1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For fiscal year ended December 31, 1998 Commission File Number 0-8076 FIFTH THIRD BANCORP (Exact name of Registrant as specified in its charter) Ohio 31-0854434 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 38 Fountain Square Plaza Cincinnati, Ohio 45263 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (513) 579-5300 Securities registered pursuant to Section 12(g) of the Act: Common Stock Without Par Value 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ The Aggregate Market Value of the Voting Stock held by non-affiliates of the Registrant was $12,846,228,056 as of February 1, 1999. (1) There were 267,147,048 shares of the Registrant's Common Stock, without par value, outstanding as of February 1, 1999. DOCUMENTS INCORPORATED BY REFERENCE 1998 Annual Report to Shareholders: Parts I, II and IV Proxy Statement for 1999 Annual Meeting of Shareholders: Parts III and IV (1) In calculating the market value of securities held by non-affiliates of Registrant as disclosed on the cover page of this Form 10-K, Registrant has treated as securities held by affiliates as of December 31, 1998, voting stock owned of record by its directors and principal executive officers, shareholders owning greater than 10% of the voting stock and voting stock held by Registrant's trust departments in a fiduciary capacity.
2 FIFTH THIRD BANCORP 1998 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS PART I <TABLE> <CAPTION> Page ---- <S> <C> Item 1. Business 3 Item 2. Properties 14 Item 3. Legal Proceedings 14 Item 4. Submission of Matters to a Vote of Security Holders 14 PART II Item 5. Market For Registrant's Common Equity and Related Shareholder Matters 17 Item 6. Selected Financial Data 17 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 17 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 17 Item 8. Financial Statements and Supplementary Data 17 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 17 PART III Item 10. Directors and Executive Officers of the Registrant 17 Item 11. Executive Compensation 18 Item 12. Security Ownership of Certain Beneficial Owners and Management 18 Item 13. Certain Relationships and Related Transactions 18 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 18 </TABLE> 2
3 PART I ITEM 1. BUSINESS - ----------------- ORGANIZATION Fifth Third Bancorp (the "Company") is an Ohio corporation organized in 1975 as a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the "Act"), and subject to regulation by the Federal Reserve Board. The Company, with its principal office located in Cincinnati, is a multi-bank holding company as defined in the Act and is registered as such with the Board of Governors of the Federal Reserve System and has 17 wholly-owned subsidiaries: Fifth Third Bank; Fifth Third Bank, Central Ohio; Fifth Third Bank, Northwestern Ohio, N.A.; Fifth Third Bank, Ohio Valley; Fifth Third Bank, Western Ohio; Fifth Third Bank, Florida; Fifth Third Bank, Northern Kentucky, Inc.; Fifth Third Bank, Kentucky, Inc.; Fifth Third Bank, Indiana; Fifth Third Bank, Southwest, F.S.B.; Fifth Third Community Development Company; Fifth Third Investment Company; Fountain Square Insurance Company; Calvin Hotel Co.; Fifth Third/The Ohio Company; State Savings Mortgage Company and Heartland Capital Management, Inc. At December 31, 1998, the Company, its affiliated banks and other subsidiaries had consolidated total assets of $28.9 billion, consolidated total deposits of $18.8 billion and consolidated total shareholders' equity of $3.2 billion. The Company, through its subsidiaries, engages primarily in commercial, retail and trust banking, investment services and leasing activities and also provides credit life, accident and health insurance, discount brokerage services and property management for its properties. Those subsidiaries consist of The Fifth Third Company, Fifth Third Securities, Inc., The Fifth Third Leasing Company, Midwest Payment Systems, Inc. ("MPS"), Fifth Third International Company and Fifth Third/W. Lyman Case & Company. Fifth Third's affiliates provide a full range of financial products and services to the retail, commercial, financial, governmental, educational and medical sectors, including a wide variety of checking, savings and money market accounts, and credit products such as credit cards, installment loans, mortgage loans and leasing. Each of the banking affiliates has deposit insurance provided by the Federal Deposit Insurance Corporation ("FDIC") through the Bank Insurance Fund ("BIF") and the Savings Association Insurance Fund ("SAIF"). The Company, through its banking subsidiaries, operates for itself and other financial institutions a proprietary automated teller machine ("ATM") network, Jeanie(R). The Jeanie system participates in a shared ATM network called "Money Station(R)," which includes several Ohio bank holding companies and over 5,000 ATM's. The "Money Station" network participates in another shared ATM network called "PLUS System(R)," which is a nationwide network with over 170,000 participating ATM's. Fifth Third Bank, through its wholly-owned subsidiary, MPS, also provides electronic switch services for several regional banks and bank holding companies in Ohio, Kentucky and Illinois. 3
