Fifth Third Bank 2010 Annual Report Download - page 21

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fifth Third Bancorp 19
NON-GAAP FINANCIAL MEASURES
The Bancorp considers various measures when evaluating capital
utilization and adequacy, including the tangible equity ratio,
tangible common equity ratio and tier I common equity ratio, in
addition to capital ratios defined by banking regulators. These
calculations are intended to complement the capital ratios defined
by banking regulators for both absolute and comparative
purposes. Because U.S. GAAP does not include capital ratio
measures, the Bancorp believes there are no comparable U.S.
GAAP financial measures to these ratios. Tier I common equity is
not formally defined by U.S. GAAP or codified in the federal
banking regulations and, therefore, is considered to be a non-
GAAP financial measure. Since analysts and banking regulators
may assess the Bancorp’s capital adequacy using these ratios, the
Bancorp believes they are useful to provide investors the ability to
assess its capital adequacy on the same basis.
The Bancorp believes these non-GAAP measures are
important because they reflect the level of capital available to
withstand unexpected market conditions. Additionally,
presentation of these measures allows readers to compare certain
aspects of the Bancorp’s capitalization to other organizations.
However, because there are no standardized definitions for these
ratios, the Bancorp’s calculations may not be comparable with
other organizations, and the usefulness of these measures to
investors may be limited. As a result, the Bancorp encourages
readers to consider its Consolidated Financial Statements in their
entirety and not to rely on any single financial measure.
The following table reconciles non-GAAP financial measures
to U.S. GAAP as of December 31:
TABLE 3: NON-GAAP FINANCIAL MEASURES
($ in millions) 2010 2009
Total Bancorp shareholders’ equity (U.S. GAAP) $14,051 $13,497
Less:
Goodwill (2,417) (2,417)
Intangible assets (62) (106)
Accumulated other comprehensive income (314) (241)
Tangible equity (1) 11,258 10,733
Less: preferred stock (3,654) (3,609)
Tangible common equity (2) 7,604 7,124
Total assets (U.S. GAAP) 111,007 113,380
Less:
Goodwill (2,417) (2,417)
Intangible assets (62) (106)
Accumulated other comprehensive income, before tax (483) (370)
Tangible assets, excluding unrealized gains / losses (3) $108,045 $110,487
Total Bancorp shareholders’ equity (U.S. GAAP) 14,051 $13,497
Goodwill and certain other intangibles (2,546) (2,565)
Unrealized gains (314) (241)
Qualifying trust preferred securities 2,763 2,763
Other 11 (26)
Tier I capital 13,965 13,428
Less: Preferred stock (3,654) (3,609)
Qualifying trust preferred securities (2,763) (2,763)
Qualified noncontrolling interest in consolidated subsidiaries (30) -
Tier I common equity (4) 7,518 7,056
Risk-weighted assets (5) (a) 100,193 100,933
Ratios:
Tangible equity (1) / (3) 10.42% 9.71%
Tangible common equity (2) / (3) 7.04% 6.45%
Tier I common equity (4) / (5) 7.50% 6.99%
(a) Under the banking agencies’ risk-based capital guidelines, assets and credit equivalent amounts of derivatives and off-balance sheet exposures are assigned to broad risk categories. The aggregate
dollar amount in each risk category is multiplied by the associated risk weight of the category. The resulting weighted values are added together, resulting in the Bancorp’s total risk-weighted assets.
RECENT ACCOUNTING STANDARDS
Note 1 of the Notes to Consolidated Financial Statements
provides a discussion of the significant new accounting standards
adopted by the Bancorp during 2010 and 2009 and the expected
impact of significant accounting standards issued, but not yet
required to be adopted.