NOTES TO CONSOLIDATED FINANCIAL STATEMENTS its principal shareholders, directors and executives at December 31:  The Bancorp and FTPS have various agreements in place  covering services relating to the operations of FTPS. The services  provided by the Bancorp to FTPS were required to support FTPS  as a standalone entity during the deconversion period. These  services involve transition support, including product development,  risk management, legal, accounting and general business resources.  FTPS paid the Bancorp $49 million and $76 million, respectively,  for these services for the years ended December 31, 2010 and  2009. Other services provided to FTPS by the Bancorp, which will  continue beyond the deconversion period, include treasury management, clearing, settlement, sponsorship, data center support  and office space. FTPS paid the Bancorp $34 million and $14  million, respectively, for these services for the years ended  December 31, 2010 and 2009. In addition to the previously  mentioned services, the Bancorp entered into an agreement under  which FTPS will provide processing services to the Bancorp. The  total amount of fees relating to the processing services provided to  the Bancorp by FTPS totaled $64 million and $33 million,  respectively, for the years ended December 31, 2010 and 2009. The commitments to lend are in the form of loans and  guarantees for various business and personal interests. This  indebtedness was incurred in the ordinary course of business on  substantially the same terms, including interest rates and collateral,  as those prevailing at the time for comparable transactions with  unrelated parties. This indebtedness does not involve more than  the normal risk of repayment or present other features unfavorable  to the Bancorp. During the fourth quarter of 2010, FTPS refinanced its debt  into a larger syndicated loan structure that included the Bancorp.  As a result, loans to FTPS declined to $381 million as of December  31, 2010 from $1.24 billion at December 31, 2009. The Bancorp  recognized $4 million in syndication fees in 2010 associated with  the refinanced loan to FTPS. The amount of FTPS’ line of credit  with the Bancorp was also reduced to $50 million as of December  31, 2010 from $125 million as of December 31, 2009. FTPS did  not draw upon its lines of credit during the years ended December  31, 2010 or 2009. Interest income relating to the loans was $102  million and $60 million, respectively, for the years ended December  31, 2010 and 2009 and is included in interest and fees on loans and  leases in the Consolidated Statements of Income. On June 30, 2009, the Bancorp completed the sale of a  majority interest in its Processing Businesses, FTPS. Advent  International acquired an approximate 51% interest in FTPS for  cash and warrants. The Bancorp retained the remaining approximate 49% interest in FTPS and, as part of the sale, FTPS  assumed loans totaling $1.25 billion owed to the Bancorp. The  Bancorp recognized $26 million and $15 million, respectively, in  noninterest income as part of its equity method investment in  FTPS for the years ended December 31, 2010 and 2009 and  received distributions totaling $25 million and $18 million,  respectively, during 2010 and 2009.  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:  21. INCOME TAXES  The following is a reconciliation between the statutory U.S. income tax rate and the Bancorp’s effective tax rate for the years ended December 31:  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. During 2010, the Bancorp settled its outstanding dispute with  the IRS relating to a specific capital raising transaction. This  favorable settlement reduced income tax expense (including  interest) by $19 million. During 2009, the Bancorp settled its  outstanding dispute with the IRS relating to certain leveraged  Fifth Third Bancorp 105 2010 2009 2008 Statutory tax rate  35.0% 35.0 (35.0) Increase (decrease) resulting from: State taxes, net of federal benefit  1.8 (.1) (.5) Tax-exempt income (3.6) (18.7) 1.5 Credits (14.1) (14.6) (3.6) Goodwill  - 8.7 11.9 Interest to taxing authority, net of tax  (0.8) (7.6) 5.1 Other changes in unrecognized tax benefits  (1.8) - - Unrealized stock-based compensation benefits  2.5 0.6 - Other, net 0.8  0.6 (.1) Effective tax rate  19.8% 3.9 (20.7) ($ in millions)  2010 2009 2008 Current income tax (benefit) expense:  U.S. income taxes ($5) (157) 560 State and local income taxes  16  6  25 Non-U.S. income taxes  -  (3)  3 Total current tax (benefit) expense  11 (154) 588 Deferred income tax expense (benefit):  U.S. income taxes 165 190 (1,090) State and local income taxes  11  (8)  (47)  Non-U.S. income taxes  -  2 (2) Total deferred tax expense (benefit)  176 184  (1,139)  Applicable income tax expense (benefit) $187 30 (551) ($ in millions)  2010  2009  Commitments to lend, net of participations:  Directors and their affiliated companies  $157  143  Executive officers  3  6  Total  160  149  Outstanding balance on loans, net of  participations and undrawn commitments  74  68 