• 3Q12 net income available to common shareholders of $354 million, or $0.38 per diluted common share, vs. $376 million, or $0.40 per diluted share, in 2Q12 and $373 million, or $0.40 per diluted share, in 3Q11
  • 3Q12 results included $26 million pre-tax in debt extinguishment costs (~$17 million after-tax, or $0.02 per share) associated with the August redemption of trust preferred securities (TruPS); a $16 million pre-tax negative adjustment (~$10 million after-tax, or $0.01 per share) on the valuation of the warrant Fifth Third holds in Vantiv; and $11 million in pre-tax income (~$8 million after-tax, or $0.01 per share) on the sale of certain Fifth Third funds. 3Q12 results also included additional charges of $24 million (~$16 million after-tax, or $0.02 per share) related to an increase in mortgage representation and warranty reserve
  • 2Q12 results included a $56 million pre-tax gain (~$36 million after-tax, or $0.04 per share) on the valuation of the warrant Fifth Third holds in Vantiv
  • 3Q12 return on assets (ROA) of 1.23%; return on average common equity of 10.4%; return on average tangible common equity** of 12.8%
• Pre-provision net revenue (PPNR)** of $568 million in 3Q12, or $617 million excluding items noted on following page
  • Net interest income (FTE) of $907 million, up 1% sequentially; net interest margin 3.56%
  • Noninterest income of $671 million included $16 million negative valuation adjustment on Vantiv warrant and $13 million in gains recognized from sale of certain Fifth Third funds
  • Noninterest expense of $1.0 billion included $26 million of debt extinguishment costs associated with 3Q12 TruPS redemptions and $22 million in additional expenses resulting from increase in mortgage representation and warranty reserve
• 3Q12 effective tax rate of 27.7%; elevated level of 31.8% in 2Q12 due to seasonal stock options expirations
• Credit trends remain favorable
  • 3Q12 net charge-offs of $156 million (0.75% of loans and leases) vs. 2Q12 NCOs of $181 million and 3Q11 NCOs of $262 million; lowest NCO level since 3Q07; 3Q12 provision expense of $65 million compared with 2Q12 provision of $71 million and 3Q11 provision of $87 million
  • Loan loss allowance declined $91 million sequentially reflecting continued improvement in credit trends; allowance to loan ratio of 2.32%, 133% of nonperforming assets, 167% of nonperforming loans and leases, and 3.1 times 3Q12 annualized net charge-offs
  • Total nonperforming assets (NPAs) of $1.5 billion including loans held-for-sale (HFS) declined $190 million, or 11%, sequentially; NPAs excluding loans HFS of $1.4 billion declined $173 million, or 11%; lowest since 4Q07; NPA ratio of 1.73% down 23 bps from 2Q12, NPL ratio of 1.38% down 24 bps from 2Q12
  • Total delinquencies (includes loans 30-89 days past due and over 90 days past due) down 5% sequentially, lowest levels since 2005
• Strong capital ratios*; repurchased ~22 million common shares through share repurchase transaction expected to settle in 4Q12 (~8 million impact on average share count)
  • Tier 1 common ratio 9.67%**, down 10 bps sequentially (Basel III pro forma estimate of ~9%)
  • Tier 1 capital ratio 10.85%, Total capital ratio 14.76%, Leverage ratio 10.09%
  • Tangible common equity ratio** of 9.10% excluding unrealized gains/losses; 9.45% including them
• Book value per share of $14.84; tangible book value per share** of $12.12 up 2% from 2Q12 and 10% from 3Q11

* Capital ratios estimated; presented under current U.S. capital regulations. The pro forma Tier I common equity ratio is management’s estimate based upon its current interpretation of the three draft Federal Register notices proposing enhancements to regulatory capital requirements published in June 2012. The actual impact to the Bancorp’s Tier I common equity ratio may change significantly due to further clarification of the agencies proposals or revisions to the agencies final rules, which remain subject to public comment. See pp.15-16 in Exhibit 99.1 of 8-k filing dated 10/18/12 for more information.

** Non-GAAP measure; see Reg. G reconciliation on page 34 in Exhibit 99.1 of 8-k filing dated 10/18/12.

CINCINNATI--(BUSINESS WIRE)--Oct. 18, 2012-- Fifth Third Bancorp (Nasdaq: FITB) today reported third quarter 2012 net income of $363 million, compared with net income of $385 million in the second quarter of 2012 and net income of $381 million in the third quarter of 2011. After preferred dividends, net income available to common shareholders was $354 million, or $0.38 per diluted share, in the third quarter of 2012, compared with $376 million, or $0.40 per diluted share, in the second quarter of 2012, and $373 million, or $0.40 per diluted share, in the third quarter of 2011.

