Exhibit 99.1
[LOGO] FIFTH THIRD BANCORP
News Release
| CONTACT: | | Neal E. Arnold, CFO (Analysts) (513) 579-4356 Bradley S. Adams, IR (Analysts) (513) 534-0983 Roberta R. Jennings (Media) (513) 579-4153 | | FOR IMMEDIATE RELEASE July 15, 2003 |
FIFTH THIRD BANCORP REPORTS 10 PERCENT INCREASE IN
SECOND QUARTER EARNINGS PER SHARE
Fifth Third Bancorp’s second quarter earnings per diluted share were $.75, an increase of 10 percent over $.68 per diluted share for the same period in 2002. Second quarter net income totaled $437,488,000, an eight percent increase over second quarter 2002’s net income of $404,077,000. Second quarter return on average assets (ROA) and return on average equity (ROE) were 2.02 percent and 19.9 percent, respectively, compared to 2.20 percent and 20.2 percent in 2002’s second quarter. Fifth Third continues to maintain its commitment to a strong, flexible balance sheet evidenced by the second quarter 2003 capital ratio of 10.19 percent.
“We are extremely pleased to deliver solid financial results in a challenging environment,” stated George A. Schaefer, Jr., President and CEO. “Earnings this quarter were highlighted by very strong loan growth throughout all of our markets, a stable net interest margin and credit quality that remains among the best in the industry. Our sales results this quarter are particularly gratifying given the concerns for a meaningful rebound in business activity and the difficulties presented by the lowest interest rates in 45 years. In times like these, our people truly make the difference and I would like to thank all of our employees for their hard work in attracting new relationships and delivering superior service to all of our customers.”
“In June, Fifth Third’s Board of Directors increased the quarterly cash dividend by 26 percent over the same period last year and 12 percent over the cash dividend declared last quarter. This quarter’s dividend increase illustrates the importance we place on delivering shareholder value and follows our last dividend increase only nine months ago—a pattern we have consistently followed over the years. We have always worked diligently to deliver solid investment returns to our shareholders.”
“In March of this year, Fifth Third signed a Written Agreement with the Federal Reserve Bank of Cleveland and the State of Ohio, Department of Commerce to address and strengthen risk management processes and internal controls. We are continuing to work very hard and are making excellent progress in these areas. Fifth Third is committed to building a comprehensive enterprise-wide risk management function that compliments our local market operating model and allows us to effectively navigate in today’s business environment. We believe these improvements in our infrastructure will better prepare us as we become a larger and more complex company.”
Very Strong Loan and Deposit Growth, Balance Sheet Trends
Loan and lease demand exhibited very strong growth with average loans and leases increasing 12 percent on an annualized sequential basis and 13 percent over the same quarter last year. Better than expected middle- market and small business commercial loan originations and continued strength in direct installment lending highlight the second quarter balance sheet growth. Period-end commercial loan and lease balances increased by $960 million from last quarter, or 15 percent on an annualized sequential basis, on the strength of new customer additions and strong sales results in Cleveland, Chicago, Indianapolis and Detroit and modest increases in existing commercial line of credit utilization percentages across the footprint. Direct installment loan originations remained very strong and totaled $2.0 billion in the second quarter, compared to $1.7 billion last quarter, with balances increasing by 17 percent over the second quarter of last year and 25 percent on an annualized sequential basis. Fifth Third is continuing to devote significant focus on producing banking center based loan originations given the strong credit performance and attractive yields available in these products.
Commercial customer additions and retail sales momentum in most of our markets resulted in a surprisingly strong quarter of deposit growth for Fifth Third. Average interest checking balances and average demand deposit balances each increased 16 percent compared to last year’s second quarter with average transaction account balances as a whole increasing 14 percent over the same quarter last year. Despite better equity market performance during the quarter, average demand deposits and interest checking balances increased by 22 percent and seven percent on an annualized sequential basis, respectively.
Net interest income on a fully-taxable equivalent basis increased nine percent over the same quarter last year due to strong earning asset growth and despite a 38 basis point (bp) decrease in net interest margin. Sequentially, net interest income on a fully-taxable equivalent basis increased by 18 percent on an annualized basis despite a five bp decline in net interest margin. The net interest margin has contracted in recent periods due to the absolute level of interest rates and the impact of higher origination volumes at lower market rates of interest. Overall, earning assets are continuing to reprice at lower market rates of interest with increased prepayment activity resulting in shorter asset durations and considerable cash flows from various asset classes. Although prepayments, sales and subsequent reinvestment of high coupon mortgage-backed securities contributed to the decrease in the net interest margin relative to last quarter, these actions serve to stabilize near and intermediate term net interest income performance trends and maintain Fifth Third’s posture with regard to Board approved interest rate risk policy limits. Fifth Third expects that margin and net interest income trends in coming periods will depend upon the magnitude of loan demand, the speed of any interest rate changes and the magnitude of compression between margin and spread.
Fifth Third repurchased approximately 5.8 million shares of its common stock for a total of approximately $329 million in the second quarter of 2003. As of June 30, 2003, the authority under the repurchase plan approved by the Board of Directors in December 2001 had been completed with an additional 19.2 million shares remaining under a plan authorizing the repurchase of up to 20 million shares approved by the Board of Directors in March 2003.
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Other Operating Income Advances 22 Percent
Recent strong business line revenue growth trends continued in the second quarter with total other operating income up 22 percent over the same quarter last year.
Fifth Third Processing Solutions, our Electronic Payment Processing subsidiary, delivered a 16 percent increase in revenues over the second quarter of last year. Comparisons to prior periods are impacted by a slowdown in transaction volume growth rates on the existing customer base reflective of current economic conditions and sluggish growth in the retail sector of the economy. Fifth Third Processing Solutions continues to realize strong sales momentum from the addition of new customer relationships in both its Merchant Services and Electronic Funds Transfer (EFT) businesses. Significant new processing customers welcomed thus far in 2003 include, among others, T.G.I. Friday’s®, La Quinta Corporation, GNC Nutrition Centers, National Commerce Financial Corporation and May’s Drug Stores, Inc. Fifth Third Processing Solutions now handles electronic processing for over 189,000 merchant locations and 1,400 financial institutions worldwide.
Successful sales of retail and commercial deposit accounts and corporate treasury management products fueled increases in deposit service revenues of 14 percent over the same quarter last year. The second quarter increase was highlighted by a 14 percent increase in retail deposit based revenues and a 14 percent increase in commercial deposit based revenues over the same quarter last year on the strength of Fifth Third’s continuing focus on cross-sell initiatives, new customer relationships and the benefit of a lower interest rate environment.
Mortgage net service revenue totaled $92.8 million in the second quarter compared to $76.8 million last quarter and $10.2 million in 2002’s second quarter. Inclusive of net realized securities gains/losses resulting from sales from a portfolio established to hedge against volatility related to the value of mortgage servicing rights, mortgage net service revenue in the second quarter totaled $94.6 million compared to $77.9 million last quarter and $45.8 million in 2002’s second quarter. Mortgage originations totaled $4.9 billion in the second quarter versus $4.3 billion last quarter and $2.0 billion in the second quarter of last year. Fifth Third does not expect the current low-rate environment to continue in the long-term at which time the contribution of mortgage banking to total revenues will decline. Second quarter mortgage net service revenue was comprised of $136.3 million in total mortgage banking fees and loan sales, plus $1.8 million of gains on the sale of balance sheet securities from a portfolio established to hedge against volatility related to the value of mortgage servicing rights, plus $28.7 million of gains and mark-to-market adjustments on both settled and outstanding free-standing derivative financial instruments and less $72.2 million in net valuation adjustments and amortization on mortgage servicing rights. The sale of balance sheet securities, mark-to-market adjustments and settlement of free-standing derivative financial instruments and corresponding valuation adjustments resulted from movements in interest rates and the anticipated level of prepayment speeds on the mortgage servicing portfolio. Recent period increases in gains and mark-to-market adjustments on free standing derivatives have resulted from the increased use of free-standing derivatives rather than available-for-sale securities as part of Fifth Third’s overall hedging strategy. The mortgage servicing asset, net of the valuation reserve, is $244.4 million at June 30, 2003, compared to $248.6 million last quarter and $414.5 million a year ago.
