38 Fountain Square Plaza
Cincinnati, Ohio 45263
Toll Free: (800) 972-3030
Fax: (513) 579-4312
Web site: http://www.53.com
Incorporated: 1908 as The Fifth Third National Bank of Cincinnati
Stock Exchanges: Nasdaq
Ticker Symbol: FITB
NAICS: 522110 Commercial Banking; 522210 Credit Card Issuing; 523930 Investment Advice; 551111 Offices of Bank Holding Companies
Fifth Third Bancorp operates Fifth Third Bank, along with several other financial services companies. With more than 1,100 banking centers in 10 states, Fifth Third Bank, based in Cincinnati, Ohio, is one of the Midwest's largest banking institutions, offering traditional commercial banking services, consumer lending, and wealth and asset management consultation. The company has more than $350 million in assets. Other Fifth Third subsidiaries offer insurance, provide human resources consultation services, and assist private and institutional clientele with investment management and retirement planning.
Fifth Third Bancorp traces its history to the mid-19thcentury formulation of the national banking system in the United States. Although national banks had existed since the late 18th century, a lack of consensus on the advantages of a national currency prevented the federal government from establishing a unified currency structure. Rampant inflation, however, during the Civil War prompted the 1863 ratification of the National Banking Act, thereby creating a uniform, government-backed national currency to replace the diverse currencies issued by state banks and other firms. That same year, a group of influential Cincinnati businessmen led by A. L. Mowry applied for and received one of the first national bank charters. Their institution, Cincinnati's Third National Bank, opened in a Masonic Temple later that year under a 20-year charter.
The firm that would become Fifth Third Bancorp evolved and grew through dozens of mergers over the ensuing decades. When Third National Bank acquired Bank of the Ohio Valley (founded in 1858) in 1871, the Cincinnati Enquirer hailed the union as “one of the best managed banks in Ohio.” The superlative descriptions continued when Third National was recapitalized in 1882 at $1.6 million, the highest-asset bank in the state.
The Federal Reserve Act of 1913 organized a regional system of 12 Federal Reserve banks that were capitalized with contributions from national banks in each region. The legislation required each national bank to deposit 3 percent of its capital and surplus into its regional Federal Reserve bank. These moves helped inspire confidence in the national banks, thus preventing panics and runs on banks. The Federal Reserve Act also gave the federal government more control over the U.S. money supply, made commercial credit available, and discouraged venturesome banking practices. Although bankers initially resisted its creation, the Federal Reserve laid the groundwork for the country's modern banking system.
Another bank industry consolidation followed World War I. The 1919 affiliation with Union Savings Bank and Trust Company, a state-chartered bank, brought several changes to Fifth Third's operations. Affiliation with a state bank permitted Fifth Third to circumvent the stricture against national banks' establishment of branches. Before the end of the year, Fifth Third assumed control of the assets of several local banks, including Market National Bank, Security Savings Bank and Safe Deposit Company, Mohawk State Bank, and Walnut Hills Savings Bank. It operated these institutions as branch offices.
Although the 1920s were marked by increased governmental supervision and general economic prosperity, many U.S. banks remained weak. The situation gave Fifth Third the opportunity to continue to grow through the acquisition of four local banks. Fifth Third consolidated with Union Trust Company to form Fifth Third Union Trust Company in 1927. The advent of the Great Depression in 1929 intensified this activity somewhat because Fifth Third was one of the stronger banks in the Cincinnati area. Fifth Third assumed control of three banks from 1930 to 1933.
The Great Depression also brought increased regulation of the banking industry, including expansion of the Federal Reserve Board's powers and the establishment of the Federal Deposit Insurance Corporation (FDIC). The economic crisis also spawned a plethora of federal and state legislation restricting interstate retail banking. Strong popular and governmental reaction to the Great Depression helped make banking one of the most regulated segments of U.S. industry. These barriers effectively restricted Fifth Third's growth through acquisition until after World War II.
