Fifth Third Bank 2012 Annual Report Download - page 122

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
120 Fifth Third Bancorp
The net gains (losses) recorded in the Consolidated Statements of Income relating to free-standing derivative instruments used for customer
accommodation are summarized in the following table:
For the year ended December 31 Consolidated Statements of
Income Caption ($ in millions) 2012 2011 2010
Interest rate contracts:
Interest rate contracts for customers (contract revenue) Corporate banking revenue $ 30 28 26
Interest rate contracts for customers (credit losses) Other noninterest expense (2) (13) (22)
Interest rate contracts for customers (credit portion of fair value adjustment) Other noninterest expense 6 13 (1)
Interest rate lock commitments Mortgage banking net revenue 417 206 187
Commodity contracts:
Commodity contracts for customers (contract revenue) Corporate banking revenue 7 8 8
Commodity contracts for customers (credit portion of fair value adjustment) Other noninterest expense 2 - -
Foreign exchange contracts:
Foreign exchange contracts - customers (contract revenue) Corporate banking revenue 65 47 63
Foreign exchange contracts - customers (credit portion of fair value adjustment) Other noninterest expense 2 1 (1)
13. OTHER ASSETS
The following table provides the components of other assets included in the Consolidated Balance Sheets as of December 31:
($ in millions) 2012 2011
Derivative instruments $1,972 2,356
Partnership investments 1,657 1,413
Bank owned life insurance 1,547 1,742
A
ccounts receivable and drafts-in-process 1,155 955
Investment in Vantiv Holding, LLC 563 576
Bankers' acceptances 398 726
A
ccrued interest receivable 369 382
OREO and other repossessed personal property 329 442
Prepaid expenses 80 84
Income tax receivable 10 5
Other 124 182
Total $8,204 8,863
The Bancorp incorporates the utilization of derivative instruments
as part of its overall risk management strategy to reduce certain risks
related to interest rate, prepayment and foreign currency volatility.
The Bancorp also holds derivatives instruments for the benefit of its
commercial customers. For further information on derivative
instruments, see Note 12.
CDC, a wholly owned subsidiary of the Bancorp, was created
to invest in projects to create affordable housing, revitalize business
and residential areas, and preserve historic landmarks, which are
included above in partnership investments. In addition, the Bancorp
invests as a limited partner in private equity funds. The Bancorp has
determined that these entities are VIEs and the Bancorp’s
investments represent variable interests. See Note 10 for further
information.
The Bancorp purchases life insurance policies on the lives of
certain directors, officers and employees and is the owner and
beneficiary of the policies. Certain BOLI policies have a stable value
agreement through either a large, well-rated bank or multi-national
insurance carrier that provides limited cash surrender value
protection from declines in the value of each policy’s underlying
investments. See Note 1 for further information.
On June 30, 2009, the Bancorp sold an approximate 51%
interest in Vantiv Holding, LLC to Advent International. During
the first quarter of 2012, Vantiv, Inc. priced an IPO of its shares
and contributed the net proceeds to Vantiv Holding, LLC for
additional ownership interests. As a result of this offering, the
Bancorp’s ownership of Vantiv Holding, LLC was reduced to
approximately 39%. In addition, the Bancorp sold an approximate
6% interest during the fourth quarter of 2012. The Bancorp’s
remaining approximate 33% ownership in Vantiv Holding, LLC is
accounted for under the equity method of accounting. See Note 18
for further information.
A bankers’ acceptance is created when a time draft is drawn on
and accepted by a bank. By accepting the draft, the bank assumes
the credit risk of the underlying obligor, usually the buyer or the
seller of goods or their bank, and makes an unconditional promise
to pay the holder of the draft the amount of the draft at maturity,
which is generally less than one year from the date of the draft.
When the Bancorp is the accepting bank, it records the full amount
of the acceptance in both other assets and other liabilities on the
Consolidated Balance Sheets.
OREO represents property acquired through foreclosure or
other proceedings and is carried at the lower of cost or fair value,
less costs to sell. See Note 1 for further information.