UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
x | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2013
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 (NO FEE REQUIRED) |
For the transition period from to
Commission file number 001-33653
A. | Full title of the plan and the address of the plan, if different from that of the issuer named below: |
THE FIFTH THIRD BANCORP MASTER PROFIT SHARING PLAN
38 Fountain Square Plaza, Cincinnati, Ohio 45263
B. | Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: |
FIFTH THIRD BANCORP
38 Fountain Square Plaza, Cincinnati, Ohio 45263
FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements and exhibits are filed as part of this annual report:
Exhibit 23 | Consent of Independent Registered Public Accounting Firm. | |
Exhibit 99 | Financial Statements as of and for the years ended December 31, 2013 and 2012 and Supplemental Schedule as of December 31, 2013 for the Fifth Third Bancorp Master Profit Sharing Plan. |
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, The Fifth Third Bank Pension and Profit Sharing Committee has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
THE FIFTH THIRD BANCORP | ||||||
MASTER PROFIT SHARING PLAN | ||||||
Date: June 27, 2014 | By: | /s/ Teresa J. Tanner | ||||
Teresa J. Tanner | ||||||
Member, Pension and Profit Sharing Committee |
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 33-55553 of Fifth Third Bancorp on Form S-8 of our report dated June 27, 2014, relating to the financial statements of the Fifth Third Bancorp Master Profit Sharing Plan appearing in this Annual Report on Form 11-K of the Fifth Third Bancorp Master Profit Sharing Plan for the year ended December 31, 2013.
/s/ DELOITTE & TOUCHE, LLP
Cincinnati, Ohio
June 27, 2014
Exhibit 99
The Fifth Third Bancorp Master Profit Sharing Plan
Financial Statements as of and for the Years Ended December 31, 2013 and 2012, Supplemental Schedule as of December 31, 2013, and Report of Independent Registered Public Accounting Firm
THE FIFTH THIRD BANCORP MASTER PROFIT SHARING PLAN
TABLE OF CONTENTS
Page | ||||
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 | |||
FINANCIAL STATEMENTS: |
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Statements of Net Assets Available for Benefits as of December 31, 2013 and 2012 |
2 | |||
Statements of Changes in Net Assets Available for Benefits for the Years Ended December 31, 2013 and 2012 |
3 | |||
Notes to Financial Statements as of and for the Years Ended December 31, 2013 and 2012 |
4 - 15 | |||
SUPPLEMENTAL SCHEDULE - |
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Schedule H, Part IV, Line 4i - Schedule of Assets (Held at End of Year) as of December 31, 2013 |
17 |
NOTE: | All other schedules required by Section 2520.103-10 of the Department of Labors Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 have been omitted because they are not applicable. |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To Fifth Third Bancorp as the Plan Sponsor and the Pension and Profit Sharing Committee of The Fifth Third Bancorp Master Profit Sharing Plan:
We have audited the accompanying statements of net assets available for benefits of The Fifth Third Bancorp Master Profit Sharing Plan (the Plan) as of December 31, 2013 and 2012, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plans management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plans internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2013 and 2012, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental Schedule of Assets (Held at End of Year) as of December 31, 2013, is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labors Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This schedule is the responsibility of the Plans management. Such schedule has been subjected to the auditing procedures applied in our audit of the basic 2013 financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole.
/s/ DELOITTE & TOUCHE, LLP |
Cincinnati, Ohio |
June 27, 2014 |
THE FIFTH THIRD BANCORP MASTER PROFIT SHARING PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2013 AND 2012
2013 | 2012 | |||||||
ASSETS: |
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Cash |
$ | 369,860 | $ | 181,875 | ||||
Investments - at fair value: |
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Cash equivalents |
117,838,732 | 5,759,485 | ||||||
Common stock |
258,381,790 | 211,751,953 | ||||||
Collective funds |
631,777,145 | 565,228,740 | ||||||
Mutual funds |
598,263,892 | 521,580,152 | ||||||
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Total investments |
1,606,261,559 | 1,304,320,330 | ||||||
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Receivables: |
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Employer contribution |
33,425,862 | 46,254,042 | ||||||
Notes receivable from participants |
22,368,448 | 21,438,823 | ||||||
Accrued investment income |
1,478,380 | 1,401,294 | ||||||
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Total receivables |
57,272,690 | 69,094,159 | ||||||
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Total assets |
1,663,904,109 | 1,373,596,364 | ||||||
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LIABILITIES: |
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Excess contributions payable |
1,582,960 | 2,136,301 | ||||||
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NET ASSETS AVAILABLE FOR BENEFITS AT FAIR VALUE |
1,662,321,149 | 1,371,460,063 | ||||||
Adjustments from fair value to contract value for fully benefit-responsive investment contracts |
| (1,614,665 | ) | |||||
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NET ASSETS AVAILABLE FOR BENEFITS |
$ | 1,662,321,149 | $ | 1,369,845,398 | ||||
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See Notes to Financial Statements.
