EX-99.1 3 dex991.htm PRESS RELEASE DATED JANUARY 17, 2006 Press release dated January 17, 2006

Exhibit 99.1

 

LOGO

 

            News Release
CONTACT:   Bradley S. Adams (Analysts)       FOR IMMEDIATE RELEASE
    (513) 534-0983       January 17, 2006
    Debra DeCourcy (Media)        
    (513) 534-4153        

 

FIFTH THIRD BANCORP REPORTS FOURTH QUARTER 2005

EARNINGS OF $0.60 PER DILUTED SHARE

 

Fifth Third Bancorp’s 2005 fourth quarter earnings per diluted share were $.60 compared to $.31 per diluted share for the same period in 2004. Fourth quarter net income totaled $332 million compared to $176 million in the same quarter last year. Return on average assets (ROA) and return on average equity (ROE) were 1.27 percent and 13.9 percent, respectively, compared to 0.72 percent and 7.6 percent in 2004’s fourth quarter. Earnings per diluted share for the full year 2005 were $2.77, an increase of three percent over last year’s earnings of $2.68. ROA for the full year 2005 was 1.50 percent and ROE was 16.6 percent, compared to 1.61 percent and 17.2 percent, respectively, in 2004. Fourth quarter and full year 2004 earnings were negatively impacted by $326 million in total pre-tax ($208 million after-tax) termination charges and securities losses, or $.37 per diluted share, related to balance sheet initiatives undertaken to reduce leverage and improve our interest rate profile for expected market conditions. Earnings and balance sheet comparisons to the prior year are also impacted by the first quarter 2005 acquisition of First National Bankshares of Florida, Inc. (First National).

 

“Revenue and net income trends were significantly below our expectations entering the year,” stated George A. Schaefer, Jr., President and CEO of Fifth Third Bancorp. “Although loan growth remained strong in 2005, disappointing deposit growth in the first half of the year combined with significant flattening of the yield curve throughout the year provided a challenging environment for Fifth Third. The resulting declines in returns from the securities portfolio have more than offset growth generated from core banking activities this year with spread based revenues, the largest component of our income statement, remaining essentially unchanged from the prior year. Efforts to reduce the level of securities and wholesale funding on the balance sheet began in late 2004 and continued throughout 2005. While restraining balance sheet growth negatively impacts short-term earnings and comparisons to prior periods, we believe that these actions will improve the risk profile of the balance sheet and deliver more consistent returns on invested capital over the long-term. In the short term, we continue to focus on all expense categories given the difficulty of the interest rate environment. While maintaining an appropriate level of investment in our high opportunity markets remains vital to our long-term success, we believe that 2006 will provide opportunities to optimize returns on recent investments and improve expense efficiency in light of current revenue trends.”

 

“Despite the difficulties encountered this year and their impacts on the performance of our stock, I feel that we have accomplished many things to improve our competitive position and drive revenue and earnings growth in the years to come. We are extremely proud of the efforts of our employees in producing very strong lending

results, renewed strength in deposit growth and the strong overall results from Fifth Third Processing Solutions and our commercial line of business. In addition to these core strengths, Fifth Third added numerous new banking center locations in 2005 in extremely attractive deposit markets, meaningfully expanded our sales force and accomplished numerous infrastructure improvements that we believe have improved the earnings potential, efficiency and strength of your company.”

 

Balance Sheet Trends

 

Retail transaction account growth and commercial customer additions resulted in strong deposit trends in the second half of 2005. Compared to the fourth quarter last year, average transaction account balances increased by $3.8 billion, or eight percent, highlighted by strong growth in average savings and money market deposits. Compared to the third quarter of 2005, average transaction account balances increased by $1.4 billion, or 11 percent on an annualized sequential basis. On a full year average basis, total transaction deposits increased by $4.8 billion, or 11 percent, over last year. Including consumer time deposits, total core deposits increased by 12 percent over the same quarter last year and 13 percent on an annualized sequential basis. Deposit comparisons to prior year periods are impacted by the first quarter 2005 acquisition of First National. Exclusive of the impact of this transaction, average transaction account balances increased by five percent on a full year basis and average core deposits increased eight percent on the same basis (comparisons are being provided to supplement an understanding of the fundamental deposit trends).

 

Loan and lease balances exhibited continued strength with average loans and leases increasing by $1.9 billion from last quarter, or 11 percent on an annualized sequential basis, and by 19 percent on a full year average basis. On a period end basis, total loans and leases increased by 18 percent over the same quarter last year and by seven percent on an annualized sequential basis. Period end commercial loan and lease balances increased by 22 percent over the same quarter last year and by $1.3 billion, or 14 percent on an annualized sequential basis. Period end consumer loan and lease balances, excluding residential mortgage, increased by 14 percent over the same quarter last year and by three percent on an annualized sequential basis. Loan and lease comparisons to prior year periods are impacted by the addition of approximately $3.9 billion in total loans in conjunction with the acquisition of First National. Exclusive of the impact of this transaction, period end commercial loan and lease balances increased by 14 percent and period end consumer loan and lease balances, excluding residential mortgage, increased by 12 percent over last year (comparisons are being provided to supplement an understanding of fundamental lending trends).

 

Net Interest Income

 

Net interest income on a fully taxable equivalent basis decreased two percent on a full year basis due to 25 basis points (bp) of contraction in the net interest margin. Margin compression during 2005 largely resulted from decreases in the net interest rate spread associated with increases in rates paid across deposit and other funding categories, continued mix shifts within the deposit base to higher cost time deposits and the prolonged and significant flattening of the yield curve throughout the year. Fifth Third is focused on growing core deposit balances and remains optimistic that recent trend improvement will continue in 2006 in order to improve the funding mix, more effectively fund future loan growth and improve net interest margin trends.

 

Compared to the fourth quarter of 2004, net interest income on a fully taxable equivalent basis decreased two percent, despite five percent growth in average earning assets, due to a 24 bp decline in the net interest margin. Earning asset growth relative to the fourth quarter of 2004 has been muted due to a reduction of $6.3 billion in the average available-for-sale securities portfolio. In addition to the resulting impact from a decreasing

 

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net interest rate spread and the flattening yield curve, margin, net interest income and earning asset trends and comparisons to prior year periods are impacted by common stock repurchase activity, the impact of sales and cash flows in the reduction of the available-for-sale securities portfolio and the first quarter 2005 acquisition of First National, including a modestly negative impact to net interest income from purchase accounting loan and deposit net amortization.

 

Compared to the third quarter of 2005, net interest income on a fully taxable equivalent basis decreased by $10 million, or five percent annualized, due to modest growth in average earning assets and 5 bp of contraction in the net interest margin. Fourth quarter earning asset growth was muted by efforts to reduce the risks associated with increasing short-term interest rates including the maintenance of strong capital levels through reductions in the available-for-sale securities portfolio. Due to the timing of sale activities at the end of the third quarter, the available-for-sale securities portfolio decreased approximately $1.7 billion on an average basis and $460 million on a period end basis from third quarter levels.

 

Noninterest Income

 

Improved performance in certain business line revenue segments resulted in good noninterest income performance in the fourth quarter of 2005. Overall noninterest income, excluding operating lease revenues and securities gains and losses, increased by 18 percent over the same quarter last year and 16 percent on an annualized sequential basis.

 

Fifth Third Processing Solutions, our electronic payment processing division, delivered a 16 percent increase in revenues over the same quarter last year and an 18 percent increase on a full year basis. Full year revenue comparisons are impacted by the second quarter 2004 sale of certain small merchant processing contracts. Exclusive of the impact of this transaction, electronic payment processing revenue increased 23 percent on a full year basis (comparisons are being provided to supplement an understanding of fundamental revenue trends). Fourth quarter trends are representative of continuing momentum in attracting new customer relationships and moderated by slower growth in the level of retail sales transaction volumes in the fourth quarter of 2005. Fifth Third remains confident in the near and intermediate term growth outlook in this business and continues to see significant opportunities to attract new financial institution customers and retailers.

