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Press release from PR Newswire

SunTrust Reports Third Quarter Results

Thursday, October 21, 2010

SunTrust Reports Third Quarter Results06:30 EDT Thursday, October 21, 2010Higher Revenues and Lower Credit Costs Drive Earnings Per Share of $0.17 and Net Income of $84 MillionATLANTA, Oct. 21 /PRNewswire-FirstCall/ -- SunTrust Banks, Inc. (NYSE: STI) announced today that stronger revenue performance and a continued decline in credit-related costs resulted in net income available to common shareholders of $84 million, or $0.17 per average common diluted share, in the third quarter of 2010.  The Company reported a net loss of $377 million, or $0.76 per average common share, in the third quarter of 2009 and a net loss of $56 million, or $0.11 per average common share, in the second quarter of 2010."The revenue generation of our core business and continued strength of the balance sheet affirms our confidence that our client-centric strategies are gaining traction and driving better results," said James M. Wells III, chairman and chief executive officer of SunTrust Banks, Inc.  "While decreasing credit costs are certainly welcomed, we are even more encouraged by the improvement in our operating results that are being driven by several of our lines of business." Mr. Wells also noted an improvement in net interest income, a result of increased earning assets and continued favorable deposit trends.    Third Quarter 2010 Consolidated HighlightsNet income available to common shareholders of $0.17 per share compared to net losses of $0.11 per share in the prior quarter and $0.76 per share in the third quarter of 2009.Net income for the quarter before preferred dividends was $153 million, up from $12 million in the second quarter.Total revenues increased compared to the second quarter driven by mortgage and capital markets-related revenues and higher net interest income.  The results were generated despite $81 million in mark-to-market valuation losses, net of hedges, related to the Company's public debt and index-linked certificates of deposit carried at fair value.Net interest margin increased 8 basis points to 3.41% and net interest income rose 8% on a sequential quarter basis due to a continued decline in funding costs, further improvement in deposit mix and earning asset growth.Noninterest expenses were relatively flat on a sequential quarter basis with lower debt extinguishment costs offset primarily by higher revenue-related personnel costs and legal-related expenses.Asset quality continued to improve in the third quarter.  Nonperforming assets, nonaccrual loans and net charge-offs all declined compared to the prior quarter and the third quarter of 2009.  Provision expense declined due to lower net charge-offs and the impact of improved credit trends on the allowance for loan losses.  The allowance for loan losses declined $70 million and total loans increased 2% resulting in an allowance to loan ratio of 2.69%.Average loans grew slightly during the current quarter primarily in consumer loans and government guaranteed residential mortgage loans.  Consumer loan growth included the purchase of a high-quality consumer auto loan portfolio.  Average deposits increased as growth in lower-cost deposits was partially offset by a decline in higher-cost time deposits.Capital ratios remained strong with an estimated Tier 1 common equity ratio of 8.00% and Tier 1 capital ratio of 13.60%.3rd Quarter2nd Quarter3rd Quarter201020102009Income Statement(Dollars in millions, except per share data)Net income /(loss)$153$12$(317)Net income/(loss) available to common shareholders84(56)(377)Net income/(loss) per average common diluted share0.17(0.11)(0.76)Total revenue ? fully taxable-equivalent2,3132,1601,943Revenue ? fully taxable-equivalent, excluding securities gains/losses, net2,2442,1031,897Net interest income ? fully taxable-equivalent1,2661,2081,168Provision for credit losses6156621,134Noninterest income1,047952775Noninterest expense1,4991,5031,429Net interest margin ? fully taxable equivalent 3.41%3.33%3.10%Balance Sheet(Dollars in billions)Average loans$113.3$113.0$119.8Average consumer and commercial deposits117.2116.5114.5CapitalTier 1 capital ratio (1)13.60%13.51%12.58%Tier 1 common equity ratio (1)8.00%7.92%7.49%Total average shareholders' equity to total average assets13.42%13.03%13.03%Asset QualityNet charge-offs to average loans (annualized)2.42%2.57%3.33%Allowance for loan losses to period-end loans2.69%2.81%2.61%Nonperforming loans to total loans3.80%4.16%4.67%(1) Current period Tier 1 capital and Tier 1 common equity ratios are estimated as of the earnings release date.CONSOLIDATED FINANCIAL PERFORMANCE(Presented on a fully taxable-equivalent basis unless otherwise noted)RevenueFor the third quarter of 2010, total revenue rose 7% on a sequential quarter basis and increased 19% over the third quarter of 2009.  Revenue growth was driven by higher net interest income and growth in fee-based income, particularly mortgage and capital markets-related revenues.  Mark-to-market valuation losses, net of hedges, on the Company's public debt and index-linked certificates of deposits carried at fair value were $81 million in the third quarter compared to gains of $86 million in the second quarter of 2010 and losses of $145 million in the third quarter of 2009.  The current quarter included net gains of $69 million from the sale of securities, compared to gains of $57 million and $47 million in the prior quarter and third quarter of 2009, respectively.For the nine months, total revenue was $6.4 billion, essentially flat compared to the same period in 2009.  Higher net interest income, gains on the Company's debt carried at fair value compared to losses in 2009, and gains on the sale of securities in 2010 were offset by lower mortgage production income and service charges in 2010.  Additionally, the Company recognized a $112 million gain from the sale of Visa shares in the second quarter of 2009.Net Interest IncomeNet interest income was $1.3 billion in the third quarter of 2010, an increase of 8% from the third quarter of 2009 and 5% on a sequential quarter basis.  Higher average securities available for sale and total loans contributed to a 1% increase in average earning assets on a sequential quarter basis.  Compared to a year ago, average earning assets declined $2.3 billion, or 2%, primarily attributable to declines in loans and loans held for sale, partially offset by an increase in average securities available for sale.Net interest margin for the third quarter was 3.41%, up 31 basis points from the same quarter last year and eight basis points compared to the prior quarter, primarily driven by lower funding costs.  