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What changed in FIFTH THIRD BANCORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of FIFTH THIRD BANCORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+717 added−741 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-24)

Top changes in FIFTH THIRD BANCORP's 2023 10-K

717 paragraphs added · 741 removed · 553 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

55 edited+24 added−16 removed124 unchanged
Biggest changeThe following table presents the minimum regulatory capital ratios, minimum ratio plus stress capital buffer, and well-capitalized minimums compared with the Bancorp’s and the Bank’s regulatory capital ratios as of December 31, 2022, calculated using the regulatory capital methodology applicable during 2022: Regulatory Capital Ratios: Minimum Regulatory Capital Ratio Minimum Ratio + Stress Capital Buffer (a) Well-Capitalized Minimums (b) Actual at December 31, 2022 CET1 risk-based capital ratio: Fifth Third Bancorp 4.50 % 7.00 N/A 9.28 Fifth Third Bank, National Association 4.50 7.00 6.50 11.31 Tier 1 risk-based capital ratio: Fifth Third Bancorp 6.00 8.50 6.00 10.53 Fifth Third Bank, National Association 6.00 8.50 8.00 11.31 Total risk-based capital ratio: Fifth Third Bancorp 8.00 10.50 10.00 12.79 Fifth Third Bank, National Association 8.00 10.50 10.00 12.81 Leverage ratio: Fifth Third Bancorp 4.00 N/A N/A 8.56 Fifth Third Bank, National Association 4.00 N/A 5.00 9.23 (a) Reflects the stress capital buffer of 2.5% applicable during 2022.
Biggest changeThe FRB may require BHCs, including the Bancorp, to maintain capital ratios substantially in excess of mandated minimum levels, depending upon general economic conditions and a BHC’s particular condition, risk profile, and growth plans. 21 Fifth Third Bancorp Table of Contents The following table presents the minimum regulatory capital ratios, minimum ratio plus stress capital buffer, and well-capitalized minimums compared with the Bancorp’s and the Bank’s regulatory capital ratios as of December 31, 2023, calculated using the regulatory capital methodology applicable during 2023: Regulatory Capital Ratios: Minimum Regulatory Capital Ratio Minimum Ratio + Stress Capital Buffer (a) Well-Capitalized Minimums (b) Actual at December 31, 2023 CET1 risk-based capital ratio: Fifth Third Bancorp 4.50 % 7.00 N/A 10.29 Fifth Third Bank, National Association 4.50 7.00 6.50 12.42 Tier 1 risk-based capital ratio: Fifth Third Bancorp 6.00 8.50 6.00 11.59 Fifth Third Bank, National Association 6.00 8.50 8.00 12.42 Total risk-based capital ratio: Fifth Third Bancorp 8.00 10.50 10.00 13.72 Fifth Third Bank, National Association 8.00 10.50 10.00 13.85 Leverage ratio: Fifth Third Bancorp 4.00 N/A N/A 8.73 Fifth Third Bank, National Association 4.00 N/A 5.00 9.38 (a) Reflects the stress capital buffer of 2.5% applicable during 2023.
In addition to traditional benefit offerings, the Bancorp offers a 401(k) retirement program that pays a match up to 7% of an employee’s eligible compensation, parental bonding leave, telemedicine services, and tools that help find the highest quality and lowest cost treatment options. These services help assist employees in maintaining a healthy work-life balance.
In addition to traditional benefit offerings, the Bancorp offers a 401(k) retirement program that pays a match up to 7% of an employee’s eligible compensation, parental bonding leave, telemedicine services and tools that help find the highest quality and lowest cost treatment options. These services assist employees in maintaining a healthy work-life balance.
FDIC Assessments The DIF provides insurance coverage for certain deposits, up to a standard maximum deposit insurance amount of $250,000 per depositor per account ownership category and is funded through assessments on insured depository institutions, based on the risk each institution poses to the DIF.
FDIC Assessments The DIF provides insurance coverage for certain deposits, up to a standard maximum deposit insurance amount of $250,000 per depositor per account ownership category per bank and is funded through assessments on insured depository institutions, based on the risk each institution poses to the DIF.
Refer to Exhibit 21 filed as an attachment to this Annual Report on Form 10-K for a list of subsidiaries of the Bancorp as of February 15, 2023. Additional information regarding the Bancorp’s businesses is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations. Availability of Financial Information The Bancorp files reports with the SEC.
Refer to Exhibit 21 filed as an attachment to this Annual Report on Form 10-K for a list of subsidiaries of the Bancorp as of February 15, 2024. Additional information regarding the Bancorp’s businesses is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations. Availability of Financial Information The Bancorp files reports with the SEC.
Dodd-Frank provides that the SEC must issue rules directing the stock exchanges to prohibit listing any security of a company unless the company develops and implements a policy providing for disclosure of the policy of the company on incentive-based compensation that is based on financial information required to be reported under the securities laws.
Dodd-Frank required the SEC to issue rules directing the stock exchanges to prohibit listing any security of a company unless the company develops and implements a policy providing for disclosure of the policy of the company on incentive-based compensation that is based on financial information required to be reported under the securities laws.
In addition, various U.S. regulators, including the OCC, FRB and the SEC, have increased their focus on cyber security through guidance, examinations and regulations. The Bancorp has adopted a customer information security program that has been approved by the Bancorp’s Board of Directors.
In addition, various U.S. regulators, including the OCC, FRB and the SEC, have increased their focus on cybersecurity through guidance, examinations and regulations. The Bancorp has adopted a customer information security program that has been approved by the Bancorp’s Board of Directors.
As a result, the FRB’s annual CCAR process is now used to calibrate the Bancorp’s stress capital buffer requirement. Among other changes, the revised capital plan rule also eliminates the assumption that the Bancorp’s balance sheet assets would increase over the planning horizon.
As a result, the FRB’s annual CCAR process is now used to calibrate the Bancorp’s stress capital buffer requirement. Among other changes, the revised capital plan rule also eliminated the assumption that the Bancorp’s balance sheet assets would increase over the planning horizon.
In addition, provided that the Bancorp is otherwise in compliance with automatic restrictions on distributions under the Capital Rules, the Bancorp will no longer be required to seek prior approval to make capital distributions in excess of those included in its capital plan.
In addition, provided that the Bancorp is otherwise in compliance with automatic restrictions on distributions under the Capital Rules, the Bancorp is no longer required to seek prior approval to make capital distributions in excess of those included in its capital plan.
If the FRB were to apply the same or a very similar well-capitalized standard to BHCs as that applicable to the Bank, the Bancorp’s capital ratios as of December 31, 2022, would exceed such revised well-capitalized standard.
If the FRB were to apply the same or a very similar well-capitalized standard to BHCs as that applicable to the Bank, the Bancorp’s capital ratios as of December 31, 2023, would exceed such revised well-capitalized standard.
The FRB may require a BHC to make capital injections into a troubled subsidiary bank and may charge the BHC with engaging in unsafe and unsound practices if the BHC fails to commit resources to such a subsidiary bank or if it undertakes actions that the FRB believes might jeopardize the BHC’s ability to commit resources to such subsidiary bank.
U.S. banking regulators may require a BHC to make capital injections into a troubled subsidiary bank and may charge the BHC with engaging in unsafe and unsound practices if the BHC fails to commit resources to such a subsidiary bank or if it undertakes actions that the FRB believes might jeopardize the BHC’s ability to commit resources to such subsidiary bank.
On October 18, 2022, the FDIC adopted an amended restoration plan to increase the likelihood that the reserve ratio would be restored to at least 1.35% by September 30, 2028. The FDIC’s amended restoration plan increases the initial base deposit insurance assessment rate schedules uniformly by 2 basis points, beginning in the first quarterly assessment period of 2023.
On October 18, 2022, the FDIC adopted an amended restoration plan to increase the likelihood that the reserve ratio would be restored to at least 1.35% by September 30, 2028. The FDIC’s amended restoration plan increases the initial base deposit insurance assessment rate schedules uniformly by 2 basis points, which began with the first quarterly assessment period of 2023.
On October 10, 2019, the FRB adopted a rule that adjusts the thresholds at which certain enhanced prudential standards (“EPS”) apply to BHCs with $100 billion or more in total consolidated assets (the “EPS Tailoring Rule”) and the FRB, the Office of the Comptroller of the Currency (the “OCC”) and FDIC adopted a rule that similarly adjusts the thresholds at which certain other capital and liquidity standards apply to BHCs and banks with $100 billion or more in total consolidated assets (the “Capital and Liquidity Tailoring Rule” and, together with the EPS Tailoring Rule, the “Tailoring Rules”).
Subsequent to the EGRRCPA, the FRB adopted a rule that adjusts the thresholds at which certain enhanced prudential standards (“EPS”) apply to BHCs with $100 billion or more in total consolidated assets (the “EPS Tailoring Rule”) and the FRB, the Office of the Comptroller of the Currency (the “OCC”) and FDIC adopted a rule that similarly adjusts the thresholds at which certain other capital and liquidity standards apply to BHCs and banks with $100 billion or more in total consolidated assets (the “Capital and Liquidity Tailoring Rule” and, together with the EPS Tailoring Rule, the “Tailoring Rules”).
For purposes of the FRB’s Regulation Y, including determining whether a BHC meets the requirements to be an FHC, BHCs, such as the Bancorp, must maintain 25 Fifth Third Bancorp Table of Contents a Tier 1 Risk-Based Capital Ratio of 6.0% or greater and a Total Risk-Based Capital Ratio of 10.0% or greater.
For purposes of the FRB’s Regulation Y, including determining whether a BHC meets the requirements to be an FHC, BHCs, such as the Bancorp, must maintain a Tier 1 Risk-Based Capital Ratio of 6.0% or greater and a Total Risk-Based Capital Ratio of 10.0% or greater.
Fifth Third is among the largest money managers in the Midwest and, as of December 31, 2022, had $510 billion in assets under care, of which it managed $55 billion for individuals, corporations and not-for-profit organizations. Investor information and press releases can be viewed on the Bancorp’s Investor Relations website at ir.53.com.
Fifth Third is among the largest money managers in the Midwest and, as of December 31, 2023, had $574 billion in assets under care, of which it managed $59 billion for individuals, corporations and not-for-profit organizations. Investor information and press releases can be viewed on the Bancorp’s Investor Relations website at ir.53.com.
These laws obligate depository institutions and broker-dealers to verify their customers’ identity, conduct customer due diligence, report on suspicious activity, file reports of transactions in currency and conduct enhanced due diligence on certain accounts. They also prohibit U.S. persons from engaging in transactions with certain designated restricted countries and persons.
These laws obligate depository 23 Fifth Third Bancorp Table of Contents institutions and broker-dealers to verify their customers’ identity, conduct customer due diligence, report on suspicious activity, file reports of transactions in currency and conduct enhanced due diligence on certain accounts. They also prohibit U.S. persons from engaging in transactions with certain designated restricted countries and persons.
The final rule is applicable to BHCs with $100 26 Fifth Third Bancorp Table of Contents billion or more in total consolidated assets and was effective on October 1, 2020. The FRB uses the supervisory stress test to determine the Bancorp’s stress capital buffer, subject to a floor of 2.5%.
The final rule is applicable to BHCs with $100 billion or more in total consolidated assets and was effective on October 1, 2020. The FRB uses the supervisory stress test to determine the Bancorp’s stress capital buffer, subject to a floor of 2.5%.
In April 2019, the FDIC released an advanced notice of proposed rulemaking with respect to the FDIC’s bank resolution plan requirements that requested comments on how to better tailor bank resolution 28 Fifth Third Bancorp Table of Contents plans to a firm’s size, complexity, and risk profile.
In April 2019, the FDIC released an advanced notice of proposed rulemaking with respect to the FDIC’s bank resolution plan requirements that requested comments on how to better tailor bank resolution plans to a firm’s size, complexity, and risk profile.
As of December 31, 2022, Fifth Third had $207 billion in assets and operates 1,087 full-service Banking Centers and 2,132 Fifth Third branded ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia, North Carolina and South Carolina. The Bancorp operates three main businesses: Commercial Banking, Consumer and Small Business Banking and Wealth & Asset Management.
As of December 31, 2023, Fifth Third had $215 billion in assets and operates 1,088 full-service Banking Centers and 2,104 Fifth Third branded ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia, North Carolina and South Carolina. The Bancorp operates three main businesses: Commercial Banking, Consumer and Small Business Banking and Wealth & Asset Management.
Similar to the capital conservation buffer, the Bancorp must maintain capital ratios above the sum of its minimum risk-based capital ratios and the stress capital buffer to avoid certain limitations on capital distributions and discretionary bonuses to executive officers.
Similar to the capital conservation 22 Fifth Third Bancorp Table of Contents buffer, the Bancorp must maintain capital ratios above the sum of its minimum risk-based capital ratios and the stress capital buffer to avoid certain limitations on capital distributions and discretionary bonuses to executive officers.
The Tailoring Rules establish four risk-based categories of institutions, and the extent to 22 Fifth Third Bancorp Table of Contents which enhanced prudential standards and certain other capital and liquidity standards apply to these BHCs and banks depends on the banking organization’s category.
The Tailoring Rules establish four risk-based categories of institutions, and the extent to which enhanced prudential standards and certain other capital and liquidity standards apply to these BHCs and banks depends on the banking organization’s category.
Future Legislative and Regulatory Initiatives Federal and state legislators as well as regulatory agencies may introduce or enact new laws and rules, or amend existing laws and rules, that may affect the regulation of financial institutions and their holding companies. The impact of any future legislative or regulatory changes cannot be predicted.
Future Legislative and Regulatory Initiatives Federal and state legislators as well as regulatory agencies may introduce or enact new laws and rules, or amend existing laws and rules, that may affect the regulation of financial institutions and their holding companies.
These employees support the organization’s ambition to be the One Bank people most value and trust by upholding its four Core Values: Be Respectful & Inclusive, Take Accountability, Work as One Bank and Act with Integrity. 20 Fifth Third Bancorp Table of Contents Equality, Equity and Inclusion Fifth Third believes that inclusion and diversity are essential to living its Core Values, serving its customers, delivering financial performance and being recognized as a leader in building an engaging workplace, a strong supplier base and vibrant communities.
These employees support the organization’s vision to be the One Bank people most value and trust by upholding its four Core Values: Be Respectful & Inclusive, Take Accountability, Work as One Bank and Act with Integrity. 16 Fifth Third Bancorp Table of Contents Equality, Equity and Inclusion Fifth Third believes that an inclusive culture is essential to living its Core Values, serving its customers, delivering financial performance and being recognized as a leader in building an engaging workplace.
The FDIC, FRB and OCC have jointly issued rules for institutions that do not apply advanced approaches to regulatory capital, including the Bancorp and the Bank.
The FDIC, FRB and OCC have jointly issued rules for institutions that do not apply advanced approaches to regulatory capital, including the 20 Fifth Third Bancorp Table of Contents Bancorp and the Bank.
The Bancorp’s holistic approach to collecting, measuring and responding to employee feedback enhances engagement with employees at critical points during their careers and during times of change in business or work environments. Feedback is collected through a variety of methods, including the Employee Viewpoints Survey which includes questions around engagement, inclusion, customer experience and the Bancorp’s culture.
The Bancorp’s holistic approach to collecting, measuring and responding to employee feedback enhances the employee experience at critical points during times of change in business or work environments. Feedback is collected through a variety of methods, including the Employee Viewpoints Survey which includes questions related to culture, engagement, inclusion, employee well-being, expectations and intent to stay.
The Bancorp’s stress capital buffer requirement has been 2.5% since the introduction of this framework and was most recently affirmed in June of 2022 as part of the FRB’s 2022 supervisory stress test with an effective date of October 1, 2022. The Bancorp’s capital ratios have exceeded the stress capital buffer requirement for all periods presented.
The Bancorp’s stress capital buffer requirement has been 2.5% since the introduction of this framework and was most recently affirmed as part of Fifth Third’s 2023 Capital Plan submission with an effective date of October 1, 2023. The Bancorp’s capital ratios have exceeded the stress capital buffer requirement for all periods presented.
Total Rewards – Compensation and Benefits The Bancorp is committed to providing competitive compensation programs that attract and retain top talent to drive its business strategy, effectively manage risk within incentive programs designed to pay for performance, consider applicable regulatory expectations with attention to corporate values and behavioral expectations, and align with the creation of long-term shareholder value.
Total Rewards – Compensation and Benefits The Bancorp is committed to providing competitive compensation programs that attract and retain top talent, while driving its business strategy and effectively managing risk. Compensation programs are designed to pay for performance and consider applicable regulatory expectations, corporate values and behavioral expectations. The Bancorp’s Compensation Philosophy aligns with the creation of long-term shareholder value.
There have been a number of significant 27 Fifth Third Bancorp Table of Contents enforcement actions by regulators, as well as state attorneys general and the Department of Justice, against banks, broker-dealers and non-bank financial institutions with respect to these laws and some have resulted in substantial penalties, including criminal pleas.
There have been a number of significant enforcement actions by regulators, as well as state attorneys general and the Department of Justice, against banks, broker-dealers and non-bank financial institutions with respect to these laws and some have resulted in substantial penalties, including criminal pleas. The Bancorp’s Board has approved policies and procedures that the Bancorp believes comply with these laws.
No assurances can be given that the Bank will, in any circumstances, pay dividends to the Bancorp. 23 Fifth Third Bancorp Table of Contents The Bancorp’s ability to declare and pay dividends is similarly limited by federal banking law and FRB regulations and policy.
Certain contractual restrictions also may limit the ability of the Bank to pay dividends to the Bancorp. No assurances can be given that the Bank will, in any circumstances, pay dividends to the Bancorp. The Bancorp’s ability to declare and pay dividends is similarly limited by federal banking law and FRB regulations and policy.
Each year, the Bancorp requires all employees and contingent workers to complete courses related to risk and compliance on topics that support strong risk management behaviors and accountability. In addition, the Bancorp’s learning and development strategy delivers personalized and accessible experiences that fuel career growth and help retain talent.
The Bancorp’s learning, development and career mobility strategy delivers personalized and accessible experiences that fuel career growth and help retain talent. In 2023, employees completed over 779,000 training hours. In addition, the Bancorp requires all employees and contingent workers to complete compliance courses that support strong risk management behaviors and accountability.
The FRB also must consider the CRA record of each subsidiary bank of a BHC in connection with any acquisition or merger application filed by the BHC.
The FRB also must consider the CRA record of each subsidiary bank of a BHC in connection with any acquisition or merger application filed by the BHC. An unsatisfactory CRA record could substantially delay or result in the denial of an approval or application by the Bancorp or the Bank.
(b) Refle cts the well-capitalized standard applicable to the Bancorp under FRB Regulation Y and the well-capitalized standard applicable to the Bank. Liquidity Regulation As a result of the Tailoring Rules, the Bancorp, as a Category IV banking organization, is now exempt from the liquidity coverage ratio requirement, but remains subject to internal liquidity stress tests and standards.
Liquidity Regulation As a result of the Tailoring Rules, the Bancorp, as a Category IV banking organization, is exempt from the liquidity coverage ratio requirement but remains subject to internal liquidity stress tests and standards.