2
THE FIFTH THIRD BANCORP MASTER PROFIT SHARING PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
2013 | 2012 | |||||||
ADDITIONS: |
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Investment income: |
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Dividends |
$ | 42,855,426 | $ | 28,112,283 | ||||
Interest |
919,806 | 894,378 | ||||||
Net appreciation in fair value of investments |
246,874,382 | 125,804,585 | ||||||
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Net investment income |
290,649,614 | 154,811,246 | ||||||
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Other income |
4,757,483 | 2,973,775 | ||||||
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Contributions: |
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Employer |
75,250,154 | 86,867,949 | ||||||
Employee, net of excess contributions |
78,713,525 | 76,478,490 | ||||||
Rollover |
4,717,225 | 5,075,456 | ||||||
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Total contributions |
158,680,904 | 168,421,895 | ||||||
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Total additions |
454,088,001 | 326,206,916 | ||||||
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DEDUCTIONS: |
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Benefits paid to participants |
(160,779,459 | ) | (136,246,245 | ) | ||||
Administrative expenses |
(832,791 | ) | (632,284 | ) | ||||
Other disbursements |
| (1,253 | ) | |||||
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Total deductions |
(161,612,250 | ) | (136,879,782 | ) | ||||
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INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS |
292,475,751 | 189,327,134 | ||||||
NET ASSETS AVAILABLE FOR BENEFITS: |
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Beginning of period |
1,369,845,398 | 1,180,518,264 | ||||||
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End of period |
$ | 1,662,321,149 | $ | 1,369,845,398 | ||||
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See Notes to Financial Statements.
3
THE FIFTH THIRD BANCORP MASTER PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
1. | DESCRIPTION OF PLAN |
The following brief description of The Fifth Third Bancorp Master Profit Sharing Plan (the Plan) is provided for general information purposes only. Participants should refer to the Plan agreement for a more complete description of the Plans information.
General - The Plan is a defined contribution profit sharing plan, with a 401(k) feature, with separate accounts maintained for each participant. Each employee of a participating Fifth Third Bancorp (the Bancorp) subsidiary automatically becomes a participant on the first payroll date after becoming an employee. With regard to the profit sharing feature, employees are eligible immediately upon hire. For the 401(k) feature, employees are eligible to participate after 30 days of service. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The Bancorp is the Plan Sponsor. The original Plan became effective December 31, 1954.
Amendments to the Plan during 2013 and 2012 are summarized as follows:
The fourth amendment to the Plan, effective in 2013, included:
| When a participants benefit becomes distributable, such benefit shall be paid in accordance with the specifics of the Plan and in such of the forms as the participant elects: single sum, periodic installments, or partial withdrawal. |
The third amendment to the Plan, effective in 2013, included:
| Loans shall be repaid only by payroll withholding properly authorized by the participant, provided that the Administrator, Fifth Third Bank, may allow complete prepayment through other means. |
The second amendment to the Plan, effective in 2012, included:
| An investment election feature was enacted whereby an investment election shall be made in such manner as the Administrator, Fifth Third Bank, shall direct. The Administrator shall have the power and authority 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, regulate the amount or increment a participant may allocate to a particular fund or the self-directed brokerage account and require or allow an election to relate only to future contributions. |
| The Administrator may designate one or more default investment alternatives and may prescribe the circumstances in which a participants account is to be invested in a default investment alternative. |
| If the value of a terminated participant/s non-forfeitable account does not exceed $5,000, then it shall be paid in a single lump sum as soon as administratively feasible after it |
4
otherwise becomes distributable. If the participant does not make an election as to how to have the account paid, then it will be paid as follows: |
| If the portion of the distribution attributable to the Roth Account exceeds $1,000, then this portion will be directly rolled over to an Individual Retirement Account. If the Roth portion is less than $1,000, then it will be paid directly to the participant. |
| If the Non-Roth portion of the distribution exceeds $1,000, then this portion will be directly rolled over to an Individual Retirement Account. If the Non-Roth portion is less than $1,000, then it will be paid directly to the participant. |
Investment Options - At December 31, 2013, participants can direct their accounts to be invested in Fifth Third Bancorp common stock, two money market funds, 16 collective funds, 12 mutual funds and a self-directed brokerage window offering mutual funds only offered by the Plan as investment options with a few limited restrictions. At December 31, 2012, participants could direct their accounts to be invested in Fifth Third Bancorp common stock, one money market fund, 17 collective funds, 11 mutual funds and a self-directed brokerage window offering mutual funds only offered by the Plan as investment options with a few limited restrictions.
