FITB Fifth Third Bancorp

Fifth Third Bancorp (Nasdaq:FITB):

• 1Q18 net income available to common shareholders of $689 million, or $0.97 per diluted common share
• Results included a net positive $0.40 impact on reported 1Q18 EPS:
  • $414 million pre-tax (~$327 million after-tax)(a) step-up gain included in other noninterest income from the Vantiv merger with Worldpay
  • $39 million pre-tax (~$31 million after-tax)(a) charge to other noninterest income related to the valuation of the Visa total return swap
  • $8 million pre-tax (~$6 million after-tax)(a) impairment charge to other noninterest income related to an assessment of the branch network which is expected to result in a 9 branch reduction by 3Q18
  • $8 million pre-tax (~$6 million after-tax)(a) charge to other noninterest expense from an adjustment to litigation reserves

• Reported net interest income (NII) of $996 million; taxable equivalent NII of $999 million(b), up 4% from 4Q17 (or up 1% excluding 4Q17 lease remeasurement)(b) and up 6% from 1Q17 (or up 8% excluding 1Q17 card remediation impact)(b)
• Taxable equivalent net interest margin (NIM) of 3.18%(b), up 16 bps from 4Q17 (or up 8 bps excluding 4Q17 lease remeasurement)(b) and up 16 bps from 1Q17 (or up 20 bps excluding 1Q17 card remediation impact)(b)
• Average portfolio loans and leases of $92.3 billion, flat from both 4Q17 and from 1Q17
• Noninterest income of $909 million, compared with $577 million in 4Q17 and $523 million in 1Q17; performance primarily driven by the Worldpay step-up gain previously noted
• Noninterest expense of $1.046 billion, down 3% from 4Q17 and up 6% from 1Q17
• Net charge-offs (NCOs) of $81 million, up $5 million from 4Q17 and down $8 million from 1Q17; NCO ratio of 0.36% compared to 0.33% in 4Q17 and 0.40% in 1Q17
• Portfolio nonperforming asset (NPA) ratio of 0.55%, up 2 bps from 4Q17 and down 24 bps from 1Q17
• 1Q18 provision expense of $23 million compared to $67 million in 4Q17 and $74 million in 1Q17
• Common equity Tier 1 (CET1)(c) ratio of 10.82%
• Tangible common equity ratio of 8.89%(b); 9.14% excluding unrealized gains/losses(b)
• Book value per share of $21.68, flat from 4Q17 and up 8% from 1Q17; tangible book value per share(b) of $18.05 flat from 4Q17 and up 7% from 1Q17

Fifth Third Bancorp (Nasdaq:FITB) today reported first quarter 2018 net income of $704 million versus net income of $509 million in the fourth quarter of 2017 and $305 million in the first quarter of 2017. After preferred dividends, net income available to common shareholders was $689 million, or $0.97 per diluted share, in the first quarter of 2018, compared with $486 million, or $0.67 per diluted share, in the fourth quarter of 2017, and $290 million, or $0.38 per diluted share, in the first quarter of 2017.

Earnings Highlights                                               For the Three Months Ended     % Change March     December   September   June   March           2018     2017   2017   2017   2017     Seq   Yr/Yr Income Statement Data ($ in millions) Net income attributable to Bancorp $704 $509 $1,014 $367 $305 38% 131% Net income available to common shareholders $689 $486 $999 $344 $290 42% 138%   Earnings Per Share Data Average common shares outstanding (in thousands): Basic 689,820 703,372 721,280 741,401 747,668 (2%) (8%) Diluted 704,101 716,908 733,285 752,328 760,809 (2%) (7%) Earnings per share, basic $0.99 $0.68 $1.37 $0.46 $0.38 46% 161% Earnings per share, diluted 0.97 0.67 1.35 0.45 0.38 45% 155%   Common Share Data Cash dividends per common share $0.16 $0.16 $0.16 $0.14 $0.14 - 14% Book value per share 21.68 21.67 21.30 20.42 20.13 - 8% Tangible book value per share(b) 18.05 18.10 17.86 17.11 16.89 - 7% Common shares outstanding (in thousands) 684,942 693,805 705,474 738,873 750,145 (1%) (9%)   Financial Ratios bps Change Return on average assets 2.02 % 1.43 % 2.85 % 1.05 % 0.88 % 59 114 Return on average common equity 18.6 12.7 25.6 9.0 7.8 590 1080 Return on average tangible common equity(b) 22.4 15.2 30.4 10.7 9.3 720 1310 CET1 capital(c) 10.82 10.61 10.59 10.63 10.76 21 6 Tier I risk-based capital(c) 11.95 11.74 11.72 11.76 11.90 21 5 Net interest margin (taxable equivalent)(b) 3.18 3.02 3.07 3.01 3.02 16 16 Efficiency (taxable equivalent)(b)     54.8     69.7   38.4   63.4   67.4     (1490)   (1260)  

“Our first quarter results were strong and reflected the repositioning of our balance sheet over the last 24 months to improve the resiliency of our earnings. Our balance sheet continues to strengthen as evidenced by improving credit quality, strong capital ratios and the level of asset sensitivity which positions us well in the current rate environment,” said Greg D. Carmichael, Chairman, President and CEO of Fifth Third Bancorp.

