Fifth Third Bancorp Reports Third Quarter Results

• Press Release
• Source: Fifth Third Bancorp
• On 7:00 am EDT, Thursday October 22, 2009

CINCINNATI, Oct. 22 /PRNewswire-FirstCall/ --

• Net loss of $97 million; $0.20 loss per diluted share
• Net interest margin of 3.43%, up 17 bps from the previous quarter; net interest income increased 5% sequentially
• Average core deposits up 11%, wholesale funding down 30% from a year ago
• Sold Visa stake for a $288 million pre-tax benefit, increasing capital ratios by approximately 17 bps; also released additional $29 million of Visa litigation reserves
• Tangible common equity ratio of 6.74%, Tier 1 common ratio of 7.03%, Tier 1 ratio of 13.23%, total capital ratio of 17.48%

• Allowance to loan ratio increased to 4.69%, allowance to nonperforming loans ratio of 125%, allowance 1.2 times annualized net charge-offs
• Extended over $17 billion of new and renewed credit in the third quarter

Earnings Highlights

                               For the Three Months Ended          % Change
                        ----------------------------------------- -----------
                        Sept.    June    March     Dec.     Sept.
                        2009     2009     2009     2008     2008   Seq  Yr/Yr
                        ----     ----     ----     ----     ----   ---  -----
    Earnings ($ in
     millions)
    Net income (loss)    ($97)    $882      $50  ($2,142)    ($56)  NM  (74%)
    Net income (loss)
     available to common
     shareholders       ($159)    $856     ($26) ($2,184)    ($81)  NM  (97%)

    Common Share Data
    Earnings per share,
     basic              (0.20)    1.35    (0.04)   (3.78)   (0.14)  NM  (43%)
    Earnings per share,
     diluted            (0.20)    1.15    (0.04)   (3.78)   (0.14)  NM  (43%)
    Cash dividends per
     common share        0.01     0.01     0.01     0.01     0.15    -  (93%)

    Financial Ratios
    Return on average
     assets              (.34%)   3.05%    0.17%   (7.16%)   (.19%) NM  (79%)
    Return on average
     common equity       (6.1)    41.2     (1.4)   (94.6)    (3.3)  NM  (85%)
    Tier I capital      13.23    12.90    10.93    10.59     8.57    3%  54%
    Tier I common
     equity              7.03    6.94      4.50     4.37     5.18    3%  42%
    Net interest
     margin (a)          3.43    3.26      3.06     3.46     4.24    5% (19%)
    Efficiency (a)       50.8    29.9      65.1    131.3     54.2   70%  (6%)

    Common shares
     outstanding (in
     thousands)       795,316  795,313  576,936  577,387  577,487    -   38%
    Average common
     shares outstanding
     (in thousands):
       Basic          790,334  629,789  571,810  571,809  571,705   25%  38%
       Diluted        790,334  718,245  571,810  571,809  571,705   10%  38%

     (a) Presented on a fully taxable equivalent basis
     NM: not meaningful
    --------------------------------------------------

Fifth Third Bancorp (Nasdaq: FITB - News) today reported a third quarter 2009 net loss of $97 million, compared with net income of $882 million in the second quarter of 2009 and a net loss of $56 million in the third quarter of 2008. After preferred dividends, the third quarter 2009 net loss available to common shareholders was $159 million, compared with net income of $856 million in the second quarter of 2009 and a net loss of $81 million in the third quarter of 2008. In the third quarter, the net loss was $0.20 per diluted share, compared with net earnings of $1.15 per diluted share in the second quarter and a net loss of $0.14 per diluted share in the third quarter of 2008.

Third quarter 2009 results included a pre-tax net benefit of $288 million from the sale of our Visa, Inc. Class B common shares. This benefit consisted of a pre-tax gain of $244 million on the sale of the Class B shares and the recognition of a derivative that transfers the conversion risk of the Class B shares back to the Bancorp, and a $44 million net reduction in noninterest expense related to the reversal of an existing litigation reserve. Third quarter results also included the release of additional Visa litigation reserves due to Visa's supplemental funding of its litigation escrow account, which reduced noninterest expense by $29 million. In total, these items benefitted earnings by $317 million pre-tax, or $0.26 per diluted share after-tax.

Second quarter 2009 results included a pre-tax gain of $1,764 million related to the processing business transaction with Advent International, and a pre-tax charge of $55 million related to the special FDIC deposit insurance fund assessment. Second quarter 2009 net income available to common shareholders also included a $35 million benefit, recorded as a reduction to preferred dividend expense, reflecting the excess of the carrying value of preferred shares over the fair value of the common shares and cash exchanged through our tender offer for Series G preferred stock. Third quarter 2008 reported results included net charges of $83 million pre-tax: a $51 million charge due to the impairment of preferred stock held in Fannie Mae and Freddie Mac, a non-cash charge of $45 million related to Visa's settlement with Discover, a non-cash charge of $27 million to lower the cash surrender value of one of our Bank-Owned Life Insurance (BOLI) policies, and a net benefit of $40 million related to the satisfactory resolution of a court case stemming from goodwill created in a prior acquisition.

"Results for the third quarter continue to reflect solid core results offset by high credit costs," said Kevin T. Kabat, Chairman, CEO and President of Fifth Third Bancorp. "Highlights include significant improvement in the net interest margin, up 17 basis points from the second quarter, which drove a 5 percent sequential increase in net interest income. Transaction deposits were up 3 percent from last quarter and the mix continues to shift from higher cost CDs to lower cost savings accounts. As a result, we further reduced wholesale funding by $5 billion in the third quarter. Excluding the effect of the processing business sale and Visa transaction, fee growth was solid driven by continued robust mortgage banking revenue which mitigated the effect of unusually high credit related charges in other noninterest income. We remain focused on careful management of expenses, despite growth in credit-related operating expenses which were at unusually elevated levels this quarter.

