MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
## Table 0 ##
exchange contracts for the benefit of commercial customers involved in international trade to hedge their exposure to foreign currency fluctuations.
The Bancorp has internal controls in place to help ensure excessive risk is not being taken in providing this service to customers.
These controls include an independent determination of currency volatility and credit equivalent exposure on these contracts, counterparty credit approvals and country limits.
LIQUIDITY RISK MANAGEMENT The goal of liquidity management is to provide adequate funds to meet changes in loan and lease demand, unexpected deposit withdrawals and other contractual obligations.
A summary of certain obligations and commitments to make future payments under contracts is included in Table 42.
Mitigating liquidity risk is accomplished by maintaining liquid assets in the form of investment securities, maintaining sufficient unused borrowing capacity in the debt markets and delivering consistent growth in core deposits.
Cash flows from estimated loan and lease repayment are included in Table 37.
The estimated weightedaverage life of the available-for-sale securities portfolio was 3.2 years at December 31, 2008, based on current prepayment expectations.
Of the $14.3 billion of securities in the portfolio at December 31, 2008, $5.8 billion in principal and interest is expected to be received in the next 12 months and an additional $2.2 billion is expected to be received in the next 13 to 24 months.
In addition to the securities portfolio, asset-driven liquidity is provided by the Bancorp’s ability to sell or securitize loan and lease assets.
In order to reduce the exposure to interest rate fluctuations and to manage liquidity, the Bancorp has developed securitization and sale procedures for several types of interestsensitive assets.
A majority of the long-term, fixed-rate singlefamily residential mortgage loans underwritten according to FHLMC or FNMA guidelines are sold for cash upon origination.
Additional assets such as jumbo fixed-rate residential mortgages, certain commercial loans, home equity loans, automobile loans and other consumer loans are also capable of being securitized or sold.
For the year ended December 31, 2008 and 2007, loans totaling $15.7 billion and $12.2 billion, respectively, were securitized or sold.
Core deposits have historically provided the Bancorp with a sizeable source of relatively stable and low cost funds.
The Bancorp’s average core deposits and shareholders’ equity funded 65% of its average total assets during 2008.
In addition to core deposit funding, the Bancorp also accesses a variety of other short-term and long-term funding sources, which include the use of various regional Federal Home Loan Banks as a funding source.
Certificates carrying a balance of $100,000 or more and deposits in the Bancorp’s foreign branch located in the Cayman Islands are wholesale funding tools utilized to fund asset growth.
Management does not rely on any one source of liquidity and manages availability in response to changing balance sheet needs.
The Bancorp has a shelf registration in place with the SEC permitting ready access to the public debt markets and qualifies as a “well-known seasoned issuer” under SEC rules.
As of December 31, 2008, $4.4 billion of debt or other securities were available for issuance from this shelf registration under the current Bancorp’s Board of Directors’ authorizations, however, due to current market disruptions, access to these markets may not be readily available.
The Bancorp also has $16.2 billion of funding available for issuance through private offerings of debt securities pursuant to its bank note program and currently has approximately $17.9 billion of borrowing capacity available through secured borrowing sources including the Federal Home Loan Banks and Federal Reserve Banks.
The Bancorp has approximately $1.3 billion of unsecured long-term debt and $2.8 billion of total long-term debt that will mature during 2009.
The Bancorp’s senior debt ratings as of February 23, 2009 are summarized in Table 39, which indicate the Bancorp’s strong capacity to meet financial commitments.
* Additional information on senior debt credit ratings is as follows: ?
Moody’s A2 rating is considered upper-medium-grade obligations and is the third highest ranking within its overall classification system; ?
Standard & Poor’s A- rating indicates the obligor’s capacity to meet its financial commitment is STRONG and is the third highest ranking within its overall classification system; ?
Fitch Ratings’ A rating is considered high credit quality and is the third highest ranking within its overall classification system; and ?
DBRS Ltd. ’s AAL rating is considered superior credit quality and is the second highest ranking within its overall classification system.
* As an investor, you should be aware that a security rating is not a recommendation to buy, sell or hold securities, that it may be subject to revision or withdrawal at any time by the assigning rating organization and that each rating should be evaluated independently of any other rating.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fifth Third Bancorp 85 18.