Growth in lower-cost deposits, coupled with significant reductions in higher-cost time deposits and long-term debt contributed to a 49 basis point year-over-year decline in the cost of average interest-bearing liabilities.For the nine months, net interest income was $3.7 billion, an increase of 9% from the prior year, while net interest margin increased 38 basis points to 3.35%.  The same factors in the quarterly year-over-year comparisons contributed to the nine month increase in net interest income and margin.Noninterest IncomeTotal noninterest income was $1.0 billion for the third quarter of 2010, a $95 million, or 10%, sequential quarter increase primarily driven by higher mortgage and capital markets-related income, partially offset by lower service charges.  Due to improvement in the Company's credit spreads during the quarter, the Company recorded market valuation losses, net of hedges, on its public debt and index-linked certificates of deposit carried at fair value of $81 million compared to a gain of $86 million in the prior quarter.  Compared to the third quarter of 2009, noninterest income increased $272 million, or 35%, due to higher mortgage and capital markets-related income, partially offset by lower service charges.  In addition, the third quarter of 2009 included $145 million in mark-to-market net losses on the Company's public debt and index-linked certificates of deposit carried at fair value.  In the current quarter, gains from the sale of securities associated with repositioning the investment portfolio were $69 million compared to $57 million in the prior quarter and $47 million in the third quarter of 2009.Mortgage production income increased significantly due to lower interest rates, increasing $150 million over the prior quarter and $105 million over the third quarter of 2009, as application volumes increased over 25% and margins expanded compared to the second quarter of 2010.  Estimated mortgage repurchase losses recognized during the current quarter were $95 million, compared to $148 million in the prior quarter and $136 million in the third quarter of 2009.  As of September 30, 2010, mortgage repurchase reserves totaled $270 million, up $14 million during the quarter.Mortgage servicing income for the quarter was $132 million, which was $44 million higher than the prior quarter due to improved hedge performance.  Net hedge performance in the current quarter was $74 million compared to $35 million in the prior quarter.  Mortgage servicing income for the third quarter of 2009 was $60 million.  As of September 30, 2010, the Company serviced $176.6 billion in mortgage loans, down slightly compared to the prior year.Trading account profits and commissions decreased $130 million on a sequential quarter basis in the third quarter of 2010 primarily due to the mark-to-market valuation losses, net of hedges, on the Company's public debt and index-linked certificates of deposits carried at fair value.  The Company has historically recorded certain index-linked certificates of deposits at fair value.  The outstanding balance of these deposits since September 30, 2009 has remained stable at approximately $1.2 billion.  The mark-to-market valuation gains and losses related to these instruments in prior periods has been relatively insignificant; however, during the current quarter, improvement in the Company's credit spreads combined with the significant decline in interest rates resulted in a $59 million mark-to-market loss.  Excluding these debt-related mark-to-market losses, trading income increased due to higher fixed income and derivatives trading income.  Compared to the third quarter of 2009, trading account profits and commissions increased $65 million, primarily due to the $64 million reduction in mark-to-market valuation losses on the Company's public debt and index-linked certificates of deposit carried at fair value.  Increased mergers and acquisition advisory fees and bond underwriting activities drove a 66% increase in investment banking income on a sequential quarter basis and a 28% increase over the third quarter of 2009.Noninterest income in the current quarter from consumer and commercial fee-based services was generally higher compared to the prior quarter and third quarter of 2009 with the exception of service charges on deposits.  During the current quarter, service charges on deposits were impacted by the recently enacted regulations requiring clients to elect whether to opt in to certain account transaction services.  Service charges declined $24 million, or 11%, on a sequential quarter basis, and $35 million, or 16%, compared to the third quarter of 2009.For the nine months, total noninterest income was $2.7 billion, down 9% compared to the same period of 2009.  The decline was largely due to lower mortgage production income from increased mortgage repurchase losses and lower loan production in 2010, lower service charges in 2010, and the gain on the sale of Visa shares of $112 million recorded in 2009, partially offset by higher gains on the sale of securities and reduced mark-to-market value losses on the Company's debt instruments carried at fair value in 2010.Noninterest ExpenseTotal noninterest expense in the current quarter was $1.5 billion, up $70 million, or 5%, from the third quarter of 2009.  Increases in employee compensation-related expenses, FDIC insurance premiums, outside processing and software expense, and debt extinguishment costs drove the year-over-year increase in noninterest expense, which was partially offset by lower credit-related costs.  Personnel-related expenses increased primarily due to higher salary and contract labor expense.  Full-time equivalent employees increased by 584 compared to September 30, 2009, with the majority of the increase occurring in retail branches and client support areas.  Higher incentive compensation related to improved business performance, including higher mortgage loan production, also contributed to the increase in personnel-related expenses.  Credit-related expenses were $180 million in the current quarter, down $34 million, or 16%, primarily due to the $29 million of expense related to the reserve for unfunded commitments recorded in the third quarter of 2009; beginning in the fourth quarter of 2009, this expense was included in provision for credit losses.  FDIC insurance premiums increased due to higher deposit balances and assessment rates that became effective in the fourth quarter of 2009.  Outside processing and software expense increased $10 million, or 7%, due to higher transaction volume and increased investment in software.  