Exhibit 99.1

 

				News Release
CONTACTS:		Jim Eglseder (Investors)		FOR IMMEDIATE RELEASE
		(513) 534-8424		January 21, 2015
		Laura Wehby (Investors)
		(513) 534-7407
		Larry Magnesen (Media)
		(513) 534-8055

FIFTH THIRD ANNOUNCES FOURTH QUARTER EARNINGS PER DILUTED SHARE OF $0.43

2014 EARNINGS PER DILUTED SHARE OF $1.66

 

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4Q14 net income available to common shareholders of $362 million, or $0.43 per diluted common share

 

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Includes a $56 million pre-tax (~$37 million after-tax, or $0.04 per share) positive valuation adjustment on the warrant Fifth Third holds in Vantiv, $23 million pre-tax (~$15 million after-tax, or $0.02 per share) of provision expense related to the transfer of residential mortgage loans classified as troubled debt restructurings to held-for-sale, and a $19 million pre-tax (~$13 million after-tax, or $0.02 per share) charge related to the valuation of Visa total return swap

 

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4Q14 return on average assets (ROA) of 1.13%; return on average common equity of 10.0%; return on average tangible common equity** of 12.1%

 

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Pre-provision net revenue (PPNR)** of $618 million in 4Q14

 

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Net interest income (FTE) of $888 million, down 2% sequentially and down 2% from 4Q13; net interest margin of 2.96%, down 14 basis points sequentially

 

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Average portfolio loans of $91.0 billion, up $242 million sequentially and $3.1 billion from 4Q13

 

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Noninterest income of $653 million compared with $520 million in the prior quarter; impacted by valuations on the Vantiv warrant and the valuation of the Visa total return swap during both quarters and the annual payment received from Vantiv pursuant to the tax receivable agreement in the fourth quarter

 

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Noninterest expense of $918 million compared with $888 million in the prior quarter primarily driven by higher compensation-related expenses and credit-related costs

 

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Credit trends

 

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4Q14 net charge-offs of $191 million (0.83% of loans and leases) included $87 million of charge-offs related to the transfer of residential mortgage loans classified as troubled debt restructurings to held-for-sale; 3Q14 NCOs of $115 million (0.50% of loans and leases) and 4Q13 NCOs of $148 million (0.67% of loans and leases)

 

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4Q14 provision expense of $99 million included $23 million impact related to the aforementioned transfer of loans to held-for-sale; $71 million in 3Q14 and $53 million in 4Q13

 

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Allowance for loan and lease losses decreased $92 million sequentially ($64 million reduction related to aforementioned transfer of loans to held-for-sale); allowance to loan ratio of 1.47%

 

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Total nonperforming assets (NPAs) of $783 million, including loans held-for-sale (HFS), declined $20 million sequentially; portfolio NPA ratio of 0.82% down 6 bps from 3Q14, NPL ratio of 0.64% down 4 bps from 3Q14; 2 bps improvement due to aforementioned transfer of loans to held-for-sale

 

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Strong capital ratios*

 

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Tier 1 common ratio** 9.65%, vs. 9.64% in 3Q14 (Basel III pro forma estimate of ~9.4%)

 

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Tier 1 risk-based capital ratio 10.83%, Total risk-based capital ratio 14.33%, Leverage ratio 9.66%

 

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Tangible common equity ratio** of 8.71%; 8.43% excluding securities portfolio unrealized gains/losses

 

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Book value per share of $17.35; tangible book value per share** of $14.40; up 3% from 3Q14 and up 11% from 4Q13

 

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Repurchased 10 million common shares in 4Q14; incremental impact from 3Q14 and 4Q14 transactions reduced average diluted share count by 11 million in 4Q14

 

*	Capital ratios estimated; presented under current U.S. capital regulations. The pro forma Basel III Tier I common equity ratio is management’s estimate based upon its current interpretation of the Basel III Final Rule approved in July 2013. See “Capital Position” section for more information.

**	Non-GAAP measure; see Reg. G reconciliation on page 33.

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Fifth Third Bancorp (Nasdaq: FITB) today reported full year 2014 net income of $1.5 billion, down 19 percent from net income of $1.8 billion in 2013. After preferred dividends, 2014 net income available to common shareholders was $1.4 billion, or $1.66 per diluted share, down 21 percent compared with 2013 net income available to common shareholders of $1.8 billion, or $2.02 per diluted share.

Fourth quarter 2014 net income was $385 million, an increase of 13 percent from net income of $340 million in the third quarter of 2014 and a decrease of 4 percent from net income of $402 million in the fourth quarter of 2013. After preferred dividends, net income available to common shareholders was $362 million, or $0.43 per diluted share, in the fourth quarter 2014, compared with $328 million, or $0.39 per diluted share, in the third quarter 2014, and $383 million, or $0.43 per diluted share, in the fourth quarter of 2013.

Fourth quarter 2014 included:

Income

 

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$56 million positive valuation adjustment on the Vantiv warrant

 

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$23 million annual payment received from Vantiv pursuant to tax receivable agreement

 

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($19 million) charge related to the valuation of the total return swap entered into as part of the 2009 sale of Visa, Inc. Class B shares

Expenses

 

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($6 million) in severance expense

 

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$3 million reversal of litigation reserves

Results also included $23 million of provision expense related to the transfer of residential mortgage loans classified as troubled debt restructurings to held-for-sale. Additionally, results included an immaterial amount in mortgage repurchase provision.

Third quarter 2014 included:

Income

 

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($53 million) negative valuation adjustment on the Vantiv warrant

 

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($3 million) charge related to the valuation of the total return swap entered into as part of the 2009 sale of Visa, Inc. Class B shares

Expenses

 

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($4 million) in litigation reserve charges

 

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($2 million) in severance expense

Results also included the impact of $3 million in mortgage repurchase provision.

Fourth quarter 2013 included:

Income

 

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$91 million positive valuation adjustment on the Vantiv warrant

 

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($18 million) charge related to the valuation of the total return swap entered into as part of the 2009 sale of Visa, Inc. Class B shares

 

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$9 million annual payment received from Vantiv pursuant to tax receivable agreement

Expenses

 

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($69 million) in net charges to increase litigation reserves

 

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($8 million) of debt extinguishment costs associated with the redemption of Fifth Third Capital Trust IV trust preferred securities (TruPS)

 

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($8 million) contribution to Fifth Third Foundation

 

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($8 million) in severance expense

Results also included a benefit to the mortgage repurchase provision of $28 million primarily related to Fifth Third’s settlement with Freddie Mac and corresponding expectations for future repurchase requests and file claims.

 

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Earnings Highlights

 

		For the Three Months Ended																				% Change
		December 2014				September 2014				June 2014				March 2014				December 2013				Seq				Yr/Yr
Earnings ($ in millions)
Net income attributable to Bancorp		$	385			$	340			$	439			$	318			$	402				13	%			(4	%)
Net income available to common shareholders		$	362			$	328			$	416			$	309			$	383				10	%			(6	%)
Common Share Data
Earnings per share, basic			0.44				0.39				0.49				0.36				0.44				13	%			—
Earnings per share, diluted			0.43				0.39				0.49				0.36				0.43				10	%			—
Cash dividends per common share			0.13				0.13				0.13				0.12				0.12				—				8	%
Financial Ratios
Return on average assets			1.13	%			1.02	%			1.34	%			1.00	%			1.24	%			10	%			(10	%)
Return on average common equity			10.0				9.2				11.9				9.0				10.8				9	%			(7	%)
Return on average tangible common equity(b)			12.1				11.1				14.4				11.0				13.1				9	%			(8	%)
Tier I risk-based capital			10.83				10.83				10.80				10.45				10.43				—				4	%
Tier I common equity(b)			9.65				9.64				9.61				9.51				9.45				—				2	%
Net interest margin(a)			2.96				3.10				3.15				3.22				3.21				(5	%)			(8	%)
Efficiency(a)			59.6				62.1				58.2				64.9				61.5				(4	%)			(3	%)
Common shares outstanding (in thousands)			824,047				834,262				844,489				847,569				855,306				(1	%)			(4	%)
Average common shares outstanding (in thousands):
Basic			819,057				829,392				838,492				845,860				868,077				(1	%)			(6	%)
Diluted			827,831				838,324				848,245				857,924				877,511				(1	%)			(6	%)

 

(a)	Presented on a fully taxable equivalent basis.

(b)

The tangible common equity and tier 1 common equity ratios, while not required by accounting principles generally accepted in the United States of America (U.S. GAAP), are considered to be critical metrics with which to analyze banks. The ratios have been included herein to facilitate a greater understanding of the Bancorp’s capital structure and financial condition. See the Regulation G Non-GAAP Reconciliation table for a reconciliation of these ratios to U.S. GAAP.

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

NM: Not meaningful.

“Fifth Third reported full year net income available to common shareholders of $1.4 billion and earnings per diluted share were $1.66. Full year 2014 earnings included solid performance across our business lines highlighted by growth in corporate banking, payments processing, and investment advisory revenue,” said Kevin T. Kabat, Vice Chairman and CEO of Fifth Third Bancorp. “Highlights for the year also included 7 percent growth in demand deposits and well-controlled expenses that were down 6 percent. Return on average assets was 1.1 percent and return on average tangible common equity* was 12.2 percent.

“Fourth quarter earnings of $385 million rounded out a solid year in a very tough operating environment. Average total deposits were up 3 percent sequentially, highlighted by 5 percent average demand deposit growth. Fee income comparisons were led by corporate banking which increased 20 percent sequentially, led by strong results in capital markets fees to close out the year. We continue to make what we believe to be long-term value enhancing decisions when we deploy our shareholders’ equity and maintain our focus on earnings growth as we anticipate a healthier economy in 2015.

 

*	Non-GAAP measure; see Reg. G reconciliation on page 33.

 

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“Full year net charge-offs were impacted by our decision to move $720 million of residential mortgage TDRs to held-for-sale, as we look to take advantage of market conditions to reduce our TDR portfolio. This decision increased our charge-offs by $87 million. The intended transaction is in line with our previous statements about our view of the current pricing for risk assets and is another indication of our strong focus to reduce the volatility of our future earnings. Otherwise in credit, nonperforming assets were down 24 percent from last year and remain at very low levels. Our credit metrics are moving in the right direction and provide further support to our positive credit outlook.

“We continued to prudently and actively manage our capital position, reducing our share count by another 4 percent in 2014. Fifth Third performed very well in 2014, and we made a number of decisions throughout the year to reduce risk and volatility of earnings, and we feel the Company is well positioned as we enter 2015.”

Income Statement Highlights

 

		For the Three Months Ended																				% Change
		December 2014				September 2014				June 2014				March 2014				December 2013				Seq				Yr/Yr
Condensed Statements of Income ($ in millions)
Net interest income (taxable equivalent)		$	888			$	908			$	905			$	898			$	905				(2	%)			(2	%)
Provision for loan and lease losses			99				71				76				69				53				40	%			87	%
Total noninterest income			653				520				736				564				703				26	%			(7	%)
Total noninterest expense			918				888				954				950				989				3	%			(7	%)
Income before income taxes (taxable equivalent)			524				469				611				443				566				12	%			(8	%)
Taxable equivalent adjustment			5				5				5				5				5				(4	%)			(1	%)
Applicable income taxes			134				124				167				119				159				8	%			(16	%)
Net income			385				340				439				319				402				13	%			(4	%)
Less: Net income attributable to noncontrolling interests			—				—				—				1				—				(70	%)			NM
Net income attributable to Bancorp			385				340				439				318				402				13	%			(4	%)
Dividends on preferred stock			23				12				23				9				19				87	%			19	%
Net income available to common shareholders			362				328				416				309				383				10	%			(6	%)
Earnings per share, diluted		$	0.43			$	0.39			$	0.49			$	0.36			$	0.43				10	%			—

 

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Net Interest Income

 

		For the Three Months Ended																				% Change
		December 2014				September 2014				June 2014				March 2014				December 2013				Seq				Yr/Yr
Interest Income ($ in millions)
Total interest income (taxable equivalent)		$	1,016			$	1,023			$	1,013			$	998			$	1,007				(1	%)			1	%
Total interest expense			128				115				108				100				102				11	%			25	%
Net interest income (taxable equivalent)		$	888			$	908			$	905			$	898			$	905				(2	%)			(2	%)
Average Yield
Yield on interest-earning assets (taxable equivalent)			3.38	%			3.49	%			3.53	%			3.58	%			3.57	%			(3	%)			(5	%)
Rate paid on interest-bearing liabilities			0.61	%			0.56	%			0.54	%			0.51	%			0.52	%			9	%			17	%
Net interest rate spread (taxable equivalent)			2.77	%			2.93	%			2.99	%			3.07	%			3.05	%			(5	%)			(9	%)
Net interest margin (taxable equivalent)			2.96	%			3.10	%			3.15	%			3.22	%			3.21	%			(5	%)			(8	%)
Average Balances ($ in millions)
Loans and leases, including held for sale		$	91,581			$	91,428			$	91,241			$	90,238			$	88,865				—				3	%
Total securities and other short-term investments			27,604				24,927				23,940				22,940				23,043				11	%			20	%
Total interest-earning assets			119,185				116,355				115,181				113,178				111,908				2	%			7	%
Total interest-bearing liabilities			82,544				81,157				80,770				79,130				77,573				2	%			6	%
Bancorp shareholders’ equity			15,644				15,486				15,157				14,862				14,757				1	%			6	%

Net interest income of $888 million on a fully taxable equivalent basis decreased $20 million from the third quarter primarily driven by the effects of loan repricing and higher interest expense associated with the debt issuance in the third quarter of 2014 and partially offset by the benefit of loan growth. Additionally, net interest income was negatively impacted by lower average investment securities balances and higher deposit costs in the quarter.

The net interest margin was 2.96 percent, a decrease of 14 bps from the previous quarter primarily resulting from elevated cash balances due to growth in funding balances. Additionally, the net interest margin was negatively impacted by debt issuances and loan repricing during the quarter.

Compared with the fourth quarter of 2013, net interest income decreased $17 million and the net interest margin decreased 25 bps. The decrease in net interest income was driven by the effect of loan repricing and higher interest expense resulting from increased long-term debt balances partially offset by higher investment securities balances and loan balances. The decline in the net interest margin was primarily driven by the impact of loan repricing.

Securities

Average securities and other short-term investments were $27.6 billion in the fourth quarter of 2014 compared with $24.9 billion in the previous quarter and $23.0 billion in the fourth quarter of 2013. Average securities of $22.4 billion decreased $216 million from the prior quarter reflecting the decision to not reinvest portfolio cash flows. Other short-term investments average balances of $5.2 billion increased $2.9 billion sequentially while end of period balances increased $4.3 billion reflecting higher cash balances held at the Federal Reserve.

