-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ni5ypvDFpA+v/l0JrbIxKWYGf91UUfM6gb/IPNSrX6aKiPopfwCxF8eNTmqZtelt HP8tn7HL7Ql3gIleD9L5jg== 0000950152-98-004638.txt : 19980518 0000950152-98-004638.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950152-98-004638 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIFTH THIRD BANCORP CENTRAL INDEX KEY: 0000035527 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 310854434 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-08076 FILM NUMBER: 98624103 BUSINESS ADDRESS: STREET 1: 38 FOUNTAIN SQ PLZ STREET 2: FIFTH THIRD CENTER CITY: CINCINNATI STATE: OH ZIP: 45263 BUSINESS PHONE: 5135795300 10-Q 1 FIFTH THIRD BANCORP 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended March 31, 1998 Commission File Number 0-8076 FIFTH THIRD BANCORP (Exact name of Registrant as specified in its charter) Ohio 31-0854434 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) Fifth Third Center Cincinnati, Ohio 45263 (Address of principal executive offices) Registrant's telephone number, including area code: (513) 579-5300 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 ----- ----- There were 233,130,522 shares of the Registrant's Common Stock, without par value, outstanding as of March 31, 1998. 2 FIFTH THIRD BANCORP INDEX Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets - March 31, 1998 and 1997 and December 31, 1997 3 Consolidated Statements of Income - Three Months Ended March 31, 1998 and 1997 4 Consolidated Statements of Cash Flows - Three Months Ended March 31, 1998 and 1997 5 Consolidated Statements of Changes in Shareowners' Equity - Three Months Ended March 31, 1998 and 1997 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders 12 Item 6. Exhibits 13 2 3 FIFTH THIRD BANCORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
================================================================================================== MARCH 31, December 31, March 31, ($000'S) 1998 1997 1997 ================================================================================================== ASSETS - -------------------------------------------------------------------------------------------------- Cash and Due from Banks $ 707,635 720,133 506,720 Securities Available for Sale (a) 7,229,858 6,397,077 6,465,434 Securities Held to Maturity (b) 80,555 72,236 88,119 Other Short-Term Investments 205,673 29,424 32,641 Loans Held for Sale 248,933 62,110 9,509 Loans and Leases Commercial Loans 4,327,931 4,268,238 4,102,127 Construction Loans 362,402 360,242 375,093 Commercial Mortgage Loans 796,681 810,436 794,602 Commercial Lease Financing 1,459,723 1,416,227 1,092,127 Residential Mortgage Loans 2,240,699 2,234,161 2,066,783 Consumer Loans 2,813,925 2,769,786 2,533,339 Consumer Lease Financing 2,105,676 2,064,642 1,910,198 Unearned Income (558,441) (547,125) (446,292) Reserve for Credit Losses (202,703) (200,931) (187,343) - -------------------------------------------------------------------------------------------------- Total Loans and Leases 13,345,893 13,175,676 12,240,634 Bank Premises and Equipment 261,468 251,898 233,163 Accrued Income Receivable 181,717 178,803 162,036 Other Assets 594,767 487,697 437,441 - -------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 22,856,499 $ 21,375,054 $ 20,175,697 ================================================================================================== LIABILITIES ================================================================================================== Deposits Demand $ 2,491,436 2,426,198 2,039,309 Interest Checking 2,283,393 2,252,571 2,002,915 Savings 2,362,684 2,298,749 1,999,459 Money Market 1,127,124 1,106,850 1,430,396 Other Time 5,140,010 5,278,375 5,520,254 Certificates - $100,000 and Over 1,071,554 1,010,438 802,097 Foreign Office 255,788 540,951 128,086 - -------------------------------------------------------------------------------------------------- Total Deposits 14,731,989 14,914,132 13,922,516 Federal Funds Borrowed 2,323,342 1,253,553 1,512,613 Short-Term Bank Notes 622,000 555,000 705,000 Other Short-Term Borrowings 1,157,629 1,252,378 1,184,792 Accrued Taxes, Interest and Expenses 550,947 505,048 387,143 Other Liabilities 183,180 159,654 90,995 Long-Term Debt 947,965 457,878 457,747 - -------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 20,517,052 19,097,643 18,260,806 ================================================================================================== SHAREOWNERS' EQUITY ================================================================================================== Common Stock (c) 517,550 516,898 513,728 Capital Surplus 446,690 452,568 459,530 Retained Earnings 1,471,034 1,401,649 1,197,289 Unrealized Gains (Losses) on Securities Available for Sale 79,185 90,876 (26,978) Treasury Stock (175,012) (184,580) (228,678) ================================================================================================== TOTAL SHAREOWNERS' EQUITY 2,339,447 2,277,411 1,914,891 ================================================================================================== TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $ 22,856,499 21,375,054 20,175,697 ==================================================================================================
(a) Amortized cost: March 31, 1998 - $7,108,034, December 31, 1997 - $6,257,268, and March 31, 1997 - $6,506,939. (b) Market value: March 31, 1998 - $80,555, December 31, 1997 - $72,236 and March 31, 1997 - $88,119. (c) Stated value $2.22 per share; authorized 300,000,000; outstanding March 31, 1998 - 233,130,522 (EXCLUDES 5,131,205 TREASURY SHARES), December 31, 1997 - 232,836,842 (excludes 5,424,885 treasury shares) and March 31, 1997 - 231,409,388 (excludes 6,857,703 treasury shares). Outstanding and treasury shares have been adjusted for the three-for-two stock split effected in the form of a stock dividend declared March 17, 1998 and distributed April 15, 1998. See Notes to Consolidated Financial Statements 3 4 FIFTH THIRD BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
