Exhibit 99.1
| | | | |
| | | | | News Release |
| | |
CONTACT: | | Bradley S. Adams (Analysts) (513) 534-0983 Roberta R. Jennings (Media) (513) 579-4153 | | FOR IMMEDIATE RELEASE April 14, 2005 |
FIFTH THIRD BANCORP REPORTS
FIRST QUARTER 2005 RESULTS
Fifth Third Bancorp’s 2005 first quarter earnings per diluted share were $.72 compared to $.75 per diluted share for the same period in 2004. First quarter net income totaled $405 million, a six percent decrease from first quarter 2004’s net income of $430 million. First quarter earnings and balance sheet comparisons were impacted by the acquisition of First National Bankshares of Florida, Inc. (“First National”), including the recognition of $7 million of pre-tax acquisition related charges in the first quarter, or $.01 per diluted share. Excluding the impact of acquisition related charges, earnings per diluted share were $.73; a comparison being provided to supplement an understanding of fundamental earnings trends. First quarter return on average assets (ROA) and return on average equity (ROE) were 1.62 percent and 18.0 percent, respectively, compared to 1.88 percent and 19.7 percent in 2004’s first quarter.
“We continue to make progress in returning to the type of performance our shareholders expect from us,” stated George A. Schaefer, Jr., President and CEO of Fifth Third Bancorp. “While we are not satisfied with bottom line results, we are encouraged by deposit trends, solid momentum in adding new customers and excellent overall results from Fifth Third Processing Solutions. We also saw considerable strength in our lending businesses in the first quarter, highlighted by 24 percent growth in commercial loans and 16 percent growth in consumer loans. Ultimately, higher interest rates combined with good loan and deposit growth will result in strengthening spread based revenues. Credit quality in our loan and lease portfolios remains well behaved and we are continuing to see solid returns from our de-novo banking center expansion efforts, including the first quarter opening of our first banking center in Pittsburgh. However, challenges remain on several fronts. We are working hard to reinvigorate revenue growth in some of our service businesses and we will continue to seek productivity enhancements to drive greater efficiency in our back office operations. These enhancements, combined with expected trend improvement in spread based revenues, provide optimism that results will improve over the remainder of the year.”
“The acquisition of First National, a $5.6 billion asset bank holding company located primarily in the fast-growing markets of Orlando, Tampa, Sarasota, Naples and Fort Myers, was announced in 2004 and completed this quarter. We completed conversion activity in February and have been investing in growth and aggressively expanding our sales force in these markets as we strive to deliver increased product and service capabilities to new and existing customers in our Florida markets.”
Balance Sheet Trends
Retail transaction account and commercial customer additions resulted in good deposit trends in the first quarter. Compared to the same quarter last year, average transaction account balances increased by $6.2 billion, or 15 percent, highlighted by 18 percent growth in average demand deposits and 35 percent growth in average savings and money market balances. Compared to the fourth quarter of 2004, average transaction account balances increased by $2.5 billion, or 22 percent on an annualized sequential basis. Fifth Third is intensely focused on generating growth in customers and deposit balances and remains confident in its ability to competitively price and generate growth in an increasing interest rate environment. Deposit comparisons to 2004 are impacted by the first quarter 2005 acquisition of First National and the second quarter 2004 acquisition of Franklin Financial Corporation (“Franklin Financial”). Exclusive of the impact of these transactions, average transaction account balances increased by eight percent over the same quarter last year and were essentially flat sequentially despite the significant seasonal increases in transaction deposits typically seen in the fourth quarter; comparisons being provided to supplement an understanding of the fundamental deposit trends.
Loan and lease balances exhibited continued strength with period end loans and leases increasing by $5.1 billion from last quarter, or 35 percent on an annualized sequential basis. On an average basis, total loans and leases, including held for sale, increased by 19 percent over the same quarter last year and by 38 percent on an annualized sequential basis. Period end commercial loan and lease balances increased by 24 percent over the same quarter last year and by $3.9 billion, or 50 percent on an annualized sequential basis. Period end consumer loan and lease balances excluding residential mortgage, increased by eight percent over the same quarter last year and by $805 million, or 15 percent on an annualized sequential basis. Loan and lease comparisons to prior year periods are impacted by the addition of approximately $3.9 billion in total loans in conjunction with the acquisition of First National and approximately $581 million in total loans in conjunction with the acquisition of Franklin Financial. Exclusive of the impact of these transactions, total commercial loan and lease balances increased 13 percent and total consumer loan and lease balances, excluding residential mortgages, increased six percent over last year. On an annualized sequential basis, commercial loan and lease balances increased 14 percent and consumer loan and lease balances, excluding residential mortgages, increased eight percent; comparisons being provided to supplement an understanding of fundamental lending trends.
Compared to the first quarter of 2004, net interest income on a fully taxable equivalent basis was essentially flat despite eight percent growth in average earning assets due to a 22 basis point (bp) decline in the
2
net interest margin. Compared to the fourth quarter of 2004, net interest income on a fully taxable equivalent basis increased four percent on an annualized sequential basis, or $7 million, due to a three bp increase in the net interest margin and good growth in average earning assets mitigated by day count comparisons. Margin and net interest income trends and comparisons to prior periods are impacted by the first quarter 2005 acquisition of First National, including a modestly negative impact to net interest income from purchase accounting loan and deposit net amortization, the repurchase of common stock described in further detail later in this document and the full quarter average impact of previously disclosed balance sheet initiatives undertaken in the fourth quarter of 2004 to reduce the risks associated with increasing interest rates including: (i) sale of approximately $6.4 billion in the available-for-sale securities portfolio; (ii) the early retirement of approximately $2.8 billion of long-term debt; (iii) the termination of $2.8 billion in notional of receive-fixed/pay-variable interest rate swaps; and (iv) reductions in certain other wholesale borrowings. Margin trends in 2005 will depend upon the speed of further interest rate changes and the level and mix of earning asset and deposit growth.
