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Press release from PR Newswire

SunTrust Reports Fourth Quarter 2010 Results

Friday, January 21, 2011

SunTrust Reports Fourth Quarter 2010 Results06:30 EST Friday, January 21, 2011Earnings of $0.23 per Share Driven by Solid Revenues and Continued Improvement in Credit QualityATLANTA, Jan. 21, 2011 /PRNewswire/ -- SunTrust Banks, Inc. (NYSE: STI) announced today that solid revenues and further improvement in credit quality resulted in net income available to common shareholders of $114 million, or $0.23 per average common share, for the fourth quarter of 2010.  This result compares favorably to a net loss of $248 million, or $0.64 per average common share, for the fourth quarter of 2009 and to earnings of $84 million, or $0.17 per common share, for the third quarter of 2010.  For the year, SunTrust earned $189 million in net income before preferred dividends and reported a net loss to common shareholders of $0.18 per share, a significant improvement from the net loss per share of $3.98 reported for 2009."Our focus on serving our clients and managing our core businesses continues to drive better bottom line results at SunTrust," said James M. Wells III, chairman and chief executive officer of SunTrust Banks, Inc. "We are pleased with the diversity of our revenue sources and the continued improvement in our credit quality.  The Company continues to take advantage of opportunities in our markets and is well-positioned to benefit from a recovering economy."Fourth Quarter 2010 Financial HighlightsNet income available to common shareholders was $0.23 per share, compared to earnings per share of $0.17 in the prior quarter and a loss of $0.64 per share in the fourth quarter of 2009.Net income before preferred dividends increased to $185 million, up $32 million from the third quarter.Total revenue was stable relative to the solid results reported in the third quarter.  Net interest income increased primarily due to lower funding costs.  Noninterest income declined modestly as higher market-sensitive revenue was offset by lower mortgage-related revenue.  The net interest margin expanded to 3.44%, the seventh consecutive quarterly increase, and net interest income increased 7% from the fourth quarter of 2009.Noninterest expense increased compared to the prior quarter due largely to continued investments in people, technology, and marketing, as well as higher earnings-related compensation. Credit quality continued to improve with net charge-offs, nonperforming assets, and early stage delinquencies all declining.Provision for credit losses declined due to lower net charge-offs and the impacts that improved credit quality had on the allowance for loan losses.  The allowance for loan losses was $3.0 billion, or 2.58% of total loans, down 11 basis points from the prior quarter.Average loans increased modestly over the prior quarter, as commercial and consumer loan growth more than offset the continued reduction in the higher-risk construction portfolio.Average customer deposits grew, and the favorable deposit mix trends continued; lower-cost deposits increased, while higher-cost time deposits declined.Capital ratios remained healthy and well above the recent Basel III guidance, with the estimated Tier 1 common equity ratio at 8.1%, the Tier 1 capital ratio at 13.7%, and the Tier 1 capital ratio excluding the TARP preferred stock at 10.0%.4th Quarter3rd Quarter4th QuarterFullYear2010FullYear2009201020102009Income Statement(Presented on a fully taxable equivalent basis)(Dollars in millions, except per share data)Net income/(loss)$185$153$(248)$189$(1,564)Net income/(loss) available to common shareholders11484(316)(87)(1,733)Net income/(loss) per average common diluted share0.230.17(0.64)(0.18)(3.98)Total revenue ? FTE2,3262,3131,9498,6998,299Total revenue - FTE, excluding net securities gains/losses2,2622,2441,8768,5088,201Net interest income ?FTE1,2941,2661,2074,9704,589Provision for credit losses5126159742,6514,064Noninterest income1,0321,0477423,7293,710Noninterest expense1,5481,4991,4535,9116,562Net interest margin ? FTE3.44%3.41%3.27%3.38%3.04%Balance Sheet(Dollars in billions)Average loans$114.9$113.3$115.0$113.9$121.0Average consumer and commercial deposits119.7117.2117.0117.1113.2CapitalTier 1 capital ratio (1)13.65%13.58%12.96%Tier 1 common equity ratio (1)8.08%8.02%7.67%Total average shareholders' equity to total average assets13.49%13.42%12.86%13.25%12.70%Asset QualityNet charge-offs to average loans (annualized)2.14%2.42%2.83%2.51%2.67%Allowance for loan losses to period end loans2.58%2.69%2.76%Nonperforming loans to total loans3.54%3.80%4.75%(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)RevenueTotal revenue of $2.3 billion for the fourth quarter of 2010 was essentially flat on a sequential quarter basis as higher net interest income was partially offset by a slight decline in noninterest income.  