-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, RdXnZmW9n71WTu+LwX9gJx8N9J5t7Pjc8nNWsaii/WfDXv74gj2l7lSFkncBZye2 mBCPhcwK3az7Bv4GUNvmSA== 0000035527-94-000008.txt : 19940218 0000035527-94-000008.hdr.sgml : 19940218 ACCESSION NUMBER: 0000035527-94-000008 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940217 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIFTH THIRD BANCORP CENTRAL INDEX KEY: 0000035527 STANDARD INDUSTRIAL CLASSIFICATION: 6022 IRS NUMBER: 310854434 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 000-08076 FILM NUMBER: 94510400 BUSINESS ADDRESS: STREET 1: 38 FOUNTAIN SQ PLZ CITY: CINCINNATI STATE: OH ZIP: 45263 BUSINESS PHONE: 5135795300 10-K 1 DECEMBER 31, 1993 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For fiscal year ended December 31, 1993 Commission File Number 0-8076 FIFTH THIRD BANCORP (Exact name of Registrant as specified in its charter) Ohio 31-0854434 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 38 Fountain Square Plaza Cincinnati, Ohio 45263 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (513) 579-5300 Securities registered pursuant to Section 12(g) of the Act: Common Stock Without Par Value 4-1/4% Convertible Subordinated Notes due 1998 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: /X/ No: / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / The Aggregate Market Value of the Voting Stock held by non-affiliates of the Registrant was $2,120,474,478 as of February 1, 1994. (NOTE 1) The number of shares outstanding of the Registrant's Common Stock, without par value, as of February 1, 1994 was 61,479,066 shares. DOCUMENTS INCORPORATED BY REFERENCE 1993 Annual Report to Stockholders: Parts II and IV Proxy Statement for 1994 Annual Meeting of Stockholders: Parts III and IV NOTE 1: In calculating the market value of securities held by non-affiliates of Registrant as disclosed on the cover page of this Form 10-K, Registrant has treated as securities held by affiliates as of December 31, 1993, voting stock owned of record by its directors and principal executive officers, stockholders owning greater than 10% of the voting stock, and voting stock held by Registrant's trust departments in a fiduciary capacity. Total Pages: 67 FIFTH THIRD BANCORP 1993 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS PART I PAGE Item 1. Business 3 Item 2. Properties 18 Item 3. Legal Proceedings 19 Item 4. Submission of Matters to a Vote of Security Holders 19 PART II Item 5. Market For Registrant's Common Equity and Related Stockholder Matters 20 Item 6. Selected Financial Data 20 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 21 Item 8. Financial Statements and Supplementary Data 21 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 21 PART III Item 10. Directors and Executive Officers of the Registrant 21 Item 11. Executive Compensation 21 Item 12. Security Ownership of Certain Beneficial Owners and Management 21 Item 13. Certain Relationships and Related Transactions 21 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 21 Page 2 PART I ITEM 1. BUSINESS FIFTH THIRD BANCORP ORGANIZATION Registrant was organized in 1974 under the laws of the State of Ohio. It began operations in 1975 upon reorganization of its principal subsidiary The Fifth Third Bank. The executive offices of the Registrant are located in Cincinnati, Ohio. The Registrant is a multi-bank holding company as defined in the Bank Holding Company Act of 1956, as amended, and is registered as such with the Board of Governors of the Federal Reserve System. Registrant is also a unitary savings and loan holding company and is registered with the Office of Thrift Supervision. Registrant has thirteen wholly-owned subsidiaries: The Fifth Third Bank; The Fifth Third Bank of Columbus; The Fifth Third Bank of Northwestern Ohio, National Association; The Fifth Third Bank of Southern Ohio; The Fifth Third Bank of Western Ohio, National Association; Fifth Third Community Development Company; Fifth Third Trust Co. & Savings Bank, FSB; Fountain Square Management Co.; Fifth Third Bank of Central Kentucky, Inc.; Fifth Third Bank of Northern Kentucky, Inc.; The Fifth Third Bank of Central Indiana; The Fifth Third Bank of Southeastern Indiana; and Fountain Square Insurance Company. Unless the context otherwise indicates the term "Company" as used herein means the Registrant and the term "Bank" means its wholly-owned subsidiary, The Fifth Third Bank. As of December 31, 1993, the Company's consolidated total assets were $11,966,000,000 and capital accounts totalled $1,197,646,000. The Bank has four wholly-owned subsidiaries: Midwest Payment Systems, Inc.; Fifth Third Securities, Inc.; The Fifth Third Company; and The Fifth Third Leasing Company. PRIOR ACQUISITIONS The Company is the result of mergers and acquisitions over the years involving 25 financial institutions throughout Ohio, Indiana, Kentucky, and Florida. The Company during 1993 made the following acquisitions: On January 22, 1993, the Company purchased $54 million in deposits from Home Savings of America. The three offices were located in Oxford, Fremont, and Chillicothe Ohio and were acquired by The Bank, The Fifth Third Bank of Northwestern Ohio, National Association and the Fifth Third Bank of Southern Ohio, respectively. On February 26, 1993, the Company purchased $106 million in deposits of six Cincinnati banking offices of First National Bank of Dayton which were acquired by the Bank. On October 18, 1993, the Company purchased $131 million in deposits from World Savings and Loan Association. The two branches located in Norwalk and Sandusky, Ohio were acquired by The Fifth Third Bank of Northwestern Ohio, National Association and the three branches located in Piqua and Sidney, Ohio were acquired by The Fifth Third Bank of Western Ohio, National Association. Page 3 On December 23, 1993, the Company acquired The TriState Bancorp with consolidated assets of approximately $342 million. TriState's subsidiary, First Financial Savings Association, F.A., which had six branches in Cincinnati, was merged with the Bank. OTHER OPERATIONS The Company has other operations conducted through non-bank entities as follows: Fountain Square Insurance Company, a wholly-owned subsidiary of the Company, was formed for the purpose of engaging in credit life, accident and health insurance underwriting and reinsurance activities. Fifth Third Community Development Company, a wholly-owned subsidiary of the Company, was formed for the purpose of engaging in development and rehabilitation of real estate, investment in business ventures, and related activities specifically designed to address the needs in housing, employment, and public facilities of low and moderate income persons and communities. Fountain Square Management Co., a wholly-owned subsidiary of the Company, was formed for the purpose of engaging in real estate management of the Fifth Third Center and other Company owned properties. Fifth Third Company, a wholly-owned subsidiary of the Bank, owns a 32-story office tower and 5-story office building and parking garage known as the Fifth Third Center and the William S. Rowe Building, respectively. The Company occupies 70% of the buildings and leases the remainder to commercial and retail tenants. Fifth Third Securities, Inc., a wholly-owned subsidiary of the Bank, is a registered broker-dealer, through which the Company operates its securities brokerage business. Fifth Third Leasing Company, a wholly-owned subsidiary of the Bank, is engaged in the business of leasing personal property. Midwest Payment Systems, Inc., a wholly-owned subsidiary of the Bank, engages in providing merchant processing, electronic funds transfers and other data processing services. THE FIFTH THIRD BANK ORGANIZATION The present Bank is the result of mergers and acquisitions over the years involving thirty-one Cincinnati financial institutions, the oldest of which was The Bank of Ohio Valley, organized June 17, 1858. Other major banks involved in the mergers were The Fifth National Bank, The Third National Bank and The Union Trust Company. Sixty-three of the Bank's banking centers are located in Hamilton County, Ohio; with its other banking centers in the following counties: Butler County - 12; Clermont County - 5; Cuyahoga Co 3; Lake County - 5; Montgomery County - 12; and Warren County - 7. Page 4 As of December 31, 1993, the Bank's total assets were $6,875,027,000 including total loans and leases of $4,847,723,000. On that date, total deposits were $4,605,082,000 and capital accounts totalled $518,088,000. The Bank in 1993 opened 10 new banking centers, purchased or acquired through merger 12 banking centers, transferred 2 banking centers to an affiliate and closed 3 banking centers. The Bank has 34 Bank Marts(R), non-traditional centers located in select grocery stores, which combine location accessibility with extended hours on Saturday and Sunday afternoons. The Bank provides full service banking to individuals, industry and governmental agencies through each of its 118 banking centers. The Company, through its Affiliates and the Bank, provides a full line of banking services including Retail, Commercial, Trust & Investment, and Data Processing. RETAIL BANKING Retail Banking is responsible for operating the 102 banking centers in southwestern Ohio. The Affiliate Division is responsible for the operations of the Company's other nine banks throughout Ohio, Kentucky, Indiana and Florida. The banking centers offer full service banking to individuals, industry and governmental agencies providing customers with easy accessibility to banking services. The Bank operates banking centers which are open seven days a week (which are referred to under the federally registered trademark as "Bank Marts") in select Kroger, FINAST and Marsh Supermarkets and retirement centers, providing the ultimate in convenience for the busy consumer of the '90s. Convenience and personal service, delivered along with a comprehensive package of banking products continue to reinforce the Company's marketing position. The Bank makes a strong impact on the southwestern Ohio retail banking market through a great variety of services, including personal checking accounts and savings programs, certificates of deposit, money market accounts, individual retirement accounts and Keogh plans. Consumer Banking includes the Bankcard, Installment Loan, Leasing and Residential Mortgage Loan Departments, services individual as well as corporate customers, offering a broad range of credit programs for all retail customers including credit card banking under the VISA and MasterCard designation, as well as private label cards, installment loans, student loans, and secured and unsecured personal loans. The Residential Mortgage Loan Department provides FHA, VA and conventional as well as adjustable rate mortgage loans to individuals, and is active in originating mortgages for sale in the secondary market. The Affiliate banks are headquartered in major geographic areas and make a strong impact on the banking market in the region. These banks provide full service banking including consumer lending, commercial lending, and trust and investment services making a major contribution to the Company's strong growth. Twenty-three of the Company's new banking centers were opened or purchased by the Affiliate banks bringing the total to 171 banking centers. The Affiliate banks had a strong year with 1993 net income increasing 24.4 percent over 1992. The Affiliates Division is also responsible for identifying acquisition candidates and for coordinating the merging of the acquired institutions and branches into the Company. The Company's Annual Report has a full discussion of announced acquisitions expected to occur in 1994. Page 5 COMMERCIAL BANKING Commercial Banking experienced solid growth in commercial loan and lease outstandings during 1994 with significant improvement in credit quality. The Company's strong capital base and consistent earnings performance allow flexibility to work with its borrowers. A sound lending philosophy, aggressive calling, cross-selling techniques and a strong focus on customer service allowed Commercial Banking to experience strong growth. Commercial Banking provides a variety of services to meet the needs of the Bank's corporate customers. Available are all types of commercial loans, including lines of credit, revolving credits, term loans, real estate mortgage loans and other specialized loans including asset-based financing as well as various types of commercial leases. The Company further serves the requirements of large and small industrial and commercial enterprises by providing cash management services including freight payment, payroll programs, merchant banking services, cashiering, lockbox and other automated services. Relationship banking continues to be the focus, with emphasis on product packages and cross-selling to produce outstanding results. The Bank through its Financial Institutions Department, serves as correspondent for numerous banks principally located in the four state area of Ohio, Kentucky, Indiana and West Virginia. The Bank offers a wide variety of services to its correspondent banks, including check clearance, loan participation, automated data processing services as well as investment, trust, pension and profit sharing services. The Bank through the International Department, assists local businesses and customers in carrying out their import-export activities and provides letters of credit, foreign exchange, banker's acceptance financing and other related international banking services. TRUST & INVESTMENT SERVICES The Trust & Investment Group is customer driven offering a full range of trust and investment services for individuals, corporations and not-for-profit organizations. The Company offers investment management to all its customers. For those who prefer to choose their own investment options, Fifth Third Securities, Inc., the Bank's brokerage subsidiary, offers full-service brokerage to both institutional and retail customers. For the year ended December 31, 1993, the Trust & Investment Services, primarily within the Bank, had over $38 billion in assets under care, of which approximately $7 billion is under management. The Personal Trust Department offers a diverse range of investment and financial services, including Investment Management, Private Banking, Tax and Real Estate Services, Trust Services, Estate Planning and a Foundation Office. These services are tailored to suit any individual's needs. Corporations and non-profit organizations also benefit from the Bank's wide range of services, including Investment Management, Employee Benefits, Corporate Trust, Stock Transfer, Securities Custody, Mutual Funds, Custody and Endowments. Page 6 The Bank is the Investment Advisor of the Fountain Square Funds. The Fountain Square Funds is a family of mutual funds consisting of three money market funds and six stock and bond funds. At December 31, 1993 the Fountain Square Funds' assets were approximately $1 billion. DATA PROCESSING Midwest Payment Systems, Inc. ("MPS") a subsidiary of the Bank, provides computer services and electronic funds transfer services for the Bank as well as for other retail and financial institutions. MPS is one of the nation's leading providers of electronic funds transfer (EFT) services, servicing customers nationwide and a source of substantial fee income. MPS is active in the Point of Sale (POS) business, where it has become a national force in credit card authorization and data capture. MPS is committed to growth as a single- source solution for financial institutions, retail businesses and governmental entities. MPS offers an online automated teller machine (ATM) network, known as the JEANIE(R) network, and serves as the transaction switch processor for several regional ATM Networks including MONEY(SM) Station of Ohio located principally in Ohio where the JEANIE network members participate, the Kentucky regional ATM Network called the QUEST Network, and a shared ATM Network operating in Chicago, Illinois called CASH(SM) Station. It also provides other electronic banking services to financial institutions throughout the United States and online credit card authorization and data capture for retail merchants at the point of sale. ____________________ (R) Registered Trademark with U.S. Pat. & T.M. Office (SM) Service Mark owned by Money Station, Inc. (SM) Service Mark owned by Cash Station, Inc. FINANCE The Finance Group consists of the Treasury and Accounting Groups. The Treasury Group's responsibilities primarily include monitoring and managing the Company's net interest income in response to changes in economic conditions and interest rate movements. The Treasury Group monitors changes in the Company's financial risk exposures and coordinates strategies with various business units, and manages and monitors the Bank's and the Company's money market funding, asset liability management, institutional security dealer sales, investor relations areas, and monitors the affiliate banks' investment portfolios. COMPETITION There are hundreds of commercial banks, savings and loans and other financial service providers in Ohio, Kentucky, Indiana and Florida, and adjoining states, thus providing strong competition to the Company's subsidiaries. With respect to correspondent banking, the Bank's area of competition includes most of Kentucky and southern Ohio and parts of Indiana and West Virginia. The Company's subsidiaries compete for deposits with commercial banks, savings and loan associations and other competitors such as brokerage houses and for retail and commercial business with banks in other areas of the country, many of which possess greater financial resources. With respect to the data processing services, the Bank competes with other third party service providers such as Deluxe Data Services, EDS and Electronic Payment Systems. Page 7 The earnings of the Company are affected by general economic conditions as well as by the monetary policies of the Federal Reserve Board. Such policies, which include regulating the national supply of bank reserves and bank credit, can have a major effect upon the source and cost of funds and the rates of return earned on loans and investments. The Federal Reserve influences the size and distribution of bank reserves through its open market operations and changes in cash reserve requirements against member bank deposits. REGULATION AND SUPERVISION The Company, as a bank holding company, is subject to the restrictions of the Bank Holding Company act of 1956, as amended. This Act provides that the acquisition of control of a bank is subject to the prior approval of the Board of Governors of the Federal Reserve System. The Company is required to obtain the prior approval of the Federal Reserve Board before it can acquire control of more than 5% of the voting shares of another bank. The Act does not permit the Federal Reserve Board to approve an acquisition by the Company, or any of its subsidiaries, of any bank located in a state other than Ohio, unless the acquisition is specifically authorized by the law of the state in which such bank is located. The Bank, as a state member bank, is subject to regulation by the Superintendent of Banks of the State of Ohio, the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation. The Company and any other subsidiaries which it now owns or may hereafter acquire are considered affiliates of the Bank as that term is defined in the Securities Act of 1933, as amended. The Company's other affiliate state banks are primarily subject to the laws of the state in which each is located, the Board of Governors of the Federal Reserve System and/or the Federal Deposit Insurance Corporation. The affiliate banks which are organized under the laws of the United States are primarily subject to regulation by the Comptroller of the Currency and the Federal Deposit Insurance Corporation. The Company and its banking affiliates are subject to certain restrictions on loans by the Bank, on investments by the Bank in their stock and on its taking such stock and securities as collateral for loans to any borrower. The Company and affiliates of the Bank are also subject to certain restrictions with respect to engaging in the underwriting and public sale and distribution of securities. In addition, any such affiliates of the Bank will be subject to examination at the discretion of supervisory authorities. The Company as a saving and loan holding company and its savings and loan subsidiary is subject to examination and regulation by the Office of Thrift Supervision. The Bank Holding Company Act limits the activities which may be engaged in by the Company and its subsidiaries to ownership of banks and those activities which the Federal Reserve Board has deemed or may in the future find to be so closely related to banking as to be a proper incident thereto. Page 8 Those activities presently authorized by the Federal Reserve Board include the following general activities: (1) the making or servicing of loans or other extensions of credit; (2) operating as an industrial bank, Morris Plan Bank, or industrial loan company according to state law without the accepting of demand deposits and without the making of commercial loans; (3) performing the functions and activities of a trust company; (4) acting with certain limitations as investment or financial advisor; (5) leasing personal property and equipment; (6) the making of equity and debt investments in projects or corporations designated primarily to promote community welfare; (7) providing bookkeeping and data processing services for the internal operations of the bank holding company and its subsidiaries; and providing to others data processing and transmission services and facilities for banking, financial or related economic data; (8) acting as insurance agent or broker under certain circumstances and with respect to certain types of insurance, including underwriter for credit life insurance, credit accident insurance and health insurance which is directly related to extensions of credit by the bank holding company system; (9) providing limited courier services for the internal operations of the holding company, for checks exchanged among banking institutions, and for audit and accounting media of a banking or financial nature used in processing such media; (10) providing management consulting advice to non-affiliate banks under certain limitations; (11) the retail sale of money orders with a face value of $1,000 or less, of travelers checks and of U.S. Savings Bonds; (12) performing appraisals of real estate; (13) acting as intermediary in arranging financing of commercial or industrial income-producing real estate; (14) providing securities brokerage services, (restricted to buying and selling securities solely as agent for customers), related securities activities and incidental activities; (15) underwriting and dealing in government obligations and money market instruments; (16) foreign exchange advisory and transactional services; (17) acting as futures commission merchant; (18) providing investment advice on financial futures and options on futures; (19) providing consumer financial counseling; (20) providing tax planning and preparation; (21) providing check guaranty services; (22) operating a collection agency; and (23) operating a credit bureau. For details and limitations on these activities, reference should be made to Regulation Y of the Federal Reserve Board, as amended. Further, under the 1970 amendment of this Act and the regulations of the Federal Reserve Board, the Company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit or provisions of any property or service. EMPLOYEES As of December 31, 1993, there were no full time employees of the Company. Affiliates of the Company employed 5,294 employees of whom 860 were officers and 1,162 were part-time employees. STATISTICAL INFORMATION Pages 10 to 17 contain statistical information on the Company and its subsidiaries. Page 9 SECURITIES PORTFOLIO The securities portfolio as of December 31 for each of the last five years, and the maturity distribution and weighted average yield of securities as of December 31, 1993, are incorporated herein by reference to the securities tables on page 30 of the Company's 1993 Annual Report to Stockholders attached to this filing as Exhibit 13. The weighted average yields for the securities portfolio are yields to maturity weighted by the par values of the securities. The weighted average yields on securities exempt from income taxes are computed on a taxable equivalent basis. The taxable equivalent yields are net after-tax yields to maturity divided by the complement of the full corporate tax rate (35%). In order to express yields on a taxable equivalent basis, yields on obligations of states and political subdivisions have been increased as follows: Under 1 year 2.43% 1 - 5 years 2.73% 6 - 10 years 2.65% Over 10 years 3.09% Total securities 2.64% The Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Debt and Equity Securities," effective December 31, 1993. This Statement requires securities to be classified as held to maturity, available for sale or trading. Only those securities classified as held to maturity are reported at amortized cost, with those available for sale and trading reported at fair value with unrealized gains and losses included in stockholders' equity or income, respectively. Refer to pages 19 and 20 in the Company's 1993 Annual Report to Stockholders for a summary of the investment portfolio classifications at December 31, 1993. The investment portfolio has increased in size during the past year due in part to the securitization and transfer to securities of $291,586,000 in residential mortgage loans. The investment portfolio is comprised largely of fixed and variable rate mortgage-backed securities. These AAA rated securities are backed by first mortgages on single-family homes predominately underwritten to the standards of and guaranteed by the government sponsored agencies of GNMA, FNMA and FHLMC. They differ from traditional debt securities primarily in that they have uncertain maturity dates, and are priced based on estimated prepayment rates on the underlying mortgages. The estimated average life of the portfolio is three years and six months, which is very short by industry standards and minimizes our exposure to the risk of rising interest rates. The Company holds no securities which would be classified as high risk under the new FFIEC guidelines on mortgage-backed securities. The Company had sales of securities available for sale of approximately $230 million during 1993. This activity resulted in $6.5 million in realized securities gains, less than 2.2% of income before income taxes, and represented 12.2% of total security gains, realized and unrealized, as of December 31, 1993. Page 10 AVERAGE BALANCE SHEETS The average balance sheets are incorporated herein by reference to Table 1 on pages 26 and 27 of the Company's 1993 Annual Report to Stockholders attached to this filing as Exhibit 13. ANALYSIS OF NET INTEREST INCOME AND NET INTEREST INCOME CHANGES The analysis of net interest income and the analysis of net interest income changes are incorporated herein by reference to Table 1 and Table 2 and the related discussion on pages 26 through 28 of the Company's 1993 Annual Report to Stockholders attached to this filing as Exhibit 13. Page 11 Types of Loans and Leases - ------------------------- A summary of loans and leases by major category as of December 31 follows ($000's):
1993 1992 1991 1990 1989 ------ ------ ------ ------ ------ Commercial, financial and agricultural loans $2,679,611 2,485,310 2,206,176 2,266,553 2,236,707 Real estate - construction loans 322,910 308,781 281,021 244,435 274,169 Real estate - mortgage loans 2,792,464 2,431,072 1,506,224 1,253,954 1,088,204 Consumer loans 2,000,459 1,631,496 1,440,219 1,414,088 1,257,839 Lease financing 1,170,231 737,186 478,125 429,231 425,794 ---------- ---------- ---------- ---------- ---------- Loans and leases, gross 8,965,675 7,593,845 5,911,765 5,608,261 5,282,713 Unearned income (154,636) (118,986) (105,153) (111,271) (118,873) Reserve for credit losses (135,097) (114,751) (90,324) (85,025) (79,956) ---------- ---------- ---------- ---------- ---------- Loans and leases, net $8,675,942 7,360,108 5,716,288 5,411,965 5,083,884 ========== ========== ========== ========== ==========
Maturities and Sensitivity of Loans to Changes in Interest Rates - ------------------------------------------------------------------- The remaining maturities of the loan portfolio distributed to reflect expected cash flows (excluding residential mortgage and consumer loans) at December 31, 1993, and the sensitivity of loans to interest rate changes for loans due after one year is as follows ($000's):
Commercial, Financial and Real Estate Real Estate Agricultural Construction Commercial Loans Loans Loans Total ------------ ------------ ------------ ------------ Due in one year or less $1,560,221 102,873 75,695 1,738,789 Due after one year through five years 887,389 151,343 316,142 1,354,874 Due after five years 232,001 68,694 242,658 543,353 ---------- ---------- -------- ---------- Total $2,679,611 322,910 634,495 3,637,016 ========== ========== ======== ========== Loans due after one year Predetermined interest rate $600,918 218,539 428,442 1,247,899 ========== ========== ======== ========== Floating or adjustable interest rate $518,472 1,498 130,358 650,328 ========== ========== ======== ==========
Page 12 Risk Elements - ------------- Interest on loans is normally accrued at the rate agreed upon at the time each loan was negotiated. It is the Company's policy to discontinue accrual of interest on commercial, construction and mortgage loans when there is a clear indication that the borrower's cash flow may not be sufficient to meet payments as they become due. Loans, other than consumer loans, are placed on nonaccrual status when principal or interest is past due ninety days or more, unless the loan is well secured and in the process of collection. The following table presents data concerning loans and leases at risk at December 31, 1993 and previous years ($000's):
1993 1992 1991 1990 1989 ------ ------ ------ ------ ------ Nonaccrual loans and leases $15,709 29,273 65,253 70,115 31,811 Loans and leases contractually past due ninety days or more as to interest, principal or rental payments 9,696 21,382 26,898 23,908 17,025 Loans and leases renegotiated to provide a reduction or deferral of interest, principal or rental payments because of the financial position deterioration of the borrower 377 402 793 6,248 2,832 Loans and leases now current where there are serious doubts as to the ability of the borrower to comply with present repayment terms 35,992 35,097 32,819 36,690 29,003 For calendar year 1993, interest income of $368,000 was recorded on nonaccrual and renegotiated loans and leases. Additional interest income of $1,169,000 would have been recorded if the nonaccrual and renegotiated loans and leases had been current in accordance with their original terms.
