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## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

Interest income recognized on a cash basis for loans on nonaccrual status during 2010, 2009, and 2008, was $25 million, $20 million, and $10 million, respectively. 

The following table summarizes the Bancorp’s nonperforming loans and leases, by class, as of December 31, 2010: 

<img src='content_image/201648.jpg'>

(a) Excludes $294  and $224 of nonaccrual loans held for sale at December 31, 2010  and 2009, respectively. 

## 8. LOANS WITH DETERIORATED CREDIT QUALITY ACQUIRED IN A TRANSFER 

The Bancorp has acquired certain loans for which there was evidence of deterioration of credit quality since origination and for which it was probable, at acquisition, that all contractually required payments would not be collected. These loans were evaluated either individually or segregated into pools based on common risk characteristics and accounted for under U.S. GAAP guidance for loans acquired with deteriorated credit quality. U.S. GAAP requires acquired loans to be recorded at their initial fair value and prohibits carrying over valuation allowances when applying purchase accounting. Loans carried at fair value, mortgage loans held for sale and loans under revolving credit agreements are excluded from the scope of this guidance on loans acquired with deteriorated credit quality. During the years ended December 31, 2010, 2009 and 2008, the Bancorp recorded provision expense for loans acquired with deteriorated credit quality of $6 million, $21 million and $35 million, respectively, in the Consolidated Statements of Income. In addition, as of December 31, 2010 and 2009, the Bancorp maintained an allowance for loan and lease losses of $3 million and $21 million, respectively, on these loans. 

The following table reflects the outstanding balance of all contractually required payments and carrying amounts of loans acquired with deteriorated credit quality at December 31: 

<img src='content_image/201645.jpg'>

At the acquisition date, the Bancorp determines the excess of the loan’s contractually required payments over all cash flows expected to be collected as an amount that should not be accreted into interest income (nonaccretable difference). The remaining amount representing the difference in the expected cash flows of acquired loans and the initial investment in the acquired loans is 

accreted into interest income over the remaining life of the loan or pool of loans (accretable yield). A summary of activity is provided. 

<img src='content_image/201647.jpg'>

The following table reflects loans that were acquired with deteriorated credit quality during the years ended December 31: 

<img src='content_image/201646.jpg'>