Declines in mortgage-related income were largely offset by higher trading income, primarily due to more favorable mark-to-market impacts.  Compared to the fourth quarter of 2009, total revenue increased 19% on higher net interest income and noninterest income, particularly mortgage and capital markets-related income.  The current quarter included net gains of $64 million from the sale of securities, compared to net gains of $69 million and $73 million in the prior quarter and the fourth quarter of 2009, respectively.For the year ended December 31, 2010, total revenue was $8.7 billion, an increase of $400 million, or 5%, from 2009, which was substantially attributable to higher net interest income.  Noninterest income was essentially flat, as declines in mortgage production income and service charges on deposits were offset by an increase in trading income due to lower mark-to-market losses, net of hedges, on the Company's debt carried at fair value.  The current year included net gains of $191 million from the sale of securities, compared to net gains of $210 million in 2009 related to the sale of securities and Visa shares.Net Interest IncomeFor the fourth quarter of 2010, net interest income was $1.3 billion, an increase of 2% on a sequential quarter basis and up 7% compared to the fourth quarter of 2009.  Net interest income growth over the third quarter was attributable to lower rates paid on deposits and borrowed funds, as well as the continued shift in the deposit mix toward lower-cost accounts.  Relative to the fourth quarter of 2009, these same factors drove the growth, together with a significant reduction in higher-cost time deposits and longer-term debt balances.Net interest margin for the fourth quarter of 2010 was 3.44%, an increase of 3 basis points on a sequential quarter basis.  Compared to the fourth quarter of 2009, net interest margin increased 17 basis points, primarily driven by a 38 basis point decline in rates paid on interest-bearing liabilities, which more than offset a 17 basis point decline in earning asset yields.For the year ended December 31, 2010, net interest income was $5.0 billion, an increase of 8% compared to 2009.  Net interest margin was 3.38%, up 34 basis points over 2009.  The same factors that drove the quarterly year-over-year increases contributed to the full-year net interest income and margin growth.Noninterest IncomeTotal noninterest income was $1.0 billion in the fourth quarter of 2010, down $15 million, or 1%, on a sequential quarter basis.  The decline in mortgage-related income and service charges on deposit accounts was partially offset by more favorable mark-to-market valuation impacts included in trading account profits and commissions.  Compared to the fourth quarter of 2009, noninterest income increased $290 million, or 39%, primarily due to higher capital markets and mortgage-related income, as well as higher mark-to-market valuation impacts, partially offset by lower service charges.  Gains on the sale of securities associated with the repositioning of the investment portfolio were $64 million, $69 million, and $73 million in the fourth and third quarters of 2010 and the fourth quarter of 2009, respectively.Mortgage servicing income declined $64 million compared to the third quarter, due to a reduction in net hedge performance and the negative impact that higher prepayments had on the fair value of the mortgage servicing rights.  Compared to the fourth quarter of 2009, mortgage servicing income increased $21 million due to higher net hedge performance.  The mortgage servicing portfolio was $167.2 billion as of December 31, 2010, down from $178.9 billion at December 31, 2009.Mortgage production income declined $92 million from the third quarter, due to lower mortgage production volume and reduced margins.  The provision for mortgage repurchase losses was $85 million in the current quarter, down $10 million from the third quarter.  