Fifth Third Bank 2011 Annual Report Download - page 100

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
98 Fifth Third Bancorp
Nonperforming Assets:
The following table summarizes the Bancorp’s nonperforming loans and leases, by class, as of December 31:
($ in millions) 2011 2010
Commercial:
Commercial and industrial loans $ 487 568
Commercial mortgage owner-occupied loans 170 168
Commercial mortgage nonowner-occupied loans 251 267
Commercial construction loans 138 192
Commercial leases 12 19
Total commercial loans and leases 1,058 1,214
Residential mortgage loans 275 268
Consumer:
Home equity 54 56
A
utomobile loans 2 3
Credit card 48 55
Other consumer loans and leases 1 84
Total consumer loans and leases 105 198
Total nonperforming loans and leases(a) $ 1,438 1,680
OREO and other repossessed property(b) 378 494
(a) Excludes $138 and $294 of nonaccrual loans held for sale at December 31, 2011 and 2010, respectively.
(b) Excludes
$64 and $38 of OREO related to government insured loans at December 31, 2011 and 2010, respectively.
Troubled Debt Restructurings
If a borrower is experiencing financial difficulty, the Bancorp may
consider, in certain circumstances, modifying the terms of their loan
to maximize collection of amounts due. Within each of the
Bancorp’s loan classes, TDRs typically involve either a reduction of
the stated interest rate of the loan, an extension of the loan’s
maturity date(s) at a stated rate lower than the current market rate
for a new loan with similar risk, or in limited circumstances, a
reduction of the principal balance of the loan or the loan’s accrued
interest. Upon modification, an impairment loss is recognized as an
increase to the ALLL and is measured as the difference between the
original loan’s carrying amount and the present value of expected
future cash flows discounted at the original, effective yield of the
loan. If a portion of the original loan’s principal balance is
determined to be uncollectible at the time of modification, or if the
TDR involves a reduction of the principal balance of the loan or the
loan’s accrued interest, that amount is charged off to the ALLL. At
December 31, 2011, the Bancorp had $42 million in line of credit
commitments and $1 million in letter of credit commitments to lend
additional funds to borrowers whose terms have been modified in a
troubled debt restructuring compared to $47 million and $1 million,
respectively, at December 31, 2010.
The following table provides a summary of loans modified in a TDR by the Bancorp during the year ended December 31, 2011:
Recorded investment Increase
Number of loans in loans modified (Decrease) Charge-offs
modified in a TDR in a TDR to ALLL upon recognized upon
($ in millions)(a) during the period(b) during the period modification modification
Commercial:
Commercial and industrial loans 52 $ 83 (4) 3
Commercial mortgage owner-occupied loans 32 55 (6) 2
Commercial mortgage nonowner-occupied loans 39 90 (21) 3
Commercial construction loans 26 59 (9) 1
Commercial leases 2 - - -
Residential mortgage loans 1,728 338 34 -
Consumer:
Home equity 1,317 80 1 -
A
utomobile loans 1,482 26 3 -
Credit card 12,234 79 11 -
Total portfolio loans and leases 16,912 $ 810 9 9
(a) Excludes all loans and leases held for sale and loans acquired with deteriorated credit quality.
(b) Represents number of loans post-modification.
The Bancorp considers TDRs that become 90 days or more past
due under the modified terms as subsequently defaulted. For
commercial loans not subject to individual review for impairment,
the historical loss rates that are applied to such commercial loans for
purposes of determining the allowance include historical losses
associated with subsequent defaults on loans previously modified in
a TDR. For consumer loans, the Bancorp performs a qualitative
assessment of the adequacy of the consumer ALLL by comparing
the consumer ALLL to forecasted consumer losses over the
projected loss emergence period (the forecasted losses include the
impact of subsequent defaults of consumer TDRs). When a
residential mortgage, home equity, auto or other consumer loan that
has been modified in a TDR subsequently defaults, the present
value of expected cash flows used in the measurement of the
potential impairment loss is generally limited to the expected net
proceeds from the sale of the loan’s underlying collateral and any
resulting impairment loss is reflected as a charge-off or an increase
in ALLL. When a credit card loan that has been modified in a TDR
subsequently defaults, the calculation of the impairment loss is
consistent with the Bancorp’s calculation for other credit card loans
that have become 90 days or more past due.