SunTrust Reports Fourth Quarter 2007 Earnings

ATLANTA, Jan. 23 /PRNewswire-FirstCall/ -- SunTrust Banks, Inc. reported net income available to common shareholders of $1,603.7 million, or $4.55 per average common diluted share for 2007 compared to $2,109.7 million, or $5.82 per average common diluted share last year. The Company's 2007 results were adversely impacted by declines in the market value of recently acquired asset-backed securities, as well as credit losses related to residential real estate loans. Increased delinquencies in mortgage-related loans and declines in home values have hampered the liquidity and value of assets tied to the residential real estate market. Net income available to common shareholders in the fourth quarter of 2007 was $3.3 million, down from $498.6 million in the fourth quarter of 2006. Net income per average common diluted share was $0.01 compared to $1.39 in the fourth quarter of 2006.

"Continued progress in implementing shareholder value-oriented initiatives at SunTrust was eclipsed in the fourth quarter by the impact of industry-wide pressures, notably rapid deterioration of the residential real estate market, the change in the credit cycle and consumer credit quality, and the resulting impact on liquidity in the financial markets," said James M. Wells III, President and Chief Executive Officer of SunTrust. Mr. Wells noted that modest growth in net interest income, double-digit growth in several fee- related products, and disciplined expense management were not sufficient to overcome the losses resulting from the deterioration in the credit markets.

Despite the very difficult operating environment, the Company continues to make considerable progress on the E2 Efficiency and Productivity Program. The estimated gross cost savings in 2007 were $215 million, which is 119% of the revised goal of $181 million and significantly above the original $135 million target. The Company continues to realize savings as a result of the E2 initiatives and is well positioned going into 2008 to continue to more efficiently utilize resources while enhancing the overall customer service experience for clients.

Market Valuation Losses

In aggregate, the Company recorded net market valuation losses of $555 million during the quarter. The Company recorded approximately $510 million in market valuation losses related to securities that were purchased during the fourth quarter from certain money market funds that are managed by Trusco Capital Management, a subsidiary of the Company, as well as Three Pillars Funding LLC, a multi-seller commercial paper conduit sponsored by the Company. At the time of purchase, these securities were predominantly AAA or AA-rated, short dated residential mortgage-backed securities, Structured Investment Vehicles ("SIVs"), and corporate and consumer collateralized debt obligations. These mark-downs reflect the lack of liquidity in the market for these securities, deterioration in the credit quality of the underlying assets, and/or the fact that the respective investment vehicle has entered restructuring proceedings. The Company also recognized in the fourth quarter approximately $45 million in net market valuation losses related to its trading and securitization assets, mortgage loan valuation write-downs, and a net write-up in SunTrust corporate debt. Also significantly impacting the fourth quarter was $356.8 million in provision for loan losses, which was driven by deterioration in the residential real estate market.

The full year results include approximately $700 million in market valuation losses related to the asset-backed securities, the mortgage loan warehouse, and the capital markets warehouse and residual interests, net of market valuation gains on the Company's debt carried at fair value.

Financial Highlights 4th 4th Full Full Quarter Quarter Year Year 2007 2006 Change 2007 2006 Change Income Statement (Dollars in millions, except per share data) Net income available to common shareholders $3.3 $498.6 (99.3)% $1,603.7 $2,109.7 (24.0)% Net income per average common diluted share 0.01 1.39 (99.3)% 4.55 5.82 (21.8)% Total revenue - fully taxable - equivalent 1,770.8 2,067.8 (14.4)% 8,250.9 8,216.8 0.4% Provision for loan losses 356.8 115.8 NM 664.9 262.5 NM Noninterest income 576.0 882.6 (34.7)% 3,428.7 3,468.4 (1.1)% Noninterest expense 1,455.3 1,233.8 18.0% 5,233.8 4,879.9 7.3% Net interest margin 3.13% 2.94% 19 bps 3.11% 3.00% 11 bps Balance Sheet (Dollars in billions) Average loans $121.1 $121.4 (0.2)% $120.1 $119.6 0.4% Average consumer and commercial deposits 99.6 98.6 1.1% 98.0 97.2 0.9% Capital Tier 1 capital ratio (1) 7.00% 7.72% Total average shareholders' equity to total average assets 10.30% 9.96% Tangible equity to tangible assets 6.28% 6.03% Asset Quality Net charge-offs to average loans (annualized) 0.55% 0.52% 0.35% 0.21% Nonperforming loans to total loans 1.19% 0.44% (1) Current period Tier 1 capital ratio is estimated as of the earnings release date. NM - Not meaningful. Those changes over 100% were not considered to be meaningful. -- Net market valuation losses and an increase in provision for loan losses adversely impacted fourth quarter income resulting in a pre-tax loss of $68.6 million. Net income available to common shareholders was $3.3 million. -- For the fourth quarter, fully taxable-equivalent total revenue decreased $297.0 million, or 14.4%. The $555 million in net market valuation losses recognized in the fourth quarter were partially offset by growth in net interest income, fee-related noninterest income, and real estate related gains. -- Fully taxable-equivalent net interest income increased 0.8% in the fourth quarter over the same quarter last year and 1.6% in 2007 over 2006 due to balance sheet management strategies that the Company implemented in 2006 and 2007. -- Fourth quarter 2007 noninterest income declined $306.6 million, or 34.7%, due to the net market valuation adjustments of approximately $555 million. The decline was partially offset by strong growth in service charges on deposits, retail investment services, card fees, and mortgage servicing income. -- Total average loans in the fourth quarter were flat compared to the fourth quarter of 2006 due to the Company's balance sheet management strategies implemented in 2007, but increased $1.5 billion, or 1.3%, compared to the third quarter of 2007. -- Total average consumer and commercial deposits increased $1.1 billion, or 1.1%, compared to the fourth quarter of 2006 and $2.9 billion, or 3.0%, compared to the third quarter of 2007. The increase was primarily in interest bearing categories. CONSOLIDATED FINANCIAL PERFORMANCE Revenue

Fully taxable-equivalent total revenue was $1,770.8 million for the fourth quarter of 2007, down $297.0 million, or 14.4%, compared to the fourth quarter of 2006. The decline was primarily attributable to $555 million in net market valuation losses related to the write-down of certain asset-backed securities, as well as mortgage loan warehouse and trading and securitization assets. These net market valuation losses were partially offset by growth in net interest income, fee-related noninterest income, and a net gain from sale leaseback transactions.