4 Fifth Third International Company has a 99.9 percent owned subsidiary: Fifth Third Trade Services Limited. Fifth Third Investment Company owns the remaining .01 percent. The Fifth Third Leasing Company has a 100 percent owned subsidiary: Fifth Third Auto Leasing Trust. ACQUISITIONS The Company is the result of mergers and acquisitions over the years involving financial institutions throughout Ohio, Indiana, Kentucky, Arizona and Florida. The Company made the following acquisitions during 1998: On April 9, 1998, the Company acquired W. Lyman Case & Company, a commercial mortgage banking company headquartered in Columbus, Ohio, for $15 million. W. Lyman Case & Company originated more than $680 million in financing and equity transactions since acquisition and has a loan servicing portfolio of $2 billion at year-end 1998. On June 12, 1998, the Company acquired The Ohio Company, a full-service broker-dealer for retail and institutional clients headquartered in Columbus, Ohio, for consideration consisting of 1,862,765 shares of the Company's common stock. These transactions were accounted for as purchases. On June 19, 1998, the Company acquired State Savings Company ("State"), a privately-owned thrift holding company headquartered in Columbus, Ohio with $2.7 billion in assets. On June 26, 1998, the Company acquired CitFed Bancorp, Inc. ("CitFed"), a publicly-traded savings and loan holding company headquartered in Dayton, Ohio with $3.1 billion in assets. These transactions were tax-free, stock-for-stock exchanges accounted for as poolings-of-interests. The Company exchanged 16,625,271 shares of the Company's common stock for all outstanding shares of State. The Company exchanged 13,222,869 shares of the Company's common stock for each outstanding share of CitFed. Financial data for all prior periods has been restated to reflect the second quarter 1998 mergers with CitFed and State. Cash dividends per common share are those of the Company declared prior to the mergers with CitFed and State. The restatement of the CitFed merger was accomplished by combining CitFed's March 31, 1998 fiscal year financial information with the Company's December 31, 1997 calendar year financial information. In 1998, CitFed's fiscal year was conformed to the Company's calendar year. As a result of conforming fiscal periods, the Company's Consolidated Statements of Income for the fourth quarter of 1997 and the first quarter of 1998 include CitFed's net income for the three months ended March 31, 1998 of $7.8 million. An adjustment to shareholders' equity removes the effect of including CitFed's financial results in both periods. COMPETITION There are hundreds of commercial banks, savings and loans and other financial services providers in Ohio, Kentucky, Indiana, Arizona and Florida and nationally, which provide strong 4
5 competition to the Company's banking subsidiaries. As providers of a full range of financial services, these subsidiaries compete with national and state banks, savings and loan associations, securities dealers, brokers, mortgage bankers, finance and insurance companies, and other financial service companies. With respect to data processing services, the Bank's data processing subsidiary, Midwest Payment Systems, Inc., competes with other electronic fund transfer (EFT) service providers such as Electronic Payment Systems, Deluxe Corporation and Electronic Data Systems and other merchant processing providers such as First Data Corporation, National Processing, Inc. and First USA Paymentech, Inc. The earnings of the Company are affected by general economic conditions as well as by the monetary policies of the Federal Reserve Board. Such policies, which include regulating the national supply of bank reserves and bank credit, can have a major effect upon the source and cost of funds and the rates of return earned on loans and investments. The Federal Reserve influences the size and distribution of bank reserves through its open market operations and changes in cash reserve requirements against member bank deposits. REGULATION AND SUPERVISION The Company, as a bank holding company, is subject to the restrictions of the Act. The Act provides that the acquisition of control of a bank is subject to the prior approval of the Board of Governors of the Federal Reserve System. The Company is required to obtain the prior approval of the Federal Reserve Board before it can acquire control of more than 5 percent of the voting shares of another bank. The Act does not permit the Federal Reserve Board to approve an acquisition by the Company, or any of its subsidiaries, of any bank located in a state other than Ohio, unless the acquisition is specifically authorized by the law of the state in which such bank is located. On September 29, 1994, the Act was amended by The Interstate Banking and Branch Efficiency Act of 1994 which authorizes interstate bank acquisitions anywhere in the country effective one year after the date of enactment, and interstate branching by acquisition and consolidation effective June 1, 1997, in those states that have not opted out by that date. The Company's subsidiary state banks are primarily subject to the laws of the state in which each is located, the Board of Governors of the Federal Reserve System and/or the Federal Deposit Insurance Corporation. The subsidiary bank which is organized under the laws of the United States is primarily subject to regulation by the Comptroller of the Currency and the Federal Deposit Insurance Corporation. The Company's savings and loan subsidiary is subject to regulation by the Office of Thrift Supervision. The Company and its subsidiaries are subject to certain restrictions on intercompany loans and investments. The Company and its subsidiaries are also subject to certain restrictions with respect to engaging in the underwriting and public sale and distribution of securities. In addition, 5
