Fifth Third Bank 2006 Annual Report Download - page 72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fifth Third Bancorp
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held by its brokerage clearing agent for the benefit of FTS
customers. FTS is responsible for payment to its brokerage
clearing agent for any loss, liability, damage, cost or expense
incurred as a result of customers failing to comply with margin or
margin maintenance calls on all margin accounts. The margin
account balance held by the brokerage clearing agent as of
December 31, 2006 was $51 million compared to $55 million as of
December 31, 2005. In the event of any customer default, FTS has
rights to the underlying collateral provided. Given the existence of
the underlying collateral provided and negligible historical credit
losses, FTS does not maintain a loss reserve.
15. RELATED PARTY TRANSACTIONS
At December 31, 2006 and 2005, certain directors, executive
officers, principal holders of Bancorp common stock, associates of
such persons, and affiliated companies of such persons were
indebted, including undrawn commitments to lend, to the
Bancorp’s banking subsidiaries in the aggregate amount, net of
participations, of $271 million and $307 million, respectively. As
of December 31, 2006 and 2005, the outstanding balance on loans
to related parties, net of participations and undrawn commitments,
was $76 million and $81 million, respectively.
Commitments to lend to related parties as of December 31,
2006 and 2005, net of participations, were comprised of $260
million and $296 million, respectively, to directors and $11 million
at December 31, 2006 and 2005 to executive officers. The
commitments are in the form of loans and guarantees for various
business and personal interests. This indebtedness was incurred in
the ordinary course of business on substantially the same terms,
including interest rates and collateral, as those prevailing at the time
of comparable transactions with unrelated parties. This
indebtedness does not involve more than the normal risk of
repayment or present other unfavorable features.
None of the Bancorp’s affiliates, officers, directors or
employees has an interest in or receives any remuneration from any
special purpose entities or qualified special purpose entities with
which the Bancorp transacts business.
The Bancorp maintains a written policy and procedures
covering related party transactions. These procedures cover
transactions such as employee-stock purchase loans, personal lines
of credit, residential secured loans, overdrafts, letters of credit and
increases in indebtedness. Such transactions are subject to the
Bancorp’s normal underwriting and approval procedures. Prior to
the loan closing, Compliance Risk Management must approve and
determine whether the transaction requires approval from or a post
notification be sent to the Bancorp’s Board of Directors.
16. OTHER COMPREHENSIVE INCOME
The Bancorp has elected to present the disclosures required by
SFAS No. 130, “Reporting of Comprehensive Income,” in the
Consolidated Statements of Changes in Shareholders’ Equity and
in the table below. The Bancorp adopted SFAS No. 158,
“Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans - An Amendment of FASB Statements No.
87, 88, 106, and 132(R).” This statement requires companies to
recognize the unamortized actuarial net gains or losses and
unamortized prior service costs as components of accumulated
other comprehensive income.
Disclosure of the reclassification adjustments, related tax
effects allocated to other comprehensive income and accumulated
other comprehensive income as of and for the years ended
December 31 were as follows:
Current Period Activity Accumulated Balance
($ in millions) Pretax Tax Effect Net Pretax Tax Effect Net
2006
Gains (losses) on available-for-sale securities $61 (20) 41 $(183) 64 (119)
Reclassification adjustment for net losses recognized in net income 364 (129) 235
Reclassification adjustment for cash flow hedge derivative net losses
recognized in net income 20 (8) 12 (2) 1 (1)
Total other comprehensive income $445 (157) 288 (185) 65 (120)
Cumulative effect of change in accounting for pension and other
postretirement obligations (92) 33 (59)
Total accumulated other comprehensive income $(277) 98 (179)
2005
Losses on available-for-sale securities $(455) 158 (297) (608) 213 (395)
Reclassification adjustment for net gains recognized in net income (39) 13 (26)
Gains (losses) on cash flow hedge derivatives 9 (3) 6 (22) 9 (13)
Reclassification adjustment for net losses recognized in net income 21 (7) 14
Change in minimum pension liability 90 (31) 59 (8) 3 (5)
Total $(374) 130 (244) (638) 225 (413)
2004
Losses on available-for-sale securities $(74) 27 (47) (114) 42 (72)
Reclassification adjustment for net losses recognized in net income 37 (13) 24
Losses on cash flow hedge derivatives (39) 15 (24) (52) 19 (33)
Reclassification adjustment for net gains recognized in net income (1) - (1)
Change in minimum pension liability (1) - (1) (98) 34 (64)
Total $(78) 29 (49) (264) 95 (169)