Investment Advisory revenues declined seven percent from the same quarter last year but increased 17 percent on an annualized basis from last quarter. The decrease in service revenue compared to the year ago quarter resulted primarily from market value declines mitigated in part by stronger institutional and private client asset management
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sales. As equity market valuations continue to build upon recent momentum, revenue contributions from institutional and private client are expected to continue to increase. Fifth Third continues to focus its sales efforts on integrating services across business lines and working closely with retail and commercial team members to take advantage of a diverse and expanding customer base. Fifth Third Investment Advisors, among the largest money managers in the Midwest, has $31 billion in assets under management and $188 billion in assets under care.
Other service charges and fee revenue totaled $139.2 million in the second quarter, a one percent decline from the second quarter last year and a 12 percent decline from last quarter. Compared to the second quarter of last year, commercial banking revenues increased 12 percent, institutional fixed income trading and sales revenues increased 44 percent, cardholder fee revenue increased 22 percent and insurance revenue decreased 48 percent due to the fourth quarter 2002 sale of the property and casualty insurance agency product line operations. Other service charges and fee revenue comparisons to last quarter are impacted by seasonality factors in various revenue categories and the impact of prepayments on loan fees.
Operating Expenses
Second quarter operating expenses increased 15 percent over the same period last year and 11 percent on an annualized basis from last quarter. Comparisons to prior year periods are impacted by implications of growth in all of our markets and increases in spending related to the expansion and improvement of our sales force, growth of the retail banking platform, continuing investment in support personnel, process improvement, technology and infrastructure to support recent and future growth, increasing insurance and other employee benefit expenses and expenses related to certain third party consultant reviews. Third party consultant reviews of reconciliation activities and process evaluations associated with the March 26, 2003 Written Agreement entered into by Fifth Third Bancorp, the Federal Reserve Bank of Cleveland and the State of Ohio, Department of Commerce, Division of Financial Institutions resulted in approximately $12.6 million in incremental expenses in the second quarter. Fifth Third expects third-party consultant expenses will return to more normalized levels for the remainder of 2003. Second quarter operating expenses are also impacted by a charge of $20.1 million related to the early retirement of approximately $200 million of Federal Home Loan Bank advances. Fifth Third continues to explore additional alternatives regarding the level and cost of various other sources of funds. Fifth Third’s second quarter efficiency ratio stands at 43.5 percent compared to 44.5 percent last quarter and 43.5 percent in the second quarter of last year.
Fifth Third has concluded the review of the treasury clearing and other related settlement accounts that gave rise to the $82 million pre-tax ($53 million after-tax) charge-off realized in the third quarter of 2002. Fifth Third has expended considerable effort and internal resources and employed significant external resources with expertise in treasury operations in the review and reconstruction of these accounts as well as in the validation of the results. The conclusion of this process in the second quarter of 2003 has identified a $30.8 million pre-tax ($20.1 million after-tax) recovery, realized as a credit to other operating expenses. Based on activities performed by Fifth Third and independent third-party experts, including the completion of a third party review of all Bancorp account reconciliations, Fifth Third has concluded that there is no additional financial liability or additional recovery relating to these treasury clearing and other related settlement accounts.
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Credit Quality
Credit quality metrics and trends were relatively stable in the second quarter with net charge-offs increasing by $12.8 million and nonaccrual loans and leases decreasing by $4.2 million from last quarter. Overall, the level of nonperforming loans and net charge-offs remain a small percentage of the total loan and lease portfolio. Nonperforming assets (NPAs) stand at 62 bp of total loans and leases and other real estate owned at June 30, 2003, compared to the 65 bp posted last quarter. Net charge-offs for the quarter were $77.5 million, compared to $64.7 million last quarter and $43.4 million in the second quarter of 2002. Commercial loan and lease net charge-offs totaled $44.3 million in the second quarter with the $18.0 million increase from last quarter largely attributable to two credits totaling $15.5 million. The second quarter provision for loan and lease losses totaled $108.9 million, compared to $84.8 million last quarter and $64.0 million in the same quarter last year, resulting in a $31.4 million increase in the credit loss reserve, remaining at 1.49 percent of total loans and leases outstanding. As a percentage of average loans and leases, second quarter net charge-offs were 64 bp, compared to 56 bp last quarter and 40 bp in 2002’s second quarter.
Conference Call
Fifth Third will host a conference call to discuss these second quarter financial results at 9:30 a.m. (Eastern Time) today. Investors, analysts and other interested parties may dial into the conference call at 888-896-0863 for domestic access and 973-582-2703 for international access (passcode: Fifth Third). A replay of the conference call will be available until 5:00 p.m. July 22, 2003 by dialing 877-519-4471 for domestic access and 973-341-3080 for international access (passcode: 4032522#).
Corporate Profile
Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. The Company has $88 billion in assets, operates 17 affiliates with 943 full-service Banking Centers, including 132 Bank Mart® locations open seven days a week inside select grocery stores and 1,883 Jeanie® ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee and West Virginia. The financial strength of Fifth Third’s affiliate banks continues to be recognized by rating agencies with deposit ratings of AA- and Aa1 from Standard & Poor’s and Moody’s, respectively. Additionally, Fifth Third Bancorp continues to maintain the highest short-term ratings available at A-1+ and Prime-1 and is recognized by Moody’s with one of the highest senior debt ratings for any U.S. bank holding company of Aa2. Fifth Third operates four main businesses: Retail, Commercial, Investment Advisors and Fifth Third Processing Solutions. Investor information and press releases can be viewed at www.53.com. Fifth Third’s common stock is traded through the Nasdaq National Market System under the symbol “FITB.”
This release may contain forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder, that involve inherent risks and uncertainties. This press release may contain certain forward-looking statements with respect to our financial condition, results of operations, plans, objectives, future performance and business including statements preceded by, followed by or that include the words or phrases such as “believes,” “expects,” “anticipates,” “plans,” “trend,” “objective,” “continue,” “remain,” “pattern” or similar expressions or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) competitive pressures among depository institutions increase significantly; (2) changes in the
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interest rate environment reduce interest margins; (3) prepayment speeds, loan sale volumes, charge-offs and loan loss provisions; (4) general economic conditions, either national or in the states in which we do business, are less favorable than expected; (5) political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; (6) legislative or regulatory changes or actions adversely affect the businesses in which we are engaged; (7) changes and trends in the securities markets; (8) a delayed or incomplete resolution of regulatory issues; (9) the impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity; and (10) the outcome of regulatory and legal proceedings. We undertake no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release. Further information on other factors which could affect the financial results of Fifth Third are included in Fifth Third’s filings with the Securities and Exchange Commission. These documents are available free of charge at the Commission’s website at http://www.sec.gov and/or from Fifth Third.
