Edgar Filing: FIFTH THIRD BANCORP

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2014

Commission File Number 001-33653

LOGO

(Exact name of Registrant as specified in its charter)

Ohio

31-0854434

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification Number)

Fifth Third Center

Cincinnati, Ohio 45263

(Address of principal executive offices)

Registrant’s telephone number, including area code: (800) 972-3030

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

There were 850,512,610 shares of the Registrant’s common stock, without par value, outstanding as of April 30, 2014.

LOGO

FINANCIAL CONTENTS


Part I. Financial Information
Glossary of Abbreviations and Acronyms			3
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 2)
Selected Financial Data			4
Overview			5
Non-GAAP Financial Measures			9
Recent Accounting Standards			11
Critical Accounting Policies			11
Statements of Income Analysis			12
Balance Sheet Analysis			18
Business Segment Review			23
Risk Management—Overview			29
Credit Risk Management			30
Market Risk Management			45
Liquidity Risk Management			48
Capital Management			49
Off-Balance Sheet Arrangements			52
Quantitative and Qualitative Disclosures about Market Risk (Item 3)			53
Controls and Procedures (Item 4)			53
Condensed Consolidated Financial Statements and Notes (Item 1)
Balance Sheets (unaudited)			54
Statements of Income (unaudited)			55
Statements of Comprehensive Income (unaudited)			56
Statements of Changes in Equity (unaudited)			57
Statements of Cash Flows (unaudited)			58
Notes to Condensed Consolidated Financial Statements (unaudited)			59

Part II. Other Information
Legal Proceedings (Item 1)			107
Risk Factors (Item 1A)			107
Unregistered Sales of Equity Securities and Use of Proceeds (Item 2)			107
Exhibits (Item 6)			107
Signatures			108
Certifications

FORWARD-LOOKING STATEMENTS

This report 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. 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,” “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. 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) general economic conditions and weakening in the economy, specifically the real estate market, either nationally 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) deteriorating credit quality; (3) political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; (4) changes in the interest rate environment reduce interest margins; (5) prepayment speeds, loan origination and sale volumes, charge-offs and loan loss provisions; (6) Fifth Third’s ability to maintain required capital levels and adequate sources of funding and liquidity; (7) maintaining capital requirements may limit Fifth Third’s operations and potential growth; (8) changes and trends in capital markets; (9) problems encountered by larger or similar financial institutions may adversely affect the banking industry and/or Fifth Third; (10) competitive pressures among depository institutions increase significantly; (11) effects of critical accounting policies and judgments; (12) changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board (FASB) or other regulatory agencies; (13) 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, including the Dodd-Frank Wall Street Reform and Consumer Protection Act; (14) ability to maintain favorable ratings from rating agencies; (15) fluctuation of Fifth Third’s stock price; (16) ability to attract and retain key personnel; (17) ability to receive dividends from its subsidiaries; (18) potentially dilutive effect of future acquisitions on current shareholders’ ownership of Fifth Third; (19) effects of accounting or financial results of one or more acquired entities; (20) difficulties from Fifth Third’s investment in, relationship with, and nature of the operations of Vantiv, LLC; (21) loss of income from any sale or potential sale of businesses that could have an adverse effect on Fifth Third’s earnings and future growth; (22) ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks; and (23) the impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity.

Glossary of Abbreviations and Acronyms

Fifth Third Bancorp provides the following list of abbreviations and acronyms as a tool for the reader that are used in Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Condensed Consolidated Financial Statements and the Notes to Condensed Consolidated Financial Statements.

ALCO: Asset Liability Management Committee

ALLL: Allowance for Loan and Lease Losses

AOCI: Accumulated Other Comprehensive Income

ARM: Adjustable Rate Mortgage

ATM: Automated Teller Machine

BCBS: Basel Committee on Banking Supervision

BHC: Bank Holding Company

BOLI: Bank Owned Life Insurance

BPO: Broker Price Opinion

bps: Basis points

CCAR: Comprehensive Capital Analysis and Review

CD: Certificate of Deposit

CDC: Fifth Third Community Development Corporation

CFPB: United States Consumer Financial Protection Bureau

C&I: Commercial and Industrial

DCF: Discounted Cash Flow

ERISA: Employee Retirement Income Security Act

ERM: Enterprise Risk Management

ERMC: Enterprise Risk Management Committee

EVE: Economic Value of Equity

FASB: Financial Accounting Standards Board

FDIC: Federal Deposit Insurance Corporation

FHLB: Federal Home Loan Bank

FHLMC: Federal Home Loan Mortgage Corporation

FICO: Fair Isaac Corporation (credit rating)

FNMA: Federal National Mortgage Association

FRB: Federal Reserve Bank

FTE: Fully Taxable Equivalent

FTP: Funds Transfer Pricing

FTS: Fifth Third Securities

GNMA: Government National Mortgage Association

GSE: Government Sponsored Enterprise

HAMP: Home Affordable Modification Program

HARP: Home Affordable Refinance Program

IPO: Initial Public Offering

IRC: Internal Revenue Code

IRLC: Interest Rate Lock Commitment

ISDA: International Swaps and Derivatives Association, Inc.

LCR: Liquidity Coverage Ratio

LIBOR: London InterBank Offered Rate

LLC: Limited Liability Company

LTV: Loan-to-Value

MD&A: Management’s Discussion and Analysis of Financial Condition and Results of Operations

MSR: Mortgage Servicing Right

N/A: Not Applicable

NII: Net Interest Income

NM: Not Meaningful

NPR: Notice of Proposed Rulemaking

NSFR: Net Stable Funding Ratio

OCC: Office of the Comptroller of the Currency

OCI: Other Comprehensive Income

OREO: Other Real Estate Owned

OTTI: Other-Than-Temporary Impairment

PMI: Private Mortgage Insurance

SBA: Small Business Administration

SEC: United States Securities and Exchange Commission

TBA: To Be Announced

TDR: Troubled Debt Restructuring

TruPS: Trust Preferred Securities

U.S.: United States of America

U.S. GAAP: United States Generally Accepted Accounting Principles

VaR: Value-at-Risk

VIE: Variable Interest Entity

VRDN: Variable Rate Demand Note

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 2)

The following is MD&A of certain significant factors that have affected Fifth Third Bancorp’s (the “Bancorp” or “Fifth Third”) financial condition and results of operations during the periods included in the Condensed Consolidated Financial Statements, which are a part of this filing. Reference to the Bancorp incorporates the parent holding company and all consolidated subsidiaries.

TABLE 1: Selected Financial Data


	For the three months ended March 31,
($ in millions, except for per share data)	2014			2013		% Change
Income Statement Data
Net interest income^(a)	$	898			893		1
Noninterest income		564			743		(24	)
Total revenue^(a)		1,462			1,636		(11	)
Provision for loan and lease losses		69			62		12
Noninterest expense		950			978		(3	)
Net income attributable to Bancorp		318			422		(25	)
Net income available to common shareholders		309			413		(25	)

Common Share Data
Earnings per share, basic	$	0.36			0.47		(23	)
Earnings per share, diluted		0.36			0.46		(22	)
Cash dividends per common share		0.12			0.11		9
Book value per share		16.27			15.42		6
Market value per share		22.96			16.31		41

Financial Ratios (%)
Return on average assets		1.00	%		1.41		(29	)
Return on average common equity		9.0			12.5		(28	)
Dividend payout ratio		33.3			23.4		42
Average Bancorp shareholders’ equity as a percent of average assets		11.53			11.38		1
Tangible common equity^(b)		8.79			9.03		(3	)
Net interest margin^(a)		3.22			3.42		(6	)
Efficiency^(a)		64.9			59.8		9

Credit Quality
Net losses charged off	$	168			133		26
Net losses charged off as a percent of average loans and leases^(d)		0.76	%		0.63		21
ALLL as a percent of portfolio loans and leases		1.65			2.08		(21	)
Allowance for credit losses as a percent of portfolio loans and leases^(c)		1.82			2.28		(20	)
Nonperforming assets as a percent of portfolio loans, leases and other assets, including other real estate owned^(d)		1.05			1.41		(25	)

Average Balances
Loans and leases, including held for sale	$	90,238			88,880		2
Total securities and other short-term investments		22,940			16,846		36
Total assets		128,930			121,117		6
Transaction deposits^(e)		87,896			80,938		9
Core deposits^(f)		91,512			84,920		8
Wholesale funding^(g)		18,244			17,683		3
Bancorp shareholders’ equity		14,862			13,779		8

Regulatory Capital Ratios (%)
Tier I risk-based capital		10.45	%		10.83		(4	)
Total risk-based capital		14.02			14.35		(2	)
Tier I leverage		9.65			10.03		(4	)
Tier I common equity^(b)		9.51			9.70		(2	)

(a)

Amounts presented on an FTE basis. The FTE adjustment for the three months ended March 31, 2014 and 2013 was $5.

(b)

The tangible common equity and Tier I common equity ratios are non-GAAP measures. For further information, see the Non-GAAP Financial Measures section of the MD&A.

(c)

The allowance for credit losses is the sum of the ALLL and the reserve for unfunded commitments.

(d)

Excludes nonaccrual loans held for sale.

(e)

Includes demand, interest checking, savings, money market and foreign office deposits.

(f)

Includes transaction deposits plus other time deposits.

(g)

Includes certificates $100,000 and over, other deposits, federal funds purchased, other short-term borrowings and long-term debt.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

OVERVIEW

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. At March 31, 2014, the Bancorp had $129.7 billion in assets, operated 17 affiliates with 1,311 full-service Banking Centers, including 104 Bank Mart^® locations open seven days a week inside select grocery stores, and 2,614 ATMs in 12 states throughout the Midwestern and Southeastern regions of the U.S. The Bancorp reports on four business segments: Commercial Banking, Branch Banking, Consumer Lending and Investment Advisors. The Bancorp also has a 26% interest in Vantiv Holding, LLC. The carrying value of the Bancorp’s investment in Vantiv Holding, LLC was $437 million as of March 31, 2014.

This overview of MD&A highlights selected information in the financial results of the Bancorp and may not contain all of the information that is important to you. For a more complete understanding of trends, events, commitments, uncertainties, liquidity, capital resources and critical accounting policies and estimates, you should carefully read this entire document as well as the 2013 Form 10-K. Each of these items could have an impact on the Bancorp’s financial condition, results of operations and cash flows. In addition, see the Glossary of Abbreviations and Acronyms in this report for a list of terms included as a tool for the reader of this quarterly report on Form 10-Q. The abbreviations and acronyms identified therein are used throughout this MD&A, as well as the Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements.

The Bancorp believes that banking is first and foremost a relationship business where the strength of the competition and challenges for growth can vary in every market. The Bancorp believes its affiliate operating model provides a competitive advantage by emphasizing individual relationships. Through its affiliate operating model, individual managers at all levels within the affiliates are given the opportunity to tailor financial solutions for their customers.

Net interest income, net interest margin and the efficiency ratio are presented in MD&A on an FTE basis. The FTE basis adjusts for the tax-favored status of income from certain loans and securities held by the Bancorp that are not taxable for federal income tax purposes. The Bancorp believes this presentation to be the preferred industry measurement of net interest income as it provides a relevant comparison between taxable and non-taxable amounts.

The Bancorp’s revenues are dependent on both net interest income and noninterest income. For the three months ended March 31, 2014, net interest income, on an FTE basis, and noninterest income provided 61% and 39% of total revenue, respectively. The Bancorp derives the majority of its revenues within the U.S. from customers domiciled in the U.S. Revenue from foreign countries and external customers domiciled in foreign countries is immaterial to the Bancorp’s Condensed Consolidated Financial Statements. Changes in interest rates, credit quality, economic trends and the capital markets are primary factors that drive the performance of the Bancorp. As discussed later in the Risk Management section, risk identification, measurement, monitoring, control and reporting are important to the management of risk and to the financial performance and capital strength of the Bancorp.

Net interest income is the difference between interest income earned on assets such as loans, leases and securities, and interest expense incurred on liabilities such as deposits, short-term borrowings and long-term debt. Net interest income is affected by the general level of interest rates, the relative level of short-term and long-term interest rates, changes in interest rates and changes in the amount and composition of interest-earning assets and interest-bearing liabilities. Generally, the rates of interest the Bancorp earns on its assets and pays on its liabilities are established for a period of time. The change in market interest rates over time exposes the Bancorp to interest rate risk through potential adverse changes to net interest income and financial position. The Bancorp manages this risk by continually analyzing and adjusting the composition of its assets and liabilities based on their payment streams and interest rates, the timing of their maturities and their sensitivity to changes in market interest rates. Additionally, in the ordinary course of business, the Bancorp enters into certain derivative transactions as part of its overall strategy to manage its interest rate and prepayment risks. The Bancorp is also exposed to the risk of losses on its loan and lease portfolio, as a result of changing expected cash flows caused by borrower credit events, such as, loan defaults and inadequate collateral due to a weakened economy within the Bancorp’s footprint.

Noninterest income is derived primarily from service charges on deposits, mortgage banking net revenue, corporate banking revenue, investment advisory revenue, card and processing revenue and other noninterest income. Noninterest expense is primarily driven by personnel costs, net occupancy expenses, and technology and communication costs.

Accelerated Share Repurchase Transactions

During 2013 and the three months ended March 31, 2014, the Bancorp entered into a number of accelerated share repurchase transactions. As part of these transactions, the Bancorp entered into forward contracts in which the final number of shares delivered at settlement was based generally on a discount to the average daily volume weighted average price of the Bancorp’s common stock during the term of the repurchase agreements. For more information on the accounting for these instruments, see the Capital Management section of MD&A. For a summary of the Bancorp’s accelerated share repurchase transactions that were entered into or settled during the three months ended March 31, 2014 refer to Table 2.

TABLE 2: Summary of Accelerated Share Repurchase Transactions


Repurchase Date	Amount ($ in millions)		Shares Repurchased		Shares Received from Forward Contract Settlement		Total Shares Repurchased		Settlement Date
November 18, 2013	$	200		8,538,423		1,132,495		9,670,918		March 5, 2014
December 13, 2013		456		19,084,195		2,294,932		21,379,127		March 31, 2014
January 31, 2014		99		3,950,705		602,109		4,552,814		March 31, 2014

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Senior Notes Offering

On February 28, 2014, the Bancorp issued and sold $500 million of 2.30% unsecured senior fixed rate notes, with a maturity of five years, due on March 1, 2019. These notes will be redeemable by the Bancorp, in whole or in part, on or after the date that is 30 days prior to the maturity date at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest up to, but excluding the redemption date.

Automobile Loan Securitization

In February of 2014, the Bancorp transferred approximately $1.3 billion in fixed-rate consumer automobile loans to a bankruptcy remote trust which was deemed to be a VIE. The Bancorp concluded that it is the primary beneficiary of the VIE and, therefore, has consolidated this VIE. For additional information on the automobile loan securitization, refer to Note 8 of the Notes to Condensed Consolidated Financial Statements.

