Annual Report (Form 10-K), fiscal year 1994

ITEM 1. BUSINESS
ORGANIZATION
Registrant was organized in 1974 under the laws of the State of Ohio. It began operations in 1975 upon reorganization of its principal subsidiary, The Fifth Third Bank. The executive offices of the Registrant are located in Cincinnati, Ohio. The Registrant is a two-tiered, multi-bank holding company as defined in the Bank Holding Company Act of 1956, as amended, and is registered as such with the Board of Governors of the Federal Reserve System. The Registrant is also a multi-savings-and-loan holding company and is registered with the Office of Thrift Supervision. Registrant has thirteen wholly-owned subsidiaries: Fifth Third Kentucky Bank Holding Company; The Fifth Third Bank; The Fifth Third Bank of Columbus; The Fifth Third Bank of Northwestern Ohio, National Association; The Fifth Third Bank of Southern Ohio; The Fifth Third Bank of Western Ohio; Fifth Third Trust Co. & Savings Bank, FSB; Fifth Third Bank of Northern Kentucky, Inc.; The Fifth Third Bank of Central Indiana; The Fifth Third Bank of Southeastern Indiana; Fifth Third Community Development Company; Fifth Third Investment Company; and Fountain Square Insurance Company. Unless the context otherwise indicates the term "Company" as used herein means the Registrant and the term "Bank" means its wholly-owned subsidiary, The Fifth Third Bank.
As of December 31, 1994, the Company's consolidated total assets were $14,957,009,000 and stockholders' equity totalled $1,398,774,000.
Fifth Third Kentucky Bank Holding Company has two wholly-owned subsidiaries: Fifth Third Bank of Kentucky, Inc. and The Fifth Third Savings Bank of Western Kentucky, FSB. In addition, the Bank has four wholly-owned subsidiaries: Midwest Payment Systems, Inc.; Fifth Third Securities, Inc.; The Fifth Third Company; and The Fifth Third Leasing Company.
PRIOR ACQUISITIONS
The Company is the result of mergers and acquisitions over the years involving 27 financial institutions throughout Ohio, Indiana, Kentucky, and Florida. The Company made the following acquisitions during 1994:
On May 20, 1994, the Company purchased $294 million in deposits from Equitable Savings Bank. The seven offices were located in southern and central Ohio and were acquired by the Bank, The Fifth Third Bank of Columbus and The Fifth Third Bank of Southern Ohio.
On June 3, 1994, the Company acquired The National Bancorp of Kentucky, Inc., with consolidated assets of approximately $90 million, in a transaction accounted for as a pooling of interests. The Consolidated Financial Statements for prior periods have not been restated for this acquisition due to immateriality. National Bancorp's subsidiaries, First National Bank of Falmouth and National Bank of Cynthiana, were merged with Fifth Third Bank of Northern Kentucky, Inc. and Fifth Third Bank of Kentucky, Inc. (formerly Fifth Third Bank of Central Kentucky, Inc.), respectively.
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On August 26, 1994, the Company acquired The Cumberland Federal Bancorporation, Inc., with consolidated assets of approximately $1.1 billion, and its wholly- owned subsidiary, The Cumberland Federal Savings Bank ("Cumberland FSB") in a transaction accounted for as a pooling of interests. Financial information for all prior periods has been restated. In concurrent transactions, Fifth Third Bank of Kentucky, Inc. purchased substantially all of the assets and assumed substantially all of the liabilities of The Cumberland FSB, and The Cumberland FSB's main office was relocated to Mayfield, Kentucky and renamed The Fifth Third Savings Bank of Western Kentucky, FSB.
COMPETITION
There are hundreds of commercial banks, savings and loans and other financial services providers in Ohio, Kentucky, Indiana, Florida and nationally, which provide strong competition to the Company's banking subsidiaries. As providers of a full range of financial services, these subsidiaries compete with national and state banks, savings and loan associations, securities dealers, brokers, mortgage bankers, finance and insurance companies, and other financial service companies. With respect to data processing services, the Bank's data processing subsidiary, Midwest Payment Systems, Inc., competes with other third party service providers such as Deluxe Data Services, EDS and Electronic Payment Systems.