6 the Company and its subsidiaries are subject to examination at the discretion of supervisory authorities. The Act limits the activities which may be engaged in by the Company and its subsidiaries to ownership of banks and those activities which the Federal Reserve Board has deemed or may in the future find to be so closely related to banking as to be a proper incident thereto. The Financial Reform, Recovery and Enforcement Act of 1989 (FIRREA) provides that a holding company's controlled insured depository institutions are liable for any loss incurred by the Federal Deposit Insurance Corporation in connection with the default of, or any FDIC-assisted transaction involving, an affiliated insured bank or savings association. The Federal Deposit Insurance Corporation Improvement Act of 1991 (the "FDIC Improvement Act") covers a wide expanse of banking regulatory issues. The FDIC Improvement Act deals with the recapitalization of the Bank Insurance Fund, with deposit insurance reform, including requiring the FDIC to establish a risk-based premium assessment system, and with a number of other regulatory and supervisory matters. EMPLOYEES As of December 31, 1998, there were no employees of the Company. Subsidiaries of the Company employed 8,761 employees -- 1,383 were officers and 1,568 were part-time employees. There were 8,330 full-time equivalent employees as of December 31, 1998. STATISTICAL INFORMATION Pages 6 to 13 contain statistical information on the Company and its subsidiaries. Information about the Company's business segments is incorporated herein by reference to pages 28 and 29 of Registrant's 1998 Annual Report to Shareholders attached to this filing as Exhibit 13. 6
7 SECURITIES PORTFOLIO The securities portfolio as of December 31 for each of the last five years, and the maturity distribution and weighted average yield of securities as of December 31, 1998, are incorporated herein by reference to the securities tables on page 36 of the Company's 1998 Annual Report to Shareholders attached to this filing as Exhibit 13. The weighted average yields for the securities portfolio are yields to maturity weighted by the par values of the securities. The weighted average yields on securities exempt from income taxes are computed on a taxable-equivalent basis. The taxable-equivalent yields are net after-tax yields to maturity divided by the complement of the full corporate tax rate (35 percent). In order to express yields on a taxable-equivalent basis, yields on obligations of states and political subdivisions (municipal securities) have been increased as follows: <TABLE> <S> <C> Under 1 year 2.70% 1 - 5 years 2.46% 6 - 10 years 2.55% Over 10 years 2.83% Total municipal securities 2.52% </TABLE> AVERAGE BALANCE SHEETS The average balance sheets are incorporated herein by reference to Table 1 on pages 30 and 31 of the Company's 1998 Annual Report to Shareholders attached to this filing as Exhibit 13. ANALYSIS OF NET INTEREST INCOME AND NET INTEREST INCOME CHANGES The analysis of net interest income and the analysis of net interest income changes are incorporated herein by reference to Table 1 and Table 2 and the related discussion on pages 30 through 32 of the Company's 1998 Annual Report to Shareholders attached to this filing as Exhibit 13. 7
8 TYPES OF LOANS AND LEASES A summary of loans and leases by major category as of December 31 ($000's): <TABLE> <CAPTION> 1998 1997 1996 1995 1994 ---- ---- ---- ---- --- <S> <C> <C> <C> <C> <C> Commercial, financial and agricultural loans $ 4,822,992 4,363,289 4,093,432 3,663,973 3,104,599 Real estate - construction loans 572,082 560,381 593,276 530,940 438,073 Real estate - mortgage loans 5,448,632 6,311,872 5,884,557 5,425,989 5,443,570 Consumer loans 3,354,681 3,068,597 2,837,742 3,235,003 2,546,688 Lease financing 4,269,851 3,582,731 3,095,894 2,297,125 1,703,492 ------------------------------------ ---------------- ---------------- --------------- Loans and leases, gross 18,468,238 17,886,870 16,504,901 15,153,030 13,236,422 Unearned income (689,215) (573,927) (470,378) (339,833) (243,648) Reserve for credit losses (266,860) (250,950) (233,803) (224,134) (202,009) ------------------------------------ ---------------- ---------------- --------------- Loans and leases, net $ 17,512,163 17,061,993 15,800,720 14,589,063 12,790,765 ==================================== ================ ================ =============== Loans held for sale $ 492,017 263,772 74,916 139,484 41,723 ==================================== ================ ================ =============== </TABLE> MATURITIES AND SENSITIVITY OF LOANS TO CHANGES IN INTEREST RATES The remaining maturities of the loan portfolio distributed to reflect cash flows (excluding residential mortgage and consumer loans) at December 31, 1998, based on scheduled repayments and the sensitivity of loans to interest rate changes for loans due after one year ($000's): <TABLE> <CAPTION> Commercial, Financial and Real Estate Real Estate Agricultural Construction Commercial Loans Loans Loans Total ------------------------------------ ---------------- ---------------- <S> <C> <C> <C> <C> Due in one year or less $ 2,219,859 332,350 476,777 $ 3,028,986 Due after one year through five years 1,795,744 155,026 582,166 2,532,936 Due after five years 807,389 84,706 119,809 1,011,904 ------------------------------------ ---------------- ---------------- Total $ 4,822,992 572,082 1,178,752 $ 6,573,826 ==================================== ================ ================ Loans due after one year: Predetermined interest rate $ 2,075,132 154,495 531,405 $ 2,761,032 ==================================== ================ ================ Floating or adjustable interest rate $ 528,001 85,237 170,570 $ 783,808 ==================================== ================ ================ </TABLE> 8
