FITB 10-Q Quarter ended Sept. 30, 2011

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2011

Commission File Number 001-33653

(Exact name of Registrant as specified in its charter)

Fifth Third Center

Cincinnati, Ohio 45263

(Address of principal executive offices)

Registrant’s telephone number, including area code: (800) 972-3030

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x No ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes x No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

There were 919,778,512 shares of the Registrant’s common stock, without par value, outstanding as of September 30, 2011.

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FINANCIAL CONTENTS

This report may contain forward-looking statements about Fifth Third Bancorp and/or the company as combined acquired entities within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder, that involve inherent risks and uncertainties. This report may contain certain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Fifth Third Bancorp and/or the combined company including statements preceded by, followed by or that include the words or phrases such as “will likely result,” “may,” “are expected to,” “is anticipated,” “estimate,” “forecast,” “projected,” “intends to,” or may include other similar words or phrases such as “believes,” “plans,” “trend,” “objective,” “continue,” “remain,” or similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” or similar verbs. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) general economic conditions and weakening in the economy, specifically the real estate market, either nationally or in the states in which Fifth Third, one or more acquired entities and/or the combined company do business, are less favorable than expected; (2) deteriorating credit quality; (3) political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; (4) changes in the interest rate environment reduce interest margins; (5) prepayment speeds, loan origination and sale volumes, charge-offs and loan loss provisions; (6) Fifth Third’s ability to maintain required capital levels and adequate sources of funding and liquidity; (7) maintaining capital requirements may limit Fifth Third’s operations and potential growth; (8) changes and trends in capital markets; (9) problems encountered by larger or similar financial institutions may adversely affect the banking industry and/or Fifth Third; (10) competitive pressures among depository institutions increase significantly; (11) effects of critical accounting policies and judgments; (12) changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board (FASB) or other regulatory agencies; (13) legislative or regulatory changes or actions, or significant litigation, adversely affect Fifth Third, one or more acquired entities and/or the combined company or the businesses in which Fifth Third, one or more acquired entities and/or the combined company are engaged, including the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act); (14) ability to maintain favorable ratings from rating agencies; (15) fluctuation of Fifth Third’s stock price; (16) ability to attract and retain key personnel; (17) ability to receive dividends from its subsidiaries; (18) potentially dilutive effect of future acquisitions on current shareholders’ ownership of Fifth Third; (19) effects of accounting or financial results of one or more acquired entities; (20) difficulties in separating Vantiv, LLC, formerly Fifth Third Processing Solutions, LLC from Fifth Third; (21) loss of income from any sale or potential sale of businesses that could have an adverse effect on Fifth Third’s earnings and future growth; (22) ability to secure confidential information through the use of computer systems and telecommunications networks; and (23) the impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity. Additional information concerning factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements is available in the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2010, filed with the United States Securities and Exchange Commission (SEC). Copies of this filing are available at no cost on the SEC’s Web site at www.sec.gov or on the Fifth Third Web site at www.53.com . Fifth Third undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this report.

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Glossary of Terms

Fifth Third Bancorp provides the following list of acronyms as a tool for the reader. The acronyms identified below are used in Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Condensed Consolidated Financial Statements and in the Notes to Condensed Consolidated Financial Statements.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 2)

The following is MD&A of certain significant factors that have affected Fifth Third Bancorp’s (the “Bancorp” or “Fifth Third”) financial condition and results of operations during the periods included in the Condensed Consolidated Financial Statements, which are a part of this filing. Reference to the Bancorp incorporates the parent holding company and all consolidated subsidiaries.

TABLE 1: Selected Financial Data

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

OVERVIEW

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. At September 30, 2011, the Bancorp had $115 billion in assets, operated 15 affiliates with 1,314 full-service Banking Centers, including 103 Bank Mart ^® locations open seven days a week inside select grocery stores, and 2,437 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 Vantiv, LLC, formerly 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. In addition, see the Glossary of Terms on page 3 of this report for a list of acronyms included as a tool for the reader of this quarterly report on Form 10-Q. The acronyms identified therein are used throughout this MD&A, as well as the Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements.