Compared to the fourth quarter of 2009, mortgage production related income increased $109 million primarily due to a $136 million decline in the provision for mortgage repurchase losses.  As of December 31, 2010, mortgage repurchase reserves totaled $265 million.Trading account profits and commissions increased $115 million on a sequential quarter basis.  The largest driver was a $64 million mark-to-market differential, net of hedges, on the Company's index-linked certificates of deposit carried at fair value; a $5 million gain was recognized on this item in the fourth quarter compared to a $59 million loss in the third quarter.  Additionally, a $16 million mark-to-market valuation gain, net of hedges, was recognized in the current quarter on the Company's public debt carried at fair value, compared to a valuation loss of $22 million in the prior quarter.  Compared to the fourth quarter of 2009, trading account profits and commissions increased $124 million.  This was largely driven by a $54 million increase, net of hedges, from the prior year in mark-to-market valuation gains on the Company's public debt carried at fair value.  An approximate $30 million of the increase was due to lower valuation losses on previously securitized and sold loans, and the net impact of gains on the sale of, and improved market valuations on, assets carried at fair value. Consumer and commercial fee-based income in the fourth quarter of 2010 were essentially flat compared to the prior quarter and fourth quarter of 2009, as strong investment banking income and card fees were offset by lower service charges on deposits as a result of recently enacted regulations.  Other income in the fourth quarter of 2010 included a $13 million gain recognized upon the previously-announced sale of the Company's money market mutual fund business.For the year ended December 31, 2010, noninterest income was essentially flat compared to 2009.  Trading account profits and commissions increased as a result of reduced valuation losses, net of hedges, on the Company's public debt carried at fair value.  This was offset by lower mortgage-related income and service charges on deposit accounts.Noninterest ExpenseFor the fourth quarter of 2010, noninterest expense was $1.5 billion, an increase of $49 million, or 3%, on a sequential quarter basis, and an increase of $95 million, or 7%, over the fourth quarter of 2009.  The expense increase relative to both periods was primarily due to investments that are expected to enhance future revenue generation capabilities.  Employee compensation and benefits increased $29 million from the sequential quarter and $44 million from the fourth quarter of 2009.  This increase was driven by higher salaries, mostly due to additional full-time equivalent employees - which increased by 458 and 1,055 over the sequential quarter and the fourth quarter of 2009, respectively - primarily in the mortgage, technology, and client support areas.  Additionally, higher incentive compensation related to improved financial performance in certain business lines contributed to the increase.  Outside processing and software expense increased $17 million compared to the third quarter and $25 million over the prior year quarter due to increased expenses associated with client acquisition and risk management technology projects and higher transaction volumes.  Marketing and customer development expenses increased $13 million, or 30%, on a sequential quarter basis, and $8 million, or 17%, compared to the fourth quarter of 2009.  Credit-related costs were $189 million in the fourth quarter of 2010, up $8 million compared to the third quarter and $15 million higher than the fourth quarter of 2009, driven by higher other real estate losses.  The current quarter included $4 million in net losses on the extinguishment of debt compared to $12 million in the third quarter and $23 million in the fourth quarter of 2009.Total noninterest expense was $5.9 billion in 2010, a decrease of $651 million, or 10%, compared to 2009, which included a $751 million non-cash goodwill impairment charge recognized in the first quarter of 2009.  Personnel-related expenses increased $21 million, or 1%, due to increased full time-equivalent employees partially offset by lower pension cost.  Outside processing and software expenses increased $59 million, or 10%, related to technology investments made to enhance the client experience, as well as increased transaction volumes.  