UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2023

Commission File Number 001-33653

(Exact name of Registrant as specified in its charter)

Ohio	31-0854434
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification Number)

38 Fountain Square Plaza

Cincinnati, Ohio 45263

(Address of principal executive offices)

Registrant’s telephone number, including area code: (800) 972-3030

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered:
Common Stock, Without Par Value	FITB	The	NASDAQ	Stock Market LLC
Depositary Shares Representing a 1/1000th Ownership Interest in a Share of
6.625% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series I	FITBI	The	NASDAQ	Stock Market LLC
Depositary Shares Representing a 1/40th Ownership Interest in a Share of
6.00% Non-Cumulative Perpetual Class B Preferred Stock, Series A	FITBP	The	NASDAQ	Stock Market LLC
Depositary Shares Representing a 1/1000th Ownership Interest in a Share of
4.95% Non-Cumulative Perpetual Preferred Stock, Series K	FITBO	The	NASDAQ	Stock Market LLC

There were 680,888,757 shares of the Registrant’s common stock, without par value, outstanding as of July 31, 2023.

FINANCIAL CONTENTS

Part I. Financial Information
Glossary of Abbreviations and Acronyms	2
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 2)	3
Overview	3
Non-GAAP Financial Measures	8
Recent Accounting Standards	10
Critical Accounting Policies	10
Statements of Income Analysis	12
Balance Sheet Analysis	22
Business Segment Review	29
Risk Management—Overview	36
Credit Risk Management	36
Interest Rate and Price Risk Management	52
Liquidity Risk Management	57
Capital Management	59
Quantitative and Qualitative Disclosures about Market Risk (Item 3)	62
Controls and Procedures (Item 4)	62
Condensed Consolidated Financial Statements and Notes (Item 1)	63
Balance Sheets (unaudited)	63
Statements of Income (unaudited)	64
Statements of Comprehensive Income (unaudited)	65
Statements of Changes in Equity (unaudited)	66
Statements of Cash Flows (unaudited)	68
Notes to Condensed Consolidated Financial Statements (unaudited)	69
Part II. Other Information
Legal Proceedings (Item 1)	140
Risk Factors (Item 1A)	140
Unregistered Sales of Equity Securities and Use of Proceeds (Item 2)	140
Defaults Upon Senior Securities (Item 3)	140
Mine Safety Disclosures (Item 4)	140
Other Information (Item 5)	140
Exhibits (Item 6)	141
Signature	142

FORWARD-LOOKING STATEMENTS

This report 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. All statements other than statements of historical fact are forward-looking statements. These statements relate to our financial condition, results of operations, plans, objectives, future performance, capital actions 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,” “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 by our Quarterly Reports on Form 10-Q. 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) effects of the global COVID-19 pandemic; (2) deteriorating credit quality; (3) loan concentration by location or industry of borrowers or collateral; (4) problems encountered by other financial institutions; (5) inadequate sources of funding or liquidity; (6) unfavorable actions of rating agencies; (7) inability to maintain or grow deposits; (8) limitations on the ability to receive dividends from subsidiaries; (9) cyber-security risks; (10) Fifth Third’s ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks; (11) failures by third-party service providers; (12) inability to manage strategic initiatives and/or organizational changes; (13) inability to implement technology system enhancements; (14) failure of internal controls and other risk management systems; (15) losses related to fraud, theft, misappropriation or violence; (16) inability to attract and retain skilled personnel; (17) adverse impacts of government regulation; (18) governmental or regulatory changes or other actions; (19) failures to meet applicable capital requirements; (20) regulatory objections to Fifth Third’s capital plan; (21) regulation of Fifth Third’s derivatives activities; (22) deposit insurance premiums; (23) assessments for the orderly liquidation fund; (24) replacement of LIBOR; (25) weakness in the national or local economies; (26) global political and economic uncertainty or negative actions; (27) changes in interest rates and the effects of inflation; (28) changes and trends in capital markets; (29) fluctuation of Fifth Third’s stock price; (30) volatility in mortgage banking revenue; (31) litigation, investigations, and enforcement proceedings by governmental authorities; (32) breaches of contractual covenants, representations and warranties; (33) competition and changes in the financial services industry; (34) changing retail distribution strategies, customer preferences and behavior; (35) difficulties in identifying, acquiring or integrating suitable strategic partnerships, investments or acquisitions; (36) potential dilution from future acquisitions; (37) loss of income and/or difficulties encountered in the sale and separation of businesses, investments or other assets; (38) results of investments or acquired entities; (39) changes in accounting standards or interpretation or declines in the value of Fifth Third’s goodwill or other intangible assets; (40) inaccuracies or other failures from the use of models; (41) effects of critical accounting policies and judgments or the use of inaccurate estimates; (42) weather-related events, other natural disasters, or health emergencies (including pandemics); (43) the impact of reputational risk created by these or other developments on such matters as business generation and retention, funding and liquidity; (44) changes in law or requirements imposed by Fifth Third’s regulators impacting our capital actions, including dividend payments and stock repurchases; and (45) Fifth Third’s ability to meet its environmental and/or social targets, goals and commitments. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations or any changes in events, conditions or circumstances on which any such statement is based, except as may be required by law, and we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The information contained herein is intended to be reviewed in its totality, and any stipulations, conditions or provisos that apply to a given piece of information in one part of this report should be read as applying mutatis mutandis to every other instance of such information appearing herein.

