result of the Bancorp’s foreclosure, during the fourth quarter of 2010, on a commercial loan collateralized by individual consumer loans with a carrying value of $78 million that were classified as nonaccrual loans at December 31, 2010. Consumer restructured loans on accrual status totaled $1.6 billion and $1.4 billion as of December 31, 2010 and 2009, respectively, driven by an increased volume of restructured loans. As of December 31, 2010, redefault rates on restructured residential mortgage, home equity loans and credit card loans were 27%, 18% and 20%, respectively. 

Repossessed personal property and OREO increased from $297 million at December 31, 2009 to $494 million at December 31, 2010, driven by higher levels of foreclosures on commercial mortgage loans. At December 31, 2010 OREO totaled $467 million and included $351 million of commercial assets and $116 million of consumer assets. Properties in Michigan and Florida accounted for 49% of foreclosed real estate at December 31, 2010. 

In 2010 and 2009, approximately $10 million and $20 million, respectively, of interest income was recognized on a cash basis for loans on nonaccrual. In 2010 and 2009, additional interest income of approximately $206 million and $236 million, respectively, would have been recorded if the nonaccrual and renegotiated loans and leases on nonaccrual status had been current in accordance with the original terms. Although this value helps demonstrate the costs of carrying nonaccrual credits, the Bancorp does not expect to recover the full amount of interest. 

## Analysis of Net Loan Charge-offs 

Net charge-offs were 302 bp of average loans and leases for 2010, compared to 320 bp for 2009. Table 39 provides a summary of credit loss experience and net charge-offs as a percentage of average loans and leases outstanding by loan category. 

The ratio of commercial loan net charge-offs to average commercial loans outstanding decreased to 3.10% in 2010 compared to 3.27% in 2009. This improvement was primarily due to actions taken by the Bancorp to address problem loans, reflected by significant net charge-offs recorded in 2008 and 2009 and the impact of loss mitigation activities such as suspending home builder and developer lending and non-owner occupied commercial real estate lending in 2007 and 2008, respectively, and tighter underwriting standards implemented on commercial loan products over the past three years. Net charge-offs for 2010 included $625 million related to non-owner occupied commercial real-estate, a decrease from $721 million in 2009. Charge-offs on these loans represented 46% of all commercial net charge-offs in 2010 and 2009. Florida and Michigan continued to experience the most stress, accounting for approximately 48% of the total net 

charge-offs in the commercial loan product portfolio in 2010 compared to 44% in 2009. 

The ratio of consumer loan net charge-offs to average consumer loans outstanding decreased to 2.92% in 2010 compared to 3.10% in 2009. Compared to 2009, total consumer net charge-offs decreased $54 million to $964 million in 2010. Residential mortgage loan net charge-offs increased $82 million to $439 million during 2010. The ratio of residential mortgage net charge-offs to average residential mortgage loans increased from 4.15% in 2009 to 5.49% in 2010. These increases were primarily due to $123 million in charge-offs taken on $228 million of portfolio residential mortgage loans sold during the third quarter of 2010. The Bancorp’s Florida and Michigan markets continue to experience the most stress as residential mortgage loan charge-offs in these states accounted for 72% of residential mortgage net charge-offs during 2010. 

Home equity net charge-offs decreased $58 million to $264 million during 2010. The ratio of home equity net charge-offs to average home equity loans decreased from 2.57% in 2009 to 2.20% in 2010. These decreases are primarily due to a $33 million decrease in net charge-offs on the brokered home equity portfolio and a $20 million decrease in net charge-offs in the Florida and Michigan markets on home equity products originated by the Bancorp. Management responded to the performance of the brokered home equity portfolio by eliminating this channel of origination at the end of 2007. In addition, management actively manages lines of credit and makes reductions in lending limits when it believes it is necessary based on FICO score deterioration and property devaluation. 

Automobile loan net charge offs decreased $60 million to $88 million in 2010. The ratio of automobile loan net charge-offs to average automobile loans was .85% for 2010, a decrease of 83 bp compared to 2009. These decreases are the result of improvements in delinquencies and loss severity as well as improvements made in underwriting over the past three years. 

Credit card net charge-offs decreased $15 million to $155 million in 2010. The net charge-off ratio on credit card balances decreased from 8.87% in 2009 to 8.28% in 2010. The decreases from the prior year are primarily due to the Bancorp actively managing open credit card balances and a decrease in delinquency trends throughout 2010 as general economic conditions began to show signs of improvement. Management expects trends in the charge-off ratio on credit card balances to be consistent with general economic trends, such as unemployment and personal bankruptcy filings. The Bancorp employs a risk-adjusted pricing methodology to help ensure adequate compensation is received for those products that have higher credit costs. 

