NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table reflects the change in fair value of interest rate contracts, designated as fair value hedges, as well as the change in fair value  of the related hedged items, included in the Consolidated Statements of Income:  For the year ended December 31, ($ in millions)  Consolidated Statements of  Income Caption  2010  2009 2008 Interest rate contracts:  Change in fair value of interest rate swaps hedging long-term debt  Interest on long-term debt  $167  (548) (776) Change in fair value of hedged long-term debt  Interest on long-term debt  (168)  538 765 Change in fair value of interest rate swaps hedging time deposits  Interest on deposits  6  4 (19) Change in fair value of hedged time deposits  Interest on deposits  (6)  (3) 19 Cash Flow Hedges  The Bancorp may enter into interest rate swaps to convert  floating-rate assets and liabilities to fixed rates or to hedge certain  forecasted transactions. The assets or liabilities are typically  grouped and share the same risk exposure for which they are  being hedged. The Bancorp may also enter into interest rate caps  and floors to limit cash flow variability of floating rate assets and  liabilities. As of December 31, 2010, all hedges designated as cash  flow hedges are assessed for effectiveness using regression  analysis. Ineffectiveness is generally measured as the amount by  which the cumulative change in the fair value of the hedging  instrument exceeds the present value of the cumulative change in  the hedged item’s expected cash flows. Ineffectiveness is reported  within other noninterest income in the Consolidated Statements  of Income. The effective portion of the gains or losses on cash  flow hedges are reported within accumulated other comprehensive income and are reclassified from accumulated  other comprehensive income to current period earnings when the  forecasted transaction affects earnings. As of December 31, 2010,  the maximum length of time over which the Bancorp is hedging  its exposure to the variability in future cash flows related to the  forecasted issuance of floating rate debt is 27 months.  Reclassified gains and losses on interest rate floors and  swaps related to commercial loans and interest rate caps and  swaps related to debt are recorded within interest income and  interest expense, respectively. As of December 31, 2010 and  2009, $67 million and $105 million, respectively, of deferred  gains, net of tax, on cash flow hedges were recorded in  accumulated other comprehensive income. As of December 31,  2010, $45 million in net deferred gains, net of tax, recorded in  accumulated other comprehensive income are expected to be  reclassified into earnings during the next twelve months. The following table presents the net gains recorded in the  Consolidated Statements of Income and accumulated other  comprehensive income relating to interest rate contracts designated as cash flow hedges. Included in the ineffectiveness  for the year ended December 31, 2010 are certain terminated  interest rate caps previously designated as cash flow hedges on  debt. In conjunction with these terminations, the Bancorp  reclassified $17 million of losses from accumulated other  comprehensive income into earnings as it was determined that the  original forecasted transaction was no longer probable of  occurring by the end of the originally specified time period or  within the additional period of time as defined by U.S. GAAP.  For the year ended December 31: ($ in millions)  2010  2009  2008  Amount of gain recognized in OCI  $2  75 100 Amount of gain reclassified from OCI into net interest income  60  49 3 Amount of ineffectiveness recognized in other noninterest income  6  (1) 1 Free-Standing Derivative Instruments – Risk Management  and Other Business Purposes  component of mortgage banking net revenue in the Consolidated Statements of Income.  As part of its overall risk management strategy relative to its  mortgage banking activity, the Bancorp may enter into various  free-standing derivatives (principal-only swaps, swaptions, floors, options and interest rate swaps) to economically hedge  changes in fair value of its largely fixed-rate MSR portfolio.  Principal-only swaps hedge the mortgage-LIBOR spread because these swaps appreciate in value as a result of tightening  spreads. Principal-only swaps also provide prepayment protection by increasing in value when prepayment speeds  increase, as opposed to MSRs that lose value in a faster  prepayment environment. Receive fixed/pay floating interest  rate swaps and swaptions increase in value when interest rates  do not increase as quickly as expected.  The Bancorp enters into forward contracts to economically hedge the change in fair value of certain  residential mortgage loans held for sale due to changes in  interest rates. The Bancorp may also enter into forward swaps  to economically hedge the change in fair value of certain  commercial mortgage loans held for sale due to changes in  interest rates. Interest rate lock commitments issued on  residential mortgage loan commitments that will be held for  sale are also considered free-standing derivative instruments  and the interest rate exposure on these commitments is  economically hedged primarily with forward contracts. Revaluation gains and losses from free-standing derivatives  related to mortgage banking activity are recorded as a  The Bancorp previously entered into foreign exchange  derivative contracts to economically hedge certain foreign  denominated loans. Derivative instruments that the Bancorp  may use to economically hedge these foreign denominated  loans include foreign exchange swaps and forward contracts.  The Bancorp does not designate these instruments against the  foreign denominated loans, and therefore, does not obtain  hedge accounting treatment. Revaluation gains and losses on  these foreign currency derivative contracts are recorded within  other noninterest income in the Consolidated Statements of  Income, as are revaluation gains and losses on foreign  denominated loans. Additionally, the Bancorp may enter into free-standing  derivative instruments (options, swaptions and interest rate  swaps) in order to minimize significant fluctuations in earnings  and cash flows caused by interest rate and prepayment  volatility. The gains and losses on these derivative contracts are  recorded within other noninterest income in the Consolidated  Statements of Income.  In conjunction with the Processing Business Sale in 2009,  the Bancorp received warrants and issued put options, which  are accounted for as free-standing derivatives. Refer to Note 28  for further discussion of significant inputs and assumptions  used in the valuation of these instruments.  In conjunction with the sale of Visa, Inc. Class B shares in  2009, the Bancorp entered into a total return swap in which  Fifth Third Bancorp 95 