Fifth Third Bank 2010 Annual Report Download - page 87

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fifth Third Bancorp 85
Interest income recognized on a cash basis for loans on nonaccrual status during 2010, 2009, and 2008, was $25 million, $20 million, and $10
million, respectively.
The following table summarizes the Bancorp’s nonperforming loans and leases, by class, as of December 31, 2010:
($in millions)
Nonperforming
Loans & Leases (a)
Commercial:
Commercial and industrial loans $568
Commercial mortgage loans owner-occupied 168
Commercial mortgage loans nonowner-occupied 267
Commercial construction 192
Commercial leasing 19
Total Commercial $1,214
Residential mortgage loans $268
Consumer:
Home equity 56
Automobile loans 3
Credit card 55
Other consumer loans and leases 84
Total Consumer $198
Total nonperforming loans and leases $1,680
(a) Excludes
$294
and $224 of nonaccrual loans held for sale at
December 31, 2010
and 2009, respectively.
8. LOANS WITH DETERIORATED CREDIT QUALITY ACQUIRED IN A TRANSFER
The Bancorp has acquired certain loans for which there was
evidence of deterioration of credit quality since origination and for
which it was probable, at acquisition, that all contractually
required payments would not be collected. These loans were
evaluated either individually or segregated into pools based on
common risk characteristics and accounted for under U.S. GAAP
guidance for loans acquired with deteriorated credit quality. U.S.
GAAP requires acquired loans to be recorded at their initial fair
value and prohibits carrying over valuation allowances when
applying purchase accounting. Loans carried at fair value,
mortgage loans held for sale and loans under revolving credit
agreements are excluded from the scope of this guidance on loans
acquired with deteriorated credit quality. During the years ended
December 31, 2010, 2009 and 2008, the Bancorp recorded
provision expense for loans acquired with deteriorated credit
quality of $6 million, $21 million and $35 million, respectively, in
the Consolidated Statements of Income. In addition, as of
December 31, 2010 and 2009, the Bancorp maintained an
allowance for loan and lease losses of $3 million and $21 million,
respectively, on these loans.
The following table reflects the outstanding balance of all
contractually required payments and carrying amounts of loans
acquired with deteriorated credit quality at December 31:
($ in millions) 2010 2009
Commercial $15 158
Consumer 58 58
Outstanding balance $73 216
Carrying amount $24 71
At the acquisition date, the Bancorp determines the excess of the
loan’s contractually required payments over all cash flows
expected to be collected as an amount that should not be accreted
into interest income (nonaccretable difference). The remaining
amount representing the difference in the expected cash flows of
acquired loans and the initial investment in the acquired loans is
accreted into interest income over the remaining life of the loan or
pool of loans (accretable yield). A summary of activity is provided.
($ in millions)
Accretable
Yield
Balance as of December 31, 2007 $6
A
dditions 24
A
ccretion (15)
Disposals -
Reclassifications from (to) nonaccretable difference,
net 13
Balance as of December 31, 2008 $28
A
dditions -
A
ccretion (6)
Disposals -
Reclassifications from (to) nonaccretable difference,
net (13)
Balance as of December 31, 2009 $9
A
dditions -
A
ccretion (2)
Disposals (2)
Reclassifications from (to) nonaccretable difference,
net (3)
Balance as of December 31, 2010 $2
The following table reflects loans that were acquired with
deteriorated credit quality during the years ended December 31:
($ in millions) 2010 2009 2008
Contractually required payments receivable
at acquisition:
Commercial $ - - 182
Consumer 23 -34
Total $23 - 216
Cash flows expected to be collected at
acquisition $8 -90
Fair value of acquired loans at
acquisition 8-66