1

PART I. FINANCIAL INFORMATION

Glossary of Abbreviations and Acronyms

Fifth Third Bancorp provides the following list of abbreviations and acronyms as a tool for the reader that are used in Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Condensed Consolidated Financial Statements and the Notes to Condensed Consolidated Financial Statements.

ACL: Allowance for Credit Losses	FTS: Fifth Third Securities, Inc.
AFS: Available-For-Sale	GDP: Gross Domestic Product
ALCO: Asset Liability Management Committee	GNMA: Government National Mortgage Association
ALLL: Allowance for Loan and Lease Losses	HTM: Held-To-Maturity
AOCI: Accumulated Other Comprehensive Income (Loss)	IPO: Initial Public Offering
APR: Annual Percentage Rate	IRC: Internal Revenue Code
ARM: Adjustable Rate Mortgage	IRLC: Interest Rate Lock Commitment
ASC: Accounting Standards Codification	ISDA: International Swaps and Derivatives Association, Inc.
ASU: Accounting Standards Update	LIBOR: London Interbank Offered Rate
ATM: Automated Teller Machine	LIHTC: Low-Income Housing Tax Credit
BHC: Bank Holding Company	LLC: Limited Liability Company
BOLI: Bank Owned Life Insurance	LTV: Loan-to-Value Ratio
bps: Basis Points	MD&A: Management’s Discussion and Analysis of Financial
CD: Certificate of Deposit	Condition and Results of Operations
CDC: Fifth Third Community Development Corporation and Fifth Third	MSR: Mortgage Servicing Right
Community Development Company, LLC	N/A: Not Applicable
CECL: Current Expected Credit Loss	NII: Net Interest Income
CET1: Common Equity Tier 1	NM: Not Meaningful
CFPB: United States Consumer Financial Protection Bureau	OAS: Option-Adjusted Spread
CME: Chicago Mercantile Exchange	OCC: Office of the Comptroller of the Currency
C&I: Commercial and Industrial	OCI: Other Comprehensive Income (Loss)
DCF: Discounted Cash Flow	OREO: Other Real Estate Owned
DTCC: Depository Trust & Clearing Corporation	PPP: Paycheck Protection Program
DTI: Debt-to-Income Ratio	ROU: Right-of-Use
ERM: Enterprise Risk Management	SBA: Small Business Administration
ERMC: Enterprise Risk Management Committee	SEC: United States Securities and Exchange Commission
EVE: Economic Value of Equity	SOFR: Secured Overnight Financing Rate
FASB: Financial Accounting Standards Board	TBA: To Be Announced
FDIC: Federal Deposit Insurance Corporation	TDR: Troubled Debt Restructuring
FHA: Federal Housing Administration	TILA: Truth in Lending Act
FHLB: Federal Home Loan Bank	U.S.: United States of America
FHLMC: Federal Home Loan Mortgage Corporation	USD: United States Dollar
FICO: Fair Isaac Corporation (credit rating)	U.S. GAAP: United States Generally Accepted Accounting
FINRA: Financial Industry Regulatory Authority	Principles
FNMA: Federal National Mortgage Association	VA: United States Department of Veterans Affairs
FOMC: Federal Open Market Committee	VIE: Variable Interest Entity
FRB: Federal Reserve Bank	VRDN: Variable Rate Demand Note
FTE: Fully Taxable Equivalent
FTP: Funds Transfer Pricing

