Exhibit 99.1
News Release
| CONTACT: | | Neal E. Arnold, CFO (Analysts) | | FOR IMMEDIATE RELEASE |
| | | (513) 579-4356 | | October 14, 2003 |
| | | Bradley S. Adams, IR (Analysts) | | |
| | | (513) 534-0983 | | |
| | | Roberta R. Jennings (Media) | | |
| | | (513) 579-4153 | | |
FIFTH THIRD BANCORP REPORTS THIRD QUARTER EARNINGS
“EPS of $.76…$.77 Excluding Cumulative Effect”
Fifth Third Bancorp’s third quarter earnings per diluted share were $.76, an increase of nine percent over $.70 per diluted share for the same period in 2002, including an after-tax charge for a nonrecurring cumulative effect of a change in accounting principle of $10.8 million, or $.02 per diluted share on a rounded basis, related to the early implementation of FASB Interpretation No. 46; third quarter net income before the cumulative effect was $448,145,000, or $.77 per diluted share. Third quarter net income totaled $437,198,000, compared to third quarter 2002’s net income of $416,554,000. Third quarter return on average assets (ROA) and return on average equity (ROE) were 1.94 percent and 20.6 percent, respectively, compared to 2.18 percent and 19.6 percent in 2002’s third quarter.
“We are extremely pleased to deliver solid financial results in what continues to be a challenging year for the economy in general,” stated George A. Schaefer, Jr., President and CEO. “Our employees are to be commended for their hard work in continuing to focus on the things we can control. Local market execution, disciplined expense control, an unwavering focus on revenue growth and a conservative approach to risk management continue to differentiate Fifth Third from our competitors. Earnings this quarter were highlighted by strong loan and deposit sales results and continued strength from our service businesses. The credit quality of our loan portfolio remained strong in the third quarter and shows signs of improvement in the near-term despite the lack of a meaningful rebound in economic activity. Our outlook for the remainder of the year and into 2004 remains upbeat as our sales force and affiliate management teams continue to focus on winning customer relationships and cross-selling additional products and services.”
“Fifth Third has worked extremely hard in recent months to strengthen risk management processes and internal controls. Comprehensive third-party reviews of these areas have been completed and Fifth Third is continuing to focus on areas for improvement. I’m very proud of the hard work of our employees in implementing the investments Fifth Third has made in technology, operations, internal audit and risk management in recent periods. We feel the progress that we are making in these areas will complement our long-standing conservative operating principles and serve to make Fifth Third an even stronger company as we continue to grow.”
Strong Loan and Deposit Growth, Balance Sheet Trends
Loan and lease balances exhibited very strong growth with period end loans and leases increasing by $2.4 billion, or 20 percent on an annualized sequential basis from last quarter, driven primarily by very strong results in consumer lending and continued growth in commercial loans and leases. On an average basis, total loans and leases increased by 18 percent over the same quarter last year. Direct installment loan originations remained very strong and totaled $2.2 billion in the third quarter, compared to $2.0 billion last quarter, with balances increasing by 20 percent over the third quarter of last year and 33 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. Period end commercial loan and lease
balances increased by 12 percent over the same quarter last year and by over $330 million from last quarter. Growth in middle-market and small business commercial loan originations during the quarter was partially mitigated by seasonal decreases in existing commercial line of credit utilization percentages across the footprint. During the third quarter, Fifth Third securitized and sold $903 million in home equity lines of credit to limit balance sheet leverage due to the exceptionally strong demand experienced in this asset class over recent periods relative to the entire loan and lease portfolio.
Commercial customer additions and net new retail checking account growth resulted in another quarter of positive deposit growth for Fifth Third. Average interest checking balances and average demand deposit balances increased by nine percent and 20 percent, respectively, with average transaction account balances as a whole increasing nine percent compared to the same quarter last year. Sequentially, average demand deposits and interest checking balances increased by 32 percent and three percent on an annualized basis, respectively. The level of savings, money market, and time deposit balances continued to moderate given the low level of interest rates. Fifth Third is continuing to focus on net checking account growth in its retail and commercial franchises.
Net interest income on a fully-taxable equivalent basis increased seven percent over the same quarter last year primarily due to strong earning asset growth. The implementation of SFAS No. 150 during the third quarter, discussed in greater detail later in this release, and the resulting reclassification of approximately $10.2 million of minority interest expense into interest expense, impacted net interest income and margin performance comparisons to prior periods. Additional contraction in the net interest margin in the third quarter is attributable to the effect of the absolute level of interest rates on earning asset yields and the impact of higher origination volumes at lower market rates of interest. Specifically, the average yield on interest earning assets declined 33 bp and the variance between margin and rate spread compressed six bp from the second quarter, driving a two percent sequential decrease in net interest income on a fully-taxable equivalent basis despite strong loan growth in the quarter. Third quarter performance trends were also impacted by the prepayments and sales of mortgage-backed securities that resulted in a $1.0 billion decrease in the available for sale securities portfolio. These actions will serve to stabilize near and intermediate term net interest income performance trends in a volatile interest rate environment and maintain Fifth Third’s interest rate risk posture. Overall, earning asset yields continue to be impacted by loan growth and the prepayment of assets resulting in shorter durations and considerable cash flows. Fifth Third expects that margin and net interest income trends in coming periods will benefit from the recent slowing of prepayment speeds.
Other Operating Income
Recent strong business line revenue growth trends continued in the third quarter with total other operating income up 12 percent over the same quarter last year.
Fifth Third Processing Solutions, our Electronic Payment Processing division, delivered a six percent increase in revenues over the third 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, sluggish growth in the retail sector of the economy and a $5 million third quarter revenue impact associated with the recent MasterCard®/Visa® settlement. Revenue from Electronic Funds Transfer (EFT) declined two percent from the same quarter last year and merchant processing increased 13 percent over the same quarter last year despite growth of only approximately two percent in transaction volumes from the existing merchant customer base. Fifth Third Processing Solutions continues to realize strong sales momentum from the addition of new customer relationships in both its Merchant Services and EFT businesses. Fifth Third Processing Solutions now handles electronic processing for over 194,000 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 10 percent over the same quarter last year. The third quarter increase was highlighted by a nine percent increase in retail deposit based revenues and an 11 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.
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Mortgage net service revenue totaled $74.8 million in the third quarter compared to $92.8 million last quarter and $9.4 million in 2002’s third 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 totaled $94.6 million last quarter and $43.2 million in 2002’s third quarter. Mortgage originations totaled $4.9 billion in the third quarter versus $4.9 billion last quarter and $2.7 billion in the third quarter of last year. The $18.0 million decrease in mortgage banking revenues relative to last quarter is primarily attributable to movements in interest rates during the quarter and the corresponding impacts on loan sales into the secondary market. Fifth Third currently expects mortgage banking originations to decline from recent period record levels as refinance activity and new applications continue to decline. Third quarter mortgage net service revenue was comprised of $120.1 million in total mortgage banking fees and loan sales, less $16.0 million of losses and mark-to-market adjustments on both settled and outstanding free-standing derivative financial instruments and less $29.3 million in net valuation adjustments and amortization on mortgage servicing rights. The mark-to-market adjustments and settlement of free-standing derivative financial instruments and corresponding valuation adjustments resulted from higher interest rate volatility and the resulting impact of changing prepayment speeds on the mortgage servicing portfolio. The mortgage servicing asset, net of the valuation reserve, is $274.6 million at September 30, 2003, compared to $244.4 million last quarter and $254.3 million a year ago.
Investment Advisory revenues increased six percent over the same quarter last year and seven percent on an annualized basis from last quarter. The increase in service revenue compared to the same quarter last year resulted primarily from strengthening sales results in Retirement Plan Services and improved institutional asset management revenues. 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 $32 billion in assets under management and $193 billion in assets under care.
