MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Branch Banking Comparison of 2010 with 2009  Comparison of 2009 with 2008 Fifth Third Bancorp 37  For the years ended December 31 ($ in millions)  2010  2009 2008 Net interest income $1,501  1,559 1,714 Provision for loan and lease  losses  542  585 352 Noninterest income:  Service charges on deposits  369  428 447 Card and processing revenue  303  264 246 Investment advisory revenue  106  84 84 Other noninterest income  115  122 130 Noninterest expense:  Salaries, incentives and  benefits  552  502 517 Net occupancy and equipment expense  223  217 203 Card and processing expense  102  68 45 Other noninterest expense  664  585 528 Income before taxes 311  500 976 Applicable income tax expense 110  176 344 Net income  $201  324 632 Average Balance Sheet Data  Consumer loans  $12,944  13,096 12,665 Commercial loans  4,815  5,335 5,600 Demand deposits  6,936  6,363 6,008 Interest checking  7,332  7,395 7,845 Savings and money market  19,963  17,010 16,184 Other time  12,712  16,995 13,749 TABLE 15: BRANCH BANKING  Noninterest income decreased $5 million, or one percent,  from 2009 as decreases in service charges on deposits and other  noninterest income were partially offset by increases in card and  processing revenue and investment advisory revenue. Service  charges on deposits decreased $59 million, or 14%, compared to  2009 as a result of new regulations in 2010 that decreased income  on overdrafts. Card and processing revenue increased $39 million,  or 15%, from 2009 primarily due to an increase in debit and credit  card transactions that resulted in a 13% increase in both credit and  Average loans and leases increased one percent compared to  2008 as a three percent growth in consumer loans was partially  offset by a five percent decrease in commercial loans. In addition,  credit card balances grew $211 million, or 14%. Average core  deposits were up eight percent compared to 2008 primarily due to  growth in short term consumer certificates.  Noninterest expense increased $80 million, or six percent,  compared to 2008 primarily due to an increase in FDIC related  expenses of $86 million as a result of a special assessment charged  in 2009 coupled with an increase in assessment rates.  Noninterest income was relatively flat compared to 2008 as  decreases in deposit fees and retail service fees, included in other  noninterest income, were offset by an increase in card and  processing revenue.  Net charge-offs as a percent of average loan and leases  increased to 317 bp in 2009, from 194 bp in 2008. Net charge-offs  increased compared to 2008 as the segment experienced higher  charge-offs on home equity lines and loans, commercial loans and  credit cards reflecting borrower stress and a decrease in home  values primarily within the Bancorp’s footprint.  Net income decreased $308 million, or 49%, in 2009 compared to  2008 driven by decreases in net interest income and service fees  combined with a higher provision for loan and lease losses. Net  interest income decreased nine percent compared to 2008 due to a  $27 million decline in the accretion of discounts on acquired loans  and deposits combined with an increase in interest expense due to  higher average balances in other time deposits. Provision for loan and lease losses decreased $43 million, or  seven percent, from 2009. Net charge-offs as a percent of average  loans and leases decreased from 317 bp in 2009 to 305 bp in 2010  as a result of a 36 bp decrease in consumer net charge-offs as a  percent of average consumer loans partially offset by a 52 bp  increase in commercial net charge-offs as a percent of average  commercial loans. The decrease in consumer net charge-offs was  primarily the result of a decrease in delinquencies, tighter  underwriting standards and signs of improvement in economic  conditions during 2010. The increase in commercial net charge- offs was primarily due to $24 million of charge-offs taken on $60  million of commercial loans which were sold or moved to held for  sale during the third quarter of 2010.  Net income decreased $123 million, or 38%, compared to 2009  driven by an increase in noninterest expense and a decrease in net  interest income partially offset by a decrease in provision for loan  and lease losses. Net interest income decreased $58 million, or  four percent, compared to 2009 as the impact of lower loan  balances more than offset a favorable shift in the segment’s  deposit mix towards lower cost transaction deposits. Branch Banking provides a full range of deposit and loan and  lease products to individuals and small businesses through 1,312  full-service banking centers. Branch Banking offers depository  and loan products, such as checking and savings accounts, home  equity loans and lines of credit, credit cards and loans for  automobiles and other personal financing needs, as well as  products designed to meet the specific needs of small businesses,  including cash management services. The following table contains  selected financial data for the Branch Banking segment.  debit card interchange revenue. Investment advisory revenue  increased $22 million, or 26%, compared to 2009 primarily due to  an increase in retail brokerage transactions. Other noninterest  income decreased $7 million, or six percent, primarily due to the  CARD Act of 2009, which resulted in the reduction of certain  credit card fees. Noninterest expense increased $169 million, or 12%, from  2009 due to increases in each category. Salaries, incentives and  benefits increased $50 million, or 10%, from the prior year due  primarily to additional branch personnel related to expanded  branch hours of operation and greater incentive accruals attributable to success in opening new deposit and brokerage  accounts. Net occupancy and equipment expense increased $6  million, or three percent, as a result of increases to rent expenses  during 2010. Card and processing expense increased $34 million,  or 50%, from 2009 due to increased costs associated with an  increase in credit and debit card transaction volumes during 2010.  Other noninterest expense increased $79 million, or 14%, due to  increases in loan and lease expense, marketing expense and other  allocated shared service expenses.  Average consumer loans decreased $152 million, or one  percent, and average commercial loans decreased $520 million, or  10%. The decrease in average consumer loans was the result of a  $311 million decrease in home equity loans due to a decrease in  demand and tighter underwriting standards that limited allowable  loan to value ratios, partially offset by a $254 million increase in  residential mortgage loans due to management’s decision to retain  certain residential mortgage loans in portfolio upon origination.  The decrease in average commercial loans was due to lower  customer demand for new originations, lower utilization rates on  corporate lines and tighter underwriting standards applied to both  new commercial loan originations and renewals. Average core deposits were flat compared to 2009 as runoff  of higher priced consumer certificates of deposit, included in  other time deposits, was replaced with growth in transaction  accounts due to excess customer liquidity and low interest rates. 