FIFTH THIRD BANCORP - FORM 8-K - EX-99.1

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8-K - FORM 8-K - FIFTH THIRD BANCORP	d481106d8k.htm

Exhibit 99.1

On October 24, 2017, Fifth Third Bancorp (Nasdaq: FITB) reported third quarter 2017 net income of $1.0 billion versus net income of $367 million in the second quarter of 2017 and $516 million in the third quarter of 2016. After preferred dividends, net income available to common shareholders was $999 million, or $1.35 per diluted share, in the third quarter of 2017, compared with $344 million, or $0.45 per diluted share, in the second quarter of 2017, and $501 million, or $0.65 per diluted share, in the third quarter of 2016.

Earnings Highlights


	For the Three Months Ended										% Change
	September 2017		June 2017		March 2017		December 2016		September 2016^(d)		Seq		Yr/Yr
Earnings ($ in millions)
Net income attributable to Bancorp	$	1,014	$	367	$	305	$	395	$	516		NM		97%
Net income available to common shareholders	$	999	$	344	$	290	$	372	$	501		NM		99%

Common Share Data
Earnings per share, basic	$	1.37	$	0.46	$	0.38	$	0.49	$	0.66		NM		NM
Earnings per share, diluted		1.35		0.45		0.38		0.49		0.65		NM		NM
Cash dividends per common share		0.16		0.14		0.14		0.14		0.13		14%		23%

Common shares outstanding (in thousands)		705,474		738,873		750,145		750,479		755,582		(5%)		(7%)
Average common shares outstanding (in thousands):
Basic		721,280		741,401		747,668		746,367		750,886		(3%)		(4%)
Diluted		733,285		752,328		760,809		757,704		757,856		(3%)		(3%)

Financial Ratios												bps Change

Return on average assets		2.85%		1.05%		0.88%		1.11%		1.44%		180		141
Return on average common equity		25.6		9.0		7.8		9.7		12.8		1660		1280
Return on average tangible common equity^(b)		30.4		10.7		9.3		11.6		15.2		1970		1520
CET1 capital^(c)		10.59		10.63		10.76		10.39		10.17		(4)		42
Tier I risk-based capital^(c)		11.72		11.76		11.90		11.50		11.27		(4)		45
CET1 capital (fully-phased in)^(b)(c)		10.47		10.52		10.66		10.29		10.09		(5)		38
Net interest margin (taxable equivalent)^(b)		3.07		3.01		3.02		2.86		2.88		6		19
Efficiency (taxable equivalent)^(b)		38.4		63.4		67.4		62.8		55.5		(2500)		(1710)

Income Statement Highlights


($ in millions, except per-share data)	For the Three Months Ended										% Change
	September 2017		June 2017		March 2017		December 2016		September 2016^(d)		Seq		Yr/Yr
Condensed Statements of Income
Net interest income (taxable equivalent)^(b)	$	977	$	945	$	939	$	909	$	913		3%		7%
Provision for loan and lease losses		67		52		74		54		80		29%		(16%)
Total noninterest income		1,561		564		523		620		840		NM		86%
Total noninterest expense		975		957		986		960		973		2%		—

Income before income taxes (taxable equivalent)^(b)	$	1,496	$	500	$	402	$	515	$	700		NM		NM


Taxable equivalent adjustment		7		6		6		6		6		17%		17%
Applicable income tax expense		475		127		91		114		178		NM		NM

Net income	$	1,014	$	367	$	305	$	395	$	516		NM		97%
Less: Net income attributable to noncontrolling interests		—		—		—		—		—		NM		NM

Net income attributable to Bancorp	$	1,014	$	367	$	305	$	395	$	516		NM		97%
Dividends on preferred stock		15		23		15		23		15		(35%)		—

Net income available to common shareholders	$	999	$	344	$	290	$	372	$	501		NM		99%

Earnings per share, diluted	$	1.35	$	0.45	$	0.38	$	0.49	$	0.65		NM		NM

Net Interest Income


(Taxable equivalent basis; $ in millions)^(b)	For the Three Months Ended										% Change
	September 2017		June 2017		March 2017		December 2016		September 2016		Seq		Yr/Yr
Interest Income
Total interest income	$	1,159	$	1,112	$	1,092	$	1,058	$	1,063		4%		9%
Total interest expense		182		167		153		149		150		9%		21%

Net interest income	$	977	$	945	$	939	$	909	$	913		3%		7%


Average Yield											bps Change
Yield on interest-earning assets		3.64%		3.54%		3.51%		3.33%		3.36%		10		28
Rate paid on interest-bearing liabilities		0.85%		0.79%		0.73%		0.70%		0.70%		6		15

Net interest rate spread		2.79%		2.75%		2.78%		2.63%		2.66%		4		13

Net interest margin		3.07%		3.01%		3.02%		2.86%		2.88%		6		19

Average Balances											% Change
Loans and leases, including held for sale	$	92,617	$	92,653	$	92,791	$	93,981	$	94,417		—		(2%)
Total securities and other short-term investments		33,826		33,481		33,177		32,567		31,675		1%		7%
Total interest-earning assets		126,443		126,134		125,968		126,548		126,092		—		—
Total interest-bearing liabilities		85,328		85,320		84,890		84,552		85,193		—		—
Bancorp shareholders’ equity^(d)		16,820		16,615		16,429		16,545		16,883		1%		—

Taxable equivalent net interest income of $977 million in the third quarter of 2017 was up $32 million, or 3 percent from the prior quarter, reflecting the impact of higher short-term market rates during the quarter, the continued shift into higher yielding consumer loans, and a higher day count. The taxable equivalent net interest margin was 3.07 percent, up 6 bps sequentially, primarily driven by higher short-term market rates and improving consumer and commercial portfolio yields, partially offset by a higher day count and a decrease in core deposits.

Compared to the third quarter of 2016, taxable equivalent net interest income was up $64 million, or 7 percent, primarily driven by higher short-term market rates. The net interest margin was up 19 bps from the third quarter of 2016, also primarily driven by higher short-term market rates.

Securities

Average securities and other short-term investments were $33.8 billion in the third quarter of 2017 compared to $33.5 billion in the previous quarter and $31.7 billion in the third quarter of 2016. Available-for-sale securities were $31.5 billion in the third quarter of 2017 down $343 million, or 1 percent, sequentially and up $791 million, or 3 percent, from the third quarter of 2016.