Third quarter 2012 noninterest income included a $16 million negative valuation adjustment on the Vantiv warrant; $13 million in gains recognized on the sale of certain Fifth Third funds; and a $1 million reduction related to the valuation of the Visa total return swap. Net gains on investment securities were $2 million. Third quarter noninterest expense included $26 million of debt extinguishment costs associated with the redemption of Fifth Third Capital Trust V and Fifth Third Capital Trust VI TruPS, a $5 million benefit from the sale of affordable housing investments, and $2 million of expenses associated with the sale of certain Fifth Third funds. Results also included an additional $24 million of charges associated with the increase of the mortgage representation and warranty reserve.

Second quarter 2012 noninterest income included a $56 million positive valuation adjustment on the Vantiv warrant; a $17 million negative valuation adjustment associated with bank premises held-for-sale; and an $11 million reduction related to the valuation of the Visa total return swap. Net gains on investment securities were $3 million. Second quarter noninterest expense was reduced by $17 million related to affordable housing investments and FDIC insurance. Third quarter 2011 noninterest income included a $17 million reduction in other noninterest income related to the valuation of a total return swap entered into as part of the 2009 sale of Visa, Inc. Class B shares, a $3 million positive valuation adjustment on Vantiv puts and warrants, and net gains on investment securities of $26 million. Third quarter 2011 noninterest expense included $28 million related to the termination of certain FHLB borrowings and hedging transactions.

Earnings Highlights

“Third quarter earnings were highlighted by solid net interest income results and continued strong mortgage banking revenue, contributing to an ROA of 1.23 percent and a return on average common equity of 10.4 percent,” said Kevin Kabat, CEO of Fifth Third Bancorp. “We had success across our commercial bank and consumer lending businesses, with double-digit growth in corporate banking revenue, up 16 percent year-over-year, and mortgage banking revenue, up 13 percent year-over-year.

“Results reflect our strong support of customers and communities in the midst of a relatively weak economic recovery. Mortgage loans have increased 16 percent and C&I loans have increased 15 percent from a year ago. Transaction deposits were up 7 percent over last year and charged-off loans dropped to 75 basis points of loans and leases, down 14 percent sequentially and 40 percent compared with a year ago. The overall quality of our portfolios continues to improve and is clearly reflected in our results.

“Pursuant to our 2012 capital plan, we increased our common stock dividend to $0.10 per share in September and entered into a share repurchase agreement for $350 million of common stock. Our current capital levels and ability to generate capital are strong, and we expect to continue to return capital to shareholders in a prudent manner, absent any significant changes in the operating environment. Tangible book value per share increased 10 percent from a year ago, our tangible common equity ratio ended the quarter at 9.5 percent, and the Tier 1 common ratio was 9.7 percent.

“Our capabilities and business model continue to position Fifth Third well to compete in this environment and in the future.”

Income Statement Highlights

Net Interest Income

Net interest income of $907 million on a fully taxable equivalent basis increased $8 million from the second quarter, with a $4 million decrease in interest income and a $12 million decrease in interest expense. Net interest income included approximately $10 million in non-recurring benefits during the third quarter, primarily associated with hedge ineffectiveness from the redeemed TruPS and income related to the auto securitization clean-up call. An additional day in the quarter contributed $6 million to the sequential increase in net interest income. The decline in interest income was primarily attributable to loan repricing, particularly in the C&I and auto portfolios; lower reinvestment rates on the securities portfolio and higher average securities balances during the second quarter from the pre-investment of a portion of portfolio cash flows; and lower purchase accounting accretion. These effects were partially offset by the benefit of net loan growth. Interest expense declined primarily as a result of lower deposit costs and a reduction in long-term debt expense of $4 million due to the redemption of $1.4 billion of TruPS in August.

The net interest margin was 3.56 percent, consistent with 3.56 percent in the previous quarter, and benefited from the non-recurring items described above that, in total, contributed 4 bps to net interest margin. This impact was primarily offset by lower loan and securities yields, lower purchase accounting accretion (2 bps), and the negative effect of day count (1 bp). The margin otherwise benefited by 2 bps from the TruPS redemption.

