EX-99.1 2 d570016dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

 

          News Release
CONTACTS:   

Jim Eglseder (Investors)

(513) 534-8424

Laura Wehby (Investors)

(513) 534-7407

Larry Magnesen (Media)

(513) 534-8055

   

FOR IMMEDIATE RELEASE

July 18, 2013

FIFTH THIRD ANNOUNCES SECOND QUARTER 2013 NET INCOME TO COMMON SHAREHOLDERS OF $594 MILLION OR $0.66 PER DILUTED SHARE

 

  •  

2Q13 net income available to common shareholders of $594 million, or $0.66 per diluted common share, vs. $413 million or $0.46 per share in 1Q13, up 43%, and $376 million or $0.40 per share in 2Q12, up 65%

 

  •  

2Q13 results included a benefit of $242 million pre-tax (~$157 million after-tax, or ~$0.17 per share) on the sale of shares of Vantiv and $76 million pre-tax (~$49 million after-tax, or ~$0.05 per share) on the valuation of the warrant Fifth Third holds in Vantiv

 

  •  

In 1Q13 and 2Q12, the benefit of the valuation of the warrant Fifth Third holds in Vantiv was $34 million pre-tax (~$22 million after-tax, or ~$0.02 per share) and $56 million pre-tax (~$36 million after-tax, or ~$0.04 per share), respectively

 

  •  

2Q13 return on assets (ROA) of 1.98%; return on average common equity of 17.6%; return on average tangible common equity** of 21.6%

 

  •  

Pre-provision net revenue (PPNR)** of $923 million in 2Q13

 

  •  

Net interest income (FTE) of $885 million, down 1% sequentially; net interest margin 3.33%; average portfolio loans up 1% sequentially (includes impact from 1Q13 securitization of auto loans); period end loans up 2%

 

  •  

Noninterest income of $1.1 billion compared with $743 million in prior quarter; increase largely driven by sale of Vantiv shares. Excluding Vantiv, noninterest income of $742 million up 5% from $709 million in 1Q13.

 

  •  

Noninterest expense of $1.0 billion, up 4% from 1Q13; largely driven by increase in litigation reserves

 

  •  

2Q13 effective tax rate of 29.8% compared with 30.4% in 1Q13 and 31.8% in 2Q12

 

  •  

Credit trends remain favorable

 

  •  

2Q13 net charge-offs of $112 million (0.51% of loans and leases) vs. 1Q13 NCOs of $133 million (0.63% of loans and leases) and 2Q12 NCOs of $181 million (0.88% of loans and leases)

 

  •  

2Q13 provision expense of $64 million vs. provision of $62 million in 1Q13 and $71 million in 2Q12

 

  •  

Loan loss allowance decreased $48 million sequentially reflecting continued improvement in credit trends; allowance to loan ratio of 1.99%, 151% of nonperforming assets, 191% of nonperforming loans and leases

 

  •  

Total nonperforming assets (NPAs) of $1.2 billion, including loans held-for-sale (HFS), declined $64 million, or 5%, sequentially; portfolio NPA ratio of 1.32% down 9 bps from 1Q13, NPL ratio of 1.04% down 7 bps from 1Q13

 

  •  

Strong capital ratios*

 

  •  

Tier 1 common ratio 9.44%**, down 26 bps sequentially, largely due to repurchases of ~$539 million in common shares announced during the quarter (Basel III pro forma estimate of ~9.10%)

 

  •  

Tier 1 capital ratio 11.07%, Total capital ratio 14.35%, Leverage ratio 10.41%

 

  •  

Tangible common equity ratio** of 8.83% excluding unrealized gains/losses; 8.95% including them

 

  •  

Repurchased ~26 million common shares in 2Q13; average diluted share count reduced by 13 million shares including impact from 1Q13 and 2Q13 share repurchases

 

  •  

Book value per share of $15.57; tangible book value per share** of $12.71 up 1% from 1Q13 and 7% from 2Q12

 

* Capital ratios estimated; presented under current U.S. capital regulations. The pro forma Basel III Tier I common equity ratio is management’s estimate based upon its current interpretation of recent prospective regulatory capital requirements approved in July 2013. See “Capital Position” section for more information.
** Non-GAAP measure; see Reg. G reconciliation on page 34.

Fifth Third Bancorp (Nasdaq: FITB) today reported second quarter 2013 net income of $603 million, compared with net income of $422 million in the first quarter of 2013 and net income of $385 million in the second quarter of 2012. After preferred dividends, second quarter 2013 net income available to common shareholders was $594 million, or $0.66 per diluted share, compared with first quarter net income to common shareholders of $413 million, or $0.46 per diluted share, and net income to common shareholders of $376 million, or $0.40 per diluted share, in the second quarter of 2012.

Second quarter 2013 noninterest income results included a $242 million gain on the sale of Vantiv shares; a $76 million positive valuation adjustment on the Vantiv warrant; a pre-tax benefit of $10 million resulting from a settlement related to a previously surrendered bank-owned life insurance (BOLI) policy; and a $5 million charge related to the valuation of the Visa total return swap. Second quarter noninterest expense included $33 million in charges to increase litigation reserves.

First quarter 2013 noninterest income included a $34 million positive valuation adjustment on the Vantiv warrant; a $7 million gain on the sale of certain Fifth Third Asset Management (FTAM) advisory contracts; and a $7 million charge related to the valuation of the Visa total return swap. Net gains on investment securities were $17 million. First quarter noninterest expense included $9 million in charges to increase litigation reserves. First quarter income tax expense was higher by $12 million due to the seasonal expiration of employee stock options.

Second quarter 2012 results included a $56 million positive valuation adjustment on the Vantiv warrant; a $17 million negative valuation adjustment associated with bank premises held-for-sale; and an $11 million charge related to the valuation of the Visa total return swap. Net gains on investment securities were $3 million. Second quarter 2012 noninterest expense included a $9 million reduction to FDIC insurance expense.

 

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Earnings Highlights

 

     For the Three Months Ended     % Change  
     June     March     December     September     June              
     2013     2013     2012     2012     2012         Seq             Yr/Yr      

Earnings ($ in millions)

               

Net income attributable to Bancorp

    $ 603      $ 422      $ 399      $ 363      $ 385        43 %      57 % 

Net income available to common shareholders

    $ 594      $ 413      $ 390      $ 354      $ 376        44 %      58 % 

Common Share Data

               

Earnings per share, basic

      0.69        0.47        0.44        0.39        0.41        47 %      68 % 

Earnings per share, diluted

      0.66        0.46        0.43        0.38        0.40        43 %      65 % 

Cash dividends per common share

      0.12        0.11        0.10        0.10        0.08        9 %      50 % 

Financial Ratios

               

Return on average assets

      1.98 %      1.41 %      1.33 %      1.23 %      1.32 %      40 %      50 % 

Return on average common equity

      17.6        12.5        11.5        10.4        11.4        41 %      54 % 

Return on average tangible common equity

      21.6        15.4        14.1        12.8        14.1        40 %      53 % 

Tier I capital

      11.07        10.83        10.65        10.85        12.31        2 %      (10 %) 

Tier I common equity

      9.44        9.70        9.51        9.67        9.77        (3 %)      (3 %) 

Net interest margin (a)

      3.33        3.42        3.49        3.56        3.56        (3 %)      (6 %) 

Efficiency (a)

      52.3        59.8        65.2        63.7        59.4        (12 %)      (12 %) 

Common shares outstanding (in thousands)

      851,474        874,645        882,152        897,467        918,913        (3 %)      (7 %) 

Average common shares outstanding

               

(in thousands):

               

Basic

      858,583        870,923        884,676        904,475        913,541        (1 %)      (6 %) 

Diluted

      900,625        913,163        925,585        944,821        954,622        (1 %)      (6 %) 

 

(a) Presented on a fully taxable equivalent basis

The percentages in all of the tables in this earning release are calculated on actual dollar amounts not the rounded dollar amounts.

“Second quarter results were again strong for Fifth Third,” said Kevin T. Kabat, CEO of Fifth Third Bancorp. “The Company reported $594 million in net income to common shareholders. Return on assets was 1.98 percent and return on average tangible common equity* was 21.6 percent for the quarter including Vantiv-related gains, and were 1.30 percent and 14.1 percent, respectively, excluding them.

“We posted our tenth consecutive quarter of sequential average portfolio loan growth, driven by C&I loan growth of 3 percent. Nearly all fee income categories increased quarter-over-quarter, highlighted by mortgage banking net revenue and corporate banking revenue, which grew 6 and 7 percent, respectively. All major fee categories showed mid-single digit growth year-over-year.

“Credit trends continued to improve as net charge-offs declined 16 percent to $112 million, or 51 basis points of loans, and we saw continued, broad based improvement in nearly every key credit metric.

“During the quarter, we entered into an agreement to repurchase $539 million of common shares. We have approximately $600 million of repurchase capacity remaining under our current CCAR plan extending through March 31, 2014, excluding any potential gains from Vantiv share sales in the future. At the beginning of the third quarter, we converted our Series G preferred stock into common stock, although those shares were already included in our fully diluted share count. Regulatory approval of final capital rules for U.S. banks provides welcome clarity for our management of capital, and our capital position under those rules would remain strong with an estimated pro forma Tier 1 common equity ratio* of 9.1 percent under the new final rules compared with 9.4 percent under current rules.”

 

* Non-GAAP measure; see Reg. G reconciliation on page 34.

 

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Income Statement Highlights

 

     For the Three Months Ended      % Change  
     June      March     December     September      June               
     2013      2013     2012     2012      2012      Seq     Yr/Yr  

Condensed Statements of Income ($ in millions)

                  

Net interest income (taxable equivalent)

    $ 885       $ 893      $ 903      $ 907       $ 899         (1 %)      (2 %) 

Provision for loan and lease losses

      64         62        76        65         71         2 %      (11 %) 

Total noninterest income

      1,060         743        880        671         678         43 %      56 % 

Total noninterest expense

      1,017         978        1,163        1,006         937         4 %      9 % 
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Income before income taxes (taxable equivalent)

      864         596        544        507         569         45 %      52 % 
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Taxable equivalent adjustment

      5         5        4        4         4         5 %      8 % 

Applicable income taxes

      256         179        144        139         180         42 %      42 % 
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Net income

      603         412        396        364         385         46 %      56 % 

Less: Net income attributable to noncontrolling interest

      —            (10 )      (3 )      1         —            NM        10 % 
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Net income attributable to Bancorp

      603         422        399        363         385         43 %      57 % 

Dividends on preferred stock

      9         9        9        9         9         2 %      2 % 
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Net income available to common shareholders

      594         413        390        354         376         44 %      58 % 
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Earnings per share, diluted

    $ 0.66       $ 0.46      $ 0.43      $ 0.38       $ 0.40         43 %      65 % 

Net Interest Income

 

     For the Three Months Ended     % Change  
     June     March     December     September     June              
     2013     2013     2012     2012     2012         Seq             Yr/Yr      

Interest Income ($ in millions)

               

Total interest income (taxable equivalent)

    $ 989      $ 1,000      $ 1,020      $ 1,027      $ 1,031        (1 %)      (4 %) 

Total interest expense

      104        107        117        120        132        (3 %)      (21 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net interest income (taxable equivalent)

    $ 885      $ 893      $ 903      $ 907      $ 899        (1 %)      (2 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average Yield

               

Yield on interest-earning assets (taxable equivalent)

      3.73 %      3.84 %      3.94 %      4.03 %      4.08 %      (3 %)      (9 %) 

Yield on interest-bearing liabilities

      0.57 %      0.59 %      0.65 %      0.67 %      0.73 %      (3 %)      (22 %) 

Net interest rate spread (taxable equivalent)

      3.16 %      3.25 %      3.29 %      3.36 %      3.35 %      (3 %)      (6 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net interest margin (taxable equivalent)

      3.33 %      3.42 %      3.49 %      3.56 %      3.56 %      (3 %)      (6 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average Balances ($ in millions)

               

Loans and leases, including held for sale

    $ 89,473      $ 88,880      $ 86,180      $ 84,829      $ 84,508        1 %      6 % 

Total securities and other short-term investments

      16,962        16,846        16,765        16,588        17,168        1 %      (1 %) 

Total interest-earning assets

      106,435        105,726        102,945        101,417        101,676        1 %      5 % 

Total interest-bearing liabilities

      73,363        74,038        71,420        72,026        73,162        (1 %)      —     

Bancorp shareholders’ equity

      14,221        13,779        13,855        13,887        13,628        3 %      4 % 

Net interest income of $885 million on a fully taxable equivalent basis decreased $8 million from the first quarter and included a $6 million increase due to higher day count in the second quarter. Excluding the impact of day count, the decline in net interest income reflected loan repricing and maturities of interest rate floors, partially offset by net loan growth and the benefit of higher yields on investment securities. Net interest income also benefited from a decline in interest expense driven by the maturity of $750 million in holding company debt and related swaps during the quarter, partially offset by the full quarter impact of the $1.3 billion bank note issuance and related swaps in the first quarter.

 

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The net interest margin was 3.33 percent, a decrease of 9 bps from 3.42 percent in the previous quarter. The decline in net interest margin was primarily driven by lower loan yields and the maturity of interest rate floors, partially offset by higher securities yields and the debt maturity in the first quarter. The impact of day count reduced the net interest margin by 1 bp.

Compared with the second quarter of 2012, net interest income decreased $14 million and the net interest margin decreased 23 bps, driven by lower asset yields partially offset by higher average loan balances, lower long-term debt expense, and run-off in higher-priced CDs.

Securities

Average securities and other short-term investments were $17.0 billion in the second quarter of 2013 compared with $16.8 billion in the previous quarter and $17.2 billion in the second quarter of 2012. On an end of period basis, available for sale securities of $16.2 billion increased $924 million from the prior quarter as a result of the pre-investment of expected portfolio cash flows. Other short-term investment end of period balances of $1.1 billion declined $1.2 billion from unusually high cash balances held at the Federal Reserve at the end of the first quarter.

Loans

 

     For the Three Months Ended      % Change  
     June
2013		      March
2013		      December
2012		      September
2012		      June
2012		          Seq             Yr/Yr      

Average Portfolio Loans and Leases ($ in millions)

                    

Commercial:

                    

Commercial and industrial loans

    $ 37,630       $ 36,395       $ 34,301       $ 33,111       $ 32,734         3 %      15 % 

Commercial mortgage

      8,618         8,965         9,193         9,567         9,810         (4 %)      (12 %) 

Commercial construction

      713         695         686         742         873         3 %      (18 %) 

Commercial leases

      3,552         3,556         3,509         3,481         3,469         —          2 % 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

  

Subtotal—commercial loans and leases

      50,513         49,611         47,689         46,901         46,886         2 %      8 % 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

  

Consumer:

                    

Residential mortgage loans

      12,260         12,096         11,846         11,578         11,274         1 %      9 % 

Home equity

      9,625         9,872         10,129         10,312         10,430         (2 %)      (8 %) 

Automobile loans

      11,887         11,961         11,944         11,812         11,755         (1 %)      1 % 

Credit card

      2,071         2,069         2,029         1,971         1,915         —          8 % 

Other consumer loans and leases

      351         294         306         314         326         20 %      8 % 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

  

Subtotal—consumer loans and leases

      36,194         36,292         36,254         35,987         35,700         —          1 % 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

  

Total average loans and leases (excluding held for sale)

    $ 86,707       $ 85,903       $ 83,943       $ 82,888       $ 82,586         1 %      5 % 

Average loans held for sale

      2,766         2,977         2,237         1,941         1,922         (7 %)      44 % 

Average loan and lease balances (excluding loans held-for-sale) increased $804 million, or 1 percent, sequentially and increased $4.1 billion, or 5 percent, from the second quarter of 2012. Period end loan and lease balances (excluding loans held-for-sale) increased $1.4 billion, or 2 percent sequentially and increased $4.7 billion, or 6 percent, from a year ago. Comparisons reflect the securitization of approximately $500 million of auto loans in March 2013, as the full quarter impact of the securitization reduced average portfolio loans by $338 million compared with the first quarter of 2013.

