FINANCIAL CONTENTS
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
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Managements Assessment as to the Effectiveness of Internal Control over Financial Reporting |
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Financial Statements |
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FORWARD-LOOKING STATEMENTS
This report contains statements that we believe are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. They usually can be identified by the use of forward-looking language such as will likely result, may, are expected to, is anticipated, estimate, forecast, projected, intends to, or may include other similar words or phrases such as believes, plans, trend, objective, continue, remain, or similar expressions, or future or conditional verbs such as will, would, should, could, might, can, or similar verbs. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements we may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to us. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) general economic conditions and weakening in the economy, specifically the real estate market, either nationally or in the states in which Fifth Third, one or more acquired entities and/or the combined company do business, are less favorable than expected; (2) deteriorating credit quality; (3) political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; (4) changes in the interest rate environment reduce interest margins; (5) prepayment speeds, loan origination and sale volumes, charge-offs and loan loss provisions; (6) Fifth Thirds ability to maintain required capital levels and adequate sources of funding and liquidity; (7) maintaining capital requirements may limit Fifth Thirds operations and potential growth; (8) changes and trends in capital markets; (9) problems encountered by larger or similar financial institutions may adversely affect the banking industry and/or Fifth Third; (10) competitive pressures among depository institutions increase significantly; (11) effects of critical accounting policies and judgments; (12) changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board (FASB) or other regulatory agencies; (13) legislative or regulatory changes or actions, or significant litigation, adversely affect Fifth Third, one or more acquired entities and/or the combined company or the businesses in which Fifth Third, one or more acquired entities and/or the combined company are engaged, including the Dodd-Frank Wall Street Reform and Consumer Protection Act; (14) ability to maintain favorable ratings from rating agencies; (15) fluctuation of Fifth Thirds stock price; (16) ability to attract and retain key personnel; (17) ability to receive dividends from its subsidiaries; (18) potentially dilutive effect of future acquisitions on current shareholders ownership of Fifth Third; (19) effects of accounting or financial results of one or more acquired entities; (20) difficulties from the separation of or the results of operations of Vantiv, LLC from Fifth Third; (21) loss of income from any sale or potential sale of businesses that could have an adverse effect on Fifth Thirds earnings and future growth; (22) ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks; and (23) the impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity.
Fifth Third Bancorp provides the following list of acronyms as a tool for the reader. The acronyms identified below are used in Managements Discussion and Analysis of Financial Condition and Results of Operations, the Consolidated Financial Statements and in the Notes to Consolidated Financial Statements.
ALCO: Asset Liability Management Committee ALLL: Allowance for Loan and Lease Losses AOCI: Accumulated Other Comprehensive Income ARM: Adjustable Rate Mortgage ATM: Automated Teller Machine BBA: British Bankers Association BOLI: Bank Owned Life Insurance bps: Basis points BPO: Broker Price Opinion CCAR: Comprehensive Capital Analysis and Review CDC: Fifth Third Community Development Corporation CFPB: United States Consumer Financial Protection Bureau C&I: Commercial and Industrial CPP: Capital Purchase Program CRA: Community Reinvestment Act DCF: Discounted Cash Flow DIF: Deposit Insurance Fund ERISA: Employee Retirement Income Security Act ERM: Enterprise Risk Management ERMC: Enterprise Risk Management Committee EVE: Economic Value of Equity FASB: Financial Accounting Standards Board FDIC: Federal Deposit Insurance Corporation FHLB: Federal Home Loan Bank FHLMC: Federal Home Loan Mortgage Corporation FICO: Fair Isaac Corporation (credit rating) FNMA: Federal National Mortgage Association FRB: Federal Reserve Bank FSOC: Financial Stability Oversight Council FTAM: Fifth Third Asset Management, Inc. FTE: Fully Taxable Equivalent FTP: Funds Transfer Pricing FTPS: Fifth Third Processing Solutions, now Vantiv, LLC FTS: Fifth Third Securities GNMA: Government National Mortgage Association GSE: Government Sponsored Enterprise HAMP: Home Affordable Modification Program HARP: Home Affordable Refinance Program |
HFS: Held for Sale IFRS: International Financial Reporting Standards IPO: Initial Public Offering IRC: Internal Revenue Code IRLC: Interest Rate Lock Commitment IRS: Internal Revenue Service LIBOR: London InterBank Offered Rate LLC: Limited Liability Company LTV: Loan-to-Value MD&A: Managements Discussion and Analysis of Financial Condition and Results of Operations MSR: Mortgage Servicing Right NII: Net Interest Income NM: Not Meaningful NPR: Notice of Proposed Rulemaking OCC: Office of the Comptroller of the Currency OCI: Other Comprehensive Income OFR: Office of Financial Research OREO: Other Real Estate Owned OTTI: Other-Than-Temporary Impairment PMI: Private Mortgage Insurance RSAs: Restricted Stock Awards SARs: Stock Appreciation Rights SEC: United States Securities and Exchange Commission SCAP: Supervisory Capital Assessment Program TARP: Troubled Asset Relief Program TBA: To Be Announced TDR: Troubled Debt Restructuring TruPS: Trust Preferred Securities TSA: Transition Service Agreement UK: United Kingdom U.S.: United States of America U.S. GAAP: Accounting principles generally accepted in the United States of America VaR: Value-at-Risk VIE: Variable Interest Entity VRDN: Variable Rate Demand Note |
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Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is MD&A of certain significant factors that have affected Fifth Third Bancorps (the Bancorp or Fifth Third) financial condition and results of operations during the periods included in the Consolidated Financial Statements, which are a part of this filing. Reference to the Bancorp incorporates the parent holding company and all consolidated subsidiaries.
TABLE 1: SELECTED FINANCIAL DATA
For the years ended December 31 ($ in millions, except for per share data) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
Income Statement Data |
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Net interest income(a) |
$ | 3,613 | 3,575 | 3,622 | 3,373 | 3,536 | ||||||||||||||
Noninterest income |
2,999 | 2,455 | 2,729 | 4,782 | 2,946 | |||||||||||||||
Total revenue(a) |
6,612 | 6,030 | 6,351 | 8,155 | 6,482 | |||||||||||||||
Provision for loan and lease losses |
303 | 423 | 1,538 | 3,543 | 4,560 | |||||||||||||||
Noninterest expense |
4,081 | 3,758 | 3,855 | 3,826 | 4,564 | |||||||||||||||
Net income (loss) attributable to Bancorp |
1,576 | 1,297 | 753 | 737 | (2,113 | ) | ||||||||||||||
Net income (loss) available to common shareholders |
1,541 | 1,094 | 503 | 511 | (2,180 | ) | ||||||||||||||
Common Share Data |
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Earnings per share, basic |
$ | 1.69 | 1.20 | 0.63 | 0.73 | (3.91 | ) | |||||||||||||
Earnings per share, diluted |
1.66 | 1.18 | 0.63 | 0.67 | (3.91 | ) | ||||||||||||||
Cash dividends per common share |
0.36 | 0.28 | 0.04 | 0.04 | 0.75 | |||||||||||||||
Book value per share |
15.10 | 13.92 | 13.06 | 12.44 | 13.57 | |||||||||||||||
Market value per share |
15.20 | 12.72 | 14.68 | 9.75 | 8.26 | |||||||||||||||
Financial Ratios (%) |
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Return on assets |
1.34 | % | 1.15 | 0.67 | 0.64 | (1.85 | ) | |||||||||||||
Return on average common equity |
11.6 | 9.0 | 5.0 | 5.6 | (23.0 | ) | ||||||||||||||
Dividend payout ratio |
21.3 | 23.3 | 6.3 | 5.5 | NM | |||||||||||||||
Average equity as a percent of average assets |
11.65 | 11.41 | 12.22 | 11.36 | 8.78 | |||||||||||||||
Tangible common equity(b) |
8.83 | 8.68 | 7.04 | 6.45 | 4.23 | |||||||||||||||
Net interest margin(a) |
3.55 | 3.66 | 3.66 | 3.32 | 3.54 | |||||||||||||||
Efficiency(a) |
61.7 | 62.3 | 60.7 | 46.9 | 70.4 | |||||||||||||||
Credit Quality |
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Net losses charged off |
$ | 704 | 1,172 | 2,328 | 2,581 | 2,710 | ||||||||||||||
Net losses charged off as a percent of average loans and leases(d) |
0.85 | % | 1.49 | 3.02 | 3.20 | 3.23 | ||||||||||||||
ALLL as a percent of portfolio loans and leases |
2.16 | 2.78 | 3.88 | 4.88 | 3.31 | |||||||||||||||
Allowance for credit losses as a percent of portfolio loans and leases(c) |
2.37 | 3.01 | 4.17 | 5.27 | 3.54 | |||||||||||||||
Nonperforming assets as a percent of portfolio loans, leases and other assets, including other real estate owned(d) (e) |
1.49 | 2.23 | 2.79 | 4.22 | 2.38 | |||||||||||||||
Average Balances |
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Loans and leases, including held for sale |
$ | 84,822 | 80,214 | 79,232 | 83,391 | 85,835 | ||||||||||||||
Total securities and other short-term investments |
16,814 | 17,468 | 19,699 | 18,135 | 14,045 | |||||||||||||||
Total assets |
117,614 | 112,666 | 112,434 | 114,856 | 114,296 | |||||||||||||||
Transaction deposits(f) |
78,116 | 72,392 | 65,662 | 55,235 | 52,680 | |||||||||||||||
Core deposits(g) |
82,422 | 78,652 | 76,188 | 69,338 | 63,815 | |||||||||||||||
Wholesale funding(h) |
16,978 | 16,939 | 18,917 | 28,539 | 36,261 | |||||||||||||||
Bancorp shareholders equity |
13,701 | 12,851 | 13,737 | 13,053 | 10,038 | |||||||||||||||
Regulatory Capital Ratios (%) |
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Tier I risk-based capital |
10.65 | % | 11.91 | 13.89 | 13.30 | 10.59 | ||||||||||||||
Total risk-based capital |
14.42 | 16.09 | 18.08 | 17.48 | 14.78 | |||||||||||||||
Tier I leverage |
10.05 | 11.10 | 12.79 | 12.34 | 10.27 | |||||||||||||||
Tier I common equity(b) |
9.51 | 9.35 | 7.48 | 6.99 | 4.37 |
(a) | Amounts presented on an FTE basis. The FTE adjustment for years ended December 31, 2012, 2011, 2010, 2009, and 2008 were $18, $18, $18, $19 and $22, respectively. |
(b) | The tangible common equity and Tier I common equity ratios are non-GAAP measures. For further information, see the Non-GAAP Financial Measures section of the MD&A. |
(c) | The allowance for credit losses is the sum of the ALLL and the reserve for unfunded commitments. |
(d) | Excludes nonaccrual loans held for sale. |
(e) | The Bancorp modified its nonaccrual policy in 2009 to exclude consumer TDR loans less than 90 days past due as they were performing in accordance with restructuring terms. For comparability purposes, prior periods were adjusted to reflect this reclassification. |
(f) | Includes demand, interest checking, savings, money market and foreign office deposits. |
(g) | Includes transaction deposits plus other time deposits. |
(h) | Includes certificates $100,000 and over, other deposits, federal funds purchased, other short-term borrowings and long-term debt. |
Fifth Third Bancorp |
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 2: CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31 ($ in millions, except per share data) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
Interest income (FTE) |
$ | 4,125 | 4,236 | 4,507 | 4,687 | 5,630 | ||||||||||||||
Interest expense |
512 | 661 | 885 | 1,314 | 2,094 | |||||||||||||||
Net interest income (FTE) |
3,613 | 3,575 | 3,622 | 3,373 | 3,536 | |||||||||||||||
Provision for loan and lease losses |
303 | 423 | 1,538 | 3,543 | 4,560 | |||||||||||||||
Net interest income (loss) after provision for loan and lease losses (FTE) |
3,310 | 3,152 | 2,084 | (170 | ) | (1,024 | ) | |||||||||||||
Noninterest income |
2,999 | 2,455 | 2,729 | 4,782 | 2,946 | |||||||||||||||
Noninterest expense |
4,081 | 3,758 | 3,855 | 3,826 | 4,564 | |||||||||||||||
Income (loss) before income taxes (FTE) |
2,228 | 1,849 | 958 | 786 | (2,642 | ) | ||||||||||||||
Fully taxable equivalent adjustment |
18 | 18 | 18 | 19 | 22 | |||||||||||||||
Applicable income tax expense (benefit) |
636 | 533 | 187 | 30 | (551 | ) | ||||||||||||||
Net income (loss) |
1,574 | 1,298 | 753 | 737 | (2,113 | ) | ||||||||||||||
Less: Net income attributable to noncontrolling interests |
(2 | ) | 1 | | | | ||||||||||||||
Net income (loss) attributable to Bancorp |
1,576 | 1,297 | 753 | 737 | (2,113 | ) | ||||||||||||||
Dividends on preferred stock |
35 | 203 | 250 | 226 | 67 | |||||||||||||||
Net income (loss) available to common shareholders |
$ | 1,541 | 1,094 | 503 | 511 | (2,180 | ) | |||||||||||||
Earnings per share |
$ | 1.69 | 1.20 | 0.63 | 0.73 | (3.91 | ) | |||||||||||||
Earnings per diluted share |
1.66 | 1.18 | 0.63 | 0.67 | (3.91 | ) | ||||||||||||||
Cash dividends declared per common share |
$ | 0.36 | 0.28 | 0.04 | 0.04 | 0.75 |
Fifth Third Bancorp |
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table reconciles non-GAAP financial measures to U.S. GAAP as of and for the years ended December 31:
TABLE 3: NON-GAAP FINANCIAL MEASURES
($ in millions) | 2012 | 2011 | ||||||
Income before income taxes (U.S. GAAP) |
$ | 2,210 | 1,831 | |||||
Add: Provision expense (U.S. GAAP) |
303 | 423 | ||||||
Pre-provision net revenue |
2,513 | 2,254 | ||||||
Net income available to common shareholders (U.S. GAAP) |
$ | 1,541 | 1,094 | |||||
Add: Intangible amortization, net of tax |
9 | 15 | ||||||
Tangible net income available to common shareholders |
1,550 | 1,109 | ||||||
Total Bancorp shareholders equity (U.S. GAAP) |
$ | 13,716 | 13,201 | |||||
Less: Preferred stock |
(398 | ) | (398 | ) | ||||
Goodwill |
(2,416 | ) | (2,417 | ) | ||||
Intangible assets |
(27 | ) | (40 | ) | ||||
Tangible common equity, including unrealized gains / losses |
10,875 | 10,346 | ||||||
Less: Accumulated other comprehensive income |
(375 | ) | (470 | ) | ||||
Tangible common equity, excluding unrealized gains / losses (1) |
10,500 | 9,876 | ||||||
Add: Preferred stock |
398 | 398 | ||||||
Tangible equity (2) |
10,898 | 10,274 | ||||||
Total assets (U.S. GAAP) |
$ | 121,894 | 116,967 | |||||
Less: Goodwill |
(2,416 | ) | (2,417 | ) | ||||
Intangible assets |
(27 | ) | (40 | ) | ||||
Accumulated other comprehensive income, before tax |
(577 | ) | (723 | ) | ||||
Tangible assets, excluding unrealized gains / losses (3) |
$ | 118,874 | 113,787 | |||||
Total Bancorp shareholders equity (U.S. GAAP) |
$ | 13,716 | 13,201 | |||||
Less: Goodwill and certain other intangibles |
(2,499 | ) | (2,514 | ) | ||||
Accumulated other comprehensive income |
(375 | ) | (470 | ) | ||||
Add: Qualifying TruPS |
810 | 2,248 | ||||||
Other |
33 | 38 | ||||||
Tier I risk-based capital |
11,685 | 12,503 | ||||||
Less: Preferred stock |
(398 | ) | (398 | ) | ||||
Qualifying TruPS |
(810 | ) | (2,248 | ) | ||||
Qualified noncontrolling interests in consolidated subsidiaries |
(48 | ) | (50 | ) | ||||
Tier I common equity (4) |
$ | 10,429 | 9,807 | |||||
Risk-weighted assets (5)(a) |
$ | 109,699 | 104,945 | |||||
Ratios: |
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Tangible equity (2) / (3) |
9.17 | % | 9.03 | |||||
Tangible common equity (1) / (3) |
8.83 | % | 8.68 | |||||
Tier I common equity (4) / (5) |
9.51 | % | 9.35 | |||||
Basel III - Estimated Tier I common equity ratio |
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Tier I common equity (Basel I) |
$ | 10,429 | ||||||
Add: Adjustment related to AOCI for available-for-sale securities |
429 | |||||||
Estimated Tier I common equity under Basel III rules(b) |
10,858 | |||||||
Estimated risk-weighted assets under Basel III rules(c) |
123,725 | |||||||
Estimated Tier I common equity ratio under Basel III rules |
8.78 | % |
(a) | Under the banking agencies risk-based capital guidelines, assets and credit equivalent amounts of derivatives and off-balance sheet exposures are assigned to broad risk categories. The aggregate dollar amount in each risk category is multiplied by the associated risk weight of the category. The resulting weighted values are added together, along with the measure for market risk, resulting in the Bancorps total risk-weighted assets. |
(b) | Tier I common equity under Basel III includes the unrealized gains and losses for available-for-sale securities. Other adjustments include mortgage servicing rights and deferred tax assets subject to threshold limitations and deferred tax liabilities related to intangible assets. |
(c) | Key differences under Basel III in the calculation of risk-weighted assets compared to Basel I include: (1) risk weighting for commitments under 1 year; (2) higher risk weighting for exposures to residential mortgage, home equity, past due loans, foreign banks and certain commercial real estate; (3) higher risk weighting for mortgage servicing rights and deferred tax assets that are under certain thresholds as a percent of Tier I capital; (4) incremental capital requirements for stress VaR; and (5) derivatives are differentiated between exchange clearing and over-the-counter and the 50% risk-weight cap is removed. The estimated Basel III risk-weighted assets are based upon the Bancorps interpretations of the three draft Federal Register notices proposing enhancements to the regulatory capital requirements that were published in June of 2012. These amounts are preliminary and subject to change depending on the adoption of final Basel III capital rules by the Regulatory Agencies. |
Fifth Third Bancorp |
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TABLE 4: CONSOLIDATED AVERAGE BALANCE SHEET AND ANALYSIS OF NET INTEREST INCOME
For the years ended December 31 |
2012 | 2011 | 2010 | |||||||||||||||||||||||||||||||||
($ in millions) |
|
Average Balance |
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Revenue/ Cost |
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|
Average Yield/Rate |
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|
Average Balance |
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|
Revenue/ Cost |
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|
Average Yield/ Rate |
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Volume | |
Revenue/ Cost |
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|
Average Yield/Rate |
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Assets |
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Interest-earning assets: |
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Loans and leases:(a) |
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Commercial and industrial loans |
$ | 32,911 | $ | 1,349 | 4.10 | % | $ | 28,546 | $ | 1,240 | 4.34 | % | $ | 26,334 | $ | 1,238 | 4.70 | % | ||||||||||||||||||
Commercial mortgage |
9,686 | 369 | 3.81 | 10,447 | 417 | 3.99 | 11,585 | 476 | 4.11 | |||||||||||||||||||||||||||
Commercial construction |
835 | 25 | 2.99 | 1,740 | 53 | 3.06 | 3,066 | 93 | 3.01 | |||||||||||||||||||||||||||
Commercial leases |
3,502 | 127 | 3.62 | 3,341 | 133 | 3.99 | 3,343 | 147 | 4.40 | |||||||||||||||||||||||||||
Subtotal commercial |
46,934 | 1,870 | 3.98 | 44,074 | 1,843 | 4.18 | 44,328 | 1,954 | 4.41 | |||||||||||||||||||||||||||
Residential mortgage loans |
13,370 | 543 | 4.06 | 11,318 | 503 | 4.45 | 9,868 | 478 | 4.84 | |||||||||||||||||||||||||||
Home equity |
10,369 | 393 | 3.79 | 11,077 | 433 | 3.91 | 11,996 | 479 | 4.00 | |||||||||||||||||||||||||||
Automobile loans |
11,849 | 439 | 3.70 | 11,352 | 530 | 4.67 | 10,427 | 608 | 5.83 | |||||||||||||||||||||||||||
Credit card |
1,960 | 192 | 9.79 | 1,864 | 184 | 9.86 | 1,870 | 201 | 10.73 | |||||||||||||||||||||||||||
Other consumer loans/leases |
340 | 155 | 45.32 | 529 | 136 | 25.77 | 743 | 116 | 15.58 | |||||||||||||||||||||||||||
Subtotal consumer |
37,888 | 1,722 | 4.54 | 36,140 | 1,786 | 4.94 | 34,904 | 1,882 | 5.39 | |||||||||||||||||||||||||||
Total loans and leases |
84,822 | 3,592 | 4.23 | 80,214 | 3,629 | 4.52 | 79,232 | 3,836 | 4.84 | |||||||||||||||||||||||||||
Securities: |
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Taxable |
15,262 | 527 | 3.45 | 15,334 | 596 | 3.89 | 16,054 | 650 | 4.05 | |||||||||||||||||||||||||||
Exempt from income taxes(a) |
57 | 2 | 3.29 | 103 | 6 | 5.41 | 317 | 13 | 3.92 | |||||||||||||||||||||||||||
Other short-term investments |
1,495 | 4 | 0.26 | 2,031 | 5 | 0.25 | 3,328 | 8 | 0.25 | |||||||||||||||||||||||||||
Total interest-earning assets |
101,636 | 4,125 | 4.06 | 97,682 | 4,236 | 4.34 | 98,931 | 4,507 | 4.56 | |||||||||||||||||||||||||||
Cash and due from banks |
2,355 | 2,352 | 2,245 | |||||||||||||||||||||||||||||||||
Other assets |
15,695 | 15,335 | 14,841 | |||||||||||||||||||||||||||||||||
Allowance for loan and lease losses |
(2,072 | ) | (2,703 | ) | (3,583 | ) | ||||||||||||||||||||||||||||||
Total assets |
$ | 117,614 | $ | 112,666 | $ | 112,434 | ||||||||||||||||||||||||||||||
Liabilities and Equity |
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Interest-bearing liabilities: |
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Interest checking |
$ | 23,096 | $ | 49 | 0.22 | % | $ | 18,707 | $ | 49 | 0.26 | % | $ | 18,218 | $ | 52 | 0.29 | % | ||||||||||||||||||
Savings |
21,393 | 37 | 0.17 | 21,652 | 67 | 0.31 | 19,612 | 107 | 0.55 | |||||||||||||||||||||||||||
Money market |
4,903 | 11 | 0.22 | 5,154 | 14 | 0.27 | 4,808 | 19 | 0.40 | |||||||||||||||||||||||||||
Foreign office deposits |
1,528 | 4 | 0.27 | 3,490 | 10 | 0.28 | 3,355 | 12 | 0.35 | |||||||||||||||||||||||||||
Other time deposits |
4,306 | 68 | 1.59 | 6,260 | 140 | 2.23 | 10,526 | 276 | 2.62 | |||||||||||||||||||||||||||
Certificates$100,000 and over |
3,102 | 46 | 1.48 | 3,656 | 72 | 1.97 | 6,083 | 125 | 2.06 | |||||||||||||||||||||||||||
Other deposits |
27 | - | 0.13 | 7 | - | 0.03 | 6 | - | 0.13 | |||||||||||||||||||||||||||
Federal funds purchased |
560 | 1 | 0.14 | 345 | - | 0.11 | 291 | 1 | 0.17 | |||||||||||||||||||||||||||
Other short-term borrowings |
4,246 | 8 | 0.18 | 2,777 | 3 | 0.12 | 1,635 | 3 | 0.21 | |||||||||||||||||||||||||||
Long-term debt |
9,043 | 288 | 3.17 | 10,154 | 306 | 3.01 | 10,902 | 290 | 2.65 | |||||||||||||||||||||||||||
Total interest-bearing liabilities |
72,204 | 512 | 0.71 | 72,202 | 661 | 0.92 | 75,436 | 885 | 1.17 | |||||||||||||||||||||||||||
Demand deposits |
27,196 | 23,389 | 19,669 | |||||||||||||||||||||||||||||||||
Other liabilities |
4,462 | 4,189 | 3,580 | |||||||||||||||||||||||||||||||||
Total liabilities |
103,862 | 99,780 | 98,685 | |||||||||||||||||||||||||||||||||
Total equity |
13,752 | 12,886 | 13,749 | |||||||||||||||||||||||||||||||||
Total liabilities and equity |
$ | 117,614 | $ | 112,666 | $ | 112,434 | ||||||||||||||||||||||||||||||
Net interest income |
$ | 3,613 | $ | 3,575 | $ | 3,622 | ||||||||||||||||||||||||||||||
Net interest margin |
3.55 | % | 3.66 | % | 3.66 | % | ||||||||||||||||||||||||||||||
Net interest rate spread |
3.35 | 3.42 | 3.39 | |||||||||||||||||||||||||||||||||
Interest-bearing liabilities to interest-earning assets |
71.04 | 73.92 | 76.25 |
(a) The FTE adjustments included in the above table are $18 for the years ended December 31, 2012, 2011 and 2010. The federal statutory rate utilized was 35% for all periods presented.
36 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 5: CHANGES IN NET INTEREST INCOME ATTRIBUTABLE TO VOLUME AND YIELD/RATE(a)
For the years ended December 31 |
2012 Compared to 2011 | 2011 Compared to 2010 | ||||||||||||||||||||||
($ in millions) |
Volume | Yield/Rate | Total | Volume | Yield/Rate | Total | ||||||||||||||||||
Assets |
||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Loans and leases: |
||||||||||||||||||||||||
Commercial and industrial loans |
$ | 180 | (71 | ) | 109 | $ | 100 | (98 | ) | 2 | ||||||||||||||
Commercial mortgage |
(30 | ) | (18 | ) | (48 | ) | (45 | ) | (14 | ) | (59 | ) | ||||||||||||
Commercial construction |
(27 | ) | (1 | ) | (28 | ) | (42 | ) | 2 | (40 | ) | |||||||||||||
Commercial leases |
7 | (13 | ) | (6 | ) | - | (14 | ) | (14 | ) | ||||||||||||||
Subtotal commercial |
130 | (103 | ) | 27 | 13 | (124 | ) | (111 | ) | |||||||||||||||
Residential mortgage loans |
87 | (47 | ) | 40 | 67 | (42 | ) | 25 | ||||||||||||||||
Home equity |
(27 | ) | (13 | ) | (40 | ) | (34 | ) | (12 | ) | (46 | ) | ||||||||||||
Automobile loans |
23 | (114 | ) | (91 | ) | 51 | (129 | ) | (78 | ) | ||||||||||||||
Credit card |
9 | (1 | ) | 8 | (1 | ) | (16 | ) | (17 | ) | ||||||||||||||
Other consumer loans/leases |
(59 | ) | 78 | 19 | (41 | ) | 61 | 20 | ||||||||||||||||
Subtotal consumer |
33 | (97 | ) | (64 | ) | 42 | (138 | ) | (96 | ) | ||||||||||||||
Total loans and leases |
163 | (200 | ) | (37 | ) | 55 | (262 | ) | (207 | ) | ||||||||||||||
Securities: |
||||||||||||||||||||||||
Taxable |
(2 | ) | (67 | ) | (69 | ) | (29 | ) | (25 | ) | (54 | ) | ||||||||||||
Exempt from income taxes |
(2 | ) | (2 | ) | (4 | ) | (10 | ) | 3 | (7 | ) | |||||||||||||
Other short-term investments |
(1 | ) | - | (1 | ) | (3 | ) | - | (3 | ) | ||||||||||||||
Total interest-earning assets |
158 | (269 | ) | (111 | ) | 13 | (284 | ) | (271 | ) | ||||||||||||||
Total change in interest income |
$ | 158 | (269 | ) | (111 | ) | $ | 13 | (284 | ) | (271 | ) | ||||||||||||
Liabilities and Equity |
||||||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||
Interest checking |
$ | 9 | (9 | ) | - | $ | 2 | (5 | ) | (3 | ) | |||||||||||||
Savings |
- | (30 | ) | (30 | ) | 11 | (51 | ) | (40 | ) | ||||||||||||||
Money market |
(1 | ) | (2 | ) | (3 | ) | 1 | (6 | ) | (5 | ) | |||||||||||||
Foreign office deposits |
(6 | ) | - | (6 | ) | - | (2 | ) | (2 | ) | ||||||||||||||
Other time deposits |
(38 | ) | (34 | ) | (72 | ) | (99 | ) | (37 | ) | (136 | ) | ||||||||||||
Certificates$100,000 and over |
(10 | ) | (16 | ) | (26 | ) | (48 | ) | (5 | ) | (53 | ) | ||||||||||||
Federal funds purchased |
1 | - | 1 | (1 | ) | - | (1 | ) | ||||||||||||||||
Other short-term borrowings |
3 | 2 | 5 | 2 | (2 | ) | - | |||||||||||||||||
Long-term debt |
(34 | ) | 16 | (18 | ) | (21 | ) | 37 | 16 | |||||||||||||||
Total interest-bearing liabilities |
(76 | ) | (73 | ) | (149 | ) | (153 | ) | (71 | ) | (224 | ) | ||||||||||||
Total change in interest expense |
(76 | ) | (73 | ) | (149 | ) | (153 | ) | (71 | ) | (224 | ) | ||||||||||||
Total change in net interest income |
$ | 234 | (196 | ) | 38 | $ | 166 | (213 | ) | (47 | ) |
(a) Changes in interest not solely due to volume or yield/rate are allocated in proportion to the absolute dollar amount of change in volume and yield/rate.
Fifth Third Bancorp |
37 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Noninterest Income
Noninterest income increased $544 million, or 22%, for the year ended December 31, 2012 compared to the year ended December 31, 2011. The components of noninterest income are as follows:
TABLE 6: NONINTEREST INCOME
For the years ended December 31 ($ in millions) |
2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
Mortgage banking net revenue |
$ | 845 | 597 | 647 | 553 | 199 | ||||||||||||||
Service charges on deposits |
522 | 520 | 574 | 632 | 641 | |||||||||||||||
Corporate banking revenue |
413 | 350 | 364 | 372 | 431 | |||||||||||||||
Investment advisory revenue |
374 | 375 | 361 | 326 | 366 | |||||||||||||||
Card and processing revenue |
253 | 308 | 316 | 615 | 912 | |||||||||||||||
Gain on sale of the processing business |
- | - | - | 1,758 | - | |||||||||||||||
Other noninterest income |
574 | 250 | 406 | 479 | 363 | |||||||||||||||
Securities gains (losses), net |
15 | 46 | 47 | (10 | ) | (86 | ) | |||||||||||||
Securities gains, net, non-qualifying hedges on mortgage servicing rights |
3 | 9 | 14 | 57 | 120 | |||||||||||||||
Total noninterest income |
$ | 2,999 | 2,455 | 2,729 | 4,782 | 2,946 |
Mortgage banking net revenue
Mortgage banking net revenue increased $248 million, or 41%, in 2012 compared to 2011. The components of mortgage banking net revenue are as follows:
TABLE 7: COMPONENTS OF MORTGAGE BANKING NET REVENUE
For the years ended December 31 ($ in millions) | 2012 | 2011 | 2010 | |||||||||
Origination fees and gains on loan sales |
$ | 821 | 396 | 490 | ||||||||
Net servicing revenue: |
||||||||||||
Gross servicing fees |
250 | 234 | 221 | |||||||||
Servicing rights amortization |
(186 | ) | (135 | ) | (137 | ) | ||||||
Net valuation adjustments on servicing rights and free-standing derivatives entered into to economically hedge MSR |
(40 | ) | 102 | 73 | ||||||||
Net servicing revenue |
24 | 201 | 157 | |||||||||
Mortgage banking net revenue |
$ | 845 | 597 | 647 |
38 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Other noninterest income
The major components of other noninterest income are as follows:
TABLE 8: COMPONENTS OF OTHER NONINTEREST INCOME
For the years ended December 31 ($ in millions) |
2012 | 2011 | 2010 | |||||||||
Gain on Vantiv, Inc. IPO and sale of Vantiv, Inc. shares |
$ | 272 | - | - | ||||||||
Net gain from warrant and put options associated with sale of the processing business |
67 | 39 | 5 | |||||||||
Equity method income from interest in Vantiv Holding, LLC |
61 | 57 | 26 | |||||||||
Operating lease income |
60 | 58 | 62 | |||||||||
Cardholder fees |
46 | 41 | 36 | |||||||||
BOLI income |
35 | 41 | 194 | |||||||||
Banking center income |
32 | 27 | 22 | |||||||||
Insurance income |
28 | 28 | 38 | |||||||||
Consumer loan and lease fees |
27 | 31 | 32 | |||||||||
Gain on loan sales |
20 | 37 | 51 | |||||||||
TSA revenue |
1 | 21 | 49 | |||||||||
Loss on swap associated with the sale of Visa, Inc. class B shares |
(45 | ) | (83 | ) | (19 | ) | ||||||
Loss on sale of OREO |
(57 | ) | (71 | ) | (78 | ) | ||||||
Other, net |
27 | 24 | (12 | ) | ||||||||
Total other noninterest income |
$ | 574 | 250 | 406 |
Fifth Third Bancorp |
39 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 9: NONINTEREST EXPENSE
For the years ended December 31 ($ in millions) |
2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
Salaries, wages and incentives |
$ | 1,607 | 1,478 | 1,430 | 1,339 | 1,337 | ||||||||||||||
Employee benefits |
371 | 330 | 314 | 311 | 278 | |||||||||||||||
Net occupancy expense |
302 | 305 | 298 | 308 | 300 | |||||||||||||||
Technology and communications |
196 | 188 | 189 | 181 | 191 | |||||||||||||||
Card and processing expense |
121 | 120 | 108 | 193 | 274 | |||||||||||||||
Equipment expense |
110 | 113 | 122 | 123 | 130 | |||||||||||||||
Goodwill impairment |
- | - | - | - | 965 | |||||||||||||||
Other noninterest expense |
1,374 | 1,224 | 1,394 | 1,371 | 1,089 | |||||||||||||||
Total noninterest expense |
$ | 4,081 | 3,758 | 3,855 | 3,826 | 4,564 | ||||||||||||||
Efficiency ratio |
61.7 | % | 62.3 | 60.7 | 46.9 | 70.4 |
The major components of other noninterest expense are as follows:
TABLE 10: COMPONENTS OF OTHER NONINTEREST EXPENSE
For the years ended December 31 ($ in millions) |
2012 | 2011 | 2010 | |||||||||
Losses and adjustments |
$ | 187 | 129 | 187 | ||||||||
Loan and lease |
183 | 195 | 211 | |||||||||
Loss (gain) on debt extinguishment |
169 | (8 | ) | 17 | ||||||||
Marketing |
128 | 115 | 98 | |||||||||
FDIC insurance and other taxes |
114 | 201 | 242 | |||||||||
Impairment of affordable housing investments |
90 | 85 | 100 | |||||||||
Professional service fees |
56 | 58 | 77 | |||||||||
Travel |
52 | 52 | 51 | |||||||||
Postal and courier |
48 | 49 | 48 | |||||||||
Operating lease |
43 | 41 | 41 | |||||||||
Data processing |
40 | 29 | 24 | |||||||||
Recruitment and education |
28 | 31 | 31 | |||||||||
OREO expense |
21 | 34 | 33 | |||||||||
Insurance |
18 | 25 | 42 | |||||||||
Supplies |
17 | 18 | 24 | |||||||||
Intangible asset amortization |
13 | 22 | 43 | |||||||||
Provision (benefit) for unfunded commitments and letters of credit |
(2 | ) | (46 | ) | (24 | ) | ||||||
Other, net |
169 | 194 | 149 | |||||||||
Total other noninterest expense |
$ | 1,374 | 1,224 | 1,394 |
40 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Bancorps income before income taxes, applicable income tax expense and effective tax rate are as follows:
TABLE 11: APPLICABLE INCOME TAXES
For the years ended December 31 ($ in millions) |
2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
Income (loss) before income taxes |
$ | 2,210 | 1,831 | 940 | 767 | (2,664 | ) | |||||||||||||
Applicable income tax expense (benefit) |
636 | 533 | 187 | 30 | (551 | ) | ||||||||||||||
Effective tax rate |
28.8 | % | 29.1 | 19.8 | 3.9 | 20.7 |
Fifth Third Bancorp |
41 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net income by business segment is summarized in the following table:
TABLE 12: BUSINESS SEGMENT NET INCOME AVAILABLE TO COMMON SHAREHOLDERS
For the years ended December 31 ($ in millions) |
2012 | 2011 | 2010 | |||||||||
Income Statement Data |
||||||||||||
Commercial Banking |
$ | 694 | 441 | 178 | ||||||||
Branch Banking |
186 | 190 | 185 | |||||||||
Consumer Lending |
223 | 56 | (26 | ) | ||||||||
Investment Advisors |
43 | 24 | 29 | |||||||||
General Corporate & Other |
428 | 587 | 387 | |||||||||
Net income |
1,574 | 1,298 | 753 | |||||||||
Less: Net income attributable to noncontrolling interests |
(2 | ) | 1 | - | ||||||||
Net income attributable to Bancorp |
1,576 | 1,297 | 753 | |||||||||
Dividends on preferred stock |
35 | 203 | 250 | |||||||||
Net income available to common shareholders |
$ | 1,541 | 1,094 | 503 |
42 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table contains selected financial data for the Commercial Banking segment:
TABLE 13: COMMERCIAL BANKING | ||||||||||||
For the years ended December 31 ($ in millions) |
2012 | 2011 | 2010 | |||||||||
Income Statement Data |
||||||||||||
Net interest income (FTE)(a) |
$ | 1,449 | 1,374 | 1,545 | ||||||||
Provision for loan and lease losses |
223 | 490 | 1,159 | |||||||||
Noninterest income: |
||||||||||||
Corporate banking revenue |
395 | 332 | 346 | |||||||||
Service charges on deposits |
225 | 207 | 199 | |||||||||
Other noninterest income |
117 | 102 | 90 | |||||||||
Noninterest expense: |
||||||||||||
Salaries, incentives and benefits |
268 | 240 | 214 | |||||||||
Other noninterest expense |
838 | 833 | 757 | |||||||||
Income before taxes |
857 | 452 | 50 | |||||||||
Applicable income tax expense (benefit)(a)(b) |
163 | 11 | (128 | ) | ||||||||
Net income |
$ | 694 | 441 | 178 | ||||||||
Average Balance Sheet Data |
||||||||||||
Commercial loans, including held for sale |
$ | 41,364 | 38,384 | 38,304 | ||||||||
Demand deposits |
15,046 | 13,130 | 10,872 | |||||||||
Interest checking |
7,613 | 7,901 | 8,432 | |||||||||
Savings and money market |
2,669 | 2,776 | 2,823 | |||||||||
Other time and certificates$100,000 and over |
1,793 | 1,778 | 3,014 | |||||||||
Foreign office deposits and other deposits |
1,282 | 1,581 | 2,017 |
(a) | Includes FTE adjustments of $17 for the years ended December 31, 2012 and 2011, and, $14 for the year ended December 31, 2010. |
(b) | Applicable income tax expense for all periods includes the tax benefit from tax-exempt income and business tax credits, partially offset by the effect of certain nondeductible expenses. Refer to the Applicable Income Taxes section of the MD&A for additional information. |
Fifth Third Bancorp |
43 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table contains selected financial data for the Branch Banking segment:
TABLE 14: BRANCH BANKING | ||||||||||||
For the years ended December 31 ($ in millions) |
2012 | 2011 | 2010 | |||||||||
Income Statement Data |
||||||||||||
Net interest income |
$ | 1,362 | 1,423 | 1,514 | ||||||||
Provision for loan and lease losses |
294 | 393 | 555 | |||||||||
Noninterest income: |
||||||||||||
Service charges on deposits |
294 | 309 | 369 | |||||||||
Card and processing revenue |
279 | 305 | 298 | |||||||||
Investment advisory revenue |
129 | 117 | 106 | |||||||||
Other noninterest income |
110 | 106 | 112 | |||||||||
Noninterest expense: |
||||||||||||
Salaries, incentives and benefits |
573 | 581 | 560 | |||||||||
Net occupancy and equipment expense |
241 | 235 | 223 | |||||||||
Card and processing expense |
115 | 114 | 105 | |||||||||
Other noninterest expense |
663 | 645 | 668 | |||||||||
Income before taxes |
288 | 292 | 288 | |||||||||
Applicable income tax expense |
102 | 102 | 103 | |||||||||
Net income |
$ | 186 | 190 | 185 | ||||||||
Average Balance Sheet Data |
||||||||||||
Consumer loans, including held for sale |
$ | 14,926 | 14,151 | 13,125 | ||||||||
Commercial loans, including held for sale |
4,569 | 4,621 | 4,815 | |||||||||
Demand deposits |
10,087 | 8,408 | 7,006 | |||||||||
Interest checking |
9,262 | 8,086 | 7,462 | |||||||||
Savings and money market |
22,729 | 22,241 | 19,963 | |||||||||
Other time and certificates$100,000 and over |
5,389 | 7,778 | 12,712 |
44 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table contains selected financial data for the Consumer Lending segment:
TABLE 15: CONSUMER LENDING | ||||||||||||
For the years ended December 31 ($ in millions) |
2012 | 2011 | 2010 | |||||||||
Income Statement Data |
||||||||||||
Net interest income |
$ | 314 | 343 | 405 | ||||||||
Provision for loan and lease losses |
176 | 261 | 569 | |||||||||
Noninterest income: |
||||||||||||
Mortgage banking net revenue |
830 | 585 | 619 | |||||||||
Other noninterest income |
46 | 45 | 51 | |||||||||
Noninterest expense: |
||||||||||||
Salaries, incentives and benefits |
231 | 183 | 194 | |||||||||
Other noninterest expense |
439 | 443 | 352 | |||||||||
Income (loss) before taxes |
344 | 86 | (40 | ) | ||||||||
Applicable income tax expense (benefit) |
121 | 30 | (14 | ) | ||||||||
Net income (loss) |
$ | 223 | 56 | (26 | ) | |||||||
Average Balance Sheet Data |
||||||||||||
Residential mortgage loans, including held for sale |
$ | 10,143 | 9,348 | 9,384 | ||||||||
Home equity |
643 | 730 | 851 | |||||||||
Automobile loans |
11,191 | 10,665 | 9,713 | |||||||||
Consumer leases |
35 | 158 | 384 |
Fifth Third Bancorp |
45 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
46 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table contains selected financial data for the Investment Advisors segment:
TABLE 16: INVESTMENT ADVISORS | ||||||||||||
For the years ended December 31 ($ in millions) |
2012 | 2011 | 2010 | |||||||||
Income Statement Data |
||||||||||||
Net interest income |
$ | 117 | 113 | 138 | ||||||||
Provision for loan and lease losses |
10 | 27 | 44 | |||||||||
Noninterest income: |
||||||||||||
Investment advisory revenue |
366 | 364 | 346 | |||||||||
Other noninterest income |
30 | 9 | 10 | |||||||||
Noninterest expense: |
||||||||||||
Salaries, incentives and benefits |
161 | 164 | 156 | |||||||||
Other noninterest expense |
276 | 257 | 249 | |||||||||
Income before taxes |
66 | 38 | 45 | |||||||||
Applicable income tax expense |
23 | 14 | 16 | |||||||||
Net income |
$ | 43 | 24 | 29 | ||||||||
Average Balance Sheet Data |
||||||||||||
Loans and leases |
$ | 1,877 | 2,037 | 2,574 | ||||||||
Core deposits |
7,709 | 6,798 | 5,897 |
Fifth Third Bancorp |
47 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
48 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fifth Third Bancorp |
49 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 17: QUARTERLY INFORMATION (unaudited)
|
||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||
For the three months ended ($ in millions, except per share data) | 12/31 | 9/30 | 6/30 | 3/31 | 12/31 | 9/30 | 6/30 | 3/31 | ||||||||||||||||||||||||
Net interest income (FTE) |
$ | 903 | 907 | 899 | 903 | 920 | 902 | 869 | 884 | |||||||||||||||||||||||
Provision for loan and lease losses |
76 | 65 | 71 | 91 | 55 | 87 | 113 | 168 | ||||||||||||||||||||||||
Noninterest income |
880 | 671 | 678 | 769 | 550 | 665 | 656 | 584 | ||||||||||||||||||||||||
Noninterest expense |
1,163 | 1,006 | 937 | 973 | 993 | 946 | 901 | 918 | ||||||||||||||||||||||||
Net income attributable to Bancorp |
399 | 363 | 385 | 430 | 314 | 381 | 337 | 265 | ||||||||||||||||||||||||
Net income available to common shareholders |
390 | 354 | 376 | 421 | 305 | 373 | 328 | 88 | ||||||||||||||||||||||||
Earnings per share, basic |
0.44 | 0.39 | 0.41 | 0.46 | 0.33 | 0.41 | 0.36 | 0.10 | ||||||||||||||||||||||||
Earnings per share, diluted |
0.43 | 0.38 | 0.40 | 0.45 | 0.33 | 0.40 | 0.35 | 0.10 |
50 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 18: COMPONENTS OF LOANS AND LEASES (INCLUDES HELD FOR SALE) | ||||||||||||||||||||
As of December 31 ($ in millions) |
2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
Commercial: |
||||||||||||||||||||
Commercial and industrial loans |
$ | 36,077 | 30,828 | 27,275 | 25,687 | 29,220 | ||||||||||||||
Commercial mortgage loans |
9,116 | 10,214 | 10,992 | 11,936 | 12,731 | |||||||||||||||
Commercial construction loans |
707 | 1,037 | 2,111 | 3,871 | 5,335 | |||||||||||||||
Commercial leases |
3,549 | 3,531 | 3,378 | 3,535 | 3,666 | |||||||||||||||
Subtotal commercial |
49,449 | 45,610 | 43,756 | 45,029 | 50,952 | |||||||||||||||
Consumer: |
||||||||||||||||||||
Residential mortgage loans |
14,873 | 13,474 | 10,857 | 9,846 | 10,292 | |||||||||||||||
Home equity |
10,018 | 10,719 | 11,513 | 12,174 | 12,752 | |||||||||||||||
Automobile loans |
11,972 | 11,827 | 10,983 | 8,995 | 8,594 | |||||||||||||||
Credit card |
2,097 | 1,978 | 1,896 | 1,990 | 1,811 | |||||||||||||||
Other consumer loans and leases |
312 | 364 | 702 | 812 | 1,194 | |||||||||||||||
Subtotal consumer |
39,272 | 38,362 | 35,951 | 33,817 | 34,643 | |||||||||||||||
Total loans and leases |
$ | 88,721 | 83,972 | 79,707 | 78,846 | 85,595 | ||||||||||||||
Total portfolio loans and leases (excludes loans held for sale) |
$ | 85,782 | 81,018 | 77,491 | 76,779 | 84,143 |
TABLE 19: COMPONENTS OF AVERAGE LOANS AND LEASES (INCLUDES HELD FOR SALE) | ||||||||||||||||||||
As of December 31 ($ in millions) |
2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
Commercial: |
||||||||||||||||||||
Commercial and industrial loans |
$ | 32,911 | 28,546 | 26,334 | 27,556 | 28,426 | ||||||||||||||
Commercial mortgage loans |
9,686 | 10,447 | 11,585 | 12,511 | 12,776 | |||||||||||||||
Commercial construction loans |
835 | 1,740 | 3,066 | 4,638 | 5,846 | |||||||||||||||
Commercial leases |
3,502 | 3,341 | 3,343 | 3,543 | 3,680 | |||||||||||||||
Subtotal commercial |
46,934 | 44,074 | 44,328 | 48,248 | 50,728 | |||||||||||||||
Consumer: |
||||||||||||||||||||
Residential mortgage loans |
13,370 | 11,318 | 9,868 | 10,886 | 10,993 | |||||||||||||||
Home equity |
10,369 | 11,077 | 11,996 | 12,534 | 12,269 | |||||||||||||||
Automobile loans |
11,849 | 11,352 | 10,427 | 8,807 | 8,925 | |||||||||||||||
Credit card |
1,960 | 1,864 | 1,870 | 1,907 | 1,708 | |||||||||||||||
Other consumer loans and leases |
340 | 529 | 743 | 1,009 | 1,212 | |||||||||||||||
Subtotal consumer |
37,888 | 36,140 | 34,904 | 35,143 | 35,107 | |||||||||||||||
Total average loans and leases |
$ | 84,822 | 80,214 | 79,232 | 83,391 | 85,835 | ||||||||||||||
Total average portfolio loans and leases (excludes loans held for sale) |
$ | 82,733 | 78,533 | 77,045 | 80,681 | 83,895 |
Fifth Third Bancorp |
51 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 20: COMPONENTS OF INVESTMENT SECURITIES |
||||||||||||||||||||
As of December 31 ($ in millions) |
2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
Available-for-sale and other: (amortized cost basis) |
||||||||||||||||||||
U.S. Treasury and government agencies |
$ | 41 | 171 | 225 | 464 | 186 | ||||||||||||||
U.S. Government sponsored agencies |
1,730 | 1,782 | 1,564 | 2,143 | 1,651 | |||||||||||||||
Obligations of states and political subdivisions |
203 | 96 | 170 | 240 | 323 | |||||||||||||||
Agency mortgage-backed securities |
8,403 | 9,743 | 10,570 | 11,074 | 8,529 | |||||||||||||||
Other bonds, notes and debentures(a) |
3,161 | 1,792 | 1,338 | 2,541 | 613 | |||||||||||||||
Other securities(b) |
1,033 | 1,030 | 1,052 | 1,417 | 1,248 | |||||||||||||||
Total available-for-sale and other securities |
$ | 14,571 | 14,614 | 14,919 | 17,879 | 12,550 | ||||||||||||||
Held-to-maturity: (amortized cost basis) |
||||||||||||||||||||
Obligations of states and political subdivisions |
$ | 282 | 320 | 348 | 350 | 355 | ||||||||||||||
Other bonds, notes and debentures |
2 | 2 | 5 | 5 | 5 | |||||||||||||||
Total held-to-maturity |
$ | 284 | 322 | 353 | 355 | 360 | ||||||||||||||
Trading: (fair value) |
||||||||||||||||||||
Variable rate demand notes |
- | - | 106 | 235 | 1,140 | |||||||||||||||
Other securities |
207 | 177 | 188 | 120 | 51 | |||||||||||||||
Total trading |
$ | 207 | 177 | 294 | 355 | 1,191 |
(a) | Other bonds, notes, and debentures consist of non-agency mortgage backed securities, certain other asset backed securities (primarily automobile and commercial loan backed securities) and corporate bond securities. |
(b) | Other securities consist of FHLB and FRB restricted stock holdings that are carried at par, FHLMC and FNMA preferred stock holdings and certain mutual fund holdings and equity security holdings. |
52 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 21: CHARACTERISTICS OF AVAILABLE-FOR-SALE AND OTHER SECURITIES
As of December 31, 2012 ($ in millions) |
Amortized Cost | Fair Value |
|
Weighted-Average Life (in years) |
|
|
Weighted-Average Yield |
| ||||||||
U.S. Treasury and government agencies: |
||||||||||||||||
Average life of one year or less |
$ | 40 | 40 | 0.4 | 0.13 | % | ||||||||||
Average life 5 10 years |
1 | 1 | 6.1 | 1.48 | ||||||||||||
Total |
41 | 41 | 0.5 | 0.16 | ||||||||||||
U.S. Government sponsored agencies: |
||||||||||||||||
Average life of one year or less |
204 | 206 | 0.5 | 2.50 | ||||||||||||
Average life 1 5 years |
1,526 | 1,705 | 4.0 | 3.63 | ||||||||||||
Total |
1,730 | 1,911 | 3.6 | 3.50 | ||||||||||||
Obligations of states and political subdivisions:(a) |
||||||||||||||||
Average life of one year or less |
7 | 7 | 0.8 | 0.12 | ||||||||||||
Average life 1 5 years |
84 | 85 | 2.9 | 1.50 | ||||||||||||
Average life 5 10 years |
96 | 102 | 6.3 | 4.37 | ||||||||||||
Average life greater than 10 years |
16 | 18 | 11.3 | 5.21 | ||||||||||||
Total |
203 | 212 | 5.1 | 3.10 | ||||||||||||
Agency mortgage-backed securities: |
||||||||||||||||
Average life of one year or less |
495 | 506 | 0.7 | 4.44 | ||||||||||||
Average life 1 5 years |
6,254 | 6,529 | 3.3 | 3.59 | ||||||||||||
Average life 5 10 years |
1,654 | 1,695 | 5.8 | 3.42 | ||||||||||||
Total |
8,403 | 8,730 | 3.6 | 3.60 | ||||||||||||
Other bonds, notes and debentures: |
||||||||||||||||
Average life of one year or less |
245 | 252 | 0.7 | 1.46 | ||||||||||||
Average life 1 5 years |
2,049 | 2,135 | 3.4 | 2.55 | ||||||||||||
Average life 5 10 years |
659 | 677 | 6.4 | 2.52 | ||||||||||||
Average life greater than 10 years |
208 | 213 | 14.7 | 2.35 | ||||||||||||
Total |
3,161 | 3,277 | 4.6 | 2.45 | ||||||||||||
Other securities |
1,033 | 1,036 | ||||||||||||||
Total available-for-sale and other securities |
$ | 14,571 | 15,207 | 3.8 | 3.30 | % |
(a) | Taxable-equivalent yield adjustments included in the above table are 0.03%, 0.01%, 0.40%, 1.79% and 0.34% for securities with an average life of one year or less, 1-5 years, 5-10 years, greater than 10 years and in total, respectively. |
TABLE 22: DEPOSITS
As of December 31 ($ in millions) |
2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
Demand |
$ | 30,023 | 27,600 | 21,413 | 19,411 | 15,287 | ||||||||||||||
Interest checking |
24,477 | 20,392 | 18,560 | 19,935 | 14,222 | |||||||||||||||
Savings |
19,879 | 21,756 | 20,903 | 17,898 | 16,063 | |||||||||||||||
Money market |
6,875 | 4,989 | 5,035 | 4,431 | 4,689 | |||||||||||||||
Foreign office |
885 | 3,250 | 3,721 | 2,454 | 2,144 | |||||||||||||||
Transaction deposits |
82,139 | 77,987 | 69,632 | 64,129 | 52,405 | |||||||||||||||
Other time |
4,015 | 4,638 | 7,728 | 12,466 | 14,350 | |||||||||||||||
Core deposits |
86,154 | 82,625 | 77,360 | 76,595 | 66,755 | |||||||||||||||
Certificates$100,000 and over |
3,284 | 3,039 | 4,287 | 7,700 | 11,851 | |||||||||||||||
Other |
79 | 46 | 1 | 10 | 7 | |||||||||||||||
Total deposits |
$ | 89,517 | 85,710 | 81,648 | 84,305 | 78,613 |
Fifth Third Bancorp |
53 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table presents average deposits for the twelve months ending December 31:
TABLE 23: AVERAGE DEPOSITS
As of December 31 ($ in millions) |
2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
Demand |
$ | 27,196 | 23,389 | 19,669 | 16,862 | 14,017 | ||||||||||||||
Interest checking |
23,096 | 18,707 | 18,218 | 15,070 | 14,191 | |||||||||||||||
Savings |
21,393 | 21,652 | 19,612 | 16,875 | 16,192 | |||||||||||||||
Money market |
4,903 | 5,154 | 4,808 | 4,320 | 6,127 | |||||||||||||||
Foreign office |
1,528 | 3,490 | 3,355 | 2,108 | 2,153 | |||||||||||||||
Transaction deposits |
78,116 | 72,392 | 65,662 | 55,235 | 52,680 | |||||||||||||||
Other time |
4,306 | 6,260 | 10,526 | 14,103 | 11,135 | |||||||||||||||
Core deposits |
82,422 | 78,652 | 76,188 | 69,338 | 63,815 | |||||||||||||||
Certificates$100,000 and over |
3,102 | 3,656 | 6,083 | 10,367 | 9,531 | |||||||||||||||
Other |
27 | 7 | 6 | 157 | 2,067 | |||||||||||||||
Total average deposits |
$ | 85,551 | 82,315 | 82,277 | 79,862 | 75,413 |
On an end of period basis, other time deposits and certificates $100,000 and over totaled $7.3 billion and $7.7 billion at December 31, 2012 and 2011, respectively. All of these deposits were interest-bearing.