Distanced from the Great Depression by the trauma of global war, U.S. banks began to cautiously expand their operations to include a broader range of financial services, especially in the field of retail or personal banking, in the postwar era. Under the direction of G. Carlton Hill from 1955 to 1963, Fifth Third began to formulate its focus on retail or consumer banking. For example, the company established a travel department to issue traveler's checks and plan tours. These activities intensified during the presidency of Bill Rowe, who was the son of 1930s-era Fifth Third leader John J. Rowe.
Over the course of the 1960s, the bank instituted a program of internal expansion with an emphasis on convenience and personal service. Advertising featuring the company's 5/3 shield logo promoted Fifth Third's many suburban locations and extended hours. During the 1970s the bank shifted its lending emphasis from commercial or business loans to consumer credit. In 1973 Fifth Third hired Johnny Bench, famed catcher for the Cincinnati Reds baseball team, as spokesman. It adopted the long-running slogan “The only bank you'll ever need” the same year.
Back-office changes supported the bank's growth and profitability. Fifth Third, which had booted up its first computer in 1960, initiated home banking services and Jeanie automated teller machines (ATMs) in the 1970s. The institution's home banking system, which could be accessed via the average touchtone phone, was uniquely user-friendly. These electronic services formed the basis of what would become Fifth Third's Midwest Payment Services department. Later in the decade, the bank offered its automated services to other banks and corporate clients. By the early 1990s Midwest Payment Services maintained ATMs and electronic cash registers for more than 1,000 clients. This lucrative business niche contributed one-third of the bank's annual income in the early 1990s.
The 1975 creation of a bank holding company, Fifth Third Bancorp, enabled the institution to sidestep some of the most rigorous state banking regulations. This new corporate entity was not technically a bank and was thus exempt from laws that prohibited cross-county branching. By 1976 Fifth Third included 37 banking offices.
The further liberalization of Ohio banking laws in the early 1980s expanded both the types of products banks were permitted to offer and the geographic reach they were allowed to attain. Strictures against growth outside the home bank's county were first to fall. Barriers to interstate branching continued to deteriorate in the early 1980s. In September 1985 federal and state banking regulations changed dramatically, freeing Ohio's banks to enter into agreements with banking organizations outside the state. Fifth Third became Ohio's first holding company to take advantage of the new legislation when it acquired American National Bank in Newport, Kentucky, just across the Ohio River from Cincinnati, later that year. Fifth Third's roster of branches increased 125 percent over the course of the 1980s, and it expanded its reach from a single Ohio county to becoming an interstate bank.
Much of this vigorous growth was inspired by a new corporate leader, Clement L. Buenger, who took the helm of Fifth Third in 1981. Buenger brought his background in life insurance sales to the bank. The new president transformed the bank's corporate culture through innovative incentive programs and personal example. Whereas some Fifth Third offices were open only from 10:00 a.m. to 2:00 p.m., Buenger worked 10- to 12-hour days and expected many of his managers to do the same. The president (who later became CEO and chairman) even made cold calls on prospective clients. One incentive program, the “Shoe Leather Award,” evolved from his passion for earning new business. A new pair of designer shoes was awarded to each month's best cold caller. In fact, all employees could earn sales incentives.
Fifth Third's focus on consumer banking and safe lending helped the bank avoid the real estate loans, Third World debt, and leveraged buyout problems that troubled many financial institutions during the 1980s. George A. Schaefer Jr. took Fifth Third's reins in 1989 at the age of 44. Some industry observers predicted that the new leader would be stymied, both by the shadow of his predecessor and by the difficult banking environment. Nevertheless, although literally hundreds of banks failed each year in the late 1980s and early 1990s, Fifth Third continued its outstanding performance and was even able to benefit from the misfortune of others by inexpensively acquiring dozens of new outlets. This allowed the bank to slowly expand its sphere of influence yet maintain shareholder value.
In 1992 Fifth Third proposed a merger with Star Banc Corp. that would have unified the two largest Cincinnati-based financial institutions. Star had not grown as fast as Fifth Third, but its record of continued growth made it an enticing acquisition target. The alliance was viewed by many analysts and investors as a good deal for both banks. Fifth Third made a generous offer of $42 per share, which amounted to more than twice Star's book value. Nevertheless, when CEO Schaefer prematurely publicized the heretofore private proposition, Star's longtime president, Oliver Waddell, balked, and the target's board unanimously rejected the offer.
