- Jeff Richardson (Investors) 513.534.0983
- Jim Eglseder (Analysts) 513.534.8424
- Stephanie Honan (Media) 513.534.6957
Fifth Third Bancorp Reports 2007 Earnings of $2.03 Per Diluted Share
Fifth Third Bancorp today reported 2007 earnings of $1.1 billion, or $2.03 per diluted share, compared with $1.2 billion, or $2.13 per diluted share in 2006. Reported fourth quarter 2007 earnings were $38 million, or $0.07 per diluted share, compared with $325 million, or $0.61 per diluted share in the third quarter of 2007 and $66 million, or $0.12 per diluted share, for the same period in 2006. Reported results included a non-cash estimated charge of $155 million, both pre-tax and after-tax, or $0.29 per share, to lower the current cash surrender value of one of our Bank-Owned Life Insurance (“BOLI”) policies. Additionally, quarterly results included a non-cash charge of $94 million pre-tax, or $0.12 per share after-tax, related to Visa members’ indemnification of estimated future litigation settlements, as well as $8 million pre-tax, or $0.01 per share after-tax, in acquisition-related costs primarily associated with the acquisition of R-G Crown, which closed in early November.
As noted above, the BOLI charge is based on year-end estimated values provided by the insurance carrier and is subject to change based on receipt of audited December 31, 2007 valuation data. Our audited financial results, which we expect to file on Form 10-K in late February, will be based on the final audited valuation we anticipate receiving from the insurance carrier. If received prior to filing the Form 10-K, the final audited valuation could result in changes that would affect our reported earnings, earnings per share, and other financial measures reported in this release.
The following operating results on a non-GAAP basis exclude the impact of the above charges, the third quarter non-cash charge related to the Visa/American Express litigation settlement of $78 million pre-tax, or $0.10 per share after-tax, and the fourth quarter 2006 non-cash charges related to balance sheet actions of $454 million pre-tax, or $0.52 per diluted share (comparisons are being provided to supplement an understanding of the fundamental trends). On an operating basis, 2007 full year earnings were $1.4 billion, or $2.54 per diluted share, compared with $1.5 billion, or $2.65 per diluted share in 2006. On the same basis, fourth quarter 2007 earnings were $260 million, or $0.49 per diluted share, compared with $376 million, or $0.71 per diluted share, in the third quarter of 2007, and $357 million, or $0.64 per diluted share, in the fourth quarter of 2006.
Visa has announced plans for an initial public offering and to fund litigation settlements from an escrow account to be funded by the IPO. When and if that occurs, we would expect to reverse the $172 million in litigation reserves we’ve recorded in addition to recording the gains that result from the IPO.
“Obviously, this has been a difficult quarter for the banking industry,” said Kevin T. Kabat, President and CEO of Fifth Third Bancorp. “Like others, we saw a fairly marked turn in credit performance during the quarter. And, while we have not had any significant market-related losses on structured securities, loans, or funds we manage for others, one of our BOLI insurance policies was invested in assets that experienced significant market declines due to widening credit spreads, which negatively impacted our reported results. Operating results continue to be relatively strong, in terms of loan and core deposit growth, net interest income growth, and noninterest income growth. However, the credit environment remains challenging, and we expect credit conditions and the performance of our loan portfolio to continue to deteriorate in the near term. This led to an increase in our loan loss reserves in the fourth quarter and, given current trends, we would expect that to continue in the near-term. We have been actively working over the past year to take steps to address areas of concern. These areas include home equity loans and, more generally, real estate loans, particularly in the upper Midwest and Florida.
As a lending institution, we know we will experience credit cycles and we expect them. It is our responsibility to ensure that we are prepared for them and that we have the balance sheet strength and earnings power to manage through them. Fortunately, Fifth Third is well-positioned on both counts, and we intend to continue to focus on executing on our strategic plans and capitalizing on opportunities presented by this environment.”
Income Statement Highlights
Net Interest Income
Net interest income of $785 million on a taxable equivalent basis grew $25 million, or 3 percent, from the third quarter. The addition of R-G Crown contributed approximately 1 percent of the increase. Growth was driven by a 5 percent increase in earning assets, core deposit growth, and lower funding costs for both core deposits and wholesale borrowings resulting from lower market interest rates. These positive effects were partially offset by lower loan yields related to lower market interest rates, the reversal of previously recognized interest on higher nonperforming assets, and the issuance of $1.4 billion of trust preferred securities in the third and fourth quarters.