Legislative Developments

On July 21, 2010, the Dodd-Frank Act was signed into federal law. This act implements changes to the financial services industry and affects the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies. The legislation establishes a CFPB responsible for implementing and enforcing compliance with consumer financial laws, changes the methodology for determining deposit insurance assessments, gives the FRB the ability to regulate and limit interchange rates charged to merchants for the use of debit cards, enacts new limitations on proprietary trading, broadens the scope of derivative instruments subject to regulation, requires on-going stress tests and the submission of annual capital plans for certain organizations and requires changes to regulatory capital ratios. This act also calls for federal regulatory agencies to conduct multiple studies over the next several years in order to implement its provisions. While the total impact of the fully implemented Dodd-Frank Act on the Bancorp is not currently known, the impact is expected to be substantial and may have an adverse impact on the Bancorp’s financial performance and growth opportunities.

The FRB launched the 2014 capital planning and stress testing program, CCAR, on November 1, 2013. The CCAR program requires BHCs with $50 billion or more of total consolidated assets to submit annual capital plans to the FRB for review and to conduct stress tests under a number of economic scenarios. The capital plan and stress testing results were submitted by the Bancorp to the FRB on January 6, 2014.

In March of 2014, the FRB disclosed its estimates of participating institutions results under the FRB supervisory stress scenario, including capital results, which assume all banks take certain consistently applied future capital actions. In addition, the FRB disclosed its estimates of participating institutions results under the FRB supervisory severe stress scenarios including capital results based on each company’s own base scenario capital actions.

On March 26, 2014, the Bancorp announced the results of its capital plan submitted to the FRB as part of the 2014 CCAR. The FRB indicated to the Bancorp that it did not object to the following capital actions for the period beginning April 1, 2014 and ending March 31, 2015:

•

the potential increase in the quarterly common stock dividend to $0.13 per share;

•

the potential repurchase of common shares in an amount up to $669 million;

•

and the ability to repurchase shares in the amount of any after-tax gains from the sale of Vantiv, Inc. common stock.

For more information on the 2014 CCAR results, refer to the Capital Management section of MD&A.

The Bancorp and other large bank holding companies are required to conduct a separate mid-year stress test using financial data as of March 31^st under three company-derived macro-economic scenarios (base, adverse and severely adverse). The Bancorp will submit the results of its mid-year stress test to the FRB in July of 2014. For further discussion on the 2014 mid-year stress test, see the Capital Management section of MD&A.

Fifth Third offers qualified deposit customers a deposit advance product if they choose to avail themselves of this product to meet short term, small-dollar financial needs. In April of 2013, the CFPB issued a “White Paper” which studied financial services industry offerings and customer use of deposit advance products as well as payday loans and is considering whether rules governing these products are warranted. At the same time, the OCC and FDIC each issued proposed supervisory guidance for public comment to institutions they supervise which supplements existing OCC and FDIC guidance, detailing the principles they expect financial institutions to follow in connection with deposit advance products and supervisory expectations for the use of deposit advance products. The Federal Reserve also issued a statement in April to state member banks like Fifth Third for whom the Federal Reserve is the primary regulator. This statement encouraged state member banks to respond to customers’ small-dollar credit needs in a responsible manner; emphasized that they should take into consideration the risks associated with deposit advance products, including potential consumer harm and potential elevated compliance risk; and reminded them that these product offerings must comply with applicable laws and regulations. Fifth Third’s deposit advance product is designed to fully comply with the applicable federal and state laws and use of this product is subject to strict eligibility requirements and advance restriction guidelines to limit dependency on this product as a borrowing source. Fifth Third believes this product provides customers with a relatively low-cost alternative for such needs. On January 17, 2014, given developments in industry practice, Fifth Third announced that it will no longer enroll new customers in its deposit advance product and will phase out the service to existing customers by the end of 2014. These advance balances are included in other consumer loans and leases in the Bancorp’s Condensed Consolidated Balance Sheets and represent substantially all of the revenue reported in interest and fees on other consumer loans and leases in the Bancorp’s Condensed Consolidated Statements of Income and in Table 4 in the Statements of Income Analysis section of MD&A. Fifth Third has been monitoring industry developments and is working to develop and implement alternative products and services in order to address the needs of its customers. The Bancorp is currently in the process of evaluating the impact to the Bancorp’s Condensed Consolidated Financial Statements of both the phase out of the deposit advance product and the development of alternative products and services.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

In December of 2010 and revised in June of 2011, the BCBS issued Basel III, a global regulatory framework, to enhance international capital standards. In June of 2012, U.S. banking regulators proposed enhancements to the regulatory capital requirements for U.S. banks, which implement aspects of Basel III, such as re-defining the regulatory capital elements and minimum capital ratios, introducing regulatory capital buffers above those minimums, revising the agencies’ rules for calculating risk-weighted assets and introducing a new Tier I common equity ratio. In July of 2013, U.S. banking regulators approved the final enhanced regulatory capital rules (Basel III Final Rule), which included modifications to the proposed rules. The Bancorp continues to evaluate the Basel III Final Rule and its potential impact. For more information on the impact of the regulatory capital enhancements, refer to the Capital Management section of MD&A. Refer to the Non-GAAP section of MD&A for an estimate of the Basel III Tier 1 common equity ratio.

On December 10, 2013, the banking agencies finalized section 619 of the Dodd-Frank Act known as the Volcker Rule, which became effective April 1, 2014. Though the final rule was effective April 1, 2014, the Federal Reserve has granted the industry an extension of time until July 21, 2015 to conform activities to be in compliance with the Volcker Rule. It is possible that additional conformance period extensions could be granted either to the entire industry, or, upon request, to requesting banking organizations on a case-by-case basis. The final rule prohibits banks and bank holding companies from engaging in short-term proprietary trading of certain securities, derivatives, commodity futures and options on these instruments for their own account. The Volcker Rule also restricts banks and their affiliated entities from owning, sponsoring or having certain relationships with private equity and hedge funds, as well as holding certain collateralized loan obligations that are deemed to contain ownership interests. Exemptions are provided for certain activities such as underwriting, market making, hedging, trading in certain government obligations and organizing and offering a hedge fund or private equity fund. Fifth Third does not sponsor any private equity or hedge funds that, under the final rule, it is prohibited from sponsoring. As of March 31, 2014, the Bancorp held no collateralized loan obligations. As of March 31, 2014, the Bancorp had approximately $183 million in interests and approximately $75 million in binding commitments to invest in private equity funds that are affected by the Volcker Rule. It is expected that over time the Bancorp may need to sell or redeem these investments, however no formal plan to sell has been approved as of March 31, 2014. The Bancorp believes it is likely that these investments will be reduced over time in the ordinary course before compliance is required.

On January 7, 2013, the BCBS issued a final international standard for the LCR for large, internationally active banks. In addition, the BCBS plans on introducing the NSFR final standard in the next two years. On October 24, 2013, the U.S. banking agencies issued an NPR that would implement a LCR requirement for U.S. banks that is generally consistent with the international LCR standards for large, internationally active banking organizations, generally those with $250 billion or more in total consolidated assets or $10 billion or more in on-balance sheet foreign exposure, and a Modified LCR for BHCs with at least $50 billion in total consolidated assets that are not internationally active, like Fifth Third. The NPR was open for public comment until January 31, 2014. Refer to the Liquidity Risk Management section in MD&A for further discussion on these ratios.

On July 31, 2013, the U.S. District Court for the District of Columbia issued an order granting summary judgment to the plaintiffs in a case challenging certain provisions of the FRB’s rule concerning electronic debit card transaction fees and network exclusivity arrangements (the “Current Rule”) that were adopted to implement Section 1075 of the Dodd-Frank Act, known as the Durbin Amendment. The Court held that, in adopting the Current Rule, the FRB violated the Durbin Amendment’s provisions concerning which costs are allowed to be taken into account for purposes of setting fees that are reasonable and proportional to the costs incurred by the issuer and therefore the Current Rule’s maximum permissible fees were too high. In addition, the Court held that the Current Rule’s network non-exclusivity provisions concerning unaffiliated payment networks for debit cards also violated the Durbin Amendment. The Court vacated the Current Rule, but stayed its ruling to provide the FRB an opportunity to replace the invalidated portions. The FRB appealed this decision and on March 21, 2014, the D.C. Circuit Court of Appeals reversed the District Court’s grant of summary judgment and remanded the case for further proceedings in accordance with its opinion. If this decision is ultimately overturned and/or the FRB re-issues rules for purposes of implementing the Durbin Amendment in a manner consistent with the District Court decision, the amount of debit card interchange fees the Bancorp would be permitted to charge likely would be reduced. Refer to the Noninterest Income subsection of the Statements of Income Analysis section of MD&A for further information regarding the Bancorp’s debit card interchange revenue.

Earnings Summary

The Bancorp’s net income available to common shareholders for the first quarter of 2014 was $309 million, or $0.36 per diluted share, which was net of $9 million in preferred stock dividends. The Bancorp’s net income available to common shareholders for the first quarter of 2013 was $413 million, or $0.46 per diluted share, which was net of $9 million in preferred stock dividends. Pre-provision net revenue was $507 million for the three months ended March 31, 2014 compared to $653 million in the same period in 2013. Pre-provision net revenue is a non-GAAP measure. For further information, see the Non-GAAP Financial Measures section in MD&A.

Net interest income was $898 million for the quarter ended March 31, 2014 compared to $893 million for the first quarter of 2013. Net interest income was positively impacted by increases in average taxable securities of $5.2 billion and average loans and leases of $1.4 billion, as well as a decrease in rates paid on long-term debt compared to the same period in the prior year. These benefits were partially offset by lower yields on the Bancorp’s interest-earning assets and an increase in average long-term debt of $2.8 billion. Net interest margin was 3.22% and 3.42% for the three months ended March 31, 2014 and 2013, respectively.

Noninterest income decreased $179 million in the first quarter of 2014 compared to the same period in the prior year. The decrease from the first quarter of 2013 was primarily due to a decrease in mortgage banking net revenue and other noninterest income. Mortgage banking net revenue decreased $111 million for the three months ended March 31, 2014 compared to the same period in the prior year primarily due to a decrease in origination fees and gains on loan sales and a decrease in positive net valuation adjustments on mortgage servicing rights and free-standing derivatives entered into to economically hedge the MSR portfolio partially offset by a decrease in mortgage servicing rights amortization. Other noninterest income decreased $68 million in the first quarter of 2014 compared to the first quarter of 2013 primarily due to a negative valuation adjustment of $36 million on the stock warrant associated with Vantiv Holding, LLC for the three months ended March 31, 2014 compared to a positive valuation adjustment of $34 million for the three months ended March 31, 2013.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Noninterest expense decreased $28 million in the first quarter of 2014 compared to the same period in 2013 primarily due to a decrease in total personnel costs partially offset by an increase in other noninterest expense. Total personnel costs decreased $53 million for the three months ended March 31, 2014 compared to the three months ended March 31, 2013 primarily due to decreases in incentive compensation, base compensation, and employee benefits. Other noninterest expense increased $18 million for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to an increase in litigation expense and an increase in impairment on affordable housing investments partially offset by a decrease in the provision for representation and warranty claims, FDIC insurance and other taxes, and loan and lease expenses.

Credit Summary

The Bancorp does not originate subprime mortgage loans and does not hold asset-backed securities backed by subprime mortgage loans in its securities portfolio. However, the Bancorp has exposure to disruptions in the capital markets and weakened economic conditions. The provision for loan and lease losses was $69 million for the three months ended March 31, 2014 compared to $62 million during the same period in 2013. The increase in provision expense compared to the same period in the prior year was due to an increase in certain impaired commercial loans partially offset by improved delinquency metrics. In addition, net charge-offs as a percent of average portfolio loans and leases were 0.76% during the first quarter of 2014 compared to 0.63% during the first quarter of 2013. At March 31, 2014, nonperforming assets as a percent of portfolio loans, leases and other assets, including OREO (excluding nonaccrual loans held for sale) were 1.05%, compared to 1.10% at December 31, 2013. For further discussion on credit quality, see the Credit Risk Management section in MD&A.

Capital Summary

The Bancorp’s capital ratios exceed the “well-capitalized” guidelines as defined by the FRB. As of March 31, 2014, the Tier I risk-based capital ratio was 10.45%, the Tier I leverage ratio was 9.65% and the total risk-based capital ratio was 14.02%.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

NON-GAAP FINANCIAL MEASURES

The Bancorp considers various measures when evaluating capital utilization and adequacy, including the tangible equity ratio, tangible common equity ratio and Tier I common equity ratio, in addition to capital ratios defined by banking regulators. These calculations are intended to complement the capital ratios defined by banking regulators for both absolute and comparative purposes. Because U.S. GAAP does not include capital ratio measures, the Bancorp believes there are no comparable U.S. GAAP financial measures to these ratios. These ratios are not formally defined by U.S. GAAP or codified in the federal banking regulations and, therefore, are considered to be non-GAAP financial measures. Since analysts and banking regulators may assess the Bancorp’s capital adequacy using these ratios, the Bancorp believes they are useful to provide investors the ability to assess its capital adequacy on the same basis.

The Bancorp believes these non-GAAP measures are important because they reflect the level of capital available to withstand unexpected market conditions. Additionally, presentation of these measures allows readers to compare certain aspects of the Bancorp’s capitalization to other organizations. However, because there are no standardized definitions for these ratios, the Bancorp’s calculations may not be comparable with other organizations, and the usefulness of these measures to investors may be limited. As a result, the Bancorp encourages readers to consider its Condensed Consolidated Financial Statements in their entirety and not to rely on any single financial measure.

U.S. banking regulators approved final capital rules (Basel III Final Rule) in July of 2013 that substantially amend the existing risk-based capital rules (Basel I) for banks. The Bancorp believes providing an estimate of its capital position based upon the final rules is important to complement the existing capital ratios and for comparability to other financial institutions. Since these rules are not effective for the Bancorp until January 1, 2015, they are considered non-GAAP measures and therefore are included in the following non-GAAP financial measures table.