For the year ended December 31, 2007, fully taxable-equivalent total revenue was $8,250.9 million, an increase of 0.4% over 2006. Total revenue includes approximately $700 million in net market valuation related losses, which were offset by growth in net interest income, the $234.8 million gain on sale of Coke stock, fee-related noninterest income, and other gains, including real estate related gains from various sale leaseback transactions executed during 2007.

Net Interest Income

For the fourth quarter of 2007, fully taxable-equivalent net interest income was $1,194.8 million, up slightly compared to the prior year and down $24.4 million, or 2.0%, compared to the prior quarter. Net interest income growth in the fourth quarter was constrained due to asset yields tied to the prime rate declining in lock-step with Federal Reserve reductions while deposit rates were declining to a lesser extent due to deposit competition. Net interest margin for the fourth quarter of 2007 was 3.13%, an increase of 19 basis points over the fourth quarter of 2006. During 2007, the Company was able to reduce lower yielding assets and de-leverage the balance sheet by reducing higher cost wholesale deposits as part of its balance sheet management strategies. Compared to third quarter of 2007, net interest margin declined 5 basis points due to the prime rate based asset yields declining faster than deposit rates.

For the year ended December 31, 2007, fully taxable-equivalent net interest income was $4,822.2 million, up $73.8 million, or 1.6%, compared to 2006. Net interest margin was 3.11% compared to 3.00% in 2006. The increase in net interest income and net interest margin was due to the Company's balance sheet management initiatives that were implemented in 2006 and 2007.

Noninterest Income

Total noninterest income was $576.0 million for the fourth quarter of 2007, which was $306.6 million, or 34.7%, below prior year. The fourth quarter included net market valuation losses of approximately $555 million related to market value declines in asset-backed securities, as well as valuation declines in mortgage loans held for sale, and trading and securitization assets. Mortgage-related income increased $23.3 million, or 41.2%, compared to the fourth quarter of 2006 due to higher servicing income generated from the servicing portfolio, which increased over 15% in 2007, and a $19.2 million gain on sale of mortgage servicing rights. Mortgage-related income is also estimated to have increased approximately $34 million due to the Company electing to record at fair value certain newly-originated mortgage loans held for sale. The increase in mortgage-related income was partially offset by approximately $78 million in mortgage loan valuation losses. Investment banking income decreased $16.2 million, or 22.7%, due to lower securitization and syndicated finance activities. Compared to the fourth quarter of 2006, service charges on deposit accounts, card fees, and retail investment services income each grew in excess of 10%. The Company also recognized a net gain of $118.8 million from the sale leaseback of branch and office properties.

For the year ended December 31, 2007, noninterest income was $3,428.7 million, which was $39.7 million, or 1.1%, below 2006. The Company recognized approximately $700 million in net market valuation losses related to the purchase of asset-backed securities and market value declines in the mortgage loan warehouse and securitization and trading assets. Trust and investment management income was flat compared to prior year, despite the sale of the bond trustee business in the third quarter of 2006 and the merger of Lighthouse Partners in the first quarter of 2007. Service charges on deposit accounts increased $58.3 million, or 7.6%, over 2006 due primarily to higher NSF fees. Card fees were up $33.1 million, or 13.3%, on higher interchange income. Retail investment services increased $44.1 million, or 18.8%, due to higher annuity sales and higher recurring managed account fees. Mortgage servicing income increased $73.7 million, or 60.5%, primarily due to the larger servicing portfolio. Mortgage production was $58.3 billion in 2007 compared to $55.4 billion in 2006; however, mortgage production-related income declined $126.4 million, or 58.2%, due to $165.4 million in net valuation losses from the widening of credit spreads related to mortgage loans held for sale. The Company also recognized a gain on the sale of shares of The Coca Cola Company stock of $234.8 million in 2007. Other gains from the sale of assets included a $118.8 million net gain from several sale leaseback transactions and a $32.3 million gain from the merger of Lighthouse Partners in 2007. In 2006, the Company recognized a $112.8 million gain on the sale of its bond trustee business and $50.5 million in losses on the sale of available for sale securities.

Noninterest Expense

For the fourth quarter 2007, noninterest expense was $1,455.3 million, an increase of $221.6 million, or 18.0%, over the fourth quarter of 2006. The increase was driven by a $76.9 million accrual for Visa litigation and $57.7 million in write-downs related to Affordable Housing properties, compared to $11.8 million in Affordable Housing related write-downs recognized in 2006. In addition, the Company increased its marketing expenses $13.9 million related to various deposit growth initiatives. Operating losses increased $27.9 million primarily related to mortgage application fraud. Employee compensation expenses increased $25.7 million, which was attributable to approximately $34 million of additional compensation expense related to the Company's election in 2007 to record at fair value certain newly-originated mortgage loans held for sale. Under this election, costs associated with the origination of mortgage loans held for sale are recognized as a component of compensation expense when the loan is originated. Prior to the election, these costs were deferred and recognized as part of gain/loss on the sale of the loan. Partially offsetting the increase in employee compensation expense was a decrease in salary expense as a result of total personnel decreasing from 33,599 at December 31, 2006, to 32,323 at December 31, 2007. The remaining increase in expense is primarily the result of credit related expenses, occupancy, equipment, and outside processing expenses.