The net interest margin was 3.29 percent, down 5 bps from the third quarter. The addition of R-G Crown to the balance sheet reduced the margin by approximately 3 bps. The remaining reduction was primarily driven by the reversal of previously recognized interest on nonperforming assets and the effect of third and fourth quarter trust preferred issuances. The effect of market interest rates on loan yields, deposit rates, and wholesale borrowings largely offset one another.
Compared with the fourth quarter of 2006, net interest income increased $41 million, or 6 percent, and the net interest margin expanded 13 bps, primarily the result of the effect of the fourth quarter 2006 balance sheet actions..
Average loan and lease balances grew 2 percent sequentially and 6 percent from the fourth quarter of last year. R-G Crown contributed 1 percent of the sequential and the year-over-year growth, offsetting the effect of the transfer of auto loans to held for sale. Average commercial loans and leases grew 5 percent sequentially and 8 percent compared with the fourth quarter of 2006. Growth was primarily driven by commercial and industrial (C&I) lending, up 7 percent sequentially and 11 percent versus a year ago, reflecting solid production across our footprint. Commercial mortgage balances grew $456 million and commercial construction loans were up $45 million sequentially, primarily due to the addition of R-G Crown loan balances. Consumer loans and leases were flat sequentially and grew 2 percent compared with the fourth quarter of 2006. Excluding R-G Crown, comparisons with both periods reflect growth in residential mortgages, primarily jumbo mortgage, and credit card loans, offset by lower home equity originations and the transfer to loans held-for-sale of $1 billion in auto loans in each of the third and fourth quarters.
Average core deposits were up 3 percent sequentially and when compared with the fourth quarter of 2006. R-G Crown contributed approximately 1 percent of the sequential and year-over-year growth. Deposit growth versus the third quarter was otherwise characterized by increases in savings and money market balances, certificates of deposit (CDs) and demand deposit accounts (DDAs), partially offset by a slight decline in interest checking balances. On a year-over-year basis, strong growth in savings and money market balances more than offset declines in interest checking, DDA and CD balances.
Retail core deposits increased 2 percent sequentially and 1 percent year-over-year. Excluding R-G Crown, retail core deposits increased 1 percent sequentially, and were flat versus last year as growth in savings and money market accounts and DDA balances offset declines in interest checking and CDs. Commercial core deposits increased 6 percent sequentially and 3 percent year over year. Excluding R-G Crown, commercial core deposits grew 5 percent sequentially and 2 percent compared with the fourth of quarter of 2006.
Noninterest income of $576 million was lower by $146 million sequentially, or 20 percent. The decline was driven by the non-cash charge to reduce the cash surrender value of one of our BOLI policies. Based on estimated year-end values, the estimated charge is $155 million after-tax, which exceeds the prior estimated charge of $100-110 million based on November 30, 2007 values. The increased loss was due to further deterioration in the values of asset-backed securities as well as widening of credit and municipal spreads at year-end. Fourth quarter results also included a $22 million loss due to the termination of cash flow hedges associated with $1 billion of auto loans currently classified as held for sale. Otherwise, sequential noninterest income growth was $31 million, or 4 percent, reflecting strong growth in corporate banking, electronic payment processing revenue and service charges on deposits. Compared with the fourth quarter of 2006, noninterest income increased $357 million, mainly due to $415 million in losses on securities and derivatives related to our fourth quarter of 2006 balance sheet actions. Excluding those charges and the BOLI and hedge losses this quarter, noninterest income growth was $118 million, or 19 percent, with particular year-over-year strength in service charges on deposits, electronic payment processing, and corporate banking revenue.
Electronic payment processing revenue of $268 million increased 6 percent sequentially and 16 percent compared with last year. Sequentially, seasonally strong growth of 9 percent in both merchant processing and card issuer interchange was offset by a slight seasonal decline in financial institutions revenue. Compared with a year ago, growth was driven by continued strong merchant processing results, up 20 percent, as well as 20 percent growth in card issuer interchange driven by higher card usage and an increase in credit card accounts stemming from success in our initiative to increase the penetration of our customer base and card usage levels. Higher card usage volumes drove solid financial institutions revenue growth of 7 percent versus the fourth quarter of 2006.
