Fifth Third Bank 2004 Annual Report Download - page 60

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
58 Fifth Third Bancorp
Static pool credit losses are calculated by aggregating the actual
and projected future credit losses for a securitization and dividing
these losses by the original balance in each pool of assets. For the
home equity lines of credit securitized in 2003, the static pool credit
losses were .78% and .66% as of December 31, 2004 and 2003,
respectively. For the automotive loans securitized in 2004, the static
pool credit losses were 1.14% as of December 31, 2004.
During 2004 and 2003, the Bancorp transferred, subject to
credit recourse, certain commercial loans to an unconsolidated QSPE
that is wholly owned by an independent third party. At December
31, 2004 and 2003, the outstanding balance of loans transferred was
$1.9 billion and $1.8 billion, respectively. The commercial loans
transferred to the QSPE are primarily fl oating-rate and short-term
investment grade in nature. Generally, the loans transferred provide
a lower yield due to their investment grade nature, and therefore
transferring these loans to the QSPE allows the Bancorp to reduce
its exposure to these lower yielding loan assets while maintaining
the customer relationships. These commercial loans are transferred
at par with no gain or loss recognized. The Bancorp receives rights
to future cash fl ows arising after the investors in the securitization
trust have received the return for which they contracted. Due to the
relatively short-term nature of the loans transferred, no value has
been assigned to this retained future stream of fees to be received.
As of December 31, 2004, the $1.9 billion balance of outstanding
loans had a weighted-average remaining maturity of 62 days.
During 2004, the Bancorp securitized and sold $750 million
in automotive loans to an unconsolidated QSPE that is wholly
owned by an independent third party. The Bancorp retained servic-
ing rights and receives a servicing fee based on a percentage of the
outstanding balance. Additionally, the Bancorp retained a subor-
dinated tranche of securities and rights to future cash fl ows arising
after investors in the securitization trust have received the return for
which they contracted. The investors and the securitization trust
have no recourse to the Bancorp’s other assets for failure of debtors
to pay when due. The Bancorp’s retained interest is subordinate to
investor’s interests and its value is subject to credit, prepayment and
interest rate risks on the sold automotive loans. As of December 31,
2004, the remaining balance of sold automotive loans was $568
million.
During 2003, the Bancorp securitized and sold $903 million
in home equity lines of credit to an unconsolidated QSPE that is
wholly owned by an independent third party. The Bancorp retained
servicing rights and receives a servicing fee based on a percentage of
the outstanding balance. Additionally, the Bancorp retained rights
to future cash fl ows arising after investors in the securitization trust
have received the return for which they contracted. The investors
and the securitization trust have no recourse to the Bancorp’s other
assets for failure of debtors to pay when due. The Bancorp’s retained
interest is subordinate to investor’s interests and its value is subject
to credit, prepayment and interest rate risks on the sold home equity
lines of credit. As of December 31, 2004, the remaining balance of
sold home equity lines of credit was $717 million.
The Bancorp had the following cash fl ows with unconsolidated
QSPE’s during 2004 and 2003:
Balance
Balance of Loans 90 Days
or More Past Due Net Credit Losses
For the Years Ended December 31 ($ in millions) 2004 2003 2004 2003 2004 2003
Commercial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,058 14,226 $ 21 14 $ 81 136
Commercial mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,636 6,894 8997
Commercial leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,426 3,264 11722
Construction loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,726 3,636 9962
Residential mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,629 5,801 44 50 15 24
Other consumer loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,222 19,036 62 61 118 96
Consumer leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,051 2,448 3619 25
Total loans and leases managed and securitized (a) . . . . . . . . 61,748 55,305 $148 150 $255 312
Less:
Loans securitized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,381 1,116
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 559 1,881
Total loans and leases held for investment . . . . . . . . . . . . . . $59,808 52,308
(a) Excluding securitized assets that the Bancorp continues to service but with which it has no other continuing involvement.
($ in millions) 2004 2003
Proceeds from transfers, including new securitizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,379 1,345
Proceeds from collections re-invested in revolving-period securitizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 46
Transfers received from QSPE’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 116
Fees received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 25