Fifth Third Bank 2011 Annual Report Download - page 104

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
102 Fifth Third Bancorp
Based on the results of the Step 1 test, the Bancorp determined
that the fair value of the Commercial Banking, Branch Banking, and
Investment Advisors segments exceeded their respective carrying
values, and consequently, no further testing was required.
The Step 1 analysis prepared for the Bancorp’s segments
resulted in the fair values of the Commercial Banking and Branch
Banking segments exceeding their carrying values, including
goodwill, by 9% and 4% respectively, while the fair value of the
Investment Advisors segment substantially exceeded its carrying
value, including goodwill.
The long-term growth rate required to avoid failing Step 1 for
the Commercial Banking reporting unit, with all other assumptions
held constant, was 0.3%. Other key assumptions used in forecasting
cash flows for the Commercial Banking reporting unit include
commercial loan portfolio growth as well as long-term credit loss
rates, which are based on long-term historical loss rates and
management’s expectation of long-term credit quality within the
portfolio.
The long-term growth rate required to avoid failing Step 1 for
the Branch Banking reporting unit, with all other assumptions held
constant, was 1.4%. Other key assumptions used in forecasting cash
flows for the Branch Banking reporting unit include deposit growth
assumptions, forecasted spreads earned on the unit’s deposits, and
the impact of recent and anticipated regulatory changes affecting
retail banking.
The Bancorp forecasts its deposit growth based on expected
growth in loan demand as well as availability and expected use of
alternative funding sources over that period. The earnings spread
assumption on deposits is based on forward LIBOR rates and the
sensitivity of the Bancorp’s deposit rates to changes in LIBOR. The
Bancorp considered the impact of recent and anticipated regulatory
changes that impacted overdraft revenue, debit interchange revenue
and credit card revenue in 2011 and will continue to evaluate the
potential impact of these changes in 2012 and beyond. Changes in
these key assumptions and inputs to these key assumptions could
negatively impact the fair value of the Commercial Banking and
Branch Banking reporting units in future periods. These changes
would include unanticipated regulatory changes, movement in
interest rates and economic trends affecting the segments’
profitability.
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, 2011 of 3.9 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 12.
The details of the Bancorp’s intangible assets are shown in the
following table.
Gross Carrying Accumulated Valuation Net Carrying
($ in millions) Amount Amortization Allowance Amount
A
s of December 31, 2011
Mortgage servicing rights $2,520 (1,281) (558) 681
Core deposit intangibles 439 (407) - 32
Other 44 (36) - 8
Total intangible assets $3,003 (1,724) (558) 721
A
s of December 31, 2010
Mortgage servicing rights $2,284 (1,146) (316) 822
Core deposit intangibles 439 (389) - 50
Other 44 (32) - 12
Total intangible assets $2,767 (1,567) (316) 884
As of December 31, 2011, 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, 2011, 2010 and 2009 was $157 million, $181 million
and $204 million, respectively. Estimated amortization expense for
the years ending December 31, 2012 through 2016 is as follows:
Mortgage Other
($ in millions) Servicing Rights Intangible Assets Total
2012 $252 13 265
2013 193 8 201
2014 153 4 157
2015 121 2 123
2016 97 2 99