2

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 2)

The following is Management’s Discussion and Analysis of Financial Condition and Results of Operations of certain significant factors that have affected Fifth Third Bancorp’s (the “Bancorp” or “Fifth Third”) financial condition and results of operations during the periods included in the Condensed Consolidated Financial Statements, which are a part of this filing. Reference to the Bancorp incorporates the parent holding company and all consolidated subsidiaries. The Bancorp’s banking subsidiary is referred to as the Bank.

OVERVIEW

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. At June 30, 2023, the Bancorp had $207 billion in assets and operated 1,072 full-service banking centers and 2,114 Fifth Third branded ATMs in eleven states throughout the Midwestern and Southeastern regions of the U.S. The Bancorp reports on three business segments: Commercial Banking, Consumer and Small Business Banking and Wealth and Asset Management.

This overview of MD&A highlights selected information in the financial results of the Bancorp and may not contain all of the information that is important to you. For a more complete understanding of trends, events, commitments, uncertainties, liquidity, capital resources and critical accounting policies and estimates, you should carefully read this entire document as well as the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2022. Each of these items could have an impact on the Bancorp’s financial condition, results of operations and cash flows. In addition, refer to the Glossary of Abbreviations and Acronyms in this report for a list of terms included as a tool for the reader of this Quarterly Report on Form 10-Q. The abbreviations and acronyms identified therein are used throughout this MD&A, as well as the Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements.

Net interest income, net interest margin, net interest rate spread and the efficiency ratio are presented in MD&A on an FTE basis. The FTE basis adjusts for the tax-favored status of income from certain loans and leases 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. The FTE basis for presenting net interest income is a non-GAAP measure. For further information, refer to the Non-GAAP Financial Measures section of MD&A.

The Bancorp’s revenues are dependent on both net interest income and noninterest income. For the three months ended June 30, 2023, net interest income on an FTE basis and noninterest income provided 67% and 33% of total revenue, respectively. For the six months ended June 30, 2023, net interest income on an FTE basis and noninterest income provided 68% and 32% of total revenue, respectively. The Bancorp derives the majority of its revenues within the U.S. from customers domiciled in the U.S. Revenue from foreign countries and external customers domiciled in foreign countries was immaterial to the Condensed Consolidated Financial Statements for the three and six months ended June 30, 2023. Changes in interest rates, credit quality, economic trends and the capital markets are primary factors that drive the performance of the Bancorp. As discussed later in the Risk Management section of MD&A, risk identification, measurement, monitoring, control and reporting are important to the management of risk and to the financial performance and capital strength of the Bancorp.

Net interest income is the difference between interest income earned on assets such as loans, leases and securities, and interest expense incurred on liabilities such as deposits, other short-term borrowings and long-term debt. Net interest income is affected by the general level of interest rates, the relative level of short-term and long-term interest rates, changes in interest rates and changes in the amount and composition of interest-earning assets and interest-bearing liabilities. Generally, the rates of interest the Bancorp earns on its assets and pays on its liabilities are established for a period of time. The change in market interest rates over time exposes the Bancorp to interest rate risk through potential adverse changes to net interest income and financial position. The Bancorp manages this risk by continually analyzing and adjusting the composition of its assets and liabilities based on their payment streams and interest rates, the timing of their maturities and their sensitivity to changes in market interest rates. Additionally, in the ordinary course of business, the Bancorp enters into certain derivative transactions as part of its overall strategy to manage its interest rate and prepayment risks. The Bancorp is also exposed to the risk of loss on its loan and lease portfolio as a result of changing expected cash flows caused by borrower credit events, such as loan defaults and inadequate collateral.