The credit environment remains challenging, and we continue to aggressively work to manage risk in the portfolio. Net charge-offs were $756 million, an increase of $130 million from the second quarter, driven largely by losses on shared national credits (SNC). Excluding SNC related losses, commercial loan losses were up $80 million sequentially, driven by higher real estate and construction losses. Consumer losses declined by $28 million, or 10 percent, reflecting some stabilization in trends. We expect net charge-offs to be lower in the fourth quarter due to a reduction in C&I losses. Nonperforming assets in the loan portfolio increased 13 percent, in line with our expectations, and we expect a generally similar mid-teens rate of growth in the fourth quarter.

The provision for loan losses exceeded net charge-offs by $196 million, increasing the reserve to loan ratio to 4.69 percent. Our reserve position relative to loans, nonperforming loans, and levels of charge-offs remains very strong relative to problem assets and current levels of losses. It remains our expectation that reserve building will lessen from the pace seen earlier in the cycle as we move forward. We continue to believe that our pre-provision earnings power and our strong capital and reserve levels position us well for the remainder of this cycle."

Income Statement Highlights

                               For the Three Months Ended          % Change
                        ----------------------------------------- -----------
                        Sept.    June    March     Dec.     Sept.
                        2009     2009     2009     2008     2008   Seq  Yr/Yr
                        ----     ----     ----     ----     ----   ---  -----
    Condensed Statements
     of Income
     ($ in millions)
    Net interest
     income (taxable
     equivalent)         $874     $836     $781     $897   $1,068    5% (18%)
    Provision for loan
     and lease losses     952    1,041      773    2,356      941   (9%)  1%
    Total noninterest
     income               851    2,583      697      642      717  (67%) 19%
    Total noninterest
     expense              876    1,021      962    2,022      967  (14%) (9%)
    -----------------     ---    -----      ---    -----      ---   ---   --
    Income (loss) before
     income taxes
    (taxable equivalent) (103)   1,357     (257)  (2,839)    (123)  NM  (16%)
    -------------------- ----    -----     ----   ------     ----   --   ---

    Taxable equivalent
     adjustment             5        5        5        5        5    -    -
    Applicable income
     taxes                (11)     470     (312)    (702)     (72)  NM  (85%)
    -----------------     ---      ---     ----     ----      ---   --   ---
    Net income (loss)     (97)     882       50   (2,142)     (56)  NM  (74%)
    Dividends on preferred
     stock                 62       26       76       42       25  138% 148%
    ---------------------- --       --       --       --       --  ---  ---
    Net income (loss)
     available to common
     shareholders        (159)     856      (26)  (2,184)     (81)  NM  (97%)
    -------------------- ----      ---      ---   ------      ---   --   ---
    Earnings per share,
     diluted           ($0.20)   $1.15   ($0.04)  ($3.78)  ($0.14)  NM  (43%)
    ------------------ ------    -----   ------   ------   ------   --   ---

    NM: not meaningful
    ------------------

Net Interest Income

                               For the Three Months Ended          % Change
                        ----------------------------------------- -----------
                        Sept.    June    March     Dec.     Sept.
                        2009     2009     2009     2008     2008   Seq  Yr/Yr
                        ----     ----     ----     ----     ----   ---  -----
    Interest Income
     ($ in millions)
    Total interest
     income (taxable
     equivalent)       $1,174   $1,184   $1,183   $1,411   $1,553   (1%) (24%)
    Total interest
     expense              300      348      402      514      485  (14%) (38%)
    --------------        ---      ---      ---      ---      ---   ---   ---
    Net interest
     income (taxable
     equivalent)         $874     $836     $781     $897   $1,068    5%  (18%)
    ----------------     ----     ----     ----     ----    ------   --   ---

    Average Yield
    Yield on interest-
     earning assets      4.61%    4.62%    4.63%    5.44%    6.16%   -   (25%)
    Yield on interest-
     bearing liabilities 1.51%    1.67%    1.89%    2.28%    2.25% (10%) (33%)
    -------------------- ----     ----     ----     ----     ----   ---   ---
      Net interest rate
       spread (taxable
       equivalent)       3.10%    2.95%    2.74%    3.16%    3.91%   5%  (21%)
    -------------------- ----     ----     ----     ----     ----    --   ---
      Net interest
       margin (taxable
       equivalent)       3.43%    3.26%    3.06%    3.46%    4.24%   5%  (19%)

    Average Balances
     ($ in millions)
    Loans and leases,
     including held
     for sale         $82,888  $84,996  $85,829  $87,426  $85,772   (2%)  (3%)
    Total securities
     and other short-
     term investments  18,065   17,762   17,835   15,683   14,515    2%   24%
    Total interest-
     bearing
     liabilities       78,759   83,407   86,218   89,440   85,990   (6%)  (8%)
    Shareholders'
     equity            13,885   12,490   12,084   10,291   10,843   11%   28%
    -----------------  ------   ------   ------   ------   ------   --    --

Net interest income of $874 million on a taxable equivalent basis increased $38 million, or 5 percent, from the second quarter of 2009. The net interest margin was 3.43 percent, up 17 bps from 3.26 percent from the previous quarter. The sequential increase in net interest income and net interest margin was driven by improved spreads on loan originations and continued deposit mix shift to lower cost core deposits as higher priced term deposits issued in the third and fourth quarters of 2008 matured. These effects were partially offset by lower loan balances and an increase in non-accrual loan balances.

Compared with the third quarter of 2008, net interest income decreased $194 million and the net interest margin decreased 81 bps from 4.24 percent. Third quarter 2008 results included $215 million in loan discount accretion related to the First Charter acquisition compared with $27 million this quarter. Excluding this impact in both periods, net interest income declined by 1 percent and net interest margin declined by 5 bps.