Marketing and customer development expenses increased $25 million, or 16%, due to increased advertising and other expenses aimed at driving deposit growth.  FDIC insurance premiums declined $37 million, primarily due to the special assessment paid in 2009.  Credit-related costs were down $28 million as higher other real estate losses were offset by lower mortgage reinsurance losses.  Debt extinguishment costs increased $31 million over 2009.Income TaxesFor the fourth quarter of 2010, the Company recorded a provision for income taxes of $45 million compared to a benefit of $263 million in the fourth quarter of 2009.  The effective tax rate for the fourth quarter of 2010 was 19.7%.  For the year, the Company recognized a benefit for income taxes of $185 million compared to a benefit of $898 million in 2009.U.S. Treasury Preferred DividendsFor the fourth quarter and full years of 2010 and 2009, the Company recorded $67 million, $267 million, and $266 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 December 31, 2010, SunTrust had total assets of $172.9 billion and shareholders' equity of $23.1 billion, representing 13.4% of total assets.  Book and tangible book value per common share were $36.34 and $23.76, respectively, as of December 31, 2010.LoansAverage loans for the fourth quarter of 2010 were $114.9 billion, up $1.6 billion, or 1%, compared to the third quarter.  Growth in average commercial, residential mortgage, and consumer loans was partially offset by declines in construction and commercial real estate loans.  During the fourth quarter, the Company completed an approximately $900 million purchase of high-quality indirect auto loans.  Average loans for the fourth quarter of 2010 were essentially flat compared to the fourth quarter of 2009; however, the mix of loans changed over this time.  The Company reduced its outstanding exposure to construction, home equity, and commercial real estate loans by a combined $4.0 billion, or 11%.  Meanwhile, the outstanding balances in consumer direct (primarily student loans) and indirect auto increased by a combined $3.5 billion, or 30%.   The preponderance of the growth in 2010 within residential mortgage and student loans came in loans carrying a government guarantee, also helping to reduce the overall risk profile of the loan portfolio. During the current quarter, loan originations including renewals and loan commitments totaled $22.2 billion, up 13% over the prior quarter.DepositsConsumer and commercial deposits in the fourth quarter of 2010 averaged $119.7 billion, an increase of $2.5 billion, or 2%, compared to the prior quarter.  Growth was driven by lower-cost accounts, including demand, NOW, and money market.  Compared to the fourth quarter of 2009, average consumer and commercial deposits increased $2.7 billion, or 2%.  This growth was also driven by the lower-cost accounts, which grew a combined $8.5 billion, or 10%.  Higher-cost consumer and other time deposits declined $6.0 billion, or 22%.  While changing client preferences and the economic environment have contributed to this favorable shift in the deposit mix, SunTrust also attributes the growth to its investments in enhancing the client experience and its marketing initiatives.  Among other benefits, the growth in low-cost deposits has enabled reductions in wholesale funding sources, including brokered and foreign deposit declines of $2.3 billion, or 45%.  Capital and LiquidityThe estimated Tier 1 common, Tier 1 capital, and tangible equity to tangible asset ratios remained relatively consistent compared to the prior quarter at 8.1%, 13.7%, and 10.1%, respectively, as of December 31, 2010.  The estimated Tier 1 capital ratio excluding the TARP preferred stock was 10.0% at year-end.  The Company's capital position remains strong relative to current regulatory requirements.  Its Tier 1 common ratio also exceeds the guidelines recently published by the Basel Committee and endorsed by U.S. regulatory agencies.  The Company continues to have substantial liquidity as the inflows of deposits have largely been retained in cash or invested in high quality government-backed securities.  In addition, the Company continues to have significant available borrowing capacity from its contingent funding sources.Asset QualityAsset quality metrics continued to improve during the quarter.  