========================================================================================================= THREE MONTHS ENDED MARCH 31, ----------------------------------------- ($000S) 1998 1997 ========================================================================================================= INTEREST INCOME Interest and Fees on Loans and Leases $ 273,076 250,725 Interest on Securities Taxable 115,598 107,159 Exempt from Income Taxes 2,940 4,374 - --------------------------------------------------------------------------------------------------------- Total Interest on Securities 118,538 111,533 Interest on Other Short-Term Investments 1,382 487 - --------------------------------------------------------------------------------------------------------- Total Interest Income 392,996 362,745 - --------------------------------------------------------------------------------------------------------- INTEREST EXPENSE Interest on Deposits Interest Checking 13,911 11,561 Savings 19,925 15,933 Money Market 8,776 11,967 Other Time 69,838 75,268 Certificates - $100,000 and Over 13,009 10,313 Foreign Office 4,779 4,453 - --------------------------------------------------------------------------------------------------------- Total Interest on Deposits 130,238 129,495 Interest on Federal Funds Borrowed 27,208 24,969 Interest on Short-Term Bank Notes 12,466 9,365 Interest on Other Short-Term Borrowings 14,116 12,558 Interest on Long-Term Debt and Notes 11,068 5,042 - --------------------------------------------------------------------------------------------------------- Total Interest Expense 195,096 181,429 - --------------------------------------------------------------------------------------------------------- NET INTEREST INCOME 197,900 181,316 Provision for Credit Losses 19,825 17,446 - --------------------------------------------------------------------------------------------------------- NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 178,075 163,870 OTHER OPERATING INCOME Investment Advisory Income 26,912 20,851 Service Charges on Deposits 24,809 22,433 Data Processing Income 29,830 22,739 Other Service Charges and Fees 40,618 31,865 Securities Gains 4,212 672 - --------------------------------------------------------------------------------------------------------- Total Other Operating Income 126,381 98,560 OPERATING EXPENSES Salaries, Wages and Incentives 55,738 47,408 Employee Benefits 14,153 10,011 Equipment Expenses 5,878 5,254 Net Occupancy Expenses 9,098 9,337 Other Operating Expenses 55,007 48,965 - --------------------------------------------------------------------------------------------------------- Total Operating Expenses 139,874 120,975 - --------------------------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 164,582 141,455 Applicable Income Taxes 55,601 46,959 - --------------------------------------------------------------------------------------------------------- NET INCOME $ 108,981 94,496 ========================================================================================================= Per Share (a): Earnings $ 0.47 0.41 Diluted Earnings $ 0.46 0.39 Cash Dividends $ 0.17 .12-7/8 ========================================================================================================= Average Shares (000s) (a): Outstanding 232,980 234,869 Diluted 237,905 238,373 =========================================================================================================
(a) Per share amounts and average shares outstanding have been adjusted for the three-for-two stock split effected in the form of a stock dividend declared March 17, 1998 and distributed April 15, 1998. See Notes to Consolidated Financial Statements 4 5 FIFTH THIRD BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
======================================================================================================================= THREE MONTHS ENDED MARCH 31, ------------------------------ ($000S) 1998 1997 ======================================================================================================================= OPERATING ACTIVITIES Net Income $ 108,981 94,496 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Provision for Credit Losses 19,825 17,446 Depreciation, Amortization and Accretion 15,100 15,231 Provision for Deferred Income Taxes 4,329 4,174 Realized Securities Gains (4,344) (1,848) Realized Securities Losses 132 1,176 Proceeds from Sales of Residential Mortgage Loans Held for Sale 255,430 78,311 Net Gains on Sales of Loans (3,972) (2,626) Increase in Residential Mortgage Loans Held for Sale (438,269) (71,138) Decrease (Increase) in Accrued Income Receivable (2,914) 20,818 Decrease (Increase) in Other Assets (112,878) 110,158 Increase in Accrued Taxes, Interest and Expenses 47,865 32,129 Increase (Decrease) in Other Liabilities 18,042 (21,067) - ----------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (92,673) 277,260 ======================================================================================================================= INVESTING ACTIVITIES Proceeds from Sales of Securities Available for Sale 76,877 435,221 Proceeds from Calls, Paydowns and Maturities of Securities Available for Sale 444,334 186,563 Purchases of Securities Available for Sale (1,287,849) (933,877) Proceeds from Calls, Paydowns and Maturities of Securities Held to Maturity 11,804 96,264 Purchases of Securities Held to Maturity (20,123) (7,579) Decrease (Increase) in Other Short-Term Investments (176,249) 11,938 Decrease (Increase) in Loans and Leases (272,658) 55,378 Purchases of Bank Premises and