The CFTC’s Title VII regulations are applicable to the Bank’s activity as a swap dealer and include rules related to internal and external business conduct standards, reporting and recordkeeping, mandatory clearing for certain swaps, and trade documentation and confirmation requirements.
As a registered swap dealer, the Bank is subject to the requirements of Title VII, including rules related to internal and external business conduct standards, reporting, recordkeeping, mandatory clearing for certain swaps, and trade documentation and confirmation requirements.
As of December 31, 2022, the Bancorp was permitted to use 100% of its eligible retained income for these purposes in the first quarter of 2023. This definition applies with respect to all of the Bancorp’s capital requirements.
As of December 31, 2023, the Bancorp was permitted to use 100% of its eligible retained income for these purposes in the first quarter of 2024.
On May 24, 2018, the EGRRCPA was signed into law. Among other regulatory changes, the EGRRCPA amends various sections of Dodd-Frank, including section 165, which was revised to raise the asset thresholds for determining the application of enhanced prudential standards for BHCs.
The EGRRCPA amended various sections of Dodd-Frank, including section 165, which was revised to raise the asset thresholds for determining the application of enhanced prudential standards for BHCs.
The CFTC and U.S. banking regulators have finalized most rules applicable to the over-the-counter derivatives markets and swap dealers, and the SEC has finalized most of its rules related to security-based swaps.
The Bank is registered with the CFTC as a swap dealer. With the finalization of the position limits and capital requirements, CFTC and U.S. banking regulators have finalized the rules implementing Title VII applicable to the over-the-counter derivatives markets and swap dealers, and the SEC has finalized most of its rules related to security-based swaps.
Acquisitions The BHCA requires the prior approval of the FRB for a BHC to acquire substantially all the assets of a bank or to acquire direct or indirect ownership or control of more than 5% of any class of the voting shares of any bank, BHC or savings association, or to merge or consolidate with any BHC.
This discussion is not intended to describe all laws and regulations applicable to the Bancorp, the Bank and the Bancorp’s other subsidiaries. 18 Fifth Third Bancorp Table of Contents Acquisitions The BHCA requires the prior approval of the FRB for a BHC to acquire substantially all the assets of a bank or to acquire direct or indirect ownership or control of more than 5% of any class of the voting shares of any bank, BHC or savings association, or to merge or consolidate with any BHC.
In addition, the U.S. banking regulators have finalized regulations applicable to the Bank regarding mandatory posting and collection of margin by certain swap counterparties and segregation of customer funds. The Bank is not currently subject to regulation as a security-based swap dealer.
In addition, the U.S. banking regulators have finalized regulations applicable to the Bank regarding mandatory posting, collection, and segregation of margin by certain swap counterparties, and capital requirements.
The Bank accepts customer deposits that are insured by the DIF and, therefore, must pay insurance premiums. The FDIC may increase the Bank’s insurance premiums based on various factors, including the FDIC’s assessment of its risk profile. As of June 30, 2020, the DIF reserve ratio fell to 1.30%, below the statutory minimum of 1.35%.
The FDIC may increase the Bank’s insurance premiums based on various factors, including the FDIC’s assessment of its risk profile. 19 Fifth Third Bancorp Table of Contents As of June 30, 2020, the DIF reserve ratio fell to 1.30%, below the statutory minimum of 1.35%.
No final rule has been issued, but the rulemaking may affect the Bank’s CRA compliance obligations in the future. Regulatory Capital Requirements The Bancorp and the Bank are subject to certain risk-based capital and leverage ratio requirements under the capital adequacy rules (the “Capital Rules”) adopted by the FRB, for the Bancorp, and by the OCC, for the Bank.
Regulatory Capital Requirements The Bancorp and the Bank are subject to certain risk-based capital and leverage ratio requirements under the capital adequacy rules (the “Capital Rules”) adopted by the FRB, for the Bancorp, and by the OCC, for the Bank.
The following discussion describes certain elements of the comprehensive regulatory framework applicable to the Bancorp and its subsidiaries. This discussion is not intended to describe all laws and regulations applicable to the Bancorp, the Bank, and the Bancorp’s other subsidiaries.
The following discussion describes certain elements of the comprehensive regulatory framework applicable to the Bancorp and its subsidiaries.
The amount of the modified CECL transition amount was then fixed as of December 31, 2021 and that amount will be subject to the three-year phase out.
The amount of the modified CECL transition amount was then fixed as of December 31, 2021 and that amount is subject to the three-year phase out. Refer to the Capital Management section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for more information.
These rules impose requirements regarding routing and exclusivity of electronic debit transactions, and generally require that debit cards be usable in at least two unaffiliated networks.
These rules impose requirements regarding routing and exclusivity of electronic debit transactions, and generally require that debit cards be usable in at least two unaffiliated networks. On October 25, 2023, the FRB proposed to lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction.
As a result, discussions, and in some cases, negotiations regarding acquisitions and investments may take place and future transactions involving cash, debt or equity securities may occur. These typically involve the payment of a premium over book value and current market price, and therefore, some dilution of book value and net income per share may occur with any future transactions.
As a result, discussions, and in some cases, negotiations regarding acquisitions and investments may take place and future transactions involving cash, debt or equity securities may occur.
The rules implementing the pay ratio provisions of Dodd-Frank require companies to disclose the ratio of the compensation of its chief executive officer to the median compensation of its employees.
The rules implementing the pay ratio provisions of Dodd-Frank require companies to disclose the ratio of the compensation of its chief executive officer to the median compensation of its employees. The SEC’s rules also direct the stock exchanges to prohibit listing classes of equity securities of a company if a company’s compensation committee members are not independent.
As of December 31, 2022, the Bancorp’s employees were approximately 58% female and approximately 28% persons of color: 72% White, 13% Black/African American, 8% Hispanic/Latino, 5% Asian, and 2% Other. The Bancorp has continued to focus on accelerating racial equality, equity and inclusion as a key priority.
As of December 31, 2023, the Bancorp’s employees were approximately 57% female and approximately 29% persons of color: 71% White, 13% Black/African American, 8% Hispanic/Latino, 6% Asian, and 2% Other. The Bancorp has embedded approaches that continue to drive strategies across several key workstreams that focus on employees, customers, and the community.
Resolution Planning In past years, the Bancorp was required to submit annually to the FRB and the FDIC a resolution plan for the orderly resolution of the Bancorp and its significant legal entities under the U.S. Bankruptcy Code or other applicable insolvency laws in a rapid and orderly fashion in the event of future material financial distress or failure.
Fifth Third continues to monitor the development of these proposed rule revisions. 24 Fifth Third Bancorp Table of Contents Resolution Planning In past years, the Bancorp was required to submit annually to the FRB and the FDIC a resolution plan for the orderly resolution of the Bancorp and its significant legal entities under the U.S.
The Bancorp’s Board has approved policies and procedures that the Bancorp believes comply with these laws. Executive Compensation Pursuant to Dodd-Frank, each public company must give its shareholders the opportunity to vote on the compensation of its executives at least once every three years.
Executive Compensation Pursuant to Dodd-Frank, each public company must give its shareholders the opportunity to vote on the compensation of its executives at least once every three years. The SEC also adopted rules on disclosure and voting requirements for golden parachute compensation that is payable to named executive officers in connection with sale transactions.
These requirements do not currently have a material impact and are not expected to have a future material impact on the Bancorp’s investing and trading activities. Derivatives Title VII of Dodd-Frank imposes a regulatory structure on the over-the-counter derivatives market, including requirements for clearing, exchange trading, capital margin, segregation trade reporting, and recordkeeping.
Regulatory Regime for Derivatives Title VII of Dodd-Frank imposes a registration regime and regulatory structure on the over-the-counter derivatives market, including requirements for clearing, exchange trading, capital margin, segregation trade reporting, position limits, business conduct standards, and recordkeeping. Title VII also requires certain persons to register as a swap dealer or a security-based swap dealer.
Human Capital Resources The Bancorp’s human capital programs are designed to attract, develop and retain a workforce that reflects the communities it serves. As of December 31, 2022, the Bancorp had 19,319 full-time equivalent employees, compared to 19,112 as of December 31, 2021.
Human Capital Resources The Bancorp’s human capital strategy is designed to attract, develop and retain talent. This strategy ensures that Fifth Third has the talent, capabilities, and organizational structure to support business needs now and in the future. As of December 31, 2023, the Bancorp had 18,724 full-time equivalent employees, compared to 19,319 as of December 31, 2022.
The Bancorp has also continued to progress towards its goal of achieving and sustaining a 10% supplier diversity spend during the year ended December 31, 2022. Engagement and Development Fifth Third believes that an engaged workforce is one of its most valuable assets in sustaining its success. The Bancorp’s continuous listening strategy forms the foundation of its employee culture.
BRGs across the footprint share best practices, embedding specific actions and activities to progress a culture of belonging and engagement. Engagement and Development Fifth Third believes that an engaged workforce is one of its most valuable assets in sustaining its success. The Bancorp’s continuous listening strategy is an important component of its inclusive culture.
Regulation and Supervision In addition to the generally applicable state and federal laws governing businesses and employers, the Bancorp and the Bank are subject to extensive regulation and supervision under federal and state laws and regulations applicable to financial institutions and their parent companies.
These typically involve the payment of a premium over book value and current market price, and therefore, some dilution of tangible book value and net income per share may occur with any future transactions. 17 Fifth Third Bancorp Table of Contents Regulation and Supervision In addition to the generally applicable state and federal laws governing businesses and employers, the Bancorp and the Bank are subject to extensive regulation and supervision under federal and state laws and regulations applicable to financial institutions and their parent companies.
The Bancorp continuously analyzes its compensation and benefits programs and practices with the objective of providing all employees with an equal opportunity to maximize their potential. In 2022, the Bancorp raised its minimum wage to $20 per hour and concurrently provided a wage adjustment for its first four job levels.
The Bancorp continuously analyzes its compensation and benefits programs and practices with the objective of providing all employees with an equal opportunity to maximize their potential. Although not a nationwide requirement, Fifth Third recognizes a footprint-wide salary history ban and does not ask for a candidate’s current salary to use as a factor in determining an employment offer.
However, such changes could affect the Bancorp’s business, financial condition and results of operations. 29 Fifth Third Bancorp Table of Contents
The regulatory agencies may seek to apply higher standards to the Bancorp and the Bank than as required by law, through supervision. The impact of any future legislative or regulatory changes, or supervisory direction, cannot be predicted. However, such changes could affect the Bancorp’s business, financial condition and results of operations. 26 Fifth Third Bancorp Table of Contents
The Bancorp has an Executive Diversity Leadership Council which continues to lead concentrated strategies across several key workstreams that focus on employees, customers, and the community. To support its commitment, the Bancorp has invested in the ongoing growth and expansion of its employee Business Resource Groups (“BRGs”).
To support its commitment, the Bancorp has invested in the ongoing growth and expansion of its nine employee Business Resource Groups (“BRGs”). All employees regardless of background may join any BRG. Each BRG focuses on three pillars: employee development, community involvement/volunteerism and business innovation.
These included minimizing benefit cost increases on its medical plans, transitioning to a new paid time off structure that provides employees more control and flexibility to manage their time away and updating its short-term disability program to enhance the value it provides to employees.
In 2023, the Bancorp transitioned to a new paid time off structure that provides employees more control and flexibility to manage their time away, which includes paid time off for volunteering. In addition, the Bancorp enhanced its wellness offerings and resources to support employees and their families.
Removed
These groups: African American, Asian & Pacific Islander, Individuals with Disabilities, Latino, LGBTQ+, Military, Women’s, Young Professionals, and Sustainability support the Bancorp’s three BRG Pillars; to drive business innovation, encourage community volunteerism, and provide an environment that supports employee development, engagement and networking. In 2022, Fifth Third launched a new Sustainability BRG.
Added
Recruitment and Retention The Bancorp continues to navigate the changing talent landscape by monitoring the external environment and adapting talent strategies to meet internal needs. The Bancorp’s focus on the Employee Value Proposition demonstrates a continued commitment to employees by developing great leaders, evolving the employee experience, and focusing on equality, equity and inclusion.
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The group focuses on social, environmental and related matters which include, but are not limited to, community engagement initiatives, philanthropy, environmental programs and corporate governance practices.
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Full year turnover significantly improved, decreasing from 21.0% in 2022 to 16.9% in 2023. The Bancorp’s focus on multicultural recruitment strengthens the organization by fostering an inclusive culture.
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The Bancorp continued to drive meaningful change in our inclusion and diversity efforts by progressing towards the Six Bold Goals it plans to achieve by 2025: • Complete Unconscious Bias Awareness training for 100% of employees • Ensure the diversity of the Bancorp’s workforce matches the markets it serves • Grow leadership positions at each management level for women and persons of color • Create a work environment where there is no disparity in race or gender • Advance the Bancorp as a leader in diversity and inclusion • Achieve and sustain a 10% supplier diversity spend Progressing on these goals, the Bancorp has seen an increase in diversity of its workforce in seven of the nine states in its branch network footprint that include 250 or more employees and continues to be recognized in various nationwide rankings for advancing as a leader in inclusion and diversity.
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To attract the most talented employees, the Bancorp continues to enhance relationships with universities and partner organizations to attract top talent from various backgrounds including women, minorities, individuals with disabilities, veterans and LGBTQ+ individuals. Creating and developing an inclusive workforce is important for the Bancorp’s business growth, leading to enhanced innovation while focusing on the needs of our customers.
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Employees completed over 775,000 training hours during 2022, including content covering unconscious bias.
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The Bank accepts customer deposits that are insured by the DIF and, therefore, must pay insurance premiums.
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These changes resulted in a compensation increase for more than 40% of the Bancorp’s employees. The Bancorp continues to honor a footprint-wide ban on salary history, which means that the Bancorp does not ask for a candidate’s current salary to use as a factor in determining an employment offer.
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In November 2023, the FDIC issued a final rule for a special deposit insurance assessment on banking organizations with greater than $5 billion in assets to recover the costs associated with protecting uninsured depositors following the bank failures that occurred in 2023.
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In 2022, the Bancorp conducted a Total Rewards Survey to assess which components of its compensation and benefit programs were most important to employees. In response to feedback obtained in this survey, the Bancorp made enhancements to its benefits packages, effective 21 Fifth Third Bancorp Table of Contents in 2023.
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The estimate of the Bancorp’s special assessment under the provisions of the final rule was $224 million, which was recognized in earnings upon issuance of the final rule and will be paid to the FDIC over an anticipated total of eight quarterly assessment periods beginning with the first quarter of 2024.
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Recruitment and Retention In 2022, the Bancorp continued to face a rapidly changing work environment and workforce. The Bancorp responded proactively by reinforcing its employee value proposition which centers around inclusion and diversity, employee health and wellness and career development.
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On October 24, 2023, the OCC, FRB, and FDIC issued a final rule to modernize their respective CRA regulations. The revised rules substantially alter the methodology for assessing compliance with the CRA, with material aspects taking effect January 1, 2026 and revised data reporting requirements taking effect January 1, 2027.
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Through strategic actions and decisions as well as its human capital policies, programs and practices, the Bancorp helped support a culture of belonging and performance where employees feel valued and motivated to succeed. Full year 2022 turnover decreased to 21.0% from 21.2% in 2021.
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Among other things, the revised rules evaluate lending outside traditional assessment areas generated by the growth of non-branch delivery systems, such as online and mobile banking, apply a metrics-based benchmarking approach to assessment, and clarify eligible CRA activities.
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Fifth Third executed several retention strategies in 2022 to address trends in employee attrition including a focus on employee development and career progression, workplace flexibility and continued employee listening strategies. The Bancorp’s multicultural recruitment strategy strengthens the organization by developing an employee base that reflects the communities it serves while also enhancing the lives of tomorrow’s leaders.
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(b) Reflects the well-capitalized standard applicable to the Bancorp under FRB Regulation Y and the well-capitalized standard applicable to the Bank.
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The Bancorp has strong partnerships with diversity-focused affinity groups, both with universities and partner organizations, that drive engagement with a diverse candidate population which includes women, minorities, LGBTQ+ communities, individuals with disabilities and veterans.
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Proposed Updates to Regulatory Requirements for Capital On July 27, 2023, the U.S. banking agencies released a notice of proposed rulemaking to revise the Basel III Capital Rules, which would modify its existing risk-based capital framework for large banks and introduce a new framework that implements international capital standards.
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Certain contractual restrictions also may limit the ability of the Bank to pay dividends to the Bancorp.
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The proposed rulemaking would increase capital requirements applicable to banking organizations with total assets of $100 billion or more, including Fifth Third, and would align the calculation of regulatory capital and the calculation of risk-weighted assets across large banking organizations.
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An unsatisfactory CRA record could substantially delay or result in the denial of an approval or application by the Bancorp or the Bank. 24 Fifth Third Bancorp Table of Contents On May 5, 2022, the OCC, FRB, and FDIC issued a notice of proposed rulemaking to provide for a coordinated approach to modernize their respective CRA regulations, such that all banks will be subject to the same set of CRA rules.
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As proposed, the rules would be effective for the Bancorp on July 1, 2025 and phased in over a three-year transition period. The Bancorp is in the process of evaluating this proposed rulemaking and assessing its potential impact.
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The FRB may require BHCs, including the Bancorp, to maintain capital ratios substantially in excess of mandated minimum levels, depending upon general economic conditions and a BHC’s particular condition, risk profile, and growth plans.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA ratings downgrade to Fifth Third, its subsidiaries or their securities could also create obligations or liabilities of Fifth Third under the terms of its outstanding securities that could increase Fifth Third’s costs or otherwise have a negative effect on its results of operations or financial condition.
Biggest changeA ratings downgrade to Fifth Third, its subsidiaries or their securities could also create obligations or liabilities of Fifth Third under the terms of its outstanding securities that could increase Fifth Third’s costs or otherwise have a negative effect on its results of operations or financial condition. 28 Fifth Third Bancorp Table of Contents Additionally, a downgrade of the credit rating of any particular security issued by Fifth Third or its subsidiaries could negatively affect the ability of the holders of that security to sell the securities and the prices at which any such securities may be sold.
In addition, because the techniques used to cause such security breaches change frequently, often are not recognized until launched against a target and may originate from less regulated and remote areas around the world, Fifth Third may be unable to proactively address these techniques or to implement adequate preventative measures.
In addition, because the techniques used to cause such security breaches change frequently, often are not recognized until launched against a target and may originate from remote and less regulated areas around the world, Fifth Third may be unable to proactively address these techniques or to implement adequate preventative measures.
If personal, confidential or proprietary information of customers or clients in the Bancorp’s or such vendors’ or other third parties’ possession were to be mishandled or misused, the Bancorp could suffer significant regulatory consequences, reputational damage and financial loss.
If personal, confidential or proprietary information of customers or clients in the Bancorp’s or such vendors’ or other third parties’ possession were to be mishandled or misused, the Bancorp could suffer significant regulatory consequences, reputational damage and financial loss.
Other conditions and factors that could materially adversely affect Fifth Third’s liquidity and funding include: • a lack of market or customer confidence in Fifth Third or negative news about Fifth Third or the financial services industry generally, which also may result in a loss of customer deposits and/or negatively affect Fifth Third’s ability to access the capital markets; • the loss of customer deposits due to competition from other banks or due to alternative investments; • inability to sell or securitize loans or other assets; • increased collateral requirements; • increased regulatory requirements; • reductions in one or more of Fifth Third’s credit ratings; • increased utilization of revolving lines of credit by customers; and • systematic failure of financial market utilities relied upon by Fifth Third to settle intrabank payment activity.