Compared with the third quarter of 2011, net interest income increased $5 million, driven by the items noted above as well as higher average loan balances, run-off in higher-priced CDs and mix shift to lower cost deposit products, partially offset by lower asset yields. The net interest margin decreased 9 bps from a year ago.

Securities

Average securities and other short-term investments were $16.6 billion in the third quarter of 2012 compared with $17.2 billion in the previous quarter and $18.1 billion in the third quarter of 2011. The sequential decrease in average balances was related to the pre-investment in the second quarter of anticipated third quarter cash flows. The year-over-year decline was due to the timing of reinvestment in portfolio cash flows during 2011 as well as lower cash balances held at the Fed.

Loans

Average loan and lease balances (excluding loans held-for-sale) increased $302 million sequentially and increased $4.3 billion, or 5 percent, from the third quarter of 2011. Period end loan and lease balances (excluding loans held-for-sale) increased $700 million, or 1 percent, sequentially and $3.8 billion, or 5 percent, from a year ago.

Average commercial portfolio loan and lease balances were up $15 million sequentially and increased $3.0 billion, or 7 percent, from the third quarter of 2011. Average C&I loans increased 1 percent sequentially and 15 percent compared with the third quarter of 2011. Average commercial mortgage and commercial construction loan balances combined declined 4 percent sequentially and 13 percent from the same period the previous year, reflecting continued low customer demand and business opportunities. Commercial line usage, on an end of period basis, was 32 percent of committed lines in the third quarter of 2012 compared with 32 percent in the second quarter of 2012 and 33 percent in the third quarter of 2011.

Average consumer portfolio loan and lease balances increased $287 million, or 1 percent, sequentially and $1.2 billion, or 4 percent, from the third quarter of 2011. Average residential mortgage loans increased 3 percent sequentially, reflecting strong originations due to continued refinancing activity associated with historically low interest rates as well as the continued retention of certain shorter term residential mortgage loans. Compared with the third quarter of 2011, average residential mortgage loans increased 16 percent and reflected the retention of these shorter term mortgage loans. Home equity loan balances declined 1 percent sequentially and 6 percent year-over-year due to lower demand and production. Average auto loans were flat sequentially and increased 3 percent year-over-year.

Average loans held-for-sale of $1.9 billion increased $21 million sequentially and $548 million compared with the third quarter of 2011 primarily driven by higher mortgage held-for-sale balances. Period end loans held-for-sale of $1.8 billion decreased $61 million from the previous quarter and $38 million from the third quarter of 2011.

Deposits

Average core deposits declined $258 million sequentially and increased $3.5 billion, or 4 percent, from the third quarter of 2011. Average transaction deposits, which are included in core deposits, decreased $123 million from the second quarter of 2012 primarily driven by lower savings and interest checking balances partially offset by higher demand deposits and money market account balances. Year-over-year growth of $5.3 billion, or 7 percent, was driven by higher interest checking and demand deposits balances, partially offset by lower foreign office, savings, and money market account balances. Other time deposits decreased 3 percent sequentially and 30 percent from the third quarter of 2011.

Commercial average transaction deposits were flat sequentially and increased 10 percent from the previous year. Sequential performance reflected higher demand deposits balances, partially offset by lower interest checking driven by public funds deposits. Year-over-year growth was primarily driven by higher inflows to interest checking and demand deposit account balances, partially offset by lower foreign office balances. Average public funds balances were $5.1 billion compared with $5.7 billion in the second quarter of 2012 and $5.6 billion in the third quarter of 2011.

Consumer average transaction deposits decreased 1 percent sequentially and increased 5 percent from the third quarter of 2011. The sequential decline reflected lower savings balances, which were partially offset by higher money market and demand deposit account balances. Year-over-year growth was primarily driven by increased interest checking and demand deposit balances partially offset by lower savings and money market account balances. Consumer CDs included in core deposits declined 3 percent sequentially, driven by customer reluctance to purchase CDs given the current low rate environment, and declined 30 percent year-over-year driven by maturities of higher-rate CDs.

Noninterest Income

Noninterest income of $671 million decreased $7 million sequentially, or 1 percent, and increased $6 million, or 1 percent, compared with prior year results. The sequential decline was primarily due to the decline in other noninterest income related to the impact of significant items described below partially offset by higher mortgage banking net revenue. The increase from a year ago reflected higher mortgage banking net revenue and corporate banking revenue, partially offset by lower net gains on investment securities, card and processing revenue, and service charges on deposits.

