MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Fifth Third Bancorp is a diversified financial services company  headquartered in Cincinnati, Ohio. At December 31, 2010, the  Bancorp had $111 billion in assets and operated 15 affiliates with  1,312 full-service Banking Centers including 103 Bank Mart®  locations open seven days a week inside select grocery stores and  2,445 Jeanie® ATMs in 12 states throughout the Midwestern and  Southeastern regions of the United States. The Bancorp reports  on four business segments: Commercial Banking, Branch Banking, Consumer Lending and Investment Advisors. The  Bancorp also has a 49% interest in Fifth Third Processing  Solutions, LLC.  This overview of MD&A highlights selected information in  the financial results of the Bancorp and may not contain all of the  information that is important to you. For a more complete  understanding of trends, events, commitments, uncertainties,  liquidity, capital resources and critical accounting policies and  estimates, you should carefully read this entire document. Each of  these items could have an impact on the Bancorp’s financial  condition, results of operations and cash flows.  The Bancorp believes that banking is first and foremost a  relationship business where the strength of the competition and  challenges for growth can vary in every market. The Bancorp  believes its affiliate operating model provides a competitive  advantage by emphasizing individual relationships. Through its  affiliate operating model, individual managers at all levels within  the affiliates are given the opportunity to tailor financial solutions  for their customers.  The Bancorp’s revenues are dependent on both net interest  income and noninterest income. For the year ended December 31,  2010, net interest income, on an FTE basis, and noninterest  income provided 58% and 42% of total revenue, respectively.  Changes in interest rates, credit quality, economic trends and the  capital markets are primary factors that drive the performance of  the Bancorp. As discussed later in the Risk Management section,  risk identification, measurement, monitoring, control and reporting are important to the management of risk and to the  financial performance and capital strength of the Bancorp. Net interest income is the difference between interest income  earned on assets such as loans, leases and securities, and interest  expense incurred on liabilities such as deposits, short-term  borrowings and long-term debt. Net interest income is affected by  the general level of interest rates, the relative level of short-term  and long-term interest rates, changes in interest rates and changes  in the amount and composition of interest-earning assets and  interest-bearing liabilities. Generally, the rates of interest the  Bancorp earns on its assets and pays on its liabilities are  established for a period of time. The change in market interest  rates over time exposes the Bancorp to interest rate risk through  potential adverse changes to net interest income and financial  position. The Bancorp manages this risk by continually analyzing  and adjusting the composition of its assets and liabilities based on  their payment streams and interest rates, the timing of their  maturities and their sensitivity to changes in market interest rates.  Additionally, in the ordinary course of business, the Bancorp  enters into certain derivative transactions as part of its overall  strategy to manage its interest rate and prepayment risks. The  Bancorp is also exposed to the risk of losses on its loan and lease  portfolio as a result of changing expected cash flows caused by  loan defaults and inadequate collateral due to a weakened  economy within the Bancorp’s footprint.  Net interest income, net interest margin and the efficiency  ratio are presented in MD&A on an FTE basis. The FTE basis  adjusts for the tax-favored status of income from certain loans  and securities held by the Bancorp that are not taxable for federal  income tax purposes. The Bancorp believes this presentation to  be the preferred industry measurement of net interest income as it  provides a relevant comparison between taxable and non-taxable  amounts.  Noninterest income is derived primarily from mortgage  banking net revenue, service charges on deposits, corporate  banking revenue, fiduciary and investment management fees and  card and processing revenue. Noninterest expense is primarily  driven by personnel costs and occupancy expenses, costs incurred  in the origination of loans and leases, and insurance expenses paid  to the FDIC.  On June 30, 2009, the Bancorp completed the sale  (hereinafter the “Processing Business Sale”) of a majority interest  in its merchant acquiring and financial institutions processing  business. As a result of the sale, the Bancorp recognized a pre-tax  gain of approximately $1.8 billion. Under the terms of the sale,  Advent International acquired an approximate 51% interest in the  business. The Bancorp accounts for the retained noncontrolling  interest in the business under the equity method of accounting. On January 25, 2011, the Bancorp raised $1.7 billion in new  common equity through the issuance of 121,428,572 shares of  common stock in an underwriting offering at an initial price of  $14.00 per share. On January 24, 2011, the underwriters exercised  their option to purchase an additional 12,142,857 shares at the  offering price of $14.00 per share. In connection with this  exercise, the Bancorp entered into a forward sale agreement which  resulted in a final net payment of 959,821 shares on February 4,  2011.  On January 25, 2011, the Bancorp issued $1.0 billion of  senior notes to third party investors, and entered into a  Supplemental Indenture dated January 25, 2011 with Wilmington  Trust Company, as Trustee, which modifies the existing Indenture  for Senior Debt Securities dated April 30, 2008 between the  Bancorp and the Trustee. The Supplemental Indenture and the  Indenture define the rights of the Senior Notes, which Senior  Notes are represented by Global Securities dated as of January 25,  2011. The senior notes bear a fixed rate of interest of 3.625% per  annum. The notes are unsecured, senior obligations of the  Bancorp. Payment of the full principal amount of the notes will be  due upon maturity on January 25, 2016. The notes will not be  subject to the redemption at the Bancorp’s option at any time  prior to maturity.  As further discussed in Note 24 of the Notes to Consolidated  Financial Statements, on December 31, 2008, the Bancorp issued  $3.4 billion of Fixed Rate Cumulative Perpetual Preferred Stock,  Series F, and related warrants to the U.S. Treasury under the U.S.  Treasury’s CPP. On February 2, 2011, the Bancorp redeemed all 136,320  shares of its Series F Preferred Stock held by the U.S. Treasury.  As discussed above, the net proceeds from the Bancorp’s January  2011 common stock and senior notes offerings and other funds  were used to redeem the $3.4 billion of Series F Preferred Stock.  In connection with the redemption of the Series F preferred  Stock, the Bancorp accelerated the accretion of the remaining  issuance discount on the Series F Preferred Stock and recorded a  corresponding reduction in retained earnings of $153 million. This  resulted in a one-time, noncash reduction in net income available  to common shareholders and related basic and diluted earnings  per share. This transaction will be reflected in the Bancorp’s  Consolidated Financial Statements for the quarter ended March  31, 2011.  16 Fifth Third Bancorp  Repurchase of Outstanding TARP Preferred Stock Common Stock and Senior Notes Offerings 