Other conditions and factors that could materially adversely affect Fifth Third’s liquidity and funding include: • a lack of market or customer confidence in Fifth Third or negative news about Fifth Third, regional banks or the financial services industry generally, which also may result in a loss of customer deposits and/or negatively affect Fifth Third’s ability to access the capital markets; • the loss of customer deposits due to competition from other banks or due to alternative investments; • inability to sell or securitize loans or other assets; • increased collateral requirements; • increased regulatory requirements; • reductions in one or more of Fifth Third’s credit ratings; • increased utilization of revolving lines of credit by customers; and • systematic failure of financial market utilities relied upon by Fifth Third to settle intrabank payment activity.
Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their ESG practices and disclosure. For Fifth Third and others in the financial services industry, this focus extends to the practices and disclosures of the customers, counterparties, and service providers with whom Fifth Third chooses to do business.
Companies are facing increasing scrutiny from customers, regulators, investors and other stakeholders related to their ESG practices and disclosures. For Fifth Third and others in the financial services industry, this focus extends to the practices and disclosures of the customers, counterparties and service providers with whom Fifth Third chooses to do business.
Fifth Third’s actual or alleged conduct in activities, such as certain sales and lending practices, data security, corporate governance and acquisitions, inappropriate behavior or misconduct of employees, failure to deliver minimum or required standards of service or quality, association with particular customers, business partners, investments or vendors, as well as developments from any of the other risks described above, may result in negative public opinion at large (or with certain segments of the public) and may damage Fifth Third’s reputation.
Fifth Third’s actual or alleged conduct in activities, such as certain sales and lending practices, data security, operational resiliency, corporate governance and acquisitions, inappropriate behavior or misconduct of employees, failure to deliver minimum or required standards of service or quality, association with particular customers, business partners, investments or vendors, as well as developments from any of the other risks described above, may result in negative public opinion at large (or with certain segments of the public) and may damage Fifth Third’s reputation.
Fifth Third believes that both the ALLL and the reserve for unfunded commitments are adequate to cover expected losses at December 31, 2022; however, there is no assurance that they will be sufficient to cover future credit losses associated with exposures existing at December 31, 2022, especially if economic conditions decline, including but not limited to housing and employment conditions.
Fifth Third believes that both the ALLL and the reserve for unfunded commitments are adequate to cover expected losses at December 31, 2023; however, there is no assurance that they will be sufficient to cover future credit losses associated with exposures existing at December 31, 2023, especially if economic conditions decline, including but not limited to housing and employment conditions.
Fifth Third has established processes and procedures intended to identify, measure, monitor, report and manage the types of risk to which it is subject, including liquidity risk, credit risk, interest rate risk, price risk, legal and regulatory compliance risk, strategic risk, reputational risk and operational risk related to its employees, systems and vendors, among others.
Fifth Third has established processes and procedures intended to identify, measure, monitor, report and manage the types of risk to which it is exposed, including liquidity risk, credit risk, interest rate risk, price risk, legal and regulatory compliance risk, strategic risk, reputational risk and operational risk related to its employees, systems and vendors, among others.
Despite Fifth Third’s efforts to prevent a cyber-attack, a successful cyber-attack could persist for an extended period of time before being detected, and, following detection, it could take considerable time for Fifth Third to obtain full and reliable information about the cyber security incident and the extent, amount and type of information compromised.
Despite Fifth Third’s efforts to prevent a cyber-attack, a successful cyber-attack could persist for an extended period of time before being detected, and, following detection, it could take considerable time for Fifth Third to obtain full and reliable information about the cybersecurity incident and the extent, amount and type of information compromised.
If new information arises that results in a material change to a reserve amount, such a change could result in a change to previously announced financial results. Refer to the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operation for more information regarding management’s significant estimates.
If new information arises that results in a material change to a reserve amount, such a change could result in a change to previously announced financial results. Refer to the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for more information regarding management’s significant estimates.
For further information, refer to Regulation and Supervision in Item 1 of this Annual Report on Form 10-K and Note 3 of the Notes to Consolidated Financial Statements. OPERATIONAL RISKS Fifth Third is exposed to cyber security risks that create both operational and reputational risk for the Bank and its customers across all lines of business.
For further information, refer to Regulation and Supervision in Item 1 of this Annual Report on Form 10-K and Note 3 of the Notes to Consolidated Financial Statements. OPERATIONAL RISKS Fifth Third is exposed to cybersecurity risks that create both operational and reputational risk for the Bank and its customers across all lines of business.
Furthermore, financial services companies are regularly the target of cyber-attacks such as distributed denial of service attacks and ransomware attacks. The unintentional or willful acts or omissions of employees also remains the primary avenue through which threat actors attempt to gain access to company networks, information systems and data.
Furthermore, financial services companies are regularly the target of cyber-attacks such as distributed denial of service, social engineering and ransomware attacks. The unintentional or willful acts or omissions of employees also remains the primary avenue through which threat actors attempt to gain access to company networks, information systems, data and credentials.
An emerging risk is the use of third- and fourth-party providers to host critical data and platforms for Fifth Third, or in some cases provide IT services to Fifth Third domestically and internationally.
An additional risk is the use of third- and fourth-party providers to host critical data and platforms for Fifth Third, or in some cases provide IT services to Fifth Third domestically and internationally.
In addition to the challenge of competing 42 Fifth Third Bancorp Table of Contents against other banks in attracting and retaining customers for traditional banking services, Fifth Third’s competitors also include securities dealers, brokers, mortgage bankers, investment advisors and specialty finance, telecommunications, technology and insurance companies as well as large retailers who seek to offer one-stop financial services in addition to other products and services desired by consumers that may include services that banks have not been able or allowed to offer to their customers in the past or may not be currently able or allowed to offer.
In addition to the challenge of competing against other banks in attracting and retaining customers for traditional banking services, Fifth Third’s competitors also include securities dealers, brokers, mortgage bankers, investment advisors and specialty finance, telecommunications, technology and insurance companies as well as large retailers who seek to offer one-stop financial services in addition to other products and services desired by consumers that may include services that banks have not been able or allowed to offer to their customers in the past or may not be currently able or allowed to offer.
A reduction in Fifth Third’s credit rating could adversely affect its ability to borrow funds, including by raising the cost of borrowings substantially and could cause creditors and business counterparties to raise collateral requirements or take other actions that could adversely affect Fifth Third’s ability to raise capital.
A reduction in Fifth Third’s credit rating could adversely affect its ability to retain deposits, borrow funds (including by raising the cost of borrowings substantially) and could cause creditors and business counterparties to raise collateral requirements or take other actions that could adversely affect Fifth Third’s ability to raise liquidity or capital.
This is sometimes referred to as “systemic risk” and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges, with which the Bancorp interacts on a daily basis, and therefore could adversely affect Fifth Third. Inability to refinance in capital markets could cause a default that impacts Fifth Third borrowers.
This is sometimes referred to as “systemic risk” and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges, with which the Bancorp interacts on a daily basis, and therefore could adversely affect Fifth Third. 27 Fifth Third Bancorp Table of Contents Inability to refinance in capital markets could cause a default that impacts Fifth Third borrowers.
Fifth Third may be required to repurchase residential mortgage loans, indemnify the securitization trust, investor or insurer, or reimburse the securitization trust, investor or insurer, for credit losses incurred on loans in the event of a breach of contractual representations or warranties that is not remedied within a specified 37 Fifth Third Bancorp Table of Contents period (usually 60 days or less) after Fifth Third receives notice of the breach.
Fifth Third may be required to repurchase residential mortgage loans, indemnify the securitization trust, investor or insurer, or reimburse the securitization trust, investor or insurer, for credit losses incurred on loans in the event of a breach of contractual representations or warranties that is not remedied within a specified period (usually 60 days or less) after Fifth Third receives notice of the breach.
If large scale events occur, they may significantly impact its loan portfolios by damaging properties pledged as collateral as well as impairing its borrowers’ ability to repay their loans. Additionally, the impact of widespread health emergencies may adversely impact Fifth Third’s results of operations, such as the potential impact from the COVID-19 pandemic.
If large scale events occur, they may significantly impact Fifth Third’s loan portfolios by damaging properties pledged as collateral as well as impairing its borrowers’ ability to repay their loans. Additionally, the impact of widespread health emergencies may adversely impact Fifth Third’s results of operations, such as the impacts previously experienced from the COVID-19 pandemic.
Future acquisition and investment activities and efforts to monitor newly acquired businesses or reap the benefits of a new strategic relationship may require Fifth Third to devote substantial time and resources and may cause these acquisitions, investments and relationships to be unprofitable or cause Fifth Third to be unable to pursue other business opportunities.
Future acquisition and investment activities and efforts to monitor newly acquired businesses or reap the benefits of a new strategic relationship may 37 Fifth Third Bancorp Table of Contents require Fifth Third to devote substantial time and resources and may cause these acquisitions, investments and relationships to be unprofitable or cause Fifth Third to be unable to pursue other business opportunities.
These emerging risks are increasing the costs of Fifth Third’s investment in technology and cyber security and require further investment in cyber-related and data loss event insurance which Fifth Third has in place. Though Fifth Third has insurance against some cyber security risks and attacks, it may not be sufficient to offset the impact of a material loss event.
These additional risks are increasing the costs of Fifth Third’s investment in technology and cybersecurity and require further investment in cyber-related and data loss event insurance which Fifth Third has in place. Though Fifth Third has insurance against some cybersecurity risks and attacks, it may not be sufficient to offset the impact of a material loss event.
Core deposits, which include transaction deposits and certificates of deposit $250,000 or less, have historically provided Fifth Third with a sizeable source of relatively stable and low-cost funds (average core deposits funded 78% of average total assets for the year ending December 31, 2022).
Core deposits, which include transaction deposits and certificates of deposit $250,000 or less, have historically provided Fifth Third with a sizeable source of relatively stable and low-cost funds (average core deposits funded 76% of average total assets for the year ending December 31, 2023).
During the course of an investigation, Fifth Third may not necessarily know the full effects of the incident or how to remediate it, and actions and decisions that are taken or made in an effort to mitigate risk may further increase the costs and other negative consequences of the incident.
During the course of an investigation, Fifth Third may not necessarily know the full effects of the incident or how to remediate it, and actions and decisions that are taken or made in an effort to mitigate risk may further increase the costs and other negative 29 Fifth Third Bancorp Table of Contents consequences of the incident.
Any failures or disruptions of the Bancorp’s systems or operations could give rise to losses in service to customers and clients, adversely affect the Bancorp’s business and results of operations by subjecting the Bancorp to losses or liability, or require the Bancorp to expend significant resources to correct the failure or disruption, as well as by exposing the Bancorp to reputational harm, litigation, regulatory fines or penalties or losses not covered by insurance.
Any failures or disruptions of the Bancorp’s systems or operations could give rise to losses in service to customers and clients, adversely affect the Bancorp’s business and results of operations by subjecting the Bancorp to losses or liability, or require the Bancorp to expend significant resources to correct the failure or disruption, as well as by exposing the Bancorp to reputational harm, litigation, regulatory fines 30 Fifth Third Bancorp Table of Contents or penalties or losses not covered by insurance.
The process for determining the amount of the ALLL and the reserve for unfunded commitments is critical to Fifth Third’s financial results and condition. Such determination 31 Fifth Third Bancorp Table of Contents requires difficult, subjective and complex judgments about the environment, including analysis of economic or market conditions that may impair the ability of borrowers to repay their loans.
The process for determining the amount of the ALLL and the reserve for unfunded commitments is critical to Fifth Third’s financial results and condition. Such determination requires difficult, subjective and complex judgments about the environment, including analysis of economic or market conditions that may impair the ability of borrowers to repay their loans.
If Fifth Third is unable to protect or acquire rights to use intellectual property it owns or licenses, it may lose certain competitive advantages, incur expenses and/or lose revenue and may suffer harm to its business results and financial condition. 38 Fifth Third Bancorp Table of Contents Fifth Third is subject to various regulatory requirements that may limit its operations and potential growth.
If Fifth Third is unable to protect or acquire rights to use intellectual property it owns or licenses, it may lose certain competitive advantages, incur expenses and/or lose revenue and may suffer harm to its business results and financial condition. Fifth Third is subject to various regulatory requirements that may limit its operations and potential growth.
The impact of these changes may be magnified if Fifth Third does not effectively manage the relative sensitivity of its assets and liabilities to changes in market interest rates. Fluctuations in these areas may adversely affect 41 Fifth Third Bancorp Table of Contents Fifth Third, its customers and its shareholders.
The impact of these changes may be magnified if Fifth Third does not effectively manage the relative sensitivity of its assets and liabilities to changes in market interest rates. Fluctuations in these areas may adversely affect Fifth Third, its customers and its shareholders.
If Fifth Third or its relationships with customers, vendors and suppliers were to become the subject of such negative publicity, Fifth Third’s ability to attract and retain customers and employees may be negatively impacted and its stock price may also be impacted.
If 38 Fifth Third Bancorp Table of Contents Fifth Third or its relationships with customers, vendors and suppliers were to become the subject of such negative publicity, Fifth Third’s ability to attract and retain customers and employees may be negatively impacted and its stock price may also be impacted.
The total amount that Fifth Third pays for funding costs is dependent, in part, on Fifth Third’s ability to maintain or grow its deposits. If Fifth Third is unable to sufficiently maintain or grow its deposits to meet liquidity objectives, it may be subject to paying higher funding costs.
If Fifth Third is unable to maintain or grow its deposits, it may be subject to paying higher funding costs. The total amount that Fifth Third pays for funding costs is dependent, in part, on Fifth Third’s ability to maintain or grow its deposits.
In addition to customer deposits, sources of liquidity include investments in the 32 Fifth Third Bancorp Table of Contents securities portfolio, Fifth Third’s sale or securitization of loans in secondary markets, the pledging of loans and investment securities to access secured borrowing facilities through the FHLB and the FRB, and Fifth Third’s ability to raise funds in money and capital markets.
In addition to customer deposits, sources of liquidity include investments in the securities portfolio, Fifth Third’s sale or securitization of loans in secondary markets, the pledging of loans and investment securities to access secured borrowing facilities through the FHLB and the FRB, and Fifth Third’s ability to raise funds in money and capital markets.
Fifth Third has significant investments in bank premises and equipment for its branch network including its 1,087 full-service banking centers, 14 parcels of land held for the development of future banking centers and 45 properties that are developed or in the process of being developed as branches, as well as its retail work force and other branch banking assets.
Fifth Third has significant investments in bank premises and equipment for its branch network including its 1,088 full-service banking centers, 5 parcels of land held for the development of future banking centers and 49 properties that are developed or in the process of being developed as branches, as well as its retail work force and other branch banking assets.
In those events, Fifth Third could become more susceptible to economic downturns, dislocations in capital markets and competitive pressures. 43 Fifth Third Bancorp Table of Contents Fifth Third may sell or consider selling one or more of its businesses or investments.
In those events, Fifth Third could become more susceptible to economic downturns, dislocations in capital markets and competitive pressures. Fifth Third may sell or consider selling one or more of its businesses or investments.
Fifth Third’s efforts to take these risks into account in making lending and other decisions, 45 Fifth Third Bancorp Table of Contents including by increasing business relationships with climate-friendly companies, may not be effective in protecting Fifth Third from the negative impact of new laws and regulations or changes in consumer or business behavior.
Fifth Third’s efforts to take these risks into account in making lending and other decisions, including by increasing business relationships with climate-resilient companies, may not be effective in protecting Fifth Third from the negative impact of new laws and regulations or changes in consumer or business behavior.
Increased use of the internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and operations, coupled with the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others increases Fifth Third’s security risks.
Nationally, reported incidents of fraud and other financial crimes have increased. Increased use of the internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and operations, coupled with the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others increases Fifth Third’s security risks.
These rates are highly sensitive to many factors that are beyond Fifth Third’s control, including general economic conditions in the U.S. or abroad and the policies of various governmental and regulatory agencies (in particular, the FRB).
These rates are highly sensitive to many factors that are beyond Fifth Third’s control, including general economic conditions in the U.S. or abroad and the 35 Fifth Third Bancorp Table of Contents policies of various governmental and regulatory agencies (in particular, the FRB).
Such actions and activities that may be subject to prior approval include, but are not limited to, increasing dividends or other capital distributions by the Bancorp or the Bank, entering into a merger or acquisition transaction, acquiring or establishing new branches, and entering into certain new businesses.
Such actions and activities that may be subject to prior approval include, but are not limited to, increasing dividends or other 33 Fifth Third Bancorp Table of Contents capital distributions by the Bancorp or the Bank, entering into a merger or acquisition transaction, acquiring or establishing new branches, and entering into certain new businesses.
Worldwide financial markets have recently experienced periods of extraordinary disruption and volatility, which have been driven by factors such as the COVID-19 pandemic and the Russia/Ukraine conflict, resulting in heightened credit risk, reduced valuation of investments, decreased economic activity, heightened risk of cyberattacks, and inflation.
Worldwide financial markets have recently experienced periods of extraordinary disruption and volatility, which have been driven by factors such as the COVID-19 pandemic, the Russia/Ukraine conflict and the evolving conflict in Israel and Gaza, resulting in heightened credit risk, reduced valuation of investments, decreased economic activity, heightened risk of cyber-attacks, and inflation.
International events such as trade disputes, separatist movements, leadership changes and political and military conflicts (such as the ongoing military tension between Russia and Ukraine) could adversely affect global financial activity and markets and could negatively affect the U.S. economy.
International events such as trade disputes, separatist movements, leadership changes and political and military conflicts (such as the ongoing military tension between Russia and Ukraine and the evolving conflict in Israel and Gaza) could adversely affect global financial activity and markets and could negatively affect the U.S. economy.
Competition for qualified candidates in the activities and markets that Fifth Third serves is intense, which may increase Fifth Third’s expenses and may result in Fifth Third not being 36 Fifth Third Bancorp Table of Contents able to hire candidates or retain them.
Competition for qualified candidates in the activities and markets that Fifth Third serves is intense, which may increase Fifth Third’s expenses and may result in Fifth Third not being able to hire candidates or retain them.
Fifth Third relies on its systems and certain third-party service providers and certain failures (including those driven by climate-related weather events) could materially adversely affect operations. Fifth Third’s operations, including its financial and accounting systems, use computer systems and telecommunications networks operated by both Fifth Third and third-party service providers.
Fifth Third relies on its systems and certain third-party service providers and certain failures (including those related to cybersecurity or weather events exacerbated by climate change) could materially adversely affect operations. Fifth Third’s operations, including its financial and accounting systems, use computer systems and telecommunications networks operated by both Fifth Third and third-party service providers.
Fifth Third also considers the physical and transition risks arising from climate change to be transverse risk drivers that impact all of these material risks and have therefore integrated climate change considerations into its risk management framework.
Fifth Third also considers the physical and transition risks arising from climate change to be transverse risk drivers 39 Fifth Third Bancorp Table of Contents that impact all of these material risks and has therefore integrated climate change considerations into its risk management framework.