On January 1, 2005, Fifth Third completed the acquisition of First National with the issuance of 30.6 million shares for a total purchase price of approximately $1.5 billion. The transaction resulted in approximately $71 million in core deposit and other intangible assets, net of related deferred taxes, and approximately $1.2 billion in goodwill, inclusive of approximately $28 million of employee-related payments and certain contract termination charges, net of tax, recognized in the opening balance sheet. As previously announced, conversion activity was completed on February 14, 2005.
On January 10, 2005, Fifth Third repurchased 35.5 million shares of its common stock, approximately six percent of total outstanding shares, for approximately $1.6 billion in an overnight accelerated share repurchase transaction. The transaction provides that the counterparty will purchase shares in the market over a period of time. Upon completion, the Bancorp will receive or pay a price adjustment in the form of cash or shares, at its election, that is largely based on the volume weighted-average price of the shares purchased by the counterparty. On January 18, 2005, Fifth Third announced that its Board of Directors had authorized the repurchase of 20 million shares of common stock through the open market or in any private transaction. The timing of the purchases and the exact number of shares to be purchased depends upon market conditions and may commence upon the completion of the overnight accelerated share repurchase transaction.
Noninterest Income
Fifth Third Processing Solutions, our electronic payment processing division, delivered a 13 percent increase in revenues over the same quarter last year. Comparisons to prior periods are impacted by the significant seasonal increases in transaction volumes typically seen in the fourth quarter and the sale of certain small merchant processing contracts in the second and third quarters of 2004. Excluding the $25 million revenue impact of sold contracts in the prior year period, first quarter revenues increased by 36 percent over the same period last year; a comparison being provided to supplement an understanding of the fundamental revenue trends.
3
First quarter trends are representative of strong continuing momentum in attracting new customer relationships and good results in the level of retail sales activity. Fifth Third continues to see significant opportunities to attract new financial institution customers and retailers.
Investment Advisory revenues decreased by four percent over the same quarter last year and increased by 35 percent on an annualized sequential basis. The decrease in service revenue in the first quarter relative to last year resulted primarily from declines in retail brokerage related revenues. The increase in revenue compared to the fourth quarter last year resulted primarily from seasonal strength in retail brokerage and improved results in institutional asset management and private client services. Fifth Third expects near and intermediate term revenue growth to be driven by the degree of success in continuing to grow the institutional money management business and in penetrating a large middle market commercial customer base with retirement and wealth planning services. Fifth Third Investment Advisors, among the largest money managers in the Midwest, has $34 billion in assets under management and $183 billion in assets under care.
Deposit service revenues decreased one percent compared to the same quarter last year despite growth in the number of consumer and commercial account relationships. Both retail and commercial deposit based revenues were essentially unchanged from prior year levels. Compared to the fourth quarter of last year, commercial deposit based revenues were essentially flat despite increased activity and retail deposit based revenues declined eight percent due to both seasonal factors and declines in consumer overdraft related revenues.
Mortgage net service revenue totaled $41 million in the first quarter compared to $24 million last quarter and $44 million in 2004’s first quarter. Mortgage originations totaled $1.9 billion in the first quarter versus $2.0 billion last quarter and $2.0 billion in the first quarter of last year. First quarter mortgage banking net service revenue was comprised of $47 million in total mortgage banking fees and loan sales, plus $4 million in amortization and valuation adjustments on mortgage servicing rights and less $10 million of losses and mark-to-market adjustments on both settled and outstanding free-standing derivative financial instruments. The mark-to-market adjustments and settlement of free-standing derivative financial instruments and corresponding valuation adjustments resulted from interest rate volatility and the resulting impact of changing prepayment speeds on the mortgage servicing portfolio. The mortgage servicing asset, net of the valuation reserve, was $367 million at March 31, 2005 on a servicing portfolio of $23.3 billion, compared to $339 million last quarter on a servicing portfolio of $23.0 billion.
Other noninterest income totaled $153 million in the first quarter, an eight percent increase from the first quarter last year and a 20 percent increase from last quarter. Comparisons to prior periods are impacted by the first quarter 2005 acquisition of First National. Compared to the first quarter of last year, revenue improvement was realized in cardholder fees, commercial banking revenue, including strong performance in international, bank owned life insurance and customer derivative sales. Compared to the fourth quarter of last year, revenue improvement was realized in cardholder fees, bank owned life insurance and student loan sales.
4
Credit Quality
Credit quality metrics and trends remained fairly consistent in the first quarter and improved compared to the same quarter last year. Net charge-offs as a percentage of average loans and leases were 40 bp in the first quarter, compared to 44 bp last quarter and 54 bp in the first quarter of 2004. Nonperforming assets were 53 bp of total loans and leases and other real estate owned at March 31, 2005, up slightly from 51 bp last quarter and improved from the 57 bp posted a year ago. Overall, the level of nonperforming loans and net charge-offs remains a small percentage of the total loan and lease portfolio. Net charge-offs were $63 million in the first quarter, compared to $71 million in the same quarter last year and $65 million in the fourth quarter of 2004. The provision for loan and lease losses totaled $67 million in the first quarter compared to $87 million in the same quarter last year and $65 million in the fourth quarter of 2004. The loan and lease assets of First National were recorded on Fifth Third’s balance sheet at their respective fair values as of January 1, 2005. Estimated credit impairment was included in this determination of fair value; therefore, the previously existing allowance for loan and lease losses did not carryover to the allowance for loan and lease losses on Fifth Third’s balance sheet. Fifth Third expects credit quality trends in 2005 to remain similar to those seen in recent periods.