Debt extinguishment costs of $12 million were related to the repayment of $1.0 billion of long-term debt during the third quarter of 2010.  On a sequential quarter basis, debt extinguishment costs declined $51 million.  Personnel expenses increased $26 million, or 4%.  Full-time equivalent employees increased 349 with the majority attributable to increased mortgage production.  Incentive compensation also increased related to higher revenue.  The increase in other noninterest expense was primarily due to legal-related expenses.  Credit-related expenses remained stable as increases in operating losses were offset by reductions in other real estate expenses.For the nine months, total noninterest expense was $4.4 billion, a decrease of $747 million, or 15%, compared to the same period in 2009.  The decline was primarily due to the $751 million non-cash goodwill impairment charge recorded in the first quarter of 2009.  FDIC insurance premiums declined $45 million, primarily due to the special assessment paid in the second quarter of 2009.  Credit-related expenses remained elevated but declined $43 million compared to a year ago, as mortgage reinsurance costs declined $80 million, partially offset by a $28 million increase in other real estate expenses.  Marketing and customer development costs increased 18% on increased promotional and advertising spending, while outside processing expense increased 8% for the same reasons cited in the year-over-year quarterly comparison.  Debt extinguishment costs increased $51 million.Income TaxesFor the third quarter of 2010, the Company recognized a provision for income taxes of $14 million, compared to a benefit of $336 million for the third quarter of 2009.  The effective tax rate for the current quarter was 8.25%.U.S. Treasury Preferred DividendsFor the third quarter and year-to-date periods of 2010 and 2009, the Company recorded $67 million and $200 million, respectively, in preferred dividends related to the $4.85 billion in preferred securities issued to the U.S. Treasury under the Capital Purchase Program.  The 5.5% effective yield reflects the 5.0% dividend rate and the amortization of the discount recorded on the preferred stock at issuance.Balance SheetAs of September 30, 2010, SunTrust had total assets of $174.7 billion and shareholders' equity of $23.4 billion, representing 13.42% of total assets.  Book value per common share was $37.01 as of September 30, 2010.LoansAverage loans for the third quarter of 2010 were $113.3 billion, down $6.5 billion, or 5%, compared to the third quarter of 2009.  The decline was concentrated in the construction, residential real estate, commercial and commercial real estate loan categories.  The Company continues to reduce its exposure to residential real estate, most notably real estate construction loans, which, on average, declined 39% from the third quarter of 2009.  On a sequential quarter basis, average loans increased slightly as declines in commercial real estate and home equity lines were offset by growth in consumer loans and government guaranteed residential mortgage loans.  Consumer loan growth included the purchase of a high-quality $741 million consumer auto loan portfolio.  The Company also consolidated a $467 million student loan portfolio at the end of the third quarter of 2010.  As of September 30, 2010, total loans outstanding were $115.1 billion compared to $112.9 billion as of June 30, 2010, up 2%.  During the current quarter, loan originations totaled $19.7 billion, including renewals and loan commitments, which is 12% greater than the prior quarter.DepositsAverage consumer and commercial deposits for the third quarter of 2010 totaled $117.2 billion, up 2% from the third quarter of 2009. As clients continued to migrate to more liquid products, average demand deposits and money market accounts increased $2.0 billion, or 8%, and $7.3 billion, or 23%, respectively, while consumer time deposits and other time deposits declined $6.5 billion, or 22%.  Average total brokered and foreign deposits declined $2.5 billion, or 47%, from the third quarter of 2009, as the Company's deposit growth initiatives replaced these wholesale funding sources with client deposits.  On a sequential quarter basis, average consumer and commercial deposits increased 1%, with the majority of the increase in lower-cost deposits.Capital and LiquidityThe Company's capital ratios remained strong at September 30, 2010, with estimated Tier 1 common equity, Tier 1 capital, and tangible equity to tangible asset ratios of 8.00%, 13.60%, and 10.19%, respectively.  The increase in the Tier 1 common equity and Tier 1 capital ratios was due to earnings in the quarter as risk weighted assets increased marginally due to growth in high-quality loans and investment securities. The Company's regulatory capital position remains strong relative to current regulatory requirements and the guidelines recently published by the Basel Committee and endorsed by U.S. regulatory agencies.  The Company also has substantial available liquidity, as the inflows of client deposits have largely been retained in cash or invested in high-quality government-backed securities.Asset QualityAsset quality trends continued to improve during the quarter with net charge-offs, nonperforming loans, and nonperforming assets all declining compared to the prior quarter.  Early stage delinquencies remained relatively stable, declining 2 basis points to 1.24%.  The allowance for loan losses declined $70 million to $3.1 billion as of September 30, 2010.  The allowance for loan losses was 2.69% of total loans, down 12 basis points from June 30, 2010 due to the decline in the allowance for loan losses combined with higher period-end loan balances.  As of September 30, 2010, approximately 7% of the Company's loan portfolio was substantially guaranteed by the federal government and its agencies.  The allowance to nonperforming loans was 71.07% as of September 30, 2010, up 343 basis points from June 30, 2010.  The reserve for unfunded commitments was $55 million at quarter end, down $5 million from June 30, 2010, due to improved credit quality related to certain commercial and large corporate clients.The provision for credit losses was $615 million, a decline of $47 million on a sequential quarter basis and a decline of $519 million from the third quarter of 2009.  Net charge-offs in the current quarter were $690 million, down $316 million from the same quarter last year and down $32 million on a sequential quarter basis.  