Fifth Third Bank 2009 Annual Report Download - page 41

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fifth Third Bancorp 39
BALANCE SHEET ANALYSIS
Loans and Leases
Total loans and leases, including loans held for sale, at December
31, 2009, decreased $6.7 billion, or eight percent, compared to
December 31, 2008. The decrease in total loans and leases was
primarily due to a $3.5 billion decrease in the commercial loans
portfolio and a $1.5 billion decrease in the commercial
construction portfolio.
Total commercial loans and leases decreased $5.9 billion, or
12%, compared to December 31, 2008. Lower customer demand,
net charge-offs of $1.6 billion, a decrease in line utilization, and
tighter underwriting standards implemented since the third quarter
of 2008 and applied to new commercial originations and renewals
contributed to the decrease in commercial loans and leases. The
commercial loan product balance decreased $3.5 billion, or 12%
from December 31, 2008 due to net charge-offs of $718 million
and an overall decrease in customer line utilization to 33% at
December 31, 2009 compared to 54% at December 31, 2008.
Included within the commercial loan product balance at
December 31, 2009 is $1.24 billion in loans issued in conjunction
with the Processing Business Sale in the second quarter of 2009.
Commercial mortgage loans decreased $795 million, or six percent
from December 31, 2008 due to net charge-offs of $422 million,
tighter lending requirements, and the Bancorp’s effort to limit
overall exposure to commercial mortgages. Commercial
construction loans decreased $1.5 billion, or 27%, primarily due to
management’s strategy to suspend new lending on commercial
non-owner occupied real estate in the second quarter of 2008.
Other factors contributing to the decrease in commercial
construction loans included net charge offs of $416 million along
with continued pay downs on existing loans.
Total consumer loans and leases decreased $826 million, or
two percent, from December 31, 2008. Residential mortgage loans
decreased $446 million, or four percent, from December 31, 2008
due to approximately $188 million of portfolio loans sales during
2009, net charge-offs of $356 million, as well as normal principal
pay downs. This decline in residential mortgage loans occurred
despite the 81% increase in mortgage originations compared to
2008 as the Bancorp sells nearly all of its newly originated
mortgage loans at or near loan closing. Home equity loans
decreased $578 million, or five percent, from December 31, 2008
due to tighter underwriting standards on loan to value ratios and
net charge-offs of $322 million. Other consumer loans and leases,
primarily made up automobile leases and student loans designated
as held-for-sale, decreased $382 million, or 32%, compared to the
prior year end due to a decline in new originations as a result of
tighter underwriting standards across the other consumer loan and
lease portfolio. The growth in automobile loans of $401 million,
or five percent, compared to December 31, 2008 was primarily the
result of an increase in automobile loan originations due to the
federal government offering cash rebates on new automobile
purchases in the “Cash for Clunkers” program. Credit card loans
increased $179 million, or 10%, from December 31, 2008 as a
result of the Bancorp’s continued success in cross-selling credit
cards to its existing retail customer base, but was partially offset by
net charge-offs of $169 million.
Average total commercial loans and leases decreased $2.5
billion, or five percent, compared to December 31, 2008. The
decrease in average total commercial loans and leases was driven
by the aforementioned reasons as the Bancorp experienced
declines in all commercial loan categories compared to December
31, 2008.
Average total consumer loans and leases were flat compared
to 2008 as declines in other consumer loans and leases, driven by
tighter underwriting standards, were offset by increases in credit
card loans and home equity loans. Increases in average credit card
loans of 12% are a result of cross-selling to the existing customer
base and increases in average home equity loans of two percent
was primarily due to the impact of acquisition activity in 2008.
TABLE 18: COMPONENTS OF TOTAL LOANS AND LEASES (INCLUDES HELD FOR SALE)
A
s of December 31 ($ in millions) 2009 2008 2007 2006 2005
Commercial:
Commercial loans $25,687 29,220 26,079 20,831 19,377
Commercial mortgage 11,936 12,731 11,967 10,405 9,188
Commercial construction 3,871 5,335 5,561 6,168 6,342
Commercial leases 3,535 3,666 3,737 3,841 3,698
Subtotal - commercial 45,029 50,952 47,344 41,245 38,605
Consumer:
Residential mortgage loans 9,846 10,292 11,433 9,905 8,991
Home equity 12,174 12,752 11,874 12,154 11,805
Automobile loans 8,995 8,594 11,183 10,028 9,396
Credit card 1,990 1,811 1,591 1,004 788
Other consumer loans and leases 812 1,194 1,157 1,167 1,644
Subtotal - consumer 33,817 34,643 37,238 34,258 32,624
Total loans and leases $78,846 85,595 84,582 75,503 71,229
Total loans and leases (excludes held for sale) $76,779 84,143 80,253 74,353 69,925
TABLE 19: COMPONENTS OF AVERAGE TOTAL LOANS AND LEASES (INCLUDES HELD FOR SALE)
A
s of December 31 ($ in millions) 2009 2008 2007 2006 2005
Commercial:
Commercial loans $27,556 28,426 22,351 20,504 18,310
Commercial mortgage 12,511 12,776 11,078 9,797 8,923
Commercial construction 4,638 5,846 5,661 6,015 5,525
Commercial leases 3,543 3,680 3,683 3,730 3,495
Subtotal - commercial 48,248 50,728 42,773 40,046 36,253
Consumer:
Residential mortgage loans 10,886 10,993 10,489 9,574 8,982
Home equity 12,534 12,269 11,887 12,070 11,228
Automobile loans 8,807 8,925 10,704 9,570 8,649
Credit card 1,907 1,708 1,276 838 728
Other consumer loans and leases 1,009 1,212 1,219 1,395 1,897
Subtotal - consumer 35,143 35,107 35,575 33,447 31,484
Total average loans and leases $83,391 85,835 78,348 73,493 67,737
Total average portfolio loans and leases (excludes held for sale) $80,681 83,895 76,033 72,447 66,685