Fifth Third Bank 2008 Annual Report Download - page 40

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
38 Fifth Third Bancorp
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, 2008, total
investment securities were $14.3 billion compared to $11.2 billion
at December 31, 2007.
Securities are classified as trading when bought and held
principally for the purpose of selling them in the near term.
Securities are classified as available-for-sale when, in
management’s judgment, they may be sold in response to, or in
anticipation of, changes in market conditions. The Bancorp’s
management has evaluated the securities in an unrealized loss
position in the available-for-sale portfolio for OTTI on the basis
of both the duration of the decline in value of the security and the
severity of that decline, and maintains the intent and ability to
hold these securities to the earlier of the recovery of the loss or
maturity. Securities, which management has the intent and ability
to hold to maturity and are classified as held-to-maturity are
reported at amortized cost.
At December 31, 2008, the Bancorp’s investment portfolio
primarily consisted of AAA-rated agency mortgage-backed
securities. The investment portfolio includes FHLMC preferred
TABLE 21: COMPONENTS OF INVESTMENT SECURITIES
A
s of December 31 ($ in millions) 2008 2007 2006 2005 2004
Trading:
Variable rate demand notes $1,140 -- --
Other securities 51 171 187 117 77
Total trading $1,191 171 187 117 77
Available-for-sale and other: (amortized cost basis)
U.S. Treasury and Government agencies $186 3 1,396 506 503
U.S. Government sponsored agencies 1,651 160 100 2,034 2,036
Obligations of states and political subdivisions 323 490 603 657 823
Agency mortgage-backed securities 8,529 8,738 7,999 16,127 17,571
Other bonds, notes and debentures 613 385 172 2,119 2,862
Other securities 1,248 1,045 966 1,090 1,006
Total available-for-sale and other $12,550 10,821 11,236 22,533 24,801
Held-to-maturity:
Obligations of states and political subdivisions $355 351 345 378 245
Other bonds, notes and debentures 54 11 11 10
Total held-to-maturity $360 355 356 389 255
TABLE 22: CHARACTERISTICS OF AVAILABLE-FOR-SALE AND OTHER SECURITIES
As of December 31, 2008 ($ in millions) Amortized Cost Fair Value
Weighted-
Average Life (in
years)
Weighted-
Average Yield
U.S. Treasury and Government agencies:
Average life of one year or less $41 $41 0.8 2.11%
Average life 1 – 5 years 143 147 1.5 2.10
Average life 5 – 10 years - - - -
Average life greater than 10 years 2 2 11.2 2.46
Total 186 190 1.5 2.11
U.S. Government sponsored agencies:
Average life of one year or less 164 165 0.1 4.47
Average life 1 – 5 years 168 174 1.7 3.10
Average life 5 – 10 years 1,319 1,391 7.7 3.79
Average life greater than 10 years - - - -
Total 1,651 1,730 6.4 3.78
Obligations of states and political subdivisions (a):
Average life of one year or less 202 203 0.3 7.31
Average life 1 – 5 years 71 72 2.5 7.18
Average life 5 – 10 years 49 50 7.5 6.87
Average life greater than 10 years 1 1 12.1 3.93
Total 323 326 1.9 7.21
Agency mortgage-backed securities:
Average life of one year or less 909 919 0.7 5.44
Average life 1 – 5 years 7,337 7,470 2.7 5.24
Average life 5 – 10 years 282 291 5.6 5.28
Average life greater than 10 years 1 1 10.4 5.09
Total 8,529 8,681 2.6 5.26
Other bonds, notes and debentures (b):
Average life of one year or less 186 178 0.1 2.51
Average life 1 – 5 years 265 242 3.0 7.27
Average life 5 – 10 years 112 102 6.6 7.55
Average life greater than 10 years 50 48 25.4 7.20
Total 613 570 4.6 5.87
Other securities (c) 1,248 1,231
Total available-for-sale and other securities $12,550 $12,728 3.2 5.08%
(a) Taxable-equivalent yield adjustments included in the above table are 2.46%, 2.13%, 0.26%, 1.32% and 2.05% for securities with an average life of one year or less, 1-5 years, 5-10 years,
greater than 10 years and in total, respectively.
(b) Other bonds, notes, and debentures consist of commercial paper, non-agency mortgage backed securities, certain other asset backed securities (primarily automobile and commercial loan backed
securities) and corporate bond securities.
(c) Other securities consist of Federal Home Loan Bank (FHLB) and Federal Reserve Bank restricted stock holdings that are carried at par, FHLMC and FNMA preferred stock, certain
mutual
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