Compared to the third quarter of 2009, net charge-offs in all loan categories declined with the exception of a small increase in commercial real estate-related loans.  On a sequential quarter basis, net charge-offs related to construction and commercial loans declined but were partially offset by increases in the commercial real estate and residential mortgage portfolios.  Net charge-offs to average annualized loans declined to 2.42% in the current quarter, down 91 basis points from the same period in 2009 and down 15 basis points on a sequential quarter basis.  Year-to-date, net charge-offs were $2.2 billion, down $184 million, or 8%, from the same period in 2009, while  the provision for credit losses was down $952 million, or 31%.Nonaccrual loans declined, continuing a trend that began in the third quarter of 2009, and totaled $4.4 billion, or 3.80% of total loans, as of September 30, 2010.  This compares to $5.4 billion, or 4.67%, of total loans as of September 30, 2009.  The decrease was driven primarily by residential mortgages and construction loans; however, all nonaccrual loan categories have declined except for commercial real estate, which increased $182 million compared to a year ago.  Nonaccrual loans declined $326 million, or 7%, on a sequential quarter basis with all loan categories stable or down.  The overall decline in nonaccrual loans was due to repayments, net charge-offs, transfers to other real estate owned, and reduced inflows into nonaccrual.  Despite the migrations of nonperforming loans into other real estate owned, OREO declined $55 million during the quarter to $645 million as of September 30, 2010.Efforts to assist clients that are experiencing financial difficulties have continued during the third quarter resulting in loan modifications.  Accruing restructured loans totaled $2.5 billion as of September 30, 2010, an increase of $247 million over the prior quarter end.  The increase primarily related to residential mortgages, with commercial real estate related restructured loans increasing $17 million.  Nonaccruing restructured loans remained relatively stable at $988 million.LINE OF BUSINESS FINANCIAL PERFORMANCELine of Business ResultsThe Company has included line of business financial tables as part of this release on its website at www.suntrust.com in the Investor Relations section located under "About SunTrust."  During the second quarter of 2010 the Company adjusted its lines of business used to measure business activities to align with certain organizational changes implemented during the quarter.  The Company's business segments are: Retail Banking, Diversified Commercial Banking, Corporate and Investment Banking, Mortgage, Wealth and Investment Management, and Commercial Real Estate.  All revenue in the line of business tables is reported on a fully taxable-equivalent basis.  For the lines of business, results include net interest income, which is computed using matched-maturity funds transfer pricing.  Further, provision for loan losses is represented by net charge-offs.  SunTrust also reports results for Corporate Other and Treasury, which includes the Treasury department as well as the residual expense associated with operational and support expense allocations.  This segment also includes differences created between internal management accounting practices and generally accepted accounting principles, certain matched-maturity funds transfer pricing credits and charges, differences in provision for loan losses compared to net charge-offs, as well as equity and its related impact.  A detailed discussion of the line of business results will be included in the Company's forthcoming quarterly report on Form 10-Q.Corresponding Financial Tables and InformationInvestors are encouraged to review the foregoing summary and discussion of SunTrust's earnings and financial condition in conjunction with the detailed financial tables and information which SunTrust has also published today and SunTrust's forthcoming quarterly report on Form 10-Q. Detailed financial tables and other information are also available on the Company's website at www.suntrust.com in the Investor Relations section located under "About SunTrust." This information is also included in a current report on Form 8-K furnished with the Securities and Exchange Commission today.Conference Call SunTrust management will host a conference call on October 21, 2010, at 8:00 a.m. (Eastern Time) to discuss the earnings results and business trends. Individuals may call in beginning at 7:45 a.m. (Eastern Time) by dialing 1-888-972-7805 (Passcode: 3Q10). Individuals calling from outside the United States should dial 1-517-308-9091 (Passcode: 3Q10). A replay of the call will be available approximately one hour after the call ends on October 21, 2010, and will remain available until November 4, 2010, by dialing 1-800-879-7389 (domestic) or 1-402-220-5339 (international). Alternatively, individuals may listen to the live webcast of the presentation by visiting the SunTrust investor relations website at www.suntrust.com/investorrelations. Beginning the afternoon of October 21, 2010, listeners may access an archived version of the webcast in the "Webcasts and Presentations" subsection found on the investor relations webpage. This webcast will be archived and available for one year. A link to the Investor Relations page is also found in the footer of the SunTrust home page. SunTrust Banks, Inc., headquartered in Atlanta, is one of the nation's largest banking organizations, serving a broad range of consumer, commercial, corporate and institutional clients. The Company operates an extensive branch and ATM network throughout the Southeast and Mid-Atlantic states and a full array of technology-based, 24-hour delivery channels. The Company also serves clients in selected markets nationally. Its primary businesses include deposit, credit, and trust and investment management services. Through various subsidiaries, the Company provides mortgage banking, insurance, brokerage, equipment leasing, and capital markets services. SunTrust's Internet address is www.suntrust.com. Important Cautionary Statement About Forward-Looking Statements This news release includes non-GAAP financial measures to describe SunTrust's performance. The reconciliations of those measures to GAAP measures are provided within or in the appendix to this news release. In this news release, the Company presents net interest income and net interest margin on a fully taxable-equivalent ("FTE") basis, and ratios on an annualized basis. The FTE basis adjusts for the tax-favored status of income from certain loans and investments. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts.This news release may contain forward-looking statements. Statements regarding future levels of net interest margin, future levels of and rates of change in delinquencies, future levels of nonperforming loans and charge-offs, the future level of service charge income, the impact of legislative and regulatory changes, the level of future losses from repurchase requests, the size of future reserve additions, future levels of litigation related costs, and future levels of the allowance for loan losses are forward-looking statements. Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "initiatives," "potentially," "probably," "projects," "outlook" or similar expressions or future conditional verbs such as "may," "will," "should," "would," and "could." Forward-looking statements are based upon the current beliefs and expectations of management and on information currently available to management. Such statements speak as of the date hereof, and we do not assume any obligation to update the statements made herein or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events. Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward-looking statements. Factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Item 1A of Part I of our 10-K and in other periodic reports that we file with the SEC. Those factors include: difficult market conditions have adversely affected our industry; recent levels of market volatility are unprecedented; we are subject to capital adequacy guidelines and, if we fail to meet these guidelines, our financial condition would be adversely affected; recently enacted legislation, or legislation enacted in the future, or any proposed federal programs subject us to increased regulation and may adversely affect us; we have not yet received permission to repay TARP funds; emergency measures designed to stabilize the U.S. banking system are beginning to wind down; we are subject to credit risk; weakness in the economy and in the real estate market, including specific weakness within our geographic footprint, has adversely affected us and may continue to adversely affect us; weakness in the real estate market, including the secondary residential mortgage loan markets, has adversely affected us and may continue to adversely affect us; as a financial services company, adverse changes in general business or economic conditions could have a material adverse effect on our financial condition and results of operations; changes in market interest rates or capital markets could adversely affect our revenue and expense, the value of assets and obligations, and the availability and cost of capital or liquidity; the fiscal and monetary policies of the federal government and its agencies could have a material adverse effect on our earnings; we may be required to repurchase mortgage loans or indemnify mortgage loan purchasers as a result of breaches of representations and warranties, borrower fraud, or certain borrower defaults, which could harm our liquidity, results of operations, and financial condition; we may continue to suffer increased losses in our loan portfolio despite enhancement of our underwriting policies; depressed market values for our stock may require us to write down goodwill; clients could pursue alternatives to bank deposits, causing us to lose a relatively inexpensive source of funding; consumers may decide not to use banks to complete their financial transactions, which could affect net income; we have businesses other than banking which subject us to a variety of risks; hurricanes and other natural disasters may adversely affect loan portfolios and operations and increase the cost of doing business; negative public opinion could damage our reputation and adversely impact business and revenues; we rely on other companies to provide key components of our business infrastructure; the soundness of other financial institutions could adversely affect us; we rely on our systems, employees, and certain counterparties, and certain failures could materially adversely affect our operations; we depend on the accuracy and completeness of information about clients and counterparties; we are subject to certain litigation, and our expenses related to this litigation may adversely affect our results; regulation by federal and state agencies could adversely affect the business, revenue, and profit margins; competition in the financial services industry is intense and could result in losing business or reducing margins; future legislation could harm our competitive position; maintaining or increasing market share depends on market acceptance and regulatory approval of new products and services; we may not pay dividends on your common stock; our ability to receive dividends from our subsidiaries accounts for most of our revenue and could affect our liquidity and ability to pay dividends; significant legal actions could subject us to substantial uninsured liabilities; recently declining values of real estate, increases in unemployment, and the related effects on local economies may increase our credit losses, which would negatively affect our financial results; deteriorating credit quality, particularly in real estate loans, has adversely impacted us and may continue to adversely impact us; our allowance for loan losses may not be adequate to cover our eventual losses; we will realize future losses if the proceeds we receive upon liquidation of nonperforming assets are less than the carrying value of such assets; disruptions in our ability to access global capital markets may negatively affect our capital resources and liquidity; in 2009 and 2010, credit rating agencies downgraded the credit ratings of SunTrust Bank and SunTrust Banks, Inc., and these downgrades and any subsequent downgrades could adversely impact the price and liquidity of our securities and could have an impact on our businesses and results of operations; we have in the past and may in the future pursue acquisitions, which could affect costs and from which we may not be able to realize anticipated benefits; we depend on the expertise of key personnel, and if these individuals leave or change their roles without effective replacements, operations may suffer; we may not be able to hire or retain additional qualified personnel and recruiting and compensation costs may increase as a result of turnover, both of which may increase costs and reduce profitability and may adversely impact our ability to implement our business strategy; our accounting policies and processes are critical to how we report our financial condition and results of operations, and require management to make estimates about matters that are