Administration - Fifth Third Bank, a wholly-owned subsidiary of the Bancorp, serves as the Plan administrator. JP Morgan Chase Bank, N.A. serves as the trustee of the Plan. The investment assets of the Plan are held in separate trust funds by JP Morgan Chase Bank, N.A. where such assets are managed. JP Morgan must adhere to the investment authority of the Plan Administrator. JP Morgan Retirement Plan Services serves as the Plans recordkeeper and performs certain functions as agent of the trustee under an agency agreement.
Funding and Vesting - The Bancorps profit sharing contribution to the Plan is a percentage of eligible compensation determined annually by the Board of Directors of the Bancorp and allocated to participants in accordance with the provisions of the Plan. The profit sharing contribution by the Bancorp is allocated to participants in the proportion that the compensation of each participant bears to the compensation of all participants for the Plan year.
The 401(k) component of the Plan permits voluntary contributions from participants up to 50% of their compensation. Such contributions are credited directly to the participants accounts and are fully vested. Contributions may be allocated to the available investment options at the discretion of the participant. Gains and losses under the Plan are calculated on a daily basis and allocated to participant accounts based on account balances.
The Plan also accepts before-tax rollover contributions and Roth rollover contributions from other qualified plans or from individual retirement accounts. Rollovers are credited to a participants rollover contribution account. Before-tax rollover contributions are treated in a manner similar to before-tax contributions for Plan accounting and federal income tax purposes. Neither type of rollover contribution is eligible for matching contributions by the Bancorp.
For voluntary and matching contributions, employees are eligible to participate in the Plan the pay period after they have completed 30 days of service. The Bancorp matches 100% of the first 4% contributed on a pre-tax or Roth basis. Both matching and profit sharing contributions vest on a three-year cliff vesting schedule, so that after three years of service, a participant is 100% vested in the matching and profit sharing contributions; anything less than three years of service, a participant
5
is 0% vested. Matching and profit sharing contributions are invested in the same funds selected by participants for future contributions.
Both voluntary contributions and Bancorp matching contributions are subject to statutory limitations.
Participant Accounts - Individual accounts are maintained for each participant of the Plan. Each participants account is credited with the participants contribution, the Bancorps matching contribution, allocations of the Bancorps discretionary contributions, Plan earnings, and charged with withdrawals and an allocation of Plan losses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participants vested account.
Forfeited Accounts - At December 31, 2013 and 2012, forfeited nonvested accounts totaled $6,894,816 and $6,870,350, respectively, and the entire balances of these accounts were used to reduce future employer contributions.
Termination - Although it has not expressed its intention to do so, the Bancorp has the right under the Plan to discontinue the contributions of any participating Bancorp subsidiary at any time and to amend or terminate the Plan subject to the provisions set forth in ERISA. If the Plan were to be terminated, the value of the proportionate interest of each participant would be determined as of the date of termination, and this amount would be fully vested and nonforfeitable.
Payment of Benefits - The Plan provides for payment of benefits of accumulated vested amounts upon termination of employment. Benefits are generally payable in the form of lump-sum payments or periodic payments. Benefits are recorded when paid. The benefit to which an employee is entitled is the benefit that can be provided from the participants vested account.
Benefits Payable - Amounts allocated to accounts of persons who have elected to withdraw from the Plan, but have not yet been paid were immaterial at December 31, 2013 and 2012, respectively.
Tax Status - The Internal Revenue Service has determined and informed the Bancorp by a letter dated October 30, 2013 that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (IRC). The Plan has been amended since receiving the determination letter. However, the Plan administrator and the Plans tax counsel believe that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC. Therefore, no provision for income taxes has been included in the Plans financial statements.
Accounting principles generally accepted in the United States of America (U.S. GAAP) require Plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Plan administrator believes it is no longer subject to income tax examinations for years prior to 2010.
Notes Receivable from Participants - Loans to participants are measured at amortized cost. Participants may borrow from certain of their fund accounts a minimum of $1,000 up to the lesser of $50,000 or 50% of the vested portion of their account balance. A participant can request a loan for any reason. Each loan, by its terms, is required to be repaid within five years. The loans are secured by the balance in the participants account and bear interest at a rate equal to the rate charged by the
6
Bancorp on a similar loan as determined quarterly by the Plan administrator. Interest rates on loans at December 31, 2013 and 2012 ranged from 4.25% - 9.25%. Principal and interest are paid by the participant through payroll deductions authorized by the participant. Terminated employees must repay the outstanding loan principal balance in full or take a deemed distribution equal to the outstanding loan principal balance.
Withdrawals - Subject to the Plan administrators sole and absolute discretion, participants are allowed to withdraw an amount not to exceed the total amount of that participants voluntary contributions for financial hardship purposes.