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6
FIFTH THIRD BANCORP AND SUBSIDIARIES
QUARTERLY FINANCIAL REVIEW FOR JUNE 30, 2003
TABLE OF CONTENTS
| | | Page
|
| |
Earnings Review: | | |
| |
Financial Highlights | | 8-9 |
| |
Consolidated Statements of Income | | 10-11 |
| |
Consolidated Statements of Changes in Shareholders’ Equity | | 12 |
| |
Condensed Consolidated Quarterly Statements of Income (Taxable Equivalent) | | 13 |
| |
Other Operating Income and Operating Expenses | | 14 |
| |
Financial Condition: | | |
| |
Consolidated Balance Sheets | | 15 |
| |
Loans and Leases Serviced | | 16 |
| |
Consolidated Average Balance Sheets, Yields (Taxable Equivalent) and Rates | | 17-18 |
| |
Regulatory Capital | | 19 |
| |
Asset Quality | | 20 |
7
FIFTH THIRD BANCORP AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (UNAUDITED)
| | | For the Three Months Ended
| | Percent Change
| |
| | | June 30, 2003
| | | June 30, 2002
| |
| | | | |
| | | ($ in thousands, except per share) | |
Earnings | | | | | | | | | |
Net Interest Income (Taxable Equivalent) | | $ | 749,149 | | | 688,068 | | 8.9 | |
Net Income Available to Common Shareholders | | | 437,488 | | | 404,077 | | 8.3 | |
Earnings Per Share: | | | | | | | | | |
Basic | | | 0.76 | | | 0.69 | | 10.1 | |
Diluted | | | 0.75 | | | 0.68 | | 10.3 | |
| | | |
Key Ratios (percent) | | | | | | | | | |
Return on Average Assets (ROAA) | | | 2.02 | % | | 2.20 | | (8.2 | ) |
Return on Average Equity (ROAE) | | | 19.9 | | | 20.2 | | (1.6 | ) |
Net Interest Margin (Taxable Equivalent) | | | 3.69 | | | 4.07 | | (9.3 | ) |
Efficiency | | | 43.5 | | | 43.5 | | 0.0 | |
Average Shareholders’ Equity to Average Assets | | | 10.19 | | | 10.92 | | (6.7 | ) |
Risk-Based Capital(a): | | | | | | | | | |
Tier 1 Capital | | | 11.32 | | | 12.28 | | (7.8 | ) |
Total Capital | | | 13.82 | | | 14.66 | | (5.7 | ) |
Tier 1 Leverage | | | 9.23 | | | 10.36 | | (10.9 | ) |
| | | |
Common Stock Data | | | | | | | | | |
Cash Dividends Declared Per Share | | $ | 0.29 | | | 0.23 | | 26.1 | |
Book Value Per Share | | | 15.01 | | | 14.10 | | 6.5 | |
Market Price Per Share: | | | | | | | | | |
High | | | 60.49 | | | 69.70 | | (13.2 | ) |
Low | | | 47.24 | | | 62.45 | | (24.4 | ) |
End of Period | | | 57.42 | | | 66.65 | | (13.8 | ) |
Price/Earnings Ratio(b) | | | 19.87 | | | 27.09 | | (26.7 | ) |
| | |
| | | For the Six Months Ended
| | Percent Change
| |
| | | June 30, 2003
| | | June 30, 2002
| |
| | | | |
| | | ($ in thousands, except per share) | |
Earnings | | | | | | | | | |
Net Interest Income (Taxable Equivalent) | | $ | 1,465,446 | | | 1,342,351 | | 9.2 | |
Net Income Available to Common Shareholders | | | 856,307 | | | 794,047 | | 7.8 | |
Earnings Per Share: | | | | | | | | | |
Basic | | | 1.49 | | | 1.36 | | 9.6 | |
Diluted | | | 1.47 | | | 1.34 | | 9.7 | |
| | | |
Key Ratios (percent) | | | | | | | | | |
Return on Average Assets (ROAA) | | | 2.03 | % | | 2.22 | | (8.6 | ) |
Return on Average Equity (ROAE) | | | 19.8 | | | 20.1 | | (1.7 | ) |
Net Interest Margin (Taxable Equivalent) | | | 3.72 | | | 4.09 | | (9.0 | ) |
Efficiency | | | 44.0 | | | 43.8 | | 0.4 | |
Average Shareholders’ Equity to Average Assets | | | 10.30 | | | 11.00 | | (6.4 | ) |
| | | |
Common Stock Data | | | | | | | | | |
Cash Dividends Declared Per Share | | $ | 0.55 | | | 0.46 | | 19.6 | |
Market Price Per Share: | | | | | | | | | |
High | | | 62.15 | | | 69.70 | | (10.8 | ) |
Low | | | 47.05 | | | 60.10 | | (21.7 | ) |
| (a) | | June 30, 2003 risk-based capital ratios are estimated. |
| (b) | | Based on the most recent twelve-month earnings per diluted share and end of period stock prices. |
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FIFTH THIRD BANCORP AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (UNAUDITED)
| | | Book Value Per Share
| | Market Price
Range Per Share
|
Values Per Share
| | March 31
| | June 30
| | September 30
| | December 31
| | Low
| | High
|
1998 | | $ | 8.87 | | $ | 9.27 | | $ | 9.43 | | $ | 9.64 | | $ | 31.67 | | $ | 49.42 |
1999 | | | 9.74 | | | 9.59 | | | 9.56 | | | 9.84 | | | 38.58 | | | 50.29 |
2000 | | | 9.99 | | | 10.33 | | | 10.72 | | | 11.71 | | | 29.33 | | | 60.88 |
2001 | | | 12.19 | | | 12.26 | | | 12.81 | | | 13.11 | | | 45.69 | | | 64.77 |
2002 | | | 13.39 | | | 14.10 | | | 14.48 | | | 14.76 | | | 55.26 | | | 69.70 |
2003 | | | 15.07 | | | 15.01 | | | | | | | | | 47.05 | | | 62.15 |
| | |
| | | For the Three Months Ended
| | Year-to-Date
|
Earnings Per Share, Basic
| | March 31
| | June 30
| | September 30
| | December 31
| |
1998 | | $ | 0.38 | | $ | 0.18 | | $ | 0.45 | | $ | 0.43 | | $ | 1.44 |
1999 | | | 0.45 | | | 0.45 | | | 0.45 | | | 0.33 | | | 1.68 |
2000 | | | 0.47 | | | 0.44 | | | 0.55 | | | 0.56 | | | 2.02 |
2001 | | | 0.52 | | | 0.22 | | | 0.48 | | | 0.67 | | | 1.90 |
2002 | | | 0.67 | | | 0.69 | | | 0.72 | | | 0.73 | | | 2.82 |
2003 | | | 0.73 | | | 0.76 | | | | | | | | | 1.49 |
| | |
| | | For the Three Months Ended
| | Year-to-Date
|
Earnings Per Share, Diluted
| | March 31
| | June 30
| | September 30
| | December 31
| |
1998 | | $ | 0.37 | | $ | 0.18 | | $ | 0.44 | | $ | 0.43 | | $ | 1.42 |
1999 | | | 0.44 | | | 0.44 | | | 0.44 | | | 0.33 | | | 1.66 |
2000 | | | 0.46 | | | 0.43 | | | 0.54 | | | 0.55 | | | 1.98 |
2001 | | | 0.51 | | | 0.22 | | | 0.47 | | | 0.65 | | | 1.86 |
2002 | | | 0.66 | | | 0.68 | | | 0.70 | | | 0.72 | | | 2.76 |
2003 | | | 0.72 | | | 0.75 | | | | | | | | | 1.47 |
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FIFTH THIRD BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| | | For the Three Months Ended
|
| | | June 30,
2003
| | June 30,
2002
|
| | | ($ in thousands, except per share) |
Interest Income | | | | | |
Interest and Fees on Loans and Leases | | $ | 690,106 | | 702,484 |
Interest on Securities: | | | | | |
Taxable | | | 315,841 | | 329,652 |
Exempt from Income Taxes | | | 12,889 | | 13,884 |
| | |
|
| |
|
Total Interest on Securities | | | 328,730 | | 343,536 |
Interest on Other Short-Term Investments | | | 1,082 | | 1,281 |
| | |
|
| |
|
Total Interest Income | | | 1,019,918 | | 1,047,301 |
Interest Expense | | | | | |
Interest on Deposits: | | | | | |