Noninterest Expense
Total noninterest expense increased nine percent over the same quarter last year and decreased 25 percent compared to last quarter. Comparisons to prior periods are notably impacted by the following factors: the previously disclosed $247 million in charges related to the early retirement of approximately $2.8 billion of long-term debt in the fourth quarter of 2004 and increases across all expense captions due in part to the first quarter 2005 acquisition of First National, including $7 million in acquisition related expenses, a $4 million increase in marketing costs in Florida markets and $5 million in increased intangible amortization. Increases in expenses compared to the same period last year are predominantly related to information technology expenditures and significant investments in the sales force and retail distribution network as evidenced by the increase in headcount and the corresponding increases in the employee-related and net occupancy expense captions. Compared to the same quarter last year, Fifth Third has added 132 net banking centers to the retail distribution network, non-employee information technology expenses have increased by $10 million and total full-time equivalent employees have increased by approximately 2,700, including approximately 2,300 sales personnel. Fifth Third’s first quarter efficiency ratio was 51.6 percent, compared to 76.0 percent last quarter and 46.8 percent in the first quarter of last year.
Conference Call
Fifth Third will host a conference call to discuss these first quarter financial results at 9:00 a.m. (Eastern Time) today. Investors, analysts and other interested parties may dial into the conference call at 877-309-0967 for domestic access and 706-679-3977 for international access (password: Fifth Third). A replay of the conference
5
call will be available for approximately seven days by dialing 800-642-1687 for domestic access and 706-645-9291 for international access (passcode: 5391102#).
Corporate Profile
Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. The Company has $102.7 billion in assets as of March 31, 2005. The Company operates 17 affiliates with 1,092 full-service Banking Centers, including 130 Bank Mart® locations open seven days a week inside select grocery stores and 1,988 Jeanie® ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia and Pennsylvania. The financial strength of Fifth Third’s Ohio and Michigan banks continues to be recognized by rating agencies with deposit ratings of AA- and Aa1 from Standard & Poor’s and Moody’s, respectively. Additionally, Fifth Third Bancorp continues to maintain 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 origination and 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) changes and trends in the securities markets; (7) legislative or regulatory changes or actions, or significant litigation, adversely affect us or the businesses in which we are engaged;(8) difficulties in combining the operations of acquired entities; and (9) the impact of reputational risk created by the developments discussed above on such matters as business generation and retention, funding and liquidity. 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.
# # #
6
7
FIFTH THIRD BANCORP AND SUBSIDIARIES
Financial Highlights
(unaudited)
| | | | | | | | | |
| | | For the Three Months Ended
| | | |
| | | March 31, 2005 | | | March 31, 2004 | | Percent Change | |
Earnings ($ in millions, except per share data) | | | | | | | | | |
Net interest income (taxable equivalent) | | $ | 759 | | | 759 | | - | |
Net income | | | 405 | | | 430 | | (6.0 | ) |
Earnings Per Share | | | | | | | | | |
Basic | | | 0.73 | | | 0.76 | | (3.9 | ) |
Diluted | | | 0.72 | | | 0.75 | | (4.0 | ) |
Key Ratios (percent) | | | | | | | | | |
Return on average assets | | | 1.62 | % | | 1.88 | | (13.8 | ) |
Return on average shareholders’ equity | | | 18.0 | | | 19.7 | | (8.6 | ) |
Net interest margin (taxable equivalent) | | | 3.38 | | | 3.60 | | (6.1 | ) |
Efficiency | | | 51.6 | | | 46.8 | | 10.3 | |
Average equity as a percent of average assets | | | 9.02 | | | 9.55 | | (5.5 | ) |
Regulatory capital (a): | | | | | | | | | |
Tier 1 capital | | | 8.46 | | | 10.96 | | (22.8 | ) |
Total risk-based capital | | | 10.33 | | | 13.22 | | (21.9 | ) |
Tier 1 leverage | | | 7.61 | | | 9.23 | | (17.6 | ) |
Common Stock Data | | | | | | | | | |
Cash dividends per common share | | $ | 0.35 | | | 0.32 | | 9.4 | |
Book value per share | | | 16.04 | | | 15.77 | | 1.7 | |
Market price per share: | | | | | | | | | |
High | | | 48.12 | | | 60.00 | | (19.8 | ) |
Low | | | 42.05 | | | 53.27 | | (21.1 | ) |
End of period | | | 42.98 | | | 55.37 | | (22.4 | ) |
Price/Earnings ratio (b) | | | 16.22 | | | 18.77 | | (13.6 | ) |
| (a) | March 31, 2005 regulatory capital ratios are estimated. |