Equipment (16,369) (7,840) Proceeds from Disposal of Bank Premises and Equipment 317 545 - ----------------------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (1,239,916) (163,387) ======================================================================================================================= FINANCING ACTIVITIES Increase (Decrease) in Core Deposits 41,904 (462,821) Increase (Decrease) in CDs - $100,000 and Over, including Foreign (224,047) 10,681 Increase in Federal Funds Borrowed 1,069,789 91,919 Increase (Decrease) in Short-Term Bank Notes 67,000 (101,000) Increase (Decrease) in Other Short-Term Borrowings (94,749) 146,054 Proceeds from Issuance of Long-Term Debt and Notes 500,000 200,000 Repayment of Long-Term Debt (10,000) (20,000) Payment of Cash Dividends (34,149) (30,718) Exercise of Stock Options 4,342 3,762 Purchases of Treasury Stock -- (253,956) - ----------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) BY FINANCING ACTIVITIES 1,320,090 (416,079) ======================================================================================================================= DECREASE IN CASH AND DUE FROM BANKS (12,499) (302,206) CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 720,133 808,926 - ----------------------------------------------------------------------------------------------------------------------- CASH AND DUE FROM BANKS AT END OF PERIOD 707,634 506,720 =======================================================================================================================
See Notes to Consolidated Financial Statements 5 6 FIFTH THIRD BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY (UNAUDITED)
====================================================================================================== THREE MONTHS ENDED MARCH 31, ----------------------------------- ($000S) 1998 1997 ====================================================================================================== BALANCE AT JANUARY 1 $ 2,277,411 2,144,125 Net Income 108,981 94,496 Nonowner Changes in Equity, Net of Tax: Unrealized Gains/(Losses) on Securities Available for Sale (11,691) (43,576) - ----------------------------------------------------------------------------------------------------- Net Income and Nonowner Changes in Equity 97,290 50,920 Cash Dividends Declared (1998 - $.17 per share and 1997 - $.12-7/8 per share) (a) (39,596) (29,960) Shares Acquired for Treasury -- (253,956) Stock Options Exercised Including Treasury Shares Issued 4,342 3,762 - ----------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31 $ 2,339,447 1,914,891 ======================================================================================================
(a) Per share amounts have been adjusted for the three-for-two stock split effected in the form of a stock dividend declared March 17, 1998 and distributed April 15, 1998. See Notes to Consolidated Financial Statements 6 7 FINANCIAL INFORMATION Item 1. Notes to Consolidated Financial Statements 1. In the opinion of management, the unaudited consolidated financial statements include all adjustments (which consist of normal recurring accruals) necessary to present fairly the consolidated financial position as of March 31, 1998 and 1997, and the results of operations and cash flows for the three months ended March 31, 1998 and 1997. In accordance with generally accepted accounting principles for interim financial information, these statements do not include all of the information and footnotes required by generally accepted accounting principles for complete annual financial statements. Financial information as of December 31, 1997 has been derived from the audited consolidated financial statements of the Registrant. The results of operations and cash flows for the three months ended March 31, 1998 and 1997 are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 1997, included in the Registrant's Annual Report on Form 10-K. 2. Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" is required for 1998. The statement is not required to be applied to interim reporting and will be applied in the Registrant's 1998 annual financial statements. The statement requires financial disclosure and descriptive information about reportable operating segments. Upon its adoption, this statement may result in additional financial statement disclosures. 3. The Registrant's board of directors approved a three-for-two stock split on March 17, 1998. The additional shares resulting from the split were distributed on April 15, 1998 to shareowners of record as of March 31, 1998. The consolidated financial statements, notes and other references to share and per share data have been retroactively restated for the stock split. 4. In the first three months of 1998, the Registrant paid $197,239,000 in interest and no Federal income taxes. In the first three months of 1997, the Registrant paid $192,683,000 in interest and no Federal income taxes. In the first three months of 1998, the Registrant had noncash investing activities consisting of the securitization of $82,604,000 of residential mortgage loans. There were no loan securitizations during the first three months of 1997. 5. In 1998, the Registrant adopted SFAS No. 130, "Reporting Comprehensive Income." The statement establishes standards for the reporting and display of net income and nonowner changes in equity. The Registrant elected to present the required disclosures in the Consolidated Statement of Changes in Shareowners' Equity on page 6. The caption "Net income and nonowner changes in equity," represents total comprehensive income as 7 8 defined in the statement. Disclosure of the reclassification adjustments, related tax effects allocated to nonowner changes in equity and accumulated nonowner changes in equity for the three months ended March 31 is provided below ($000s).
