Fifth Third Bank 2013 Annual Report Download - page 70

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
68 Fifth Third Bancorp
exposure is managed by having established country exposure limits.
The Bancorp’s total exposure to European domiciled or owned
businesses and European financial institutions was $3.3 billion and
funded exposure was $1.8 billion as of December 31, 2013.
Additionally, the Bancorp was within its established country
exposure limits for all European countries.
Certain European countries have been experiencing increased
levels of stress throughout 2012 and 2013 including Greece, Ireland,
Italy, Portugal and Spain. The Bancorp’s total exposure to
businesses domiciled or owned by companies and financial
institutions in these countries was approximately $212 million and
funded exposure was $103 million as of December 31, 2013.
The following table provides detail about the Bancorp’s exposure to all European domiciled and owned businesses and financial
i
nstitutions as o
f
December 31, 2013:
TABLE 48: EUROPEAN EXPOSURE
Sovereigns Financial Institutions
Non-Financial
Institutions Total
Total Funded Total Funded Total Funded Total Funded
($ in millions) Exposure Exposure Exposure Exposure Exposure Exposure Exposure(a) Exposure
Peripheral Europe(b) $ - - 10 - 202 103 212 103
Other Eurozone(c) - - 56 14 2,031 1,161 2,087 1,175
Total Eurozone - - 66 14 2,233 1,264 2,299 1,278
Other Europe(d) - - 83 23 889 500 972 523
Total Europe $ - - 149 37 3,122 1,764 3,271 1,801
(a) Total exposure includes funded exposure and unfunded commitments, reported net of collateral.
(b) Peripheral Europe includes Greece, Ireland, Italy, Portugal and Spain.
(c) Eurozone includes countries participating in the European common currency (Euro).
(d) Other Europe includes European countries not part of the Euro (primarily the United Kingdom and Switzerland).
Analysis of 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; restructured commercial and credit card
loans which have not yet met the requirements to be classified as a
performing asset; restructured consumer loans which 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 other
assets, including OREO and other repossessed property. A
summary of nonperforming assets is included in Table 49.
Residential mortgage loans are typically placed on nonaccrual
status when principal and interest payments have become past due
150 days unless such loans are both well secured and in the process
of collection. Residential mortgage loans may stay on nonaccrual
status for an extended time as the foreclosure process typically lasts
longer than 180 days. During the fourth quarter of 2013, the
Bancorp modified its nonaccrual policy for home equity loans and
lines of credit. Home equity loans and lines of credit are reported on
nonaccrual status if principal or interest has been in default for 90
days or more unless the loan is both well secured and in the process
of collection. Home equity loans and lines of credit that have been
in default for 60 days or more are also reported on nonaccrual status
if the senior lien has been in default 120 days or more, unless the
loan is both well secured and in the process of collection. As a result
of the modification of the nonaccrual policy for home equity loans
and lines of credit, $46 million of home equity loans and lines of
credit were reclassified from accrual to nonaccrual status during the
fourth quarter of 2013. Residential mortgage, home equity,
automobile and other consumer loans and leases that have been
modified in a TDR and subsequently become past due 90 days are
placed on nonaccrual status unless the loan is both well secured and
in the process of collection. Commercial and credit card loans that
have been modified in a TDR are classified as nonaccrual unless
such loans have a sustained repayment performance of six months
or greater and the Bancorp is reasonably assured of repayment in
accordance with the restructured terms. Well secured loans are
collateralized by perfected security interests in real and/or personal
property for which the Bancorp estimates proceeds from sale would
be sufficient to recover the outstanding principal and accrued
interest balance of the loan and pay all costs to sell the collateral.
The Bancorp considers a loan in the process of collection if
collection efforts or legal action is proceeding and the Bancorp
expects to collect funds sufficient to bring the loan current or
recover the entire outstanding principal and accrued interest
balance. When a loan is placed on nonaccrual status, the accrual of
interest, amortization of loan premiums, accretion of loan discounts
and amortization or accretion of deferred net loan fees or costs are
discontinued and previously accrued, but unpaid interest is reversed.
Commercial loans on nonaccrual status are reviewed for impairment
at least quarterly. If the principal or a portion of the principal is
deemed a loss, the loss amount is charged off to the ALLL.
Total nonperforming assets, including loans held for sale, were
$986 million at December 31 2013 compared to $1.3 billion at
December 31, 2012. At December 31, 2013, $6 million of
nonaccrual loans, consisting primarily of real estate secured loans,
were held for sale, compared to $29 million at December 31, 2012.
Total nonperforming assets, including loans held for sale, as a
percentage of total loans, leases and other assets, including OREO
as of December 31, 2013 were 1.10%, compared to 1.48% as of
December 31, 2012. Excluding nonaccrual loans held for sale,
nonperforming assets as a percentage of portfolio loans, leases and
other assets, including OREO were 1.10% as of December 31,
2013, compared to 1.49% as of December 31, 2012. The
composition of nonaccrual loans and leases continues to be
concentrated in real estate as 60% of nonaccrual loans and leases
were secured by real estate as of December 31, 2013 compared to
67% as of December 31, 2012.
Commercial nonperforming loans and leases were $464 million
at December 31, 2013, a decrease of $262 million from December
31, 2012 due primarily to the impact of loss mitigation actions and
modest improvement in general economic conditions. Excluding
commercial nonperforming loans and leases held for sale,
commercial nonperforming loans and leases at December 31, 2013
decreased $239 million compared to December 31, 2012.
Consumer nonperforming loans and leases were $293 million
at December 31, 2013, a decrease of $39 million from December 31,
2012. The decrease is primarily due to a decline in new nonaccrual
levels due to modest improvement in general economic conditions
in 2013. Home equity nonaccrual levels increased $39 million from
the prior year due to the aforementioned nonaccrual policy change