Fifth Third Bank 2009 Annual Report Download - page 51

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fifth Third Bancorp 49
Automobile Portfolio
The automobile portfolio is characterized by direct and indirect
lending products to consumers. As of December 31, 2009, the
automobile loan portfolio was comprised of approximately 47%
in new automobile loans. It is a common competitive practice to
advance on automobile loans an amount in excess of the
automobile value due to the inclusion of taxes, title, and other fees
paid at closing. The Bancorp monitors its exposure to these higher
risk accounts. The following tables provide analysis of the
Bancorp’s automobile loans with a LTV at origination greater than
100% as of December 31, 2009 and 2008.
TABLE 39: AUTOMOBILE LOANS OUTSTANDING WITH LTV GREATER THAN 100%
As of December 31, 2008 ($ in millions)
For the Year Ended
December 31, 2008
By State: Outstanding
90 Days
Past Due Nonaccrual Net Charge-offs
Ohio $467 2 - 10
Illinois 365 1 - 11
Michigan 301 1 - 6
Indiana 249 1 - 5
Florida 215 1 - 9
Kentucky 205 1 - 4
All other states 1,683 6 1 37
Total $3,485 13 1 82
Analysis of Nonperforming Assets
Prior to 2009, certain consumer loans (including residential
mortgage loans, home equity loans and automobile loans)
modified in a troubled debt restructuring (TDR) were maintained
on nonaccrual status until the Bancorp believed repayment under
the revised terms was reasonably assured and a sustained period
of repayment performance was achieved (typically defined as six
months for a monthly amortizing loan). Beginning in 2009, based
on published guidance with respect to TDR’s from certain
banking regulators and to conform to general practices within the
banking industry, the Bancorp determined it was appropriate to
maintain these consumer loans modified as part of a TDR on
accrual status, provided there is reasonable assurance of
repayment and of performance according to the modified terms
based upon a current, well-documented credit evaluation.
Management believes this policy is reflective of recent regulatory
guidance and provides better comparability to other financial
institutions. Accordingly, during the first quarter of 2009, the
Bancorp reclassified from nonaccrual to accrual status the
consumer loans modified as part of a TDR that were less than 90
days past due as measured by their restructured terms. For
comparability purposes, prior periods were adjusted to reflect this
reclassification. The income statement effect of this
reclassification was immaterial to the Bancorp’s Consolidated
Financial Statements. The effect of this reclassification on other
amounts previously reported in prior periods is as follows:
TABLE 38: AUTOMOBILE LOANS OUTSTANDING WITH LTV GREATER THAN 100%
As of December 31, 2009 ($ in millions)
For the Year Ended
December 31, 2009
By State: Outstanding
90 Days
Past Due Nonaccrual Net Charge-offs
Ohio $422 1 - 9
Illinois 357 1 - 9
Michigan 252 1 - 6
Indiana 215 - - 5
Florida 193 1 - 11
Kentucky 177 - - 4
All other states 2,067 6 1 46
Total $3,683 10 1 90
TABLE 40: IMPACT OF POLICY CHANGE ON REPORTED RESTRUCTURED LOANS
December 31, 2008 ($ in millions)
As Previously
Reported
As Reflected Under
New Policy
Restructured loans (nonaccrual)
Residential mortgage loans $342 20
Home equity 196 29
Automobile loans 6 1
Nonperforming assets as a percent of loans, leases and other assets, including other real estate owned 2.96% 2.38
December 31, 2007 ($ in millions)
Restructured loans (nonaccrual)
Residential mortgage loans $29 27
Home equity 46 11
Automobile loans - -
Nonperforming assets as a percent of loans, leases and other assets, including other real estate owned 1.32% 1.25