Loans


($ in millions)	For the Three Months Ended										% Change
	September 2017		June 2017		March 2017		December 2016		September 2016		Seq		Yr/Yr
Average Portfolio Loans and Leases
Commercial:
Commercial and industrial loans	$	41,302	$	41,601	$	41,854	$	42,548	$	43,116		(1%)		(4%)
Commercial mortgage loans		6,807		6,845		6,941		6,957		6,888		(1%)		(1%)
Commercial construction loans		4,533		4,306		3,987		3,890		3,848		5%		18%
Commercial leases		4,072		4,036		3,901		3,921		3,962		1%		3%

Total commercial loans and leases	$	56,714	$	56,788	$	56,683	$	57,316	$	57,814		—		(2%)

Consumer:
Residential mortgage loans	$	15,523	$	15,417	$	15,200	$	14,854	$	14,455		1%		7%
Home equity		7,207		7,385		7,581		7,779		7,918		(2%)		(9%)
Automobile loans		9,267		9,410		9,786		10,162		10,508		(2%)		(12%)
Credit card		2,140		2,080		2,141		2,180		2,165		3%		(1%)
Other consumer loans and leases		1,055		892		755		673		651		18%		62%

Total consumer loans and leases	$	35,192	$	35,184	$	35,463	$	35,648	$	35,697		—		(1%)

Total average portfolio loans and leases	$	91,906	$	91,972	$	92,146	$	92,964	$	93,511		—		(2%)

Average loans held for sale	$	711	$	681	$	645	$	1,017	$	906		4%		(22%)

Average portfolio loan and lease balances were flat sequentially and decreased $1.6 billion, or 2 percent, from the third quarter of 2016. The year-over-year decrease was primarily driven by declines in commercial and industrial (C&I) and automobile loans. The year-over-year decline in C&I loans was primarily due to deliberate exits from certain C&I loans that did not meet risk-adjusted profitability targets. The year-over-year decline in automobile loans continues to reflect the decision to reduce lower-return originations to improve returns on capital. Period end portfolio loans and leases of $91.9 billion were also flat sequentially, and decreased $1.3 billion, or 1 percent, from a year ago. On a year-over-year basis, the decrease in period end loan balances was primarily due to declines in C&I and automobile loans, partially offset by increases in residential mortgage and commercial construction loans.

Average commercial portfolio loan and lease balances were flat sequentially, and decreased $1.1 billion, or 2 percent, from the third quarter of 2016. Average C&I loans decreased $299 million, or 1 percent, from the prior quarter and decreased $1.8 billion, or 4 percent, from the third quarter of 2016. The decline in C&I loans was primarily due to the aforementioned deliberate exits. Average commercial real estate loans increased $189 million, or 2 percent, from the prior quarter and increased $604 million, or 6 percent, from the third quarter of 2016. Within commercial real estate, average commercial mortgage balances decreased $38 million and average commercial construction balances increased $227 million sequentially. Period end commercial line utilization of 34 percent compared to 34 percent in the second quarter of 2017 and 35 percent in the third quarter of 2016.

Average consumer portfolio loan and lease balances were flat sequentially and decreased $505 million, or 1 percent, from the third quarter of 2016. The year-over-year decrease was primarily driven by the decline in average automobile loans. Average automobile loans decreased 2 percent sequentially and 12 percent from a year ago. Average residential mortgage loans increased 1 percent sequentially and 7 percent from the previous year. Average home equity loans decreased 2 percent sequentially and 9 percent from the third quarter of 2016. Average credit card loans increased 3 percent sequentially and decreased 1 percent from the third quarter of 2016.

Deposits


($ in millions)	For the Three Months Ended										% Change
	September 2017		June 2017		March 2017		December 2016		September 2016		Seq		Yr/Yr
Average Deposits
Demand	$	34,850	$	34,915	$	35,084	$	36,412	$	35,918		—		(3%)
Interest checking		25,765		26,014		26,760		25,644		24,475		(1%)		5%
Savings		13,889		14,238		14,117		13,979		14,232		(2%)		(2%)
Money market		20,028		20,278		20,603		20,476		19,706		(1%)		2%
Foreign office^(e)		395		380		454		497		524		4%		(25%)

Total transaction deposits	$	94,927	$	95,825	$	97,018	$	97,008	$	94,855		(1%)		—
Other time		3,722		3,745		3,827		3,941		4,020		(1%)		(7%)

Total core deposits	$	98,649	$	99,570	$	100,845	$	100,949	$	98,875		(1%)		—
Certificates - $100,000 and over		2,625		2,623		2,579		2,539		2,768		—		(5%)
Other		560		264		162		115		749		NM		(25%)

Total average deposits	$	101,834	$	102,457	$	103,586	$	103,603	$	102,392		(1%)		(1%)

Average core deposits decreased 1 percent sequentially and were flat from the third quarter of 2016. Average transaction deposits decreased $898 million, or 1 percent, sequentially and were flat from the third quarter of 2016. The sequential decline was primarily driven by decreases in commercial money market account balances as well as consumer savings and demand deposit account balances, partially offset by higher commercial demand deposit account balances and consumer money market account balances. Year-over-year performance was primarily driven by lower commercial demand deposit and money market account balances, largely offset by higher commercial interest checking deposit and consumer money market account balances. Other time deposits decreased by 1 percent sequentially and 7 percent year-over-year.

Average total commercial transaction deposits of $42 billion decreased 1 percent sequentially and 5 percent from the third quarter of 2016. Average total consumer transaction deposits of $53 billion decreased 1 percent sequentially and increased 4 percent from the third quarter of 2016.

Wholesale Funding


($ in millions)	For the Three Months Ended										% Change
	September 2017		June 2017		March 2017		December 2016		September 2016		Seq		Yr/Yr
Average Wholesale Funding
Certificates - $100,000 and over	$	2,625	$	2,623	$	2,579	$	2,539	$	2,768		—		(5%)
Other deposits		560		264		162		115		749		NM		(25%)
Federal funds purchased		675		311		639		280		446		NM		51%
Other short-term borrowings		4,212		4,194		1,893		1,908		2,171		—		94%
Long-term debt		13,457		13,273		13,856		15,173		16,102		1%		(16%)

Total average wholesale funding	$	21,529	$	20,665	$	19,129	$	20,015	$	22,236		4%		(3%)

Average wholesale funding of $21.5 billion increased $864 million, or 4 percent, sequentially and decreased $707 million, or 3 percent, compared with the third quarter of 2016. The sequential increase in average wholesale funding was primarily driven by an increase in federal funds purchased and other borrowings to offset a decline in core deposits, as well as the full quarter’s impact of $700 million of 5-year holding company debt issued in June of 2017. The year-over-year decrease in wholesale funding was primarily driven by lower long-term debt balances concurrent with declining asset balances.

Noninterest Income


($ in millions)	For the Three Months Ended										% Change
	September 2017		June 2017		March 2017		December 2016		September 2016		Seq		Yr/Yr
Noninterest Income
Service charges on deposits	$	138	$	139	$	138	$	141	$	143		(1%)		(3%)
Corporate banking revenue		101		101		74		101		111		—		(9%)
Mortgage banking net revenue		63		55		52		65		66		15%		(5%)
Wealth and asset management revenue		102		103		108		100		101		(1%)		1%
Card and processing revenue		79		79		74		79		79		—		—
Other noninterest income		1,076		85		77		137		336		NM		NM
Securities gains (losses), net		—		—		—		(3)		4		NM		(100%)
Securities gains, net - non-qualifying hedges on mortgage servicing rights		2		2		—		—		—		—		NM

Total noninterest income	$	1,561	$	564	$	523	$	620	$	840		NM		86%

Noninterest income of $1.6 billion increased $997 million sequentially and increased $721 million compared with prior year results. The sequential and year-over-year comparisons reflect the impacts described below.

