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Section 1: 425 (425)

425

Filed by Fifth Third Bancorp

pursuant to Rule 425 under the Securities Act of 1933

and deemed filed pursuant to Rule 14a-12

under the Securities Exchange Act of 1934

Subject Company: MB Financial, Inc.

SEC File No.: 001-36599

Filer’s SEC File No.: 001-33653

Date: October 23, 2018

 

LOGO

Fifth Third Announces Third Quarter 2018 Results

Diluted earnings per share of $0.61

Reported results included a negative $0.03 from certain items on page 2

 

 

3Q18 Key Financial Data

 

                             

 

Key Highlights

 

  $ millions for all balance sheet and income statement items

 

     
    3Q18     2Q18     3Q17         Strengthened balance sheet
         

Income Statement Data

       

   

 

  Commercial criticized ratio of 3.45% (17+ year low)

 

  Total NPA ratio of 0.48% (14 year low)

 

  Modified LCR of 119%(e)

 

Focused on profitable relationship growth

 

  Households up 4% compared to 3Q17

 

  Adjusted PPNR(a) up 9% compared to 3Q17

 

  Core deposits up 3% compared to 3Q17

 

  NIM(a) up 16 bps compared to 3Q17

 

Disciplined expense management

 

  Expenses down 3% compared to prior quarter

 

  Full-time equivalent employees down 4% compared to prior quarter

 

On-track to achieve NorthStar targets(a)

 

  ROTCE - 13.5% (adjusted 14%)

 

  ROA - 1.21% (adjusted 1.26%)

 

  Efficiency ratio ex. LIH - 60.2% (adjusted 59.3%)

 

Net income available to common shareholders

    $418            $563            $999         

 

Net interest income (U.S. GAAP)

    1,043            1,020            970         

 

Net interest income (FTE)(a)

    1,047            1,024            977         

 

Noninterest income

    563            743            1,561         

 

Noninterest expense

 

   

 

1,008     

 

 

 

   

 

1,037     

 

 

 

   

 

975     

 

 

 

 

Per Share Data

       

 

Earnings per share, basic

    $0.62            $0.81            $1.37         

 

Earnings per share, diluted

    0.61            0.80            1.35         

 

Book value per share

    21.92            21.97            21.30         

 

Tangible book value per share(a)

 

   

 

18.17     

 

 

 

   

 

18.30     

 

 

 

   

 

17.86     

 

 

 

 

Balance Sheet & Credit Quality

       

 

Average portfolio loans and leases

    $93,192            $92,557            $91,906         

 

Average deposits

    104,666            103,945            101,834         

 

Net charge-off ratio(b)

    0.30  %       0.41  %       0.29  %    

 

Nonperforming asset ratio(c)

 

   

 

0.48     

 

 

 

   

 

0.52     

 

 

 

   

 

0.60     

 

 

 

 

Financial Ratios, as reported

       

 

Return on average assets

    1.21  %       1.66  %       2.85  %    

 

Return on average common equity

    11.2            15.3            25.6         

 

Return on average tangible common equity(a)

    13.5            18.4            30.4         

 

CET1 capital(d)(e)

    10.67            10.91            10.59         

 

Net interest margin(a)

    3.23            3.21            3.07         

 

Efficiency(a)

    62.6            58.7            38.4         

 

Other than the Quarterly Financial Review tables beginning on page 13, 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. LIH refers to low income housing expense.

 

 
       

CEO Commentary

 

 

“Our strong quarterly results again reflected the progress we have made toward achieving our long-term financial targets. Our balance sheet continued to become more resilient, as evidenced by the consistent improvement in key credit quality metrics. Although market dynamics remained challenging during the quarter, our net interest margin increased and we generated solid loan, deposit, and household growth. We continued to diligently manage expenses as we drive toward achieving our long-term efficiency target.”

“Five months after we initially announced our planned acquisition of MB Financial, we remain confident in our ability to achieve the expected financial synergies from the transaction. We have received the necessary shareholder approvals for the acquisition and have recently re-submitted our pro-forma capital plans. We continue to expect the transaction to close in the first quarter of 2019.”

“With improving returns and a strengthened balance sheet, we remain very confident in our ability to achieve our long-term financial targets under Project NorthStar and remain well-positioned to outperform through the cycle.”

-Greg D. Carmichael, Chairman, President and CEO

 

Investor contact: Sameer Gokhale (513) 534-2219 | Media contact: Larry Magnesen (513) 534-8055    October 23, 2018


  Income Statement Highlights

 

                                           
  ($ in millions, except per-share data)    For the Three Months Ended      % Change  
     September            June            September                 
     2018            2018            2017       Seq          Yr/Yr      

Condensed Statements of Income

                  

Net interest income (NII)(a)

     $1,047          $1,024          $977        2%        7%  

Provision for loan and lease losses

     86          33          67        161%        28%  

Noninterest income

     563          743          1,561        (24%)        (64%)  

Noninterest expense

     1,008          1,037          975        (3%)        3%  

Income before income taxes (a)

     $516          $697          $1,496        (26%)        (66%)  

Taxable equivalent adjustment

     4          4          7        -        (43%)  

Applicable income tax expense

     79          107          475        (26%)        (83%)  

Net income

     $433          $586          $1,014        (26%)        (57%)  

Less: Net income attributable to noncontrolling interests

     -          -          -        NM        NM  

Net income attributable to Bancorp

     $433          $586          $1,014        (26%)        (57%)  

Dividends on preferred stock

     15          23          15        (35%)        -  

Net income available to common shareholders

     $418          $563          $999        (26%)        (58%)  

Earnings per share, diluted

     $0.61          $0.80          $1.35        (24%)        (55%)  

Fifth Third Bancorp (Nasdaq: FITB) today reported third quarter 2018 net income of $433 million compared to net income of $1.0 billion in the year-ago quarter. Net income available to common shareholders was $418 million, or $0.61 per diluted share, compared to $999 million, or $1.35 per diluted share in the year-ago quarter. Prior quarter net income was $586 million and net income available to common shareholders was $563 million, or $0.80 per diluted share.

 

Diluted earnings per share impact of  certain items        
($ in millions, except per-share data)       
         

Valuation of Visa total return swap, after-tax(f)

     $14    

GreenSky equity securities losses, after-tax(f)

     $6    

After-tax impact(f)

     $20    
      

Average diluted common shares outstanding (thousands)

     679,199    
      

Diluted earnings per share impact

     $0.03    
          

 

2


                                                                
 Net Interest Income                                   
   
 (FTE; $ in millions)(a)    For the Three Months Ended      % Change  
     September      June      September                
     2018      2018      2017      Seq      Yr/Yr  

Interest Income

              

Interest income

     $1,319        $1,273        $1,159        4%        14%  

Interest expense

     272        249        182        9%        49%  

Net interest income (NII)

     $1,047        $1,024        $977        2%        7%  

Average Yield/Rate Analysis

              bps Change  

Yield on interest-earning assets

     4.07%        3.98%        3.64%        9        43  

Rate paid on interest-bearing liabilities

     1.20%        1.12%        0.85%        8        35  

Ratios

              

Net interest rate spread

     2.87%        2.86%        2.79%        1        8  

Net interest margin

                 3.23%                    3.21%                3.07%                      2                  16  

Compared to the year-ago quarter, NII increased $70 million, or 7 percent, reflecting higher short-term market rates and growth in interest-earning assets, partially offset by an increase in funding costs. NIM increased 16 bps, primarily driven by higher short-term market rates.

