10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

Or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 0-8076

FIFTH THIRD BANCORP

(Exact name of Registrant as specified in its charter)

Ohio	31-0854434
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

38 Fountain Square Plaza

Cincinnati, Ohio 45263

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:

(513) 534-5300

Securities registered pursuant to Section 12(g) of the Act:

Common Stock Without Par Value

(Title of Class)

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes: x No: ¨

The Aggregate Market Value of the Voting Stock held by non-affiliates of the Registrant was $25,776,059,754 as of June 30, 2004.

There were 553,283,714 shares of the Registrant’s Common Stock, without par value, outstanding as of January 31, 2005.

DOCUMENTS INCORPORATED BY REFERENCE

2004 Annual Report to Shareholders:	Parts I, II and IV
Proxy Statement for 2005 Annual Meeting of Shareholders:	Parts III and IV

FIFTH THIRD BANCORP

2004 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	3-11
Item 2.	Properties	12
Item 3.	Legal Proceedings	12
Item 4.	Submission of Matters to a Vote of Security Holders	12
	Executive Officers of the Registrant	13-14
PART II
Item 5.	Market For Registrant’s Common Equity and Related Stockholder Matters	14
Item 6.	Selected Financial Data	14
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	14
Item 8.	Financial Statements and Supplementary Data	14
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	14
Item 9A.	Controls and Procedures	14
Item 9B.	Other Information	14
PART III
Item 10.	Directors and Executive Officers of the Registrant	15
Item 11.	Executive Compensation	15
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	15
Item 13.	Certain Relationships and Related Transactions	15
Item 14.	Principal Accountant Fees and Services	15
PART IV
Item 15.	Exhibits and Financial Statement Schedules	16-19
SIGNATURES		20

PART I

ITEM 1. BUSINESS

This report may contain forward-looking statements about Fifth Third Bancorp and/or the company as combined with acquired entities within the meaning of Sections 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and 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 “believes,” “expects,” “anticipates,” “plans,” “trend,” “objective,” “continue,” “remain” or similar expressions or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions. 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) competitive pressures among depository institutions increase significantly; (2) changes in the interest rate environment reduce interest margins; (3) prepayment speeds, loan origination and sale volumes, charge-offs and loan loss provisions; (4) general economic conditions, either national 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; (5) political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; (6) changes and trends in the securities markets; (7) 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; (8) difficulties in combining the operations of acquired entities and (9) the impact of reputational risk created by the developments discussed above on such matters as business generation and retention, funding and liquidity. Fifth Third undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this report.

ORGANIZATION

Fifth Third Bancorp (the “Registrant”) is an Ohio corporation organized in 1975 and is a bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHCA”), and subject to regulation by the Board of Governors of the Federal Reserve System (“FRB”). The Registrant, with its principal office located in Cincinnati, is a bank holding company as defined in the BHCA and is registered as such with the FRB. At December 31, 2004, the Registrant’s wholly-owned second tier holding company, Fifth Third Financial Corporation, had eight wholly-owned direct subsidiaries: Fifth Third Bank; Fifth Third Bank (Michigan); Fifth Third Bank National Association (“Fifth Third Bank, N.A.”); Fifth Third Community Development Corporation; Fifth Third Investment Company; Old Kent Capital Trust I, Franklin Capital Trust I and Fifth Third Reinsurance Company, LTD.

At December 31, 2004, the Registrant, its affiliated banks and other subsidiaries had consolidated total assets of approximately $94.5 billion, consolidated total deposits of approximately $58.2 billion and consolidated total shareholders’ equity of approximately $8.9 billion.

The Registrant, through its subsidiaries, engages primarily in commercial and retail banking, electronic payment processing services and investment advisory services. Direct subsidiaries of the Registrant’s subsidiary banks include: The Fifth Third Company; Fifth Third Leasing Company; Fifth Third International Company; Fifth Third Holdings, LLC; Fifth Third Securities, Inc.; Fifth Third Real Estate Capital Markets Company; Fifth Third Mortgage Company; Fifth Third Mortgage Insurance Reinsurance Company; Fifth Third Insurance Agency, Inc.; Old Kent Investment Corporation; Home Equity of America, Inc.; Fifth Third Asset Management, Inc.; Old Kent Mortgage Services, Inc. and GNB Management, LLC. Refer to Exhibit 21 attached to this document for a list of all the subsidiaries of the Registrant. The Registrant’s subsidiaries provide a wide range of financial products and services to the retail, commercial, financial, governmental, educational and medical sectors, including a wide variety of checking, savings and money market accounts, and credit products such as credit cards, installment loans, mortgage loans and leasing. Each of the banking subsidiaries has deposit insurance provided by the Federal Deposit Insurance Corporation (“FDIC”) through the Bank Insurance Fund (“BIF”) and/or the Savings Association Insurance Fund (“SAIF”).

Fifth Third Processing Solutions, the Registrant’s electronic payment processing division, operates for itself and other financial institutions, a proprietary automated teller machine (“ATM”) and Point of Sale (“POS”) network, Jeanie^® and provides electronic fund transfers, ATM processing, electronic personal banking, merchant transaction processing, electronic bill payment and electronic benefit transfer services for thousands of regional banks, bank holding companies, service retailers and other financial institutions throughout the United States. The Registrant’s banking subsidiaries participate in several regional shared ATM networks including “NYCE^®,” “Pulse^®,” and “Star^®.” The Registrant’s banking subsidiaries also participate in “Cirrus^®,” and “Plus System^®,” which are international ATM networks.

Additional information regarding the Registrant’s businesses is included in the Management Editorial (page 7) in the Registrant’s 2004 Annual Report to Shareholders and is incorporated herein by reference and attached to this filing as Exhibit 13.

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ITEM 1. BUSINESS (Continued)

ACQUISITIONS

The Registrant has completed a number of mergers and acquisitions over the years involving financial institutions throughout Ohio, Indiana, Kentucky, Michigan, Wisconsin, and Florida. On June 11, 2004, the Registrant completed the acquisition of Franklin Financial Corporation (“Franklin Financial”) and its subsidiary, Franklin National Bank, headquartered in Franklin, Tennessee. Under the terms of the transaction, each share of Franklin Financial common stock was exchanged for .5933 shares of the Registrant’s common stock, resulting in the issuance of 5.1 million shares of common stock. The common stock issued to effect the transaction was valued at $55.52 per common share for a total transaction value, including fair value of employee stock awards, of $317 million.

On August 2, 2004, the Registrant and First National Bankshares of Florida, Inc. (“First National”) announced the signing of a definitive agreement in which the Registrant would acquire First National and its subsidiaries, headquartered in Naples, Florida. As of December 31, 2004, First National has approximately $5.6 billion in total assets, $3.8 billion in total deposits and 77 full-service banking centers located primarily in Orlando, Tampa, Sarasota, Naples and Fort Myers. The acquisition, which closed on January 1, 2005, provided First National’s shareholders with .5065 shares of the Registrant’s common stock for each share of First National common stock. Based on the price of the Registrant’s common shares at the close of business on December 31, 2004, the transaction is valued at $23.96 per share of First National common stock. The total transaction value, including the fair value of employee stock awards, is approximately $1.5 billion.

See “Business – Regulation and Supervision – The Registrant – The BCHA – Acquisitions and Permissible Activities on page 5 for a discussion of regulatory restrictions on acquisitions.

The Registrant’s strategy for growth includes strengthening its presence in core markets, expanding into contiguous markets and broadening its product offerings while taking into account the integration and other risks of growth. The Registrant evaluates strategic acquisition opportunities and conducts due diligence activities in connection with possible transactions. As a result, discussions, and in some cases, negotiations may take place and future acquisitions involving cash, debt or equity securities may occur. These typically involve the payment of a premium over book value and current market price, and therefore, some dilution of book value and net income per share may occur with any future transactions.

Additional information, with respect to acquisitions, is included in Note 26 (page 62) of the Notes to Consolidated Financial Statements in the Registrant’s 2004 Annual Report to Shareholders, and is incorporated herein by reference and attached to this filing as Exhibit 13.

COMPETITION

There are hundreds of commercial banks, savings and loans and other financial service providers in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Pennsylvania, Missouri and nationally that provide strong competition to the Registrant’s banking subsidiaries. The Registrant competes for deposits, loans and other banking services in its principal geographic markets as well as in selected national markets as opportunities arise. In addition to the challenge of attracting and retaining customers for traditional banking services, the Registrant’s competitors now include securities dealers, brokers, mortgage bankers, investment advisors and insurance companies. The Gramm-Leach-Bliley Act of 1999, effective March 11, 2000, has changed the competitive environment in which the Registrant conducts business. See “Regulation and Supervision” below. These competitors with focused products targeted at highly profitable customer segments, compete across geographic boundaries and provide customers increasing access to meaningful alternatives to banking services in nearly all significant products. The increasingly competitive environment is a result primarily of changes in regulation, changes in technology, product delivery systems and the accelerating pace of consolidation among financial service providers. These competitive trends are likely to continue. The Registrant’s ability to maintain its history of strong financial performance and return on investment to shareholders will depend in part on the Registrant’s ability over time to expand its scope of available financial services as needed to meet the needs and demands of its customers. With respect to electronic payment processing services, Fifth Third Processing Solutions, the Registrant’s electronic payment processing division, competes with other national electronic fund transfer (“EFT”) and merchant processing service providers.

REGULATION AND SUPERVISION

In addition to the generally applicable state and federal laws governing businesses and employers, the Registrant and its subsidiary banks are subject to extensive regulation by federal and state laws and regulations applicable to financial institutions and their parent companies. Virtually all aspects of the business of the Registrant and its subsidiary banks are subject to specific requirements or restrictions and general regulatory oversight. The principal objectives of state and federal banking laws are the maintenance of the safety and soundness of financial institutions and the federal deposit insurance system and the protection of consumers or classes of consumers, rather than the specific protection of shareholders of a bank or the parent company of a bank, such as the Registrant. In addition, the supervision, regulation and examination of the Registrant and its subsidiaries by the bank regulatory agencies is not

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ITEM 1. BUSINESS (Continued)

intended for the protection of the Registrant’s security holders. To the extent the following material describes statutory or regulatory provisions, it is qualified in its entirety by reference to the particular statute or regulation.

The Registrant

General. The Registrant is a bank holding company registered under the BHCA. The Registrant is subject to regulation and supervision by the FRB and the Ohio Division of Financial Institutions (the “Division”). The Registrant is required to file various reports with, and is subject to examination by, the FRB and the Division. The FRB has the authority to issue orders to bank holding companies to cease and desist from unsound banking practices and violations of conditions imposed by, or violations of agreements with, the FRB. The FRB is also empowered to assess civil money penalties against companies or individuals who violate the BHCA or orders or regulations thereunder, to order termination of non-banking activities of non-banking subsidiaries of bank holding companies, and to order termination of ownership and control of a non-banking subsidiary by a bank holding company.

The BHCA – Acquisitions and Permissible Activities. The BHCA requires the prior approval of the FRB, for a bank holding company to acquire substantially all the assets of a bank or acquiring direct or indirect ownership or control of more than 5% of any class of the voting shares of any bank, bank holding company or savings association, or increasing any such non-majority ownership or control of any bank, bank holding company or savings association, or merging or consolidating with any bank holding company. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 generally authorizes bank holding companies to acquire banks located in any state, subject to certain state-imposed age and deposit concentration limits, and also generally authorizes interstate bank holding company and bank mergers and to a lesser extent, interstate branching.

Unless a bank holding company becomes a financial holding company (“FHC”) under the Gramm-Leach-Bliley Act of 1999 (“GLBA”) (as discussed below), the BHCA also prohibits a bank holding company from acquiring a direct or indirect interest in or control of more than 5% of any class of the voting shares of a company that is not a bank or a bank holding company and from engaging directly or indirectly in activities other than those of banking, managing or controlling banks or furnishing services to its subsidiary banks, except that it may engage in and may own shares of companies engaged in certain activities the FRB has determined to be so closely related to banking or managing or controlling banks as to be proper incident thereto.

The GLBA, which was enacted on November 12, 1999, permits a qualifying bank holding company to become a FHC and thereby to engage directly or indirectly in a broader range of activities than had previously been permitted for a bank holding company under the BHCA. Permitted activities include securities underwriting and dealing, insurance underwriting and brokerage, merchant banking and other activities that are declared by the FRB, in cooperation with the Treasury Department, to be “financial in nature or incidental thereto” or are declared by the FRB unilaterally to be “complementary” to financial activities. In addition, a FHC is allowed to conduct permissible new financial activities or acquire permissible non-bank financial companies with after-the-fact notice to the FRB. A bank holding company may elect to become a FHC if each of its subsidiary banks is “well capitalized” (as discussed on pages 7 - 8 under “The Subsidiary Banks”) is “well managed” and has at least a “Satisfactory” rating under the Federal Community Reinvestment Act (“CRA”). In 2000, the Registrant elected and qualified for FHC status under the GLBA.

The Registrant has three subsidiary banks, Fifth Third Bank, Fifth Third Bank (Michigan) and Fifth Third Bank, N.A. (the “Subsidiary Banks”). Fifth Third Bank and Fifth Third Bank (Michigan) are state-chartered banks subject primarily to federal regulation from the FRB and the Federal Deposit Insurance Corporation (“FDIC”) and, in addition, are regulated and examined by their respective state banking departments. Fifth Third Bank, N.A. is a national bank and is subject to regulation and examination primarily by the Office of Comptroller of the Currency (“OCC”) and secondarily by the FDIC and FRB.

Subsidiary banks are limited by law and regulations in the scope of permitted activities and investments. Subsidiary state banks and their operating subsidiaries may engage in any activities that are determined by the appropriate state banking regulator to be part of or incidental to the business of banking. In addition, the GLBA permits a state chartered member bank to engage in expanded activities through the formation of a “financial subsidiary.” Fifth Third Bank has filed a notice to control, or acquire an interest in, a financial subsidiary with the FRB and may thus engage through a financial subsidiary in any activity that is financial in nature or incidental to a financial activity, except for insurance underwriting, insurance investments, real estate investment or development, or merchant banking. So as to qualify to establish or acquire, and thereafter maintain, a financial subsidiary, Fifth Third Bank and each of its depository institution affiliates must be “well capitalized” and “well managed,” and may not have a less than “Satisfactory” CRA rating. In addition, the total assets of all financial subsidiaries of a state chartered member bank may not exceed the lesser of $50 billion or 45% of the parent bank’s total assets. A state chartered member bank that is one of the largest 100 insured banks in the United States, such as Fifth Third Bank, must also have issued debt with a certain rating. In addition to calculating its risk-based capital information from its consolidated financial statements, a state chartered member bank with one or more financial subsidiaries must also be “well capitalized” after excluding from its assets and equity all equity investments, including retained earnings, in a financial subsidiary, and the assets of the financial subsidiary from the bank’s consolidated assets. The bank must also have policies and procedures to assess financial subsidiary risk and protect the bank from such risks and potential liabilities.

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PART I

ITEM 1. BUSINESS (Continued)

Capital Requirements. The FRB has adopted capital adequacy guidelines pursuant to which it assesses the adequacy of capital in examining and supervising a bank holding company and in analyzing applications to it under the BHCA. These capital adequacy guidelines generally require bank holding companies to maintain total capital equal to 8% of total risk-adjusted assets and off-balance sheet items (the “Total Risk-Based Capital Ratio”), with at least one-half of that amount consisting of Tier I or core capital and the remaining amount consisting of Tier II or supplementary capital. As a practical matter, however, the FRB requires larger bank holding companies, such as the Registrant, to maintain a Total Risk-Based Capital Ratio of at least 10%, and a Tier 1 capital ratio of at least 6%, which is the standard for a “well-capitalized” bank holding company. Tier I capital for bank holding companies generally consists of the sum of common shareholders’ equity and perpetual preferred and trust preferred stock (subject in the case of the preferred stock to limitations on the kind and amount of such stock which may be included as Tier I capital), less goodwill and certain other intangible assets. Tier II capital generally consists of perpetual and trust preferred stock which is not eligible to be included as Tier I capital; term subordinated debt; intermediate-term preferred stock; and, subject to limitations, general allowances for loan and lease losses. Assets are adjusted under the risk-based guidelines to take into account different risk characteristics.

In addition to the risk-based capital requirements, the FRB requires bank holding companies to maintain a minimum leverage capital ratio of Tier I capital (defined by reference to the risk-based capital guidelines) to total average assets (the “Leverage Ratio”) of 3.0%. Total average assets for this purpose does not include goodwill and any other intangible assets and investments that the FRB determines should be deducted from Tier I capital. The FRB has announced that the 3.0% Leverage Ratio requirement is the minimum for the top-rated bank holding companies without any supervisory, financial or operational weaknesses or deficiencies or those that are not experiencing or anticipating significant growth. For all other bank holding companies, the minimum leverage ratio is 4%, and bank holding companies with supervisory, financial, managerial or operational weaknesses or organizations expecting significant growth are expected to maintain capital ratios well above minimum levels.

As a practical matter, the FRB requires larger bank holding companies, such as the Registrant, to maintain a Leverage Ratio of at least 5% in order to qualify as “well capitalized.”

The Registrant is currently in compliance with the Total Risk-Based Capital Ratio, Tier I Capital and the Leverage Ratio requirements. As of December 31, 2004, the Registrant had a Tier I Risk-Based Capital Ratio and a Total Risk-Based Capital Ratio equal to 10.31% and 12.31%, respectively, and a Leverage Ratio equal to 8.89%. U.S. bank regulatory authorities and international bank supervisory organizations, principally the Basel Committee on Banking Supervision, currently are considering changes to the risk-based capital adequacy framework for banks, including emphasis on credit, market and operational risk components, which ultimately could affect the appropriate capital guidelines for bank holding companies such as the Registrant.

Limitations on Acquisitions of Common Stock. The Federal Change in Bank Control Act prohibits a person or group of persons from acquiring “control” of a depository institution or a depository institution holding company unless the appropriate federal banking agency has been given at least 60 days to review the proposal and public notice has been provided. “Control” is generally defined under this Act as ownership of 25% or more of any class of voting stock. In addition, under a rebuttable presumption established by the FRB, the acquisition of 10% or more of a class of voting stock of a depository institution or a depository institution holding company, with a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) would, under the circumstances set forth in the presumption, constitute the acquisition of control. Furthermore, any company, as that term is broadly defined in the BHCA, would be required to obtain the approval of the FRB under BHCA before acquiring 25% (5% in the case of an acquirer that is a bank holding company) or more of any class of voting securities of a depository institution or a depository institution holding company, or such lesser percentage as the FRB deems to constitute a “controlling influence.”

Ohio Law. Ohio law, the principal state law governing the Registrant and its largest bank subsidiary, does not require bank holding companies to register with the Division. As a general matter, the Division does not rule upon or regulate the activities in which bank holding companies or their non-bank subsidiaries engage. A bank holding company, however, may not acquire control of an Ohio bank through purchase, assignment, transfer, pledge, or other disposition of voting securities without the prior consent of the Division. In examining the Ohio banks of a bank holding company, the bank holding company itself is subject to review by the Division. The Division has the authority to issue orders to bank holding companies to cease and desist from unsound banking practices and violations of law and of conditions imposed by, or violations of agreements with, the Division in connection with the operation of Ohio banks. The Division is also empowered to assess civil money penalties against bank holding companies and banks engaging in unsafe or unsound practices.

Bank Holding Company Dividends. The FRB has authority to prohibit bank holding companies from paying dividends if such payment is deemed to be an unsafe or unsound practice. The FRB has indicated generally that it may be an unsafe or unsound practice for bank holding companies to pay dividends unless a bank holding company’s net income is sufficient to fund the dividends and the expected rate of earnings retention is consistent with the organization’s capital needs, asset quality and overall financial condition. The Registrant depends in part upon dividends received from its subsidiary banks to fund its activities, including the payment of dividends. Each of the Subsidiary Banks is subject to regulatory limitations on the amount of dividends it may declare and pay.

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PART I

ITEM 1. BUSINESS (Continued)

Bank Holding Company Support of Subsidiary Banks. Under FRB policy, a bank holding company is expected to act as a source of financial and managerial strength to each of its subsidiary banks and to commit resources to their support. This support may be required at times when the bank holding company may not have the resources to provide it. Similarly, under the cross-guarantee provisions of the Federal Deposit Insurance Act (“FDIA”), the FDIC can hold any FDIC-insured depository institution liable for any loss suffered or anticipated by the FDIC in connection with (1) the “default” of a commonly controlled FDIC-insured depository institution; or (2) any assistance provided by the FDIC to a commonly controlled FDIC-insured depository institution “in danger of default.”

The Subsidiary Banks

State-Chartered. The Registrant owns two state banks, Fifth Third Bank and Fifth Third Bank (Michigan), chartered under the laws of Ohio and Michigan, respectively. These banks are subject to extensive state regulation and examination by the appropriate state banking agency in the particular state or states where each bank is chartered, by the FRB, and by the FDIC, which insures the deposits of each of the state banks to the maximum extent permitted by law. The federal and state laws and regulations that are applicable to banks regulate, among other matters, the scope of their business, their investments, their reserves against deposits, the timing of the availability of deposited funds, the amount of loans to individual and related borrowers and the nature, amount of and collateral for certain loans, and the amount of interest that may be charged on loans. Various state consumer laws and regulations also affect the operations of the state banks.

National. The Registrant’s national subsidiary bank, Fifth Third Bank, N.A. is subject to regulation and examination primarily by the OCC and secondarily by the FRB and the FDIC, which insures the deposits to the maximum extent permitted by law. The federal laws and regulations that are applicable to banks regulate, among other matters, the scope of their business, their investments, their reserves against deposits, the timing of the availability of deposited funds, the amount of loans to individual and related borrowers and the nature, amount of and collateral for certain loans, and the amount of interest that may be charged on loans.

FDIC Insurance Premiums. The Registrant’s Subsidiary Banks pay deposit insurance premiums to the FDIC generally based on an assessment rate established by the FDIC for Bank Insurance Fund-member institutions. The FDIC has established a risk-based assessment system under which institutions are classified, and generally pay premiums according to their perceived risk to the federal deposit insurance funds. FDIA does not require the FDIC to charge all banks deposit insurance premiums when the ratio of deposit insurance reserves to insured deposits is maintained above specified levels and, at the present time, the ratio is above the minimum level and, accordingly all banks are not required to pay premiums. However, as a result of general economic conditions and recent bank failures, it is possible that the ratio of deposit insurance reserves to insured deposits could fall below the minimum ratio that FDIA requires, which would result in the FDIC setting deposit insurance assessment rates sufficient to increase deposit insurance reserves to the required ratio. A resumption of assessments of deposit insurance premiums charged to all institutions would have an adverse effect on net earnings.

Capital Requirements. Both the FRB and OCC have promulgated regulations regarding the capital adequacy of the Subsidiary Banks. These requirements are substantially similar to those adopted by the FRB regarding bank holding companies, as described above. In addition, the federal banking agencies have promulgated substantially similar regulations to implement the system of prompt corrective action established by Section 38 of the FDIA. Under the regulations, a bank generally shall be deemed to be (i) “well capitalized” if it has a Total Risk-Based Capital Ratio of 10.0% or more, a Tier I Risk-Based Capital Ratio of 6.0% or more, a Leverage Ratio of 5.0% or more and is not subject to any written capital order or directive; (ii) “adequately capitalized” if it has a Total Risk-Based Capital Ratio of 8.0% or more, a Tier I Risk-Based Capital Ratio of 4.0% or more, and a Leverage Ratio of 4.0% or more (3.0% under certain circumstances) and does not meet the definition of “well capitalized;” (iii) “undercapitalized” if it has a Total Risk-Based Capital Ratio that is less than 8.0%, a Tier I Risk-Based Capital Ratio that is less than 4.0% or a Leverage Ratio that is less than 4.0% (3.0% under certain circumstances); (iv) “significantly undercapitalized” if it has a Total Risk-Based Capital Ratio that is less than 6.0%, a Tier I Risk-Based Capital Ratio that is less than 3.0% or a Leverage Ratio that is less than 3.0%, and (v) “critically undercapitalized” if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%. If an institution becomes undercapitalized, it would become subject to significant additional oversight, regulation and requirements as mandated by the FDIA.

As of December 31, 2004, each of the Registrant’s Subsidiary Banks was deemed to be a well-capitalized institution for the above purposes. As discussed above, the Subsidiary Banks are required to remain well-capitalized institutions at all times because the Registrant elected to be treated as an FHC. Additional information, with respect to these capital and leverage ratios, is included in Note 27 (pages 62 and 63) of the Notes to Consolidated Financial Statements in the Registrant’s 2004 Annual Report to Shareholders, and is incorporated herein by reference and attached to this filing as Exhibit 13.

Transactions with Affiliates. Federal law, Sections 23A and 23B of the Federal Reserve Act, restricts transactions between a bank and an affiliated company, including a parent bank holding company. The Subsidiary Banks are subject to certain restrictions on loans to affiliated companies, on investments in the stock or securities thereof, on the taking of such stock or securities as collateral for

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ITEM 1. BUSINESS (Continued)

loans to any borrower, and on the issuance of a guarantee or letter of credit on their behalf. Among other things, these restrictions limit the amount of such transactions, require collateral in prescribed amounts for extensions of credit, prohibit the purchase of low quality assets and require that the terms of such transactions be substantially equivalent to terms of similar transactions with non-affiliates. The FRB adopted a final rule, which became effective April 1, 2003, to implement comprehensively Sections 23A and 23B of the Federal Reserve Act.

This rule, among numerous other requirements, specifies that derivative transactions are subject to the “substantially equivalent terms” requirements of Section 23B (including use of daily marks and two way collateralization) but generally not to the amount and collateral requirements of Section 23A, except that derivatives in which the bank provides credit protection to a non-affiliate on behalf of an affiliate will be treated as a guarantee for purposes of Section 23A. The rule also requires banks to establish policies and procedures to monitor credit exposure to affiliates. The FRB has stated that it intends to propose future regulations to treat derivatives that are the functional equivalent of a loan to an affiliate as subject to Section 23A. One result of these restrictions is a limitation on the ability of the Subsidiary Banks to fund the Registrant. Generally, each Subsidiary Bank is limited in its extensions of credit to any affiliate to 10% of the Subsidiary Bank’s capital and in its extensions of credit to all affiliates to 20% of the Subsidiary Bank’s capital.

Activities and Investments of Insured State-Chartered Banks. Section 24 of the FDIA generally limits the activities as principal and equity investments of FDIC-insured, state-chartered banks to those that are permissible for national banks. However, the GLBA permits national banks and state banks, to the extent permitted under state law, to engage through a “financial subsidiary” in certain new activities that are permissible for subsidiaries of a FHC. In order to form a financial subsidiary, a state bank must be well capitalized, and the bank would be subject to certain capital deductions, risk management and affiliate transaction rules. As previously mentioned, Fifth Third Bank has established a financial subsidiary that is subject to these requirements.

Community Reinvestment Act. The CRA generally requires insured depository institutions to identify the communities they serve and to make loans and investments and provide services that meet the credit needs of these communities. Furthermore, the CRA requires the FRB to evaluate the performance of each of the Subsidiary Banks in helping to meet the credit needs of their communities. As a part of the CRA program, the Subsidiary Banks are subject to periodic examinations by the FRB, and must maintain comprehensive records of their CRA activities for this purpose. During these examinations, the FRB rates such institutions’ compliance with CRA as “Outstanding,” “Satisfactory,” “Needs to Improve” or “Substantial Noncompliance.” Failure of an institution to receive at least a “Satisfactory” rating could inhibit such institution or its holding company from undertaking certain activities, including engaging in activities newly permitted as a financial holding company under the GLBA and acquisitions of other financial institutions, or, as discussed above, require divestitures. The FRB must take into account the record of performance of banks in meeting the credit needs of the entire community served, including low-and moderate-income neighborhoods. Each of the Subsidiary Banks has a CRA rating of “Satisfactory.” Because the Registrant is an FHC, with limited exceptions, the Registrant may not commence any new financial activities or acquire control of any companies engaged in financial activities in reliance on the GLBA if any of the Subsidiary Banks receives a CRA rating of less than “Satisfactory.”

Customer Information Security. The FRB, the FDIC and other bank regulatory agencies have adopted final guidelines (the “Guidelines”) for safeguarding confidential, personal customer information. The Guidelines require each financial institution, under the supervision and ongoing oversight of its Board of Directors or an appropriate committee thereof, to create, implement and maintain a comprehensive written information security program designed to ensure the security and confidentiality of customer information, protect against any anticipated threats or hazards to the security or integrity of such information and protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer. The Registrant has adopted a customer information security program that has been approved by the Registrant’s Board of Directors (the “Board”).

Privacy. The GLBA requires financial institutions to implement policies and procedures regarding the disclosure of nonpublic personal information about consumers to non-affiliated third parties. In general, the statute requires explanations to consumers on policies and procedures regarding the disclosure of such nonpublic personal information, and, except as otherwise required by law, prohibits disclosing such information except as provided in the Subsidiary Banks policies and procedures. The Subsidiary Banks have implemented a privacy policy effective since the GLBA became law, pursuant to which all of its existing and new customers are notified of the privacy policies.

USA PATRIOT Act. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”), designed to deny terrorists and others the ability to obtain access to the United States financial system, has significant implications for depository institutions, brokers, dealers and other businesses involved in the transfer of money. The Patriot Act, as implemented by various federal regulatory agencies, requires financial institutions, including the Registrant and its subsidiaries, to implement new policies and procedures or amend existing policies and procedures with respect to, among other matters, anti-money laundering, compliance, suspicious activity and currency transaction reporting and due diligence on customers. The Patriot Act and its underlying regulations also permit information sharing for counter-terrorist purposes between

8

PART I

ITEM 1. BUSINESS (Continued)

federal law enforcement agencies and financial institutions, as well as among financial institutions, subject to certain conditions, and require the FRB (and other federal banking agencies) to evaluate the effectiveness of an applicant in combating money laundering activities when considering applications filed under Section 3 of the BHCA or the Bank Merger Act. The Registrant’s Board has approved policies and procedures that are believed to be compliant with the USA Patriot Act.

Regulatory Enforcement Authority. The enforcement powers available to federal banking regulators include, among other things, the ability to assess civil money penalties, to issue cease-and-desist or removal orders, to require written agreements and to initiate injunctive actions against banking organizations and institution-affiliated parties, as defined. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with regulatory authorities. Federal law requires, except under certain circumstances, public disclosure of final enforcement actions by the federal banking agencies, such as the Written Agreement. In addition, the FRB may take various other informal actions.

Regulation of Investment Companies. Certain mutual fund and unit investment trust custody and administrative clients are regulated as “investment companies” as that term is defined under the Investment Company Act of 1940, as amended (the “ICA”), and are subject to various examination and reporting requirements.

The provisions of the ICA and the regulations promulgated thereunder prescribe the type of institution that may act as a custodian of investment company assets, as well as the manner in which a custodian administers the assets in its custody. As a custodian for a number of investment company clients, these regulations require, among other things, that certain minimum aggregate capital, surplus and undivided profit levels are maintained by the Subsidiary Banks. Additionally, arrangements with clearing agencies or other securities depositories must meet ICA requirements for segregation of assets, identification of assets and client approval. Future legislative and regulatory changes in the existing laws and regulations governing custody of investment company assets, particularly with respect to custodian qualifications, may have a material and adverse impact on the Registrant. Currently, management believes the Registrant is in compliance with all minimum capital and securities depository requirements. Further, the Registrant is not aware of any proposed or pending regulatory developments, which, if approved, would adversely affect its ability to act as custodian to an investment company.

Investment companies are also subject to extensive record keeping and reporting requirements. These requirements dictate the type, volume and duration of the record keeping the Registrant undertakes, either in the role as custodian for an investment company or as a provider of administrative services to an investment company. Further, specific ICA guidelines must be followed when calculating the net asset value of a client mutual fund. Consequently, changes in the statutes or regulations governing record keeping and reporting or valuation calculations will affect the manner in which operations are conducted.

New legislation or regulatory requirements could have a significant impact on the information reporting requirements applicable to the Registrant and may in the short term adversely affect the Registrant’s ability to service clients at a reasonable cost. Any failure to provide such support could cause the loss of customers and have a material adverse effect on financial results. Additionally, legislation or regulations may be proposed or enacted to regulate the Registrant in a manner that may adversely affect financial results. Furthermore, the mutual fund industry may be significantly affected by new laws and regulations following revelations about timing trading and late trading.

Other Securities Laws Issues. The GLBA amended the federal securities laws to eliminate the blanket exceptions that banks traditionally have had from the definition of “broker” and “dealer” for a “bank.” In February 2003, the SEC extended the temporary exemption from the definition of “dealer” for banks until September 30, 2003 and, in April 2003, it extended the temporary exemption from the definition of “broker” until November 12, 2004 and in June 2004, the SEC further extended the temporary exemption to January 1, 2006. In February 2003, the SEC also issued final rules that, among other matters, adopt amendments to its rule granting an exemption to banks from dealer registration for a de minimis number of riskless principal transactions, and to its rule that defines terms used in the bank exception to dealer registration for asset-backed transactions, and it adopted a new exemption for banks from the definition of broker and dealer under the Exchange Act for certain securities lending transactions. Banks not falling within the specific exemptions provided by the new law may have to register with the SEC as a broker or a dealer or both and become subject to SEC jurisdiction. The Registrant evaluated the activities of its subsidiary banks in light of the revisions to the bank exemption from the definition of dealer as effective September 30, 2003. The Registrant determined that the activities of its subsidiary banks fall within the bank exemption from the definition of dealer as revised and effective September 30, 2003. The Registrant is currently evaluating alternatives to ensure that its subsidiary banks will not be required to register as a broker upon the January 1, 2006 effective date of the revisions to the bank exemption from the definition of broker.

The Sarbanes-Oxley Act. The Sarbanes-Oxley Act of 2002, (“Sarbanes-Oxley”) implements a broad range of corporate governance and accounting measures for public companies (including publicly-held bank holding companies such as the Registrant) designed to promote honesty and transparency in corporate America. Sarbanes-Oxley’s principal provisions, many of which have been interpreted through regulations, provide for and include, among other things: (i) the creation of an independent accounting

9

PART I

ITEM 1. BUSINESS (Continued)

oversight board; (ii) auditor independence provisions that restrict non-audit services that accountants may provide to their audit clients; (iii) additional corporate governance and responsibility measures, including the requirement that the chief executive officer and chief financial officer of a public company certify financial statements; (iv) the forfeiture of bonuses or other incentive-based compensation and profits from the sale of an issuer’s securities by directors and senior officers in the twelve month period following initial publication of any financial statements that later require restatement; (v) an increase in the oversight of, and enhancement of certain requirements relating to, audit committees of public companies and how they interact with the Company’s independent auditors; (vi) requirements that audit committee members must be independent and are barred from accepting consulting, advisory or other compensatory fees from the issuer; (vii) requirements that companies disclose whether at least one member of the audit committee is a ‘financial expert’ (as such term is defined by the SEC) and if not discussed, why the audit committee does not have a financial expert; (viii) expanded disclosure requirements for corporate insiders, including accelerated reporting of stock transactions by insiders and a prohibition on insider trading during pension blackout periods; (ix) a prohibition on personal loans to directors and officers, except certain loans made by insured financial institutions on nonpreferential terms and in compliance with other bank regulatory requirements; (x) disclosure of a code of ethics and filing a Form 8-K for a change or waiver of such code; (xi) requirements that management assess the effectiveness of internal control over financial reporting and the Company’s Independent Registered Public Accounting Firm attest to the assessment; and (xii) a range of enhanced penalties for fraud and other violations.

Additional Information

Additional information regarding regulatory matters is included in Note 27 (pages 62 and 63) of the Notes to Consolidated Financial Statements in the Registrant’s 2004 Annual Report to Shareholders, and is incorporated herein by reference and attached to this filing as Exhibit 13.

EMPLOYEES

As of December 31, 2004, there were no employees of the Registrant. Subsidiaries of the Registrant employed 21,027 employees – 4,675 were officers and 2,733 were part-time employees. There were 19,659 full-time equivalent employees as of December 31, 2004.

SEGMENT INFORMATION

Information about the Registrant’s business segments is included in Note 29 (pages 63 and 64) of the Notes to the Consolidated Financial Statements in the Registrant’s 2004 Annual Report to Shareholders and is incorporated herein by reference and attached to this filing as Exhibit 13.

AVERAGE BALANCE SHEETS

The average balance sheets for each of the last three fiscal years are incorporated herein by reference to Table 4 of Management’s Discussion and Analysis of Financial Condition and Results of Operations (page 19) of the Registrant’s 2004 Annual Report to Shareholders attached to this filing as Exhibit 13.

ANALYSIS OF NET INTEREST INCOME AND NET INTEREST INCOME CHANGES

The analysis of net interest income and the analysis of net interest income changes are incorporated herein by reference to Table 4 and Table 5 of Management’s Discussion and Analysis of Financial Condition and Results of Operations and the related discussion on pages 18 through 20 of the Registrant’s 2004 Annual Report to Shareholders attached to this filing as Exhibit 13.

INVESTMENT SECURITIES PORTFOLIO

The investment securities portfolio as of December 31 for each of the last five years and the weighted-average maturity and weighted-average yield of investment securities as of December 31, 2004 are incorporated herein by reference to Table 14 and Table 15 of Management’s Discussion and Analysis of Financial Condition and Results of Operations and the related discussion on pages 24 and 25 of the Registrant’s 2004 Annual Report to Shareholders attached to this filing as Exhibit 13.

10

PART I

ITEM 1. BUSINESS (Continued)

LOAN AND LEASE PORTFOLIO

The loan and lease portfolio as of December 31 for each of the last five years and maturities and sensitivities of loans and leases to changes in interest rates at December 31, 2004 are incorporated herein by reference to Table 13, Table 25 and Table 26 of Management’s Discussion and Analysis of Financial Condition and Results of Operations and the related discussion on pages 23 and 24 of the Registrant’s 2004 Annual Report to Shareholders attached to this filing as Exhibit 13.

RISK ELEMENTS OF LOAN AND LEASE PORTFOLIO

The risk elements of the loan and lease portfolio, including a summary of credit loss experience, are incorporated herein by reference to Table 18, Table 19, Table 20, Table 21, Table 22 and Table 23 and the related discussions in the Credit Risk Management section of Management’s Discussion and Analysis of Financial Condition and Results of Operations (pages 26 through 29) of the Registrant’s 2004 Annual Report to Shareholders attached to this filing as Exhibit 13.

DEPOSITS

The types of deposits and maturity distribution of certificates - $100,000 and over at December 31, 2004 is incorporated herein by reference to Tables 16 and 27 of Management’s Discussion and Analysis of Financial Condition and Results of Operations and the related discussion on page 25 of the Registrant’s 2004 Annual Report to Shareholders attached to this filing as Exhibit 13.

An analysis of the average balances and the average rate paid by deposit category for each of the last three years is incorporated herein by reference to Table 4 of Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Registrant’s 2004 Annual Report to Shareholders attached to this filing as Exhibit 13.

RETURN ON EQUITY AND ASSETS

Information about the Registrant’s return on average assets, return on average equity, dividend payout ratio and average equity as a percent of average assets is included in Table 1 of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Registrant’s 2004 Annual Report to Shareholders and is incorporated herein by reference and attached to this filing as Exhibit 13.

SHORT-TERM BORROWINGS

Short-term borrowings related detail by category as of December 31 for each of the last three years is incorporated herein by reference to Note 10 (page 50) of the Notes to the Consolidated Financial Statements of the Registrant’s 2004 Annual Report to Shareholders attached to this filing as Exhibit 13.

AVAILABILITY OF FINANCIAL INFORMATION

The Registrant files reports with the SEC. Those reports include the annual report on Form 10-K, quarterly reports on Form 10-Q, current event reports on Form 8-K and proxy statements, as well as any amendments to those reports. The public may read and copy any materials the Registrant files with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. The Registrant’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are accessible at no cost on the Registrant’s web site at www.53.com on a same day basis after they are electronically filed with or furnished to the SEC.

11

PART I

ITEM 2. PROPERTIES

The Registrant’s executive offices and the main office of Fifth Third Bank are located on Fountain Square Plaza in downtown Cincinnati, Ohio in a 32-story office tower, a five-story office building with an attached parking garage and a separate ten-story office building known as the Fifth Third Center, the William S. Rowe Building and the 530 Building, respectively. The Registrant’s main operations center is located in Cincinnati, Ohio, in a three-story building with an attached parking garage known as the Madisonville Operations Center. A subsidiary of the Registrant owns 100 percent of these buildings.

At December 31, 2004, the Registrant, through its banking and non-banking subsidiaries, operated 1,011 banking centers, of which 703 were owned and 308 were leased, located throughout in the states of Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia and Pennsylvania. The Registrant’s significant owned properties are owned free from mortgages and major encumbrances.

ITEM 3. LEGAL PROCEEDINGS

Legal and regulatory proceedings are incorporated herein by reference to Note 13 (page 52) of the Notes to the Consolidated Financial Statements in the Registrant’s 2004 Annual Report to Shareholders attached to this filing as Exhibit 13.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

12

PART I

EXECUTIVE OFFICERS OF THE REGISTRANT

The names, ages and positions of the Executive Officers of the Registrant as of March 1, 2005 are listed below along with their business experience during the past 5 years. Officers are appointed annually by the Board of Directors at the meeting of Directors immediately following the Annual Meeting of Shareholders.

Name and Age	Current Position and Business Experience During the Past 5 Years
George A. Schaefer, Jr., 59	PRESIDENT AND CHIEF EXECUTIVE OFFICER. President and Chief Executive Officer of the Registrant and Fifth Third Bank since 1990.
Neal E. Arnold, 45	EXECUTIVE VICE PRESIDENT. Executive Vice President of the Registrant and Fifth Third Bank since December 1998. Previously, Mr. Arnold was Chief Financial Officer, Treasurer and Senior Vice President of the Registrant and Fifth Third Bank.
Greg D. Carmichael, 43	EXECUTIVE VICE PRESIDENT AND CHIEF INFORMATION OFFICER. Executive Vice President and Chief Information Officer of the Registrant since June 2003. Previously, Mr. Carmichael was the Chief Information Officer of Emerson Electric Company.
David J. DeBrunner, 38	SENIOR VICE PRESIDENT AND CONTROLLER. Senior Vice President and Controller of the Registrant since September 2004 and January 2002, respectively. Previously, Mr. DeBrunner was Vice President of the Registrant and Fifth Third Bank since January 2002 and 1997, respectively.
Diane L. Dewbrey, 40	SENIOR VICE PRESIDENT. Senior Vice President of the Registrant and Fifth Third Bank since January 2002. Previously, Ms. Dewbrey was Senior Vice President of Fifth Third Bank since 1995 and Vice President of Fifth Third Bank since 1992.
R. Mark Graf, 40	SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER. Senior Vice President of the Registrant since January 2003 and Chief Financial Officer since April 2004. Previously, Mr. Graf was Treasurer of the Registrant since January 2002 and of Fifth Third Bank since July 2001. Mr. Graf joined the Registrant in July 2001 after serving in various management capacities at AmSouth Bancorporation since 1998.
Malcolm D. Griggs, 44	EXECUTIVE VICE PRESIDENT AND CHIEF RISK OFFICER. Executive Vice President and Chief Risk Officer of the Registrant since June 2003. Previously, Mr. Griggs was the Director of Risk Policy for Wachovia Corporation.
Kevin T. Kabat, 48	EXECUTIVE VICE PRESIDENT. Executive Vice President of the Registrant since December 2003. President and CEO of Fifth Third Bank (Michigan) since April 2001. Previously, Mr. Kabat was Vice Chairman of Old Kent Financial Corporation and President and CEO of Old Kent Bank.
Ronald D. Marks, 50	SENIOR VICE PRESIDENT AND TREASURER. Senior Vice President of the Registrant since September 2004 and Treasurer since April 2004. Mr. Marks joined the Registrant in September 2003. Previously, Mr. Marks was Senior Vice President and Treasurer of Comerica Incorporated since 1997.
Daniel T. Poston, 46	EXECUTIVE VICE PRESIDENT AND AUDITOR. Executive Vice President of the Registrant since June 2003. Senior Vice President of the Registrant and Fifth Third Bank since January 2002. Auditor of the Registrant and Fifth Third Bank. Mr. Poston joined the Registrant in October 2001. Previously, Mr. Poston was a partner at Arthur Andersen since 1994.
Paul L. Reynolds, 43	EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY. General Counsel and Secretary of the Registrant since January 2002. Executive Vice President of the Registrant since September 1999. Previously, Senior Vice President of the Registrant and Fifth Third Bank since March 1997. Assistant Secretary of the Registrant since March 1995, General Counsel and Assistant Secretary of Fifth Third Bank since January 1995.

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PART I

EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)

Robert A. Sullivan, 50 EXECUTIVE VICE PRESIDENT. Executive Vice President of the Registrant since December 2002. Previously, Mr. Sullivan was President and CEO of Fifth Third Bank (Northwestern Ohio), since March 9, 2001 and President and Chief Operating Officer of Capital Holding, Inc. prior to its acquisition by Fifth Third Bancorp effective March 9, 2001. Mr. Sullivan was Co-Founder, President and Chief Operating Officer of Capital Holding, Inc. since 1989.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated herein by reference to Corporate Information (page 67) and the discussion of dividend limitations that the subsidiaries can pay to the Registrant discussed in Note 27 (pages 62 and 63) of the Notes to the Consolidated Financial Statements in the Registrant’s 2004 Annual Report to Shareholders attached to this filing as Exhibit 13. Additionally, as of December 31, 2004, the Registrant had approximately 53,000 shareholders of record.

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased (a)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (b)
October 1, 2004 - October 31, 2004	5,134	$	49.30	—	39,585,112
November 1, 2004 - November 30, 2004	4,133	$	49.65	—	39,585,112
December 1, 2004 - December 31, 2004	3,905,826	$	47.00	3,900,000	35,685,112
Total	3,915,093	$	47.00	3,900,000	35,685,112

(a) The Registrant purchased 5,134, 4,133 and 5,826 shares of its common stock during October, November and December 2004, respectively, in connection with various employee compensation and incentive plans of the Registrant. These purchases are not included against the maximum number of shares that may yet be purchased under the Board of Directors authorization.

(b) On June 15, 2004, the Registrant announced that its Board of Directors had authorized management to purchase up to 40 million shares of the Registrant’s common stock through the open market or any private transaction. The timing of the purchases and the exact number of shares to be purchased depends upon the market conditions. The authorization does not include specific price targets or an expiration date.

ITEM 6. SELECTED FINANCIAL DATA

The information required by this item is incorporated herein by reference to Management’s Discussion and Analysis of Financial Condition and Results of Operations (page 14) of the Registrant’s 2004 Annual Report to Shareholders attached to this filing as Exhibit 13.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information required by this item is incorporated herein by reference to Management’s Discussion and Analysis of Financial Condition and Results of Operations (pages 14 through 33) of the Registrant’s 2004 Annual Report to Shareholders attached to this filing as Exhibit 13.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this item is incorporated herein by reference to the Market Risk Management section of Management’s Discussion and Analysis of Financial Condition and Results of Operations (pages 29 through 31) of the Registrant’s 2004 Annual Report to Shareholders attached to this filing as Exhibit 13.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is incorporated herein by reference to pages 35 through 64 of the Registrant’s 2004 Annual Report to Shareholders attached to this filing as Exhibit 13.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

The information required by this item is incorporated herein by reference to pages 33 and 34 of the Registrant’s 2004 Annual Report to Shareholders attached to this filing as Exhibit 13.

ITEM 9B. OTHER INFORMATION

Not applicable.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item relating to the Executive Officers of the Registrant is included in PART I (pages 13 and 14) under “EXECUTIVE OFFICERS OF THE REGISTRANT.”

The information required by this item concerning Directors is incorporated herein by reference under the caption “ELECTION OF DIRECTORS” (pages 2 through 5) of the Registrant’s Proxy Statement for the 2005 Annual Meeting of Shareholders.

The information required by this item concerning Audit Committee expert and Code of Business Conduct and Ethics is incorporated herein by reference under the caption “BOARD OF DIRECTORS, ITS COMMITTEES, MEETINGS AND FUNCTIONS” (pages 6 through 7) of the Registrant’s Proxy Statement for the 2005 Annual Meeting of Shareholders.

The information required by this item concerning Section 16 (a) Beneficial Ownership Reporting Compliance is incorporated herein by reference under the caption “SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE” (page 11) of the Registrant’s Proxy Statement for the 2005 Annual Meeting of Shareholders.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference under the caption “EXECUTIVE COMPENSATION” (pages 7 through 16) and “FINANCIAL PERFORMANCE” (pages 18 through 19) of the Registrant’s Proxy Statement for the 2005 Annual Meeting of Shareholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Security ownership information of certain beneficial owners and management is incorporated herein by reference under the captions “CERTAIN BENEFICIAL OWNERS, ELECTION OF DIRECTORS AND EXECUTIVE COMPENSATION” (pages 2 through 5 and page 10) of the Registrant’s Proxy Statement for the 2005 Annual Meeting of Shareholders.

The information required by this item concerning Equity Compensation Plan information is incorporated herein by reference to Note 18 of the Notes to the Consolidated Financial Statements (pages 55 through 56) of the Registrant’s 2004 Annual Report to Shareholders attached to this filing as Exhibit 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated herein by reference under the caption “CERTAIN TRANSACTIONS” (page 18) of the Registrant’s Proxy Statement for the 2005 Annual Meeting of Shareholders.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated herein by reference under the caption “PRINCIPAL INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES” (page 18) of the Registrant’s Proxy Statement for the 2005 Annual Meeting of Shareholders.

15

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

a) Documents Filed as Part of the Report

1. Index to Financial Statements

	Page
Report of Independent Registered Public Accounting Firm — Deloitte & Touche LLP	*
Consolidated Statements of Income for the Years Ended December 31, 2004, 2003 and 2002	*
Consolidated Balance Sheets as of December 31, 2004 and 2003	*
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2004, 2003 and 2002	*
Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and 2002	*
Notes to Consolidated Financial Statements	*

* Incorporated by reference to pages 35 through 64 of the Registrant’s 2004 Annual Report to Shareholders attached to this filing as Exhibit 13.

2. Financial Statement Schedules

The schedules for the Registrant and its subsidiaries are omitted because of the absence of conditions under which they are required, or because the information is set forth in the consolidated financial statements or the notes thereto.

