Business Segments

9 Months Ended

Sep. 30, 2014

Segment Reporting

Business Segments

23.Business Segments

The Bancorp reports on four business segments: Commercial Banking, Branch Banking, Consumer Lending and Investment Advisors. Results of the Bancorp's business segments are presented based on its management structure and management accounting practices. The structure and accounting practices are specific to the Bancorp; therefore, the financial results of the Bancorp's business segments are not necessarily comparable with similar information for other financial institutions. The Bancorp refines its methodologies from time to time as management's accounting practices and businesses change.

The Bancorp manages interest rate risk centrally at the corporate level by employing an FTP methodology. This methodology insulates the business segments from interest rate volatility, enabling them to focus on serving customers through loan originations and deposit taking. The FTP system assigns charge rates and credit rates to classes of assets and liabilities, respectively, based on expected duration and the U.S. swap curve. Matching duration allocates interest income and interest expense to each segment so its resulting net interest income is insulated from interest rate risk. In a rising rate environment, the Bancorp benefits from the widening spread between deposit costs and wholesale funding costs. However, the Bancorp's FTP system credits this benefit to deposit-providing businesses, such as Branch Banking and Investment Advisors, on a duration-adjusted basis. The net impact of the FTP methodology is captured in General Corporate and Other.

The Bancorp adjusts the FTP charge and credit rates as dictated by changes in interest rates for various interest-earning assets and interest-bearing liabilities and by the review of the estimated durations for the indeterminate-lived deposits. The credit rate provided for demand deposit accounts is reviewed annually based upon the account type, its estimated duration and the corresponding fed funds, U.S. swap curve or swap rate. The credit rates for several deposit products were reset January 1, 2014 to reflect the current market rates and updated market assumptions. These rates weregenerally higher than those in place during 2013, thus net interest income for deposit providing businesses was positively impacted during 2014.

The business segments are charged provision expense based on the actual net charge-offs experienced by the loans and leases owned by each segment. Provision expense attributable to loan and lease growth and changes in ALLL factors are captured in General Corporate and Other. The financial results of the business segments include allocations for shared services and headquarters expenses. Even with these allocations, the financial results are not necessarily indicative of the business segments' financial condition and results of operations as if they existed as independent entities. Additionally, the business segments form synergies by taking advantage of cross-sell opportunities and when funding operations, by accessing the capital markets as a collective unit.

The results of operations and financial position for the three and nine months ended September 30, 2013 were adjusted to reflect the transfer of certain customers and Bancorp employees from Branch Banking to Commercial Banking, effective January 1, 2014. In addition, the prior year balances were adjusted to reflect a change in internal allocation methodology.

The following is a description of each of the Bancorp's business segments, and the products and services they provide to their respective client bases.

Commercial Banking offers credit intermediation, cash management and financial services to large and middle-market businesses and government and professional customers. In addition to the traditional lending and depository offerings, Commercial Banking products and services include global cash management, foreign exchange and international trade finance, derivatives and capital markets services, asset-based lending, real estate finance, public finance, commercial leasing and syndicated finance.

Branch Banking provides a full range of deposit and loan and lease products to individuals and small businesses through 1,308 full-service Banking Centers. Branch Banking offers depository and loan products, such as checking and savings accounts, home equity loans and lines of credit, credit cards and loans for automobiles and other personal financing needs, as well as products designed to meet the specific needs of small businesses, including cash management services.

Consumer Lending includes the Bancorp's mortgage, home equity, automobile and other indirect lending activities. Mortgage and home equity lending activities include the origination, retention and servicing of mortgage, automobile and home equity loans or lines of credit, sales and securitizations of those loans, pools of loans or lines of credit, and all associated hedging activities. Indirect lending activities include extending loans to consumers through correspondent lenders and automobile dealers.

Investment Advisors provides a full range of investment alternatives for individuals, companies and not-for-profit organizations. Investment Advisors is made up of four main businesses: FTS, an indirect wholly-owned subsidiary of the Bancorp; ClearArc Capital, Inc., an indirect wholly-owned subsidiary of the Bancorp; Fifth Third Private Bank; and Fifth Third Institutional Services. FTS offers full service retail brokerage services to individual clients and broker dealer services to the institutional marketplace. ClearArc Capital, Inc. provides asset management services and previously advised the Bancorp's proprietary family of mutual funds. Fifth Third Private Bank offers holistic strategies to affluent clients in wealth planning, investing, insurance and wealth protection. Fifth Third Institutional Services provides advisory services for institutional clients including states and municipalities.