Average commercial portfolio loan and lease balances were up $902 million, or 2 percent, sequentially and increased $3.6 billion, or 8 percent, from the second quarter of 2012. Average commercial and industrial (C&I) loans increased 3 percent sequentially and increased 15 percent compared with the second quarter of 2012. Average commercial mortgage and

 

5

commercial construction loan balances combined declined 3 percent sequentially and declined 13 percent from the same period in the previous year. Commercial line usage, on an end of period basis, was 31 percent of committed lines in the second quarter of 2013 compared with 31 percent in the first quarter of 2013 and 32 percent in the second quarter of 2012.

Average consumer portfolio loan and lease balances were flat sequentially and increased $494 million, or 1 percent, from the second quarter of 2012. In the first quarter, approximately $500 million in auto loans were reclassified to held-for-sale in anticipation of their securitization and sale, which took place at the end of March. The full quarter impact of the securitization reduced average portfolio loans by $338 million compared with the first quarter of 2013. Average residential mortgage loans increased 1 percent sequentially and increased 9 percent from a year ago, reflecting the continued retention of certain shorter term residential mortgage loans. Average auto loans declined 1 percent sequentially and increased 1 percent from the second quarter of 2012, and included the effect of the first quarter 2013 auto securitization. Average home equity loan balances declined 2 percent sequentially and declined 8 percent year-over-year due to lower demand and production.

Average loans held-for-sale balances of $2.8 billion decreased $211 million sequentially, primarily reflecting a $135 million decrease in auto loans that were moved to held-for-sale prior to being securitized and sold at the end of March. Average loans held-for-sale balances increased $844 million compared with the second quarter of 2012. Period end loans held-for-sale of $2.1 billion decreased $543 million from the previous quarter and increased $285 million from the second quarter of 2012 reflecting fluctuations in residential mortgage held-for-sale balances.

Deposits

 

     For the Three Months Ended      % Change  
     June
2013		      March
2013		      December
2012		      September
2012		      June
2012		          Seq             Yr/Yr      

Average Deposits ($ in millions)

                    

Demand deposits

    $ 29,682       $ 28,565       $ 29,223       $ 27,127       $ 26,351         4 %      13 % 

Interest checking

      22,796         23,763         23,556         22,967         23,548         (4 %)      (3 %) 

Savings

      18,864         19,576         20,216         21,283         22,143         (4 %)      (15 %) 

Money market

      8,918         7,932         6,026         4,776         4,258         12 %      NM   

Foreign office (a)

      1,418         1,102         1,174         1,345         1,321         29 %      7 % 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

  

Subtotal—Transaction deposits

      81,678         80,938         80,195         77,498         77,621         1 %      5 % 

Other time

      3,859         3,982         4,094         4,224         4,359         (3 %)      (11 %) 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

  

Subtotal—Core deposits

      85,537         84,920         84,289         81,722         81,980         1 %      4 % 

Certificates—$100,000 and over

      6,519         4,017         3,084         3,016         3,130         62 %      NM   

Other

      10         40         32         32         23         (74 %)      (55 %) 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

  

Total deposits

    $ 92,066       $ 88,977       $ 87,405       $ 84,770       $ 85,133         3 %      8 % 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

  

 

(a) Includes commercial customer Eurodollar sweep balances for which the Bancorp pays rates comparable to other commercial deposit accounts.

Average core deposits increased $617 million, or 1 percent, sequentially and increased $3.6 billion, or 4 percent, from the second quarter of 2012. Average transaction deposits, which are included in core deposits, increased $740 million, or 1 percent, from the first quarter of 2013 primarily driven by higher demand deposits and money market balances, partially offset by lower interest checking and savings balances. Year-over-year transaction deposits increased $4.1 billion, or 5 percent, driven by higher money market and demand deposits, partially offset by lower savings and interest checking balances. Other time deposits, primarily CDs, decreased 3 percent sequentially and 11 percent compared with the second quarter of 2012.

 

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Commercial average transaction deposits increased 1 percent sequentially and increased 4 percent from the previous year. Sequential performance reflected higher foreign office, demand deposit, and money market balances partially offset by lower interest checking balances. Year-over-year growth was primarily driven by higher inflows to demand deposit and money market account balances. Average public funds balances were $5.2 billion compared with $5.5 billion in the first quarter of 2013 and $5.7 billion in the second quarter of 2012.

Consumer average transaction deposits increased 1 percent sequentially and increased 6 percent from the second quarter of 2012. The sequential increase reflected higher demand deposit and money market deposits, which were partially offset by lower savings and interest checking balances. Year-over-year growth was driven by increased money market and demand deposit balances partially offset by lower savings and interest checking balances. Consumer CDs included in core deposits declined 3 percent sequentially, driven by customer reluctance to purchase CDs given the continued low rate environment, and declined 11 percent year-over-year driven by maturities of higher-rate CDs.

Wholesale Funding

 

     For the Three Months Ended      % Change  
     June
2013		      March
2013		      December
2012		      September
2012		      June
2012		          Seq             Yr/Yr      

Average Wholesale Funding ($ in millions)

                    

Certificates—$100,000 and over

    $ 6,519       $ 4,017       $ 3,084       $ 3,016       $ 3,130         62 %      NM   

Other deposits

      10         40         32         32         23         (74 %)      (55 %) 

Federal funds purchased

      560         691         794         664         408         (19 %)      37 % 

Other short-term borrowings

      2,867         5,429         4,553         4,856         4,303         (47 %)      (33 %) 

Long-term debt

      7,552         7,506         7,891         8,863         9,669         1 %      (22 %) 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

  

Total wholesale funding

    $ 17,508       $ 17,683       $ 16,354       $ 17,431       $ 17,533         (1 %)      —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

  

Average wholesale funding of $17.5 billion decreased $175 million, or 1 percent, sequentially and was flat compared with the second quarter of 2012. The sequential and year-over-year comparisons reflect lower short-term borrowings, primarily short-term FHLB borrowings, partially offset by the issuance of certificates $100,000 and over. Average long-term debt balances reflected the full quarter impact of the $1.3 billion bank note issuance in the first quarter partially offset by the $750 million and $500 million senior note maturities in the second quarter of 2013.

 

7

Noninterest Income

 

     For the Three Months Ended      % Change  
     June
2013		      March
2013		      December
2012		     September
2012		      June
2012		          Seq             Yr/Yr      

Noninterest Income ($ in millions)

                   

Service charges on deposits

    $ 136       $ 131       $ 134      $ 128       $ 130         4 %      4 % 

Corporate banking revenue

      106         99         114        101         102         7 %      4 % 

Mortgage banking net revenue

      233         220         258        200         183         6 %      28 % 

Investment advisory revenue

      98         100         93        92         93         (2 %)      6 % 

Card and processing revenue

      67         65         66        65         64         4 %      6 % 

Other noninterest income

      414         109         215        78         103         NM        NM   

Securities gains, net

      —           17         2        2         3         (99 %)      (96 %) 

Securities gains (losses), net—non-qualifying hedges on mortgage servicing rights

      6         2         (2 )      5         —           NM        NM   
  

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

    

 

 

  

Total noninterest income

    $ 1,060       $ 743       $ 880      $ 671       $ 678         43 %      56 % 

NM: Not Meaningful

Noninterest income of $1.1 billion increased $317 million sequentially and increased $382 million compared with prior year results. The sequential and year-over-year increases were driven by the $242 million gain on the sale of Vantiv shares and a higher valuation adjustment on the Vantiv warrant. Vantiv warrant valuation adjustments were a positive $76 million in the second quarter of 2013 compared with positive $34 million and positive $56 million in the first quarter of 2013 and second quarter of 2012, respectively. Excluding these Vantiv-related benefits, noninterest income increased $33 million, or 5 percent, from the first quarter and $120 million, or 19 percent, from the second quarter of 2012.

Second quarter 2013 results also included a pre-tax benefit of $10 million resulting from a settlement related to a previously surrendered BOLI policy and a $5 million charge related to the valuation of the total return swap entered into as part of the 2009 sale of Visa, Inc. Class B shares. Negative valuation adjustments on this swap were $7 million in the first quarter of 2013 and $11 million in the second quarter of 2012. First quarter 2013 results also included $7 million in gains on the sale of certain FTAM advisory contracts. Second quarter 2012 results also included $17 million in lower of cost or market adjustments associated with bank premises held-for-sale. Excluding these items, the aforementioned Vantiv-related impacts, and investment securities gains in all periods, noninterest income of $737 million increased $45 million, or 7 percent, from the previous quarter and increased $90 million, or 14 percent, from the second quarter of 2012. The sequential comparison primarily reflected higher mortgage banking net revenue, corporate banking revenue, and service charges on deposits. The year-over-year comparison primarily reflected higher mortgage banking net revenue and mid-single digit growth in most other fee categories.

Service charges on deposits of $136 million increased 4 percent from the first quarter and increased 4 percent compared with the same quarter last year. Retail service charges increased 10 percent sequentially and 4 percent from the second quarter of 2012 primarily due to the transition to our new and simplified deposit product offerings. Commercial service charges increased 1 percent sequentially and increased 5 percent from a year ago primarily as a result of higher treasury management fees.

Corporate banking revenue of $106 million increased 7 percent from the first quarter of 2013 and 4 percent from the same period last year. The sequential and year-over-year increases were primarily driven by higher syndication fees, interest rate derivatives, foreign exchange fees, and business lending fees, partially offset by lower institutional sales revenue and letter of credit fees.

 

8

Mortgage banking net revenue was $233 million in the second quarter of 2013, a 6 percent increase from the first quarter of 2013 and a 28 percent increase from the second quarter of 2012. Second quarter 2013 originations were a record $7.5 billion, compared with $7.4 billion in the previous quarter and $5.9 billion in the second quarter of 2012. Second quarter 2013 originations resulted in gains of $150 million on mortgages sold, compared with gains of $169 million during the previous quarter and $183 million during the second quarter of 2012. The decline from the prior quarter and prior year primarily reflected lower gain on sale margins. Mortgage servicing fees this quarter were $62 million, compared with $61 million in the previous quarter and $63 million in the second quarter of 2012. Mortgage banking net revenue is also affected by net servicing asset value adjustments, which include mortgage servicing rights (MSR) amortization and MSR valuation adjustments (including mark-to-market adjustments on free-standing derivatives used to economically hedge the MSR portfolio). These net servicing asset valuation adjustments were positive $21 million in the second quarter of 2013 (reflecting MSR amortization of $51 million and MSR valuation adjustments of positive $72 million); negative $10 million in the first quarter of 2013 (MSR amortization of $53 million and MSR valuation adjustments of positive $43 million); and negative $63 million in the second quarter of 2012 (MSR amortization of $41 million and MSR valuation adjustments of negative $22 million). The mortgage servicing asset, net of the valuation reserve, was $894 million at quarter end on a servicing portfolio of $67 billion.

Net gains on securities held as non-qualifying hedges for the MSR portfolio were $6 million in the second quarter of 2013, compared with net gains of $2 million in the first quarter of 2013 and no gains or losses in the second quarter of 2012.

Investment advisory revenue of $98 million decreased 2 percent from record first quarter levels and increased 6 percent year-over-year. The sequential decline reflected lower tax-related private client services revenue, which is seasonally strong in the first quarter. The year-over-year increase was due to higher private client services revenue, brokerage fees, and institutional fees, resulting from increased production and an improvement in equity and bond market values. This fee revenue was partially offset by the absence of mutual fund fees due to the sale of certain Fifth Third funds in the third quarter of 2012.

Card and processing revenue of $67 million in the second quarter of 2013 increased 4 percent sequentially and increased 6 percent from the second quarter of 2012. The sequential increase reflected higher transactions volumes compared with seasonally weaker first quarter volumes. The year-over-year increase reflected the impact of higher transaction volumes, higher levels of consumer spending, and the benefit of new products.

Other noninterest income totaled $414 million in the second quarter of 2013, compared with $109 million in the previous quarter and $103 million in the second quarter of 2012. The second quarter of 2013 included a $242 million gain from the sale of Vantiv shares and a $10 million benefit resulting from a settlement related to a previously surrendered BOLI policy. Other noninterest income also included effects of the valuation of the Vantiv warrant and changes in income related to the valuation of the Visa total return swap. For the quarters ending June 30, 2013, March 31, 2013, and June 30, 2012, the impact of warrant valuation adjustments were positive $76 million, positive $34 million, and positive $56 million, respectively, and changes in income related to the Visa total return swap were losses of $5 million, $7 million, and $11 million, respectively. First quarter 2013 results also included $7 million in gains on the sale of certain FTAM advisory

 

9

contracts. Second quarter 2012 results also included $17 million in lower of cost or market adjustments associated with bank premises held-for-sale. Excluding the items detailed above, other noninterest income of $91 million increased approximately $16 million, or 21 percent, from the first quarter of 2013 and the second quarter of 2012.

Net credit-related costs recognized in other noninterest income were $6 million in the second quarter of 2013 versus $10 million last quarter and $17 million in the second quarter of 2012. Second quarter 2013 results included no material gains or losses on sales of commercial loans held-for-sale and $1 million of fair value charges on commercial loans held-for-sale, as well as $5 million of losses on other real estate owned (OREO). First quarter 2013 results included $2 million of net gains on sales of commercial loans held-for-sale and $1 million of fair value charges on commercial loans held-for-sale, as well as $10 million of losses on OREO. Second quarter 2012 results included $8 million of net gains on sales of commercial loans held-for-sale, $5 million of fair value charges on commercial loans held-for-sale, and $19 million of losses on OREO.

Net gains on investment securities were immaterial in the second quarter of 2013, compared with investment securities gains of $17 million in the previous quarter and $3 million in the second quarter of 2012.

Noninterest Expense

 

     For the Three Months Ended      % Change  
     June      March      December      September      June               
     2013      2013      2012      2012      2012          Seq             Yr/Yr      

Noninterest Expense ($ in millions)

                    

Salaries, wages and incentives

    $ 404       $ 399       $ 416       $ 399       $ 393         1 %      3 % 

Employee benefits

      83         114         96         79         84         (27 %)      (1 %) 

Net occupancy expense

      76         79         76         76         74         (3 %)      4 % 

Technology and communications

      50         49         52         49         48         —          3 % 

Equipment expense

      28         28         27         28         27         (1 %)      1 % 

Card and processing expense

      33         31         31         30         30         6 %      10 % 

Other noninterest expense

      343         278         465         345         281         23 %      22 % 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

  

Total noninterest expense

    $ 1,017       $ 978       $ 1,163       $ 1,006       $ 937         4 %      9 % 
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

 

  

Noninterest expense of $1.0 billion increased 4 percent from the first quarter of 2013 and increased 9 percent versus the second quarter of 2012. Second quarter 2013 expenses included $33 million in charges to increase litigation reserves; and a $2 million benefit from the sale of affordable housing investments. First quarter 2013 expenses included a $9 million benefit from the sale of affordable housing investments and $9 million in charges to increase litigation reserves. Second quarter 2012 expenses included a $9 million reduction to FDIC insurance expense and an $8 million benefit from the sale of affordable housing investments. Excluding these items, noninterest expense of $986 million increased $8 million, or 1 percent, compared with the first quarter of 2013 and increased $32 million, or 3 percent, compared with the second quarter of 2012. Second quarter 2013 also included a net $6 million increase in the mortgage representation and warranty reserve, driven by a $9 million increase in the reserve as a result of additional information obtained from Freddie Mac regarding changes to their selection criteria for future mortgage repurchases and file requests. As such, we are able to better estimate the losses that are probable on loans sold to Freddie Mac with representation and warranty provisions. (Freddie Mac loans represent approximately 53 percent of the outstanding balance of sold loans.) The sequential comparison included a decrease in benefits expense due to seasonally higher FICA and unemployment costs in the first quarter. Sequential and year-over-year comparisons also reflected increased compensation-related expenses.