=========================================================================================================================== Reclassification Adjustments, Before Tax 1998 1997 - --------------------------------------------------------------------------------------------------------------------------- Change in Unrealized Gains/(Losses) Arising During Period $ (22,198) (67,712) Less: Reclassification Adjustment For Gains Included in Net Income 4,212 672 - --------------------------------------------------------------------------------------------------------------------------- Net Unrealized Losses on Securities Available for Sale $ (17,986) (67,040) - --------------------------------------------------------------------------------------------------------------------------- Related Tax Effects - --------------------------------------------------------------------------------------------------------------------------- Change in Unrealized Gains/(Losses) Arising During Period $ 7,769 23,699 Less: Reclassification Adjustment For Gains Included in Net Income (1,474) (235) - --------------------------------------------------------------------------------------------------------------------------- Net Unrealized Losses on Securities Available for Sale $ 6,295 23,464 - --------------------------------------------------------------------------------------------------------------------------- Reclassification Adjustments, Net of Tax - --------------------------------------------------------------------------------------------------------------------------- Change in Unrealized Gains/(Losses) Arising During Period $ (14,429) (44,013) Less: Reclassification Adjustment For Gains Included in Net Income 2,738 437 - --------------------------------------------------------------------------------------------------------------------------- Net Unrealized Losses on Securities Available for Sale $ (11,691) (43,576) - --------------------------------------------------------------------------------------------------------------------------- Accumulated Nonowner Changes in Equity - --------------------------------------------------------------------------------------------------------------------------- Beginning Balance-Unrealized Holding Gains on Securities Available for Sale $ 90,876 16,598 Current Period Change (11,691) (43,576) - --------------------------------------------------------------------------------------------------------------------------- Ending Balance-Unrealized Holding Gains (Losses) on Securities Available for Sale $ 79,185 (26,978) ===========================================================================================================================
6. In January 1998, the Registrant entered into merger agreements with State Savings Company, a privately-owned thrift holding company headquartered in Columbus, Ohio with $2.8 billion in assets and CitFed Bancorp, Inc., a publicly-traded savings and loan holding company headquartered in Dayton, Ohio with $3.5 billion in assets. These transactions will be tax-free, stock-for-stock exchanges accounted for as poolings of interests. The Registrant will exchange 16,625,340 shares of Fifth Third Bancorp common stock for all outstanding shares of State Savings Company. The Registrant will exchange 1.005 shares of Fifth Third Bancorp common stock for each outstanding share of CitFed Bancorp, Inc. Both transactions are expected to be completed in mid-1998 and are subject to approval by shareowners and appropriate regulatory agencies. 7. In December 1997, the Registrant entered into a merger agreement with The Ohio Company, a full-service broker-dealer for retail and institutional clients headquartered in Columbus, Ohio. The merger is expected to be completed in mid-1998, will be accounted for as a purchase and is subject to approval by shareowners and appropriate regulatory agencies. In connection with the acquisition of The Ohio Company, the Registrant will exchange all of the outstanding shares of capital stock of The Ohio Company for shares of Fifth Third Common Stock having a fair market value of $80 million. 8 9 8. On April 9, 1998, the Registrant acquired W. Lyman Case & Company, a commercial mortgage banking firm based in Columbus, Ohio which originated more than $800 million in financing and equity transactions in 1997 and has a loan servicing portfolio in excess of $2 billion. The transaction was accounted for as a purchase. The pro forma effects of the acquisition were not material. 