Dividend Pass-Through Election - A participant with an account (including any sub-account) invested in Fifth Third Bancorp common stock (or in the event of the participants death, their beneficiary), shall have the right to elect, in accordance with instructions or procedures of the Plan administrator, or its delegate to either (1) leave such dividends in the Plan for reinvestment in common stock of Fifth Third Bancorp; or (2) take the dividends in cash.
Excess Contributions Payable - In accordance with IRC limits, the Plan is required to return excess contributions received during the Plan year. Contributions totaling $1,582,960 and $2,136,301 were refunded to applicable participants during 2014 and 2013, respectively. These refunds are required in order for the Plan to pass the Average Deferral Percentage (ADP) test and to comply with IRC Section 415 for the years ended December 31, 2013 and 2012.
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The following are the significant accounting policies followed by the Plan:
Basis of Accounting - The accounting records of the Plan are maintained on the accrual basis of accounting. The accompanying financial statements have been prepared in accordance with U.S. GAAP.
Use of Estimates - The preparation of financial statements in conformity with U.S. GAAP requires the Plan administrator to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and assumptions.
Risk and Uncertainties - The Plan, at the direction of the participant, invests in various securities, which may include U.S. governmental securities, corporate debt instruments and corporate stocks. Investment securities, in general, are exposed to various risks, such as interest rate, credit and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements.
Cash Equivalents - Cash equivalents include amounts held in the Federated Prime Cash Obligation Money Market Fund and the JPMorgan Prime Money Market Fund, which are readily convertible to cash upon demand and are considered short term investment funds that have a maturity of 90 days or less and are valued at cost which approximates fair value.
Valuation of Investments - The Plans investments are stated at fair value in accordance with Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (ASC 820). Quoted market prices, when available, are used to value equity securities and mutual funds. Collective funds are stated at fair value, as determined by the issuer of the collective funds, based on
7
the net asset value (NAV) per share or its equivalent, without adjustment, as quoted by the issuer or the collective fund. For further information on fair value measurements, see Notes 4 and 6.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation (depreciation) includes the Plans gains and losses on investments bought and sold during the year.
Management fees and operating expenses charged to the Plan for investments in the mutual funds and collective trust funds are deducted from income earned on a daily basis and are not separately reflected. Consequently, management fees and operating expenses are reflected as a reduction of investment return for such investments.
Administrative Expenses - Certain administrative expenses of the Plan are paid by the Plan as provided in the Plan document. A portion of the legal fees incurred in the administration of the Plan were also allocated to participants accounts on a pro-rata basis.
3. | INVESTMENTS |
Investments representing 5% or more of net assets available for benefits as of December 31, 2013 and 2012 are as follows, and stated at fair value except as denoted below:
2013 | 2012 | |||||||
Fifth Third Bancorp common stock (12,286,343 and 13,940,221 shares, respectively) |
$ | 258,381,790 | $ | 211,751,953 | ||||
Federated Prime Cash Obligations Money Market Fund (113,678,146 shares) (2) |
113,710,064 | | ||||||
Touchstone Large Cap Growth Fund (2,997,202 and 3,056,609 shares, respectively) |
95,300,307 | 81,795,419 | ||||||
JPMorgan Core Bond Fund (6,720,034 shares) |
< 5 | % | 81,114,998 | |||||
Fifth Third Bank Stable Value Fund for Employee Benefit Plans (113,144,636 shares) (1) (2) |
| 113,144,636 |
(1) | Investment amount at contract value. The fair value of the investments was $114,759,301 at December 31, 2012. |
(2) | The Stable Value Fund was dissolved on September 27, 2013 and the cash was transferred to the Federated Prime Cash Obligations Money Market Fund. |
The following table represents the net appreciation in the fair value of investments for the Plan during the years ended December 31, 2013 and 2012:
2013 | 2012 | |||||||
Net appreciation in the fair value of investments: |
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Common stock of Fifth Third Bancorp |
$ | 76,736,795 | $ | 37,929,090 | ||||
Collective funds |
106,105,032 | 30,855,213 | ||||||
Mutual funds |
64,032,555 | 57,020,282 | ||||||
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Total |
$ | 246,874,382 | $ | 125,804,585 | ||||
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4. | STABLE VALUE FUND |
The Plans Stable Value Fund (the SVF or the Fund) was a collective trust fund sponsored by Fifth Third Bank and was included within the collective funds on the Statements of Net Assets Available for Benefits. The Fund was dissolved and cash was distributed to the unit holders of the Fund on September 27, 2013. The beneficial interest of each participant was represented by units. The NAV for each unit class of the Fund was calculated daily by dividing the net assets (at contract value) applicable to each unit class by the respective number of units outstanding for that class. Deposits to and withdrawals from the Fund were made daily at the current NAV per unit. The final NAV date was September 26, 2013.
