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Weak Quarter at Fifth Third

Fifth Third Bancorp was among a small group of large lenders to report a decline in linked-quarter home-loan production. In addition, the rate of past-due payments increased from the first quarter on residential loans, while outstanding repurchase demands grew.

The Cincinnati-based company reported $5.9 billion in second-quarter originations.

Business fell from $6.4 billion three months earlier. Fifth Third was among a minority of mortgage lenders that have so far reported a decline in business from the first quarter.

But production climbed from $3.1 billion in the second-quarter 2011.

The third-party mortgage servicing portfolio crept higher to $62 billion as of June 30 from $60 billion as of March 31. The servicing portfolio was only $56 billion as of June 30, 2011.

Fifth Third owned $11.429 billion in residential loans, growing its investment from $11.094 billion as of the first quarter. In the same period of last year home loan holdings totaled just $9.849 trillion.

Residential delinquency of at least three months worsened to 0.70 percent from 0.66 percent. But the rate was down from 0.88 percent in the second-quarter 2011.

Home-equity loans on the balance sheet slipped to $10.377 billion from $10.493 billion and were $11.048 billion in the same quarter during 2011.

The 90-day delinquency rate on brokered HELs fell to 1.15 percent from 1.23 percent the prior quarter and 1.46 percent a year earlier. On retail-originated HELs, the rate dropped to 0.56 percent from 0.62 percent and was 0.64 percent a year earlier.

Commercial mortgages on the books were trimmed to $9.662 billion from $9.909 billion three months earlier and $10.233 billion a year earlier. The 90-day delinquency rate on commercial real estate loans fell to 0.23 percent from 0.30 percent as of March 31. But performance has deteriorated from a year prior, when the rate was 0.11 percent.

Commercial construction loan have also been reduced, to $0.822 billion in the latest quarter from $0.901 billion in the prior period and $1.778 billion in the same quarter last year. Delinquency in this category was reported as “not meaningful,” better than 0.05 percent at the end of the first quarter and 2.71 percent in the second-quarter 2011.

Outstanding repurchase claims stood at $96 million at the end of last month, up from $78 million at the end of March.

As of June 30, there was $75 million set aside for repurchase reserves, growing from $71 million three months prior. The company added $20 million to reserves during the quarter and took $16 million in charges.

Income before taxes fell to $565 million from the first quarter’s $603 million but increased from $506 million in the second quarter of last year.

There were 20,888 full-time employees at Fifth Third as of June 30. The bank reduced its headcount from 21,206 as of the end of March and 20,953 as of June 30, 2011.

Fifth Third operated 1,322 banking centers, growing from 1,315 as of the end of the first quarter.

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