Loans and Leases

12 Months Ended

Dec. 31, 2012

Loans and Leases

5. Loans and leases

The Bancorp diversifies its loan and lease portfolio by offering a variety of loan and lease products with various payment terms and rate structures. Lending activities are concentrated within those states in which the Bancorp has banking centers and are primarily located in the Midwestern and Southeastern regions of the United States. The Bancorp's commercial loan portfolio consists of lending to various industry types. Management periodically reviews the performance of its loan and lease products to evaluate whether they are performing within acceptable interest rate and credit risk levels and changes are made to underwriting policies and procedures as needed. The Bancorp maintains an allowance to absorb loan and lease losses inherent in the portfolio. For further information on credit quality and the ALLL, see Note6.

The following table provides a summary of the total loans and leases classified by primary purpose as of December 31:
($ in millions)			2012	2011
Loans and leases held for sale:
	Commercial and industrial loans	$	39	45
	Commercial mortgage loans		13	76
	Commercial construction loans		9	17
	Residential mortgage loans		2,856	2,802
	Other consumer loans and leases		22	14
Total loans and leases held for sale		$	2,939	2,954
Portfolio loans and leases:
	Commercial and industrial loans	$	36,038	30,783
	Commercial mortgage loans		9,103	10,138
	Commercial construction loans		698	1,020
	Commercial leases		3,549	3,531
Total commercial loans and leases			49,388	45,472
	Residential mortgage loans		12,017	10,672
	Home equity		10,018	10,719
	Automobile loans		11,972	11,827
	Credit card		2,097	1,978
	Other consumer loans and leases		290	350
Total consumer loans and leases			36,394	35,546
Total portfolio loans and leases		$	85,782	81,018

Total portfolio loans and leases are recorded net of unearned income, which totaled $758 million as of December 31, 2012and $942million as of December 31, 2011. Additionally, portfolio loans and leases are recorded net of unamortized premiums and discounts, deferred loan fees and costs, and fair value adjustments (associated with acquired loans or loans designated as fair value upon origination) which totaled a net premium of $73million and$45 million as of December 31, 2012 and 2011, respectively.

The Bancorp's FHLB and FRB advances are generally secured by loans. The Bancorp had loans of $12.7 billion and $11.2 billion at December 31, 2012 and 2011, respectively, pledged at the FHLB, and loans of $30.9 billion and $26.8 billion at December 31, 2012 and 2011, respectively, pledged at the FRB.

The following table presents a summary of the total loans and leases owned by the Bancorp as of and for the years ended December 31:
					90 Days Past Due			Net
		Balance			and Still Accruing			Charge-Offs
($ in millions)		2012	2011		2012	2011		2012	2011
Commercial and industrial loans	$	36,077	30,828	$	1	4	$	165	276
Commercial mortgage loans		9,116	10,214		22	3		99	195
Commercial construction loans		707	1,037		1	1		25	85
Commercial leases		3,549	3,531		-	-		8	(2)
Residential mortgage loans		14,873	13,474		75	79		122	173
Home equity loans		10,018	10,719		58	74		157	220
Automobile loans		11,972	11,827		8	9		31	53
Credit card		2,097	1,978		30	30		74	98
Other consumer loans and leases		312	364		-	-		23	74
Total loans and leases	$	88,721	83,972	$	195	200	$	704	1,172
Less: Loans held for sale	$	2,939	2,954
Total portfolio loans and leases	$	85,782	81,018

The Bancorp engages in commercial and consumer lease products primarily related to the financing of commercial equipment and automobiles. The Bancorp had $3.0billion of direct financing leases and $1.3billion of leveraged leases at December 31, 2012compared to $2.9billion and $1.7 billion, respectively, at December 31, 2011.

Pre-tax income from leveraged leases for 2012was $37million compared to pre-tax income in 2011 of $33million. The tax effect of this income was a benefit of $6 million in 2012 and an expense of $10million in 2011.

The components of the investment in lease financing at December 31:
($ in millions)		2012	2011
Rentals receivable, net of principal and interest on nonrecourse debt	$	3,543	3,757
Estimated residual value of leased assets		760	772
Initial direct cost, net of amortization		16	16
Gross investment in lease financing		4,319	4,545
Unearned income		(758)	(942)
Net investment in lease financing(a)	$	3,561	3,603

• The accumulated allowance for uncollectible minimum lease payments was $67 million and $79million at December 31, 2012and 2011, respectively.

The Bancorp periodically reviews residual values associated with its leasing portfolio. Declines in residual values that are deemed to be other-than-temporary are recognized as a loss. The Bancorp recognized $9 million and $4 millionof residual value write-downs related to commercial leases for the years ended December 31, 2012 and 2011, respectively. The residual value write-downs related to commercial leases are recorded in corporate banking revenue in the Consolidated Statements of Income. The Bancorp recognized no residual value write-downs relating to consumer automobile leases in 2012 and 2011. At December 31, 2012, the minimum future lease payments receivable for each of the years 2013 through 2017 was $612 million, $593 million, $472 million, $389 million and $312 million, respectively.