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Press release from PR Newswire

SunTrust Reports Second Quarter 2012 Results

Friday, July 20, 2012

SunTrust Reports Second Quarter 2012 Results06:00 EDT Friday, July 20, 2012Core Performance Momentum Continues, Drives Earnings Per Share of $0.50ATLANTA, July 20, 2012 /PRNewswire/ -- SunTrust Banks, Inc. (NYSE: STI) today reported net income available to common shareholders of $270 million, or $0.50 per average common share, for the second quarter of 2012.  Earnings per average common share increased by $0.04 from the first quarter of 2012 and by $0.17 from the second quarter of 2011.  For the first half of 2012, SunTrust earned $0.96 per share compared to $0.41 per share earned in the same period last year."We delivered another quarter of improved results marked by solid noninterest income growth and increased average performing loan balances, which were up nearly $10 billion from the second quarter of last year," said William H. Rogers, Jr., chairman and chief executive officer of SunTrust Banks, Inc.  "We remain focused on executing our strategies to drive better core performance and efficiency across the organization."Second Quarter 2012 Financial HighlightsIncome StatementContinued improvement in core business fundamentals helped drive net income available to common shareholders of $270 million.   Revenue grew 1% and 2% compared to the prior quarter and the second quarter of 2011, respectively.  Net interest income declined 3%, and the net interest margin declined ten basis points compared to the first quarter of 2012,  primarily as a result of the anticipated reduction in swap-related interest income.  Compared to the second quarter of 2011, net interest income increased 2% primarily due to higher loan balances and favorable trends in deposit mix and pricing. Noninterest income increased 7% and 3% compared to the prior quarter and the second quarter of 2011, respectively, due primarily to higher mortgage production income as strong production volumes continued  through the quarter.  Noninterest expense was relatively unchanged from the prior quarter and the second quarter of  2011.  The current quarter included a $13 million non-cash debt extinguishment charge related to the previously announced redemption of higher cost trust preferred securities. Balance SheetAs a result of targeted loan growth, average performing loans increased $1.1 billion over the prior quarter and $9.7 billion compared to the second quarter of 2011, while certain real estate-related loan portfolios continued to decline. Average client deposits remained steady at the record levels achieved in the prior quarter, and favorable mix trends continued.  Average demand deposits increased 3% and 23% on a sequential quarter and prior year basis, respectively.Capital Estimated capital ratios continue to be well above current regulatory requirements.  The Tier 1 common equity ratio increased to 9.40%.  In its revised capital plan submission in conjunction with the 2012 CCAR process, the Company elected to not request any incremental return of capital due to the close proximity of the resubmission to the 2013 CCAR process, which is expected to commence in the fourth quarter of 2012.Asset QualityImprovement in all primary credit metrics: Net charge-offs declined 17% compared with the prior quarter; the annualized net charge-off ratio was 1.14%, lower by 24 basis points compared to the prior quarter and 62 basis points lower than the second quarter of 2011. Nonperforming loans declined 7% sequentially and were 1.97% of total loans as of quarter end compared to 3.14% a year ago. Early stage delinquencies declined seven basis points sequentially as a result of improvements in the residential loan portfolio.Provision for credit losses declined 5% and 23% compared to the prior quarter and second quarter of 2011, respectively.  The allowance for loan losses was $2.3 billion, or 1.85% of total loans.   Income Statement (presented on a fully taxable-equivalent basis)2Q 20111Q 20122Q 2012(Dollars in millions, except per share data)Net income$178$250$275Net income available to common shareholders174245270Earnings per average common diluted share0.330.460.50Total revenue2,1982,2182,246Total revenue, excluding net securities gains/losses2,1662,2002,232Net interest income1,2861,3421,306Provision for credit losses392317300Noninterest income912876940Noninterest expense1,5421,5411,546Net interest margin3.53%3.49%3.39%Balance Sheet(Dollars in billions)Average loans$114.9$122.5$123.4Average consumer and commercial deposits121.9125.8125.9CapitalTier 1 capital ratio(1)11.11%11.00%10.15%Tier 1 common equity ratio(1)9.22%9.33%9.40%Total average shareholders' equity to total average assets11.44%11.45%11.51%Asset QualityNet charge-offs to average loans (annualized)1.76%1.38%1.14%Allowance for loan losses to period end loans2.40%1.92%1.85%Nonperforming loans to total loans3.14%2.16%1.97%(1)  Current period Tier 1 capital and Tier 1 common equity ratios are estimated as of the date of this news release and include the effect of the trust preferred securities redemption on July 11, 2012.  