“Expenses were well managed while we continued to invest in our strategic initiatives. We remain focused on driving improved shareholder returns and achieving our long term profitability targets.”

Income Statement Highlights                                                                   ($ in millions, except per-share data) For the Three Months Ended     % Change March   December   September   June   March         2018   2017   2017   2017   2017   Seq   Yr/Yr Condensed Statements of Income Taxable equivalent net interest income(b) $999 $963 $977 $945 $939 4% 6% Provision for loan and lease losses 23 67 67 52 74 (66%) (69%) Total noninterest income 909 577 1,561 564 523 58% 74% Total noninterest expense     1,046   1,073   975   957   986   (3%)   6% Taxable equivalent income before income taxes (b)     $839   $400   $1,496   $500   $402   110%   109%   Taxable equivalent adjustment 3 7 7 6 6 (57%) (50%) Applicable income tax expense (benefit)     132   (116)   475   127   91   (214%)   45% Net income $704 $509 $1,014 $367 $305 38% 131% Less: Net income attributable to noncontrolling interests     -   -   -   -   -   NM   NM Net income attributable to Bancorp $704 $509 $1,014 $367 $305 38% 131% Dividends on preferred stock     15   23   15   23   15   (35%)   - Net income available to common shareholders     $689   $486   $999   $344   $290   42%   138% Earnings per share, diluted     $0.97   $0.67   $1.35   $0.45   $0.38   45%   155%   Net Interest Income                                                           (Taxable equivalent basis; $ in millions)(b) For the Three Months Ended     % Change March December September June March 2018   2017   2017   2017   2017   Seq   Yr/Yr Interest Income Total interest income $1,209 $1,151 $1,159 $1,112 $1,092 5% 11% Total interest expense     210     188     182     167     153     12%   37% Net interest income (NII)     $999     $963     $977     $945     $939     4%   6%   Average Yield bps Change Yield on interest-earning assets 3.85% 3.61% 3.64% 3.54% 3.51% 24 34 Adjusted yield on interest-earning assets 3.85% 3.69% 3.64% 3.54% 3.51% 16 34 Rate paid on interest-bearing liabilities 0.97% 0.88% 0.85% 0.79% 0.73% 9 24   Ratios Net interest rate spread 2.88% 2.73% 2.79% 2.75% 2.78% 15 10 Net interest margin (NIM) 3.18% 3.02% 3.07% 3.01% 3.02% 16 16 Adjusted NIM 3.18% 3.10% 3.07% 3.01% 2.98% 8 20   Average Balances % Change Loans and leases, including held for sale $92,869 $92,865 $92,617 $92,653 $92,791 - - Total securities and other short-term investments 34,677 33,756 33,826 33,481 33,177 3% 5% Total interest-earning assets 127,546 126,621 126,443 126,134 125,968 1% 1% Total interest-bearing liabilities 87,607 84,820 85,328 85,320 84,890 3% 3% Bancorp shareholders' equity     16,313     16,493     16,820     16,615     16,429     (1%)   (1%)  

Taxable equivalent NII of $999 million in the first quarter of 2018 increased $36 million, or 4 percent, from the prior quarter. The prior quarter’s results were negatively impacted by a $27 million leveraged lease remeasurement. Excluding the impact of the remeasurement, taxable equivalent NII in the first quarter of 2018 was up $9 million, or 1 percent, from the prior quarter, reflecting higher short-term market rates, partially offset by a lower day count. Taxable equivalent NIM of 3.18 percent in the first quarter of 2018 increased 16 bps from the prior quarter. Excluding the lease remeasurement, taxable equivalent NIM increased 8 bps from the prior quarter’s adjusted NIM, primarily driven by higher short-term market rates and a lower day count.