The earnings of the Company are affected by general economic conditions as well as by the monetary policies of the Federal Reserve Board. Such policies, which include regulating the national supply of bank reserves and bank credit, can have a major effect upon the source and cost of funds and the rates of return earned on loans and investments. The Federal Reserve influences the size and distribution of bank reserves through its open market operations and changes in cash reserve requirements against member bank deposits.
REGULATION AND SUPERVISION
The Company, as a bank holding company, is subject to the restrictions of the Bank Holding Company act of 1956, as amended. This Act provides that the acquisition of control of a bank is subject to the prior approval of the Board of Governors of the Federal Reserve System. The Company is required to obtain the prior approval of the Federal Reserve Board before it can acquire control of more than 5% of the voting shares of another bank. The Act does not permit the Federal Reserve Board to approve an acquisition by the Company, or any of its subsidiaries, of any bank located in a state other than Ohio, unless the acquisition is specifically authorized by the law of the state in which such bank is located.
On September 29, 1994, the Act was amended by The Interstate Banking and Branch Efficiency Act of 1994 which authorizes interstate bank acquisitions anywhere in the country effective one year after the date of enactment, and interstate branching by acquisition and consolidation effective June 1, 1997, in those states that have not opted out by that date. The impact of this amendment on the Company cannot be measured at this time.
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The Company's subsidiary state banks are primarily subject to the laws of the state in which each is located, the Board of Governors of the Federal Reserve System and/or the Federal Deposit Insurance Corporation. The subsidiary banks which are organized under the laws of the United States are primarily subject to regulation by the Comptroller of the Currency and the Federal Deposit Insurance Corporation. The Company and Fifth Third Kentucky Bank Holding Company, as savings and loan holding companies, and their savings and loan subsidiaries are subject to regulation by the Office of Thrift Supervision.
The Company and its subsidiaries are subject to certain restrictions on intercompany loans and investments. The Company and its subsidiaries are also subject to certain restrictions with respect to engaging in the underwriting and public sale and distribution of securities. In addition, the Company and its subsidiaries are subject to examination at the discretion of supervisory authorities.
The Bank Holding Company Act limits the activities which may be engaged in by the Company and its subsidiaries to ownership of banks and those activities which the Federal Reserve Board has deemed or may in the future find to be so closely related to banking as to be a proper incident thereto.
The Financial Reform, Recovery and Enforcement Act of 1989 (FIRREA) provides that a holding company's controlled insured depository institutions are liable for any loss incurred by the Federal Deposit Insurance Corporation in connection with the default of, or any FDIC-assisted transaction involving, an affiliated insured bank or savings association.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the "FDIC Improvement Act") covers a wide expanse of banking regulatory issues. The FDIC Improvement Act deals with the recapitalization of the Bank Insurance Fund, with deposit insurance reform, including requiring the FDIC to establish a risk-based premium assessment system, and with a number of other regulatory and supervisory matters. The full effect of the FDIC Improvement Act generally on the financial services industry, and specifically on the Company, is not determinable.
EMPLOYEES
As of December 31, 1994, there were no employees of the Company. Subsidiaries of the Company employed 6,045 employees--1,015 were officers and 1,237 were part-time employees.
STATISTICAL INFORMATION
Pages 6 to 12 contain statistical information on the Company and its subsidiaries.
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SECURITIES PORTFOLIO
The securities portfolio as of December 31 for each of the last five years, and the maturity distribution and weighted average yield of securities as of December 31, 1994, are incorporated herein by reference to the securities tables on page 30 of the Company's 1994 Annual Report to Stockholders attached to this filing as Exhibit 13.
The weighted average yields for the securities portfolio are yields to maturity weighted by the par values of the securities. The weighted average yields on securities exempt from income taxes are computed on a taxable equivalent basis. The taxable equivalent yields are net after-tax yields to maturity divided by the complement of the full corporate tax rate (35%). In order to express yields on a taxable equivalent basis, yields on obligations of states and political subdivisions (municipal securities) have been increased as follows:
Under 1 year 2.16% 1 - 5 years 2.61% 6 - 10 years 2.63% Over 10 years 2.74% Total municipal securities 2.49%
AVERAGE BALANCE SHEETS
The average balance sheets are incorporated herein by reference to Table 1 on pages 26 and 27 of the Company's 1994 Annual Report to Stockholders attached to this filing as Exhibit 13.