Consolidated Financial Performance Details(Presented on a fully taxable-equivalent basis unless otherwise noted)RevenueTotal revenue was $2.2 billion for the second quarter of 2012, an increase of $28 million from the prior quarter and $48 million higher than the second quarter of 2011.  Net gains from the sales of securities were $14 million for the second quarter of 2012 compared to $18 million for the first quarter of 2012 and $32 million for the second quarter of 2011.  Excluding net securities gains, total revenue increased 1% and 3% compared to the first quarter of 2012 and second quarter of 2011, respectively.  The increase in revenue was predominantly due to higher mortgage-related revenue.For the six months ended June 30, 2012, total revenue, excluding securities gains and losses, was $4.4 billion, up 4% over the first six months of 2011.  The increase was driven by higher mortgage-related revenue and higher net interest income, partially offset by a decline in card fees.Net Interest IncomeFor the second quarter of 2012, net interest income was $1,306 million compared to $1,342 million for the prior quarter and $1,286 million for the second quarter of 2011.  The 3% decline from the first quarter of 2012 was largely driven by the reduction in income derived from previously terminated interest rate swaps utilized to manage interest rate risk on commercial loans.  The 2% increase in net interest income compared to the second quarter of 2011 was due to higher average loan balances, the favorable shift in the deposit mix toward lower-cost accounts, and lower rates paid on interest-bearing deposits and long-term debt, which was partially offset by lower yields on average earning assets.  Net interest margin for the second quarter of 2012 was 3.39%, a decline of 10 basis points from the first quarter of 2012 and a decline of 14 basis points from the second quarter of 2011.  On a sequential quarter basis, the decline was primarily driven by the reduction in swap income, which was the primary contributor to the 11 basis point decline in earning assets yields, while rates paid on interest-bearing liabilities remained relatively stable. Compared to the second quarter of 2011, the decline in the net interest margin was primarily due to a 40 basis point decline in loan yields, the result of the continued low interest rate environment.  The decline in loan yields was partially offset by a 24 basis point decline in interest-bearing liabilities due to lower rates paid on deposits, primarily due to the shift towards lower-cost accounts, and lower long-term debt rates.For the six months ended June 30, 2012, net interest income was $2,648 million in 2012 compared to $2,563 million in 2011, an increase of  $85 million, or 3%.  Net interest margin was 3.44% in 2012 compared to 3.53% in 2011.  The primary drivers of the increase in net interest income and the decline in net interest margin are consistent with those described in the quarterly comparisons.Noninterest IncomeTotal noninterest income was $940 million for the second quarter of 2012 compared to $876 million for the first quarter of 2012 and $912 million for the second quarter of 2011.  The $64 million sequential quarter increase was driven by higher mortgage production-related revenue and increases in multiple other consumer and commercial noninterest income categories, partially offset by lower mortgage servicing revenue.  The increase of $28 million over the second quarter of 2011 was attributable to higher mortgage production-related revenue and higher trading income, partially offset by lower securities gains, investment banking income, and card fees. Mortgage production income was $103 million for the second quarter of 2012, compared to $63 million for the first quarter of 2012 and $4 million for the second quarter of 2011.  The $40 million sequential quarter increase was predominantly driven by $18 million in net gains from the sale of government guaranteed mortgages and a $20 million decrease in the mortgage repurchase provision.  As of June 30, 2012, the reserve for mortgage repurchases totaled $434 million, an increase of $51 million from the prior quarter.  The reserve increased due to the continued relatively high level of repurchase demands received during the quarter and the timing of demand resolution.  Compared to the second quarter of 2011, mortgage production income increased $99 million, primarily due to higher loan production and increased gain on sale margins, partially offset by a $65 million increase in the mortgage repurchase provision.  Mortgage loan production volume increased 8% on a sequential quarter basis due to an increase in home purchase activity.  Production volume increased 76% over the second quarter of 2011 due to the low mortgage interest rate environment and the HARP 2.0 program.    Mortgage servicing income was $70 million for the second quarter of 2012 compared to $81 million for the prior quarter and $72 million for the second quarter of 2011.  