Fifth Third Bank 2014 Annual Report Download - page 69

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
67 Fifth Third Bancorp
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. For
further information on the Bancorp’s policies related to accounting
for delinquent and nonperforming loans refer to the Nonaccrual
Loans and Leases section of Note 1 of the Notes to Consolidated
Financial Statements.
Total nonperforming assets, including loans held for sale, were
$783 million at December 31 2014 compared to $986 million at
December 31, 2013. At December 31, 2014, $39 million of
nonaccrual loans, consisting primarily of real estate secured loans,
were held for sale, compared to $6 million at December 31, 2013.
Total nonperforming assets, including loans held for sale, as a
percentage of total loans, leases and other assets, including OREO
as of December 31, 2014 were 0.86%, compared to 1.10% as of
December 31, 2013. Excluding nonaccrual loans held for sale,
nonperforming assets as a percentage of portfolio loans, leases and
other assets, including OREO were 0.82% as of December 31,
2014, compared to 1.10% as of December 31, 2013. The
composition of nonaccrual loans and leases continues to be
concentrated in real estate as 50% of nonaccrual loans and leases
were secured by real estate as of December 31, 2014 compared to
60% as of December 31, 2013.
Commercial nonperforming loans and leases were $391 million
at December 31, 2014, a decrease of $73 million from December 31,
2013 as charge-offs, loan paydowns/payoffs, loan transfers to
performing and loans sold from the portfolio outpaced new
nonaccruals. Excluding commercial nonperforming loans and leases
held for sale, commercial nonperforming loans and leases at
December 31, 2014 decreased $91 million compared to December
31, 2013.
Consumer nonperforming loans and leases were $227 million
at December 31, 2014, a decrease of $66 million from December 31,
2013 as loan pay downs/payoffs, charge-offs and transfers to
performing and OREO outpaced new nonaccrual loans. Excluding
consumer nonperforming loans and leases held for sale, consumer
nonperforming loans and leases at December 31, 2014 decreased
$81 million compared to December 31, 2013. Geographical market
conditions continue to be a large driver of nonaccrual activity as
Florida properties represent approximately 11% and seven percent
of residential mortgage and home equity balances, respectively, but
represent 32% and 15% of nonaccrual loans for each category at
December 31, 2014. Refer to Table 50 for a rollforward of the
nonperforming loans and leases.
OREO and other repossessed property was $165 million at
December 31, 2014, compared to $229 million at December 31,
2013. The Bancorp recognized $26 million and $45 million in losses
on the sale or write-down of OREO properties in 2014 and 2013,
respectively. The decrease from the prior year was primarily due to a
modest improvement in general economic conditions.
In 2014 and 2013, approximately $49 million and $71 million,
respectively, of interest income would have been recognized if the
nonaccrual and renegotiated loans and leases on nonaccrual status
had been current in accordance with their original terms. Although
these values help demonstrate the costs of carrying nonaccrual
credits, the Bancorp does not expect to recover the full amount of
interest as nonaccrual loans and leases are generally carried below
their principal balance.