FIFTH THIRD BANCORP [FITB] Filings

10-Q 1 fitb-20230930.htm 10-Q fitb-20230930

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2023

Commission File Number 001-33653

(Exact name of Registrant as specified in its charter)


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

38 Fountain Square Plaza

Cincinnati, Ohio 45263

(Address of principal executive offices)

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

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

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

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered:

Common Stock, Without Par Value

FITB

The

NASDAQ

Stock Market LLC

Depositary Shares Representing a 1/1000th Ownership Interest in a Share of

6.625% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series I

FITBI

The

NASDAQ

Stock Market LLC

Depositary Shares Representing a 1/40th Ownership Interest in a Share of

6.00% Non-Cumulative Perpetual Class B Preferred Stock, Series A

FITBP

The

NASDAQ

Stock Market LLC

Depositary Shares Representing a 1/1000th Ownership Interest in a Share of

4.95% Non-Cumulative Perpetual Preferred Stock, Series K

FITBO

The

NASDAQ

Stock Market LLC

There were 681,016,616 shares of the Registrant’s common stock, without par value, outstanding as of October 31, 2023.

Table of Contents

FINANCIAL CONTENTS


Part I. Financial Information
Glossary of Abbreviations and Acronyms			2
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 2)			3
Overview			3
Non-GAAP Financial Measures			8
Recent Accounting Standards			10
Critical Accounting Policies			10
Statements of Income Analysis			12
Balance Sheet Analysis			22
Business Segment Review			29
Risk Management—Overview			36
Credit Risk Management			36
Interest Rate and Price Risk Management			52
Liquidity Risk Management			57
Capital Management			59
Quantitative and Qualitative Disclosures about Market Risk (Item 3)			62
Controls and Procedures (Item 4)			62
Condensed Consolidated Financial Statements and Notes (Item 1)			63
Balance Sheets (unaudited)			63
Statements of Income (unaudited)			64
Statements of Comprehensive Income (unaudited)			65
Statements of Changes in Equity (unaudited)			66
Statements of Cash Flows (unaudited)			68
Notes to Condensed Consolidated Financial Statements (unaudited)			69

Part II. Other Information
Legal Proceedings (Item 1)			140
Risk Factors (Item 1A)			140
Unregistered Sales of Equity Securities and Use of Proceeds (Item 2)			140
Defaults Upon Senior Securities (Item 3)			140
Mine Safety Disclosures (Item 4)			140
Other Information (Item 5)			140
Exhibits (Item 6)			141
Signature			142

FORWARD-LOOKING STATEMENTS

This report contains statements that we believe are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder. All statements other than statements of historical fact are forward-looking statements. These statements relate to our financial condition, results of operations, plans, objectives, future performance, capital actions or business. They usually can be identified by the use of forward-looking language such as “will likely result,” “may,” “are expected to,” “is anticipated,” “potential,” “estimate,” “forecast,” “projected,” “intends to,” or may include other similar words or phrases such as “believes,” “plans,” “trend,” “objective,” “continue,” “remain,” or similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” or similar verbs. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including but not limited to the risk factors set forth in our most recent Annual Report on Form 10-K, as updated by our Quarterly Reports on Form 10-Q. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to us. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) effects of the global COVID-19 pandemic; (2) deteriorating credit quality; (3) loan concentration by location or industry of borrowers or collateral; (4) problems encountered by other financial institutions; (5) inadequate sources of funding or liquidity; (6) unfavorable actions of rating agencies; (7) inability to maintain or grow deposits; (8) limitations on the ability to receive dividends from subsidiaries; (9) cyber-security risks; (10) Fifth Third’s ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks; (11) failures by third-party service providers; (12) inability to manage strategic initiatives and/or organizational changes; (13) inability to implement technology system enhancements; (14) failure of internal controls and other risk management systems; (15) losses related to fraud, theft, misappropriation or violence; (16) inability to attract and retain skilled personnel; (17) adverse impacts of government regulation; (18) governmental or regulatory changes or other actions; (19) failures to meet applicable capital requirements; (20) regulatory objections to Fifth Third’s capital plan; (21) regulation of Fifth Third’s derivatives activities; (22) deposit insurance premiums; (23) assessments for the orderly liquidation fund; (24) replacement of LIBOR; (25) weakness in the national or local economies; (26) global political and economic uncertainty or negative actions; (27) changes in interest rates and the effects of inflation; (28) changes and trends in capital markets; (29) fluctuation of Fifth Third’s stock price; (30) volatility in mortgage banking revenue; (31) litigation, investigations, and enforcement proceedings by governmental authorities; (32) breaches of contractual covenants, representations and warranties; (33) competition and changes in the financial services industry; (34) changing retail distribution strategies, customer preferences and behavior; (35) difficulties in identifying, acquiring or integrating suitable strategic partnerships, investments or acquisitions; (36) potential dilution from future acquisitions; (37) loss of income and/or difficulties encountered in the sale and separation of businesses, investments or other assets; (38) results of investments or acquired entities; (39) changes in accounting standards or interpretation or declines in the value of Fifth Third’s goodwill or other intangible assets; (40) inaccuracies or other failures from the use of models; (41) effects of critical accounting policies and judgments or the use of inaccurate estimates; (42) weather-related events, other natural disasters, or health emergencies (including pandemics); (43) the impact of reputational risk created by these or other developments on such matters as business generation and retention, funding and liquidity; (44) changes in law or requirements imposed by Fifth Third’s regulators impacting our capital actions, including dividend payments and stock repurchases; and (45) Fifth Third’s ability to meet its environmental and/or social targets, goals and commitments. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations or any changes in events, conditions or circumstances on which any such statement is based, except as may be required by law, and we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The information contained herein is intended to be reviewed in its totality, and any stipulations, conditions or provisos that apply to a given piece of information in one part of this report should be read as applying mutatis mutandis to every other instance of such information appearing herein.