Page 13 Summary of Credit Loss Experience - ------------------------------------ A summary of the activity in the reserve for credit losses arising from provisions charged to operations, losses charged off and recoveries of losses previously charged off is as follows ($000's):
1993 1992 1991 1990 1989 ------ ------ ------ ------ ------ Loans and leases outstanding at December 31 $8,811,039 7,474,859 5,806,612 5,496,990 5,163,840 =========== =========== =========== =========== =========== Average loans and leases outstanding $8,186,873 6,616,396 5,659,608 5,250,014 4,805,763 =========== =========== =========== =========== =========== Reserve for credit losses, January 1 $114,751 90,324 85,025 79,956 67,412 --------- --------- --------- --------- --------- Losses charged off: Commercial, financial and agricultural loans (12,113) (24,156) (22,380) (13,021) (9,523) Real estate - construction loans -- -- -- (1,724) -- Real estate - mortgage loans (6,451) (5,700) (8,153) (4,303) (2,346) Consumer loans (15,571) (21,474) (25,024) (20,833) (17,908) Lease financing (1,850) (1,910) (2,556) (2,339) (3,063) --------- --------- --------- --------- --------- Total losses (35,985) (53,240) (58,113) (42,220) (32,840) --------- --------- --------- --------- --------- Recoveries of losses previously charged off: Commercial, financial and agricultural loans 2,103 1,109 1,580 1,995 1,894 Real estate - construction loans -- -- -- -- -- Real estate - mortgage loans 449 372 280 139 305 Consumer loans 6,532 6,574 4,972 4,054 4,495 Lease financing 638 499 538 1,222 1,049 --------- --------- --------- --------- --------- Total recoveries 9,722 8,554 7,370 7,410 7,743 --------- --------- --------- --------- --------- Net losses charged off: Commercial, financial and agricultural loans (10,010) (23,047) (20,800) (11,026) (7,629) Real estate - construction loans -- -- -- (1,724) -- Real estate - mortgage loans (6,002) (5,328) (7,873) (4,164) (2,041) Consumer loans (9,039) (14,900) (20,052) (16,779) (13,413) Lease financing (1,212) (1,411) (2,018) (1,117) (2,014) --------- --------- --------- --------- --------- Total net losses charged off (26,263) (44,686) (50,743) (34,810) (25,097) --------- --------- --------- --------- --------- Reserve of acquired banks 2,122 3,798 298 -- 1,173 --------- --------- --------- --------- --------- Provision charged to operations 44,487 65,315 55,744 39,879 36,468 --------- --------- --------- --------- --------- Reserve for credit losses, December 31 $135,097 114,751 90,324 85,025 79,956 ========= ========= ========= ========= =========
Page 14 Summary of Credit Loss Experience, continued - --------------------------------------------
1993 1992 1991 1990 1989 ------ ------ ------ ------ ------ Reserve for credit losses, December 31: Commercial, financial and agricultural loans $68,825 65,285 48,383 53,377 54,811 Real estate - construction loans 6,442 6,096 -- 5,198 2,000 Real estate - mortgage loans 18,136 12,194 15,358 4,257 3,698 Consumer loans 32,271 25,715 22,232 17,534 15,987 Lease financing 9,423 5,461 4,351 4,659 3,460 --------- --------- --------- --------- --------- Total reserve for credit losses $135,097 114,751 90,324 85,025 79,956 ========= ========= ========= ========= =========
The distribution of loans and leases by type, the ratio of net charge-offs to average loans and leases outstanding and the ratio of the reserve for credit losses to loans and leases outstanding is as follows:
1993 1992 1991 1990 1989 ------ ------ ------ ------ ------ Percentage of loans and leases to total loans and leases at December 31 Commercial, financial and agricultural loans 29.9 % 32.7 37.3 40.4 42.3 Real estate - construction loans 3.6 4.1 4.8 4.4 5.2 Real estate - mortgage loans 31.1 32.0 25.5 22.3 20.6 Consumer loans 22.3 21.5 24.4 25.2 23.8 Lease financing 13.1 9.7 8.0 7.7 8.1 ------ ------ ------ ------ ------ Total 100.0 % 100.0 100.0 100.0 100.0 ------ ------ ------ ------ ------ Ratio of net charge-offs during year to average loans and leases outstanding during year Commercial, financial and agricultural loans 0.38 % 0.98 0.92 0.51 0.37 Real estate - construction loans -- -- -- 0.70 -- Real estate - mortgage loans 0.23 0.27 0.57 0.36 0.21 Consumer loans 0.50 0.98 1.45 1.28 1.13 Lease financing 0.15 0.29 0.54 0.32 0.62 Weighted Average Ratio 0.32 0.68 0.90 0.66 0.52 Ratio of reserve for credit losses to loans and leases outstanding at December 31 1.53 % 1.54 1.56 1.55 1.55
Page 15 Reserve for Credit Losses - ------------------------- The reserve for credit losses is established through charges to operations by a provision for credit losses. Loans and leases which are determined to be uncollectible are charged against the reserve and any subsequent recoveries are credited to the reserve. The amount charged to operations is based on several factors. These include the following: 1. Analytical reviews of the credit loss experience in relationship to outstanding loans and leases to determine an adequate reserve for credit losses required for loans and leases at risk. 2. A continuing review of problem or at risk loans and leases and the overall portfolio quality. 3. Regular examinations and appraisals of the loan and lease portfolio conducted by the Bank's examination staff and the banking supervisory authorities. 4. Management's judgement with respect to the current and expected economic conditions and their impact on the existing loan and lease portfolio. The amount provided for credit losses exceeded actual net charge-offs by $18,224,000 in 1993, $20,629,000 in 1992 and $5,001,000 in 1991. Management reviews the reserve on a quarterly basis to determine whether additional provisions should be made after considering the factors noted above. Based on these procedures, management is of the opinion that the reserve at December 31, 1993 of $135,097,000 is adequate. Maturity Distribution of Domestic Certificates of Deposit of $100,000 and Over - ------------------------------------------------------------------------------ at December 31, 1993 ($000's) ----------------------------- Under 3 months $174,719 3 to 6 months 70,717 7 to 12 months 45,625 Over 12 months 14,469 -------- Total certificates - $100,000 and over $305,530 ======== Note: Foreign office deposits are denominated in amounts greater than $100,000. Page 16 Purchase of Deposits - -------------------- On January 22, 1993, the Company purchased $54 million of deposits as well as the facilities of three Home Savings of America offices in Oxford, Chillicothe and Fremont, Ohio. On February 26, 1993, the Company purchased $106 million in deposits and the facilities of six First National Bank of Dayton locations in Cincinnati. On October 18, 1993, the Company purchased $131 million in deposits and the facilities of five World Savings and Loan Association branches in western and northwestern Ohio. Funds Borrowed - -------------- Funds borrowed is comprised of various short-term sources of funds. A summary of the average outstanding, maximum month-end balance and weighted average interest rate for the years ended December 31 follows ($000's): 1993 1992 1991 ---- ---- ---- Average outstanding $1,275,568 1,173,253 766,860 Maximum month-end balance $1,602,217 1,436,203 1,042,566 Weighted average interest rate 3.00% 3.47 5.59 Return on Equity and Assets - --------------------------- The following table presents certain operating ratios: 1993 1992 1991 ------ ------ ------ Return on assets (A) 1.80% 1.74 1.68 Return on equity (B) 18.2% 17.3 16.6 Dividend payout ratio (C) 31.8% 33.0 33.7 Equity to assets ratio (D) 9.92% 10.07 10.11 - ----------------------------------------- (A) net income divided by average assets (B) net income divided by average equity (C) dividends declared per share divided by fully diluted net income per share (D) average equity divided by average assets Page 17 ITEM 2. PROPERTIES The Company's executive offices and the main office of the Bank are located on Fountain Square Plaza in downtown Cincinnati, Ohio. On August 17, 1983, these facilities, located in a 32-story office tower and a 5-story office building and parking garage known as the Fifth Third Center and the William S. Rowe Building, respectively, were purchased by a subsidiary of the Bank, as a 65% partner in a partnership with two other partners. The Bank's subsidiary has acquired the interest of the other two partners and now owns 100% of the Fifth Third Center and the William S. Rowe Building. The Bank operates 118 banking centers, of which 53 are owned and 65 are leased. These leases have various expiration dates to the year 2013. Properties owned by the Bank are free from mortgages and encumbrances. The Company has nine other affiliate banks, four located in Ohio, two in Kentucky, two in Indiana, and one in Florida. The affiliate banks operate 171 banking centers, of which 99 are owned and 72 are leased. OHIO BANKS The Fifth Third Bank of Columbus opened 7 new banking centers, 3 of which were Bank Marts. The Fifth Third Bank of Columbus, with its main office in the Fifth Third Center, Columbus, Ohio, now has 35 locations. The Fifth Third Bank of Northwestern Ohio, National Association, opened 1 new banking center and purchased 3 banking centers. The Fifth Third Bank of Northwestern Ohio, National Association, with its main office located in Toledo, Ohio, now has 49 locations. The Fifth Third Bank of Western Ohio, National Association, purchased 3 banking centers (2 of which were later closed), and closed 1 banking center. The Fifth Third Bank of Western Ohio, National Association, with its main office located in Piqua, Ohio, now has 28 locations. The Fifth Third Bank of Southern Ohio purchased 1 banking center, and had 2 banking centers transferred from the Bank. The Fifth Third Bank of Southern Ohio, with its main office located in Hillsboro, Ohio, now has 13 locations. KENTUCKY BANKS Fifth Third Bank of Northern Kentucky, Inc., opened 3 new banking centers. The Fifth Third Bank of Northern Kentucky, with its main office located in Covington, Kentucky, now has 18 locations. Fifth Third Bank of Central Kentucky, Inc., opened 2 new banking centers. The Fifth Third Bank of Central Kentucky, Inc., with its main office in Lexington, Kentucky, now has 6 locations. INDIANA BANKS The Fifth Third Bank of Central Indiana opened 4 new banking centers, 2 of which were Bank Marts. The Fifth Bank of Central Indiana, with its main office in Indianapolis, Indiana, now has 15 locations. Page 18 The Fifth Third Bank of Southeastern Indiana did not open or close any banking centers in 1993. The Fifth Third Bank of Southeastern Indiana, with its main office located in Greensburg, Indiana, has 6 locations. FLORIDA SAVINGS BANK Fifth Third Trust Co. & Savings Bank, FSB, relocated its banking center to a new full-service location in 1993. The Fifth Third Trust Co. & Savings Bank, FSB, has its main office and banking center located in Naples, Florida. ITEM 3. LEGAL PROCEEDINGS The Company and its subsidiaries are not parties to any material legal proceedings other than routine litigation incidental to its business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None EXECUTIVE OFFICERS The names, ages and positions of the Executive Officers of the Company as of January 31, 1994 are listed below along with their business experience during the past 5 years. Officers are appointed annually by the Board of Directors at the meeting of Directors immediately following the Annual Meeting of Stockholders. CURRENT POSITION and Name and Age Business Experience During Past 5 Years George A. Schaefer, Jr., 48 PRESIDENT AND CEO. President and Chief Executive Officer of the Company and the Bank since January, 1991. Previously, Mr. Schaefer was President and COO of the Company and Bank since April, 1989. Formerly, Mr. Schaefer had been Executive Vice President of the Company and the Bank. George W. Landry, 53 EXECUTIVE VICE PRESIDENT. Executive Vice President of the Company and Bank since November, 1989. Previously, Mr. Landry was Group Vice President of the Bank. Stephen J. Schrantz, 45 EXECUTIVE VICE PRESIDENT. Executive Vice President of the Company and Bank since November, 1989. Previously, Mr. Schrantz was Senior Vice President of the Bank. Michael D. Baker, 43 SENIOR VICE PRESIDENT. Senior Vice President of the Company since March, 1993, and of the Bank since July, 1987. P. Michael Brumm, 46 SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER. CFO of the Company and Bank since June, 1990, and Senior Vice President of the Bank. Page 19 Robert P. Niehaus, 47 SENIOR VICE PRESIDENT. Senior Vice President of the Company since March 1993, and Senior Vice President of the Bank. Previously, Mr. Niehaus was Vice President of the Company. Michael K. Keating, 38 SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY. Senior Vice President and General Counsel of the Company since March, 1993 and Senior Vice President and Counsel of the Bank since November, 1989, and Secretary of the Company and the Bank since January, 1994. Previously, Mr. Keating was Vice President, Counsel and Assistant Secretary of the Bank and Counsel of the Company. Mr. Keating is a son of Mr. William J. Keating, Director. Neal E. Arnold, 33 TREASURER. Treasurer of the Company and the Bank since October, 1990 and Senior Vice President of the Bank since April, 1993. Previously, Mr. Arnold was Vice President of the Bank since October, 1990. Previously, Mr. Arnold was CFO and Senior Vice President with First National Bank of Grand Forks, North Dakota. Gerald L. Wissel, 37 AUDITOR. Auditor of the Company and the Bank since March 1990 and Senior Vice President of the Bank since November 1991. Previously, Mr. Wissel was Vice President of the Bank since March 1990. Mr. Wissel was formerly with Deloitte and Touche, independent public accountants. Roger W. Dean, 31 CONTROLLER. Controller of the Company and Vice President of the Bank since June, 1993. Previously, Mr. Dean was with Deloitte & Touche, independent public accountants. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this item is incorporated herein by reference to Page 1 of Registrant's 1993 Annual Report to Stockholders attached to this filing as Exhibit 13. ITEM 6. SELECTED FINANCIAL DATA The information required by this item is incorporated herein by reference to page 35 of Registrant's 1993 Annual Report to Stockholders attached to this filing as Exhibit 13. Page 20 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is incorporated herein by reference to pages 26 through 34 of Registrant's 1993 Annual Report to Stockholders attached to this filing as Exhibit 13. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is incorporated herein by reference to pages 15 through 25 and page 35 of Registrant's 1993 Annual Report to Stockholders attached to this filing as Exhibit 13. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item concerning Directors is incorporated herein by reference under the caption "ELECTION OF DIRECTORS" of the Registrant's 1994 Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated herein by reference under the caption "EXECUTIVE COMPENSATION" of the Registrant's 1994 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated herein by reference under the captions "CERTAIN BENEFICIAL OWNERS, ELECTION OF DIRECTORS, AND EXECUTIVE COMPENSATION" of the Registrant's 1994 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated herein by reference under the caption "CERTAIN TRANSACTIONS" of the Registrant's 1994 Proxy Statement. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K a) Documents Filed as Part of the Report PAGE 1. Index to Financial Statements Consolidated Statements of Income for the Years Ended December 31, 1993, 1992 and 1991 * Consolidated Balance Sheets, December 31, 1993 and 1992 * Page 21 Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1993, 1992 and 1991 * Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1992 and 1991 * Notes to Consolidated Financial Statements * * Incorporated by reference to pages 15 through 25 of Registrant's 1993 Annual Report to Stockholders attached to this filing as Exhibit 13. 2. Financial Statement Schedules The schedules for Registrant and its subsidiaries are omitted because of the absence of conditions under which they are required, or because the information is set forth in the consolidated financial statements or the notes thereto. 3. Exhibits EXHIBIT NO. 3- Amended Articles of Incorporation and Code of Regulations ** 10(a)- Fifth Third Bancorp Unfunded Deferred Compensation Plan for Non-Employee Directors *** 10(b)- Fifth Third Bancorp 1990 Stock Option Plan **** 10(c)- Fifth Third Bancorp 1987 Stock Option Plan ***** 10(d)- Fifth Third Bancorp 1982 Stock Option Plan ****** 10(e)- Fifth Third Bancorp Stock Option Plan for Employees of The Fifth Third Bank of Miami Valley, National Association ******* 10(f)- Fifth Third Bancorp Stock Option Plan for Employees of The Fifth Third Bank of Eastern Indiana ******** 10(g)- Indenture effective November 19, 1992 between Fifth Third Bancorp, Issuer and NBD Bank, N.A., Trustee ********* 10(h)- Fifth Third Bancorp Amended and Restated Stock Option Plan for Employees and Directors of The TriState Bancorp ********** 10(i)- Fifth Third Bancorp 1993 Discount Stock Purchase Plan *********** 11- Computation of Consolidated Net Income Per Share for the Years Ended December 31, 1993, 1992, 1991, 1990 and 1989 13- Fifth Third Bancorp 1993 Annual Report to Stockholders Page 22 21- Fifth Third Bancorp Subsidiaries 23- Independent Auditors' Consent b) Reports on Form 8-K NONE. ____________________ ** Incorporated by reference to Registrant's Registration Statement, Exhibits 3.1 and 3.2, on Form S-4, Registration No. 33-19965 which is effective. *** Incorporated in this Form 10-K Annual Report by reference to Form 10-K filed for fiscal year ended December 31, 1985. **** Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 34075, which is effective. ***** Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 13252, which is effective. ****** Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 2-98550, which is effective. ******* Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 20888, which is effective. ******** Incorporated by reference to Registrant's filing with the Securities and Exchange Commission on November 18, 1992 a Form 8-K Current Report as an exhibit to a Registration Statement on Form S-8, Registration No. 33-30690, which is effective. ********* Incorporated by reference to Registrant's filing with the Securities and Exchange Commission on November 18, 1992 a Form 8-K Current Report dated November 16, 1992 and as Exhibit 4.1 to a Registration Statement on Form S-3, Registration No. 33-54134, which is effective. ********** Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 51679, which is effective. *********** Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 60474, which is effective. Page 23 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIFTH THIRD BANCORP (Registrant) /s/George A. Schaefer, Jr. February 15, 1994 George A. Schaefer, Jr. President and CEO (Principal Executive Officer) Pursuant to requirements of the Securities Exchange Act of 1934, this report has been signed on February 15, 1994 by the following persons on behalf of the Registrant and in the capacities indicated. /s/P. Michael Brumm /s/Roger W. Dean P. Michael Brumm Roger W. Dean Senior Vice President and CFO Controller (Chief Financial Officer) (Principal Accounting Officer) /s/John F. Barrett /s/Richard T. Farmer /s/Robert B. Morgan John F. Barrett Richard T. Farmer Robert B. Morgan Director Director Director /s/John D. Geary /s/Michael H. Norris J. Kenneth Blackwell John D. Geary Michael H. Norris Director Director Director Milton C. Boesel, Jr.Ivan W. Gorr Brian H. Rowe Director Director Director /s/Clement L. Buenger/s/Joseph H. Head, Jr. /s/George A. Schaefer, Jr. Clement L. Buenger Joseph H. Head, Jr. George A. Schaefer, Jr. Director Director Director /s/Nolan W. Carson /s/Joan R. Herschede /s/John J. Schiff, Jr. Nolan W. Carson Joan R. Herschede John J. Schiff, Jr. Director Director Director /s/Thomas L. Dahl /s/William G. Kagler Thomas L. Dahl William G. Kagler Stephen Stranahan Director Director Director /s/Gerald V. Dirvin /s/William J. Keating /s/Dennis J. Sullivan, Jr. Gerald V. Dirvin William J. Keating Dennis J. Sullivan, Jr. Director Director Director /s/James D. Kiggen /s/Dudley S. Taft Thomas B. Donnell James D. Kiggen Dudley S. Taft Director Director Director Page 24 EX-11 2 EXHIBIT 11 EXHIBIT 11 FIFTH THIRD BANCORP COMPUTATION OF CONSOLIDATED NET INCOME PER SHARE ($000's except per share data)