9. On May 12, 1998, the Registrant, through a public offering, issued 3,600,000 shares of Common Stock. The net proceeds from the sale of Common Stock will be used by the Registrant as working capital for general corporate purposes. The issuance of the offered shares will also facilitate the Registrant's ability to account for the acquisition of State Savings Company and/or the acquisition of CitFed Bancorp, Inc. as a pooling-of-interests. 10. The following appears in accordance with the Securities Litigation Reform Act of 1995: This report includes forward-looking statements that involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those in the forward-looking statements. Those factors include the economic environment, competition, products and pricing in geographic and business areas in which the Registrant operates, prevailing interest rates, changes in government regulations and policies affecting financial services companies, credit quality and credit risk management, acquisitions and integration of acquired businesses. Fifth Third Bancorp undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this report. 11. Certain prior year's data has been reclassified to conform to current presentation. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following is management's discussion and analysis of certain significant factors which have affected the Registrant's financial condition and results of operations during the periods included in the consolidated financial statements which are a part of this filing. Results of Operations The Registrant's net income was $108,981,000 for the first quarter of 1998, up 15 percent compared to $94,496,000 for the same period last year. Diluted earnings per share for the first quarter was $.46, an 18 percent increase over 1997's $.39. Total assets were $22.9 billion at quarter end, compared to 1997's quarter-end assets of $20.2 billion. Return on average equity was 19.9 percent and return on average assets was 2.00 percent for the first quarter of 1998 compared to 18.7 percent and 1.88 percent, respectively, for the same quarter of last year. 9 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) The Registrant's net interest income on a fully taxable equivalent basis for the first quarter of 1998 was $209.7 million, a 9.1 percent increase over $192.2 million for the same period of 1997. This increase resulted primarily from strong loan and lease volume, an emphasis on direct lending and higher loan yields. The net provision for credit losses was $19.8 million in the first quarter of 1998 and $17.4 million in the first quarter of 1997. Net charge-offs for the first quarter were .55 percent of average loans and leases compared to .56 percent for the first quarter of 1997. The net charge-off ratio remains near the Registrant's historical 10-year average of .50 percent and the reserve for credit losses is in excess of four times nonperforming assets. Nonperforming assets as a percentage of total loans, leases and other real estate owned was .33 percent at March 31, 1998, down from .36 percent at March 31, 1997. The reserve for credit losses as a percentage of total loans and leases was 1.50 percent at March 31, 1998 and 1.51 percent at March 31, 1997. Total other operating income, excluding securities gains, for the first quarter increased 25 percent to $122.2 million compared to the first quarter of 1997. Data processing income was up 31 percent in the first quarter as a result of new customers and resulting increases in merchant transaction volumes, the success of debit cards and increased popularity of ATMs. Successful new sales efforts and continued strength in the financial markets led to 29 percent growth in investment advisory income. Commercial banking income, consumer loan and lease fees and mortgage banking revenue contributed to the 27 percent increase in other service charges and fees. Mortgage banking fee income increased 40 percent, driven by a favorable interest rate environment and successful selling that fueled strong origination volume in the first quarter. Mortgage loan servicing fees were up 14 percent, consistent with the related increase in the Registrant's $6.3 billion residential mortgage servicing portfolio. The overhead ratio (operating expenses divided by the sum of taxable equivalent net interest income and other operating income) remained unchanged at 41.6 percent as compared to the first quarter of 1997, well below industry norms. The Registrant's expense growth over first quarter 1997 was higher than customary as the Registrant used strong revenue growth to invest, in part, in technology upgrades and Year 2000 systems integration and implementation projects. Salaries, wages, incentives and employee benefits rose in the first quarter as a result of more variable compensation for increased sales production, increased staffing costs related to computer programming and additional FTEs to support sales and the Registrant's volume-related businesses. Equipment expenses increased 12 percent over 1997's first quarter due primarily to software and processing technology upgrades and the addition of 307 ATMs. Volume-related expenses of the Registrant's processing and fee businesses, along with higher loan and lease processing costs from record volumes, contributed mostly to the 12 percent increase in other operating expense. 