The contractual maturities of certificates $100,000 and over as of December 31, 2012 are summarized in the following table:
TABLE 24: CONTRACTUAL MATURITIES OF CERTIFICATES $100,000 AND OVER | ||||
As of December 31 ($ in millions) |
2012 | |||
Three months or less |
$ | 1,444 | ||
After three months through six months |
230 | |||
After six months through 12 months |
639 | |||
After 12 months |
971 | |||
Total |
$ | 3,284 |
The contractual maturities of other time deposits and certificates $100,000 and over as of December 31, 2012 are summarized in the following table:
TABLE 25: CONTRACTUAL MATURITIES OF OTHER TIME DEPOSITS AND CERTIFICATES $100,000 AND OVER |
||||
As of December 31 ($ in millions) |
2012 | |||
Next 12 months |
$ | 4,834 | ||
13-24 months |
1,464 | |||
25-36 months |
565 | |||
37-48 months |
231 | |||
49-60 months |
152 | |||
After 60 months |
53 | |||
Total |
$ | 7,299 |
54 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 26: BORROWINGS | ||||||||||||||||||||
As of December 31 ($ in millions) |
2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
Federal funds purchased |
$ | 901 | 346 | 279 | 182 | 287 | ||||||||||||||
Other short-term borrowings |
6,280 | 3,239 | 1,574 | 1,415 | 9,959 | |||||||||||||||
Long-term debt |
7,085 | 9,682 | 9,558 | 10,507 | 13,585 | |||||||||||||||
Total borrowings |
$ | 14,266 | 13,267 | 11,411 | 12,104 | 23,831 |
TABLE 27: AVERAGE BORROWINGS | ||||||||||||||||||||
As of December 31 ($ in millions) |
2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
Federal funds purchased |
$ | 560 | 345 | 291 | 517 | 2,975 | ||||||||||||||
Other short-term borrowings |
4,246 | 2,777 | 1,635 | 6,463 | 7,785 | |||||||||||||||
Long-term debt |
9,043 | 10,154 | 10,902 | 11,035 | 13,903 | |||||||||||||||
Total average borrowings |
$ | 13,849 | 13,276 | 12,828 | 18,015 | 24,663 |
Fifth Third Bancorp |
55 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
56 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following tables provide a summary of potential problem loans as of December 31:
TABLE 28: POTENTIAL PROBLEM LOANS
As of December 31, 2012 ($ in millions) | |
Carrying Value |
|
|
Unpaid Principal Balance |
|
Exposure | |||||
Commercial and industrial |
$ | 1,015 | 1,017 | 1,212 | ||||||||
Commercial mortgage |
848 | 849 | 851 | |||||||||
Commercial construction |
87 | 87 | 100 | |||||||||
Commercial leases |
9 | 9 | 9 | |||||||||
Total |
$ | 1,959 | 1,962 | 2,172 |
TABLE 29: POTENTIAL PROBLEM LOANS
As of December 31, 2011 ($ in millions) | |
Carrying Value |
|
|
Unpaid Principal Balance |
|
Exposure | |||||
Commercial and industrial |
$ | 1,376 | 1,376 | 1,744 | ||||||||
Commercial mortgage |
1,215 | 1,216 | 1,223 | |||||||||
Commercial construction |
239 | 240 | 258 | |||||||||
Commercial leases |
33 | 33 | 33 | |||||||||
Total |
$ | 2,863 | 2,865 | 3,258 |
Fifth Third Bancorp |
57 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
58 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 30: COMMERCIAL MORTGAGE LOANS OUTSTANDING BY LTV, LOANS GREATER THAN $1 MILLION
As of December 31, 2012 ($ in millions) | LTV > 100% | LTV 80-100% | LTV £ 80% | |||||||||
Commercial mortgage owner-occupied loans |
$ | 390 | 302 | 2,325 | ||||||||
Commercial mortgage nonowner-occupied loans |
450 | 605 | 1,955 | |||||||||
Total |
$ | 840 | 907 | 4,280 |
TABLE 31: COMMERCIAL MORTGAGE LOANS OUTSTANDING BY LTV, LOANS GREATER THAN $1 MILLION
As of December 31, 2011($ in millions) | LTV > 100% | LTV 80-100% | LTV £ 80% | |||||||||
Commercial mortgage owner-occupied loans |
$ | 528 | 419 | 2,353 | ||||||||
Commercial mortgage nonowner-occupied loans |
684 | 734 | 2,164 | |||||||||
Total |
$ | 1,212 | 1,153 | 4,517 |
The following table provides detail on commercial loan and leases by industry classification (as defined by the North American Industry Classification System), by loan size and by state, illustrating the diversity and granularity of the Bancorps commercial loans and leases:
TABLE 32: COMMERCIAL LOAN AND LEASE PORTFOLIO (EXCLUDING LOANS HELD FOR SALE)
2012 | 2011 | |||||||||||||||||||||||
As of December 31 ($ in millions) | Outstanding | Exposure | Nonaccrual | Outstanding | Exposure | Nonaccrual | ||||||||||||||||||
By industry: |
||||||||||||||||||||||||
Manufacturing |
$ | 9,982 | 18,414 | 58 | $ | 9,020 | 17,065 | 116 | ||||||||||||||||
Real estate |
5,588 | 6,840 | 198 | 6,274 | 7,060 | 299 | ||||||||||||||||||
Financial services and insurance |
4,886 | 12,062 | 54 | 4,596 | 9,975 | 46 | ||||||||||||||||||
Business services |
4,600 | 6,917 | 56 | 3,898 | 5,976 | 78 | ||||||||||||||||||
Healthcare |
4,079 | 6,094 | 14 | 3,477 | 5,179 | 15 | ||||||||||||||||||
Wholesale trade |
4,042 | 7,401 | 26 | 3,656 | 6,796 | 50 | ||||||||||||||||||
Transportation and warehousing |
3,105 | 4,222 | 3 | 2,304 | 3,152 | 16 | ||||||||||||||||||
Retail trade |
2,624 | 5,699 | 38 | 2,639 | 5,548 | 56 | ||||||||||||||||||
Construction |
1,995 | 3,254 | 105 | 2,226 | 3,470 | 199 | ||||||||||||||||||
Mining |
1,683 | 2,767 | | 1,157 | 1,994 | 7 | ||||||||||||||||||
Communication and information |
1,547 | 2,631 | 19 | 1,128 | 2,117 | 3 | ||||||||||||||||||
Accommodation and food |
1,478 | 2,160 | 17 | 1,127 | 1,636 | 22 | ||||||||||||||||||
Other services |
1,156 | 1,517 | 42 | 998 | 1,503 | 48 | ||||||||||||||||||
Entertainment and recreation |
914 | 1,393 | 11 | 874 | 1,228 | 18 | ||||||||||||||||||
Utilities |
608 | 2,009 | | 564 | 1,752 | | ||||||||||||||||||
Public administration |
441 | 693 | | 644 | 886 | | ||||||||||||||||||
Agribusiness |
376 | 527 | 44 | 425 | 564 | 65 | ||||||||||||||||||
Individuals |
281 | 335 | 12 | 460 | 512 | 20 | ||||||||||||||||||
Other |
3 | 2 | | 5 | 5 | | ||||||||||||||||||
Total |
$ | 49,388 | 84,937 | 697 | $ | 45,472 | 76,418 | 1,058 | ||||||||||||||||
By loan size: |
||||||||||||||||||||||||
Less than $200,000 |
2 | % | 1 | 9 | 2 | % | 2 | 7 | ||||||||||||||||
$200,000 to $1 million |
6 | 5 | 22 | 8 | 6 | 23 | ||||||||||||||||||
$1 million to $5 million |
15 | 12 | 28 | 18 | 15 | 32 | ||||||||||||||||||
$5 million to $10 million |
11 | 9 | 13 | 12 | 10 | 15 | ||||||||||||||||||
$10 million to $25 million |
27 | 25 | 24 | 28 | 25 | 19 | ||||||||||||||||||
Greater than $25 million |
39 | 48 | 4 | 32 | 42 | 4 | ||||||||||||||||||
Total |
100 | % | 100 | 100 | 100 | % | 100 | 100 | ||||||||||||||||
By state: |
||||||||||||||||||||||||
Ohio |
20 | % | 24 | 13 | 24 | % | 27 | 16 | ||||||||||||||||
Michigan |
11 | 10 | 17 | 13 | 11 | 22 | ||||||||||||||||||
Illinois |
8 | 8 | 8 | 7 | 8 | 10 | ||||||||||||||||||
Florida |
7 | 6 | 19 | 8 | 6 | 17 | ||||||||||||||||||
Indiana |
5 | 5 | 11 | 5 | 5 | 10 | ||||||||||||||||||
Kentucky |
4 | 3 | 4 | 4 | 4 | 4 | ||||||||||||||||||
North Carolina |
3 | 3 | 2 | 3 | 3 | 4 | ||||||||||||||||||
Tennessee |
3 | 3 | 5 | 3 | 3 | 2 | ||||||||||||||||||
Pennsylvania |
3 | 2 | 1 | 2 | 2 | 1 | ||||||||||||||||||
All other states |
36 | 36 | 20 | 31 | 31 | 14 | ||||||||||||||||||
Total |
100 | % | 100 | 100 | 100 | % | 100 | 100 |
Fifth Third Bancorp |
59 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table provides analysis of each of the categories of loans (excluding loans held for sale) by state as of December 31, 2012 and 2011:
TABLE 33: NON-OWNER OCCUPIED COMMERCIAL REAL ESTATE (a)
As of December 31, 2012 ($ in millions) |
|
For the Year Ended December 31, 2012 |
| |||||||||||||||||
By State: | Outstanding | Exposure | 90 Days Past Due |
Nonaccrual | Net Charge-offs | |||||||||||||||
Ohio |
$ | 1,236 | 1,351 | | 39 | 19 | ||||||||||||||
Michigan |
1,098 | 1,123 | | 49 | 32 | |||||||||||||||
Florida |
596 | 632 | | 42 | 20 | |||||||||||||||
Illinois |
430 | 481 | | 21 | 11 | |||||||||||||||
Indiana |
283 | 303 | | 14 | 2 | |||||||||||||||
North Carolina |
205 | 228 | | 12 | 6 | |||||||||||||||
All other states |
972 | 1,250 | | 33 | (3 | ) | ||||||||||||||
Total |
$ | 4,820 | 5,368 | | 210 | 87 |
(a) | Included in commercial mortgage and commercial construction loans on the Consolidated Balance Sheets. |
TABLE 34: NON-OWNER OCCUPIED COMMERCIAL REAL ESTATE (a)
As of December 31, 2011 ($ in millions) | For the Year Ended December 31, 2011 |
|||||||||||||||||||
By State: | Outstanding | Exposure | 90 Days Past Due |
Nonaccrual | Net Charge-offs | |||||||||||||||
Ohio |
$ | 1,958 | 2,125 | 1 | 88 | 64 | ||||||||||||||
Michigan |
1,443 | 1,476 | 1 | 77 | 39 | |||||||||||||||
Florida |
713 | 740 | | 72 | 44 | |||||||||||||||
Illinois |
417 | 499 | 1 | 44 | 31 | |||||||||||||||
Indiana |
312 | 316 | | 13 | 6 | |||||||||||||||
North Carolina |
302 | 332 | | 33 | 13 | |||||||||||||||
All other states |
586 | 650 | | 35 | 14 | |||||||||||||||
Total |
$ | 5,731 | 6,138 | 3 | 362 | 211 |
(a) | Included in commercial mortgage and commercial construction loans on the Consolidated Balance Sheets. |
TABLE 35: HOMEBUILDER AND DEVELOPER (a)
As of December 31, 2012 ($ in millions) | For the Year Ended December 31, 2012 |
|||||||||||||||||||
By State: | Outstanding | Exposure | 90 Days Past Due |
Nonaccrual | Net Charge-offs | |||||||||||||||
Ohio |
$ | 133 | 199 | | 11 | 7 | ||||||||||||||
Michigan |
52 | 60 | | 6 | 7 | |||||||||||||||
Florida |
32 | 59 | | 3 | 10 | |||||||||||||||
North Carolina |
24 | 34 | | 4 | 1 | |||||||||||||||
Indiana |
18 | 21 | | 8 | | |||||||||||||||
Illinois |
28 | 31 | | 8 | 3 | |||||||||||||||
All other states |
31 | 35 | | 2 | | |||||||||||||||
Total |
$ | 318 | 439 | | 42 | 28 |
(a) | Homebuilder and Developer loans, exclusive of commercial and industrial loans with an outstanding balance of $73 and a total exposure of $132 are also included in Table 33: Non-Owner Occupied Commercial Real Estate. |
60 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 36: HOMEBUILDER AND DEVELOPER (a)
As of December 31, 2011 ($ in millions) | For the Year Ended December 31, 2011 |
|||||||||||||||||||
By State: | Outstanding | Exposure | 90 Days Past Due |
Nonaccrual | Net Charge-offs | |||||||||||||||
Ohio |
$ | 166 | 234 | | 15 | 22 | ||||||||||||||
Michigan |
108 | 128 | | 8 | 7 | |||||||||||||||
Florida |
64 | 73 | | 27 | 12 | |||||||||||||||
North Carolina |
50 | 56 | | 13 | 7 | |||||||||||||||
Indiana |
51 | 56 | | 10 | 3 | |||||||||||||||
Illinois |
16 | 27 | | 9 | 4 | |||||||||||||||
All other states |
57 | 69 | | 14 | 1 | |||||||||||||||
Total |
$ | 512 | 643 | | 96 | 56 |
(a) | Homebuilder and Developer loans, exclusive of commercial and industrial loans with an outstanding balance of $136 and a total exposure of $222 are also included in Table 34: Non-Owner Occupied Commercial Real Estate. |
Fifth Third Bancorp |
61 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table provides an analysis of the residential mortgage portfolio loans outstanding, excluding held for sale, by LTV at origination:
TABLE 37: RESIDENTIAL MORTGAGE PORTFOLIO LOANS BY LTV AT ORIGINATION
2012 | 2011 | |||||||||||||||
As of December 31 ($ in millions) | Outstanding | Weighted Average LTV |
Outstanding | Weighted Average LTV |
||||||||||||
LTV > 80% |
$ | 8,993 | 65.8 | % | $ | 7,876 | 66.6 | % | ||||||||
LTV > 80%, with mortgage insurance |
1,165 | 93.6 | 1,030 | 92.7 | ||||||||||||
LTV > 80%, no mortgage insurance |
1,859 | 95.6 | 1,766 | 95.6 | ||||||||||||
Total |
$ | 12,017 | 73.1 | % | $ | 10,672 | 73.9 | % |
The following tables provide analysis of the residential mortgage portfolio loans outstanding, excluding held for sale, with a greater than 80% LTV ratio and no mortgage insurance as of December 31, 2012 and 2011:
TABLE 38: RESIDENTIAL MORTGAGE PORTFOLIO LOANS, LTV GREATER THAN 80%, NO MORTGAGE INSURANCE
As of December 31, 2012 ($ in millions) | For the Year Ended December 31, 2012 |
|||||||||||||||
By State: | Outstanding | 90 Days Past Due |
Nonaccrual | Net Charge-offs | ||||||||||||
Ohio |
$ | 600 | 4 | 24 | 13 | |||||||||||
Michigan |
310 | 1 | 10 | 10 | ||||||||||||
Florida |
262 | | 17 | 15 | ||||||||||||
North Carolina |
111 | 1 | 5 | 3 | ||||||||||||
Indiana |
115 | 1 | 5 | 2 | ||||||||||||
Illinois |
193 | 1 | 5 | 3 | ||||||||||||
Kentucky |
89 | 1 | 2 | 1 | ||||||||||||
All other states |
179 | | 5 | 5 | ||||||||||||
Total |
$ | 1,859 | 9 | 73 | 52 |
62 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 39: RESIDENTIAL MORTGAGE PORTFOLIO LOANS, LTV GREATER THAN 80%, NO MORTGAGE INSURANCE
As of December 31, 2011 ($ in millions) | For the Year Ended December 31, 2011 |
|||||||||||||||
By State: | Outstanding | 90 Days Past Due |
Nonaccrual | Net Charge-offs | ||||||||||||
Ohio |
$ | 600 | 6 | 25 | 15 | |||||||||||
Michigan |
305 | 1 | 14 | 13 | ||||||||||||
Florida |
283 | 2 | 27 | 29 | ||||||||||||
North Carolina |
123 | | 4 | 7 | ||||||||||||
Indiana |
111 | 1 | 4 | 2 | ||||||||||||
Illinois |
122 | 1 | 3 | 2 | ||||||||||||
Kentucky |
84 | 1 | 3 | 1 | ||||||||||||
All other states |
138 | 1 | 5 | 7 | ||||||||||||
Total |
$ | 1,766 | 13 | 85 | 76 |
The following table provides an analysis of home equity loans outstanding disaggregated based upon refreshed FICO score:
TABLE 40: HOME EQUITY LOANS OUTSTANDING BY REFRESHED FICO SCORE
($ in millions) | December 31, 2012 |
% of Total |
December 31, 2011 |
% of Total |
||||||||||||
First Liens: |
||||||||||||||||
FICO < 620 |
$ | 224 | 2 | % | 214 | 2 | % | |||||||||
FICO 621-719 |
653 | 6 | 643 | 6 | ||||||||||||
FICO > 720 |
2,374 | 24 | 2,466 | 23 | ||||||||||||
Total First Liens |
3,251 | 32 | 3,323 | 31 | ||||||||||||
Second Liens: |
||||||||||||||||
FICO < 620 |
661 | 7 | 750 | 7 | ||||||||||||
FICO 621-719 |
1,817 | 18 | 1,929 | 18 | ||||||||||||
FICO > 720 |
4,289 | 43 | 4,717 | 44 | ||||||||||||
Total Second Liens |
6,767 | 68 | 7,396 | 69 | ||||||||||||
Total |
$ | 10,018 | 100 | % | 10,719 | 100 | % |
Fifth Third Bancorp |
63 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Bancorp believes that home equity loans with a greater than 80% combined LTV ratio present a higher level of risk. The following table provides an analysis of the home equity loans outstanding in a first and second lien position by LTV at origination:
TABLE 41: HOME EQUITY LOANS OUTSTANDING BY LTV AT ORIGINATION
2012 | 2011 | |||||||||||||||||
As of December 31 ($ in millions) | Outstanding | Weighted Average LTV |
Outstanding | Weighted Average LTV |
||||||||||||||
First Liens: |
||||||||||||||||||
LTV £ 80% |
$ | 2,763 | 54.9 | % | $ | 2,800 | 54.9 | % | ||||||||||
LTV > 80% |
488 | 88.9 | 523 | 89.2 | ||||||||||||||
Total First Liens |
3,251 | 60.2 | 3,323 | 60.4 | ||||||||||||||
Second Liens: |
||||||||||||||||||
LTV £ 80% |
3,602 | 67.3 | 3,882 | 67.3 | ||||||||||||||
LTV > 80% |
3,165 | 91.6 | 3,514 | 91.8 | ||||||||||||||
Total Second Liens |
6,767 | 80.5 | 7,396 | 81.0 | ||||||||||||||
Total |
$ | 10,018 | 73.4 | % | $ | 10,719 | 74.0 | % |
The following tables provide analysis of home equity loans by state with LTV greater than 80% as of December 31, 2012 and 2011:
TABLE 42: HOME EQUITY LOANS OUTSTANDING WITH LTV GREATER THAN 80%
As of December 31, 2012 ($ in millions) | For the Year Ended December 31, 2012 |
|||||||||||||||||||
By State: | Outstanding | Exposure | 90 Days Past Due |
Nonaccrual | Net Charge-offs | |||||||||||||||
Ohio |
$ | 1,254 | 1,927 | 8 | 6 | 24 | ||||||||||||||
Michigan |
795 | 1,108 | 6 | 4 | 24 | |||||||||||||||
Illinois |
428 | 611 | 5 | 3 | 17 | |||||||||||||||
Indiana |
348 | 521 | 2 | 2 | 5 | |||||||||||||||
Kentucky |
327 | 499 | 2 | 1 | 6 | |||||||||||||||
Florida |
130 | 175 | 2 | 3 | 8 | |||||||||||||||
All other states |
371 | 491 | 4 | 2 | 17 | |||||||||||||||
Total |
$ | 3,653 | 5,332 | 29 | 21 | 101 |
TABLE 43: HOME EQUITY LOANS OUTSTANDING WITH LTV GREATER THAN 80%
As of December 31, 2011 ($ in millions) | For the Year Ended December 31, 2011 |
|||||||||||||||||||
By State: | Outstanding | Exposure | 90 Days Past Due |
Nonaccrual | Net Charge-offs | |||||||||||||||
Ohio |
$ | 1,393 | 2,083 | 12 | 7 | 33 | ||||||||||||||
Michigan |
884 | 1,197 | 8 | 4 | 37 | |||||||||||||||
Illinois |
448 | 630 | 8 | 2 | 17 | |||||||||||||||
Indiana |
391 | 573 | 2 | 2 | 9 | |||||||||||||||
Kentucky |
366 | 549 | 3 | 2 | 8 | |||||||||||||||
Florida |
146 | 190 | 4 | 3 | 17 | |||||||||||||||
All other states |
409 | 519 | 5 | 2 | 19 | |||||||||||||||
Total |
$ | 4,037 | 5,741 | 42 | 22 | 140 |
The following table provides an analysis of automobile loans outstanding by LTV at origination:
TABLE 44: AUTOMOBILE LOANS OUTSTANDING WITH LTV AT ORIGINATION
2012 | 2011 | |||||||||||||||||
As of December 31 ($ in millions) | Outstanding | Weighted Average LTV |
Outstanding | Weighted Average LTV |
||||||||||||||
LTV £ 100% |
$ | 8,123 | 81.5 | % | $ | 7,805 | 81.7 | % | ||||||||||
LTV > 100% |
3,849 | 110.8 | 4,022 | 111.5 | ||||||||||||||
Total |
$ | 11,972 | 91.2 | % | $ | 11,827 | 92.1 | % |
64 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following tables provide analysis of the Bancorps automobile loans with a LTV at origination greater than 100% as of December 31, 2012 and 2011, respectively:
TABLE 45: AUTOMOBILE LOANS OUTSTANDING WITH LTV GREATER THAN 100%
As of December 31, 2012 ($ in millions) | For the Year Ended December 31, 2012 |
|||||||||||||||
By State: | Outstanding | 90 Days Past Due |
Nonaccrual | Net Charge-offs | ||||||||||||
Ohio |
$ | 409 | | | 2 | |||||||||||
Illinois |
232 | | | 2 | ||||||||||||
Michigan |
221 | | | 2 | ||||||||||||
Indiana |
158 | | | 1 | ||||||||||||
Florida |
194 | | | 1 | ||||||||||||
Kentucky |
141 | | | 1 | ||||||||||||
All other states |
2,494 | 4 | 2 | 15 | ||||||||||||
Total |
$ | 3,849 | 4 | 2 | 24 |
TABLE 46: AUTOMOBILE LOANS OUTSTANDING WITH LTV GREATER THAN 100%
As of December 31, 2011 ($ in millions) | For the Year Ended December 31, 2011 |
|||||||||||||||
By State: | Outstanding | 90 Days Past Due |
Nonaccrual | Net Charge-offs | ||||||||||||
Ohio |
$ | 425 | 1 | | 3 | |||||||||||
Illinois |
291 | | | 3 | ||||||||||||
Michigan |
245 | | | 2 | ||||||||||||
Indiana |
181 | | | 2 | ||||||||||||
Florida |
192 | | | 3 | ||||||||||||
Kentucky |
158 | | | 1 | ||||||||||||
All other states |
2,530 | 3 | 2 | 20 | ||||||||||||
Total |
$ | 4,022 | 4 | 2 | 34 |
The following table provides detail about the Bancorps exposure to all European domiciled and owned businesses and financial institutions as of December 31, 2012:
TABLE 47: EUROPEAN EXPOSURE
Sovereigns | Financial Institutions | Non-Financial Institutions |
Total | |||||||||||||||||||||||||||||
Total | Funded | Total | Funded | Total | Funded | Total | Funded | |||||||||||||||||||||||||
($ in millions) | Exposure | Exposure | Exposure | Exposure | Exposure | Exposure | Exposure (a) | Exposure | ||||||||||||||||||||||||
Peripheral Europe(b) |
$ | | | 26 | | 184 | 115 | 210 | 115 | |||||||||||||||||||||||
Other Eurozone(c) |
| | 50 | 46 | 1,463 | 846 | 1,513 | 892 | ||||||||||||||||||||||||
Total Eurozone |
| | 76 | 46 | 1,647 | 961 | 1,723 | 1,007 | ||||||||||||||||||||||||
Other Europe(d) |
| | 62 | 32 | 821 | 485 | 883 | 517 | ||||||||||||||||||||||||
Total Europe |
$ | | | 138 | 78 | 2,468 | 1,446 | 2,606 | 1,524 |
(a) | Total exposure includes funded exposure and unfunded commitments, reported net of collateral. |
(b) | Peripheral Europe includes Greece, Ireland, Italy, Portugal and Spain. |
(c) | Eurozone includes countries participating in the European common currency (Euro). |
(d) | Other Europe includes European countries not part of the Euro (primarily the United Kingdom and Switzerland). |
Fifth Third Bancorp |
65 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
66 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 48: SUMMARY OF NONPERFORMING ASSETS AND DELINQUENT LOANS
As of December 31 ($ in millions) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
Nonaccrual loans and leases: |
||||||||||||||||||||
Commercial and industrial loans |
$ | 234 | 408 | 473 | 734 | 541 | ||||||||||||||
Commercial mortgage loans |
215 | 358 | 407 | 898 | 482 | |||||||||||||||
Commercial construction loans |
70 | 123 | 182 | 646 | 362 | |||||||||||||||
Commercial leases |
1 | 9 | 11 | 67 | 21 | |||||||||||||||
Residential mortgage loans |
114 | 134 | 152 | 275 | 259 | |||||||||||||||
Home equity |
30 | 25 | 23 | 21 | 26 | |||||||||||||||
Automobile loans |
| | 1 | 1 | 5 | |||||||||||||||
Other consumer loans and leases |
1 | 1 | 84 | | | |||||||||||||||
Restructured loans and leases: |
||||||||||||||||||||
Commercial and industrial loans |
96 | 79 | 95 | 35 | | |||||||||||||||
Commercial mortgage loans |
67 | 63 | 28 | 4 | | |||||||||||||||
Commercial construction loans |
6 | 15 | 10 | 8 | | |||||||||||||||
Commercial leases |
8 | 3 | 8 | | | |||||||||||||||
Residential mortgage loans(a) |
123 | 141 | 116 | 137 | 20 | |||||||||||||||
Home equity(a) |
23 | 29 | 33 | 33 | 29 | |||||||||||||||
Automobile loans(a) |
2 | 2 | 2 | 1 | 1 | |||||||||||||||
Credit card |
39 | 48 | 55 | 87 | 30 | |||||||||||||||
Total nonperforming loans and leases(e) |
1,029 | 1,438 | 1,680 | 2,947 | 1,776 | |||||||||||||||
OREO and other repossessed property(d) |
257 | 378 | 494 | 297 | 230 | |||||||||||||||
Total nonperforming assets |
1,286 | 1,816 | 2,174 | 3,244 | 2,006 | |||||||||||||||
Nonaccrual loans held for sale |
29 | 138 | 294 | 224 | 473 | |||||||||||||||
Total nonperforming assets including loans held for sale |
$ | 1,315 | 1,954 | 2,468 | 3,468 | 2,479 | ||||||||||||||
Loans and leases 90 days past due and accruing: |
||||||||||||||||||||
Commercial and industrial loans |
$ | 1 | 4 | 16 | 118 | 76 | ||||||||||||||
Commercial mortgage loans |
22 | 3 | 11 | 59 | 136 | |||||||||||||||
Commercial construction loans |
1 | 1 | 3 | 17 | 74 | |||||||||||||||
Commercial leases |
| | | 4 | 4 | |||||||||||||||
Residential mortgage loans(c) |
75 | 79 | 100 | 189 | 198 | |||||||||||||||
Home equity |
58 | 74 | 89 | 99 | 96 | |||||||||||||||
Automobile loans |
8 | 9 | 13 | 17 | 21 | |||||||||||||||
Credit card and other |
30 | 30 | 42 | 64 | 56 | |||||||||||||||
Other consumer loans and leases |
| | | | 1 | |||||||||||||||
Total loans and leases 90 days past due and accruing(f) |
$ | 195 | 200 | 274 | 567 | 662 | ||||||||||||||
Nonperforming assets as a percent of portfolio loans, leases and other assets, including OREO(b) |
1.49 | % | 2.23 | 2.79 | 4.22 | 2.38 | ||||||||||||||
Allowance for loan and lease losses as a percent of nonperforming assets(a)(b) |
144 | 124 | 138 | 116 | 139 |
(a) | During 2009, the Bancorp modified its consumer nonaccrual policy to exclude TDR loans that were less than 90 days past due because they were performing in accordance with the restructured terms. For comparability purposes, prior periods were adjusted to reflect this reclassification. |
(b) | Excludes nonaccrual loans held for sale. |
(c) | Information for all periods presented excludes advances made pursuant to servicing agreements to GNMA mortgage loan pools whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. As of December 31, 2012, 2011, 2010, 2009, and 2008 these advances were $414, $309, $279, $130 and $40 respectively. The Bancorp recognized credit losses of $2 million for the year ended December 31, 2012 and immaterial credit losses for 2011 due to claim denials and curtailments associated with these advances. |
(d) | Excludes $72, $64, $38, $15 and $23 of OREO related to government insured loans at December 31, 2012, 2011, 2010, 2009, and 2008, respectively. |
(e) | Includes $10, $17, $24, $32, and $29 of nonaccrual government insured commercial loans whose repayments are insured by the Small Business Administration at December 31, 2012, 2011, 2010, 2009, and 2008, respectively, and $1 and $2 of restructured nonaccrual government insured commercial loans at December 31, 2012 and 2011, respectively and zero for 2010, 2009 and 2008. |
(f) | Includes an immaterial amount of government insured commercial loans 90 days past due and accruing whose repayments are insured by the Small Business Administration at December 31, 2012, 2011, 2010, 2009, and 2008. |
Fifth Third Bancorp |
67 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table provides a rollforward of portfolio nonperforming loans and leases, by portfolio segment:
TABLE 49: ROLLFORWARD OF PORTFOLIO NONPERFORMING LOANS AND LEASES
For the year ended December 31, 2012 ($ in millions) | Commercial | Residential Mortgage |
Consumer | Total | ||||||||||||
Beginning Balance |
$ | 1,058 | 275 | 105 | 1,438 | |||||||||||
Transfers to nonperforming |
560 | 318 | 354 | 1,232 | ||||||||||||
Transfers to performing |
(22 | ) | (45 | ) | (73 | ) | (140 | ) | ||||||||
Transfers to performing (restructured) |
(31 | ) | (57 | ) | (90 | ) | (178 | ) | ||||||||
Transfers to held for sale |
(13 | ) | | | (13 | ) | ||||||||||
Loans sold from portfolio |
(36 | ) | (4 | ) | | (40 | ) | |||||||||
Loan paydowns/payoffs |
(466 | ) | (121 | ) | (12 | ) | (599 | ) | ||||||||
Transfers to other real estate owned |
(108 | ) | (71 | ) | | (179 | ) | |||||||||
Charge-offs |
(297 | ) | (58 | ) | (194 | ) | (549 | ) | ||||||||
Draws/other extensions of credit |
52 | | 5 | 57 | ||||||||||||
Ending Balance |
$ | 697 | 237 | 95 | 1,029 | |||||||||||
For the year ended December 31, 2011 ($ in millions) |
||||||||||||||||
Beginning Balance |
$ | 1,214 | 268 | 198 | 1,680 | |||||||||||
Transfers to nonperforming |
1,075 | 396 | 456 | 1,927 | ||||||||||||
Transfers to performing |
(23 | ) | (45 | ) | (85 | ) | (153 | ) | ||||||||
Transfers to performing (restructured) |
(1 | ) | (74 | ) | (95 | ) | (170 | ) | ||||||||
Transfers from held for sale |
4 | | | 4 | ||||||||||||
Transfers to held for sale |
(92 | ) | | | (92 | ) | ||||||||||
Loans sold from portfolio |
(57 | ) | (1 | ) | (21 | ) | (79 | ) | ||||||||
Loan paydowns/payoffs |
(425 | ) | (85 | ) | (13 | ) | (523 | ) | ||||||||
Transfers to other real estate owned |
(110 | ) | (79 | ) | | (189 | ) | |||||||||
Charge-offs |
(554 | ) | (106 | ) | (342 | ) | (1,002 | ) | ||||||||
Draws/other extensions of credit |
27 | 1 | 7 | 35 | ||||||||||||
Ending Balance |
$ | 1,058 | 275 | 105 | 1,438 |
The following table summarizes TDRs by loan type and delinquency status:
TABLE 50: PERFORMING AND NONPERFORMING TDRs
Performing | ||||||||||||||||||||
As of December 31, 2012 ($ in millions) | Current | 30-89 Days Past Due |
90 Days or More Past Due |
Nonaccrual | Total | |||||||||||||||
Commercial |
$ 431 | | | 177 | $ | 608 | ||||||||||||||
Residential mortgages(a) |
1,006 | 70 | 99 | 123 | 1,298 | |||||||||||||||
Home equity |
377 | 35 | | 23 | 435 | |||||||||||||||
Credit card |
35 | | | 39 | 74 | |||||||||||||||
Automobile and other consumer loans and leases |
31 | 2 | | 2 | 35 | |||||||||||||||
Total |
$ 1,880 | 107 | 99 | 364 | $ | 2,450 |
(a) | Information includes advances made pursuant to servicing agreements for GNMA mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. As of December 31, 2012, these advances represented $107 of current loans, $26 of 30-89 days past due loans and $79 of 90 days or more past due loans. |
68 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fifth Third Bancorp |
69 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 51: SUMMARY OF CREDIT LOSS EXPERIENCE
For the years ended December 31 ($ in millions) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
Losses charged off: |
||||||||||||||||||||
Commercial and industrial loans |
$ | (194 | ) | (314 | ) | (631 | ) | (768 | ) | (667 | ) | |||||||||
Commercial mortgage loans |
(120 | ) | (211 | ) | (541 | ) | (436 | ) | (618 | ) | ||||||||||
Commercial construction loans |
(34 | ) | (89 | ) | (265 | ) | (420 | ) | (750 | ) | ||||||||||
Commercial leases |
(10 | ) | (1 | ) | (7 | ) | (11 | ) | | |||||||||||
Residential mortgage loans |
(129 | ) | (180 | ) | (441 | ) | (359 | ) | (243 | ) | ||||||||||
Home equity |
(172 | ) | (234 | ) | (276 | ) | (330 | ) | (212 | ) | ||||||||||
Automobile loans |
(55 | ) | (85 | ) | (132 | ) | (189 | ) | (168 | ) | ||||||||||
Credit card |
(90 | ) | (114 | ) | (164 | ) | (178 | ) | (101 | ) | ||||||||||
Other consumer loans and leases |
(33 | ) | (86 | ) | (28 | ) | (28 | ) | (32 | ) | ||||||||||
Total losses |
(837 | ) | (1,314 | ) | (2,485 | ) | (2,719 | ) | (2,791 | ) | ||||||||||
Recoveries of losses previously charged off: |
||||||||||||||||||||
Commercial and industrial loans |
29 | 38 | 45 | 50 | 18 | |||||||||||||||
Commercial mortgage loans |
21 | 16 | 17 | 14 | 5 | |||||||||||||||
Commercial construction loans |
9 | 4 | 13 | 4 | 2 | |||||||||||||||
Commercial leases |
2 | 3 | 5 | 4 | 1 | |||||||||||||||
Residential mortgage loans |
7 | 7 | 2 | 2 | | |||||||||||||||
Home equity |
15 | 14 | 12 | 8 | 7 | |||||||||||||||
Automobile loans |
24 | 32 | 44 | 41 | 34 | |||||||||||||||
Credit card |
16 | 16 | 9 | 8 | 7 | |||||||||||||||
Other consumer loans and leases |
10 | 12 | 10 | 7 | 7 | |||||||||||||||
Total recoveries |
133 | 142 | 157 | 138 | 81 | |||||||||||||||
Net losses charged off: |
||||||||||||||||||||
Commercial and industrial loans |
(165 | ) | (276 | ) | (586 | ) | (718 | ) | (649 | ) | ||||||||||
Commercial mortgage loans |
(99 | ) | (195 | ) | (524 | ) | (422 | ) | (613 | ) | ||||||||||
Commercial construction loans |
(25 | ) | (85 | ) | (252 | ) | (416 | ) | (748 | ) | ||||||||||
Commercial leases |
(8 | ) | 2 | (2 | ) | (7 | ) | 1 | ||||||||||||
Residential mortgage loans |
(122 | ) | (173 | ) | (439 | ) | (357 | ) | (243 | ) | ||||||||||
Home equity |
(157 | ) | (220 | ) | (264 | ) | (322 | ) | (205 | ) | ||||||||||
Automobile loans |
(31 | ) | (53 | ) | (88 | ) | (148 | ) | (134 | ) | ||||||||||
Credit card |
(74 | ) | (98 | ) | (155 | ) | (170 | ) | (94 | ) | ||||||||||
Other consumer loans and leases |
(23 | ) | (74 | ) | (18 | ) | (21 | ) | (25 | ) | ||||||||||
Total net losses charged off |
$ | (704 | ) | (1,172 | ) | (2,328 | ) | (2,581 | ) | (2,710 | ) | |||||||||
Net charge-offs as a percent of average loans and leases (excluding held for sale): |
||||||||||||||||||||
Commercial and industrial loans |
0.50 | % | 0.97 | 2.23 | 2.61 | 2.31 | ||||||||||||||
Commercial mortgage loans |
1.02 | 1.89 | 4.58 | 3.43 | 4.80 | |||||||||||||||
Commercial construction loans |
3.08 | 4.96 | 8.48 | 9.24 | 12.80 | |||||||||||||||
Commercial leases |
0.22 | (0.08 | ) | 0.05 | 0.22 | (0.02 | ) | |||||||||||||
Total commercial loans |
0.63 | 1.26 | 3.10 | 3.27 | 3.99 | |||||||||||||||
Residential mortgage loans |
1.07 | 1.75 | 5.49 | 4.15 | 2.47 | |||||||||||||||
Home equity |
1.51 | 1.97 | 2.20 | 2.57 | 1.67 | |||||||||||||||
Automobile loans |
0.26 | 0.47 | 0.85 | 1.68 | 1.56 | |||||||||||||||
Credit card |
3.79 | 5.19 | 8.28 | 8.87 | 5.51 | |||||||||||||||
Other consumer loans and leases |
7.02 | 15.29 | 2.58 | 2.14 | 2.10 | |||||||||||||||
Total consumer loans and leases |
1.13 | 1.79 | 2.92 | 3.10 | 2.08 | |||||||||||||||
Total net losses charged off |
0.85 | % | 1.49 | 3.02 | 3.20 | 3.23 |
70 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 52: CHANGES IN ALLOWANCE FOR CREDIT LOSSES
For the years ended December 31 ($ in millions) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
ALLL: |
||||||||||||||||||||
Balance, beginning of period |
$ | 2,255 | 3,004 | 3,749 | 2,787 | 937 | ||||||||||||||
Impact of change in accounting principle |
| | 45 | | | |||||||||||||||
Losses charged off |
(837 | ) | (1,314 | ) | (2,485 | ) | (2,719 | ) | (2,791 | ) | ||||||||||
Recoveries of losses previously charged off |
133 | 142 | 157 | 138 | 81 | |||||||||||||||
Provision for loan and lease losses |
303 | 423 | 1,538 | 3,543 | 4,560 | |||||||||||||||
Balance, end of period |
$ | 1,854 | 2,255 | 3,004 | 3,749 | 2,787 | ||||||||||||||
Reserve for unfunded commitments: |
||||||||||||||||||||
Balance, beginning of period |
$ | 181 | 227 | 294 | 195 | 95 | ||||||||||||||
Impact of change in accounting principle |
| | (43 | ) | | | ||||||||||||||
Provision for unfunded commitments |
(2 | ) | (46 | ) | (24 | ) | 99 | 100 | ||||||||||||
Balance, end of period |
$ | 179 | 181 | 227 | 294 | 195 |
Fifth Third Bancorp |
71 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 53: ATTRIBUTION OF ALLOWANCE FOR LOAN AND LEASE LOSSES TO PORTFOLIO LOANS AND LEASES
As of December 31 ($ in millions) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
Allowance attributed to: |
||||||||||||||||||||
Commercial and industrial loans |
$ | 802 | 929 | 1,123 | 1,282 | 824 | ||||||||||||||
Commercial mortgage loans |
333 | 441 | 597 | 734 | 363 | |||||||||||||||
Commercial construction loans |
33 | 77 | 158 | 380 | 252 | |||||||||||||||
Commercial leases |
68 | 80 | 111 | 121 | 61 | |||||||||||||||
Residential mortgage loans |
229 | 227 | 310 | 375 | 388 | |||||||||||||||
Home equity |
143 | 195 | 265 | 294 | 289 | |||||||||||||||
Automobile loans |
28 | 43 | 73 | 127 | 150 | |||||||||||||||
Credit card |
87 | 106 | 158 | 199 | 148 | |||||||||||||||
Other consumer loans and leases |
20 | 21 | 59 | 44 | 33 | |||||||||||||||
Unallocated |
111 | 136 | 150 | 193 | 279 | |||||||||||||||
Total ALLL |
$ | 1,854 | 2,255 | 3,004 | 3,749 | 2,787 | ||||||||||||||
Portfolio loans and leases: |
||||||||||||||||||||
Commercial and industrial loans |
$ | 36,038 | 30,783 | 27,191 | 25,683 | 29,197 | ||||||||||||||
Commercial mortgage loans |
9,103 | 10,138 | 10,845 | 11,803 | 12,502 | |||||||||||||||
Commercial construction loans |
698 | 1,020 | 2,048 | 3,784 | 5,114 | |||||||||||||||
Commercial leases |
3,549 | 3,531 | 3,378 | 3,535 | 3,666 | |||||||||||||||
Residential mortgage loans |
12,017 | 10,672 | 8,956 | 8,035 | 9,385 | |||||||||||||||
Home equity |
10,018 | 10,719 | 11,513 | 12,174 | 12,752 | |||||||||||||||
Automobile loans |
11,972 | 11,827 | 10,983 | 8,995 | 8,594 | |||||||||||||||
Credit card |
2,097 | 1,978 | 1,896 | 1,990 | 1,811 | |||||||||||||||
Other consumer loans and leases |
290 | 350 | 681 | 780 | 1,122 | |||||||||||||||
Total portfolio loans and leases |
$ | 85,782 | 81,018 | 77,491 | 76,779 | 84,143 | ||||||||||||||
Attributed allowance as a percent of respective portfolio loans and leases: |
||||||||||||||||||||
Commercial and industrial loans |
2.23 | % | 3.02 | 4.13 | 4.99 | 2.82 | ||||||||||||||
Commercial mortgage loans |
3.66 | 4.35 | 5.50 | 6.22 | 2.90 | |||||||||||||||
Commercial construction loans |
4.73 | 7.55 | 7.71 | 10.04 | 4.93 | |||||||||||||||
Commercial leases |
1.92 | 2.27 | 3.29 | 3.42 | 1.66 | |||||||||||||||
Residential mortgage loans |
1.91 | 2.13 | 3.46 | 4.67 | 4.13 | |||||||||||||||
Home equity |
1.43 | 1.82 | 2.30 | 2.41 | 2.27 | |||||||||||||||
Automobile loans |
0.23 | 0.36 | 0.66 | 1.41 | 1.75 | |||||||||||||||
Credit card |
4.15 | 5.36 | 8.33 | 10.00 | 8.17 | |||||||||||||||
Other consumer loans and leases |
6.90 | 6.00 | 8.66 | 5.64 | 2.94 | |||||||||||||||
Unallocated (as a percent of total portfolio loans and leases) |
0.13 | 0.17 | 0.19 | 0.25 | 0.33 | |||||||||||||||
Total portfolio loans and leases |
2.16 | % | 2.78 | 3.88 | 4.88 | 3.31 |
72 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table shows the Bancorps estimated net interest income sensitivity profile and ALCO policy limits as of December 31:
TABLE 54: ESTIMATED NII SENSITIVITY PROFILE
2012 | 2011 | |||||||||||||||||||||||||||||||||||||
Percent Change in NII (FTE) | ALCO Policy Limits | Percent Change in NII (FTE) | ALCO Policy Limits | |||||||||||||||||||||||||||||||||||
Change in Interest Rates (bps) | 12 Months | 13 to 24 Months |
12 Months | 13 to 24 Months |
12 Months | 13 to 24 Months |
12 Months | 13 to 24 Months |
||||||||||||||||||||||||||||||
+200 |
1.78 | % | 7.75 | (4.00 | ) | (6.00 | ) | 0.35 | % | 5.61 | (5.00 | ) | (7.00 | ) | ||||||||||||||||||||||||
+100 |
0.90 | 3.78 | | | | 2.64 | | |
The following table shows the Bancorps EVE sensitivity profile as of December 31:
TABLE 55: ESTIMATED EVE SENSITIVITY PROFILE
2012 | 2011 | |||||||||||||||||
Change in Interest Rates (bps) | Change in EVE | ALCO Policy Limit | Change in EVE | ALCO Policy Limit | ||||||||||||||
+200 |
2.16 | % | (12.00 | ) | 1.37 | % | (15.00 | ) | ||||||||||
+100 |
1.50 | 1.22 | ||||||||||||||||
+25 |
0.43 | 0.32 | ||||||||||||||||
-25 |
(0.52 | ) | (0.25 | ) |
Fifth Third Bancorp |
73 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 56: PORTFOLIO LOAN AND LEASE CONTRACTUAL MATURITIES
As of December 31, 2012 ($ in millions) | Less than 1 year | 1-5 years | Over 5 years | Total | ||||||||||||
Commercial and industrial loans |
$ | 9,822 | 23,971 | 2,245 | 36,038 | |||||||||||
Commercial mortgage loans |
4,297 | 4,110 | 696 | 9,103 | ||||||||||||
Commercial construction loans |
299 | 369 | 30 | 698 | ||||||||||||
Commercial leases |
612 | 1,573 | 1,364 | 3,549 | ||||||||||||
Subtotalcommercial loans and leases |
15,030 | 30,023 | 4,335 | 49,388 | ||||||||||||
Residential mortgage loans |
3,213 | 4,879 | 3,925 | 12,017 | ||||||||||||
Home equity |
1,485 | 5,560 | 2,973 | 10,018 | ||||||||||||
Automobile loans |
4,798 | 6,945 | 229 | 11,972 | ||||||||||||
Credit card |
598 | 1,499 | | 2,097 | ||||||||||||
Other consumer loans and leases |
232 | 55 | 3 | 290 | ||||||||||||
Subtotalconsumer loans and leases |
10,326 | 18,938 | 7,130 | 36,394 | ||||||||||||
Total |
$ | 25,356 | 48,961 | 11,465 | 85,782 |
TABLE 57: PORTFOLIO LOAN AND LEASE PRINCIPAL CASH FLOWS OCCURING AFTER ONE YEAR
Interest Rate | ||||||||
As of December 31, 2012 ($ in millions) | Fixed | Floating or Adjustable | ||||||
Commercial and industrial loans |
$ | 3,385 | 22,831 | |||||
Commercial mortgage loans |
1,319 | 3,487 | ||||||
Commercial construction loans |
27 | 372 | ||||||
Commercial leases |
2,937 | | ||||||
Subtotalcommercial loans and leases |
7,668 | 26,690 | ||||||
Residential mortgage loans |
6,394 | 2,410 | ||||||
Home equity |
1,058 | 7,475 | ||||||
Automobile loans |
7,128 | 46 | ||||||
Credit card |
627 | 872 | ||||||
Other consumer loans and leases |
38 | 20 | ||||||
Subtotalconsumer loans and leases |
15,245 | 10,823 | ||||||
Total |
$ | 22,913 | 37,513 |
74 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fifth Third Bancorp |
75 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 58: AGENCY RATINGS
As of February 22, 2013 | Moodys | Standard and Poors | Fitch | DBRS | ||||
Fifth Third Bancorp: |
||||||||
Short-term |
No rating | A-2 | F1 | R-1L | ||||
Senior debt |
Baa1 | BBB | A | AL | ||||
Subordinated debt |
Baa2 | BBB- | BBB+ | BBBH | ||||
Fifth Third Bank: |
||||||||
Short-term |
P-2 | A-2 | F1 | R-1L | ||||
Long-term deposit |
A3 | No rating | A | A | ||||
Senior debt |
A3 | BBB+ | A | A | ||||
Subordinated debt |
Baa1 | BBB | BBB+ | A (low) |
76 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 59: CAPITAL RATIOS
As of December 31 ($ in millions) |
2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
Average equity as a percent of average assets |
11.65 | % | 11.41 | 12.22 | 11.36 | 8.78 | ||||||||||||||
Tangible equity as a percent of tangible assets(a) |
9.17 | 9.03 | 10.42 | 9.71 | 7.86 | |||||||||||||||
Tangible common equity as a percent of tangible assets(a) |
8.83 | 8.68 | 7.04 | 6.45 | 4.23 | |||||||||||||||
Tier I capital |
$ | 11,685 | 12,503 | 13,965 | 13,428 | 11,924 | ||||||||||||||
Total risk-based capital |
15,816 | 16,885 | 18,178 | 17,648 | 16,646 | |||||||||||||||
Risk-weighted assets(b) |
109,699 | 104,945 | 100,561 | 100,933 | 112,622 | |||||||||||||||
Regulatory capital ratios: |
||||||||||||||||||||
Tier I capital |
10.65 | % | 11.91 | 13.89 | 13.30 | 10.59 | ||||||||||||||
Total risk-based capital |
14.42 | 16.09 | 18.08 | 17.48 | 14.78 | |||||||||||||||
Tier I leverage |
10.05 | 11.10 | 12.79 | 12.34 | 10.27 | |||||||||||||||
Tier I common equity(a) |
9.51 | 9.35 | 7.48 | 6.99 | 4.37 |
(a) | For further information on these ratios, see the Non-GAAP Financial Measures section of the MD&A. |
(b) | Under the banking agencies risk-based capital guidelines, assets and credit equivalent amounts of derivatives and off-balance sheet exposures are assigned to broad risk categories. The aggregate dollar amount in each risk category is multiplied by the associated risk weight of the category. The resulting weighted values are added together resulting in the Bancorps total risk-weighted assets. |
Fifth Third Bancorp |
77 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 60: SHARE REPURCHASES
For the years ended December 31 |
2012 | 2011 | 2010 | |||||||||
Shares authorized for repurchase at January 1 |
19,201,518 | 19,201,518 | 19,201,518 | |||||||||
Additional authorizations(a) |
86,269,178 | | | |||||||||
Share repurchases(b) |
(42,424,014 | ) | | | ||||||||
Shares authorized for repurchase at December 31 |
63,046,682 | 19,201,518 | 19,201,518 | |||||||||
Average price paid per share |
$ | 14.82 | N/A | N/A |
(a) | In August 2012, the Bancorp announced that its Board of Directors had authorized management to purchase 100 million shares of the Bancorps common stock through the open market or in any private transaction. The authorization does not include specific price targets or an expiration date. This share repurchase authorization replaces the Boards previous authorization pursuant to which approximately 14 million shares remained available for repurchase by the Bancorp. |
(b) | Excludes 2,059,003, 1,164,254 and 333,808 shares repurchased during 2012, 2011, and 2010, respectively, in connection with various employee compensation plans. These repurchases are not included in the calculation for average price paid and do not count against the maximum number of shares that may yet be repurchased under the Board of Directors authorization. |
78 |
Fifth Third Bancorp |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OFF-BALANCE SHEET ARRANGEMENTS
Fifth Third Bancorp |
79 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
TABLE 61: CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
As of December 31, 2012 ($ in millions) | |
Less than 1 year |
|
1-3 years | 3-5 years | |
Greater than 5 years |
|
Total | |||||||||||
Contractually obligated payments due by period: |
||||||||||||||||||||
Deposits with a stated maturity of less than one year(a) |
$ | 82,218 | | | | 82,218 | ||||||||||||||
Time deposits(c) |
4,834 | 2,029 | 383 | 53 | 7,299 | |||||||||||||||
Short-term borrowings(e) |
7,181 | | | | 7,181 | |||||||||||||||
Long-term debt(b) |
1,277 | 597 | 1,928 | 3,283 | 7,085 | |||||||||||||||
Forward contracts to sell mortgage loans(d) |
5,322 | | | | 5,322 | |||||||||||||||
Noncancelable lease obligations(f) |
89 | 166 | 141 | 373 | 769 | |||||||||||||||
Partnership investment commitments(g) |
219 | 134 | 10 | 31 | 394 | |||||||||||||||
Pension obligations(i) |
19 | 35 | 31 | 67 | 152 | |||||||||||||||
Purchase obligations and capital expenditures(h) |
49 | 42 | 25 | | 116 | |||||||||||||||
Capital lease obligations |
7 | 13 | 3 | 1 | 24 | |||||||||||||||
Total contractually obligated payments due by period |
$ | 101,215 | 3,016 | 2,521 | 3,808 | 110,560 | ||||||||||||||
Other commitments by expiration period |
||||||||||||||||||||
Commitments to extend credit(j) |
$ | 30,715 | 7,497 | 15,191 | 121 | 53,524 | ||||||||||||||
Letters of credit(k) |
1,831 | 2,088 | 319 | 43 | 4,281 | |||||||||||||||
Total other commitments by expiration period |
$ | 32,546 | 9,585 | 15,510 | 164 | 57,805 |
(a) | Includes demand, interest checking, savings, money market and foreign office deposits. For additional information, see the Deposits discussion in the Balance Sheet Analysis section of MD&A. |
(b) | In the banking industry, interest-bearing obligations are principally used to fund interest-earning assets. As such, interest charges on contractual obligations were excluded from reported amounts, as the potential cash outflows would have corresponding cash inflows from interest-earning assets. See Note 15 of the Notes to Consolidated Financial Statements for additional information on these debt instruments. |
(c) | Includes other time and certificates $100,000 and over. For additional information, see the Deposits discussion in the Balance Sheet Analysis section of MD&A. |
(d) | See Note 11 of the Notes to Consolidated Financial Statements for additional information on forward contracts to sell residential mortgage loans. |
(e) | Includes federal funds purchased and borrowings with an original maturity of less than one year. For additional information, see Note 14 of the Notes to Consolidated Financial Statements. |
(f) | Includes rental commitments. |
(g) | Includes low-income housing, historic tax investments and market tax credits. |
(h) | Represents agreements to purchase goods or services and includes commitments to various general contractors for work related to banking center construction. |
(i) | See Note 20 of the Notes to Consolidated Financial Statements for additional information on pension obligations. |
(j) | Commitments to extend credit are agreements to lend, typically having fixed expiration dates or other termination clauses that may require payment of a fee. Many of the commitments to extend credit may expire without being drawn upon. The total commitment amounts include capital commitments for private equity investments and do not necessarily represent future cash flow requirements. For additional information, see Note 16 of the Notes to Consolidated Financial Statements. |
(k) | Letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. For additional information, see Note 16 of the Notes to Consolidated Financial Statements. |
80 |
Fifth Third Bancorp |
MANAGEMENTS ASSESSMENT AS TO THE EFFECTIVENESS OF INTERNAL CONTROL OVER FINANCIAL REPORTING
The Bancorp conducted an evaluation, under the supervision and with the participation of the Bancorps management, including the Bancorps Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Bancorps disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act). Based on the foregoing, as of the end of the period covered by this report, the Bancorps Chief Executive Officer and Chief Financial Officer concluded that the Bancorps disclosure controls and procedures were effective, in all material respects, to ensure that information required to be disclosed in the reports the Bancorp files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required and information is accumulated and communicated to management on a timely basis.
The management of Fifth Third Bancorp is responsible for establishing and maintaining adequate internal control, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Bancorps management assessed the effectiveness of the Bancorps internal control over financial reporting as of December 31, 2012. Managements assessment is based on the criteria established in the Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and was designed to provide reasonable assurance that the Bancorp maintained effective internal control over financial reporting as of December 31, 2012. Based on this assessment, management believes that the Bancorp maintained effective internal control over financial reporting as of December 31, 2012. The Bancorps independent registered public accounting firm, that audited the Bancorps consolidated financial statements included in this annual report, has issued an audit report on our internal control over financial reporting as of December 31, 2012. This report appears on page 82 of the annual report.
The Bancorps management also conducted an evaluation of internal control over financial reporting to determine whether any changes occurred during the year covered by this report that have materially affected, or are reasonably likely to materially affect, the Bancorps internal control over financial reporting. Based on this evaluation, there has been no such change during the year covered by this report.
|
| |
Kevin T. Kabat |
Daniel T. Poston | |
Vice Chairman and Chief Executive Officer |
Executive Vice President and Chief Financial Officer | |
February 22, 2013 | February 22, 2013 |
Fifth Third Bancorp |
81 |
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Fifth Third Bancorp:
We have audited the internal control over financial reporting of Fifth Third Bancorp and subsidiaries (the Bancorp) as of December 31, 2012, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Bancorps management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements Assessment as to the Effectiveness of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Bancorps internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed by, or under the supervision of, the companys principal executive and principal financial officers, or persons performing similar functions, and effected by the companys board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Bancorp maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on the criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2012 of the Bancorp and our report dated February 22, 2013 expressed an unqualified opinion on those consolidated financial statements.
Cincinnati, Ohio
February 22, 2013
To the Shareholders and Board of Directors of Fifth Third Bancorp:
We have audited the accompanying consolidated balance sheets of Fifth Third Bancorp and subsidiaries (the Bancorp) as of December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2012. These consolidated financial statements are the responsibility of the Bancorps management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Fifth Third Bancorp and subsidiaries at December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Bancorps internal control over financial reporting as of December 31, 2012, based on the criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2013 expressed an unqualified opinion on the Bancorps internal control over financial reporting.