8
Participants ordinarily directed the withdrawal or transfer of all or a portion of their investment at contract value. Contract value represented contributions made to the Fund, plus earnings, less participant withdrawals and administrative expenses. The Fund imposed certain restrictions on the Plan, and the Fund itself was subject to circumstances that affected its ability to transact at contract value. As of December 31, 2012, Plan management believed that the occurrence of events that caused the Fund to transact at less than contract value were not probable.
Events Limiting the Ability of the Fund to Transact at the Contract Value with the Issuer
Benefit-responsive investment contracts, including guaranteed investment contracts (GICs) and wrap (synthetic) contracts are agreements with high quality banks and insurance companies, which are designed to help preserve principal and provide a stable crediting rate. These contracts are fully benefit-responsive and provide that plan participant initiated withdrawals permitted under a participating plan will be paid at contract value. In addition to certain wrap agreement termination provisions discussed in the section below, the contracts generally provide for withdrawals associated with certain events which are not in the ordinary course of Fund operations, and that the issuer determines will have a material adverse effect on the issuers financial interest, will be paid with a market value adjustment to the contract value amount of such withdrawal as defined in such contracts.
While each contract issuer specifies the events which may trigger such a market value adjustment, typically such events include all or a portion of the following: (i) amendments to the Fund documents or Funds administration; (ii) changes to Funds prohibition on competing investment options by participating plans or deletion of equity wash provisions; (iii) complete or partial termination of the Fund or its merger with another fund; (iv) the failure of the Fund or its trust to qualify for exemption from federal income taxes or any required prohibited transaction exemption under ERISA; (v) unless made in accordance with the withdrawal provisions of the Fund, the redemption of all or a portion of the interests in the Fund held by a participating plan at the direction of the participating plan sponsor, including withdrawals due to the removal of a specifically identifiable group of employees from coverage under the participating plan (such as a group layoff or early retirement incentive program), or the closing or sale of a subsidiary, employing unit or affiliate, the bankruptcy or insolvency of a plan sponsor, the merger of the plan with another plan, or the plan sponsors establishment of another tax qualified defined contribution plan; (vi) any change in law, regulation, ruling, administrative or judicial position or accounting requirement, in any case applicable to the Fund or participating plans, and (vii) the delivery of any communication to plan participants designed to influence a participant not to invest in the Fund.
Average Yield
The average yield earned by the entire Fund for the period from January 1, 2013 to September 27, 2013 (Date of Dissolution) was 0.16% compared to 0.47% for the year ended December 31, 2012. The average yield earned by the entire Fund with an adjustment to reflect the actual interest rate credited to participants in the Fund for the period from January 1, 2013 to September 27, 2013 (Date of Dissolution) was 0.77% compared to 1.18% for the year ended December 31, 2012.
Fully Benefit-Responsive Investment Contracts
The SVF primarily invested in fully benefit-responsive investment contracts such as GICs issued by insurance companies and other financial institutions and other investment products (synthetic GICs) with similar characteristics.
Traditional GICs are backed by the general account of the issuer. The Fund deposited a lump sum with the issuer and received a guaranteed interest rate for a specified time. Interest was accrued on either a simple interest or fully compounded basis and paid either periodically or at the end of the
9
contract term. The issuer guarantees that all qualified participant withdrawals will occur at contract value (principal plus accrued interest).
A synthetic GIC, or alternative investment contract, is an investment contract issued by an insurance company or bank, backed by a portfolio of bonds or common funds that were owned by the Fund. These assets underlying the wrap contract are maintained separate from the contract issuers general assets, usually by a third party custodian. The wrapper contracts are obligated to provide an interest rate not less than zero. These contracts typically provide that realized and unrealized gains and losses on the underlying assets are not reflected immediately in the net assets of the Fund, but rather are amortized, usually over the time to maturity or the duration of the underlying investments, through adjustments to the future interest crediting rate. The issuer guarantees that all qualified participant withdrawals will occur at contract value.
Gains and losses in the fair value of the underlying investments, relative to the wrapper contract value, are represented on the Statements of Net Assets Available for Benefits as adjustments from fair value to contract value for fully benefit-responsive investment contracts. As of December 31, 2012, the adjustment amount was negative, which indicated that the wrapper contracts values were less than the fair value of the underlying investments. The amortization of the embedded fair value gains caused the future interest crediting rate to be higher.
There were no reserves against contract value for credit risk of the contract issuers or otherwise. The crediting rate for the portfolio was 0.84% as of September 26, 2013 compared to 0.77% as of December 31, 2012. The crediting interest rate was based on a formula agreed upon with the issuers.