Fifth Third moved aggressively through the second half of the decade, building on its 20 consecutive years of increased earnings. To remain competitive and to ensure continued growth and strong earnings, the company stepped up its acquisition efforts and began to pursue new businesses, including mortgage brokering and investment services, and new territories. In mid-1995, for instance, Fifth Third acquired Bank of Naples, Florida, and increased its assets in the Florida region, which Fifth Third first entered in 1989. Other acquisitions Fifth Third made in 1995 included Mutual Federal Savings Bank in Dayton, Ohio; Bank One Lebanon; PNC Bank's Dayton division; and seven offices of Bank One, Cincinnati. The PNC purchase, which included 12 offices, increased Fifth Third's banking centers in the Dayton area to 30, making it the fourth-largest financial establishment in the region.
In the following years the firm continued to follow its strategy to increase market share in the Midwest by acquiring small businesses. Fifth Third made three acquisitions in 1996: the Ohio branch of 1st Nationwide Bank, the Ohio operations of First Chicago NBD Bank, and Kentucky Enterprise Bancorp, Inc., located in northern Kentucky. Four acquisitions were made the following year, all in Fifth Third's familiar midwest region. In June Fifth Third purchased Gateway Leasing Corporation for $2.2 million, and a month later it bought Suburban Bancorporation, Inc., a savings and loan holding company. Fifth Third also acquired Heartland Capital Management Inc., a money managing company in Indiana, and Great Lakes National Bank Ohio, with eight branches in Ohio, in 1997.
Fifth Third found substantial support from industry analysts, who regarded the company's stock as reliable and profitable. From 1993 to 1998, according to an article by Matt Murray in the Wall Street Journal, Fifth Third's annual revenue increased 15.9 percent, about three points better than the industry average. To continue its streak of increased earnings, Fifth Third in 1998 branched into new business arenas and made some major acquisitions. To start out 1998, Fifth Third announced it would acquire CitFed Bancorp, Inc., of Dayton and its subsidiary Citizens Federal Bank FSB for $661 million in stock. CitFed had 35 offices in Ohio. The acquisition, completed in June, created the largest bank in Dayton and boosted Fifth Third's market share there to 28 percent. Fifth Third's market share in its hometown of Cincinnati was 22.7 percent.
Also at the beginning of 1998, Fifth Third announced plans to buy State Savings Company of Columbus and its subsidiaries, State Savings Bank, Century Bank, and FSB, which provided Fifth Third access to a new territory, Arizona. When the deal closed in June, it created the fourth-largest bank in Columbus. The Ohio Company, a brokerage and investment management firm with 49 offices in Ohio and 4 additional states, was also acquired in June. Fifth Third expanded into another business field when it acquired W. Lyman Case & Company, a commercial mortgage banking company with headquarters in Columbus. Four offices of Bank One were acquired as well, boosting Fifth Third's presence in southern Ohio. Fifth Third celebrated its 25th consecutive year of increased revenues at the end of 1998 and had increased the number of its branches from 35 to 468.
The following year, CEO Schaefer revealed to Geert De Lombaerde in the Cincinnati Business Courier that he planned to continue expanding Fifth Third through acquisitions. “I see more opportunity for us now than at any point in the last 25 years,” said Schaefer. “We continue to pick up market share in every market.”
In 1999 the company completed the acquisition of Enterprise Federal Bancorp Inc., one of the biggest thrifts in the Cincinnati area. The purchase, estimated at $96.4 million, provided Fifth Third with 11 additional branches in greater Cincinnati. Fifth Third also acquired Ashland Bankshares, Inc., and subsidiary Bank of Ashland, both based in Kentucky. The $80 million purchase gave Fifth Third four more branches, as well as $160 million in assets. Fifth Third also began to implement plans to expand farther into Florida and acquired South Florida Bank Holding Corp. in June, adding another four branches to its Florida roster. Additional expansion into the Cleveland, Ohio, area came with the acquisition of Emerald Financial Corp. and its subsidiary, Strongsville Savings Bank, for $204 million.
