Fifth Third Bank 2011 Annual Report Download - page 22

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
20 Fifth Third Bancorp
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. These ratios are not formally defined by U.S. GAAP or
codified in the federal banking regulations and, therefore, are
considered to be non-GAAP financial measures. 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.
Pre-provision net revenue is net interest income plus
noninterest income minus noninterest expense and taxable
equivalent adjustment. The Bancorp believes this measure is
important because it provides a ready view of the Bancorp’s
earnings before the impact of provision expense.
The following table reconciles non-GAAP financial measures
to U.S. GAAP as of December 31:
TABLE 4: NON-GAAP FINANCIAL MEASURES
($ in millions) 2011 2010
Income before income taxes (U.S. GAAP) $ 1,831 940
A
dd: Provision expense (U.S. GAAP) 423 1,538
Pre-provision net revenue 2,254 2,478
Net income available to common shareholders (U.S. GAAP) $ 1,094 503
A
dd: Intangible amortization, net of tax 15 29
Tangible net income available to common shareholders 1,109 532
Total Bancorp shareholders’ equity (U.S. GAAP) $ 13,201 14,051
Less: Preferred stock (398) (3,654)
Goodwill (2,417) (2,417)
Intangible assets (40) (62)
Tangible common equity, including unrealized gains / losses 10,346 7,918
Less: Accumulated other comprehensive income (470) (314)
Tangible common equity, excluding unrealized gains / losses (1) 9,876 7,604
A
dd: Preferred stock 398 3,654
Tangible equity (2) 10,274 11,258
Total assets (U.S. GAAP) $ 116,967 111,007
Less: Goodwill (2,417) (2,417)
Intangible assets (40) (62)
Accumulated other comprehensive income, before tax (723) (483)
Tangible assets, excluding unrealized gains / losses (3) $ 113,787 108,045
Total Bancorp shareholders’ equity (U.S. GAAP) $ 13,201 14,051
Less: Goodwill and certain other intangibles (2,514) (2,546)
Accumulated other comprehensive income (470) (314)
A
dd: Qualifying trust preferred securities 2,248 2,763
Other 38 11
Tier I capital 12,503 13,965
Less: Preferred stock (398) (3,654)
Qualifying trust preferred securities (2,248) (2,763)
Qualified noncontrolling interest in consolidated subsidiaries (50) (30)
Tier I common equity (4) $ 9,807 7,518
Risk-weighted assets (5) (a) $ 104,945 100,561
Ratios:
Tangible equity (2) / (3) 9.03 %10.42
Tangible common equity (1) / (3) 8.68 %7.04
Tier I common equity (4) / (5) 9.35 %7.48
(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, along with the measure for market risk, resulting in the Bancorp’s
total risk-weighted assets.