The Fund was considered fully benefit-responsive because all of the following criteria were met:
| The investment contract was between the fund and the issuer, and the contract was not sold or assigned. |
| The contract issuer was obligated to repay principal and interest to participants in the fund, or provide prospective crediting rate adjustments that did not result in an interest crediting rate less than zero. |
| All permitted participant-initiated transactions occurred at contract value, without limitations. |
| An event that would limit the ability of the participant to transact at contract value was not probable. |
| The fund allowed participants reasonable access to their funds. |
5. | EXEMPT PARTY-IN-INTEREST TRANSACTIONS |
Fifth Third Bank provided the Plan with certain accounting and administrative services for which no fees were charged.
At December 31, 2013 and 2012, the Plan held 12,286,343 and 13,940,221 shares of the Bancorps common stock, respectively, with fair values of $258,381,790 and $211,751,953, respectively. Total dividends received from shares of the Bancorps common stock totaled $6,021,343 and $5,258,147 during the years ended December 31, 2013 and 2012, respectively.
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6. | FAIR VALUE MEASUREMENTS |
The Plan measures certain financial assets and liabilities at fair value in accordance with U.S. GAAP, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP also establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the instruments fair value measurement. The three levels within the fair value hierarchy are described as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Plan has the ability to access at the measurement date.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 - Unobservable inputs for the asset or liability for which there is little, if any, market activity at the measurement date. Unobservable inputs reflect the Plans own assumptions about what market participants would use to price the asset or liability. The inputs are developed based on the best information available in the circumstances, which might include the Plans own financial data such as internally developed pricing models, discounted cash flow methodologies, as well as instruments for which the fair value determination requires significant management judgment.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
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The following tables summarize assets measured at fair value on a recurring basis:
Fair Value Measurements Using |
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As of December 31, 2013 |
Level 1 (a) | Level 2 (a) | Level 3 | Total Fair Value |
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Investments: |
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Cash equivalents |
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Federated Prime Cash Obligation Money Market Fund |
$ | 113,710,064 | $ | | $ | | $ | 113,710,064 | ||||||||
JPMorgan Prime money market fund |
4,128,668 | | | 4,128,668 | ||||||||||||
Common stock |
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Fifth Third Bancorp |
258,381,790 | | | 258,381,790 | ||||||||||||
Collective funds |
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Other collective funds |
| 631,777,145 | | 631,777,145 | ||||||||||||
Mutual funds |
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Large cap allocation funds |
225,396,417 | | | 225,396,417 | ||||||||||||
Bond funds |
85,124,852 | | | 85,124,852 | ||||||||||||
Mid cap allocation funds |
135,442,998 | | | 135,442,998 | ||||||||||||
Small cap allocation funds |
76,265,598 | | | 76,265,598 | ||||||||||||
Foreign large cap allocation funds |
41,760,633 | | | 41,760,633 | ||||||||||||
Self-directed brokerage account |
34,273,394 | | | 34,273,394 | ||||||||||||
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Total investments |
$ | 974,484,414 | $ | 631,777,145 | $ | | $ | 1,606,261,559 | ||||||||
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Fair Value Measurements Using |
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As of December 31, 2012 |
Level 1 (a) | Level 2 (a) | Level 3 | Total Fair Value |
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Investments: |
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Cash equivalents |
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JPMorgan Prime money market fund |
$ | 5,759,485 | $ | | $ | | $ | 5,759,485 | ||||||||
Common stock |
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Fifth Third Bancorp |
211,751,953 | | | 211,751,953 | ||||||||||||
Collective funds |
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Stable value fund |
| 114,759,301 | | 114,759,301 | ||||||||||||
Other collective funds |
| 450,469,439 | 450,469,439 | |||||||||||||
Mutual funds |
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Large cap allocation funds |
195,640,829 | | | 195,640,829 | ||||||||||||
Bond funds |
104,265,590 | | | 104,265,590 | ||||||||||||
Mid cap allocation funds |
100,461,568 | | | 100,461,568 | ||||||||||||
Small cap allocation funds |
54,775,593 | | | 54,775,593 | ||||||||||||
Foreign large cap allocation funds |
35,809,794 | | | 35,809,794 | ||||||||||||
Self-directed brokerage account |
30,626,778 | | | 30,626,778 | ||||||||||||
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Total investments |
$ | 739,091,590 | $ | 565,228,740 | $ | | $ | 1,304,320,330 | ||||||||
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(a) | The Bancorp evaluates the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total net assets available for benefits. During the years ended December 31, 2013 and 2012, no assets or liabilities were transferred between Level 1 and Level 2. |
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The following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.
Cash equivalents
Cash equivalents are comprised of money market mutual funds that invest in short-term money market instruments that are issued and payable in U.S. dollars. The Plan measures its cash equivalent funds that are exchange-traded using the funds quoted price, which is in an active market. Therefore, these investments are classified within Level 1 of the valuation hierarchy.