In mid-1999 Fifth Third made its largest acquisition to date when it announced it would purchase CNB Bancshares, Inc., the biggest independent bank holding company in Indiana. The $2.4 billion purchase, completed in October, propelled Fifth Third deeper into Indiana and made Fifth Third the third-largest bank in Indiana, as well as the 28th-biggest bank in the United States. CNB was the parent company of Civitas Bank and had 145 banking offices and $7.2 billion in assets. The CNB purchase also provided Fifth Third with an entry into insurance sales. Fifth Third quickly followed up the CNB purchase with another significant acquisition. Increasing its presence in the Indianapolis area, Fifth Third bought Peoples Bank Corporation and its subsidiary, Peoples Bank & Trust Co., for $228 million. The buy moved Fifth Third from sixth to fourth place in the Indianapolis market, with a market share of about 7 percent.
Fifth Third was now ready to undertake additional billion-dollar deals and move away from smaller, million-dollar acquisitions. After accomplishing 12 deals, amounting to nearly $5 billion in a mere 16 months, Fifth Third was certainly on a fast track. Its Midwest Payment Systems data processing subsidiary had seen net income increase by 34 percent in 1998 over 1997, and in 1999 the subsidiary's profits were up 37 percent from the previous year. Fifth Third's net income for the first half of 1999 was up 21 percent compared with the same period a year earlier.
Near the beginning of the new century, Fifth Third bolstered its payments business through mergers, two in 2000 and another in 2001. Midwest Payment Systems was renamed Fifth Third Processing Solutions in January 2003.
Meanwhile, on the banking front, longtime CEO Schaefer broke with his tried-and-true strategy of acquiring smaller entities. The deal to acquire Old Kent Financial Corp. of Grand Rapids, Michigan, struck in November 2000, was two times the size of any previous acquisition. The addition of Old Kent moved Fifth Third from 24th to 16th place among the largest U.S. banking companies, with $70 million in assets.
At the outset the new road seemed rocky, the economy was in a downturn, 15 percent of its new Old Kent workforce faced layoffs, and its stock price lagged behind its midwest peers. Yet Fifth Third's integration strategy, by and large, had proved successful in the past. One exception was a 1998 regional brokerage acquisition. Brokers and client assets drained off, as staff took umbrage with the new management style.
To bring this unprecedented acquisition into Fifth Third's culture, Old Kent was divided into three affiliate banks, two under Fifth Third executives and one under an Old Kent executive. A sales push during 2000, produced earnings growth of nearly 18 percent for Fifth Third. The $4.92 billion Old Kent acquisition, completed on April 2, 2001, taxed back-office operations. Fifth Third had not only increased in sheer size but also in complexity. To further complicate matters, a rash of wrongdoing by U.S. financial corporations and the terrorists attacks on the United States on September 11, 2011, resulted in more stringent regulation of financial institutions in certain areas.
In September 2002 Fifth Third revealed a $54 million charge tied to an error in the booking of certain securities transactions. In response, Ohio regulators and the Federal Reserve Bank of Cleveland imposed a moratorium on Fifth Third's acquisitions, halting one in its tracks. In a March 2003 agreement between Fifth Third, the Cleveland Fed, and the Ohio Division of Financial Institutions, Fifth Third was cited for being out of compliance with holding company requirements of the Gramm-Leach-Bliley Act, in addition to other issues.
When the acquisition moratorium was lifted, Fifth Third moved to complete a deal for Franklin Financial Corporation of Nashville, accomplished in June 2004. Fifth Third followed up with a bid for the 16-branch First National Bankshares of Florida, Inc., the largest remaining independent bank in the state. Some analysts and investors questioned the premium price linked to the Florida expansion, American Banker reported. As for internal growth engines, Schaefer looked to fee generation, cross-selling, and new locations. The thousandth branch opened in August 2004.
Over time, the $106 billion asset company's operational, financial, and regulatory problems translated into a downturn in its price per share. In early 2002 the stock traded at nearly $70 per share. In late August 2006, it traded at just below $40 per share.