Average Loans

                               For the Three Months Ended          % Change
                        ----------------------------------------- -----------
                        Sept.    June    March     Dec.    Sept.
                        2009     2009     2009     2008     2008   Seq  Yr/Yr
                        ----     ----     ----     ----     ----   ---  -----
    Average Portfolio
     Loans and Leases
     ($ in millions)
    Commercial:
      Commercial
       loans          $27,400  $28,027  $28,949  $30,227  $28,284   (2%)  (3%)
      Commercial
       mortgage        12,269   12,463   12,508   13,189   13,257   (2%)  (7%)
      Commercial
       construction     4,337    4,672    4,987    5,990    6,110   (7%) (29%)
      Commercial
       leases           3,522    3,512    3,564    3,610    3,641    -    (3%)
    ----------------    -----    -----    -----    -----    -----   ---   ---
    Subtotal -
     commercial loans
     and leases        47,528   48,674   50,008   53,016   51,292   (2%)  (7%)
    -----------------  ------   ------   ------   ------   ------    --    --
    Consumer:
      Residential
       mortgage loans   8,355    8,713    9,195    9,335    9,681   (4%) (14%)
      Home equity      12,452   12,636   12,763   12,677   12,534   (1%)  (1%)
      Automobile loans  8,871    8,692    8,687    8,428    8,303    2%    7%
      Credit card       1,955    1,863    1,825    1,748    1,720    5%   14%
      Other consumer
       loans and leases   899      995    1,083    1,165    1,165  (10%) (23%)
    -------------------   ---      ---    -----    -----    -----   ---   ---
    Subtotal - consumer
     loans and leases  32,532   32,899   33,553   33,353   33,403   (1%)  (3%)
    ------------------ ------   ------   ------   ------   ------    --    --
    Total average loans
     and leases
     (excluding held
     for sale)        $80,060  $81,573  $83,561  $86,369  $84,695   (2%)  (5%)

      Average loans
       held for sale    2,828    3,422    2,268    1,057    1,077  (17%) 163%
    ----------------    -----    -----    -----    -----    -----   ---  ---

Average portfolio loan and lease balances decreased 2 percent sequentially and declined 5 percent from the third quarter of 2008. Including loans held-for-sale, average loans declined by 2 percent sequentially and 3 percent from the same period the previous year. The decline was due to lower demand for consumer and commercial loans and leases as well as higher net charge-offs.

Average commercial loan and lease balances decreased 2 percent sequentially and declined 7 percent from the third quarter of the previous year. The sequential and year-over-year decline in average commercial loan and lease balances was primarily driven by lower customer line utilization, which was down $1.5 billion from the previous quarter and $2.9 billion from the same quarter the previous year. During the third quarter of 2009, commercial and industrial (C&I) average loans decreased by 2 percent due to lower customer line usage. Average commercial mortgage and commercial construction loan balances declined by a combined 3 percent sequentially and 14 percent from the same period the previous year, reflecting the suspension of residential homebuilder/developer and non-owner occupied lending more than a year ago.

Average consumer loan and lease balances decreased 1 percent sequentially and declined 3 percent from the third quarter of 2008. Both sequential and year-over-year comparisons reflect lower home equity and residential mortgage loan balances, which more than offset growth in credit card and auto balances. Excluding loans charged-off, period-end consumer loans increased by 1 percent from the previous year.

The majority of Fifth Third's mortgages are originated to be sold to agencies and are not reflected in portfolio loans or portfolio loan growth. Warehoused residential mortgages held-for-sale remain at relatively high levels of $2.5 billion due to continued high mortgage origination volumes.

Average Deposits

                               For the Three Months Ended          % Change
                        ----------------------------------------- -----------
                        Sept.    June    March     Dec.     Sept.
                        2009     2009     2009     2008     2008   Seq  Yr/Yr
                        ----     ----     ----     ----     ----   ---  -----
    Average Deposits
     ($ in millions)
      Demand deposits $17,059  $16,689  $15,532  $14,602  $14,225    2%   20%
      Interest
       checking        14,869   14,837   14,229   13,698   13,843    -     7%
      Savings          16,967   16,705   16,272   15,960   16,154    2%    5%
      Money market      4,280    4,167    4,559    4,983    6,051    3%  (29%)
      Foreign
       office (a)       2,432    1,717    1,755    1,876    2,126   42%   14%
    ----------------    -----    -----    -----    -----    -----   --    --
    Subtotal -
     Transaction
     deposits          55,607   54,115   52,347   51,119   52,399    3%    6%
    ----------------   ------   ------   ------   ------   ------   ---   ---
      Other time       14,264   14,612   14,501   13,337   10,780   (2%)  32%
    ----------------   ------   ------   ------   ------   ------    --   --
    Subtotal - Core
     deposits          69,871   68,727   66,848   64,456   63,179    2%   11%
    ----------------   ------   ------   ------   ------   ------    --   --
      Certificates -
       $100,000 and
       over            10,055   11,455   11,802   12,468   11,623  (12%) (13%)
      Other                95      240      247    1,090      395  (60%) (76%)
    ----------------       --      ---      ---    -----      ---   ---   ---
    Total deposits    $80,021  $80,422  $78,897  $78,014  $75,197     -    6%
    ---------------   -------  -------  -------  -------  -------   ---   ---
    (a) Includes commercial customer Eurodollar sweep balances for which the
        Bancorp pays rates comparable to other commercial deposit accounts.
    -------------------------------------------------------------------------

Average core deposits increased 2 percent sequentially and 11 percent from the third quarter of 2008. On a sequential basis, growth in average demand deposit (DDA), savings, money market, and foreign office commercial sweep deposits was partially offset by lower consumer CD balances. Higher priced, short-term consumer CDs originated in the second half of 2008 continue to be replaced by lower cost savings deposits and DDA deposits. Average transaction deposits (excluding consumer time deposits) were up 3 percent from second quarter of 2009 and increased 6 percent from a year ago.

