Fifth Third Bank 2008 Annual Report Download - page 88

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
86 Fifth Third Bancorp
19. 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
($ and shares in millions) Value Shares Value Shares (a) Value Shares
Shares at December 31, 2005 $1,295 583 $9 - $1,279 28
Shares acquired for treasury - - - - 82 2
Stock-based awards exercised, including shares issued - - - - (84) (2)
Restricted stock grants - - - - (45) (1)
Shares at December 31, 2006 $1,295 583 $9 - $1,232 27
Shares acquired for treasury - - - - 1,084 27
Stock-based awards exercised, including treasury shares issued - - - - (86) (2)
Restricted stock grants - - - - (59) (1)
Employee stock ownership through benefit plans - - - - 38 1
Shares at December 31, 2007 $1,295 583 $9 - $2,209 52
Issuance of preferred shares, Series G --1,072 - - -
Issuance of preferred shares, Series F --3,169 - - -
Redemption of preferred shares, Series D, E --(9) - - -
Stock-based awards exercised, including treasury shares issued --- - (2) -
Restricted stock grants - - - - (136) (3)
Shares issued in business combinations - - - - (1,841) (43)
Employee stock ownership through benefit plans --- - (1) -
Shares at December 31, 2008 $1,295 583 $4,241 - $229 6
(a) There were 7,250 shares of Series D preferred stock and 2,000 shares of Series E preferred stock at December 31, 2005, 2006 and 2007. As of December 31, 2008, 44,300 shares of Series G
preferred stock and 136,320 shares of Series F preferred stock had been issued.
During 2008, the Bancorp repurchased an immaterial amount of
common stock. During 2007, the Bancorp repurchased
approximately 27 million shares of its common stock, five percent
of total outstanding shares, in open market transactions for $1.1
billion. During 2006, the Bancorp repurchased approximately 2
million shares of its common stock, less than one percent of total
outstanding shares, in open market transactions for $82 million.
In 2008, 8.5% non-cumulative Series G convertible preferred
stock was issued in the second quarter. The depository shares
represented 46,000 shares of its convertible preferred stock and
had a liquidation preference of $25,000 per share. The preferred
stock is convertible at any time, at the option of the shareholder,
into 2,159.8272 shares of common stock, representing a
conversion price of approximately $11.575 per share of common
stock. As of December 31, 2008, Series G preferred stock had
44,300 shares outstanding and 1,700 shares reserved for issuance.
On December 31, 2008, the U.S. Treasury purchased
approximately $3.4 billion, or 136,320 shares, of the Bancorp’s
Fixed Rate Cumulative Perpetual Preferred Stock, Series F, with a
liquidation preference of $25,000 per share and related 10-year
warrants in the amount of 15% of the preferred stock investment.
The warrants allow the U.S. Treasury to purchase up to
43,617,747 shares of the Bancorp’s common stock with an
exercise price of $11.72. The Series F senior preferred stock was
issued complying with the terms established by the CPP. Per the
program terms, the U.S. Treasury’s investment consists of senior
preferred stock with a five percent dividend for each of the first
five years of investment and nine percent thereafter, unless the
shares are redeemed. The shares are callable by the Bancorp at
par after three years and may be repurchased at any time under
certain circumstances. The terms also include restrictions on the
repurchase of common stock and an increase in common stock
dividends, which require the U.S. Treasury’s consent, 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.
The proceeds from issuance of the Series F preferred stock
were allocated to the preferred stock and to the warrants based on
their relative fair values, which resulted in an initial book value of
$3.2 billion for the preferred stock and $239 million for the
warrants. The resulting discount to the preferred stock will be
accreted over five years through retained earnings as a preferred
stock dividend, resulting in an effective yield of 6.7% for the
Series F preferred stock for the first five years. The warrants will
remain in capital surplus at their initial book value until they are
exercised or expire.
The CPP terms also required that preferred stock issued to
U.S. Treasury rank senior to, or pari passu with, other preferred
stock. In order to meet the U.S. Treasury’s standard terms, in the
fourth quarter of 2008, the Bancorp repurchased its Series D and
Series E preferred stock. The preferred stock was repurchased for
aggregate consideration in cash of approximately $28 million, in
which $9 million par value was accounted for as retirement of the
Series D and Series E preferred stock and the remaining $19
million was recognized as dividends paid to the holders of the
preferred stock.