 

Sales of retail deposit accounts and corporate treasury management products led to an increase in deposit service revenues of six percent over the same quarter last year and one percent on a full year basis. Retail deposit revenues strengthened in the latter half of 2005 and increased by seven percent over the same quarter last year and three percent on a full year basis. Commercial deposit revenues increased by three percent over the same quarter last year and were essentially unchanged on a full year basis with good growth in the number of relationships mitigated by the impacts of higher interest rates on compensating balances in commercial deposit accounts. Compared to the third quarter of 2005, deposit service revenues declined modestly primarily due to a decrease in consumer overdraft related revenues.

 

Investment Advisory revenues increased by five percent over the same quarter last year and were essentially unchanged on a full year basis. Modest revenue in 2005 resulted primarily from declines in brokerage related revenues. Fifth Third continues to focus its efforts on improving execution in retail brokerage and growing the institutional money management business by improving penetration and cross-sell in our large middle market commercial customer base. Fifth Third Investment Advisors, among the largest money managers in the Midwest, has $33 billion in assets under management and $196 billion in assets under care.

 

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Mortgage net service revenue totaled $42 million in the fourth quarter and $174 million on a full year basis compared to $24 million in 2004’s fourth quarter and $178 million in all of 2004. Mortgage originations remained strong and totaled $2.5 billion in the fourth quarter versus $2.9 billion last quarter and $2.0 billion in the fourth quarter of last year. Fourth quarter mortgage banking net service revenue was comprised of $65 million in total mortgage banking fees and loan sales, less $13 million in amortization and valuation adjustments on mortgage servicing rights and less $10 million of losses and mark-to-market adjustments on both settled and outstanding free-standing derivative financial instruments. The mark-to-market adjustments and settlement of free-standing derivative financial instruments and corresponding valuation adjustments resulted from interest rate volatility and the resulting impact of changing prepayment speeds on the mortgage servicing portfolio. The mortgage servicing asset, net of the valuation reserve, was $433 million at December 31, 2005 on a servicing portfolio of $25.7 billion, compared to $408 million last quarter on a servicing portfolio of $24.5 billion.

 

Other noninterest income totaled $165 million in the fourth quarter and $620 million on a full year basis, compared to $125 million in the same quarter last year and $671 million for all of 2004. Comparison of full year results are impacted by a 2004 total pre-tax gain of approximately $157 million on the second and third quarter sales of certain third-party sourced merchant processing contracts. Exclusive of the impact of this transaction, other noninterest income increased by 20 percent on a full year basis primarily due to strong growth in commercial banking revenues, customer interest rate derivative sales, bank owned life insurance and cardholder fees; comparisons being provided to supplement an understanding of fundamental revenue trends. Compared to the third quarter of 2005, other noninterest income increased by $20 million due to very strong growth in commercial banking revenues and customer interest rate derivative sales.

 

Credit Quality

 

Fourth quarter credit quality trends reflect an elevated level of net charge-offs associated with approximately $27 million in previously announced losses to bankrupt commercial airline carriers and an increase in consumer loan and lease losses associated with increased personal bankruptcies prior to the recently enacted reform legislation. Net charge-offs as a percentage of average loans and leases were 67 bp in the fourth quarter, compared to 38 bp last quarter and 44 bp in the fourth quarter of 2004. Nonperforming assets were 52 bp of total loans and leases and other real estate owned at December 31, 2005, compared to 51 bp last quarter and in the year ago fourth quarter. Overall, the level of nonperforming loans and net charge-offs remains a small percentage of the total loan and lease portfolio. Net charge-offs were $117 million in the fourth quarter, compared to $65 million in the same quarter last year and $64 million in the third quarter of 2005. The provision for loan and lease losses totaled $134 million in the fourth quarter compared to $65 million in the same quarter last year and $69 million in the third quarter of 2005. The allowance for loan and lease losses represents 1.06 percent of total loans and leases outstanding as of December 31, 2005, compared to 1.06 percent last quarter and 1.19 percent in the same quarter last year. Comparisons to the level of prior year allowance for loan and lease losses are impacted by the first quarter 2005 acquisition of First National. The loan and lease assets of First National were recorded on Fifth Third’s balance sheet at their respective fair values as of January 1, 2005. Estimated credit impairment was included in this determination of fair value; therefore, the previously existing allowance for loan and lease losses did not carryover to the allowance for loan and lease losses on Fifth Third’s balance sheet.

 

Noninterest Expense

 

Total noninterest expense decreased by 18 percent compared to the same quarter last year and by two percent on a full year basis. Comparisons to prior periods are impacted by the previously disclosed $247 million

 

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charge related to the early retirement of approximately $2.8 billion of long-term debt in the fourth quarter of 2004 and a $78 million charge related to the early retirement of approximately $1 billion of long-term debt in the second quarter of 2004. Exclusive of the impact of these termination charges, total noninterest expense increased by 11 percent in both the fourth quarter and on a full year basis primarily due to increases in sales force headcount, information technology and occupancy expenditures related to the addition of 63 de-novo banking centers in 2005 that did not involve relocation. Compared to the third quarter of 2005, total noninterest expense increased by $31 million due to growth in volume related bankcard expenditures, approximately $9 million in fraud related expenses and approximately $10 million in tax related expense.

 

Fifth Third expects growth in noninterest expenses in 2006 to be modest with continued management focus in light of current revenue trends. Cost savings initiatives will be somewhat mitigated by continuing investment in certain high opportunity markets, including the expected addition of approximately 50 net new banking centers throughout the year, in order to provide greater convenience to our customers and drive deposit and loan growth. Fifth Third’s efficiency ratio was 55.6 percent in the fourth quarter and 53.2 percent on a full year basis compared to 76.0 percent and 53.9 percent in the same periods last year.

 

Conference Call

 

Fifth Third will host a conference call to discuss these fourth quarter financial results at 8:30 a.m. (Eastern Time) today. Investors, analysts and other interested parties may dial into the conference call at 877-309-0967 for domestic access and 706-679-3977 for international access (password: Fifth Third). A replay of the conference call will be available for approximately seven days by dialing 800-642-1687 for domestic access and 706-645-9291 for international access (passcode: 4130197#).

 

Corporate Profile

 

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. The Company has $105.2 billion in assets, operates 19 affiliates with 1,119 full-service Banking Centers, including 119 Bank Mart® locations open seven days a week inside select grocery stores and 2,024 Jeanie® ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Pennsylvania and Missouri. The financial strength of Fifth Third’s Ohio and Michigan banks continues to be recognized by rating agencies with deposit ratings of AA- and Aa1 from Standard & Poor’s and Moody’s, respectively. Additionally, Fifth Third Bancorp continues to maintain among the highest short-term ratings available at A-1+ and Prime-1 and is recognized by Moody’s with one of the highest senior debt ratings for any U.S. bank holding company of Aa2. Fifth Third operates four main businesses: Retail, Commercial, Investment Advisors and Fifth Third Processing Solutions. Investor information and press releases can be viewed at www.53.com. Fifth Third’s common stock is traded through the NASDAQ® National Market System under the symbol “FITB.”

 

This press release may contain forward-looking statements about Fifth Third Bancorp and/or the company as combined with acquired entities within the meaning of Sections 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder, that involve inherent risks and uncertainties. This press release may contain certain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Bancorp and/or the combined company including statements preceded by, followed by or that include the words or phrases such as “believes,” “expects,” “anticipates,” “plans,” “trend,” “objective,” “continue,” “remain” or similar expressions or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) competitive pressures among depository institutions increase significantly; (2) changes in the interest rate environment reduce interest

 

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margins; (3) prepayment speeds, loan origination and sale volumes, charge-offs and loan loss provisions; (4) general economic conditions, either national or in the states in which the Bancorp, one or more acquired entities and/or the combined company do business, are less favorable than expected; (5) political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; (6) changes and trends in the securities markets; (7) legislative or regulatory changes or actions, or significant litigation, adversely affect the Bancorp, one or more acquired entities and/or the combined company or the businesses in which the Bancorp, one or more acquired entities and/or the combined company are engaged; (8) difficulties in combining the operations of acquired entities and (9) the impact of reputational risk created by the developments discussed above on such matters as business generation and retention, funding and liquidity. The Bancorp undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this press release.