Table of Contents


PART I. FINANCIAL INFORMATION
Glossary of Abbreviations and Acronyms

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


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


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

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

OVERVIEW

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. At September 30, 2023, the Bancorp had $213 billion in assets and operated 1,073 full-service banking centers and 2,101 Fifth Third branded ATMs in eleven states throughout the Midwestern and Southeastern regions of the U.S. The Bancorp reports on three business segments: Commercial Banking, Consumer and Small Business Banking and Wealth and Asset Management.

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

Net interest income, net interest margin, net interest rate spread and the efficiency ratio are presented in MD&A on an FTE basis. The FTE basis adjusts for the tax-favored status of income from certain loans and leases and securities held by the Bancorp that are not taxable for federal income tax purposes. The Bancorp believes this presentation to be the preferred industry measurement of net interest income as it provides a relevant comparison between taxable and non-taxable amounts. The FTE basis for presenting net interest income is a non-GAAP measure. For further information, refer to the Non-GAAP Financial Measures section of MD&A.

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

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

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

Current Economic Conditions

Economic growth accelerated in the third quarter of 2023. Inflation has remained persistent and continues to be above the FRB’s target, which may lead to interest rates remaining elevated for a sustained period of time. In response to inflationary pressures, FRB officials have raised benchmark interest rates several times since March 2022 and have signaled that they will continue to monitor the cumulative economic effects of their policy actions, including tighter credit conditions for households and businesses, when determining future monetary actions. Amidst the rapid pace of interest rate increases, several financial markets have experienced heightened volatility. In addition, the rise in longer-term rates during the third quarter of 2023 has the potential to adversely impact asset prices and economic activity.

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


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

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

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

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

Proposed Updates to Regulatory Requirements for Capital and Long-Term Debt

On July 27, 2023, the U.S. banking agencies released a notice of proposed rulemaking to revise the Basel III Capital Rules, which would replace its existing risk-based capital framework for large banks with a new framework that implements international capital standards. The proposed rulemaking would increase capital requirements applicable to banking organizations with total assets of $100 billion or more, including Fifth Third, and would align the calculation of regulatory capital and the calculation of risk-weighted assets across large banking organizations. As proposed, the rules would be effective for the Bancorp on July 1, 2025 and phased in over a three-year transition period. The Bancorp is in the process of evaluating this proposed rulemaking and assessing its potential impact.

On August 29, 2023, the U.S. banking agencies issued a notice of proposed rulemaking to require that certain banking organizations with $100 billion or more in consolidated assets, including Fifth Third, comply with certain long-term debt requirements at the holding company and insured depository institution levels. These proposed requirements are intended to absorb losses in the event of the failure of a banking organization. As proposed, the rules would be phased in over a three-year period after their effective date. The Bancorp is in the process of evaluating this proposed rulemaking and assessing its potential impact.

LIBOR Transition

In July 2017, the Chief Executive of the United Kingdom Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that the FCA would stop persuading or compelling banks to submit rates for the calculation of LIBOR to the administrator of LIBOR after 2021.

