Fifth Third Bank 2008 Annual Report Download - page 70

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
68 Fifth Third Bancorp
The following table provides the fair value and gross unrealized loss, aggregated by investment category and length of time the individual
securities have been in a continuous unrealized loss position, as of December 31, 2008 and 2007:
Less than 12 months 12 months or more Total
($ in millions) Fair Value
Unrealized
Losses Fair Value
Unrealized
Losses Fair Value
Unrealized
Losses
2008
U.S. Treasury and Government agencies $1 - 1 - 2 -
U.S. Government sponsored agencies 367 (4) - - 367 (4)
Obligations of states and political subdivisions 5(1) 3 - 8(1)
Agency mortgage-backed securities 480 (2) 876 (3) 1,356 (5)
Other bonds, notes and debentures 184 (23) 81 (20) 265 (43)
Other securities 37 (17) 2 - 39 (17)
Total $1,074 (47) 963 (23) 2,037 (70)
2007
U.S. Treasury and Government agencies $1 - 1 - 2 -
U.S. Government sponsored agencies 99 (1) - - 99 (1)
Obligations of states and political subdivisions 6 - 1 - 7 -
Agency mortgage-backed securities 2,279 (25) 3,730 (128) 6,009 (153)
Other bonds, notes and debentures 279 (9) 6 (1) 285 (10)
Other securities 57 (7) 27 (12) 84 (19)
Total $2,721 (42) 3,765 (141) 6,486 (183)
The Bancorp’s management has evaluated the securities in an
unrealized loss position in the available-for-sale portfolio 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.
At December 31, 2008 and 2007, 26% and four percent,
respectively, of unrealized losses in the available-for-sale securities
portfolio were represented by non-rated securities.
In 2008, the Bancorp recognized $104 million in OTTI
charges on certain securities. Trust preferred securities included in
other bonds, notes and debentures, which had an original par value
of $116 million, are now carried at $79 million, after an OTTI
charge of $37 million. Additionally, FHLMC and FNMA preferred
stock included in other securities had OTTI charges totaling $67
million in 2008 and are now carried at $1 million at December 31,
2008. These charges were recognized due to the severity of the
decline in the fair value of these securities during 2008.
5. LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES
A summary of the total loans and leases classified by primary purpose as of December 31:
Total portfolio loans and leases were recorded net of unearned
income, which totaled $1.4 billion and $1.3 billion as of December
31, 2008 and 2007, respectively. Additionally, unamortized
premiums and discounts, deferred loan fees and costs, and fair
value adjustments (associated with acquired loans or loans
designated as fair value upon origination) were $421 million and
$18 million as of December 31, 2008 and 2007, respectively.
The Bancorp diversifies its loan and lease portfolio by
offering a variety of loan and lease products with various payment
terms and rate structures. Lending activities are concentrated
within those states that the Bancorp has banking centers and are
primarily located in the Midwest and Southeastern portion of the
United States. The Bancorp’s commercial loan portfolio consists
of lending to various industry types. Management periodically
reviews the performance of its loan and lease products to ensure
they are performing within acceptable interest rate and credit risk
levels and changes are made to underwriting policies and
procedures as needed. The Bancorp maintains an allowance to
absorb loan and lease losses inherent in the portfolio.
($ in millions) 2008 2007
Loans and leases held for sale:
Commercial loans $23 1,266
Commercial mortgage loans 229 105
Commercial constructions loans 221 -
Residential mortgage loans 906 893
Automobile loans -1,982
Other consumer loans and leases 73 83
Total loans and leases held for sale $1,452 4,329
Portfolio loans and leases (a):
Commercial loans $29,197 24,813
Commercial mortgage loans 12,502 11,862
Commercial construction loans 5,114 5,561
Commercial leases 3,666 3,737
Total commercial loans and leases 50,479 45,973
Residential mortgage loans 9,385 10,540
Home equity 12,752 11,874
Automobile loans 8,594 9,201
Credit card 1,811 1,591
Other consumer loans and leases 1,122 1,074
Total consumer loans and leases 33,664 34,280
Total portfolio loans and leases $84,143 80,253
(a) At December 31, 2008 and 2007, deposit overdrafts of $51 million and $78 million, respectively, were included in portfolio loans.