1993 1992 1991 1990 1989 ------ ------ ------ ------ ------ Net Income $ 196,447 164,092 138,150 120,441 108,318 ======== ======== ======== ======== ======== Net income per common share - assuming no dilution: Weighted average number of shares outstanding (a) 59,952 59,632 59,200 58,847 58,263 ======== ======== ======== ======== ======== Per share (net income divided by the weighted average number of shares outstanding) $ 3.28 2.75 2.33 2.05 1.86 ======== ======== ======== ======== ======== Net income per common and common equivalent share: Net income $ 196,447 164,092 138,150 120,441 108,318 Add - Interest on 4 1/4% convertible subordinated notes due 1998, net of applicable income taxes 4,393 546 -- -- -- -------- -------- -------- -------- -------- Adjusted net income $ 200,840 164,638 138,150 120,441 108,318 ======== ======== ======== ======== ======== Adjusted weighted average number of shares outstanding - after giving effect to the conversion of stock options and convertible subordinated notes (a) 62,557 60,255 59,493 58,929 58,521 ======== ======== ======== ======== ======== Per share (adjusted net income divided by the adjusted weighted average number of shares outstanding) $ 3.21 2.73 2.32 2.05 1.85 ======== ======== ======== ======== ======== Net income per common share - assuming full dilution: Adjusted net income $ 200,840 164,638 138,150 120,441 108,318 ======== ======== ======== ======== ======== Adjusted weighted average number of shares outstanding - after giving effect to the conversion of stock options and convertible subordinated notes (a) 62,563 60,356 59,702 58,974 58,579 ======== ======== ======== ======== ======== Per share (adjusted net income divided by the adjusted weighted average number of shares outstanding) $ 3.21 2.73 2.31 2.04 1.85 ======== ======== ======== ======== ======== (a) Per share amounts and average shares outstanding reflect the three-for-two stock splits effected in the form of stock dividends paid April 15, 1992 and January 13, 1990.
EX-13 3 EXHIBIT 13 FIFTH THIRD BANCORP AND SUBSIDIARIES FINANCIAL HIGHLIGHTS
1993 1992 % Change - ----------------------------------------------------------------------------------------------------------------------- Earnings and Dividends ($000's) Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $196,447 164,092 19.7 Cash Dividends Declared . . . . . . . . . . . . . . . . . . . . . . . 61,544 53,758 14.5 - ---------------------------------------------------------------------------------------------------------------------- PER SHARE Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.28 2.75 19.3 Cash Dividends Declared . . . . . . . . . . . . . . . . . . . . . . . 1.02 .90 13.3 Year-End Book Value . . . . . . . . . . . . . . . . . . . . . . . . . 19.50 16.80 16.1 Year-End Market Price . . . . . . . . . . . . . . . . . . . . . . . . 51.75 54.00 (4.2) - ---------------------------------------------------------------------------------------------------------------------- AT YEAR END ($ in millions) Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,966 10,213 17.2 Loans and Leases . . . . . . . . . . . . . . . . . . . . . . . . . . 8,811 7,475 17.9 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,628 7,532 14.6 Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . 1,198 1,005 19.2 - ---------------------------------------------------------------------------------------------------------------------- KEY RATIOS Return on Average Assets . . . . . . . . . . . . . . . . . . . . . . 1.80% 1.74 3.4 Return on Average Equity . . . . . . . . . . . . . . . . . . . . . . 18.2 17.3 5.2 Net Interest Margin . . . . . . . . . . . . . . . . . . . . . . . . . 4.51 4.73 (4.7) - ---------------------------------------------------------------------------------------------------------------------- Number of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 61,402,257 59,831,540 2.6 Number of Stockholders . . . . . . . . . . . . . . . . . . . . . . . 11,302 10,437 8.3 Number of Banking Locations . . . . . . . . . . . . . . . . . . . . . 289 249 16.1 Number of Full-Time Equivalent Employees . . . . . . . . . . . . . . 4,938 4,579 7.8 - ----------------------------------------------------------------------------------------------------------------------
FIFTH THIRD BANCORP STOCKHOLDER AND CORPORATE INFORMATION
STOCK DATA DIVIDENDS PAID PER Year Period High Low SHARE - -------------------------------------------------------- 1992 First Quarter $50 3/8 $43 $.20 Second Quarter 46 3/4 40 1/8 .22 Third Quarter 52 3/4 40 3/4 .22 Fourth Quarter 54 46 3/4 .22 - -------------------------------------------------------- 1993 FIRST QUARTER $55 1/8 $49 7/8 $.24 SECOND QUARTER 58 1/2 50 1/4 .24 THIRD QUARTER 54 5/8 51 1/4 .24 FOURTH QUARTER 54 49 3/4 .27 - -------------------------------------------------------- The common stock of Fifth Third Bancorp is traded in the over-the-counter market and is listed under the symbol ''FITB'' on the NASDAQ National Market System.
RATINGS STANDARD MOODY'S & POOR'S FITCH - -------------------------------------------------------- FIFTH THIRD BANCORP Commercial Paper P1 A1+ F1+ - -------------------------------------------------------- FIFTH THIRD BANK--CINCINNATI Short-Term Deposit P1 A1+ F1 Long-Term Deposit Aa2 AA- AA Medium-Term Deposit Aa2 AA- AA - -------------------------------------------------------- FIFTH THIRD BANK OF NORTHWESTERN OHIO, N.A. Short-Term Deposit - A1+ - Long-Term Deposit - AA- - - --------------------------------------------------------
CORPORATE OFFICE The Corporate Office is located at Fifth Third Center, 38 Fountain Square Plaza, Cincinnati, Ohio 45263. The telephone number is (513) 579-5300. ANNUAL MEETING The Annual Meeting of Stockholders will be held at 11:30 a.m. on Tuesday, March 15, 1994, on the fifth floor of the Corporate Office. FORM 10-K Any individual requesting general information or a copy of the Corporation's 1993 Form 10-K Report (to be filed with the Securities and Exchange Commission before March 31, 1994) may obtain these by writing to Investor Relations at the Corporate Office. DIVIDEND REINVESTMENT For the convenience of stockholders, the Corporation has established a plan whereby stockholders may have their dividends automatically reinvested in Fifth Third Bancorp common stock. Details of the plan will be sent on request (see back page). TRANSFER AGENT AND REGISTRAR Transfer agent and registrar is Fifth Third Bank, Fifth Third Center, Cincinnati, Ohio 45263. 1 FIFTH THIRD BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31 ($000's) 1993 1992 1991 - --------------------------------------------------------------------------------------------------------------------- INTEREST INCOME Interest and Fees on Loans and Leases . . . . . . . . . . . . . . . . . . . $611,509 556,423 558,557 - --------------------------------------------------------------------------------------------------------------------- Interest on Securities Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,019 123,633 127,026 Exempt from Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . 12,559 10,789 12,521 - --------------------------------------------------------------------------------------------------------------------- Total Interest on Securities . . . . . . . . . . . . . . . . . . . . . . . 115,578 134,422 139,547 - --------------------------------------------------------------------------------------------------------------------- Interest on Other Short-Term Investments . . . . . . . . . . . . . . . . . 262 3,615 15,397 - --------------------------------------------------------------------------------------------------------------------- Total Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . 727,349 694,460 713,501 - --------------------------------------------------------------------------------------------------------------------- INTEREST EXPENSE Interest on Deposits Interest Checking . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,647 26,145 31,275 Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,497 13,673 15,460 Money Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,271 43,056 60,837 Other Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,088 147,924 171,441 Certificates-$100,000 and Over . . . . . . . . . . . . . . . . . . . . . 15,622 23,456 57,021 Foreign Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,030 1,714 756 - --------------------------------------------------------------------------------------------------------------------- Total Interest on Deposits . . . . . . . . . . . . . . . . . . . . . . . . 240,155 255,968 336,790 Interest on Federal Funds Borrowed . . . . . . . . . . . . . . . . . . . . 18,963 17,316 16,760 Interest on Other Short-Term Borrowings . . . . . . . . . . . . . . . . . . 19,314 23,380 26,110 Interest on Long-Term Debt and Notes . . . . . . . . . . . . . . . . . . . 12,528 3,602 1,620 - --------------------------------------------------------------------------------------------------------------------- Total Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . 290,960 300,266 381,280 - --------------------------------------------------------------------------------------------------------------------- NET INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . 436,389 394,194 332,221 Provision for Credit Losses . . . . . . . . . . . . . . . . . . . . . . . . 44,487 65,315 55,744 - --------------------------------------------------------------------------------------------------------------------- NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES . . . . . . . . . . . 391,902 328,879 276,477 - --------------------------------------------------------------------------------------------------------------------- OTHER OPERATING INCOME Trust Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,603 47,033 40,263 Service Charges on Deposits . . . . . . . . . . . . . . . . . . . . . . . . 55,468 49,856 41,673 Data Processing Income . . . . . . . . . . . . . . . . . . . . . . . . . . 53,582 45,842 40,601 Other Service Charges and Fees . . . . . . . . . . . . . . . . . . . . . . 60,433 55,851 45,221 Securities Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,492 1,471 4,153 - --------------------------------------------------------------------------------------------------------------------- Total Other Operating Income . . . . . . . . . . . . . . . . . . . . . . . 226,578 200,053 171,911 - --------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Salaries and Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,046 107,816 95,718 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,578 29,732 25,652 Equipment Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,173 13,354 12,256 Net Occupancy Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 23,222 20,833 18,729 Other Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 133,368 117,541 97,437 - --------------------------------------------------------------------------------------------------------------------- Total Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 323,387 289,276 249,792 - --------------------------------------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . 295,093 239,656 198,596 Applicable Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 98,646 75,564 60,446 - --------------------------------------------------------------------------------------------------------------------- NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $196,447 164,092 138,150 - --------------------------------------------------------------------------------------------------------------------- NET INCOME PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . $3.28 2.75 2.33 - --------------------------------------------------------------------------------------------------------------------- AVERAGE SHARES OUTSTANDING (000's) . . . . . . . . . . . . . . . . . . . . 59,952 59,632 59,200 CASH DIVIDENDS DECLARED PER SHARE . . . . . . . . . . . . . . . . . . . . . $1.02 .90 .78 - --------------------------------------------------------------------------------------------------------------------- See Notes to Consolidated Financial Statements.
15 FIFTH THIRD BANCORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
December 31 ($000's) 1993 1992 - --------------------------------------------------------------------------------------------------------------------- ASSETS - --------------------------------------------------------------------------------------------------------------------- Cash and Due from Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $580,936 565,948 - --------------------------------------------------------------------------------------------------------------------- Securities Available for Sale (at market) . . . . . . . . . . . . . . . . . . . . 815,986 -- - --------------------------------------------------------------------------------------------------------------------- Securities Held to Maturity (Market Value 1993--$1,515,255 and 1992--$1,960,300). 1,487,322 1,933,008 - --------------------------------------------------------------------------------------------------------------------- Other Short-Term Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 2,773 790 - --------------------------------------------------------------------------------------------------------------------- Loans and Leases Commercial Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,679,611 2,485,310 Construction Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322,910 308,781 Commercial Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . 634,495 495,818 Residential Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . 2,157,969 1,935,254 Consumer Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,459 1,631,496 Commercial Lease Financing . . . . . . . . . . . . . . . . . . . . . . . . 350,306 282,579 Consumer Lease Financing . . . . . . . . . . . . . . . . . . . . . . . . . 819,925 454,607 Unearned Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (154,636) (118,986) Reserve for Credit Losses . . . . . . . . . . . . . . . . . . . . . . . . . (135,097) (114,751) - --------------------------------------------------------------------------------------------------------------------- Total Loans and Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,675,942 7,360,108 - --------------------------------------------------------------------------------------------------------------------- Bank Premises and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . 156,051 120,650 - --------------------------------------------------------------------------------------------------------------------- Accrued Income Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,825 76,000 - --------------------------------------------------------------------------------------------------------------------- Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,165 156,816 - --------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,966,000 10,213,320 - --------------------------------------------------------------------------------------------------------------------- LIABILITIES - --------------------------------------------------------------------------------------------------------------------- Deposits Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,462,712 1,306,766 Interest Checking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,365,462 1,185,660 Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609,533 491,764 Money Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,460,271 1,405,469 Other Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,255,347 2,672,344 Certificates--$100,000 and Over . . . . . . . . . . . . . . . . . . . . . . 305,530 399,210 Foreign Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169,643 70,733 - --------------------------------------------------------------------------------------------------------------------- Total Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,628,498 7,531,946 Federal Funds Borrowed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,031,564 466,889 Other Short-Term Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . 570,653 762,902 Accrued Taxes, Interest and Expenses . . . . . . . . . . . . . . . . . . . . . . 172,884 106,728 Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,891 85,629 Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,119 111,768 Convertible Subordinated Notes . . . . . . . . . . . . . . . . . . . . . . . . . 142,745 142,293 - --------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,768,354 9,208,155 - --------------------------------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY (a) - --------------------------------------------------------------------------------------------------------------------- Common Stock (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,313 132,859 Capital Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243,377 201,887 Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 805,726 670,823 Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (404) Unrealized Gains on Securities Available for Sale . . . . . . . . . . . . . . . . 12,230 -- - --------------------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,197,646 1,005,165 - --------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . $11,966,000 10,213,320 - --------------------------------------------------------------------------------------------------------------------- (a) 500,000 shares of no par value preferred stock are authorized of which none have been issued. (b) Stated value $2.22 per share; authorized 100,000,000; outstanding 1993--61,402,257 and 1992--59,831,540, (excluding 14,763 treasury shares at December 31, 1992). See Notes to Consolidated Financial Statements.