For the year ended December 31, 2007, total noninterest expense was $5,233.8, an increase of $353.9 million, or 7.3%, over 2006. In addition to the items previously discussed, the full year impact of the increase in employee compensation expense attributable to the election in 2007 to record certain newly-originated mortgage loans held for sale was approximately $78 million. The Company incurred implementation costs of $61.7 million related to the Company's E2 Efficiency and Productivity Program, which includes $45 million in severance expense. Partially offsetting the expense increase was a $33.6 million reduction in the accrued liability related to the call of a capital instrument. Taking into consideration the incremental impact of these items, expense growth for the year was 2.6%, which was attributable to certain expenses associated with the change in the credit cycle.

Provision for Income Taxes

For the fourth quarter, the Company recognized a tax benefit of $79.7 million compared to a tax provision of $187.9 million recognized in the fourth quarter of 2006. The tax benefit was the result of the lower than anticipated fourth quarter earnings, which resulted in an annual effective tax rate of 27.4% in 2007 compared to an annual effective tax rate of 29.1% in 2006.

Balance Sheet

As of December 31, 2007, SunTrust had total assets of $179.6 billion and shareholders' equity was $18.1 billion, representing 10.1% of total assets. Book value per common share was $50.38 as of December 31, 2007.

Loans

Average loans for the fourth quarter of 2007 were $121.1 billion, which was down slightly compared to the fourth quarter of 2006. Average residential real estate loans declined $2.4 billion, or 6.9%, from the fourth quarter 2006, which was offset by growth in real estate home equity loans and commercial loans. Average loans in the fourth quarter of 2007 increased $1.5 billion, or 1.3%, over the third quarter due to commercial loan growth and the transfer of approximately $840 million in residential real estate loans from loans held for sale due to the lack of marketability of the loans and SunTrust's intent to hold these loans to maturity. For the fourth quarter of 2007, average loans held for sale declined $3.2 billion, or 26.9%, compared to the same period of 2006 primarily due to the lower mortgage production volume and the aforementioned transfer of loans held for sale.

Deposits

Average consumer and commercial deposits were $99.6 billion for the fourth quarter of 2007, an increase of $2.9 billion, or 3.0%, compared to the third quarter of 2007 and $1.1 billion, or 1.1%, compared to the fourth quarter of 2006. The increase was driven by growth in NOW, money market, and time deposits, partially offset by declines in savings accounts and demand deposit balances. Average balances for brokered and foreign deposits declined $5.4 billion in the fourth quarter of 2007 as compared to the third quarter of 2007, as the Company was able to reduce its reliance on higher cost sources of funding.

Capital

The estimated Tier 1 capital and tangible equity to tangible asset ratios at December 31, 2007, were 7.00% and 6.28%, respectively, a decline of 44 and 4 basis points compared to September 30, 2007. The decline is attributable to lower net income in the fourth quarter of 2007, higher risk-weighted assets from the purchase of certain investment securities, as well as the redemption of a capital instrument during the fourth quarter. The Company continues to target a Tier 1 capital ratio of 7.5%.

Asset Quality

Net charge-offs for the fourth quarter were $168.0 million compared to $158.6 million for the fourth quarter in 2006. The fourth quarter of 2006 includes charge-offs related to a large commercial loan. Annualized net- charge offs to average loans for the quarter ended December 31, 2007, was 0.55% compared to 0.34% for the quarter ended September 30, 2007. The increase in net charge-offs was primarily related to consumer and residential real estate loans. Annual net charge-offs in 2007 were $422.8 million compared to $246.1 million in 2006. The corresponding net charge-off ratios were 0.35% and 0.21%, respectively. The increase was also due to consumer and residential real estate related loans.

Total nonperforming loans were $1,460.3 billion, or 1.19% of total loans as of December 31, 2007, compared to $1,003.8 million, or 0.83% of total loans as of September 30, 2007. The increase in nonperforming loans was most pronounced in residential real estate and construction loans and relates to the overall downturn in the housing market.

The allowance for loan and lease losses was $1,282.5 million as of December 31, 2007, which was 1.05% of total loans. As of September 30, 2007, the allowance for loan and lease losses was 0.91% of total loans. The allowance for loan and lease losses increased $188.8 million due to an increased expectation for charge-offs primarily related to consumer and residential real estate loans.

LINE OF BUSINESS FINANCIAL PERFORMANCE

The following discussion details results for SunTrust's five business lines: Retail, Commercial, Corporate and Investment Banking, Mortgage, and Wealth and Investment Management. All revenue 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 expense compared to net charge-offs, as well as equity and its related impact.

Retail Three Months Ended December 31, 2007 vs. 2006

Retail's net income for the fourth quarter of 2007 was $126.4 million, a decrease of $50.1 million, or 28.4%, compared to the fourth quarter of 2006. This decrease was primarily the result of higher provision expense and lower net interest income, partially offset by higher noninterest income.

Net interest income decreased $37.1 million, or 6.3%, driven by a continued shift in deposit mix and decreased spreads, as customers continue to migrate into higher yielding interest bearing accounts. Net interest income on deposits decreased $39.5 million, as average deposits declined $2.0 billion primarily due to a decrease in average demand deposits and savings account balances, as both consumer and small business clients moved excess balances to higher rate deposit products. Positively impacting net interest income was a $924.2 million, or 3.0%, increase in average loan balances driven by growth in home equity and commercial loans which grew 6.5% and 14.0%, respectively, over the fourth quarter of 2006.

Provision for loan losses increased $60.2 million over the same period in 2006. The provision increase was most pronounced in home equity, indirect auto and commercial loans, reflecting the negative impact from the current deterioration in certain segments of the consumer portfolio, primarily related to the residential real estate market.