Compared to the prior quarter, NII increased $23 million, or 2 percent, reflecting higher short-term market rates and a higher day count. NIM increased 2 bps, primarily driven by higher short-term market rates, loan growth, and an increase in higher-yielding consumer loans, partially offset by a higher day count.

 

 Noninterest Income                                 
                                            
 ($ in millions)    For the Three Months Ended      % Change  
     September     June     September                
     2018     2018     2017      Seq      Yr/Yr  

Noninterest Income

            

Service charges on deposits

     $139       $137       $138        1%        1%  

Corporate banking revenue

     100       120       101        (17%)        (1%)  

Mortgage banking net revenue

     49       53       63        (8%)        (22%)  

Wealth and asset management revenue

     114       108       102        6%        12%  

Card and processing revenue

     82       84       79        (2%)        4%  

Other noninterest income

     86       250       1,076        (66%)        (92%)  

Securities (losses) gains, net

     (6     (5     -        (20%)        NM  

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

     (1     (4     2        75%        NM  

Total noninterest income

                 $563                   $743               $1,561                  (24%)              (64%)  

Reported noninterest income decreased $998 million, or 64 percent, from the year-ago quarter, and decreased $180 million, or 24 percent, from the prior quarter. The comparisons reflect the impact of certain significant items in the table on page 4.

 

3


Compared to the year-ago quarter, corporate banking revenue decreased $1 million, or 1 percent, as a decline in loan syndication and equity capital markets revenue was partially offset by higher financial risk management fees. Mortgage banking net revenue decreased $14 million, or 22 percent, primarily driven by lower origination fees and gains on loan sales. Mortgage originations of $1.9 billion decreased 12 percent. Wealth and asset management revenue increased $12 million, or 12 percent, primarily driven by higher personal asset management revenue and brokerage fees. Card and processing revenue increased $3 million, or 4 percent, due to higher credit card spend volume and higher debit transaction volume, partially offset by higher rewards.

Compared to the prior quarter, corporate banking revenue decreased $20 million, or 17 percent, primarily driven by decreases in loan syndication revenue and corporate bond fees. Mortgage banking net revenue decreased $4 million, or 8 percent, primarily driven by lower origination fees and gains on loan sales as well as elevated negative net valuation adjustments. Mortgage originations decreased 12 percent. Wealth and asset management revenue increased $6 million, or 6 percent, primarily driven by higher personal asset management revenue and brokerage fees. Card and processing revenue decreased $2 million, or 2 percent, reflecting higher rewards.

 

  Noninterest Income excluding certain items  
                                          
  ($ in millions)    For the Three Months Ended     % Change  
     September     June       September              
     2018     2018       2017     Seq     Yr/Yr      

Noninterest Income excluding certain items

          

Noninterest income (U.S. GAAP)

     $563       $743       $1,561      

Valuation of Visa total return swap

     17       10       47      

Branch and land network impairment charge

     -       30       -      

Gain from GreenSky IPO

     -       (16     -      

Gain on sale of Worldpay shares

     -       (205     (1,037    

GreenSky equity securities losses

     8       5       -      

Securities losses / (gains), net (excluding GreenSky)

     (2     -       -                  

Noninterest income excluding certain items(a)

                 $586                   $567                   $571                    3%                      3%  

Compared to the year-ago quarter, noninterest income excluding the items in the table above increased $15 million, or 3 percent. Compared to the prior quarter, noninterest income excluding these items increased $19 million, or 3 percent.

Other noninterest income on a reported basis in the current and previous quarters was impacted by the items disclosed in the table above with the exception of all securities losses / (gains). Excluding these items, other noninterest income of $103 million increased $17 million, or 20 percent compared to the year-ago quarter. Compared to the prior quarter, other noninterest income excluding these items increased $34 million, or 49 percent. Performance compared to the year-ago and prior quarter reflected higher private equity investment income.

 

4


                                                                          
  Noninterest Expense                                   
                                              
  ($ in millions)    For the Three Months Ended      % Change  
     September      June            September                  
     2018      2018            2017        Seq          Yr/Yr      

Noninterest Expense

              

Salaries, wages and incentives

     $421        $471        $407        (11%)        3%  

Employee benefits

     82        78        77        5%        6%  

Net occupancy expense

     70        74        74        (5%)        (5%)  

Technology and communications

     71        67        62        6%        15%  

Equipment expense

     31        30        30        3%        3%  

Card and processing expense

     31        30        32        3%        (3%)  

Other noninterest expense

     302        287        293        5%        3%  

Total noninterest expense

     $1,008        $1,037        $975        (3%)        3%  

Compared to the year-ago quarter, noninterest expense increased $33 million, or 3 percent, primarily driven by higher compensation related expense as well as technology and communication expense.

Compared to the prior quarter, noninterest expense decreased $29 million, or 3 percent. Excluding both a $19 million compensation expense, primarily related to a staffing review, and a $10 million contribution to the Fifth Third Foundation from the prior quarter, noninterest expense was flat. Performance primarily reflected lower compensation expense partially offset by higher technology and communications expense, as well as increased marketing expense.

 

                                                                          
  Average Interest-Earning Assets                                   
                                              
  ($ in millions)    For the Three Months Ended      % Change  
     September      June            September                  
     2018      2018            2017        Seq          Yr/Yr      

Average Portfolio Loans and Leases

              

Commercial loans and leases:

              

Commercial and industrial loans

     $42,494        $42,292        $41,302        -        3%  

Commercial mortgage loans

     6,635        6,514        6,807        2%        (3%)  

Commercial construction loans

     4,870        4,743        4,533        3%        7%  

Commercial leases

     3,738        3,847        4,072        (3%)        (8%)  

Total commercial loans and leases

     $57,737        $57,396        $56,714        1%        2%  

Consumer loans:

              

Residential mortgage loans

     $15,598        $15,581        $15,523        -        -  

Home equity

     6,529        6,672        7,207        (2%)        (9%)  

Automobile loans

     8,969        8,968        9,267        -        (3%)  

Credit card

     2,299        2,221        2,140        4%        7%  

Other consumer loans

     2,060        1,719        1,055        20%        95%  

Total consumer loans

     $35,455        $35,161        $35,192        1%        1%  

Portfolio loans and leases

     $93,192        $92,557        $91,906        1%        1%  

Loans held for sale

     785        675        711        16%        10%  

Securities and other short-term investments

     34,822        34,935        33,826        -        3%  

Total average interest-earning assets

     $128,799        $128,167        $126,443        -        2%  

Compared to the year-ago quarter, average portfolio loans and leases increased 1 percent, primarily driven by higher commercial and industrial (C&I) and other consumer loans, partially offset by declines in home equity loans, commercial leases, and automobile loans. Period end portfolio loans and leases increased 2 percent. Compared to the prior quarter, average portfolio loans and leases increased 1 percent, primarily driven by higher other consumer and C&I loans, partially offset by a decline in home equity loans. Period end portfolio loans and leases increased 2 percent.