 

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Loans

 

		For the Three Months Ended																				% Change
		December 2014				September 2014				June 2014				March 2014				December 2013				Seq				Yr/Yr
Average Portfolio Loans and Leases ($ in millions)
Commercial:
Commercial and industrial loans		$	41,277			$	41,477			$	41,374			$	40,377			$	38,835				—				6	%
Commercial mortgage loans			7,480				7,633				7,885				7,981				8,047				(2	%)			(7	%)
Commercial construction loans			1,909				1,563				1,362				1,116				952				22	%			NM
Commercial leases			3,600				3,571				3,555				3,607				3,578				1	%			1	%
Subtotal—commercial loans and leases			54,266				54,244				54,176				53,081				51,412				—				6	%
Consumer:
Residential mortgage loans			13,046				12,785				12,611				12,659				12,609				2	%			3	%
Home equity			8,937				9,009				9,101				9,194				9,296				(1	%)			(4	%)
Automobile loans			12,073				12,105				12,070				12,023				12,019				—				—
Credit card			2,324				2,295				2,232				2,230				2,202				1	%			6	%
Other consumer loans and leases			395				361				359				343				357				9	%			11	%
Subtotal—consumer loans and leases			36,775				36,555				36,373				36,449				36,483				1	%			1	%
Total average loans and leases (excluding held for sale)		$	91,041			$	90,799			$	90,549			$	89,530			$	87,895				—				4	%
Average loans held for sale			540				629				692				708				970				(14	%)			(44	%)

Average loan and lease balances (excluding loans held-for-sale) increased $242 million sequentially and increased $3.1 billion, or 4 percent, from the fourth quarter of 2013. The sequential increase in average loans and leases was primarily driven by growth in commercial construction and residential mortgage loans. Sequential growth was partially offset by declines in commercial and industrial (C&I), commercial mortgage, and home equity loans. Period end loans and leases (excluding loans held-for-sale) of $90.1 billion decreased $540 million sequentially, reflecting the impact of $720 million residential mortgage loans classified as troubled debt restructurings transferred to held-for-sale during the quarter, and increased $1.5 billion, or 2 percent, from a year ago.

Average commercial portfolio loan and lease balances were flat sequentially and increased $2.9 billion, or 6 percent, from the fourth quarter of 2013. Average C&I loans decreased $200 million from the prior quarter and increased $2.4 billion from the fourth quarter of 2013. Within commercial real estate, average commercial mortgage balances continued to decline and average commercial construction balances increased for the eighth consecutive quarter. Commercial line usage, on an end of period basis, was 32 percent of committed lines in the fourth quarter of 2014 compared with 32 percent in the third quarter of 2014 and 29 percent in the fourth quarter of 2013.

Average consumer portfolio loan and lease balances increased $220 million, or 1 percent, sequentially and increased $292 million, or 1 percent, year-over-year. Average residential mortgage loans increased 2 percent sequentially and 3 percent from a year ago. Average home equity loans declined 1 percent sequentially and 4 percent from the fourth quarter of 2013. Average credit card loans increased 1 percent sequentially and 6 percent from the fourth quarter of 2013.

 

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Average loans held-for-sale balances of $540 million decreased $89 million sequentially and $430 million compared with the fourth quarter of 2013. Period end loans held-for-sale of $1.3 billion increased $620 million from the previous quarter and $317 million from the fourth quarter of 2013 primarily due to the transfer of certain residential mortgage loans classified as troubled debt restructurings to held-for-sale.

Deposits

 

		For the Three Months Ended																				% Change
		December 2014				September 2014				June 2014				March 2014				December 2013				Seq				Yr/Yr
Average Deposits ($ in millions)
Demand		$	33,301			$	31,790			$	31,275			$	30,626			$	30,765				5	%			8	%
Interest checking			25,478				24,926				25,222				25,911				24,650				2	%			3	%
Savings			15,173				15,759				16,509				16,903				17,323				(4	%)			(12	%)
Money market			17,023				15,222				13,942				12,439				11,285				12	%			51	%
Foreign office(a)			1,439				1,663				2,200				2,017				1,717				(13	%)			(16	%)
Subtotal—Transaction deposits			92,414				89,360				89,148				87,896				85,740				3	%			8	%
Other time			3,936				3,800				3,693				3,616				3,529				4	%			12	%
Subtotal—Core deposits			96,350				93,160				92,841				91,512				89,269				3	%			8	%
Certificates—$100,000 and over			2,998				3,339				3,840				5,576				7,456				(10	%)			(60	%)
Other			—				—				—				—				—				NM				NM
Total deposits		$	99,348			$	96,499			$	96,681			$	97,088			$	96,725				3	%			3	%

 

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

Average core deposits increased $3.2 billion sequentially and increased $7.1 billion, or 8 percent, from the fourth quarter of 2013. Average transaction deposits increased $3.1 billion from the third quarter of 2014 primarily driven by higher money market account, demand deposit, and interest checking balances, partially offset by lower savings and foreign office balances. Year-over-year transaction deposits increased $6.7 billion, or 8 percent, driven by higher money market account, demand deposit, and interest checking balances, partially offset by lower savings and foreign office balances. Other time deposits increased 4 percent sequentially and 12 percent compared with the fourth quarter of 2013.

Average commercial transaction deposits increased 5 percent sequentially and 10 percent from the previous year. Sequential performance reflected higher demand deposit, money market account, and interest checking balances, partially offset by lower foreign office balances. Year-over-year growth reflected higher demand deposit, interest checking, and money market account balances as customers are holding higher balances.

Average consumer transaction deposits increased 2 percent sequentially and increased 6 percent from the fourth quarter of 2013. The sequential performance reflected higher money market account, interest checking, and demand deposit balances partially offset by lower savings balances. Year-over-year growth was driven by increased money market account and demand deposit balances partially offset by lower savings and interest checking balances.

 

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Wholesale Funding

 

		For the Three Months Ended																				% Change
		December 2014				September 2014				June 2014				March 2014				December 2013				Seq				Yr/Yr
Average Wholesale Funding ($ in millions)
Certificates—$100,000 and over		$	2,998			$	3,339			$	3,840			$	5,576			$	7,456				(10	%)			(60	%)
Other deposits			—				—				—				—				—				NM				NM
Federal funds purchased			161				520				606				547				301				(69	%)			(47	%)
Other short-term borrowings			1,481				1,973				2,234				1,808				2,177				(25	%)			(32	%)
Long-term debt			14,855				13,955				12,524				10,313				9,135				6	%			63	%
Total wholesale funding		$	19,495			$	19,787			$	19,204			$	18,244			$	19,069				(1	%)			2	%

Average wholesale funding of $19.5 billion decreased $292 million, or 1 percent, sequentially and increased $426 million, or 2 percent, compared with the fourth quarter of 2013. The sequential decrease was driven by a decrease in other short-term borrowings, federal funds purchased, and certificates $100,000 and over, partially offset by an increase in long-term debt. Average other short-term borrowings decreased $492 million from the prior quarter primarily due to a decrease in FHLB borrowings. The year-over-year increase in average wholesale funding reflected an increase in long-term debt, partially offset by a decrease in certificates $100,000 and over and other short-term borrowings. Average long-term debt balances reflected the $1.0 billion on-balance sheet auto securitization executed in the fourth quarter of 2014, as well as the full quarter impact of $850 million of bank senior debt issued in the third quarter of 2014.

Noninterest Income

 

		For the Three Months Ended																				% Change
		December 2014				September 2014				June 2014				March 2014				December 2013				Seq				Yr/Yr
Noninterest Income ($ in millions)
Service charges on deposits		$	142			$	145			$	139			$	133			$	142				(2	%)			—
Corporate banking revenue			120				100				107				104				94				20	%			27	%
Mortgage banking net revenue			61				61				78				109				126				—				(51	%)
Investment advisory revenue			100				103				102				102				98				(2	%)			2	%
Card and processing revenue			76				75				76				68				71				2	%			7	%
Other noninterest income			150				33				226				41				170				NM				(13	%)
Securities gains, net			4				3				8				7				2				15	%			NM
Securities gains, net—non-qualifying hedges on mortgage servicing rights			—				—				—				—				—				—				—
Total noninterest income		$	653			$	520			$	736			$	564			$	703				26	%			(7	%)

Noninterest income of $653 million increased $133 million sequentially and decreased $50 million compared with prior year results. These comparisons reflect the impacts described below.

For the quarters ending December 31, 2014, September 30, 2014, and December 31, 2013, the impacts of Vantiv warrant valuation adjustments were positive $56 million, negative $53 million, and positive $91 million, respectively. Quarterly results also included charges related to the valuation of the total return swap entered into as part of the 2009 sale of Visa, Inc. Class B shares. Valuation adjustments on this swap were a negative $19 million, negative $3 million, and negative $18 million in the fourth quarter of 2014, the third quarter of 2014, and the fourth quarter of 2013, respectively. Excluding these items and net securities gains in all periods, noninterest income of $612 million increased $39 million, or 7 percent,

 

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from the previous quarter and decreased $16 million, or 3 percent, from the fourth quarter of 2013. The sequential increase was primarily due to the $23 million annual payment received from Vantiv pursuant to the tax receivable agreement in the fourth quarter of 2014 and an increase in corporate banking revenue. The year-over-year decline was primarily due to lower mortgage banking net revenue partially offset by higher corporate banking revenue and higher payments received from Vantiv pursuant to the tax receivable agreement in the fourth quarter of 2014 compared to the fourth quarter of 2013, which were $23 million and $9 million, respectively.

Service charges on deposits of $142 million decreased 2 percent from the third quarter and were flat compared with the same quarter last year. The sequential decline was due to a 2 percent decrease in commercial service charges as well as a 2 percent decrease in retail service charges due to lower overdraft occurrences.

Corporate banking revenue of $120 million increased 20 percent from the third quarter of 2014 and 27 percent from the fourth quarter of 2013. The sequential increase was due to higher syndication fees, business lending fees, and foreign exchange fees, partially offset by a decrease in institutional sales revenue. The year-over-year increase was driven by higher syndication fees, lease remarketing fees, letter of credit fees, and foreign exchange fees, partially offset by a decrease in institutional sales revenue.

Mortgage banking net revenue was $61 million in the fourth quarter of 2014, flat from the third quarter of 2014 and a 51 percent decrease from the fourth quarter of 2013. Fourth quarter 2014 originations were $1.7 billion, compared with $2.1 billion in the previous quarter and $2.6 billion in the fourth quarter of 2013. Fourth quarter 2014 originations resulted in gains of $36 million on mortgages sold, compared with gains of $34 million during the previous quarter and $60 million during the fourth quarter of 2013. The sequential increase was driven by higher gain on sale margins, partially offset by lower production. The decrease from the prior year reflected lower production, including Fifth Third’s exit from the broker channel, partially offset by higher gain on sale margins. Mortgage servicing fees were $60 million this quarter, $61 million in the third quarter of 2014, and $64 million in the fourth quarter of 2013. Mortgage banking net revenue is also affected by net servicing asset valuation adjustments, which include mortgage servicing rights (MSR) amortization and MSR valuation adjustments (including mark-to-market adjustments on free-standing derivatives used to economically hedge the MSR portfolio). These net servicing asset valuation adjustments were negative $34 million in the fourth quarter of 2014 (reflecting MSR amortization of $32 million and MSR valuation adjustments of negative $2 million); negative $34 million in the third quarter of 2014 (MSR amortization of $33 million and MSR valuation adjustments of negative $1 million); and positive $3 million in the fourth quarter of 2013 (MSR amortization of $23 million and MSR valuation adjustments of positive $26 million). The mortgage servicing asset, net of the valuation reserve, was $856 million at quarter-end on a servicing portfolio of $65 billion.

Investment advisory revenue of $100 million decreased 2 percent from the third quarter and increased 2 percent year-over-year. The sequential decline reflected a decrease in personal specialty and insurance fees relative to elevated levels in the third quarter, as well as a decrease in securities and brokerage fees due to a continued shift from transaction-based fees to recurring revenue streams. The year-over-year increase reflected an increase in personal asset management fees due to market-related growth, partially offset by a decrease in securities and brokerage fees.

 

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Card and processing revenue of $76 million in the fourth quarter of 2014 increased 2 percent sequentially and increased 7 percent from the fourth quarter of 2013. The sequential and year-over-year increases reflect an increase in the number of actively used cards and an increase in customer spend volume.

Other noninterest income totaled $150 million in the fourth quarter of 2014, compared with $33 million in the previous quarter and $170 million in the fourth quarter of 2013. As previously described, the results included the impact of Vantiv warrant valuation adjustments and charges related to the valuation of the Visa total return swap. Excluding these items, other noninterest income of $113 million increased approximately $24 million, or 27 percent, from the third quarter of 2014 and increased approximately $16 million, or 16 percent, from the fourth quarter of 2013. The sequential and year-over-year increases were primarily due to payments received from Vantiv pursuant to the tax receivable agreement of $23 million in the fourth quarter of 2014 and $9 million in the fourth quarter of 2013.

Net gains on investment securities were $4 million in the fourth quarter of 2014, compared with $3 million in the previous quarter and $2 million in the fourth quarter of 2013.

Noninterest Expense

 

		For the Three Months Ended																				% Change
		December 2014				September 2014				June 2014				March 2014				December 2013				Seq				Yr/Yr
Noninterest Expense ($ in millions)
Salaries, wages and incentives		$	366			$	357			$	368			$	359			$	388				3	%			(6	%)
Employee benefits			79				75				79				101				78				5	%			1	%
Net occupancy expense			77				78				79				80				77				(1	%)			—
Technology and communications			54				53				52				53				53				2	%			2	%
Equipment expense			30				30				30				30				29				—				3	%
Card and processing expense			36				37				37				31				37				(1	%)			(2	%)
Other noninterest expense			276				258				309				296				327				7	%			(16	%)
Total noninterest expense		$	918			$	888			$	954			$	950			$	989				3	%			(7	%)

Noninterest expense of $918 million increased 3 percent compared with the third quarter of 2014 and decreased 7 percent compared with the fourth quarter of 2013.

Fourth quarter 2014 expenses included a $3 million reversal of litigation reserves, compared with $4 million in charges to litigation reserves in the third quarter of 2014 and $69 million in charges to litigation reserves in the fourth quarter of 2013. Fourth quarter 2014 expenses also included $6 million in severance expense compared with $2 million in the third quarter of 2014 and $8 million in the fourth quarter of 2013. Fourth quarter of 2013 also included $8 million of debt extinguishment costs associated with the redemption of Fifth Third Capital Trust IV and an $8 million contribution to Fifth Third Foundation. Excluding these items, noninterest expense of $915 million was up $33 million, or 4 percent, sequentially and increased $19 million, or 2 percent, year-over-year. The sequential increase reflected higher credit-related costs and compensation-related expense. The year-over-year increase reflected increased credit-related costs, partially offset by lower compensation-related expense, primarily due to changes in our mortgage and retail staffing.