 

10

Credit costs related to problem assets recorded as noninterest expense totaled $35 million in the second quarter of 2013, compared with $24 million in the first quarter of 2013 and $40 million in the second quarter of 2012. Second quarter credit-related expenses included provision expense for mortgage repurchases of $20 million, compared with $20 million in the first quarter and $18 million a year ago. (Realized mortgage repurchase losses were $14 million in the second quarter of 2013, compared with $20 million last quarter and $16 million in the second quarter of 2012.) Provision for unfunded commitments was a benefit of $2 million in the current quarter, compared with a benefit of $11 million last quarter and a benefit of $1 million a year ago. Derivative valuation adjustments related to customer credit risk were a net zero, positive $1 million, and a net zero for this quarter, last quarter and the year ago quarter, respectively. OREO expense was $3 million this quarter, compared with $4 million last quarter and $5 million a year ago. Other problem asset-related expenses were $14 million in the second quarter, compared with $12 million the previous quarter and $19 million in the same period last year.

Credit Quality

 

     For the Three Months Ended  
     June     March     December     September     June  
     2013     2013     2012     2012     2012  

Total net losses charged off ($ in millions)

           

Commercial and industrial loans

    ($ 33 )    ($ 25 )    ($ 36 )    ($ 29 )    ($ 46 ) 

Commercial mortgage loans

      (10 )      (26 )      (17 )      (28 )      (25 ) 

Commercial construction loans

      —           (3 )      (4 )      (4 )      —      

Commercial leases

      (2 )      —           1        (1 )      (7 ) 

Residential mortgage loans

      (15 )      (20 )      (23 )      (26 )      (36 ) 

Home equity

      (23 )      (30 )      (34 )      (37 )      (39 ) 

Automobile loans

      (5 )      (4 )      (9 )      (7 )      (7 ) 

Credit card

      (19 )      (20 )      (19 )      (18 )      (18 ) 

Other consumer loans and leases

      (5 )      (5 )      (6 )      (6 )      (3 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total net losses charged off

      (112 )      (133 )      (147 )      (156 )      (181 ) 

Total losses

      (145 )      (168 )      (177 )      (188 )      (219 ) 

Total recoveries

      33        35        30        32        38   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total net losses charged off

    ($ 112 )    ($ 133 )    ($ 147 )    ($ 156 )    ($ 181 ) 

Ratios (annualized)

           

Net losses charged off as a percent of average loans and leases (excluding held for sale)

      0.51 %      0.63 %      0.70 %      0.75 %      0.88 % 

Commercial

      0.36 %      0.44 %      0.46 %      0.53 %      0.67 % 

Consumer

      0.73 %      0.89 %      1.01 %      1.04 %      1.15 % 

Net charge-offs were $112 million in the second quarter of 2013, or 51 bps of average loans on an annualized basis, the lowest ratio since the first quarter of 2007. Net charge-offs declined 16 percent compared with first quarter 2013 net charge-offs of $133 million, and declined 39 percent versus second quarter 2012 net charge-offs of $181 million.

Commercial net charge-offs were $45 million, or 36 bps, the lowest ratio since the third quarter of 2007. Commercial net charge-offs declined $9 million compared with $54 million, or 44 bps, in the first quarter. C&I net charge-offs were $33 million, an increase of $8 million from $25 million in the previous quarter. Commercial mortgage net charge-offs totaled $10 million, down $16 million compared with $26 million in the prior quarter. Commercial construction net charge-offs were zero in the second quarter, down $3 million compared with the previous quarter.

 

11

Consumer net charge-offs were $67 million, or 73 bps, down $12 million sequentially to the lowest ratio since the second quarter of 2007. Net charge-offs on residential mortgage loans in the portfolio were $15 million, down $5 million from the previous quarter. Home equity net charge-offs were $23 million, down $7 million from the first quarter of 2013. Net charge-offs on brokered home equity loans represented 32 percent of second quarter home equity losses; such loans are 13 percent of the total home equity portfolio. The home equity portfolio included $1.2 billion of brokered loans, down from a peak of $2.6 billion in 2007; originations of these loans were discontinued in 2007. Net charge-offs in the auto portfolio of $5 million increased $1 million compared with the prior quarter. Net charge-offs on consumer credit card loans were $19 million, down $1 million from first quarter. Net charge-offs on other consumer loans were $5 million, or flat compared with the previous quarter.

 

     For the Three Months Ended  
     June     March     December     September     June  
     2013     2013     2012     2012     2012  

Allowance for Credit Losses ($ in millions)

           

Allowance for loan and lease losses, beginning

    $ 1,783      $ 1,854      $ 1,925      $ 2,016      $ 2,126   

Total net losses charged off

      (112 )      (133 )      (147 )      (156 )      (181 ) 

Provision for loan and lease losses

      64        62        76        65        71   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Allowance for loan and lease losses, ending

      1,735        1,783        1,854        1,925        2,016   

Reserve for unfunded commitments, beginning

      168        179        176        178        179   

Provision for unfunded commitments

      (2 )      (11 )      3        (2 )      (1 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Reserve for unfunded commitments, ending

      166        168        179        176        178   

Components of allowance for credit losses:

           

Allowance for loan and lease losses

      1,735        1,783        1,854        1,925        2,016   

Reserve for unfunded commitments

      166        168        179        176        178   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total allowance for credit losses

    $ 1,901      $ 1,951      $ 2,033      $ 2,101      $ 2,194   

Allowance for loan and lease losses ratio

           

As a percent of loans and leases

      1.99 %      2.08 %      2.16 %      2.32 %      2.45 % 

As a percent of nonperforming loans and leases (a)

      191 %       187 %      180 %      167 %      150 % 

As a percent of nonperforming assets (a)

      151 %       147 %      144 %      133 %      125 % 

 

(a) Excludes nonaccrual loans and leases in loans held for sale

Provision for loan and lease losses totaled $64 million in the second quarter of 2013, up $2 million from the first quarter of 2013 and down $7 million from the second quarter of 2012. The allowance for loan and lease losses declined $48 million sequentially reflecting continued improvement in credit trends. The allowance represented 1.99 percent of total loans and leases outstanding as of quarter end, compared with 2.08 percent last quarter, and represented 191 percent of nonperforming loans and leases, and 151 percent of nonperforming assets.

 

12

      As of  
     June     March     December     September     June  
     2013     2013     2012     2012     2012  

Nonperforming Assets and Delinquent Loans ($ in millions)

           

Nonaccrual portfolio loans and leases:

           

Commercial and industrial loans

    $ 274      $ 229      $ 234      $ 309      $ 377   

Commercial mortgage loans

      169        184        215        263        357   

Commercial construction loans

      39        66        70        76        99   

Commercial leases

      1        1        1        5        3   

Residential mortgage loans

      96        110        114        126        135   

Home equity

      28        28        30        29        30   

Automobile loans

      —           —           —           —           1   

Other consumer loans and leases

      —           —           1        —           —      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total nonaccrual loans and leases

    $ 607      $ 618      $ 665      $ 808      $ 1,002   

Restructured loans and leases—commercial (nonaccrual)

      140  (c)      159  (c)      177        153        147   

Restructured loans and leases—consumer (nonaccrual)

      162        174        187        192        193   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total nonperforming loans and leases

    $ 909      $ 951      $ 1,029      $ 1,153      $ 1,342   

Repossessed personal property

      6        7        8        10        9   

Other real estate owned (a)

      235        252        249        283        268   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total nonperforming assets (b)

    $ 1,150      $ 1,210      $ 1,286      $ 1,446      $ 1,619   

Nonaccrual loans held for sale

      15        16        25        38        55   

Restructured loans—commercial (nonaccrual) held for sale

      —           3        4        5        5   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total nonperforming assets including loans held for sale

    $ 1,165      $ 1,229      $ 1,315      $ 1,489      $ 1,679   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Restructured Consumer loans and leases (accrual)

    $ 1,671      $ 1,683      $ 1,655      $ 1,641      $ 1,634   

Restructured Commercial loans and leases (accrual)

    $ 475  (c)    $ 441  (c)    $ 431      $ 442      $ 455   

Total loans and leases 90 days past due

    $ 152      $ 164      $ 195      $ 201      $ 203   

Nonperforming loans and leases as a percent of portfolio loans, leases and other assets, including other real estate owned (b)

      1.04 %      1.11 %      1.19 %      1.38 %      1.62 % 

Nonperforming assets as a percent of portfolio loans, leases and other assets, including other real estate owned (b)

      1.32 %      1.41 %      1.49 %      1.73 %      1.96 % 

 

(a) Excludes government insured advances.
(b) Does not include nonaccrual loans held for sale.
(c) Excludes $21.5 million of restructured nonaccrual loans and $7.6 million of restructured accruing loans associated with a consolidated variable interest entity in which the Bancorp has no continuing credit risk.

Total nonperforming assets, including loans held-for-sale, were $1.2 billion, a decline of $64 million, or 5 percent, from the previous quarter. Nonperforming assets held-for-investment (NPAs) were $1.2 billion, or 1.32 percent, of total loans, leases and OREO, and decreased $60 million, or 5 percent, from the previous quarter. Nonperforming loans held-for-investment (NPLs) at quarter end were $909 billion or 1.04 percent of total loans, leases and OREO, and decreased $42 million, or 4 percent, from the previous quarter.

Commercial portfolio NPAs were $794 million, or 1.56 percent of commercial loans, leases and OREO, and decreased $34 million, or 4 percent, from the first quarter. Commercial portfolio NPLs were $623 million, or 1.23 percent of commercial loans and leases, and decreased $16 million from last quarter. C&I portfolio NPAs of $361 million increased $29 million from the prior quarter. Commercial mortgage portfolio NPAs were $355 million, down $54 million from the previous quarter. Commercial construction portfolio NPAs were $69 million, a decrease of $9 million from the previous quarter. Commercial real estate loans in Michigan and Florida represented 50 percent of commercial real estate NPAs and 36 percent of our total commercial real estate portfolio. Within the overall commercial loan portfolio, residential real estate builder and developer portfolio NPAs of $63 million declined $16 million from the first quarter, of which $38 million were commercial mortgage assets, $18 million were commercial construction assets and $7 million were C&I assets. Commercial portfolio NPAs included $140 million of nonaccrual troubled debt restructurings (TDRs), compared with $159 million last quarter.

 

13

Consumer portfolio NPAs of $356 million, or 0.98 percent of consumer loans, leases and OREO, decreased $26 million from the first quarter. Consumer portfolio NPLs were $286 million, or 0.79 percent of consumer loans and leases and decreased $26 million from last quarter. Of consumer NPAs, $312 million were in residential real estate portfolios. Residential mortgage NPAs were $254 million, $21 million lower than last quarter, with Florida representing 44 percent of residential mortgage NPAs and 13 percent of total residential mortgage loans. Home equity NPAs of $57 million were down $1 million compared with last quarter. Credit card NPAs were down $3 million compared to the previous quarter at $37 million. Consumer nonaccrual TDRs were $162 million in the second quarter of 2013, compared with $174 million in the first quarter 2013.

Second quarter OREO balances included in portfolio NPA balances described above were $235 million, down $17 million from the first quarter, and included $171 million in commercial OREO and $64 million in consumer OREO. Repossessed personal property of $6 million consisted largely of autos.

Loans still accruing over 90 days past due were $152 million, down $12 million, or 7 percent, from the first quarter of 2013. Commercial balances over 90 days past due were immaterial. Consumer balances 90 days past due of $152 million were down $11 million from the previous quarter. Loans 30-89 days past due of $258 million decreased $48 million, or 16 percent, from the previous quarter. Commercial balances 30-89 days past due of $7 million were down $30 million sequentially and consumer balances 30-89 days past due of $251 million decreased $18 million from the first quarter, reflecting declines in most categories. The above delinquencies figures exclude nonaccruals described previously.

Commercial nonaccrual loans held-for-sale were $15 million, compared with $19 million at the end of the first quarter.

 

14

Capital Position

 

     For the Three Months Ended  
     June     March     December     September     June  
     2013     2013     2012     2012     2012  

Capital Position

           

Average shareholders’ equity to average assets

      11.64 %      11.38 %      11.65 %      11.82 %      11.58 % 

Tangible equity (a)

      9.65 %      9.36 %      9.17 %      9.45 %      9.50 % 

Tangible common equity (excluding unrealized gains/losses) (a)

      8.83 %      9.03 %      8.83 %      9.10 %      9.15 % 

Tangible common equity (including unrealized gains/losses) (a)

      8.95 %      9.28 %      9.10 %      9.45 %      9.49 % 

Tangible common equity as a percent of risk-weighted assets (excluding unrealized gains/losses) (a) (b)

      9.50 %      9.77 %      9.57 %      9.74 %      9.84 % 

Regulatory capital ratios: (c)

           

Tier I capital

      11.07 %      10.83 %      10.65 %      10.85 %      12.31 % 

Total risk-based capital

      14.35 %      14.35 %      14.42 %      14.76 %      16.24 % 

Tier I leverage

      10.41 %      10.03 %      10.05 %      10.09 %      11.39 % 

Tier I common equity (a)

      9.44 %      9.70 %      9.51 %      9.67 %      9.77 % 

Book value per share

      15.57        15.42        15.10        14.84        14.56   

Tangible book value per share (a)

      12.71        12.62        12.33        12.12        11.89   

 

(a) The tangible equity, tangible common equity, tier I common equity and tangible book value per share ratios, while not required by accounting principles generally accepted in the United States of America (U.S. GAAP), are considered to be critical metrics with which to analyze banks. The ratios have been included herein to facilitate a greater understanding of the Bancorp’s capital structure and financial condition. See the Regulation G Non-GAAP Reconciliation table for a reconciliation of these ratios to U.S. GAAP.
(b) Under the banking agencies risk-based capital guidelines, assets and credit equivalent amounts of derivatives and off-balance sheet exposures are assigned to broad risk categories. The aggregate dollar amount in each risk category is multiplied by the associated risk weight of the category. The resulting weighted values are added together resulting in the Bancorp’s total risk weighted assets.
(c) Current period regulatory capital data ratios are estimated.

Capital ratios remained strong, reflecting growth in retained earnings, the perpetual preferred stock issuance, and the impact of share repurchase activity during the quarter. Compared with the prior quarter, the Tier 1 common equity ratio* decreased 26 bps to 9.44 percent, and included a 48 bps reduction due to repurchases of approximately $539 million in common shares announced during the quarter. The tangible common equity to tangible assets ratio* was 8.83 percent (excluding unrealized gains/losses) and 8.95 percent (including unrealized gains/losses). The Tier 1 capital ratio increased 24 bps to 11.07 percent. The Total capital ratio was flat at 14.35 percent and the Leverage ratio increased 38 bps to 10.41 percent. The Tier 1 and Total capital ratios reflected the $593 million issuance of perpetual preferred stock during the quarter.

Book value per share at June 30, 2013 was $15.57 and tangible book value per share* was $12.71, compared with March 31, 2013 book value per share of $15.42 and tangible book value per share of $12.62. Both measures included the impact of retained earnings and share repurchase activity.

As previously announced, Fifth Third entered into a share repurchase agreement with a counterparty on January 28, 2013, whereby Fifth Third would purchase approximately $125 million of its outstanding common stock. Upon completion of the agreement on April 5, 2013, an additional 849,037 shares were repurchased. This transaction reduced average share count by approximately 2 million shares in the second quarter. Additionally, as previously announced, Fifth Third entered into a share repurchase agreement with a counterparty on May 21, 2013, whereby Fifth Third would purchase approximately $539 million of its outstanding common stock. For the quarter, this transaction reduced Fifth Third’s share count by 25 million shares on the initial transaction date, which had a 10 million share impact on average share count. Fifth Third expects the settlement of this forward contract to occur on or before October 21, 2013.

 

* Non-GAAP measure; see Reg. G reconciliation on page 34.

 

15

U.S. banking regulators recently approved final capital rules for U.S. banks, including changes to the definition of capital components (i.e. the numerator of capital ratios) and changes to risk-weighting rules for assets (i.e. the denominator of capital ratios). These final rules implement portions of rules proposed by international banking regulators known as Basel III and Basel II. Fifth Third is not a Basel “Advanced Approaches” institution. Therefore, Fifth Third would be subject to the general capital rules governing the capital or numerator portion of these final rules and the “Standardized Approach” for risk-weighting assets. Additionally, Fifth Third would have a one-time irrevocable option to neutralize certain accumulated other comprehensive income (AOCI) components in capital, comparable to treatment under prevailing capital rules. Fifth Third will also be subject to the Market Risk Rule for trading assets and liabilities, which has been re-proposed for alignment with the other final capital rules. We continue to evaluate the final rule and its impact, which would apply beginning reporting periods after January 1, 2015.