ACCUMULATED OTHER COMPREHENSIVE INCOME The Bancorp has elected to present the disclosures required by SFAS No.130, “Reporting of Comprehensive Income,” in the Consolidated Statements of Changes in Shareholders’ Equity and in the following table.
Disclosure of the reclassification adjustments, related tax effects allocated to other comprehensive income and accumulated other comprehensive income as of and for the years ended December 31 were as follows:
## Table 1 ##
a) Upon adoption of SFAS No.158, the Bancorp measured its liability for its total pension and other postretirement obligations to be $59 million.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
## Table 2 ##
Commercial loans held for sale During 2013 and 2012, the Bancorp transferred $5 million and $16 million, respectively, of commercial loans from the portfolio to loans held for sale that upon transfer were measured at fair value using significant unobservable inputs.
These loans had fair value adjustments in 2013 and 2012 totaling $4 million and $1 million, respectively, and were generally based on appraisals of the underlying collateral and were therefore, classified within Level 3 of the valuation hierarchy.
Additionally, during 2013 and 2012 there were fair value adjustments on existing commercial loans held for sale of $3 million and $12 million, respectively.
The fair value adjustments were also based on appraisals of the underlying collateral and were therefore classified within Level 3 of the valuation hierarchy.
An adverse change in the fair value of the underlying collateral would result in a decrease in the fair value measurement.
The Accounting Department determines the procedures for valuation of commercial HFS loans which may include a comparison to recently executed transactions of similar type loans.
A monthly review of the portfolio is performed for reasonableness.
Quarterly, appraisals approaching a year old are updated and the Real Estate Valuation group, which reports to the Chief Risk and Credit Officer, in conjunction with the Commercial Line of Business review the third party appraisals for reasonableness.
Additionally, the Commercial Line of Business Finance Department, which reports to the Bancorp Chief Financial Officer, in conjunction with Accounting review all loan appraisal values, carrying values and vintages.
Commercial loans held for investment During 2013 and 2012, the Bancorp recorded nonrecurring impairment adjustments to certain commercial and industrial, commercial mortgage and commercial construction loans held for investment.
Larger commercial loans included within aggregate borrower relationship balances exceeding $1 million that exhibit probable or observed credit weaknesses are subject to individual review for impairment.
The Bancorp considers the current value of collateral, credit quality of any guarantees, the guarantor’s liquidity and willingness to cooperate, the loan structure and other factors when evaluating whether an individual loan is impaired.
When the loan is collateral dependent, the fair value of the loan is generally based on the fair value of the underlying collateral supporting the loan and therefore these loans were classified within Level 3 of the valuation hierarchy.
In cases where the carrying value exceeds the fair value, an impairment loss is recognized.
An adverse change in the fair value of the underlying collateral would result in a decrease in the fair value measurement.
The fair values and recognized impairment losses are reflected in the previous table.
Commercial Credit Risk, which reports to the Chief Risk and Credit Officer, is responsible for preparing and reviewing the fair value estimates for commercial loans held for investment.
MSRs Mortgage interest rates increased during the year ended December 31, 2013 and the Bancorp recognized a recovery of temporary impairment on servicing rights.
The Bancorp recognized temporary impairments in certain classes of the MSR portfolio during the year ended December 31, 2012 and the carrying value was adjusted to the fair value.
MSRs do not trade in an active, open market with readily observable prices.
While sales of MSRs do occur, the precise terms and conditions typically are not readily available.
Accordingly, the Bancorp estimates the fair value of MSRs using internal discounted cash flow models with certain unobservable inputs, primarily prepayment speed assumptions, discount rates and weighted average lives, resulting in a classification within Level 3 of the valuation hierarchy.
Refer to Note 11 for further information on the assumptions used in the valuation of the Bancorp’s MSRs.
The Secondary Marketing Department and Treasury Department are responsible for determining the valuation methodology for MSRs.
Representatives from Secondary Marketing, Treasury, Accounting and Risk Management are responsible for reviewing key assumptions used in the internal discounted cash flow model.
Two external valuations of the MSR portfolio are obtained from third parties that use valuation models in order to assess the reasonableness of the internal discounted cash flow model.
Additionally, the Bancorp participates in peer surveys that provide additional confirmation of the reasonableness of key assumptions utilized in the MSR valuation process and the resulting MSR prices.