10 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Financial Condition The Registrant continues to focus on improved asset mix. Improved earning asset yields combined with eight percent growth in average loan and lease balances led to net interest income growth. Direct installment loan originations exceeded $313 million this quarter compared to $243 million last quarter and $181 million in the same quarter a year ago. Residential mortgage originations exceeded $677 million this quarter compared to $510 million last quarter and $291 million in the first quarter last year. A successful direct loan campaign lead to a 30 percent increase in home equity loans and lines of credit. During the first quarter of 1997, the Registrant, through its wholly-owned Fifth Third Capital Trust I, a Delaware statutory business trust (the "Trust"), issued $200 million of 8.136 percent Capital Securities. These securities, representing Junior Subordinate Deferrable Interest Debentures, are classified as long-term debt in the Consolidated Balance Sheet and qualify as Tier 1 regulatory capital. Liquidity and Capital Resources The maintenance of an adequate level of liquidity is necessary to ensure sufficient funds are available to meet customer loan demand and deposit withdrawals. The banking subsidiaries' liquidity sources consist of short-term marketable securities, maturing loans and federal funds loaned and selected securitizable loan assets. Liquidity has also been obtained through liabilities such as customer-related core deposits, funds borrowed, certificates of deposit and public funds deposits. At March 31, 1998, shareowners' equity was $2.339 billion, compared to $1.915 billion at March 31, 1997, an increase of $424 million, or 22.1 percent. Shareowners' equity as a percentage of total assets as of March 31, 1998 was 10.2 percent. The Federal Reserve Board has adopted risk-based capital guidelines which assign risk weightings to assets and off-balance sheet items and also define and set minimum capital requirements (risk-based capital ratios). The guidelines also define "well-capitalized" ratios of Tier 1, total capital and leverage as 6 percent, 10 percent and 5 percent, respectively. The Registrant exceeded these "well-capitalized" ratios at March 31, 1998 and 1997. At March 31, 1998, the Registrant had a Tier 1 risk-based capital ratio of 11.35 percent, a total risk-based capital ratio of 13.71 percent and a leverage ratio of 9.90 percent. At March 31, 1997, the Registrant had a Tier 1 risk-based capital ratio of 11.59 percent, a total risk-based capital ratio of 14.30 percent and a leverage ratio of 9.23 percent. In January 1998, the Registrant's board of directors rescinded Fifth Third Bancorp's stock repurchase programs. No shares have been purchased under these programs since June 1997. The Registrant anticipates approximately 1,500,000 shares of Fifth Third Bancorp Common Stock will be issued to the shareowners of The Ohio Company pursuant to the proposed merger. Prior to the closing of this acquisition, the Registrant may repurchase up to 1,500,000 shares of Fifth Third Common Stock in the open market to be used solely for such issuance. 11 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Market Risk Interest rate risk management focuses on maintaining consistent growth in net interest income within Board-approved policy limits. The Registrant uses an earnings simulation model to analyze net interest income sensitivity to movements in interest rates. Given an immediate, sustained 200 basis point upward shock to the yield curve used in the simulation model, it is estimated net interest income for the Registrant would decrease by a negative 2.56 percent over one year and increase by 6.4 percent over two years. A 200 basis point immediate, sustained downward shock in the yield curve would increase net interest income by an estimated .79 percent over one year and