Our current estimate of the pro-forma fully phased in Tier I common equity ratio at June 30, 2013 under the final capital rule, assuming the Company elected to maintain the current treatment of AOCI components in capital, would be approximately 9.10 percent**. This would compare with 9.44 percent* as calculated under the currently prevailing Basel I capital framework. The primary drivers of the change from the prevailing capital framework to the Basel III framework would be an increase in Tier I common equity of approximately 9 bps, which would be more than offset by modestly higher risk-weighted assets. (The largest impact to the numerator is that the new rules would not require the current 10 percent deduction of mortgage servicing rights assets; the largest changes to the denominator would be the treatment of securitizations and lending commitments of less than a year.) Fifth Third’s previous estimates of its pro forma Basel III Tier 1 common equity ratio assumed, as previously proposed, the inclusion of AOCI components in capital and the proposed risk-weighting treatment for 1-4 family senior and junior lien residential mortgages. Those factors would have caused the most significant pro forma impacts to previously proposed regulatory common equity ratios. Should Fifth Third make the election to include AOCI components in capital, the June 30, 2013 pro forma Basel III Tier 1 common ratio would be increased by approximately 13 bps. Fifth Third’s pro forma Tier 1 common equity ratio exceeds the minimum buffered Tier 1 common equity ratio of 7 percent, comprising a minimum of 4.5 percent plus a capital conservation buffer of 2.5 percent. The pro forma Tier 1 common equity ratio does not include the effect of any mitigating actions the Bancorp may undertake to offset any impact of the final capital rules.

The new regulations approved by U.S. banking regulators also cease Tier 1 capital treatment for outstanding trust preferred securities (“TruPS”) for banking organizations greater than $15 billion by January 1, 2016. Fifth Third’s Tier 1 and Total capital levels at June 30, 2013 included $810 million of TruPS, or 72 bps of risk weighted assets. Based on regulatory developments, Fifth Third will continue to evaluate the role of these types of securities in its capital structure. Fifth Third included the potential redemption of $750 million in TruPS in its 2013 CCAR plan. To the extent these types of securities remain outstanding during and after the phase-in period, they would continue to be included in Total capital, as approved in the capital rules described above. We expect to manage our capital structure over time – including the components represented by common equity and non-common equity – to adapt to and reflect the effect of changes in U.S. bank capital regulations, transition periods for inclusion of capital components in capital, regulatory expectations, and our goals for capital levels and capital composition, as appropriate.

 

* Non-GAAP measure; see Reg. G reconciliation on page 34.
** Capital ratios estimated; presented under current U.S. capital regulations. The pro forma Basel III Tier I common equity ratio is management’s estimate based upon its current interpretation of recent prospective regulatory capital requirements approved in July 2013.

 

16

Fifth Third is subject to the Federal Reserve’s (FRB) Capital Plans Rule which was issued November 9, 2012. Under this rule, we are required to submit our annual capital plan to the Federal Reserve, for its objection or non-objection. The plan includes those capital actions Fifth Third intends to pursue or contemplate during the period covered by the FRB’s response, which is the second quarter of 2013 through the first quarter of 2014. These actions were more fully described in our March 14, 2013 announcement that the FRB did not object to Fifth Third’s 2013 CCAR capital plan. Any such actions would be based on environmental and market conditions, earnings results, our capital position, and other factors, as well as approval by the Fifth Third Board of Directors, at the time.

Pursuant to Fifth Third’s 2013 CCAR capital plan, Fifth Third issued $593 million of 5.10 percent fixed-to-floating non-cumulative perpetual preferred stock (Series H preferred stock) on May 16, 2013. Additionally, pursuant to its capital plan, on June 11, 2013, Fifth Third provided notice that its Board of Directors had authorized the conversion of all $398 million in outstanding Depositary Shares representing Series G 8.5 percent convertible preferred stock into approximately 35.5 million common shares issued to the holders. (Note that these securities have been accounted for under the “if-converted” method for inclusion in common shares for diluted earnings per share reporting purposes.) Effective as of the close of the market on July 1, 2013, after the close of the second quarter of 2013, Fifth Third converted all remaining outstanding shares of Series G Preferred Stock, represented by 4,110,500 Depositary Shares, into shares of Fifth Third’s Common Stock. Each Depositary Share was convertible into 8.6393 shares of Common Stock, and the aggregate number of shares of Common Stock issued in this conversion was 35,511,740.

Tax Rate

The effective tax rate was 29.8 percent this quarter compared with 30.4 percent in the first quarter. The higher first quarter tax rate included the seasonal impact of the expiration of employee stock options.

Other

Fifth Third Bank owns 53.8 million units representing a 28 percent interest in Vantiv Holding, LLC, convertible into shares of Vantiv, Inc., a publicly traded firm (NYSE: VNTV). Based upon Vantiv’s closing price of $27.60 on June 28, 2013, our interest in Vantiv was valued at approximately $1.5 billion. Next month in our 10-Q, we will update our disclosure of the carrying value of our interest in Vantiv stock, which was $574 million as of March 31, 2013. The difference between the market value and the book value of Fifth Third’s interest in Vantiv’s shares is not recognized in Fifth Third’s equity or capital. Additionally, Fifth Third has a warrant to purchase additional shares in Vantiv which is carried as a derivative asset at a fair value of $287 million as of June 30, 2013.

Conference Call

Fifth Third will host a conference call to discuss these financial results at 9:00 a.m. (Eastern Time) today. This conference call will be webcast live by Thomson Financial and may be accessed through the Fifth Third Investor Relations website at www.53.com (click on “About Fifth Third” then “Investor Relations”). The webcast also is being distributed over Thomson Financial’s Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through Thomson Financial’s individual investor center at www.earnings.com or by visiting any of the investor sites in Thomson Financial’s Individual Investor Network. Institutional investors can access the call via Thomson Financial’s password-protected event management site, StreetEvents (www.streetevents.com).

 

17

Those unable to listen to the live webcast may access a webcast replay through the Fifth Third Investor Relations website at the same web address. Additionally, a telephone replay of the conference call will be available beginning approximately two hours after the conference call until Thursday, August 1 by dialing 800-585-8367 for domestic access and 404-537-3406 for international access (passcode 88820035#).

Corporate Profile

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. As of June 30, 2013, the Company had $123 billion in assets and operated 18 affiliates with 1,326 full-service Banking Centers, including 104 Bank Mart® locations open seven days a week inside select grocery stores and 2,433 ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Pennsylvania, Missouri, Georgia and North Carolina. Fifth Third operates four main businesses: Commercial Banking, Branch Banking, Consumer Lending, and Investment Advisors. Fifth Third also has a 28% interest in Vantiv Holding, LLC. Fifth Third is among the largest money managers in the Midwest and, as of June 30, 2013, had $313 billion in assets under care, of which it managed $27 billion for individuals, corporations and not-for-profit organizations. Investor information and press releases can be viewed at www.53.com. Fifth Third’s common stock is traded on the NASDAQ® National Global Select Market under the symbol “FITB.”

Forward-Looking Statements

This news release contains statements that we believe are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. They usually can be identified by the use of forward-looking language such as “will likely result,” “may,” “are expected to,” “is anticipated,” “estimate,” “forecast,” “projected,” “intends to,” or may include other similar words or phrases such as “believes,” “plans,” “trend,” “objective,” “continue,” “remain,” or similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” or similar verbs. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including but not limited to the risk factors set forth in our most recent Annual Report on Form 10-K. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements we may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to us.

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) general economic conditions and weakening in the economy, specifically the real estate market, either nationally or in the states in which Fifth Third, one or more acquired entities and/or the combined company do business, are less favorable than expected; (2) deteriorating credit quality; (3) political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; (4) changes in the interest rate environment reduce interest margins; (5) prepayment speeds, loan origination and sale volumes, charge-offs and loan loss provisions; (6) Fifth Third’s ability to maintain required capital levels and adequate sources of funding and liquidity; (7) maintaining capital requirements may limit Fifth Third’s operations and potential growth; (8) changes and trends in capital markets; (9) problems encountered by larger or similar financial institutions may adversely affect the banking industry and/or Fifth Third; (10) competitive pressures among depository institutions increase significantly; (11) effects of critical accounting policies and judgments; (12) changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board (FASB) or other regulatory agencies; (13) legislative or regulatory changes or actions, or significant litigation, adversely affect Fifth Third, one or more acquired entities and/or the combined company or the businesses in which Fifth Third, one or more acquired entities and/or the combined company are engaged, including the Dodd-Frank Wall Street Reform and Consumer Protection Act; (14) ability to maintain favorable ratings from rating agencies; (15) fluctuation of Fifth Third’s stock price; (16) ability to attract and retain key personnel; (17) ability to receive dividends from its subsidiaries; (18) potentially dilutive effect of future acquisitions on current shareholders’ ownership of Fifth Third; (19) effects of accounting or financial results of one or more acquired entities; (20) difficulties from the separation of or the results of operations of Vantiv, LLC; (21) loss of income from any sale or potential sale of businesses that could have an adverse effect on Fifth Third’s earnings and future growth; (22) ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks; and (23) the impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity.

You should refer to our periodic and current reports filed with the Securities and Exchange Commission, or “SEC,” for further information on other factors, which could cause actual results to be significantly different from those expressed or implied by these forward-looking statements.

# # #

 

18

 

LOGO

Quarterly Financial Review for June 30, 2013

Table of Contents

 

Financial Highlights

      20-21   

Consolidated Statements of Income

      22   

Consolidated Statements of Income (Taxable Equivalent)

      23   

Consolidated Balance Sheets

      24-25   

Consolidated Statements of Changes in Equity

      26   

Average Balance Sheet and Yield Analysis

      27-29   

Summary of Loans and Leases

      30   

Regulatory Capital

      31   

Summary of Credit Loss Experience

      32   

Asset Quality

      33   

Regulation G Non-GAAP Reconciliation

      34   

Segment Presentation

      35   

 

19

Fifth Third Bancorp and Subsidiaries

Financial Highlights

$ in millions, except per share data

(unaudited)

 

     For the Three Months Ended     % Change     Year to Date     % Change  
     June
2013		     March
2013		     June
2012		     Seq     Yr/Yr     June
2013		     June
2012		     Yr/Yr  

Income Statement Data

                 

Net interest income (a)

    $ 885      $ 893      $ 899        (1 %)      (2 %)    $ 1,777      $ 1,802        (1 %) 

Noninterest income

      1,060        743        678        43 %      56 %      1,803        1,448        25 % 

Total revenue (a)

      1,945        1,636        1,577        19 %      23 %      3,580        3,250        10 % 

Provision for loan and lease losses

      64        62        71        2 %      (11 %)      126        162        (22 %) 

Noninterest expense

      1,017        978        937        4 %      9 %      1,996        1,911        4 % 

Net income attributable to Bancorp

      603        422        385        43 %      57 %      1,024        815        26 % 

Net income available to common shareholders

      594        413        376        44 %      58 %      1,006        797        26 % 

Common Share Data

                 

Earnings per share, basic

    $ 0.69      $ 0.47      $ 0.41        47 %      68 %    $ 1.16      $ 0.87        33 % 

Earnings per share, diluted

      0.66        0.46        0.40        43 %      65 %      1.12        0.85        32 % 

Cash dividends per common share

      0.12        0.11        0.08        9 %      50 %      0.23        0.16        44 % 

Book value per share

      15.57        15.42        14.56        1 %      7 %      15.57        14.56        7 % 

Market price per share

      18.05        16.31        13.40        11 %      35 %      18.05        13.40        35 % 

Common shares outstanding (in thousands)

      851,474        874,645        918,913        (3 %)      (7 %)      851,474        918,913        (7 %) 

Average common shares outstanding (in thousands):

                 

Basic

      858,583        870,923        913,541        (1 %)      (6 %)      864,719        914,383        (5 %) 

Diluted

      900,625        913,163        954,622        (1 %)      (6 %)      906,860        956,016        (5 %) 

Market capitalization

    $ 15,369      $ 14,265      $ 12,313        8 %      25 %    $ 15,369      $ 12,313        25 % 

Financial Ratios

                 

Return on assets

      1.98 %      1.41 %      1.32 %      40 %      50 %      1.70 %      1.40 %      21 % 

Return on average common equity

      17.6 %      12.5 %      11.4 %      41 %      54 %      15.1 %      12.2 %      23 % 

Return on average tangible common equity (b)

      21.6 %      15.4 %      14.1 %      40 %      53 %      18.5 %      15.2 %      22 % 

Noninterest income as a percent of total revenue

      55 %      45 %      43 %      20 %      27 %      51 %      45 %      13 % 

Average equity as a percent of average assets

      11.64 %      11.38 %      11.58 %      2 %      —          11.51 %      11.54 %      —     

Tangible common equity (c)(d)

      8.83 %      9.03 %      9.15 %      (2 %)      (4 %)      8.83 %      9.15 %      (4 %) 

Net interest margin (a)

      3.33 %      3.42 %      3.56 %      (3 %)      (6 %)      3.38 %      3.59 %      (6 %) 

Efficiency (a)

      52.3 %      59.8 %      59.4 %      (12 %)      (12 %)      55.5 %      58.8 %      (6 %) 

Effective tax rate

      29.8 %      30.4 %      31.8 %      (2 %)      (6 %)      30.1 %      30.2 %      —     

Credit Quality

                 

Net losses charged off

    $ 112      $ 133      $ 181        (16 %)      (39 %)    $ 245      $ 401        (39 %) 

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

      0.51 %      0.63 %      0.88 %      (18 %)      (42 %)      0.57 %      0.98 %      (42 %) 

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

      1.99 %      2.08 %      2.45 %      (4 %)      (19 %)      1.99 %      2.45 %      (19 %) 

Allowance for credit losses as a percent of loans and leases

      2.18 %      2.28 %      2.66 %      (4 %)      (18 %)      2.18 %      2.66 %      (18 %) 

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

      1.32 %      1.41 %      1.96 %      (6 %)      (33 %)      1.32 %      1.96 %      (33 %) 

Average Balances

                 

Loans and leases, including held for sale

    $ 89,473      $ 88,880      $ 84,508        1 %      6 %    $ 89,179      $ 84,132        6 % 

Total securities and other short-term investments

      16,962        16,846        17,168        1 %      (1 %)      16,904        16,952        —     

Total assets

      122,212        121,117        117,654        1 %      4 %      121,668        116,989        4 % 

Transaction deposits (f)

      81,678        80,938        77,621        1 %      5 %      81,311        77,378        5 % 

Core deposits (g)

      85,537        84,920        81,980        1 %      4 %      85,231        81,833        4 % 

Wholesale funding (h)

      17,508        17,683        17,533        (1 %)      —          17,595        17,065        3 % 

Bancorp shareholders’ equity

      14,221        13,779        13,628        3 %      4 %      14,001        13,497        4 % 

Regulatory Capital Ratios(i)

                

Tier I capital

      11.07 %      10.83 %      12.31 %      2 %      (10 %)      11.07 %      12.31 %      (10 %) 

Total risk-based capital

      14.35 %      14.35 %      16.24 %      —          (12 %)      14.35 %      16.24 %      (12 %) 

Tier I leverage

      10.41 %      10.03 %      11.39 %      4 %      (9 %)      10.41 %      11.39 %      (9 %) 

Tier I common equity (d)

      9.44 %      9.70 %      9.77 %      (3 %)      (3 %)      9.44 %      9.77 %      (3 %) 

Operations

                 

Banking centers

      1,326        1,320        1,322        —          —          1,326        1,322        —     

ATMs

      2,433        2,426        2,409        —          1 %      2,433        2,409        1 % 

Full-time equivalent employees

      20,569        20,744        20,888        (1 %)      (2 %)      20,569        20,888        (2 %) 

 

(a) Presented on a fully taxable equivalent basis.
(b) The return on average tangible common equity is calculated as tangible net income available to common shareholders excluding tax effected amortization of intangibles) divided by average tangible common equity, (average common equity less goodwill and intangible assets).
(c) The tangible common equity ratio is calculated as tangible common equity (shareholders’ equity less preferred stock, goodwill, intangible assets and accumulated other comprehensive income divided by tangible assets (total assets less goodwill, intangible assets and accumulated other comprehensive income).
(d) The tangible common equity and tier I common equity ratios, while not required by U.S. GAAP, are considered to be important metrics with which to analyze a bank’s position. The ratios have been included herein to facilitate a greater understanding of the Bancorp’s capital structure and financial condition.
(e) Excludes nonaccrual loans held for sale.
(f) Includes demand, interest checking, savings, money market and foreign office deposits of commercial customers.
(g) Includes transaction deposits plus other time deposits.
(h) Includes certificates $100,000 and over, other deposits, federal funds purchased, short-term borrowings and long-term debt.
(i) Current period regulatory capital ratios are estimates.