3. Exhibits

Exhibit No.
3.1	Second Amended Articles of Incorporation of Fifth Third Bancorp, as amended. Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.
3.2	Code of Regulations of Fifth Third Bancorp, as amended. Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.
4(a)	Junior Subordinated Indenture, dated as of March 20, 1997 between Fifth Third Bancorp and Wilmington Trust Company, as Debenture Trustee. Incorporated by reference to Registrant’s filing with the Securities and Exchange Commission on March 26, 1997, a Form 8-K Current Report.
4(b)	Certificate Representing the 8.136% Junior Subordinated Deferrable Interest Debentures, Series A, of Fifth Third Bancorp. Incorporated by reference to Registrant’s filing with the Securities and Exchange Commission on March 26, 1997, a Form 8-K Current Report.
4(c)	Amended and Restated Trust Agreement, dated as of March 20, 1997 of Fifth Third Capital Trust II, among Fifth Third Bancorp, as Depositor, Wilmington Trust Company, as Property Trustee, and the Administrative Trustees name therein. Incorporated by reference to Registrant’s filing with the Securities and Exchange Commission on March 26, 1997, a Form 8-K Current Report.
4(d)	Certificate Representing the 8.136% Capital Securities, Series A, of Fifth Third Capital Trust I. Incorporated by reference to Registrant’s filing with the Securities and Exchange Commission on March 26, 1997, a Form 8-K Current Report.
4(e)	Guarantee Agreement, dated as of March 20, 1997 between Fifth Third Bancorp, as Guarantor, and Wilmington Trust Company, as Guarantee Trustee. Incorporated by reference to Registrant’s filing with the Securities and Exchange Commission on March 26, 1997, a Form 8-K Current Report.
4(f)	Agreement as to Expense and Liabilities, dated as of March 20, 1997 between Fifth Third Bancorp, as the holder of the Common Securities of Fifth Third Capital Trust I and Fifth Third Capital Trust II. Incorporated by reference to Registrant’s filing with the Securities and Exchange Commission on March 26, 1997, a Form 8-K Current Report.
4(g)	Old Kent Capital Trust I Floating Rate Subordinated Capital Income Securities. Incorporated by reference to the Exhibits to Old Kent Financial Corporation’s Form S-4 Registration Statement filed July 19, 1997.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (Continued)

4(h)	Form of Fifth Third Bancorp, as successor to Old Kent Financial Corporation, Floating Rate Junior Subordinated Debentures Due 2027. Incorporated by reference to the Exhibits to Old Kent Financial Corporation’s Form S-4 Registration Statement filed July 19, 1997.
4(i)	Indenture, dated as of January 31, 1997 between Fifth Third Bancorp, as successor to Old Kent Financial Corporation, and Bankers Trust Company. Incorporated by reference to the Exhibits to Old Kent Financial Corporation’s Form 8-K filed on March 5, 1997.
4(j)	Guarantee Agreement, dated as of January 31, 1997, between Fifth Third Bancorp, as successor to Old Kent Financial Corporation. Incorporated by reference to the Exhibits to Old Kent Financial Corporation’s Form 8-K filed on March 4, 1998.
4(k)	Amended and Restated Declaration of Trust dated as of January 31, 1997, between Fifth Third Bancorp, as successor to Old Kent Financial Corporation, and Bankers Trust Company. Incorporated by reference to the Exhibits to Old Kent Financial Corporation’s Form 8-K filed on March 5, 1997.
4(l)	Indenture, dated as of May 23, 2003, between Fifth Third Bancorp and Wilmington Trust Company, as Trustee, defining the rights of the 4.50% Subordinated Notes due 2018. Incorporated by reference to Registrant’s filing with the Securities and Exchange Commission on May 22, 2003, a Form 8-K Current Report.
4(m)	Global security representing Fifth Third Bancorp’s $500,000,000 4.50% Subordinated Notes due 2018. Incorporated by reference to Registrant’s filing with the Securities and Exchange Commission on May 22, 2003, a Form 8-K Current Report.
10(a)	Fifth Third Bancorp Unfunded Deferred Compensation Plan for Non-Employee Directors. Incorporated by reference to Registrant’s Form 10-K filed for fiscal year ended December 31, 1985. *
10(b)	Fifth Third Bancorp 1990 Stock Option Plan. Incorporated by reference to Registrant’s filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33-34075. *
10(c)	Fifth Third Bancorp 1987 Stock Option Plan. Incorporated by reference to Registrant’s filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-8, Registration No. 33-13252. *
10(d)	Indenture effective November 19, 1992 between Fifth Third Bancorp, Issuer and NBD Bank, N.A., Trustee. Incorporated by reference to Registrant’s filing with the Securities and Exchange Commission on November 18, 1992, a Form 8-K Current Report dated November 16, 1992 and as Exhibit 4.1 to a Registration Statement on Form S-3, Registration No. 33-54134.
10(e)	Fifth Third Bancorp Master Profit Sharing Plan, as Amended. *
10(f)	Fifth Third Bancorp Incentive Compensation Plan. Incorporated by reference to Registrant’s Proxy Statement dated February 19, 2004. *
10(g)	Amended and Restated Fifth Third Bancorp 1993 Stock Purchase Plan. Incorporated by reference to Registrant’s Form 10-K filed for the fiscal year ended December 31, 2003. *
10(h)	Fifth Third Bancorp 1998 Long-Term Incentive Stock Plan, as Amended. Incorporated by reference to the Exhibits to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003. *
10(i)	Fifth Third Bancorp Non-qualified Deferred Compensation Plan, as Amended and Restated. Incorporated by reference to Registrant’s Proxy Statement dated February 9, 2001. *
10(j)	CNB Bancshares, Inc. 1999 Stock Incentive Plan, 1995 Stock Incentive Plan, 1992 Stock Incentive Plan and Associate Stock Option Plan; and Indiana Federal Corporation 1986 Stock Option and Incentive Plan. Incorporated by reference to Registrant’s filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-4, Registration No. 333-84955 and by reference to CNB Bancshares Form 10-K, as amended, for the fiscal year ended December 31, 1998. *
10(k)	Fifth Third Direct. Incorporated by reference to Registrant’s filing with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form S-3, Registration No. 333-41164. *

17

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (Continued)

10(l)	Fifth Third Bancorp Stock Option Gain Deferral Plan. Incorporated by reference to Registrant’s Proxy Statement dated February 9, 2001. *
10(m)	Old Kent Executive Stock Option Plan of 1986, as Amended. Incorporated by reference to the following filings by Old Kent Financial Corporation with the Securities and Exchange Commission: Exhibit 10 to Form 10-Q for the quarter ended September 30, 1995; Exhibit 10.19 to Form 8-K filed on March 5, 1997; Exhibit 10.3 to Form 8-K filed on March 2, 2000. *
10(n)	Old Kent Stock Option Incentive Plan of 1992, as Amended. Incorporated by reference to the following filings by Old Kent Financial Corporation with the Securities and Exchange Commission: Exhibit 10(b) to Form 10-Q for the quarter ended June 30, 1995; Exhibit 10.20 to Form 8-K filed on March 5, 1997; Exhibit 10(d) to Form 10-Q for the quarter ended June 30, 1997; Exhibit 10.3 to Form 8-K filed on March 2, 2000. *
10(o)	Old Kent Executive Stock Incentive Plan of 1997, as Amended. Incorporated by reference to Old Kent Financial Corporation’s Annual Meeting Proxy Statement dated March 1, 1997. *
10(p)	Old Kent Stock Incentive Plan of 1999. Incorporated by reference to Old Kent Financial Corporation’s Annual Meeting Proxy Statement dated March 1, 1999. *
10(q)	Schedule of Director Compensation Arrangements. *
10(r)	Schedule of Executive Officer Compensation Arrangements. *
10(s)	Notice of Grant of Performance Units and Award Agreement. *
10(t)	Notice of Grant of Restricted Stock and Award Agreement (for Executive Officers). *
10(u)	Notice of Grant of Stock Appreciation Rights and Award Agreement. *
10(v)	Notice of Grant of Restricted Stock and Award Agreement (for Directors). *
10(w)	Franklin Financial Corporation 1990 Incentive Stock Option Plan. Incorporated by reference to Franklin Financial Corporation’s Form 10-K for the year ended December 31, 1989. *
10(x)	Franklin Financial Corporation 2000 Incentive Stock Option Plan. . Incorporated by reference to Franklin Financial Corporation’s Registration Statement on Form S-8, Registration No. 333-52928. *
10(y)	Amended and Restated First National Bankshares of Florida, Inc. 2003 Incentive Plan. Incorporated by reference to First National Bankshares of Florida, Inc.’s Form 10-K for the year ended December 31, 2003. *
10(z)	Southern Community Bancorp Equity Incentive Plan. Incorporated by reference to Southern Community Bancorp’s Registration Statement on Form SB-2, Registration No. 333-35548. *
10(aa)	Southern Community Bancorp Director Statutory Stock Option Plan. . Incorporated by reference to Southern Community Bancorp’s Registration Statement on Form SB-2, Registration No. 333-35548. *
10(bb)	Peninsula Bank of Central Florida Key Employee Stock Option Plan. Incorporated by reference to Southern Community Bancorp’s Form 10-K for the year ended December 31, 2003. *
10(cc)	Peninsula Bank of Central Florida Director Stock Option Plan. Incorporated by reference to Southern Community Bancorp’s Form 10-K for the year ended December 31, 2003. *
10(dd)	First Bradenton Bank Amended and Restated Stock Option Plan. *
12(a)	Computations of Consolidated Ratios of Earnings to Fixed Charges.
12(b)	Computations of Consolidated Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements.
13	Fifth Third Bancorp 2004 Annual Report to Shareholders.
14	Code of Ethics. Incorporated by reference to Exhibit 14 of the Registrant’s filing with the Securities and Exchange Commission on December 22, 2004, a Form 8-K Current Report.

18

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (Continued)

21	Fifth Third Bancorp Subsidiaries, as of December 31, 2004.
23	Consent of Independent Registered Public Accounting Firm—Deloitte & Touche LLP.
31 (i)	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer.
31 (ii)	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer.
32 (i)	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer.
32 (ii)	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer.

* Denotes management contract or compensatory plan or arrangement

19

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FIFTH THIRD BANCORP (Registrant)
/S/    GEORGE A. SCHAEFER, JR.	March 1, 2005
George A. Schaefer, Jr. President and CEO (Principal Executive Officer)

Pursuant to requirements of the Securities Exchange Act of 1934, this report has been signed on March 1, 2005 by the following persons on behalf of the Registrant and in the capacities indicated.

/S/    GEORGE A. SCHAEFER, JR.	/S/    R. MARK GRAF	/S/    DAVID J. DEBRUNNER
George A. Schaefer, Jr. Director, President, and CEO (Principal Executive Officer)	R. Mark Graf Senior Vice President and CFO (Principal Financial Officer)	David J. DeBrunner Senior Vice President and Controller (Principal Accounting Officer)
/S/    DARRYL F. ALLEN	/S/    JOHN F. BARRETT	/s/    JAMES P. HACKETT
Darryl F. Allen Director	John F. Barrett Director	James P. Hackett Director
/S/    JOAN R. HERSCHEDE	/S/    ALLEN M. HILL	/S/    ROBERT L. KOCH II
Joan R. Herschede Director	Allen M. Hill Director	Robert L. Koch II Director
/S/    MITCHEL D. LIVINGSTON, PH.D.		/s/    HENDRIK G. MEIJER
Mitchel D. Livingston, Ph.D. Director	Kenneth W. Lowe Director	Hendrik G. Meijer Director
/s/    ROBERT B. MORGAN	/s/    JAMES E. ROGERS	/S/    JOHN J. SCHIFF, JR.
Robert B. Morgan Director	James E. Rogers Director	John J. Schiff, Jr. Director
/S/    DUDLEY S. TAFT
Dudley S. Taft Director	Thomas W. Traylor Director

20

EX-10.(E)

Exhibit 10(e)

THIRD AMENDMENT

TO

THE FIFTH THIRD BANCORP MASTER

PROFIT SHARING PLAN

(as amended and restated effective as of December 31, 2000)

Pursuant to the reserved power of amendment contained in Section 12.1 of The Fifth Third Bancorp Master Profit Sharing Plan (as amended and restated effective as of December 31, 2000) (the “Plan”), the Plan is hereby amended in the following respects:

1. Section 4.1(a) is amended in its entirety effective January 1, 2003 to read as follows:

4.1 Compensation Reduction Contributions.

(a) Compensation Reduction.

(1) Regular 401(k) Contributions. Each Participant may enter into a compensation reduction agreement with his Employer whereby he authorizes his Employer to reduce his Deferrable Compensation or any part thereof, by such percentage or dollar amount prospectively as he shall specify. Such an agreement shall remain in effect until the Participant revokes it or changes it. The Administrator may from time to time establish rules with respect to compensation reduction contributions hereunder, including but not limited to, rules restricting the amount by which compensation may be reduced, rules restricting such contributions to Participants whose pay is paid through the Fifth Third payroll system, and rules respecting the time for filing forms. In accordance with such rules and procedures as the Administrator deems appropriate, the Employer may treat a Participant as having made a compensation reduction election unless and until a Participant affirmatively elects to revoke or revise such deemed compensation reduction election. The maximum compensation reduction for any pay period or for any payment of Deferrable Compensation _hen combined with voluntary after-tax contributions (if any) under Section 4.5 of the Plan shall be 20%.

(2) Catch-Up Contributions. Each “Catch-Up Eligible Participant,” as defined below, shall be eligible to make catch-up contributions in accordance with, and subject to the limitations of, section 414(v) of the Code. Such catch-up contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of sections 402(g) and 415 of the Code. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of section 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of the Code, as applicable, by reason of the making of such catch-up contributions. “Catch-Up Eligible Participant” means a Participant who is age 50 or older and for this purpose a Participant who is projected to attain age 50 before the end of a calendar year is deemed to be age 50 as of January 1 of such year.

Catch-up contributions (including catch-up contributions later re-characterized as regular section 401(k) contributions) shall not be eligible for matching contributions under Section 4.4.

2. Section 4.4(a) is amended effective January 1, 2003 by changing the cross-reference to “Section 4.1” each time it occurs to “Section 4.1(a)(1).”

3. Section 4.5(a) is amended effective January 1, 2003 by adding the following thereto:

The maximum voluntary after-tax contribution for any pay period or for any payment of Deferrable Compensation when combined with regular section 401(k) contributions (if any) under Section 4.1(a)(1) of the Plan shall be 20%.

4. Article 13 of the Plan is amended by adding a new Section 13.5 to read as follows:

13.5 EGTRRA Modifications.

(a) Effective Date. This Section shall apply for purposes of determining whether the Plan is a top-heavy plan under section 416(g) of the Code for Plan Years beginning after December 31, 2001, and whether the Plan satisfies the minimum benefits requirements of section 416(c) of the Code for such years. This Section amends Article 13 of the Plan.

(b) Determination of Top-Heavy Status.

(1) Key Employee. Key employee means any employee or former employee (including any deceased employee) who at any time during the Plan Year that includes the determination date was an officer of the employer having annual compensation greater than $130,000 (as adjusted under section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002), a 5-percent owner of the employer, or a 1-percent owner of the employer having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of section 415(c)(3) of the Code. The determination of who is a key employee will be made in accordance with section 416(i)(l) of the Code and the applicable regulations and other guidance of general applicability issued thereunder.

(2) Determination of Present Values and Amounts. This Section 13.5(b)(2) shall apply for purposes of determining the present values of accrued benefits and the amounts of account balances of employees as of the determination date.

(A) Distributions During Year Ending on the Determination Date. The present values of accrued benefits and the amounts of account balances of an employee as of the determination date shall be increased by the distributions made with respect to the employee under the Plan and any plan aggregated with the Plan under section 416(g)(2) of the Code during the 1-year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting “5-year period” for “1-year period.”

2

(B) Employees not Performing Services During Year Ending on the Determination Date. The accrued benefits and accounts of any individual who has not performed services for the employer during the 1-year period ending on the determination date shall not be taken into account.

(c) Minimum Benefits. Employer matching contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of section 416(c)(2) of the Code and the Plan. The preceding sentence shall apply with respect to matching contributions under the Plan or, if the Plan provides that the minimum contribution requirement shall be met in another plan, such other plan. Employer matching contributions that are used to satisfy the minimum contribution requirements shall be treated as matching contributions for purposes of the actual contribution percentage test and other requirements of section 401(m) of the Code.

IN WITNESS WHEREOF, the undersigned Director of Legal/Human Resources of Fifth Third Bank has caused this Amendment to be adopted as of this 9th day of January, 2003.

FIFTH THIRD BANK
BY:	/s/ Paul L. Reynolds
	Paul L. Reynolds Director of Legal/Human Resources

3

FOURTH AMENDMENT

TO

THE FIFTH THIRD BANCORP MASTER

PROFIT SHARING PLAN

(as amended and restated effective as of December 31, 2000)

Pursuant to the reserved power of amendment contained in Section 12.1 of The Fifth Third Bancorp Master Profit Sharing Plan (as amended and restated effective as of December 31, 2000) (the “Plan”), the Plan is hereby amended in the following respects:

1. QNEC. In order to allow the Employer to make qualified nonelective contributions, the Plan is amended in the following respects effective December 31, 2001:

(a) Section 2.3(a)(1) is amended in its entirety to read as follows:

(1) The amount of the Employee’s voluntary after-tax Participant contributions actually contributed under Section 4.5(a)(l) during the Plan Year, plus any amounts contributed on behalf of each such Employee under Section 4.5(a)(2), to

(b) Section 4.5(a), as amended by the Third Amendment, is amended by placing the current text in a subparagraph (1) with the heading “Participant Contributions.” and by adding a new subparagraph (2) to read as follows:

(2) QNEC.

(A) The Employer, in its sole discretion, may contribute, for allocation to the Section 401(k) Salary Deferral Accounts of those Participants entitled under (B) below to receive an allocation, such amount as it determines appropriate to satisfy the nondiscrimination test of section 401(m)(2) of the Code and (b) below. Any such contribution shall be allocated as of the last day of the Plan Year for which the Employer makes the contribution.

(B) Participants who are Employees at any time during the Plan Year and who are not Highly Compensated Employees shall be qualified to receive an allocation of any contribution under (A) above for a Plan Year; provided that any such contribution shall be allocated by making the maximum permissible allocation permitted under Article 5 beginning with the Participant with the least Section 415 Compensation (as defined in Section 5.1(d)) and continuing such maximum permissible allocation to each such Participant in order of Section 415 Compensation (least

Section 415 Compensation to greatest Section 415 Compensation) until the entire contribution is allocated.

This type of contribution is nonforfeitable when made (see Section 6.1(c)) and is subject to the withdrawal and distribution limitations of Section 8.6.

2. Testing Methods During Remedial Amendment Period. In order to clarify the ADP/ACP testing methods used, the Plan is amended in the following respects:

(a) Section 4.3(c)(1) is amended in its entirety to read as follows, a new Section 4.3(c)(2) is added to read as follows and existing Section 4.3(c)(2) is re-designated as Section 4.3(c)(3):

(1) Prior Year Testing. Effective for Plan Years beginning after December 30, 2001, the Actual Deferral Percentage for any Plan Year for Participants who are Highly Compensated Employees shall not exceed the greater of:

(A) 1.25 times the Actual Deferral Percentage for the preceding Plan Year for all the Participants who were Non-highly Compensated Employees or

(B) the lesser of:

(i) 2 times the Actual Deferral Percentage for the preceding Plan Year for the Participants who were Non-highly Compensated Employees, provided that the Actual Deferral Percentage for the Participants who are Highly Compensated Employees shall not exceed the Actual Deferral Percentage for the preceding Plan Year for Participants who were Non-highly Compensated Employees by more than 2 percentage points; or

(ii) such amount as the Secretary of Treasury may prescribe to prevent multiple use of this alternative limitation with respect to any Highly Compensated Employee for Plan Years beginning before January 1, 2002. In no event, however, shall the multiple use of this alternative limitation as between the Employer matching contributions under Section 4.4 and the remainder of the Plan be prohibited.

(2) Current Year Testing. For Plan Years beginning after December 31, 1996 and before December 31, 2001, the limitations of (1)(A) and (B) above were applied by reference to the current

- 2 -

year (rather than prior year) Actual Deferral Percentages for Participants who were Non-highly Compensated Employees.

(b) Sections 4.4(c)(1) and 4.5(b)(1) are amended by replacing their headings “Prior Year Testing” with “Current Year Testing” and by replacing the phrase “preceding Plan Year” with “current Plan Year” at each occurrence.

3. Sale of Universal Savings Bank, F.A. In order to reflect the sale of Universal Savings Bank, F.A., the Plan is amended effective October 31, 2002 by adding a new Section 3 to Appendix XIX to read as follows:

3. Sale of Universal Savings Bank, F.A. Due to the sale of 100% of the outstanding shares of capital stock of Universal Savings Bank, F.A. (“Universal”) on October 31, 2002, Universal is no longer a subsidiary of Fifth Third Bancorp, and therefore, is no longer an Employer under the Plan. As such, after October 31, 2002, employees of Universal are no longer “Employees” under the Plan. In order to make Participants who, on and after October 31, 2002 were employees of Universal eligible to take distributions under the Plan, such Universal employees shall be considered to have incurred a termination of employment under Section 8.3 of the Plan on October 31, 2002.

4. Sale of Fifth Third Insurance Services, Inc. In order to reflect the sale of Fifth Third Insurance Services, Inc. and special provisions associated with such sale, Appendix XVIII is amended effective December 31, 2002, by adding a new Section 3 to read as follows:

3. Sale of Fifth Third Insurance Services, Inc.

(a) Cessation of Active Participation. Due to the sale of 100% of the outstanding shares of capital stock of Fifth Third Insurance Services, Inc. (“Insurance Sub”) on December 31, 2002, Insurance Sub is no longer a subsidiary of Fifth Third Bancorp, and therefore, is no longer an Employer under the Plan. As such, after December 31, 2002, employees of Insurance Sub are no longer “Employees” under the Plan.

(b) Vesting. Notwithstanding any other provisions to the contrary, a Participant who was an employee of Insurance Sub on December 31, 2002 and who continued as an employee of Insurance Sub (and not of an Employer) immediately after the sale, shall have a nonforfeitable right to 100% of his Account (including each of its subaccounts).

(c) Distributable Event. In order to make Participants who, on and after December 31, 2002, were employees of Insurance Sub eligible to take distributions under the Plan, such Insurance Sub employees shall be considered to have incurred a termination of

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employment under Section 8.3 of the Plan immediately after December 31, 2002.

IN WITNESS WHEREOF, the undersigned Director of Legal/Human Resources of Fifth Third Bank has caused this Amendment to be adopted as of this 6th day of March, 2003.

FIFTH THIRD BANK
BY:	/s/ Paul L. Reynolds
	Paul L. Reynolds
	Director of Legal/Human Resources

- 4 -

FIFTH AMENDMENT

TO

THE FIFTH THIRD BANCORP MASTER

PROFIT SHARING PLAN

(as amended and restated effective as of December 31, 2000)

Pursuant to the reserved power of amendment contained in Section 12.1 of The Fifth Third Bancorp Master Profit Sharing Plan (as amended and restated effective as of December 31, 2000) (the “Plan”), the Plan is hereby amended effective June 1, 2003, by adding a new Section 7.7 to read as follows:

“7.7 Separately Allocable Plan Expenses. The Administrator may direct that any expenses attributable to specific Participants’ Accounts due to investment elections, loans, withdrawals, distributions, domestic relations orders or any other reasons, be deducted directly from the Account for which the expense was incurred to the extent paid from Plan Assets.”

IN WITNESS WHEREOF, the undersigned Director of Legal/Human Resources of Fifth Third Bank has caused this Amendment to be adopted as of this 20th day of June, 2003.

FIFTH THIRD BANK
BY:	/s/ Paul L. Reynolds
	Paul L. Reynolds
	Director of Legal/Human Resources

SIXTH AMENDMENT

TO

THE FIFTH THIRD BANCORP MASTER PROFIT SHARING PLAN

(as amended and restated effective as of December 31, 2000)

Pursuant to the reserved power of amendment contained in Section 12.1 of The Fifth Third Bancorp Master Profit Sharing Plan (as amended and restated effective as of December 31, 2000) (the “Plan”), the Plan is hereby amended by changing paragraph 2 of Appendix XV (Enterprise Federal Savings Bank/Financial Institutions Retirement Fund) in its entirety, effective December 31, 2002, to read as follows:

2. Profit Sharing Contributions. Notwithstanding anything in the Plan to the contrary, Enterprise Federal Employees shall not be considered “Eligible Participants” under Section 4.2 of the Plan and shall not be entitled to receive an allocation of the Employer contribution under Section 4.2 of the Plan for any Plan Year beginning before December 31, 2002. For Plan Years beginning December 31, 2002 and later, this exclusion shall no longer apply.

IN WITNESS WHEREOF, the undersigned Director of Legal/Human Resources of Fifth Third Bank has caused this Amendment to be adopted as of this 10th day of November, 2003.

FIFTH THIRD BANK
By:	/s/ Paul L Reynolds
	Director of Legal/Human Resources

SEVENTH AMENDMENT

TO

THE FIFTH THIRD BANCORP MASTER

PROFIT SHARING PLAN

(as amended and restated effective as of December 31, 2000)

Pursuant to the reserved power of amendment contained in Section 12.1 of The Fifth Third Bancorp Master Profit Sharing Plan (as amended and restated effective as of December 31, 2000) (the “Plan”), the Plan is hereby amended in the following respects:

1. Amendments to Compensation Definitions.

(a) Section 2.8 is amended in its entirety to read as follows effective December 31, 2003:

2.8 “Annual Compensation” means the remuneration (before reduction for withheld amounts) an Employee receives, or would have received but for compensation reduction pursuant to Section 4.1, pursuant to The Fifth Third Bank 125 Plan or pursuant to a Code section 132(f)(4) qualified transportation arrangement, from an Employer during a Plan Year, from and after becoming a Participant, in the form of base wages or salary, overtime, variable compensation, and similar compensation, but excluding payments made pursuant to product-focused incentive plans, Jeanie maintenance payments, tuition refund reimbursements, Benefit Choice Dollars and similar payments and benefits. Performance-based additional cash compensation incentives (other than variable compensation) shall be excluded from Annual Compensation unless an applicable incentive program by its terms provides that such compensation shall be taken into account under the Plan for either all Employees or all Non-Highly Compensated Employees covered by such incentive program.

Solely for purposes of determining the Actual Deferral Percentage and the Actual Contribution Percentage, the Administrator, in its discretion, may use the definition of “Annual Compensation” set forth in the above paragraph, or the following definition. If the Administrator so determines, “Annual Compensation” for purposes of determining the Actual Deferral Percentage and the Actual Contribution Percentage shall mean the total wages as defined in section 3401 of the Code and all other payments of compensation by the Employer (in the course of its trade or business) for which the Employer is required to furnish the Employee a written statement under sections 604l(d), 6051(a)(3) and 6052 of the Code determined without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in section 3401(a)(2) of the Code) which is paid by the Employer to an Employee during a Plan Year including amounts that otherwise would have been included within this definition

but for section 402(a)(8) of the Code (relating to a salary reduction election under section 401(k) of the Code), section 125 of the Code (relating to the cafeteria or flexible benefit plans), section 132(f)(4), section 402(h) of the Code (relating to SEPs), section 403(b) of the Code (relating to certain tax deferred annuities), section 457(b) of the Code (relating to deferred compensation plans of state and local governments and tax-exempt organizations), section 414(h)(2) of the Code (relating to certain picked-up employee contributions).

For any Plan Year, only the first $205,000 (as adjusted by the Secretary of Treasury in accordance with section 401(a)(17) of the Code) of a Participant’s Annual Compensation shall be taken into account.

(b) Section 2.12 is amended effective December 31, 2003 by changing the last clause in the first sentence to read: “plus, for the January 2, 2004 payday only, Benefit Choice Dollars allocable to periods after becoming a Participant (without regard to how the Participant elects to utilize such Benefit Choice Dollars).”

2. New Performance-Based Profit Sharing.

(a) Section 4.2 is amended effective December 31, 2003 by changing the heading to read “Profit Sharing Contributions Before 2004” and by changing subsection (a) in its entirety to read as follows:

(a) General. For each Plan Year beginning before December 31, 2003, the Board of Directors of Fifth Third Bancorp shall determine the amount to be contributed to the Plan for allocation under this Section 4.2, subject to Article 5 and this Article 4. This Section 4.2 shall no longer apply after December 30, 2003.

(b) Sections 4.9 and 4.10 are deleted effective December 30, 2003, and a new Section 4.9 is added effective January 1, 2004 to read as follows:

4.9 Performance Reward Contributions Effective 2004.

(a) General. For each Plan Year beginning after December 31, 2003, the Board of Directors of Fifth Third Bancorp shall determine the amount to be contributed to the Plan for allocation under this Section 4.9, subject to Article 5 and this Article 4.

(b) Allocation Among Employers. Each Employer shall contribute under the Plan the total contribution allocable to its Eligible Participants.

- 2 -

(c) Participants Entitled to Receive an Allocation of Employer Contribution. A Participant shall be an “Eligible Participant” and shall be entitled to receive an allocation of the Employer contribution to the Plan under (a) above for a Plan Year if he:

(1) is in the employment of an Employer on the last day of such Plan Year;

(2) died during such Plan Year and prior to the termination of his employment;

(3) retired on or after his reaching Normal Retirement Age during such Plan Year;

(4) retired on or after his reaching Early Retirement Age during such Plan Year;

(5) incurred a Disability and retired as a result thereof during such Plan Year; or

(6) is on leave of absence at the close of such Plan Year, if he received compensation from an Employer during such Plan Year.

(d) Allocation Formula. Subject to the limitations of Article 5, as of the last day of a Plan Year, there shall be allocated to the Performance Reward Account of each Participant qualified, under (c) above, to receive such an allocation that portion of the Employer’s contribution under (a) above for such Plan Year that bears the same ratio to the total amount of such contribution as the Annual Compensation of such Participant for such Plan Year bears to the total amount of the Annual Compensation for all such Participants for such Plan Year.

(c) Section 2.1 is amended in its entirety effective January 1, 2004 to read as follows:

2.1 “Account” means, with respect to a Participant, his allocable share of the Plan Assets. A Participant’s Account under the Plan may include one or more of the following subaccounts:

(a) After-Tax Account;

(b) Employer Matching Account;

(c) Frozen Cash Election Account;

(d) Frozen Vesting Account;

(e) Performance Reward Account;

(f) Profit Sharing Account;

(g) Rollover Account; and

(h) Section 401 (k) Salary Deferral Account.

- 3 -

A Participant’s Account also may include applicable subaccounts as specified under an Appendix to the Plan. A Participant’s account, if any, under a Predecessor Plan which merges into, or makes transfers to, this Plan, shall be allocated to the appropriate subaccounts as determined by the Administrator. The establishment and maintenance of separate Accounts under the Plan is for accounting purposes, and a segregation and separate investment of each Account shall not be required.

(d) Section 2.16 is amended in its entirety effective January 1, 2004 to read as follows:

2.16 “Eligible Participant” means a Participant, described in Section 4.2(c) or 4.9(c), who is qualified to receive an allocation of the Employer contribution under Section 4.2 or 4.9, as the case may be, for a Plan Year. As provided in an applicable Appendix, certain individuals may be excluded from the term “Eligible Participant.”

(e) A new Section 2.34 is added to Article 2 effective January 1, 2004 to read as follows and existing Section 2.34 and each subsequent Section in Article 2 are re numbered accordingly:

2.34 “Performance Reward Account” means the separate portion of each Participant’s Account which reflects the Employer’s contributions for Plan Years after 2003 under Section 4.9 and forfeitures allocated thereto as adjusted in accordance with Article 7.

(f) Section 2.38 (2.39 after the re-numbering referred to above) is amended in its entirety effective December 30, 2003 to read as follows:

2.39 “Profit Sharing Account” means the separate portion of each Participant’s Account which reflects the Employer’s contributions for Plan Years after 1996 and before 2004 under Section 4.2(d) and forfeitures allocated thereto as adjusted in accordance with Article 7.

(g) Section 6.1(f) is amended effective January 1, 2004 by changing the heading to “Frozen Vesting Account, Performance Reward Account and Employer Matching Account” and by changing “Frozen Vesting Account” to “Frozen Vesting Account, Performance Reward Account and Employer Matching Account” at each occurrence in Section 6.1(f)(1), (2)(B), (3), and (5).

(h) Section 6.1(f)(2)(A) is amended in its entirety effective January 1, 2004 to read as follows:

(A) Vesting Schedule.

(i) Frozen Vesting Account. Subject to (6) below, a Participant who has credit for any Service on or after the Effective Date shall have a nonforfeitable right to a percentage of his Frozen Vesting Account on the basis

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of the number of Vesting Years with which he is credited, pursuant to the following vesting schedule:

Vesting Years	Nonforfeitable Percentage
Less than 3	0%
3	30%
4	40%
5	60%
6	80%
7 or more	100%

If a Participant is reemployed after incurring a forfeiture, any balance remaining in his Frozen Vesting Account at the time of such reemployment shall be separately accounted for, shall be nonforfeitable, and shall not be subject to the above vesting schedule.

A Participant who does not have credit for any Service on or after the Effective Date shall have the vested percentage of his Frozen Vesting Account determined under the applicable provisions of the Old Plan.

(ii) Performance Reward Account. A Participant shall have a nonforfeitable right to a percentage of his Performance Reward Account on the basis of the number of Vesting Years with which he is credited, pursuant to the following schedule:

Vesting Years	Nonforfeitable Percentage
Less than 5	0%
5 or more	100%

(iii) Employer Matching Account. Subject to Section 6.1(e) above, a Participant shall have a nonforfeitable right to a percentage of his Employer Matching Account on the basis of the number of Vesting Years with which he is credited, pursuant to the following vesting schedule:

Vesting Years	Nonforfeitable Percentage
Less than 3	0%
3 or more	100%

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(i) Section 13.3(a) is amended in its entirety effective January 1, 2004 to read as follows:

(a) Top-Heavy Years. Anything in Article 6 to the contrary notwithstanding, for any Plan Year for which the Plan is a Top-Heavy Plan, a Participant who has at least one Hour of Service after the Plan becomes a Top-Heavy Plan shall have a nonforfeitable right to a percentage of his Frozen Vesting Account and Performance Reward Account determined under the following tables; provided however, no Participant’s vested percentage (as of the day before the Plan’s becoming a Top-Heavy Plan) shall be reduced:

Frozen Vesting Account Table

Vesting Years	Nonforfeitable Percentage
Less than 2	0%
2	20%
3	40%
4	60%
5	80%
6 or more	100%

Performance Reward Account Table

Vesting Years	Nonforfeitable Percentage
Less than 3	0%
3 or more	100%

(j) Section 13.3(b)(i) is amended effective January 1, 2004 by changing “Frozen Vesting Account” to “Frozen Vesting Account and Performance Reward Account.”

(k) Section 6.1(e) is amended in its entirety to read as follows:

(e) Pre-2004 Employer Matching Account. Notwithstanding Section 6.1(f)(2) below, but subject to Section 6.1(f)(6) below, a Participant’s rights to his Employer Matching Account on or before December 31, 2003 shall be nonforfeitable at all times. Any balance in the Participant’s Employer Matching Account as of December 31, 2004 shall be separately accounted for, shall be nonforfeitable and shall not be subject to the vesting schedule in Section 6.1(f)(2)(A) below.

3. Revised Eligibility.

(a) Section 3.1 is amended in its entirety effective January 1, 2004 to read as follows:

3.1 Eligibility and Participation.

(a) For Performance Reward Contributions and Rollovers. Each Employee shall become a Participant as of the date on which he has credit for at least one Hour of Service.

(b) For 401(k) Contributions, Matching Contributions and After-Tax Contributions. Notwithstanding (a) above, an Employee with an Employment Commencement Date on or after January 1, 2004 shall be eligible to make 401(k) Contributions under Section 4.1, to receive matching contributions under Section 4.4 and to make after-tax contributions under Section 4.5 only on

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and after the first pay date following his completion of 30 days of Eligibility Service. If an Employee terminates employment after completing 30 days of Eligibility Service and is later re-employed as an Employee, he shall be eligible for such contributions beginning with the first pay date after such re-employment provided he still has credit for 30 days of Eligibility Service.

(b) Section 4.1(a)(1) and Section 4.4(a) are amended effective January 1, 2004 by changing “Each Participant” to “Each Participant who has met the eligibility requirements of Section 3.1(b).”

4. Revised Match. Section 4.4(a) is amended in its entirety effective January 1, 2004 to read as follows:

(a) Pay Period Match. The Employer shall make matching contributions to the Employer Matching Accounts of each Participant who has compensation reduction contributions made on his behalf under Section 4.1 for any pay period. The amount of such matching contributions shall be calculated by reference to so much of the Participant’s compensation reduction contributions under Section 4.1 for such pay period as do not exceed four percent (4%) of the Participant’s Deferrable Compensation otherwise payable for such pay period.

The Employer matching contribution shall equal one hundred percent (100%) of so much of the Participant’s compensation reduction contributions under Section 4.1 for such pay period as do not exceed four percent (4%) of the Participant’s Deferrable Compensation otherwise payable for such pay period.

In the event the rate of matching contribution (determined after corrective distribution of elective deferrals under sections 401(k) or (m) or 402(g) of the Code) is determined by the Administrator to be discriminatory in favor of one or more Highly Compensated Employees, the Administrator shall forfeit that part of such matching contribution (as adjusted in accordance with Article 7) as is necessary to make such rate nondiscriminatory (and in such a case the contributions shall be disregarded under the Plan’s provisions relative to sections 401(k)(3) and 401(m)(2) of the Code).

For Plan Years beginning after December 30, 2001, a Participant who is otherwise eligible for the pay period match as described above but who is required to stop his compensation reduction contribution by reason of having reached the adjusted $10,500 limit under Section 4.3(d) above (and section 402(g) of the Code) nevertheless may qualify for the subsequent pay period matches in the Plan Year by making voluntary after-tax contributions out of his Deferrable Compensation. When a Participant reaches such limit, the Administrator may treat his 401(k) compensation reduction election as an election to make voluntary after-tax contributions unless and until the Participant revokes or revises such deemed election. Such match shall be calculated and administered under this Section 4.4(a) by treating the Participant’s voluntary after-tax contributions made

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from his Deferrable Compensation after having reached such limit as if they were compensation reduction contributions under Section 4.1.

5. Forfeitures. Section 6.2 is amended in its entirety effective January 1, 2004, to read as follows:

6.2 Allocation of Forfeitures. Forfeitures occurring during a Plan Year, first, shall be applied under Section 6.1(f)(5)(B) to the restoration of forfeitures and then, to the reduction of the Employer’s contributions to the Plan.

6. Diversification of Match.

(a) Section 7.3 is amended in its entirety effective January 1, 2004 to read as follows:

7.3 Diversification Election. Each Participant may elect the manner in which his Employer Matching Account is invested from among such investment funds as the Administrator directs the Trustee to make available under Section 7.1(c). Although matching contributions will be made into the Fifth Third Stock Fund (and a Participant may not direct that matching contributions be made to any of the other investment funds available under the Plan), after contribution, the Participant may elect for such amounts to be moved from the Fifth Third Stock Fund to such other investment funds, as he directs. In all events, the Administrator shall direct the Trustee to make available at least three investment funds in addition to the Fifth Third Stock Fund (as defined below).

An investment election shall be made in such manner as the Administrator shall direct. The Administrator may prescribe rules consistent with the requirements of section 401(a)(28) of the Code including rules which limit the frequency of changes to elections, prescribe times for making elections or regulate the amount of increment a Participant may allocate to a particular fund.

7. Plan Loan Availability. Section 7.6(b)(2) is amended effective January 1, 2004 by adding the following sentence at the end thereof:

A loan made after December 31, 2003 shall be available at the request of the Participant (subject to the other requirements of this Section 7.6) and shall not be limited to the circumstances described above in this Section 7.6(b)(2).

8. Section 9.1(b)(3) is amended in its entirety effective January 1, 2004 to read as follows:

(3) with respect to a Participant whose employment terminates on or after his reaching Early Retirement Age, a partial cash withdrawal, no more frequent than once per Plan Year, of the portion of the Participant’s vested Account the Participant specifies, with the remaining portion of the Participant’s vested Account balance deferred until future payment under the terms of the Plan, or

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9. Change Back to Calendar Plan Year. Section 2.36 (2.37 after the re-numbering referred to above) is amended in its entirety effective December 30, 2003 to read as follows:

2.37 “Plan Year” means:

(a) For Plan Years beginning after December 30, 1999 and before December 31, 2003, the 12-month period commencing on December 31 and ending on December 30;

(b) For the Plan Year beginning on December 31, 2003, the period commencing and ending on December 31, 2003; and

(c) For Plan Years beginning after December 31, 2003, the calendar year.

10. Testing Methods During Remedial Amendment Period. In order to clarify the ADP testing methods used, the Plan is amended in the following respects:

(a) Section 4.3(c)(1) is amended by changing “Effective for Plan Years beginning after December 30, 2001” to “Effective for the December 31, 2001 through December 30, 2002 Plan Year”.

(b) Section 4.3(c)(2) is amended by changing “For Plan Years beginning after December 31, 1996 and before December 31, 2001,” to “For Plan Years beginning after December 31, 1996 and before December 31, 2001 and for Plan Years beginning after December 30, 2002,”.

(c) Section 4.3(b) is amended in its entirety effective December 31, 2002 to read as follows:

(b) QNEC.

(1) The Employer, in its sole discretion, may contribute, for allocation to the Section 401(k) Salary Deferral Accounts of those Participants entitled under (2) below to receive an allocation, such amount as it determines appropriate to satisfy the nondiscrimination test of section 401(k)(3) of the Code and (c) below. Any such contribution shall be allocated as of the last day of the Plan Year for which the Employer makes the contribution.

(2) Participants who are Employees at any time during the Plan Year and who are not Highly Compensated Employees shall be qualified to receive an allocation of any contribution under (1) above for a Plan Year; provided that any such contribution shall be allocated by making the maximum permissible

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allocation permitted under Article 5 beginning with the Participant with the least Section 415 Compensation (as defined in Section 5.1(d)) and continuing such maximum permissible allocation to each such Participant in order of Section 415 Compensation (least Section 415 Compensation to greatest Section 415 Compensation) until the entire contribution is allocated.

This type of contribution is nonforfeitable when made (see Section 6.1(c)) and is subject to the withdrawal and distribution limitations of Section 8.6.

11. Transfer from AmeriBank Pension Plan. Article 4 is amended effective December 30, 2003 by adding a new Section 4.10 to read as follows:

4.10 Transfer of Excess Plan Assets from the AmeriBank Pension Plan. After satisfaction of all liabilities of the terminated AmeriBank Pension Plan (the “AmeriBank Plan”) the sponsor of which is Fifth Third Bank, Indiana, an Affiliate, and before (or instead of) accepting a reversion of excess assets from the AmeriBank Plan, the Employer may transfer directly to the Plan, and the Plan shall accept, such excess assets as the Employer elects. Such transferred excess assets shall be allocated at the Employer’s discretion either as matching contributions under Section 4.4, profit sharing contributions under Section 4.2 or performance reward contributions under Section 4.9, reducing the amount the Employer would otherwise contribute under such Sections. Such allocation shall occur in the year of transfer and shall satisfy the requirements of Sections 401(a)(4) and 415 of the Code.

This Section 4.10 is intended to comply with Section 4980 of the Code and Revenue Ruling 2003-85.

12. Adoption of Required Minimum Distribution Model Amendment. Section 9.9 is amended by changing the heading to read “Minimum Distributions under 2001 Proposed Regulations” and a new Section 9.10 is amended effective January 1, 2003 to read as follows:

9.10 New Minimum Distribution Requirements.

(a) General Rules.

(1) Effective Date. The provisions of this Section will apply for purposes of determining required minimum distributions for calendar years beginning with the 2003 calendar year.

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(2) Precedence. The requirements of this Section will take precedence over any inconsistent provisions of the Plan.

(3) Requirements of Treasury Regulations Incorporated. All distributions required under this Section will be determined and made in accordance with the Treasury Regulations under section 401(a)(9) of the Code.

(4) TEFRA Section 242(b)(2) Elections. Notwithstanding the other provisions of this Section, distributions may be made under a designation made before January 1, 1984, in accordance with section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the provisions of the Plan that relate to section 242(b)(2) of TEFRA.

(b) Time and Manner of Distribution.

(1) Required Beginning Date. The Participant’s entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant’s required beginning date.

(2) Death of Participant Before Distributions Begin. If the participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:

(A) If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, then, distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 70 1/2, if later.

(B) If the Participant’s surviving spouse is not the Participant’s sole designated Beneficiary, then, distributions to the designated Beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died.

(C) If there is no designated Beneficiary as of September 30 of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(D) If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary and the surviving spouse dies after the Participant but before distributions to the surviving spouse begin, this Section 9.10(b)(2), other than Section 9.10(b)(2)(A), will apply as if the surviving spouse were the Participant.

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For purposes of this Section 9.10(b)(2) and Section 9.10(d), unless Section 9.10(b)(2)(D) applies, distributions are considered to begin on the Participant’s required beginning date. If Section 9.10(b)(2)(D) applies, distributions are considered to begin on the date distributions are required to begin to the surviving spouse under Section 9.10(b)(2)(A). If distributions under an annuity purchased from an insurance company irrevocably commence to the Participant before the Participant’s required beginning date (or to the Participant’s surviving spouse before the date distributions are required to begin to the surviving spouse under Section 9.10(b)(2)(A)), the date distributions are considered to begin is the date distributions actually commence.

(3) Forms of Distribution. Unless the Participant’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the required beginning date, as of the first distribution calendar year distributions will be made in accordance with Sections 9.10(c) and (d). If the Participant’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of section 401(a)(9) of the Code and the Treasury Regulations.

(c) Required Minimum Distributions During Participant’s Lifetime.

(1) Amount of Required Minimum Distribution For Each Distribution Calendar Year. During the Participant’s lifetime, the minimum amount that will be distributed for each distribution calendar year is the lesser of:

(A) the quotient obtained by dividing the Participant’s Account balance by the distribution period in the Uniform Lifetime Table set forth in section 1.401(a)(9)-9 of the Treasury Regulations, using the Participant’s age as of the Participant’s birthday in the distribution calendar year; or

(B) if the Participant’s sole designated Beneficiary for the distribution calendar year is the Participant’s spouse, the quotient obtained by dividing the Participant’s Account balance by the number in the Joint and Last Survivor Table set forth in section 1.401(a)(9)-9 of the Treasury Regulations, using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the distribution calendar year.

(2) Lifetime Required Minimum Distributions Continue Through Year of Participant’s Death. Required minimum distributions will be determined under this Section 9.10(c) beginning with the first distribution calendar year and up to and including the distribution calendar year that includes the Participant’s date of death.

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(d) Required Minimum Distributions After Participant’s Death.

(1) Death On or After Date Distributions Begin.

(A) Participant Survived by Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account balance by the longer of the remaining life expectancy of the Participant or the remaining life expectancy of the Participant’s designated Beneficiary, determined as follows:

(i) The Participant’s remaining life expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(ii) If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, the remaining life expectancy of the surviving spouse is calculated for each distribution calendar year after the year of the Participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For distribution calendar years after the year of the surviving spouse’s death, the remaining life expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year.

(iii) If the Participant’s surviving spouse is not the Participant’s sole designated Beneficiary, the designated Beneficiary’s remaining life expectancy is calculated using the age of the Beneficiary in the year following the year of the Participant’s death, reduced by one for each subsequent year.

(B) No Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is no designated Beneficiary as of September 30 of the year after the year of the Participant’s death, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account balance by the Participant’s remaining life expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(2) Death Before Date Distributions Begin.

(A) Participant Survived by Designated Beneficiary. If the Participant dies before the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by

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dividing the Participant’s Account balance by the remaining life expectancy of the Participant’s designated Beneficiary, determined as provided in Section 9.10(d)(l).

(B) No Designated Beneficiary. If the Participant dies before the date distributions begin and there is no designated Beneficiary as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(C) Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin. If the Participant dies before the date distributions begin, the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse under Section 9.10(b)(2)(A), this Section 9.10(d)(2) will apply as if the surviving spouse were the Participant.

(e) Definitions.

(1) Designated Beneficiary. The individual who is designated as the Beneficiary under Section 2.9 of the Plan and is the designated Beneficiary under section 401 (a)(9) of the Code and section 1.401 (a)(9)- 1, Q&A-4, of the Treasury Regulations.

(2) Distribution Calendar Year. A calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the Participant’s required beginning date. For distributions beginning after the Participant’s death, the first distribution calendar year is the calendar year in which distributions are required to begin under Section 9.10(b)(2). The required minimum distribution for the Participant’s first distribution calendar year will be made on or before the Participant’s required beginning date. The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the Participant’s required beginning date occurs, will be made on or before December 31 of that distribution calendar year.

(3) Life Expectancy. Life expectancy as computed by use of the Single Life Table in section 1.401(a)(9)-9 of the Treasury Regulations.

(4) Participant’s Account Balance. The Account balance as of the last valuation date in the calendar year immediately preceding the distribution calendar year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the Account balance as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date. The

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Account balance for the valuation calendar year includes any amounts rolled over or transferred to the Plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year.

(5) Required Beginning Date. The date specified in Section 8.5(d)(2) of the Plan.

IN WITNESS WHEREOF, the undersigned Director of Legal/Human Resources of Fifth Third Bank has caused this Amendment to be adopted as of this 24^th day of December, 2003.

FIFTH THIRD BANK
BY:	/s/ Paul L. Reynolds
	Paul L. Reynolds Director of Legal/Human Resources

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NINTH AMENDMENT

TO

THE FIFTH THIRD BANCORP MASTER

PROFIT SHARING PLAN

(as amended and restated effective as of December 31, 2000)

Pursuant to the reserved power of amendment contained in Section 12.1 of The Fifth Third Bancorp Master Profit Sharing Plan (as amended and restated effective as of December 31, 2000) (the “Plan”), the Plan is hereby amended effective January 1, 2005 in the following respects:

1. A new Appendix XXI is added to the Plan in the form attached hereto, and the First National Bankshares of Florida, Inc. Salary Savings Plan is merged into the Plan as of January 1, 2005.

2. Appendix I is amended by adding the following line item in the chart immediately following the First-Mason Bank line item:

First National Bankshares of Florida, Inc. (and subsidiaries) XXI XXI

IN WITNESS WHEREOF, the undersigned Director of Legal/Human Resources of Fifth Third Bank has caused this Amendment to be adopted as of this 30^th day of December, 2004.

FIFTH THIRD BANK
BY:
	Paul L. Reynolds
	Director of Legal/Human Resources

THE FIFTH THIRD BANCORP

MASTER PROFIT SHARING PLAN

APPENDIX XXI

FIRST NATIONAL BANKSHARES OF FLORIDA. INC. SALARY SAVINGS PLAN

1. Merger of First National Bankshares of Florida, Inc. Salary Savings Plan. Effective as of January 1, 2005 upon the merger of First National Bankshares of Florida, Inc. into Fifth Third Financial Corporation (the “Merger Date”), the First National Bankshares of Florida, Inc. Salary Savings Plan (the “FNB Plan”) is completely amended and restated and merged into this Plan. This Plan represents a continuation of the FNB Plan and contributions shall continue as provided in this Plan. Upon the merger, an individual who is not already a Participant (or Beneficiary) but who had an account in the FNB Plan on the Merger Date, shall become a Participant (or Beneficiary). The FNB Plan is a Predecessor Plan such that service taken into account under the FNB Plan shall count as service under Section 2.44 of this Plan.

2. Separate Accounting. The portion of a Participant’s Account attributable to his accrued benefit under the FNB Plan shall be separately accounted for under the Plan. A Participant shall have an FNB Account which, as of the Merger Date, shall be equal to his accounts under the FNB Plan as of such date. A Participant’s FNB Account shall be adjusted in accordance with Section 7.2 and shall not share in any contributions or forfeitures allocated under the Plan (ongoing contributions under the Plan instead are reflected in the subaccounts referred to in Article 4 of the Plan). There shall be maintained for each Participant (in addition to the subaccounts referred to in Section 2.1 of the Plan) such of the following subaccounts of his FNB Account as are necessary in order to separately account for the merger of the FNB Plan into the Plan:

(a) an “FNB 401(k) Account,” which is attributable to a Participant’s “Elective Deferral Contributions” under the FNB Plan, as adjusted in accordance with Section 7.2.

(b) an “FNB Qualified Matching Account,” which is attributable to “Qualified Matching Contributions” (“Matching Contributions” made on or after January 1, 2004) under the FNB Plan, as adjusted in accordance with Section 7.2.

(c) an “FNB Pre-2004 Matching Account,” which is attributable to “Matching Contributions” made before January 1, 2004 under the FNB Plan, as adjusted in accordance with Section 7.2.

(d) an “FNB Additional Contribution Account,” which is attributable to “Additional Contributions” under the FNB Plan other than such amounts credited to the FNB Pre-Spin-Off Additional Contribution Account, as adjusted in accordance with Section 7.2.

(e) an “FNB Pre-Spin-Off Additional Contribution Account,” which is attributable to “Additional Contributions” under the FNB Plan, which immediately after the spin- off of First National Bankshares of Florida, Inc. by F.N.B. Corporation, was invested in F.N.B. Corporation stock, as adjusted in accordance with Section 7.2.

XXI - 1

(f) an “FNB Rollover Account,” which is attributable to a Participant’s “Rollover Contributions” under the FNB Plan, as adjusted in accordance with Section 7.2.

The foregoing subaccounts shall be considered to be part of the Participant’s Account within the meaning of Section 2.1 of the Plan. A Participant’s FNB 401(k) Account and FNB Qualified Matching Account shall be subject to the withdrawal and distribution limitations of Section 8.6 of the Plan.

3. Investment of FNB Account.

(a) FNB Additional Contribution Account.

(1) ESOP. Subject to (2) below, the Plan Assets attributable to the FNB Additional Contribution Accounts shall be invested in the Fifth Third Stock Investment Option (as defined below).

(2) Diversification Election. Each Participant who has attained age 55 may elect the manner in which his FNB Additional Contribution Account is to be invested from among such investment funds as the Administrator directs be made available for this purpose. In all events, the Administrator shall direct that at least three investment funds be made available in addition to the Fifth Third Stock Investment Option (as defined below).

An investment election shall be made in such manner as the Administrator shall direct. The Administrator may prescribe rules consistent with the requirements of section 401(a)(28) of the Code including rules which limit the frequency of changes to elections, prescribe times for making elections, regulate the amount or increment a Participant may allocate to a particular fund, require or allow an election (or election change) to relate only to future allocations, and provide for the investment of an FNB Additional Contribution Account of a Participant who fails to make an investment election.

(b) Participant Investment Rights. A Participant shall have Participant-directed investment rights over his FNB 401(k) Account, FNB Qualified Matching Account, FNB Pre-2004 Matching Account, FNB Pre-Spin-Off Additional Contribution Account and FNB Rollover Account comparable to the Participant-directed investment rights described in Section 7.1(c)(2). Such Participant-directed investment rights applicable to a Participant’s FNB Account shall be administered separately from such comparable investment rights as are applicable to other subaccounts under the Plan. The Administrator shall determine the investment options to be made available for the FNB Accounts, which, initially may be some or all of the same investment options as are available under the FNB Plan as of the Merger Date. Such investment funds need not be the same as the investment funds made available for the investment of other subaccounts under the Plan. In all events, the Fifth Third Stock Investment Option, as described in (1) below, shall be one of the available investment options. In all events, the F.N.B. Corporation Stock Investment Option, as described and as restricted in (2) below, shall be one of the available investment options.

XXI - 2

(1) Fifth Third Stock Investment Option.

(A) General. The Fifth Third Stock Investment Option shall consist of common stock of Fifth Third Bancorp or a fund invested primarily in such shares. This represents a continuation of the investment option under the FNB Plan of qualifying employer securities (the First National Bankshares of Florida, Inc. common stock became common stock of Fifth Third Bancorp as of the Merger Date).

(B) Voting of Employer Securities. To the extent a Participant’s FNB Account is invested under the Fifth Third Stock Investment Option, the Participant (or in the event of his death, his Beneficiary) shall have the right to determine the manner in which his shares (or the shares represented by his interest in any such fund) are to be voted at each annual or special meeting of the shareholders of Fifth Third Bancorp and as to the manner in which any other right relating to such stock is to be exercised.

(C) ESOP Designation. The Fifth Third Stock Investment Option shall be part of the Plan’s stock bonus plan feature and employee stock ownership plan (as defined in section 4975(e)(7) of the Code) feature.

(D) ESOP Dividend Pass-Through Election. A Participant with an FNB Account (including any subaccount of his FNB Account) invested in the Fifth Third Stock Investment Option (or in the event of his death, his Beneficiary), shall have the right to elect, in accordance with instructions or procedures of the Administrator, or its delegate to either (1) leave such dividends in the Plan for reinvestment in common stock of Fifth Third Bancorp under the Fifth Third Stock Investment Option or otherwise, or (2) take the dividends in cash.