decrease net interest income by an estimated negative 7.74 percent over two years. All of these estimated changes in net interest income are within the policy guidelines established by the Registrant's board of directors. Item 4. Submission of Matters to a Vote of Security Holders On March 17, 1998, the Registrant held its Annual Meeting of Stockholders for which the Board of Directors solicited proxies. At the Annual Meeting, the shareowners adopted all the proposals stated in the Proxy Statement dated February 9, 1998, which is incorporated herein by reference. The proposals voted on and approved by the shareowners are as follows (all votes have been adjusted for the 3-for-2 stock split declared on March 17, 1998 and distributed April 15, 1998: 1. The election of six Class III Directors (Darryl F. Allen, Gerald V. Dirvin, Ivan W. Gorr, Joseph H. Head, Jr., Dr. Mitchel O. Livingston and James E. Rogers) to serve until the Annual Meeting of Stockholders in 2001. 2. Approval of the proposal to adopt the Variable Compensation Plan by a vote of 197,606,624 for, 6,106,952 against and 2,172,924 abstaining. 3. Approval of the proposal to adopt the 1998 Long-Term Incentive Stock Plan by a vote of 162,567,513 for, 31,568,945 against and 2,116,692 abstaining. 4. Approval of the appointment of the firm of Deloitte & Touche LLP to serve as independent auditors for the Registrant for the year 1998 by a vote of 203,365,806 for, 1,759,955 against and 421,305 abstaining. 12 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Item 6. Exhibits and Reports on Form 8-K (a) List of Exhibits (11) - Computation of Consolidated Earnings Per Share for the Three Months Ended March 31, 1998 and 1997 (27) - Financial Data Schedules for the Three Months Ended March 31, 1998 and 1997 (27.1) - Financial Data Schedules for the Three Months Ended March 31, 1997, Six Months Ended June 30, 1997 and Nine Months Ended September 30, 1997 (27.2) - Financial Data Schedules for the Three Months Ended March 31, 1996, Six Months Ended June 30, 1996 and Nine Months Ended September 30, 1996 (27.3) - Financial Data Schedules for the Years Ended December 31, 1997 and 1996 (b) Form 8-K dated March 17, 1998 describing the three-for-two stock split declared March 17, 1998 and distributed April 15, 1998 and the resulting effect on the exchange ratios offerred in the pending acquisitions of CitFed Bancorp, Inc. and State Savings Company, was previously filed and is incorporated into this Form 10-Q by reference. SIGNATURES Pursuant to the requirements 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 Date: May 14, 1998 /s/ Neal E. Arnold --------------------------- Neal E. Arnold Senior Vice President and Chief Financial Officer 13 EX-11 2 EXHIBIT 11 1 EXHIBIT 11 FIFTH THIRD BANCORP COMPUTATION OF CONSOLIDATED EARNINGS PER SHARE FOR THE THREE MONTHS ENDED MARCH 31 ($000'S, EXCEPT PER SHARE DATA)
1998 1997 ---- ---- NET INCOME $108,981 94,496 ======== ======= EARNINGS PER SHARE: WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (a) 232,980 234,869 ======== ======= PER SHARE (NET INCOME DIVIDED BY THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING) $ 0.47 0.41 ======== ======= DILUTED EARNINGS PER SHARE: NET INCOME $108,981 94,496 ======== ======= ADJUSTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - AFTER GIVING EFFECT TO THE CONVERSION OF STOCK OPTIONS (A) 237,905 238,373 ======== ======= PER SHARE (ADJUSTED NET INCOME DIVIDED BY THE ADJUSTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING) $ 0.46 0.39 ======== =======
- -------------------------------------------------------- (a) Per share amounts and average shares outstanding have been adjusted for the three-for-two stock splits effected in the form of stock dividends paid April 15, 1998 and July 15, 1997. EX-27 3 EXHIBIT 27
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIFTH THIRD BANCORP'S QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000035527 FIFTH THIRD BANCORP 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 707,635 178,550 27,123 0 7,229,858 80,555 80,555 13,797,529 202,703 22,856,499 14,731,989 4,102,971 734,127 947,965 0 0 517,550 1,821,897 22,856,499 273,076 118,538 1,382 392,996 130,238 195,096 197,900 19,825 4,212 139,874 164,582 108,981 0 0 108,981 .47 .46 4.11 42,610 41,861 125 0 200,931 23,443 5,388 202,703 202,703 0 0
EX-27.1 4 EXHIBIT 27.1