The $11 million sequential quarter decline was due to less favorable hedge performance than in the prior quarter. The mortgage servicing portfolio was $153 billion at the end of the second quarter of 2012 compared to $163 billion at June 30, 2011.Card fees were $66 million for the second quarter of 2012, compared to $61 million for the prior quarter and $105 million for the second quarter of 2011.  The 8% sequential quarter increase was due to increased transaction volume, while the 37% decline from the prior year was the result of regulations on debit card interchange fees that became effective at the beginning of the fourth quarter of 2011. Investment banking income was $75 million for the second quarter of 2012 compared to $71 million for the prior quarter and $95 million for the second quarter of 2011.  The sequential quarter increase was due to higher bond origination fees, partially offset by lower  syndicated finance fees.  The decline relative to the second quarter of 2011 was attributable to lower syndicated finance fee income, partially offset by increased bond origination and M&A transaction fee income.Trading  income was $70 million for the second quarter of 2012 compared to $57 million for the prior quarter and $53 million for the second quarter of 2011.  The $13 million sequential quarter increase was primarily attributable to a $20 million decline in mark-to-market losses on the Company's fair value debt and index-linked CDs during the current quarter.  The $17 million increase in trading income compared to the second quarter of 2011 was largely driven by higher core trading income due to improved market conditions.  For the six months ended June 30, 2012, noninterest income was $1,816 million in 2012 and $1,795 million in 2011.  The $21 million, or 1%, increase was primarily driven by higher mortgage-related income, partially offset by lower securities gains and lower card fees.  Noninterest ExpenseNoninterest expense was $1,546 million for the second quarter of 2012 and was relatively flat compared to $1,541 million for the first quarter of 2012 and $1,542 million for the second quarter of 2011.  On a sequential quarter basis, the seasonal decline in employee benefits expense was offset by increases in credit-related and other operating expenses, as well as $13 million in non-cash charges associated with the previously announced redemption of higher cost trust preferred securities.  Compared to the second quarter of 2011, increases in personnel costs, outside processing expenses, and the aforementioned debt extinguishment loss were offset by decreases in FDIC assessment premiums, marketing expenses, and credit-related expenses. As of the end of the current quarter, $250 million in annualized expenses had been eliminated from the Company's expense base through the Playbook for Profitable Growth program, compared to the $300 million goal expected to be achieved by year end 2013.  Employee compensation and benefits expense declined $35 million from the prior quarter, primarily attributable to seasonally higher 401(k) and payroll taxes in the prior quarter.  The $14 million, or 2%, increase in employee compensation and benefits expense compared to the second quarter of 2011 was due to improved business performance and modest annual merit increases.Credit-related expenses, which are included in other noninterest expense and comprised of other real estate-related expenses and credit and collection costs, increased $7 million on a sequential quarter basis due to accruals for anticipated tax and insurance payments on delinquent mortgage loans.  Credit-related expenses declined $11 million compared to the second quarter of 2011 due to lower losses recognized on OREO during the current quarter.Operating losses increased by $9 million and $7 million from the prior quarter and the second quarter of 2011, respectively.  The increase in both periods was driven by litigation-related expenses as well as operating losses associated with mortgage-related activities.  Compared to the second quarter of 2011, FDIC premiums and regulatory assessments declined $21 million, and marketing and customer development declined $14 million due to reduced advertising spending.     For the six months ended June 30, 2012, noninterest expense was $3.1 billion compared to $3.0 billion in 2011.  The $80 million, or 3%, increase was due to increases in: employee compensation, largely driven by improved business performance, operating losses associated primarily with mortgage-related activities, and outside processing and software costs.  These increases were partially offset by declines in marketing and customer development expenses and a decline in FDIC premiums and regulatory assessments.Income TaxesFor the second quarter of 2012, the Company recorded an income tax provision of $91 million compared to $69 million for the first quarter of 2012 and $58 million for the second quarter of 2011.  The effective tax rate was 25% for the second quarter of 2012 compared to 22% for the first quarter of 2012 and 24% for the second quarter of 2011.  