CINCINNATI--(BUSINESS WIRE)--Fifth Third Bancorp (Nasdaq:FITB) today reported full year 2016 net income of $1.6 billion, down 9 percent from net income of $1.7 billion in 2015. After preferred dividends, 2016 net income available to common shareholders was $1.5 billion, or $1.93 per diluted share, down 9 percent compared with 2015 net income available to common shareholders of $1.6 billion, or $2.01 per diluted share. Results were significantly impacted by Vantiv-related transactions throughout 2015 and 2016.
Fourth quarter 2016 net income was $395 million, a decrease of 23 percent from net income of $516 million in the third quarter of 2016 and a decrease of 40 percent from net income of $657 million in the fourth quarter of 2015. Results were significantly impacted by Vantiv-related transactions explained in further detail below, including $280 million in pre-tax income in third quarter of 2016 and $469 million in pre-tax income in fourth quarter of 2015. After preferred dividends, net income available to common shareholders was $372 million, or $0.49 per diluted share, in the fourth quarter 2016, compared with $501 million, or $0.65 per diluted share, in the third quarter 2016, and $634 million, or $0.79 per diluted share, in the fourth quarter of 2015.
Fourth quarter 2016 included:
Income
- $9 million gain on the Vantiv warrant net exercise and share sale
- $6 million benefit related to the valuation of the Visa total return swap
- ($16 million) reduction to net interest income for refunds offered to certain bankcard customers
Expenses
- ($5 million) contribution to Fifth Third Foundation
Results also included a $6 million tax benefit from the early adoption of an accounting standard, and a $33 million annual payment recognized from Vantiv pursuant to the tax receivable agreement, which was recorded in other noninterest income.
Third quarter 2016 included:
Income
- $280 million gain from the termination and settlement of gross cash flows from existing Vantiv tax receivable agreements (TRA) and the expected obligation to terminate and settle the remaining TRA cash flows upon the exercise of put or call options
- $11 million gain on the sale of a non-branch facility
- ($28 million) non-cash impairment charge related to previously announced plans to sell or consolidate certain bank branches and land acquired for future branch expansion
- ($12 million) charge related to the valuation of the Visa total return swap
- ($9 million) charge from the transfer of certain nonconforming investments affected by the Volcker Rule to held-for-sale
- ($2 million) negative valuation adjustment on the Vantiv warrant
Results also included an $8 million beneficial tax impact in connection with certain commercial lease terminations.
Fourth quarter 2015 included:
Income
- $331 million gain on the sale of Vantiv shares
- $89 million gain on Vantiv warrant actions taken during the quarter
- $49 million payment received from Vantiv to terminate a portion of its tax receivable agreement
- $21 million positive valuation adjustment on the remaining Vantiv warrant
- ($10 million) related to the valuation of the Visa total return swap
Expenses
- ($10 million) contribution to Fifth Third Foundation
Results also included a $31 million annual payment recognized from Vantiv pursuant to the tax receivable agreement, which was recorded in other noninterest income.
| Earnings Highlights | |||||||||||||||||||
| For the Three Months Ended | % Change | ||||||||||||||||||
| December | September | June | March | December | |||||||||||||||
| 2016 | 2016(d) | 2016(d) | 2016(d) | 2015 | Seq | Yr/Yr | |||||||||||||
| Earnings ($ in millions) | |||||||||||||||||||
| Net income attributable to Bancorp | $395 | $516 | $328 | $326 | $657 | (23%) | (40%) | ||||||||||||
| Net income available to common shareholders | $372 | $501 | $305 | $311 | $634 | (26%) | (41%) | ||||||||||||
| Common Share Data | |||||||||||||||||||
| Earnings per share, basic | $0.49 | $0.66 | $0.40 | $0.40 | $0.80 | (26%) | (39%) | ||||||||||||
| Earnings per share, diluted | 0.49 | 0.65 | 0.39 | 0.40 | 0.79 | (25%) | (38%) | ||||||||||||
| Cash dividends per common share | 0.14 | 0.13 | 0.13 | 0.13 | 0.13 | 8% | 8% | ||||||||||||
| Common shares outstanding (in thousands) | 750,479 | 755,582 | 766,346 | 770,471 | 785,080 | (1%) | (4%) | ||||||||||||
| Average common shares outstanding | |||||||||||||||||||
| (in thousands): | |||||||||||||||||||
| Basic | 746,107 | 750,886 | 759,105 | 773,564 | 784,855 | (1%) | (5%) | ||||||||||||
| Diluted | 757,444 | 757,856 | 764,811 | 777,758 | 794,481 | - | (5%) | ||||||||||||
| Financial Ratios | bps Change | ||||||||||||||||||
| Return on average assets | 1.11 | % | 1.44 | % | 0.92 | % | 0.93 | % | 1.83 | % | (33) | (72) | |||||||
| Return on average common equity | 9.7 | 12.8 | 8.0 | 8.3 | 17.2 | (310) | (750) | ||||||||||||
| Return on average tangible common equity(b) | 11.6 | 15.2 | 9.6 | 9.9 | 20.6 | (360) | (900) | ||||||||||||
| CET1 capital(c) | 10.40 | 10.17 | 9.94 | 9.81 | 9.82 | 23 | 58 | ||||||||||||
| Tier I risk-based capital(c) | 11.51 | 11.27 | 11.03 | 10.91 | 10.93 | 24 | 58 | ||||||||||||
| CET1 capital (fully-phased in)(b)(c) | 10.30 | 10.09 | 9.86 | 9.72 | 9.72 | 21 | 58 | ||||||||||||
| Net interest margin(a)(b) | 2.86 | 2.88 | 2.88 | 2.91 | 2.85 | (2) | 1 | ||||||||||||
| Efficiency(a)(b) | 62.8 | 55.5 | 65.3 | 63.8 | 48.0 | 730 | 1480 | ||||||||||||
| (a) Presented on a fully taxable equivalent basis. | |||||||||||||||||||
| (b) Non-GAAP measure; see discussion of non-GAAP and Reg. G reconciliation beginning on page 32 in Exhibit 99.1 of 8-K filing dated 1/24/17. | |||||||||||||||||||
| (c) Under the banking agencies' Basel III Final Rule, assets and credit equivalent amounts of off-balance sheet exposures are calculated according to the standardized approach for risk-weighted assets. The resulting values are added together resulting in the Bancorp's total risk-weighted assets used in the calculation of the tier I risk-based capital and common equity tier 1 ratios. Current period regulatory capital ratios are estimated. | |||||||||||||||||||
| (d) The Condensed Consolidated Financial Statements include a $1 million, $5 million and $0 net reclassification of excess tax benefits from capital surplus to applicable income tax expense at March 31, 2016, June 30, 2016 and September 30, 2016, respectively, related to the early adoption of ASU 2016-09 during the fourth quarter of 2016, with an effective date of January 1, 2016. | |||||||||||||||||||
| NA: Not applicable. | |||||||||||||||||||
“Our fourth quarter results were strong and reflected our continued commitment to improving shareholder returns. With a balance sheet positioned to benefit from a rising rate environment, effective expense controls, and good credit quality, we achieved solid results during the quarter,” said Greg D. Carmichael, President and CEO of Fifth Third Bancorp.