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 three months ended September 30, 2011, net interest income, on an FTE basis, and noninterest income provided 58% and 42% of total revenue, respectively. The Bancorp derives the majority of its revenues within the United States from customers domiciled in the United States. Revenue from foreign countries and external customers domiciled in foreign countries is immaterial to the Bancorp’s Condensed Consolidated Financial Statements. 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 premiums paid to the FDIC.

Legislative Developments

On July 21, 2010, the Dodd-Frank Act was signed into law. This act implements changes to the financial services industry and affects the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies. The legislation establishes a Bureau of Consumer Financial Protection responsible for implementing and enforcing compliance with consumer financial laws, changes the methodology for determining deposit insurance assessments, gives the Federal Reserve the ability to regulate and limit interchange rates charged to merchants for the use of debit cards, enacts new limitations on proprietary trading, broadens the scope of derivative instruments subject to regulation, requires on-going stress tests and the submission of annual capital plans for certain organizations and requires changes to regulatory capital ratios . This act also calls for federal regulatory agencies to conduct multiple studies over the next several years in order to implement its provisions. While the total impact of this legislation on Fifth Third is not currently known, the impact is expected to be substantial and may have an adverse impact on Fifth Third’s financial performance and growth opportunities.

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Earnings Summary

The Bancorp’s net income available to common shareholders for the third quarter of 2011 was $373 million, net of $8 million in preferred stock dividends or, $0.40 per diluted share. For the third quarter of 2010, the Bancorp’s net income available to common shareholders was $175 million, net of $63 million in preferred stock dividends, or $0.22 per diluted share. The Bancorp’s net income available to common shareholders for the nine months ended September 30, 2011 was $789 million, net of $194 million in preferred stock dividends, or $0.86 per diluted share. The preferred stock dividends for the nine months ended September 30, 2011 included $153 million in discount accretion resulting from the Bancorp’s repurchase of Series F preferred stock. For the nine months ended September 30, 2010, the Bancorp’s net income available to common shareholders was $233 million, net of $187 million in preferred stock dividends, or $0.29 per diluted share.

Net interest income (FTE) decreased two percent in the third quarter of 2011 to $902 million, compared to $916 million in the same period last year. The decrease from the third quarter of 2010 was primarily due to a 37 bp decrease in the average yield on loans and leases from the third quarter of 2010 partially offset by a 27 bp decrease in the average rate paid on interest-bearing liabilities primarily driven by a continued mix shift from higher cost term deposits to lower cost core deposits, coupled with a three percent decrease in average interest-bearing liabilities. Net interest income (FTE) was $2.7 billion for the nine months ended September 30, 2011 and 2010. Net interest income for the nine months ended September 30, 2011 compared to the same period in the prior year was impacted by a 20 bp decrease in average yield on average interest earning assets and a $2.4 billion decrease in average interest bearing assets offset by 26 bp decrease in the average rate paid on interest bearing liabilities and a $3.9 billion decrease in average interest bearing liabilities. Net interest margin was 3.65% and 3.66% for the three and nine months ended September 30, 2011, respectively, compared to 3.70% and 3.63% for the same periods in the prior year.

Noninterest income decreased 20% to $665 million in the third quarter of 2011 compared to the same period last year. Noninterest income decreased eight percent to $1.9 billion for the nine months ended September 30, 2011 compared to the same period in the prior year. The decrease from both periods in the prior year was primarily the result of $152 million litigation settlement related to one of the Bancorp’s BOLI policies during the third quarter of 2010. Additionally, mortgage banking net revenue decreased $54 million from the third quarter of 2010 and $56 million from the nine months ended September 30, 2010 due to a decrease in origination fees and gains on loan sales.

Noninterest expense decreased three percent to $946 million in the third quarter of 2011 and decreased four percent to $2.8 billion for the nine months ended September 30, 2011 compared to the same periods in the prior year. The decrease from the third quarter of 2010 and the nine months ended September 30, 2010 was primarily due to a decrease of $25 million and $58 million, respectively, in the provision for representation and warranty claims related to residential mortgage loans sold to third parties; a decrease of $26 million and $21 million, respectively, in professional services fees primarily driven by the litigation settlement related to the previously mentioned settlement of one of the Bancorp’s BOLI policies during the third quarter of 2010 and a decrease of $5 million and $38 million, respectively, in FDIC insurance and other taxes. Partially offsetting this activity was $27 million of expenses associated with the termination of two cash flow hedging transactions during the third quarter of 2011.

