SunTrust Reports Fourth Quarter 2011 Results

ATLANTA, Jan. 20, 2012 /PRNewswire/ -- SunTrust Banks, Inc. (NYSE: STI) today reported net income available to common shareholders of $152 million, or $0.28 per average common share, for the fourth quarter of 2011.  Earnings per average common share compared favorably to $0.23 for the fourth quarter of 2010 and declined from $0.39 in the third quarter of 2011.  Strong loan and deposit growth drove results, and credit quality continued to improve.  For the year, earnings were $1.09 per average common share compared to a loss of $0.18 per average common share in 2010.  The improvement in annual earnings was due to higher net interest income, lower provision for credit losses, and the repayment of TARP.

"Our client-centric banking approach is driving momentum in our core business fundamentals," said William H. Rogers, Jr., chairman and chief executive officer of SunTrust Banks, Inc.  "We experienced healthy loan growth again this quarter, particularly in our commercial and industrial portfolio, which we have targeted for expansion.  Our favorable deposit growth and mix trends continued.  Additionally, credit quality improved with further declines in net charge-offs and nonperforming loans."   Mr. Rogers also noted that, while the Company is still facing some legacy mortgage challenges, it is making progress in its efforts to reduce its expense base and ultimately improve efficiency.      

Fourth Quarter 2011 Financial Highlights
Income Statement

• Net income available to common shareholders for the fourth quarter of 2011 was $0.28 per average common share compared to earnings of $0.39 per average common share for the prior quarter and $0.23 per average common share for the fourth quarter of 2010.
• Earnings per average common share was $1.09 for the full year 2011 compared to a net loss of $0.18 per average common share for 2010. The growth was driven by a lower provision for credit losses, higher net interest income, and the elimination of the TARP preferred dividends. These factors were partially offset by lower mortgage-related revenue, reduced deposit service charges, and higher mortgage and legal expenses.
• Total revenue, excluding net gains on the sale of investment securities, declined 8% and 10% compared to the prior quarter and the fourth quarter of 2010, respectively. The sequential quarter decrease was driven by a higher mortgage repurchase provision, a mortgage servicing rights valuation adjustment, and lower card fee income, partially offset by higher net interest income.
• Net interest income increased 2% compared to both the prior quarter and the fourth quarter of 2010. Growth was predominantly driven by lower deposit costs as a result of the continued favorable shift in the deposit mix toward low-cost accounts; higher loan balances also contributed.
• The net interest margin was 3.46%, a decline of three basis points from the prior quarter due to lower earning asset yields, partially offset by lower rates on interest-bearing liabilities. The net interest margin increased two basis points over the fourth quarter of 2010 due to lower deposit costs.
• Noninterest income declined 20% and 30%, respectively, from the prior quarter and the fourth quarter of 2010. The declines from both periods were attributable to an increase in the mortgage repurchase provision, as well as a mortgage servicing rights valuation adjustment arising from anticipated refinance activity from the HARP 2.0 program. Card fees also declined as a result of reduced debit interchange revenue due to regulations that became effective during the fourth quarter of 2011.
• Noninterest expense declined 1% compared to the prior quarter and remained stable compared to the fourth quarter of 2010. Lower employee compensation and benefits expense was predominantly offset by increases in credit-related expenses, legal accruals, and severance expense.

Credit Quality

• Credit quality continued to improve with net charge-offs, nonperforming loans, and nonperforming assets all declining.
• Early stage delinquencies increased due to the acquisition of government-guaranteed student loans; however, when excluding government-guaranteed loans, early stage delinquencies declined.
• Net charge-offs declined 4% compared with the prior quarter and 24% compared with the fourth quarter of 2010. The annualized net charge-off ratio was 1.57% for the current quarter.
• Nonperforming loans declined 10% during the quarter, the tenth consecutive quarterly decline. Nonperforming loans declined 29% from a year ago.
• Provision for credit losses declined. The allowance for loan losses was $2.5 billion, or 2.01% of total loans, as of December 31, 2011. When excluding government-guaranteed loans, the allowance for loan losses was 2.27%.