Pre-provision net revenue is net interest income plus noninterest income minus noninterest expense. The Bancorp believes this measure is important because it provides a ready view of the Bancorp’s earnings before the impact of provision expense.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

The following table reconciles non-GAAP financial measures to U.S. GAAP as of or for three months ended:

TABLE 3: Non-GAAP Financial Measures


	March 31,			March 31,
($ in millions)	2014			2013
Income before income taxes (U.S. GAAP)	$	438			591
Add: Provision expense (U.S. GAAP)		69			62

Pre-provision net revenue		507			653
Net income available to common shareholders (U.S. GAAP)	$	309			413
Add: Intangible amortization, net of tax		1			1

Tangible net income available to common shareholders	$	310			414


	March 31,			December 31,
	2014			2013
Total Bancorp shareholders’ equity (U.S. GAAP)	$	14,826			14,589
Less: Preferred stock		(1,034	)		(1,034	)
Goodwill		(2,416	)		(2,416	)
Intangible assets		(18	)		(19	)

Tangible common equity, including unrealized gains / losses		11,358			11,120
Less: Accumulated other comprehensive income		(196	)		(82	)

Tangible common equity, excluding unrealized gains / losses (1)		11,162			11,038
Add: Preferred stock		1,034			1,034

Tangible equity (2)	$	12,196			12,072

Total assets (U.S. GAAP)	$	129,654			130,443
Less: Goodwill		(2,416	)		(2,416	)
Intangible assets		(18	)		(19	)
Accumulated other comprehensive income, before tax		(302	)		(126	)

Tangible assets, excluding unrealized gains / losses (3)	$	126,918			127,882

Total Bancorp shareholders’ equity (U.S. GAAP)	$	14,826			14,589
Less: Goodwill and certain other intangibles		(2,490	)		(2,492	)
Accumulated other comprehensive income		(196	)		(82	)
Add: Qualifying TruPS		60			60
Other		(18	)		19

Tier I risk-based capital		12,182			12,094
Less: Preferred stock		(1,034	)		(1,034	)
Qualifying TruPS		(60	)		(60	)
Qualified noncontrolling interests in consolidated subsidiaries		(1	)		(37	)

Tier I common equity (4)	$	11,087			10,963

Risk-weighted assets (5) ^(a)		$116,622			116,736
Ratios:
Tangible equity (2) / (3)		9.61	%		9.44
Tangible common equity (1) / (3)		8.79	%		8.63
Tier I common equity (4) / (5)		9.51	%		9.39

Basel III Final Rule—Estimated Tier I common equity ratio
Tier I common equity (Basel I)	$	11,087			10,963
Add: Adjustment related to capital components^(b)		99			82

Estimated Tier I common equity under Basel III Final Rule without AOCI (opt out) (6)		11,186			11,045
Add: Adjustment related to AOCI^(c)		196			82

Estimated Tier I common equity under Basel III Final Rule with AOCI (non opt out) (7)		11,382			11,127

Estimated risk-weighted assets under Basel III Final Rule ^(d) (8)		122,659			122,851

Estimated Tier I common equity ratio under Basel III Final Rule (opt out) (6) / (8)		9.12	%		8.99
Estimated Tier I common equity ratio under Basel III Final Rule (non opt out) (7) / (8)		9.28	%		9.06

(a)

Under the banking agencies’ risk-based capital guidelines, assets and credit equivalent amounts of derivatives and off-balance sheet exposures are assigned to broad risk categories. The aggregate dollar amount in each risk category is multiplied by the associated risk weight of the category. The resulting weighted values are added together, along with the measure for market risk, resulting in the Bancorp’s total risk-weighted assets.

(b)

Adjustments related to capital components include MSRs and deferred tax assets subject to threshold limitations and deferred tax liabilities related to intangible assets, which were deductions to capital under Basel I capital rules.

(c)

Under final Basel III rules, non-advanced approach banks are permitted to make a one-time election to opt out of the requirement to include AOCI in Tier I common equity.

(d)

Key differences under Basel III in the calculation of risk-weighted assets compared to Basel I include: (1) Risk weighting for commitments under 1 year; (2) Higher risk weighting for exposures to securitizations, past due loans, foreign banks and certain commercial real estate; (3) Higher risk weighting for MSRs and deferred tax assets that are under certain thresholds as a percent of Tier I capital; and (4) Derivatives are differentiated between exchange clearing and over-the-counter and the 50% risk-weight cap is removed.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

RECENT ACCOUNTING STANDARDS

Note 3 of the Notes to Condensed Consolidated Financial Statements provides a discussion of the significant new accounting standards applicable to the Bancorp and the expected impact of significant accounting standards issued, but not yet required to be adopted.

CRITICAL ACCOUNTING POLICIES

The Bancorp’s Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP. Certain accounting policies require management to exercise judgment in determining methodologies, economic assumptions and estimates that may materially affect the Bancorp’s financial position, results of operations and cash flows. The Bancorp’s critical accounting policies include the accounting for the ALLL, reserve for unfunded commitments, income taxes, valuation of servicing rights, fair value measurements and goodwill. These accounting policies are discussed in detail in Management’s Discussion and Analysis – Critical Accounting Policies in the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2013. No material changes were made to the valuation techniques or models during the three months ended March 31, 2014.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

STATEMENTS OF INCOME ANALYSIS

Net Interest Income

Net interest income is the interest earned on securities, loans and leases (including yield-related fees) and other interest-earning assets less the interest paid for core deposits (includes transaction deposits and other time deposits) and wholesale funding (includes certificates of deposit $100,000 and over, other deposits, federal funds purchased, other short-term borrowings and long-term debt). The net interest margin is calculated by dividing net interest income by average interest-earning assets. Net interest rate spread is the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities. Net interest margin is typically greater than net interest rate spread due to the interest income earned on those assets that are funded by noninterest-bearing liabilities, or free funding, such as demand deposits or shareholders’ equity.

Table 4 presents the components of net interest income, net interest margin and net interest rate spread for the three months ended March 31, 2014 and 2013, as well as the relative impact of changes in the balance sheet and changes in interest rates on net interest income. Nonaccrual loans and leases and loans held for sale have been included in the average loan and lease balances. Average outstanding securities balances are based on amortized cost with any unrealized gains or losses on available-for-sale securities included in other assets.

Net interest income was $898 million for the first quarter of 2014, an increase of $5 million compared to the first quarter of 2013. For the three months ended March 31, 2014, net interest income was positively impacted by increases in average taxable securities of $5.2 billion and average loans and leases of $1.4 billion, as well as a decrease in rates paid on long-term debt compared to the same period in the prior year. These benefits were partially offset by lower yields on the Bancorp’s interest-earning assets and an increase in average long-term debt of $2.8 billion. The net interest rate spread decreased to 3.07% in the first quarter of 2014 from 3.25% in the same period in 2013, as the benefit of the decrease in rates on average interest-bearing liabilities was more than offset by a 26 bps decrease in yield on average interest-earnings assets.

Net interest margin was 3.22% for the three months ended March 31, 2014 compared to 3.42% for the three months ended March 31, 2013. The decrease of 20 bps was driven primarily by a decline in yields on loans partially offset by an increase in free funding balances and lower rates on interest-bearing liabilities.

Interest income from loans and leases decreased $59 million, or seven percent, compared to the first quarter of 2013. The decrease from the three months ended March 31, 2013 was primarily the result of a decrease of 32 bps in average loans and leases yields partially offset by an increase of two percent in average loans and leases. The increase in average loans and leases for the three months ended March 31, 2014 was driven primarily by an increase of $4.0 billion, or 11%, in average commercial and industrial loans partially offset by a decrease of $1.6 billion, or 11%, in average residential mortgage loans. For more information on the Bancorp’s loan and lease portfolio, see the Loans and Leases section of the Balance Sheet Analysis section of MD&A. In addition, interest income from investment securities and other short-term investments increased $57 million compared to the three months ended March 31, 2013, primarily as the result of an increase of $5.2 billion, or 34%, in average taxable securities coupled with a 35 bps increase in yields on average taxable securities.

Average core deposits increased $6.6 billion, or eight percent, compared to the first quarter of 2013. The increase was primarily due to an increase in average money market deposits, average interest checking deposits and average demand deposits partially offset by a decrease in average savings deposits. The cost of average core deposits decreased to 18 bps for the three months ended March 31, 2014 from 19 bps for the three months ended March 31, 2013. This decrease was primarily the result of a mix shift to lower cost core deposits as a result of run-off of higher priced CDs partially offset by an increase of 4 bps in the rate paid on average money market deposits compared to the three months ended March 31, 2013.

For the three months ended March 31, 2014, interest expense on average wholesale funding decreased $4 million, or seven percent, compared to the three months ended March 31, 2013, primarily as a result of a decrease in interest expense related to long-term debt and a $3.6 billion decrease in average other short-term borrowings coupled with an 8 bps decrease in the rate paid for other short-term borrowings. Interest expense on long-term debt decreased due to a decrease in the rate paid on long-term debt of 90 bps partially offset by a $2.8 billion increase in average long-term debt. Refer to the Borrowings section of the Balance Sheet Analysis section of MD&A for additional information on the Bancorp’s borrowings. During the three months ended March 31, 2014, average wholesale funding represented 23% of average interest-bearing liabilities compared to 24% during the three months ended March 31, 2013. For more information on the Bancorp’s interest rate risk management, including estimated earnings sensitivity to changes in market interest rates, see the Market Risk Management section of MD&A.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

TABLE 4: Condensed Average Balance Sheets and Analysis of Net Interest Income


For the three months ended	March 31, 2014								March 31, 2013								Attribution of Change in Net Interest Income^(a)
($ in millions)	Average Balance			Revenue/ Cost		Average Yield/ Rate			Average Balance			Revenue/ Cost		Average Yield/ Rate			Volume			Yield/Rate			Total
Assets
Interest-earning assets:
Loans and leases:^(b)
Commercial and industrial loans	$	40,409		$	334		3.35	%	$	36,423		$	350		3.90	%	$	36			(52	)		(16	)
Commercial mortgage		7,983			67		3.43			8,978			80		3.63			(9	)		(4	)		(13	)
Commercial construction		1,118			10		3.48			700			6		3.21			3			1			4
Commercial leases		3,607			27		3.09			3,557			30		3.38			—			(3	)		(3	)

Subtotal – commercial		53,117			438		3.35			49,658			466		3.80			30			(58	)		(28	)
Residential mortgage loans		13,304			129		3.94			14,866			146		3.98			(16	)		(1	)		(17	)
Home equity		9,194			85		3.74			9,872			91		3.74			(6	)		—			(6	)
Automobile loans		12,023			85		2.86			12,096			98		3.29			(1	)		(12	)		(13	)
Credit card		2,230			54		9.90			2,069			49		9.67			4			1			5
Other consumer loans/leases		370			36		39.93			319			36		46.77			6			(6	)		—

Subtotal – consumer		37,121			389		4.26			39,222			420		4.35			(13	)		(18	)		(31	)

Total loans and leases		90,238			827		3.72			88,880			886		4.04			17			(76	)		(59	)
Securities:
Taxable		20,385			168		3.33			15,224			112		2.98			42			14			56
Exempt from income taxes^(b)		46			1		5.51			51			1		5.44			—			—			—
Other short-term investments		2,509			2		0.26			1,571			1		0.26			1			—			1

Total interest-earning assets		113,178			998		3.58			105,726			1,000		3.84			60			(62	)		(2	)
Cash and due from banks		2,850								2,225
Other assets		14,478								15,016
Allowance for loan and lease losses		(1,576	)							(1,850	)

Total assets	$	128,930							$	121,117

Liabilities and Equity
Interest-bearing liabilities:
Interest checking	$	25,911		$	14		0.23	%	$	23,763		$	13		0.23	%	$	—			1			1
Savings		16,903			5		0.11			19,576			6		0.13			—			(1	)		(1	)
Money market		12,439			9		0.28			7,932			5		0.24			3			1			4
Foreign office deposits		2,017			1		0.29			1,102			1		0.26			—			—			—
Other time deposits		3,616			9		0.99			3,982			15		1.50			(1	)		(5	)		(6	)
Certificates - $100,000 and over		5,576			10		0.70			4,017			11		1.09			4			(5	)		(1	)
Other deposits		—			—		0.05			40			—		0.13			—			—			—
Federal funds purchased		547			—		0.10			691			—		0.14			—			—			—
Other short-term borrowings		1,808			1		0.10			5,429			2		0.18			—			(1	)		(1	)
Long-term debt		10,313			51		2.04			7,506			54		2.94			16			(19	)		(3	)

Total interest-bearing liabilities		79,130			100		0.51			74,038			107		0.59			22			(29	)		(7	)
Demand deposits		30,626								28,565
Other liabilities		4,274								4,687

Total liabilities		114,030								107,290
Total equity		14,900								13,827

Total liabilities and equity	$	128,930							$	121,117

Net interest income				$	898							$	893				$	38			(33	)		5
Net interest margin							3.22	%							3.42	%
Net interest rate spread							3.07								3.25
Interest-bearing liabilities to interest-earning assets							69.92								70.03

(a)

Changes in interest not solely due to volume or yield/rate are allocated in proportion to the absolute dollar amount of change in volume and yield/rate.

(b)

The FTE adjustments included in the above table were $5 for the three months ended March 31, 2014 and 2013.

Provision for Loan and Lease Losses

The Bancorp provides as an expense an amount for probable loan and lease losses within the loan and lease portfolio that is based on factors previously discussed in the Critical Accounting Policies section of the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2013. The provision is recorded to bring the ALLL to a level deemed appropriate by the Bancorp to cover losses inherent in the portfolio. Actual credit losses on loans and leases are charged against the ALLL. The amount of loans and leases actually removed from the Condensed Consolidated Balance Sheets is referred to as charge-offs. Net charge-offs include current period charge-offs less recoveries on previously charged-off loans and leases.

The provision for loan and lease losses was $69 million for the three months ended March 31, 2014 compared to $62 million during the same period in 2013. The increase in provision expense compared to the same period in the prior year was due to an increase in certain impaired commercial loans partially offset by improved delinquency metrics. The ALLL declined $99 million from $1.6 billion at December 31, 2013 to $1.5 billion at March 31, 2014. As of March 31, 2014, the ALLL as a percent of portfolio loans and leases decreased to 1.65%, compared to 1.79% at December 31, 2013.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Refer to the Credit Risk Management section of the MD&A as well as Note 6 of the Notes to Condensed Consolidated Financial Statements for more detailed information on the provision for loan and lease losses, including an analysis of loan portfolio composition, nonperforming assets, net charge-offs, and other factors considered by the Bancorp in assessing the credit quality of the loan and lease portfolio and the ALLL.

Noninterest Income

Noninterest income decreased $179 million, or 24%, for the three months ended March 31, 2014 compared to the three months ended March 31, 2013.

The components of noninterest income are as follows:

TABLE 5: Noninterest Income


	For the three months ended March 31,
($ in millions)	2014		2013		% Change
Service charges on deposits	$	133		131		2
Mortgage banking net revenue		109		220		(50	)
Corporate banking revenue		104		99		6
Investment advisory revenue		102		100		2
Card and processing revenue		68		65		5
Other noninterest income		41		109		(63	)
Securities gains, net		7		17		(60	)
Securities gains, net - non-qualifying hedges on mortgage servicing rights		—		2		(100	)

Total noninterest income	$	564		743		(24	)

Service charges on deposits

Service charges on deposits increased $2 million for the three months ended March 31, 2014 compared to the same period in the prior year. The increase for the three months ended March 31, 2014 was primarily driven by commercial deposit revenue which increased $3 million due to new customer acquisition and product expansion. The increase in commercial deposit revenue was partially offset by a $1 million decrease in consumer deposit revenue due to a decrease in consumer overdraft fees.