Other service charges and fee revenue totaled $171.4 million in the third quarter, a 19 percent increase from the third quarter last year and a 23 percent increase from last quarter. Compared to the third quarter of last year, commercial banking revenues increased 26 percent, institutional fixed income trading and sales revenues increased 74 percent, cardholder fee revenue increased 36 percent, indirect loan fees increased 25 percent and insurance revenue decreased 37 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 are also impacted by a $22 million gain on the previously discussed securitization and sale of $903 million of home equity lines of credit during the third quarter.
Operating Expenses
Third quarter operating expenses increased three percent over the same period last year with direct comparisons to prior periods impacted by the following factors: (i) the early implementation of FASB Interpretation No. 46 (FIN 46) in the third quarter of 2003, discussed in greater detail later in this release, resulted in the recognition of $50 million of depreciation expense on operating lease assets captured as a component of operating expenses; (ii) an $82 million pre-tax charge realized in the third quarter of 2002 related to treasury clearing and other related settlement accounts; (iii) a $30.8 million pre-tax recovery of the above mentioned treasury charge realized as a credit to other operating expense in the second quarter of 2003; and (iv) a charge of $20.1 million related to the early retirement of approximately $200 million of Federal Home Loan Bank advances in the second quarter of 2003. Fifth Third’s third quarter efficiency ratio stands at 44.8 percent compared to 43.5 percent last quarter and 47.8 percent in the third quarter of last year.
Excluding the impact of the above mentioned factors, operating expenses increased by nine percent over the same quarter last year and decreased by 14 percent on an annualized basis from last quarter; comparisons being
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provided to supplement an understanding of the fundamental trends in operating expenses. The increase over the same quarter last year is primarily attributable to the 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 and increasing insurance and other employee benefit expenses. Expense improvement from last quarter relates primarily to decreases in third- party consultant expenses. Fifth Third expects continued near-term improvement from certain volume related expense items and efficiency initiatives related to non-risk management expenses.
Credit Quality
Credit quality metrics and trends improved modestly in the third quarter. Third quarter net charge-offs as a percentage of average loans and leases were 59 bp, compared to 64 bp last quarter. Nonperforming assets (NPAs) were 62 bp of total loans and leases and other real estate owned at September 30, 2003, consistent with the 62 bp posted last quarter. Overall, the level of nonperforming loans and net charge-offs remain a small percentage of the total loan and lease portfolio. Net charge-offs for the quarter were $75.1 million, compared to $77.5 million last quarter and $43.6 million in the third quarter of 2002. Commercial loan and lease net charge-offs declined modestly from the second quarter and totaled $43.1 million in the third quarter. The third quarter provision for loan and lease losses totaled $112.1 million, compared to $108.9 million last quarter and $55.5 million in the same quarter last year, resulting in a $37.0 million increase in the credit loss reserve which remained at 1.49 percent of total loans and leases outstanding.
Other Items
The early adoption on July 1, 2003 of the new FIN 46, “Consolidation of Variable Interest Entities,” required Fifth Third to consolidate a special purpose entity involved in the sale-leaseback of certain auto leases as Fifth Third was deemed to be the primary beneficiary under the provisions of this new Interpretation. Consolidation of these operating lease assets did not impact risk-based capital ratios or bottom line income statement trends; however, lease payments on the operating lease assets are now reflected as a component of other operating income and depreciation expense is now reflected as component of operating expenses. As of September 30, 2003, the total outstanding balance of leased autos sold was $900 million. Adopting the provisions of this Interpretation required Fifth Third to recognize a below-the-line after-tax cumulative effect charge in the third quarter of $10.8 million (approximately $.02 per diluted share) representing the difference between the carrying value of the leased autos sold and the carrying value of the newly consolidated liability.
The adoption on July 1, 2003 of SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” required a reclassification of minority interest expense to interest expense for preferred stock issued during 2001 by a subsidiary of Fifth Third. The existence of the mandatory redemption feature of this issue upon its mandatory conversion to trust preferred securities necessitated this reclassification between expense categories beginning in the third quarter of 2003 and will not result in any change in bottom line income statement trends.
Conference Call
Fifth Third will host a conference call to discuss these third quarter financial results at 9:30 a.m. (Eastern Daylight Time) today. Investors, analysts and other interested parties may dial into the conference call at 877-309-0967 for domestic access and 706-679-3977 for international access (password: Fifth Third). A replay of the conference call will be available until 11:59 p.m. October 21, 2003 by dialing 800-642-1687 for domestic access and 706-645-9291 for international access (password: Fifth Third).
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Corporate Profile
Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. The Company has $89 billion in assets, operates 17 affiliates with 948 full-service Banking Centers, including 131 Bank Mart® locations open seven days a week inside select grocery stores and 1,891 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” or similar expressions or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) competitive pressures among depository institutions increase significantly; (2) changes in the interest rate environment reduce interest 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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FIFTH THIRD BANCORP AND SUBSIDIARIES