Compared to the first quarter of 2017, taxable equivalent NII increased $60 million, or 6 percent, from the first quarter of 2017. The first quarter of 2017 results were positively impacted by a $12 million reversal of a previously-estimated charge for refunds to certain bankcard customers. Excluding the card remediation impact, taxable equivalent NII in the first quarter of 2018 was up $72 million, or 8 percent, from the first quarter of 2017, reflecting higher short-term rates and an increase in investment portfolio balances. Taxable equivalent NIM increased 16 bps from the first quarter of 2017, primarily driven by higher short-term market rates, partially offset by the aforementioned card remediation impact. Excluding this impact, the taxable equivalent NIM increased 20 bps from the first quarter of 2017.

Securities

Average securities and other short-term investments were $34.7 billion in the first quarter of 2018 compared to $33.8 billion in the previous quarter and $33.2 billion in the first quarter of 2017. Average available-for-sale debt and other securities of $32.2 billion in the first quarter of 2018 were up $917 million, or 3 percent, sequentially and up $937 million, or 3 percent, from the first quarter of 2017.

Loans                                                           ($ in millions) For the Three Months Ended     % Change March December September June March 2018   2017   2017   2017   2017   Seq   Yr/Yr Average Portfolio Loans and Leases Commercial loans and leases: Commercial and industrial loans $41,782 $41,438 $41,302 $41,601 $41,854 1% - Commercial mortgage loans 6,582 6,751 6,807 6,845 6,941 (3%) (5%) Commercial construction loans 4,671 4,660 4,533 4,306 3,987 - 17% Commercial leases     3,960     4,016     4,072     4,036     3,901     (1%)   2% Total commercial loans and leases     $56,995     $56,865     $56,714     $56,788     $56,683     -   1% Consumer loans: Residential mortgage loans $15,575 $15,590 $15,523 $15,417 $15,200 - 2% Home equity 6,889 7,066 7,207 7,385 7,581 (3%) (9%) Automobile loans 9,064 9,175 9,267 9,410 9,786 (1%) (7%) Credit card 2,224 2,202 2,140 2,080 2,141 1% 4% Other consumer loans     1,587     1,352     1,055     892     755     17%   110% Total consumer loans     $35,339     $35,385     $35,192     $35,184     $35,463     -   - Total average portfolio loans and leases $92,334 $92,250 $91,906 $91,972 $92,146 - -   Average loans held for sale     $535     $615     $711     $681     $645     (13%)   (17%)  

Average portfolio loan and lease balances were flat sequentially and year-over-year. Sequential performance was primarily driven by increases in commercial and industrial (C&I) and other consumer loans, offset by decreases in home equity and commercial real estate loans. Year-over-year performance was primarily driven by increases in other consumer loans and residential mortgage loans, offset by decreases in automobile and home equity loans. Period end portfolio loans and leases of $92.0 billion were flat sequentially and year-over-year.

Average commercial portfolio loan and lease balances were flat sequentially, and increased 1 percent from the first quarter of 2017. Sequential performance was primarily driven by an increase in C&I loans reflecting growth within industry verticals, offset by a decrease in commercial real estate loans. Within commercial real estate, commercial mortgage balances decreased 3 percent and commercial construction balances were flat sequentially. Year-over-year performance was primarily driven by an increase in commercial real estate loans. Period end commercial line utilization of 35 percent compared to 34 percent in the fourth quarter of 2017 and 34 percent in the first quarter of 2017.

Average consumer portfolio loan and lease balances were flat sequentially and year-over-year. Sequential performance was primarily driven by an increase in other consumer loans, offset by a decline in home equity and automobile loan balances. Year-over-year performance was primarily driven by an increase in other consumer loans and residential mortgage loans, offset by lower automobile and home equity loan balances.

Deposits                                                           ($ in millions) For the Three Months Ended     % Change March December September June March 2018   2017   2017   2017   2017   Seq   Yr/Yr Average Deposits Demand $33,825 $35,519 $34,850 $34,915 $35,084 (5%) (4%) Interest checking 28,403 26,992 25,765 26,014 26,760 5% 6% Savings 13,546 13,593 13,889 14,238 14,117 - (4%) Money market 20,750 20,023 20,028 20,278 20,603 4% 1% Foreign office(d)     494     323     395     380     454     53%   9% Total transaction deposits $97,018 $96,450 $94,927 $95,825 $97,018 1% - Other time     3,856     3,792     3,722     3,745     3,827     2%   1% Total core deposits $100,874 $100,242 $98,649 $99,570 $100,845 1% - Certificates - $100,000 and over 2,284 2,429 2,625 2,623 2,579 (6%) (11%) Other     379     119     560     264     162     218%   134% Total average deposits     $103,537     $102,790     $101,834     $102,457     $103,586     1%   -  

Average core deposits increased 1 percent sequentially and were flat year-over-year. Average transaction deposits increased 1 percent sequentially and were flat compared with the first quarter of 2017. The sequential performance was primarily driven by increases in commercial interest checking deposits and consumer money market account balances, partially offset by lower commercial demand deposit account balances. Year-over-year performance was primarily driven by higher consumer money market account balances and commercial interest checking deposits, offset by lower commercial demand deposit account balances and commercial money market account balances. Other time deposits increased by 2 percent sequentially and 1 percent year-over-year.

