EX-99.1 2 d143747dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

 

Key Financial Data

 

         
                            

  $ millions for all balance sheet and income statement items

   

 

      4Q19

 

     3Q19       4Q18           

Income Statement Data

         

 

Net income available to common shareholders

   

 

 

 

$701

 

 

  

 

 

 

$530

 

 

  

 

 

 

$432

 

 

  

 

Net interest income (U.S. GAAP)

   

 

 

 

1,228

 

 

  

 

 

 

1,242

 

 

  

 

 

 

1,081

 

 

  

 

Net interest income (FTE)(a)

   

 

 

 

1,232

 

 

  

 

 

 

1,246

 

 

  

 

 

 

1,085

 

 

  

 

Noninterest income

   

 

 

 

1,035

 

 

  

 

 

 

740

 

 

  

 

 

 

575

 

 

  

 

Noninterest expense

   

 

 

 

1,160

 

 

  

 

 

 

1,159

 

 

  

 

 

 

975

 

 

  

 

Per Share Data

         

 

Earnings per share, basic

   

 

 

 

$0.97

 

 

  

 

 

 

$0.72

 

 

  

 

 

 

$0.65

 

 

  

 

Earnings per share, diluted

   

 

 

 

0.96

 

 

  

 

 

 

0.71

 

 

  

 

 

 

0.64

 

 

  

 

Book value per share

   

 

 

 

27.41

 

 

  

 

 

 

27.32

 

 

  

 

 

 

23.07

 

 

  

 

Tangible book value per share(a)

   

 

 

 

21.13

 

 

  

 

 

 

21.06

 

 

  

 

 

 

19.17

 

 

  

 

Balance Sheet & Credit Quality

         

 

Average portfolio loans and leases

   

 

 

 

$109,787

 

 

  

 

 

 

$109,541

 

 

  

 

 

 

$94,757

 

 

  

 

Average deposits

   

 

 

 

126,116

 

 

  

 

 

 

125,206

 

 

  

 

 

 

107,495

 

 

  

 

Net charge-off ratio(b)

   

 

 

 

0.41

 

  % 

  

 

 

 

0.36

 

  % 

  

 

 

 

0.35

 

  % 

  

 

Nonperforming asset ratio(c)

   

 

 

 

0.62

 

 

  

 

 

 

0.47

 

 

  

 

 

 

0.41

 

 

  

 

Financial Ratios

         

 

Return on average assets

   

 

 

 

1.72

 

  % 

  

 

 

 

1.28

 

  % 

  

 

 

 

1.25

 

  % 

  

 

Return on average common equity

   

 

 

 

14.2

 

 

  

 

 

 

10.7

 

 

  

 

 

 

11.8

 

 

  

 

Return on average tangible common equity(a)

   

 

 

 

18.7

 

 

  

 

 

 

14.2

 

 

  

 

 

 

14.3

 

 

  

 

CET1 capital(d)(e)

   

 

 

 

9.75

 

 

  

 

 

 

9.56

 

 

  

 

 

 

10.24

 

 

  

 

Net interest margin(a)

   

 

 

 

3.27

 

 

  

 

 

 

3.32

 

 

  

 

 

 

3.29

 

 

  

 

Efficiency(a)

   

 

 

 

51.2

 

 

  

 

 

 

58.4

 

 

  

 

 

 

58.7

 

 

  

 

Other than the Quarterly Financial Review tables commentary is on a fully taxable-equivalent (FTE) basis unless otherwise noted. Consistent with SEC guidance in Industry Guide 3 that contemplates the calculation of tax-exempt income on a taxable-equivalent basis, net interest income, net interest margin, net interest rate spread, total revenue and the efficiency ratio are provided on an FTE basis.

 

  

Income Statement Highlights                                        

($ in millions, except per share data)

      For the Three Months Ended        % Change  
     December        September        December        
         2019            2019            2018            Seq            Yr/Yr      

Condensed Statements of Income

               

Net interest income (NII)(a)

      $1,232        $1,246        $1,085        (1%)        14%  

Provision for credit losses

      162        134        97        21%        67%  

Noninterest income

      1,035        740        575        40%        80%  

Noninterest expense

      1,160        1,159        975        -        19%  

Income before income taxes(a)

      $945        $693        $588        36%        61%  

Taxable equivalent adjustment

      4        4        4        -        -  

Applicable income tax expense

      207        140        129        48%        60%  

Net income

      $734        $549        $455        34%        61%  

Less: Net income attributable to noncontrolling interests

      -        -        -        NM        NM  

Net income attributable to Bancorp

      $734        $549        $455        34%        61%  

Dividends on preferred stock

      33        19        23        74%        43%  

Net income available to common shareholders

      $701        $530        $432        32%        62%  

Earnings per share, diluted

      $0.96        $0.71        $0.64        35%        50%  

Fifth Third Bancorp (Nasdaq: FITB) today reported fourth quarter 2019 net income of $734 million compared to net income of $455 million in the year-ago quarter. Net income available to common shareholders was $701 million, or $0.96 per diluted share, compared to $432 million, or $0.64 per diluted share in the year-ago quarter. Prior quarter net income was $549 million and net income available to common shareholders was $530 million, or $0.71 per diluted share.

 

Diluted earnings per share impact of certain items - 4Q19        
(after-tax impacts(f); $ in millions, except per share data)       
         

Valuation of Visa total return swap

      ($34 ) 

Fifth Third Foundation contribution

      ($15 ) 

Provision impact from conversion to a national charter

      ($7 ) 

Merger-related expenses

      ($7 ) 

Gain recognized from Worldpay TRA transaction

      $265  

After-tax impact(f) of certain items

      $202  
      

Average diluted common shares outstanding (thousands)

      724,968  
      

Diluted earnings per share impact

      $0.28  
          

Reported full year 2019 net income was $2.5 billion compared to full year 2018 net income of $2.2 billion. Full year 2019 net income available to common shareholders was $2.4 billion, or $3.33 per diluted share, compared to 2018 full year net income available to common shareholders of $2.1 billion, or $3.06 per diluted share.

 

2

 Net Interest Income                                        
 (FTE; $ in millions)(a)    For the Three Months Ended      % Change  
     December      September      December                
     2019      2019      2018      Seq          Yr/Yr      

Interest Income

               

Interest income

      $1,563        $1,629        $1,397        (4%)        12%  

Interest expense

      331        383        312        (14%)        6%  

Net interest income (NII)

      $1,232        $1,246        $1,085        (1%)        14%  

Adjusted NII(a)

      $1,214        $1,218        $1,085        -        12%  

Average Yield/Rate Analysis

               bps Change  
           

 

 

  

Yield on interest-earning assets

      4.15%        4.34%        4.23%        (19)        (8 ) 

Rate paid on interest-bearing liabilities

      1.22%        1.41%        1.33%        (19)        (11 ) 

Ratios

               

Net interest rate spread

      2.93%        2.93%        2.90%        -        3  

Net interest margin (NIM)

      3.27%        3.32%        3.29%        (5)        (2 ) 

Adjusted NIM(a)

      3.22%        3.25%        3.29%        (3)        (7 ) 

Compared to the year-ago quarter, reported NII increased $147 million, or 14%. Excluding purchase accounting accretion of $18 million in the fourth quarter of 2019, adjusted NII increased $129 million, or 12%, reflecting an increase in interest-earning assets, including the impact from the MB Financial acquisition, partially offset by the declining rate environment. Compared to the year-ago quarter, reported NIM decreased 2 bps, or 7 bps excluding purchase accounting accretion.