As Matthias Rieker of American Banker explained in August 2006, “The company's sizable securities portfolio was ill-positioned for rising short-term interest rates and a flattening yield curve, causing much pain to earnings over the last two years. It was one of the last big banking companies to reshuffle its balance sheet when the yield curve started to flatten.”
To further its reemergence, Fifth Third planned renewed merger and acquisition activity and continued organic growth. It had entered St. Louis and Pittsburgh and looked toward Baltimore, Charlotte, and Atlanta as target markets. Unfortunately, massive upheaval in the mortgage market sent the U.S. economy into a tailspin in late 2007, launching the Great Recession. Real estate values fell, and bank valuations tumbled. Hit hard by foreclosures were Michigan, Ohio, Florida, and, less so, Indiana and Illinois.
Although Fifth Third did not significantly participate in the subprime loan business that had precipitated much of the problem, the bank was not immune to the economic downslide. Fifth Third posted charges linked to loan losses and soured investments. To mitigate further harm, the company began to intervene earlier in problem credit situations and exited riskier lines of business. The electronic payments processing segment, meanwhile, continued to be a pocket of strength.
In November 2007 Fifth Third acquired R-G Crown Bank and its 30 Florida and 3 Augusta, Georgia, locations. Fifth Third added nine Atlanta-area branches in May 2008, and entered North Carolina in June, both through acquisitions. In a sign of the times, Fifth Third assumed about $250 million in deposits of an insolvent bank, in November, through FDIC action. Despite the acquisition activity and declaration of capital strength, Fifth Third's future was less certain, as the economy continued to spiral down. The company posted a net loss of $2.18 billion in 2008, versus a net income of $1.08 billion a year earlier.
Fifth Third had tapped into the Troubled Asset Relief Program (TARP) to the tune of $3.45 billion, at the end of 2008. Just nine U.S. banks had received a greater infusion of federal money. Subsequent plans to renovate executive offices raised the hackles of those at odds with the massive bailout of the country's financial institutions. In a move to further strengthen its capital base, Fifth Third agreed to sell 51 percent of its profitable payment-processing unit to private equity firm Advent International for $561 million in cash. Fifth Third would retain 49 percent of the stand-alone company, Fifth Third Processing Solutions, LLC, and chipped in $1.25 billion in bank loans for the new company, evidence of the dearth of deal financing available in the skittish private market. The sale closed in 2009. (In 2011 Fifth Third Processing Solutions was renamed Vantiv, Inc.) Meanwhile the federal government continued stress testing the nation's largest banks.
After its $2.18 billion net loss for 2008, Fifth Third tightened its belt and put the brakes on its plans for expansion and acquisition. Investors were not reassured, however, and the company's share price dropped from $8.26 to just over $1, over the first few months of 2009. The price began to rebound once the federal government announced that Fifth Third had essentially passed the recently imposed stress testing. The government also announced, however, that the company would have to raise about $1 billion in order to remain adequately capitalized in the event of another economic downturn. By that summer, the company had raised that amount from the sale of 158 million shares of common stock. By the end of fiscal 2009, the company's stock had climbed above $10 per share.
Despite the good news, Fifth Third was still in a fairly precarious position after chalking up nearly $3 billion in loan losses over the previous fiscal year. Its net income remained stagnant, at $737 million in 2009 and $753 million in 2010. In 2011, as net income topped $1 billion once more and began climbing upward, Fifth Third paid back the TARP funds. Rather than acquire new banking networks, Fifth Third had been concentrating on consolidating and upgrading services, reconfiguring more than 40 types of checking and savings accounts into just three savings and five checking platforms. It had also dramatically expanded its electronic and mobile banking services.
In 2012 Fifth Third sold a portion of its stake in Vantiv. Months later, Vantiv went public, attaining a market capitalization of more than $4 billion. Fifth Third continued to hold about one-third of Vantiv's equity. After charging off nearly $9 billion in bad loans in three years, Fifth Third's loan losses were now at their lowest level in five years and the company's share price was still creeping upward.
