MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Commercial Banking $^{ }$Comparison of 2010 with 2009 Comparison of 2009 with 2008 TABLE 14: COMMERCIAL BANKING  Commercial Banking offers banking, cash management and  financial services to large and middle-market businesses and  government and professional customers. In addition to the  traditional lending and depository offerings, Commercial Banking  products and services include global cash management, foreign  exchange and international trade finance, derivatives and capital  markets services, asset-based lending, real estate finance, public  finance, commercial leasing and syndicated finance. The following  table contains selected financial data for the Commercial Banking  segment.  increase in commercial credit card activity, partially offset by a $7  million decrease in corporate banking revenue. Corporate banking  revenue decreased from the prior year primarily as a result of a $6  million decrease in fees on letters of credit.  Noninterest expense was flat compared to 2009 due to an  increase in salaries, incentives and benefits offset by a decrease in  other noninterest expense. Salaries, incentives and benefits  increased $33 million, or 15%, due to compensation related to  improved performance in the segment and an increase in  headcount during 2010. Loan and lease expense decreased $32  million, or four percent, as a result of lower loan demand during  2010, a decrease in collection related expenses and a decrease in  FDIC expenses due to a special assessment in the second quarter  of 2009.  Average commercial loans and leases decreased $3.0 billion,  or seven percent, compared to the prior year due to decreases  across all commercial loan categories. Commercial construction  loans decreased $1.5 billion, commercial and industrial loans  decreased $655 million, commercial mortgage loans decreased  $631 million and commercial leases decreased $209 million. These  decreases were the result of 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. These impacts were partially offset by  the consolidation of $724 million of commercial and industrial  loans on January 1, 2010, which had a remaining balance of $372  million at December 31, 2010. Average core deposits increased $5.8 billion, or 32%,  compared to 2009 due to the migration of higher priced  certificates of deposit into transaction accounts, as well as the  impact of historically low interest rates and excess customer  liquidity. Commercial Banking realized net income of $165 million in 2010  compared to a net loss of $120 million in 2009. This improvement  was primarily due to an increase in net interest income and a  decrease in provision for loan and lease losses partially offset by  growth in salaries, incentives and benefits. Net interest income  increased $162 million, or 12%, primarily due to a mix shift from  higher cost term deposits to lower cost deposit products which  resulted in a decrease to interest expense of 34% during 2010.  This improvement was partially offset by the negative impact to  net interest income of a decrease in average commercial loans  during 2010 and a decrease of $35 million in the accretion of  discounts on loans associated with the acquisition of First Charter  in 2008. Provision for loan and lease losses decreased $201 million, or  15%, from 2009. Net charge-offs as a percent of average loans  and leases decreased from 329 bp in 2009 to 302 bp in 2010.  These decreases are primarily due to actions taken by the Bancorp  to address problem loans which resulted in significant net charge- offs recorded in 2008 and 2009, as well as the impact of loss  mitigation activities such as suspending home builder and  developer lending and non-owner occupied commercial real estate  lending in 2007 and 2008, respectively, and tighter underwriting  standards across commercial loan product offerings.  Noninterest income increased $26 million, or four percent,  from 2009 primarily as a result of $24 million increase in gains on  private equity investments, included in other noninterest income,  and a $5 million increase in card and processing revenue due to an  Commercial Banking reported a net loss of $120 million in 2009  compared to a net loss of $733 million in 2008. This improvement  was due to a $750 million goodwill impairment charge taken in  2008 and a $504 million decrease in the provision for loan and  lease losses in 2009, partially offset by a decrease in net interest  income of $184 million. The decrease in net interest income  compared to 2008 was primarily due to a decrease in the accretion  of loan discounts on acquired loans and deposits which  contributed $204 million to net interest income in 2008 compared  to $60 million in 2009. Average commercial loans and leases  decreased $1.9 billion, or four percent, due to lower utilization  rates on corporate lines, net charge-offs and tighter lending  standards implemented in the second half of 2008 and continued  throughout 2009. Provision expense decreased from $1.9 billion in 2008 to $1.4  billion in 2009. Net charge-offs as a percent of average loans and  leases decreased to 329 bp from 432 bp in 2008 due primarily to  $800 million in net charge-offs in 2008 resulting from the sale or  transfer to held-for-sale of $1.3 billion in commercial and  industrial loans and commercial mortgage loans in the fourth  quarter of 2008.  Noninterest income decreased $69 million compared to 2008  due to a decrease in corporate banking revenue of $48 million and  a $31 million decline in other noninterest income, partially offset  by a $10 million increase in service charges on deposits.  Noninterest expense decreased $679 million compared to  2008 primarily due to goodwill impairment of $750 million in  2008. Excluding the goodwill impairment charge, noninterest  expense increased $71 million due to increases in FDIC and loan  and leases expenses. 36 Fifth Third Bancorp For the years ended December 31  ($ in millions)  2010  2009 2008 Income Statement Data  Net interest income (FTE)  (a)  $1,545  1,383 1,567 Provision for loan and lease  losses  1,159  1,360 1,864 Noninterest income:  Corporate banking revenue  346  353 401 Service charges on deposits  199  196 186 Other noninterest income  90  60 91 Noninterest expense:  Salaries, incentives and  benefits  254  221 243 Goodwill impairment  -  - 750 Other noninterest expense  736  768 675 Income (loss) before taxes  31  (357) (1,287) Applicable income tax benefit  (134)  (237) (554) Net income (loss)  $165  (120) (733) Average Balance Sheet Data  Commercial loans  $38,304  41,341 43,198 Demand deposits  10,872  8,581 6,206 Interest checking  8,432  6,018 4,632 Savings and money market  2,823  2,457 4,046 Certificates $100,000 and over and  other time  3,014  4,376 2,293 Foreign office deposits  2,017  1,275 1,835 (a) Includes FTE adjustments of  $14  for  2010 , $13 for 2009 and $15 for 2008