In the United States, SOFR was identified as the preferred alternative rate. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. As a secured borrowing rate, SOFR may not exhibit similar behavior in response to market and economic volatility as LIBOR, which was an unsecured rate.

As of September 30, 2023, substantially all contracts have transitioned to alternative reference rates. Refer to Note 16 and Note 17 of the Notes to Condensed Consolidated Financial Statements for additional information about certain exposures which were transitioned to an alternative reference rate.

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

Senior Notes Offering

On July 27, 2023, the Bancorp issued and sold $1.25 billion of fixed-rate/floating-rate senior notes which will mature on July 27, 2029. The senior notes bear interest at a rate of 6.339% per annum to, but excluding, July 27, 2028. From, and including, July 27, 2028 until, but excluding, July 27, 2029, the senior notes will bear interest at a rate of compounded SOFR plus 2.340%. The senior notes are redeemable in whole at par plus accrued and unpaid interest one year prior to their maturity date, or may be wholly or partially redeemed on or after 30 days prior to maturity. Additionally, the senior notes are redeemable at the Bancorp’s option, in whole or in part, beginning 180 days after the issue date and prior to July 27, 2028, at the greater of: (a) the aggregate principal amount of the senior notes being redeemed, or (b) the discounted present value of the remaining scheduled payments of principal and interest that would be due if the senior notes being redeemed matured on July 27, 2028.


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

Automobile Loan Securitization

In a securitization transaction that occurred in August of 2023, the Bancorp transferred $1.74 billion in aggregate automobile loans to a bankruptcy remote trust which subsequently issued approximately $1.58 billion of asset-backed notes, of which approximately $79 million were retained by the Bancorp, resulting in approximately $1.5 billion of outstanding notes included in long-term debt in the Condensed Consolidated Balance Sheets. As discussed in Note 12, the bankruptcy remote trust was deemed to be a VIE and the Bancorp, as the primary beneficiary, consolidated the VIE. The third-party holders of the asset-backed notes do not have recourse to the general assets of the Bancorp.

Accelerated Share Repurchase Transaction

During the first quarter of 2023, the Bancorp entered into and settled an accelerated share repurchase transaction. As part of the transaction, the Bancorp entered into a forward contract in which the final number of shares delivered at settlement was based generally on a discount to the average daily volume weighted-average price of the Bancorp’s common stock during the term of the repurchase agreement. Refer to Note 17 of the Notes to Condensed Consolidated Financial Statements for additional information on share repurchase activity.

Key Performance Indicators

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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


TABLE 1: Earnings Summary
	For the three months ended September 30,				%	For the nine months ended September 30,				%
($ in millions, except for per share data)	2023			2022	Change	2023			2022	Change
Income Statement Data
Net interest income (U.S. GAAP)	$	1,438		1,498	(4)	$	4,411		4,032	9
Net interest income (FTE)(a)(b)	1,445			1,502	(4)	4,429			4,043	10
Noninterest income	715			672	6	2,137			2,031	5
Total revenue (FTE)(a)(b)	2,160			2,174	(1)	6,566			6,074	8
Provision for credit losses	119			158	(25)	460			383	20
Noninterest expense	1,188			1,167	2	3,750			3,501	7
Net income	660			653	1	1,819			1,709	6
Net income available to common shareholders	623			631	(1)	1,719			1,631	5
Common Share Data
Earnings per share - basic	$	0.91		0.91	—	$	2.51		2.37	6
Earnings per share - diluted	0.91			0.91	—	2.50			2.34	7
Cash dividends declared per common share	0.35			0.33	6	1.01			0.93	9
Book value per share	21.19			21.30	(1)	21.19			21.30	(1)
Market value per share	25.33			31.96	(21)	25.33			31.96	(21)
Financial Ratios
Return on average assets	1.26		%	1.25	1	1.18		%	1.10	7
Return on average common equity	16.3			14.9	9	14.6			12.3	19
Return on average tangible common equity(b)	24.7			21.9	13	21.8			17.3	26
Dividend payout	38.5			36.3	6	40.2			39.2	3

(a)Amounts presented on an FTE basis. The FTE adjustments were $7 and $4 for the three months ended September 30, 2023 and 2022, respectively, and $18 and $11 for the nine months ended September 30, 2023 and 2022, respectively.