 

5


Compared to the year-ago quarter, average commercial portfolio loans and leases increased 2 percent, primarily driven by higher C&I loans led by growth in corporate banking and middle market lending. Compared to the prior quarter, average commercial portfolio loans and leases increased 1 percent, primarily driven by growth in C&I and commercial real estate loans. Period end commercial line utilization was 35 percent, stable compared to both the year-ago and prior quarter.

Compared to the year-ago quarter, average consumer portfolio loans increased 1 percent, primarily driven by higher other consumer loans, partially offset by declines in home equity and automobile loans. Compared to the prior quarter, average consumer portfolio loans increased 1 percent, primarily driven by higher other consumer loans, partially offset by a decline in home equity.

Average securities and other short-term investments were $34.8 billion compared to $33.8 billion in the year-ago quarter, and $34.9 billion in the prior quarter. Average available-for-sale debt and other securities of $32.6 billion were up 4 percent compared to the year-ago quarter, and flat compared to the prior quarter.

 

  Average Deposits                                   
                                              
  ($ in millions)    For the Three Months Ended      % Change  
     September      June            September                  
     2018      2018            2017        Seq          Yr/Yr      

Average Deposits

              

Demand

     $32,333        $32,834        $34,850        (2%)        (7%)  

Interest checking

     29,681        28,715        25,765        3%        15%  

Savings

     13,231        13,618        13,889        (3%)        (5%)  

Money market

     21,753        22,036        20,028        (1%)        9%  

Foreign office(g)

     317        371        395        (15%)        (20%)  

Total transaction deposits

     $97,315        $97,574        $94,927        -        3%  

Other time

     4,177        4,018        3,722        4%        12%  

Total core deposits

     $101,492        $101,592        $98,649        -        3%  

Certificates - $100,000 and over

     2,596        2,155        2,625        20%        (1%)  

Other deposits

     578        198        560        192%        3%  

Total average deposits

     $104,666        $103,945        $101,834        1%        3%  

Compared to the year-ago quarter, both average transaction and core deposits increased 3 percent. Performance was primarily driven by higher commercial interest checking deposits and consumer money market deposits, partially offset by lower commercial demand deposits. Commercial transaction deposits increased 2 percent and consumer transaction deposits increased 3 percent.

Compared to the prior quarter, both average transaction and core deposits were flat. Performance continued to reflect migration from demand deposits to interest-bearing accounts. Commercial transaction deposits increased 1 percent, and consumer transaction deposits decreased 1 percent.

 

6


                                                                                              
  Average Wholesale Funding                                  
                                             
  ($ in millions)   For the Three Months Ended      % Change  
    September      June           September                  
    2018      2018           2017        Seq          Yr/Yr    

Average Wholesale Funding

             

Certificates - $100,000 and over

    $2,596        $2,155        $2,625        20%        (1%)  

Other deposits

    578        198        560        192%        3%  

Federal funds purchased

    1,987        1,080        675        84%        194%  

Other short-term borrowings

    1,018        2,452        4,212        (58%)        (76%)  

Long-term debt

    14,434        14,579        13,457        (1%)        7%  

Total average wholesale funding

    $20,613        $20,464        $21,529        1%        (4%)  

Compared to the year-ago quarter, average wholesale funding decreased 4 percent, as strong deposit growth outpaced growth in interest-earning assets. Compared to the prior quarter, average wholesale funding increased 1 percent. Performance reflected higher federal funds borrowings, partially offset by a decline in other short-term borrowings.

 

7


  Credit Quality Summary

 

                                    
  ($ in millions)   For the Three Months Ended  
    September     June         March         December      September   
    2018     2018         2018         2017      2017   

Total nonaccrual portfolio loans and leases (NPLs)

  $403       $437         $452         $437         $506   

Repossessed property

                            10   

OREO

  37       36         43         43         39   

Total nonperforming portfolio assets (NPAs)

  $448       $480         $504         $489         $555   

NPL ratio(h)

  0.43%      0.47%        0.49%        0.48%        0.55%  

NPA ratio(c)

  0.48%      0.52%        0.55%        0.53%        0.60%  

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

  270       217         299         280         252   

Total loans and leases 90 days past due (accrual)

  87       89         107         97         77   

Allowance for loan and lease losses, beginning

  $1,077       $1,138         $1,196         $1,205         $1,226   

Total net losses charged-off

  (72)      (94)        (81)        (76)        (68)  

Provision for loan and lease losses

  86       33         23         67         67   

Deconsolidation of a variable interest entity

                            (20)  

Allowance for loan and lease losses, ending

  $1,091       $1,077         $1,138         $1,196         $1,205   

Reserve for unfunded commitments, beginning

  $131       $151         $161         $157         $162   

(Benefit from) provision for unfunded commitments

  (2)      (20)        (10)               (5)  

Reserve for unfunded commitments, ending

  $129       $131         $151         $161         $157   
             

Total allowance for credit losses

  $1,220       $1,208         $1,289         $1,357         $1,362   

Allowance for loan and lease losses ratio

             

As a percent of portfolio loans and leases

  1.17%      1.17%        1.24%        1.30%        1.31%  

As a percent of nonperforming portfolio loans and leases

  270%      247%        252%        274%        238%  

As a percent of nonperforming portfolio assets

  243%      224%        226%        245%        217%  

Total losses charged-off

  $(112)      $(118)        $(103)        $(94)        $(85)  

Total recoveries of losses previously charged-off

  40       24         22         18         17   

Total net losses charged-off

  $(72)      $(94)        $(81)        $(76)        $(68)  

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

  0.30%      0.41%        0.36%        0.33%        0.29%  

Commercial NCO ratio

  0.19%      0.34%        0.21%        0.22%        0.21%  

Consumer NCO ratio

  0.50%      0.52%        0.60%        0.51%        0.43%  

Compared to the year-ago quarter, NPLs decreased $103 million, or 20 percent, with the resulting NPL ratio of 0.43 percent decreasing 12 bps. Repossessed personal property decreased $2 million and OREO balances decreased $2 million. NPAs decreased $107 million, or 19 percent, with the resulting NPA ratio of 0.48 percent, decreasing 12 bps.

Compared to the prior quarter, NPLs decreased $34 million, or 8 percent, with the resulting NPL ratio decreasing 4 bps. Repossessed personal property increased $1 million and OREO balances increased $1 million. NPAs decreased $32 million, or 7 percent, with the resulting NPA ratio decreasing 4 bps.