Mortgage banking net revenue

Mortgage banking net revenue decreased $111 million, or 50%, for the three months ended March 31, 2014 compared to the three months ended March 31, 2013.

The components of mortgage banking net revenue are as follows:

TABLE 6: Components of Mortgage Banking Net Revenue


	For the three months ended March 31,
($ in millions)	2014			2013
Origination fees and gains on loan sales	$	41			169
Net mortgage servicing revenue:
Gross mortgage servicing fees		62			61
Mortgage servicing rights amortization		(22	)		(53	)
Net valuation adjustments on mortgage servicing rights and free-standing derivatives entered into to economically hedge MSR		28			43

Net mortgage servicing revenue		68			51

Mortgage banking net revenue	$	109			220

Origination fees and gains on loan sales decreased $128 million for the three months ended March 31, 2014 compared to the three months ended March 31, 2013, primarily due to a 76% decrease in residential mortgage loan originations coupled with a decrease in profit margins on sold residential mortgage loans. Residential mortgage loan originations decreased to $1.7 billion during the first quarter of 2014 compared to $7.4 billion during the first quarter of 2013 as fewer borrowers were able to achieve savings refinancing their mortgages.

Net servicing revenue is comprised of gross servicing fees and related servicing rights amortization as well as valuation adjustments on MSRs and mark-to-market adjustments on both settled and outstanding free-standing derivative financial instruments used to economically hedge the MSR portfolio. Net servicing revenue increased $17 million for the three months ended March 31, 2014 compared to the three months ended March 31, 2013, driven primarily by a $31 million decrease in servicing rights amortization for the three months ended March 31, 2014 compared to the three months ended March 31, 2013 due to an increase in interest rates which caused prepayment speeds to slow. The decrease in mortgage servicing rights amortization was partially offset by a $15 million decrease in net valuation adjustments.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

The net valuation adjustment of $28 million during the first quarter of 2014 included $24 million in gains from derivatives economically hedging the MSRs and a $4 million recovery of temporary impairment on the MSRs. Actual prepayments on the servicing portfolio continued to decline during the three months ended March 31, 2014 compared to the three months ended March 31, 2013. This caused modeled prepayment speeds to slow, which led to the recovery of temporary impairment on servicing rights during the quarter ended March 31, 2014. The net valuation adjustment of $43 million during the first quarter of 2013 included a $49 million recovery of temporary impairment on the MSRs partially offset by $6 million in losses from derivatives economically hedging the MSRs. The Bancorp’s total residential loans serviced as of March 31, 2014 and 2013 were $82.2 billion and $79.5 billion, respectively, with $68.9 billion and $64.8 billion, respectively, of residential mortgage loans serviced for others.

Servicing rights are deemed impaired when a borrower’s loan rate is distinctly higher than prevailing rates. Impairment on servicing rights is reversed when the prevailing rates return to a level commensurate with the borrower’s loan rate. Further detail on the valuation of MSRs can be found in Note 9 of the Notes to Condensed Consolidated Financial Statements. The Bancorp maintains a non-qualifying hedging strategy to manage a portion of the risk associated with changes in the valuation on the MSR portfolio. See Note 10 of the Notes to Condensed Consolidated Financial Statements for more information on the free-standing derivatives used to economically hedge the MSR portfolio.

In addition to the derivative positions used to economically hedge the MSR portfolio, the Bancorp acquires various securities as a component of its non-qualifying hedging strategy. There were no gains or losses recognized during the three months ended March 31, 2014 and the Bancorp recognized net gains of $2 million during the three months ended March 31, 2013.

Corporate banking revenue

Corporate banking revenue increased $5 million for the three months ended March 31, 2014 compared to the three months ended March 31, 2013. The increase compared to the three months ended March 31, 2013 was primarily due to an increase in syndication fees and lease remarketing fees partially offset by a decrease in foreign exchange fees and interest rate derivatives.

Investment advisory revenue

Investment advisory revenue increased $2 million for the three months ended March 31, 2014 compared to the same period in 2013, primarily driven by a $3 million increase in private client service fees partially offset by a $2 million decrease in securities and brokerage fees due to a decrease in equity market values. The Bancorp had approximately $302 billion and $318 billion in total assets under care as of March 31, 2014 and 2013, respectively, and managed $26 billion and $27 billion in assets, respectively, for individuals, corporations and not-for-profit organizations for the same comparative periods.

Card and processing revenue

Card and processing revenue increased $3 million for the three months ended March 31, 2014 compared to the three months ended March 31, 2013. The increase was the result of higher processing fees related to additional ATM locations and an increase in the number of actively used cards. Debit card interchange revenue, included in card and processing revenue, was $30 million and $29 million for the three months ended March 31, 2014 and 2013, respectively.

Other noninterest income

The major components of other noninterest income are as follows:

TABLE 7: Components of Other Noninterest Income


	For the three months ended March 31,
($ in millions)	2014			2013
Operating lease income	$	21			16
Equity method income from interest in Vantiv Holding, LLC		14			17
Cardholder fees		11			11
BOLI income		11			10
Banking center income		8			9
Consumer loan and lease fees		6			6
Insurance income		3			8
Gain (loss) on swap associated with the sale of Visa, Inc. class B shares		1			(7	)
Gain on loan sales		—			2
Loss on OREO		(10	)		(10	)
Valuation adjustments on stock warrant associated with Vantiv Holding, LLC		(36	)		34
Other, net		12			13

Total other noninterest income	$	41			109

Other noninterest income decreased $68 million, or 63%, in the first quarter of 2014 compared to the first quarter of 2013 primarily due to valuation adjustments on the stock warrant associated with Vantiv Holding, LLC. The fair value of the stock warrant is calculated using the Black-Scholes valuation model, which utilizes several key inputs (Vantiv Inc. stock price, strike price per the warrant and several unobservable inputs). The negative valuation adjustment of $36 million for the three months ended March 31, 2014 was primarily due to a decline of seven percent in Vantiv Inc.’s share price from December 31, 2013 to March 31, 2014. The positive valuation adjustment of $34 million for the three months ended March 31, 2013 was primarily due to an increase of 16% in Vantiv Inc.’s share price from December 31, 2012 to March 31, 2013. For additional information on the valuation of the warrant, see Note 19 of the Notes to Condensed Consolidated Financial Statements.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Noninterest Expense

Total noninterest expense decreased $28 million, or three percent, for the three months ended March 31, 2014 compared to the three months ended March 31, 2013.

The major components of noninterest expense are as follows:

TABLE 8: Noninterest Expense


	For the three months ended March 31,
($ in millions)	2014			2013			% Change
Salaries, wages and incentives	$	359			399			(10	)
Employee benefits		101			114			(11	)
Net occupancy expense		80			79			1
Technology and communications		53			49			8
Card and processing expense		31			31			—
Equipment expense		30			28			6
Other noninterest expense		296			278			6

Total noninterest expense	$	950			978			(3	)

Efficiency ratio		64.9	%		59.8	%

Total personnel costs (salaries, wages and incentives plus employee benefits) decreased $53 million for the three months ended March 31, 2014 compared to the three months ended March 31, 2013, primarily due to a decrease in incentive compensation driven by the mortgage business which had lower production levels and a decrease in base compensation and employee benefits as a result of a decline in the number of full time equivalent employees. Full time equivalent employees totaled 19,080 at March 31, 2014 compared to 20,744 at March 31, 2013.

TABLE 9: Components of Other Noninterest Expense


	For the three months ended March 31,
($ in millions)	2014			2013
Losses and adjustments	$	65			38
Affordable housing investments impairment		32			20
Loan and lease		29			40
FDIC insurance and other taxes		28			34
Marketing		22			26
Professional service fees		18			14
Operating lease		17			12
Travel		12			13
Postal and courier		12			13
Data processing		9			11
Recruitment and education		7			6
OREO expense		5			4
Insurance		4			5
Intangible asset amortization		1			2
Benefit from the reserve for unfunded commitments and letters of credit		(9	)		(11	)
Other, net		44			51

Total other noninterest expense	$	296			278

Total other noninterest expense increased $18 million, or six percent, for the three months ended March 31, 2014 compared to the same period in 2013. Losses and adjustments increased $27 million for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to an increase in litigation expense partially offset by a decrease in representation and warranty expense. Litigation expense increased $49 million during the three months ended March 31, 2014 compared to the same period in the prior year due to increased litigation and regulatory activity. The provision for representation and warranty claims decreased $15 million for the three months ended March 31, 2014 compared to the same period in 2013 due to improving underlying repurchase metrics and the settlement in the fourth quarter of 2013 with FHLMC. Impairment on affordable housing investments increased $12 million for the three months ended March 31, 2014 compared to the same period in 2013, as the prior period included a $9 million benefit from the sale of affordable housing investments. These impacts were partially offset by a decrease in loan and lease expense and FDIC insurance and other taxes. Loan and lease expenses decreased $11 million for the three months ended March 31, 2014 compared to the same period in 2013 primarily as a result of decreases in loan closing fees and appraisal fees due to a decline in mortgage originations. FDIC insurance and other taxes decreased $6 million for the three months ended March 31, 2014 compared to the same period in 2013 due to the improved credit quality of loans which is a component of the FDIC assessment rate calculation.

The Bancorp continues to focus on efficiency initiatives as part of its core emphasis on operating leverage and expense control. The efficiency ratio (noninterest expense divided by the sum of net interest income (FTE) and noninterest income) was 64.9% for the three months ended March 31, 2014 compared to 59.8% for the three months ended March 31, 2013.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Applicable Income Taxes

The Bancorp’s income before income taxes, applicable income tax expense and effective tax rate are as follows:

TABLE 10: Applicable Income Taxes


	For the three months ended March 31,
($ in millions)	2014			2013
Income before income taxes	$	438			591
Applicable income tax expense		119			179
Effective tax rate		27.3	%		30.4

Applicable income tax expense for all periods includes the benefit from tax-exempt income, tax-advantaged investments, and tax credits, partially offset by the effect of certain nondeductible expenses. The tax credits are associated with the Low-Income Housing Tax Credit program established under Section 42 of the IRC, the New Markets Tax Credit program established under Section 45D of the IRC, the Rehabilitation Investment Tax Credit program established under Section 47 of the IRC, and the Qualified Zone Academy Bond program established under Section 1397E of the IRC.

As required under U.S. GAAP, the Bancorp established a deferred tax asset for stock-based awards granted to its employees and directors. When the actual tax deduction for these stock-based awards is less than the expense previously recognized for financial reporting or when the awards expire unexercised, the Bancorp is required to write-off the deferred tax asset previously established for these stock-based awards. The stock-based awards granted in March of 2003 had an exercise period that expired in March of 2013. As these stock-based awards were not exercised on or before their expiration date, the Bancorp was required to write-off the $12 million deferred tax asset established for these awards during the first quarter of 2013. Based on the Bancorp’s stock price at March 31, 2014, the Bancorp does not believe it will need to recognize a non-cash charge to income tax expense over the next twelve months related to stock-based awards. However, the Bancorp cannot predict its stock price or whether its employees will exercise other stock-based awards with lower exercise prices in the future. Therefore, it is possible the Bancorp may need to recognize a non-cash charge to income tax expense in the future.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

BALANCE SHEET ANALYSIS

Loans and Leases

The Bancorp classifies loans and leases based upon their primary purpose. Table 11 summarizes end of period loans and leases, including loans held for sale and Table 12 summarizes average total loans and leases, including loans held for sale.

TABLE 11: Components of Total Loans and Leases (includes held for sale)


	March 31, 2014				December 31, 2013
($ in millions)	Balance		% of Total		Balance		% of Total
Commercial:
Commercial and industrial loans	$	40,692		46		39,347		45
Commercial mortgage loans		7,959		9		8,069		9
Commercial construction loans		1,220		1		1,041		1
Commercial leases		3,577		4		3,626		4

Subtotal – commercial		53,448		60		52,083		59

Consumer:
Residential mortgage loans		13,275		15		13,570		15
Home equity		9,125		10		9,246		10
Automobile loans		12,088		13		11,984		13
Credit card		2,177		2		2,294		3
Other consumer loans and leases		372		—		381		—

Subtotal – consumer		37,037		40		37,475		41

Total loans and leases	$	90,485		100		89,558		100

Total portfolio loans and leases (excludes loans held for sale)	$	89,705				88,614

Loans and leases, including loans held for sale, increased $927 million from December 31, 2013. The increase from December 31, 2013 was the result of a $1.4 billion, or three percent, increase in commercial loans and leases partially offset by a $438 million, or one percent, decrease in consumer loans and leases.

Commercial loans and leases increased from December 31, 2013 primarily due to an increase in commercial and industrial loans and commercial construction loans partially offset by a decrease in commercial mortgage loans. Commercial and industrial loans increased $1.3 billion, or three percent, from December 31, 2013 and commercial construction loans increased $179 million, or 17%, from December 31, 2013 as a result of an increase in new loan origination activity from an increase in demand due to a strengthening economy and targeted marketing efforts. Commercial mortgage loans decreased $110 million, or one percent, from December 31, 2013 due to continued runoff as the level of new originations was less than the repayments of the existing portfolio.

Consumer loans and leases decreased from December 31, 2013 primarily due to a decrease in residential mortgage loans, home equity and credit card loans partially offset by an increase in automobile loans. Residential mortgage loans decreased $295 million, or two percent, primarily due to a decline in loans held for sale of $241 million from reduced origination volumes. Home equity decreased $121 million, or one percent, from December 31, 2013 as payoffs exceeded new loan production. Credit card loans decreased $117 million, or five percent, from December 31, 2013 due to seasonal trends from the paydown of year-end balances which were higher due to holiday spending. Additionally, automobile loans increased $104 million, or one percent, from December 31, 2013 due to a seasonal increase in originations.

