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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 March 31, 2004

Commission File Number 0-8076

 

FIFTH THIRD BANCORP

(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)

 

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 562,853,868 shares of the Registrant’s Common Stock, without par value, outstanding as of April 30, 2004.

Table of Contents

FIFTH THIRD BANCORP

 

INDEX

 

Part I. Financial Information

Item 1.

    Financial Statements     
     Condensed Consolidated Balance Sheets -
March 31, 2004 and 2003 and December 31, 2003		    3
     Condensed Consolidated Statements of Income -
Three Months Ended March 31, 2004 and 2003		    4
     Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2004 and 2003		    5
     Condensed Consolidated Statements of Changes in Shareholders’ Equity -
Three Months Ended March 31, 2004 and 2003		    6
     Notes to Condensed Consolidated Financial Statements    7 - 23

Item 2.

    Management’s Discussion and Analysis of
Financial Condition and Results of Operations		    24 - 41

Item 3.

    Quantitative and Qualitative Disclosures About Market Risk    42 - 44

Item 4.

    Controls and Procedures    45

Part II. Other Information

    

Item 1.

    Legal Proceedings    46

Item 2.

    Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities    46

Item 4.

    Submission of Matters to a Vote of Security Holders    47

Item 6.

    Exhibits and Reports on Form 8-K    48
     Signatures    49
     Certifications     

 

2

Table of Contents

Fifth Third Bancorp and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)

 
($ in thousands, except share data)      March 31,
2004		      December 31,
2003		      March 31,
2003		  
  

Assets

                         

Cash and Due from Banks

      $ 2,012,466      2,359,371      1,771,527  

Securities Available-for-Sale (a)

        30,576,640      28,999,168      27,190,554  

Securities Held-to-Maturity (b)

        179,002      135,215      86,146  

Trading Securities

        96,425      55,393      32,955  

Other Short-Term Investments

        191,039      268,092      782,066  

Loans Held for Sale

        1,660,669      1,881,127      3,011,377  

Loans and Leases:

                         

Commercial Loans

        14,468,576      14,209,129      13,380,294  

Construction Loans

        3,819,710      3,635,977      3,360,884  

Commercial Mortgage Loans

        7,197,126      6,893,742      5,983,988  

Commercial Lease Financing

        4,558,781      4,429,605      3,931,722  

Residential Mortgage Loans

        4,937,181      4,425,421      3,670,154  

Consumer Loans

        17,793,963      17,432,495      15,425,100  

Consumer Lease Financing

        2,606,642      2,708,511      2,746,288  

Unearned Income

        (1,469,705 )    (1,427,027 )    (1,231,734 )
  

Total Loans and Leases

        53,912,274      52,307,853      47,266,696  

Reserve for Credit Losses

        (782,806 )    (770,394 )    (703,354 )
  

Total Loans and Leases, Net

        53,129,468      51,537,459      46,563,342  

Bank Premises and Equipment

        1,101,569      1,061,191      921,076  

Operating Lease Equipment

        657,756      766,762      -  

Accrued Interest Receivable

        411,998      408,104      440,194  

Goodwill

        738,054      738,054      740,124  

Intangible Assets

        154,777      194,569      231,552  

Servicing Rights

        283,291      298,564      248,569  

Other Assets

        2,539,056      2,478,027      2,305,336  
  

Total Assets

      $ 93,732,210      91,181,096      84,324,818  
  

Liabilities

                         

Deposits:

                         

Demand

      $ 12,374,287      12,141,582      10,468,664  

Interest Checking

        19,375,214      19,757,044      18,681,537  

Savings

        7,391,478      7,375,486      8,098,013  

Money Market

        2,994,638      3,201,398      2,852,108  

Other Time

        6,449,918      6,685,935      7,500,968  

Certificates - $100,000 and Over

        2,097,358      1,370,717      4,934,571  

Foreign Office

        4,567,372      6,563,147      2,022,235  
  

Total Deposits

        55,250,265      57,095,309      54,558,096  

Federal Funds Purchased

        7,501,301      6,928,505      4,924,065  

Short-Term Bank Notes

        500,000      500,000      -  

Other Short-Term Borrowings

        7,251,665      5,742,202      4,275,336  

Accrued Taxes, Interest and Expenses

        2,410,801      2,199,607      2,336,578  

Other Liabilities

        963,622      985,640      927,497  

Long-Term Debt

        10,990,799      9,062,830      8,033,230  
  

Total Liabilities

        84,868,453      82,514,093      75,054,802  

Minority Interest

        -      -      471,734  

Shareholders’ Equity

                         

Common Stock (c)

        1,295,263      1,295,263      1,295,241  

Preferred Stock (d)

        9,250      9,250      9,250  

Capital Surplus

        1,953,448      1,965,363      2,005,563  

Retained Earnings

        6,731,366      6,480,558      5,704,878  

Accumulated Nonowner Changes in Equity

        98,771      (120,701 )    296,728  

Treasury Stock

        (1,224,341 )    (962,730 )    (513,378 )
  