Balance Sheet

• Average loans increased 3% compared to the prior quarter. Commercial & industrial and guaranteed student loans were the primary drivers of the growth, while certain real estate-related loan portfolios continued to decline.
• Average client deposits grew to another record level, increasing $2.1 billion, or 2%, compared to the prior quarter. The favorable trend in the deposit mix toward lower-cost accounts continued as demand deposits increased $2.1 billion, or 7%, while higher-cost time deposits declined.
• Estimated capital ratios continue to be well above current regulatory requirements, as well as the Basel III proposed guidance. The Tier 1 capital and Tier 1 common ratios were estimated to be 10.95% and 9.25%, respectively, as of December 31, 2011.

 

 

Consolidated Financial Performance
(Presented on a fully taxable-equivalent basis unless otherwise noted)

Revenue
Total revenue was $2,047 million for the quarter, lower by $149 million from the prior quarter and lower by $279 million from the fourth quarter of 2010.  Net gains from the sales of securities were $19 million for the fourth quarter of 2011 compared to $2 million for the third quarter of 2011 and $64 million for the fourth quarter of 2010.  Excluding net securities gains, total revenue decreased 8% and 10%, respectively, compared to the prior quarter and fourth quarter of 2010.  The declines were predominantly due to a higher mortgage repurchase provision, a mortgage servicing rights (MSR) valuation adjustment, and lower card fee income, partially offset by higher net interest income.

For 2011, total revenue, excluding net securities gains, was $8,483 million, a modest decline of $25 million compared with 2010.  The decrease in noninterest income, namely mortgage-related income and service charges on deposit accounts, was largely offset by increased net interest income.

Net Interest Income
For the fourth quarter of 2011, net interest income was $1,324 million compared with $1,293 million for the prior quarter and $1,294 million for the fourth quarter of 2010.  The 2% increases over both the prior quarter and the fourth quarter of 2010 were driven by increased earning assets, lower rates on deposits, and a continued shift in the deposit mix toward low-cost deposits, largely offset by lower earning asset yields.  For the year, net interest income increased 4%.

Net interest margin for the fourth quarter of 2011 was 3.46%, a decline of three basis points from the prior quarter and an increase of two basis points from the fourth quarter of 2010.  On a sequential quarter basis, yields on earning assets declined eleven basis points, driven by lower loan and investment securities yields, while rates on interest-bearing liabilities declined nine basis points due to lower rates on deposits.  Compared to the fourth quarter of 2010, the favorable shift in deposit mix, lower deposit rates, and reduced long-term debt contributed to a decline in interest-bearing liabilities of 25 basis points, more than offsetting the 20 basis point decline in earning asset yields.  Net interest margin was 3.50% for 2011, up twelve basis points from 2010 due to the decline in rates on deposits more than offsetting the lower yield on earning assets.   

Noninterest Income
Total noninterest income was $723 million for the fourth quarter of 2011 compared to $903 million for the prior quarter and $1,032 million for the fourth quarter of 2010.  The $180 million decline compared to the prior quarter was driven by a higher mortgage repurchase provision, the MSR valuation adjustment associated with HARP 2.0, and lower card fee income.  These declines were partially offset by higher investment banking income and an increase in net gains on the sale of investment securities.  The decline of $309 million from the fourth quarter of 2010 was also largely attributable to the higher mortgage repurchase provision, the MSR valuation adjustment, and lower card fees, with additional declines occurring across most other fee income categories.

Mortgage production income was a loss of  $62 million for the fourth quarter of 2011, compared to income of $54 million for the prior quarter and $41 million for the fourth quarter of 2010.  The $116 million sequential quarter decrease was predominantly driven by a $98 million increase in the mortgage repurchase provision, due to higher agency-related repurchase requests and an increase in the mortgage repurchase reserve.  As of December 31, 2011, reserves for mortgage repurchases totaled $320 million, an increase of $38 million from the prior quarter.  Compared to the fourth quarter of 2010, mortgage production income declined $103 million, primarily due to an increase in the mortgage repurchase provision, partially offset by higher income from loan production activities.  

Mortgage servicing income was $22 million for the fourth quarter of 2011 compared to $58 million for the prior quarter and $68 million for the fourth quarter of  2010.  An increase in prepayment assumptions attributable to anticipated refinancing activity arising from the HARP 2.0 program resulted in a $38 million decline in the fair value of the MSR.  The mortgage servicing portfolio was $158 billion at the end of the fourth quarter of 2011.

Card fee income was $62 million for the fourth quarter of 2011 compared to $104 million for the prior quarter and $99 million for the fourth quarter of 2010.  The decrease in the current quarter was a result of regulations on debit card interchange fee income that became effective at the beginning of this quarter.