16 FIFTH THIRD BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
COMMON STOCK ------------------------- SHARES CAPITAL RETAINED TREASURY UNREALIZED ($000's) OUTSTANDING AMOUNT SURPLUS EARNINGS STOCK GAINS TOTAL - ---------------------------------------------------------------------------------------------------------------------------- BALANCE AT JANUARY 1, 1991 ........... 39,386,956 $ 87,439 182,473 512,786 -- -- 782,698 Net Income ........................... 138,150 138,150 Cash Dividends Declared at $.78 Per Share ..................... (46,216) ( 46,216) Shares Acquired for Treasury ......... (43,650) (2,426) ( 2,426) Stock Options Exercised, Including Treasury Shares Issued ... 226,134 427 3,770 2,022 6,219 Corporate Tax Benefit Related to Exercise of Non-Qualified Stock Options ...................... 467 467 Stock Issued in Acquisition (Previously Held in Escrow) ........ 14,069 31 527 558 - ---------------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1991 ......... 39,583,509 87,897 187,237 604,720 ( 404) -- 879,450 Net Income ........................... 164,092 164,092 Cash Dividends Declared at $.90 Per Share ..................... ( 53,758) ( 53,758) Three-for-Two Stock Split Effected ... in the Form of a Stock Dividend .... 19,791,755 43,937 ( 43,937) -- Shares Acquired for Treasury ......... ( 11,980) ( 491) ( 491) Stock Options Exercised, Including Treasury Shares Issued ... 212,533 422 3,269 491 4,182 Corporate Tax Benefit Related to Exercise of Non-Qualified Stock Options ...................... 56 56 Fractional Shares Purchased in Stock Split Effected in the Form of a Stock Dividend ................ ( 106) ( 106) Stock Issued in Acquisitions and Other .......................... 255,723 603 11,325 ( 188) 11,740 - ---------------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1992 ......... 59,831,540 132,859 201,887 670,823 ( 404) -- 1,005,165 Net Income ........................... 196,447 196,447 Cash Dividends Declared at $1.02 Per Share ................. ( 61,544) ( 61,544) Shares Acquired for Treasury ......... ( 440) ( 22) ( 22) Stock Options Exercised, Including Treasury Shares Issued ... 214,843 443 3,599 426 4,468 Corporate Tax Benefit Related to Exercise of Non-Qualified Stock Options ...................... 286 286 Stock Issued in Acquisition and Other .......................... 1,356,314 3,011 37,605 40,616 Effect of Change in Accounting for Securities Available for Sale ...... 12,230 12,230 - ---------------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1993 ......... 61,402,257 $136,313 243,377 805,726 -- 12,230 1,197,646 - ---------------------------------------------------------------------------------------------------------------------------- See Notes to Consolidated Financial Statements.
17 FIFTH THIRD BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------------------------------------------------- For the Years Ended December 31 ($000's) 1993 1992 1991 - -------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 196,447 164,092 138,150 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Provision for Credit Losses . . . . . . . . . . . . . . . . . . . . 44,487 65,315 55,744 Depreciation, Amortization and Accretion . . . . . . . . . . . . . 30,396 33,087 15,116 Provision for Deferred Income Taxes . . . . . . . . . . . . . . . . 24,094 4,783 ( 3,341) Realized Securities Gains . . . . . . . . . . . . . . . . . . . . . ( 6,640) ( 1,687) ( 4,352) Realized Securities Losses . . . . . . . . . . . . . . . . . . . . 148 216 199 Proceeds from Sales of Residential Mortgage Loans Held for Sale . . 706,701 155,487 76,779 Gains from Sales of Residential Mortgage Loans Held for Sale . . . ( 10,993) ( 2,932) ( 2,873) Net Increase in Residential Mortgage Loans Held for Sale . . . . . ( 826,788) ( 177,427) ( 91,623) Decrease (Increase) in Accrued Income Receivable . . . . . . . . . ( 16,825) 135 8,453 Decrease (Increase) in Other Assets . . . . . . . . . . . . . . . . 10,002 26,802 ( 63,143) Increase (Decrease) in Accrued Taxes, Interest and Expenses . . . . 31,307 ( 29,835) ( 3,637) Increase (Decrease) in Other Liabilities . . . . . . . . . . . . . ( 6,005) ( 531) 44,522 - -------------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . 176,331 237,505 169,994 - -------------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Proceeds from Sales of Securities Available for Sale . . . . . . . . . . . . . 230,277 -- -- Proceeds from Calls, Paydowns and Maturities of Securities Available for Sale . 213,299 -- -- Purchases of Securities Available for Sale . . . . . . . . . . . . . . . . . . ( 274,911) -- -- Proceeds from Calls, Paydowns and Maturities of Securities Held to Maturity . . 760,613 -- -- Purchases of Securities Held to Maturity . . . . . . . . . . . . . . . . . . . ( 844,663) -- -- Proceeds from Sales of Securities . . . . . . . . . . . . . . . . . . . . . . . -- 249,565 270,165 Proceeds from Calls, Paydowns and Maturities of Securities . . . . . . . . . . -- 1,102,605 609,479 Purchases of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- ( 994,850) (1,584,498) Net Decrease (Increase) in Other Short-Term Investments . . . . . . . . . . . . ( 1,884) 223,795 145,315 Net Increase in Loans and Leases . . . . . . . . . . . . . . . . . . . . . . . (1,336,333) (1,646,561) ( 322,254) Purchases of Bank Premises and Equipment . . . . . . . . . . . . . . . . . . . ( 43,418) ( 17,353) ( 13,491) Proceeds from Disposals of Bank Premises and Equipment . . . . . . . . . . . . 2,017 4,088 1,626 Net Cash Acquired (Paid) in Purchases of Subsidiaries . . . . . . . . . . . . . ( 11,207) 13,536 10,604 - -------------------------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . (1,306,210) (1,065,175) ( 883,054) - -------------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Net Increase in Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 509,647 234,147 31,945 Purchases of Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290,857 277,717 224,425 Net Increase in Federal Funds Borrowed . . . . . . . . . . . . . . . . . . . . 564,675 98,731 109,479 Net Increase (Decrease) in Other Short-Term Borrowings . . . . . . . . . . . . ( 193,584) 88,494 325,540 Proceeds from Issuance of Long-Term Debt and Notes . . . . . . . . . . . . . . 40,000 241,194 -- Repayment of Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . ( 12,124) ( 221) ( 669) Payment of Cash Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . ( 59,325) ( 51,273) ( 44,979) Exercise of Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,754 4,238 6,686 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ( 33) ( 597) ( 2,426) - -------------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES . . . . . . . . . . . . . . . . . . . 1,144,867 892,430 650,001 - -------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND DUE FROM BANKS . . . . . . . . . . . . . . . . 14,988 64,760 ( 63,059) CASH AND DUE FROM BANKS AT BEGINNING OF YEAR . . . . . . . . . . . . . . . . . 565,948 501,188 564,247 - -------------------------------------------------------------------------------------------------------------------------- CASH AND DUE FROM BANKS AT END OF YEAR . . . . . . . . . . . . . . . . . . . . $ 580,936 565,948 501,188 - -------------------------------------------------------------------------------------------------------------------------- Note: The Bancorp paid Federal income taxes of $73,400,000, $62,839,000 and $57,774,000 in 1993, 1992 and 1991, respectively. The Bancorp paid interest of $277,266,000, $307,513,000 and $386,482,000 in 1993, 1992 and 1991, respectively. The Bancorp had noncash investing activities consisting of the securitization and transfer to securities of $291,586,000 and $120,813,000 of residential mortgage loans in 1993 and 1992, respectively. The Bancorp had noncash activities consisting of the reclassification of $851,725,000 in securities as available for sale in 1993. See Notes to Consolidated Financial Statements.
18 FIFTH THIRD BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES The following is a summary of the significant policies: BASIS OF PRESENTATION The Consolidated Financial Statements include the accounts of Fifth Third Bancorp (Bancorp) and its subsidiaries. All material intercompany transactions and balances have been eliminated. Certain prior period data has been reclassified to conform to current period presentation. SECURITIES Statement of Financial Accounting Standards (SFAS) No. 115, ''Accounting for Certain Investments in Debt and Equity Securities'' requires securities to be classified as held to maturity, available for sale or trading. Only those securities classified as held to maturity are reported at amortized cost, with those available for sale and trading reported at fair value with unrealized gains and losses included in stockholders' equity or income, respectively. The Bancorp adopted this Statement effective December 31, 1993. Prior to 1993, all securities were classified in a single portfolio accounted for at amortized cost. Securities gains or losses are shown separately as other operating income in the Consolidated Statements of Income. The cost of securities sold is based on the specific identification method. LOANS Residential mortgage loans held for sale are valued at the lower of aggregate cost or market value and were $174,314,000 and $58,049,000 at December 31, 1993 and 1992, respectively. SFAS No. 114, "Accounting by Creditors for Impairment of a Loan'' requires that impaired loans be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or the fair value of the underlying collateral. SFAS No. 114 is effective for fiscal years beginning after December 15, 1994 and, although not yet quantified, the effect on the Consolidated Financial Statements is not expected to be material. RESERVE FOR CREDIT LOSSES The reserve is maintained at a level management considers to be adequate to absorb potential loan and lease losses. Credit losses are charged and recoveries are credited to the reserve. Provisions for credit losses are charged to operating expenses and are based on management's review of the historical credit loss experience and such other factors which, in management's judgment, deserve recognition under existing economic conditions in estimating potential credit losses. BANK PREMISES AND EQUIPMENT Bank premises and equipment, including leasehold improvements, are stated at cost less accumulated depreciation and amortization. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets. Amortization of leasehold improvements is computed on the straight-line method over the lives of the related leases or useful lives of the related assets, whichever is shorter. Maintenance, repairs and minor improvements are charged to operating expenses as incurred. INTANGIBLE ASSETS Goodwill and other intangible assets are amortized on a straight-line basis generally over a period of 15 years. REVENUE RECOGNITION Interest income on loans is based on the principal balance outstanding, with the exception of interest on discount basis loans which is computed using a method which approximates the interest method. The accrual of interest for commercial, construction and mortgage loans is discontinued when there is a clear indication that the borrower's cash flow may not be sufficient to meet payments as they become due. Such loans are also placed on nonaccrual status when principal or interest is past due ninety days or more, unless the loan is well secured and in the process of collection. Loan origination and commitment fees and certain direct loan origination costs are deferred and the net amount amortized over the estimated life of the related loans or commitments as a yield adjustment. Income on direct financing leases is recognized on a basis to achieve a constant periodic rate of return on the outstanding investment. Income on leveraged leases is recognized on a basis to achieve a constant rate of return on the outstanding investment in the lease, net of the related deferred tax liability, in the years in which the net investment is positive. Trust income is recognized on the accrual basis. NET INCOME PER SHARE Net income per share is calculated by dividing net income for the period by the weighted average number of shares of common stock outstanding during the period. The assumed conversion of convertible subordinated notes and the exercise of stock options would not have a materially dilutive effect. OTHER Securities and other property held by the Trust Division of the banking subsidiaries in a fiduciary or agency capacity are not included in the Consolidated Balance Sheets since such items are not assets of the banks. NOTE 2--SECURITIES Securities available for sale as of December 31, 1993:
- -------------------------------------------------------- Amortized Unrealized Unrealized Market ($000's) Cost Gains Losses Value - -------------------------------------------------------- U.S. Government and agencies obligations .. $195,950 3,536 -- 199,486 Agency mortgage- backed securities ... 504,237 9,067 259 513,045 Other bonds, notes and debentures ... 96,068 314 13 96,369 Other securities 915 6,171 -- 7,086 - -------------------------------------------------------- Total securities $797,170 19,088 272 815,986 - --------------------------------------------------------
19 FIFTH THIRD BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Securities held to maturity as of December 31, 1993:
- ------------------------------------------------------------- Book Unrealized Unrealized Market ($000's) Value Gains Losses Value - ------------------------------------------------------------- Obligations of states and political subdivisions . $ 327,636 6,725 -- 334,361 Agency mortgage- backed securities . . 1,008,555 22,802 -- 1,031,357 Other bonds, notes and debentures . . 141,661 40 1,634 140,067 Other securities 9,470 -- -- 9,470 - ------------------------------------------------------------- Total securities $1,487,322 29,567 1,634 1,515,255 - -------------------------------------------------------------
Securities as of December 31, 1992:
- ------------------------------------------------------------- Book Unrealized Unrealized Market ($000's) Value Gains Losses Value - ------------------------------------------------------------- U.S. Government and agencies obligations .. $ 275,726 9,875 21 285,580 Obligations of states and political subdivisions.. 222,015 4,708 238 226,485 Agency mortgage- backed securities ... 1,271,645 16,006 2,635 1,285,016 Other bonds, notes and debentures ... 152,085 549 952 151,682 Other securities 11,537 -- -- 11,537 - ------------------------------------------------------------- Total securities $1,933,008 31,138 3,846 1,960,300 - -------------------------------------------------------------
The amortized cost, book value and approximate market value of securities at December 31, 1993, by contractual maturity, are shown in the following table. Actual maturities may differ from contractual maturities when there exists a right to call or prepay obligations with or without call or prepayment penalties. Maturities of mortgage-backed securities were estimated based on historical and expected future prepayment trends.
- --------------------------------------------------------- Available for Sale Held to Maturity ------------------- --------------------- Amortized Market Book Market ($000's) Cost Value Value Value - --------------------------------------------------------- Debt securities: Under 1 year $163,210 166,320 $ 131,790 133,858 1-5 years 456,529 466,164 1,145,843 1,168,452 6-10 years 165,774 165,238 151,711 155,002 Over 10 years 10,742 11,178 48,508 48,473 Other securities 915 7,086 9,470 9,470 - --------------------------------------------------------- Total securities $797,170 815,986 $1,487,322 1,515,255 - ---------------------------------------------------------
At December 31, 1993 and 1992, securities with an amortized cost or book value of $1,150,319,000 and $1,162,568,000, respectively, were pledged to secure securities sold under agreements to repurchase, public deposits, trust funds and for other purposes as required or permitted by law. NOTE 3--RESERVE FOR CREDIT LOSSES Transactions in the reserve for credit losses for the years ended December 31:
- ------------------------------------------------------------ ($000's) 1993 1992 1991 - ------------------------------------------------------------ Balance at January 1 . . . $114,751 90,324 85,025 Losses charged off . . . . ( 35,985) ( 53,240) (58,113) Recoveries of losses previously charged off . . . . . . 9,722 8,554 7,370 - ------------------------------------------------------------ Net charge-offs . . . . . . ( 26,263) ( 44,686) (50,743) Provision charged to operations 44,487 65,315 55,744 Reserve of acquired banks . 2,122 3,798 298 - ------------------------------------------------------------ Balance at December 31 . . $135,097 114,751 90,324 - ------------------------------------------------------------
For calendar years 1993, 1992 and 1991, interest income of $368,000, $565,000 and $1,579,000, respectively, was recorded on nonaccrual and renegotiated loans and leases. Additional interest income of $1,169,000, $4,012,000 and $7,639,000 would have been recorded if the nonaccrual and renegotiated loans and leases had been current in accordance with their original terms. NOTE 4--LEASE FINANCING A summary of the gross investment in lease financing at December 31:
- -------------------------------------------------------- ($000's) 1993 1992 - -------------------------------------------------------- Direct financing leases . . . . . .$1,131,016 695,187 Leveraged leases . . . . . . . . . 39,215 41,999 - -------------------------------------------------------- Total lease financing . . . . . . .$1,170,231 737,186 - --------------------------------------------------------
The components of the investment in lease financing at December 31:
- --------------------------------------------------------------- ($000's) 1993 1992 - --------------------------------------------------------------- Rentals receivable, net of principal and interest on the nonrecourse debt . . . $ 779,034 515,793 Estimated residual value of leased assets. 391,197 221,393 - --------------------------------------------------------------- Gross investment in lease financing . . . 1,170,231 737,186 Unearned income . . . . . . . . . . . . . ( 147,280) (105,706) - --------------------------------------------------------------- Total net investment in lease financing . $1,022,951 631,480 - ---------------------------------------------------------------
NOTE 5--BANK PREMISES AND EQUIPMENT A summary of bank premises and equipment at December 31:
- ----------------------------------------------------------- Estimated ($000's) Useful Life 1993 1992 - ----------------------------------------------------------- Land and improvements . . $ 29,090 17,645 Buildings . . . . . . . . 18 to 50 yrs. 120,394 98,814 Equipment . . . . . . . . 3 to 20 yrs. 85,564 81,281 Leasehold improvements . 6 to 25 yrs. 23,418 17,843 Accumulated depreciation and amortization . . . (102,415) ( 94,933) - ----------------------------------------------------------- Total bank premises and equipment . . . . . . . $156,051 120,650 - -----------------------------------------------------------
Depreciation and amortization expense related to bank premises and equipment was $13,307,000 in 1993, $11,652,000 in 1992 and $11,025,000 in 1991. Occupancy expense has been reduced by rental income from leased premises, including the Bancorp's pro rata interest in the rental income from Fifth Third Center, of $8,314,000 in 1993, $7,067,000 in 1992 and $6,829,000 in 1991. 20 FIFTH THIRD BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The banking subsidiaries have entered into a number of noncancelable lease agreements with respect to bank premises and equipment. A summary of the minimum annual rental commitments under these leases, exclusive of taxes and other charges payable by the lessee:
- -------------------------------------------------------- Land and ($000's) Buildings Equipment Total - -------------------------------------------------------- 1994 . . . . . . . . . $ 6,902 486 7,388 1995 . . . . . . . . . 6,120 352 6,472 1996 . . . . . . . . . 5,250 270 5,520 1997 . . . . . . . . . 4,242 257 4,499 1998 . . . . . . . . . 3,978 8 3,986 1999 and subsequent years 22,433 -- 22,433 - -------------------------------------------------------- Total . . . . . . . . . $48,925 1,373 50,298 - --------------------------------------------------------
Rental expense for cancelable and noncancelable leases was $9,670,000 for 1993, $8,287,000 for 1992 and $7,466,000 for 1991. NOTE 6--INTANGIBLES Intangibles, net of accumulated amortization, included in Other Assets in the Consolidated Balance Sheets at December 31:
- -------------------------------------------------------- ($000's) 1993 1992 - -------------------------------------------------------- Goodwill . . . . . . . . . . . . . $32,569 34,688 Premium on purchased deposits . . . 21,468 20,144 Purchased mortgage servicing rights 404 810 Other intangibles . . . . . . . . . -- 911 - -------------------------------------------------------- Total intangibles . . . . . . . . . $54,441 56,553 - --------------------------------------------------------
NOTE 7--FEDERAL FUNDS BORROWED AND OTHER SHORT-TERM BORROWINGS A summary of Federal funds borrowed and other short-term borrowings at December 31:
- -------------------------------------------------------- 1993 1992 ---------------- ---------------- ($000's) Amount Rate Amount Rate - -------------------------------------------------------- Federal funds borrowed . . . $1,031,564 2.90% $ 466,889 3.29% - -------------------------------------------------------- Securities sold under agreements to repurchase . . 416,023 2.66 564,806 3.08 Commercial paper 56,296 3.11 99,622 3.22 U.S. Treasury demand notes . . . . 98,334 2.60 98,474 2.66 - -------------------------------------------------------- Other short-term borrowings . . 570,653 2.69 762,902 3.04 - -------------------------------------------------------- Total . . . . . . $1,602,217 2.83% $1,229,791 3.14% - -------------------------------------------------------- Average outstanding $1,275,568 $1,173,253 Maximum month-end balance . . . $1,602,217 $1,436,203 Weighted average interest rate 3.00% 3.47% - --------------------------------------------------------
At December 31, 1993, the Bancorp had unused lines of credit of $100,000,000 available to support commercial paper transactions and other corporate requirements. NOTE 8--LONG-TERM DEBT AND CONVERTIBLE SUBORDINATED NOTES At December 31, 1993 and 1992, the Bancorp had $142,745,000 and $142,293,000, respectively, net of discount, in 4 1/4% convertible subordinated notes due 1998. The notes are convertible into Bancorp common stock at $63.625 per share and are redeemable in whole or in part at 101.70% from January 22, 1996 to January 21, 1997, and at 100.85% thereafter, until maturity. At December 31, 1993 and 1992, the Bancorp had $99,603,000 and $99,134,000, respectively, net of discount, in 4% medium-term bank notes due 1994, with interest payable semiannually, under a $200,000,000 facility. At December 31, 1993, the Bancorp had $40,000,000 in notes payable to the Federal Home Loan Bank (FHLB) which bear interest of 3.90% to 4.55%. The FHLB notes mature quarterly in $5,000,000 installments beginning in December 1994 and interest is payable monthly. The FHLB notes are secured by certain residential mortgage loans (book value of $237,458,000 at December 31, 1993) of a subsidiary bank. The Bancorp has issued other promissory notes which bear interest of approximately 7-9% and are payable as follows: $110,000 for 1994, $115,000 for 1995, $90,000 for 1996, $100,000 for 1997 and $105,000 for 1998. NOTE 9--INCOME TAXES The Bancorp and its subsidiaries file a consolidated Federal income tax return. A summary of applicable income taxes included in the Consolidated Statements of Income:
- ---------------------------------------------------------- ($000's) 1993 1992 1991 - ---------------------------------------------------------- Current U.S. income taxes . $72,524 69,226 62,290 State and local income taxes 2,028 1,555 1,497 - ---------------------------------------------------------- Total . . . . . . . . . . . 74,552 70,781 63,787 - ---------------------------------------------------------- Deferred U.S. income taxes resulting from temporary differences . . . . . . 24,094 4,783 ( 3,341) - ---------------------------------------------------------- Applicable income taxes $98,646 75,564 60,446 - ----------------------------------------------------------