 

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Credit costs related to problem assets recorded as noninterest expense totaled $33 million in the fourth quarter of 2014, compared with $13 million in the third quarter of 2014, and a benefit of $12 million in the fourth quarter of 2013. Credit- related expenses included provision for mortgage repurchases that was an immaterial amount in the fourth quarter of 2014, compared with expense of $3 million in the third quarter of 2014. The fourth quarter of 2013 included a benefit of $26 million reflecting the reduction in the mortgage representation and warranty reserve primarily related to Fifth Third’s settlement with Freddie Mac and corresponding expectations for future repurchase requests and file claims. (Realized mortgage repurchase losses were $2 million in the fourth quarter of 2014, compared with $3 million in the third quarter of 2014, and $33 million in the fourth quarter of 2013.) Provision for unfunded commitments was an expense of $1 million in the current quarter, compared with a benefit of $8 million last quarter and a benefit of $5 million a year ago. Derivative valuation adjustments related to customer credit risk were negative $10 million for the current quarter, positive $1 million in the third quarter, and positive $2 million for the year ago quarter. Other problem asset-related expenses were $17 million in the fourth quarter, compared with $15 million in the previous quarter, and $17 million in the same period last year.

Credit Quality

 

		For the Three Months Ended
		December 2014				September 2014				June 2014				March 2014				December 2013
Total net losses charged off ($ in millions)
Commercial and industrial loans		($	44	)		($	50	)		($	31	)		($	97	)		($	66	)
Commercial mortgage loans			(10	)			(5	)			(9	)			(3	)			(8	)
Commercial construction loans			—				—				(8	)			(5	)			(4	)
Commercial leases			(1	)			—				—				—				—
Residential mortgage loans			(94	)			(9	)			(8	)			(15	)			(13	)
Home equity			(11	)			(14	)			(18	)			(16	)			(26	)
Automobile loans			(7	)			(7	)			(5	)			(8	)			(6	)
Credit card			(20	)			(23	)			(21	)			(19	)			(21	)
Other consumer loans and leases			(4	)			(7	)			(1	)			(5	)			(4	)
Total net losses charged off			(191	)			(115	)			(101	)			(168	)			(148	)
Total losses			(215	)			(146	)			(127	)			(190	)			(183	)
Total recoveries			24				31				26				22				35
Total net losses charged off		($	191	)		($	115	)		($	101	)		($	168	)		($	148	)
Ratios (annualized)
Net losses charged off as a percent of average loans and leases (excluding held for sale)			0.83	%			0.50	%			0.45	%			0.76	%			0.67	%
Commercial			0.40	%			0.40	%			0.35	%			0.79	%			0.60	%
Consumer			1.47	%			0.66	%			0.60	%			0.72	%			0.76	%

Net charge-offs were $191 million, or 83 bps of average loans on an annualized basis, in the fourth quarter of 2014 compared with net charge-offs of $115 million, or 50 bps, in the third quarter of 2014 and $148 million, or 67 bps, in the fourth quarter of 2013. The fourth quarter of 2014 net charge-offs included $87 million (38 bps) related to the transfer of residential mortgage loans classified as troubled debt restructurings to held-for-sale. Excluding these, net charge-offs were $104 million, or 45 bps, in the fourth quarter of 2014. For comparison purposes, the fourth quarter of 2013 included a single large credit that was restructured which resulted in a charge-off of $43 million (19 bps).

 

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Commercial net charge-offs were $55 million, or 40 bps, and were flat sequentially. C&I net charge-offs of $44 million decreased $6 million from the previous quarter and commercial real estate net charge-offs increased $5 million from the previous quarter.

Consumer net charge-offs were $136 million, or 147 bps, up $76 million sequentially. Net charge-offs on residential mortgage loans in the portfolio were $94 million, up $85 million from the previous quarter primarily reflecting the impact of the charge-offs mentioned above. Home equity net charge-offs were $11 million, down $3 million from the third quarter of 2014, and net charge-offs in the auto portfolio of $7 million were flat compared with the prior quarter. Net charge-offs on consumer credit card loans were $20 million, down $3 million from the third quarter. Net charge-offs on other consumer loans were $4 million, down $3 million compared with the previous quarter.

 

		For the Three Months Ended
		December 2014				September 2014				June 2014				March 2014				December 2013
Allowance for Credit Losses ($ in millions)
Allowance for loan and lease losses, beginning		$	1,414			$	1,458			$	1,483			$	1,582			$	1,677
Total net losses charged off			(191	)			(115	)			(101	)			(168	)			(148	)
Provision for loan and lease losses			99				71				76				69				53
Allowance for loan and lease losses, ending			1,322				1,414				1,458				1,483				1,582
Reserve for unfunded commitments, beginning			134				142				153				162				167
Provision (benefit) for unfunded commitments			1				(8	)			(11	)			(9	)			(5	)
Reserve for unfunded commitments, ending			135				134				142				153				162
Components of allowance for credit losses:
Allowance for loan and lease losses			1,322				1,414				1,458				1,483				1,582
Reserve for unfunded commitments			135				134				142				153				162
Total allowance for credit losses		$	1,457			$	1,548			$	1,600			$	1,636			$	1,744
Allowance for loan and lease losses ratio
As a percent of loans and leases			1.47	%			1.56	%			1.61	%			1.65	%			1.79	%
As a percent of nonperforming loans and leases(a)			228	%			228	%			228	%			202	%			211	%
As a percent of nonperforming assets(a)			178	%			178	%			175	%			157	%			161	%

 

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

Provision for loan and lease losses totaled $99 million in the fourth quarter of 2014 and included a $23 million impact related to the transfer of residential mortgage loans classified as troubled debt restructurings to held-for-sale. The provision increased $28 million from the third quarter of 2014 and increased $46 million from the fourth quarter of 2013. The allowance for loan and lease losses declined $92 million sequentially reflecting a $64 million reduction related to the aforementioned transfer of loans to held-for-sale, as well as the portfolio’s overall risk profile and charges to the allowance. The allowance represented 1.47 percent of total loans and leases outstanding as of quarter end, compared with 1.56 percent last quarter, and represented 228 percent of nonperforming loans and leases, and 178 percent of nonperforming assets.

 

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		As of
		December 2014				September 2014				June 2014				March 2014				December 2013
Nonperforming Assets and Delinquent Loans ($ in millions)
Nonaccrual portfolio loans and leases:
Commercial and industrial loans		$	86			$	102			$	103			$	153			$	127
Commercial mortgage loans			64				77				86				96				90
Commercial construction loans			—				2				3				3				10
Commercial leases			3				3				2				3				3
Residential mortgage loans			44				52				56				68				83
Home equity			72				69				73				75				74
Automobile loans			—				—				—				—				—
Other consumer loans and leases			—				—				—				—				—
Total nonaccrual loans and leases (excludes restructured loans)		$	269			$	305			$	323			$	398			$	387
Restructured loans—commercial (nonaccrual)(c)			214				201				202				209				228
Restructured loans—consumer (nonaccrual)			96				114				115				126				136
Total nonaccrual portfolio loans and leases		$	579			$	620			$	640			$	733			$	751
Repossessed personal property			18				19				18				6				7
Other real estate owned(a)			147				157				174				207				222
Total nonperforming assets(b)		$	744			$	796			$	832			$	946			$	980
Nonaccrual loans held for sale			24				4				5				3				6
Restructured loans—(nonaccrual) held for sale			15				3				—				—				—
Total nonperforming assets including loans held for sale		$	783			$	803			$	837			$	949			$	986
Restructured Consumer loans and leases (accrual)		$	905			$	1,610			$	1,623			$	1,682			$	1,685
Restructured Commercial loans and leases (accrual)(c)		$	844			$	885			$	914			$	847			$	869
Total loans and leases 90 days past due		$	87			$	87			$	94			$	94			$	103
Nonperforming loans and leases as a percent of portfolio loans, leases and other assets, including other real estate owned(b)			0.64	%			0.68	%			0.70	%			0.82	%			0.84	%
Nonperforming assets as a percent of portfolio loans, leases and other assets, including other real estate owned(b)			0.82	%			0.88	%			0.92	%			1.05	%			1.10	%

 

(a)	Excludes government insured advances.

(b)	Does not include nonaccrual loans held for sale.

(c)

Excludes $21 million of restructured nonaccrual loans and $7 million of restructured accruing loans as of December 31, 2014, September 30, 2014, June 30, 2014, and March 31, 2014 and excludes $21 million of restructured nonaccrual loans and $8 million of restructured accruing loans as of December 31, 2013 associated with a consolidated variable interest entity in which the Bancorp has no continuing credit risk.

Total nonperforming assets, including loans held-for-sale, were $783 million, a decline of $20 million, or 3 percent, from the previous quarter. Nonperforming loans (NPLs) at quarter-end were $579 million or 0.64 percent of total loans, leases and OREO, and decreased $41 million, or 7 percent, from the previous quarter. The fourth quarter NPLs declined $24 million related to the transfer of residential mortgage loans classified as troubled debt restructurings to held-for-sale.

Commercial NPAs were $461 million, or 0.85 percent of commercial loans, leases and OREO, and decreased $26 million, or 5 percent, from the third quarter. Commercial NPLs were $367 million, or 0.68 percent of commercial loans and leases, and decreased $18 million from last quarter. C&I NPAs of $246 million decreased $32 million from the prior quarter. Commercial mortgage NPAs were $195 million, up $9 million from the previous quarter. Commercial construction NPAs were $16 million, a decrease of $3 million from the previous quarter. Commercial lease NPAs were $4 million, flat from the previous quarter. Commercial NPAs included $214 million of nonaccrual troubled debt restructurings (TDRs), compared with $201 million last quarter.

 

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Consumer NPAs of $283 million, or 0.78 percent of consumer loans, leases and OREO, decreased $26 million from the third quarter. Consumer NPLs were $212 million, or 0.59 percent of consumer loans and leases and decreased $23 million from last quarter. The declines in consumer NPAs and NPLs were driven by the residential mortgage loans moved to held-for-sale in the fourth quarter. Residential mortgage NPAs were $126 million, $38 million lower than last quarter reflecting the aforementioned NPAs moved to held-for-sale. Home equity NPAs of $108 million increased $7 million sequentially and credit card NPAs of $41 million were up $4 million compared with the previous quarter. Consumer nonaccrual TDRs were $96 million in the fourth quarter of 2014, compared with $114 million in the third quarter of 2014.

Fourth quarter OREO balances included in NPA balances were $147 million, down $10 million from the third quarter, and included $83 million in commercial OREO and $64 million in consumer OREO. Repossessed personal property of $18 million decreased $1 million from the prior quarter.

Loans over 90 days past due and still accruing were $87 million, flat from the third quarter of 2014. Commercial balances over 90 days past due were less than $1 million compared with $1 million in the prior quarter, and consumer balances 90 days past due of $87 million were up $1 million from the previous quarter. Loans 30-89 days past due of $250 million were down $29 million from the previous quarter. Commercial balances 30-89 days past due of $16 million were down $1 million sequentially and consumer balances 30-89 days past due of $234 million decreased $28 million from the third quarter. The above delinquencies figures exclude nonaccruals described previously.

 

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Capital Position

 

		For the Three Months Ended
		December 2014				September 2014				June 2014				March 2014				December 2013
Capital Position
Average shareholders’ equity to average assets			11.54	%			11.71	%			11.57	%			11.53	%			11.51	%
Tangible equity(a)			9.41	%			9.65	%			9.77	%			9.61	%			9.44	%
Tangible common equity (excluding unrealized gains/losses)(a)			8.43	%			8.64	%			8.74	%			8.79	%			8.63	%
Tangible common equity (including unrealized gains/losses)(a)			8.71	%			8.84	%			9.00	%			8.93	%			8.69	%
Tangible common equity as a percent of risk-weighted assets (excluding unrealized gains/losses)(a)(b)			9.70	%			9.70	%			9.67	%			9.57	%			9.52	%
Regulatory capital ratios:(c)
Tier I risk-based capital			10.83	%			10.83	%			10.80	%			10.45	%			10.43	%
Total risk-based capital			14.33	%			14.34	%			14.30	%			14.02	%			14.17	%
Tier I leverage			9.66	%			9.82	%			9.86	%			9.71	%			9.73	%
Tier I common equity(a)			9.65	%			9.64	%			9.61	%			9.51	%			9.45	%
Book value per share			17.35				16.87				16.74				16.27				15.85
Tangible book value per share(a)			14.40				13.95				13.86				13.40				13.00

 

(a)

The tangible equity, tangible common equity, tier I common equity and tangible book value per share ratios, while not required by accounting principles generally accepted in the United States of America (U.S. GAAP), are considered to be critical metrics with which to analyze banks. The ratios have been included herein to facilitate a greater understanding of the Bancorp’s capital structure and financial condition. See the Regulation G Non-GAAP Reconciliation table for a reconciliation of these ratios to U.S. GAAP.

(b)

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

(c)	Current period regulatory capital data ratios are estimated.

Capital ratios remained strong during the quarter, reflecting growth in retained earnings, the payment of preferred dividends, and share repurchase activity. Compared with the prior quarter, the Tier 1 common equity ratio* of 9.65 percent increased 1 bp. The tangible common equity to tangible assets ratio* was 8.43 percent (excluding unrealized gains/losses) and 8.71 percent (including unrealized gains/losses). The Tier 1 risk-based capital ratio was 10.83 percent and was flat compared to the prior quarter. The total risk-based capital ratio decreased 1 bps to 14.33 percent and the Leverage ratio decreased 16 bps to 9.66 percent.

Our current estimate of the pro-forma fully phased in Tier I common equity ratio at December 31, 2014 under the final capital rule, assuming the Company elected to maintain the current treatment of AOCI components in capital, would be approximately 9.4 percent**. This would compare with 9.7 percent* as calculated under the currently prevailing Basel I capital framework. Were Fifth Third to make the election to include AOCI components in capital, the December 31, 2014 pro forma Basel III Tier 1 common ratio would be increased by approximately 35 bps. Fifth Third’s pro forma Tier 1 common equity ratio exceeds the minimum buffered Tier 1 common equity ratio of 7 percent, comprising a minimum of 4.5 percent plus a capital conservation buffer of 2.5 percent. The pro forma Tier 1 common equity ratio does not include the effect of any mitigating actions the Bancorp may undertake to offset any impact of the final capital rules.

