Fifth Third Announces Fourth Quarter 2021 Results

By: Fifth Third Bancorp via Business Wire

January 20, 2022 at 06:30 AM EST

Reported diluted earnings per share of $0.90

Reported results included a negative $0.03 impact from certain items on page 2 of the 4Q21 earnings release

Fifth Third Bancorp (NASDAQ ^®: FITB):

Key Highlights

(fourth quarter 2021 except where noted)

Select Business Highlights:

Generated record commercial loan production of $8.2BN (up nearly 50% compared to 3Q21) reflecting strength in corporate and middle market banking
Record commercial banking revenue
Record assets under management net inflows
Generated consumer household growth of 3% vs. 4Q20
Made special COVID staffing bonus to front-line employees ($10MM noninterest expense)
Issued inaugural Green Bond ($500MM); first Category IV firm to issue ESG bond of any type
Announced strategic acquisition of Dividend Finance, a point-of-sale consumer lender focused on sustainable energy solutions (~30 bps of CET1 capital; expect to close in 2Q22)

Select Financial Highlights:

FY21 ROTCE^(a) of 16.6%; adjusted ROTCE^(a) of 19.1% excl. AOCI
Average C&I loan growth ex. PPP of 7% compared to 3Q21 (end of period growth of 11%)
Average securities balances increased just 1% compared to 3Q21
NCO ratio of 0.14%; NPL ratio of 0.44%; commercial criticized assets declined 13% compared to 3Q21
Repurchased shares totaling $316 million as part of capital plan; targeting 9.0% CET1

Key Financial Data

$ millions for all balance sheet and income statement items
	4Q21		3Q21		4Q20

Income Statement Data
Net income available to common shareholders	$627		$684		$569
Net interest income (U.S. GAAP)	1,197		1,189		1,182
Net interest income (FTE)^(a)	1,200		1,192		1,185
Noninterest income	791		836		787
Noninterest expense	1,206		1,172		1,236

Per Share Data
Earnings per share, basic	$0.91		$0.98		$0.79
Earnings per share, diluted	0.90		0.97		0.78
Book value per share	29.43		29.59		29.46
Tangible book value per share^(a)	22.58		22.79		23.28

Balance Sheet & Credit Quality
Average portfolio loans and leases	$109,487		$107,970		$109,360
Average deposits	167,541		162,647		158,626
Net charge-off ratio^(b)	0.14	%	0.08	%	0.43	%
Nonperforming asset ratio^(c)	0.47		0.52		0.79

Financial Ratios
Return on average assets	1.25	%	1.36	%	1.18	%
Return on average common equity	12.2		13.0		10.8
Return on average tangible common equity^(a)	16.1		16.9		13.9
CET1 capital^(d)(e)	9.53		9.86		10.34
Net interest margin^(a)	2.55		2.59		2.58
Efficiency^(a)	60.6		57.8		62.7

Other than the Quarterly Financial Review tables beginning on page 14 of the 4Q21 earnings release, commentary is on a fully taxable-equivalent (FTE) basis unless otherwise noted. Consistent with SEC guidance in Regulation S-K that contemplates the calculation of tax-exempt income on a taxable-equivalent basis, net interest income, net interest margin, net interest rate spread, total revenue and the efficiency ratio are provided on an FTE basis.

CEO Commentary

"Fifth Third has continued to deliver strong financial results while fully supporting our customers, communities, and employees. Results for the quarter reflected strong business momentum in most of our businesses, resulting in improved and diversified revenues. Net interest income excluding the impact of PPP increased 2% sequentially, benefiting from robust C&I loan growth while continuing to be disciplined in managing our excess cash position. We generated record commercial banking and wealth and asset management revenue, while mortgage revenue was impacted by environmental factors and our decision to retain a portion of our salable production. We expect the positive momentum in our businesses to carry forward into 2022 and beyond.

We had yet another quarter of benign credit results, resulting in a full year net charge-off ratio of just 16 basis points. Additionally, non-performing loans and commercial criticized assets continued to improve.

We took action in recognition of the extraordinary efforts made by our front-line employees throughout the pandemic by making a special COVID staffing bonus totaling $10 million in the fourth quarter.

