Fifth Third Bank 2009 Annual Report Download - page 43

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fifth Third Bancorp 41
Deposits
Deposit balances represent an important source of funding and
revenue growth opportunity. The Bancorp is continuing to focus
on core deposit growth in its retail and commercial franchises by
offering competitive rates and enhancing its product offerings. At
December 31, 2009, core deposits represented 68% of the
Bancorp’s asset funding base, compared to 56% at December 31,
2008.
Core deposits increased $9.8 billion or 15% compared to
2008 primarily due to a $5.7 billion increase in interest checking
and $4.1 billion increase in demand deposits. A majority of the
increase in interest checking was due to a $4.0 billion increase in
the balance of public fund deposits, driven by strong growth in
the fourth quarter of 2009 and a $1.6 billion increase in consumer
accounts due to runoff of higher priced certificates originated in
the second half of 2008. The growth in the demand deposit
account balances can be attributed to a $3.4 billion increase in
commercial demand deposit accounts as commercial customers
took advantage of increased protection provided by FDIC
insurance programs in 2009.
Included in core deposits are foreign office deposits, which
are Eurodollar sweep accounts for the Bancorp’s commercial
customers. These accounts bear interest at rates slightly higher
than money market accounts, but the Bancorp does not have to
pay FDIC insurance nor hold collateral. The Bancorp uses these
deposits, as well as certificates of deposit $100,000 and over, as a
method to fund earning asset growth. Certificates $100,000 and
over at December 31, 2009 decreased by $4.2 billion compared to
December 31, 2008 as customers opted to maintain their balances
in liquid accounts due to lower pricing on certificates in 2009.
On an average basis, core deposits increased $5.5 billion or
nine percent primarily due to increases in other time deposits of
$3.0 billion, demand deposits of $2.8 billion, and savings deposits
of $683 million, partially offset by a decrease in money market
accounts of $1.8 billion. Average other time deposits balances
increased compared to the prior year as customers took advantage
of competitive rates in the fourth quarter of 2008 on short term
certificates which matured in the second half of 2009. Average
demand and savings accounts increased compared to the prior
year as customers preferred to hold cash in the second half of
2009 due to lower pricing on certificates. Average money market
accounts decreased from 2008 due to lower interest rates offered
on accounts in 2009.
TABLE 21: CHARACTERISTICS OF AVAILABLE-FOR-SALE AND OTHER SECURITIES
A
s of December 31, 2009 ($ 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 $141 $142 0.5 2.09%
Average life 1 – 5 years 75 75 2.3 1.27
Average life 5 – 10 years 247 240 9.6 3.40
Average life greater than 10 years 1 1 11.8 1.46
Total 464 458 5.6 2.65
U.S. Government sponsored agencies:
Average life of one year or less 85 86 0.3 2.86
Average life 1 – 5 years 133 135 1.8 2.66
Average life 5 – 10 years 1,925 1,921 6.9 3.63
Average life greater than 10 years - - - -
Total 2,143 2,142 6.4 3.54
Obligations of states and political subdivisions (a):
Average life of one year or less 139 139 0.2 7.44
Average life 1 – 5 years 14 15 3.0 7.24
Average life 5 – 10 years 48 48 6.6 6.87
Average life greater than 10 years 39 41 11.6 3.91
Total 240 243 3.5 6.74
A
gency mortgage-backed securities:
Average life of one year or less 233 238 0.6 4.92
Average life 1 – 5 years 3,725 3,839 3.1 4.69
Average life 5 – 10 years 7,115 7,304 6.1 4.95
Average life greater than 10 years 1 1 10.1 4.22
Total 11,074 11,382 5.0 4.88
Other bonds, notes and debentures (b):
Average life of one year or less 1,203 1,206 0.2 2.20
Average life 1 – 5 years 1,028 1,054 2.0 6.13
Average life 5 – 10 years 182 192 7.5 7.13
Average life greater than 10 years 128 117 17.1 7.45
Total 2,541 2,569 2.1 4.28
Other securities (c) 1,417 1,419
Total available-for-sale and other securities $17,879 $18,213 4.4 4.48%
(a) Taxabl
e
-equivalent yield adjustments included in the above table are 2.59%, 1.14%, 0.20%, 0.01% and 1.61% 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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