Total Shareholders’ Equity

        8,863,757      8,667,003      8,798,282  
  

Total Liabilities and Shareholders’ Equity

      $     93,732,210      91,181,096      84,324,818  
  
(a) Amortized cost: March 31, 2004 - $30,342,464, December 31, 2003 - $29,075,805 and March 31, 2003 - $26,633,108.
(b) Market values: March 31, 2004 - $179,002, December 31, 2003 - $135,215 and March 31, 2003 - $86,146.
(c) Common shares: Stated value $2.22 per share; authorized 1,300,000,000; outstanding at March 31, 2004 - 562,131,643 (excludes 21,320,048 treasury shares), December 31, 2003 - 566,685,301 (excludes 16,766,390 treasury shares) and March 31, 2003 - 574,743,788 (excludes 8,697,903 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 per share were authorized, issued and outstanding; 2,000 shares of 8.00% cumulative Series E perpetual preferred stock with a stated value of $1,000 per share 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
March 31,
  
($ in thousands, except per share data)      2004      2003  
  

Interest Income

                  

Interest and Fees on Loans and Leases

      $ 669,331      676,058  

Interest on Securities:

                  

Taxable

        308,472      310,823  

Exempt from Income Taxes

        11,808      12,645  
  

Total Interest on Securities

        320,280      323,468  

Interest on Other Short-Term Investments

        514      772  
  

Total Interest Income

        990,125      1,000,298  

Interest Expense

                  

Interest on Deposits:

                  

Interest Checking

        36,536      55,267  

Savings

        8,935      21,034  

Money Market

        6,636      9,209  

Other Time

        44,081      62,109  

Certificates - $100,000 and Over

        5,373      12,318  

Foreign Office

        14,966      9,567  
  

Total Interest on Deposits

        116,527      169,504  

Interest on Federal Funds Purchased

        17,954      19,620  

Interest on Short-Term Bank Notes

        1,260      -  

Interest on Other Short-Term Borrowings

        15,591      12,509  

Interest on Long-Term Debt

        89,050      92,422  
  

Total Interest Expense

        240,382      294,055  
  

Net Interest Income

        749,743      706,243  

Provision for Credit Losses

        83,240      84,817  
  

Net Interest Income After Provision for Credit Losses

        666,503      621,426  

Other Operating Income

                  

Electronic Payment Processing Revenue

        148,234      130,138  

Service Charges on Deposits

        123,247      114,322  

Mortgage Banking Net Revenue

        43,938      76,849  

Investment Advisory Revenue

        93,165      79,737  

Other Service Charges and Fees

        140,579      158,363  

Operating Lease Revenue

        51,652      -  

Securities Gains, Net

        25,590      24,909  

Securities Gains, Net - Non-Qualifying Hedges on Mortgage Servicing

        -      1,015  
  

Total Other Operating Income

        626,405      585,333  

Operating Expenses

                  

Salaries, Wages and Incentives

        245,438      268,710  

Employee Benefits

        75,562      60,650  

Equipment Expenses

        19,888      19,712  

Net Occupancy Expenses

        45,648      38,397  

Operating Lease Expenses

        38,282      -  

Other Operating Expenses

        227,250      226,459  
  

Total Operating Expenses

        652,068      613,928  
  

Income from Continuing Operations Before Income Taxes and Minority Interest

        640,840      592,831  

Applicable Income Taxes

        210,524      193,468  
  

Income from Continuing Operations Before Minority Interest

        430,316      399,363  

Minority Interest, Net of Tax

        -      (10,229 )
  

Income from Continuing Operations

        430,316      389,134  

Income from Discontinued Operations, Net of Tax

        -      813  
  

Net Income

        430,316      389,947  

Dividends on Preferred Stock

        185      185  
  

Net Income Available to Common Shareholders

      $         430,131      389,762  
  

Basic Earnings Per Share:

                  

Income from Continuing Operations

      $ .76      .68  

Income from Discontinued Operations

        -      -  
  

Net Income

      $ .76      .68  
  

Diluted Earnings Per Share:

                  

Income from Continuing Operations

      $ .75      .67  

Income from Discontinued Operations

        -      -  
  

Net Income

      $ .75      .67  
  

 

See Notes to Condensed Consolidated Financial Statements

 

4

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Fifth Third Bancorp and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)

       Three Months Ended
March 31,
  
($ in thousands)      2004      2003  
  

Operating Activities

                  

Net Income

      $ 430,316      389,947  

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:

                  

Provision for Credit Losses

        83,240      84,817  

Minority Interest in Net Income

        -           10,229  

Depreciation, Amortization and Accretion

        124,640      118,517  

Stock-Based Compensation Expense

        22,568      35,908  

Provision for Deferred Income Taxes

        105,331      5,881