Compared to the prior quarter, reported NII decreased $14 million, or 1%. Excluding purchase accounting accretion, adjusted NII decreased $4 million primarily reflecting lower short-term market rates, partially offset by growth in the indirect secured consumer portfolio (predominantly indirect automobile), as well as the favorable impact of previously executed cash flow hedges. Compared to the prior quarter, reported NIM decreased 5 bps. Excluding purchase accounting accretion, adjusted NIM decreased 3 bps, primarily reflecting lower short-term market rates, partially offset by the favorable impact of previously executed hedges, proactive management of deposit rates, and a decrease in other short-term investments.

 

Noninterest Income  
($ in millions)      For the Three Months Ended       % Change  
     December     September      December        
     2019     2019      2018     Seq      Yr/Yr  

Noninterest Income

             

Service charges on deposits

      $149       $143        $135       4%        10%  

Corporate banking revenue

      153       168        130       (9%)        18%  

Mortgage banking net revenue

      73       95        54       (23%)        35%  

Wealth and asset management revenue

      129       124        109       4%        18%  

Card and processing revenue

      95       94        84       1%        13%  

Other noninterest income

      427       111        93       285%        359%  

Securities gains (losses), net

      10       5        (32 )      100%        NM  

Securities (losses) gains, net - non-qualifying hedges on mortgage servicing rights

      (1 )      -        2       NM        NM  

Total noninterest income

      $1,035               $740                $575       40%        80%  

 

3

Reported noninterest income increased $460 million, or 80%, from the year-ago quarter, and increased $295 million, or 40%, from the prior quarter. The reported results reflect the impact of certain items in the table below, in both the prior quarter and the year-ago quarter.

 

Noninterest Income excluding certain items                         
                          
($ in millions)    For the Three Months Ended  
     December     September     December  
     2019     2019     2018  

Noninterest Income excluding certain items

       

Noninterest income (U.S. GAAP)

      $1,035       $740       $575  

Valuation of Visa total return swap

      44       11       (7 ) 

GreenSky equity securities losses

      -       -       21  

Gain recognized from Worldpay TRA transaction

      (345 )      -       -  

Securities (gains) losses, net (excluding GreenSky)

      (10 )      (5 )      11  

Noninterest income excluding certain items(a)

      $724       $746       $600  

Compared to the year-ago quarter, noninterest income excluding the items in the preceding table increased $124 million, or 21%. Compared to the prior quarter, noninterest income excluding the items in the preceding table decreased $22 million, or 3%.

Compared to the year-ago quarter, service charges on deposits increased $14 million, or 10%, driven by higher commercial deposit fees, partially offset by lower consumer deposit fees. Corporate banking revenue increased $23 million, or 18%, primarily driven by leasing business revenue resulting from the MB Financial acquisition, as well as an increase in corporate bond fees. Mortgage banking net revenue increased $19 million, or 35%, primarily driven by higher mortgage originations of $3.8 billion, an increase of 144%. Wealth and asset management revenue increased $20 million, or 18%, primarily driven by higher personal asset management revenue.

Compared to the prior quarter, service charges on deposits increased $6 million, or 4%, driven by higher consumer and commercial deposit fees. Corporate banking revenue decreased $15 million, or 9%, primarily driven by a decrease in leasing business revenue, partially offset by an increase in loan syndications revenue. Mortgage banking net revenue decreased $22 million, or 23%, primarily driven by a seasonally lower gain on sale margin partially offset by a 13% increase in origination volumes. Wealth and asset management revenue increased $5 million, or 4%, primarily driven by higher personal asset management revenue and brokerage fees.

Other noninterest income results on a reported basis in the current quarter were impacted by the gain recognized from the Worldpay TRA transaction. Current and previous quarters were also impacted by the Visa total return swap valuation adjustments. Excluding these items, other noninterest income of $126 million increased $40 million, or 47%, compared to the year-ago quarter, primarily driven by operating lease revenue from MB Financial. Compared to the prior quarter, other noninterest income excluding these item increased $4 million, or 3%, reflecting higher private equity investment income.

 

4

 Noninterest Expense  
 ($ in millions)      For the Three Months Ended        % Change      
     December      September      December         
         2019              2019              2018              Seq              Yr/Yr      

Noninterest Expense

               

Compensation and benefits

      $576        $584        $506        (1%)        14%  

Net occupancy expense

      84        84        73        -        15%  

Technology and communications

      103        100        79        3%        30%  

Equipment expense

      33        33        31        -        6%  

Card and processing expense

      33        33        33        -        -  

Intangible amortization expense

      14        14        1        -        NM  

Other noninterest expense

      317        311        252        2%        26%  

Total noninterest expense

      $1,160        $1,159        $975        -        19%  

 

 Impacts of Merger-Related Expenses                          
                            
 ($ in millions)    For the Three Months Ended  
     December      September      December  
         2019              2019              2018      

Merger-Related Expenses

         

Compensation and benefits

      $1        $14        $1  

Net occupancy expense

      3        3        -  

Technology and communications

      4        8        6  

Equipment expense

      -        -        -  

Card and processing expense

      -        -        1  

Intangible amortization expense

      -        -        -  

Other noninterest expense

      1        3        19  

Total merger-related expenses

      $9        $28        $27  

 

 Noninterest Expense excluding Merger-Related Expenses(a)  
($ in millions)      For the Three Months Ended        % Change  
     December      September      December         
         2019              2019              2018              Seq              Yr/Yr      

Noninterest Expense excluding Merger-Related Expenses

               

Compensation and benefits

      $575        $570        $505        1%        14%  

Net occupancy expense

      81        81        73        -        11%  

Technology and communications

      99        92        73        8%        36%  

Equipment expense

      33        33        31        -        6%  

Card and processing expense

      33        33        32        -        3%  

Intangible amortization expense

      14        14        1        -        NM  

Other noninterest expense

      316        308        233        3%        36%  

Total noninterest expense excluding merger-related expenses

      $1,151        $1,131        $948        2%        21%  

Compared to the year-ago quarter, reported noninterest expense increased $185 million, or 19%, impacted by the expenses associated with the MB Financial acquisition. Excluding the merger-related expenses, intangible amortization expense, and a $20 million contribution to the Fifth Third Foundation (included in other noninterest expense) in the current quarter, noninterest expense increased $170 million, or 18%, reflecting the operating expenses resulting from the MB Financial acquisition as well as continued technology investments.

Compared to the prior quarter, reported noninterest expense increased $1 million. Excluding the aforementioned merger-related expenses, intangible amortization expense, and contribution to the Fifth Third Foundation, noninterest expense was flat driven by investments in technology and offset by the continued benefits from the MB Financial expense synergies.