 

*	Non-GAAP measure; see Reg. G reconciliation on page 33.

**	Capital ratios estimated; presented under current U.S. capital regulations. The pro forma Basel III Tier I common equity ratio is management’s estimate based upon its current interpretation of the Basel III Final Rule approved in July 2013.

 

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Book value per share at December 31, 2014 was $17.35 and tangible book value per share* was $14.40, compared with the September 30, 2014 book value per share of $16.87 and tangible book value per share of $13.95.

As previously announced, Fifth Third entered into a share repurchase agreement with a counterparty on October 20, 2014, whereby Fifth Third would purchase approximately $180 million of its outstanding common stock. This transaction reduced Fifth Third’s fourth quarter share count by 8.34 million shares on October 23, 2014. Settlement of the forward contract related to this agreement occurred on January 5, 2015 and an additional 0.79 million shares were repurchased upon completion of the agreement. In addition, the settlement of the forward contract related to the July 21, 2014 $225 million share repurchase agreement occurred on October 14, 2014. An additional 1.90 million shares were repurchased upon completion of the agreement. In total, the incremental impact to the average diluted share count in the fourth quarter of 2014 was approximately 10.53 million shares due to share repurchase transactions in the third and fourth quarters of 2014.

Tax Rate

The effective tax rate was 25.9 percent this quarter compared with 26.7 percent in the third quarter of 2014 and 28.4 percent in the fourth quarter of 2013.

Other

Fifth Third Bank owns 43 million units representing a 22.8 percent interest in Vantiv Holding, LLC, convertible into shares of Vantiv, Inc., a publicly traded firm (NYSE: VNTV). Based upon Vantiv’s closing price of $33.92 on December 31, 2014, our interest in Vantiv was valued at approximately $1.5 billion. Next month in our 10-K, we will update our disclosure of the carrying value of our interest in Vantiv stock, which was $388 million as of September 30, 2014. The difference between the market value and the book value of Fifth Third’s interest in Vantiv’s shares is not recognized in Fifth Third’s equity or capital. Additionally, Fifth Third has a warrant to purchase additional shares in Vantiv which is carried as a derivative asset at a fair value of $415 million as of December 31, 2014.

Conference Call

Fifth Third will host a conference call to discuss these financial results at 9:00 a.m. (Eastern Time) today. This conference call will be webcast live by Thomson Financial and may be accessed through the Fifth Third Investor Relations website at www.53.com (click on “About Fifth Third” then “Investor Relations”). Institutional investors can access the call via Thomson Financial’s password-protected event management site, StreetEvents (www.streetevents.com).

Those unable to listen to the live webcast may access a webcast replay through the Fifth Third Investor Relations website at the same web address. Additionally, a telephone replay of the conference call will be available beginning approximately two hours after the conference call until Wednesday, February 4, 2015 by dialing 800-585-8367 for domestic access or 404-537-3406 for international access (passcode 46038333#).

 

*	Non-GAAP measure; see Reg. G reconciliation on page 33.

 

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Corporate Profile

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. As of December 31, 2014, the Company had $139 billion in assets and operated 15 affiliates with 1,302 full-service Banking Centers, including 101 Bank Mart^® locations, most open seven days a week, inside select grocery stores and 2,638 ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Pennsylvania, Missouri, Georgia and North Carolina. Fifth Third operates four main businesses: Commercial Banking, Branch Banking, Consumer Lending, and Investment Advisors. Fifth Third also has a 22.8% interest in Vantiv Holding, LLC. Fifth Third is among the largest money managers in the Midwest and, as of December 31, 2014, had $308 billion in assets under care, of which it managed $27 billion for individuals, corporations and not-for-profit organizations. Investor information and press releases can be viewed at www.53.com. Fifth Third’s common stock is traded on the NASDAQ^® Global Select Market under the symbol “FITB.”

Forward-Looking Statements

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

There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) general economic conditions and weakening in the economy, specifically the real estate market, either nationally or in the states in which Fifth Third, one or more acquired entities and/or the combined company do business, are less favorable than expected; (2) deteriorating credit quality; (3) political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; (4) changes in the interest rate environment reduce interest margins; (5) prepayment speeds, loan origination and sale volumes, charge-offs and loan loss provisions; (6) Fifth Third’s ability to maintain required capital levels and adequate sources of funding and liquidity; (7) maintaining capital requirements and adequate sources of funding and liquidity may limit Fifth Third’s operations and potential growth; (8) changes and trends in capital markets; (9) problems encountered by larger or similar financial institutions may adversely affect the banking industry and/or Fifth Third; (10) competitive pressures among depository institutions increase significantly; (11) effects of critical accounting policies and judgments; (12) changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board (FASB) or other regulatory agencies; (13) legislative or regulatory changes or actions, or significant litigation, adversely affect Fifth Third, one or more acquired entities and/or the combined company or the businesses in which Fifth Third, one or more acquired entities and/or the combined company are engaged, including the Dodd-Frank Wall Street Reform and Consumer Protection Act; (14) ability to maintain favorable ratings from rating agencies; (15) fluctuation of Fifth Third’s stock price; (16) ability to attract and retain key personnel; (17) ability to receive dividends from its subsidiaries; (18) potentially dilutive effect of future acquisitions on current shareholders’ ownership of Fifth Third; (19) effects of accounting or financial results of one or more acquired entities; (20) difficulties from Fifth Third’s investment in, relationship with, and nature of the operations of Vantiv, LLC; (21) loss of income from any sale or potential sale of businesses that could have an adverse effect on Fifth Third’s earnings and future growth; (22) ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks; and (23) the impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity.

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

# # #

 

17

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Quarterly Financial Review for December 31, 2014

Table of Contents

 

Financial Highlights			19-20
Consolidated Statements of Income			21
Consolidated Statements of Income (Taxable Equivalent)			22
Consolidated Balance Sheets			23-24
Consolidated Statements of Changes in Equity			25
Average Balance Sheet and Yield Analysis			26-28
Summary of Loans and Leases			29
Regulatory Capital			30
Summary of Credit Loss Experience			31
Asset Quality			32
Regulation G Non-GAAP Reconciliation			33
Segment Presentation			34

 

18

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Fifth Third Bancorp and Subsidiaries

Financial Highlights

$ in millions, except per share data

(unaudited)

 

		For the Three Months Ended												% Change								Year to Date								% Change
		December 2014				September 2014				December 2013				Seq				Yr/Yr				December 2014				December 2013				Yr/Yr
Income Statement Data
Net interest income(a)		$	888			$	908			$	905				(2	%)			(2	%)		$	3,600			$	3,581				1	%
Noninterest income			653				520				703				26	%			(7	%)			2,473				3,227				(23	%)
Total revenue(a)			1,541				1,428				1,608				8	%			(4	%)			6,073				6,808				(11	%)
Provision for loan and lease losses			99				71				53				40	%			87	%			315				229				38	%
Noninterest expense			918				888				989				3	%			(7	%)			3,709				3,961				(6	%)
Net income attributable to Bancorp			385				340				402				13	%			(4	%)			1,481				1,836				(19	%)
Net income available to common shareholders			362				328				383				10	%			(6	%)			1,414				1,799				(21	%)
Common Share Data
Earnings per share, basic		$	0.44			$	0.39			$	0.44				13	%			—			$	1.68			$	2.05				(18	%)
Earnings per share, diluted			0.43				0.39				0.43				10	%			—				1.66				2.02				(17	%)
Cash dividends per common share			0.13				0.13				0.12				—				8	%			0.51				0.47				9	%
Book value per share			17.35				16.87				15.85				3	%			9	%			17.35				15.85				9	%
Market price per share			20.38				20.02				21.03				2	%			(3	%)			20.38				21.03				(3	%)
Common shares outstanding (in thousands)			824,047				834,262				855,306				(1	%)			(4	%)			824,047				855,306				(4	%)
Average common shares outstanding (in thousands):
Basic			819,057				829,392				868,077				(1	%)			(6	%)			833,116				869,463				(4	%)
Diluted			827,831				838,324				877,511				(1	%)			(6	%)			842,967				894,736				(6	%)
Market capitalization		$	16,790			$	16,702			$	17,987				1	%			(7	%)		$	16,790			$	17,987				(7	%)
Financial Ratios
Return on average assets			1.13	%			1.02	%			1.24	%			10	%			(10	%)			1.12	%			1.48	%			(24	%)
Return on average common equity			10.0	%			9.2	%			10.8	%			9	%			(7	%)			10.0	%			13.1	%			(24	%)
Return on average tangible common equity(b)(j)			12.1	%			11.1	%			13.1	%			9	%			(8	%)			12.2	%			16.0	%			(24	%)
Noninterest income as a percent of total revenue			42	%			36	%			44	%			16	%			(3	%)			41	%			47	%			(14	%)
Average Bancorp shareholders’ equity as a percent of average assets			11.54	%			11.71	%			11.51	%			(1	%)			—				11.59	%			11.56	%			—
Tangible common equity(c)(d)(j)			8.43	%			8.64	%			8.63	%			(2	%)			(2	%)			8.43	%			8.63	%			(2	%)
Net interest margin(a)			2.96	%			3.10	%			3.21	%			(5	%)			(8	%)			3.10	%			3.32	%			(6	%)
Efficiency(a)			59.6	%			62.1	%			61.5	%			(4	%)			(3	%)			61.1	%			58.2	%			5	%
Effective tax rate			25.9	%			26.7	%			28.4	%			(3	%)			(9	%)			26.9	%			29.7	%			(10	%)
Credit Quality
Net losses charged off		$	191			$	115			$	148				67	%			29	%		$	575			$	501				15	%
Net losses charged off as a percent of average loans and leases			0.83	%			0.50	%			0.67	%			66	%			25	%			0.64	%			0.58	%			10	%
Allowance for loan and lease losses as a percent of portfolio loans and leases			1.47	%			1.56	%			1.79	%			(6	%)			(18	%)			1.47	%			1.79	%			(18	%)
Allowance for credit losses as a percent of portfolio loans and leases			1.62	%			1.71	%			1.97	%			(5	%)			(18	%)			1.62	%			1.97	%			(18	%)
Nonperforming assets as a percent of portfolio loans, leases and other assets, including other real estate owned(e)			0.82	%			0.88	%			1.10	%			(6	%)			(25	%)			0.82	%			1.10	%			(25	%)
Average Balances
Loans and leases, including held for sale		$	91,581			$	91,428			$	88,865				—				3	%		$	91,127			$	89,093				2	%
Total securities and other short-term investments			27,604				24,927				23,043				11	%			20	%			24,866				18,861				32	%
Total assets			135,580				132,220				128,179				3	%			6	%			131,943				123,732				7	%
Transaction deposits(f)			92,414				89,360				85,740				3	%			8	%			89,715				82,915				8	%
Core deposits(g)			96,350				93,160				89,269				3	%			8	%			93,477				86,675				8	%
Wholesale funding(h)			19,495				19,787				19,069				(1	%)			2	%			19,188				17,797				8	%
Bancorp shareholders’ equity			15,644				15,486				14,757				1	%			6	%			15,290				14,302				7	%
Regulatory Capital Ratios(i)
Tier I risk-based capital			10.83	%			10.83	%			10.43	%			—				4	%			10.83	%			10.43	%			4	%
Total risk-based capital			14.33	%			14.34	%			14.17	%			—				1	%			14.33	%			14.17	%			1	%
Tier I leverage			9.66	%			9.82	%			9.73	%			(2	%)			—				9.66	%			9.73	%			—
Tier I common equity(d)(j)			9.65	%			9.64	%			9.45	%			—				2	%			9.65	%			9.45	%			2	%
Operations
Banking centers			1,302				1,308				1,320				—				(1	%)			1,302				1,320				(1	%)
ATMs			2,638				2,639				2,586				—				2	%			2,638				2,586				2	%
Full-time equivalent employees			18,351				18,503				19,446				(1	%)			(6	%)			18,351				19,446				(6	%)

 

(a)	Presented on a fully taxable equivalent basis.

(b)	The return on average tangible common equity is calculated as tangible net income available to common shareholders excluding tax effected amortization of intangibles) divided by average tangible common equity (average common equity less goodwill and intangible assets).

(c)

The tangible common equity ratio is calculated as tangible common equity (shareholders’ equity less preferred stock, goodwill, intangible assets and accumulated other comprehensive income divided by tangible assets (total assets less goodwill, intangible assets and accumulated other comprehensive income).

(d)

The tangible common equity and tier I common equity ratios, while not required by U.S. GAAP, are considered to be important metrics with which to analyze a bank’s position. The ratios have been included herein to facilitate a greater understanding of the Bancorp’s capital structure and financial condition.

(e)	Excludes nonaccrual loans held for sale.

(f)	Includes demand, interest checking, savings, money market and foreign office deposits of commercial customers.

(g)	Includes transaction deposits plus other time deposits.

(h)	Includes certificates $100,000 and over, other deposits, federal funds purchased, short-term borrowings and long-term debt.

(i)	Current period regulatory capital ratios are estimates.

(j)	Non-GAAP measure; see Reg. G reconciliation on page 33.