Total noninterest income increased $34.5 million, or 13.4%, from the fourth quarter of 2006. This increase was driven primarily by a $26.1 million, or 17.4%, increase in service charges on deposit accounts from both consumer and business accounts primarily due to higher NSF fees.

Total noninterest expense increased $17.7 million, or 3.3%, primarily driven by personnel expense which increased 3.4% over the fourth quarter 2006 due in part to branch personnel expense. Other expenses related to investments in the branch distribution network and business banking also drove the increase.

Twelve Months Ended December 31, 2007 vs. 2006

Retail's net income for the twelve months ended December 31, 2007, was $602.1 million, a decrease of $113.4 million, or 15.9%, compared to the same period in 2006. The decrease was primarily the result of higher provision expense and lower net interest income, partially offset by higher noninterest income.

Net interest income decreased $58.2 million, or 2.5%, driven by a shift in deposit mix and compressed spreads as deposit competition and the interest rate environment encouraged customers to migrate into higher yielding interest bearing accounts. Average deposits decreased $761.5 million, or 1.1% year over year, as increases in certain higher-cost NOW account products and time deposits were offset by declines in demand deposits and certain lower-cost money market accounts. Positively impacting net interest income was an $824.8 million, or 2.7%, increase in average loans driven by 4.4% and 10.5% growth in home equity and commercial loans, respectively. These increases were partially offset by a 4.4% decrease in indirect auto loans and a 14.0% decrease in direct installment loans.

Provision for loan losses increased $160.6 million over 2006. The provision increase was most pronounced in home equity, indirect auto and commercial loans, reflecting the negative impact from the current deterioration in certain segments of the consumer portfolio, primarily related to the residential real estate market.

Total noninterest income for 2007 increased $53.0 million, or 5.0%, over 2006 levels. The increase was due to a $45.8 million, or 7.7%, increase in service charges on deposit accounts driven by higher consumer and business fees primarily due to higher NSF fees. Interchange income also grew due to increased transaction volume. These increases were partially offset by a decrease in gains on sales of student loans.

Total noninterest expense increased $17.1 million, less than 1% year over year. A 2.7% increase in personnel expense and other expenses related to investments in the branch distribution network and business banking was partially offset by decreases in amortization of core deposit intangibles and new loan production expense.

Commercial Three Months Ended December 31, 2007 vs. 2006

Commercial's net income for the fourth quarter of 2007 was $68.6 million, a decrease of $37.3 million, or 35.2%, from the same period in 2006. The decrease was primarily the result of higher Affordable Housing-related noninterest expense and lower net interest income, partially offset by higher noninterest income.

Net interest income decreased $17.7 million, or 7.4%, from the fourth quarter of 2006. Although average deposits increased $850.1 million, or 6.0%, the continued shift in deposit mix to higher-rate deposit products decreased net interest income by $4.9 million. This compression in deposit spreads was primarily due to a decrease in demand deposits, as customers redeployed liquidity in the current rate environment to higher-yielding NOW accounts, certificates of deposit, and off-balance sheet sweep products. The fourth quarter 2007 increase in average deposits was driven by increases in institutional and government deposits, partially offset by decreases in lower- cost demand deposits and money market accounts. Average loans were relatively flat, increasing $97.6 million, or 0.3%, while net interest income derived from loan products decreased $13.9 million, or 8.2%, primarily due to decreased spreads on commercial real estate loans.

Provision for loan losses was $8.5 million, an increase of $6.0 million compared to the fourth quarter of 2006.

Total noninterest income increased $6.7 million, or 9.2%, over the fourth quarter of 2006, driven by increases in service charges on deposit accounts and higher referral revenues from BankCard and capital markets products, partially offset by decreases in letters of credit fees and mortgage origination referral revenues.

For the fourth quarter of 2007, total noninterest expense increased $44.5 million, or 25.3%, over the same period in 2006. A 4.4% decrease in personnel related expense was more than offset by a $57.7 million write-down related to Affordable Housing properties.

Twelve Months Ended December 31, 2007 vs. 2006

Commercial's net income for the twelve months ended December 31, 2007, was $373.1 million, a decrease of $51.4 million, or 12.1%. The decrease was primarily the result of higher Affordable Housing-related noninterest expense and lower net interest income, partially offset by higher noninterest income.

Net interest income decreased $50.2 million, or 5.2%. Although average deposits increased $609.0 million, or 4.4%, the continued shift in deposit mix to higher-rate deposit products decreased net interest income by $31.8 million. This compression in deposit spreads was primarily due to a decrease in demand deposits, as customers redeployed liquidity in the current rate environment to higher-yielding NOW accounts, certificates of deposit, and off- balance sheet sweep products. The increase in average deposits was driven by increases in institutional and government deposits, partially offset by decreases in lower-cost demand deposits and money market accounts. Average loans increased $447.2 million, or 1.4% year over year, while net interest income derived from loan products decreased $18.4 million, or 2.8%. While commercial loan spreads were up, commercial real estate spreads decreased.

Provision for loan losses for the year was $22.2 million, an increase of $12.5 million compared to the same period in 2006.

Total noninterest income increased $14.5 million, or 5.1%, year over year, driven by increases in service charges on deposit accounts and higher referral revenues from BankCard and capital markets products, as well as higher deposit sweep revenue. These increases were partially offset by decreases in loan fees, letter of credit fees, and mortgage origination referral revenues.

Total noninterest expense in 2007 increased $41.5 million, or 6.1%, over 2006. Decreases in personnel expense, credit and collection expenses, and shared corporate expenses were more than offset by $48.7 million in increased write-downs related to Affordable Housing properties.

Corporate and Investment Banking Three Months Ended December 31, 2007 vs. 2006

Corporate and Investment Banking incurred a net loss of $54.3 million for the fourth quarter of 2007, a decrease of $78.7 million in net income compared to the prior year. The decrease was driven by market valuation write-downs and losses primarily in structured products due to capital markets volatility associated with turmoil in the mortgage industry, lack of loan liquidity, and widening credit spreads, partially offset by lower provision expense.

