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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q


QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended September 30, 2002

Commission File Number 0-8076


FIFTH THIRD BANCORP
(Exact name of Registrant as specified in its charter)


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

Fifth Third Center
Cincinnati, Ohio 45263
(Address of principal executive offices)

Registrant’s telephone number, including area code:  (513) 534-5300

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 x No o

There were 577,787,646 shares of the Registrant’s Common Stock, without par value, outstanding as of October 31, 2002.


 

Table of Contents

FIFTH THIRD BANCORP

INDEX

         
           
Part I.   Financial Information  
           
    Item 1.   Financial Statements  
           
        Condensed Consolidated Balance Sheets -
September 30, 2002 and 2001 and December 31, 2001		 3
           
        Condensed Consolidated Statements of Income -
Three and Nine Months Ended September 30, 2002 and 2001		 4
           
        Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2002 and 2001		 5
           
        Condensed Consolidated Statements of Changes in Shareholders’ Equity -
Nine Months Ended September 30, 2002 and 2001		 6
           
        Notes to Condensed Consolidated Financial Statements 7 - 20
           
    Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations 21 - 30
           
    Item 3.   Quantitative and Qualitative Disclosures About Market Risk 31 - 32
           
    Item 4.   Controls and Procedures 33
           
Part II.   Other Information  
           
    Item 5.   Other Information 34
           
    Item 6.   Exhibits and Reports on Form 8-K 34
           
        Signatures 35
           
        Certifications 36 - 41

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Table of Contents

Fifth Third Bancorp and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)

($000’s except share data) September 30,
2002		 December 31,
2001		 September 30,
2001
               
Assets                
               
Cash and Due from Banks   $ 1,830,093     2,030,950     1,446,136  
Securities Available-for-Sale (a)     24,402,195     20,506,594     20,952,183  
Securities Held-to-Maturity (b)     21,372     16,472     16,738  
Other Short-Term Investments     597,836     224,674     466,746  
Loans Held for Sale     2,663,976     2,180,063     1,864,214  
Loans and Leases                    
   Commercial Loans     12,427,344     10,838,518     10,682,686  
   Construction Loans     3,207,166     3,356,172     3,336,839  
   Commercial Mortgage Loans     5,659,393     6,085,060     6,248,635  
   Commercial Lease Financing     3,671,477     3,150,863     2,983,570  
   Residential Mortgage Loans     3,037,955     4,505,067     4,671,937  
   Consumer Loans     14,756,437     12,564,893     12,372,202  
   Consumer Lease Financing     2,484,536     1,958,410     1,813,334  
   Unearned Income     (1,038,739 )   (911,091 )   (873,400 )
   Reserve for Credit Losses     (660,934 )   (624,080 )   (616,608 )
Total Loans and Leases     43,544,635     40,923,812     40,619,195  
Bank Premises and Equipment     849,540     832,738     826,173  
Accrued Income Receivable     524,055     617,882     593,645  
Goodwill     709,872     682,300     545,658  
Mortgage Servicing Rights     254,265     426,376     484,299  
Intangible Assets     244,265     267,464     216,116  
Other Assets     2,051,906     2,317,015     2,087,073  
Total Assets   $ 77,694,010     71,026,340     70,118,176  
                   
Liabilities                    
Deposits                    
   Demand   $ 9,926,197     9,243,549     7,781,894  
   Interest Checking     17,207,565     13,474,278     11,436,884  
   Savings and Money Market     11,834,408     8,417,228     7,911,666  
   Time Deposits, including Foreign     12,478,030     14,719,035     18,442,284  
Total Deposits     51,446,200     45,854,090     45,572,728  
Federal Funds Borrowed     3,009,053     2,543,769     2,246,652  
Short-Term Bank Notes     —     33,938     14,100  
Other Short-Term Borrowings     4,155,184     4,875,023     4,625,522  
Accrued Taxes, Interest and Expenses     2,341,017     1,962,882     2,332,449  
Other Liabilities     456,596     665,945     791,229  
Long-Term Debt     7,458,117     7,029,926     6,957,334  
Guaranteed Preferred Beneficial Interests in Convertible
    Subordinated Debentures		     —     —     172,500  
Total Liabilities     68,866,167     62,965,573     62,712,514  
Minority Interest     452,105     421,490     —  
Shareholders’ Equity                    
Common Stock (c)     1,295,208     1,293,715     1,282,980  
Preferred Stock (d)     9,250     9,250     9,250  
Capital Surplus     1,432,276     1,494,764     1,317,501  
Retained Earnings     5,630,445     4,837,807     4,571,373  
Accumulated Nonowner Changes in Equity     319,758     7,823     237,945  
Treasury Stock     (311,199 )   (4,082 )   (13,387 )
Total Shareholders’ Equity     8,375,738     7,639,277     7,405,662  
Total Liabilities and Shareholders’ Equity   $ 77,694,010     71,026,340     70,118,176  

  (a)     Amortized cost: September 30, 2002 - $23,876,165, December 31, 2001 - $20,479,014 and September 30, 2001 - $20,542,514.