 

19

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Fifth Third Bancorp and Subsidiaries

Financial Highlights

$ in millions, except per share data

(unaudited)

 

		For the Three Months Ended
		December 2014				September 2014				June 2014				March 2014				December 2013
Income Statement Data
Net interest income(a)		$	888			$	908			$	905			$	898			$	905
Noninterest income			653				520				736				564				703
Total revenue(a)			1,541				1,428				1,641				1,462				1,608
Provision for loan and lease losses			99				71				76				69				53
Noninterest expense			918				888				954				950				989
Net income attributable to Bancorp			385				340				439				318				402
Net income available to common shareholders			362				328				416				309				383
Common Share Data
Earnings per share, basic		$	0.44			$	0.39			$	0.49			$	0.36			$	0.44
Earnings per share, diluted			0.43				0.39				0.49				0.36				0.43
Cash dividends per common share			0.13				0.13				0.13				0.12				0.12
Book value per share			17.35				16.87				16.74				16.27				15.85
Market price per share			20.38				20.02				21.35				22.96				21.03
Common shares outstanding (in thousands)			824,047				834,262				844,489				847,569				855,306
Average common shares outstanding (in thousands):
Basic			819,057				829,392				838,492				845,860				868,077
Diluted			827,831				838,324				848,245				857,924				877,511
Market capitalization		$	16,790			$	16,702			$	18,030			$	19,456			$	17,987
Financial Ratios
Return on average assets			1.13	%			1.02	%			1.34	%			1.00	%			1.24	%
Return on average common equity			10.0	%			9.2	%			11.9	%			9.0	%			10.8	%
Return on average tangible common equity(b)(j)			12.1	%			11.1	%			14.4	%			11.0	%			13.1	%
Noninterest income as a percent of total revenue			42	%			36	%			45	%			39	%			44	%
Average Bancorp shareholders’ equity as a percent of average assets			11.54	%			11.71	%			11.57	%			11.53	%			11.51	%
Tangible common equity(c)(d)(j)			8.43	%			8.64	%			8.74	%			8.79	%			8.63	%
Net interest margin(a)			2.96	%			3.10	%			3.15	%			3.22	%			3.21	%
Efficiency(a)			59.6	%			62.1	%			58.2	%			64.9	%			61.5	%
Effective tax rate			25.9	%			26.7	%			27.6	%			27.3	%			28.4	%
Credit Quality
Net losses charged off		$	191			$	115			$	101			$	168			$	148
Net losses charged off as a percent of average loans and leases			0.83	%			0.50	%			0.45	%			0.76	%			0.67	%
Allowance for loan and lease losses as a percent of portfolio loans and leases			1.47	%			1.56	%			1.61	%			1.65	%			1.79	%
Allowance for credit losses as a percent of portfolio loans and leases			1.62	%			1.71	%			1.77	%			1.82	%			1.97	%
Nonperforming assets as a percent of portfolio loans, leases and other assets, including other real estate owned(e)			0.82	%			0.88	%			0.92	%			1.05	%			1.10	%
Average Balances
Loans and leases, including held for sale		$	91,581			$	91,428			$	91,241			$	90,238			$	88,865
Total securities and other short-term investments			27,604				24,927				23,940				22,940				23,043
Total assets			135,580				132,220				130,965				128,930				128,179
Transaction deposits(f)			92,414				89,360				89,148				87,896				85,740
Core deposits(g)			96,350				93,160				92,841				91,512				89,269
Wholesale funding(h)			19,495				19,787				19,204				18,244				19,069
Bancorp shareholders’ equity			15,644				15,486				15,157				14,862				14,757
Regulatory Capital Ratios(i)
Tier I risk-based capital			10.83	%			10.83	%			10.80	%			10.45	%			10.43	%
Total risk-based capital			14.33	%			14.34	%			14.30	%			14.02	%			14.17	%
Tier I leverage			9.66	%			9.82	%			9.86	%			9.71	%			9.73	%
Tier I common equity(d)(j)			9.65	%			9.64	%			9.61	%			9.51	%			9.45	%
Operations
Banking centers			1,302				1,308				1,309				1,311				1,320
ATMs			2,638				2,639				2,619				2,614				2,586
Full-time equivalent employees			18,351				18,503				18,732				19,080				19,446

 

(a)	Presented on a fully taxable equivalent basis.

(b)	The return on average tangible common equity is calculated as tangible net income available to common shareholders excluding tax effected amortization of intangibles) divided by average tangible common equity (average common equity less goodwill and intangible assets).

(c)

The tangible common equity ratio is calculated as tangible common equity (shareholders’ equity less preferred stock, goodwill, intangible assets and accumulated other comprehensive income divided by tangible assets (total assets less goodwill, intangible assets and accumulated other comprehensive income).

(d)

The tangible common equity and tier I common equity ratios, while not required by U.S. GAAP, are considered to be important metrics with which to analyze a bank’s position. The ratios have been included herein to facilitate a greater understanding of the Bancorp’s capital structure and financial condition.

(e)	Excludes nonaccrual loans held for sale.

(f)	Includes demand, interest checking, savings, money market and foreign office deposits of commercial customers.

(g)	Includes transaction deposits plus other time deposits.

(h)	Includes certificates $100,000 and over, other deposits, federal funds purchased, short-term borrowings and long-term debt.

(i)	Current period regulatory capital ratios are estimates.

(j)	Non-GAAP measure; see Reg. G reconciliation on page 33.

 

20

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Fifth Third Bancorp and Subsidiaries

Consolidated Statements of Income

$ in millions

(unaudited)

 

		For the Three Months Ended												% Change								Year to Date								% Change
		December 2014				September 2014				December 2013				Seq				Yr/Yr				December 2014				December 2013				Yr/Yr
Interest Income
Interest and fees on loans and leases		$	823			$	827			$	845				(1	%)			(3	%)			3,298				3,447				(4	%)
Interest on securities			185				189				154				(2	%)			20	%			724				520				39	%
Interest on other short-term investments			3				2				3				NM				13	%			8				6				30	%
Total interest income			1,011				1,018				1,002				(1	%)			1	%			4,030				3,973				1	%
Interest Expense
Interest on deposits			54				51				48				7	%			15	%			202				202				—
Interest on other short-term borrowings			—				1				1				(33	%)			(56	%)			2				6				(61	%)
Interest on long-term debt			74				63				53				14	%			36	%			247				204				21	%
Total interest expense			128				115				102				11	%			25	%			451				412				9	%
Net Interest Income			883				903				900				(2	%)			(2	%)			3,579				3,561				1	%
Provision for loan and lease losses			99				71				53				40	%			87	%			315				229				38	%
Net interest income after provision for loan and lease losses			784				832				847				(6	%)			(7	%)			3,264				3,332				(2	%)
Noninterest Income
Service charges on deposits			142				145				142				(2	%)			—				560				549				2	%
Corporate banking revenue			120				100				94				20	%			27	%			430				400				7	%
Mortgage banking net revenue			61				61				126				—				(51	%)			310				700				(56	%)
Investment advisory revenue			100				103				98				(2	%)			2	%			407				393				4	%
Card and processing revenue			76				75				71				2	%			7	%			295				272				8	%
Other noninterest income			150				33				170				NM				(13	%)			450				879				(49	%)
Securities gains, net			4				3				2				15	%			NM				21				21				4	%
Securities gains, net—non-qualifying hedges on mortgage servicing rights			—				—				—				—				—				—				13				(100	%)
Total noninterest income			653				520				703				26	%			(7	%)			2,473				3,227				(23	%)
Noninterest Expense
Salaries, wages and incentives			366				357				388				3	%			(6	%)			1,449				1,581				(8	%)
Employee benefits			79				75				78				5	%			1	%			334				357				(7	%)
Net occupancy expense			77				78				77				(1	%)			—				313				307				2	%
Technology and communications			54				53				53				2	%			2	%			212				204				4	%
Equipment expense			30				30				29				—				3	%			121				114				6	%
Card and processing expense			36				37				37				(1	%)			(2	%)			141				134				5	%
Other noninterest expense			276				258				327				7	%			(16	%)			1,139				1,264				(10	%)
Total noninterest expense			918				888				989				3	%			(7	%)			3,709				3,961				(6	%)
Income before income taxes			519				464				561				11	%			(8	%)			2,028				2,598				(22	%)
Applicable income tax expense			134				124				159				8	%			(16	%)			545				772				(29	%)
Net Income			385				340				402				13	%			(4	%)			1,483				1,826				(19	%)
Less: Net income attributable to noncontrolling interests			—				—				—				NM				NM				2				(10	)			NM
Net income attributable to Bancorp			385				340				402				13	%			(4	%)			1,481				1,836				(19	%)
Dividends on preferred stock			23				12				19				87	%			19	%			67				37				82	%
Net income available to common shareholders		$	362			$	328			$	383				10	%			(6	%)			1,414				1,799				(21	%)

 

21

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Fifth Third Bancorp and Subsidiaries

Consolidated Statements of Income (Taxable Equivalent)

$ in millions

(unaudited)

 

		For the Three Months Ended
		December 2014				September 2014				June 2014				March 2014				December 2013
Interest Income
Interest and fees on loans and leases		$	823			$	827			$	826			$	823			$	845
Interest on securities			185				189				181				168				154
Interest on other short-term investments			3				2				1				2				3
Total interest income			1,011				1,018				1,008				993				1,002
Taxable equivalent adjustment			5				5				5				5				5
Total interest income (taxable equivalent)			1,016				1,023				1,013				998				1,007
Interest Expense
Interest on deposits			54				51				49				48				48
Interest on other short-term borrowings			—				1				1				1				1
Interest on long-term debt			74				63				58				51				53
Total interest expense			128				115				108				100				102
Net Interest Income (taxable equivalent)			888				908				905				898				905
Provision for loan and lease losses			99				71				76				69				53
Net interest income (taxable equivalent) after provision for loan and lease losses			789				837				829				829				852
Noninterest Income
Service charges on deposits			142				145				139				133				142
Corporate banking revenue			120				100				107				104				94
Mortgage banking net revenue			61				61				78				109				126
Investment advisory revenue			100				103				102				102				98
Card and processing revenue			76				75				76				68				71
Other noninterest income			150				33				226				41				170
Securities gains, net			4				3				8				7				2
Securities gains, net—non-qualifying hedges on mortgage servicing rights			—				—				—				—				—
Total noninterest income			653				520				736				564				703
Noninterest Expense
Salaries, wages and incentives			366				357				368				359				388
Employee benefits			79				75				79				101				78
Net occupancy expense			77				78				79				80				77
Technology and communications			54				53				52				53				53
Equipment expense			30				30				30				30				29
Card and processing expense			36				37				37				31				37
Other noninterest expense			276				258				309				296				327
Total noninterest expense			918				888				954				950				989
Income before income taxes (taxable equivalent)			524				469				611				443				566
Taxable equivalent adjustment			5				5				5				5				5
Income before income taxes			519				464				606				438				561
Applicable income tax expense			134				124				167				119				159
Net Income			385				340				439				319				402
Less: Net Income attributable to noncontrolling interests			—				—				—				1				—
Net income attributable to Bancorp			385				340				439				318				402
Dividends on preferred stock			23				12				23				9				19
Net income available to common shareholders		$	362			$	328			$	416			$	309			$	383

 

22

---

Fifth Third Bancorp and Subsidiaries

Consolidated Balance Sheets

$ in millions, except per share data

(unaudited)

 

		As of												% Change
		December 2014				September 2014				December 2013				Seq				Yr/Yr
Assets
Cash and due from banks		$	3,091			$	3,125			$	3,178				(1	%)			(3	%)
Available-for-sale and other securities(a)			22,408				22,912				18,597				(2	%)			20	%
Held-to-maturity securities(b)			187				191				208				(2	%)			(10	%)
Trading securities			360				389				343				(8	%)			5	%
Other short-term investments			7,914				3,637				5,116				NM				55	%
Loans held for sale			1,261				641				944				97	%			34	%
Portfolio loans and leases:
Commercial and industrial loans			40,765				41,072				39,316				(1	%)			4	%
Commercial mortgage loans			7,399				7,564				8,066				(2	%)			(8	%)
Commercial construction loans			2,069				1,702				1,039				22	%			99	%
Commercial leases			3,720				3,554				3,625				5	%			3	%
Residential mortgage loans			12,389				12,941				12,680				(4	%)			(2	%)
Home equity			8,886				8,987				9,246				(1	%)			(4	%)
Automobile loans			12,037				12,121				11,984				(1	%)			—
Credit card			2,401				2,317				2,294				4	%			5	%
Other consumer loans and leases			418				366				364				14	%			15	%
Portfolio loans and leases			90,084				90,624				88,614				(1	%)			2	%
Allowance for loan and lease losses			(1,322	)			(1,414	)			(1,582	)			(7	%)			(16	%)
Portfolio loans and leases, net			88,762				89,210				87,032				(1	%)			2	%
Bank premises and equipment			2,465				2,467				2,531				—				(3	%)
Operating lease equipment			728				732				730				(1	%)			—
Goodwill			2,416				2,416				2,416				—				—
Intangible assets			15				16				19				(7	%)			(24	%)
Servicing rights			858				935				971				(8	%)			(12	%)
Other assets			8,241				7,517				8,358				10	%			(1	%)
Total assets		$	138,706			$	134,188			$	130,443				3	%			6	%
Liabilities
Deposits:
Demand		$	34,809			$	32,258			$	32,634				8	%			7	%
Interest checking			26,800				24,930				25,875				7	%			4	%
Savings			15,051				15,355				17,045				(2	%)			(12	%)
Money market			17,083				16,199				11,644				5	%			47	%
Foreign office			1,114				1,577				1,976				(29	%)			(44	%)
Other time			3,960				3,856				3,530				3	%			12	%
Certificates—$100,000 and over			2,895				3,117				6,571				(7	%)			(56	%)
Other			—				—				—				NM				NM
Total deposits			101,712				97,292				99,275				5	%			2	%
Federal funds purchased			144				148				284				(2	%)			(49	%)
Other short-term borrowings			1,556				2,730				1,380				(43	%)			13	%
Accrued taxes, interest and expenses			2,020				1,706				1,758				18	%			15	%
Other liabilities			2,642				2,533				3,487				4	%			(24	%)
Long-term debt			14,967				14,336				9,633				4	%			55	%
Total liabilities			123,041				118,745				115,817				4	%			6	%
Equity
Common stock(c)			2,051				2,051				2,051				—				—
Preferred stock			1,331				1,331				1,034				—				29	%
Capital surplus			2,646				2,621				2,561				1	%			3	%
Retained earnings			11,141				10,886				10,156				2	%			10	%
Accumulated other comprehensive income			429				301				82				42	%			NM
Treasury stock			(1,972	)			(1,786	)			(1,295	)			10	%			52	%
Total Bancorp shareholders’ equity			15,626				15,404				14,589				1	%			7	%
Noncontrolling interests			39				39				37				—				3	%
Total Equity			15,665				15,443				14,626				1	%			7	%
Total liabilities and equity		$	138,706			$	134,188			$	130,443				3	%			6	%
(a) Amortized cost		$	21,677			$	22,392			$	18,409				(3	%)			18	%
(b) Market values			187				191				208				(2	%)			(10	%)
(c) Common shares, stated value $2.22 per share (in thousands):
Authorized			2,000,000				2,000,000				2,000,000				—				—
Outstanding, excluding treasury			824,047				834,262				855,306				(1	%)			(4	%)
Treasury			99,846				89,631				68,587				11	%			46	%

 

23

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Fifth Third Bancorp and Subsidiaries

Consolidated Balance Sheets

$ in millions, except per share data

(unaudited)

 