Deferred income taxes are included in the Consolidated Balance Sheets in the caption ''Accrued Taxes, Interest and Expenses'' and are comprised of the following temporary differences at December 31:
- --------------------------------------------------------- ($000's) 1993 1992 - --------------------------------------------------------- Lease financing . . . . . . . . . . $111,402 78,686 Reserve for credit losses . . . . . ( 43,797) ( 37,189) Bank premises and equipment . . . . 4,600 4,298 Unrealized gains on securities available for sale . . . . . . . 6,586 -- Other . . . . . . . . . . . . . . . ( 2,658) ( 3,954) - --------------------------------------------------------- Total net deferred tax liability . $ 76,133 41,841 - ---------------------------------------------------------
The effect on deferred taxes of the increase in statutory tax rates during 1993 was $1,039,000. A reconciliation between the statutory U.S. income tax rate and the Bancorp's effective tax rate:
- ---------------------------------------------------------- 1993 1992 1991 - ---------------------------------------------------------- Statutory tax rate . . . . . . 35.0% 34.0 34.0 Increase (decrease) resulting from: Tax exempt interest . . . . ( 2.8) ( 3.1) ( 4.5) Other--net . . . . . . . . . 1.2 .6 .9 - ---------------------------------------------------------- Effective tax rate . . . . . . 33.4% 31.5 30.4 - ----------------------------------------------------------
21 FIFTH THIRD BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10--OTHER SERVICE CHARGES AND FEES AND OTHER OPERATING EXPENSES The major components for the years ended December 31 are:
- ---------------------------------------------------------------- ($000's) 1993 1992 1991 - ---------------------------------------------------------------- Other Service Charges and Fees: Bank card operations . . . $ 10,742 11,040 12,376 Consumer loan fees . . . . 10,279 8,659 6,922 Commercial loan and commitment fees . . . . 10,785 10,392 7,547 Mortgage banking . . . . . 19,612 9,857 5,937 Other . . . . . . . . . . 9,015 15,903 12,439 - ---------------------------------------------------------------- Total other service charges and fees $ 60,433 55,851 45,221 - ---------------------------------------------------------------- Other Operating Expenses: Marketing and communications $ 21,587 19,451 17,218 FDIC insurance . . . . . . 17,236 16,145 13,419 Franchise taxes . . . . . 10,312 9,809 9,718 Other . . . . . . . . . . 84,233 72,136 57,082 - ---------------------------------------------------------------- Total other operating expenses $133,368 117,541 97,437 - ----------------------------------------------------------------
NOTE 11--STOCK OPTIONS Options have been granted under the Bancorp's Stock Option Plans to key employees and directors of the Bancorp and its subsidiaries. A summary of option transactions during 1993, 1992 and 1991:
- -------------------------------------------------------------------------- 1993 1992 1991 ----------------- ------------------- ------------------- Average Average Average Option Option Option Shares Price Shares Price Shares Price - -------------------------------------------------------------------------- Outstanding, beginning of year. 1,152,006 $32.50 $1,079,093 $24.27 1,149,390 $19.57 Exercised.. ( 214,843) 20.80 ( 212,533) 19.50 ( 339,201) 17.94 Expired ... ( 34,011) 47.08 ( 17,694) 32.80 ( 32,971) 21.20 Granted ... 503,599 52.33 303,140 52.67 301,875 34.73 - -------------------------------------------------------------------------- Outstanding, end of year ... 1,406,751 $41.03 1,152,006 $32.50 1,079,093 $24.27 - --------------------------------------------------------------------------
At December 31, 1993, there were 1,015,844 incentive options and 390,907 nonqualified options outstanding. At December 31, 1993, options to purchase 908,912 shares were exercisable and 946,725 shares were available for granting additional options. NOTE 12--RETIREMENT PLAN AND BENEFIT PLANS The Bancorp maintains a noncontributory retirement plan covering substantially all regular full-time employees and providing defined benefits based on years of credited service and compensation level, partially offset by social security benefits. Contributions to the plan are based on the entry age actuarial cost method and are limited to amounts currently deductible for income tax purposes. In determining the actuarial present value of the projected benefit obligation, the weighted average discount rate was 7.25% in 1993 and 7.75% in 1992, and the rate of increase in future compensation levels was 5.5% in both years. The expected long-term rate of return on retirement plan assets was 9.0% in 1993 and in 1992. A summary of the plan's funded status at December 31:
- -------------------------------------------------------- ($000's) 1993 1992 - -------------------------------------------------------- Vested benefit obligation . . . . . . $19,716 18,417 Non-vested benefit obligation . . . . 1,323 1,709 - -------------------------------------------------------- Accumulated benefit obligation . . . $21,039 20,126 - -------------------------------------------------------- Plan assets at fair value, primarily common funds managed by The Fifth Third Bank, listed stocks and U.S. bonds . . . $45,822 48,891 Projected benefit obligation for service rendered to date . . . . . . . . . 25,157 23,723 - -------------------------------------------------------- Plan assets in excess of projected benefit obligation . . . . . . . . . . . . 20,665 25,168 Less: Unrecognized transition assets being amortized over 15.6 years . . . 2,254 2,665 Unrecognized reduction in prior service cost . . . . . . . . . 4,377 4,970 Unrecognized net gain . . . . . . 2,918 10,021 - -------------------------------------------------------- Prepaid pension cost . . . . . . . . $11,116 7,512 - --------------------------------------------------------
A summary of the components of the provision for retirement cost for the years ended December 31:
- -------------------------------------------------------- ($000's) 1993 1992 1991 - -------------------------------------------------------- Service cost for current year $ 1,453 1,462 1,285 Interest cost . . . . . . . 1,928 1,971 1,917 Actual return on plan assets ( 104) (2,548) (9,324) Amortization, primarily of initial unrecognized asset and prior service cost . . . . . . (1,004) (1,227) ( 896) Net gain (loss)--deferred . (4,284) (1,907) 5,803 - -------------------------------------------------------- Net retirement income . . . $(2,011) (2,249) (1,215) - --------------------------------------------------------
The Bancorp sponsors an unfunded Supplemental Retirement Income Plan that provides certain officers with defined pension benefits in excess of the limits imposed on the qualified plan by federal tax law. At December 31, 1993 and 1992, the projected benefit obligations under this nonqualified plan were $5,479,000 and $1,596,000, respectively. Pension costs for the plan were $433,000 in 1993, $335,000 in 1992 and $287,000 in 1991. The Bancorp has a profit sharing plan covering substantially all regular full-time employees. The contribution to the plan is an amount determined annually by the Board of Directors and was $15,400,000 for 1993, $14,560,000 for 1992 and $11,550,000 for 1991. NOTE 13--COMMITMENTS AND CONTINGENT LIABILITIES The Bancorp is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers in Ohio, Kentucky and Indiana. These financial instruments primarily include commitments to extend credit, letters of credit and foreign exchange forward contracts and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Consolidated Balance Sheets. The contract amounts of these instruments reflect the extent of involvement the Bancorp has in particular classes of financial instruments. Creditworthiness for all instruments is evaluated on a case-by-case basis in 22 FIFTH THIRD BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS accordance with Bancorp credit policies. Collateral, if deemed necessary, is based on management's credit evaluation of the counterparty and may include business assets of commercial borrowers as well as personal property and real estate of individual borrowers or guarantors. A summary of significant commitments at December 31:
- -------------------------------------------------------- Contract Amount ---------------------- ($000's) 1993 1992 - -------------------------------------------------------- Commitments to extend credit . $3,449,185 3,397,531 Letters of credit (including standby letters of credit) . 416,702 356,810 Forward contracts: Foreign exchange--buy and sell 161,237 94,929 Other commitments to sell . 106,000 -- - --------------------------------------------------------
Commitments to extend credit are agreements to lend. The Bancorp's credit loss in the event of nonperformance by the other party is represented by the contractual amount. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Total commitment amounts do not necessarily represent future cash requirements. Letters of credit, which totalled $17,712,000 at December 31, 1993, are issued to commercial customers for a duration of one year or less to facilitate trade payments in domestic and foreign transactions. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. At December 31, 1993, approximately $213,981,000 of standby letters of credit will expire within one year, $142,658,000 expire between one to five years and $42,351,000 expire thereafter. The Bancorp's exposure to credit loss in the event of nonperformance by the other party for letters of credit is represented by the contractual amount. Forward contracts are contracts for future delivery of foreign currency or residential mortgage loans at a specified price or yield. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from any resultant exposure to movement in foreign exchange rates and interest rates, rather than from loss of the notional principal or contract amount. The Bancorp reduces its market risk for foreign exchange forward contracts by entering into offsetting contracts. There are claims pending against the Bancorp and its subsidiaries. Based on a review of such litigation with legal counsel, management believes that any resulting liability would not have a material effect upon the Bancorp's consolidated financial position or results of operations. NOTE 14--ACQUISITIONS
- ------------------------------------------------------------------- Consideration ----------------- Common Date Cash Shares Method of Consummated ($000's) Issued Accounting - -------------------------------------------------------------------- THE TRISTATE BANCORP 12/23/93 $ 12 1,356,314 Pooling CINCINNATI, OHIO First Federal Savings and 9/08/92 -- 49,096 Purchase Loan Association of Lima Lima, Ohio Pinnacle Bancorp, Inc. 3/27/92 23 206,627 Purchase Middletown, Ohio Sovereign Savings Bank, FSB 9/16/91 800 -- Purchase Palm Harbor, Florida The Farmers Exchange Bank 8/16/91 3,000 -- Purchase Millersburg, Kentucky - ----------------------------------------------------------------
The Consolidated Financial Statements have not been restated to include the acquisition of The TriState Bancorp, which was accounted for as a pooling of interests, because of immateriality. In January, 1994, the Bancorp entered into a merger agreement with The Cumberland Federal Bancorporation, Inc., a savings and loan holding company with $1.1 billion in assets headquartered in Louisville, Kentucky. This transaction is expected to be completed in mid-1994, will be accounted for as a pooling of interests and is subject to approval by shareholders and appropriate regulatory agencies. NOTE 15--REGULATORY MATTERS The principal source of income and funds for the Bancorp (parent company) are dividends from the banking subsidiaries. During the year 1994, the amount of dividends that the banking subsidiaries can pay to the Bancorp without prior approval of bank regulatory agencies is limited to their 1994 eligible net profits, as defined, and $154,963,000, the adjusted retained 1993 and 1992 net income of the banking subsidiaries. The banks must maintain noninterest-bearing cash balances on reserve with the Federal Reserve Bank. In 1993 and 1992, the banks were required to maintain average reserve balances of $167,682,000 and $137,164,000, respectively. NOTE 16--RELATED PARTY TRANSACTIONS At December 31, 1993 and 1992, certain directors, executive officers, principal holders of Bancorp common stock and any associates of such persons were indebted to the banking subsidiaries in the aggregate amount of $171,493,000 and $112,608,000, respectively. During 1993, new loans aggregating $111,172,000 were made to such parties and loans aggregating $52,287,000 were repaid. Such indebtedness was incurred in the ordinary course of business on substantially the same terms as those prevailing at the time of comparable transactions with unrelated parties. NOTE 17--FAIR VALUE OF FINANCIAL INSTRUMENTS Carrying amounts and estimated fair values for financial instruments as of December 31:
- -------------------------------------------------------------- 1993 ---------------------- Carrying Fair ($000's) Amount Value - -------------------------------------------------------------- FINANCIAL ASSETS: Cash and due from banks . . $ 580,936 580,936 Securities available for sale 815,986 815,986 Securities held to maturity 1,487,322 1,515,255 Other short-term investments 2,773 2,773 Loans, net . . . . . . . . . 7,652,991 7,831,331 FINANCIAL LIABILITIES: Deposits . . . . . . . . . . 8,628,498 8,679,517 Federal funds borrowed . . . 1,031,564 1,031,564 Other short-term borrowings 570,653 570,653 Long-term debt . . . . . . . 140,119 140,227 Convertible subordinated notes 142,745 142,399 OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS: Commitments to extend credit -- 7,576 Letters of credit . . . . -- 4,167 Forward contracts: Foreign exchange--buy and sell -- 169 Other commitments to sell -- 476 - --------------------------------------------------------------
23 FIFTH THIRD BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------- 1992 --------------------- Carrying Fair ($000's) Amount Value - -------------------------------------------------------- Financial Assets: Cash and due from banks . . $ 565,948 565,948 Securities . . . . . . . . . 1,933,008 1,960,300 Other short-term investments 790 790 Loans, net . . . . . . . . . 6,728,628 6,975,628 Financial Liabilities: Deposits . . . . . . . . . . 7,531,946 7,560,614 Federal funds borrowed . . . 466,889 466,889 Other short-term borrowings 762,902 762,902 Long-term debt . . . . . . . 111,768 111,768 Convertible subordinated notes 142,293 142,293 Off-Balance-Sheet Financial Instruments: Commitments to extend credit -- 6,348 Letters of credit . . . . -- 3,746 Foreign exchange forward contracts--buy and sell -- 44 - --------------------------------------------------------
Fair values for financial instruments were based on various assumptions and estimates as of a specific point in time, are essentially liquidation values and may vary significantly from amounts that will be realized in actual transactions. In addition, certain financial instruments and all non-financial instruments were excluded from the fair value disclosure requirements. Therefore, the fair values presented above should not be construed as the underlying value of the Bancorp. The following methods and assumptions were used in determining the fair value of selected financial instruments: Short-term financial assets and liabilities-for financial instruments with short or no stated maturity, prevailing market rates and limited credit risk, carrying amounts approximate fair value. Those financial instruments include cash and due from banks, other short-term investments, certain deposits (demand, interest checking, savings and money market), Federal funds borrowed and other short-term borrowings. Securities, available for sale and held to maturity-fair values were based on quoted market prices, dealer quotes and prices obtained from independent pricing services. Loans-fair values of loans were estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Deposits-fair values for other time, certificates of deposit-$100,000 and over and foreign office were estimated using a discounted cash flow calculation that applies interest rates currently being offered for deposits of similar remaining maturities. Long-term debt and convertible subordinated notes-fair value of convertible subordinated notes was based on quoted market prices. Fair value of long-term debt was based on quoted market prices, when available, and a discounted cash flow calculation using prevailing market rates for borrowings of similar terms. Off-balance-sheet financial instruments-fair values of commitments to extend credit and letters of credit were based on fees currently charged to enter into similar agreements with similar remaining maturities. Fair values of forward contracts were estimated using quoted market prices of comparable instruments. NOTE 18-PARENT COMPANY FINANCIAL STATEMENTS The condensed financial statements of the Bancorp ($000's):
- ------------------------------------------------------------- CONDENSED STATEMENTS OF INCOME (PARENT COMPANY ONLY) For the Years Ended December 31 1993 1992 1991 - -------------------------------------------------------------- INCOME Dividends from Subsidiaries . . . $63,777 141,799 54,000 Interest on Loans to Subsidiaries . 15,890 6,508 11,558 Other . . . . . . . . . . . . . . . 50 1,601 181 - -------------------------------------------------------------- TOTAL INCOME . . . . . . . . . . . 79,717 149,908 65,739 - -------------------------------------------------------------- EXPENSES Interest . . . . . . . . . . . . . 9,494 4,255 5,723 Other . . . . . . . . . . . . . . . 2,456 2,441 2,893 - -------------------------------------------------------------- TOTAL EXPENSES . . . . . . . . . . 11,950 6,696 8,616 - -------------------------------------------------------------- INCOME BEFORE TAXES AND CHANGE IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES . . . . . . . . . . 67,767 143,212 57,123 Applicable Income Taxes . . . . . . 1,640 20 74 - -------------------------------------------------------------- INCOME BEFORE CHANGE IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES . . . . . . . . . . 66,127 143,192 57,049 Increase in Undistributed Earnings of Subsidiaries . . . . 130,320 20,900 81,101 - -------------------------------------------------------------- NET INCOME . . . . . . . . . . . . $196,447 164,092 138,150 - --------------------------------------------------------------
- -------------------------------------------------------- CONDENSED BALANCE SHEETS (PARENT COMPANY ONLY) December 31 1993 1992 - -------------------------------------------------------- ASSETS Cash . . . . . . . . . . . . . . $1,771 902 Securities Held to Maturity . . . 90 1,480 Loans to Subsidiaries . . . . . . 374,506 445,931 Investment in Subsidiaries . . . 1,017,846 798,017 Dividends Receivable from Subsidiaries 6,176 -- Excess of Cost Over Equity in Purchased Subsidiaries . . . . 13,154 15,518 Other Assets . . . . . . . . . . 2,496 154 - -------------------------------------------------------- TOTAL ASSETS . . . . . . . . . . $1,416,039 1,262,002 - -------------------------------------------------------- LIABILITIES Other Short-Term Borrowings . . . $56,296 99,622 Accrued Expenses and Other Liabilities 19,352 14,922 Convertible Subordinated Notes . 142,745 142,293 - -------------------------------------------------------- TOTAL LIABILITIES . . . . . . . . 218,393 256,837 - -------------------------------------------------------- STOCKHOLDERS' EQUITY . . . . . . 1,197,646 1,005,165 - -------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . $1,416,039 1,262,002 - --------------------------------------------------------
24 FIFTH THIRD BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------- CONDENSED STATEMENTS OF CASH FLOWS (Parent Company Only) For the Years Ended December 31 1993 1992 1991 - ------------------------------------------------------------------------- OPERATING ACTIVITIES Net Income ............................ $196,447 164,092 138,150 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Amortization ...................... 1,236 810 554 Provision for Deferred Income Taxes ................... ( 1,099) ( 171) 724 Realized Securities Gains ......... -- ( 25) ( 57) Realized Securities Losses ........ -- 123 97 Net Decrease (Increase) in Dividends Receivable from Subsidiaries .............. ( 6,176) 23,800 22,934 Decrease (Increase) in Other Assets .................. 741 ( 7,884) 2,854 Increase (Decrease) in Accrued Expenses and Other Liabilities .............. 3,071 4,560 ( 2,488) Increase in Undistributed Earnings of Subsidiaries ....... (130,320) ( 20,900) ( 81,101) - ------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES ................ 63,900 164,405 81,667 - ------------------------------------------------------------------------- INVESTING ACTIVITIES Proceeds from Maturities of Securities Held to Maturity ......... 475 -- -- Proceeds from Sales of Securities ...... -- 740 2,891 Proceeds from Maturities of Securities .......................... -- 450 650 Purchases of Securities ................ -- ( 700) -- Net Decrease (Increase) in Loans to Subsidiaries ............... 71,425 (242,051) ( 30,935) Capital Contributions to Subsidiaries ........................ ( 37,000) ( 22,401) ( 23,000) Purchases of Subsidiaries .............. ( 12) ( 23) ( 3,800) Proceeds from Liquidation of Subsidiaries ........................ -- 3,018 -- - ------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ................. 34,888 (260,967) ( 54,194) - ------------------------------------------------------------------------- FINANCING ACTIVITIES Net Increase (Decrease)in Other Short-Term Borrowings .......... ( 43,326) 1,921 13,610 Repayment of Long-Term Debt ............. -- -- ( 372) Proceeds from Issuance of Convertible Subordinated Notes ....... -- 142,207 -- Payment of Cash Dividends ............... ( 59,325) ( 51,273) ( 44,979) Shares Acquired for Treasury ............ ( 22) ( 491) ( 2,426) Fractional Shares Purchased in Stock Split .......................... -- ( 106) -- Exercise of Stock Options ............... 4,754 4,238 6,686 - ------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ................. ( 97,919) 96,496 ( 27,481) - ------------------------------------------------------------------------- INCREASE (DECREASE)IN CASH .............. 869 ( 66) ( 8) CASH AT BEGINNING OF YEAR ............... 902 968 976 - ------------------------------------------------------------------------- CASH AT END OF YEAR ..................... $ 1,771 902 968 - -------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT To the Stockholders and Board of Directors of Fifth Third Bancorp: We have audited the accompanying consolidated balance sheets of Fifth Third Bancorp and subsidiaries as of December 31, 1993 and 1992 and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Companies at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. As discussed in Note 1 to the Consolidated Financial Statements, the Bancorp changed its method of accounting for debt and equity securities effective December 31, 1993. /s/ Deloitte & Touche Cincinnati, Ohio January 14, 1994 25 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In the following pages, Management discusses its analysis of the Bancorp's financial condition and results of operations in 1993 compared to prior years. The data presented in this discussion should be read in conjunction with the audited Consolidated Financial Statements on pages 15 to 25 of this report. RESULTS OF OPERATIONS SUMMARY Net income advanced in 1993 for the twentieth consecutive year. The Bancorp's net income to average assets, referred to as return on assets, has gradually increased for the last five years as has return on average stockholders' equity. The table below summarizes these measures:
- ----------------------------------------------------------------------------- 1993 1992 1991 1990 1989 - ----------------------------------------------------------------------------- Net Income ($000's)....... $196,447 164,092 138,150 120,411 108,318 Net income per share (a).. $ 3.28 2.75 2.33 2.05 1.86 Return on assets ......... 1.80% 1.74 1.68 1.64 1.62 Return on equity ......... 18.2% 17.3 16.6 16.2 16.5 - ----------------------------------------------------------------------------- (a) Per share amounts reflect the three-for-two stock splits effected in the form of stock dividends paid April 15, 1992 and January 13, 1990.