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

Earnings Summary

The Bancorp’s net income available to common shareholders for the third quarter of 2023 was $623 million, or $0.91 per diluted share, which was net of $37 million in preferred stock dividends. The Bancorp’s net income available to common shareholders for the third quarter of 2022 was $631 million, or $0.91 per diluted share, which was net of $22 million in preferred stock dividends. The Bancorp’s net income available to common shareholders for the nine months ended September 30, 2023 was $1.7 billion, or $2.50 per diluted share, which was net of $100 million in preferred stock dividends. The Bancorp’s net income available to common shareholders for the nine months ended September 30, 2022 was $1.6 billion, or $2.34 per diluted share, which was net of $78 million in preferred stock dividends.

Net interest income on an FTE basis (non-GAAP) was $1.4 billion for the three months ended September 30, 2023, a decrease of $57 million compared to the same period in the prior year. Net interest income was negatively impacted by higher funding costs due to increases in market interest rates and deposit balance migration into higher yielding products. Rates paid on average interest-bearing core deposits, average long-term debt and average FHLB advances increased for the three months ended September 30, 2023 compared to the same period in the prior year. The balance migration impacting net interest income was primarily due to decreases in the average balances of demand deposits and increases in the average balances of interest-bearing core deposits and CDs over $250,000 for the three months ended September 30, 2023 compared to the same period in the prior year. These negative impacts were partially offset by increases in yields on average loans and leases and average other short-term investments for the three months ended September 30, 2023 compared to the same period in the prior year. Net interest income also benefited from increases in average other short-term investments and average other consumer loans for the three months ended September 30, 2023 compared to the same period in the prior year. Net interest margin on an FTE basis (non-GAAP) was 2.98% for the three months ended September 30, 2023 compared to 3.22% for the same period in the prior year.

Net interest income on an FTE basis (non-GAAP) was $4.4 billion for the nine months ended September 30, 2023, an increase of $386 million compared to the same period in the prior year. Net interest income benefited from increases in market interest rates, resulting in increases in yields on average loans and leases, average other short-term investments and average taxable securities for the nine months ended September 30, 2023 compared to the same period in the prior year. Net interest income also benefited from increases in average other consumer loans, average taxable securities and average commercial and industrial loans for the nine months ended September 30, 2023 compared to the same period in the prior year. These positive impacts were partially offset by increases in rates paid on average interest-bearing core deposits, average long-term debt and average FHLB advances as well as decreases in the average balances of demand deposits and increases in the average balances of interest-bearing core deposits, CDs over $250,000 and long-term debt for the nine months ended September 30, 2023 compared to the same period in the prior year. Net interest margin on an FTE basis (non-GAAP) was 3.12% for the nine months ended September 30, 2023 compared to 2.91% for the same period in the prior year.


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

The provision for credit losses was $119 million and $460 million for the three and nine months ended September 30, 2023, respectively, compared to $158 million and $383 million during the same periods in the prior year. The provision for credit losses for the three months ended September 30, 2023 included the impacts of decreases to specific reserves on individually evaluated commercial loans and decreases in period-end loan and lease balances, which were partially offset by the impact of slight deterioration in the economic forecast. The provision for credit losses for the nine months ended September 30, 2023 included the impacts of increases in period-end loan and lease balances, increases in specific reserves on individually evaluated commercial loans and deterioration in the economic forecast. The provision for credit losses for the three and nine months ended September 30, 2022 included the impacts of increases in period-end loan and lease balances and deterioration in forecasted macroeconomic conditions. The provision for credit losses for the nine months ended September 30, 2022 also included the initial recognition of provision for credit losses on loans acquired as part of a business acquisition completed in the second quarter of 2022. Net losses charged off as a percent of average portfolio loans and leases were 0.41% and 0.21% for the three months ended September 30, 2023 and 2022, respectively, and 0.32% and 0.18% for the nine months ended September 30, 2023 and 2022, respectively. At September 30, 2023 and December 31, 2022, nonperforming portfolio assets as a percent of portfolio loans and leases and OREO were 0.51% and 0.44%, respectively. For more information on credit quality, refer to the Credit Risk Management subsection of the Risk Management section of MD&A as well as Note 6 of the Notes to Condensed Consolidated Financial Statements.

Noninterest income increased $43 million and $106 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year. The increase for the three months ended September 30, 2023 was primarily due to a decrease in net securities losses and an increase in commercial banking revenue, partially offset by a decrease in mortgage banking net revenue. The increase for the nine months ended September 30, 2023 was primarily due to net securities gains in the current year compared to net securities losses in the prior year, as well as increases in commercial banking revenue and mortgage banking net revenue, partially offset by decreases in other noninterest income, service charges on deposits and leasing business revenue.