We continue to focus on growing strong relationships and managing the balance sheet with a through-the-cycle perspective to generate sustainable long-term value and continue our position as a top performing regional bank."

-Greg D. Carmichael, Chairman and CEO

Income Statement Highlights
($ in millions, except per share data)	For the Three Months Ended			% Change
	December	September	December
	2021	2021	2020	Seq	Yr/Yr
Condensed Statements of Income
Net interest income (NII)^(a)	$1,200	$1,192	$1,185	1%	1%
Benefit from credit losses	(47)	(42)	(13)	12%	262%
Noninterest income	791	836	787	(5)%	1%
Noninterest expense	1,206	1,172	1,236	3%	(2)%
Income before income taxes^(a)	$832	$898	$749	(7)%	11%

Taxable equivalent adjustment	$3	$3	$3	—	—
Applicable income tax expense	167	191	142	(13)%	18%
Net income	$662	$704	$604	(6)%	10%
Dividends on preferred stock	35	20	35	75%	—
Net income available to common shareholders	$627	$684	$569	(8)%	10%
Earnings per share, diluted	$0.90	$0.97	$0.78	(7)%	15%

Fifth Third Bancorp (NASDAQ^®: FITB) today reported fourth quarter 2021 net income of $662 million compared to net income of $704 million in the prior quarter and $604 million in the year-ago quarter. Net income available to common shareholders in the current quarter was $627 million, or $0.90 per diluted share, compared to $684 million, or $0.97 per diluted share, in the prior quarter and $569 million, or $0.78 per diluted share, in the year-ago quarter.


		Diluted earnings per share impact of certain items - 4Q21

		(after-tax impacts^(f); $ in millions, except per share data)

		Valuation of Visa total return swap (noninterest income)	$(14)
		Special COVID staffing bonus to front-line employees (noninterest expense)	(8)
		After-tax impact^(f)of certain items	$(22)

		Diluted earnings per share impact of certain items¹	$(0.03)

		¹Diluted earnings per share impact reflects 697.532 million average diluted shares outstanding

Reported full year 2021 net income was $2.8 billion compared to full year 2020 net income of $1.4 billion. Full year 2021 net income available to common shareholders was $2.7 billion, or $3.73 per diluted share, compared to 2020 full year net income available to common shareholders of $1.3 billion, or $1.83 per diluted share.

Net Interest Income
(FTE; $ in millions)^(a)	For the Three Months Ended			% Change
	December	September	December
	2021	2021	2020	Seq	Yr/Yr
Interest Income
Interest income	$1,297	$1,295	$1,318	—	(2)%
Interest expense	97	103	133	(6)%	(27)%
Net interest income (NII)	$1,200	$1,192	$1,185	1%	1%

Average Yield/Rate Analysis				bps Change
Yield on interest-earning assets	2.75%	2.81%	2.87%	(6)	(12)
Rate paid on interest-bearing liabilities	0.33%	0.36%	0.45%	(3)	(12)

Ratios
Net interest rate spread	2.42%	2.45%	2.42%	(3)	—
Net interest margin (NIM)	2.55%	2.59%	2.58%	(4)	(3)

Compared to the prior quarter, NII increased $8 million, or 1%, primarily due to higher commercial & industrial (C&I) loan balances, seasonal mutual fund dividends and elevated prepayment penalties received in the investment portfolio, and a reduction in long-term debt, partially offset by lower yields on C&I loan balances due to continued spread compression and lower PPP-related income. PPP-related interest income was $36 million compared to $47 million in the prior quarter. Excluding the impact of PPP-related income, NII increased $19 million, or 2%, sequentially. Compared to the prior quarter, reported NIM decreased 4 bps, primarily due to a $2.6 billion increase in other short-term investments (primarily interest-bearing cash) and lower yields on C&I loans, partially offset by the aforementioned seasonal mutual fund dividends and elevated prepayment penalties received in the investment portfolio. Underlying NIM^(g) decreased 1 bp sequentially. Excess liquidity and PPP had a negative impact on reported NIM of approximately 47 bps in the current quarter, compared to 44 bps in the prior quarter.

