NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  referenced above were carried at fair value and included in  available-for-sale securities. The fair value of such interests were  based on quoted market prices, if available. If quoted prices were  not available, fair value was based on the present value of future  expected cash flows using management’s best estimates for the  key assumptions, including credit losses, prepayment speeds,  forward yield curves and discount rates commensurate with the  risks involved. Gains or losses recognized on the sale or  securitization of such loans prior to January 1, 2010 were reported  as a component of noninterest income in the Consolidated  Statements of Income and were based on the previous carrying  amount of the loans sold or securitized, as well as the fair value of  the servicing rights and other interests obtained by the Bancorp at  the date of sale or securitization. Adjustments to the fair value of  such interests prior to January 1, 2010 were included in  accumulated other comprehensive income in the Consolidated  Balance Sheets or in noninterest income in the Consolidated  Statements of Income if the fair value had declined below the  carrying amount and such decline was determined to be other- than-temporary. Servicing rights resulting from residential mortgage and  commercial loan sales are initially recorded at fair value and  subsequently amortized in proportion to and over the period of  estimated net servicing revenues and are reported as a component  of mortgage banking net revenue and corporate banking revenue,  respectively, in the Consolidated Statements of Income. Servicing  rights are assessed for impairment monthly, based on fair value,  with temporary impairment recognized through a valuation  allowance and permanent impairment recognized through a write- off of the servicing asset and related valuation allowance. Key  economic assumptions used in measuring any potential impairment of the servicing rights include the prepayment speeds  of the underlying loans, the weighted-average life, the discount  rate, the weighted-average coupon and the weighted-average  default rate, as applicable. The primary risk of material changes to  the value of the servicing rights resides in the potential volatility in  the economic assumptions used, particularly the prepayment  speeds. The Bancorp monitors risk and adjusts its valuation  allowance as necessary to adequately reserve for impairment in the  servicing portfolio. For purposes of measuring impairment, the  mortgage servicing rights are stratified into classes based on the  financial asset type (fixed-rate vs. adjustable-rate) and interest  rates. Fees received for servicing loans owned by investors are  based on a percentage of the outstanding monthly principal  balance of such loans and are included in noninterest income in  the Consolidated Statements of Income as loan payments are  received. Costs of servicing loans are charged to expense as  incurred. Bank premises and equipment, including leasehold improvements,  are carried at cost less accumulated depreciation and amortization.  Depreciation is calculated using the straight-line method based on  estimated useful lives of the assets for book purposes, while  accelerated depreciation is used for income tax purposes.  Amortization of leasehold improvements is computed using the  straight-line method over the lives of the related leases or useful  lives of the related assets, whichever is shorter. The Bancorp tests  its long-lived assets for impairment through both a probability- weighted and primary-asset approach whenever events or changes  in circumstances dictate. Maintenance, repairs and minor improvements are charged to noninterest expense in the Consolidated Statements of Income as incurred.  The Bancorp accounts for its derivatives as either assets or  liabilities measured at fair value through adjustments to accumulated other comprehensive income and/or current Accrued taxes represent the net estimated amount due to  taxing jurisdictions and are reported in accrued taxes, interest and  expenses in the Consolidated Balance Sheets. The Bancorp  evaluates and assesses the relative risks and appropriate tax  treatment of transactions and filing positions after considering  statutes, regulations, judicial precedent and other information and  maintains tax accruals consistent with its evaluation of these  relative risks and merits. Changes to the estimate of accrued taxes  occur periodically due to changes in tax rates, interpretations of  tax laws, the status of examinations being conducted by taxing  authorities and changes to statutory, judicial and regulatory  guidance that impact the relative risks of tax positions. These  changes, when they occur, can affect deferred taxes and accrued  taxes as well as the current period’s income tax expense and can  be significant to the operating results of the Bancorp. For  additional information on income taxes, see Note 21.  Deferred income tax assets and liabilities are determined  using the balance sheet method and are reported in other assets  and accrued taxes, interest and expenses, respectively, in the  Consolidated Balance Sheets. Under this method, the net deferred  tax asset or liability is based on the tax effects of the differences  between the book and tax basis of assets and liabilities, and  reflects enacted changes in tax rates and laws. Deferred tax assets  are recognized to the extent they exist and are subject to a  valuation allowance based on management’s judgment that  realization is more-likely-than-not. This analysis is performed on a  quarterly basis and includes an evaluation of all positive and  negative evidence to determine whether realization is more-likely- than-not.  The Bancorp estimates income tax expense based on amounts  expected to be owed to the various tax jurisdictions in which the  Bancorp conducts business. On a quarterly basis, management  assesses the reasonableness of its effective tax rate based upon its  current estimate of the amount and components of net income,  tax credits and the applicable statutory tax rates expected for the  full year. The estimated income tax expense is recorded in the  Consolidated Statements of Income.  Prior to entering into a hedge transaction, the Bancorp  formally documents the relationship between hedging instruments  and hedged items, as well as the risk management objective and  strategy for undertaking various hedge transactions. This process  includes linking all derivative instruments that are designated as  fair value or cash flow hedges to specific assets or liabilities on the  balance sheet or to specific forecasted transactions, along with a  formal assessment at both inception of the hedge and on an  ongoing basis as to the effectiveness of the derivative instrument  in offsetting changes in fair values or cash flows of the hedged  item. If it is determined that the derivative instrument is not  highly effective as a hedge, hedge accounting is discontinued and  the adjustment to fair value of the derivative instrument is  recorded in net income. earnings, as appropriate. On the date the Bancorp enters into a  derivative contract, the Bancorp designates the derivative instrument as either a fair value hedge, cash flow hedge or as a  free-standing derivative instrument. For a fair value hedge,  changes in the fair value of the derivative instrument and changes  in the fair value of the hedged asset or liability or of an  unrecognized firm commitment attributable to the hedged risk are  recorded in current period net income. For a cash flow hedge,  changes in the fair value of the derivative instrument, to the extent  that it is effective, are recorded in accumulated other comprehensive income and subsequently reclassified to net  income in the same period(s) that the hedged transaction impacts  net income. For free-standing derivative instruments, changes in  fair values are reported in current period net income. Income Taxes  Bank Premises and Equipment  Derivative Financial Instruments  Fifth Third Bancorp 75