Average total commercial transaction deposits of $43 billion decreased 2 percent sequentially and decreased 3 percent from the first quarter of 2017. Average total consumer transaction deposits of $54 billion increased 2 percent sequentially and increased 3 percent from the first quarter of 2017.

Wholesale Funding                                                           ($ in millions) For the Three Months Ended     % Change March December September June March 2018   2017   2017   2017   2017   Seq   Yr/Yr Average Wholesale Funding Certificates - $100,000 and over $2,284 $2,429 $2,625 $2,623 $2,579 (6%) (11%) Other deposits 379 119 560 264 162 218% 134% Federal funds purchased 692 602 675 311 639 15% 8% Other short-term borrowings 2,423 2,316 4,212 4,194 1,893 5% 28% Long-term debt     14,780     14,631     13,457     13,273     13,856     1%   7% Total average wholesale funding     $20,558     $20,097     $21,529     $20,665     $19,129     2%   7%  

Average wholesale funding of $20.6 billion increased $461 million, or 2 percent, sequentially and increased $1.4 billion, or 7 percent, from the first quarter of 2017. The sequential and year-over-year increase in wholesale funding reflected the increase in interest-earning assets.

Noninterest Income                                                 ($ in millions) For the Three Months Ended   % Change March December September June March 2018   2017   2017   2017   2017   Seq   Yr/Yr Noninterest Income Service charges on deposits $137 $138 $138 $139 $138 (1%) (1%) Corporate banking revenue 88 77 101 101 74 14% 19% Mortgage banking net revenue 56 54 63 55 52 4% 8% Wealth and asset management revenue 113 106 102 103 108 7% 5% Card and processing revenue 79 80 79 79 74 (1%) 7% Other noninterest income 460 123 1,076 85 77 274% 497% Securities gains (losses), net (11) 1 - - - NM NM Securities gains (losses), net - non-qualifying hedges on mortgage servicing rights     (13)   (2)   2   2   -   550%   NM Total noninterest income     $909   $577   $1,561   $564   $523   58%   74%  

Noninterest income of $909 million increased $332 million sequentially and increased $386 million year-over-year. The sequential and year-over-year comparisons reflect the impact of the following items:

Noninterest Income excluding certain items                           ($ in millions)     For the Three Months Ended     % Change   March   December   March       2018   2017   2017     Seq   Yr/Yr Noninterest Income excluding certain items Noninterest income (U.S. GAAP) $909 $577 $523 Worldpay step-up gain (414 ) - - Valuation of Visa total return swap 39 11 13 Branch network impairment charge 8 - - Securities losses / (gains), net 11     (1 )   -           Noninterest income excluding certain items(b)     $553     $587     $536     (6 %)   3 %  

Excluding the items in the table above, noninterest income of $553 million decreased 6 percent from the previous quarter and increased 3 percent from the first quarter of 2017. The sequential performance was impacted by $44 million in revenue recognized from Worldpay related to the tax receivable agreement (TRA) and a $25 million lease remarketing impairment recognized in the fourth quarter of 2017. The year-over-year performance was impacted by a $31 million lease remarketing impairment recognized in the first quarter of 2017. Excluding these impacts, adjusted noninterest income decreased 3 percent sequentially and decreased 2 percent year-over-year, primarily due to lower equity method income resulting from Worldpay acquisition and integration costs.

Corporate banking revenue of $88 million was up 14 percent sequentially and up 19 percent year-over-year. The sequential and year-over-year increases were primarily driven by an increase in M&A advisory fees, as well as the aforementioned lease remarketing impairments recognized both in the fourth quarter of 2017 and first quarter of 2017. Excluding the impact of the lease impairments, corporate banking revenue decreased 14 percent sequentially and decreased 16 percent year-over-year, primarily driven by lower loan syndication fees and business lending fees.