Noninterest Income excluding certain items


($ in millions)	For the Three Months Ended						% Change
	September 2017		June 2017		September 2016		Seq		Yr/Yr
Noninterest Income excluding certain items
Noninterest income (U.S. GAAP)	$	1,561	$	564	$	840
Valuation of Visa total return swap		47		9		12
Gain on sale of Vantiv shares		(1,037)		—		—
Branch / land impairment charge		—		—		28
Transfer of certain nonconforming investments under Volcker to HFS		—		—		9
Vantiv warrant valuation		—		—		2
Gain on sale of a non-branch facility		—		—		(11)
Gain from termination and settlement of Vantiv TRA and the expected obligation to terminate and settle the remaining TRA cash flows upon exercise of put or call options		—		—		(280)
Securities (gains) / losses		—		—		(4)

Noninterest income excluding certain items^(b)	$	571	$	573	$	596		—		(4%)

Excluding the items in the table above, noninterest income of $571 million was flat from the previous quarter and decreased 4 percent, from the third quarter of 2016. The sequential performance was primarily driven by decreases in service charges on deposits, wealth and asset management revenue, and other noninterest income, offset by an increase in mortgage banking net revenue. The year-over-year decrease was driven by declines in corporate banking revenue and service charges on deposits.

Corporate banking revenue of $101 million was flat sequentially and decreased 9 percent from the third quarter of 2016. The sequential performance was primarily driven by increases in institutional sales revenue and foreign exchange revenue, partially offset by decreases in lease syndication and remarketing fees. The year-over-year decrease was primarily driven by a decline in lease remarketing fees.

Mortgage Banking Net Revenue


($ in millions)	For the Three Months Ended										% Change
	September 2017		June 2017		March 2017		December 2016		September 2016		Seq		Yr/Yr
Mortgage Banking Net Revenue
Origination fees and gains on loan sales	$	40	$	37	$	29	$	30	$	61		8%		(34%)
Net mortgage servicing revenue:
Gross mortgage servicing fees		56		49		47		48		49		14%		14%
MSR amortization		—		—		—		(35)		(35)		NM		NM
Net valuation adjustments on MSRs and free-standing derivatives purchased to economically hedge MSRs		(33)		(31)		(24)		22		(9)		6%		NM

Net mortgage servicing revenue		23		18		23		35		5		28%		NM

Total mortgage banking net revenue	$	63	$	55	$	52	$	65	$	66		15%		(5%)

Mortgage banking net revenue was $63 million in the third quarter of 2017, up $8 million from the second quarter of 2017 and down $3 million from the third quarter of 2016. The sequential increase was driven by higher gross mortgage servicing fees. The year-over-year decrease was driven by lower origination fees and gains on loans, partially offset by higher gross mortgage servicing fees. Originations of $2.1 billion in the current quarter decreased 6 percent sequentially and decreased 26 percent from the third quarter of 2016.

Wealth and asset management revenue of $102 million decreased 1 percent from the second quarter of 2017 and increased 1 percent from the third quarter of 2016. The sequential decrease was primarily driven by lower brokerage revenue, partially offset by higher personal asset management revenue. The year-over-year increase was primarily driven by higher personal asset management revenue.

Card and processing revenue of $79 million in the third quarter of 2017 was flat both sequentially and from the third quarter of 2016.The sequential and year-over-year performance reflected increased credit card spend volume, offset by higher rewards.

Other noninterest income totaled $1.1 billion in the third quarter of 2017, compared with $85 million in the previous quarter and $336 million in the third quarter of 2016. The reported results included Vantiv-related transactions and adjustments, the valuation of the Visa total return swap, and other items as shown in the table on page 8. For the third quarter of 2017, excluding these items, other noninterest income of $86 million decreased approximately $8 million, or 9 percent, from the second quarter of 2017 and decreased $10 million, or 10 percent, from the third quarter of 2016.

Net gains/losses on investment securities were immaterial in the third quarter of 2017 and second quarter of 2017, compared with a $4 million net gain in the third quarter of 2016. Net gains on securities held as non-qualifying hedges for the MSR portfolio were $2 million in the third quarter of 2017 and second quarter of 2017.

Noninterest Expense


($ in millions)	For the Three Months Ended										% Change
	September 2017		June 2017		March 2017		December 2016		September 2016		Seq		Yr/Yr
Noninterest Expense
Salaries, wages and incentives	$	407	$	397	$	411	$	403	$	400		3%		2%
Employee benefits		77		86		111		76		78		(10%)		(1%)
Net occupancy expense		74		70		78		73		73		6%		1%
Technology and communications		62		57		58		56		62		9%		—
Equipment expense		30		29		28		29		29		3%		3%
Card and processing expense		32		33		30		31		30		(3%)		7%
Other noninterest expense		293		285		270		292		301		3%		(3%)

Total noninterest expense	$	975	$	957	$	986	$	960	$	973		2%		—

Noninterest expense of $975 million increased $18 million, or 2 percent, compared with the second quarter of 2017, and was flat compared with the third quarter of 2016. The sequential increase was driven by higher salaries, wages and incentives, technology and communications expense, and additional marketing expense included in other noninterest expense, partially offset by lower employee benefits expense. The year-over-year performance was impacted by higher salaries, wages and incentives, offset by lower other noninterest expense.

Credit Quality


($ in millions)	For the Three Months Ended
	September 2017		June 2017		March 2017		December 2016		September 2016
Total net losses charged-off
Commercial and industrial loans	($	27)	($	18)	($	36)	($	25)	($	61)
Commercial mortgage loans		(3)		(5)		(5)		(2)		(2)
Commercial construction loans		—		—		—		—		—
Commercial leases		—		(1)		(1)		(1)		—
Residential mortgage loans		1		(2)		(5)		(2)		(2)
Home equity		(3)		(5)		(6)		(6)		(7)
Automobile loans		(8)		(6)		(11)		(11)		(9)
Credit card		(20)		(22)		(22)		(19)		(20)
Other consumer loans and leases		(8)		(5)		(3)		(7)		(6)

Total net losses charged-off	($	68)	($	64)	($	89)	($	73)	($	107)

Total losses charged-off	($	85)	($	95)	($	107)	($	97)	($	137)
Total recoveries of losses previously charged-off		17		31		18		24		30

Total net losses charged-off	($	68)	($	64)	($	89)	($	73)	($	107)
Ratios (annualized)
Net losses charged-off as a percent of average portfolio loans and leases (excluding held for sale)		0.29%		0.28%		0.40%		0.31%		0.45%
Commercial		0.21%		0.17%		0.29%		0.20%		0.43%
Consumer		0.43%		0.46%		0.56%		0.49%		0.49%

Net charge-offs were $68 million, or 29 bps of average portfolio loans and leases on an annualized basis, in the third quarter of 2017 compared with net charge-offs of $64 million, or 28 bps, in the second quarter of 2017 and $107 million, or 45 bps, in the third quarter of 2016.