Common stock
The Plan measures its common stock using the stocks quoted price, which is available in an active market. Therefore, these investments are classified within Level 1 of the valuation hierarchy.
Collective funds - stable value fund
The SVF invested in a diversified portfolio of stable assets, which included, but were not limited to, units of collective trust funds consistent with the funds objective of stable value, GICs, alternative and separate account investment contracts as well as cash equivalents, such as short-term money market instruments. The collective funds value was derived from their respective NAV. The collective funds consisted of bonds and asset-backed securities whose value was derived from observable inputs based on the pricing of similar instruments that were publicly traded. GICs were valued based on their underlying securities, which consisted of bonds whose value was derived from observable inputs including London Interbank Offered Rate (LIBOR) forward interest rate curves. The bonds were valued based on the pricing of similar bonds that were publicly traded. In determining fair value, factors such as the benefit-responsiveness of the investment contracts and the ability of the parties to the investment contracts to perform in accordance with the terms of the contracts were considered; such inputs were not significant to the valuation. Alternative investment contracts were valued based on their underlying securities, which consisted of common funds consisting of bonds and asset-backed securities whose value was derived from observable inputs based on the pricing of similar instruments that were publicly traded. Therefore, the Plan classified stable value funds as Level 2 securities in the fair value hierarchy.
The beneficial interest of each participant was represented by units. Units were issued and redeemed daily at the Funds constant NAV of $1 per unit. Distribution to the Funds unit holders was declared daily from the net investment income and automatically reinvested in the Fund on a monthly basis, when paid. It was the policy of the Fund to use its best efforts to maintain a stable NAV of $1 per unit; although there was no guarantee that the Fund would maintain this value.
Collective funds - other collective funds
Investments in collective funds are valued based upon the redemption price of units held by the Plan, which is based on the current fair value of the funds underlying assets. Unit values are determined by the financial institution sponsoring such funds by dividing the funds net assets at fair value by its units outstanding at the valuation dates to obtain the investments NAV. Therefore, these investments are classified within Level 2 of the valuation hierarchy.
Mutual funds
The Plan measures its mutual funds that are exchange-traded, including the self directed brokerage account offering mutual funds, using the funds quoted price, which is available in an active market. Therefore, these investments are classified within Level 1 of the valuation hierarchy.
NAV Disclosures
The Plan measures the fair value of certain investments based on the investees NAV or its equivalent. Investments valued using NAV as a practical expedient as of December 31, 2013
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consisted of the other collective funds (OCF). Investments valued using NAV as a practical expedient as of December 31, 2012 consisted of the Fifth Third Bank Stable Value Fund and OCF. Investments in the OCF do not have a holding period and there are no unfunded commitments. Investments in the SVF did not have a holding period and there were no unfunded commitments.
The OCF seek an investment return that approximates as closely as practicable, before expenses, the performance of the associated investment index over the long term.
The OCF are managed using a passive or indexing investment approach, by which the sponsoring investment institution attempts to invest in the securities comprising the relevant investment index in the same proportions as they are represented in the index. In some cases, it may not be possible or practicable to purchase all of the securities comprising the index, or to hold them in the same weightings as they represent in the index. From time to time, the sponsoring investment institution may purchase securities that are not yet represented in the index or sell securities that have not yet been removed from the index.
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 Amount |
Fair Value
Measurements Using |
Total Fair Value |
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As of December 31, 2013 |
Level 1 | Level 2 | Level 3 | |||||||||||||||||
Financial assets: |
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Cash |
$ | 369,860 | 369,860 | | | $ | 369,860 | |||||||||||||
Employer contribution |
33,425,862 | 33,425,862 | | | 33,425,862 | |||||||||||||||
Notes receivable from participants |
22,368,448 | 22,368,448 | | | 22,368,448 | |||||||||||||||
Accrued investment income |
1,478,380 | 1,478,380 | | | 1,478,380 | |||||||||||||||
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Financial liabilities: |
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Excess contributions payable |
1,582,960 | 1,582,960 | | | 1,582,960 | |||||||||||||||
Net
Carrying Amount |
Fair Value
Measurements Using |
Total Fair Value |
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As of December 31, 2012 |
Level 1 | Level 2 | Level 3 | |||||||||||||||||
Financial assets: |
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Cash |
$ | 181,875 | 181,875 | | | $ | 181,875 | |||||||||||||
Employer contribution |
46,254,042 | 46,254,042 | | | 46,254,042 | |||||||||||||||
Notes receivable from participants |
21,438,823 | 21,438,823 | | | 21,438,823 | |||||||||||||||
Accrued investment income |
1,401,294 | 1,401,294 | | | 1,401,294 | |||||||||||||||
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Financial liabilities: |
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Excess contributions payable |
2,136,301 | 2,136,301 | | | 2,136,301 |
Cash, employer contribution, notes receivable from participants, accrued investment income and excess contributions payable
For financial instruments with a short-term or no stated maturity, prevailing market rates and limited credit risk, carrying amounts approximate fair value.