(2) F.N.B. Corporation Stock Investment Option.

(A) General. The F.N.B. Corporation Stock Investment Option shall consist of stock of F.N.B. Corporation or a fund invested primarily in such shares.

(B) Restrictions. No new investments (through investment transfers or otherwise) may be made into the F.N.B. Corporation Stock Investment Option. In accordance with rules or procedures established by the Administrator, a Participant may elect to transfer part or all of his FNB Account out of the F.N.B. Corporation Stock Investment Option and into other investment options as described at 3(b) above. However, such amounts may not be transferred back into the F.N.B. Corporation Stock Investment Option.

(C) Voting of F.N.B. Corporation Stock. To the extent a Participant’s FNB Account is invested in the F.N.B. Corporation Stock Investment Option, the Participant (or in the event of his death, his Beneficiary) shall have the right to determine the manner in which the shares are to be voted at each annual or special meeting of the shareholders of F.N.B. Corporation and as to the manner in which any other right relating to such stock is to be exercised.

4. Funding Entities. The Plan Assets attributable to the FNB Plan shall be held under such trusts and/or annuity contracts as the Employer, in its sole discretion, may establish or cause to be established or entered into for the purposes of carrying out the Plan. The

XXI - 3

Employer shall determine the form and terms of any such trust and/or annuity contract, from time to time, consistent with the objectives of the Plan, ERISA and any other applicable legal requirements, and may remove any trustee and/or insurance company and select a successor trustee or trustees and/or insurance company or may terminate any such trust and/or annuity contract. Any such trust or annuity contract so established and maintained is and shall be a part of the Plan.

5. Vesting.

(a) Fully Vested Accounts. A Participant’s rights to his FNB 401(k) Account, FNB Qualified Matching Account and FNB Rollover Account shall be nonforfeitable at all times.

(b) Vesting Schedule. A Participant shall have a nonforfeitable right to a percentage of his FNB Pre-2004 Matching Account, his FNB Pre-Spin-Off Additional Contribution Account and his FNB Additional Contribution Account on the basis of the number of his Vesting Years with which he is credited, pursuant to the following vesting schedule:

Vesting Years	Nonforfeitable Percentage
Less than 1	0%
1	20%
2	40%
3	60%
4	80%
5 or more	100%

Upon and after a Participant’s attainment of age 62, if he is then in the service of the Employer or an Affiliate, he shall have a nonforfeitable right to his FNB Pre-2004 Matching Account, FNB Pre-Spin-Off Additional Contribution Account, and his FNB Additional Contribution Account. In addition, the provisions of Section 6.1(f)(2)(B) and (C), (3), (5) and (7) shall apply to a Participant’s FNB Pre-2004 Matching Account, FNB Pre-Spin-Off Additional Contribution and his FNB Additional Contribution Account.

(c) Other Vesting Provisions. Notwithstanding paragraph (b) above, a Participant whose position as an Employee was affected by the restructuring of F.N.B. Corporation and who was notified of such before August 20, 2003, shall be fully vested in his entire FNB Account provided his employment continued through the separation date set by his employer.

A Participant whose position is eliminated as a result of the affiliation of First National Bankshares of Florida, Inc. (and subsidiaries) with Fifth Third Bancorp and who receives a benefit under the First National Bankshares of Florida, Inc. Severance Pay Plan, shall be fully vested in his entire FNB Account.

XXI - 4

6. Hardship Withdrawals. In the event of a Participant’s incurrence of a hardship, he may make withdrawals from his
FNB 401(k) Account; provided however, the aggregate of any such withdrawals may not exceed the aggregate of his “Elective Deferral Contributions” under the FNB Plan. For purposes hereof, “hardship” means an immediate and heavy financial need of an Employee, which consists of one of the circumstances described in Sections 8.1(b)(2)(A), (B), (C) and (D) (but not (E)) of the Plan. A withdrawal based on financial hardship cannot exceed the amount required to satisfy that need (including taxes and penalties on the withdrawal). A withdrawal will be deemed necessary to satisfy an immediate and heavy financial need if and only if all of the following requirements are satisfied:

(a) the withdrawal is not in excess of the amount of the immediate and heavy financial need of the Employee;

(b) the Employee has obtained all withdrawals and distributions (other than hardship withdrawals) and all nontaxable loans currently available under all plans maintained by the Employer;

(c) the Plan, and all other plans maintained by the Employer, provide that the Employee’s elective contributions under section 401(k) of the Code and nondeductrible employee contributions will be suspended for at least 6 months after receipt of the hardship withdrawal; and

(d) the Plan, and all other plans maintained by the Employer, provide that the Employee may not make elective contributions under section 401(k) of the Code for the Employee’s taxable year immediately following the taxable year of the hardship withdrawal in excess of the applicable limit under section 402(g) of the Code for such next taxable year less the amount of such Employee’s elective contributions for the taxable year of the hardship withdrawal.

Such a withdrawal shall be made in a single sum.

In the event of a hardship withdrawal hereunder, the Participant shall be suspended from making section 401(k) compensation reduction contributions and voluntary after-tax participant contributions for a period of 6 months.

7. In-Service Withdrawals After Age 59- ¹/2. A Participant who has not terminated employment shall have the right to make withdrawals (of all or a portion) from his FNB Account if he has reached age 59 ¹/2. Such a withdrawal shall be made in a single sum.

8. Loans. Any outstanding loans as of the Merger Date shall continue to be administered in accordance with the terms of the FNB Plan prior to the Merger Date. A Participant may borrow from his FNB Account, excluding his FNB Additional Contribution Account. Loans shall be subject to Section 7.6 except as follows:

(a) Except for the maximum loan limit under Section 7.6(c), the limitations in Section 7.6 shall apply separately as between a Participant’s loan privilege from his FNB Account and his loan privileges from the remainder of his Account. As such, the minimum loan

XXI - 5

from a Participant’s FNB Account hereunder is $1,000 and the minimum loan from other available accounts under Section 7.6 is $1,000.

(b) A Participant may have up to two loans outstanding from his FNB Account and up to one loan outstanding from other available subaccounts under Section 7.6. No more than two loans from a Participant’s FNB Account shall be approved in any 12-month period.

(c) In addition to the other applicable limits under Section 7.6(c), a loan from the Participant’s FNB Account may not exceed 50 percent of his FNB Account, reduced by any outstanding loan balance on the date the new loan is made.

(d) The Administrator is authorized to administer the loan program as applied to the FNB Account and such administration may vary from the administration otherwise applicable to loans under Section 7.6.

9. Distribution of Employer Stock. Notwithstanding anything to the contrary contained in the Plan, to the extent the portion of a Participant’s FNB Account is invested in the common stock of Fifth Third Bancorp (or a fund consisting primarily of the common stock of Fifth Third Bancorp), the Participant (or in the event of his death, his Beneficiary) may elect, in accordance with rules and procedures established by the Administrator, to have shares of Fifth Third Bancorp stock distributed to him in any distributions of his FNB Account.

10. Distribution of F.N.B. Corporation Stock. Notwithstanding anything to the contrary contained in the Plan, to the extent the portion of a Participant’s FNB Account is invested in the common stock of F.N.B. Corporation (or a fund consisting primarily of the common stock of F.N.B. Corporation), the Participant (or in the event of his death, his Beneficiary) may elect, in accordance with rules and procedures established by the Administrator, to have shares of F.N.B. Corporation stock distributed to him in any distributions of his FNB Account.

11. Forms of Payment/Administration of Distributions.

(a) Separate Administration. The Administrator shall administer distributions of the FNB Account separately from distributions of the other subaccounts of the Participant’s Account; provided, however, the Participant’s entire Account (including his FNB Account) shall be taken into account for purposes of Sections 8.5(c)(l), 8.5(e) and 9.1(c) (regarding the $5,000 threshold for Participant consent and cash-out), and Sections 8.5(d), 9.4, 9.9 and 9.10 (regarding the required beginning date and minimum distributions).

(b) Qualified Joint and Survivor Annuity.

(1) Automatic Form of Payment. The form of payment of a Participant’s FNB Account shall be a Qualified Joint and Survivor Annuity (defined in (2) below) if:

(A) the Participant elects payment of benefits in the form of a life annuity, and

XXI - 6

(B) the Participant has not waived such Annuity pursuant to (3) below.

(2) Definition of Qualified Joint and Survivor Annuity.

(A) Married Participant. For a Participant who is married (including a Participant who is subject to an applicable qualified domestic relations order as described in section 414(p) of the Code), “Qualified Joint and Survivor Annuity” means an immediate annuity for the life of the Participant with a survivor annuity for the life of the Participant’s Surviving Spouse which is one-half of the annuity payable during the joint lives of the Participant and such spouse, with installment refund.

(B) Single Participant. For a Participant who is not married, “Qualified Joint and Survivor Annuity” means an immediate annuity for the life of the Participant, with installment refund.

(C) Amount. The Qualified Joint and Survivor Annuity will be the amount of benefit which can be purchased with the Participant’s nonforfeitable FNB Account balance.

(3) Waiver.

(A) Election Period. A Participant may waive the Qualified Joint and Survivor Annuity form of benefit at any time during a 90-day election period ending on the date as of which his benefit payments are to begin. Such a waiver must be in writing and must specify the optional form of benefit elected and the specific Beneficiary or Beneficiaries, if any, to whom any death benefits under the Plan will be payable.

(B) Revocation. A Participant may also revoke any waiver under (A) above during the election period thereunder. There shall be no limitation on the number of such elections and revocations permitted during such election period.

(C) Written Explanation. The Administrator shall provide to each Participant, no less than 30 days and no more than 90 days, prior to the date as of which his benefit payments are to begin (and consistent with such regulations as the Secretary of Treasury may prescribe), a written explanation of:

(i) the terms and conditions of the Qualified Joint and Survivor Annuity,

(ii) the Participant’s right to make, and the effect of, an election under (A) above to waive the Qualified Joint and Survivor Annuity form of benefit,

(iii) the rights of the Participant’s spouse under (4) below,

(iv) the right to make, and the effect of, a revocation of an election under (B) above, and

XXI - 7

(v) the eligibility requirements, material features and relative values of any optional forms of benefit under the Plan.

To the extent permitted by Treasury Regulations or pronouncements of the Internal Revenue Service, the Administrator may permit the Participant to waive the 30-day limit and/or to provide such written explanation after the annuity starting date.

(4) Spousal Consent. A waiver of the Qualified Joint and Survivor Annuity shall not take effect with respect to a spouse of a Participant unless:

(A) such spouse consents in writing to such election, and such spouse’s consent:

(i) acknowledges the effect of such election,

(ii) acknowledges the specific Beneficiary or Beneficiaries, if any, to whom any death benefits under the Plan will be payable, which may not be changed without spousal consent (or the consent of the spouse expressly permits designations by the Participant without any requirement of further consent by the spouse),

(iii) acknowledges the specific optional form of benefit elected which may not be changed without spousal consent (except back to the Qualified Joint and Survivor Annuity) (or the consent of the spouse expressly permits changes by the Participant without any requirement of further consent by the spouse), and

(iv) is witnessed by a Plan representative or a notary public; or

(B) it is established to the satisfaction of a Plan representative that the consent required under (A) above may not be obtained because there is no spouse, because the spouse cannot be located, or because of such other circumstances as may be provided in regulations of the Internal Revenue Service.

General consents referred to in the parentheticals under (A)(ii) and (iii) above must acknowledge that the spouse has the right to limit consent to a specific Beneficiary or Beneficiaries and a specific optional form or forms of benefit and that the spouse voluntarily elects to relinquish the rights so relinquished.

(c) Optional Forms of Benefit. In addition to the Qualified Joint and Survivor Annuity, a Participant may, by filing the proper form with the Administrator, elect to receive his vested FNB Account in any of the following forms:

(1) a single sum,

(2) a straight life annuity,

(3) a single life annuity with a certain period of 5, 10 or 15 years,

XXI - 8

(4) a single life annuity with installment refund,

(5) a survivorship life annuity with installment refund and a survivorship percentage of 50%, 66-2/3% or 100%,

(6) a fixed period annuity for any period of whole months which is not less than 60 and does not exceed life expectancy (as described in Section 9.5 of the Plan, without recalculation), and

(7) a full flexibility option in which the Participant elects the amount to be distributed each year, subject to a $1,000 minimum and subject to the minimum distribution rules of Section 9.10 of the Plan.

12. Preretirement Survivor Annuity.

(a) General. A Participant’s Surviving Spouse, if any, shall be entitled to a Preretirement Survivor Annuity if:

(1) the Participant dies before the commencement of benefit payments;

(2) prior to his death, the Participant elects payment of his FNB Account in the form of a life annuity; and

(3) the Participant and such Surviving Spouse were married throughout the 1-year period ending on the date of the Participant’s death or, if such Surviving Spouse is a former spouse treated as a Surviving Spouse pursuant to a qualified domestic relations order as described in section 414(p) of the Code, the Participant and such Surviving Spouse were married for at least 1 year.

(b) Definition of Preretirement Survivor Annuity. The “Preretirement Survivor Annuity” is an annuity which is for the life of a Participant’s Surviving Spouse with installment refund, in the amount of benefit that can be purchased with 100 percent of the Participant’s nonforfeitable FNB Account balance as of the date of his death, and under which annuity payments commence as of a date (not later than December 31 of the calendar year in which the Participant would have attained age 70 ¹/2) elected by such Surviving Spouse.

(c) Spouse’s Election of Lump Sum or Other Optional Form of Payment. A Surviving Spouse entitled to a Preretirement Survivor Annuity may elect to receive a lump sum payment of the amount that would otherwise be applied to the purchase of such Annuity or any Annuity that is an optional form of retirement benefit. Such election shall be in writing, shall acknowledge its effect, and shall be witnessed by a Plan representative or a notary public.

13. Balance of Death Benefit When Preretirement Survivor Annuity is Not Applicable. Upon the death of a Participant, prior to the commencement of benefit payments from his FNB Account, his Beneficiary shall be entitled to a benefit equal to his vested FNB Account if the Preretirement Survivor Annuity is not applicable because the Participant had not elected a life annuity, the Participant has no Surviving Spouse or if the Surviving Spouse dies before the Preretirement Survivor Annuity commences. Payment to the Beneficiary shall be in a

XXI - 9

single sum distribution or any annuity that is an optional form of benefit (except the full flexibility option shall not be available if the Beneficiary is not the spouse of the deceased Participant). The payment of a Participant’s FNB Account upon his death shall be administered separately from the payment upon death of his other subaccounts under the Plan. A separate Beneficiary designation form shall be used for the FNB Account and any such forms on file for the FNB Plan as of the Merger Date shall be controlling with respect to his FNB Accounts under this Plan unless and until revoked or replaced in accordance with Plan procedures. The Beneficiary designation form used for the Plan subaccounts other than the FNB Accounts shall not be relevant as to the disposition of the FNB Accounts.

14. Application of Forfeitures. Any forfeitures under the FNB Plan that have not been applied pursuant to the provisions of that plan as of the Merger Date, shall be applied as provided in Section 6.2 of this Plan.

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EX-10.(Q)

Exhibit 10(q)

FIFTH THIRD BANCORP

Schedule of Director Compensation Arrangements

For 2004, non-employee Directors of Fifth Third Bancorp received a single annual retainer of $50,000 (payable $25,000 in cash and approximately $25,000 in restricted stock granted under the Fifth Third Bancorp Incentive Compensation Plan and vesting on December 31, 2004) and a fee of $1,500 per meeting attended. Non-employee Directors (other than committee chairs) received a fee of $1,500 per committee meeting attended. Committee chairs received an additional annual retainer of $7,500 and received $2,500 per committee meeting. Pursuant to a Deferred Compensation Plan, Directors may annually defer from one-half to all of their cash compensation as Directors until age 65 or until they cease to serve on the Board, whichever occurs last. The deferred funds bear interest until paid at an annually adjusted rate equal to 1% over the U.S. treasury bill rate or Directors may elect to receive a return on deferred funds at a rate equal to the rate of return on the Company’s Common Stock. Non-employee Directors will likely receive substantially similar compensation for 2005. Directors who are also employees receive no additional compensation for service on the Board or its Committees.

The Fifth Third Bancorp Incentive Compensation Plan (the “Plan”), provides that the Compensation Committee has full authority to provide stock-based or other incentive awards to non-employee Directors. The following types of awards may be granted under the Plan:

Stock Appreciation Rights (“SARs”). The Compensation Committee may grant SARs independently of any stock option or in tandem with all or any part of a stock option granted under the Plan. Upon exercise, each SAR entitles a participant to receive an amount equal to the excess of the Fair Market Value (as defined in the Plan) of a share of Common Stock on the date the SAR is exercised over the Fair Market Value of a share of Common Stock on the date the SAR is granted. The payment may be made in shares of Common Stock having a Fair Market Value on the date of exercise equal to the amount due upon the exercise of the SAR, may be paid in cash, or in a combination. Upon exercise of an SAR granted in conjunction with a stock option, the option may be required to be surrendered.

Restricted Stock and Restricted Stock Units. An award of Restricted Stock is an award of shares of Common Stock that may not be sold or otherwise disposed of during a restricted period determined by the Committee. An award of Restricted Stock Units is an award of the right to receive a share of Common Stock after the expiration of a restricted period determined by the Committee. Restricted Stock may be voted by the recipient. To the extent provided by the Committee, dividends on the Restricted Stock and Restricted Stock Units may be payable to the recipient in cash or in additional Restricted Stock or Restricted Stock Units.

Performance Shares and Performance Units. Performance Shares and Performance Units are awards of a fixed or variable number of shares or of dollar-denominated units that are earned by achievement of performance goals established by the Committee. If the applicable performance criteria are met, the shares are earned and become unrestricted with respect to Performance Shares or an amount is payable with respect to the Performance Units. The Committee may provide that a certain percentage of the number of Performance Shares or Units originally awarded may be earned based upon the attainment of the performance goals. Amounts earned under Performance Share and Performance Unit Awards may be paid in Common Stock, cash or a combination of both. During the applicable performance period for an award, the shares may be voted by the recipient and the recipient may be entitled to receive dividends on those shares, at the discretion of the Committee.

Stock Options. Stock Options may be nonqualified stock options or incentive stock options that comply with Code Section 422. The exercise period for any stock option will be determined by the Committee at the time of grant. The exercise price per share for all shares of Common Stock issued pursuant to stock options under the Plan may not be less than 100% of the Fair Market Value of a share of Common Stock on the grant date. Each stock option may be exercised in whole, at any time, or in part, from time to time, after the grant becomes exercisable. The Plan limits the term of any stock option to 10 years and prohibits repricing of options.

Annual Incentive Awards. Participants in the Plan may receive Annual Incentive Awards. Under an Annual Incentive Award, the participant may receive an amount based on the achievement of performance goals established by the Committee. As required by Code Section 162(m), the Plan provides an annual limit of $4,000,000 on the amount a single participant may earn under an Annual Incentive Award for any calendar year.

Other Incentive Awards. The Committee may grant other types of awards of which may be based in whole or in part by reference to Common Stock or upon the achievement of performance goals or such other terms and conditions as the Committee may prescribe. As required by Code Section 162(m), the Plan provides an annual limit of $4,000,000 on the amount a single participant may earn under any such Other Incentive Award. For purposes of this limitation, any award earned over a period greater than one year is deemed to have been earned ratably over the full and partial calendar years in such period.

Awards to non-employee Directors are subject to the discretion of the Compensation Committee.

EX-10.(R)

Exhibit 10(r)

FIFTH THIRD BANCORP

Schedule of Executive Officer Compensation Arrangements

The Company’s cash compensation package for its executive officers consists of two components: (1) base salary; and (2) annual performance-based bonuses. The Company also provides stock based equity incentive grants to its executive officers as a means to drive long-term performance and promote ownership in the Company.

Base Salary

Individual salaries are reviewed annually and salary increases are based on the Company’s overall performance and the executive’s attainment of individual objectives during the preceding year.

Set forth below are the 2005 base salaries of the following named executive officers of Fifth Third Bancorp that have been reported in Fifth Third Bancorp’s 2005 Proxy Statement (2004 base salaries are also shown for comparison):

Named Executive Officer:	Base Salary:
	2005		2004
George A. Schaefer, Jr.	$	990,018	$	990,018
Neal E. Arnold		537,992		524,992
Kevin T. Kabat		537,992		520,000
Robert A. Sullivan		537,992		425,0061
Greg D. Carmichael		440,003		375,003

¹ Effective May 17, 2004. Prior to this date, Mr. Sullivan’s 2004 base salary was $325,000.

Annual Bonuses

Officers eligible to receive bonuses are placed in bonus pools that designate their bonus opportunity based on their position and job level. Executive Officers are specifically designated by the Committee as participants in the bonus pool by virtue of the Incentive Compensation Plan (the “Plan”) which was approved and adopted by the Company’s shareholders in 2004. The Plan allows the Company to issue Annual Incentive Awards comprised of cash or equity awards. The Performance Goals (as defined in the Plan) for 2004 were in the form of a bonus matrix comprised of incrementally increasing amounts of earnings per share, which, if attained, make an incentive bonus pool available for payments. The matrix was established by the Committee to reflect a bonus pool, which increased if incrementally higher earnings per share resulted in 2004 as compared to 2003. The Performance Goals for 2005 will likely be substantially similar to those used in 2004, subject to the discretion of the

Compensation Committee. The Committee also has discretion under the Plan, as in past years, to consider unusual items that impacted earnings per share of the Company, both those items that contribute to an increase in earnings per share of the Company and those that contribute to a decrease in earnings per share.

Nonqualified Deferred Compensation Plan

Executive Officers of Fifth Third Bancorp are eligible to participate in the Amended and Restated Fifth Third Bancorp Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”). The Deferred Compensation Plan is a non-qualified deferred compensation plan which is not subject to the qualification requirements of Section 401(a) of the Internal Revenue Code. The Deferred Compensation Plan permits participants to defer eligible compensation on the date or dates selected by the participant or on such other date or dates specified in the Deferred Compensation Plan.

Eligible compensation deferred by participants is credited with earnings and investment gains and losses based on hypothetical investments in Fifth Third Bancorp Common Stock. Investments in a participant’s Common Stock account are designated in units and no shares of Common Stock will be issued until the participant receives a distribution from the Plan. Amounts deferred are not actually invested in Common Stock. Rather, a grantor trust, which has been created in connection with the Deferred Compensation Plan, holds plan assets.

Fifth Third Bancorp may make an additional contribution in an amount determined for each individual to matching stock account for the participant at the time of such allocation. The Deferred Compensation Plan provides that Fifth Third Bancorp may credit a participant’s Company Common Stock Account with additional amounts, at its sole discretion. Participants are 100% vested at all times in the amounts credited to their accounts under the plan. In addition, participants are credited with dividends on such units of Common Stock which dividends are deemed to be reinvested in additional shares of Common Stock.

The amounts of benefits payable in the future under the plan are not determinable because such benefits depend upon the amount of compensation each participating employee elects to defer and the percentage of compensation that Fifth Third Bancorp, at its sole discretion, may determine to credit to the accounts of the participants.

Stock Based Equity Compensation Grants

Executive Officers are eligible to receive awards based on Fifth Third’s Common Stock under the Plan. The following types of stock based equity compensation awards may be granted under the Plan:

Stock Appreciation Rights (“SARs”). The Compensation Committee may grant SARs independently of any stock option or in tandem with all or any part of a stock option granted under the Plan. Upon exercise, each SAR entitles a participant to receive

an amount equal to the excess of the Fair Market Value (as defined in the Plan) of a share of Common Stock on the date the SAR is exercised over the Fair Market Value of a share of Common Stock on the date the SAR is granted. The payment may be made in shares of Common Stock having a Fair Market Value on the date of exercise equal to the amount due upon the exercise of the SAR, may be paid in cash, or in a combination. Upon exercise of an SAR granted in conjunction with a stock option, the option may be required to be surrendered.

Restricted Stock and Restricted Stock Units. An award of Restricted Stock is an award of shares of Common Stock that may not be sold or otherwise disposed of during a restricted period determined by the Committee. An award of Restricted Stock Units is an award of the right to receive a share of Common Stock after the expiration of a restricted period determined by the Committee. Restricted Stock may be voted by the recipient. To the extent provided by the Committee, dividends on the Restricted Stock and Restricted Stock Units may be payable to the recipient in cash or in additional Restricted Stock or Restricted Stock Units.

Performance Shares and Performance Units. Performance Shares and Performance Units are awards of a fixed or variable number of shares or of dollar-denominated units that are earned by achievement of performance goals established by the Committee. If the applicable performance criteria are met, the shares are earned and become unrestricted with respect to Performance Shares or an amount is payable with respect to the Performance Units. The Committee may provide that a certain percentage of the number of Performance Shares or Units originally awarded may be earned based upon the attainment of the performance goals. Amounts earned under Performance Share and Performance Unit Awards may be paid in Common Stock, cash or a combination of both. During the applicable performance period for an award, the shares may be voted by the recipient and the recipient may be entitled to receive dividends on those shares, at the discretion of the Committee.

Stock Options. Stock Options may be nonqualified stock options or incentive stock options that comply with Code Section 422. The exercise period for any stock option will be determined by the Committee at the time of grant. The exercise price per share for all shares of Common Stock issued pursuant to stock options under the Plan may not be less than 100% of the Fair Market Value of a share of Common Stock on the grant date. Each stock option may be exercised in whole, at any time, or in part, from time to time, after the grant becomes exercisable. The Plan limits the term of any stock option to 10 years and prohibits repricing of options.

Other Incentive Awards. The Committee may grant other types of awards of which may be based in whole or in part by reference to Common Stock or upon the achievement of performance goals or such other terms and conditions as the Committee may prescribe. As required by Code Section 162(m), the Plan provides an annual limit of $4,000,000 on the amount a single participant may earn under any such Other Incentive Award. For purposes of this limitation, any award earned over a period greater than one year is deemed to have been earned ratably over the full and partial calendar years in such period.

In 2004, grants of Stock Appreciation Rights (“SARs”), Restricted Stock and Performance Units were made to Executive Officers under the Plan. Grants of SARs were made to Executive Officers at an exercise price of 100% of the market value on the date of grant. Grants of Restricted Stock were made to a limited number of Executive Officers and generally had a four-year period of restriction. Performance Units were granted to the remaining Executive Officers with a three-year performance period. The Performance Units were granted with goals set in terms of relative total shareholder return in relation to a peer group. The Performance Units were payable half in cash and half in common stock.

Fifth Third Bancorp’s Compensation Committee may make grants of stock based equity compensation awards to the Executive Officers of Fifth Third Bancorp in 2005. Any such awards will likely be substantially similar to those granted in 2004, subject to the discretion of the Compensation Committee.

Stock Option Gain Deferral Plan

Executive Officers of Fifth Third Bancorp are eligible to participate in the Fifth Third Bancorp Stock Option Gain Deferral Plan (the “Deferral Plan”). The Deferral Plan is an unfunded deferred compensation arrangement maintained by Fifth Third Bancorp for a select group of management or highly compensated employees of the Company and its affiliates.

Participants elect to defer delivery and receipt of “net shares” (those shares to be received on exercise minus the shares used to pay the exercise price and any tax withholding) that result from exercise of a stock option. The participant is then issued shares of Common Stock equal to the number of shares tendered and, for each net share deferred by the participant, a stock unit is credited to the participant’s deferred stock unit account as of the date of exercise of the stock option. This election must be made at least six (6) months in advance of a participant’s exercise of a stock option. Once made, a participant may not revoke the election after it is received by the company.

On each dividend payment date, Fifth Third Bancorp credits each participant’s deferred stock unit account with an amount equivalent to the dividends paid by the Company on the number of shares of Common Stock equal to the number of stock units in the participant’s deferred stock unit account. The dividend equivalent amounts credited to each participant’s deferred stock unit account are reinvested in additional stock units at a price equal to the fair market value of the Common Stock on the dividend payment date.

A participant may elect to have the shares of Common Stock represented by the participant’s deferred stock unit account paid (or commence to be paid) as of the first business day of June of the plan year immediately following the plan year in which the

participant’s service with the company terminates, or the first business day of June of any subsequent year, but not later than the first business day of June of the fifth plan year following the plan year in which the termination occurs. A participant may elect to have these shares of Common Stock paid in a single distribution of Common Stock or in distributions of Common Stock in annual installments of not more than 10 years.

Participants may make or change elections with respect to the commencement date and form of distributions at any time. Payment will be made in accordance with an election only if the participant terminates service with the company at least two (2) years following the date of the election. Otherwise, the payment will be made in accordance with the election in effect immediately prior to the changed election. If a participant has no election concerning the commencement date of benefits in effect at the time he terminates service with the company, payment will be made (or commence) as of the first business day of June of the Plan Year immediately following the Plan Year in which the termination of service occurs. If a participant has no election concerning the form of benefit payment in effect at the time he terminates service with the company, payment will be made in a single distribution of Common Stock.

It cannot be determined at this time what benefits or amounts, if any, will be received by or allocated to any Executive Officer under the Deferral Plan in the future. Such determinations are subject to the discretion of the Committee and the elections of the eligible participants.

Retirement Plans

Fifth Third Bancorp also maintains The Fifth Third Bancorp Master Retirement Plan (the “Retirement Plan”) and The Fifth Third Bancorp Supplemental Retirement Income Plan (the “Supplemental Plan”). The Retirement Plan and Supplemental Plan were frozen as of November 15, 1998 except for employees who were at least age 50 and had 15 years of credited service as of December 31, 1998. The following table shows estimated annual benefits payable upon retirement under Retirement Plan and the Supplemental Plan based upon combinations of compensation levels and years of service:

PENSION PLAN TABLE

Approximate Annual Retirement Benefit Upon Retirement At Age 65 Before Adjustments ^{(1) (2) (3)}

Remuneration(4)(5)	15	20	25	30	35
700,000	104,178	138,903	173,629	208,355	208,355
800,000	119,428	159,237	199,046	238,855	238,855
900,000	134,678	179,570	224,463	269,355	269,355
1,000,000	149,928	199,903	249,879	299,855	299,855
1,100,000	165,178	220,237	275,296	330,355	330,355
1,200,000	180,428	240,570	300,713	360,855	360,855
1,300,000	195,678	260,903	326,129	391,355	391,355
1,400,000	210,928	281,237	351,546	421,855	421,855
1,500,000	226,178	301,570	376,963	452,355	452,355
1,600,000	241,428	321,903	402,379	482,855	482,855
1,700,000	256,678	342,237	427,796	513,355	513,355
1,800,000	271,928	362,570	453,213	543,855	543,855
1,900,000	287,178	382,903	478,629	574,355	574,355
2,000,000	302,428	403,237	504,046	604,855	604,855
2,100,000	317,678	423,570	529,463	635,355	635,355
2,200,000	332,928	443,903	554,879	665,855	665,855
2,300,000	348,178	464,237	580,296	696,355	696,355
2,400,000	363,428	484,570	605,713	726,855	726,855
2,500,000	378,678	504,903	631,129	757,355	757,355

(1) Benefits shown are computed on the basis of a straight life annuity. Other available forms of benefits payment under the Retirement Plan, which are the actuarial equivalent of the straight life annuity, are the joint and surviving spouse annuity, the contingent annuitant option, the life — 10-year-certain option, and the single lump-sum option. The method of payment from the Supplemental Plan is either a single lump sum or an installment.

(2) Under the current law, the maximum annual pension benefit payable under the Internal Revenue Code, applicable to the Retirement Plan, is $165,000 for 2004. Any annual pension benefit accrued over $165,000 is payable under the Supplemental Plan.

(3) The Retirement Plan and Supplemental Plan were frozen as of November 15, 1998 except for employees who were at least age 50 and had 15 years of credited service as of December 31, 1998. For the purpose of computing a benefit under these Plans on December, 31, 2004, Mr. Schaefer had 33 years of credited service and Mr. Arnold, 14 years. Mr. Schaefer continues to accrue benefits under these Plans. Mr. Arnold is not accruing benefits under these Plans but does continue to accrue service for eligibility of an immediate early retirement benefit. Mr. Kabat has a frozen benefit related to his service with Old Kent Financial Corporation.

His annual benefit at age 65 would be approximately $65,400. Mr. Carmichael and Mr. Sullivan joined Fifth Third Bancorp after these plans were frozen and therefore are not eligible to participate.

(4) The amounts shown are the gross benefit amounts provided by both the Retirement Plan and the Supplemental Plan. Plan benefits are determined as 30.5% of final average pay minus 11.1% of the participant’s social security final average compensation (up to his social security covered compensation) with a reduction of 1/30th for each year of credited service less than 30. Benefits are also reduced for termination of service prior to age 60, for a commencement of benefit payments prior to age 60, and eliminated under the vesting schedule if the participant has less than five (5) vesting years.

(5) Compensation for retirement benefit calculations under the Retirement Plan is defined as the base rate of pay plus variable compensation and is based on the final average pay for the highest five consecutive years out of the ten years preceding retirement. The 2004 base pay plus variable compensation are substantially the same as the amounts shown under the “Salary and Bonus” columns of the Summary Compensation Table contained in Fifth Third Bancorp’s 2005 proxy Statement. No more than an inflation adjusted $200,000 limit is taken into consideration under the Retirement Plan. Compensation in excess of an inflation adjusted $200,000 limit is taken into account under the Supplemental Plan.

EX-10.(S)

Exhibit 10(s)

Notice of Grant of Performance Units and Award Agreement

ID: «EMP_»

«First» «Middle» «Last»

Fifth Third Bank, «Affiliate»

It is a pleasure to inform you that you are hereby granted              Performance Units, subject to the terms and conditions of this Notice and the terms of the Fifth Third Bancorp Incentive Compensation Plan (the “Plan”):

Date of Performance Units Award	__________, ____
Performance Period	__________, ____ to __________, _____
Number of Performance Units Granted (Target)	_______
Thirty Day Average Value of Fifth Third Stock at Beginning of Performance Period	$_____
Performance Goals Total Shareholder Return (TSR) Relative to Peer Group

The number, if any, of performance units you may earn under this award will be based on the level of achievement of the performance goals. Your final earned performance units will be determined by multiplying your target performance units by the performance matrix percent.

If you accept the terms of this performance units award, you will be deemed to have consented to all of the terms and conditions of this performance unit award and of Fifth Third Bancorp Incentive Compensation Plan. In the event of any conflict between the terms of this Notice and the Plan, the terms of the Plan shall control.

This performance unit award will expire by its own terms unless accepted within sixty days of the date hereof.

For Fifth Third Bancorp:

George A. Schaefer, Jr. President & CEO	Date
Grantee	Date

TERMS OF PERFORMANCE UNITS AWARD

Performance Goals

Performance Measure: The number of performance units earned is dependent upon the relative total shareholder return (TSR) achieved by Fifth Third Bancorp stockholders during the Performance Period commencing             ,          and ending             ,         . TSR will be determined by reference to change in market value of Fifth Third Bancorp stock, plus reinvested dividends, during the Performance Period. Fifth Third Bancorp TSR will be compared to the TSR of the peer group shown below. For the purpose of measuring TSR for Fifth Third Bancorp and the peer group, a 30-day average price will be used to measure market value at the beginning and end of the Performance Period. Dividends will be reinvested at the market price on the day of the dividend.

Performance Goal: The goal is to achieve a relatively high return for Fifth Third Bancorp. No performance units will be earned unless Fifth Third Bancorp’s TSR is at least equal to the             ^th percentile of the TSR achieved by the Peer Group.

Peer Group:

Performance Matrix:

Relative Total Shareholder Return	Payout as Percentage of Target
Less than 40th Percentile	0	%
__th Percentile	50	%
__th Percentile	100	%
__th Percentile	120	%
__th Percentile	140	%
__th Percentile	150	%
__th Percentile	170	%
__th Percentile	200	% (Maximum)

Determination and Payment of Earned Performance Units

Upon completion of the Performance Period, the level of achievement of the Performance Goals will be determined by the Committee. The final award will be determined by multiplying the Target Performance Units awarded by the

applicable percentage. Straight-line extrapolation will be used to determine % of Target Performance Units Earned for achievement between performance levels shown above.

The value of the earned Performance Units (based on the fair market value of one share of Fifth Third Bancorp stock per earned Performance Unit as of the end of the performance period) will be paid 50% in cash in one lump sum and 50% in shares of Fifth Third Bancorp stock. Payments will be made no later than             ,         .

Tax Withholding

The amount of cash and the fair market value of the shares paid with respect to earned Performance Units will be taxed as wages. Tax withholding will apply at the time of payment.

Effect of Termination of Employment Prior to End of Performance Period

In the event you cease to be employed by Fifth Third Bancorp or its subsidiaries prior to the end of the Performance Period of Restriction, the disposition of the Performance Units will be as provided in Sections 11.1, 11.2 and 11.3 of the Plan.

Transferability

The performance units granted under the terms of this Notice (the “Units”) may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated.

EX-10.(T)

Exhibit 10(t)

Notice of Grant of Restricted Stock and Award Agreement

ID: «SSN»

«FIRST_NAME» «MIDDLE_NAME» «LAST_NAME»

«EXTRA_FIELD_1»

It is a pleasure to inform you that you are hereby granted              restricted shares of Fifth Third Bancorp stock. These shares of stock are restricted and are subject to the terms and conditions of this Notice and the terms of the Fifth Third Bancorp Incentive Compensation Plan (the “Plan”):

Date of Restricted Stock Award	__________, ____
Award Number	____
Plan	Incentive Compensation Plan
Restrictions will Lapse	__________, _____
Total Number of Restricted Shares Granted	____
Value at Date of Grant	$____
Total Value at Date of Grant	$____

This restricted stock award will vest and the restrictions will lapse on             ,          (the end of the period of restriction) provided you are an employee of Fifth Third Bancorp or its subsidiaries at that time.

If you accept the terms of this restricted stock award, you will be deemed to have consented to all of the terms and conditions of this restricted stock award and of Fifth Third Bancorp Incentive Compensation Plan. In the event of any conflict between the terms of this Notice and the Plan, the terms of the Plan shall control.

This restricted stock award will expire by its own terms unless accepted within ninety days of the date hereof.

For Fifth Third Bancorp:

George A. Schaefer, Jr. President & CEO	Date
Grantee	Date

EX-10.(U)

Exhibit 10(u)

Notice of Grant of Stock Appreciation Right and Grant Agreement

ID: «SSN»

«FIRST_NAME» «MIDDLE_NAME» «LAST_NAME»

«EXTRA_FIELD_1»

It is a pleasure to inform you that you are hereby granted an award of stock appreciation rights (“SARs”) subject to the terms and conditions of this Notice and the terms of the Fifth Third Bancorp Incentive Compensation Plan (the “Plan”):

SAR Grant Number	_______
Date of Grant	__________, ____
Plan	Incentive Compensation Plan
Total Number of SARs Granted	_______
Grant Date Price Per Share of Stock	$_____

These stock appreciation rights will vest and become exercisable as follows:

Shares Date

This Award will expire on             ,         .

Upon exercise, you will be entitled to a payment in the form of shares of Stock with a fair market value equal to the fair market value of a share of Stock at the date of exercise over the grant date price per share of Stock, multiplied by the number of SARs exercised.

This Award of stock appreciation rights will expire by its own terms unless accepted within sixty days of the date hereof.

For Fifth Third Bancorp:

George A. Schaefer, Jr. President & CEO	Date
Participant	Date

EX-10.(V)

Exhibit 10(v)

Notice of Grant of Restricted Stock and Award Agreement

ID: «SSN»

«FIRST_NAME» «MIDDLE_NAME» «LAST_NAME»

«EXTRA_FIELD_1»

It is a pleasure to inform you that you are hereby granted              restricted shares of Fifth Third Bancorp stock. These shares of stock are restricted and are subject to the terms and conditions of this Notice and the terms of the Fifth Third Bancorp Incentive Compensation Plan (the “Plan”):

Date of Restricted Stock Award	__________, ____
Plan	Incentive Compensation Plan
Total Number of Restricted Shares Granted	____

This restricted stock award will vest and the restrictions will lapse on December 31,              provided you are a Director of Fifth Third Bancorp or Fifth Third Bank at that time.

If you accept the terms of this restricted stock award, you will be deemed to have consented to all of the terms and conditions of this restricted stock award and of Fifth Third Bancorp Incentive Compensation Plan. In the event of any conflict between the terms of this Notice and the Plan, the terms of the Plan shall control.

This restricted stock award will expire by its own terms unless accepted within sixty days of the date hereof.

For Fifth Third Bancorp:

George A. Schaefer, Jr. President & CEO	Date
Grantee	Date

EX-10.(DD)

Exhibit 10(dd)

FIRST BRADENTON BANK

AMENDED AND RESTATED INCENTIVE STOCK OPTION PLAN

Section 1. Purpose and Scope

The purposes of this Plan are to encourage stock ownership by key management employees of First Bradenton Bank (herein called the “Bank”) to provide an incentive for such employees to expand and improve the profits and prosperity of the Bank, and to assist the Bank in attracting and retaining key personnel through the grant of Options to purchase shares of the Bank’s common stock.

Section 2. Definitions

“Bank” shall mean First Bradenton Bank, a Florida banking corporation.

“Board” shall mean the Board of Directors of the Bank.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Option” shall mean a right to purchase Stock, granted pursuant to the Plan, which options are intended to qualify as incentive stock options within the meaning of §422 of the Code.

“Option Price” shall mean the purchase price for Stock under an Option, as determined in Section 6 below.

“Participant” shall mean an employee of the Bank to whom an Option is granted under the plan.

“Plan” shall mean this First Bradenton Bank Stock Option Plan.

“Stock” shall mean the common stock of the Bank.

Section 3. Shares Reserved Under Plan

Subject to the provisions of Section 12 of the Plan, the maximum number of shares of Stock that may be optioned or sold under the Plan is four (4) shares. Such shares may be treasury, or authorized, but unissued, shares of Stock of the Bank.

Section 4. Administration

The Plan shall be administered by the Board. The Board shall make all decisions with respect to participation in the Plan by employees of the Bank and with respect to the extent of that participation. The interpretation and construction of any provision of the Plan by the Board shall be final. No member of the Board shall be liable for any action or determination made by him in good faith. The Board may in its discretion at any time delegate its powers to administer the Plan to a Committee consisting of two or more directors, in which event all references to the “Board” throughout this Plan shall be deemed to refer to such Committee.

Section 5. Eligibility

The Board may grant Options to any key employee of the Bank other than an employee who owns 10 percent or more of the Bank’s Stock. Options may be awarded by the Board at any time and from time to time to new Participants, or to then Participants, or to a greater or lesser number of Participants, and may include or exclude previous Participants, as the Board shall determine. Options granted at different times need not contain similar provisions.

Section 6. Option Price

The purchase price for Stock under each Option shall be the greater of (i) 100 percent of its fair marker value at the time the Option is granted or (ii) the par value thereof. For this purpose, the fair market value of the Stock shall be determined without regard to any restriction other than a restriction which, by its terms, will never lapse.

Section 7. Terms and Conditions of Options

Options granted pursuant to the Plan shall be authorized by the Board and shall be evidenced by written agreements in the form of Exhibit A hereto or such other form as the Board shall from time to time approve (the “Agreements”). Such agreements shall comply with and be subject to the following terms and conditions:

A. Employment Agreement. The Board may, in its discretion, include in any Option granted under the Plan a condition that the Participant shall agree to remain in the employ of, and to render services to, the Bank or any of its Subsidiaries for a period of time (specified in the agreement) following the date the Option is granted. No such agreement shall impose upon the Bank any obligation to employ the Participant for any period of time.

B. Time Method of Payment. The Option Price shall be paid in full in cash at the time an Option is exercised under the Plan. Otherwise, an exercise of any Option granted under the Plan shall be invalid and of no effect. Promptly after the exercise of an Option and the payment of the full Option Price, the Participant shall be entitled to the issuance of a stock certificate evidencing his ownership of such of Stock. A Participant shall have none of the rights of a shareholder until shares are issued to him, and no adjustment will be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued.

C. Number of Shares; Limitation. Each Option shall state the total number of shares of Stock to which it pertains. Options to purchase fractional shares may not be granted. The aggregate fair market value (determined on the date the option is granted) of Stock subject to an Option granted to any one Participant that can be exercised for the first time in any one calendar year shall not exceed $100,000. Notwithstanding the foregoing, the Agreement may provide that more than $100,000 worth of optioned Stock can first be exercised within a single calendar year if the

Agreement states that only a percentage of each share of Stock acquired upon exercise of the Option will be treated as having been acquired pursuant to an incentive stock option within the meaning of §422 of the Code and the remainder of the Stock will be treated as having been acquired pursuant to a non-qualifying stock option. The percentage which shall be treated as having been acquired pursuant to an incentive stock option shall be determined by the following fraction:

$100,000	=	Percentage of stock treated as acquired pursuant to incentive stock option
Fair marketing value of stock first exercisable within one calendar year based on value at date option granted

D. Option Period and Limitations on Exercise of Options. The Board may, in its discretion, provide that an Option may not be exercised in whole or in part for any period or periods of time specified in the agreement and the exercise may be further conditioned on such events as the Board may elect to establish and set forth in the agreement. Except as provided in the agreement, an Option may be exercised in whole or in part at any time during its term. No Option may be exercised after the expiration of seven (7) years from the date it is granted.

Section 8. Termination of Employment; Retirement; Permanent Disability

Except as provided in Section 9 below, if a Participant ceases to be employed by the Bank, his Options shall terminate immediately; provided, however, that if a Participant’s cessation of employment with the Bank is due to retirement or permanent disability (as each is determined by the Board), the Participant may, at any time within three months after such cessation of employment, exercise his Options to the extent that he was entitled to exercise them on the date of cessation of employment, but in no event shall any Option be exercisable more than seven (7) years from the date it was granted. The Board may cancel an Option during the three-month period referred to in this paragraph if the Participant engages in employment or activities contrary, in the opinion of the Board, to the best interests of the Bank. The Board shall determine in each case whether a

termination of employment shall be considered a retirement with the consent of the Bank, and, subject to applicable law, whether a leave of absence shall constitute a termination of employment. Any such determination of the Board shall be final and conclusive.

Section 9. Rights in Event of Death

If a Participant dies while employed by the Bank, or within three months after having retired with the consent of the Bank, and without having fully exercised his Options, the personal representative or administrator of his estate shall have the right to exercise such Options; provided, however, that in the event of the death of the Participant in no event shall the Options be exercisable more than one (1) year after the Participant’s death or more than seven (7) years from the date they were granted.

Section 10. No Obligations to Exercise Option

The granting of an Option shall impose no obligation upon the Participant to exercise such Option.

Section 11. Nonassignability

Options shall not be transferable other than by will or by the laws of descent and distribution, and during a Participant’s lifetime shall be exercisable only by such Participant or in the event of his legal incapacity, his duly authorized representative.

Section 12. Effect of Change in Stock Subject to the Plan

The aggregate number of shares of Stock available for Options under the Plan, the shares subject to any Option, and the price per share shall all be proportionately adjusted for any increase or decrease in the number of issued shares of Stock subsequent to the effective date of the Plan resulting from (1) a subdivision or consolidation of shares or any other capital adjustment, (2) the payment of a stock dividend, or (3) other increase or decrease in such shares effected without receipt

of consideration by the Bank. If the Bank shall be the surviving institution in any merger or consolidation, any Option shall pertain, apply, and relate to the securities to which a holder of the number of shares of Stock subject to the Option would have been entitled after the merger or consolidation. Upon dissolution or liquidation of the Bank, or upon a merger or consolidation in which the Bank is not the surviving institution, all Options outstanding under the Plan shall terminate; provided, however, that each Participant (and each other person entitled under Section 9 to exercise an Option) shall have the right, immediately prior to such dissolution or liquidation, or such merger or consolidation, to exercise such Participant’s Options in whole or in part, but only to the extent that such Options are otherwise exercisable under the terms of the Plan.

Section 13. Amendment and Termination

The Board, by resolution, may terminate, amend, or revise the Plan with respect to any shares as to which Options have not been granted. The Board may not, without the consent of the holder of an Option, alter or impair any Option previously granted under the Plan, except as authorized herein. Unless sooner terminated, the Plan shall remain in effect for a period of seven (7) years from the date of the Plan’s adoption by the Board. Termination of the Plan shall not affect any Option previously granted.

Section 14. Transfer Restriction; Representation of Employees

As a condition to the exercise of any portion of an Option, the Bank may require the person exercising such option to agree not to sell, pledge or otherwise transfer any or all shares of Stock acquired at exercise for up to two (2) years and/or to represent and warrant at the time of such exercise that any shares of Stock acquired at exercise are being acquired only for investment and without any intention to sell or distribute such shares, if, in the opinion of counsel for the Bank, such a representation is required under the Securities Act of 1933 or any other applicable law, regulation,

or rule of any governmental agency. Certificates representing shares of Stock acquired at exercise may, in the discretion of the Board, bear a restrictive legend indicating that the sale or other transfer of such Stock is restricted. The content of such legend shall be determined by the Board at the time of exercise.

Section 15. Reservation of Shares of Stock

The Bank, during the term of this Plan, will at all times reserve and keep available, and will seek or obtain from any regulatory body having jurisdiction any requisite authority necessary to issue and to sell, the number of shares of Stock that shall be sufficient to satisfy the requirements of this Plan. The inability of the Bank to obtain from any regulatory body having jurisdiction the authority deemed necessary by counsel for the Bank for the lawful issuance and sale of its Stock hereunder shall relieve the Bank of any liability in respect of the failure to issue or sell Stock as to which the requisite authority has not been obtained.

Section 16. General Restriction

Each grant of an Option under the Plan shall be subject to the requirement that, if at any time the Board shall determined that (i) the listing, registration or qualification of the shares of Stock subject or related thereto upon any securities exchange or under any state or Federal law, or (ii) the consent or approval of any government regulatory body, or (iii) an agreement by the grantee of an option with respect to the disposition of shares of Stock, is necessary or desirable as a condition of, or in connection with, the grant or the issue or purchase of shares of Stock thereunder, such grant may not be consummated in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Committee.

Section 17. Withholding Taxes

Whenever the Bank proposes or is required to issue or transfer shares of Stock under the Plan, the Bank shall have the right to require the grantee to remit to the Bank an amount sufficient to satisfy any Federal, state and/or local withholding tax requirements prior to the delivery of any certificate or certificates for such shares. Alternatively, the Bank may issue or transfer such shares of Stock net of the number of shares sufficient to satisfy the withholding tax requirements. For withholding tax purposes, the shares of Stock shall be valued on the dare the withholding obligation is incurred.

Section 18. Non-Uniform Determination

The Board’s determinations under the Plan (including without limitation determinations of the persons to receive grants, the form, amount and timing of such grants, the terms and provisions of such grants and the agreements evidencing same) need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, grants under the Plan, whether or not such persons are similarly situated.

Section 19. Effective Date of Plan

The Plan shall be effective from the date that the Plan is approved by the Board and the holders of a majority of the Bank’s Stock. However, Options may be granted under the Plan following its adoption by the Board and prior to approval of the Plan by the holders of a majority of the Bank’s Stock provided such grant is expressly subject to stockholder approval of the Plan within 12 months following its adoption by the Board.

Exhibit A to Plan

FIRST BRADENTON BANK

FORM OF STOCK OPTION AGREEMENT

Section 1. Grant. A STOCK OPTION (the “Option”) for a total of          share(s) of Common Stock of First Bradenton Bank, a federal savings bank (herein the “Bank”) is hereby granted to                                  (herein the “Optionee”), subject in all respects to the terms and provisions of the First Bradenton Bank Incentive Stock Option Plan (herein the “Plan”), adopted November     , 1998, a copy of which is attached hereto and which is incorporated herein by reference [and to stockholder approval of the Plan as provided in Section 19 thereof].

Section 2. Price. The Option exercise price as determined by the Board of Directors of the Bank is $                     per share, which is its fair market value as of the date hereof.

Section 3. Exercise; Expiration Date. Subject to the terms of this Agreement and the Plan, this Option shall be exercisable only from and after five (5) years from the date hereof. This Option shall terminate and expire on the seventh (7th) anniversary hereof. Notwithstanding the foregoing, this Option shall be exercisable at any time commencing from and after the 10th day immediately prior to the occurrence of a Change of Control of the Bank. As used herein, “Change of Control” shall mean (a) the acquisition of the Bank by any individual, entity or group by means of a merger, purchase of assets or other form of acquisitive reorganization or (b) the acquisition by any individual, entity or group, other than the currently existing shareholders, of beneficial ownership of 50 percent or more of either (i) the then outstanding Common Stock of the Bank or (ii) the combined voting power of the outstanding voting securities of the Bank entitled to vote generally in the election of directors.

Section 4. Restrictions.

A. This Option may not be exercised if the issuance of shares of Common Stock of the Bank upon such exercise would constitute a violation of any applicable Federal or State securities or other law or valid regulation.

B. The Optionee, as a condition to his exercise of this Option, shall represent to the Bank that the shares of Common Stock of the Bank that he acquires under this Option are being acquired by him for investment and not with a present view to distribution or resale, unless counsel for the Bank is then of the opinion that such a representation is not required under the Securities Act of 1933 or any other applicable law, regulation, or rule of any governmental agency.

C. Shares of Common Stock of the Bank acquired under this Option may not be pledged, sold or otherwise transferred (except by will or the laws of descent and distribution upon death) for two years following the date of issuance without the prior written consent of the Bank.

Section 5. Option Non-Transferable; Exception. This Option may not be transferred in any manner otherwise than by will or the laws of descent and distribution and may be exercised during the lifetime of the Optionee only by him or by his legal or by his legal or personal representative upon his incapacity or death as provided in the Plan. The terms of this Option shall be binding upon the executors, administrators, heirs, successors, and permitted assigns of the Optionee.