 

# # #

 

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LOGO

 

FIFTH THIRD BANCORP AND SUBSIDIARIES

 

Quarterly Financial Review for December 31, 2005

Table of Contents

 

           

Financial Highlights

    8-9     

Consolidated Statements of Income

    10     

Consolidated Statements of Income (Taxable Equivalent)

    11     

Consolidated Balance Sheets

    12-13     

Consolidated Statements of Changes in Shareholders’ Equity

    14     

Average Balance Sheet and Yield Analysis

    15-17     

Summary of Loans and Leases

    18     

Regulatory Capital

    19     

Asset Quality

    20     
           

 

7

Fifth Third Bancorp and Subsidiaries

Financial Highlights

$ in millions, except per share data

(unaudited)

    For the Three Months Ended   % Change     Year to Date   % Change  
  December
2005		   September
2005		   December
2004		   Yr/Yr     Seq     December
2005		   December
2004		   Yr/Yr  

Income Statement Data

                                      

Net interest income (a)

   $735   $745   $752   (2% )   (1% )   $2,996   $3,048   (2% )

Noninterest income

   636   622   479   33%     2%     2,500   2,465   1%  

Total revenue (a)

   1,371   1,367   1,231   11%     -      5,496   5,513   -   

Provision for loan and lease losses

   134   69   65   106%     94%     330   268   23%  

Noninterest expense

   763   732   935   (18% )   4%     2,927   2,972   (2% )

Net income

   332   395   176   89%     (16% )   1,549   1,525   2%  

Common Share Data

                                      

Earnings per share, basic

   $0.60   $0.71   $0.31   94%     (15% )   $2.79   $2.72   3%  

Earnings per share, diluted

   0.60   0.71   0.31   94%     (15% )   2.77   2.68   3%  

Cash dividends per common share

   0.38   0.38   0.35   9%     -      1.46   1.31   11%  

Book value per share

   17.00   16.93   16.00   6%     -      17.00   16.00   6%  

Dividend payout ratio

   63.3%   53.5%   112.9%   (44% )   18%     52.7%   48.9%   8%  

Market price per share:

                                      

High

   $42.50   $43.99   $52.34   (19% )   (3% )   $48.12   $60.00   (20% )

Low

   35.04   36.38   45.32   (23% )   (4% )   35.04   45.32   (23% )

End of period

   37.72   36.75   47.30   (20% )   3%     37.72   47.30   (20% )

Common shares outstanding (in thousands)

   555,623   554,400   557,649   -      -      555,623   557,649   -   

Average common shares outstanding (in thousands):

                                      

Basic

   553,591   553,855   560,162   (1% )   -      554,411   561,259   (1% )

Diluted

   556,322   557,681   566,108   (2% )   -      558,443   568,234   (2% )

Market capitalization

   $20,958   $20,374   $26,377   (21% )   3%     $20,958   $26,377   (21% )

Price/earnings ratio (b)

   13.57   14.76   17.65   (23% )   (8% )   13.57   17.65   (23% )

Financial Ratios

                                      

Return on average assets

   1.27%   1.51%   0.72%   76%     (16% )   1.50%   1.61%   (7% )

Return on average equity

   13.9%   16.6%   7.6%   83%     (16% )   16.6%   17.2%   (3% )

Noninterest income as a percent of total revenue

   46%   46%   39%   18%     -      45%   45%   -   

Average equity as a percent of average assets

   9.12%   9.11%   9.51%   (4% )   -      9.06%   9.34%   (3% )

Net interest margin (a)

   3.11%   3.16%   3.35%   (7% )   (2% )   3.23%   3.48%   (7% )

Efficiency (a)

   55.6%   53.5%   76.0%   (27% )   4%     53.2%   53.9%   (1% )

Effective tax rate

   28.9%   29.2%   20.9%   38%     (1% )   29.9%   31.8%   (6% )

Credit Quality

                                      

Net losses charged off

   $117   $64   $65   80%     83%     $299   $252   19%  

Net losses charged off as a percent of average loans and leases

   0.67%   0.38%   0.44%   52%     76%     0.45%   0.45%   -   

Allowance for loan and lease losses as a percent of loans and leases

   1.06%   1.06%   1.19%   (11% )   -      1.06%   1.19%   (11% )

Allowance for credit losses as a percent of loans and leases

   1.16%   1.16%   1.31%   (11% )   -      1.16%   1.31%   (11% )

Nonperforming assets as a percent of loans, leases and other assets, including other real estate owned

   0.52%   0.51%   0.51%   2%     2%     0.52%   0.51%   2%  

Underperforming assets as a percent of loans, leases and other assets, including other real estate owned

   0.74%   0.74%   0.74%   -      -      0.74%   0.74%   -   

Average Balances

                                      

Loans and leases, including held for sale

   $70,489   $68,556   $59,440   19%     3%     $67,737   $57,042   19%  

Total securities and other short-term investments

   23,274   24,915   29,725   (22% )   (7% )   24,999   30,597   (18% )

Total assets

   103,988   103,699   97,062   7%     -     102,876   94,896   8%  

Transaction deposits

   48,937   47,568   45,126   8%     3%     47,929   43,175   11%  

Core deposits

   58,080   56,298   51,807   12%     3%     56,420   49,383   14%  

Interest-bearing deposits

   52,038   50,402   44,879   16%     3%     50,520   43,908   15%  

Short-term borrowings

   9,179   9,620   11,208   (18% )   (5% )   9,511   13,539   (30% )

Long-term debt

   15,956   16,914   15,585   2%     (6% )   16,384   13,323   23%  

Shareholders’ equity

   9,480   9,451   9,229   3%     -     9,317   8,860   5%  

Regulatory Capital Ratios (c)

                                      

Tier 1 capital

   8.43%   8.45%   10.31%   (18% )   -     8.43%   10.31%   (18% )

Total risk-based capital

   10.51%   10.57%   12.31%   (15% )   (1% )   10.51%   12.31%   (15% )

Tier 1 leverage

   8.08%   7.93%   8.89%   (9% )   2%     8.08%   8.89%   (9% )

Operations

                                      

Banking centers

   1,119   1,106   1,011   11%     1%     1,119   1,011   11%  

ATMs

   2,024   1,996   1,898   7%     1%     2,024   1,898   7%  

Full-time equivalent employees

   21,681   21,674   19,659   10%     -     21,681   19,659   10%  

(a) Presented on a fully taxable equivalent basis

(b) Based on the most recent twelve-month diluted earnings per share and end of period stock prices

(c) Current period regulatory capital ratios are estimates

 

8

Fifth Third Bancorp and Subsidiaries

Financial Highlights

$ in millions, except per share data

(unaudited)

 

     For the Three Months Ended
     December
2005		    September
2005		   

June

2005

    March
2005		    December
2004

Income Statement Data

                         

Net interest income (a)

    $735    $745    $758    $759    $752

Noninterest income

    636    622    635    607    479

Total revenue (a)

    1,371    1,367    1,393    1,366    1,231

Provision for loan and lease losses

    134    69    60    67    65

Noninterest expense

    763    732    728    705    935

Net income

    332    395    417    405    176

Common Share Data

                         

Earnings per share, basic

    $0.60    $0.71    $0.75    $0.73    $0.31

Earnings per share, diluted

    0.60    0.71    0.75    0.72    0.31

Cash dividends per common share

    0.38    0.38    0.35    0.35    0.35

Book value per share

    17.00    16.93    16.82    16.04    16.00

Dividend payout ratio

    63.3%    53.5%    46.7%    48.6%    112.9%

Market price per share:

                         