Also, customers typically move money from bank deposits to alternative investments during rising interest rate environments. Customers may also move noninterest-bearing deposits to interest-bearing accounts increasing the cost of those deposits. Checking and savings account balances and other forms of customer deposits may decrease when customers perceive alternative investments, such as the stock market, as providing a better risk/return trade-off.
Customers may also move noninterest-bearing deposits to interest-bearing accounts increasing the cost of those deposits. Checking and savings account balances and other forms of customer deposits may decrease when customers perceive alternative investments, such as the stock market, as providing a better risk/return trade-off.
If Fifth Third’s risk management framework proves ineffective, Fifth Third could incur litigation, negative regulatory consequences, reputational damages among other adverse consequences and Fifth Third could suffer unexpected losses that may affect its financial condition or results of operations. Fifth Third may experience losses related to fraud, theft or violence.
If Fifth Third’s risk management framework proves ineffective, Fifth Third could incur litigation costs, negative regulatory consequences, reputational damages among other adverse consequences and Fifth Third could suffer unexpected losses that may affect its financial condition or results of operations.
In addition, mergers and acquisitions could be hindered by increased antitrust and other regulatory scrutiny. Reform proposals are also expected for the short-term wholesale markets. It is uncertain which, if any, of these policies would be implemented and what their impact would be on Fifth Third.
In addition, mergers and acquisitions may be hindered by increased antitrust and other regulatory scrutiny. Reform proposals are also expected for the short-term wholesale markets. It is uncertain if the implementation of any of these policies would impact Fifth Third, and if so, what the impact would be.
This agenda could include a heightened focus on the risks arising from climate change, fair lending, consumer protection, Bank Secrecy Act and anti-money laundering requirements, topics related to social equity, executive compensation, and increased capital and liquidity, as well as limits on share buybacks and dividends.
The Biden Administration has sought to implement a regulatory agenda that has included, or could include, a heightened focus on the risks arising from climate change, fair lending, consumer protection, Bank Secrecy Act and anti-money laundering requirements, topics related to social equity, executive compensation, and increased capital and liquidity, as well as limits on share buybacks and dividends.
Fifth Third is subject to extensive governmental regulation which could adversely impact Fifth Third or the businesses in which Fifth Third is engaged. Government regulation and legislation subject Fifth Third and other financial institutions to restrictions, oversight and/or costs that may have an impact on Fifth Third’s business, financial condition, results of operations or the price of its common stock.
Government regulation and legislation subject Fifth Third and other financial institutions to restrictions, oversight and/or costs that may have an impact on Fifth Third’s business, financial condition, results of operations or the price of its common stock.
Further, the increase in market interest rates is likely to reduce Fifth Third’s loan origination volume, particularly refinance volume, and/or reduce its interest rate spread, which could have an adverse effect on Fifth Third’s profitability and results of operations. Conversely, a lowering in interest rates would likely further reduce the interest Fifth Third earns on loans and other earning assets.
Further, the increase in market interest rates is likely to reduce Fifth Third’s loan origination volume, particularly refinance volume, and/or reduce its interest rate spread, which could have an adverse effect on Fifth Third’s profitability and results of operations.
Additionally, the FRB and other major central banks have begun the process of removing or reducing monetary accommodation, increasing the risk of recession and may also negatively impact asset values and credit spreads that were impacted by extraordinary monetary stimulus.
Additionally, the FRB and other major central banks have removed or reduced monetary accommodation and raised interest rates, increasing the risk of recession and may also negatively impact asset values and credit spreads that were impacted by extraordinary monetary stimulus.
Fifth Third has experienced, and may experience again in the future, losses incurred due to customer or employee fraud, theft or physical violence. Additionally, physical violence may negatively affect Fifth Third’s key personnel, facilities or systems. These losses may be material and negatively affect Fifth Third’s results of operations, financial condition or prospects.
Fifth Third may experience losses related to fraud, theft or violence. Fifth Third has experienced, and may experience again in the future, losses incurred due to customer or employee fraud, theft or physical violence. Additionally, physical violence may negatively affect Fifth Third’s key personnel, facilities or systems.
The Bancorp could also be adversely affected if it loses access to information or services from a third-party service provider as a result of a security breach or system or operational failure, or disruption affecting the third-party service provider.
The Bancorp could also be adversely affected if it loses access to information or services from a third-party service provider as a result of a security breach or system or operational failure, or disruption affecting the third-party service provider. Fifth Third’s insurance may be inadequate to compensate for failures by, or affecting, third-party service providers upon which Fifth Third relies.
Due to uncertainties relating to these factors, there can be no assurance that the reserves Fifth Third establishes will be adequate or that the total amount of losses incurred will not have a material adverse effect on Fifth Third’s financial condition or results of operations.
Due to uncertainties relating to these factors, there can be no assurance that the reserves Fifth Third establishes will be adequate or that the total amount of losses incurred will not have a material adverse effect on Fifth Third’s financial condition or results of operations. 32 Fifth Third Bancorp Table of Contents Fifth Third is subject to extensive governmental regulation which could adversely impact Fifth Third or the businesses in which Fifth Third is engaged.
A failure in Fifth Third’s internal controls could have a significant negative impact not only on its earnings, but also on the perception that customers, regulators and investors may have of Fifth Third. Fifth Third continues to devote a significant amount of effort, time and resources to improving its controls and ensuring compliance with complex regulations.
A failure in Fifth Third’s internal controls could have a significant negative impact not only on its earnings, but also on the perception that customers, regulators and investors may have of Fifth Third.
Fifth Third’s insurance may be inadequate to compensate for failures by, or affecting, third-party service providers upon which Fifth Third relies. 35 Fifth Third Bancorp Table of Contents Fifth Third may not be able to effectively manage organizational changes and implement key initiatives in a timely fashion, or at all, due to competing priorities which could adversely affect its business, results of operations, financial condition and reputation.
Fifth Third may not be able to effectively manage organizational changes and implement key initiatives in a timely fashion, or at all, due to competing priorities which could adversely affect its business, results of operations, financial condition and reputation.
As inflation increases and market interest rates rise, the value of Fifth Third’s investment securities, particularly those that have fixed rates or longer maturities, could decrease. Increasing rates would also increase debt service requirements for some of Fifth Third’s borrowers and may adversely affect those borrowers’ ability to pay as contractually obligated and could result in additional delinquencies or charge-offs.
Increasing rates would also increase debt service requirements for some of Fifth Third’s borrowers and may adversely affect those borrowers’ ability to pay as contractually obligated and could result in additional delinquencies or charge-offs.
Deposit insurance premiums levied against the Bank may increase if the number of bank failures increase or the cost of resolving failed banks increases. The FDIC maintains a Deposit Insurance Fund (“DIF”) to protect insured depositors in the event of bank failures. The DIF is funded by fees assessed on insured depository institutions including the Bank.
The FDIC maintains a Deposit Insurance Fund (“DIF”) to protect insured depositors in the event of bank failures. The DIF is funded by fees assessed on insured depository institutions including the Bank.
These losses could also lead to significant reputational risks and other effects. The industry fraud threat continues to evolve, including but not limited to, card fraud, check fraud, electronic fraud, wire fraud, social engineering and phishing attacks for identity theft and account takeover. Nationally, reported incidents of fraud and other financial crimes have increased.
These losses may be material and negatively affect Fifth Third’s results of operations, financial condition or prospects. These losses could also lead to significant reputational risks and other effects. The industry fraud threat continues to evolve, including but not limited to, card fraud, check fraud, electronic fraud, wire fraud, social engineering and phishing attacks for identity theft and account takeover.
LEGAL AND REGULATORY COMPLIANCE RISKS Fifth Third and/or its affiliates are or may become involved from time to time in information-gathering requests, investigations and litigation, regulatory or other enforcement proceedings by various governmental regulatory agencies and law enforcement authorities, as well as self-regulatory agencies which may lead to adverse consequences.
These interruptions may impair Fifth Third’s ability to operate and may interfere with its ability to carry out business and serve clients and customers. 31 Fifth Third Bancorp Table of Contents LEGAL AND REGULATORY COMPLIANCE RISKS Fifth Third and/or its affiliates are or may become involved from time to time in information-gathering requests, investigations and litigation, regulatory or other enforcement proceedings by various governmental regulatory agencies and law enforcement authorities, as well as self-regulatory agencies which may lead to adverse consequences.
Actions taken by government regulators, shareholder activists and community organizations may also damage Fifth Third’s reputation. Additionally, whereas negative public opinion once was primarily driven by adverse news coverage in traditional media, the advent and expansion of social media facilitates the rapid dissemination of information or misinformation.
Additionally, whereas negative public opinion once was primarily driven by adverse news coverage in traditional media, the advent and expansion of social media facilitates the rapid dissemination of information or misinformation.
Decisions that its regulators make, including those related to capital distributions to its shareholders, could be affected adversely due to the perception that the models used to generate the relevant information are unreliable or inadequate.
Decisions that its regulators make, including those related to capital distributions to its shareholders, could be affected adversely due to the perception that the models used to generate the relevant information are unreliable or inadequate. Fifth Third’s framework for managing risks may not be effective in mitigating its risk and loss.
Additionally, Fifth Third has a substantial portfolio of commercial and residential real estate loans and weaknesses in residential or commercial real estate markets may adversely impact Fifth Third’s business, results of operations or financial condition.
Additionally, Fifth Third has a substantial portfolio of commercial and residential real estate loans and weaknesses in residential or commercial real estate markets may adversely impact Fifth Third’s business, results of operations or financial condition. Problems encountered by other financial institutions could adversely affect financial markets generally and have direct and indirect adverse effects on Fifth Third.
Future deposit premiums paid by the Bank depend on FDIC rules, which are subject to change, the level of the DIF and the magnitude and cost of future bank failures.
Future deposit premiums paid by the Bank depend on FDIC rules, which are subject to change, the level of the DIF and the magnitude and cost of future bank failures. As of June 30, 2020, the DIF reserve ratio fell to 1.30%, below the statutory minimum of 1.35%.
Fifth Third and other financial institutions are subject to scrutiny from government authorities, including bank regulatory authorities, stemming from broader systemic regulatory concerns, including with respect to stress testing, liquidity and capital levels, asset quality, provisioning, AML/BSA, fair lending, consumer compliance and other prudential matters and efforts to ensure that financial institutions take steps to improve their risk management and prevent future crises.
Fifth Third is also subject to certain regulatory requirements as a result of its banking activity including with respect to stress testing, liquidity and capital levels, asset quality, provisioning, AML/BSA, fair lending, consumer compliance and other prudential matters and efforts to ensure that financial institutions take steps to improve their risk management and prevent future crises.
Inadequate processes to collect and review this information prior to disclosure could be subject to potential liability related to such information. 44 Fifth Third Bancorp Table of Contents Activists are increasingly targeting financial firms with public criticism for their relationships with clients that are engaged in certain industries (such as those which are carbon intensive), including businesses whose products are or are perceived to be harmful to health, the environment, the global climate, or the social good.
Activists are increasingly targeting financial firms with public criticism for their relationships with clients that are engaged in certain industries (such as those which are carbon intensive), including businesses whose products are or are perceived to be harmful to health, the environment, the global climate, or the social good.
Other rating agencies may also take actions to downgrade their ratings of the securities issued by Fifth Third or its subsidiaries.
Other rating agencies may also take actions to downgrade their ratings of the securities issued by Fifth Third or its subsidiaries. There can be no assurances that Fifth Third or its subsidiaries will retain any specific rating from any specific rating agency.
Also, a violation of law or regulation by another financial institution may give rise to an inquiry or investigation by regulators or other authorities of the same or similar practices by Fifth Third.
Department of Justice, etc., as well as state and other governmental authorities and self-regulatory bodies, regarding their respective customers and businesses. Also, a violation of law or regulation by another financial institution may give rise to an inquiry or investigation by regulators or other authorities of the same or similar practices by Fifth Third.
Failures, interruptions of service or breaches in the security of these environments occur across the financial services industry with some frequency and, if a material event of this nature occurred at Fifth Third or one of its third-party providers, this could result in disruptions to Fifth Third’s accounting, deposit, lending and other systems, and adversely affect its customer relationships.
If an event of this nature occurred at Fifth Third or one of its third-party providers and such event proved to be material, this could result in disruptions to Fifth Third’s accounting, deposit, lending and other systems, and adversely affect its customer relationships.
STRATEGIC RISKS If Fifth Third does not respond to intense competition and rapid changes in the financial services industry or otherwise adapt to changing customer preferences, its financial performance may suffer.
There may be periods where Fifth Third elects not to use derivatives and other instruments to hedge mortgage banking interest rate and price risks. 36 Fifth Third Bancorp Table of Contents STRATEGIC RISKS If Fifth Third does not respond to intense competition and rapid changes in the financial services industry or otherwise adapt to changing customer preferences, its financial performance may suffer.
Fifth Third competes with banks and other financial services companies for deposits. If competitors raise the rates they pay on deposits, Fifth Third’s funding costs may increase, either because Fifth Third raises rates to avoid losing deposits or because Fifth Third loses deposits and must rely on more expensive sources of funding.
If competitors raise the rates they pay on deposits, Fifth Third’s funding costs may increase, either because Fifth Third raises rates to avoid losing deposits or because Fifth Third loses deposits and must rely on more expensive sources of funding. Also, customers typically move money from bank deposits to alternative investments during rising interest rate environments.
While Fifth Third monitors regulatory developments in this area to avoid noncompliance, Fifth Third cannot assure that it will be at all times fully compliant with CRB-related laws, which could result in significant fines, penalties or other losses. The COVID-19 pandemic creates significant risks and uncertainties for Fifth Third’s business.
While Fifth Third monitors regulatory developments in this area to avoid noncompliance, Fifth Third cannot assure that it will be at all times fully compliant with CRB-related laws, which could result in significant fines, penalties or other losses. 40 Fifth Third Bancorp Table of Contents Recent bank failures have created significant market volatility and regulatory uncertainty which could have a material adverse effect on Fifth Third’s business and financial condition.
The Bank may be required to pay significantly higher FDIC premiums if market developments change such that the DIF balance is reduced or the FDIC changes its rules to require higher premiums. If an orderly liquidation of a systemically important BHC or non-bank financial company were triggered, Fifth Third could face assessments for the Orderly Liquidation Fund.
The FDIC may further increase the assessment rates or impose additional special assessments in the future, which may require the Bank to pay significantly higher FDIC premiums. If an orderly liquidation of a systemically important BHC or non-bank financial company were triggered, Fifth Third could face assessments for the Orderly Liquidation Fund.
Treasury rates, LIBOR, SOFR or Eurodollars that may not perfectly correlate with the value or income being hedged. Fifth Third could incur significant losses from its hedging activities. There may be periods where Fifth Third elects not to use derivatives and other instruments to hedge mortgage banking interest rate and price risks.
Treasury rates, SOFR or other benchmarks that may not perfectly correlate with the value or income being hedged. Fifth Third could incur significant losses from its hedging activities.
Past, present and future litigation have included or could include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages.
Past, present and future litigation have included or could include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. Investigations by regulatory authorities may from time to time result in civil or criminal referrals to law enforcement.
Weakness in the U.S. economy, including within Fifth Third’s geographic footprint, has adversely affected Fifth Third in the past and may adversely affect Fifth Third in the future. Fifth Third has been, and will continue to be, impacted by general business and economic conditions in the United States.
Fifth Third has been, and will continue to be, impacted by general business and economic conditions in the United States.
Industry trends are moving more to cloud providers, Software as a Service partners and hosted platforms that traditionally resided inside Fifth Third’s firewall and data centers. These emerging risks are further heightened through the increasing use of near real-time money movement solutions such as Zelle, and increase the difficulty to detect, prevent and recover fraudulent transactions.
These additional risks are further heightened through the increasing use of near real-time money movement solutions such as Zelle, and increase the difficulty to detect, prevent and recover fraudulent transactions.
Fifth Third must make investments in its ability to oversee third- and fourth-party 34 Fifth Third Bancorp Table of Contents providers and its failure to do so could result in customer losses, operational issues, litigation, regulatory actions and reputational loss.
Fifth Third must make investments in its ability to oversee third- and fourth-party providers and its failure to do so could result in customer losses, operational issues, litigation, regulatory actions and reputational loss. Industry trends are moving more to cloud providers, Software as a Service partners and hosted platforms that traditionally resided inside Fifth Third’s firewall and data centers.
Fifth Third’s framework for managing risks may not be effective in mitigating its risk and loss. Fifth Third’s risk management framework seeks to mitigate risk and loss.
Fifth Third’s risk management framework seeks to mitigate risk and loss.
Fifth Third and/or its affiliates are or may become involved from time to time in information-gathering requests, reviews, investigations and proceedings (both formal and informal) by governmental regulatory agencies and law enforcement authorities, as well as self-regulatory agencies, regarding their respective customers and businesses, as well as their sales practices, data security, product offerings, compensation practices and other compliance issues.
Fifth Third and/or its affiliates are or may become involved from time to time in information-gathering requests, reviews, investigations and proceedings (both formal and informal) by governmental regulatory agencies and law enforcement authorities, including but not limited to the FRB, OCC, CFPB, SEC, FINRA, U.S.
Any such assessments may adversely affect Fifth Third’s business, financial condition or results of operations. MARKET RISKS: INTEREST RATE RISKS AND PRICE RISKS The replacement of LIBOR could adversely affect Fifth Third’s revenue or expenses and the value of those assets or obligations.
Any such assessments may adversely affect Fifth Third’s business, financial condition or results of operations. MARKET RISKS: INTEREST RATE RISKS AND PRICE RISKS Weakness in the U.S. economy, including within Fifth Third’s geographic footprint, has adversely affected Fifth Third in the past and may adversely affect Fifth Third in the future.
Additionally, Fifth Third may encounter difficulties in separating the operations of any businesses it sells, which may affect its business or results of operations. REPUTATION RISKS Damage to Fifth Third’s reputation could harm its business.
Additionally, Fifth Third may encounter difficulties in separating the operations of any businesses it sells, which may affect its business or results of operations. Fifth Third has businesses other than banking that are subject to a variety of risks. Fifth Third is a diversified financial services company. As a result, the Bancorp is subject to additional risks and uncertainties.
The Bancorp’s stress capital buffer requirement has been 2.5% since the introduction of this framework and was most recently affirmed as part of the FRB’s 2022 supervisory stress test for the period from October 1, 2022 to September 30, 2023, based on the Bancorp’s 2022 supervisory stress 39 Fifth Third Bancorp Table of Contents testing results, subject to potential adjustments by the FRB.
The Bancorp’s stress capital buffer requirement has been 2.5% since the introduction of this framework and was most recently affirmed as part of Fifth Third’s 2023 Capital Plan submission with an effective date of October 1, 2023.
These rules raise the costs and liquidity burden associated with Fifth Third’s derivatives activities and could have an adverse effect on its business, financial condition and results of operations. For more information, refer to Regulation and Supervision—Derivatives in Item 1 of this Annual Report on Form 10-K.
For more information, refer to Regulation and Supervision—Regulatory Regime for Derivatives in Item 1 of this Annual Report on Form 10-K.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAt December 31, 2022, the Bancorp, through its banking and non-banking subsidiaries, operated 1,087 banking centers, of which 744 were owned, 203 were leased and 140 for which the buildings are owned but the land is leased.
