Fifth Third Bank 2009 Annual Report Download - page 105

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fifth Third Bancorp 103
26. EARNINGS PER SHARE
The calculation of earnings per share and the reconciliation of earnings per share to earnings per diluted share for the years ended December 31:
2009 2008 2007
(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 (loss) $737 ($2,113) $1,076
Dividends on preferred stock 226 67 1
Net income (loss) available to common
shareholders 511 (2,180) 1,075
Income (loss) allocated to participating
securities 4 (21) 5
Net income (loss) allocated to common
shareholders $507 696 $0.73 ($2,159) 553 ($3.91) $1,070 538 $1.99
Earnings per diluted share:
Net income (loss) available to common
shareholders $511 ($2,180) $1,075
Effect of dilutive securities:
Stock based awards 2- - - 2 (.01)
Convertible preferred stock (a) (b) (21) 28 (0.06) - - - - - -
Net income (loss) available to common
shareholders plus assumed conversions 490 (2,180) 1,076
Income (loss) allocated to participating
securities 4 (21) 5
Net income (loss) allocated to common
shareholders $486 726 $0.67 ($2,159) 553 ($3.91) $1,071 540 $1.98
(a) The additive effect to income from dividends on convertible preferred stock for the year ended December 31, 2009 included preferred dividends of $14 million for Series G preferred shares, offset
by a $35 million reduction to preferred dividends due to the conversion of a portion of Series G preferred shares during the second quarter of 2009.
(b) The additive effect to income from dividends on convertible preferred stock is $.580 million and the average share dilutive effect from convertible preferred stock is .308 million shares for the year
ended December 31, 2007.
The Bancorp calculates earnings per share pursuant to the two-
class method. The two-class method is an earnings allocation
formula that determines earnings per share separately for common
stock and participating securities according to dividends declared
and participation rights in undistributed earnings. For purposes of
calculating earnings per share under the two-class method,
restricted shares that contain nonforfeitable rights to dividends are
considered participating securities until vested. While the
dividends declared per share on such restricted shares are the
same as dividends declared per common share outstanding, the
dividends recognized on such restricted shares may be less
because dividends paid on restricted shares that are expected to be
forfeited are reclassified to compensation expense during the
period when forfeiture is expected.
For the year ended December 31, 2009, there were 44 million
shares under warrants related to the Bancorp’s Series F preferred
stock from the Capital Purchase Plan (CPP) that were excluded
from the computation of net income per diluted share, as their
inclusion would have been anti-dilutive to earnings per share due
to the exercise price of the shares being greater than the average
market price of the common shares. The warrants have an initial
exercise price of $11.72 per share. In addition, the diluted earnings
per share computation for the year ended December 31, 2009
excludes 17 million stock options and 23 million stock
appreciation rights that had not yet been exercised, 4 million
shares of unvested restricted stock and 36 million shares related to
the Bancorp’s Series G preferred stock that were not part of the
conversion of preferred shares in the second quarter of 2009. The
shares were excluded from the computation of net income per
diluted share because their inclusion would have been anti-dilutive
to earnings per share.
Due to the net loss for the year ended December 31, 2008,
the diluted earnings per share calculation excluded all common
stock equivalents, including 43 million stock options and stock
appreciation rights, 6 million shares of restricted stock, 96 million
common shares from convertible preferred stock and 44 million
shares under warrants related to the CPP as their inclusion would
have been anti-dilutive to earnings per share.
At December 31, 2007, 36 million shares were excluded from
the computation of net income per diluted share. These shares
consisted of options and stock appreciation rights that had not yet
been exercised and unvested restricted stock.