Noninterest income is derived from commercial banking revenue, wealth and asset management revenue, service charges on deposits, card and processing revenue, mortgage banking net revenue, leasing business revenue, other noninterest income and net securities gains or losses. Noninterest expense includes compensation and benefits, technology and communications, net occupancy expense, equipment expense, leasing business expense, marketing expense, card and processing expense and other noninterest expense.

Current Economic Conditions

Economic activity expanded in the second quarter of 2023. The labor market has remained strong and inflation has slowed. In response to persistent inflationary pressures, the FRB has raised benchmark interest rates several times since March 2022 and has signaled they will continue to monitor the cumulative economic effects of their policy actions, including tighter credit conditions for households and businesses, when determining future monetary actions. Amidst the rapid rate increases, several financial markets have experienced heightened volatility.

Changes in interest rates can affect numerous aspects of the Bancorp’s business and may impact the Bancorp’s future performance. If financial markets remain volatile, this may impact the future performance of various segments of the Bancorp’s business, including the value

3

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

of the Bancorp’s investment securities portfolio. The Bancorp continues to closely monitor the pace of inflation and the impacts of inflation on the broader market.

The recent high-profile bank failures involving Silicon Valley Bank, Signature Bank and First Republic Bank have generated significant market volatility and have increased regulatory and market focus on the liquidity, asset-liability management and unrealized securities losses of banks. In May 2023, the FDIC proposed a special deposit insurance assessment on banking organizations with greater than $5 billion in assets to recover the costs associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank. As proposed, the special assessment would be collected by the FDIC over an anticipated total of eight quarterly assessments beginning with the first quarter of 2024. The comment period for the proposed rule recently ended and the final rule is expected to be issued later in 2023. While the ultimate impact of the special assessment will be dependent on the final rule, the Bancorp has estimated that its special assessment under the provisions of the proposed rule would be approximately $208 million, which is expected to be recognized in earnings upon issuance of the final rule. The Bancorp continues to monitor regulatory changes related to these developments.

For further discussion on current economic conditions, refer to the Credit Risk Management subsection of the Risk Management section of MD&A. Additionally, refer to the Interest Rate and Price Risk Management and Liquidity Risk Management subsections of the Risk Management section of MD&A for additional information about the Bancorp’s interest rate risk management and liquidity risk management activities.

Accelerated Share Repurchase Transaction

During the first quarter of 2023, the Bancorp entered into and settled an accelerated share repurchase transaction. As part of the transaction, the Bancorp entered into a forward contract in which the final number of shares delivered at settlement was based generally on a discount to the average daily volume weighted-average price of the Bancorp’s common stock during the term of the repurchase agreement. Refer to Note 16 of the Notes to Condensed Consolidated Financial Statements for additional information on share repurchase activity.

LIBOR Transition

In July 2017, the Chief Executive of the United Kingdom Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that the FCA would stop persuading or compelling banks to submit rates for the calculation of LIBOR to the administrator of LIBOR after 2021. Since then, central banks around the world, including the Federal Reserve, have commissioned working groups of market participants and official sector representatives with the goal of finding suitable replacements for LIBOR.

On March 5, 2021, the FCA and ICE Benchmark Administration, Limited announced that the publication of the one-week and two-month USD LIBOR maturities and non-USD LIBOR maturities would cease immediately after December 31, 2021, with the remaining USD LIBOR maturities ceasing immediately after June 30, 2023. In the United States, the Alternative Rates Reference Committee (the “ARRC”), a group of market participants convened in 2014 to help ensure a successful transition away from USD LIBOR, identified SOFR as its preferred alternative rate. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. The composition and characteristics of SOFR are not the same as those of LIBOR, and SOFR is fundamentally different from LIBOR for two key reasons: (1) SOFR is a secured rate, while LIBOR is an unsecured rate, and (2) SOFR is an overnight rate, while LIBOR is a forward-looking rate that represents interbank funding over different maturities. As a result, there can be no assurance that SOFR, however calculated, will perform the same way as LIBOR would have at any time, including, as a result of changes in interest and yield rates in the market, market volatility, or global or regional economic, financial, political, regulatory, judicial or other events.