Commercial net charge-offs of $30 million, or 21 bps, increased $6 million sequentially. This primarily reflected a $9 million increase in net charge-offs of C&I loans, partially offset by a $2 million decrease in net charge-offs of commercial mortgage loans.

Consumer net charge-offs of $38 million, or 43 bps, decreased $2 million sequentially. Compared with the previous quarter, net charge-offs on residential mortgage loans decreased $3 million. Net charge-offs on the home equity portfolio decreased $2 million from the previous quarter. Net charge-offs on the auto portfolio increased $2 million from the previous quarter. Net charge-offs on credit card loans decreased $2 million from the previous quarter. Net charge-offs on other consumer loans increased $3 million sequentially.


($ in millions)	For the Three Months Ended
	September 2017		June 2017		March 2017		December 2016		September 2016
Allowance for Credit Losses
Allowance for loan and lease losses, beginning	$	1,226	$	1,238	$	1,253	$	1,272	$	1,299
Total net losses charged-off		(68)		(64)		(89)		(73)		(107)
Provision for loan and lease losses		67		52		74		54		80
Deconsolidation of a variable interest entity		(20)		—		—		—		—

Allowance for loan and lease losses, ending	$	1,205	$	1,226	$	1,238	$	1,253	$	1,272

Reserve for unfunded commitments, beginning	$	162	$	159	$	161	$	162	$	151
Provision for unfunded commitments		(5)		3		(2)		(1)		11

Reserve for unfunded commitments, ending	$	157	$	162	$	159	$	161	$	162

Components of allowance for credit losses:
Allowance for loan and lease losses	$	1,205	$	1,226	$	1,238	$	1,253	$	1,272
Reserve for unfunded commitments		157		162		159		161		162

Total allowance for credit losses	$	1,362	$	1,388	$	1,397	$	1,414	$	1,434
Allowance for loan and lease losses ratio
As a percent of portfolio loans and leases		1.31%		1.34%		1.35%		1.36%		1.37%
As a percent of nonperforming loans and leases^(f)		238%		200%		188%		190%		212%
As a percent of nonperforming assets^(f)		217%		185%		172%		170%		182%

As of quarter end, the allowance for loan and lease loss ratio represented 1.31 percent of total portfolio loans and leases outstanding, compared with 1.34 percent last quarter, and represented 238 percent of nonperforming loans and leases, and 217 percent of nonperforming assets.

The provision for loan and lease losses totaled $67 million in the third quarter of 2017, up $15 million sequentially. An increase in period end loan balances contributed to the increase in provision. Provision expense decreased $13 million from the third quarter of 2016.


($ in millions)	As of
	September 2017		June 2017		March 2017		December 2016		September 2016
Nonperforming Assets and Delinquent Loans
Nonaccrual portfolio loans and leases:
Commercial and industrial loans	$	144	$	225	$	251	$	302	$	235
Commercial mortgage loans		14		15		21		27		31
Commercial construction loans		—		—		—		—		—
Commercial leases		1		1		—		2		—
Residential mortgage loans		19		19		21		17		19
Home equity		56		52		53		55		59

Total nonaccrual portfolio loans and leases (excludes restructured loans)	$	234	$	312	$	346	$	403	$	344
Nonaccrual restructured portfolio commercial loans and leases^(g)		214		244		251		192		194
Nonaccrual restructured portfolio consumer loans and leases		58		58		60		65		63

Total nonaccrual portfolio loans and leases	$	506	$	614	$	657	$	660	$	601
Repossessed property		10		11		14		15		13
OREO		39		37		50		63		84

Total nonperforming portfolio assets^(f)	$	555	$	662	$	721	$	738	$	698
Nonaccrual loans held for sale		18		7		7		4		91
Nonaccrual restructured loans held for sale		2		1		2		9		9

Total nonperforming assets	$	575	$	670	$	730	$	751	$	798


Restructured Portfolio consumer loans and leases (accrual)	$	929	$	933	$	950	$	959	$	972
Restructured Portfolio commercial loans and leases (accrual)^(g)	$	232	$	224	$	277	$	321	$	408

Total loans and leases 30-89 days past due (accrual)	$	252	$	190	$	180	$	231	$	205
Total loans and leases 90 days past due (accrual)	$	77	$	75	$	75	$	84	$	76
Nonperforming portfolio loans and leases as a percent of portfolio loans, leases and other assets, including OREO^(f)		0.55%		0.67%		0.72%		0.72%		0.64%
Nonperforming portfolio assets as a percent of portfolio loans and leases and OREO^(f)		0.60%		0.72%		0.79%		0.80%		0.75%

Total nonperforming portfolio assets decreased $107 million, or 16 percent, from the previous quarter to $555 million. Portfolio nonperforming loans and leases (NPLs) at quarter-end decreased $108 million from the previous quarter to $506 million. NPLs as a percent of total loans, leases and OREO at quarter end decreased 12 bps from the previous quarter to 0.55 percent.

Commercial portfolio NPLs decreased $112 million from last quarter to $373 million, or 0.66 percent of commercial portfolio loans, leases and OREO. Consumer portfolio NPLs increased $4 million from last quarter to $133 million, or 0.37 percent of consumer portfolio loans, leases and OREO.

OREO balances increased $2 million from the prior quarter to $39 million, and included $18 million in commercial OREO and $21 million in consumer OREO. Repossessed personal property decreased $1 million from the prior quarter to $10 million.

Loans over 90 days past due and still accruing increased $2 million from the second quarter of 2017 at $77 million. Loans 30-89 days past due of $252 million increased $62 million from the previous quarter.

Capital and Liquidity Position


	For the Three Months Ended
	September 2017		June 2017		March 2017		December 2016		September 2016
Capital Position
Average total Bancorp shareholders’ equity to average assets		11.93%		11.84%		11.72%		11.66%		11.83%
Tangible equity^(b)		9.84%		9.98%		10.12%		9.82%		9.73%
Tangible common equity (excluding unrealized gains/losses)^(b)		8.89%		9.02%		9.15%		8.87%		8.78%
Tangible common equity (including unrealized gains/losses)^(b)		9.00%		9.12%		9.20%		8.91%		9.24%

Regulatory capital ratios:
CET1 capital^(c)		10.59%		10.63%		10.76%		10.39%		10.17%
Tier I risk-based capital^(c)		11.72%		11.76%		11.90%		11.50%		11.27%
Total risk-based capital^(c)		15.16%		15.22%		15.45%		15.02%		14.88%
Tier I leverage		9.97%		10.07%		10.15%		9.90%		9.80%

CET1 capital (fully phased-in)^(b)(c)		10.47%		10.52%		10.66%		10.29%		10.09%

Book value per share	$	21.30	$	20.42	$	20.13	$	19.82	$	20.44
Tangible book value per share^(b)	$	17.86	$	17.11	$	16.89	$	16.60	$	17.22

Modified liquidity coverage ratio (LCR)^(h)		124%		115%		119%		128%		115%

Capital ratios remained strong during the quarter. The CET1 ratio was 10.59 percent, the tangible common equity to tangible assets ratio^(b) was 8.89 percent (excluding unrealized gains/losses), and 9.00 percent (including unrealized gains/losses). The Tier I risk-based capital ratio was 11.72 percent, the Total risk-based capital ratio was 15.16 percent, and the Tier I leverage ratio was 9.97 percent.