 

8


The provision for loan and lease losses totaled $86 million in the current quarter compared to $67 million in the year-ago quarter and $33 million in the prior quarter. The resulting allowance for loan and lease loss ratio represented 1.17 percent of total portfolio loans and leases outstanding in the current quarter, compared with 1.31 percent in the year-ago quarter and 1.17 in the prior quarter. The allowance for loan and lease losses represented 270 percent of nonperforming loans and leases, and 243 percent of nonperforming assets in the current quarter.

Net losses charged-off totaled $72 million in the current quarter compared to $68 million in the year-ago quarter and $94 million in the prior quarter. The resulting NCO ratio of 0.30 percent in the current quarter increased 1 bp compared to the year-ago quarter and decreased 11 bps compared to the prior quarter.

 

 Capital and Liquidity Position

 

                                      
    For the Three Months Ended  
    September      June          March        December      September  
    2018      2018          2018        2017      2017  

Capital Position

 

             

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

    11.39%        11.38%        11.52%        11.69%        11.93%  

Tangible equity(a)

    10.07%        10.29%        10.09%        9.90%        9.84%  

Tangible common equity (excluding unrealized gains/losses)(a)

    9.12%        9.33%        9.14%        8.94%        8.89%  

Tangible common equity (including unrealized gains/losses)(a)

    8.63%        8.98%        8.89%        8.99%        9.00%  

Regulatory Capital and Liquidity Ratios(e)

 

CET1 capital(d)

    10.67%        10.91%        10.82%        10.61%        10.59%  

Tier I risk-based capital(d)

    11.78%        12.02%        11.95%        11.74%        11.72%  

Total risk-based capital(d)

    15.01%        15.21%        15.25%        15.16%        15.16%  

Tier I leverage

    10.10%        10.24%        10.11%        10.01%        9.97%  

Modified liquidity coverage ratio (LCR)

    119%        116%        113%        129%        124%  

Capital ratios remained strong during the quarter. The CET1 ratio was 10.67 percent, the tangible common equity to tangible assets ratio was 9.12 percent (excluding unrealized gains/losses), and 8.63 percent (including unrealized gains/losses). The Tier I risk-based capital ratio was 11.78 percent, the Total risk-based capital ratio was 15.01 percent, and the Tier I leverage ratio was 10.10 percent.

During the third quarter of 2018, Fifth Third entered into open market repurchase transactions of 16.9 million shares, or approximately $500 million, of its outstanding common stock, which settled between July 24, 2018 and August 6, 2018.

Tax Rate

The effective tax rate was 15.6 percent compared with 31.9 percent in the year-ago quarter and 15.5 percent in the prior quarter.

Other

Fifth Third has re-submitted its CCAR 2018 capital plan to the Federal Reserve, recognizing the pro forma impact of the combined Fifth Third MB Financial post-merger entity. In the meantime, Fifth Third expects to resume capital distribution activities consistent with the originally-submitted April 2018 capital plan. The timing and amount of this activity is subject to market conditions and applicable securities laws.

 

9


On September 18, 2018, MB Financial, Inc. common stockholders approved Fifth Third’s acquisition originally announced May 21, 2018. The acquisition is expected to close in the first quarter of 2019, subject to regulatory approvals and other customary closing conditions.

As of September 30, 2018, Fifth Third Bank owned approximately 10.3 million units representing a 3.3 percent interest in Worldpay Holding, LLC, convertible into shares of Worldpay, Inc., a publicly traded firm. Based upon Worldpay’s closing price of $101.27 on September 30, 2018, Fifth Third’s interest in Worldpay was valued at approximately $1.04 billion. The difference between the market value and the book value of Fifth Third’s interest in Worldpay’s shares is not recognized in Fifth Third’s equity or capital.

Conference Call

Fifth Third will host a conference call to discuss these financial results at 9:00 a.m. (Eastern Time) today. This conference call will be webcast live and may be accessed through the Fifth Third Investor Relations website at www.53.com (click on “About Us” then “Investor Relations”).

Those unable to listen to the live webcast may access a webcast replay through the Fifth Third Investor Relations website at the same web address. Additionally, a telephone replay of the conference call will be available after the conference call until approximately November 6, 2018 by dialing 800-585-8367 for domestic access or 404-537-3406 for international access (passcode 4083528#).

Corporate Profile

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. As of September 30, 2018, the Company had $142 billion in assets and operates 1,152 full-service Banking Centers, and 2,443 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. As of September 30, 2018, Fifth Third also had a 3.3% interest in Worldpay Holding, LLC, a subsidiary of Worldpay, Inc. Fifth Third is among the largest money managers in the Midwest and, as of September 30, 2018, had $376 billion in assets under care, of which it managed $38 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.”

Earnings Release End Notes

(a)

 Non-GAAP measure; see discussion of non-GAAP and Reg. G reconciliation beginning on page 25

 

(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 and liquidity ratios are estimated

 

(f)

 Assumes a 21% 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

 

10


IMPORTANT ADDITIONAL INFORMATION AND WHERE TO FIND IT

In connection with the proposed merger, Fifth Third Bancorp has filed with the SEC a Registration Statement on Form S-4 that includes the Proxy Statement of MB Financial, Inc. and a Prospectus of Fifth Third Bancorp, as well as other relevant documents concerning the proposed transaction. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. INVESTORS AND STOCKHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE PROXY STATEMENT/PROSPECTUS REGARDING THE MERGER AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.

A free copy of the Proxy Statement/Prospectus, as well as other filings containing information about Fifth Third Bancorp and MB Financial, Inc., may be obtained at the SEC’s Internet site (http://www.sec.gov). You will also be able to obtain these documents, free of charge, from Fifth Third Bancorp at ir.53.com or from MB Financial, Inc. by accessing MB Financial, Inc.’s website at investor.mbfinancial.com.

Copies of the Proxy Statement/Prospectus can also be obtained, free of charge, by directing a request to Fifth Third Investor Relations at Fifth Third Investor Relations, MD 1090QC, 38 Fountain Square Plaza, Cincinnati, OH 45263, by calling (866) 670-0468, or by sending an e-mail to ir@53.com or to MB Financial, Attention: Corporate Secretary, at 6111 North River Road, Rosemont, Illinois 60018, by calling (847) 653-1992 or by sending an e-mail to dkoros@mbfinancial.com.

Fifth Third Bancorp and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of MB Financial, Inc. in respect of the transaction described in the Proxy Statement/Prospectus. Information regarding Fifth Third Bancorp’s directors and executive officers is contained in Fifth Third Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2017 and its Proxy Statement on Schedule 14A, dated March 6, 2018, which are filed with the SEC. Information regarding MB Financial, Inc.’s directors and executive officers is contained in its Proxy Statement on Schedule 14A filed with the SEC on April 3, 2018. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the Proxy Statement/Prospectus regarding the proposed merger. Free copies of this document may be obtained as described in the preceding paragraph.