Mortgage Banking Net Revenue                                                 ($ in millions) For the Three Months Ended   % Change March December September June March 2018   2017   2017   2017   2017   Seq   Yr/Yr Mortgage Banking Net Revenue Origination fees and gains on loan sales $24 $32 $40 $37 $29 (25%) (17%) Net mortgage servicing revenue: Gross mortgage servicing fees 53 54 56 49 47 (2%) 13% Net valuation adjustments on MSRs and (21) (32) (33) (31) (24) (34%) (13%) free-standing derivatives purchased to economically hedge MSRs                               Net mortgage servicing revenue     32   22   23   18   23   45%   39% Total mortgage banking net revenue     $56   $54   $63   $55   $52   4%   8%  

Mortgage banking net revenue was $56 million in the first quarter of 2018, up 4 percent from the fourth quarter of 2017 and up 8 percent from the first quarter of 2017. The sequential increase was driven by a lower negative impact from net valuation adjustments, partially offset by lower origination fees and gains on loan sales. The year-over-year increase was driven by higher gross mortgage servicing fees, partially offset by lower origination fees and gains on loan sales. Originations of $1.6 billion in the current quarter decreased 18 percent sequentially and decreased 19 percent from the first quarter of 2017.

Wealth and asset management revenue of $113 million increased 7 percent from the fourth quarter of 2017 and increased 5 percent from the first quarter of 2017. The sequential increase was primarily driven by seasonally strong tax-related private client service revenue. The year-over-year increase was primarily driven by higher personal asset management revenue.

Card and processing revenue of $79 million in the first quarter of 2018 decreased 1 percent sequentially and increased 7 percent year-over-year. The sequential decrease reflected seasonally lower credit card spend volume compared with the fourth quarter, largely offset by lower rewards costs. The year-over-year increase reflected higher credit spend volume and an increase in actively used cards.

Other noninterest income totaled $460 million in the first quarter of 2018, compared with $123 million in the previous quarter, and $77 million in the first quarter of 2017. As disclosed in the table on page 7, the reported results included the impact of the Worldpay step-up gain, valuation of the Visa total return swap, and the branch impairment charge. For the first quarter of 2018, excluding these items, other noninterest income of $93 million decreased $41 million, or 31 percent, from the fourth quarter of 2017 and increased $3 million, or 3 percent, from the first quarter of 2017. The sequential decrease was primarily due to the $44 million gain from the TRA in the fourth quarter of 2017. The year-over-year increase was primarily due to an increase in private equity investment income.

Net losses on investment securities were $11 million in the first quarter of 2018, compared with a net gain of $1 million in the fourth quarter of 2017 and no net gains/losses in the first quarter of 2017. Net losses on securities held as non-qualifying hedges for the MSR portfolio were $13 million in the first quarter of 2018 and $2 million in the fourth quarter of 2017.

Noninterest Expense                                                                     ($ in millions) For the Three Months Ended     % Change March     December     September     June     March           2018     2017     2017     2017     2017     Seq   Yr/Yr Noninterest Expense Salaries, wages and incentives $447 $418 $407 $397 $411 7% 9% Employee benefits 110 82 77 86 111 34% (1%) Net occupancy expense 75 74 74 70 78 1% (4%) Technology and communications 68 68 62 57 58 - 17% Equipment expense 31 29 30 29 28 7% 11% Card and processing expense 29 34 32 33 30 (15%) (3%) Other noninterest expense     286     368     293     285     270     (22%)   6% Total noninterest expense     $1,046     $1,073     $975     $957     $986     (3%)   6%  

Noninterest expense of $1.046 billion decreased $27 million, or 3 percent, compared with the fourth quarter of 2017, and increased $60 million, or 6 percent, compared with the first quarter of 2017. Excluding the $8 million litigation reserve charge discussed on page 1, as well as the items related to the Tax Cuts and Jobs Act recognized in the fourth quarter of 2017, noninterest expense increased $63 million, or 6 percent. The sequential increase primarily reflected seasonally higher compensation-related expenses, as well as an increase in the amortization of affordable housing investments primarily resulting from the Tax Cuts and Jobs Act. The year-over-year increase was primarily driven by higher base compensation and technology and communications expense.

Summary of Credit Loss Experience                                     ($ in millions) For the Three Months Ended March December September June March 2018   2017   2017   2017   2017 Net losses charged-off Commercial and industrial loans ($28 ) ($32 ) ($27 ) ($18 ) ($36 ) Commercial mortgage loans (1 ) 1 (3 ) (5 ) (5 ) Commercial leases - (1 ) - (1 ) (1 ) Residential mortgage loans (3 ) (1 ) 1 (2 ) (5 ) Home equity (5 ) (4 ) (3 ) (5 ) (6 ) Automobile loans (11 ) (10 ) (8 ) (6 ) (11 ) Credit card (25 ) (20 ) (20 ) (22 ) (22 ) Other consumer loans and leases     (8 )   (9 )   (8 )   (5 )   (3 ) Total net losses charged-off ($81 ) ($76 ) ($68 ) ($64 ) ($89 )   Total losses charged-off ($103 ) ($94 ) ($85 ) ($95 ) ($107 ) Total recoveries of losses previously charged-off     22     18     17     31     18   Total net losses charged-off ($81 ) ($76 ) ($68 ) ($64 ) ($89 )   Ratios (annualized) Net losses charged-off as a percent of average portfolio loans and leases 0.36 % 0.33 % 0.29 % 0.28 % 0.40 % Commercial 0.21 % 0.22 % 0.21 % 0.17 % 0.29 % Consumer     0.60 %   0.51 %   0.43 %   0.46 %   0.56 %  