Results of operations and assets by segment for the three and nine months ended September 30, 2014 and 2013 are:
						General
		Commercial	Branch	Consumer	Investment	Corporate
($ in millions)		Banking	Banking	Lending	Advisors	and Other	Eliminations	Total
Three months ended September 30, 2014
Net interest income	$	418	389	64	30	2	-	903
Provision for loan and lease losses		47	50	17	1	(44)	-	71
Net interest income after provision for loan
and lease losses		371	339	47	29	46	-	832
Noninterest income:
Service charges on deposits		72	73	-	-	-	-	145
Corporate banking revenue		98	2	-	-	-	-	100
Investment advisory revenue		1	40	-	101	(1)	(38)(a)	103
Mortgage banking net revenue		-	1	60	-	-	-	61
Card and processing revenue		16	58	-	1	-	-	75
Other noninterest income		31	20	10	-	(28)	-	33
Securities gains, net		-	-	-	-	3	-	3
Securities gains, net - non-qualifying hedges on
mortgage servicing rights		-	-	-	-	-	-	-
Total noninterest income		218	194	70	102	(26)	(38)	520
Noninterest expense:
Salaries, wages and incentives		63	106	23	33	132	-	357
Employee benefits		10	29	7	6	23	-	75
Net occupancy expense		6	47	2	2	21	-	78
Technology and communications		2	1	1	-	49	-	53
Card and processing expense		2	35	-	-	-	-	37
Equipment expense		3	15	-	-	12	-	30
Other noninterest expense		236	160	82	70	(252)	(38)	258
Total noninterest expense		322	393	115	111	(15)	(38)	888
Income before income taxes		267	140	2	20	35	-	464
Applicable income tax expense		50	49	1	7	17	-	124
Net income		217	91	1	13	18	-	340
Less: Net income attributable to noncontrolling interests		-	-	-	-	-	-	-
Net income attributable to Bancorp		217	91	1	13	18	-	340
Dividends on preferred stock		-	-	-	-	12	-	12
Net income available to common shareholders	$	217	91	1	13	6	-	328
Total goodwill	$	613	1,655	-	148	-	-	2,416
Total assets	$	56,496	49,552	22,631	9,856	(4,347)	-	134,188

• Revenue sharing agreements between Investment Advisors and Branch Banking are eliminated in the Condensed Consolidated Statements of Income.

						General
		Commercial	Branch	Consumer	Investment	Corporate
($ in millions)		Banking	Banking	Lending	Advisors	and Other	Eliminations	Total
Three months ended September 30, 2013
Net interest income	$	401	347	76	38	31	-	893
Provision for loan and lease losses		39	50	20	-	(58)	-	51
Net interest income after provision for loan
and lease losses		362	297	56	38	89	-	842
Noninterest income:
Service charges on deposits		67	72	-	1	-	-	140
Corporate banking revenue		100	2	-	1	(1)	-	102
Investment advisory revenue		2	35	-	95	-	(35)(a)	97
Mortgage banking net revenue		-	3	118	-	-	-	121
Card and processing revenue		16	52	-	1	-	-	69
Other noninterest income		31	23	11	1	119	-	185
Securities gains, net		-	-	2	-	-	-	2
Securities gains, net - non-qualifying hedges on
mortgage servicing rights		-	-	5	-	-	-	5
Total noninterest income		216	187	136	99	118	(35)	721
Noninterest expense:
Salaries, wages and incentives		63	106	40	33	147	-	389
Employee benefits		11	29	9	6	28	-	83
Net occupancy expense		6	46	2	2	19	-	75
Technology and communications		4	1	-	-	47	-	52
Card and processing expense		3	30	-	-	-	-	33
Equipment expense		1	15	-	-	13	-	29
Other noninterest expense		226	167	117	66	(243)	(35)	298
Total noninterest expense		314	394	168	107	11	(35)	959
Income before income taxes		264	90	24	30	196	-	604
Applicable income tax expense		48	31	9	10	85	-	183
Net income		216	59	15	20	111	-	421
Less: Net income attributable to noncontrolling interests		-	-	-	-	-	-	-
Net income attributable to Bancorp		216	59	15	20	111	-	421
Dividends on preferred stock		-	-	-	-	-	-	-
Net income available to common shareholders	$	216	59	15	20	111	-	421
Total goodwill	$	613	1,655	-	148	-	-	2,416
Total assets	$	53,212	46,359	23,015	9,182	(6,095)	-	125,673

• Revenue sharing agreements between Investment Advisors and Branch Banking are eliminated in the Condensed Consolidated Statements of Income.