Investment banking income was $87 million for the fourth quarter of 2011 compared to $68 million for the prior quarter and $103 million for the fourth quarter of 2010.  The increase in the current quarter was due to higher loan syndication fee income.  The decline relative to the fourth quarter of 2010 came across most capital markets fee categories, as the prior year quarter posted record investment banking revenue.

Trading account profits and commissions were $77 million for the fourth quarter of 2011 compared with $66 million for the prior quarter and $93 million for the fourth quarter of 2010.  The $11 million sequential quarter increase was largely attributable to market conditions that were less volatile in the fourth quarter of 2011.  Predominantly offsetting the increase from the more favorable market conditions was a $61 million decline in valuation gains related the Company's fair value debt and index-linked CDs, net of hedges.  Such gains totaled $78 million during the third quarter of 2011, driven by the widening of financial institutions' credit spreads amidst the third quarter market volatility; during the fourth quarter of 2011, these fair value gains, net of hedges, totaled $17 million.  The $16 million decrease in trading account profits and commissions compared to the fourth quarter of 2010 was largely driven by lower valuation gains on illiquid securities.

Other noninterest income was $39 million for the fourth quarter of 2011 compared with $53 million for the prior quarter and $70 million for the fourth quarter of 2010.  The $14 million sequential quarter decrease was largely driven by lower leasing gains and certain asset write-downs.  The $31 million decline compared to the fourth quarter of 2010 was largely driven by a gain from the sale of the money market mutual fund business in the fourth quarter of 2010 and the aforementioned asset write-downs.

For the full year, noninterest income was $3.4 billion for 2011, lower by $308 million compared to the full year 2010.  Decreases in mortgage-related income, service charges on deposit accounts (due to Reg. E), other fee income, and gains on sale of investment securities were partially offset by increased trust income, retail investment income, and higher valuation gains on the Company's fair value debt and index-linked CDs.

Noninterest Expense
Noninterest expense was $1,547 million for the current quarter compared to $1,560 million for the prior quarter and $1,548 million for the fourth quarter of 2010.  The modest changes from both the sequential quarter and prior year were predominantly due to a decrease in employee compensation and benefits expenses offset by increases in severance expense, credit-related expenses, and operating losses. 

Employee compensation and benefits expense declined from the prior quarter by $126 million, driven by a $60 million gain recorded in connection with the decision to curtail the Company's defined benefit pension plans, partially offset by a discretionary 401(k) contribution.  Additionally, employee compensation and benefits declined due to a fourth quarter 2011 reduction in incentives that are tied to the Company's annual financial performance.  The $114 million decline in employee compensation and benefits from the fourth quarter of 2010 was attributable to these same factors. 

Other noninterest expense increased $79 million from the prior quarter and $53 million from the prior year quarter.  During the fourth quarter of 2011, the Company accrued $27 million in severance expense related to its Playbook for Profitable Growth (PPG) initiative.  Significant strides in the design and implementation of the PPG initiatives occurred, resulting in the recognition of the severance costs and a decline in full-time equivalent employees.  At year end 2011, $75 million in annualized expenses had been eliminated from the expense base, compared to the $300 million goal expected to be achieved by year end 2013.  Credit and collections expenses increased by approximately $20 million from both the prior quarter and prior year quarter due to costs associated with the servicing and resolution of nonperforming loans.  The remaining variance in other noninterest expense from the prior quarter was largely attributable to affordable housing write-downs and consulting expenses, which both increased by approximately $10 million.

Operating losses increased by $24 million from the prior quarter and $70 million from the prior year quarter.  The sequential quarter increase was due to increased litigation-related expenses tied to specific claims.  The increase from the fourth quarter of 2010 was primarily due to litigation expenses and operating losses associated with mortgage servicing.  The Company recently commenced discussions related to a mortgage servicing settlement.  Because these discussions are in the preliminary stages, we are not able to provide an estimate and have not recorded an accrual for the potential financial impact in the Company's 2011 financial results.  We expect to provide an update on this matter in the upcoming Form 10-K, which may include recording a charge effective December 31, 2011, in accordance with the appropriate accounting standards.