Interest Checking | | | 45,961 | | 79,661 |
Savings | | | 16,544 | | 40,901 |
Money Market | | | 7,836 | | 7,776 |
Other Time | | | 54,799 | | 93,175 |
Certificates—$100,000 and Over | | | 15,414 | | 14,612 |
Foreign Office | | | 11,151 | | 11,067 |
| | |
|
| |
|
Total Interest on Deposits | | | 151,705 | | 247,192 |
Interest on Federal Funds Borrowed | | | 21,764 | | 10,527 |
Interest on Other Short-Term Borrowings | | | 14,336 | | 15,940 |
Interest on Long-Term Debt | | | 92,647 | | 95,626 |
| | |
|
| |
|
Total Interest Expense | | | 280,452 | | 369,285 |
| | |
|
| |
|
Net Interest Income | | | 739,466 | | 678,016 |
Provision for Credit Losses | | | 108,877 | | 64,040 |
| | |
|
| |
|
Net Interest Income After Provision for Credit Losses | | | 630,589 | | 613,976 |
Other Operating Income | | | | | |
Electronic Payment Processing Income | | | 141,501 | | 121,787 |
Service Charges on Deposits | | | 120,826 | | 106,092 |
Mortgage Banking Net Revenue | | | 92,826 | | 10,156 |
Investment Advisory Income | | | 85,866 | | 91,959 |
Other Service Charges and Fees | | | 139,217 | | 141,023 |
Securities Gains, Net | | | 38,860 | | 201 |
Securities Gains, Net—Non-Qualifying Hedges on Mortgage Servicing | | | 1,793 | | 35,654 |
| | |
|
| |
|
Total Other Operating Income | | | 620,889 | | 506,872 |
Operating Expenses | | | | | |
Salaries, Wages and Incentives | | | 243,885 | | 224,771 |
Employee Benefits | | | 64,870 | | 44,726 |
Equipment Expenses | | | 20,343 | | 19,444 |
Net Occupancy Expenses | | | 37,857 | | 35,403 |
Other Operating Expenses | | | 229,175 | | 195,531 |
| | |
|
| |
|
Total Operating Expenses | | | 596,130 | | 519,875 |
| | |
|
| |
|
Income Before Income Taxes and Minority Interest | | | 655,348 | | 600,973 |
Applicable Income Taxes | | | 207,446 | | 187,282 |
| | |
|
| |
|
Income Before Minority Interest | | | 447,902 | | 413,691 |
Minority Interest, Net of Tax | | | 10,229 | | 9,429 |
| | |
|
| |
|
Net Income | | | 437,673 | | 404,262 |
Dividend on Preferred Stock | | | 185 | | 185 |
| | |
|
| |
|
Net Income Available to Common Shareholders | | $ | 437,488 | | 404,077 |
| | |
|
| |
|
| | |
Earnings Per Share: | | | | | |
Basic | | $ | 0.76 | | 0.69 |
Diluted | | $ | 0.75 | | 0.68 |
| | |
|
| |
|
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FIFTH THIRD BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| | | For the Six Months
Ended
| |
| | | June 30,
2003
| | June 30,
2002
| |
| | | ($ in thousands, except per share) | |
Interest Income | | | | | | |
Interest and Fees on Loans and Leases | | $ | 1,366,164 | | 1,401,240 | |
Interest on Securities: | | | | | | |
Taxable | | | 626,664 | | 632,320 | |
Exempt from Income Taxes | | | 25,534 | | 28,136 | |
| | |
|
| |
|
|
Total Interest on Securities | | | 652,198 | | 660,456 | |
Interest on Other Short-Term Investments | | | 1,854 | | 3,317 | |
| | |
|
| |
|
|
Total Interest Income | | | 2,020,216 | | 2,065,013 | |
Interest Expense | | | | | | |
Interest on Deposits: | | | | | | |
Interest Checking | | | 101,228 | | 147,048 | |
Savings | | | 37,578 | | 76,735 | |
Money Market | | | 17,045 | | 15,859 | |
Other Time | | | 116,908 | | 204,287 | |
Certificates—$100,000 and Over | | | 27,732 | | 33,164 | |
Foreign Office | | | 20,718 | | 18,162 | |
| | |
|
| |
|
|
Total Interest on Deposits | | | 321,209 | | 495,255 | |
Interest on Federal Funds Borrowed | | | 41,233 | | 22,797 | |
Interest on Short-Term Bank Notes | | | — | | 54 | |
Interest on Other Short-Term Borrowings | | | 26,844 | | 32,877 | |
Interest on Long-Term Debt | | | 185,069 | | 189,846 | |
| | |
|
| |
|
|
Total Interest Expense | | | 574,355 | | 740,829 | |
| | |
|
| |
|
|
Net Interest Income | | | 1,445,861 | | 1,324,184 | |
Provision for Credit Losses | | | 193,694 | | 119,002 | |
| | |
|
| |
|
|
Net Interest Income After Provision for Credit Losses | | | 1,252,167 | | 1,205,182 | |
Other Operating Income | | | | | | |
Electronic Payment Processing Income | | | 271,638 | | 229,845 | |
Service Charges on Deposits | | | 235,148 | | 204,660 | |
Mortgage Banking Net Revenue | | | 169,675 | | 111,829 | |
Investment Advisory Income | | | 168,273 | | 176,407 | |
Other Service Charges and Fees | | | 297,616 | | 271,946 | |
Securities Gains, Net | | | 63,769 | | 9,501 | |
Securities Gains (Losses), Net—Non-Qualifying Hedges on Mortgage Servicing | | | 2,809 | | (1,041 | ) |
| | |
|
| |
|
|
Total Other Operating Income | | | 1,208,928 | | 1,003,147 | |
Operating Expenses | | | | | | |
Salaries, Wages and Incentives | | | 478,144 | | 442,742 | |
Employee Benefits | | | 125,671 | | 94,327 | |
Equipment Expenses | | | 40,056 | | 40,032 | |
Net Occupancy Expenses | | | 76,275 | | 69,538 | |
Other Operating Expenses | | | 455,769 | | 381,104 | |
| | |
|
| |
|
|
Total Operating Expenses | | | 1,175,915 | | 1,027,743 | |
| | |
|
| |
|
|
Income Before Income Taxes and Minority Interest | | | 1,285,180 | | 1,180,586 | |
Applicable Income Taxes | | | 408,045 | | 367,311 | |
| | |
|
| |
|
|
Income Before Minority Interest | | | 877,135 | | 813,275 | |
Minority Interest, Net of Tax | | | 20,458 | | 18,858 | |
| | |
|
| |
|
|
Net Income | | | 856,677 | | 794,417 | |
Dividend on Preferred Stock | | | 370 | | 370 | |
| | |
|
| |
|
|
Net Income Available to Common Shareholders | | $ | 856,307 | | 794,047 | |
| | |
|
| |
|
|
Earnings Per Share: | | | | | | |
Basic | | $ | 1.49 | | 1.36 | |
Diluted | | $ | 1.47 | | 1.34 | |
| | |
|
| |
|
|
11
FIFTH THIRD BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
| | | For the Three Months Ended
| |
| | | June 30,
2003
| | | June 30,
2002
| |
| | | ($ in thousands, except per share) | |
Total Shareholders’ Equity, Beginning | | $ | 8,663,744 | | | 7,803,490 | |
Net Income | | | 437,673 | | | 404,262 | |
Nonowner Changes in Equity, Net of Tax: | | | | | | | |
Change in Unrealized Gains/(Losses) on Securities Available-for-Sale and Qualifying Cash Flow Hedge | | | (60,635 | ) | | 255,618 | |
| | |
| | |
|
|
| |
|
|
Net Income and Nonowner Changes in Equity | | | 377,038 | | | 659,880 | |
Cash Dividends Declared: | | | | | | | |
Common Stock (2003—$.29 per share and 2002—$.23 per share) | | | (165,377 | ) | | (133,648 | ) |