Service charges on deposits of $160 million increased 6 percent sequentially and 30 percent versus the same quarter last year. Retail service charges increased 3 percent from the third quarter, driven by higher levels of customer activity and modest growth in transaction accounts. Retail service charges grew 41 percent compared with the fourth quarter a year ago, driven by higher levels of customer activity and comparisons to the unusual weakness experienced in the same quarter last year. Commercial service charges increased 10 percent sequentially and 19 percent compared with last year, primarily due to reduced earnings credit rates paid on deposit balances due to lower market rates as well as fee growth associated with new product and service offerings.
Corporate banking revenue of $106 million increased 17 percent sequentially and 29 percent year-over-year, reflecting the success of our efforts to build out our corporate banking capabilities. Revenue growth versus both periods was driven by broad-based strength, with particularly strong sequential growth in syndication fees and continued growth in institutional sales, customer interest rate derivative sales, and international income.
Investment advisory revenue of $94 million was down 1 percent sequentially and up 4 percent over fourth quarter last year. Private banking revenue increased 2 percent sequentially, largely due to higher investment management and insurance revenue, and 9 percent from the same quarter last year on continued strong results in wealth planning and trust. Brokerage fee revenue declined 7 percent sequentially, reflecting the effect of volatility in equity markets in the fourth quarter, and was flat compared with a year ago as the effect of recent market conditions offset growth in the number of licensed brokers.
Mortgage banking net revenue totaled $26 million in both the fourth and third quarters and $30 million in the prior year quarter. Mortgage originations of $2.7 billion were down from $3.0 billion in the third quarter of 2007 and up from $2.3 billion in the fourth quarter of 2006. Gains on loan sales and other fees of $18 million increased from $9 million in the third quarter and decreased from $23 million in fourth quarter 2006. Improvement in the liquidity of the mortgage market during the fourth quarter drove higher revenue compared with last quarter. Net servicing revenue, before mortgage servicing rights (MSR) valuation adjustments, totaled $14 million in the fourth quarter, compared with $14 million last quarter and $12 million a year ago. MSR valuation adjustments, including mark-to-market adjustments on free-standing derivatives, netted to a negative $6 million adjustment in the fourth quarter, compared with a positive $3 million adjustment last quarter and a negative $5 million adjustment in the same quarter a year ago. The mortgage-servicing asset, net of the valuation reserve, was $610 million at quarter end on a servicing portfolio of $34.5 billion.
Net securities gains of $6 million were recorded in the fourth quarter on non-qualifying hedges on mortgage servicing rights which offset MSR valuation adjustments, compared with none last quarter and $3 million in the same quarter last year.
Net gains on investment securities were $7 million in the fourth quarter of 2007 compared with net gains of $13 million last quarter and net losses of $398 million in the fourth quarter of 2006. Net securities losses of $398 million last year reflected our balance sheet actions in the fourth quarter.
Other noninterest income totaled a negative $91 million in the fourth quarter compared with $93 million last quarter and $58 million in the same quarter last year. Results in the fourth quarter of 2007 included the decrease in value of the BOLI policy of $155 million as well as the $22 million loss on the hedges for the auto loans held for sale. Also included in fourth quarter results was a $7 million gain on the sale of $53 million of certain non-strategic credit card accounts. Last quarter’s results included a gain of $15 million on the sale of FDIC deposit insurance credits and a loss of $6 million on auto loans held for sale. Last year’s results included a $17 million loss on derivatives that hedged securities sold as part of our fourth quarter balance sheet actions.
Noninterest expense of $985 million increased 10 percent from third quarter of 2007 due primarily to $94 million in non-cash expenses accrued to reflect potential future Visa litigation settlements as well as $8 million in fourth quarter acquisition-related expenses, primarily marketing expenses recorded in other noninterest expense. R-G Crown represented approximately $5 million of operating expenses. Fourth quarter expenses also included $13 million in provision expense for unfunded loan commitments, an increase of $11 million from the third quarter. Third quarter results included $78 million related to the Visa/American Express settlement as well as $6 million of pension settlement expense recorded in benefits expense. Payment processing expense grew 8 percent sequentially on seasonally higher processing activity. Employee compensation expenses increased 2 percent sequentially, driven by higher fee revenue based incentives partially offset by lower employee benefits expense. Other noninterest expense growth was primarily driven by the Visa litigation expenses, provision for unfunded commitments, affordable housing investment expense, acquisition-related expenses, and loan and lease expense.
