As of September 30, 2012 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Commercial loans held for sale	$	13	Appraised value	Appraised value	NM	NM
				Cost to sell	NM	10.0%
Commercial and industrial loans		79	Appraised value	Default rates	100%	NM
				Collateral value	NM	NM
Commercial mortgage loans		59	Appraised value	Default rates	100%	NM
				Collateral value	NM	NM
Commercial construction loans		8	Appraised value	Default rates	100%	NM
				Collateral value	NM	NM
MSRs		679	Discounted cash flow	Prepayment speed	0 - 100%	(Fixed) 16.9% (Adjustable) 27.1%
				Discount rates	9.4 - 18.0%	(Fixed) 10.6% (Adjustable) 11.7%
OREO		114	Appraised value	Appraised value	NM	NM

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The following tables represent those assets that were subject to fair value adjustments during the three and nine months ended September 30, 2013 and 2012 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	Total Losses
						For the three months	For the nine months
As of September 30, 2013 ($ in millions)		Level 1	Level 2	Level 3	Total	ended September 30, 2013	ended September 30, 2013
Commercial loans held for sale^(a)	$	-	-	-	-	-	(5)
Commercial and industrial loans		-	-	431	431	(103)	(134)
Commercial mortgage loans		-	-	63	63	(9)	(34)
Commercial construction loans		-	-	3	3	(4)	(6)
Commercial leases		-	-	1	1	-	-
MSRs		-	-	915	915	(1)	150
OREO		-	-	109	109	(8)	(37)
Total	$	-	-	1,522	1,522	(125)	(66)


		Fair Value Measurements Using				Total Losses	Total Losses
						For the three months	For the nine months
As of September 30, 2012 ($ in millions)		Level 1	Level 2	Level 3	Total	ended September 30, 2012	ended September 30, 2012
Commercial loans held for sale^(a)	$	-	-	13	13	(4)	(10)
Commercial and industrial loans		-	-	79	79	(31)	(86)
Commercial mortgage loans		-	-	59	59	(11)	(40)
Commercial construction loans		-	-	8	8	(5)	(21)
MSRs		-	-	679	679	(72)	(122)
OREO		-	-	114	114	(16)	(60)
Total	$	-	-	952	952	(139)	(339)

Includes commercial nonaccrual loans held for sale.

Difference Between the Aggregate Fair Value and the Aggregate Unpaid Principal Balance for Residential Mortgage Loans Measured at Fair Value

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

		Aggregate	Aggregate Unpaid
($ in millions)		Fair Value	Principal Balance	Difference
September 30, 2013
Residential mortgage loans measured at fair value	$	1,387	1,331	56
Past due loans of 90 days or more		2	3	(1)
Nonaccrual loans		1	1	-

December 31, 2012
Residential mortgage loans measured at fair value		2,932	2,775	157
Past due loans of 90 days or more		3	4	(1)
Nonaccrual loans		-	1	(1)

Carrying Amounts and Estimated Fair Values for Certain Financial Instruments

Fair Value of Certain Financial Instruments
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	Fair Value Measurements Using			Total
As of September 30, 2013 ($ in millions)		Amount	Level 1	Level 2	Level 3	Fair Value
Financial assets:
Cash and due from banks	$	2,887	2,887	-	-	2,887
Other securities		846	-	846	-	846
Held-to-maturity securities		265	-	-	265	265
Other short-term investments		2,622	2,622	-	-	2,622
Loans held for sale		32	-	-	32	32
Portfolio loans and leases:
Commercial and industrial loans		37,440	-	-	38,987	38,987
Commercial mortgage loans		7,813	-	-	7,309	7,309
Commercial construction loans		843	-	-	699	699
Commercial leases		3,509	-	-	3,248	3,248
Residential mortgage loans^(a)		12,251	-	-	11,635	11,635
Home equity		9,251	-	-	9,179	9,179
Automobile loans		12,046	-	-	11,879	11,879
Credit card		2,070	-	-	2,230	2,230
Other consumer loans and leases		343	-	-	357	357
Unallocated allowance for loan and lease losses		(101)	-	-	-	-
Total portfolio loans and leases, net^(a)	$	85,465	-	-	85,523	85,523
Financial liabilities:
Deposits		94,126	-	94,157	-	94,157
Federal funds purchased		225	225	-	-	225
Other short-term borrowings		3,487	-	3,487	-	3,487
Long-term debt		8,098	7,943	635	-	8,578

Excludes $89 of residential mortgage loans measured at fair value on a recurring basis.

		Net Carrying	Fair Value Measurements Using
As of December 31, 2012 ($ in millions)		Amount	Level 1	Level 2	Level 3	Fair Value
Financial assets:
Cash and due from banks	$	2,441	2,441	-	-	2,441
Other securities		844	-	844	-	844
Held-to-maturity securities		284	-	-	284	284
Other short-term investments		2,421	2,421	-	-	2,421
Loans held for sale		83	-	-	83	83
Portfolio loans and leases:
Commercial and industrial loans		35,236	-	-	36,496	36,496
Commercial mortgage loans		8,770	-	-	8,020	8,020
Commercial construction loans		665	-	-	505	505
Commercial leases		3,481	-	-	3,310	3,310
Residential mortgage loans^(a)		11,712	-	-	11,532	11,532
Home equity		9,875	-	-	9,798	9,798
Automobile loans		11,944	-	-	12,076	12,076
Credit card		2,010	-	-	2,139	2,139
Other consumer loans and leases		270	-	-	288	288
Unallocated allowance for loan and lease losses		(111)	-	-	-	-
Total portfolio loans and leases, net^(a)	$	83,852	-	-	84,164	84,164
Financial liabilities:
Deposits		89,517	-	89,592	-	89,592
Federal funds purchased		901	901	-	-	901
Other short-term borrowings		6,280	-	6,280	-	6,280
Long-term debt		7,085	6,925	884	-	7,809

Excludes $76 of residential mortgage loans measured at fair value on a recurring basis.

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

+ References+ Details

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

+ References+ Details

- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

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