FORWARD-LOOKING STATEMENTS

This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not limited to, Fifth Third Bancorp’s and MB Financial, Inc.’s expectations or predictions of future financial or business performance or conditions. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “plan,” “predict,” “project,” “forecast,” “guidance,” “goal,” “objective,” “prospects,” “possible” or “potential,” by future conditional verbs such as “assume,” “will,” “would,” “should,” “could” or “may”, or by variations of such words or by similar expressions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made and we assume no duty to update forward-looking statements. Actual results may differ materially from current projections.

In addition to factors previously disclosed in Fifth Third Bancorp’s and MB Financial, Inc.’s reports filed with or furnished to the SEC and those identified elsewhere in this communication, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: the ability to obtain regulatory approvals and meet other closing conditions to the merger, including approval of the merger by MB Financial, Inc.’s stockholders on the expected terms and schedule, including the risk that regulatory approvals required for the merger are not obtained or are obtained subject to conditions that are not anticipated; delay in closing the merger; difficulties and delays in integrating the businesses of MB Financial, Inc. or fully realizing cost savings and other benefits; business disruption following the merger; changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer acceptance of Fifth Third Bancorp’s products and services; customer borrowing, repayment, investment and deposit practices; customer disintermediation; the introduction, withdrawal, success and timing of business initiatives; competitive conditions; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with mergers, acquisitions and divestitures; economic conditions; and the impact, extent and timing of technological changes, capital management activities, and other actions of the Federal Reserve Board and legislative and regulatory actions and reforms.

Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.

# # #

 

11


LOGO

Quarterly Financial Review for September 30, 2018

Table of Contents

 

          

Financial Highlights

     13-14          

Consolidated Statements of Income

     15          

Consolidated Balance Sheets

     16-17          

Consolidated Statements of Changes in Equity

     18          

Average Balance Sheet and Yield/Rate Analysis

     19-20          

Summary of Loans and Leases

     21          

Regulatory Capital

     22          

Summary of Credit Loss Experience

     23          

Asset Quality

     24          

Regulation G Non-GAAP Reconciliation

     26-27          

Segment Presentation

     28          
          

 

12


Fifth Third Bancorp and Subsidiaries

                       

Financial Highlights

                       

$ in millions, except per share data

              % / bps                  % / bps      

(unaudited)

     For the Three Months Ended        Change            Year to Date        Change      
     September        June            September              September        September     
       2018        2018            2017        Seq            Yr/Yr            2018        2017        Yr/Yr          

Income Statement Data

                       

Net interest income

     $1,043        $1,020        $970        2%        8%        $3,059        $2,842        8%  

Net interest income (FTE)(a)

     1,047        1,024        977        2%        7%        3,071        2,861        7%  

Noninterest income

     563        743        1,561        (24%)        (64%)        2,215        2,648        (16%)  

Total revenue (FTE)

     1,610        1,767        2,538        (9%)        -        5,286        5,509        (4%)  

Provision for loan and lease losses

     86        33        67        161%        28%        142        193        (26%)  

Noninterest expense

     1,008        1,037        975        (3%)        3%        3,090        2,918        6%  

Net income attributable to Bancorp

     433        586        1,014        (26%)        (57%)        1,721        1,685        2%  

Net income available to common shareholders

     418        563        999        (26%)        (58%)        1,669        1,633        2%  

Earnings Per Share Data

                       

Net income allocated to common shareholders

     $413        $557        $989        (26%)        (58%)        $1,651        $1,615        2%  

Average common shares outstanding (in thousands):

                       

Basic

     667,624        683,345        721,280        (2%)        (7%)        680,182        736,686        (8%)  

Diluted

     679,199        696,210        733,285        (2%)        (7%)        693,079        748,707        (7%)  

Earnings per share, basic

     $0.62        $0.81        $1.37        (23%)        (55%)        $2.43        $2.19        11%  

Earnings per share, diluted

     0.61        0.80        1.35        (24%)        (55%)        2.38        2.16        10%  

Common Share Data

                       

Cash dividends per common share

     $0.18        $0.18        $0.16        -        13%        $0.52        $0.44        18%  

Book value per share

     21.92        21.97        21.30        -        3%        21.92        21.30        3%  

Market price per share

     27.92        28.70        27.98        (3%)        -        27.92        27.98        -  

Common shares outstanding (in thousands)

     661,373        678,162        705,474        (2%)        (6%)        661,373        705,474        (6%)  

Market capitalization

     $18,466        $19,463        $19,739        (5%)        (6%)        $18,466        $19,739        (6%)  

Financial Ratios

                    

Return on average assets

     1.21%        1.66%        2.85%        (45)        (164)        1.63%        1.60%         

Return on average common equity

     11.2%        15.3%        25.6%        (410)        (1,440)        15.0%        14.3%        70   

Return on average tangible common equity(a)

     13.5%        18.4%        30.4%        (490)        (1,690)        18.1%        17.0%        110   

Noninterest income as a percent of total revenue(a)

     35%        42%        62%        (700)        (2,700)        42%        48%        (600)  

Dividend payout

     29.0%        22.2%        11.7%        680         1,730         21.4%        20.1%        130   

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

     11.39%        11.38%        11.93%               (54)        11.43%        11.83%        (40)  

Tangible common equity(a)

     9.12%        9.33%        8.89%        (21)        23         9.12%        8.89%        23   

Net interest margin (FTE)(a)

     3.23%        3.21%        3.07%               16         3.20%        3.03%        17   

Efficiency (FTE)(a)

     62.6%        58.7%        38.4%        390         2,420         58.5%        53.0%        550   

Effective tax rate

     15.6%        15.5%        31.9%        10         (1,630)        15.7%        29.2%        (1,350)  

Credit Quality

                    

Net losses charged-off

     $72        $94        $68        (23%)        6%        $247        $221        12%  

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

     0.30%        0.41%        0.29%        (11)               0.36%        0.32%         

ALLL as a percent of portfolio loans and leases

     1.17%        1.17%        1.31%        -        (14)        1.17%        1.31%        (14)  

Allowance for credit losses as a percent of portfolio loans and leases(g)

     1.31%        1.31%        1.48%        -        (17)        1.31%        1.48%        (17)  

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

     0.48%        0.52%        0.60%        (4)        (12)        0.48%        0.60%        (12)  

Average Balances

                       

Loans and leases, including held for sale

     $93,977        $93,232        $92,617        1%        1%        $93,363        $92,686        1%  

Securities and other short-term investments

     34,822        34,935        33,826        -        3%        34,813        33,497        4%  

Assets

     141,752        141,529        140,992        -        1%        141,616        140,495        1%  

Transaction deposits(b)

     97,315        97,574        94,927        -        3%        97,303        95,916        1%  

Core deposits(c)

     101,492        101,592        98,649        -        3%        101,321        99,680        2%  

Wholesale funding(d)

     20,613        20,464        21,529        1%        (4%)        20,546        20,450        0%  

Bancorp shareholders’ equity

     16,145        16,108        16,820        -        (4%)        16,187        16,623        (3%)  

Regulatory Capital and Liquidity Ratios(e)

                    

CET1 capital(f)

     10.67%        10.91%        10.59%        (24)               10.67%        10.59%         

Tier I risk-based capital(f)

     11.78%        12.02%        11.72%        (24)               11.78%        11.72%         

Total risk-based capital(f)

     15.01%        15.21%        15.16%        (20)        (15)        15.01%        15.16%        (15)  

Tier I leverage

     10.10%        10.24%        9.97%        (14)        13         10.10%        9.97%        13   

Modified liquidity coverage ratio (LCR)

     119%        116%        124%        3%        (4%)        119%        124%        (4%)  

Operations

                    

Banking centers

     1,152        1,158        1,155        (1%)        -        1,152        1,155        -  

ATMs

     2,443        2,458        2,465        (1%)        (1%)        2,443        2,465        (1%)  

Full-time equivalent employees

     17,512        18,163        17,797        (4%)        (2%)        17,512        17,797        (2%)  
(a)

Non-GAAP measure; see discussion of non-GAAP and Reg. G reconciliation beginning on page 25.