On March 15, 2022, President Biden signed the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) into law. The LIBOR Act offers a federal solution for transitioning legacy instruments that lack sufficient provisions addressing LIBOR’s cessation by outlining a uniform process to govern the transition from LIBOR to a replacement rate. The LIBOR Act also establishes a safe harbor for lenders, shielding lenders from litigation as a result of their choice of a replacement rate (such as SOFR) per FRB recommendations. On December 16, 2022, the FRB issued its final regulations which carry out the terms of the LIBOR Act, which became effective on February 27, 2023. These regulations: (i) address the applicability of the LIBOR Act to various LIBOR contracts, (ii) identify the FRB-selected benchmark replacements for various types of LIBOR contracts, (iii) include certain benchmark replacement conforming changes, (iv) address the issue of preemption and (v) provide other clarifications, definitions and information.

In accordance with regulatory guidance, the Bancorp previously discontinued entering into new LIBOR-based contracts, except for permissible limited use, such as part of hedging and risk management programs. Additionally, the Bancorp has offered products which utilize alternative reference rates, including SOFR, since the fourth quarter of 2021. As of June 30, 2023, all remaining LIBOR-based exposures, including derivative contracts, loans, preferred stock and long-term debt, will transition to appropriate alternative reference rates at the time of the next repricing event. Refer to Note 15 and Note 16 of the Notes to Condensed Consolidated Financial Statements for additional information about certain exposures which were transitioned to an alternative reference rate.

In the second quarter of 2023, as part of the LIBOR transition, certain central clearing parties converted existing LIBOR-based contracts into multiple replacement contracts: short-dated LIBOR contracts which continue through the next repricing event after the cessation of LIBOR

4

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

publication and SOFR contracts which are effective at the expiration of the short-dated contracts and continue through the maturity of the original contracts. Each set of replacement contracts is designed to cover the same period of time as the original LIBOR-based contract. As a result of this approach, the conversion resulted in a temporary increase in notional balances when compared to the former LIBOR-based contracts cleared through certain central clearing parties. The Bancorp’s notional balances increased by approximately $12.5 billion for cash flow hedges, $18.0 billion for interest rate contracts for collateral management and $18.0 billion for interest rate contracts for customer accommodation. The temporary increase in notional amounts due to the replacement contracts is expected to end in the third quarter of 2023.

For a further discussion of the various risks the Bancorp faces in connection with the replacement of LIBOR on its operations, see “Risk Factors—Market Risks—The replacement of LIBOR could adversely affect Fifth Third’s revenue or expenses and the value of those assets or obligations.” in Item 1A. Risk Factors of the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2022.

Key Performance Indicators

The Bancorp, as a banking institution, utilizes various key indicators of financial condition and operating results in managing and monitoring the performance of the business. In addition to traditional financial metrics, such as revenue and expense trends, the Bancorp monitors other financial measures that assist in evaluating growth trends, capital strength and operational efficiencies. The Bancorp analyzes these key performance indicators against its past performance, its forecasted performance and with the performance of its peer banking institutions. These indicators may change from time to time as the operating environment and businesses change.

The following are some of the key indicators used by management to assess the Bancorp’s business performance, including those which are considered in the Bancorp’s compensation programs:

•CET1 Capital Ratio: CET1 capital divided by risk-weighted assets as defined by the Basel III standardized approach to risk-weighting of assets

•Return on Average Tangible Common Equity (non-GAAP): Tangible net income available to common shareholders divided by average tangible common equity

•Return on Average Common Equity, Excluding AOCI (non-GAAP): Net income available to common shareholders divided by total equity, excluding AOCI and preferred stock

•Net Interest Margin (non-GAAP): Net interest income on an FTE basis divided by average interest-earning assets