Preferred Stock | | | (185 | ) | | (185 | ) |
Stock Options Exercised Including Treasury Shares Issued | | | 31,604 | | | 22,028 | |
Loans Issued Related to Exercise of Stock Options | | | (20,102 | ) | | — | |
Corporate Tax Benefit Related to Exercise of Non-Qualified Stock Options | | | — | | | 241 | |
Shares Purchased | | | (329,359 | ) | | (160,795 | ) |
Other | | | (3,129 | ) | | (672 | ) |
| | |
|
|
| |
|
|
Total Shareholders’ Equity, Ending | | $ | 8,554,234 | | | 8,190,339 | |
| | |
|
|
| |
|
|
| | | For the Six Months Ended
| |
| | | June 30,
2003
| | | June 30,
2002
| |
Total Shareholders’ Equity, Beginning | | $ | 8,475,017 | | | 7,639,277 | |
Net Income | | | 856,677 | | | 794,417 | |
Nonowner Changes in Equity, Net of Tax: | | | | | | | |
Change in Unrealized Gains/(Losses) on Securities Available-for-Sale and Qualifying Cash Flow Hedge | | | (132,909 | ) | | 216,714 | |
| | |
| | |
|
|
| |
|
|
Net Income and Nonowner Changes in Equity | | | 723,768 | | | 1,011,131 | |
Cash Dividends Declared: | | | | | | | |
Common Stock (2003—$.55 per share and 2002—$.46 per share) | | | (314,886 | ) | | (267,574 | ) |
Preferred Stock | | | (370 | ) | | (370 | ) |
Stock Options Exercised Including Treasury Shares Issued | | | 55,277 | | | 64,581 | |
Loans Issued Related to Exercise of Stock Options | | | (20,102 | ) | | — | |
Corporate Tax Benefit Related to Exercise of Non-Qualified Stock Options | | | 309 | | | 366 | |
Shares Purchased | | | (361,819 | ) | | (256,036 | ) |
Other | | | (2,960 | ) | | (1,036 | ) |
| | |
|
|
| |
|
|
Total Shareholders’ Equity, Ending | | $ | 8,554,234 | | | 8,190,339 | |
| | |
|
|
| |
|
|
12
FIFTH THIRD BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED QUARTERLY STATEMENTS OF INCOME (TAXABLE EQUIVALENT) (UNAUDITED)
| | | For the Three Months Ended
|
| | | June 30,
2003
| | March 31,
2003
| | December 31,
2002
| | September 30,
2002
| | June 30,
2002
|
| | | ($ in thousands, except per share) |
Interest Income | | $ | 1,019,918 | | 1,000,298 | | 1,027,852 | | 1,036,547 | | 1,047,301 |
Taxable Equivalent Adjustment | | | 9,683 | | 9,902 | | 10,395 | | 10,580 | | 10,052 |
| | |
|
| |
| |
| |
| |
|
Interest Income (Taxable Equivalent) | | | 1,029,601 | | 1,010,200 | | 1,038,247 | | 1,047,127 | | 1,057,353 |
Interest Expense | | | 280,452 | | 293,903 | | 329,387 | | 358,874 | | 369,285 |
| | |
|
| |
| |
| |
| |
|
Net Interest Income (Taxable Equivalent) | | | 749,149 | | 716,297 | | 708,860 | | 688,253 | | 688,068 |
Provision for Credit Losses | | | 108,877 | | 84,817 | | 72,085 | | 55,524 | | 64,040 |
| | |
|
| |
| |
| |
| |
|
Net Interest Income After Provision for Credit Losses (Taxable Equivalent) | | | 640,272 | | 631,480 | | 636,775 | | 632,729 | | 624,028 |
Other Operating Income | | | 620,889 | | 588,039 | | 583,322 | | 607,657 | | 506,872 |
Operating Expenses | | | 596,130 | | 579,785 | | 569,282 | | 619,162 | | 519,875 |
| | |
|
| |
| |
| |
| |
|
Income Before Income Taxes and Minority Interest (Taxable Equivalent) | | | 665,031 | | 639,734 | | 650,815 | | 621,224 | | 611,025 |
Applicable Income Taxes | | | 207,446 | | 200,599 | | 207,463 | | 184,483 | | 187,282 |
Taxable Equivalent Adjustment | | | 9,683 | | 9,902 | | 10,395 | | 10,580 | | 10,052 |
| | |
|
| |
| |
| |
| |
|
Income Before Minority Interest | | | 447,902 | | 429,233 | | 432,957 | | 426,161 | | 413,691 |
Minority Interest, Net of Tax | | | 10,229 | | 10,229 | | 9,400 | | 9,422 | | 9,429 |
| | |
|
| |
| |
| |
| |
|
Net Income | | | 437,673 | | 419,004 | | 423,557 | | 416,739 | | 404,262 |
Dividend on Preferred Stock | | | 185 | | 185 | | 185 | | 185 | | 185 |
| | |
|
| |
| |
| |
| |
|
Net Income Available to Common Shareholders | | $ | 437,488 | | 418,819 | | 423,372 | | 416,554 | | 404,077 |
| | |
|
| |
| |
| |
| |
|
Earnings Per Share: | | | | | | | | | | | |
Basic | | $ | 0.76 | | 0.73 | | 0.73 | | 0.72 | | 0.69 |
Diluted | | $ | 0.75 | | 0.72 | | 0.72 | | 0.70 | | 0.68 |
| | |
|
| |
| |
| |
| |
|
13
FIFTH THIRD BANCORP AND SUBSIDIARIES
OTHER OPERATING INCOME AND OPERATING EXPENSES (UNAUDITED)
| | | For the Three Months Ended
|
| | | June 30,
2003
| | March 31,
2003
| | December 31,
2002
| | September 30,
2002
| | June 30,
2002
|
| | | ($ in thousands) |
Other Operating Income | | | | | | | | | | | |
Electronic Payment Processing Income | | $ | 141,501 | | 130,138 | | 147,343 | | 134,866 | | 121,787 |
Service Charges on Deposits | | | 120,826 | | 114,322 | | 112,646 | | 113,770 | | 106,092 |
Mortgage Banking Net Revenue | | | 92,826 | | 76,849 | | 66,689 | | 9,401 | | 10,156 |
Investment Advisory Income | | | 85,866 | | 82,407 | | 77,117 | | 82,723 | | 91,959 |
Other Service Charges and Fees | | | 139,217 | | 158,399 | | 164,013 | | 143,767 | | 141,023 |
Securities Gains, Net | | | 38,860 | | 24,909 | | 14,731 | | 89,347 | | 201 |
Securities Gains, Net—Non-Qualifying Hedges on Mortgage Servicing | | | 1,793 | | 1,015 | | 783 | | 33,783 | | 35,654 |
| | |
|
| |
| |
| |
| |
|
Total Other Operating Income | | $ | 620,889 | | 588,039 | | 583,322 | | 607,657 | | 506,872 |
| | |
|
| |
| |
| |
| |
|
Operating Expenses | | | | | | | | | | | |
Salaries, Wages and Incentives | | $ | 243,885 | | 234,260 | | 242,673 | | 219,465 | | 224,771 |
Employee Benefits | | | 64,870 | | 60,800 | | 59,740 | | 47,581 | | 44,726 |
Equipment Expenses | | | 20,343 | | 19,713 | | 19,861 | | 19,459 | | 19,444 |
Net Occupancy Expenses | | | 37,857 | | 38,417 | | 36,707 | | 36,209 | | 35,403 |
Other Operating Expenses(a) | | | 229,175 | | 226,595 | | 210,301 | | 296,448 | | 195,531 |
| | |
|
| |
| |
| |
| |
|
Total Operating Expenses | | $ | 596,130 | | 579,785 | | 569,282 | | 619,162 | | 519,875 |
| | |
|
| |
| |
| |
| |
|
Full-Time Equivalent Employees | | | 19,830 | | 19,573 | | 19,119 | | 18,764 | | 18,651 |
Banking Centers | | | 943 | | 941 | | 930 | | 919 | | 921 |
| | |
|
| |
| |
| |
| |
|
| (a) | | Includes intangible amortization expense of $11.6 million, $9.3 million, $9.4 million, $9.0 million, and $9.2 million for the three months ended June 30, 2003, March 31, 2003, December 31, 2002, September 30, 2002 and June 30, 2002, respectively. |
14
FIFTH THIRD BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| | | As of
