Fifth Third Bank 2012 Annual Report Download - page 98

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
96 Fifth Third Bancorp
elements of its capital plan, including increases in its quarterly
common dividend and the initiation of common share repurchases.
The Bancorp resubmitted its capital plan to the FRB in the second
quarter of 2012. The resubmitted plan included capital actions and
distributions for the covered period through March 31, 2013 that
were substantially similar to those included in the original
submission, with adjustments primarily reflecting the change in the
expected timing of capital actions and distributions relative to the
timing assumed in the original submission. On August 21, 2012, the
Bancorp announced the FRB did not object to the Bancorp’s
resubmitted capital plan which included the potential increase of the
quarterly common stock dividend and the repurchases of common
shares of up to $600 million through the first quarter of 2013.
On October 9, 2012, the FRB published final stress testing
rules that implement section 165(i)(1) and (i)(2) of the Dodd-Frank
Act. The 19 bank holding companies that participated in the 2009
SCAP and subsequent CCAR, which includes Fifth Third, are
subject to the final stress testing rules. The rules require both
supervisory and company-run stress tests, which provide forward-
looking information to supervisors to help assess whether
institutions have sufficient capital to absorb losses and support
operations during adverse economic conditions.
The FRB launched the 2013 stress testing program and CCAR
on November 9, 2012. The CCAR requires bank holding companies
to submit a capital plan in addition to their stress testing results. The
mandatory elements of the capital plan are an assessment of the
expected use and sources of capital over the planning horizon, a
description of all planned capital actions over the planning horizon,
a discussion of any expected changes to the Bancorp’s business plan
that are likely to have a material impact on its capital adequacy or
liquidity, a detailed description of the Bancorp’s process for
assessing capital adequacy and the Bancorp’s capital policy. The
stress testing results and capital plan were submitted by the Bancorp
to the FRB on January 7, 2013.
The FRB’s review of the capital plan will assess the
comprehensiveness of the capital plan, the reasonableness of the
assumptions and the analysis underlying the capital plan.
Additionally, the FRB will review the robustness of the capital
adequacy process, the capital policy and the Bancorp’s ability to
maintain capital above the minimum regulatory capital ratios and
above a Tier 1 common ratio of 5 percent on a pro forma basis
under expected and stressful conditions throughout the planning
horizon. The FRB will also assess the Bancorp’s strategies for
addressing proposed revisions to the regulatory capital framework
agreed upon by the Basel Committee on Banking Supervision and
requirements arising from the Dodd-Frank Act.
The FRB has indicated that it expects to disclose on March 7,
2013 its estimates of participating institutions results under the FRB
supervisory stress scenario, including capital results, which assume
that all banks take certain consistently applied future capital actions.
The FRB has indicated that it expects to disclose on March 14, 2013
its estimates of participating institutions results under the FRB
supervisory severe stress scenarios including capital results based on
each company’s own base scenario capital actions. The FRB will
also issue an objection or non-objection to each participating
institution’s capital plan submitted under CCAR. Additionally, as a
CCAR institution, Fifth Third is required to disclose our own
estimates of results under the supervisory severely adverse scenario
using the same consistently applied capital actions noted above, and
to provide information related to risks included in its stress testing;
a summary description of the methodologies used; estimates of
aggregate pre-provision net revenue, losses, provisions, and pro
forma capital ratios at the end of the forward-looking planning
horizon of at least nine quarters; and an explanation of the most
significant causes of changes in regulatory capital ratios. These
disclosures are required by March 31, 2013 and are to be sent to the
FRB and publicly disclosed.
4. SECURITIES
The following table provides the amortized cost, fair value and unrealized gains and losses for the major categories of the available-for-sale and
held-to-maturity securities portfolios as of December 31:
2012 2011
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
($ in millions) Cost Gains Losses Value Cost Gains Losses Value
A
vailable-for-sale and other:
U.S. Treasury and government agencies $ 41 - - 41 171 - - 171
U.S. Government sponsored agencies 1,730 181 - 1,911 1,782 180 - 1,962
Obligations of states and political subdivisions 203 9 - 212 96 5 - 101
A
gency mortgage-backed securities(a) 8,403 345 (18) 8,730 9,743 542 (1) 10,284
Other bonds, notes and debentures 3,161 119 (3) 3,277 1,792 29 (9) 1,812
Other securities(b) 1,033 3 - 1,036 1,030 2 - 1,032
Total $ 14,571 657 (21) 15,207 14,614 758 (10) 15,362
Held-to-maturity:
Obligations of states and political subdivisions $ 282 - - 282 320 - - 320
Other debt securities 2 - - 2 2 - - 2
Total $ 284 - - 284 322 - - 322
(a) Includes interest-only mortgage backed securities of $408 and $110 as of December 31, 2012 and 2011, respectively, recorded at fair value with fair value changes recorded in securities gains, net
and securities gains, net – non-qualifying hedges on mortgage servicing rights in the Consolidated Statements of Income.
(b) Other securities consist of FHLB and FRB restricted stock holdings of $497 and $347 , respectively, at December 31, 2012 and, $497 and $345, respectively, at December 31, 2011, that are
carried at cost, and certain mutual fund and equity security holdings.