26 Fifth Third Bancorp MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS fulfill their contractual obligations (or will be subject to the same  risk of fraud or operational errors as Fifth Third). These  disruptions may interfere with service to Fifth Third’s customers  and result in a financial loss or liability.  accounting and reporting standards. Fifth Third may also not  realize the expected benefits of the acquisition due to lower  financial results pertaining to the acquired entity. For example,  Fifth Third could experience higher charge offs than originally  anticipated related to the acquired loan portfolio.  During the second quarter of 2009, Fifth Third sold an  approximate 51% interest in FTPS to Advent International. Prior  to the sale, FTPS relied on Fifth Third to support its operating  and administrative functions. Fifth Third has entered into  agreements to provide FTPS certain services during the deconversion period. Fifth Third’s operating results may suffer if  the cost of providing these services exceeds the amount received  from FTPS. As part of the sale, FTPS also assumed loans owed  Fifth Third. Repayment of these loans is contingent on future  cash flows and profitability at FTPS. Fifth Third owns several non-strategic businesses that are not  significantly synergistic with its core financial services businesses.  Fifth Third has, from time to time, considered the sale of such  businesses. If it were to determine to sell such businesses, Fifth  Third would be subject to market forces that may make  completion of a sale unsuccessful or may not be able to do so  within a desirable time frame. If Fifth Third were to complete the  sale of non-core businesses, it would suffer the loss of income  from the sold businesses, and such loss of income could have an  adverse effect on its future earnings and growth.  In connection with the sale, Fifth Third provided Advent  International with certain put rights that are exercisable in the  event of three unlikely circumstances. Based on Fifth Third’s  current ownership share in FTPS of approximately 49%, FTPS is  accounted for under the equity method and is not consolidated.  The exercise of the put rights would result in FTPS becoming a  wholly owned subsidiary of Fifth Third. As a result, FTPS would  be consolidated and would subject Fifth Third to the risks  inherent in integrating a business. Additionally, such a change in  the accounting treatment for FTPS may adversely impact Fifth  Third’s capital.  Fifth Third collects, processes and stores sensitive consumer data  by utilizing computer systems and telecommunications networks  operated by both Fifth Third and third party service providers.  Fifth Third has security, backup and recovery systems in place, as  well as a business continuity plan to ensure the system will not be  inoperable. Fifth Third also has security to prevent unauthorized  access to the system. In addition, Fifth Third requires its third  party service providers to maintain similar controls. However,  Fifth Third cannot be certain that the measures will be successful.  A security breach in the system and loss of confidential  information such as credit card numbers and related information  could result in losing the customers’ confidence and thus the loss  of their business as well as additional significant costs for privacy  monitoring activities. Fifth Third’s footprint stretches from the upper Midwestern to  lower Southeastern regions of the United States. This area has  experienced weather events including hurricanes and other natural  disasters. The nature and level of these events and the impact of  global climate change upon their frequency and severity cannot be  predicted. If large scale events occur, they may significantly impact  its loan portfolios by damaging properties pledged as collateral as  well as impairing its borrower’s ability to repay their loans.  Weather related events or other natural disasters may have  an effect on the performance of Fifth Third’s loan portfolios,  especially in its coastal markets, thereby adversely impacting  its results of operations.  Material breaches in security of Fifth Third’s systems may  have a significant effect on Fifth Third’s business. The inability of FTPS to succeed as a stand-alone entity  could have a negative impact on Fifth Third’s operating  results and financial condition.  Fifth Third may sell or consider selling one or more of its  businesses. Should it determine to sell such a business, it  may not be able to generate gains on sale orrelatedincrease  in shareholders’ equity commensurate with desirable levels.  Moreover, if Fifth Third soldsuch businesses, the loss of  income could have an adverse effect on its earnings and  future growth.  $^{ }$Fifth Third is exposed to operational and reputational risk.  RISKS RELATED TO THE LEGAL AND REGULATORY  ENVIRONMENT  As a regulated entity, Fifth Third mustmaintain certain  capital requirements that may limit its operations and  potential growth. Fifth Third’s subsidiary bank must remain well-capitalized,  well-managed and maintain at least a “Satisfactory” CRA rating  for Fifth Third to retain its status as a financial holding company.  Failure to meet these requirements could result in the FRB placing  limitations or conditions on Fifth Third’s activities (and the  commencement of new activities) and could ultimately result in  Fifth Third is a bank holding company and a financial holding  company. As such, Fifth Third is subject to the comprehensive,  consolidated supervision and regulation of the FRB, including  risk-based and leverage capital requirements. Fifth Third must  maintain certain risk-based and leverage capital ratios as required  by its banking regulators and which can change depending upon  general economic conditions and Fifth Third’s particular condition, risk profile and growth plans. Compliance with the  capital requirements, including leverage ratios, may limit operations that require the intensive use of capital and could  adversely affect Fifth Third’s ability to expand or maintain present  business levels.  Fifth Third’s necessary dependence upon automated systems  to record and process its transaction volume poses the risk that  technical system flaws or employee errors, tampering or manipulation of those systems will result in losses and may be  difficult to detect. Fifth Third may also be subject to disruptions  of its operating systems arising from events that are beyond its  control (for example, computer viruses or electrical or telecommunications outages). Fifth Third is further exposed to  the risk that its third party service providers may be unable to  Fifth Third is exposed to many types of operational risk, including  reputational risk, legal and compliance risk, environmental risks  from its properties, the risk of fraud or theft by employees,  customers or outsiders, unauthorized transactions by employees,  operating system disruptions or operational errors.   Negative public opinion can result from Fifth Third’s actual  or alleged conduct in activities, such as lending practices, data  security, corporate governance and acquisitions, and may damage  Fifth Third’s reputation. Negative public opinion has been  observed in relation to banks participating in the U.S. Treasury’s  TARP program, in which Fifth Third was a participant.  Additionally, actions taken by government regulators and community organizations may also damage Fifth Third’s reputation. This negative public opinion can adversely affect Fifth  Third’s ability to attract and keep customers and can expose it to  litigation and regulatory action.