Third quarter 2012 noninterest income results included a $16 million negative valuation adjustment on the Vantiv warrant, compared with a $56 million positive valuation adjustment in the second quarter of 2012 and a $3 million positive valuation adjustment on the Vantiv warrant and put instruments in the third quarter of 2011. This quarter’s results also included $13 million in gains recognized on the sale of certain Fifth Third funds as well as a $1 million charge related to the valuation of the total return swap entered into as part of the 2009 sale of Visa, Inc. Class B shares. Negative valuation adjustments on this swap were $11 million in the second quarter of 2012 and $17 million in the third quarter of 2011. Second quarter 2012 results included $17 million in lower of cost or market adjustments associated with bank premises held-for-sale. Excluding these items, as well as investment securities gains in all periods, noninterest income of $673 million increased $26 million, or 4 percent, from the previous quarter and increased $20 million, or 3 percent, from the third quarter of 2011.

Service charges on deposits of $128 million decreased 2 percent from the second quarter and 5 percent compared with the same quarter last year. Retail service charges declined 9 percent sequentially and 19 percent compared with the third quarter of 2011 largely due to the full quarter effect of the elimination of daily overdraft fees on continuing customer overdraft positions late in the second quarter of 2012. Commercial service charges increased 3 percent sequentially and 6 percent compared with results a year ago due to increased treasury management sales and account growth.

Corporate banking revenue of $101 million decreased 1 percent from the second quarter of 2012 and increased 16 percent from the same period last year. The sequential decline was driven by seasonally lower foreign exchange revenue and lower interest rate derivatives revenue, partially offset by increased lease remarketing fees. The year-over-year increase was due to increased syndication fees, lease remarketing fees, institutional sales revenue and business lending fees, partially offset by lower letter of credit and foreign exchange revenue.

Mortgage banking net revenue was $200 million in the third quarter of 2012, a 9 percent increase from the second quarter of 2012 and a 13 percent increase from the third quarter of 2011. Third quarter 2012 originations were $5.8 billion, compared with $5.9 billion in the previous quarter and $4.5 billion in the third quarter of 2011. Third quarter 2012 originations resulted in gains of $226 million on mortgages sold reflecting higher gain on sale margins. This compares with gains of $183 million during the previous quarter and $119 million during the third quarter of 2011. Mortgage servicing fees this quarter were $62 million, compared with $63 million in the previous quarter and $59 million in the third quarter of 2011. Mortgage banking net revenue is also affected by net servicing asset value adjustments, which include mortgage servicing rights (MSR) amortization and MSR valuation adjustments (including mark-to-market adjustments on free-standing derivatives used to economically hedge the MSR portfolio). These net servicing asset valuation adjustments were negative $88 million in the third quarter of 2012 (reflecting MSR amortization of $48 million and MSR valuation adjustments of negative $40 million); negative $63 million in the second quarter of 2012 (MSR amortization of $41 million and MSR valuation adjustments of negative $22 million); and net zero in the third quarter of 2011 (MSR amortization of $34 million and MSR valuation adjustments of positive $34 million). The mortgage servicing asset, net of the valuation reserve, was $679 million at quarter end on a servicing portfolio of $62 billion.

Net gains on securities held as non-qualifying hedges for the MSR portfolio were $5 million in the third quarter of 2012, compared with none in the second quarter of 2012 and net gains of $6 million in the third quarter of 2011.

Investment advisory revenue of $92 million decreased 2 percent sequentially and was flat year–over-year, driven by lower mutual fund fees largely due to the sale of certain Fifth Third funds, which closed in early September. Otherwise stable results reflected higher institutional trust and private client services fees, which benefited from improvement in equity and bond market values.

Card and processing revenue was $65 million in the third quarter of 2012, an increase of 2 percent sequentially and a decline of 17 percent from the third quarter of 2011. The sequential increase reflected higher transaction volumes and higher levels of consumer spending. The year-over-year decline was driven by the impact of debit interchange legislation, partially offset by mitigation activities and higher transaction volumes.