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIFTH THIRD BANCORP'S QUARTERLY REPORTS ON FORM 10-Q FOR THE QUARTERS ENDED MARCH 31, 1997, JUNE 30, 1997, AND SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000035527 FIFTH THIRD BANCORP 1,000 3-MOS 6-MOS 9-MOS DEC-31-1997 DEC-31-1997 DEC-31-1997 JAN-01-1997 JAN-01-1997 JAN-01-1997 MAR-31-1997 JUN-30-1997 SEP-30-1997 506,720 847,525 645,916 30,836 30,052 28,306 1,805 21,030 2,550 0 0 0 6,465,434 6,210,577 6,437,593 88,119 75,740 76,426 85,119 75,740 76,426 12,437,486 12,724,097 13,023,979 187,343 191,434 194,773 20,175,697 20,694,518 20,927,002 13,922,516 13,972,647 14,594,731 3,402,405 3,676,148 3,132,263 478,138 584,361 599,397 457,757 457,834 457,791 0 0 0 0 0 0 513,728 513,142 515,773 1,401,163 1,490,386 1,627,047 20,175,697 20,694,518 20,927,002 250,725 505,184 770,233 111,533 222,722 328,173 487 1,118 1,731 362,745 729,024 1,100,137 129,495 262,127 396,148 181,429 362,893 547,640 181,316 366,131 552,497 17,446 37,596 55,437 672 857 2,929 120,975 248,772 377,486 141,455 286,999 441,844 94,496 190,577 294,001 0 0 0 0 0 0 94,496 190,577 294,001 .41 .82 1.27 .39 .80 1.24 4.07 4.09 4.09 40,149 42,041 39,226 35,287 40,634 43,354 95 96 104 0 0 0 187,278 187,278 187,278 23,016 44,913 68,005 5,635 11,473 17,358 187,343 191,434 194,773 187,343 191,434 194,773 0 0 0 0 0 0 BASIC EARNINGS PER SHARE IN ACCORDANCE WITH STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128 DILUTED EARNINGS PER SHARE IN ACCORDANCE WITH STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128 RESTATED TO GIVE RETROACTIVE EFFECT TO THE 3-FOR-2 STOCK SPLIT DECLARED MARCH 17, 1998 AND DISTRIBUTED APRIL 15, 1998
EX-27.2 5 EXHIBIT 27.2
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIFTH THIRD BANCORP'S QUARTERLY REPORTS ON FORM 10-Q FOR THE QUARTERS ENDED MARCH 31, 1996, JUNE 30, 1996, AND SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000035527 FIFTH THIRD BANCORP 1,000 3-MOS 6-MOS 9-MOS DEC-31-1996 DEC-31-1996 DEC-31-1996 JAN-01-1996 JAN-01-1996 JAN-01-1996 MAR-31-1996 JUN-30-1996 SEP-30-1996 470,337 474,963 683,196 10,751 12,796 29,735 10,005 15,180 14,355 0 0 0 5,436,077 6,183,028 6,098,576 185,987 114,252 166,145 185,987 114,252 166,145 12,104,260 12,266,352 12,393,286 181,006 183,876 185,689 18,869,875 19,855,498 20,086,988 13,709,298 14,723,901 14,576,688 2,455,723 2,474,512 2,721,738 482,384 423,765 480,120 429,703 282,594 277,565 0 0 0 0 0 0 510,952 528,284 528,829 1,281,815 1,422,442 1,502,048 18,869,875 19,855,498 20,086,988 239,636 488,608 742,627 83,223 177,694 282,457 191 379 627 323,050 666,681 1,025,711 122,278 256,991 395,722 161,422 333,524 515,455 161,628 333,157 510,256 9,750 27,798 44,229 205 372 390 117,239 237,626 375,289 118,307 243,152 361,507 79,140 162,389 241,444 0 0 0 0 0 0 79,140 162,389 241,444 .35 .71 1.04 .34 .69 1.02 4.04 4.02 3.99 36,884 42,637 40,127 22,179 22,356 31,315 394 469 863 0 0 0 177,388 177,388 177,388 15,744 37,478 56,991 3,774 10,330 15,225 181,006 183,876 185,689 181,006 183,876 185,689 0 0 0 0 0 0 BASIC EARNINGS PER SHARE IN ACCORDANCE WITH STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128 DILUTED EARNINGS PER SHARE IN ACCORDANCE WITH STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128 RESTATED TO GIVE RETROACTIVE EFFECT TO THE 3-FOR-2 STOCK SPLITS DISTRIBUTED APRIL 15, 1998 AND JULY 15, 1997
EX-27.3 6 EXHIBIT 27.3
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIFTH THIRD BANCORP'S ANNUAL REPORTS ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AND 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000035527 FIFTH THIRD BANCORP 1,000 YEAR YEAR DEC-31-1997 DEC-31-1996 JAN-01-1997 JAN-01-1996 DEC-31-1997 DEC-31-1996 720,133 808,926 27,224 31,424 2,200 13,155 0 0 6,397,077 6,223,881 72,236 176,804 72,236 176,798 13,438,717 12,514,792 200,931 187,278 21,375,054 20,548,998 14,914,132 14,374,656 3,060,931 3,265,432 664,702 487,124 457,878 277,661 0 0 0 0 516,898 528,933 1,760,513 1,615,192 21,375,054 20,548,998 1,043,102 992,407 433,105 391,187 2,181 1,519 1,478,388 1,385,113 531,631 530,356 733,426 695,869 744,962 689,244 80,342 64,014 6,326 4,563 506,158 493,330 603,923 500,315 401,237 335,059 0 0 0 0 401,237 335,059 1.73 1.43 1.69 1.41 4.11 3.99 37,401 29,046 46,281 38,053 128 1,121 29,145 43,097 187,278 177,388 91,801 80,444 23,407 20,482 200,931 187,278 200,931 187,278 0 0 0 0 BASIC EARNINGS PER SHARE IN ACCORANCE WITH STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128 DILUTED EARNINGS PER SHARE IN ACCORDANCE WITH STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128 RESTATED TO GIVE RETROACTIVE EFFECT TO THE 3-FOR-2 STOCK SPLITS DISTRIBUTED APRIL 15, 1998 AND JULY 15, 1997 RESTATED TO GIVE RETROACTIVE EFFECT TO THE 3-FOR-2 STOCK SPLIT DISTRIBUTED APRIL 15, 1998
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