•Efficiency Ratio (non-GAAP): Noninterest expense divided by the sum of net interest income on an FTE basis and noninterest income

•Earnings Per Share, Diluted: Net income allocated to common shareholders divided by average common shares outstanding after the effect of dilutive stock-based awards

•Nonperforming Portfolio Assets Ratio: Nonperforming portfolio assets divided by portfolio loans and leases and OREO

•Net Charge-off Ratio: Net losses charged-off divided by average portfolio loans and leases

•Return on Average Assets: Net income divided by average assets

•Loan-to-Deposit Ratio: Total loans divided by total deposits

•Household Growth: Change in the number of consumer households with retail relationship-based checking accounts

The list of indicators above is intended to summarize some of the most important metrics utilized by management in evaluating the Bancorp’s performance and does not represent an all-inclusive list of all performance measures that may be considered relevant or important to management or investors.

5

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

TABLE 1: Earnings Summary
	For the three months ended June 30,				%	For the six months ended June 30,				%
($ in millions, except for per share data)	2023			2022	Change	2023			2022	Change
Income Statement Data
Net interest income (U.S. GAAP)	$	1,457		1,339	9	$	2,974		2,534	17
Net interest income (FTE)(a)(b)	1,463			1,342	9	2,985			2,541	17
Noninterest income	726			676	7	1,422			1,359	5
Total revenue (FTE)(a)(b)	2,189			2,018	8	4,407			3,900	13
Provision for credit losses	177			179	(1)	341			224	52
Noninterest expense	1,231			1,112	11	2,562			2,334	10
Net income	601			562	7	1,159			1,056	10
Net income available to common shareholders	562			526	7	1,097			1,000	10
Common Share Data
Earnings per share - basic	$	0.82		0.76	8	$	1.60		1.45	10
Earnings per share - diluted	0.82			0.76	8	1.59			1.44	10
Cash dividends declared per common share	0.33			0.30	10	0.66			0.60	10
Book value per share	23.05			24.56	(6)	23.05			24.56	(6)
Market value per share	26.21			33.60	(22)	26.21			33.60	(22)
Financial Ratios
Return on average assets	1.17		%	1.09	7	1.14		%	1.03	11
Return on average common equity	13.9			12.3	13	13.8			11.1	24
Return on average tangible common equity(b)	20.5			17.5	17	20.5			15.3	34
Dividend payout	40.2			39.5	2	41.3			41.4	—

(a)Amounts presented on an FTE basis. The FTE adjustments were $6 and $3 for the three months ended June 30, 2023 and 2022, respectively, and $11 and $7 for the six months ended June 30, 2023 and 2022, respectively.

(b)These are non-GAAP measures. For further information, refer to the Non-GAAP Financial Measures section of MD&A.

Earnings Summary

The Bancorp’s net income available to common shareholders for the second quarter of 2023 was $562 million, or $0.82 per diluted share, which was net of $39 million in preferred stock dividends. The Bancorp’s net income available to common shareholders for the second quarter of 2022 was $526 million, or $0.76 per diluted share, which was net of $36 million in preferred stock dividends. The Bancorp’s net income available to common shareholders for the six months ended June 30, 2023 was $1.1 billion, or $1.59 per diluted share, which was net of $62 million in preferred stock dividends. The Bancorp’s net income available to common shareholders for the six months ended June 30, 2022 was $1.0 billion, or $1.44 per diluted share, which was net of $56 million in preferred stock dividends.

Net interest income on an FTE basis (non-GAAP) was $1.5 billion for the three months ended June 30, 2023, an increase of $121 million compared to the same period in the prior year. Net interest income benefited from increases in market interest rates, resulting in increases in yields on average loans and leases, average other short-term investments and average taxable securities for the three months ended June 30, 2023 compared to the same period in the prior year. Net interest income also benefited from increases in average other consumer loans, average commercial and industrial loans and average taxable securities for the three months ended June 30, 2023 compared to the same period in the prior year. These positive impacts were partially offset by increases in rates paid on average interest-bearing core deposits, average long-term debt and average balances of FHLB advances as well as decreases in the average balances of demand deposits and increases in the average balances of CDs over $250,000 and FHLB advances for the three months ended June 30, 2023 compared to the same period in the prior year. Net interest margin on an FTE basis (non-GAAP) was 3.10% for the three months ended June 30, 2023 compared to 2.92% for the same period in the prior year.