Other noninterest income totaled $78 million in the third quarter of 2012, compared with $103 million in the previous quarter and $64 million in the third quarter of 2011. Other noninterest income includes effects of the valuation of the Vantiv warrant and changes in income related to the valuation of the Visa total return swap. For periods ending September 30, 2012, June 30, 2012, and September 30, 2011, the impact of warrant and put option valuation adjustments were negative $16 million, positive $56 million, and positive $3 million, respectively, and reductions in income related to the Visa total return swap were $1 million, $11 million, and $17 million, respectively. Third quarter 2012 results also included $13 million in gains recognized on the sale of certain Fifth Third funds. Second quarter 2012 results also included $17 million in lower of cost or market adjustments associated with bank premises held-for-sale. Excluding the items detailed above, other noninterest income of $82 million increased approximately $7 million from the previous quarter and increased approximately $4 million from the third quarter of 2011.

Net credit-related costs recognized in other noninterest income were $14 million in the third quarter of 2012 versus $17 million last quarter and $25 million in the third quarter of 2011. Third quarter 2012 results included $2 million of net gains on sales of commercial loans held-for-sale and $3 million of fair value charges on commercial loans held-for-sale, as well as $11 million of losses on other real estate owned (OREO). Second quarter 2012 results included $8 million of net gains on sales of commercial loans held-for-sale and $5 million of fair value charges on commercial loans held-for-sale, as well as $19 million of losses on OREO. Third quarter 2011 results included $3 million of net gains on sales of commercial loans held-for-sale, $6 million of fair value charges on commercial loans held-for-sale, and $21 million of losses on OREO.

Net gains on investment securities were $2 million in the third quarter of 2012, compared with investment securities gains of $3 million in the previous quarter and $26 million in the third quarter of 2011.

Noninterest Expense

Noninterest expense of $1.0 billion increased 7 percent from the second quarter of 2012 and increased 6 percent from the third quarter of 2011. Third quarter 2012 expenses included $26 million of debt extinguishment costs associated with the redemption of Capital Trust V and Capital Trust VI TruPS, $22 million of additional expenses associated with the increase in the mortgage representation and warranty reserve, $5 million benefit from the sale of affordable housing investments, and $2 million of costs associated with the sale of certain Fifth Third funds. Second quarter 2012 expenses included a $9 million reduction to FDIC insurance expense and an $8 million benefit from the sale of affordable housing investments. Third quarter 2011 expenses included $28 million of costs related to the termination of certain FHLB borrowings and hedging transactions. Excluding these items, noninterest expense of $961 million increased 1 percent compared with the second quarter of 2012. Compared with the third quarter of 2011, noninterest expense, excluding the aforementioned items, increased $43 million, or 5 percent, compared with the third quarter of 2011 largely due to higher compensation costs reflecting higher revenue.

Credit costs related to problem assets recorded as noninterest expense totaled $59 million in the third quarter of 2012, compared with $40 million in the second quarter of 2012 and $45 million in the third quarter of 2011. Third quarter credit-related expenses included provisioning for mortgage repurchases of $36 million, compared with $18 million in the second quarter and $19 million a year ago. (Realized mortgage repurchase losses were $15 million in the third quarter of 2012, compared with $16 million last quarter and $31 million in the third quarter of 2011.) The increase in mortgage representation and warranty expense was primarily due to an increase in the reserve as a result of additional information obtained from Freddie Mac regarding future mortgage repurchases and file requests. As such, we were able to better estimate the losses that are probable on loans sold to Freddie Mac with representation and warranty provisions. (Freddie Mac loans represent approximately 56 percent of Fifth Third’s mortgage servicing portfolio.) Provision for unfunded commitments was a benefit of $2 million in the current quarter, compared with a benefit of $1 million last quarter and $10 million a year ago. Derivative valuation adjustments related to customer credit risk were positive $2 million this quarter versus net zero last quarter and $4 million in expense a year ago. OREO expense was $6 million this quarter, compared with $5 million last quarter and $7 million a year ago. Other problem asset-related expenses were $21 million in the third quarter, compared with $19 million the previous quarter and $25 million in the same period last year.

Credit Quality

Net charge-offs were $156 million in the third quarter of 2012, or 75 bps of average loans on an annualized basis, the lowest level since the third quarter of 2007. Net charge-offs declined 14 percent compared with second quarter 2012 net charge-offs of $181 million, and declined 40 percent versus third quarter 2011 net charge-offs of $262 million.