Book value per share at September 30, 2017 was $21.30 and tangible book value per share^(b) was $17.86, compared with the June 30, 2017 book value per share of $20.42 and tangible book value per share^(b) of $17.11.

Fifth Third entered into or completed multiple share repurchases during the quarter. Below is a summary of those share repurchases.

•

On July 31, 2017, Fifth Third settled the forward contract related to the April 26, 2017 $342 million share repurchase agreement. An additional 2.2 million shares were repurchased in connection with the completion of this agreement.

•

On August 17, 2017, Fifth Third initially settled a share repurchase agreement whereby Fifth Third would purchase $990 million of its outstanding stock. This reduced third quarter common shares outstanding by 31.5 million shares. Settlement of the forward contract related to this agreement is expected to occur on or before December 18, 2017.

In total, common shares outstanding decreased by approximately 33.4 million shares in the third quarter of 2017 from the second quarter of 2017.

Tax Rate

The effective tax rate was 31.9 percent in the third quarter of 2017 compared with 25.9 percent in the second quarter of 2017 and 25.6 percent in the third quarter of 2016. The sequential and year-over-year increase was primarily driven by the impact of the Vantiv sale during the quarter.

Other

On August 9, 2017, Fifth Third Bank exchanged 19.79 million of its Class B Units in Vantiv Holding, LLC for 19.79 million shares of Vantiv, Inc.’s Class A common stock, and Vantiv, Inc. repurchased such newly issued shares of Class A common stock from Fifth Third Bank. During the third quarter, Fifth Third recognized a pre-tax gain of $1.037 billion related to the sale. For more detail on the transaction see the Form 8-K dated August 8, 2017.

Fifth Third Bank owns approximately 15 million units representing an 8.6 percent interest in Vantiv Holding, LLC, convertible into shares of Vantiv, Inc., a publicly traded firm. Based upon Vantiv’s closing price of $70.47 on September 30, 2017, our interest in Vantiv was valued at approximately $1.1 billion. 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.

Corporate Profile

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. As of September 30, 2017, the Company had $142 billion in assets and operates 1,155 full-service Banking Centers, and 2,465 Fifth Third branded ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia and North Carolina. In total, Fifth Third provides its customers with access to more than 45,000 fee-free ATMs across the United States. Fifth Third operates four main businesses: Commercial Banking, Branch Banking, Consumer Lending, and Wealth & Asset Management. Fifth Third also has an 8.6% interest in Vantiv Holding, LLC. Fifth Third is among the largest money managers in the Midwest and, as of September 30, 2017, had $348 billion in assets under care, of which it managed $36 billion for individuals, corporations and not-for-profit organizations through its Trust and Registered Investment Advisory businesses. 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.”

End Notes

(a)

Assumes a 35% tax rate.

(b)

Non-GAAP measure; see discussion of non-GAAP and Reg. G reconciliation.

(c)

Under the banking agencies’ Basel III Final Rule, assets and credit equivalent amounts of off-balance sheet exposures are calculated according to the standardized approach for risk-weighted assets. The resulting values are added together resulting in the Bancorp’s total risk-weighted assets used in the calculation of the tier I risk-based capital and common equity tier 1 ratios. Current period regulatory capital ratios are estimated.

(d)

Average common shares outstanding – diluted were adjusted for the three months ended September 30,2016 related to the early adoption of ASU 2016-09 during the fourth quarter of 2016, with an effective date of January 1, 2016.

(e)

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

(f)

Excludes nonaccrual loans in loans held for sale.

(g)

As of June 30, 2017, March 31, 2017 and December 31, 2016, excludes $7 million of restructured accruing loans and $19 million of restructured nonaccrual loans associated with a consolidated VIE in which the Bancorp has no continuing credit risk due to the risk being assumed by a third party. As of September 30, 2016, excludes $7 million of restructured accruing loans and $20 million of restructured nonaccrual loans associated with a consolidated VIE in which the Bancorp has no continuing credit risk due to the risk being assumed by a third party.

(h)

The Bancorp became subject to the Modified LCR regulations effective January 1, 2016. Current period LCR is estimated.

FORWARD-LOOKING STATEMENTS

This 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,” “anticipates,” “potential,” “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 from time to time 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 is a risk that additional information may become known during the company’s quarterly closing process or as a result of subsequent events that could affect the accuracy of the statements and financial information contained herein.

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 or real estate market conditions, either nationally or in the states in which Fifth Third, one or more acquired entities and/or the combined company do business, weaken or 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) changes in customer preferences or information technology systems; (12) effects of critical accounting policies and judgments; (13) changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board (FASB) or other regulatory agencies; (14) 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; (15) ability to maintain favorable ratings from rating agencies; (16) failure of models or risk management systems or controls; (17) fluctuation of Fifth Third’s stock price; (18) ability to attract and retain key personnel; (19) ability to receive dividends from its subsidiaries; (20) potentially dilutive effect of future acquisitions on current shareholders’ ownership of Fifth Third; (21) declines in the value of Fifth Third’s goodwill or other intangible assets; (22) effects of accounting or financial results of one or more acquired entities; (23) difficulties from Fifth Third’s investment in, relationship with, and nature of the operations of Vantiv Holding, LLC; (24) loss of income from any sale or potential sale of businesses; (25) difficulties in separating the operations of any branches or other assets divested; (26) losses or adverse impacts on the carrying values of branches and long-lived assets in connection with their sales or anticipated sales; (27) inability to achieve expected benefits from branch consolidations and planned sales within desired timeframes, if at all; (28) ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks; and (29) the negotiation and (if any) implementation by Vantiv, Inc. and/or Worldpay Group plc of the potential acquisition of Worldpay Group plc by Vantiv, Inc. and such other actions as Vantiv, Inc. and Worldpay Group plc may take in furtherance thereof; and (30) 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.

In this release, we may sometimes provide non-GAAP financial information. Please note that although non-GAAP financial measures provide useful insight to analysts, investors and regulators, they should not be considered in isolation or relied upon as a substitute for analysis using GAAP measures. We provide a discussion of these non-GAAP measures and reconciliation to the most directly comparable GAAP measures beginning on page 20.

