Fifth Third Bank 2014 Annual Report Download - page 138

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
136 Fifth Third Bancorp
19. RELATED PARTY TRANSACTIONS
The Bancorp maintains written policies and procedures covering
related party transactions to principal shareholders, directors and
executives of the Bancorp. These procedures cover transactions
such as employee-stock purchase loans, personal lines of credit,
residential secured loans, overdrafts, letters of credit and increases in
indebtedness. Such transactions are subject to the Bancorp’s normal
underwriting and approval procedures. Prior to approving a loan to
a related party, Compliance Risk Management must review and
determine whether the transaction requires approval from or a post
notification to the Bancorp’s Board of Directors. At December 31,
2014 and 2013, certain directors, executive officers, principal
holders of Bancorp common stock, associates of such persons, and
affiliated companies of such persons were indebted, including
undrawn commitments to lend, to the Bancorp’s banking subsidiary.
The following table summarizes the Bancorp’s activities with its principal shareholders, directors and executives at December 31:
($ in millions) 2014 2013
Commitments to lend, net of participations:
Directors and their affiliated companies $ 525 586
Executive officers 3 2
Total $ 528 588
Outstanding balance on loans, net of participations and undrawn commitments $ 63 86
The commitments to lend are in the form of loans and guarantees
for various business and personal interests. This indebtedness was
incurred in the ordinary course of business on substantially the same
terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with unrelated parties. This
indebtedness does not involve more than the normal risk of
repayment or present other features unfavorable to the Bancorp.
On June 30, 2009, the Bancorp completed the sale of a
majority interest in its processing business, Vantiv Holding, LLC.
Advent International acquired an approximate 51% interest in
Vantiv Holding, LLC for cash and a warrant. The Bancorp retained
the remaining approximate 49% interest in Vantiv Holding, LLC.
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%. The impact of the capital contributions to
Vantiv Holding, LLC and the resulting dilution in the Bancorp’s
interest resulted in a gain of $115 million recognized by the Bancorp
in the first quarter of 2012.
The following table provides a summary of the sales transactions that impacted the Bancorp's ownership interest in Vantiv Holding, LLC after the
initial IPO:
($ in millions)
Ownership
Percentage Sold Gain on Sale
Remaining Ownership
Percentage(a) Period
Q4 2012 6 % $ 157 33 %
Q2 2013 5 242 28
Q3 2013 3 85 25
Q2 2014 3 125 23
(a) The Bancorp’s remaining investment in Vantiv Holding, LLC of $394 as of December 31, 2014 was accounted for as an equity method investment in the Bancorp’s Consolidated Financial
Statements.
A
As of December 31, 2014, the Bancorp continued to hold
approximately 43 million Class B units of Vantiv Holding, LLC and
a warrant to purchase approximately 20.4 million Class C non-
voting units of Vantiv Holding, LLC, both of which may be
exchanged for Class A Common Stock of Vantiv, Inc. on a one for
one basis or at Vantiv, Inc.’s option for cash. In addition, the
Bancorp holds approximately 43 million Class B common shares of
Vantiv, Inc. The Class B common shares give the Bancorp voting
rights, but no economic interest in Vantiv, Inc. The voting rights
attributable to the Class B common shares are limited to 18.5% of
the voting power in Vantiv, Inc. at any time other than in
connection with a stockholder vote with respect to a change in
control in Vantiv, Inc. These securities are subject to certain terms
and restrictions.
The Bancorp recognized $48 million, $77 million and $61
million respectively, in noninterest income as part of its equity
method investment in Vantiv Holding, LLC for the years ended
December 31, 2014, 2013 and 2012 and received cash distributions
totaling $23 million, $40 million and $30 million during 2014, 2013
and 2012, respectively.
The Bancorp and Vantiv Holding, LLC have various
agreements in place covering services relating to the operations of
Vantiv Holding, LLC. The services provided by the Bancorp to
Vantiv Holding, LLC were initially required to support Vantiv
Holding, LLC as a standalone entity during the deconversion
period. The majority of services previously provided by the Bancorp
to support Vantiv Holding, Inc. as a standalone entity are no longer
necessary and are now limited to certain general business resources.
Vantiv Holding, LLC paid the Bancorp $1 million for these services
for the years ended December 31, 2014, 2013 and 2012,
respectively. Other services provided to Vantiv Holding, LLC by the
Bancorp, have continued beyond the deconversion period, include
clearing, settlement and sponsorship. Vantiv Holding, LLC paid the
Bancorp $44 million for these services for the year ended December
31, 2014 and $34 million for the years ended December 31, 2013
and 2012, respectively. In addition to the previously mentioned
services, the Bancorp entered into an agreement under which Vantiv
Holding, LLC will provide processing services to the Bancorp. The
total amount of fees relating to the processing services provided to
the Bancorp by Vantiv Holding, LLC totaled $83 million, $88