Fifth Third Bank 2007 Annual Report Download - page 5

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top10.Whilethepaceofforeclosureshasincreasedin
recentmonthsinFlorida,thegrowthrateofforeclosuresina
numberofourgeographiesseemstobeslowing.Therefore,
thereisreasontohopethatatsomepointduring2008we
maybegintoseestabilizationinkeycredittrends.When
thatoccurs,wewouldexpectourbottomlinetobeginto
benetfromthenumerousstepswe’vetakentoincrease
theCompany’sunderlyingearningsbase.

Our2007resultsreectedtheweakoperatingenvironment
outlinedabove.Reportedearningsperdilutedsharewere
$1.99,lowerthanthe$2.13pershareindilutedearnings
reportedin2006.Resultsduringtherstthreequartersof
2007weresolid,reectingboththebenetsofthebalance
sheetactionswetookinthefourthquarteroflastyearas
wellasincreasesinrevenue,whichweremorethanoffsetby
theeffectofrisingprovisionexpensestocoverincreases
inloanlosses.
Duringthefourthquarterof2007,however,theCompany
recordedseveralchargesthatreectedthedeteriorating
creditenvironmentexperiencedthroughoutthenancial
sector.First,asaresultofhigherexpectedlosses,we
recordedanincrementalprovisionforloanandleaselosses
overnetcharge-offsof$110million.Thisrepresented$0.13
inearningspershare.Second,wetookachargeof
$177million,or$0.33pershareonanafter-taxbasis,
againstoneofourBank-OwnedLifeInsurance(BOLI)
policies,toreectlossesexperiencedontheunderlying
investmentsduetosignicantdisruptionsinthenancial
markets.Additionally,FifthThirdandanumberofother
bankswererequiredtoaccrueexpensesrelatedtocurrent
andfuturelegalsettlementsasamember-bankowner
ofVisa,Inc.Theseexpenseswere$78millioninthethird
quarterand$94millioninthefourthquarter,totaling
$0.21persharefortheyear.Wefullyexpecttoreverse
theselegalaccrualswhenVisacompletesitsinitialpublic
offering,currentlyanticipatedinthersthalfof2008.
Finally,werecorded$8million,or$0.01pershare,inmerger-
relatedcostsinthefourthquarter,primarilyrelatedtoour
acquisitionofR-GCrownBankinFloridainNovember2007.
Asareminder,inthefourthquarterof2006,werecorded
pretaxchargesrelatedtobalancesheetactionstotaling
$454million,or$0.52pershare.
Settingasidetheitemsoutlinedabove,2007resultswere
inlinewith2006,withsignicantimprovementsinour
underlyingbusinesslargelyoffsetbyhigherloanlosses
during2007.Weareworkinghardtohavethemany
improvementsmadetotheCompany’soperationsresult
inabetterbottomline.
Whileourcredittrendswerelargelyinlinewiththerest
oftheindustry,theyalsoweredisappointing.Higherloss
expectationsdroveprovisionexpenseto$628million
comparedto$343millionin2006.Netloanlosseswere
$462millionin2007versus$316millionin2006.Asa
percentageofloansandleases,netlossesroseto0.61
percentforthefullyearof2007comparedwith0.44
percentin2006.Thedeteriorationoccurredmostlyinour
consumerportfolio,whichsawitsloanlossratioincrease
from0.55percentin2006to0.84percentin2007,largely
reectinghigherresidentialrealestatelosses,particularlyin
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