The company sold even more of its stake in Vantiv in 2015, retaining only 18 percent, around the same time that it was preparing to close or consolidate more than 100 of its branches in a bid to save about $60 million per year. In the process, Fifth Third completely exited the Pittsburgh and St. Louis banking markets. Inprogress plans for another 30 new offices were also tabled. In July 2015, after successfully shepherding Fifth Third through the Great Recession, Kabat announced his retirement as CEO. His replacement, who assumed the post that November, was former COO Greg D. Carmichael, who had been serving as president since September 2012.
Among other strategies, Carmichael put Fifth Third back in the acquisition hunt, picking up several firms in an effort to expand a number of the company's business sidelines. These included two insurance companies, a human resources consulting firm, and a retirement planning advisory firm. In July 2016, however, the Federal Reserve barred Fifth Third from acquiring more banks until its services for low- and moderate-income communities improved. In 2017 the company launched a major new marketing push centered around its unusual name and using the slogan, “This Is Banking a Fifth Third Better.” The same year, the company's net income topped $2 billion for the first time in its history.
After committing to some $30 billion in investments in services and support for low- and moderate-income communities, Fifth Third was given the green light for further bank acquisitions in January 2018. The company wasted little time. That May, Fifth Third announced that it would acquire the $4.7 billion, 61-branch, Chicago-based MB Financial, which would make it that city's fourth-largest banking operation in the process. “This is not a fixer-upper,” Carmichael explained to Alexander Coolidge in the Cincinnati Enquirer in May 2018, “This is a well-run Chicago franchise where we already have a large presence…. Cincinnati is our largest market, but Chicago is our largest opportunity market.”
The following month, the company announced plans to step up its presence in the Atlanta market, possibly through further acquisitions. “We came into the market with the intention to expand, and the financial crisis put banks in a holding pattern for a few years,” Carmichael told Collin Huguley and Maria Saporta in the Atlanta Business Chronicle for a June 15, 2018, article. Time would tell where Fifth Third would set its sights next.
April D. Gasbarre
Updated, Mariko Fujinaka; Kathleen Peippo; Chris Herzog
Fifth Third Financial Corporation; Fifth Third Bank; Fifth Third Community Development Corporation; Fifth Third Capital Holdings, LLC; Fifth Third Reinsurance Company, Ltd. (Turks and Caicos Islands); Fountain Square Life Reinsurance Company, Ltd. (Turks and Caicos Islands); Vista Settlement Services, LLC; Fifth Third Investment Company; First Charter Capital Trust I; First Charter Capital Trust II.
Bank of America Corporation; Commerce National Bank; The PNC Financial Services Group Inc.; Republic Bancorp, Inc.; SVB Financial Group; United Bankshares, Inc.; U.S. Bancorp.
Coolidge, Alexander. “Federal Reserve Removes Acquisition Hurdles for Fifth Third.” Cincinnati Enquirer, January 10, 2018.
———. “Fifth Third Makes Largest Acquisition since 2001, Taking Over Chicago's MB Financial for $4.7 Billion.” Cincinnati Enquirer, May 21, 2018.
———. “Kabat's Legacy: Bringing Fifth Third Back from the Brink.” Cincinnati Enquirer, July 8, 2015.
Davis, Paul, and Matthew Monks. “Fifth Third's Latest Deal: Too Little, Too Late?” American Banker, March 31, 2009, 1.
De Lombaerde, Geert. “Acquisitions Continue to Fuel Fifth Third's Growth.” Cincinnati Business Courier, April 9, 1999.
Lattman, Peter, and Dan Fitzpatrick. “Fifth Third to Sell 51% Stake in Its Payment Unit to Advent.” Wall Street Journal, March 30, 2009.
Huguley, Collin, and Maria Saporta. “Fifth Third Sets Atlanta Expansion in Motion.” Atlanta Business Chronicle, June 15, 2018.
Murray, Matt. “Fifth Third Bancorp Is First on Experts' List of Bank Stocks Due to High Revenue Growth.” Wall Street Journal, January 13, 1998.
Rieker, Matthias. “New Team, New Plans: Fifth Third Sets Course.” American Banker, August 24, 2006.
Slater, Sherry. “Fifth Third '08 Losses Reach $2.2 Billion.” Fort Wayne (IN) Journal Gazette, January 23, 2009.