Fifth Third Bank 2011 Annual Report Download - page 65

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fifth Third Bancorp 63
The following table provides a rollforward of portfolio nonperforming loans and leases, by portfolio segment:
TABLE 46: ROLLFORWARD OF PORTFOLIO NONPERFORMING LOANS AND LEASES
Residential
For the year ended December 31, 2011 ($ in millions) Commercial Mortgage Consumer Total
Beginning Balance $ 1,214 268 198 1,680
Transfers to nonperforming 1,075 396 456 1,927
Transfers to performing (23) (45) (85) (153)
Transfers to performing (restructured) (1) (74) (95) (170)
Transfers from held for sale 4 - - 4
Transfers to held for sale (92) - - (92)
Loans sold from portfolio (57) (1) (21) (79)
Loan paydowns/payoffs (425) (85) (13) (523)
Transfers to other real estate owned (110) (79) - (189)
Charge-offs (554) (106) (342) (1,002)
Draws/other extensions of credit 27 1 7 35
Ending Balance $ 1,058 275 105 1,438
For the year ended December 31, 2010
Beginning Balance $ 2,392 412 143 2,947
Transfers to nonperforming 1,666 624 551 2,841
Transfers to performing (32) (67) (46) (145)
Transfers to performing (restructured) (10) (69) (61) (140)
Transfers to held for sale (386) (205) - (591)
Loans sold from portfolio (48) - - (48)
Loan paydowns/payoffs (773) (88) (42) (903)
Transfers to other real estate owned (290) (163) (1) (454)
Charge-offs (1,364) (176) (358) (1,898)
Draws/other extensions of credit 59 - 12 71
Ending Balance $ 1,214 268 198 1,680
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. Typically, these
modifications reduce the loan interest rate, extend the loan term, or
in limited circumstances, reduce the principal balance of the loan.
These modifications are classified as TDRs.
At the time of modification, the Bancorp maintains certain
consumer loan TDRs (including residential mortgage loans, home
equity loans, and other consumer loans) on accrual status, provided
there is reasonable assurance of repayment and performance
according to the modified terms based upon a current, well-
documented credit evaluation. Commercial loan TDRs and credit
card TDRs are classified as nonaccrual loans and are typically
returned to accrual status upon a six month period of sustained
performance under the restructured terms. The following table
summarizes TDRs by loan type and delinquency status.
TABLE 47: PERFORMING AND NONPERFORMING TDRs
Performing
30-89 Days 90 Days or
As of December 31, 2011 ($ in millions) Current Past Due More Past Due Nonaccrual Total
Commercial $ 388 2 - 160 $ 550
Residential mortgages(a) 978 72 67 141 1,258
Home equity 372 39 - 29 440
Credit card 44 - - 48 92
Other consumer 38 2 - 2 42
Total $ 1,820 115 67 380 $ 2,382
(a) Information includes advances made pursuant to servicing agreements for GNMA mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the
Department of Veterans Affairs. As of December 31, 2011, these advances represented $64 of current loans, $16 of 30-89 days past due loans and $46 of 90 days or more past due loans.
Analysis of Net Loan Charge-offs
Net charge-offs were 149 bps and 302 bps of average loans and
leases for the years ended December 31, 2011 and 2010,
respectively. Table 48 provides a summary of credit loss experience
and net charge-offs as a percentage of average loans and leases
outstanding by loan category.
The ratio of commercial loan and lease net charge-offs to
average commercial loans and leases decreased to 126 bps during
2011 compared to 310 bps in 2010, as a result of decreases in net
charge-offs of $810 million. Decreases in net charge-offs were
realized across all commercial loan types and were primarily due to
improvements in general economic conditions and previous actions
taken by the Bancorp to address problem loans. Actions taken by
the Bancorp include suspending homebuilder and developer lending
in 2007 and non-owner occupied commercial real estate lending in
2008 and tightened underwriting standards across all commercial
loan product offerings. In addition, the Bancorp implemented other
loss mitigation strategies that included the previously mentioned sale
of troubled loans during the third quarter of 2010. Net charge-offs
for 2011 related to non-owner occupied commercial real estate were
$211 million compared to $625 million in 2010. Net charge-offs
related to non-owner occupied commercial real estate are recorded
in the commercial mortgage loans and commercial construction
loans captions in Table 48. Net charge-offs on these loans
represented 38% of total commercial loan and lease net charge-offs
in 2011 and 46% in 2010.