Fifth Third Bank 2003 Annual Report Download - page 50

FIFTH THIRD BANCORP AND SUBSIDIARIES
48
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
interest rate spread. The net interest margin is determined by
dividing fully-taxable equivalent net interest income by average
interest-earning assets. The net interest rate spread is the difference
between the average fully-taxable equivalent yield earned on
interest-earning assets and the average rate paid on interest-bearing
liabilities. The net interest margin is generally greater than the net
interest rate spread due to the additional income earned on those
assets funded by noninterest-bearing liabilities, or free funding, such
as demand deposits and shareholders’ equity.
Table 2 below, Consolidated Average Balance Sheets and Analysis
of Net Interest Income, presents the net interest income, net interest
margin, and net interest rate spread for the three years of 2001
through 2003, comparing interest income, average interest-bearing
liabilities and average free funding outstanding. Each of these
measures is reported on a FTE basis. Nonaccrual loans and leases and
loans held for sale have been included in the average loans and lease
balances. Average outstanding securities balances are based upon fair
value including any unrealized gains or losses on securities available-
for-sale.
Net interest income on a FTE basis rose 8% to $2.9 billion in
Table 2–Consolidated Average Balance Sheets and Analysis of Net Interest Income
For the Years Ended December 31 (Taxable Equivalent Basis)
2003 2002 2001
Average Average Average
Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/ Yield/
($ in millions) Balance Cost Rate Balance Cost Rate Balance Cost Rate
Assets
Interest-Earning Assets:
Loans and Leases (a) . . . . . . . . . . $52,414 $2,724 5.20% $45,539 $2,824 6.20% $44,888 $3,434 7.65%
Securities:
Taxable. . . . . . . . . . . . . . . . . . . 27,584 1,226 4.45 22,145 1,257 5.68 18,482 1,213 6.56
Exempt from Income Taxes (a) . 1,056 77 7.26 1,101 81 7.40 1,255 97 7.71
Other Short-Term Investments . . 307 3 .97 339 6 1.72 201 10 4.88
Total Interest-Earning Assets . . . . . 81,361 4,030 4.95 69,124 4,168 6.03 64,826 4,754 7.33
Cash and Due from Banks. . . . . . . 1,600 1,551 1,482
Other Assets . . . . . . . . . . . . . . . . . 5,212 4,969 4,980
Reserve for Credit Losses . . . . . . . . (730) (645) (625)
Total Assets . . . . . . . . . . . . . . . . $87,443 $74,999 $70,663
Liabilities
Interest-Bearing Liabilities:
Interest Checking. . . . . . . . . . . . $18,679 $ 189 1.01% $16,239 $ 296 1.83% $11,489 $ 311 2.71%
Savings . . . . . . . . . . . . . . . . . . . 8,020 64 .79 9,465 158 1.67 4,928 174 3.54
Money Market. . . . . . . . . . . . . . 3,189 32 1.01 1,162 27 2.36 2,552 38 1.47
Other Time Deposits . . . . . . . . . 7,168 214 2.98 9,403 357 3.80 13,473 745 5.53
Certificates–$100,000 and Over . 3,090 45 1.46 1,689 55 3.24 3,821 187 4.89
Foreign Office Deposits . . . . . . . 3,862 44 1.13 2,018 35 1.71 1,992 97 4.84
Federal Funds Purchased . . . . . . 7,001 80 1.14 3,262 54 1.66 3,682 155 4.21
Short-Term Bank Notes . . . . . . . 22 — 1.06 2 — 3.40 10 — 2.13
Other Short-Term Borrowings . . 5,350 55 1.03 3,927 67 1.71 5,107 204 4.00
Long-Term Debt . . . . . . . . . . . . 8,747 363 4.15 7,640 381 4.99 6,301 367 5.83
Total Interest-Bearing Liabilities . . 65,128 1,086 1.67 54,807 1,430 2.61 53,355 2,278 4.27
Demand Deposits . . . . . . . . . . . . . 10,482 8,953 7,394
Other Liabilities . . . . . . . . . . . . . . 2,982 2,602 2,623
Total Liabilities. . . . . . . . . . . . . . . 78,592 66,362 63,372
Minority Interest. . . . . . . . . . . . . . 234 440 30
Shareholders’ Equity . . . . . . . . . . . 8,617 8,197 7,261
Total Liabilities and
Shareholders’ Equity . . . . . . . . $87,443 $74,999 $70,663
Net Interest Income Margin on
a Taxable Equivalent Basis . . . . . $2,944 3.62% $2,738 3.96% $2,476 3.82%
Net Interest Rate Spread . . . . . . . . 3.28% 3.42% 3.06%
Interest-Bearing Liabilities
to Interest-Earning Assets . . . . . 80.05% 79.29% 82.30%
(a) Interest income and yield include the effects of taxable-equivalent adjustments using a federal income tax rate of 35%, reduced by the nondeductible portion of interest
expenses. The net taxable-equivalent adjustment amounts included in the above table are $39 million, $39 million and $45 million for the years ended December 31, 2003,
2002 and 2001, respectively.