Credit Summary

The Bancorp does not originate subprime mortgage loans, does not hold credit default swaps and does not hold asset-backed securities backed by subprime mortgage loans in its securities portfolio. However, the Bancorp has exposure to disruptions in the capital markets and weakened economic conditions. Throughout 2010 and into 2011, the Bancorp continued to be affected by high unemployment rates, weakened housing markets, particularly in the upper Midwest and Florida, and a challenging credit environment. Credit trends, however, continued to show signs of moderation and, as a result, the provision for loan and lease losses decreased 81% to $87 million and 73% to $368 million for the three and nine months ended September 30, 2011 compared to $457 million and $1.4 billion, respectively, for the same periods in 2010. In addition, net charge-offs as a percent of average loans and leases decreased to 1.32% during the third quarter of 2011 compared to 4.95% during the third quarter of 2010 and decreased to 1.60% for the nine months ended September 30, 2011 compared to 3.41% for the same period in the prior year. At September 30, 2011, nonperforming assets as a percent of loans, leases and other assets, including OREO (excluding nonaccrual loans held for sale) decreased to 2.44%, compared to 2.79% at December 31, 2010 and 2.72% at September 30, 2010. For further discussion on credit quality, see the Credit Risk Management section.

Capital Summary

The Bancorp’s capital ratios exceed the “well-capitalized” guidelines as defined by the Board of Governors of the Federal Reserve System. As of September 30, 2011, the Tier I capital ratio was 11.96%, the Tier I leverage ratio was 11.08% and the total risk-based capital ratio was 16.25%. For additional information on the Bancorp’s capital ratios, see the Capital Management section.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

NON-GAAP FINANCIAL MEASURES

The Bancorp considers various measures when evaluating capital utilization and adequacy, including the return on average tangible common equity ratio, tangible equity ratio, tangible common equity ratio and Tier I common equity ratio, in addition to capital ratios defined by banking regulators. These calculations are intended to complement the capital ratios defined by banking regulators for both absolute and comparative purposes. Because U.S. GAAP does not include capital ratio measures, the Bancorp believes there are no comparable U.S. GAAP financial measures to these ratios. These ratios are not formally defined by U.S. GAAP or codified in the federal banking regulations and, therefore, are considered to be a non-GAAP financial measure. Since analysts and banking regulators may assess the Bancorp’s capital adequacy using these ratios, the Bancorp believes they are useful to provide investors the ability to assess its capital adequacy on the same basis.

The Bancorp believes these non-GAAP measures are important because they reflect the level of capital available to withstand unexpected market conditions. Additionally, presentation of these measures allows readers to compare certain aspects of the Bancorp’s capitalization to other organizations. However, because there are no standardized definitions for these ratios, the Bancorp’s calculations may not be comparable with other organizations, and the usefulness of these measures to investors may be limited. As a result, the Bancorp encourages readers to consider its Condensed Consolidated Financial Statements in their entirety and not to rely on any single financial measure.

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The following table reconciles non-GAAP financial measures to U.S. GAAP as of or for the three months ended:

TABLE 2: Non-GAAP Financial Measures

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RECENT ACCOUNTING STANDARDS

Note 3 of the Notes to Condensed Consolidated Financial Statements provides a complete discussion of the significant new accounting standards recently adopted by the Bancorp and the expected impact of significant accounting standards issued, but not yet required to be adopted.

CRITICAL ACCOUNTING POLICIES

The Bancorp’s Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP. Certain accounting policies require management to exercise judgment in determining methodologies, economic assumptions and estimates that may materially affect the value of the Bancorp’s assets or liabilities and results of operations and cash flows. The Bancorp’s critical accounting policies include the accounting for the ALLL, reserve for unfunded commitments, income taxes, valuation of servicing rights, fair value measurements and goodwill. These accounting policies are discussed in detail in Management’s Discussion and Analysis - Critical Accounting Policies in the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2010. No material changes have been made to the valuation techniques or models during the nine months ended September 30, 2011.

