Fifth Third Bank 2011 Annual Report Download - page 59

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fifth Third Bancorp 57
Consumer Portfolio
The Bancorp’s consumer portfolio is materially comprised of three
categories of loans: residential mortgage, home equity, and
automobile. The Bancorp has identified certain categories within
these loan types which it believes represent a higher level of risk
compared to the rest of the consumer loan portfolio due to high
loan amount to collateral value. The Bancorp does not update LTV
ratios for the consumer portfolio subsequent to origination except
as part of the charge-off process for real estate secured loans.
Residential Mortgage Portfolio
The Bancorp manages credit risk in the mortgage portfolio through
conservative underwriting and documentation standards and
geographic and product diversification. The Bancorp may also
package and sell loans in the portfolio or may purchase mortgage
insurance for the loans sold in order to mitigate credit risk.
The Bancorp does not originate mortgage loans that permit
customers to defer principal payments or make payments that are
less than the accruing interest. The Bancorp originates both fixed
and adjustable rate residential mortgage loans. Resets of rates on
adjustable rate mortgages are not expected to have a material impact
on credit costs in the current interest rate environment, as
approximately $1.2 billion of adjustable rate residential mortgage
loans will have rate resets during the next twelve months, with
approximately three percent of those resets expected to experience
an increase in monthly payments in comparison to the monthly
payment at the time of origination.
Certain residential mortgage products have contractual features
that may increase credit exposure to the Bancorp in the event of a
decline in housing values. These types of mortgage products offered
by the Bancorp include loans with high LTV ratios, multiple loans
on the same collateral that when combined result in an LTV greater
than 80% and interest-only loans. The Bancorp monitors residential
mortgage loans with greater than 80% LTV ratio and no mortgage
insurance as it believes these loans represent a higher level of risk.
The following table provides an analysis of the residential mortgage
portfolio loans outstanding, excluding held for sale, by LTV at
origination:
TABLE 34: RESIDENTIAL MORTGAGE PORTFOLIO LOANS BY LTV AT ORIGINATION
2011 2010
Weighted
Average LTV's
Weighted
A
verage LTV's
A
s of December 31 ($ in millions) Outstanding Outstanding
LTV ≤ 80 % $ 7,876 66.6 % 6,419 68.0 %
LTV > 80%, with mortgage insurance 1,030 92.7 871 93.0
LTV > 80%, no mortgage insurance 1,766 95.6 1,666 95.4
Total $ 10,672 73.9 % 8,956 75.5 %
The following tables provide analysis of the residential mortgage portfolio loans outstanding, excluding held for sale, with a greater than 80% LTV
ratio and no mortgage insurance as of December 31, 2011 and 2010:
TABLE 35: RESIDENTIAL MORTGAGE PORTFOLIO LOANS, LTV GREATER THAN 80%, NO MORTGAGE INSURANCE
A
s of December 31, 2011 ($ in millions)
For the Year Ended
December 31, 2011
90 Days
Net Charge-offs By State: Outstanding Past Due Nonaccrual
Ohio $ 600 6 25 15
Michigan 305 1 14 13
Florida 283 2 27 29
North Carolina 123 - 4 7
Indiana 111 1 4 2
Illinois 122 1 3 2
Kentucky 84 1 3 1
A
ll other states 138 1 5 7
Total $ 1,766 13 85 76
TABLE 36: RESIDENTIAL MORTGAGE LOANS OUTSTANDING, LTV GREATER THAN 80%, NO MORTGAGE INSURANCE
A
s of December 31, 2010 ($ in millions)
For the Year Ended
December 31, 2010
90 Days
Net Charge-offs By State: Outstanding Past Due Nonaccrual
Ohio $ 569 3 24 22
Michigan 294 2 20 21
Florida 294 4 31 56
North Carolina 131 1 7 12
Indiana 111 1 4 6
Kentucky 78 1 3 2
Illinois 67 - 1 4
A
ll other states 122 3 5 8
Total $ 1,666 15 95 131