Net charge-offs were $81 million, or 36 bps of average portfolio loans and leases on an annualized basis, in the first quarter of 2018 compared with net charge-offs of $76 million, or 33 bps, in the fourth quarter of 2017 and $89 million, or 40 bps, in the first quarter of 2017.

Commercial net charge-offs of $29 million, or 21 bps, decreased $3 million sequentially. This primarily reflected a $4 million decrease in net charge-offs of C&I loans, partially offset by a $2 million increase in net charge-offs of commercial mortgage loans.

Consumer net charge-offs of $52 million, or 60 bps, increased $8 million sequentially. This primarily reflected a $5 million increase in net charge-offs on credit card loans.

        ($ in millions)     For the Three Months Ended March   December   September   June   March 2018   2017   2017   2017   2017 Allowance for Credit Losses Allowance for loan and lease losses, beginning $1,196 $1,205 $1,226 $1,238 $1,253 Total net losses charged-off (81 ) (76 ) (68 ) (64 ) (89 ) Provision for loan and lease losses 23 67 67 52 74 Deconsolidation of a variable interest entity     -     -     (20 )   -     -   Allowance for loan and lease losses, ending $1,138 $1,196 $1,205 $1,226 $1,238   Reserve for unfunded commitments, beginning $161 $157 $162 $159 $161 Provision for unfunded commitments     (10 )   4     (5 )   3     (2 ) Reserve for unfunded commitments, ending $151 $161 $157 $162 $159   Components of allowance for credit losses: Allowance for loan and lease losses $1,138 $1,196 $1,205 $1,226 $1,238 Reserve for unfunded commitments     151     161     157     162     159   Total allowance for credit losses $1,289 $1,357 $1,362 $1,388 $1,397 Allowance for loan and lease losses ratio As a percent of portfolio loans and leases 1.24 % 1.30 % 1.31 % 1.34 % 1.35 % As a percent of nonperforming portfolio loans and leases(e) 252 % 274 % 238 % 200 % 188 % As a percent of nonperforming portfolio assets(e)     226 %   245 %   217 %   185 %   172 %  

The provision for loan and lease losses totaled $23 million in the first quarter of 2018, and decreased $44 million sequentially, reflecting continued low levels of net charge-offs and an improvement in criticized assets. Provision expense decreased $51 million from the first quarter of 2017.

As of quarter end, the allowance for loan and lease loss ratio represented 1.24 percent of total portfolio loans and leases outstanding, compared with 1.30 percent last quarter, and represented 252 percent of nonperforming loans and leases, and 226 percent of nonperforming assets.

($ in millions)     As of March   December   September   June   March Nonperforming Assets and Delinquent Loans 2018   2017   2017   2017   2017 Nonaccrual portfolio loans and leases: Commercial and industrial loans $155 $144 $144 $225 $251 Commercial mortgage loans 9 12 14 15 21 Commercial leases 4 - 1 1 - Residential mortgage loans 16 17 19 19 21 Home equity 55 56 56 52 53 Other consumer loans and leases     1   -   -   -   - Total nonaccrual portfolio loans and leases (excludes restructured loans) $240 $229 $234 $312 $346 Nonaccrual restructured portfolio commercial loans and leases(f) 154 150 214 244 251 Nonaccrual restructured portfolio consumer loans and leases     58   58   58   58   60 Total nonaccrual portfolio loans and leases $452 $437 $506 $614 $657 Repossessed property 9 9 10 11 14 OREO     43   43i   39i   37i   50i Total nonperforming portfolio assets(e) $504 $489 $555 $662 $721 Nonaccrual loans held for sale 5 5 18 7 7 Nonaccrual restructured loans held for sale     19   1   2   1   2 Total nonperforming assets     $528   $495   $575   $670   $730   Restructured portfolio consumer loans and leases (accrual) $916 $927 $929 $933 $950 Restructured portfolio commercial loans and leases (accrual)(f) $249 $249 $232 $224 $277   Total loans and leases 30-89 days past due (accrual) $299 $280 $252 $190 $180 Total loans and leases 90 days past due (accrual) $107 $97 $77 $75 $75   Nonperforming portfolio loans and leases as a percent of portfolio loans and leases and OREO(e) 0.49% 0.48% 0.55% 0.67% 0.72% Nonperforming portfolio assets as a percent of portfolio loans and leases and OREO(e)     0.55%   0.53%   0.60%   0.72%   0.79%  