Retail average core deposits were flat sequentially and increased 10 percent from the third quarter of 2008. Sequential growth in savings and foreign office sweep deposits was offset by small declines in DDAs, interest checking, and consumer CD balances. On a year-over-year basis, growth in DDA, savings, consumer CD, and foreign office sweep deposits was partially offset by lower interest checking and money market balances. Net new account production offset lower average account balances. Commercial core deposits increased 8 percent sequentially and 12 percent from the previous year. Sequential growth in DDA, interest checking, and money market account balances drove the increase. Deposit growth was driven primarily by higher average account balances.

Noninterest Income

                               For the Three Months Ended          % Change
                        ----------------------------------------- -----------
                        Sept.    June     March    Dec.     Sept.
                        2009     2009     2009     2008     2008   Seq  Yr/Yr
                        ----     ----     ----     ----     ----   ---  -----
    Noninterest Income
     ($ in millions)
    Service charges
     on deposits         $164     $162     $146     $162     $172    1%   (4%)
    Corporate banking
     revenue               86       99      116      121      104  (13%) (18%)
    Mortgage banking
     net revenue          140      147      134      (29)      45   (5%) 208%
    Investment advisory
     revenue               74       73       76       78       90    1%  (18%)
    Card and processing
     revenue               74      243      223      230      235  (70%) (69%)
    Gain on sale of
     FTPS joint venture    (6)   1,764        -        -        -   NM    NM
    Other noninterest
     income               311       49       10        24     112  538%  177%
    Securities gains
     (losses), net          8        5      (24)      (40)    (63)  60%   NM
    Securities gains, net
     - non-qualifying
     hedges on mortgage
     servicing rights       -       41       16        96      22 (100%)(100%)
    --------------------  ---       --       --        --      --  ----  ----
    Total noninterest
     income              $851   $2,583     $697      $642    $717  (67%)  19%
    -------------------- ----   ------     ----      ----    ----   ---   ---

Noninterest income of $851 million decreased $1.7 billion sequentially and increased $134 million from a year ago. Third quarter 2009 results included a $244 million gain from the sale of our Visa, Inc. Class B common shares. Second quarter 2009 results included the $1.8 billion gain from the completion of the sale of the processing business, while third quarter 2008 results included a $76 million gain related to a litigation settlement stemming from a prior acquisition and a $27 million charge to lower the cash surrender value of a BOLI policy. The sale of the processing business included the merchant processing and financial institutions businesses. Revenue from these businesses accounted for $169 million in the second quarter of 2009 and $162 million in the same period the previous year. Excluding the divested processing revenue and the items outlined above, as well as investment securities gains/losses in all periods, noninterest income declined by $46 million, or 7 percent, from the previous quarter and increased by $30 million, or 5 percent, from the third quarter of 2008. The sequential decline on this basis was driven by a combined $34 million increase in losses on the sale of other real estate owned (OREO) and fair value adjustments on loans held-for-sale and the effect of $41 million of hedge gains on MSRs in the second quarter of 2009. Year-over-year growth on this basis was driven primarily by continued strong mortgage banking revenue partially offset by the increase in OREO losses and fair value adjustments just mentioned. Comparisons versus both periods also benefited from $38 million in revenue associated with the transition service agreement (TSA) entered into as part of the processing business sale, under which the Bancorp provides services to the processing business to support its operations during the deconversion period.

Service charges on deposits of $164 million increased 1 percent sequentially and declined 4 percent compared with the same quarter last year. Retail service charges increased 1 percent from the previous quarter and declined 9 percent compared with the third quarter of 2008. The sequential increase was driven by net new account production while the year-over-year decline was due to lower transaction volume. Commercial service charges increased 2 percent both sequentially and compared with last year. Year-over-year growth primarily reflected an increase in customer accounts and lower market interest rates, as reduced earnings credit rates paid on customer balances have resulted in higher realized net service fees to pay for treasury management services.

Corporate banking revenue of $86 million decreased 13 percent from the previous quarter and 18 percent from the same period the previous year. Sequential results were driven primarily by lower interest rate derivative sales revenue and a reduction in business lending fees largely as a result of reduced loan originations, partially offset by growth in institutional sales. On a year-over-year basis, lower interest rate derivative sales revenue and foreign exchange revenue was partially offset by growth in institutional sales and business lending fees.

Mortgage banking net revenue was $140 million in the third quarter of 2009, a decrease of $7 million from record second quarter 2009 results and an increase of $95 million from the third quarter of 2008. Third quarter 2009 originations were $4.4 billion, down from a record $6.9 billion the previous quarter, and up from $2.0 billion in the third quarter of 2008. Third quarter 2009 originations resulted in gains of $96 million on mortgages sold compared with gains of $161 million during the previous quarter and $43 million during the same period in 2008. Net servicing revenue, before mortgage servicing rights (MSR) valuation adjustments, totaled $21 million in the third quarter, compared with $2 million last quarter and $17 million a year ago. MSR valuation adjustments, including mark-to-market related adjustments on free-standing derivatives used to economically hedge the MSR portfolio, represented a net gain of $23 million in the third quarter of 2009, compared with a net loss of $16 million last quarter and a net loss of $15 million a year ago. The mortgage-servicing asset, net of the valuation reserve, was $625 million at quarter end on a servicing portfolio of $46.8 billion.

Investment advisory revenue of $74 million was up 1 percent sequentially and down 18 percent from the third quarter of 2008. Institutional trust revenue was up 6 percent from the previous quarter and down 17 percent from the previous year while private client revenue increased 4 percent sequentially and declined 14 percent from the third quarter of 2008. Both sequential and year-over-year comparisons for institutional trust revenue and private client revenue were driven by overall changes in market values. Mutual fund fees were down 2 percent from the previous quarter and 30 percent from the previous year generally due to continued outflows from long-term equity funds to money market funds. Brokerage fees were down 6 percent from the second quarter of 2009 and declined 18 percent from the same period the previous year, reflecting lower transaction based revenues.