Net interest income increased slightly in the fourth quarter of 2007, up $1.6 million, or 2.9%, compared to the same period in 2006. Average loan balances decreased $58.5 million, or 0.4%, while the corresponding net interest income decreased 5.4% due to declining volumes and a decrease in spreads. The decline in balances was driven by a $1.9 billion structured asset sale of corporate loans in the first quarter of 2007, partially offset by growth in corporate banking loans and lease financing assets. Total average deposits were up $2.4 billion, or 82.4%, in the fourth quarter of 2007 over the same period in 2006, primarily in corporate money market accounts, while the associated net interest income was up $2.1 million.

Provision for loan losses was $7.3 million, an improvement of $101.7 million from the same period in 2006 as that period included the charge-off of a single large commercial loan.

Total noninterest income in the fourth quarter of 2007 decreased $224.1 million compared to the same period in 2006. The decrease was primarily driven by write-downs and losses of approximately $194.7 million in collateralized debt obligations, mortgage-backed securities, and collateralized loan obligation warehouses. The write-down included $144.7 million associated with the December purchase of $718 million of asset-backed securities from Three Pillars Funding, a multi-seller commercial paper conduit sponsored by the Company. At the time of purchase, these securities were AAA or AA-rated residential mortgage-backed securities and corporate and consumer collateralized debt obligations. These mark-downs reflect the lack of liquidity in the market for these securities and deterioration in the credit quality of the underlying assets. The securities are being carried as trading assets on the Company's balance sheet. Further contributing to the decrease were lower revenues from merchant banking, M&A activities, and bond originations, partially offset by solid performances in derivatives, structured leasing, and equity offerings.

In the fourth quarter of 2007, total noninterest expense decreased $2.6 million, or 2.1%, compared to the fourth quarter of 2006 driven primarily by lower incentive-based compensation expense tied to revenue offset by higher legal and consulting fees.

Twelve Months Ended December 31, 2007 vs. 2006

Corporate and Investment Banking's net income for the twelve months ended December 31, 2007, was $45.6 million, a decrease of $144.6 million, or 76.0%, from 2006. The decrease was driven by write-downs and losses primarily in structured products due to capital markets volatility created by turmoil in the mortgage industry, lack of loan liquidity, and widening credit spreads, partially offset by lower provision expense.

Net interest income decreased $12.3 million, or 5.2%, year over year. Average loan balances decreased $419.4 million, or 2.6%. The decline in loan balances along with compressed spreads resulted in an 11.3% decrease in loan- related net interest income. The decline in balances was driven by a $1.9 billion structured asset sale of corporate loans in the first quarter of 2007, partially offset by growth in corporate banking loans and lease financing assets. Total deposits increased $469.3 million, or 15.1%, driven by an increase in higher cost corporate money market accounts. Deposit related net interest income was down $3.1 million, or 5.0%, as the shift to higher cost money market accounts compressed deposit spreads. Partially offsetting these declines was improved net interest income from higher balances and favorable spreads in sales and trading.

Provision for loan losses was $37.7 million, an improvement of $76.2 million, or 66.9%, from 2006 due to the charge-off a single large commercial loan in the fourth quarter of 2006.

For the year, total noninterest income decreased $289.6 million, or 43.4%, compared to 2006. The decrease was primarily driven by write-downs and losses of approximately $316.1 million in collateralized debt obligations, mortgage- backed securities, and collateralized loan obligation securities, most of which occurred during the third and fourth quarters of 2007. Weakness in fixed income trading, loan related fees, and M&A fee revenue was partially offset by strong performance in derivatives, structured leasing, merchant banking and equipment lease financing.

Total noninterest expense decreased $2.6 million, or 0.5%, compared to 2006. The improvement was driven by lower personnel expense related to lower incentive-based compensation expense tied to revenue, decreased expense related to merchant banking activities, and lower shared corporate expenses. These decreases were partially offset by the reversal of leveraged lease expense in the second quarter of 2006, higher outside processing, legal, and consulting expenses in 2007.

Mortgage Three Months Ended December 31, 2007 vs. 2006

Mortgage reported a net loss of $30.0 million for the fourth quarter of 2007, a decrease of $71.9 million compared to fourth quarter of 2006. The decrease resulted primarily from credit-related losses on mortgage loans and net valuation losses on mortgage loans held for sale, which was partially offset by higher mortgage servicing revenues and gains on sales of mortgage servicing assets.

Net interest income for the fourth quarter of 2007 decreased $20.1 million, or 13.5%, due to lower income from portfolio loans and loans held for sale, as well as higher funding costs for mortgage servicing rights. Total average loans, principally residential mortgage and residential construction loans, were down $1.0 billion, or 3.1%. The balance decline, in conjunction with lower spreads, resulted in lower net interest income of $16.7 million. The decline in average balances was due to the Company's balance sheet management strategies that included the transfer of $4.1 billon of portfolio loans to held for sale at fair value in the first quarter of 2007 and subsequent sale of the majority of those loans, offset by loan growth from mortgage originations. Average loans held for sale declined $3.1 billion, resulting in an income decline of $6.2 million, or 19.6%, driven by lower mortgage origination volume. Average mortgage servicing rights increased $0.3 billion resulting in lower net interest income of $4.3 million, or 54.4%. The lower income was partially offset by higher income from investment securities, which increased $3.9 billion and contributed $7.6 million to the change in net interest income.

Provision for loan losses increased $43.2 million driven by higher consumer mortgage and residential construction loan charge-offs.