 

5

Average Interest-Earning Assets                                   
                                              
($ in millions)    For the Three Months Ended      % Change  
     December      September      December                
     2019      2019      2018      Seq      Yr/Yr  

Average Portfolio Loans and Leases

               

Commercial loans and leases:

               

Commercial and industrial loans

      $50,938        $51,241        $43,829        (1%)        16%  

Commercial mortgage loans

      10,831        10,692        6,864        1%        58%  

Commercial construction loans

      5,334        5,267        4,885        1%        9%  

Commercial leases

      3,384        3,562        3,632        (5%)        (7%)  

Total commercial loans and leases

      $70,487        $70,762        $59,210        -        19%  

Consumer loans:

               

Residential mortgage loans

      $16,697        $16,736        $15,520        -        8%  

Home equity

      6,147        6,267        6,438        (2%)        (5%)  

Indirect secured consumer loans

      11,281        10,707        8,970        5%        26%  

Credit card

      2,496        2,448        2,373        2%        5%  

Other consumer loans

      2,679        2,621        2,246        2%        19%  

Total consumer loans

      $39,300        $38,779        $35,547        1%        11%  

Total average portfolio loans and leases

      $109,787        $109,541        $94,757        -        16%  

Average Loans and Leases Held for Sale

               

Commercial loans and leases held for sale

      $43        $127        $88        (66%)        (51%)  

Consumer loans held for sale

      1,156        998        553        16%        109%  

Total average loans and leases held for sale

      $1,199        $1,125        $641        7%        87%  

Securities and other short-term investments

      $38,326        $38,188        $35,674        -        7%  

Total average interest-earning assets

      $149,312        $148,854        $131,072        -        14%  

Compared to the year-ago quarter, total average portfolio loans and leases increased 16%, reflecting the impact of the MB Financial acquisition. Average commercial portfolio loans and leases increased 19%, reflecting the impact of MB Financial as well as higher commercial mortgage and commercial and industrial (C&I) loans, partially offset by a decline in commercial leases. Average consumer portfolio loans increased 11%, reflecting the impact of MB Financial as well as growth in indirect secured consumer loans and other consumer loans.

Compared to the prior quarter, total average portfolio loans and leases were flat, as higher indirect secured consumer loans were partially offset by lower C&I loans and commercial leases. Average commercial portfolio loans and leases were flat, as higher commercial mortgage and construction loans were offset by lower C&I loans. Average consumer portfolio loans increased 1%, reflecting growth in indirect secured consumer loans (predominantly automobile) and other consumer loans, partially offset by a decline in home equity loans.

Period end commercial line utilization was 36%, consistent with both the year-ago quarter and prior quarter.

Average securities and other short-term investments were $38.3 billion compared to $35.7 billion in the year-ago quarter and $38.2 billion in the prior quarter. Average available-for-sale debt and other securities of $35.4 billion increased 6% compared to the year-ago quarter and increased 2% compared to the prior quarter.

 

6

Average Deposits                                   
                                              
($ in millions)    For the Three Months Ended      % Change  
     December      September      December                
     2019      2019      2018      Seq      Yr/Yr  

Average Deposits

               

Demand

      $35,710        $35,223        $31,571        1%        13%  

Interest checking

      38,628        37,729        32,428        2%        19%  

Savings

      14,274        14,405        12,933        (1%)        10%  

Money market

      27,429        26,962        22,517        2%        22%  

Foreign office(g)

      244        222        272        10%        (10%)  

Total transaction deposits

      $116,285        $114,541        $99,721        2%        17%  

Other time

      5,507        5,823        4,366        (5%)        26%  

Total core deposits

      $121,792        $120,364        $104,087        1%        17%  

Certificates - $100,000 and over

      4,072        4,795        2,662        (15%)        53%  

Other deposits

      252        47        746        436%        (66%)  

Total average deposits

      $126,116        $125,206        $107,495        1%        17%  

Compared to the year-ago quarter, average core deposits increased 17%, reflecting the impact of the MB Financial acquisition. Average core deposit growth was primarily driven by an increase in interest checking, money market, and demand deposits. Average commercial transaction deposits increased 22% and average consumer transaction deposits increased 12%.

Compared to the prior quarter, average core deposits increased 1%, primarily driven by higher interest checking, demand, and money market deposits. Average demand deposits represented 29% of total core deposits in both the current and prior quarter. Average commercial transaction deposits increased 2%, and average consumer transaction deposits increased 1%.

 

Average Wholesale Funding

 

                                        
($ in millions)    For the Three Months Ended      % Change  
     December      September      December                
     2019      2019      2018      Seq      Yr/Yr  

Average Wholesale Funding

               

Certificates - $100,000 and over

      $4,072        $4,795        $2,662        (15%)        53%  

Other deposits

      252        47        746        436%        (66%)  

Federal funds purchased

      1,174        739        2,254        59%        (48%)  

Other short-term borrowings

      1,133        1,278        578        (11%)        96%  

Long-term debt

      14,860        15,633        14,420        (5%)        3%  

Total average wholesale funding

      $21,491        $22,492        $20,660        (4%)        4%  

Compared to the year-ago quarter, average wholesale funding increased 4% driven by growth in jumbo CD balances associated with the acquisition of MB Financial, as well as increased other short-term borrowings, partially offset by a decrease in federal funds borrowings. Compared to the prior quarter, average wholesale funding decreased 4%, reflecting the ability to fund the balance sheet through strong core deposit growth.

 

7

Credit Quality Summary(1)                                   
($ in millions)   For the Three Months Ended  
    December       September           June             March         December  
    2019     2019         2019         2019     2018  

Total nonaccrual portfolio loans and leases (NPLs)

     $618       $482       $521       $450       $348  

Repossessed property

     10       9       8       11       10  

OREO

     52       28       31       37       37  

Total nonperforming portfolio loans and leases and OREO (NPAs)

     $680       $519       $560       $498       $395  

NPL ratio(h)

     0.56%       0.44%       0.48%       0.41%       0.37%  

NPA ratio(c)

     0.62%       0.47%       0.51%       0.45%       0.41%  

Total loans and leases 30-89 days past due (accrual)

     364       402       383       322       297  

Total loans and leases 90 days past due (accrual)

     130       132       128       132       93  

Allowance for loan and lease losses, beginning

     $1,143       $1,115       $1,115       $1,103       $1,091  

Total net losses charged-off

     (113 )      (99 )      (78 )      (77 )      (83 ) 

Provision for loan and lease losses

     172       127       78       89       95  

Allowance for loan and lease losses, ending

     $1,202       $1,143       $1,115       $1,115       $1,103  

Reserve for unfunded commitments, beginning

     $154       $147       $133       $131       $129  

Reserve for acquired commitments

     -       -       7       1       -  

(Benefit from) provision for the reserve for unfunded commitments

     (10 )      7       7       1       2  

Reserve for unfunded commitments, ending

     $144       $154       $147       $133       $131  
                                         

Total allowance for credit losses

     $1,346       $1,297       $1,262       $1,248       $1,234  

Allowance for loan and lease losses ratios

          

As a percent of portfolio loans and leases

     1.10%       1.04%       1.02%       1.02%       1.16%  

As a percent of nonperforming portfolio loans and leases

     194%       237%       214%       248%       317%  

As a percent of nonperforming portfolio assets

     177%       221%       199%       224%       279%  

Total losses charged-off

     $(152 )      $(130 )      $(119 )      $(108 )      $(116 ) 

Total recoveries of losses previously charged-off

     39       31       41       31       33  

Total net losses charged-off

     $(113 )      $(99 )      $(78 )      $(77 )      $(83 ) 

Net charge-off ratio (NCO ratio)(b)

     0.41%       0.36%       0.29%       0.32%       0.35%  

Commercial NCO ratio

     0.20%       0.18%       0.13%       0.11%       0.19%  

Consumer NCO ratio

     0.78%       0.68%       0.59%       0.68%       0.61%  

(1) Upon conversion of Fifth Third Bank to a national charter in the fourth quarter of 2019, Fifth Third changed its accounting policy to conform to Office of the Comptroller of the Currency (OCC) guidance regarding non-reaffirmed loans included in Chapter 7 bankruptcy filings to be accounted for as nonperforming troubled debt restructurings (TDRs) and collateral dependent loans regardless of payment history and capacity to pay in the future. As a result of the change in accounting policy, TDRs increased $105 million, of which $83 million were transferred to NPL status. Due to the fact that the collateral dependent loans require the carrying value to be less than or equal to the appraised value less the cost to sell, Fifth Third also incurred a $10 million increase in charge-offs during the quarter, which resulted in a $9 million impact to provision for loan and lease losses. In addition, Fifth Third changed its accounting policy to conform to OCC guidance associated with branch-related real estate no longer intended to be used for banking purposes, which resulted in an increase in OREO of $30 million, with an offsetting reduction to bank premises and equipment.