“We believe the hard work and focus of our employees throughout 2016 have positioned us well for 2017 and beyond. With our long-term goals firmly in place, we are executing on the initiatives that we have outlined under Project North Star. Although we did not assume improving economic conditions to help us achieve our targets, we should continue to benefit from a more positive operating environment.
“Also, our confidence in our underlying businesses and our outlook has allowed us to increase our quarterly common stock dividend 8 percent to $0.14. Our capital and liquidity ratios remain strong and growing.
“Lastly, during the quarter we announced plans to invest $30 billion in community development, and also announced a newly-created corporate responsibility and reputation office. Fifth Third is committed to delivering positive outcomes for our customers, our shareholders, and the communities we serve.”
| Income Statement Highlights | |||||||||||||||||||
| For the Three Months Ended | % Change | ||||||||||||||||||
| December | September | June | March | December | |||||||||||||||
| 2016 | 2016(b) | 2016(b) | 2016(b) | 2015 | Seq | Yr/Yr | |||||||||||||
| Condensed Statements of Income ($ in millions) | |||||||||||||||||||
| Net interest income (taxable equivalent)(a) | $909 | $913 | $908 | $909 | $904 | - | 1% | ||||||||||||
| Provision for loan and lease losses | 54 | 80 | 91 | 119 | 91 | (33%) | (41%) | ||||||||||||
| Total noninterest income | 620 | 840 | 599 | 637 | 1,104 | (26%) | (44%) | ||||||||||||
| Total noninterest expense | 960 | 973 | 983 | 986 | 963 | (1%) | - | ||||||||||||
| Income before income taxes (taxable equivalent)(a) | $515 | $700 | $433 | $441 | $954 | (26%) | (46%) | ||||||||||||
| Taxable equivalent adjustment | 6 | 6 | 6 | 6 | 5 | - | 20% | ||||||||||||
| Applicable income tax expense | 114 | 178 | 103 | 109 | 292 | (36%) | (61%) | ||||||||||||
| Net income | $395 | $516 | $324 | $326 | $657 | (23%) | (40%) | ||||||||||||
| Less: Net income attributable to noncontrolling interests | - | - | (4) | - | - | - | - | ||||||||||||
| Net income attributable to Bancorp | $395 | $516 | $328 | $326 | $657 | (23%) | (40%) | ||||||||||||
| Dividends on preferred stock | 23 | 15 | 23 | 15 | 23 | 53% | - | ||||||||||||
| Net income available to common shareholders | $372 | $501 | $305 | $311 | $634 | (26%) | (41%) | ||||||||||||
| Earnings per share, diluted | $0.49 | $0.65 | $0.39 | $0.40 | $0.79 | (25%) | (38%) | ||||||||||||
| (a) Non-GAAP measure; see discussion of non-GAAP and Reg. G reconciliation beginning on page 32 in Exhibit 99.1 of 8-K filing dated 1/24/17. | |||||||||||||||||||
| (b) The Condensed Consolidated Financial Statements include a $1 million, $5 million and $0 net reclassification of excess tax benefits from capital surplus to applicable income tax expense at March 31, 2016, June 30, 2016 and September 30, 2016, respectively, related to the early adoption of ASU 2016-09 during the fourth quarter of 2016, with an effective date of January 1, 2016. | |||||||||||||||||||
| Net Interest Income | |||||||||||||||||||
| For the Three Months Ended | % Change | ||||||||||||||||||
| December | September | June | March | December | |||||||||||||||
| 2016 | 2016 | 2016 | 2016 | 2015 | Seq | Yr/Yr | |||||||||||||
| Interest Income ($ in millions) | |||||||||||||||||||
| Total interest income (taxable equivalent)(a) | $1,058 | $1,063 | $1,052 | $1,044 | $1,035 | - | 2% | ||||||||||||
| Total interest expense | 149 | 150 | 144 | 135 | 131 | (1%) | 14% | ||||||||||||
| Net interest income (taxable equivalent)(a) | $909 | $913 | $908 | $909 | $904 | - | 1% | ||||||||||||
| Average Yield | bps Change | ||||||||||||||||||
| Yield on interest-earning assets (taxable equivalent) | 3.33% | 3.36% | 3.34% | 3.34% | 3.26% | (3) | 7 | ||||||||||||
| Rate paid on interest-bearing liabilities | 0.70% | 0.70% | 0.67% | 0.64% | 0.61% | - | 9 | ||||||||||||
| Net interest rate spread (taxable equivalent) | 2.63% | 2.66% | 2.67% | 2.70% | 2.65% | (3) | (2) | ||||||||||||
| Net interest margin (taxable equivalent)(a) | 2.86% | 2.88% | 2.88% | 2.91% | 2.85% | (2) | 1 | ||||||||||||
| Average Balances ($ in millions) | % Change | ||||||||||||||||||
| Loans and leases, including held for sale | $93,981 | $94,417 | $94,807 | $94,078 | $94,587 | - | (1%) | ||||||||||||
| Total securities and other short-term investments | 32,567 | 31,675 | 32,040 | 31,573 | 31,256 | 3% | 4% | ||||||||||||
| Total interest-earning assets | 126,548 | 126,092 | 126,847 | 125,651 | 125,843 | - | 1% | ||||||||||||
| Total interest-bearing liabilities | 84,552 | 85,193 | 86,145 | 85,450 | 85,381 | (1%) | (1%) | ||||||||||||
| Bancorp shareholders' equity | 16,545 | 16,883 | 16,584 | 16,376 | 15,982 | (2%) | 4% | ||||||||||||
| (a) Non-GAAP measure; see discussion of non-GAAP and Reg. G reconciliation beginning on page 32 in Exhibit 99.1 of 8-K filing dated 1/24/17. | |||||||||||||||||||
Excluding the $16 million reduction for the card refunds, net interest income (FTE)* of $925 million was up 1 percent from the third quarter of 2016. Reported net interest income of $903 million and net interest income (FTE)* of $909 million both decreased $4 million from the third quarter of 2016, primarily driven by the aforementioned card refunds, partially offset by improved short-term market rates in the fourth quarter and higher investment securities balances.