Compared with the fourth quarter of 2006, noninterest expense increased 23 percent. Current quarter expenses included the $94 million in Visa litigation accruals, $8 million in acquisition-related charges, $5 million in operating expenses at R-G Crown, and an $11 million increase in provision for unfunded commitments. Results in the fourth quarter of 2006 included a $39 million charge associated with the early termination of certain debt as part of our balance sheet actions announced in that quarter. Salaries, wages and incentives were up 9 percent, largely the result of higher performance-based compensation and the effects of R-G Crown. Payment processing expense growth of 27 percent was driven by similar growth in transaction volumes and the effect of expense growth associated with our credit card initiative.
Net charge-offs as a percentage of average loans and leases were 89 bps in the fourth quarter, compared with 60 bps last quarter and 52 bps in the fourth quarter of 2006. Loss experience continues to be concentrated in Michigan and Florida, as noted below.
Consumer net charge-offs of $99 million, or 118 bps, grew $20 million from the third quarter, driven primarily by losses in our residential real estate portfolio. Net charge-offs in Michigan and Florida represented 34 percent of fourth quarter consumer losses. Home equity net charge-offs of $32 million increased $5 million compared with last quarter, primarily due to increased losses on higher LTV and brokered second lien loans, reflecting borrower stress and lower home price valuations in certain geographies. Net losses on brokered home equity loans were $20 million, or 60 percent, of fourth quarter home equity losses. Brokered home equity loans represented $2.7 billion, or 22 percent, of total home equity loans of $11.9 billion. Michigan and Florida represented 37 percent of fourth quarter home equity losses. Net charge-offs within the residential mortgage portfolio of $18 million increased $9 million, primarily as a result of declining property values on foreclosed loans, with losses in Michigan and Florida representing 58 percent of losses in the fourth quarter. Net charge-offs in the auto portfolio of $30 million increased $5 million, driven by seasonality, lower recoveries of value at auction, and earlier experience of loss within 2005 and 2006 vintages.
Commercial net charge-offs of $75 million, or 66 bps, increased $39 million compared with the third quarter, driven by increased losses in the C&I, commercial mortgage and commercial construction portfolios, with continued increases in eastern Michigan and northeastern Ohio. The increase in commercial losses was driven in part by one large $15 million fraud-related loss on a C&I credit in the Chicago market, which represented 13 bps of the fourth quarter commercial charge-off ratio. Only one other commercial charge-off exceeded $2.5 million. Net charge-offs in the C&I portfolio were $48 million, an increase of $25 million from the third quarter. Excluding that fraud-related loss, losses within the C&I portfolio increased by $10 million and were not concentrated within any geographic area or industry. Commercial mortgage net charge-offs of $15 million increased $7 million from the third quarter. Commercial construction net charge-offs of $12 million increased $7 million from the third quarter. Of total commercial real estate charge-offs of $27 million, Michigan and northeastern Ohio represented 57 percent. Losses on loans to homebuilders represented $3 million of commercial net-charge offs.
Provision for loan and lease losses totaled $284 million in the fourth quarter, exceeding net charge-offs of $174 million by $110 million. The increase in provision expense for loan and lease losses and in allowance for loan losses was driven by higher probable losses resulting from negative trends in nonperforming and other criticized assets, particularly in the home equity and commercial real estate portfolios.
The allowance for loan and lease losses represented 1.17 percent of total loans and leases outstanding as of quarter end, compared with 1.08 percent last quarter and 1.04 percent in the same quarter last year. The allowance increased 12 bps of loans before the inclusion of R-G Crown, which was partially offset by a 3 bps negative effect from the addition of R-G Crown loans to our loan balances. These loans were brought onto our balance sheet at their market value and therefore do not add to our allowance for loan and lease losses.
The purchase accounting mark-to-market related to credit on R-G Crown’s loan portfolio was $89 million. The allowance for loan and lease losses plus the credit-related purchase accounting discount total $1.0 billion and 1.28 percent of total outstanding loans before the discounts. Additionally, we maintain a credit reserve for unfunded commitments classified in other liabilities which totalled $95 million at year end.