Section 6. Terms of Plan. This option may be exercised during its term only in accordance with the terms of the Plan.

Dated:

FIRST BRADENTON BANK
By:
Name:	George T. Smith
Title:	Chairman of the Board

The Optionee accepts the grant of the Option described herein and acknowledges that he is familiar with the terms and provisions of the Plan. The Optionee hereby accepts this Option subject to all the terms and provisions of the Plan.

Dated:

OPTIONEE

EX-12.(A)

Exhibit 12(a)

Fifth Third Bancorp

Computations of Consolidated Ratios Of Earnings To Fixed Charges

($ In Millions)

	Year Ended December 31,
	2004			2003	2002	2001	2000
Excluding Interest on Deposits:
Fixed Charges:
Interest Expense (excluding interest on deposits)	$	563		498	502	726	878
One-Third of Rents, Net of Income from Subleases		15		14	11	14	14
Total Fixed Charges	$	578		512	513	740	892
Earnings:
Income from Continuing Operations
Before Income Taxes, Minority Interest & Cumulative Effect of Accounting Change	$	2,237		2,438	2,299	1,530	1,561
Fixed Charges		578		512	513	740	892
Total Earnings	$	2,815		2,950	2,812	2,270	2,453
Ratio of Earnings to Fixed Charges, Excluding
Interest On Deposits		4.87	x	5.76	5.48	3.07	2.75
Including Interest on Deposits:
Fixed Charges:
Interest Expense	$	1,102		1,086	1,430	2,278	2,697
One-Third of Rents, Net of Income from Subleases		15		14	11	14	14
Total Fixed Charges	$	1,117		1,100	1,441	2,292	2,711
Earnings:
Income from Continuing Operations
Before Income Taxes, Minority Interest & Cumulative Effect of Accounting Change	$	2,237		2,438	2,299	1,530	1,561
Fixed Charges		1,117		1,100	1,441	2,292	2,711
Total Earnings	$	3,354		3,538	3,740	3,822	4,272
Ratio of Earnings to Fixed Charges, Including Interest On Deposits		3.00	x	3.22	2.60	1.67	1.58

EX-12.(B)

Exhibit 12(b)

Fifth Third Bancorp

Computations of Consolidated Ratios Of Earnings To Combined Fixed Charges and Preferred Stock Dividend Requirements

($ In Millions)

	Year Ended December 31,
	2004			2003	2002	2001	2000
Excluding Interest on Deposits:
Fixed Charges:
Interest Expense (excluding interest on deposits)	$	563		498	502	726	878
One-Third of Rents, Net of Income from Subleases		15		14	11	14	14
Preferred Stock Dividends		1		1	1	1	1
Total Fixed Charges	$	579		513	514	741	893
Earnings:
Income from Continuing Operations
Before Income Taxes, Minority Interest & Cumulative Effect of Accounting Change	$	2,237		2,438	2,299	1,530	1,561
Fixed Charges - Excluding Preferred Stock Dividends		578		512	513	740	892
Total Earnings	$	2,815		2,950	2,812	2,270	2,453
Ratio of Earnings to Fixed Charges, Excluding Interest On Deposits		4.86	x	5.75	5.47	3.06	2.75
Including Interest on Deposits:
Fixed Charges:
Interest Expense	$	1,102		1,086	1,430	2,278	2,697
One-Third of Rents, Net of Income from Subleases		15		14	11	14	14
Preferred Stock Dividends		1		1	1	1	1
Total Fixed Charges	$	1,118		1,101	1,442	2,293	2,712
Earnings:
Income from Continuing Operations
Before Income Taxes, Minority Interest &
Cumulative Effect of Accounting Change	$	2,237		2,438	2,299	1,530	1,561
Fixed Charges - Excluding Preferred Stock Dividends		1,117		1,100	1,441	2,292	2,711
Total Earnings	$	3,354		3,538	3,740	3,822	4,272
Ratio of Earnings to Fixed Charges, Including Interest On Deposits		3.00	x	3.21	2.59	1.67	1.58

EX-13

Exhibit 13

CORPORATE PROFILE

Fifth Third Bancorp

Assets: $94 billion

Rank in assets among U.S. peers: 11^th

Market value of stock: $26 billion

Rank by market value among U.S. peers: 8^th

Total Employed: 21,027

Banking Centers: 1,011

we are Fifth Third.

We are committed to acting with the highest level of integrity in everything we do and in every relationship – with our customers, shareholders and communities. We are focused on taking every opportunity to exceed our customers’ expectations – in products, price and service. We are committed to working as a team to meet customer needs – across business lines, geography and functions. We will continue to invest to achieve best-in-class performance – in convenience, sales and growth. We are focused on creating value – growing revenue, controlling expenses and effectively balancing risk and reward. We are committed, focused and will invest in the communities where we live and work – through charitable donations, volunteerism and civic leadership. We will maintain the flexibility and financial strength to adapt to changing business and economic conditions. We are Fifth Third.

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. The Company has $94.5 billion in assets as of December 31, 2004. The Company operates 17 affiliates with 1,011 full-service Banking Centers, including 128 Bank Mart^® locations open seven days a week inside select grocery stores and 1,898 Jeanie^® ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia and Pennsylvania. The financial strength of Fifth Third’s largest banks continues to be recognized by rating agencies with deposit ratings of AA- and Aa1 from Standard & Poor’s and Moody’s, respectively. Additionally, Fifth Third Bancorp continues to maintain among the highest short-term ratings available at A-1 and Prime-1 and is recognized by Moody’s with one of the highest senior debt ratings for any U.S. bank holding company of Aa2. Fifth Third operates four main businesses: Retail, Commercial, Investment Advisors and Fifth Third Processing Solutions. Investor information and press releases can be viewed at www.53.com. Fifth Third’s common stock is traded through the NASDAQ^® National Market System under the symbol “FITB.”

FINANCIAL HIGHLIGHTS

For the years ended December 31	2004		2003		Percent Change
$ in millions, except share data
Earnings and Dividends
Net Income	$	1,525	$	1,665	(8	)
Cash Dividends Declared		735		645	14
Per Share
Earnings	$	2.72	$	2.91	(7	)
Diluted Earnings		2.68		2.87	(7	)
Cash Dividends Declared		1.31		1.13	16
Year-End Book Value		16.00		15.29	5
Year-End Market Price		47.30		59.10	(20	)
At Year-End
Assets	$	94,456	$	91,254	4
Loans and Leases		59,808		52,308	14
Deposits		58,226		57,095	2
Shareholders’ Equity		8,924		8,667	3
Market Capitalization		26,377		33,491	(21	)
Key Ratios (Percent)
Return on Average Assets (ROA)		1.61		1.90	(15	)
Return on Average Equity (ROE)		17.2		19.0	(9	)
Net Interest Margin		3.48		3.62	(4	)
Efficiency Ratio		53.9		47.0	15
Average Shareholders’ Equity to Average Assets		9.34		10.01	(7	)
Actuals
Number of Shares		557,648,989		566,685,301	(2	)
Number of Banking Locations		1,011		952	6
Number of Full-Time Equivalent Employees		19,659		18,899	4
Deposit and Debt Ratings	Moody’s		Standard & Poor’s		Fitch
Fifth Third Bancorp
Commercial Paper		Prime -1		A-1	F1+
Senior Debt		Aa2		A+	AA-
Fifth Third Bank and Fifth Third Bank (Michigan)
Short-Term Deposit		Prime -1		A-1 +	F1+
Long-Term Deposit		Aa1		AA-	AA

1

LETTER FROM THE PRESIDENT & CHIEF EXECUTIVE

we know who we are

George A. Schaefer, Jr.

President & CEO

Dear Shareholders and Friends,

We improved our competitive positioning on many fronts in 2004 in order to drive revenue and earnings growth in the years to come. Business line revenue growth, success in attracting new deposit and loan customers and improved credit quality, however, were offset by the difficulties in managing through the transition from the lowest level in interest rates in over 40 years.

Earnings per diluted share for the full year 2004 were $2.68, a decrease of seven percent over last year’s earnings of $2.87. Return on average assets was 1.61 percent and return on average equity was 17.2 percent, compared to 1.90 percent and 19.0 percent, respectively, in 2003. Earnings in 2004 were impacted by initiatives undertaken in the fourth quarter to better position the balance sheet for current and expected market conditions, including debt termination charges and securities losses totaling $326 million pre-tax ($208 million after-tax) or $.37 per diluted share.

The prolonged low interest rate environment led to declines in asset yields, net interest margin and returns on capital in 2004 that ultimately led us to the decision to reposition the balance sheet. Although this action impacted fourth quarter and full-year results, we believe it was in the best long-term interests of our shareholders. The balance sheet is now better positioned as the economy trends toward what we believe will be a more normalized and favorable interest rate environment.

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“We improved our competitive positioning on many fronts to drive revenue and earnings growth in the years to come.”

2004 highlights include:

• The 2004 dividend of $1.31 per share was a 16 percent increase over last year and a 34 percent increase over the 2002 annual dividend.

• Credit quality improved in 2004 with nonperforming assets and net charge-offs, as a percent of loans and leases, declining from .61 percent in 2003 to .51 percent in 2004 and from ..63 percent in 2003 to .45 percent in 2004, respectively.

• Average loans and leases increased by nine percent and average transaction deposits increased by seven percent over 2003.

• We added 1,155 net new sales positions throughout our markets.

• We added 76 new banking center locations in 2004, excluding relocations of existing facilities. We believe this is the most cost-effective method of expansion in our largest affiliate markets.

• The acquisition and integration of Franklin Financial, combined with continuing de-novo expansion, provided entry into the attractive Nashville market. With $1.9 billion in assets and 14 locations, our Nashville affiliate provides a strong springboard for continued growth in the Southeast.

• The acquisition of First National Bankshares of Florida, a $5.6 billion asset bank holding company located primarily in the rapidly expanding markets of Orlando, Tampa, Sarasota, Naples and Fort Myers, was announced in 2004 and subsequently completed early in 2005. First National was the largest bank holding company headquartered in the state of Florida and provides Fifth Third with a tremendous platform in some of the fastest growing deposit markets in the United States.

• We also invested significantly in information technology including the launch of an improved internet banking platform. We completed numerous automation and infrastructure improvements that will all serve to ensure the scalability and strength of your company.

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“our vision has not changed, and the very same core principles responsible for our success remain intact...”

Outstanding financial performance has long been a hallmark of Fifth Third. Revenue and earnings per diluted share have both increased at annual compound rates of 11 percent over the last 10 years. Over the last five years, these same measures have increased at annual compound rates of nine percent and 12 percent, respectively. Owners of our company have realized just a one percent annualized total return on this earnings growth over the same five-year time period. While outperforming many broader market indices, this level of investment performance has been the source of frustration for our management team and investors alike. However, our focus as a management team remains on making the necessary investments and sound decisions to strengthen our competitive advantage within our core middle market commercial and retail customer base. Ultimately, top line revenue growth and disciplined expense control will continue to drive the earnings and capital growth that we believe provides for stock price appreciation over the long-term.

Fifth Third has grown over the years to become one of the largest and strongest financial services companies in the United States. With more than 1,000 banking locations in attractive metropolitan markets, nearly $100 billion in assets, and, with a market capitalization in excess of $25 billion, we rank among the 10 largest banks in the country. We are very enthusiastic about the future and, with only an eight percent market share in our markets and a best-in-class operating model and distribution network, we have a tremendous opportunity in front of us. Our vision has not changed and the very same core principles responsible for our past success remain intact, including an unwavering commitment to be the premier financial services provider and employer of choice in all of our markets. We continue to strive to exceed the expectations of our customers, shareholders and neighbors, and I invite you to read about our approach and what we feel is the strength of our franchise in the pages that follow.

Today, Fifth Third is comprised of 17 affiliates headquartered in metropolitan markets throughout the Midwest and Florida. While every market is unique, two things remain constant at Fifth Third: a deeply held belief in the talent and entrepreneurship of our employees combined with the knowledge that a decentralized operating model allows them the

4

flexibility to better serve our customers. We empower local managers to find the best ways to produce growth. In the years to come, you can expect to see us continue to increase our presence in our existing markets and establish affiliates in new metropolitan markets as an important part of our continuing growth. On average, our expectation is to add 70 to 100 banking centers and to increase our sales force by 15 to 20 percent every year. Our existing competitive and financial strength combined with enhanced infrastructure and technology, make me extremely optimistic about the future.

Last year marked the passing of a good friend: James D. Kiggen served on our Board for 20 years and his insight was instrumental in the success of Fifth Third. He will be missed. I would also like to extend our appreciation for the guidance and leadership of Richard T. Farmer and Joseph H. Head, Jr., both of whom retired from our Board of Directors in 2004 after 22 and 17 years of service, respectively.

I would also like to thank our customers, employees, board members and our communities for their continued support and confidence. The focus in all of our markets in 2005 will be driving revenue and quality loan and deposit growth by adding new customers, increasing market share and striving to meet all the financial services needs of our customers. Fifth Third continues to maintain a cost advantage over competitors, possesses one of the strongest balance sheets in the industry, has a best-in-class distribution network, and, with significant growth potential, we look with great optimism to the challenges that lie ahead in 2005.

Sincerely,

George A. Schaefer, Jr.

President & Chief Executive Officer

January 2005

We recently began hosting a series of employee meetings throughout our markets. Our credo, You Make the Difference, helps keep all clearly focused on our mission of exceeding the expectations of our customers, co-workers and shareholders, of being our customers’ first choice and of being a great place to work.

5

we are focused

. . . on customer’s NEEDS AND EXPECTATIONS

Our sales culture is renowned throughout the industry, and our sales force has always worked extremely hard to generate new relationships to offer competitively-priced financial products and services. More recently, we have enhanced these efforts through the implementation of detailed relationship management databases, account retention strategies, increased automation and process improvement programs designed to reduce error rates. In early 2005, we began interviewing customers monthly about their experiences in our banking centers so we can evaluate the service we are delivering in every affiliate, region and banking center. For the first time in our history, incentive compensation programs across the Bancorp will incorporate customer satisfaction results. There are many factors affecting a customer’s decision about where to bank. Fifth Third offers not only convenience and competitively priced products, but also integrity, financial stability and a relentless drive to deliver the best service in every single one of our markets. Ultimately, customers trust us to ensure the safety of their money. This is a trust that we are intensely focused on maintaining every day.

(L to R) Malcolm D. Griggs, Executive Vice President & Chief Risk Officer

Daniel T. Poston, Executive Vice President, Internal Audit

Paul L. Reynolds, Executive Vice President, Secretary & General Counsel

. . . on REPUTATION

The past couple of years have brought about a number of changes in our economy as corporate America continues to respond to the challenges of an evolving regulatory landscape. Fifth Third believes that great companies have a very real opportunity to differentiate themselves in this environment and we are committed to being among them. Fifth Third has long been known for its commitment to accountability at every level of the organization and this holds true for our commitment to best-in-class compliance, governance and risk management functions. A reputation for excellence takes a lifetime to build and only a moment to destroy, and Fifth Third views the integrity of its actions as one of its greatest assets.

6

. . . on our CORE BUSINESS

In all of our markets, we focus on four business lines – retail and commercial banking, investment advisors and Fifth Third Processing Solutions (“FTPS”). Nearly half of our revenues are derived from retail banking and a third from the commercial business. Our investment advisors division makes up about 10 percent of our revenues and is one of the largest money managers in the Midwest with $34 billion in directly managed assets and over $182 billion in assets under care. FTPS handles ATM processing and merchant credit and debit card processing. FTPS, which accounts for about 11 percent of our revenues, processed 12 billion electronic transactions in 2004. Fifth Third believes that these businesses provide us with a diversified and profitable mix, as well as the necessary expertise to meet all of the financial service needs of our core retail and middle-market commercial customer base.

RETAIL BANKING

Fifth Third’s 1,011 banking centers, including 128 Bank Mart^® locations, serve as the primary point of contact for our six million customers. Through these locations, Fifth Third strives to provide best-in-class products, convenience and customer service to the individual and small business customers within our geographic footprint.

COMMERCIAL BANKING

Fifth Third’s 1,200 commercial relationship officers and support staff offer companies within our geographic footprint a business partner of unparalleled capital strength and stability, sound expertise and experience and comprehensive and customized financial solutions for all their cash management, international and borrowing needs.

(L to R) Robert A. Sullivan, Executive Vice President, Commercial Banking; Kevin T. Kabat, Executive Vice President, Retail Banking and Affiliate Administration; Neal E. Arnold, Executive Vice President, Investment Advisors and Fifth Third Processing Solutions.

FIFTH THIRD PROCESSING SOLUTIONS

FTPS authorizes, initiates, captures and settles electronic payment transactions as part of an integrated cash management solution for financial institutions and merchants all over the world. As a leading electronic processor, Fifth Third helps our commercial customers eliminate paper and reduce cycle time and expense while providing instant on-line access to information through a platform integrated with traditional banking services.

INVESTMENT ADVISORS

Fifth Third is a full-service money management firm featuring a broad array of equity and fixed income products catering to retail and commercial clients across our footprint. From retirement planning, wealth management, public finance to private client services, Fifth Third delivers a full spectrum of investment strategies of varying scope and complexity for both long and short-term investment horizons.

7

we are investors

...in DISTRIBUTION

Over the last couple of years, our level of investment in our core businesses has accelerated rapidly. Most notably, we began a significant de-novo branching effort in 2002 to enhance distribution in our larger markets. This marks the first time in our history that we have undertaken a de-novo effort on this scale. For most of the last two decades, many in our industry believed that deregulation and the emergence of the internet would signal the demise of traditional bricks and mortar as a sales channel for the financial services industry. Fifth Third believes banking centers will continue to be a very important sales channel because we listen to our customers. The overwhelming majority of our customers visit one of our 1,011 banking centers several times a month. For this reason, Fifth Third built 76 new banking centers in 2004, excluding relocations, that attracted over $657 million in new deposits and $178 million in new loans.

...in PEOPLE

Fifth Third has the business model, technology, incentives, awareness and ambition to become the employer of choice in all of our markets. More so than at any time in our history, the promise of being recognized and rewarded for individual performance is attracting people to work for Fifth Third. In 2004, Fifth Third added 1,155 net new sales positions throughout our 17 affiliate markets. Leadership, teamwork and integrity are just a few of the attributes of a Fifth Third employee – and why we think we have the best employees in the industry.

8

Fifth Third asks employees to be leaders in sales and service and matches that action with generous performance incentives and a commitment to career development.

...in TECHNOLOGY

Fifth Third is investing in technology in order to improve efficiency, provide greater convenience for our customers and drive financial performance. We have invested significantly over the past couple of years and spent a great deal of time and effort upgrading our sales and support systems. Many of our customer information systems have been enhanced to provide for increased availability of information, reliability and timeliness. Significant upgrades were completed this year to our online banking platform, online customer interfaces, banking center workstations, network capacity and numerous sales information systems. We are now able to access more timely and detailed financial information regarding sales and profitability results. This information can be viewed on several levels, including line of business, affiliate, officer and banking center.

...in ACQUISITIONS

In addition to core growth in our established markets, Fifth Third periodically utilizes acquisitions as a means of expanding its presence and gaining entry into new metropolitan markets. Our approach to acquisitions has remained unchanged over the years. Our primary hurdle when evaluating any transaction is determining whether we can grow revenue from the resulting platform. Cost cutting in the first year is not a path to long-term success and does not meet our return requirements. We are interested in adding platforms in large, deposit-rich metropolitan markets adjacent to our footprint that when combined with expansion efforts will enable us to achieve #1 market share over time. This holds true for our most recent acquisition of First National. This acquisition provides Fifth Third with a tremendous platform and opportunity in the most attractive and fastest growing markets in Western and Central Florida. We believe the foundation we have acquired will easily assimilate into our affiliate bank operating model and become an integral part of Fifth Third’s continuing growth.

9

we are committed

...to our BUSINESS MODEL

Our affiliate operating structure differentiates us from our competitors and ensures that our customers receive individualized service and comprehensive financial solutions. All aspects of customer relationships are managed locally by local affiliate Presidents responsible for the bank’s operation and community development; and by local officers with the authority and incentives to make the right decisions for the Bank and our customers. Competitive pressures are different in every market and on every street corner, so we rely on experienced local officers empowered with the authority and infrastructure to employ the best practices of our company to deliver a personalized level of service to our customers. This approach is central to our strategy of ensuring decisions are made by the people most familiar with our customer’s needs. Fifth Third’s team has the experience to advise our customers, the financial strength to support their growth and the willingness, resources and ability to provide them with customized financial solutions. All of our officers run their own business, manage to detailed financial statements and are compensated based on performance. In short, we strive to create a culture of business ownership, and we reward each of our officers for making the right decisions. A local presence with market knowledge, management accountability and a team approach characterize our affiliate banking model. We are committed to it.

10

. . . to our EMPLOYEES

Banking is first and foremost a relationship built upon the foundation of daily interaction between customers and our most vital asset – our employees. The quality of our customer experience begins and ends with our team members. Motivated, talented and knowledgeable employees will earn the trust of their communities and gain market share over time. Our employees are the driver of our success. Each of our team members knows that they own their business, can impact the bottom line, are accountable for their results and are rewarded for their accomplishments. Our employees make the difference in terms of realizing our vision of continuing to be a growth company. Our employees make the difference in the lives of our customers, co-workers and neighbors by delivering superior performance. There is no stronger correlation than between daily individual employee contributions and growth in customers, revenue and bottom line earnings. We are committed to it.

(L to R) R. Mark Graf, Senior Vice President & Chief Financial Officer; Pete Pesce, Executive Vice President, Human Resources; Greg D. Carmichael, Executive Vice President & Chief Information Officer; Diane L. Dewbrey, Senior Vice President, Operations

. . . to our COMMUNITIES

Fifth Third provides banking, investments and processing solutions to six million customers everyday, and we leverage our success to strengthen the communities we serve. We reaffirmed our commitment through over $30 million in grants and support to deserving organizations, including $22 million from the Fifth Third Foundation and charitable trusts for which the Bank serves as Trustee. We were again honored to be included in BusinessWeek magazine’s “America’s Most Philanthropic Companies” listing for our giving as a percentage of revenues. Our commitment to diversity is equally unwavering. Employee diversity councils and minority mentoring programs are just two of the ways we work to build and nurture diverse employment and leadership throughout the Bancorp. The Fifth Third Foundation Office, Community Development Corporation and Community Affairs department are three key extensions of the Bank’s community investment activities.

The Foundation Office helps direct grants for Arts & Culture, Community Development, Education and Health & Human Services, while the Fifth Third Community Development Corporation invests in low-income housing, historic tax credit and economic development projects to support community revitalization. Our Community Affairs department identifies lending and real estate opportunities in traditionally underserved

11

markets, such as ethnically diverse, urban and low- to moderate-income census tracts. This group also champions financial literacy – the keystone for stable communities – by providing homebuyer training, credit counseling and college savings match programs.

As a leader in residential mortgage lending, Fifth Third partnered with Freddie Mac to launch the Homeownership Mobile, or eBus, a 38-foot mobile classroom. Fifth Third and Freddie Mac eBus staffers provide multi-lingual assistance, and the initiative helps combat many misconceptions about homeownership and the homebuyer process, such as the perceived need for near perfect credit or downpayments as large as 20 percent of the home price. Fifth Third also launched a new mortgage product, Immigrant Homeownership Program, to better serve the 4.2 million U.S. tax-paying, foreign-born individuals living in the Midwest. The program helps encourage many first-time homebuyers, as well as those with limited traditional credit histories, to begin a banking relationship.

We are proud of our legacy of philanthropy. These initiatives and many others reflect our long-held belief that if you help build a stronger community, you will build a stronger bank. We are committed to it.

United Way GIVING

Over the past five years, Fifth Third’s corporate and employee contributions to the United Way have reached $38.8 million.

2000	$5.5 million
2001	$6.5 million
2002	$7.4 million
2003	$9.0 million
2004	$10.4 million

12

FIFTH THIRD BANCORP 2004 ANNUAL REPORT

FINANCIAL CONTENTS

Management’s Discussion and Analysis of Financial Condition and Results of Operations
Selected Financial Data	14
Overview	15
Recent Accounting Standards	16
Critical Accounting Policies	16
Statements of Income Analysis	18
Balance Sheet Analysis	23
Risk Management	25
Controls and Procedures	33
Management’s Assessment as to the Effectiveness of Internal Control over Financial Reporting	34
Reports of Independent Registered Public Accounting Firm	34
Financial Statements
Consolidated Statements of Income	36
Consolidated Balance Sheets	37
Consolidated Statements of Changes in Shareholders’ Equity	38
Consolidated Statements of Cash Flows	39
Notes to Consolidated Financial Statements
Summary of Significant Accounting and Reporting Policies	40
Securities	45
Loans and Leases and Reserve for Loan and Lease Losses	46
Bank Premises and Equipment	47
Operating Lease Equipment	47
Goodwill	47
Intangible Assets	47
Servicing Rights and Retained Interests	48
Derivatives	48
Short-Term Borrowings	50
Long-Term Debt	51
Commitments and Contingent Liabilities	52
Legal and Regulatory Proceedings	52
Guarantees	53
Related Party Transactions	53
Other Comprehensive Income	54
Common Stock and Treasury Stock	54
Stock-Based Compensation	55
Other Noninterest Income and Other Noninterest Expense	56
Sales and Transfers of Loans	57
Discontinued Operations	59
Income Taxes	59
Retirement and Benefit Plans	60
Earnings Per Share	61
Fair Value of Financial Instruments	61
Business Combinations	62
Certain Regulatory Requirements and Capital Ratios	62
Parent Company Financial Statements	63
Segments	63
Consolidated Ten Year Comparison	65
Directors and Officers	66
Corporate Information	67

FORWARD-LOOKING STATEMENTS

This report may contain forward-looking statements about Fifth Third Bancorp and/or the company as combined with acquired entities within the meaning of Sections 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and 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 “believes,” “expects,” “anticipates,” “plans,” “trend,” “objective,” “continue,” “remain” or similar expressions or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions. 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) competitive pressures among depository institutions increase significantly; (2) changes in the interest rate environment reduce interest margins; (3) prepayment speeds, loan origination and sale volumes, charge-offs and loan loss provisions; (4) general economic conditions, either national 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; (5) political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; (6) changes and trends in the securities markets; (7) 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; (8) difficulties in combining the operations of acquired entities and (9) the impact of reputational risk created by the developments discussed above on such matters as business generation and retention, funding and liquidity. Fifth Third undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this report.

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

The following is management’s discussion and analysis 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 Consolidated Financial Statements, which are a part of this report.

TABLE 1: SELECTED FINANCIAL DATA

For the Years Ended December 31 ($ in millions, except per share data)	2004			2003	2002	2001	2000
Income Statement Data
Net interest income (a)	$	3,048		2,944	2,738	2,476	2,297
Noninterest income		2,465		2,483	2,183	1,788	1,476
Total revenue (a)		5,513		5,427	4,921	4,264	3,773
Provision for loan and lease losses		268		399	246	236	138
Noninterest expense		2,972		2,551	2,337	2,453	2,027
Net income		1,525		1,665	1,531	1,002	1,055
Common Share Data
Earnings per share	$	2.72		2.91	2.64	1.74	1.86
Earnings per diluted share		2.68		2.87	2.59	1.70	1.83
Cash dividends per common share		1.31		1.13	.98	.83	.70
Book value per share		16.00		15.29	14.98	13.31	11.83
Dividend payout ratio, as originally reported		48.9	%	39.4	37.8	48.8	41.7
Financial Ratios
Return on average assets		1.61	%	1.90	2.04	1.42	1.58
Return on average shareholders’ equity		17.2		19.0	18.4	13.6	17.5
Average equity as a percent of average assets		9.34		10.01	11.08	10.40	9.06
Net interest margin (a)		3.48		3.62	3.96	3.82	3.73
Efficiency ratio (a)		53.9		47.0	47.5	57.5	53.7
Credit Quality
Net losses charged off	$	252		312	187	227	109
Net losses charged off as a percent of average loans and leases		.45	%	.63	.43	.54	.26
Reserve for loan and lease losses as a percent of loans and leases (b)		1.19		1.33	1.49	1.50	1.43
Reserve for credit losses as a percent of loans and leases (b)		1.31		1.47	1.49	1.50	1.43
Nonperforming assets as a percent of loans, leases and other assets, including other real estate owned		.51		.61	.59	.57	.47
Underperforming assets as a percent of loans, leases and other assets, including other real estate owned		.74		.89	.95	.96	.77
Average Balances
Loans and leases, including held for sale	$	57,042		52,414	45,539	44,888	42,690
Investment securities and other short-term investments		30,597		28,947	23,585	19,938	18,830
Total assets		94,896		87,481	75,037	70,683	66,611
Demand deposits		12,327		10,482	8,953	7,394	6,257
Interest-bearing deposits		43,908		44,008	39,976	38,255	38,164
Short-term borrowings		13,539		12,373	7,191	8,799	9,725
Long-term debt		13,323		8,747	7,640	6,301	4,707
Shareholders’ equity		8,860		8,754	8,317	7,348	6,033
Regulatory Capital Ratios
Tier 1 capital		10.31	%	11.11	11.84	12.49	11.40
Total risk-based capital		12.31		13.56	13.65	14.55	13.50
Tier 1 leverage		8.89		9.23	9.84	10.64	9.49

(a) Amounts presented on a fully taxable equivalent basis (“FTE”).

(b) As of December 31, 2004, the reserve for unfunded commitments has been reclassified from the reserve for loan and lease losses to other liabilities. The 2003 year-end reserve for unfunded commitments has been reclassified to conform to the current period presentation. The reserve for credit losses is the sum of the reserve for loan and lease losses and the reserve for unfunded commitments.

TABLE 2: QUARTERLY INFORMATION

	2004					2003
For the Three Months Ended ($ in millions, except per share data)	12/31		9/30	6/30	3/31	12/31	9/30	6/30	3/31
Net interest income (FTE)	$	752	766	771	759	745	735	749	716
Provision for loan and lease losses		65	26	90	87	94	112	109	85
Noninterest income		479	611	749	626	599	680	618	586
Noninterest expense		935	648	742	648	657	657	621	614
Income from continuing operations before income taxes, minority interest and cumulative effect		222	694	679	641	583	636	627	593
Net income		176	471	448	430	442	418	415	390
Earnings per share		.31	.84	.80	.76	.78	.73	.72	.68
Earnings per diluted share		.31	.83	.79	.75	.77	.72	.71	.67

14 Fifth Third Bancorp

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

OVERVIEW

This overview of management’s discussion and analysis 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 and results of operations.

The Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. The Bancorp has $94.5 billion in assets, operates 17 affiliates with 1,011 full-service banking centers and 1,898 Jeanie^® ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia and Pennsylvania. The financial strength of the Bancorp’s largest banks, Fifth Third Bank and Fifth Third Bank (Michigan), continues to be recognized by rating agencies with deposit ratings of AA- and Aa1 from Standard & Poor’s and Moody’s, respectively. Additionally, the Bancorp is recognized by Moody’s with one of the highest senior debt ratings for any U.S. bank holding company of Aa2. The Bancorp operates four main businesses: Commercial Banking, Retail Banking, Investment Advisors and Fifth Third Processing Solutions.

Fifth Third 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. Our affiliate operating model provides a competitive advantage by keeping the decisions close to the customer and by emphasizing individual relationships. Through our affiliate operating model, individual managers, from the banking center to the executive level, are given the opportunity to tailor financial solutions for their customers.

The Bancorp’s revenues are fairly evenly dependent on net interest income and noninterest income. During 2004, net interest income, on a fully taxable equivalent (“FTE”) basis, and noninterest income provided 55% and 45% 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 continuation of the strong financial performance and capital strength of the Bancorp.

Net interest income is the difference between interest income on earning assets such as loans, leases and securities, and interest expense paid on liabilities such as deposits and borrowings, and continues to be the Bancorp’s largest revenue source. Net interest income is affected by the general level of interest rates, changes in interest rates and by 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 owes 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 and potential adverse changes in net interest income. 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 risks 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, among other factors.

Noninterest income is derived primarily from electronic funds transfer (“EFT”) and merchant transaction processing fees, fiduciary and investment management fees, banking fees and service charges, mortgage banking revenue and operating lease revenue.

Net interest income, net interest margin, net interest rate spread and the efficiency ratio are presented in Management’s Discussion and Analysis of Financial Condition and Results of Operations 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 measure to be the preferred industry measurement of net interest income as it provides a relevant comparison between taxable and non-taxable amounts.

The Bancorp’s net income was $1.5 billion in 2004, down eight percent compared to $ 1.7 billion in 2003. Earnings per diluted share were $2.68 in 2004, down seven percent from $2.87 in 2003. The Bancorp’s dividend in 2004 increased 16% to $1.31 per common share from $ 1.13 in 2003. The results of operations reflect the impact of the balance sheet repositioning initiatives announced and completed during the fourth quarter of 2004, including debt retirement charges and losses from security sales, which reduced net income and earnings per diluted share by $208 million and $.37, respectively. The prolonged low interest rate environment led to declines in asset yields, net interest margin and returns on capital in 2004, which ultimately led to the decision to reposition the balance sheet. Further discussion of the repositioning is included in relevant sections throughout this report. The results of operations also reflect the impact of the after-tax gain of $91 million, or $.16 per diluted share, from the sales of certain small merchant processing contracts in 2004 and an additional after-tax charge of $50 million, or $.09 per diluted share, from the early retirement of debt in the second quarter of 2004.

The Bancorp experienced growth across nearly all of the lines of business, including solid growth in both commercial and consumer loans. The Bancorp also benefited from improvements in commercial credit and continued control of operational expenses. Noninterest income was flat compared to 2003 as benefits from the emphasis on cross-selling services and the gain from the sales of certain small merchant processing contracts were offset by losses on securities sold as a result of the balance sheet repositioning and a decrease in mortgage banking revenues.

The Bancorp continues to invest in the geographic areas within its footprint that offer the best growth prospects. The Bancorp opened 76 new banking centers during 2004, excluding relocations, with a net increase of 50, excluding acquisitions. The Bancorp plans to add a similar number of new banking centers in 2005, as it believes additional banking centers are a cost effective method of expansion in its largest affiliate markets. The Bancorp also completed its acquisition of Franklin Financial Corporation (“Franklin Financial”) in June of 2004, which expanded the Bancorp’s presence in the Nashville market to 14 locations. In August 2004, the Bancorp announced an agreement to acquire First National Bankshares of Florida, Inc., a bank holding company with $5.6 billion in assets located primarily in Orlando, Tampa, Sarasota, Naples and Fort Myers. The acquisition was completed on January 1, 2005 and as a result of this transaction, the Florida affiliate now has nearly 100 full-service locations and approximately $5 billion in deposits.

The Bancorp’s capital ratios exceed the “well-capitalized” guidelines as defined by the Board of Governors of the Federal Reserve System (“FRB”). As of December 31, 2004, the Tier 1 capital ratio was 10.31% and the total risk-based capital ratio was 12.31%. The Bancorp’s capital strength and financial stability have enabled it to maintain a Moody’s credit rating that is equaled or surpassed by only three other U.S. bank holding companies.

Fifth Third Bancorp 15

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

RECENT ACCOUNTING STANDARDS

In December 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure—an Amendment of FASB Statement No. 123.” This Statement amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. Effective January 1, 2004, the Bancorp adopted the fair value recognition provisions of SFAS No. 123 using the retroactive restatement method described in SFAS No. 148. As a result, financial information for all prior periods has been restated to reflect the compensation expense that would have been recognized had the fair value method of accounting been applied to all awards granted to employees after January 1, 1995. Stock-based compensation expense is included in salaries, wages and incentives expense in the Consolidated Statements of Income.

In December 2004, the FASB issued SFAS No. 123 (Revised 2004), “Share-Based Payment.” This Statement requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award with the cost to be recognized over the vesting period. As the Bancorp has previously adopted the fair value recognition provisions of SFAS No. 123 and the retroactive restatement method described in SFAS No. 148, the adoption of this Statement will not have a material impact on the Bancorp’s Consolidated Financial Statements.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” This Statement establishes standards for how an entity classifies and measures certain financial instruments with characteristics of both liabilities and equity. This Statement requires that an issuer classify a financial instrument that is within its scope as a liability. Many of those instruments were previously classified as equity, or in some cases, presented between the liabilities section and the equity section of the statement of financial position. This Statement was effective for financial instruments entered into or modified after May 31, 2003 and otherwise was effective at the beginning of the first interim period beginning after June 15, 2003. Adoption of this Statement on July 1, 2003 required a reclassification of a minority interest to long-term debt and the corresponding minority interest expense to interest expense, relating to preferred stock issued during 2001 by a subsidiary of the Bancorp. The existence of the mandatory redemption feature of this issue upon its mandatory conversion to trust preferred securities necessitated these reclassifications and did not result in any change in bottom line income statement trends.

In January 2003, the FASB issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities.” This interpretation requires variable interest entities (“VIEs”) to be consolidated by the primary beneficiary, which is defined as the enterprise that will absorb the majority of the VIE’s expected losses if they occur, receive a majority of the VIE’s residual returns if they occur, or both. In December 2003, FASB issued Interpretation No. 46R (“FIN 46R”), “Consolidation of Variable Interest Entities — an interpretation of ARB 51 (revised December 2003).” FIN 46R was primarily issued to clarify the required accounting for interests in VIEs. The Bancorp early adopted the provisions of FIN 46 on July 1, 2003 and consolidated a VIE for which the Bancorp was deemed to be the primary beneficiary and was created for the sole purpose of participating in the sale and subsequent leaseback of leased autos. The Bancorp consolidated the operating lease assets and corresponding liability of the VIE as well as recognized an after-tax cumulative effect charge of $11 million ($.02 per diluted share) representing the difference between the carrying value of the leased autos sold and the carrying value of the newly consolidated obligation as of July 1, 2003. Consolidation of these operating lease assets and corresponding liability did not impact risk-based capital ratios or bottom line income statement trends; however lease payments on the operating lease assets are now reflected as a component of noninterest income and depreciation expense is now reflected as a component of noninterest expense.

CRITICAL ACCOUNTING POLICIES

Reserve for Loan and Lease Losses

The Bancorp maintains a reserve to absorb probable loan and lease losses inherent in the portfolio. The reserve is maintained at a level the Bancorp considers to be adequate and is based on ongoing quarterly assessments and evaluations of the collectibility and historical loss experience of loans and leases. Credit losses are charged and recoveries are credited to the reserve. Provisions for loan and lease losses are based on the Bancorp’s review of the historical credit loss experience and such factors that, in management’s judgment, deserve consideration under existing economic conditions in estimating probable credit losses. In determining the appropriate level of reserves, the Bancorp estimates losses using a range derived from “base” and “conservative” estimates. The Bancorp’s methodology for assessing the appropriate reserve level consists of several key elements. The Bancorp’s strategy for credit risk management includes a combination of conservative exposure limits significantly below legal lending limits and conservative underwriting, documentation and collections standards. The strategy also emphasizes diversification on a geographic, industry and customer level, regular credit examinations and quarterly management reviews of large credit exposures and loans experiencing deterioration of credit quality.

Larger commercial loans that exhibit probable or observed credit weaknesses are subject to individual review. Where appropriate, reserves are allocated to individual loans based on management’s estimate of the borrower’s ability to repay the loan given the availability of collateral, other sources of cash flow and legal options available to the Bancorp. The review of individual loans includes those loans that are impaired as provided in SFAS No. 114, “Accounting by Creditors for Impairment of a Loan.” Any reserves for impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or fair value of the underlying collateral. The Bancorp evaluates the collectibility of both principal and interest when assessing the need for a loss accrual. Historical loss rates are applied to other commercial loans not subject to specific reserve allocations. The loss rates are derived from a migration analysis, which computes the net charge-off experience sustained on loans according to their internal risk grade. The Bancorp utilizes two risk grading systems for commercial loans and leases. The current risk grading system utilized for reserve analysis purposes encompasses ten categories. The Bancorp also maintains a dual risk rating system that provides for 13 probability of default grade categories and an additional six grade categories measuring loss factors given an event of default. The probability of default and loss given default analyses are not separated in the ten grade risk rating system. The Bancorp is in the process of completing significant validation and testing of the dual risk rating system prior to implementation for reserve analysis purposes. The dual risk rating system is consistent with Basel II expectations and allows for more precision in the analysis of commercial credit risk.

Homogenous loans, such as consumer installment, residential mortgage loans and automobile leases are not individually risk graded. Rather, standard credit scoring systems and delinquency monitoring are used to assess credit risks. Reserves are established for each pool of loans based on the expected net charge-offs for one year. Loss rates are based on the average net charge-off history by loan category.

16 Fifth Third Bancorp

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

Historical loss rates for commercial and consumer loans may be adjusted for significant factors that, in management’s judgment, reflect the impact of any current conditions on loss recognition. Factors that management considers in the analysis include the effects of the national and local economies, trends in the nature and volume of loans (delinquencies, charge-offs and nonaccrual loans), changes in mix, credit score migration comparisons, asset quality trends, risk management and loan administration, changes in the internal lending policies and credit standards, collection practices and examination results from bank regulatory agencies and the Bancorp’s internal credit examiners.

An unallocated reserve is maintained to recognize the imprecision in estimating and measuring loss when evaluating reserves for individual loans or pools of loans. Reserves on individual loans and historical loss rates are reviewed quarterly and adjusted as necessary based on changing borrower and/or collateral conditions and actual collection and charge-off experience.

The Bancorp’s primary market areas for lending are Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia and Pennsylvania. When evaluating the adequacy of reserves, consideration is given to this regional geographic concentration and the closely associated effect changing economic conditions have on the Bancorp’s customers.

The Bancorp has not substantively changed any aspect to its overall approach in the determination of the reserve for loan and lease losses. There have been no material changes in assumptions or estimation techniques as compared to prior periods that impacted the determination of the current period reserve for loan and lease losses. As of December 31, 2004, the reserve for unfunded commitments has been reclassified from the reserve for loan and lease losses to other liabilities. The December 31, 2003 reserve for unfunded commitments and all subsequent activity has been reclassified to conform to current period presentation.

Valuation of Servicing Rights

When the Bancorp sells loans through either securitizations or individual loan sales in accordance with its investment policies, it may retain servicing rights. Servicing rights resulting from loan sales are amortized in proportion to and over the period of estimated net servicing revenues. Servicing rights are assessed for impairment monthly, based on fair value, with temporary impairment recognized through a valuation allowance and permanent impairment recognized through a write-off of the servicing asset and related valuation reserve. Key economic assumptions used in measuring any potential impairment of the servicing rights include the prepayment speeds of the underlying loans, the weighted-average life of the loan, the discount rate, the weighted-average coupon and the weighted-average default rate, as applicable. The primary risk of material changes to the value of the servicing rights resides in the potential volatility in the economic assumptions used, particularly the prepayment speeds. The Bancorp monitors risk and adjusts its valuation allowance as necessary to adequately reserve for any probable impairment in the portfolio. For purposes of measuring impairment, the servicing rights are stratified based on the financial asset type and interest rates. In addition, the Bancorp obtains an independent third-party valuation of the mortgage servicing rights (“MSR”) portfolio on a quarterly basis. Fees received for servicing loans owned by investors are based on a percentage of the outstanding monthly principal balance of such loans and are included in noninterest income as loan payments are received. Costs of servicing loans are charged to expense as incurred.

The change in the fair value of MSRs at December 31, 2004, due to immediate 10% and 20% adverse changes in the current prepayment assumptions would be a decrease of approximately $18 million and $33 million, respectively and due to immediate 10% and 20% favorable changes in the current prepayment assumption would be approximately $19 million and $40 million, respectively. The change in the fair value of the MSR portfolio at December 31, 2004, due to immediate 10% and 20% adverse changes in the discount rate assumptions would be a decrease of approximately $10 million and $18 million, respectively and due to immediate 10% and 20% favorable changes in the discount rate assumption would be approximately $10 million and $20 million, respectively. Sensitivity analysis related to other consumer and commercial servicing rights is not material to the Bancorp’s Consolidated Financial Statements. These sensitivities are hypothetical and should be used with caution. As the figures indicate, change in fair value based on a 10% and 20% variation in assumptions typically cannot be extrapolated because the relationship of the change in assumptions to change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the retained interests is calculated without changing any other assumption; in reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities.

Securities

Securities are classified as held-to-maturity, available-for-sale or trading on the date of purchase. Only those securities classified as held-to-maturity, and which management has both the intent and ability to hold to maturity, are reported at amortized cost. Available-for-sale and trading securities are reported at fair value with unrealized gains and losses, net of related deferred income taxes, included in accumulated other comprehensive income on the Consolidated Balance Sheets and noninterest income in the Consolidated Statements of Income, respectively. The fair value of a security is determined based on quoted market prices. If quoted market prices are not available, fair value is determined based on quoted prices of similar instruments. Realized securities gains or losses are reported within noninterest income in the Consolidated Statements of Income. The cost of securities sold is based on the specific identification method. Available-for-sale and held-to-maturity securities are reviewed quarterly for possible other-than-temporary impairment. The review includes an analysis of the facts and circumstances of each individual investment such as the severity of loss, the length of time the fair value has been below cost, the expectation for that security’s performance, the creditworthiness of the issuer and the Bancorp’s intent and ability to hold the security. A decline in value that is considered to be other-than-temporary is recorded as a loss within noninterest income in the Consolidated Statements of Income. At December 31, 2004, 94% of the unrealized losses in the available-for-sale security portfolio were comprised of securities issued by U.S. Treasury and Government agencies, U.S. Government sponsored agencies and states and political subdivisions as well as agency mortgage-backed securities. The Bancorp believes the price movements in these securities are dependent upon the movement in market interest rates particularly given the negligible inherent credit risk for these securities. The Bancorp also maintains its intent and ability to hold these securities.

Fifth Third Bancorp 17

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

STATEMENTS OF INCOME ANALYSIS

TABLE 3: CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Years Ended December 31 ($ in millions, except per share data)	2004		2003		2002		2001		2000
Interest income (FTE)	$	4,150	4,030		4,168		4,754		4,994
Interest expense		1,102	1,086		1,430		2,278		2,697
Net interest income (FTE)		3,048	2,944		2,738		2,476		2,297
Provision for loan and lease losses		268	399		246		236		138
Net interest income after provision for loan and lease losses (FTE)		2,780	2,545		2,492		2,240		2,159
Noninterest income		2,465	2,483		2,183		1,788		1,476
Noninterest expense		2,972	2,551		2,337		2,453		2,027
Income from continuing operations before income taxes, minority interest and cumulative effect (FTE)		2,273	2,477		2,338		1,575		1,608
Taxable equivalent adjustment		36	39		39		45		47
Applicable income taxes		712	786		734		523		511
Income from continuing operations before minority interest and cumulative effect		1,525	1,652		1,565		1,007		1,050
Minority interest, net of tax		—	(20	)	(38	)	(2	)	—
Income from continuing operations before cumulative effect		1,525	1,632		1,527		1,005		1,050
Income from discontinued operations, net of tax		—	44		4		4		5
Income before cumulative effect		1,525	1,676		1,531		1,009		1,055
Cumulative effect of change in accounting principle, net of tax		—	(11	)	—		(7	)	—
Net income	$	1,525	1,665		1,531		1,002		1,055
Earnings per share	$	2.72	2.91		2.64		1.74		1.86
Earnings per diluted share		2.68	2.87		2.59		1.70		1.83
Cash dividends declared per share		1.31	1.13		.98		.83		.70

Net Interest Income

The relative performance of lending and deposit-raising functions is frequently measured by two statistics - net interest margin and net interest rate spread. Net interest margin is determined by dividing net interest income (FTE) by average interest-earning assets. Net interest rate spread is the difference between the average FTE yield on interest-earning assets and the average rate paid on interest-bearing liabilities. Net interest margin is generally greater than the net interest rate spread due to the additional income earned on those assets funded by noninterest-bearing liabilities, or free funding, such as demand deposits and shareholders’ equity.

Table 4 presents net interest income, net interest margin and net interest spread for the three years ended December 31, 2004, 2003 and 2002, comparing interest income, average interest-bearing liabilities and average free funding outstanding. Nonaccrual loans and leases and loans held for sale have been included in the average loans and leases balances. Average outstanding securities balances are based upon amortized cost with any unrealized gains or losses on available-for-sale securities included in other assets. Table 5 also provides the relative impact of growth in the balance sheet and changes in interest rates on net interest income.

Net interest income (FTE) in 2004 was $3.0 billion, a four percent increase over $2.9 billion in 2003. The increase in net interest income was due to the $6.3 billion, or eight percent, increase in average interest-earning assets, mitigated by the 14 basis point (“bp”) decrease in net interest margin. The net interest margin contracted in 2004 as compared to 2003 due to the low absolute level of interest rates in the first half of 2004 and interest-bearing liabilities repricing more quickly than interest-earning assets in response to rising interest rates in the second half of 2004. Additionally, the contribution of noninterest-bearing funding to the net interest margin decreased to 31 bp in 2004 from 34 bp in 2003. The Bancorp implemented several actions, largely in the fourth quarter, to improve its long-term profile and reduce the risks associated with increasing interest rates. These actions included: (i) the sale of approximately $6.4 billion of available-for-sale securities with a weighted-average coupon of 3.2%; (ii) the early retirement of approximately $3.8 billion of long-term debt, $2.8 billion in the fourth quarter, with a weighted-average rate of 5.4% and a weighted-average remaining maturity of approximately five years and; (iii) the termination of approximately $4.9 billion in notional of receive-fixed/pay-variable interest rate swaps. In total, these actions resulted in pre-tax securities losses of $79 million recorded in noninterest income and pre-tax debt termination charges of $325 million, $247 million in the fourth quarter, recorded in other noninterest expense. The Bancorp also decreased certain wholesale borrowings in order to further decrease the speed at which liabilities reprice relative to earning assets in response to anticipated increases in interest rates. These actions stabilized and improved the net interest margin as the 2004 year ended and have resulted in improved balance sheet positioning. Margin trends in 2005 will depend upon the timing, frequency, magnitude and direction of further interest rate changes, the level and mix of earning asset and deposit growth and the impact of capital management activities. The Bancorp currently expects net interest income and earning asset growth on an annualized sequential basis during 2005 in the low double digit range.

Interest income (FTE) on loans and leases increased $136 million, or five percent, compared to 2003. The increase in average loans and leases included growth in commercial loans of $3.3 billion, or 13% in 2004. Excluding the impact of the Franklin Financial acquisition, average commercial loans increased by 12%; comparisons being provided to supplement an understanding of the fundamental trends. The increase in average commercial loans was primarily due to strong growth in the Chicago, Indianapolis and Cincinnati markets. The Bancorp’s continued investment in additional commercial sales people has largely contributed to its commercial loan portfolio growth in a period of flat to declining commercial loan demand. The Bancorp continues to benefit from increased credit line usage from existing commercial customers as well as success in gaining new customers within its footprint. Average consumer loans increased by $1.3 billion, or five percent, compared to 2003. Comparisons in consumer loans are impacted by the sales and securitizations of $903 million of home equity lines in the third quarter of 2003 and $750 million of automotive loans in the second quarter of 2004. Excluding these transactions, average consumer loans increased nine percent in 2004 from 2003; comparisons being provided to supplement an understanding of the fundamental trends. Average consumer loans increased in nearly all of the Bancorp’s markets with strong growth in Cleveland, Columbus and Detroit.

18 Fifth Third Bancorp

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

TABLE 4: CONSOLIDATED AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST INCOME (FTE)

For the Years Ended December 31 ($ in millions)	2004							2003							2002
	Average Balance			Revenue/ Cost		Average Yield/ Rate		Average Balance			Revenue/ Cost		Average Yield/ Rate		Average Balance			Revenue/ Cost		Average Yield/ Rate
Assets
Interest-earning assets:
Loans and leases	$	57,042		$	2,860	5.01	%	$	52,414		$	2,724	5.20	%	$	45,539		$	2,824	6.20	%
Securities:
Taxable		29,365			1,217	4.15			27,584			1,226	4.45			22,145			1,257	5.68
Exempt from income taxes		917			68	7.44			1,056			77	7.26			1,101			81	7.40
Other short-term investments		315			5	1.48			307			3	.97			339			6	1.72
Total interest-earning assets		87,639			4,150	4.73			81,361			4,030	4.95			69,124			4,168	6.03
Cash and due from banks		2,216							1,600							1,551
Other assets		5,763							5,250							5,007
Reserve for loan and lease losses		(722	)						(730	)						(645	)
Total assets	$	94,896						$	87,481						$	75,037
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest checking	$	19,434		$	174	.89	%	$	18,679		$	189	1.01	%		16,239		$	296	1.83	%
Savings		7,941			58	.72			8,020			64	.79			9,465			158	1.67
Money market		3,473			39	1.12			3,189			32	1.01			1,162			27	2.36
Other time deposits		6,208			162	2.62			6,426			196	3.04			8,855			335	3.78
Certificates - $100,000 and over		2,403			48	1.99			3,832			63	1.65			2,237			77	3.44
Foreign office deposits		4,449			58	1.31			3,862			44	1.13			2,018			35	1.71
Federal funds purchased		5,896			77	1.30			7,001			80	1.14			3,262			54	1.66
Short-term bank notes		1,003			15	1.46			22			—	1.06			2			—	3.40
Other short-term borrowings		6,640			78	1.17			5,350			55	1.03			3,927			67	1.71
Long-term debt		13,323			393	2.95			8,747			363	4.15			7,640			381	4.99
Total interest-bearing liabilities		70,770			1,102	1.56			65,128			1,086	1.67			54,807			1,430	2.61
Demand deposits		12,327							10,482							8,953
Other liabilities		2,939							2,883							2,520
Total liabilities		86,036							78,493							66,280
Minority interest		—							234							440
Shareholders’ equity		8,860							8,754							8,317
Total liabilities and shareholders’ equity	$	94,896						$	87,481						$	75,037
Net interest income margin				$	3,048	3.48	%				$	2,944	3.62	%				$	2,738	3.96	%
Net interest rate spread						3.17							3.28							3.42
Interest-bearing liabilities to interest-earning assets						80.75							80.05							79.29

TABLE 5: CHANGES IN NET INTEREST INCOME (FTE) ATTRIBUTED TO VOLUME AND YIELD/RATE (a)

For the Years Ended December 31 ($ in millions)	2004 Compared to 2003							2003 Compared to 2002
	Volume			Yield/Rate		Total		Volume		Yield/Rate		Total
Increase (decrease) in interest income:
Loans and leases	$	235		(99	)	136		393		(493	)	(100	)
Securities:
Taxable		76		(85	)	(9	)	273		(304	)	(31	)
Exempt from income taxes		(10	)	1		(9	)	(3	)	(1	)	(4	)
Other short-term investments		—		2		2		(1	)	(2	)	(3	)
Total change in interest income		301		(181	)	120		662		(800	)	(138	)
Increase (decrease) in interest expense:
Interest checking		8		(23	)	(15	)	40		(147	)	(107	)
Savings		(1	)	(5	)	(6	)	(21	)	(73	)	(94	)
Money market		3		4		7		27		(22	)	5
Other time deposits		(7	)	(27	)	(34	)	(81	)	(58	)	(139	)
Certificates - $100,000 and over		(26	)	11		(15	)	38		(52	)	(14	)
Foreign office deposits		7		7		14		24		(15	)	9
Federal funds purchased		(13	)	10		(3	)	47		(21	)	26
Short-term bank notes		15		—		15		—		—		—
Other short-term borrowings		15		8		23		20		(32	)	(12	)
Long-term debt		154		(124	)	30		51		(69	)	(18	)
Total change in interest expense		155		(139	)	16		145		(489	)	(344	)
Total change in net interest income	$	146		(42	)	104		517		(311	)	206

(a) Changes in interest not solely due to volume or yield/rate are allocated in proportion to the absolute amount of change in volume or yield/rate.

