Fifth Third Bank 2007 Annual Report Download - page 42

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fifth Third Bancorp
40
Classification System), by loan size and by state, illustrating the
diversity and granularity of the Bancorp’s portfolio.
The commercial portfolio is characterized by 85% of
outstanding balances and exposures concentrated within the
Bancorp’s primary market areas of Ohio, Kentucky, Indiana,
Michigan, Illinois, Florida, Tennessee, Pennsylvania, and Missouri.
Exclusive of the national large-ticket leasing business, the
commercial portfolio is characterized by 91% of outstanding
balances and 89% of exposures concentrated within these nine
states. The following table provides further information on the
location of commercial real estate and construction industry loans
and leases.
TABLE 27: OUTSTANDING COMMERCIAL REAL ESTATE
AND CONSTRUCTION LOANS AND LEASES BY STATE
As of December 31 ($ in millions) 2007 2006
Michigan $4,692 4,637
Ohio 4,167 4,072
Florida 2,790 2,543
Illinois 1,425 1,337
Indiana 1,298 1,294
Kentucky 791 794
Tennessee 496 399
All other states 1,131 1,066
Total $16,790 16,142
As of December 31, 2007, the Bancorp had outstanding
homebuilder exposure of $4.4 billion, outstanding loans of $2.9
billion with $176 million in nonaccrual loans.
Residential Mortgage Portfolio
The Bancorp manages credit risk in the mortgage portfolio through
conservative underwriting and documentation standards and
geographic and product diversification. The Bancorp may also
package and sell loans in the portfolio without recourse or may
purchase mortgage insurance for the loans sold in order to mitigate
credit risk.
Certain mortgage products have contractual features that may
increase credit exposure to the Bancorp in the event of a decline in
housing prices. These types of mortgage products offered by the
Bancorp include loans with high LTV ratios, multiple loans on the
same collateral that when combined result in a high LTV (“80/20”)
and interest-only loans. Table 28 shows the Bancorp’s originations
of these products for the years ended December 31, 2007 and
2006. The Bancorp does not originate mortgage loans that permit
customers to defer principal payments or make payments that are
less than the accruing interest. Table 29 provides the amount of
these loans as a percent of the residential mortgage loans in the
Bancorp’s portfolio and the delinquency rates of these loan
products as of December 31, 2007 and 2006. The Bancorp
TABLE 26: COMMERCIAL LOAN AND LEASE PORTFOLIO EXPOSURE (a)
2007 2006
As of December 31 ($ in millions) Outstanding Exposure Nonaccrual Outstandin
g
Exposure Nonaccrual
By industry:
Real estate $11,564 14,450 147 10,652 13,196 50
Manufacturing 6,570 14,365 28 5,198 11,443 22
Construction 5,226 8,534 258 5,490 8,963 69
Retail trade 4,175 7,251 29 3,655 6,515 27
Transportation and warehousing 2,565 3,076 21 2,097 2,432 4
Financial services and insurance 2,484 6,916 6 1,509 4,855 8
Healthcare 2,347 4,007 15 1,860 3,208 9
Business services 2,266 4,251 25 1,862 3,640 16
Wholesale trade 2,179 4,127 16 1,827 3,642 11
Individuals 1,252 1,626 15 1,364 1,785 13
Other services 1,049 1,455 17 959 1,373 14
Accommodation and food 1,036 1,470 21 860 1,323 10
Other 963 1,897 59 578 1,269 4
Communication and information 741 1,439 1 567 1,073 1
Public administration 737 957 - 792 930 -
Entertainment and recreation 617 873 6 602 841 2
Agribusiness 606 788 3 609 782 8
Mining 578 1,090 3 288 637 3
Utilities 389 1,210 2 370 1,187 -
Total $47,334 79,782 672 41,139 69,094 271
By loan size:
Less than $200,000 3 % 3 9 4 3 13
$200,000 to $1 million 13 10 24 16 12 34
$1 million to $5 million 28 23 43 32 27 48
$5 million to $10 million 26 23 19 17 16 5
$10 million to $25 million 13 14 5 21 24 -
Greater than $25 million 17 27 - 10 18 -
Total 100 % 100 100 100 100 100
By state:
Ohio 26 % 30 20 25 28 36
Michigan 20 18 36 22 19 19
Florida 11 9 23 10 9 9
Illinois 99 610 10 8
Indiana 88 99 9 15
Kentucky 55 26 6 8
Tennessee 33 13 3 1
Pennsylvania 22 -1 2 -
Missouri 11 -1 1 -
All other states 15 15 3 13 13 4
Total 100 % 100 100 100 100 100
(a) Outstanding reflects total commercial customer loan and lease balances, including held for sale and net of unearned income, and exposure reflects total commercial customer lending commitments.