| (b) | Based on the most recent twelve-month earnings per diluted share and end of period stock prices. |
Values Per Share
| | | | | | | | | | | | | | | |
| | | Book Value Per Share
| | Market Price Range Per Share
|
| | | March 31 | | June 30 | | September 30 | | December 31 | | Low | | High |
2000 | | $ | 10.07 | | 10.42 | | 10.82 | | 11.83 | | $ | 29.33 | | $ | 60.88 |
2001 | | | 12.33 | | 12.40 | | 12.97 | | 13.31 | | | 45.69 | | | 64.77 |
2002 | | | 13.59 | | 14.31 | | 14.69 | | 14.98 | | | 55.26 | | | 69.70 |
2003 | | | 15.31 | | 15.25 | | 15.24 | | 15.29 | | | 47.05 | | | 62.15 |
2004 | | | 15.77 | | 14.97 | | 16.11 | | 16.00 | | | 45.32 | | | 60.00 |
2005 | | | 16.04 | | | | | | | | | 42.05 | | | 48.12 |
| | | | | | | | | | | | | | | | |
| | | For the Three Months Ended
| | | | |
| Earnings Per Share | | March 31 | | June 30 | | September 30 | | December 31 | | | | Year-to-Date |
2000 | | $ | 0.43 | | 0.39 | | 0.51 | | 0.53 | | | | | $ | 1.86 |
2001 | | | 0.49 | | 0.18 | | 0.44 | | 0.63 | | | | | | 1.74 |
2002 | | | 0.63 | | 0.65 | | 0.67 | | 0.69 | | | | | | 2.64 |
2003 | | | 0.68 | | 0.72 | | 0.73 | | 0.78 | | | | | | 2.91 |
2004 | | | 0.76 | | 0.80 | | 0.84 | | 0.31 | | | | | | 2.72 |
2005 | | | 0.73 | | | | | | | | | | | | 0.73 |
| | | | | | | | | | | | | | | | |
| | | For the Three Months Ended
| | | | |
| Earnings Per Diluted Share | | March 31 | | June 30 | | September 30 | | December 31 | | | | Year-to-Date |
2000 | | $ | 0.43 | | 0.38 | | 0.50 | | 0.52 | | | | | $ | 1.83 |
2001 | | | 0.48 | | 0.18 | | 0.43 | | 0.61 | | | | | | 1.70 |
2002 | | | 0.62 | | 0.64 | | 0.66 | | 0.67 | | | | | | 2.59 |
2003 | | | 0.67 | | 0.71 | | 0.72 | | 0.77 | | | | | | 2.87 |
2004 | | | 0.75 | | 0.79 | | 0.83 | | 0.31 | | | | | | 2.68 |
2005 | | | 0.72 | | | | | | | | | | | | 0.72 |
8
FIFTH THIRD BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited) ($ in millions, except per share data)
| | | | | |
| | | For the Three Months Ended
|
| | | March 31,
2005 | | March 31,
2004 |
Interest income | | | | | |
Interest and fees on loans and leases | | $ | 867 | | 669 |
Interest on securities: | | | | | |
Taxable | | | 267 | | 308 |
Exempt from income taxes | | | 10 | | 12 |
Total interest on securities | | | 277 | | 320 |
| Interest on other short-term investments | | | 1 | | 1 |
Total interest income | | | 1,145 | | 990 |
Interest expense | | | | | |
Interest on deposits: | | | | | |
Interest checking | | | 63 | | 37 |
Savings | | | 27 | | 9 |
Money market | | | 25 | | 7 |
Other time | | | 52 | | 40 |
Certificates - $100,000 and over | | | 25 | | 9 |
Foreign office | | | 27 | | 15 |
Total interest on deposits | | | 219 | | 117 |
Interest on federal funds purchased | | | 25 | | 18 |
Interest on short-term bank notes | | | 5 | | 1 |
Interest on other short-term borrowings | | | 27 | | 16 |
| Interest on long-term debt | | | 118 | | 88 |
| Total interest expense | | | 394 | | 240 |
Net interest income | | | 751 | | 750 |
| Provision for loan and lease losses | | | 67 | | 87 |
Net interest income after provision for loan and lease losses | | | 684 | | 663 |
Noninterest income | | | | | |
Electronic payment processing revenue | | | 168 | | 148 |
Service charges on deposits | | | 121 | | 123 |
Mortgage banking net revenue | | | 41 | | 44 |
Investment advisory revenue | | | 90 | | 93 |
Other noninterest income | | | 153 | | 141 |
Operating lease revenue | | | 20 | | 52 |
| Securities gains, net | | | 14 | | 25 |
Total noninterest income | | | 607 | | 626 |
Noninterest expense | | | | | |
Salaries, wages and incentives | | | 265 | | 245 |
Employee benefits | | | 82 | | 76 |
Equipment expense | | | 25 | | 20 |
Net occupancy expense | | | 54 | | 46 |
Operating lease expense | | | 15 | | 38 |
| Other noninterest expense | | | 264 | | 223 |
| Total noninterest expense | | | 705 | | 648 |
Income before income taxes | | | 586 | | 641 |
| Applicable income taxes | | | 181 | | 211 |
| Net income | | $ | 405 | | 430 |
| Net income available to common shareholders (a) | | $ | 404 | | 430 |
Earnings per share | | $ | 0.73 | | 0.76 |
| Earnings per diluted share | | $ | 0.72 | | 0.75 |
| (a) | Dividend on Preferred Stock is $.185 million for the three months ended March 31, 2005 and 2004. |
9
FIFTH THIRD BANCORP AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders’ Equity
(unaudited) ($ in millions, except per share data)
| | | | | | | |
| | | For the Three Months Ended
| |
| | | March 31,
2005 | | | March 31,
2004 | |
Total shareholders’ equity, beginning | | $ | 8,924 | | | 8,667 | |
Net income | | | 405 | | | 430 | |
Other comprehensive income, net of tax: | | | | | | | |
Change in unrealized (losses) gains on available-for-sale securities, qualifying cash flow hedges and additional pension liability | | | (154 | ) | | 219 | |
Comprehensive income | | | 251 | | | 649 | |