Compared to the year-ago quarter, NII increased $15 million, or 1%, primarily reflecting the benefit of GNMA forbearance loan buyout purchases, a reduction in long-term debt, higher indirect secured consumer loan balances, and lower deposit costs, partially offset by lower home equity, C&I, and construction balances as well as the impact of lower market rates. Compared to the year-ago quarter, reported NIM decreased 3 bps, primarily reflecting loan spread compression and lower market rates, partially offset by PPP-related income and lower long-term debt and deposit costs.

Noninterest Income
($ in millions)	For the Three Months Ended			% Change
	December	September	December
	2021	2021	2020	Seq	Yr/Yr
Noninterest Income
Service charges on deposits	$156	$152	$146	3%	7%
Commercial banking revenue	171	152	141	13%	21%
Mortgage banking net revenue	35	86	25	(59)%	40%
Wealth and asset management revenue	150	147	133	2%	13%
Card and processing revenue	104	102	92	2%	13%
Leasing business revenue	74	78	69	(5)%	7%
Other noninterest income	120	120	168	—	(29)%
Securities (losses) gains, net	(19)	(1)	14	NM	NM
Securities losses, net - non-qualifying hedges
on mortgage servicing rights	—	—	(1)	NM	(100)%
Total noninterest income	$791	$836	$787	(5)%	1%

Reported noninterest income decreased $45 million, or 5%, from the prior quarter, and increased $4 million, or 1%, from the year-ago quarter. The reported results reflect the impact of certain items in the table below. Reported results include securities gains and losses, including a $17 million loss attributable to market value changes on Fifth Third's 1.7 million shares of AvidXchange Holdings, Inc. that have occurred since its initial public offering.

Noninterest Income excluding certain items
($ in millions)	For the Three Months Ended
	December	September	December
	2021	2021	2020
Noninterest Income excluding certain items
Noninterest income (U.S. GAAP)	$791	$836	$787
Valuation of Visa total return swap	19	17	30
Net disposition charges/(gain)	—	(60)	11
Securities losses/(gains), net	19	1	(14)
Noninterest income excluding certain items^(a)	$829	$794	$814

Compared to the prior quarter, noninterest income excluding certain items increased $35 million, or 4%. Compared to the year-ago quarter, noninterest income excluding certain items increased $15 million, or 2%.

Compared to the prior quarter, service charges on deposits increased $4 million, or 3%, reflecting an increase in both commercial treasury management and consumer deposit fees. Record commercial banking revenue increased $19 million, or 13%, primarily driven by an increase in M&A advisory revenue, partially offset by lower corporate bond fees. Mortgage banking net revenue decreased $51 million, or 59%, reflecting a $41 million decrease in origination fees and gains on loan sales (including a $12 million unfavorable impact from the retention of certain mortgages originated during the quarter), and a $14 million decrease from MSR net valuation adjustments, partially offset by an increase in servicing fees. Current quarter mortgage originations of $4.3 billion decreased $0.7 billion, or 14%, compared to the prior quarter. Wealth and asset management revenue increased $3 million, or 2%, driven primarily by increased high net worth insurance and personal asset management revenue. Card and processing revenue increased $2 million, or 2%, primarily driven by higher spend volume. Leasing business revenue decreased $4 million, or 5%, primarily driven by a decrease in business solutions revenue, partially offset by an increase in lease remarketing revenue. Other noninterest income results were driven by the recognition of tax receivable agreement revenue of $46 million as well as private equity income.

Compared to the year-ago quarter, service charges on deposits increased $10 million, or 7%, reflecting an increase in both commercial treasury management and consumer deposit fees. Commercial banking revenue increased $30 million, or 21%, primarily driven by increases in M&A advisory revenue and loan syndication revenue, partially offset by lower corporate bond fees. Mortgage banking net revenue increased $10 million, or 40%, reflecting an $11 million decrease in MSR asset decay reflecting slower prepayment speeds and an $8 million improvement from MSR net valuation adjustments, partially offset by a $10 million decrease in origination fees and gains on loan sales. Wealth and asset management revenue increased $17 million, or 13%, primarily driven by higher personal asset management revenue and brokerage fees. Card and processing revenue increased $12 million, or 13%, primarily driven by higher spend volumes, partially offset by higher rewards. Leasing business revenue increased $5 million, or 7%, primarily reflecting increases in lease remarketing revenue.

