Fifth Third Bank 2014 Annual Report Download - page 139

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
137 Fifth Third Bancorp
million and $83 million for the years ended December 31, 2014,
2013 and 2012, respectively.
As part of the initial sale, Vantiv Holding, LLC assumed loans
totaling $1.25 billion owed to the Bancorp, which were refinanced
in 2010 into a larger syndicated loan structure that included the
Bancorp. The outstanding balance of loans to Vantiv Holding, LLC
was $204 million and $348 million at December 31, 2014 and 2013,
respectively. Interest income relating to the loans was $5 million, $7
million and $11 million, respectively, for the years ended December
31, 2014, 2013 and 2012 and is included in interest and fees on
loans and leases in the Consolidated Statements of Income. Vantiv
Holding, LLC’s line of credit was $50 million as of December 31,
2014 and 2013. Vantiv Holding, LLC did not draw upon its line of
credit during the years ended December 31, 2014 or 2013.
20. INCOME TAXES
The Bancorp and its subsidiaries file a consolidated federal income tax return. The following is a summary of applicable income taxes included in
the Consolidated Statements of Income for the years ended December 31:
($ in millions) 2014 2013 2012
Current income tax expense:
U.S. Federal income taxes $ 424 494 327
State and local income taxes 34 23 38
Foreign income taxes 8 2 -
Total current tax expense 466 519 365
Deferred income tax expense (benefit):
U.S. Federal income taxes 71 232 252
State and local income taxes 9 23 19
Foreign income taxes (1) (2) -
Total deferred income tax expense 79 253 271
A
pplicable income tax expense $ 545 772 636
The following is a reconciliation between the statutory U.S. Federal income tax rate and the Bancorp’s effective tax rate for the years ended
December 31:
2014 2013 2012
Statutory tax rate 35.0 %35.0 35.0
Increase (decrease) resulting from:
State taxes, net of federal benefit 1.4 1.2 1.7
Tax-exempt income (1.4) (1.1) (2.1)
Credits (8.1) (6.0) (6.7)
Unrealized stock-based compensation benefits - 0.3 0.8
Other, net - 0.3 0.1
Effective tax rate 26.9 %29.7 28.8
Tax-exempt income in the rate reconciliation table includes interest
on municipal bonds, interest on tax-exempt lending,
income/charges on life insurance policies held by the Bancorp, and
certain gains on sales of leases that are exempt from federal
taxation.
The following table provides a reconciliation of the beginning and ending amounts of the Bancorp’s unrecognized tax benefits:
($ in millions) 2014 2013 2012
Unrecognized tax benefits at January 1 $ 7 18 14
Gross increases for tax positions taken during prior period 2 1 6
Gross decreases for tax positions taken during prior period - (7) (3)
Gross increases for tax positions taken during current period 2 1 2
Settlements with taxing authorities - (5) -
Lapse of applicable statute of limitations - (1) (1)
Unrecognized tax benefits at December 31(a) $ 11 7 18
(a) Amounts represent unrecognized tax benefits that if recognized would affect the annual effective tax rate.
A
The Bancorp’s unrecognized tax benefits as of December 31, 2014,
2013 and 2012 relate to state income tax exposures from taking tax
positions where the Bancorp believes it is likely that, upon
examination, a state will take a position contrary to the position
taken by the Bancorp.
While it is reasonably possible that the amount of the
unrecognized tax benefits with respect to certain of the Bancorp’s
uncertain tax positions could increase or decrease during the next 12
months, the Bancorp believes it is unlikely that its unrecognized tax
benefits will change by a material amount during the next 12
months.