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STATEMENTS OF INCOME ANALYSIS

Net Interest Income

Net interest income is the interest earned on securities, loans and leases (including yield-related fees) and other interest-earning assets less the interest paid for core deposits (includes transaction deposits and other time deposits) and wholesale funding (includes certificates of deposit $100,000 and over, other deposits, federal funds purchased, short-term borrowings and long-term debt). The net interest margin is calculated by dividing net interest income by average interest-earning assets. Net interest rate spread is the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities. Net interest margin is typically greater than net interest rate spread due to the interest income earned on those assets that are funded by noninterest-bearing liabilities, or free funding, such as demand deposits or shareholders’ equity.

Tables 3 and 4 present the components of net interest income, net interest margin and net interest rate spread for the three and nine months ended September 30, 2011 and 2010. Nonaccrual loans and leases and loans held for sale have been included in the average loan and lease balances. Average outstanding securities balances are based on amortized cost with any unrealized gains or losses on available-for-sale securities included in other assets.

Net interest income was $902 million for the third quarter of 2011, a decrease of $14 million from the third quarter of 2010. Net interest income was $2.7 billion for the nine months ended September 30, 2011 a decrease of $48 million from the nine months ended September 30, 2010. Included within net interest income are amounts related to the accretion of discounts on acquired loans and deposits, primarily as a result of the second quarter 2008 acquisition of First Charter Corporation, which increased net interest income $9 million and $32 million during the three and nine months ended September 30, 2011, respectively, compared to $14 million and $52 million during the three and nine months ended September 30, 2010, respectively. The original purchase accounting discount reflected the high discount rate in the market at the time of the acquisition; the total loan discounts are being accreted into net interest income over the remaining period to maturity of the loans acquired. Based upon the remaining period to maturity, and excluding the impact of prepayments, the Bancorp anticipates recognizing approximately $5 million in additional net interest income during the remainder of 2011 as a result of the amortization and accretion of premiums and discounts on acquired loans and deposits. Exclusive of the impact of these items, net interest income decreased $9 million compared to the third quarter of 2010 and $28 million from the nine months ended September 30, 2010.

For the three and nine months ended September 30, 2011, net interest income was adversely impacted by lower yields on both the commercial and consumer loan portfolios partially offset by an increase in average consumer loans and a decrease in interest expense compared to the three and nine months ended September 30, 2010, respectively. Yields on the commercial and consumer loan portfolio have decreased throughout 2011 as the result of low interest rates during the year. Average consumer loans increased primarily as the result of increases in average residential mortgage loans and automobile loans partially offset by a decrease in home equity loans compared to the three and nine months ended September 30, 2010. The decreases in interest expense was primarily the result of a $2.6 billion and $3.9 billion decrease in average interest bearing liabilities from the three and nine months ended September 30, 2010, respectively, coupled with a continued mix shift to lower cost core deposits as well as the benefit of lower rates offered on savings account balances and other time deposits. The decrease in average interest bearing liabilities was the result of migration from certificates of deposit into demand accounts due to low interest rates during 2011. For the three months ended September 30, 2011, the net interest rate spread decreased to 3.42% from 3.44% primarily due to a 29 bp decrease on the yields on average total assets partially offset by a 27 bp decrease on the rates for average interest bearing liabilities. For the nine months ended September 30, 2011, the net interest rate spread increased to 3.41% from 3.35% primarily due to a 26 bp decrease in rates on interest bearing liabilities partially offset by a 20 bp decrease in yield on average interest earnings assets.

