content_image/161579.jpg
## 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. 

<img src='content_image/161579.jpg'>

(a) Includes FTE adjustments of $14  for 2010 , $13 for 2009 and $15 for 2008 

## $^{ }$Comparison of 2010 with 2009 

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 

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. 

## Comparison of 2009 with 2008 

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. 

