NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Visa litigation  Long-term borrowing obligations  Margin accounts  million of commercial paper issued by the VIE, representing 87%  of the VIE’s total commercial paper then outstanding. Effective  January 1, 2010 with the adoption of amended accounting  guidance regarding the consolidation of VIEs, the Bancorp was  required to consolidate the assets and liabilities of this VIE. See  Note 1 for further information on the amended accounting  guidance.  FTS, a subsidiary of the Bancorp, guarantees the collection of all  margin account balances held by its brokerage clearing agent for  the benefit of its customers. FTS is responsible for payment to its  brokerage clearing agent for any loss, liability, damage, cost or  expense incurred as a result of customers failing to comply with  margin or margin maintenance calls on all margin accounts. The  margin account balance held by the brokerage clearing agent was  $10 million and $8 million at December 31, 2010 and 2009,  respectively. In the event of any customer default, FTS has rights  to the underlying collateral provided. Given the existence of the  underlying collateral provided and negligible historical credit  losses, the Bancorp does not maintain a loss reserve related to the  margin accounts.  The Bancorp had fully and unconditionally guaranteed certain  long-term borrowing obligations issued by wholly-owned issuing  trust entities with a carrying value of $2.9 billion and $2.8 billion  as of December 31, 2010 and 2009, respectively. See Note 17 for  further information on these long-term borrowing obligations.  The Bancorp, as a member bank of Visa prior to Visa’s  reorganization and initial public offerings of its Class A common  shares in 2008, had certain indemnification obligations pursuant to  Visa’s certificate of incorporation and by-laws and in accordance  with their membership agreements. In accordance with Visa’s by- laws prior to the IPO, the Bancorp could have been required to  indemnify Visa for the Bancorp’s proportional share of losses  based on the pre-IPO membership interests. As part of its  reorganization and IPO, the Bancorp’s indemnification obligation  was modified to include only certain known litigation (the  “Covered Litigation”) as of the date of the restructuring. This  modification triggered a requirement to recognize a $3 million  liability for the year ended December 31, 2007 equal to the fair  value of the indemnification obligation. Additionally during 2007,  the Bancorp recorded $169 million for its share of litigation  formally settled by Visa and for probable future litigation  settlements. In conjunction with the IPO, the Bancorp received  10.1 million of Visa’s Class B shares based on the Bancorp’s  membership percentage in Visa prior to the IPO. The Class B  shares are not transferable (other than to another member bank)  until the later of the third anniversary of the IPO closing or the  date which the Covered Litigation has been resolved; therefore,  the Bancorp’s Class B shares were classified in other assets and  accounted for at their carryover basis of $0. Visa deposited $3  billion of the proceeds from the IPO into a litigation escrow  account, established for the purpose of funding judgments in, or  settlements of, the Covered Litigation. If Visa’s litigation  committee determines that the escrow account is insufficient, then  Visa will issue additional Class A shares and deposit the proceeds  from the sale of the shares into the litigation escrow account.  When Visa funds the litigation escrow account, the Class B shares  are subject to dilution through an adjustment in the conversion  rate of Class B shares into Class A shares. During 2008, the  Bancorp recorded additional reserves of $71 million for probable  future settlements related to the Covered Litigation and recorded  its proportional share of $169 million of the Visa escrow account  net against the Bancorp’s litigation reserve. During 2009, Visa announced it had deposited an additional  $700 million into the litigation escrow account. As a result of this  funding, the Bancorp recorded its proportional share of $29  million of these additional funds as a reduction to its net Visa  litigation reserve liability and a reduction to noninterest expense.  Later in 2009, the Bancorp completed the sale of its Visa, Inc.  Class B shares for proceeds of $300 million. As part of this  transaction the Bancorp entered into a total return swap in which  the Bancorp will make or receive payments based on subsequent  changes in the conversion rate of the Class B shares into Class A  shares. The swap terminates on the later of the third anniversary  of Visa’s IPO or the date on which the Covered Litigation is  finally settled. The Bancorp calculates the fair value of the swap  based on its estimate of the probability and timing of certain  Covered Litigation settlement scenarios and the resulting payments related to the swap. The counterparty to the swap as a  result of its ownership of the Class B shares will be impacted by  dilutive adjustments to the conversion rate of the Class B shares  into Class A shares caused by any Covered Litigation losses in  excess of the litigation escrow account. If actual judgments in, or  settlements of, the Covered Litigation significantly exceed current  expectations, then additional funding by Visa of the litigation  escrow account and the resulting dilution of the Class B shares  could result in a scenario where the Bancorp’s ultimate exposure  associated with the Covered Litigation (the “Visa Litigation  Exposure”) exceeds the value of the Class B shares owned by the  swap counterparty (the “Class B Value”). In the event the  Bancorp concludes that it is probable that the Visa Litigation  Exposure exceeds the Class B Value, the Bancorp would record a  litigation reserve liability and a corresponding amount of other  noninterest expense for the amount of the excess. Any such  litigation reserve liability would be separate and distinct from the  fair value derivative liability associated with the total return swap.  As of the date of the Bancorp’s sale of Visa Class B shares  and through December 31, 2010, the Bancorp has concluded that  it is not probable that the Visa Covered Litigation Exposure will  exceed the Class B Value. Based on this determination, upon the  sale of Class B shares, the Bancorp reversed its net Visa litigation  reserve liability and recognized a free-standing derivative liability  associated with the total return swap with an initial fair value of  $55 million. The sale of the Class B shares, recognition of the  derivative liability and reversal of the net litigation reserve liability  resulted in a pre-tax benefit of $288 million ($187 million after- tax) recognized by the Bancorp for the year ended December 31,  2009. In the second quarter of 2010, Visa funded an additional  $500 million into the escrow account which resulted in further  dilution in the conversion of Class B shares into Class A shares  and required the Bancorp to make a $20 million cash payment  (which reduced the swap liability) to the swap counterparty in  accordance with the terms of the swap contract. In the fourth  quarter of 2010, Visa funded an additional $800 million into the  litigation escrow account which resulted in further dilution in the  conversion of Class B shares into Class A shares and required the  Bancorp to make a $35 million cash payment (which reduced the  swap liability) to the swap counterparty in accordance with the  terms of the swap contract. The fair value of the swap liability was  $18 million and $55 million as of December 31, 2010 and 2009,  respectively.  Fifth Third Bancorp 103