Credit Costs Weigh on Regionals.

New York-Rising credit costs and asset writedowns continued to pressure regional banks that are big players in the mortgage industry late last year.

Fifth Third Bancorp, Cincinnati, lost $2.2 billion in the fourth quarter, with a $965 million goodwill impairment charge (reflecting a drop in the firm's market capitalization) and a $729 million credit loss provision taking a toll on the firm.

The bank transferred $1.6 billion of loans, the vast majority of them backed by commercial real estate in Florida or Michigan, to its held-for-sale account, reflecting the company's desire to unload assets "exhibiting the most significant credit deterioration."

Other steps taken by the company to reduce its credit exposure include suspending the origination of residential homebuilding and development loans. The company also discontinued the production of broker-originated home-equity loans in 2007. Brokered home-equity loans still totaled $2.3 billion, or 18% of Fifth Third's consumer loan portfolio, late last year.

The company also modified $218 million of consumer loans in the fourth quarter, a move designed to increase the likelihood of repayment by borrowers.

Fifth Third also lost $96 million as a result of a mark-to-market charge against its mortgage servicing rights.

The bank said that after charge-offs, the loans that have been sold or transferred are now valued at roughly 33% of their contractual balances.