Biggest changeAt December 31, 2023, the Bancorp, through its banking and non-banking subsidiaries, operated 1,088 banking centers, of which 727 were owned, 192 were leased and 169 were in owned buildings but on leased land. The banking centers are located in the states of Ohio, Florida, Michigan, Illinois, Indiana, North Carolina, Kentucky, Tennessee, Georgia, South Carolina and West Virginia.
The banking centers are located in the states of Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia, North Carolina and South Carolina. The Bancorp’s significant owned properties are owned free from mortgages and major encumbrances.
The Bancorp’s significant owned properties are owned free from mortgages and major encumbrances.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeStein was Chief Credit Officer from March 2018 through November 2020, Head 48 Fifth Third Bancorp Table of Contents of the Commercial Bank from March 2016 through March 2018 and Senior Vice President and Chief Credit Officer from November 2014 through March 2016. Melissa S. Stevens, 48. Executive Vice President and Chief Marketing Officer since February 2023. Previously, Ms.
Biggest changeZaunbrecher has been Executive Vice President and Chief Legal Officer since May 2018. Ms. Zaunbrecher has been Corporate Secretary since March 2023 and was previously Corporate Secretary from May 2018 to November 2020. Prior to Fifth Third, Ms.
Zaunbrecher was a partner at the law firm Dinsmore and Shohl LLP, where she practiced for 28 years and served as the Chair of the Corporate Department and a member of the firm’s board of directors and executive committee. 49 Fifth Third Bancorp Table of Contents PART II
Zaunbrecher was a partner at the law firm Dinsmore and Shohl LLP, where she practiced for 28 years and served as the Chair of the Corporate Department and a member of the firm’s board of directors and executive committee. 45 Fifth Third Bancorp Table of Contents PART II
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 47 Fifth Third Bancorp Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS Officers are appointed annually by the Board of Directors at the meeting of Directors immediately following the Annual Meeting of Shareholders.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 43 Fifth Third Bancorp Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS Officers are appointed annually by the Board of Directors at the meeting of Directors immediately following the Annual Meeting of Shareholders.
Executive Vice President and Chief Information Officer since March 2018. Previously, Mr. Schramm served as Chief Information Officer for GE Aviation and held various positions at GE beginning in 2001. Robert P. Shaffer , 53. Executive Vice President and Chief Risk Officer since November 2020. Previously, Mr.
Executive Vice President and Chief Information Officer since March 2018. Previously, Mr. Schramm served as Chief Information Officer for GE Aviation and held various positions at GE beginning in 2001. Robert P. Shaffer , 54. Executive Vice President and Chief Risk Officer since November 2020. Previously, Mr.
Spence was Executive Vice President and Head of Consumer Bank, Payments, and Strategy of the Bancorp from August 2018 to October 2020, Head of Payments, Strategy and Digital Solutions from 2017 to 2020, and Chief Strategy Officer of the Bancorp from September 2015 to October 2020.
Previously, Mr. Spence was Executive Vice President and Head of Consumer Bank, Payments, and Strategy of the Bancorp from August 2018 to October 2020, Head of Payments, Strategy and Digital Solutions from 2017 to 2020, and Chief Strategy Officer of the Bancorp from September 2015 to October 2020.
Stevens was Chief Digital Officer and Head of Digital, Marketing, Design and Innovation from November 2020 to February 2023. She also served as Senior Vice President, Chief Digital Officer, and Head of Omnichannel Banking Experiences, Design, and Innovation from May 2016 through November 2020.
Executive Vice President and Chief Marketing Officer since February 2023. Previously, Ms. Stevens was Chief Digital Officer and Head of Digital, Marketing, Design and Innovation from November 2020 to February 2023. She also served as Senior Vice President, Chief Digital Officer and Head of Omnichannel Banking Experiences, Design, and Innovation from May 2016 through November 2020.
Executive Vice President and Chief Human Resources Officer since September 2021. Previously, Ms. Pinckney was Senior Vice President and Director of Human Capital Business Consulting from February 2012 through September 2021 and Director of Employee Relations from March 2010 to February 2012. Prior to that, she held various positions within Fifth Third’s human resources division. Jude A. Schramm , 50.
Nancy C. Pinckney , 60. Executive Vice President and Chief Human Resources Officer since September 2021. Previously, Ms. Pinckney was Senior Vice President and Director of Human Capital Business Consulting from February 2012 through September 2021 and Director of Employee Relations from March 2010 to February 2012. Prior to that, she held various positions within Fifth Third’s human resources division.
Hazel , 57. Executive Vice President and Controller of the Bancorp since February 2010. Mr. Hazel has been an Executive Vice President of the Bancorp since September 2021. Previously, Mr. Hazel was the Assistant Bancorp Controller since 2006 and was the Controller of Nonbank entities since 2003. Kevin P. Lavender , 61.
Executive Vice President and Controller of the Bancorp since February 2010. Mr. Hazel has been an Executive Vice President of the Bancorp since September 2021. Previously, Mr. Hazel was the Assistant Bancorp Controller from 2006 to 2010 and was the Controller of Nonbank entities from 2003 to 2006. Kevin P. Lavender , 62.
Leonard was Chief Risk Officer from February 2020 to November 2020, Treasurer of the Bancorp from October 2013 to January 2020, Senior Vice President from October 2013 to September 2015, the Director of Business Planning and Analysis from 2006 to 2013 and the Chief Financial Officer of the Commercial Banking Division from 2001 to 2006. Nancy C. Pinckney , 59.
Leonard was Chief Financial Officer from November 2020 to December 2023, Chief Risk Officer from February 2020 to November 2020, Treasurer of the Bancorp from October 2013 to January 2020, Senior Vice President from October 2013 to September 2015, the Director of Business Planning and Analysis from 2006 to 2013 and the Chief Financial Officer of the Commercial Banking Division from 2001 to 2006.
Gibson served as Head of Business Banking and Chief Enterprise Corporate Responsibility Officer from December 2020 to February 2022, Head of Business Banking from September 2013 to December 2020, Senior Vice President from September 2011 to June 2019, and Business Banking Executive for Fifth Third’s East Michigan Region from July 2011 to September 2013. Howard Hammond, 57.
Gibson served as Head of Business Banking and Chief Enterprise Corporate Responsibility Officer from December 2020 to February 2022, Head of Business Banking from September 2013 to December 2020, Senior Vice President from September 2011 to June 2019, and Business Banking Executive for Fifth Third’s East Michigan Region from July 2011 to September 2013. Mark D. Hazel , 58.
Lavender was Senior Vice President and Managing Director of Large Corporate and Specialized Lending from January 2009 to 2016 and the Senior Vice President and Head of National Healthcare Lending from December 2005 to January 2009. James C. Leonard , 53. Executive Vice President and Chief Financial Officer since November 2020. Mr.
Lavender was Senior Vice President and Managing Director of Large Corporate and Specialized Lending from January 2009 to 2016 and the Senior Vice President and Head of National Healthcare Lending from December 2005 to January 2009. James C. Leonard , 54. Executive Vice President and Chief Operating Officer since January 2024. Mr.
Shaffer was Chief Human Resource Officer from February 2017 to November 2020 and Chief Auditor from August 2007 to February 2017. He was named Executive Vice President in 2010 and Senior Vice President in 2004. Prior to that, he held various positions within Fifth Third’s audit division. Richard L. Stein, 53.
Shaffer was Chief Human Resource Officer from February 2017 to November 2020 and Chief Auditor from August 2007 to February 2017. He was named Executive Vice President in 2010 and Senior Vice President in 2004. Prior to that, he held various positions within Fifth Third’s audit division. Melissa S. Stevens , 49.
The names, ages and positions of the Executive Officers of the Bancorp as of February 24, 2023 are listed below along with their business experience during the past five years: Timothy N. Spence , 44. President and Chief Executive Officer since July 2022. Mr. Spence has been President since October 2020. Previously, Mr.
The names, ages and positions of the Executive Officers of the Bancorp as of February 27, 2024 are listed below along with their business experience during the past five years: Timothy N. Spence , 45. Chairman, Chief Executive Officer and President. Mr. Spence has been Chairman since January 2024, Chief Executive Officer since July 2022 and President since October 2020.
Prior to joining Fifth Third, she served in several senior management positions at Citigroup, including Chief Operating Officer and Managing Director of Citi FinTech from November 2015 through April 2016. Susan B. Zaunbrecher , 63. Executive Vice President and Chief Legal Officer of the Bancorp since May 2018. Previously, Ms.
Prior to joining Fifth Third, she served in several senior management positions at Citigroup, including Chief Operating Officer and Managing Director of Citi FinTech from November 2015 through April 2016. 44 Fifth Third Bancorp Table of Contents Susan B. Zaunbrecher , 64. Executive Vice President, Chief Legal Officer and Corporate Secretary. Ms.
Previously, she was Senior Vice President and Head of Wealth & Asset Management from July 2019 to November 2020 and Head of Fifth Third Private Bank from October 2017 until July 2019. Previously, she was President of Private Wealth in Chicago at CIBC U.S. from 2009 to 2017. Kala J. Gibson , 50.
Garrett has been Executive Vice President and Head of Wealth & Asset Management since November 2020. Previously, she was Senior Vice President and Head of Wealth & Asset Management from July 2019 to November 2020 and Head of Fifth Third Private Bank from October 2017 until July 2019.
Executive Vice President and Chief Corporate Responsibility Officer since February 2022. Mr. Gibson has been an Executive Vice President of the Bancorp since June 2019. Previously, Mr.
Previously, she was President of Private Wealth in Chicago at CIBC U.S. from 2009 to 2017. Kala J. Gibson , 52. Executive Vice President and Chief Corporate Responsibility Officer since February 2022. Mr. Gibson has been an Executive Vice President of the Bancorp since June 2019. Previously, Mr.
He also previously served as a senior partner in the Financial Services practice at Oliver Wyman since 2006, a global strategy and risk management consulting firm. Greg D. Carmichael , 61. Executive Chairman of the Bancorp since July 2022. Mr. Carmichael has been Chairman of the Board since February 2018. Previously, Mr.
He also previously served as a senior partner in the Financial Services practice at Oliver Wyman, a global strategy and risk management consulting firm, from 2006 to 2015. Kristine R. Garrett , 65. Executive Vice President, Group Regional President and Head of Wealth & Asset Management since July 2022. Ms.
Executive Vice President and Chief Credit Officer since November 2020. Mr. Stein has been an Executive Vice President of the Bancorp since April 2016. Previously, Mr.
Bryan D. Preston , 47. Executive Vice President and Chief Financial Officer since January 2024. Mr. Preston has been an Executive Vice President of the Bancorp since October 2022. Previously, Mr.
Removed
Carmichael was Chief Executive Officer from November 2015 to July 2022.
Added
Preston served as the Treasurer of the Bancorp from February 2020 to January 2024, Consumer Line of Business Chief Financial Officer from September 2017 to February 2020, Assistant Treasurer from March 2014 to September 2017 and in various other roles in finance and accounting within Fifth Third from 2008 to 2014. Jude A. Schramm , 51.
Removed
He was also President of the Bancorp from September 2012 to October 2020, Chief Operating Officer of the Bancorp from June 2006 to August 2015, Executive Vice President of the Bancorp from June 2006 to September 2012 and Chief Information Officer of the Bancorp from June 2003 to June 2006. Kristine R. Garrett , 64.
Removed
Executive Vice President, Group Regional President and Head of Wealth & Asset Management since July 2022. Ms. Garrett has been Executive Vice President and Head of Wealth & Asset Management since November 2020.
Removed
Executive Vice President and Head of Consumer Bank since February 2021. Previously, he was Senior Vice President and Head of Retail Banking and Retail Brokerage from April 2020 through February 2021, Head of Retail and Brokerage Distribution from June 2019 through April 2020, and Head Managing Director of Fifth Third Securities from March 2006 through June 2019. Mark D.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAPR : Annual Percentage Rate LIBOR : London Interbank Offered Rate ARM : Adjustable Rate Mortgage LIHTC : Low-Income Housing Tax Credit ASC : Accounting Standards Codification LLC : Limited Liability Company ASU : Accounting Standards Update LTV : Loan-to-Value Ratio ATM : Automated Teller Machine MD&A : Management’s Discussion and Analysis of Financial BHC : Bank Holding Company Condition and Results of Operations BOLI : Bank Owned Life Insurance MSR : Mortgage Servicing Right bps : Basis Points N/A : Not Applicable CCAR : Comprehensive Capital Analysis and Review NAV : Net Asset Value CD: Certificate of Deposit NII : Net Interest Income CDC : Fifth Third Community Development Corporation and Fifth Third NM : Not Meaningful Community Development Company, LLC OAS : Option-Adjusted Spread CECL : Current Expected Credit Loss OCC : Office of the Comptroller of the Currency CET1 : Common Equity Tier 1 OCI : Other Comprehensive Income (Loss) CFPB : United States Consumer Financial Protection Bureau OREO : Other Real Estate Owned C&I : Commercial and Industrial PCD : Purchased Credit Deteriorated DCF : Discounted Cash Flow PPP : Paycheck Protection Program DTCC : Depository Trust & Clearing Corporation PSA : Performance Share Award DTI : Debt-to-Income Ratio RCC : Risk and Compliance Committee ERM : Enterprise Risk Management ROU : Right-of-Use ERMC : Enterprise Risk Management Committee RSA : Restricted Stock Award EVE : Economic Value of Equity RSU : Restricted Stock Unit FASB : Financial Accounting Standards Board SAR : Stock Appreciation Right FDIC : Federal Deposit Insurance Corporation SBA : Small Business Administration FHA : Federal Housing Administration SEC : United States Securities and Exchange Commission FHLB : Federal Home Loan Bank SOFR : Secured Overnight Financing Rate FHLMC : Federal Home Loan Mortgage Corporation TBA : To Be Announced FICO : Fair Isaac Corporation (credit rating) TDR : Troubled Debt Restructuring FINRA : Financial Industry Regulatory Authority TILA : Truth in Lending Act FNMA : Federal National Mortgage Association TRA : Tax Receivable Agreement FOMC : Federal Open Market Committee TruPS : Trust Preferred Securities FRB : Federal Reserve Bank U.S. : United States of America FTE : Fully Taxable Equivalent USD : United States Dollar FTP : Funds Transfer Pricing U.S.
Biggest changeARM : Adjustable Rate Mortgage LCR : Liquidity Coverage Ratio ASC : Accounting Standards Codification LIBOR : London Interbank Offered Rate ASU : Accounting Standards Update LIHTC : Low-Income Housing Tax Credit ATM : Automated Teller Machine LLC : Limited Liability Company BHC : Bank Holding Company LTV : Loan-to-Value Ratio BOLI : Bank Owned Life Insurance MD&A : Management’s Discussion and Analysis of Financial bps : Basis Points Condition and Results of Operations CCAR : Comprehensive Capital Analysis and Review MSR : Mortgage Servicing Right CD: Certificate of Deposit N/A : Not Applicable CDC : Fifth Third Community Development Corporation and Fifth Third NII : Net Interest Income Community Development Company, LLC NM : Not Meaningful CECL : Current Expected Credit Loss OAS : Option-Adjusted Spread CET1 : Common Equity Tier 1 OCC : Office of the Comptroller of the Currency CFPB : United States Consumer Financial Protection Bureau OCI : Other Comprehensive Income (Loss) CME : Chicago Mercantile Exchange OREO : Other Real Estate Owned C&I : Commercial and Industrial PPP : Paycheck Protection Program DCF : Discounted Cash Flow PSA : Performance Share Award DTCC : Depository Trust & Clearing Corporation RCC : Risk and Compliance Committee DTI : Debt-to-Income Ratio ROU : Right-of-Use ERM : Enterprise Risk Management RSA : Restricted Stock Award ERMC : Enterprise Risk Management Committee RSU : Restricted Stock Unit EVE : Economic Value of Equity SAR : Stock Appreciation Right FASB : Financial Accounting Standards Board SBA : Small Business Administration FDIC : Federal Deposit Insurance Corporation SEC : United States Securities and Exchange Commission FHA : Federal Housing Administration SOFR : Secured Overnight Financing Rate FHLB : Federal Home Loan Bank TBA : To Be Announced FHLMC : Federal Home Loan Mortgage Corporation TDR : Troubled Debt Restructuring FICO : Fair Isaac Corporation (credit rating) TILA : Truth in Lending Act FINRA : Financial Industry Regulatory Authority TRA : Tax Receivable Agreement FNMA : Federal National Mortgage Association TruPS : Trust Preferred Securities FOMC : Federal Open Market Committee U.S. : United States of America FRB : Federal Reserve Bank U.S.
See further discussion on share repurchase transactions and stock-based compensation in Note 24 and Note 25 of the Notes to Consolidated Financial Statements, which is incorporated herein by reference. 50 Fifth Third Bancorp Table of Contents The following performance graphs do not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Bancorp specifically incorporates the performance graphs by reference therein.
See further discussion on share repurchase transactions and stock-based compensation in Note 24 and Note 25 of the Notes to Consolidated Financial Statements, which is incorporated herein by reference. 46 Fifth Third Bancorp Table of Contents The following performance graphs do not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Bancorp specifically incorporates the performance graphs by reference therein.
Total Return Analysis The graphs below summarize the cumulative return experienced by the Bancorp’s shareholders over the five and ten year periods ended December 31, 2022, respectively, compared to the S&P 500 Stock, the S&P Banks and the KBW Banks indices. FIFTH THIRD BANCORP VS.
Total Return Analysis The graphs below summarize the cumulative return experienced by the Bancorp’s shareholders over the five and ten year periods ended December 31, 2023, respectively, compared to the S&P 500 Stock, the S&P Banks and the KBW Banks indices. FIFTH THIRD BANCORP VS.
See a discussion of dividend limitations that the subsidiaries can pay to the Bancorp discussed in Note 3 of the Notes to Consolidated Financial Statements, which is incorporated herein by reference. Additionally, as of December 31, 2022, the Bancorp had 34,165 common shareholders of record.
See a discussion of dividend limitations that the subsidiaries can pay to the Bancorp discussed in Note 3 of the Notes to Consolidated Financial Statements, which is incorporated herein by reference. Additionally, as of December 31, 2023, the Bancorp had 32,995 common shareholders of record.
ACL : Allowance for Credit Losses HTM : Held-To-Maturity AFS : Available-For-Sale IPO : Initial Public Offering ALCO : Asset Liability Management Committee IRC : Internal Revenue Code ALLL : Allowance for Loan and Lease Losses IRLC : Interest Rate Lock Commitment AOCI : Accumulated Other Comprehensive Income (Loss) ISDA : International Swaps and Derivatives Association, Inc.
ACL : Allowance for Credit Losses GSE : United States Government Sponsored Enterprise AFS : Available-For-Sale HTM : Held-To-Maturity ALCO : Asset Liability Management Committee IPO : Initial Public Offering ALLL : Allowance for Loan and Lease Losses IRC : Internal Revenue Code AOCI : Accumulated Other Comprehensive Income (Loss) IRLC : Interest Rate Lock Commitment APR : Annual Percentage Rate ISDA : International Swaps and Derivatives Association, Inc.