Commercial net charge-offs were $62 million, or 53 bps, down $16 million compared with $78 million, or 67 bps, in the second quarter driven by declines in C&I net charge-offs. Commercial net charge-offs were at the lowest level since the third quarter of 2007. C&I net losses were $29 million, down $17 million from $46 million in the previous quarter. Commercial mortgage net losses totaled $28 million, compared with net losses of $25 million in the previous quarter. Commercial construction net losses were $4 million in the third quarter, compared with no net losses in the prior quarter. Net losses on residential builder and developer portfolio loans across the C&I and commercial real estate categories totaled $3 million. Originations of homebuilder / developer loans were suspended in 2007 and the remaining portfolio balance is $376 million, down from a peak of $3.3 billion in the second quarter of 2008.

Consumer net charge-offs were $94 million, or 104 bps, down $9 million sequentially. Net charge-offs on residential mortgage loans in the portfolio were $26 million, down $10 million from the previous quarter. Home equity net charge-offs were $37 million, down $2 million from the second quarter. Net losses on brokered home equity loans represented 35 percent of third quarter home equity losses; such loans are 14 percent of the total home equity portfolio. The home equity portfolio included $1.4 billion of brokered loans, down from a peak of $2.6 billion in 2007; originations of these loans were discontinued in 2007. Net charge-offs in the auto portfolio of $7 million were flat compared with the prior quarter. Net losses on consumer credit card loans were $18 million, which were also flat compared with the previous quarter. Net charge-offs in other consumer loans were $6 million, up $3 million from the previous quarter.

Provision for loan and lease losses totaled $65 million in the third quarter of 2012, down $6 million from the second quarter of 2012 and down $22 million from the third quarter of 2011. The allowance for loan and lease losses declined $91 million sequentially reflecting continued improvement in credit trends. This allowance represented 2.32 percent of total loans and leases outstanding as of quarter end, compared with 2.45 percent last quarter, and represented 167 percent of nonperforming loans and leases, 133 percent of nonperforming assets, and 310 percent of third quarter annualized net charge-offs.

Total nonperforming assets, including loans held-for-sale, were $1.5 billion, a decline of $190 million, or 11 percent, from the previous quarter. Nonperforming assets held-for-investment (NPAs) were $1.4 billion or 1.73 percent of total loans, leases and OREO, and decreased $173 million, or 11 percent, from the previous quarter. Nonperforming loans held-for-investment (NPLs) at quarter end were $1.2 billion or 1.38 percent of total loans, leases and OREO, and decreased $189 million, or 14 percent, from the previous quarter.

Commercial portfolio NPAs were $1.0 billion, or 2.16 percent of commercial loans, leases and OREO, and decreased $165 million, or 14 percent, from the second quarter. Commercial portfolio NPLs were $806 million, or 1.71 percent of commercial loans and leases, and decreased $177 million from last quarter driven by declines in C&I and commercial mortgage NPLs. C&I portfolio NPAs of $406 million decreased $73 million from the previous quarter. Commercial mortgage portfolio NPAs were $489 million, down $66 million from the prior quarter. Commercial construction portfolio NPAs were $110 million, a decline of $31 million from the previous quarter. Commercial real estate loans in Michigan and Florida represented 45 percent of commercial real estate NPAs and 37 percent of our total commercial real estate portfolio. Within the overall commercial loan portfolio, residential real estate builder and developer portfolio NPAs of $104 million declined $9 million from the second quarter, of which $34 million were commercial construction assets, $59 million were commercial mortgage assets and $11 million were C&I assets. Commercial portfolio NPAs included $153 million of nonaccrual troubled debt restructurings (TDRs), compared with $147 million last quarter.

Consumer portfolio NPAs of $429 million, or 1.18 percent of consumer loans, leases and OREO, decreased $8 million from the second quarter. Consumer portfolio NPLs were $347 million, or 0.96 percent of consumer loans and leases and decreased $12 million from last quarter. Of consumer NPAs, $379 million were in residential real estate portfolios. Residential mortgage NPAs were $317 million, $5 million lower than last quarter, with Florida representing 46 percent of residential mortgage NPAs and 15 percent of total residential mortgage loans. Home equity NPAs of $62 million were down $2 million compared with last quarter. Credit card NPAs decreased $3 million from the previous quarter to $39 million. Consumer nonaccrual TDRs were $192 million in the third quarter of 2012, compared with $193 million in the second quarter 2012.

Third quarter OREO balances included in portfolio NPA balances described above were $283 million, up $15 million from the second quarter, and included $208 million in commercial OREO and $75 million in consumer OREO. Repossessed personal property of $10 million consisted largely of autos.