Cincinnati, Ohio
February 22, 2013
82 |
Fifth Third Bancorp |
As of December 31 ($ in millions, except share data) | 2012 | 2011 | ||||||
Assets |
||||||||
Cash and due from banks (a) |
$ | 2,441 | 2,663 | |||||
Available-for-sale and other securities (b) |
15,207 | 15,362 | ||||||
Held-to-maturity securities (c) |
284 | 322 | ||||||
Trading securities |
207 | 177 | ||||||
Other short-term investments (a) |
2,421 | 1,781 | ||||||
Loans held for sale (d) |
2,939 | 2,954 | ||||||
Portfolio loans and leases: |
||||||||
Commercial and industrial loans |
36,038 | 30,783 | ||||||
Commercial mortgage loans (a) |
9,103 | 10,138 | ||||||
Commercial construction loans |
698 | 1,020 | ||||||
Commercial leases |
3,549 | 3,531 | ||||||
Residential mortgage loans(e) |
12,017 | 10,672 | ||||||
Home equity (a) |
10,018 | 10,719 | ||||||
Automobile loans (a) |
11,972 | 11,827 | ||||||
Credit card |
2,097 | 1,978 | ||||||
Other consumer loans and leases |
290 | 350 | ||||||
Portfolio loans and leases |
85,782 | 81,018 | ||||||
Allowance for loan and lease losses(a) |
(1,854 | ) | (2,255 | ) | ||||
Portfolio loans and leases, net |
83,928 | 78,763 | ||||||
Bank premises and equipment |
2,542 | 2,447 | ||||||
Operating lease equipment |
581 | 497 | ||||||
Goodwill |
2,416 | 2,417 | ||||||
Intangible assets |
27 | 40 | ||||||
Servicing rights |
697 | 681 | ||||||
Other assets(a) |
8,204 | 8,863 | ||||||
Total Assets |
$ | 121,894 | 116,967 | |||||
Liabilities |
||||||||
Deposits: |
||||||||
Demand |
$ | 30,023 | 27,600 | |||||
Interest checking |
24,477 | 20,392 | ||||||
Savings |
19,879 | 21,756 | ||||||
Money market |
6,875 | 4,989 | ||||||
Other time |
4,015 | 4,638 | ||||||
Certificates$100,000 and over |
3,284 | 3,039 | ||||||
Foreign office and other |
964 | 3,296 | ||||||
Total deposits |
89,517 | 85,710 | ||||||
Federal funds purchased |
901 | 346 | ||||||
Other short-term borrowings |
6,280 | 3,239 | ||||||
Accrued taxes, interest and expenses |
1,708 | 1,469 | ||||||
Other liabilities (a) |
2,639 | 3,270 | ||||||
Long-term debt (a) |
7,085 | 9,682 | ||||||
Total Liabilities |
108,130 | 103,716 | ||||||
Equity |
||||||||
Common stock (f) |
2,051 | 2,051 | ||||||
Preferred stock (g) |
398 | 398 | ||||||
Capital surplus |
2,758 | 2,792 | ||||||
Retained earnings |
8,768 | 7,554 | ||||||
Accumulated other comprehensive income |
375 | 470 | ||||||
Treasury stock |
(634 | ) | (64 | ) | ||||
Total Bancorp shareholders equity |
13,716 | 13,201 | ||||||
Noncontrolling interests |
48 | 50 | ||||||
Total Equity |
13,764 | 13,251 | ||||||
Total Liabilities and Equity |
$ | 121,894 | 116,967 |
(a) | At December 31, 2012 and 2011, includes $0 and $30 of cash, $0 and $7 of other short-term investments, $50 and $50 of commercial mortgage loans, $0 and $223 of home equity loans, $0 and $259 of automobile loans, ($5) and ($10) of ALLL, $3 and $4 of other assets, $0 and $4 of other liabilities, $0 and $191 of long-term debt from consolidated VIEs that are included in their respective captions. See Note 10. |
(b) | Amortized cost of $14,571 and $14,614 at December 31, 2012 and 2011, respectively. |
(c) | Fair value of $284 and $322 at December 31, 2012 and 2011, respectively. |
(d) | Includes $2,856 and $2,751 of residential mortgage loans held for sale measured at fair value at December 31, 2012, and 2011, respectively. |
(e) | Includes $76 and $65 of residential mortgage loans measured at fair value at December 31, 2012 and 2011, respectively. |
(f) | Common shares: Stated value $2.22 per share; authorized 2,000,000,000; outstanding at December 31, 2012 882,152,057 (excludes 41,740,524 treasury shares) and December 31, 2011 919,804,436 (excludes 4,088,145 treasury shares). |
(g) | 317,680 shares of undesignated no par value preferred stock are authorized of which none had been issued; 8.5% non-cumulative Series G convertible (into 2,159.8272 common shares) perpetual preferred stock with a $25,000 liquidation preference: 46,000 authorized, 16,450 issued and outstanding at December 31, 2012 and 2011. |
See Notes to Consolidated Financial Statements.
Fifth Third Bancorp |
83 |
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31 ($ in millions, except per share data) | 2012 | 2011 | 2010 | |||||||||
Interest Income | ||||||||||||
Interest and fees on loans and leases |
$ | 3,574 | 3,613 | 3,823 | ||||||||
Interest on securities |
529 | 600 | 658 | |||||||||
Interest on other short-term investments |
4 | 5 | 8 | |||||||||
Total interest income |
4,107 | 4,218 | 4,489 | |||||||||
Interest Expense |
||||||||||||
Interest on deposits |
216 | 352 | 591 | |||||||||
Interest on other short-term borrowings |
8 | 4 | 4 | |||||||||
Interest on long-term debt |
288 | 305 | 290 | |||||||||
Total interest expense |
512 | 661 | 885 | |||||||||
Net Interest Income |
3,595 | 3,557 | 3,604 | |||||||||
Provision for loan and lease losses |
303 | 423 | 1,538 | |||||||||
Net Interest Income After Provision for Loan and Lease Losses |
3,292 | 3,134 | 2,066 | |||||||||
Noninterest Income |
||||||||||||
Mortgage banking net revenue |
845 | 597 | 647 | |||||||||
Service charges on deposits |
522 | 520 | 574 | |||||||||
Corporate banking revenue |
413 | 350 | 364 | |||||||||
Investment advisory revenue |
374 | 375 | 361 | |||||||||
Card and processing revenue |
253 | 308 | 316 | |||||||||
Other noninterest income |
574 | 250 | 406 | |||||||||
Securities gains, net |
15 | 46 | 47 | |||||||||
Securities gains, netnon-qualifying hedges on mortgage servicing rights |
3 | 9 | 14 | |||||||||
Total noninterest income |
2,999 | 2,455 | 2,729 | |||||||||
Noninterest Expense |
||||||||||||
Salaries, wages and incentives |
1,607 | 1,478 | 1,430 | |||||||||
Employee benefits |
371 | 330 | 314 | |||||||||
Net occupancy expense |
302 | 305 | 298 | |||||||||
Technology and communications |
196 | 188 | 189 | |||||||||
Card and processing expense |
121 | 120 | 108 | |||||||||
Equipment expense |
110 | 113 | 122 | |||||||||
Other noninterest expense |
1,374 | 1,224 | 1,394 | |||||||||
Total noninterest expense |
4,081 | 3,758 | 3,855 | |||||||||
Income Before Income Taxes |
2,210 | 1,831 | 940 | |||||||||
Applicable income tax expense |
636 | 533 | 187 | |||||||||
Net Income |
1,574 | 1,298 | 753 | |||||||||
Less: Net income attributable to noncontrolling interests |
(2 | ) | 1 | - | ||||||||
Net Income Attributable to Bancorp |
1,576 | 1,297 | 753 | |||||||||
Dividends on preferred stock |
35 | 203 | 250 | |||||||||
Net Income Available to Common Shareholders |
$ | 1,541 | 1,094 | 503 | ||||||||
Earnings Per Share |
$ | 1.69 | 1.20 | 0.63 | ||||||||
Earnings Per Diluted Share |
$ | 1.66 | 1.18 | 0.63 | ||||||||
Average common shares - basic |
904,425,226 | 906,460,550 | 790,852,185 | |||||||||
Average common shares - diluted |
945,554,102 | 949,545,420 | 799,381,153 | |||||||||
Cash dividends declared per share |
$ | 0.36 | 0.28 | 0.04 |
See Notes to Consolidated Financial Statements.
84 |
Fifth Third Bancorp |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31 ($ in millions) | 2012 | 2011 | 2010 | |||||||||
Net income |
$ | 1,574 | 1,298 | 753 | ||||||||
Other comprehensive income (loss), net of tax: |
||||||||||||
Unrealized gains on available-for-sale securities: |
||||||||||||
Unrealized holding (losses) gains on available-for-sale securities arising during period |
(63 | ) | 201 | 143 | ||||||||
Reclassification adjustment for net gains included in net income |
(10 | ) | (37 | ) | (38 | ) | ||||||
Unrealized gains on cash flow hedge derivatives: |
||||||||||||
Unrealized holding gains on cash flow hedge derivatives arising during period |
24 | 58 | 1 | |||||||||
Reclassification adjustment for net gains included in net income |
(54 | ) | (45 | ) | (39 | ) | ||||||
Defined benefit pension plans: |
||||||||||||
Net actuarial loss (gain) arising during period |
8 | (21 | ) | 6 | ||||||||
Other comprehensive (loss) income |
(95 | ) | 156 | 73 | ||||||||
Comprehensive income |
1,479 | 1,454 | 826 | |||||||||
Less: Comprehensive income attributable to noncontrolling interests |
(2 | ) | 1 | - | ||||||||
Comprehensive income attributable to Bancorp |
$ | 1,481 | 1,453 | 826 |
See Notes to Consolidated Financial Statements.
Fifth Third Bancorp |
85 |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Bancorp Shareholders Equity | ||||||||||||||||||||||||||||||||||||
Accumulated | Total | |||||||||||||||||||||||||||||||||||
Other | Bancorp | Non- | ||||||||||||||||||||||||||||||||||
Common | Preferred | Capital | Retained | Comprehensive | Treasury | Shareholders | Controlling | Total | ||||||||||||||||||||||||||||
($ in millions, except per share data) | Stock | Stock | Surplus | Earnings | Income | Stock | Equity | Interests | Equity | |||||||||||||||||||||||||||
Balance at December 31, 2009 |
$ | 1,779 | 3,609 | 1,743 | 6,326 | 241 | (201 | ) | 13,497 | 13,497 | ||||||||||||||||||||||||||
Net income |
753 | 753 | 753 | |||||||||||||||||||||||||||||||||
Other comprehensive income |
73 | 73 | 73 | |||||||||||||||||||||||||||||||||
Cash dividends declared: |
||||||||||||||||||||||||||||||||||||
Common stock at $0.04 per share |
(32 | ) | (32 | ) | (32 | ) | ||||||||||||||||||||||||||||||
Preferred stock |
(205 | ) | (205 | ) | (205 | ) | ||||||||||||||||||||||||||||||
Accretion of preferred dividends, Series F |
45 | (45 | ) | - | - | |||||||||||||||||||||||||||||||
Stock-based compensation expense |
45 | (1 | ) | 44 | 44 | |||||||||||||||||||||||||||||||
Stock-based awards issued or exercised, including treasury shares issued |
(10 | ) | 6 | (4 | ) | (4 | ) | |||||||||||||||||||||||||||||
Restricted stock grants |
(62 | ) | 62 | - | - | |||||||||||||||||||||||||||||||
Impact of cumulative effect of change in accounting principle |
(77 | ) | (77 | ) | (77 | ) | ||||||||||||||||||||||||||||||
Noncontrolling interest |
- | 29 | 29 | |||||||||||||||||||||||||||||||||
Other |
(1 | ) | 3 | 2 | 2 | |||||||||||||||||||||||||||||||
Balance at December 31, 2010 |
1,779 | 3,654 | 1,715 | 6,719 | 314 | (130 | ) | 14,051 | 29 | 14,080 | ||||||||||||||||||||||||||
Net income |
1,297 | 1,297 | 1 | 1,298 | ||||||||||||||||||||||||||||||||
Other comprehensive income |
156 | 156 | 156 | |||||||||||||||||||||||||||||||||
Cash dividends declared: |
||||||||||||||||||||||||||||||||||||
Common stock at $0.28 per share |
(257 | ) | (257 | ) | (257 | ) | ||||||||||||||||||||||||||||||
Preferred stock |
(50 | ) | (50 | ) | (50 | ) | ||||||||||||||||||||||||||||||
Issuance of common stock |
272 | 1,376 | 1,648 | 1,648 | ||||||||||||||||||||||||||||||||
Redemption of preferred shares, Series F |
(3,408 | ) | (3,408 | ) | (3,408 | ) | ||||||||||||||||||||||||||||||
Redemption of stock warrant |
(280 | ) | (280 | ) | (280 | ) | ||||||||||||||||||||||||||||||
Accretion of preferred dividends, Series F |
153 | (153 | ) | - | - | |||||||||||||||||||||||||||||||
Stock-based compensation expense |
52 | 52 | 52 | |||||||||||||||||||||||||||||||||
Stock-based awards issued or exercised, including treasury shares issued |
(15 | ) | 7 | (8 | ) | (8 | ) | |||||||||||||||||||||||||||||
Restricted stock grants |
(58 | ) | 58 | - | - | |||||||||||||||||||||||||||||||
Noncontrolling interests |
- | 21 | 21 | |||||||||||||||||||||||||||||||||
Other |
(1 | ) | 2 | (2 | ) | 1 | - | (1 | ) | (1 | ) | |||||||||||||||||||||||||
Balance at December 31, 2011 |
2,051 | 398 | 2,792 | 7,554 | 470 | (64 | ) | 13,201 | 50 | 13,251 | ||||||||||||||||||||||||||
Net income |
1,576 | 1,576 | (2 | ) | 1,574 | |||||||||||||||||||||||||||||||
Other comprehensive loss |
(95 | ) | (95 | ) | (95 | ) | ||||||||||||||||||||||||||||||
Cash dividends declared: |
||||||||||||||||||||||||||||||||||||
Common stock at $0.36 per share |
(325 | ) | (325 | ) | (325 | ) | ||||||||||||||||||||||||||||||
Preferred stock |
(35 | ) | (35 | ) | (35 | ) | ||||||||||||||||||||||||||||||
Shares acquired for treasury |
(23 | ) | (627 | ) | (650 | ) | (650 | ) | ||||||||||||||||||||||||||||
Stock-based compensation expense |
63 | 63 | 63 | |||||||||||||||||||||||||||||||||
Stock-based awards issued or exercised, including treasury shares issued |
(27 | ) | 7 | (20 | ) | (20 | ) | |||||||||||||||||||||||||||||
Restricted stock grants |
(47 | ) | 47 | - | - | |||||||||||||||||||||||||||||||
Other |
(2 | ) | 3 | 1 | 1 | |||||||||||||||||||||||||||||||
Balance at December 31, 2012 |
$ | 2,051 | 398 | 2,758 | 8,768 | 375 | (634 | ) | 13,716 | 48 | 13,764 |
See Notes to Consolidated Financial Statements.
86 |
Fifth Third Bancorp |
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31 ($ in millions) | 2012 | 2011 | 2010 | |||||||||
Operating Activities | ||||||||||||
Net income |
$ | 1,574 | 1,298 | 753 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||
Provision for loan and lease losses |
303 | 423 | 1,538 | |||||||||
Depreciation, amortization and accretion |
531 | 455 | 457 | |||||||||
Stock-based compensation expense |
69 | 59 | 64 | |||||||||
Provision for deferred income taxes |
271 | 437 | 176 | |||||||||
Realized securities gains |
(69 | ) | (58 | ) | (60 | ) | ||||||
Realized securities gains non-qualifying hedges on mortgage servicing rights |
(10 | ) | (24 | ) | (14 | ) | ||||||
Realized securities losses |
54 | 12 | 13 | |||||||||
Realized securities losses non-qualifying hedges on mortgage servicing rights |
7 | 15 | - | |||||||||
Provision for mortgage servicing rights |
103 | 242 | 36 | |||||||||
Net (gains) losses on sales of loans and fair value adjustments on loans held for sale |
(278 | ) | (145 | ) | 114 | |||||||
Bank premises and equipment impairment |
21 | - | - | |||||||||
Capitalized mortgage servicing rights |
(305 | ) | (236 | ) | (297 | ) | ||||||
Loss on extinguishment on TruPS |
26 | - | - | |||||||||
Loss on extinguishment on debt |
143 | - | - | |||||||||
Proceeds from sales of loans held for sale |
22,044 | 14,783 | 18,634 | |||||||||
Loans originated for sale, net of repayments |
(21,439 | ) | (15,199 | ) | (18,231 | ) | ||||||
Dividends representing return on equity method investments |
45 | 13 | 31 | |||||||||
Gain on Vantiv, Inc. IPO and sale of Vantiv, Inc. shares |
(272 | ) | - | - | ||||||||
Net change in: |
||||||||||||
Trading securities |
(28 | ) | 115 | 67 | ||||||||
Other assets |
4 | (67 | ) | 9 | ||||||||
Accrued taxes, interest and expenses |
1 | 79 | (63 | ) | ||||||||
Other liabilities |
(238 | ) | 164 | 78 | ||||||||
Net Cash Provided by Operating Activities |
2,557 | 2,366 | 3,305 | |||||||||
Investing Activities |
||||||||||||
Sales: |
||||||||||||
Available-for-sale securities |
2,521 | 2,471 | 2,578 | |||||||||
Loans |
275 | 371 | 538 | |||||||||
Disposal of bank premises and equipment |
13 | 35 | 10 | |||||||||
Repayments / maturities: |
||||||||||||
Available-for-sale securities |
4,100 | 3,502 | 4,620 | |||||||||
Held-to-maturity securities |
36 | 29 | 1 | |||||||||
Purchases: |
||||||||||||
Available-for-sale securities |
(6,813 | ) | (5,689 | ) | (5,218 | ) | ||||||
Held-to-maturity securities |
- | - | (1 | ) | ||||||||
Bank premises and equipment |
(362 | ) | (319 | ) | (224 | ) | ||||||
Restricted cash from the initial consolidation of variable interest entities |
- | - | 63 | |||||||||
Proceeds from sale and dividends representing return of equity method investments |
393 | 63 | 8 | |||||||||
Net change in: |
||||||||||||
Other short-term investments |
(640 | ) | (267 | ) | 1,861 | |||||||
Loans and leases |
(5,930 | ) | (5,422 | ) | (2,507 | ) | ||||||
Operating lease equipment |
(126 | ) | (59 | ) | (21 | ) | ||||||
Net Cash (Used in) Provided by Investing Activities |
(6,533 | ) | (5,285 | ) | 1,708 | |||||||
Financing Activities |
||||||||||||
Net change in: |
||||||||||||
Core deposits |
3,529 | 5,264 | 784 | |||||||||
Certificates - $100,000 and over, including other foreign office |
279 | (1,202 | ) | (3,429 | ) | |||||||
Federal funds purchased |
555 | 67 | 97 | |||||||||
Other short-term borrowings |
3,041 | 1,665 | 38 | |||||||||
Dividends paid on common shares |
(309 | ) | (192 | ) | (32 | ) | ||||||
Dividends paid on preferred shares |
(35 | ) | (50 | ) | (205 | ) | ||||||
Proceeds from issuance of long-term debt |
523 | 1,500 | 14 | |||||||||
Repayment of long-term debt |
(3,159 | ) | (1,607 | ) | (2,473 | ) | ||||||
Repurchases of treasury shares and related forward contracts |
(650 | ) | - | - | ||||||||
Issuance of common shares |
- | 1,648 | - | |||||||||
Redemption of preferred shares, Series F |
- | (3,408 | ) | - | ||||||||
Redemption of stock warrant |
- | (280 | ) | - | ||||||||
Capital contributions from noncontrolling interests |
- | 21 | 30 | |||||||||
Other |
(20 | ) | (3 | ) | 4 | |||||||
Net Cash Provided By (Used In) Financing Activities |
3,754 | 3,423 | (5,172 | ) | ||||||||
(Decrease) Increase in Cash and Due from Banks |
(222 | ) | 504 | (159 | ) | |||||||
Cash and Due from Banks at Beginning of Period |
2,663 | 2,159 | 2,318 | |||||||||
Cash and Due from Banks at End of Period |
$ | 2,441 | 2,663 | 2,159 |
See Notes to Consolidated Financial Statements. Note 2 contains cash payments related to interest and income taxes in addition to noncash investing and financing activities.
Fifth Third Bancorp |
87 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
88 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fifth Third Bancorp |
89 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
90 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fifth Third Bancorp |
91 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
92 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fifth Third Bancorp |
93 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
94 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments related to interest and income taxes, in addition to noncash investing and financing activities, are presented in the following table for the years ended December 31:
($ in millions) | 2012 | 2011 | 2010 | |||||||||
Cash payments: |
||||||||||||
Interest |
$ | 524 | 658 | 920 | ||||||||
Income taxes |
383 | 102 | 79 | |||||||||
Transfers: |
||||||||||||
Portfolio loans to held for sale loans |
62 | 143 | 650 | |||||||||
Held for sale loans to portfolio loans |
77 | 32 | 160 | |||||||||
Portfolio loans to OREO |
272 | 342 | 662 | |||||||||
Held for sale loans to OREO |
23 | 43 | 68 | |||||||||
Impact of change in accounting principle: |
||||||||||||
Decrease in available-for-sale securities, net |
| | 941 | |||||||||
Increase in portfolio loans |
| | 2,217 | |||||||||
Decrease in demand deposits |
| | 18 | |||||||||
Increase in other short-term borrowings |
| | 122 | |||||||||
Increase in long-term debt |
| | 1,344 |
3. RESTRICTIONS ON CASH AND DIVIDENDS
Fifth Third Bancorp |
95 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table provides the amortized cost, fair value and unrealized gains and losses for the major categories of the available-for-sale and held-to-maturity securities portfolios as of December 31:
2012 | 2011 | |||||||||||||||||||||||||||||||
($ in millions) | Amortized Cost |
Unrealized Gains |
Unrealized Losses |
Fair Value |
Amortized Cost |
Unrealized Gains |
Unrealized Losses |
Fair Value |
||||||||||||||||||||||||
Available-for-sale and other: |
||||||||||||||||||||||||||||||||
U.S. Treasury and government agencies |
$ | 41 | | | 41 | 171 | | | 171 | |||||||||||||||||||||||
U.S. Government sponsored agencies |
1,730 | 181 | | 1,911 | 1,782 | 180 | | 1,962 | ||||||||||||||||||||||||
Obligations of states and political subdivisions |
203 | 9 | | 212 | 96 | 5 | | 101 | ||||||||||||||||||||||||
Agency mortgage-backed securities(a) |
8,403 | 345 | (18 | ) | 8,730 | 9,743 | 542 | (1 | ) | 10,284 | ||||||||||||||||||||||
Other bonds, notes and debentures |
3,161 | 119 | (3 | ) | 3,277 | 1,792 | 29 | (9 | ) | 1,812 | ||||||||||||||||||||||
Other securities(b) |
1,033 | 3 | - | 1,036 | 1,030 | 2 | | 1,032 | ||||||||||||||||||||||||
Total |
$ | 14,571 | 657 | (21 | ) | 15,207 | 14,614 | 758 | (10 | ) | 15,362 | |||||||||||||||||||||
Held-to-maturity: |
||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions |
$ | 282 | | | 282 | 320 | | | 320 | |||||||||||||||||||||||
Other debt securities |
2 | | | 2 | 2 | | | 2 | ||||||||||||||||||||||||
Total |
$ | 284 | | | 284 | 322 | | | 322 |
(a) | Includes interest-only mortgage backed securities of $408 and $110 as of December 31, 2012 and 2011, respectively, recorded at fair value with fair value changes recorded in securities gains, net and securities gains, net non-qualifying hedges on mortgage servicing rights in the Consolidated Statements of Income. |
(b) | Other securities consist of FHLB and FRB restricted stock holdings of $497 and $347, respectively, at December 31, 2012 and, $497 and $345, respectively, at December 31, 2011, that are carried at cost, and certain mutual fund and equity security holdings. |
96 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents realized gains and losses that were recognized in income from available-for-sale securities for the years ended December 31:
($ in millions) | 2012 | 2011 | 2010 | |||||||||
Realized gains |
$ | 75 | 75 | 69 | ||||||||
Realized losses |
(2 | ) | | (10 | ) | |||||||
OTTI |
(58 | ) | (19 | ) | (3 | ) | ||||||
Net realized gains |
$ | 15 | 56 | 56 |
The expected maturity distribution of the Bancorps agency mortgage-backed securities and the contractual maturity distribution of the Bancorps available-for-sale and other and held-to-maturity securities as of December 31, 2012 are shown in the following table:
Available-for-Sale & Other |
Held-to-Maturity | |||||||||||||||
($ in millions) | Amortized Cost |
Fair Value |
Amortized Cost |
Fair Value |
||||||||||||
Debt securities:(a) |
||||||||||||||||
Under 1 year |
$ | 555 | 566 | 73 | 73 | |||||||||||
1-5 years |
8,865 | 9,356 | 185 | 185 | ||||||||||||
5-10 years |
2,223 | 2,280 | 20 | 20 | ||||||||||||
Over 10 years |
1,895 | 1,969 | 6 | 6 | ||||||||||||
Other securities |
1,033 | 1,036 | | | ||||||||||||
Total |
$ | 14,571 | 15,207 | 284 | 284 |
(a) | Actual maturities may differ from contractual maturities when there exists a right to call or prepay obligations with or without call or prepayment penalties. |
The following table provides the fair value and gross unrealized losses on available-for-sale securities in an unrealized loss position, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position as of December 31:
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
($ in millions) | Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
||||||||||||||||||
2012 |
||||||||||||||||||||||||
U.S. Treasury and government agencies |
$ | | | | | | | |||||||||||||||||
U.S. Government sponsored agencies |
| | | | | | ||||||||||||||||||
Obligations of states and political subdivisions |
| | | | | | ||||||||||||||||||
Agency mortgage-backed securities |
1,784 | (18 | ) | | | 1,784 | (18 | ) | ||||||||||||||||
Other bonds, notes and debentures |
454 | (3 | ) | | | 454 | (3 | ) | ||||||||||||||||
Other securities |
1 | | | | 1 | | ||||||||||||||||||
Total |
$ | 2,239 | (21 | ) | | | 2,239 | (21 | ) | |||||||||||||||
2011 |
||||||||||||||||||||||||
U.S. Treasury and government agencies |
$ | 70 | | 1 | | 71 | | |||||||||||||||||
U.S. Government sponsored agencies |
| | | | | | ||||||||||||||||||
Obligations of states and political subdivisions |
| | 2 | | 2 | | ||||||||||||||||||
Agency mortgage-backed securities |
34 | (1 | ) | 6 | | 40 | (1 | ) | ||||||||||||||||
Other bonds, notes and debentures |
523 | (4 | ) | 38 | (5 | ) | 561 | (9 | ) | |||||||||||||||
Other securities |
6 | | | | 6 | | ||||||||||||||||||
Total |
$ | 633 | (5 | ) | 47 | (5 | ) | 680 | (10 | ) |
Fifth Third Bancorp |
97 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table provides a summary of the total loans and leases classified by primary purpose as of December 31:
($ in millions) | 2012 | 2011 | ||||||
Loans and leases held for sale: |
||||||||
Commercial and industrial loans |
$ | 39 | 45 | |||||
Commercial mortgage loans |
13 | 76 | ||||||
Commercial construction loans |
9 | 17 | ||||||
Residential mortgage loans |
2,856 | 2,802 | ||||||
Other consumer loans and leases |
22 | 14 | ||||||
Total loans and leases held for sale |
$ | 2,939 | 2,954 | |||||
Portfolio loans and leases: |
||||||||
Commercial and industrial loans |
$ | 36,038 | 30,783 | |||||
Commercial mortgage loans |
9,103 | 10,138 | ||||||
Commercial construction loans |
698 | 1,020 | ||||||
Commercial leases |
3,549 | 3,531 | ||||||
Total commercial loans and leases |
49,388 | 45,472 | ||||||
Residential mortgage loans |
12,017 | 10,672 | ||||||
Home equity |
10,018 | 10,719 | ||||||
Automobile loans |
11,972 | 11,827 | ||||||
Credit card |
2,097 | 1,978 | ||||||
Other consumer loans and leases |
290 | 350 | ||||||
Total consumer loans and leases |
36,394 | 35,546 | ||||||
Total portfolio loans and leases |
$ | 85,782 | 81,018 |
The following table presents a summary of the total loans and leases owned by the Bancorp as of and for the years ended December 31:
Balance | 90 Days Past Due and Still Accruing |
Net Charge-Offs |
||||||||||||||||||||||
($ in millions) | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||
Commercial and industrial loans |
$ | 36,077 | 30,828 | $ | 1 | 4 | $ | 165 | 276 | |||||||||||||||
Commercial mortgage loans |
9,116 | 10,214 | 22 | 3 | 99 | 195 | ||||||||||||||||||
Commercial construction loans |
707 | 1,037 | 1 | 1 | 25 | 85 | ||||||||||||||||||
Commercial leases |
3,549 | 3,531 | | | 8 | (2 | ) | |||||||||||||||||
Residential mortgage loans |
14,873 | 13,474 | 75 | 79 | 122 | 173 | ||||||||||||||||||
Home equity loans |
10,018 | 10,719 | 58 | 74 | 157 | 220 | ||||||||||||||||||
Automobile loans |
11,972 | 11,827 | 8 | 9 | 31 | 53 | ||||||||||||||||||
Credit card |
2,097 | 1,978 | 30 | 30 | 74 | 98 | ||||||||||||||||||
Other consumer loans and leases |
312 | 364 | | | 23 | 74 | ||||||||||||||||||
Total loans and leases |
$ | 88,721 | 83,972 | $ | 195 | 200 | $ | 704 | 1,172 | |||||||||||||||
Less: Loans held for sale |
$ | 2,939 | 2,954 | |||||||||||||||||||||
Total portfolio loans and leases |
$ | 85,782 | 81,018 |
98 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of the investment in lease financing at December 31:
($ in millions) | 2012 | 2011 | ||||||
Rentals receivable, net of principal and interest on nonrecourse debt |
$ | 3,543 | 3,757 | |||||
Estimated residual value of leased assets |
760 | 772 | ||||||
Initial direct cost, net of amortization |
16 | 16 | ||||||
Gross investment in lease financing |
4,319 | 4,545 | ||||||
Unearned income |
(758 | ) | (942 | ) | ||||
Net investment in lease financing(a) |
$ | 3,561 | 3,603 |
(a) | The accumulated allowance for uncollectible minimum lease payments was $67 million and $79 million at December 31, 2012 and 2011, respectively. |
6. CREDIT QUALITY AND THE ALLOWANCE FOR LOAN AND LEASE LOSSES
The Bancorp disaggregates ALLL balances and transactions in the ALLL by portfolio segment. Credit quality related disclosures for loans and leases are further disaggregated by class.
Allowance for Loan and Lease Losses
The following tables summarize transactions in the ALLL by portfolio segment:
For the year ended December 31, 2012 ($ in millions) |
Commercial | Residential Mortgage |
Consumer | Unallocated | Total | |||||||||||||||
Transactions in the ALLL: |
||||||||||||||||||||
Balance at January 1 |
$ | 1,527 | 227 | 365 | 136 | 2,255 | ||||||||||||||
Losses charged off |
(358 | ) | (129 | ) | (350 | ) | | (837 | ) | |||||||||||
Recoveries of losses previously charged off |
61 | 7 | 65 | | 133 | |||||||||||||||
Provision for loan and lease losses |
6 | 124 | 198 | (25 | ) | 303 | ||||||||||||||
Balance at December 31 |
$ | 1,236 | 229 | 278 | 111 | 1,854 |
For the year ended December 31, 2011 ($ in millions) |
Commercial | Residential Mortgage |
Consumer | Unallocated | Total | |||||||||||||||
Transactions in the ALLL: |
||||||||||||||||||||
Balance at January 1 |
$ | 1,989 | 310 | 555 | 150 | 3,004 | ||||||||||||||
Losses charged off |
(615 | ) | (180 | ) | (519 | ) | | (1,314 | ) | |||||||||||
Recoveries of losses previously charged off |
61 | 7 | 74 | | 142 | |||||||||||||||
Provision for loan and lease losses |
92 | 90 | 255 | (14 | ) | 423 | ||||||||||||||
Balance at December 31 |
$ | 1,527 | 227 | 365 | 136 | 2,255 |
For the year ended December 31, 2010 ($ in millions) |
Commercial | Residential Mortgage |
Consumer | Unallocated | Total | |||||||||||||||
Transactions in the ALLL: |
||||||||||||||||||||
Balance at January 1 |
$ | 2,517 | 375 | 664 | 193 | 3,749 | ||||||||||||||
Losses charged off |
(1,444 | ) | (441 | ) | (600 | ) | | (2,485 | ) | |||||||||||
Recoveries of losses previously charged off |
80 | 2 | 75 | | 157 | |||||||||||||||
Provision for loan and lease losses |
836 | 374 | 371 | (43 | ) | 1,538 | ||||||||||||||
Impact of change in accounting principle |
| | 45 | | 45 | |||||||||||||||
Balance at December 31 |
$ | 1,989 | 310 | 555 | 150 | 3,004 |
Fifth Third Bancorp |
99 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following tables provide a summary of the ALLL and related loans and leases classified by portfolio segment:
As of December 31, 2012 ($ in millions) | Commercial | Residential Mortgage |
Consumer | Unallocated | Total | |||||||||||||||
ALLL:(a) |
||||||||||||||||||||
Individually evaluated for impairment |
$ | 95 | 137 | 62 | | 294 | ||||||||||||||
Collectively evaluated for impairment |
1,140 | 91 | 216 | | 1,447 | |||||||||||||||
Loans acquired with deteriorated credit quality |
1 | 1 | | | 2 | |||||||||||||||
Unallocated |
| | | 111 | 111 | |||||||||||||||
Total ALLL |
$ | 1,236 | 229 | 278 | 111 | 1,854 | ||||||||||||||
Loans and leases:(b) |
||||||||||||||||||||
Individually evaluated for impairment |
$ | 980 | 1,298 | 544 | | 2,822 | ||||||||||||||
Collectively evaluated for impairment |
48,407 | 10,637 | 23,833 | | 82,877 | |||||||||||||||
Loans acquired with deteriorated credit quality |
1 | 6 | | | 7 | |||||||||||||||
Total portfolio loans and leases |
$ | 49,388 | 11,941 | 24,377 | | 85,706 |
(a) | Includes $11 related to leveraged leases. |
(b) | Excludes $76 of residential mortgage loans measured at fair value, and includes $862 of leveraged leases, net of unearned income. |
As of December 31, 2011 ($ in millions) | Commercial | Residential Mortgage |
Consumer | Unallocated | Total | |||||||||||||||
ALLL:(a) |
||||||||||||||||||||
Individually evaluated for impairment |
$ | 155 | 130 | 65 | | 350 | ||||||||||||||
Collectively evaluated for impairment |
1,371 | 96 | 300 | | 1,767 | |||||||||||||||
Loans acquired with deteriorated credit quality |
1 | 1 | | | 2 | |||||||||||||||
Unallocated |
| | | 136 | 136 | |||||||||||||||
Total ALLL |
$ | 1,527 | 227 | 365 | 136 | 2,255 | ||||||||||||||
Loans and leases:(b) |
||||||||||||||||||||
Individually evaluated for impairment |
$ | 1,170 | 1,258 | 574 | | 3,002 | ||||||||||||||
Collectively evaluated for impairment |
44,299 | 9,341 | 24,300 | | 77,940 | |||||||||||||||
Loans acquired with deteriorated credit quality |
3 | 8 | | | 11 | |||||||||||||||
Total portfolio loans and leases |
$ | 45,472 | 10,607 | 24,874 | | 80,953 |
(a) | Includes $14 related to leveraged leases. |
(b) | Excludes $65 of residential mortgage loans measured at fair value, and includes $1,022 of leveraged leases, net of unearned income. |
100 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CREDIT RISK PROFILE
Commercial Portfolio Segment
The following table summarizes the credit risk profile of the Bancorps commercial portfolio segment, by class:
As of December 31, 2012 ($ in millions) | Pass | Special Mention |
Substandard | Doubtful | Total | |||||||||||||||
Commercial and industrial loans |
$ | 33,521 | 1,113 | 1,379 | 25 | 36,038 | ||||||||||||||
Commercial mortgage loans owner-occupied |
3,934 | 338 | 603 | 1 | 4,876 | |||||||||||||||
Commercial mortgage loans nonowner-occupied |
2,958 | 449 | 815 | 5 | 4,227 | |||||||||||||||
Commercial construction loans |
444 | 59 | 195 | | 698 | |||||||||||||||
Commercial leases |
3,483 | 48 | 18 | | 3,549 | |||||||||||||||
Total |
$ | 44,340 | 2,007 | 3,010 | 31 | 49,388 |
As of December 31, 2011 ($ in millions) | Pass | Special Mention |
Substandard | Doubtful | Total | |||||||||||||||
Commercial and industrial loans |
$ | 27,199 | 1,641 | 1,831 | 112 | 30,783 | ||||||||||||||
Commercial mortgage loans owner-occupied |
3,893 | 567 | 778 | 28 | 5,266 | |||||||||||||||
Commercial mortgage loans nonowner-occupied |
3,328 | 521 | 984 | 39 | 4,872 | |||||||||||||||
Commercial construction loans |
343 | 235 | 413 | 29 | 1,020 | |||||||||||||||
Commercial leases |
3,434 | 52 | 44 | 1 | 3,531 | |||||||||||||||
Total |
$ | 38,197 | 3,016 | 4,050 | 209 | 45,472 |
Fifth Third Bancorp |
101 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents a summary of the Bancorps residential mortgage and consumer portfolio segments disaggregated into performing versus nonperforming status as of December 31:
2012 | 2011 | |||||||||||||||
($ in millions) | Performing | Nonperforming | Performing | Nonperforming | ||||||||||||
Residential mortgage loans(a) |
$ | 11,704 | 237 | 10,332 | 275 | |||||||||||
Home equity |
9,965 | 53 | 10,665 | 54 | ||||||||||||
Automobile loans |
11,970 | 2 | 11,825 | 2 | ||||||||||||
Credit card |
2,058 | 39 | 1,930 | 48 | ||||||||||||
Other consumer loans and leases |
289 | 1 | 349 | 1 | ||||||||||||
Total |
$ | 35,986 | 332 | 35,101 | 380 |
(a) | Excludes $76 and $65 of loans measured at fair value at December 31, 2012 and 2011, respectively. |
Age Analysis of Past Due Loans and Leases
The following tables summarize the Bancorps recorded investment in portfolio loans and leases by age and class:
Past Due | ||||||||||||||||||||||||
As of December 31, 2012 ($ in millions) |
Current Loans and Leases(c) |
30-89 Days(c) |
90 Days and Greater(c) |
Total Past Due |
Total Loans and Leases |
90 Days Past Due and Still Accruing |
||||||||||||||||||
Commercial: |
||||||||||||||||||||||||
Commercial and industrial loans |
$ | 35,826 | 46 | 166 | 212 | 36,038 | 1 | |||||||||||||||||
Commercial mortgage owner-occupied loans |
4,752 | 29 | 95 | 124 | 4,876 | 22 | ||||||||||||||||||
Commercial mortgage nonowner-occupied loans |
4,094 | 21 | 112 | 133 | 4,227 | - | ||||||||||||||||||
Commercial construction loans |
622 | - | 76 | 76 | 698 | 1 | ||||||||||||||||||
Commercial leases |
3,546 | 2 | 1 | 3 | 3,549 | - | ||||||||||||||||||
Residential mortgage loans(a)(b) |
11,547 | 87 | 307 | 394 | 11,941 | 75 | ||||||||||||||||||
Home equity |
9,782 | 126 | 110 | 236 | 10,018 | 58 | ||||||||||||||||||
Automobile loans |
11,900 | 62 | 10 | 72 | 11,972 | 8 | ||||||||||||||||||
Credit card |
2,025 | 38 | 34 | 72 | 2,097 | 30 | ||||||||||||||||||
Other consumer loans and leases |
287 | 2 | 1 | 3 | 290 | - | ||||||||||||||||||
Total portfolio loans and leases(a)(d) |
$ | 84,381 | 413 | 912 | 1,325 | 85,706 | 195 |
(a) | Excludes $76 of loans measured at fair value. |
(b) | Information for current residential mortgage loans includes advances made pursuant to servicing agreements for GNMA mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. As of December 31, 2012, $80 of these loans were 30-89 days past due and $414 were 90 days or more past due. The Bancorp recognized $2 million of losses for the year ended December 31, 2012 due to claim denials and curtailments associated with these advances. |
(c) | Includes accrual and nonaccrual loans and leases. |
(d) | Includes an immaterial amount of government insured commercial loans 30-89 days and 90 days past due and accruing whose repayments are insured by the Small Business Administration at December 31, 2012. |
Past Due | ||||||||||||||||||||||||
As of December 31, 2011 ($ in millions) |
Current Loans and Leases(c) |
30-89 Days(c) |
90 Days and Greater(c) |
Total Past Due |
Total Loans and Leases |
90 Days Past Due and Still Accruing |
||||||||||||||||||
Commercial: |
||||||||||||||||||||||||
Commercial and industrial loans |
$ | 30,493 | 49 | 241 | 290 | 30,783 | 4 | |||||||||||||||||
Commercial mortgage owner-occupied loans |
5,088 | 62 | 116 | 178 | 5,266 | 1 | ||||||||||||||||||
Commercial mortgage nonowner-occupied loans |
4,649 | 41 | 182 | 223 | 4,872 | 2 | ||||||||||||||||||
Commercial construction loans |
887 | 12 | 121 | 133 | 1,020 | 1 | ||||||||||||||||||
Commercial leases |
3,521 | 4 | 6 | 10 | 3,531 | - | ||||||||||||||||||
Residential mortgage loans(a)(b) |
10,149 | 110 | 348 | 458 | 10,607 | 79 | ||||||||||||||||||
Consumer: |
||||||||||||||||||||||||
Home equity |
10,455 | 136 | 128 | 264 | 10,719 | 74 | ||||||||||||||||||
Automobile loans |
11,744 | 71 | 12 | 83 | 11,827 | 9 | ||||||||||||||||||
Credit card |
1,873 | 33 | 72 | 105 | 1,978 | 30 | ||||||||||||||||||
Other consumer loans and leases |
348 | 1 | 1 | 2 | 350 | - | ||||||||||||||||||
Total portfolio loans and leases(a)(d) |
$ | 79,207 | 519 | 1,227 | 1,746 | 80,953 | 200 |
(a) | Excludes $65 of loans measured at fair value. |
(b) | Information for current residential mortgage loans includes advances made pursuant to servicing agreements for GNMA mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. As of December 31, 2011, $45 of these loans were 30-89 days past due and $309 were 90 days or more past due. The Bancorp recognized an immaterial amount of losses for the year ended December 31, 2011 due to claim denials and curtailments associated with these advances. |
(c) | Includes accrual and nonaccrual loans and leases. |
(d) | Includes an immaterial amount of government insured commercial loans 30-89 and 90 days past due and accruing whose repayments are insured by the Small Business Administration at December 31, 2011. |
102 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the Bancorps impaired loans and leases (by class) that were subject to individual review as of December 31, 2012:
As of December 31, 2012 ($ in millions) |
Unpaid Principal Balance |
Recorded Investment |
Allowance | |||||||||
With a related allowance recorded: |
||||||||||||
Commercial: |
||||||||||||
Commercial and industrial loans |
$ | 263 | 194 | 65 | ||||||||
Commercial mortgage owner-occupied loans |
54 | 43 | 5 | |||||||||
Commercial mortgage nonowner-occupied loans |
215 | 160 | 16 | |||||||||
Commercial construction loans |
48 | 37 | 5 | |||||||||
Commercial leases |
8 | 8 | 5 | |||||||||
Restructured residential mortgage loans |
1,067 | 1,023 | 137 | |||||||||
Restructured consumer: |
||||||||||||
Home equity |
400 | 396 | 46 | |||||||||
Automobile loans |
31 | 30 | 4 | |||||||||
Credit card |
74 | 74 | 12 | |||||||||
Other consumer loans and leases |
2 | 2 | - | |||||||||
Total impaired loans with a related allowance |
$ | 2,162 | 1,967 | 295 | ||||||||
With no related allowance recorded: |
||||||||||||
Commercial: |
||||||||||||
Commercial and industrial loans |
$ | 207 | 169 | - | ||||||||
Commercial mortgage owner-occupied loans |
107 | 99 | - | |||||||||
Commercial mortgage nonowner-occupied loans |
209 | 199 | - | |||||||||
Commercial construction loans |
109 | 67 | - | |||||||||
Commercial leases |
5 | 5 | - | |||||||||
Restructured residential mortgage loans |
326 | 275 | - | |||||||||
Restructured consumer: |
||||||||||||
Home equity |
40 | 39 | - | |||||||||
Automobile loans |
3 | 3 | - | |||||||||
Total impaired loans with no related allowance |
1,006 | 856 | - | |||||||||
Total impaired loans |
$ | 3,168 | 2,823 | (a) | 295 |
(a) | Includes $431, $1,175 and $480, respectively, of commercial, residential mortgage and consumer TDRs on accrual status; $177, $123 and $64, respectively, of commercial, residential mortgage and consumer TDRs on nonaccrual status. |
Fifth Third Bancorp |
103 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the Bancorps impaired loans and leases (by class) that were subject to individual review as of December 31, 2011:
As of December 31, 2011 ($ in millions) |
Unpaid Principal Balance |
Recorded Investment |
Allowance | |||||||||
With a related allowance recorded: |
||||||||||||
Commercial: |
||||||||||||
Commercial and industrial loans |
$ | 330 | 246 | 102 | ||||||||
Commercial mortgage owner-occupied loans |
66 | 52 | 10 | |||||||||
Commercial mortgage nonowner-occupied loans |
203 | 147 | 24 | |||||||||
Commercial construction loans |
213 | 120 | 18 | |||||||||
Commercial leases |
11 | 10 | 2 | |||||||||
Restructured residential mortgage loans |
1,091 | 1,038 | 131 | |||||||||
Restructured consumer: |
||||||||||||
Home equity |
401 | 397 | 46 | |||||||||
Automobile loans |
37 | 37 | 5 | |||||||||
Credit card |
94 | 88 | 14 | |||||||||
Other consumer loans and leases |
2 | 2 | | |||||||||
Total impaired loans with a related allowance |
$ | 2,448 | 2,137 | 352 | ||||||||
With no related allowance recorded: |
||||||||||||
Commercial: |
||||||||||||
Commercial and industrial loans |
$ | 375 | 265 | | ||||||||
Commercial mortgage owner-occupied loans |
78 | 69 | | |||||||||
Commercial mortgage nonowner-occupied loans |
191 | 157 | | |||||||||
Commercial construction loans |
143 | 105 | | |||||||||
Commercial leases |
2 | 2 | | |||||||||
Restructured residential mortgage loans |
276 | 228 | | |||||||||
Restructured consumer: |
||||||||||||
Home equity |
48 | 46 | | |||||||||
Automobile loans |
4 | 4 | | |||||||||
Total impaired loans with no related allowance |
1,117 | 876 | | |||||||||
Total impaired loans |
$ | 3,565 | 3,013 | (a) | 352 |
(a) | Includes $390, $1,117 and $495, respectively, of commercial, residential mortgage and consumer TDRs on accrual status; $160, $141 and $79, respectively, of commercial, residential mortgage and consumer TDRs on nonaccrual status. |
The following table summarizes the Bancorps average impaired loans and leases and interest income by class for the year ended December 31:
2012 | 2011 | |||||||||||||||
($ in millions) | Average Recorded Investment |
Interest Income Recognized |
Average Recorded Investment |
Interest Income Recognized |
||||||||||||
Commercial: |
||||||||||||||||
Commercial and industrial loans |
$ | 448 | 4 | 532 | 5 | |||||||||||
Commercial mortgage owner-occupied loans |
156 | 4 | 117 | 2 | ||||||||||||
Commercial mortgage nonowner-occupied loans |
361 | 10 | 288 | 5 | ||||||||||||
Commercial construction loans |
160 | 2 | 198 | 3 | ||||||||||||
Commercial leases |
10 | | 16 | | ||||||||||||
Restructured residential mortgage loans |
1,276 | 47 | 1,217 | 41 | ||||||||||||
Restructured consumer: |
||||||||||||||||
Home equity |
439 | 24 | 444 | 23 | ||||||||||||
Automobile loans |
38 | 1 | 41 | 1 | ||||||||||||
Credit card |
80 | 4 | 94 | 3 | ||||||||||||
Other consumer loans and leases |
1 | | 21 | - | ||||||||||||
Total impaired loans |
$ | 2,969 | 96 | 2,968 | 83 |
During the year ended December 31, 2010, interest income of $74 million was recognized on impaired loans that had an average balance of $3.2 billion.