Fifth Third Bancorp 19

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

TABLE 6: COMPONENTS OF AVERAGE LOAN PORTFOLIO

For the Years Ended December 31 ($ in millions)	2004		2003	2002
Commercial loans:
Commercial	$	14,908	13,672	11,665
Mortgage		7,391	6,299	5,834
Construction		3,807	3,097	3,023
Leases		3,296	3,037	2,640
Total commercial loans, including held for sale		29,402	26,105	23,162
Consumer loans:
Installment		17,755	16,343	13,461
Mortgage and construction		6,801	6,880	6,377
Credit card		787	591	478
Leases		2,297	2,495	2,061
Total consumer loans, including held for sale		27,640	26,309	22,377
Total loan portfolio, including held for sale	$	57,042	52,414	45,539
Total loan portfolio, excluding held for sale	$	55,951	49,700	43,529

The interest income (FTE) from investment securities and short-term investments decreased by $16 million, or one percent, in 2004 compared to 2003. The decrease in interest income is due to lower asset yields. As previously mentioned, the Bancorp sold approximately $6.4 billion of securities in the fourth quarter of 2004 with a weighted-average coupon of approximately 3.2% in order to improve its long-term profile and reduce the risks associated with increasing interest rates.

The interest paid on interest-bearing deposits decreased $49 million, or eight percent, in 2004 compared to 2003. Average interest-bearing deposits were lower by $100 million, or less than one percent, compared to 2003. The four percent increase in average interest checking balances and nine percent increase in money market balances were mitigated by the 37% decline in certificates of deposit greater than $100,000. The movement in the certificates of deposit category is largely a function of overall balance sheet funding requirements. Average demand deposits in 2004 increased $1.8 billion, or 18%, over 2003 reflecting the Bancorp’s success in generating new account growth in its commercial line of business. The growth in noninterest-bearing funding is a critical component in the growth in net interest income. A key focus of the Bancorp in 2005 continues to be growing its transaction account products such as checking, savings and money market accounts in order to reduce its reliance on other sources to fund the expected growth in the balance sheet.

The interest paid on long-term debt increased by $30 million, or eight percent, in 2004 compared to 2003 due to the increase in the average long-term debt outstanding. Average long-term debt increased $4.6 billion, or 52%, in 2004 over 2003. The Bancorp has increased long-term debt to fund the growth in the balance sheet and to reduce its short-term wholesale funding position. Average federal funds purchased declined $1.1 billion, or 16%, compared to 2003. The interest expense associated with federal funds declined by only $3 million, or four percent, due to the federal funds rate increases that occurred throughout 2004.

Provision for Loan and Lease Losses

The Bancorp provides as an expense an amount for probable credit losses within the loan portfolio that is based on factors discussed in the Critical Accounting Policies. The provision is recorded to bring the reserve for loan and lease losses to a level deemed appropriate by the Bancorp. Actual credit losses on loans and leases are charged against the reserve for loan and lease losses. The amount of loans actually removed from the Consolidated Balance Sheets is referred to as charge-offs and net charge-offs include current charge-offs less recoveries in the current period on previously charged off assets.

The provision for loan and lease losses was $268 million in 2004 compared to $399 million in 2003. The $131 million decrease in the provision was due to the reduction in net charge-offs as a percentage of average loans and leases and the continued improvement and expected stability in credit quality trends. Net charge-offs decreased to $252 million in 2004 as compared to $312 million in 2003. The reserve for loan and lease losses as a percent of loans and leases declined to 1.19% at December 31, 2004 from 1.33% at December 31, 2003. In addition, nonperforming assets as a percentage of loans, leases and other assets, including other real estate owned, declined to .51% from .61% in 2003. Refer to the Credit Risk Management section for further information on the provision for loan and lease losses, net charge-offs, nonperforming assets and other factors considered by the Bancorp in assessing the credit quality of the loan portfolio and the reserve for loan and lease losses.

Noninterest Income

Electronic payment processing revenue increased $47 million, or eight percent, in 2004 despite the sales of certain small merchant processing contracts. Excluding the lost revenue associated with the sold contracts of approximately $70 million for all of 2004, revenue increased 23%; comparisons being provided to supplement an understanding of the fundamental revenue trends. The Bancorp continues to realize strong sales momentum from the addition of new customer relationships in both its merchant services and EFT businesses. Merchant processing revenue was essentially flat in 2004 compared to 2003 due to the above-mentioned sales of certain small merchant processing contracts. Excluding the lost revenue associated with the sold contracts, merchant processing revenue increased 29% due to the addition of new customers and the resulting increases in merchant transaction volumes, as well as an increase in transaction volume growth on the existing customer base reflective of an improving retail sector of the economy. Compared to 2003, EFT revenues, including debit and credit card interchange, increased by 18% in 2004. The Bancorp now handles electronic processing for more than 127,000 merchant locations and 1,300 financial institutions worldwide.

Service charges on deposits increased $30 million, or six percent, over 2003 primarily due to continued sales success in corporate treasury management products and commercial deposit campaigns. Commercial deposit revenues increased 14% over 2003 on the strength of a continued focus on cross-sell initiatives, an increased sales force and new customer relationships. Retail deposit revenues were flat compared to last year. Growth in the number of retail checking account relationships and in deposits is a key focus for the Bancorp for the upcoming year.

Mortgage banking net revenue declined to $178 million in 2004 from $302 million as a result of the record high level of refinancing activity seen in 2003 that has declined in 2004 due to rising interest rates. The components of mortgage banking net revenue are shown in Table 8. As a result of rising interest rates, mortgage originations declined to $8.4 billion in 2004 compared to $16.0 billion in 2003, directly contributing to the decrease in core mortgage banking fees in 2004. The increase in interest rates during 2004 and the resulting impact of changing prepayment speeds led to the recovery of $60 million in temporary impairment on the MSR portfolio in 2004 as compared to the $3 million in temporary impairment recognized in 2003. Servicing rights are deemed impaired when a borrower’s loan rate is distinctly higher than prevailing market rates. As temporary impairment was recognized on the MSR portfolio in 2003 due to falling primary and secondary mortgage rates and earnings rates and corresponding increases in prepayment speeds, the Bancorp sold certain securities that were held at the time as a component of an overall non-qualifying hedging strategy it maintained in order to manage a portion of the risk associated with changes in impairment on its MSR portfolio. As a result, the Bancorp realized net gains of $3 million in 2003 that were captured as a component of other noninterest income in the Consolidated Statements of Income. In addition, the Bancorp recognized a net loss of $10 million and a net gain of $15 million in 2004 and 2003, respectively, related to changes in fair value and settlement of free-standing derivatives purchased to economically hedge the MSR portfolio. As of December 31, 2003, the Bancorp no longer held any available-for-sale securities related to its non-qualifying hedging strategy.

20 Fifth Third Bancorp

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

TABLE 7: NONINTEREST INCOME

For the Years Ended December 31 ($ in millions)	2004			2003	2002	2001	2000
Electronic payment processing revenue	$	622		575	512	347	252
Service charges on deposits		515		485	431	367	298
Mortgage banking net revenue		178		302	188	63	256
Investment advisory revenue		360		332	325	298	275
Other noninterest income		671		581	580	542	389
Operating lease revenue		156		124	—	—	—
Securities (losses) gains, net		(37	)	81	114	28	6
Securities gains, net – non-qualifying hedges on mortgage servicing rights		—		3	33	143	—
Total noninterest income	$	2,465		2,483	2,183	1,788	1,476

TABLE 8: COMPONENTS OF MORTGAGE BANKING NET REVENUE

For the Years Ended December 31 ($ in millions)	2004			2003		2002		2001		2000
Total mortgage banking fees and loan sales	$	219		466		386		354		315
Net (losses) gains and mark-to-market adjustments on both settled and outstanding free-standing derivative financial instruments		(9	)	14		98		20		—
Net valuation adjustments and amortization on mortgage servicing rights		(32	)	(178	)	(296	)	(311	)	(59	)
Mortgage banking net revenue	$	178		302		188		63		256

TABLE 9: COMPONENTS OF OTHER NONINTEREST INCOME

For the Years Ended December 31 ($ in millions)	2004		2003	2002	2001	2000
Cardholder fees	$	48	59	51	50	42
Consumer loan and lease fees		57	65	70	59	49
Commercial banking revenue		174	178	157	125	86
Bank owned life insurance income		61	62	62	52	43
Insurance income		31	28	55	49	48
Gain on sale of branches		—	—	7	43	—
Gain on sale of property and casualty insurance product lines		—	—	26	—	—
Gain on sale of small merchant processing contracts		157	—	—	—	—
Other		143	189	152	164	121
Total other noninterest income	$	671	581	580	542	389

In 2004, the Bancorp primarily used principal only swaps and swaptions to hedge the economic risk of the MSR portfolio as they are deemed to be the best available instrument for several reasons. Principal only swaps hedge the mortgage-LIBOR spread because they appreciate in value as a result of tightening spreads. They also provide prepayment protection as they increase in value as prepayment speeds increase, as opposed to MSRs that lose value in a faster prepayment environment. Swaptions are positive convexity hedges primarily used to hedge the negative convexity of the MSR portfolio. Due to an increasing interest rate environment in 2004, the Bancorp increased the level of purchased options/swaptions used to economically hedge the MSR portfolio as compared to 2003. As of December 31, 2004 and 2003, the Bancorp held a combination of free-standing derivatives, including principal only swaps, swaptions and interest rate swaps with a fair value of $4 million and $8 million, respectively, on an outstanding notional amount of $1.9 billion and $.9 billion, respectively. The increase in the derivative outstanding notionals at December 31, 2004 as compared to 2003 was primarily due to the level of current interest rates.

The Bancorp expects the core contribution of mortgage banking to total revenues to remain relatively flat from 2004 levels as refinance activity and new applications continue to moderate.

The Bancorp’s total residential mortgage loan servicing portfolio at the end of 2004 and 2003 was $30.6 billion and $30.0 billion, respectively, with $23.0 billion and $24.5 billion, respectively, of loans serviced for others.

The increase of $28 million, or eight percent, in investment advisory service revenue in 2004 compared to 2003 resulted primarily from strengthening sales in retirement plan services, improved institutional asset management and mutual fund revenues. The Bancorp is one of the largest money managers in the Midwest and as of December 31, 2004 had over $182 billion in assets under care, $34 billion of assets under management and $13 billion in its proprietary Fifth Third Funds.*

The increase in operating lease revenue is due to the consolidation beginning in the third quarter of 2003 of a special purpose entity (“SPE”) formed for the purpose of the sale and subsequent leaseback of leased autos. The consolidation was the result of the Bancorp’s adoption of FIN 46. The Bancorp expects operating lease revenue to decline in 2005 as the leases mature.

*FIFTH THIRD FUNDS^® PERFORMANCE DISCLOSURE

Investments in the Fifth Third Funds are: NOT INSURED BY THE FDIC or any other government agency, are not deposits or obligations of, or guaranteed by, any bank, the distributor or any of their affiliates, and involve investment risks, including the possible loss of the principal amount invested. An investor should consider the fund’s investment objectives, risks, and charges and expenses carefully before investing or sending money. This and other important information about the investment company can be found in the fund’s prospectus. To obtain a prospectus, please call 1-800-282-5706 or visit www.53.com. Please read the prospectus carefully before investing.

Fifth Third Bancorp 21

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

TABLE 10: NONINTEREST EXPENSE

For the Years Ended December 31 ($ in millions)	2004		2003	2002	2001	2000
Salaries, wages and incentives	$	1,018	1,031	1,029	959	893
Employee benefits		261	240	201	148	144
Equipment expenses		84	82	79	91	100
Net occupancy expense		185	159	142	146	138
Operating lease expense		114	94	—	—	—
Merger-related charges		—	—	—	349	87
Other noninterest expense		1,310	945	886	760	665
Total noninterest expense	$	2,972	2,551	2,337	2,453	2,027

TABLE 11: COMPONENTS OF OTHER NONINTEREST EXPENSE

For the Years Ended December 31 ($ in millions)	2004		2003	2002	2001	2000
Marketing and communications	$	99	99	96	102	97
Postal and courier		49	49	48	50	45
Bankcard		197	176	142	103	72
Intangible and goodwill amortization		29	40	37	71	60
Franchise and other taxes		32	33	30	18	28
Loan and lease		82	106	91	62	39
Printing and supplies		33	35	37	40	41
Travel		41	35	38	34	34
Data processing and operations		114	97	82	70	86
Debt prepayment		325	20	—	1	1
Other		309	255	285	209	162
Total other noninterest expense	$	1,310	945	886	760	665

The major components of other noninterest income for each of the last five years are shown in Table 9. In the second and third quarters of 2004, the Bancorp sold certain small merchant processing contracts resulting in a total gain of $157 million. The other component was impacted by the $22 million gain on the securitization and sale of $903 million of home equity lines of credit in 2003. The remaining categories in 2004 are flat to down as compared to 2003.

Noninterest Expense

The Bancorp continues to focus on efficiency initiatives as part of its core emphasis on operating leverage. These initiatives include increasing levels of process automation, the rationalization and reduction of non-core businesses as they relate to the Bancorp’s retail and middle market customer base, an increased emphasis on required returns on invested capital and related opportunities for continued growth.

Operating expense levels are often measured using an efficiency ratio (noninterest expense divided by the sum of net interest income (FTE) and noninterest income). The efficiency ratio was 53.9% and 47.0% for 2004 and 2003, respectively.

Noninterest expense increased 17% in 2004 compared to 2003. Comparisons to the prior year are impacted by (i) $247 million of charges related to the early retirement of approximately $2.8 billion of long-term debt in the fourth quarter of 2004; (ii) a charge of $78 million related to the early retirement of approximately $ 1 billion of Federal Home Loan Bank (“FHLB”) advances in the second quarter of 2004; (iii) a charge of $20 million related to the early retirement of approximately $200 million of FHLB advances in 2003 and; (iv) a $31 million pre-tax recovery in 2003 of previously charged off treasury clearing and settlement account balances. Each of these items was recorded in other noninterest expense. Excluding the impact of these items, noninterest expense increased three percent compared to 2003; comparisons being provided to supplement an understanding of the fundamental trends in noninterest expense.

Total personnel costs (salaries, wages and incentives plus employee benefits) increased by less than one percent in 2004 compared to 2003, and included $87 million in total stock compensation expense compared to $110 million in 2003. The year over year decrease in stock compensation expense was offset by an increase in profit sharing expense to $69 million in 2004 from $48 million in 2003. Significant investments in the sales force contributed to a four percent increase in full time equivalent employees from 2003 to 2004. Full time equivalent employees totaled 19,659 as of December 31, 2004 compared to 18,899 as of December 31, 2003. Net occupancy expenses increased primarily due to $10 million of higher depreciation expense related to the increase in banking centers and expansion of the Bancorp’s main operations center and $10 million of higher repairs and maintenance expense.

Pension Plans

Pension costs, included in employee benefits, declined to $ 16 million in 2004 compared to $31 million in 2003. The decrease is primarily due to lower amortization of actuarial losses and lower settlement expense. The Bancorp’s net pension expense for 2004 is based upon specific actuarial assumptions, including an expected long-term rate of return on plan assets of 8.75%. The expected long-term rate of return on plan assets assumption reflects the average return expected on the assets invested to provide for the plan’s liabilities. In determining the expected long-term rate of return on plan assets assumption, the Bancorp evaluated actuarial and economic inputs, including long-term inflation rate assumptions and broad equity and bond indices long-term return projections as well as actual long-term plan performance. The discount rate assumption reflects the yield of a portfolio of high quality fixed-income instruments that have a similar duration to the plan’s liabilities. The discount rate determined on this basis has decreased from 6.00% at December 31, 2003 to 5.85% at December 31, 2004. Lowering the expected rate of return on plan assets by .25% (8.75% to 8.50%) and by lowering the discount rate by .25% (6.00% to 5.75%) would have increased the 2004 pension expense by approximately $ 1 million.

The Bancorp based the determination of pension expense on a market-related valuation of assets. This market-related valuation recognizes investment gains or losses over a three-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the market-related value of assets. Since the market-related value of assets recognizes gains or losses over a three-year period, the future value of assets will be impacted as previously deferred gains or losses are recorded. As of December 31, 2004 the Bancorp had cumulative losses of approximately $ 101 million, which remain to be recognized in the calculation of the market-related value of assets. These unrecognized net actuarial losses result in an increase in the Bancorp’s future pension expense depending on several factors, including whether such losses at each measurement date exceed the corridor in accordance with SFAS No. 87, “Employers’ Accounting for Pensions.”

22 Fifth Third Bancorp

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

TABLE 12: APPLICABLE INCOME TAXES

For the Years Ended December 31 ($ in millions)	2004			2003	2002	2001	2000
Income from continuing operations before income taxes, minority interest and cumulative effect	$	2,237		2,438	2,299	1,530	1,561
Applicable income taxes		712		786	734	523	511
Effective tax rate		31.8	%	32.3	31.9	34.2	32.7

The value of the plan assets has decreased from $223 million at December 31, 2003 to $201 million at December 31, 2004 as settlements and benefits paid exceeded the investment returns and contributions made during 2004. The Bancorp’s unfunded plan status, net of benefit obligations, increased from $41 million at December 31, 2003 to an unfunded status of $53 million at December 31, 2004. During 2004, the Bancorp made $3 million in cash contributions to the plan and believes that, based on the actuarial assumptions, no cash contribution to the plan will be required in 2005.

Applicable Income Taxes

The Bancorp’s income from continuing operations before income taxes, applicable income tax expense and effective tax rate for each of the periods indicated are shown in Table 12. Applicable income tax expense for all periods include the benefit from tax-exempt income, tax-advantaged investments and general business tax credits, partially offset by the effect of nondeductible expenses.

Comparison of 2003 with 2002

Net income in 2003 increased to $1.7 billion compared to $1.5 billion in 2002. Earnings per diluted share were $2.87 compared to $2.59.

Return on average assets was 1.90% and return on average shareholders’ equity was 19.0% compared to 2.04% and 18.4%, respectively, in 2002.

Net interest income (FTE) was $2.9 billion in 2003 compared to $2.7 billion in 2002. The net interest margin declined to 3.62% in 2003 from 3.96% in 2002, which is attributable to the low absolute levels of interest rates in 2003 and corresponding impact of accelerated prepayments across all asset classes and higher origination volumes at the lower rates. The decline in net interest margin was offset by an 18% increase in average earning assets from 2002 to 2003.

Noninterest income increased 14% to $2.5 billion in 2003 compared to $2.2 billion in 2002. The increase in 2003 was driven, in part, by mortgage banking as a result of the large volume of mortgage originations due to the interest rate declines in the first half of 2003. The increase was also due, in part, to the adoption of FIN 46 in the third quarter of 2003 and the resulting recognition of $124 million of operating lease revenue.

Noninterest expense totaled $2.6 billion in 2003 compared to $2.3 billion in 2002. The increase, in part, resulted from the adoption of FIN 46 in the third quarter of 2003 and the resulting recognition of $94 million of operating lease expense. Remaining increases were largely related to the expansion of the sale force and investment in additional banking centers.

The provision for loan and lease losses was $399 million in 2003 compared to $246 million in 2002. During 2003, net charge-offs were $312 million, or .63% of average loans and leases outstanding, compared to $187 million, or .43%, during 2002. The increase in charge-offs was largely reflective of the overall challenging economic landscape in 2003 and growth in the overall loan portfolio.

BALANCE SHEET ANALYSIS

Loans

Table 13 summarizes the end of period commercial and consumer loans and leases, including loans held for sale, by major category. Commercial loan and lease outstandings, including loans held for sale, increased 14% compared to December 31, 2003. The increase in commercial loans and leases was attributable to growth in middle-market and small business loan originations, the strength of new customer additions, the acquisition of $441 million of commercial loans obtained in the Franklin Financial acquisition in 2004 and strong results in several markets, including Cincinnati, Chicago and Indianapolis.

Consumer loan and lease outstandings, including loans held for sale, increased nine percent compared to 2003. Consumer loan comparisons to the prior periods are impacted by the securitization and sale of $750 million of automotive loans and $140 million of consumer loans obtained in the Franklin Financial acquisition in 2004. Consumer installment loan originations were $6.9 billion in 2004 compared to $7.4 billion in 2003. The Bancorp is continuing to devote significant focus on producing retail-based loan originations given the strong credit performance and attractive yields available in these products. Residential mortgage and construction loans, including held for sale, increased 35% compared to 2003 as the overall proportion of retained originations increased. Comparisons to prior periods are dependent upon the volume and timing of originations as well as the timing of loan sales. Residential mortgage originations totaled $8.4 billion in 2004 compared to $16.0 billion in 2003. Consumer lease balances decreased 16% in 2004 compared to 2003 largely resulting from continued competition from captive finance companies offering promotional lease rates. Consumer loan and lease outstandings are affected considerably by sales and securitizations, which totaled approximately $6.0 billion in 2004 and $15.6 billion in 2003.

TABLE 13: COMPONENTS OF LOAN PORTFOLIO (INCLUDING HELD FOR SALE)

As of December 31 ($ in millions)	2004		2003	2002	2001	2000
Commercial loans:
Commercial	$	16,058	14,226	12,786	10,909	10,734
Mortgage		7,636	6,894	5,885	6,085	6,227
Construction		4,348	3,301	3,009	3,103	2,819
Leases		3,426	3,264	3,019	2,487	2,571
Total commercial loans		31,468	27,685	24,699	22,584	22,351
Consumer loans:
Installment		18,093	17,429	14,584	12,138	11,249
Mortgage and construction		7,912	5,865	7,123	6,815	7,570
Credit card		843	762	537	448	361
Leases		2,051	2,448	2,343	1,743	2,654
Total consumer loans		28,899	26,504	24,587	21,144	21,834
Total loan portfolio	$	60,367	54,189	49,286	43,728	44,185

Fifth Third Bancorp 23

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

Investment Securities

As of December 31, 2004, total investment securities were $25.0 billion, compared to $29.2 billion at December 31, 2003 representing a decrease of 14%. The increased rate environment resulted in a net unrealized loss on the available-for-sale securities portfolio at December 31, 2004 of $114 million, compared to a net unrealized loss of $77 million at December 31, 2003. Responding to the change in interest rates, the Bancorp has allocated a greater portion of current purchases to adjustable-rate and shorter-term securities. As a result of all purchase and sale activity during 2004, 14% of the debt securities in the available-for-sale portfolio at December 31, 2004 were adjustable-rate instruments, compared to seven percent at December 31, 2003. The estimated average life of the debt securities in the available-for-sale portfolio at December 31, 2004 was 4.4 years based on current prepayment expectations, compared to 5.2 years at December 31, 2003.

Information presented in Table 15 is on a weighted-average life basis, anticipating future prepayments. Yield information is presented on an FTE basis and is computed utilizing historical cost balances. Maturity and yield calculations for the total available-for-sale portfolio exclude equity securities that have no stated yield or maturity.

TABLE 14: COMPONENTS OF INVESTMENT SECURITIES (AMORTIZED COST BASIS)

As of December 31 ($ in millions)	2004		2003	2002	2001	2000
Available-for-sale:
U.S Treasury and Government agencies	$	503	838	303	188	211
U.S Government sponsored agencies		2,036	3,877	2,308	1,142	1,235
Obligations of states and political subdivisions		823	922	1,033	1,198	889
Agency mortgage-backed securities		17,571	21,101	19,328	15,287	13,897
Other bonds, notes and debentures		2,862	1,401	1,084	1,872	1,978
Other securities		1,006	937	734	792	776
Total available-for-sale	$	24,801	29,076	24,790	20,479	18,986
Held-to-maturity:
Obligations of states and political subdivisions	$	245	126	52	16	475
Other bonds, notes and debentures		10	9	—	—	45
Other securities		—	—	—	—	33
Total held-to-maturity	$	255	135	52	16	553

TABLE 15: CHARACTERISTICS OF AVAILABLE-FOR-SALE SECURITIES

As of December 31, 2004 ($ in millions)	Amortized Cost		Fair Value	Weighted-Average Life (in years)	Weighted-Average Yield
U.S Treasuries and Government agencies:
Average life of one year or less	$	—	—	—	—	%
Average life 1 – 5 years		1	1	2.0	6.08
Average life 5 – 10 years		502	490	8.4	3.70
Average life greater than 10 years		—	—	—	—
Total		503	491	8.4	3.71
U.S Government sponsored agencies:
Average life of one year or less		5	5	.2	7.15
Average life 1 – 5 years		1,677	1,662	3.0	3.60
Average life 5 – 10 years		354	346	6.2	4.08
Average life greater than 10 years		—	—	—	—
Total		2,036	2,013	3.6	3.70
Obligations of states and political subdivisions (a):
Average life of one year or less		86	88	.5	8.20
Average life 1 – 5 years		374	392	3.1	7.65
Average life 5 – 10 years		348	367	6.5	7.25
Average life greater than 10 years		15	16	11.4	6.63
Total		823	863	4.4	7.52
Agency mortgage-backed securities:
Average life of one year or less		190	190	.6	6.02
Average life 1 – 5 years		13,855	13,796	4.0	4.43
Average life 5 – 10 years		3,410	3,348	6.1	4.48
Average life greater than 10 years		116	111	10.8	4.65
Total		17,571	17,445	4.4	4.46
Other bonds, notes and debentures (b):
Average life of one year or less		29	29	.5	6.53
Average life 1 – 5 years		2,187	2,201	3.4	4.20
Average life 5 – 10 years		644	644	6.9	3.21
Average life greater than 10 years		2	2	16.9	5.63
Total		2,862	2,876	4.2	4.00
Other securities (c)		1,006	999	—	—
Total available-for-sale securities	$	24,801	24,687	4.4	4.43	%

(a) Taxable-equivalent yield adjustments included in above table are 2.81%, 2.62%, 2.49%, 2.28% and 2.58% for securities with an average life of one year or less, 1-5 years, 5-10 years, greater than 10 years and in total, respectively.

(b) Other bonds, notes and debentures consist of non-agency mortgage-backed securities, certain other asset backed securities (primarily credit card, automobile and commercial loan backed securities) and corporate bond securities.

(c) Other securities consists of FHLB, Federal Reserve Bank and Federal Home Loan Mortgage Corporation (“FHLMC”) stock holdings, certain mutual fund holdings and equity security holdings.

24 Fifth Third Bancorp

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

Deposits

Total deposits at December 31, 2004 increased two percent compared to December 31, 2003. The $767 million of deposits obtained in the Franklin Financial acquisition and the $2.8 billion, or seven percent, increase in transaction deposits excluding Franklin Financial were offset by the decrease in foreign office deposits in 2004. The Bancorp utilizes these deposits, which represent U.S. dollar denominated deposits of the Bancorp’s foreign branch located in the Cayman Islands, as a method to fund earning asset growth. Transaction deposit balances represent an important source of funding and revenue growth opportunity and the Bancorp is continuing to focus on net checking account growth in its retail and commercial franchises. The Bancorp is confident in its ability to competitively price and generate growth in customers and deposit balances in an increasing interest rate environment.

Overall, the Bancorp experienced deposit growth with significant contributions from the Chicago, Cleveland, Columbus, Detroit and Florida markets, due to the popularity of existing products. The Bancorp expects to attract new customer relationships across its footprint to drive transaction account deposit growth.

Borrowings

The Bancorp reduced its dependence on overnight wholesale funding during 2004, given the rising interest rate environment. As previously mentioned in the Statements of Income Analysis section, the Bancorp retired approximately $3.8 billion of long-term debt during 2004. These instruments had a weighted-average coupon of approximately 5.4% and a total weighted-average remaining maturity of approximately five years. The Bancorp continues to explore additional alternatives regarding the level and cost of various other sources of funds. Refer to the Liquidity Risk Management section for discussion of the Bancorp’s liquidity management and Note 11 to the Consolidated Financial Statements for a detail of long-term debt.

TABLE 16: DEPOSITS

As of December 31 ($ in millions)	2004		2003	2002	2001	2000
Demand	$	13,486	12,142	10,095	9,243	7,152
Interest checking		19,481	19,757	17,878	13,474	10,320
Savings		8,310	7,375	10,056	7,065	5,991
Money market		4,321	3,201	1,044	1,352	923
Other time		6,837	6,201	7,638	11,301	14,231
Certificates - $100,000 and over		2,121	1,856	1,723	2,197	5,049
Foreign office		3,670	6,563	3,774	1,222	4,694
Total deposits	$	58,226	57,095	52,208	45,854	48,360

TABLE 17: BORROWINGS

As of December 31 ($ in millions)	2004		2003	2002	2001	2000
Federal funds purchased	$	4,714	6,928	4,748	2,544	2,178
Short-term bank notes		775	500	—	34	—
Other short-term borrowings		4,537	5,742	4,075	4,875	4,166
Long-term debt and convertible subordinated debentures		13,983	9,063	8,179	7,030	6,239
Total borrowings	$	24,009	22,233	17,002	14,483	12,583

RISK MANAGEMENT

Managing risk is an essential component of successfully operating a financial services company. The Bancorp’s risk management function is responsible for the identification, measurement, monitoring, control and reporting of risk and avoidance of those risks that are inconsistent with the Bancorp’s risk profile. The Enterprise Risk Management division, led by the Bancorp Chief Risk Officer, ensures consistency in the Bancorp’s approach to managing and monitoring risk including, but not limited to, credit, market, operational and regulatory compliance risk, within the structure of Fifth Third’s affiliate operating model. In addition, the Internal Audit division provides an independent assessment of the Bancorp’s internal control structure and related systems and processes. The Enterprise Risk Management division includes the following key functions: (i) a Risk Policy function that ensures consistency in the approach to risk management as the Bancorp’s clearinghouse for credit, market and operational risk policies, procedures and guidelines; (ii) an Operational Risk Management function that is responsible for the risk self-assessment process, the change control evaluation process, business continuity planning and disaster recovery, fraud prevention and detection, and root cause analysis and corrective action plans relating to identified operational losses; (iii) an Insurance Risk Management function that is responsible for all property, casualty and liability insurance policies including the claims administration process for the Bancorp; (iv) a Capital Markets Risk Management function that is responsible for establishing and monitoring proprietary trading limits, monitoring liquidity and interest rate risk and utilizing value at risk and earnings at risk models; (v) an Affiliate Risk Management function that is responsible for the coordination of risk management activities in each banking affiliate and division; (vi) a Credit Risk Review function that is responsible for evaluating the sufficiency of underwriting, documentation and approval processes for consumer and commercial credits; (vii) a Compliance Risk Management function that is responsible for oversight of compliance with all banking regulations and; (viii) a Risk Strategies and Reporting function that is responsible for quantitative analytics and Board of Director and senior management reporting on credit, market and operational risk metrics.

All business lines and affiliates have a designated risk manager reporting jointly to a senior executive within the division or affiliate and to the Enterprise Risk Management division.

Risk management oversight and governance is provided by the Risk and Compliance Committee of the Board of Directors and through multiple management committees whose membership includes a broad cross-section of line of business, affiliate and support representatives. The Risk and Compliance Committee of the Board of Directors consists of three outside directors and has the responsibility for the oversight of credit, market, operational, regulatory compliance and strategic risk management activities for the Bancorp as well as for the Bancorp’s overall aggregate risk profile. The Risk and Compliance Committee has approved the formation of key management governance committees that are responsible for evaluating risks and controls. These committees include the Market Risk Committee, the Credit Risk Committee and the Operational Risk Committee. There are also new products and new initiatives processes applicable to every line of business to ensure an appropriate standard readiness assessment is performed before launching a new product or initiative.

Fifth Third Bancorp 25

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

TABLE 18: COMMERCIAL LOAN AND LEASE PORTFOLIO EXPOSURE (a)

	2004				2003
As of December 31 ($ in millions)	Outstanding			Exposure	Outstanding	Exposure
By industry
Manufacturing	$	3,970		9,034	3,497	7,464
Real estate		7,287		8,620	6,303	7,289
Construction		3,654		5,823	3,121	4,896
Retail trade		2,957		4,903	2,449	4,060
Business services		1,751		3,124	1,851	2,964
Wholesale trade		1,619		3,178	1,330	2,508
Individuals		1,673		2,135	1,511	1,943
Financial services and insurance		744		2,348	602	1,938
Healthcare		1,355		2,245	1,151	1,714
Transportation and warehousing		1,382		1,678	1,222	1,434
Accommodation and food		850		1,237	861	1,144
Public administration		796		911	862	965
Other services		748		1,027	648	878
Other		781		1,335	645	857
Communication and information		478		971	423	768
Entertainment and recreation		443		639	401	603
Agribusiness		509		676	456	593
Utilities		237		729	164	531
Mining		234		413	188	278
Total	$	31,468		51,026	27,685	42,827
By loan size
Less than $5 million		62	%	49	66	55
$5 million to $15 million		25		26	24	26
$15 million to $25 million		9		13	7	12
Greater than $25 million		4		12	3	7
Total		100	%	100	100	100
By state
Ohio		30	%	33	31	35
Michigan		25		23	26	23
Indiana		11		10	10	10
Illinois		10		10	10	10
Kentucky		6		6	7	7
Tennessee		3		2	1	1
Florida		2		2	2	2
Pennsylvania		1		1	—	1
West Virginia		—		1	—	—
Out-of-footprint		12		12	13	11
Total		100	%	100	100	100

(a) Outstanding reflects total commercial customer loan and lease balances, net of unearned income and exposure reflects total commercial customer lending commitments.

Significant risk policies approved by the management governance committees are also reviewed and approved by the Board of Directors Risk and Compliance Committee.

CREDIT RISK MANAGEMENT

The objective of the Bancorp’s credit risk management strategy is to quantify and manage credit risk on an aggregate portfolio basis as well as to limit the risk of loss resulting from an individual customer default. Credit risk is managed through a combination of conservative exposure limits and underwriting, documentation and collection standards and overall counterparty limits. The Bancorp’s credit risk management strategy also emphasizes diversification on a geographic, industry and customer level, regular credit examinations and monthly management reviews of large credit exposures and credits experiencing deterioration of credit quality. Lending officers with the authority to extend credit are delegated specific authority amounts, the utilization of which is closely monitored. Lending activities are largely decentralized, while the Enterprise Risk Management division manages the policy process centrally. The Credit Risk Review function, within the Enterprise Risk Management division, provides objective assessments of the quality of underwriting and documentation, the accuracy of risk grades and the charge-off and reserve analysis process.

The Bancorp’s credit review process and overall assessment of required reserves is based on ongoing quarterly assessments of the probable estimated losses inherent in the loan and lease portfolio. In addition to the individual review of larger commercial loans that exhibit probable or observed credit weaknesses, the commercial credit review process includes the use of a risk grading system. The Bancorp utilizes two risk grading systems for commercial loans and leases. The current risk grading system utilized for reserve analysis purposes encompasses ten categories. The Bancorp also maintains a dual risk rating system that provides for 13 probability of default grade categories and an additional six grade categories measuring loss factors given an event of default. The probability of default and loss given default analyses are not separated in the ten grade risk rating system. The Bancorp is in the process of completing significant validation and testing of the dual risk rating system prior to implementation for reserve analysis purposes. The dual risk rating system is consistent with Basel II expectations and allows for more precision in the analysis of commercial credit risk. Scoring systems and delinquency monitoring are used to assess the credit risk in the Bancorp’s homogenous consumer loan portfolios.

The Bancorp’s credit risk management strategy includes minimizing size risk and other concentrations of risk. Table 18 provides a breakout of the commercial loan and lease portfolio, including held for sale, by major industry classification, by size of credit and by state, illustrating the diversity and granularity of the Bancorp’s portfolio.

26 Fifth Third Bancorp

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

The table below provides a breakout of the commercial nonaccrual loans and leases by loan size further illustrating the granularity of the Bancorp’s commercial loan portfolio.

TABLE 19: SUMMARY OF COMMERCIAL NONACCRUAL LOANS AND LEASES BY LOAN SIZE

As of December 31	2004		2003	2002
Less than $ 200,000	24	%	23	16
$200,000 to $1 million	39		34	19
$1 million to $5 million	24		28	34
$5 million to $10 million	13		15	25
$10 million to $15 million	—		—	6
Total .	100	%	100	100

TABLE 20: SUMMARY OF NONPERFORMING AND UNDERPERFORMING ASSETS

As of December 31 ($ in millions)	2004			2003	2002	2001	2000
Commercial loans and leases	$	110		129	159	122	73
Commercial mortgages		51		42	41	57	42
Commercial construction		13		19	14	26	11
Residential mortgages and construction		24		25	18	11	42
Consumer loans and leases		30		27	15	—	6
Total nonaccrual loans and leases		228		242	247	216	174
Renegotiated loans and leases		1		8	—	—	2
Other assets, including other real estate owned		74		69	26	19	25
Total nonperforming assets		303		319	273	235	201
Commercial loans and leases		22		15	29	25	31
Commercial mortgages and construction		13		12	18	24	6
Credit card receivables		13		13	9	8	5
Residential mortgages and construction		43		51	60	56	49
Consumer loans and leases		51		54	46	51	37
Total ninety days past due loans and leases		142		145	162	164	128
Total underperforming assets	$	445		464	435	399	329
Nonperforming assets as a percent of total loans, leases and other assets, including other real estate owned		.51	%	.61	.59	.57	.47
Underperforming assets as a percent of total loans, leases and other assets, including other real estate owned		.74		.89	.95	.96	.77
Reserve for loan and lease losses as a percent of total nonperforming assets (a)		235		219	251	265	304
Reserve for credit losses as a percent of total nonperforming assets		259		242	251	265	304
Reserve for loan and lease losses as a percent of total underperforming assets (a)		160		150	157	156	185
Reserve for credit losses as a percent of total underperforming assets		176		166	157	156	185

(a) As of December 31, 2004, the reserve for unfunded commitments has been reclassified from the reserve for loan and lease losses to other liabilities. The 2003 year-end reserve for unfunded commitments has been reclassified to conform to the current year presentation. The reserve for unfunded commitments balance was $72 million and $73 million at December 31, 2004 and 2003, respectively. The reserve for credit losses is the sum of the reserve for loan and lease losses and the reserve for unfunded commitments.

The commercial portfolio is further characterized by 88% of outstanding balances and exposures concentrated within the Bancorp’s primary market areas of Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia and Pennsylvania. Exclusive of a national large-ticket leasing business, the commercial portfolio is characterized by 95% of outstanding balances and 93% of exposures concentrated within these nine states. The mortgage and construction segments of the commercial portfolio are characterized by 98% of outstanding balances and exposures concentrated within these nine states.

Analysis of Nonperforming Assets

Nonperforming assets include nonaccrual loans and leases on which ultimate collectibility of the full amount of the interest is uncertain, loans and leases which have been renegotiated to provide for a reduction or deferral of interest or principal because of deterioration in the financial position of the borrower and other assets, including other real estate owned and repossessed equipment. Underperforming assets include nonperforming assets and loans and leases past due 90 days or more as to principal or interest, which are not already accounted for as nonperforming assets.

Commercial nonaccrual credits as a percent of loans improved considerably in 2004 to .56% from .68% in 2003 and were primarily driven by the Cincinnati, Columbus, Toledo, Indianapolis and Evansville markets. Consumer nonaccrual credits as a percent of loans increased slightly from .19% in 2003 to .21% in 2004 and was not attributable to any particular market. Overall, nonaccrual credits continue to represent a small portion of the portfolio at just .38% as of December 31, 2004, compared to .46% as of December 31, 2003.

Total nonperforming assets were $303 million at December 31, 2004, down $16 million compared to $319 million at December 31, 2003. Total nonperforming assets as a percent of total loans,

TABLE 21: CHANGES IN RESERVE FOR LOAN AND LEASE LOSSES

For the Years Ended December 31 ($ in millions)	2004			2003		2002		2001		2000
Balance at January 1	$	697		683		624		609		573
Net charge-offs		(252	)	(312	)	(187	)	(227	)	(109	)
Reserve of acquired institutions and other		—		—		—		6		7
Provision for loan and lease losses		268		399		246		201		126
Merger-related provision .		—		—		—		35		12
Reclassification of reserve related to unfunded commitments		—		(73	)	—		—		—
Balance at December 31	$	713		697		683		624		609

Fifth Third Bancorp 27

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

TABLE 22: ATTRIBUTION OF RESERVE FOR LOAN AND LEASE LOSSES TO LOAN PORTFOLIOS

As of December 31 ($ in millions)	2004			2003	2002(a)	2001(a)	2000(a)
Reserve attributed to:
Commercial, financial and agricultural loans	$	210		234	159	118	107
Real estate - commercial mortgage loans		73		77	117	102	103
Real estate - construction loans		43		34	41	32	28
Real estate - residential mortgage loans		44		29	43	31	18
Consumer loans		160		146	141	132	134
Lease financing		47		64	132	101	113
Unallocated		136		113	50	108	106
Total reserve for loan and lease losses	$	713		697	683	624	609
Credit portfolios (excluding held for sale):
Commercial, financial and agricultural loans	$	16,058		14,209	12,743	10,807	10,669
Real estate - commercial mortgage loans		7,636		6,894	5,885	6,085	6,227
Real estate - construction loans		4,726		3,636	3,327	3,356	3,223
Real estate - residential mortgage loans		6,988		4,425	3,495	4,505	5,635
Consumer loans		18,923		17,432	15,116	12,565	11,551
Lease financing		5,477		5,712	5,362	4,230	5,225
Total loans and leases (excluding held for sale)	$	59,808		52,308	45,928	41,548	42,530
Reserve as a percent of loan and lease portfolios (excluding held for sale):
Commercial, financial and agricultural loans		1.31	%	1.65	1.24	1.09	1.00
Real estate - commercial mortgage loans		.96		1.12	1.98	1.69	1.65
Real estate - construction loans		.90		.94	1.24	.97	.87
Real estate - residential mortgage loans		.63		.66	1.24	.69	.31
Consumer loans		.85		.84	.93	1.05	1.16
Lease financing		.86		1.12	2.46	2.38	2.17
Unallocated (as a percent of total loans and leases)		.23		.22	.11	.26	.25
Total loans and leases (excluding held for sale)		1.19	%	1.33	1.49	1.50	1.43

(a) The reserve for loan and lease losses in 2002, 2001 and 2000 includes funded and unfunded commitments. As of December 31, 2004, the reserve for unfunded commitments has been reclassified from the reserve for loan and lease losses to other liabilities. The 2003 year-end reserve for unfunded commitments has been reclassified to conform to the current period presentation.

TABLE 23: SUMMARY OF CREDIT LOSS EXPERIENCE

For the Years Ended December 31 ($ in millions)	2004			2003		2002		2001		2000
Losses charged off:
Commercial, financial and agricultural loans	$	(95	)	(152	)	(81	)	(106	)	(37	)
Real estate - commercial mortgage loans		(14	)	(9	)	(18	)	(12	)	(22	)
Real estate - construction loans		(7	)	(3	)	(6	)	(2	)	(1	)
Real estate - residential mortgage loans		(15	)	(24	)	(10	)	(7	)	(3	)
Consumer loans		(156	)	(136	)	(115	)	(117	)	(73	)
Lease financing		(34	)	(56	)	(43	)	(65	)	(40	)
Total losses		(321	)	(380	)	(273	)	(309	)	(176	)
Recoveries of losses previously charged off:
Commercial, financial and agricultural loans		14		16		20		21		16
Real estate - commercial mortgage loans		5		2		5		10		10
Real estate - construction loans		—		1		3		—		—
Real estate - residential mortgage loans		—		—		—		—		1
Consumer loans		41		40		46		39		31
Lease financing		9		9		12		12		9
Total recoveries		69		68		86		82		67
Net losses charged off:
Commercial, financial and agricultural loans		(81	)	(136	)	(61	)	(85	)	(21	)
Real estate - commercial mortgage loans		(9	)	(7	)	(13	)	(2	)	(12	)
Real estate - construction loans		(7	)	(2	)	(3	)	(2	)	(1	)
Real estate - residential mortgage loans		(15	)	(24	)	(10	)	(7	)	(2	)
Consumer loans		(115	)	(96	)	(69	)	(78	)	(42	)
Lease financing		(25	)	(47	)	(31	)	(53	)	(31	)
Total net losses charged off	$	(252	)	(312	)	(187	)	(227	)	(109	)
Net charge-offs as a percent of average loans and leases (excluding held for sale):
Commercial, financial and agricultural loans		.54	%	1.00		.52		.79		.20
Real estate - commercial mortgage loans		.12		.10		.23		.04		.21
Real estate - construction loans		.15		.09		.12		.06		.03
Real estate - residential mortgage loans		.27		.57		.23		.14		.04
Consumer loans		.63		.58		.49		.65		.41
Lease financing		.46		.84		.65		1.13		.58
Total net charge-offs as a percent of average loans and leases (excluding held for sale)		.45	%	.63		.43		.54		.26

28 Fifth Third Bancorp

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

leases and other assets, including other real estate owned declined to .51% as of December 31, 2004 from .61% as of December 31, 2003. Loans and leases 90 days past due have also declined at December 31, 2004 compared to December 31, 2003. The Bancorp expects credit quality trends in 2005 to remain similar to 2004.

At December 31, 2004, there were $40.9 million of loans and leases currently performing in accordance with contractual terms, but for which there were serious doubts as to the ability of the borrower to comply with such terms. For the years 2004 and 2003, interest income of $6 million and $5 million, respectively, was recorded on nonaccrual and renegotiated loans and leases. For the years 2004 and 2003, additional interest income of $33 million and $23 million, respectively, would have been recorded if the nonaccrual and renegotiated loans and leases had been current in accordance with the original terms.

Analysis of Net Loan Charge-offs

Net charge-offs as a percent of average loans and leases outstanding decreased 18 bp to .45% for 2004 from .63% for 2003. The decrease in net charge-offs in the current year compared to 2003 was primarily due to lower net charge-offs in commercial loans and commercial and consumer lease financing. Total commercial loan net charge-offs decreased $55 million to $81 million in 2004 compared to $136 million in 2003. Commercial loan net charge-offs as a percentage of average commercial loans outstanding were .54% in 2004, compared to 1.00% in 2003. The decrease in commercial loan net charge-offs compared to 2003 was concentrated in several markets, including Columbus and Chicago. The Bancorp experienced significant improvement in commercial loan net charge-off activity in 2004 as compared to 2003 as a result of overall improving credit trends and economic outlook. Commercial mortgage net charge-offs were comparable to the low level seen in 2003. Commercial leasing net charge-offs improved due to charge-offs related to two commercial airline leases totaling $20 million occurring in 2003. Total consumer loan net charge-offs in 2004 increased to $115 million compared with $96 million in 2003, with increases not concentrated in any specific market. The ratio of consumer loan net charge-offs to average loans outstanding increased slightly to .63% in 2004 from .58% in 2003, and the ratio for residential mortgage loan net charge-offs improved from .57% to .27% due to improvements in most of the Bancorp’s markets.

Provision and Reserve for Loan and Lease Losses

The reserve for loan and lease losses provides coverage for probable and estimable losses in the loan and lease portfolio. The Bancorp evaluates the reserve each quarter to determine that it is adequate to cover inherent losses. In the current year, the Bancorp has not substantively changed any aspect to its overall approach in the determination of the reserve for loan and lease losses, and there have been no material changes in assumptions or estimation techniques as compared to prior periods that impacted the determination of the current period reserve. Table 21 shows the changes in the reserve for loan and lease losses during 2004. As of December 31, 2004, the reserve for unfunded commitments has been reclassified from the reserve for loan and lease losses to other liabilities. The December 31, 2003 reserve for unfunded commitments and all subsequent activity has been reclassified to conform to current period presentation.

The increase in the balance of the reserve for loan and lease losses in 2004 compared to 2003 is primarily due to the increase in the total loan and lease portfolio. The reserve for loan and lease losses at December 31, 2004 decreased to 1.19% of the total loan and lease portfolio compared to 1.33% at December 31, 2003 due to improvements in credit quality trends. Additionally, the Bancorp’s long history of low exposure limits, minimal exposure to national or sub-prime lending businesses, centralized risk management and its diversified portfolio reduces the likelihood of significant unexpected credit losses. Table 22 provides the amount of the reserve for loan and lease losses by category.

MARKET RISK MANAGEMENT

Market risk arises from fluctuations in interest rates, foreign exchange rates and equity prices that may result in the potential reduction in net interest income. Interest rate risk, a component of market risk, is the exposure to adverse changes in net interest income due to changes in interest rates. Management considers interest rate risk a prominent market risk in terms of its potential impact on earnings. Interest rate risk can occur for any one or more of the following reasons: (i) assets and liabilities may mature or reprice at different times; (ii) short-term and long-term market interest rates may change by different amounts or; (iii) the remaining maturity of various assets or liabilities may shorten or lengthen as interest rates change. In addition to the direct impact of interest rate changes on net interest income, interest rates can indirectly impact earnings through their effect on loan demand, credit losses, mortgage origination fees, the value of servicing rights and other sources of the Bancorp’s earnings. Consistency of the Bancorp’s net interest income is largely dependent upon the effective management of interest rate risk.

Net Interest Income Simulation Model

The Bancorp employs a variety of measurement techniques to identify and manage its interest rate risk, including the use of an earnings simulation model to analyze net interest income sensitivity to changing interest rates. The model is based on actual cash flows and repricing characteristics for all of the Bancorp’s financial instruments and incorporates market-based assumptions regarding the effect of changing interest rates on the prepayment rates of certain assets and liabilities. The model also includes senior management projections for activity levels in each of the product lines offered by the Bancorp and incorporates the loss of free funding resulting from the Bancorp’s share repurchase activity. Actual results will differ from these simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and management strategies.

The Bancorp’s Asset/Liability Risk Management Committee (“ALCO”), which includes senior management representatives and is accountable to the Risk and Compliance Committee of the Board of Directors, monitors and manages interest rate risk within Board approved policy limits. In addition to the risk management activities of ALCO, the Bancorp created a Market Risk Management department as part of the Enterprise Risk Management Division, which provides independent oversight of market risk activities. The Bancorp’s current interest rate risk policy limits are determined by measuring the anticipated change in net interest income over a 12-month and 24-month horizon assuming a 200 bp linear increase or decrease in all interest rates. In accordance with the current policy, the rate movements are assumed to occur over one year and are sustained thereafter. Given the low level of interest rates, the Bancorp’s ALCO has measured the risk of a decrease in interest rates at 100 basis points. Additionally, in order to further illustrate the estimated earnings sensitivity of interest rate changes, the Bancorp has included the anticipated change to net interest income over a 12-month and 24-month horizon assuming a 100 bp linear increase. The following table shows the Bancorp’s estimated earnings sensitivity profile on the asset and liability positions as of December 31, 2004:

TABLE 24: ESTIMATED EARNINGS SENSITIVITY PROFILE

	Change in Net Interest Income
Change in Interest Rates (bp)	12 Months		24 Months
+200	.34	%	4.07
+100	.32		2.86
-100	.04		(4.05	)

Fifth Third Bancorp 29

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

Based upon expected repayments, the following is a summary of the remaining maturities of loans and leases held for investment as of December 31, 2004:

TABLE 25: LOAN AND LEASE MATURITIES

($ in millions)	Less than 1 year		1-5 years	Greater than 5 years	Total
Commercial, financial and agricultural	$	9,503	5,641	914	16,058
Real estate - commercial mortgage loans		2,124	4,729	783	7,636
Real estate - construction loans		2,657	1,669	400	4,726
Residential mortgage loans		1,957	2,527	2,504	6,988
Consumer loans		5,583	9,465	3,875	18,923
Lease financing		1,524	3,163	790	5,477
Total	$	23,348	27,194	9,266	59,808

Segregated by sensitivity to interest rate changes, the following is a summary of expected repayments exceeding one year as of December 31, 2004:

TABLE 26: LOAN AND LEASE INTEREST RATE SENSITIVITY

	Interest Rate
($ in millions)	Predetermined		Floating or Adjustable
Commercial, financial and agricultural	$	1,992	4,563
Real estate - commercial mortgage loans		2,228	3,284
Real estate - construction loans		478	1,591
Residential mortgage loans		1,647	3,384
Consumer loans		6,438	6,902
Lease financing		3,953	—
Total	$	16,736	19,724

TABLE 27: MATURITY DISTRIBUTION OF CERTIFICATES – $100,000 AND OVER

As of December 31, 2004 ($ in millions)
Three months or less	$	908
Over three months through six months		292
Over six months through one year		422
Over one year		499
Total	$	2,121

The balance sheet repositioning in the fourth quarter of 2004 changed the interest rate sensitivity profile of the Bancorp from liability sensitive to asset sensitive (i.e., from a negative outlook to a positive outlook in a rising rate environment). Management does not expect any significant adverse effect to net interest income in 2005 based on the current composition of the portfolio, anticipated trends in rates and earning asset and deposit growth.