Card and processing revenue was $74 million in the third quarter, consisting primarily of interchange from the Bank's credit and debit cards and ATM revenue. Results from previous quarters included merchant processing revenue and financial institutions revenue, which are now part of the processing business joint venture. These items contributed $169 million and $162 million to card and processing revenue in the second quarter of 2009 and the third quarter of 2008, respectively. Excluding merchant processing and financial institutions revenue, card and processing revenue was consistent with levels from both the previous quarter and the same period the previous year. Strong growth in debit card transaction volumes and an increase in average dollar amount per transaction were offset by lower credit card usage.

Other noninterest income totaled $311 million in the third quarter of 2009 versus $49 million in the previous quarter and $112 million in the third quarter of 2008. Third quarter 2009 results included the $244 million gain from the Visa transaction. Second quarter 2009 results included a $15 million write-down on a facility we are vacating, while third quarter 2008 results included a $76 million gain related to a litigation settlement stemming from a prior acquisition and a $27 million charge to lower the cash surrender value of a BOLI policy. Excluding these items, other noninterest income of $67 million increased by $3 million compared with the previous quarter and increased by $4 million from the same period the previous year. The sequential and year-over-year growth reflected third quarter revenue of $38 million related to the processing business TSA and income of $7 million from our ownership interest in the processing business joint venture, partially offset by losses on the sale of OREO and fair value adjustments on loans held-for-sale. Losses on the sale of OREO totaled $22 million in the third quarter compared with $13 million in the previous quarter and $12 million in the third quarter of 2008. Fair value adjustments on loans held-for-sale totaled $30 million in the third quarter of 2009 compared with $6 million in the previous quarter. There were no fair value adjustments in the third quarter of 2008. Net gains on loan sales were $8 million in the third quarter versus net gains of $11 million in the second quarter of 2009 and net losses of $1 million in the same quarter the previous year.

There were no net securities gains on non-qualifying hedges on MSRs in the third quarter of 2009 compared with net gains of $41 million in the previous quarter and gains of $22 million in the third quarter of 2008.

Net gains on investment securities were $8 million in the third quarter of 2009, compared with securities gains of $5 million in the previous quarter and net losses of $63 million in the same period the previous year.

Noninterest Expense

                               For the Three Months Ended          % Change
                        ----------------------------------------- -----------
                        Sept.    June    March     Dec.     Sept.
                        2009     2009     2009     2008     2008   Seq Yr/Yr
                        ----     ----     ----     ----     ----   ---  -----
    Noninterest Expense
     ($ in millions)
    Salaries, wages
     and incentives      $335     $346     $327     $337     $321   (3%)   4%
    Employee benefits     $83      $75      $83      $61      $72   11%   16%
    Net occupancy
     expense              $75      $79      $79      $77      $77   (5%)  (3%)
    Technology and
     communications       $43      $45      $45      $48      $46   (4%)  (7%)
    Equipment expense     $30      $31      $31      $35      $34   (4%) (12%)
    Card and processing
     expense              $25      $75      $67      $70      $70  (66%) (64%)
    Other noninterest
     expense             $285     $370     $330   $1,394     $346  (23%) (18%)
    -------------------  ----     ----     ----   ------     ----   ---   ---
    Total noninterest
     expense             $876   $1,021     $962   $2,022     $967  (14%)  (9%)
    -------------------  ----   ------     ----   ------     ----   ---    --

Noninterest expense of $876 million decreased $145 million sequentially and decreased $91 million from a year ago. Third quarter 2009 results included the Visa litigation reserve reversal of $73 million and $10 million of seasonal pension settlement expense. Second quarter 2009 results included a $55 million FDIC special assessment charge. Excluding the effect of the items previously mentioned, third quarter 2009 noninterest expense of $939 million declined by $27 million, or 3 percent, from the previous quarter, driven by the reduction in core expenses due to the processing joint venture as well as broad based expense control, partially offset by higher provision expense for unfunded commitments. Third quarter 2008 results included a $45 million charge due to Visa's pending settlement with Discover, $36 million related to legal expenses associated with the litigation settlement from a prior acquisition, and $7 million in seasonal pension settlement expense. Excluding the items noted above for the third quarter in both periods, expenses increased by $60 million, or 7 percent, driven by higher credit-related costs partially offset by a reduction in core expenses due to the processing business sale.

During the third quarter we incurred approximately $38 million in operating expenses related to the processing business joint venture that were offset with revenue under the TSA that was reported in other noninterest income.

Expenses incurred in the management of problem assets totaled $100 million in the third quarter of 2009, compared with $46 million in the previous quarter and $45 million in the third quarter of 2008. The largest driver of the sequential increase was the provision expense for unfunded commitments, which was $45 million in the third quarter of 2009 compared with $8 million the previous quarter and $17 million in the third quarter of 2008. Derivative valuation adjustments related to customer risk were $21 million this quarter versus $2 million last quarter. There were none a year ago. Other work-out related expenses were $28 million in the third quarter, compared with $32 million the previous quarter and $25 million in the same period last year. OREO expense was $6 million this quarter, compared with $4 million last quarter and $3 million a year ago.