Quarterly Financial Review for September 30, 2003
Table of Contents
| | Page
|
Earnings Review: | | |
Financial Highlights | | 7-8 |
Consolidated Statements of Income | | 9-10 |
Consolidated Statements of Changes in Shareholders’ Equity | | 11 |
Condensed Consolidated Quarterly Statements of Income (Taxable Equivalent) | | 12 |
Other Operating Income and Operating Expenses | | 13 |
| |
Financial Condition: | | |
Consolidated Balance Sheets | | 14 |
Loans and Leases Serviced | | 15 |
Consolidated Average Balance Sheets, Yields (Taxable Equivalent) and Rates | | 16-17 |
Regulatory Capital | | 18 |
Asset Quality | | 19 |
6
FIFTH THIRD BANCORP AND SUBSIDIARIES
Financial Highlights
(unaudited)
| | | For the Three Months Ended
| | Percent Change
| |
| | | September 30, 2003
| | | September 30, 2002
| |
Earnings ($ in thousands, except per share) | | | | | | | | | |
Net Interest Income (Taxable Equivalent) | | $ | 734,707 | | | 688,253 | | 6.7 | |
Net Income Available to Common Shareholders | | | 437,198 | | | 416,554 | | 5.0 | |
Earnings Per Share: | | | | | | | | | |
Basic | | | 0.77 | | | 0.72 | | 6.9 | |
Diluted | | | 0.76 | | | 0.70 | | 8.6 | |
| | | |
Key Ratios (percent) | | | | | | | | | |
Return on Average Assets (ROAA) | | | 1.94 | % | | 2.18 | | (11.0 | ) |
Return on Average Equity (ROAE) | | | 20.6 | | | 19.6 | | 5.1 | |
Net Interest Margin (Taxable Equivalent) | | | 3.52 | | | 3.91 | | (10.0 | ) |
Efficiency | | | 44.8 | | | 47.8 | | (6.3 | ) |
Average Shareholders’ Equity to Average Assets | | | 9.42 | | | 11.11 | | (15.2 | ) |
Risk-Based Capital (a): | | | | | | | | | |
Tier 1 Capital | | | 11.54 | | | 12.11 | | (4.7 | ) |
Total Capital | | | 13.98 | | | 13.98 | | 0.0 | |
Tier 1 Leverage | | | 9.23 | | | 10.22 | | (9.7 | ) |
| | | |
Common Stock Data | | | | | | | | | |
Cash Dividends Declared Per Share | | $ | 0.29 | | | 0.26 | | 11.5 | |
Book Value Per Share | | | 15.00 | | | 14.48 | | 3.6 | |
Market Price Per Share: | | | | | | | | | |
High | | | 59.44 | | | 68.54 | | (13.3 | ) |
Low | | | 52.50 | | | 55.26 | | (5.0 | ) |
End of Period | | | 55.54 | | | 61.23 | | (9.3 | ) |
Price/Earnings Ratio (b) | | | 18.83 | | | 22.76 | | (17.3 | ) |
| | |
| | | For the Nine Months Ended
| | Percent
Change
| |
| | | September 30,
2003
| | | September 30,
2002
| |
Earnings ($ in thousands, except per share) | | | | | | | | | |
Net Interest Income (Taxable Equivalent) | | $ | 2,200,153 | | | 2,030,604 | | 8.3 | |
Net Income Available to Common Shareholders | | | 1,293,505 | | | 1,210,601 | | 6.8 | |
Earnings Per Share: | | | | | | | | | |
Basic | | | 2.26 | | | 2.08 | | 8.7 | |
Diluted | | | 2.23 | | | 2.04 | | 9.3 | |
| | | |
Key Ratios (percent) | | | | | | | | | |
Return on Average Assets (ROAA) | | | 2.00 | % | | 2.20 | | (9.1 | ) |
Return on Average Equity (ROAE) | | | 20.0 | | | 20.0 | | 0.0 | |
Net Interest Margin (Taxable Equivalent) | | | 3.65 | | | 4.02 | | (9.2 | ) |
Efficiency | | | 44.2 | | | 45.2 | | (2.2 | ) |
Average Shareholders’ Equity to Average Assets | | | 9.99 | | | 11.04 | | (9.5 | ) |
| | | |
Common Stock Data | | | | | | | | | |
Cash Dividends Declared Per Share | | $ | 0.84 | | | 0.72 | | 16.7 | |
Market Price Per Share: | | | | | | | | | |
High | | | 62.15 | | | 69.70 | | (10.8 | ) |
Low | | | 47.05 | | | 55.26 | | (14.9 | ) |
| (a) | | September 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)
Values Per Share |
| | |
| | | Book Value Per Share
| | Market Price Range 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 | | | 15.00 | | | | | | 47.05 | | | 62.15 |
|
Earnings Per Share, Basic |
| | | |
| | | For the Three Months Ended
| | | | Year-to-Date
|
| | | 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 | | | 0.77 | | | | | | | | | 2.26 |
|
Earnings Per Share, Diluted |
| | | |
| | | For the Three Months Ended
| | | | Year-to-Date
|
| | | 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 | | | 0.76 | | | | | | | | | 2.23 |
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FIFTH THIRD BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited) ($ in thousands, except per share)
| | | For the Three Months Ended
|
| | | September 30, 2003
| | September 30, 2002
|
Interest Income | | | | | |
Interest and Fees on Loans and Leases | | $ | 676,628 | | 702,948 |
Interest on Securities: | | | | | |
Taxable | | | 292,942 | | 318,238 |
Exempt from Income Taxes | | | 12,520 | | 14,080 |
| | |
|
| |
|
Total Interest on Securities | | | 305,462 | | 332,318 |
Interest on Other Short-Term Investments | | | 888 | | 1,281 |
| | |
|
| |
|
Total Interest Income | | | 982,978 | | 1,036,547 |
Interest Expense | | | | | |
Interest on Deposits: | | | | | |
Interest Checking | | | 43,015 | | 80,691 |
Savings | | | 14,362 | | 44,819 |
Money Market | | | 7,458 | | 6,910 |
Other Time | | | 49,266 | | 81,967 |
Certificates—$100,000 and Over | | | 11,524 | | 12,518 |
Foreign Office | | | 8,772 | | 7,265 |
| | |
|
| |
|
Total Interest on Deposits | | | 134,397 | | 234,170 |
Interest on Federal Funds Borrowed | | | 19,056 | | 12,018 |
Interest on Other Short-Term Borrowings | | | 13,800 | | 17,881 |
Interest on Long-Term Debt | | | 90,679 | | 94,805 |
| | |
|
| |
|
Total Interest Expense | | | 257,932 | | 358,874 |
| | |
|
| |
|
Net Interest Income | | | 725,046 | | 677,673 |
Provision for Credit Losses | | | 112,082 | | 55,524 |
| | |
|
| |
|
Net Interest Income After Provision for Credit Losses | | | 612,964 | | 622,149 |
Other Operating Income | | | | | |
Electronic Payment Processing Income | | | 143,210 | | 134,866 |
Service Charges on Deposits | | | 125,130 | | 113,770 |
Mortgage Banking Net Revenue | | | 74,830 | | 9,401 |
Investment Advisory Income | | | 87,472 | | 82,723 |
Other Service Charges and Fees | | | 171,365 | | 143,767 |
Operating Lease Income | | | 65,809 | | — |
Securities Gains, Net | | | 15,308 | | 89,347 |
Securities Gains, Net—Non-Qualifying Hedges on Mortgage Servicing | | | — | | 33,783 |
| | |
|
| |
|
Total Other Operating Income | | | 683,124 | | 607,657 |
Operating Expenses | | | | | |
Salaries, Wages and Incentives | | | 226,212 | | 219,465 |
Employee Benefits | | | 61,223 | | 47,581 |
Equipment Expenses | | | 21,047 | | 19,459 |