Noninterest Expense
($ in millions)	For the Three Months Ended			% Change
	December	September	December
	2021	2021	2020	Seq	Yr/Yr
Noninterest Expense
Compensation and benefits	$655	$627	$679	4%	(4)%
Net occupancy expense	77	79	98	(3)%	(21)%
Technology and communications	103	98	90	5%	14%
Equipment expense	36	34	34	6%	6%
Card and processing expense	19	19	31	—	(39)%
Leasing business expense	36	33	37	9%	(3)%
Marketing expense	35	29	30	21%	17%
Other noninterest expense	245	253	237	(3)%	3%
Total noninterest expense	$1,206	$1,172	$1,236	3%	(2)%

Reported noninterest expense increased $34 million, or 3%, from the prior quarter, and decreased $30 million, or 2%, from the year-ago quarter. The reported results reflect the impact of certain items in the table below.

Noninterest Expense excluding certain items
($ in millions)	For the Three Months Ended
	December	September	December
	2021	2021	2020
Noninterest Expense excluding certain items
Noninterest expense (U.S. GAAP)	$1,206	$1,172	$1,236
Special COVID staffing bonus to front-line employees	(10)	—	—
Fifth Third Foundation contribution	—	(15)	(25)
Branch and non-branch real estate charges	—	—	(21)
Business acquisition charges	—	—	(16)
Noninterest expense excluding certain items^(a)	$1,196	$1,157	$1,174

Compared to the prior quarter, noninterest expense excluding certain items increased $39 million, or 3%, primarily reflecting an increase in compensation and benefits, driven by higher performance-based compensation expense reflecting strong business results as well as elevated medical benefits, increased marketing expense associated with Fifth Third Momentum Banking, and an increase in technology and communications expense related to continued modernization investments.

Compared to the year-ago quarter, noninterest expense excluding certain items increased $22 million, or 2%, primarily driven by an increase in technology and communications expense related to continued modernization investments, expenses associated with the aforementioned GNMA forbearance loan buyout purchases, and an increase in travel and entertainment expense. These items were partially offset by lower card and processing expense due to contract renegotiations and a decrease in compensation and benefits expense, primarily reflecting a decline in full-time equivalent employees.

Average Interest-Earning Assets
($ in millions)	For the Three Months Ended			% Change
	December	September	December
	2021	2021	2020	Seq	Yr/Yr
Average Portfolio Loans and Leases
Commercial loans and leases:
Commercial and industrial loans	$49,566	$47,766	$50,385	4%	(2)%
Commercial mortgage loans	10,247	10,317	10,727	(1)%	(4)%
Commercial construction loans	5,329	5,728	5,820	(7)%	(8)%
Commercial leases	3,057	3,158	2,932	(3)%	4%
Total commercial loans and leases	$68,199	$66,969	$69,864	2%	(2)%
Consumer loans:
Residential mortgage loans	$16,188	$16,223	$16,016	—	1%
Home equity	4,179	4,409	5,315	(5)%	(21)%
Indirect secured consumer loans	16,345	15,590	13,272	5%	23%
Credit card	1,739	1,748	2,042	(1)%	(15)%
Other consumer loans	2,837	3,031	2,851	(6)%	—
Total consumer loans	$41,288	$41,001	$39,496	1%	5%
Total average portfolio loans and leases	$109,487	$107,970	$109,360	1%	—

Memo:
Average PPP loans	$1,756	$3,071	$5,098	(43)%	(66)%
Average portfolio commercial and industrial loans - excl. PPP loans	$47,810	$44,695	$45,287	7%	6%

Average Loans and Leases Held for Sale
Commercial loans and leases held for sale	$5	$31	$56	(84)%	(91)%
Consumer loans held for sale	5,298	5,527	2,048	(4)%	159%
Total average loans and leases held for sale	$5,303	$5,558	$2,104	(5)%	152%