The adjusted net interest margin* was 2.91 percent, up 3 bps from the prior quarter, excluding the aforementioned card refunds. The reported net interest margin was 2.84 percent and the net interest margin (FTE)* was 2.86 percent, both decreasing 2 bps from the previous quarter, primarily due to a 5 basis point impact from the aforementioned card refunds. This impact was partially offset by improved short-term market rates in the fourth quarter.
Compared to the fourth quarter of 2015, adjusted net interest income (FTE)* was up 2 percent, excluding the card refunds. Adjusted net interest margin (FTE)* was up 6 bps from the fourth quarter of 2015, excluding the card refunds. Reported net interest income and net interest income (FTE)*, increased by $4 million and $5 million, or 2 percent, respectively from the fourth quarter of 2015. The reported net interest margin and net interest margin (FTE)* increased by 1 bp year-over-year. The increase in net interest income was driven by the impact of higher investment securities balances and improved short-term market rates, partially offset by the previously-mentioned card refunds. The increase in the net interest margin was driven by improved short-term market rates, partially offset by the previously-mentioned card refunds.
* Non-GAAP measure; see discussion of non-GAAP and Reg. G reconciliation beginning on page 32 in Exhibit 99.1 of 8-K filing dated 1/24/17.
Securities
Average securities and other short-term investments were $32.6 billion in the fourth quarter of 2016 compared to $31.7 billion in the previous quarter and $31.3 billion in the fourth quarter of 2015. Average balances of other short-term investments decreased by $18 million sequentially to $1.8 billion.
| Loans | |||||||||||||||||||
| For the Three Months Ended | % Change | ||||||||||||||||||
| December | September | June | March | December | |||||||||||||||
| 2016 | 2016 | 2016 | 2016 | 2015 | Seq | Yr/Yr | |||||||||||||
| Average Portfolio Loans and Leases ($ in millions) | |||||||||||||||||||
| Commercial: | |||||||||||||||||||
| Commercial and industrial loans | $42,548 | $43,116 | $43,876 | $43,089 | $43,154 | (1%) | (1%) | ||||||||||||
| Commercial mortgage loans | 6,957 | 6,888 | 6,831 | 6,886 | 7,032 | 1% | (1%) | ||||||||||||
| Commercial construction loans | 3,890 | 3,848 | 3,551 | 3,297 | 3,141 | 1% | 24% | ||||||||||||
| Commercial leases | 3,921 | 3,962 | 3,898 | 3,874 | 3,839 | (1%) | 2% | ||||||||||||
| Total commercial loans and leases | $57,316 | $57,814 | $58,156 | $57,146 | $57,166 | (1%) | - | ||||||||||||
| Consumer: | |||||||||||||||||||
| Residential mortgage loans | $14,854 | $14,455 | $14,046 | $13,788 | $13,504 | 3% | 10% | ||||||||||||
| Home equity | 7,779 | 7,918 | 8,054 | 8,217 | 8,360 | (2%) | (7%) | ||||||||||||
| Automobile loans | 10,162 | 10,508 | 10,887 | 11,283 | 11,670 | (3%) | (13%) | ||||||||||||
| Credit card | 2,180 | 2,165 | 2,134 | 2,179 | 2,218 | 1% | (2%) | ||||||||||||
| Other consumer loans and leases | 673 | 651 | 654 | 662 | 676 | 3% | - | ||||||||||||
| Total consumer loans and leases | $35,648 | $35,697 | $35,775 | $36,129 | $36,428 | - | (2%) | ||||||||||||
| Total average portfolio loans and leases | $92,964 | $93,511 | $93,931 | $93,275 | $93,594 | (1%) | (1%) | ||||||||||||
| Average loans held for sale | $1,017 | $906 | $876 | $803 | $993 | 12% | 2% | ||||||||||||
Average portfolio loan and lease balances decreased $547 million, or 1 percent, sequentially and decreased $630 million, or 1 percent, from the fourth quarter of 2015. The sequential and year-over-year decrease was driven by both declines in automobile loans related to the strategic decision to reduce auto loan originations to improve return on shareholders’ equity and deliberate exits from certain commercial and industrial (C&I) loans that did not meet risk-adjusted profitability targets. The sequential and year-over-year decreases were partially offset by increases in residential mortgage and commercial real estate loans. Period end portfolio loans and leases of $92.1 billion decreased $1.1 billion, or 1 percent, sequentially and $484 million, or 1 percent, from a year ago. The sequential decrease was primarily due to decreases in C&I and automobile loans, partially offset by an increase in residential mortgage loans. The year-over-year decline was primarily driven by decreases in automobile and home equity loans, partially offset by increases in residential mortgage and commercial construction loans.
Average commercial portfolio loan and lease balances decreased $498 million, or 1 percent, sequentially and were flat from the fourth quarter of 2015. Average C&I loans decreased $568 million, or 1 percent, from the prior quarter and decreased $606 million, or 1 percent, from the fourth quarter of 2015. Average commercial real estate loans increased $111 million, or 1 percent, from the prior quarter and increased $674 million, or 7 percent, from the fourth quarter of 2015. Within commercial real estate, growth was relatively balanced as average commercial mortgage balances increased $69 million and average commercial construction balances increased $42 million sequentially. Period end commercial line utilization of 34% decreased 95 bps from the third quarter of 2016 and decreased 88 bps from the fourth quarter of 2015.