# # #

Fifth Third Bancorp and Subsidiaries

Consolidated Statements of Income

$ in millions

(unaudited)


	For the Three Months Ended						% Change				Year to Date				% Change
	September 2017		June 2017		September 2016		Seq		Yr/Yr		September 2017		September 2016^(a)		Yr/Yr
Interest Income
Interest and fees on loans and leases	$	899	$	858	$	816		5%		10%	$	2,595	$	2,429		7%
Interest on securities		249		245		239		2%		4%		739		707		5%
Interest on other short-term investments		4		3		2		33%		100%		10		6		67%

Total interest income		1,152		1,106		1,057		4%		9%		3,344		3,142		6%

Interest Expense
Interest on deposits		73		65		51		12%		43%		197		151		30%
Interest on federal funds purchased		2		1		—		100%		NM		4		2		100%
Interest on other short-term borrowings		12		10		2		20%		NM		24		8		NM
Interest on long-term debt		95		91		97		4%		(2%)		277		269		3%

Total interest expense		182		167		150		9%		21%		502		430		17%


Net Interest Income		970		939		907		3%		7%		2,842		2,712		5%

Provision for loan and lease losses		67		52		80		29%		(16%)		193		289		(33%)

Net Interest Income After Provision for Loan and Lease Losses		903		887		827		2%		9%		2,649		2,423		9%

Noninterest Income
Service charges on deposits		138		139		143		(1%)		(3%)		415		417		—
Corporate banking revenue		101		101		111		—		(9%)		276		330		(16%)
Mortgage banking net revenue		63		55		66		15%		(5%)		170		219		(22%)
Wealth and asset management revenue		102		103		101		(1%)		1%		313		304		3%
Card and processing revenue		79		79		79		—		—		232		240		(3%)
Other noninterest income		1,076		85		336		NM		NM		1,237		552		NM
Securities gains, net		—		—		4		NM		(100%)		1		13		(92%)
Securities gains, net - non-qualifying hedges on mortgage servicing rights		2		2		—		—		NM		4		—		NM

Total noninterest income		1,561		564		840		NM		86%		2,648		2,075		28%

Noninterest Expense
Salaries, wages and incentives		407		397		400		3%		2%		1,215		1,209		—
Employee benefits		77		86		78		(10%)		(1%)		274		263		4%
Net occupancy expense		74		70		73		6%		1%		221		226		(2%)
Technology and communications		62		57		62		9%		—		177		178		(1%)
Equipment expense		30		29		29		3%		3%		88		89		(1%)
Card and processing expense		32		33		30		(3%)		7%		95		101		(6%)
Other noninterest expense		293		285		301		3%		(3%)		848		876		(3%)

Total noninterest expense		975		957		973		2%		—		2,918		2,942		(1%)

Income Before Income Taxes		1,489		494		694		NM		NM		2,379		1,556		53%
Applicable income tax expense		475		127		178		NM		NM		694		390		78%

Net Income		1,014		367		516		NM		97%		1,685		1,166		45%
Less: Net income attributable to noncontrolling interests		—		—		—		NM		NM		—		(4)		(100%)

Net Income Attributable to Bancorp		1,014		367		516		NM		97%		1,685		1,170		44%
Dividends on preferred stock		15		23		15		(35%)		—		52		52		—

Net Income Available to Common Shareholders	$	999	$	344	$	501		NM		99%	$	1,633	$	1,118		46%

(a)

Net tax deficiencies of $6 million were reclassified from capital surplus to applicable income tax expense for the nine months ended September 30, 2016, related to the early adoption of ASU 2016-09 during the fourth quarter of 2016, with an effective date of January 1, 2016.

Fifth Third Bancorp and Subsidiaries

Consolidated Balance Sheets

$ in millions, except per share data

(unaudited)


	As of						% Change
	September 2017		June 2017		September 2016^(d)		Seq		Yr/Yr
Assets
Cash and due from banks	$	2,205	$	2,203	$	2,164		—		2%
Available-for-sale and other securities^(a)		31,480		31,823		30,689		(1%)		3%
Held-to-maturity securities^(b)		25		26		56		(4%)		(55%)
Trading securities		850		842		431		1%		97%
Other short-term investments		3,298		2,163		2,995		52%		10%
Loans held for sale		711		766		1,060		(7%)		(33%)
Portfolio loans and leases:
Commercial and industrial loans		41,011		40,914		42,727		—		(4%)
Commercial mortgage loans		6,863		6,868		6,856		—		—
Commercial construction loans		4,652		4,366		3,905		7%		19%
Commercial leases		4,043		4,157		3,995		(3%)		1%
Residential mortgage loans		15,588		15,460		14,643		1%		6%
Home equity		7,143		7,301		7,864		(2%)		(9%)
Automobile loans		9,236		9,318		10,349		(1%)		(11%)
Credit card		2,168		2,117		2,169		2%		—
Other consumer loans and leases		1,179		945		643		25%		83%

Portfolio loans and leases		91,883		91,446		93,151		—		(1%)
Allowance for loan and lease losses		(1,205)		(1,226)		(1,272)		(2%)		(5%)

Portfolio loans and leases, net		90,678		90,220		91,879		1%		(1%)
Bank premises and equipment		2,018		2,041		2,084		(1%)		(3%)
Operating lease equipment		663		719		771		(8%)		(14%)
Goodwill		2,423		2,423		2,416		—		—
Intangible assets		18		18		10		—		80%
Servicing rights		848		849		619		—		37%
Other assets		7,047		6,974		8,105		1%		(13%)

Total Assets	$	142,264	$	141,067	$	143,279		1%		(1%)


Liabilities
Deposits:
Demand	$	35,246	$	34,965	$	35,625		1%		(1%)
Interest checking		26,091		25,436		24,483		3%		7%
Savings		13,693		14,068		14,019		(3%)		(2%)
Money market		19,646		20,191		19,910		(3%)		(1%)
Foreign office		609		395		518		54%		18%
Other time		3,756		3,692		3,971		2%		(5%)
Certificates $100,000 and over		2,411		2,633		2,745		(8%)		(12%)
Other		—		500		—		(100%)		—

Total deposits		101,452		101,880		101,271		—		—
Federal funds purchased		118		117		126		1%		(6%)
Other short-term borrowings		5,688		5,389		3,494		6%		63%
Accrued taxes, interest and expenses		2,071		1,617		2,178		28%		(5%)
Other liabilities		2,516		2,162		2,516		16%		—
Long-term debt		14,039		13,456		16,890		4%		(17%)

Total Liabilities		125,884		124,621		126,475		1%		—

Equity
Common stock^(c)		2,051		2,051		2,051		—		—
Preferred stock		1,331		1,331		1,331		—		—
Capital surplus		2,682		2,751		2,750		(3%)		(2%)
Retained earnings		14,748		13,862		13,175		6%		12%
Accumulated other comprehensive income		185		163		755		13%		(75%)
Treasury stock		(4,637)		(3,739)		(3,286)		24%		41%