ANALYSIS OF NET INTEREST INCOME AND NET INTEREST INCOME CHANGES
The analysis of net interest income and the analysis of net interest income changes are incorporated herein by reference to Table 1 and Table 2 and the related discussion on pages 26 through 28 of the Company's 1994 Annual Report to Stockholders attached to this filing as Exhibit 13.
Reserve for Credit Losses - -------------------------
The reserve for credit losses is established through charges to operations by a provision for credit losses. Loans and leases which are determined to be uncollectible are charged against the reserve and any subsequent recoveries are credited to the reserve. The amount charged to operations is based on several factors. These include the following:
1. Analytical reviews of the credit loss experience in relationship to outstanding loans and leases to determine an adequate reserve for credit losses required for loans and leases at risk. 2. A continuing review of problem or at risk loans and leases and the overall portfolio quality. 3. Regular examinations and appraisals of the loan and lease portfolio conducted by the Bank's examination staff and the banking supervisory authorities. 4. Management's judgement with respect to the current and expected economic conditions and their impact on the existing loan and lease portfolio.
The amount provided for credit losses exceeded actual net charge-offs by $18,306,000 in 1994, $20,963,000 in 1993 and $20,335,000 in 1992.
Management reviews the reserve on a quarterly basis to determine whether additional provisions should be made after considering the factors noted above. Based on these procedures, management is of the opinion that the reserve at December 31, 1994 of $155,918,000 is adequate.
Maturity Distribution of Domestic Certificates of Deposit of $100,000 - --------------------------------------------------------------------- and Over at December 31, 1993 ($000's) --------------------------------------
Three months or less $142,325 Over three months through six months 70,936 Over six months through twelve months 23,816 Over twelve months 25,325 -------- Total certificates - $100,000 and over $262,402 ========
Note: Foreign office deposits are denominated in amounts greater than $100,000.
Short-Term Borrowings - ---------------------
Short-term borrowings is comprised of various short-term sources of funds, primarily Federal funds borrowed from correspondent banks, securities sold under agreements to repurchase, short-term bank notes and commercial paper issuances. A summary of the average amount outstanding, maximum month-end balance and weighted average interest rate for the years ended December 31 follows ($000's):
1994 1993 1992 ------ ------ ------ Average outstanding $1,967,819 1,365,070 1,229,664
Maximum month-end balance $2,452,218 1,734,920 1,551,092
Weighted average interest rate 4.12% 3.17 3.80
Return on Equity and Assets - ---------------------------
The following table presents certain operating ratios:
1994 1993 1992 ------ ------ ------ Return on assets (A) 1.77% 1.71 1.63
Return on equity (B) 18.6% 17.8 16.9
Dividend payout ratio (C) 32.3% 31.7 33.0
Equity to assets ratio (D) 9.50% 9.61 9.62 - ------------------------------------ (A) net income divided by average assets (B) net income divided by average equity (C) dividends declared per share divided by fully diluted net income per share (D) average equity divided by average assets
ITEM 2.



ITEM 2. PROPERTIES
The Company's executive offices and the main office of the Bank are located on Fountain Square Plaza in downtown Cincinnati, Ohio, located in a 32-story office tower and a 5-story office building and parking garage known as the Fifth Third Center and the William S. Rowe Building, respectively. One of the Bank's subsidiaries owns 100% of these buildings.
The Company, through its subsidiary banks and savings banks, five located in Ohio, three in Kentucky, two in Indiana and one in Florida, operate 353 banking centers, of which 177 are owned and 176 are leased. The properties owned are free from mortgages and encumbrances.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are not parties to any material legal proceedings other than routine litigation incidental to its business.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated herein by reference to Page 1 of Registrant's 1994 Annual Report to Stockholders attached to this filing as Exhibit 13.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated herein by reference to page 35 of Registrant's 1994 Annual Report to Stockholders attached to this filing as Exhibit 13.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required by this item is incorporated herein by reference to pages 26 through 34 of Registrant's 1994 Annual Report to Stockholders attached to this filing as Exhibit 13.
ITEM 8.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by reference to pages 13 through 25 and page 35 of Registrant's 1994 Annual Report to Stockholders attached to this filing as Exhibit 13.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10.