Average consumer portfolio loan and lease balances were flat sequentially and decreased $780 million, or 2 percent, from the fourth quarter of 2015. This was primarily driven by average automobile loans which decreased 3 percent sequentially and 13 percent from a year ago. Average residential mortgage loans increased 3 percent sequentially and 10 percent from the previous year. Average home equity loans decreased 2 percent sequentially and 7 percent from the fourth quarter of 2015. Average credit card loans increased 1 percent sequentially and decreased 2 percent from the fourth quarter of 2015.
| Deposits | ||||||||||||||||||||
| For the Three Months Ended | % Change | |||||||||||||||||||
| December | September | June | March | December | ||||||||||||||||
| 2016 | 2016 | 2016 | 2016 | 2015 | Seq | Yr/Yr | ||||||||||||||
| Average Deposits ($ in millions) | ||||||||||||||||||||
| Demand | $36,412 | $35,918 | $35,912 | $35,201 | $36,254 | 1% | - | |||||||||||||
| Interest checking | 25,644 | 24,475 | 24,714 | 25,740 | 25,296 | 5% | 1% | |||||||||||||
| Savings | 13,979 | 14,232 | 14,576 | 14,601 | 14,615 | (2%) | (4%) | |||||||||||||
| Money market | 20,476 | 19,706 | 19,243 | 18,655 | 18,775 | 4% | 9% | |||||||||||||
| Foreign office(a) | 497 | 524 | 484 | 483 | 736 | (5%) | (32%) | |||||||||||||
| Total transaction deposits | $97,008 | $94,855 | $94,929 | $94,680 | $95,676 | 2% | 1% | |||||||||||||
| Other time | 3,941 | 4,020 | 4,044 | 4,035 | 4,052 | (2%) | (3%) | |||||||||||||
| Total core deposits | $100,949 | $98,875 | $98,973 | $98,715 | $99,728 | 2% | 1% | |||||||||||||
| Certificates - $100,000 and over | 2,539 | 2,768 | 2,819 | 2,815 | 3,305 | (8%) | (23%) | |||||||||||||
| Other | 115 | 749 | 467 | - | 7 | (85%) | NM | |||||||||||||
| Total average deposits | $103,603 | $102,392 | $102,259 | $101,530 | $103,040 | 1% | 1% | |||||||||||||
| (a)Includes commercial customer Eurodollar sweep balances for which the Bancorp pays rates comparable to other commercial deposit accounts. | ||||||||||||||||||||
Average core deposits increased $2.1 billion, or 2 percent, sequentially and increased $1.2 billion, or 1 percent, from the fourth quarter of 2015. Average transaction deposits increased $2.2 billion, or 2 percent from the third quarter of 2016 and increased $1.3 billion, or 1 percent from the fourth quarter of 2015. Sequential performance was primarily driven by increased commercial interest checking account balances, as well as consumer money market account balances that benefited from the recent enactment of new money market reforms, partially offset by lower savings account balances. The year-over-year increase was primarily driven by higher consumer money market and consumer interest checking account balances, partially offset by lower savings and foreign office account balances. Other time deposits decreased by 2 percent sequentially and 3 percent year-over-year.
Average total commercial transaction deposits of $45 billion increased 3 percent sequentially and decreased 2 percent from the fourth quarter of 2015. Average total consumer transaction deposits of $52 billion increased 2 percent sequentially and increased 5 percent from the fourth quarter of 2015.
| Wholesale Funding | ||||||||||||||||||||
| For the Three Months Ended | % Change | |||||||||||||||||||
| December | September | June | March | December | ||||||||||||||||
| 2016 | 2016 | 2016 | 2016 | 2015 | Seq | Yr/Yr | ||||||||||||||
| Average Wholesale Funding ($ in millions) | ||||||||||||||||||||
| Certificates - $100,000 and over | $2,539 | $2,768 | $2,819 | $2,815 | $3,305 | (8%) | (23%) | |||||||||||||
| Other deposits | 115 | 749 | 467 | - | 7 | (85%) | NM | |||||||||||||
| Federal funds purchased | 280 | 446 | 693 | 608 | 1,182 | (37%) | (76%) | |||||||||||||
| Other short-term borrowings | 1,908 | 2,171 | 3,754 | 3,564 | 1,675 | (12%) | 14% | |||||||||||||
| Long-term debt | 15,173 | 16,102 | 15,351 | 14,949 | 15,738 | (6%) | (4%) | |||||||||||||
| Total average wholesale funding | $20,015 | $22,236 | $23,084 | $21,936 | $21,907 | (10%) | (9%) | |||||||||||||
Average wholesale funding of $20.0 billion decreased $2.2 billion, or 10 percent, sequentially and decreased $1.9 billion, or 9 percent, compared with the fourth quarter of 2015. The sequential decrease in average wholesale funding was primarily driven by a decline in long-term debt largely due to maturities early in the fourth quarter. The year-over-year decline reflected a decrease in federal funds purchased resulting from an increase in deposit balances.
| Noninterest Income | ||||||||||||||
| For the Three Months Ended | % Change | |||||||||||||
| December | September | June | March | December | ||||||||||
| 2016 | 2016 | 2016 | 2016 | 2015 | Seq | Yr/Yr | ||||||||
| Noninterest Income ($ in millions) | ||||||||||||||
| Service charges on deposits | $141 | $143 | $138 | $137 | $144 | (1%) | (2%) | |||||||
| Corporate banking revenue | 101 | 111 | 117 | 102 | 104 | (9%) | (3%) | |||||||
| Mortgage banking net revenue | 65 | 66 | 75 | 78 | 74 | (2%) | (12%) | |||||||
| Wealth and asset management revenue | 100 | 101 | 101 | 102 | 102 | (1%) | (2%) | |||||||
| Card and processing revenue | 79 | 79 | 82 | 79 | 77 | - | 3% | |||||||
| Other noninterest income | 137 | 336 | 80 | 136 | 602 | (59%) | (77%) | |||||||
| Securities gains (losses), net | (3) | 4 | 6 | 3 | 1 | NM | NM | |||||||
| Total noninterest income | $620 | $840 | $599 | $637 | $1,104 | (26%) | (44%) | |||||||
Noninterest income of $620 million decreased $220 million sequentially and decreased $484 million compared with prior year results. The sequential and year-over-year comparisons reflect the impacts described below.
| Noninterest Income excluding certain items | |||||||||||||
| For the Three Months Ended | % Change | ||||||||||||
| December | September | December | |||||||||||
| 2016 | 2016 | 2015 | Seq | Yr/Yr | |||||||||
| Noninterest Income excluding certain items ($ in millions) | |||||||||||||
| Noninterest income (U.S. GAAP) | $620 | $840 | $1,104 | ||||||||||
| Gain on Vantiv warrant actions | (9) | - | (89) | ||||||||||
| Valuation of Visa total return swap | (6) | 12 | 10 | ||||||||||
|
Gain from termination and settlement of Vantiv TRA and the expected |
- | (280) | (49) | ||||||||||
| Gain on sale of a non-branch facility | - | (11) | - | ||||||||||
| Gain on sale of Vantiv shares | - | - | (331) | ||||||||||
| Vantiv warrant valuation | - | 2 | (21) | ||||||||||
| Transfer of certain nonconforming investments under Volcker to HFS | - | 9 | - | ||||||||||
| Branch / land impairment charge | - | 28 | - | ||||||||||
| Securities (gains) / losses | 3 | (4) | (1) | ||||||||||
| Noninterest income excluding certain items(a) | $608 | $596 | $623 | 2% | (2%) | ||||||||
| (a) Non-GAAP measure; see discussion of non-GAAP and Reg. G reconciliation beginning on page 32 in Exhibit 99.1 of 8-K filing dated 1/24/17. | |||||||||||||
Excluding the items in the table above, noninterest income of $608 million increased $12 million, or 2 percent, from the previous quarter and decreased $15 million, or 2 percent, from the fourth quarter of 2015. The sequential increase was primarily due to the $33 million annual payment received from Vantiv pursuant to the tax receivable agreement in the fourth quarter of 2016, partially offset by a decrease in corporate banking revenue. The year-over-year decrease was driven by a decline in mortgage banking net revenue.