Loans still accruing over 90 days past due were $201 million, down $2 million, or 1 percent, from the second quarter of 2012. Commercial balances 90 days past due of $24 million decreased $1 million sequentially. Consumer balances 90 days past due of $177 million were down $1 million from the previous quarter. Loans 30-89 days past due of $346 million decreased $24 million, or 7 percent, from the previous quarter driven by reductions in commercial real estate. Commercial balances 30-89 days past due of $24 million were down $37 million sequentially and consumer balances 30-89 days past due of $322 million increased $13 million from the second quarter, reflecting increases in credit card and auto.

Commercial nonaccrual loans held-for-sale were $43 million, compared with $60 million at the end of the second quarter. During the quarter $5 million of nonaccrual held-for-sale loans were sold; $9 million of nonaccrual commercial loans from the portfolio were transferred to loans held-for-sale, and $16 million of loans from loans held-for-sale were transferred to OREO. Negative valuation adjustments of $3 million were recorded on held-for-sale loans and net gains of $2 million were recorded on loans that were sold or settled during the quarter.

Capital Position

Capital ratios remained strong during the quarter, reflecting growth in retained earnings, and included the impact of the redemption of TruPS during the quarter as well as the increase in the common dividend and share repurchase activity. Compared with the prior quarter, the Tier 1 common equity ratio* decreased 10 bps to 9.67 percent. The tangible common equity to tangible assets ratio* was 9.10 percent (excluding unrealized gains/losses) and 9.45 percent (including unrealized gains/losses). The Tier 1 capital ratio decreased 146 bps to 10.85 percent. The Total capital ratio decreased 148 bps to 14.76 percent and the Leverage ratio decreased 130 bps to 10.09 percent. The tier 1 common capital ratio was reduced during the quarter by approximately 33 bps due to the repurchase of $350 million in common shares. The Tier 1 and Total capital ratios were reduced by approximately 135 basis points due to the redemption of $1.4 billion in TruPS during the quarter.

Book value per share at September 30, 2012 was $14.84 and tangible book value per share* was $12.12, compared with June 30, 2012 book value per share of $14.56 and tangible book value per share of $11.89.

As previously announced, Fifth Third entered into a share repurchase agreement with a counterparty on August 23, 2012, whereby Fifth Third would purchase approximately $350 million of its outstanding common stock. For the quarter, this transaction reduced Fifth Third’s share count by 21.5 million shares on the initial transaction date, which had an 8 million impact on average share count. Fifth Third expects the settlement of this transaction to occur on or before November 26, 2012.

U.S. banking regulators have recently proposed new capital rules for U.S. banks as well as changes to risk-weightings for assets, which implement portions of rules proposed by international banking regulators known as Basel III and Basel II. Fifth Third would be subject to the proposed “standardized approach” for risk-weightings of assets and would be subject to the Market Risk Rule for trading assets and liabilities. These proposals have been presented for public comment. The Bancorp continues to evaluate these proposals and their potential impact. Its current estimate of the pro-forma fully phased in Tier I common equity ratio at September 30, 2012 under the proposed capital rules is approximately 9%** compared with 9.67%* as calculated under the existing Basel I capital framework. The primary drivers of the change from the existing Basel I capital framework to the Basel III proposal are an increase in Tier I common equity of approximately 50 bps (primarily from including AOCI) which would be more than offset by the impact of increases in risk-weighted assets (primarily from 1-4 family senior and junior lien residential mortgages and commitments with an original maturity of one year or less). The pro forma Tier I common equity ratio exceeds the proposed minimum Tier I common equity ratio of 7% comprised of a minimum of 4.5% plus a capital conservation buffer of 2.5%. The pro forma Tier I common equity ratio does not include the effect of any mitigating actions the Bancorp may undertake to offset the impact of the proposed capital enhancements. As noted, the proposed rules remain subject to public comment, interpretation, and change.