Net Occupancy Expenses | | | 36,299 | | 36,209 |
Operating Lease Expenses | | | 49,558 | | — |
Other Operating Expenses | | | 240,531 | | 296,448 |
| | |
|
| |
|
Total Operating Expenses | | | 634,870 | | 619,162 |
| | |
|
| |
|
Income Before Income Taxes, Minority Interest and Cumulative Effect | | | 661,218 | | 610,644 |
Applicable Income Taxes | | | 213,073 | | 184,483 |
| | |
|
| |
|
Income Before Minority Interest and Cumulative Effect | | | 448,145 | | 426,161 |
Minority Interest, Net of Tax | | | — | | 9,422 |
| | |
|
| |
|
Income Before Cumulative Effect | | | 448,145 | | 416,739 |
Cumulative Effect of Change in Accounting Principle, Net of Tax | | | 10,762 | | — |
| | |
|
| |
|
Net Income | | | 437,383 | | 416,739 |
Dividend on Preferred Stock | | | 185 | | 185 |
| | |
|
| |
|
Net Income Available to Common Shareholders | | $ | 437,198 | | 416,554 |
| | |
|
| |
|
Earnings Per Share: | | | | | |
Basic | | $ | 0.77 | | 0.72 |
Diluted | | $ | 0.76 | | 0.70 |
| | |
|
| |
|
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FIFTH THIRD BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited) ($ in thousands, except per share)
| | | For the Nine Months Ended
|
| | | September 30, 2003
| | September 30, 2002
|
Interest Income | | | | | |
Interest and Fees on Loans and Leases | | $ | 2,042,792 | | 2,104,189 |
Interest on Securities: | | | | | |
Taxable | | | 919,606 | | 950,558 |
Exempt from Income Taxes | | | 38,054 | | 42,215 |
| | |
|
| |
|
Total Interest on Securities | | | 957,660 | | 992,773 |
Interest on Other Short-Term Investments | | | 2,742 | | 4,598 |
| | |
|
| |
|
Total Interest Income | | | 3,003,194 | | 3,101,560 |
Interest Expense | | | | | |
Interest on Deposits: | | | | | |
Interest Checking | | | 144,243 | | 227,738 |
Savings | | | 51,940 | | 121,554 |
Money Market | | | 24,503 | | 22,769 |
Other Time | | | 166,173 | | 286,255 |
Certificates—$100,000 and Over | | | 39,257 | | 45,681 |
Foreign Office | | | 29,490 | | 25,428 |
| | |
|
| |
|
Total Interest on Deposits | | | 455,606 | | 729,425 |
Interest on Federal Funds Borrowed | | | 60,289 | | 34,816 |
Interest on Short-Term Bank Notes | | | — | | 54 |
Interest on Other Short-Term Borrowings | | | 40,645 | | 50,758 |
Interest on Long-Term Debt | | | 275,748 | | 284,651 |
| | |
|
| |
|
Total Interest Expense | | | 832,288 | | 1,099,704 |
| | |
|
| |
|
Net Interest Income | | | 2,170,906 | | 2,001,856 |
Provision for Credit Losses | | | 305,775 | | 174,526 |
| | |
|
| |
|
Net Interest Income After Provision for Credit Losses | | | 1,865,131 | | 1,827,330 |
Other Operating Income | | | | | |
Electronic Payment Processing Income | | | 414,848 | | 364,711 |
Service Charges on Deposits | | | 360,279 | | 318,430 |
Mortgage Banking Net Revenue | | | 244,505 | | 121,230 |
Investment Advisory Income | | | 255,745 | | 259,130 |
Other Service Charges and Fees | | | 468,980 | | 415,714 |
Operating Lease Income | | | 65,809 | | — |
Securities Gains, Net | | | 79,077 | | 98,848 |
Securities Gains, Net—Non-Qualifying Hedges on Mortgage Servicing | | | 2,809 | | 32,742 |
| | |
|
| |
|
Total Other Operating Income | | | 1,892,052 | | 1,610,805 |
Operating Expenses | | | | | |
Salaries, Wages and Incentives | | | 704,356 | | 662,207 |
Employee Benefits | | | 186,893 | | 141,908 |
Equipment Expenses | | | 61,103 | | 59,491 |
Net Occupancy Expenses | | | 112,574 | | 105,747 |
Operating Lease Expense | | | 49,558 | | — |
Other Operating Expenses | | | 696,301 | | 677,552 |
| | |
|
| |
|
Total Operating Expenses | | | 1,810,785 | | 1,646,905 |
| | |
|
| |
|
Income Before Income Taxes, Minority Interest and Cumulative Effect | | | 1,946,398 | | 1,791,230 |
Applicable Income Taxes | | | 621,118 | | 551,794 |
| | |
|
| |
|
Income Before Minority Interest and Cumulative Effect | | | 1,325,280 | | 1,239,436 |
Minority Interest, Net of Tax | | | 20,458 | | 28,280 |
| | |
|
| |
|
Income Before Cumulative Effect | | | 1,304,822 | | 1,211,156 |
Cumulative Effect of Change in Accounting Principle, Net of Tax | | | 10,762 | | — |
| | |
|
| |
|
Net Income | | | 1,294,060 | | 1,211,156 |
Dividend on Preferred Stock | | | 555 | | 555 |
| | |
|
| |
|
Net Income Available to Common Shareholders | | $ | 1,293,505 | | 1,210,601 |
| | |
|
| |
|
Earnings Per Share: | | | | | |
Basic | | $ | 2.26 | | 2.08 |
Diluted | | $ | 2.23 | | 2.04 |
| | |
|
| |
|
10
FIFTH THIRD BANCORP AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders’ Equity
(unaudited) ($ in thousands, except per share)
| | | For the Three Months Ended
| |
| | | September 30, 2003
| | | September 30, 2002
| |
Total Shareholders’ Equity, Beginning | | $ | 8,554,234 | | | 8,190,339 | |
Net Income | | | 437,383 | | | 416,739 | |
Nonowner Changes in Equity, Net of Tax: | | | | | | | |
Change in Unrealized Gains and (Losses) on Securities Available-for-Sale and Qualifying Cash Flow Hedges | | | (245,499 | ) | | 95,221 | |
| | |
|
|
| |
|
|
Net Income and Nonowner Changes in Equity | | | 191,884 | | | 511,960 | |
Cash Dividends Declared: | | | | | | | |
Common Stock (2003—$.29 per share and 2002—$.26 per share) | | | (165,559 | ) | | (150,475 | ) |
Preferred Stock | | | (185 | ) | | (185 | ) |
Stock Options Exercised Including Treasury Shares Issued | | | 12,883 | | | 28,898 | |
Loans Issued Related to Exercise of Stock Options | | | (17,082 | ) | | — | |
Corporate Tax Benefit Related to Exercise of Non-Qualified Stock Options | | | — | | | 42 | |
Shares Purchased | | | (22,315 | ) | | (202,382 | ) |
Other | | | (74 | ) | | (2,459 | ) |
| | |
|
|
| |
|
|
Total Shareholders’ Equity, Ending | | $ | 8,553,786 | | | 8,375,738 | |
| | |
|
|
| |
|
|
| |
| | | For the Nine Months Ended
| |
| | | September 30,
2003
| | | September 30,
2002
| |
Total Shareholders’ Equity, Beginning | | $ | 8,475,017 | | | 7,639,277 | |
Net Income | | | 1,294,060 | | | 1,211,156 | |
Nonowner Changes in Equity, Net of Tax: | | | | | | | |
Change in Unrealized Gains and (Losses) on Securities Available-for-Sale and Qualifying Cash Flow Hedges | | | (378,408 | ) | | 311,935 | |
| | |
|
|
| |
|
|
Net Income and Nonowner Changes in Equity | | | 915,652 | | | 1,523,091 | |
Cash Dividends Declared: | | | | | | | |
Common Stock (2003—$.84 per share and 2002—$.72 per share) | | | (480,446 | ) | | (418,049 | ) |
Preferred Stock | | | (555 | ) | | (555 | ) |
Stock Options Exercised Including Treasury Shares Issued | | | 68,159 | | | 93,845 | |
