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## MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

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## Deposits 

Deposit balances represent an important source of funding and revenue growth opportunity. The Bancorp continues to focus on core deposit growth in its retail and commercial franchises by improving customer satisfaction, building complete relationships and offering competitive rates. At December 31, 2010, core deposits represented 70% of the Bancorp’s asset funding base compared to 68% at December 31, 2009. 

Core deposits increased $765 million, or one percent, compared to 2009 due primarily to increases of $3.0 billion in savings and $2.0 billion in demand deposits which was primarily the result of excess customer liquidity. In addition, foreign office deposits increased $1.3 billion due to an increase in commercial customer deposits due to excess customer liquidity, and those customers opting to sweep additional funds into these accounts for the higher interest rates. These increases were partially offset by the continued run-off of higher priced certificates included in other time deposits, which declined $4.7 billion, or 38%, compared to December 31, 2009, as well as a decline in interest 

checking due primarily to rate management actions on single product public funds accounts in the second half of 2010. 

Included in core deposits are foreign office deposits, which are Eurodollar sweep accounts for the Bancorp’s commercial customers. These accounts bear interest at rates slightly higher than money market accounts, but the Bancorp does not have to pay FDIC insurance nor pledge collateral. The Bancorp uses these deposits, as well as certificates of deposit $100,000 and over, as a method to fund earning asset growth. Certificates $100,000 and over at December 31, 2010 decreased $3.4 billion compared to December 31, 2009 as customers opted to maintain their balances in liquid accounts due to historically low interest rates. 

On an average basis, core deposits increased $6.9 billion, or 10%, due to increases in interest checking of $3.1 billion, demand deposits of $2.8 billion, savings deposits of $2.7 billion and foreign office deposits of $1.2 billion, partially offset by a decrease in other time deposits of $3.6 billion. This activity was the result of the migration of higher priced certificates included in other time deposits into transaction accounts, as well as the impact of historically low rates and excess customer liquidity. 