 

8

Nonperforming portfolio loans and leases were $618 million in the current quarter, with the resulting NPL ratio of 0.56%. NPLs included an $83 million unfavorable impact due to the aforementioned accounting policy change, or 7 bps to the NPL ratio. Compared to the year-ago quarter, NPLs increased $270 million with the NPL ratio increasing 19 bps. Compared to the prior quarter, NPLs increased $136 million with the NPL ratio increasing 12 bps.

Nonperforming portfolio assets were $680 million in the current quarter, with the resulting NPA ratio of 0.62%. NPAs included a $113 million unfavorable impact due to the aforementioned accounting policy changes, or 10 bps to the NPA ratio. Compared to the year-ago quarter, NPAs increased $285 million with the NPA ratio increasing 21 bps. Compared to the prior quarter, NPAs increased $161 million, or with the NPA ratio increasing 15 bps.

The provision for loan and lease losses totaled $172 million in the current quarter, which included a $9 million unfavorable impact due to the aforementioned accounting policy change. The provision for loan and lease losses increased $77 million compared to the year-ago quarter, and $45 million compared to the prior quarter. The allowance for loan and lease losses ratio represented 1.10% of total portfolio loans and leases outstanding in the current quarter, compared with 1.16% in the year-ago quarter and 1.04% in the prior quarter. The allowance for loan and lease losses represented 194% of nonperforming portfolio loans and leases in the current quarter. The allowance for loan and lease losses represented 177% of nonperforming portfolio assets in the current quarter.

Net charge-offs were $113 million in the current quarter, with the resulting NCO ratio of 0.41%. NCOs included a $10 million unfavorable impact due to the aforementioned accounting policy changes, or 4 bps to the NCO ratio. Compared to the year-ago quarter, net charge-offs increased $30 million and the NCO ratio increased 6 bps. Compared to the prior quarter, net charge-offs increased $14 million and the NCO ratio increased 5 bps.

 

Capital Position

 

                                        
     For the Three Months Ended  
     December      September      June      March      December  
     2019      2019      2019      2019      2018  

Capital Position

               

Average total Bancorp shareholders’ equity as a percent of average assets

      12.58%        12.43%        12.02%        11.43%        10.95%  

Tangible equity(a)

      9.52%        9.29%        9.09%        9.03%        9.63%  

Tangible common equity (excluding AOCI)(a)

      8.44%        8.21%        8.27%        8.21%        8.71%  

Tangible common equity (including AOCI)(a)

      9.08%        9.09%        8.91%        8.44%        8.64%  

Regulatory Capital Ratios(e)

  

CET1 capital(d)

     9.75%        9.56%        9.57%        9.60%        10.24%  

Tier I risk-based capital(d)

     10.99%        10.81%        10.62%        10.67%        11.32%  

Total risk-based capital(d)

     13.84%        13.68%        13.53%        13.57%        14.48%  

Tier I leverage

      9.54%        9.36%        9.24%        10.32%        9.72%  

Capital ratios remained strong during the quarter. The CET1 capital ratio was 9.75%, the tangible common equity to tangible assets ratio was 8.44% excluding AOCI, and 9.08% including AOCI. The Tier I risk-based capital ratio was 10.99%, the Total risk-based capital ratio was 13.84%, and the Tier I leverage ratio was 9.54%.

On October 25, 2019, Fifth Third initially settled a share repurchase agreement whereby Fifth Third would purchase $300 million of its outstanding stock. The initial settlement reduced third quarter common shares outstanding by 9.0 million shares. On December 17, 2019, Fifth Third settled the forward contract, which resulted in an additional 1.1 million shares repurchased in connection with the completion of this agreement.

 

9

Tax Rate

The effective tax rate was 22.0% compared with 22.4% in the year-ago quarter and 20.2% in the prior quarter.

Other

On December 27, 2019, Fifth Third Bancorp entered into a transaction with FIS and Worldpay which grants each of Fifth Third Bancorp and Worldpay the ability to terminate and settle certain cash flows payable under Fifth Third Bancorp’s Tax Receivable Agreement with Worldpay. Under the TRA transaction, Worldpay may be obligated to pay up to a total of approximately $366 million to Fifth Third Bancorp to terminate and settle certain remaining cash flows Fifth Third Bancorp expected to receive under the TRA in the years 2021 to 2035, totaling an estimated $720 million. If exercised, certain of the obligations would be settled with four quarterly payments beginning in April 2020, a second set of the obligations would be settled with four quarterly payments beginning in April 2022, and a third set of the obligations would be settled with four quarterly payments beginning in April 2023. Fifth Third Bancorp recognized a pre-tax gain and corresponding receivable of $345 million in the fourth quarter of 2019 associated with these options.

Corporate Profile

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio, and the indirect parent company of Fifth Third Bank, National Association, a federally chartered institution. As of December 31, 2019, the Company had $169 billion in assets and operates 1,149 full-service Banking Centers, and 2,481 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 approximately 53,000 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 is among the largest money managers in the Midwest and, as of December 31, 2019, had $413 billion in assets under care, of which it managed $49 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.”

 

10

Earnings Release End Notes

 

(a)

Non-GAAP measure; see discussion of non-GAAP and Reg. G reconciliation beginning on page 19.

 

(b)

Net losses charged-off as a percent of average portfolio loans and leases.

 

(c)

Nonperforming portfolio assets as a percent of portfolio loans and leases and OREO.

 

(d)

Under the U.S. 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.

 

(e)

Current period regulatory capital ratios are estimated.

 

(f)

Assumes a 23% tax rate.

 

(g)

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

 

(h)

Nonperforming portfolio loans and leases as a percent of portfolio loans and leases and OREO.

 

11

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,” “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. 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. We undertake no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this document.

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) deteriorating credit quality; (2) loan concentration by location or industry of borrowers or collateral; (3) problems encountered by other financial institutions; (4) inadequate sources of funding or liquidity; (5) unfavorable actions of rating agencies; (6) inability to maintain or grow deposits; (7) limitations on the ability to receive dividends from subsidiaries; (8) cyber-security risks; (9) Fifth Third’s ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks; (10) failures by third-party service providers; (11) inability to manage strategic initiatives and/or organizational changes; (12) inability to implement technology system enhancements; (13) failure of internal controls and other risk management systems; (14) losses related to fraud, theft or violence; (15) inability to attract and retain skilled personnel; (16) adverse impacts of government regulation; (17) governmental or regulatory changes or other actions; (18) failures to meet applicable capital requirements; (19) regulatory objections to Fifth Third’s capital plan; (20) regulation of Fifth Third’s derivatives activities; (21) deposit insurance premiums; (22) assessments for the orderly liquidation fund; (23) replacement of LIBOR; (24) weakness in the national or local economies; (25) global political and economic uncertainty or negative actions; (26) changes in interest rates; (27) changes and trends in capital markets; (28) fluctuation of Fifth Third’s stock price; (29) volatility in mortgage banking revenue; (30) litigation, investigations, and enforcement proceedings by governmental authorities; (31) breaches of contractual covenants, representations and warranties; (32) competition and changes in the financial services industry; (33) changing retail distribution strategies, customer preferences and behavior; (34) risks relating to Fifth Third’s ability to realize anticipated benefits of the merger with MB Financial, Inc.; (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 or other natural disasters; and (43) the impact of reputational risk created by these or other 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.