		As of
		December 2014				September 2014				June 2014				March 2014				December 2013
Assets
Cash and due from banks		$	3,091			$	3,125			$	3,312			$	3,153			$	3,178
Available-for-sale and other securities(a)			22,408				22,912				22,814				20,749				18,597
Held-to-maturity securities(b)			187				191				194				195				208
Trading securities			360				389				361				347				343
Other short-term investments			7,914				3,637				2,386				2,202				5,116
Loans held for sale			1,261				641				682				780				944
Portfolio loans and leases:
Commercial and industrial loans			40,765				41,072				41,299				40,591				39,316
Commercial mortgage loans			7,399				7,564				7,805				7,958				8,066
Commercial construction loans			2,069				1,702				1,424				1,218				1,039
Commercial leases			3,720				3,554				3,567				3,577				3,625
Residential mortgage loans			12,389				12,941				12,652				12,626				12,680
Home equity			8,886				8,987				9,056				9,125				9,246
Automobile loans			12,037				12,121				12,050				12,088				11,984
Credit card			2,401				2,317				2,261				2,177				2,294
Other consumer loans and leases			418				366				370				345				364
Portfolio loans and leases			90,084				90,624				90,484				89,705				88,614
Allowance for loan and lease losses			(1,322	)			(1,414	)			(1,458	)			(1,483	)			(1,582	)
Portfolio loans and leases, net			88,762				89,210				89,026				88,222				87,032
Bank premises and equipment			2,465				2,467				2,491				2,528				2,531
Operating lease equipment			728				732				667				714				730
Goodwill			2,416				2,416				2,416				2,416				2,416
Intangible assets			15				16				17				18				19
Servicing rights			858				935				931				975				971
Other assets			8,241				7,517				7,265				7,355				8,358
Total assets		$	138,706			$	134,188			$	132,562			$	129,654			$	130,443
Liabilities
Deposits:
Demand		$	34,809			$	32,258			$	32,140			$	31,234			$	32,634
Interest checking			26,800				24,930				24,744				25,472				25,875
Savings			15,051				15,355				16,087				16,867				17,045
Money market			17,083				16,199				14,216				13,208				11,644
Foreign office			1,114				1,577				1,418				1,922				1,976
Other time			3,960				3,856				3,724				3,660				3,530
Certificates—$100,000 and over			2,895				3,117				3,623				4,511				6,571
Other			—				—				—				—				—
Total deposits			101,712				97,292				95,952				96,874				99,275
Federal funds purchased			144				148				153				268				284
Other short-term borrowings			1,556				2,730				3,146				2,717				1,380
Accrued taxes, interest and expenses			2,020				1,706				1,824				1,669				1,758
Other liabilities			2,642				2,533				2,018				2,029				3,487
Long-term debt			14,967				14,336				13,961				11,233				9,633
Total liabilities			123,041				118,745				117,054				114,790				115,817
Equity
Common stock(c)			2,051				2,051				2,051				2,051				2,051
Preferred stock			1,331				1,331				1,331				1,034				1,034
Capital surplus			2,646				2,621				2,613				2,674				2,561
Retained earnings			11,141				10,886				10,666				10,363				10,156
Accumulated other comprehensive income			429				301				382				196				82
Treasury stock			(1,972	)			(1,786	)			(1,574	)			(1,492	)			(1,295	)
Total Bancorp shareholders’ equity			15,626				15,404				15,469				14,826				14,589
Noncontrolling interests			39				39				39				38				37
Total Equity			15,665				15,443				15,508				14,864				14,626
Total liabilities and equity		$	138,706			$	134,188			$	132,562			$	129,654			$	130,443
(a) Amortized cost		$	21,677			$	22,392			$	22,184			$	20,393			$	18,409
(b) Market values			187				191				194				195				208
(c) Common shares, stated value $2.22 per share (in thousands):
Authorized			2,000,000				2,000,000				2,000,000				2,000,000				2,000,000
Outstanding, excluding treasury			824,047				834,262				844,489				847,569				855,306
Treasury			99,846				89,631				79,404				76,324				68,587

 

24

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Fifth Third Bancorp and Subsidiaries

Consolidated Statements of Changes in Equity

$ in millions

(unaudited)

 

		For the Three Months Ended								Year to Date
		December 2014				December 2013				December 2014				December 2013
Total equity, beginning		$	15,443			$	14,680			$	14,626			$	13,764
Net income attributable to Bancorp			385				402				1,481				1,836
Other comprehensive income, net of tax:
Change in unrealized gains and (losses):
Available-for-sale securities			137				(147	)			354				(291	)
Qualifying cash flow hedges			11				(18	)			10				(37	)
Change in accumulated other comprehensive income related to employee benefit plans			(20	)			29				(17	)			35
Comprehensive income			513				266				1,828				1,543
Cash dividends declared:
Common stock			(107	)			(103	)			(427	)			(407	)
Preferred stock			(23	)			(19	)			(67	)			(37	)
Impact of stock transactions under stock compensation plans, net			19				17				60				60
Shares acquired for treasury			(180	)			(656	)			(654	)			(1,320	)
Issuance of preferred stock			—				442				297				1,035
Noncontrolling interest			—				(1	)			2				(11	)
Other			—				—				—				(1	)
Total equity, ending		$	15,665			$	14,626			$	15,665			$	14,626

 

25

---

Fifth Third Bancorp and Subsidiaries

Average Balance Sheet and Yield Analysis

$ in millions, except share data

(unaudited)

 

		For the Three Months Ended												% Change
		December 2014				September 2014				December 2013				Seq				Yr/Yr
Assets
Interest-earning assets:
Commercial and industrial loans		$	41,313			$	41,525			$	38,846				(1	%)			6	%
Commercial mortgage loans			7,482				7,637				8,051				(2	%)			(7	%)
Commercial construction loans			1,911				1,565				955				22	%			NM
Commercial leases			3,601				3,576				3,579				1	%			1	%
Residential mortgage loans			13,526				13,342				13,544				1	%			—
Home equity			8,937				9,009				9,296				(1	%)			(4	%)
Automobile loans			12,073				12,105				12,019				—				—
Credit card			2,324				2,295				2,202				1	%			6	%
Other consumer loans and leases			414				374				373				11	%			11	%
Taxable securities			22,364				22,594				18,383				(1	%)			22	%
Tax exempt securities			64				50				48				27	%			32	%
Other short-term investments			5,176				2,283				4,612				NM				12	%
Total interest-earning assets			119,185				116,355				111,908				2	%			7	%
Cash and due from banks			3,008				2,862				2,956				5	%			2	%
Other assets			14,800				14,461				14,986				2	%			(1	%)
Allowance for loan and lease losses			(1,413	)			(1,458	)			(1,671	)			(3	%)			(15	%)
Total assets		$	135,580			$	132,220			$	128,179				3	%			6	%
Liabilities
Interest-bearing liabilities:
Interest checking		$	25,478			$	24,926			$	24,650				2	%			3	%
Savings			15,173				15,759				17,323				(4	%)			(12	%)
Money market			17,023				15,222				11,285				12	%			51	%
Foreign office			1,439				1,663				1,717				(13	%)			(16	%)
Other time			3,936				3,800				3,529				4	%			12	%
Certificates—$100,000 and over			2,998				3,339				7,456				(10	%)			(60	%)
Other			—				—				—				NM				NM
Federal funds purchased			161				520				301				(69	%)			(47	%)
Other short-term borrowings			1,481				1,973				2,177				(25	%)			(32	%)
Long-term debt			14,855				13,955				9,135				6	%			63	%
Total interest-bearing liabilities			82,544				81,157				77,573				2	%			6	%
Demand deposits			33,301				31,790				30,765				5	%			8	%
Other liabilities			4,052				3,749				5,045				8	%			(20	%)
Total liabilities			119,897				116,696				113,383				3	%			6	%
Equity			15,683				15,524				14,796				1	%			6	%
Total liabilities and equity		$	135,580			$	132,220			$	128,179				3	%			6	%
Yield Analysis
Interest-earning assets:
Commercial and industrial loans			3.21	%			3.25	%			3.46	%
Commercial mortgage loans			3.28	%			3.34	%			3.53	%
Commercial construction loans			3.30	%			3.49	%			3.46	%
Commercial leases			2.96	%			2.96	%			3.10	%
Residential mortgage loans			3.80	%			3.84	%			3.88	%
Home equity			3.68	%			3.69	%			3.62	%
Automobile loans			2.73	%			2.72	%			2.96	%
Credit card			10.08	%			9.87	%			9.90	%
Other consumer loans and leases			31.97	%			36.98	%			43.19	%
Total loans and leases			3.58	%			3.61	%			3.79	%
Taxable securities			3.28	%			3.32	%			3.32	%
Tax exempt securities			4.42	%			5.34	%			5.65	%
Other short-term investments			0.26	%			0.26	%			0.26	%
Total interest-earning assets			3.38	%			3.49	%			3.57	%
Interest-bearing liabilities:
Interest checking			0.22	%			0.22	%			0.22	%
Savings			0.08	%			0.09	%			0.11	%
Money market			0.39	%			0.37	%			0.26	%
Foreign office			0.30	%			0.29	%			0.27	%
Other time			1.14	%			1.07	%			0.98	%
Certificates—$100,000 and over			1.05	%			0.96	%			0.64	%
Other			0.00	%			0.00	%			0.05	%
Federal funds purchased			0.10	%			0.09	%			0.14	%
Other short-term borrowings			0.10	%			0.10	%			0.15	%
Long-term debt			1.94	%			1.80	%			2.32	%
Total interest-bearing liabilities			0.61	%			0.56	%			0.52	%
Ratios:
Net interest margin (taxable equivalent)			2.96	%			3.10	%			3.21	%
Net interest rate spread (taxable equivalent)			2.77	%			2.93	%			3.05	%
Interest-bearing liabilities to interest-earning assets			69.26	%			69.75	%			69.32	%

 

26

---

Fifth Third Bancorp and Subsidiaries

Average Balance Sheet and Yield Analysis

$ in millions, except share data

(unaudited)

 

		Year to Date								% Change
		December 2014				December 2013				Yr/Yr
Assets
Interest-earning assets:
Commercial and industrial loans		$	41,178			$	37,770				9	%
Commercial mortgage loans			7,745				8,481				(9	%)
Commercial construction loans			1,492				793				88	%
Commercial leases			3,585				3,565				1	%
Residential mortgage loans			13,344				14,428				(8	%)
Home equity			9,059				9,554				(5	%)
Automobile loans			12,068				12,021				—
Credit card			2,271				2,121				7	%
Other consumer loans and leases			385				360				7	%
Taxable securities			21,770				16,395				33	%
Tax exempt securities			53				49				8	%
Other short-term investments			3,043				2,417				26	%
Total interest-earning assets			115,993				107,954				7	%
Cash and due from banks			2,892				2,482				17	%
Other assets			14,539				15,053				(3	%)
Allowance for loan and lease losses			(1,481	)			(1,757	)			(16	%)
Total assets			131,943				123,732				7	%
Liabilities
Interest-bearing liabilities:
Interest checking			25,382				23,582				8	%
Savings			16,080				18,440				(13	%)
Money market			14,670				9,467				55	%
Foreign office			1,828				1,501				22	%
Other time			3,762				3,760				—
Certificates—$100,000 and over			3,929				6,339				(38	%)
Other			—				17				(100	%)
Federal funds purchased			458				503				(9	%)
Other short-term borrowings			1,873				3,024				(38	%)
Long-term debt			12,928				7,914				63	%
Total interest-bearing liabilities			80,910				74,547				9	%
Demand deposits			31,755				29,925				6	%
Other liabilities			3,950				4,917				(20	%)
Total liabilities			116,615				109,389				7	%
Equity			15,328				14,343				7	%
Total liabilities and equity			131,943				123,732				7	%
Yield Analysis
Interest-earning assets:
Commercial and industrial loans			3.27	%			3.60	%			(9	%)
Commercial mortgage loans			3.36	%			3.60	%			(7	%)
Commercial construction loans			3.44	%			3.45	%			—
Commercial leases			3.01	%			3.26	%			(8	%)
Residential mortgage loans			3.88	%			3.91	%			(1	%)
Home equity			3.71	%			3.71	%			—
Automobile loans			2.77	%			3.10	%			(11	%)
Credit card			9.98	%			9.87	%			1	%
Other consumer loans and leases			35.99	%			42.93	%			(16	%)
Total loans and leases			3.64	%			3.89	%			(6	%)
Taxable securities			3.32	%			3.16	%			5	%
Tax exempt securities			4.94	%			5.29	%			(7	%)
Other short-term investments			0.26	%			0.26	%			3	%
Total interest-earning assets			3.49	%			3.70	%			(6	%)
Interest-bearing liabilities:
Interest checking			0.22	%			0.23	%
Savings			0.10	%			0.12	%
Money market			0.35	%			0.25	%
Foreign office			0.29	%			0.28	%
Other time			1.06	%			1.33	%
Certificates—$100,000 and over			0.85	%			0.78	%
Other			0.02	%			0.11	%
Federal funds purchased			0.09	%			0.12	%
Other short-term borrowings			0.10	%			0.18	%
Long-term debt			1.91	%			2.58	%
Total interest-bearing liabilities			0.56	%			0.55	%
Ratios:
Net interest margin (taxable equivalent)			3.10	%			3.32	%
Net interest rate spread (taxable equivalent)			2.94	%			3.15	%
Interest-bearing liabilities to interest-earning assets			69.75	%			69.05	%

 

27

---

Fifth Third Bancorp and Subsidiaries

Average Balance Sheet and Yield Analysis

$ in millions, except share data

(unaudited)