Loans Issued Related to Exercise of Stock Options | | | (37,184 | ) | | — | |
Corporate Tax Benefit Related to Exercise of Non-Qualified Stock Options | | | 309 | | | 408 | |
Shares Purchased | | | (384,135 | ) | | (458,418 | ) |
Other | | | (3,031 | ) | | (3,861 | ) |
| | |
|
|
| |
|
|
Total Shareholders’ Equity, Ending | | $ | 8,553,786 | | | 8,375,738 | |
| | |
|
|
| |
|
|
11
FIFTH THIRD BANCORP AND SUBSIDIARIES
Condensed Consolidated Quarterly Statements of Income (Taxable Equivalent)
(unaudited) ($ in thousands, except per share)
| | | For the Three Months Ended
|
| | | September 30, 2003
| | June 30, 2003
| | March 31, 2003
| | December 31, 2002
| | September 30, 2002
|
Interest Income | | $ | 982,978 | | 1,019,918 | | 1,000,298 | | 1,027,852 | | 1,036,547 |
Taxable Equivalent Adjustment | | | 9,661 | | 9,683 | | 9,902 | | 10,395 | | 10,580 |
| | |
|
| |
| |
| |
| |
|
Interest Income (Taxable Equivalent) | | | 992,639 | | 1,029,601 | | 1,010,200 | | 1,038,247 | | 1,047,127 |
Interest Expense | | | 257,932 | | 280,452 | | 293,903 | | 329,387 | | 358,874 |
| | |
|
| |
| |
| |
| |
|
Net Interest Income (Taxable Equivalent) | | | 734,707 | | 749,149 | | 716,297 | | 708,860 | | 688,253 |
Provision for Credit Losses | | | 112,082 | | 108,877 | | 84,817 | | 72,085 | | 55,524 |
| | |
|
| |
| |
| |
| |
|
Net Interest Income After Provision for Credit Losses (Taxable Equivalent) | | | 622,625 | | 640,272 | | 631,480 | | 636,775 | | 632,729 |
Other Operating Income | | | 683,124 | | 620,889 | | 588,039 | | 583,322 | | 607,657 |
Operating Expenses | | | 634,870 | | 596,130 | | 579,785 | | 569,282 | | 619,162 |
| | |
|
| |
| |
| |
| |
|
Income Before Income Taxes, Minority Interest and Cumulative Effect (Taxable Equivalent) | | | 670,879 | | 665,031 | | 639,734 | | 650,815 | | 621,224 |
Applicable Income Taxes | | | 213,073 | | 207,446 | | 200,599 | | 207,463 | | 184,483 |
Taxable Equivalent Adjustment | | | 9,661 | | 9,683 | | 9,902 | | 10,395 | | 10,580 |
| | |
|
| |
| |
| |
| |
|
Income Before Minority Interest and Cumulative Effect | | | 448,145 | | 447,902 | | 429,233 | | 432,957 | | 426,161 |
Minority Interest, Net of Tax | | | — | | 10,229 | | 10,229 | | 9,400 | | 9,422 |
| | |
|
| |
| |
| |
| |
|
Income Before Cumulative Effect | | | 448,145 | | 437,673 | | 419,004 | | 423,557 | | 416,739 |
Cumulative Effect of Change in Accounting Principle, Net of Tax | | | 10,762 | | — | | — | | — | | — |
| | |
|
| |
| |
| |
| |
|
Net Income | | | 437,383 | | 437,673 | | 419,004 | | 423,557 | | 416,739 |
Dividend on Preferred Stock | | | 185 | | 185 | | 185 | | 185 | | 185 |
| | |
|
| |
| |
| |
| |
|
Net Income Available to Common Shareholders | | $ | 437,198 | | 437,488 | | 418,819 | | 423,372 | | 416,554 |
| | |
|
| |
| |
| |
| |
|
Earnings Per Share: | | | | | | | | | | | |
Basic | | $ | 0.77 | | 0.76 | | 0.73 | | 0.73 | | 0.72 |
Diluted | | $ | 0.76 | | 0.75 | | 0.72 | | 0.72 | | 0.70 |
| | |
|
| |
| |
| |
| |
|
12
FIFTH THIRD BANCORP AND SUBSIDIARIES
Other Operating Income and Operating Expenses
(unaudited) ($ in thousands)
| | | For the Three Months Ended
|
| | | September 30, 2003
| | June 30, 2003
| | March 31, 2003
| | December 31, 2002
| | September 30, 2002
|
Other Operating Income | | | | | | | | | | | |
Electronic Payment Processing Income | | $ | 143,210 | | 141,501 | | 130,138 | | 147,343 | | 134,866 |
Service Charges on Deposits | | | 125,130 | | 120,826 | | 114,322 | | 112,646 | | 113,770 |
Mortgage Banking Net Revenue | | | 74,830 | | 92,826 | | 76,849 | | 66,689 | | 9,401 |
Investment Advisory Income | | | 87,472 | | 85,866 | | 82,407 | | 77,117 | | 82,723 |
Other Service Charges and Fees | | | 171,365 | | 139,217 | | 158,399 | | 164,013 | | 143,767 |
Operating Lease Income | | | 65,809 | | — | | — | | — | | — |
Securities Gains, Net | | | 15,308 | | 38,860 | | 24,909 | | 14,731 | | 89,347 |
Securities Gains, Net—Non-Qualifying Hedges on Mortgage Servicing | | | — | | 1,793 | | 1,015 | | 783 | | 33,783 |
| | |
|
| |
| |
| |
| |
|
Total Other Operating Income | | | 683,124 | | 620,889 | | 588,039 | | 583,322 | | 607,657 |
| | |
|
| |
| |
| |
| |
|
Operating Expenses | | | | | | | | | | | |
Salaries, Wages and Incentives | | | 226,212 | | 243,885 | | 234,260 | | 242,673 | | 219,465 |
Employee Benefits | | | 61,223 | | 64,870 | | 60,800 | | 59,740 | | 47,581 |
Equipment Expenses | | | 21,047 | | 20,343 | | 19,713 | | 19,861 | | 19,459 |
Net Occupancy Expenses | | | 36,299 | | 37,857 | | 38,417 | | 36,707 | | 36,209 |
Operating Lease Expenses | | | 49,558 | | — | | — | | — | | — |
Other Operating Expenses (a) | | | 240,531 | | 229,175 | | 226,595 | | 210,301 | | 296,448 |
| | |
|
| |
| |
| |
| |
|
Total Operating Expenses | | $ | 634,870 | | 596,130 | | 579,785 | | 569,282 | | 619,162 |
| | |
|
| |
| |
| |
| |
|
Full-Time Equivalent Employees | | | 19,770 | | 19,830 | | 19,573 | | 19,119 | | 18,764 |
Banking Centers | | | 942 | | 943 | | 941 | | 930 | | 919 |
| | |
|
| |
| |
| |
| |
|
| (a) | | Includes intangible amortization expense of $9.5 million, $11.6 million, $9.3 million, $9.4 million and $9.0 million for the three months ended September 30, 2003, June 30, 2003, March 31, 2003, December 31, 2002 and September 30, 2002, respectively. |
13
FIFTH THIRD BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited) ($ in thousands, except per share)
| | | As of
| |
| | | September 30, 2003
| | | September 30, 2002
| |
Assets | | | | | | | |
Cash and Due from Banks | | $ | 2,393,563 | | | 1,830,093 | |
Securities Available-for-Sale (a) | | | 28,011,116 | | | 24,402,195 | |
Securities Held-to-Maturity (b) | | | 145,051 | | | 21,372 | |
Other Short-Term Investments | | | 258,265 | | | 597,836 | |
Loans Held for Sale | | | 1,528,137 | | | 2,663,976 | |
Loans and Leases: | | | | | | | |
Commercial Loans | | | 13,824,382 | | | 12,427,344 | |
Construction Loans | | | 3,470,077 | | | 3,207,166 | |
Commercial Mortgage Loans | | | 6,590,021 | | | 5,659,393 | |
Commercial Lease Financing | | | 4,249,420 | | | 3,671,477 | |
Residential Mortgage Loans | | | 4,493,264 | | | 3,037,955 | |
Consumer Loans | | | 17,710,265 | | | 14,756,437 | |
Consumer Lease Financing | | | 2,839,928 | | | 2,484,536 | |
Unearned Income | | | (1,370,918 | ) | | (1,038,739 | ) |
| | |
|
|
| |
|
|
Total Loans and Leases | | | 51,806,439 | | | 44,205,569 | |
Reserve for Credit Losses | | | (771,709 | ) | | (660,934 | ) |
