Fifth Third Bank 2013 Annual Report Download - page 66

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
64 Fifth Third Bancorp
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 residential mortgage
portfolio through conservative underwriting and documentation
standards and geographic and product diversification. The Bancorp
may also package and sell loans in the portfolio.
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 $975 million of adjustable rate residential mortgage
loans will have rate resets during the next twelve months, with less
than one percent of those resets expected to experience an increase
in monthly payments in comparison to the monthly payment at the
time of origination.
Certain residential mortgage products have contractual features
that may increase credit exposure to the Bancorp in the event of a
decline in housing values. These types of mortgage products offered
by the Bancorp include loans with high LTV ratios, multiple loans
on the same collateral that when combined result in an LTV greater
than 80% and interest-only loans. The Bancorp monitors residential
mortgage loans with greater than 80% LTV ratios and no mortgage
insurance as it believes these loans represent a higher level of risk.
The following table provides an analysis of the residential mortgage portfolio loans outstanding by LTV at origination:
TABLE 38: RESIDENTIAL MORTGAGE PORTFOLIO LOANS BY LTV AT ORIGINATION
2013 2012
Weighted
Average LTV
Weighted
Average LTV
A
s of December 31 ($ in millions) Outstanding Outstanding
LTV ≤ 80% $ 9,507 65.2 % $ 8,993 65.8 %
LTV > 80%, with mortgage insurance 1,242 93.7 1,165 93.6
LTV > 80%, no mortgage insurance 1,931 95.9 1,859 95.6
Total $ 12,680 72.7 % $ 12,017 73.1 %
The following tables provide analysis of the residential mortgage portfolio loans outstanding with a greater than 80% LTV rat
i
o and no mortgage
insurance:
TABLE 39: RESIDENTIAL MORTGAGE PORTFOLIO LOANS, LTV GREATER THAN 80%, NO MORTGAGE INSURANCE
A
s of December 31, 2013 ($ in millions)
For the Year Ended
December 31, 2013
90 Days
Net Charge-offs By State: Outstanding Past Due Nonaccrual
Ohio $ 583 3 20 10
Michigan 305 2 7 5
Florida 260 1 11 3
Illinois 236 - 5 2
Indiana 120 1 4 1
North Carolina 94 - 2 -
Kentucky 83 - 3 2
A
ll other states 250 1 2 1
Total $ 1,931 8 54 24