High

    $42.50    $43.99    $44.67    $48.12    $52.34

Low

    35.04    36.38    40.24    42.05    45.32

End of period

    37.72    36.75    41.17    42.98    47.30

Common shares outstanding (in thousands)

    555,623    554,400    555,938    554,055    557,649

Average common shares outstanding (in thousands):

                         

Basic

    553,591    553,855    553,872    556,362    560,162

Diluted

    556,322    557,681    558,176    561,659    566,108

Market capitalization

    $20,958    $20,374    $22,888    $23,813    $26,377

Price/earnings ratio (b)

    13.57    14.76    15.77    16.22    17.65

Financial Ratios

                         

Return on average assets

    1.27%    1.51%    1.63%    1.62%    0.72%

Return on average equity

    13.9%    16.6%    18.1%    18.0%    7.6%

Noninterest income as a percent of total revenue

    46%    46%    46%    44%    39%

Average equity as a percent of average assets

    9.12%    9.11%    8.98%    9.02%    9.51%

Net interest margin (a)

    3.11%    3.16%    3.29%    3.38%    3.35%

Efficiency (a)

    55.6%    53.5%    52.2%    51.6%    76.0%

Effective tax rate

    28.9%    29.2%    30.1%    30.9%    20.9%

Credit Quality

                         

Net losses charged off

    $117    $64    $55    $63    $65

Net losses charged off as a percent of average loans and leases

    0.67%    0.38%    0.34%    0.40%    0.44%

Allowance for loan and lease losses as a percent of loans and leases

    1.06%    1.06%    1.09%    1.11%    1.19%

Allowance for credit losses as a percent of loans and leases

    1.16%    1.16%    1.20%    1.21%    1.31%

Nonperforming assets as a percent of loans, leases and other assets, including other real estate owned

    0.52%    0.51%    0.51%    0.53%    0.51%

Underperforming assets as a percent of loans, leases and other assets, including other real estate owned

    0.74%    0.74%    0.71%    0.73%    0.74%

Average Balances

                         

Loans and leases, including held for sale

    $70,489    $68,556    $66,762    $65,076    $59,440

Total securities and other short-term investments

    23,274    24,915    25,716    26,119    29,725

Total assets

    103,988    103,699    102,765    101,009    97,062

Transaction deposits

    48,937    47,568    47,624    47,581    45,126

Core deposits

    58,080    56,298    55,910    55,368    51,807

Interest-bearing deposits

    52,038    50,402    49,858    49,763    44,879

Short-term borrowings

    9,179    9,620    9,372    9,878    11,208

Long-term debt

    15,956    16,914    17,049    15,604    15,585

Shareholders’ equity

    9,480    9,451    9,224    9,108    9,229

Regulatory Capital Ratios (c)

                         

Tier 1 capital

    8.43%    8.45%    8.48%    8.40%    10.31%

Total risk-based capital

    10.51%    10.57%    10.80%    10.78%    12.31%

Tier 1 leverage

    8.08%    7.93%    7.76%    7.62%    8.89%

Operations

                         

Banking centers

    1,119    1,106    1,098    1,092    1,011

ATMs

    2,024    1,996    1,994    1,988    1,898

Full-time equivalent employees

    21,681    21,674    21,594    21,287    19,659

(a) Presented on a fully taxable equivalent basis

(b) Based on the most recent twelve-month diluted earnings per share and end of period stock prices

(c) Current period regulatory capital ratios are estimates

 

9

Fifth Third Bancorp and Subsidiaries

Consolidated Statements of Income

$ in millions

(unaudited)

 

    For the Three Months Ended     % Change     Year to Date     % Change  
    December
2005		   September
2005		   December
2004		     Yr/Yr     Seq     December
2005		   December
2004		     Yr/Yr  

Interest Income

                                          

Interest and fees on loans and leases

   $1,098   $1,017   $775     42%     8%     $3,918   $2,847     38%  

Interest on securities:

                                          

Taxable

   243   255   293     (17% )   (5% )   1,032   1,217     (15% )

Exempt from income taxes

   9   10   11     (18% )   (10% )   39   45     (13% )

Total interest on securities

   252   265   304     (17% )   (5% )   1,071   1,262     (15% )

Interest on other short-term investments

   2   1   2     -      100%     6   5     20%  

Total interest income

   1,352   1,283   1,081     25%     5%     4,995   4,114     21%  

Interest Expense

                                          

Interest on deposits:

                                          

Interest checking

   94   86   56     68%     9%     314   174     80%  

Savings

   67   48   21     219%     40%     176   58     203%  

Money market

   50   37   16     213%     35%     140   39     259%  

Other time

   81   68   45     80%     19%     263   162     62%  

Certificates - $100,000 and over

   40   34   13     208%     18%     129   48     169%  

Foreign office

   37   34   20     85%     9%     126   58     117%  

Total interest on deposits

   369   307   171     116%     20%     1,148   539     113%  

Interest on federal funds purchased

   49   35   24     104%     40%     138   77     79%  

Interest on short-term bank notes

   -    -    6     (100% )   NM     6   15     (60% )

Interest on other short-term borrowings

   36   41   22     64%     (12% )   138   78     77%  

Interest on long-term debt

   170   163   115     48%     4%     600   393     53%  

Total interest expense

   624   546   338     85%     14%     2,030   1,102     84%  

Net Interest Income

   728   737   743     (2% )   (1% )   2,965   3,012     (2% )

Provision for loan and lease losses

   134   69   65     106%     94%     330   268     23%  

Net interest income after provision for loan and lease losses

   594   668   678     (12% )   (11% )   2,635   2,744     (4% )

Noninterest Income

                                          

Electronic payment processing revenue

   200   187   173     16%     7%     735   622     18%  

Service charges on deposits

   133   137   126     6%     (3% )   522   515     1%  

Mortgage banking net revenue

   42   45   24     75%     (7% )   174   178     (2% )

Investment advisory revenue

   86   89   82     5%     (3% )   355   360     (1% )

Other noninterest income

   165   145   125     32%     14%     620   671     (8% )

Operating lease revenue

   9   11   27     (67% )   (18% )   55   156     (65% )

Securities gains (losses), net

   1   8   (78 )   NM     (88% )   39   (37 )   NM  

Total noninterest income

   636   622   479     33%     2%     2,500   2,465     1%  

Noninterest Expense

                                          

Salaries, wages and incentives

   287   285   266     8%     1%     1,133   1,018     11%  

Employee benefits

   65   70   56     16%     (7% )   283   261     8%  

Equipment expense

   29   26   23     26%     12%     105   84     25%  

Net occupancy expense

   59   54   48     23%     9%     221   185     19%  

Operating lease expense

   6   8   20     (70% )   (25% )   40   114     (65% )

Other noninterest expense

   317   289   522     (39% )   10%     1,145   1,310     (13% )

Total noninterest expense

   763   732   935     (18% )   4%     2,927   2,972     (2% )

Income before income taxes

   467   558   222     110%     (16% )   2,208   2,237     (1% )

Applicable income taxes

   135   163   46     193%     (17% )   659   712     (7% )

Net income

   $332   $395   $176     89%     (16% )   $1,549   $1,525     2%  

Net income available to common shareholders (a)

   $332   $395   $176     89%     (16% )   $1,548   $1,524     2%  

(a) Dividends on preferred stock are $.185 million for all quarters presented and $.740 for all year to date periods presented

 

10

Fifth Third Bancorp and Subsidiaries

Consolidated Statements of Income (Taxable Equivalent)

$ in millions

(unaudited)

 

     For the Three Months Ended  
     December
2005		    September
2005		    June
2005		    March
2005		    December
2004		  

Interest Income

                           

Interest and fees on loans and leases

    $1,098    $1,017    $936    $867    $775  

Interest on securities:

                           

Taxable

    243    255    268    267    293  

Exempt from income taxes

    9    10    10    10    11  

Total interest on securities

    252    265    278    277    304  

Interest on other short-term investments

    2    1    1    1    2  

Total interest income

    1,352    1,283    1,215    1,145    1,081  

Taxable equivalent adjustment

    7    8    8    8    9  

Total interest income (taxable equivalent)

