Fifth Third Bank 2008 Annual Report Download - page 69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fifth Third Bancorp 67
3. RESTRICTIONS ON CASH AND DIVIDENDS
The Federal Reserve Bank requires banks to maintain minimum
average reserve balances. The amount of the reserve requirement
was approximately $406 million and $301 million at December 31,
2008 and December 31, 2007, respectively.
Dividends paid by the Bancorp are subject to various federal
and state regulatory limitations. The dividends paid by the
Bancorp’s state chartered subsidiary banks are subject to state
regulations. Dividends that may be paid by the Bancorp’s national
charter subsidiary bank without the express approval of the Office
of the Comptroller of the Currency (OCC) are limited to that
bank’s retained net profits for the preceding two calendar years
plus retained net profits up to the date of any dividend declaration
in the current calendar year. Under these provisions, the
Bancorp’s state chartered and national subsidiary banks could
have declared additional dividends of $492 million and $1.9 billion
at December 31, 2008 and 2007, respectively, without obtaining
prior regulatory approval. The Bancorp’s nonbank subsidiaries
are also limited by certain federal and state statutory provisions
and regulations covering the amount of dividends that may be
paid in any given year. Based on retained earnings at December
31, 2008 and 2007, the Bancorp’s nonbank subsidiaries could have
declared additional dividends of $50 million and $100 million,
respectively, without obtaining prior regulatory approval.
On December 31, 2008, the Bancorp sold approximately $3.4
billion in senior preferred stock and related warrants to the U.S.
Treasury under the terms of the CPP. The terms include
restrictions on common stock dividends, which require the U.S.
Treasury’s consent to increase common stock dividends for a
period of three years from the date of investment unless the
preferred shares are redeemed in whole or the U.S. Treasury has
transferred all of the preferred shares to a third party. For the
Bancorp, approval from the U.S. Treasury will be required for
common stock dividends in excess of $0.15 per share of common
stock. In addition, no dividends can be declared or paid on the
Bancorp’s common stock unless all accrued and unpaid dividends
have been paid on the preferred shares.
4. SECURITIES
Trading securities were $1.2 billion as of December 31, 2008
compared to $171 million at December 31, 2007. The increase in
trading securities was due to the Bancorp purchasing VRDNs
from the market during 2008. VRDNs classified as trading
securities totaled $1.1 billion at December 31, 2008. See Note 15
for further information on VRDNs. Unrealized gains and losses
on trading securities held at December 31, 2008 and 2007 were
immaterial to the Consolidated Financial Statements.
In 2008, 2007, and 2006, gross realized securities gains were
$164 million, $28 million and $48 million, respectively, while gross
realized securities losses were $130 million, $1 million and $408
million, respectively.
At December 31, 2008 and 2007, securities with a fair value
of $9.2 billion and $8.8 billion, respectively, were pledged to
secure borrowings, public deposits, trust funds and for other
purposes as required or permitted by law. The following table
provides a breakdown of the available-for-sale and held-to-
maturity securities portfolio as of December 31:
2008 2007
($ 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 $186 4 - 190 3- -3
U.S. Government sponsored
agencies 1,651 83 (4) 1,730 160 1 (1) 160
Obligations of states and
political subdivisions 323 4 (1) 326 490 6 - 496
Agency mortgage-backed
securities 8,529 157 (5) 8,681 8,738 24 (153) 8,609
Other bonds, notes and
debentures 613 - (43) 570 385 1 (10) 376
Other securities(a) 1,248 - (17) 1,231 1,045 7 (19) 1,033
Total $12,550 248 (70) 12,728 10,821 39 (183) 10,677
Held-to-maturity:
Obligations of states and
political subdivisions $355 - - 355 351 - - 351
Other debt securities 5 - - 5 4- -4
Total $360 - - 360 355 - - 355
(a) Other securities consist of FHLB and Federal Reserve Bank restricted stock holdings of $545 million and $252 million at December 31, 2008, respectively, and $523 million and $199 million
at December 31, 2007, respectively, that are carried at cost, certain mutual fund holdings and equity security holdings.
The amortized cost and approximate fair value of securities at December 31, 2008, by contractual maturity, are shown in the following
table. Actual maturities may differ from contractual maturities when there exists a right to call or prepay obligations with or without call or
prepayment penalties.
Available-for-Sale & Other Held-to-Maturity
($ in millions)
Amortized
Cost Fair Value
Amortized
Cost Fair Value
Debt securities:
Under 1 year $263 264 2 2
1-5 years 750 762 79 79
5-10 years 2,013 2,080 248 248
Over 10 years 8,276 8,391 31 31
Other securities 1,248 1,231 - -
Total $12,550 12,728 360 360