Total nonperforming portfolio assets increased $15 million, or 3 percent, from the previous quarter to $504 million. Portfolio nonperforming loans and leases (NPLs) at quarter end increased $15 million from the previous quarter to $452 million. NPLs as a percent of total loans, leases and OREO at quarter end increased 1 bps from the previous quarter to 0.49 percent.

Commercial portfolio NPLs increased $16 million from last quarter to $322 million, or 0.57 percent of commercial portfolio loans, leases and OREO. Consumer portfolio NPLs decreased $1 million from last quarter to $130 million, or 0.37 percent of consumer portfolio loans, leases and OREO.

OREO balances were flat from the prior quarter at $43 million, and included $18 million in commercial OREO and $25 million in consumer OREO. Repossessed personal property was flat from the prior quarter at $9 million.

Loans over 90 days past due and still accruing increased $10 million from the fourth quarter of 2017 at $107 million. Loans 30-89 days past due of $299 million increased $19 million from the previous quarter.

Capital and Liquidity Position                                     For the Three Months Ended March December September June March 2018   2017   2017   2017   2017 Capital Position Average total Bancorp shareholders' equity as a percent of average assets 11.52% 11.69% 11.93% 11.84% 11.72% Tangible equity(b) 10.09% 9.90% 9.84% 9.98% 10.12% Tangible common equity (excluding unrealized gains/losses)(b) 9.14% 8.94% 8.89% 9.02% 9.15% Tangible common equity (including unrealized gains/losses)(b) 8.89% 8.99% 9.00% 9.12% 9.20%   Regulatory Capital and Liquidity Ratios CET1 capital(c) 10.82% 10.61% 10.59% 10.63% 10.76% Tier I risk-based capital(c) 11.95% 11.74% 11.72% 11.76% 11.90% Total risk-based capital(c) 15.29% 15.16% 15.16% 15.22% 15.45% Tier I leverage 10.11% 10.01% 9.97% 10.07% 10.15% Modified liquidity coverage ratio (LCR)     113%   129%   124%   115%   119%  

Capital ratios remained strong and increased during the quarter. The CET1 ratio was 10.82 percent, the tangible common equity to tangible assets ratio(b) was 9.14 percent (excluding unrealized gains/losses), and 8.89 percent (including unrealized gains/losses). The Tier I risk-based capital ratio was 11.95 percent, the Total risk-based capital ratio was 15.29 percent, and the Tier I leverage ratio was 10.11 percent.

Fifth Third entered into or completed multiple share repurchases during the quarter. Below is a summary of those share repurchases.

• On February 12, 2018, Fifth Third initially settled a $318 million share repurchase agreement, including $283 million of repurchases that were part of Fifth Third’s 2017 CCAR Capital Plan, as well as an additional de minimis repurchase of $35 million. The initial settlement reduced first quarter common shares outstanding by 8.7 million shares. On March 26, 2018, Fifth Third settled the forward contract. An additional 1.0 million shares were repurchased in connection with the completion of this agreement.
• On March 19, 2018, Fifth Third settled the forward contract related to the December 19, 2017 $273 million share repurchase agreement. An additional 0.8 million shares were repurchased in connection with the completion of this agreement.

Based on the transactions noted above, common shares outstanding decreased by approximately 10.5 million shares in the first quarter of 2018 from the fourth quarter of 2017.

Tax Rate

The effective tax rate was 15.8 percent in the first quarter of 2018 compared with (29.8) percent in the fourth quarter of 2017 and 22.9 percent in the first quarter of 2017. The tax rate in the first quarter of 2018 was impacted by a $7 million tax benefit primarily associated with the exercise and vesting of employee equity awards.

Other

As of March 31, 2018, Fifth Third Bank owned approximately 15 million units representing a 4.9 percent interest in Vantiv Holding, LLC, convertible into shares of Worldpay, Inc., a publicly traded firm. Based upon Worldpay’s closing price of $82.24 on March 31, 2018, our interest in Worldpay was valued at approximately $1.3 billion. The difference between the market value and the book value of Fifth Third’s interest in Worldpay’s shares is not recognized in Fifth Third’s equity or capital.

