Fifth Third Bank 2010 Annual Report Download - page 102

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
100 Fifth Third Bancorp
restrictions, the Bancorp’s ability to redeem the junior
subordinated notes prior to their scheduled maturity. In
November 2010, the Bancorp amended the debt covenants to
remove a requirement to issue replacement capital securities at
least 180 days prior to calling the trust preferred securities.
The 8.88% junior subordinated notes due in 2068, with a
current carrying value and outstanding principal balance of $400
million at December 31, 2010, pay a fixed rate until 2058, then
convert to floating rate at three month LIBOR plus 500 bp. The
Bancorp entered into an interest rate swap to convert $275 million
of the fixed rate debt into a floating rate. At December 31, 2010,
the rate paid on the swap was 3.54%. The obligations were issued
by Fifth Third Capital Trust VII. The Bancorp’s obligations under
the transaction documents, taken together, have the effect of
providing a full and unconditional guarantee by the Bancorp, on a
subordinated basis, of the payment obligations under the trust
preferred securities. The junior subordinated notes may be
redeemed at the option of the Bancorp on or after May 15, 2013,
or in certain other limited circumstances, at a redemption price of
100% of the principal amount plus accrued but unpaid interest.
All redemptions are subject to certain conditions and generally
require approval by the FRB.
On January 25, 2011, the Bancorp issued $1.0 billion of
senior notes to third party investors. The senior notes bear a fixed
rate of interest of 3.625% per annum. The notes are unsecured,
senior obligations of the Bancorp. Payment of the full principal
amount of the notes will be due upon maturity on January 25,
2016. The notes will not be subject to the redemption at the
Bancorp’s option at any time prior to maturity. See Note 32 for
further information.
Subsidiary Long-Term Borrowings
Medium-term senior notes and subordinated bank notes with
maturities ranging from one year to 30 years can be issued by the
Bancorp’s subsidiary bank, of which $1.0 billion was outstanding
at December 31, 2010 with $19.0 billion available for future
issuance. The senior floating-rate bank notes due in 2013 pay a
floating rate at three-month LIBOR plus 11 bp. For the
subordinated fixed-rate bank notes due in 2015, the Bancorp
entered into interest rate swaps to convert the fixed-rate debt into
floating rate. At December 31, 2010, the weighted-average rate
paid on the swaps was 0.39%.
The senior fixed-rate bank notes matured and were paid in
February of 2010.
The junior subordinated floating-rate bank notes due in 2032
and 2033 were assumed by a subsidiary of the Bancorp as part of
the acquisition of RG Crown in November 2008. Two of the
notes due in 2032 and 2033 pay floating rates at three-month
LIBOR plus 325 and 310 bp, respectively. A third note, due in
2032, pays a floating rate at six-month LIBOR plus 370 bp.
The three-month LIBOR plus 290 bp and the three-month
LIBOR plus 279 bp junior subordinated debentures due in 2033
and 2034, respectively, were assumed by a subsidiary of the
Bancorp in connection with the acquisition of First National Bank
in 2005. The obligations were issued to FNB Statutory Trusts I
and II, respectively.
The junior subordinated floating-rate bank notes due in 2035
were assumed by a subsidiary of the Bancorp as part of the
acquisition of First Charter in May 2008. The obligations were
issued to First Charter Capital Trust I and II, respectively. The
notes of First Charter Capital Trust I and II pay floating at three-
month LIBOR plus 169 bp and 142 bp, respectively. The Bancorp
has fully and unconditionally guaranteed all obligations under the
acquired trust preferred securities issued by First Charter Capital
Trust I and II.
At December 31, 2010, FHLB advances have rates ranging
from 0% to 8.34%, with interest payable monthly. The advances
are secured by certain residential mortgage loans and securities
totaling $12.7 billion. At December 31, 2010, $500 million of
FHLB advances are floating-rate. The Bancorp entered into an
interest rate swap with a notional value of $500 million to convert
the floating-rate advances to a fixed rate of 2.63%. In November
2010, the Bancorp repaid a floating-rate advance of $1.0 billion
due in 2012 and terminated the interest rate cap associated with
this advance. The Bancorp recognized a gain on this
extinguishment of debt of $1 million. The $1.6 billion in advances
mature as follows: $2 million in 2011, $500 million in 2013, $3
million in 2014, $5 million in 2015 and $1.1 billion thereafter.
As previously discussed in Note 12, the Bancorp was
determined to be the primary beneficiary of VIEs associated with
certain automobile loan and home equity securitizations and,
effective January 1, 2010, these VIEs have been consolidated in
the Bancorp’s Consolidated Financial Statements. As of
December 31, 2010, the outstanding long-term debt associated
with the automobile loan securitizations and home equity
securitization was $559 million and $133 million, respectively.
Third-party holders of this debt do not have recourse to the
general assets of the Bancorp.