# # #

 

12

Fifth Third Bancorp and Subsidiaries                                                          
Consolidated Statements of Income                                                          
$ in millions         For the Three Months Ended     % Change      Year to Date     % Change  
(unaudited)         December     September      December                   December      December        
            2019     2019      2018     Seq      Yr/Yr      2019      2018     Yr/Yr  

Interest Income

                        

Interest and fees on loans and leases

         $1,252       $1,320        $1,104       (5%)        13%        $5,051        $4,078       24%  

Interest on securities

         299       291        282       3%        6%        1,162        1,080       8%  

Interest on other short-term investments

           8       14        7       (43%)        14%        41        25       64%  

Total interest income

         1,559       1,625        1,393       (4%)        12%        6,254        5,183       21%  

Interest Expense

                        

Interest on deposits

         201       243        179       (17%)        12%        892        538       66%  

Interest on federal funds purchased

         5       4        13       25%        (62%)        29        30       (3%)  

Interest on other short-term borrowings

         5       8        4       (38%)        25%        28        29       (3%)  

Interest on long-term debt

           120       128        116       (6%)        3%        508        446       14%  

Total interest expense

           331       383        312       (14%)        6%        1,457        1,043       40%  

Net Interest Income

         1,228       1,242        1,081       (1%)        14%        4,797        4,140       16%  

Provision for credit losses

           162       134        97       21%        67%        471        207       128%  

Net Interest Income After Provision for Credit Losses

         1,066       1,108        984       (4%)        8%        4,326        3,933       10%  

Noninterest Income

                        

Service charges on deposits

         149       143        135       4%        10%        565        549       3%  

Corporate banking revenue

         153       168        130       (9%)        18%        570        438       30%  

Mortgage banking net revenue

         73       95        54       (23%)        35%        287        212       35%  

Wealth and asset management revenue

         129       124        109       4%        18%        487        444       10%  

Card and processing revenue

         95       94        84       1%        13%        360        329       9%  

Other noninterest income

         427       111        93       285%        359%        1,224        887       38%  

Securities gains (losses), net

         10       5        (32 )      100%        NM        40        (54 )      NM  

Securities gains (losses), net - non-qualifying hedges on mortgage servicing rights

           (1 )      -        2       NM        NM        3        (15 )      NM  

Total noninterest income

         1,035       740        575       40%        80%        3,536        2,790       27%  

Noninterest Expense

                        

Compensation and benefits

         576       584        506       (1%)        14%        2,418        2,115       14%  

Net occupancy expense

         84       84        73       -        15%        332        292       14%  

Technology and communications

         103       100        79       3%        30%        422        285       48%  

Equipment expense

         33       33        31       -        6%        129        123       5%  

Card and processing expense

         33       33        33       -        -        130        123       6%  

Other noninterest expense

           331       325        253       2%        31%        1,229        1,020       20%  

Total noninterest expense

           1,160       1,159        975       -        19%        4,660        3,958       18%  

Income Before Income Taxes

         941       689        584       37%        61%        3,202        2,765       16%  

Applicable income tax expense

           207       140        129       48%        60%        690        572       21%  

Net Income

         734       549        455       34%        61%        2,512        2,193       15%  

Less: Net income attributable to noncontrolling interests

           -       -        -       -        -        -        -       -  

Net Income Attributable to Bancorp

         734       549        455       34%        61%        2,512        2,193       15%  

Dividends on preferred stock

           33       19        23       74%        43%        93        75       24%  

Net Income Available to Common Shareholders

           $701       $530        $432       32%        62%        $2,419        $2,118       14%  

 

13

Fifth Third Bancorp and Subsidiaries                                  

Consolidated Statements of Income

              

$ in millions

      For the Three Months Ended  

(unaudited)

      December           September            June            March            December      
       2019           2019            2019            2018            2018      

Interest Income

              

Interest and fees on loans and leases

      $1,252       $1,320        $1,336        $1,143        $1,104  

Interest on securities

      299       291        290        281        282  

Interest on other short-term investments

      8       14        10        9        7  

Total interest income

      1,559       1,625        1,636        1,433        1,393  

Interest Expense

              

Interest on deposits

      201       243        243        205        179  

Interest on federal funds purchased

      5       4        8        12        13  

Interest on other short-term borrowings

      5       8        9        6        4  

Interest on long-term debt

      120       128        131        128        116  

Total interest expense

      331       383        391        351        312  

Net Interest Income

      1,228       1,242        1,245        1,082        1,081  

Provision for credit losses

      162       134        85        90        97  

Net Interest Income After Provision for Credit Losses

      1,066       1,108        1,160        992        984  

Noninterest Income

              

Service charges on deposits

      149       143        143        131        135  

Corporate banking revenue

      153       168        137        112        130  

Mortgage banking net revenue

      73       95        63        56        54  

Wealth and asset management revenue

      129       124        122        112        109  

Card and processing revenue

      95       94        92        79        84  

Other noninterest income

      427       111        93        592        93  

Securities gains (losses), net

      10       5        8        16        (32 ) 

Securities (losses) gains, net - non-qualifying hedges on mortgage servicing rights

      (1 )      -        2        3        2  

Total noninterest income

      1,035       740        660        1,101        575  

Noninterest Expense

              

Compensation and benefits

      576       584        641        610        506  

Net occupancy expense

      84       84        88        75        73  

Technology and communications

      103       100        136        83        79  

Equipment expense

      33       33        33        30        31  

Card and processing expense

      33       33        34        31        33  

Other noninterest expense

      331       325        311        268        253  

Total noninterest expense

      1,160       1,159        1,243        1,097        975  

Income Before Income Taxes

      941       689        577        996        584  

Applicable income tax expense

      207       140        124        221        129  

Net Income

      734       549        453        775        455  

Less: Net income attributable to noncontrolling interests

      -       -        -        -        -  

Net Income Attributable to Bancorp

      734       549        453        775        455  

Dividends on preferred stock

      33       19        26        15        23  

Net Income Available to Common Shareholders

      $701       $530        $427        $760        $432  

 

14

Fifth Third Bancorp and Subsidiaries                                   

Consolidated Balance Sheets

               

$ in millions, except per share data

      As of        % Change  

(unaudited)

      December            September            December            
       2019            2019            2018            Seq            Yr/Yr      

Assets

               

Cash and due from banks

      $3,278        $3,261        $2,681        1%        22%  

Other short-term investments

      1,950        3,235        1,825        (40%)        7%  

Available-for-sale debt and other securities(a)

     36,028        37,178        32,830        (3%)        10%  

Held-to-maturity securities(b)

     17        18        18        (6%)        (6%)  

Trading debt securities

      297        297        287        -        3%  

Equity securities

      564        459        452        23%        25%  

Loans and leases held for sale

      1,400        1,223        607        14%        131%  

Portfolio loans and leases:

               

Commercial and industrial loans

      50,542        50,768        44,340        -        14%  

Commercial mortgage loans

      10,963        10,822        6,974        1%        57%  

Commercial construction loans

      5,090        5,281        4,657        (4%)        9%  

Commercial leases

      3,363        3,495        3,600        (4%)        (7%)  