| |
| | | June 30, 2003
| | | June 30, 2002
| |
| | | ($ in millions, except per share) | |
Assets | | | | | | | |
Cash and Due from Banks | | $ | 1,776 | | | 1,746 | |
Securities Available-for-Sale(a) | | | 29,052 | | | 23,418 | |
Securities Held-to-Maturity(b) | | | 106 | | | 22 | |
Other Short-Term Investments | | | 282 | | | 559 | |
Loans Held for Sale | | | 3,245 | | | 1,290 | |
Loans and Leases: | | | | | | | |
Commercial Loans | | | 14,015 | | | 11,521 | |
Construction Loans | | | 3,362 | | | 3,254 | |
Commercial Mortgage Loans | | | 6,297 | | | 5,759 | |
Commercial Lease Financing | | | 3,935 | | | 3,275 | |
Residential Mortgage Loans | | | 3,745 | | | 4,203 | |
Consumer Loans | | | 16,374 | | | 13,992 | |
Consumer Lease Financing | | | 2,838 | | | 2,344 | |
Unearned Income | | | (1,209 | ) | | (960 | ) |
| | |
|
|
| |
|
|
Total Loans and Leases | | | 49,357 | | | 43,388 | |
Reserve for Credit Losses | | | (735 | ) | | (649 | ) |
| | |
|
|
| |
|
|
Total Loans and Leases, net | | | 48,622 | | | 42,739 | |
Bank Premises and Equipment | | | 948 | | | 837 | |
Accrued Income Receivable | | | 525 | | | 519 | |
Goodwill | | | 700 | | | 686 | |
Intangible Assets | | | 222 | | | 249 | |
Mortgage Servicing Rights | | | 244 | | | 415 | |
Other Assets | | | 2,543 | | | 2,443 | |
| | |
|
|
| |
|
|
Total Assets | | $ | 88,265 | | | 74,923 | |
| | |
|
|
| |
|
|
Liabilities | | | | | | | |
Deposits: | | | | | | | |
Demand | | $ | 11,633 | | | 9,163 | |
Interest Checking | | | 18,432 | | | 16,558 | |
Savings | | | 7,981 | | | 10,082 | |
Money Market | | | 3,299 | | | 1,037 | |
Other Time | | | 7,066 | | | 9,391 | |
Certificates—$100,000 and Over | | | 4,302 | | | 1,742 | |
Foreign Office | | | 3,162 | | | 2,116 | |
| | |
|
|
| |
|
|
Total Deposits | | | 55,875 | | | 50,089 | |
Federal Funds Borrowed | | | 5,841 | | | 1,893 | |
Other Short-Term Borrowings | | | 5,687 | | | 3,689 | |
Accrued Taxes, Interest and Expenses | | | 2,569 | | | 2,328 | |
Other Liabilities | | | 919 | | | 749 | |
Long-Term Debt | | | 8,338 | | | 7,545 | |
| | |
|
|
| |
|
|
Total Liabilities | | | 79,229 | | | 66,293 | |
Minority Interest | | | 482 | | | 440 | |
Total Shareholders’ Equity(c) | | | 8,554 | | | 8,190 | |
| | |
|
|
| |
|
|
Total Liabilities and Shareholders’ Equity | | $ | 88,265 | | | 74,923 | |
| | |
|
|
| |
|
|
| (a) | | Amortized cost: June 30, 2003—$28,594 and June 30, 2002—$23,047. |
| (b) | | Market values: June 30, 2003—$106 and June 30, 2002—$22. |
| (c) | | Common Shares: Stated value $2.22 per share; authorized 1,300,000,000; outstanding June 30, 2003—569,963,718 (excluding 13,487,973 treasury shares) and June 30, 2002—580,985,828 (excluding 2,441,276 treasury shares). |
15
FIFTH THIRD BANCORP AND SUBSIDIARIES
LOANS AND LEASES SERVICED (UNAUDITED)
| | | As of
|
| | | June 30, 2003
| | March 31, 2003
| | December 31, 2002
| | September 30, 2002
| | June 30, 2002
|
| | | ($ in millions) |
Commercial | | | | | | | | | | | |
Commercial | | $ | 14,015 | | 13,380 | | 12,743 | | 12,427 | | 11,521 |
Mortgage | | | 6,297 | | 5,984 | | 5,885 | | 5,659 | | 5,759 |
Construction | | | 3,053 | | 3,065 | | 3,009 | | 2,930 | | 3,008 |
Leases | | | 3,022 | | 2,998 | | 3,019 | | 2,918 | | 2,582 |
| | |
|
| |
| |
| |
| |
|
Subtotal | | | 26,387 | | 25,427 | | 24,656 | | 23,934 | | 22,870 |
Consumer | | | | | | | | | | | |
Consumer | | | 15,786 | | 14,864 | | 14,579 | | 14,277 | | 13,503 |
Mortgage & Construction | | | 4,054 | | 3,966 | | 3,813 | | 3,316 | | 4,449 |
Credit Card | | | 588 | | 562 | | 537 | | 479 | | 488 |
Leases | | | 2,542 | | 2,448 | | 2,343 | | 2,200 | | 2,078 |
| | |
|
| |
| |
| |
| |
|
Subtotal | | | 22,970 | | 21,840 | | 21,272 | | 20,272 | | 20,518 |
| | |
|
| |
| |
| |
| |
|
Total Loans and Leases | | | 49,357 | | 47,267 | | 45,928 | | 44,206 | | 43,388 |
Loans Held for Sale | | | 3,245 | | 3,011 | | 3,358 | | 2,664 | | 1,290 |
Loans and Leases Serviced for Others: | | | | | | | | | | | |
Residential Mortgage(a) | | | 24,990 | | 25,848 | | 26,468 | | 29,044 | | 30,529 |
Commercial Mortgage(b) | | | 2,009 | | 1,990 | | 1,959 | | 2,241 | | 2,293 |
Commercial Loans(c) | | | 1,813 | | 1,831 | | 1,763 | | 1,890 | | 1,947 |
Consumer Leases(d) | | | 1,128 | | 1,310 | | 1,475 | | 1,636 | | 1,814 |
| | |
|
| |
| |
| |
| |
|
Total Loans and Leases Serviced for Others | | | 29,940 | | 30,979 | | 31,665 | | 34,811 | | 36,583 |
| | |
|
| |
| |
| |
| |
|
Total Loans and Leases Serviced | | $ | 82,542 | | 81,257 | | 80,951 | | 81,681 | | 81,261 |
| | |
|
| |
| |
| |
| |
|
| (a) | | Fifth Third sells certain residential mortgage loans, primarily conforming and fixed-rate in nature, and retains servicing responsibilities. |
| (b) | | Fifth Third sells certain commercial mortgage loans and retains servicing responsibilities. |
| (c) | | Fifth Third transfers, subject to credit recourse and with servicing retained, certain investment grade commercial loans to an unconsolidated qualified special purpose entity (QSPE), which is wholly-owned by an independent third party. |
| (d) | | Prior to January 1, 2002, Fifth Third sold to and subsequently leased back from an unrelated asset-backed special purpose entity (SPE) certain consumer auto lease assets, subject to credit recourse and with servicing retained. Fifth Third will adopt the provisions of FASB Interpretation No. 46 and consolidate this SPE on July 1, 2003, as Fifth Third will be deemed the primary beneficiary under the provisions of this new interpretation. |
16
FIFTH THIRD BANCORP AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS (TAXABLE EQUIVALENT) AND RATES (UNAUDITED)
| | | For the Three Months Ended
| |
| | | June 30, 2003
| | | June 30, 2002
| |
| | | Average
Balance
| | | Average
Yield/ Rate
| | | Average
Balance
| | | Average
Yield/
Rate
| |
| | | ($ in millions) | |
Assets | | | | | | | | | | | | | |
Interest-Earning Assets: | | | | | | | | | | | | | |
Loans and Leases | | $ | 51,813 | | | 5.37 | % | | 44,459 | | | 6.37 | % |
Taxable Securities | | | 28,003 | | | 4.52 | | | 21,874 | | | 6.04 | |
Tax Exempt Securities | | | 1,062 | | | 7.36 | | | 1,120 | | | 7.43 | |
Other Short-Term Investments | | | 458 | | | 0.95 | | | 277 | | | 1.85 | |