OREO During 2013 and 2012, the Bancorp recorded nonrecurring adjustments to certain commercial and residential real estate properties classified as OREO and measured at the lower of carrying amount or fair value.
These nonrecurring losses are primarily due to declines in real estate values of the properties recorded in OREO.
For the years ended December 31, 2013 and 2012, these losses include $19 million and $17 million, respectively, recorded as charge-offs, on new OREO properties transferred from loans during the respective periods and $26 million and $57 million, respectively, recorded as negative fair value adjustments on OREO in other noninterest income subsequent to their transfer from loans.
As discussed in the following paragraphs, the fair value amounts are generally based on appraisals of the property values, resulting in a

Tables referenced above, in order (Table 0 first):
<table><tr><td>As of February 23, 2009</td><td>Moody’s</td><td>Standard and Poor’s</td><td>Fitch</td><td>DBRS</td></tr><tr><td>Fifth Third Bancorp:</td><td></td><td></td><td></td><td></td></tr><tr><td>Commercial paper</td><td>Prime-1</td><td>A-2</td><td>F1</td><td>R-1M</td></tr><tr><td>Senior debt</td><td>A2</td><td>A-</td><td>A</td><td>AAL</td></tr><tr><td>Subordinated debt</td><td>A3</td><td>BBB+</td><td>A-</td><td>A</td></tr><tr><td>Fifth Third Bank and Fifth Third Bank (Michigan):</td><td></td><td></td><td></td><td></td></tr><tr><td>Short-term deposit</td><td>Prime-1</td><td>A1</td><td>F1</td><td>R-1H</td></tr><tr><td>Long-term deposit</td><td>A1</td><td>A</td><td>A+</td><td>AA</td></tr><tr><td>Senior debt</td><td>A1</td><td>A</td><td>A</td><td>AA</td></tr><tr><td>Subordinated debt</td><td>A2</td><td>A-</td><td>A-</td><td>AAL</td></tr></table>
<table><tr><td></td><td colspan="3"> Total Other Comprehensive Income</td><td colspan="3"> Total Accumulated Other Comprehensive Income</td></tr><tr><td>($ in millions)</td><td> Pretax Activity</td><td> Tax Effect</td><td> Net Activity</td><td> Beginning Balance</td><td> Net Activity</td><td> Ending Balance</td></tr><tr><td> 2008</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Unrealized holding gains on available-for-sale securities arising during period</td><td> $353</td><td> -123</td><td> 230</td><td></td><td></td><td></td></tr><tr><td>Reclassification adjustment for net gains included in net loss</td><td> -31</td><td> 10</td><td> -21</td><td></td><td></td><td></td></tr><tr><td>Net unrealized gains (losses) on available-for-sale securities</td><td> 322</td><td> -113</td><td> 209</td><td> -94</td><td> 209</td><td> 115</td></tr><tr><td>Unrealized holding gains on cash flow hedge derivatives</td><td> 100</td><td> -35</td><td> 65</td><td></td><td></td><td></td></tr><tr><td>Reclassification adjustment for net gains on cash flow hedge derivatives included in netloss</td><td> -3</td><td> 1</td><td> -2</td><td></td><td></td><td></td></tr><tr><td>Net unrealized gains on cash flow hedge derivatives</td><td> 97</td><td> -34</td><td> 63</td><td> 25</td><td> 63</td><td> 88</td></tr><tr><td>Defined benefit plans:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Net prior service cost</td><td> -</td><td> -</td><td> -</td><td></td><td></td><td></td></tr><tr><td>Net actuarial loss</td><td> -74</td><td> 26</td><td> -48</td><td></td><td></td><td></td></tr><tr><td>Defined benefit plans, net</td><td> -74</td><td> 26</td><td> -48</td><td> -57</td><td> -48</td><td> -105</td></tr><tr><td>Total</td><td> $345</td><td> -121</td><td> 224</td><td> -126</td><td> 224</td><td> 98</td></tr><tr><td> 2007</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Unrealized holding gains on available-for-sale securities arising during