Fifth Third Bancorp (FITB)

Commercial Loan Sales to a QSPE

During 2008, the Bancorp transferred, subject to credit recourse, certain primarily floating-rate, short-term, investment grade commercial loans to an unconsolidated QSPE that is wholly owned by an independent third-party. The transfers of loans to the QSPE were accounted for as sales in accordance with SFAS No. 140. The QSPE issues commercial paper and uses the proceeds to fund the acquisition of commercial loans transferred to it by the Bancorp. The Bancorp did not transfer any new loans to the QSPE during the first quarter of 2009.

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Fifth Third Bancorp and Subsidiaries

Notes to Condensed Consolidated Financial Statements (continued)

The Bancorp transferred the loans for par at origination; therefore, no gains or losses were recognized on the transfers to the QSPE for the three months ended March 31, 2009 and 2008. Generally, the loans transferred provide a lower yield due to their investment grade nature and, therefore, transferring these loans to the QSPE allows the Bancorp to reduce its interest rate exposure to these lower yielding loan assets while maintaining the customer relationships. Under current accounting provisions, QSPEs are exempt from consolidation and, therefore, not included in the Bancorp’s Condensed Consolidated Financial Statements. The outstanding balance of these loans at March 31, 2009 and 2008 was $1.6 billion and $3.0 billion, respectively. As of March 31, 2009, the loans transferred had a weighted average life of 2.0 years. These loans may be transferred back to the Bancorp upon the occurrence of certain specified events. These events include borrower default on the loans transferred, bankruptcy preferences initiated against underlying borrowers, ineligible loans transferred by the Bancorp to the QSPE, and the inability of the QSPE to issue commercial paper. The maximum amount of credit risk in the event of nonperformance by the underlying borrowers is approximately equivalent to the total outstanding balance. During the three months ended March 31, 2009 and 2008, the QSPE did not transfer any loans back to the Bancorp as a result of a credit event.

The Bancorp monitors the credit risk associated with the underlying borrowers through the same risk grading system currently utilized for establishing loss reserves in its loan and lease portfolio. Under this risk rating system as of March 31, 2009, approximately $1.4 billion of the loans in the QSPE were classified average or better; approximately $54 million were classified as watch-list or special mention; and approximately $77 million were classified as substandard. At March 31, 2009 and 2008, the Bancorp’s loss reserve related to the credit enhancement provided to the QSPE was $42 million and $17 million, respectively, and was recorded in other liabilities in the Condensed Consolidated Balance Sheets. To determine the credit loss reserve, the Bancorp used an approach that is consistent with its overall approach in estimating credit losses for various categories of commercial loans held in its loan portfolio.

During the three months ended March 31, 2009, the Bancorp collected $4 million in servicing fees from the QSPE. For the three months ended March 31, 2008, the Bancorp collected $366 million in net cash proceeds from loan transfers and $4 million in servicing fees from the QSPE.

The ability of the QSPE to issue commercial paper is a function of general market conditions and the credit rating of the liquidity provider. In the event the QSPE is unable to issue commercial paper, the Bancorp has agreed to provide liquidity support to the QSPE in the form of purchases of commercial paper, a line of credit to the QSPE and the repurchase of assets from the QSPE. As of March 31, 2009 and 2008, the liquidity asset purchase agreement was $2.4 billion and $5.0 billion, respectively. During 2008 and the first quarter of 2009, the dislocation in the short-term funding market caused the QSPE difficulty in obtaining sufficient funding through the issuance of commercial paper. As a result, the Bancorp continued to provide liquidity support to the QSPE during the first quarter of 2009 through purchases of commercial paper. As of March 31, 2009, the Bancorp held approximately $1.2 billion of asset-backed commercial paper issued by the QSPE, representing 67% of the total commercial paper issued by the QSPE. As of March 31, 2008, the Bancorp held approximately $600 million of asset-backed commercial paper issued by the QSPE, representing 19% of the total commercial paper issued by the QSPE. As of March 31, 2009 and 2008, there were no outstanding balances on the line of credit from the Bancorp to the QSPE.

Commercial Loan Sales to a QSPE

Through December 31, 2008, 2007 and 2006, the Bancorp had transferred, subject to credit recourse, certain primarily floating-rate, short-term, investment grade commercial loans to an unconsolidated QSPE that is wholly owned by an independent third-party. The transfer of loans to the QSPE was accounted for as a sale in accordance with SFAS No. 140. The QSPE issues commercial paper and uses the proceeds to fund the acquisition of commercial loans transferred to it by the Bancorp.

The Bancorp transferred the loans for par at origination, therefore, no gains or losses were recognized on the transfers to the QSPE for the years ended 2008, 2007 and 2006. Generally, the loans transferred provide a lower yield due to their investment grade nature, and therefore transferring these loans to the QSPE allows the Bancorp to reduce its interest rate exposure to these lower yielding loan assets while maintaining the customer relationships. Under current accounting provisions, QSPEs are exempt from consolidation and, therefore, not included in the Bancorp’s Consolidated Financial Statements. The outstanding balance of these loans at December 31, 2008 and 2007 was $1.9 billion and $3.0 billion, respectively. At December 31, 2008 and 2007, the value of the servicing asset related to these sales was immaterial to the Bancorp’s Consolidated Financial Statements. As of December 31, 2008, the loans transferred had a weighted average life of 2.2 years. These loans may be transferred back to the Bancorp upon the occurrence of certain specified events. These events include borrower default on the loans transferred, bankruptcy preferences initiated against underlying borrowers, ineligible loans transferred by the Bancorp to the QSPE, and the inability of the QSPE to issue commercial paper. The maximum amount of credit risk in the event of nonperformance by the underlying borrowers is approximately equivalent to the total outstanding balance. During the years ended December 31, 2008, 2007 and 2006, the QSPE did not transfer any loans back to the Bancorp as a result of a credit event.

The Bancorp monitors the credit risk associated with the underlying borrowers through the same risk grading system currently utilized for establishing loss reserves in its loan and lease portfolio. Under this risk rating system as of December 31, 2008, approximately $1.8 billion of the loans in the QSPE were classified average or better; approximately $77 million were classified as watch-list or special mention; and approximately $76 million were classified as substandard. At December 31, 2008 and 2007, the Bancorp’s loss reserve related to the credit enhancement provided to the QSPE was $37 million and $18 million, respectively, and was recorded in other liabilities in the Consolidated Balance Sheets. To determine the credit loss reserve, the Bancorp used an approach that is consistent with its overall approach in estimating credit losses for various categories of commercial loans held in its loan portfolio.

For the year ended December 31, 2008, the Bancorp collected $334 million in net cash proceeds from loan transfers and $13 million in servicing fees from the QSPE. For the year ended December 31, 2007, the Bancorp collected $1.1 billion in net cash proceeds from loan transfers and $30 million in servicing fees from the QSPE. For the year ended December 31, 2006, the Bancorp collected $1.6 billion in net cash proceeds from loan transfers and $30 million in servicing fees from the QSPE.

The ability of the QSPE to issue commercial paper is a function of general market conditions and the credit rating of the liquidity provider. In the event the QSPE is unable to issue commercial paper, the Bancorp has agreed to provide liquidity support to the QSPE in the form of purchases of commercial paper, a line of credit to the QSPE and the repurchase of assets from the QSPE. As of December 31, 2008 and 2007, the liquidity asset purchase agreement was $2.8 billion and $5.0 billion, respectively. During 2008, dislocation in the short-term funding