Fifth Third Bank 2012 Annual Report Download - page 70

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
68 Fifth Third Bancorp
The following table provides a rollforward of portfolio nonperforming loans and leases, by portfolio segment:
TABLE 49: ROLLFORWARD OF PORTFOLIO NONPERFORMING LOANS AND LEASES
Residential
For the year ended December 31, 2012 ($ in millions) Commercial Mortgage Consumer Total
Beginning Balance $ 1,058 275 105 1,438
Transfers to nonperforming 560 318 354 1,232
Transfers to performing (22) (45) (73) (140)
Transfers to performing (restructured) (31) (57) (90) (178)
Transfers to held for sale (13) - - (13)
Loans sold from portfolio (36) (4) - (40)
Loan paydowns/payoffs (466) (121) (12) (599)
Transfers to other real estate owned (108) (71) - (179)
Charge-offs (297) (58) (194) (549)
Draws/other extensions of credit 52 - 5 57
Ending Balance $ 697 237 95 1,029
For the year ended December 31, 2011 ($ in millions)
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
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 loans modified as part
of a TDR are maintained on accrual status provided there is a
sustained payment history of six months or greater prior to the
modification in accordance with the modified terms and all
remaining contractual payments under the modified terms are
reasonably assured of collection. TDRs of commercial loans and
credit card loans that do not have a sustained payment history of six
months or greater in accordance with the modified terms remain on
nonaccrual status until a six-month payment history is sustained.
During the third quarter of 2012, the OCC, a national bank
regulatory agency, issued interpretive guidance that requires Chapter
7 non-reaffirmed loans to be accounted for as nonperforming
TDRs and collateral dependent loans regardless of their payment
history and capacity to pay in the future. The Bancorp’s banking
subsidiary is a state chartered bank and therefore is not subject to
guidance of the OCC, however, the Bancorp is closely following
these developments and is in communication with its regulators to
evaluate their position on this new guidance. At December 31, 2012,
the Bancorp had loans with unpaid principal balances totaling
approximately $175 million that could potentially be impacted by
this guidance, of which approximately 87% are current with their
original contractual payments and approximately one third of which
are already classified as TDRs. This guidance, if fully adopted by the
Bancorp’s regulators, would result in additional charge-offs of
approximately $70 million as well as additional TDRs and possible
increases to nonperforming assets.
The following table summarizes TDRs by loan type and delinquency status:
TABLE 50: PERFORMING AND NONPERFORMING TDRs
Performing
30-89 Days 90 Days or
A
s of December 31, 2012 ($ in millions) Current Past Due More Past Due Nonaccrual Total
Commercial $ 431 - - 177 $ 608
Residential mortgages(a) 1,006 70 99 123 1,298
Home equity 377 35 - 23 435
Credit card 35 - - 39 74
A
utomobile and other consumer loans and leases 31 2 - 2 35
Total $ 1,880 107 99 364 $ 2,450
(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, 2012, these advances represented $107 of current loans, $26 of 30-89 days past due loans and $79 of 90 days or more past due loans.