Service charges on deposits of $141 million decreased 1 percent from the third quarter of 2016, and decreased 2 percent compared with the fourth quarter of 2015. The sequential decrease primarily reflected a 2 percent decrease in commercial service charges, as well as a 1 percent decrease in retail service charges. The decrease from the fourth quarter of 2015 was primarily due to a 5 percent decrease in retail service charges.
Corporate banking revenue of $101 million decreased 9 percent compared to the third quarter of 2016 and decreased 3 percent from the fourth quarter of 2015. The sequential comparison reflects decreases in institutional sales revenue and lease remarketing fees, partially offset by an increase in foreign exchange fees. The year-over-year decrease was primarily driven by lower lease remarketing fees and letter of credit fees, partially offset by higher foreign exchange fees and institutional sales revenue.
Mortgage banking net revenue was $65 million in the fourth quarter of 2016, down $1 million from the third quarter of 2016 and down $9 million from the fourth quarter of 2015. Originations of $2.7 billion in the current quarter decreased 5 percent sequentially and increased 54 percent from the same quarter last year. Fourth quarter 2016 originations resulted in $30 million of origination fees and gains on loan sales, compared with $61 million during the previous quarter and $37 million during the fourth quarter of 2015. Net mortgage servicing revenue (which consists of gross mortgage servicing fees, MSR amortization, and net valuation adjustments on MSRs and mark-to-market adjustments on free-standing derivatives used to economically hedge the MSR portfolio) was $35 million this quarter, $5 million in the third quarter of 2016, and $37 million in the fourth quarter of 2015. Gross mortgage servicing fees were $48 million this quarter, $49 million in the third quarter of 2016, and $53 million in the fourth quarter of 2015. MSR amortization was $35 million this quarter, $35 million in the third quarter of 2016, and $29 million in the fourth quarter of 2015. Net servicing asset valuation adjustments resulted in a positive $23 million impact in the fourth quarter of 2016, negative $9 million in the third quarter of 2016, and positive $13 million in the fourth quarter of 2015.
Wealth and asset management revenue of $100 million decreased 1 percent from the third quarter of 2016 and decreased 2 percent from the fourth quarter of 2015. The sequential decrease was primarily driven by lower personal asset management fees. The year-over-year decline was primarily driven by lower securities and brokerage fees, partially offset by an increase in institutional trust fees.
Card and processing revenue of $79 million in the fourth quarter of 2016 was flat sequentially and increased 3 percent from the fourth quarter of 2015. The year-over-year increase reflected higher spend volume and actively used cards.
Other noninterest income totaled $137 million in the fourth quarter of 2016, compared with $336 million in the previous quarter and $602 million in the fourth quarter of 2015. As previously described, the results included the adjustments in the table on page 9 with the exception of securities gains / (losses) in all comparable periods. Excluding these items, other noninterest income of $122 million increased approximately $26 million, or 27 percent, from the third quarter of 2016 and was flat from the fourth quarter of 2015. The sequential increase was primarily due to the $33 million annual payment received from Vantiv pursuant to the tax receivable agreement in the fourth quarter of 2016.
Net losses on investment securities were $3 million in the fourth quarter of 2016, compared with $4 million net gains in the previous quarter and a $1 million net gain in the fourth quarter of 2015.
| Noninterest Expense | |||||||||||||||||||
| For the Three Months Ended | % Change | ||||||||||||||||||
| December | September | June | March | December | |||||||||||||||
| 2016 | 2016 | 2016 | 2016 | 2015 | Seq | Yr/Yr | |||||||||||||
| Noninterest Expense ($ in millions) | |||||||||||||||||||
| Salaries, wages and incentives | $403 | $400 | $407 | $403 | $386 | 1% | 4% | ||||||||||||
| Employee benefits | 76 | 78 | 85 | 100 | 74 | (3%) | 3% | ||||||||||||
| Net occupancy expense | 73 | 73 | 75 | 77 | 83 | - | (12%) | ||||||||||||
| Technology and communications | 56 | 62 | 60 | 56 | 59 | (10%) | (5%) | ||||||||||||
| Equipment expense | 29 | 29 | 30 | 30 | 32 | - | (9%) | ||||||||||||
| Card and processing expense | 31 | 30 | 37 | 35 | 40 | 3% | (23%) | ||||||||||||
| Other noninterest expense | 292 | 301 | 289 | 285 | 289 | (3%) | 1% | ||||||||||||
| Total noninterest expense | $960 | $973 | $983 | $986 | $963 | (1%) | - | ||||||||||||
Noninterest expense of $960 million declined $13 million, or 1 percent, compared with the third quarter of 2016 and was flat compared with the fourth quarter of 2015. The sequential decrease primarily reflected lower technology and communications expense, the change in provision for unfunded commitments, and seasonally lower marketing expense. The year-over-year decrease was primarily driven by lower card and processing expense, predominantly due to contract renegotiations as well as lower net occupancy expense, partially offset by increased compensation expense mainly as a result of personnel additions in risk and compliance and information technology.
