Fifth Third Bank 2014 Annual Report Download - page 65

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
63 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
ARMs are not expected to have a material impact on credit costs in
the current interest rate environment, as approximately $900 million
of adjustable rate residential mortgage loans will have rate resets
during the next twelve months. Approximately three fourths of
those resets are expected to experience an increase in rate, with an
average increase of approximately an eighth of a percent.
Certain residential mortgage products have contractual features
that may increase credit exposure to the Bancorp in the event of a
decline in housing values. These types of mortgage products offered
by the Bancorp include loans with high LTV ratios, multiple loans
on the same collateral that when combined result in a LTV greater
than 80% and interest-only loans. The Bancorp has deemed
residential mortgage loans with greater than 80% LTV ratios and no
mortgage insurance as loans that represent a higher level of risk.
The following table provides an analysis of the residential mortgage portfolio loans outstanding by LTV at origination:
TABLE 39: RESIDENTIAL MORTGAGE PORTFOLIO LOANS BY LTV AT ORIGINATION
2014 2013
Weighted
Average LTV
Weighted
Average LTV
A
s of December 31 ($ in millions) Outstanding Outstanding
LTV 80% $ 9,220 65.1 % $ 9,507 65.2 %
LTV > 80%, with mortgage insurance 1,206 93.8 1,242 93.7
LTV > 80%, no mortgage insurance 1,963 96.2 1,931 95.9
Total $ 12,389 73.0 % $ 12,680 72.7 %
The following tables provide an analysis of the residential mortgage portfolio loans outstanding with a greater than 80% LTV ratio and no mortgage
insurance:
TABLE 40: RESIDENTIAL MORTGAGE PORTFOLIO LOANS, LTV GREATER THAN 80%, NO MORTGAGE INSURANCE
A
s of December 31, 2014 ($ in millions)
For the Year Ended
December 31, 2014
90 Days
By State: Outstanding Past Due Nonaccrual Net Charge-offs
Ohio $ 509 1 10 22
Illinois 293 1 4 3
Michigan 265 1 5 11
Florida 247 1 5 3
Indiana 126 1 2 3
North Carolina 100 1 1 -
Kentucky 78 - 1 2
A
ll other states 345 - 2 2
Total $ 1,963 6 30 46
(a)
(a) Includes $34 in charge-offs related to the transfer of $720 of restructured residential mortgage loans from the portfolio to loans held for sale during the fourth quarter of 2014.