| | |
|
|
| |
|
|
Total Loans and Leases, net | | | 51,034,730 | | | 43,544,635 | |
Bank Premises and Equipment | | | 999,891 | | | 849,540 | |
Operating Lease Equipment | | | 899,348 | | | — | |
Accrued Income Receivable | | | 425,143 | | | 524,055 | |
Goodwill | | | 699,981 | | | 709,872 | |
Intangible Assets | | | 212,511 | | | 244,265 | |
Servicing Rights | | | 284,812 | | | 254,265 | |
Other Assets | | | 2,521,166 | | | 2,051,906 | |
| | |
|
|
| |
|
|
Total Assets | | $ | 89,413,714 | | | 77,694,010 | |
| | |
|
|
| |
|
|
Liabilities | | | | | | | |
Deposits: | | | | | | | |
Demand | | $ | 11,875,326 | | | 9,926,197 | |
Interest Checking | | | 18,714,625 | | | 17,207,565 | |
Savings | | | 7,894,918 | | | 10,838,103 | |
Money Market | | | 3,389,447 | | | 996,305 | |
Other Time | | | 6,686,020 | | | 8,615,910 | |
Certificates—$100,000 and Over | | | 2,009,068 | | | 1,437,289 | |
Foreign Office | | | 3,724,791 | | | 2,424,831 | |
| | |
|
|
| |
|
|
Total Deposits | | | 54,294,195 | | | 51,446,200 | |
Federal Funds Borrowed | | | 6,833,511 | | | 3,009,053 | |
Other Short-Term Borrowings | | | 6,907,417 | | | 4,155,184 | |
Accrued Taxes, Interest and Expenses | | | 2,390,876 | | | 2,341,017 | |
Other Liabilities | | | 1,179,393 | | | 456,596 | |
Long-Term Debt | | | 9,254,536 | | | 7,458,117 | |
| | |
|
|
| |
|
|
Total Liabilities | | | 80,859,928 | | | 68,866,167 | |
Minority Interest | | | — | | | 452,105 | |
Total Shareholders’ Equity (c) | | | 8,553,786 | | | 8,375,738 | |
| | |
|
|
| |
|
|
Total Liabilities and Shareholders’ Equity | | $ | 89,413,714 | | | 77,694,010 | |
| | |
|
|
| |
|
|
| (a) | | Amortized cost: September 30, 2003—$27,930,841 and September 30, 2002—$23,876,165. |
| (b) | | Market values: September 30, 2003—$145,051 and September 30, 2002—$21,372. |
| (c) | | Common Shares: Stated value $2.22 per share; authorized 1,300,000,000; outstanding September 30, 2003—570,298,014 (excluding 13,153,677 treasury shares) and September 30, 2002—578,525,454 (excluding 4,901,650 treasury shares). |
14
FIFTH THIRD BANCORP AND SUBSIDIARIES
Loans and Leases Serviced
(unaudited) ($ in thousands)
| | | As of
|
| | | September 30, 2003
| | June 30, 2003
| | March 31, 2003
| | December 31, 2002
| | September 30, 2002
|
Commercial | | | | | | | | | | | |
Commercial Loans | | $ | 13,824,371 | | 14,014,541 | | 13,380,264 | | 12,742,725 | | 12,427,271 |
Mortgage | | | 6,590,021 | | 6,297,335 | | 5,983,988 | | 5,885,544 | | 5,659,393 |
Construction | | | 3,143,315 | | 3,052,459 | | 3,064,878 | | 3,009,113 | | 2,929,580 |
Leases | | | 3,160,839 | | 3,021,888 | | 2,998,208 | | 3,019,190 | | 2,917,129 |
| | |
|
| |
| |
| |
| |
|
Subtotal | | | 26,718,546 | | 26,386,223 | | 25,427,338 | | 24,656,572 | | 23,933,373 |
Consumer | | | | | | | | | | | |
Consumer Loans | | | 17,090,372 | | 15,785,717 | | 14,862,765 | | 14,578,705 | | 14,277,085 |
Mortgage & Construction | | | 4,820,026 | | 4,054,287 | | 3,966,160 | | 3,812,518 | | 3,315,540 |
Credit Card | | | 619,893 | | 588,338 | | 562,335 | | 537,549 | | 479,352 |
Leases | | | 2,557,602 | | 2,541,934 | | 2,448,098 | | 2,342,792 | | 2,200,219 |
| | |
|
| |
| |
| |
| |
|
Subtotal | | | 25,087,893 | | 22,970,276 | | 21,839,358 | | 21,271,564 | | 20,272,196 |
| | |
|
| |
| |
| |
| |
|
Total Loans and Leases | | | 51,806,439 | | 49,356,499 | | 47,266,696 | | 45,928,136 | | 44,205,569 |
| | | | | |
Loans Held for Sale | | | 1,528,137 | | 3,245,470 | | 3,011,377 | | 3,357,507 | | 2,663,976 |
| | | | | |
Operating Lease Equipment (a) | | | 899,348 | | — | | — | | — | | — |
| | | | | |
Loans and Leases Serviced for Others: | | | | | | | | | | | |
Residential Mortgage (b) | | | 24,379,988 | | 24,990,054 | | 25,848,335 | | 26,467,761 | | 29,044,417 |
Commercial Mortgage (c) | | | 2,017,717 | | 2,008,982 | | 1,990,481 | | 1,959,290 | | 2,241,208 |
Commercial Loans (d) | | | 1,925,655 | | 1,813,106 | | 1,831,119 | | 1,762,564 | | 1,889,405 |
Consumer Loans (e) | | | 909,090 | | — | | — | | — | | — |
Consumer Leases (a) | | | — | | 1,127,470 | | 1,309,487 | | 1,475,219 | | 1,635,677 |
| | |
|
| |
| |
| |
| |
|
Total Loans and Leases Serviced for Others | | | 29,232,450 | | 29,939,612 | | 30,979,422 | | 31,664,834 | | 34,810,707 |
| | |
|
| |
| |
| |
| |
|
Total Loans and Leases Serviced | | $ | 83,466,374 | | 82,541,581 | | 81,257,495 | | 80,950,477 | | 81,680,252 |
| | |
|
| |
| |
| |
| |
|
| (a) | | 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 adopted the provisions of FASB Interpretation No. 46 and consolidated this SPE effective July 1, 2003, as Fifth Third was deemed the primary beneficiary under the provisions of this Interpretation. |
| (b) | | Fifth Third sells certain residential mortgage loans, primarily conforming and fixed-rate in nature, and retains servicing responsibilities. |
| (c) | | Fifth Third sells certain commercial mortgage loans and retains servicing responsibilities. |
| (d) | | 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. |
| (e) | | Fifth Third sells certain consumer loans that are primarily variable rate in nature and retains servicing responsibilities. |
15
FIFTH THIRD BANCORP AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields (Taxable Equivalent) and Rates
(unaudited) ($ in thousands)
| | | For the Three Months Ended
| |
| | | September 30, 2003
| | | September 30, 2002
| |
| | | Average
Balance
| | | Average Yield/Rate
| | | Average Balance
| | | Average Yield/Rate
| |
Assets | | | | | | | | | | | | | |
Interest-Earning Assets: | | | | | | | | | | | | | |
Loans and Leases | | $ | 53,871,422 | | | 5.01 | % | | 45,760,405 | | | 6.12 | % |
Taxable Securities | | | 27,658,511 | | | 4.20 | | | 22,768,169 | | | 5.55 | |
Tax Exempt Securities | | | 1,050,251 | | | 7.17 | | | 1,092,531 | | | 7.68 | |
Other Short-Term Investments | | | 256,982 | | | 1.37 | | | 255,789 | | | 1.99 | |
| | |
|
|
| |
|
| |
|
| |
|
|
Total Interest-Earning Assets | | | 82,837,166 | | | 4.75 | | | 69,876,894 | | | 5.95 | |
Cash and Due from Banks | | | 1,398,390 | | | | | | 1,503,966 | | | | |
Other Assets | | | 5,885,823 | | | | | | 4,952,376 | | | | |
Reserve for Credit Losses | | | (739,930 | ) | | | | | (657,291 | ) | | | |
| | |
|
|
| | | | |
|
| | | |
Total Assets | | $ | 89,381,449 | | | | | | 75,675,945 | | | | |
| | |
|
|
| | | | |
|
| | | |
Liabilities | | | | | | | | | | | | | |