Principles GDP : Gross Domestic Product VA : United States Department of Veterans Affairs GNMA : Government National Mortgage Association VIE : Variable Interest Entity GSE : United States Government Sponsored Enterprise VRDN : Variable Rate Demand Note 53 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
VIE : Variable Interest Entity GDP : Gross Domestic Product VRDN : Variable Rate Demand Note GNMA : Government National Mortgage Association 49 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MARKET INDICES 51 Fifth Third Bancorp Table of Contents 2022 ANNUAL REPORT FINANCIAL CONTENTS Glossary of Abbreviations and Acronyms 53 Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview 54 Non-GAAP Financial Measures 59 Recent Accounting Standards 61 Critical Accounting Policies 61 Statements of Income Analysis 65 Business Segment Review 72 Balance Sheet Analysis 81 Risk Management - Overview 88 Credit Risk Management 89 Interest Rate and Price Risk Management 106 Liquidity Risk Management 112 Operational Risk Management 114 Legal and Regulatory Compliance Risk Management 115 Capital Management 116 Report of Independent Registered Public Accounting Firm 118 Financial Statements Consolidated Balance Sheets 120 Consolidated Statements of Income 121 Consolidated Statements of Comprehensive Income 122 Consolidated Statements of Changes in Equity 123 Consolidated Statements of Cash Flows 125 Notes to Consolidated Financial Statements Summary of Significant Accounting and Reporting Policies 126 Long-Term Debt 173 Supplemental Cash Flow Information 139 Commitments, Contingent Liabilities and Guarantees 177 Restrictions on Dividends and Capital Actions 139 Legal and Regulatory Proceedings 181 Investment Securities 140 Related Party Transactions 183 Loans and Leases 143 Income Taxes 185 Credit Quality and the Allowance for Loan and Lease Losses 145 Retirement and Benefit Plans 187 Bank Premises and Equipment 155 Accumulated Other Comprehensive Income 190 Operating Lease Equipment 156 Common, Preferred and Treasury Stock 192 Lease Obligations – Lessee 156 Stock-Based Compensation 194 Goodwill 158 Other Noninterest Income and Other Noninterest Expense 197 Intangible Assets 159 Earnings Per Share 198 Variable Interest Entities 160 Fair Value Measurements 199 Sales of Receivables and Servicing Rights 163 Regulatory Capital Requirements and Capital Ratios 208 Derivative Financial Instruments 165 Parent Company Financial Statements 209 Other Assets 171 Business Segments 211 Short-Term Borrowings 172 Subsequent Event 214 Management’s Assessment as to the Effectiveness of Internal Control over Financial Reporting 215 Report of Independent Registered Public Accounting Firm 216 Consolidated Ten Year Comparison 224 Directors and Officers 225 Corporate Information 52 Fifth Third Bancorp Table of Contents GLOSSARY OF ABBREVIATIONS AND ACRONYMS Fifth Third Bancorp provides the following list of abbreviations and acronyms as a tool for the reader that are used in Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Consolidated Financial Statements and the Notes to Consolidated Financial Statements.
MARKET INDICES 47 Fifth Third Bancorp Table of Contents 2023 ANNUAL REPORT FINANCIAL CONTENTS Glossary of Abbreviations and Acronyms 49 Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview 50 Non-GAAP Financial Measures 54 Recent Accounting Standards 56 Critical Accounting Policies 56 Statements of Income Analysis 61 Business Segment Review 69 Balance Sheet Analysis 75 Risk Management - Overview 82 Credit Risk Management 83 Interest Rate and Price Risk Management 98 Liquidity Risk Management 104 Operational Risk Management 106 Legal and Regulatory Compliance Risk Management 107 Capital Management 108 Report of Independent Registered Public Accounting Firm 110 Financial Statements Consolidated Balance Sheets 112 Consolidated Statements of Income 113 Consolidated Statements of Comprehensive Income 114 Consolidated Statements of Changes in Equity 115 Consolidated Statements of Cash Flows 117 Notes to Consolidated Financial Statements Summary of Significant Accounting and Reporting Policies 118 Long-Term Debt 170 Supplemental Cash Flow Information 133 Commitments, Contingent Liabilities and Guarantees 174 Restrictions on Dividends and Capital Actions 133 Legal and Regulatory Proceedings 178 Investment Securities 134 Related Party Transactions 180 Loans and Leases 137 Income Taxes 181 Credit Quality and the Allowance for Loan and Lease Losses 139 Retirement and Benefit Plans 183 Bank Premises and Equipment 152 Accumulated Other Comprehensive Income 186 Operating Lease Equipment 153 Common, Preferred and Treasury Stock 188 Lease Obligations – Lessee 153 Stock-Based Compensation 190 Goodwill 155 Other Noninterest Income and Other Noninterest Expense 193 Intangible Assets 156 Earnings Per Share 194 Variable Interest Entities 157 Fair Value Measurements 195 Sales of Receivables and Servicing Rights 160 Regulatory Capital Requirements and Capital Ratios 204 Derivative Financial Instruments 162 Parent Company Financial Statements 205 Other Assets 168 Business Segments 207 Short-Term Borrowings 169 Subsequent Event 210 Management’s Assessment as to the Effectiveness of Internal Control over Financial Reporting 211 Report of Independent Registered Public Accounting Firm 212 Consolidated Ten Year Comparison 221 Directors and Officers 222 Corporate Information 48 Fifth Third Bancorp Table of Contents GLOSSARY OF ABBREVIATIONS AND ACRONYMS Fifth Third Bancorp provides the following list of abbreviations and acronyms as a tool for the reader that are used in Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Consolidated Financial Statements and the Notes to Consolidated Financial Statements.
Issuer Purchases of Equity Securities Period Total Number of Shares Purchased (a) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs October 1 - October 31, 2022 73,176 $ 33.08 — 40,785,269 November 1 - November 30, 2022 23,625 34.93 — 40,785,269 December 1 - December 31, 2022 3,089,094 32.47 3,079,462 37,705,807 Total 3,185,895 $ 32.51 3,079,462 37,705,807 (a) Includes 106,433 shares repurchased during the fourth quarter of 2022 in connection with various employee compensation plans of the Bancorp.
Issuer Purchases of Equity Securities Period Total Number of Shares Purchased (a) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs (b) October 1 - October 31, 2023 75,992 $ 24.48 — 32,115,811 November 1 - November 30, 2023 17,203 25.78 — 32,115,811 December 1 - December 31, 2023 37,496 33.77 — 32,115,811 Total 130,691 $ 27.32 — 32,115,811 (a) Shares repurchased during the periods presented were in connection with various employee compensation plans.
GAAP : United States Generally Accepted Accounting FTS : Fifth Third Securities, Inc.
GAAP : United States Generally Accepted Accounting FTE : Fully Taxable Equivalent Principles FTP : Funds Transfer Pricing VA : United States Department of Veterans Affairs FTS : Fifth Third Securities, Inc.
These purchases do not count against the maximum number of shares that may yet be purchased under the Board of Directors’ authorization.
These purchases do not count against the maximum number of shares that may yet be purchased under the Board of Directors’ authorization. (b) On June 18, 2019, the Bancorp announced that its Board of Directors had authorized management to purchase 100 million shares of the Bancorp ’ s common stock through the open market or in any private party transactions.
Added
This authorization did not include specific targets or an expiration date.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

385 edited+111 added−128 removed215 unchanged
Biggest changeFor more information on the Bancorp’s interest rate risk management, including estimated earnings sensitivity to changes in market interest rates, see the Interest Rate and Price Risk Management subsection of the Risk Management section of MD&A. 65 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS TABLE 7: Consolidated Average Balance Sheets and Analysis of Net Interest Income on an FTE Basis For the years ended December 31 2022 2021 2020 ($ in millions) Average Balance Interest Earned/Paid Average Yield/ Rate Average Balance Interest Earned/Paid Average Yield/ Rate Average Balance Interest Earned/Paid Average Yield/ Rate Assets: Interest-earning assets: Loans and leases: (a) Commercial and industrial loans $ 55,618 2,401 4.32 % $ 48,966 1,735 3.54 % $ 53,814 1,954 3.63 % Commercial mortgage loans 10,723 415 3.87 10,396 313 3.01 11,011 391 3.54 Commercial construction loans 5,458 239 4.38 5,783 181 3.13 5,509 201 3.65 Commercial leases 2,828 85 3.02 3,130 92 2.94 3,038 104 3.43 Total commercial loans and leases 74,627 3,140 4.21 68,275 2,321 3.40 73,372 2,650 3.61 Residential mortgage loans 19,731 645 3.27 21,359 695 3.26 17,828 622 3.49 Home equity 3,971 177 4.46 4,565 164 3.59 5,679 222 3.90 Indirect secured consumer loans 16,914 560 3.31 15,156 508 3.35 12,454 490 3.93 Credit card 1,737 221 12.73 1,783 219 12.28 2,230 260 11.64 Other consumer loans 3,581 220 6.16 2,979 180 6.03 2,848 192 6.76 Total consumer loans 45,934 1,823 3.97 45,842 1,766 3.85 41,039 1,786 4.35 Total loans and leases $ 120,561 4,963 4.12 % $ 114,117 4,087 3.58 % $ 114,411 4,436 3.88 % Securities: Taxable $ 52,218 1,493 2.86 % $ 36,164 1,074 2.97 % $ 36,109 1,114 3.08 % Exempt from income taxes (a) 1,128 31 2.72 854 20 2.33 233 6 2.61 Other short-term investments 12,419 116 0.94 33,243 42 0.13 21,935 29 0.13 Total interest-earning assets $ 186,326 6,603 3.54 % $ 184,378 5,223 2.83 % $ 172,688 5,585 3.23 % Cash and due from banks 3,093 3,055 2,978 Other assets 19,490 21,050 20,933 Allowance for loan and lease losses (1,980) (2,159) (2,369) Total assets $ 206,929 $ 206,324 $ 194,230 Liabilities and Equity: Interest-bearing liabilities: Interest checking deposits $ 45,835 297 0.65 % $ 45,850 26 0.06 % $ 46,890 126 0.27 % Savings deposits 23,445 32 0.14 20,531 4 0.02 16,440 10 0.06 Money market deposits 29,326 67 0.23 30,631 12 0.04 29,879 88 0.29 Foreign office deposits 170 1 0.74 164 — 0.04 185 — 0.21 CDs $250,000 or less 2,342 9 0.40 3,214 10 0.31 5,247 66 1.25 Total interest-bearing core deposits 101,118 406 0.40 100,390 52 0.05 98,641 290 0.29 CDs over $250,000 1,688 41 2.45 530 7 1.30 2,208 31 1.41 Other deposits — — — — — — 71 1 0.76 Federal funds purchased 381 6 1.69 333 — 0.12 385 2 0.58 Securities sold under repurchase agreements 482 1 0.17 594 — 0.02 610 2 0.28 FHLB advances 3,733 98 2.63 — — — 470 3 0.65 Derivative collateral and other borrowed money 329 9 2.94 513 2 0.30 629 9 1.44 Long-term debt 11,893 417 3.50 13,109 380 2.89 16,004 452 2.82 Total interest-bearing liabilities $ 119,624 978 0.82 % $ 115,469 441 0.38 % $ 119,018 790 0.66 % Demand deposits 60,185 62,028 47,111 Other liabilities 8,040 6,015 5,546 Total liabilities $ 187,849 $ 183,512 $ 171,675 Total equity $ 19,080 $ 22,812 $ 22,555 Total liabilities and equity $ 206,929 $ 206,324 $ 194,230 Net interest income (FTE) (b) $ 5,625 $ 4,782 $ 4,795 Net interest margin (FTE) (b) 3.02 % 2.59 % 2.78 % Net interest rate spread (FTE) (b) 2.72 2.45 2.57 Interest-bearing liabilities to interest-earning assets 64.20 62.63 68.92 (a) The FTE adjustments included in the above table were $16, $12 and $13 for the years ended December 31, 2022, 2021, and 2020, respectively.
Biggest changeFor more information on the Bancorp’s interest rate risk management, including estimated earnings sensitivity to changes in market interest rates, refer to the Interest Rate and Price Risk Management subsection of the Risk Management section of MD&A. 61 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS TABLE 6: Consolidated Average Balance Sheets and Analysis of Net Interest Income on an FTE Basis For the years ended December 31 2023 2022 2021 ($ in millions) Average Balance Interest Earned/Paid Average Yield/ Rate Average Balance Interest Earned/Paid Average Yield/ Rate Average Balance Interest Earned/Paid Average Yield/ Rate Assets: Interest-earning assets: Loans and leases: (a) Commercial and industrial loans $ 57,005 3,887 6.82 % $ 55,618 2,401 4.32 % $ 48,966 1,735 3.54 % Commercial mortgage loans 11,262 672 5.97 10,723 415 3.87 10,396 313 3.01 Commercial construction loans 5,582 380 6.80 5,458 239 4.38 5,783 181 3.13 Commercial leases 2,629 95 3.63 2,828 85 3.02 3,130 92 2.94 Total commercial loans and leases 76,478 5,034 6.58 74,627 3,140 4.21 68,275 2,321 3.40 Residential mortgage loans 18,002 621 3.45 19,731 645 3.27 21,359 695 3.26 Home equity 3,936 298 7.58 3,971 177 4.46 4,565 164 3.59 Indirect secured consumer loans 15,944 687 4.31 16,914 560 3.31 15,156 508 3.35 Credit card 1,800 252 14.00 1,737 221 12.73 1,783 219 12.28 Other consumer loans 6,122 457 7.46 3,581 220 6.16 2,979 180 6.03 Total consumer loans 45,804 2,315 5.05 45,934 1,823 3.97 45,842 1,766 3.85 Total loans and leases $ 122,282 7,349 6.01 % $ 120,561 4,963 4.12 % $ 114,117 4,087 3.58 % Securities: Taxable $ 56,066 1,733 3.09 % $ 52,218 1,493 2.86 % $ 36,164 1,074 2.97 % Exempt from income taxes (a) 1,461 47 3.20 1,128 31 2.72 854 20 2.33 Other short-term investments 11,934 656 5.50 12,419 116 0.94 33,243 42 0.13 Total interest-earning assets $ 191,743 9,785 5.10 % $ 186,326 6,603 3.54 % $ 184,378 5,223 2.83 % Cash and due from banks 2,772 3,093 3,055 Other assets 16,169 19,490 21,050 Allowance for loan and lease losses (2,258) (1,980) (2,159) Total assets $ 208,426 $ 206,929 $ 206,324 Liabilities and Equity: Interest-bearing liabilities: Interest checking deposits $ 52,378 1,552 2.96 % $ 45,835 297 0.65 % $ 45,850 26 0.06 % Savings deposits 20,872 147 0.71 23,445 32 0.14 20,531 4 0.02 Money market deposits 30,943 666 2.15 29,326 67 0.23 30,631 12 0.04 Foreign office deposits 158 3 1.82 170 1 0.74 164 — 0.04 CDs $250,000 or less 8,298 308 3.71 2,342 9 0.40 3,214 10 0.31 Total interest-bearing core deposits 112,649 2,676 2.38 101,118 406 0.40 100,390 52 0.05 CDs over $250,000 5,332 253 4.74 1,688 41 2.45 530 7 1.30 Federal funds purchased 307 15 4.96 381 6 1.69 333 — 0.12 Securities sold under repurchase agreements 348 4 1.22 482 1 0.17 594 — 0.02 FHLB advances 4,596 235 5.11 3,733 98 2.63 — — — Derivative collateral and other borrowed money 100 8 8.24 329 9 2.94 513 2 0.30 Long-term debt 14,260 742 5.20 11,893 417 3.50 13,109 380 2.89 Total interest-bearing liabilities $ 137,592 3,933 2.86 % $ 119,624 978 0.82 % $ 115,469 441 0.38 % Demand deposits 46,195 60,185 62,028 Other liabilities 6,935 8,040 6,015 Total liabilities $ 190,722 $ 187,849 $ 183,512 Total equity $ 17,704 $ 19,080 $ 22,812 Total liabilities and equity $ 208,426 $ 206,929 $ 206,324 Net interest income (FTE) (b) $ 5,852 $ 5,625 $ 4,782 Net interest margin (FTE) (b) 3.05 % 3.02 % 2.59 % Net interest rate spread (FTE) (b) 2.24 2.72 2.45 Interest-bearing liabilities to interest-earning assets 71.76 64.20 62.63 (a) The FTE adjustments included in the above table were $25, $16 and $12 for the years ended December 31, 2023, 2022 and 2021, respectively.
Noninterest income is derived from service charges on deposits, wealth and asset management revenue, commercial banking revenue, card and processing revenue, leasing business revenue, mortgage banking net revenue, other noninterest income and net securities gains or losses.
Noninterest income is derived from commercial banking revenue, wealth and asset management revenue, service charges on deposits, card and processing revenue, mortgage banking net revenue, leasing business revenue, other noninterest income and net securities gains or losses.
Refer to Note 1 of the Notes to Consolidated Financial Statements for additional information about the Bancorp’s processes for developing these models, estimating credit losses for periods beyond the reasonable and supportable forecast period and for estimating credit losses for individually evaluated loans.
Refer to Note 1 of the Notes to Consolidated Financial Statements for additional information about the Bancorp’s processes for developing these models, for estimating credit losses for periods beyond the reasonable and supportable forecast period and for estimating credit losses for individually evaluated loans.
The estimates for loss severity are primarily based on collateral type and coverage levels and the susceptibility of those characteristics to changes in macroeconomic conditions.
The estimates for loss severity are primarily based on collateral type and coverage levels and the susceptibility of those characteristics to changes in macroeconomic conditions.
The Bancorp’s consumer portfolio is materially comprised of five categories of loans: residential mortgage loans, home equity, indirect secured consumer loans, credit card and other consumer loans. The Bancorp has identified certain credit characteristics within these five categories of loans which it believes represent a higher level of risk compared to the rest of the consumer loan portfolio.
Consumer Portfolio The Bancorp’s consumer portfolio is materially comprised of five categories of loans: residential mortgage loans, home equity, indirect secured consumer loans, credit card and other consumer loans. The Bancorp has identified certain credit characteristics within these five categories of loans which it believes represent a higher level of risk compared to the rest of the consumer loan portfolio.
Qualitative factors may also be used to address the impacts of unforeseen events on key inputs and assumptions within the Bancorp’s expected credit loss models, such as the reasonable and supportable forecast period, changes to historical loss information or changes to the reversion period or methodology.
Qualitative factors may also be used to address the impacts of unforeseen events on key inputs and assumptions within the Bancorp’s expected credit loss models, such as the reasonable and supportable forecast period, changes to historical loss information or changes to the reversion period or methodology.
For loans with available credit, the estimate of the expected balance at the time of default considers expected utilization rates, which are primarily based on macroeconomic conditions and the utilization history of similar borrowers under those economic conditions.
For loans with available credit, the estimate of the expected balance at the time of default considers expected utilization rates, which are primarily based on macroeconomic conditions and the utilization history of similar borrowers under those economic conditions.
The estimates for loss severity are primarily based on collateral type and coverage levels and the susceptibility of those characteristics to changes in macroeconomic conditions.
The estimates for loss severity are primarily based on collateral type and coverage levels and the susceptibility of those characteristics to changes in macroeconomic conditions.
For collectively evaluated loans in the consumer and residential mortgage portfolio segments, the Bancorp’s expected credit loss models primarily utilize the borrower’s FICO score and delinquency history in combination with macroeconomic conditions when estimating the probability of default.
