Fifth Third Bank 2007 Annual Report Download - page 38

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fifth Third Bancorp
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BALANCE SHEET ANALYSIS
Loans and Leases
Total loans and leases increased 12% compared to December 31,
2006. Table 19 presents the Bancorp’s total commercial and
consumer loan and lease portfolio classified by the primary
purpose of the loan.
Total commercial loans and leases increased $6.1 billion, or
15%, compared to the prior year. Excluding loans acquired from
Crown, commercial loans and leases increased approximately $5.6
billion, or 14%, reflecting growth in commercial and industrial
loans throughout the Bancorp’s footprint. Commercial mortgage
growth was primarily a result of the Crown acquisition. Growth
in commercial mortgage and the decrease in commercial
construction is also attributed to the conversion of construction
loans to permanent financing.
Total consumer loans and leases increased $3.0 billion, or
nine percent, compared to December 31, 2006 as a result of the
Crown acquisition, growth in the automobile loan portfolio and
increased promotion of credit cards. Excluding Crown, total
consumer loans and leases increased approximately $1.5 billion, or
four percent. Residential mortgage loans increased $1.5 billion, or
15%, compared to 2006, primarily from the Crown acquisition.
Excluding Crown, residential mortgage loans increased
approximately $260 million, or three percent, compared to the
prior year. Residential mortgage originations totaled $11.9 billion
in 2007 compared to $9.4 billion in 2006. Automobile loans
increased $1.2 billion, or 12%, compared to 2006. The growth in
automobile loans was attributed to an increase in the number of
dealers in the Bancorp’s indirect automobile lending network
from 8,700 in 2006 to 9,300 in 2007. A key focus for the Bancorp
in 2007 was increasing its penetration of credit cards within in its
retail footprint through marketing campaigns targeted to specific
borrowers. Credit card balances increased 58%, to $1.6 billion,
with growth primarily a result of a 26% increase in the number of
accounts. The Bancorp will continue to focus on growing credit
card balances throughout 2008.
Average commercial loans and leases increased $2.7 billion,
or seven percent, compared to December 31, 2006, with growth
in commercial loans and commercial mortgage loans. The
Bancorp experienced double-digit growth in more than a third of
its affiliates, including 11% in the Florida affiliates, 29% in
Lexington and 26% in Tennessee.
Average consumer loans and leases increased $2.1 billion, or
six percent, compared to 2006. The growth in average consumer
loans and leases was a result of strong growth in residential
mortgage, automobile and credit card balances mitigated by a
decline in home equity loans and consumer automobile leases.
The Bancorp experienced its largest growth in the Chicago
affiliate, an increase of $254 million, or nine percent. Additionally,
the Bancorp saw growth of 11% in the Florida affiliates and 30%
in Tennessee offset by a decline of nine percent in the Western
Ohio affiliate.
Investment Securities
The Bancorp uses investment securities as a means of managing
interest rate risk, providing liquidity support and providing
collateral for pledging purposes. As of December 31, 2007, total
investment securities were $11.2 billion compared to $11.6 billion
at December 31, 2006. Securities are classified as available-for-
sale when, in management’s judgment, they may be sold in
response to, or in anticipation of, changes in market conditions.
The Bancorp’s management has evaluated the securities in an
unrealized loss position in the available-for-sale portfolio and
maintains the intent and ability to hold these securities to the
earlier of the recovery of the losses or maturity.
Net unrealized losses on the available-for-sale securities
portfolio were $144 million at December 31, 2007 compared to
$183 million at December 31, 2006. At December 31, 2007, 85%
of the unrealized losses in the available-for-sale securities portfolio
were comprised of agency mortgage-backed securities and
securities issued by U.S. Government sponsored agencies. The
Bancorp’s management believes the price movements in these
TABLE 19: COMPONENTS OF TOTAL LOANS AND LEASES (INCLUDING HELD FOR SALE)
A
s of December 31 ($ in millions) 2007 2006 2005 2004 2003
Commercial:
Commercial loans $26,079 20,831 19,377 16,107 14,261
Commercial mortgage 11,967 10,405 9,188 7,636 6,894
Commercial construction 5,561 6,168 6,342 4,348 3,301
Commercial leases 3,737 3,841 3,698 3,426 3,264
Total commercial loans and leases 47,344 41,245 38,605 31,517 27,720
Consumer:
Residential mortgage loans 11,433 9,905 8,991 7,912 5,865
Home equity 11,874 12,154 11,805 10,318 8,783
Automobile loans 11,183 10,028 9,396 7,734 8,606
Credit card 1,591 1,004 788 794 727
Other consumer loans and leases 1,157 1,167 1,644 2,092 2,488
Total consumer loans and leases 37,238 34,258 32,624 28,850 26,469
Total loans and leases $84,582 75,503 71,229 60,367 54,189
TABLE 20: COMPONENTS OF AVERAGE TOTAL LOANS AND LEASES
A
s of December 31 ($ in millions) 2007 2006 2005 2004 2003
Commercial:
Commercial loans $22,351 20,504 18,310 14,955 13,705
Commercial mortgage 11,078 9,797 8,923 7,391 3,097
Commercial construction 5,661 6,015 5,525 3,807 6,299
Commercial leases 3,683 3,730 3,495 3,296 3,037
Total commercial loans and leases (including held for sale) 42,773 40,046 36,253 29,449 26,138
Consumer:
Residential mortgage loans 10,489 9,574 8,982 6,801 6,880
Home equity 11,887 12,070 11,228 9,584 8,796
Automobile loans 10,704 9,570 8,649 8,128 7,403
Credit card 1,276 838 728 740 559
Other consumer loans and leases 1,219 1,395 1,897 2,340 2,638
Total consumer loans and leases (including held for sale) 35,575 33,447 31,484 27,593 26,276
Total loans and leases (including held for sale) $78,348 73,493 67,737 57,042 52,414
Total portfolio loans and leases (excluding held for sale) $76,033 72,447 66,685 55,951 49,700