Under the Dodd-Frank Act financial reform legislation, trust preferred securities (“TruPS”) were to be phased out of Tier 1 capital over three years beginning in 2013. The new regulations proposed by U.S. banking regulators also propose to cease Tier 1 capital treatment for outstanding TruPS with a similar phasing period. Fifth Third’s Tier 1 and Total capital levels at September 30, 2012 included $810 million of TruPS, or 0.8 percent of risk weighted assets. On August 8, 2012, Fifth Third called the $862.5 million of Fifth Third Capital Trust VI TruPS due to a determination of a Capital Treatment Event. On August 15, 2012, Fifth Third called the $575 million of Fifth Third Capital Trust V TruPS. We will continue to evaluate the role of these types of securities in our capital structure, based on regulatory developments. To the extent these types of securities remain outstanding during and after the phase-in period they would be expected to continue to be included in Total capital, subject to final rule-making for U.S. capital standards.

Fifth Third is one of 31 large U.S. Bank Holding Companies (BHCs) subject to the Federal Reserve’s (FRB) Capital Plans Rule which was issued November 22, 2011, and is also subject to the FRB’s Comprehensive Capital Analysis & Review process for U.S. BHCs over $50 billion in assets. Under this CCAR rule, we are required to submit an annual capital plan to the Federal Reserve each January, for its objection or non-objection. On August 21, 2012, Fifth Third announced that the FRB did not object to the proposed capital actions in its June capital plan submission, which included the increase in the quarterly common stock dividend to $0.10 per share and the potential repurchase of up to $600 million shares through the first quarter of 2013 (in addition to any incremental repurchases related to any after-tax gains from the sale of Vantiv stock).

* Non-GAAP measure; see Reg. G reconciliation on page 34 in Exhibit 99.1 of 8-k filing dated 10/18/12.

** The pro forma Tier I common equity ratio is management’s estimate based upon its current interpretation of the three draft Federal Register notices proposing enhancements to regulatory capital requirements published in June 2012. The actual impact to the Bancorp’s Tier I common equity ratio may change significantly due to further clarification of the agencies proposals or revisions to the agencies final rules, which remain subject to public comment.

Tax Rate

The effective tax rate was 27.7 percent this quarter compared with 31.8 percent in the second quarter. The elevated tax rate in the second quarter included tax expense of $19 million associated with the expiration of employee stock options.

Other

Fifth Third Bank owns 84 million units representing a 39 percent interest in Vantiv Holding, LLC. Based upon Vantiv’s closing price of $21.55 on September 28, 2012, our interest in Vantiv was valued at approximately $1.8 billion. Next month in our 10-Q, we will update our disclosure of the carrying value of our interest in Vantiv stock which was approximately $640 million as of June 30, 2012. The difference between the market value and our book value is not recognized in Fifth Third’s equity or capital. Additionally, Fifth Third has a warrant to purchase additional shares in Vantiv which is carried as a derivative asset at a fair value of $197 million.

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 Fifth Third” then “Investor Relations”). The webcast also is being distributed over Thomson Financial’s Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through Thomson Financial’s individual investor center at www.earnings.com or by visiting any of the investor sites in Thomson Financial’s Individual Investor Network. 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 Thursday, November 1 by dialing 800-585-8367 for domestic access and 404-537-3406 for international access (passcode 25523698#).

Corporate Profile

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. As of September 30, 2012, the Company had $117 billion in assets and operated 15 affiliates with 1,320 full-service Banking Centers, including 104 Bank Mart® locations open seven days a week inside select grocery stores and 2,404 ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Pennsylvania, Missouri, Georgia and North Carolina. Fifth Third operates four main businesses: Commercial Banking, Branch Banking, Consumer Lending, and Investment Advisors. Fifth Third also has a 39% interest in Vantiv Holding, LLC. Fifth Third is among the largest money managers in the Midwest and, as of September 30, 2012, had $300 billion in assets under care, of which it managed $26 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® National Global Select Market under the symbol “FITB.”

Forward-Looking Statements

This news release contains statements that we believe are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. They usually can be identified by the use of forward-looking language such as “will likely result,” “may,” “are expected to,” “is anticipated,” “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. 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 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 conditions and weakening in the economy, specifically the real estate market, either nationally or in the states in which Fifth Third, one or more acquired entities and/or the combined company do business, 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 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 the separation of or the results of operations of Vantiv, LLC from Fifth Third; (21) loss of income from any sale or potential sale of businesses that could have an adverse effect on Fifth Third’s earnings and future growth; (22) ability to secure confidential information through the use of computer systems and telecommunications networks; and (23) 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.

Source: Fifth Third Bancorp

Fifth Third Bancorp
Jim Eglseder (Investors), 513-534-8424
Laura Wehby (Investors), 513-534-7407
Debra DeCourcy, APR (Media), 513-534-4153