9 RISK ELEMENTS Interest on loans is normally accrued at the rate agreed upon at the time each loan was negotiated. It is the Company's policy to discontinue accrual of interest on commercial, construction and mortgage loans when there is a clear indication the borrower's cash flow may not be sufficient to meet payments as they become due. Such loans, other than consumer loans, are also placed on nonaccrual status when principal or interest is past due ninety days or more, unless the loan is well secured and in the process of collection. The following table presents data concerning loans and leases at risk at December 31 ($000's): <TABLE> <CAPTION> 1998 1997 1996 1995 1994 ----- ----- ----- ----- ---- <S> <C> <C> <C> <C> <C> Nonaccrual loans and leases $ 42,760 71,667 66,745 76,281 39,253 Loans and leases contractually past due ninety days or more as to interest, principal or rental payments but still accruing interest 79,233 46,281 38,053 20,455 13,237 Loans and leases renegotiated to provide a reduction or deferral of interest, principal or rental payments because of the financial position deterioration of the borrower - 128 1,121 506 443 </TABLE> As of December 31, 1998, there were $46,742,000 of loans and leases currently performing in accordance with contractual terms where there are serious doubts as to the ability of the borrower to comply with such terms. For the years 1998, 1997 and 1996, interest income of $789,000, $714,000 and $807,000, respectively was recorded on nonaccrual and renegotiated loans and leases. Additional interest income of $2,837,000, $5,482,000 and $6,329,000 would have been recorded if the nonaccrual and renegotiated loans and leases had been current in accordance with their original terms. 9
10 SUMMARY OF CREDIT LOSS EXPERIENCE A summary of the activity in the reserve for credit losses arising from provisions charged to operations, losses charged off and recoveries of losses previously charged off ($000's): <TABLE> <CAPTION> 1998 1997 1996 1995 1994 ----- ----- ----- ----- ---- <S> <C> <C> <C> <C> <C> Loans and leases outstanding at December 31: $ 17,779,023 17,312,943 16,034,523 14,813,197 12,992,774 ================= ================ ================ ================ ================ Loans held for sale $ 492,017 263,772 74,916 139,484 41,723 ================= ================ ================ ================ ================ Average loans and leases outstanding $ 17,664,000 16,583,000 15,612,000 13,929,000 12,195,000 ================= ================ ================ ================ ================ Reserve for credit losses, January 1 $ 250,950 233,803 224,134 202,009 185,416 ----------------- ---------------- ---------------- ---------------- ---------------- Losses charged off: Commercial, financial and agricultural loans (35,335) (8,952) (11,349) (6,950) (9,321) Real estate - construction loans (953) (5) (147) (69) - Real estate - mortgage loans (7,562) (8,348) (7,602) (7,776) (4,894) Consumer loans (51,267) (61,177) (54,216) (26,967) (17,105) Lease financing (28,570) (23,034) (13,284) (5,084) (2,252) ----------------- ---------------- ---------------- ---------------- ---------------- Total losses (123,687) (101,516) (86,598) (46,846) (33,572) ----------------- ---------------- ---------------- ---------------- ---------------- Recoveries of losses previously charged off: Commercial, financial and agricultural loans 1,313 2,461 2,915 1,607 1,864 Real estate - construction loans 75 293 - 61 - Real estate - mortgage loans 2,096 2,017 2,866 2,845 4,229 Consumer loans 17,824 15,777 13,400 8,652 9,041 Lease financing 5,612 6,315 2,866 1,393 773 ----------------- ---------------- ---------------- ---------------- ---------------- Total recoveries 26,920 26,863 22,047 14,558 15,907 ----------------- ---------------- ---------------- ---------------- ---------------- Net losses charged off: Commercial, financial and agricultural loans (34,022) (6,491) (8,434) (5,343) (7,457) Real estate - construction loans (878) 288 (147) (8) - Real estate - mortgage loans (5,466) (6,331) (4,736) (4,931) (665) Consumer loans (33,443) (45,400) (40,816) (18,315) (8,064) Lease financing (22,958) (16,719) (10,418) (3,691) (1,479) ----------------- ---------------- ---------------- ---------------- ---------------- Total net losses charged off (96,767) (74,653) (64,551) (32,288) (17,665) ----------------- ---------------- ---------------- ---------------- ---------------- Letter of credit - - - - (7,800) Reserve of acquired institutions and other 3,506 1,705 5,838 8,479 875 Provision charged to operations 109,171 90,095 68,382 45,934 41,183 ----------------- ---------------- ---------------- ---------------- ---------------- Reserve for credit losses, December 31 $ 266,860 250,950 233,803 224,134 202,009 ================= ================ ================ ================ ================ Reserve as a percent of loans and leases outstanding 1.50% 1.45 1.46 1.51 1.55 ================= ================ ================ ================ ================ </TABLE> 10