The effective tax rate for each quarterly period was primarily the result of positive pre-tax earnings adjusted for net favorable permanent tax items, such as interest income from lending to tax-exempt entities and federal tax credits from community reinvestment activities.  U.S. Treasury Preferred Dividends The Company formerly paid dividends to the U.S. Treasury on its $4.85 billion of TARP preferred securities through the first quarter of 2011.  The Company redeemed these shares at the end of the first quarter of 2011 and, therefore, did not pay such dividends during 2012 or the last three quarters of 2011.  The six months ended June 30, 2011 included $66 million of preferred dividends paid to the U.S. Treasury and a $74 million, or $0.14 per common share, non-cash charge related to the unamortized discount that was recognized upon the redemption of the TARP preferred shares.Balance SheetAs of June 30, 2012, the Company had total assets of $178.3 billion and shareholders' equity of $20.6 billion, representing 11.5% of total assets.  Both book value and tangible book value per common share increased during the quarter and were $37.69 and $26.02, respectively, as of June 30, 2012.LoansAverage loans for the second quarter of 2012 were $123.4 billion, compared to average loans of $122.5 billion and $114.9 billion during the first quarter of 2012 and second quarter of 2011, respectively.  On a sequential quarter basis, the $0.8 billion, or 1%, growth was concentrated in commercial & industrial loans, which increased $1.3 billion, and high credit quality, non-guaranteed mortgage loans, which increased $761 million.  This was partially offset by a decrease of $625 million in government-guaranteed mortgage loans, primarily due to the sale of approximately $500 million of such loans that occurred during the current quarter.  Average loans increased $8.4 billion, or 7%, over the second quarter of 2011.  Growth was driven by targeted loan categories, including commercial & industrial and government-guaranteed student and residential mortgage loans, which increased by $10 billion combined, while certain real estate-related loan categories were managed down.  The reduction in real estate-related loans, together with an increase in government-guaranteed loans, resulted in improvement in the risk profile of the loan portfolio.  As of June 30, 2012, 10% of the Company's loan portfolio was comprised of government-guaranteed loans, up from 8% at the end of the second quarter of 2011.  DepositsAverage consumer and commercial deposits for the second quarter of 2012 were $125.9 billion compared to $125.8 billion and $121.9 billion for the first quarter of 2012 and second quarter of 2011, respectively.  The favorable shift in the deposit mix toward lower cost accounts continued during the quarter, with a $1.2 billion, or 3%, increase in demand deposits and a $0.3 billion, or 6%, increase in savings accounts.  These were largely offset by a $650 million, or 4%, decline in time deposits and a $539 million, or 1%, decline in money market account deposits.  Compared to the second quarter of 2011, average consumer and commercial deposits increased $4.0 billion, or 3%. Average demand deposits increased $6.8 billion, or 23%, and savings accounts increased $0.6 billion, or 13%.  Time deposits declined $2.7 billion, or 14%, and money market account deposits declined $0.9 billion, or 2%.  Capital and LiquidityThe Company's estimated capital ratios are well above regulatory requirements with Tier 1 capital and Tier 1 common ratios estimated at 10.15% and 9.40%, respectively.  The Company redeemed $38 million of trust preferred securities during the second quarter and also announced plans to redeem an additional $1.2 billion, which it subsequently completed in July.  As a result of the announcement of these redemptions, these instruments no longer qualified for Tier 1 capital as of the end of the second quarter, which accounted for 90 basis points of the decline in the estimated Tier 1 capital ratio from the prior quarter.  The ratios of total average equity to total average assets and tangible equity to tangible assets were 11.51% and 8.31%, respectively, as of June 30, 2012.  The aforementioned trust preferred securities redemptions were included as part of the Company's capital plan submitted to the Federal Reserve in January 2012 in conjunction with the Comprehensive Capital Assessment Review (CCAR) process.  Upon completing its review of the Company's capital plan in March 2012, the Federal Reserve did not object to the trust preferred redemptions or to the Company retaining its current common stock dividend.  Because the Federal Reserve objected to other proposed capital actions, the Company was required to submit a revised capital plan, which it did in June 2012.  In the revised submission, the Company elected to not request an increase in the current level of its common dividend or any other return of capital, due to the close proximity of the resubmission to the 2013 CCAR process, which is expected to commence in the fourth quarter of 2012 and will provide the Company an opportunity to consider future capital deployment alternatives.  