Net interest margin decreased to 3.65% for the third quarter of 2011 from 3.70% for the third quarter of 2010. Net interest margin increased to 3.66% for the nine months ended September 30, 2011 compared to 3.63% for the nine months ended September 30, 2010. Net interest margin was impacted by the amortization and accretion of premiums and discounts on acquired loans and deposits that resulted in a increases of 3 bp and 4 bp during the three and nine months ended September 30, 2011, respectively, compared to a 5 bp and 6 bp increase during the three and nine months ended September 30, 2010, respectively. Exclusive of these amounts, net interest margin decreased 3 bp for the third quarter of 2011 and increased 5 bp for the nine months ended September 30, 2011 compared to the same periods in the prior year. The decrease from the third quarter of 2010 was primarily the result of the previously mentioned decrease on the yield of average total loans and leases partially offset by the mix shift to lower cost core deposits and an increase in free funding balances. The increase from the nine months ended September 30, 2010 was primarily the result of the mix shift to lower cost core deposits during 2011, an increase in free funding balances and a decrease in average interest earnings assets partially offset by the previously mentioned decrease on the yield of average loans and leases.

Total average interest-earning assets for the third quarter of 2011 were relatively flat compared to the third quarter of 2010 as a $1.2 billion decrease in other short-term investments was offset by a $1.2 billion increase in average loans and leases. Total average interest-earning assets decreased two percent for the nine months ended September 30, 2011 compared to the same period in the prior year primarily as the result of a 13% decrease in the average investment portfolio and a two percent decrease in average commercial loans; partially offset by a three percent increase in average consumer loans.

Interest income from loans and leases decreased $62 million, or six percent, compared to the third quarter of 2010 and $169 million, or six percent, compared to the nine months ended September 30, 2010. The decrease from the third quarter of 2010 and nine months ended September 30, 2010 was primarily the result of a 37 bp and 30 bp decrease, respectively, in average loan yields partially offset by increases

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of nine percent and seven percent, respectively, in commercial and industrial loans and a three percent increase in average consumer loans compared to both periods. Yields across much of the loan and lease portfolio decreased as the result of lower interest rates on newly originated loans and a decline in interest rates on automobile loans due to increased competition. Exclusive of the amortization and accretion of premiums and discounts on acquired loans, interest income from loans and leases decreased $57 million and $149 million compared to the three and nine months ended September 30, 2010, respectively. Interest income from investment securities and short-term investments decreased $9 million, or five percent, compared to the third quarter of 2010 and $55 million, or 11%, compared to the nine months ended September 30, 2010. The decrease from the third quarter of 2010 was primarily due to an 18 bp decrease in the yield on taxable securities and a six percent decrease in the average balance of investment securities. The decrease from the nine months ended September 30, 2010 was primarily due to a six percent decrease in the average balance of taxable securities and a 16 bp decrease in the yield on those securities.

Average core deposits increased $3.0 billion, or four percent, compared to the third quarter of 2010 and increased $1.9 billion, or two percent, compared to the nine months ended September 30, 2010. The increase from both periods was primarily due to an increase in average demand deposits and average savings deposits partially offset by a decrease in average time deposits; the third quarter of 2011 also had an increase in average interest checking deposits compared to the third quarter of 2010. The cost of average core deposits decreased to 33 bp and 39 bp for the three and nine months ended September 30, 2011, respectively, from 59 bp and 66 bp from the same respective periods in the prior year. This decrease was primarily the result of a mix shift to lower cost core deposits combined with a 23 bp and 24 bp decrease in rates on average savings deposits and a 30 bp and 35 bp decrease in rates on average time deposits compared to the three and nine months ended September 30, 2010, respectively.

Interest expense on wholesale funding for the third quarter of 2011 decreased $12 million, or 12%, compared to the third quarter of 2010, primarily as a result of a $1.3 billion decrease in the average balance and an 11 bp decrease in the rate. During the nine months ended September 30, 2011, interest expense on wholesale funding decreased $31 million, or 10%, compared to the nine months ended September 30, 2010 primarily as the result of a $2.5 billion decrease in the average balance partially offset by a 9 bp increase in rate. Refer to the Borrowings section of MD&A for additional information on the Bancorp’s change in average long-term debt. During the three and nine months ended September 30, 2011, wholesale funding represented 25% and 23%, respectively, of interest-bearing liabilities compared to 26% during the three and nine months ended September 30, 2010. For more information on the Bancorp’s interest rate risk management, including estimated earnings sensitivity to changes in market interest rates, see the Market Risk Management section of MD&A.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

TABLE 3: Condensed Average Balance Sheets and Analysis of Net Interest Income