Total Bancorp shareholders’ equity		16,360		16,419		16,776		—		(2%)
Noncontrolling interests		20		27		28		(26%)		(29%)

Total Equity		16,380		16,446		16,804		—		(3%)

Total Liabilities and Equity	$	142,264	$	141,067	$	143,279		1%		(1%)

(a) Amortized cost	$	31,114	$	31,492	$	29,486		(1%)		6%
(b) Market values		25		26		56		(4%)		(55%)
(c) Common shares, stated value $2.22 per share (in thousands):
Authorized		2,000,000		2,000,000		2,000,000		—		—
Outstanding, excluding treasury		705,474		738,873		755,582		(5%)		(7%)
Treasury		218,419		185,020		168,310		18%		30%

(d)

Net tax deficiencies of $6 million were reclassified from capital surplus to applicable income tax expense at September 30, 2016, related to the early adoption of ASU 2016-09 during the fourth quarter of 2016, with an effective date of January 1, 2016.

Fifth Third Bancorp and Subsidiaries

Consolidated Statements of Changes in Equity

$ in millions

(unaudited)


	For the Three Months Ended				Year to Date
	September 2017		September 2016		September 2017		September 2016^(a)
Total Equity, Beginning	$	16,446	$	16,754	$	16,232	$	15,870
Net income attributable to Bancorp		1,014		516		1,685		1,170
Other comprehensive income, net of tax:
Change in unrealized gains (losses):
Available-for-sale securities		23		(114)		132		527
Qualifying cash flow hedges		(2)		(22)		(9)		26
Change in accumulated other comprehensive income related to employee benefit plans		1		2		3		5

Comprehensive income		1,036		382		1,811		1,728

Cash dividends declared:
Common stock		(114)		(99)		(324)		(300)
Preferred stock		(15)		(15)		(52)		(52)
Impact of stock transactions under stock compensation plans, net		22		21		51		67
Shares acquired for treasury		(990)		(240)		(1,332)		(506)
Noncontrolling interest		(7)		—		(7)		(4)
Other		2		1		1		1

Total Equity, Ending	$	16,380	$	16,804	$	16,380	$	16,804

(a)

Fifth Third Bancorp and Subsidiaries

Regulatory Capital

$ in millions

(unaudited)


	As of
	September 2017^(a)		June 2017		March 2017		December 2016		September 2016
Regulatory capital:
Common stock and related surplus (net of treasury stock)	$	96	$	1,063	$	1,407	$	1,374	$	1,510
Retained earnings		14,748		13,862		13,625		13,441		13,175
Common equity tier I capital adjustments and deductions		(2,401)		(2,403)		(2,396)		(2,389)		(2,386)

CET1 capital		12,443		12,522		12,636		12,426		12,299
Additional tier I capital		1,330		1,331		1,331		1,330		1,331

Tier I capital		13,773		13,853		13,967		13,756		13,630
Tier II capital		4,043		4,074		4,172		4,216		4,374

Total regulatory capital	$	17,816	$	17,927	$	18,139	$	17,972	$	18,004

Risk-weighted assets^(b)	$	117,527	$	117,761	$	117,407	$	119,632	$	120,954

Ratios:
Average shareholders’ equity to average assets		11.93%		11.84%		11.72%		11.66%		11.83%

Regulatory Capital Ratios:
Fifth Third Bancorp
CET1 capital^(b)		10.59%		10.63%		10.76%		10.39%		10.17%
Tier I risk-based capital^(b)		11.72%		11.76%		11.90%		11.50%		11.27%
Total risk-based capital^(b)		15.16%		15.22%		15.45%		15.02%		14.88%
Tier I leverage		9.97%		10.07%		10.15%		9.90%		9.80%
CET1 capital (fully phased-in)^(b)(c)		10.47%		10.52%		10.66%		10.29%		10.09%

Fifth Third Bank
Tier I risk-based capital^(b)		12.30%		12.24%		12.17%		11.92%		11.98%
Total risk-based capital^(b)		14.14%		14.08%		14.03%		13.76%		13.82%
Tier I leverage		10.50%		10.50%		10.41%		10.30%		10.46%

(a)

Current period regulatory capital data and ratios are estimated.

(b)

(c)

Non-GAAP measure; see discussion of non-GAAP and Reg. G reconciliation.

Use of Non-GAAP Financial Measures

In addition to GAAP measures, management considers various Non-GAAP measures when evaluating the performance of the business, including: “taxable equivalent net interest income,” “adjusted taxable equivalent net interest income,” “taxable equivalent net interest margin,” “efficiency ratio,” “taxable equivalent income before income taxes,” “noninterest income excluding certain items,” “tangible net income available to common shareholders,” “average tangible common equity,” “tangible common equity ratio,” “tangible common equity ratio (excluding unrealized gains/ losses)” “tangible common equity ratio (including unrealized gains/ losses)” “tangible equity,” “tangible book value per share,” and “Common Equity Tier 1 under Basel III Final Rule (fully phased-in),” and certain ratios derived from these measures.

The taxable equivalent basis adjusts for the tax-favored status of income from certain loans and securities held by the Bancorp that are not taxable for federal income tax purposes. The Bancorp believes this presentation to be the preferred industry measurement of net interest income as it provides a relevant comparison between taxable and non-taxable amounts.

Noninterest income excluding certain items is provided by management to assist the reader in identifying significant, unusual, or large transactions that impacted noninterest income. Adjusted taxable equivalent net interest income and adjusted taxable equivalent net interest margin are provided by management to assist the reader in identifying significant, unusual, or large transactions that impacted net interest income.

Management considers various measures when evaluating capital utilization and adequacy, including the tangible equity and tangible common equity (including and excluding unrealized gains/losses), in addition to capital ratios defined by the U.S. banking agencies. These calculations are intended to complement the capital ratios defined by the U.S. banking agencies for both absolute and comparative purposes. These ratios are not formally defined by U.S. GAAP or codified in the federal banking regulations and, therefore, are considered to be Non-GAAP financial measures. Management believes that providing the tangible common equity ratio excluding unrealized gains/losses on certain assets and liabilities enables investors and others to assess the Bancorp’s use of equity without the effects of gains or losses some of which are uncertain and providing the tangible common equity ratio including unrealized gains/losses enables investors and others to assess the Bancorp’s use of equity if all unrealized gains or losses were to be monetized.

Management believes tangible book value per share and return on average tangible common equity are important measures for evaluating the performance of a business as it calculates the return available to common shareholders and book value of common stock without the impact of intangible assets and their related amortization. This is useful for evaluating the performance of a business consistently, whether acquired or developed internally, compared to other companies in the industry who present similar measures.

