Fifth Third Bank 2013 Annual Report Download - page 114

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
112 Fifth Third Bancorp
Nonperforming Assets
Nonperforming assets include nonaccrual loans and leases for which ultimate collectability of the full amount of the principal and/or interest is
uncertain; commercial and credit card TDRs which have not yet met the requirements to be classified as a performing asset; consumer TDRs
w
hich are 90 days past due based on the restructured terms unless the loan is both well-secured and in the process of collection; and certain othe
r
assets, including OREO and other repossessed property. The following table summarizes the Bancorp’s nonperforming loans and leases, by class,
as of December 31:
($ in millions) 2013 2012
Commercial:
Commercial and industrial loans $281 330
Commercial mortgage owner occupied loans(a) 95 125
Commercial mortgage non-owner occupied loans 48 157
Commercial construction loans 29 76
Commercial leases 5 9
Total commercial loans and leases 458 697
Residential mortgage loans 166 237
Consumer:
Home equity 93 53
A
utomobile loans 1 2
Credit card 33 39
Other consumer loans and leases - 1
Total consumer loans and leases 127 95
Total nonperforming loans and leases(b)(c) $ 751 1,029
OREO and other repossessed property(d) 229 257
(a) Excludes $21 of restructured nonaccrual loans at December 31, 2013 associated with a consolidated variable interest entity in which the Bancorp has no continuing credit risk due the risk being
assumed by a third party.
(b) Excludes $6 and $29 of nonaccrual loans held for sale at December 31, 2013 and 2012, respectively.
(c) Includes $10 of nonaccrual government insured commercial loans whose repayments are insured by the SBA at both December 31, 2013 and 2012, and $2 and $1 of restructured nonaccrual
government insured commercial loans at December 31, 2013 and 2012, respectively.
(d) Excludes $77 and $72 of OREO related to government insured loans at December 31, 2013 and 2012, respectively.
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. Within each of the
Bancorp’s loan classes, TDRs typically involve either a reduction of
the stated interest rate of the loan, an extension of the loan’s
maturity date(s) with a stated rate lower than the current market rate
for a new loan with similar risk, or in limited circumstances, a
reduction of the principal balance of the loan or the loan’s accrued
interest. Modifying the terms of loans may result in an increase or
decrease to the ALLL depending upon the terms modified, the
method used to measure the ALLL for a loan prior to modification,
and whether any charge-offs were recorded on the loan before or at
the time of modification. Refer to the ALLL section of Note 1 for
information on the Bancorp’s ALLL methodology. Upon
modification of a loan, the Bancorp measures the related
impairment as the difference between the estimated future cash
flows, discounted at the original effective yield of the loan, expected
to be collected on the modified loan and the carrying value of the
loan. The resulting measurement may result in the need for minimal
or no valuation allowance because it is probable that all cash flows
will be collected under the modified terms of the loan. In addition,
if the stated interest rate was increased in a TDR, the cash flows on
the modified loan, using the pre-modification interest rate as the
discount rate, often exceed the recorded investment of the loan.
Conversely, the Bancorp often recognizes an impairment loss as an
increase to ALLL upon a modification that reduces the stated
interest rate on a loan. If a TDR involves a reduction of the
principal balance of the loan or the loan’s accrued interest, that
amount is charged off to the ALLL. At December 31, 2013, the
Bancorp had $46 million in line of credit commitments and $40
million in letter of credit commitments to lend additional funds to
borrowers whose terms have been modified in a TDR compared to
$28 million and $25 million, respectively, at December 31, 2012.