Nonperforming loans, nonperforming assets, early stage delinquencies, and net charge-offs declined compared to the third quarter and are significantly lower than the fourth quarter of 2009.  As of December 31, 2010, the allowance for loan losses was $3.0 billion, a decline of $112 million from the prior quarter.  The reduction in the allowance for loan losses, combined with $920 million of growth in period-end total loans, resulted in a decline in the allowance to total loans ratio of 11 basis points to 2.58%.  At the end of 2010, approximately 7.5% of the Company's loan portfolio was comprised of government-guaranteed loans.  The reserve for unfunded commitments increased $3 million sequentially to $58 million.  Early stage delinquencies were 1.18% as of year-end, a modest improvement of 6 basis points from the end of the third quarter.  Net charge-off trends continued to improve, with fourth quarter net charge-offs of $621 million being less than the levels recognized in each of the previous six quarters.  On a sequential basis, net charge-offs declined $69 million. Construction and residential mortgage net charge-offs declined $102 million, while commercial loan charge-offs increased $29 million; net charge-offs for all other loan categories were relatively flat.  Compared to the fourth quarter of 2009, net charge-offs declined $200 million with declines in all loan categories except for commercial real estate, which increased to $38 million from $3 million.  For the current quarter, the ratio of annualized net charge-offs to total average loans was 2.14%, down 28 basis points and 69 basis points from the prior quarter and the fourth quarter of 2009, respectively.  The provision for credit losses for the current quarter was $512 million, down $103 million from the third quarter and down $462 million from the fourth quarter of 2009.  For the year, net charge-offs were $2.9 billion, down $384 million compared to 2009, while the provision for credit losses declined $1.4 billion.Nonaccrual loans declined $263 million, or 6%, from the prior quarter, continuing the downward trend experienced since the third quarter of 2009.  The overall decline during the quarter in nonaccrual loans was mainly attributable to reductions in construction, residential mortgage, and commercial loans, while nonaccrual commercial real estate loans increased $43 million, or 9%.  Nonaccrual loans totaled $4.1 billion, down $1.3 billion, or 24%, from the prior year.  Residential mortgage and construction nonaccrual loans declined $857 million, or 32%, and $356 million, or 24%, respectively.  At the end of the fourth quarter of 2010, nonaccrual loans represented 3.54% of total loans, down 121 basis points from the fourth quarter of 2009 and down 26 basis points from the prior quarter.  Repayments, charge-offs, transfers to other real estate owned, and reduced inflows to nonaccrual status contributed to the overall decline.  As of December 31, 2010, other real estate owned totaled $596 million, down $49 million since the prior quarter end. The Company continued its efforts to assist borrowers experiencing financial difficulties through loan modifications.  Accruing restructured loans increased during the quarter by $97 million and totaled $2.6 billion as of December 31, 2010.  Compared to December 31, 2009, accruing restructured loans increased $972 million.  Nonaccruing restructured loans remained relatively stable at $1.0 billion.  The vast majority of accruing restructured loans relate to consumers, primarily residential mortgages.  Nonaccruing restructured loans are also primarily related to consumers but also include $324 million of loans to business clients.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 annual report on Form 10-K.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 annual report on Form 10-K. 