Fifth Third Bank 2011 Annual Report Download - page 52

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
50 Fifth Third Bancorp
current market conditions. Interest checking deposits increased $1.8
billion, or 10%, primarily due to an increase in new accounts from
the Preferred Checking Program introduced in February 2011 and
growth from maturing certificates of deposits. Savings deposits
increased $853 million, or four percent, primarily due to growth
from maturing certificates of deposits and the impact of the
relationship savings program. Other time deposits decreased $3.1
billion, or 40%, compared to December 31, 2010, primarily as a
result of continued runoff of certificates of deposits due to the low
interest rate environment, as customers have opted to maintain
balances in more liquid transaction accounts.
Included in core deposits are foreign office deposits, which are
primarily Eurodollar sweep accounts from the Bancorp’s
commercial customers. These accounts bear interest rates at slightly
higher than money market accounts and unlike repurchase
agreements the Bancorp does not have to pledge collateral. Foreign
office deposits decreased $471 million, or 13%, from December 31,
2010 due to a reduction in sweep activity from commercial demand
deposits.
The Bancorp uses certificates of deposit $100,000 and over, as
a method to fund earning asset growth. At December 31, 2011,
certificates $100,000 and over decreased $1.2 billion, or 29%,
compared to December 31, 2010 due to continued runoff from the
low rate environment.
The following table presents average deposits for the twelve
months ending December 31:
TABLE 23: AVERAGE DEPOSITS
A
s of December 31 ($ in millions) 2011 2010 2009 2008 2007
Demand $ 23,389 19,669 16,862 14,017 13,261
Interest checking 18,707 18,218 15,070 14,191 14,820
Savings 21,652 19,612 16,875 16,192 14,836
Money market 5,154 4,808 4,320 6,127 6,308
Foreign office 3,490 3,355 2,108 2,153 1,762
Transaction deposits 72,392 65,662 55,235 52,680 50,987
Other time 6,260 10,526 14,103 11,135 10,778
Core deposits 78,652 76,188 69,338 63,815 61,765
Certificates - $100,000 and over 3,656 6,083 10,367 9,531 6,466
Other 7 6 157 2,067 1,393
Total average deposits $ 82,315 82,277 79,862 75,413 69,624
On an average basis, core deposits increased $2.5 billion, or three
percent, compared to December 31, 2010 due to increases in
demand deposits of $3.7 billion, interest checking of $489 million
and savings deposits of $2.0 billion, partially offset by a decrease in
other time deposits of $4.3 billion. This activity was the result of
the migration of other time deposits and certificates of deposits
greater than $100,000 into transaction accounts, due to the impact
of historically low rates and excess customer liquidity and the
reasons discussed above.
Borrowings
Total borrowings increased $1.9 billion, or 16%, from December
31, 2010 due primarily to an increase in other short-term
borrowings. As of December 31, 2011, total borrowings as a
percentage of interest-bearing liabilities was 19% compared to 16%
at December 31, 2010.
TABLE 24: BORROWINGS
A
s of December 31 ($ in millions) 2011 2010 2009 2008 2009
Federal funds purchased $ 346 279 182 287 4,427
Other short-term borrowings 3,239 1,574 1,415 9,959 4,747
Long-term debt 9,682 9,558 10,507 13,585 12,857
Total borrowings $ 13,267 11,411 12,104 23,831 22,031
Other short-term borrowings increased $1.7 billion, or 106%, from
December 31, 2010 driven by an increase of $1.5 billion in short-
term FHLB borrowings due to the runoff of certificates of deposits
greater than $100,000. Long-term debt increased $124 million, or
one percent, from December 31, 2010 due to the issuance of $1.0
billion in senior notes during the first quarter of 2011 and a $375
million increase in structured repurchase agreements. The increase
in long-term debt was partially offset by the redemption of $519
million of certain trust preferred securities during 2011, the
redemption of a $500 million long-term FHLB advance during the
third quarter of 2011, and pay-downs related to previously
consummated home equity and auto loan securitizations. In
addition the Bancorp purchased $85 million of outstanding home
equity securitization debt from the market in 2011 which was
accounted for as an extinguishment of debt. For further information
on the Bancorp’s previous securitization activity refer to Note 11 of
the Notes to the Consolidated Financial Statements. During 2011,
the Bancorp recorded an $8 million gain on extinguishment of long-
term debt within other noninterest expense in the Consolidated
Statements of Income.