Credit Quality

                                          For the Three Months Ended
                                   -----------------------------------------
                                   Sept.    June    March     Dec.     Sept.
                                   2009     2009     2009     2008     2008
                                   ----     ----     ----     ----     ----
    Total net losses charged off
     ($ in millions)
      Commercial loans            ($256)   ($177)   ($103)   ($422)    ($85)
      Commercial mortgage loans    (118)     (85)     (77)    (465)     (94)
      Commercial construction
       loans                       (126)     (79)     (76)    (539)     (88)
      Commercial leases               -       (1)       -        -        -
      Residential mortgage loans    (92)    (112)     (75)     (68)     (77)
      Home equity                   (80)     (88)     (72)     (54)     (55)
      Automobile loans              (34)     (36)     (46)     (43)     (32)
      Credit card                   (45)     (45)     (36)     (30)     (24)
      Other consumer loans and
       leases                        (5)      (3)      (5)      (6)      (8)
    ----------------------------     --       --       --       --       --
    Total net losses charged off   (756)    (626)    (490)  (1,627)    (463)

    Total losses                   (796)    (658)    (521)  (1,652)    (481)
    Total recoveries                 40       32       31       25       18
    ----------------                 --       --       --       --       --
    Total net losses charged off  ($756)   ($626)   ($490) ($1,627)   ($463)
    Ratios (annualized)
    Net losses charged off as a
     percent of average loans
     and leases (excluding held
     for sale)                     3.75%    3.08%    2.38%    7.50%    2.17%
      Commercial                   4.17%    2.81%    2.08%   10.70%    2.07%
      Consumer                     3.13%    3.48%    2.82%    2.40%    2.33%
    ----------                     ----     ----     ----     ----     ----

Net charge-offs were $756 million in the third quarter of 2009, or 375 bps of average loans on an annualized basis. Second quarter net charge-offs were $626 million, or 308 bps of average loans on an annualized basis. Approximately 60 percent of the total increase in total net-charge offs was due to losses on Shared National Credits ("SNC"). Loss experience overall continues to be driven by commercial and residential real estate loans in Michigan and Florida. In aggregate, Florida and Michigan represented approximately 45 percent of total losses during the quarter and 28 percent of total loans and leases.

Commercial net charge-offs were $500 million, or 417 bps, in the third quarter of 2009, an increase of $158 million from the second quarter of 2009. Losses on SNC were $95 million in the third quarter of 2009, an increase of $78 million from the previous quarter. Within the commercial portfolio, C&I losses were $256 million, an increase of $79 million from the previous quarter. C&I losses included losses on SNC loans of $60 million, an increase of $43 million from the previous quarter, and losses on loans to companies in real estate-related industries of $40 million, an increase of $2 million from the previous quarter. Commercial mortgage net losses totaled $118 million, an increase of $33 million from the previous quarter, and included $1 million of SNC net charge-offs. Michigan and Florida accounted for 55 percent of commercial mortgage losses. Commercial construction net losses were $126 million, an increase of $47 from the previous quarter, of which SNC net losses accounted for $34 million of the increase. Michigan and Florida accounted for 50 percent of total commercial construction losses. Across all commercial portfolios, net losses on residential builder and developer portfolio loans totaled $108 million, compared with $76 million in the second quarter. These homebuilder losses included $57 million on commercial construction loans, $42 million on commercial mortgage loans, and $9 million on C&I loans. Originations of homebuilder/developer loans were suspended in 2007 and the remaining portfolio balance totals $1.8 billion.

Consumer net charge-offs of $256 million, or 313 bps, declined $28 million from the second quarter of 2009. Michigan and Florida represented 43 percent of second quarter home equity losses and 29 percent of total home equity loans. Net charge-offs within the residential mortgage portfolio were $92 million, a decrease of $20 million from the previous quarter, with losses in Michigan and Florida representing 77 percent of losses in the third quarter and approximately 43 percent of total residential mortgage loans. Home equity net charge-offs of $80 million decreased $8 million sequentially. Net losses on brokered home equity loans were $30 million, down $9 million sequentially, and represented 38 percent of second quarter home equity losses. Brokered home equity loans represented $2 billion, or 16 percent, of the total home equity portfolio with originations being discontinued in 2007. Net charge-offs in the auto portfolio decreased by $2 million from the second quarter of 2009 to $34 million reflecting improved values on used cars sold at auction. Net losses on consumer credit card loans were $45 million, consistent with the previous quarter, as higher unemployment and weakened economic conditions continue to impact the credit card portfolio.

                                          For the Three Months Ended
                                   -----------------------------------------
                                   Sept.    June    March     Dec.     Sept.
                                   2009     2009     2009     2008     2008
                                   ----     ----     ----     ----     ----
    Allowance for Credit Losses
     ($ in millions)
    Allowance for loan and lease
     losses, beginning           $3,485   $3,070   $2,787   $2,058   $1,580
      Total net losses charged
       off                         (756)    (626)    (490)  (1,627)    (463)
      Provision for loan and
       lease losses                 952    1,041      773    2,356      941
    ----------------------------    ---    -----      ---    -----      ---
    Allowance for loan and lease
     losses, ending               3,681    3,485    3,070    2,787    2,058

    Reserve for unfunded
     commitments, beginning         239      231      195      132      115
      Provision for unfunded
       commitments                   45        8       36       63       17
    -------------------------
    Reserve for unfunded
     commitments, ending            284      239      231      195      132

    Components of allowance for
     credit losses:
      Allowance for loan and
       lease losses               3,681    3,485    3,070    2,787    2,058
      Reserve for unfunded
       commitments                  284      239      231      195      132
    ---------------------------     ---      ---      ---      ---      ---
    Total allowance for credit
     losses                      $3,965   $3,724   $3,301   $2,982   $2,190
    Allowance for loan and
     lease losses ratio
      As a percent of loans and
      leases                       4.69%    4.28%    3.72%    3.31%    2.41%
      As a percent of
       nonperforming loans
       and leases (a) (b)           125%     135%     128%     157%      92%
      As a percent of
       nonperforming
       assets (a) (b)               114%     123%     116%     139%      84%

    (a) Excludes non accrual loans and leases in loans held for sale
    (b) During 1Q09 the Bancorp modified its nonaccrual policy to exclude
        TDR loans less than 90 days past due because they were performing in
        accordance with restructured terms. For comparability purposes,
        prior periods were adjusted to reflect this reclassification.
    ------------------------------------------------------------------------

Provision for loan and lease losses totaled $952 million in the third quarter of 2009, exceeding net charge-offs by $196 million. The allowance for loan and lease losses represented 4.69 percent of total loans and leases outstanding as of quarter end, compared with 4.28 percent last quarter, and represented 125 percent of nonperforming loans and leases and 122 percent of third quarter annualized net charge-offs.