		For the Three Months Ended
		December 2014				September 2014				June 2014				March 2014				December 2013
Assets
Interest-earning assets:
Commercial and industrial loans		$	41,313			$	41,525			$	41,451			$	40,409			$	38,846
Commercial mortgage loans			7,482				7,637				7,886				7,983				8,051
Commercial construction loans			1,911				1,565				1,364				1,118				955
Commercial leases			3,601				3,576				3,556				3,607				3,579
Residential mortgage loans			13,526				13,342				13,202				13,304				13,544
Home equity			8,937				9,009				9,101				9,194				9,296
Automobile loans			12,073				12,105				12,070				12,023				12,019
Credit card			2,324				2,295				2,232				2,230				2,202
Other consumer loans and leases			414				374				379				370				373
Taxable securities			22,364				22,594				21,706				20,385				18,383
Tax exempt securities			64				50				52				46				48
Other short-term investments			5,176				2,283				2,182				2,509				4,612
Total interest-earning assets			119,185				116,355				115,181				113,178				111,908
Cash and due from banks			3,008				2,862				2,847				2,850				2,956
Other assets			14,800				14,461				14,417				14,478				14,986
Allowance for loan and lease losses			(1,413	)			(1,458	)			(1,480	)			(1,576	)			(1,671	)
Total assets		$	135,580			$	132,220			$	130,965			$	128,930			$	128,179
Liabilities
Interest-bearing liabilities:
Interest checking		$	25,478			$	24,926			$	25,222			$	25,911			$	24,650
Savings			15,173				15,759				16,509				16,903				17,323
Money market			17,023				15,222				13,942				12,439				11,285
Foreign office			1,439				1,663				2,200				2,017				1,717
Other time			3,936				3,800				3,693				3,616				3,529
Certificates—$100,000 and over			2,998				3,339				3,840				5,576				7,456
Other			—				—				—				—				—
Federal funds purchased			161				520				606				547				301
Other short-term borrowings			1,481				1,973				2,234				1,808				2,177
Long-term debt			14,855				13,955				12,524				10,313				9,135
Total interest-bearing liabilities			82,544				81,157				80,770				79,130				77,573
Demand deposits			33,301				31,790				31,275				30,626				30,765
Other liabilities			4,052				3,749				3,724				4,274				5,045
Total liabilities			119,897				116,696				115,769				114,030				113,383
Equity			15,683				15,524				15,196				14,900				14,796
Total liabilities and equity		$	135,580			$	132,220			$	130,965			$	128,930			$	128,179
Yield Analysis
Interest-earning assets:
Commercial and industrial loans			3.21	%			3.25	%			3.27	%			3.35	%			3.46	%
Commercial mortgage loans			3.28	%			3.34	%			3.39	%			3.43	%			3.53	%
Commercial construction loans			3.30	%			3.49	%			3.54	%			3.48	%			3.46	%
Commercial leases			2.96	%			2.96	%			3.04	%			3.09	%			3.10	%
Residential mortgage loans			3.80	%			3.84	%			3.93	%			3.94	%			3.88	%
Home equity			3.68	%			3.69	%			3.71	%			3.74	%			3.62	%
Automobile loans			2.73	%			2.72	%			2.77	%			2.86	%			2.96	%
Credit card			10.08	%			9.87	%			10.06	%			9.90	%			9.90	%
Other consumer loans and leases			31.97	%			36.98	%			35.63	%			39.93	%			43.19	%
Total loans and leases			3.58	%			3.61	%			3.65	%			3.72	%			3.79	%
Taxable securities			3.28	%			3.32	%			3.34	%			3.33	%			3.32	%
Tax exempt securities			4.42	%			5.34	%			4.69	%			5.51	%			5.65	%
Other short-term investments			0.26	%			0.26	%			0.28	%			0.26	%			0.26	%
Total interest-earning assets			3.38	%			3.49	%			3.53	%			3.58	%			3.57	%
Interest-bearing liabilities:
Interest checking			0.22	%			0.22	%			0.22	%			0.23	%			0.22	%
Savings			0.08	%			0.09	%			0.11	%			0.11	%			0.11	%
Money market			0.39	%			0.37	%			0.33	%			0.28	%			0.26	%
Foreign office			0.30	%			0.29	%			0.29	%			0.29	%			0.27	%
Other time			1.14	%			1.07	%			1.03	%			0.99	%			0.98	%
Certificates—$100,000 and over			1.05	%			0.96	%			0.83	%			0.70	%			0.64	%
Other			0.00	%			0.00	%			0.00	%			0.05	%			0.05	%
Federal funds purchased			0.10	%			0.09	%			0.10	%			0.10	%			0.14	%
Other short-term borrowings			0.10	%			0.10	%			0.10	%			0.10	%			0.15	%
Long-term debt			1.94	%			1.80	%			1.89	%			2.04	%			2.32	%
Total interest-bearing liabilities			0.61	%			0.56	%			0.54	%			0.51	%			0.52	%
Ratios:
Net interest margin (taxable equivalent)			2.96	%			3.10	%			3.15	%			3.22	%			3.21	%
Net interest rate spread (taxable equivalent)			2.77	%			2.93	%			2.99	%			3.07	%			3.05	%
Interest-bearing liabilities to interest-earning assets			69.26	%			69.75	%			70.12	%			69.92	%			69.32	%

 

28

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Fifth Third Bancorp and Subsidiaries

Summary of Loans and Leases

$ in millions

(unaudited)

 

		For the Three Months Ended
		December 2014				September 2014				June 2014				March 2014				December 2013
Average Loans and Leases
Commercial:
Commercial and industrial loans		$	41,277			$	41,477			$	41,374			$	40,377			$	38,835
Commercial mortgage loans			7,480				7,633				7,885				7,981				8,047
Commercial construction loans			1,909				1,563				1,362				1,116				952
Commercial leases			3,600				3,571				3,555				3,607				3,578
Subtotal—commercial			54,266				54,244				54,176				53,081				51,412
Consumer:
Residential mortgage loans			13,046				12,785				12,611				12,659				12,609
Home equity			8,937				9,009				9,101				9,194				9,296
Automobile loans			12,073				12,105				12,070				12,023				12,019
Credit card			2,324				2,295				2,232				2,230				2,202
Other consumer loans and leases			395				361				359				343				357
Subtotal—consumer			36,775				36,555				36,373				36,449				36,483
Total average loans and leases (excluding held for sale)		$	91,041			$	90,799			$	90,549			$	89,530			$	87,895
Average loans held for sale			540				629				692				708				970
End of Period Loans and Leases
Commercial:
Commercial and industrial loans		$	40,765			$	41,072			$	41,299			$	40,591			$	39,316
Commercial mortgage loans			7,399				7,564				7,805				7,958				8,066
Commercial construction loans			2,069				1,702				1,424				1,218				1,039
Commercial leases			3,720				3,554				3,567				3,577				3,625
Subtotal—commercial			53,953				53,892				54,095				53,344				52,046
Consumer:
Residential mortgage loans			12,389				12,941				12,652				12,626				12,680
Home equity			8,886				8,987				9,056				9,125				9,246
Automobile loans			12,037				12,121				12,050				12,088				11,984
Credit card			2,401				2,317				2,261				2,177				2,294
Other consumer loans and leases			418				366				370				345				364
Subtotal—consumer			36,131				36,732				36,389				36,361				36,568
Total portfolio loans and leases		$	90,084			$	90,624			$	90,484			$	89,705			$	88,614
Core business activity			590				634				677				776				938
Portfolio management activity			671				7				5				4				6
Total loans held for sale			1,261				641				682				780				944
Operating lease equipment			728				732				667				714				730
Loans and Leases Serviced for Others:(a)
Commercial and industrial loans			637				620				649				702				685
Commercial mortgage loans			270				274				277				280				274
Commercial construction loans			20				22				39				35				43
Commercial leases			283				267				235				223				227
Residential mortgage loans			65,413				66,808				68,085				68,909				69,159
Automobile loans			232				263				297				334				370
Total loans and leases serviced for others			66,855				68,254				69,582				70,483				70,758
Total loans and leases serviced		$	158,928			$	160,251			$	161,415			$	161,682			$	161,046

 

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

 

29

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Fifth Third Bancorp and Subsidiaries

Regulatory Capital^(a)

$ in millions

(unaudited)

 

		As of
		December 2014				September 2014				June 2014				March 2014				December 2013
Tier I capital:
Bancorp shareholders’ equity			15,626				15,404				15,469				14,826				14,589
Goodwill and certain other intangibles			(2,476	)			(2,484	)			(2,484	)			(2,490	)			(2,492	)
Unrealized (gains) losses			(429	)			(301	)			(382	)			(196	)			(82	)
Qualifying trust preferred securities			60				60				60				60				60
Other			(17	)			(18	)			(19	)			(18	)			19
Total tier I capital			12,764				12,661				12,644				12,182				12,094
Total risk-based capital:
Tier I capital			12,764				12,661				12,644				12,182				12,094
Qualifying allowance for credit losses			1,475				1,466				1,466				1,461				1,454
Qualifying subordinated notes			2,657				2,637				2,635				2,713				2,883
Total risk-based capital			16,896				16,764				16,745				16,356				16,431
Risk-weighted assets(b)			117,887				116,917				117,117				116,622				115,969
Ratios:
Average shareholders’ equity to average assets			11.54	%			11.71	%			11.57	%			11.53	%			11.51	%
Regulatory capital:
Fifth Third Bancorp
Tier I risk-based capital			10.83	%			10.83	%			10.80	%			10.45	%			10.43	%
Total risk-based capital			14.33	%			14.34	%			14.30	%			14.02	%			14.17	%
Tier I leverage			9.66	%			9.82	%			9.86	%			9.71	%			9.73	%
Tier I common equity(c)			9.65	%			9.64	%			9.61	%			9.51	%			9.45	%
Fifth Third Bank
Tier I risk-based capital			11.85	%			11.87	%			11.79	%			11.65	%			11.59	%
Total risk-based capital			13.10	%			13.12	%			13.04	%			12.91	%			12.94	%
Tier I leverage			10.58	%			10.77	%			10.77	%			10.84	%			10.83	%

 

(a)	Current period regulatory capital data and ratios are estimated.

(b)

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

(c)	The tier I common equity ratio while not required by U.S. GAAP, is considered to be an important metric with which to analyze a bank’s position. The ratio has been included herein to facilitate a greater understanding of the Bancorp’s capital structure and financial condition.

 

30

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Fifth Third Bancorp and Subsidiaries

Summary of Credit Loss Experience

$ in millions

(unaudited)

 

		For the Three Months Ended
		December 2014				September 2014				June 2014				March 2014				December 2013
Average loans and leases (excluding held for sale):
Commercial and industrial loans		$	41,277			$	41,477			$	41,374			$	40,377			$	38,835
Commercial mortgage loans			7,480				7,633				7,885				7,981				8,047
Commercial construction loans			1,909				1,563				1,362				1,116				952
Commercial leases			3,600				3,571				3,555				3,607				3,578
Residential mortgage loans			13,046				12,785				12,611				12,659				12,609
Home equity			8,937				9,009				9,101				9,194				9,296
Automobile loans			12,073				12,105				12,070				12,023				12,019
Credit card			2,324				2,295				2,232				2,230				2,202
Other consumer loans and leases			395				361				359				343				357
Total average loans and leases (excluding held for sale)		$	91,041			$	90,799			$	90,549			$	89,530			$	87,895
Losses charged off:
Commercial and industrial loans			($50	)			($62	)			($36	)			($100	)			($78	)
Commercial mortgage loans			(12	)			(10	)			(11	)			(5	)			(13	)
Commercial construction loans			—				—				(8	)			(5	)			(4	)
Commercial leases			(1	)			—				—				—				—
Residential mortgage loans			(97	)			(12	)			(11	)			(19	)			(15	)
Home equity			(15	)			(18	)			(22	)			(20	)			(30	)
Automobile loans			(11	)			(11	)			(10	)			(12	)			(11	)
Credit card			(23	)			(26	)			(24	)			(22	)			(24	)
Other consumer loans and leases			(6	)			(7	)			(5	)			(7	)			(8	)
Total losses			(215	)			(146	)			(127	)			(190	)			(183	)
Recoveries of losses previously charged off:
Commercial and industrial loans			6				12				5				3				12
Commercial mortgage loans			2				5				2				2				5
Commercial construction loans			—				—				—				—				—
Commercial leases			—				—				—				—				—
Residential mortgage loans			3				3				3				4				2
Home equity			4				4				4				4				4
Automobile loans			4				4				5				4				5
Credit card			3				3				3				3				3
Other consumer loans and leases			2				—				4				2				4
Total recoveries			24				31				26				22				35
Net losses charged off:
Commercial and industrial loans			(44	)			(50	)			(31	)			(97	)			(66	)
Commercial mortgage loans			(10	)			(5	)			(9	)			(3	)			(8	)
Commercial construction loans			—				—				(8	)			(5	)			(4	)
Commercial leases			(1	)			—				—				—				—
Residential mortgage loans			(94	)			(9	)			(8	)			(15	)			(13	)
Home equity			(11	)			(14	)			(18	)			(16	)			(26	)
Automobile loans			(7	)			(7	)			(5	)			(8	)			(6	)
Credit card			(20	)			(23	)			(21	)			(19	)			(21	)
Other consumer loans and leases			(4	)			(7	)			(1	)			(5	)			(4	)
Total net losses charged off			($191	)			($115	)			($101	)			($168	)			($148	)
Net charge-off ratios:
Commercial and industrial loans			0.43	%			0.48	%			0.30	%			0.97	%			0.67	%
Commercial mortgage loans			0.53	%			0.24	%			0.44	%			0.16	%			0.40	%
Commercial construction loans			(0.01	%)			(0.11	%)			2.26	%			1.66	%			1.65	%
Commercial leases			0.06	%			0.00	%			0.00	%			(0.03	%)			(0.01	%)
Residential mortgage loans			2.87	%			0.28	%			0.24	%			0.49	%			0.39	%
Home equity			0.47	%			0.63	%			0.80	%			0.72	%			1.09	%
Automobile loans			0.22	%			0.24	%			0.15	%			0.29	%			0.20	%
Credit card			3.40	%			3.89	%			3.71	%			3.41	%			3.69	%
Other consumer loans and leases			4.57	%			8.13	%			4.08	%			6.58	%			6.03	%
Total net charge-off ratio			0.83	%			0.50	%			0.45	%			0.76	%			0.67	%

 

31

---

Fifth Third Bancorp and Subsidiaries

Asset Quality

$ in millions

(unaudited)

 