104 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nonperforming Assets
The following table summarizes the Bancorps nonperforming loans and leases, by class, as of December 31:
($ in millions) | 2012 | 2011 | ||||||
Commercial: |
||||||||
Commercial and industrial loans |
$ | 330 | 487 | |||||
Commercial mortgage owner-occupied loans |
125 | 170 | ||||||
Commercial mortgage nonowner-occupied loans |
157 | 251 | ||||||
Commercial construction loans |
76 | 138 | ||||||
Commercial leases |
9 | 12 | ||||||
Total commercial loans and leases |
697 | 1,058 | ||||||
Residential mortgage loans |
237 | 275 | ||||||
Consumer: |
||||||||
Home equity |
53 | 54 | ||||||
Automobile loans |
2 | 2 | ||||||
Credit card |
39 | 48 | ||||||
Other consumer loans and leases |
1 | 1 | ||||||
Total consumer loans and leases |
95 | 105 | ||||||
Total nonperforming loans and leases(a)(c) |
$ | 1,029 | 1,438 | |||||
OREO and other repossessed property(b) |
257 | 378 |
(a) | Excludes $29 and $138 of nonaccrual loans held for sale at December 31, 2012 and 2011, respectively. |
(b) | Excludes $72 and $64 of OREO related to government insured loans at December 31, 2012 and 2011, respectively. |
(c) | Includes $10 and $17 of nonaccrual government insured commercial loans whose repayments are insured by the Small Business Administration at December 31, 2012 and 2011, respectively, and $1 and $2 of restructured nonaccrual government insured commercial loans at December 31, 2012 and 2011, respectively. |
Troubled Debt Restructurings
Fifth Third Bancorp |
105 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table provides a summary of loans modified in a TDR by the Bancorp during the year ended December 31:
2012 ($ in millions)(a) | Number of loans modified in a TDR during the period(b) |
Recorded investment in a TDR during the period |
Increase (Decrease) to ALLL upon modification |
Charge-offs recognized upon modification |
||||||||||||
Commercial: |
||||||||||||||||
Commercial and industrial loans |
108 | $ | 84 | (7 | ) | 9 | ||||||||||
Commercial mortgage owner-occupied loans |
67 | 53 | (8 | ) | 2 | |||||||||||
Commercial mortgage nonowner-occupied loans |
67 | 91 | (7 | ) | - | |||||||||||
Commercial construction loans |
17 | 38 | (4 | ) | - | |||||||||||
Commercial leases |
8 | 7 | 1 | - | ||||||||||||
Residential mortgage loans |
1,758 | 340 | 35 | - | ||||||||||||
Consumer: |
||||||||||||||||
Home equity |
1,343 | 82 | 1 | - | ||||||||||||
Automobile loans |
1,289 | 23 | 2 | - | ||||||||||||
Credit card |
11,407 | 75 | 11 | - | ||||||||||||
Total portfolio loans and leases |
16,064 | $ | 793 | 24 | 11 |
2011 ($ in millions)(a) | Number of loans modified in a TDR during the period(b) |
Recorded investment in a TDR during the period |
Increase (Decrease) to ALLL upon modification |
Charge-offs recognized upon modification |
||||||||||||
Commercial: |
||||||||||||||||
Commercial and industrial loans |
52 | $ | 83 | (4 | ) | 3 | ||||||||||
Commercial mortgage owner-occupied loans |
32 | 55 | (6 | ) | 2 | |||||||||||
Commercial mortgage nonowner-occupied loans |
39 | 90 | (21 | ) | 3 | |||||||||||
Commercial construction loans |
26 | 59 | (9 | ) | 1 | |||||||||||
Commercial leases |
2 | - | - | - | ||||||||||||
Residential mortgage loans |
1,728 | 338 | 34 | - | ||||||||||||
Consumer: |
||||||||||||||||
Home equity |
1,317 | 80 | 1 | - | ||||||||||||
Automobile loans |
1,482 | 26 | 3 | - | ||||||||||||
Credit card |
12,234 | 79 | 11 | - | ||||||||||||
Total portfolio loans and leases |
16,912 | $ | 810 | 9 | 9 |
(a) | Excludes all loans and leases held for sale and loans acquired with deteriorated credit quality. |
(b) | Represents number of loans post-modification. |
106 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table provides a summary of subsequent defaults that occurred during the years ended December 31, 2012 and 2011 and within 12 months of the restructuring date:
December 31, 2012 ($ in millions)(a) | Number of Contracts |
Recorded Investment |
||||||
Commercial: |
||||||||
Commercial and industrial loans |
2 | $ | 3 | |||||
Commercial mortgage owner-occupied loans |
3 | 2 | ||||||
Commercial mortgage nonowner-occupied loans |
2 | 1 | ||||||
Commercial construction loans |
2 | 3 | ||||||
Residential mortgage loans |
332 | 57 | ||||||
Consumer: |
||||||||
Home equity |
101 | 7 | ||||||
Automobile loans |
42 | | ||||||
Credit card |
28 | | ||||||
Total portfolio loans and leases |
512 | $ | 73 |
December 31, 2011 ($ in millions)(a) | Number of Contracts |
Recorded Investment |
||||||
Commercial: |
||||||||
Commercial and industrial loans |
8 | $ | 4 | |||||
Commercial mortgage owner-occupied loans |
4 | 5 | ||||||
Commercial mortgage nonowner-occupied loans |
4 | 3 | ||||||
Commercial construction loans |
3 | 4 | ||||||
Residential mortgage loans |
337 | 55 | ||||||
Consumer: |
||||||||
Home equity |
206 | 13 | ||||||
Automobile loans |
28 | 1 | ||||||
Credit card |
67 | 1 | ||||||
Total portfolio loans and leases |
657 | $ | 86 |
(a) | Excludes all loans and leases held for sale and loans acquired with deteriorated credit quality. |
Fifth Third Bancorp |
107 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment at December 31:
($ in millions) | Estimated Useful Life |
2012 | 2011 | |||||||||
Land and improvements |
$ | 841 | 834 | |||||||||
Buildings |
5 to 50 yrs. | 1,692 | 1,623 | |||||||||
Equipment |
2 to 20 yrs. | 1,460 | 1,318 | |||||||||
Leasehold improvements |
3 to 40 yrs. | 386 | 394 | |||||||||
Construction in progress |
141 | 140 | ||||||||||
Accumulated depreciation and amortization |
(1,978 | ) | (1,862 | ) | ||||||||
Total |
$ | 2,542 | 2,447 |
The following table provides the annual future minimum payments under capital leases and noncancelable operating leases at December 31, 2012:
($ in millions) | Operating Leases |
Capital Leases |
||||||
Year ended December 31, |
||||||||
2013 |
$ | 89 | 7 | |||||
2014 |
85 | 7 | ||||||
2015 |
81 | 6 | ||||||
2016 |
74 | 3 | ||||||
2017 |
66 | - | ||||||
Thereafter |
374 | 1 | ||||||
Total minimum lease payments |
$ | 769 | 24 | |||||
Less: Amounts representing interest |
- | 3 | ||||||
Present value of net minimum lease payments |
- | 21 |
Changes in the net carrying amount of goodwill, by reporting unit, for the years ended December 31, 2012 and 2011 were as follows:
($ in millions) | Commercial Banking |
Branch Banking |
Consumer Lending |
Investment Advisors |
Total | |||||||||||||||
Net carrying value as of December 31, 2010 |
$ | 613 | 1,656 | - | 148 | 2,417 | ||||||||||||||
Acquisition activity |
- | - | - | - | - | |||||||||||||||
Net carrying value as of December 31, 2011 |
$ | 613 | 1,656 | - | 148 | 2,417 | ||||||||||||||
Acquisition activity |
- | (1 | ) | - | - | (1 | ) | |||||||||||||
Net carrying value as of December 31, 2012 |
$ | 613 | 1,655 | - | 148 | 2,416 |
108 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The details of the Bancorps intangible assets are shown in the following table:
($ in millions) | Gross Carrying Amount |
Accumulated Amortization |
Valuation Allowance |
Net Carrying Amount |
||||||||||||
As of December 31, 2012 |
||||||||||||||||
Mortgage servicing rights |
$ | 2,825 | (1,467 | ) | (661 | ) | 697 | |||||||||
Core deposit intangibles |
180 | (160 | ) | - | 20 | |||||||||||
Other |
44 | (37 | ) | - | 7 | |||||||||||
Total intangible assets |
$ | 3,049 | (1,664 | ) | (661 | ) | 724 | |||||||||
As of December 31, 2011 |
||||||||||||||||
Mortgage servicing rights |
$ | 2,520 | (1,281 | ) | (558 | ) | 681 | |||||||||
Core deposit intangibles |
439 | (407 | ) | - | 32 | |||||||||||
Other |
44 | (36 | ) | - | 8 | |||||||||||
Total intangible assets |
$ | 3,003 | (1,724 | ) | (558 | ) | 721 |
Estimated amortization expense for the years ending December 31, 2013 through 2017 is as follows:
($ in millions) | Mortgage Servicing Rights |
Other Intangible Assets |
Total | |||||||||
2013 |
$ | 284 | 8 | 292 | ||||||||
2014 |
220 | 4 | 224 | |||||||||
2015 |
173 | 2 | 175 | |||||||||
2016 |
137 | 2 | 139 | |||||||||
2017 |
109 | 2 | 111 |
Fifth Third Bancorp |
109 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. VARIABLE INTEREST ENTITIES
Consolidated VIEs
The following table provides a summary of the classifications of consolidated VIE assets, liabilities and noncontrolling interests included in the Bancorps Consolidated Balance Sheets as of:
December 31, 2012 ($ in millions) | Home Equity Securitization |
Automobile Loan Securitizations |
CDC Investments |
Total | ||||||||||||
Assets: |
||||||||||||||||
Cash and due from banks |
$ | - | - | - | - | |||||||||||
Other short-term investments |
- | - | - | - | ||||||||||||
Commercial mortgage loans |
- | - | 50 | 50 | ||||||||||||
Home equity |
- | - | - | - | ||||||||||||
Automobile loans |
- | - | - | - | ||||||||||||
ALLL |
- | - | (5 | ) | (5 | ) | ||||||||||
Other assets |
- | - | 3 | 3 | ||||||||||||
Total assets |
- | - | 48 | 48 | ||||||||||||
Liabilities: |
||||||||||||||||
Other liabilities |
$ | - | - | - | - | |||||||||||
Long-term debt |
- | - | - | - | ||||||||||||
Total liabilities |
$ | - | - | - | - | |||||||||||
Noncontrolling interests |
48 | 48 |
December 31, 2011 ($ in millions) | Home Equity Securitization |
Automobile Loan Securitizations |
CDC Investments |
Total | ||||||||||||
Assets: |
||||||||||||||||
Cash and due from banks |
$ | 5 | 25 | - | 30 | |||||||||||
Other short-term investments |
- | 7 | - | 7 | ||||||||||||
Commercial mortgage loans |
- | - | 50 | 50 | ||||||||||||
Home equity |
223 | - | - | 223 | ||||||||||||
Automobile loans |
- | 259 | - | 259 | ||||||||||||
ALLL |
(5 | ) | (3 | ) | (2 | ) | (10 | ) | ||||||||
Other assets |
1 | 1 | 2 | 4 | ||||||||||||
Total assets |
224 | 289 | 50 | 563 | ||||||||||||
Liabilities: |
||||||||||||||||
Other liabilities |
$ | - | 4 | - | 4 | |||||||||||
Long-term debt |
22 | 169 | - | 191 | ||||||||||||
Total liabilities |
$ | 22 | 173 | - | 195 | |||||||||||
Noncontrolling interest |
50 | 50 |
110 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Non-consolidated VIEs
The following tables provide a summary of assets and liabilities carried on the Bancorps Consolidated Balance Sheets related to non-consolidated VIEs for which the Bancorp holds a variable interest, but is not the primary beneficiary of the VIE, as well as the Bancorps maximum exposure to losses associated with its interests in the entities:
As of December 31, 2012 ($ in millions) | Total Assets |
Total Liabilities |
Maximum Exposure |
|||||||||
CDC investments |
$ | 1,442 | 394 | 1,442 | ||||||||
Private equity investments |
189 | - | 310 | |||||||||
Loans provided to VIEs |
1,622 | - | 2,465 | |||||||||
Restructured loans |
2 | - | 2 |
As of December 31, 2011 ($ in millions) | Total Assets |
Total Liabilities |
Maximum Exposure |
|||||||||
CDC investments |
$ | 1,243 | 269 | 1,243 | ||||||||
Private equity investments |
161 | 3 | 327 | |||||||||
Money market funds |
53 | - | 62 | |||||||||
Loans provided to VIEs |
1,370 | - | 2,203 | |||||||||
Restructured loans |
10 | - | 12 |
Fifth Third Bancorp |
111 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
112 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. SALES OF RESIDENTIAL MORTGAGE RECEIVABLES AND MORTGAGE SERVICING RIGHTS
Information related to residential mortgage loan sales and the Bancorps mortgage banking activity, which is included in mortgage banking net revenue in the Consolidated Statements of Income, for the years ended December 31 is as follows:
($ in millions) | 2012 | 2011 | 2010 | |||||||||
Residential mortgage loan sales |
$ | 21,574 | 14,733 | 17,861 | ||||||||
Origination fees and gains on loan sales |
821 | 396 | 490 | |||||||||
Servicing fees |
250 | 234 | 221 |
Servicing Assets
The following table presents changes in the servicing assets related to residential mortgage loans for the years ended December 31:
($ in millions) | 2012 | 2011 | ||||||
Carrying amount before valuation allowance as of the beginning of the period |
$ | 1,239 | 1,138 | |||||
Servicing obligations that result from the transfer of residential mortgage loans |
305 | 236 | ||||||
Amortization |
(186 | ) | (135 | ) | ||||
Carrying amount before valuation allowance |
1,358 | 1,239 | ||||||
Valuation allowance for servicing assets: |
||||||||
Beginning balance |
(558 | ) | (316 | ) | ||||
Servicing impairment |
(103 | ) | (242 | ) | ||||
Ending balance |
(661 | ) | (558 | ) | ||||
Carrying amount as of the end of the period |
$ | 697 | 681 |
The following table displays the beginning and ending fair value for the years ended December 31:
($ in millions) | 2012 | 2011 | ||||||
Fixed rate residential mortgage loans: |
||||||||
Beginning balance |
$ | 649 | 791 | |||||
Ending balance |
664 | 649 | ||||||
Adjustable rate residential mortgage loans: |
||||||||
Beginning balance |
32 | 31 | ||||||
Ending balance |
33 | 32 |
The following table presents activity related to valuations of the MSR portfolio and the impact of the non-qualifying hedging strategy, which is included in the Consolidated Statements of Income for the years ended December 31:
($ in millions) | 2012 | 2011 | 2010 | |||||||||
Securities gains, netnon-qualifying hedges on MSRs |
$ | 3 | 9 | 14 | ||||||||
Changes in fair value and settlement of free-standing derivatives purchased to economically hedge the MSR portfolio (Mortgage banking net revenue) |
63 | 344 | 109 | |||||||||
Provision for MSR impairment (Mortgage banking net revenue) |
(103 | ) | (242 | ) | (36 | ) |
Fifth Third Bancorp |
113 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2012 and 2011, the key economic assumptions used in measuring the MSRs that continued to be held by the Bancorp at the date of sale or securitization resulting from transactions completed during the years ended December 31 were as follows:
2012 | 2011 | |||||||||||||||||||||||||||||||||
Rate | Weighted- Average Life (in years) |
Prepayment Speed (annual) |
Discount Rate (annual) |
Weighted- Average Default rate |
Weighted- Average Life (in years) |
Prepayment Speed (annual) |
Discount Rate (annual) |
Weighted- Average Default rate |
||||||||||||||||||||||||||
Residential mortgage loans: |
||||||||||||||||||||||||||||||||||
Servicing assets |
Fixed | 6.9 | 9.6 | % | 10.4 | % | N/A | 7.2 | 8.8 | % | 10.5 | % | N/A | |||||||||||||||||||||
Servicing assets |
Adjustable | 3.8 | 22.0 | 11.4 | N/A | 3.7 | 22.8 | 11.4 | N/A |
At December 31, 2012, the sensitivity of the current fair value of residual cash flows to immediate 10%, 20% and 50% adverse changes in prepayment speed assumptions and immediate 10% and 20% adverse changes in other assumptions are as follows:
Fair |
Weighted- |
Prepayment Speed Assumption |
Residual Servicing Cash Flows |
|||||||||||||||||||||||||||||||||||||
Impact of Adverse Change on Fair Value |
Discount | Impact of Adverse Change on Fair Value |
||||||||||||||||||||||||||||||||||||||
($ in millions)(a) | Rate | Value | years) | Rate | 10% | 20% | 50% | Rate | 10% | 20% | ||||||||||||||||||||||||||||||
Residential mortgage loans: |
||||||||||||||||||||||||||||||||||||||||
Servicing assets |
Fixed | $ | 664 | 4.8 | 16.1 | % | $ | (37 | ) | (72 | ) | (159 | ) | 10.5 | % | $ | (22 | ) | (42 | ) | ||||||||||||||||||||
Servicing assets |
Adjustable | 33 | 3.1 | 26.9 | (2 | ) | (3 | ) | (6 | ) | 11.7 | (1 | ) | (2 | ) |
(a) | The impact of the weighted-average default rate on the current fair value of residual cash flows for all scenarios is immaterial. |
114 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. DERIVATIVE FINANCIAL INSTRUMENTS
Fifth Third Bancorp |
115 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following tables reflect the notional amounts and fair values for all derivative instruments included in the Consolidated Balance Sheets as of:
Fair Value | ||||||||||||
Notional | Derivative | Derivative | ||||||||||
December 31, 2012 ($ in millions) | Amount | Assets | Liabilities | |||||||||
Qualifying hedging instruments |
||||||||||||
Fair value hedges: |
||||||||||||
Interest rate swaps related to long-term debt |
$ | 2,880 | 558 | - | ||||||||
Total fair value hedges |
558 | - | ||||||||||
Cash flow hedges: |
||||||||||||
Interest rate floors related to C&I loans |
1,500 | 22 | - | |||||||||
Interest rate swaps related to C&I loans |
1,000 | 60 | - | |||||||||
Interest rate caps related to long-term debt |
500 | - | - | |||||||||
Interest rate swaps related to long-term debt |
250 | - | 1 | |||||||||
Total cash flow hedges |
82 | 1 | ||||||||||
Total derivatives designated as qualifying hedging instruments |
640 | 1 | ||||||||||
Derivatives not designated as qualifying hedging instruments |
||||||||||||
Free-standing derivativesrisk management and other business purposes: |
||||||||||||
Interest rate contracts related to MSRs |
10,177 | 219 | - | |||||||||
Forward contracts related to held for sale mortgage loans |
5,322 | 2 | 14 | |||||||||
Stock warrants associated with sale of the processing business |
416 | 177 | - | |||||||||
Swap associated with the sale of Visa, Inc. Class B shares |
644 | - | 33 | |||||||||
Total free-standing derivativesrisk management and other business purposes |
398 | 47 | ||||||||||
Free-standing derivativescustomer accommodation: |
||||||||||||
Interest rate contracts for customers |
27,354 | 586 | 602 | |||||||||
Interest rate lock commitments |
4,894 | 60 | - | |||||||||
Commodity contracts |
3,084 | 87 | 82 | |||||||||
Foreign exchange contracts |
17,297 | 201 | 183 | |||||||||
Derivative instruments related to equity linked CDs |
5 | - | - | |||||||||
Total free-standing derivativescustomer accommodation |
934 | 867 | ||||||||||
Total derivatives not designated as qualifying hedging instruments |
1,332 | 914 | ||||||||||
Total |
$ | 1,972 | 915 |
116 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair Value | ||||||||||||
Notional | Derivative | Derivative | ||||||||||
December 31, 2011 ($ in millions) | Amount | Assets | Liabilities | |||||||||
Qualifying hedging instruments |
||||||||||||
Fair value hedges: |
||||||||||||
Interest rate swaps related to long-term debt |
$ | 4,080 | 662 | - | ||||||||
Total fair value hedges |
662 | - | ||||||||||
Cash flow hedges: |
||||||||||||
Interest rate floors related to C&I loans |
1,500 | 91 | - | |||||||||
Interest rate swaps related to C&I loans |
1,500 | 59 | - | |||||||||
Interest rate caps related to long-term debt |
500 | - | - | |||||||||
Interest rate swaps related to long-term debt |
250 | - | 5 | |||||||||
Total cash flow hedges |
150 | 5 | ||||||||||
Total derivatives designated as qualifying hedging instruments |
812 | 5 | ||||||||||
Derivatives not designated as qualifying hedging instruments |
||||||||||||
Free-standing derivativesrisk management and other business purposes: |
||||||||||||
Interest rate contracts related to MSRs |
3,077 | 187 | - | |||||||||
Forward contracts related to held for sale mortgage loans |
5,705 | 8 | 54 | |||||||||
Interest rate swaps related to long-term debt |
311 | 1 | 3 | |||||||||
Put options associated with sale of the processing business |
978 | - | 1 | |||||||||
Stock warrants associated with sale of the processing business |
223 | 111 | - | |||||||||
Swap associated with the sale of Visa, Inc. Class B shares |
436 | - | 78 | |||||||||
Total free-standing derivativesrisk management and other business purposes |
307 | 136 | ||||||||||
Free-standing derivativescustomer accommodation: |
||||||||||||
Interest rate contracts for customers |
30,000 | 774 | 795 | |||||||||
Interest rate lock commitments |
3,835 | 33 | 1 | |||||||||
Commodity contracts |
2,074 | 134 | 130 | |||||||||
Foreign exchange contracts |
17,909 | 294 | 275 | |||||||||
Derivative instruments related to equity linked CDs |
34 | 2 | 2 | |||||||||
Total free-standing derivativescustomer accommodation |
1,237 | 1,203 | ||||||||||
Total derivatives not designated as qualifying hedging instruments |
1,544 | 1,339 | ||||||||||
Total |
$ | 2,356 | 1,344 |
Fifth Third Bancorp |
117 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table reflects the change in fair value of interest rate contracts, designated as fair value hedges, as well as the change in fair value of the related hedged items attributable to the risk being hedged, included in the Consolidated Statements of Income:
For the year ended December 31 ($ in millions) | Consolidated Statements of Income Caption |
2012 | 2011 | 2010 | ||||||||||
Interest rate contracts: |
||||||||||||||
Change in fair value of interest rate swaps hedging long-term debt |
Interest on long-term debt | $ | (104 | ) | 220 | 167 | ||||||||
Change in fair value of hedged long-term debt attributable to the risk being hedged |
Interest on long-term debt | 107 | (227 | ) | (168 | ) | ||||||||
Change in fair value of interest rate swaps hedging time deposits |
Interest on deposits | - | - | 6 | ||||||||||
Change in fair value of hedged time deposits |
Interest on deposits | - | - | (6 | ) |
The following table presents the net gains recorded in the Consolidated Statements of Income and the Consolidated Statements of Comprehensive Income relating to derivative instruments designated as cash flow hedges:
For the year ended December 31 ($ in millions) | 2012 | 2011 | 2010 | |||||||||
Amount of net gain recognized in OCI |
$ | 37 | 89 | 2 | ||||||||
Amount of net gain reclassified from OCI into net income |
83 | 69 | 60 | |||||||||
Amount of ineffectiveness recognized in other noninterest income |
- | 1 | 6 |
118 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The net gains (losses) recorded in the Consolidated Statements of Income relating to free-standing derivative instruments used for risk management and other business purposes are summarized in the following table:
For the year ended December 31 ($ in millions) | Consolidated Statements of Income Caption |
2012 | 2011 | 2010 | ||||||||||
Interest rate contracts: |
||||||||||||||
Forward contracts related to mortgage loans held for sale |
Mortgage banking net revenue | $ | 28 | (128 | ) | 40 | ||||||||
Interest rate contracts related to MSRs |
Mortgage banking net revenue | 63 | 345 | 109 | ||||||||||
Interest rate swaps related to long-term debt |
Other noninterest income | 2 | 7 | 2 | ||||||||||
Equity contracts: |
||||||||||||||
Stock warrants associated with sale of the processing business |
Other noninterest income | 66 | 32 | 4 | ||||||||||
Put options associated with sale of the processing business |
Other noninterest income | 1 | 7 | 1 | ||||||||||
Swap associated with sale of Visa, Inc. Class B shares |
Other noninterest income | (45 | ) | (83 | ) | (19 | ) |
Risk ratings of the notional amount of risk participation agreements under this risk rating system are summarized in the following table:
At December 31 ($ in millions) | 2012 | 2011 | ||||||
Pass |
$ | 993 | 772 | |||||
Special mention |
- | 14 | ||||||
Substandard |
13 | 18 | ||||||
Doubtful |
- | 4 | ||||||
Total |
$ | 1,006 | 808 |
Fifth Third Bancorp |
119 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The net gains (losses) recorded in the Consolidated Statements of Income relating to free-standing derivative instruments used for customer accommodation are summarized in the following table:
For the year ended December 31 ($ in millions) |
Consolidated Statements of Income Caption |
2012 | 2011 | 2010 | ||||||||||
Interest rate contracts: |
||||||||||||||
Interest rate contracts for customers (contract revenue) |
Corporate banking revenue | $ | 30 | 28 | 26 | |||||||||
Interest rate contracts for customers (credit losses) |
Other noninterest expense | (2 | ) | (13 | ) | (22 | ) | |||||||
Interest rate contracts for customers (credit portion of fair value adjustment) |
Other noninterest expense | 6 | 13 | (1 | ) | |||||||||
Interest rate lock commitments |
Mortgage banking net revenue | 417 | 206 | 187 | ||||||||||
Commodity contracts: |
||||||||||||||
Commodity contracts for customers (contract revenue) |
Corporate banking revenue | 7 | 8 | 8 | ||||||||||
Commodity contracts for customers (credit portion of fair value adjustment) |
Other noninterest expense | 2 | - | - | ||||||||||
Foreign exchange contracts: |
||||||||||||||
Foreign exchange contractscustomers (contract revenue) |
Corporate banking revenue | 65 | 47 | 63 | ||||||||||
Foreign exchange contractscustomers (credit portion of fair value adjustment) |
Other noninterest expense | 2 | 1 | (1 | ) |
The following table provides the components of other assets included in the Consolidated Balance Sheets as of December 31:
($ in millions) | 2012 | 2011 | ||||||
Derivative instruments |
$ | 1,972 | 2,356 | |||||
Partnership investments |
1,657 | 1,413 | ||||||
Bank owned life insurance |
1,547 | 1,742 | ||||||
Accounts receivable and drafts-in-process |
1,155 | 955 | ||||||
Investment in Vantiv Holding, LLC |
563 | 576 | ||||||
Bankers acceptances |
398 | 726 | ||||||
Accrued interest receivable |
369 | 382 | ||||||
OREO and other repossessed personal property |
329 | 442 | ||||||
Prepaid expenses |
80 | 84 | ||||||
Income tax receivable |
10 | 5 | ||||||
Other |
124 | 182 | ||||||
Total |
$ | 8,204 | 8,863 |
120 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of short-term borrowings and weighted-average rates follows:
2012 | 2011 | |||||||||||||||
($ in millions) | Amount | Rate | Amount | Rate | ||||||||||||
As of December 31: |
||||||||||||||||
Federal funds purchased |
$ | 901 | 0.10 | % | $ | 346 | 0.04 | % | ||||||||
Other short-term borrowings |
6,280 | 0.15 | 3,239 | 0.09 | ||||||||||||
Average for the years ended December 31: |
||||||||||||||||
Federal funds purchased |
$ | 560 | 0.14 | % | $ | 345 | 0.11 | % | ||||||||
Other short-term borrowings |
4,246 | 0.18 | 2,777 | 0.12 | ||||||||||||
Maximum month-end balance for the years ended December 31: |
||||||||||||||||
Federal funds purchased |
$ | 901 | $ | 451 | ||||||||||||
Other short-term borrowings |
6,330 | 4,894 |
Fifth Third Bancorp |
121 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table is a summary of the Bancorps long-term borrowings at December 31:
($ in millions) | Maturity | Interest Rate | 2012 | 2011 | ||||||||||||
Parent Company |
||||||||||||||||
Senior: |
||||||||||||||||
Fixed-rate notes |
2013 | 6.25% | $ | 758 | 779 | |||||||||||
Fixed-rate notes |
2016 | 3.625% | 999 | 1,000 | ||||||||||||
Fixed-rate notes |
2022 | 3.50% | 497 | - | ||||||||||||
Subordinated:(b) |
||||||||||||||||
Floating-rate notes |
2016 | 0.73% | 250 | 250 | ||||||||||||
Fixed-rate notes |
2017 | 5.45% | 583 | 589 | ||||||||||||
Fixed-rate notes |
2018 | 4.50% | 584 | 581 | ||||||||||||
Fixed-rate notes |
2038 | 8.25% | 1,330 | 1,348 | ||||||||||||
Junior subordinated:(a) |
||||||||||||||||
Fixed-rate notes(c) |
2067 | 6.50% | 750 | 750 | ||||||||||||
Fixed-rate notes(c) |
- | 594 | ||||||||||||||
Fixed-rate notes(c) |
- | 894 | ||||||||||||||
Structured repurchase agreements: |
||||||||||||||||
Floating-rate notes |
- | 250 | ||||||||||||||
Floating-rate notes |
- | 125 | ||||||||||||||
Subsidiaries |
||||||||||||||||
Senior: |
||||||||||||||||
Floating-rate bank notes |
2013 | 0.42% | 500 | 500 | ||||||||||||
Subordinated:(b) |
||||||||||||||||
Fixed-rate bank notes |
2015 | 4.75% | 546 | 561 | ||||||||||||
Junior subordinated:(a) |
||||||||||||||||
Floating-rate debentures |
2035 | 1.73% -2.00% | 50 | 62 | ||||||||||||
FHLB advances |
2014-2041 | 0.05% -8.34% | 53 | 1,055 | ||||||||||||
Notes associated with consolidated VIEs: |
||||||||||||||||
Automobile loan securitizations: |
||||||||||||||||
Fixed-rate notes |
- | 2 | ||||||||||||||
Floating-rate notes |
- | 169 | ||||||||||||||
Home equity securitization: |
||||||||||||||||
Floating-rate notes |
- | 22 | ||||||||||||||
Other |
2013-2039 | Varies | 185 | 151 | ||||||||||||
Total |
$ | 7,085 | 9,682 |
(a) | Qualify as Tier I capital for regulatory capital purposes. See Note 27 for further information. |
(b) | Qualify as Tier II capital for regulatory capital purposes. |
(c) | Future periods of debt are floating. |
The Bancorp pays down long-term debt in accordance with contractual terms over maturity periods summarized in the above table. The aggregate annual maturities of long-term debt obligations (based on final maturity dates) as of December 31, 2012, are presented in the following table:
($ in millions) | Parent | Subsidiaries | Total | |||||||||
2013 |
$ | 758 | 519 | 1,277 | ||||||||
2014 |
- | 38 | 38 | |||||||||
2015 |
- | 560 | 560 | |||||||||
2016 |
1,249 | 10 | 1,259 | |||||||||
2017 |
583 | 86 | 669 | |||||||||
Thereafter |
3,161 | 121 | 3,282 | |||||||||
Total |
$ | 5,751 | 1,334 | 7,085 |
122 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fifth Third Bancorp |
123 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
124 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. COMMITMENTS, CONTINGENT LIABILITIES AND GUARANTEES
Commitments
The Bancorp has certain commitments to make future payments under contracts. The following table reflects a summary of significant commitments as of December 31:
($ in millions) | 2012 | 2011 | ||||||
Commitments to extend credit |
$ | 53,403 | 47,719 | |||||
Forward contracts to sell mortgage loans |
5,322 | 5,705 | ||||||
Letters of credit |
4,281 | 4,744 | ||||||
Noncancelable lease obligations |
769 | 851 | ||||||
Capital commitments for private equity investments |
121 | 166 | ||||||
Purchase obligations |
87 | 115 | ||||||
Capital expenditures |
29 | 41 | ||||||
Capital lease obligations |
24 | 26 |
Risk ratings under this risk rating system are summarized in the following table as of December 31:
($ in millions) | 2012 | 2011 | ||||||
Pass |
$ | 52,812 | 46,825 | |||||
Special mention |
370 | 480 | ||||||
Substandard |
221 | 403 | ||||||
Doubtful |
- | 11 | ||||||
Total |
$ | 53,403 | 47,719 |
Letters of credit
Standby and commercial letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party and expire as summarized in the following table as of December 31, 2012:
($ in millions) | ||||
Less than 1 year(a) |
$ | 1,831 | ||
1 - 5 years(a) |
2,407 | |||
Over 5 years |
43 | |||
Total |
$ | 4,281 |
(a) | Includes $60 and $4 issued on behalf of commercial customers to facilitate trade payments in U.S. dollars and foreign currencies which expire less than one year and between one and five years, respectively. |
Fifth Third Bancorp |
125 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Risk ratings under this risk rating system are summarized in the following table as of December 31:
($ in millions) | 2012 | 2011 | ||||||
Pass |
$ | 3,902 | 4,338 | |||||
Special mention |
129 | 149 | ||||||
Substandard |
223 | 254 | ||||||
Doubtful |
27 | 2 | ||||||
Loss |
- | 1 | ||||||
Total |
$ | 4,281 | 4,744 |
126 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes activity in the reserve for representation and warranty provisions:
($ in millions) | 2012 | 2011 | ||||||
Balance, beginning of period |
$ | 55 | 85 | |||||
Net additions to the reserve |
107 | 52 | ||||||
Losses charged against the reserve |
(52 | ) | (82 | ) | ||||
Balance, end of period |
$ | 110 | 55 |
The following table provides a rollforward of unresolved claims by claimant type for the year ended December 31, 2012:
GSE | Private Label | |||||||||||||||
($ in millions) | Units | Dollars | Units | Dollars | ||||||||||||
Balance, beginning of period |
328 | $ | 47 | 109 | $ | 19 | ||||||||||
New demands |
2,519 | 333 | 230 | 7 | ||||||||||||
Loan paydowns/payoffs |
(42 | ) | (7 | ) | (2 | ) | | |||||||||
Resolved demands |
(2,511 | ) | (325 | ) | (213 | ) | (7 | ) | ||||||||
Balance, end of period |
294 | $ | 48 | 124 | $ | 19 |
The following table provides a rollforward of unresolved claims by claimant type for the year ended December 31, 2011:
GSE | Private Label | |||||||||||||||
($ in millions) | Units | Dollars | Units | Dollars | ||||||||||||
Balance, beginning of period |
845 | $ | 150 | 71 | $ | 11 | ||||||||||
New demands |
2,050 | 328 | 107 | 22 | ||||||||||||
Loan paydowns/payoffs |
(21 | ) | (3 | ) | (2 | ) | | |||||||||
Resolved demands |
(2,546 | ) | (428 | ) | (67 | ) | (14 | ) | ||||||||
Balance, end of period |
328 | $ | 47 | 109 | $ | 19 |
Fifth Third Bancorp |
127 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
128 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. LEGAL AND REGULATORY PROCEEDINGS
Fifth Third Bancorp |
129 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
130 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. RELATED PARTY TRANSACTIONS
The following table summarizes the Bancorps activities with its principal shareholders, directors and executives at December 31:
($ in millions) | 2012 | 2011 | ||||||
|
||||||||
Commitments to lend, net of participations: |
||||||||
Directors and their affiliated companies |
$ | 364 | 254 | |||||
Executive officers |
3 | 5 | ||||||
|
||||||||
Total |
$ | 367 | 259 | |||||
Outstanding balance on loans, net of participations and undrawn commitments |
$ | 93 | 172 | |||||
|
Fifth Third Bancorp |
131 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Bancorp and its subsidiaries file a consolidated federal income tax return. The following is a summary of applicable income taxes included in the Consolidated Statements of Income for the years ended December 31:
($ in millions) | 2012 | 2011 | 2010 | |||||||||
Current income tax expense (benefit): |
||||||||||||
U.S. Federal income taxes |
$ | 327 | 82 | (5 | ) | |||||||
State and local income taxes |
38 | 14 | 16 | |||||||||
Total current tax expense |
365 | 96 | 11 | |||||||||
Deferred income tax expense |
||||||||||||
U.S. Federal income taxes |
252 | 411 | 165 | |||||||||
State and local income taxes |
19 | 26 | 11 | |||||||||
Total deferred income tax expense |
271 | 437 | 176 | |||||||||
Applicable income tax expense |
$ | 636 | 533 | 187 | ||||||||
The following is a reconciliation between the statutory U.S. Federal income tax rate and the Bancorps effective tax rate for the years ended December 31:
($ in millions) | 2012 | 2011 | 2010 | |||||||||
Statutory tax rate |
35.0 | % | 35.0 | 35.0 | ||||||||
Increase (decrease) resulting from: |
||||||||||||
State taxes, net of federal benefit |
1.7 | 1.4 | 1.8 | |||||||||
Tax-exempt income |
(2.1 | ) | (1.4 | ) | (3.6 | ) | ||||||
Credits |
(6.7 | ) | (7.3 | ) | (14.1 | ) | ||||||
Interest to taxing authority, net of tax |
- | - | (0.8 | ) | ||||||||
Other changes in unrecognized tax benefits |
- | - | (1.8 | ) | ||||||||
Unrealized stock-based compensation benefits |
0.8 | 1.3 | 2.5 | |||||||||
Other, net |
0.1 | 0.1 | 0.8 | |||||||||
Effective tax rate |
28.8 | % | 29.1 | 19.8 | ||||||||
The following table provides a summary of the Bancorps unrecognized tax benefits as of December 31:
($ in millions) | 2012 | 2011 | ||||||
Tax positions that would impact the effective tax rate, if recognized |
$ | 18 | 14 | |||||
Tax positions where the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of the deduction |
- | - | ||||||
Unrecognized tax benefits |
$ | 18 | 14 | |||||
The following table provides a reconciliation of the beginning and ending amounts of the Bancorps unrecognized tax benefits:
($ in millions) | 2012 | 2011 | 2010 | |||||||||
Unrecognized tax benefits at January 1 |
$ | 14 | 16 | 82 | ||||||||
Gross increases for tax positions taken during prior period |
6 | 1 | 4 | |||||||||
Gross decreases for tax positions taken during prior period |
(3 | ) | (2 | ) | (23 | ) | ||||||
Gross increases for tax positions taken during current period |
2 | - | 2 | |||||||||
Settlements with taxing authorities |
- | - | (48 | ) | ||||||||
Lapse of applicable statute of limitations |
(1 | ) | (1 | ) | (1 | ) | ||||||
Unrecognized tax benefits at December 31 |
$ | 18 | 14 | 16 | ||||||||
132 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred income taxes are comprised of the following items at December 31:
($ in millions) | 2012 | 2011 | ||||||
Deferred tax assets: |
||||||||
Allowance for loan and lease losses |
$ | 649 | 789 | |||||
Deferred compensation |
105 | 119 | ||||||
Impairment reserves |
74 | 102 | ||||||
Reserves |
63 | 70 | ||||||
Reserve for unfunded commitments |
47 | 63 | ||||||
State net operating losses |
33 | 63 | ||||||
Other |
191 | 216 | ||||||
Total deferred tax assets |
$ | 1,162 | 1,422 | |||||
Deferred tax liabilities: |
||||||||
Lease financing |
$ | 844 | 853 | |||||
Investments in joint ventures and partnership interests |
470 | 468 | ||||||
Other comprehensive income |
202 | 253 | ||||||
MSRs |
162 | 173 | ||||||
Bank premises and equipment |
108 | 95 | ||||||
State deferred taxes |
64 | 74 | ||||||
Other |
155 | 130 | ||||||
Total deferred tax liabilities |
$ | 2,005 | 2,046 | |||||
Total net deferred tax liability |
$ | (843 | ) | (624 | ) | |||
Fifth Third Bancorp |
133 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20. RETIREMENT AND BENEFIT PLANS
The following table summarizes the defined benefit retirement plans as of and for the years ended December 31:
Plans with an Underfunded Status | ||||||||
($ in millions) | 2012 | 2011 | ||||||
Fair value of plan assets at January 1 |
$ | 181 | 197 | |||||
Actual return on assets |
21 | - | ||||||
Contributions |
4 | 4 | ||||||
Settlement |
(10 | ) | (10 | ) | ||||
Benefits paid |
(11 | ) | (10 | ) | ||||
Fair value of plan assets at December 31 |
$ | 185 | 181 | |||||
Projected benefit obligation at January 1 |
$ | 253 | 227 | |||||
Service cost |
- | - | ||||||
Interest cost |
10 | 11 | ||||||
Settlement |
(10 | ) | (10 | ) | ||||
Actuarial loss |
14 | 35 | ||||||
Benefits paid |
(11 | ) | (10 | ) | ||||
Projected benefit obligation at December 31 |
$ | 256 | 253 | |||||
Unfunded projected benefit obligation at December 31 |
$ | (71 | ) | (72 | ) | |||
The following table summarizes net periodic benefit cost and other changes in plan assets and benefit obligations recognized in other comprehensive income for the years ended December 31:
($ in millions) | 2012 | 2011 | 2010 | |||||||||
Components of net periodic benefit cost: |
||||||||||||
Service cost |
$ | - | - | - | ||||||||
Interest cost |
10 | 11 | 12 | |||||||||
Expected return on assets |
(13 | ) | (15 | ) | (14 | ) | ||||||
Amortization of net actuarial loss |
14 | 11 | 12 | |||||||||
Amortization of net prior service cost |
- | 1 | 1 | |||||||||
Settlement |
6 | 6 | - | |||||||||
Net periodic benefit cost |
$ | 17 | 14 | 11 | ||||||||
Other changes in plan assets and benefit obligations recognized in other comprehensive income: |
||||||||||||
Net actuarial loss |
7 | 50 | 2 | |||||||||
Net prior service cost |
- | - | - | |||||||||
Amortization of net actuarial loss |
(14 | ) | (11 | ) | (12 | ) | ||||||
Amortization of prior service cost |
- | (1 | ) | (1 | ) | |||||||
Settlement |
(6 | ) | (6 | ) | - | |||||||
Total recognized in other comprehensive income |
(13 | ) | 32 | (11 | ) | |||||||
Total recognized in net periodic benefit cost and other comprehensive income |
$ | 4 | 46 | - | ||||||||
134 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair Value Measurements of Plan Assets
The following table summarizes plan assets measured at fair value on a recurring basis as of December 31:
Fair Value Measurements Using (a) | ||||||||||||||||
2012 ($ in millions) | Level 1 | Level 2 | Level 3 | Total Fair Value |
||||||||||||
Equity securities: |
||||||||||||||||
Equity securities (Growth)(b) |
$ | 50 | - | - | $ | 50 | ||||||||||
Equity securities (Value) |
52 | - | - | 52 | ||||||||||||
Equity securities (Blended) |
4 | - | - | 4 | ||||||||||||
Total equity securities |
106 | - | - | 106 | ||||||||||||
Mutual and exchange traded funds: |
||||||||||||||||
Money market funds |
4 | - | - | 4 | ||||||||||||
International funds |
29 | - | - | 29 | ||||||||||||
Commodity funds |
9 | - | - | 9 | ||||||||||||
Total mutual and exchange traded funds |
42 | - | - | 42 | ||||||||||||
Debt securities: |
||||||||||||||||
U.S. Treasury obligations |
13 | - | - | 13 | ||||||||||||
Agency mortgage backed |
- | 21 | - | 21 | ||||||||||||
Non-agency mortgage backed |
- | 2 | - | 2 | ||||||||||||
Corporate bonds(c) |
- | 1 | - | 1 | ||||||||||||
Total debt securities |
13 | 24 | - | 37 | ||||||||||||
Total plan assets |
$ | 161 | 24 | - | $ | 185 | ||||||||||
Fair Value Measurements Using (a) | ||||||||||||||||
2011 ($ in millions) | Level 1 | Level 2 | Level 3 | Total Fair Value |
||||||||||||
Equity Securities: |
||||||||||||||||
Equity securities (Growth)(b) |
$ | 53 | - | - | $ | 53 | ||||||||||
Equity securities (Value) |
52 | - | - | 52 | ||||||||||||
Total equity securities |
105 | - | - | 105 | ||||||||||||
Mutual and exchange traded funds: |
||||||||||||||||
Money market funds |
5 | - | - | 5 | ||||||||||||
International funds |
25 | - | - | 25 | ||||||||||||
Commodity funds |
9 | - | - | 9 | ||||||||||||
Total mutual and exchange traded funds |
39 | - | - | 39 | ||||||||||||
Debt securities: |
||||||||||||||||
U.S. Treasury obligations |
10 | - | - | 10 | ||||||||||||
Agency mortgage backed |
- | 25 | - | 25 | ||||||||||||
Non-agency mortgage backed |
- | 1 | - | 1 | ||||||||||||
Corporate bonds(c) |
- | 1 | - | 1 | ||||||||||||
Total debt securities |
10 | 27 | - | 37 | ||||||||||||
Total plan assets |
$ | 154 | 27 | - | $ | 181 | ||||||||||
(a) | For further information on fair value hierarchy levels, see Note 1. |
(b) | Includes holdings in Bancorp common stock. |
(c) | Includes private label asset backed securities. |
Fifth Third Bancorp |
135 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the plan assumptions for the years ended December 31:
Weighted-Average Assumptions | 2012 | 2011 | 2010 | |||||||||
For measuring benefit obligations at year end: |
||||||||||||
Discount rate |
3.83 | % | 4.27 | 5.39 | ||||||||
Rate of compensation increase |
4.00 | 5.00 | 5.00 | |||||||||
Expected return on plan assets |
8.00 | 8.25 | 8.25 | |||||||||
For measuring net periodic benefit cost: |
||||||||||||
Discount rate |
4.27 | 5.39 | 5.88 | |||||||||
Rate of compensation increase |
5.00 | 5.00 | 5.00 | |||||||||
Expected return on plan assets |
8.00 | 8.25 | 8.25 | |||||||||
The following table provides the Bancorps targeted and actual weighted-average asset allocations by asset category for the years ended December 31:
Weighted-average asset allocation | Targeted range |
2012 | 2011 | |||||||||||||
Equity securities |
76 | % | 74 | |||||||||||||
Bancorp common stock |
1 | 2 | ||||||||||||||
Total equity securities(a) |
70-80 | % | 77 | 76 | ||||||||||||
Total fixed income securities |
20-25 | 20 | 21 | |||||||||||||
Cash(b) |
0-5 | 3 | 3 | |||||||||||||
Total |
100 | % | 100 | |||||||||||||
(a) | Includes mutual and exchange traded funds |
(b) | Cash held in a Fifth Third Money Market Fund. |
136 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amounts relating to the Bancorps defined benefit plans with benefit obligations exceeding assets were as follows at December 31:
($ in millions) | 2012 | 2011 | ||||||
Projected benefit obligation |
$ | 256 | 253 | |||||
Accumulated benefit obligation |
256 | 253 | ||||||
Fair value of plan assets |
185 | 181 | ||||||
Fifth Third Bancorp |
137 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. ACCUMULATED OTHER COMPREHENSIVE INCOME
The activity of the components of other comprehensive income and accumulated other comprehensive income for the years ended December 31:
Total Other Comprehensive Income |
Total Accumulated Other Comprehensive Income |
|||||||||||||||||||||||
($ in millions) | Pretax Activity |
Tax Effect |
Net Activity |
Beginning Balance |
Net Activity |
Ending Balance |
||||||||||||||||||
2012 |
||||||||||||||||||||||||
Unrealized holding losses on available-for-sale securities arising during period |
$ | (97 | ) | 34 | (63 | ) | ||||||||||||||||||
Reclassification adjustment for net gains included in net income |
(15 | ) | 5 | (10 | ) | |||||||||||||||||||
Net unrealized gains on available-for-sale securities |
(112 | ) | 39 | (73 | ) | 485 | (73 | ) | 412 | |||||||||||||||
Unrealized holding gains on cash flow hedge derivatives arising during period |
37 | (13 | ) | 24 | ||||||||||||||||||||
Reclassification adjustment for net gains on cash flow hedge derivatives included in net income |
(83 | ) | 29 | (54 | ) | |||||||||||||||||||
Net unrealized gains on cash flow hedge derivatives |
(46 | ) | 16 | (30 | ) | 80 | (30 | ) | 50 | |||||||||||||||
Defined benefit plans: |
||||||||||||||||||||||||
Net actuarial loss |
13 | (5 | ) | 8 | ||||||||||||||||||||
Defined benefit plans, net |
13 | (5 | ) | 8 | (95 | ) | 8 | (87 | ) | |||||||||||||||
Total |
$ | (145 | ) | 50 | (95 | ) | 470 | (95 | ) | 375 | ||||||||||||||
2011 |
||||||||||||||||||||||||
Unrealized holding gains on available-for-sale securities arising during period |
$ | 309 | (108 | ) | 201 | |||||||||||||||||||
Reclassification adjustment for net gains included in net income |
(56 | ) | 19 | (37 | ) | |||||||||||||||||||
Net unrealized gains on available-for-sale securities |
253 | (89 | ) | 164 | 321 | 164 | 485 | |||||||||||||||||
Unrealized holding gains on cash flow hedge derivatives arising during period |
89 | (31 | ) | 58 | ||||||||||||||||||||
Reclassification adjustment for net gains on cash flow hedge derivatives included in net income |
(69 | ) | 24 | (45 | ) | |||||||||||||||||||
Net unrealized gains on cash flow hedge derivatives |
20 | (7 | ) | 13 | 67 | 13 | 80 | |||||||||||||||||
Defined benefit plans: |
||||||||||||||||||||||||
Net actuarial gain |
(32 | ) | 11 | (21 | ) | |||||||||||||||||||
Defined benefit plans, net |
(32 | ) | 11 | (21 | ) | (74 | ) | (21 | ) | (95 | ) | |||||||||||||
Total |
$ | 241 | (85 | ) | 156 | 314 | 156 | 470 | ||||||||||||||||
2010 |
||||||||||||||||||||||||
Unrealized holding gains on available-for-sale securities arising during period |
$ | 216 | (73 | ) | 143 | |||||||||||||||||||
Reclassification adjustment for net gains included in net income |
(57 | ) | 19 | (38 | ) | |||||||||||||||||||
Net unrealized gains on available-for-sale securities |
159 | (54 | ) | 105 | 216 | 105 | 321 | |||||||||||||||||
Unrealized holding gains on cash flow hedge derivatives arising during period |
2 | (1 | ) | 1 | ||||||||||||||||||||
Reclassification adjustment for net gains on cash flow hedge derivatives included in net income |
(60 | ) | 21 | (39 | ) | |||||||||||||||||||
Net unrealized gains on cash flow hedge derivatives |
(58 | ) | 20 | (38 | ) | 105 | (38 | ) | 67 | |||||||||||||||
Defined benefit plans: |
||||||||||||||||||||||||
Net prior service cost |
1 | (1 | ) | - | ||||||||||||||||||||
Net actuarial loss |
10 | (4 | ) | 6 | ||||||||||||||||||||
Defined benefit plans, net |
11 | (5 | ) | 6 | (80 | ) | 6 | (74 | ) | |||||||||||||||
Total |
$ | 112 | (39 | ) | 73 | 241 | 73 | 314 |
138 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. COMMON, PREFERRED AND TREASURY STOCK
The following is a summary of the share activity within common, preferred and treasury stock for the years ended December 31:
Common Stock | Preferred Stock | Treasury Stock | ||||||||||||||||||||||
($ in millions, except share data) | Value | Shares | Value | Shares | Value | Shares | ||||||||||||||||||
Shares at December 31, 2009 |
$ | 1,779 | 801,504,188 | $ | 3,609 | 152,771 | $ | 201 | 6,436,024 | |||||||||||||||
Accretion from dividends on preferred shares, Series F |
- | - | 45 | - | - | - | ||||||||||||||||||
Stock-based awards issued or exercised, including treasury shares issued |
- | - | - | - | (6 | ) | 16,391 | |||||||||||||||||
Restricted stock grants |
- | - | - | - | (62 | ) | (1,334,967 | ) | ||||||||||||||||
Other |
- | - | - | - | (3 | ) | 114,218 | |||||||||||||||||
Shares at December 31, 2010 |
$ | 1,779 | 801,504,188 | $ | 3,654 | 152,771 | $ | 130 | 5,231,666 | |||||||||||||||
Issuance of common shares |
272 | 122,388,393 | - | - | - | - | ||||||||||||||||||
Exchange of preferred shares, Series G |
- | - | - | (1 | ) | - | - | |||||||||||||||||
Redemption of preferred shares, Series F |
- | - | (3,408 | ) | (136,320 | ) | - | - | ||||||||||||||||
Accretion from dividends on preferred shares, Series F |
- | - | 153 | - | - | - | ||||||||||||||||||
Stock-based awards issued or exercised, including treasury shares issued |
- | - | - | - | (7 | ) | (336,735 | ) | ||||||||||||||||
Restricted stock grants |
- | - | - | - | (58 | ) | (756,381 | ) | ||||||||||||||||
Other |
- | - | (1 | ) | (1 | ) | (50,405 | ) | ||||||||||||||||
Shares at December 31, 2011 |
$ | 2,051 | 923,892,581 | $ | 398 | 16,450 | $ | 64 | 4,088,145 | |||||||||||||||
Shares acquired for treasury |
- | - | - | - | 627 | 42,424,014 | ||||||||||||||||||
Stock-based awards issued or exercised, including treasury shares issued |
- | - | - | - | (7 | ) | (1,776,508 | ) | ||||||||||||||||
Restricted stock grants |
- | - | - | - | (47 | ) | (2,877,657 | ) | ||||||||||||||||
Other |
- | - | - | - | (3 | ) | (117,470 | ) | ||||||||||||||||
Shares at December 31, 2012 |
$ | 2,051 | 923,892,581 | $ | 398 | 16,450 | $ | 634 | 41,740,524 |
Fifth Third Bancorp |
139 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Plan Category (shares in thousands) | Number of Shares to be Issued Upon Exercise |
Weighted- Average Exercise Price |
Shares Available for Future Issuance |
|||||||||
Equity compensation plans approved by shareholders |
23,215 | (a) | ||||||||||
SARs |
(b) | (b) | (a | ) | ||||||||
Restricted stock |
6,379 | N/A | (a | ) | ||||||||
Stock options(c) |
3,108 | $ | 51.75 | (a | ) | |||||||
Phantom stock units |
(d) | N/A | N/A | |||||||||
Performance units |
(e) | N/A | (a | ) | ||||||||
Employee stock purchase plan |
8,720 | (f) | ||||||||||
Total shares |
9,487 | 31,935 |
(a) | Under the 2011 Incentive Compensation Plan, 39 million shares plus up to 4.5 million shares from the 2008 Incentive Compensation Plan (the Predecessor Plan) of stock were authorized for issuance as incentive and nonqualified stock options, SARs, restricted stock and restricted stock units, performance units and performance restricted stock awards. |
(b) | The number of shares to be issued upon exercise will be determined at vesting based on the difference between the grant price and the market price at the date of exercise. |
(c) | Excludes 0.8 million outstanding options awarded under plans assumed by the Bancorp in connection with certain mergers and acquisitions. The Bancorp has not made any awards under these plans and will make no additional awards under these plans. The weighted-average exercise price of the outstanding options is $17.74 per share. |
(d) | Phantom stock units are settled in cash. |
(e) | The number of shares to be issued is dependent upon the Bancorp achieving certain predefined performance targets and ranges from zero shares to approximately 0.6 million shares. |
(f) | Represents remaining shares of Fifth Third common stock under the Bancorps 1993 Stock Purchase Plan, as amended and restated, including an additional 1.5 million shares approved by shareholders on March 28, 2007 and an additional 12 million shares approved by shareholders on April 21, 2009. |
140 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2012 | 2011 | 2010 | ||||||||||
Expected life (in years) |
6 | 6 | 6 | |||||||||
Expected volatility |
37 | % | 35 | % | 38 | % | ||||||
Expected dividend yield |
2.8 | % | 2.0 | % | 2.0 | % | ||||||
Risk-free interest rate |
1.2 | % | 2.6 | % | 3.1 | % |
2012 | 2011 | 2010 | ||||||||||||||||||||||
SARs (shares in thousands) | Shares | Weighted- Average Grant Price |
Shares | Weighted- Average Grant Price |
Shares | Weighted- Average Grant Price |
||||||||||||||||||
Outstanding at January 1 |
36,502 | $ | 22.20 | 31,152 | $ | 24.67 | 28,571 | $ | 26.82 | |||||||||||||||
Granted |
12,179 | 14.36 | 8,633 | 13.36 | 5,310 | 14.74 | ||||||||||||||||||
Exercised |
(1,271 | ) | 6.29 | (521 | ) | 3.96 | (319 | ) | 3.96 | |||||||||||||||
Forfeited or expired |
(3,290 | ) | 23.33 | (2,762 | ) | 25.76 | (2,410 | ) | 30.87 | |||||||||||||||
Outstanding at December 31 |
44,120 | $ | 20.41 | 36,502 | $ | 22.20 | 31,152 | $ | 24.67 | |||||||||||||||
Exercisable at December 31 |
23,248 | $ | 26.76 | 20,070 | $ | 30.29 | 16,347 | $ | 34.94 |
The following table summarizes outstanding and exercisable SARs by grant price at December 31, 2012:
Outstanding SARs | Exercisable SARs | |||||||||||||||||||||||
Grant price per share | Number of SARs at Year End (000s) |
Weighted- Average Grant Price |
Weighted- Average Remaining Contractual Life (in years) |
Number of SARs at Year End (000s) |
Weighted- Average Grant Price |
Weighted- Average Remaining Contractual Life (in years) |
||||||||||||||||||
Under $10.00 |
5,100 | $ | 4.06 | 6.3 | 3,481 | $ | 3.96 | 6.3 | ||||||||||||||||
$10.01-$20.00 |
27,812 | 14.98 | 8.0 | 8,559 | 16.94 | 6.4 | ||||||||||||||||||
$20.01-$30.00 |
34 | 22.88 | 5.2 | 34 | 22.88 | 5.2 | ||||||||||||||||||
$30.01-$40.00 |
7,231 | 38.69 | 3.6 | 7,231 | 38.69 | 3.6 | ||||||||||||||||||
Over $40.00 |
3,943 | 46.37 | 2.2 | 3,943 | 46.37 | 2.2 | ||||||||||||||||||
All SARs |
44,120 | $ | 20.41 | 6.6 | 23,248 | $ | 26.76 | 4.8 |
Fifth Third Bancorp |
141 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2012 | 2011 | 2010 | ||||||||||||||||||||||
RSAs (shares in thousands) | Shares | Weighted- Average -Date Fair |
Shares | Weighted- -Date Fair |
Shares | Weighted- -Date Fair |
||||||||||||||||||
Nonvested at January 1 |
4,764 | $ | 15.95 | 5,158 | $ | 18.89 | 4,645 | $ | 23.85 | |||||||||||||||
Granted |
3,863 | 14.33 | 1,702 | 13.19 | 1,677 | 14.69 | ||||||||||||||||||
Exercised |
(1,826 | ) | 18.37 | (1,646 | ) | 22.52 | (817 | ) | 36.96 | |||||||||||||||
Forfeited |
(422 | ) | 15.35 | (450 | ) | 15.34 | (347 | ) | 22.39 | |||||||||||||||
Nonvested at December 31 |
6,379 | $ | 14.32 | 4,764 | $ | 15.95 | 5,158 | $ | 18.89 |
The following table summarizes unvested RSAs by grant-date fair value at December 31, 2012:
Nonvested RSAs | ||||||||
Grant-Date Fair Value Per Share | Number of RSAs at Year End (000s) |
Weighted- Remaining Contractual Life (in years) |
||||||
Under $10.00 |
254 | 0.9 | ||||||
$10.01-$20.00 |
6,123 | 1.4 | ||||||
