Fifth Third Bank 2010 Annual Report Download - page 55

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fifth Third Bancorp 53
Automobile Portfolio
The automobile portfolio is characterized by direct and indirect
lending products to consumers. As of December 31, 2010, the
automobile loan portfolio was comprised of approximately 48%
in new automobile loans. It is a common 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, 2010 and 2009.
TABLE 36: 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
Analysis of Nonperforming Assets
A summary of nonperforming assets is included in Table 37.
Nonperforming assets include nonaccrual loans and leases for
which ultimate collectability of the full amount of the principal
and/or interest is uncertain; restructured consumer loans which
are 90 days past due based on the restructured terms and credit
card loans immediately upon restructuring; restructured
commercial loans which have not yet met the requirements to be
classified as a performing asset; and other assets, including OREO
and repossessed equipment. Typically, commercial loans, home
equity, automobile and other consumer loans and leases are
reported on nonaccrual status if principal or interest has been in
default for 90 days or more unless the loan is both well-secured
and in the process of collection. Residential mortgage loans are
typically placed on nonaccrual status when principal and interest
payments have become past due 150 days unless such loans are
both well secured and in the process of collection. When a loan is
placed on nonaccrual status, the accrual of interest, amortization
of loan premiums, accretion of loan discounts and amortization or
accretion of deferred net loan fees or costs are discontinued and
previously accrued, but unpaid interest is reversed. Commercial
loans on nonaccrual status are reviewed for level of impairment at
least quarterly. If the principal or a portion of the principal is
deemed a loss, the loss amount is charged off to the ALLL.
Total nonperforming assets were $2.5 billion at December
31, 2010, compared to $3.5 billion at December 31, 2009. At
December 31, 2010, $294 million of nonaccrual commercial loans
were held-for-sale, a significant portion of which were real estate
secured loans in Michigan and Florida. Nonperforming assets as a
percentage of total loans, leases and other assets, including OREO
and nonaccrual loans held for sale, was 3.08% and 4.38% as of
December 31, 2010 and 2009, respectively. Excluding the held-
for-sale nonaccrual loans, nonperforming assets as a percentage of
total loans, leases and other assets, including OREO, as of
December 31, 2010 was 2.79% compared to 4.22% as of
December 31, 2009. The composition of nonaccrual loans and
leases continues to be concentrated in real estate as 66% of
nonaccrual loans were secured by real estate as of December 31,
2010 compared to approximately 77% as of December 31, 2009.
Commercial nonperforming loans and leases decreased to
$1.6 billion at December 31, 2010 from $2.6 billion at December
31, 2009 due to the impact of previous loss mitigation actions and
moderation in general economic conditions. Excluding
nonperforming loans held-for-sale, commercial nonperforming
loans and leases decreased from $2.3 billion at December 31, 2009
to $1.3 billion as of December 31, 2010. These decreases were due
to the previously discussed factors and the impact of commercial
nonperforming loans transferred to held for sale during the third
quarter of 2010. The Bancorp transferred commercial loans with a
carrying value prior to transfer of $961 million to held for sale
during the third quarter, of which $694 million were
nonperforming. Of those loans transferred in the third quarter of
2010, 52% were secured by non-owner occupied real estate,
including 22% secured by developed and undeveloped land.
Approximately 40% of those transferred loans were in Florida or
Michigan. The remaining balance of the loans transferred during
the third quarter of 2010 was $223 million at December 31, 2010.
Consumer nonperforming loans and leases decreased to $466
million as of December 31, 2010, compared to $555 million at
December 31, 2009, driven primarily by a $144 million decrease in
residential mortgage loans on nonaccrual, partially offset by an
$84 million increase in other consumer loans. The decrease in
residential mortgage loans was primarily the result of $205 million
of nonperforming residential mortgage loans sold during the third
quarter of 2010. The increase in other consumer loans was the
TABLE 35: AUTOMOBILE LOANS OUTSTANDING WITH LTV GREATER THAN 100%
As of December 31, 2010 ($ in millions)
For the Year Ended
December 31, 2010
By State: Outstanding
90 Days
Past Due Nonaccrual Net Charge-offs
Ohio $447 1 - 5
Illinois 375 1 - 5
Michigan 269 - - 4
Indiana 208 1 - 3
Florida 199 - - 5
Kentucky 181 - - 3
All other states 2,451 4 2 33
Total $4,130 7 2 58