                                                     As of
    Nonperforming Assets and      -----------------------------------------
     Delinquent Loans              Sept.    June    March     Dec.     Sept.
     ($ in millions)               2009     2009     2009     2008     2008
                                   ----     ----     ----     ----     ----
    Nonaccrual portfolio loans
     and leases:
      Commercial loans             $752     $603     $667     $541     $550
      Commercial mortgage loans     912      760      692      482      724
      Commercial construction
       loans                        697      684      551      362      636
      Commercial leases              51       51       27       21       23
      Residential mortgage loans    267      262      265      259      216
      Home equity                    24       26       25       26       27
      Automobile loans                1        1        2        5        3
      Other consumer loans and
       leases                         -        -        -        -        -
    ------------------------        ---      ---      ---      ---      ---
        Total nonaccrual loans
         and leases              $2,704   $2,387   $2,229   $1,696   $2,179
    Restructured loans and
     leases - commercial
     (non accrual) (a)               18       12        -        -        -
    Restructured loans and
     leases - consumer
     (non accrual) (a)              225      188      167       80       50
    ----------------------          ---      ---      ---       --       --
        Total nonperforming
         loans and leases        $2,947   $2,587   $2,396   $1,776   $2,229
    Repossessed personal
     property                        22       21       25       24       24
    Other real estate owned (b)     251      232      227      206      198
    ---------------------------     ---      ---      ---      ---      ---
        Total nonperforming
         assets (c)              $3,220   $2,840   $2,648   $2,006   $2,451
    Nonaccrual loans held for
     sale                           286      352      403      473        -
    Restructured loans -
     commercial (non accrual)
     held for sale                    2        -        -        -        -
    -------------------------       ---      ---      ---      ---      ---
        Total nonperforming
         assets including loans
         held for sale           $3,508   $3,192   $3,051   $2,479   $2,451
    ---------------------------  ------   ------   ------   ------   ------

    Restructured loans and
     leases (accrual) (a)        $1,280   $1,074     $615      494      377

    Total loans and leases 90
     days past due                 $992     $762     $733     $662     $671
    Nonperforming loans and
     leases as a percent of
     portfolio loans, leases
     and other assets, including
     other real estate owned (c)   3.75%    3.17%    2.89%    2.11%    2.60%
    Nonperforming assets as a
     percent of portfolio loans,
     leases and other assets,
     including other real estate
     owned (c)                     4.09%    3.48%    3.20%    2.38%    2.86%

    (a) During 1Q09 the Bancorp modified its nonaccrual policy to exclude
        TDR loans less than 90 days past due because they were performing in
        accordance with  restructured terms. For comparability purposes,
        prior periods were adjusted to reflect this reclassification.
    (b) Excludes government insured advances.
    (c) Does not include non accrual loans held-for-sale.
    -------------------------------------------------------------------------

Nonperforming assets (NPAs) at quarter end were $3.2 billion or 4.09 percent of total loans and leases and OREO, up $380 million, or 13 percent from $2.8 billion, or 3.48 percent, last quarter. Including $288 million of nonaccrual loans classified as held-for-sale, total nonperforming assets were $3.5 billion compared with $3.2 billion in the second quarter. Growth in NPAs continues to be largely associated with commercial and residential real estate loans in Michigan and Florida. In aggregate, Florida and Michigan represented approximately 45 percent of NPAs in the loan portfolio.

Commercial NPAs at quarter-end were $2.6 billion, or 5.56 percent, and increased $350 million, or 16 percent, from the second quarter of 2009. C&I portfolio NPAs of $790 million increased $156 million from the previous quarter. Commercial construction portfolio NPAs were $751 million, an increase of $16 million from the second quarter of 2009. Commercial mortgage NPAs were $968 million, a sequential increase of $178 million. Commercial real estate loans in Michigan and Florida represented 38 percent of our total commercial real estate portfolio in the third quarter 2009 and 47 percent of commercial real estate NPAs. Across the entire commercial loan portfolio, residential real estate builder and developer portfolio NPAs were $600 million in the third quarter, down $13 million from the previous quarter. Of the residential real estate builder and developer portfolio NPAs, $306 million were commercial construction NPAs, $253 million were commercial mortgage NPAs and $41 million were C&I NPAs.

At quarter-end, $288 million of commercial nonaccrual loans were held-for-sale, compared with $352 million at the end of the second quarter. During the third quarter, we recorded a net gain of $5 million on $26 million of loans that were sold or settled, and we transferred $15 million of loans to OREO. These loans continue to be carried at the lower of cost or market, currently 36 percent of the original balance.

Consumer NPAs of $660 million, or 2.04 percent, increased $32 million from the second quarter of 2009. Of consumer NPAs, $556 million were in residential real estate portfolios. Residential mortgage NPAs were $484 million, up $9 million from the previous quarter. Home equity NPAs decreased $1 million from last quarter to $72 million. Residential real estate loans in Michigan and Florida represented 61 percent of total residential real estate NPAs and 35 percent of total residential real estate loans. Nonaccrual troubled debt restructurings were $225 million, compared with $188 million last quarter. Excluding non accruing TDRs, consumer NPAs declined by $5 million from the previous quarter. Third quarter OREO balances were $251 million compared with OREO balances of $232 million in the second quarter of 2009, and included $106 million in residential mortgage assets, $15 million in home equity assets, and $130 million in commercial real estate assets. Repossessed personal property of $22 million largely consisted of autos.

