Fifth Third Bank 2008 Annual Report Download - page 91

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fifth Third Bancorp 89
21. OTHER NONINTEREST INCOME AND OTHER NONINTEREST EXPENSE
The major components of other noninterest income and other noninterest expense for the years ended December 31:
($ in millions) 2008 2007 2006
Other noninterest income:
Gain on redemption of Visa, Inc. ownership shares $273 --
CitFed litigation settlement 76 --
Cardholder fees 58 56 49
Consumer loan and lease fees 51 46 47
Operating lease income 47 32 26
Insurance income 36 32 28
Banking center income 31 29 22
Gain (loss) on loan sales (11) 25 17
Loss on sale of other real estate owned (60) (14) (8)
Bank owned life insurance income (loss) (156) (106) 86
Other 18 53 32
Total $363 153 299
Other noninterest expense:
Loan processing $188 119 93
Marketing 102 84 78
Professional services fees 102 54 41
Provision for unfunded commitments and letters of credit 98 16 5
FDIC insurance and other taxes 73 31 39
Affordable housing investments 67 57 42
Intangible asset amortization 56 42 45
Travel 54 54 52
Postal and courier 54 52 49
Recruitment and education 33 41 51
Operating lease 32 22 18
Supplies 31 31 28
Visa litigation expense (share redemption) (99) 172 -
Debt and other financing agreement termination --49
Other 298 214 173
Total $1,089 989 763
22. INCOME TAXES
The Bancorp and its subsidiaries file a consolidated federal income tax return. The following is a summary of applicable income taxes included
in the Consolidated Statements of Income at December 31:
($ in millions) 2008 2007 2006
Current income tax expense:
U.S. income taxes $560 623 457
State and local income taxes 25 16 7
Non-U.S. income taxes 3--
Total current tax expense 588 639 464
Deferred income tax expense:
U.S. income taxes (1,090) (197) (24)
State and local income taxes (47) 19 3
Non-U.S. income taxes (2) - -
Total deferred tax expense (1,139) (178) (21)
Applicable income tax expense (benefit) ($551) 461 443
A reconciliation between the statutory U.S. income tax rate and the Bancorp’s effective tax rate for the years ended December 31:
2008 2007 2006
Statutory tax rate (35.0%) 35.0 35.0
Increase (decrease) resulting from:
State taxes, net of federal benefit (.5) 1.5 .4
Tax-exempt income 1.5 1.4 (2.8)
Credits (3.6) (5.0) (3.9)
Dividends on subsidiary preferred stock - (2.5) (2.2)
Goodwill 11.9 - -
Interest to taxing authority, net of tax 5.1 .1 1.1
Other, net (.1) (.5) (.4)
Effective tax rate (20.7%) 30.0 27.2
Tax-exempt income in the rate reconciliation table includes
interest on municipal bonds, interest on tax-exempt lending, and
income/charges on life insurance policies held by the Bancorp.
The effective tax rate was adversely impacted in 2008 and 2007 by
$215 million and $177 million, respectively, of charges to one of
the Bancorp’s BOLI policies. See Note 12 for a further
discussion of those charges.
The Internal Revenue Service has completed its audits for
the 2004 and 2005 income tax years. In addition to the leveraged
leases, there are several items that are currently being addressed as
part of the appeals process and are considered in arriving at the
Bancorp’s uncertain tax position liability discussed below. The
statute of limitations for federal income tax returns remains open
for tax years 2004 through 2008. In addition, limited federal