For collectively evaluated loans in the consumer and residential mortgage portfolio segments, the Bancorp’s expected credit loss models primarily utilize the borrower’s FICO score and delinquency history in combination with macroeconomic conditions when estimating the probability of default.
The estimates for loss severity are primarily based on collateral type and coverage levels and the susceptibility of those characteristics to changes in macroeconomic conditions.
The estimates for loss severity are primarily based on collateral type and coverage levels and the susceptibility of those characteristics to changes in macroeconomic conditions.
The expected balance at the estimated date of default is also especially impactful in the expected credit loss models for portfolio classes which generally have longer terms (such as residential mortgage loans and home equity) and portfolio classes containing a high concentration of loans with revolving privileges (such as home equity).
The expected balance at the estimated date of default is also especially impactful in the expected credit loss models for portfolio classes which generally have longer terms (such as residential mortgage loans and home equity) and portfolio classes containing a high concentration of loans with revolving privileges (such as home equity).
The estimate of the expected balance at the time of default considers expected prepayment and utilization rates where applicable, which are primarily based on macroeconomic conditions and the utilization history of similar borrowers under those economic conditions.
The estimate of the expected balance at the time of default considers expected prepayment and utilization rates where applicable, which are primarily based on macroeconomic conditions and the utilization history of similar borrowers under those economic conditions.
Refer to the Credit Risk Management subsection of the Risk Management section of MD&A as well as Note 6 of the Notes to Consolidated Financial Statements for more detailed information on the provision for credit losses, including an analysis of loan and lease portfolio composition, nonperforming assets, net charge-offs and other factors considered by the Bancorp in assessing the credit quality of the loan and lease portfolio and determining the level of the ACL.
Refer to the Credit Risk Management subsection of the Risk Management section of MD&A as well as Note 6 of the Notes to Consolidated Financial Statements for more information on the provision for credit losses, including an analysis of loan and lease portfolio composition, nonperforming assets, net charge-offs and other factors considered by the Bancorp in assessing the credit quality of the loan and lease portfolio and determining the level of the ACL.
As part of its larger environmental, social and governance responsibilities the Nominating and Corporate Governance Committee is responsible for overseeing climate strategy and climate-related issues in the context of stakeholder concerns. 114 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LEGAL AND REGULATORY COMPLIANCE RISK MANAGEMENT Legal and regulatory compliance risk is the risk of legal or regulatory sanctions, financial loss or damage to reputation as a result of noncompliance with (i) applicable laws, regulations, rules and other regulatory requirements (including but not limited to the risk of consumers experiencing economic loss or other legal harm as a result of noncompliance with consumer protection laws, regulations and requirements); (ii) internal policies and procedures, standards of best practice or codes of conduct; and (iii) principles of integrity and fair dealing applicable to Fifth Third’s activities and functions.
As part of its larger environmental, social and governance responsibilities the Nominating and Corporate Governance Committee is responsible for overseeing climate strategy and climate-related issues in the context of stakeholder concerns. 106 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LEGAL AND REGULATORY COMPLIANCE RISK MANAGEMENT Legal and regulatory compliance risk is the risk of legal or regulatory sanctions, financial loss or damage to reputation as a result of noncompliance with (i) applicable laws, regulations, rules and other regulatory requirements (including but not limited to the risk of consumers experiencing economic loss or other legal harm as a result of noncompliance with consumer protection laws, regulations and requirements); (ii) internal policies and procedures, standards of best practice or codes of conduct; and (iii) principles of integrity and fair dealing applicable to Fifth Third’s activities and functions.
The Board and executive management approve the risk appetite, which is considered in the development of business strategies and forms the basis for enterprise risk management. • The core principles that define the Bancorp’s risk appetite are as follows: ◦ Act with integrity in all activities. ◦ Understand the risks taken and ensure that they are in alignment with the Bancorp’s business strategies and risk appetite. ◦ Avoid risks that cannot be understood, managed or monitored. ◦ Provide transparency of risk to the Bancorp’s management and Board by escalating risks and issues as necessary. ◦ Ensure Fifth Third’s products and services are aligned to the Bancorp’s core customer base and are designed, delivered and maintained to provide value and benefit to the Bancorp’s customers and to Fifth Third. ◦ Only offer products or services that are appropriate or suitable for the Bancorp’s customers. ◦ Focus on providing operational excellence by providing reliable, accurate and efficient services to meet the Bancorp’s customers’ needs. ◦ Maintain a strong financial position to ensure the Bancorp meets its strategic objectives through all economic cycles and is able to access the capital markets at all times, even under stressed conditions. ◦ Protect the Bancorp’s reputation by thoroughly understanding the consequences of business strategies, products and processes. ◦ Conduct the Bancorp’s business in compliance with all applicable laws, rules and regulations and in alignment with internal policies and procedures. • Fifth Third’s core values and culture provide the foundation for sound risk management practices by establishing expectations for appropriate conduct and accountability across the organization.
The Board and executive management approve the risk appetite, which is considered in the development of business strategies and forms the basis for enterprise risk management. • The core principles that define the Bancorp’s risk appetite are as follows: ◦ Act with integrity in all activities. ◦ Understand the risks taken and ensure that they are in alignment with the Bancorp’s business strategies and risk appetite. ◦ Avoid risks that cannot be understood, managed or monitored. ◦ Provide transparency of risk to the Bancorp’s management and Board by escalating risks and issues as necessary. ◦ Ensure Fifth Third’s products and services are aligned to the Bancorp’s core customer base and are designed, delivered and maintained to provide value and benefit to the Bancorp’s customers and to Fifth Third. ◦ Only offer products or services that are appropriate or suitable for the Bancorp’s customers. ◦ Focus on providing operational excellence by providing reliable, accurate and efficient services to meet customers’ needs. ◦ Maintain a strong financial position to ensure the Bancorp meets its strategic objectives through all economic cycles and is able to access the capital markets at all times, even under stressed conditions. ◦ Protect the Bancorp’s reputation by thoroughly understanding the consequences of business strategies, products and processes. ◦ Conduct the Bancorp’s business in compliance with all applicable laws, rules and regulations and in alignment with internal policies and procedures. • Fifth Third’s core values and culture provide the foundation for supporting sound risk management practices by setting expectations for appropriate conduct and accountability across the organization.
General Corporate and Other General Corporate and Other includes the unallocated portion of the investment securities portfolio, securities gains and losses, certain non-core deposit funding, unassigned equity, unallocated provision for credit losses expense or a benefit from the reduction of the ACL, the payment of preferred stock dividends and certain support activities and other items not attributed to the business segments.
General Corporate and Other General Corporate and Other includes the unallocated portion of the investment securities portfolio, securities gains and losses, certain non-core deposit funding, unassigned equity, unallocated provision for credit losses or a benefit from the reduction of the ACL, the payment of preferred stock dividends and certain support activities and other items not attributed to the business segments.
With continued increases in interest rates, minimum payments on these products also increase, raising the potential for the environment to be disruptive to some borrowers. The Bancorp actively monitors the portion of its consumer portfolio that is susceptible to increases in minimum payments and continues to assess the impact on the overall risk appetite and soundness of the portfolio.
With increases in interest rates, minimum payments on these products also increase, raising the potential for the environment to be disruptive to some borrowers. The Bancorp actively monitors the portion of its consumer portfolio that is susceptible to increases in minimum payments and continues to assess the impact on the overall risk appetite and soundness of the portfolio.
Refer to Note 6 of the Notes to Consolidated Financial Statements for further information on the Bancorp’s credit grade categories, which are derived from standard regulatory rating definitions. In addition, stress testing is performed on various commercial and consumer portfolios utilizing various models.
Refer to Note 6 of the Notes to Consolidated Financial Statements for further information on the Bancorp’s credit rating categories, which are derived from standard regulatory rating definitions. In addition, stress testing is performed on various commercial and consumer portfolios utilizing various models.
The strategy also emphasizes diversification on a geographic, industry and customer level, regular credit examinations and quarterly management reviews of large credit exposures and loans experiencing deterioration of credit quality. Refer to the Credit Risk Management section of MD&A for additional information.
The strategy also emphasizes diversification on a geographic, industry and customer level, regular credit examinations and quarterly management reviews of large credit exposures and loans experiencing deterioration of credit quality. Refer to the Credit Risk Management subsection of the Risk Management section of MD&A for additional information.
Credit officers with the authority to extend credit are delegated specific authority amounts based on risk and exposure amount, the use of which is closely monitored. Underwriting activities are centrally managed, and Credit Risk Management manages the policy and the authority delegation process directly.
Credit officers with the authority to extend credit are delegated specific authority based on risk and exposure amount, the use of which is closely monitored. Underwriting activities are centrally managed, and Credit Risk Management manages the policy and the authority delegation process directly.
For further information on the Bancorp’s securities portfolio, refer to the Investment Securities subsection of the Balance Sheet Analysis section of MD&A. Asset-driven liquidity is provided by the Bancorp’s ability to sell or securitize loans and leases.
For further information on the Bancorp’s securities portfolio, refer to the Investment Securities subsection of the Balance Sheet Analysis section of MD&A. Asset-driven liquidity is provided by the Bancorp’s ability to pledge, sell or securitize loans and leases.
The Bancorp’s credit risk management strategy also emphasizes diversification on a geographic, industry and customer level as well as ongoing portfolio monitoring and timely management reviews of large credit exposures and credits experiencing deterioration of credit quality.
The Bancorp’s credit risk management strategy also emphasizes diversification on a geographic, industry, product and customer level as well as ongoing portfolio monitoring and timely management reviews of large credit exposures and credits experiencing deterioration of credit quality.
These controls include an independent determination of commodity volatility and potential future exposure on these contracts and counterparty credit approvals performed by independent risk management. 111 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY RISK MANAGEMENT The goal of liquidity management is to provide adequate funds to meet changes in loan and lease demand, unexpected levels of deposit withdrawals and other contractual obligations.
These controls include an independent determination of commodity volatility and potential future exposure on these contracts and counterparty credit approvals performed by independent risk management. 103 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY RISK MANAGEMENT The goal of liquidity management is to provide adequate funds to meet changes in loan and lease demand, unexpected levels of deposit withdrawals and other contractual obligations.
In addition, refer to the Liquidity Risk Management subsection of the Risk Management section of MD&A for a discussion on the role of borrowings in the Bancorp’s liquidity management. 87 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RISK MANAGEMENT – OVERVIEW Effective risk management is critical to the Bancorp’s ongoing success and ensures that the Bancorp operates in a safe and sound manner, complies with applicable laws and regulations and safeguards the Bancorp’s brand and reputation.
In addition, refer to the Liquidity Risk Management subsection of the Risk Management section of MD&A for a discussion on the role of borrowings in the Bancorp’s liquidity management. 81 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RISK MANAGEMENT – OVERVIEW Effective risk management is critical to the Bancorp’s ongoing success and ensures that the Bancorp operates in a safe and sound manner, complies with applicable laws and regulations and safeguards the Bancorp’s brand and reputation.
Operational risk is inherent in the Bancorp’s activities and can manifest itself in various ways, including fraudulent acts, business interruptions, inappropriate behavior of employees, unintentional failure to comply with applicable laws and regulations, poor design or delivery of products and services, cyber-security or physical security incidents and privacy breaches or failure of third parties to perform in accordance with their arrangements.
Operational risk is inherent in the Bancorp’s activities and can manifest itself in various ways, including fraudulent acts, business interruptions, inappropriate behavior of employees, unintentional failure to comply with applicable laws and regulations, poor design or delivery of products and services, cybersecurity or physical security incidents and privacy breaches or failure of third parties to perform in accordance with their arrangements.
As of December 31, 2022, the Bancorp’s interest rate risk exposure is governed by a risk framework that utilizes the change in NII over 12-month and 24-month horizons under parallel ramped increases and decreases in interest rates. Policy limits are utilized for scenarios assuming a 200 bps increase and a 200 bps decrease in interest rates over twelve months.
As of December 31, 2023, the Bancorp’s interest rate risk exposure is governed by a risk framework that utilizes the change in NII over 12-month and 24-month horizons under parallel ramped increases and decreases in interest rates. Policy limits are utilized for scenarios assuming a 200 bps increase and a 200 bps decrease in interest rates over twelve months.
These guidelines will be monitored and adjusted as deemed appropriate in response to the prevailing economic conditions while remaining within the Bancorp’s risk tolerance limits. The payment structures for certain variable rate products (such as residential mortgage loans, home equity and credit card) are susceptible to changes in benchmark interest rates.
These guidelines are monitored and adjusted as deemed appropriate in response to the prevailing economic conditions while remaining within the Bancorp’s risk tolerance limits. The payment structures for certain variable rate products (such as residential mortgage loans, home equity and credit card) are susceptible to changes in benchmark interest rates.
For additional information on the Bancorp’s methodology for measuring the ACL, refer to Note 1 of the Notes to Consolidated Financial Statements. 105 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTEREST RATE AND PRICE RISK MANAGEMENT Interest rate risk is the risk to earnings or capital arising from movement of interest rates.
For additional information on the Bancorp’s methodology for measuring the ACL, refer to Note 1 of the Notes to Consolidated Financial Statements. 97 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTEREST RATE AND PRICE RISK MANAGEMENT Interest rate risk is the risk to earnings or capital arising from movement of interest rates.
The Management Compliance Committee reports to the ERMC, which reports to the RCC of the Board of Directors of Fifth Third Bancorp and Fifth Third Bank, National Association. 115 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAPITAL MANAGEMENT Management regularly reviews the Bancorp’s capital levels to help ensure it is appropriately positioned under various operating environments.
The Management Compliance Committee reports to the ERMC, which reports to the RCC of the Board of Directors of Fifth Third Bancorp and Fifth Third Bank, National Association. 107 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAPITAL MANAGEMENT Management regularly reviews the Bancorp’s capital levels to help ensure it is appropriately positioned under various operating environments.
For certain portfolios, such as real estate and leveraged lending, stress testing is performed at the individual loan level during credit underwriting. In addition to the individual review of larger commercial loans that exhibit probable or observed credit weaknesses, the commercial credit review process includes the use of two risk grading systems.
For certain portfolios, such as real estate and leveraged lending, stress testing is performed at the individual loan level during credit underwriting. In addition to the individual review of larger commercial loans that exhibit probable or observed credit weaknesses, the commercial credit review process includes the use of two risk rating systems.
The Bancorp does not update LTVs for the consumer portfolio subsequent to origination except as part of the charge-off process for real estate secured loans. The Bancorp actively manages the consumer portfolio through concentration limits, which mitigate credit risk through limiting the exposure to lower FICO scores, higher LTVs and specific geographic concentration risks.
The Bancorp does not update LTVs for the consumer portfolio subsequent to origination except as part of the charge-off process for real estate secured loans. The Bancorp actively manages the consumer portfolio through concentration limits, which mitigate credit risk through limiting the exposure to lower FICO scores, higher LTVs, specific geographic concentration risks and additional risk elements.
These processes support the Bancorp’s goals to minimize future operational losses and strengthen the Bancorp’s performance by maintaining sufficient capital to absorb operational losses that are incurred. The Bancorp also maintains a robust information security program to support the management of cyber-security risk within the organization with a focus on prevention, detection and recovery processes.
These processes support the Bancorp’s goals to minimize future operational losses and strengthen the Bancorp’s performance by maintaining sufficient capital to absorb operational losses that are incurred. The Bancorp also maintains a robust information security program to support the management of cybersecurity risk within the organization with a focus on prevention, detection and recovery processes.
The credit rates for deposit products also increased since December 31, 2021, due to higher interest rates and modified assumptions. Thus, net interest income for asset-generating business segments was negatively impacted by the rates charged on assets while deposit-providing business segments were positively impacted during the year ended December 31, 2022.
The credit rates for deposit products also increased since December 31, 2022 due to higher interest rates and modified assumptions. Thus, net interest income for asset-generating business segments was negatively impacted by the rates charged on assets while deposit-providing business segments were positively impacted during the year ended December 31, 2023.
The home equity portfolio is managed in two primary groups: loans outstanding with a combined LTV greater than 80% and those loans with an LTV of 80% or less based upon appraisals at origination. For additional information on these loans, refer to Table 38 and Table 39.
The home equity portfolio is managed in two primary groups: loans outstanding with a combined LTV greater than 80% and those loans with an LTV of 80% or less based upon appraisals at origination. For additional information on these loans, refer to Table 37 and Table 38.
The Bancorp’s revenues are dependent on both net interest income and noninterest income. For the year ended December 31, 2022, net interest income on an FTE basis and noninterest income provided 67% and 33% of total revenue, respectively. The Bancorp derives the majority of its revenues within the U.S. from customers domiciled in the U.S.
The Bancorp’s revenues are dependent on both net interest income and noninterest income. For the year ended December 31, 2023, net interest income on an FTE basis and noninterest income provided 67% and 33% of total revenue, respectively. The Bancorp derives the majority of its revenues within the U.S. from customers domiciled in the U.S.
Revenue from foreign countries and external customers domiciled in foreign countries was immaterial to the Consolidated Financial Statements for the year ended December 31, 2022. Changes in interest rates, credit quality, economic trends and the capital markets are primary factors that drive the performance of the Bancorp.
Revenue from foreign countries and external customers domiciled in foreign countries was immaterial to the Consolidated Financial Statements for the year ended December 31, 2023. Changes in interest rates, credit quality, economic trends and the capital markets are primary factors that drive the performance of the Bancorp.
The Bancorp’s forecasts of market and economic conditions and the internal risk grades assigned to loans and leases in the commercial portfolio segment are examples of inputs to the expected credit loss models that require significant management judgment. These inputs have the potential to drive significant variability in the resulting ALLL.
The Bancorp’s forecasts of market and economic conditions and the internal risk ratings assigned to loans and leases in the commercial portfolio segment are examples of inputs to the expected credit loss models that require significant management judgment. These inputs have the potential to drive significant variability in the resulting ALLL.
The Credit Risk Review function provides independent and objective assessments of the quality of underwriting and documentation, the accuracy of risk grades and the charge-off, nonaccrual and reserve analysis process. The Bancorp’s credit review process and overall assessment of the adequacy of the ACL is based on quarterly assessments of the estimated losses expected in the loan and lease portfolio.
The Credit Risk Review function provides independent and objective assessments of the quality of underwriting and documentation, the accuracy of risk ratings and the charge-off, nonaccrual and reserve analysis process. The Bancorp’s credit review process and overall assessment of the adequacy of the ACL is based on quarterly assessments of the estimated losses expected in the loan and lease portfolio.
The Bancorp’s risk appetite is defined using quantitative metrics and qualitative measures to ensure prudent risk taking and drive balanced decision making. The Bancorp’s goal is to ensure that aggregate residual risks do not exceed the Bancorp’s risk appetite, and that risks taken are supportive of the Bancorp’s portfolio diversification and profitability objectives.
Risk appetite is defined using quantitative metrics and qualitative measures to ensure prudent risk taking, driving balanced decision making. The Bancorp’s goal is to ensure that aggregate residual risks do not exceed the Bancorp’s risk appetite, and that risks taken are supportive of the Bancorp’s portfolio diversification and profitability objectives.