| | |
|
|
| |
|
| |
|
| |
|
|
Total Interest-Earning Assets | | | 81,336 | | | 5.08 | | | 67,730 | | | 6.26 | |
Cash and Due from Banks | | | 1,399 | | | | | | 1,460 | | | | |
Other Assets | | | 4,638 | | | | | | 5,055 | | | | |
Reserve for Credit Losses | | | (712 | ) | | | | | (637 | ) | | | |
| | |
|
|
| | | | |
|
| | | |
Total Assets | | $ | 86,661 | | | | | | 73,608 | | | | |
| | |
|
|
| | | | |
|
| | | |
Liabilities | | | | | | | | | | | | | |
Interest-Bearing Liabilities: | | | | | | | | | | | | | |
Interest Checking | | $ | 18,527 | | | 1.00 | % | | 16,022 | | | 1.99 | % |
Savings | | | 8,082 | | | 0.82 | | | 8,955 | | | 1.83 | |
Money Market | | | 2,989 | | | 1.05 | | | 1,287 | | | 2.42 | |
Other Time | | | 7,299 | | | 3.01 | | | 9,662 | | | 3.87 | |
Certificates-$100,000 and Over | | | 4,259 | | | 1.45 | | | 1,741 | | | 3.37 | |
Foreign Office Deposits | | | 3,529 | | | 1.27 | | | 2,420 | | | 1.83 | |
Federal Funds Borrowed | | | 6,886 | | | 1.27 | | | 2,551 | | | 1.66 | |
Other Short-Term Borrowings | | | 4,544 | | | 1.27 | | | 3,737 | | | 1.71 | |
Long-Term Debt | | | 8,109 | | | 4.58 | | | 7,527 | | | 5.10 | |
| | |
|
|
| |
|
| |
|
| |
|
|
Total Interest-Bearing Liabilities | | | 64,224 | | | 1.75 | | | 53,902 | | | 2.75 | |
Demand Deposits | | | 10,055 | | | | | | 8,633 | | | | |
Other Liabilities | | | 3,077 | | | | | | 2,604 | | | | |
| | |
|
|
| | | | |
|
| | | |
Total Liabilities | | | 77,356 | | | | | | 65,139 | | | | |
Minority Interest | | | 477 | | | | | | 434 | | | | |
Shareholders' Equity | | | 8,828 | | | | | | 8,035 | | | | |
| | |
|
|
| | | | |
|
| | | |
Total Liabilities and Shareholders’ Equity | | $ | 86,661 | | | | | | 73,608 | | | | |
| | |
|
|
| | | | |
|
| | | |
Average Common Shares (in thousands): | | | | | | | | | | | | | |
Outstanding | | | 573,888 | | | | | | 581,814 | | | | |
Diluted | | | 581,663 | | | | | | 594,257 | | | | |
| | |
|
|
| | | | |
|
| | | |
Ratios (percent): | | | | | | | | | | | | | |
Net Interest Margin (Taxable Equivalent) | | | | | | 3.69 | % | | | | | 4.07 | % |
Net Interest Rate Spread (Taxable Equivalent) | | | | | | 3.33 | % | | | | | 3.51 | % |
Interest-Bearing Liabilities to Interest-Earning Assets | | | | | | 78.96 | % | | | | | 79.58 | % |
| | | | | | |
|
| | | | |
|
|
17
FIFTH THIRD BANCORP AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS (TAXABLE EQUIVALENT) AND RATES (UNAUDITED)
| | | For the Six Months Ended
| |
| | | June 30, 2003
| | | June 30, 2002
| |
| | | Average
Balance
| | | Average
Yield/
Rate
| | | Average
Balance
| | | Average
Yield/
Rate
| |
| | | ($ in millions) | |
Assets | | | | | | | | | | | | | |
Interest-Earning Assets: | | | | | | | | | | | | | |
Loans and Leases | | $ | 50,924 | | | 5.44 | % | | 43,932 | | | 6.46 | % |
Taxable Securities | | | 27,150 | | | 4.65 | | | 20,808 | | | 6.13 | |
Tax Exempt Securities | | | 1,075 | | | 7.24 | | | 1,121 | | | 7.14 | |
Other Short-Term Investments | | | 383 | | | 0.98 | | | 372 | | | 1.80 | |
| | |
|
|
| |
|
| |
|
| |
|
|
Total Interest-Earning Assets | | | 79,532 | | | 5.17 | | | 66,233 | | | 6.34 | |
Cash and Due from Banks | | | 1,478 | | | | | | 1,584 | | | | |
Other Assets | | | 4,557 | | | | | | 5,099 | | | | |
Reserve for Credit Losses | | | (703 | ) | | | | | (629 | ) | | | |
| | |
|
|
| | | | |
|
| | | |
Total Assets | | $ | 84,864 | | | | | | 72,287 | | | | |
| | |
|
|
| | | | |
|
| | | |
Liabilities | | | | | | | | | | | | | |
Interest-Bearing Liabilities: | | | | | | | | | | | | | |
Interest Checking | | $ | 18,365 | | | 1.11 | % | | 15,096 | | | 1.96 | % |
Savings | | | 8,144 | | | 0.93 | | | 8,368 | | | 1.85 | |
Money Market | | | 3,003 | | | 1.14 | | | 1,313 | | | 2.44 | |
Other Time | | | 7,563 | | | 3.12 | | | 10,138 | | | 4.06 | |
Certificates-$100,000 and Over | | | 3,632 | | | 1.54 | | | 1,860 | | | 3.60 | |
Foreign Office Deposits | | | 3,242 | | | 1.29 | | | 1,924 | | | 1.90 | |
Federal Funds Borrowed | | | 6,565 | | | 1.27 | | | 2,703 | | | 1.70 | |
Short-Term Bank Notes | | | — | | | — | | | 3 | | | 3.40 | |
Other Short-Term Borrowings | | | 4,252 | | | 1.27 | | | 3,915 | | | 1.69 | |
Long-Term Debt | | | 8,119 | | | 4.60 | | | 7,476 | | | 5.12 | |
| | |
|
|
| |
|
| |
|
| |
|
|
Total Interest-Bearing Liabilities | | | 62,885 | | | 1.84 | | | 52,796 | | | 2.83 | |
Demand Deposits | | | 9,793 | | | | | | 8,549 | | | | |
Other Liabilities | | | 2,973 | | | | | | 2,560 | | | | |
| | |
|
|
| | | | |
|
| | | |
Total Liabilities | | | 75,651 | | | | | | 63,905 | | | | |
Minority Interest | | | 472 | | | | | | 430 | | | | |
Shareholders’ Equity | | | 8,741 | | | | | | 7,952 | | | | |
| | |
|
|
| | | | |
|
| | | |
Total Liabilities and Shareholders’ Equity | | $ | 84,864 | | | | | | 72,287 | | | | |
| | |
|
|
| | | | |
|
| | | |
Average Common Shares (in thousands): | | | | | | | | | | | | | |
Outstanding | | | 574,126 | | | | | | 582,196 | | | | |
Diluted | | | 582,233 | | | | | | 594,631 | | | | |
| | |
|
|
| | | | |
|
| | | |
Ratios (percent): | | | | | | | | | | | | | |
Net Interest Margin (Taxable Equivalent) | | | | | | 3.72 | % | | | | | 4.09 | % |
Net Interest Rate Spread (Taxable Equivalent) | | | | | | 3.33 | % | | | | | 3.51 | % |
Interest-Bearing Liabilities to Interest-Earning Assets | | | | | | 79.07 | % | | | | | 79.71 | % |
| | | | | | |
|
| | | | |
|
|
18
FIFTH THIRD BANCORP AND SUBSIDIARIES
REGULATORY CAPITAL (UNAUDITED)
| | | June 30,
2003(a)
| | | March 31,
2003
| | | December 31,
2002
| | | September 30,
2002
| | | June 30,
2002
| |
| | | ($ in millions) | |
Tier 1 Capital: | | | | | | | | | | | | | | | | |
Shareholders’ Equity and Other | | $ | 9,111 | | | 9,210 | | | 9,010 | | | 8,910 | | | 8,690 | |
Goodwill and Certain Other Intangibles | | | (912 | ) | | (924 | ) | | (933 | ) | | (950 | ) | | (936 | ) |
Unrealized Gains | | | (288 | ) | | (349 | ) | | (421 | ) | | (321 | ) | | (228 | ) |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Total Tier 1 Capital | | $ | 7,911 | | | 7,937 | | | 7,656 | | | 7,639 | | | 7,526 | |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Total Capital: | | | | | | | | | | | | | | | | |
Tier 1 Capital | | $ | 7,911 | | | 7,937 | | | 7,656 | | | 7,639 | | | 7,526 | |