$20.01-$30.00 |
2 | 0.3 | ||||||
All RSAs |
6,379 | 1.4 |
2012 | 2011 | 2010 | ||||||||||||||||||||||
Stock Options (shares in thousands) | Shares | Weighted- Exercise Price |
Shares | Weighted- Exercise Price |
Shares | Weighted- Grant Price |
||||||||||||||||||
Outstanding at January 1 |
7,584 | $ | 53.88 | 11,859 | $ | 52.01 | 15,504 | $ | 49.29 | |||||||||||||||
Exercised |
(205 | ) | 10.32 | (96 | ) | 9.25 | (58) | 8.76 | ||||||||||||||||
Forfeited or expired |
(3,502 | ) | 66.25 | (4,179 | ) | 49.61 | (3,587 | ) | 40.54 | |||||||||||||||
Outstanding at December 31 |
3,877 | $ | 45.00 | 7,584 | $ | 53.88 | 11,859 | $ | 52.01 | |||||||||||||||
Exercisable at December 31 |
3,877 | $ | 45.00 | 7,584 | $ | 53.88 | 11,859 | $ | 52.01 |
The following table summarizes outstanding and exercisable stock options by exercise price at December 31, 2012:
Outstanding and Exercisable Stock Options | ||||||||||||
Exercise price per share | Number of Options at Year End (000s) |
Weighted- Average Exercise Price |
Weighted- Remaining Contractual Life (in years) |
|||||||||
Under $10.00 |
5 | $9.65 | 1.5 | |||||||||
$10.01-$20.00 |
590 | 12.86 | 2.1 | |||||||||
$20.01-$30.00 |
33 | 23.38 | 0.2 | |||||||||
$30.01-$40.00 |
136 | 36.31 | 1.3 | |||||||||
Over $40.00 |
3,113 | 51.77 | 0.3 | |||||||||
All stock options |
3,877 | $45.00 | 0.6 |
142 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fifth Third Bancorp |
143 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
24. OTHER NONINTEREST INCOME AND OTHER NONINTEREST EXPENSE
The following table presents the major components of other noninterest income and other noninterest expense for the years ended December 31:
($ in millions) | 2012 | 2011 | 2010 | |||||||||
Other noninterest income: |
||||||||||||
Gain on Vantiv, Inc. IPO and sale of Vantiv, Inc. shares |
$ | 272 | - | - | ||||||||
Net gain from warrant and put options associated with sale of the processing business |
67 | 39 | 5 | |||||||||
Equity method income from interest in Vantiv Holding, LLC |
61 | 57 | 26 | |||||||||
Operating lease income |
60 | 58 | 62 | |||||||||
Cardholder fees |
46 | 41 | 36 | |||||||||
BOLI income |
35 | 41 | 194 | |||||||||
Banking center income |
32 | 27 | 22 | |||||||||
Insurance income |
28 | 28 | 38 | |||||||||
Consumer loan and lease fees |
27 | 31 | 32 | |||||||||
Gain on loan sales |
20 | 37 | 51 | |||||||||
TSA revenue |
1 | 21 | 49 | |||||||||
Loss on swap associated with the sale of Visa, Inc. class B shares |
(45 | ) | (83) | (19) | ||||||||
Loss on sale of OREO |
(57 | ) | (71) | (78) | ||||||||
Other, net |
27 | 24 | (12) | |||||||||
Total |
$ | 574 | 250 | 406 | ||||||||
Other noninterest expense: |
||||||||||||
Losses and adjustments |
$ | 187 | 129 | 187 | ||||||||
Loan and lease |
183 | 195 | 211 | |||||||||
Loss (gain) on debt extinguishment |
169 | (8) | 17 | |||||||||
Marketing |
128 | 115 | 98 | |||||||||
FDIC insurance and other taxes |
114 | 201 | 242 | |||||||||
Impairment of affordable housing investments |
90 | 85 | 100 | |||||||||
Professional services fees |
56 | 58 | 77 | |||||||||
Travel |
52 | 52 | 51 | |||||||||
Postal and courier |
48 | 49 | 48 | |||||||||
Operating lease |
43 | 41 | 41 | |||||||||
Data processing |
40 | 29 | 24 | |||||||||
Recruitment and education |
28 | 31 | 31 | |||||||||
OREO expense |
21 | 34 | 33 | |||||||||
Insurance |
18 | 25 | 42 | |||||||||
Supplies |
17 | 18 | 24 | |||||||||
Intangible asset amortization |
13 | 22 | 43 | |||||||||
Provision (benefit) for unfunded commitments and letters of credit |
(2 | ) | (46) | (24) | ||||||||
Other, net |
169 | 194 | 149 | |||||||||
Total |
$ | 1,374 | 1,224 | 1,394 |
144 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The calculation of earnings per share and the reconciliation of earnings per share and earnings per diluted share for the years ended December 31:
2012 | 2011 | 2010 | ||||||||||||||||||||||||||||||||||
(in millions, except per share data) | Income | Average Shares |
Per Share Amount |
Income | Average Shares |
Per Share Amount |
Income | Average Shares |
Per Share Amount |
|||||||||||||||||||||||||||
Earnings per share: |
||||||||||||||||||||||||||||||||||||
Net income attributable to Bancorp |
$ | 1,576 | 1,297 | 753 | ||||||||||||||||||||||||||||||||
Dividends on preferred stock |
35 | 203 | 250 | |||||||||||||||||||||||||||||||||
Net income available to common shareholders |
1,541 | 1,094 | 503 | |||||||||||||||||||||||||||||||||
Less: Income allocated to participating securities |
10 | 6 | 3 | |||||||||||||||||||||||||||||||||
Net income allocated to common shareholders |
$ | 1,531 | 904 | 1.69 | 1,088 | 906 | 1.20 | 500 | 791 | 0.63 | ||||||||||||||||||||||||||
Earnings per diluted share: |
||||||||||||||||||||||||||||||||||||
Net income available to common shareholders |
$ | 1,541 | 1,094 | 503 | ||||||||||||||||||||||||||||||||
Effect of dilutive securities: |
||||||||||||||||||||||||||||||||||||
Stock-based awards |
- | 6 | - | - | 6 | - | - | 5 | - | |||||||||||||||||||||||||||
Series G convertible preferred stock |
35 | 36 | (0.03) | 35 | 36 | (0.02) | - | - | - | |||||||||||||||||||||||||||
Warrants related to Series F preferred stock |
- | - | - | - | 2 | - | - | 3 | - | |||||||||||||||||||||||||||
Net income available to common shareholders plus assumed conversions |
1,576 | 1,129 | 503 | |||||||||||||||||||||||||||||||||
Less: Income allocated to participating securities |
10 | 6 | 3 | |||||||||||||||||||||||||||||||||
Net income allocated to common shareholders plus assumed conversions |
$ | 1,566 | 946 | 1.66 | 1,123 | 950 | 1.18 | 500 | 799 | 0.63 |
Fifth Third Bancorp |
145 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables summarize assets and liabilities measured at fair value on a recurring basis, including residential mortgage loans held for sale for which the Bancorp has elected the fair value option as of:
Fair Value Measurements Using | ||||||||||||||||
December 31, 2012 ($ in millions) | Level 1(c) | Level 2(c) | Level 3 | Total Fair Value |
||||||||||||
Assets: |
||||||||||||||||
Available-for-sale securities: |
||||||||||||||||
U.S. Treasury and Government agencies |
$41 | - | - | 41 | ||||||||||||
U.S. Government sponsored agencies |
- | 1,911 | - | 1,911 | ||||||||||||
Obligations of states and political subdivisions |
- | 212 | - | 212 | ||||||||||||
Agency mortgage-backed securities |
- | 8,730 | - | 8,730 | ||||||||||||
Other bonds, notes and debentures |
- | 3,277 | - | 3,277 | ||||||||||||
Other securities(a) |
79 | 113 | - | 192 | ||||||||||||
Available-for-sale securities(a) |
120 | 14,243 | - | 14,363 | ||||||||||||
Trading securities: |
||||||||||||||||
U.S. Treasury and Government agencies |
1 | - | - | 1 | ||||||||||||
U.S. Government sponsored agencies |
- | 6 | - | 6 | ||||||||||||
Obligations of states and political subdivisions |
- | 16 | 1 | 17 | ||||||||||||
Agency mortgage-backed securities |
- | 7 | - | 7 | ||||||||||||
Other bonds, notes and debentures |
- | 15 | - | 15 | ||||||||||||
Other securities |
161 | - | - | 161 | ||||||||||||
Trading securities |
162 | 44 | 1 | 207 | ||||||||||||
Residential mortgage loans held for sale |
- | 2,856 | - | 2,856 | ||||||||||||
Residential mortgage loans(b) |
- | - | 76 | 76 | ||||||||||||
Derivative assets: |
||||||||||||||||
Interest rate contracts |
2 | 1,445 | 60 | 1,507 | ||||||||||||
Foreign exchange contracts |
- | 201 | - | 201 | ||||||||||||
Equity contracts |
- | - | 177 | 177 | ||||||||||||
Commodity contracts |
- | 87 | - | 87 | ||||||||||||
Derivative assets |
2 | 1,733 | 237 | 1,972 | ||||||||||||
Total assets |
$284 | 18,876 | 314 | 19,474 | ||||||||||||
Liabilities: |
||||||||||||||||
Derivative liabilities |
||||||||||||||||
Interest rate contracts |
$ | 14 | 600 | 3 | 617 | |||||||||||
Foreign exchange contracts |
- | 183 | - | 183 | ||||||||||||
Equity contracts |
- | - | 33 | 33 | ||||||||||||
Commodity contracts |
- | 82 | - | 82 | ||||||||||||
Derivative liabilities |
14 | 865 | 36 | 915 | ||||||||||||
Short positions |
8 | 2 | - | 10 | ||||||||||||
Total liabilities |
$22 | 867 | 36 | 925 |
146 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair Value Measurements Using | ||||||||||||||||
December 31, 2011 ($ in millions) | Level 1(c) | Level 2(c) | Level 3 | Total Fair Value |
||||||||||||
Assets: |
||||||||||||||||
Available-for-sale securities: |
||||||||||||||||
U.S. Treasury and Government agencies |
$171 | - | - | 171 | ||||||||||||
U.S. Government sponsored agencies |
- | 1,962 | - | 1,962 | ||||||||||||
Obligations of states and political subdivisions |
- | 101 | - | 101 | ||||||||||||
Agency mortgage-backed securities |
- | 10,284 | - | 10,284 | ||||||||||||
Other bonds, notes and debentures |
- | 1,812 | - | 1,812 | ||||||||||||
Other securities(a) |
185 | 5 | - | 190 | ||||||||||||
Available-for-sale securities(a) |
356 | 14,164 | - | 14,520 | ||||||||||||
Trading securities: |
||||||||||||||||
Obligations of states and political subdivisions |
- | 8 | 1 | 9 | ||||||||||||
Agency mortgage-backed securities |
- | 11 | - | 11 | ||||||||||||
Other bonds, notes and debentures |
- | 13 | - | 13 | ||||||||||||
Other securities |
144 | - | - | 144 | ||||||||||||
Trading securities |
144 | 32 | 1 | 177 | ||||||||||||
Residential mortgage loans held for sale |
- | 2,751 | - | 2,751 | ||||||||||||
Residential mortgage loans(b) |
- | - | 65 | 65 | ||||||||||||
Derivative assets: |
||||||||||||||||
Interest rate contracts |
8 | 1,773 | 34 | 1,815 | ||||||||||||
Foreign exchange contracts |
- | 294 | - | 294 | ||||||||||||
Equity contracts |
- | - | 113 | 113 | ||||||||||||
Commodity contracts |
- | 134 | - | 134 | ||||||||||||
Derivative assets |
8 | 2,201 | 147 | 2,356 | ||||||||||||
Total assets |
$508 | 19,148 | 213 | 19,869 | ||||||||||||
Liabilities: |
||||||||||||||||
Derivative liabilities |
||||||||||||||||
Interest rate contracts |
$ | 54 | 802 | 2 | 858 | |||||||||||
Foreign exchange contracts |
- | 275 | - | 275 | ||||||||||||
Equity contracts |
- | - | 81 | 81 | ||||||||||||
Commodity contracts |
- | 130 | - | 130 | ||||||||||||
Derivative liabilities |
54 | 1,207 | 83 | 1,344 | ||||||||||||
Short positions |
2 | 4 | - | 6 | ||||||||||||
Total liabilities |
$56 | 1,211 | 83 | 1,350 |
(a) | Excludes FHLB and FRB restricted stock totaling $497 and $347, respectively, at December 31, 2012 and $497 and $345, respectively, at December 31, 2011. |
(b) | Includes residential mortgage loans originated as held for sale and subsequently transferred to held for investment. |
(c) | During the years ended December 31, 2012 and 2011, no assets or liabilities were transferred between Level 1 and Level 2. |
Fifth Third Bancorp |
147 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
148 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following tables are a reconciliation of assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) |
||||||||||||||||||||
For the year ended December 31, 2012 ($ in millions) | Trading Securities |
Residential Mortgage Loans |
Interest Rate Derivatives, Net(a) |
Equity Derivatives, Net(a) |
Total Fair Value |
|||||||||||||||
Beginning balance |
$ | 1 | 65 | 32 | 32 | $ | 130 | |||||||||||||
Total gains or losses (realized/unrealized): |
||||||||||||||||||||
Included in earnings |
- | - | 418 | 22 | 440 | |||||||||||||||
Purchases |
- | - | - | - | - | |||||||||||||||
Settlements |
- | (15) | (393) | 90 | (318) | |||||||||||||||
Transfers into Level 3(b) |
- | 26 | - | - | 26 | |||||||||||||||
Ending balance |
$ | 1 | 76 | 57 | 144 | $ | 278 | |||||||||||||
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2012(c) |
$ | - | - | 233 | 22 | $ | 255 |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) |
||||||||||||||||||||
For the year ended December 31, 2011 ($ in millions) | Trading Securities |
Residential Mortgage Loans |
Interest Rate Derivatives, Net(a) |
Equity Derivatives, Net(a) |
Total Fair Value |
|||||||||||||||
Beginning balance |
$ | 6 | 46 | 2 | 53 | $ | 107 | |||||||||||||
Total gains or losses (realized/unrealized): |
||||||||||||||||||||
Included in earnings |
- | 4 | 205 | (43) | 166 | |||||||||||||||
Purchases |
- | - | - | 2 | 2 | |||||||||||||||
Sales |
(5) | - | - | - | (5) | |||||||||||||||
Settlements |
- | (9) | (175) | 20 | (164) | |||||||||||||||
Transfers into Level 3(b) |
- | 24 | - | - | 24 | |||||||||||||||
Ending balance |
$ | 1 | 65 | 32 | 32 | $ | 130 | |||||||||||||
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2011(c) |
$ | - | 4 | 32 | (43) | $ | (7) |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) |
||||||||||||||||||||||||
For the year ended December 31, 2010 ($ in millions) | Residual Interests in Securitizations |
Trading Securities |
Residential Mortgage Loans |
Interest Rate Derivatives, Net(a) |
Equity Derivatives, Net(a) |
Total Fair Value |
||||||||||||||||||
Beginning balance |
$ | 174 | 13 | 26 | (2) | 11 | $ | 222 | ||||||||||||||||
Total gains or losses (realized/unrealized): |
||||||||||||||||||||||||
Included in earnings |
- | 3 | - | 187 | (14) | 176 | ||||||||||||||||||
Purchases, sales, issuances, and settlements, net |
(174)(d) | (10) | (6) | (183) | 56 | (317) | ||||||||||||||||||
Transfers into Level 3(b) |
- | - | 26 | - | - | 26 | ||||||||||||||||||
Ending balance |
$ | - | 6 | 46 | 2 | 53 | $ | 107 | ||||||||||||||||
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2010(c) |
$ | - | - | - | 60 | (14) | $ | 46 |
(a) | Net interest rate derivatives include derivative assets and liabilities of $60 and $3, respectively, as of December 31, 2012, $34 and $2, respectively as of December 31, 2011 and $13 and $11, respectively, as of December 31, 2010. Net equity derivatives include derivative assets and liabilities of $177 and $33, respectively, as of December 31, 2012, $113 and $81, respectively, as of December 31, 2011, and $81 and $28, respectively, as of December 31, 2010. |
(b) | Includes residential mortgage loans held for sale that were transferred to held for investment. |
(c) | Includes interest income and expense. |
(d) | Due to a change in U.S. GAAP adopted by the Bancorp on January 1, 2010, all residual interests in securitizations were eliminated concurrent with the consolidation of the related VIEs. |
Fifth Third Bancorp |
149 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The total gains and losses included in earnings for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) were recorded in the Consolidated Statements of Income as follows:
($ in millions) | 2012 | 2011 | 2010 | |||||||||
Mortgage banking net revenue |
418 | 210 | 187 | |||||||||
Corporate banking revenue |
1 | 2 | 1 | |||||||||
Other noninterest income |
21 | (46) | (15) | |||||||||
Securities gains, net |
- | - | 3 | |||||||||
Total gains |
$440 | 166 | 176 |
The total gains and losses included in earnings attributable to changes in unrealized gains and losses related to Level 3 assets and liabilities still held at December 31, 2012, 2011 and 2010 were recorded in the Consolidated Statements of Income as follows:
($ in millions) | 2012 | 2011 | 2010 | |||||||||
Mortgage banking net revenue |
233 | 37 | 60 | |||||||||
Corporate banking revenue |
1 | 1 | 1 | |||||||||
Other noninterest income |
21 | (45) | (15) | |||||||||
Total (losses) gains |
$255 | (7) | 46 |
The following table presents information as of December 31, 2012 about significant unobservable inputs related to the Bancorps material categories of Level 3 financial assets and liabilities measured on a recurring basis:
($ in millions) | ||||||||||||||
Financial Instrument | Fair Value | Valuation Technique | Significant Unobservable Inputs |
Ranges of Inputs |
Weighted-Average | |||||||||
Residential mortgage loans | $ 76 | Loss rate model | Interest rate risk factor | (91.2) - 17.0% | 5.8% | |||||||||
Credit risk factor | 0 - 68.4% | 4.3% | ||||||||||||
IRLCs, net | 60 | Discounted cash flow | Loan closing rates | 9.9 - 95.0% | 58.3% | |||||||||
Stock warrants associated with the sale of the processing business |
177 | Black-Scholes option valuation model |
Expected term (years) | 2.00 - 16.50 | 6.2 | |||||||||
Expected volatility(a) | 27.2 - 40.0% | 33.8% | ||||||||||||
Expected dividend rate | - | - | ||||||||||||
Swap associated with the sale of Visa, Inc. Class B shares |
(33) | Discounted cash flow | Timing of the resolution of the Covered Litigation |
|
12/31/2013 - 12/31/2016 |
|
NM |
(a) | Based on historical and implied volatilities of comparable companies assuming similar expected terms. |
The following tables represent those assets that were subject to fair value adjustments during the years ended December 31, 2012 and 2011 and still held as of the end of the period, and the related losses from fair value adjustments on assets sold during the period as well as assets still held as of the end of the period:
Fair Value Measurements Using |
Total Losses |
|||||||||||||||||||
As of December 31, 2012 ($ in millions) | Level 1 | Level 2 | Level 3 | Total | 2012 | |||||||||||||||
Commercial loans held for sale(a) |
$ | - | - | 9 | 9 | (13 | ) | |||||||||||||
Commercial and industrial loans |
- | - | 83 | 83 | (122 | ) | ||||||||||||||
Commercial mortgage loans |
- | - | 46 | 46 | (50 | ) | ||||||||||||||
Commercial construction loans |
- | - | 4 | 4 | (22 | ) | ||||||||||||||
MSRs |
- | - | 697 | 697 | (103 | ) | ||||||||||||||
OREO property |
- | - | 165 | 165 | (74 | ) | ||||||||||||||
Total |
$ | - | - | 1,004 | 1,004 | (384 | ) |
150 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair Value Measurements Using |
Total Losses |
|||||||||||||||||||
As of December 31, 2011 ($ in millions) | Level 1 | Level 2 | Level 3 | Total | 2011 | |||||||||||||||
Commercial loans held for sale(a) |
$ | - | - | 27 | 27 | (67 | ) | |||||||||||||
Commercial and industrial loans |
- | - | 101 | 101 | (328 | ) | ||||||||||||||
Commercial mortgage loans |
- | - | 85 | 85 | (124 | ) | ||||||||||||||
Commercial construction loans |
- | - | 55 | 55 | (60 | ) | ||||||||||||||
MSRs |
- | - | 681 | 681 | (242 | ) | ||||||||||||||
OREO property |
- | - | 224 | 224 | (171 | ) | ||||||||||||||
Total |
$ | - | - | 1,173 | 1,173 | (992 | ) |
(a) | Includes commercial nonaccrual loans held for sale. |
The following table presents information as of December 31, 2012 about significant unobservable inputs related to the Bancorps material categories of Level 3 financial assets and liabilities measured on a nonrecurring basis:
($ in millions) | ||||||||||||
Financial Instrument | Fair Value | Valuation Technique | Significant Unobservable Inputs |
Ranges of Inputs |
Weighted-Average | |||||||
Commercial loans held for sale |
$ 9 | Appraised value |
Appraised value |
NM | NM | |||||||
Cost to sell |
NM | 10.0% | ||||||||||
Commercial and industrial loans |
83 | Appraised value |
Default rates |
100% | NM | |||||||
Collateral value |
NM | NM | ||||||||||
Loss severities |
0 - 100% | 8.9% | ||||||||||
Commercial mortgage loans |
46 | Appraised value |
Default rates |
100% | NM | |||||||
Collateral value |
NM | NM | ||||||||||
Loss severities |
0 - 100% | 19.9% | ||||||||||
Commercial construction loans |
4 | Appraised value |
Default rates |
100% | NM | |||||||
Collateral value |
NM | NM | ||||||||||
Loss severities |
0 - 21.5% | 8.9% | ||||||||||
MSRs |
697 | Discounted cash flow |
Prepayment speed |
0 - 100% | (Fixed) 16.1% (Adjustable) 26.9% | |||||||
Discount rates |
9.4 - 18.0% | (Fixed) 10.5% (Adjustable) 11.7% | ||||||||||
OREO property |
165 | Appraised value |
Appraised value |
NM | NM |
Fifth Third Bancorp |
151 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the difference between the fair value and the principal balance for residential mortgage loans measured at fair value as of:
($ in millions) | Aggregate Fair Value |
Aggregate Unpaid Principal Balance |
Difference | |||||||||
December 31, 2012 |
||||||||||||
Residential mortgage loans measured at fair value |
$2,932 | 2,775 | 157 | |||||||||
Past due loans of 90 days or more |
3 | 4 | (1) | |||||||||
Nonaccrual loans |
- | 1 | (1) | |||||||||
December 31, 2011 |
||||||||||||
Residential mortgage loans measured at fair value |
$2,816 | 2,693 | 123 | |||||||||
Past due loans of 90 days or more |
4 | 5 | (1) | |||||||||
Nonaccrual loans |
- | - | - |
152 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair Value of Certain Financial Instruments
The following tables summarize the carrying amounts and estimated fair values for certain financial instruments, excluding financial instruments measured at fair value on a recurring basis:
Net Carrying | Fair Value Measurements Using | Total | ||||||||||||||||||
As of December 31, 2012 ($ in millions) | Amount | Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||||
Financial assets: |
||||||||||||||||||||
Cash and due from banks |
$ | 2,441 | 2,441 | - | - | 2,441 | ||||||||||||||
Other securities |
844 | - | 844 | - | 844 | |||||||||||||||
Held-to-maturity securities |
284 | - | - | 284 | 284 | |||||||||||||||
Other short-term investments |
2,421 | 2,421 | - | - | 2,421 | |||||||||||||||
Loans held for sale |
83 | - | - | 83 | 83 | |||||||||||||||
Portfolio loans and leases: |
||||||||||||||||||||
Commercial and industrial loans |
35,236 | - | - | 36,496 | 36,496 | |||||||||||||||
Commercial mortgage loans |
8,770 | - | - | 8,020 | 8,020 | |||||||||||||||
Commercial construction loans |
665 | - | - | 505 | 505 | |||||||||||||||
Commercial leases |
3,481 | - | - | 3,310 | 3,310 | |||||||||||||||
Residential mortgage loans(a) |
11,712 | - | - | 11,532 | 11,532 | |||||||||||||||
Home equity |
9,875 | - | - | 9,798 | 9,798 | |||||||||||||||
Automobile loans |
11,944 | - | - | 12,076 | 12,076 | |||||||||||||||
Credit card |
2,010 | - | - | 2,139 | 2,139 | |||||||||||||||
Other consumer loans and leases |
270 | - | - | 288 | 288 | |||||||||||||||
Unallocated allowance for loan and lease losses |
(111 | ) | - | - | - | - | ||||||||||||||
Total portfolio loans and leases, net(a) |
83,852 | - | - | 84,164 | 84,164 | |||||||||||||||
Financial liabilities: |
||||||||||||||||||||
Deposits |
89,517 | - | 89,592 | - | 89,592 | |||||||||||||||
Federal funds purchased |
901 | 901 | - | - | 901 | |||||||||||||||
Other short-term borrowings |
6,280 | - | 6,280 | - | 6,280 | |||||||||||||||
Long-term debt |
7,085 | 6,925 | 884 | 7,809 |
(a) | Excludes $76 of residential mortgage loans measured at fair value on a recurring basis. |
As of December 31, 2011 ($ in millions) | Net Carrying Amount |
Fair Value |
||||||
Financial assets: |
||||||||
Cash and due from banks |
$ | 2,663 | 2,663 | |||||
Other securities |
842 | 842 | ||||||
Held-to-maturity securities |
322 | 322 | ||||||
Other short-term investments |
1,781 | 1,781 | ||||||
Loans held for sale |
203 | 203 | ||||||
Portfolio loans and leases: |
||||||||
Commercial and industrial loans |
29,854 | 30,300 | ||||||
Commercial mortgage loans |
9,697 | 8,870 | ||||||
Commercial construction loans |
943 | 791 | ||||||
Commercial leases |
3,451 | 3,237 | ||||||
Residential mortgage loans(a) |
10,380 | 9,978 | ||||||
Home equity |
10,524 | 9,737 | ||||||
Automobile loans |
11,784 | 11,747 | ||||||
Credit card |
1,872 | 1,958 | ||||||
Other consumer loans and leases |
329 | 346 | ||||||
Unallocated allowance for loan and lease losses |
(136 | ) | - | |||||
Total portfolio loans and leases, net(a) |
78,698 | 76,964 | ||||||
Financial liabilities: |
||||||||
Deposits |
85,710 | 85,599 | ||||||
Federal funds purchased |
346 | 346 | ||||||
Other short-term borrowings |
3,239 | 3,239 | ||||||
Long-term debt |
9,682 | 10,197 |
(a) | Excludes $65 of residential mortgage loans measured at fair value on a recurring basis. |
Fifth Third Bancorp |
153 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
154 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
27. CERTAIN REGULATORY REQUIREMENTS AND CAPITAL RATIOS
The following table presents capital and risk-based capital and leverage ratios for the Bancorp and its banking subsidiary at December 31:
2012 | 2011 | |||||||||||||||
($ in millions) | Amount | Ratio | Amount | Ratio | ||||||||||||
Tier I risk-based capital (to risk-weighted assets):(a) |
||||||||||||||||
Fifth Third Bancorp (Consolidated) |
$ | 11,685 | 10.65 | % | $ | 12,503 | 11.91 | % | ||||||||
Fifth Third Bank |
12,145 | 11.28 | 12,373 | 12.02 | ||||||||||||
Total risk-based capital (to risk-weighted assets):(a) |
||||||||||||||||
Fifth Third Bancorp (Consolidated) |
15,816 | 14.42 | 16,885 | 16.09 | ||||||||||||
Fifth Third Bank |
13,721 | 12.74 | 14,013 | 13.61 | ||||||||||||
Tier I leverage (to average assets): |
||||||||||||||||
Fifth Third Bancorp (Consolidated) |
11,685 | 10.05 | 12,503 | 11.10 | ||||||||||||
Fifth Third Bank |
12,145 | 10.65 | 12,373 | 11.20 |
(a) | Under the banking agencies risk-based capital guidelines, assets and credit equivalent amounts of derivatives and off-balance sheet exposures are assigned to broad risk categories. The aggregate dollar amount in each risk category is multiplied by the associated risk weight of the category. The resulting weighted values are added together resulting in the Bancorps total risk-weighted assets. |
Fifth Third Bancorp |
155 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
28. PARENT COMPANY FINANCIAL STATEMENTS
Condensed Statements of Income (Parent Company Only) | ||||||||||||
For the years ended December 31 ($ in millions) | 2012 | 2011 | 2010 | |||||||||
Income |
||||||||||||
Dividends from subsidiaries: |
||||||||||||
Consolidated bank subsidiaries(a) |
$ | | | | ||||||||
Consolidated nonbank subsidiary |
1,959 | 1,677 | 1,400 | |||||||||
Interest on loans to subsidiaries |
17 | 29 | 33 | |||||||||
Total income |
1,976 | 1,706 | 1,433 | |||||||||
Expenses |
||||||||||||
Interest |
215 | 216 | 188 | |||||||||
Other |
61 | 25 | 26 | |||||||||
Total expenses |
276 | 241 | 214 | |||||||||
Income Before Income Taxes and Change in Undistributed Earnings of Subsidiaries |
1,700 | 1,465 | 1,219 | |||||||||
Applicable income tax benefit |
96 | 79 | 64 | |||||||||
Income Before Change in Undistributed Earnings of Subsidiaries |
1,796 | 1,544 | 1,283 | |||||||||
Decrease in undistributed earnings |
(220 | ) | (247 | ) | (530 | ) | ||||||
Net Income |
$ | 1,576 | 1,297 | 753 |
(a) The Bancorps indirect banking subsidiary paid dividends, to the Bancorps direct nonbank subsidiary holding company of $2.0 billion, $2.0 billion, and $1.4 billion for the years ended 2012, 2011, and 2010, respectively.
Condensed Statements of Comprehensive Income (Parent Company Only) | ||||||||||||
For the years ended December 31 ($ in millions) | 2012 | 2011 | 2010 | |||||||||
Net income |
$ | 1,576 | 1,297 | 753 | ||||||||
Other comprehensive income (loss), net of tax: |
||||||||||||
Unrealized gains on cash flow hedge derivatives |
3 | 2 | (4 | ) | ||||||||
Other comprehensive income (loss) |
3 | 2 | (4 | ) | ||||||||
Comprehensive income |
1,579 | 1,299 | 749 | |||||||||
Less: Comprehensive income attributable to noncontrolling interests |
(2 | ) | 1 | | ||||||||
Comprehensive income attributable to Bancorp |
$ | 1,581 | 1,298 | 749 |
156 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Balance Sheets (Parent Company Only) |
||||||||
As of December 31 ($ in millions) |
2012 | 2011 | ||||||
Assets |
||||||||
Cash |
$ | | 50 | |||||
Short-term investments |
3,481 | 3,588 | ||||||
Loans to subsidiaries: |
||||||||
Bank subsidiaries |
| | ||||||
Nonbank subsidiaries |
1,021 | 1,032 | ||||||
Total loans to subsidiaries |
1,021 | 1,032 | ||||||
Investment in subsidiaries |
||||||||
Nonbank subsidiaries |
15,376 | 15,631 | ||||||
Total investment in subsidiaries |
15,376 | 15,631 | ||||||
Goodwill |
80 | 80 | ||||||
Other assets |
579 | 731 | ||||||
Total Assets |
$ | 20,537 | 21,112 | |||||
Liabilities |
||||||||
Other short-term borrowings |
566 | 655 | ||||||
Accrued expenses and other liabilities |
456 | 422 | ||||||
Long-term debt (external) |
5,751 | 6,784 | ||||||
Total Liabilities |
6,773 | 7,861 | ||||||
Parent Company Shareholders Equity |
13,764 | 13,251 | ||||||
Total Liabilities and Parent Company Shareholders Equity |
$ | 20,537 | 21,112 |
Condensed Statements of Cash Flows (Parent Company Only) |
||||||||||||
For the years ended December 31 ($ in millions) |
2012 | 2011 | 2010 | |||||||||
Operating Activities |
||||||||||||
Net income |
$ | 1,576 | 1,297 | 753 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||
Provision for (Benefit from) deferred income taxes |
2 | (3 | ) | (2 | ) | |||||||
Decrease in undistributed earnings |
220 | 247 | 530 | |||||||||
Net change in: |
||||||||||||
Other assets |
57 | 39 | (6 | ) | ||||||||
Accrued expenses and other liabilities |
18 | 3 | (339 | ) | ||||||||
Other, net |
| | (11 | ) | ||||||||
Net Cash Provided by Operating Activities |
1,873 | 1,583 | 925 | |||||||||
Investing Activities |
||||||||||||
Net change in: |
||||||||||||
Short-term investments |
107 | (635 | ) | (603 | ) | |||||||
Loans to subsidiaries |
11 | 489 | (161 | ) | ||||||||
Net Cash Provided by (Used in) Investing Activities |
118 | (146 | ) | (764 | ) | |||||||
Financing Activities |
||||||||||||
Net change in other short-term borrowings |
(89 | ) | 241 | 134 | ||||||||
Proceeds from issuance of long-term debt |
500 | 1,000 | | |||||||||
Repayment of long-term debt |
(1,440 | ) | (400 | ) | | |||||||
Dividends paid on common shares |
(309 | ) | (192 | ) | (32 | ) | ||||||
Dividends paid on preferred shares |
(35 | ) | (50 | ) | (205 | ) | ||||||
Issuance of common shares |
| 1,648 | | |||||||||
Repurchases of treasury shares and related forward contracts |
(650 | ) | | | ||||||||
Redemption of Series F preferred shares and related warrants |
| (3,688 | ) | | ||||||||
Other, net |
(18 | ) | (6 | ) | | |||||||
Net Cash Used in Financing Activities |
(2,041 | ) | (1,447 | ) | (103 | ) | ||||||
Net (Decrease) Increase in Cash |
(50 | ) | (10 | ) | 58 | |||||||
Cash at Beginning of Year |
50 | 60 | 2 | |||||||||
Cash at End of Year |
$ | | 50 | 60 |
Fifth Third Bancorp |
157 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
158 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2012 ($ in millions) | Commercial Banking |
Branch Banking |
Consumer Lending |
Investment Advisors |
General Corporate and Other |
Eliminations | Total | |||||||||||||||||||||
Net interest income |
$ | 1,432 | 1,362 | 314 | 117 | 370 | | 3,595 | ||||||||||||||||||||
Provision for loan and lease losses |
223 | 294 | 176 | 10 | (400 | ) | | 303 | ||||||||||||||||||||
Net interest income after provision for loan |
||||||||||||||||||||||||||||
and lease losses |
1,209 | 1,068 | 138 | 107 | 770 | | 3,292 | |||||||||||||||||||||
Noninterest income: |
||||||||||||||||||||||||||||
Mortgage banking net revenue |
| 14 | 830 | 1 | | | 845 | |||||||||||||||||||||
Service charges on deposits |
225 | 294 | | 3 | | | 522 | |||||||||||||||||||||
Corporate banking revenue |
395 | 15 | | 3 | | 413 | ||||||||||||||||||||||
Investment advisory revenue |
6 | 129 | | 366 | | (127 | )(a) | 374 | ||||||||||||||||||||
Card and processing revenue |
46 | 279 | | 4 | (76 | ) | | 253 | ||||||||||||||||||||
Other noninterest income |
65 | 81 | 42 | 19 | 367 | | 574 | |||||||||||||||||||||
Securities gains, net |
| | 1 | | 14 | | 15 | |||||||||||||||||||||
Securities gains, netnon-qualifying hedges on mortgage servicing rights |
| | 3 | | | | 3 | |||||||||||||||||||||
Total noninterest income |
737 | 812 | 876 | 396 | 305 | (127 | ) | 2,999 | ||||||||||||||||||||
Noninterest expense: |
||||||||||||||||||||||||||||
Salaries, wages and incentives |
229 | 448 | 192 | 136 | 602 | | 1,607 | |||||||||||||||||||||
Employee benefits |
39 | 125 | 39 | 25 | 143 | | 371 | |||||||||||||||||||||
Net occupancy expense |
21 | 187 | 8 | 11 | 75 | | 302 | |||||||||||||||||||||
Technology and communications |
10 | 3 | 1 | | 182 | | 196 | |||||||||||||||||||||
Card and processing expense |
5 | 115 | | | 1 | | 121 | |||||||||||||||||||||
Equipment expense |
2 | 54 | 1 | 1 | 52 | | 110 | |||||||||||||||||||||
Other noninterest expense |
800 | 660 | 429 | 264 | (652 | ) | (127 | ) | 1,374 | |||||||||||||||||||
Total noninterest expense |
1,106 | 1,592 | 670 | 437 | 403 | (127 | ) | 4,081 | ||||||||||||||||||||
Income before income taxes |
840 | 288 | 344 | 66 | 672 | | 2,210 | |||||||||||||||||||||
Applicable income tax expense |
146 | 102 | 121 | 23 | 244 | | 636 | |||||||||||||||||||||
Net income |
694 | 186 | 223 | 43 | 428 | | 1,574 | |||||||||||||||||||||
Less: Net income attributable to noncontrolling interests |
| | | | (2 | ) | | (2 | ) | |||||||||||||||||||
Net income attributable to Bancorp |
694 | 186 | 223 | 43 | 430 | | 1,576 | |||||||||||||||||||||
Dividends on preferred stock |
| | | | 35 | | 35 | |||||||||||||||||||||
Net income available to common shareholders |
$ | 694 | 186 | 223 | 43 | 395 | | 1,541 | ||||||||||||||||||||
Total goodwill |
$ | 613 | 1,655 | | 148 | | | 2,416 | ||||||||||||||||||||
Total assets |
$ | 48,693 | 48,856 | 24,657 | 9,212 | (9,524 | ) | | 121,894 |
(a) | Revenue sharing agreements between Investment Advisors and Branch Banking are eliminated in the Consolidated Statements of Income |
Fifth Third Bancorp |
159 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2011 ($ in millions) | Commercial Banking |
Branch Banking |
Consumer Lending |
Investment Advisors |
General Corporate and Other |
Eliminations | Total | |||||||||||||||||||||
Net interest income |
$ | 1,357 | 1,423 | 343 | 113 | 321 | | 3,557 | ||||||||||||||||||||
Provision for loan and lease losses |
490 | 393 | 261 | 27 | (748 | ) | | 423 | ||||||||||||||||||||
Net interest income after provision for loan and lease losses |
867 | 1,030 | 82 | 86 | 1,069 | | 3,134 | |||||||||||||||||||||
Noninterest income: |
||||||||||||||||||||||||||||
Mortgage banking net revenue |
| 11 | 585 | 1 | | | 597 | |||||||||||||||||||||
Service charges on deposits |
207 | 309 | | 4 | | | 520 | |||||||||||||||||||||
Corporate banking revenue |
332 | 14 | | 3 | 1 | | 350 | |||||||||||||||||||||
Investment advisory revenue |
12 | 117 | | 364 | (1 | ) | (117 | )(a) | 375 | |||||||||||||||||||
Card and processing revenue |
38 | 305 | | 4 | (39 | ) | | 308 | ||||||||||||||||||||
Other noninterest income |
52 | 81 | 36 | (3 | ) | 84 | | 250 | ||||||||||||||||||||
Securities gains, net |
| | | | 46 | | 46 | |||||||||||||||||||||
Securities gains, netnon-qualifying hedges on mortgage servicing rights |
| | 9 | | | | 9 | |||||||||||||||||||||
Total noninterest income |
641 | 837 | 630 | 373 | 91 | (117 | ) | 2,455 | ||||||||||||||||||||
Noninterest expense: |
||||||||||||||||||||||||||||
Salaries, wages and incentives |
203 | 454 | 149 | 138 | 534 | | 1,478 | |||||||||||||||||||||
Employee benefits |
37 | 127 | 34 | 26 | 106 | | 330 | |||||||||||||||||||||
Net occupancy expense |
20 | 184 | 8 | 11 | 82 | | 305 | |||||||||||||||||||||
Technology and communications |
11 | 5 | 1 | 1 | 170 | | 188 | |||||||||||||||||||||
Card and processing expense |
5 | 114 | | | 1 | | 120 | |||||||||||||||||||||
Equipment expense |
2 | 51 | 1 | 1 | 58 | | 113 | |||||||||||||||||||||
Other noninterest expense |
795 | 640 | 433 | 244 | (771 | ) | (117 | ) | 1,224 | |||||||||||||||||||
Total noninterest expense |
1,073 | 1,575 | 626 | 421 | 180 | (117 | ) | 3,758 | ||||||||||||||||||||
Income before income taxes |
435 | 292 | 86 | 38 | 980 | | 1,831 | |||||||||||||||||||||
Applicable income tax (benefit) expense |
(6 | ) | 102 | 30 | 14 | 393 | | 533 | ||||||||||||||||||||
Net income |
441 | 190 | 56 | 24 | 587 | | 1,298 | |||||||||||||||||||||
Less: Net income attributable to noncontrolling interest |
| | | | 1 | | 1 | |||||||||||||||||||||
Net income attributable to Bancorp |
441 | 190 | 56 | 24 | 586 | | 1,297 | |||||||||||||||||||||
Dividends on preferred stock |
| | | | 203 | | 203 | |||||||||||||||||||||
Net income available to common shareholders |
$ | 441 | 190 | 56 | 24 | 383 | | 1,094 | ||||||||||||||||||||
Total goodwill |
$ | 613 | 1,656 | | 148 | | | 2,417 | ||||||||||||||||||||
Total assets |
$ | 45,864 | 46,703 | 24,325 | 7,670 | (7,595 | ) | | 116,967 |
(a) | Revenue sharing agreements between Investment Advisors and Branch Banking are eliminated in the Consolidated Statements of Income. |
160 |
Fifth Third Bancorp |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2010 ($ in millions) | Commercial Banking |
Branch Banking |
Consumer Lending |
Investment Advisors |
General Corporate and Other |
Eliminations | Total | |||||||||||||||||||||
Net interest income |
$ | 1,531 | 1,514 | 405 | 138 | 16 | | 3,604 | ||||||||||||||||||||
Provision for loan and lease losses |
1,159 | 555 | 569 | 44 | (789 | ) | | 1,538 | ||||||||||||||||||||
Net interest income (loss) after provision for loan and lease losses |
372 | 959 | (164 | ) | 94 | 805 | | 2,066 | ||||||||||||||||||||
Noninterest income: |
||||||||||||||||||||||||||||
Mortgage banking net revenue |
| 27 | 619 | 2 | (1 | ) | | 647 | ||||||||||||||||||||
Service charges on deposits |
199 | 369 | 1 | 6 | (1 | ) | | 574 | ||||||||||||||||||||
Corporate banking revenue |
346 | 15 | | 3 | | | 364 | |||||||||||||||||||||
Investment advisory revenue |
15 | 106 | | 346 | | (106 | )(a) | 361 | ||||||||||||||||||||
Card and processing revenue |
33 | 298 | | 1 | (16 | ) | | 316 | ||||||||||||||||||||
Other noninterest income |
42 | 70 | 36 | (2 | ) | 260 | | 406 | ||||||||||||||||||||
Securities gains, net |
| | | | 47 | | 47 | |||||||||||||||||||||
Securities gains, netnon-qualifying hedges on mortgage servicing rights |
| | 14 | | | | 14 | |||||||||||||||||||||
Total noninterest income |
635 | 885 | 670 | 356 | 289 | (106 | ) | 2,729 | ||||||||||||||||||||
Noninterest expense: |
||||||||||||||||||||||||||||
Salaries, wages and incentives |
182 | 439 | 163 | 131 | 515 | | 1,430 | |||||||||||||||||||||
Employee benefits |
32 | 121 | 31 | 25 | 105 | | 314 | |||||||||||||||||||||
Net occupancy expense |
16 | 174 | 7 | 9 | 92 | | 298 | |||||||||||||||||||||
Technology and communications |
14 | 16 | 2 | 2 | 155 | | 189 | |||||||||||||||||||||
Card and processing expense |
2 | 105 | | | 1 | | 108 | |||||||||||||||||||||
Equipment expense |
2 | 49 | 1 | 1 | 69 | | 122 | |||||||||||||||||||||
Other noninterest expense |
723 | 652 | 342 | 237 | (454 | ) | (106 | ) | 1,394 | |||||||||||||||||||
Total noninterest expense |
971 | 1,556 | 546 | 405 | 483 | (106 | ) | 3,855 | ||||||||||||||||||||
Income (loss) before income taxes |
36 | 288 | (40 | ) | 45 | 611 | | 940 | ||||||||||||||||||||
Applicable income tax expense (benefit) |
(142 | ) | 103 | (14 | ) | 16 | 224 | | 187 | |||||||||||||||||||
Net income (loss) |
178 | 185 | (26 | ) | 29 | 387 | | 753 | ||||||||||||||||||||
Less: Net income attributable to noncontrolling interest |
| | | | | | | |||||||||||||||||||||
Net income (loss) attributable to Bancorp |
178 | 185 | (26 | ) | 29 | 387 | | 753 | ||||||||||||||||||||
Dividends on preferred stock |
| | | | 250 | | 250 | |||||||||||||||||||||
Net income available to common shareholders |
$ | 178 | 185 | (26 | ) | 29 | 137 | | 503 | |||||||||||||||||||
Total goodwill |
$ | 613 | 1,656 | | 148 | | | 2,417 | ||||||||||||||||||||
Total assets |
$ | 43,609 | 46,244 | 22,604 | 6,759 | (8,209 | ) | | 111,007 |
(a) | Revenue sharing agreements between Investment Advisors and Branch Banking are eliminated in the Consolidated Statements of Income. |
Fifth Third Bancorp |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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164 |
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166 |
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168 |
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170 |
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PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Bancorps common stock is traded in the over-the-counter market and is listed under the symbol FITB on the NASDAQ® Global Select Market System.
High and Low Stock Prices and Dividends Paid Per Share
2012 | High | Low | Dividends Paid Per Share | |||||||
Fourth Quarter |
$ | 16.16 | $ | 13.75 | $0.10 | |||||
Third Quarter |
$ | 15.95 | $ | 13.07 | $0.10 | |||||
Second Quarter |
$ | 14.67 | $ | 12.04 | $0.08 | |||||
First Quarter |
$ | 14.73 | $ | 12.78 | $0.08 | |||||
2011 | High | Low | Dividends Paid Per Share | |||||||
Fourth Quarter |
$ | 13.08 | $ | 9.60 | $0.08 | |||||
Third Quarter |
$ | 13.09 | $ | 9.13 | $0.08 | |||||
Second Quarter |
$ | 14.15 | $ | 11.88 | $0.06 | |||||
First Quarter |
$ | 15.75 | $ | 13.25 | $0.06 |
See a discussion of dividend limitations that the subsidiaries can pay to the Bancorp discussed in Note 3 of the Notes to the Consolidated Financial Statements. Additionally, as of December 31, 2012, the Bancorp had 52,997 shareholders of record.
Issuer Purchases of Equity Securities
Period | Shares Purchased(a) |
Average Price Paid Per Share |
Shares Purchased as Part of Publicly Announced Plans or Programs |
Maximum Shares that May Be Purchased Under the Plans or Programs |
||||||||||||
October 2012 |
1,444,047 | $ | 15.23 | 1,444,047 | 77,024,853 | |||||||||||
November 2012 |
7,710,761 | 14.35 | 7,710,761 | 69,314,092 | ||||||||||||
December 2012 |
6,267,410 | 14.83 | 6,267,410 | 63,046,682 | ||||||||||||
Total |
15,422,218 | $ | 14.63 | 15,422,218 | 63,046,682 |
(a) | The Bancorp repurchased 87,515, 65,484 and 55,046 shares during October, November and December of 2012 in connection with various employee compensation plans of the Bancorp. These purchases are not included against the maximum number of shares that may yet be purchased under the Board of Directors authorization. |
See further discussion of stock-based compensation in Note 23 of the Notes to the Consolidated Financial Statements.
Fifth Third Bancorp |
171 |
The following performance graphs do not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Bancorp specifically incorporates the performance graphs by reference therein.
Total Return Analysis
The graphs below summarize the cumulative return experienced by the Bancorps shareholders over the years 2007 through 2012, and 2002 through 2012, respectively, compared to the S&P 500 Stock and the S&P Banks indices.
FIFTH THIRD BANCORP VS. MARKET INDICES
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173 |
174 |
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175 |
176 |
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CONSOLIDATED TEN YEAR COMPARISON
AVERAGE ASSETS ($ IN MILLIONS) | ||||||||||||||||||||||||||||||||
Interest-Earning Assets | ||||||||||||||||||||||||||||||||
Year | Loans and Leases |
Federal Funds Sold (a) |
Interest- Bearing Deposits in Banks (a) |
Securities | Total | Cash and Due from Banks |
Other Assets |
Total Average Assets |
||||||||||||||||||||||||
2012 |
$ | 84,822 | 2 | 1,493 | 15,319 | $ | 101,636 | 2,355 | 15,695 | $ | 117,614 | |||||||||||||||||||||
2011 |
80,214 | 1 | 2,030 | 15,437 | 97,682 | 2,352 | 15,335 | 112,666 | ||||||||||||||||||||||||
2010 |
79,232 | 11 | 3,317 | 16,371 | 98,931 | 2,245 | 14,841 | 112,434 | ||||||||||||||||||||||||
2009 |
83,391 | 12 | 1,023 | 17,100 | 101,526 | 2,329 | 14,266 | 114,856 | ||||||||||||||||||||||||
2008 |
85,835 | 438 | 183 | 13,424 | 99,880 | 2,490 | 13,411 | 114,296 | ||||||||||||||||||||||||
2007 |
78,348 | 257 | 147 | 11,630 | 90,382 | 2,275 | 10,613 | 102,477 | ||||||||||||||||||||||||
2006 |
73,493 | 252 | 144 | 20,910 | 94,799 | 2,477 | 8,713 | 105,238 | ||||||||||||||||||||||||
2005 |
67,737 | 88 | 113 | 24,806 | 92,744 | 2,750 | 8,102 | 102,876 | ||||||||||||||||||||||||
2004 |
57,042 | 120 | 195 | 30,282 | 87,639 | 2,216 | 5,763 | 94,896 | ||||||||||||||||||||||||
2003 |
52,414 | 92 | 215 | 28,640 | 81,361 | 1,600 | 5,250 | 87,481 |
AVERAGE DEPOSITS AND SHORT-TERM BORROWINGS ($ IN MILLIONS) | ||||||||||||||||||||||||||||||||||||||||
Deposits | ||||||||||||||||||||||||||||||||||||||||
Year | Demand | Interest Checking |
Savings | Money Market |
Other Time |
Certificates $100,000 and Over |
Foreign Office |
Total | Short-Term Borrowings |
Total | ||||||||||||||||||||||||||||||
2012 |
$ | 27,196 | 23,096 | 21,393 | 4,903 | 4,306 | 3,102 | 1,555 | $ | 85,551 | 4,806 | $ | 90,357 | |||||||||||||||||||||||||||
2011 |
23,389 | 18,707 | 21,652 | 5,154 | 6,260 | 3,656 | 3,497 | 82,315 | 3,122 | 85,437 | ||||||||||||||||||||||||||||||
2010 |
19,669 | 18,218 | 19,612 | 4,808 | 10,526 | 6,083 | 3,361 | 82,277 | 1,926 | 84,203 | ||||||||||||||||||||||||||||||
2009 |
16,862 | 15,070 | 16,875 | 4,320 | 14,103 | 10,367 | 2,265 | 79,862 | 6,980 | 86,842 | ||||||||||||||||||||||||||||||
2008 |
14,017 | 14,191 | 16,192 | 6,127 | 11,135 | 9,531 | 4,220 | 75,413 | 10,760 | 86,173 | ||||||||||||||||||||||||||||||
2007 |
13,261 | 14,820 | 14,836 | 6,308 | 10,778 | 6,466 | 3,155 | 69,624 | 6,890 | 76,514 | ||||||||||||||||||||||||||||||
2006 |
13,741 | 16,650 | 12,189 | 6,366 | 10,500 | 5,795 | 3,711 | 68,952 | 8,670 | 77,622 | ||||||||||||||||||||||||||||||
2005 |
13,868 | 18,884 | 10,007 | 5,170 | 8,491 | 4,001 | 3,967 | 64,388 | 9,511 | 73,899 | ||||||||||||||||||||||||||||||
2004 |
12,327 | 19,434 | 7,941 | 3,473 | 6,208 | 2,403 | 4,449 | 56,235 | 13,539 | 69,774 | ||||||||||||||||||||||||||||||
2003 |
10,482 | 18,679 | 8,020 | 3,189 | 6,426 | 3,832 | 3,862 | 54,490 | 12,373 | 66,863 |
INCOME ($ IN MILLIONS, EXCEPT PER SHARE DATA) | ||||||||||||||||||||||||||||||||||||||||
Per Share (b) | ||||||||||||||||||||||||||||||||||||||||
Originally Reported | ||||||||||||||||||||||||||||||||||||||||
Year | Interest Income |
Interest Expense |
Noninterest Income |
Noninterest Expense |
Net Income (Loss) Available to Common Shareholders |
Earnings | Diluted Earnings |
Dividends Declared |
Earnings | Diluted Earnings |
||||||||||||||||||||||||||||||
2012 |
$ | 4,107 | 512 | 2,999 | 4,081 | 1,541 | 1.69 | 1.66 | 0.36 | 1.69 | $ | 1.66 | ||||||||||||||||||||||||||||
2011 |
4,218 | 661 | 2,455 | 3,758 | 1,094 | 1.20 | 1.18 | 0.28 | 1.20 | 1.18 | ||||||||||||||||||||||||||||||
2010 |
4,489 | 885 | 2,729 | 3,855 | 503 | 0.63 | 0.63 | 0.04 | 0.63 | 0.63 | ||||||||||||||||||||||||||||||
2009 |
4,668 | 1,314 | 4,782 | 3,826 | 511 | 0.73 | 0.67 | 0.04 | 0.73 | 0.67 | ||||||||||||||||||||||||||||||
2008 |
5,608 | 2,094 | 2,946 | 4,564 | (2,180 | ) | (3.91 | ) | (3.91 | ) | 0.75 | (3.94 | ) | (3.94 | ) | |||||||||||||||||||||||||
2007 |
6,027 | 3,018 | 2,467 | 3,311 | 1,075 | 1.99 | 1.98 | 1.70 | 2.00 | 1.99 | ||||||||||||||||||||||||||||||
2006 |
5,955 | 3,082 | 2,012 | 2,915 | 1,188 | 2.13 | 2.12 | 1.58 | 2.14 | 2.13 | ||||||||||||||||||||||||||||||
2005 |
4,995 | 2,030 | 2,374 | 2,801 | 1,548 | 2.79 | 2.77 | 1.46 | 2.79 | 2.77 | ||||||||||||||||||||||||||||||
2004 |
4,114 | 1,102 | 2,355 | 2,863 | 1,524 | 2.72 | 2.68 | 1.31 | 2.72 | 2.68 | ||||||||||||||||||||||||||||||
2003 |
3,991 | 1,086 | 2,398 | 2,466 | 1,664 | 2.91 | 2.87 | 1.13 | 2.91 | 2.87 |
MISCELLANEOUS AT DECEMBER 31 ($ IN MILLIONS, EXCEPT PER SHARE DATA) | ||||||||||||||||||||||||||||||||||||||||
Bancorp Shareholders Equity | ||||||||||||||||||||||||||||||||||||||||
Year | Common Shares Outstanding |
Common Stock |
Preferred Stock |
Capital Surplus |
Retained Earnings |
Accumulated Other Comprehensive Income |
Treasury Stock |
Total | Book Value Per Share |
Allowance for Loan and Leases Losses |
||||||||||||||||||||||||||||||
2012 |
882,152,057 | $ | 2,051 | 398 | 2,758 | 8,768 | 375 | (634 | ) | $ | 13,716 | 15.10 | $ | 1,854 | ||||||||||||||||||||||||||
2011 |
919,804,436 | 2,051 | 398 | 2,792 | 7,554 | 470 | (64 | ) | 13,201 | 13.92 | 2,255 | |||||||||||||||||||||||||||||
2010 |
796,272,522 | 1,779 | 3,654 | 1,715 | 6,719 | 314 | (130 | ) | 14,051 | 13.06 | 3,004 | |||||||||||||||||||||||||||||
2009 |
795,068,164 | 1,779 | 3,609 | 1,743 | 6,326 | 241 | (201 | ) | 13,497 | 12.44 | 3,749 | |||||||||||||||||||||||||||||
2008 |
577,386,612 | 1,295 | 4,241 | 848 | 5,824 | 98 | (229 | ) | 12,077 | 13.57 | 2,787 | |||||||||||||||||||||||||||||
2007 |
532,671,925 | 1,295 | 9 | 1,779 | 8,413 | (126 | ) | (2,209 | ) | 9,161 | 17.18 | 937 | ||||||||||||||||||||||||||||
2006 |
556,252,674 | 1,295 | 9 | 1,812 | 8,317 | (179 | ) | (1,232 | ) | 10,022 | 18.00 | 771 | ||||||||||||||||||||||||||||
2005 |
555,623,430 | 1,295 | 9 | 1,827 | 8,007 | (413 | ) | (1,279 | ) | 9,446 | 16.98 | 744 | ||||||||||||||||||||||||||||
2004 |
557,648,989 | 1,295 | 9 | 1,934 | 7,269 | (169 | ) | (1,414 | ) | 8,924 | 15.99 | 713 | ||||||||||||||||||||||||||||
2003 |
566,685,301 | 1,295 | 9 | 1,964 | 6,481 | (120 | ) | (962 | ) | 8,667 | 15.29 | 697 |
(a) | Federal funds sold and interest-bearing deposits in banks are combined in other short-term investments in the Consolidated Financial Statements. |
(b) | Adjusted for accounting guidance related to the calculation of earnings per share, which was adopted retroactively on January 1, 2009. |
178 |
Fifth Third Bancorp |
Fifth Third Bancorp |
179 |
Exhibit 10.7
SECOND AMENDMENT
TO
THE FIFTH THIRD BANCORP MASTER
PROFIT SHARING PLAN
(as amended and restated effective as of September 20, 2010)
Pursuant to the reserved power of amendment contained in Section 12.1 of The Fifth Third Bancorp Master Profit Sharing Plan (as amended and restated effective as of September 20, 2010) (the Plan), the Plan is hereby amended effective January 1, 2012 in the following respects:
1. Section 7.1(c)(2) is amended in its entirety and a new Section 7.1(c)(3) is added, to read as follows:
(2) Procedural. An investment election shall be made in such manner as the Administrator shall direct. The Administrator shall have the power and authority in its sole, absolute and uncontrolled discretion to prescribe rules and procedures applicable to this investment election feature. Without limitation, this may include rules and procedures which limit the frequency of changes to elections, prescribe times for making elections, including new elections when a core investment fund (referred to in (1)(A) above) is eliminated or when the Administrator determines to implement a re-enrollment, regulate the amount or increment a Participant may allocate to a particular fund or the self-directed brokerage account, require or allow an election (or election change) to relate only to future contributions, specify how an election may apply to the subaccounts within an Account and provide for the investment of an Account of a Participant who fails to make an investment election when required to do so, as more fully described in (3) below.
(3) Default Investment Alternative. The Administrator may designate one or more default investment alternatives and may prescribe the circumstances in which a Participants Account (or portion thereof) is to be invested in a default investment alternative. Such circumstances may include, without limitation, when an original investment election is not correctly and timely made by a Participant, when a core investment fund (referred to in (1)(A) above) is eliminated and a new election is not correctly and timely made by a Participant for any amounts in that fund, or in a re-enrollment in which Participants are required to make new investment elections, and a Participant does not respond with a correct and timely investment election.
The Administrator may administer the default investment alternatives in a manner intended to qualify for the safe harbor of ERISA §404(c)(5). Neither the Administrator, the Employer, nor the Trustee shall have any fiduciary responsibility in connection with the failure of a Participant to make an investment election when required to do so, or the resulting investment of his Account (or portion thereof) in a default investment alternative.
2. Section 8.6(d) of the Plan is hereby amended in its entirety to read as follows:
(d) Cash-Out Distributions.
(1) $5,000 and Under Cash-Out. Any other provisions of the Plan to the contrary notwithstanding, any amount payable to a Participant under the Plan shall be paid in a single sum, provided that the value of the Participants nonforfeitable benefit under the Plan (including the value of a Participants Rollover Account and other subaccounts specified in an Appendix attributable to rollover contributions), determined as of the date of distribution, does not exceed $5,000, and such payment is made before payment otherwise begins. Such single sum shall be paid as soon as administratively feasible after the amount otherwise becomes distributable under the Plan.
(2) Default Method of Payment. In the event of such a cash-out under (1) above (also referred to in Section 9.1(c)), if the Participant does not affirmatively make an election as to whether to have such distribution paid directly to an eligible retirement plan specified by the Participant in a direct rollover or to receive such distribution directly in accordance with Section 9.3, then the Administrator will pay the distribution as follows:
(A) Roth Accounts. If the portion of the distribution attributable to the Roth 401(k) Account and the Roth Rollover Account in the aggregate exceeds $1,000, then the Administrator will pay such portion of the distribution in a direct rollover to an individual retirement plan designated by the Administrator. If the portion of the distribution attributable to the Roth 401(k) Account and the Roth Rollover Account in the aggregate is $1,000 or less, then the Administrator will pay such portion of the distribution directly to the Participant.
(B) Non-Roth Accounts. If the portion of the distribution attributable to the non-Roth subaccounts (that is, all subaccounts other than the Roth 401(k) Account and the Roth Rollover Account) in the aggregate exceeds $1,000, then the Administrator will pay such portion of the distribution in a direct rollover to an individual retirement plan designated by the Administrator. If the portion of the distribution attributable to the non-Roth subaccounts in the aggregate is $1,000 or less, then the Administrator will pay such portion of the distribution directly to the Participant.
IN WITNESS WHEREOF, Fifth Third Bank has caused this Amendment to be adopted as of this day of , 2012.