Securities (taxable and tax-exempt)	$37,631	$37,208	$35,965	1%	5%
Other short-term investments	34,624	32,065	34,989	8%	(1)%
Total average interest-earning assets	$187,045	$182,801	$182,418	2%	3%

Compared to the prior quarter, total average portfolio loans and leases increased 1%, reflecting an increase in both commercial loan and lease balances and consumer loans. Average commercial portfolio loans and leases increased 2%, primarily reflecting growth in C&I loans which increased 4% (or 7% excluding the impact of PPP loans). Average consumer portfolio loans increased 1%, as higher indirect secured consumer loans were partially offset by lower home equity and other consumer loan balances.

Compared to the year-ago quarter, total average portfolio loans and leases were flat, as an increase in consumer loans was offset by lower commercial loans and leases. Average commercial portfolio loans and leases decreased 2% primarily due to PPP forgiveness and lower commercial construction loans, partially offset by higher C&I loans (which were up 6% excluding the impact of PPP loans). Average consumer portfolio loans increased 5%, as higher indirect secured consumer loans were partially offset by lower home equity and credit card balances.

Average loans and leases held for sale were $5 billion in the current quarter compared to $6 billion in the prior quarter and $2 billion in the year-ago quarter. The increase from the year-ago quarter was primarily attributable to the aforementioned GNMA forbearance loan buyout purchases within consumer loans held for sale (approximately $4.7 billion purchased since December 2020, including $0.7 billion in October 2021).

Average securities (taxable and tax-exempt) of $38 billion in the current quarter increased $0.4 billion, or 1%, compared to the prior quarter and increased $2 billion, or 5%, compared to the year-ago quarter.

Average other short-term investments (including interest-bearing cash) of $35 billion in the current quarter increased $3 billion, or 8%, compared to the prior quarter and decreased $0.4 billion, or 1%, compared to the year-ago quarter.

Total period-end commercial portfolio loans and leases of $70 billion increased 5% compared to the prior quarter, primarily reflecting growth of 11% in C&I loans excluding PPP, partially offset by PPP forgiveness and lower construction loan balances. Compared to the year-ago quarter, total period-end commercial portfolio loans increased $1 billion, or 2%, primarily reflecting growth in C&I loans excluding PPP, partially offset by PPP forgiveness and lower construction and commercial mortgage loan balances. Period-end commercial revolving line utilization was 33%, compared to 31% in the prior quarter and 32% in the year-ago quarter.

Period-end consumer portfolio loans of $42 billion increased 1% compared to the prior quarter, as continued growth in indirect secured consumer loans was partially offset by a decline in other consumer loan and home equity balances. Compared to the year-ago quarter, total period-end consumer portfolio loans increased $2 billion, or 5%, reflecting higher indirect secured consumer loan balances, partially offset by lower home equity and other consumer loan balances.

Average Deposits
	($ in millions)	For the Three Months Ended			% Change
		December	September	December
		2021	2021	2020	Seq	Yr/Yr
	Average Deposits
	Demand	$64,828	$62,626	$56,365	4%	15%
	Interest checking	47,384	45,128	47,664	5%	(1)%
	Savings	21,702	20,941	17,658	4%	23%
	Money market	30,566	30,514	31,205	—	(2)%
	Foreign office^(h)	193	195	161	(1)%	20%
	Total transaction deposits	$164,673	$159,404	$153,053	3%	8%
	CDs $250,000 or less	2,604	2,937	4,260	(11)%	(39)%
	Total core deposits	$167,277	$162,341	$157,313	3%	6%
	CDs over $250,000	264	306	1,313	(14)%	(80)%
	Total average deposits	$167,541	$162,647	$158,626	3%	6%
	Fifth Third has elected to record CDs $250,000 or less within core deposits, consistent with minimum FDIC insurance coverage. Fifth Third had previously recorded certificates under $100,000 as "other time" within core deposits. Prior periods have been adjusted to conform to current period presentation.