TABLE 12: Components of Average Total Loans and Leases (includes held for sale)


	March 31, 2014				March 31, 2013
For the three months ended ($ in millions)	Balance		% of Total		Balance		% of Total
Commercial:
Commercial and industrial loans	$	40,409		46		36,423		41
Commercial mortgage loans		7,983		9		8,978		10
Commercial construction loans		1,118		1		700		1
Commercial leases		3,607		4		3,557		4

Subtotal – commercial		53,117		60		49,658		56

Consumer:
Residential mortgage loans		13,304		15		14,866		17
Home equity		9,194		10		9,872		11
Automobile loans		12,023		13		12,096		14
Credit card		2,230		2		2,069		2
Other consumer loans and leases		370		—		319		—

Subtotal – consumer		37,121		40		39,222		44

Total average loans and leases	$	90,238		100		88,880		100

Total average portfolio loans and leases (excludes loans held for sale)	$	89,530				85,903

Average loans and leases, including loans held for sale, increased $1.4 billion, or two percent, from March 31, 2013. The increase from March 31, 2013 was the result of a $3.5 billion, or seven percent, increase in average commercial loans and leases partially offset by a $2.1 billion, or five percent, decrease in average consumer loans and leases.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Average commercial loans and leases increased from March 31, 2013 primarily due to an increase in average commercial and industrial loans and average commercial construction loans partially offset by a decrease in average commercial mortgage loans. Average commercial and industrial loans increased $4.0 billion, or 11%, from March 31, 2013 and average commercial construction loans increased $418 million, or 60%, from March 31, 2013 due to an increase in new loan origination activity from an increase in demand due to a strengthening economy and targeted marketing efforts. Average commercial mortgage loans decreased $995 million, or 11%, from March 31, 2013 due to continued runoff as the level of new originations was less than the repayments on the current portfolio.

Average consumer loans and leases decreased from March 31, 2013 due to a decrease in average residential mortgage loans, average home equity, and average automobile loans, partially offset by an increase in average credit card loans. Average residential mortgage loans decreased $1.6 billion, or 11%, from March 31, 2013 due to a decline in average loans held for sale of $2.1 billion from reduced origination volumes driven by higher mortgage rates partially offset by the continued retention of certain shorter term residential mortgage loans originated through the Bancorp’s retail branches. Average home equity decreased $678 million, or seven percent, from March 31, 2013 as payoffs exceeded new loan production. Average automobile loans decreased $73 million, or one percent, from March 31, 2013 due to a decline in average loans held for sale of $135 million primarily driven by the impact of the securitization and sale of automobile loans in the first quarter of 2013, partially offset by an increase in average portfolio loans of $62 million driven by loan originations exceeding runoff in the following periods. Average credit card loans increased $161 million, or eight percent, from March 31, 2013 due to an increase in open and active accounts driven by the volume of new customer accounts.

Investment Securities

The Bancorp uses investment securities as a means of managing interest rate risk, providing liquidity support and providing collateral for pledging purposes. Total investment securities were $21.3 billion and $19.1 billion at March 31, 2014 and December 31, 2013, respectively.

Securities are classified as trading when bought and held principally for the purpose of selling them in the near term. Securities are classified as available-for-sale when, in management’s judgment, they may be sold in response to, or in anticipation of, changes in market conditions. Securities that management has the intent and ability to hold to maturity are classified as held-to-maturity and reported at amortized cost.

At March 31, 2014, the Bancorp’s investment portfolio consisted primarily of AAA-rated available-for-sale securities. The Bancorp did not hold asset-backed securities backed by subprime mortgage loans in its investment portfolio. Additionally, securities classified as below investment grade were immaterial as of March 31, 2014 and December 31, 2013. The Bancorp’s management has evaluated the securities in an unrealized loss position in the available-for-sale and held-to-maturity portfolios for OTTI. The Bancorp recognized $17 million of OTTI on its available-for sale and other debt securities during the three months ended March 31, 2014 and did not recognize any OTTI on its available-for sale and other debt securities during the three months ended March 31, 2013. The Bancorp did not recognize OTTI on any of its available-for-sale equity securities or its held-to-maturity debt securities during the three months ended March 31, 2014 and 2013.

TABLE 13: Components of Investment Securities


($ in millions)	March 31, 2014		December 31, 2013
Available-for-sale and other: (amortized cost basis)
U.S. Treasury and government agencies	$	26		26
U.S. Government sponsored agencies		1,522		1,523
Obligations of states and political subdivisions		186		187
Agency mortgage-backed securities^(a)		14,029		12,294
Other bonds, notes and debentures^(b)		3,917		3,514
Other securities^(c)		713		865

Total available-for-sale and other securities	$	20,393		18,409

Held-to-maturity: (amortized cost basis)
Obligations of states and political subdivisions	$	194		207
Other bonds, notes and debentures		1		1

Total held-to-maturity	$	195		208

Trading: (fair value)
U.S. Treasury and government agencies	$	—		1
U.S. Government sponsored agencies		5		4
Obligations of states and political subdivisions		15		13
Agency mortgage-backed securities		3		3
Other bonds, notes and debentures^(b)		10		7
Other securities^(c)		314		315

Total trading	$	347		343

(a)

Includes interest-only mortgage backed securities of $217 and $262 as of March 31, 2014 and December 31, 2013, respectively, recorded at fair value with fair value changes recorded in securities gains, net and securities gains, net non-qualifying hedges on mortgage servicing rights in the Condensed Consolidated Financial Statements.

(b)

Other bonds, notes, and debentures primarily consist of commercial mortgage-backed securities, certain other asset-backed securities (primarily other consumer loan-backed securities) and corporate bond securities.

(c)

Other securities consist of FHLB and FRB restricted stock holdings that are carried at par, FHLMC and FNMA preferred stock holdings and certain mutual fund holdings and equity security holdings.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Available-for-sale and other securities on an amortized cost basis increased $2.0 billion, or 11%, from December 31, 2013 primarily due to increases in agency mortgage-backed securities and other bonds, notes, and debentures. Agency mortgage-backed securities increased $1.7 billion, or 14%, from December 31, 2013 due to $3.4 billion in purchases of agency mortgage-backed securities partially offset by $1.3 billion in sales and $386 million in paydowns on the portfolio during the three months ended March 31, 2014. Other bonds, notes, and debentures increased $403 million, or 11%, due to the purchase of $1.3 billion of asset-backed securities partially offset by the sale of $916 million of asset-backed securities, collateralized loan obligations, collateralized mortgage-backed securities and corporate bonds and $10 million of paydowns during the three months ended March 31, 2014.

Available-for-sale securities on an amortized cost basis were 18% and 16% of total interest-earning assets at March 31, 2014 and December 31, 2013, respectively. The estimated weighted-average life of the debt securities in the available-for-sale portfolio was 6.7 years at both March 31, 2014 and December 31, 2013. In addition, at March 31, 2014, the available-for-sale securities portfolio had a weighted-average yield of 3.49%, compared to 3.39% at December 31, 2013.

Information presented in Table 14 is on a weighted-average life basis, anticipating future prepayments. Yield information is presented on an FTE basis and is computed using historical cost balances. Maturity and yield calculations for the total available-for-sale portfolio exclude equity securities that have no stated yield or maturity. Total net unrealized gains on the available-for-sale securities portfolio were $356 million at March 31, 2014 compared to $188 million at December 31, 2013. The increase from December 31, 2013 was primarily due to a decrease in interest rates during the first quarter of 2014. The fair value of investment securities is impacted by interest rates, credit spreads, market volatility and liquidity conditions. The fair value of investment securities generally increases when interest rates decrease or when credit spreads contract.

TABLE 14: Characteristics of Available-for-Sale and Other Securities


As of March 31, 2014 ($ in millions)	Amortized Cost		Fair Value		Weighted-Average Life (in years)		Weighted-Average Yield
U.S. Treasury and government agencies:
Average life 1 – 5 years	$	25		25		2.4		0.81	%
Average life 5 – 10 years		1		1		5.4		1.50

Total		26		26		2.5		0.81
U.S. Government sponsored agencies:
Average life 1 – 5 years		1,522		1,635		2.8		3.64

Total		1,522		1,635		2.8		3.64
Obligations of states and political subdivisions:^(a)
Average life 1 – 5 years		151		156		3.0		2.77
Average life 5 – 10 years		24		26		8.3		3.87
Average life greater than 10 years		11		12		10.7		3.27

Total		186		194		4.1		2.94
Agency mortgage-backed securities:
Average life of one year or less		90		93		0.6		5.95
Average life 1 – 5 years		1,627		1,686		4.0		5.57
Average life 5 – 10 years		11,389		11,465		7.0		3.37
Average life greater than 10 years		923		941		12.9		3.94

Total		14,029		14,185		7.0		3.68
Other bonds, notes and debentures:
Average life of one year or less		176		181		0.2		1.64
Average life 1 – 5 years		1,163		1,197		3.1		2.70
Average life 5 – 10 years		2,067		2,085		8.5		3.13
Average life greater than 10 years		511		528		14.9		1.97

Total		3,917		3,991		7.4		2.78
Other securities		713		718

Total available-for-sale and other securities	$	20,393		20,749		6.7		3.49	%

(a)

Taxable-equivalent yield adjustments included in the above table are 0.00%, 2.06%, 1.75% and 0.37% for securities with an average life of 1-5 years, 5-10 years, greater than 10 years and in total, respectively.

Deposits

The Bancorp’s deposit balances represent an important source of funding and revenue growth opportunity. The Bancorp continues to focus on core deposit growth in its retail and commercial franchises by improving customer satisfaction, building full relationships and offering competitive rates. Core deposits represented 71% of the Bancorp’s asset funding base at both March 31, 2014 and December 31, 2013.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

TABLE 15: Deposits


	March 31, 2014				December 31, 2013
			% of				% of
($ in millions)	Balance		Total		Balance		Total
Demand	$	31,234		32		32,634		32
Interest checking		25,472		26		25,875		26
Savings		16,867		17		17,045		17
Money market		13,208		14		11,644		12
Foreign office		1,922		2		1,976		2

Transaction deposits		88,703		91		89,174		89
Other time		3,660		4		3,530		4

Core deposits		92,363		95		92,704		93
Certificates-$100,000 and over		4,511		5		6,571		7

Total deposits	$	96,874		100		99,275		100

Core deposits decreased $341 million from December 31, 2013 driven by a decrease of $471 million, or one percent, in transaction deposits partially offset by an increase of $130 million, or four percent, in other time deposits. Total transaction deposits decreased from December 31, 2013 due to a decrease in demand deposits, interest checking deposits and savings deposits partially offset by an increase in money market deposits. Demand deposits decreased $1.4 billion, or four percent, from December 31, 2013 primarily due to uninvested trust funds held in demand deposit accounts at December 31, 2013 that were invested during the first quarter of 2014. The remaining decrease was due to seasonality as commercial customers opted to hold excess cash at December 31, 2013 and reinvest cash during the first quarter of 2014, partially offset by an increase in consumer demand deposits due to seasonality. Interest checking deposits decreased $403 million, or two percent, primarily due to commercial customer seasonality. Money market deposits increased $1.6 billion, or 13%, from December 31, 2013 driven by seasonality and a promotional product offering which drove balance migration from savings deposits which decreased $178 million, or one percent, from December 31, 2013. The increase in other time deposits from December 31, 2013 was primarily the result of the acquisition of new deposits due to competitive interest rates.

The Bancorp uses certificates $100,000 and over as a method to fund earning assets. At March 31, 2014, certificates $100,000 and over decreased $2.1 billion compared to December 31, 2013 primarily due to the maturity of retail and institutional certificates of deposits during the first quarter of 2014.

The following table presents average deposits for the three months ending:

TABLE 16: Average Deposits


	March 31, 2014				March 31, 2013
			% of				% of
($ in millions)	Balance		Total		Balance		Total
Demand	$	30,626		31		28,565		32
Interest checking		25,911		27		23,763		27
Savings		16,903		17		19,576		22
Money market		12,439		13		7,932		9
Foreign office		2,017		2		1,102		1

Transaction deposits		87,896		90		80,938		91
Other time		3,616		4		3,982		4

Core deposits		91,512		94		84,920		95
Certificates-$100,000 and over		5,576		6		4,017		5
Other		—		—		40		—

Total average deposits	$	97,088		100		88,977		100

On an average basis, core deposits increased $6.6 billion, or eight percent, from March 31, 2013 due to an increase of $7.0 billion, or nine percent, in average transaction deposits partially offset by a decrease of $366 million, or nine percent, in average other time deposits. The increase in average transaction deposits was driven by an increase in average money market deposits, average interest checking deposits, average demand deposits and average foreign office deposits partially offset by a decrease in average savings deposits. Average money market deposits increased $4.5 billion, or 57%, from March 31, 2013 primarily due to a promotional product offering which drove balance migration from savings deposits which decreased $2.7 billion, or 14%, from March 31, 2013. The remaining increase in average money market deposits is due to new commercial customer accounts. Average interest checking deposits increased $2.1 billion, or nine percent, from March 31, 2013 primarily due to an increase in average balance per account and new commercial and consumer customer growth. Average demand deposits increased $2.1 billion, or seven percent, from March 31, 2013 due to an increase in average balance per account and new deposit growth. Average foreign office deposits increased $915 million, or 83%, from March 31, 2013 due primarily to new customer accounts and an increase in average balance per account. Average other time deposits decreased $366 million, or nine percent, from March 31, 2013 primarily as a result of continued run-off of certificates of deposits due to the low interest rate environment, as customers have opted to maintain balances in more liquid transaction accounts. Average certificates $100,000 and over increased $1.6 billion, or 39%, from March 31, 2013 due to the diversification of funding sources through the issuance of retail and institutional certificates of deposits during the second half of 2013.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Contractual maturities

As of March 31, 2014 the contractual maturities of certificates $100,000 and over are summarized in the following table:

TABLE 17: Contractual Maturities of Certificates—$100,000 and over


($ in millions)
Three months or less	$	1,738
After three months through six months		1,046
After six months through 12 months		656
After 12 months		1,071

Total	$	4,511

As of March 31, 2014 the contractual maturities of other time deposits and certificates $100,000 and over are summarized in the following table:

TABLE 18: Contractual Maturities of Other Time Deposits and Certificates $100,000 and over


($ in millions)
Next 12 months	$	5,319
13-24 months		1,168
25-36 months		736
37-48 months		538
49-60 months		281
After 60 months		129

Total	$	8,171

Borrowings

Total borrowings increased $2.9 billion, or 26%, from December 31, 2013. Table 19 summarizes the end of period components of total borrowings. As of March 31, 2014, total borrowings as a percentage of interest-bearing liabilities were 18% compared to 14% at December 31, 2013.

TABLE 19: Borrowings


($ in millions)	March 31, 2014		December 31, 2013
Federal funds purchased	$	268		284
Other short-term borrowings		2,717		1,380
Long-term debt		11,233		9,633

Total borrowings	$	14,218		11,297

Federal funds purchased decreased $16 million, or six percent, from December 31, 2013 driven by a decrease in excess balances in reserve accounts held at Federal Reserve Banks that the Bancorp purchased from other member banks on an overnight basis. Other short-term borrowings increased $1.3 billion, or 97%, from December 31, 2013 driven by an increase of $1.5 billion in short-term FHLB borrowings. The level of these borrowings can fluctuate significantly from period to period depending on funding needs and which sources are used to satisfy those needs. Long-term debt increased by $1.6 billion, or 17%, from December 31, 2013 primarily driven by the issuance of $500 million of unsecured senior bank notes and the issuance of asset-backed securities by a consolidated VIE of $1.3 billion related to an automobile loan securitization in the first quarter of 2014. For additional information regarding long-term debt and the automobile securitization, see Note 8 and Note 12 of the Notes to Condensed Consolidated Financial Statements.

