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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 Quarterly Period Ended June 30, 2003

Commission File Number 0-8076

 

FIFTH THIRD BANCORP

(Exact name of Registrant as specified in its charter)

 

Ohio   31-0854434
(State or other jurisdiction
of incorporation or organization)		   (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      

 

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

 

Yes  X        No      

 

There were 569,766,341 shares of the Registrant’s Common Stock, without par value, outstanding as of July 31, 2003.

Table of Contents

FIFTH THIRD BANCORP

 

INDEX

 

Part I. Financial Information

     

    Item 1.

    Financial Statements     
     Condensed Consolidated Balance Sheets -
June 30, 2003 and 2002 and December 31, 2002		    3
     Condensed Consolidated Statements of Income -
Three and Six Months Ended June 30, 2003 and 2002		    4
     Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2003 and 2002		    5
     Condensed Consolidated Statements of Changes in Shareholders’ Equity -
Six Months Ended June 30, 2003 and 2002		    6
     Notes to Condensed Consolidated Financial Statements    7 - 23

    Item 2.

    Management’s Discussion and Analysis of
Financial Condition and Results of Operations		    24 - 43

    Item 3.

    Quantitative and Qualitative Disclosures About Market Risk    44 - 45

    Item 4.

    Controls and Procedures    46

Part II. Other Information

     

    Item 1.

    Legal Proceedings    47

    Item 6.

    Exhibits and Reports on Form 8-K    48
     Signatures    49

 

2

Table of Contents

Fifth Third Bancorp and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)

($ in thousands, except share data)    June 30,
2003		     December 31,
2002		     June 30,
2002		  

Assets

                     

Cash and Due from Banks

    $ 1,776,334     1,890,809     1,746,350  

Securities Available-for-Sale (a)

      29,051,531     25,464,056     23,418,350  

Securities Held-to-Maturity (b)

      106,310     51,768     21,602  

Other Short-Term Investments

      282,056     311,943     559,208  

Loans Held for Sale

      3,245,470     3,357,507     1,290,316  

Loans and Leases

                     

Commercial Loans

      14,014,557     12,742,832     11,521,402  

Construction Loans

      3,361,687     3,327,026     3,253,524  

Commercial Mortgage Loans

      6,297,335     5,885,544     5,759,142  

Commercial Lease Financing

      3,935,160     3,985,896     3,275,267  

Residential Mortgage Loans

      3,745,059     3,494,606     4,202,772  

Consumer Loans

      16,374,055     15,116,254     13,991,688  

Consumer Lease Financing

      2,837,880     2,637,926     2,343,959  

Unearned Income

      (1,209,234 )   (1,261,948 )   (959,815 )

Reserve for Credit Losses

      (734,756 )   (683,193 )   (649,166 )

Total Loans and Leases

      48,621,743     45,244,943     42,738,773  

Bank Premises and Equipment

      947,664     890,934     837,438  

Accrued Income Receivable

      525,191     569,533     519,475  

Goodwill

      699,981     702,051     686,266  

Mortgage Servicing Rights

      244,413     263,499     414,491  

Intangible Assets

      222,044     236,144     249,324  

Other Assets

      2,542,101     1,911,261     2,441,744  

Total Assets

    $ 88,264,838     80,894,448     74,923,337  

Liabilities

                     

Deposits

                     

Demand

    $ 11,633,492     10,095,225     9,162,972  

Interest Checking

      18,432,242     17,878,326     16,558,345  

Savings

      7,980,833     10,055,639     10,081,802  

Money Market

      3,298,811     1,044,371     1,037,344  

Other Time

      7,065,932     8,179,520     9,390,741  

Certificates - $100,000 and Over

      4,302,135     1,180,765     1,742,206  

Foreign Office

      3,161,617     3,774,581     2,115,854  

Total Deposits

      55,875,062     52,208,427     50,089,264  

Federal Funds Borrowed

      5,840,359     4,748,568     1,892,985  

Other Short-Term Borrowings

      5,687,128     4,074,577     3,689,255  

Accrued Taxes, Interest and Expenses

      2,568,789     2,307,717     2,327,759  

Other Liabilities

      918,961     439,933     748,858  

Long-Term Debt

      8,338,341     8,178,704     7,544,529  

Total Liabilities

      79,228,640     71,957,926     66,292,650  

Minority Interest

      481,964     461,505     440,348  

Shareholders’ Equity

                     

Common Stock (c)

      1,295,263     1,295,208     1,295,208  

Preferred Stock (d)

      9,250     9,250     9,250  

Capital Surplus

      1,351,547     1,441,406     1,460,138  

Retained Earnings

      6,442,382     5,904,148     5,364,282  

Accumulated Nonowner Changes in Equity

      236,093     369,002     224,537  

Treasury Stock

      (780,301 )   (543,997 )   (163,076 )