  (b)     Market values: September 30, 2002 - $21,372, December 31, 2001 - $16,472 and September 30, 2001 - $16,738.

  (c)     Common Shares: Stated value $2.22 per share; authorized 1,300,000,000; outstanding at September 30, 2002 - 578,525,454 (excludes 4,901,650 treasury shares), December 31, 2001 - 582,674,580 (excludes 80,000 treasury shares) and September 30, 2001 - 577,668,069 (excludes 250,663 treasury shares).

  (d)     490,750 shares of no par value preferred stock are authorized of which none had been issued; 7,250 shares of 8.00% cumulative Series D convertible (at $23.5399 per share) perpetual preferred stock with a stated value of $1,000 were authorized, issued and outstanding; 2,000 shares of 8.00% cumulative Series E perpetual preferred stock with a stated value of $1,000 were authorized, issued and outstanding.

See Notes to Condensed Consolidated Financial Statements.

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Fifth Third Bancorp and Subsidiaries
Condensed Consolidated Statements of Income (unaudited)

Three Months Ended
September 30,		 Nine Months Ended
September 30,
($000’s except per share) 2002 2001 2002 2001
Interest Income                  
Interest and Fees on Loans and Leases   $ 702,948     819,889   $ 2,104,189     2,678,859  
Interest on Securities                          
   Taxable     318,238     317,249     950,558     904,520  
   Exempt from Income Taxes     14,080     16,167     42,215     50,930  
Total Interest on Securities     332,318     333,416     992,773     955,450  
Interest on Other Short-Term Investments     1,281     2,198     4,598     8,800  
Total Interest Income     1,036,547     1,155,503     3,101,560     3,643,109  
Interest Expense                          
Interest on Deposits                          
   Interest Checking     80,691     75,568     227,738     246,487  
   Savings and Money Market     51,729     51,206     144,323     167,147  
   Time Deposits, Including Foreign     101,750     244,639     357,364     836,326  
Total Interest on Deposits     234,170     371,413     729,425     1,249,960  
Interest on Federal Funds Borrowed     12,018     29,941     34,816     139,972  
Interest on Short-Term Bank Notes     —     62     —     62  
Interest on Other Short-Term Borrowings     17,881     37,856     50,812     176,563  
Interest on Long-Term Debt     94,805     108,276     284,651     272,476  
Total Interest Expense     358,874     547,548     1,099,704     1,839,033  
Net Interest Income     677,673     607,955     2,001,856     1,804,076  
Provision for Credit Losses     55,524     47,509     174,526     139,066  
Merger-Related Provision for Credit Losses     —     —     —     35,437  
Net Interest Income After Provision for Credit Losses     622,149     560,446     1,827,330     1,629,573  
Other Operating Income                          
Electronic Payment Processing Income     134,866     86,038     364,711     233,974  
Service Charges on Deposits     113,770     94,629     318,430     264,329  
Mortgage Banking Net Revenue     9,401     (28,047 )   121,230     85,575  
Investment Advisory Income     82,723     75,902     259,130     233,426  
Other Service Charges and Fees     143,767     163,927     415,714     406,040  
Securities Gains, Net     89,347     3,232     98,848     10,339  
Securities Gains, Net - Non-Qualifying Hedges on Mortgage Servicing     33,783     69,673     32,742     69,673  
Total Other Operating Income     607,657     465,354     1,610,805     1,303,356  
Operating Expenses                          
Salaries, Wages and Incentives     219,465     210,271     662,207     629,700  
Employee Benefits     47,581     38,948     141,908     115,765  
Equipment Expenses     19,459     20,656     59,491     68,267  
Net Occupancy Expenses     36,209     35,872     105,747     109,519  
Other Operating Expenses     296,448     184,058     677,552     565,026  
Merger-Related Charges     —     129,366     —     348,595  
Total Operating Expenses     619,162     619,171     1,646,905     1,836,872  
Income Before Income Taxes, Minority Interest & Cumulative Effect     610,644     406,629     1,791,230     1,096,057  
Applicable Income Taxes     184,483     127,027     551,794     381,167  
Income Before Minority Interest & Cumulative Effect     426,161     279,602     1,239,436     714,890  
Minority Interest, Net of Tax     9,422     —     28,280     —  
Income Before Cumulative Effect     416,739     279,602     1,211,156     714,890  
Cumulative Effect of Change in Accounting                          
   Principle, Net of Tax     —     —     —     6,781  
Net Income     416,739     279,602     1,211,156     708,109  
Dividends on Preferred Stock     185     185     555     555  
Net Income Available to Common Shareholders   $ 416,554     279,417   $ 1,210,601     707,554  
Per Share:                          
   Earnings   $ 0.72     0.48   $ 2.08     1.23  
   Diluted Earnings   $ 0.70     0.47   $ 2.04     1.21  
   Cash Dividends   $ 0.26     0.20   $ 0.72     0.60  
Average Shares (000’s):                          
   Outstanding     580,504     577,252     581,626     574,349  
   Diluted     592,024     593,762     593,758     590,190  

See Notes to Condensed Consolidated Financial Statements.