The Company continues to have substantial available liquidity provided in the form of its client deposit base and other available funding resources, as well as the portfolio of cash and high-quality government-backed securities.  Asset QualityAsset quality continued to improve during the quarter, with declines in early-stage delinquencies, net charge-offs, nonperforming loans, and nonperforming assets.  Nonperforming loans declined again this quarter and totaled $2.5 billion as of June 30, 2012.  Relative to the first quarter of 2012, the $191 million, or 7%, decline occurred across all loan categories, most prominently in commercial construction, residential construction, and commercial real estate loans.  During the second quarter, the Company sold the nonperforming residential loans that were moved to held for sale during the prior quarter; the sales price was similar to the carrying value of these loans as of March 31, 2012.  Compared to June 30, 2011, nonperforming loans declined $1.2 billion, or 32%, with declines across all loan categories, most significantly in commercial loans and non-guaranteed mortgages.  At the end of the second quarter of 2012, the percentage of nonperforming loans to total loans was 1.97%, down by 19 and 117 basis points from the first quarter of 2012 and second quarter of 2011, respectively.  Other real estate owned totaled $331 million at the end of the current quarter, down 19% on a sequential quarter basis and down 31% since June 30, 2011.  Net charge-offs were $350 million in the current quarter compared to $422 million for the prior quarter and $505 million for the second quarter of 2011.  The sequential quarter decline was largely driven by nonguaranteed mortgages, home equity, and commercial real estate.  The prior year decline was widespread across loan categories, most notably in commercial & industrial, commercial construction, and home equity.  The ratio of annualized net charge-offs to total average loans was 1.14%, a reduction of 24 basis points and 62 basis points from the first quarter of 2012 and second quarter of 2011, respectively.  The provision for credit losses was $300 million, down by $17 million and $92 million from the prior quarter and the second quarter of 2011, respectively. As of June 30, 2012, the allowance for loan losses was $2.3 billion and represented 1.85% of total loans, down seven basis points from March 31, 2012.  The $48 million decline in the allowance for loan losses during the second quarter of 2012 was reflective of the continued improvement in asset quality, partially offset by growth in the loan portfolio.Early stage delinquencies decreased seven basis points to 0.97% from the end of the first quarter of 2012. The decline was primarily due to improvement in the residential portfolio, driven by non-guaranteed residential mortgages, home equity products, and construction loans.  Excluding government-guaranteed loans, early stage delinquencies were 0.51%, a decline of eight basis points from March 31, 2012.Accruing restructured loans totaled $2.7 billion, and nonaccruing restructured loans totaled $0.7 billion as of June 30, 2012, both declining modestly from the prior quarter.   $3.0 billion of restructured loans related to residential loans, while $0.3 billion were commercial loans.LINE OF BUSINESS FINANCIAL PERFORMANCELine of Business ResultsThe Company has included line of business financial tables as part of this release on the Investor Relations portion of its website at www.suntrust.com/investorrelations. The Company's business segments include: Consumer Banking and Private Wealth Management, Wholesale Banking, and Mortgage Banking. 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, which includes the Treasury department as well as the residual expense associated with operational and support expense allocations. The Corporate Other 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 Investor Relations portion of the Company's website at www.suntrust.com/investorrelations. This information is also included in a current report on Form 8-K furnished with the Securities and Exchange Commission today.Conference CallSunTrust management will host a conference call on July 20, 2012, 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: 2Q12). Individuals calling from outside the United States should dial 1-517-308-9091 (Passcode: 2Q12). A replay of the call will be available approximately one hour after the call ends on July 20, 2012, and will remain available until August 20, 2012, by dialing 1-800-239-4590 (domestic) or 1-402-220-9698 (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 July 20, 2012, listeners may access an archived version of the webcast in the "Recent Earnings and Conference 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 StatementsThis 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.  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," "goals," "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. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements 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 Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2011 and in other periodic reports that we file with the SEC. Those factors include: as one of the largest lenders in the Southeast and Mid-Atlantic U.S. and a provider of financial products and services to consumers and businesses across the U.S., our financial results have been, and may continue to be, materially affected by general economic conditions, particularly unemployment levels and home prices in the U.S., and a deterioration of economic conditions or of the financial markets may materially adversely affect our lending and other businesses and our financial results and condition; legislation and regulation, including the Dodd-Frank Act, as well as future legislation and/or regulation, could require us to change certain of our business practices, reduce our revenue, impose additional costs on us or otherwise adversely affect our business operations and/or competitive position; we are subject to capital adequacy and liquidity guidelines and, if we fail to meet these guidelines, our financial condition would be adversely affected; loss of customer deposits and market illiquidity could increase our funding costs; we rely on the mortgage secondary market and GSEs for some of our liquidity; we are subject to credit risk; our ALLL may not be adequate to cover our eventual losses; we may have more credit risk and higher credit losses to the extent our loans are concentrated by loan type, industry segment, borrower type, or location of the borrower or collateral; we will realize future losses if the proceeds we receive upon liquidation of nonperforming assets are less than the carrying value of such assets; a downgrade in the U.S. government's sovereign credit rating, or in the credit ratings of instruments issued, insured or guaranteed by related institutions, agencies or instrumentalities, could result in risks to us and general economic conditions that we are not able to predict; the failure of the European Union to stabilize the fiscal condition and creditworthiness of its weaker member economies, such as Greece, Portugal, Spain, Hungary, Ireland, and Italy, could have international implications potentially impacting global financial institutions, the financial markets, and the economic recovery underway in the U.S.; weakness in the real estate market, including the secondary residential mortgage loan markets, has adversely affected us and may continue to adversely affect us; we are subject to certain risks related to originating and selling mortgages, and may be required to repurchase mortgage loans or indemnify mortgage loan purchasers as a result of breaches of representations and warranties, borrower fraud, or as a result of certain breaches of our servicing agreements, and this could harm our liquidity, results of operations, and financial condition; financial difficulties or credit downgrades of mortgage and bond insurers may adversely affect our servicing and investment portfolios; we may be terminated as a servicer or master servicer, be required to repurchase a mortgage loan or reimburse investors for credit losses on a mortgage loan, or incur costs, liabilities, fines and other sanctions if we fail to satisfy our servicing obligations, including our obligations with respect to mortgage loan foreclosure actions; we are subject to risks related to delays in the foreclosure process; we may continue to suffer increased losses in our loan portfolio despite enhancement of our underwriting policies and practices; our mortgage production and servicing revenue can be volatile; 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 and liquidity; changes in interest rates could also reduce the value of our MSRs and mortgages held for sale, reducing our earnings; the fiscal and monetary policies of the federal government and its agencies could have a material adverse effect on our earnings; 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 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; a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors and other service providers, including as a result of cyber attacks, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses; we rely on other companies to provide key components of our business infrastructure; the soundness of other financial institutions could adversely affect us; we depend on the accuracy and completeness of information about clients and counterparties; 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 margin declines; maintaining or increasing market share depends on market acceptance and regulatory approval of new products and services; we might not pay dividends on your common stock; our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay dividends; disruptions in our ability to access global capital markets may adversely affect our capital resources and liquidity; any reduction in our credit rating could increase the cost of our funding from the capital markets; 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 are subject to certain litigation, and our expenses related to this litigation may adversely affect our results; we may incur fines, penalties and other negative