11 SUMMARY OF CREDIT LOSS EXPERIENCE, CONTINUED <TABLE> <CAPTION> Reserve for credit losses, December 31: 1998 1997 1996 1995 1994 ----- ----- ----- ----- ---- <S> <C> <C> <C> <C> <C> Commercial, financial and agricultural loans $ 95,924 20,034 28,636 35,120 79,315 Real estate - construction loans 920 342 552 733 813 Real estate - mortgage loans 12,448 18,209 11,273 26,397 10,205 Consumer loans 96,199 155,526 151,355 134,170 94,535 Lease financing 61,369 53,839 41,987 27,714 17,141 -------------- --------------- -------------- ---------------------------- Total reserve for credit losses $ 266,860 250,950 233,803 224,134 202,009 ============== =============== ============== ============================ </TABLE> The analysis above is for analytical purposes. The reserve for credit losses is general in nature and is available to absorb losses from any portion of the loan and lease portfolio. The distribution of loans and leases by type and the ratio of net charge-offs to average loans and leases outstanding: <TABLE> <CAPTION> 1998 1997 1996 1995 1994 ----- ----- ----- ----- ---- <S> <C> <C> <C> <C> <C> Percentage of loans and leases to total loans and leases at December 31: Commercial, financial and agricultural loans 26.2% 24.6 25.2 24.4 23.7 Real estate - construction loans 3.1 3.2 3.7 3.5 3.3 Real estate - mortgage loans 32.2 37.4 37.0 37.1 42.0 Consumer loans 18.7 17.5 17.6 21.6 19.6 Lease financing 19.8 17.3 16.5 13.4 11.4 -------------- --------------- -------------- ---------------- ------------ Total 100.0% 100.0 100.0 100.0 100.0 ============== =============== ============== ============================ </TABLE> <TABLE> <S> <C> <C> <C> <C> <C> Ratio of net charge-offs during year to average loans and leases outstanding during year: Commercial, financial and agricultural loans 0.74% 0.15 0.22 0.16 0.24 Real estate - construction loans 0.16 (0.05) 0.03 0.00 0.00 Real estate - mortgage loans 0.09 0.10 0.08 0.09 0.01 Consumer loans 1.04 1.54 1.34 0.63 0.32 Lease financing 0.69 0.58 0.45 0.21 0.10 Weighted Average Ratio 0.55 0.45 0.41 0.23 0.14 </TABLE> 11
12 RESERVE FOR CREDIT LOSSES The reserve is maintained at a level management considers to be adequate to absorb probable loan and lease losses inherent in the portfolio. Credit losses are charged and recoveries are credited to the reserve. Provisions for credit losses are based on management's review of the historical credit loss experience and such other factors which, in management's judgment, deserve consideration under existing economic conditions in estimating potential credit losses. Based on the procedures discussed below, management is of the opinion the reserve of $266,860,000 at December 31, 1998 was adequate. In determining the adequacy of the reserve for credit losses, management of each affiliate bank, on a quarterly basis, specifically evaluates the necessity of a reserve for individual loans classified by management. The specifically allocated reserve for a classified loan is determined based on management's estimate of the borrower's ability to repay the loan given the availability of collateral, other sources of cash flow, and legal options available to the Company. Once a review is completed, the need for a specific reserve is determined by senior management and allocated to the loan. Other loans not specifically reviewed by management are evaluated using a rolling five-year average historical charge-off experience ratio calculated by type of loan. The historical charge-off ratio factors into account the homogeneous nature of the loans, the geographical lending areas involved, regulatory examination findings, specific grading systems applied and any other known factors which may impact the ratios used. Specific reserves on individual loans and historical ratios are reviewed quarterly and adjusted as necessary based on subsequent collections, loan upgrades or downgrades, nonperforming trends or actual principal charge-offs. The Company's primary market area for lending is Ohio, Kentucky and Indiana. When evaluating the adequacy of reserves, consideration is given to this regional geographic concentration and the closely-associated effect changing economic conditions has on the Company's customers. MATURITY DISTRIBUTION OF DOMESTIC CERTIFICATES OF DEPOSIT OF $100,000 AND OVER AT DECEMBER 31, 1998 ($000'S) <TABLE> <S> <C> Three months or less $ 782,236 Over three months through six months 192,588 Over six months through twelve months 183,535 Over twelve months 125,221 ------------- Total certificates - $100,000 and over $ 1,283,580 ============= </TABLE> Foreign office deposits totaling $353,824 are denominated in amounts greater than $100,000. 12
