Fifth Third Bank 2009 Annual Report Download - page 82

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
80 Fifth Third Bancorp
of the Step 1 test, the Bancorp determined that the fair value of
the Commercial Banking, Branch Banking, and Investment
Advisors reporting units exceeded their respective carrying values,
and consequently no further testing was required.
On June 30, 2009, the Bancorp completed the Processing
Business Sale, which resulted in a $212 million reduction of
goodwill for the Bancorp. See Note 18 for further information
regarding the Processing Business Sale.
On June 6, 2008, the Bancorp acquired First Charter, which
resulted in the recognition of $1.1 billion of goodwill.
During the fourth quarter of 2008, the Bancorp determined
that the fair value of certain reporting units had more-likely-than-
not decreased below their carrying values and therefore an interim
impairment test was performed as of December 31, 2008. The
Bancorp determined that the Commercial Banking and Consumer
Lending reporting units’ goodwill carrying amounts exceeded their
associated implied fair values by $750 million and $215 million,
respectively. The resulting $965 million goodwill impairment
charge was recorded in the fourth quarter of 2008 and represents
the total amount of accumulated impairment losses as of
December 31, 2009 and 2008.
10. INTANGIBLE ASSETS
Intangible assets consist of servicing rights, core deposit
intangibles, customer lists, non-compete agreements and
cardholder relationships. Intangible assets, excluding servicing
rights, are amortized on either a straight-line or an accelerated
basis over their estimated useful lives and have an estimated
weighted-average life at December 31, 2009 of 2.8 years. The
Bancorp reviews intangible assets for possible impairment
whenever events or changes in circumstances indicate that
carrying amounts may not be recoverable. For more information
on servicing rights, see Note 11. The details of the Bancorp’s
intangible assets are shown in the following table.
As of December 31, 2009, all of the Bancorp’s intangible assets were being amortized. Amortization expense recognized on intangible assets,
including servicing rights, for the years ending December 31, 2009, 2008 and 2007 was $204 million, $164 million and $135 million
respectively. Estimated amortization expense, including servicing rights, for the years ending December 31, 2010 through 2014 is as follows:
($ in millions)
2010 $239
2011 178
2012 130
2013 103
2014 80
11. SALES OF RECEIVABLES AND SERVICING RIGHTS
Residential Mortgage Loan Sales
The Bancorp sold fixed and adjustable rate residential mortgage
loans during 2009 and 2008. In those sales, the Bancorp obtained
servicing responsibilities and the investors have no recourse to the
Bancorp’s other assets for failure of debtors to pay when due. The
Bancorp receives annual servicing fees based on a percentage of
the outstanding balance. The Bancorp identifies classes of servicing
assets based on financial asset type and interest rates.
For the years ended December 31, 2009, 2008 and 2007, the
Bancorp recognized gains of $485 million, $260 million and $79
million, respectively, on residential mortgage loan sales activity of
$20.6 billion, $11.5 billion and $10.1 billion, respectively.
Additionally, the Bancorp recognized $197 million, $164 million
and $145 million in servicing fees on residential mortgages for the
years ended December 31, 2009, 2008 and 2007, respectively. The
gains on sales of residential mortgages and servicing fees related to
residential mortgages are included in mortgage banking net revenue
in the Consolidated Statements of Income. Refer to Note 16 for
further information on residential mortgage loans sold with
recourse.
Automobile Loan Securitizations
During 2008, the Bancorp sold $2.7 billion of automobile loans in
three separate transactions, recognizing gains of $15 million, offset
by $26 million in losses on related hedges. Each transaction
isolated the related loans through the use of a securitization trust or
a conduit, formed as QSPEs, to facilitate the securitization process.
The QSPEs issued asset-backed securities with varying levels of
credit subordination and payment priority. The investors in these
securities have no credit recourse to the Bancorp’s other assets for
failure of debtors to pay when due. During 2008 and 2009,
required repurchases of previously transferred automobile loans
from the QSPE were immaterial to the Bancorp’s Consolidated
Financial Statements.
In each of these sales, the Bancorp obtained servicing
responsibilities, but no servicing asset or liability was recorded as
the market based servicing fee was considered adequate
compensation. For the years ended December 31, 2009 and 2008,
the Bancorp recognized $8 million and $9 million, respectively, of
servicing fees on these automobile loans. The servicing fees are
included in other noninterest income in the Consolidated
Statements of Income.
($ in millions)
Gross Carrying
Amount
Accumulated
Amortization
Valuation
Allowance
Net Carrying
Amount
As of December 31, 2009:
Mortgage servicing rights $1,987 (1,008) (280) 699
Core deposit intangibles 487 (397) - 90
Other consumer and commercial servicing rights 12 (11) - 1
Other 53 (37) - 16
Total intangible assets $2,539 (1,453) (280) 806
As of December 31, 2008:
Mortgage servicing rights $1,614 (862) (256) 496
Core deposit intangibles 487 (346) - 141
Other consumer and commercial servicing rights 13 (10) - 3
Other 61 (34) - 27
Total intangible assets $2,175 (1,252) (256) 667