Cash dividends declared: | | | | | | | |
Common stock (2005 - $.35 per share and 2004 - $.32 per share) | | | (194 | ) | | (180 | ) |
Preferred stock (a) | | | - | | | - | |
Stock options exercised, including treasury shares issued | | | 26 | | | 29 | |
Stock-based compensation expense | | | 18 | | | 23 | |
Loans repaid related to the exercise of stock options, net | | | 2 | | | - | |
Excess corporate tax benefit related to stock-based compensation | | | 3 | | | - | |
Shares purchased | | | (1,640 | ) | | (325 | ) |
Acquisitions | | | 1,498 | | | - | |
| Other | | | - | | | 1 | |
Total shareholders’ equity, ending | | $ | 8,888 | | | 8,864 | |
| (a) | Dividend on Preferred Stock is $.185 million for the three months ended March 31, 2005 and 2004. |
10
FIFTH THIRD BANCORP AND SUBSIDIARIES
Condensed Consolidated Quarterly Statements of Income (Taxable Equivalent)
(unaudited) ($ in millions)
| | | | | | | | | | | |
| | | For the Three Months Ended
|
| | | March 31, 2005 | | December 31, 2004 | | September 30, 2004 | | June 30, 2004 | | March 31, 2004 |
Interest income | | $ | 1,145 | | 1,081 | | 1,043 | | 1,000 | | 990 |
| Taxable equivalent adjustment | | | 8 | | 9 | | 9 | | 9 | | 9 |
Interest income (taxable equivalent) | | | 1,153 | | 1,090 | | 1,052 | | 1,009 | | 999 |
| Interest expense | | | 394 | | 338 | | 286 | | 238 | | 240 |
Net interest income (taxable equivalent) | | | 759 | | 752 | | 766 | | 771 | | 759 |
| Provision for loan and lease losses | | | 67 | | 65 | | 26 | | 90 | | 87 |
Net interest income after provision for loan and lease losses (taxable equivalent) | | | 692 | | 687 | | 740 | | 681 | | 672 |
Noninterest income | | | 607 | | 479 | | 611 | | 749 | | 626 |
| Noninterest expense | | | 705 | | 935 | | 648 | | 742 | | 648 |
Income before income taxes (taxable equivalent) | | | 594 | | 231 | | 703 | | 688 | | 650 |
Applicable income taxes | | | 181 | | 46 | | 223 | | 231 | | 211 |
| Taxable equivalent adjustment | | | 8 | | 9 | | 9 | | 9 | | 9 |
Net income | | $ | 405 | | 176 | | 471 | | 448 | | 430 |
Net income available to common shareholders (a) | | $ | 404 | | 176 | | 471 | | 448 | | 430 |
| (a) | Dividend on Preferred Stock is $.185 million for all quarters presented. |
Noninterest Income and Noninterest Expense
(unaudited) ($ in millions)
| | | | | | | | | | | | |
| | | For the Three Months Ended
|
| | | March 31, 2005 | | December 31, 2004 | | | September 30, 2004 | | June 30, 2004 | | March 31, 2004 |
Noninterest income | | | | | | | | | | | | |
Electronic payment processing revenue | | $ | 168 | | 173 | | | 152 | | 148 | | 148 |
Service charges on deposits | | | 121 | | 126 | | | 134 | | 131 | | 123 |
Mortgage banking net revenue | | | 41 | | 24 | | | 49 | | 61 | | 44 |
Investment advisory revenue | | | 90 | | 82 | | | 88 | | 97 | | 93 |
Other noninterest income | | | 153 | | 125 | | | 137 | | 268 | | 141 |
Operating lease revenue | | | 20 | | 27 | | | 35 | | 44 | | 52 |
| Securities gains (losses), net | | | 14 | | (78 | ) | | 16 | | - | | 25 |
Total noninterest income | | $ | 607 | | 479 | | | 611 | | 749 | | 626 |
Noninterest expense | | | | | | | | | | | | |
Salaries, wages and incentives | | $ | 265 | | 266 | | | 252 | | 254 | | 245 |
Employee benefits | | | 82 | | 56 | | | 64 | | 66 | | 76 |
Equipment expense | | | 25 | | 23 | | | 22 | | 19 | | 20 |
Net occupancy expense | | | 54 | | 48 | | | 45 | | 47 | | 46 |
Operating lease expense | | | 15 | | 20 | | | 24 | | 32 | | 38 |
| Other noninterest expense (a) | | | 264 | | 522 | | | 241 | | 324 | | 223 |
Total noninterest expense | | $ | 705 | | 935 | | | 648 | | 742 | | 648 |
Full-time equivalent employees | | | 21,287 | | 19,659 | | | 19,061 | | 18,937 | | 18,583 |
Banking centers | | | 1,092 | | 1,011 | | | 1,005 | | 992 | | 960 |
| (a) | Includes intangible amortization expense of $12 million, $7 million, $7 million, $6 million and $9 million for the three months ended March 31, 2005, December 31, 2004, September 30, 2004, June 30, 2004 and March 31, 2004, respectively. |
11
FIFTH THIRD BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited) ($ in millions, except share data)
| | | | | | | |
| | | As of
| |
| | | March 31,
2005 | | | March 31,
2004 | |
Assets | | | | | | | |
Cash and due from banks | | $ | 2,420 | | | 2,012 | |
Available-for-sale securities (a) | | | 25,101 | | | 30,577 | |
Held-to-maturity securities (b) | | | 303 | | | 179 | |
Trading securities | | | 128 | | | 96 | |
Other short-term investments | | | 1,213 | | | 191 | |
Loans held for sale | | | 809 | | | 1,661 | |
Loans and leases: | | | | | | | |
Commercial loans | | | 17,500 | | | 14,469 | |
Construction loans | | | 5,922 | | | 3,820 | |
Commercial mortgage loans | | | 9,048 | | | 7,197 | |
Commercial lease financing | | | 4,533 | | | 4,559 | |