NET INTEREST INCOME The largest source of the Bancorp's income is net interest income. Net interest income is the spread between income on interest-earning assets, such as loans and securities, and the interest expense on liabilities used to fund those assets, such as deposits and funds borrowed. Net interest income is affected by both changes in the level of interest rates and changes in the amount and composition of interest-earning assets and interest-bearing liabilities. Changes in net interest income are frequently measured by two statistics--net interest margin and net interest rate spread. Net interest margin is expressed as net interest income divided by average earning assets. Net interest rate spread is the difference between the average rate earned on earning assets and the average rate incurred on interest-bearing liabilities. Both of these measures are reported on a taxable equivalent basis. Net interest margin is greater than net interest rate spread due to the interest income earned on assets funded by non-interest-bearing liabilities, primarily demand deposits and stockholders' equity.
TABLE 1. CONSOLIDATED AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST INCOME For the Years Ended December 31 (Taxable Equivalent Basis) - --------------------------------------------------------------------------------------------------------------------- 1993 1992 -------------------------------- ------------------------------- Average Average Average Average Out- Revenue/ Yield/ Out- Revenue/ Yield/ (000's) standing Cost Rate standing Cost Rate - ---------------------------------------------------------------------------------------------------------------------- ASSETS Interest-Earning Assets Loans and Leases ........................... $ 8,186,873 $625,652 7.64% $6,616,396 $568,564 8.59% Securities Taxable .................................. 1,675,545 103,019 6.15 1,775,634 123,633 6.96 Exempt from Income Taxes ................. 267,247 18,797 7.03 203,418 15,801 7.77 Other Short-Term Investments ............... 8,338 262 3.14 106,402 3,615 3.40 - -------------------------------------------------------------------------------------------------------------------- Total Interest-Earning Assets ................ 10,138,003 747,730 7.38 8,701,850 711,613 8.18 - -------------------------------------------------------------------------------------------------------------------- Cash and Due from Banks ...................... 479,775 429,467 Other Assets ................................. 403,960 385,480 Reserve for Credit Loses ..................... ( 127,130) ( 102,841) - -------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS ................................. $10,894,608 $9,413,956 - -------------------------------------------------------------------------------------------------------------------- Liabilities Interest-Bearing Liabilities Interest Checking .......................... $ 1,224,662 26,647 2.18 $1,008,998 26,145 2.59 Savings .................................... 554,287 13,497 2.44 442,433 13,673 3.09 Money Market ............................... 1,415,419 35,271 2.49 1,364,221 43,056 3.16 Other Time Deposits ........................ 2,937,394 141,088 4.80 2,612,961 147,924 5.66 Certificates - $100,000 and Over ........... 441,882 15,622 3.54 490,293 23,456 4.78 Foreign Office Deposits .................... 242,245 8,030 3.31 48,200 1,714 3.56 Federal Funds Borrowed ..................... 622,068 18,963 3.05 529,201 17,316 3.27 Other Short-Term Borrowings ................ 653,500 19,314 2.96 644,052 23,380 3.63 Long-Term Debt and Convertible Subordinated Notes ....................... 260,608 12,528 4.81 56,137 3,602 6.42 - -------------------------------------------------------------------------------------------------------------------- Total Interest-Bearing Liabilities ........... 8,352,065 290,960 3.48 7,196,496 300,266 4.17 - -------------------------------------------------------------------------------------------------------------------- Demand Deposits .............................. 1,264,384 1,067,377 Other Liabilities ............................ 197,226 202,419 - -------------------------------------------------------------------------------------------------------------------- Total Liabilities ............................ 9,813,675 8,466,292 - -------------------------------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY ......................... 1,080,933 947,664 - -------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ... $10,894,608 $9,413,956 - -------------------------------------------------------------------------------------------------------------------- NET INTEREST INCOME MARGIN ON A TAXABLE EQUIVALENT BASIS ....... $456,770 4.51% $411,347 4.73% - -------------------------------------------------------------------------------------------------------------------- NET INTEREST RATE SPREAD ..................... 3.90% 4.01% - -------------------------------------------------------------------------------------------------------------------- INTEREST-BEARING LIABILITIES TO INTEREST-EARNING ASSETS ................. 82.38% 82.70% - --------------------------------------------------------------------------------------------------------------------
26 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Table 1, Consolidated Average Balance Sheets and Analysis of Net Interest Income, computes the net interest income, net interest margin and net interest rate spread for the five years 1989 through 1993 by comparing interest revenue and interest-earning assets outstanding with interest cost and interest-bearing liabilities outstanding. All three of these measures are reported on a taxable equivalent basis. Nonaccrual loans have been included in the loan balances. The Bancorp's net interest income grew $45.4 million to $456.8 million in 1993, an increase of 11.0% over the $411.3 million earned during 1992. Net interest income grew by $60.0 million or 17.1% in 1992 over 1991. For 1993, the increase was attributable to an increase in average interest-earning assets, changes in earning asset mix and lower funding costs due to the overall lower interest rate environment. During 1993, average interest-earning assets grew $1.44 billion to $10.14 billion, up 16.5% over 1992. Most of this growth occurred in the retail loan and lease portfolios. Average loans and leases were up $1.57 billion or 23.7% over 1992 and represented 80.8% of total average interest-earning assets as compared to 76.0% for 1992. The shift from shorter-term investments to higher yielding loans and leases positively impacted net interest income. Average interest-earning asset growth in 1992 consisted primarily of a $956.8 million or 16.9% increase in average loans and leases and a $225.2 million or 14.5% increase in average taxable securities. Average interest-bearing liabilities grew $1.16 billion to $8.35 billion in 1993, up 16.1% over 1992, including higher interest-bearing deposit growth, up $848.8 million or 14.2% over 1992. Overall interest expense declined despite higher balances due to continued repricing downward of deposit rates. The net interest margin declined to 4.51% in 1993, down 22 basis points (bp) (a basis point is equivalent to .01%) from 4.73% in 1992. This decline resulted from the reduced impact of free funding sources and from long-term interest rates falling faster than short-term interest rates. Although free funding (average non-interest-bearing sources) increased during 1993, lower average yields reduced their favorable impact on net interest margin, providing 61 bp in 1993 versus 72 bp in 1992. The net interest margin increased 15 bp during 1992 over 1991, due in large part to a 183 bp decline in funding costs. The decline in funding costs was attributable to dramatic decreases in overall deposit rates as well as the issuance of long-term financing.
- --------------------------------------------------------------------------------------------------------- 1991 1990 1989 - ------------------------------- ------------------------------- ------------------------------- Average Average Average Average Average Average Out- Revenue/ Yield/ Out- Revenue/ Yield/ Out- Revenue/ Yield/ standing Cost Rate standing Cost Rate standing Cost Rate - --------------------------------------------------------------------------------------------------------- $5,659,608 $571,985 10.11% $5,250,014 $579,632 11.04% $4,805,763 $549,230 11.43% 1,550,389 127,026 8.19 1,029,449 87,955 8.54 899,438 73,765 8.20 204,329 18,216 8.92 161,943 15,610 9.64 157,296 16,581 10.54 255,154 15,397 6.03 315,985 26,076 8.25 264,174 23,233 8.79 - ------------------------------------------------------------------------------------------------------- 7,669,480 732,624 9.55 6,757,391 709,273 10.50 6,126,671 662,809 10.82 - ------------------------------------------------------------------------------------------------------- 369,998 383,148 368,845 296,380 287,887 254,622 ( 88,867) ( 82,836) ( 72,830) - ------------------------------------------------------------------------------------------------------- $8,246,991 $7,345,590 $6,677,308 - ------------------------------------------------------------------------------------------------------- $ 763,561 31,275 4.10 $ 665,265 31,217 4.69 $ 573,292 26,974 4.71 346,698 15,460 4.46 362,443 17,732 4.89 397,005 19,480 4.91 1,217,193 60,837 5.00 1,117,560 71,762 6.42 1,011,737 67,901 6.71 2,355,902 171,441 7.28 2,064,217 167,855 8.13 1,674,374 135,734 8.11 876,369 57,021 6.51 935,769 75,921 8.11 889,802 78,938 8.87 13,079 756 5.78 2,313 187 8.08 5,596 526 9.40 298,923 16,760 5.61 166,788 13,323 7.99 200,057 18,173 9.08 467,937 26,110 5.58 294,525 23,219 7.88 282,378 25,486 9.03 13,552 1,620 11.95 14,081 1,710 12.14 12,876 1,529 11.87 - ------------------------------------------------------------------------------------------------------- 6,353,214 381,280 6.00 5,622,961 402,926 7.17 5,047,117 374,741 7.42 - ------------------------------------------------------------------------------------------------------- 890,162 823,186 816,564 169,524 155,951 157,247 - ------------------------------------------------------------------------------------------------------- 7,412,900 6,602,098 6,020,928 - ------------------------------------------------------------------------------------------------------- 834,091 743,492 656,380 - ------------------------------------------------------------------------------------------------------- $8,246,991 $7,345,590 $6,677,308 - ------------------------------------------------------------------------------------------------------- $351,344 4.58% $306,347 4.53% $288,068 4.70% - ------------------------------------------------------------------------------------------------------- 3.55% 3.33% 3.40% - ------------------------------------------------------------------------------------------------------- 82.84% 83.21% 82.38% - -------------------------------------------------------------------------------------------------------
27 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TABLE 2.--ANALYSIS OF NET INTEREST INCOME CHANGES (TAXABLE EQUIVALENT BASIS) - ------------------------------------------------------------------------------------------------------------------------------- 1993 Compared to 1992 1992 Compared to 1991 ------------------------------------ ----------------------------------------- ($000's) Volume Yield/Rate Mix Total Volume Yield/Rate Mix Total - ------------------------------------------------------------------------------------------------------------------------------- Increase (Decrease) in Interest Income Loans and Leases . . . . . . . . . . . . $134,955 $(62,930) $(14,937) $57,088 $96,697 $( 85,640) $(14,478) $( 3,421) Securities Taxable . . . . . . . . . . . . . . . ( 6,969) (14,460) 815 (20,614) 18,455 ( 19,077) ( 2,771) ( 3,393) Exempt from Income Taxes . . . . . . 4,958 ( 1,493) ( 469) 2,996 ( 81) ( 2,344) 10 ( 2,415) Other Short-Term Investments . . . . . . ( 3,331) ( 272) 250 ( 3,353) ( 8,976) ( 6,728) 3,922 (11,782) - ------------------------------------------------------------------------------------------------------------------------------- TOTAL INTEREST INCOME CHANGE . . . . . . . 129,613 (79,155) (14,341) 36,117 106,095 (113,789) (13,317) (21,011) - ------------------------------------------------------------------------------------------------------------------------------- Increase (Decrease) in Interest Expense Interest Checking . . . . . . . . . . . 5,588 ( 4,191) ( 895) 502 10,053 ( 11,490) ( 3,693) ( 5,130) Savings . . . . . . . . . . . . . . . . 3,457 ( 2,900) ( 733) ( 176) 4,269 ( 4,746) ( 1,310) ( 1,787) Money Market . . . . . . . . . . . . . . 1,616 ( 9,061) ( 340) ( 7,785) 7,349 ( 22,422) ( 2,708) (17,781) Other Time Deposits . . . . . . . . . . 18,367 (22,419) ( 2,784) ( 6,836) 18,706 ( 38,069) ( 4,154) (23,517) Certificates-$100,000 and Over . . . . . ( 2,316) ( 6,123) 605 ( 7,834) (25,120) ( 15,095) 6,650 (33,565) Foreign Office Deposits . . . . . . . . 6,900 ( 116) ( 468) 6,316 2,030 ( 291) ( 781) 958 Federal Funds Borrowed . . . . . . . . . 3,039 ( 1,184) ( 208) 1,647 12,911 ( 6,979) ( 5,376) 556 Other Short-Term Borrowings . . . . . . 343 ( 4,345) ( 64) ( 4,066) 9,827 ( 9,123) ( 3,434) ( 2,730) Long-Term Debt and Convertible Subordinated Notes . . . . . . . 13,120 ( 903) ( 3,291) 8,926 5,091 ( 750) ( 2,359) 1,982 - ------------------------------------------------------------------------------------------------------------------------------- TOTAL INTEREST EXPENSE CHANGE . . . . . . . 50,114 (51,242) ( 8,178) ( 9,306) 45,116 (108,965) (17,165) (81,014) - ------------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE)IN NET INTEREST INCOME ON A TAXABLE EQUIVALENT BASIS . . $ 79,499 $(27,913) $( 6,163) 45,423 $60,979 $( 4,824) $ 3,848 60,003 - ------------------------------------------------------------------------------------------------------------------------------- DECREASE (INCREASE) IN TAXABLE EQUIVALENT ADJUSTMENT . . . . . . . . . ( 3,228) 1,970 - ------------------------------------------------------------------------------------------------------------------------------- NET INTEREST INCOME CHANGE . . . . . . . . $42,195 $ 61,973 - -------------------------------------------------------------------------------------------------------------------------------
Table 2, the Analysis of Net Interest Income Changes, separates the Bancorp's change in net interest income into its three components: (1) volume of average assets and liabilities outstanding; (2) average yields on interest-earning assets and average rates for interest-bearing liabilities; and (3) combined volume and yield/rate effects. Table 2 shows the income impact of balance sheet changes and changes in interest rate levels which occurred during 1993 and 1992. The increase in net interest income during 1993 was due primarily to the increase in average interest-earning assets in excess of the increase in average interest-bearing liabilities offset by the lower overall interest rates. The increase in net interest income during 1992 was due almost entirely to the increase in average interest-earning assets in excess of the increase in average interest-bearing liabilities, as the changes in interest rates were offset by changes in the balance sheet mix. OTHER OPERATING INCOME The table below shows the components of other operating income for the five years ending December 31, 1993. Total other operating income excluding securities gains and losses has increased over 10% each year during this five-year period, up 10.8% in 1993 over 1992 and up 18.4% in 1992 over 1991. Trust income totalled $50,603,000 in 1993, an increase of 7.6% over 1992's $47,033,000. During 1992, trust income increased 16.8% over 1991. Both increases can be attributed to the increase in the market value of total assets under care (both managed or in custody), with market value increases of 6.7% in 1993 and 11.3% in 1992, fueled by our customers' increased interest in alternative investment options such as mutual funds. Service charges on deposits totalled $55,468,000 in 1993 and $49,856,000 in 1992, up 11.3% and 19.6% over 1992 and 1991, respectively. Contributing to these increases were the escalating numbers of customer accounts, due in part to deposit purchases from Savings of America, First National Bank of Dayton and World Savings and Loan Association in 1993 and Chase Bank of Ohio in 1992 and the acquisitions of First Federal Savings and Loan Association of Lima and Pinnacle Bancorp, Inc. in 1992. The acquisition of The TriState Bancorp in December, 1993 occurred too late in the year to have an impact. Data processing income in 1993 totalled $53,582,000, an increase of 16.9% over 1992's $45,842,000. The past two years' increases of over 12% have been due to several factors, including higher automated teller machine transaction
- ----------------------------------------------------------------------------------- ($000's) 1993 1992 1991 1990 1989 - ------------------------------------------------------------------------------------ Trust income ...................... $ 50,603 47,033 40,263 34,428 31,599 Service charges on deposits ....... 55,468 49,856 41,673 35,013 28,297 Data processing income ............ 53,582 45,842 40,601 34,830 29,856 Other service charges and fees .... 60,433 55,851 45,221 40,646 34,342 - ------------------------------------------------------------------------------------ Subtotal .......................... 220,086 198,582 167,758 144,917 124,094 - ------------------------------------------------------------------------------------ Securities gains (losses) ......... 6,492 1,471 4,153 ( 52) 757 - ------------------------------------------------------------------------------------ Total ............................. $226,578 200,053 171,911 144,865 124,851 - ------------------------------------------------------------------------------------ After-tax securities gains (losses) $ 4,213 1,002 2,735 ( 117) 508 - ------------------------------------------------------------------------------------
28 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS processsing with the addition of 40 new member institutions in 1993 and growth in credit card and retail merchant activity. Other service charges and fees in 1993 were $60,433,000, an increase of 8.2% over 1992. Mortgage banking fee income, which includes servicing fee income, gains on sales of residential mortgage loans and other mortgage loan fees, increased $9,755,000 or 99.0% over 1992. At December 31, 1993, the Bancorp was servicing $3.5 billion in residential mortgage loans. Consumer loan fees were also up, $1,620,000 or 18.7% over 1992, consistent with the increase in average consumer loan balances. Other service charges and fees in 1992 totalled $55,851,000, an increase of $10,630,000 or 23.5% over 1991. Included in this increase is mortgage banking fee income, increasing $3,920,000 or 66.0%. Another component of the increase was a $1,104,000 gain on the sale of Fifth Third Travel, Inc. OPERATING EXPENSES The Bancorp's profitability levels over the last several years have been achieved in large part due to successful expense control. Contributing factors include efficient staffing, a comprehensive budgeting process and centralization of various internal functions such as data processing and loan operations. One measure of this success is the overhead ratio (operating expenses divided by the sum of taxable equivalent net interest income and other operating income). This ratio, at or under 50%, has remained well below peer group ratios over the past five years. Total operating expenses for 1993 were up 11.8% over 1992, and 1992 was up 15.8% over 1991. Banking Center growth over the last two years, with the addition of 40 locations in 1993 and 23 locations in 1992 through acquisitions and other expansion, has impacted all categories of expenses. The table below shows the dollar amounts and the components of other operating expenses for the last five years. Salaries, wages and employee benefits, which comprised 47.2% and 47.5% of total operating expenses in 1993 and 1992, respectively, increased 11.0% in 1993 and 13.3% in 1992 over the previous year. Climbing costs of employee benefits including medical insurance, payroll taxes and profit sharing were augmented by an increase of 359 full-time equivalent (FTE) employees during 1993 and 420 during 1992. The Bancorp's productivity ratios (average earning assets and net income per FTE employee), which measure the degree of efficiency of our employees, have shown continued improvement since 1988. Average earning assets per employee has increased 61% since 1988, while net income per employee has increased 66%. Equipment and net occupancy expenses increased 9.4% in 1993 and 10.3% in 1992. Increased rental property costs, utilities and real estate taxes, due in part to the expanded number of locations, and increased expenses such as depreciation associated with the purchase of the remaining interest in Fifth Third Center in 1993, contributed to the higher expenditures. Other operating expenses of $133,368,000 in 1993 were up 13.5% over 1992. Contributing factors to this increase were FDIC insurance, up $1,091,000 or 6.8% and marketing and communications expenses, up $2,136,000 or 11.0%. The effect on deferred taxes of the increase in statutory tax rates during 1993 was $1,039,000. Other real estate owned expenses were $802,000 in 1993, $1,707,000 in 1992 and $629,000 in 1991. Other operating expenses of $117,541,000 in 1992 increased 20.6% over 1991. FDIC insurance was up $2,726,000 or 20.3% over 1991. Other contributors to the increase were increased communication charges related to data processing income, increased postage expenses and the generally expanded volume of Bancorp activities.