 

20

Fifth Third Bancorp and Subsidiaries

Financial Highlights

$ in millions, except per share data

(unaudited)

 

     For the Three Months Ended  
     June
2013		     March
2013		     December
2012		     September
2012		     June
2012		  
          

Income Statement Data

           

Net interest income (a)

    $ 885      $ 893      $ 903      $ 907      $ 899   

Noninterest income

      1,060        743        880        671        678   

Total revenue (a)

      1,945        1,636        1,783        1,578        1,577   

Provision for loan and lease losses

      64        62        76        65        71   

Noninterest expense

      1,017        978        1,163        1,006        937   

Net income attributable to Bancorp

      603        422        399        363        385   

Net income available to common shareholders

      594        413        390        354        376   

Common Share Data

           

Earnings per share, basic

    $ 0.69      $ 0.47      $ 0.44      $ 0.39      $ 0.41   

Earnings per share, diluted

      0.66        0.46        0.43        0.38        0.40   

Cash dividends per common share

      0.12        0.11        0.10        0.10        0.08   

Book value per share

      15.57        15.42        15.10        14.84        14.56   

Market price per share

      18.05        16.31        15.20        15.51        13.40   

Common shares outstanding (in thousands)

      851,474        874,645        882,152        897,467        918,913   

Average common shares outstanding (in thousands):

           

Basic

      858,583        870,923        884,676        904,475        913,541   

Diluted

      900,625        913,163        925,585        944,821        954,622   

Market capitalization

    $ 15,369      $ 14,265      $ 13,409      $ 13,920      $ 12,313   

Financial Ratios

           

Return on assets

      1.98 %      1.41 %      1.33 %      1.23 %      1.32 % 

Return on average common equity

      17.6 %      12.5 %      11.5 %      10.4 %      11.4 % 

Return on average tangible common equity (b)

      21.6 %      15.4 %      14.1 %      12.8 %      14.1 % 

Noninterest income as a percent of total revenue

      55 %      45 %      49 %      43 %      43 % 

Average equity as a percent of average assets

      11.64 %      11.38 %      11.65 %      11.82 %      11.58 % 

Tangible common equity (c) (d)

      8.83 %      9.03 %      8.83 %      9.10 %      9.15 % 

Net interest margin (a)

      3.33 %      3.42 %      3.49 %      3.56 %      3.56 % 

Efficiency (a)

      52.3 %      59.8 %      65.2 %      63.7 %      59.4 % 

Effective tax rate

      29.8 %      30.4 %      26.8 %      27.7 %      31.8 % 

Credit Quality

           

Net losses charged off

    $ 112      $ 133      $ 147      $ 156      $ 181   

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

      0.51 %      0.63 %      0.70 %      0.75 %      0.88 % 

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

      1.99 %      2.08 %      2.16 %      2.32 %      2.45 % 

Allowance for credit losses as a percent of loans and leases

      2.18 %      2.28 %      2.37 %      2.53 %      2.66 % 

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

      1.32 %      1.41 %      1.49 %      1.73 %      1.96 % 

Average Balances

           

Loans and leases, including held for sale

    $ 89,473      $ 88,880      $ 86,180      $ 84,829      $ 84,508   

Total securities and other short-term investments

      16,962        16,846        16,765        16,588        17,168   

Total assets

      122,212        121,117        118,943        117,521        117,654   

Transaction deposits (f)

      81,678        80,938        80,195        77,498        77,621   

Core deposits (g)

      85,537        84,920        84,289        81,722        81,980   

Wholesale funding (h)

      17,508        17,683        16,354        17,431        17,533   

Bancorp shareholders’ equity

      14,221        13,779        13,855        13,887        13,628   

Regulatory Capital Ratios(i)

           

Tier I capital

      11.07 %      10.83 %      10.65 %      10.85 %      12.31 % 

Total risk-based capital

      14.35 %      14.35 %      14.42 %      14.76 %      16.24 % 

Tier I leverage

      10.41 %      10.03 %      10.05 %      10.09 %      11.39 % 

Tier I common equity (d)

      9.44 %      9.70 %      9.51 %      9.67 %      9.77 % 

Operations

           

Banking centers

      1,326        1,320        1,325        1,320        1,322   

ATMs

      2,433        2,426        2,415        2,404        2,409   

Full-time equivalent employees

      20,569        20,744        20,798        20,789        20,888   

 

(a) Presented on a fully taxable equivalent basis.
(b) The return on average tangible common equity is calculated as tangible net income available to common shareholders excluding tax effected amortization of intangibles) divided by average tangible common equity, (average common equity less goodwill and intangible assets).
(c) The tangible common equity ratio is calculated as tangible common equity (shareholders’ equity less preferred stock, goodwill, intangible assets and accumulated other comprehensive income divided by tangible assets (total assets less goodwill, intangible assets and accumulated other comprehensive income).
(d) The tangible common equity and tier I common equity ratios, while not required by U.S. GAAP, are considered to be important metrics with which to analyze a bank’s position. The ratios have been included herein to facilitate a greater understanding of the Bancorp’s capital structure and financial condition.
(e) Excludes nonaccrual loans held for sale.
(f) Includes demand, interest checking, savings, money market and foreign office deposits of commercial customers.
(g) Includes transaction deposits plus other time deposits.
(h) Includes certificates $100,000 and over, other deposits, federal funds purchased, short-term borrowings and long-term debt.
(i) Current period regulatory capital ratios are estimates.

 

21

Fifth Third Bancorp and Subsidiaries

Consolidated Statements of Income

$ in millions

(unaudited)

 

     For the Three Months Ended      % Change     Year to Date      % Change  
     June
2013		      March
2013		     June
2012		      Seq     Yr/Yr     June
2013		     June
2012		      Yr/Yr  

Interest Income

                    

Interest and fees on loans and leases

    $ 864       $ 882      $ 891         (2 %)      (3 %)      1,746        1,789         (2 %) 

Interest on securities

      119         112        135         6 %      (12 %)      231        276         (16 %) 

Interest on other short-term investments

      1         1        1         (5 %)      2 %      2        2         9 % 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Total interest income

      984         995        1,027         (1 %)      (4 %)      1,979        2,067         (4 %) 

Interest Expense

                    

Interest on deposits

      53         50        55         5 %      (5 %)      103        114         (9 %) 

Interest on short-term borrowings

      1         3        2         (46 %)      (29 %)      4        3         31 % 

Interest on long-term debt

      50         54        75         (8 %)      (33 %)      104        157         (34 %) 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Total interest expense

      104         107        132         (3 %)      (21 %)      211        274         (23 %) 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Net Interest Income

      880         888        895         (1 %)      (2 %)      1,768        1,793         (1 %) 

Provision for loan and lease losses

      64         62        71         2 %      (11 %)      126        162         (22 %) 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Net interest income after provision for loan and lease losses

      816         826        824         (1 %)      (1 %)      1,642        1,631         1 % 

Noninterest Income

                    

Service charges on deposits

      136         131        130         4 %      4 %      267        260         3 % 

Corporate banking revenue

      106         99        102         7 %      4 %      205        199         3 % 

Mortgage banking net revenue

      233         220        183         6 %      28 %      453        387         17 % 

Investment advisory revenue

      98         100        93         (2 %)      6 %      198        190         5 % 

Card and processing revenue

      67         65        64         4 %      6 %      132        122         8 % 

Other noninterest income

      414         109        103         NM        NM        523        279         88 % 

Securities gains, net

      —            17        3         (99 %)      (96 %)      17        11         48 % 

Securities gains, net—non-qualifying hedges on mortgage servicing rights

      6         2        —            NM        NM        8        —            NM   
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Total noninterest income

      1,060         743        678         43 %      56 %      1,803        1,448         25 % 

Noninterest Expense

                    

Salaries, wages and incentives

      404         399        393         1 %      3 %      803        792         1 % 

Employee benefits

      83         114        84         (27 %)      (1 %)      197        195         1 % 

Net occupancy expense

      76         79        74         (3 %)      4 %      155        151         3 % 

Technology and communications

      50         49        48         —          3 %      99        95         4 % 

Equipment expense

      28         28        27         (1 %)      1 %      56        55         2 % 

Card and processing expense

      33         31        30         6 %      10 %      65        60         8 % 

Other noninterest expense

      343         278        281         23 %      22 %      621        563         10 % 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Total noninterest expense

      1,017         978        937         4 %      9 %      1,996        1,911         4 % 

Income before income taxes

      859         591        565         45 %      52 %      1,449        1,168         24 % 

Applicable income taxes

      256         179        180         42 %      42 %      435        352         24 % 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Net Income

      603         412        385         46 %      56 %      1,014        816         24 % 

Less: Net income attributable to noncontrolling interest

      —            (10 )      —            NM        10 %      (10 )      1         NM   
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Net income attributable to Bancorp

      603         422        385         43 %      57 %      1,024        815         26 % 

Dividends on preferred stock

      9         9        9         2 %      2 %      18        18         1 % 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  

Net income available to common shareholders

    $ 594       $ 413      $ 376         44 %      58 %      1,006        797         26 % 

 

22

Fifth Third Bancorp and Subsidiaries

Consolidated Statements of Income (Taxable Equivalent)

$ in millions

(unaudited)

 

     For the Three Months Ended  
     June      March     December     September      June  
     2013      2013     2012     2012      2012  

Interest Income

             

Interest and fees on loans and leases

    $ 864       $ 882      $ 891      $ 893       $ 891   

Interest on securities

      119         112        124        129         135   

Interest on other short-term investments

      1         1        1        1         1   
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Total interest income

      984         995        1,016        1,023         1,027   

Taxable equivalent adjustment

      5         5        4        4         4   
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Total interest income (taxable equivalent)

      989         1,000        1,020        1,027         1,031   

Interest Expense

             

Interest on deposits

      53         50        51        52         55   

Interest on short-term borrowings

      1         3        3        3         2   

Interest on long-term debt

      50         54        63        65         75   
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Total interest expense

      104         107        117        120         132   
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Net Interest Income (taxable equivalent)

      885         893        903        907         899   

Provision for loan and lease losses

      64         62        76        65         71   
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

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

      821         831        827        842         828   

Noninterest Income

             

Service charges on deposits

      136         131        134        128         130   

Corporate banking revenue

      106         99        114        101         102   

Mortgage banking net revenue

      233         220        258        200         183   

Investment advisory revenue

      98         100        93        92         93   

Card and processing revenue

      67         65        66        65         64   

Other noninterest income

      414         109        215        78         103   

Securities gains, net

      —           17        2        2         3   

Securities gains, net—non-qualifying hedges on mortgage servicing rights

      6         2        (2 )      5         —     
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Total noninterest income

      1,060         743        880        671         678   

Noninterest Expense

             

Salaries, wages and incentives

      404         399        416        399         393   

Employee benefits

      83         114        96        79         84   

Net occupancy expense

      76         79        76        76         74   

Technology and communications

      50         49        52        49         48   

Equipment expense

      28         28        27        28         27   

Card and processing expense

      33         31        31        30         30   

Other noninterest expense

      343         278        465        345         281   
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Total noninterest expense

      1,017         978        1,163        1,006         937   
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Income before income taxes (taxable equivalent)

      864         596        544        507         569   

Taxable equivalent adjustment

      5         5        4        4         4   
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Income before income taxes

      859         591        540        503         565   

Applicable income taxes

      256         179        144        139         180   
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Net Income

      603         412        396        364         385   

Less: Net Income attributable to noncontrolling interests

      —           (10 )      (3 )      1         —     
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Net income attributable to Bancorp

      603         422        399        363         385   

Dividends on preferred stock

      9         9        9        9         9   
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Net income available to common shareholders

    $ 594       $ 413      $ 390      $ 354       $ 376   
  

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

 

23

Fifth Third Bancorp and Subsidiaries

Consolidated Balance Sheets

$ in millions, except per share data

(unaudited)

 

     As of     % Change  
     June
2013		     March
2013		     June
2012		     Seq     Yr/Yr  

Assets

           

Cash and due from banks

    $ 2,390      $ 2,186      $ 2,393        9 %      —     

Available-for-sale and other securities (a)

      16,187        15,263        15,552        6 %      4 % 

Held-to-maturity securities (b)

      274        283        305        (3 %)      (10 %) 

Trading securities

      219        218        200        1 %      10 % 

Other short-term investments

      1,109        2,286        1,964        (51 %)      (44 %) 

Loans held for sale

      2,148        2,691        1,863        (20 %)      15 % 

Portfolio loans and leases:

           

Commercial and industrial loans

      37,856        36,757        32,612        3 %      16 % 

Commercial mortgage loans

      8,443        8,766        9,662        (4 %)      (13 %) 

Commercial construction loans

      754        694        822        9 %      (8 %) 

Commercial leases

      3,567        3,568        3,467        —          3 % 

Residential mortgage loans

      12,400        12,091        11,429        3 %      8 % 

Home equity

      9,531        9,727        10,377        (2 %)      (8 %) 

Automobile loans

      12,015        11,741        11,739        2 %      2 % 

Credit card

      2,114        2,043        1,943        3 %      9 % 

Other consumer loans and leases

      352        289        308        22 %      15 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Portfolio loans and leases

      87,032        85,676        82,359        2 %      6 % 

Allowance for loan and lease losses

      (1,735 )      (1,783 )      (2,016 )      (3 %)      (14 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Portfolio loans and leases, net

      85,297        83,893        80,343        2 %      6 % 

Bank premises and equipment

      2,540        2,540        2,506        —          1 % 

Operating lease equipment

      645        598        511        8 %      26 % 

Goodwill

      2,416        2,416        2,417        —          —     

Intangible assets

      23        25        33        (9 %)      (29 %) 

Servicing rights

      899        772        736        16 %      22 % 

Other assets

      9,213        8,211        8,720        12 %      6 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

    $ 123,360      $ 121,382      $ 117,543        2 %      5 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Liabilities

           

Deposits:

           

Demand

    $ 30,097      $ 30,027      $ 26,251        —          15 % 

Interest checking

      22,878        23,175        23,197        (1 %)      (1 %) 

Savings

      18,448        19,339        22,011        (5 %)      (16 %) 

Money market

      9,247        8,613        4,223        7 %      NM   

Foreign office

      1,570        1,089        1,265        44 %      24 % 

Other time

      3,793        3,909        4,261        (3 %)      (11 %) 

Certificates—$100,000 and over

      7,374        5,472        3,065        35 %      NM   

Other

      47        —         —         NM        NM   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total deposits

      93,454        91,624        84,273        2 %      11 % 

Federal funds purchased

      636        386        641        65 %      (1 %) 

Other short-term borrowings

      2,112        2,439        4,613        (13 %)      (54 %) 

Accrued taxes, interest and expenses

      1,625        1,599        1,491        2 %      9 % 

Other liabilities

      4,304        3,094        3,016        39 %      43 % 

Long-term debt

      6,940        8,320        9,685        (17 %)      (28 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total liabilities

      109,071        107,462        103,719        1 %      5 % 

Equity

           

Common stock (c)

      2,051        2,051        2,051        —          —     

Preferred stock

      991        398        398        NM        NM   

Capital surplus

      2,689        2,782        2,752        (3 %)      (2 %) 

Retained earnings

      9,573        9,084        8,201        5 %      17 % 

Accumulated other comprehensive income

      149        333        454        (55 %)      (67 %) 

Treasury stock

      (1,202 )      (766 )      (83 )      57 %      NM   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Bancorp shareholders’ equity