Qualifying Reserves for Credit Losses | | | 753 | | | 708 | | | 692 | | | 668 | | | 661 | |
Qualifying Subordinated Notes | | | 992 | | | 492 | | | 496 | | | 508 | | | 797 | |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Total Risk-Based Capital | | $ | 9,656 | | | 9,137 | | | 8,844 | | | 8,815 | | | 8,984 | |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Risk-Weighted Assets | | $ | 69,887 | | | 66,737 | | | 65,444 | | | 63,056 | | | 61,263 | |
Ratios (percent): | | | | | | | | | | | | | | | | |
Average Shareholders’ Equity to Average Assets | | | 10.19 | % | | 10.42 | | | 10.63 | | | 11.11 | | | 10.92 | |
Risk-Based Capital: | | | | | | | | | | | | | | | | |
Tier 1 Capital | | | 11.32 | % | | 11.89 | | | 11.70 | | | 12.11 | | | 12.28 | |
Total Capital | | | 13.82 | % | | 13.69 | | | 13.51 | | | 13.98 | | | 14.66 | |
Tier 1 Leverage | | | 9.23 | % | | 9.67 | | | 9.73 | | | 10.22 | | | 10.36 | |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
| (a) | | June 30, 2003 regulatory capital data and ratios are estimated. |
19
FIFTH THIRD BANCORP AND SUBSIDIARIES
ASSET QUALITY (UNAUDITED)
Summary of Credit Loss Experience
| | | For the Three Months Ended
| |
| | | June 30,
2003
| | | March 31,
2003
| | | December 31,
2002
| | | September 30,
2002
| | | June
30,
2002
| |
| | | ($ in thousands) | |
Losses Charged Off: | | | | | | | | | | | | | | | | |
Commercial, Financial and Agricultural Loans | | $ | (29,259 | ) | | (27,140 | ) | | (17,236 | ) | | (24,554 | ) | | (17,678 | ) |
Real Estate—Commercial Mortgage Loans | | | (1,218 | ) | | (1,061 | ) | | (5,591 | ) | | (1,402 | ) | | (9,818 | ) |
Real Estate—Construction Loans | | | (410 | ) | | (198 | ) | | (1,167 | ) | | (2,150 | ) | | — | |
Real Estate—Residential Mortgage Loans | | | (3,195 | ) | | (8,806 | ) | | (3,467 | ) | | (2,844 | ) | | (2,230 | ) |
Consumer Loans | | | (31,802 | ) | | (33,266 | ) | | (31,397 | ) | | (25,583 | ) | | (26,247 | ) |
Lease Financing | | | (25,721 | ) | | (12,007 | ) | | (11,038 | ) | | (10,107 | ) | | (8,825 | ) |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Total Losses | | | (91,605 | ) | | (82,478 | ) | | (69,896 | ) | | (66,640 | ) | | (64,798 | ) |
Recoveries of Losses Previously Charged Off: | | | | | | | | | | | | | | | | |
Commercial, Financial and Agricultural Loans | | | 2,379 | | | 4,489 | | | 3,736 | | | 7,740 | | | 4,460 | |
Real Estate—Commercial Mortgage Loans | | | 418 | | | 686 | | | 830 | | | 1,248 | | | 1,589 | |
Real Estate—Construction Loans | | | 33 | | | 176 | | | 237 | | | 6 | | | 932 | |
Real Estate—Residential Mortgage Loans | | | 11 | | | 2 | | | 1 | | | 3 | | | 258 | |
Consumer Loans | | | 8,393 | | | 10,159 | | | 12,501 | | | 11,715 | | | 11,235 | |
Lease Financing | | | 2,896 | | | 2,310 | | | 3,074 | | | 2,358 | | | 2,965 | |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Total Recoveries | | | 14,130 | | | 17,822 | | | 20,379 | | | 23,070 | | | 21,439 | |
Net Losses Charged Off: | | | | | | | | | | | | | | | | |
Commercial, Financial and Agricultural Loans | | | (26,880 | ) | | (22,651 | ) | | (13,500 | ) | | (16,814 | ) | | (13,218 | ) |
Real Estate—Commercial Mortgage Loans | | | (800 | ) | | (375 | ) | | (4,761 | ) | | (154 | ) | | (8,229 | ) |
Real Estate—Construction Loans | | | (377 | ) | | (22 | ) | | (930 | ) | | (2,144 | ) | | 932 | |
Real Estate—Residential Mortgage Loans | | | (3,184 | ) | | (8,804 | ) | | (3,466 | ) | | (2,841 | ) | | (1,972 | ) |
Consumer Loans | | | (23,409 | ) | | (23,107 | ) | | (18,896 | ) | | (13,868 | ) | | (15,012 | ) |
Lease Financing | | | (22,825 | ) | | (9,697 | ) | | (7,964 | ) | | (7,749 | ) | | (5,860 | ) |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Total Net Losses Charged Off | | $ | (77,475 | ) | | (64,656 | ) | | (49,517 | ) | | (43,570 | ) | | (43,359 | ) |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Reserve for Credit Losses, Beginning | | $ | 703,354 | | | 683,193 | | | 660,934 | | | 649,166 | | | 628,595 | |
Total Net Losses Charged Off | | | (77,475 | ) | | (64,656 | ) | | (49,517 | ) | | (43,570 | ) | | (43,359 | ) |
Provision Charged to Operations | | | 108,877 | | | 84,817 | | | 72,085 | | | 55,524 | | | 64,040 | |
Acquired Institutions and Other | | | — | | | — | | | (309 | ) | | (186 | ) | | (110 | ) |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Reserve for Credit Losses, Ending | | $ | 734,756 | | | 703,354 | | | 683,193 | | | 660,934 | | | 649,166 | |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Nonperforming and Underperforming Assets
| | | As of
|
| | | June 30, 2003
| | | March 31,
2003
| | December 31,
2002
| | September 30,
2002
| | June 30,
2002
|
Nonaccrual Loans and Leases(a) | | $ | 273,293 | | | 277,452 | | 246,986 | | 226,840 | | 211,592 |
Other Real Estate Owned | | | 33,212 | | | 29,221 | | 25,618 | | 21,028 | | 19,498 |
| | |
|
|
| |
| |
| |
| |
|
Total Nonperforming Assets | | | 306,505 | | | 306,673 | | 272,604 | | 247,868 | | 231,090 |
Ninety Days Past Due Loans and Leases(a) | | | 137,503 | | | 134,024 | | 162,213 | | 191,116 | | 182,884 |
| | |
|
|
| |
| |
| |
| |
|
Total Underperforming Assets | | $ | 444,008 | | | 440,697 | | 434,817 | | 438,984 | | 413,974 |
| | |
|
|
| |
| |
| |
| |
|
Average Loans and Leases(b) | | $ | 48,561,158 | | | 47,154,837 | | 45,272,569 | | 44,173,797 | | 42,982,821 |
Loans and Leases(b) | | $ | 49,356,499 | | | 47,266,696 | | 45,928,136 | | 44,205,569 | | 43,387,938 |
Ratios | | | | | | | | | | | | |
Net Losses Charged Off as a Percent of Average Loans and Leases | | | 0.64 | % | | 0.56 | | 0.43 | | 0.39 | | 0.40 |
Reserve as a Percent of Loans and Leases | | | 1.49 | % | | 1.49 | | 1.49 | | 1.50 | | 1.50 |
Nonperforming Assets as a Percent of Loans, Leases and Other Real Estate Owned | | | 0.62 | % | | 0.65 | | 0.59 | | 0.56 | | 0.53 |
Underperforming Assets as a Percent of Loans, Leases and Other Real Estate Owned | | | 0.90 | % | | 0.93 | | 0.95 | | 0.99 | | 0.95 |
| (a) | | Nonaccrual includes $18.0 million and Ninety Days Past Due includes $44.7 million of residential mortgage loans as of June 30, 2003. |
| (b) | | Excludes loans held for sale. |
20