____________________________________________________________________________________________________________________ ($000's) 1993 1992 1991 1990 1989 ____________________________________________________________________________________________________________________ Salaries and wages . . . . . . . . . . . . . . . $119,046 107,816 95,718 88,981 83,543 Employee benefits . . . . . . . . . . . . . . . . 33,578 29,732 25,652 23,223 21,104 Equipment expenses . . . . . . . . . . . . . . . 14,173 13,354 12,256 12,608 13,935 Net occupancy expenses . . . . . . . . . . . . . 23,222 20,833 18,729 15,341 12,866 Other operating expenses . . . . . . . . . . . . 133,368 117,541 97,437 83,171 76,079 ____________________________________________________________________________________________________________________ Total . . . . . . . . . . . . . . . . . . . . . . $323,387 289,276 249,792 223,324 207,527 ____________________________________________________________________________________________________________________
There are three bar graphs at the bottom of the page which are based on the information in the following tables:
($ in millions) 1988 1989 1990 1991 1992 1993 Other operating income $106.9 $124.9 $144.9 $171.9 $200.1 $226.6 Five Year Growth Rate: 16.2%
1988 1989 1990 1991 1992 1993 Growth in Net Income Per Employee 100% 116% 125% 139% 150% 166% 1988 Base Year = 100
1988 1989 1990 1991 1992 1993 Fifth Third 49.4 50.3 49.5 47.7 47.3 47.3 Peer Group 64.3 64.1 66.1 63.9 62.6 --
29 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION SECURITIES The investment portfolio is comprised largely of fixed and floating rate mortgage related securities, predominantly underwritten to the standards of and guaranteed by the government sponsored agencies of FHLMC and FNMA. These securities differ primarily from traditional debt securities in that they have uncertain maturity dates and are priced based on estimated prepayment rates on the underlying mortgages. We have estimated the average life of the portfolio at 3.5 years based on current prepayment expectations. During 1993 and 1992, the Bancorp securitized $291,586,000 and $120,813,000 fixed and adjustable rate residential mortgages, respectively. These securitizations are a means to improve liquidity ratios, reduce the reserve for credit loss requirement and increase risk-based capital ratios. This activity is expected to continue in 1994.
SECURITIES AT DECEMBER 31 - ------------------------------------------------------------------------------------------------------------ ($000's) 1993 1992 1991 1990 1989 - ------------------------------------------------------------------------------------------------------------ SECURITIES HELD TO MATURITY: U.S. Treasury ............................... $ -- 111,268 295,404 536,307 622,274 - ------------------------------------------------------------------------------------------------------------ U.S. Government agencies and corporations ... -- 164,458 254,543 212,008 169,696 - ------------------------------------------------------------------------------------------------------------ States and political subdivisions ........... 327,636 222,015 207,049 187,921 149,189 - ------------------------------------------------------------------------------------------------------------ Agency mortgage-backed securities ........... 1,008,555 1,271,645 1,255,494 333,042 55,616 - ------------------------------------------------------------------------------------------------------------ Other bonds, notes and debentures ........... 141,661 152,085 43,101 75,476 50,849 - ------------------------------------------------------------------------------------------------------------ Other securities ............................ 9,470 11,537 8,175 10,212 11,580 - ------------------------------------------------------------------------------------------------------------ SECURITIES AVAILABLE FOR SALE: U.S. Treasury ............................... 63,183 -- -- -- -- - ------------------------------------------------------------------------------------------------------------ U.S. Government agencies and corporations ... 136,303 -- -- -- -- - ------------------------------------------------------------------------------------------------------------ Agency mortgage-backed securities ........... 513,045 -- -- -- -- - ------------------------------------------------------------------------------------------------------------ Other bonds, notes and debentures ........... 96,369 -- -- -- -- - ------------------------------------------------------------------------------------------------------------ Other securities ............................ 7,086 -- -- -- -- - ------------------------------------------------------------------------------------------------------------
SECURITIES AT DECEMBER 31, 1993 - ------------------------------------------------------------------------------------------------------------------ MATURITY 1-5 YEAR 6-10 YEAR OVER 10 UNDER 1 YEAR MATURITY MATURITY YEAR MATURITY TOTAL -------------- --------------- --------------- -------------- ----------------- (000's) AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD - -------------------------------------------------------------------------------------------------------------------------- SECURITIES HELD TO MATURITY: States and political subdivisions (a) ......... $97,967 6.93% $168,325 7.81% $ 53,165 7.58% $ 8,179 8.82% $ 327,636 7.53% - -------------------------------------------------------------------------------------------------------------------------- Agency mortgage-backed securities (b) .......... 30,961 6.89 839,341 6.02 98,046 5.54 40,207 4.11 1,008,555 5.92 - ------------------------------------------------------------------------------------------------------------------------- Other bonds, notes and debentures (c) .......... 2,862 4.01 138,177 6.06 500 7.90 122 5.50 141,661 6.02 - ------------------------------------------------------------------------------------------------------------------------- SECURITIES AVAILABLE FOR SALE: U.S. Treasury .............. 38,284 7.24 24,899 5.67 -- -- -- -- 63,183 6.62 - ------------------------------------------------------------------------------------------------------------------------- U.S. Government agencies and corporations ....... 93,821 7.33 39,465 7.14 3,017 6.39 -- -- 136,303 7.25 - ------------------------------------------------------------------------------------------------------------------------- Agency mortgage-backed securities ............ 34,215 5.65 319,199 6.27 148,453 6.00 11,178 6.28 513,045 6.15 - ------------------------------------------------------------------------------------------------------------------------- Other bonds, notes and debentures (d) ......... -- -- 82,601 4.74 13,768 4.78 -- -- 96,369 4.74 - ------------------------------------------------------------------------------------------------------------------------- Maturities of mortgage-backed securities were estimated based on historical and predicted prepayment trends. (a) taxable equivalent yield. (b) included in agency mortgage-backed securities held to maturity are floating rate investments totalling $455,117,000. (c) included in other bonds, notes and debentures held to maturity are floating rate investments totalling $1,305,000. (d) other bonds, notes and debentures available for sale are floating rate investments.
30 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LOANS AND LEASES The following table shows the history of commercial and consumer loans and leases by major category at December 31.
LOAN AND LEASE PORTFOLIOS ______________________________________________________________________________________________________________________ 1993 1992 1991 1990 1989 ________________ _________________ ________________ ________________ ________________ ($ IN MILLIONS) Amount % Amount % Amount % Amount % Amount % ______________________________________________________________________________________________________________________ Commercial: Commercial . . . . . . $2,674 30.3% $2,476 33.1% $2,196 37.8% $2,258 41.1% $2,229 43.2% Mortgage . . . . . . . 634 7.2 496 6.6 435 7.5 381 6.9 341 6.6 Construction . . . . . 323 3.7 309 4.1 281 4.8 244 4.4 274 5.3 Leases . . . . . . . . 302 3.4 236 3.2 201 3.5 192 3.5 170 3.3 ______________________________________________________________________________________________________________________ 3,933 44.6 3,517 47.0 3,113 53.6 3,075 55.9 3,014 58.4 ______________________________________________________________________________________________________________________ Consumer: Installment . . . . . 1,792 20.3 1,450 19.4 1,229 21.2 1,170 21.3 1,016 19.7 Mortgage . . . . . . . 2,158 24.5 1,935 25.9 1,071 18.4 873 15.9 747 14.4 Credit Card . . . . . 207 2.4 178 2.4 197 3.4 216 3.9 203 3.9 Leases . . . . . . . . 721 8.2 395 5.3 197 3.4 163 3.0 184 3.6 ______________________________________________________________________________________________________________________ 4,878 55.4 3,958 53.0 2,694 46.4 2,422 44.1 2,150 41.6 ______________________________________________________________________________________________________________________ TOTAL . . . . . . . . . . $8,811 100.0% $7,475 100.0% $5,807 100.0% $5,497 100.0% $5,164 100.0% ______________________________________________________________________________________________________________________
The most significant increase in the loan and lease portfolio during 1993 was in consumer leases and installment loans. Installment loans increased $342,000,000 or 23.6% and consumer leases increased $326,000,000 or 82.5%. Although leasing has become a popular alternative means of automobile financing, the current low-interest rate environment has enabled installment lending to remain strong. Consumer mortgages continued to grow, up $223,000,000 or 11.5% in 1993; however, excluding the securitization and transfer to securities of $291,586,000 and $120,813,000 of mortgages in 1993 and 1992, respectively, consumer mortgages actually rose 19.2% over 1992. This growth was aided by the acquisition of The Tristate Bancorp, which contributed approximately $189,000,000 in outstandings. Commercial loans and leases were up 11.8% in 1993. Commercial leasing was a notable contributor, up $66,000,000 or 28.0% over 1992. Commercial mortgages also showed solid growth, up 27.8% over 1992, and consisted primarily of credits located within our primary market areas of Ohio, Kentucky and Indiana. Commercial mortgages consist principally of owner-occupied commercial mortgages, loans on properties occupied by the principal borrower. In 1992, robust gains in consumer mortgages and consumer leases led the portfolio with growth of 80.7% and 100.5% over 1991, respectively. Consumer mortgage growth was aided by acquisitions which contributed approximately $200,000,000 in outstandings. PROVISION AND RESERVE FOR CREDIT LOSSES The Bancorp provides as an expense an amount which reflects expected credit losses. This provision is based on the growth of the loan and lease portfolio and on recent loss experience and is called the provision for credit losses in the Consolidated Statements of Income. Actual losses on loans and leases are charged against the reserve built up on the Consolidated Balance Sheets through the provision for credit losses. The amount of loans and leases actually removed as assets from the Consolidated Balance Sheets is referred to as charge-offs and, after netting out recoveries on previously charged-off assets, becomes net charge-offs. Net charge-offs have declined over the last three years, with 1993's $26,263,000 down 41.2% over 1992's $44,686,000, which had marked an 11.9% decrease over 1991. The provision for credit losses of $44,487,000 in 1993 was down from the $65,315,000 in 1992. The reserve for credit losses as a percent of loans and leases outstanding was 1.53% and 1.54% for December 31, 1993 and 1992, respectively. The table below presents credit loss data for the most recent five year period.
RESERVE FOR CREDIT LOSSES FIVE YEAR HISTORY _________________________________________________________________________________________________________________________ ($000'S) 1993 1992 1991 1990 1989 _________________________________________________________________________________________________________________________ Balance at January 1 . . . . . . . . . . . . $ 114,751 90,324 85,025 79,956 67,412 Provision for credit losses . . . . . . . . . 44,487 65,315 55,744 39,879 36,468 Losses charged off . . . . . . . . . . . . . ( 35,985) ( 53,240) ( 58,113) ( 42,220) ( 32,840) Recoveries of losses previously charged off . 9,722 8,554 7,370 7,410 7,743 Reserve of acquired banks . . . . . . . . . . 2,122 3,798 298 -- 1,173 _________________________________________________________________________________________________________________________ Balance at December 31 . . . . . . . . . . . $ 135,097 114,751 90,324 85,025 79,956 _________________________________________________________________________________________________________________________ Loans and leases outstanding at December 31 . $8,811,039 $7,474,859 $5,806,612 $5,496,990 $5,163,840 Reserve as a percent of loans and leases outstanding 1.53% 1.54% 1.56% 1.55% 1.55% Average loans and leases . . . . . . . . . . $8,186,873 $6,616,396 $5,659,608 $5,250,014 $4,805,763 Net charge-offs as a percent of average loans and leases outstanding . . . . . . . . . . . . .32% .68% .90% .66% .52% Reserve as a percent of total nonperforming assets 559.76% 214.48% 92.61% 90.74% 220.96% Reserve as a percent of total under-performing assets 399.33% 153.24% 72.59% 72.30% 150.26% _________________________________________________________________________________________________________________________
31 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS UNDER-PERFORMING ASSETS Under-performing assets consist of (1) nonaccrual loans and leases on which the ultimate collectibility of the full amount of interest is uncertain, (2) loans and leases which have been renegotiated to provide for a reduction or deferral of interest or principal because of a deterioration in the financial position of the borrower, (3) loans and leases past due ninety days or more as to principal or interest and (4) other real estate owned. A summary of under-performing assets at December 31 follows:
- --------------------------------------------------------------------- ($000's) 1993 1992 1991 - --------------------------------------------------------------------- Nonaccrual loans and leases .......... $15,709 29,273 65,253 Renegotiated loans and leases ........ 377 402 793 Other real estate owned .............. 8,049 23,826 31,490 - --------------------------------------------------------------------- Total nonperforming assets ........... 24,135 53,501 97,536 Ninety days past due loans and leases. 9,696 21,382 26,898 - --------------------------------------------------------------------- Total under-performing assets ........ $33,831 74,883 124,434 - --------------------------------------------------------------------- Nonperforming assets as a percent of total loans, leases and other real estate owned ................. .27% .71 1.67 Under-performing assets as a percent of total loans, leases and other real estate owned ....... .38% 1.00 2.13 - ---------------------------------------------------------------------
Of the total under-performing assets at December 31, 1993, $23,240,000 is to borrowers or projects in the Cincinnati-Dayton market area, $1,495,000 in the Toledo market area, $3,585,000 in Columbus, $2,485,000 distributed in the market areas of our smaller affiliate banks and $3,026,000 outside of the Ohio-Kentucky-Indiana area. Of the total nonperforming assets at December 31, 1993, $14,825,000 or 61.4% was related to commercial real estate. Nonaccrual commercial real estate loans and leases were $7,394,000, a decrease of 58.8% from 1992's $17,937,000. At December 31, 1993 and 1992, there were no renegotiated commercial real estate loans and leases. Commercial other real estate owned decreased from $22,404,000 in 1992 to $7,431,000 in 1993, a decline of 66.8%. DEPOSITS Primarily core deposits are used to fund interest-earning assets. The deregulation of deposits has caused a change in the deposit mix of financial institutions as funds have flowed from non-interest-bearing deposits and passbook-type savings deposits into higher market rate deposits which earn interest at money market rates. The accompanying tables show the relative composition of the Bancorp's average deposits and the change in average deposit sources during the last five years. Other time deposits is comprised primarily of consumer certificates of deposit. The Company completed $568,574,000 in deposit acquisitions during the last two years ($290,857,000 in 1993 and $277,717,000 in 1992). Core deposit growth has been slower than previous years due to the low absolute rate levels. The Bancorp would expect these growth rates to increase as interest rates increase.
DISTRIBUTION OF AVERAGE DEPOSITS - ---------------------------------------------------------- 1993 1992 1991 1990 1989 - ---------------------------------------------------------- Demand . . 15.6% 15.2 13.8 13.8 15.2 Interest checking 15.2 14.3 11.8 11.1 10.7 Savings . . 6.9 6.3 5.4 6.1 7.4 Money market . 17.5 19.4 18.8 18.7 18.8 Other time 36.3 37.1 36.5 34.6 31.2 Certificates- $100,000 and over 5.5 7.0 13.6 15.7 16.6 Foreign office 3.0 .7 .1 -- .1 - ---------------------------------------------------------- Total . . . 100.0% 100.0 100.0 100.0 100.0 - ----------------------------------------------------------
CHANGE IN AVERAGE DEPOSIT SOURCES - --------------------------------------------------------------- ($000) 1993 1992 1991 1990 1989 - --------------------------------------------------------------- Demand .... $ 197,007 177,215 66,976 6,622 35,587 Interest Checking 215,664 245,437 98,296 91,973 52,446 Savings .... 111,854 95,735 ( 15,745) ( 34,562) ( 2,580) Money Market... 51,198 147,028 99,633 105,823 70,624 Other Time 324,433 257,059 291,685 389,843 368,227 Certificates- $100,000 and Over. ( 48,411) (386,076) ( 59,400) 45,967 221,016 Foreign Office... 194,045 35,121 10,766 ( 3,283) ( 1,911) - --------------------------------------------------------------- Total Change $1,045,790 571,519 492,211 602,383 743,409 - ---------------------------------------------------------------
FEDERAL FUNDS BORROWED AND OTHER SHORT-TERM BORROWINGS These primarily represent the borrowing of short-term excess funds from correspondent banks, securities sold under agreements to repurchase and commercial paper issuance. The Bancorp resells the funds or may retain a portion to fund short-term, rate-sensitive interest-earning asset growth. The increase in borrowed funds is in part a result of the Bancorp's strategy to shift large certificate of deposit customers into non-FDIC assessed products. As the following table of average funds borrowed and average Federal funds loaned indicates, the Bancorp was a net borrower of funds of $1,268,314,000 in 1993, up from $1,099,709,000 in 1992:
- ------------------------------------------------------------------ ($000's) 1993 1992 1991 1990 1989 - ------------------------------------------------------------------ Federal funds borrowed and other short-term borrowings... $1,275,568 1,173,253 766,860 461,313 482,435 Federal funds loaned ..... $ 7,254 73,544 220,064 275,058 228,564 - ------------------------------------------------------------------ Net funds borrowed ... $1,268,314 1,099,709 546,796 186,255 253,871 - ------------------------------------------------------------------
32 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAPITAL RESOURCES The Bancorp maintains a relatively high level of capital as a margin of safety for its depositors and stockholders. At December 31, 1993, stockholders' equity was $1,197,646,000 compared to $1,005,165,000 at December 31, 1992, an increase of $192,481,000 or 19.1%. This increase in capital resulted primarily from the retention of earnings. During 1990, the Federal Reserve Board adopted a minimum leverage ratio of 3.0% for bank holding companies. The Bancorp's leverage ratio (defined as stockholders' equity less unrealized gains on securities available for sale, goodwill and certain other intangibles divided by average quarterly assets) was 9.9% at December 31, 1993 and 9.5% at December 31, 1992, well above the Federal Reserve Board's ''well capitalized'' level of 5%. The Federal Reserve Board has adopted risk-based capital guidelines which assign risk weightings to assets and off-balance sheet items. The guidelines also define and set minimum capital requirements (risk-based capital ratios) which increased over a transition period ending in 1992. Under the final 1992 rules, all banks are required to have core capital (Tier 1) of at least 4.0% of risk-weighted assets and total capital of 8.0% of risk-weighted assets. Tier 1 capital consists principally of stockholders' equity less unrealized gains on securities available for sale, goodwill and certain other intangibles, while total capital consists of core capital, certain debt instruments and a portion of the reserve for credit losses. The guidelines also define well capitalized levels of Tier 1 and total capital as 6% and 10%, respectively. The Bancorp had Tier 1 capital ratios of 11.4% and 11.2% and total capital ratios of 13.8% and 14.1% for December 31, 1993 and 1992, respectively, computed using the final 1992 rules. The Bancorp and its affiliate banks had Tier 1 and total capital ratios above the well capitalized levels at December 31, 1993. The Federal Reserve Board has proposed regulations which would revise the current risk-based capital guidelines to include a measurement of interest rate risk. Based on an analysis of the Bancorp's current interest rate sensitivity, management feels there would be no adverse affects caused by the adoption of these new capital guidelines. The following table shows several capital and liquidity ratios for the last three years:
- --------------------------------------------------------- 1993 1992 1991 - --------------------------------------------------------- Average stockholders' equity to Average assets . . . . . . 9.92% 10.07% 10.11% Average deposits . . . . . 13.38 13.47 12.91 Average loans and leases . 13.20 14.32 14.74 Risk-based capital ratio (a) Tier 1 . . . . . . . . . . 11.41 11.20 12.49 Total . . . . . . . . . . 13.82 14.12 13.74 - --------------------------------------------------------- (a) Based on year-end 1992 guidelines.