Nonperforming assets (NPAs) at quarter end were $1.1 billion, or 1.32 percent of total loans and leases and other real estate owned, up from 0.92 percent last quarter and 0.61 percent in the fourth quarter a year ago. Sequential growth in NPAs was $358 million, or 51 percent. The inclusion of R-G Crown contributed $68 million in fourth quarter growth in total NPAs, 10 percent of the growth rate, and 8 bps to the NPA ratio. The effect of R-G Crown to our NPA and over 90 days past due loans is outlined in the table above.
Commercial NPAs of $695 million, or 1.51 percent, grew $249 million or 56 percent in the fourth quarter, of which R-G Crown contributed $57 million, 13 percent of the growth rate, and 12 bps of the commercial NPA ratio. Commercial NPA growth was primarily driven by continued deterioration in the commercial construction and commercial mortgage portfolios, particularly in Michigan and Florida, including NPAs acquired with the R-G Crown transaction. NPAs in the C&I portfolio of $178 million were flat compared with the third quarter. Commercial construction NPAs were $257 million, an increase of $151 million from the third quarter of 2007. Commercial mortgage NPAs were $255 million, an increase of $99 million from the third quarter of 2007. Commercial real estate loans in Michigan and Florida represent 47 percent of our total commercial real estate portfolio. NPA growth in these states represented 68 percent of commercial real estate NPA growth and these states accounted for 60 percent of total commercial real estate NPAs. Homebuilders represented approximately $113 million in commercial NPAs, an increase of $64 million from the third quarter of which the addition of R-G Crown represented approximately $20 million.
Consumer NPAs of $369 million, or 1.07 percent, grew $109 million or 41 percent in the fourth quarter, of which R-G Crown contributed $11 million, four percent of the growth rate, and 3 bps of the consumer NPA ratio. Consumer NPA growth was primarily experienced in the residential mortgage and home equity portfolios, particularly in Michigan and Florida (including NPAs from R-G Crown). Of the $109 million in growth, $100 million was experienced in residential real estate portfolios, with 61 percent in the residential mortgage portfolio. Residential mortgage NPAs were $216 million, of which $95 million was in other real estate owned (“OREO”). Of residential mortgage NPAs, $10 million were in residential construction loans (of which $4 million was OREO). Home equity NPAs were $123 million, of which $32 million was OREO. Residential real estate loans in Michigan and Florida represented 50 percent of the growth in residential real estate NPAs, 48 percent of total residential real estate NPAs, and 26 percent of total residential real estate loans. Included within consumer NPAs was $80 million related to debt restructurings, including $58 million entered into in the fourth quarter, primarily in residential real estate loans, to assist qualifying borrowers in creating workable payment plans to enable them to remain in their homes.
Loans still accruing over 90 days past due were $491 million, up $131 million from the third quarter, of which R-G Crown contributed $41 million. Approximately two-thirds of the growth was in consumer. Commercial and consumer 90 days past due growth was generally concentrated in commercial real estate and residential mortgages in the geographies noted earlier.
Capital ratios were generally lower during the quarter, the result of the addition of R-G Crown, which was a cash acquisition, in addition to the effects of the BOLI and Visa charges taken during the quarter. The tangible equity ratio equaled 6.07 percent, down due to the aforementioned factors and higher tangible assets at year-end. Share repurchases in early 2007 accounted for the remaining change from the 7.79 percent tangible equity ratio at year-end 2006. Regulatory capital ratios benefited from the issuance of $863 million in trust preferred securities in October of 2007. This issuance more than offset the effect of Fifth Third’s previously announced agreement to repurchase the outstanding Series B REIT preferred shares which settled in December of 2007. R-G Crown reduced the tangible equity ratio by 41 bps; the BOLI charge reduced the tangible equity ratio by 13 bps; and the Visa charges reduced the tangible equity ratio by 6 bps in the fourth quarter and 5 bps in the third quarter. The effect on regulatory capital ratios approximated the effect outlined on the tangible equity ratio.
There were no open market share repurchases during the quarter and as of December 31, 2007, there were 19.2 million shares remaining under our current share repurchase authorization.
Our effective tax rate was 55.4%, higher than our normal tax rate. The increase was largely due to the BOLI charge, which is non-deductible and therefore reflected as an after-tax charge.
