Fifth Third Bank 2012 Annual Report Download - page 112

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
110 Fifth Third Bancorp
10. VARIABLE INTEREST ENTITIES
The Bancorp, in the normal course of business, engages in a variety
of activities that involve VIEs, which are legal entities that lack
sufficient equity to finance their activities, or the equity investors of
the entities as a group lack any of the characteristics of a controlling
interest. The primary beneficiary of a VIE is generally the enterprise
that has both the power to direct the activities most significant to
the economic performance of the VIE and the obligation to absorb
losses or receive benefits that could potentially be significant to the
VIE. For certain investment funds, the primary beneficiary is the
enterprise that will absorb a majority of the fund’s expected losses
or receive a majority of the fund’s expected residual returns. The
Bancorp evaluates its interest in certain entities to determine if these
entities meet the definition of a VIE and whether the Bancorp is the
primary beneficiary and should consolidate the entity based on the
variable interests it held both at inception and when there is a
change in circumstances that requires a reconsideration. If the
Bancorp is determined to be the primary beneficiary of a VIE, it
must account for the VIE as a consolidated subsidiary. If the
Bancorp is determined not to be the primary beneficiary of a VIE
but holds a variable interest in the entity, such variable interests are
accounted for under the equity method of accounting or other
accounting standards as appropriate.
Consolidated VIEs
The following table provides a summary of the classifications of consolidated VIE assets, liabilities and noncontrolling interests included in the
Bancorp’s Consolidated Balance Sheets as of:
Home Equity Automobile Loan CDC
December 31, 2012 ($ in millions) Securitization Securitizations Investments Total
A
ssets:
Cash and due from banks $ - - - -
Other short-term investments - - - -
Commercial mortgage loans - - 50 50
Home equity - - - -
A
utomobile loans - - - -
A
LL
L
- - (5) (5)
Other assets - - 3 3
Total assets - - 48 48
Liabilities:
Other liabilities $ - - - -
Long-term debt - - - -
Total liabilities $ - - - -
Noncontrolling interests 48 48
Home Equity Automobile Loan CDC
December 31, 2011 ($ in millions) Securitization Securitizations Investments Total
A
ssets:
Cash and due from banks $ 5 25 - 30
Other short-term investments - 7 - 7
Commercial mortgage loans - - 50 50
Home equity 223 - - 223
A
utomobile loans - 259 - 259
A
LL
L
(5) (3) (2) (10)
Other assets 1 1 2 4
Total assets 224 289 50 563
Liabilities:
Other liabilities $ - 4 - 4
Long-term debt 22 169 - 191
Total liabilities $ 22 173 - 195
Noncontrolling interest 50 50
Home Equity and Automobile Loan Securitizations
The Bancorp previously sold $903 million of home equity lines of
credit to an isolated trust. Additionally, the Bancorp previously sold
$2.7 billion of automobile loans to an isolated trust and conduits in
three separate transactions. Each of these transactions isolated the
related loans through the use of a VIE that, under accounting
guidance effective prior to January 1, 2010, was not consolidated by
the Bancorp. The VIEs were funded through loans from large
multi-seller asset-backed commercial paper conduits sponsored by
third party agents, asset-backed securities issued with varying levels
of credit subordination and payment priority, and residual interests.
The Bancorp retained residual interests in these entities and,
therefore, had an obligation to absorb losses and a right to receive
benefits from the VIEs that could potentially be significant to the
VIEs. In addition, the Bancorp retained servicing rights for the
underlying loans and, therefore, held the power to direct the
activities of the VIEs that most significantly impact the economic
performance of the VIEs. As a result, the Bancorp determined it
was the primary beneficiary of these VIEs and, effective January 1,
2010, these VIEs were consolidated in the Bancorp’s Consolidated
Financial Statements. On February 8, 2012, the Bancorp exercised
cleanup call options on an automobile securitization conduit and an
isolated trust and acquired all remaining automobile loans, the
proceeds of which were used by the conduit and trust to repay
outstanding debt. On April 12, 2012, the Bancorp exercised its
cleanup call option on the home equity isolated trust and acquired
all remaining home equity loans, the proceeds of which were used
by the trust to repay outstanding debt. On September 17, 2012, the