      14,251        13,882        13,773        3 %      3 % 

Noncontrolling interests

      38        38        51        1 %      (24 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Equity

      14,289        13,920        13,824        3 %      3 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total liabilities and equity

    $ 123,360      $ 121,382      $ 117,543        2 %      5 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

(a) Amortized cost

    $ 15,793      $ 14,652      $ 14,818        8 %      7 % 

(b) Market values

      274        283        305        (3 %)      (10 %) 

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

           

Authorized

      2,000,000        2,000,000        2,000,000        —          —     

Outstanding, excluding treasury

      851,474        874,645        918,913        (3 %)      (7 %) 

Treasury

      72,419        49,248        4,979        47 %      NM   

 

24

Fifth Third Bancorp and Subsidiaries

Consolidated Balance Sheets

$ in millions, except per share data

(unaudited)

 

     As of  
     June
2013		     March
2013		     December
2012		     September
2012		     June
2012		  

Assets

           

Cash and due from banks

    $ 2,390      $ 2,186      $ 2,441      $ 2,490      $ 2,393   

Available-for-sale and other securities (a)

      16,187        15,263        15,207        15,402        15,552   

Held-to-maturity securities (b)

      274        283        284        287        305   

Trading securities

      219        218        207        205        200   

Other short-term investments

      1,109        2,286        2,421        1,286        1,964   

Loans held for sale

      2,148        2,691        2,939        1,802        1,863   

Portfolio loans and leases:

           

Commercial and industrial loans

      37,856        36,757        36,038        33,344        32,612   

Commercial mortgage loans

      8,443        8,766        9,103        9,348        9,662   

Commercial construction loans

      754        694        698        672        822   

Commercial leases

      3,567        3,568        3,549        3,549        3,467   

Residential mortgage loans

      12,400        12,091        12,017        11,708        11,429   

Home equity

      9,531        9,727        10,018        10,238        10,377   

Automobile loans

      12,015        11,741        11,972        11,912        11,739   

Credit card

      2,114        2,043        2,097        1,994        1,943   

Other consumer loans and leases

      352        289        290        294        308   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Portfolio loans and leases

      87,032        85,676        85,782        83,059        82,359   

Allowance for loan and lease losses

      (1,735 )      (1,783 )      (1,854 )      (1,925 )      (2,016 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Portfolio loans and leases, net

      85,297        83,893        83,928        81,134        80,343   

Bank premises and equipment

      2,540        2,540        2,542        2,520        2,506   

Operating lease equipment

      645        598        581        542        511   

Goodwill

      2,416        2,416        2,416        2,417        2,417   

Intangible assets

      23        25        27        30        33   

Servicing rights

      899        772        697        679        736   

Other assets

      9,213        8,211        8,204        8,689        8,720   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

    $ 123,360      $ 121,382      $ 121,894      $ 117,483      $ 117,543   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Liabilities

           

Deposits:

           

Demand

    $ 30,097      $ 30,027      $ 30,023      $ 27,606      $ 26,251   

Interest checking

      22,878        23,175        24,477        22,891        23,197   

Savings

      18,448        19,339        19,879        20,624        22,011   

Money market

      9,247        8,613        6,875        5,285        4,223   

Foreign office

      1,570        1,089        885        1,059        1,265   

Other time

      3,793        3,909        4,015        4,167        4,261   

Certificates—$100,000 and over

      7,374        5,472        3,284        2,978        3,065   

Other

      47        —          79        78        —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total deposits

      93,454        91,624        89,517        84,688        84,273   

Federal funds purchased

      636        386        901        686        641   

Other short-term borrowings

      2,112        2,439        6,280        5,503        4,613   

Accrued taxes, interest and expenses

      1,625        1,599        1,708        1,588        1,491   

Other liabilities

      4,304        3,094        2,639        3,122        3,016   

Long-term debt

      6,940        8,320        7,085        8,127        9,685   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total liabilities

      109,071        107,462        108,130        103,714        103,719   

Equity

           

Common stock (c)

      2,051        2,051        2,051        2,051        2,051   

Preferred stock

      991        398        398        398        398   

Capital surplus

      2,689        2,782        2,758        2,733        2,752   

Retained earnings

      9,573        9,084        8,768        8,466        8,201   

Accumulated other comprehensive income

      149        333        375        468        454   

Treasury stock

      (1,202 )      (766 )      (634 )      (398 )      (83 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Bancorp shareholders’ equity

      14,251        13,882        13,716        13,718        13,773   

Noncontrolling interests

      38        38        48        51        51   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Equity

      14,289        13,920        13,764        13,769        13,824   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total liabilities and equity

    $ 123,360      $ 121,382      $ 121,894      $ 117,483      $ 117,543   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

(a) Amortized cost

    $ 15,793      $ 14,652      $ 14,571      $ 14,641      $ 14,818   

(b) Market values

      274        283        284        287        305   

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

           

Authorized

      2,000,000        2,000,000        2,000,000        2,000,000        2,000,000   

Outstanding, excluding treasury

      851,474        874,645        882,152        897,467        918,913   

Treasury

      72,419        49,248        41,741        26,425        4,979   

 

25

Fifth Third Bancorp and Subsidiaries

Consolidated Statements of Changes in Equity

$ in millions

(unaudited)

 

     For the Three Months
Ended		     For the Six Months
Ended		  
     June
2013		     June
2012		     June
2013		     June
2012		  

Total equity, beginning

    $ 13,920      $ 13,610      $ 13,764      $ 13,251   

Net income attributable to Bancorp

      603        385        1,024        815   

Other comprehensive income, net of tax:

         

Change in unrealized gains and (losses):

         

Available-for-sale securities

      (178 )      (12 )      (209 )      (9 ) 

Qualifying cash flow hedges

      (8 )      (4 )      (21 )      (11 ) 

Change in accumulated other comprehensive income related to employee benefit plans

      2        2        4        4   
  

 

 

    

 

 

    

 

 

    

 

 

  

Comprehensive income

      419        371        798        799   

Cash dividends declared:

         

Common stock

      (102 )      (74 )      (198 )      (148 ) 

Preferred stock

      (9 )      (9 )      (18 )      (18 ) 

Stock-based awards exercised, including treasury shares issued

      (16 )      (18 )      (16 )      (15 ) 

Stock-based compensation expense

      23        19        41        30   

Shares acquired for treasury

      (539 )      (75 )      (664 )      (75 ) 

Issuance of preferred stock

      593        —         593        —    

Noncontrolling interest

      —         —         (10 )      —    

Other

      —         —         (1 )      —    
  

 

 

    

 

 

    

 

 

    

 

 

  

Total equity, ending

    $ 14,289      $ 13,824      $ 14,289      $ 13,824   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

26

Fifth Third Bancorp and Subsidiaries

Average Balance Sheet and Yield Analysis

$ in millions, except share data

(unaudited)

 

     For the Three Months Ended     % Change  
     June
2013		     March
2013		     June
2012		     Seq     Yr/Yr  

Assets

           

Interest-earning assets:

           

Commercial and industrial loans

    $ 37,636      $ 36,423      $ 32,770        3 %      15 % 

Commercial mortgage loans

      8,627        8,978        9,873        (4 %)      (12 %) 

Commercial construction loans

      717        700        886        3 %      (18 %) 

Commercial leases

      3,553        3,557        3,471        —          2 % 

Residential mortgage loans

      14,984        14,866        13,059        1 %      15 % 

Home equity

      9,625        9,872        10,430        (2 %)      (8 %) 

Automobile loans

      11,887        12,096        11,755        (1 %)      1 % 

Credit card

      2,071        2,069        1,915        —          8 % 

Other consumer loans and leases

      373        319        349        20 %      8 % 

Taxable securities

      15,346        15,224        15,548        1 %      (1 %) 

Tax exempt securities

      55        51        62        8 %      (12 %) 

Other short-term investments

      1,561        1,571        1,558        (1 %)      —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total interest-earning assets

      106,435        105,726        101,676        1 %      5 % 

Cash and due from banks

      2,359        2,225        2,264        6 %      4 % 

Other assets

      15,198        15,016        15,835        1 %      (4 %) 

Allowance for loan and lease losses

      (1,780 )      (1,850 )      (2,121 )      (4 %)      (16 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

    $ 122,212      $ 121,117      $ 117,654        1 %      4 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Liabilities

           

Interest-bearing liabilities:

           

Interest checking

    $ 22,796      $ 23,763      $ 23,548        (4 %)      (3 %) 

Savings

      18,864        19,576        22,143        (4 %)      (15 %) 

Money market

      8,918        7,932        4,258        12 %      NM   

Foreign office

      1,418        1,102        1,321        29 %      7 % 

Other time

      3,859        3,982        4,359        (3 %)      (11 %) 

Certificates—$100,000 and over

      6,519        4,017        3,130        62 %      NM   

Other

      10        40        23        (74 %)      (55 %) 

Federal funds purchased

      560        691        408        (19 %)      37 % 

Other short-term borrowings

      2,867        5,429        4,303        (47 %)      (33 %) 

Long-term debt

      7,552        7,506        9,669        1 %      (22 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total interest-bearing liabilities

      73,363        74,038        73,162        (1 %)      —     

Demand deposits

      29,682        28,565        26,351        4 %      13 % 

Other liabilities

      4,908        4,687        4,462        5 %      10 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total liabilities

      107,953        107,290        103,975        1 %      4 % 

Equity

      14,259        13,827        13,679        3 %      4 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total liabilities and equity

    $ 122,212      $ 121,117      $ 117,654        1 %      4 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Yield Analysis

           

Interest-earning assets:

           

Commercial and industrial loans

      3.58 %      3.90 %      4.13 %     

Commercial mortgage loans

      3.65 %      3.63 %      3.81 %     

Commercial construction loans

      3.41 %      3.21 %      3.05 %     

Commercial leases

      3.36 %      3.38 %      3.68 %     

Residential mortgage loans

      3.91 %      3.98 %      4.12 %     

Home equity

      3.76 %      3.74 %      3.80 %     

Automobile loans

      3.16 %      3.29 %      3.76 %     

Credit card

      9.97 %      9.67 %      9.92 %     

Other consumer loans and leases

      39.49 %      46.77 %      42.87 %     
  

 

 

    

 

 

    

 

 

      

Total loans and leases

      3.89 %      4.04 %      4.26 %     

Taxable securities

      3.09 %      2.98 %      3.48 %     

Tax exempt securities

      5.01 %      5.44 %      5.02 %     

Other short-term investments

      0.24 %      0.26 %      0.24 %     
  

 

 

    

 

 

    

 

 

      

Total interest-earning assets

      3.73 %      3.84 %      4.08 %     

Interest-bearing liabilities:

           

Interest checking

      0.23 %      0.23 %      0.22 %     

Savings

      0.12 %      0.13 %      0.19 %     

Money market

      0.24 %      0.24 %      0.22 %     

Foreign office

      0.29 %      0.26 %      0.27 %     

Other time

      1.48 %      1.50 %      1.60 %     

Certificates—$100,000 and over

      0.82 %      1.09 %      1.50 %     

Other

      0.08 %      0.13 %      0.13 %     

Federal funds purchased

      0.11 %      0.14 %      0.15 %     

Other short-term borrowings

      0.18 %      0.18 %      0.17 %     

Long-term debt

      2.65 %      2.94 %      3.11 %     
  

 

 

    

 

 

    

 

 

      

Total interest-bearing liabilities

      0.57 %      0.59 %      0.73 %     

Ratios:

           

Net interest margin (taxable equivalent)

      3.33 %      3.42 %      3.56 %     

Net interest rate spread (taxable equivalent)

      3.16 %      3.25 %      3.35 %     

Interest-bearing liabilities to interest-earning assets

      68.93 %      70.03 %      71.96 %     

 

27

Fifth Third Bancorp and Subsidiaries

Average Balance Sheet and Yield Analysis

$ in millions, except share data

(unaudited)

 

     Year to Date     % Change  
     June
2013		     June
2012		     Yr/Yr  

Assets

       

Interest-earning assets:

       

Commercial and industrial loans

      37,033        32,095        15 % 

Commercial mortgage loans

      8,801        9,975        (11 %) 

Commercial construction loans

      709        947        (25 %) 

Commercial leases

      3,555        3,507        1 % 

Residential mortgage loans

      14,925        12,994        15 % 

Home equity

      9,748        10,518        (7 %) 

Automobile loans

      11,991        11,819        1 % 

Credit card

      2,070        1,920        8 % 

Other consumer loans and leases

      347        357        (3 %) 

Taxable securities

      15,285        15,430        (1 %) 

Tax exempt securities

      53        61        (13 %) 

Other short-term investments

      1,566        1,461        7 % 
  

 

 

    

 

 

    

 

 

  

Total interest-earning assets

      106,083        101,084        5 % 

Cash and due from banks

      2,292        2,304        (1 %) 

Other assets

      15,108        15,785        (4 %) 

Allowance for loan and lease losses

      (1,815 )      (2,184 )      (17 %) 
  

 

 

    

 

 

    

 

 

  

Total assets

      121,668        116,989        4 % 
  

 

 

    

 

 

    

 

 

  

Liabilities

       

Interest-bearing liabilities:

       

Interest checking

      23,277        22,928        2 % 

Savings

      19,218        22,043        (13 %) 

Money market

      8,428        4,401        92 % 

Foreign office

      1,261        1,799        (30 %) 

Other time

      3,920        4,455        (12 %) 

Certificates—$100,000 and over

      5,275        3,154        67 % 

Other

      25        21        18 % 

Federal funds purchased

      625        389        61 % 

Other short-term borrowings

      4,141        3,782        9 % 

Long-term debt

      7,529        9,719        (23 %) 
  

 

 

    

 

 

    

 

 

  

Total interest-bearing liabilities

      73,699        72,691        —     

Demand deposits

      29,127        26,207        11 % 

Other liabilities

      4,798        4,544        6 % 
  

 

 

    

 

 

    

 

 

  

Total liabilities

      107,624        103,442        4 % 

Equity

      14,044        13,547        4 % 
  

 

 

    

 

 

    

 

 

  

Total liabilities and equity

      121,668        116,989        4 % 
  

 

 

    

 

 

    

 

 

  

Yield Analysis

       

Interest-earning assets:

       

Commercial and industrial loans

      3.74 %      4.16 %      (10 %) 

Commercial mortgage loans

      3.64 %      3.88 %      (6 %) 

Commercial construction loans

      3.32 %      3.05 %      9 % 

Commercial leases

      3.37 %      3.73 %      (10 %) 

Residential mortgage loans

      3.94 %      4.15 %      (5 %) 

Home equity

      3.75 %      3.82 %      (2 %) 

Automobile loans

      3.22 %      3.87 %      (17 %) 

Credit card

      9.82 %      9.67 %      2 % 

Other consumer loans and leases

      42.84 %      41.46 %      3 % 
  

 

 

    

 

 

    

 

 

  

Total loans and leases

      3.97 %      4.30 %      (8 %) 

Taxable securities

      3.04 %      3.58 %      (15 %) 

Tax exempt securities

      5.21 %      5.31 %      (2 %) 

Other short-term investments

      0.25 %      0.25 %      2 % 
  

 

 

    

 

 

    

 

 

  

Total interest-earning assets

      3.78 %      4.13 %      (8 %) 

Interest-bearing liabilities:

       

Interest checking

      0.23 %      0.22 %   

Savings

      0.12 %      0.20 %   

Money market

      0.24 %      0.22 %   

Foreign office

      0.28 %      0.26 %   

Other time

      1.49 %      1.61 %   

Certificates—$100,000 and over

      0.92 %      1.52 %   

Other

      0.12 %      0.11 %   

Federal funds purchased

      0.13 %      0.13 %   

Other short-term borrowings

      0.18 %      0.15 %   

Long-term debt

      2.79 %      3.26 %   
  

 

 

    

 

 

    

Total interest-bearing liabilities

      0.58 %      0.76 %   

Ratios:

       

Net interest margin (taxable equivalent)

      3.38 %      3.59 %   

Net interest rate spread (taxable equivalent)

      3.20 %      3.37 %   

Interest-bearing liabilities to interest-earning assets

      69.47 %      71.91 %   
  

 