For the year ended December 31, noninterest expense was $6.1 billion for 2011 and $5.9 billion for 2010.  The 3% increase in the current year was attributable to increased employee compensation and benefits expenses, operating losses, and FDIC insurance premiums, partially offset by lower losses on the extinguishment of debt.  The increase in employee compensation and benefits was predominantly related to higher compensation arising from improved business performance as compared to the full year 2010, as well as increases during 2011 in client-facing full-time equivalent employees.  This was partially offset by the gain related to the pension curtailment.  The increase in operating losses related to increased mortgage-related expenses and litigation expenses tied to specific claims.  The increase in FDIC expense was the result of a change in the assessment methodology during the current year.

Income Taxes
For the fourth quarter of 2011, the Company recorded an income tax benefit of $18 million compared to an income tax provision of $45 million for both the third quarter of 2011 and fourth quarter of 2010.  The effective tax rate of (12.9)% for the fourth quarter of 2011 compares to 17.3% for the prior quarter and 19.7% for the fourth quarter of 2010.  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.  Such items, together with the decline in pre-tax earnings from the third quarter of 2011, resulted in the negative effective tax rate for the current quarter.  For 2011, the Company recognized an income tax provision of $118 million and an effective tax rate of 13.9% compared to an income tax benefit of $185 million in 2010.

U.S. Treasury Preferred Dividends
The Company formerly paid dividends to the U.S. Treasury on its $4.85 billion of TARP preferred securities.  The Company redeemed these shares at the end of the first quarter of 2011 and, therefore, did not pay such dividends during the last three quarters of 2011.  The first quarter of 2011 included $66 million of preferred dividends paid to the U.S. Treasury as well as a $74 million non-cash charge associated with the redemption of the TARP preferred shares.  The fourth quarter of 2010 included $67 million of preferred dividends paid to the U.S. Treasury.

Balance Sheet
As of December 31, 2011, the Company had total assets of $176.9 billion and shareholders' equity of $20.1 billion, representing 11.4% of total assets.  Book value and tangible book value per common share were $37.01 and $25.33, respectively, as of December 31, 2011, both down 1% from the third quarter, predominantly due to lower accumulated other comprehensive income from market-related items, partially offset by higher retained earnings.

Loans
Average loans for the fourth quarter of 2011 were $119.5 billion, compared to average loans of $115.6 billion and $114.9 billion during the third quarter of 2011 and the fourth quarter of 2010, respectively.  On a sequential quarter basis, the $3.8 billion, or 3% growth was concentrated in commercial & industrial loans, which increased $2.2 billion, or 5%, and government-guaranteed student loans, which grew $1.2 billion as a result of portfolio acquisitions.  Higher-risk loan categories such as home equity, commercial real estate, and construction loans continued to decline.  Average loans increased $4.5 billion, or 4%, over the fourth quarter of 2010.  Growth over the prior year was driven by targeted loan categories, including commercial & industrial, indirect auto, and government-guaranteed student and residential mortgage loans, which increased by approximately $8 billion combined, while residential real estate categories declined.  The risk profile of the loan portfolio continued to improve during the year; in addition to higher-risk loan categories declining meaningfully, approximately 11% of the Company's loan portfolio was comprised of government-guaranteed loans as of December 31, 2011, up from 8% at the end of 2010.

Deposits
Average consumer and commercial deposits for the fourth quarter of 2011 were $125.1 billion, compared to $123.0 billion and $119.7 billion for the third quarter of 2011 and fourth quarter of 2010, respectively.  The favorable shift in the deposit mix continued during the quarter, with the $2.1 billion sequential quarter growth in average deposits being driven by a $2.1 billion, or 7%, increase in demand deposits and a $1.0 billion, or 4%, increase in NOW accounts.  Time deposits declined $0.8 billion, or 4%. 

Compared with the fourth quarter of 2010, average consumer and commercial deposits increased $5.4 billion, or 4%. Average low-cost deposits increased a combined $8.3 billion, or 8%, while time deposits declined $2.9 billion, or 13%. 

Capital and Liquidity
The Company's estimated capital ratios are well above regulatory requirements, as well as the proposed guidelines recently published by the Basel Committee and endorsed by U.S. regulatory agencies.  The Tier 1 capital and Tier 1 common ratios were estimated at 10.95% and 9.25%, respectively.  The ratios of total equity to total assets and tangible equity to tangible assets were 11.39% and 8.14%, respectively, as of December 31, 2011.  The Company continues to have substantial available liquidity provided in the form of its client deposit base, other available funding resources, and the retention of cash and high-quality government-backed securities.