Total commercial loans and leases

      69,958        70,366        59,571        (1%)        17%  

Residential mortgage loans

      16,724        16,675        15,504        -        8%  

Home equity

      6,083        6,218        6,402        (2%)        (5%)  

Indirect secured consumer loans

      11,538        11,026        8,976        5%        29%  

Credit card

      2,532        2,467        2,470        3%        3%  

Other consumer loans

      2,723        2,657        2,342        2%        16%  

Total consumer loans

      39,600        39,043        35,694        1%        11%  

Portfolio loans and leases

      109,558        109,409        95,265        -        15%  

Allowance for loan and lease losses

      (1,202 )       (1,143 )       (1,103 )       5%        9%  

Portfolio loans and leases, net

      108,356        108,266        94,162        -        15%  

Bank premises and equipment

      1,995        2,053        1,861        (3%)        7%  

Operating lease equipment

      848        869        518        (2%)        64%  

Goodwill

      4,252        4,290        2,478        (1%)        72%  

Intangible assets

      201        201        40        -        403%  

Servicing rights

      993        910        938        9%        6%  

Other assets

      9,190        8,819        7,372        4%        25%  

Total Assets

      $169,369        $171,079        $146,069        (1%)        16%  

Liabilities

               

Deposits:

               

Demand

      $35,968        $35,893        $32,116        -        12%  

Interest checking

      40,409        36,965        34,058        9%        19%  

Savings

      14,248        14,354        12,907        (1%)        10%  

Money market

      27,277        27,370        22,597        -        21%  

Foreign office

      221        226        240        (2%)        (8%)  

Other time

      5,237        5,662        4,490        (8%)        17%  

Certificates $100,000 and over

      3,702        4,377        2,427        (15%)        53%  

Other deposits

      -        500        -        (100%)        -  

Total deposits

      127,062        125,347        108,835        1%        17%  

Federal funds purchased

      260        876        1,925        (70%)        (86%)  

Other short-term borrowings

      1,011        4,046        573        (75%)        76%  

Accrued taxes, interest and expenses

      2,441        2,507        1,562        (3%)        56%  

Other liabilities

      2,422        2,425        2,498        -        (3%)  

Long-term debt

      14,970        14,474        14,426        3%        4%  

Total Liabilities

      148,166        149,675        129,819        (1%)        14%  

Equity

               

Common stock(c)

     2,051        2,051        2,051        -        -  

Preferred stock

      1,770        1,770        1,331        -        33%  

Capital surplus

      3,599        3,589        2,873        -        25%  

Retained earnings

      18,315        17,786        16,578        3%        10%  

Accumulated other comprehensive income (loss)

      1,192        1,635        (112 )       (27%)        NM  

Treasury stock

      (5,724 )       (5,427 )       (6,471 )       5%        (12%)  

Total Bancorp shareholders’ equity

      21,203        21,404        16,250        (1%)        30%  

Noncontrolling interests

      -        -        -        -        -  

Total Equity

      21,203        21,404        16,250        (1%)        30%  

Total Liabilities and Equity

      $169,369        $171,079        $146,069        (1%)        16%  

(a)    Amortized cost

      $34,966        $35,662        $33,128        (2%)        6%  

(b)    Market values

      17        18        18        (6%)        (6%)  

(c)    Common shares, stated value $2.22 per share (in thousands):

               

      Authorized

      2,000,000        2,000,000        2,000,000        -        -  

      Outstanding, excluding treasury

      708,916        718,583        646,631        (1%)        10%  

      Treasury

      214,977        205,309        277,262        5%        (22%)  

 

15

Fifth Third Bancorp and Subsidiaries

               

Consolidated Balance Sheets

               

$ in millions, except per share data

      As of  

(unaudited)

      December            September            June            March            December      
       2019            2019            2019            2019            2018      

Assets

               

Cash and due from banks

      $3,278        $3,261        $2,764        $2,749        $2,681  

Other short-term investments

      1,950        3,235        3,357        3,556        1,825  

Available-for-sale debt and other securities(a)

      36,028        37,178        35,753        35,048        32,830  

Held-to-maturity securities(b)

      17        18        21        21        18  

Trading debt securities

      297        297        322        325        287  

Equity securities

      564        459        485        426        452  

Loans and leases held for sale

      1,400        1,223        1,205        692        607  

Portfolio loans and leases:

               

Commercial and industrial loans

      50,542        50,768        51,104        51,862        44,340  

Commercial mortgage loans

      10,963        10,822        10,717        10,686        6,974  

Commercial construction loans

      5,090        5,281        5,264        5,231        4,657  

Commercial leases

      3,363        3,495        3,677        3,909        3,600  

Total commercial loans and leases

      69,958        70,366        70,762        71,688        59,571  

Residential mortgage loans

      16,724        16,675        16,777        16,811        15,504  

Home equity

      6,083        6,218        6,325        6,435        6,402  

Indirect secured consumer loans

      11,538        11,026        10,403        10,031        8,976  

Credit card

      2,532        2,467        2,436        2,388        2,470  

Other consumer loans

      2,723        2,657        2,580        2,489        2,342  

Total consumer loans

      39,600        39,043        38,521        38,154        35,694  

Portfolio loans and leases

      109,558        109,409        109,283        109,842        95,265  

Allowance for loan and lease losses

      (1,202 )       (1,143 )       (1,115 )       (1,115 )       (1,103 ) 

Portfolio loans and leases, net

      108,356        108,266        108,168        108,727        94,162  

Bank premises and equipment

      1,995        2,053        2,074        2,092        1,861  

Operating lease equipment

      848        869        894        908        518  

Goodwill

      4,252        4,290        4,284        4,321        2,478  

Intangible assets

      201        201        215        218        40  

Servicing rights

      993        910        1,039        1,141        938  

Other assets

      9,190        8,819        8,221        7,629        7,372  

Total Assets

      $169,369        $171,079        $168,802        $167,853        $146,069  

Liabilities

               

Deposits:

               

Demand

      $35,968        $35,893        $35,589        $35,963        $32,116  

Interest checking

      40,409        36,965        37,491        35,746        34,058  

Savings

      14,248        14,354        14,484        14,451        12,907  

Money market

      27,277        27,370        26,465        25,942        22,597  

Foreign office

      221        226        175        154        240  

Other time

      5,237        5,662        5,759        5,539        4,490  

Certificates $100,000 and over

      3,702        4,377        5,429        5,569        2,427  

Other deposits

      -        500        -        300        -  

Total deposits

      127,062        125,347        125,392        123,664        108,835  

Federal funds purchased

      260        876        179        2,630        1,925  

Other short-term borrowings

      1,011        4,046        957        1,329        573  

Accrued taxes, interest and expenses

      2,441        2,507        2,397        2,242        1,562  

Other liabilities

      2,422        2,425        3,422        2,661        2,498  

Long-term debt

      14,970        14,474        15,784        15,483        14,426  

Total Liabilities

      148,166        149,675        148,131        148,009        129,819  

Equity

               

Common stock(c)

      2,051        2,051        2,051        2,051        2,051  

Preferred stock

      1,770        1,770        1,331        1,331        1,331  

Capital surplus

      3,599        3,589        3,572        3,444        2,873  

Retained earnings

      18,315        17,786        17,431        17,184        16,578  

Accumulated other comprehensive income (loss)

      1,192        1,635        1,178        409        (112 ) 

Treasury stock

      (5,724 )       (5,427 )       (5,089 )       (4,772 )       (6,471 ) 