| Credit Quality | |||||||||||||||
| For the Three Months Ended | |||||||||||||||
| December | September | June | March | December | |||||||||||
| 2016 | 2016 | 2016 | 2016 | 2015 | |||||||||||
| Total net losses charged-off ($ in millions) | |||||||||||||||
| Commercial and industrial loans | ($25) | ($61) | ($39) | ($46) | ($30) | ||||||||||
| Commercial mortgage loans | (2) | (2) | (6) | (6) | (3) | ||||||||||
| Commercial construction loans | - | - | - | - | - | ||||||||||
| Commercial leases | (1) | - | (1) | (2) | (1) | ||||||||||
| Residential mortgage loans | (2) | (2) | (2) | (2) | (3) | ||||||||||
| Home equity | (6) | (7) | (6) | (8) | (9) | ||||||||||
| Automobile loans | (11) | (9) | (8) | (9) | (9) | ||||||||||
| Credit card | (19) | (20) | (21) | (20) | (19) | ||||||||||
| Other consumer loans and leases | (7) | (6) | (4) | (3) | (6) | ||||||||||
| Total net losses charged-off | ($73) | ($107) | ($87) | ($96) | ($80) | ||||||||||
| Total losses charged-off | ($97) | ($137) | ($105) | ($116) | ($105) | ||||||||||
| Total recoveries of losses previously charged-off | 24 | 30 | 18 | 20 | 25 | ||||||||||
| Total net losses charged-off | ($73) | ($107) | ($87) | ($96) | ($80) | ||||||||||
| Ratios (annualized) | |||||||||||||||
| Net losses charged-off as a percent of average portfolio loans and | |||||||||||||||
| leases (excluding held for sale) | 0.31% | 0.45% | 0.37% | 0.42% | 0.34% | ||||||||||
| Commercial | 0.20% | 0.43% | 0.32% | 0.38% | 0.24% | ||||||||||
| Consumer | 0.49% | 0.49% | 0.45% | 0.48% | 0.49% | ||||||||||
Net charge-offs were $73 million, or 31 bps of average portfolio loans and leases on an annualized basis, in the fourth quarter of 2016 compared with net charge-offs of $107 million, or 45 bps, in the third quarter of 2016 and $80 million, or 34 bps, in the fourth quarter of 2015.
Commercial net charge-offs were $28 million, or 20 bps, and were down $35 million sequentially. The decrease was primarily due to lower charge-offs of C&I loans, which decreased by $36 million from the third quarter of 2016. Commercial real estate net charge-offs were flat from the previous quarter.
Consumer net charge-offs were $45 million, or 49 bps, and were up $1 million sequentially. Compared with the previous quarter, net charge-offs on residential mortgage loans were flat. Net charge-offs on the auto portfolio were up $2 million. Net charge-offs on home equity and credit card loans were each down $1 million from the third quarter of 2016. Net charge-offs on other consumer loans of $7 million were up $1 million sequentially.
| For the Three Months Ended | ||||||||||||||
| December | September | June | March | December | ||||||||||
| 2016 | 2016 | 2016 | 2016 | 2015 | ||||||||||
| Allowance for Credit Losses ($ in millions) | ||||||||||||||
| Allowance for loan and lease losses, beginning | $1,272 | $1,299 | $1,295 | $1,272 | $1,261 | |||||||||
| Total net losses charged-off | (73) | (107) | (87) | (96) | (80) | |||||||||
| Provision for loan and lease losses | 54 | 80 | 91 | 119 | 91 | |||||||||
| Allowance for loan and lease losses, ending | $1,253 | $1,272 | $1,299 | $1,295 | $1,272 | |||||||||
| Reserve for unfunded commitments, beginning | $162 | $151 | $144 | $138 | $134 | |||||||||
| Provision for unfunded commitments | (1) | 11 | 7 | 6 | 4 | |||||||||
| Reserve for unfunded commitments, ending | $161 | $162 | $151 | $144 | $138 | |||||||||
| Components of allowance for credit losses: | ||||||||||||||
| Allowance for loan and lease losses | $1,253 | $1,272 | $1,299 | $1,295 | $1,272 | |||||||||
| Reserve for unfunded commitments | 161 | 162 | 151 | 144 | 138 | |||||||||
| Total allowance for credit losses | $1,414 | $1,434 | $1,450 | $1,439 | $1,410 | |||||||||
| Allowance for loan and lease losses ratio | ||||||||||||||
| As a percent of portfolio loans and leases | 1.36% | 1.37% | 1.38% | 1.38% | 1.37% | |||||||||
| As a percent of nonperforming loans and leases(a) | 190% | 212% | 188% | 185% | 252% | |||||||||
| As a percent of nonperforming assets(a) | 170% | 182% | 161% | 157% | 197% | |||||||||
| (a) Excludes nonaccrual loans in loans held for sale. | ||||||||||||||
Provision for loan and lease losses totaled $54 million in the fourth quarter of 2016. The allowance represented 1.36 percent of total portfolio loans and leases outstanding as of quarter end, compared with 1.37 percent last quarter, and represented 190 percent of nonperforming loans and leases, and 170 percent of nonperforming assets.
Provision for loan and lease losses decreased $26 million from the third quarter of 2016 and $37 million from the fourth quarter of 2015, impacted by improving criticized assets. The allowance for loan and lease losses decreased $19 million sequentially. As of December 31, the reserve allocated to the energy portfolio was approximately 4.04%, down from approximately 4.95% last quarter.