Interest-Bearing Liabilities: | | | | | | | | | | | | | |
Interest Checking | | $ | 18,672,995 | | | 0.91 | % | | 17,056,673 | | | 1.88 | % |
Savings | | | 8,095,064 | | | 0.70 | | | 10,606,422 | | | 1.68 | |
Money Market | | | 3,356,421 | | | 0.88 | | | 1,016,131 | | | 2.70 | |
Other Time | | | 6,827,532 | | | 2.86 | | | 8,966,315 | | | 3.63 | |
Certificates-$100,000 and Over | | | 3,585,726 | | | 1.28 | | | 1,697,949 | | | 2.92 | |
Foreign Office Deposits | | | 3,340,205 | | | 1.04 | | | 1,703,362 | | | 1.69 | |
Federal Funds Borrowed | | | 7,356,536 | | | 1.03 | | | 2,679,891 | | | 1.78 | |
Other Short-Term Borrowings | | | 6,196,755 | | | 0.88 | | | 3,909,761 | | | 1.81 | |
Long-Term Debt | | | 9,580,619 | | | 3.76 | | | 7,461,781 | | | 5.04 | |
| | |
|
|
| |
|
| |
|
| |
|
|
Total Interest-Bearing Liabilities | | | 67,011,853 | | | 1.53 | | | 55,098,285 | | | 2.58 | |
Demand Deposits | | | 10,859,457 | | | | | | 9,025,412 | | | | |
Other Liabilities | | | 3,087,416 | | | | | | 2,696,873 | | | | |
| | |
|
|
| | | | |
|
| | | |
Total Liabilities | | | 80,958,726 | | | | | | 66,820,570 | | | | |
Minority Interest | | | — | | | | | | 444,319 | | | | |
Shareholders’ Equity | | | 8,422,723 | | | | | | 8,411,057 | | | | |
| | |
|
|
| | | | |
|
| | | |
Total Liabilities and Shareholders’ Equity | | $ | 89,381,449 | | | | | | 75,675,946 | | | | |
| | |
|
|
| | | | |
|
| | | |
Average Common Shares (in thousands): | | | | | | | | | | | | | |
Outstanding | | | 570,088 | | | | | | 580,504 | | | | |
Diluted | | | 578,777 | | | | | | 592,024 | | | | |
| | |
|
|
| | | | |
|
| | | |
Ratios (percent): | | | | | | | | | | | | | |
Net Interest Margin (Taxable Equivalent) | | | | | | 3.52 | % | | | | | 3.91 | % |
Net Interest Rate Spread (Taxable Equivalent) | | | | | | 3.22 | % | | | | | 3.37 | % |
Interest-Bearing Liabilities to Interest-Earning Assets | | | | | | 80.90 | % | | | | | 78.85 | % |
| | | | | | |
|
| | | | |
|
|
16
FIFTH THIRD BANCORP AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields (Taxable Equivalent) and Rates
(unaudited) ($ in thousands)
| | | For the Nine Months Ended
| |
| | | September 30, 2003
| | | September 30, 2002
| |
| | | Average
Balance
| | | Average Yield/Rate
| | | Average Balance
| | | Average Yield/Rate
| |
Assets | | | | | | | | | | | | | |
Interest-Earning Assets: | | | | | | | | | | | | | |
Loans and Leases | | $ | 51,917,515 | | | 5.29 | % | | 44,547,921 | | | 6.35 | % |
Taxable Securities | | | 27,321,557 | | | 4.50 | | | 21,468,919 | | | 5.92 | |
Tax Exempt Securities | | | 1,066,399 | | | 7.22 | | | 1,111,416 | | | 7.32 | |
Other Short-Term Investments | | | 340,529 | | | 1.08 | | | 332,952 | | | 1.85 | |
| | |
|
|
| |
|
| |
|
| |
|
|
Total Interest-Earning Assets | | | 80,646,000 | | | 5.03 | | | 67,461,208 | | | 6.20 | |
Cash and Due from Banks | | | 1,451,010 | | | | | | 1,556,876 | | | | |
Other Assets | | | 5,004,952 | | | | | | 5,049,479 | | | | |
Reserve for Credit Losses | | | (715,561 | ) | | | | | (638,509 | ) | | | |
| | |
|
|
| | | | |
|
| | | |
Total Assets | | $ | 86,386,401 | | | | | | 73,429,054 | | | | |
| | |
|
|
| | | | |
|
| | | |
Liabilities | | | | | | | | | | | | | |
Interest-Bearing Liabilities: | | | | | | | | | | | | | |
Interest Checking | | $ | 18,469,039 | | | 1.04 | % | | 15,756,530 | | | 1.93 | % |
Savings | | | 8,127,746 | | | 0.85 | | | 9,122,686 | | | 1.78 | |
Money Market | | | 3,121,811 | | | 1.05 | | | 1,212,700 | | | 2.51 | |
Other Time | | | 7,315,335 | | | 3.04 | | | 9,743,199 | | | 3.93 | |
Certificates-$100,000 and Over | | | 3,616,426 | | | 1.45 | | | 1,805,236 | | | 3.38 | |
Foreign Office Deposits | | | 3,274,870 | | | 1.20 | | | 1,850,061 | | | 1.84 | |
Federal Funds Borrowed | | | 6,831,649 | | | 1.18 | | | 2,695,237 | | | 1.73 | |
Short-Term Bank Notes | | | — | | | — | | | 2,118 | | | 3.40 | |
Other Short-Term Borrowings | | | 4,907,249 | | | 1.11 | | | 3,913,329 | | | 1.73 | |
Long-Term Debt | | | 8,611,745 | | | 4.28 | | | 7,471,048 | | | 5.09 | |
| | |
|
|
| |
|
| |
|
| |
|
|
Total Interest-Bearing Liabilities | | | 64,275,870 | | | 1.73 | | | 53,572,144 | | | 2.74 | |
Demand Deposits | | | 10,152,578 | | | | | | 8,709,379 | | | | |
Other Liabilities | | | 3,011,429 | | | | | | 2,606,299 | | | | |
| | |
|
|
| | | | |
|
| | | |
Total Liabilities | | | 77,439,877 | | | | | | 64,887,822 | | | | |
Minority Interest | | | 312,699 | | | | | | 434,527 | | | | |
Shareholders’ Equity | | | 8,633,825 | | | | | | 8,106,705 | | | | |
| | |
|
|
| | | | |
|
| | | |
Total Liabilities and Shareholders’ Equity | | $ | 86,386,401 | | | | | | 73,429,054 | | | | |
| | |
|
|
| | | | |
|
| | | |
Average Common Shares (in thousands): | | | | | | | | | | | | | |
Outstanding | | | 572,765 | | | | | | 581,626 | | | | |
Diluted | | | 581,055 | | | | | | 593,758 | | | | |
| | |
|
|
| | | | |
|
| | | |
Ratios (percent): | | | | | | | | | | | | | |
Net Interest Margin (Taxable Equivalent) | | | | | | 3.65 | % | | | | | 4.02 | % |
Net Interest Rate Spread (Taxable Equivalent) | | | | | | 3.30 | % | | | | | 3.46 | % |
Interest-Bearing Liabilities to Interest-Earning Assets | | | | | | 79.70 | % | | | | | 79.41 | % |
| | | | | | |
|
| | | | |
|
|
17
FIFTH THIRD BANCORP AND SUBSIDIARIES
Regulatory Capital
(unaudited) ($ in thousands)
| | | September 30, 2003 (a)
| | | June 30, 2003
| | | March 31, 2003
| | | December 31, 2002
| | | September 30, 2002
| |
Tier 1 Capital: | | | | | | | | | | | | | | | | |
Shareholders’ Equity | | $ | 8,553,786 | | | 8,554,234 | | | 8,663,744 | | | 8,475,017 | | | 8,375,738 | |
Goodwill and Certain Other Intangibles | | | (941,868 | ) | | (912,531 | ) | | (923,607 | ) | | (932,646 | ) | | (950,285 | ) |
Unrealized Gains | | | (42,829 | ) | | (288,328 | ) | | (348,963 | ) | | (421,237 | ) | | (321,040 | ) |
Other | | | 595,241 | | | 556,967 | | | 546,319 | | | 535,118 | | | 534,356 | |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Total Tier 1 Capital | | $ | 8,164,330 | | | 7,910,342 | | | 7,937,493 | | | 7,656,252 | | | 7,638,769 | |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Total Capital: | | | | | | | | | | | | | | | | |
Tier 1 Capital | | $ | 8,164,330 | | | 7,910,342 | | | 7,937,493 | | | 7,656,252 | | | 7,638,769 | |
Qualifying Reserves for Credit Losses | | | 787,786 | | | 755,103 | | | 708,122 | | | 691,567 | | | 668,284 | |