Residential mortgage loans | | | 7,416 | | | 4,937 | |
Consumer loans | | | 19,698 | | | 17,794 | |
Consumer lease financing | | | 2,099 | | | 2,606 | |
Unearned income | | | (1,314 | ) | | (1,470 | ) |
Total loans and leases | | | 64,902 | | | 53,912 | |
| Allowance for loan and lease losses | | | (717 | ) | | (713 | ) |
Total loans and leases, net | | | 64,185 | | | 53,199 | |
Bank premises and equipment | | | 1,529 | | | 1,102 | |
Operating lease equipment | | | 224 | | | 658 | |
Accrued interest receivable | | | 438 | | | 412 | |
Goodwill | | | 2,167 | | | 738 | |
Intangible assets | | | 243 | | | 155 | |
Servicing rights | | | 378 | | | 283 | |
| Other assets | | | 3,575 | | | 2,539 | |
| Total assets | | $ | 102,713 | | | 93,802 | |
| | |
Liabilities | | | | | | | |
Deposits: | | | | | | | |
Demand | | $ | 13,960 | | | 12,374 | |
Interest checking | | | 19,722 | | | 19,376 | |
Savings | | | 9,711 | | | 7,391 | |
Money market | | | 4,777 | | | 2,995 | |
Other time | | | 8,017 | | | 5,978 | |
Certificates - $100,000 and over | | | 3,867 | | | 2,569 | |
Foreign office | | | 5,257 | | | 4,567 | |
Total deposits | | | 65,311 | | | 55,250 | |
Federal funds purchased | | | 2,669 | | | 7,501 | |
Short-term bank notes | | | 775 | | | 500 | |
Other short-term borrowings | | | 4,925 | | | 7,252 | |
Accrued taxes, interest and expenses | | | 2,273 | | | 2,411 | |
Other liabilities | | | 1,551 | | | 1,034 | |
| Long-term debt | | | 16,321 | | | 10,990 | |
Total liabilities | | | 93,825 | | | 84,938 | |
| Total shareholders’ equity (c) | | | 8,888 | | | 8,864 | |
| Total liabilities and shareholders’ equity | | $ | 102,713 | | | 93,802 | |
| (a) | Amortized cost: March 31, 2005 - $25,558 and March 31, 2004 - $30,342. |
| (b) | Market values: March 31, 2005 - $303 and March 31, 2004 - $179. |
| (c) | Common Shares: Stated value $2.22 per share; authorized 1,300,000,000; outstanding March 31, 2005 - 554,054,749 (excluding 29,372,355 treasury shares) and March 31, 2004 - 562,131,643 (excluding 21,320,048 treasury shares). |
12
FIFTH THIRD BANCORP AND SUBSIDIARIES
Loans and Leases Serviced
(unaudited) ($ in millions)
| | | | | | | | | | | |
| | | As of
|
| | | March 31,
2005 | | December 31,
2004 | | September 30,
2004 | | June 30,
2004 | | March 31,
2004 |
Commercial | | | | | | | | | | | |
Commercial loans | | $ | 17,500 | | 16,058 | | 15,259 | | 15,244 | | 14,469 |
Mortgage | | | 9,048 | | 7,636 | | 7,644 | | 7,541 | | 7,197 |
Construction | | | 5,365 | | 4,348 | | 4,077 | | 3,768 | | 3,493 |
Lease financing | | | 3,416 | | 3,426 | | 3,357 | | 3,275 | | 3,327 |
Subtotal | | | 35,329 | | 31,468 | | 30,337 | | 29,828 | | 28,486 |
Consumer | | | | | | | | | | | |
Consumer loans | | | 18,909 | | 18,080 | | 17,829 | | 17,522 | | 17,037 |
Mortgage & construction | | | 7,973 | | 7,366 | | 6,852 | | 6,213 | | 5,264 |
Credit card | | | 790 | | 843 | | 809 | | 779 | | 757 |
Lease financing | | | 1,901 | | 2,051 | | 2,209 | | 2,337 | | 2,368 |
| Subtotal | | | 29,573 | | 28,340 | | 27,699 | | 26,851 | | 25,426 |
Total loans and leases | | | 64,902 | | 59,808 | | 58,036 | | 56,679 | | 53,912 |
| | | | | |
Loans held for sale | | | 809 | | 559 | | 452 | | 577 | | 1,661 |
| | | | | |
Operating lease equipment | | | 224 | | 304 | | 394 | | 525 | | 658 |
| | | | | |
Loans and Leases Serviced for Others | | | | | | | | | | | |
Residential mortgage (a) | | | 23,341 | | 23,026 | | 23,458 | | 23,943 | | 24,114 |
Commercial mortgage (b) | | | 2,043 | | 2,045 | | 2,091 | | 2,104 | | 2,147 |
Commercial loans (c) | | | 2,351 | | 1,941 | | 2,033 | | 1,913 | | 1,953 |
Commercial leases (b) | | | 271 | | 323 | | 220 | | 217 | | 226 |
Consumer loans (d) | | | 1,192 | | 1,298 | | 1,407 | | 1,511 | | 832 |
| Total loans and leases serviced for others | | | 29,198 | | 28,633 | | 29,209 | | 29,688 | | 29,272 |
| Total loans and leases serviced | | $ | 95,133 | | 89,304 | | 88,091 | | 87,469 | | 85,503 |
| (a) | Fifth Third sells certain residential mortgage loans, primarily conforming and fixed-rate in nature, and retains servicing responsibilities. |
| (b) | Fifth Third sells certain commercial mortgage loans and commercial leases and retains servicing responsibilities. |
| (c) | Fifth Third transfers, subject to credit recourse and with servicing retained, certain investment grade commercial loans to an unconsolidated qualified special purpose entity (QSPE), which is wholly-owned by an independent third party. |
| (d) | Fifth Third sells certain consumer loans and retains servicing responsibilities. |
13
FIFTH THIRD BANCORP AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields (Taxable Equivalent) and Rates
(unaudited) ($ in millions)
| | | | | | | | | | | | | | |
| | | For the Three Months Ended
| |
| | | March 31, 2005 | | | March 31, 2004 | |
| | | Average Balance
| | | Average
Yield/Rate