Use of Derivatives to Manage Interest Rate Risk

An integral component of the Bancorp’s interest risk management strategy is its use of derivative instruments to minimize significant unplanned fluctuations in earnings and cash flows caused by market volatility. Examples of derivative instruments that the Bancorp may use as part of its interest rate risk management strategy include interest rate swaps, interest rate floors, interest rate caps, forward contracts, principal only swaps, options and swaptions. Interest rate swap contracts are exchanges of interest payments, such as fixed-rate payments for floating-rate payments, based on a common notional amount and maturity date. Interest rate floors protect against declining rates, while interest rate caps protect against rising interest rates. Forwards are contracts in which the buyer agrees to purchase, and the seller agrees to make delivery of, a specific financial instrument at a predetermined price or yield. Swaptions provide the buyer the option to exchange streams of payments with the seller over a specified period of time.

As part of its overall risk management strategy relative to its mortgage banking activity, the Bancorp enters into forward contracts accounted for as free-standing derivatives to economically hedge interest rate lock commitments, which are also considered free-standing derivatives.

The Bancorp also establishes derivative contracts with reputable third parties to economically hedge significant exposures assumed in commercial customer accommodation derivative contracts. Generally, these contracts have similar terms in order to protect the Bancorp from the market volatility. Credit risks arise from the possible inability of counterparties to meet the terms of their contracts, which the Bancorp minimizes through credit approvals, limits and monitoring procedures. The notional amount and fair values of these derivatives as of December 31, 2004 are included in Note 9 to the Consolidated Financial Statements.

Mortgage Servicing Rights and Interest Rate Risk

The net carrying amount of the MSR portfolio was $339 million as of December 31, 2004. The Bancorp maintains a non-qualifying hedging strategy relative to its mortgage banking activity, including consultation with an independent third-party specialist, in order to manage a portion of the risk associated with changes in impairment on its MSR portfolio as a result of changing interest rates. This strategy includes the purchase of free-standing derivatives (principal only swaps, swaptions, floors, interest rate swaps, options and forward contracts). The mark-to-market adjustments associated with these derivatives are expected to economically hedge a portion of the change in value of the MSR portfolio caused by fluctuating discount rates, earnings rates and prepayment speeds. The value of servicing rights can fluctuate sharply depending on changes in interest rates and other factors. Generally, as interest rates decline and loans are prepaid to take advantage of refinancing, the total value of existing servicing rights declines because no further servicing fees are collected on repaid loans.

The increase in interest rates during 2004 and the resulting impact of changing prepayment speeds led to the recovery of $60 million in temporary impairment in the MSR portfolio as compared to the $3 million in temporary impairment recognized in 2003. The servicing rights are deemed impaired when a borrower’s loan rate is distinctly higher than prevailing market rates. See Note 8 to the Consolidated Financial Statements for further discussion on servicing rights.

Foreign Currency Risk

The Bancorp enters into foreign exchange derivative contracts for the benefit of commercial customers involved in international trade to hedge their exposure to foreign currency fluctuations. The Bancorp has in place several controls to ensure excessive risk is not being taken in providing this service to customers. These include an independent determination of currency volatility and credit equivalent exposure on these contracts, counterparty credit approvals and country limits.

30 Fifth Third Bancorp

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

TABLE 28: AGENCY RATINGS

As of February 9, 2005	Moody’s	Standard and Poor’s	Fitch
Fifth Third Bancorp:
Commercial paper	Prime-1	A-1	F1+
Senior debt	Aa2	A+	AA-
Fifth Third Bank and Fifth Third Bank (Michigan):
Short-term deposit	Prime-1	A-1+	F1+
Long-term deposit	Aa1	AA-	AA

TABLE 29: CAPITAL RATIOS

As of December 31 ($ in millions)	2004			2003	2002	2001	2000
Tier 1 capital	$	8,522		8,272	7,747	7,433	6,377
Total capital		10,176		10,096	8,935	8,656	7,554
Risk-weighted assets		82,633		74,477	65,444	59,491	55,943
Risk-based capital ratios:
Tier 1 capital		10.31	%	11.11	11.84	12.49	11.40
Total capital		12.31		13.56	13.65	14.55	13.50
Leverage ratio		8.89		9.23	9.84	10.64	9.49

TABLE 30: SHARE REPURCHASES

For the Years Ended December 31	2004			2003		2002
Shares authorized for repurchase at January 1		14,137,512		5,600,681		17,338,791
Additional authorizations		40,000,000		20,000,000		—
Shares repurchases (a)		(18,452,400	)	(11,463,169	)	(11,738,110	)
Shares authorized for repurchase at December 31		35,685,112		14,137,512		5,600,681
Average price paid per share	$	53.48		57.13		61.30

(a) Excludes 40,850 shares repurchased during 2004 in connection with various employee compensation plans. These repurchases are not included against the maximum number of shares that may yet be repurchased under the Board of Directors’ authorization.

LIQUIDITY RISK MANAGEMENT

The goal of liquidity risk management is to provide adequate funds to satisfy changes in loan and lease demand or unexpected deposit withdrawals. This goal is accomplished by maintaining liquid assets in the form of investment securities, maintaining sufficient unused borrowing capacity in the national money markets and delivering consistent growth in core deposits. The primary source of asset driven liquidity is provided by debt securities in the available-for-sale securities portfolio. The estimated average life of the available-for-sale portfolio is 4.4 years at December 31, 2004, based on current prepayment expectations. Of the $24.7 billion (fair value basis) of available-for-sale securities in the portfolio at December 31, 2004, $3.8 billion is expected to be received in the next 12 months, and an additional $2.8 billion is expected to be received in the next 13 to 24 months. In addition to the proceeds from available-for-sale portfolio securities, asset-driven liquidity is provided by the Bancorp’s ability to sell or securitize loan and lease assets. In order to reduce the exposure to interest rate fluctuations as well as to manage liquidity, the Bancorp has developed securitization and sale procedures for several types of interest-sensitive assets. A majority of the long-term, fixed-rate single-family residential mortgage loans underwritten according to FHLMC or Federal National Mortgage Association guidelines are sold for cash upon origination. Periodically, additional assets such as jumbo fixed-rate residential mortgages, certain floating rate short-term commercial loans, certain floating rate home equity loans, certain auto loans and other consumer loans are also securitized, sold or transferred off-balance sheet. For the years ended December 31, 2004 and 2003, a total of $6.7 billion and $15.9 billion, respectively, were sold, securitized, or transferred off-balance sheet.

The Bancorp also has in place a shelf registration with the Securities and Exchange Commission permitting ready access to the public debt markets. As of December 31, 2004, $1.5 billion of debt or other securities were available for issuance under this shelf registration. Additionally, as determined in accordance with applicable regulatory requirements, the Bancorp as of December 31, 2004 has $14.3 billion of funding available for issuance through private offerings of debt securities pursuant to its bank note program. In January 2005, a subsidiary of the Bancorp issued $500 million of subordinated bank notes under this bank note program. Such bank notes may be sold to qualified institutional buyers, financial institutions, banks, insurance companies and similar entities in the ordinary course of business from time to time, which together with the Bancorp’s 9.34% average equity capital base and shelf registration availability, constitute some of the various sources of funds utilized to maintain a stable and diverse funding base.

Since June 2002, Moody’s senior debt rating for the Bancorp has been Aa2, a rating equaled or surpassed by only three other U.S. bank holding companies. This rating by Moody’s reflects the Bancorp’s capital strength and financial stability. Table 28 provides Moody’s, Standard and Poor’s and Fitch’s deposit and debt ratings as of February 9, 2005 for the Bancorp, Fifth Third Bank and Fifth Third Bank (Michigan). These debt ratings, along with capital ratios significantly above regulatory guidelines, provide the Bancorp with additional access to liquidity.

Core customer deposits have historically provided the Bancorp with a sizeable source of relatively stable and low-cost funds. The Bancorp’s average core deposits and stockholders’ equity funded 61% of its average total assets during 2004. In addition to core deposit funding, the Bancorp also accesses a variety of other short-term and long-term funding sources, which include the use of various regional Federal Home Loan Banks as a funding source. Certificates carrying a balance of $100,000 or more and deposits in the Bancorp’s foreign branch located in the Cayman Islands are wholesale funding tools utilized to fund asset growth. The maturity distribution of domestic certificates of deposit of $100,000 and over as of December 31, 2004 is shown in Table 27. Management does not rely on any one source of liquidity and manages availability in response to changing balance sheet needs.

CAPITAL MANAGEMENT

The Bancorp maintains a relatively high level of capital as a margin of safety for its depositors and shareholders. At December 31, 2004, shareholders’ equity was $8.9 billion compared to $8.7 billion at December 31, 2003, an increase of three percent. Average shareholders’ equity as a percentage of average assets for the year ended December 31, 2004 was 9.34%. The FRB adopted quantitative measures that assign risk weightings to assets and off-balance sheet items and also define and set minimum regulatory capital requirements (risk-based capital ratios). The guidelines define “well-capitalized” ratios of Tier 1, total capital and leverage as 6%, 10% and 5%, respectively. The Bancorp exceeded these “well-capitalized” ratios at December 31, 2004 and 2003. The Bancorp expects to maintain these ratios above the well-capitalized levels.

Fifth Third Bancorp 31

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

Dividend Policy

The Bancorp’s common stock dividend policy reflects its earnings outlook, desired payout ratios, the need to maintain adequate capital levels and alternative investment opportunities. In 2004, the Bancorp’s annual dividend increased to $1.31 from $1.13 in 2003.

On June 15, 2004, the Bancorp announced that its Board of Directors had authorized management to purchase 40 million shares of the Bancorp’s common stock through the open market or in any private transaction. The timing of the purchases and the exact number of shares to be purchased depends upon market conditions. The authorization does not include specific price targets or an expiration date. The Bancorp’s repurchase of equity securities is shown in Table 30.

On January 10, 2005, the Bancorp repurchased 35.5 million shares of its common stock, approximately six percent of total outstanding shares, for approximately $1.6 billion in an overnight accelerated share repurchase transaction. The transaction provides that the counterparty will purchase shares in the market over a period of time. Upon completion, the Bancorp will receive or pay a price adjustment in the form of cash or shares, at its election, that is largely based on the volume weighted-average price of the shares purchased by the counterparty. On January 18, 2005, the Bancorp announced that its Board of Directors had authorized management to purchase 20 million shares of the Bancorp’s common stock through the open market or in any private transaction. The timing of the purchases and the exact number of shares to be purchased depends upon market conditions and may commence upon the completion of the overnight accelerated share repurchase transaction. The authorization does not include specific price targets or an expiration date.

The Bancorp’s stock repurchase program is an important element of its capital planning activities. The Bancorp views share repurchases as an effective means of delivering value to shareholders.

Off-Balance Sheet Arrangements

The Bancorp consolidates all of its majority-owned subsidiaries. Other entities, including certain joint ventures, in which there is greater than 20% ownership, but upon which the Bancorp does not possess, nor can it exert, significant influence or control, are accounted for by equity method accounting and not consolidated. Those entities in which there is less than 20% ownership are generally carried at the lower of cost or fair value.

The Bancorp does not participate in any trading activities involving commodity contracts that are accounted for at fair value. In addition, the Bancorp has no fair value contracts for which a lack of marketplace quotations necessitates the use of fair value estimation techniques. The Bancorp’s derivative product policy and investment policies provide a framework within which the Bancorp and its affiliates may use certain authorized financial derivatives as a market risk management tool in meeting the Bancorp’s ALCO capital planning directives, to hedge changes in fair value of its largely fixed rate mortgage servicing rights portfolio or to provide qualifying customers access to the derivative products market. These policies are reviewed and approved annually by the Audit Committee and the Risk and Compliance Committee of the Board of Directors.

As part of the Bancorp’s market risk management, the Bancorp may transfer, subject to credit recourse, certain types of individual financial assets to a non-consolidated qualified special purpose entity (“QSPE”) that is wholly owned by an independent third-party. The accounting for QSPEs is currently under review by the FASB, and the conditions for consolidation or non-consolidation of such entities could change. During the year ended December 31, 2004, certain commercial loans (primarily fixed-rate short-term investment grade) were transferred to the QSPE. 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 exposure to these lower yielding loan assets while maintaining these customer relationships. These individual loans are transferred at par with no gain or loss recognized and qualify as sales, as set forth in SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities – a Replacement of FASB Statement No. 125.” At December 31, 2004, the outstanding balance of loans transferred was $1.9 billion. Given the investment grade nature of the loans transferred, as well as the underlying collateral security provided, the Bancorp has not maintained any loss reserve related to these loans transferred.

The Bancorp utilizes securitization trusts formed by independent third parties to facilitate the securitization process of residential mortgage loans, certain floating rate home equity lines of credit, certain auto loans and other consumer loans. The cash flows to and from the securitization trusts are principally limited to the initial proceeds from the securitization trust at the time of sale with subsequent cash flows relating to retained interests. The Bancorp’s securitization policy permits the retention of subordinated tranches, servicing rights, interest-only strips, residual interests, credit recourse, other residual interests and, in some cases, a cash reserve account. At December 31, 2004, the Bancorp had retained servicing assets totaling $352 million, subordinated tranche security interests totaling $34 million and residual interests totaling $52 million.

The Bancorp had the following cash flows with these unconsolidated QSPEs during the year ended December 31, 2004 and 2003.

TABLE 31: CASH FLOWS WITH UNCONSOLIDATED QSPEs

For the Years Ended December 31 ($ in millions)	2004		2003
Proceeds from transfers, including new
securitizations	$	1,379	1,345
Proceeds from collections reinvested in revolving-period securitizations		162	46
Transfers received from QSPEs		164	116
Fees received		32	25

At December 31, 2004, the Bancorp had provided credit recourse on approximately $569 million of residential mortgage loans sold to unrelated third parties. In the event of any customer default, pursuant to the credit recourse provided, the Bancorp is required to reimburse the third party. The maximum amount of credit risk in the event of nonperformance by the underlying borrowers is equivalent to the total outstanding balance of $569 million. In the event of nonperformance, the Bancorp has rights to the underlying collateral value attached to the loan. Consistent with its overall approach in estimating credit losses for various categories of residential mortgage loans held in its loan portfolio, the Bancorp maintains an estimated credit loss reserve of $17 million relating to these residential mortgage loans sold.

32 Fifth Third Bancorp

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

Contractual Obligations and Commitments

The Bancorp has certain obligations and commitments to make future payments under contracts. At December 31, 2004, the aggregate contractual obligations and commitments were:

TABLE 32: CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

As of December 31, 2004 ($ in millions)	Less than 1 year		1-3 years	4-5 years	Greater than 5 years	Total
Contractually obligated payments due by period:
Total deposits (a)	$	54,504	195	21	3,506	58,226
Long-term debt (b)		3,306	4,587	3,246	2,844	13,983
Interest on fixed-rate long-term debt (c)		169	240	178	717	1,304
Short-term borrowings (d)		10,026	—	—	—	10,026
Noncancelable leases (e)		49	87	69	186	391
Purchase obligations (f)		29	22	8	—	59
Total contractually obligated payments due by period	$	68,083	5,131	3,522	7,253	83,989
Other commitments by expiration period:
Letters of credit (g)	$	1,817	2,360	1,452	294	5,923
Commitments to extend credit (g)		18,698	12,614	—	—	31,312
Total other commitments by expiration period	$	20,515	14,974	1,452	294	37,235

(a) Includes demand, interest checking, savings, money market, other time, certificates-$100,000 and over and foreign office deposits. For additional information see the Deposits discussion in the Balance Sheet Analysis section of Management’s Discussion and Analysis.

(b) See Note 11 of the Notes to the Consolidated Financial Statements for additional information on these debt instruments.

(c) Represents expected interest expense to be incurred on fixed-rate long-term debt. See Note 11 of the Notes to the Consolidated Financial Statements for additional information.

(d) Includes federal funds purchased, bank notes, securities sold under repurchase agreements and other debt instruments as discussed in Note 10 of the Notes to the Consolidated Financial Statements.

(e) See Note 4 of the Notes to the Consolidated Financial Statements for additional information on these noncancelable leases.

(f) Represents agreements to purchase goods or services.

(g) See Note 12 of the Notes to the Consolidated Financial Statements for additional information on these commitments.

CONTROLS AND PROCEDURES

The Bancorp maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Bancorp’s Securities Exchange Act of 1934 (“Exchange Act”) reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Bancorp’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Exchange Act Rules 13a-15(e) and 15d-15(e). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by this report, the Bancorp carried out an evaluation, under the supervision and with the participation of the Bancorp’s management, including the Bancorp’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Bancorp’s disclosure controls and procedures. Based on the foregoing, the Bancorp’s Chief Executive Officer and Chief Financial Officer concluded that the Bancorp’s disclosure controls and procedures were effective, in all material respects, to ensure that information required to be disclosed in the reports the Bancorp files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required.

The Bancorp’s management also conducted an evaluation of internal control over financial reporting to determine whether any changes occurred during the year covered by this report that have materially affected, or are reasonably likely to materially affect, the Bancorp’s internal control over financial reporting. Based on this evaluation, there has been no such change during the year covered by this report.

Fifth Third Bancorp 33

MANAGEMENT’S ASSESSMENT AS TO THE EFFECTIVENESS OF INTERNAL CONTROL OVER FINANCIAL REPORTING

The Management of Fifth Third Bancorp is responsible for establishing and maintaining adequate internal control, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting of Fifth Third Bancorp and subsidiaries (“the Bancorp”) includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions of the Bancorp; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Bancorp are being made only in accordance with authorizations of management and directors of the Bancorp; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Bancorp’s assets that could have a material effect on the financial statements.

All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

The Bancorp’s Management assessed the effectiveness of the Bancorp’s internal control over financial reporting as of December 31,2004 as required by Section 404 of the Sarbanes Oxley Act of 2002. Management’s assessment is based on the criteria established in the Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and was designed to provide reasonable assurance that the Bancorp maintained effective internal control over financial reporting as of December 31, 2004. Based on this assessment, Management believes that the Bancorp maintained effective internal control over financial reporting as of December 31, 2004.

The Bancorp’s independent registered public accounting firm, that audited the Bancorp’s consolidated financial statements included in this annual report, has issued an attestation report on our internal control over financial reporting as of December 31, 2004 and Bancorp Management’s assessment of the internal control over financial reporting. This report appears below.

George A. Schaefer, Jr. President and Chief Executive Officer February 9, 2005	R. Mark Graf Senior Vice President and Chief Financial Officer February 9, 2005

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Fifth Third Bancorp:

We have audited management’s assessment, included in the accompanying Management’s Assessment as to the Effectiveness of Internal Control over Financial Reporting, that Fifth Third Bancorp and subsidiaries (the “Bancorp”) maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Bancorp’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Bancorp’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Bancorp maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Bancorp maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2004 of the Bancorp and our report dated February 9, 2005 (which includes an explanatory paragraph related to the adoption on January 1, 2004 of the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation,” and the adoption of Financial Accounting Standards Board Interpretation No. 46, “Consolidation of Variable Interest Entities”) expressed an unqualified opinion on those financial statements.

Cincinnati, Ohio

February 9, 2005

34 Fifth Third Bancorp

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Fifth Third Bancorp:

We have audited the accompanying consolidated balance sheets of Fifth Third Bancorp and subsidiaries (the “Bancorp”) as of December 31, 2004 and 2003, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Bancorp’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Fifth Third Bancorp and subsidiaries at December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 – New Accounting Pronouncements, effective January 1, 2004, the Bancorp changed its method of accounting for stock-based compensation by adopting the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation,” using the retroactive restatement method. As further discussed in Note 1 – New Accounting Pronouncements, the Bancorp adopted the provisions of Financial Accounting Standards Board Interpretation No. 46, “Consolidation of Variable Interest Entities,” effective July 1, 2003.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Bancorp’s internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 9, 2005 expressed an unqualified opinion on management’s assessment of the effectiveness of the Bancorp’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Bancorp’s internal control over financial reporting.

Cincinnati, Ohio

February 9, 2005

Fifth Third Bancorp 35

CONSOLIDATED STATEMENTS OF INCOME

For the Years Ended December 31 ($ in millions, except per share data)	2004			2003		2002
Interest Income
Interest and fees on loans and leases	$	2,847		2,711		2,810
Interest on securities:
Taxable		1,217		1,226		1,257
Exempt from income taxes		45		51		56
Total interest on securities		1,262		1,277		1,313
Interest on other short-term investments		5		3		6
Total interest income		4,114		3,991		4,129
Interest Expense
Interest on deposits:
Interest checking		174		189		296
Savings		58		64		158
Money market		39		32		27
Other time		162		196		335
Certificates–$100,000 and over		48		63		77
Foreign office		58		44		35
Total interest on deposits		539		588		928
Interest on federal funds purchased		77		80		54
Interest on short-term bank notes		15		—		—
Interest on other short-term borrowings		78		55		67
Interest on long-term debt		393		363		381
Total interest expense		1,102		1,086		1,430
Net Interest Income		3,012		2,905		2,699
Provision for loan and lease losses		268		399		246
Net Interest Income After Provision for Loan and Lease Losses		2,744		2,506		2,453
Noninterest Income
Electronic payment processing revenue		622		575		512
Service charges on deposits		515		485		431
Mortgage banking net revenue		178		302		188
Investment advisory revenue		360		332		325
Other noninterest income		671		581		580
Operating lease revenue		156		124		—
Securities (losses) gains, net		(37	)	81		114
Securities gains, net – non-qualifying hedges on mortgage servicing rights		—		3		33
Total noninterest income		2,465		2,483		2,183
Noninterest Expense
Salaries, wages and incentives		1,018		1,031		1,029
Employee benefits		261		240		201
Equipment expense		84		82		79
Net occupancy expense		185		159		142
Operating lease expense		114		94		—
Other noninterest expense		1,310		945		886
Total noninterest expense		2,972		2,551		2,337
Income from Continuing Operations Before Income Taxes, Minority Interest and Cumulative Effect		2,237		2,438		2,299
Applicable income taxes		712		786		734
Income from Continuing Operations Before Minority Interest and Cumulative Effect		1,525		1,652		1,565
Minority interest, net of tax		—		(20	)	(38	)
Income from Continuing Operations Before Cumulative Effect		1,525		1,632		1,527
Income from discontinued operations, net of tax		—		44		4
Income Before Cumulative Effect		1,525		1,676		1,531
Cumulative effect of change in accounting principle, net of tax		—		(11	)	—
Net Income	$	1,525		1,665		1,531
Net Income Available to Common Shareholders	$	1,524		1,664		1,530
Earnings per share from continuing operations	$	2.72		2.85		2.63
Earnings per share from discontinued operations, net		—		.08		.01
Earnings per share from cumulative effect of change in accounting principle, net		—		(.02	)	—
Earnings Per Share	$	2.72		2.91		2.64
Earnings per diluted share from continuing operations	$	2.68		2.81		2.58
Earnings per diluted share from discontinued operations, net		—		.08		.01
Earnings per diluted share from cumulative effect of change in accounting principle, net		—		(02	)	—
Earnings Per Diluted Share	$	2.68		2.87		2.59

See Notes to Consolidated Financial Statements.

36 Fifth Third Bancorp

CONSOLIDATED BALANCE SHEETS

As of December 31 ($ in millions, except share data)	2004			2003
Assets
Cash and due from banks	$	2,561		2,359
Available-for-sale securities (amortized cost 2004–$24,801 and 2003–$29,076)		24,687		28,999
Held-to-maturity securities (fair value 2004–$255 and 2003–$135)		255		135
Trading securities		77		55
Other short-term investments		532		268
Loans held for sale		559		1,881
Loans and leases:
Commercial loans		16,058		14,209
Construction loans		4,726		3,636
Commercial mortgage loans		7,636		6,894
Commercial lease financing		4,634		4,430
Residential mortgage loans		6,988		4,425
Consumer loans		18,923		17,432
Consumer lease financing		2,273		2,709
Unearned income		(1,430	)	(1,427	)
Total loans and leases		59,808		52,308
Reserve for loan and lease losses		(713	)	(697	)
Total loans and leases, net		59,095		51,611
Bank premises and equipment		1,315		1,061
Operating lease equipment		304		767
Accrued interest receivable		397		408
Goodwill		979		738
Intangible assets		150		195
Servicing rights		352		299
Other assets		3,193		2,478
Total Assets	$	94,456		91,254
Liabilities
Deposits:
Demand	$	13,486		12,142
Interest checking		19,481		19,757
Savings		8,310		7,375
Money market		4,321		3,201
Other time		6,837		6,201
Certificates–$100,000 and over		2,121		1,856
Foreign office		3,670		6,563
Total deposits		58,226		57,095
Federal funds purchased		4,714		6,928
Short-term bank notes		775		500
Other short-term borrowings		4,537		5,742
Accrued taxes, interest and expenses		2,216		2,200
Other liabilities		1,081		1,059
Long-term debt		13,983		9,063
Total Liabilities		85,532		82,587
Shareholders’ Equity
Common stock (a)		1,295		1,295
Preferred stock (b)		9		9
Capital surplus		1,934		1,964
Retained earnings		7,269		6,481
Accumulated other comprehensive income		(169	)	(120	)
Treasury stock		(1,414	)	(962	)
Total Shareholders’ Equity		8,924		8,667
Total Liabilities and Shareholders’ Equity	$	94,456		91,254

(a) Stated value $2.22 per share; authorized 1,300,000,000; outstanding at 2004 — 557,648,989 (excludes 25,802,702 treasury shares) and 2003 — 566,685,301(excludes 16,766,390 treasury shares).

(b) 490,750 shares of undesignated no par value preferred stock are authorized of which none had been issued; 7,250 shares of 8.0% cumulative Series D convertible (at $23.5399 per share) perpetual preferred stock with a stated value of $1,000 per share were authorized, issued and outstanding; 2,000 shares of 8.0% cumulative Series E perpetual preferred stock with a stated value of $1,000 per share were authorized, issued and outstanding.

See Notes to Consolidated Financial Statements.

Fifth Third Bancorp 37

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

($ in millions, except per share data)	Common Stock		Preferred Stock	Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Income		Treasury Stock		Total
Balance at December 31, 2001	$	1,294	9	1,943		4,502		8		(4	)	7,752
Net income						1,531						1,531
Other comprehensive income								361				361
Comprehensive income												1,892
Cash dividends declared:
Common stock at $.98 per share						(567	)					(567	)
Preferred stock						(1	)					(1	)
Shares acquired for treasury										(720	)	(720	)
Stock-based compensation expense				128								128
Stock options exercised, including treasury shares issued		1		(77	)					180		104
Excess corporate tax benefit related to stock-based compensation				19								19
Other				(3	)							(3	)
Balance at December 31, 2002		1,295	9	2,010		5,465		369		(544	)	8,604
Net income						1,665						1,665
Other comprehensive income								(489	)			(489	)
Comprehensive income												1,176
Cash dividends declared:
Common stock at $1.13 per share						(645	)					(645	)
Preferred stock						(1	)					(1	)
Shares acquired for treasury										(655	)	(655	)
Stock-based compensation expense				110								110
Stock options exercised, including treasury shares issued				(136	)					233		97
Loans issued related to the exercise of stock options, net				(34	)							(34	)
Excess corporate tax benefit related to stock-based compensation				18								18
Other				(4	)	(3	)			4		(3	)
Balance at December 31, 2003		1,295	9	1,964		6,481		(120	)	(962	)	8,667
Net income						1,525						1,525
Other comprehensive income								(49	)			(49	)
Comprehensive income												1,476
Cash dividends declared:
Common stock at $1.31 per share						(735	)					(735	)
Preferred stock						(1	)					(1	)
Shares acquired for treasury										(987	)	(987	)
Stock-based compensation expense				87								87
Restricted stock grants				(33	)					33		—
Stock options exercised, including treasury shares issued				(133	)					222		89
Excess corporate tax benefit related to stock-based compensation				11								11
Stock issued in business combinations				36						281		317
Other				2		(1	)			(1	)	—
Balance at December 31, 2004	$	1,295	9	1,934		7,269		(169	)	(1,414	)	8,924

See Notes to Consolidated Financial Statements.

38 Fifth Third Bancorp

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31 ($ in millions)	2004			2003		2002
Operating Activities
Net income	$	1,525		1,665		1,531
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses		268		399		246
Minority interest in net income		—		20		38
Cumulative effect of change in accounting principle, net of tax		—		11		—
Depreciation, amortization and accretion		459		550		338
Stock-based compensation expense		87		110		128
(Benefit) provision for deferred income taxes		(13	)	295		253
Realized securities gains		(58	)	(150	)	(125	)
Realized securities gains – non-qualifying hedges on mortgage servicing rights		—		(3	)	(86	)
Realized securities losses		95		69		11
Realized securities losses – non-qualifying hedges on mortgage servicing rights		—		—		53
Proceeds from sales/transfers of residential mortgage and other loans held for sale		6,824		16,280		9,924
Net gains on sales of loans		(112	)	(340	)	(269	)
Net gains on divestitures		(91	)	(40	)	(34	)
Increase in residential mortgage and other loans held for sale		(4,788	)	(10,501	)	(9,892	)
Decrease (increase) in trading securities		259		(37	)	(18	)
Decrease in accrued interest receivable		16		45		49
(Increase) decrease in other assets		(867	)	(646	)	453
(Decrease) increase in accrued taxes, interest and expenses		(26	)	253		(114	)
(Decrease) increase in other liabilities		(73	)	135		(276	)
Net Cash Provided by Operating Activities		3,505		8,115		2,210
Investing Activities
Proceeds from sales of available-for-sale securities		11,331		22,522		20,605
Proceeds from calls, paydowns and maturities of available-for-sale securities		6,234		9,264		7,481
Purchases of available-for-sale securities		(13,425	)	(36,123	)	(32,278	)
Proceeds from calls, paydowns and maturities of held-to-maturity securities		42		18		5
Purchases of held-to-maturity securities		(148	)	(92	)	(35	)
(Increase) decrease in other short-term investments		(264	)	33		(69	)
Increase in loans and leases		(7,749	)	(10,651	)	(5,608	)
Decrease in operating lease equipment		357		214		—
Purchases of bank premises and equipment		(391	)	(284	)	(174	)
Proceeds from disposal of bank premises and equipment		13		16		14
Cash received from divestitures		233		67		55
Cash acquired in business combination		29		—		—
Net Cash Used in Investing Activities		(3,738	)	(15,016	)	(10,004	)
Financing Activities
Increase in core deposits		3,327		1,908		4,916
(Decrease) increase in certificates – $100,000 and over, including foreign office		(2,962	)	2,978		1,536
(Decrease) increase in federal funds purchased		(2,238	)	2,180		2,204
Increase (decrease) in short-term bank notes		275		500		(34	)
(Decrease) increase in other short-term borrowings		(1,210	)	2,093		(304	)
Proceeds from issuance of long-term debt		11,128		1,095		1,143
Repayment of long-term debt		(6,283	)	(2,159	)	(635	)
Payment of cash dividends		(704	)	(631	)	(553	)
Exercise of stock options, net		89		63		104
Purchases of treasury stock		(987	)	(655	)	(720	)
Other		—		(3	)	(3	)
Net Cash Provided by Financing Activities		435		7,369		7,654
Increase (Decrease) in Cash and Due from Banks		202		468		(140	)
Cash and Due from Banks at Beginning of Year		2,359		1,891		2,031
Cash and Due from Banks at End of Year	$	2,561		2,359		1,891
Cash Payments
Interest	$	1,096		1,112		1,497
Federal income taxes		693		432		456
Significant Noncash Transactions
Business acquisitions:
Fair value of tangible assets acquired (noncash)		921		—		—
Goodwill and identifiable intangible assets acquired		282		—		—
Liabilities assumed		(916	)	—		—
Stock options		(36	)	—		—
Common stock issued		(281	)	—		—
Securitizations:
Capitalized servicing rights		9		9		10
Residual interest		21		28		—
Securities retained		21		—		25
Reclassification of minority interest to long-term debt		—		482		—
Consolidation of special purpose entity:
Operating leases		—		1,068		—
Long-term debt		—		1,109		—
Other assets/liabilities, net		—		25		—

See Notes to Consolidated Financial Statements.

Fifth Third Bancorp 39

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

Nature of Operations

Fifth Third Bancorp (“Bancorp”), an Ohio corporation, conducts its principal activities through its banking and non-banking subsidiaries from 1,011 banking centers located throughout Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia and Pennsylvania. Principal activities include Commercial Banking, Retail Banking, Investment Advisors and Fifth Third Processing Solutions.

Basis of Presentation

The Consolidated Financial Statements include the accounts of the Bancorp and its majority-owned subsidiaries. Other entities, including certain joint ventures, in which there is greater than 20% ownership, but upon which the Bancorp does not possess, nor can it exert, significant influence or control, are accounted for by the equity method and not consolidated; those in which there is less than 20% ownership are generally carried at the lower of cost or fair value. All material intercompany transactions and balances have been eliminated. Certain prior period data has been reclassified to conform to current period presentation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Securities

Securities are classified as held-to-maturity, available-for-sale or trading on the date of purchase. Only those securities classified as held-to-maturity, and which management has both the intent and ability to hold to maturity, are reported at amortized cost. Available-for-sale and trading securities are reported at fair value with unrealized gains and losses, net of related deferred income taxes, included in accumulated other comprehensive income and other noninterest income, respectively. The fair value of a security is determined based on quoted market prices. If quoted market prices are not available, fair value is determined based on quoted prices of similar instruments. Realized securities gains or losses are reported within noninterest income in the Consolidated Statements of Income. The cost of securities sold is based on the specific identification method. Available-for-sale and held-to-maturity securities are reviewed quarterly for possible other-than-temporary impairment. The review includes an analysis of the facts and circumstances of each individual investment such as the severity of loss, the length of time the fair value has been below cost, the expectation for that security’s performance, the creditworthiness of the issuer and the Bancorp’s intent and ability to hold the security. A decline in value that is considered to be other-than-temporary is recorded as a loss within noninterest income in the Consolidated Statements of Income.

Loans and Leases

Interest income on loans is based on the principal balance outstanding computed using the effective interest method. The accrual of interest income for commercial, construction and mortgage loans is discontinued when there is a clear indication the borrower’s cash flow may not be sufficient to meet payments as they become due. Such loans are also placed on nonaccrual status when the principal or interest is past due ninety days or more, unless the loan is well secured and in the process of collection. Consumer loans and revolving lines of credit for equity lines that have principal and interest payments that have become past due one hundred and twenty days and credit cards that have principal and interest payments that have become past due one hundred and eighty days are charged off to the reserve for loan and lease losses. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest receivable is charged against income and the loan is accounted for on the cash method thereafter, until qualifying for return to accrual status. Generally, a loan is returned to accrual status when all delinquent interest and principal payments become current in accordance with the terms of the loan agreement or when the loan is both well secured and in the process of collection.

Loan and lease origination and commitment fees and certain direct loan and lease origination costs are deferred and the net amount amortized over the estimated life of the related loans, leases or commitments as a yield adjustment.

Direct financing leases are carried at the aggregate of lease payments plus estimated residual value of the leased property, less unearned income. Interest income on direct financing leases is recognized over the term of the lease to achieve a constant periodic rate of return on the outstanding investment. Interest income on leveraged leases is recognized over the term of the lease to achieve a constant rate of return on the outstanding investment in the lease, net of the related deferred income tax liability, in the years in which the net investment is positive.

Residential mortgage loans held for sale are valued at the lower of aggregate cost or fair value. Loans held for sale that qualify for fair value hedge accounting are carried at fair value. Fair value is based on the contract price at which the mortgage loans will be sold. The Bancorp generally has commitments to sell residential mortgage loans held for sale in the secondary market. Gains or losses on sales are recognized in mortgage banking net revenue upon delivery.

Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the underlying collateral. The Bancorp evaluates the collectibility of both principal and interest when assessing the need for a loss accrual.

Other Real Estate Owned

Other real estate owned (“OREO”), which is included in other assets, represents property acquired through foreclosure or other proceedings. OREO is carried at the lower of cost or fair value, less costs to sell. All property is periodically evaluated and reductions in fair value are recognized in noninterest expense in the Consolidated Statements of Income.

Reserve for Loan and Lease Losses

The Bancorp maintains a reserve to absorb probable loan and lease losses inherent in the portfolio. The reserve is maintained at a level the Bancorp considers to be adequate and is based on ongoing quarterly assessments and evaluations of the collectibility and historical loss experience of loans and leases. Credit losses are charged and recoveries are credited to the reserve. Provisions for loan and lease losses are based on the Bancorp’s review of the historical credit loss experience and such factors that, in management’s judgment, deserve consideration under existing economic conditions in estimating probable credit losses. In determining the appropriate level of reserves, the Bancorp estimates losses using a range derived from “base” and “conservative” estimates. The Bancorp’s methodology for assessing the appropriate reserve level consists of several key elements, as discussed below. The Bancorp’s strategy for credit risk management includes a combination of conservative exposure limits significantly below legal lending limits and conservative underwriting, documentation and collections standards. The strategy also emphasizes diversification on a geographic, industry and customer level, regular credit examinations and quarterly management reviews of large credit exposures and loans experiencing deterioration of credit quality.

40 Fifth Third Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Larger commercial loans that exhibit probable or observed credit weaknesses are subject to individual review. Where appropriate, reserves are allocated to individual loans based on management’s estimate of the borrower’s ability to repay the loan given the availability of collateral, other sources of cash flow and legal options available to the Bancorp. The review of individual loans includes those loans that are impaired as provided in SFAS No. 114, “Accounting by Creditors for Impairment of a Loan.” Any reserves for impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or fair value of the underlying collateral. The Bancorp evaluates the collectibility of both principal and interest when assessing the need for a loss accrual. Historical loss rates are applied to other commercial loans not subject to specific reserve allocations. The loss rates are derived from a migration analysis, which computes the net charge-off experience sustained on loans according to their internal risk grade. The Bancorp utilizes two risk grading systems for commercial loans and leases. The current risk grading system utilized for reserve analysis purposes encompasses ten categories. The Bancorp also maintains a dual risk rating system that provides for 13 probability of default grade categories and an additional six grade categories measuring loss factors given an event of default. The probability of default and loss given default analyses are not separated in the ten grade risk rating system. The Bancorp is in the process of completing significant validation and testing of the dual risk rating system prior to implementation for reserve analysis purposes. The dual risk rating system is consistent with Basel II expectations and allows for more precision in the analysis of commercial credit risk.

Homogenous loans, such as consumer installment, residential mortgage loans and automobile leases are not individually risk graded. Rather, standard credit scoring systems and delinquency monitoring are used to assess credit risks. Reserves are established for each pool of loans based on the expected net charge-offs for one year. Loss rates are based on the average net charge-off history by loan category.

Historical loss rates for commercial and consumer loans may be adjusted for significant factors that, in management’s judgment, reflect the impact of any current conditions on loss recognition. Factors that management considers in the analysis include the effects of the national and local economies, trends in the nature and volume of loans (delinquencies, charge-offs and nonaccrual loans), changes in mix, credit score migration comparisons, asset quality trends, risk management and loan administration, changes in the internal lending policies and credit standards, collection practices and examination results from bank regulatory agencies and the Bancorp’s internal credit examiners.

An unallocated reserve is maintained to recognize the imprecision in estimating and measuring loss when evaluating reserves for individual loans or pools of loans. Reserves on individual loans and historical loss rates are reviewed quarterly and adjusted as necessary based on changing borrower and/or collateral conditions and actual collection and charge-off experience.

The Bancorp’s primary market areas for lending are Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia and Pennsylvania. When evaluating the adequacy of reserves, consideration is given to this regional geographic concentration and the closely associated effect changing economic conditions have on the Bancorp’s customers.

The Bancorp has not substantively changed any aspect to its overall approach in the determination of the reserve for loan and lease losses. There have been no material changes in assumptions or estimation techniques as compared to prior periods that impacted the determination of the current period reserve for loan and lease losses. As of December 31, 2004, the reserve for unfunded commitments has been reclassified from the reserve for loan and lease losses to other liabilities. The December 31, 2003 reserve for unfunded commitments and all subsequent activity has been reclassified to conform to current period presentation.

Reserve for Unfunded Commitments

The reserve for unfunded commitments is maintained at a level believed by management to be sufficient to absorb estimated probable losses related to unfunded credit facilities. The determination of the adequacy of the reserve is based upon an evaluation of the unfunded credit facilities, including an assessment of historical commitment utilization experience, credit risk grading and credit grade migration. Net adjustments to the reserve for unfunded commitments are included in other noninterest expense.

Loan Sales and Securitizations

When the Bancorp sells loans through either securitizations or individual loan sales in accordance with its investment policies, it may retain one or more subordinated tranches, servicing rights, interest-only strips, credit recourse, other residual interests and in some cases, a cash reserve account, all of which are considered retained interests in the securitized or sold loans. Gain or loss on sale or securitization of the loans depends in part on the previous carrying amount of the financial assets sold or securitized, allocated between the assets sold and the retained interests based on their relative fair value at the date of sale or securitization. To obtain fair values, quoted market prices are used if available. If quotes are not available for retained interests, the Bancorp calculates fair value based on the present value of future expected cash flows using both management’s best estimates and third-party data sources for the key assumptions, including credit losses, prepayment speeds, forward yield curves and discount rates commensurate with the risks involved. Gain or loss on sale or securitization of loans is reported as a component of noninterest income in the Consolidated Statements of Income. Retained interests from securitized or sold loans, excluding servicing rights, are carried at fair value. Adjustments to fair value for retained interests classified as available-for-sale securities are included in accumulated other comprehensive income in equity, or in noninterest income in the Consolidated Statements of Income if the fair value has declined below the carrying amount and such decline has been determined to be other-than-temporary. Adjustments to fair value for retained interests classified as trading securities are recorded within noninterest income in the Consolidated Statements of Income.

Servicing rights resulting from residential mortgage, home equity line of credit and automotive loan sales are amortized in proportion to and over the period of estimated net servicing revenues and are reported as a component of mortgage banking net revenue and other noninterest income, respectively, in the Consolidated Statements of Income. Servicing rights are assessed for impairment monthly, based on fair value, with temporary impairment recognized through a valuation allowance and permanent impairment recognized through a write-off of the servicing asset and related valuation reserve. Key economic assumptions used in measuring any potential impairment of the servicing rights include the prepayment speeds of the underlying loans, the weighted-average life of the loan, the discount rate, weighted-average coupon and the weighted-average default rate, as applicable. The primary risk of material changes to the value of the servicing rights resides in the potential volatility in the economic assumptions used, particularly the prepayment speeds. The Bancorp monitors this risk and adjusts its valuation allowance as necessary to adequately reserve for any probable impairment in the portfolio. For purposes of measuring impairment, the mortgage servicing rights are stratified based on the financial asset type and interest rates. In addition, the Bancorp obtains an independent third-party valuation of the mortgage servicing portfolio on a quarterly basis. Fees received for servicing loans owned by investors are based on a percentage of the outstanding monthly principal balance of such loans and are included in noninterest income. Costs of servicing loans are charged to expense as incurred.

Fifth Third Bancorp 41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Bank Premises and Equipment

Bank premises and equipment, including leasehold improvements, are stated at cost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method based on estimated useful lives of the assets for book purposes, while accelerated depreciation is used for income tax purposes. Amortization of leasehold improvements is computed using the straight-line method over the lives of the related leases or useful lives of the related assets, whichever is shorter. In accordance with the adoption of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Bancorp tests its long-lived assets for impairment through both a “probability-weighted” and “primary-asset” approach whenever events or changes in circumstances dictate. Maintenance, repairs and minor improvements are charged to noninterest expense as incurred.

Operating Lease Equipment

Operating lease equipment is recorded at cost, net of accumulated depreciation. Income from operating leases is recognized ratably over the term of the leases and recorded within noninterest income in the Consolidated Statements of Income. Depreciation expense on operating lease equipment is recorded on a straight-line basis over the term of the lease from the original cost of the asset to the estimated residual value at the end of the lease term. Depreciation expense is recorded within operating lease expense in the Consolidated Statements of Income. The estimated residual value of operating lease assets is periodically reviewed and, in the event that the original estimated residual value is determined to be greater than the asset’s estimated market value at the end of the lease term, depreciation expense is adjusted prospectively.

Derivative Financial Instruments

The Bancorp accounts for its derivatives in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. The Statement requires recognition of all derivatives as either assets or liabilities in the balance sheet and requires measurement of those instruments at fair value through adjustments to either accumulated other comprehensive income within shareholders’ equity or current earnings or both, as appropriate. On the date the Bancorp enters into a derivative contract, the Bancorp designates the derivative instrument as either a fair value hedge, cash flow hedge or as a free-standing derivative instrument. For a fair value hedge, changes in the fair value of the derivative instrument and changes in the fair value of the hedged asset or liability or of an unrecognized firm commitment attributable to the hedged risk are recorded in current period net income. For a cash flow hedge, changes in the fair value of the derivative instrument, to the extent that it is effective, are recorded in accumulated other comprehensive income and subsequently reclassified to net income in the same period(s) that the hedged transaction impacts net income. For free-standing derivative instruments, changes in fair values are reported in current period net income.

Prior to entering a hedge transaction, the Bancorp formally documents the relationship between the hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivative instruments that are designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific forecasted transactions along with a formal assessment at both inception of the hedge and on an ongoing basis as to the effectiveness of the derivative instrument in offsetting changes in fair values or cash flows of the hedged item. If it is determined that the derivative instrument is not highly effective as a hedge, hedge accounting is discontinued and the adjustment to fair value of the derivative instrument is recorded in net income.

Earnings Per Share

In accordance with SFAS No. 128, “Earnings Per Share,” basic earnings per share are computed by dividing net income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Earnings per diluted share are computed by dividing adjusted net income available to common shareholders by the weighted-average number of shares of common stock and common stock equivalents outstanding during the period. Dilutive common stock equivalents represent the assumed conversion of convertible preferred stock and the exercise of stock options.

Other

Securities and other property held by Fifth Third Investment Advisors, a division of the Bancorp’s banking subsidiaries, in a fiduciary or agency capacity are not included in the Consolidated Balance Sheets because such items are not assets of the subsidiaries. Investment advisory revenue in the Consolidated Statements of Income is recognized on the accrual basis. Investment advisory service revenues are recognized monthly based on a fee charged per transaction processed and a fee charged on the market value of ending account balances associated with individual contracts.

The Bancorp recognizes revenue from its electronic payment processing services on an accrual basis as such services are performed, recording revenues net of certain costs (primarily interchange fees charged by credit card associations) not controlled by the Bancorp.

Acquisitions of treasury stock are carried at cost. Reissuance of shares in treasury for acquisitions, stock option exercises or other corporate purposes is recorded based on the specific identification method.

New Accounting Pronouncements

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure—an Amendment of FASB Statement No. 123.” This Statement amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require more prominent disclosures about the method of accounting for stock-based employee compensation and the effect of the method used on reported results in both annual and interim financial statements. This Statement was effective for financial statements for fiscal years ending after December 15, 2002. Effective January 1, 2004, the Bancorp adopted the fair value recognition provisions of SFAS No. 123 using the retroactive restatement method described in SFAS No. 148. As a result, financial information for all prior periods has been restated to reflect the compensation expense that would have been recognized had the fair value method of accounting been applied to all awards granted to employees after January 1, 1995.

The adoption of the retroactive restatement method resulted in the restatement of previously reported balances of capital surplus, retained earnings and deferred taxes. As of December 31, 2003, previously reported capital surplus was increased by $633 million, retained earnings were decreased by $529 million and deferred tax assets were increased by $104 million. As of December 31, 2002, previously reported capital surplus was increased by $530 million, retained earnings were decreased by $439 million, and deferred tax assets were increased by $91 million. In addition, in adopting the fair value method of expense recognition, the Bancorp determined that in 2000 and 2001 certain outstanding stock options exchanged in immaterial business combinations were omitted from the determination of total purchase price and resulting goodwill.

42 Fifth Third Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Adjustment for those items resulted in an additional increase in goodwill and capital surplus balances as of December 31, 2002 and 2003 of $38 million. Stock-based compensation expense is included in salaries, wages and incentives expense in the Consolidated Statements of Income.

The impact of the adoption of the retroactive restatement method for employee stock-based compensation on previously reported net income, basic and earnings per diluted share for 2003 and 2002 is as follows:

($ in millions, except per share data)	2003			2002
Net income available to common shareholders, as originally reported	$	1,754		1,634
Stock-based compensation expense determined under the fair value method, net of tax		(90	)	(104	)
Net income available to common shareholders, as restated	$	1,664		1,530
Earnings per share:
As originally reported	$	3.07		2.82
As restated		2.91		2.64
Earnings per diluted share:
As originally reported		3.03		2.76
As restated		2.87		2.59

The weighted-average fair value of stock options and stock appreciation rights granted was $14.11, $18.27 and $26.14 in 2004, 2003 and 2002, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants in 2004, 2003 and 2002: expected option lives ranging from six to nine years; expected dividend yield of 2.3% for 2004, 1.6% for 2003, and 1.4% for 2002; expected volatility of 28% for all three years and risk-free interest rates of 3.9%, 4.4% and 5.0%, respectively.

In December 2004, the FASB issued SFAS No. 123 (Revised 2004), “Share-Based Payment.” This Statement requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award with the cost to be recognized over the vesting period. This Statement is effective for financial statements as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. As the Bancorp has previously adopted the fair value recognition provisions of SFAS No. 123 and the retroactive restatement method described in SFAS No. 148, the adoption of this Statement will not have a material impact on the Bancorp’s Consolidated Financial Statements.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain embedded derivatives, and for hedging activities under SFAS No. 133. This Statement amends SFAS No. 133 to reflect the decisions made as part of the Derivatives Implementation Group (“DIG”) and in other FASB projects or deliberations. SFAS No. 149 was effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. Adoption of this Statement did not have a material effect on the Bancorp’s Consolidated Financial Statements.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” This Statement establishes standards for how an entity classifies and measures certain financial instruments with characteristics of both liabilities and equity. This Statement requires that an issuer classify a financial instrument that is within its scope as a liability. Many of those instruments were previously classified as equity, or in some cases, presented between the liabilities section and the equity section of the statement of financial position. This Statement was effective for financial instruments entered into or modified after May 31, 2003, and otherwise was effective at the beginning of the first interim period beginning after June 15, 2003. Adoption of this Statement on July 1, 2003 required a reclassification of a minority interest to long-term debt and the corresponding minority interest expense to interest expense, relating to preferred stock issued during 2001 by a subsidiary of the Bancorp. The existence of the mandatory redemption feature of this issue upon its mandatory conversion to trust preferred securities necessitated these reclassifications and did not result in any change in bottom line income statement trends.

In December 2003, the FASB issued SFAS No. 132 (Revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits.” This Statement expands upon the existing disclosure requirements as prescribed under the original SFAS No. 132 by requiring more details about pension plan assets, benefit obligations, cash flows, benefit costs and related information. SFAS No. 132(R) also requires companies to disclose various elements of pension and postretirement benefit costs in interim-period financial statements beginning after December 15, 2003. This Statement is effective for financial statements with fiscal years ending after December 15, 2003. The Bancorp adopted this Statement and all of its required disclosures are included in Note 23.

In November 2002, the FASB issued Interpretation No. 45, (“FIN 45”) “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” which elaborates on the disclosures to be made by a guarantor about its obligations under certain guarantees issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The Interpretation expands on the accounting guidance of SFAS No. 5, “Accounting for Contingencies,” SFAS No. 57, “Related Party Disclosures,” and SFAS No. 107, “Disclosures about Fair Value of Financial Instruments.” It also incorporates without change the provisions of FASB Interpretation No. 34, “Disclosure of Indirect Guarantees of Indebtedness of Others,” which is superseded. The initial recognition and measurement provisions of this Interpretation apply on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements in this Interpretation were effective for periods ending after December 15, 2002. Significant guarantees that have been entered into by the Bancorp are disclosed in Note 14. Adoption of this Interpretation did not have a material effect on the Bancorp’s Consolidated Financial Statements.

In January 2003, the FASB issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities.” This Interpretation clarifies the application of ARB No. 51, “Consolidated Financial Statements,” for certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated support from other parties. This Interpretation requires variable interest entities (“VIEs”) to be consolidated by the primary beneficiary which represents the enterprise that will absorb the majority of the VIE’s expected losses if they occur, receive a majority of the VIEs residual returns if they occur, or both. Qualifying Special Purpose Entities (“QSPE”) are exempt from the consolidation requirements of FIN 46. This Interpretation was effective for VIEs created after January 31, 2003 and for VIEs in which an enterprise obtains an interest after that date.