The following table presents average borrowings for the three months ending:

TABLE 20: Average Borrowings


($ in millions)	March 31, 2014		March 31, 2013
Federal funds purchased	$	547		691
Other short-term borrowings		1,808		5,429
Long-term debt		10,313		7,506

Total average borrowings	$	12,668		13,626

Average total borrowings decreased $958 million, or seven percent, compared to March 31, 2013, primarily due to decreases in average other short-term borrowings and average federal funds purchased partially offset by an increase in average long-term debt. The level of average other short-term borrowings and average federal funds purchased can fluctuate significantly from period to period depending on funding needs and which sources are used to satisfy those needs. The increase in average long-term debt was driven by the aforementioned issuances of long-term debt as discussed above as well as the issuance of $3.1 billion of unsecured senior bank notes, the issuance of $750 million of subordinated notes and the issuance of asset-backed securities by a consolidated VIE of $1.3 billion related to an automobile loan securitization during 2013. The impact of these issuances was partially offset by the maturity of $1.3 billion of senior notes and the redemption of $750 million of outstanding TruPS during 2013. Information on the average rates paid on borrowings is discussed in the net interest income section of the MD&A. In addition, refer to the Liquidity Risk Management section for a discussion on the role of borrowings in the Bancorp’s liquidity management.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

BUSINESS SEGMENT REVIEW

The Bancorp reports on four business segments: Commercial Banking, Branch Banking, Consumer Lending and Investment Advisors. Additional detailed financial information on each business segment is included in Note 20 of the Notes to Condensed Consolidated Financial Statements. Results of the Bancorp’s business segments are presented based on its management structure and management accounting practices. The structure and accounting practices are specific to the Bancorp; therefore, the financial results of the Bancorp’s business segments are not necessarily comparable with similar information for other financial institutions. The Bancorp refines its methodologies from time to time as management’s accounting practices or businesses change.

The Bancorp manages interest rate risk centrally at the corporate level and employs an FTP methodology at the business segment level. This methodology insulates the business segments from interest rate volatility, enabling them to focus on serving customers through loan and deposit products. The FTP system assigns charge rates and credit rates to classes of assets and liabilities, respectively, based on expected duration and the U.S. swap curve. Matching duration allocates interest income and interest expense to each segment so its resulting net interest income is insulated from interest rate risk. In a rising rate environment, the Bancorp benefits from the widening spread between deposit costs and wholesale funding costs. However, the Bancorp’s FTP system credits this benefit to deposit-providing businesses, such as Branch Banking and Investment Advisors, on a duration-adjusted basis. The net impact of the FTP methodology is captured in General Corporate and Other.

The Bancorp adjusts the FTP charge and credit rates as dictated by changes in interest rates for various interest-earning assets and interest-bearing liabilities and by the review of the estimated durations for the indeterminate-lived deposits. The credit rate provided for demand deposit accounts is reviewed annually based upon the account type, its estimated duration and the corresponding fed funds, U.S. swap curve or swap rate. The credit rates for several deposit products were reset January 1, 2014 to reflect the current market rates and updated duration assumptions. These rates were generally higher than those in place during 2013, thus net interest income for deposit providing businesses was positively impacted for the three months ended March 31, 2014.

The business segments are charged provision expense based on the actual net charge-offs experienced on the loans and leases owned by each segment. Provision expense attributable to loan and lease growth and changes in ALLL factors are captured in General Corporate and Other. The financial results of the business segments include allocations for shared services and headquarters expenses. Even with these allocations, the financial results are not necessarily indicative of the business segments’ financial condition and results of operations as if they existed as independent entities. Additionally, the business segments form synergies by taking advantage of cross-sell opportunities and when funding operations by accessing the capital markets as a collective unit.

The results of operations and financial position for the three months ended March 31, 2013 were restated to reflect the transfer of certain customers and Bancorp employees from Branch Banking to Commercial Banking, effective January 1, 2014. In addition, the prior year balances were restated to reflect a change in internal allocation methodology.

Net income (loss) by business segment is summarized in the following table:

TABLE 21: Business Segment Net Income Available to Common Shareholders


	For the three months
	ended March 31,
($ in millions)	2014			2013
Income Statement Data
Commercial Banking	$	164			198
Branch Banking		80			34
Consumer Lending		(6	)		70
Investment Advisors		17			18
General Corporate & Other		64			92

Net income		319			412
Less: Net income attributable to noncontrolling interests		1			(10	)

Net income attributable to Bancorp		318			422
Dividends on preferred stock		9			9

Net income available to common shareholders	$	309			413

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Commercial Banking

Commercial Banking offers credit intermediation, cash management and financial services to large and middle-market businesses and government and professional customers. In addition to the traditional lending and depository offerings, Commercial Banking products and services include global cash management, foreign exchange and international trade finance, derivatives and capital markets services, asset-based lending, real estate finance, public finance, commercial leasing and syndicated finance.

The following table contains selected financial data for the Commercial Banking segment:

TABLE 22: Commercial Banking


	For the three months
	ended March 31,
($ in millions)	2014		2013
Income Statement Data
Net interest income (FTE)^(a)	$	409		389
Provision for loan and lease losses		97		44
Noninterest income:
Corporate banking revenue		104		97
Service charges on deposits		69		65
Other noninterest income		37		32
Noninterest expense:
Salaries, incentives and benefits		83		90
Other noninterest expense		251		210

Income before taxes		188		239
Applicable income tax expense^(a)(b)		24		41

Net income	$	164		198

Average Balance Sheet Data
Commercial loans, including held for sale	$	50,317		46,786
Demand deposits		18,158		16,376
Interest checking		8,353		7,183
Savings and money market		5,900		4,506
Certificates-$100,000 and over		1,323		1,273
Foreign office deposits and other deposits		2,014		1,090

(a)

Includes FTE adjustments of $5 for both the three months ended March 31, 2014 and 2013.

(b)

Applicable income tax expense for all periods includes the tax benefit from tax-exempt income and business tax credits, partially offset by the effect of certain nondeductible expenses. Refer to the Applicable Income Taxes section of MD&A for additional information.

Net income was $164 million for the three months ended March 31, 2014 compared to net income of $198 million for the three months ended March 31, 2013. The decrease in net income was driven by increases in the provision for loan and lease losses and noninterest expense partially offset by increases in net interest income and noninterest income.

Net interest income increased $20 million for the three months ended March 31, 2014 compared to the same period of the prior year. The increase was driven primarily by growth in average commercial and industrial portfolio loans, an increase in the FTP credits due to an increase in average demand deposits and a decrease in the FTP charges on loans due to improvement in the credit quality of commercial portfolio loans and leases, partially offset by a decline in yields of 36 bps on average commercial loans for the three months ended March 31, 2014 compared to the same period in 2013.

Provision for loan and lease losses increased $53 million for the three months ended March 31, 2014 compared to the same period of the prior year due to an increase in net charge-offs related to certain impaired commercial loans. Net charge-offs as a percent of average portfolio loans and leases increased to 79 bps for the three months ended March 31, 2014 compared to 38 bps for the same period of the prior year.

Noninterest income increased $16 million in the first quarter of 2014 compared to the first quarter of 2013 due to increases in corporate banking revenue, other noninterest income and service charges on deposits. Corporate banking increased $7 million from the prior year quarter primarily driven by increases in syndication fees and lease remarketing. Other noninterest income increased $5 million from the first quarter of 2013 due primarily to an increase in operating lease income. Service charges on deposits increased $4 million for the three months ended March 31, 2014 compared to the same period in the prior year primarily driven by higher commercial deposit revenue which increased due to the acquisition of new customers.

Noninterest expense increased $34 million for the three months ended March 31, 2014 compared to the same period of the prior year. The increase for the three months ended March 31, 2014 was driven by an increase in other noninterest expense partially offset by a decrease in salaries, incentives and benefits. The increase in other noninterest expense was driven primarily by increases in corporate overhead allocations, impairment on affordable housing investments and operating lease expense. Salaries, incentive and benefits decreased compared to the first quarter of 2013 due primarily to a decrease in incentive compensation resulting from a change to the structure of the incentive compensation plans in the first quarter of 2014.

Average commercial loans increased $3.5 billion for the three months ended March 31, 2014 compared to the same period of the prior year primarily due to increases in average commercial and industrial loans and average commercial construction loans partially offset by a decrease in average commercial mortgage loans. Average commercial and industrial portfolio loans and average commercial construction

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

portfolio loans increased $4.0 billion and $408 million, respectively, for the three months ended March 31, 2014 compared to the same period of the prior year due to an increase in new loan origination activity from an increase in demand due to a strengthening economy and targeted marketing efforts. Average commercial mortgage portfolio loans decreased $962 million for the three months ended March 31, 2014 compared to the same period of the prior year due to continued run-off as the level of new originations was below the level of repayments on the current portfolio.

Average core deposits increased $5.3 billion for the three months ended March 31, 2014 compared to the three months ended March 31, 2013. The increase was primarily driven by increases in average demand deposits, average savings and money market deposits, average interest checking balances and foreign deposits, which increased $1.8 billion, $1.4 billion, $1.2 billion and $923 million, respectively, for the three months ended March 31, 2014 compared to the same period of the prior year.

Branch Banking

Branch Banking provides a full range of deposit and loan and lease products to individuals and small businesses through 1,311 full-service Banking Centers. Branch Banking offers depository and loan products, such as checking and savings accounts, home equity loans and lines of credit, credit cards and loans for automobiles and other personal financing needs, as well as products designed to meet the specific needs of small businesses, including cash management services.

The following table contains selected financial data for the Branch Banking segment:

TABLE 23: Branch Banking


	For the three months
	ended March 31,
($ in millions)	2014		2013
Income Statement Data
Net interest income	$	385		323
Provision for loan and lease losses		45		57
Noninterest income:
Service charges on deposits		63		65
Card and processing revenue		51		49
Investment advisory revenue		36		37
Other noninterest income		22		27
Noninterest expense:
Salaries, incentives and benefits		140		145
Net occupancy and equipment expense		61		60
Card and processing expense		29		29
Other noninterest expense		160		156

Income before taxes		122		54
Applicable income tax expense		42		20

Net income	$	80		34

Average Balance Sheet Data
Consumer loans, including held for sale	$	15,102		15,124
Commercial loans, including held for sale		1,700		1,844
Demand deposits		10,996		10,034
Interest checking		9,205		8,967
Savings and money market		22,611		22,165
Other time and certificates-$100,000 and over		4,491		4,971

Net income was $80 million for the three months ended March 31, 2014 compared to net income of $34 million for the three months ended March 31, 2013. The increase was driven by an increase in net interest income and a decline in the provision for loan and lease losses, partially offset by a decrease in noninterest income.

Net interest income increased $62 million for the three months ended March 31, 2014 compared to the same period of the prior year. The primary drivers of the increase are increases in the FTP credit rates for savings and money market deposits and interest checking deposits and a decline in interest expense on core deposits due to favorable shifts from certificates of deposit to lower cost transaction deposits.

Provision for loan and lease losses for the three months ended March 31, 2014 decreased $12 million compared to the first quarter of 2013. Net charge-offs as a percent of average loans and leases decreased to 108 bps for the three months ended March 31, 2014 compared to 136 bps for the same period of the prior year as a result of improved credit trends.

Noninterest income decreased $6 million for the three months ended March 31, 2014 compared to the same period of the prior year. The decrease was primarily driven by a $5 million decrease in other noninterest income compared to the first quarter in 2013 due primarily to a decline in mortgage origination fees and gains on loan sales and lower retail service fees.

Noninterest expense was flat from the three months ended March 31, 2013, primarily driven by a $5 million decrease in salaries, incentives and benefits offset by increases in other noninterest expense and net occupancy and equipment expense, which increased $4 million and $1 million, respectively. The decrease in salaries, incentives and benefits was primarily driven by lower compensation and bonus and incentives.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

The increase in other noninterest expense for the three months ended March 31, 2014 was primarily driven by higher corporate overhead allocations partially offset by decreases in loan and lease expense and marketing expense.

Average consumer loans decreased $22 million for the first quarter of 2014 compared to the same period in the prior year primarily due to a decrease in average home equity loans of $620 million, as payoffs exceeded new loan production, and a decrease in average automobile loans of $48 million. The decrease in average home equity and automobile loans was partially offset by increases in average residential mortgage loans and average credit card loans of $490 million and $156 million, respectively. The increase in average residential mortgage portfolio loans was due to the continued retention of certain shorter term residential mortgage loans. Average credit card loans increased due to higher average balances per account and the acquisition of new customers.

Average core deposits increased by $1.3 billion for the three months ended March 31, 2014 compared to the same period in the prior year as the growth in transaction accounts due to excess customer liquidity and historically low interest rates outpaced the run-off of higher priced other time deposits.

Consumer Lending

Consumer Lending includes the Bancorp’s mortgage, home equity, automobile and other indirect lending activities. Mortgage and home equity lending activities include the origination, retention and servicing of mortgage, automobile and home equity loans or lines of credit, sales and securitizations of those loans, pools of loans or lines of credit, and all associated hedging activities. Indirect lending activities include extending loans to consumers through mortgage brokers and automobile dealers.

The following table contains selected financial data for the Consumer Lending segment:

TABLE 24: Consumer Lending


	For the three months
	ended March 31,
($ in millions)	2014			2013
Income Statement Data
Net interest income	$	64			85
Provision for loan and lease losses		25			29
Noninterest income:
Mortgage banking net revenue		108			216
Other noninterest income		10			13
Noninterest expense:
Salaries, incentives and benefits		34			63
Other noninterest expense		132			114

(Loss) income before taxes		(9	)		108
Applicable income tax (benefit) expense		(3	)		38

Net (loss) income	$	(6	)		70

Average Balance Sheet Data
Residential mortgage loans, including held for sale	$	8,819			11,053
Home equity		510			595
Automobile loans, including held for sale		11,452			11,467
Other consumer loans and leases		26			9

Consumer Lending incurred a net loss of $6 million for the three months ended March 31, 2014 compared to net income of $70 million for the same period in the prior year. The net loss for the first quarter of 2014 was driven by decreases in noninterest income and net interest income partially offset by declines in noninterest expense and the provision for loan and lease losses.

Net interest income decreased $21 million for the three months ended March 31, 2014 compared to the three months ended March 31, 2013. The decrease was primarily driven by decreases in average residential mortgage loans and average home equity loans and lower yields on average residential mortgage loans and average automobile loans partially offset by a decrease in FTP charges on loans.

Provision for loan and lease losses decreased $4 million for the three months ended March 31, 2014 compared to the same period of the prior year, as delinquency metrics and underlying loss trends improved primarily in residential mortgage loans and home equity loans. Net charge-offs as a percent of average loans and leases decreased to 51 bps for the three months ended March 31, 2014 compared to 58 bps for the same period of the prior year.