Total Bancorp shareholders’ equity

      21,203        21,404        20,474        19,647        16,250  

Noncontrolling interests

      -        -        197        197        -  

Total Equity

      21,203        21,404        20,671        19,844        16,250  

Total Liabilities and Equity

      $169,369        $171,079        $168,802        $167,853        $146,069  

(a)    Amortized cost

      $34,966        $35,662        $34,731        $34,784        $33,128  

(b)    Market values

      17        18        21        21        18  

(c)    Common shares, stated value $2.22 per share (in thousands):

               

      Authorized

      2,000,000        2,000,000        2,000,000        2,000,000        2,000,000  

      Outstanding, excluding treasury

      708,916        718,583        731,474        739,406        646,631  

      Treasury

      214,977        205,309        192,419        184,486        277,262  

 

16

Fifth Third Bancorp and Subsidiaries                         
Consolidated Statements of Changes in Equity                         
$ in millions    For the Three Months Ended     Year to Date  
(unaudited)    December         December         December         December      
        2019           2018           2019           2018      

Total Equity, Beginning

      $21,404       $15,701       $16,250       $16,220  

Net income attributable to Bancorp

      734       455       2,512       2,193  

Other comprehensive income, net of tax:

         

Change in unrealized gains (losses):

         

Available-for-sale securities

      (346 )      465       1,039       (362 ) 

Qualifying cash flow hedges

      (96 )      193       262       171  

Change in accumulated other comprehensive income related to employee benefit plans

      (1 )      5       3       8  

Comprehensive income

      291       1,118       3,816       2,010  

Cash dividends declared:

         

Common stock

      (173 )      (144 )      (691 )      (499 ) 

Preferred stock

      (33 )      (23 )      (93 )      (75 ) 

Issuance of preferred stock

      -       -       439       -  

Impact of stock transactions under stock compensation plans, net

      13       20       72       65  

Shares acquired for treasury

      (300 )      (400 )      (1,763 )      (1,453 ) 

Impact of MB Financial, Inc. acquisition

      -       -       3,159       -  

Noncontrolling interest

      -       (20 )      -       (20 ) 

Other

      1       (2 )      4       (2 ) 

Impact of cumulative effect of change in account principles

      -       -       10       4  

Total Equity, Ending

      $21,203       $16,250       $21,203       $16,250  

 

17

Fifth Third Bancorp and Subsidiaries

               

Regulatory Capital

               

$ in millions

      As of  

(unaudited)

      December        September        June        March        December  
       2019(a)        2019        2019        2019        2018  

Regulatory Capital

               

CET1 capital

      $13,847        $13,568        $13,532        $13,430        $12,534  

Additional tier I capital

      1,769        1,769        1,493        1,493        1,330  

Tier I capital

      15,616        15,337        15,025        14,923        13,864  

Tier II capital

      4,044        4,076        4,112        4,048        3,859  

Total regulatory capital

      $19,660        19,413        $19,137        $18,971        $17,723  

Risk-weighted assets(b)

      $142,046        $141,880        $141,421        $139,844        $122,432  

Ratios

               

Average total Bancorp shareholders’ equity as a percent of average assets

      12.58%        12.43%        12.02%        11.43%        10.95%  

Regulatory Capital Ratios

               

Fifth Third Bancorp

               

CET1 capital(b)

      9.75%        9.56%        9.57%        9.60%        10.24%  

Tier I risk-based capital(b)

      10.99%        10.81%        10.62%        10.67%        11.32%  

Total risk-based capital(b)

      13.84%        13.68%        13.53%        13.57%        14.48%  

Tier I leverage

      9.54%        9.36%        9.24%        10.32%        9.72%  

Fifth Third Bank

               

Tier I risk-based capital(b)

      11.86%        11.79%        11.67%        12.22%        11.93%  

Total risk-based capital(b)

      13.46%        13.37%        13.23%        13.86%        13.57%  

Tier I leverage

      10.36%        10.26%        10.59%        10.49%        10.27%  
(a)

Current period regulatory capital data and ratios are estimated.

(b)

Under the U.S. 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.

 

18

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: “net interest income (FTE),” “interest income (FTE),” “net interest margin (FTE),” “net interest rate spread (FTE),” “income before income taxes (FTE),” “tangible net income available to common shareholders,” “average tangible common equity,” “return on average tangible common equity,” “tangible common equity (excluding AOCI),” “tangible common equity (including AOCI),” “tangible equity,” “tangible book value per share,” “adjusted noninterest income,” “adjusted noninterest expense,” “pre-provision net revenue,” “adjusted efficiency ratio,” “adjusted return on average common equity,” “adjusted return on average tangible common equity,” “adjusted return on average tangible common equity, excluding accumulated other comprehensive income,” “adjusted net interest margin,” “adjusted pre-provision net revenue,” “adjusted return on average assets,” “efficiency ratio (FTE),” “total revenue (FTE),” and certain ratios derived from these measures. The Bancorp believes these non-GAAP measures provide useful information to investors because these are among the measures used by the Fifth Third management team to evaluate operating performance and make day-to-day operating decisions.

The FTE 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 and net interest margin as they provide a relevant comparison between taxable and non-taxable amounts.

The Bancorp believes tangible net income available to common shareholders, average tangible common equity, tangible common equity (excluding AOCI), tangible common equity (including AOCI), tangible equity, tangible book value per share and return on average tangible common equity are important measures for evaluating the performance of the business without the impacts of intangible items, whether acquired or created internally, compared to other companies in the industry who present similar measures.

The Bancorp believes noninterest income, noninterest expense, net interest income, net interest margin, pre-provision net revenue, efficiency ratio, return on average common equity, return on average tangible common equity, and return on average assets are important measures that adjust for significant, unusual, or large transactions that may occur in a reporting period which management does not consider indicative of on-going financial performance and enhances comparability of results with prior periods.

Management considers various measures when evaluating capital utilization and adequacy, including the tangible equity and tangible common equity (including and excluding AOCI), 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 AOCI on certain assets and liabilities enables investors and others to assess the Bancorp’s use of equity without the effects of changes in AOCI some of which are uncertain and providing the tangible common equity ratio including AOCI enables investors and others to assess the Bancorp’s use of equity if components of AOCI, such as unrealized gains or losses, were to be monetized.

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 Reg. G reconciliations of all historical Non-GAAP measures used in this release to the most directly comparable GAAP measures, beginning on the following page.

 

19

Fifth Third Bancorp and Subsidiaries                               
Regulation G Non-GAAP Reconciliation                               
$ and shares in millions    For the Three Months Ended  
(unaudited)    December     September     June     March     December  
      2019     2019     2019     2019     2018  

Net interest income

      $1,228       $1,242       $1,245       $1,082       $1,081  

Add: Taxable equivalent adjustment

      4       4       5       4       4  

Net interest income (FTE) (a)

      1,232       1,246       1,250       1,086       1,085  
   

Net interest income (annualized) (b)

      4,872       4,928       4,994       4,388       4,289  

Net interest income (FTE) (annualized) (c)

      4,888       4,943       5,014       4,404       4,305  
   

Net interest income (FTE)

      1,232       1,246       1,250       1,086       1,085  

Less: Net interest income impact from purchase accounting accretion

      18       28       18       1       -  

Adjusted net interest income (FTE) (d)

      1,214       1,218       1,232       1,085       1,085  

Adjusted net interest income (FTE) (annualized) (e)

      4,816       4,832       4,942       4,400       4,305  
   

Interest income

      1,559       1,625       1,636       1,433       1,393  

Add: Taxable equivalent adjustment

      4       4       5       4       4  

Interest income (FTE)

