Fifth Third Bank 2010 Annual Report Download - page 47

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fifth Third Bancorp 45
Trading securities decreased from $355 million at December
31, 2009 to $294 million at December 31, 2010. The decrease was
driven by the sale of VRDNs which were held by the Bancorp in
its trading securities portfolio. These securities were purchased
from the market during 2008 and 2009 through FTS who was also
the remarketing agent. During the fourth quarter of 2009 and into
2010, the rates on these securities began to decline substantially,
and as a result the Bancorp sold a majority of its VRDNs and
replaced them with higher-yielding agency mortgage-backed
securities classified as available-for-sale. The Bancorp continued
to sell the VRDNs throughout 2010, resulting in the decrease
from December 31, 2009. For more information on the VRDNs,
see Note 18 of the Notes to Consolidated Financial Statements.
Included in trading securities as of December 31, 2010 were $6
million of auction rate securities, which had an unrealized loss of
$1 million. The Bancorp held $13 million of auction rate securities
in its trading portfolio at December 31, 2009, which had an
unrealized loss of $4 million.
TABLE 21: CHARACTERISTICS OF AVAILABLE-FOR-SALE AND OTHER SECURITIES
A
s of December 31, 2010 ($ 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 $25 $25 0.3 0.91%
Average life 1 – 5 years 100 101 1.4 1.20
Average life 5 – 10 years 100 104 8.9 3.57
Average life greater than 10 years - - - -
Total 225 230 4.6 2.22
U.S. Government sponsored agencies:
Average life of one year or less 80 81 0.2 3.35
Average life 1 – 5 years 51 51 1.7 1.54
Average life 5 – 10 years 1,433 1,513 5.9 3.75
Average life greater than 10 years - - - -
Total 1,564 1,645 5.5 3.66
Obligations of states and political subdivisions (a):
Average life of one year or less 126 126 0.1 4.20
Average life 1 – 5 years 4 5 2.8 8.21
Average life 5 – 10 years 8 9 9.4 6.27
Average life greater than 10 years 32 32 11.0 5.98
Total 170 172 2.7 4.73
A
gency mortgage-backed securities:
Average life of one year or less 264 270 0.7 4.85
Average life 1 – 5 years 8,579 8,956 3.8 4.40
Average life 5 – 10 years 1,668 1,689 6.8 4.30
Average life greater than 10 years 59 58 10.3 4.09
Total 10,570 10,973 4.2 4.40
Other bonds, notes and debentures (b):
Average life of one year or less 131 131 0.5 1.11
Average life 1 – 5 years 801 812 2.6 4.37
Average life 5 – 10 years 337 330 6.0 3.60
Average life greater than 10 years 69 69 23.0 7.21
Total 1,338 1,342 4.3 4.00
Other securities (c) 1,052 1,052
Total available-for-sale and other securities $14,919 $15,414 4.4 4.24%
(a) Taxabl
e
-equivalent yield adjustments included in the above table are 1.45%, 2.83%, 2.16%, 2.06% and 1.63%
f
or 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 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 FHLB and FRB restricted stock holdings that are carried at par, FHLMC and FNMA preferred stock, certain mutual fund holdings and equity security
holdin
g
s.