In December 2003, the FASB issued Interpretation No. 46R (“FIN 46R”), “Consolidation of Variable Interest Entities — an interpretation of ARB 51 (revised December 2003),” which replaces FIN 46. FIN 46R was primarily issued to clarify the required accounting for interests in VIEs. Additionally, this Interpretation exempts certain entities from its requirements and provides for special effective dates for enterprises that have fully or partially applied FIN 46 as of December 24, 2003. Application of FIN 46R is required in financial statements of public enterprises that have interests in structures that are commonly referred to as special-

Fifth Third Bancorp 43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

purpose entities, or SPEs, for periods ending after December 15, 2003. Application by public enterprises, other than small business issuers, for all other types of VIEs (i.e., non-SPEs) is required in financial statements for periods ending after March 15, 2004, with earlier adoption permitted. The Bancorp early adopted the provisions of FIN 46 on July 1, 2003. Through December 31, 2004 the Bancorp has provided full credit recourse to an unrelated and unconsolidated asset-backed SPE in conjunction with the sale and subsequent leaseback of leased autos. The unrelated and unconsolidated asset-backed SPE was formed for the sole purpose of participating in the sale and subsequent leaseback transactions with the Bancorp. Based on this credit recourse, the Bancorp is deemed to be the primary beneficiary as it maintains the majority of the variable interests in this SPE and was therefore required to consolidate the entity. Early adoption of this Interpretation required the Bancorp to consolidate these operating lease assets and a corresponding liability as well as recognize an after-tax cumulative effect charge of $11 million ($.02 per diluted share) representing the difference between the carrying value of the leased autos sold and the carrying value of the newly consolidated obligation as of July 1, 2003. As of December 31, 2004, the outstanding balance of leased autos sold was approximately $259 million. Consolidation of these operating lease assets did not impact risk-based capital ratios or bottom line income statement trends; however lease payments on the operating lease assets are now reflected as a component of noninterest income and depreciation expense is now reflected as a component of noninterest expense. The Bancorp also early adopted the provisions of FIN 46 related to the consolidation of two wholly-owned finance entities involved in the issuance of trust preferred securities. Effective July 1, 2003, the Bancorp deconsolidated the wholly-owned issuing trust entities resulting in a recharacterization of the underlying consolidated debt obligation from the previous trust preferred securities obligations to the junior subordinated debenture obligations that exist between the Bancorp and the issuing trust entities. See Note 14 for discussion of certain guarantees that the Bancorp has provided for the benefit of the wholly-owned issuing trust entities related to their debt obligations.

In March 2004, the Securities and Exchange Commission staff released Staff Accounting Bulletin (“SAB”) No. 105, “Application of Accounting Principles to Loan Commitments.” This SAB disallows the inclusion of expected future cash flows related to the servicing of a loan in the determination of the fair value of a loan commitment. Further, no other internally developed intangible asset should be recorded as part of the loan commitment derivative. Recognition of intangible assets would only be appropriate in a third-party transaction, such as a purchase of a loan commitment or in a business combination. The SAB is effective for all loan commitments entered into after March 31, 2004, but does not require retroactive adoption for loan commitments entered into on or before March 31, 2004. Adoption of this SAB did not have a material effect on the Bancorp’s Consolidated Financial Statements.

In March 2004, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” The EITF reached a consensus on an other-than-temporary impairment model for debt and equity securities accounted for under SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and cost method investments. The basic model developed to evaluate whether an investment within the scope of Issue 03-1 is other-than-temporarily impaired involves a three-step process including, determining whether an investment is impaired (fair value less than cost), evaluating whether the impairment is other-than-temporary and, if other-than-temporary, requiring recognition of an impairment loss equal to the difference between the investment’s cost and its fair value. In September 2004, the FASB issued Staff Position (“FSP”) No. EITF 03-01-1, “Effective Date of Paragraphs 10-20 of EITF 03-01.” This FSP delays the effective date of the measurement and recognition guidance contained in paragraphs 10-20 of Issue 03-01. The amount of any other-than-temporary impairment that needs to be recognized in the future will be dependent on market conditions, the occurrence of certain events or changes in circumstances relative to an investee, the Bancorp’s intent and ability to hold the impaired investments at the time of the valuation and the measurement and recognition guidance to be defined in a future FSP issuance.

In December 2003, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position (“SOP”) 03-3, “Accounting for Certain Loans and Debt Securities Acquired in a Transfer.” SOP 03-3 addresses the accounting for certain acquired loans that show evidence of credit deterioration since their origination (i.e. impaired loans) and for which a loss is deemed probable of occurring. SOP 03-3 requires acquired loans to be recorded at their fair value, defined as the present value of future cash flows, including interest income, to be recognized over the life of the loan. SOP 03-3 prohibits the carryover of an allowance for loan loss on certain acquired loans within its scope. SOP 03-3 is effective for loans that are acquired in fiscal years beginning after December 15, 2004. The Bancorp will evaluate the applicability of this SOP for all prospective loans acquired in fiscal years beginning after December 15, 2004. The Bancorp does not anticipate this Statement to have a material effect on its Consolidated Financial Statements.

44 Fifth Third Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SECURITIES

The following table provides a breakdown of the securities portfolio as of December 31:

	2004						2003
($ in millions)	Amortized Cost		Unrealized Gains	Unrealized Losses		Fair Value	Amortized Cost	Unrealized Gains	Unrealized Losses		Fair Value
Available-for-sale:
US Treasury and Government agencies	$	503	—	(12	)	491	838	2	(19	)	821
US Government sponsored agencies		2,036	3	(26	)	2,013	3,877	13	(36	)	3,854
Obligations of states and political subdivisions		823	41	(1	)	863	922	55	—		977
Agency mortgage-backed securities		17,571	89	(215	)	17,445	21,101	163	(283	)	20,981
Other bonds, notes and debentures		2,862	23	(9	)	2,876	1,401	12	(10	)	1,403
Other securities		1,006	1	(8	)	999	937	35	(9	)	963
Total	$	24,801	157	(271	)	24,687	29,076	280	(357	)	28,999
Held-to-maturity:
Obligations of states and political subdivisions	$	245	—	—		245	126	—	—		126
Other bonds, notes and debentures		10	—	—		10	9	—	—		9
Total	$	255	—	—		255	135	—	—		135

The amortized cost and approximate fair value of securities as of December 31, 2004, by contractual maturity, are shown in the following table. Actual maturities may differ from contractual maturities when there exists a right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-Sale			Held-to-Maturity
($ in millions)	Amortized Cost		Fair Value	Amortized Cost	Fair Value
Debt securities:
Under 1 year	$	46	46	22	22
1-5 years		1,514	1,531	1	1
6-10 years		2,637	2,640	105	105
Over 10 years		19,598	19,471	127	127
Other securities		1,006	999	—	—
Total	$	24,801	24,687	255	255

The following tables provide the gross unrealized loss and fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, as of December 31, 2004 and 2003:

	Less than 12 months				12 months or more			Total
($ in millions)	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
2004
US Treasury and Government agencies	$	—	—		485	(12	)	485	(12	)
US Government sponsored agencies		1,092	(8	)	634	(18	)	1,726	(26	)
Obligations of states and political subdivisions		13	(1	)	—	—		13	(1	)
Agency mortgage-backed securities		7,510	(84	)	5,706	(131	)	13,216	(215	)
Other bonds, notes and debentures		1,234	(8	)	76	(1	)	1,310	(9	)
Other securities		47	(5	)	28	(3	)	75	(8	)
Total	$	9,896	(106	)	6,929	(165	)	16,825	(271	)
2003
U.S. Treasury and Government agencies	$	735	(19	)	—	—		735	(19	)
U.S. Government sponsored agencies		2,232	(36	)	—	—		2,232	(36	)
Agency mortgage-backed securities		12,868	(283	)	—	—		12,868	(283	)
Other bonds, notes and debentures		657	(9	)	23	(1	)	680	(10	)
Other securities		36	(3	)	36	(6	)	72	(9	)
Total	$	16,528	(350	)	59	(7	)	16,587	(357	)

Fifth Third Bancorp 45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2004, 94% of the unrealized losses in the available-for-sale security portfolio were comprised of securities issued by U.S. Treasury and Government agencies, U.S. Government sponsored agencies and states and political subdivisions as well as agency mortgage-backed securities. The Bancorp believes the price movements in these securities are dependent upon the movement in market interest rates particularly given the negligible inherent credit risk for these securities. At December 31, 2004, the percentage of unrealized losses in the available-for-sale security portfolio represented by non-rated securities was one percent.

At December 31, 2004 and 2003, securities with a fair value of $17.8 billion and $17.9 billion, respectively, were pledged to secure borrowings, public deposits, trust funds and for other purposes as required or permitted by law.

Unrealized gains (losses) on trading securities held at December 31, 2004 and 2003 were not material to the Consolidated Financial Statements.

3. LOANS AND LEASES AND RESERVE FOR LOAN AND LEASE LOSSES

A summary of the loan portfolio as of December 31:

	2004					2003
As of December 31 ($ in millions)	Gross		Unearned Income		Net	Gross	Unearned Income		Net
Loans held for sale:
Commercial	$	—	—		—	17	—		17
Residential mortgage		545	—		545	1,105	—		1,105
Other consumer		14	—		14	759	—		759
Total loans held for sale	$	559	—		559	1,881	—		1,881
Loans and leases held for investment:
Commercial:
Commercial	$	16,058	—		16,058	14,209	—		14,209
Construction		4,348	—		4,348	3,301	—		3,301
Commercial mortgage		7,636	—		7,636	6,894	—		6,894
Commercial lease financing		4,634	(1,208	)	3,426	4,430	(1,166	)	3,264
Total commercial		32,676	(1,208	)	31,468	28,834	(1,166	)	27,668
Consumer:
Residential mortgage		6,988	—		6,988	4,425	—		4,425
Construction		378	—		378	335	—		335
Credit card		843	—		843	762	—		762
Home equity		10,508	—		10,508	8,993	—		8,993
Other consumer		7,572	—		7,572	7,677	—		7,677
Consumer lease financing		2,273	(222	)	2,051	2,709	(261	)	2,448
Total consumer		28,562	(222	)	28,340	24,901	(261	)	24,640
Total loans and leases held for investment	$	61,238	(1,430	)	59,808	53,735	(1,427	)	52,308

A summary of the gross investment in lease financing as of December 31:

($ in millions)	2004		2003
Direct financing leases	$	4,474	4,978
Leveraged leases		2,433	2,161
Total	$	6,907	7,139

The components of the investment in lease financing as of December 31:

($ in millions)	2004			2003
Rentals receivable, net of principal and interest on nonrecourse debt	$	4,749		4,917
Estimated residual value of leased assets		2,158		2,222
Gross investment in lease financing		6,907		7,139
Unearned income		(1,430	)	(1,427	)
Net investment in lease financing	$	5,477		5,712

At December 31, 2004, the minimum future lease payments receivable for each of the years 2005 through 2009 were $1,375 million, $1,251 million, $934 million, $575 million and $356 million, respectively.

Transactions in the reserve for loan and lease losses for the years ended December 31:

($ in millions)	2004			2003		2002
Balance at January 1	$	697		683		624
Losses charged off		(321	)	(380	)	(273	)
Recoveries of losses previously charged off		69		68		86
Net charge-offs		(252	)	(312	)	(187	)
Provision for loan and lease losses		268		399		246
Reclassification of reserve for unfunded commitments		—		(73	)	—
Balance at December 31	$	713		697		683

46 Fifth Third Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2004, the reserve for unfunded commitments, totaling $72 million, is included in other liabilities. The December 31, 2003 reserve for unfunded commitments has been reclassified from the reserve for loan and lease losses to other liabilities and all subsequent activity has been reclassified to conform to the current period presentation. See Note 1 for a discussion of the reserve for unfunded commitments.

As of December 31, 2004, impaired loans, under SFAS No. 114, with a valuation reserve totaled $108 million and impaired loans without a valuation reserve totaled $54 million. The total valuation reserve on the impaired loans at December 31, 2004 was $28 million. As of December 31, 2003, impaired loans with a valuation reserve totaled $173 million and impaired loans without a valuation reserve totaled $32 million. The total valuation reserve on the impaired loans at December 31, 2003 was $40 million.

Average impaired loans, net of valuation reserves, were $140 million in 2004, $166 million in 2003 and $163 million in 2002. Cash basis interest income recognized on those loans during each of the years was immaterial.

4. BANK PREMISES AND EQUIPMENT

A summary of bank premises and equipment as of December 31:

($ in millions)	Estimated Useful Life	2004			2003
Land and improvements		$	265		210
Buildings	5 to 50 yrs.		933		858
Equipment	3 to 20 yrs.		811		723
Leasehold improvements	3 to 30 yrs.		175		118
Construction in progress			133		63
Accumulated depreciation and amortization			(1,002	)	(911	)
Total		$	1,315		1,061

Depreciation and amortization expense related to bank premises and equipment was $130 million in 2004, $106 million in 2003 and $97 million in 2002.

Occupancy expense has been reduced by rental income from leased premises of $12 million in 2004, $14 million in 2003 and $14 million in 2002.

The Bancorp’s subsidiaries have entered into a number of noncancelable lease agreements with respect to bank premises and equipment. The minimum annual rental commitments under noncancelable lease agreements for land and buildings at December 31, 2004, exclusive of income taxes and other charges, are $49 million in 2005, $45 million in 2006, $42 million in 2007, $37 million in 2008, $32 million in 2009 and $186 million in 2010 and subsequent years.

Rental expense for cancelable and noncancelable leases was $57 million for 2004, $56 million for 2003 and $48 million for 2002.

5. OPERATING LEASE EQUIPMENT

Operating lease equipment primarily consists of automobiles leased to customers, which are reported at cost, net of accumulated depreciation. Upon the early adoption of FIN 46 on July 1, 2003, the Bancorp was required to consolidate operating lease assets of an unrelated and previously unconsolidated asset-backed SPE that was formed for the sole purpose of participating in sale-leaseback transactions with the Bancorp. See Note 1 for further discussion of the adoption of FIN 46.

Operating lease equipment at December 31, 2004 and 2003 was $304 million and $767 million, net of accumulated depreciation of $244 million and $542 million, respectively. Depreciable lives for operating lease equipment generally range from three years to ten years. The minimum future lease rental payments due from customers on operating lease equipment at December 31, 2004, totaled $270 million, of which $190 million is due in 2005, $77 million in 2006 and $3 million in 2007. Depreciation expense related to operating lease equipment for the years ended December 31, 2004 and 2003 was $106 million and $87 million, respectively.

6. GOODWILL

Changes in the net carrying amount of goodwill by operating segment for the years ended December 31, 2004 and 2003 were as follows:

($ in millions)	Commercial Banking		Retail Banking	Investment Advisors		Processing Solutions		Total
Balance as of December 31, 2002	$	188	234	101		217		740
Goodwill adjustment		—	—	(2	)	—		(2	)
Balance as of December 31, 2003		188	234	99		217		738
Acquisition		185	78	4		—		267
Divestiture		—	—	—		(26	)	(26	)
Balance as of December 31, 2004	$	373	312	103		191		979

SFAS No. 142, “Goodwill and Other Intangible Assets,” issued in June 2001, discontinued the practice of amortizing goodwill and initiated an annual review for impairment. Impairment is to be examined more frequently if certain indicators are encountered. The Bancorp has completed its most recent annual goodwill impairment test required by this Statement as of September 30, 2004 and has determined that no impairment exists.

7. INTANGIBLE ASSETS

Intangible assets consist of servicing rights, core deposits, acquired merchant processing portfolios, customer lists and non-compete agreements. Intangibles are amortized on either a straight-line or an accelerated basis over their estimated useful lives, generally over a period of up to 25 years. The Bancorp reviews intangible assets for possible impairment whenever events or changes in circumstances indicate that carrying amounts may not be recoverable.

Fifth Third Bancorp 47

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Detail of amortizable intangible assets as of December 31:

	2004					2003
($ in millions)	Gross Carrying Amount		Accumulated Amortization (a)		Net Carrying Amount	Gross Carrying Amount	Accumulated Amortization (a)		Net Carrying Amount
Mortgage servicing rights	$	940	(601	)	339	870	(581	)	289
Other consumer and commercial servicing rights		22	(9	)	13	11	(1	)	10
Core deposits		347	(204	)	143	341	(181	)	160
Merchant processing portfolios		—	—		—	60	(25	)	35
Other intangible assets		9	(2	)	7	—	—		—
Total	$	1,318	(816	)	502	1,282	(788	)	494

(a) Accumulated amortization for mortgage servicing rights includes a $79 million and $152 million valuation allowance at December 31, 2004 and 2003, respectively.

As of December 31, 2004, all of the Bancorp’s intangible assets were being amortized. Amortization expense of $130 million, $216 million and $191 million, respectively, was recognized on intangible assets (including servicing rights) for the years ended December 31, 2004, 2003 and 2002, respectively. Estimated amortization expense, including servicing rights, is $119 million in 2005, $102 million in 2006, $82 million in 2007, $69 million in 2008 and $55 million in 2009.

8. SERVICING RIGHTS AND RETAINED INTERESTS

Changes in capitalized servicing rights for the years ended December 31:

($ in millions)	2004			2003
Balance at January 1	$	299		263
Amount capitalized		94		217
Amortization		(101	)	(177	)
Sales		—		(1	)
Change in valuation reserve		60		(3	)
Balance at December 31	$	352		299

Changes in the servicing rights valuation reserve for the years ended December 31:

($ in millions)	2004			2003
Balance at January 1	$	(152	)	(278	)
Servicing valuation recovery (provision)		60		(3	)
Permanent impairment write-off		13		129
Balance at December 31	$	(79	)	(152	)

The Bancorp maintains a non-qualifying hedging strategy to manage a portion of the risk associated with changes in impairment on the mortgage servicing rights (“MSR”) portfolio. This strategy includes the purchase of various free-standing derivatives (principal only swaps, swaptions, floors, forward contracts, options and interest rate swaps). The mark-to-market adjustments associated with these derivatives are expected to economically hedge a portion of the change in value of the MSR portfolio caused by fluctuating discount rates, earnings rates and prepayment speeds. The increase in interest rates during 2004 and the resulting impact of changing prepayment speeds led to the recovery of $60 million in temporary impairment on the MSR portfolio. The combined magnitude of decreasing interest rates during the first six months of 2003 and subsequent increasing interest rates in the last six months of 2003, led to the recognition of a net $3 million in temporary impairment on the MSR portfolio in 2003. As temporary impairment was recognized on the MSR portfolio in 2003 due to falling primary and secondary mortgage rates and earnings rates and corresponding increases in prepayment speeds, the Bancorp sold certain securities that were held at the time as a component of the overall non-qualifying hedging strategy, resulting in net realized gains of $3 million in 2003 that were captured as a component of other noninterest income in the Consolidated Statements of Income. In addition, the Bancorp recognized a net loss of $10 million and a net gain of $15 million in 2004 and 2003, respectively, related to changes in fair value and settlement of free-standing derivatives purchased to economically hedge the MSR portfolio. As of December 31, 2003, the Bancorp no longer held any available-for-sale securities related to its non-qualifying hedging strategy. As of December 31, 2004 and 2003, other assets included free-standing derivative instruments with a fair value of $7 million and $8 million, respectively, and other liabilities included a fair value of $3 million as of December 31, 2004. The outstanding notional amounts on the free-standing derivative instruments related to the MSR portfolio totaled $1.9 billion and $.9 billion as of December 31, 2004 and 2003, respectively.

The continued decline in primary and secondary mortgage rates during 2003 led to historically high refinance rates and corresponding increases in prepayment speeds. Therefore, the Bancorp determined a portion of the MSR portfolio was permanently impaired, resulting in a write-off of $129 million in MSRs against the related valuation reserve. In 2004, interest rate movement expectations and corresponding continued acceleration in prepayment speeds resulted in the Bancorp determining a portion of the MSR portfolio was permanently impaired, resulting in a write-off of $13 million in MSRs against the related valuation reserve. Temporary changes in the MSR valuation reserve are captured as a component of mortgage banking net revenue in the Consolidated Statements of Income.

The fair value of capitalized servicing rights was $353 million and $307 million at December 31, 2004 and 2003, respectively. The Bancorp serviced $23.0 billion and $24.5 billion of residential mortgage loans and $1.3 billion and $.9 billion of consumer loans for other investors at December 31, 2004 and 2003, respectively.

9. DERIVATIVES

The Bancorp maintains an overall interest rate risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings and cash flows caused by interest rate volatility. The Bancorp’s interest rate risk management strategy involves modifying the repricing characteristics of certain assets and liabilities so that changes in interest rates do not adversely affect the net interest margin and cash flows. Examples of derivative instruments that the Bancorp may use as part of its interest rate risk management strategy include interest rate swaps, interest rate floors, interest rate caps, forward contracts, options and swaptions. Interest rate swap contracts are exchanges of interest payments, such as fixed-rate payments for floating-rate payments, based on a common notional amount and maturity date. Forward contracts are contracts in which the buyer agrees to purchase, and the seller agrees to make delivery of, a specific financial instrument at a predetermined price or yield. Swaptions, which have the features of a swap and an option, allow, but do not require, counterparties to exchange streams of payments over a specified period of time.

As part of its overall risk management strategy relative to its mortgage banking activity, the Bancorp may enter into freestanding forward contracts to economically hedge interest rate lock

48 Fifth Third Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

commitments. Additionally, the Bancorp may enter into various free-standing derivatives (principal only swaps, swaptions, floors, options and interest rate swaps) to economically hedge changes in fair value of its largely fixed-rate MSR portfolio.

The Bancorp also enters into foreign exchange contracts and interest rate swaps, floors and caps for the benefit of customers. The Bancorp economically hedges significant exposures related to these free-standing derivatives, entered into for the benefit of customers, by entering into offsetting third-party contracts with approved, reputable counterparties with matching terms and currencies that are generally settled daily. Credit risks arise from the possible inability of counterparties to meet the terms of their contracts. The Bancorp’s exposure is limited to the replacement value of the contracts rather than the notional, principal or contract amounts. The Bancorp minimizes the credit risk through credit approvals, limits and monitoring procedures.

Fair Value Hedges

The Bancorp enters into interest rate swaps to convert its fixed-rate, long-term debt to floating-rate debt. Decisions to convert fixed-rate debt to floating are made primarily by consideration of the asset/liability mix of the Bancorp, the desired asset/liability sensitivity and interest rate levels. For the years ended December 31, 2004 and 2003, certain interest rate swaps met the criteria required to qualify for the shortcut method of hedge accounting as defined in SFAS No. 133, as amended. Based on this shortcut method of accounting treatment, no ineffectiveness is assumed and fair value changes in the interest rate swaps are recorded as changes in the value of both the swap and the long-term debt. If any of the interest rate swaps do not qualify for the shortcut method of accounting, the ineffectiveness due to differences in the changes in the fair value of the interest rate swap and the long-term debt are reported within interest expense in the Consolidated Statements of Income. For the years ended December 31,2004 and 2003, changes in the fair value of any interest rate swaps attributed to hedge ineffectiveness were insignificant to the Bancorp’s Consolidated Statements of Income.

During 2004 and 2003, the Bancorp terminated interest rate swaps designated as fair value hedges. In accordance with SFAS No. 133, the fair value of the swaps at the date of termination was recognized as a premium on the previously hedged long-term debt and is being amortized over the remaining life of the long-term debt as an adjustment to yield.

The Bancorp also enters into forward contracts to hedge the forecasted sale of its residential mortgage loans. For the years ended December 31, 2004 and 2003, the Bancorp met certain criteria to qualify for matched terms hedge accounting as defined in SFAS No. 133, as amended, on the hedged loans for sale. Based on this treatment, fair value changes in the forward contracts are recorded as changes in the value of both the forward contract and loans held for sale in the Consolidated Balance Sheets.

As of December 31, 2004, there were no instances of designated hedges no longer qualifying as fair value hedges. The following table reflects all fair value hedges included in the Consolidated Balance Sheets as of December 31:

($ in millions)	2004		2003
Included in other assets:
Interest rate swaps related to debt	$	49	54
Included in other liabilities:
Interest rate swaps related to debt		44	—
Forward contracts related to mortgage loans held for sale		1	3
Total included in other liabilities	$	45	3

Cash Flow Hedges

The Bancorp enters into interest rate swaps to convert floating-rate assets and liabilities to fixed rates and to hedge certain forecasted transactions. The assets and liabilities are typically grouped and share the same risk exposure for which they are being hedged. The Bancorp may also enter into forward contracts to hedge certain forecasted transactions. As of December 31, 2004 and 2003, $33 million and $8 million, respectively, in net deferred losses, net of tax, related to cash flow hedges were recorded in accumulated other comprehensive income. Gains and losses on derivative contracts that are reclassified from accumulated other comprehensive income to current period earnings are included in the line item in which the hedged item’s effect in earnings is recorded. As of December 31, 2004, $17 million in deferred losses, net of tax, on derivative instruments included in accumulated other comprehensive income are expected to be reclassified into earnings during the next 12 months. All components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness.

The maximum term over which the Bancorp is hedging its exposure to the variability of future cash flows is eight months for hedges converting floating-rate debt to fixed. During the years ended December 31, 2004 and 2003, the Bancorp terminated certain derivatives qualifying as cash flow hedges. The fair value of these contracts, net of tax, is included in accumulated other comprehensive income and is being amortized over the designated hedging periods, which range from 17 months to 14 years.

For the year ended December 31, 2004, there were no cash flow hedges that were discontinued related to forecasted transactions deemed not probable of occurring. The Bancorp had less than $1 million and had $7 million of cash flow hedges converting floating-rate debt to fixed included in other liabilities as of December 31, 2004 and 2003, respectively.

Free-Standing Derivative Instruments

The Bancorp enters into various derivative contracts that focus on providing derivative products to commercial customers. These derivative contracts are not designated against specific assets or liabilities on the balance sheet or to forecasted transactions and, therefore, do not qualify for hedge accounting. These instruments include foreign exchange derivative contracts entered into for the benefit of commercial customers involved in international trade to hedge their exposure to foreign currency fluctuations and various interest rate derivative contracts for the benefit of commercial customers. The Bancorp economically hedges significant exposures related to these derivative contracts entered into for the benefit of customers by generally entering into offsetting third-party forward contracts with approved reputable counterparties with matching terms and currencies that are typically settled daily.

Interest rate lock commitments issued on residential mortgage loan commitments that will be held for resale are also considered free-standing derivative instruments. The interest rate exposure on these commitments is economically hedged primarily with forward contracts. The Bancorp also enters into a combination of freestanding derivative instruments (principal only swaps, swaptions, floors, forward contracts, options and interest rate swaps) to economically hedge changes in fair value of its largely fixed rate MSR portfolio. Additionally, the Bancorp occasionally enters into free-standing derivative instruments in order to minimize significant fluctuations in earnings and cash flows caused by interest rate volatility. The interest rate lock commitments and free-standing derivative instruments related to the MSR portfolio are marked to market and recorded as a component of mortgage banking net revenue, and the foreign exchange derivative contracts, other customer derivative contracts and interest rate risk derivative contracts are marked to market and recorded within other noninterest income in the Consolidated Statements of Income. The net gains (losses) recorded in the Consolidated Statements of Income relating to free-standing derivative instruments for the years ended December 31 are summarized in the table that follows on the next page.

Fifth Third Bancorp 49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

($ in millions)	2004			2003		2002
Foreign exchange contracts for customers	$	45		35		25
Interest rate lock commitments and forward contracts related to interest rate lock commitments		1		(1	)	(2	)
Derivative instruments related to MSR portfolio		(10	)	15		100
Derivative instruments related to interest rate risk		7		6		—

The following table reflects all free-standing derivatives included in the Consolidated Balance Sheets as of December 31:

($ in millions)	2004		2003
Included in other assets:
Foreign exchange contracts for customers	$	168	167
Interest rate contracts for customers		46	67
Interest rate lock commitments		1	—
Forward contracts related to interest rate lock commitments		—	(1	)
Derivative instruments related to MSR portfolio		7	8
Derivative instruments related to interest rate risk		—	7
Total included in other assets	$	222	248
Included in other liabilities:
Foreign exchange contracts for customers	$	137	131
Interest rate contracts for customers		46	67
Interest rate lock commitments		1	—
Derivative instruments related to MSR portfolio		3	—
Total included in other liabilities	$	187	198

The following table summarizes the Bancorp’s derivative position (excluding $13.6 billion in notional amount related to customer accommodation activity) as of December 31, 2004:

($ in millions)	Notional Amount		Weighted-Average Remaining Maturity (in months)	Average Receive Rate		Average Pay Rate
Interest rate swaps related to debt:
Receive fixed/pay floating	$	2,832	82	4.99	%	2.83	%
Receive floating/pay fixed		72	4	2.29		3.99
Forward contracts related to mortgage loans held for sale		386	1
Mortgage servicing rights portfolio:
Principal only swaps		130	19			2.57
Receive fixed/pay floating interest rate swaps		475	93	4.21		2.32
Receive floating/pay fixed interest rate swaps		101	77	2.50		4.08
Purchased swaptions		1,195	2	4.49
Total	$	5,191

10. SHORT-TERM BORROWINGS

Borrowings with original maturities of one year or less are classified as short-term. Federal funds purchased are excess balances in reserve accounts held at Federal Reserve Banks that the Bancorp purchased from other member banks on an overnight basis. Bank notes are promissory notes issued by the Bancorp’s subsidiary banks. Other short-term borrowings includes securities sold under repurchase agreements, Federal Home Loan Bank advances and other borrowings with original maturities of one year or less. A summary of short-term borrowings and weighted-average rates follows:

	2004				2003				2002
($ in millions)	Amount		Rate		Amount		Rate		Amount		Rate
As of December 31:
Federal funds purchased	$	4,714	2.00	%	$	6,928	.91	%	$	4,748	1.21	%
Short-term bank notes		775	2.30			500	1.05			—	—
Other short-term borrowings		4,537	1.71			5,742	.74			4,075	1.27
Average for the years ending December 31:
Federal funds purchased	$	5,896	1.30	%	$	7,001	1.14	%	$	3,262	1.66	%
Short-term bank notes		1,003	1.46			22	1.06			2	3.40
Other short-term borrowings		6,640	1.17			5,350	1.03			3,927	1.71
Maximum month-end balance:
Federal funds purchased	$	8,037			$	7,768			$	5,976
Short-term bank notes		1,275				500				34
Other short-term borrowings		8,233				6,907				4,399

As of December 31, 2004, the Bancorp had issued $28 million in commercial paper, with unused lines of credit of $72 million available to support commercial paper transactions and other corporate requirements.

50 Fifth Third Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. LONG-TERM DEBT

A summary of long-term debt at December 31:

($ in millions)	Maturity	Interest Rate	2004		2003
Parent Company
Senior:
Extendable notes	2006 –2009	2.375%	$	1,749	—
Subordinated:
Fixed-rate notes (a)	2018	4.5%		469	458
Junior subordinated:
Fixed-rate debentures (a)	2027	8.136%		229	233
Subsidiaries
Senior:
Fixed-rate bank notes	2005 – 2019	1.05%–5.20%		2,565	497
Floating-rate bank notes	2005	2.21%–2.37%		1,100	—
Extendable bank notes	2006 – 2014	2.11%–2.43%		1,199	—
Subordinated:
Fixed-rate notes	2005	6.625% –6.75%		354	365
FixFloat notes (a)	2010	7.75%		151	159
Junior subordinated:
Floating-rate debentures (a)	2027	2.96%		103	103
Floating-rate debentures (a)	2030	5.57%		17	—
Mandatorily redeemable securities (a)	2031	Varies		548	505
Federal Home Loan Bank advances	2005 – 2034	1.09% –8.34%		3,888	5,094
Securities sold under repurchase agreements	2007 – 2008	2.00% – 2.15%		1,300	825
Commercial paper-backed obligations	2005 – 2007	2.34% – 2.41%		286	792
Other	2005 – 2032	Varies		25	32
Total			$	13,983	9,063

(a) Qualify as total capital for regulatory capital purposes.

The 8.136% junior subordinated debentures due in 2027 were issued by the Bancorp to Fifth Third Capital Trust I (“FTCT1”). The Bancorp has fully and unconditionally guaranteed all of FTCT1’s obligations under trust preferred securities issued by FTCT1. The trust preferred securities are redeemable beginning in 2007.

The three-month LIBOR plus 80 bp junior subordinated debentures due in 2027 were issued to Old Kent Capital Trust 1 (“OKCT1”). The Bancorp has fully and unconditionally guaranteed all of OKCT1’s obligations under trust preferred securities issued by OKCT1. The trust preferred securities are redeemable beginning in 2007.

Upon the early adoption of FIN 46 effective July 1, 2003, the Bancorp deconsolidated both FTCT1 and OKCT1 resulting in a recharacterization of the underlying consolidated debt obligations from the previous trust preferred securities obligations to junior subordinated debenture obligations.

The junior subordinated debentures due in 2030 were assumed by a subsidiary of the Bancorp in connection with the acquisition of Franklin Financial. The obligations were issued to Franklin Capital Trust 1 (“FCT1”). The Bancorp has fully and unconditionally guaranteed all of FCT1’s obligations under trust preferred securities issued by FCT1.

The interest rate on the unsecured subordinated fixfloat notes due in 2010 is 7.75% and will convert to a floating rate during 2005. The notes may be redeemed on a semi-annual basis.

The mandatorily redeemable securities due 2031 relate to a preferred stock obligation of a subsidiary of the Bancorp. The preferred stock will be automatically exchanged for trust preferred securities in 2031. Beginning five years from the date of issuance, the Bancorp’s subsidiary has the option, subject to regulatory approval, to exchange the preferred stock for trust preferred securities or cash upon a change in the Bancorp’s senior debt rating to or below BBB, a change in the investor’s tax elections or a change in applicable tax law. Upon the adoption of SFAS No. 150 on July 1, 2003, the Bancorp reclassified its previous minority interest obligation to long-term debt and its corresponding minority interest expense to interest expense due to the existence of the mandatory redemption feature.

At December 31, 2004, Federal Home Loan Bank advances have rates ranging from 1.09% to 8.34%, with interest payable monthly. The advances are secured by certain residential mortgage loans and securities totaling $8.4 billion. The advances mature as follows: $400 million in 2005, $105 million in 2006, $1,827 million in 2007, $3 million in 2008 and $1,553 million thereafter.

At December 31, 2004, securities sold under agreements to repurchase have variable rates ranging from 2.00% to 2.15% with interest payable monthly. The repurchase agreements mature as follows: $1,000 million in 2007 and $300 million in 2008.

The floating-rate, commercial paper-backed obligations are rolling in nature, mature through 2007 and were recognized as a result of the early adoption of FIN 46 and related consolidation of an unrelated SPE involved in the sale and subsequent leaseback of certain automobile operating lease assets with the Bancorp. See Note 1 for further discussion of adoption of FIN 46.

Medium-term senior notes and subordinated bank notes with maturities ranging from one year to 30 years can be issued by two subsidiary banks, of which $4.9 billion was outstanding at December 31, 2004 with $14.3 billion available for future issuance. There were no other medium-term senior notes outstanding on either of the two subsidiary banks as of December 31, 2004. In January 2005, a subsidiary of the Bancorp issued $500 million of subordinated bank notes with a rate of 4.75% due in 2015.

Fifth Third Bancorp 51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. COMMITMENTS AND CONTINGENT LIABILITIES

The Bancorp, in the normal course of business, uses derivatives and other financial instruments to manage its interest rate risks and prepayment risks and to meet the financing needs of its customers. These financial instruments primarily include commitments to extend credit, standby and commercial letters of credit, foreign exchange contracts, commitments to sell residential mortgage loans, principal only swaps, interest rate swap agreements, written options and interest rate lock commitments. These instruments involve, to varying degrees, elements of credit risk, counterparty risk and market risk in excess of the amounts recognized in the Bancorp’s Consolidated Balance Sheets. As of December 31, 2004, 100% of the Bancorp’s risk management derivatives exposure was to investment grade companies. The contract or notional amounts of these instruments reflect the extent of involvement the Bancorp has in particular classes of financial instruments.

Creditworthiness for all instruments is evaluated on a case-by-case basis in accordance with the Bancorp’s credit policies. While notional amounts are typically used to express the volume of these transactions, it does not represent the much smaller amounts that are potentially subject to credit risk. Entering into derivative instruments involves the risk of dealing with counterparties and their ability to meet the terms of the contract. The Bancorp controls the credit risk of these transactions through adherence to a derivatives products policy, credit approval policies and monitoring procedures. Collateral, if deemed necessary, is based on management’s credit evaluation of the counterparty and may include business assets of commercial borrowers, as well as personal property and real estate of individual borrowers and guarantors.

A summary of significant commitments and contingent liabilities at December 31:

	Contract or Notional Amount
($ in millions)	2004		2003
Commitments to extend credit	$	31,312	25,406
Letters of credit (including standby letters of credit)		5,923	4,908
Foreign exchange contracts for customers:
Spots		342	141
Forwards		4,624	3,950
Written options		349	240
Forward contracts to sell mortgage loans		739	796
Principal only swaps		130	181
Interest rate swap agreements		9,798	7,280
Written options		437	600
Interest rate lock commitments		328	377

Commitments to extend credit are agreements to lend, typically having fixed expiration dates or other termination clauses that may require payment of a fee. Since many of the commitments to extend credit may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash flow requirements. The Bancorp is exposed to credit risk in the event of nonperformance for the amount of the contract. Fixed-rate commitments are also subject to market risk resulting from fluctuations in interest rates and the Bancorp’s exposure is limited to the replacement value of those commitments. As of December 31, 2004 and 2003, the Bancorp had a reserve for probable credit losses totaling $53 million and $55 million, respectively, included in other liabilities.

Standby and commercial letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. At December 31, 2004, approximately $1,782 million of standby letters of credit expire within one year, $3,812 million expire between one to five years and $294 million expire thereafter. At December 31, 2004, letters of credit of approximately $35 million were issued to commercial customers for a duration of one year or less to facilitate trade payments in domestic and foreign currency transactions. The amount of credit risk involved in issuing letters of credit in the event of nonperformance by the other party is the contract amount. As of December 31, 2004 and 2003, the Bancorp had a reserve for probable credit losses totaling $19 million and $18 million, respectively, included in other liabilities.

As discussed in Note 9, the Bancorp’s policy is to enter into derivative contracts to accommodate customers, to offset customer accommodations and to offset its own market risk incurred in the ordinary course of its business. Contingent obligations arising from market risk assumed in derivatives are offset with additional rights contained in other derivatives or contracts, such as loans or borrowings. Certain derivatives provide the Bancorp rights without contingent obligations (purchased options). Other derivatives represent contingent obligations without providing additional rights (written options, including interest rate lock commitments). Still other derivatives provide additional rights combined with contingent obligations (foreign exchange spots and forwards, forward contracts to sell mortgage loans, principal only swaps and interest rate swap agreements). All derivatives that possess a contingent obligation are included in the table.

There are claims pending against the Bancorp and its subsidiaries that have arisen in the normal course of business. Based on a review of such litigation with legal counsel, management believes any resulting liability would not have a material effect upon the Bancorp’s consolidated financial position or results of operations. See Note 13 for additional information regarding these proceedings.

13. LEGAL AND REGULATORY PROCEEDINGS

During 2003, eight putative class action complaints were filed in the United States District Court for the Southern District of Ohio against the Bancorp and certain of its officers alleging violations of federal securities laws related to disclosures made by the Bancorp regarding its integration of Old Kent and its effect on the Bancorp’s infrastructure, including internal controls, and prospects and related matters. The complaints, which have been consolidated, seek unquantified damages on behalf of putative classes of persons who purchased the Bancorp’s common stock, attorneys’ fees and other expenses. Management believes there are substantial defenses to these lawsuits. Management believes the impact of the final disposition of these lawsuits will not be material to the Bancorp.

The Bancorp and its subsidiaries are not parties to any other material litigation other than those arising in the normal course of business. While it is impossible to ascertain the ultimate resolution or range of financial liability with respect to these contingent matters, management believes any resulting liability from these other actions would not have a material effect upon the Bancorp’s consolidated financial position or results of operations.

52 Fifth Third Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. GUARANTEES

The Bancorp has performance obligations upon the occurrence of certain events under financial guarantees provided in certain contractual arrangements. These various arrangements are summarized below.

At December 31, 2004, the Bancorp had issued approximately $5.9 billion of financial and performance standby letters of credit to guarantee the performance of various customers to third parties. The maximum amount of credit risk in the event of nonperformance by these parties is equivalent to the contract amount and totals $5.9 billion. Upon issuance, the Bancorp recognizes a liability equivalent to the amount of fees received from the customer for these standby letter of credit commitments. At December 31, 2004, the Bancorp maintained a credit loss reserve of approximately $ 19 million related to these financial standby letters of credit. Approximately 75% of the total standby letters of credit are secured and in the event of nonperformance by the customers, the Bancorp has rights to the underlying collateral provided including commercial real estate, physical plant and property, inventory, receivables, cash and marketable securities.

Through December 31, 2004, the Bancorp had transferred, subject to credit recourse, certain primarily floating-rate and short-term investment grade commercial loans to an unconsolidated QSPE that is wholly owned by an independent third-party. The outstanding balance of such loans at December 31, 2004 was approximately $1.9 billion. These loans may be transferred back to the Bancorp upon the occurrence of an event specified in the legal documents that established the QSPE. These events include borrower default on the loans transferred, bankruptcy preferences initiated against underlying borrowers and ineligible loans transferred by the Bancorp to the QSPE. The maximum amount of credit risk in the event of nonperformance by the underlying borrowers is approximately equivalent to the total outstanding balance of $1.9 billion at December 31, 2004. The outstanding balances are typically secured by the underlying collateral that include commercial real estate, physical plant and property, inventory, receivables, cash and marketable securities. Given the investment grade nature of the loans transferred as well as the underlying collateral security provided, the Bancorp has not maintained any loss reserve related to these loans transferred.

At December 31, 2004, the Bancorp had provided credit recourse on approximately $569 million of residential mortgage loans sold to unrelated third parties. In the event of any customer default, pursuant to the credit recourse provided, the Bancorp is required to reimburse the third party. The maximum amount of credit risk in the event of nonperformance by the underlying borrowers is equivalent to the total outstanding balance of $569 million. In the event of nonperformance, the Bancorp has rights to the underlying collateral value attached to the loan. Consistent with its overall approach in estimating credit losses for various categories of residential mortgage loans held in its loan portfolio, the Bancorp maintains an estimated credit loss reserve of approximately $17 million relating to these residential mortgage loans sold.

As of December 31, 2004, the Bancorp has also fully and unconditionally guaranteed $349 million of certain long-term borrowing obligations issued by three wholly-owned issuing trust entities that have been deconsolidated upon the early adoption of the provisions of FIN 46. See Note 1 for further discussion of adoption of FIN 46.

During 2004, the Bancorp, through its electronic payment processing division, processed VISA^® and MasterCard^® merchant card transactions. Pursuant to VISA^® and MasterCard^® rules, the Bancorp assumes certain contingent liabilities relating to these transactions which typically arise from billing disputes between the merchant and cardholder that are ultimately resolved in the cardholder’s favor. In such cases, these transactions are “charged back” to the merchant and disputed amounts are refunded to the cardholder. In the event that the Bancorp is unable to collect these amounts from the merchant, it will bear the loss for refunded amounts. The likelihood of incurring a contingent liability arising from chargebacks is relatively low, as most products or services are delivered when purchased, and credits are issued on returned items. For the year ended December 31, 2004, the Bancorp processed approximately $121 million of chargebacks presented by issuing banks resulting in actual losses to the Bancorp of approximately $3 million. The Bancorp accrues for probable losses based on historical experience. The credit loss reserve was not material at December 31, 2004.

Fifth Third Securities, Inc (“FTS”), a subsidiary of the Bancorp, guarantees the collection of all margin account balances held by its brokerage clearing agent for the benefit of FTS customers. FTS is responsible for payment to its brokerage clearing agent for any loss, liability, damage, cost or expense incurred as a result of customers failing to comply with margin or margin maintenance calls on all margin accounts. The margin account balance held by the brokerage clearing agent as of December 31, 2004 was $48 million. In the event of any customer default, FTS has rights to the underlying collateral provided. Given certain FTS margin account relationships were in place prior to January 1, 2003 and the existence of the underlying collateral provided as well as the negligible historical credit losses, FTS does not maintain any loss reserve.

15. RELATED PARTY TRANSACTIONS

At December 31, 2004 and 2003, certain directors, executive officers, principal holders of Bancorp common stock and associates of such persons were indebted, including undrawn commitments to lend, to the Bancorp’s banking subsidiaries in the aggregate amount, net of participations, of $260 million and $385 million, respectively. As of December 31, 2004 and 2003, the outstanding balance on loans to related parties, net of participations and undrawn commitments, was $70 million and $118 million, respectively.

Commitments to lend to related parties as of December 31, 2004 and 2003, net of participations, were comprised of $244 million and $364 million, respectively, in loans and guarantees for various business and personal interests made to the Bancorp and subsidiary directors and $16 million and $21 million, respectively, to certain executive officers. This indebtedness was incurred in the ordinary course of business on substantially the same terms as those prevailing at the time of comparable transactions with unrelated parties.

During 2004, the Bancorp entered into a daily line of credit and term loan agreement with First National Bankshares of Florida, Inc. (“First National”) and its subsidiaries. Outstanding balances on the line of credit and term loan at December 31, 2004 were $328 million and $30 million, respectively. The Bancorp completed the acquisition of First National on January 1, 2005.

None of the Bancorp’s affiliates, officers, directors or employees has an interest in or receives any remuneration from any special purpose entities or qualified special purpose entities with which the Bancorp transacts business.

Fifth Third Bancorp 53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. OTHER COMPREHENSIVE INCOME

The Bancorp has elected to present the disclosures required by SFAS No. 130, “Reporting Comprehensive Income,” in the Consolidated Statements of Changes in Shareholders’ Equity on page 38 and in the table below. Disclosure of the reclassification adjustments, related tax effects allocated to other comprehensive income and accumulated other comprehensive income as of and for the years ended December 31:

	Current Period Activity							Accumulated Balance
($ in millions)	Pre-Tax			Tax Effect		Net		Pre-Tax		Tax Effect		Net
2004
Losses on available-for-sale securities	$	(74	)	27		(47	)	(114	)	42		(72	)
Reclassification adjustment for losses recognized in net income		37		(13	)	24
Losses on cash flow hedge derivatives		(39	)	15		(24	)	(52	)	19		(33	)
Reclassification adjustment for gains recognized in net income		(1	)	—		(1	)
Change in minimum pension liability		(1	)	—		(1	)	(98	)	34		(64	)
Total	$	(78	)	29		(49	)	(264	)	95		(169	)
2003
Losses on available-for-sale securities	$	(667	)	234		(433	)	(77	)	28		(49	)
Reclassification adjustment for gains recognized in net income		(84	)	30		(54	)
Gains (losses) on cash flow hedge derivatives		14		(5	)	9		(12	)	4		(8	)
Change in minimum pension liability		(17	)	6		(11	)	(97	)	34		(63	)
Total	$	(754	)	265		(489	)	(186	)	66		(120	)
2002
Gains on available-for-sale securities	$	793		(277	)	516		674		(236	)	438
Reclassification adjustment for gains recognized in net income		(147	)	51		(96	)
Losses on cash flow hedge derivatives		(10	)	3		(7	)	(26	)	9		(17	)
Change in minimum pension liability		(80	)	28		(52	)	(80	)	28		(52	)
Total	$	556		(195	)	361		568		(199	)	369

17. COMMON STOCK AND TREASURY STOCK

The following is a summary of the share activity within common stock issued and treasury stock for the years ended December 31:

	Common Stock			Treasury Stock
($ and shares in millions)	Value		Shares	Value			Shares
Shares at December 31, 2001	$	1,294	583	$	4		—
Shares acquired for treasury		—	—		720		12
Stock options exercised, including treasury shares issued		1	—		(180	)	(3	)
Shares at December 31, 2002		1,295	583		544		9
Shares acquired for treasury		—	—		655		12
Stock options exercised, including treasury shares issued		—	—		(233	)	(4	)
Other		—	—		(4	)	—
Shares at December 31, 2003		1,295	583		962		17
Shares acquired for treasury		—	—		987		19
Stock options exercised, including treasury shares issued		—	—		(222	)	(4	)
Restricted stock issued		—	—		(33	)	(1	)
Stock issued in business combination		—	—		(281	)	(5	)
Other		—	—		1		—
Shares at December 31, 2004	$	1,295	583	$	1,414		26

On January 10, 2005, the Bancorp repurchased 35.5 million shares of its common stock, approximately six percent of the total outstanding shares, for approximately $1.6 billion in an overnight accelerated share repurchase transaction. The transaction provides that the counterparty will purchase shares in the market over a period of time. Upon completion, the Bancorp will receive or pay a price adjustment in the form of cash or shares, at its election, that is largely based on the volume weighted-average price of the shares purchased by the counterparty.

54 Fifth Third Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. STOCK-BASED COMPENSATION

The Bancorp has historically emphasized employee stock ownership. Accordingly, the Bancorp encourages further ownership through granting stock-based compensation to approximately 24% of its employees, including approximately 5,000 officers. Based on total stock-based awards outstanding and shares remaining for future grants under the Incentive Compensation Plan, the Bancorp’s total overhang is approximately 11%. The following table provides detail of the number of shares to be issued upon exercise of outstanding stock-based awards and remaining shares available for future issuance under all of the Bancorp’s equity compensation plans, as of December 31, 2004:

Plan Category (in thousands)	Number of Shares to Be Issued Upon Exercise		Weighted-Average Exercise Price			Shares Available for Future Issuance (a)
Equity compensation plans approved by shareholders:
Options	33,442		$	46.40		(b	)
Restricted stock	596			(c	)	(b	)
Performance units	(d	)		(c	)	(b	)
Stock appreciation rights (“SARs”)	(e	)		(e	)	(b	)
Equity compensation plans not approved by shareholders:
Employee stock purchase plan						764	(f)
Total (g)	34,038		$	46.40		20,413	(h)

(a) Excludes shares to be issued upon exercise of outstanding awards.

(b) Under the Incentive Compensation Plan, 20.0 million shares of stock were authorized for issuance as nonqualified and incentive stock options, SARs, restricted stock and restricted stock units, performance shares and performance units and stock awards. As of December 31, 2004, 19.1 million shares remain available for future issuance.

(c) Not applicable

(d) The number of shares to be issued is dependent upon the Bancorp achieving certain predefined performance targets and ranges from zero shares to approximately 98 thousand shares, dependent on relative performance.

(e) During 2004, approximately 3.7 million SARs were granted at a weighted-average grant price of $54.37. The number of shares to be issued upon exercise will be determined at exercise based on the difference between the grant price and the market price at the date of exercise.

(f) Represents remaining shares of Fifth Third common stock under the Bancorp’s 1993 Stock Purchase Plan, as amended and restated.

(g) Excludes 2.7 million outstanding options awarded under plans assumed by the Bancorp in connection with certain mergers and acquisitions. The Bancorp has not made any awards under these plans and will make no additional awards under these plans. The weighted-average exercise price of the outstanding options is $31.92 per share.

(h) Includes .5 million shares issuable relating to deferred stock compensation plans.

Stock-based awards are eligible for issuance under the Bancorp’s Incentive Compensation Plan to key employees and directors of the Bancorp and its subsidiaries. The Incentive Stock Compensation Plan was approved by shareholders on March 23, 2004. The plan authorized the issuance of up to 20 million shares as equity compensation, in addition to those shares available for issuance under the predecessor plan, the 1998 Long Term Incentive Stock Plan. During 2004, the Bancorp utilized all shares remaining under the predecessor plan. Options and SARs are issued at fair market value at the date of grant, have up to ten-year terms and vest and become fully exercisable at the end of three or four years of continued employment. Currently, all SARs outstanding are to be settled with stock. Restricted stock grants vest after four years of continued employment and include dividend and voting rights. The Bancorp applies the fair value provisions of SFAS No. 123 in accounting for stock-based compensation plans. Under SFAS No. 123, the Bancorp recognizes compensation expense for the fair value of stock-based awards issued over their vesting period. Stock-based compensation expense was $87 million, $110 million and $128 million for the years ended December 31, 2004, 2003 and 2002, respectively. The exercise price of the Bancorp’s stock option grants equals the market price of the underlying stock on the date of grant. A summary of stock-based award activity during the years ended December 31:

	2004				2003				2002
Options (shares in thousands)	Shares		Average Option Price		Shares		Average Option Price		Shares		Average Option Price
Outstanding at January 1	40,727		$	44.40	39,030		$	41.85	36,735		$	36.27
Exercised	(4,248	)		25.41	(3,843	)		27.25	(3,736	)		30.73
Canceled	(1,422	)		58.07	(958	)		58.61	(533	)		53.97
Granted (a)	1,105			19.81	6,498			51.88	6,564			67.68
Outstanding at December 31	36,162		$	45.31	40,727		$	44.40	39,030		$	41.85
Exercisable at December 31	30,912		$	43.57	30,574		$	40.46	29,935		$	36.96

(a) 2004 options granted include 1,021 options assumed as part of the Franklin Financial acquisition completed on June 11, 2004. These options were granted under a Franklin Financial plan assumed by the Bancorp.

