Fifth Third Bank 2014 Annual Report Download - page 24

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
22 Fifth Third Bancorp
U.S. banking regulators approved final capital rules (Basel III
Final Rule) in July of 2013 that substantially amend the existing risk-
based capital rules (Basel I) for banks. The Bancorp believes
providing an estimate of its capital position based upon the final
rules is important to complement the existing capital ratios and for
comparability to other financial institutions. Since these rules are not
effective for the Bancorp until January 1, 2015, they are considered
non-GAAP measures and therefore are included in the following
non-GAAP financial measures table.
The following table reconciles non-GAAP capital ratios to U.S. GAAP as of December 31:
TABLE 7: Non-GAAP Financial Measures - Capital Ratios
($ in millions) 2014 2013
Total Bancorp shareholders’ equity (U.S. GAAP) $ 15,626 14,589
Less: Preferred stock (1,331) (1,034)
Goodwill (2,416) (2,416)
Intangible assets and other servicing rights (16) (19)
Tangible common equity, including unrealized gains / losses 11,863 11,120
Less: Accumulated other comprehensive income (429) (82)
Tangible common equity, excluding unrealized gains / losses (1) 11,434 11,038
A
dd: Preferred stock 1,331 1,034
Tangible equity (2) 12,765 12,072
Total assets (U.S. GAAP) $ 138,706 130,443
Less: Goodwill (2,416) (2,416)
Intangible assets and other servicing rights (16) (19)
Accumulated other comprehensive income, before tax (660) (126)
Tangible assets, excluding unrealized gains / losses (3) $ 135,614 127,882
Total Bancorp shareholders’ equity (U.S. GAAP) $ 15,626 14,589
Less: Goodwill and certain other intangibles (2,476) (2,492)
Accumulated other comprehensive income (429) (82)
A
dd: Qualifying TruPS 60 60
Other (17) 19
Tier I risk-based capital 12,764 12,094
Less: Preferred stock (1,331) (1,034)
Qualifying TruPS (60) (60)
Qualified noncontrolling interests in consolidated subsidiaries (1) (37)
Tier I common equity (4) $ 11,372 10,963
Risk-weighted assets (5)(a) $ 117,878 115,969
Ratios:
Tangible equity (2) / (3) 9.41 % 9.44
Tangible common equity (1) / (3) 8.43 % 8.63
Tier I common equity (4) / (5) 9.65 % 9.45
Basel III Final Rule - Estimated Tier I common equity ratio
Tier I common equity (Basel I) $ 11,372 10,963
A
dd: Ad
j
ustment related to capital components(b) 84 82
Estimated Tier I common equity under Basel III Final Rule without AOCI (opt out) (6) 11,456 11,045
A
dd: Ad
j
ustment related to AOCI(c) 429 82
Estimated Tier I common equity under Basel III Final Rule with AOCI (non opt out) (7) 11,885 11,127
Estimated risk-weighted assets under Basel III Final Rule (8)(d) 122,018 122,074
Estimated Tier I common equity ratio under Basel III Final Rule (opt out) (6) / (8) 9.39 %9.05
Estimated Tier I common equity ratio under Basel III Final Rule (non opt out) (7) / (8) 9.74 %9.12
(a) Under the banking agencies’ risk-based capital guidelines, assets and credit equivalent amounts of derivatives and off-balance sheet exposures are assigned to broad risk categories. The aggregate dollar
amount in each risk category is multiplied by the associated risk-weight of the category. The resulting weighted values are added together, along with the measure for market risk, resulting in the
Bancorp’s total risk-weighted assets.
(b) Adjustments related to capital components include MSRs and deferred tax assets subject to threshold limitations and deferred tax liabilities related to intangible assets, which were deductions to
capital under Basel I capital rules.
(c) Under Basel III, non-advanced approach banks are permitted to make a one-time election to opt out of the requirement to include AOCI in Tier I common equity.
(d) Key differences under Basel III in the calculation of risk-weighted assets compared to Basel I include: (1) Risk-weighting for commitments less than 1 year; (2) Higher risk-weighting for exposures to
securitizations, past due loans, foreign banks and certain commercial real estate; (3) Higher risk-weighting for MSRs and deferred tax assets that are under certain thresholds as a percent of Tier I
capital; and (4) Derivatives are differentiated between exchange clearing and over-the-counter and the 50% risk-weight cap is removed.