    1,359    1,291    1,223    1,153    1,090  

Interest Expense

                           

Interest on deposits:

                           

Interest checking

    94    86    71    63    56  

Savings

    67    48    35    27    21  

Money market

    50    37    28    25    16  

Other time

    81    68    61    52    45  

Certificates - $100,000 and over

    40    34    29    25    13  

Foreign office

    37    34    29    27    20  

Total interest on deposits

    369    307    253    219    171  

Interest on federal funds purchased

    49    35    29    25    24  

Interest on short-term bank notes

    -     -     2    5    6  

Interest on other short-term borrowings

    36    41    34    27    22  

Interest on long-term debt

    170    163    147    118    115  

Total interest expense

    624    546    465    394    338  

Net interest income (taxable equivalent)

    735    745    758    759    752  

Provision for loan and lease losses

    134    69    60    67    65  

Net interest income (taxable equivalent) after provision for loan and lease losses

    601    676    698    692    687  

Noninterest Income

                           

Electronic payment processing revenue

    200    187    180    168    173  

Service charges on deposits

    133    137    132    121    126  

Mortgage banking net revenue

    42    45    46    41    24  

Investment advisory revenue

    86    89    91    90    82  

Other noninterest income

    165    145    156    153    125  

Operating lease revenue

    9    11    15    20    27  

Securities gains (losses), net

    1    8    15    14    (78 )

Total noninterest income

    636    622    635    607    479  

Noninterest Expense

                           

Salaries, wages and incentives

    287    285    295    265    266  

Employee benefits

    65    70    67    82    56  

Equipment expense

    29    26    25    25    23  

Net occupancy expense

    59    54    54    54    48  

Operating lease expense

    6    8    10    15    20  

Other noninterest expense

    317    289    277    264    522  

Total noninterest expense

    763    732    728    705    935  

Income before income taxes (taxable equivalent)

    474    566    605    594    231  

Taxable equivalent adjustment

    7    8    8    8    9  

Income before income taxes

    467    558    597    586    222  

Applicable income taxes

    135    163    180    181    46  

Net income

    $332    $395    $417    $405    $176  

Net income available to common shareholders (a)

    $332    $395    $417    $404    $176  

(a) Dividends on preferred stock are $.185 million for all quarters presented

 

11

Fifth Third Bancorp and Subsidiaries

Consolidated Balance Sheets

$ in millions, except per share data

(unaudited)

 

     As of     % Change  
     December
2005		     September
2005		     December
2004		     Yr/Yr     Annual
Seq		  

Assets

                               

Cash and due from banks

    $3,078     $3,372     $2,561     20%     (35% )

Available-for-sale securities (a)

    21,924     22,537     24,687     (11% )   (11% )

Held-to-maturity securities (b)

    389     332     255     53%     68%  

Trading securities

    117     105     77     52%     45%  

Other short-term investments

    158     113     532     (70% )   158%  

Loans held for sale

    1,304     1,237     559     133%     21%  

Portfolio loans and leases:

                               

Commercial loans

    19,174     18,591     16,058     19%     12%  

Construction loans

    7,037     6,529     4,726     49%     31%  

Commercial mortgage loans

    9,188     9,138     7,636     20%     2%  

Commercial lease financing

    4,852     4,731     4,634     5%     10%  

Residential mortgage loans

    7,152     7,353     6,988     2%     (11% )

Consumer loans

    22,084     21,786     18,923     17%     5%  

Consumer lease financing

    1,751     1,910     2,273     (23% )   (33% )

Unearned income

    (1,313 )   (1,284 )   (1,430 )   (8% )   9%  

Portfolio loans and leases

    69,925     68,754     59,808     17%     7%  

Allowance for loan and lease losses

    (744 )   (727 )   (713 )   4%     9%  

Portfolio loans and leases, net

    69,181     68,027     59,095     17%     7%  

Bank premises and equipment

    1,726     1,643     1,315     31%     20%  

Operating lease equipment

    143     159     304     (53% )   (40% )

Accrued interest receivable

    511     482     397     29%     24%  

Goodwill

    2,169     2,176     979     122%     (1% )

Intangible assets

    208     220     150     39%     (22% )

Servicing rights

    441     417     352     25%     23%  

Other assets

    3,876     3,788     3,193     21%     9%  

Total assets

    $105,225     $104,608     $94,456     11%     2%  

Liabilities

                               

Deposits:

                               

Demand

    $14,609     $14,294     $13,486     8%     9%  

Interest checking

    18,282     18,169     19,481     (6% )   2%  

Savings

    11,276     10,437     8,310     36%     32%  

Money market

    6,129     5,855     4,321     42%     19%  

Other time

    9,313     8,867     6,837     36%     20%  

Certificates - $100,000 and over

    4,343     4,195     2,121     105%     14%  

Foreign office

    3,482     3,678     3,670     (5% )   (21% )

Total deposits

    67,434     65,495     58,226     16%     12%  

Federal funds purchased

    5,323     3,548     4,714     13%     198%  

Short-term bank notes

    -      -      775     (100% )   NM  

Other short-term borrowings

    4,246     6,075     4,537     (6% )   (119% )

Accrued taxes, interest and expenses

    2,142     2,136     2,216     (3% )   1%  

Other liabilities

    1,407     1,447     1,081     30%     (11% )

Long-term debt

    15,227     16,522     13,983     9%     (31% )

Total liabilities

    95,779     95,223     85,532     12%     2%  

Total shareholders’ equity (c)

    9,446     9,385     8,924     6%     3%  

Total liabilities and shareholders’ equity

    $105,225     $104,608     $94,456     11%     2%  

(a) Amortized cost

    $22,533     $22,993     $24,801     (9% )   (8% )

(b) Market values

    389     332     255     53%     68%  

(c) Common shares, stated value $2.22 per share (in thousands):

                               

Authorized

    1,300,000     1,300,000     1,300,000     -      -   

Outstanding, excluding treasury

    555,623     554,400     557,649     -      1%  

Treasury

    27,804     29,027     25,803     8%     (17% )

 

12

Fifth Third Bancorp and Subsidiaries

Consolidated Balance Sheets

$ in millions, except per share data

(unaudited)

 

    As of  
    December
2005		     September
2005		     June
2005		     March
2005		     December
2004		  

Assets

                              

Cash and due from banks

   $3,078     $3,372     $2,781     $2,420     $2,561  

Available-for-sale securities (a)

   21,924     22,537     24,647     25,101     24,687  

Held-to-maturity securities (b)

   389     332     307     303     255  

Trading securities

   117     105     84     128     77  

Other short-term investments

   158     113     113     1,213     532  

Loans held for sale

   1,304     1,237     783     809     559  

Portfolio loans and leases:

                              

Commercial loans

   19,174     18,591     18,013     17,500     16,058  

Construction loans

   7,037     6,529     6,201     5,922     4,726  

Commercial mortgage loans

   9,188     9,138     9,091     9,048     7,636  

Commercial lease financing

   4,852     4,731     4,639     4,533     4,634  

Residential mortgage loans

   7,152     7,353     7,042     7,416     6,988  

Consumer loans

   22,084     21,786     20,610     19,698     18,923  

Consumer lease financing

   1,751     1,910     1,994     2,099     2,273  

Unearned income

   (1,313 )   (1,284 )   (1,294 )   (1,314 )   (1,430 )

Portfolio loans and leases

   69,925     68,754     66,296     64,902     59,808  

Allowance for loan and lease losses

   (744 )   (727 )   (722 )   (717 )   (713 )