	2004				2003		2002
Stock Appreciation Rights (shares in thousands)	Shares		Average Grant Price		Shares	Average Grant Price	Shares	Average Grant Price
Outstanding at January 1	—		$	—	—	—	—	—
Exercised	—			—	—	—	—	—
Canceled	(187	)		54.40	—	—	—	—
Granted	3,716			54.37	—	—	—	—
Outstanding at December 31	3,529		$	54.37	—	—	—	—
Exercisable at December 31	1		$	54.40	—	—	—	—

Fifth Third Bancorp 55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	2004				2003				2002
Restricted Stock (shares in thousand)	Shares		Average Market Price at Grant		Shares		Average Market Price at Grant		Shares		Average Market Price at Grant
Outstanding unvested at January 1	48		$	58.11	18		$	62.54	165		$	54.73
Vested	(18	)		59.16	(8	)		62.81	(155	)		54.23
Canceled	(41	)		54.26	—			—	—			—
Granted	607			53.86	38			56.90	8			62.78
Outstanding unvested at December 31	596		$	54.01	48		$	58.11	18		$	62.54

At December 31, 2004, there were 14.2 million incentive options, 22.0 million non-qualified options, 3.5 million SARs, .1 million shares reserved for performance unit awards and .6 million restricted stock awards outstanding and 19.1 million shares available for grant. Options, SARs and restricted stock outstanding represent seven percent of the Bancorp’s issued shares at December 31, 2004.

Exercise Price per Share	Lowest Price		Highest Price		Number of Options at Year-End (000’s)	Outstanding Stock Options			Exercisable Stock Options
						Weighted-Average Exercise Price		Average Remaining Contractual Life (in years)	Number of Options (000’ s)	Weighted-Average Exercise Price
Under $11	$	5.06	$	10.86	358	$	7.49	1.24	358	$	7.49
$11-$25		11.06		24.90	4,990		19.06	2.11	4,990		19.06
$25-$40		25.22		39.96	5,100		35.81	3.55	5,086		35.81
$40-$55		40.17		54.99	19,365		48.37	6.02	15,680		47.65
Over $55		55.01		68.76	6,349		66.37	7.27	4,798		66.61
All options	$	5.06	$	68.76	36,162	$	45.31	5.30	30,912	$	43.57

In addition, approximately 98 thousand shares of performance-based awards were granted during 2004. These awards are payable in stock and cash contingent upon the Bancorp achieving certain predefined performance targets over the three-year measurement period. These performance targets are based on the Bancorp’s performance relative to a defined peer group. The performance-based awards were granted at an average fair value of $55.75 per share.

The Bancorp sponsors a Stock Purchase Plan that allows qualifying employees to purchase shares of the Bancorp’s common stock at a 15% discount from market price. During the years ended December 31, 2004, 2003 and 2002, respectively, there were 236,115, 194,133 and 157,308 shares purchased by participants and the Bancorp recognized compensation expense of $2 million in 2004 and $1 million in both 2003 and 2002.

19. OTHER NONINTEREST INCOME AND OTHER NONINTEREST EXPENSE

The major components of other noninterest income and other noninterest expense for the years ended December 31:

($ in millions)	2004		2003	2002
Other noninterest income:
Cardholder fees	$	48	59	51
Consumer loan and lease fees		57	65	70
Commercial banking revenue		174	178	157
Bank owned life insurance income		61	62	62
Insurance income		31	28	55
Gain on sale of branches		—	—	7
Gain on sale of property and casualty insurance product lines		—	—	26
Gain on sale of small merchant processing contracts		157	—	—
Other		143	189	152
Total	$	671	581	580
Other noninterest expense:
Marketing and communication	$	99	99	96
Postal and courier		49	49	48
Bankcard		197	176	142
Intangible amortization		29	40	37
Franchise and other taxes		32	33	30
Loan and lease		82	106	91
Printing and supplies		33	35	37
Travel		41	35	38
Data processing and operations		114	97	82
Debt prepayment		325	20	—
Other		309	255	285
Total	$	1,310	945	886

56 Fifth Third Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20. SALES AND TRANSFERS OF LOANS

The Bancorp sold fixed and adjustable rate residential mortgage loans in securitization transactions, during 2004 and 2003. The Bancorp also securitized and sold certain automotive loans in 2004 and securitized and sold certain home equity lines of credit in 2003. In all of those sales, the Bancorp retained servicing responsibilities. In addition, the Bancorp retained a residual interest and an interest only strip (“IO strip”) in the 2003 home equity lines of credit securitization and a residual interest and a subordinated tranche in the 2004 automotive loans securitization. The Bancorp receives annual servicing fees at a percentage of the outstanding balance and rights to future cash flows arising after the investors in the securitization trusts have received the return for which they contracted. The investors and the securitization trusts have no recourse to the Bancorp’s other assets for failure of debtors to pay when due. The Bancorp’s retained interests are subordinate to investor’s interests. Their value is subject to credit, prepayment and interest rate risks on the sold financial assets. In 2004 and 2003, the Bancorp recognized pretax gains of $112 million and $340 million, respectively, on the sales of residential mortgage loans, home equity lines of credit and automotive loans. Total proceeds from residential mortgage loan, home equity lines of credit and automotive loan sales in 2004 and 2003 were $6.1 billion and $16.0 billion, respectively.

Initial carrying values of retained interests recognized during 2004 and 2003 were as follows:

($ in millions)	2004		2003
Mortgage servicing assets	$	83	206
Other consumer and commercial servicing assets		11	11
Consumer residual interests		26	29
Subordinated interests		21	—

The subordinated interests recognized in 2004 are securities retained from the automotive loan securitization. These securities are investment grade and are carried at their market value. Key economic assumptions used in measuring other retained interests at the date of securitization resulting from securitizations completed during 2004 and 2003 were as follows:

		2004							2003
	Rate	Weighted- Average Life (in years)	Prepayment Speed Assumption		Discount Rate		Weighted- Average Default Rate		Weighted- Average Life (in years)	Prepayment Speed Assumption		Discount Rate		Weighted- Average Default Rate
Residential mortgage loans:
Servicing assets	Fixed	7.0	16.1	%	9.5	%	N/A		6.2	15.5	%	9.8	%	N/A
Servicing assets	Adjustable	4.4	25.6		10.7		N/A		3.3	31.9		10.7		N/A
Home equity lines of credit:
Servicing assets	Adjustable	2.0	38.8		11.7		N/A		2.1	40		12.0		N/A
Residual interest	Adjustable	2.0	38.8		11.7		.35	%	2.1	40		11.7		.35	%
Automotive loans:
Servicing assets	Fixed	2.9	1.55		12.0		N/A		—	—		—		—
Residual interest	Fixed	2.9	1.55		12.0		1.25		—	—		—		—

Expected credit losses and the effect of an unfavorable change in credit losses for servicing rights have been deemed to be immaterial based on historical credit experience. At December 31, 2004, key economic assumptions and the sensitivity of the current fair value of residual cash flows to immediate 10% and 20% adverse changes in those assumptions are as follows:

($ in millions)	Rate	Fair Value		Weighted- Average Life (in years)	Prepayment Speed Assumption						Residual Servicing Cash Flows						Weighted-Average Default
					Rate		Impact of Adverse Change on Fair Value				Discount Rate		Impact of Adverse Change on Fair Value				Rate		Impact of Adverse Change on Fair Value
							10%		20%				10%		20%				10%		20%
Residential mortgage loans:
Servicing assets	Fixed	$	313	6.1	15.2	%	$	16	$	30	9.5	%	$	9	$	17	—	%	$	—	$	—
Servicing assets	Adjustable		26	3.5	29.6			2		3	11.4			1		1	—			—		—
Home equity lines of credit:
Servicing assets	Adjustable		7	2.4	35.0			1		1	11.7			—		—	—			—		—
Residual interest	Adjustable		29	2.1	35.0			2		4	11.7			1		1	.35			—		1
Automotive loans:
Servicing assets	Fixed		7	1.3	1.55			—		1	12.0			—		—	—			—		—
Residual interest	Fixed		23	1.2	1.55			—		—	12.0			—		1	1.25			1		1

These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10% variation in assumptions typically cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the above table, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption; in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments and increased credit losses), which might magnify or counteract the sensitivities.

In addition to the retained interests listed above, the Bancorp retains certain investment grade securities from securitizations. The fair value of these retained securities was $34 million and $56 million at December 31, 2004 and 2003, respectively. The securities are valued using quoted market prices.

Fifth Third Bancorp 57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides a summary of the total loans and leases managed by the Bancorp, including loans securitized:

	Balance			Balance of Loans 90 Days or More Past Due			Net Credit Losses
For the Years Ended December 31 ($ in millions)	2004		2003	2004		2003	2004		2003
Commercial loans	$	16,058	14,226	$	21	14	$	81	136
Commercial mortgage		7,636	6,894		8	9		9	7
Commercial leases		3,426	3,264		1	1		7	22
Construction loans		4,726	3,636		9	9		6	2
Residential mortgage		7,629	5,801		44	50		15	24
Other consumer loans		20,222	19,036		62	61		118	96
Consumer leases		2,051	2,448		3	6		19	25
Total loans and leases managed and securitized (a)		61,748	55,305	$	148	150	$	255	312
Less:
Loans securitized		1,381	1,116
Loans held for sale		559	1,881
Total loans and leases held for investment	$	59,808	52,308

(a) Excluding securitized assets that the Bancorp continues to service but with which it has no other continuing involvement.

Static pool credit losses are calculated by aggregating the actual and projected future credit losses for a securitization and dividing these losses by the original balance in each pool of assets. For the home equity lines of credit securitized in 2003, the static pool credit losses were .78% and .66% as of December 31, 2004 and 2003, respectively. For the automotive loans securitized in 2004, the static pool credit losses were 1.14% as of December 31, 2004.

During 2004 and 2003, the Bancorp transferred, subject to credit recourse, certain commercial loans to an unconsolidated QSPE that is wholly owned by an independent third party. At December 31, 2004 and 2003, the outstanding balance of loans transferred was $1.9 billion and $1.8 billion, respectively. The commercial loans transferred to the QSPE are primarily floating-rate and short-term investment grade in nature. 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 exposure to these lower yielding loan assets while maintaining the customer relationships. These commercial loans are transferred at par with no gain or loss recognized. The Bancorp receives rights to future cash flows arising after the investors in the securitization trust have received the return for which they contracted. Due to the relatively short-term nature of the loans transferred, no value has been assigned to this retained future stream of fees to be received. As of December 31, 2004, the $1.9 billion balance of outstanding loans had a weighted-average remaining maturity of 62 days.

During 2004, the Bancorp securitized and sold $750 million in automotive loans to an unconsolidated QSPE that is wholly owned by an independent third party. The Bancorp retained servicing rights and receives a servicing fee based on a percentage of the outstanding balance. Additionally, the Bancorp retained a subordinated tranche of securities and rights to future cash flows arising after investors in the securitization trust have received the return for which they contracted. The investors and the securitization trust have no recourse to the Bancorp’s other assets for failure of debtors to pay when due. The Bancorp’s retained interest is subordinate to investor’s interests and its value is subject to credit, prepayment and interest rate risks on the sold automotive loans. As of December 31, 2004, the remaining balance of sold automotive loans was $568 million.

During 2003, the Bancorp securitized and sold $903 million in home equity lines of credit to an unconsolidated QSPE that is wholly owned by an independent third party. The Bancorp retained servicing rights and receives a servicing fee based on a percentage of the outstanding balance. Additionally, the Bancorp retained rights to future cash flows arising after investors in the securitization trust have received the return for which they contracted. The investors and the securitization trust have no recourse to the Bancorp’s other assets for failure of debtors to pay when due. The Bancorp’s retained interest is subordinate to investor’s interests and its value is subject to credit, prepayment and interest rate risks on the sold home equity lines of credit. As of December 31, 2004, the remaining balance of sold home equity lines of credit was $717 million.

The Bancorp had the following cash flows with unconsolidated QSPE’s during 2004 and 2003:

($ in millions)	2004		2003
Proceeds from transfers, including new securitizations	$	1,379	1,345
Proceeds from collections re-invested in revolving-period securitizations		162	46
Transfers received from QSPE’s		164	116
Fees received		32	25

58 Fifth Third Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21. DISCONTINUED OPERATIONS

In November 2003, the Bancorp announced an agreement to sell its corporate trust business, a component of the Commercial Banking segment. The transaction closed in December 2003. The Bancorp recognized an after-tax gain of $40 million on the sale, which is captured as a component of net income from discontinued operations in the Consolidated Statements of Income.

Financial information for discontinued operations is summarized below:

($ in millions)	2003		2002
Total revenues	$	12	12
Gain on sale		62	—
Total expense		6	6
Income before income taxes		68	6
Applicable income taxes		24	2
Net income from discontinued operations	$	44	4
Total assets	$	2	2

22. INCOME TAXES

The Bancorp and its subsidiaries file a consolidated Federal income tax return. A summary of applicable income taxes included in the Consolidated Statements of Income as of December 31:

($ in millions)	2004			2003	2002
Current income taxes:
U.S. income taxes	$	691		482	454
State and local income taxes		34		9	27
Total current tax		725		491	481
Deferred income taxes:
U.S. income taxes		(12	)	264	257
State and local income taxes		(1	)	31	(4	)
Total deferred taxes		(13	)	295	253
Applicable income taxes	$	712		786	734

Deferred income taxes are included as a component of accrued taxes, interest and expenses in the Consolidated Balance Sheets and are comprised of the following temporary differences as of December 31:

($ in millions)	2004		2003
Deferred tax assets:
Reserves for credit losses	$	250	269
Deferred compensation		141	137
Other comprehensive income		95	66
State net operating losses		153	154
Other		122	53
Total deferred tax assets		761	679
Deferred tax liabilities:
Lease financing		1,819	1,801
State deferred taxes		236	238
Bank premises and equipment		75	54
Other		231	241
Total deferred tax liabilities		2,361	2,334
Total net deferred tax liability	$	1,600	1,655

A reconciliation between the statutory U.S. income tax rate and the Bancorp’s effective tax rate for the years ended December 31:

	2004		2003		2002
Statutory tax rate	35.0	%	35.0		35.0
Increase (decrease) resulting from:
State taxes, net of federal benefit	1.0		1.0		.6
Tax-exempt income	(2.0	)	(1.8	)	(2.1	)
Credits	(1.7	)	(1.2	)	(.9	)
Other, net	(.5	)	(.8	)	(.7	)
Effective tax rate	31.8	%	32.2		31.9

Retained earnings at December 31, 2004 includes $ 157 million in allocations of earnings for bad debt deductions of former thrift subsidiaries for which no income tax has been provided. Under current tax law, if certain of the Bancorp’s subsidiaries use these bad debt reserves for purposes other than to absorb bad debt losses, they will be subject to Federal income tax at the current corporate tax rate.

Fifth Third Bancorp 59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

23. RETIREMENT AND BENEFIT PLANS

The measurement date for all of the Bancorp’s defined benefit retirement plans is December 31. A combined summary of the defined benefit retirement plans as of and for the years ended December 31:

($ in millions)	2004			2003
Projected benefit obligation at January 1	$	264		243
Service cost		1		1
Interest cost		15		16
Settlement		(17	)	(27	)
Actuarial loss		1		40
Benefits paid		(10	)	(9	)
Projected benefit obligation at December 31	$	254		264
Fair value of plan assets at January 1	$	223		177
Actual return on assets		7		28
Contributions		3		62
Settlement		(22	)	(35	)
Benefits paid		(10	)	(9	)
Fair value of plan assets at December 31	$	201		223
Funded status	$	(53	)	(41	)
Unrecognized transition amount		—		(1	)
Unrecognized prior service cost		3		4
Unrecognized actuarial loss		101		103
Net amount recognized	$	51		65
Amounts recognized in the Consolidated Balance Sheets consist of:
Prepaid benefit cost	$	—		3
Accrued benefit liability		(51	)	(39	)
Intangible asset		4		4
Deferred tax asset		34		34
Accumulated other comprehensive income		64		63
Net amount recognized	$	51		65

($ in millions)	2004			2003		2002
Components of net periodic pension cost:
Service cost	$	1		1		1
Interest cost		15		16		16
Curtailment		—		—		2
Expected return on assets		(18	)	(15	)	(23	)
Amortization and deferral of transition amount		(2	)	(2	)	(2	)
Amortization of actuarial loss		9		15		—
Amortization of unrecognized prior service cost		1		1		—
Settlement		10		15		19
Net periodic pension cost	$	16		31		13

Net periodic pension cost is recorded as a component of employee benefits in the Consolidated Statements of Income. Net periodic pension cost for 2004, 2003 and 2002 included settlement charges of $ 10 million, $ 15 million and $ 19 million, respectively, primarily related to an increased level of lump-sum distributions made during the respective years as a result of the headcount reductions that occurred in connection with the integration of Old Kent.

The Plan assumptions are evaluated annually and are updated as necessary. The discount rate assumption reflects the yield of a portfolio of high quality fixed-income instruments that have a similar duration to the Plan’s liabilities. The expected long-term rate of return assumption reflects the average return expected on the assets invested to provide for the Plan’s liabilities. In determining the expected long-term rate of return assumption, the Bancorp evaluated actuarial and economic inputs, including long-term inflation rate assumptions and broad equity and bond indices long-term return projections, as well as actual long-term historical Plan performance.

Weighted-average assumptions	2004		2003	2002
For disclosure:
Discount rate	5.85	%	6.00	6.75
Rate of compensation increase	5.10		5.00	5.10
Expected return on plan assets	8.00		8.75	9.00
For measuring net periodic pension cost:
Discount rate	6.00		6.75	7.25
Rate of compensation increase	5.00		5.10	4.86
Expected return on plan assets	8.75		9.00	8.99

Plan assets consist primarily of common trust and mutual funds (equities and fixed income) managed by Fifth Third Bank, a subsidiary of the Bancorp, and Bancorp common stock securities. The following table provides the Bancorp’s weighted-average asset allocations by asset category for 2004 and 2003:

Weighted-average asset allocation	2004		2003
Equity securities	65	%	54
Bancorp common stock	10		18
Total equity securities	75		72
Fixed income securities	25		26
Cash	—		2
Total	100	%	100

The Bancorp’s policy for the investment of Plan assets is to employ investment strategies that achieve a weighted-average target asset allocation of 70% to 80% in equity securities, 20% to 25% in fixed income securities and up to five percent in cash. The accumulated benefit obligation for all defined benefit plans was $251 million and $262 million at December 31, 2004 and 2003, respectively. For the Bancorp’s defined benefit plans, with an accumulated benefit obligation exceeding assets, the total projected benefit obligation, accumulated benefit obligation and fair value of plan assets were $254 million, $251 million and $201 million, respectively, as of December 31, 2004 and $260 million, $257 million and $218 million, respectively, as of December 31, 2003. The increase in the additional minimum pension liability, recorded as a reduction to shareholders’ equity, was $1 million, net of a tax benefit of less than $1 million, in 2004 and $11 million, net of a tax benefit of $6 million, in 2003. Based on the actuarial assumptions, the Bancorp expects to make no cash contribution to the Plan in 2005. Estimated pension benefit payments, which reflect expected future service, are $22 million in 2005 and $18 million in each year from 2006 to 2009. The total estimated payments for the years 2010 to 2014 is $82 million.

The Bancorp’s profit sharing plan expense was $69 million for 2004, $48 million for 2003 and $58 million for 2002. Expenses recognized during the years ended December 31, 2004, 2003 and 2002 for matching contributions to the Bancorp’s defined contribution savings plans were $28 million, $12 million and $14 million, respectively.

60 Fifth Third Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

24. EARNINGS PER SHARE

Reconciliation of earnings per share to diluted earnings per share for the years ended December 31:

	2004					2003							2002
($ in millions, except per share data)	Income		Average Shares	Per Share Amount		Income			Average Shares	Per Share Amount			Income		Average Shares	Per Share Amount
EPS
Income from continuing operations before cumulative effect	$	1,525				$	1,632						$	1,527
Net income from continuing operations available to commons shareholders (a)		1,524	561	$	2.72		1,631		572	$	2.85			1,526	580	$	2.63
Income from discontinued operations, net of tax		—			—		44				.08			4			.01
Cumulative effect of change in accounting principle, net of tax		—			—		(11	)			(.02	)		—			—
Net income available to common shareholders	$	1,524	561	$	2.72	$	1,664		572	$	2.91		$	1,530	580	$	2.64
Diluted EPS
Net income from continuing operations available to common shareholders	$	1,524	561			$	1,631		572				$	1,526	580
Effect of dilutive securities			7						8						12
Income from continuing operations plus assumed conversions (b)		1,525	568	$	2.68		1,632		580	$	2.81			1,527	592	$	2.58
Income from discontinued operations, net of tax		—			—		44				.08			4			.01
Cumulative effect of change in accounting principle, net of tax		—			—		(11	)			(.02	)		—			—
Net income available to common shareholders plus assumed conversions	$	1,525	568	$	2.68	$	1,665		580	$	2.87		$	1,531	592	$	2.59

(a) Dividends on preferred stock are $.740 million for the years ended December 31, 2004, 2003 and 2002.

(b) The effect of dividends on convertible preferred stock is $.580 million for the years ended December 31, 2004, 2003 and 2002.

Options to purchase 16.2 million, 7.0 million and 6.2 million shares outstanding at December 31, 2004, 2003 and 2002, respectively, were not included in the computation of net income per diluted share because the effect would be antidilutive.

25. FAIR VALUE OF FINANCIAL INSTRUMENTS

Carrying amounts and estimated fair values for financial instruments as of December 31:

	2004			2003
($ in millions)	Carrying Amount		Fair Value	Carrying Amount	Fair Value
Financial assets:
Cash and due from banks	$	2,561	2,561	2,359	2,359
Available-for-sale securities		24,687	24,687	28,999	28,999
Held-to-maturity securities		255	255	135	135
Trading securities		77	77	55	55
Other short-term investments		532	532	268	268
Loans held for sale		559	562	1,881	1,897
Total loans and leases, net		59,095	59,708	51,611	52,331
Derivative assets		271	271	302	302
Bank owned life insurance assets		1,573	1,573	1,016	1,016
Financial liabilities:
Deposits		58,226	58,221	57,095	56,990
Federal funds purchased		4,714	4,714	6,928	6,928
Short-term bank notes		775	775	500	500
Other short-term borrowings		4,537	4,537	5,742	5,742
Long-term debt		13,983	14,232	9,063	9,724
Derivative liabilities		232	232	208	208
Short positions		15	15	2	2
Other financial instruments:
Commitments to extend credit		53	53	55	55
Letters of credit		19	19	18	18

Fair values for financial instruments, which were based on various assumptions and estimates as of a specific point in time, represent liquidation values and may vary significantly from amounts that will be realized in actual transactions. In addition, certain non-financial instruments were excluded from the fair value disclosure requirements. Therefore, the fair values presented in the table above should not be construed as the underlying value of the Bancorp.

The following methods and assumptions were used in determining the fair value of selected financial instruments:

Short-term financial assets and liabilities—for financial instruments with a short-term or no stated maturity, prevailing market rates and limited credit risk, carrying amounts approximate fair value. Those financial instruments include cash and due from banks, other short-term investments, certain deposits (demand, interest checking, savings and money market), federal funds purchased, short-term bank notes and other short-term borrowings.

Fifth Third Bancorp 61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Available-for-sale, held-to-maturity and trading securities, including short positions—fair values were based on prices obtained from an independent nationally recognized pricing service.

Loans—fair values were estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Loans held for sale—the fair value of loans held for sale was estimated based on outstanding commitments from investors or current investor yield requirements.

Deposits—fair values for other time, certificates of deposit – $100,000 and over and foreign office were estimated using a discounted cash flow calculation that applies interest rates currently being offered for deposits of similar remaining maturities.

Long-term debt—fair value of long-term debt was based on quoted market prices, when available, and a discounted cash flow calculation using prevailing market rates for borrowings of similar terms.

Commitments and letters of credit—fair values of loan commitments and letters of credit were based on estimated probable credit losses.

Derivative assets and derivative liabilities—fair values were based on the estimated amount the Bancorp would receive or pay to terminate the derivative contracts, taking into account the current interest rates and the creditworthiness of the counterparties. The fair values represent an asset or liability at December 31, 2004.

Bank owned life insurance assets—fair values of insurance policies owned by the Bancorp were based on the insurance contract’s cash surrender value, net of any policy loans.

26. BUSINESS COMBINATIONS

On June 11, 2004, the Bancorp completed the acquisition of Franklin Financial, a bank holding company located in the Nashville, Tennessee metropolitan market.

Under the terms of the transaction, each share of Franklin Financial common stock was exchanged for .5933 shares of the Bancorp’s common stock, resulting in the issuance of 5.1 million shares of common stock. The common stock issued to effect the transaction was valued at $55.52 per common share for a total transaction value of $317 million. The total purchase price also includes the fair value of stock awards issued in exchange for stock awards held by Franklin Financial employees, for which the aggregate fair value was $36 million.

The assets and liabilities of Franklin Financial were recorded on the balance sheet at their respective fair values as of the closing date. The results of Franklin Financial’s operations were included in the Bancorp’s income statement from the date of acquisition. The transaction resulted in total goodwill and intangible assets of $282 million based upon the purchase price, the fair values of the acquired assets and assumed liabilities and applicable purchase accounting adjustments. Of this total intangibles amount, $7 million was allocated to core deposit intangibles, $6 million was allocated to customer lists and $2 million was allocated to noncompete agreements. The core deposit intangible and the customer lists are being amortized using an accelerated method over seven and five years, respectively. The noncompete agreements are being amortized using the straight-line method over the duration of the agreements. The remaining $267 million of intangible assets was recorded as goodwill. Goodwill recognized in the Franklin Financial acquisition is not deductible for income tax purposes. The pro forma effect and the financial results of Franklin Financial included in the results of operations subsequent to the date of acquisition were not material to the Bancorp’s financial condition or the operating results for the periods presented.

On August 2, 2004, the Bancorp and First National announced the signing of a definitive agreement in which the Bancorp would acquire First National and its subsidiaries, headquartered in Naples, Florida. As of December 31, 2004, First National has approximately $5.6 billion in total assets, $3.8 billion in total deposits and 77 full-service banking centers located primarily in Orlando, Tampa, Sarasota, Naples and Fort Myers. The acquisition, which closed on January 1, 2005, provided First National’s shareholders with .5065 shares of the Bancorp’s common stock for each share of First National common stock. Based on the price of the Bancorp’s common shares at the close of business on December 31, 2004, the transaction is valued at $23.96 per share of First National common stock. The total transaction value, including the fair value of employee stock awards, is approximately $1.5 billion.

27. CERTAIN REGULATORY REQUIREMENTS AND CAPITAL RATIOS

The principal source of income and funds for the Bancorp (parent company) are dividends from its subsidiaries. During 2004, the amount of dividends the bank subsidiaries can pay to the Bancorp without prior approval of regulatory agencies was limited to their 2004 eligible net profits, as defined, and the adjusted retained 2003 and 2002 net income of those subsidiaries.

The Bancorp’s subsidiary banks must maintain cash reserve balances when total reservable deposit liabilities are greater than the regulatory exemption. These reserve requirements may be satisfied with vault cash and noninterest-bearing cash balances on reserve with a Federal Reserve Bank. In 2004 and 2003, the banks were required to maintain average cash reserve balances of $ 192 million and $290 million, respectively.

In December of 2003, the Bancorp completed the merger of its Fifth Third Bank, Kentucky, Inc., Fifth Third Bank, Northern Kentucky, Inc., Fifth Third Bank, Indiana and Fifth Third Bank, Florida subsidiary banks with and into Fifth Third Bank (Michigan). Although these mergers changed the legal structure of the subsidiary banks, there were no significant changes to the Bancorp’s affiliate structure or operating model.

The Board of Governors of the Federal Reserve System (“FRB”) adopted quantitative measures which assign risk weightings to assets and off-balance sheet items and also define and set minimum regulatory capital requirements (risk-based capital ratios). All banks are required to have core capital (Tier 1) of at least 4% of risk-weighted assets, total capital of at least 8% of risk-weighted assets and a minimum Tier 1 leverage ratio of 3% of adjusted quarterly average assets. Tier 1 capital consists principally of shareholders’ equity including Tier 1 qualifying subordinated debt but excluding unrealized gains and losses on securities available-for-sale, less goodwill and certain other intangibles. Total capital consists of Tier 1 capital plus certain debt instruments and the reserves for credit losses, subject to limitation. Failure to meet the minimum capital requirements can initiate certain actions by regulators that could have a direct material effect on the Consolidated Financial Statements of the Bancorp. The regulations also define well-capitalized levels of Tier 1, total capital and Tier 1 leverage as 6%, 10% and 5%, respectively. The Bancorp and each of its subsidiary banks had Tier 1, total capital and leverage ratios above the well-capitalized levels at December 31, 2004 and 2003. As of December 31, 2004, the most recent notification from the FRB categorized the Bancorp and each of its subsidiary banks as well-capitalized under the regulatory framework for prompt corrective action.

62 Fifth Third Bancorp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capital and risk-based capital and leverage ratios for the Bancorp and its significant subsidiary banks as of December 31:

	2004				2003
($ in millions)	Amount		Ratio		Amount		Ratio
Total Capital (to Risk-Weighted Assets):
Fifth Third Bancorp	$	10,176	12.31	%	$	10,096	13.56	%
Fifth Third Bank (Ohio)		5,772	12.85			5,154	11.88
Fifth Third Bank (Michigan)		4,164	10.72			3,813	11.11
Fifth Third Bank, N.A.		161	13.57			N/A	N/A
Tier 1 Capital (to Risk-Weighted Assets):
Fifth Third Bancorp		8,522	10.31			8,272	11.11
Fifth Third Bank (Ohio)		5,009	11.15			4,354	10.03
Fifth Third Bank (Michigan)		3,617	9.31			3,266	9.52
Fifth Third Bank, N.A.		153	12.89			N/A	N/A
Tier 1 Leverage (to Average Assets):
Fifth Third Bancorp		8,522	8.89			8,272	9.23
Fifth Third Bank (Ohio)		5,009	8.48			4,354	7.74
Fifth Third Bank (Michigan)		3,617	9.39			3,266	8.84
Fifth Third Bank, N.A		153	14.44			N/A	N/A

28. PARENT COMPANY FINANCIAL STATEMENTS

($ in millions)
Condensed Statements of Income (Parent Company Only)
For the Years Ended December 31	2004		2003	2002
Income
Dividends from subsidiaries	$	682	1,262	1,258
Interest on loans to subsidiaries		32	27	32
Other		1	24	—
Total income		715	1,313	1,290
Expenses
Interest		15	31	5
Other		9	3	3
Total expenses		24	34	8
Income before taxes and change in undistributed earnings of subsidiaries		691	1,279	1,282
Applicable income taxes		1	5	8
Income before change in undistributed earnings of subsidiaries		690	1,274	1,274
Increase in undistributed earnings of subsidiaries		835	391	257
Net Income	$	1,525	1,665	1,531

Condensed Balance Sheets (Parent Company Only)
At December 31	2004		2003
Assets
Cash	$	33	40
Loans to subsidiaries		2,340	1,581
Investment in subsidiaries		9,034	7,743
Goodwill		137	137
Other assets		102	46
Total Assets	$	11,646	9,547
Liabilities
Commercial paper	$	28	4
Accrued expenses and other liabilities		247	185
Long-term debt		2,447	691
Total Liabilities		2,722	880
Shareholders’ Equity		8,924	8,667
Total Liabilities and Shareholders’ Equity	$	11,646	9,547

Condensed Statements of Cash Flows (Parent Company Only) For the Years Ended December 31
	2004			2003		2002
Operating Activities
Net income	$	1,525		1,665		1,531
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense		—		1		—
Benefit for deferred income taxes		(1	)	(5	)	(3	)
Increase in other assets		(24	)	(39	)	(29	)
(Decrease) increase in accrued expenses and other liabilities		(84	)	54		2
Increase in undistributed earnings of subsidiaries		(835	)	(391	)	(257	)
Net Cash Provided by Operating Activities		581		1,285		1,244
Investing Activities
Proceeds from sales of available-for-sale securities		—		—		1
Increase in loans to subsidiaries		(759	)	(471	)	(159	)
Net Cash Used in Investing Activities		(759	)	(471	)	(158	)
Financing Activities
Increase (decrease) in other short-term borrowings		24		(89	)	72
Proceeds from issuance of long-term debt		1,749		497		—
Payment of cash dividends		(704	)	(631	)	(553	)
Purchases of treasury stock		(987	)	(655	)	(719	)
Exercise of stock options		89		97		104
Other		—		7		10
Net Cash Provided by (Used in) Financing Activities		171		(774	)	(1,086	)
(Decrease) increase in cash		(7	)	40		—
Cash at January 1		40		—		—
Cash at December 31	$	33		40		—

29. SEGMENTS

The Bancorp’s principal activities include Commercial Banking, Retail Banking, Investment Advisors and Fifth Third Processing Solutions. Commercial Banking offers banking, cash management and financial services to business, government and professional customers. Retail Banking provides a full range of deposit products and consumer loans and leases. Investment Advisors provides a full range of investment alternatives for individuals, companies and not-for-profit organizations. Fifth Third Processing Solutions provides electronic funds transfer, debit, credit and merchant transaction processing, operates the Jeanie^® ATM network and provides other data processing services to affiliated and unaffiliated customers. The Other/Eliminations column includes the unallocated portion of the investment portfolio, certain non-deposit funding, unassigned equity and other items not attributed to the other segments.

The Bancorp manages interest rate risk centrally at the corporate level by employing a funds transfer pricing (“FTP”) methodology. This methodology insulates the segments from interest rate

Fifth Third Bancorp 63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

risk, enabling them to focus on serving customers through loan originations and deposit taking. The FTP system assigns charge rates and credit rates to classes of assets and liabilities, respectively, based on expected duration. In addition to the previously mentioned items, the Other/Eliminations column includes the net effect of the FTP methodology.

The performance measurement of the segments is based on the management structure of the Bancorp and is not necessarily comparable with similar information for any other financial institution. Additionally, the information presented is not necessarily indicative of the segments’ financial condition and results of operations if they were to exist as independent entities. Generally, the segments form synergies by taking advantage of cross-sell opportunities and when funding operations by accessing the capital markets as a collective unit.

In 2004, the Bancorp refined its segment reporting as a result of a cost center review and point of cross-sell identification. Prior periods have been conformed to the current period presentation. The financial information for each segment is reported on the basis used internally by the Bancorp’s management to evaluate performance and allocate resources. The allocation has been consistently applied for all periods presented. Revenues from affiliated transactions are typically charged at rates available to and transacted with unaffiliated customers.

Results of operations and average assets by segment for each of the three years ended December 31 are as follows:

($ in millions)	Commercial Banking		Retail Banking		Investment Advisors	Processing Solutions	Other/ Eliminations		Acquisitions (a)		Total
2004
Net interest income (b)	$	1,203	1,929		168	15	(254	)	(13	)	3,048
Provision for loan and lease losses		96	175		8	10	(21	)	—		268
Net interest income after provision for loan and lease losses		1,107	1,754		160	5	(233	)	(13	)	2,780
Noninterest income		429	1,053		379	697	(90	)	(3	)	2,465
Noninterest expense		608	1,266		359	408	343		(12	)	2,972
Income before income taxes		928	1,541		180	294	(666	)	(4	)	2,273
Applicable income taxes (c)		280	524		61	100	(214	)	(3	)	748
Net income	$	648	1,017		119	194	(452	)	(1	)	1,525
Average assets	$	25,327	54,769		2,309	665	12,244		(418	)	94,896
2003
Net interest income (b)	$	1,055	1,784		128	14	(6	)	(31	)	2,944
Provision for loan and lease losses		182	202		10	9	(1	)	(3	)	399
Net interest income after provision for loan and lease losses		873	1,582		118	5	(5	)	(28	)	2,545
Noninterest income		419	1,187		349	512	27		(11	)	2,483
Noninterest expense		548	1,262		346	377	42		(24	)	2,551
Income from continuing operations before income taxes, minority interest and cumulative effect		744	1,507		121	140	(20	)	(15	)	2,477
Applicable income taxes (c)		225	512		41	47	5		(5	)	825
Minority interest, net		—	—		—	—	(20	)	—		(20	)
Discontinued operations, net		44	—		—	—	—		—		44
Cumulative effect, net		—	(11	)	—	—	—		—		(11	)
Net income	$	563	984		80	93	(45	)	(10	)	1,665
Average assets	$	22,561	54,562		1,899	602	8,738		(881	)	87,481
2002
Net interest income (b)	$	889	1,554		101	11	216		(33	)	2,738
Provision for loan and lease losses		101	133		6	7	2		(3	)	246
Net interest income after provision for loan and lease losses		788	1,421		95	4	214		(30	)	2,492
Noninterest income		343	889		333	450	179		(11	)	2,183
Noninterest expense		505	1,114		316	314	111		(23	)	2,337
Income from continuing operations before income taxes and minority interest		626	1,196		112	140	282		(18	)	2,338
Applicable income taxes (c)		205	407		37	47	84		(7	)	773
Minority interest, net		—	—		—	—	(38	)	—		(38	)
Discontinued operations, net		4	—		—	—	—		—		4
Net income	$	425	789		75	93	160		(11	)	1,531
Average assets	$	20,069	54,046		1,559	616	(458	)	(795	)	75,037

(a) In acquisitions accounted for under the purchase method, management “pools” historical results to improve comparability with the current period. The results of Franklin Financial have been included in the segments and eliminated in the Acquisitions column.

(b) Net interest income is fully taxable equivalent and is presented on an FTP basis.

(c) Applicable income taxes includes income tax provision and taxable equivalent adjustment reversal of $36 million, $39 million and $39 million for the years ended December 31, 2004, 2003 and 2002, respectively.

64 Fifth Third Bancorp

CONSOLIDATED TEN YEAR COMPARISON

AVERAGE ASSETS ($ IN MILLIONS)

	Interest-Earning Assets										Cash and Due from Banks		Other Assets		Total Average Assets
Year	Loans and Leases		Federal Funds Sold (a)		Interest-Bearing Deposits in Banks (a)		Securities		Total
2004	$	57,042	$	120	$	195	$	30,282	$	87,639	$	2,216	$	5,763	$	94,896
2003		52,414		92		215		28,640		81,361		1,600		5,250		87,481
2002		45,539		155		184		23,246		69,124		1,551		5,007		75,037
2001		44,888		69		132		19,737		64,826		1,482		5,000		70,683
2000		42,690		118		82		18,630		61,520		1,456		4,229		66,611
1999		38,652		224		103		16,901		55,880		1,628		3,344		60,292
1998		36,014		241		135		16,090		52,480		1,566		2,782		56,306
1997		33,850		327		186		15,425		49,788		1,367		2,495		53,161
1996		30,742		325		211		14,959		46,237		1,401		2,212		49,367
1995		27,598		494		182		12,715		40,989		1,365		1,715		43,608

AVERAGE DEPOSITS AND SHORT-TERM BORROWINGS ($ IN MILLIONS)

Year	Deposits																Short-Term Borrowings		Total
	Demand		Interest Checking		Savings		Money Market		Other Time		Certificates — $100,000 and Over		Foreign Office		Total
2004	$	12,327	$	19,434	$	7,941	$	3,473	$	6,208	$	2,403	$	4,449	$	56,235	$	13,539	$	69,774
2003		10,482		18,679		8,020		3,189		6,426		3,832		3,862		54,490		12,373		66,863
2002		8,953		16,239		9,465		1,162		8,855		2,237		2,018		48,929		7,191		56,120
2001		7,394		11,489		4,928		2,552		13,473		3,821		1,992		45,649		8,799		54,448
2000		6,257		9,531		5,799		939		13,716		4,283		3,896		44,421		9,725		54,146
1999		6,079		8,553		6,206		1,328		13,858		4,197		952		41,173		8,573		49,746
1998		5,627		7,030		6,332		1,471		15,117		3,856		270		39,703		7,095		46,798
1997		4,932		6,209		4,548		2,508		15,887		4,173		441		38,698		6,113		44,811
1996		4,492		5,559		4,237		2,909		15,171		4,186		569		37,123		4,837		41,960
1995		4,050		5,017		3,374		2,949		12,597		3,944		1,007		32,938		4,582		37,520

INCOME ($ IN MILLIONS, EXCEPT PER SHARE DATA)

Year	Interest Income		Interest Expense		Noninterest Income		Noninterest Expense		Net Income Avail. to Common Shareholders		Per Share (b)
											Earnings		Diluted Earnings		Originally Reported
															Dividends Declared			Earnings		Diluted Earnings		Dividend Payout Ratio
2004	$	4,114	$	1,102	$	2,465	$	2,972	$	1,524	$	2.72	$	2.68	$	1.31		$	2.72	$	2.68	48.9	%
2003		3,991		1,086		2,483		2,551		1,664		2.91		2.87		1.13			2.91		2.87	39.4
2002		4,129		1,430		2,183		2,337		1,530		2.64		2.59		.98			2.64		2.59	37.8
2001		4,709		2,278		1,788		2,453		1,001		1.74		1.70		.83			1.74		1.70	48.8
2000		4,947		2,697		1,476		2,027		1,054		1.86		1.83		.70			1.70		1.68	41.7
1999		4,199		2,026		1,335		1,987		871		1.55		1.53		.58	2/3		1.32		1.29	45.5
1998		4,052		2,047		1,161		1,826		759		1.36		1.34		.47	1/3		1.09		1.06	44.6
1997		3,933		2,030		901		1,486		756		1.35		1.33		.37	9/10		1.10		1.08	35.2
1996		3,621		1,853		746		1,423		646		1.15		1.13		.32	4/7		.93		.91	35.8
1995		3,239		1,677		613		1,225		588		1.08		1.06		.28	4/9		.85		.83	34.3

MISCELLANEOUS AT DECEMBER 31 ($ IN MILLIONS, EXCEPT PER SHARE DATA)

	Shareholders’ Equity
Year	Number of Shares of Stock Outstanding (b)	Common Stock		Preferred Stock		Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Income			Treasury Stock			Total		Per Share (b)		Reserve for Loan and Lease Losses
2004	557,648,989	$	1,295	$	9	$	1,934	$	7,269	$	(169	)	$	(1,414	)	$	8,924	$	16.00	$	713
2003	566,685,301		1,295		9		1,964		6,481		(120	)		(962	)		8,667		15.29		697
2002	574,355,247		1,295		9		2,010		5,465		369			(544	)		8,604		14.98		683
2001	582,674,580		1,294		9		1,943		4,502		8			(4	)		7,752		13.31		624
2000	569,056,843		1,263		9		1,454		3,982		28			(1	)		6,735		11.83		609
1999	565,425,468		1,255		9		1,090		3,551		(302	)		—			5,603		9.91		573
1998	557,438,774		1,238		9		887		3,179		135			(58	)		5,390		9.67		532
1997	556,356,059		1,235		9		812		3,000		140			(184	)		5,005		9.00		509
1996	564,561,419		1,253		9		755		2,663		17			—			4,695		8.32		484
1995	548,266,213		1,217		14		528		2,397		46			—			4,200		7.66		474

(a) Federal funds sold and interest-bearing deposits in banks are combined in other short-term investments in the Consolidated Financial Statements.

(b) Number of shares outstanding and per share data have been adjusted for stock splits in 2000, 1998, 1997 and 1996.

Fifth Third Bancorp 65

DIRECTORS AND OFFICERS

FIFTH THIRD BANCORP DIRECTORS

George A. Schaefer, Jr.

President & CEO

Fifth Third Bancorp and Fifth Third Bank

Darryl F. Allen

Retired Chairman President & CEO

Aeroquip-Vickers, Inc.

John F. Barrett Chairman, President & CEO

The Western & Southern Life Insurance Company

James P. Hackett

President & CEO

Steelcase, Inc.

Joan R. Herschede

President & CEO

The Frank Herschede Company

Allen M. Hill

Retired President & CEO

DPL, Inc.

Robert L. Koch II

President & CEO,

Koch Enterprises, Inc.

Mitchel D. Livingston, Ph.D.

Vice President for Student Affairs and Services

University of Cincinnati

Kenneth W. Lowe

President & CEO

The E.W. Scripps Company

Hendrik G. Meijer

Co-Chairman

Meijer, Inc.

Robert B. Morgan

Executive Counselor

Cincinnati Financial Corporation & Cincinnati Insurance Company

James E. Rogers

Chairman, President & CEO

Cinergy Corp.

John J. Schiff, Jr.

Chairman, President & CEO

Cincinnati Financial Corporation

Dudley S. Taft

President

Taft Broadcasting Company

Thomas W. Traylor

CEO

Traylor Bros., Inc.

DIRECTORS EMERITI

Neil A. Armstrong

Philip G. Barach

Vincent H. Beckman

J. Kenneth Blackwell

Milton C. Boesel, Jr.

Douglas G. Cowan

Thomas L. Dahl

Ronald A. Dauwe

Gerald V. Dirvin

Thomas B. Donnell

Nicholas M. Evans

Richard T. Farmer

Louis R. Fiore

John D. Geary

Ivan W. Gorr

Joseph H. Head, Jr.

William G. Kagler

William J. Keating

Jerry L. Kirby

Michael H. Norris

David E. Reese

Brian H. Rowe

C. Wesley Rowles

Donald B. Shackelford

David B. Sharrock

Stephen Stranahan

Dennis J. Sullivan, Jr.

N. Beverley Tucker, Jr.

Alton C. Wendzel

FIFTH THIRD BANCORP OFFICERS

George A. Schaefer, Jr.

President & CEO

Neal E. Arnold

Executive Vice President

Greg D. Carmichael

Executive Vice President and Chief Information Officer

David J. DeBrunner

Senior Vice President & Controller

Diane L. Dewbrey Senior Vice President

R. Mark Graf

Senior Vice President and Chief Financial Officer

Malcolm D. Griggs

Executive Vice President and Chief Risk Officer

Kevin T. Kabat

Executive Vice President

Ronald D. Marks

Senior Vice President & Treasurer

Pete Pesce

Executive Vice President

Daniel T. Poston

Executive Vice President & Auditor

Paul L. Reynolds

Executive Vice President, Secretary & General Counsel

Robert A. Sullivan

Executive Vice President

AFFILIATE PRESIDENTS & CEOs

Samuel G. Barnes

Lexington, Kentucky

Todd F. Clossin

Northeastern Ohio

John N. Daniel

Southern Indiana

Robert M. Eversole

Central Ohio

Patrick J. Fehring, Jr.

Eastern Michigan

Kevin C. Hale

Florida

Dan W. Hogan

Tennessee

Bruce K. Lee

Northwestern Ohio

Philip R. McHugh

Louisville, Kentucky

John E. Pelizzari

Northern Michigan

Timothy P. Rawe

Northern Kentucky

R. Daniel Sadlier

Western Ohio

Maurice J. Spagnoletti

Central Indiana

Michelle L. VanDyke

Western Michigan

Raymond J. Webb

Ohio Valley

Terry E. Zink

Chicago

AFFILIATE CHAIRMEN

H. Lee Cooper

Southern Indiana

James R. Gaunt

Louisville

Gordon E. Inman

Tennessee

Donald B. Shackelford

Central Ohio

William A. Stinnett III

Ohio Valley

John S. Szuch

Northwestern Ohio

Gary L. Tice

Florida

FIFTH THIRD BANCORP BOARD COMMITTEES

Executive Committee

George A. Schaefer, Jr., Chairman

Allen M. Hill

Robert L. Koch II

John J. Schiff, Jr.

Dudley S. Taft

Compensation Committee

Allen M. Hill, Chairman

Kenneth W. Lowe

James E. Rogers

Audit Committee

Robert B. Morgan, Chairman

Darryl F. Allen, Vice Chairman

John F. Barrett

James P. Hackett

Joan R. Herschede

Nominating and Corporate Governance Committee

Dudley S. Taft, Chairman

Darryl F. Allen

Robert L. Koch II

James E. Rogers

Risk and Compliance Committee

John F. Barrett, Chairman

Hendrik G. Meijer

Thomas W. Traylor

Trust Committee

Mitchel D. Livingston, Ph.D., Chairman

Joan R. Herschede

Kenneth W. Lowe

George A. Schaefer, Jr.

66 Fifth Third Bancorp

CORPORATE INFORMATION

Corporate Office

Fifth Third Center

Cincinnati, Ohio 45263

(513) 579-5300

Website

www.53.com

Investor Relations

R. Mark Graf

Senior Vice President & Chief Financial Officer

(513) 534-6936

(513) 534-3945 (fax)

Bradley S. Adams

Vice President & Investor Relations Officer

(513) 534-0983

(513) 534-0629 (fax)

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

250 East Fifth Street

Cincinnati, OH 45202

Transfer Agent

Computershare Investor Services LLC

PO Box 2388

Chicago, IL 60690-2388

(888) 294-8285

Investordirect.53.com

Stock Trading

The common stock of Fifth Third Bancorp is traded in the over-the-counter market and is listed under the symbol “FITB” on the NASDAQ^® National Market.

Press Releases

For copies of current press releases, please visit our website at www.53.com.

stock data

	2004						2003
	High		Low		Dividends Paid Per Share		High		Low		Dividends Paid Per Share
Fourth Quarter	$	52.34	$	45.32	$	.35	$	60.01	$	55.47	$	.29
Third Quarter	$	54.07	$	46.59	$	.32	$	59.44	$	52.50	$	.29
Second Quarter	$	57.00	$	51.13	$	.32	$	60.49	$	47.24	$	.29
First Quarter	$	60.00	$	53.27	$	.32	$	62.15	$	47.05	$	.26

^©Fifth Third Bank 2005

Member F.D.I.C. – Federal Reserve System

^®Reg. U.S. Pat. & T.M. Office

EX-21

Exhibit 21

FIFTH THIRD BANCORP SUBSIDIARIES

As of December 31, 2004

Name	Jurisdiction of Incorporation
Fifth Third Capital Trust I	Delaware
Fifth Third Financial Corporation	Ohio
Fifth Third Bank	Ohio
The Fifth Third Company	Ohio
The Fifth Third Leasing Company	Ohio
The Fifth Third Auto Leasing Trust	Delaware
Fifth Third Foreign Lease Management, LLC	Delaware
Fifth Third International Company	Kentucky
Fifth Third Trade Services Limited	Hong Kong
Fifth Third Real Estate Capital Markets Company	Ohio
Fifth Third Holdings, LLC	Delaware
Fifth Third Mortgage Insurance Reinsurance Company	Vermont
Fifth Third Mortgage Company	Ohio
Fifth Third Real Estate Investment Trust, Inc.	Maryland
Fifth Third Securities, Inc.	Ohio
Fifth Third Asset Management, Inc.	Ohio
Fifth Third Insurance Agency, Inc.	Ohio
Fifth Third Reinsurance Company, LTD	Turks and Caicos Islands
Fifth Third Community Development Corporation	Indiana
Fifth Third New Markets Development Co., LLC	Ohio
Fountain Square Life Reinsurance Company, Ltd.	Turks and Caicos Islands
Old Kent Capital Trust I	Delaware
Franklin Capital Trust I	Delaware
Old Kent Financial Life Insurance Company	Arizona
Fifth Third Investment Company	Ohio
Fifth Third Bank (Michigan)	Michigan
Community Financial Services, Inc.	Indiana
Pedcor Investments 1994 XXLP	Indiana
Old Kent Investment Corporation	Nevada
Home Equity of America, Inc.	Ohio
GNB Management, LLC	Delaware
GNB Realty, LLC	Delaware
Old Kent Mortgage Services, Inc.	Michigan
Fifth Third Mortgage—MI, LLC	Delaware
Fifth Third Funding, LLC	Delaware
Fifth Third Auto Funding, LLC	Delaware
Fifth Third Bank, National Association	United States of America

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements of Fifth Third Bancorp of our reports dated February 9, 2005, relating to the consolidated financial statements of Fifth Third Bancorp (which report expresses an unqualified opinion and includes an explanatory paragraph related to the adoption on January 1, 2004 of the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock Based Compensation,” using the retroactive restatement method and the adoption of Financial Accounting Standards Board Interpretation No. 46, “Consolidation of Variable Interest Entities”, effective July 1, 2003) and management’s report on the effectiveness of internal control over financial reporting incorporated by reference in this Annual Report on Form 10-K of Fifth Third Bancorp for the year ended December 31, 2004:

Form S-8	Form S-3
No. 33-34075	No. 33-54134
No. 33-55223	No. 333-42379
No. 33-55553	No. 333-80919
No. 333-58249	No. 333-56450
No. 333-48049	No. 333-34798
No. 33-61149	No. 333-53826
No. 333-77293	No. 333-41164
No. 333-84955	No. 333-86360
No. 333-47428
No. 333-53434
No. 333-52188
No. 333-84911
No. 333-52182
No. 333-58618
No. 333-63518
No. 333-72910
No. 333-108996
No. 333-116535
No. 333-114001
No. 333-119280

/s/ Deloitte & Touche LLP

Cincinnati, Ohio

February 28, 2005

EX-31.(I)

Exhibit 31(i)

CERTIFICATION PURSUANT

TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, George A. Schaefer, Jr., certify that:

1. I have reviewed this annual report on Form 10-K of Fifth Third Bancorp (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

/s/ George A. Schaefer, Jr.

George A. Schaefer, Jr.

President and Chief Executive Officer

March 1, 2005

EX-31.(II)

Exhibit 31(ii)

CERTIFICATION PURSUANT

TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, R. Mark Graf, certify that:

1. I have reviewed this annual report on Form 10-K of Fifth Third Bancorp (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

/s/ R. Mark Graf

R. Mark Graf

Senior Vice President and Chief Financial Officer

March 1, 2005

EX-32.(I)

Exhibit 32(i)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Fifth Third Bancorp (the “Registrant”) on Form 10-K for the year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, George A. Schaefer, Jr., President and Chief Executive Officer of the Registrant, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ George A. Schaefer, Jr.

George A. Schaefer, Jr.

President and Chief Executive Officer

March 1, 2005

EX-32.(II)

Exhibit 32(ii)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Fifth Third Bancorp (the “Registrant”) on Form 10-K for the year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, R. Mark Graf, Senior Vice President and Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ R. Mark Graf

R. Mark Graf

Senior Vice President and Chief Financial Officer

March 1, 2005