		For the Three Months Ended
		December 2014				September 2014				June 2014				March 2014				December 2013
Allowance for Credit Losses
Allowance for loan and lease losses, beginning		$	1,414			$	1,458			$	1,483			$	1,582			$	1,677
Total net losses charged off			(191	)			(115	)			(101	)			(168	)			(148	)
Provision for loan and lease losses			99				71				76				69				53
Allowance for loan and lease losses, ending		$	1,322			$	1,414			$	1,458			$	1,483			$	1,582
Reserve for unfunded commitments, beginning		$	134			$	142			$	153			$	162			$	167
Provision (benefit) for unfunded commitments			1				(8	)			(11	)			(9	)			(5	)
Reserve for unfunded commitments, ending		$	135			$	134			$	142			$	153			$	162
Components of allowance for credit losses:
Allowance for loan and lease losses		$	1,322			$	1,414			$	1,458			$	1,483			$	1,582
Reserve for unfunded commitments			135				134				142				153				162
Total allowance for credit losses		$	1,457			$	1,548			$	1,600			$	1,636			$	1,744
Nonperforming Assets and Delinquent Loans
Nonaccrual portfolio loans and leases:
Commercial and industrial loans		$	86			$	102			$	103			$	153			$	127
Commercial mortgage loans			64				77				86				96				90
Commercial construction loans			—				2				3				3				10
Commercial leases			3				3				2				3				3
Residential mortgage loans			44				52				56				68				83
Home equity			72				69				73				75				74
Automobile loans			—				—				—				—				—
Other consumer loans and leases			—				—				—				—				—
Total nonaccrual portfolio loans and leases (excludes restructured loans)			269				305				323				398				387
Restructured loans—commercial (nonaccrual)			214				201				202				209				228
Restructured loans—consumer (nonaccrual)			96				114				115				126				136
Total nonaccrual portfolio loans and leases			579				620				640				733				751
Repossessed property			18				19				18				6				7
Other real estate owned(b)			147				157				174				207				222
Total nonperforming assets(a)			744				796				832				946				980
Nonaccrual loans held for sale			24				4				5				3				6
Restructured loans—(nonaccrual) held for sale			15				3				—				—				—
Total nonperforming assets including loans held for sale		$	783			$	803			$	837			$	949			$	986
Restructured portfolio consumer loans and leases (accrual)		$	905			$	1,610			$	1,623			$	1,682			$	1,685
Restructured portfolio commercial loans and leases (accrual)		$	844			$	885			$	914			$	847			$	869
Ninety days past due loans and leases:
Commercial and industrial loans		$	—			$	—			$	—			$	1			$	—
Commercial mortgage loans			—				1				—				—				—
Commercial construction loans			—				—				—				—				—
Commercial leases			—				—				—				—				—
Total commercial loans and leases			—				1				—				1				—
Residential mortgage loans			56				57				60				56				66
Home equity			—				—				—				—				—
Automobile loans			8				8				8				7				8
Credit card			23				21				26				30				29
Other consumer loans and leases			—				—				—				—				—
Total consumer loans and leases			87				86				94				93				103
Total ninety days past due loans and leases(c)		$	87			$	87			$	94			$	94			$	103
Ratios
Net losses charged off as a percent of average loans and leases			0.83	%			0.50	%			0.45	%			0.76	%			0.67	%
Allowance for loan and lease losses:
As a percent of portfolio loans and leases			1.47	%			1.56	%			1.61	%			1.65	%			1.79	%
As a percent of nonperforming loans and leases(a)			228	%			228	%			228	%			202	%			211	%
As a percent of nonperforming assets(a)			178	%			178	%			175	%			157	%			161	%
Nonperforming loans and leases as a percent of portfolio loans, leases and other assets , including other real estate owned(a)			0.64	%			0.68	%			0.70	%			0.82	%			0.84	%
Nonperforming assets as a percent of portfolio loans, leases and other assets, including other real estate owned(a)			0.82	%			0.88	%			0.92	%			1.05	%			1.10	%
Nonperforming assets as a percent of total loans, leases and other assets, including other real estate owned			0.86	%			0.88	%			0.92	%			1.05	%			1.10	%
Allowance for credit losses as a percent of nonperforming assets			196	%			195	%			192	%			173	%			178	%

 

(a)	Does not include nonaccrual loans held for sale

(b)	Excludes OREO related to government insured loans

(c)	Does not include loans held for sale

 

32

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Fifth Third Bancorp and Subsidiaries

Regulation G Non-GAAP Reconciliation

$ and shares in millions

(unaudited)

 

		For the Three Months Ended
		December 2014				September 2014				June 2014				March 2014				December 2013
Income before income taxes (U.S. GAAP)		$	519			$	464			$	606			$	438			$	561
Add: Provision expense (U.S. GAAP)			99				71				76				69				53
Pre-provision net revenue			618				535				682				507				614
Net income available to common shareholders (U.S. GAAP)			362				328				416				309				383
Add: Intangible amortization, net of tax			1				1				1				1				1
Tangible net income available to common shareholders			363				329				417				310				384
Tangible net income available to common shareholders (annualized) (a)			1,440				1,305				1,673				1,257				1,523
Average Bancorp shareholders’ equity (U.S. GAAP)			15,644				15,486				15,157				14,862				14,757
Less: Average preferred stock			(1,331	)			(1,331	)			(1,119	)			(1,034	)			(703	)
Average goodwill			(2,416	)			(2,416	)			(2,416	)			(2,416	)			(2,416	)
Average intangible assets and other servicing rights			(17	)			(16	)			(17	)			(19	)			(20	)
Average tangible common equity (b)			11,880				11,723				11,605				11,393				11,618
Total Bancorp shareholders’ equity (U.S. GAAP)			15,626				15,404				15,469				14,826				14,589
Less: Preferred stock			(1,331	)			(1,331	)			(1,331	)			(1,034	)			(1,034	)
Goodwill			(2,416	)			(2,416	)			(2,416	)			(2,416	)			(2,416	)
Intangible assets and other servicing rights			(16	)			(16	)			(17	)			(18	)			(19	)
Tangible common equity, including unrealized gains / losses (c)			11,863				11,641				11,705				11,358				11,120
Less: Accumulated other comprehensive income			(429	)			(301	)			(382	)			(196	)			(82	)
Tangible common equity, excluding unrealized gains / losses (d)			11,434				11,340				11,323				11,162				11,038
Add: Preferred stock			1,331				1,331				1,331				1,034				1,034
Tangible equity (e)			12,765				12,671				12,654				12,196				12,072
Total assets (U.S. GAAP)			138,706				134,188				132,562				129,654				130,443
Less: Goodwill			(2,416	)			(2,416	)			(2,416	)			(2,416	)			(2,416	)
Intangible assets and other servicing rights			(16	)			(16	)			(17	)			(18	)			(19	)
Tangible assets, including unrealized gains / losses (f)			136,274				131,756				130,129				127,220				128,008
Less: Accumulated other comprehensive income / loss, before tax			(660	)			(463	)			(588	)			(302	)			(126	)
Tangible assets, excluding unrealized gains / losses (g)			135,614				131,293				129,541				126,918				127,882
Total Bancorp shareholders’ equity (U.S. GAAP)			15,626				15,404				15,469				14,826				14,589
Goodwill and certain other intangibles			(2,476	)			(2,484	)			(2,484	)			(2,490	)			(2,492	)
Unrealized gains			(429	)			(301	)			(382	)			(196	)			(82	)
Qualifying trust preferred securities			60				60				60				60				60
Other			(17	)			(18	)			(19	)			(18	)			19
Tier I capital			12,764				12,661				12,644				12,182				12,094
Less: Preferred stock			(1,331	)			(1,331	)			(1,331	)			(1,034	)			(1,034	)
Qualifying trust preferred securities			(60	)			(60	)			(60	)			(60	)			(60	)
Qualifying noncontrolling interests in consolidated subsidiaries			(1	)			(1	)			(1	)			(1	)			(37	)
Tier I common equity (h)			11,372				11,269				11,252				11,087				10,963
Common shares outstanding (i)			824				834				844				848				855
Risk-weighted assets, determined in accordance with
prescribed regulatory requirements (j)			117,887				116,917				117,117				116,622				115,969
Ratios:
Return on average tangible common equity (a) / (b)			12.1	%			11.1	%			14.4	%			11.0	%			13.1	%
Tangible equity (e) / (g)			9.41	%			9.65	%			9.77	%			9.61	%			9.44	%
Tangible common equity (excluding unrealized gains/losses) (d) / (g)			8.43	%			8.64	%			8.74	%			8.79	%			8.63	%
Tangible common equity (including unrealized gains/losses) (c) / (f)			8.71	%			8.84	%			9.00	%			8.93	%			8.69	%
Tangible common equity as a percent of risk-weighted assets (excluding unrealized gains/losses) (d) / (j)			9.70	%			9.70	%			9.67	%			9.57	%			9.52	%
Tangible book value per share (c) / (i)		$	14.40			$	13.95			$	13.86			$	13.40			$	13.00
Tier I common equity (h) / (j)			9.65	%			9.64	%			9.61	%			9.51	%			9.45	%
Basel III-Estimated Tier I common equity ratio
		December 2014				September 2014				June 2014				March 2014				December 2013
Tier I common equity (Basel I)			11,372				11,269				11,252				11,087				10,963
Add: Adjustment related to capital components			84				99				96				99				82
Estimated Tier I common equity under final Basel III rules without AOCI (opt out)(k)			11,456				11,368				11,348				11,186				11,045
Add: Adjustment related to AOCI			429				301				382				196				82
Estimated Tier I common equity under final Basel III rules with AOCI (non opt out)(l)			11,885				11,669				11,730				11,382				11,127
Estimated risk-weighted assets under final Basel III rules (m)			122,027				121,219				122,465				122,659				122,074
Estimated Tier I common equity ratio under final Basel III rules (opt out) (k) / (m)			9.39	%			9.38	%			9.27	%			9.12	%			9.05	%
Estimated Tier I common equity ratio under final Basel III rules (non opt out) (l) / (m)			9.74	%			9.63	%			9.58	%			9.28	%			9.12	%

 

(k)(l)

Under the final Basel III rules, non-advanced approach banks are permitted to make a one-time election to opt out of the requirement to include AOCI in Tier I common equity. Other adjustments include mortgage servicing rights and deferred tax assets subject to threshold limitations and deferred tax liabilities related to intangible assets.

(m)

Key differences under Basel III in the calculation of risk-weighted assets compared to Basel I include: (1) Risk weighting for commitments under 1 year; (2) Higher risk weighting for exposures to securitizations, past due loans, foreign banks and certain commercial real estate; (3) Higher risk weighting for mortgage servicing rights and deferred tax assets that are under certain thresholds as a percent of Tier I capital; and (4) Derivatives are differentiated between exchange clearing and over-the-counter and the 50% risk-weight cap is removed.

 

33

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Fifth Third Bancorp and Subsidiaries

Segment Presentation

$ in millions

(unaudited)

 

For the three months ended December 31, 2014		Commercial Banking				Branch Banking				Consumer Lending				Investment Advisors				Other/ Eliminations				Total
Net interest income(a)		$	427			$	395			$	64			$	31			($	29	)		$	888
Provision for loan and lease losses			(49	)			(40	)			(101	)			(1	)			92				(99	)
Net interest income after provision for loan and lease losses			378				355				(37	)			30				63				789
Total noninterest income			239				186				69				102				57				653
Total noninterest expense			(331	)			(385	)			(107	)			(111	)			16				(918	)
Net income before taxes			286				156				(75	)			21				136				524
Applicable income taxes(a)			(58	)			(55	)			26				(7	)			(45	)			(139	)
Net income			228				101				(49	)			14				91				385
Net income attributable to noncontrolling interest			—				—				—				—				—				—
Net income attributable to Bancorp			228				101				(49	)			14				91				385
Dividends on preferred stock			—				—				—				—				23				23
Net income available to common shareholders		$	228			$	101			($	49	)		$	14			$	68			$	362
For the three months ended September 30, 2014		Commercial Banking				Branch Banking				Consumer Lending				Investment Advisors				Other/ Eliminations				Total
Net interest income(a)		$	423			$	389			$	64			$	30			$	2			$	908
Provision for loan and lease losses			(47	)			(50	)			(17	)			(1	)			44				(71	)
Net interest income after provision for loan and lease losses			376				339				47				29				46				837
Total noninterest income			218				194				70				102				(64	)			520
Total noninterest expense			(322	)			(393	)			(115	)			(111	)			53				(888	)
Net income before taxes			272				140				2				20				35				469
Applicable income taxes(a)			(55	)			(49	)			(1	)			(7	)			(17	)			(129	)
Net income			217				91				1				13				18				340
Net income attributable to noncontrolling interest			—				—				—				—				—				—
Net income attributable to Bancorp			217				91				1				13				18				340
Dividends on preferred stock			—				—				—				—				12				12
Net income available to common shareholders		$	217			$	91			$	1			$	13			$	6			$	328
For the three months ended June 30, 2014		Commercial Banking				Branch Banking				Consumer Lending				Investment Advisors				Other/ Eliminations				Total
Net interest income(a)		$	414			$	377			$	65			$	29			$	20			$	905
Provision for loan and lease losses			(40	)			(47	)			(13	)			(1	)			25				(76	)
Net interest income after provision for loan and lease losses			374				330				52				28				45				829
Total noninterest income			219				170				89				101				157				736
Total noninterest expense			(330	)			(384	)			(164	)			(111	)			35				(954	)
Net income before taxes			263				116				(23	)			18				237				611
Applicable income taxes(a)			(49	)			(41	)			8				(6	)			(84	)			(172	)
Net income			214				75				(15	)			12				153				439
Net income attributable to noncontrolling interest			—				—				—				—				—				—
Net income attributable to Bancorp			214				75				(15	)			12				153				439
Dividends on preferred stock			—				—				—				—				23				23
Net income available to common shareholders		$	214			$	75			($	15	)		$	12			$	130			$	416
For the three months ended March 31, 2014		Commercial Banking				Branch Banking				Consumer Lending				Investment Advisors				Other/ Eliminations				Total
Net interest income(a)		$	409			$	385			$	64			$	32			$	8			$	898
Provision for loan and lease losses			(97	)			(45	)			(25	)			—				98				(69	)
Net interest income after provision for loan and lease losses			312				340				39				32				106				829
Total noninterest income			210				172				118				103				(39	)			564
Total noninterest expense			(334	)			(390	)			(166	)			(110	)			50				(950	)
Net income before taxes			188				122				(9	)			25				117				443
Applicable income taxes(a)			(24	)			(42	)			3				(8	)			(53	)			(124	)
Net income			164				80				(6	)			17				64				319
Net income attributable to noncontrolling interest			—				—				—				—				1				1
Net income attributable to Bancorp			164				80				(6	)			17				63				318
Dividends on preferred stock			—				—				—				—				9				9
Net income available to common shareholders		$	164			$	80			($	6	)		$	17			$	54			$	309
For the three months ended December 31, 2013(b)		Commercial Banking				Branch Banking				Consumer Lending				Investment Advisors				Other/ Eliminations				Total
Net interest income(a)		$	426			$	354			$	66			$	45			$	14			$	905
Provision for loan and lease losses			(73	)			(54	)			(21	)			—				95				(53	)
Net interest income after provision for loan and lease losses			353				300				45				45				109				852
Total noninterest income			201				187				133				100				82				703
Total noninterest expense			(323	)			(397	)			(130	)			(108	)			(31	)			(989	)
Net income before taxes			231				90				48				37				160				566
Applicable income taxes(a)			(42	)			(32	)			(16	)			(13	)			(61	)			(164	)
Net income			189				58				32				24				99				402
Net income attributable to noncontrolling interest			—				—				—				—				—				—
Net income attributable to Bancorp			189				58				32				24				99				402
Dividends on preferred stock			—				—				—				—				19				19
Net income available to common shareholders		$	189			$	58			$	32			$	24			$	80			$	383

 

(a)

Includes taxable equivalent adjustments of $5 million from the three months ended December 31, 2014, $5 million for the three months ended September 30, 2014, $5 million for the three months ended June 30, 2014, $5 million for the three months ended March 31, 2014 and $5 million for the three months ended December 31, 2013.

(b)	Prior period balances have been adjusted for changes in the structure of the reporting units.

 

34