						General
		Commercial	Branch	Consumer	Investment	Corporate
($ in millions)		Banking	Banking	Lending	Advisors	and Other	Eliminations	Total
Nine months ended September 30, 2014
Net interest income	$	1,231	1,152	193	90	31	-	2,697
Provision for loan and lease losses		184	142	55	3	(168)	-	216
Net interest income after provision for loan
and lease losses		1,047	1,010	138	87	199	-	2,481
Noninterest income:
Service charges on deposits		214	202	-	2	-	-	418
Corporate banking revenue		311	3	-	1	(4)	-	311
Investment advisory revenue		2	115	-	300	-	(110)(a)	307
Mortgage banking net revenue		-	3	244	1	-	-	248
Card and processing revenue		48	167	-	3	-	-	218
Other noninterest income		72	43(b)	33	1	151	-	300
Securities gains, net		-	-	-	-	18	-	18
Securities gains, net - non-qualifying hedges on
mortgage servicing rights		-	-	-	-	-	-	-
Total noninterest income		647	533	277	308	165	(110)	1,820
Noninterest expense:
Salaries, wages and incentives		192	316	74	101	400	-	1,083
Employee benefits		38	91	22	21	83	-	255
Net occupancy expense		19	140	6	7	64	-	236
Technology and communications		8	3	2	-	145	-	158
Card and processing expense		6	98	-	-	-	-	104
Equipment expense		7	45	-	-	38	-	90
Other noninterest expense		716	474	341	204	(759)	(110)	866
Total noninterest expense		986	1,167	445	333	(29)	(110)	2,792
Income (loss) before income taxes		708	376	(30)	62	393	-	1,509
Applicable income tax expense (benefit)		114	133	(11)	22	153	-	411
Net income (loss)		594	243	(19)	40	240	-	1,098
Less: Net income attributable to noncontrolling interests		-	-	-	-	2	-	2
Net income (loss) attributable to Bancorp		594	243	(19)	40	238	-	1,096
Dividends on preferred stock		-	-	-	-	44	-	44
Net income (loss) available to common shareholders	$	594	243	(19)	40	194	-	1,052
Total goodwill	$	613	1,655	-	148	-	-	2,416
Total assets	$	56,496	49,552	22,631	9,856	(4,347)	-	134,188

• Revenue sharing agreements between Investment Advisors and Branch Banking are eliminated in the Condensed Consolidated Statements of Income.
• Includes an impairment chargeof $18for branches and land. For more information refer to Note 7 and Note 22 of the Notes to Condensed Consolidated Financial Statements.

						General
		Commercial	Branch	Consumer	Investment	Corporate
($ in millions)		Banking	Banking	Lending	Advisors	and Other	Eliminations	Total
Nine months ended September 30, 2013
Net interest income	$	1,172	1,002	246	109	132	-	2,661
Provision for loan and lease losses		122	156	71	1	(174)	-	176
Net interest income after provision for loan
and lease losses		1,050	846	175	108	306	-	2,485
Noninterest income:
Service charges on deposits		198	207	-	2	-	-	407
Corporate banking revenue		300	5	-	2	-	-	307
Investment advisory revenue		4	110	-	289	-	(108)(a)	295
Mortgage banking net revenue		-	10	563	1	-	-	574
Card and processing revenue		46	152	-	3	-	-	201
Other noninterest income		71	66	37	8	526	-	708
Securities gains, net		-	-	2	-	17	-	19
Securities gains, net - non-qualifying hedges on
mortgage servicing rights		-	-	13	-	-	-	13
Total noninterest income		619	550	615	305	543	(108)	2,524
Noninterest expense:
Salaries, wages and incentives		195	321	148	100	429	-	1,193
Employee benefits		40	93	34	20	93	-	280
Net occupancy expense		19	137	6	7	61	-	230
Technology and communications		8	3	1	-	139	-	151
Card and processing expense		6	91	-	-	-	-	97
Equipment expense		3	43	1	-	38	-	85
Other noninterest expense		640	488	366	217	(667)	(108)	936
Total noninterest expense		911	1,176	556	344	93	(108)	2,972
Income before income taxes		758	220	234	69	756	-	2,037
Applicable income tax expense		130	77	83	24	299	-	613
Net income		628	143	151	45	457	-	1,424
Less: Net income attributable to noncontrolling interests		-	-	-	-	(9)	-	(9)
Net income attributable to Bancorp		628	143	151	45	466	-	1,433
Dividends on preferred stock		-	-	-	-	18	-	18
Net income available to common shareholders	$	628	143	151	45	448	-	1,415
Total goodwill	$	613	1,655	-	148	-	-	2,416
Total assets	$	53,212	46,359	23,015	9,182	(6,095)	-	125,673

• Revenue sharing agreements between Investment Advisors and Branch Banking are eliminated in the Condensed Consolidated Statements of Income.