On August 16, 2007, Fifth Third Bancorp and First Charter Corporation signed a definitive agreement under which Fifth Third intends to acquire First Charter Bank, which operates 57 branches in North Carolina and two in Atlanta, Georgia. Fifth Third is currently planning to close this transaction in the second quarter of 2008, subject to regulatory approval from the Federal Reserve, although no assurances can be given in this regard. On September 25, 2007, Fifth Third and First Horizon Corporation signed a definitive agreement under which Fifth Third intends to acquire nine branches in the Atlanta metro area from First Horizon. Fifth Third has received all necessary regulatory approvals and the transaction is expected to close in the first quarter of 2008. The pending transactions, if consummated, are expected to reduce capital ratios by approximately 40 bps: 5 bps related to the First Horizon branches and 30 bps related to First Charter.
The following outlook represents currently expected full year 2008 growth rates compared with full year 2007 results. The outlook does not include the effect of our pending acquisitions of First Charter Bank or the First Horizon branches. Our outlook is based on current expectations as of the date of this release for results within our businesses; prevailing views related to economic growth, inflation, unemployment and other economic factors, and market forward interest rate expectations. These expectations are inherently subject to risks and uncertainties. There are a number of factors that could cause results to differ materially from historical performance and these expectations. We undertake no obligation to update these expectations after the date of this release. Please refer to the cautionary statement at the end of this release for more information.
Net interest income
Net Interest margin
Effective tax rate [non-tax equivalent]
Tangible equity/tangible asset ratio
Tier 1 capital ratio
Total capital ratio
|Growth, percentage, or bps range [change from July]
Mid single digits
High single digits
Mid-to-high single digits
Mid-to-high single digits
Mid-to-high single digits
Low-to-mid 90 bps range
2008 target 6-6.5%; LT target 6.5%
2008 target 7.5-8%
2008 target 11-11.5%
*comparison with 2007 excludes, in 2007, $155 million in non-cash charges to lower the cash surrender value of one of our BOLI policies
**comparison with 2007 excludes, in 2007, $172 million in non-cash charges in potential future Visa litigation settlements and $8 million of acquisition-related costs related to R-G Crown
Fifth Third will host a conference call to discuss these financial results at 8:30 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 or podcast 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 Tuesday, February 5 by dialing 800-642-1687 for domestic access and 706-645-9291 for international access (passcode 27291841#).
Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. The Company has $111 billion in assets, operates 18 affiliates with 1,227 full-service Banking Centers, including 102 Bank Mart® locations open seven days a week inside select grocery stores and 2,211 ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Pennsylvania, Missouri and Georgia. Fifth Third operates five main businesses: Commercial Banking, Branch Banking, Consumer Lending, Investment Advisors and Fifth Third Processing Solutions. Fifth Third is among the largest money managers in the Midwest and, as of December 31, 2007, has $223 billion in assets under care, of which it managed $33 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 through the NASDAQ® National Global Select Market System under the symbol “FITB.”
This report may contain forward-looking statements about Fifth Third Bancorp and/or the company as combined acquired entities within the meaning of Sections 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder, that involve inherent risks and uncertainties. This report may contain certain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Fifth Third Bancorp and/or the combined company including statements preceded by, followed by or that include the words or phrases such as “believes,” “expects,” “anticipates,” “plans,” “trend,” “objective,” “continue,” “remain” or similar expressions or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions. 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, either national 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) political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; (3) changes in the interest rate environment reduce interest margins; (4) prepayment speeds, loan origination and sale volumes, charge-offs and loan loss provisions; (5) our ability to maintain required capital levels and adequate sources of funding and liquidity; (6) changes and trends in capital markets; (7) competitive pressures among depository institutions increase significantly; (8) effects of critical accounting policies and judgments; (9) changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies; (10) 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; (11) ability to maintain favorable ratings from rating agencies; (12) fluctuation of Fifth Third’s stock price; (13) ability to attract and retain key personnel; (14) ability to receive dividends from its subsidiaries; (15) potentially dilutive effect of future acquisitions on current shareholders' ownership of Fifth Third; (16) effects of accounting or financial results of one or more acquired entity; (17) difficulties in combining the operations of acquired entities; (18) ability to secure confidential information through the use of computer systems and telecommunications network; and (19) the impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity. Additional information concerning factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements is available in the Bancorp's Annual Report on Form 10-K/A for the year ended December 31, 2006, filed with the United States Securities and Exchange Commission (SEC). Copies of this filing are available at no cost on the SEC's Web site at www.sec.gov or on the Fifth Third’s Web site at www.53.com. Fifth Third undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this report.