| | | Average Balance
| | | Average
Yield/Rate
| |
Assets | | | | | | | | | | | | | | |
Interest-earning assets: | | | | | | | | | | | | | | |
Loans and leases | | $ | 65,076 | | | 5.42 | % | | $ | 54,688 | | | 4.94 | % |
Taxable securities | | | 24,935 | | | 4.34 | | | | 28,854 | | | 4.30 | |
Tax exempt securities | | | 856 | | | 7.36 | | | | 995 | | | 7.27 | |
Other short-term investments | | | 328 | | | 1.56 | | | | 231 | | | 0.90 | |
Total interest-earning assets | | | 91,195 | | | 5.13 | | | | 84,768 | | | 4.74 | |
Cash and due from banks | | | 2,619 | | | | | | | 2,046 | | | | |
Other assets | | | 7,908 | | | | | | | 5,828 | | | | |
| Allowance for loan and lease losses | | | (714 | ) | | | | | | (699 | ) | | | |
| Total assets | | $ | 101,008 | | | | | | $ | 91,943 | | | | |
| | | | |
Liabilities | | | | | | | | | | | | | | |
Interest-bearing liabilities: | | | | | | | | | | | | | | |
Interest checking | | $ | 19,972 | | | 1.27 | % | | $ | 19,552 | | | 0.75 | % |
Savings | | | 9,339 | | | 1.15 | | | | 7,294 | | | 0.49 | |
Money market | | | 4,786 | | | 2.14 | | | | 3,149 | | | 0.85 | |
Other time | | | 7,787 | | | 2.72 | | | | 5,780 | | | 2.82 | |
Certificates-$100,000 and over | | | 3,539 | | | 2.92 | | | | 2,213 | | | 1.63 | |
Foreign office | | | 4,340 | | | 2.48 | | | | 5,935 | | | 1.01 | |
Federal funds purchased | | | 4,170 | | | 2.41 | | | | 7,192 | | | 1.00 | |
Short-term bank notes | | | 775 | | | 2.53 | | | | 500 | | | 1.01 | |
Other short-term borrowings | | | 4,933 | | | 2.18 | | | | 6,837 | | | 0.92 | |
Long-term debt | | | 15,604 | | | 3.10 | | | | 10,294 | | | 3.48 | |
Total interest-bearing liabilities | | | 75,245 | | | 2.12 | | | | 68,746 | | | 1.41 | |
Demand deposits | | | 13,484 | | | | | | | 11,402 | | | | |
| Other liabilities | | | 3,171 | | | | | | | 3,016 | | | | |
Total liabilities | | | 91,900 | | | | | | | 83,164 | | | | |
| Shareholders’ equity | | | 9,108 | | | | | | | 8,779 | | | | |
| Total liabilities and shareholders’ equity | | $ | 101,008 | | | | | | $ | 91,943 | | | | |
| | | | |
Average common shares outstanding: | | | | | | | | | | | | | | |
Basic | | | 556,361,533 | | | | | | | 563,583,277 | | | | |
Diluted | | | 561,658,848 | | | | | | | 571,612,473 | | | | |
| | | | |
Ratios: | | | | | | | | | | | | | | |
Net interest margin (taxable equivalent) | | | | | | 3.38% | | | | | | | 3.60% | |
Net interest rate spread (taxable equivalent) | | | | | | 3.01% | | | | | | | 3.33% | |
Interest-bearing liabilities to interest-earning assets | | | | | | 82.51% | | | | | | | 81.10% | |
14
FIFTH THIRD BANCORP AND SUBSIDIARIES
Regulatory Capital
(unaudited) ($ in millions)
| | | | | | | | | | | | | | | | |
| | | March 31,
2005 (a) | | | December 31,
2004 | | | September 30,
2004 | | | June 30,
2004 | | | March 31,
2004 | |
Tier 1 capital: | | | | | | | | | | | | | | | | |
Shareholders’ equity | | $ | 8,888 | | | 8,924 | | | 9,040 | | | 8,393 | | | 8,864 | |
Goodwill and certain other intangibles | | | (2,410 | ) | | (1,129 | ) | | (1,137 | ) | | (1,143 | ) | | (893 | ) |
Unrealized losses/(gains) | | | 314 | | | 101 | | | 146 | | | 491 | | | (162 | ) |
Other | | | 700 | | | 626 | | | 617 | | | 605 | | | 585 | |
| Total tier 1 capital | | $ | 7,492 | | | 8,522 | | | 8,666 | | | 8,346 | | | 8,394 | |
Total risk-based capital: | | | | | | | | | | | | | | | | |
Tier 1 capital | | $ | 7,492 | | | 8,522 | | | 8,666 | | | 8,346 | | | 8,394 | |
Qualifying allowances for credit losses | | | 808 | | | 806 | | | 806 | | | 831 | | | 801 | �� |
Qualifying subordinated notes | | | 848 | | | 848 | | | 868 | | | 932 | | | 926 | |
| Total risk-based capital | | $ | 9,148 | | | 10,176 | | | 10,340 | | | 10,109 | | | 10,121 | |
Risk-weighted assets | | $ | 88,562 | | | 82,633 | | | 80,749 | | | 78,779 | | | 76,587 | |
Ratios (percent): | | | | | | | | | | | | | | | | |
Average equity as a percent of average assets | | | 9.02% | | | 9.51 | | | 9.21 | | | 9.08 | | | 9.55 | |
Regulatory capital: | | | | | | | | | | | | | | | | |
Tier 1 capital | | | 8.46% | | | 10.31 | | | 10.73 | | | 10.59 | | | 10.96 | |
Total risk-based capital | | | 10.33% | | | 12.31 | | | 12.81 | | | 12.83 | | | 13.22 | |
Tier 1 leverage | | | 7.61% | | | 8.89 | | | 9.13 | | | 8.97 | | | 9.23 | |
| (a) | March 31, 2005 regulatory capital data and ratios are estimated. |
15
FIFTH THIRD BANCORP AND SUBSIDIARIES
Asset Quality
(unaudited) ($ in millions)
| | | | | | | | | | | | | | | | |
| | | For the Three Months Ended
| |
| Summary of Loan and Lease Losses | | March 31,
2005 | | | December 31,
2004 | | | September 30,
2004 | | | June 30,
2004 | | | March 31,
2004 | |
Losses charged off: | | | | | | | | | | | | | | | | |
Commercial, financial and agricultural loans | | $ | (16 | ) | | (19 | ) | | (24 | ) | | (21 | ) | | (31 | ) |