Noninterest income decreased $111 million for the three months ended March 31, 2014 compared to the same period of the prior year primarily due to a decrease in mortgage banking net revenue of $108 million. The decrease was driven by a decrease in mortgage origination fees and gains on loan sales of $125 million partially offset by a $17 million increase in residential mortgage servicing revenue. Refer to the Noninterest Income section of MD&A for additional information on the fluctuations in mortgage banking net revenue.

Noninterest expense decreased $11 million for the three months ended March 31, 2014 compared to the same period of the prior year driven primarily by a decline of $29 million in salaries, incentives and benefits which decreased primarily as a result of lower mortgage loan originations. The decrease in salaries, incentive and benefits was partially offset by an increase of $18 million in other noninterest expense. Other noninterest expense increased due primarily to higher litigation expense partially offset by decreases in representation and warranty expense, loan and lease expense and corporate overhead allocations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Average consumer loans and leases decreased $2.3 billion for the three months ended March 31, 2014 compared to the same period of the prior year. Average residential mortgage loans decreased $2.2 billion compared to the three months ended March 31, 2013 due primarily to a decline of $2.1 billion in average residential mortgage loans held for sale from reduced origination volumes driven by higher mortgage rates partially offset by the continued retention of certain shorter term residential mortgage loans.

Investment Advisors

Investment Advisors provides a full range of investment alternatives for individuals, companies and not-for-profit organizations. Investment Advisors is made up of four main businesses: FTS, an indirect wholly-owned subsidiary of the Bancorp; ClearArc Capital, Inc. (formerly Fifth Third Asset Management, Inc.), an indirect wholly-owned subsidiary of the Bancorp; Fifth Third Private Bank; and Fifth Third Institutional Services. FTS offers full service retail brokerage services to individual clients and broker dealer services to the institutional marketplace. ClearArc Capital, Inc. provides asset management services. Fifth Third Private Bank offers holistic strategies to affluent clients in wealth planning, investing, insurance and wealth protection. Fifth Third Institutional Services provides advisory services for institutional clients including states and municipalities.

The following table contains selected financial data for the Investment Advisors segment:

TABLE 25: Investment Advisors


	For the three months
	ended March 31,
($ in millions)	2014		2013
Income Statement Data
Net interest income	$	32		36
Provision for loan and lease losses		—		1
Noninterest income:
Investment advisory revenue		100		98
Other noninterest income		3		10
Noninterest expense:
Salaries, incentives and benefits		43		42
Other noninterest expense		67		73

Income before taxes		25		28
Applicable income tax expense		8		10

Net income	$	17		18

Average Balance Sheet Data
Loans and leases	$	2,209		1,925
Core deposits		9,557		8,746

Net income was $17 million for the three months ended March 31, 2014 compared to net income of $18 million for the same period in the prior year. The decrease in net income included decreases in noninterest income and net interest income partially offset by decreases in noninterest expense and the provision for loan and lease losses. Net interest income decreased $4 million due to a decrease in FTP credits on interest checking deposits. Provision for loan and leases losses decreased $1 million for the three months ended March 31, 2014 compared with the same period in the prior year as a result of improved credit trends. Net charge-offs as a percent of average loans and leases decreased to 7 bps for the three months ended March 31, 2014 compared to 14 bps for the same period of the prior year.

Noninterest income decreased $5 million for the three months ended March 31, 2014, primarily driven by a $7 million decrease in other noninterest income partially offset by a $2 million increase in investment advisory revenue. The prior year period included a $7 million gain on the sale of certain advisory contracts which were sold in the first quarter of 2013. The increase in investment advisory revenue was due primarily to an increase in private client services revenue.

Noninterest expense decreased $5 million for the three months ended March 31, 2014 compared to the same period of the prior year, primarily driven by a decrease in other noninterest expense of $6 million due primarily to a decrease in corporate overhead allocations, partially offset by an increase in salaries, incentives and benefits of $1 million for the three months ended March 31, 2014.

Average loans and leases increased $284 million for the three months ended March 31, 2014 compared to the same period in 2013 primarily due to increases in residential mortgage, commercial mortgage, other consumer, and home equity loans. Average core deposits increased $811 million for the three months ended March 31, 2014 compared to the same period of the prior year, primarily due to growth in interest checking as customers have opted to maintain excess funds in liquid transaction accounts as a result of interest rates remaining near historic lows.

General Corporate and Other

General Corporate and Other includes the unallocated portion of the investment securities portfolio, securities gains and losses, certain non-core deposit funding, unassigned equity, provision expense in excess of net charge-offs or a benefit from the reduction of the ALLL, representation and warranty expense in excess of actual losses or a benefit from the reduction of representation and warranty reserves, the payment of preferred stock dividends and certain support activities and other items not attributed to the business segments.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Results for the three months ended March 31, 2014 and 2013 were impacted by a benefit of $98 million and $69 million, respectively, due to reductions in the ALLL. Net interest income for the three months ended March 31, 2014 was $8 million compared to $60 million in the same period in 2013 primarily due to a decrease in the benefit related to the FTP charges on loans, partially offset by an increase in interest income on taxable securities and decreases in interest expense on long-term debt and other short-term borrowings. Noninterest income for the first quarter of 2014 included a $36 million negative valuation adjustment on the Vantiv warrant and a $1 million positive valuation adjustment related to the valuation of the Visa total return swap compared with a $34 million positive valuation adjustment on the Vantiv warrant and a $7 million negative valuation adjustment on the Visa total return swap for the first quarter of 2013.

Noninterest expense for the three months ended March 31, 2014 was a benefit of $15 million compared to an expense of $32 million for the three months ended March 31, 2013 primarily due to an increase in the benefit from other noninterest expense driven by increased corporate overhead allocations from Generate Corporate and Other to the other business segments.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

RISK MANAGEMENT – OVERVIEW

Managing risk is an essential component of successfully operating a financial services company. The Bancorp’s risk management approach includes processes for identifying, assessing, managing, monitoring and reporting risks. The ERM division and the Bancorp Credit division, led by the Bancorp’s Chief Risk and Credit Officer, ensure the consistency and adequacy of the Bancorp’s risk management approach within the structure of the Bancorp’s affiliate operating model. In addition, the Internal Audit division provides an independent assessment of the Bancorp’s internal control structure and related systems and processes.

The assumption of risk requires robust and active risk management practices that comprise an integrated and comprehensive set of activities, measures and strategies that apply to the entire organization. The Bancorp has established a Risk Appetite Framework, approved by the Board, that provides the foundations of corporate risk capacity, risk appetite and risk tolerances. The Bancorp’s risk capacity is represented by its available financial resources. Risk capacity sets an absolute limit on risk-assumption in the Bancorp’s annual and strategic plans. The Bancorp understands that not all financial resources may persist as viable loss buffers over time. Further, consideration must be given to planned or foreseeable events that would reduce risk capacity. Those factors take the form of capacity adjustments to arrive at an Operating Risk Capacity which represents the operating risk level the Bancorp can assume while maintaining its solvency standard. The Bancorp’s policy currently discounts its Operating Risk Capacity by a minimum of five percent to provide a buffer; as a result, the Bancorp’s risk appetite is limited by policy to, at most, 95% of its Operating Risk Capacity.

Economic capital is the amount of unencumbered financial resources required to support the Bancorp’s risks. The Bancorp measures economic capital under the assumption that it expects to maintain debt ratings at strong investment grade levels over time. The Bancorp’s capital policies require that the Operating Risk Capacity less the aforementioned buffer exceed the calculated economic capital required in its business.

Risk appetite is the aggregate amount of risk the Bancorp is willing to accept in pursuit of its strategic and financial objectives. By establishing boundaries around risk taking and business decisions, and by incorporating the needs and goals of its shareholders, regulators, rating agencies and customers, the Bancorp’s risk appetite is aligned with its priorities and goals. Risk tolerance is the maximum amount of risk applicable to each of the eight specific risk categories included in its Enterprise Risk Management Framework. This is expressed primarily in qualitative terms. The Bancorp’s risk appetite and risk tolerances are supported by risk targets and risk limits. Those limits are used to monitor the amount of risk assumed at a granular level. On a quarterly basis, the Risk and Compliance Committee of the Board reviews performance against key risk limits as well as current assessments of each of the eight risk types relative to the established tolerance. Any results over limits or outside of tolerance require the development of an action plan that describes actions to be taken to return the measure to within the limit or tolerance.

The risks faced by the Bancorp include, but are not limited to, credit, market, liquidity, operational, regulatory compliance, legal, reputational and strategic. Each of these risks is managed through the Bancorp’s risk program which includes the following key functions:

•

Enterprise Risk Management Programs is responsible for developing and overseeing the implementation of risk programs and reporting that facilitate a broad integrated view of risk. The department also leads the continual fostering of a strong risk management culture and the framework, policies and committees that support effective risk governance, including the oversight of Sarbanes-Oxley compliance;

•

Commercial Credit Risk Management provides safety and soundness within an independent portfolio management framework that supports the Bancorp’s commercial loan growth strategies and underwriting practices, ensuring portfolio optimization and appropriate risk controls;

•

Risk Strategies and Reporting is responsible for quantitative analysis needed to support the commercial dual rating methodology, ALLL methodology and analytics needed to assess credit risk and develop mitigation strategies related to that risk. The department also provides oversight, reporting and monitoring of commercial underwriting and credit administration processes. The Risk Strategies and Reporting department is also responsible for the economic capital program;

•

Consumer Credit Risk Management provides safety and soundness within an independent management framework that supports the Bancorp’s consumer loan growth strategies, ensuring portfolio optimization, appropriate risk controls and oversight, reporting, and monitoring of underwriting and credit administration processes;

•

Operational Risk Management works with affiliates and lines of business to maintain processes to monitor and manage all aspects of operational risk, including ensuring consistency in application of operational risk programs;

•

Bank Protection oversees and manages fraud prevention and detection and provides investigative and recovery services for the Bancorp;

•

Capital Markets Risk Management is responsible for instituting, monitoring, and reporting appropriate trading limits, monitoring liquidity, interest rate risk and risk tolerances within Treasury, Mortgage, and Capital Markets groups and utilizing a value at risk model for Bancorp market risk exposure;

•

Regulatory Compliance Risk Management ensures that processes are in place to monitor and comply with federal and state banking regulations, including processes related to fiduciary, community reinvestment act and fair lending compliance. The function also has the responsibility for maintenance of an enterprise-wide compliance framework; and

•

The ERM division creates and maintains other functions, committees or processes as are necessary to effectively manage risk throughout the Bancorp.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Risk management oversight and governance is provided by the Risk and Compliance Committee of the Board of Directors and through multiple management committees whose membership includes a broad cross-section of line-of-business, affiliate and support representatives. The Risk and Compliance Committee of the Board of Directors consists of five outside directors and has the responsibility for the oversight of risk management for the Bancorp, as well as for the Bancorp’s overall aggregate risk profile. The Risk and Compliance Committee of the Board of Directors has approved the formation of key management governance committees that are responsible for evaluating risks and controls. The primary committee responsible for the oversight of risk management is the ERMC. Committees accountable to the ERMC, which support the core risk programs, are the Corporate Credit Committee, the Operational Risk Committee, the Management Compliance Committee, the Asset/Liability Committee and the Enterprise Marketing Committee. Other committees accountable to the ERMC oversee the ALLL, capital and community reinvestment act/fair lending functions. There are also new products and initiatives processes applicable to every line of business to ensure an appropriate standard readiness assessment is performed before launching a new product or initiative. Significant risk policies approved by the management governance committees are also reviewed and approved by the Risk and Compliance Committee of the Board of Directors.

Credit Risk Review is an independent function responsible for evaluating the sufficiency of underwriting, documentation and approval processes for consumer and commercial credits, the accuracy of risk grades assigned to commercial credit exposure, nonaccrual status, specific reserves and monitoring for charge-offs. Credit Risk Review reports directly to the Risk and Compliance Committee of the Board of Directors and administratively to the Chief Auditor.

There have been significant changes within the mortgage industry over the past several years; as such the Bancorp conducts regular reviews of the industries we serve based on the changing competitive and regulatory environment. Based on our recent review, the Bancorp exited the Residential Wholesale Loan Broker business during the first quarter of 2014.

CREDIT RISK MANAGEMENT

The objective of the Bancorp’s credit risk management strategy is to quantify and manage credit risk on an aggregate portfolio basis, as well as to limit the risk of loss resulting from the failure of a borrower or counterparty to honor its financial or contractual obligations to the Bancorp. The Bancorp’s credit risk management strategy is based on three core principles: conservatism, diversification and monitoring. The Bancorp believes that effective credit risk management begins with conservative lending practices. These practices include conservative exposure and counterparty limits and conservative underwriting, documentation and collection standards. The Bancorp’s credit risk management strategy also emphasizes diversification on a geographic, industry and customer level as well as ongoing portfolio monitoring and timely management reviews of large credit exposures and credits experiencing deterioration of credit quality. Credit officers with the authority to extend credit are delegated specific authority amounts, the utilization of which is closely monitored. Underwriting activities are centrally managed, and ERM manages the policy and the authority delegation process directly. The Credit Risk Review function provides objective assessments of the quality of underwriting and documentation, the accuracy of risk grades and the charge-off, nonaccrual and reserve analysis process. The Bancorp’s credit review process and overall assessment of the adequacy of the allowance for credit losses is based on quarterly assessments of the probable estimated losses inherent in the loan and lease portfolio. The Bancorp uses these assessments to promptly identify potential problem loans or leases within the portfolio, maintain an adequate reserve and take any necessary charge-offs. The Bancorp defines potential problem loans as those rated substandard that do not meet the definition of a nonperforming asset or a restructured loan. See Note 6 of the Notes to the Condensed Consolidated Financial Statements for further information on the Bancorp’s credit grade categories, which are derived from standard regulatory rating definitions.