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 January 21, 2011, 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: 4Q10). Individuals calling from outside the United States should dial 1-517-308-9091 (Passcode: 4Q10). A replay of the call will be available approximately one hour after the call ends on January 21, 2011, and will remain available until February 4, 2011, by dialing 1-800-294-3092 (domestic) or 1-402-220-9770 (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 January 21, 2011, 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 impact of legislative and regulatory changes, 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," "potential impacts," "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: our expense for regulatory assessment may increase as a result of the passage of the Dodd-Frank Reform Act; 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 are subject to certain risks from originating, selling, and holding mortgages, including the risk that 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, and the risk of delays in the foreclosure process, both of 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 loans and lease 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 EndedTwelve Months EndedDecember 31%December 31%20102009Change (4)20102009Change (4)EARNINGS & DIVIDENDSNet income/(loss)$185($248) NM %$189($1,564) NM %Net income/(loss) available to common shareholders114(316) NM (87)(1,733)95Net income/(loss) available to common shareholders excluding goodwill/intangible impairment charges other than MSRs (1)114(316) NM (87)(1,018)91Total revenue - FTE (2)                              2,3261,949198,6998,2995Total revenue - FTE excluding securities gains, net (1)2,2621,876218,5088,2014Net income/(loss) per average common share                   Diluted (5)0.23(0.64) NM (0.18)(3.98)95     Diluted excluding     goodwill/intangible     impairment charges other than MSRs (1,5)0.23(0.64) NM (0.18)(2.34)92     Basic0.23(0.64) NM (0.18)(3.98)95Dividends paid per common share           0.010.01-0.040.22(82)CONDENSED BALANCE SHEETS Selected Average BalancesTotal assets$174,768$174,041-%$172,375$175,442(2)%Earning assets149,114146,5872147,187150,908(2)Loans114,930115,036-113,925121,041(6)Consumer and commercial deposits119,688117,0082117,129113,1644Brokered and foreign deposits2,8275,145(45)2,9166,082(52)Total shareholders' equity23,57622,381522,83422,2862As ofTotal assets172,874174,165(1)Earning assets148,473147,896-Loans115,975113,6752Allowance for loan and lease losses2,9743,120(5)Consumer and commercial deposits120,025116,3033Brokered and foreign deposits3,0195,560(46)Total shareholders' equity23,13022,5313FINANCIAL RATIOS & OTHER DATAReturn on average total assets0.42%(0.57)% NM %0.11%(0.89)%NM%Return on average assets less net unrealized securities gains (1)0.31(0.70) NM 0.01(0.96) NM Return on average common shareholders' equity2.44(7.19) NM (0.49)(10.07)95Return on average realized common shareholders' equity (1)          1.53(8.81) NM (1.53)(11.12)86Net interest margin (2)3.443.2753.383.0411Efficiency ratio (2)66.5774.58(11)67.9479.07(14)Tangible efficiency ratio (1)                    66.0773.96(11)67.3669.35(3)Effective tax rate/(benefit)19.66(51.46) NM NM (36.50) NM Tier 1 common equity8.08(3)7.675Tier 1 capital 13.65(3)12.965Total capital 16.50(3)16.43-Tier 1 leverage 10.90(3)10.90-Total average shareholders' equity to total average assets13.4912.86513.2512.704Tangible equity to tangible assets (1)                              10.129.665Book value per common share$36.34$35.293Tangible book value per common share (1)23.7622.595Market price:     High29.8224.092431.9230.186     Low23.2518.452620.166.00 NM     Close29.5120.294529.5120.2945Market capitalization14,76810,12846Average common shares outstanding (000s)     Diluted 499,423498,082-498,744437,48614     Basic495,710494,332-495,361435,32814Full-time equivalent employees29,05628,0014Number of ATMs2,9182,8223Full service banking offices1,6681,683(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 SubsidiariesFIVE QUARTER FINANCIAL HIGHLIGHTS(Dollars in millions, except per share data) (Unaudited)Three Months EndedDecember 31 September 30June 30March 31 December 31 20102010201020102009EARNINGS & DIVIDENDSNet income/(loss) $185$153$12($161)($248)Net income/(loss) available to common shareholders11484(56)(229)(316)Net income/(loss) available to common shareholders excludinggoodwill/intangible impairment charges other than MSRs (1)11484(56)(229)(316)Total revenue - FTE (2)                      2,3262,3132,1601,9001,949Total revenue - FTE excluding securities gains, net (1)2,2622,2442,1031,8991,876Net income/(loss) per average common share                   Diluted (4)0.230.17(0.11)(0.46)(0.64)     Diluted excluding     goodwill/intangible impairment     charges other than MSRs (1,4)0.230.17(0.11)(0.46)(0.64)     Basic0.230.17(0.11)(0.46)(0.64)Dividends paid per common share        0.010.010.010.010.01CONDENSED BALANCE SHEETS Selected Average BalancesTotal