Total noninterest income increased $39.8 million, or 65.7%, in the fourth quarter of 2007 compared to 2006 driven by higher mortgage servicing income. Production income was down $3.4 million due to net valuation losses on loans held for sale that were substantially offset by the recognition of origination fees that were deferred prior to the May 2007 election of fair value accounting for certain loans. Loan production of $12.9 billion in the fourth quarter of 2007 was down $2.1 billion, or 14.0%, compared to the same period in 2006. Servicing income was up $48.8 million due to higher servicing revenues on higher servicing balances, gains on sales of mortgage servicing assets, and lower mortgage servicing rights amortization. At December 31, 2007, total loans serviced were $149.9 billion, an increase of $19.9 billion, or 15.3%.

Fourth quarter 2007 total noninterest expense was up $90.2 million, or 60.8%, compared to 2006 principally due to increased operating losses of $30.0 million primarily driven by loan application fraud from customer misstatements of income and/or assets primarily on Alt-A products originated in prior periods, the recognition of loan origination costs that were deferred prior to the May 2007 fair value election for certain loans, and increased credit and growth-related expenses.

Twelve Months Ended December 31, 2007 vs. 2006

Mortgage's net income for the twelve months ended December 31, 2007, was $7.9 million, a decrease of $237.8 million, or 96.8%, compared to 2006. The decline resulted primarily from $166 million in net valuation losses on mortgage loans held for sale due to market volatility and mortgage spread widening in conjunction with increased credit-related losses on mortgage loans. These losses were partially offset by higher mortgage servicing revenue.

Net interest income in 2007 declined $76.0 million, or 12.6%, compared to 2006 principally due to lower income from portfolio loans and loans held for sale, as well as higher funding costs for mortgage servicing rights, which was partially offset by higher net interest income on deposits and investments. Average portfolio loans, principally consumer mortgages and residential construction loans, declined $0.4 billion, or 1.4%. The volume decline combined with compressed spreads resulted in a reduction of net interest income from total loans of $53.1 million. Average loans held for sale increased $0.5 billion; however, compressed spreads more than offset the benefit of higher balances and reduced net interest income by $38.0 million. Funding costs on higher mortgage servicing rights balances further reduced net interest income by $16.5 million. Net interest income from deposits increased $17.1 million, while net interest income from investments increased $13.1 million.

Provision for loan losses for the year 2007 increased $72.4 million driven by higher consumer mortgage and residential construction net charge-offs.

Total noninterest income declined $13.7 million, or 3.6%, due to lower production income, partially offset by higher servicing and insurance income. Production income declined $103.9 million due to net valuation losses of $166 million on loans held for sale primarily due to market volatility and mortgage spread widening. These declines were partially offset by the recognition of origination fees that were deferred prior to the May 2007 fair value election for certain loans. Loan production of $58.3 billion was up $3.0 billion, or 5.4%, for the year 2007. Servicing income increased $73.9 million, driven by higher servicing revenues from higher balances, and lower mortgage servicing rights amortization, partially offset by lower gains on sales of servicing assets in 2007. At December 31, 2007, total loans serviced were $149.9 billion, an increase of $19.9 billion, or 15.3%. Revenues from mortgage insurance increased $10.0 million due to new mortgage origination volume.

Total noninterest expense increased $222.1 million for the year 2007, or 36.9%, over 2006, principally due to increased operating losses of $84.3 million primarily driven by loan application fraud from customer misstatements of income and/or assets primarily on Alt-A products originated in prior periods, recognition of loan origination costs that were deferred prior to the May 2007 election to record certain loans at fair value, and increased credit and growth-related expenses.

Wealth and Investment Management Three Months Ended December 31, 2007 vs. 2006

Wealth and Investment Management incurred a net loss of $96.8 million for the fourth quarter of 2007 compared to net income of $61.1 million for the fourth quarter of 2006. In December 2007, the Company purchased $1.4 billion of SIV securities, at par, from the STI Classic Prime Quality Money Market Fund and the STI Classic Institutional Cash Management Money Market Fund. At the time of purchase, these were highly-rated, short-dated securities with underlying collateral including residential mortgage-backed securities and corporate and consumer collateralized debt obligations. These mark-downs reflect the lack of liquidity in the market for these securities, deterioration in the credit quality of the underlying assets, and the fact that certain SIVs have entered restructuring proceedings. Subsequent to purchasing the SIVs, a mark-to-market write-down of $250.5 million was recorded to reflect the estimated fair value of these securities as of December 31, 2007.

Net interest income decreased $10.0 million, or 10.6%, primarily due to a continued shift in deposit mix to higher cost deposits. Average deposits decreased $186.1 million, or 1.9%, due to a decrease in demand deposit and certain money market accounts, partially offset by an increase in higher-cost NOW accounts and time deposits. This shift in deposit mix coupled with compressed spreads due to increased competition for deposits resulted in a $7.7 million decrease in net interest income. Average loans decreased $404.3 million, or 4.9%, reducing net interest income $2.1 million. The decline in average loans was driven by lower consumer and commercial balances.

Provision for loan losses increased $0.6 million, or 28.6%, primarily due to higher home equity and consumer mortgage net charge-offs.

Total noninterest income decreased $234.8 million, or 93.1%, compared to the fourth quarter of 2006 due to the $250.5 million SIV mark-to-market write- down. Retail investment income increased $6.6 million, or 10.4%, due to strong annuity sales and higher recurring managed account fees. Other income increased $6.9 million in the fourth quarter of 2007 due to the receipt of the final contingent consideration from the sale of the Bond Trustee business. Trust income increased $0.8 million, or 0.5%, despite lost trust income from the Lighthouse Partners merger in the first quarter of 2007. As of December 31, 2007, assets under management were approximately $142.8 billion compared to $141.3 billion as of December 31, 2006. Approximately $5.3 billion in Lighthouse Partners assets were merged into Lighthouse Investment Partners and are not included in the December 31, 2007 total. Assets under management include individually managed assets, the STI Classic Funds, institutional assets managed by Trusco Capital Management, and participant-directed retirement accounts. SunTrust's total assets under advisement were approximately $250.0 billion, which includes $142.8 billion in assets under management, $60.9 billion in non-managed trust assets, $41.6 billion in retail brokerage assets, and $4.7 billion in non-managed corporate trust assets.