Compared to the prior quarter, average core deposits increased 3%, as increases in demand, interest checking, and savings deposit balances were partially offset by decreases in certificates $250,000 or less. Average demand deposits represented 39% of total core deposits in the current quarter, consistent with the prior quarter. Average commercial transaction deposits increased 5% and average consumer transaction deposits increased 2%.

Compared to the year-ago quarter, average core deposits increased 6%, reflecting ongoing impacts of fiscal and monetary stimulus combined with success in generating consumer household growth, partially offset by the HSA deposit sale finalized near the end of the third quarter of 2021. Average commercial transaction deposits increased 3% and average consumer transaction deposits increased 13%.

The period end portfolio loan-to-core deposit ratio was 66% in the current quarter, compared to 65% in the prior quarter and 69% in the year-ago quarter.

Average Wholesale Funding
	($ in millions)	For the Three Months Ended			% Change
		December	September	December
		2021	2021	2020	Seq	Yr/Yr
	Average Wholesale Funding
	CDs over $250,000	$264	$306	$1,313	(14)%	(80)%
	Federal funds purchased	315	348	307	(9)%	3%
	Other short-term borrowings	1,000	1,122	1,091	(11)%	(8)%
	Long-term debt	11,697	12,057	15,018	(3)%	(22)%
	Total average wholesale funding	$13,276	$13,833	$17,729	(4)%	(25)%
	Fifth Third has elected to record CDs $250,000 or less within core deposits, consistent with minimum FDIC insurance coverage. Fifth Third had previously recorded certificates under $100,000 as "other time" within core deposits. As a result wholesale funding now only includes CDs over $250,000. Prior periods have been adjusted to conform to current period presentation.

Compared to the prior quarter, average wholesale funding decreased 4%, reflecting the impact of reductions in long-term debt over the past two quarters, as well as continued runoff in jumbo CD balances and other short-term borrowings. Compared to the year-ago quarter, average wholesale funding decreased 25%, reflecting decreases in long-term debt, jumbo CD balances, and other short-term borrowings.

Credit Quality Summary
($ in millions)	As of and For the Three Months Ended
	December	September	June	March	December
	2021	2021	2021	2021	2020

Total nonaccrual portfolio loans and leases (NPLs)	$498	$528	$621	$741	$834
Repossessed property	5	4	5	7	9
OREO	24	27	31	35	21
Total nonperforming portfolio loans and leases and OREO (NPAs)	$527	$559	$657	$783	$864

NPL ratio⁽ⁱ⁾	0.44%	0.49%	0.58%	0.68%	0.77%
NPA ratio^(c)	0.47%	0.52%	0.61%	0.72%	0.79%

Total loans and leases 30-89 days past due (accrual)	$254	$267	$281	$305	$357
Total loans and leases 90 days past due (accrual)	117	92	83	124	163

Allowance for loan and lease losses (ALLL), beginning	$1,954	$2,033	$2,208	$2,453	$2,574
Total net losses charged-off	(38)	(21)	(44)	(71)	(118)
Benefit from loan and lease losses	(24)	(58)	(131)	(174)	(3)
ALLL, ending	$1,892	$1,954	$2,033	$2,208	$2,453

Reserve for unfunded commitments, beginning	$205	$189	$173	$172	$182
(Benefit from) provision for the reserve for unfunded commitments	(23)	16	16	1	(10)
Reserve for unfunded commitments, ending	$182	$205	$189	$173	$172

Total allowance for credit losses (ACL)	$2,074	$2,159	$2,222	$2,381	$2,625

ACL ratios:
As a % of portfolio loans and leases	1.85%	2.00%	2.06%	2.19%	2.41%
As a % of nonperforming portfolio loans and leases	416%	409%	358%	321%	315%
As a % of nonperforming portfolio assets	394%	386%	338%	304%	304%

ALLL as a % of portfolio loans and leases	1.69%	1.81%	1.89%	2.03%	2.25%

Total losses charged-off	$(77)	$(56)	$(103)	$(109)	$(154)
Total recoveries of losses previously charged-off	39	35	59	38	36
Total net losses charged-off	$(38)	$(21)	$(44)	$(71)	$(118)