(b)

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

(c)

Includes transaction deposits plus other time deposits.

(d)

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

(e)

Current period regulatory capital and liquidity ratios are estimates.

(f)

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.

(g)

The allowance for credit losses is the sum of the ALLL and the reserve for unfunded commitments.

 

13


Fifth Third Bancorp and Subsidiaries                                   
Financial Highlights                                   
$ in millions, except per share data                                   
(unaudited)    For the Three Months Ended  
     September        June            March            December        September    
      2018        2018            2018            2017        2017    

Income Statement Data

              

Net interest income

     $1,043        $1,020        $996        $956        $970  

Net interest income (FTE)(a)

     1,047        1,024        999        963        977  

Noninterest income

     563        743        909        577        1,561  

Total revenue (FTE)

     1,610        1,767        1,908        1,540        2,538  

Provision for loan and lease losses

     86        33        23        67        67  

Noninterest expense

     1,008        1,037        1,046        1,073        975  

Net income attributable to Bancorp

     433        586        704        509        1,014  

Net income available to common shareholders

     418        563        689        486        999  

Earnings Per Share Data

              

Net income allocated to common shareholders

     $413        $557        $681        $482        $989  

Average common shares outstanding (in thousands):

              

Basic

     667,624        683,345        689,820        703,372        721,280  

Diluted

     679,199        696,210        704,101        716,908        733,285  

Earnings per share, basic

     $0.62        $0.81        $0.99        $0.68        1.37  

Earnings per share, diluted

     0.61        0.80        0.97        0.67        1.35  

Common Share Data

              

Cash dividends per common share

     $0.18        $0.18        $0.16        $0.16        $0.16  

Book value per share

     21.92        21.97        21.68        21.67        21.30  

Market value per share

     27.92        28.70        31.75        30.34        27.98  

Common shares outstanding (in thousands)

     661,373        678,162        684,942        693,805        705,474  

Market capitalization

     $18,466        $19,463        $21,747        $21,050        $19,739  

Financial Ratios

     

Return on average assets

     1.21%        1.66%        2.02%        1.43%        2.85%  

Return on average common equity

     11.2%        15.3%        18.6%        12.7%        25.6%  

Return on average tangible common equity(a)

     13.5%        18.4%        22.4%        15.2%        30.4%  

Noninterest income as a percent of total revenue(a)

     35%        42%        48%        37%        62%  

Dividend payout

     29.0%        22.2%        16.2%        23.5%        11.7%  

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

     11.39%        11.38%        11.52%        11.69%        11.93%  

Tangible common equity(a)

     9.12%        9.33%        9.14%        8.94%        8.89%  

Net interest margin (FTE)(a)

     3.23%        3.21%        3.18%        3.02%        3.07%  

Efficiency (FTE)(a)

     62.6%        58.7%        54.8%        69.7%        38.4%  

Effective tax rate

     15.6%        15.5%        15.8%        (29.8%)        31.9%  

Credit Quality

              

Net losses charged-off

     $72        $94        $81        $76        $68  

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

     0.30%        0.41%        0.36%        0.33%        0.29%  

ALLL as a percent of portfolio loans and leases

     1.17%        1.17%        1.24%        1.30%        1.31%  

Allowance for credit losses as a percent of portfolio loans and leases(g)

     1.31%        1.31%        1.40%        1.48%        1.48%  

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

     0.48%        0.52%        0.55%        0.53%        0.60%  

Average Balances

              

Loans and leases, including held for sale

     $93,977        $93,232        $92,869        $92,865        $92,617  

Securities and other short-term investments

     34,822        34,935        34,677        33,756        33,826  

Assets

     141,752        141,529        141,565        141,055        140,992  

Transaction deposits(b)

     97,315        97,574        97,018        96,450        94,927  

Core deposits(c)

     101,492        101,592        100,874        100,242        98,649  

Wholesale funding(d)

     20,613        20,464        20,558        20,097        21,529  

Bancorp shareholders’ equity

     16,145        16,108        16,313        16,493        16,820  

Regulatory Capital and Liquidity Ratios(e)

  

CET1 capital(f)

     10.67%        10.91%        10.82%        10.61%        10.59%  

Tier I risk-based capital(f)

     11.78%        12.02%        11.95%        11.74%        11.72%  

Total risk-based capital(f)

     15.01%        15.21%        15.25%        15.16%        15.16%  

Tier I leverage

     10.10%        10.24%        10.11%        10.01%        9.97%  

Modified liquidity coverage ratio (LCR)

     119%        116%        113%        129%        124%  

Operations

              

Banking centers

     1,152        1,158        1,153        1,154        1,155  

ATMs

     2,443        2,458        2,459        2,469        2,465  

Full-time equivalent employees

     17,512        18,163        18,344        18,125        17,797  
(a)

Non-GAAP measure; see discussion of non-GAAP and Reg. G reconciliation beginning on page 25.

(b)

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

(c)

Includes transaction deposits plus other time deposits.

(d)

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

(e)

Current period regulatory capital and liquidity ratios are estimates.

(f)

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.

(g)

The allowance for credit losses is the sum of the ALLL and the reserve for unfunded commitments.