Total noninterest expense increased $1.1 million, or 0.4%, due to a $3.9 million, or 2.9%, increase in total personnel expense. Higher variable compensation primarily associated with strong retail investment income was partially offset by a $5.1 million, or 7.3%, decline in salary expense and lower Lighthouse Partners related expenses.

Twelve Months Ended December 31, 2007 vs. 2006

Wealth and Investment Management's net income for the year ended December 31, 2007, was $84.9 million, a decrease of $204.3 million, or 70.6%, compared to the year ended December 31, 2006. The decline was principally driven by a $250.5 million pre-tax mark-to-market loss on SIV securities and a $112.8 million pre-tax gain realized in 2006 on the sale of the Bond Trustee business, partially offset by a $32.3 million pre-tax gain on sale upon merger of Lighthouse Partners into Lighthouse Investment Partners and increased retail investment income in 2007.

For the full year 2007, net interest income decreased $22.4 million, or 6.1%, as the continued shift in deposit mix to higher cost products compressed spreads. Average deposits increased $303.3 million, or 3.2%, as increases in higher-cost NOW account and time deposits was partially offset by declines in lower-cost demand deposit and money market account balances. This shift in deposit mix coupled with a decline in spreads driven by deposit competition was the primary driver of a $17.7 million decline in net interest income on deposits. Average loans declined $170.0 million, or 2.1%, resulting in a $5.3 million decline in net interest income on loans. The decline in loan balances resulted from lower consumer and commercial loans.

Provision for loan losses increased $4.8 million year over year primarily due to higher home equity and consumer mortgage net charge-offs.

Total noninterest income decreased $288.1 million, or 26.3%, primarily due to a $250.5 million mark-to-market loss on SIV securities in the fourth quarter of 2007 and a $112.8 million gain realized in 2006 on the sale of the Bond Trustee business. Partially offsetting these items was a $32.3 million gain on sale upon merger of Lighthouse Partners, as well as strong growth in retail investment income, which increased $44.0 million, or 19.3%, due to strong annuity sales and higher recurring managed account fees. Trust income declined $5.1 million, or 0.7%, due to lost revenue from the Lighthouse Partners merger and sale of the Bond Trustee business.

Total noninterest expense increased $7.0 million, or 0.7%, due to a $21.2 million, or 3.9%, increase in total personnel expense. Higher variable compensation primarily associated with strong retail investment income was partially offset by a $16.0 million, or 5.6%, decline in salary expense. Favorably impacting noninterest expense was lower Lighthouse Partners related expenses as a result of the sale upon merger.

Corporate Other and Treasury Three Months Ended December 31, 2007 vs. 2006

Corporate Other and Treasury's net income for the fourth quarter of 2007 was a loss of $2.7 million, a decrease of $99.2 million compared to the fourth quarter of 2006 driven by an increased provision for loan loss and Visa litigation accrual. These decreases were partially offset by an increase in net interest income due to balance sheet management strategies executed in the first half of the year and increased noninterest income due to gains on several sale leaseback transactions of real estate properties.

Net interest income in the fourth quarter of 2007 increased $92.8 million over the same period in 2006 mainly due to the execution of balance sheet management strategies, which improved the yield on the securities portfolio and deleveraged the balance sheet reducing reliance on higher-cost wholesale funding. Total average assets decreased $9.6 billion, or 30.4%, mainly due to the reduction in size of the investment portfolio. Total average deposits decreased $10.4 billion, or 40.1%, mainly due to a decrease in brokered and foreign deposits as the Company reduced its reliance on wholesale funding sources.

Provision for loan losses, which predominantly represents the difference between consolidated provision for loan losses and net charge-offs for the lines of business, increased $232.7 million in conjunction with the further deterioration in the residential real estate market and outlook for consumer credit quality.

Total noninterest income increased $71.4 million in the fourth quarter of 2007 compared to the same period in 2006. The increase was mainly due to a $118.8 million gain on sale leaseback of real estate properties and $84.2 million in valuation gains on the Company's long-term corporate debt carried at fair value, net of hedges, partially offset by an additional market valuation write-down of $116.2 million on the securities consolidated in the third quarter in anticipation of closing the fund. These mark-downs reflect the lack of liquidity in the market for these securities and deterioration in the credit quality of the underlying assets.

Total noninterest expense increased $70.7 million compared to the fourth quarter of 2006. The increase was mainly due to a $76.9 million accrual for the Visa litigation.

Twelve Months Ended December 31, 2007 vs. 2006

Corporate Other and Treasury's net income for the twelve months ended December 31, 2007, was $520.4 million, an increase of $268.0 million compared to the same period in 2006 driven by an increase in net interest income due to balance sheet management strategies executed in the first half of this year, the $234.8 million pre-tax gain on sale of The Coca-Cola Company stock, a gain of $118.8 million on sale leaseback of real estate properties, and the net write-up in the value of the Company's fixed-rate debt carried at fair value.

Net interest income increased $292.9 million mainly due to the aforementioned balance sheet management strategies, which improved the yield on the securities portfolio and reduced the Company's reliance on wholesale funding sources. Total average assets for 2007 decreased $7.1 billion, or 21.9%, compared to 2006, mainly due to the reduction in the size of the securities portfolio. Total average deposits decreased $4.7 billion, or 17.9%, mainly due to a decrease in brokered and foreign deposits.

Provision for loan losses, which predominantly represents the difference between consolidated provision for loan losses and net charge-offs for the lines of business, increased $228.3 million, primarily in the fourth quarter of 2007 as compared to 2006, in conjunction with the further deterioration in the residential real estate market and outlook for consumer credit quality.