FIFTH THIRD BANK | ||
BY: |
Exhibit 10.11
THE FIFTH THIRD BANCORP
NONQUALIFIED DEFERRED COMPENSATION PLAN
(as amended and restated effective as of January 1, 2013)
THE FIFTH THIRD BANCORP
NONQUALIFIED DEFERRED COMPENSATION PLAN
(as amended and restated effective as of January 1, 2013)
ARTICLE I INTRODUCTION AND SECTION 409A COMPLIANCE
1.1 | Amendment and Restatement. Fifth Third Bancorp most recently amended and restated The Fifth Third Bancorp Nonqualified Deferred Compensation Plan in its entirety effective January 1, 2009. That document was amended by the First and Second Amendments. Fifth Third Bancorp hereby again amends and restates the Plan effective January 1, 2013; provided however, Section 2.10 is effective as of the first day of the Open Enrollment Period relating to the 2012 Plan Year. |
1.2 | Transition Rules under Section 409A. |
(a) | 2005 Payment Elections. In accordance with Paragraph 10.3, the Committee allowed new payment elections under Article X in 2005 with respect to Pre-2013 Accounts which, for purposes of Article X, were treated as a Participants timely initial election under Paragraph 10.2(a) with respect to his Pre-2013 Account and not as a change in election under Paragraph 10.2(b). Any such election shall be administered by the Committee in its sole and absolute discretion and in compliance with Internal Revenue Service Notice 2005-1 and any other applicable legal authority. |
(b) | 2007 and 2008 Payment Elections. In its discretion, the Committee was authorized to allow a Participant who remained actively employed by an Employer to complete a new payment election under Paragraph 10.1 with respect to his Pre-2013 Account by a date in 2007 or 2008 determined by the Committee. The Committee was authorized to allow such an election on a case-by-case basis in its discretion without being required to extend the opportunity to all Participants. Any such election shall be treated as an initial election under Paragraph 10.2(a) with respect to his Pre-2013 Account and not a change under Paragraph 10.2(b). Any such election shall be administered by the Committee in compliance with Internal Revenue Service Notice 2006-79 (for elections in 2007) and Notice 2007-86 (for elections in 2008) and any other applicable legal authority. |
(c) | 2007 Performance Based Restricted Stock Deferral. In accordance with Paragraph 4.4, the Committee shall administer deferral elections with respect to certain Performance Based Restricted Stock in 2007. Any such election shall be administered by the Committee in its sole and absolute discretion and in compliance with Internal Revenue Service Notice 2006-79 and any other applicable legal authority. |
(d) | Required 2008 Payment Elections by Active Participants. A Participant who, as of the first day of the Open Enrollment Period in 2008, was actively employed by an Employer (i.e., had not had a Separation from Service) was required to complete a new payment election under Paragraph 10.1 by a date in 2008 determined by the Committee. Any such election shall be treated as an initial election under Paragraph 10.2(a) with respect to the Participants Pre-2013 Account and not a change under Paragraph 10.2(b). If such a Participant did not make a timely election in 2008 under this Paragraph 1.2(d), payment of his Pre-2013 Account shall be made (consistent with Paragraph 10.2(a)) as of the first business day of August of the Plan Year immediately following the Plan Year in which the Separation from Service occurs in a single lump sum cash distribution (except as provided in Paragraph 10.2(b) in the case of a valid change in payment election). Any prior payment elections by such a Participant shall have no force and effect. |
ARTICLE II DEFINITIONS
2.1 | Beneficiary shall mean the person or persons entitled to receive the distributions, if any, payable under the Plan upon or after a Participants death, to such person or persons as such Participants Beneficiary. Each Participant may designate a Beneficiary by filing the proper form with the Committee. A Participant may designate one or more contingent Beneficiaries to receive any distributions after the death of a prior Beneficiary. A designation shall be effective upon said filing, provided that it is so filed during such Participants lifetime, and may be changed from time to time by the Participant. If there is no designated Beneficiary to receive any amount that becomes payable to a Beneficiary, then the Participants Beneficiary shall be the estate of the last to die of the Participant and any properly designated Beneficiaries. |
2.2 | Claims Review Committee shall mean the committee established by the Committee for purposes of administering the claims and claim review procedures under the Plan. |
2.3 | Code shall mean the Internal Revenue Code of 1986, as amended at the particular time applicable. A reference to a section of the Code shall include said section and any comparable section or sections of any future legislation that amends, supplements or supersedes said section. |
2.4 | Committee shall mean The Fifth Third Bank Pension, Profit Sharing and Medical Plan Committee which is responsible for the administration of this Plan in accordance with the provisions of the Plan as set forth in this document. A reference to the Committee includes its delegate. |
2.5 | Compensation shall mean the total base earnings plus the cash portion of variable compensation (but excluding performance-based, additional cash compensation incentives) paid by an Employer to a Participant or which would otherwise be paid but for a deferral election hereunder. |
2.6 | Effective Date shall mean January 1, 2013. |
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2.7 | Employer shall mean Fifth Third Bank, an Ohio Banking Corporation, and any other subsidiary of Fifth Third Bancorp or any successor or assignee of any of them. |
2.8 | Executive shall mean an employee of an Employer who is employed on a full-time basis and who is a Bank President, Bank Executive Vice President, Bank Senior Vice President or Bank Vice President. For employment on and after the Effective Date, full-time employment status shall no longer be required such that for periods on and after the Effective Date, Executive shall mean an employee of an Employer (regardless of whether he is full-time or part-time) who is a Bank President, Bank Executive Vice President, Bank Senior Vice President or Bank Vice President. |
2.9 | Grandfathered Participant shall mean a Participant (other than an individual who is a Participant under Paragraph 2.13(b)) whose service with all Employers terminated prior to September 1, 1999. |
2.10 | Key Employee shall mean an employee of an Employer who is in Pay Band A, B, C, D, P or Q, as determined by Fifth Third Bancorp. |
2.11 | Master Profit Sharing Plan shall mean The Fifth Third Bancorp Master Profit Sharing Plan, as amended from time to time. |
2.12 | Open Enrollment Period shall mean such period no more than thirty (30) days in length prescribed by the Committee, closing no later than the last day of the Plan Year immediately preceding the Plan Year for which elections to defer Compensation under Article IV are permitted. |
2.13 | Participant shall mean any of the following: |
(a) | any Executive or Key Employee who satisfies the eligibility requirements of Article III and who receives an allocation to his Post-2012 Account or Pre-2013 Account under Article IV, Article V, or Article VI, as well as any former Executive or Key Employee who has a Pre-2013 Account or Post-2012 Account under the Plan; or |
(b) | any person who has a Predecessor Plan Account attributable to his employment covered by a Predecessor Plan. |
2.14 | Performance Based Restricted Stock shall mean common stock without par value of Fifth Third Bancorp, granted under the 2004 Fifth Third Bancorp Incentive Compensation Plan, or any successor plan, subject to the satisfaction of specified performance goals, provided the grant is not includible in the income of the recipient in the year of grant for federal income tax purposes (and the recipient does not make an election under section 83(b) of the Code to include the grant in income in the year of the grant). |
2.15 | Plan shall mean The Fifth Third Bancorp Nonqualified Deferred Compensation Plan as described in this instrument, and as may be amended, thereafter. |
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2.16 | Plan Year shall mean the calendar year. |
2.17 | Post-2012 Account shall mean the account established by an Employer as a book reserve to reflect the amounts credited to a Participant under this Plan for Plan Years after 2012. A Participants Post-2012 Account under the Plan may include one or more of the following subaccounts: |
(a) | Post-2012 Employee Contribution Account. |
(b) | Post-2012 Employer Contribution Account. |
2.18 | Post-2012 Employee Contribution Account shall mean the account established by an Employer as a book reserve to reflect the amounts deferred by a Participant under Paragraphs 4.1 and 4.2 for Plan Years beginning after 2012, as adjusted by earnings (and losses) under Article VIII and as reduced by distributions under Article X and Article XI. |
2.19 | Post-2012 Employer Contribution Account shall mean the account established by an Employer as a book reserve to reflect the amounts credited by an Employer as matching contributions under Article V for Plan Years beginning after 2012 and profit sharing contributions under Article VI for Plan Years beginning after 2012, as adjusted by earnings (and losses) under Article VIII and as reduced by distributions under Article X and Article XI. |
2.20 | Pre-2013 Account shall mean the account established by an Employer as a book reserve to reflect the amounts credited to a Participant under this Plan for Plan Years before 2013. A Participants Pre-2013 Account under the Plan may include one or more of the following subaccounts: |
(a) | Pre-2013 Deferred Compensation Account. |
(b) | Pre-2013 Matching Account. |
(c) | Predecessor Plan Account. |
(d) | Pre-2013 Profit Sharing Account. |
2.21 | Pre-2013 Deferred Compensation Account shall mean the account established by an Employer as a book reserve to reflect the amounts deferred by a Participant under Paragraphs 4.1 and 4.2 for Plan Years beginning before 2013, as adjusted by earnings (and losses) under Article VIII and as reduced by distributions under Article X and Article XI. |
2.22 | Pre-2013 Matching Account shall mean the account established by an Employer as a book reserve to reflect the amounts credited by an Employer as matching contributions under Article V for Plan Years beginning before 2013, as adjusted by earnings (and losses) under Article VIII and as reduced by distributions under Article X and Article XI. |
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2.23 | Pre-2013 Profit Sharing Account shall mean the account established by an Employer as a book reserve to reflect the amounts credited by an Employer as profit sharing contributions under Article VI for Plan Years beginning before 2013, as adjusted by earnings (and losses) under Article VIII and as reduced by distributions under Article X and Article XI. |
2.24 | Predecessor Plan shall mean any other nonqualified deferred compensation plan designated by the Committee. Each such Predecessor Plan was completely amended and restated into this Plan. |
2.25 | Predecessor Plan Account shall mean an account established by the Employer as a book reserve to reflect amounts credited hereunder with respect to a Predecessor Plan, as adjusted by earnings (and losses) under Article VIII and as reduced by distributions under Article X and Article XI. |
2.26 | Qualified Executive shall mean an employee of an Employer who is an Executive who meets the criteria in either (a) or (b) below: |
(a) | an Executive is a Qualified Executive if he was an Executive for the 2007 Plan Year who had a Compensation deferral election in effect under the Plan for the 2007 Plan Year and thereafter; |
(b) | an Executive is a Qualified Executive if (i) he was a Key Employee who had a Compensation deferral election in effect under the Plan for the most recent Plan Year in which he was eligible to do so as a Key Employee, and thereafter, and (ii) as of the first day of an Open Enrollment Period, he no longer qualifies as a Key Employee by reason of a change in his Pay Band (i.e., he is no longer in Pay Band A, B, C, D, P or Q). |
An individual meeting the criteria in (a) or (b) shall no longer be considered a Qualified Executive if, at any time and for any reason (including termination of employment and voluntary decision to cease deferring), he no longer has a Compensation deferral election in effect.
2.27 | Separation from Service means the termination of employment with all Employers. Whether a termination of employment has occurred shall be determined based on whether the facts and circumstances indicate that the Employer and Participant reasonably anticipate that no further services would be performed after a certain date or that the level of bona fide services would permanently decrease to no more than 20 percent of the average level of bona fide services performed over the immediately preceding 36-month period (or the full period of employment if the Participant has been employed by an Employer less than 36 months). A Participant is not treated as having terminated employment while he is on military leave, sick leave or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the individual retains a right to reemployment under an applicable statute or by contract. The determination of whether a Separation of Service has occurred shall be based on applicable regulations and other applicable legal authority under section 409A of the Code. |
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ARTICLE III ELIGIBILITY AND PARTICIPATION
3.1 | For Plan Years 2009 and Later. Eligibility and participation shall be determined in accordance with this Paragraph 3.1 for Plan Years beginning on or after January 1, 2009. Each individual who, on the first day of an Open Enrollment Period relating to the 2009 Plan Year or a later Plan Year, is either a Key Employee or a Qualified Executive: |
(a) | may elect to defer Compensation for services performed during the ensuing Plan Year to which the Open Enrollment Period relates, in accordance with Article IV; and |
(b) | shall be eligible for matching allocations under Article V and profit sharing allocations under Article VI for the ensuing Plan Year to which such Open Enrollment Period relates. |
An individual who is not a Key Employee or a Qualified Executive on the first day of an Open Enrollment Period but who later becomes a Key Employee shall not be eligible to defer Compensation until the first day of the next Open Enrollment Period with respect to which he is still a Key Employee (for the Plan Year to which such next Open Enrollment Period relates); and he shall not be eligible for matching or profit sharing allocations until the Plan Year following the next Open Enrollment Period as of the first day of which he is a Key Employee.
A Qualified Executives eligibility for matching allocations under Article V and profit sharing allocations under Article VI may be limited to the amount his allocations under the Master Profit Sharing Plan are reduced by reason of his Compensation deferrals under this Plan.
3.2 | Eligibility for Deferral of Performance Based Restricted Stock. If the Committee allows a Key Employee to make a deferral election during an Open Enrollment Period with respect to Performance Based Restricted Stock granted during the ensuing Plan Year, as provided in Paragraph 4.2(a)(i), a Key Employee would be eligible to make such a deferral election only if he is a Key Employee on the first day of the applicable Open Enrollment Period. If the Committee allows a Key Employee to make a deferral election during an election period it establishes during the year of the grant of Performance Based Restricted Stock, as provided in Paragraph 4.2(a)(ii), a Key Employee could be eligible to make such a deferral election only if he is a Key Employee on the first day of the applicable election period established by the Committee. |
3.3 | Changes in Eligibility Status. A new, separate Pre-2013 Account or Post-2012 Account shall be established for a Participant who (a) has an existing Pre-2013 Account balance or Post-2012 Account balance, as the case may be, (b) is not eligible for contributions under Paragraph 3.1 in at least one Plan Year after having been eligible previously, and (c) again meets the eligibility criteria in Paragraph 3.1 for a future Plan Year. |
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The payment provisions (including available elections and changes) in Article X shall be applied separately as to each of a Participants separate Pre-2013 Accounts and Post-2012 Accounts. As an example, such a Participant, upon becoming eligible again after a period of ineligibility, may make an initial payment election under Paragraph 10.2(a) within the first Open Enrollment Period applicable to him after again meeting the eligibility requirements of Paragraph 3.1; and such election (or default payment under Paragraph 10.2(a)) shall apply solely to his new Post-2012 Account and shall not affect the payment provisions applicable to his prior Post-2012 Account or Pre-2013 Account.
In the event of multiple changes in eligibility, the above process shall be repeated such that a Participant may have multiple separate Pre-2013 Accounts and Post-2012 Accounts, each with payment provisions unaffected by the payment provisions applicable to the others.
Notwithstanding the above, Paragraph 2.1 (regarding the Participants designation of a Beneficiary) and Article XI (regarding the payment upon death) shall not be applied separately as to each of a Participants Pre-2013 Accounts and Post-2012 Accounts. Instead, a Participants Beneficiary designation under Paragraph 2.1 shall apply to a Participants entire benefit in the Plan.
In addition, for purposes of applying the $25,000 threshold in Paragraphs 10.1(a)(i) and (ii), all of a Participants Pre-2013 Accounts and Post-2012 Accounts shall be aggregated.
ARTICLE IV ELECTION TO DEFER COMPENSATION OR RESTRICTED STOCK
4.1 | Compensation Deferral |
(a) | Compensation Deferral. Each Key Employee and Qualified Executive eligible under Article III may elect to have a portion of his Compensation for services performed during a Plan Year deferred and credited with earnings in accordance with the terms and conditions of the Plan. The amount of Compensation deferred for any Plan Year by a Participant may not reduce the amount of base pay such Participant receives in a Plan Year below $50,000. |
(b) | Implementation. The Compensation otherwise payable to the Participant during the Plan Year shall be reduced by the amount of the Participants election under this Paragraph 4.1. Such amounts shall be credited to the Participants Post-2012 Employee Contribution Account at the time his Compensation is so reduced (or his Pre-2013 Deferred Compensation Account for Plan Years beginning before 2013). For purposes of this Paragraph 4.1, base earnings payable after December 31st solely for services performed during the final payroll period containing such December 31st, shall be treated as Compensation for services performed in the subsequent taxable year in which the payment is made. |
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4.2 | Performance Based Restricted Stock Deferral. |
(a) | Deferral of Performance Based Restricted Stock. |
(i) | During Open Enrollment. The Committee may allow each Key Employee eligible under Article III to elect to have all (and not less than all) eligible Performance Based Restricted Stock granted to him during the ensuing Plan Year to which an Open Enrollment Period relates to be deferred and credited with earnings in accordance with the terms and conditions of the Plan. |
(ii) | During Year of Grant. With respect to Performance Based Restricted Stock meeting the requirements of Paragraph 4.2(b)(ii) below, the Committee may allow each Key Employee to elect to have all (and not less than all) eligible Performance Based Restricted Stock granted to him during the Plan Year of the grant to be deferred and credited with earnings in accordance with the terms and conditions of the Plan. The Committee shall determine, the period within the Plan Year of the grant, during which such a deferral election must be made subject to the following: |
(A) | the election must be made on or before the 30th day after the grant; and |
(B) | the election must be made at least twelve (12) months in advance of the earliest date at which the forfeiture restrictions could lapse. A condition will not be treated as failing this requirement merely because the Performance Based Restricted Stock becomes fully vested such that there is no further requirement of services upon the death or disability (as defined in applicable Treasury Regulations) of the Key Employee or upon a change in control event (as defined in applicable Treasury Regulations). However, if such death, disability or change in control event occurs before the end of twelve (12) months of service, the deferral election shall not be given effect. |
(b) | Eligible Performance Based Restricted Stock. Performance Based Restricted Stock is eligible for deferral under (a)(i) above pursuant to an election during the Open Enrollment Period if it meets one or both of the conditions in (i) and (ii) below. Performance Based Restricted Stock is eligible for deferral under (a)(ii) above pursuant to an election during the Plan Year of the grant only if it meets the conditions in (ii) below. |
(i) | The Performance Based Restricted Stock is granted solely for services performed during the Plan Year in which the grant occurs or future services (but not for any past services); or |
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(ii) | The Performance Based Restricted Stock is granted subject to a requirement that the Key Employee continue to provide services for a period of at least twelve (12) months from the date of the grant in order to avoid forfeiture of such Performance Based Restricted Stock. A condition will not be treated as failing this requirement merely because the Performance Based Restricted Stock becomes fully vested such that there is no further requirement of services upon the death or disability (as defined in applicable Treasury Regulations) of the Key Employee or upon a change in control event (as defined in applicable Treasury Regulations). However, if such death, disability or change in control event occurs before the end of twelve (12) months of service, the deferral election shall not be given effect. |
(c) | Implementation. At such time as any eligible Performance Based Restricted Stock subject to a deferral election becomes both earned and vested according to the terms of the grant and plan under which it was granted, such Performance Based Restricted Stock shall be deemed to be credited to the Participants Pre-2013 Deferred Compensation Account or Post-2012 Employee Contribution Account, as the case may be, rather than being released in a taxable event to the Key Employee. Performance Based Restricted Stock which is not earned or which is forfeited shall not be deemed credited under this Plan. |
(d) | Deemed Investment in Fifth Third Stock Fund. Amounts credited to a Participants Pre-2013 Deferred Compensation Account or Post-2012 Employee Contribution Account pursuant to an election to defer Performance Based Restricted Stock shall be credited with earnings (or losses) under Article VIII as if invested in the Fifth Third Stock Fund. The other investment benchmarks generally available under Article VIII are not available for such amounts which must remain in the Fifth Third Stock Fund. |
(e) | Dividends on Unvested Performance Based Restricted Stock. Any dividends payable with respect to Performance Based Restricted Stock prior to such time as the Performance Based Restricted Stock is earned or vested, shall not be eligible for deferral hereunder. |
4.3 | Election Procedure. An eligible Key Employee or Qualified Executive desiring to exercise an available election under Paragraph 4.1 or 4.2 for a Plan Year shall notify the Committee each Plan Year of his deferral election during the Open Enrollment Period or other election period established by the Committee under Paragraph 4.2(a)(ii). Such notice must be binding and must be in accordance with the procedures established by the Committee during the applicable election period. A deferral election shall be effective for the entire Plan Year (but not for any future Plan Year) to which it relates and may not be modified or terminated for that Plan Year. A deferral election with respect to Performance Based Restricted Stock shall be effective for the entire grant regardless of the future year(s) in which the forfeiture restrictions lapse; and an election with respect to such grant may not be modified or terminated. |
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4.4 | 2007 Election to Defer Non-Vested Performance Based Restricted Stock. The Committee was authorized to allow an individual who, on the first day of the Open Enrollment Period falling in 2007 (relating to the 2008 Plan Year), was a Key Employee, to elect to defer Performance Based Restricted Stock previously granted to him, in accordance with the following provisions and Internal Revenue Service Notice 2006-79, Section 3.02. Any such deferral election must have been completed by a date in 2007 determined by the Committee. Such a deferral election was authorized only with respect to Performance Based Restricted Stock which had always been subject to a substantial risk of forfeiture (as defined for purposes of section 409A of the Code) and which remained subject to a substantial risk of forfeiture throughout 2007 (i.e., the substantial risk of forfeiture had not lapsed in 2007 or earlier). Such an election shall be treated as a valid and timely election under Paragraph 4.2(a), and Paragraphs 4.2(c), (d) and (e) (but not Paragraph 4.2(b)) shall apply. |
ARTICLE V MATCHING ALLOCATIONS
5.1 | Matching Allocations. An Employer, in its discretion, may credit a matching allocation to the Post-2012 Employer Contribution Account (Pre-2013 Matching Account for Plan Years before 2013) of any Key Employee or Qualified Executive eligible under Article III it selects provided: |
(a) | he remains in the employment of an Employer as a Key Employee or Qualified Executive (or is on an Employer-approved leave of absence) on the date the Committee determines to credit the allocation; and |
(b) | he either has a Compensation deferral election in effect under Paragraph 4.1 for the Plan Year, or has Annual Compensation (as defined in the Master Profit Sharing Plan) in the corresponding Plan Year of that plan in excess of the compensation limitation imposed by section 401(a)(17) of the Code. |
The matching allocations for such selected Participants shall be determined by the Employer and may vary for each such Participant. The amount of the matching allocations as so determined under this paragraph shall be credited to the Participants Post-2012 Employer Contribution Accounts (Pre-2013 Matching Accounts for Plan Years before 2013) as of the last day of the Plan Year, or at such other time or times determined by the Committee.
ARTICLE VI PROFIT SHARING ALLOCATIONS
6.1 | Profit Sharing Allocations. An Employer, in its discretion, may credit a profit sharing allocation to the Post-2012 Employer Contribution Account (Pre-2013 Profit Sharing Account for Plan Years before 2013) of any Key Employee or Qualified Executive eligible under Article III it selects for a Plan Year provided he remains in the employment of an Employer as a Key Employee or Qualified Executive (or is on an Employer-approved leave of absence) on the date the Committee determines to credit the allocation. |
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The profit sharing allocations for such selected Participants shall be determined by the Employer and may vary for each such Participant. The amount of the profit sharing allocations as so determined under this paragraph shall be credited to the Participants Post-2012 Employer Contribution Accounts (Pre-2013 Profit Sharing Accounts before 2013) as of the last day of the Plan Year, or at such other time or times determined by the Committee.
ARTICLE VII PARTICIPANTS INTEREST
7.1 | Unsecured Creditor. No Participant or his designated Beneficiary shall acquire any property interest in his Pre-2013 Account or Post-2012 Account or any other assets of the Employer or Fifth Third Bancorp, their rights being limited to receiving from the Employer or Fifth Third Bancorp deferred payments as set forth in this Plan and these rights are conditioned upon continued compliance with the terms and conditions of this Plan. To the extent that any Participant or Beneficiary acquires a right to receive benefits under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Employer or Fifth Third Bancorp. |
ARTICLE VIII CREDITING OF EARNINGS
8.1 | General. There shall be credited to the Pre-2013 Account and Post-2012 Account of each Participant an additional amount of earnings (or losses) determined under this Article VIII. |
8.2 | Investment Elections. As provided in Paragraph 4.2(d), that part of a Participants Pre-2013 Account or Post-2012 Account credited with deferred Performance Based Restricted Stock shall be credited with earnings (or losses) as if invested in the Fifth Third Stock Fund. Each Participant shall elect to have earnings (or losses) credited to all other parts of his Pre-2013 Account and Post-2012 Account from among various investment benchmarks the Committee determines to establish for this purpose. One of such investment benchmarks shall be the Fifth Third Stock Fund. |
Such an election shall be made in such manner as the Committee shall direct.
The Committee may prescribe rules including rules which limit the frequency of changes to elections, prescribe times for making elections, regulate the amount or increment a Participant may allocate to a particular investment benchmark, require or allow an election (or election change) to relate only to future allocations, require an election to apply consistently to all subaccounts and provide for the investment of a Pre-2013 Account or Post-2012 Account of a Participant who fails to make an election.
8.3 | Rate of Return Benchmarks. The Committee shall determine the rate of return for the Fifth Third Stock Fund, as well as each of the other investment benchmarks selected by the Committee under Paragraph 8.2 above. |
8.4 | Crediting. The Participants Pre-2013 Account and Post-2012 Account shall be increased or decreased as if they had earned the rate of return corresponding to the Participants investment election. The time and method of such crediting and the recordkeeping methodologies used shall be determined in the sole and absolute discretion of the Committee. |
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ARTICLE IX VESTING
9.1 | Vesting Provisions. A Participants rights to his Pre-2013 Account (including each of its subaccounts) and Post-2012 Account (including each of its subaccounts) shall be nonforfeitable at all times. |
ARTICLE X PLAN BENEFITS
10.1 | Distributions. |
(a) | Time and Form of Payment. |
(i) | Pre-2013 Account. In accordance with the election procedures in Paragraph 10.2(a)(i), a Participant was permitted to elect to have the amounts represented by the Participants vested Pre-2013 Account to be paid (or commence to be paid) as of the first business day of August of the Plan Year immediately following the Plan Year in which the Participants Separation from Service with all Employers occurs, or the first business day of August of any subsequent year, but not later than the first business day of August of the tenth Plan Year following the Plan Year in which such Separation from Service occurs. In accordance with the election procedures in Paragraph 10.2, a Participant may have elected to have such amounts paid in one of the following forms: |
(A) | single lump distribution; or |
(B) | substantially equal annual installments, the last payment of which is no later than the first business day of August of the tenth Plan Year following the Plan Year in which such Separation from Service occurs. |
If installment payments are in effect, the Participants Pre-2013 Account shall continue to be credited with earnings (or losses) under Article VIII until fully paid.
Notwithstanding the foregoing or Paragraph 10.3(a), (b) or (c), in the event the aggregate of the Participants vested Pre-2013 Account and vested Post-2012 Account does not exceed $25,000 as of any December 31st after the Participant has a Separation from Service, then any payment election by a Participant shall be disregarded. In such a case, the vested Pre-2013 Account (or remaining balance thereof) and vested Post-2012 Account (or remaining balance thereof) shall be paid in a single lump sum distribution as of the first business day of August following such December 31st (even if the aggregate of such vested Pre-2013 Account and vested Post-2012 Account exceeds $25,000 at that time).
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(ii) | Post-2012 Account. In accordance with the election procedures in Paragraph 10.2(a)(ii), a Participant may elect to have the amounts represented by the Participants vested Post-2012 Account paid (or commence to be paid) as of the first business day of August of the Plan Year immediately following the Plan Year in which the Participants Separation from Service with all Employers occurs, or the first business day of August of any subsequent year, but not later than the first business day of August of the tenth Plan Year following the Plan Year in which such Separation from Service occurs. In accordance with the election procedures in Paragraph 10.2, a Participant may elect to have such amounts paid in one of the following forms: |
(A) | single lump distribution; or |
(B) | substantially equal annual installments, the last payment of which is no later than the first business day of August of the tenth Plan Year following the Plan Year in which such Separation from Service occurs. |
If installment payments are in effect, the Participants Post-2012 Account shall continue to be credited with earnings (or losses) under Article VIII until fully paid.
Notwithstanding the foregoing or Paragraph 10.3(a), (b) or (c), in the event the aggregate of the Participants vested Post-2012 Account and vested Pre-2013 Account does not exceed $25,000 as of any December 31st after the Participant has a Separation from Service, then any payment election by a Participant shall be disregarded. In such a case, the vested Post-2012 Account (or remaining balance thereof) and vested Pre-2013 Account (or remaining balance thereof) shall be paid in a single lump sum distribution as of the first business day of August following such December 31st (even if the aggregate of such vested Post-2012 Account and vested Pre-2013 Account exceeds $25,000 at that time).
(b) | Medium of Payment. The payment as a lump sum or installments under (a) above or 10.3 shall be in cash. Previously, the Plan provided for payment in common stock of Fifth Third Bancorp, and election forms used under the Plan referenced payment in such stock. References to payment in stock on such forms shall be disregarded, and payments shall be in cash. |
10.2 | Election Procedures. |
(a) | Initial Elections. |
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(i) | Pre-2013 Account. A Participant who wished to make an initial election referred to in Paragraph 10.1(a)(i) with respect to his Pre-2013 Account was required to do so within the first Open Enrollment Period applicable to him under Article III, or, if earlier, within such other election period applicable to him established by the Committee under Paragraph 4.2(a)(ii). |
Any such election became effective immediately.
As provided in Paragraph 1.2, a payment election before 2009 under Internal Revenue Service Notice 2005-1, 2006-79 or 2007-86 shall be considered a timely initial election.
If a Participant did not make a timely initial election concerning the commencement date and payment schedule of his Pre-2013 Account under Paragraph 10.2(a)(i), then, except as provided in (b) below, payment of his Pre-2013 Account shall be made as of the first business day of August of the Plan Year immediately following the Plan Year in which the Separation from Service occurs in a single lump sum cash distribution.
(ii) | Post-2012 Account. A Participant who is eligible under Paragraph 3.1 during the Open Enrollment Period falling in 2012, applicable to the 2013 Plan Year, who wishes to make an initial election referred to in Paragraph 10.1(a)(ii) with respect to his Post-2012 Account must do so within such Open Enrollment Period. A Participant who is not eligible under Paragraph 3.1 during such Open Enrollment Period falling in 2012, who wishes to make an initial election referred to in Paragraph 10.1(a)(ii) must do so within the first Open Enrollment Period applicable to him under Article III, or, if earlier, within such other election period applicable to him established by the Committee under Paragraph 4.2(a)(ii). |
Any such election shall be effective immediately.
If a Participant does not make a timely initial election concerning the commencement date and payment schedule of benefits under Paragraph 10.2(a)(ii), then, except as provided in (b) below, payment of this Post-2012 Account shall be made as of the first business day of August of the Plan Year immediately following the Plan Year in which the Separation from Service occurs in a single lump sum cash distribution.
(b) | A Participant may make or change an election after the deadline established in (a) above at any time in order to defer payment of either (or both) his Pre-2013 Account or his Post-2012 Account, for a period of not less than five years from the date payment would otherwise begin (but not to accelerate any payment). Payment shall be made in accordance with any such election only if the Participant has a Separation from Service at least one year following the date of the election. Otherwise, the payment shall be made in accordance with the election (if any) in effect immediately prior to the changed election, or in accordance with the default payment provision in (a) above if no such election is in effect. |
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(c) | Elections shall be made in accordance with the rules and procedures established by the Committee. |
10.3 | Transition Rules. |
(a) | Grandfathered Participants. A Grandfathered Participant shall be paid in cash in accordance with the payment provisions under the Plan or election (whichever is controlling) in effect immediately prior to September 1, 1999. In the event the Participants vested Pre-2013 Account does not exceed $25,000 as of any December 31st, then any payment election by a Participant shall be disregarded. In such a case, the vested Pre-2013 Account (or remaining balance thereof) shall be paid in a single lump sum cash distribution as of the first business day of August following such December 31st (even if such vested Pre-2013 Account exceeds $25,000 at that time). |
(b) | Participants in Pay Status in 2005. A Participant (who is not a Grandfathered Participant) who had commenced receiving installment payments in 2005 or earlier, shall continue to receive such payments in accordance with the payment provisions under the Plan or election (whichever is controlling) in effect prior to January 1, 2005, provided that the value of his vested Pre-2013 Account as of a date in 2005 determined by the Committee was greater than $10,000. If the value of such a Participants vested Pre-2013 Account as of such date was not greater than $10,000, then he received a single lump sum distribution of his entire vested Pre-2013 Account in 2005. Effective December 31, 2005, in the event the Participants vested Pre-2013 Account does not exceed $25,000 as of any December 31st, then any payment election by a Participant shall be disregarded. In such a case, the vested Pre-2013 Account (or remaining balance thereof) shall be paid in a single lump sum distribution as of the first business day of August following such December 31st (even if such vested Pre-2013 Account exceeds $25,000 at that time). |
(c) | Terminated Participants Not in Pay Status in 2005. A Participant (who is not a Grandfathered Participant) who has separated from service in 2005 or earlier, but who, as of a date in 2005 determined by the Committee, has not received or commenced receiving payments of his vested Pre-2013 Account, shall be subject to the payment provisions of Paragraph 10.1, and any prior payment elections shall be of no force or effect. As provided in Paragraph 1.2, such a Participant had the opportunity to complete a new election by a date in 2005 determined by the Committee. Such a Participant who did not properly complete and return such an election by such date received a single lump sum distribution of his entire vested Pre-2013 Account as of August 1, 2006. Notwithstanding the foregoing, if such a Participants vested Pre-2013 Account as of a date in 2005 determined by the Committee was not greater than $10,000, then he received a single lump sum distribution of his entire vested Pre-2013 Account in 2005. Effective |
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December 31, 2005, in the event the Participants vested Pre-2013 Account does not exceed $25,000 as of any December 31st, then any payment election shall be disregarded. In such a case, the vested Pre-2013 Account (or remaining balance thereof) shall be paid in a single lump sum distribution as of the first business day of August following such December 31st (even if such vested Pre-2013 Account exceeds $25,000 at that time). |
(d) | 2005 Payment Elections by Participants Actively Employed. A Participant who remained employed by an Employer as of a date in 2005 determined by the Committee shall be subject to the payment provisions of Paragraph 10.1 and any prior elections shall be of no force or effect. As provided in Paragraph 1.2, such a Participant had the opportunity to complete a new election by a date in 2005 determined by the Committee. Any such election shall be treated as an initial election under Paragraph 10.2(a) with respect to his Pre-2013 Account. Such a Participant who does not make a timely election shall be treated the same as provided for in Paragraph 10.2(a)(i) for Participants who do not make timely initial elections. |
(e) | Post-2012 Account. In the event a Participant who is subject to (a), (b) or (c) above also has a Post-2012 Account, the $25,000 cashout limit in each of (a), (b) and (c) above shall be determined by aggregating the Participants vested Pre-2013 Account and vested Post-2012 Account. |
10.4 | Facility of Payment. A payment required to be made hereunder on or as of a specified date may be made in a reasonable period after such date for administrative convenience, provided the payment is made in the same taxable year as the specified date. |
ARTICLE XI DEATH
11.1 | If a Participant dies before commencing payment of the amounts represented by the Participants Pre-2013 Account or Post-2012 Account, then such Pre-2013 Account and Post-2012 Account shall be paid to the Participants Beneficiary in a single lump sum cash distribution, as soon as reasonably possible after the Committee is notified of the Participants death and in all events not more than ninety (90) days following the Participants death. Neither the Participant nor the Beneficiary shall have the right to designate the taxable year of the payment. If the Participant has already commenced receiving the amounts represented by the Participants Pre-2013 Account or Post-2012 Account in the installment payment form, the installment payments shall continue to be paid to the Participants Beneficiary in cash. |
ARTICLE XII NON-ASSIGNABLE/NON-ATTACHMENT
12.1 | Except as required by law, no right of the Participant or designated Beneficiary to receive payments under this Plan shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law and any attempt, voluntary or involuntary, to effect any such action shall be null and void and of no effect. |
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ARTICLE XIII ADMINISTRATION
13.1 | Administration. In addition to the powers which are expressly provided in the Plan, the Committee shall have the power and authority in its sole, absolute and uncontrolled discretion to control and manage the operation and administration of the Plan and shall have all powers necessary to accomplish these purposes including, but not limited to the following: |
(a) | the power to determine who is a Participant; |
(b) | the power to determine allocations, balances, and nonforfeitable percentages with respect to Participants Pre-2013 Accounts and Post-2012 Accounts; |
(c) | the power to determine when, to whom, in what amount, and in what form distributions are to be made; and |
(d) | such powers as are necessary, appropriate or desirable to enable it to perform its responsibilities, including the power to interpret the Plan, establish rules, regulations and forms with respect thereto. |
Benefits under this Plan will be paid only if the Committee decides in its discretion that the applicant is entitled to them.
13.2 | 409A of the Code. This Plan is intended to satisfy the applicable requirements of section 409A of the Code and shall be interpreted accordingly. |
ARTICLE XIV CONSOLIDATION OR MERGER
14.1 | In the event that Fifth Third Bancorp or any entity (resulting from any merger or consolidation or which shall be a purchaser or transferee so referred to), shall at any time be merged or consolidated into or with any other entity or entities, or in the event that substantially all of the assets of Fifth Third Bancorp or any such entity shall be sold or otherwise transferred to another entity, the provisions of this Plan shall be binding upon and shall inure to the benefit of the continuing entity or the entity resulting from such merger or consolidation or the entity to which such assets shall be sold or transferred. Except as provided in the preceding sentence, this Plan shall not be assignable by Fifth Third Bancorp or by any entity referred to in such preceding sentence. |
ARTICLE XV AMENDMENT OR TERMINATION
15.1 | Amendment. Fifth Third Bancorp reserves the right to amend the Plan. Any amendment of the Plan shall be by action of the Committee or by the Chairman of the Committee. If an amendment is being made by said Committee, it must be approved by a majority of the members of the Committee as constituted at the time of adoption of the amendment. |
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Any amendment may be given retroactive effect as determined by said Committee or Chairman. Any amendment may, without limitation, (a) affect a Participant whether or not vested, employed or in pay status, and (b) affect or modify Participant elections and payment methods. An amendment may be evidenced in such manner as said Committee or Chairman shall determine. If the amendment is approved by said Committee, such evidence may include (but shall not be limited to) a written resolution signed by a majority of the members of the Committee or minutes of a meeting of the Committee reflecting approval by a majority of the members. |
15.2 | Termination. Fifth Third Bancorp reserves the right to terminate the Plan. Any termination of the Plan shall be by action of the Committee. Any termination must be approved by a majority of the members of said Committee as constituted at the time of adoption of the termination; and any such termination may be given retroactive effect as determined by said Committee. Any termination may, without limitation, (a) affect a Participant whether or not vested, employed or in pay status, and (b) affect or modify Participant elections and payment methods. A termination may be evidenced in such manner as said Committee shall determine, and such evidence may include (but shall not be limited to) a written resolution signed by a majority of the members of the Committee or minutes of a meeting of the Committee reflecting approval by a majority of the members. |
ARTICLE XVI CLAIMS
16.1 | Initial Claims Procedure. |
(a) | Claim. In order to present a complaint regarding the nonpayment of a Plan benefit or a portion thereof (a Claim), a Participant or Beneficiary under the Plan (a Claimant) or his duly authorized representative must file such Claim by mailing or delivering a writing stating such Claim to the department, officer, or Employee responsible for employee benefit matters of the Employer. Upon such receipt of a Claim, the Claims Review Committee shall furnish to the Claimant a written acknowledgment which shall inform such Claimant of the time limit set forth in (b)(i) below and of the effect, pursuant to (b)(iii) below, of failure to decide the Claim within such time limit. |
(b) | Initial Decision. |
(i) | Time Limit. The Claims Review Committee shall decide upon a Claim within a reasonable period of time after receipt of such Claim; provided, however, that such period shall in no event exceed 90 days, unless special circumstances require an extension of time for processing. If such an extension of time for processing is required, then the Claimant shall, prior to the termination of the initial 90-day period, be furnished a written notice indicating such special circumstances and the date by which the Claims Review Committee expects to render a decision. In no event shall an extension exceed a period of 90 days from the end of the initial period. |
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(ii) | Notice of Denial. If the Claim is wholly or partially denied, then the Claims Review Committee shall furnish to the Claimant, within the time limit applicable under (i) above, a written notice setting forth in a manner calculated to be understood by the Claimant: |
(A) | the specific reason or reasons for such denial; |
(B) | specific reference to the pertinent Plan provisions on which such denial is based; |
(C) | a description of any additional material or information necessary for such Claimant to perfect his Claim and an explanation of why such material or information is necessary; and |
(D) | appropriate information as to the steps to be taken if such Claimant wishes to submit his Claim for review pursuant to Paragraph 16.2, including notice of the time limits set forth in subsection 16.2(b)(ii). |
(iii) | Deemed Denial for Purposes of Review. If a Claim is not granted and if, despite the provisions of (i) and (ii) above, notice of the denial of a Claim is not furnished within the time limit applicable under (i) above, then the Claimant may deem such Claim denied and may request a review of such deemed denial pursuant to the provisions of Paragraph 16.2. |
16.2 | Claim Review Procedure. |
(a) | Claimants Rights. If a Claim is wholly or partially denied under Paragraph 16.1, then the Claimant or his duly authorized representative shall have the following rights: |
(i) | to obtain, subject to (b) below, a full and fair review by the Claims Review Committee; |
(ii) | to review pertinent documents; and |
(iii) to submit issues and comments in writing.
(b) | Request for Review. |
(i) | Filing. To obtain a review pursuant to (a) above, a Claimant entitled to such a review or his duly authorized representative shall, subject to (ii) below, mail or deliver a written request for such a review (a Request for Review) to the department, officer, or Employee responsible for employee benefit matters of the Employer. |
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(ii) | Time Limits for Requesting a Review. A Request for Review must be mailed or delivered within 60 days after receipt by the Claimant of written notice of the denial of the Claim. |
(iii) | Acknowledgment. Upon such receipt of a Request for Review, the Claims Review Committee shall furnish to the Claimant a written acknowledgment which shall inform such Claimant of the time limit set forth in (c)(i) below and of the effect, pursuant to (c)(iii) below, of failure to furnish a decision on review within such time limit. |
(c) | Decision on Review. |
(i) | Time Limit. |
(A) | General. If, pursuant to (b) above, a review is requested, then, except as otherwise provided in (B) below, the Claims Review Committee or its delegate (but only if such delegate has been given the authority to make a final decision on the Claim) shall make a decision promptly and no later than 60 days after receipt of the Request for Review; except that, if special circumstances require an extension of time for processing, then the decision shall be made as soon as possible but not later than 120 days after receipt of the Request for Review. The Claims Review Committee must furnish the Claimant written notice of any extension prior to its commencement. |
(B) | Regularly Scheduled Meetings. Anything to the contrary in (A) above notwithstanding, if the Claims Review Committee holds regularly scheduled meetings at least quarterly, then its decision on review shall be made no later than the date of the meeting which immediately follows the receipt of the Request for Review; provided, however, if such Request for Review is received within 30 days preceding the date of such meeting, then such decision on review shall be made no later than the date of the second meeting which follows such receipt; and provided further that, if special circumstances require a further extension of time for processing, and if the Claimant is furnished written notice of such extension prior to its commencement, then such decision on review shall be rendered no later than the third meeting which follows such receipt. |
(ii) | Notice of Decision. The Claims Review Committee or its delegate shall furnish to the Claimant, within the time limit applicable under (i) above, a written notice setting forth in a manner calculated to be understood by the Claimant: |
(A) | the specific reason or reasons for the decision on review; |
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(B) | specific reference to the pertinent Plan provisions on which the decision on review is based; |
(C) | a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the Claimants claim for benefits; and |
(D) | a statement of the Claimants right to bring an action under section 502(a) of the Employee Retirement Income Security Act of 1974. |
(iii) | Deemed Denial. If, despite the provisions of (i) and (ii) above, the decision on review is not furnished within the time limit applicable under (i) above, then the Claimant shall be deemed to have exhausted his remedies under the Plan and he may deem the Claim to have been denied on review. |
The Claims Review Committee shall have the sole, absolute and uncontrolled discretion to decide all claims under the initial claims procedure and under the claims review procedure, and its decisions shall be binding on all parties.
16.3 | Required Exhaustion of Administrative Remedies. Before a Participant may file a lawsuit regarding the Plan or benefits under the Plan, the Participant must first use the Initial Claims Procedure and the Claim Review Procedure (including the requirement of a timely request for review) described above. |
ARTICLE XVII MISCELLANEOUS
17.1 | No Enlargement of Employment Rights. Neither this Plan, nor any action of Fifth Third Bancorp, an Employer or the Committee, nor any election to defer Compensation hereunder shall be held or construed to confer on any person any legal right to be continued as an employee of Fifth Third Bancorp, or any Employer. |
17.2 | Withholdings. Fifth Third Bancorp and the Participants Employer shall have the right to deduct from a Participants Pre-2013 Account and Post-2012 Account and/or any payments due a Participant or Beneficiary under the Plan any and all taxes determined by the Committee to be applicable with respect to such benefits. In the discretion of the Committee, Fifth Third Bancorp and the Participants Employer may accept payment by the Participant (or Beneficiary) of the amount of any applicable taxes in lieu of deducting such amount from the Participants Pre-2013 Account and Post-2012 Account or payments due under the Plan. |
17.3 | Entire Agreement. This Plan document constitutes the entire agreement between the Employer and any Participant (or Beneficiary), and supersedes all other prior agreements, undertakings, both written and oral, with respect to the subject matter hereof. This Plan document may not be amended orally or by any course or purported course of dealing, |
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but only by an amendment in accordance with Paragraph 15.1 specifically identified within its text as a Plan amendment. Written communications and descriptions not specifically identified within their text as amendments, shall not constitute amendments and shall have no interpretive or controlling effect on the interpretation of this Plan. Oral communications shall not constitute amendments and shall have no interpretation or controlling effect on the interpretation of this Plan. |
17.4 | No Guarantee of Tax Consequences. The Participant (or Beneficiary) shall be responsible for all taxes with respect to his benefit hereunder. Neither Fifth Third Bancorp nor any Employer guarantees any particular tax consequences. This includes, without limitation, any taxes, interest or penalties imposed by, or with respect to, section 409A of the Code. |
IN WITNESS WHEREOF, Fifth Third Bancorp has caused this Plan to be executed this day of , 2012.
FIFTH THIRD BANCORP | ||
By: | ||
Paul L. Reynolds, Chairman of The Fifth Third Bank Pension, Profit Sharing and Medical Plan Committee |
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Exhibit 10.50
A MARK OF [**] IN THE TEXT OF THIS EXHIBIT INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED. THIS EXHIBIT, INCLUDING THE OMIITED PORTIONS, HAS BEEN FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
To: | Fifth Third Bancorp Fifth Third Center Cincinnati, Ohio 45263 | |
From: | Credit Suisse International One Cabot Square London, England E14 4QJ | |
Re: | Accelerated Stock Buyback | |
Ref. No: | As provided in the Supplemental Confirmation | |
Date: | November 6, 2012 |
This master confirmation (this Master Confirmation), dated as of November 6, 2012 is intended to set forth certain terms and provisions of certain Transactions (each, a Transaction) entered into from time to time between Credit Suisse International (CSI), Fifth Third Bancorp (Counterparty) and Credit Suisse AG, New York Branch, as agent (the Agent). This Master Confirmation, taken alone, is neither a commitment by either party to enter into any Transaction nor evidence of a Transaction. The additional terms of any particular Transaction shall be set forth in a Supplemental Confirmation in the form of Schedule A hereto (a Supplemental Confirmation), which shall reference this Master Confirmation and supplement, form a part of, and be subject to this Master Confirmation. This Master Confirmation and each Supplemental Confirmation together shall constitute a Confirmation as referred to in the Agreement specified below.
The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the Equity Definitions), as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Master Confirmation. This Master Confirmation and each Supplemental Confirmation evidence a complete binding agreement between Counterparty and CSI as to the subject matter and terms of each Transaction to which this Master Confirmation and such Supplemental Confirmation relate and shall supersede all prior or contemporaneous written or oral communications with respect thereto.
This Master Confirmation and each Supplemental Confirmation supplement, form a part of, and are subject to an agreement in the form of the 2002 ISDA Master Agreement (the Agreement) as if CSI and Counterparty had executed the Agreement on the date of this Master Confirmation (but without any Schedule except for (i) the election of New York law (without reference to its choice of laws doctrine other than Title 14 of Article 5 of the New York General Obligations Law) as the governing law and US Dollars (USD) as the Termination Currency, (ii) the election that subparagraph (ii) of Section 2(c) will not apply to the Transactions and (iii) the election that the Cross Default provisions of Section 5(a)(vi) shall apply to Counterparty and CSI, with a Threshold Amount equal to 3% of such partys shareholders equity as reported in their respective most recent audited financial statements; provided that the words , or becoming capable at such time of being declared, shall be deleted from such Section 5(a)(vi)).
The Transactions shall be the sole Transactions under the Agreement. If there exists any ISDA Master Agreement between CSI and Counterparty or any confirmation or other agreement between CSI and Counterparty pursuant to which an ISDA Master Agreement is deemed to exist between CSI and Counterparty, then notwithstanding anything to the contrary in such ISDA Master Agreement, such confirmation or agreement or any other agreement to which CSI and Counterparty are parties, the Transactions shall not be considered Transactions under, or otherwise governed by, such existing or deemed ISDA Master Agreement.
All provisions contained or incorporated by reference in the Agreement shall govern this Master Confirmation and each Supplemental Confirmation except as expressly modified herein or in the related Supplemental Confirmation.
If, in relation to any Transaction to which this Master Confirmation and a Supplemental Confirmation relate, there is any inconsistency between the Agreement, this Master Confirmation, any Supplemental Confirmation and
the Equity Definitions, the following will prevail for purposes of such Transaction in the order of precedence indicated: (i) such Supplemental Confirmation; (ii) this Master Confirmation; (iii) the Equity Definitions; and (iv) the Agreement.
1. Each Transaction constitutes a Share Forward Transaction for the purposes of the Equity Definitions. Set forth below are the terms and conditions that, together with the terms and conditions set forth in the Supplemental Confirmation relating to any Transaction, shall govern such Transaction.
General Terms: | ||
Trade Date: |
For each Transaction, as set forth in the related Supplemental Confirmation. | |
Buyer: |
Counterparty | |
Seller: |
CSI | |
Shares: |
Common stock, without par value, of Counterparty (Ticker: FITB) | |
Exchange: |
NASDAQ Global Select Market | |
Related Exchange(s): |
All Exchanges. | |
Prepayment\Variable Obligation: |
Applicable | |
Prepayment Amount: |
For each Transaction, as set forth in the related Supplemental Confirmation. | |
Prepayment Date: |
For each Transaction, as set forth in the related Supplemental Confirmation. | |
Valuation: | ||
VWAP Price: |
For any Exchange Business Day, as determined by the Calculation Agent based on the NASDAQ 10b-18 Volume Weighted Average Price per Share for the regular trading session (including any extensions thereof) of the Exchange on such Exchange Business Day (without regard to pre-open or after hours trading outside of such regular trading session for such Exchange Business Day), as published by Bloomberg at 4:15 p.m. New York time (or 15 minutes following the end of any extension of the regular trading session) on such Exchange Business Day, on Bloomberg page FITB <Equity> AQR_SEC (or any successor thereto), or if such price is not so reported on such Exchange Business Day for any reason or is, in the Calculation Agents reasonable discretion, erroneous, such VWAP Price shall be as reasonably determined in good faith and in a commercially reasonable manner by the Calculation Agent. For purposes of calculating the VWAP Price, the Calculation Agent will include only those trades that are reported during the period of time during which Counterparty could purchase its own shares under Rule 10b-18(b)(2) and are effected pursuant to the conditions of Rule 10b-18(b)(3), each under the Securities Exchange Act of 1934, as amended (the Exchange Act) (such trades, Rule 10b-18 eligible transactions). | |
Forward Price: |
The average of the VWAP Prices for the Exchange Business Days in the Calculation Period, subject to Valuation Disruption below. | |
Forward Price Adjustment Amount: |
For each Transaction, as set forth in the related Supplemental Confirmation. | |
Calculation Period: |
The period from and including the Calculation Period Start Date to and including the Termination Date. | |
Calculation Period Start Date: |
For each Transaction, as set forth in the related Supplemental Confirmation. | |
Termination Date: |
The Scheduled Termination Date; provided that CSI shall have the right to |
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designate any Exchange Business Day on or after the First Acceleration Date to be the Termination Date (the Accelerated Termination Date) by delivering notice to Counterparty of any such designation prior to 11:59 p.m. New York City time on the Exchange Business Day immediately following the designated Accelerated Termination Date. | ||
Scheduled Termination Date: |
For each Transaction, as set forth in the related Supplemental Confirmation, subject to postponement as provided in Valuation Disruption below. | |
First Acceleration Date: |
For each Transaction, as set forth in the related Supplemental Confirmation. | |
Valuation Disruption: |
The definition of Market Disruption Event in Section 6.3(a) of the Equity Definitions is hereby amended by deleting the words at any time during the one-hour period that ends at the relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case may be and inserting the words at any time on any Scheduled Trading Day during the Calculation Period or Settlement Valuation Period after the word material, in the third line thereof.
Section 6.3(d) of the Equity Definitions is hereby amended by deleting the remainder of the provision following the term Scheduled Closing Time in the fourth line thereof.
Notwithstanding anything to the contrary in the Equity Definitions, to the extent that a Disrupted Day occurs (i) in the Calculation Period, the Calculation Agent may, in its good faith and commercially reasonable discretion, postpone the Scheduled Termination Date, or (ii) in the Settlement Valuation Period, the Calculation Agent may, in its good faith and commercially reasonable discretion, extend the Settlement Valuation Period, in both cases by no more than one Exchange Business Day for each such Disrupted Day. If any such Disrupted Day is a Disrupted Day because of a Market Disruption Event (or a deemed Market Disruption Event as provided herein), the Calculation Agent shall determine whether (i) such Disrupted Day is a Disrupted Day in full, in which case the VWAP Price for such Disrupted Day shall not be included for purposes of determining the Forward Price or the Settlement Price, as the case may be, or (ii) such Disrupted Day is a Disrupted Day only in part, in which case the VWAP Price for such Disrupted Day shall be determined by the Calculation Agent based on Rule 10b-18 eligible transactions in the Shares on such Disrupted Day taking into account the nature and duration of the relevant Market Disruption Event, and the weighting of the VWAP Price for the relevant Exchange Business Days during the Calculation Period or the Settlement Valuation Period, as the case may be, shall be adjusted in good faith and in a commercially reasonable manner by the Calculation Agent for purposes of determining the Forward Price or the Settlement Price, as the case may be, with such adjustments based on, among other factors, the duration of any Market Disruption Event and the volume, historical trading patterns and price of the Shares. Any Exchange Business Day on which, as of the date hereof, the Exchange is scheduled to close prior to its normal close of trading shall be deemed not to be an Exchange Business Day; if a closure of the Exchange prior to its normal close of trading on any Exchange Business Day is scheduled following the date hereof, then such Exchange Business Day shall be deemed to be a Disrupted Day in full.
If a Disrupted Day occurs during the Calculation Period or the Settlement Valuation Period, as the case may be, and each of the nine immediately following Scheduled Trading Days is a Disrupted Day, then the Calculation Agent, in its good faith and commercially reasonable discretion, may deem such ninth Scheduled Trading Day to be an Exchange Business Day that is not a Disrupted Day and determine the VWAP Price for such ninth Scheduled Trading Day using its good faith estimate of the value of the Shares on such ninth Scheduled Trading Day based on the volume, historical trading patterns and price of the Shares and such other factors as it deems appropriate. |
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Settlement Terms: | ||
Settlement Procedures: |
If the Number of Shares to be Delivered is positive, Physical Settlement shall be applicable; provided that CSI does not, and shall not, make the agreement or the representations set forth in Section 9.11 of the Equity Definitions related to the restrictions imposed by applicable securities laws with respect to any Shares delivered by CSI to Counterparty under any Transaction as a result of the fact that Counterparty is the Issuer of the Shares. If the Number of Shares to be Delivered is negative, then the Counterparty Settlement Provisions in Annex A shall apply. | |
Number of Shares to be Delivered: |
A number of Shares equal to (x)(a) the Prepayment Amount divided by (b) the Divisor Amount, minus (y) the number of Initial Shares. | |
Divisor Amount: |
The greater of (i) the Forward Price minus the Forward Price Adjustment Amount and (ii) $1.00. | |
Excess Dividend Amount: |
For the avoidance of doubt, all references to the Excess Dividend Amount shall be deleted from Section 9.2(a)(iii) of the Equity Definitions. | |
Settlement Date: |
If the Number of Shares to be Delivered is positive, the date that is one Settlement Cycle immediately following the Termination Date. | |
Settlement Currency: |
USD | |
Initial Share Delivery: |
CSI shall deliver a number of Shares equal to the Initial Shares to Counterparty on the Initial Share Delivery Date in accordance with Section 9.4 of the Equity Definitions, with the Initial Share Delivery Date deemed to be a Settlement Date for purposes of such Section 9.4. | |
Initial Share Delivery Date: |
For each Transaction, as set forth in the related Supplemental Confirmation. | |
Initial Shares: |
For each Transaction, as set forth in the related Supplemental Confirmation; provided that CSI does not, and shall not, make the agreement or the representations set forth in Section 9.11 of the Equity Definitions related to the restrictions imposed by applicable securities laws with respect to any Shares delivered by CSI to Counterparty under any Transaction as a result of the fact that Counterparty is the Issuer of the Shares. | |
Share Adjustments: | ||
Potential Adjustment Event: |
Notwithstanding anything to the contrary in Section 11.2(e) of the Equity Definitions, an Extraordinary Dividend shall not constitute a Potential Adjustment Event.