Net charge-off ratio (NCO ratio)^(b)	0.14%	0.08%	0.16%	0.27%	0.43%
Commercial NCO ratio	0.10%	0.03%	0.10%	0.17%	0.40%
Consumer NCO ratio	0.21%	0.16%	0.26%	0.43%	0.47%

Nonperforming portfolio loans and leases were $498 million in the current quarter, with the resulting NPL ratio of 0.44%. Compared to the prior quarter, NPLs decreased $30 million with the NPL ratio decreasing 5 bps. Compared to the year-ago quarter, NPLs decreased $336 million with the NPL ratio decreasing 33 bps.

Nonperforming portfolio assets were $527 million in the current quarter, with the resulting NPA ratio of 0.47%. Compared to the prior quarter, NPAs decreased $32 million with the NPA ratio decreasing 5 bps. Compared to the year-ago quarter, NPAs decreased $337 million with the NPA ratio decreasing 32 bps.

The benefit from credit losses totaled $47 million in the current quarter. The allowance for credit loss ratio represented 1.85% of total portfolio loans and leases at quarter end, compared with 2.00% for the prior quarter end and 2.41% for the year-ago quarter end. In the current quarter, the allowance for credit losses represented 416% of nonperforming portfolio loans and leases and 394% of nonperforming portfolio assets.

Net charge-offs were $38 million in the current quarter, with the resulting NCO ratio of 0.14%. Compared to the prior quarter, net charge-offs increased $17 million and the NCO ratio increased 6 bps, reflecting higher charge-offs in both commercial and consumer portfolios. Compared to the year-ago quarter, net charge-offs decreased $80 million and the NCO ratio decreased 29 bps, reflecting improvement in both commercial and consumer portfolios.

Capital Position
		As of and For the Three Months Ended
		December	September	June	March	December
		2021	2021	2021	2021	2020
Capital Position
Average total Bancorp shareholders' equity as a % of average assets	10.71%		11.16%	11.11%	11.26%	11.34%
Tangible equity^(a)	7.97%		8.06%	8.35%	8.20%	8.18%
Tangible common equity (excluding AOCI)^(a)	6.94%		7.01%	7.28%	7.14%	7.11%
Tangible common equity (including AOCI)^(a)	7.47%		7.74%	8.18%	7.95%	8.29%

Regulatory Capital Ratios^(d)(e)
CET1 capital	9.53%		9.86%	10.37%	10.46%	10.34%
Tier I risk-based capital	10.89%		11.28%	11.83%	11.94%	11.83%
Total risk-based capital	13.40%		13.94%	14.60%	14.80%	15.08%
Tier I leverage	8.27%		8.41%	8.55%	8.61%	8.49%

Capital ratios remained strong this quarter. The CET1 capital ratio was 9.53%, the tangible common equity to tangible assets ratio was 6.94% excluding AOCI, and 7.47% including AOCI. The Tier I risk-based capital ratio was 10.89%, the Total risk-based capital ratio was 13.40%, and the Tier I leverage ratio was 8.27%. Certain capital ratios, including the Tier I leverage ratio, continued to be impacted by the increase in assets since the onset of the pandemic, predominantly from 0% risk-weighted assets resulting from interest-bearing cash as well as PPP loans.

During the fourth quarter of 2021, Fifth Third repurchased approximately $316 million of its outstanding stock as part of the Company's capital plan, which reduced common shares by approximately 7.3 million at quarter end.

Tax Rate

The effective tax rate was 20.1% compared with 21.3% in the prior quarter and 19.1% in the year-ago quarter.

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, which will be available for 30 days.