| As of | |||||||||||||||||
| December | September | June | March | December | |||||||||||||
| Nonperforming Assets and Delinquent Loans ($ in millions) | 2016 | 2016 | 2016 | 2016 | 2015 | ||||||||||||
| Nonaccrual portfolio loans and leases: | |||||||||||||||||
| Commercial and industrial loans | $302 | $235 | $254 | $278 | $82 | ||||||||||||
| Commercial mortgage loans | 27 | 31 | 39 | 51 | 56 | ||||||||||||
| Commercial construction loans | - | - | - | - | - | ||||||||||||
| Commercial leases | 2 | - | 4 | 4 | - | ||||||||||||
| Residential mortgage loans | 17 | 19 | 27 | 25 | 28 | ||||||||||||
| Home equity | 55 | 59 | 61 | 61 | 62 | ||||||||||||
| Total nonaccrual portfolio loans and leases (excludes restructured loans) | $403 | $344 | $385 | $419 | $228 | ||||||||||||
| Nonaccrual restructured portfolio commercial loans and leases(b) | 192 | 194 | 242 | 210 | 203 | ||||||||||||
| Nonaccrual restructured portfolio consumer loans and leases | 65 | 63 | 66 | 72 | 75 | ||||||||||||
| Total nonaccrual portfolio loans and leases | $660 | $601 | $693 | $701 | $506 | ||||||||||||
| Repossessed property | 15 | 13 | 15 | 17 | 18 | ||||||||||||
| OREO | 63 | 84 | i | 97 | i | 107 | i | 123 | i | ||||||||
| Total nonperforming portfolio assets(a) | $738 | $698 | $805 | $825 | $647 | ||||||||||||
| Nonaccrual loans held for sale | 4 | 91 | 20 | 3 | 1 | ||||||||||||
| Nonaccrual restructured loans held for sale | 9 | 9 | - | 2 | 11 | ||||||||||||
| Total nonperforming assets | $751 | $798 | $825 | $830 | $659 | ||||||||||||
| Restructured Portfolio Consumer loans and leases (accrual) | $959 | $972 | $982 | $998 | $979 | ||||||||||||
| Restructured Portfolio Commercial loans and leases (accrual)(b) | $321 | $408 | $431 | $461 | $491 | ||||||||||||
| Total loans and leases 30-89 days past due (accrual) | $231 | $205 | $196 | $208 | $244 | ||||||||||||
| Total loans and leases 90 days past due (accrual) | $84 | $76 | $65 | $73 | $75 | ||||||||||||
| Nonperforming portfolio loans and leases as a percent of portfolio | |||||||||||||||||
| loans, leases and other assets, including OREO(a) | 0.72% | 0.64% | 0.74% | 0.75% | 0.55% | ||||||||||||
| Nonperforming portfolio assets as a percent of portfolio loans and | |||||||||||||||||
| leases and OREO(a) | 0.80% | 0.75% | 0.86% | 0.88% | 0.70% | ||||||||||||
| (a) Does not include nonaccrual loans held for sale. | |||||||||||||||||
| (b) As of December 31, 2016, excludes $7 million of restructured accruing loans and $19 million of restructured nonaccrual loans associated with a consolidated VIE in which the Bancorp has no continuing credit risk due to the risk being assumed by a third party. As of September 30, 2016, June 30, 2016, March 31, 2016 and December 31, 2015, excludes $7 million of restructured accruing loans and $20 million of restructured nonaccrual loans associated with a consolidated VIE in which the Bancorp has no continuing credit risk due to the risk being assumed by a third party. | |||||||||||||||||
Total nonperforming portfolio assets increased $40 million, or 6 percent, from the previous quarter to $738 million. Portfolio nonperforming loans (NPLs) at quarter-end increased $59 million, or 10 percent, from the previous quarter to $660 million, or 0.72 percent of total portfolio loans, leases and OREO.
Commercial portfolio NPLs increased $63 million from last quarter to $523 million, or 0.93 percent of commercial portfolio loans, leases and OREO. Consumer portfolio NPLs decreased $4 million from last quarter to $137 million, or 0.38 percent of consumer portfolio loans, leases and OREO.
OREO balances were down $21 million from the prior quarter to $63 million, and included $34 million in commercial OREO and $29 million in consumer OREO. Repossessed personal property increased $2 million from the prior quarter to $15 million.
Loans over 90 days past due and still accruing increased $11 million from the third quarter of 2016 to $84 million. Loans 30-89 days past due of $232 million were up $27 million from the previous quarter. The above delinquency figures exclude nonaccruals described previously.
| Capital and Liquidity Position | ||||||||||||||
| For the Three Months Ended | ||||||||||||||
| December | September | June | March | December | ||||||||||
| 2016 | 2016 | 2016 | 2016 | 2015 | ||||||||||
| Capital Position | ||||||||||||||
| Average total Bancorp shareholders' equity to average assets | 11.66% | 11.83% | 11.60% | 11.57% | 11.26% | |||||||||
| Tangible equity(a) | 9.82% | 9.73% | 9.59% | 9.51% | 9.55% | |||||||||
| Tangible common equity (excluding unrealized gains/losses)(a) | 8.87% | 8.78% | 8.64% | 8.55% | 8.59% | |||||||||
| Tangible common equity (including unrealized gains/losses)(a) | 8.91% | 9.24% | 9.18% | 8.97% | 8.71% | |||||||||
|
Regulatory capital ratios: |
||||||||||||||
| CET1 capital(b) | 10.40% | 10.17% | 9.94% | 9.81% | 9.82% | |||||||||
| Tier I risk-based capital(b) | 11.51% | 11.27% | 11.03% | 10.91% | 10.93% | |||||||||
| Total risk-based capital(b) | 15.00% | 14.88% | 14.66% | 14.66% | 14.13% | |||||||||
| Tier I leverage | 9.90% | 9.80% | 9.64% | 9.57% | 9.54% | |||||||||
| CET1 capital (fully phased-in)(a)(b) | 10.30% | 10.09% | 9.86% | 9.72% | 9.72% | |||||||||
| Book value per share | $19.82 | $20.44 | $20.09 | $19.46 | $18.48 | |||||||||
| Tangible book value per share(a) | $16.60 | $17.22 | $16.93 | $16.32 | $15.39 | |||||||||
| Modified liquidity coverage ratio (LCR)(c)(d) | 128% | 115% | 110% | 118% | N/A | |||||||||
| (a) | Non-GAAP measure; see discussion of non-GAAP and Reg. G reconciliation beginning on page 32 in Exhibit 99.1 of 8-K filing dated 1/24/17. | |||||||||||||
| (b) | Under the banking agencies Basel III Final Rule, assets and credit equivalent amounts of off-balance sheet exposures are calculated based upon the standardized approach for risk-weighted assets. The resulting values are added together resulting in the Bancorp's total risk-weighted assets. | |||||||||||||
| (c) | Current period regulatory capital and liquidity ratios are estimated. | |||||||||||||
| (d) | The Bancorp became subject to the Modified LCR regulations effective January 1, 2016. | |||||||||||||
Capital ratios remained strong and grew during the quarter. The CET1 ratio was 10.40 percent, the tangible common equity to tangible assets ratio* was 8.87 percent (excluding unrealized gains/losses), and 8.91 percent (including unrealized gains/losses). The Tier I risk-based capital ratio was 11.51 percent, the Total risk-based capital ratio was 15.00 percent, and the Tier I leverage ratio was 9.90 percent.
Book value per share at December 31, 2016 was $19.82 and tangible book value per share* was $16.60, compared with the September 30, 2016 book value per share of $20.44 and tangible book value per share* of $17.22.
Fifth Third entered into or completed multiple share repurchases during the quarter. Below is a summary of those share repurchases.
- On November 7, 2016, Fifth Third settled the forward contract related to the August 5, 2016 $240 million share repurchase agreement. An additional 1.1 million shares were repurchased in connection with the completion of this agreement.
- On December 20, 2016, Fifth Third initially settled a share repurchase agreement whereby Fifth Third would purchase $155 million of its outstanding stock. This reduced fourth quarter common shares outstanding by 4.8 million shares. Settlement of the forward contract related to this agreement is expected to occur on or before March 15, 2017.
* Non-GAAP measure; see discussion of non-GAAP and Reg. G reconciliation beginning on page 32 in Exhibit 99.1 of 8-K filing dated 1/24/17.