13 RETURN ON EQUITY AND ASSETS The following table presents certain operating ratios: <TABLE> <CAPTION> 1998(1) 1997 1996(2) ------- ---- ------- <S> <C> <C> <C> Return on assets (a) 1.67% 1.74 1.55 Return on equity (b) 16.2% 18.4 16.3 Dividend payout ratio (c) 40.3% 33.6 34.8 Equity to assets ratio (d) 10.33% 9.48 9.46 </TABLE> - --------------------------------------------------------------- (a) net income divided by average assets (b) net income divided by average equity (c) dividends declared per share divided by diluted earnings per share, as originally reported (d) average equity divided by average assets (1) Certain 1998 ratios and statistics include merger-related items of $106.4 million pretax ($75.6 million after tax or $.28 per share). For comparability, excluding the merger-related items, return on average assets, return on average equity and the dividend payout ratio for 1998 would have been 1.93%, 18.7% and 34.8%, respectively. (2) Certain 1996 ratios include the special SAIF assessment of $37.9 million pretax ($24.6 million after tax or $.09 per share). For comparability, excluding the impact of this assessment, return on average assets, return on average equity and the dividend payout ratio for 1996 would have been 1.64%, 17.4% and 33.8%, respectively. 13
14 ITEM 2. PROPERTIES - ------------------- The Company's executive offices and the main office of the Bank are located on Fountain Square Plaza in downtown Cincinnati, Ohio, located in a 32-story office tower and a 5-story office building and parking garage known as the Fifth Third Center and the William S. Rowe Building, respectively. One of the Bank's subsidiaries owns 100 percent of these buildings. At December 31, 1998, the Company, through its subsidiary banks, five located in Ohio, two in Kentucky, one in Indiana, one in Arizona and one in Florida, operated 468 banking centers, of which 253 were owned and 215 were leased. The properties owned are free from mortgages and encumbrances. ITEM 3. LEGAL PROCEEDINGS - -------------------------- The Company and its subsidiaries are not parties to any material legal proceedings other than routine litigation incidental to its business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ None. EXECUTIVE OFFICERS OF THE REGISTRANT ------------------------------------ The names, ages and positions of the Executive Officers of the Company as of February 1, 1999 are listed below along with their business experience during the past 5 years. Officers are appointed annually by the Board of Directors at the meeting of Directors immediately following the Annual Meeting of Shareholders. CURRENT POSITION AND NAME AND AGE BUSINESS EXPERIENCE DURING PAST 5 YEARS - ------------ --------------------------------------- George A. Schaefer, Jr., 53 PRESIDENT AND CEO. President and Chief Executive Officer of the Company and the Bank. Neal E. Arnold, 38 EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER. Executive Vice President of the Company and the Bank since December, 1998. Chief Financial Officer of the Company and the Bank since June, 1997. Mr. Arnold has been the Treasurer of the Company and the Bank. Previously, Mr. Arnold was Treasurer and Senior Vice President of the Bank. 14
15 CURRENT POSITION AND NAME AND AGE BUSINESS EXPERIENCE DURING PAST 5 YEARS - ------------ --------------------------------------- Michael D. Baker, 48 EXECUTIVE VICE PRESIDENT. Executive Vice President of the Company and the Bank since August, 1995. Previously, Mr. Baker was Senior Vice President of the Company since March, 1993, and of the Bank. P. Michael Brumm, 51 EXECUTIVE VICE PRESIDENT. Executive Vice President of the Company and the Bank since August, 1995. Until June, 1997, Mr. Brumm was Chief Financial Officer of the Company and the Bank. Previously, Mr. Brumm was Senior Vice President and CFO of the Company and the Bank. James J. Hudepohl, 46 EXECUTIVE VICE PRESIDENT. Executive Vice President of the Company and the Bank since January, 1997. Previously, Mr. Hudepohl was Senior Vice President of the Bank. Michael K. Keating, 43 EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY. Executive Vice President of the Company and the Bank since August, 1995 and Secretary of the Company and the Bank since January, 1994. Previously, Mr. Keating was Senior Vice President and General Counsel of the Company since March, 1993, and Senior Vice President and Counsel of the Bank. Robert P. Niehaus, 52 EXECUTIVE VICE PRESIDENT. Executive Vice President of the Company and the Bank since August, 1995. Previously, Mr. Niehaus was Senior Vice President of the Company since March, 1993, and Senior Vice President of the Bank. Stephen J. Schrantz, 49 EXECUTIVE VICE PRESIDENT. Executive Vice President of the Company and the Bank. Gerald L. Wissel, 42 EXECUTIVE VICE PRESIDENT. Executive Vice President of the Bank since January, 1997. Auditor of the Company and the Bank. Previously, Mr. Wissel was Senior Vice President of the Bank. 15
16 CURRENT POSITION AND NAME AND AGE BUSINESS EXPERIENCE DURING PAST 5 YEARS - ------------ --------------------------------------- Robert J. King, Jr., 43 EXECUTIVE VICE PRESIDENT. Executive Vice President of the Company since June, 1997. Vice Chairman of Fifth Third Bank, Northwestern Ohio, N.A. Previously, Mr. King was President and CEO of Fifth Third Bank, Northwestern Ohio, N.A. Mr. King was Senior Vice President of the Company since March, 1995. James R. Gaunt, 53 EXECUTIVE VICE PRESIDENT. Executive Vice President of the Company since June, 1997. Senior Vice President of the Company since March, 1994, and President and CEO of Fifth Third Bank of Kentucky, Inc. since August, 1994. Previously, Mr. Gaunt was Senior Vice President of the Company and the Bank. Roger W. Dean, 36 CONTROLLER. Senior Vice President of the Company and of the Bank since March, 1997. Controller of the Company and the Bank since June 1993. Previously, Mr. Dean was Vice President of the Company and the Bank. Prior to June 1993, Mr. Dean was with Deloitte & Touche LLP, independent public accountants. Paul L. Reynolds, 37 ASSISTANT SECRETARY. Senior Vice President of the Company and the Bank since March, 1997. Assistant Secretary of the Company since March, 1995, General Counsel and Assistant Secretary of the Bank since January, 1995. Previously, Mr. Reynolds was Vice President, Counsel and Assistant Secretary of the Bank since 1990. Regina G. Livers, 41 COMMUNITY AFFAIRS OFFICER. Community Affairs Officer of the Company since March 1997. Previously, Ms. Livers was Vice President and Community Affairs Officer of the Bank. 16