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Fifth Third Bancorp and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)

Nine Months Ended
September 30,
($000’s) 2002 2001
Operating Activities          
Net Income   $ 1,211,156     714,890  
Adjustments to Reconcile Net Income to Net Cash Provided by Operating
    Activities:		              
   Provision for Credit Losses     174,526     139,066  
   Minority Interest in Net Income     28,280     —  
   Cumulative Effect of Change in Accounting Principle, Net of Tax     —     (6,781 )
   Depreciation, Amortization and Accretion     240,152     163,555  
   Provision for Deferred Income Taxes     414,407     122,173  
   Realized Securities Gains     (101,063 )   (14,805 )
   Realized Securities Gains - Non-Qualifying Hedges on Mortgage Servicing     (85,496 )   (70,760 )
   Realized Securities Losses     2,215     4,466  
   Realized Securities Losses - Non-Qualifying Hedges on Mortgage Servicing     52,754     1,087  
   Proceeds from Sales of Residential Mortgage Loans Held for Sale     6,165,686     6,332,424  
   Net Gain on Sales of Loans     (181,866 )   (154,204 )
   Increase in Residential Mortgage Loans Held for Sale     (5,899,003 )   (6,378,564 )
   Decrease (Increase) in Accrued Income Receivable     93,827     (29,254 )
   Decrease (Increase) in Other Assets     321,512     (61,064 )
   (Decrease) Increase in Accrued Taxes, Interest and Expenses     (180,427 )   378,597  
   (Decrease) Increase in Other Liabilities     (222,940 )   390,122  
Net Cash Provided by Operating Activities     2,033,720     1,530,948  
Investing Activities              
Proceeds from Sales of Securities Available-for-Sale     15,312,013     7,386,252  
Proceeds from Calls, Paydowns and Maturities of Securities Available-for-Sale     5,221,907     9,987,577  
Purchases of Securities Available-for-Sale     (23,206,432 )   (16,721,457 )
Proceeds from Calls, Paydowns and Maturities of Securities Held-to-Maturity     4,833     16,951  
Purchases of Securities Held-to-Maturity     (9,733 )   —  
Increase in Other Short-Term Investments     (373,162 )   (234,222 )
(Increase) Decrease in Loans and Leases     (3,966,676 )   579,217  
Purchases of Bank Premises and Equipment     (105,669 )   (132,846 )
Proceeds from Disposal of Bank Premises and Equipment     16,914     42,272  
Net Cash Paid In Acquisitions     —     (146,807 )
Net Cash (Used In) Provided by Investing Activities     (7,106,005 )   776,937  
Financing Activities              
Increase in Transaction Account Deposits     7,833,114     2,406,815  
Decrease in Consumer Time Deposits     (2,684,835 )   (1,089,200 )
Increase (Decrease) in CDs - $100,000 and Over, including Foreign     443,830     (4,933,359 )
Increase in Federal Funds Borrowed     465,284     17,134  
(Decrease) Increase in Short-Term Bank Notes     (33,938 )   14,100  
(Decrease) Increase in Other Short-Term Borrowings     (234,465 )   412,643  
Proceeds from Issuance of Long-Term Debt     15,849     3,673,213  
Repayment of Long-Term Debt     (163,177 )   (2,807,920 )
Payment of Cash Dividends     (402,207 )   (344,849 )
Exercise of Stock Options     93,845     96,225  
Purchases of Stock     (458,418 )   (14,696 )
Other     (3,454 )   1,607  
Net Cash Provided by (Used In) Financing Activities     4,871,428     (2,568,287 )
Decrease in Cash and Due from Banks     (200,857 )   (260,402 )
Cash and Due from Banks at Beginning of Period     2,030,950     1,706,538  
Cash and Due from Banks at End of Period   $ 1,830,093     1,446,136  

See Notes to Condensed Consolidated Financial Statements

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Fifth Third Bancorp and Subsidiaries
Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited)

<
Nine Months Ended
September 30,
($000’s except per share) 2002 2001
Balance at December 31   $ 7,639,277     6,662,412  
Net Income     1,211,156     708,109  
Nonowner Changes in Equity, Net of Tax:              
     Change in Unrealized Gains on Securities Available-for-Sale and Qualifying
         Cash Flow Hedges		     311,935     209,933  
Net Income and Nonowner Changes in Equity     1,523,091     918,042  
Cash Dividends Declared:              
   Fifth Third Bancorp:              
     Common Stock (2002 - $.72 per share and 2001 - $.60 per share)     (418,049 )   (325,572 )
     Preferred Stock     (555