assets$174,768$171,999$171,273$171,429$174,041Earning assets149,114147,249145,464146,896146,587Loans114,930113,322113,016114,435115,036Consumer and commercial deposits119,688117,233116,460115,084117,008Brokered and foreign deposits2,8272,7402,6703,4335,145Total shareholders' equity23,57623,09122,31322,33822,381As ofTotal assets172,874174,703170,668171,796174,165Earning assets148,473149,994145,601147,056147,896Loans115,975115,055112,925113,979113,675Allowance for loan and lease losses2,9743,0863,1563,1763,120Consumer and commercial deposits120,025117,494116,261116,144116,303Brokered and foreign deposits3,0192,8502,4072,6065,560Total shareholders' equity23,13023,43823,02422,62022,531FINANCIAL RATIOS & OTHER DATAReturn on average total assets0.42%0.35%0.03%(0.38)%(0.57)%Return on average assets less net unrealized securities gains (1)0.310.23(0.08)(0.42)(0.70)Return on average common shareholders' equity2.441.83(1.29)(5.34)(7.19)Return on average realized common shareholders' equity (1)                     1.530.70(2.53)(5.93)(8.81)Net interest margin (2)3.443.413.333.323.27Efficiency ratio (2)66.5764.8069.5771.6074.58Tangible efficiency ratio (1)               66.0764.2468.9670.9173.96Effective tax rate/(benefit)19.668.25(133.13)(54.70)(51.46)Tier 1 common equity8.08(3)8.027.927.707.67Tier 1 capital 13.65(3)13.5813.5113.1312.96Total capital 16.50(3)16.4216.9616.6816.43Tier 1 leverage 10.90(3)11.0310.9410.9510.90Total average shareholders' equity to total average assets          13.4913.4213.0313.0312.86Tangible equity to tangible assets (1)               10.1210.1910.189.869.66Book value per common share$36.34$37.01$36.19$35.40$35.29Tangible book value per common share (1)23.7624.4223.5822.7622.59Market price:     High29.8227.0531.9228.3924.09     Low23.2521.7923.1220.1618.45     Close29.5125.8323.3026.7920.29Market capitalization14,76812,91411,64813,39110,128Average common shares outstanding (000s)     Diluted 499,423498,802498,499498,238498,082     Basic495,710495,501495,351494,871494,332Full-time equivalent employees29,05628,59928,25028,26328,001Number of ATMs2,9182,9282,9022,8282,822Full service banking offices1,6681,6701,6751,6781,683(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 SubsidiariesRECONCILEMENT OF NON-GAAP MEASURES APPENDIX A TO THE EARNINGS RELEASE (Dollars in millions, except per share data) (Unaudited) Three Months EndedTwelve Months EndedDecember 31September 30June 30March 31December 31December 31December 312010201020102010200920102009NON-GAAP MEASURES PRESENTED IN THE EARNINGS RELEASE (8)  Net income/(loss)      $185$153$12($161)($248)$189($1,564)Securities (gains)/losses, net of tax                (39)(43)(35)(1)(45)(118)(61)Net income/(loss) excluding securities (gains)/losses, net of tax             146110(23)(162)(293)71(1,625)The Coca-Cola Company stock dividend, net of tax                  (12)(12)(12)(12)(11)(47)(44)Net income/(loss) excluding securities (gains)/losses and The                Coca-Cola Company stock dividend, net of tax                        13498(35)(174)(304)24(1,669)Preferred dividends, Series A(2)(2)(2)(2)(2)(7)(14)U.S. Treasury preferred dividends and accretion of discount(67)(67)(66)(66)(66)(267)(266)Dividends and undistributed earnings allocated to unvested shares(2)----(2)17Gain on purchase of Series A preferred stock------94Net income/(loss) available to common shareholders excluding securities                (gains)/losses and The Coca-Cola Company stock dividend$63$29($103)($242)($372)($252)($1,838)Total average assets                 $174,768$171,999$171,273$171,429$174,041$172,375$175,442Average net unrealized securities gains                     (2,664)(2,395)(1,969)(1,884)(1,986)(2,231)(1,612)Average assets less net unrealized securities gains                    $172,104$169,604$169,304$169,545$172,055$170,144$173,830Total average common shareholders' equity                           $18,638$18,159$17,387$17,419$17,467$17,905$17,219Average accumulated other comprehensive income                     (2,055)(1,721)(998)(889)(698)(1,420)(692)Total average realized common shareholders' equity                $16,583$16,438$16,389$16,530$16,769$16,485$16,527Return on average total assets                 0.42%0.35%0.03%(0.38)%(0.57)%0.11%(0.89)%Impact of excluding net realized and unrealized securities                   (gains)/losses and The Coca-Cola Company stock dividend          (0.11)(0.12)(0.11)(0.04)(0.13)(0.10)(0.07)Return