consequences from regulatory violations, possibly even inadvertent or unintentional violations; 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 strategies; our accounting policies and processes are critical to how we report our financial condition and results of operations, and they 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 framework for managing risks may not be effective in mitigating risk and loss to us; 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 EndedSix Months EndedJune 30%June 30%20122011Change (4)20122011Change (4)EARNINGS & DIVIDENDSNet income$275$17854%$525$35847%Net income available to common shareholders                                                                                                                          27017455%515212NMTotal revenue - FTE 1, 2                              2,2462,1982%4,4644,3582%Total revenue - FTE excluding securities gains, net 1, 22,2322,1663%4,4324,2624%Net income per average common share                    Diluted 0.500.3352%0.960.41NM     Diluted excluding effect of accelerated accretion associated with repurchase of preferred stock issued to the U.S. Treasury 10.500.3352%0.960.5575%     Basic0.510.3355%0.970.41NMDividends paid per common share           0.050.01NM0.100.02NMCONDENSED BALANCE SHEETS Selected Average BalancesTotal assets$177,915$170,5274%$177,385$171,7893%Earning assets154,890145,9856%154,757146,3836%Loans123,365114,9207%122,954115,0407%Consumer and commercial deposits125,885121,8793%125,864121,2984%Brokered time and foreign deposits2,2432,340-4%2,2582,472-9%Total shareholders' equity20,47219,5095%20,36421,298-4%As ofTotal assets178,257172,1734%Earning assets153,939146,3675%Loans124,560114,9138%Allowance for loan and lease losses2,3002,744-16%Consumer and commercial deposits126,145121,6714%Brokered time and foreign deposits2,2583,250-31%Total shareholders' equity20,56819,6605%FINANCIAL RATIOS & OTHER DATAReturn on average total assets0.62%0.42%48%0.59%0.42%40%Return on average common shareholders' equity5.373.6149%5.162.28NMNet interest margin 23.393.53-4%3.443.53-3%Efficiency ratio 268.8370.17-2%69.1769.010%Tangible efficiency ratio 1, 2                    68.3369.64-2%68.6768.490%Effective tax rate 24.8524.452%23.3120.2115%Tier 1 common equity 39.409.222%Tier 1 capital 310.1511.11-9%Total capital 312.8014.01-9%Tier 1 leverage 38.158.92-9%Total average shareholders' equity to total average assets11.5111.441%11.4812.40-7%Tangible equity to tangible assets 1                              8.318.073%Book value per common share$37.69$36.304%Tangible book value per common share 126.0224.576%Market price:     High24.8330.13-18%24.9333.14-25%     Low20.9624.63-15%18.0724.63-27%     Close24.2325.80-6%24.2325.80-6%Market capitalization13,04513,852-6%Average common shares outstanding (000s)     Diluted 537,495535,4160%536,951519,5483%     Basic533,964531,7920%533,532515,8193%Full-time equivalent employees28,32429,235-3%Number of ATMs2,9062,9190%Full service banking offices1,6411,661-1%1See Appendix A for reconcilements of non-GAAP performance measures.                  2Total 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.            3Current 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. SunTrust Banks, Inc. and SubsidiariesFIVE QUARTER FINANCIAL HIGHLIGHTS(Dollars in millions, except per share data) (Unaudited)Three Months Ended June 30 March 31December 31September 30 June 30 20122012201120112011EARNINGS & DIVIDENDSNet income$275$250$74$215$178Net income available to common shareholders                                                      27024571211174Total revenue - FTE1, 2                      2,2462,2182,0472,1962,198Total revenue - FTE excluding securities gains, net1, 22,2322,2002,0282,1942,166Net income per average common share                    Diluted 0.500.460.130.390.33     Basic0.510.460.130.400.33Dividends paid per common share        0.050.050.050.050.01CONDENSED BALANCE SHEETS Selected Average BalancesTotal assets$177,915$176,855$174,085$172,076$170,527Earning assets154,890154,623151,561146,836145,985Loans123,365122,542119,474115,638114,920Consumer and commercial deposits125,885125,843125,072122,974121,879Brokered time and foreign deposits2,2432,2742,2932,3122,340Total shareholders' equity20,47220,25620,20820,00019,509As ofTotal assets178,257178,226176,859172,553172,173Earning assets153,939154,950154,696148,991146,367Loans124,560122,691122,495117,475114,913Allowance for loan and lease losses2,3002,3482,4572,6002,744Consumer and commercial deposits126,145127,718125,611123,933121,671Brokered time and foreign deposits2,2582,3142,3112,3183,250Total shareholders' equity20,56820,24120,06620,20019,660FINANCIAL RATIOS & OTHER DATAReturn on average total assets0.62%0.57%0.17%0.50%0.42%Return on average common shareholders' equity5.374.941.414.233.61Net interest margin23.393.493.463.493.53Efficiency ratio268.8369.5081.4571.0570.17Tangible efficiency ratio1, 2               68.3369.0280.9970.5569.64Effective tax rate424.8521.55NM17.3324.45Tier 1 common equity39.409.339.229.319.22Tier 1 capital310.1511.0010.9011.1011.11Total