Portfolio loans and leases, net

   69,181     68,027     65,574     64,185     59,095  

Bank premises and equipment

   1,726     1,643     1,581     1,529     1,315  

Operating lease equipment

   143     159     161     224     304  

Accrued interest receivable

   511     482     451     438     397  

Goodwill

   2,169     2,176     2,178     2,167     979  

Intangible assets

   208     220     231     243     150  

Servicing rights

   441     417     378     378     352  

Other assets

   3,876     3,788     3,891     3,575     3,193  

Total assets

   $105,225     $104,608     $103,160     $102,713     $94,456  

Liabilities

                              

Deposits:

                              

Demand

   $14,609     $14,294     $14,393     $13,960     $13,486  

Interest checking

   18,282     18,169     18,811     19,722     19,481  

Savings

   11,276     10,437     9,653     9,711     8,310  

Money market

   6,129     5,855     4,732     4,777     4,321  

Other time

   9,313     8,867     8,513     8,017     6,837  

Certificates - $100,000 and over

   4,343     4,195     3,986     3,867     2,121  

Foreign office

   3,482     3,678     3,089     5,257     3,670  

Total deposits

   67,434     65,495     63,177     65,311     58,226  

Federal funds purchased

   5,323     3,548     4,523     2,669     4,714  

Short-term bank notes

   -      -      -      775     775  

Other short-term borrowings

   4,246     6,075     4,972     4,925     4,537  

Accrued taxes, interest and expenses

   2,142     2,136     2,456     2,273     2,216  

Other liabilities

   1,407     1,447     1,185     1,551     1,081  

Long-term debt

   15,227     16,522     17,494     16,321     13,983  

Total liabilities

   95,779     95,223     93,807     93,825     85,532  

Total shareholders’ equity (c)

   9,446     9,385     9,353     8,888     8,924  

Total liabilities and shareholders’ equity

   $105,225     $104,608     $103,160     $102,713     $94,456  

(a) Amortized cost

   $22,533     $22,993     $24,814     $25,558     $24,801  

(b) Market values

   389     332     307     303     255  

(c) Common shares, stated value $2.22 per share (in thousands):

                              

Authorized

   1,300,000     1,300,000     1,300,000     1,300,000     1,300,000  

Outstanding, excluding treasury

   555,623     554,400     555,938     554,055     557,649  

Treasury

   27,804     29,027     27,489     29,372     25,803  

 

13

Fifth Third Bancorp and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

$ in millions

(unaudited)

 

     For the Three Months Ended     Year to Date  
     December
2005		     December
2004		     December
2005		     December
2004		  

Total shareholders’ equity, beginning

    $9,385     $9,040     $8,924     $8,667  

Net income

    332     176     1,549     1,525  

Other comprehensive income, net of tax:

                         

Change in unrealized gains and (losses):

                         

Available-for-sale securities

    (99 )   53     (323 )   (23 )

Qualifying cash flow hedges

    4     (6 )   20     (25 )

Change in additional pension liability

    (1 )   2     59     (1 )

Comprehensive income

    236     225     1,305     1,476  

Cash dividends declared:

                         

Common stock

    (211 )   (195 )   (810 )   (735 )

Preferred stock (a)

    -      -      (1 )   (1 )

Stock-based awards exercised, including treasury shares issued

    30     11     85     89  

Stock-based compensation expense

    12     23     65     87  

Loans repaid (issued) related to exercise of stock-based awards, net

    3     2     11     -   

Change in corporate tax benefit related to stock-based compensation

    (9 )   2     6     11  

Shares acquired for treasury

    (1 )   (183 )   (1,649 )   (987 )

Shares issued in business combination

    -      -      1,509     317  

Other

    1     (1 )   1     -   

Total shareholders’ equity, ending

    $9,446     $8,924     $9,446     $8,924  

(a) Dividends on preferred stock are $.185 million for all quarters presented and $.740 for all year to date periods presented

 

14

Fifth Third Bancorp and Subsidiaries

Average Balance Sheet and Yield Analysis

$ in millions, except share data

(unaudited)

 

     For the Three Months Ended      % Change  
     December
2005		     September
2005		     December
2004		      Yr/Yr      Annual
Seq		  

Assets

                                 

Interest-earning assets:

                                 

Loans and leases

    $70,489     $68,556     $59,440      19%      11%  

Taxable securities

    22,376     24,013     28,379      (21% )    (27% )

Tax exempt securities

    698     787     866      (19% )    (45% )

Other short-term investments

    200     115     480      (58% )    293%  

Total interest-earning assets

    93,763     93,471     89,165      5%      1%  

Cash and due from banks

    2,847     2,742     2,445      16%      15%  

Other assets

    8,105     8,207     6,171      31%      (5% )

Allowance for loan and lease losses

    (727 )   (721 )   (719 )    1%      3%  

Total assets

    $103,988     $103,699     $97,062      7%      1%  

Liabilities

                                 

Interest-bearing liabilities:

                                 

Interest checking

    $17,828     $18,498     $19,345      (8% )    (14% )

Savings

    11,036     9,939     8,447      31%      44%  

Money market

    5,974     5,154     4,227      41%      63%  

Other time

    9,143     8,730     6,681      37%      19%  

Certificates - $100,000 and over

    4,354     4,156     2,106      107%      19%  

Foreign office

    3,703     3,925     4,073      (9% )    (22% )

Federal funds purchased

    4,771     4,001     4,880      (2% )    76%  

Short-term bank notes

    -      -      1,188      (100% )    NM  

Other short-term borrowings

    4,408     5,619     5,140      (14% )    (86% )

Long-term debt

    15,956     16,914     15,585      2%      (22% )

Total interest-bearing liabilities

    77,173     76,936     71,672      8%      1%  

Demand deposits

    14,099     13,977     13,107      8%      3%  

Other liabilities

    3,236     3,335     3,054      6%      (12% )

Total liabilities

    94,508     94,248     87,833      8%      1%  

Shareholders’ equity

    9,480     9,451     9,229      3%      1%  

Total liabilities and shareholders’ equity

    $103,988     $103,699     $97,062      7%      1%  

Average common shares outstanding (in thousands):

                                 

Basic

    553,591     553,855     560,162      (1% )    -   

Diluted

    556,322     557,681     566,108      (2% )    (1% )

Yield Analysis

                                 

Interest-earning assets:

                                 

Loans and leases

    6.20%     5.90%     5.20%                

Taxable securities

    4.31%     4.22%     4.11%                

Tax exempt securities

    7.51%     7.42%     7.37%                

Other short-term investments

    4.41%     3.49%     2.00%                

Total interest-earning assets

    5.75%     5.48%     4.86%                

Interest-bearing liabilities:

                                 

Interest checking

    2.10%     1.84%     1.14%                

Savings

    2.41%     1.90%     1.01%                

Money market

    3.32%     2.82%     1.53%                

Other time

    3.50%     3.14%     2.71%                

Certificates - $100,000 and over

    3.66%     3.28%     2.41%                

Foreign office

    3.92%     3.41%     1.94%                

Federal funds purchased

    4.04%     3.50%     1.98%                

Short-term bank notes

    -      -      1.97%                

Other short-term borrowings

    3.27%     2.92%     1.64%                

Long-term debt

    4.25%     3.80%     2.93%                

Total interest-bearing liabilities

    3.21%     2.82%     1.87%                

Ratios:

                                 

Net interest margin (taxable equivalent)

    3.11%     3.16%     3.35%                

Net interest rate spread (taxable equivalent)

    2.54%     2.66%     2.99%                

Interest-bearing liabilities to interest-earning assets

    82.31%     82.31%     80.38%                

 

15

Fifth Third Bancorp and Subsidiaries

Average Balance Sheet and Yield Analysis

$ in millions, except share data

(unaudited)

 

     Year to Date     % Change  
     December
2005		     December
2004		     Yr/Yr  

Assets

                   

Interest-earning assets:

                   

Loans and leases

    $67,737     $57,042     19%  

Taxable securities

    24,017     29,365     (18% )

Tax exempt securities

    789     917     (14% )

Other short-term investments

    193     315     (39% )