period</td><td>$60</td><td>-23</td><td>37</td><td></td><td></td><td></td></tr><tr><td>Reclassification adjustment for net gains included in net income</td><td>-21</td><td>9</td><td>-12</td><td></td><td></td><td></td></tr><tr><td>Net unrealized gains (losses) on available-for-sale securities</td><td>39</td><td>-14</td><td>25</td><td>-119</td><td>25</td><td>-94</td></tr><tr><td>Unrealized holding gains on cash flow hedge derivatives</td><td>42</td><td>-15</td><td>27</td><td></td><td></td><td></td></tr><tr><td>Reclassification adjustment for net gains on cash flow hedge derivatives included in netincome</td><td>-1</td><td>-</td><td>-1</td><td></td><td></td><td></td></tr><tr><td>Net unrealized gains (losses) on cash flow hedge derivatives</td><td>41</td><td>-15</td><td>26</td><td>-1</td><td>26</td><td>25</td></tr><tr><td>Defined benefit plans:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Net prior service cost</td><td>-</td><td>-</td><td>-</td><td></td><td></td><td></td></tr><tr><td>Net actuarial gain</td><td>3</td><td>-1</td><td>2</td><td></td><td></td><td></td></tr><tr><td>Defined benefit plans, net</td><td>3</td><td>-1</td><td>2</td><td>-59</td><td>2</td><td>-57</td></tr><tr><td>Total</td><td>$83</td><td>-30</td><td>53</td><td>-179</td><td>53</td><td>-126</td></tr><tr><td> 2006</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Unrealized holding gains on available-for-sale securities arising during period</td><td>$61</td><td>-20</td><td>41</td><td></td><td></td><td></td></tr><tr><td>Reclassification adjustment for net losses included in net income</td><td>364</td><td>-129</td><td>235</td><td></td><td></td><td></td></tr><tr><td>Net unrealized gains (losses) on available-for-sale securities</td><td>425</td><td>-149</td><td>276</td><td>-395</td><td>276</td><td>-119</td></tr><tr><td>Reclassification adjustment for net losses on cash flow hedge derivatives included in netincome</td><td>20</td><td>-8</td><td>12</td><td></td><td></td><td></td></tr><tr><td>Net unrealized gains (losses) on cash flow hedge derivatives</td><td>20</td><td>-8</td><td>12</td><td>-13</td><td>12</td><td>-1</td></tr><tr><td>Minimum pension liability<i>(a)</i></td><td></td><td></td><td></td><td>-5</td><td>5</td><td>-</td></tr><tr><td>Cumulative effect of change in accounting for pension and other postretirement obligations<i>(a)</i></td><td></td><td></td><td></td><td>-</td><td>-59</td><td>-59</td></tr><tr><td>Total</td><td>$445</td><td>-157</td><td>288</td><td>-413</td><td>234</td><td>-179</td></tr></table>
<table><tr><td>Financial Instrument</td><td>Fair Value</td><td>Valuation Technique</td><td>Significant UnobservableInputs</td><td>Ranges ofInputs</td><td>Weighted-Average</td></tr><tr><td>Commercial loans held for sale</td><td>$ 9</td><td>Appraised value</td><td>Appraised valueCost to sell</td><td>NMNM</td><td>NM10.0%</td></tr><tr><td>Commercial and industrial loans</td><td>83</td><td>Appraised value</td><td>Default ratesCollateral value</td><td>100%NM</td><td>NMNM</td></tr><tr><td>Commercial mortgage loans</td><td>46</td><td>Appraised value</td><td>Default ratesCollateral value</td><td>100%NM</td><td>NMNM</td></tr><tr><td>Commercial construction loans</td><td>4</td><td>Appraised value</td><td>Default ratesCollateral value</td><td>100%NM</td><td>NMNM</td></tr><tr><td>MSRs</td><td>697</td><td>Discounted cash flow</td><td>Prepayment speedDiscount rates</td><td>0 - 100%9.4 - 18.0%</td><td>(Fixed) 16.1%(Adjustable) 26.9%(Fixed) 10.5%(Adjustable)11.7%</td></tr><tr><td>OREO</td><td>165</td><td>Appraised value</td><td>Appraised value</td><td>NM</td><td>NM</td></tr></table>

Question: what is the percentage change in nonrecurring losses from 2012 to 2013?
Answer: 0.11765
Reasoning program: subtract(19,17), divide(#0,17)