For the commercial portfolio segment, the estimated probabilities of default are primarily based on the probability of default ratings assigned under the through-the-cycle dual risk rating system and historical observations of how those ratings migrate to a default over time in the context of macroeconomic conditions.
For the commercial portfolio segment, the estimated probabilities of default are primarily based on the probability of default ratings assigned under the dual risk rating system and historical observations of how those ratings migrate to a default over time in the context of macroeconomic conditions.
The expected losses generated from models are adjusted by certain qualitative adjustment factors to reflect risks associated 94 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS with current conditions and trends.
The expected losses generated from models are adjusted by certain qualitative adjustment factors to reflect risks associated 88 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS with current conditions and trends.
As described in Note 1 of the Notes to Consolidated Financial Statements, the Bancorp maintains the ALLL to absorb the amount of credit losses that are expected to be incurred over the remaining contractual terms of the related loans and leases (as adjusted for prepayments and reasonably expected TDRs).
As described in Note 1 of the Notes to Consolidated Financial Statements, the Bancorp maintains the ALLL to absorb the amount of credit losses that are expected to be incurred over the remaining contractual terms of the related loans and leases (as adjusted for prepayments).
A summary of nonperforming assets is included in Table 46. For further information on the Bancorp’s policies related to accounting for delinquent and nonperforming loans and leases, refer to the Nonaccrual Loans and Leases section of Note 1 of the Notes to Consolidated Financial Statements.
A summary of nonperforming assets is included in Table 45. For further information on the Bancorp’s policies related to accounting for delinquent and nonperforming loans and leases, refer to the Nonaccrual Loans and Leases section of Note 1 of the Notes to Consolidated Financial Statements.
Key factors in maintaining high credit ratings include a stable and diverse earnings stream, strong credit quality, strong capital ratios and diverse funding sources, in addition to disciplined liquidity monitoring procedures. The Bancorp’s and Bank’s credit ratings are summarized in Table 62.
Key factors in maintaining high credit ratings include a stable and diverse earnings stream, strong credit quality, strong capital ratios and diverse funding sources, in addition to disciplined liquidity monitoring procedures. The Bancorp’s and Bank’s credit ratings are summarized in Table 59.
Earnings Summary The Bancorp’s net income available to common shareholders for the year ended December 31, 2022 was $2.3 billion, or $3.35 per diluted share, which was net of $116 million in preferred stock dividends.
The Bancorp’s net income available to common shareholders for the year ended December 31, 2022 was $2.3 billion, or $3.35 per diluted share, which was net of $116 million in preferred stock dividends.
The Bancorp uses these assessments to maintain an adequate ACL and record any necessary charge-offs. Additional loans and leases with probable or observed credit weaknesses receive enhanced monitoring and undergo a periodic review.
The Bancorp uses these assessments to maintain an adequate ACL and record any necessary charge-offs. Certain loans and leases with probable or observed credit weaknesses receive enhanced monitoring and undergo a periodic review.
At both December 31, 2022 and 2021, the Bancorp used three forward-looking economic scenarios during the reasonable and supportable forecast period in its expected credit loss models to address the inherent imprecision in macroeconomic forecasting.
At both December 31, 2023 and 2022, the Bancorp used three forward-looking economic scenarios during the reasonable and supportable forecast period in its expected credit loss models to address the inherent imprecision in macroeconomic forecasting.
These include programs, such as risk and control self-assessments, product delivery risk assessments, scenario analysis, new product/initiative risk reviews, key risk indicators, Third-Party Risk Management, cyber-security risk management, review of operational losses and monitoring of significant organizational or process changes. The function is also responsible for developing reports that support the proactive management of operational risk across the enterprise.
These include programs, such as risk and control self-assessments, product delivery risk assessments, scenario analysis, new product/initiative risk reviews, key risk indicators, Third-Party Risk Management, cybersecurity risk management, review of operational losses and monitoring of significant organizational or process changes. The function is also responsible for developing reports that support the proactive management of operational risk across the enterprise.
Credit rates for deposit products and charge rates for loan products may be reset more frequently in response to changes in market conditions. In general, the charge rates on assets have increased since December 31, 2021 as they were affected by the prevailing level of interest rates and by the duration and repricing characteristics of the portfolio.
Credit rates for deposit products and charge rates for loan products may be reset more frequently in response to changes in market conditions. In general, the charge rates on assets increased since December 31, 2022 as they were affected by the prevailing level of interest rates and by the duration and repricing characteristics of the portfolio.
Whereas the NII sensitivity analysis highlights the impact on forecasted NII on an FTE basis (non-GAAP) over one- and two-year time horizons, EVE is a point-in-time analysis of the economic sensitivity of current positions that incorporates all cash flows over their estimated remaining lives.
Whereas the NII sensitivity analysis highlights the impact on forecasted NII on an FTE basis (non-GAAP) over one- and two-year time horizons, EVE is a point-in-time analysis of the economic sensitivity of current balance sheet and off-balance sheet positions that incorporates all cash flows over their estimated remaining lives.
The increase in net income was primarily driven by a decrease in provision for credit losses as well as an increase in noninterest income and a decrease in noninterest expense, partially offset by a decrease in net interest income on an FTE basis.
The increase in net income was primarily driven by an increase in net interest income on an FTE basis, a decrease in provision for credit losses and an increase in noninterest income, partially offset by an increase in noninterest expense.
Liquidity risk is monitored and managed for both Fifth Third Bancorp and its subsidiaries. The Bancorp receives substantially all of its liquidity from dividends from its subsidiaries, primarily Fifth Third Bank, National Association.
Liquidity risk is monitored and managed for both Fifth Third Bancorp and its subsidiaries. The Bancorp (parent company) receives substantially all of its liquidity from dividends from its subsidiaries, primarily Fifth Third Bank, National Association.
The first of these risk grading systems is based on regulatory guidance for credit risk systems. These ratings are used by the Bancorp to monitor and manage its credit risk.
The first of these risk rating systems is based on regulatory guidance for credit risk rating systems. These ratings are used by the Bancorp to monitor and manage its credit risk.
The modeling assumes no lag between the timing of changes in market rates and the timing of deposit repricing despite such timing lags having occurred in prior rate cycles.
NII simulation modeling assumes no lag between the timing of changes in market rates and the timing of deposit repricing despite such timing lags having occurred in prior rate cycles.
Table 60 of the Interest Rate and Price Risk Management subsection of the Risk Management section of MD&A presents information about the timing of cash flows from loan and lease repayments.
Table 57 of the Interest Rate and Price Risk Management subsection of the Risk Management section of MD&A presents information about the timing of cash flows from loan and lease repayments.
Table 6 provides a summary of the fair value of financial instruments carried at fair value on a recurring basis and the amounts of financial instruments valued using Level 3 inputs.
Table 5 provides a summary of the fair value of financial instruments carried at fair value on a recurring basis and the amounts of financial instruments valued using Level 3 inputs.
The incremental balance run-off and growth are modeled to flow into and out of funding products that reprice in conjunction with short-term market rate changes. 106 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Another important deposit modeling assumption is the amount by which interest-bearing deposit rates will increase or decrease when market interest rates increase or decrease.
The incremental balance attrition and growth are modeled to flow into and out of funding products that reprice in conjunction with short-term market rate changes. 98 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Another important deposit modeling assumption is the amount by which interest-bearing deposit rates will increase or decrease when market interest rates increase or decrease.
Loan and lease expense decreased $50 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily driven by a decrease in loan servicing expenses related to the Bancorp’s sales of certain government-guaranteed residential mortgage loans that were previously in forbearance programs and serviced by a third party.
Loan and lease expense decreased $34 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily driven by a decrease in loan servicing expenses related to the Bancorp’s sales of certain government-guaranteed residential mortgage loans that were previously in forbearance programs and serviced by a third party.
The Bancorp closely monitors the credit performance of point-of-sale loans. Loans originated in connection with one third-party company are impacted by certain credit loss protection coverage provided by that company. The Bancorp discontinued origination of new loans with this third-party company in September 2022.
Loans originated in connection with one third-party point-of-sale company are impacted by certain credit loss protection coverage provided by that company. The Bancorp discontinued origination of new loans with this third-party company in September 2022.
TABLE 62: Agency Ratings As of February 24, 2023 Moody’s Standard and Poor’s Fitch DBRS Morningstar Fifth Third Bancorp: Short-term borrowings No rating A-2 F1 R-1L Senior debt Baa1 BBB+ A- A Subordinated debt Baa1 BBB BBB+ AL Fifth Third Bank, National Association: Short-term borrowings P-2 A-2 F1 R-1M Short-term deposit P-1 No rating F1 No rating Long-term deposit A1 No rating A AH Senior debt A3 A- A- AH Subordinated debt A3 BBB+ BBB+ A Rating Agency Outlook for Fifth Third Bancorp and Fifth Third Bank, National Association: Stable Stable Stable Stable 113 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATIONAL RISK MANAGEMENT Operational risk is the risk to current or projected financial condition and resilience arising from inadequate or failed internal processes or systems, human errors or misconduct or adverse external events that are neither market- nor credit-related.
TABLE 59: Agency Ratings As of February 27, 2024 Moody’s Standard and Poor’s Fitch DBRS Morningstar Fifth Third Bancorp: Short-term borrowings No rating A-2 F1 R-1L Senior debt Baa1 BBB+ A- A Subordinated debt Baa1 BBB BBB+ AL Fifth Third Bank, National Association: Short-term borrowings P-2 A-2 F1 R-1M Short-term deposit P-1 No rating F1 No rating Long-term deposit A1 No rating A AH Senior debt A3 A- A- AH Subordinated debt A3 BBB+ BBB+ A Rating Agency Outlook for Fifth Third Bancorp and Fifth Third Bank, National Association: Negative Stable Stable Stable 105 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATIONAL RISK MANAGEMENT Operational risk is the risk to current or projected financial condition and resilience arising from inadequate or failed internal processes or systems, human errors or misconduct or adverse external events that are neither market- nor credit-related.
(b) Primarily reflects changes due to realized cash flows and the passage of time. For the years ended December 31, 2022 and 2021, the Bancorp recognized income of $177 million and losses of $139 million, respectively, in mortgage banking net revenue for valuation adjustments on the MSR portfolio.
(b) Primarily reflects changes due to realized cash flows and the passage of time. For the years ended December 31, 2023 and 2022, the Bancorp recognized losses of $105 million and income of $177 million, respectively, in mortgage banking net revenue for valuation adjustments on the MSR portfolio.
All employees are expected to conduct themselves in alignment with Fifth Third’s Code of Business Conduct and Ethics, which may be found on www.53.com, while carrying out their responsibilities. Fifth Third’s Corporate Reputation Risk Committee provides oversight of business conduct policies, programs and strategies, and monitors reporting of potential misconduct, trends or themes across the enterprise.
All employees are expected to conduct themselves in alignment with Fifth Third’s Code of Business Conduct and Ethics, which may be found on www.53.com, while carrying out their responsibilities. Fifth Third’s Management Compliance Committee provides oversight of business conduct policies, programs and strategies, and monitors reporting of potential misconduct, trends or themes across the enterprise.
The NII simulations and EVE analyses do not necessarily include certain actions that management may undertake to manage risk in response to actual changes in interest rates. The Bancorp regularly evaluates its exposures to a static balance sheet forecast, LIBOR, SOFR, Prime Rate and other basis risks, yield curve twist risks and embedded options risks.
The NII simulations and EVE analyses do not necessarily include certain actions that management may undertake to manage risk in response to actual changes in interest rates. The Bancorp regularly evaluates its exposures to a static balance sheet forecast, basis risks relative to the Prime Rate and various SOFR terms, yield curve twist risks and embedded options risks.
The valuation adjustments on the MSR portfolio included increases of $355 million and $142 million for the years ended December 31, 2022 and 2021, respectively, due to changes in market rates and other inputs in the valuation model, including future prepayment speeds and OAS assumptions.
The valuation adjustments on the MSR portfolio included increases of $43 million and $355 million for the years ended December 31, 2023 and 2022, respectively, due to changes in market rates and other inputs in the valuation model, including future prepayment speeds and OAS assumptions.
The fair value of the Bancorp’s investment securities portfolio generally decreases when interest rates increase or when credit spreads widen. 83 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS TABLE 23: Characteristics of Available-for-Sale Debt and Other Securities As of December 31, 2022 ($ in millions) Amortized Cost Fair Value Weighted-Average Life (in years) Weighted-Average Yield U.S.
The fair value of the Bancorp’s investment securities portfolio generally decreases when interest rates increase or when credit spreads widen. 77 Fifth Third Bancorp Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS TABLE 22: Characteristics of Available-for-Sale Debt and Other Securities As of December 31, 2023 ($ in millions) Amortized Cost Fair Value Weighted-Average Life (in years) Weighted-Average Yield U.S.
Refer to the Borrowings subsection of the Balance Sheet Analysis section of MD&A for additional information on the Bancorp’s borrowings. During the year ended December 31, 2022, average wholesale funding represented 15% of average interest-bearing liabilities compared to 13% for the year ended December 31, 2021.
Refer to the Borrowings subsection of the Balance Sheet Analysis section of MD&A for additional information on the Bancorp’s borrowings. During the year ended December 31, 2023, average wholesale funding represented 18% of average interest-bearing liabilities compared to 15% for the year ended December 31, 2022.
Fifth Third’s Enterprise Risk Management Framework, which is approved annually by the Capital Committee, ERMC, RCC and the Board of Directors, includes the following key elements: • The Bancorp ensures transparency and escalation of risk through defined risk policies and a governance structure that includes the RCC, ERMC and other management-level risk committees and councils. • The Bancorp establishes a risk appetite in alignment with its strategic, financial and capital plans.
Fifth Third’s Enterprise Risk Management Framework, which is approved annually by the Capital Committee, ERMC, RCC and the Board of Directors, includes the following key elements: • The Bancorp ensures transparency of risk through defined risk policies, governance and a reporting structure that includes the RCC, ERMC and other risk-specific management committees and councils. • The Bancorp establishes a risk appetite in alignment with its strategic, financial and capital plans at the enterprise level and the line of business level.
Tables 7 and 8 present the components of net interest income, net interest margin and net interest rate spread for the years ended December 31, 2022, 2021 and 2020, as well as the relative impact of changes in the average balance sheet and changes in interest rates on net interest income.
Tables 6 and 7 present the components of net interest income, net interest margin and net interest rate spread for the years ended December 31, 2023, 2022 and 2021, as well as the relative impact of changes in the average balance sheet and changes in interest rates on net interest income.
These positive impacts were partially offset by increases in rates paid on average deposits as well as an increase in FTP charges on loans and leases for the year ended December 31, 2022 compared to the prior year.
These positive impacts were partially offset by increases in rates paid on average deposits as well as an increase in FTP charge rates on loans and leases for the year ended December 31, 2023 compared to the prior year.
The Bancorp’s FTP methodology was not adjusted during the years ended December 31, 2022, 2021 and 2020.
The Bancorp’s FTP methodology was not adjusted during the years ended December 31, 2023, 2022 and 2021.
Table 20 summarizes end of period loans and leases, including loans and leases held for sale, and Table 21 summarizes average total loans and leases, including average loans and leases held for sale.
Table 19 summarizes end of period loans and leases, including loans and leases held for sale, and Table 20 summarizes average total loans and leases, including average loans and leases held for sale.
The Bancorp does not originate residential mortgage loans that permit customers to defer principal payments or make payments that are less than the accruing interest. The Bancorp originates both fixed-rate and ARM loans. Within the ARM portfolio, approximately $514 million of ARM loans will have rate resets during the next twelve months.
The Bancorp does not originate residential mortgage loans that permit customers to make payments that are less than the accruing interest. The Bancorp originates both fixed-rate and ARM loans. Within the ARM portfolio, approximately $545 million of ARM loans will have rate resets during the next twelve months.
As a result of these factors, the Bancorp incorporated a combination of quantitative model-based estimates and qualitative adjustments. As of December 31, 2022, the Bancorp’s economic scenarios included estimates of the expected impacts of the changes in economic conditions caused by inflationary and rising interest rate pressures and the ongoing Russia-Ukraine conflict.
As a result of these factors, the Bancorp incorporated a combination of quantitative model-based estimates and qualitative adjustments. As of December 31, 2023, the Bancorp’s economic scenarios included estimates of the expected impacts of the changes in economic conditions caused by high interest rate pressures and the ongoing Russia-Ukraine conflict.
Net interest income benefited from increases in market interest rates, resulting in increases in yields on average loans and leases and average other short-term investments for the year ended December 31, 2022 compared to the prior year.
Net interest income benefited from increases in market interest rates, resulting in increases in yields on average loans and leases, average other short-term investments and average taxable securities for the year ended December 31, 2023 compared to the prior year.
Similarly, the Bancorp’s NII sensitivity modeling incorporates approximately $1 billion of incremental growth in noninterest-bearing deposit balances over 24 months for each 100 bps decrease in short-term market interest rates.
Similarly, the Bancorp’s NII sensitivity modeling incorporates approximately $800 million of incremental growth in noninterest-bearing deposit balances over 24 months for each 100 bps decrease in short-term market interest rates.
On an amortized cost basis, available-for-sale debt and other securities were 30% and 20% of total interest-earning assets at December 31, 2022 and 2021, respectively. The estimated weighted-average life of the debt securities in the available-for-sale debt and other securities portfolio wa s 6.8 years and 6.6 years at December 31, 2022 and 2021, respectively.
On an amortized cost basis, available-for-sale debt and other securities were 28% and 30% of total interest-earning assets at December 31, 2023 and 2022, respectively. The estimated weighted-average life of the debt securities in the available-for-sale debt and other securities portfolio wa s 6.2 years and 6.8 years at December 31, 2023 and 2022, respectively.
GAAP: TABLE 4: Non-GAAP Financial Measures - Return on Average Tangible Common Equity For the years ended December 31 ($ in millions) 2022 2021 2020 Net income available to common shareholders (U.S.
GAAP: TABLE 3: Non-GAAP Financial Measures - Return on Average Tangible Common Equity For the years ended December 31 ($ in millions) 2023 2022 2021 Net income available to common shareholders (U.S.
The Bancorp did not recognize provision expense for both the years ended December 31, 2022 and 2021 related to available-for-sale debt and other securities in an unrealized loss position.
The Bancorp did not recognize provision expense du ring the years ended December 31, 2023, 2022 and 2021 related to available-for-sale debt and other securities in an unrealized loss position.
The following table summarizes the end of period components of investment securities: TABLE 22: Components of Investment Securities As of December 31 ($ in millions) 2022 2021 Available-for-sale debt and other securities (amortized cost basis): U.S.
The following table summarizes the end of period components of investment securities: TABLE 21: Components of Investment Securities As of December 31 ($ in millions) 2023 2022 Available-for-sale debt and other securities (amortized cost basis): U.S.
Using the dynamic beta models, the Bancorp’s NII sensitivity modeling assumes weighted-average rising-rate interest-bearing deposit betas at the end of the ramped parallel scenarios of 68% and 70%, for a 100 bps and 200 bps increase in rates, respectively.
Using the dynamic beta models, the Bancorp’s NII sensitivity modeling assumes weighted-average rising-rate interest-bearing deposit betas at the end of the ramped parallel scenarios of 78% for both a 100 bps and 200 bps increase in rates.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Other FITBI 10-K year-over-year comparisons