Fifth Third Bank 2011 Annual Report Download - page 21

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fifth Third Bancorp 19
Noninterest expense decreased $97 million, or three percent, in
2011 compared to 2010 primarily due to a decrease of $59 million in
the provision for representation and warranty claims related to
residential mortgage loans sold to third parties; a decrease of $41
million in FDIC insurance and other taxes, a $22 million decrease
from the change in the provision for unfunded commitments and
letters of credit, a $21 million decrease in intangible asset
amortization and a $19 million decrease in professional service fees.
This activity was partially offset by a $64 million increase in total
personnel costs (salaries, wages and incentives plus employee
benefits).
Credit Summary
The Bancorp does not originate subprime mortgage loans and does
not hold asset-backed securities backed by subprime mortgage loans
in its securities portfolio. However, the Bancorp has exposure to
disruptions in the capital markets and weakened economic
conditions. Throughout 2010 and 2011, the Bancorp continued to
be affected by high unemployment rates, weakened housing
markets, particularly in the upper Midwest and Florida, and a
challenging credit environment. Credit trends have improved, and as
a result, the provision for loan and lease losses decreased to $423
million in 2011 compared to $1.5 billion in 2010. In addition, net
charge-offs as a percent of average loans and leases decreased to
1.49% during 2011 compared to 3.02% during 2010. At December
31, 2011, nonperforming assets as a percent of loans, leases and
other assets, including OREO (excluding nonaccrual loans held for
sale) decreased to 2.23%, compared to 2.79% at December 31,
2010. For further discussion on credit quality, see the Credit Risk
Management section in MD&A.
Capital Summary
The Bancorp’s capital ratios exceed the “well-capitalized” guidelines
as defined by the Board of Governors of the Federal Reserve
System. As of December 31, 2011, the Tier I capital ratio was
11.91%, the Tier I leverage ratio was 11.10% and the total risk-
based capital ratio was 16.09%.