The following tables provide a summary of potential problem loans:

TABLE 26: Potential Problem Loans

As of March 31, 2014 ($ in millions)

Carrying
Value

Unpaid
Principal
Balance

Exposure

Commercial and industrial

960

962

1,294

Commercial mortgage

429

430

429

Commercial construction

Commercial leases

Total

1,449

1,452

1,786

TABLE 27: Potential Problem Loans


As of December 31, 2013 ($ in millions)	Carrying Value		Unpaid Principal Balance		Exposure
Commercial and industrial	$	1,032		1,034		1,323
Commercial mortgage		517		520		520
Commercial construction		44		44		50
Commercial leases		18		18		18

Total	$	1,611		1,616		1,911

In addition to the individual review of larger commercial loans that exhibit probable or observed credit weaknesses, the commercial credit review process includes the use of two risk grading systems. The risk grading system currently utilized for reserve analysis purposes encompasses ten categories. The Bancorp also maintains a dual risk rating system for credit approval and pricing, portfolio monitoring and

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

capital allocation that includes a “through-the-cycle” rating philosophy for modeling expected losses. The dual risk rating system includes thirteen probabilities of default grade categories and an additional six grade categories for estimating losses given an event of default. The probability of default and loss given default evaluations are not separated in the ten-category risk rating system. The Bancorp has completed significant validation and testing of the dual risk rating system as a commercial credit risk management tool. The Bancorp is assessing the necessary modifications to the dual risk rating system outputs to develop a U.S. GAAP compliant ALLL model and will make a decision on the use of modified dual risk ratings for purposes of determining the Bancorp’s ALLL once the FASB has issued a final standard regarding proposed methodology changes to the determination of credit impairment as outlined in the FASB’s Proposed Accounting Standard Update-Financial Instruments-Credit Losses (Subtopic 825-15) issued on December 20, 2012. Scoring systems, various analytical tools and portfolio performance monitoring are used to assess the credit risk in the Bancorp’s homogenous consumer and small business loan portfolios.

Overview

Economic growth in the first quarter of 2014 was sluggish, due in part to severe weather conditions. However, GDP is expected to rise as the year progresses. The job market is slowly but steadily improving and the economy continues to trend modestly upward. Economic risks include how the Federal Reserve handles the end of quantitative easing and an increase in interest rates. Housing prices have largely stabilized and are increasing in many markets, but overall current economic conditions are causing weaker than desired qualified loan demand and a relatively low interest rate environment, which directly impacts the Bancorp’s growth and profitability.

Among consumer portfolios, residential mortgage and brokered home equity portfolios exhibited the most stress. Management suspended homebuilder and developer lending in 2007 and new commercial non-owner occupied real estate lending in 2008, discontinued the origination of brokered home equity products at the end of 2007 and tightened underwriting standards across both the commercial and consumer loan product offerings. As of March 31, 2014, consumer real estate loans originated from 2005 through 2008 represent approximately 29% of the consumer real estate portfolio and approximately 56% of total losses in 2014. Loss rates continue to improve as newer vintages are performing within expectations. With the stabilization of certain real estate markets, the Bancorp began to selectively originate new homebuilder and developer lending and non-owner occupied commercial lending real estate in the third quarter of 2011. However, the level of new fundings is below the amortization and pay-off of the current portfolio. The Bancorp continues to aggressively engage in other loss mitigation strategies such as reducing credit commitments, restructuring certain commercial and consumer loans, as well as utilizing commercial and consumer loan workout teams. For commercial and consumer loans owned by the Bancorp, loan modification strategies are developed that are workable for both the borrower and the Bancorp when the borrower displays a willingness to cooperate. These strategies typically involve either a reduction of the stated interest rate of the loan, an extension of the loan’s maturity date(s) with a stated rate lower than the current market rate for a new loan with similar risk, or in limited circumstances, a reduction of the principal balance of the loan or the loan’s accrued interest. For residential mortgage loans serviced for FHLMC and FNMA, the Bancorp participates in the HAMP and HARP 2.0 programs. For loans refinanced under the HARP 2.0 program, the Bancorp strictly adheres to the underwriting requirements of the program and promptly sells the refinanced loan back to the agencies. Loan restructuring under the HAMP program is performed on behalf of FHLMC or FNMA and the Bancorp does not take possession of these loans during the modification process. Therefore, participation in these programs does not significantly impact the Bancorp’s credit quality statistics. The Bancorp participates in trial modifications in conjunction with the HAMP program for loans it services for FHLMC and FNMA. As these trial modifications relate to loans serviced for others, they are not included in the Bancorp’s troubled debt restructurings as they are not assets of the Bancorp. In the event there is a representation and warranty violation on loans sold through the programs, the Bancorp may be required to repurchase the sold loan. As of March 31, 2014, repurchased loans restructured or refinanced under these programs were immaterial to the Bancorp’s Condensed Consolidated Financial Statements. Additionally, as of March 31, 2014, $54 million of loans refinanced under HARP 2.0 were included in loans held for sale in the Bancorp’s Condensed Consolidated Balance Sheets. For the three months ended March 31, 2014, the Bancorp recognized $5 million of noninterest income in mortgage banking net revenue in the Bancorp’s Condensed Consolidated Statements of Income related to the sale of loans restructured or refinanced under the HAMP and HARP 2.0 programs.

In the financial services industry, there has been heightened focus on foreclosure activity and processes. The Bancorp actively works with borrowers experiencing difficulties and has regularly modified or provided forbearance to borrowers where a workable solution could be found. Foreclosure is a last resort, and the Bancorp undertakes foreclosures only when it believes they are necessary and appropriate and is careful to ensure that customer and loan data are accurate.

During the fourth quarter of 2013, the Bancorp settled certain repurchase claims related to mortgage loans originated and sold to FHLMC prior to January 1, 2009 for $25 million, after paid claim credits and other adjustments. The settlement removes the Bancorp’s responsibility to repurchase or indemnify FHLMC for representation and warranty violations on any loan sold prior to January 1, 2009 except in limited circumstances.

Commercial Portfolio

The Bancorp’s credit risk management strategy includes minimizing concentrations of risk through diversification. The Bancorp has commercial loan concentration limits based on industry, lines of business within the commercial segment, geography and credit product type.

The risk within the commercial loan and lease portfolio is managed and monitored through an underwriting process utilizing detailed origination policies, continuous loan level reviews, monitoring of industry concentration and product type limits and continuous portfolio risk management reporting. The origination policies for commercial real estate outline the risks and underwriting requirements for owner and non-owner occupied and construction lending. Included in the policies are maturity and amortization terms, maximum LTVs, minimum debt service coverage ratios, construction loan monitoring procedures, appraisal requirements, pre-leasing requirements (as applicable) and sensitivity and pro-forma analysis requirements. The Bancorp requires a valuation of real estate collateral, which may include third-party appraisals, be performed at the time of origination and renewal in accordance with regulatory requirements and on an as needed basis when market conditions justify. Although the Bancorp does not back test these collateral value assumptions, the Bancorp maintains an appraisal review department to order and review third-party appraisals in accordance with regulatory requirements. Collateral values on criticized

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

assets with relationships exceeding $1 million are reviewed quarterly to assess the appropriateness of the value ascribed in the assessment of charge-offs and specific reserves. In addition, the Bancorp applies incremental valuation haircuts to older appraisals that relate to collateral dependent loans, which can currently be up to 20-30% of the appraised value based on the type of collateral. These incremental valuation haircuts generally reflect the age of the most recent appraisal as well as collateral type. Trends in collateral values, such as home price indices and recent asset dispositions, are monitored in order to determine whether adjustments to the appraisal haircuts are warranted. Other factors such as local market conditions or location may also be considered as necessary.

The Bancorp assesses all real estate and non-real estate collateral securing a loan and considers all cross collateralized loans in the calculation of the LTV ratio. The following table provides detail on the most recent LTV ratios for commercial mortgage loans greater than $1 million, excluding impaired commercial mortgage loans individually evaluated. The Bancorp does not typically aggregate the LTV ratios for commercial mortgage loans less than $1 million.

TABLE 28: Commercial Mortgage Loans Outstanding by LTV, Loans Greater Than $1 Million

As of March 31, 2014 ($ in millions)

LTV > 100%

LTV 80-100%

LTV < 80%

Commercial mortgage owner occupied loans

223

303

2,152

Commercial mortgage non-owner occupied loans

225

352

1,873

Total

448

655

4,025

TABLE 29: Commercial Mortgage Loans Outstanding by LTV, Loans Greater Than $1 Million


As of December 31, 2013 ($ in millions)	LTV > 100%		LTV 80-100%		LTV < 80%
Commercial mortgage owner occupied loans	$	240		345		2,152
Commercial mortgage non-owner occupied loans		274		353		1,798

Total	$	514		698		3,950

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

The following table provides detail on commercial loans and leases by industry classification (as defined by the North American Industry Classification System), by loan size and by state, illustrating the diversity and granularity of the Bancorp’s commercial loans and leases:

TABLE 30: Commercial Loan and Lease Portfolio (excluding loans held for sale)


	March 31, 2014							December 31, 2013
(S in millions)	Outstanding			Exposure		Nonaccrual		Outstanding			Exposure		Nonaccrual
By industry:
Manufacturing	$	10,746			20,091		81	$	10,299			19,955		55
Financial services and insurance		6,247			14,194		21		5,998			14,010		25
Real estate		5,124			7,665		70		5,027			7,302		70
Business services		4,855			7,335		73		4,910			7,411		55
Wholesale trade		4,443			8,188		23		4,407			8,406		35
Healthcare		4,139			6,240		27		4,038			6,220		26
Retail trade		3,367			6,727		26		3,301			6,673		18
Transportation and warehousing		3,098			4,416		1		3,134			4,416		1
Communication and information		2,086			3,782		2		1,801			3,295		2
Construction		1,973			3,300		37		1,865			3,196		36
Accommodation and food		1,668			2,691		10		1,668			2,556		12
Mining		1,637			3,123		38		1,580			3,206		55
Entertainment and recreation		1,134			1,995		12		1,149			1,955		12
Other services		982			1,314		13		1,013			1,362		24
Utilities		777			2,352		—		773			2,332		—
Public administration		527			729		—		541			734		—
Agribusiness		351			493		25		356			504		26
Individuals		180			225		5		174			218		6
Other		10			15		—		12			12		—

Total	$	53,344			94,875		464	$	52,046			93,763		458

By loan size:
Less than $200,000		1	%		1		7		1	%		1		8
$200,000 to $1 million		5			4		18		5			4		18
$1 million to $5 million		12			10		23		13			10		23
$5 million to $10 million		9			8		13		10			8		10
$10 million to $25 million		27			23		32		27			23		34
Greater than $25 million		46			54		7		44			54		7

Total		100	%		100		100		100	%		100		100

By state:
Ohio		18	%		21		14		19	%		22		16
Michigan		10			8		12		10			8		11
Illinois		7			8		7		7			7		8
Florida		7			6		16		7			6		19
Indiana		5			5		8		5			5		9
Kentucky		3			3		2		3			3		2
North Carolina		3			3		1		3			3		1
Tennessee		3			3		1		3			3		1
Pennsylvania		3			2		6		3			3		7
All other states		41			41		33		40			40		26

Total		100	%		100		100		100	%		100		100

The Bancorp has identified certain categories of loans which it believes represent a higher level of risk compared to the rest of the Bancorp’s loan portfolio, due to economic or market conditions within the Bancorp’s key lending areas. The following tables provide analysis of each of the categories of loans (excluding loans held for sale) by state as of and for the three months ended March 31, 2014 and 2013:

TABLE 31: Non-Owner Occupied Commercial Real Estate^(a)


As of March 31, 2014 ($ in millions)							For the three months ended March 31, 2014
By State:	Outstanding		Exposure		90 Days Past Due		Nonaccrual		Net Charge- offs
Ohio	$	1,081		1,457		—		14		1
Michigan		814		906		—		24		—
Florida		516		649		—		6		—
Illinois		438		731		—		6		—
North Carolina		284		459		—		3		—
Indiana		168		266		—		3		—
All other states		1,362		2,372		—		5		—

Total	$	4,663		6,840		—		61		1

(a)

Included in commercial mortgage and commercial construction loans on the Condensed Consolidated Balance Sheets.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

TABLE 32: Non-Owner Occupied Commercial Real Estate^(a)


As of March 31, 2013 ($ in millions)							For the three months ended March 31, 2013
By State:	Outstanding		Exposure		90 Days Past Due		Nonaccrual		Net Charge- offs
Ohio	$	1,144		1,308		—		25		12
Michigan		1,018		1,082		—		48		—
Florida		539		592		—		32		4
Illinois		417		487		—		15		—
Indiana		238		255		—		10		—
North Carolina		192		248		—		7		—
All other states		1,020		1,326		—		29		—

Total	$	4,568		5,298		—		166		16

(a)

Included in commercial mortgage and commercial construction loans on the Condensed Consolidated Balance Sheets.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Consumer Portfolio

The Bancorp’s consumer portfolio is materially comprised of three categories of loans: residential mortgage, home equity, and automobile. The Bancorp has identified certain categories within these loan types which it believes represent a higher level of risk compared to the rest of the consumer loan portfolio due to high loan amount to collateral value. The Bancorp does not update LTV ratios for the consumer portfolio subsequent to origination except as part of the charge-off process for real estate secured loans.

Residential Mortgage Portfolio

The Bancorp manages credit risk in the residential mortgage portfolio through conservative underwriting and documentation standards and geographic and product diversification. The Bancorp may also package and sell loans in the portfolio.

The Bancorp does not originate mortgage loans that permit customers to defer principal payments or make payments that are less than the accruing interest. The Bancorp originates both fixed and adjustable rate residential mortgage loans. Resets of rates on adjustable rate mortgages are not expected to have a material impact on credit costs in the current interest rate environment, as approximately $950 million of adjustable rate residential mortgage loans will have rate resets during the next twelve months, with less than one percent of those resets expected to experience an increase in monthly payments in comparison to the monthly payment at the time of origination.

Certain residential mortgage products have contractual features that may increase credit exposure to the Bancorp in the event of a decline in housing values. These types of mortgage products offered by the Bancorp include loans with high LTV ratios, multiple loans on the same collateral that when combined result in an LTV greater than 80% and interest-only loans. The Bancorp has deemed residential mortgage loans with greater than 80% LTV ratios and no mortgage insurance as loans that represent a higher level of risk.

The following table provides an analysis of the residential mortgage portfolio loans outstanding by LTV at origination:

TABLE 33: Residential Mortgage Portfolio Loans by LTV at Origination


	March 31, 2014					December 31, 2013
($ in millions)	Outstanding		Weighted Average LTV			Outstanding		Weighted Average LTV
LTV £ 80%	$	9,429		65.3	%	$	9,507		65.2	%
LTV > 80%, with mortgage insurance		1,253		93.7			1,242		93.7
LTV > 80%, no mortgage insurance		1,944		95.9			1,931		95.9

Total	$	12,626		72.9	%	$	12,680		72.7	%

The following tables provide analysis of the residential mortgage portfolio loans outstanding with a greater than 80% LTV ratio and no mortgage insurance:

TABLE 34: Residential Mortgage Portfolio Loans, LTV Greater Than 80%, No Mortgage Insurance


As of March 31, 2014 ($ in millions)							For the three months ended March 31, 2014
By State:	Outstanding		90 Days Past Due		Nonaccrual		Net Charge-offs
Ohio	$	577		2		18		2
Michigan		307		1		7		1
Florida		258		1		8		1
Illinois		243		1		5		1
Indiana		122		1		4		—
North Carolina		95		—		2		—
Kentucky		82		—		2		—
All other states		260		1		2		1

Total	$	1,944		7		48		6

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company