17 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS - ------------------------------------------------------------------------------ The information required by this item is incorporated herein by reference to Page 1 of Registrant's 1998 Annual Report to Shareholders attached to this filing as Exhibit 13. ITEM 6. SELECTED FINANCIAL DATA - -------------------------------- The information required by this item is incorporated herein by reference to page 39 of Registrant's 1998 Annual Report to Shareholders attached to this filing as Exhibit 13. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - ------------------------------------------------------------------------- RESULTS OF OPERATIONS - --------------------- The information required by this item is incorporated herein by reference to pages 30 through 39 of Registrant's 1998 Annual Report to Shareholders attached to this filing as Exhibit 13. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - -------------------------------------------------------------------- The information required by this item is incorporated herein by reference to pages 37 and 38 of Registrant's 1998 Annual Report to Shareholders attached to this filing as Exhibit 13. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ---------------------------------------------------- The information required by this item is incorporated herein by reference to pages 13 through 29 and page 39 of Registrant's 1998 Annual Report to Shareholders attached to this filing as Exhibit 13. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND - ------------------------------------------------------------------------- FINANCIAL DISCLOSURE - -------------------- None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------------------------------ The information required by this item concerning Directors is incorporated herein by reference under the caption "ELECTION OF DIRECTORS" of the Registrant's 1998 Proxy Statement. 17
18 ITEM 11. EXECUTIVE COMPENSATION - -------------------------------- The information required by this item is incorporated herein by reference under the caption "EXECUTIVE COMPENSATION" of the Registrant's 1999 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - ------------------------------------------------------------------------ The information required by this item is incorporated herein by reference under the captions "CERTAIN BENEFICIAL OWNERS, ELECTION OF DIRECTORS AND EXECUTIVE COMPENSATION" of the Registrant's 1999 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------------------------------------------------------- The information required by this item is incorporated herein by reference under the caption "CERTAIN TRANSACTIONS" of the Registrant's 1999 Proxy Statement. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - -------------------------------------------------------------------------- <TABLE> <CAPTION> a) Documents Filed as Part of the Report Page ---- <S> <C> 1. Index to Financial Statements Consolidated Statements of Income for the Years Ended December 31, 1998, 1997 and 1996 * Consolidated Balance Sheets, December 31, 1998 and 1997 * Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 1998, 1997 and 1996 * Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996 * Notes to Consolidated Financial Statements * * Incorporated by reference to pages 13 through 29 of Registrant's 1998 Annual Report to Shareholders attached to this filing as Exhibit 13. 2. Financial Statement Schedules </TABLE> 18
19 The schedules for Registrant and its subsidiaries are omitted because of the absence of conditions under which they are required, or because the information is set forth in the consolidated financial statements or the notes thereto. 3. Exhibits Exhibit No. ----------- 3 Amended Articles of Incorporation and Code of Regulations (a) 4(a) Junior Subordinated Indenture, dated as of March 20, 1997 between Fifth Third Bancorp and Wilmington Trust Company, as Debenture Trustee (b) 4(b) Certificate Representing the 8.136% Junior Subordinated Deferrable Interest Debentures, Series A, of Fifth Third Bancorp (b) 4(c) Amended and Restated Trust Agreement, dated as of March 20, 1997 of Fifth Third Capital Trust II, among Fifth Third Bancorp, as Depositor, Wilmington Trust Company, as Property Trustee, and the Administrative Trustees name therein (b) 4(d) Certificate Representing the 8.136% Capital Securities, Series A, of Fifth Third Capital Trust I (b) 4(e) Guarantee Agreement, dated as of March 20, 1997 between Fifth Third Bancorp, as Guarantor, and Wilmington Trust Company, as Guarantee Trustee (b) 4(f) Agreement as to Expense and Liabilities, dated as of March 20, 1997 between Fifth Third Bancorp, as the holder of the Common Securities of Fifth Third Capital Trust I and Fifth Third Capital Trust II (b) 10(a) Fifth Third Bancorp Unfunded Deferred Compensation Plan for Non-Employee Directors (c) 10(b) Fifth Third Bancorp 1990 Stock Option Plan (d) 10(c) Fifth Third Bancorp 1987 Stock Option Plan (e) 19