on average total assets less net unrealized            securities (gains)/losses (1)                       0.31%0.23%(0.08)%(0.42)%(0.70)%0.01%(0.96)%Return on average common shareholders' equity                     2.44%1.83%(1.29)%(5.34)%(7.19)%(0.49)%(10.07)%Impact of excluding net realized and unrealized securities (gains)/      losses and The Coca-Cola Company stock dividend                (0.91)(1.13)(1.24)(0.59)(1.62)(1.04)(1.05)Return on average realized common shareholders' equity (2)            1.53%0.70%(2.53)%(5.93)%(8.81)%(1.53)%(11.12)%Efficiency ratio (3)                    66.57%64.80%69.57%71.60%74.58%67.94%79.07%Impact of excluding amortization/impairment of goodwill/intangible assets              other than MSRs        (0.50)(0.56)(0.61)(0.69)(0.62)(0.58)(9.72)Tangible efficiency ratio (4)                           66.07%64.24%68.96%70.91%73.96%67.36%69.35%Total shareholders' equity                $23,130$23,438$23,024$22,620$22,531Goodwill, net of deferred taxes                     (6,189)(6,192)(6,197)(6,202)(6,204)Other intangible assets including MSRs, net of deferred taxes(1,545)(1,174)(1,409)(1,761)(1,671)MSRs1,4391,0721,2981,6411,540Tangible equity              16,83517,14416,71616,29816,196Preferred stock(4,942)(4,936)(4,929)(4,923)(4,917)Tangible common equity$11,893$12,208$11,787$11,375$11,279Total assets                 $172,874$174,703$170,668$171,796$174,165Goodwill                (6,323)(6,323)(6,323)(6,323)(6,319)Other intangible assets including MSRs                 (1,571)(1,204)(1,443)(1,800)(1,711)MSRs1,4391,0721,2981,6411,540Tangible assets                 $166,419$168,248$164,200$165,314$167,675Tangible equity to tangible assets (5)              10.12%10.19%10.18%9.86%9.66%Tangible book value per common share (6)$23.76$24.42$23.58$22.76$22.59Net interest income                    $1,266$1,238$1,178$1,172$1,177$4,854$4,466Taxable-equivalent adjustment                  2828303030116123Net interest income - FTE                1,2941,2661,2081,2021,2074,9704,589Noninterest income                    1,0321,0479526987423,7293,710Total revenue - FTE              2,3262,3132,1601,9001,9498,6998,299Securities gains, net(64)(69)(57)(1)(73)(191)(98)Total revenue - FTE excluding net securities (gains)/losses (7)$2,262$2,244$2,103$1,899$1,876$8,508$8,201(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)/losses.(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 MEASURESAPPENDIX A TO THE EARNINGS RELEASE, continued (Dollars in millions, except per share data) (Unaudited) Three Months EndedYear EndedDecember 312010September 302010June 302010March 312010December 312009December 312010December 312009NON-GAAP MEASURES PRESENTED IN THE EARNINGS RELEASE (2) Total noninterest expense$1,548$1,499$1,503$1,361$1,453$5,911$6,562Goodwill/intangible impairment charges other than MSRs------751Total noninterest expense excluding goodwill/intangible impairment charges other than MSRs (1)$1,548$1,499$1,503$1,361$1,453$5,911$5,811Net income/(loss)$185$153$12($161)($248)$189($1,564)Goodwill/intangible impairment charges other than MSRs, after tax ------724Net income/(loss) excluding goodwill/intangible impairment charges other than MSRs, after tax (1)$185$153$12($161)($248)$189($840)Net income/(loss) available to common shareholders$114$84($56)($229)($316)($87)($1,733)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)$114$84($56)($229)($316)($87)($1,018)Net income/(loss) per average common share, diluted$0.23$0.17($0.11)($0.46)($0.64)($0.18)($3.98)Impact of excluding goodwill/intangible impairment charges other than MSRs attributable     to common shareholders, after tax------1.64Net income/(loss) per average diluted common share, excluding goodwill/intangible      impairment charges other than MSRs, after tax (1)$0.23$0.17($0.11)($0.46)($0.64)($0.18)($2.34)SUPPLEMENTAL INCOME STATEMENT RECONCILIATIONNet income/(loss)      $185$153$12($161)($248)$189($1,564)Preferred dividends, Series A(2)(2)(2)(2)(2)(7)(14)U.S. Treasury preferred dividends and accretion of discount(67)(67)(66)(66)(66)(267)(266)Dividends and undistributed earnings allocated to unvested shares(2)----(2)17Gain on purchase of Series A preferred stock------94Net income/(loss) available to common shareholders $114$84($56)($229)($316)($87)($1,733)(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, Kris Dickson, +1-404-827-6714; Media, Mike McCoy, +1-404-588-7230