Qualifying Subordinated Notes | | | 938,248 | | | 991,441 | | | 491,655 | | | 496,427 | | | 507,666 | |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Total Risk-Based Capital | | $ | 9,890,364 | | | 9,656,886 | | | 9,137,270 | | | 8,844,246 | | | 8,814,719 | |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Risk-Weighted Assets | | $ | 70,762,000 | | | 69,849,411 | | | 66,737,471 | | | 65,444,076 | | | 63,055,668 | |
Ratios (percent): | | | | | | | | | | | | | | | | |
Average Shareholders’ Equity to Average Assets | | | 9.42 | % | | 10.19 | | | 10.42 | | | 10.63 | | | 11.11 | |
Risk-Based Capital: | | | | | | | | | | | | | | | | |
Tier 1 Capital | | | 11.54 | % | | 11.32 | | | 11.89 | | | 11.70 | | | 12.11 | |
Total Capital | | | 13.98 | % | | 13.83 | | | 13.69 | | | 13.51 | | | 13.98 | |
Tier 1 Leverage | | | 9.23 | % | | 9.18 | | | 9.67 | | | 9.73 | | | 10.22 | |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
| (a) | | September 30, 2003 regulatory capital data and ratios are estimated. |
18
FIFTH THIRD BANCORP AND SUBSIDIARIES
Asset Quality
(unaudited) ($ in thousands)
Summary of Credit Loss Experience
| | | For the Three Months Ended
| |
| | | September 30, 2003
| | | June 30, 2003
| | | March 31, 2003
| | | December 31, 2002
| | | September 30, 2002
| |
Losses Charged Off: | | | | | | | | | | | | | | | | |
Commercial, Financial and Agricultural Loans | | $ | (39,385 | ) | | (29,259 | ) | | (27,140 | ) | | (17,236 | ) | | (24,554 | ) |
Real Estate—Commercial Mortgage Loans | | | (4,622 | ) | | (1,218 | ) | | (1,061 | ) | | (5,591 | ) | | (1,402 | ) |
Real Estate—Construction Loans | | | (2,162 | ) | | (410 | ) | | (198 | ) | | (1,167 | ) | | (2,150 | ) |
Real Estate—Residential Mortgage Loans | | | (3,266 | ) | | (3,195 | ) | | (8,806 | ) | | (3,467 | ) | | (2,844 | ) |
Consumer Loans | | | (33,560 | ) | | (31,802 | ) | | (33,266 | ) | | (31,397 | ) | | (25,583 | ) |
Lease Financing | | | (9,364 | ) | | (25,721 | ) | | (12,007 | ) | | (11,038 | ) | | (10,107 | ) |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Total Losses | | | (92,359 | ) | | (91,605 | ) | | (82,478 | ) | | (69,896 | ) | | (66,640 | ) |
| | | | | |
Recoveries of Losses Previously Charged Off: | | | | | | | | | | | | | | | | |
Commercial, Financial and Agricultural Loans | | | 4,111 | | | 2,379 | | | 4,489 | | | 3,736 | | | 7,740 | |
Real Estate—Commercial Mortgage Loans | | | 390 | | | 418 | | | 686 | | | 830 | | | 1,248 | |
Real Estate—Construction Loans | | | 231 | | | 33 | | | 176 | | | 237 | | | 6 | |
Real Estate—Residential Mortgage Loans | | | 134 | | | 11 | | | 2 | | | 1 | | | 3 | |
Consumer Loans | | | 10,037 | | | 8,393 | | | 10,159 | | | 12,501 | | | 11,715 | |
Lease Financing | | | 2,327 | | | 2,896 | | | 2,310 | | | 3,074 | | | 2,358 | |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Total Recoveries | | | 17,230 | | | 14,130 | | | 17,822 | | | 20,379 | | | 23,070 | |
| | | | | |
Net Losses Charged Off: | | | | | | | | | | | | | | | | |
Commercial, Financial and Agricultural Loans | | | (35,274 | ) | | (26,880 | ) | | (22,651 | ) | | (13,500 | ) | | (16,814 | ) |
Real Estate—Commercial Mortgage Loans | | | (4,232 | ) | | (800 | ) | | (375 | ) | | (4,761 | ) | | (154 | ) |
Real Estate—Construction Loans | | | (1,931 | ) | | (377 | ) | | (22 | ) | | (930 | ) | | (2,144 | ) |
Real Estate—Residential Mortgage Loans | | | (3,132 | ) | | (3,184 | ) | | (8,804 | ) | | (3,466 | ) | | (2,841 | ) |
Consumer Loans | | | (23,523 | ) | | (23,409 | ) | | (23,107 | ) | | (18,896 | ) | | (13,868 | ) |
Lease Financing | | | (7,037 | ) | | (22,825 | ) | | (9,697 | ) | | (7,964 | ) | | (7,749 | ) |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Total Net Losses Charged Off | | $ | (75,129 | ) | | (77,475 | ) | | (64,656 | ) | | (49,517 | ) | | (43,570 | ) |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Reserve for Credit Losses, Beginning | | $ | 734,756 | | | 703,354 | | | 683,193 | | | 660,934 | | | 649,166 | |
Total Net Losses Charged Off | | | (75,129 | ) | | (77,475 | ) | | (64,656 | ) | | (49,517 | ) | | (43,570 | ) |
Provision Charged to Operations | | | 112,082 | | | 108,877 | | | 84,817 | | | 72,085 | | | 55,524 | |
Acquired Institutions and Other | | | — | | | — | | | — | | | (309 | ) | | (186 | ) |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Reserve for Credit Losses, Ending | | $ | 771,709 | | | 734,756 | | | 703,354 | | | 683,193 | | | 660,934 | |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
| | | | | |
Nonperforming and Underperforming Assets | | | | | | | | | | | | | | | | |
| |
| | | As of
| |
| | | September 30, 2003
| | | June 30, 2003
| | | March 31, 2003
| | | December 31, 2002
| | | September 30, 2002
| |
Nonaccrual Loans and Leases (a) | | $ | 271,256 | | | 273,293 | | | 277,452 | | | 246,986 | | | 226,840 | |
Other Assets, Including Other Real Estate Owned | | | 52,053 | | | 33,212 | | | 29,221 | | | 25,618 | | | 21,028 | |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Total Nonperforming Assets | | | 323,309 | | | 306,505 | | | 306,673 | | | 272,604 | | | 247,868 | |
Ninety Days Past Due Loans and Leases (a) | | | 145,643 | | | 137,503 | | | 134,024 | | | 162,213 | | | 191,116 | |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Total Underperforming Assets | | $ | 468,952 | | | 444,008 | | | 440,697 | | | 434,817 | | | 438,984 | |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Average Loans and Leases (b) | | $ | 50,615,070 | | | 48,561,158 | | | 47,154,837 | | | 45,272,569 | | | 44,173,797 | |
Loans and Leases (b) | | | 51,806,439 | | | 49,356,499 | | | 47,266,696 | | | 45,928,136 | | | 44,205,569 | |
| | | | | |
Ratios | | | | | | | | | | | | | | | | |
Net Losses Charged Off as a Percent of Average Loans and Leases | | | 0.59 | % | | 0.64 | | | 0.56 | | | 0.43 | | | 0.39 | |
Reserve as a Percent of Loans and Leases | | | 1.49 | % | | 1.49 | | | 1.49 | | | 1.49 | | | 1.50 | |
Nonperforming Assets as a Percent of Loans, Leases and Other Real Estate Owned | | | 0.62 | % | | 0.62 | | | 0.65 | | | 0.59 | | | 0.56 | |
Underperforming Assets as a Percent of Loans, Leases and Other Real Estate Owned | | | 0.90 | % | | 0.90 | | | 0.93 | | | 0.95 | | | 0.99 | |
| | |
|
|
| |
|
| |
|
| |
|
| |
|
|
| (a) | | Nonaccrual includes $20.7 million and Ninety Days Past Due includes $43.7 million of residential mortgage loans as of September 30, 2003. |
| (b) | | Excludes loans held for sale. |
19