Total noninterest income increased $484.1 million for year 2007 compared to 2006. This was driven by the $234.8 million pre-tax gain on sale of The Coca-Cola Company stock, net securities losses in 2006, a gain of $118.8 million on sale leaseback of real estate properties, and $78.1 million increase in trading income. The increase in trading income includes the items mentioned in the fourth quarter noninterest income discussion.

Total noninterest expense increased $68.8 million compared to the same period in 2006. Included in the twelve months ended December 31, 2007, was a $76.9 million accrual for Visa litigation and $50.7 million in initial implementation costs associated with the E2 Efficiency and Productivity Program, of which $45 million was severance. Positively impacting noninterest expense was a $33.6 million decrease in the accrued liability associated with a capital instrument that the Company called in the fourth quarter. Additionally, reflected in total noninterest expense are reductions in total staff expense in support functions and consulting expense.

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 available on our Web site at http://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 filed with the SEC today.

This news release contains certain non-US GAAP financial measures to describe the Company's performance. The reconciliation of those measures to the most directly comparable US GAAP financial measures, and the reasons why SunTrust believes such financial measures may be useful to investors, can be found in the financial information contained in the appendices of this news release.

Conference Call

SunTrust management will host a conference call on January 23, 2008, at 8:00 a.m. (Eastern Time) to discuss the earnings results and business trends. Individuals are encouraged to call in beginning at 7:45 a.m. (Eastern Time) by dialing 1-888-972-7805 (Passcode: 4Q07). Individuals calling from outside the United States should dial 1-517-308-9091 (Passcode: 4Q07). A replay of the call will be available beginning January 23, 2008, and ending February 6, 2008, by dialing 1-866-487-7540 (domestic) or 1-203-369-1649 (international).

Alternatively, individuals may listen to the live webcast of the presentation by visiting the SunTrust Web site at http://www.suntrust.com/. The webcast will be hosted under "Investor Relations" located under "About SunTrust" or may be accessed directly from the SunTrust home page by clicking on the earnings-related link, "4th Quarter Earnings Release." Beginning the afternoon of January 23, 2008, listeners may access an archived version of the webcast in the "Webcasts and Presentations" subsection found under "Investor Relations." 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 high-growth Southeast and Mid-Atlantic states and a full array of technology-based, 24-hour delivery channels. The Company also serves customers in selected markets nationally. Its primary businesses include deposit, credit, trust and investment services. Through various subsidiaries the Company provides credit cards, mortgage banking, insurance, brokerage, equipment leasing and capital markets services. SunTrust's Internet address is http://www.suntrust.com/.

Forward-Looking Statements

This news release may contain forward-looking statements. Statements that do not describe historical or current facts, including statements about beliefs and expectations, are forward-looking statements. These statements often include the words "may," "could," "will," "should," "believes," "expects," "anticipates," "estimates," "intends," "plans," "initiatives," "targets," "potentially," "probably," "projects," "outlook" or similar expressions. Such statements are based upon the current beliefs and expectations of SunTrust's management, and on information currently available to management, and speak as of the date hereof. 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 SunTrust's results to differ materially from those described in the forward-looking statements can be found in the Company's 2006 Annual Report on Form 10-K, in the Quarterly Reports on Form 10-Q and in the Current Reports filed on Form 8-K with the Securities and Exchange Commission and available at the Securities and Exchange Commission's internet site (http://www.sec.gov/). Those factors include: (1) adverse changes in general business or economic conditions could have a material adverse effect on our financial condition and results of operations; (2) changes in market interest rates or capital markets could adversely affect our revenues and expenses, the value of assets and obligations, costs of capital, or liquidity; (3) the fiscal and monetary policies of the federal government and its agencies could have a material adverse effect on our earnings; (4) changes in securities markets or markets for commercial or residential real estate could harm our revenues and profitability; (5) customers could pursue alternatives to bank deposits, causing us to lose a relatively inexpensive source of funding; (6) customers may decide not to use banks to complete their financial transactions, which could affect net income; (7) we have businesses other than banking, which subjects us to a variety of risks; (8) hurricanes and other natural disasters may adversely affect loan portfolios and operations and increase the cost of doing business; (9) negative public opinion could damage our reputation and adversely impact our business; (10) we rely on other companies for key components of our business infrastructure; (11) we rely on our systems, employees and certain counterparties, and certain failures could materially adversely affect our operations; (12) we depend on the accuracy and completeness of information about clients and counterparties; (13) regulation by federal and state agencies could adversely affect our business, revenues, and profit margins; (14) competition in the financial services industry is intense and could result in losing business or reducing profit margins; (15) future legislation could harm our competitive position; (16) maintaining or increasing market share depends on market acceptance and regulatory approval of new products and services; (17) our ability to receive dividends from our subsidiaries accounts for most of our revenues and could affect our liquidity and ability to pay dividends; (18) significant legal actions could subject us to substantial uninsured liabilities; (19) 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; (20) we depend on the expertise of key personnel without whom our operations may suffer; (21) we may be unable 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; (22) our accounting policies and methods are key to how we report financial condition and results of operations, and may require management to make estimates about matters that are uncertain; (23) changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition; (24) our stock price can be volatile; (25) our disclosure controls and procedures may fail to prevent or detect all errors or acts of fraud; (26) our trading assets and financial instruments carried at fair value expose the Company to certain market risks; (27) weakness in residential property values and mortgage loan markets could adversely affect us; (28) 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; and (29) we may enter into transactions with off-balance sheet entities affiliated with SunTrust or its subsidiaries which may cause us to recognize current or future losses.

The forward-looking statements in this news release speak only as of this date, and SunTrust does not assume any obligation to update such statements or to update the reasons why actual results could differ from those contained in such statements.