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item concerning Directors is incorporated herein by reference under the caption "ELECTION OF DIRECTORS" of the Registrant's 1995 Proxy Statement. The names, ages and positions of the Executive Officers of the Company as of January 31, 1995 are listed below along with their business experience during the past 5 years. Officers are appointed annually by the Board of Directors at the meeting of Directors immediately following the Annual Meeting of Stockholders.
CURRENT POSITION AND NAME AND AGE BUSINESS EXPERIENCE DURING PAST 5 YEARS - ------------ ---------------------------------------- George A. Schaefer, Jr., 49 PRESIDENT AND CEO. President and Chief Executive Officer of the Company and the Bank since January, 1991. Previously, Mr. Schaefer was President and COO of the Company and the Bank.
George W. Landry, 54 EXECUTIVE VICE PRESIDENT. Executive Vice President of the Company and the Bank.
Stephen J. Schrantz, 46 EXECUTIVE VICE PRESIDENT. Executive Vice President of the Company and the Bank.
Michael D. Baker, 44 SENIOR VICE PRESIDENT. Senior Vice President of the Company since March, 1993, and of the Bank.
P. Michael Brumm, 47 SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER. CFO of the Company and the Bank since June, 1990, and Senior Vice President of the Bank.
Robert P. Niehaus, 48 SENIOR VICE PRESIDENT. Senior Vice President of the Company since March 1993, and Senior Vice President of the Bank. Previously, Mr. Niehaus was Vice President of the Company.
James R. Gaunt, 49 SENIOR VICE PRESIDENT. Senior Vice President of the Company and President and CEO of Fifth Third Bank of Kentucky, Inc. since August, 1994. Previously, Mr. Gaunt was Senior Vice President of the Bank.
Michael K. Keating, 39 SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY. Senior Vice President and General Counsel of the Company since March, 1993 and Senior Vice President and Counsel of the Bank since November, 1989, and Secretary of the Company and the Bank since January, 1994. Mr. Keating is a son of Mr. William J. Keating, Director.
CURRENT POSITION AND NAME AND AGE BUSINESS EXPERIENCE DURING PAST 5 YEARS - ------------ ------------------------------------------ Neal E. Arnold, 34 TREASURER. Treasurer of the Company and the Bank since October, 1990 and Senior Vice President of the Bank since April, 1993. Previously, Mr. Arnold was Vice President of the Bank since October, 1990. Previously, Mr. Arnold was CFO and Senior Vice President with First National Bank of Grand Forks, North Dakota.
Gerald L. Wissel, 38 AUDITOR. Auditor of the Company and the Bank since March 1990 and Senior Vice President of the Bank since November 1991. Previously, Mr. Wissel was Vice President of the Bank since March 1990. Mr. Wissel was formerly with Deloitte and Touche LLP, independent public accountants.
Roger W. Dean, 32 CONTROLLER. Controller of the Company and Vice President of the Bank since June, 1993. Previously, Mr. Dean was with Deloitte & Touche LLP, independent public accountants.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference under the caption "EXECUTIVE COMPENSATION" of the Registrant's 1995 Proxy Statement.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference under the captions "CERTAIN BENEFICIAL OWNERS, ELECTION OF DIRECTORS, AND EXECUTIVE COMPENSATION" of the Registrant's 1995 Proxy Statement.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference under the caption "CERTAIN TRANSACTIONS" of the Registrant's 1995 Proxy Statement.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
a) Documents Filed as Part of the Report PAGE
1. Index to Financial Statements
Consolidated Statements of Income for the Years Ended December 31, 1994, 1993 and 1992 *
Consolidated Balance Sheets, December 31, 1994 and 1993 *
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1994, 1993 and 1992 *
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992 *
Notes to Consolidated Financial Statements *
* Incorporated by reference to pages 13 through 25 of Registrant's 1994 Annual Report to Stockholders attached to this filing as Exhibit 13.
2. Financial Statement Schedules
The schedules for Registrant and its subsidiaries are omitted because of the absence of conditions under which they are required, or because the information is set forth in the consolidated financial statements or the notes thereto.
3. Exhibits
EXHIBIT NO.