 

    

 

 

    

 

28

Fifth Third Bancorp and Subsidiaries

Average Balance Sheet and Yield Analysis

$ in millions, except share data

(unaudited)

 

     For the Three Months Ended  
     June
2013		     March
2013		     December
2012		     September
2012		     June
2012		  

Assets

           

Interest-earning assets:

           

Commercial and industrial loans

    $ 37,636      $ 36,423      $ 34,311      $ 33,124      $ 32,770   

Commercial mortgage loans

      8,627        8,978        9,209        9,592        9,873   

Commercial construction loans

      717        700        697        751        886   

Commercial leases

      3,553        3,557        3,509        3,483        3,471   

Residential mortgage loans

      14,984        14,866        14,028        13,458        13,059   

Home equity

      9,625        9,872        10,129        10,312        10,430   

Automobile loans

      11,887        12,096        11,944        11,812        11,755   

Credit card

      2,071        2,069        2,029        1,971        1,915   

Other consumer loans and leases

      373        319        324        326        349   

Taxable securities

      15,346        15,224        15,187        15,005        15,548   

Tax exempt securities

      55        51        57        48        62   

Other short-term investments

      1,561        1,571        1,521        1,535        1,558   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total interest-earning assets

      106,435        105,726        102,945        101,417        101,676   

Cash and due from banks

      2,359        2,225        2,442        2,368        2,264   

Other assets

      15,198        15,016        15,468        15,749        15,835   

Allowance for loan and lease losses

      (1,780 )      (1,850 )      (1,912 )      (2,013 )      (2,121 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

    $ 122,212      $ 121,117      $ 118,943      $ 117,521      $ 117,654   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Liabilities

           

Interest-bearing liabilities:

           

Interest checking

    $ 22,796      $ 23,763      $ 23,556      $ 22,967      $ 23,548   

Savings

      18,864        19,576        20,216        21,283        22,143   

Money market

      8,918        7,932        6,026        4,776        4,258   

Foreign office

      1,418        1,102        1,174        1,345        1,321   

Other time

      3,859        3,982        4,094        4,224        4,359   

Certificates—$100,000 and over

      6,519        4,017        3,084        3,016        3,130   

Other

      10        40        32        32        23   

Federal funds purchased

      560        691        794        664        408   

Other short-term borrowings

      2,867        5,429        4,553        4,856        4,303   

Long-term debt

      7,552        7,506        7,891        8,863        9,669   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total interest-bearing liabilities

      73,363        74,038        71,420        72,026        73,162   

Demand deposits

      29,682        28,565        29,223        27,127        26,351   

Other liabilities

      4,908        4,687        4,394        4,430        4,462   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total liabilities

      107,953        107,290        105,037        103,583        103,975   

Equity

      14,259        13,827        13,906        13,938        13,679   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total liabilities and equity

    $ 122,212      $ 121,117      $ 118,943      $ 117,521      $ 117,654   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Yield Analysis

           

Interest-earning assets:

           

Commercial and industrial loans

      3.58 %      3.90 %      4.01 %      4.08 %      4.13 % 

Commercial mortgage loans

      3.65 %      3.63 %      3.69 %      3.76 %      3.81 % 

Commercial construction loans

      3.41 %      3.21 %      3.01 %      2.83 %      3.05 % 

Commercial leases

      3.36 %      3.38 %      3.42 %      3.62 %      3.68 % 

Residential mortgage loans

      3.91 %      3.98 %      3.94 %      4.03 %      4.12 % 

Home equity

      3.76 %      3.74 %      3.72 %      3.78 %      3.80 % 

Automobile loans

      3.16 %      3.29 %      3.46 %      3.61 %      3.76 % 

Credit card

      9.97 %      9.67 %      9.96 %      9.82 %      9.92 % 

Other consumer loans and leases

      39.49 %      46.77 %      50.06 %      49.00 %      42.87 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total loans and leases

      3.89 %      4.04 %      4.13 %      4.21 %      4.26 % 

Taxable securities

      3.09 %      2.98 %      3.23 %      3.41 %      3.48 % 

Tax exempt securities

      5.01 %      5.44 %      2.91 %      3.29 %      5.02 % 

Other short-term investments

      0.24 %      0.26 %      0.28 %      0.25 %      0.24 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total interest-earning assets

      3.73 %      3.84 %      3.94 %      4.03 %      4.08 % 

Interest-bearing liabilities:

           

Interest checking

      0.23 %      0.23 %      0.22 %      0.21 %      0.22 % 

Savings

      0.12 %      0.13 %      0.14 %      0.15 %      0.19 % 

Money market

      0.24 %      0.24 %      0.23 %      0.22 %      0.22 % 

Foreign office

      0.29 %      0.26 %      0.27 %      0.29 %      0.27 % 

Other time

      1.48 %      1.50 %      1.54 %      1.59 %      1.60 % 

Certificates—$100,000 and over

      0.82 %      1.09 %      1.39 %      1.49 %      1.50 % 

Other

      0.08 %      0.13 %      0.14 %      0.13 %      0.13 % 

Federal funds purchased

      0.11 %      0.14 %      0.16 %      0.13 %      0.15 % 

Other short-term borrowings

      0.18 %      0.18 %      0.21 %      0.19 %      0.17 % 

Long-term debt

      2.65 %      2.94 %      3.19 %      2.97 %      3.11 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total interest-bearing liabilities

      0.57 %      0.59 %      0.65 %      0.67 %      0.73 % 

Ratios:

           

Net interest margin (taxable equivalent)

      3.33 %      3.42 %      3.49 %      3.56 %      3.56 % 

Net interest rate spread (taxable equivalent)

      3.16 %      3.25 %      3.29 %      3.36 %      3.35 % 

Interest-bearing liabilities to interest-earning assets

      68.93 %      70.03 %      69.38 %      71.02 %      71.96 % 

 

29

Fifth Third Bancorp and Subsidiaries

Summary of Loans and Leases

$ in millions

(unaudited)

 

     For the Three Months Ended  
     June
2013		      March
2013		      December
2012		      September
2012		      June
2012		  

Average Loans and Leases

               

Commercial:

               

Commercial and industrial loans

    $ 37,630       $ 36,395       $ 34,301       $ 33,111       $ 32,734   

Commercial mortgage loans

      8,618         8,965         9,193         9,567         9,810   

Commercial construction loans

      713         695         686         742         873   

Commercial leases

      3,552         3,556         3,509         3,481         3,469   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Subtotal—commercial

      50,513         49,611         47,689         46,901         46,886   

Consumer:

               

Residential mortgage loans

      12,260         12,096         11,846         11,578         11,274   

Home equity

      9,625         9,872         10,129         10,312         10,430   

Automobile loans

      11,887         11,961         11,944         11,812         11,755   

Credit card

      2,071         2,069         2,029         1,971         1,915   

Other consumer loans and leases

      351         294         306         314         326   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Subtotal—consumer

      36,194         36,292         36,254         35,987         35,700   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total average loans and leases (excluding held for sale)

    $ 86,707       $ 85,903       $ 83,943       $ 82,888       $ 82,586   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Average loans held for sale

      2,766         2,977         2,237         1,941         1,922   

End of Period Loans and Leases

               

Commercial:

               

Commercial and industrial loans

    $ 37,856       $ 36,757       $ 36,038       $ 33,344       $ 32,612   

Commercial mortgage loans

      8,443         8,766         9,103         9,348         9,662   

Commercial construction loans

      754         694         698         672         822   

Commercial leases

      3,567         3,568         3,549         3,549         3,467   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Subtotal—commercial

      50,620         49,785         49,388         46,913         46,563   

Consumer:

               

Residential mortgage loans

      12,400         12,091         12,017         11,708         11,429   

Home equity

      9,531         9,727         10,018         10,238         10,377   

Automobile loans

      12,015         11,741         11,972         11,912         11,739   

Credit card

      2,114         2,043         2,097         1,994         1,943   

Other consumer loans and leases

      352         289         290         294         308   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Subtotal—consumer

      36,412         35,891         36,394         36,146         35,796   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total portfolio loans and leases

    $ 87,032       $ 85,676       $ 85,782       $ 83,059       $ 82,359   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Core business activity

      2,134         2,672         2,910         1,758         1,803   

Portfolio management activity

      14         19         29         44         60   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total loans held for sale

      2,148         2,691         2,939         1,802         1,863   

Operating lease equipment

      645         598         581         542         511   

Loans and Leases Serviced for Others: (a)

               

Commercial and industrial loans

      748         757         721         783         682   

Commercial mortgage loans

      293         334         325         324         319   

Commercial construction loans

      39         28         29         39         41   

Commercial leases

      179         184         179         180         184   

Residential mortgage loans

      67,160         64,768         62,465         62,428         61,631   

Automobile loans

      448         489         —           —           —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total loans and leases serviced for others

      68,867         66,560         63,719         63,754         62,857   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total loans and leases serviced

    $ 158,692       $ 155,525       $ 153,021       $ 149,157       $ 147,590   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

(a) Fifth Third sells certain loans and leases and obtains servicing responsibilities

 

30

Fifth Third Bancorp and Subsidiaries

Regulatory Capital (a)

$ in millions

(unaudited)

 

     As of  
     June
2013		     March
2013		     December
2012		     September
2012		     June
2012		  

Tier I capital:

           

Bancorp shareholders’ equity

      14,251        13,882        13,716        13,718        13,773   

Goodwill and certain other intangibles

      (2,496 )      (2,504 )      (2,499 )      (2,504 )      (2,512 ) 

Unrealized (gains) losses

      (149 )      (333 )      (375 )      (468 )      (454 ) 

Qualifying trust preferred securities

      810        810        810        810        2,248   

Other

      22        23        33        38        38   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total tier I capital

      12,438        11,878        11,685        11,594        13,093   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total risk-based capital:

           

Tier I capital

      12,438        11,878        11,685        11,594        13,093   

Qualifying allowance for credit losses

      1,412        1,379        1,381        1,347        1,342   

Qualifying subordinated notes

      2,264        2,474        2,750        2,836        2,846   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total risk-based capital

      16,114        15,731        15,816        15,777        17,281   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Risk-weighted assets(b)

      112,330        109,626        109,699        106,858        106,398   

Ratios:

           

Average shareholders’ equity to average assets

      11.64 %      11.38 %      11.65 %      11.82 %      11.58 % 

Regulatory capital:

           

Fifth Third Bancorp

           

Tier I risk-based capital

      11.07 %      10.83 %      10.65 %      10.85 %      12.31 % 

Total risk-based capital

      14.35 %      14.35 %      14.42 %      14.76 %      16.24 % 

Tier I leverage

      10.41 %      10.03 %      10.05 %      10.09 %      11.39 % 

Tier I common equity

      9.44 %      9.70 %      9.51 %      9.67 %      9.77 % 

Fifth Third Bank

           

Tier I risk-based capital

      11.77 %      11.47 %      11.27 %      12.29 %      12.72 % 

Total risk-based capital

      13.12 %      12.84 %      12.74 %      13.76 %      14.19 % 

Tier I leverage

      11.06 %      10.63 %      10.65 %      11.44 %      11.75 % 

Tier I common equity

      11.77 %      11.47 %      11.28 %      12.29 %      12.72 % 

 

(a) Current period regulatory capital data and ratios are estimated.
(b) Under the banking agencies’ risk-based capital guidelines, assets and credit equivalent amounts of derivatives and off-balance sheet exposures are assigned to broad risk categories. The aggregate dollar amount in each risk category is multiplied by the associated risk weight of the category. The resulting weighted values are added together resulting in the Bancorp’s total risk weighted assets.

 

31

Fifth Third Bancorp and Subsidiaries

Summary of Credit Loss Experience

$ in millions

(unaudited)

 

     For the Three Months Ended  
     June     March     December     September     June  
     2013     2013     2012     2012     2012  

Average loans and leases (excluding held for sale):

           

Commercial and industrial loans

      $37,630        $36,395        $34,301        $33,111        $32,734   

Commercial mortgage loans

      8,618        8,965        9,193        9,567        9,810   

Commercial construction loans

      713        695        686        742        873   

Commercial leases

      3,552        3,556        3,509        3,481        3,469   

Residential mortgage loans

      12,260        12,096        11,846        11,578        11,274   

Home equity

      9,625        9,872        10,129        10,312        10,430   

Automobile loans

      11,887        11,961        11,944        11,812        11,755   

Credit card

      2,071        2,069        2,029        1,971        1,915   

Other consumer loans and leases

      351        294        306        314        326   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total average loans and leases (excluding held for sale)

      $86,707        $85,903        $83,943        $82,888        $82,586   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Losses charged off:

           

Commercial and industrial loans

      ($42 )      ($35 )      ($43 )      ($39 )      ($53 ) 

Commercial mortgage loans

      (15 )      (29 )      (23 )      (32 )      (28 ) 

Commercial construction loans

      —         (4 )      (4 )      (4 )      (6 ) 

Commercial leases

      (2 )      —         —         (1 )      (8 ) 

Residential mortgage loans

      (18 )      (22 )      (25 )      (28 )      (38 ) 

Home equity

      (27 )      (34 )      (38 )      (41 )      (43 ) 

Automobile loans

      (11 )      (12 )      (14 )      (13 )      (13 ) 

Credit card

      (23 )      (23 )      (22 )      (21 )      (24 ) 

Other consumer loans and leases

      (7 )      (9 )      (8 )      (9 )      (6 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total losses

      (145 )      (168 )      (177 )      (188 )      (219 ) 

Recoveries of losses previously charged off:

           

Commercial and industrial loans

      9        10        7        10        7   

Commercial mortgage loans

      5        3        6        4        3   

Commercial construction loans

      —         1        —         —         6   

Commercial leases

      —         —         1        —         1   

Residential mortgage loans

      3        2        2        2        2   

Home equity

      4        4        4        4        4   

Automobile loans

      6        8        5        6        6   

Credit card

      4        3        3        3        6   

Other consumer loans and leases

      2        4        2        3        3   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total recoveries

      33        35        30        32        38   

Net losses charged off:

           

Commercial and industrial loans

      (33 )      (25 )      (36 )      (29 )      (46 ) 

Commercial mortgage loans

      (10 )      (26 )      (17 )      (28 )      (25 ) 

Commercial construction loans

      —         (3 )      (4 )      (4 )      —    

Commercial leases

      (2 )      —         1        (1 )      (7 ) 

Residential mortgage loans

      (15 )      (20 )      (23 )      (26 )      (36 ) 

Home equity

      (23 )      (30 )      (34 )      (37 )      (39 ) 

Automobile loans

      (5 )      (4 )      (9 )      (7 )      (7 ) 

Credit card

      (19 )      (20 )      (19 )      (18 )      (18 ) 

Other consumer loans and leases

      (5 )      (5 )      (6 )      (6 )      (3 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total net losses charged off

      ($112 )      ($133 )      ($147 )      ($156 )      ($181 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net charge-off ratios:

           

Commercial and industrial loans

      0.35 %      0.28 %      0.42 %      0.36 %      0.57 % 

Commercial mortgage loans

      0.50 %      1.18 %      0.70 %      1.15 %      1.04 % 

Commercial construction loans

      (0.04 %)      1.44 %      1.91 %      2.29 %      (0.12 %) 

Commercial leases

      0.18 %      0.03 %      (0.08 %)      0.11 %      0.87 % 

Residential mortgage loans

      0.48 %      0.69 %      0.77 %      0.90 %      1.28 % 

Home equity

      0.96 %      1.23 %      1.36 %      1.43 %      1.50 % 

Automobile loans

      0.16 %      0.16 %      0.27 %      0.22 %      0.21 % 

Credit card

      3.68 %      3.82 %      3.71 %      3.49 %      3.78 % 

Other consumer loans and leases

      5.02 %      6.61 %      9.83 %      9.11 %      3.95 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total net charge-off ratio

      0.51 %      0.63 %      0.70 %      0.75 %      0.88 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

32

Fifth Third Bancorp and Subsidiaries

Asset Quality

$ in millions

(unaudited)

 

    

 

     For the Three Months Ended  
     June     March     December     September     June  
     2013     2013     2012     2012     2012  

Allowance for Credit Losses

           