Asset Quality
Asset quality continued to improve during the quarter, with declining net charge-offs, nonperforming loans, and nonperforming assets.  Nonperforming loans totaled $2.9 billion as of December 31, 2011, a decline of $336 million, or 10%, from the prior quarter, marking the tenth consecutive quarterly decline.  The percentage of nonperforming loans to total loans declined to 2.37%, down 39 basis points from the prior quarter.  The sequential quarter decline was primarily driven by reductions in commercial construction, commercial real estate, and commercial & industrial loans, while residential mortgage nonperforming loans also declined modestly.  Compared to December 31, 2010, nonperforming loans declined $1.2 billion, or 29%, with the most significant reductions in commercial construction; also contributing to the decline were residential mortgages, commercial & industrial, and residential construction loans.  Other real estate owned totaled $479 million at the end of the quarter, down 6% on a sequential quarter basis and down 20% since December 31, 2010.

Net charge-offs were $472 million in the current quarter compared to $492 million for the prior quarter and $621 million for the fourth quarter of 2010.  The $20 million sequential quarter decline was concentrated in commercial construction, partially offset by increases in commercial & industrial and non-guaranteed residential mortgages.  Compared to the fourth quarter of 2010, net charge-offs decreased $149 million, or 24%, with declines across almost all loan categories, most prominently non-guaranteed mortgages, commercial construction, commercial & industrial, and home equity. The ratio of annualized net charge-offs to total average loans was 1.57%, a decline of twelve basis points and 57 basis points from the third quarter of 2011 and the fourth quarter of 2010, respectively.  The provision for credit losses was $327 million, a decline of $20 million and $185 million from the third quarter of 2011 and the fourth quarter of 2010, respectively.

As of December 31, 2011, the allowance for loan losses was $2.5 billion and represented 2.01% of total loans, down 21 basis points from September 30, 2011.  The $143 million decline in the allowance for loan losses during the fourth quarter of 2011 was reflective of the continued improvement in asset quality.

Early stage delinquencies increased to 1.17%, an increase of thirteen basis points from the end of the third quarter of 2011. This quarterly increase was due to the fourth quarter 2011 acquisition of certain student loan portfolios, which carry a government guarantee.  Excluding all government-guaranteed loans, early stage delinquencies were 0.68%, a decline of two basis points from September 30, 2011.

Accruing restructured loans totaled $2.8 billion, and nonaccruing restructured loans totaled $802 million as of December 31, 2011.  Accruing restructured loans remained stable, while nonaccruing restructured loans declined $81 million compared to the prior quarter.  $3.1 billion of restructured loans related to residential loans, while $0.5 billion were commercial loans.

LINE OF BUSINESS FINANCIAL PERFORMANCE
Line of Business Results
The 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 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. The Corporate Other and Treasury 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 Information
Investors 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 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 Call
SunTrust management will host a conference call on January 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: 4Q11). Individuals calling from outside the United States should dial 1-517-308-9091 (Passcode: 4Q11). A replay of the call will be available approximately one hour after the call ends on January 20, 2012, and will remain available until February 4, 2012, by dialing 1-800-294-2480 (domestic) or 1-203-369-3227 (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 20, 2012, 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.  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, 2010, and in Part II, "Item 1A. Risk Factors" in our Quarterly Reports on Form 10-Q for the periods ended March 31, 2011, June 30, 2011, and September 30, 2011, and in other periodic reports that we file with the SEC. Those factors include: difficult market conditions have adversely affected our industry; concerns over market volatility continue; the Dodd-Frank Act makes fundamental changes in the regulation of the financial services industry, some of which may adversely affect our business; we are subject to capital adequacy and liquidity guidelines and, if we fail to meet these guidelines, our financial condition would be adversely affected; emergency measures designed to stabilize the U.S. banking system are beginning to wind down; we are subject to credit risk; our ALLL 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; 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; we are subject to certain risks related to originating and selling mortgages; we may be required to repurchase mortgage loans or indemnify mortgage loan purchasers as a result of breaches of representations and warranties, borrower fraud, or certain borrower defaults, which could harm our liquidity, results of operations, and financial condition; we 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; 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; 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 or man-made 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; the soundness of other financial institutions could adversely affect us; we rely on other companies to provide key components of our business infrastructure; 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; 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; disruptions in our ability to access global capital markets may negatively 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 depend on the expertise of key personnel, and if these individuals leave or change their roles without effective replacements, our 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 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.

SOURCE SunTrust Banks, Inc.

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