Net interest income on an FTE basis (non-GAAP) was $3.0 billion for the six months ended June 30, 2023, an increase of $444 million compared to the same period in the prior year. Net interest income benefited from increases in market interest rates, resulting in increases in yields on average loans and leases, average other short-term investments and average taxable securities for the six months ended June 30, 2023 compared to the same period in the prior year. Net interest income also benefited from increases in average taxable securities, average other consumer loans and average commercial and industrial loans for the six months ended June 30, 2023 compared to the same period in the prior year. These positive impacts were partially offset by increases in rates paid on average interest-bearing core deposits, average long-term debt and average FHLB advances as well as increases in the average balances of CDs over $250,000, FHLB advances and long-term debt for the six months ended June 30, 2023 compared to the same period in the prior year. Additionally, interest income recognized from PPP loans decreased to $2 million for the six months ended June 30, 2023 compared to $32 million for the same period in the prior year. Net interest margin on an FTE basis (non-GAAP) was 3.20% for the six months ended June 30, 2023 compared to 2.75% for the same period in the prior year.

6

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

The provision for credit losses was $177 million and $341 million for the three and six months ended June 30, 2023, respectively, compared to $179 million and $224 million during the same periods in the prior year. Provision expense for the three months ended June 30, 2023 was driven by factors that caused an increase in the ACL from March 31, 2023 which included deterioration in the economic forecast and increases to specific reserves on individually evaluated commercial and industrial loans, partially offset by lower period-end loan and lease balances. Provision expense for the six months ended June 30, 2023 was driven by factors that caused an increase in the ACL from December 31, 2022 which included the impact of higher period-end loan and lease balances and increases to specific reserves on individually evaluated commercial and industrial loans. The increase in period-end loan and lease balances for the six months ended June 30, 2023 was primarily driven by originations of point-of-sale solar energy installation loans. The provision for credit losses for both the three and six months ended June 30, 2022 also included the initial recognition of provision expense on loans acquired as part of a business combination completed in the second quarter of 2022. Net losses charged off as a percent of average portfolio loans and leases were 0.29% and 0.21% for the three months ended June 30, 2023 and 2022, respectively, and 0.27% and 0.17% for the six months ended June 30, 2023 and 2022, respectively. At June 30, 2023 and December 31, 2022, nonperforming portfolio assets as a percent of portfolio loans and leases and OREO were 0.54% and 0.44%, respectively. For further discussion on credit quality, refer to the Credit Risk Management subsection of the Risk Management section of MD&A as well as Note 6 of the Notes to Condensed Consolidated Financial Statements.

Noninterest income increased $50 million and $63 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in the prior year primarily due to increases in net securities gains, mortgage banking net revenue and commercial banking revenue, partially offset by decreases in other noninterest income, service charges on deposits and leasing business revenue.

Noninterest expense increased $119 million and $228 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in the prior year primarily due to increases in compensation and benefits expense, other noninterest expense, technology and communications expense, net occupancy expense and marketing expense.

For more information on net interest income, provision expense, noninterest income and noninterest expense refer to the Statements of Income Analysis section of MD&A.

Capital Summary

The Bancorp calculated its regulatory capital ratios under the Basel III standardized approach to risk-weighting of assets and pursuant to the five-year transition provision option to phase in the effects of CECL on regulatory capital as of June 30, 2023. As of June 30, 2023, the Bancorp’s capital ratios, as defined by the U.S. banking agencies, were:

•CET1 capital ratio: 9.49%;

•Tier 1 risk-based capital ratio: 10.73%;

•Total risk-based capital ratio: 12.83%;

•Leverage ratio: 8.81%.