Allowance for loan and lease losses, beginning

    $ 1,783      $ 1,854      $ 1,925      $ 2,016      $ 2,126   

Total net losses charged off

      (112 )      (133 )      (147 )      (156 )      (181 ) 

Provision for loan and lease losses

      64        62        76        65        71   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Allowance for loan and lease losses, ending

    $ 1,735      $ 1,783      $ 1,854      $ 1,925      $ 2,016   

Reserve for unfunded commitments, beginning

    $ 168      $ 179      $ 176      $ 178      $ 179   

Provision for unfunded commitments

      (2 )      (11 )      3        (2 )      (1 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Reserve for unfunded commitments, ending

    $ 166      $ 168      $ 179      $ 176      $ 178   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Components of allowance for credit losses:

           

Allowance for loan and lease losses

    $ 1,735      $ 1,783      $ 1,854      $ 1,925      $ 2,016   

Reserve for unfunded commitments

      166        168        179        176        178   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total allowance for credit losses

    $ 1,901      $ 1,951      $ 2,033      $ 2,101      $ 2,194   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Nonperforming Assets and Delinquent Loans

           

Nonaccrual portfolio loans and leases:

           

Commercial and industrial loans

    $ 274      $ 229      $ 234      $ 309      $ 377   

Commercial mortgage loans

      169        184        215        263        357   

Commercial construction loans

      39        66        70        76        99   

Commercial leases

      1        1        1        5        3   

Residential mortgage loans

      96        110        114        126        135   

Home equity

      28        28        30        29        30   

Automobile loans

      —           —           —           —           1   

Other consumer loans and leases

      —           —           1        —           —      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total nonaccrual portfolio loans and leases

      607        618        665        808        1,002   

Restructured loans and leases—commercial (nonaccrual)

      140        159        177        153        147   

Restructured loans and leases—consumer (nonaccrual)

      162        174        187        192        193   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total nonperforming portfolio loans and leases

      909        951        1,029        1,153        1,342   

Repossessed property

      6        7        8        10        9   

Other real estate owned (b)

      235        252        249        283        268   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total nonperforming assets (a)

      1,150        1,210        1,286        1,446        1,619   

Nonaccrual loans held for sale

      15        16        25        38        55   

Restructured loans—commercial (nonaccrual) held for sale

      —           3        4        5        5   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total nonperforming assets including loans held for sale

    $ 1,165      $ 1,229      $ 1,315      $ 1,489      $ 1,679   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Restructured portfolio consumer loans and leases (accrual)

    $ 1,671      $ 1,683      $ 1,655      $ 1,641      $ 1,634   

Restructured portfolio commercial loans and leases (accrual)

    $ 475      $ 441      $ 431      $ 442      $ 455   

Ninety days past due loans and leases:

           

Commercial and industrial loans

    $ —         $ 1      $ 1      $ 1      $ 2   

Commercial mortgage loans

      —           —           22        22        22   

Commercial construction loans

      —           —           1        —           —      

Commercial leases

      —           —           —           —           —      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total commercial loans and leases

      —           1        24        23        24   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Residential mortgage loans

      71        74        75        76        80   

Home equity

      48        53        58        65        67   

Automobile loans

      6        7        8        9        8   

Credit card

      27        29        30        28        24   

Other consumer loans and leases

      —           —           —           —           —      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total consumer loans and leases

      152        163        171        178        179   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total ninety days past due loans and leases

    $ 152      $ 164      $ 195      $ 201      $ 203   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ratios

           

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

      0.51 %      0.63 %      0.70 %      0.75 %      0.88 % 

Allowance for loan and lease losses:

           

As a percent of loans and leases

      1.99 %      2.08 %      2.16 %      2.32 %      2.45 % 

As a percent of nonperforming loans and leases (a)

      191 %      187 %      180 %      167 %      150 % 

As a percent of nonperforming assets (a)

      151 %      147 %      144 %      133 %      125 % 

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

      1.04 %      1.11 %      1.19 %      1.38 %      1.62 % 

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

      1.32 %      1.41 %      1.49 %      1.73 %      1.96 % 

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

      1.30 %      1.39 %      1.48 %      1.75 %      1.99 % 

 

(a) Does not include nonaccrual loans held for sale
(b) Excludes OREO related to government insured loans

 

33

Fifth Third Bancorp and Subsidiaries

Regulation G Non-GAAP Reconciliation

$ and shares in millions

(unaudited)

 

     For the Three Months Ended  
     June     March     December     September     June  
     2013     2013     2012     2012     2012  

Income before income taxes (U.S. GAAP)

    $ 859      $ 591      $ 540      $ 503      $ 565   

Add: Provision expense (U.S. GAAP)

      64        62        76        65        71   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-provision net revenue

      923        653        616        568        636   

Net income available to common shareholders (U.S. GAAP)

      594        413        390        354        376   

Add: Intangible amortization, net of tax

      1        1        2        2        2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Tangible net income available to common shareholders

      595        414        392        356        378   

Tangible net income available to common shareholders (annualized) (a)

      2,387        1,679        1,559        1,416        1,520   

Average Bancorp shareholders’ equity (U.S. GAAP)

      14,221        13,779        13,855        13,887        13,628   

Less: Average preferred stock

      (717 )      (398 )      (398 )      (398 )      (398 ) 

Average goodwill

      (2,416 )      (2,416 )      (2,417 )      (2,417 )      (2,417 ) 

Average intangible assets

      (24 )      (26 )      (28 )      (31 )      (34 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Average tangible common equity (b)

      11,064        10,939        11,012        11,041        10,779   

Total Bancorp shareholders’ equity (U.S. GAAP)

      14,251        13,882        13,716        13,718        13,773   

Less: Preferred stock

      (991 )      (398 )      (398 )      (398 )      (398 ) 

Goodwill

      (2,416 )      (2,416 )      (2,416 )      (2,417 )      (2,417 ) 

Intangible assets

      (23 )      (25 )      (27 )      (30 )      (33 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Tangible common equity, including unrealized gains / losses (c)

      10,821        11,043        10,875        10,873        10,925   

Less: Accumulated other comprehensive income

      (149 )      (333 )      (375 )      (468 )      (454 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Tangible common equity, excluding unrealized gains / losses (d)

      10,672        10,710        10,500        10,405        10,471   

Add: Preferred stock

      991        398        398        398        398   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Tangible equity (e)

      11,663        11,108        10,898        10,803        10,869   

Total assets (U.S. GAAP)

      123,360        121,382        121,894        117,483        117,543   

Less: Goodwill

      (2,416 )      (2,416 )      (2,416 )      (2,417 )      (2,417 ) 

Intangible assets

      (23 )      (25 )      (27 )      (30 )      (33 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Tangible assets, including unrealized gains / losses (f)

      120,921        118,941        119,451        115,036        115,093   

Less: Accumulated other comprehensive income / loss, before tax

      (229 )      (512 )      (577 )      (720 )      (698 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Tangible assets, excluding unrealized gains / losses (g)

      120,692        118,429        118,874        114,316        114,395   

Total Bancorp shareholders’ equity (U.S. GAAP)

      14,251        13,882        13,716        13,718        13,773   

Goodwill and certain other intangibles

      (2,496 )      (2,504 )      (2,499 )      (2,504 )      (2,512 ) 

Unrealized gains

      (149 )      (333 )      (375 )      (468 )      (454 ) 

Qualifying trust preferred securities

      810        810        810        810        2,248   

Other

      22        23        33        38        38   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Tier I capital

      12,438        11,878        11,685        11,594        13,093   

Less: Preferred stock

      (991 )      (398 )      (398 )      (398 )      (398 ) 

Qualifying trust preferred securities

      (810 )      (810 )      (810 )      (810 )      (2,248 ) 

Qualifying noncontrolling interests in consolidated subsidiaries

      (38 )      (38 )      (48 )      (51 )      (51 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Tier I common equity (h)

      10,599        10,632        10,429        10,335        10,396   

Common shares outstanding (i)

      851        875        882        897        919   

Risk-weighted assets, determined in accordance with prescribed regulatory requirements (j)

      112,330        109,626        109,699        106,858        106,398   

Ratios:

           

Return on average tangible common equity (a) / (b)

      21.6 %      15.4 %      14.1 %      12.8 %      14.1 % 

Tangible equity (e) / (g)

      9.65 %      9.36 %      9.17 %      9.45 %      9.50 % 

Tangible common equity (excluding unrealized gains/losses) (d) / (g)

      8.83 %      9.03 %      8.83 %      9.10 %      9.15 % 

Tangible common equity (including unrealized gains/losses) (c) / (f)

      8.95 %      9.28 %      9.10 %      9.45 %      9.49 % 

Tangible common equity as a percent of risk-weighted assets

           

(excluding unrealized gains/losses) (d) / (j)

      9.50 %      9.77 %      9.57 %      9.74 %      9.84 % 

Tangible book value per share (c) / (i)

    $ 12.71      $ 12.62      $ 12.33      $ 12.12      $ 11.89   

Tier I common equity (h) / (j)

      9.44 %      9.70 %      9.51 %      9.67 %      9.77 % 

Basel III-Estimated Tier I common equity ratio

           
     June
2013		                          

Tier I common equity (Basel I)

      10,599           

Add: Adjustment related to capital components

      86           
  

 

 

          

Estimated Tier I common equity under final Basel III rules without AOCI (opt out) (k)

      10,685           

Add: Adjustment related to AOCI

      149           
  

 

 

          

Estimated Tier I common equity under final Basel III rules with AOCI (non opt out) (l)

      10,834           
  

 

 

          

Estimated risk-weighted assets under final Basel III rules (m)

      117,383           
  

 

 

          

Estimated Tier I common equity ratio under final Basel III rules (opt out) (k) / (m)

      9.10 %         

Estimated Tier I common equity ratio under final Basel III rules (non opt out) (l) / (m)

      9.23 %         

 

(k)(l) Under the final Basel III rules, non-advanced approach banks are permitted to make a one-time election to opt out of the requirement to include AOCI in Tier I common equity. Other adjustments include mortgage servicing rights and deferred tax assets subject to threshold limitations and deferred tax liabilities related to intangible assets.
(m) Key differences under Basel III in the calculation of risk-weighted assets compared to Basel I include: (1) Risk weighting for commitments under 1 year; (2) Higher risk weighting for exposures to past due loans, foreign banks and certain commercial real estate; (3) Higher risk weighting for mortgage servicing rights and deferred tax assets that are under certain thresholds as a percent of Tier I capital; and (4) Derivatives are differentiated between exchange clearing and over-the-counter and the 50% risk-weight cap is removed.

 

34

Fifth Third Bancorp and Subsidiaries

Segment Presentation

$ in millions

(unaudited)

 

For the three months ended June 30, 2013    Commercial
Banking		     Branch
Banking		     Consumer
Lending		     Investment
Advisors		     Other/
Eliminations		     Total  

Net interest income (a)

    $ 366      $ 358      $ 85      $ 35      $ 41      $ 885   

Provision for loan and lease losses

      (37 )      (51 )      (22 )      (1 )      47        (64 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net interest income after provision for loan and lease losses

      329        307        63        34        88        821   

Total noninterest income

      198        216        250        99        297        1,060   

Total noninterest expense

      (279 )      (426 )      (190 )      (123 )      1        (1,017 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income before taxes

      248        97        123        10        386        864   

Applicable income taxes (a)

      (50 )      (35 )      (44 )      (3 )      (129 )      (261 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income

      198        62        79        7        257        603   

Net income attributable to noncontrolling interest

      —          —          —          —          —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income attributable to Bancorp

      198        62        79        7        257        603   

Dividends on preferred stock

      —          —          —          —          9        9   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income available to common shareholders

    $ 198      $ 62      $ 79      $ 7      $ 248      $ 594   
For the three months ended March 31, 2013    Commercial
Banking		     Branch
Banking		     Consumer
Lending		     Investment
Advisors		     Other/
Eliminations		     Total  

Net interest income (a)

    $ 365      $ 347      $ 85      $ 36      $ 60      $ 893   

Provision for loan and lease losses

      (43 )      (58 )      (29 )      (1 )      69        (62 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net interest income after provision for loan and lease losses

      322        289        56        35        129        831   

Total noninterest income

      184        205        229        108        17        743   

Total noninterest expense

      (277 )      (423 )      (177 )      (115 )      14        (978 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income before taxes

      229        71        108        28        160        596   

Applicable income taxes (a)

      (44 )      (26 )      (38 )      (10 )      (66 )      (184 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income

      185        45        70        18        94        412   

Net income attributable to noncontrolling interest

      —          —          —          —          (10 )      (10 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income attributable to Bancorp

      185        45        70        18        104        422   

Dividends on preferred stock

      —          —          —          —          9        9   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income available to common shareholders

    $ 185      $ 45      $ 70      $ 18      $ 95      $ 413   
For the three months ended December 31, 2012    Commercial
Banking		     Branch
Banking		     Consumer
Lending		     Investment
Advisors		     Other/
Eliminations		     Total  

Net interest income (a)

    $ 386      $ 341      $ 80      $ 31      $ 65      $ 903   

Provision for loan and lease losses

      (42 )      (68 )      (36 )      (1 )      71        (76 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net interest income after provision for loan and lease losses

      344        273        44        30        136        827   

Total noninterest income

      201        214        263        94        108        880   

Total noninterest expense

      (277 )      (393 )      (174 )      (105 )      (214 )      (1,163 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income before taxes

      268        94        133        19        30        544   

Applicable income taxes (a)

      (59 )      (33 )      (47 )      (6 )      (3 )      (148 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income

      209        61        86        13        27        396   

Net income attributable to noncontrolling interest

      —          —          —          —          (3 )      (3 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income attributable to Bancorp

      209        61        86        13        30        399   

Dividends on preferred stock

      —          —          —          —          9        9   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income available to common shareholders

    $ 209      $ 61      $ 86      $ 13      $ 21      $ 390   
For the three months ended September 30, 2012    Commercial
Banking		     Branch
Banking		     Consumer
Lending		     Investment
Advisors		     Other/
Eliminations		     Total  

Net interest income (a)

    $ 358      $ 344      $ 77      $ 30      $ 98      $ 907   

Provision for loan and lease losses

      (45 )      (71 )      (38 )      (3 )      92        (65 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net interest income after provision for loan and lease losses

      313        273        39        27        190        842   

Total noninterest income

      183        203        212        107        (34 )      671   

Total noninterest expense

      (271 )      (405 )      (167 )      (109 )      (54 )      (1,006 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income before taxes

      225        71        84        25        102        507   

Applicable income taxes (a)

      (43 )      (25 )      (30 )      (9 )      (36 )      (143 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income

      182        46        54        16        66        364   

Net income attributable to noncontrolling interest

      —          —          —          —          1        1   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income attributable to Bancorp

      182        46        54        16        65        363   

Dividends on preferred stock

      —          —          —          —          9        9   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income available to common shareholders

    $ 182      $ 46      $ 54      $ 16      $ 56      $ 354   
For the three months ended June 30, 2012    Commercial
Banking		     Branch
Banking		     Consumer
Lending		     Investment
Advisors		     Other/
Eliminations		     Total  

Net interest income (a)

    $ 352      $ 342      $ 77      $ 29      $ 99      $ 899   

Provision for loan and lease losses

      (61 )      (69 )      (49 )      (2 )      110        (71 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net interest income after provision for loan and lease losses

      291        273        28        27        209        828   

Total noninterest income

      177        205        189        98        9        678   

Total noninterest expense

      (269 )      (401 )      (166 )      (112 )      11        (937 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income before taxes

      199        77        51        13        229        569   

Applicable income taxes (a)

      (36 )      (27 )      (18 )      (5 )      (98 )      (184 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income

      163        50        33        8        131        385   

Dividends on preferred stock

      —          —          —          —          9        9   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income available to common shareholders

    $ 163      $ 50      $ 33      $ 8      $ 122      $ 376   

 

(a) Includes taxable equivalent adjustments of $5 million for the three months ended June 30, 2013, $5 million for the three months ended March 31, 2013, $4 million for the three months ended December 31, 2012, $4 million for the three months ended September 30, 2012 and $4 million for the three months ended June 30, 2012.

 

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