It shall constitute an additional Potential Adjustment Event if the Scheduled Termination Date for any Transaction is postponed pursuant to Valuation Disruption above, in which case the Calculation Agent may, in good faith and in its commercially reasonable discretion, adjust any relevant terms of any such Transaction as appropriate to account for the economic effect on the Transaction of such postponement. | |
Extraordinary Dividend: |
For any calendar quarter, any dividend or distribution on the Shares with an ex- dividend date occurring during such calendar quarter (other than any dividend or distribution of the type described in Section 11.2(e)(i) or Section 11.2(e)(ii)(A) of the Equity Definitions) (a Dividend) the amount or value of which (as determined by the Calculation Agent), when aggregated with the amount or value (as determined by the Calculation Agent) of any and all previous Dividends with ex-dividend dates occurring in the same calendar quarter, exceeds the Ordinary Dividend Amount. | |
Ordinary Dividend Amount: |
For each Transaction, as set forth in the related Supplemental Confirmation |
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Method of Adjustment: |
Calculation Agent Adjustment | |
Extraordinary Events: | ||
Consequences of Merger Events: |
||
(a) Share-for-Share: |
Modified Calculation Agent Adjustment | |
(b) Share-for-Other: |
Cancellation and Payment | |
(c) Share-for-Combined: |
Component Adjustment | |
Tender Offer: |
Applicable; provided that (i) Section 12.1(l)of the Equity Definitions shall be amended (x) by deleting the parenthetical in the fifth line thereof, (y) by replacing that in the fifth line thereof with whether or not such announcement and (z) by adding immediately after the words Tender Offer in the fifth line thereof , and any publicly announced change or amendment to such an announcement (including the announcement of an abandonment of such intention) and (ii) Sections 12.3(a) and 12.3(d) of the Equity Definitions shall each be amended by replacing each occurrence of the words Tender Offer Date by Announcement Date. | |
Consequences of Tender Offers: |
||
(a) Share-for-Share: |
Modified Calculation Agent Adjustment or Cancellation and Payment, at the election of CSI | |
(b) Share-for-Other: |
Modified Calculation Agent Adjustment or Cancellation and Payment, at the election of CSI | |
(c) Share-for-Combined: |
Modified Calculation Agent Adjustment or Cancellation and Payment, at the election of CSI | |
Nationalization, Insolvency or Delisting: |
Cancellation and Payment; provided that in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re- listed, re-traded or re-quoted on any of the New York Stock Exchange, the American Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall be deemed to be the Exchange. | |
Additional Disruption Events: |
||
(a) Change in Law: |
Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the phrase the interpretation in the third line thereof with the phrase , or public announcement of the interpretation, (ii) by replacing the word Shares where it appears in clause (X) thereof with the words Hedge Position and (iii) by immediately following the word Transaction in clause (X) thereof, adding the phrase in the manner contemplated by the Hedging Party on the Trade Date; provided further that (i) any determination as to whether (A) the adoption of or any change in any applicable law or regulation (including, for the avoidance of doubt and without limitation, (x) any tax law or (y) adoption or promulgation of new regulations authorized or mandated by existing statute) or (B) the |
5
promulgation of or any change in the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law or regulation (including any action taken by a taxing authority), in each case, constitutes a Change in Law shall be made without regard to Section 739 of the Dodd- Frank Wall Street Reform and Consumer Protection Act of 2010 or any similar legal certainty provision in any legislation enacted, or rule or regulation promulgated, on or after the Trade Date, and (ii) Section 12.9(a)(ii) of the Equity Definitions is hereby amended by replacing the parenthetical beginning after the word regulation in the second line thereof the words (including, for the avoidance of doubt and without limitation, (x) any tax law or (y) adoption or promulgation of new regulations authorized or mandated by existing statute). | ||
(b) Failure to Deliver: |
Applicable | |
(c) Insolvency Filing: |
Applicable | |
(d) Loss of Stock Borrow: |
Applicable | |
Maximum Stock Loan Rate: |
200 basis points per annum | |
Hedging Party: |
CSI | |
(e) Increased Cost of Stock Borrow: |
Applicable | |
Initial Stock Loan Rate: |
25 basis points per annum | |
Hedging Party: |
CSI | |
Determining Party: |
CSI; provided that, following the occurrence of an Event of Default pursuant to Section 5(a)(vii) of the Agreement with respect to which CSI is the Defaulting Party, Counterparty shall have the right to designate a nationally recognized third-party dealer in over-the-counter corporate equity derivatives to act, during the period commencing on the date such Event of Default occurred and ending on the Early Termination Date with respect to such Event of Default, as the Determining Party. Upon receipt of written request from Counterparty, the Determining Party shall promptly (but in no event later than within five (5) Exchange Business Days from the receipt of such request) provide Counterparty with a written explanation describing in reasonable detail any calculation, adjustment or determination made by it (including any quotations, market data or information from external sources used in making such calculation, adjustment or determination, as the case may be, but without disclosing CSIs proprietary models or other information that may be proprietary or subject to contractual, legal or regulatory obligations to not disclose such information). All calculations and determinations by the Determining Party shall be made in good faith and in a commercially reasonable manner. | |
Additional Termination Event(s): |
Notwithstanding anything to the contrary in the Equity Definitions, if, as a result of an Extraordinary Event, any Transaction would be cancelled or terminated (whether in whole or in part) pursuant to Article 12 of the Equity Definitions, an Additional Termination Event (with such terminated Transaction(s) (or portions thereof) being the Affected Transaction(s) and |
6
Counterparty being the sole Affected Party) shall be deemed to occur, and, in lieu of Sections 12.7, 12.8 and 12.9 of the Equity Definitions, Section 6 of the Agreement shall apply to such Affected Transaction(s). The declaration by the Issuer of any Extraordinary Dividend, the ex-dividend date for which occurs or is scheduled to occur during the Relevant Dividend Period, or the occurrence of an ex-dividend date for any Dividend that is not an Extraordinary Dividend during any calendar quarter occurring (in whole or in part) during the Relevant Dividend Period (as defined below) and is prior to the Scheduled Ex-Dividend Date for such calendar quarter will constitute an Additional Termination Event, with Counterparty as the sole Affected Party and all Transactions hereunder as the Affected Transactions. | ||
Relevant Dividend Period: |
The period from and including the Calculation Period Start Date to and including the Relevant Dividend Period End Date. | |
Relevant Dividend Period End Date: |
If the Number of Shares to be Delivered is negative, the last day of the Settlement Valuation Period; otherwise, the Termination Date. | |
Scheduled Ex-Dividend Dates: |
For each Transaction for each calendar quarter, as set forth in the related Supplemental Confirmation. | |
Non-Reliance/Agreements and Acknowledgements Regarding Hedging Activities/Additional Acknowledgements: |
Applicable | |
Transfer: |
Notwithstanding anything to the contrary in the Agreement, CSI may assign, transfer and set over all rights, title and interest, powers, privileges and remedies of CSI under any Transaction, in whole or in part, to an affiliate of CSI whose obligations are guaranteed by CSI, without the consent of Counterparty. | |
CSI Payment Instructions: |
To be advised under separate cover | |
Counterpartys Contact Details for Purpose of Giving Notice: |
To be provided by Counterparty | |
Role of Agent: |
Credit Suisse AG, New York branch, in its capacity as Agent will be responsible for (A) effecting this Transaction, (B) issuing all required confirmations and statements to CSI and Counterparty, (C) maintaining books and records relating to this Transaction in accordance with its standard practices and procedures and in accordance with applicable law and (D) unless otherwise requested by Counterparty, receiving, delivering, and safeguarding Counterpartys funds and any securities in connection with this Transaction, in accordance with its standard practices and procedures and in accordance with applicable law.
The Agent is acting in connection with this Transaction solely in its capacity as Agent for CSI and Counterparty pursuant to instructions from CSI and Counterparty. Agent shall have no responsibility or personal liability to CSI or Counterparty arising from any failure by CSI or Counterparty to pay or perform any obligations hereunder, or to monitor or enforce compliance by CSI or Counterparty with any obligation hereunder, including, without limitation, any obligations to maintain collateral. Each of CSI and Counterparty agrees to proceed solely against the other to collect or recover any securities or monies owing to it in connection with or as a result of this Transaction. Agent shall otherwise have no liability in respect of this Transaction, except for its gross negligence or willful misconduct in performing its duties as Agent.
Any and all notices, demands, or communications of any kind relating to this Transaction between CSI and Counterparty shall be transmitted exclusively through Agent at the following address:
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Credit Suisse AG, New York branch Eleven Madison Avenue New York, NY 10010-3629 For payments and deliveries: Facsimile No.: (212) 325 8175 Telephone No.: (212) 325 8678 / (212) 325 3213
For all other communications: Facsimile No.: (212) 325 8173 Telephone No.: (212) 325 8676 / (212) 538 5306 / (212) 538 1193 / (212) 538 6886
The date and time of the Transaction evidenced hereby will be furnished by the Agent to CSI and Counterparty upon written request.
The Agent will furnish to Counterparty upon written request a statement as to the source and amount of any remuneration received or to be received by the Agent in connection with the Transaction evidenced hereby.
CSI is regulated by The Securities and Futures Authority and has entered into this Transaction as principal. The time at which this Transaction was executed will be notified to Counterparty (through the Agent) on request. |
2. | Calculation Agent. CSI; provided that, following the occurrence of an Event of Default pursuant to Section 5(a)(vii) of the Agreement with respect to which CSI is the Defaulting Party, Counterparty shall have the right to designate a nationally recognized third-party dealer in over-the-counter corporate equity derivatives to act, during the period commencing on the date such Event of Default occurred and ending on the Early Termination Date with respect to such Event of Default, as the Calculation Agent. Upon receipt of written request from Counterparty, the Calculation Agent shall promptly (but in no event later than within five (5) Exchange Business Days from the receipt of such request) provide Counterparty with a written explanation describing in reasonable detail any calculation, adjustment or determination made by it (including any quotations, market data or information from external sources used in making such calculation, adjustment or determination, as the case may be, but without disclosing CSIs proprietary models or other information that may be proprietary or subject to contractual, legal or regulatory obligations to not disclose such information). All calculations and determinations by the Calculation Agent shall be made in good faith and in a commercially reasonable manner. |
3. | Additional Mutual Representations, Warranties and Covenants of Each Party. In addition to the representations, warranties and covenants in the Agreement, each party represents, warrants and covenants to the other party that: |
(a) Eligible Contract Participant. It is an eligible contract participant, as defined in the U.S. Commodity Exchange Act (as amended), and is entering into each Transaction hereunder as principal (and not as agent or in any other capacity, fiduciary or otherwise) and not for the benefit of any third party.
(b) Accredited Investor. Each party acknowledges that the offer and sale of each Transaction to it is intended to be exempt from registration under the Securities Act of 1933, as amended (the Securities Act), by virtue of Section 4(2) thereof. Accordingly, each party represents and warrants to the other that (i) it has the financial ability to bear the economic risk of its investment in each Transaction and is able to bear a total loss of its investment, (ii) it is an accredited investor as that term is defined under Regulation D under the Securities Act and (iii) the disposition of each Transaction is restricted under this Master Confirmation, the Securities Act and state securities laws.
4. | Additional Representations, Warranties and Covenants of Counterparty. In addition to the representations, warranties and covenants in the Agreement, Counterparty represents, warrants and covenants to CSI that: |
(a) The purchase or writing of each Transaction and the transactions contemplated hereby will not violate Rule 13e-1 or Rule 13e-4 under the Exchange Act.
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(b) It is not entering into any Transaction (i) on the basis of, and is not aware of, any material non-public information with respect to the Shares (ii) in anticipation of, in connection with, or to facilitate, a distribution of its securities, a self tender offer or a third-party tender offer or (iii) to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for the Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for the Shares).
(c) Each Transaction is being entered into pursuant to a publicly disclosed Share buy-back program and its Board of Directors has approved the use of derivatives to effect the Share buy-back program.
(d) Without limiting the generality of Section 13.1 of the Equity Definitions, Counterparty acknowledges that neither CSI nor any of its affiliates is making any representations or warranties or taking any position or expressing any view with respect to the treatment of any Transaction under any accounting standards including ASC Topic 260, Earnings Per Share, ASC Topic 815, Derivatives and Hedging, or ASC Topic 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging Contracts in Entitys Own Equity.
(e) As of (i) the date hereof and (ii) the Trade Date for each Transaction hereunder, Counterparty is in compliance with its reporting obligations under the Exchange Act and its most recent Annual Report on Form 10-K, together with all reports subsequently filed by it pursuant to the Exchange Act, taken together and as amended and supplemented to the date of this representation, do not, as of their respective filing dates, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(f) Counterparty shall report each Transaction as required under the Exchange Act and the rules and regulations thereunder.
(g) The Shares are not, and Counterparty will not cause the Shares to be, subject to a restricted period (as defined in Regulation M promulgated under the Exchange Act) at any time during any Regulation M Period (as defined below) for any Transaction unless Counterparty has provided written notice to CSI of such restricted period not later than the Scheduled Trading Day immediately preceding the first day of such restricted period; Counterparty acknowledges that any such notice may cause a Disrupted Day to occur pursuant to Section 5 below; accordingly, Counterparty acknowledges that its delivery of such notice must comply with the standards set forth in Section 6 below; Regulation M Period means, for any Transaction, (i) the Relevant Period (as defined below) and (ii) the Settlement Valuation Period, if any, for such Transaction. Relevant Period means, for any Transaction, the period commencing on the Calculation Period Start Date for such Transaction and ending on the earlier of (i) the Scheduled Termination Date and (ii) the last Additional Relevant Day (as specified in the related Supplemental Confirmation) for such Transaction, or such earlier day as elected by CSI and communicated to Counterparty on such day (or, if later, the First Acceleration Date without regard to any acceleration thereof pursuant to Special Provisions for Acquisition Transaction Announcements below).
(h) As of the Trade Date, the Prepayment Date, the Initial Share Delivery Date and the Settlement Date for each Transaction, Counterparty is not insolvent (as such term is defined under Section 101(32) of the U.S. Bankruptcy Code (Title 11 of the United States Code) (the Bankruptcy Code)) and Counterparty would be able to purchase a number of Shares with a value equal to the Prepayment Amount in compliance with the laws of the jurisdiction of Counterpartys incorporation.
(i) Counterparty is not and, after giving effect to any Transaction, will not be, required to register as an investment company as such term is defined in the Investment Company Act of 1940, as amended.
(j) Counterparty has not and will not enter into agreements similar to the Transactions described herein where any initial hedge period, calculation period, relevant period or settlement valuation period (each however defined) in such other transaction will overlap at any time (including as a result of extensions in such initial hedge period, calculation period, relevant period or settlement valuation period as provided in the relevant agreements) with any Relevant Period or, if applicable, any Settlement Valuation Period under this Master Confirmation. In the event that the initial hedge period, relevant period, calculation period or settlement valuation period in any other similar transaction overlaps with any Relevant Period or, if applicable, Settlement Valuation Period under this Master Confirmation as a result of any postponement of the Scheduled Termination Date or extension of the Settlement Valuation Period pursuant to Valuation Disruption above, Counterparty shall promptly amend such transaction to avoid any such overlap.
5. | Regulatory Disruption. In the event that CSI concludes, in good faith and based on the advice of counsel, that it is appropriate with respect to any legal, regulatory or self-regulatory requirements or related policies and |
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procedures generally applicable to the relevant line of business (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by CSI), for it to refrain from or decrease any market activity on any Scheduled Trading Day or Days during the Calculation Period or, if applicable, the Settlement Valuation Period, CSI may by written notice to Counterparty elect to deem that a Market Disruption Event has occurred and will be continuing on such Scheduled Trading Day or Days. |
6. | 10b5-1 Plan. Counterparty represents, warrants and covenants to CSI that: |
(a) Counterparty is entering into this Master Confirmation and each Transaction hereunder in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b5-1 under the Exchange Act (Rule 10b5-1) or any other antifraud or anti-manipulation provisions of the federal or applicable state securities laws and that it has not entered into or altered and will not enter into or alter any corresponding or hedging transaction or position with respect to the Shares. Counterparty acknowledges that it is the intent of the parties that each Transaction entered into under this Master Confirmation comply with the requirements of paragraphs (c)(1)(i)(A) and (B) of Rule 10b5-1 and each Transaction entered into under this Master Confirmation shall be interpreted to comply with the requirements of Rule 10b5-1(c).
(b) Counterparty will not seek to control or influence CSIs decision to make any purchases or sales (within the meaning of Rule 10b5-1(c)(1)(i)(B)(3)) under any Transaction entered into under this Master Confirmation, including, without limitation, CSIs decision to enter into any hedging transactions. Counterparty represents and warrants that it has consulted with its own advisors as to the legal aspects of its adoption and implementation of this Master Confirmation and each Supplemental Confirmation under Rule 10b5-1.
(c) Counterparty acknowledges and agrees that any amendment, modification, waiver or termination of this Master Confirmation or the relevant Supplemental Confirmation must be effected in accordance with the requirements for the amendment or termination of a plan as defined in Rule 10b5-1(c). Without limiting the generality of the foregoing, any such amendment, modification, waiver or termination shall be made in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5, and no such amendment, modification or waiver shall be made at any time at which Counterparty or any officer, director, manager or similar person of Counterparty is aware of any material non-public information regarding Counterparty or the Shares.
7. | Counterparty Purchases. Counterparty (or any affiliated purchaser as defined in Rule 10b-18 under the Exchange Act (Rule 10b-18)) shall not, without the prior written consent of CSI, directly or indirectly purchase any Shares (including by means of a derivative instrument), listed contracts on the Shares or securities that are convertible into, or exchangeable or exercisable for Shares (including, without limitation, any Rule 10b-18 purchases of blocks (as defined in Rule 10b-18)) during any Relevant Period or, if applicable, Settlement Valuation Period, except through CSI However, the foregoing shall not limit Counterpartys ability (or the ability of any agent independent of the issuer (as defined in Rule 10b-18)), pursuant to any plan (as defined in Rule 10b-18) of Counterparty, to re-acquire Shares in connection with any equity transaction related to such plan or to limit Counterpartys ability to withhold Shares to cover tax liabilities associated with such equity transactions or otherwise restrict Counterpartys ability to repurchase Shares under privately negotiated or off-market transactions (including, without limitation, an agreement relating to Counterpartys 401(k) Plan or transactions with any of Counterpartys employees, officers, directors or affiliates), so long as any re-acquisition, withholding or repurchase does not constitute a Rule 10b-18 purchase (as defined in Rule 10b-18). |
8. | Special Provisions for Merger Transactions. Notwithstanding anything to the contrary herein or in the Equity Definitions: |
(a) Counterparty agrees that it:
(i) will not during the period commencing on the Trade Date through the end of the Relevant Period or, if applicable, the Settlement Valuation Period for any Transaction make, or permit to be made, any public announcement (as defined in Rule 165(f) under the Securities Act) of any Merger Transaction or potential Merger Transaction (a Public Announcement) unless such Public Announcement is made prior to the opening or after the close of the regular trading session on the Exchange for the Shares;
(ii) shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) notify CSI following any such Public Announcement that such Public Announcement has been made; and
(iii) shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) provide CSI with written notice specifying (i) Counterpartys average daily Rule 10b-18 Purchases
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(as defined in Rule 10b-18) during the three full calendar months immediately preceding the announcement date that were not effected through CSI or its affiliates and (ii) the number of Shares purchased pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act for the three full calendar months preceding the date of such Public Announcement. Such written notice shall be deemed to be a certification by Counterparty to CSI that such information is true and correct. In addition, Counterparty shall promptly notify CSI of the earlier to occur of the completion of the relevant Merger Transaction and the completion of the vote by target shareholders.
(b) Counterparty acknowledges that a Public Announcement may cause the terms of any Transaction to be adjusted or such Transaction to be terminated; accordingly, Counterparty acknowledges that in making any Public Announcement, it must comply with the standards set forth in Section 6 above.
(c) Upon the occurrence of any Public Announcement (whether made by Counterparty or a third party), CSI may in its sole discretion (i) make adjustments in good faith and in a commercially reasonable manner to the terms of any Transaction, including, without limitation, the Scheduled Termination Date or the Forward Price Adjustment Amount, and/or suspend the Calculation Period and/or any Settlement Valuation Period or (ii) treat the occurrence of such Public Announcement as an Additional Termination Event with Counterparty as the sole Affected Party and the Transactions hereunder as the Affected Transactions and with the amount under Section 6(e) of the Agreement determined taking into account the fact that the Calculation Period or Settlement Valuation Period, as the case may be, had fewer Scheduled Trading Days than originally anticipated.
Merger Transaction means any merger, acquisition or similar transaction involving a recapitalization as contemplated by Rule 10b-18(a)(13)(iv) under the Exchange Act.
9. | Special Provisions for Acquisition Transaction Announcements. (a) If an Acquisition Transaction Announcement occurs on or prior to the Settlement Date for any Transaction, then the Number of Shares to be Delivered for such Transaction shall be determined as if the Divisor Amount were equal to The greater of (i) the Forward Price and (ii) $1.00. If an Acquisition Transaction Announcement occurs after the Trade Date, but prior to the First Acceleration Date of any Transaction, the First Acceleration Date shall be the date of such Acquisition Transaction Announcement. |
(b) Acquisition Transaction Announcement means (i) the announcement of an Acquisition Transaction, (ii) an announcement that Counterparty or any of its subsidiaries has entered into an agreement, a letter of intent or an understanding designed to result in an Acquisition Transaction, (iii) the announcement of the intention to solicit or enter into, or to explore strategic alternatives or other similar undertaking that may include, an Acquisition Transaction, (iv) any other announcement that in the reasonable judgment of the Calculation Agent could reasonably be expected to result in an Acquisition Transaction or (v) any announcement of any change or amendment to any previous Acquisition Transaction Announcement (including any announcement of the abandonment of any such previously announced Acquisition Transaction, agreement, letter of intent, understanding or intention). For the avoidance of doubt, announcements as used in the definition of Acquisition Transaction Announcement refer to any public announcement whether made by the Issuer or a third party.
(c) Acquisition Transaction means (i) any Merger Event (for purposes of this definition the definition of Merger Event shall be read with the references therein to 100% being replaced by 15% and to 50% by 75% and without reference to the clause beginning immediately following the definition of Reverse Merger therein to the end of such definition), Tender Offer or Merger Transaction or any other transaction involving the merger of Counterparty with or into any third party, (ii) the sale or transfer of all or substantially all of the assets of Counterparty, (iii) a recapitalization, reclassification, binding share exchange or other similar transaction, (iv) any acquisition, lease, exchange, transfer, disposition (including by way of spin-off or distribution) of assets (including any capital stock or other ownership interests in subsidiaries) or other similar event by Counterparty or any of its subsidiaries where the aggregate consideration transferable or receivable by or to Counterparty or its subsidiaries exceeds 15% of the market capitalization of Counterparty and (v) any transaction in which Counterparty or its board of directors has a legal obligation to make a recommendation to its shareholders in respect of such transaction (whether pursuant to Rule 14e-2 under the Exchange Act or otherwise).
10. | Acknowledgments. (a) The parties hereto intend for: |
(i) each Transaction to be a securities contract as defined in Section 741(7) of the Bankruptcy Code, a swap agreement as defined in Section 101(53B) of the Bankruptcy Code and a forward contract as defined in Section 101(25) of the Bankruptcy Code, and the parties hereto to be entitled to the protections
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afforded by, among other Sections, Sections 362(b)(6), 362(b)(17), 362(b)(27), 362(o), 546(e), 546(g), 546(j), 555, 556, 560 and 561 of the Bankruptcy Code;
(ii) the Agreement to be a master netting agreement as defined in Section 101(38A) of the Bankruptcy Code;
(iii) a partys right to liquidate, terminate or accelerate any Transaction, net out or offset termination values or payment amounts, and to exercise any other remedies upon the occurrence of any Event of Default or Termination Event under the Agreement with respect to the other party or any Extraordinary Event that results in the termination or cancellation of any Transaction to constitute a contractual right (as defined in the Bankruptcy Code); and
(iv) all payments for, under or in connection with each Transaction, all payments for the Shares (including, for the avoidance of doubt, payment of the Prepayment Amount) and the transfer of such Shares to constitute settlement payments and transfers (as defined in the Bankruptcy Code).
(b) Counterparty acknowledges that:
(i) during the term of any Transaction, CSI and its affiliates may buy or sell Shares or other securities or buy or sell options or futures contracts or enter into swaps or other derivative securities in order to establish, adjust or unwind its hedge position with respect to such Transaction;
(ii) CSI and its affiliates may also be active in the market for the Shares and derivatives linked to the Shares other than in connection with hedging activities in relation to any Transaction, including acting as agent or as principal and for its own account or on behalf of customers;
(iii) CSI shall make its own determination as to whether, when or in what manner any hedging or market activities in Counterpartys securities shall be conducted and shall do so in a manner that it deems appropriate to hedge its price and market risk with respect to the Forward Price and the VWAP Price;
(iv) any market activities of CSI and its affiliates with respect to the Shares may affect the market price and volatility of the Shares, as well as the Forward Price and VWAP Price, each in a manner that may be adverse to Counterparty; and
(v) each Transaction is a derivatives transaction in which it has granted CSI an option; CSI may purchase shares for its own account at an average price that may be greater than, or less than, the price paid by Counterparty under the terms of the related Transaction.
11. Credit Support Documents. The parties hereto acknowledge that no Transaction hereunder is secured by any collateral that would otherwise secure the obligations of Counterparty herein or pursuant to the Agreement.
12. | Set-off. (a) The parties agree to amend Section 6 of the Agreement by adding a new Section 6(f) thereto as follows: |
(f) Upon the occurrence of an Event of Default or Termination Event with respect to a party who is the Defaulting Party or the Affected Party (X), the other party (Y) will have the right (but not be obliged) without prior notice to X or any other person to set-off or apply any obligation of X owed to Y (or any Affiliate of Y) (whether or not matured or contingent and whether or not arising under the Agreement, and regardless of the currency, place of payment or booking office of the obligation) against any obligation of Y (or any Affiliate of Y) owed to X (whether or not matured or contingent and whether or not arising under the Agreement, and regardless of the currency, place of payment or booking office of the obligation). Y will give notice to the other party of any set-off effected under this Section 6(f).
Amounts (or the relevant portion of such amounts) subject to set-off may be converted by Y into the Termination Currency at the rate of exchange at which such party would be able, acting in a reasonable manner and in good faith, to purchase the relevant amount of such currency. If any obligation is unascertained, Y may in good faith estimate that obligation and set-off in respect of the estimate, subject to the relevant party accounting to the other when the obligation is ascertained. Nothing in this Section 6(f) shall be effective to create a charge or other security interest. This Section 6(f) shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise).
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(b) Notwithstanding anything to the contrary in the foregoing, CSI agrees not to set off or net amounts due from Counterparty with respect to any Transaction against amounts due from CSI to Counterparty with respect to contracts or instruments that are not Equity Contracts. Equity Contract means any transaction or instrument that does not convey to CSI rights, or the ability to assert claims, that are senior to the rights and claims of common stockholders in the event of Counterpartys bankruptcy.
13. Delivery of Shares. Notwithstanding anything to the contrary herein, CSI may, by prior notice to Counterparty, satisfy its obligation to deliver any Shares or other securities on any date due (an Original Delivery Date) by making separate deliveries of Shares or such securities, as the case may be, at more than one time on or prior to such Original Delivery Date, so long as the aggregate number of Shares and other securities so delivered on or prior to such Original Delivery Date is equal to the number required to be delivered on such Original Delivery Date.
14. Early Termination. In the event that an Early Termination Date (whether as a result of an Event of Default or a Termination Event) occurs or is designated with respect to any Transaction (except as a result of a Merger Event in which the consideration or proceeds to be paid to holders of Shares consists solely of cash), if either party would owe any amount to the other party pursuant to Section 6(d)(ii) of the Agreement (any such amount, a Payment Amount), then, in lieu of any payment of such Payment Amount, Counterparty may, no later than the Early Termination Date or the date on which such Transaction is terminated, elect to deliver or for CSI to deliver, as the case may be, to the other party a number of Shares (or, in the case of a Merger Event, a number of units, each comprising the number or amount of the securities or property that a hypothetical holder of one Share would receive in such Merger Event (each such unit, an Alternative Delivery Unit and, the securities or property comprising such unit, Alternative Delivery Property)) with a value equal to the Payment Amount, as determined by the Calculation Agent (and the parties agree that, in making such determination of value, the Calculation Agent may take into account a number of factors, including the market price of the Shares or Alternative Delivery Property on the date of early termination and, if such delivery is made by CSI, the prices at which CSI purchases Shares or Alternative Delivery Property to fulfill its delivery obligations under this Section 14); provided that in determining the composition of any Alternative Delivery Unit, if the relevant Merger Event involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash; and provided further that Counterparty may make such election only if Counterparty represents and warrants to CSI in writing on the date it notifies CSI of such election that, as of such date, Counterparty is not aware of any material non-public information concerning the Shares and is making such election in good faith and not as part of a plan or scheme to evade compliance with the federal securities laws. If such delivery is made by Counterparty, paragraphs 2 through 7 of Annex A shall apply as if such delivery were a settlement of the Transaction to which Net Share Settlement applied, the Cash Settlement Payment Date were the Early Termination Date and the Forward Cash Settlement Amount were zero (0) minus the Payment Amount owed by Counterparty.
15. Calculations and Payment Date upon Early Termination. The parties acknowledge and agree that in calculating Close-out Amount pursuant to Section 6 of the Agreement CSI may (but need not) determine losses without reference to actual losses incurred but based on expected losses assuming a commercially reasonable (including without limitation with regard to reasonable legal and regulatory guidelines) risk bid were used to determine loss to avoid awaiting the delay associated with closing out any hedge or related trading position in a commercially reasonable manner prior to or sooner following the designation of an Early Termination Date. Notwithstanding anything to the contrary in Section 6(d)(ii) of the Agreement, all amounts calculated as being due in respect of an Early Termination Date under Section 6(e) of the Agreement will be payable on the day that notice of the amount payable is effective; provided that if Counterparty elects to receive Shares or Alternative Delivery Property in accordance with Section 14, such Shares or Alternative Delivery Property shall be delivered on a date selected by CSI as promptly as practicable.
16. | [Reserved.] |
17. Automatic Termination Provisions. Notwithstanding anything to the contrary in Section 6 of the Agreement, if a Termination Price is specified in any Supplemental Confirmation, then an Additional Termination Event with Counterparty as the sole Affected Party and the Transaction to which such Supplemental Confirmation relates as the Affected Transaction will automatically occur without any notice or action by CSI or Counterparty if the price of the Shares on the Exchange at any time falls below such Termination Price, and the Exchange Business Day that the price of the Shares on the Exchange at any time falls below the Termination Price will be the Early Termination Date for purposes of the Agreement.
18. Delivery of Cash. For the avoidance of doubt, nothing in this Master Confirmation shall be interpreted as requiring Counterparty to deliver cash in respect of the settlement of the Transactions contemplated by this Master
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Confirmation following payment by Counterparty of the relevant Prepayment Amount, except in circumstances where the required cash settlement thereof is permitted for classification of the contract as equity by ASC 815-40, Derivatives and Hedging Contracts in Entitys Own Equity, as in effect on the relevant Trade Date (including, without limitation, where Counterparty so elects to deliver cash or fails timely to elect to deliver Shares or Alternative Delivery Property in respect of the settlement of such Transactions).
19. Claim in Bankruptcy. CSI acknowledges and agrees that this Confirmation is not intended to convey to it rights with respect to the Transactions that are senior to the claims of common stockholders in the event of Counterpartys bankruptcy.
20. | [Reserved.] |
21. Governing Law. The Agreement, this Master Confirmation, each Supplemental Confirmation and all matters arising in connection with the Agreement, this Master Confirmation and each Supplemental Confirmation shall be governed by, and construed and enforced in accordance with, the laws of the State of New York (without reference to its choice of laws doctrine other than Title 14 of Article 5 of the New York General Obligations Law).
22. | Offices. |
The Office of Counterparty for each Transaction is: Fifth Third Bancorp, Fifth Third Center Cincinnati, Ohio 45263.
23. Waiver of Jury Trial. Each party waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding relating to any Transaction. Each party (i) certifies that no representative, agent or attorney of the other party has represented, expressly or otherwise, that such other party would not, in the event of such a suit, action or proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other party have been induced to enter into any Transaction hereunder by, among other things, the mutual waivers and certifications provided herein.
24. Submission to Jurisdiction. Section 13(b) of the Agreement is deleted in its entirety and replaced by the following:
Each party hereby irrevocably and unconditionally submits for itself and its property in any suit, legal action or proceeding relating to this Agreement and/or any Transaction, or for recognition and enforcement of any judgment in respect thereof, (each, Proceedings) to the exclusive jurisdiction of the Supreme Court of the State of New York, sitting in New York County, the courts of the United States of America for the Southern District of New York and appellate courts from any thereof. Nothing in the Master Confirmation, any Supplemental Confirmation or this Agreement precludes either party from bringing Proceedings in any other jurisdiction if (A) the courts of the State of New York or the United States of America for the Southern District of New York lack jurisdiction over the parties or the subject matter of the Proceedings or declines to accept the Proceedings on the grounds of lacking such jurisdiction; (B) the Proceedings are commenced by a party for the purpose of enforcing against the other partys property, assets or estate any decision or judgment rendered by any court in which Proceedings may be brought as provided hereunder; (C) the Proceedings are commenced to appeal any such courts decision or judgment to any higher court with competent appellate jurisdiction over that courts decisions or judgments if that higher court is located outside the State of New York or Borough of Manhattan, such as a federal court of appeals or the U.S. Supreme Court; or (D) any suit, action or proceeding has been commenced in another jurisdiction by or against the other party or against its property, assets or estate and, in order to exercise or protect its rights, interests or remedies under this Agreement, the Master Confirmation or any Supplemental Confirmation, the party (1) joins, files a claim, or takes any other action, in any such suit, action or proceeding, or (2) otherwise commences any Proceeding in that other jurisdiction as the result of that other suit, action or proceeding having commenced in that other jurisdiction.
25. Counterparts. This Master Confirmation may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Master Confirmation by signing and delivering one or more counterparts.
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Please confirm that the foregoing correctly sets forth the terms of our agreement by signing and returning to us a copy of this Confirmation.
Yours sincerely, | ||
CREDIT SUISSE INTERNATIONAL | ||
By: | /s/ Emillie Blay | |
Authorized Signatory Emillie Blay | ||
By: | /s/ Shui Wong | |
Authorized Signatory Shui Wong | ||
CREDIT SUISSE AG, NEW YORK BRANCH, as Agent | ||
By: | /s/ Michael G. Clark | |
Authorized Signatory Michael G. Clark | ||
By: | /s/ Louis J. Impellizeri | |
Authorized Signatory Louis J. Impellizeri Director |
Agreed and Accepted By:
FIFTH THIRD BANCORP | ||
By: | /s/ Tayfun Tuzun | |
Name: Tayfun Tuzun | ||
Title: Treasurer |
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SCHEDULE A
SUPPLEMENTAL CONFIRMATION
To: | Fifth Third Bancorp Fifth Third Center Cincinnati, Ohio 45263 | |
From: | Credit Suisse International | |
Subject: | Accelerated Stock Buyback | |
Ref. No: | 55215064 | |
Date: | November 6, 2012 |
The purpose of this Supplemental Confirmation is to confirm the terms and conditions of the Transaction entered into between Credit Suisse International (CSI), Fifth Third Bancorp (Counterparty) (together, the Contracting Parties) and Credit Suisse AG, New York Branch, as agent, on the Trade Date specified below. This Supplemental Confirmation is a binding contract between CSI and Counterparty as of the relevant Trade Date for the Transaction referenced below.
1. This Supplemental Confirmation supplements, forms part of, and is subject to the Master Confirmation dated as of November 6, 2012 (the Master Confirmation) between the Contracting Parties, as amended and supplemented from time to time. All provisions contained in the Master Confirmation govern this Supplemental Confirmation except as expressly modified below.
2. The terms of the Transaction to which this Supplemental Confirmation relates are as follows:
Trade Date: | November 6, 2012 | |||
Forward Price Adjustment Amount: | [**]* | |||
Calculation Period Start Date: | November 7, 2012 | |||
Scheduled Termination Date: | February 7, 2013 | |||
First Acceleration Date: | [**]* | |||
Prepayment Amount: | USD 125,000,000 | |||
Prepayment Date: | November 9, 2012 | |||
Initial Shares: | 7,710,761 Shares; provided that if, in connection with the Transaction, CSI is unable to borrow or otherwise acquire a number of Shares equal to the Initial Shares for delivery to Counterparty on the Initial Share Delivery Date, the Initial Shares delivered on the Initial Share Delivery Date shall be reduced to such number of Shares that CSI is able to so borrow or otherwise acquire, and CSI shall use reasonable good faith efforts to borrow or otherwise acquire a number of Shares equal to the shortfall in the Initial Share Delivery and to deliver such additional Shares as soon as reasonably practicable. The aggregate of all Shares delivered to Counterparty in respect of the Transaction pursuant to this paragraph shall be the Initial Shares for purposes of | |||
Number of Shares to be Delivered in the Master Confirmation. |
* | CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. |
Initial Share Delivery Date: | November 9, 2012 | |||
Ordinary Dividend Amount: | [**]* | |||
Scheduled Ex-Dividend Dates: | December 27, 2012 | |||
Termination Price: | [**]* | |||
Additional Relevant Days: | The Three Exchange Business Days immediately following the Calculation Period. |
3. Counterparty represents and warrants to CSI that neither it nor any affiliated purchaser (as defined in Rule 10b-18 under the Exchange Act) has made any purchases of blocks pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act during either (i) the four full calendar weeks immediately preceding the Trade Date or (ii) during the calendar week in which the Trade Date occurs.
4. This Supplemental Confirmation may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Supplemental Confirmation by signing and delivering one or more counterparts.
Please confirm your agreement to be bound by the terms of the foregoing by executing the copy of this Confirmation enclosed for that purpose and returning it to us.
Yours sincerely, | ||
CREDIT SUISSE INTERNATIONAL | ||
By: | /s/ Emillie Blay | |
Authorized Signatory | ||
By: | /s/ Shui Wong | |
Authorized Signatory | ||
CREDIT SUISSE AG, NEW YORK BRANCH, as Agent | ||
By: | /s/ Michael G. Clark | |
Authorized Signatory | ||
By: | /s/ Louis J. Impellizeri | |
Louis J. Impellizeri Director |
Agreed and Accepted By:
FIFTH THIRD BANCORP | ||
By: | /s/ Tayfun Tuzun | |
Name: Tayfun Tuzun | ||
Title: Treasurer |
* | CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. |
ANNEX A
COUNTERPARTY SETTLEMENT PROVISIONS
1. The following Counterparty Settlement Provisions shall apply to the extent indicated under the Master Confirmation:
Settlement Currency: |
USD | |
Settlement Method Election: |
Applicable; provided that (i) Section 7.1 of the Equity Definitions is hereby amended by deleting the word Physical in the sixth line thereof and replacing it with the words Net Share and (ii) the Electing Party may make a settlement method election only if the Electing Party represents and warrants to CSI in writing on the date it notifies CSI of its election that, as of such date, the Electing Party is not aware of any material non-public information concerning Counterparty or the Shares and is electing the settlement method in good faith and not as part of a plan or scheme to evade compliance with the federal securities laws. | |
Electing Party: |
Counterparty | |
Settlement Method Election Date: |
The earlier of (i) the Scheduled Termination Date and (ii) the second Exchange Business Day immediately following the Accelerated Termination Date (in which case the election under Section 7.1 of the Equity Definitions shall be made no later than 10 minutes prior to the open of trading on the Exchange on such second Exchange Business Day), as the case may be. | |
Default Settlement Method: |
Cash Settlement | |
Forward Cash Settlement Amount: |
The Number of Shares to be Delivered multiplied by the Settlement Price. | |
Settlement Price: |
The average of the VWAP Prices for the Exchange Business Days in the Settlement Valuation Period, subject to Valuation Disruption as specified in the Master Confirmation. | |
Settlement Valuation Period: |
A number of Scheduled Trading Days selected by CSI in good faith and in a commercially reasonable manner, such number to be approximately equal to the Number of Shares to be Delivered divided by 10% of the ADTV (as defined in Rule 10b-18, and expressed as a number of Shares) for the Shares at the time of determination, beginning on the Scheduled Trading Day immediately following the earlier of (i) the Scheduled Termination Date or (ii) the Exchange Business Day immediately following the Termination Date. | |
Cash Settlement: |
If Cash Settlement is applicable, then Buyer shall pay to Seller the absolute value of the Forward Cash Settlement Amount on the Cash Settlement Payment Date. | |
Cash Settlement Payment Date: |
The date one Settlement Cycle following the last day of the Settlement Valuation Period. | |
Net Share Settlement Procedures: |
If Net Share Settlement is applicable, Net Share Settlement shall be made in accordance with paragraphs 2 through 7 below. |
2. Net Share Settlement shall be made by delivery on the Cash Settlement Payment Date of a number of Shares satisfying the conditions set forth in paragraph 3 below (the Registered Settlement Shares), or a number
of Shares not satisfying such conditions (the Unregistered Settlement Shares), in either case with a value equal to the absolute value of the Forward Cash Settlement Amount, with such Shares value based on the value thereof to CSI (which value shall, in the case of Unregistered Settlement Shares, take into account a commercially reasonable illiquidity discount), in each case as determined by the Calculation Agent.
3. Counterparty may only deliver Registered Settlement Shares pursuant to paragraph 2 above if:
(a) a registration statement covering public resale of the Registered Settlement Shares by CSI (the Registration Statement) shall have been filed with the Securities and Exchange Commission under the Securities Act and been declared or otherwise become effective on or prior to the date of delivery, and no stop order shall be in effect with respect to the Registration Statement; a printed prospectus relating to the Registered Settlement Shares (including any prospectus supplement thereto, the Prospectus) shall have been delivered to CSI, in such quantities as CSI shall reasonably have requested, on or prior to the date of delivery;
(b) the form and content of the Registration Statement and the Prospectus (including, without limitation, any sections describing the plan of distribution) shall be satisfactory to CSI;
(c) as of or prior to the date of delivery, CSI and its agents shall have been afforded a reasonable opportunity to conduct a due diligence investigation with respect to Counterparty customary in scope for underwritten offerings of equity securities and the results of such investigation are satisfactory to CSI, in its discretion; and
(d) as of the date of delivery, an agreement (the Underwriting Agreement) shall have been entered into with CSI in connection with the public resale of the Registered Settlement Shares by CSI substantially similar to underwriting agreements customary for underwritten offerings of equity securities, in form and substance satisfactory to CSI, which Underwriting Agreement shall include, without limitation, provisions substantially similar to those contained in such underwriting agreements relating, without limitation, to the indemnification of, and contribution in connection with the liability of, CSI and its affiliates and the provision of customary opinions, accountants comfort letters and lawyers negative assurance letters.
4. If Counterparty delivers Unregistered Settlement Shares pursuant to paragraph 2 above:
(a) all Unregistered Settlement Shares shall be delivered to CSI (or any affiliate of CSI designated by CSI) pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof;
(b) as of or prior to the date of delivery, CSI and any potential purchaser of any such shares from CSI (or any affiliate of CSI designated by CSI) identified by CSI shall be afforded a commercially reasonable opportunity to conduct a due diligence investigation with respect to Counterparty customary in scope for private placements of equity securities (including, without limitation, the right to have made available to them for inspection all financial and other records, pertinent corporate documents and other information reasonably requested by them);
(c) as of the date of delivery, Counterparty shall enter into an agreement (a Private Placement Agreement) with CSI (or any affiliate of CSI designated by CSI) in connection with the private placement of such shares by Counterparty to CSI (or any such affiliate) and the private resale of such shares by CSI (or any such affiliate), substantially similar to private placement purchase agreements customary for private placements of equity securities, in form and substance commercially reasonably satisfactory to CSI, which Private Placement Agreement shall include, without limitation, provisions substantially similar to those contained in such private placement purchase agreements relating, without limitation, to the indemnification of, and contribution in connection with the liability of, CSI and its affiliates and the provision of customary opinions, accountants comfort letters and lawyers negative assurance letters, and shall provide for the payment by Counterparty of all fees and expenses in connection with such resale, including all fees and expenses of counsel for CSI, and shall contain representations, warranties, covenants and agreements of Counterparty reasonably necessary or advisable to establish and maintain the availability of an exemption from the registration requirements of the Securities Act for such resales; and
(d) in connection with the private placement of such shares by Counterparty to CSI (or any such affiliate) and the private resale of such shares by CSI (or any such affiliate), Counterparty shall, if so requested by CSI, prepare, in cooperation with CSI, a private placement memorandum in form and substance reasonably satisfactory to CSI
5. CSI, itself or through an affiliate (the Selling Agent) or any underwriter(s), will sell all, or such lesser portion as may be required hereunder, of the Registered Settlement Shares or Unregistered Settlement Shares
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and any Makewhole Shares (as defined below) (together, the Settlement Shares) delivered by Counterparty to CSI pursuant to paragraph 6 below commencing on the Cash Settlement Payment Date and continuing until the date on which the aggregate Net Proceeds (as such term is defined below) of such sales, as determined by CSI, is equal to the absolute value of the Forward Cash Settlement Amount (such date, the Final Resale Date). If the proceeds of any sale(s) made by CSI, the Selling Agent or any underwriter(s), net of any fees and commissions (including, without limitation, underwriting or placement fees) customary for similar transactions under the circumstances at the time of the offering, together with carrying charges and expenses incurred in connection with the offer and sale of the Shares (including, but without limitation to, the covering of any over-allotment or short position (syndicate or otherwise)) (the Net Proceeds) exceed the absolute value of the Forward Cash Settlement Amount, CSI will refund, in USD, such excess to Counterparty on the date that is three (3) Currency Business Days following the Final Resale Date, and, if any portion of the Settlement Shares remains unsold, CSI shall return to Counterparty on that date such unsold Shares.
6. If the Calculation Agent determines that the Net Proceeds received from the sale of the Registered Settlement Shares or Unregistered Settlement Shares or any Makewhole Shares, if any, pursuant to this paragraph 6 are less than the absolute value of the Forward Cash Settlement Amount (the amount in USD by which the Net Proceeds are less than the absolute value of the Forward Cash Settlement Amount being the Shortfall and the date on which such determination is made, the Deficiency Determination Date), Counterparty shall on the Exchange Business Day next succeeding the Deficiency Determination Date (the Makewhole Notice Date) deliver to CSI, through the Selling Agent, a notice of Counterpartys election that Counterparty shall either (i) pay an amount in cash equal to the Shortfall on the day that is one (1) Currency Business Day after the Makewhole Notice Date, or (ii) deliver additional Shares. If Counterparty elects to deliver to CSI additional Shares, then Counterparty shall deliver additional Shares in compliance with the terms and conditions of paragraph 3 or paragraph 4 above, as the case may be (the Makewhole Shares), on the first Clearance System Business Day which is also an Exchange Business Day following the Makewhole Notice Date in such number as the Calculation Agent reasonably believes would have a market value on that Exchange Business Day equal to the Shortfall. Such Makewhole Shares shall be sold by CSI in accordance with the provisions above; provided that if the sum of the Net Proceeds from the sale of the originally delivered Shares and the Net Proceeds from the sale of any Makewhole Shares is less than the absolute value of the Forward Cash Settlement Amount then Counterparty shall, at its election, either make such cash payment or deliver to CSI further Makewhole Shares until such Shortfall has been reduced to zero.
7. Notwithstanding the foregoing, in no event shall the aggregate number of Settlement Shares and Makewhole Shares be greater than the Reserved Shares minus the amount of any Shares actually delivered by Counterparty under any other Transaction(s) under this Master Confirmation (the result of such calculation, the Capped Number). Counterparty represents and warrants (which shall be deemed to be repeated on each day that a Transaction is outstanding) that the Capped Number is equal to or less than the number of Shares determined according to the following formula:
A B
Where |
A = the number of authorized but unissued shares of the Counterparty that are not reserved for future issuance on the date of the determination of the Capped Number; and | |
B = the maximum number of Shares required to be delivered to third parties if Counterparty elected Net Share Settlement of all transactions in the Shares (other than Transactions in the Shares under this Master Confirmation) with all third parties that are then currently outstanding and unexercised. |
Reserved Shares means initially, 8,500,000 Shares. The Reserved Shares may be increased or decreased in a Supplemental Confirmation.
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Exhibit 10.51
A MARK OF [**] IN THE TEXT OF THIS EXHIBIT INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED. THIS EXHIBIT, INCLUDING THE OMIITED PORTIONS, HAS BEEN FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
To: | Fifth Third Bancorp Fifth Third Center Cincinnati, Ohio 45263 | |
From: | Credit Suisse International One Cabot Square London, England E14 4QJ | |
Re: | Accelerated Stock Buyback | |
Ref. No: | As provided in the Supplemental Confirmation | |
Date: | November 6, 2012 |
This master confirmation (this Master Confirmation), dated as of November 6, 2012 is intended to set forth certain terms and provisions of certain Transactions (each, a Transaction) entered into from time to time between Credit Suisse International (CSI), Fifth Third Bancorp (Counterparty) and Credit Suisse AG, New York Branch, as agent (the Agent). This Master Confirmation, taken alone, is neither a commitment by either party to enter into any Transaction nor evidence of a Transaction. The additional terms of any particular Transaction shall be set forth in a Supplemental Confirmation in the form of Schedule A hereto (a Supplemental Confirmation), which shall reference this Master Confirmation and supplement, form a part of, and be subject to this Master Confirmation. This Master Confirmation and each Supplemental Confirmation together shall constitute a Confirmation as referred to in the Agreement specified below.
The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the Equity Definitions), as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Master Confirmation. This Master Confirmation and each Supplemental Confirmation evidence a complete binding agreement between Counterparty and CSI as to the subject matter and terms of each Transaction to which this Master Confirmation and such Supplemental Confirmation relate and shall supersede all prior or contemporaneous written or oral communications with respect thereto.
This Master Confirmation and each Supplemental Confirmation supplement, form a part of, and are subject to an agreement in the form of the 2002 ISDA Master Agreement (the Agreement) as if CSI and Counterparty had executed the Agreement on the date of this Master Confirmation (but without any Schedule except for (i) the election of New York law (without reference to its choice of laws doctrine other than Title 14 of Article 5 of the New York General Obligations Law) as the governing law and US Dollars (USD) as the Termination Currency, (ii) the election that subparagraph (ii) of Section 2(c) will not apply to the Transactions and (iii) the election that the Cross Default provisions of Section 5(a)(vi) shall apply to Counterparty and CSI, with a Threshold Amount equal to 3% of such partys shareholders equity as reported in their respective most recent audited financial statements; provided that the words , or becoming capable at such time of being declared, shall be deleted from such Section 5(a)(vi)).
The Transactions shall be the sole Transactions under the Agreement. If there exists any ISDA Master Agreement between CSI and Counterparty or any confirmation or other agreement between CSI and Counterparty pursuant to which an ISDA Master Agreement is deemed to exist between CSI and Counterparty, then notwithstanding anything to the contrary in such ISDA Master Agreement, such confirmation or agreement or any other agreement to which CSI and Counterparty are parties, the Transactions shall not be considered Transactions under, or otherwise governed by, such existing or deemed ISDA Master Agreement.
All provisions contained or incorporated by reference in the Agreement shall govern this Master Confirmation and each Supplemental Confirmation except as expressly modified herein or in the related Supplemental Confirmation.
If, in relation to any Transaction to which this Master Confirmation and a Supplemental Confirmation relate, there is any inconsistency between the Agreement, this Master Confirmation, any Supplemental Confirmation and
the Equity Definitions, the following will prevail for purposes of such Transaction in the order of precedence indicated: (i) such Supplemental Confirmation; (ii) this Master Confirmation; (iii) the Equity Definitions; and (iv) the Agreement.
1. Each Transaction constitutes a Share Forward Transaction for the purposes of the Equity Definitions. Set forth below are the terms and conditions that, together with the terms and conditions set forth in the Supplemental Confirmation relating to any Transaction, shall govern such Transaction.
General Terms: | ||
Trade Date: |
For each Transaction, as set forth in the related Supplemental Confirmation. | |
Buyer: |
Counterparty | |
Seller: |
CSI | |
Shares: |
Common stock, without par value, of Counterparty (Ticker: FITB) | |
Exchange: |
NASDAQ Global Select Market | |
Related Exchange(s): |
All Exchanges. | |
Prepayment\Variable Obligation: |
Applicable | |
Prepayment Amount: |
For each Transaction, as set forth in the related Supplemental Confirmation. | |
Prepayment Date: |
For each Transaction, as set forth in the related Supplemental Confirmation. | |
Valuation: | ||
VWAP Price: |
For any Exchange Business Day, as determined by the Calculation Agent based on the NASDAQ 10b-18 Volume Weighted Average Price per Share for the regular trading session (including any extensions thereof) of the Exchange on such Exchange Business Day (without regard to pre-open or after hours trading outside of such regular trading session for such Exchange Business Day), as published by Bloomberg at 4:15 p.m. New York time (or 15 minutes following the end of any extension of the regular trading session) on such Exchange Business Day, on Bloomberg page FITB <Equity> AQR_SEC (or any successor thereto), or if such price is not so reported on such Exchange Business Day for any reason or is, in the Calculation Agents reasonable discretion, erroneous, such VWAP Price shall be as reasonably determined in good faith and in a commercially reasonable manner by the Calculation Agent. For purposes of calculating the VWAP Price, the Calculation Agent will include only those trades that are reported during the period of time during which Counterparty could purchase its own shares under Rule 10b-18(b)(2) and are effected pursuant to the conditions of Rule 10b-18(b)(3), each under the Securities Exchange Act of 1934, as amended (the Exchange Act) (such trades, Rule 10b-18 eligible transactions). | |
Forward Price: |
The average of the VWAP Prices for the Exchange Business Days in the Calculation Period, subject to Valuation Disruption below. | |
Forward Price Adjustment Amount: |
For each Transaction, as set forth in the related Supplemental Confirmation. | |
Calculation Period: |
The period from and including the Calculation Period Start Date to and including the Termination Date. | |
Calculation Period Start Date: |
For each Transaction, as set forth in the related Supplemental Confirmation. | |
Termination Date: |
The Scheduled Termination Date; provided that CSI shall have the right to |
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designate any Exchange Business Day on or after the First Acceleration Date to be the Termination Date (the Accelerated Termination Date) by delivering notice to Counterparty of any such designation prior to 11:59 p.m. New York City time on the Exchange Business Day immediately following the designated Accelerated Termination Date. | ||
Scheduled Termination Date: |
For each Transaction, as set forth in the related Supplemental Confirmation, subject to postponement as provided in Valuation Disruption below. | |
First Acceleration Date: |
For each Transaction, as set forth in the related Supplemental Confirmation. | |
Valuation Disruption: |
The definition of Market Disruption Event in Section 6.3(a) of the Equity Definitions is hereby amended by deleting the words at any time during the one-hour period that ends at the relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case may be and inserting the words at any time on any Scheduled Trading Day during the Calculation Period or Settlement Valuation Period after the word material, in the third line thereof.
Section 6.3(d) of the Equity Definitions is hereby amended by deleting the remainder of the provision following the term Scheduled Closing Time in the fourth line thereof.
Notwithstanding anything to the contrary in the Equity Definitions, to the extent that a Disrupted Day occurs (i) in the Calculation Period, the Calculation Agent may, in its good faith and commercially reasonable discretion, postpone the Scheduled Termination Date, or (ii) in the Settlement Valuation Period, the Calculation Agent may, in its good faith and commercially reasonable discretion, extend the Settlement Valuation Period, in both cases by no more than one Exchange Business Day for each such Disrupted Day. If any such Disrupted Day is a Disrupted Day because of a Market Disruption Event (or a deemed Market Disruption Event as provided herein), the Calculation Agent shall determine whether (i) such Disrupted Day is a Disrupted Day in full, in which case the VWAP Price for such Disrupted Day shall not be included for purposes of determining the Forward Price or the Settlement Price, as the case may be, or (ii) such Disrupted Day is a Disrupted Day only in part, in which case the VWAP Price for such Disrupted Day shall be determined by the Calculation Agent based on Rule 10b-18 eligible transactions in the Shares on such Disrupted Day taking into account the nature and duration of the relevant Market Disruption Event, and the weighting of the VWAP Price for the relevant Exchange Business Days during the Calculation Period or the Settlement Valuation Period, as the case may be, shall be adjusted in good faith and in a commercially reasonable manner by the Calculation Agent for purposes of determining the Forward Price or the Settlement Price, as the case may be, with such adjustments based on, among other factors, the duration of any Market Disruption Event and the volume, historical trading patterns and price of the Shares. Any Exchange Business Day on which, as of the date hereof, the Exchange is scheduled to close prior to its normal close of trading shall be deemed not to be an Exchange Business Day; if a closure of the Exchange prior to its normal close of trading on any Exchange Business Day is scheduled following the date hereof, then such Exchange Business Day shall be deemed to be a Disrupted Day in full.
If a Disrupted Day occurs during the Calculation Period or the Settlement Valuation Period, as the case may be, and each of the nine immediately following Scheduled Trading Days is a Disrupted Day, then the Calculation Agent, in its good faith and commercially reasonable discretion, may deem such ninth Scheduled Trading Day to be an Exchange Business Day that is not a Disrupted Day and determine the VWAP Price for such ninth Scheduled Trading Day using its good faith estimate of the value of the Shares on such ninth Scheduled Trading Day based on the volume, historical trading patterns and price of the Shares and such other factors as it deems appropriate. |
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Settlement Terms: | ||
Settlement Procedures: |
If the Number of Shares to be Delivered is positive, Physical Settlement shall be applicable; provided that CSI does not, and shall not, make the agreement or the representations set forth in Section 9.11 of the Equity Definitions related to the restrictions imposed by applicable securities laws with respect to any Shares delivered by CSI to Counterparty under any Transaction as a result of the fact that Counterparty is the Issuer of the Shares. If the Number of Shares to be Delivered is negative, then the Counterparty Settlement Provisions in Annex A shall apply. | |
Number of Shares to be Delivered: |
A number of Shares equal to (x)(a) the Prepayment Amount divided by (b) the Divisor Amount, minus (y) the number of Initial Shares. | |
Divisor Amount: |
The greater of (i) the Forward Price minus the Forward Price Adjustment Amount and (ii) $1.00. | |
Excess Dividend Amount: |
For the avoidance of doubt, all references to the Excess Dividend Amount shall be deleted from Section 9.2(a)(iii) of the Equity Definitions. | |
Settlement Date: |
If the Number of Shares to be Delivered is positive, the date that is one Settlement Cycle immediately following the Termination Date. | |
Settlement Currency: |
USD | |
Initial Share Delivery: |
CSI shall deliver a number of Shares equal to the Initial Shares to Counterparty on the Initial Share Delivery Date in accordance with Section 9.4 of the Equity Definitions, with the Initial Share Delivery Date deemed to be a Settlement Date for purposes of such Section 9.4. | |
Initial Share Delivery Date: |
For each Transaction, as set forth in the related Supplemental Confirmation. | |
Initial Shares: |
For each Transaction, as set forth in the related Supplemental Confirmation; provided that CSI does not, and shall not, make the agreement or the representations set forth in Section 9.11 of the Equity Definitions related to the restrictions imposed by applicable securities laws with respect to any Shares delivered by CSI to Counterparty under any Transaction as a result of the fact that Counterparty is the Issuer of the Shares. | |
Share Adjustments: |
||
Potential Adjustment Event: |
Notwithstanding anything to the contrary in Section 11.2(e) of the Equity Definitions, an Extraordinary Dividend shall not constitute a Potential Adjustment Event.
