Fifth Third Bank 2011 Annual Report Download - page 90

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
88 Fifth Third Bancorp
2. SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments related to interest and income taxes in addition to noncash investing and financing activities are presented in the following table
for the years ended December 31:
($ in millions) 2011 2010 2009
Cash payments:
Interest $658 920 1,416
Income taxes 102 79 109
Transfers:
Portfolio loans to held for sale loans 143 650 45
Held for sale loans to portfolio loans 32 160 47
Portfolio loans to OREO 342 662 377
Held for sale loans to OREO 43 68 36
Held for sale loans to trading securities - - 136
A
cquisitions:
Fair value of tangible assets acquired - - 7
Goodwill and identifiable intangible assets - - 13
Contingent consideration - - (4)
Impact of change in accounting principle:
Decrease in available-for-sale securities, net - 941 -
Increase in portfolio loans - 2,217 -
Decrease in demand deposits - 18 -
Increase in other short-term borrowings - 122 -
Increase in long-term debt - 1,344 -
3. RESTRICTIONS ON CASH AND DIVIDENDS
The FRB, under Regulation D, requires that banks hold cash in
reserve against deposit liabilities, known as the reserve requirement.
The amount of the reserve requirement is calculated based on net
transaction account deposits as defined by the FRB and may be
satisfied with vault cash. When vault cash is not sufficient to meet
the reserve requirement, the remaining amount must be satisfied
with funds held at the FRB. At December 31, 2011, the Bancorp’s
banking subsidiary reserve requirement was $1.1 billion. Vault cash
was not sufficient to meet the total reserve requirement; therefore,
the Bancorp’s banking subsidiary satisfied the reserve requirement
with its $1.5 billion deposit at the FRB. At December 31, 2010, the
Bancorp’s banking subsidiary reserve requirement of $575 million
was fully satisfied with vault cash.
The dividends paid by the Bancorp’s banking subsidiary are
subject to regulations and limitations prescribed by state and federal
supervisory agencies. The Bancorp’s banking subsidiary paid the
Bancorp’s nonbank subsidiary holding company $2.0 billion and
$1.4 billion in dividends during the years ended December 31, 2011
and 2010, respectively. The Bancorp’s nonbank subsidiary holding
company paid the Bancorp $1.7 billion and $1.4 billion in dividends
during the years ended December 31, 2011 and 2010, respectively.
At December 31, 2011 and 2010, the Bancorp’s banking subsidiary,
under these provisions, was prohibited from declaring additional
dividends without obtaining prior approval from supervisory
agencies.
In 2008, the Bancorp sold $3.4 billion in Series F senior
preferred stock and related warrants to the U.S. Treasury under the
terms of the CPP. The terms included certain restrictions on
common stock dividends, which required the U.S. Treasury’s
consent to increase common stock dividends for a period of three
years from the date of investment unless the preferred shares were
redeemed in whole or the U.S. Treasury transferred all of the
preferred shares to a third party. For the Bancorp, approval from
the U.S. Treasury was required for common stock dividends in
excess of $0.15 per share of common stock. Also, no dividends
could be declared or paid on the Bancorp’s common stock unless all
accrued and unpaid dividends had been paid on the preferred shares
and certain other outstanding securities. Additionally, the Bancorp’s
ability to pay dividends on its common stock was limited by its need
to maintain adequate capital levels, comply with safe and sound
banking practices and meet regulatory expectations.
On February 2, 2011, the Bancorp redeemed all 136,320 shares
of its Series F preferred stock held by the U.S. Treasury under the
CPP totaling $3.4 billion. As such, the Bancorp has no restrictions
on common stock dividends pursuant to the CPP as of December
31, 2011. See Note 23 for further information on the redemption of
the preferred shares.
In February 2009, the FRB advised bank holding companies
that safety and soundness considerations required that dividends be
substantially reduced or eliminated. Subsequently, the FRB indicated
that increased capital distributions would generally not be
considered prudent in the absence of a well-developed capital plan
and a capital position that would remain strong even under adverse
conditions. In November 2010, the FRB issued guidelines to
provide a common, conservative approach to ensure bank holding
companies hold adequate capital to maintain ready access to
funding, continue operations and meet their obligations to creditors
and counterparties, and continue to serve as credit intermediaries,
even in adverse conditions. These guidelines required the nineteen
bank holding companies that participated in the 2009 SCAP to
participate in the 2011 CCAR. The 2011 CCAR required the
submission of a comprehensive capital plan that assumed a
minimum planning horizon of 24 months under various economic
scenarios. The plan required bank holding companies to provide
dividend, stock redemption and stock repurchase plans as well as
plans for complying with the proposed revisions to the regulatory
capital framework approved by the Basel Committee on Banking
Supervision (Basel III). In March 2011, the FRB announced it had
completed the 2011 CCAR and for bank holding companies that
proposed capital distributions in their plan, the FRB either objected
to the plan or provided a non objection whereby the FRB concurred
with the proposed 2011 capital distributions. The Bancorp received
a non objection to its 2011 CCAR capital plan.
The FRB provided final rules of the 2012 CCAR on November
22, 2011. The CCAR requires the nineteen SCAP participating bank
holding companies to submit a capital plan to the FRB by January 9,