Fair Value Measurements Using  As of December 31, 2009 ($ in millions)  Level 1 Level 2  Level 3  Total Fair Value  Assets: Available-for-sale securities:  U.S. Treasury and Government agencies  $458  - - $458  U.S. Government sponsored agencies  -  2,142 - 2,142  Obligations of states and political subdivisions  -  243 - 243  Agency mortgage-backed securities  -  11,382 - 11,382  Residual interests in securitizations  -  - 174  174  Other bonds, notes and debentures  -  2,395 - 2,395  Other securities  (a) 517 9 - 526 Available-for-sale securities  (a) 975 16,171 174 17,320 Trading securities:  Obligations of states and political subdivisions   -  56 1 57  Agency mortgage-backed securities  -  24 - 24  Other bonds, notes and debentures  -  201 4 205  Other securities  61  - 8 69  Trading securities 61  281 13 355  Residential mortgage loans held for sale  - 1,470 - 1,470 Residential mortgage loans  (b) -  - 26 26  Derivative instruments 33 1,616 84 1,733 Total assets  $1,069  19,538 297 $20,904  Liabilities: Other liabilities  (c) $6 1,013 75 $1,094 Total liabilities  $6  1,013 75 $1,094  (a) Excludes FHLB and FRB restricted stock totaling  $524  and  $344 , respectively, at  December 31, 2010 , and $551 and $342, respectively, at December 31, 2009. (b) Includes residential mortgage loans originated as held for sale and subsequently transferred to held for investment. (c) Includes derivative liabilities with a negative fair value and short positions.  118 Fifth Third Bancorp Derivatives  Residential mortgage loans held for sale and held for investment Available-for-sale and trading securities 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  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 primarily on the underlying collateral values.  Therefore, these loans are classified within Level 3 of the valuation  hierarchy. December 31, 2010 and 2009, the Bancorp measured fair value  using a discount rate based on the assumed holding period. 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. There were no financial assets or liabilities transferred  between Level 1 and Level 2 of the fair value hierarchy for any of  the periods presented. 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  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 