Tax Rate
The effective tax rate was 22.6 percent in the fourth quarter of 2016 compared with 25.6 percent in the third quarter of 2016 and 30.7 percent in the fourth quarter of 2015. The tax rate in the fourth quarter of 2016 was impacted by a $6 million tax benefit associated with the early adoption of ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting”, using the modified retrospective transition method. Additionally, the early adoption resulted in incremental tax expense of $1 million in the first quarter of 2016 and $5 million in the second quarter of 2016. The tax rate in the third quarter of 2016 was impacted by Vantiv-related gains, which were partially offset by an $8 million tax benefit in connection with certain commercial lease terminations.
Other
On November 21, 2016, Vantiv, Inc. conducted a secondary offering of 4.8 million shares of its Class A common stock on behalf of Fifth Third. Vantiv also concurrently repurchased 850,000 shares of Vantiv Class A common stock from Fifth Third. The 5.65 million shares sold by Fifth Third through these transactions were obtained through the net exercise of the entire remaining warrant position in Vantiv Holding, LLC and the exchange of those Vantiv Holding, LLC units for Class A shares of common stock in Vantiv, Inc. The warrant position gave Fifth Third the right to purchase approximately 7.8 million Class C units at a $15.98 strike price, which was settled through the net issuance of 5.65 million units. For more detail, see the 8-K dated November 22, 2016.
Fifth Third Bank owns approximately 35 million units representing a 17.9 percent interest in Vantiv Holding, LLC, convertible into shares of Vantiv, Inc., a publicly traded firm. Based upon Vantiv’s closing price of $59.62 on December 31, 2016, our interest in Vantiv was valued at approximately $2.1 billion. Next month in our 10-K, we will update our disclosure of the carrying value of our interest in Vantiv stock, which was $404 million as of September 30, 2016. The difference between the market value and the book value of Fifth Third’s interest in Vantiv’s shares is not recognized in Fifth Third’s equity or capital.
Conference Call
Fifth Third will host a conference call to discuss these financial results at 9:00 a.m. (Eastern Time) today. This conference call will be webcast live by Thomson Financial and may be accessed through the Fifth Third Investor Relations website at www.53.com (click on “About Us” then “Investor Relations”). Institutional investors can access the call via Thomson Financial’s password-protected event management site, StreetEvents (www.streetevents.com).
Those unable to listen to the live webcast may access a webcast replay through the Fifth Third Investor Relations website at the same web address. Additionally, a telephone replay of the conference call will be available beginning approximately two hours after the conference call until Tuesday, February 7, 2017 by dialing 855-859-2056 for domestic access or 404-537-3406 for international access (passcode 44810588#).
Corporate Profile
Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. As of December 31, 2016, the Company had $142 billion in assets and operates 1,191 full-service Banking Centers, including 94 Bank Mart® locations, most open seven days a week, inside select grocery stores and 2,495 ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia and North Carolina. Fifth Third operates four main businesses: Commercial Banking, Branch Banking, Consumer Lending, and Wealth & Asset Management. Fifth Third also has a 17.9% interest in Vantiv Holding, LLC. Fifth Third is among the largest money managers in the Midwest and, as of December 31, 2016, had $291 billion in assets under care, of which it managed $27 billion for individuals, corporations and not-for-profit organizations. Investor information and press releases can be viewed at www.53.com. Fifth Third’s common stock is traded on the NASDAQ® Global Select Market under the symbol “FITB.”
FORWARD-LOOKING STATEMENTS
This release contains statements that we believe are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. They usually can be identified by the use of forward-looking language such as “will likely result,” “may,” “are expected to,” “anticipates,” “potential,” “estimate,” “forecast,” “projected,” “intends to,” or may include other similar words or phrases such as “believes,” “plans,” “trend,” “objective,” “continue,” “remain,” or similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” or similar verbs. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including but not limited to the risk factors set forth in our most recent Annual Report on Form 10-K as updated from time to time by our Quarterly Reports on Form 10-Q. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements we may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to us. There is a risk that additional information may become known during the company’s quarterly closing process or as a result of subsequent events that could affect the accuracy of the statements and financial information contained herein.
There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) general economic or real estate market conditions, either nationally or in the states in which Fifth Third, one or more acquired entities and/or the combined company do business, weaken or are less favorable than expected; (2) deteriorating credit quality; (3) political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; (4) changes in the interest rate environment reduce interest margins; (5) prepayment speeds, loan origination and sale volumes, charge-offs and loan loss provisions; (6) Fifth Third’s ability to maintain required capital levels and adequate sources of funding and liquidity; (7) maintaining capital requirements and adequate sources of funding and liquidity may limit Fifth Third’s operations and potential growth; (8) changes and trends in capital markets; (9) problems encountered by larger or similar financial institutions may adversely affect the banking industry and/or Fifth Third; (10) competitive pressures among depository institutions increase significantly; (11) effects of critical accounting policies and judgments; (12) changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board (FASB) or other regulatory agencies; (13) legislative or regulatory changes or actions, or significant litigation, adversely affect Fifth Third, one or more acquired entities and/or the combined company or the businesses in which Fifth Third, one or more acquired entities and/or the combined company are engaged, including the Dodd-Frank Wall Street Reform and Consumer Protection Act; (14) ability to maintain favorable ratings from rating agencies; (15) fluctuation of Fifth Third’s stock price; (16) ability to attract and retain key personnel; (17) ability to receive dividends from its subsidiaries; (18) potentially dilutive effect of future acquisitions on current shareholders’ ownership of Fifth Third; (19) effects of accounting or financial results of one or more acquired entities; (20) difficulties from Fifth Third’s investment in, relationship with, and nature of the operations of Vantiv, LLC; (21) loss of income from any sale or potential sale of businesses; (22) difficulties in separating the operations of any branches or other assets divested; (23) losses or adverse impacts on the carrying values of branches and long-lived assets in connection with their sales or anticipated sales; (24) inability to achieve expected benefits from branch consolidations and planned sales within desired timeframes, if at all; (25) ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks; and (26) the impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity.
You should refer to our periodic and current reports filed with the Securities and Exchange Commission, or “SEC,” for further information on other factors, which could cause actual results to be significantly different from those expressed or implied by these forward-looking statements.
In this release, we may sometimes provide non-GAAP financial information. Please note that although non-GAAP financial measures provide useful insight to analysts, investors and regulators, they should not be considered in isolation or relied upon as a substitute for analysis using GAAP measures. We provide GAAP reconciliations for non-GAAP measures in our earnings release and presentation, both of which are available in the investor relations section of our website, www.53.com.