20 10(d) Indenture effective November 19, 1992 between Fifth Third Bancorp, Issuer and NBD Bank, N.A., Trustee (f) 10(e) Fifth Third Bancorp 1993 Discount Stock Purchase Plan (g) 10(f) Fifth Third Bancorp Amended and Restated Stock Incentive Plan for selected Executive Officers, Employees and Directors of The Cumberland Federal Bancorporation, Inc. (h) 10(g) Fifth Third Bancorp Master Profit Sharing Plan (i) 10(h) Fifth Third Bancorp Amended and Restated Stock Option and Incentive Plan for Selected Executive Officers, Employees and Directors of Falls Financial, Inc. (j) 10(i) Fifth Third Bancorp Amended 1993 Discount Stock Purchase Plan (k) 10(j) Fifth Third Bancorp 1998 Long-Term Incentive Stock Plan (l) 10(k) Fifth Third Bancorp Variable Compensation Plan (m) 10(l) CitFed Bancorp, Inc. Amended and Restated 1991 Stock Option and Incentive Plan (n) 11 Computation of Consolidated Earnings Per Share for the Years Ended December 31, 1998, 1997, 1996, 1995 and 1994 13 Fifth Third Bancorp 1998 Annual Report to Shareholders 21 Fifth Third Bancorp Subsidiaries 23 Independent Auditors' Consent 27 Financial Data Schedules for the Years Ended December 31, 1998, 1997 and 1996 27.1 Financial Data Schedules for the Three Months Ended March 31, 1998, Six Months Ended June 30, 1998 and Nine Months Ended September 30, 1998 27.2 Financial Data Schedules for the Three Months Ended March 31, 1997, Six Months Ended June 30, 1997 and Nine Months Ended September 30, 1997 20
21 b) Reports on Form 8-K None. - ------------------------ (a) Incorporated by reference to Registrant's Registration Statement, Exhibits 3.1 and 3.2, on Form S-4, Registration No. 33-19965. (b) Incorporated by reference to Registrant's filing with the Securities and Exchange Commission on March 26, 1997, a Form 8-K Current Report. (c) Incorporated in this Form 10-K Annual Report by reference to Form 10-K filed for fiscal year ended December 31, 1985. (d) Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33-34075. (e) Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33-13252. (f) Incorporated by reference to Registrant's filing with the Securities and Exchange Commission on November 18, 1992, a Form 8-K Current Report dated November 16, 1992 and as Exhibit 4.1 to a Registration Statement on Form S-3, Registration No. 33-54134. (g) Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33-60474. (h) Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33-55223. (i) Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33-55553. (j) Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33-61149. (k) Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as Exhibit 10 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1996. 21
22 (l) Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 333-58249. (m) Incorporated by reference to Registrant's Proxy Statement dated February 9, 1998. (n) Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 333-48049 and by reference to CitFed Bancorp's Form 10-K for the fiscal year ended March 31, 1996. 22
23 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIFTH THIRD BANCORP (Registrant) /s/George A. Schaefer, Jr. February 12, 1999 - ------------------------- George A. Schaefer, Jr. President and CEO (Principal Executive Officer) Pursuant to requirements of the Securities Exchange Act of 1934, this report has been signed on February 12, 1999 by the following persons on behalf of the Registrant and in the capacities indicated. <TABLE> <S> <C> <C> /s/Neal E. Arnold /s/Roger W. Dean /s/Robert B. Morgan - -------------------------------- ------------------------------ ------------------------------ Neal E. Arnold Roger W. Dean Robert B. Morgan Executive Vice President and CFO Controller Director (Principal Financial Officer) (Principal Accounting Officer) /s/Darryl F. Allen /s/Joan R. Herschede /s/David E. Reese - -------------------------------- ------------------------------ ------------------------------ Darryl F. Allen Joan R. Herschede David E. Reese Director Director Director /s/John F. Barrett /s/Allen M. Hill - -------------------------------- ------------------------------ ------------------------------ John F. Barrett Allen M. Hill James E. Rogers Director Director Director /s/Gerald V. Dirvin /s/Brian H. Rowe - -------------------------------- ------------------------------ ------------------------------ Gerald V. Dirvin William G. Kagler Brian H. Rowe Director Director Director /s/James D. Kiggen - -------------------------------- ------------------------------ ------------------------------ Thomas B. Donnell James D. Kiggen Donald B. Schackelford Director Director Director /s/Richard T. Farmer /s/Jerry L. Kirby /s/George A. Schaefer, Jr. - -------------------------------- ------------------------------ ------------------------------ Richard T. Farmer Jerry L. Kirby George A. Schaefer, Jr. Director Director Director, President and CEO (Principal Executive Officer) /s/Joseph H. Head, Jr. /s/Mitchel D. Livingston, Ph. D. /s/John J. Schiff, Jr. - -------------------------------- ------------------------------ ------------------------------ Joseph H. Head, Jr. Mitchel D. Livingston, Ph. D. John J. Schiff, Jr. Director Director Director </TABLE> 23
24 /s/Dennis J. Sullivan, Jr. - -------------------------------- Dennis J. Sullivan, Jr. Director /s/Dudley S. Taft - -------------------------------- Dudley S. Taft Director 24