Fifth Third Bank 2014 Annual Report Download - page 40

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
38 Fifth Third Bancorp
TABLE 9: CHANGES IN NET INTEREST INCOME ATTRIBUTABLE TO VOLUME AND YIELD/RATE
(a)
For the years ended December 31 2014 Compared to 2013 2013 Compared to 2012
($ in millions) Volume Yield/Rate Total Volume Yield/Rate Total
A
ssets
Interest-earning assets:
Loans and leases:
Commercial and industrial loans $ 116 (131) (15) $ 187 (175) 12
Commercial mortgage (26) (20) (46) (44) (19) (63)
Commercial construction 24 - 24 (2) 4 2
Commercial leases 1 (9) (8) 2 (13) (11)
Subtotal – commercial loans and leases 115 (160) (45) 143 (203) (60)
Residential mortgage loans (42) (4) (46) 42 (21) 21
Home equity (18) (1) (19) (31) (7) (38)
A
utomobile loans 1 (40) (39) 6 (72) (66)
Credit card 16 2 18 15 2 17
Other consumer loans and leases 9 (26) (17) 8 (8) -
Subtotal – consumer loans and leases (34) (69) (103) 40 (106) (66)
Total loans and leases 81 (229) (148) 183 (309) (126)
Securities: -
Taxable 177 27 204 38 (47) (9)
Exempt from income taxes - - - 1 - 1
Other short-term investments 2 - 2 2 - 2
Subtotal – securities and other short-term investments 179 27 206 41 (47) (6)
Total change in interest income $ 260 (202) 58 $ 224 (356) (132)
Liabilities
Interest-bearing liabilities:
Interest checking $ 3 - 3 $ - 4 4
Savings (2) (4) (6) (4) (11) (15)
Money market 16 12 28 11 1 12
Foreign office deposits 1 - 1 - - -
Other time deposits - (10) (10) (8) (10) (18)
Certificates - $100,000 and over (20) 4 (16) 33 (29) 4
Federal funds purchased (1) - (1) - - -
Other short-term borrowings (1) (2) (3) (3) - (3)
Long-term debt 106 (63) 43 (34) (50) (84)
Total change in interest expense 102 (63) 39 (5) (95) (100)
Total change in net interest income $ 158 (139) 19 $ 229 (261) (32)
(a) Changes in interest not solely due to volume or yield/rate are allocated in proportion to the absolute dollar amount of change in volume and yield/rate.
Provision for Loan and Lease Losses
The Bancorp provides as an expense an amount for probable loan
and lease losses within the loan and lease portfolio that is based on
factors previously discussed in the Critical Accounting Policies
section. The provision is recorded to bring the ALLL to a level
deemed appropriate by the Bancorp to cover losses inherent in the
portfolio. Actual credit losses on loans and leases are charged
against the ALLL. The amount of loans actually removed from the
Consolidated Balance Sheets is referred to as charge-offs. Net
charge-offs include current period charge-offs less recoveries on
previously charged-off loans and leases.
The provision for loan and lease losses increased to $315
million in 2014 compared to $229 million in 2013. The increase in
provision expense for 2014 compared to the prior year was
primarily due to an increase in net charge-offs related to certain
impaired commercial and industrial loans in the first and third
quarters of 2014 and an increase in net charge-offs related to the
transfer of certain residential mortgage loans from the portfolio to
held for sale in the fourth quarter of 2014. The impact of these
increases in charge-offs on provision expense in 2014 was partially
offset by decreases in nonperforming loans and leases and improved
delinquency metrics. The ALLL declined $260 million from $1.6
billion at December 31, 2013 to $1.3 billion at December 31, 2014.
As of December 31, 2014, the ALLL as a percent of portfolio loans
and leases decreased to 1.47%, compared to 1.79% at December 31,
2013.
Refer to the Credit Risk Management section of MD&A as
well as Note 6 of the Notes to Consolidated Financial Statements
for more detailed information on the provision for loan and lease
losses, including an analysis of loan portfolio composition,
nonperforming assets, net charge-offs, and other factors considered
by the Bancorp in assessing the credit quality of the loan and lease
portfolio and the ALLL.