uncertain; changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition; our stock price can be volatile; our disclosure controls and procedures may not prevent or detect all errors or acts of fraud; our financial instruments carried at fair value expose us to certain market risks; our revenues derived from our investment securities may be volatile and subject to a variety of risks; and we may enter into transactions with off-balance sheet affiliates or our subsidiaries. SunTrust Banks, Inc. and SubsidiariesFINANCIAL HIGHLIGHTS(Dollars in millions, except per share data) (Unaudited)Three Months EndedNine Months EndedSeptember 30 % September 30 % 20102009Change (4)20102009Change (4)EARNINGS & DIVIDENDSNet income/(loss)$153($317) NM %$5($1,316)100%Net income/(loss) available to common shareholders84(377) NM (201)(1,417)86Net income/(loss) available to common shareholders excluding goodwill/intangible impairment charges other than MSRs (1)84(377) NM (201)(702)71Total revenue - FTE (2) 2,3131,943196,3736,350-Total revenue - FTE excluding securities (gains)/losses, net (1)2,2441,896186,2456,325(1)Net income/(loss) per average common share     Diluted0.17(0.76) NM (0.41)(3.41)88     Diluted excluding     goodwill/intangible impairment     charges other than MSRs (1)0.17(0.76) NM (0.41)(1.69)76     Basic0.17(0.76) NM (0.41)(3.41)88Dividends paid per common share           0.010.01-0.030.21(86)CONDENSED BALANCE SHEETS Selected Average BalancesTotal assets$171,999$172,463-%$171,569$175,915(2)%Earning assets147,249149,579(2)146,538152,365(4)Loans113,322119,796(5)113,587123,064(8)Consumer and commercial deposits117,233114,4862116,267111,8694Brokered and foreign deposits2,7405,193(47)2,9456,398(54)Total shareholders' equity23,09122,468322,58322,2541As ofTotal assets174,703172,7181Earning assets149,994145,5543Loans115,055116,488(1)Allowance for loan and lease losses3,0863,0242Consumer and commercial deposits117,494113,6013Brokered and foreign deposits2,8505,730(50)Total shareholders' equity23,43822,9082FINANCIAL RATIOS & OTHER DATAReturn on average total assets0.35%(0.73)% NM %-%(1.00)%100%Return on average assets less net unrealized securities gains (1)0.23(0.83) NM (0.09)(1.05)91Return on average common shareholders' equity1.83(8.52) NM (1.53)(11.06)86Return on average realized common shareholders' equity (1) 0.70(9.70) NM (2.57)(11.91)78Net interest margin (2)3.413.10103.352.9713Efficiency ratio (2)64.8073.53(12)68.4580.45(15)Tangible efficiency ratio (1) 64.2472.82(12)67.8367.94-Effective tax rate/(benefit)8.25(51.46) NM (102.05)(32.58) NM Tier 1 common equity8.00(3)7.497Tier 1 capital 13.60(3)12.588Total capital 16.55(3)15.924Tier 1 leverage 11.05(3)11.08(0)Total average shareholders' equity to total average assets13.4213.03313.1612.654Tangible equity to tangible assets (1) 10.199.962Book value per common share$37.01$36.063Tangible book value per common share (1)24.4223.355Market price:     High27.0524.431131.9230.186     Low21.7914.505020.166.00 NM     Close25.8322.551525.8322.5515Market capitalization12,91411,25615Average common shares outstanding (000s)     Diluted (5)498,802494,1691495,243415,44419     Basic495,501494,169-495,243415,44419Full-time equivalent employees28,59928,0152Number of ATMs2,9282,8074Full service banking offices1,6701,690(1)(1) See Appendix A for reconcilements of non-GAAP performance measures.                  (2) Total revenue, net interest margin, and efficiency ratios are presented on a fully taxable-equivalent ("FTE") basis.  The FTE basis adjusts for the tax-favored status of net interest income from certain loans and investments.  The Company believes this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources.  Total revenue - FTE equals net interest income on a FTE basis plus noninterest income.            (3) Current period tier 1 common equity, tier 1 capital, total capital and tier 1 leverage ratios are estimated as of the earnings release date.          (4) "NM" - Not meaningful.  Those changes over 100 percent were not considered to be meaningful.(5) For earnings per share calculation purposes, the impact of dilutive securities are excluded from the diluted share count during periods that the Company has recognized a net loss available to common shareholders because the impact would be antidilutive.SunTrust Banks, Inc. and Subsidiaries FIVE QUARTER FINANCIAL HIGHLIGHTS(Dollars in millions, except per share data) (Unaudited)Three Months Ended September 30 June 30March 31December 31 September 30 20102010201020092009EARNINGS & DIVIDENDSNet income/(loss) $153$12($161)($248)($317)Net income/(loss) available to common shareholders84(56)(229)(316)(377)Net income/(loss) available to common shareholders excluding goodwill/intangible impairment charges other than MSRs (1)84(56)(229)(316)(377)Total revenue - FTE (2) 2,3132,1601,9001,9491,943Total revenue - FTE excluding securities (gains)/losses, net (1)2,2442,1031,8981,8761,896Net income/(loss) per average common share                   Diluted0.17(0.11)(0.46)(0.64)(0.76)     Diluted excluding     goodwill/intangible impairment     charges other than MSRs (1)0.17(0.11)(0.46)(0.64)(0.76)     Basic0.17(0.11)(0.46)(0.64)(0.76)Dividends paid per common share        0.010.010.010.010.01CONDENSED BALANCE SHEETS Selected Average BalancesTotal assets$171,999$171,273$171,429$174,041$172,463Earning assets147,249145,464146,896146,587149,579Loans113,322113,016114,435115,036119,796Consumer and commercial deposits117,233116,460115,084117,008114,486Brokered and foreign deposits2,7402,6703,4335,1455,193Total shareholders' equity23,09122,31322,33822,38122,468As ofTotal assets174,703170,668171,796174,165172,718Earning assets149,994145,601147,056147,896145,554Loans115,055112,925113,979113,675116,488Allowance for loan and lease losses3,0863,1563,1763,1203,024Consumer and commercial deposits117,494116,261116,144116,303113,601Brokered and foreign deposits2,8502,4072,6065,5605,730Total shareholders' equity23,43823,02422,62022,53122,908FINANCIAL RATIOS & OTHER DATAReturn on average total assets0.35%0.03%(0.38)%(0.57)%(0.73)%Return on average assets less net unrealized securities gains (1)0.23(0.08)(0.42)(0.70)(0.83)Return on average common shareholders' equity1.83(1.29)(5.34)(7.19)(8.52)Return on average realized common shareholders' equity (1) 0.70(2.53)(5.93)(8.81)(9.70)Net interest margin (2)3.413.333.323.273.10Efficiency ratio (2)64.8069.5771.6074.5873.53Tangible efficiency ratio (1) 64.2468.9670.9173.9672.82Effective tax rate/(benefit)8.25(133.13)(54.70)(51.46)(51.46)Tier 1 common equity8.00(3)7.927.707.677.49Tier 1 capital 13.60(3)13.5113.1312.9612.58Total capital 16.55(3)16.9616.6816.4315.92Tier 1 leverage 11.05(3)10.9410.9510.9011.08Total average shareholders' equity to total average assets          13.4213.0313.0312.8613.03Tangible equity to tangible assets (1) 10.1910.189.869.669.96Book value per common share$37.01$36.19$35.40$35.29$36.06Tangible book value per common share (1) 24.4223.5822.7622.5923.35Market price:     High27.0531.9228.3924.0924.43     Low21.7923.1220.1618.4514.50     Close25.8323.3026.7920.2922.55Market capitalization12,91411,64813,39110,12811,256Average common shares outstanding (000s)     Diluted (4)498,802495,351494,871494,332494,169     Basic495,501495,351494,871494,332494,169Full-time equivalent employees28,59928,25028,26328,00128,015Number of ATMs2,9282,9022,8282,8222,807Full service banking offices1,6701,6751,6781,6831,690(1) See Appendix A for reconcilements of non-GAAP performance measures.                  (2) Total revenue, net interest margin, and efficiency ratios are presented on a fully taxable-equivalent ("FTE") basis.  The FTE basis adjusts for the tax-favored status of net interest income from certain loans and investments.  The Company believes this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt   sources.  Total revenue - FTE equals net interest income on a FTE basis plus noninterest income.  (3) Current period tier 1 common equity, tier 1 capital, total capital and tier 1 leverage ratios are estimated as of the earnings release date.          (4) For earnings per share calculation purposes, the impact of dilutive securities are excluded from the diluted share count during periods that the Company has recognized a net loss available to common  shareholders because the impact would be antidilutive.SunTrust Banks, Inc. and Subsidiaries  RECONCILEMENT OF NON-GAAP MEASURES APPENDIX A TO THE EARNINGS RELEASE (Dollars in millions, except per share data) (Unaudited) Three Months EndedNine Months EndedSeptember 30June 30March 31December 31September 30September 30September 302010201020102009200920102009NON-GAAP MEASURES PRESENTED IN THE EARNINGS RELEASE (8)  Net income/(loss) $153$12($161)($248)($317)$5($1,316)Securities (gains)/losses, net of tax (43)(35)(1)(45)(29)(79)(16)Net income/(loss) excluding securities (gains)/losses, net of tax 110(23)(162)(293)(346)(74)(1,332)The Coca-Cola Company stock dividend, net of tax (12)(12)(12)(11)(11)(36)(33)Net income/(loss) excluding securities (gains)/losses and The Coca-Cola Company stock dividend, net of tax   98(35)(174)(304)(357)(110)(1,365)Preferred dividends, Series A(2)(2)(2)(2)(2)(6)(12)U.S. Treasury preferred dividends and accretion of discount(67)(66)(66)(66)(66)(199)(199)Dividends and undistributed earnings allocated to unvested shares----3(1)16Gain on purchase of Series A preferred stock----5-94Net income/(loss) available to common shareholders excluding securities (gains)/losses and The Coca-Cola Company stock dividend$29($103)($242)($372)($417)($316)($1,466)Total average assets  $171,999$171,273$171,429$174,041$172,463$171,569$175,915Average net unrealized securities gains  (2,395)(1,969)(1,884)(1,986)(1,607)(2,085)(1,486)Average assets less net unrealized securities gains  $169,604$169,304$169,545$172,055$170,856$169,484$174,429Total average common shareholders' equity $18,159$17,387$17,419$17,467$17,556$17,658$17,135Average accumulated other comprehensive income  (1,721)(998)(889)(698)(504)(1,206)(690)Total average realized common shareholders' equity $16,438$16,389$16,530$16,769$17,052$16,452$16,445Return on average total assets 0.35%0.03%(0.38)%(0.57)%(0.73)%-%(1.00)%Impact of excluding net realized and unrealized securities (gains)/losses and The Coca-Cola Company stock dividend  (0.12)(0.11)(0.04)(0.13)(0.10)(0.09)(0.05)Return on average total assets less net unrealized securities gains (1) 0.23%(0.08)%(0.42)%(0.70)%(0.83)%(0.09)%(1.05)%Return on average common shareholders' equity  1.83%(1.29)%(5.34)%(7.19)%(8.52)%(1.53)%(11.06)%Impact of excluding net realized and unrealized securities (gains)/ losses and The Coca-Cola Company stock dividend    (1.13)(1.24)(0.59)(1.62)(1.18)(1.04)(0.85)Return on average realized common shareholders' equity (2)   0.70%(2.53)%(5.93)%(8.81)%(9.70)%(2.57)%(11.91)%Efficiency ratio (3)   64.80%69.57%71.60%74.58%73.53%68.45%80.45%Impact of excluding amortization/impairment of goodwill/intangible assets other than MSRs  (0.56)(0.61)(0.69)(0.62)(0.71)(0.62)(12.51)Tangible efficiency ratio (4) 64.24%68.96%70.91%73.96%72.82%67.83%67.94%Total shareholders' equity  $23,438$23,024$22,620$22,531$22,908Goodwill, net of deferred taxes (6,192)(6,197)(6,202)(6,204)(6,205)Other intangible assets including MSRs, net of deferred taxes(1,174)(1,409)(1,761)(1,671)(1,560)MSRs1,0721,2981,6411,5391,423Tangible equity 17,14416,71616,29816,19516,566Preferred stock(4,936)(4,929)(4,923)(4,917)(4,911)Tangible common equity$12,208$11,787$11,375$11,278$11,655Total assets  $174,703$170,668$171,796$174,165$172,718Goodwill                (6,323)(6,323)(6,323)(6,319)(6,314)Other intangible assets including MSRs  (1,204)(1,443)(1,800)(1,711)(1,604)MSRs1,0721,2981,6411,5391,423Tangible assets  $168,248$164,200$165,314$167,674$166,223Tangible equity to tangible assets (5) 10.19%10.18%9.86%9.66%9.96%Tangible book value per common share (6)$24.42$23.58$22.76$22.59$23.35Net interest income $1,238$1,178$1,171$1,176$1,137$3,587$3,289Taxable-equivalent adjustment 28303131318993Net interest income - FTE  1,2661,2081,2021,2071,1683,6763,382Noninterest income 1,0479526987427752,6972,968Total revenue - FTE 2,3132,1601,9001,9491,9436,3736,350Securities (gains)/losses, net(69)(57)(2)(73)(47)(128)(25)Total revenue - FTE excluding net securities (gains)/losses (7)$2,244$2,103$1,898$1,876$1,896$6,245$6,325(1) SunTrust presents a return on average assets less net unrealized gains on securities.  The foregoing numbers primarily reflect adjustments to remove the effects of the securities portfolio which includes the ownership by the Company of common shares of The Coca-Cola Company.  The Company uses this information internally to gauge its actual performance in the industry. The Company believes that the return on average assets less the net unrealized securities gains is more indicative of the Company's return on assets because it more accurately reflects the return on the assets that are related to the Company's core businesses which are primarily client relationship and client transaction driven.  The return on average assets less net unrealized gains on securities is computed by dividing annualized net income/(loss), excluding securities (gains)/losses and The Coca-Cola Company stock dividend, net of tax, by average assets less net unrealized securities gains.