The Bancorp became subject to the Basel III Final Rule on January 1, 2015 which defined various regulatory capital ratios including the Common Equity Tier 1 (“CET1”) ratio. The CET1 capital ratio has transition provisions that will be phased out over time. CET1 capital ratio is presented on a fully phased-in basis for comparative purposes with other organizations. The Bancorp considers the fully phased-in CET1 ratio a Non-GAAP measure since it is not the CET1 ratio in effect for the periods presented. Since analysts and the U.S. banking agencies may assess the Bancorp’s capital adequacy using these ratios, management believes they are useful to provide investors the ability to assess its capital adequacy on the same basis.

Please note that although Non-GAAP financial measures provide useful insight, they should not be considered in isolation or relied upon as a substitute for analysis using GAAP measures.

Please see the following page for Reg. G reconciliations of all historical Non-GAAP measures used in this release to the most directly comparable GAAP measures.

Fifth Third Bancorp and Subsidiaries

Regulation G Non-GAAP Reconciliation

$ and shares in millions

(unaudited)


		For the Three Months Ended
		September 2017		June 2017		March 2017		December 2016		September 2016⁽⁴⁾
Net interest income (U.S. GAAP)		$	970	$	939	$	933	$	903	$	907
Add:	Taxable equivalent adjustment		7		6		6		6		6

Taxable equivalent net interest income (a)			977		945		939		909		913

Net interest income (U.S. GAAP) (annualized) (b)			3,848		3,766		3,784		3,592		3,608
Taxable equivalent net interest income (annualized) (c)			3,876		3,790		3,808		3,616		3,632

Taxable equivalent net interest income			977		945		939		909
Add (subtract): Bankcard refunds			—		—		(12)		16

Adjusted taxable equivalent net interest income (d)			977		945		927		925
Adjusted taxable equivalent net interest income (annualized) (e)			3,876		3,790		3,760		3,680

Noninterest income (f)			1,561		564		523		620		840
Noninterest expense (g)			975		957		986		960		973
Average interest-earning assets (h)			126,443		126,134		125,968		126,548		126,092

Net interest margin (U.S. GAAP) (b)/(h)			3.04%		2.99%		3.00%		2.84%		2.86%
Taxable equivalent net interest margin (c)/(h)			3.07%		3.01%		3.02%		2.86%		2.88%
Adjusted net interest margin (e)/(h)			3.07%		3.01%		2.98%		2.91%

Taxable equivalent efficiency ratio (g)/(a)+(f)			38.4%		63.4%		67.4%		62.8%		55.5%

Income before income taxes (U.S. GAAP)		$	1,489	$	494	$	396	$	509	$	694
Add:	Taxable equivalent adjustment		7		6		6		6		6

Taxable equivalent income before income taxes		$	1,496	$	500	$	402	$	515	$	700

Net income available to common shareholders (U.S. GAAP)			999		344		290		372		501
Add:	Intangible amortization, net of tax		—		—		—		—		—

Tangible net income available to common shareholders			999		344		290		372		501
Tangible net income available to common shareholders (annualized) (i)			3,963		1,380		1,176		1,480		1,993

Average Bancorp shareholders’ equity (U.S. GAAP)			16,820		16,615		16,429		16,545		16,883
Less:	Average preferred stock		(1,331)		(1,331)		(1,331)		(1,331)		(1,331)
	Average goodwill		(2,423)		(2,424)		(2,416)		(2,416)		(2,416)
	Average intangible assets and other servicing rights		(18)		(18)		(10)		(10)		(10)

Average tangible common equity (j)			13,048		12,842		12,672		12,788		13,126

Total Bancorp shareholders’ equity (U.S. GAAP)			16,360		16,419		16,430		16,205		16,776
Less:	Preferred stock		(1,331)		(1,331)		(1,331)		(1,331)		(1,331)
	Goodwill		(2,423)		(2,423)		(2,419)		(2,416)		(2,416)
	Intangible assets and other servicing rights		(18)		(18)		(11)		(10)		(10)

Tangible common equity, including unrealized gains / losses (k)			12,588		12,647		12,669		12,448		13,019
Less:	Accumulated other comprehensive income		(185)		(163)		(68)		(59)		(755)

Tangible common equity, excluding unrealized gains / losses (l)			12,403		12,484		12,601		12,389		12,264
Add:	Preferred stock		1,331		1,331		1,331		1,331		1,331

Tangible equity (m)			13,734		13,815		13,932		13,720		13,595

Total assets (U.S. GAAP)			142,264		141,067		140,200		142,177		143,279
Less:	Goodwill		(2,423)		(2,423)		(2,419)		(2,416)		(2,416)
	Intangible assets and other servicing rights		(18)		(18)		(11)		(10)		(10)

Tangible assets, including unrealized gains / losses (n)			139,823		138,626		137,770		139,751		140,853
Less:	Accumulated other comprehensive income / loss, before tax		(285)		(251)		(105)		(91)		(1,162)

Tangible assets, excluding unrealized gains / losses (o)		$	139,538	$	138,375	$	137,665	$	139,660	$	139,691

Common shares outstanding (p)			705		739		750		750		756
Risk-weighted assets (actual) (q)⁽¹⁾		$	117,527	$	117,761	$	117,407	$	119,632	$	120,954

Ratios:
Return on average tangible common equity (i) / (j)			30.4%		10.7%		9.3%		11.6%		15.2%
Tangible equity (m) / (o)			9.84%		9.98%		10.12%		9.82%		9.73%
Tangible common equity (excluding unrealized gains/losses) (l) / (o)			8.89%		9.02%		9.15%		8.87%		8.78%
Tangible common equity (including unrealized gains/losses) (k) / (n)			9.00%		9.12%		9.20%		8.91%		9.24%
Tangible book value per share (k) / (p)		$	17.86	$	17.11	$	16.89	$	16.60	$	17.22

Basel III Final Rule - Transition to Fully Phased-In
CET1 capital (transitional)		$	12,443	$	12,522	$	12,636	$	12,426	$	12,299
Less: Adjustments to CET1 capital from transitional to fully phased-in⁽²⁾			(4)		(4)		(2)		(4)		(4)

CET1 capital (fully phased-in) (r)			12,439		12,518		12,634		12,422		12,295

Risk-weighted assets (transitional)			117,527		117,761		117,407		119,632		120,954
Add: Adjustments to risk-weighted assets from transitional to fully phased-in⁽³⁾			1,272		1,274		1,164		1,115		929

Risk-weighted assets (fully phased-in) (s)		$	118,799	$	119,035	$	118,571	$	120,747	$	121,883

Estimated CET1 capital ratio under Basel III Final Rule (fully phased-in) (r)/(s)			10.47%		10.52%		10.66%		10.29%		10.09%

(1)

Under the banking agencies’ risk-based capital guidelines, assets and off-balance sheet exposures are assigned to various risk categories based upon the Standardized Approach to Risk-Weighted Assets.

(2)

Primarily relates to disallowed intangible assets (other than goodwill and MSRs, net of associated deferred tax liabilities).

(3)

Primarily relates to higher risk-weighting for MSRs.

(4)

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