 

14


Fifth Third Bancorp and Subsidiaries                                                
Consolidated Statements of Income                                                
$ in millions                                                
(unaudited)                                                
    For the Three Months Ended     % Change     Year to Date     % Change  
    September     June         September                 September     September        
     2018     2018         2017     Seq     Yr/Yr         2018     2017     Yr/Yr     

Interest Income

               

Interest and fees on loans and leases

    $1,040        $996        $899       4%       16%       $2,975        $2,595       15%  

Interest on securities

    269        267        249       1%       8%       798        739       8%  

Interest on other short-term investments

                4       -       50%       17        10       70%  

Total interest income

    1,315        1,269        1,152       4%       14%       3,790        3,344       13%  

Interest Expense

               

Interest on deposits

    144        119        73       21%       97%       359        197       82%  

Interest on federal funds purchased

    10              2       100%       400%       17        4       325%  

Interest on other short-term borrowings

          11        12       (45%)       (50%)       25        24       4%  

Interest on long-term debt

    112        114        95       (2%)       18%       330        277       19%  

Total interest expense

    272        249        182       9%       49%       731        502       46%  

Net Interest Income

    1,043        1,020        970       2%       8%       3,059        2,842       8%  

Provision for loan and lease losses

    86        33        67       161%       28%       142        193       (26%)  

Net Interest Income After Provision for Loan and Lease Losses

    957        987        903       (3%)       6%       2,917        2,649       10%  

Noninterest Income

               

Service charges on deposits

    139        137        138       1%       1%       414        415       -  

Corporate banking revenue

    100        120        101       (17%)       (1%)       308        276       12%  

Mortgage banking net revenue

    49        53        63       (8%)       (22%)       158        170       (7%)  

Wealth and asset management revenue

    114        108        102       6%       12%       335        313       7%  

Card and processing revenue

    82        84        79       (2%)       4%       245        232       6%  

Other noninterest income

    86        250        1,076       (66%)       (92%)       794        1,237       (36%)  

Securities (losses) gains, net

    (6)       (5)       -       (20%)                 NM       (21)       1       NM  

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

    (1)       (4)       2                 75%       NM       (18)       4       NM  

Total noninterest income

    563        743        1,561       (24%)       (64%)       2,215        2,648       (16%)  

Noninterest Expense

               

Salaries, wages and incentives

    421        471        407       (11%)       3%       1,339        1,215       10%  

Employee benefits

    82        78        77       5%       6%       270        274       (1%)  

Net occupancy expense

    70        74        74       (5%)       (5%)       219        221       (1%)  

Technology and communications

    71        67        62       6%       15%       206        177       16%  

Equipment expense

    31        30        30       3%       3%       92        88       5%  

Card and processing expense

    31        30        32       3%       (3%)       91        95       (4%)  

Other noninterest expense

    302        287        293       5%       3%       873        848       3%  

Total noninterest expense

    1,008        1,037        975       (3%)       3%       3,090        2,918       6%  

Income Before Income Taxes

    512        693        1,489       (26%)       (66%)       2,042        2,379       (14%)  

Applicable income tax expense

    79        107        475       (26%)       (83%)       321        694       (54%)  

Net Income

    433        586        1,014       (26%)       (57%)       1,721        1,685       2%  

Less: Net income attributable to noncontrolling interests

                -       NM       NM             -       NM  

Net Income Attributable to Bancorp

    433                586        1,014       (26%)       (57%)       1,721        1,685       2%  

Dividends on preferred stock

    15        23        15       (35%)       -       52        52       -  

Net Income Available to Common Shareholders

    $418        $563        $999       (26%)       (58%)       $1,669        $1,633       2%  

 

15


Fifth Third Bancorp and Subsidiaries

                     

Consolidated Balance Sheets

                     

$ in millions, except per share data

                     

(unaudited)

    As of          % Change  
    September                June                    September                  
      2018                2018                    2017                Seq                    Yr/Yr          

Assets

                     

Cash and due from banks

    $2,100           $2,052           $2,205           2%          (5%)  

Other short-term investments

    1,429           1,636           3,298           (13%)          (57%)  

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

    31,808           31,961           31,391           -          1%  

Held-to-maturity securities(b)

    18           19           25           (5%)          (28%)  

Trading debt securities

    269           280           511           (4%)          (47%)  

Equity securities

    500           475           428           5%          17%  

Loans and leases held for sale

    663           783           711           (15%)          (7%)  

Portfolio loans and leases:

                     

Commercial and industrial loans

    42,631           41,403           41,011           3%          4%  

Commercial mortgage loans

    6,695           6,625           6,863           1%          (2%)  

Commercial construction loans

    4,892           4,687           4,652           4%          5%  

Commercial leases

    3,697           3,788           4,043           (2%)          (9%)  

Residential mortgage loans

    15,585           15,640           15,588           -          -  

Home equity

    6,485           6,599           7,143           (2%)          (9%)  

Automobile loans

    9,002           8,938           9,236           1%          (3%)  

Credit card

    2,325           2,270           2,168           2%          7%  

Other consumer loans

    2,131           1,982           1,179           8%          81%  

Portfolio loans and leases

    93,443           91,932           91,883           2%          2%  

Allowance for loan and lease losses

    (1,091)          (1,077)          (1,205)          1%          (9%)  

Portfolio loans and leases, net

    92,352           90,855           90,678           2%          2%  

Bank premises and equipment

    1,896           1,915           2,018           (1%)          (6%)  

Operating lease equipment

    546           606           663           (10%)          (18%)  

Goodwill

    2,462           2,462           2,423           -          2%  

Intangible assets

    28           30           18           (7%)          56%  

Servicing rights

    1,010           959           848           5%          19%  

Other assets

    6,604           6,662           7,047           (1%)          (6%)  

Total Assets

    $141,685           $140,695           $142,264           1%          -  

Liabilities

                     

Deposits:

                     

Demand

    $31,803           $32,680           $35,246           (3%)          (10%)  

Interest checking

    30,288           29,452           26,091           3%          16%  

Savings

    13,027           13,455           13,693           (3%)          (5%)  

Money market

    21,977           21,593           19,646           2%          12%  

Foreign office

    298           336           609           (11%)          (51%)  

Other time

    4,249           4,058           3,756           5%          13%  

Certificates $100,000 and over

    2,700           2,557           2,411           6%          12%  

Other deposits

                               NM          NM  

Total deposits

    104,342           104,131           101,452           -          3%  

Federal funds purchased

    2,316           597           118           288%          1863%  

Other short-term borrowings

    1,114           1,763           5,688           (37%)          (80%)  

Accrued taxes, interest and expenses

    1,155           1,206           2,071           (4%)          (44%)  

Other liabilities

    2,448           2,425           2,516           1%          (3%)  

Long-term debt

    14,460           14,321           14,039           1%          3%  

Total Liabilities

    125,835           124,443           125,884           1%          -  

Equity

                     

Common stock(c)

    2,051           2,051           2,051           -          -  

Preferred stock

    1,331           1,331           1,331           -          -  

Capital surplus

    2,856           2,833           2,682           1%          6%  

Retained earnings

    16,440           16,143           14,748           2%          11%  

Accumulated other comprehensive (loss) income

    (775)          (552)          185           (40%)          NM  

Treasury stock

    (6,073)          (5,574)          (4,637)          9%          31%  

Total Bancorp shareholders’ equity

    15,830           16,232           16,360           (2%)          (3%)  

Noncontrolling interests

    20           20           20           -          -  

Total Equity

    15,850           16,252           16,380           (2%)          (3%)  

Total Liabilities and Equity

    $141,685           $140,695           $142,264           1%          -  

(a)    Amortized cost

    $32,707           $32,589           $31,026           -          5%  

(b)    Market values

    18           19           25           (5%)          (28%)  

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

                     

    Authorized

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

    Outstanding, excluding treasury

    661,373           678,162           705,474           (2%)          (6%)  

    Treasury

    262,520           245,731           218,419           7%          20%  

 

16


Fifth Third Bancorp and Subsidiaries

              