Noninterest expense increased $21 million and $249 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year. The increase for the three months ended September 30, 2023 was primarily due to increases in compensation and benefits expense, net occupancy expense and technology and communications expense, partially offset by a decrease in other noninterest expense. The increase for the nine months ended September 30, 2023 was primarily due to increases in compensation and benefits expense, technology and communications expense, other noninterest expense, net occupancy expense and marketing expense.

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

Capital Summary

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

•CET1 capital ratio: 9.80%;

•Tier 1 risk-based capital ratio: 11.06%;

•Total risk-based capital ratio: 13.13%;

•Leverage ratio: 8.85%.


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

NON-GAAP FINANCIAL MEASURES

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

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

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


TABLE 2: Non-GAAP Financial Measures - Financial Measures and Ratios on an FTE basis
	For the three months ended September 30,				For the nine months ended September 30,
($ in millions)	2023			2022	2023	2022
Net interest income (U.S. GAAP)	$	1,438		1,498	4,411	4,032
Add: FTE adjustment	7			4	18	11
Net interest income on an FTE basis (1)	$	1,445		1,502	4,429	4,043
Net interest income on an FTE basis (annualized) (2)	5,733			5,959	5,922	5,405

Interest income (U.S. GAAP)	$	2,529		1,760	7,113	4,512
Add: FTE adjustment	7			4	18	11
Interest income on an FTE basis	$	2,536		1,764	7,131	4,523
Interest income on an FTE basis (annualized) (3)	10,061			6,998	9,534	6,047

Interest expense (annualized) (4)	$	4,328		1,039	3,613	642
Noninterest income (5)	715			672	2,137	2,031
Noninterest expense (6)	1,188			1,167	3,750	3,501
Average interest-earning assets (7)	192,216			185,378	189,578	185,883
Average interest-bearing liabilities (8)	139,779			119,773	134,588	117,344

Ratios:
Net interest margin on an FTE basis (2) / (7)	2.98		%	3.22	3.12	2.91
Net interest rate spread on an FTE basis ((3) / (7)) - ((4) / (8))	2.13			2.91	2.35	2.70
Efficiency ratio on an FTE basis (6) / ((1) + (5))	55.0			53.7	57.1	57.6

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

FIFTH THIRD BANCORP [FITB] Filings
FIFTH THIRD BANCORP [FITBI] Filings
FIFTH THIRD BANCORP [FITBO] Filings
FIFTH THIRD BANCORP [FITBP] Filings
10-Q	[2023-11-07]
10-Q	[2023-08-07]
10-Q	[2023-05-09]
10-K	[2023-02-24]
10-Q	[2022-11-08]
10-Q	[2022-08-05]
10-Q	[2022-05-09]
10-K	[2022-02-25]
10-Q	[2021-11-05]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-02-26]
10-Q	[2020-11-05]
10-Q	[2020-08-07]
10-Q	[2020-05-08]
10-K	[2020-03-02]
10-Q	[2019-11-08]
10-Q	[2019-08-08]
10-Q	[2019-05-10]
10-K	[2019-03-01]
10-Q	[2018-11-06]
10-Q	[2018-08-08]
10-Q	[2018-05-04]
10-K	[2018-02-28]
10-Q	[2017-11-06]
10-Q	[2017-08-08]
10-Q	[2017-05-05]
10-K	[2017-02-24]
10-Q	[2016-11-09]
10-Q	[2016-08-05]
10-Q	[2016-05-06]
10-K	[2016-02-25]
10-Q	[2015-11-05]
10-Q	[2015-08-05]
10-Q	[2015-05-11]
10-K	[2015-02-25]
10-Q	[2014-11-07]
10-Q	[2014-08-07]
10-Q	[2014-05-08]
10-K	[2014-02-24]
10-Q	[2013-11-06]
10-Q	[2013-08-07]
10-Q	[2013-05-09]
10-K	[2013-02-22]
10-Q	[2012-11-07]
10-Q	[2012-08-08]
10-Q	[2012-05-10]
10-K	[2012-02-29]

FIFTH THIRD BANCORP [FITB] Filings

FIFTH THIRD BANCORP [FITBI] Filings

FIFTH THIRD BANCORP [FITBO] Filings

FIFTH THIRD BANCORP [FITBP] Filings