It shall constitute an additional Potential Adjustment Event if the Scheduled Termination Date for any Transaction is postponed pursuant to Valuation Disruption above, in which case the Calculation Agent may, in good faith and in its commercially reasonable discretion, adjust any relevant terms of any such Transaction as appropriate to account for the economic effect on the Transaction of such postponement. | |
Extraordinary Dividend: |
For any calendar quarter, any dividend or distribution on the Shares with an ex- dividend date occurring during such calendar quarter (other than any dividend or distribution of the type described in Section 11.2(e)(i) or Section 11.2(e)(ii)(A) of the Equity Definitions) (a Dividend) the amount or value of which (as determined by the Calculation Agent), when aggregated with the amount or value (as determined by the Calculation Agent) of any and all previous Dividends with ex-dividend dates occurring in the same calendar quarter, exceeds the Ordinary Dividend Amount. | |
Ordinary Dividend Amount: |
For each Transaction, as set forth in the related Supplemental Confirmation |
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Method of Adjustment: |
Calculation Agent Adjustment | |
Extraordinary Events: | ||
Consequences of Merger Events: |
||
(a) Share-for-Share: |
Modified Calculation Agent Adjustment | |
(b) Share-for-Other: |
Cancellation and Payment | |
(c) Share-for-Combined: |
Component Adjustment | |
Tender Offer: |
Applicable; provided that (i) Section 12.1(l)of the Equity Definitions shall be amended (x) by deleting the parenthetical in the fifth line thereof, (y) by replacing that in the fifth line thereof with whether or not such announcement and (z) by adding immediately after the words Tender Offer in the fifth line thereof , and any publicly announced change or amendment to such an announcement (including the announcement of an abandonment of such intention) and (ii) Sections 12.3(a) and 12.3(d) of the Equity Definitions shall each be amended by replacing each occurrence of the words Tender Offer Date by Announcement Date. | |
Consequences of Tender Offers: |
||
(a) Share-for-Share: |
Modified Calculation Agent Adjustment or Cancellation and Payment, at the election of CSI | |
(b) Share-for-Other: |
Modified Calculation Agent Adjustment or Cancellation and Payment, at the election of CSI | |
(c) Share-for-Combined: |
Modified Calculation Agent Adjustment or Cancellation and Payment, at the election of CSI | |
Nationalization, Insolvency or Delisting: |
Cancellation and Payment; provided that in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re- listed, re-traded or re-quoted on any of the New York Stock Exchange, the American Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall be deemed to be the Exchange. | |
Additional Disruption Events: |
||
(a) Change in Law: |
Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the phrase the interpretation in the third line thereof with the phrase , or public announcement of the interpretation, (ii) by replacing the word Shares where it appears in clause (X) thereof with the words Hedge Position and (iii) by immediately following the word Transaction in clause (X) thereof, adding the phrase in the manner contemplated by the Hedging Party on the Trade Date; provided further that (i) any determination as to whether (A) the adoption of or any change in any applicable law or regulation (including, for the avoidance of doubt and without limitation, (x) any tax law or (y) adoption or promulgation of new regulations authorized or mandated by existing statute) or (B) the |
5
promulgation of or any change in the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law or regulation (including any action taken by a taxing authority), in each case, constitutes a Change in Law shall be made without regard to Section 739 of the Dodd- Frank Wall Street Reform and Consumer Protection Act of 2010 or any similar legal certainty provision in any legislation enacted, or rule or regulation promulgated, on or after the Trade Date, and (ii) Section 12.9(a)(ii) of the Equity Definitions is hereby amended by replacing the parenthetical beginning after the word regulation in the second line thereof the words (including, for the avoidance of doubt and without limitation, (x) any tax law or (y) adoption or promulgation of new regulations authorized or mandated by existing statute). | ||
(b) Failure to Deliver: |
Applicable | |
(c) Insolvency Filing: |
Applicable | |
(d) Loss of Stock Borrow: |
Applicable | |
Maximum Stock Loan Rate: |
200 basis points per annum | |
Hedging Party: |
CSI | |
(e) Increased Cost of Stock Borrow: |
Applicable | |
Initial Stock Loan Rate: |
25 basis points per annum | |
Hedging Party: |
CSI | |
Determining Party: |
CSI; provided that, following the occurrence of an Event of Default pursuant to Section 5(a)(vii) of the Agreement with respect to which CSI is the Defaulting Party, Counterparty shall have the right to designate a nationally recognized third-party dealer in over-the-counter corporate equity derivatives to act, during the period commencing on the date such Event of Default occurred and ending on the Early Termination Date with respect to such Event of Default, as the Determining Party. Upon receipt of written request from Counterparty, the Determining Party shall promptly (but in no event later than within five (5) Exchange Business Days from the receipt of such request) provide Counterparty with a written explanation describing in reasonable detail any calculation, adjustment or determination made by it (including any quotations, market data or information from external sources used in making such calculation, adjustment or determination, as the case may be, but without disclosing CSIs proprietary models or other information that may be proprietary or subject to contractual, legal or regulatory obligations to not disclose such information). All calculations and determinations by the Determining Party shall be made in good faith and in a commercially reasonable manner. | |
Additional Termination Event(s): |
Notwithstanding anything to the contrary in the Equity Definitions, if, as a result of an Extraordinary Event, any Transaction would be cancelled or terminated (whether in whole or in part) pursuant to Article 12 of the Equity Definitions, an Additional Termination Event (with such terminated Transaction(s) (or portions thereof) being the Affected Transaction(s) and |
6
Counterparty being the sole Affected Party) shall be deemed to occur, and, in lieu of Sections 12.7, 12.8 and 12.9 of the Equity Definitions, Section 6 of the Agreement shall apply to such Affected Transaction(s). The declaration by the Issuer of any Extraordinary Dividend, the ex-dividend date for which occurs or is scheduled to occur during the Relevant Dividend Period, or the occurrence of an ex-dividend date for any Dividend that is not an Extraordinary Dividend during any calendar quarter occurring (in whole or in part) during the Relevant Dividend Period (as defined below) and is prior to the Scheduled Ex-Dividend Date for such calendar quarter will constitute an Additional Termination Event, with Counterparty as the sole Affected Party and all Transactions hereunder as the Affected Transactions. | ||
Relevant Dividend Period: |
The period from and including the Calculation Period Start Date to and including the Relevant Dividend Period End Date. | |
Relevant Dividend Period End Date: |
If the Number of Shares to be Delivered is negative, the last day of the Settlement Valuation Period; otherwise, the Termination Date. | |
Scheduled Ex-Dividend Dates: |
For each Transaction for each calendar quarter, as set forth in the related Supplemental Confirmation. | |
Non-Reliance/Agreements and Acknowledgements Regarding Hedging Activities/Additional Acknowledgements: |
Applicable | |
Transfer: |
Notwithstanding anything to the contrary in the Agreement, CSI may assign, transfer and set over all rights, title and interest, powers, privileges and remedies of CSI under any Transaction, in whole or in part, to an affiliate of CSI whose obligations are guaranteed by CSI, without the consent of Counterparty. | |
CSI Payment Instructions: |
To be advised under separate cover | |
Counterpartys Contact Details for Purpose of Giving Notice: |
To be provided by Counterparty | |
Role of Agent: |
Credit Suisse AG, New York branch, in its capacity as Agent will be responsible for (A) effecting this Transaction, (B) issuing all required confirmations and statements to CSI and Counterparty, (C) maintaining books and records relating to this Transaction in accordance with its standard practices and procedures and in accordance with applicable law and (D) unless otherwise requested by Counterparty, receiving, delivering, and safeguarding Counterpartys funds and any securities in connection with this Transaction, in accordance with its standard practices and procedures and in accordance with applicable law.
The Agent is acting in connection with this Transaction solely in its capacity as Agent for CSI and Counterparty pursuant to instructions from CSI and Counterparty. Agent shall have no responsibility or personal liability to CSI or Counterparty arising from any failure by CSI or Counterparty to pay or perform any obligations hereunder, or to monitor or enforce compliance by CSI or Counterparty with any obligation hereunder, including, without limitation, any obligations to maintain collateral. Each of CSI and Counterparty agrees to proceed solely against the other to collect or recover any securities or monies owing to it in connection with or as a result of this Transaction. Agent shall otherwise have no liability in respect of this Transaction, except for its gross negligence or willful misconduct in performing its duties as Agent.
Any and all notices, demands, or communications of any kind relating to this Transaction between CSI and Counterparty shall be transmitted exclusively through Agent at the following address:
|
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Credit Suisse AG, New York branch Eleven Madison Avenue New York, NY 10010-3629 For payments and deliveries: Facsimile No.: (212) 325 8175 Telephone No.: (212) 325 8678 / (212) 325 3213
For all other communications: Facsimile No.: (212) 325 8173 Telephone No.: (212) 325 8676 / (212) 538 5306 / (212) 538 1193 / (212) 538 6886
The date and time of the Transaction evidenced hereby will be furnished by the Agent to CSI and Counterparty upon written request.
The Agent will furnish to Counterparty upon written request a statement as to the source and amount of any remuneration received or to be received by the Agent in connection with the Transaction evidenced hereby.
CSI is regulated by The Securities and Futures Authority and has entered into this Transaction as principal. The time at which this Transaction was executed will be notified to Counterparty (through the Agent) on request. |
2. | Calculation Agent. CSI; provided that, following the occurrence of an Event of Default pursuant to Section 5(a)(vii) of the Agreement with respect to which CSI is the Defaulting Party, Counterparty shall have the right to designate a nationally recognized third-party dealer in over-the-counter corporate equity derivatives to act, during the period commencing on the date such Event of Default occurred and ending on the Early Termination Date with respect to such Event of Default, as the Calculation Agent. Upon receipt of written request from Counterparty, the Calculation Agent shall promptly (but in no event later than within five (5) Exchange Business Days from the receipt of such request) provide Counterparty with a written explanation describing in reasonable detail any calculation, adjustment or determination made by it (including any quotations, market data or information from external sources used in making such calculation, adjustment or determination, as the case may be, but without disclosing CSIs proprietary models or other information that may be proprietary or subject to contractual, legal or regulatory obligations to not disclose such information). All calculations and determinations by the Calculation Agent shall be made in good faith and in a commercially reasonable manner. |
3. | Additional Mutual Representations, Warranties and Covenants of Each Party. In addition to the representations, warranties and covenants in the Agreement, each party represents, warrants and covenants to the other party that: |
(a) Eligible Contract Participant. It is an eligible contract participant, as defined in the U.S. Commodity Exchange Act (as amended), and is entering into each Transaction hereunder as principal (and not as agent or in any other capacity, fiduciary or otherwise) and not for the benefit of any third party.
(b) Accredited Investor. Each party acknowledges that the offer and sale of each Transaction to it is intended to be exempt from registration under the Securities Act of 1933, as amended (the Securities Act), by virtue of Section 4(2) thereof. Accordingly, each party represents and warrants to the other that (i) it has the financial ability to bear the economic risk of its investment in each Transaction and is able to bear a total loss of its investment, (ii) it is an accredited investor as that term is defined under Regulation D under the Securities Act and (iii) the disposition of each Transaction is restricted under this Master Confirmation, the Securities Act and state securities laws.
4. | Additional Representations, Warranties and Covenants of Counterparty. In addition to the representations, warranties and covenants in the Agreement, Counterparty represents, warrants and covenants to CSI that: |
(a) The purchase or writing of each Transaction and the transactions contemplated hereby will not violate Rule 13e-1 or Rule 13e-4 under the Exchange Act.
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(b) It is not entering into any Transaction (i) on the basis of, and is not aware of, any material non-public information with respect to the Shares (ii) in anticipation of, in connection with, or to facilitate, a distribution of its securities, a self tender offer or a third-party tender offer or (iii) to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for the Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for the Shares).
(c) Each Transaction is being entered into pursuant to a publicly disclosed Share buy-back program and its Board of Directors has approved the use of derivatives to effect the Share buy-back program.
(d) Without limiting the generality of Section 13.1 of the Equity Definitions, Counterparty acknowledges that neither CSI nor any of its affiliates is making any representations or warranties or taking any position or expressing any view with respect to the treatment of any Transaction under any accounting standards including ASC Topic 260, Earnings Per Share, ASC Topic 815, Derivatives and Hedging, or ASC Topic 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging Contracts in Entitys Own Equity.
(e) As of (i) the date hereof and (ii) the Trade Date for each Transaction hereunder, Counterparty is in compliance with its reporting obligations under the Exchange Act and its most recent Annual Report on Form 10-K, together with all reports subsequently filed by it pursuant to the Exchange Act, taken together and as amended and supplemented to the date of this representation, do not, as of their respective filing dates, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(f) Counterparty shall report each Transaction as required under the Exchange Act and the rules and regulations thereunder.
(g) The Shares are not, and Counterparty will not cause the Shares to be, subject to a restricted period (as defined in Regulation M promulgated under the Exchange Act) at any time during any Regulation M Period (as defined below) for any Transaction unless Counterparty has provided written notice to CSI of such restricted period not later than the Scheduled Trading Day immediately preceding the first day of such restricted period; Counterparty acknowledges that any such notice may cause a Disrupted Day to occur pursuant to Section 5 below; accordingly, Counterparty acknowledges that its delivery of such notice must comply with the standards set forth in Section 6 below; Regulation M Period means, for any Transaction, (i) the Relevant Period (as defined below) and (ii) the Settlement Valuation Period, if any, for such Transaction. Relevant Period means, for any Transaction, the period commencing on the Calculation Period Start Date for such Transaction and ending on the earlier of (i) the Scheduled Termination Date and (ii) the last Additional Relevant Day (as specified in the related Supplemental Confirmation) for such Transaction, or such earlier day as elected by CSI and communicated to Counterparty on such day (or, if later, the First Acceleration Date without regard to any acceleration thereof pursuant to Special Provisions for Acquisition Transaction Announcements below).
(h) As of the Trade Date, the Prepayment Date, the Initial Share Delivery Date and the Settlement Date for each Transaction, Counterparty is not insolvent (as such term is defined under Section 101(32) of the U.S. Bankruptcy Code (Title 11 of the United States Code) (the Bankruptcy Code)) and Counterparty would be able to purchase a number of Shares with a value equal to the Prepayment Amount in compliance with the laws of the jurisdiction of Counterpartys incorporation.
(i) Counterparty is not and, after giving effect to any Transaction, will not be, required to register as an investment company as such term is defined in the Investment Company Act of 1940, as amended.
(j) Counterparty has not and will not enter into agreements similar to the Transactions described herein where any initial hedge period, calculation period, relevant period or settlement valuation period (each however defined) in such other transaction will overlap at any time (including as a result of extensions in such initial hedge period, calculation period, relevant period or settlement valuation period as provided in the relevant agreements) with any Relevant Period or, if applicable, any Settlement Valuation Period under this Master Confirmation. In the event that the initial hedge period, relevant period, calculation period or settlement valuation period in any other similar transaction overlaps with any Relevant Period or, if applicable, Settlement Valuation Period under this Master Confirmation as a result of any postponement of the Scheduled Termination Date or extension of the Settlement Valuation Period pursuant to Valuation Disruption above, Counterparty shall promptly amend such transaction to avoid any such overlap.
5. | Regulatory Disruption. In the event that CSI concludes, in good faith and based on the advice of counsel, that it is appropriate with respect to any legal, regulatory or self-regulatory requirements or related policies and |
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procedures generally applicable to the relevant line of business (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by CSI), for it to refrain from or decrease any market activity on any Scheduled Trading Day or Days during the Calculation Period or, if applicable, the Settlement Valuation Period, CSI may by written notice to Counterparty elect to deem that a Market Disruption Event has occurred and will be continuing on such Scheduled Trading Day or Days. |
6. | 10b5-1 Plan. Counterparty represents, warrants and covenants to CSI that: |
(a) Counterparty is entering into this Master Confirmation and each Transaction hereunder in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b5-1 under the Exchange Act (Rule 10b5-1) or any other antifraud or anti-manipulation provisions of the federal or applicable state securities laws and that it has not entered into or altered and will not enter into or alter any corresponding or hedging transaction or position with respect to the Shares. Counterparty acknowledges that it is the intent of the parties that each Transaction entered into under this Master Confirmation comply with the requirements of paragraphs (c)(1)(i)(A) and (B) of Rule 10b5-1 and each Transaction entered into under this Master Confirmation shall be interpreted to comply with the requirements of Rule 10b5-1(c).
(b) Counterparty will not seek to control or influence CSIs decision to make any purchases or sales (within the meaning of Rule 10b5-1(c)(1)(i)(B)(3)) under any Transaction entered into under this Master Confirmation, including, without limitation, CSIs decision to enter into any hedging transactions. Counterparty represents and warrants that it has consulted with its own advisors as to the legal aspects of its adoption and implementation of this Master Confirmation and each Supplemental Confirmation under Rule 10b5-1.
(c) Counterparty acknowledges and agrees that any amendment, modification, waiver or termination of this Master Confirmation or the relevant Supplemental Confirmation must be effected in accordance with the requirements for the amendment or termination of a plan as defined in Rule 10b5-1(c). Without limiting the generality of the foregoing, any such amendment, modification, waiver or termination shall be made in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5, and no such amendment, modification or waiver shall be made at any time at which Counterparty or any officer, director, manager or similar person of Counterparty is aware of any material non-public information regarding Counterparty or the Shares.
7. | Counterparty Purchases. Counterparty (or any affiliated purchaser as defined in Rule 10b-18 under the Exchange Act (Rule 10b-18)) shall not, without the prior written consent of CSI, directly or indirectly purchase any Shares (including by means of a derivative instrument), listed contracts on the Shares or securities that are convertible into, or exchangeable or exercisable for Shares (including, without limitation, any Rule 10b-18 purchases of blocks (as defined in Rule 10b-18)) during any Relevant Period or, if applicable, Settlement Valuation Period, except through CSI However, the foregoing shall not limit Counterpartys ability (or the ability of any agent independent of the issuer (as defined in Rule 10b-18)), pursuant to any plan (as defined in Rule 10b-18) of Counterparty, to re-acquire Shares in connection with any equity transaction related to such plan or to limit Counterpartys ability to withhold Shares to cover tax liabilities associated with such equity transactions or otherwise restrict Counterpartys ability to repurchase Shares under privately negotiated or off-market transactions (including, without limitation, an agreement relating to Counterpartys 401(k) Plan or transactions with any of Counterpartys employees, officers, directors or affiliates), so long as any re-acquisition, withholding or repurchase does not constitute a Rule 10b-18 purchase (as defined in Rule 10b-18). |
8. | Special Provisions for Merger Transactions. Notwithstanding anything to the contrary herein or in the Equity Definitions: |
(a) Counterparty agrees that it:
(i) will not during the period commencing on the Trade Date through the end of the Relevant Period or, if applicable, the Settlement Valuation Period for any Transaction make, or permit to be made, any public announcement (as defined in Rule 165(f) under the Securities Act) of any Merger Transaction or potential Merger Transaction (a Public Announcement) unless such Public Announcement is made prior to the opening or after the close of the regular trading session on the Exchange for the Shares;
(ii) shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) notify CSI following any such Public Announcement that such Public Announcement has been made; and
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(iii) shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) provide CSI with written notice specifying (i) Counterpartys average daily Rule 10b-18 Purchases (as defined in Rule 10b-18) during the three full calendar months immediately preceding the announcement date that were not effected through CSI or its affiliates and (ii) the number of Shares purchased pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act for the three full calendar months preceding the date of such Public Announcement. Such written notice shall be deemed to be a certification by Counterparty to CSI that such information is true and correct. In addition, Counterparty shall promptly notify CSI of the earlier to occur of the completion of the relevant Merger Transaction and the completion of the vote by target shareholders.
(b) Counterparty acknowledges that a Public Announcement may cause the terms of any Transaction to be adjusted or such Transaction to be terminated; accordingly, Counterparty acknowledges that in making any Public Announcement, it must comply with the standards set forth in Section 6 above.
(c) Upon the occurrence of any Public Announcement (whether made by Counterparty or a third party), CSI may in its sole discretion (i) make adjustments in good faith and in a commercially reasonable manner to the terms of any Transaction, including, without limitation, the Scheduled Termination Date or the Forward Price Adjustment Amount, and/or suspend the Calculation Period and/or any Settlement Valuation Period or (ii) treat the occurrence of such Public Announcement as an Additional Termination Event with Counterparty as the sole Affected Party and the Transactions hereunder as the Affected Transactions and with the amount under Section 6(e) of the Agreement determined taking into account the fact that the Calculation Period or Settlement Valuation Period, as the case may be, had fewer Scheduled Trading Days than originally anticipated.
Merger Transaction means any merger, acquisition or similar transaction involving a recapitalization as contemplated by Rule 10b-18(a)(13)(iv) under the Exchange Act.
9. | Special Provisions for Acquisition Transaction Announcements. (a) If an Acquisition Transaction Announcement occurs on or prior to the Settlement Date for any Transaction, then the Number of Shares to be Delivered for such Transaction shall be determined as if the Divisor Amount were equal to The greater of (i) the Forward Price and (ii) $1.00. If an Acquisition Transaction Announcement occurs after the Trade Date, but prior to the First Acceleration Date of any Transaction, the First Acceleration Date shall be the date of such Acquisition Transaction Announcement. |
(b) Acquisition Transaction Announcement means (i) the announcement of an Acquisition Transaction, (ii) an announcement that Counterparty or any of its subsidiaries has entered into an agreement, a letter of intent or an understanding designed to result in an Acquisition Transaction, (iii) the announcement of the intention to solicit or enter into, or to explore strategic alternatives or other similar undertaking that may include, an Acquisition Transaction, (iv) any other announcement that in the reasonable judgment of the Calculation Agent could reasonably be expected to result in an Acquisition Transaction or (v) any announcement of any change or amendment to any previous Acquisition Transaction Announcement (including any announcement of the abandonment of any such previously announced Acquisition Transaction, agreement, letter of intent, understanding or intention). For the avoidance of doubt, announcements as used in the definition of Acquisition Transaction Announcement refer to any public announcement whether made by the Issuer or a third party.
(c) Acquisition Transaction means (i) any Merger Event (for purposes of this definition the definition of Merger Event shall be read with the references therein to 100% being replaced by 15% and to 50% by 75% and without reference to the clause beginning immediately following the definition of Reverse Merger therein to the end of such definition), Tender Offer or Merger Transaction or any other transaction involving the merger of Counterparty with or into any third party, (ii) the sale or transfer of all or substantially all of the assets of Counterparty, (iii) a recapitalization, reclassification, binding share exchange or other similar transaction, (iv) any acquisition, lease, exchange, transfer, disposition (including by way of spin-off or distribution) of assets (including any capital stock or other ownership interests in subsidiaries) or other similar event by Counterparty or any of its subsidiaries where the aggregate consideration transferable or receivable by or to Counterparty or its subsidiaries exceeds 15% of the market capitalization of Counterparty and (v) any transaction in which Counterparty or its board of directors has a legal obligation to make a recommendation to its shareholders in respect of such transaction (whether pursuant to Rule 14e-2 under the Exchange Act or otherwise).
10. | Acknowledgments. (a) The parties hereto intend for: |
(i) each Transaction to be a securities contract as defined in Section 741(7) of the Bankruptcy Code, a swap agreement as defined in Section 101(53B) of the Bankruptcy Code and a forward contract as
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defined in Section 101(25) of the Bankruptcy Code, and the parties hereto to be entitled to the protections afforded by, among other Sections, Sections 362(b)(6), 362(b)(17), 362(b)(27), 362(o), 546(e), 546(g), 546(j), 555, 556, 560 and 561 of the Bankruptcy Code;
(ii) the Agreement to be a master netting agreement as defined in Section 101(38A) of the Bankruptcy Code;
(iii) a partys right to liquidate, terminate or accelerate any Transaction, net out or offset termination values or payment amounts, and to exercise any other remedies upon the occurrence of any Event of Default or Termination Event under the Agreement with respect to the other party or any Extraordinary Event that results in the termination or cancellation of any Transaction to constitute a contractual right (as defined in the Bankruptcy Code); and
(iv) all payments for, under or in connection with each Transaction, all payments for the Shares (including, for the avoidance of doubt, payment of the Prepayment Amount) and the transfer of such Shares to constitute settlement payments and transfers (as defined in the Bankruptcy Code).
(b) Counterparty acknowledges that:
(i) during the term of any Transaction, CSI and its affiliates may buy or sell Shares or other securities or buy or sell options or futures contracts or enter into swaps or other derivative securities in order to establish, adjust or unwind its hedge position with respect to such Transaction;
(ii) CSI and its affiliates may also be active in the market for the Shares and derivatives linked to the Shares other than in connection with hedging activities in relation to any Transaction, including acting as agent or as principal and for its own account or on behalf of customers;
(iii) CSI shall make its own determination as to whether, when or in what manner any hedging or market activities in Counterpartys securities shall be conducted and shall do so in a manner that it deems appropriate to hedge its price and market risk with respect to the Forward Price and the VWAP Price;
(iv) any market activities of CSI and its affiliates with respect to the Shares may affect the market price and volatility of the Shares, as well as the Forward Price and VWAP Price, each in a manner that may be adverse to Counterparty; and
(v) each Transaction is a derivatives transaction in which it has granted CSI an option; CSI may purchase shares for its own account at an average price that may be greater than, or less than, the price paid by Counterparty under the terms of the related Transaction.
11. Credit Support Documents. The parties hereto acknowledge that no Transaction hereunder is secured by any collateral that would otherwise secure the obligations of Counterparty herein or pursuant to the Agreement.
12. | Set-off. (a) The parties agree to amend Section 6 of the Agreement by adding a new Section 6(f) thereto as follows: |
(f) Upon the occurrence of an Event of Default or Termination Event with respect to a party who is the Defaulting Party or the Affected Party (X), the other party (Y) will have the right (but not be obliged) without prior notice to X or any other person to set-off or apply any obligation of X owed to Y (or any Affiliate of Y) (whether or not matured or contingent and whether or not arising under the Agreement, and regardless of the currency, place of payment or booking office of the obligation) against any obligation of Y (or any Affiliate of Y) owed to X (whether or not matured or contingent and whether or not arising under the Agreement, and regardless of the currency, place of payment or booking office of the obligation). Y will give notice to the other party of any set-off effected under this Section 6(f).
Amounts (or the relevant portion of such amounts) subject to set-off may be converted by Y into the Termination Currency at the rate of exchange at which such party would be able, acting in a reasonable manner and in good faith, to purchase the relevant amount of such currency. If any obligation is unascertained, Y may in good faith estimate that obligation and set-off in respect of the estimate, subject to the relevant party accounting to the other when the obligation is ascertained. Nothing in this Section 6(f) shall be effective to create a charge or other security interest. This Section 6(f) shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise).
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(b) Notwithstanding anything to the contrary in the foregoing, CSI agrees not to set off or net amounts due from Counterparty with respect to any Transaction against amounts due from CSI to Counterparty with respect to contracts or instruments that are not Equity Contracts. Equity Contract means any transaction or instrument that does not convey to CSI rights, or the ability to assert claims, that are senior to the rights and claims of common stockholders in the event of Counterpartys bankruptcy.
13. Delivery of Shares. Notwithstanding anything to the contrary herein, CSI may, by prior notice to Counterparty, satisfy its obligation to deliver any Shares or other securities on any date due (an Original Delivery Date) by making separate deliveries of Shares or such securities, as the case may be, at more than one time on or prior to such Original Delivery Date, so long as the aggregate number of Shares and other securities so delivered on or prior to such Original Delivery Date is equal to the number required to be delivered on such Original Delivery Date.
14. Early Termination. In the event that an Early Termination Date (whether as a result of an Event of Default or a Termination Event) occurs or is designated with respect to any Transaction (except as a result of a Merger Event in which the consideration or proceeds to be paid to holders of Shares consists solely of cash), if either party would owe any amount to the other party pursuant to Section 6(d)(ii) of the Agreement (any such amount, a Payment Amount), then, in lieu of any payment of such Payment Amount, Counterparty may, no later than the Early Termination Date or the date on which such Transaction is terminated, elect to deliver or for CSI to deliver, as the case may be, to the other party a number of Shares (or, in the case of a Merger Event, a number of units, each comprising the number or amount of the securities or property that a hypothetical holder of one Share would receive in such Merger Event (each such unit, an Alternative Delivery Unit and, the securities or property comprising such unit, Alternative Delivery Property)) with a value equal to the Payment Amount, as determined by the Calculation Agent (and the parties agree that, in making such determination of value, the Calculation Agent may take into account a number of factors, including the market price of the Shares or Alternative Delivery Property on the date of early termination and, if such delivery is made by CSI, the prices at which CSI purchases Shares or Alternative Delivery Property to fulfill its delivery obligations under this Section 14); provided that in determining the composition of any Alternative Delivery Unit, if the relevant Merger Event involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash; and provided further that Counterparty may make such election only if Counterparty represents and warrants to CSI in writing on the date it notifies CSI of such election that, as of such date, Counterparty is not aware of any material non-public information concerning the Shares and is making such election in good faith and not as part of a plan or scheme to evade compliance with the federal securities laws. If such delivery is made by Counterparty, paragraphs 2 through 7 of Annex A shall apply as if such delivery were a settlement of the Transaction to which Net Share Settlement applied, the Cash Settlement Payment Date were the Early Termination Date and the Forward Cash Settlement Amount were zero (0) minus the Payment Amount owed by Counterparty.
15. Calculations and Payment Date upon Early Termination. The parties acknowledge and agree that in calculating Close-out Amount pursuant to Section 6 of the Agreement CSI may (but need not) determine losses without reference to actual losses incurred but based on expected losses assuming a commercially reasonable (including without limitation with regard to reasonable legal and regulatory guidelines) risk bid were used to determine loss to avoid awaiting the delay associated with closing out any hedge or related trading position in a commercially reasonable manner prior to or sooner following the designation of an Early Termination Date. Notwithstanding anything to the contrary in Section 6(d)(ii) of the Agreement, all amounts calculated as being due in respect of an Early Termination Date under Section 6(e) of the Agreement will be payable on the day that notice of the amount payable is effective; provided that if Counterparty elects to receive Shares or Alternative Delivery Property in accordance with Section 14, such Shares or Alternative Delivery Property shall be delivered on a date selected by CSI as promptly as practicable.
16. [Reserved.]
17. Automatic Termination Provisions. Notwithstanding anything to the contrary in Section 6 of the Agreement, if a Termination Price is specified in any Supplemental Confirmation, then an Additional Termination Event with Counterparty as the sole Affected Party and the Transaction to which such Supplemental Confirmation relates as the Affected Transaction will automatically occur without any notice or action by CSI or Counterparty if the price of the Shares on the Exchange at any time falls below such Termination Price, and the Exchange Business Day that the price of the Shares on the Exchange at any time falls below the Termination Price will be the Early Termination Date for purposes of the Agreement.
18. Delivery of Cash. For the avoidance of doubt, nothing in this Master Confirmation shall be interpreted as requiring Counterparty to deliver cash in respect of the settlement of the Transactions contemplated by this Master
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Confirmation following payment by Counterparty of the relevant Prepayment Amount, except in circumstances where the required cash settlement thereof is permitted for classification of the contract as equity by ASC 815-40, Derivatives and Hedging Contracts in Entitys Own Equity, as in effect on the relevant Trade Date (including, without limitation, where Counterparty so elects to deliver cash or fails timely to elect to deliver Shares or Alternative Delivery Property in respect of the settlement of such Transactions).
19. Claim in Bankruptcy. CSI acknowledges and agrees that this Confirmation is not intended to convey to it rights with respect to the Transactions that are senior to the claims of common stockholders in the event of Counterpartys bankruptcy.
20. [Reserved.]
21. Governing Law. The Agreement, this Master Confirmation, each Supplemental Confirmation and all matters arising in connection with the Agreement, this Master Confirmation and each Supplemental Confirmation shall be governed by, and construed and enforced in accordance with, the laws of the State of New York (without reference to its choice of laws doctrine other than Title 14 of Article 5 of the New York General Obligations Law).
22. | Offices. |
The Office of Counterparty for each Transaction is: Fifth Third Bancorp, Fifth Third Center Cincinnati, Ohio 45263.
23. Waiver of Jury Trial. Each party waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding relating to any Transaction. Each party (i) certifies that no representative, agent or attorney of the other party has represented, expressly or otherwise, that such other party would not, in the event of such a suit, action or proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other party have been induced to enter into any Transaction hereunder by, among other things, the mutual waivers and certifications provided herein.
24. Submission to Jurisdiction. Section 13(b) of the Agreement is deleted in its entirety and replaced by the following:
Each party hereby irrevocably and unconditionally submits for itself and its property in any suit, legal action or proceeding relating to this Agreement and/or any Transaction, or for recognition and enforcement of any judgment in respect thereof, (each, Proceedings) to the exclusive jurisdiction of the Supreme Court of the State of New York, sitting in New York County, the courts of the United States of America for the Southern District of New York and appellate courts from any thereof. Nothing in the Master Confirmation, any Supplemental Confirmation or this Agreement precludes either party from bringing Proceedings in any other jurisdiction if (A) the courts of the State of New York or the United States of America for the Southern District of New York lack jurisdiction over the parties or the subject matter of the Proceedings or declines to accept the Proceedings on the grounds of lacking such jurisdiction; (B) the Proceedings are commenced by a party for the purpose of enforcing against the other partys property, assets or estate any decision or judgment rendered by any court in which Proceedings may be brought as provided hereunder; (C) the Proceedings are commenced to appeal any such courts decision or judgment to any higher court with competent appellate jurisdiction over that courts decisions or judgments if that higher court is located outside the State of New York or Borough of Manhattan, such as a federal court of appeals or the U.S. Supreme Court; or (D) any suit, action or proceeding has been commenced in another jurisdiction by or against the other party or against its property, assets or estate and, in order to exercise or protect its rights, interests or remedies under this Agreement, the Master Confirmation or any Supplemental Confirmation, the party (1) joins, files a claim, or takes any other action, in any such suit, action or proceeding, or (2) otherwise commences any Proceeding in that other jurisdiction as the result of that other suit, action or proceeding having commenced in that other jurisdiction.
25. Counterparts. This Master Confirmation may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Master Confirmation by signing and delivering one or more counterparts.
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Please confirm that the foregoing correctly sets forth the terms of our agreement by signing and returning to us a copy of this Confirmation.
Yours sincerely, | ||
CREDIT SUISSE INTERNATIONAL | ||
By: | /s/ Emillie Blay | |
Authorized Signatory Emillie Blay | ||
By: | /s/ Shui Wong | |
Authorized Signatory Shui Wong | ||
CREDIT SUISSE AG, NEW YORK BRANCH, as Agent | ||
By: | /s/ Michael G. Clark | |
Authorized Signatory Michael G. Clark | ||
By: | /s/ Louis J. Impellizeri | |
Authorized Signatory Louis J. Impellizeri Director |
Agreed and Accepted By:
FIFTH THIRD BANCORP | ||
By: | /s/ Tayfun Tuzun | |
Name: Tayfun Tuzun | ||
Title: Treasurer |
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SCHEDULE A
SUPPLEMENTAL CONFIRMATION
To: | Fifth Third Bancorp Fifth Third Center Cincinnati, Ohio 45263 | |
From: | Credit Suisse International | |
Subject: | Accelerated Stock Buyback | |
Ref. No: | 55261397 | |
Date: | December 14, 2012 |
The purpose of this Supplemental Confirmation is to confirm the terms and conditions of the Transaction entered into between Credit Suisse International (CSI), Fifth Third Bancorp (Counterparty) (together, the Contracting Parties) and Credit Suisse AG, New York Branch, as agent, on the Trade Date specified below. This Supplemental Confirmation is a binding contract between CSI and Counterparty as of the relevant Trade Date for the Transaction referenced below.
1. This Supplemental Confirmation supplements, forms part of, and is subject to the Master Confirmation dated as of November 6, 2012 (the Master Confirmation) between the Contracting Parties, as amended and supplemented from time to time. All provisions contained in the Master Confirmation govern this Supplemental Confirmation except as expressly modified below.
2. The terms of the Transaction to which this Supplemental Confirmation relates are as follows:
Trade Date: |
December 14, 2012 | |
Forward Price Adjustment Amount: |
[**]* | |
Calculation Period Start Date: |
December 17, 2012 | |
Scheduled Termination Date: |
March 14, 2013 | |
First Acceleration Date: |
[**]* | |
Prepayment Amount: |
USD 100,000,000 | |
Prepayment Date: |
December 19, 2012 | |
Initial Shares: |
6,267,410 Shares; provided that if, in connection with the Transaction, CSI is unable to borrow or otherwise acquire a number of Shares equal to the Initial Shares for delivery to Counterparty on the Initial Share Delivery Date, the Initial Shares delivered on the Initial Share Delivery Date shall be reduced to such number of Shares that CSI is able to so borrow or otherwise acquire, and CSI shall use reasonable good faith efforts to borrow or otherwise acquire a number of Shares equal to the shortfall in the Initial Share Delivery and to deliver such additional Shares as soon as reasonably practicable. The aggregate of all Shares delivered to Counterparty in respect of the Transaction pursuant to this paragraph shall be the Initial Shares for purposes of Number of Shares to be Delivered in the Master Confirmation. |
* | CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. |
Initial Share Delivery Date: |
December 19, 2012 | |
Ordinary Dividend Amount: |
[**]* | |
Scheduled Ex-Dividend Dates: |
December 27, 2012 | |
Termination Price: |
[**]* | |
Additional Relevant Days: |
The Three Exchange Business Days immediately following the Calculation Period. |
3. Counterparty represents and warrants to CSI that neither it nor any affiliated purchaser (as defined in Rule 10b-18 under the Exchange Act) has made any purchases of blocks pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act during either (i) the four full calendar weeks immediately preceding the Trade Date or (ii) during the calendar week in which the Trade Date occurs.
4. This Supplemental Confirmation may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Supplemental Confirmation by signing and delivering one or more counterparts.
* | CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. |
17
Please confirm your agreement to be bound by the terms of the foregoing by executing the copy of this Confirmation enclosed for that purpose and returning it to us.
Yours sincerely, | ||
CREDIT SUISSE INTERNATIONAL | ||
By: | /s/ Shui Wong | |
Authorized Signatory | ||
By: | /s/ Bik Kwan Chung | |
Authorized Signatory | ||
CREDIT SUISSE AG, NEW YORK BRANCH, as Agent | ||
By: | /s/ Michael G. Clark | |
Authorized Signatory | ||
By: | /s/ Louis J. Impellizeri | |
Authorized Signatory |
Agreed and Accepted By:
FIFTH THIRD BANCORP | ||
By: | /s/ Tayfun Tuzun | |
Name: Tayfun Tuzun | ||
Title: Treasurer |
ANNEX A
COUNTERPARTY SETTLEMENT PROVISIONS
1. The following Counterparty Settlement Provisions shall apply to the extent indicated under the Master Confirmation:
Settlement Currency: |
USD | |
Settlement Method Election: |
Applicable; provided that (i) Section 7.1 of the Equity Definitions is hereby amended by deleting the word Physical in the sixth line thereof and replacing it with the words Net Share and (ii) the Electing Party may make a settlement method election only if the Electing Party represents and warrants to CSI in writing on the date it notifies CSI of its election that, as of such date, the Electing Party is not aware of any material non-public information concerning Counterparty or the Shares and is electing the settlement method in good faith and not as part of a plan or scheme to evade compliance with the federal securities laws. | |
Electing Party: |
Counterparty | |
Settlement Method Election Date: |
The earlier of (i) the Scheduled Termination Date and (ii) the second Exchange Business Day immediately following the Accelerated Termination Date (in which case the election under Section 7.1 of the Equity Definitions shall be made no later than 10 minutes prior to the open of trading on the Exchange on such second Exchange Business Day), as the case may be. | |
Default Settlement Method: |
Cash Settlement | |
Forward Cash Settlement Amount: |
The Number of Shares to be Delivered multiplied by the Settlement Price. | |
Settlement Price: |
The average of the VWAP Prices for the Exchange Business Days in the Settlement Valuation Period, subject to Valuation Disruption as specified in the Master Confirmation. | |
Settlement Valuation Period: |
A number of Scheduled Trading Days selected by CSI in good faith and in a commercially reasonable manner, such number to be approximately equal to the Number of Shares to be Delivered divided by 10% of the ADTV (as defined in Rule 10b-18, and expressed as a number of Shares) for the Shares at the time of determination, beginning on the Scheduled Trading Day immediately following the earlier of (i) the Scheduled Termination Date or (ii) the Exchange Business Day immediately following the Termination Date. | |
Cash Settlement: |
If Cash Settlement is applicable, then Buyer shall pay to Seller the absolute value of the Forward Cash Settlement Amount on the Cash Settlement Payment Date. | |
Cash Settlement Payment Date: |
The date one Settlement Cycle following the last day of the Settlement Valuation Period. | |
Net Share Settlement Procedures: |
If Net Share Settlement is applicable, Net Share Settlement shall be made in accordance with paragraphs 2 through 7 below. |
19
2. Net Share Settlement shall be made by delivery on the Cash Settlement Payment Date of a number of Shares satisfying the conditions set forth in paragraph 3 below (the Registered Settlement Shares), or a number of Shares not satisfying such conditions (the Unregistered Settlement Shares), in either case with a value equal to the absolute value of the Forward Cash Settlement Amount, with such Shares value based on the value thereof to CSI (which value shall, in the case of Unregistered Settlement Shares, take into account a commercially reasonable illiquidity discount), in each case as determined by the Calculation Agent.
3. Counterparty may only deliver Registered Settlement Shares pursuant to paragraph 2 above if:
(a) a registration statement covering public resale of the Registered Settlement Shares by CSI (the Registration Statement) shall have been filed with the Securities and Exchange Commission under the Securities Act and been declared or otherwise become effective on or prior to the date of delivery, and no stop order shall be in effect with respect to the Registration Statement; a printed prospectus relating to the Registered Settlement Shares (including any prospectus supplement thereto, the Prospectus) shall have been delivered to CSI, in such quantities as CSI shall reasonably have requested, on or prior to the date of delivery;
(b) the form and content of the Registration Statement and the Prospectus (including, without limitation, any sections describing the plan of distribution) shall be satisfactory to CSI;
(c) as of or prior to the date of delivery, CSI and its agents shall have been afforded a reasonable opportunity to conduct a due diligence investigation with respect to Counterparty customary in scope for underwritten offerings of equity securities and the results of such investigation are satisfactory to CSI, in its discretion; and
(d) as of the date of delivery, an agreement (the Underwriting Agreement) shall have been entered into with CSI in connection with the public resale of the Registered Settlement Shares by CSI substantially similar to underwriting agreements customary for underwritten offerings of equity securities, in form and substance satisfactory to CSI, which Underwriting Agreement shall include, without limitation, provisions substantially similar to those contained in such underwriting agreements relating, without limitation, to the indemnification of, and contribution in connection with the liability of, CSI and its affiliates and the provision of customary opinions, accountants comfort letters and lawyers negative assurance letters.
4. If Counterparty delivers Unregistered Settlement Shares pursuant to paragraph 2 above:
(a) all Unregistered Settlement Shares shall be delivered to CSI (or any affiliate of CSI designated by CSI) pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof;
(b) as of or prior to the date of delivery, CSI and any potential purchaser of any such shares from CSI (or any affiliate of CSI designated by CSI) identified by CSI shall be afforded a commercially reasonable opportunity to conduct a due diligence investigation with respect to Counterparty customary in scope for private placements of equity securities (including, without limitation, the right to have made available to them for inspection all financial and other records, pertinent corporate documents and other information reasonably requested by them);
(c) as of the date of delivery, Counterparty shall enter into an agreement (a Private Placement Agreement) with CSI (or any affiliate of CSI designated by CSI) in connection with the private placement of such shares by Counterparty to CSI (or any such affiliate) and the private resale of such shares by CSI (or any such affiliate), substantially similar to private placement purchase agreements customary for private placements of equity securities, in form and substance commercially reasonably satisfactory to CSI, which Private Placement Agreement shall include, without limitation, provisions substantially similar to those contained in such private placement purchase agreements relating, without limitation, to the indemnification of, and contribution in connection with the liability of, CSI and its affiliates and the provision of customary opinions, accountants comfort letters and lawyers negative assurance letters, and shall provide for the payment by Counterparty of all fees and expenses in connection with such resale, including all fees and expenses of counsel for CSI, and shall contain representations, warranties, covenants and agreements of Counterparty reasonably necessary or advisable to establish and maintain the availability of an exemption from the registration requirements of the Securities Act for such resales; and
(d) in connection with the private placement of such shares by Counterparty to CSI (or any such affiliate) and the private resale of such shares by CSI (or any such affiliate), Counterparty shall, if so requested by CSI, prepare, in cooperation with CSI, a private placement memorandum in form and substance reasonably satisfactory to CSI
20
5. CSI, itself or through an affiliate (the Selling Agent) or any underwriter(s), will sell all, or such lesser portion as may be required hereunder, of the Registered Settlement Shares or Unregistered Settlement Shares and any Makewhole Shares (as defined below) (together, the Settlement Shares) delivered by Counterparty to CSI pursuant to paragraph 6 below commencing on the Cash Settlement Payment Date and continuing until the date on which the aggregate Net Proceeds (as such term is defined below) of such sales, as determined by CSI, is equal to the absolute value of the Forward Cash Settlement Amount (such date, the Final Resale Date). If the proceeds of any sale(s) made by CSI, the Selling Agent or any underwriter(s), net of any fees and commissions (including, without limitation, underwriting or placement fees) customary for similar transactions under the circumstances at the time of the offering, together with carrying charges and expenses incurred in connection with the offer and sale of the Shares (including, but without limitation to, the covering of any over-allotment or short position (syndicate or otherwise)) (the Net Proceeds) exceed the absolute value of the Forward Cash Settlement Amount, CSI will refund, in USD, such excess to Counterparty on the date that is three (3) Currency Business Days following the Final Resale Date, and, if any portion of the Settlement Shares remains unsold, CSI shall return to Counterparty on that date such unsold Shares.
6. If the Calculation Agent determines that the Net Proceeds received from the sale of the Registered Settlement Shares or Unregistered Settlement Shares or any Makewhole Shares, if any, pursuant to this paragraph 6 are less than the absolute value of the Forward Cash Settlement Amount (the amount in USD by which the Net Proceeds are less than the absolute value of the Forward Cash Settlement Amount being the Shortfall and the date on which such determination is made, the Deficiency Determination Date), Counterparty shall on the Exchange Business Day next succeeding the Deficiency Determination Date (the Makewhole Notice Date) deliver to CSI, through the Selling Agent, a notice of Counterpartys election that Counterparty shall either (i) pay an amount in cash equal to the Shortfall on the day that is one (1) Currency Business Day after the Makewhole Notice Date, or (ii) deliver additional Shares. If Counterparty elects to deliver to CSI additional Shares, then Counterparty shall deliver additional Shares in compliance with the terms and conditions of paragraph 3 or paragraph 4 above, as the case may be (the Makewhole Shares), on the first Clearance System Business Day which is also an Exchange Business Day following the Makewhole Notice Date in such number as the Calculation Agent reasonably believes would have a market value on that Exchange Business Day equal to the Shortfall. Such Makewhole Shares shall be sold by CSI in accordance with the provisions above; provided that if the sum of the Net Proceeds from the sale of the originally delivered Shares and the Net Proceeds from the sale of any Makewhole Shares is less than the absolute value of the Forward Cash Settlement Amount then Counterparty shall, at its election, either make such cash payment or deliver to CSI further Makewhole Shares until such Shortfall has been reduced to zero.
7. Notwithstanding the foregoing, in no event shall the aggregate number of Settlement Shares and Makewhole Shares be greater than the Reserved Shares minus the amount of any Shares actually delivered by Counterparty under any other Transaction(s) under this Master Confirmation (the result of such calculation, the Capped Number). Counterparty represents and warrants (which shall be deemed to be repeated on each day that a Transaction is outstanding) that the Capped Number is equal to or less than the number of Shares determined according to the following formula:
A B
Where |
A = the number of authorized but unissued shares of the Counterparty that are not reserved for future issuance on the date of the determination of the Capped Number; and | |
B = the maximum number of Shares required to be delivered to third parties if Counterparty elected Net Share Settlement of all transactions in the Shares (other than Transactions in the Shares under this Master Confirmation) with all third parties that are then currently outstanding and unexercised. |
Reserved Shares means initially, 8,500,000 Shares. The Reserved Shares may be increased or decreased in a Supplemental Confirmation.
21
Exhibit 12.1
Fifth Third Bancorp
Computations of Consolidated Ratios of Earnings to Fixed Charges
($ In Millions)
Year Ended December 31, | ||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||
Excluding Interest on Deposits: |
||||||||||||||||||||
Fixed Charges: |
||||||||||||||||||||
Interest Expense (excluding interest on deposits) |
$ | 296 | 309 | 293 | 361 | 805 | ||||||||||||||
One-Third of Rents, Net of Income from Subleases |
28 | 27 | 26 | 29 | 28 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Fixed Charges |
$ | 324 | 336 | 319 | 390 | 833 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings: |
||||||||||||||||||||
Income (Loss) Before Income Taxes |
$ | 2,210 | 1,831 | 940 | 767 | (2,664 | ) | |||||||||||||
Fixed Charges |
324 | 336 | 319 | 390 | 833 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Earnings |
$ | 2,534 | 2,167 | 1,259 | 1,157 | (1,831 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ratio of Earnings to Fixed Charges, Excluding Interest On Deposits |
7.82x | 6.45x | 3.94x | 2.97x | N/A | (a) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Coverage Deficiency |
| | | | (2,664 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Including Interest on Deposits: |
||||||||||||||||||||
Fixed Charges: |
||||||||||||||||||||
Interest Expense |
$ | 512 | 661 | 885 | 1,314 | 2,094 | ||||||||||||||
One-Third of Rents, Net of Income from Subleases |
28 | 27 | 26 | 29 | 28 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Fixed Charges |
$ | 540 | 688 | 911 | 1,343 | 2,122 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings: |
||||||||||||||||||||
Income (Loss) Before Income Taxes |
$ | 2,210 | 1,831 | 940 | 767 | (2,664 | ) | |||||||||||||
Fixed Charges |
540 | 688 | 911 | 1,343 | 2,122 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Earnings |
$ | 2,750 | 2,519 | 1,851 | 2,110 | (542 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ratio of Earnings to Fixed Charges, Including Interest On Deposits |
5.09x | 3.66x | 2.03x | 1.57x | N/A | (a) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Coverage Deficiency |
| | | | (2,664 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
(a) | Earnings were inadequate to cover fixed charges by $2.7 billion |
Exhibit 12.2
Fifth Third Bancorp
Computations of Consolidated Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements
($ In Millions)
Year Ended December 31, | ||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||
Excluding Interest on Deposits: |
||||||||||||||||||||
Fixed Charges: |
||||||||||||||||||||
Interest Expense (excluding interest on deposits) |
$ | 296 | 309 | 293 | 361 | 805 | ||||||||||||||
One-Third of Rents, Net of Income from Subleases |
28 | 27 | 26 | 29 | 28 | |||||||||||||||
Preferred Stock Dividends |
35 | 203 | 250 | 226 | 67 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Fixed Charges |
$ | 359 | 539 | 569 | 616 | 900 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings: |
||||||||||||||||||||
Income (Loss) Before Income Taxes |
$ | 2,210 | 1,831 | 940 | 767 | (2,664 | ) | |||||||||||||
Fixed ChargesExcluding Preferred Stock Dividends |
324 | 336 | 319 | 390 | 833 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Earnings |
$ | 2,534 | 2,167 | 1,259 | 1,157 | (1,831 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ratio of Earnings to Fixed Charges, Excluding Interest On Deposits |
7.06x | 4.02x | 2.21x | 1.88x | N/A | (a) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Coverage Deficiency |
| | | | (2,731 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Including Interest on Deposits: |
||||||||||||||||||||
Fixed Charges: |
||||||||||||||||||||
Interest Expense |
$ | 512 | 661 | 885 | 1,314 | 2,094 | ||||||||||||||
One-Third of Rents, Net of Income from Subleases |
28 | 27 | 26 | 29 | 28 | |||||||||||||||
Preferred Stock Dividends |
35 | 203 | 250 | 226 | 67 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Fixed Charges |
$ | 575 | 891 | 1,161 | 1,569 | 2,189 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings: |
||||||||||||||||||||
Income (Loss) Before Income Taxes |
$ | 2,210 | 1,831 | 940 | 767 | (2,664 | ) | |||||||||||||
Fixed ChargesExcluding Preferred Stock Dividends |
540 | 688 | 911 | 1,343 | 2,122 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Earnings |
$ | 2,750 | 2,519 | 1,851 | 2,110 | (542 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ratio of Earnings to Fixed Charges, Including Interest On Deposits |
4.78x | 2.83x | 1.59x | 1.34x | N/A | (a) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Coverage Deficiency |
| | | | (2,731 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
(a) | Earnings were inadequate to cover fixed charges by $2.7 billion |
Exhibit 21
FIFTH THIRD BANCORP SUBSIDIARIES
As of December 31, 2012
Name |
Jurisdiction of Incorporation | |
Fifth Third Capital Trust IV |
Delaware | |
Fifth Third Financial Corporation |
Ohio | |
Fifth Third Bank |
Ohio | |
Fifth Third Equipment Finance Company |
Ohio | |
The Fifth Third Auto Leasing Trust |
Delaware | |
Fifth Third International Company |
Kentucky | |
Fifth Third Trade Services Limited |
Hong Kong | |
Fifth Third Holdings, LLC |
Delaware | |
Fifth Third Holdings Funding, LLC |
Delaware | |
Fifth Third Conduit Holdings, LLC |
Delaware | |
Fifth Third Auto Conduit Funding, LLC |
Delaware | |
Fifth Third Mortgage Insurance Reinsurance Company |
Vermont | |
Fifth Third Mortgage Company |
Ohio | |
Fifth Third Real Estate Investment Trust, Inc. |
Maryland | |
Fifth Third Securities, Inc. |
Ohio | |
Fifth Third Asset Management, Inc. |
Ohio | |
Fifth Third Insurance Agency, Inc. |
Ohio | |
FTPS Partners, LLC |
Delaware | |
Old Kent Investment Corporation |
Nevada | |
GNB Management, LLC |
Delaware | |
GNB Realty, LLC |
Delaware | |
Old Kent Mortgage Services, Inc. |
Michigan | |
Fifth Third Mortgage Michigan, LLC |
Delaware | |
Fifth Third Funding, LLC |
Delaware | |
Fifth Third Home Equity Loan Trust 2003-1 |
Delaware | |
Walnut & Vine Holdings, LLC |
Delaware | |
Walnut & Vine Properties I, LLC |
Delaware | |
Walnut & Vine Properties II, LLC |
Delaware | |
Fifth Third Community Development Corporation |
Indiana | |
Bicycle Factory Investment Fund, LLC |
Michigan | |
Boner-CDC, LLC |
Indiana | |
Capital-CDC Associates, LLC |
Indiana | |
CPF Affordable Housing Fund I, LP |
Ohio | |
Cumberland Wellness Investment Fund, LLC |
Ohio | |
Fifth Third New Markets Development Co., LLC |
Ohio | |
Fifth Third West Louisville Emerging, LLC |
Ohio | |
SCD VII Investment Company, LLC |
Delaware | |
SCG Investment Fund, LLC |
Ohio | |
Steelyyards Investment Fund, LLC |
Ohio | |
Studio One Investment Fund, LLC |
Michigan | |
5/3 Better Family Life Investment Fund, LLC |
Ohio | |
5/3 GCM NMTC Investment Fund, LLC |
Ohio | |
5/3 Georgia Aquarium Investment Fund, LLC |
Ohio | |
5/3 LWC NMTC Investment Fund, LLC |
Ohio | |
5/3 Middough NMTC Investment Fund, LLC |
Ohio | |
5/3 Middough NMTC Investment Fund, II |
Ohio | |
5/3 Shoreway NMTC Investment Fund, LLC |
Ohio | |
5/3 SIP NMTC Investment Fund, LLC |
Ohio | |
5/3 The Views NMTC Investment Fund, LLC |
Ohio | |
5/3 120 East Sixth Investment Fund, LLC |
Ohio | |
5/3 1400 Race Street Investment Fund, LLC |
Ohio | |
5/3 200 Peachtree Investment Fund, LLC |
Ohio | |
5/3 7000 Euclid Investment Fund, LLC |
Ohio | |
5/3 CNMF NMTC Investment Fund, LLC |
Ohio | |
600 Fifth Street Properties Master Tenant, LLC |
Michigan | |
Fifth Third Capital Holdings, LLC |
Delaware | |
Fountain Square Life Reinsurance Company, Ltd. |
Turks and Caicos Islands | |
Vista Settlement Services, LLC |
Delaware | |
Fifth Third Investment Company |
Ohio | |
Fifth Third Mauritius Holdings Limited |
Mauritius | |
First Charter Capital Trust I |
Delaware | |
First Charter Capital Trust II |
Delaware |
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements of Fifth Third Bancorp and subsidiaries (the Bancorp) of our reports dated February 22, 2013, relating to the consolidated financial statements of the Bancorp, and the effectiveness of the Bancorps internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Bancorp for the year ended December 31, 2012:
Form S-8 |
Form S-3 | |||
No. 33-34075 |
No. 33-54134 | |||
No. 33-55553 |
No. 333-165689 | |||
No. 333-52182 |
||||
No. 333-52188 |
||||
No. 333-58249 |
||||
No. 333-58618 |
||||
No. 333-63518 |
||||
No. 333-72910 |
||||
No. 333-108996 |
||||
No. 333-114001 |
||||
No. 333-116535 |
||||
No. 333-119280 |
||||
No. 333-123493 |
||||
No. 333-147533 |
||||
No. 333-157687 |
||||
No. 333-158742 |
||||
No. 333-175258 |
/s/ Deloitte and Touche LLP |
Cincinnati, Ohio February 22, 2013 |
Exhibit 31(i)
CERTIFICATION PURSUANT
TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, | Kevin T. Kabat, certify that: |
1. | I have reviewed this report on Form 10-K of Fifth Third Bancorp (the Registrant); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. | The Registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the Registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the Registrants internal control over financial reporting that occurred during the Registrants most recent fiscal quarter (the Registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting; and |
5. | The Registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrants auditors and the audit committee of the Registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal control over financial reporting. |
/s/ Kevin T. Kabat |
Kevin T. Kabat |
Vice Chairman and Chief Executive Officer |
February 22, 2013 |
Exhibit 31(ii)
CERTIFICATION PURSUANT
TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Daniel T. Poston, certify that:
1. | I have reviewed this report on Form 10-K of Fifth Third Bancorp (the Registrant); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. | The Registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the Registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the Registrants internal control over financial reporting that occurred during the Registrants most recent fiscal quarter (the Registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting; and |
5. | The Registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrants auditors and the audit committee of the Registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal control over financial reporting. |
/s/ Daniel T. Poston |
Daniel T. Poston |
Executive Vice President and Chief Financial Officer |
February 22, 2013 |
Exhibit 32(i)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Fifth Third Bancorp (the Registrant) on Form 10-K for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Kevin T. Kabat, Vice Chairman and Chief Executive Officer of the Registrant, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
/s/ Kevin T. Kabat |
Kevin T. Kabat |
Vice Chairman and Chief Executive Officer |
February 22, 2013 |
Exhibit 32(ii)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Fifth Third Bancorp (the Registrant) on Form 10-K for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Daniel T. Poston, Executive Vice President and Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
/s/ Daniel T. Poston |
Daniel T. Poston |
Executive Vice President and Chief Financial Officer |
February 22, 2013 |
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