Consolidated Balance Sheets

              

$ in millions, except per share data

              

(unaudited)

     As of  
     September              June                  March                  December               September        
       2018              2018                  2018                  2017               2017        

Assets

              

Cash and due from banks

     $2,100         $2,052         $2,038         $2,514         $2,205   

Other short-term investments

     1,429         1,636         1,747         2,753         3,298   

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

     31,808         31,961         31,819         31,751         31,391   

Held-to-maturity securities(b)

     18         19         23         24         25   

Trading debt securities

     269         280         571         492         511   

Equity securities

     500         475         418         439         428   

Loans and leases held for sale

     663         783         717         492         711   

Portfolio loans and leases:

              

Commercial and industrial loans

     42,631         41,403         41,635         41,170         41,011   

Commercial mortgage loans

     6,695         6,625         6,509         6,604         6,863   

Commercial construction loans

     4,892         4,687         4,766         4,553         4,652   

Commercial leases

     3,697         3,788         3,919         4,068         4,043   

Residential mortgage loans

     15,585         15,640         15,563         15,591         15,588   

Home equity

     6,485         6,599         6,757         7,014         7,143   

Automobile loans

     9,002         8,938         9,018         9,112         9,236   

Credit card

     2,325         2,270         2,188         2,299         2,168   

Other consumer loans

     2,131         1,982         1,615         1,559         1,179   

Portfolio loans and leases

     93,443         91,932         91,970         91,970         91,883   

Allowance for loan and lease losses

     (1,091)        (1,077)        (1,138)        (1,196)        (1,205)  

Portfolio loans and leases, net

     92,352         90,855         90,832         90,774         90,678   

Bank premises and equipment

     1,896         1,915         1,966         2,003         2,018   

Operating lease equipment

     546         606         625         646         663   

Goodwill

     2,462         2,462         2,462         2,445         2,423   

Intangible assets

     28         30         30         27         18   

Servicing rights

     1,010         959         926         858         848   

Other assets

     6,604         6,662         7,326         6,975         7,047   

Total Assets

     $141,685         $140,695         $141,500         $142,193         $142,264   

Liabilities

              

Deposits:

              

Demand

     $31,803         $32,680         $34,066         $35,276         $35,246   

Interest checking

     30,288         29,452         29,627         27,703         26,091   

Savings

     13,027         13,455         13,751         13,425         13,693   

Money market

     21,977         21,593         21,540         20,097         19,646   

Foreign office

     298         336         374         484         609   

Other time

     4,249         4,058         3,945         3,775         3,756   

Certificates $100,000 and over

     2,700         2,557         2,042         2,402         2,411   

Other deposits

                   116                 

Total deposits

     104,342         104,131         105,461         103,162         101,452   

Federal funds purchased

     2,316         597         178         174         118   

Other short-term borrowings

     1,114         1,763         1,335         4,012         5,688   

Accrued taxes, interest and expenses

     1,155         1,206         1,104         1,412         2,071   

Other liabilities

     2,448         2,425         2,418         2,144         2,516   

Long-term debt

     14,460         14,321         14,800         14,904         14,039   

Total Liabilities

     125,835         124,443         125,296         125,808         125,884   

Equity

              

Common stock(c)

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

Preferred stock

     1,331         1,331         1,331         1,331         1,331   

Capital surplus

     2,856         2,833         2,828         2,790         2,682   

Retained earnings

     16,440         16,143         15,707         15,122         14,748   

Accumulated other comprehensive (loss) income

     (775)        (552)        (389)        73         185   

Treasury stock

     (6,073)        (5,574)        (5,344)        (5,002)        (4,637)  

Total Bancorp shareholders’ equity

     15,830         16,232         16,184         16,365         16,360   

Noncontrolling interests

     20         20         20         20         20   

Total Equity

     15,850         16,252         16,204         16,385         16,380   

Total Liabilities and Equity

     $141,685         $140,695         $141,500         $142,193         $142,264   

(a)    Amortized cost

     $32,707         $32,589         $32,230         $31,577         $31,026   

(b)    Market values

     18         19         23         24         25   

(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

     661,373         678,162         684,942         693,805         705,474   

    Treasury

     262,520         245,731         238,951         230,088         218,419   

 

17


Fifth Third Bancorp and Subsidiaries                            
Consolidated Statements of Changes in Equity                            
$ in millions                            
(unaudited)                            
     For the Three Months Ended      Year to Date  
     September         September         September         September     
      2018         2017         2018         2017     

Total Equity, Beginning

     $16,252         $16,446         $16,385         $16,232   

Net income attributable to Bancorp

     433         1,014         1,721         1,685   

Other comprehensive income, net of tax:

           

Change in unrealized (losses) gains:

           

Available-for-sale securities

     (207)        23         (827)        132   

Qualifying cash flow hedges

     (17)        (2)        (22)        (9)  

Change in accumulated other comprehensive income related to employee benefit plans

                           

Comprehensive income

     210         1,036         875         1,811   

Cash dividends declared:

           

Common stock

     (121)        (114)        (355)        (324)  

Preferred stock

     (15)        (15)        (52)        (52)  

Impact of stock transactions under stock compensation plans, net

     24         22         46         51   

Shares acquired for treasury

     (500)        (990)        (1,053)        (1,332)  

Noncontrolling interest

            (7)               (7)  

Other

                           

Impact of cumulative effect of change in account principles

                           

Total Equity, Ending

     $15,850         $16,380         $15,850         $16,380   

 

18


Fifth Third Bancorp and Subsidiaries

                  

Average Balance Sheet and Yield/Rate Analysis

                  

$ in millions, except share data

                  

(unaudited)

                  
     For the Three Months Ended       % Change        Year to Date       % Change  
     September       June           September               September         September      
       2018       2018           2017         Seq            Yr/Yr          2018         2017         Yr/Yr  

Assets

                  

Interest-earning assets:

                  

Commercial and industrial loans

     $42,614       $42,327       $41,314       1%        3%        $42,249       $41,619       2%  

Commercial mortgage loans

     6,664       6,521       6,814       2%        (2%)        6,591       6,873       (4%)  

Commercial construction loans

     4,870       4,743       4,533       3%        7%        4,762       4,277       11%  

Commercial leases

     3,746       3,847       4,079       (3%)        (8%)        3,850       4,008       (4%)  

Residential mortgage loans

     16,226       16,213       16,206       -        -        16,176       16,011       1%  

Home equity

     6,529       6,672       7,207       (2%)        (9%)        6,695       7,389       (9%)  

Automobile loans

     8,969       8,968       9,267       -        (3%)        9,000       9,486       (5%)  

Credit card

     2,299       2,221       2,140       4%        7%        2,248       2,121       6%  

Other consumer loans

     2,060       1,720       1,057       20%        95%        1,792       902       99%  

Taxable securities

     33,301       33,380       32,289       -        3%        33,272       32,067       4%  

Tax exempt securities

     69       81       65       (15%)        6%        75       63       19%  

Other short-term investments

     1,452