capital312.8013.7313.6713.9114.01Tier 1 leverage38.158.778.758.908.92Total average shareholders' equity to total average assets          11.5111.4511.6111.6211.44Tangible equity to tangible assets1               8.318.148.108.388.07Book value per common share$37.69$37.11$36.86$37.29$36.30Tangible book value per common share126.0225.4925.1825.6024.57Market price:     High24.8324.9321.3126.5230.13     Low20.9618.0715.7916.5124.63     Close24.2324.1717.7017.9525.80Market capitalization13,04513,0059,5049,63913,852Average common shares outstanding (000s)     Diluted 537,495536,407535,717535,395535,416     Basic533,964533,100532,146531,928531,792Full-time equivalent employees28,32428,61529,18229,48329,235Number of ATMs2,9062,9142,8992,8892,919Full service banking offices1,6411,6511,6591,6581,6611See Appendix A for reconcilements of non-GAAP performance measures.                  2Total 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.  3Current 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  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 EndedSix  Months EndedJune 30March 31December 31September 30June 30June 30June 302012201220112011201120122011NON-GAAP MEASURES PRESENTED IN THE EARNINGS RELEASE1Efficiency ratio2                    68.83%69.50%81.45%71.05%70.17%69.17%69.01%Impact of excluding amortization of intangible assets                                                                                                      -0.50%-0.48%-0.46%-0.50%-0.53%-0.50%-0.52%Tangible efficiency ratio3                       68.33%69.02%80.99%70.55%69.64%68.67%68.49%Total shareholders' equity                $20,568$20,241$20,066$20,200$19,660Goodwill, net of deferred taxes of $156 million, $164 million, $154 million, $149 million, and $144 million, respectively(6,220)(6,180)(6,190)(6,195)(6,199)Other intangible assets, net of deferred taxes of $10 million, $14 million, $16 million, $18 million, and $21 million, respectively, and MSRs(929)(1,142)(1,001)(1,120)(1,518)MSRs8651,0709211,0331,423Tangible equity              14,28413,98913,79613,91813,366Preferred stock(275)(275)(275)(172)(172)Tangible common equity$14,009$13,714$13,521$13,746$13,194Total assets                 $178,257$178,226$176,859$172,553$172,173Goodwill                (6,376)(6,344)(6,344)(6,344)(6,343)Other intangible assets including MSRs                 (939)(1,155)(1,017)(1,138)(1,539)MSRs8651,0709211,0331,423Tangible assets                 $171,807$171,797$170,419$166,104$165,714Tangible equity to tangible assets4           8.31%8.14%8.10%8.38%8.07%Tangible book value per common share5$26.02$25.49$25.18$25.60$24.57Net interest income                    $1,274$1,311$1,294$1,263$1,259$2,585$2,508Taxable-equivalent adjustment                  32313030276355Net interest income - FTE                1,3061,3421,3241,2931,2862,6482,563Noninterest income                    9408767239039121,8161,795Total revenue - FTE              2,2462,2182,0472,1962,1984,4644,358Securities gains, net(14)(18)(19)(2)(32)(32)(96)Total revenue - FTE excluding net securities gains6$2,232$2,200$2,028$2,194$2,166$4,432$4,262Total loans$124,560$122,691$122,495$117,475$114,913Government guaranteed loans(12,911)(13,633)(13,871)(9,782)(9,133)Loans held at fair value(406)(413)(433)(452)(449)Total loans, excluding government guaranteed and fair value loans$111,243$108,645$108,191$107,241$105,331Allowance to total loans, excluding government guaranteed and fair value loans 72.07%2.16%2.27%2.42%2.61%1 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 EndedSix  Months EndedJune 30March 31December 31September 30June 30June 30June 302012201220112011201120122011NON-GAAP MEASURES PRESENTED IN THE EARNINGS RELEASE1Net income available to common shareholders                                                                                             $270$245$71$211$174$515$212Accelerated accretion associated with repurchase of preferred stock   issued to the U.S. Treasury------74Net income available to common shareholders excluding   accelerated accretion associated with repurchase of preferred stock   issued to the U.S. Treasury$270$245$71$211$174$515$286Net income per average common share - diluted$0.50$0.46$0.13$0.39$0.33$0.96$0.41Effect of accelerated accretion associated with repurchase of preferred   stock issued to the U.S. Treasury------0.14Net income per average common share - diluted, excluding effect   of accelerated accretion associated with repurchase of preferred stock   issued to the U.S. Treasury$0.50$0.46$0.13$0.39$0.33$0.96$0.55RECONCILIATION OF NET INCOME AVAILABLE TO COMMON SHAREHOLDERS:Net income$275$250$74$215$178$525$358Preferred dividends(3)(3)(2)(2)(2)(6)(4)Dividends and accretion of discount on preferred stock issued to the U.S. Treasury------(66)Accelerated accretion associated with repurchase of preferred stock   issued to the U.S. Treasury------(74)Dividends and undistributed earnings allocated to unvested shares(2)(2)(1)(2)(2)(4)(2)Net income available to common shareholders  $270$245$71$211$174$515$2121Certain 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; or Media, Mike McCoy, +1-404-588-7230