Fifth Third Bank 2009 Annual Report Download - page 63

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fifth Third Bancorp 61
Private Mortgage Insurance
For certain mortgage loans originated by the Bancorp, borrowers
may be required to obtain private mortgage insurance (PMI)
provided by third-party insurers. In some instances, these insurers
cede a portion of the PMI premiums to the Bancorp, and the
Bancorp provides reinsurance coverage within a specified range of
the total PMI coverage. The Bancorp’s reinsurance coverage
typically ranges from 5% to 10% of the total PMI coverage. The
Bancorp's maximum exposure in the event of nonperformance by
the underlying borrowers is equivalent to the Bancorp's total
outstanding reinsurance coverage, which was $182 million and
$170 million, respectively, at December 31, 2009 and 2008. As of
December 31, 2009 and 2008, the Bancorp maintained a reserve
of $44 million and $13 million, respectively, related to exposures
within the reinsurance portfolio. During the second quarter of
2009, the Bancorp suspended the practice of providing
reinsurance of private mortgage insurance for newly originated
mortgage loans.
CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
The Bancorp has certain obligations and commitments to make
future payments under contracts. The aggregate contractual
obligations and commitments at December 31, 2009 are shown in
Table 52. As of December 31, 2009, the Bancorp has
unrecognized tax benefits that, if recognized, would impact the
effective tax rate in future periods. Due to the uncertainty of the
amounts to be ultimately paid as well as the timing of such
payments, all uncertain tax liabilities that have not been paid have
been excluded from the Contractual Obligations and Other
Commitments table. Further detail on the impact of income taxes
is located in Note 20 of the Notes to Consolidated Financial
Statements.
(a) Includes demand, interest checking, savings, money market and foreign office deposits. For additional information, see the Deposits discussion in the Balance Sheet Analysis section of
Management’s Discussion and Analysis.
(b) Includes other time and certificates $100,000 and over. For additional information, see the Deposits discussion in the Balance Sheet Analysis section of Management’s Discussion
and Analysis.
(c) In the banking industry, interest-bearing obligations are principally used to fund interest-earning assets. As such, interest charges on contractual obligations were excluded from
reported amounts, as the potential cash outflows would have corresponding cash inflows from interest-earning assets. See Note 15 of the Notes to Consolidated Financial Statements
for additional information on these debt instruments.
(d) See Note 11 of the Notes to Consolidated Financial Statements for additional information on forward contracts to sell residential mortgage loans.
(e) Includes federal funds purchased and borrowings with an original maturity of less than one year. For additional information, see Note 14 of the Notes to Consolidated Financial
Statements.
(f) Includes rental commitments.
(g) Includes low-income housing, historic tax investments and market tax credits.
(h) See Note 21 of the Notes to Consolidated Financial Statements for additional information on pension obligations.
(i) Represents agreements to purchase goods or services and includes commitments to various general contractors for work related to banking center construction.
(j) Commitments to extend credit are agreements to lend, typically having fixed expiration dates or other termination clauses that may require payment of a fee. Many of the commitments
to extend credit may expire without being drawn upon. The total commitment amounts do not necessarily represent future cash flow requirements. For additional information, see
Note 16 of the Notes to Consolidated Financial Statements.
(k) Letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. For additional information, see Note 16 of the Notes to
Consolidated Financial Statements.
TABLE 52: CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
A
s of December 31, 2009 ($ in millions)
Less than
1 year 1-3 years 3-5 years
Greater than
5 years Total
Contractually obligated payments due by period:
Deposits without a stated maturity (a) $64,139 - - - 64,139
Time deposits (b) 13,606 835 61 5,664 20,166
Long-term debt (c) 815 1,029 1,839 6,824 10,507
Forward contracts to sell mortgage loans (d) 3,633 - - - 3,633
Short-term borrowings (e) 1,597 - - - 1,597
Noncancelable lease obligations (f) 91 168 150 497 906
Partnership investment commitments (g) 235 - - - 235
Pension obligations (h) 19 38 33 73 163
Purchase obligations (i) 43 9 - - 52
Capital lease obligations 14 27 3 - 44
Total contractually obligated payments due by period $84,192 2,106 2,086 13,058 101,442
Other commitments by expiration period:
Commitments to extend credit (j) $25,411 17,270 - - 42,681
Letters of credit (k) 2,459 3,498 444 256 6,657
Total other commitments by expiration period $27,870 20,768 444 256 49,338