Total Shareholders’ Equity

      8,554,234     8,475,017     8,190,339  

Total Liabilities and Shareholders’ Equity

    $ 88,264,838     80,894,448     74,923,337  
(a)   Amortized cost: June 30, 2003 - $28,594,278, December 31, 2002 - $24,790,289 and June 30, 2002 - $23,047,287.
(b)   Market values: June 30, 2003 - $106,310, December 31, 2002 - $51,768 and June 30, 2002 - $21,602.
(c)   Common shares: Stated value $2.22 per share; authorized at June 30, 2003, December 31, 2002 and June 30, 2002 - 1,300,000,000; outstanding at June 30, 2003 - 569,963,718 (excludes 13,487,973 treasury shares), December 31, 2002 - 574,355,247 (excludes 9,071,857 treasury shares) and June 30, 2002 - 580,985,828 (excludes 2,441,276 treasury shares).
(d)   490,750 shares of undesignated 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

 

3

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Fifth Third Bancorp and Subsidiaries

Condensed Consolidated Statements of Income (unaudited)

    

Three Months Ended

June 30,

   

Six Months Ended

June 30,

  
 
($ in thousands, except per share)    2003    2002    2003    2002  

Interest Income

                        

Interest and Fees on Loans and Leases

    $ 690,106    702,484    1,366,164    1,401,240  

Interest on Securities

                        

Taxable

      315,841    329,652    626,664    632,320  

Exempt from Income Taxes

      12,889    13,884    25,534    28,136  

Total Interest on Securities

      328,730    343,536    652,198    660,456  

Interest on Other Short-Term Investments

      1,082    1,281    1,854    3,317  

Total Interest Income

      1,019,918    1,047,301    2,020,216    2,065,013  

Interest Expense

                        

Interest on Deposits

                        

Interest Checking

      45,961    79,661    101,228    147,048  

Savings

      16,544    40,901    37,578    76,735  

Money Market

      7,836    7,776    17,045    15,859  

Other Time

      54,799    93,175    116,908    204,287  

Certificates - $100,000 and Over

      15,414    14,612    27,732    33,164  

Foreign Office

      11,151    11,067    20,718    18,162  

Total Interest on Deposits

      151,705    247,192    321,209    495,255  

Interest on Federal Funds Borrowed

      21,764    10,527    41,233    22,797  

Interest on Short-Term Bank Notes

      —      —      —      54  

Interest on Other Short-Term Borrowings

      14,336    15,940    26,844    32,877  

Interest on Long-Term Debt

      92,647    95,626    185,069    189,846  

Total Interest Expense

      280,452    369,285    574,355    740,829  

Net Interest Income

      739,466    678,016    1,445,861    1,324,184  

Provision for Credit Losses

      108,877    64,040    193,694    119,002  

Net Interest Income After Provision for Credit Losses

      630,589    613,976    1,252,167    1,205,182  

Other Operating Income

                        

Electronic Payment Processing Income

      141,501    121,787    271,638    229,845  

Service Charges on Deposits

      120,826    106,092    235,148    204,660  

Mortgage Banking Net Revenue

      92,826    10,156    169,675    111,829  

Investment Advisory Income

      85,866    91,959    168,273    176,407  

Other Service Charges and Fees

      139,217    141,023    297,616    271,946  

Securities Gains, Net

      38,860    201    63,769    9,501  

Securities Gains (Losses), Net - Non-Qualifying Hedges on Mortgage Servicing

      1,793    35,654    2,809    (1,041 )

Total Other Operating Income

      620,889    506,872    1,208,928    1,003,147  

Operating Expenses

                        

Salaries, Wages and Incentives

      243,885    224,771    478,144    442,742  

Employee Benefits

      64,870    44,726    125,671    94,327  

Equipment Expenses

      20,343    19,444    40,056    40,032  

Net Occupancy Expenses

      37,857    35,403    76,275    69,538  

Other Operating Expenses

      229,175    195,531    455,769    381,104  

Total Operating Expenses

      596,130    519,875    1,175,915    1,027,743  

Income Before Income Taxes and Minority Interest

      655,348    600,973    1,285,180    1,180,586  

Applicable Income Taxes

      207,446    187,282    408,045    367,311  

Income Before Minority Interest

      447,902    413,691    877,135    813,275  

Minority Interest, Net of Tax

      10,229    9,429    20,458    18,858  

Net Income

      437,673    404,262    856,677    794,417  

Dividends on Preferred Stock

      185    185    370    370  

Net Income Available to Common Shareholders