7

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

NON-GAAP FINANCIAL MEASURES

The following are non-GAAP financial measures which provide useful insight to the reader of the Condensed Consolidated Financial Statements but should be supplemental to primary U.S. GAAP measures and should not be read in isolation or relied upon as a substitute for the primary U.S. GAAP measures. The Bancorp encourages readers to consider the Condensed Consolidated Financial Statements in their entirety and not to rely on any single financial measure.

The FTE basis adjusts for the tax-favored status of income from certain loans and leases 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.

The following table reconciles the non-GAAP financial measures of net interest income on an FTE basis, interest income on an FTE basis, net interest margin, net interest rate spread and the efficiency ratio to U.S. GAAP:

TABLE 2: Non-GAAP Financial Measures - Financial Measures and Ratios on an FTE basis
	For the three months ended June 30,				For the six months ended June 30,
($ in millions)	2023			2022	2023	2022
Net interest income (U.S. GAAP)	$	1,457		1,339	2,974	2,534
Add: FTE adjustment	6			3	11	7
Net interest income on an FTE basis (1)	$	1,463		1,342	2,985	2,541
Net interest income on an FTE basis (annualized) (2)	5,868			5,383	6,019	5,124
Interest income (U.S. GAAP)	$	2,370		1,464	4,583	2,752
Add: FTE adjustment	6			3	11	7
Interest income on an FTE basis	$	2,376		1,467	4,594	2,759
Interest income on an FTE basis (annualized) (3)	9,530			5,884	9,264	5,564
Interest expense (annualized) (4)	$	3,662		501	3,245	440
Noninterest income (5)	726			676	1,422	1,359
Noninterest expense (6)	1,231			1,112	2,562	2,334
Average interest-earning assets (7)	189,060			184,406	188,238	186,139
Average interest-bearing liabilities (8)	134,590			115,462	131,950	116,109
Ratios:
Net interest margin on an FTE basis (2) / (7)	3.10		%	2.92	3.20	2.75
Net interest rate spread on an FTE basis ((3) / (7)) - ((4) / (8))	2.32			2.76	2.46	2.61
Efficiency ratio on an FTE basis (6) / ((1) + (5))	56.2			55.1	58.1	59.8

The Bancorp believes return on average tangible common equity is an important measure for comparative purposes with other financial institutions, but is not defined under U.S. GAAP, and therefore is considered a non-GAAP financial measure. This measure is useful for evaluating the performance of a business as it calculates the return available to common shareholders without the impact of intangible assets and their related amortization.

8

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

The following table reconciles the non-GAAP financial measure of return on average tangible common equity to U.S. GAAP:

TABLE 3: Non-GAAP Financial Measures - Return on Average Tangible Common Equity
	For the three months ended June 30,				For the six months ended June 30,
($ in millions)	2023			2022	2023	2022
Net income available to common shareholders (U.S. GAAP)	$	562		526	1,097	1,000
Add: Intangible amortization, net of tax	8			9	18	17
Tangible net income available to common shareholders	$	570		535	1,115	1,017
Tangible net income available to common shareholders (annualized) (1)	2,286			2,146	2,248	2,051
Average Bancorp shareholders’ equity (U.S. GAAP)	$	18,344		19,248	18,162	20,319
Less: Average preferred stock	2,116			2,116	2,116	2,116
Average goodwill	4,919			4,744	4,917	4,630
Average intangible assets	152			158	157	154
Average tangible common equity (2)	$	11,157		12,230	10,972	13,419
Return on average tangible common equity (1) / (2)	20.5		%	17.5	20.5	15.3

The Bancorp considers various measures when evaluating capital utilization and adequacy, including the tangible equity ratio and tangible common equity ratio, 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. As U.S. GAAP does not include capital ratio measures, the Bancorp believes there are no comparable U.S. GAAP financial measures to these ratios. 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.

The following table reconciles non-GAAP capital ratios to U.S. GAAP:

TABLE 4: Non-GAAP Financial Measures - Capital Ratios
As of ($ in millions)	June 30, 2023		December 31, 2022
Total Bancorp Shareholders’ Equity (U.S. GAAP)	$	17,809	17,327
Less: Preferred stock	2,116		2,116
Goodwill	4,919		4,915
Intangible assets	146		169