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7. | RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 |
2013 | 2012 | |||||||
Net assets available for benefits per the financial statements |
$ | 1,662,321,149 | $ | 1,369,845,398 | ||||
Adjustment from contract value to fair value for fully benefit-responsive investment contracts |
| 1,614,665 | ||||||
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Total assets (current value column) per Form 5500 Schedule of Assets (Held at End of Year) |
$ | 1,662,321,149 | $ | 1,371,460,063 | ||||
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Increase in net assets per the financial statements |
$ | 292,475,751 | $ | 189,327,134 | ||||
Net change in adjustment from contract value to fair value for fully benefit-responsive investment contracts |
(1,614,665 | ) | 251,542 | |||||
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Net income per Form 5500 |
$ | 290,861,086 | $ | 189,578,676 | ||||
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SUPPLEMENTAL SCHEDULE
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THE FIFTH THIRD BANCORP MASTER PROFIT SHARING PLAN
SCHEDULE H, PART IV, LINE 4i
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
AS OF DECEMBER 31, 2013
Asset Description |
Current Fair Value | * | ||
CASH: |
$ | 369,860 | ||
CASH EQUIVALENTS: |
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Federated Prime Cash Obligation Money Market Fund |
113,710,064 | |||
JPMorgan Prime Money Market Fund |
4,128,668 | |||
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Total cash equivalents |
117,838,732 | |||
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COMMON STOCK: |
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Fifth Third Bancorp |
258,381,790 | |||
COLLECTIVE FUNDS: |
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Fifth Third Bank Equity Index Fund for Employee Benefit Plans Class B |
77,755,358 | |||
State Street Global Advisors Global Equity Ex U.S. Index - Non-Lending Series Class C |
74,477,377 | |||
State Street Global Advisors S&P Mid Cap - Non-Lending Series Class C |
58,328,704 | |||
State Street Global Advisors Russell Large Cap Growth Index - Non-Lending Series Class C |
57,772,202 | |||
JPMorgan Target Retirement Date 2025 Fund |
44,157,894 | |||
State Street Global Advisors U.S. Bond Index - Non-Lending Series Class C |
43,420,831 | |||
JPMorgan Target Retirement Date 2030 Fund |
41,670,975 | |||
JPMorgan Target Retirement Date 2020 Fund |
39,823,349 | |||
State Street Global Advisors Russell Large Cap Value Index - Non-Lending Series Class C |
39,046,605 | |||
JPMorgan Target Retirement Date 2035 Fund |
37,129,123 | |||
JPMorgan Target Retirement Date 2015 Fund |
26,496,659 | |||
JPMorgan Target Retirement Date 2040 Fund |
26,420,370 | |||
State Street Global Advisors Russell Small Cap Index - Non-Lending Series Class C |
20,119,575 | |||
JPMorgan Target Retirement Date 2045 Fund |
19,019,507 | |||
JPMorgan Target Retirement Date Income Fund |
14,653,038 | |||
JPMorgan Target Retirement Date 2050 Fund |
11,485,578 | |||
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Total collective funds |
631,777,145 | |||
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MUTUAL FUNDS: |
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Touchstone Large Cap Growth Fund |
95,300,307 | |||
Goldman Sachs Mid Cap Value Fund |
68,348,414 | |||
JPMorgan Core Bond Fund |
67,383,381 | |||
Goldman Sachs Growth Opportunities Fund |
67,094,584 | |||
Lazard Emerging Markets Fund |
61,735,886 | |||
Touchstone Value Fund |
58,039,210 | |||
Alliance Bernstein Small Cap Growth Fund |
51,596,909 | |||
Touchstone International Value Fund |
41,760,633 | |||
Chase Investment Services Corp. Self-directed brokerage account |
34,273,394 | |||
Touchstone Small Company Value Fund |
24,668,689 | |||
American Century Inflation-Adjusted Bond Fund |
15,003,595 | |||
Ivy Core Equity Fund |
10,321,014 | |||
JPMorgan Short Duration Fund |
2,737,876 | |||
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Total mutual funds |
598,263,892 | |||
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LOANS: |
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Participant notes receivable (Interest rates ranging from 4.25% to 9.25% and maturing on various dates through January 2019) |
22,368,448 | |||
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TOTAL |
$ | 1,628,999,867 | ||
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* | Cost information is not required for participant-directed investments and, therefore, is not included. |
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