Total interest-earning assets

    92,736     87,639     6%  

Cash and due from banks

    2,758     2,216     24%  

Other assets

    8,102     5,763     41%  

Allowance for loan and lease losses

    (720 )   (722 )   -   

Total assets

    $102,876     $94,896     8%  

Liabilities

                   

Interest-bearing liabilities:

                   

Interest checking

    $18,884     $19,434     (3% )

Savings

    10,007     7,941     26%  

Money market

    5,170     3,473     49%  

Other time

    8,491     6,208     37%  

Certificates - $100,000 and over

    4,001     2,403     67%  

Foreign office

    3,967     4,449     (11% )

Federal funds purchased

    4,225     5,896     (28% )

Short-term bank notes

    248     1,003     (75% )

Other short-term borrowings

    5,038     6,640     (24% )

Long-term debt

    16,384     13,323     23%  

Total interest-bearing liabilities

    76,415     70,770     8%  

Demand deposits

    13,868     12,327     13%  

Other liabilities

    3,276     2,939     11%  

Total liabilities

    93,559     86,036     9%  

Shareholders' equity

    9,317     8,860     5%  

Total liabilities and shareholders' equity

    $102,876     $94,896     8%  

Average common shares outstanding (in thousands):

                   

Basic

    554,411     561,259     (1% )

Diluted

    558,443     568,234     (2% )

Yield Analysis

                   

Interest-earning assets:

                   

Loans and leases

    5.80%     5.01%        

Taxable securities

    4.30%     4.15%        

Tax exempt securities

    7.39%     7.44%        

Other short-term investments

    2.89%     1.48%        

Total interest-earning assets

    5.42%     4.73%        

Interest-bearing liabilities:

                   

Interest checking

    1.66%     0.89%        

Savings

    1.76%     0.72%        

Money market

    2.71%     1.12%        

Other time

    3.09%     2.62%        

Certificates - $100,000 and over

    3.22%     1.99%        

Foreign office

    3.17%     1.31%        

Federal funds purchased

    3.26%     1.30%        

Short-term bank notes

    2.60%     1.46%        

Other short-term borrowings

    2.74%     1.14%        

Long-term debt

    3.66%     2.95%        

Total interest-bearing liabilities

    2.66%     1.56%        

Ratios:

                   

Net interest margin (taxable equivalent)

    3.23%     3.48%        

Net interest rate spread (taxable equivalent)

    2.76%     3.17%        

Interest-bearing liabilities to interest-earning assets

    82.40%     80.75%        

 

16

Fifth Third Bancorp and Subsidiaries

Average Balance Sheet and Yield Analysis

$ in millions, except share data

(unaudited)

 

     For the Three Months Ended  
     December
2005		     September
2005		     June
2005		     March
2005		     December
2004		  

Assets

                               

Interest-earning assets:

                               

Loans and leases

    $70,489     $68,556     $66,762     $65,076     $59,440  

Taxable securities

    22,376     24,013     24,771     24,935     28,379  

Tax exempt securities

    698     787     815     856     866  

Other short-term investments

    200     115     130     328     480  

Total interest-earning assets

    93,763     93,471     92,478     91,195     89,165  

Cash and due from banks

    2,847     2,742     2,822     2,619     2,445  

Other assets

    8,105     8,207     8,182     7,909     6,171  

Allowance for loan and lease losses

    (727 )   (721 )   (717 )   (714 )   (719 )

Total assets

    $103,988     $103,699     $102,765     $101,009     $97,062  

Liabilities

                               

Interest-bearing liabilities:

                               

Interest checking

    $17,828     $18,498     $19,267     $19,972     $19,345  

Savings

    11,036     9,939     9,697     9,339     8,447  

Money market

    5,974     5,154     4,755     4,786     4,227  

Other time

    9,143     8,730     8,286     7,787     6,681  

Certificates - $100,000 and over

    4,354     4,156     3,946     3,539     2,106  

Foreign office

    3,703     3,925     3,907     4,340     4,073  

Federal funds purchased

    4,771     4,001     3,952     4,170     4,880  

Short-term bank notes

    -      -      230     775     1,188  

Other short-term borrowings

    4,408     5,619     5,190     4,933     5,140  

Long-term debt

    15,956     16,914     17,049     15,604     15,585  

Total interest-bearing liabilities

    77,173     76,936     76,279     75,245     71,672  

Demand deposits

    14,099     13,977     13,905     13,484     13,107  

Other liabilities

    3,236     3,335     3,357     3,172     3,054  

Total liabilities

    94,508     94,248     93,541     91,901     87,833  

Shareholders’ equity

    9,480     9,451     9,224     9,108     9,229  

Total liabilities and shareholders’ equity

    $103,988     $103,699     $102,765     $101,009     $97,062  

Average common shares outstanding (in thousands):

                               

Basic

    553,591     553,855     553,872     556,362     560,162  

Diluted

    556,322     557,681     558,176     561,659     566,108  

Yield Analysis

                               

Interest-earning assets:

                               

Loans and leases

    6.20%     5.90%     5.64%     5.42%     5.20%  

Taxable securities

    4.31%     4.22%     4.33%     4.34%     4.11%  

Tax exempt securities

    7.51%     7.42%     7.29%     7.36%     7.37%  

Other short-term investments

    4.41%     3.49%     3.28%     1.56%     2.00%  

Total interest-earning assets

    5.75%     5.48%     5.30%     5.13%     4.86%  

Interest-bearing liabilities:

                               

Interest checking

    2.10%     1.84%     1.49%     1.27%     1.14%  

Savings

    2.41%     1.90%     1.44%     1.15%     1.01%  

Money market

    3.32%     2.82%     2.37%     2.14%     1.53%  

Other time

    3.50%     3.14%     2.93%     2.72%     2.71%  

Certificates - $100,000 and over

    3.66%     3.28%     2.92%     2.92%     2.41%  

Foreign office

    3.92%     3.41%     2.98%     2.48%     1.94%  

Federal funds purchased

    4.04%     3.50%     2.97%     2.41%     1.98%  

Short-term bank notes

    -      -      2.84%     2.53%     1.97%  

Other short-term borrowings

    3.27%     2.92%     2.63%     2.18%     1.64%  

Long-term debt

    4.25%     3.80%     3.46%     3.10%     2.93%  

Total interest-bearing liabilities

    3.21%     2.82%     2.44%     2.12%     1.87%  

Ratios:

                               

Net interest margin (taxable equivalent)

    3.11%     3.16%     3.29%     3.38%     3.35%  

Net interest rate spread (taxable equivalent)

    2.54%     2.66%     2.86%     3.01%     2.99%  

Interest-bearing liabilities to interest-earning assets

    82.31%     82.31%     82.48%     82.51%     80.38%  

 

17

Fifth Third Bancorp and Subsidiaries

Summary of Loans and Leases

$ in millions

(unaudited)

 

     For the Three Months Ended
     December
2005		    September
2005		    June
2005		    March
2005		    December
2004

Average Loans and Leases (including unearned income)

                         

Commercial:

                         

Commercial loans

    $18,909    $18,203    $17,768    $18,073    $15,565

Commercial mortgage

    9,159    9,095    9,042    8,385    7,617

Commercial construction

    6,051    5,700    5,467    4,870    4,247

Commercial leases

    3,611    3,537    3,436    3,393    3,333

Subtotal - commercial

    37,730    36,535    35,713    34,721    30,762

Consumer:

                         

Residential mortgage

    8,444    8,271    8,453    8,417    7,346

Residential construction

    673    624    576    468    378

Credit card

    825    778    755    830    827

Home equity

    11,884    11,702    11,325    10,909    10,403

Other consumer loans

    9,251    8,868    8,089    7,752    7,592

Consumer leases

    1,682    1,778    1,851    1,979    2,132

Subtotal - consumer

    32,759    32,021    31,049    30,355    28,678

Total average loans and leases

    $70,489    $68,556    $66,762    $65,076    $59,440

End of Period Loans and Leases Serviced

                         

Commercial:

                         