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 and may be accessed through the Fifth Third Investor Relations website at www.53.com (click on “About Us” then “Investor Relations”).

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 after the conference call until approximately May 8, 2018 by dialing 800-585-8367 for domestic access or 404-537-3406 for international access (passcode 2496576#).

Corporate Profile

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. As of March 31, 2018, the Company had $142 billion in assets and operates 1,153 full-service Banking Centers, and 2,459 Fifth Third branded ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia and North Carolina. In total, Fifth Third provides its customers with access to more than 54,000 fee-free ATMs across the United States. Fifth Third operates four main businesses: Commercial Banking, Branch Banking, Consumer Lending, and Wealth & Asset Management. As of March 31, 2018, Fifth Third also had a 4.9% interest in Vantiv Holding, LLC, a subsidiary of Worldpay, Inc. Fifth Third is among the largest money managers in the Midwest and, as of March 31, 2018, had $363 billion in assets under care, of which it managed $37 billion for individuals, corporations and not-for-profit organizations through its Trust and Registered Investment Advisory businesses. Investor information and press releases can be viewed at www.53.com. Fifth Third’s common stock is traded on the NASDAQ® Global Select Market under the symbol “FITB.”

Earnings Release End Notes

(a) Assumes a 21% tax rate.

(b) Non-GAAP measure; see discussion of non-GAAP and Reg. G reconciliation beginning on page 28.

(c) Under the banking agencies' Basel III Final Rule, assets and credit equivalent amounts of off-balance sheet exposures are calculated according to the standardized approach for risk-weighted assets. The resulting weighted values are added together resulting in the total risk-weighted assets. Current period regulatory capital ratios are estimated.

(d) Includes commercial customer Eurodollar sweep balances for which the Bancorp pays rates comparable to other commercial deposit accounts.

(e) Excludes nonaccrual loans held for sale.

(f) As of June 30, 2017 and March 31, 2017, excludes $7 million of restructured accruing loans and $19 million of restructured nonaccrual loans associated with a consolidated VIE in which the Bancorp has no continuing credit risk due to the risk being assumed by a third party.

FORWARD-LOOKING STATEMENTS

This release contains or incorporates 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,” “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 those described in this release or in our most recent Annual Report on Form 10-K as updated from time to time by our Quarterly Reports on Form 10-Q. 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) deteriorating credit quality; (2) loan concentration by location or industry of borrowers or collateral; (3) problems encountered by other financial institutions; (4) inadequate sources of funding or liquidity; (5) unfavorable actions of rating agencies; (6) inability to maintain or grow deposits; (7) limitations on the ability to receive dividends from subsidiaries; (8) cyber-security risks; (9) Fifth Third’s ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks; (10) failures by third-party service providers; (11) inability to manage strategic initiatives and/or organizational changes; (12) inability to implement technology system enhancements; (13) failure of internal controls and other risk management systems; (14) losses related to fraud, theft or violence; (15) inability to attract and retain skilled personnel; (16) adverse impacts of government regulation; (17) governmental or regulatory changes or other actions; (18) failures to meet applicable capital requirements; (19) regulatory objections to Fifth Third’s capital plan; (20) regulation of Fifth Third’s derivatives activities; (21) regulatory objections to Fifth Third’s resolution plan; (22) deposit insurance premiums; (23) assessments for the orderly liquidation fund; (24) changes in LIBOR; (25) weakness in the national or local economies; (26) global political and economic uncertainty or negative actions; (27) changes in interest rates; (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 Vantiv Holding, LLC, a subsidiary of Worldpay, Inc. or other investments or acquired entities; (39) difficulties from or changes in Fifth Third’s investment in, relationship with, and nature of the operations of Vantiv Holding, LLC, a subsidiary of Worldpay, Inc.; (40) changes in accounting standards or interpretation or declines in the value of Fifth Third’s goodwill or other intangible assets; (41) inaccuracies or other failures from the use of models; (42) effects of critical accounting policies and judgments or the use of inaccurate estimates; (43) weather related events or other natural disasters; and (44) the impact of reputational risk created by these or other developments on such matters as business generation and retention, funding and liquidity.

In this release, we may sometimes provide non-GAAP financial information. Please note that although non-GAAP financial measures provide useful insight to analysts, investors and regulators, they should not be considered in isolation or relied upon as a substitute for analysis using GAAP measures. We provide a discussion of these non-GAAP measures and reconciliation to the most directly comparable GAAP measures beginning on page 28.

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Fifth Third BancorpSameer Gokhale, 513-534-2219orLarry Magnesen, 513-534-8055(Media)