(2) SunTrust believes that the return on average realized common shareholders' equity is more indicative of the Company's return on equity because the excluded equity relates primarily to the holding of a specific security.  The return on average realized common shareholders' equity is computed by dividing annualized net income/(loss) available to common shareholders, excluding securities (gains)/losses and The Coca-Cola Company stock dividend, net of tax, by average realized common shareholders' equity.     (3) Computed by dividing noninterest expense by total revenue - FTE.  The FTE basis adjusts for the tax-favored status of net interest income from certain loans and investments.  The Company believes this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources. (4) SunTrust presents a tangible efficiency ratio which excludes the amortization/impairment of goodwill/intangible assets other than MSRs.  The Company believes this measure is useful to investors because, by removing the effect of these intangible asset costs (the level of which may vary from company to company), it allows investors to more easily compare the Company?s efficiency to other companies in the industry.  This measure is utilized by management to assess the efficiency of the Company and its lines of business.  (5) SunTrust presents a tangible equity to tangible assets ratio that excludes the after-tax impact of purchase accounting intangible assets.   The Company believes this measure is useful to investors because, by removing the effect of intangible assets that result from merger and acquisition activity (the level of which may vary from company to company), it allows investors to more easily compare the Company's capital adequacy to other companies in the industry.  This measure is used by management to analyze capital adequacy. (6) SunTrust presents a tangible book value per common share that excludes the after-tax impact of purchase accounting intangible assets and also excludes preferred stock from tangible equity.  The Company believes this measure is useful to investors because, by removing the effect of intangible assets that result from merger and acquisition activity as well as preferred stock (the level of which may vary from company to company), it allows investors to more easily compare the Company's book value on common stock to other companies in the industry.  (7)  SunTrust presents total revenue - FTE excluding net securities (gains)/losses.  The Company believes noninterest income without net securities (gains)/losses is more indicative of the Company's performance because it isolates income that is primarily client relationship and client transaction driven and is more indicative of normalized operations.(8)  Certain amounts in this schedule are presented net of applicable income taxes, which are calculated based on each subsidiary?s federal and state tax rates and laws.  In general, the federal marginal tax rate is 35%, but the state marginal tax rates range from 1% to 8% in accordance with the subsidiary?s income tax filing requirements with various tax authorities.  In addition, the effective tax rate may differ from the federal and state marginal tax rates in certain cases where a permanent difference exists.SunTrust Banks, Inc. and Subsidiaries    RECONCILEMENT OF NON-GAAP MEASURES  APPENDIX A TO THE EARNINGS RELEASE, continued  (Dollars in millions, except per share data) (Unaudited)  Three Months EndedNine Months EndedSeptember 30June 30March 31December 31September 30September 30September 302010201020102009200920102009NON-GAAP MEASURES PRESENTED IN THE EARNINGS RELEASE (2)  Total noninterest expense$1,499$1,503$1,361$1,454$1,429$4,362$5,109Goodwill/intangible impairment charges other than MSRs------751Total noninterest expense excluding goodwill/intangible impairment charges other than MSRs(1)$1,499$1,503$1,361$1,454$1,429$4,362$4,358Net income/(loss)$153$12($161)($248)($317)$5($1,316)Goodwill/intangible impairment charges other than MSRs, after tax ------724Net income/(loss) excluding goodwill/intangible impairment charges other than MSRs, after tax(1)$153$12($161)($248)($317)$5($592)Net income/(loss) available to common shareholders$84($56)($229)($316)($377)($201)($1,417)Goodwill/intangible impairment charges other than MSRs attributable to  common shareholders, after tax ------715Net income/(loss) available to common shareholders excluding goodwill/intangible impairment charges other than MSRs, after tax(1)$84($56)($229)($316)($377)($201)($702)Net income/(loss) per average common share, diluted$0.17($0.11)($0.46)($0.64)($0.76)($0.41)($3.41)Impact of excluding goodwill/intangible impairment charges other than MSRs attributable  to common shareholders, after tax------1.72Net income/(loss) per average diluted common share, excluding goodwill/intangible impairment charges other than MSRs, after tax(1)$0.17($0.11)($0.46)($0.64)($0.76)($0.41)($1.69)SUPPLEMENTAL INCOME STATEMENT RECONCILIATIONNet income/(loss)      $153$12($161)($248)($317)$5($1,316)Preferred dividends, Series A(2)(2)(2)(2)(2)(6)(12)U.S. Treasury preferred dividends and accretion of discount(67)(66)(66)(66)(66)(199)(199)Dividends and undistributed earnings allocated to unvested shares----3(1)16Gain on purchase of Series A preferred stock----5-94Net income/(loss) available to common shareholders $84($56)($229)($316)($377)($201)($1,417)(1) SunTrust presents noninterest expense, net income/(loss), net income/(loss) available to common shareholders, and net income/(loss) per average common diluted share that excludes the portion of the impairment charges on goodwill and intangible assets other than MSRs allocated to the common shareholders.  The Company believes these measures are useful to investors, because removing the non-cash impairment charges provides a more representative view of normalized operations and the measures also allow better comparability with peers in the industry who also provide a similar presentation when applicable.  In addition, management uses the measures internally to analyze performance.(2)  Certain amounts in this schedule are presented net of applicable income taxes, which are calculated based on each subsidiary?s federal and state tax rates and laws.  In general, the federal marginal tax rate is 35%, but the state marginal tax rates range from 1% to 8% in accordance with the subsidiary?s income tax filing requirements with various tax authorities.  In addition, the effective tax rate may differ from the federal and state marginal tax rates in certain cases where a permanent difference exists.SOURCE SunTrust Banks, Inc.For further information: Investors: Steve Shriner, +1-404-827-6714, or Media: Mike McCoy, +1-404-588-7230