3- Amended Articles of Incorporation and Code of Regulations**
10(a)- Fifth Third Bancorp Unfunded Deferred Compensation Plan for Non-Employee Directors ***
10(b)- Fifth Third Bancorp 1990 Stock Option Plan ****
10(c)- Fifth Third Bancorp 1987 Stock Option Plan *****
10(d)- Fifth Third Bancorp 1982 Stock Option Plan ******
10(e)- Fifth Third Bancorp Stock Option Plan for Employees of The Fifth Third Bank of Miami Valley, National Association *******
10(f)- Fifth Third Bancorp Stock Option Plan for Employees of The Fifth Third Bank of Eastern Indiana ********
10(g)- Indenture effective November 19, 1992 between Fifth Third Bancorp, Issuer and NBD Bank, N.A., Trustee *********
10(h)- Fifth Third Bancorp Amended and Restated Stock Option Plan for Employees and Directors of The TriState Bancorp **********
10(i)- Fifth Third Bancorp 1993 Discount Stock Purchase Plan ***********
10(j)- Fifth Third Bancorp Amended and Restated Stock Incentive Plan for selected Executive Officers, Employees and Directors of The cumberland Federal Bancorporation, Inc. ************
10(k)- Fifth Third Bancorp Master Profit Sharing Plan*************
11- Computation of Consolidated Net Income Per Share for the Years Ended December 31, 1994, 1993, 1992, 1991 and 1990
13- Fifth Third Bancorp 1994 Annual Report to Stockholders
21- Fifth Third Bancorp Subsidiaries
23- Independent Auditors' Consent
b) Reports on Form 8-K
NONE. ____________________
** Incorporated by reference to Registrant's Registration Statement, Exhibits 3.1 and 3.2, on Form S-4, Registration No. 33-19965 which is effective.
*** Incorporated in this Form 10-K Annual Report by reference to Form 10-K filed for fiscal year ended December 31, 1985.
**** Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 34075, which is effective.
***** Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 13252, which is effective.
****** Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 2-98550, which is effective.
******* Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 20888, which is effective.
******** Incorporated by reference to Registrant's filing with the Securities and Exchange Commission on November 18, 1992 a Form 8-K Current Report as an exhibit to a Registration Statement on Form S-8, Registration No. 33-30690, which is effective.
********* Incorporated by reference to Registrant's filing with the Securities and Exchange Commission on November 18, 1992 a Form 8-K Current Report dated November 16, 1992 and as Exhibit 4.1 to a Registration Statement on Form S-3, Registration No. 33-54134, which is effective.
********** Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 51679, which is effective.
*********** Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 60474, which is effective.
************ Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 55223, which is effective.
************* Incorporated by reference to Registrant's filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33- 55553, which is effective.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
FIFTH THIRD BANCORP (Registrant)
/s/George A. Schaefer, Jr. February 21, 1995 - ----------------------------- George A. Schaefer, Jr. President and CEO (Principal Executive Officer)
Pursuant to requirements of the Securities Exchange Act of 1934, this report has been signed on February 21, 1995 by the following persons on behalf of the Registrant and in the capacities indicated.
/s/P. Michael Brumm /s/Roger W. Dean - --------------------------------- ------------------------------ P. Michael Brumm Roger W. Dean Senior Vice President and CFO Controller (Chief Financial Officer) (Principal Accounting Officer)
/s/John F. Barrett - --------------------- ----------------------- ------------------------- John F. Barrett Ivan W. Gorr Michael H. Norris Director Director Director
/s/Joseph H. Head, Jr. /s/Brian H. Rowe - --------------------- ----------------------- ------------------------- Milton C. Boesel, Jr. Joseph H. Head, Jr. Brian H. Rowe Director Director Director
/s/George A. Schaefer, Jr. - --------------------- ----------------------- ------------------------- Clement L. Buenger Joan R. Herschede George A. Schaefer, Jr. Director Director Director
/s/Gerald V. Dirvin /s/William G. Kagler /s/John J. Schiff, Jr. - --------------------- ----------------------- ------------------------- Gerald V. Dirvin William G. Kagler John J. Schiff, Jr. Director Director Director
/s/William J. Keating /s/Dennis J. Sullivan, Jr. - --------------------- ----------------------- ------------------------- Thomas B. Donnell William J. Keating Dennis J. Sullivan, Jr. Director Director Director
/s/James D. Kiggen - --------------------- ----------------------- ------------------------- Richard T. Farmer James D. Kiggen Dudley S. Taft Director Director Director
/s/John D. Geary - --------------------- ----------------------- John D. Geary Robert B. Morgan Director Director