Loans still accruing over 90 days past due were $992 million, up $230 million from the second quarter of 2009. Commercial 90 days past due balances increased $274 million to $612 million in the third quarter of 2009. Of the commercial balances, $188 million reflected notes past maturity as opposed to being 90 days delinquent on their payments, while $424 million are loans that are delinquent on payments. Commercial 90 days past due are expected to decline in the fourth quarter due to resolutions and lower early stage delinquencies at the end of the third quarter. Consumer 90 days past due balances of $380 million declined by $44 million from the previous quarter, reflecting moderation of primarily mortgage related consumer loans flowing into early stage delinquencies and continued migration of legacy delinquencies out of the 90 days past due category. Commercial 30-89 days past due balances were down $200 million sequentially, due to migration into the 90 days past due category, and consumer 30-89 days past due were consistent with prior quarter levels as new delinquencies continue to stabilize.

Capital Position

                                          For the Three Months Ended
                                   -----------------------------------------
                                   Sept.    June    March     Dec.     Sept.
                                   2009     2009     2009     2008     2008
                                   ----     ----     ----     ----     ----
    Capital Position
    Average shareholders' equity
     to average assets            12.24%   10.78%   10.18%    8.65%    9.45%
    Tangible equity (a)           10.08%    9.72%    7.89%    7.86%    6.19%
    Tangible common equity
     (excluding unrealized gains/
     losses) (a)                   6.74%    6.55%    4.23%    4.23%    5.23%
    Tangible common equity
     (including unrealized gains/
     losses) (a)                   6.98%    6.67%    4.35%    4.31%    5.19%
    Tangible common equity as a
     percent of risk-weighted
     assets (excluding unrealized
     gains/losses) (a) (b)         7.09%    6.96%    4.51%    4.39%    5.19%
    Regulatory capital ratios: (c)
    ------------------------------
      Tier I capital              13.23%   12.90%   10.93%   10.59%    8.57%
      Total risk-based capital    17.48%   16.96%   15.13%   14.78%   12.30%
      Tier I leverage             12.34%   12.17%   10.29%   10.27%    8.77%
      Tier I common equity         7.03%    6.94%    4.50%    4.37%    5.18%
    Book value per share          12.69    12.71    13.61    13.57    16.65
    Tangible book value per
     share (a)                     9.50     9.51     8.79     8.74    10.10

    (a) The tangible equity ratio, tangible common equity ratios and
        tangible book value per share ratio, while not required by
        accounting principles generally accepted in the United States of
        America (GAAP), are considered to be critical metrics with which to
        analyze banks.  The ratios have been included herein to facilitate a
        greater understanding of the Bancorp's capital structure and financial
        condition.  See the Regulation G Non-GAAP Reconciliation table for a
        reconciliation of these ratios to GAAP.
    (b) 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 resulting in the Bancorp's total risk weighted assets.
    (c) Current period regulatory capital data ratios are estimated.

Compared with the prior quarter, the Tier 1 common equity ratio increased 9 bps to 7.0 percent and the tangible common equity to risk weighted assets ratio increased 13 bps to 7.1 percent. The Tier 1 capital ratio increased 33 bps to 13.2 percent, and the total capital ratio increased 52 bps to 17.5 percent. Book value per share at September 30, 2009 was $12.69 and tangible book value per share was $9.50, compared with June 30, 2009 book value per share of $12.71 and tangible book value per share of $9.51.

Conference Call

Fifth Third will host a conference call to discuss these financial results at 9:00 a.m. (Eastern Time) today. This conference call will be webcast live by Thomson Financial and may be accessed through the Fifth Third Investor Relations website at www.53.com (click on "About Fifth Third" then "Investor Relations"). The webcast also is being distributed over Thomson Financial's Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through Thomson Financial's individual investor center at www.earnings.com or by visiting any of the investor sites in Thomson Financial's Individual Investor Network. Institutional investors can access the call via Thomson Financial's password-protected event management site, StreetEvents (www.streetevents.com).

Those unable to listen to the live webcast may access a webcast replay or podcast through the Fifth Third Investor Relations website at the same web address. Additionally, a telephone replay of the conference call will be available beginning approximately two hours after the conference call until Thursday, November 5th by dialing 800-642-1687 for domestic access and 706-645-9291 for international access (passcode 31026648#).

Corporate Profile

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. As of September 30, 2009, the Company has $111 billion in assets, operates 16 affiliates with 1,306 full-service Banking Centers, including 100 Bank Mart® locations open seven days a week inside select grocery stores and 2,372 ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Pennsylvania, Missouri, Georgia and North Carolina. Fifth Third operates four main businesses: Commercial Banking, Branch Banking, Consumer Lending, and Investment Advisors. Fifth Third also has a 49% interest in Fifth Third Processing Solutions, LLC. Fifth Third is among the largest money managers in the Midwest and, as of September 30, 2009, has $184 billion in assets under care, of which it managed $25 billion for individuals, corporations and not-for-profit organizations. Investor information and press releases can be viewed at www.53.com. Fifth Third's common stock is traded on the NASDAQ® National Global Select Market under the symbol "FITB."

Forward-Looking Statements

This news release contains statements that we believe are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder. 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 and our most recent quarterly report on Form 10-Q. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements we may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to us.

There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) 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; (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) lower than expected gains related to any sale or potential sale of businesses; (21) difficulties in separating Fifth Third Processing Solutions from Fifth Third; (22) 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;(23) ability to secure confidential information through the use of computer systems and telecommunications networks; and (24) the impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity.

You should refer to our periodic and current reports filed with the Securities and Exchange Commission, or "SEC," for further information on other factors, which could cause actual results to be significantly different from those expressed or implied by these forward-looking statements.

Buzz up!