Commercial loans

    $19,174    $18,591    $18,013    $17,500    $16,058

Commercial mortgage

    9,188    9,138    9,091    9,048    7,636

Commercial construction

    6,342    5,880    5,590    5,365    4,348

Commercial leases

    3,695    3,619    3,527    3,416    3,426

Subtotal - commercial

    38,399    37,228    36,221    35,329    31,468

Consumer:

                         

Residential mortgage

    7,152    7,353    7,042    7,416    6,988

Residential construction

    695    649    611    557    378

Credit card

    866    805    749    790    843

Home equity

    12,000    11,766    11,521    11,085    10,508

Other consumer loans

    9,218    9,215    8,340    7,824    7,572

Consumer leases

    1,595    1,738    1,812    1,901    2,051

Subtotal - consumer

    31,526    31,526    30,075    29,573    28,340

Total portfolio loans and leases

    69,925    68,754    66,296    64,902    59,808

Loans held for sale

    1,304    1,237    783    809    559

Operating lease equipment

    143    159    161    224    304

Loans and Leases Serviced for Others:

                         

Residential mortgage (a)

    25,669    24,525    24,497    23,341    23,026

Commercial mortgage (b)

    2,126    2,095    2,067    2,043    2,045

Commercial loans (c)

    2,754    2,528    2,346    2,351    1,941

Commercial leases (b)

    264    240    269    271    323

Consumer loans (d)

    871    972    1,089    1,192    1,298

Total loans and leases serviced for others

    31,684    30,360    30,268    29,198    28,633

Total loans and leases serviced

    $103,056    $100,510    $97,508    $95,133    $89,304
(a) Fifth Third sells certain residential mortgage loans, primarily conforming and fixed-rate in nature and retains servicing responsibilities
(b) Fifth Third sells certain commercial mortgage loans and commercial leases and retains servicing responsibilities
(c) Fifth Third transfers, subject to credit recourse and with servicing retained, certain investment grade commercial loans to an unconsolidated qualified special purpose entity, which is wholly-owned by an independent third party
(d) Fifth Third sells certain consumer loans and retains servicing responsibilities

 

18

Fifth Third Bancorp and Subsidiaries

Regulatory Capital (a)

$ in millions

(unaudited)

 

     As of  
     December
2005		     September
2005		     June
2005		     March
2005		     December
2004		  

Tier 1 capital:

                               

Shareholders’ equity

    $9,446     $9,385     $9,353     $8,888     $8,924  

Goodwill and certain other intangibles

    (2,377 )   (2,396 )   (2,409 )   (2,410 )   (1,129 )

Unrealized (gains) losses

    405     310     127     314     101  

Other

    735     731     712     717     626  

Total tier 1 capital

    $8,209     $8,030     $7,783     $7,509     $8,522  

Total risk-based capital:

                               

Tier 1 capital

    $8,209     $8,030     $7,783     $7,509     $8,522  

Qualifying allowance for credit losses

    838     823     819     809     806  

Qualifying subordinated notes

    1,193     1,193     1,312     1,316     848  

Total risk-based capital

    $10,240     $10,046     $9,914     $9,634     $10,176  

Risk-weighted assets

    $97,399     $95,083     $91,791     $89,401     $82,633  

Ratios:

                               

Average shareholders’ equity to average assets

    9.12%     9.11%     8.98%     9.02%     9.51%  

Regulatory capital:

                               

Tier 1 capital

    8.43%     8.45%     8.48%     8.40%     10.31%  

Total risk-based capital

    10.51%     10.57%     10.80%     10.78%     12.31%  

Tier 1 leverage

    8.08%     7.93%     7.76%     7.62%     8.89%  

(a) Current period regulatory capital data and ratios are estimated

 

19

Fifth Third Bancorp and Subsidiaries

Asset Quality

$ in millions

(unaudited)

 

     For the Three Months Ended  
     December
2005		     September
2005		     June
2005		     March
2005		     December
2004		  

Summary of Credit Loss Experience

                               

Losses charged off:

                               

Commercial, financial and agricultural loans

    ($35 )   ($24 )   ($24 )   ($16 )   ($19 )

Real estate - commercial mortgage loans

    (3 )   (5 )   (3 )   (2 )   (7 )

Real estate - construction loans

    (3 )   (1 )   -      (1 )   (3 )

Real estate - residential mortgage

    (5 )   (3 )   (5 )   (5 )   (4 )

Consumer loans

    (58 )   (41 )   (40 )   (42 )   (42 )

Commercial lease financing

    (28 )   (1 )   -      (8 )   (3 )

Consumer lease financing

    (5 )   (4 )   (4 )   (6 )   (6 )

Total losses

    (137 )   (79 )   (76 )   (80 )   (84 )

Recoveries of losses previously charged off:

                               

Commercial, financial and agricultural loans

    10     5     6     3     4  

Real estate - commercial mortgage loans

    1     -      1     1     1  

Real estate - construction loans

    -      -      -       1     -   

Real estate - residential mortgage

    -      -      -      -      -   

Consumer loans

    8     9     12     11     12  

Commercial lease financing

    -      -      1     -      -   

Consumer lease financing

    1     1     1     1     2  

Total recoveries

    20     15     21     17     19  

Net losses charged off:

                               

Commercial, financial and agricultural loans

    (25 )   (19 )   (18 )   (13 )   (15 )

Real estate - commercial mortgage loans

    (2 )   (5 )   (2 )   (1 )   (6 )

Real estate - construction loans

    (3 )   (1 )   -      -      (3 )

Real estate - residential mortgage

    (5 )   (3 )   (5 )   (5 )   (4 )

Consumer loans

    (50 )   (32 )   (28 )   (31 )   (30 )

Commercial lease financing

    (28 )   (1 )   1     (8 )   (3 )

Consumer lease financing

    (4 )   (3 )   (3 )   (5 )   (4 )

Total net losses charged off

    ($117 )   ($64 )   ($55 )   ($63 )   ($65 )

Allowance for loan and lease losses, beginning

    $727     $722     $717     $713     $713  

Total net losses charged off

    (117 )   (64 )   (55 )   (63 )   (65 )

Provision for loan and lease losses

    134     69     60     67     65  

Allowance for loan and lease losses, ending

    $744     $727     $722     $717     $713  

Reserve for unfunded commitments, beginning

    $69     $71     $67     $72     $72  

Provision for unfunded commitments

    1     (2 )   4     (6 )   -   

Acquisitions

    -      -      -      1     -   

Reserve for unfunded commitments, ending

    $70     $69     $71     $67     $72  

Components of allowance for credit losses:

                               

Allowance for loan and lease losses

    $744     $727     $722     $717     $713  

Reserve for unfunded commitments

    70     69     71     67     72  

Total allowance for credit losses

    $814     $796     $793     $784     $785  

Nonperforming and underperforming assets

                               

Nonaccrual loans and leases (a)

    $294     $285     $273     $268     $228  

Renegotiated loans and leases

    -      1     1     1     1  

Other assets, including other real estate owned

    67     65     66     74     74  

Total nonperforming assets

    361     351     340     343     303  

Ninety days past due loans and leases (a)

    155     156     129     129     142  

Total underperforming assets

    $516     $507     $469     $472     $445  

Ratios

                               

Net losses charged off as a percent of
average loans and leases

    0.67%     0.38%     0.34%     0.40%     0.44%  

Allowance for loan and lease losses as a percent of
loans and leases

    1.06%     1.06%     1.09%     1.11%     1.19%  

Allowance for credit losses as a percent of
loans and leases

    1.16%     1.16%     1.20%     1.21%     1.31%  

Nonperforming assets as a percent of loans, leases and
other assets, including other real estate owned

    0.52%     0.51%     0.51%     0.53%     0.51%  

Underperforming assets as a percent of loans, leases and other assets, including other real estate owned

    0.74%     0.74%     0.71%     0.73%     0.74%  

(a) Nonaccrual includes $29 million and Ninety Days Past Due includes $48 million of residential mortgage loans as of December 31, 2005

 

20