Real estate - commercial mortgage loans | | | (2 | ) | | (7 | ) | | (1 | ) | | (2 | ) | | (3 | ) |
Real estate - construction loans | | | (1 | ) | | (3 | ) | | - | | | (3 | ) | | (1 | ) |
Real estate - residential mortgage loans | | | (5 | ) | | (4 | ) | | (3 | ) | | (3 | ) | | (4 | ) |
Consumer loans | | | (42 | ) | | (42 | ) | | (37 | ) | | (38 | ) | | (40 | ) |
Lease financing | | | (14 | ) | | (9 | ) | | (7 | ) | | (9 | ) | | (9 | ) |
Total losses | | | (80 | ) | | (84 | ) | | (72 | ) | | (76 | ) | | (88 | ) |
| | | | | |
Recoveries of losses previously charged off: | | | | | | | | | | | | | | | | |
Commercial, financial and agricultural loans | | | 3 | | | 4 | | | 3 | | | 3 | | | 4 | |
Real estate - commercial mortgage loans | | | 1 | | | 1 | | | 1 | | | 1 | | | 1 | |
Real estate - construction loans | | | 1 | | | - | | | - | | | - | | | - | |
Real estate - residential mortgage loans | | | - | | | - | | | - | | | - | | | - | |
Consumer loans | | | 11 | | | 12 | | | 9 | | | 11 | | | 10 | |
Lease financing | | | 1 | | | 2 | | | 2 | | | 2 | | | 2 | |
Total recoveries | | | 17 | | | 19 | | | 15 | | | 17 | | | 17 | |
| | | | | |
Net losses charged off: | | | | | | | | | | | | | | | | |
Commercial, financial and agricultural loans | | | (13 | ) | | (15 | ) | | (21 | ) | | (18 | ) | | (27 | ) |
Real estate - commercial mortgage loans | | | (1 | ) | | (6 | ) | | - | | | (1 | ) | | (2 | ) |
Real estate - construction loans | | | - | | | (3 | ) | | - | | | (3 | ) | | (1 | ) |
Real estate - residential mortgage loans | | | (5 | ) | | (4 | ) | | (3 | ) | | (3 | ) | | (4 | ) |
Consumer loans | | | (31 | ) | | (30 | ) | | (28 | ) | | (27 | ) | | (30 | ) |
Lease financing | | | (13 | ) | | (7 | ) | | (5 | ) | | (7 | ) | | (7 | ) |
| Total net losses charged off | | $ | (63 | ) | | (65 | ) | | (57 | ) | | (59 | ) | | (71 | ) |
| | | | | |
Allowance for loan and lease losses rollforward: | | | | | | | | | | | | | | | | |
Allowance for loan and lease losses, beginning | | $ | 713 | | | 713 | | | 744 | | | 713 | | | 697 | |
Total net losses charged off | | | (63 | ) | | (65 | ) | | (57 | ) | | (59 | ) | | (71 | ) |
Provision for loan and lease losses | | | 67 | | | 65 | | | 26 | | | 90 | | | 87 | |
| Allowance for loan and lease losses, ending | | $ | 717 | | | 713 | | | 713 | | | 744 | | | 713 | |
Reserve for unfunded commitments rollforward: | | | | | | | | | | | | | | | | |
Reserve for unfunded commitments, beginning | | $ | 72 | | | 72 | | | 68 | | | 70 | | | 73 | |
Change - other noninterest expense | | | (5 | ) | | - | | | 4 | | | (2 | ) | | (3 | ) |
| Reserve for unfunded commitments, ending | | $ | 67 | | | 72 | | | 72 | | | 68 | | | 70 | |
Components of allowance for credit losses: | | | | | | | | | | | | | | | | |
Allowance for loan and lease losses | | $ | 717 | | | 713 | | | 713 | | | 744 | | | 713 | |
Reserve for unfunded commitments | | | 67 | | | 72 | | | 72 | | | 68 | | | 70 | |
| Total allowance for credit losses | | $ | 784 | | | 785 | | | 785 | | | 812 | | | 783 | |
| |
| | | As of
| |
| Nonperforming and Underperforming Assets | | March 31,
2005 | | | December 31,
2004 | | | September 30,
2004 | | | June 30,
2004 | | | March 31,
2004 | |
Nonaccrual loans and leases (a) | | $ | 268 | | | 228 | | | 207 | | | 216 | | | 233 | |
Renegotiated loans and leases | | | 5 | | | 1 | | | 3 | | | 3 | | | 1 | |
| Other assets, including other real estate owned | | | 70 | | | 74 | | | 72 | | | 64 | | | 74 | |
Total nonperforming assets | | | 343 | | | 303 | | | 282 | | | 283 | | | 308 | |
| Ninety days past due loans and leases (a) | | | 129 | | | 142 | | | 137 | | | 132 | | | 133 | |
| Total underperforming assets | | $ | 472 | | | 445 | | | 419 | | | 415 | | | 441 | |
| | | | | |
Average loans and leases (b) | | $ | 64,269 | | | 58,714 | | | 57,160 | | | 54,960 | | | 52,927 | |
Loans and leases (b) | | $ | 64,902 | | | 59,808 | | | 58,036 | | | 56,679 | | | 53,912 | |
| | | | | |
Ratios: | | | | | | | | | | | | | | | | |
Net losses charged off as a percent of average loans and leases | | | 0.40% | | | 0.44 | | | 0.40 | | | 0.43 | | | 0.54 | |
Allowance for loan and lease losses as a percent of loans and leases | | | 1.11% | | | 1.19 | | | 1.23 | | | 1.31 | | | 1.32 | |
Allowance for credit losses as a percent of loans and leases | | | 1.21% | | | 1.31 | | | 1.35 | | | 1.43 | | | 1.45 | |
Nonperforming assets as a percent of loans, leases and other assets, including other real estate owned | | | 0.53% | | | 0.51 | | | 0.48 | | | 0.50 | | | 0.57 | |
Underperforming assets as a percent of loans, leases and other assets, including other real estate owned | | | 0.73% | | | 0.74 | | | 0.72 | | | 0.73 | | | 0.82 | |
| (a) | Nonaccrual includes $23 million and Ninety Days Past Due includes $43 million of residential mortgage loans as of March 31, 2005. |
| (b) | Excludes loans held for sale. |
16