      1,563       1,629       1,641       1,437       1,397  

Interest income (FTE) (annualized) (f)

      6,201       6,463       6,582       5,828       5,542  
   

Interest expense (annualized) (g)

      1,313       1,520       1,568       1,424       1,238  

Average interest-earning assets (h)

      149,312       148,854       148,790       134,463       131,072  

Average interest-bearing liabilities (i)

      107,573       107,633       106,340       97,137       93,176  
   

Net interest margin (b) / (h)

      3.26%       3.31%       3.36%       3.26%       3.27%  

Net interest margin (FTE) (c) / (h)

      3.27%       3.32%       3.37%       3.28%       3.29%  

Adjusted net interest margin (e) / (h)

      3.22%       3.25%       3.32%       3.28%       3.29%  

Net interest rate spread (FTE) (f) / (h) - (g) / (i)

      2.93%       2.93%       2.95%       2.87%       2.90%  
   

Income before income taxes

      $941       $689       $577       $996       $584  

Add:   Taxable equivalent adjustment

      4       4       5       4       4  

Income before income taxes (FTE)

      $945       $693       $582       $1,000       $588  
              

Net income available to common shareholders

      $701       $530       $427       $760       $432  

Add:   Intangible amortization, net of tax

      11       11       11       2       1  

Tangible net income available to common shareholders (j)

      712       541       438       762       433  

Tangible net income available to common shareholders (annualized) (k)

      2,825       2,146       1,757       3,090       1,718  
   

Average Bancorp shareholders’ equity

      21,304       21,087       20,135       17,025       15,794  

Less:  Average preferred stock

      (1,770 )      (1,445 )      (1,331 )      (1,331 )      (1,331 ) 

           Average goodwill

      (4,260 )      (4,286 )      (4,301 )      (2,682 )      (2,468 ) 

           Average intangible assets

      (194 )      (208 )      (215 )      (58 )      (32 ) 

Average tangible common equity, including accumulated other comprehensive income (“AOCI”) (l)

      15,080       15,148       14,288       12,954       11,963  

Less: Average AOCI

      (1,416 )      (1,444 )      (619)       -       719  

Average tangible common equity, excluding AOCI (m)

      13,664       13,704       13,669       12,954       12,682  
   

Total Bancorp shareholders’ equity

      21,203       21,404       20,474       19,647       16,250  

Less:  Preferred stock

      (1,770 )      (1,770 )      (1,331 )      (1,331 )      (1,331 ) 

           Goodwill

      (4,252 )      (4,290 )      (4,284 )      (4,321 )      (2,478 ) 

           Intangible assets

      (201 )      (201 )      (215 )      (218 )      (40 ) 

Tangible common equity, including AOCI (n)

      14,980       15,143       14,644       13,777       12,401  

Less: AOCI

      (1,192 )      (1,635 )      (1,178 )      (409 )      112  

Tangible common equity, excluding AOCI (o)

      13,788       13,508       13,466       13,368       12,513  

Add: Preferred stock

      1,770       1,770       1,331       1,331       1,331  

Tangible equity (p)

      15,558       15,278       14,797       14,699       13,844  
   

Total assets

      169,369       171,079       168,802       167,853       146,069  

Less:  Goodwill

      (4,252 )      (4,290 )      (4,284 )      (4,321 )      (2,478 ) 

           Intangible assets

      (201 )      (201 )      (215 )      (218 )      (40 ) 

Tangible assets, including AOCI (q)

      164,916       166,588       164,303       163,314       143,551  

Less: AOCI, before tax

      (1,509 )      (2,070 )      (1,491 )      (518 )      142  

Tangible assets, excluding AOCI (r)

      $163,407       $164,518       $162,812       $162,796       $143,693  
   

Common shares outstanding (s)

      709       719       731       739       647  

Tangible equity (p) / (r)

      9.52%       9.29%       9.09%       9.03%       9.63%  

Tangible common equity (excluding AOCI) (o) / (r)

      8.44%       8.21%       8.27%       8.21%       8.71%  

Tangible common equity (including AOCI) (n) / (q)

      9.08%       9.09%       8.91%       8.44%       8.64%  

Tangible book value per share (n) / (s)

      $21.13       $21.06       $20.03       $18.64       $19.17  

 

20

  Fifth Third Bancorp and Subsidiaries

       

  Regulation G Non-GAAP Reconciliation

       

  $ in millions

      For the Three Months Ended  

  (unaudited)

      December       September       December  
       2019       2019       2018  

Net income attributable to Bancorp (t)

      $734       $549       $455  

Net income attributable to Bancorp (annualized) (u)

      2,912       2,178       1,805  
   

Adjustments (pre-tax items)

         

Valuation of Visa total return swap

      44       11       (7 ) 

Fifth Third Foundation contribution

      20       -       -  

Provision impact from conversion to a national charter

      9       -       -  

Merger-related expense

      9       28       27  

GreenSky securities losses (gains)

      -       -       21  

Gain recognized from Worldpay TRA transaction

      (345 )      -       -  

Adjustments, after-tax (v)(a)

      (202 )      30       32  
   

Noninterest income (w)

      1,035       740       575  

Valuation of Visa total return swap

      44       11       (7 ) 

GreenSky securities losses (gains)

      -       -       21  

Gain recognized from Worldpay TRA transaction

      (345 )      -       -  

Adjusted noninterest income (x)

      734       751       589  
   

Noninterest expense (y)

      1,160       1,159       975  

Merger-related expense

      (9 )      (28 )      (27 ) 

Fifth Third Foundation contribution

      (20 )      -       -  

Adjusted noninterest expense (z)

      1,131       1,131       948  

Intangible amortization expense

      14       14       1  

Adjusted noninterest expense excluding intangible amortization expense (aa)

      1,117       1,117       947  
   

Adjusted net income attributable to Bancorp (t) + (v)

      532       579       487  

Adjusted net income attributable to Bancorp (annualized) (ab)

      2,111       2,297       1,932  
   

Adjusted tangible net income available to common shareholders (j) + (v)

      510       571       465  

Adjusted tangible net income available to common shareholders (annualized) (ac)

      2,023       2,265       1,845  
   

Average assets (ad)

 

     

 

             $169,327

 

  

 

    

 

             $169,585

 

  

 

    

 

             $144,185

 

  

 

Return on average tangible common equity (k) / (l)

      18.7%       14.2%       14.3%  

Adjusted return on average tangible common equity, including AOCI (ac) / (l)

      13.4%       15.0%       15.4%  

Adjusted return on average tangible common equity, excluding AOCI (ac) / (m)

      14.8%       16.5%       14.5%  

 

Return on average assets (u) / (ad)

   

 

 

 

1.72%

 

 

  

 

 

 

1.28%

 

 

  

 

 

 

1.25%

 

 

Adjusted return on average assets (ab) / (ad)

      1.25%       1.35%       1.34%  

Efficiency ratio (y) / [(a) + (w)]

      51.2%       58.4%       58.7%  

Adjusted efficiency ratio (aa) / [(d) + (x)]

      57.3%       56.7%       56.6%  

Total revenue (FTE) (a) + (w)

      $2,267       $1,986       $1,660  

Pre-provision net revenue (PPNR) (a) + (w) - (y)

      $1,107       $827       $685  

Adjusted pre-provision net revenue (PPNR) (d) + (x) - (aa)

      $831       $852       $727  

 

    (a)

Assumes a 23% tax rate, except for merger-related expenses impacted by certain non-deductible items.

 

21