Corporate Profile

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio, and the indirect parent company of Fifth Third Bank, National Association, a federally chartered institution. As of December 31, 2021, the Company had $211 billion in assets and operates 1,117 full-service Banking Centers, and 2,322 Fifth Third branded ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia, North Carolina and South Carolina. In total, Fifth Third provides its customers with access to approximately 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. Fifth Third is among the largest money managers in the Midwest and, as of December 31, 2021, had $554 billion in assets under care, of which it managed $65 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)	Non-GAAP measure; see discussion of non-GAAP reconciliation beginning on page 27 of the 4Q21 earnings release.
(b)	Net losses charged-off as a percent of average portfolio loans and leases presented on an annualized basis.
(c)	Nonperforming portfolio assets as a percent of portfolio loans and leases and OREO.
(d)	Regulatory capital ratios are calculated pursuant to the five-year transition provision option to phase in the effects of CECL on regulatory capital after its adoption on January 1, 2020.
(e)	Current period regulatory capital ratios are estimated.
(f)	Assumes a 23% tax rate.
(g)	Fourth quarter 2021 underlying NIM calculated by reducing average interest-earning assets approximately $32.1 billion resulting from excess cash compared to normalized levels (average other short term investments less a $2.5 billion normalized level) and approximately $1.8 billion from average PPP balances (with a corresponding reduction to net interest income of approximately $36 million), resulting in an underlying NIM of approximately 3.02%; Third quarter 2021 underlying NIM calculated by reducing average interest-earning assets approximately $29.6 billion resulting from excess cash compared to normalized levels (average other short term investments less a $2.5 billion normalized level) and approximately $3.1 billion from average PPP balances (with a corresponding reduction to net interest income of approximately $47 million), resulting in an underlying NIM of approximately 3.03%.
(h)	Includes commercial customer Eurodollar sweep balances for which the Bank pays rates comparable to other commercial deposit accounts.
(i)	Nonperforming portfolio loans and leases as a percent of portfolio loans and leases.

FORWARD-LOOKING STATEMENTS

This release contains 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. All statements other than statements of historical fact are forward-looking statements. These statements relate to our financial condition, results of operations, plans, objectives, future performance, capital actions 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 the risk factors set forth in our most recent Annual Report on Form 10-K as updated by our filings with the U.S. Securities and Exchange Commission (“SEC”).

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) effects of the global COVID-19 pandemic; (2) deteriorating credit quality; (3) loan concentration by location or industry of borrowers or collateral; (4) problems encountered by other financial institutions; (5) inadequate sources of funding or liquidity; (6) unfavorable actions of rating agencies; (7) inability to maintain or grow deposits; (8) limitations on the ability to receive dividends from subsidiaries; (9) cyber-security risks; (10) Fifth Third’s ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks; (11) failures by third-party service providers; (12) inability to manage strategic initiatives and/or organizational changes; (13) inability to implement technology system enhancements; (14) failure of internal controls and other risk management systems; (15) losses related to fraud, theft, misappropriation or violence; (16) inability to attract and retain skilled personnel; (17) adverse impacts of government regulation; (18) governmental or regulatory changes or other actions; (19) failures to meet applicable capital requirements; (20) regulatory objections to Fifth Third’s capital plan; (21) regulation of Fifth Third’s derivatives activities; (22) deposit insurance premiums; (23) assessments for the orderly liquidation fund; (24) replacement of 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 investments or acquired entities; (39) changes in accounting standards or interpretation or declines in the value of Fifth Third’s goodwill or other intangible assets; (40) inaccuracies or other failures from the use of models; (41) effects of critical accounting policies and judgments or the use of inaccurate estimates; (42) weather-related events, other natural disasters, or health emergencies (including pandemics); (43) the impact of reputational risk created by these or other developments on such matters as business generation and retention, funding and liquidity; (44) changes in law or requirements imposed by Fifth Third’s regulators impacting our capital actions, including dividend payments and stock repurchases; and (45) Fifth Third's ability to meet its sustainability targets, goals and commitments.

You should refer to our periodic and current reports filed with the Securities and Exchange Commission, or “SEC,” for further information on other factors, which could cause actual results to be significantly different from those expressed or implied by these forward-looking statements. 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. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations or any changes in events, conditions or circumstances on which any such statement is based, except as may be required by law, and we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The information contained herein is intended to be reviewed in its totality, and any stipulations, conditions or provisos that apply to a given piece of information in one part of this press release should be read as applying mutatis mutandis to every other instance of such information appearing herein.

Category: Earnings