LIQUIDITY AND INTEREST RATE SENSITIVITY The objective of the Bancorp's Asset/Liability Management function is to maintain consistent growth in net interest income within the Bancorp's policy guidelines. This objective is accomplished through flexible management of the Bancorp's balance sheet liquidity and interest rate risk exposures due to changes in economic conditions, interest rate levels and customer preferences. The goal of liquidity management is to provide adequate funds to meet changes in loan demand or any potential unexpected deposit withdrawals. This goal is accomplished primarily by maintaining sufficient liquid assets along with consistent core deposit growth to fund earning assets and the availability of unused capacity to purchase funds in the national money markets. At year end 1993, the Bancorp had approximately $1.2 billion in securities and other short-term investments maturing within one year compared to $653 million at year end 1992. Additional asset liquidity is provided by the remainder of the securities portfolio and selected securitizable loan assets. The Bancorp has a practice of maintaining core deposits as the primary means of funding interest-earning assets. Average core deposits, defined as all deposits except certificates-$100,000 and over, fund approximately 73% of total average interest-earning assets at December 31, 1993. This, in addition to the Bancorp's 10% average equity capital base, serves as a stable funding base. The Bancorp has significant unused national money market funding capability. The Bancorp maintains A1+/P1 Standard & Poor's and Moody's ratings on its commercial paper and its lead bank, The Fifth Third Bank, in Cincinnati, Ohio, maintains an Aa2 Moody's rating for long-term deposits. The Bancorp's affiliate in Toledo, The Fifth Third Bank of Northwestern Ohio, N.A., maintains A1+ and AA- Standard and Poor's ratings on its short-term and long-term deposits, respectively. These ratings, along with capital ratios significantly above the current regulatory guidelines, provide the Bancorp additional liquidity. Management does not rely on any one source of liquidity and has managed these levels in response to other balance sheet factors. During 1993, the Bancorp accessed a new funding source to supplement its core deposit funding. The Bancorp, through one of its affiliate banks, issued $40,000,000 in notes payable to the Federal Home Loan Bank (FHLB). The notes mature quarterly beginning in 1994 and bear interest of 3.90% to 4.55%. The Bancorp expects to utilize the FHLB as an additional funding source for its affiliate banks in the future. The Bancorp employs a variety of measurement techniques to identify and manage its exposure to changing interest rates. The Bancorp uses simulation techniques which attempt to measure the net interest income volatility of changes in the level of interest rates, basic banking interest rate spreads, the shape of the yield curve and changing product growth patterns. The table which follows shows the Bancorp's interest rate sensitivity analysis for the year ended December 31, 1993. The assets and liabilities are distributed to reflect expected cash flows and are based on historical deposit rate relationships to changes in market interest over long-term rate changes. The Bancorp would anticipate very limited exposure to rising interest rates during 1994. 33 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RATE SENSITIVITY ANALYSIS December 31, 1993 - -------------------------------------------------------------------------------------------------------------------- Maturing or Repricing ------------------------------------------------------------------------- Total Non-Rate 1-30 31-90 91-180 181-365 1 Year Sensitive & ($ in millions) Days Days Days Days & Under Over 1 Year Total - -------------------------------------------------------------------------------------------------------------------- Interest-Earning Assets Loans and leases . . . . . . . . . . $2,259 375 519 831 3,984 4,827 8,811 Securities available for sale . . . 64 120 239 388 811 5 816 Securities held to maturity . . . . 28 65 85 162 340 1,147 1,487 Other short-term investments . . . . 3 -- -- -- 3 -- 3 - -------------------------------------------------------------------------------------------------------------------- Total Interest-Earning Assets . . . . . 2,354 560 843 1,381 5,138 5,979 11,117 Other assets . . . . . . . . . . . . . -- -- -- -- -- 849 849 - -------------------------------------------------------------------------------------------------------------------- Total Assets . . . . . . . . . . . . . 2,354 560 843 1,381 5,138 6,828 11,966 - -------------------------------------------------------------------------------------------------------------------- Interest-Bearing Liabilities Interest checking . . . . . . . . . 273 -- -- -- 273 1,092 1,365 Savings . . . . . . . . . . . . . . 122 -- -- -- 122 488 610 Money market . . . . . . . . . . . . 876 -- -- -- 876 584 1,460 Certificates-$100,000 and over . . . 268 112 55 27 462 13 475 Other time deposits . . . . . . . . 612 306 500 691 2,109 1,146 3,255 Federal funds borrowed . . . . . . . 1,032 -- -- -- 1,032 -- 1,032 Other short-term borrowings . . . . 522 19 15 15 571 -- 571 Long-term debt and convertible subordinated notes . . . . . . . . -- -- -- 100 100 183 283 - -------------------------------------------------------------------------------------------------------------------- Total Interest-Bearing Liabilities . . 3,705 437 570 833 5,545 3,506 9,051 - -------------------------------------------------------------------------------------------------------------------- Demand deposits . . . . . . . . . . -- -- -- -- -- 1,463 1,463 Other liabilities . . . . . . . . . -- -- -- -- -- 254 254 Stockholders' equity . . . . . . . . -- -- -- -- -- 1,198 1,198 - -------------------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity 3,705 437 570 833 5,545 6,421 11,966 - -------------------------------------------------------------------------------------------------------------------- Rate Sensitivity Gap . . . . . . . . . (1,351) 123 273 548 ( 407) 407 - -------------------------------------------------------------------------------------------------------------------- Cumulative Gap . . . . . . . . . . . . $(1,351) (1,228) (955) ( 407) - -------------------------------------------------------------------------------------------------------------------- Cumulative Gap as a Percentage of Total Assets . . . . . . . . . . . . . . . ( 11.3)% ( 10.3)% (8.0)% ( 3.4)% - --------------------------------------------------------------------------------------------------------------------
34 FIFTH THIRD BANCORP AND SUBSIDIARIES CONSOLIDATED SIX YEAR SUMMARY OF OPERATIONS
- -------------------------------------------------------------------------------------------------------------------- For the Years Ended December 31 ($000's) 1993 1992 1991 1990 1989 1988 - -------------------------------------------------------------------------------------------------------------------- Interest Income . . . . . . . . . . . . . . . . $727,349 694,460 713,501 689,547 643,444 509,484 Interest Expense . . . . . . . . . . . . . . . 290,960 300,266 381,280 402,926 374,741 277,594 - -------------------------------------------------------------------------------------------------------------------- Net Interest Income . . . . . . . . . . . . . . 436,389 394,194 332,221 286,621 268,703 231,890 Provision for Credit Losses . . . . . . . . . . 44,487 65,315 55,744 39,879 36,468 38,910 - -------------------------------------------------------------------------------------------------------------------- Net Interest Income After Provision for Credit Losses . . . . . . . . 391,902 328,879 276,477 246,742 232,235 192,980 Other Operating Income . . . . . . . . . . . . 226,578 200,053 171,911 144,865 124,851 106,849 Operating Expenses . . . . . . . . . . . . . . 323,387 289,276 249,792 223,324 207,527 179,083 - -------------------------------------------------------------------------------------------------------------------- Income Before Income Taxes . . . . . . . . . . 295,093 239,656 198,596 168,283 149,559 120,746 Applicable Income Taxes . . . . . . . . . . . . 98,646 75,564 60,446 47,872 41,241 29,643 - -------------------------------------------------------------------------------------------------------------------- Net Income . . . . . . . . . . . . . . . . . . $196,447 164,092 138,150 120,411 108,318 91,103 - -------------------------------------------------------------------------------------------------------------------- Net Income Per Share (a) . . . . . . . . . . . $3.28 2.75 2.33 2.05 1.86 1.61 - -------------------------------------------------------------------------------------------------------------------- Cash Dividends Declared Per Share (a) . . . . . $1.02 .90 .78 .68 .60 .52 - -------------------------------------------------------------------------------------------------------------------- (a) Per share amounts reflect the three-for-two stock splits effected in the form of stock dividends paid April 15, 1992 and January 13, 1990.
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
- ----------------------------------------------------------------------------------------------------------------------- As of December 31 ($000's) 1993 1992 1991 1990 1989 1988 - ----------------------------------------------------------------------------------------------------------------------- Securities . . . . . . . . . . . . . . . . . . $ 2,303,308 1,933,008 2,063,766 1,354,966 1,059,204 980,420 Loans and Leases . . . . . . . . . . . . . . . 8,811,039 7,474,859 5,806,612 5,496,990 5,163,840 4,541,692 Assets . . . . . . . . . . . . . . . . . . . . 11,966,000 10,213,320 8,826,130 7,955,808 7,142,972 6,379,182 Deposits . . . . . . . . . . . . . . . . . . . 8,628,498 7,531,946 6,687,262 6,385,221 5,783,527 5,060,001 Funds Borrowed (b) . . . . . . . . . . . . . . 1,602,217 1,229,791 1,042,566 607,047 479,219 561,285 Long-Term Debt and Convertible Subordinated Notes. . . . . . . . . . . . . . . . . . . . . 282,864 254,061 12,848 13,517 12,607 12,232 Stockholders' Equity . . . . . . . . . . . . . 1,197,646 1,005,165 879,450 782,698 699,261 610,541 - ----------------------------------------------------------------------------------------------------------------------- (b) Funds borrowed combines Federal funds borrowed and other short-term borrowings from the Consolidated Financial Statements.
SUMMARIZED QUARTERLY FINANCIAL INFORMATION
- ----------------------------------------------------------------------------------------------------------------------- 1993 1992 ------------------------------------------ -------------------------------------------- Fourth Third Second First Fourth Third Second First (Unaudited)($000's) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter - ----------------------------------------------------------------------------------------------------------------------- Interest income . . . . . $185,587 182,402 182,657 176,703 177,190 175,006 173,493 168,771 Net interest income . . . 111,856 109,491 109,283 105,759 106,009 101,420 95,854 90,911 Provision for credit losses . . . . . . . . . 6,918 10,244 14,730 12,595 18,733 14,025 16,379 16,178 Income before income taxes. . . . . . . . . . 78,365 77,774 71,656 67,298 64,877 63,785 58,776 52,218 Net income . . . . . . . 52,323 51,580 47,907 44,637 44,258 43,217 40,443 36,174 Net income per share . . .87 .86 .80 .75 .74 .72 .68 .61 - -----------------------------------------------------------------------------------------------------------------------
35 FIFTH THIRD BANCORP AND SUBSIDIARIES CONSOLIDATED TEN YEAR COMPARISON AVERAGE ASSETS ($000'S)
- -------------------------------------------------------------------------------------------------------------------- Interest-Earning Assets ----------------------------------------------------------------- Federal Interest Bearing Cash and Total Loans and Funds Deposits Due from Other Average Year Leases Loaned(a) Securities in Banks(a) Total Banks Assets Assets - -------------------------------------------------------------------------------------------------------------------- 1993 $8,186,873 $ 7,254 $1,942,792 $ 1,084 $10,138,003 $479,775 $403,960 $10,894,608 1992 6,616,396 73,544 1,979,052 32,858 8,701,850 429,467 385,480 9,413,956 1991 5,659,608 220,064 1,754,718 35,090 7,669,480 369,998 296,380 8,246,991 1990 5,250,014 275,058 1,191,392 40,927 6,757,391 383,148 287,887 7,345,590 1989 4,805,763 228,564 1,056,734 35,610 6,126,671 368,845 254,622 6,677,308 1988 4,027,892 225,702 930,222 44,788 5,228,604 354,450 222,047 5,744,579 1987 3,307,991 362,985 853,436 31,432 4,555,844 325,653 193,183 5,025,479 1986 2,673,693 416,181 857,261 29,818 3,976,953 279,783 198,680 4,414,316 1985 2,198,521 406,269 839,200 25,226 3,469,216 238,731 172,406 3,847,322 1984 1,771,612 345,890 761,975 37,560 2,917,037 217,024 145,532 3,254,679 - --------------------------------------------------------------------------------------------------------------------
AVERAGE DEPOSITS AND FUNDS BORROWED ($000'S)
- -------------------------------------------------------------------------------------------------------------------- Deposits ----------------------------------------------------------------------------------- Certificates- Interest Money Other $100,000 Foreign Funds Year Demand Checking Savings Market Time and Over Office Total Borrowed(b) Total - -------------------------------------------------------------------------------------------------------------------- 1993 $1,264,384 $1,224,662 $554,287 $1,415,419 $2,937,394 $441,882 $242,245 $8,080,273 $1,275,568 $9,355,841 1992 1,067,377 1,008,998 442,433 1,364,221 2,612,961 490,293 48,200 7,034,483 1,173,253 8,207,736 1991 890,162 763,561 346,698 1,217,193 2,355,902 876,369 13,079 6,462,964 766,860 7,229,824 1990 823,186 665,265 362,443 1,117,560 2,064,217 935,769 2,313 5,970,753 461,313 6,432,066 1989 816,564 573,292 397,005 1,011,737 1,674,374 889,802 5,596 5,368,370 482,435 5,850,805 1988 780,977 520,846 399,585 941,113 1,306,147 668,786 7,507 4,624,961 402,799 5,027,760 1987 728,098 455,972 372,903 850,926 1,045,727 497,977 3,130 3,954,733 422,576 4,377,309 1986 659,135 358,990 299,133 752,305 981,865 346,774 3,851 3,402,053 409,792 3,811,845 1985 588,882 258,693 275,571 615,225 943,349 266,887 3,914 2,952,521 390,179 3,342,700 1984 521,429 174,352 251,785 502,008 808,426 222,137 3,483 2,483,620 357,867 2,841,487 - --------------------------------------------------------------------------------------------------------------------
INCOME
- -------------------------------------------------------------------------------------------------------------------- Per Share(d) ------------------------------- Originally Other Reported Dividends Interest Interest Operating Operating Net Net Dividends Net Paid as % of Year Income(c) Expense(c) Income(c) Expense(c) Income(c) Income Declared Income Net Income - -------------------------------------------------------------------------------------------------------------------- 1993 $727,349 $290,960 $226,578 $323,387 $196,447 $3.28 $1.02 $3.28 30.2% 1992 694,460 300,266 200,053 289,276 164,092 2.75 .90 2.75 31.2 1991 713,501 381,280 171,911 249,792 138,150 2.33 .78 2.33 32.6 1990 689,547 402,926 144,865 223,324 120,411 2.05 .68 2.05 32.3 1989 643,444 374,741 124,851 207,527 108,318 1.86 .60 1.86 30.5 1988 509,484 277,594 106,849 179,083 91,103 1.61 .52 1.75 32.5 1987 423,883 224,733 92,323 163,473 82,868 1.48 .45 1/3 1.52 31.0 1986 389,863 213,423 77,144 147,135 70,809 1.28 .39 1.29 29.5 1985 370,882 217,147 66,106 128,451 61,569 1.15 .32 2/3 1.11 28.6 1984 333,377 208,994 53,386 106,407 51,494 1.03 .27 2/3 .96 29.2 - --------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS AT DECEMBER 31
- -------------------------------------------------------------------------------------------------------------------- Stockholders' Equity ----------------------------------------------------------------------------- Number of Reserve Shares of Stock Common Capital Retained Treasury Per for Credit Year Outstanding(d) Stock(c) Surplus(c) Earnings(c)(e) Stock(c) Total(c) Share Losses(c) - -------------------------------------------------------------------------------------------------------------------- 1993 61,402,257 $136,313 $243,377 $817,956 $ -- $1,197,646 $19.50 $135,097 1992 59,831,540 132,859 201,887 670,823 (404) 1,005,165 16.80 114,751 1991 59,375,264 87,897 187,237 604,720 (404) 879,450 14.81 90,324 1990 59,080,434 87,439 182,473 512,786 -- 782,698 13.25 85,025 1989 58,712,297 86,894 179,918 432,449 -- 699,261 11.91 79,956 1988 57,647,276 56,879 170,042 383,620 -- 610,541 10.59 67,412 1987 56,089,377 55,342 152,892 322,337 -- 530,571 9.46 55,120 1986 55,929,977 36,789 151,963 284,287 -- 473,039 8.46 44,512 1985 52,383,497 22,971 114,168 247,157 -- 384,296 7.33 38,408 1984 52,203,254 22,892 113,540 198,185 -- 334,617 6.41 29,129 - -------------------------------------------------------------------------------------------------------------------- (a) Federal funds loaned and interest bearing deposits in banks are combined in other short-term investments in the Consolidated Financial Statements. (b) Funds borrowed combines Federal funds borrowed and other short-term borrowings from the Consolidated Financial Statements. (c) Thousands of dollars. (d) Number of shares outstanding and per share data reflect stock splits in 1992, 1990, 1987, 1986 and 1985. (e) Includes unrealized gains on securities available for sale.
36 Appendix A In accordance with Rule 304 of Regulation S-T, the following graphic material was omitted from this electronic exhibit and is more fully described on page 29 of Exhibit 13: Certain graphs contained on page 29 of the 1993 Annual Report to Stockholders have been omitted from this electronic exhibit and are described in tabular form on page 29 of this Exhibit 13. EX-21 4 EXHIBIT 21 EXHIBIT 21 Fifth Third Bancorp Subsidiaries Jurisdiction of Name Incorporation - ---- ------------- The Fifth Third Bank Ohio The Fifth Third Company Ohio The Fifth Third Leasing Company Ohio Fifth Third Securities, Inc. Ohio Midwest Payment Systems, Inc. Ohio The Fifth Third Bank of Columbus Ohio The Fifth Third Bank of Northwestern Ohio, National Association Federal The Fifth Third Bank of Southern Ohio Ohio The Fifth Third Bank of Western Ohio, National Association Federal Fifth Third Community Development Company Ohio Fountain Square Management Co. Ohio Fifth Third Bank of Northern Kentucky, Inc. Kentucky Fifth Third Bank of Central Kentucky, Inc. Kentucky The Fifth Third Bank of Central Indiana Indiana The Fifth Third Bank of Southeastern Indiana Indiana Fountain Square Insurance Company Arizona Fifth Third Trust Co. & Savings Bank, FSB Federal EX-23 5 EXHIBIT 23 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements No. 33- 34075, 33-13252, 2-98550, 33-20888, 33-30690, 33-60474 and 33-51679, of Fifth Third Bancorp on Form S-8 of our report dated January 14, 1994 (which expresses an unqualified opinion and includes an explanatory paragraph relating to a change in the method of accounting for debt and equity securities), incorporated by reference in this Annual Report on Form 10-K of Fifth Third Bancorp for the year ended December 31, 1993. /s/ Deloitte & Touche February 15, 1994 Cincinnati, Ohio -----END PRIVACY-ENHANCED MESSAGE-----