SunTrust Banks, Inc. today reported net income available to common shareholders of $387 million, or $0.72 per average common diluted share.  The current quarter's results were negatively impacted by $0.09 per share related to specific items described below.  Excluding these items, earnings per share in the current quarter were $0.81compared to $0.73 in the prior quarter and $0.68 in the second quarter of 2013.  For the first half of 2014, earnings per share were $1.45, and excluding the items described below, were $1.54 per share, 18% higher than the first half of 2013. 

Summary of July 3, 2014 8-K and Other Legacy Mortgage-Related Matters:

• SunTrust Mortgage entered into a settlement agreement regarding its administration of the federal Home Affordable Modification Program that resulted in a $204 million pre-tax charge.
• The Company recorded a $105 million pre-tax gain pursuant to the completion of the sale of its asset management subsidiary, RidgeWorth Capital Management, Inc. ("RidgeWorth").
• The progression of other legacy mortgage-related matters resulted in a net $25 million accrual reversal.
• In aggregate, the aforementioned items negatively impacted net income in the current quarter by$49 million, or $0.09 per share.

"Favorable revenue trends, particularly growth in loans, deposits and fee income, coupled with continued expense discipline and further asset quality improvements led to solid core earnings growth this quarter," said William H. Rogers, Jr., Chairman and Chief Executive Officer of SunTrust Banks, Inc. "The sale of RidgeWorth and resolution of certain legacy mortgage matters enable us to further sharpen our efforts to deepen client relationships, expand key businesses, and improve efficiency to benefit our shareholders, clients and communities."

Second Quarter 2014 Financial Highlights

Income Statement

• Net income available to common shareholders was $387 million, or $0.72 per average common diluted share; excluding the July 3, 2014 8-K and other legacy mortgage-related matters, net income available to common shareholders was $436 million, or $0.81 per share.
  • Net income available to common shareholders was $393 million, or $0.73 per share, and$365 million, or $0.68 per share, in the prior quarter and second quarter of 2013, respectively.
• Total revenue increased $171 million, or 8%, compared to the prior quarter. Excluding the sale of RidgeWorth, total revenue increased $66 million, or 3%, compared to the prior quarter.
  • Net interest income increased $5 million due to loan growth and one additional day.
  • Excluding the sale of RidgeWorth, noninterest income increased $61 million compared to the prior quarter, driven by higher investment banking income and broad-based fee income growth.
• Reported noninterest expense increased $160 million compared to the prior quarter. Excluding the$179 million in specific legacy mortgage-related operating losses incurred in the second quarter and the $36 million legacy affordable housing impairment in the first quarter, noninterest expense increased $17 million sequentially.

Balance Sheet

• Average performing loans increased $2.3 billion, or 2%, sequentially, and $9.8 billion, or 8%, compared to the second quarter of 2013, driven primarily by growth in the C&I, commercial real estate, and consumer portfolios.
• Average client deposits increased 2% sequentially and 3% compared to the second quarter of 2013, with the favorable mix shift toward lower-cost deposits continuing.

Capital

• Estimated capital ratios continued to be well above regulatory requirements. The Basel I Tier 1 common and Basel III Common Equity Tier 1 ratios were both estimated to be 9.7%.
• During the quarter, the Company increased its quarterly common stock dividend from $0.10 per share to $0.20 per share and repurchased $83 million of its common shares.
• Book value per share was $40.18 and tangible book value per common share was $28.64, up 2% and 3%, respectively, compared to March 31, 2014. The increase was primarily due to growth in retained earnings.

Asset Quality

• Asset quality continued to improve as nonperforming loans decreased 3% from the prior quarter and totaled 0.69% of total loans at June 30, 2014.
• The provision for credit losses declined $29 million compared to the prior quarter and $73 millioncompared to the second quarter of 2013.
• Annualized net charge-offs were 0.35% of average loans and unchanged relative to the prior quarter.

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

Revenue

Total revenue was $2.2 billion for the current quarter, an increase of $171 million, or 8%, compared to the prior quarter.  Excluding the sale of RidgeWorth, total revenue increased $66 million, or 3%, compared to the prior quarter.  The sequential increase was primarily driven by broad-based growth across most noninterest income categories.   Compared to the second quarter of 2013, total revenue, excluding the sale of RidgeWorth, declined $4 million as higher investment banking and mortgage servicing income was offset by a decline in mortgage production income. 

For the six months ended June 30, 2014, total revenue was $4.2 billion, an increase of $17 millioncompared to the first six months of 2013.  Excluding the sale of RidgeWorth, total revenue declined$88 million.  The decline was primarily driven by lower mortgage production income, which was partially offset by increases in mortgage servicing, investment banking, and retail investment services.

Net Interest Income

Net interest income was $1.2 billion for the current quarter, an increase of $5 million from the prior quarter.  The increase was primarily due to one additional day and higher average loan balances, partially offset by a 7 basis point decline in loan yields. Compared to the second quarter of 2013, net interest income increased $2 million primarily due to higher average loan balances, partially offset by a 15 basis point decline in earning asset yields.

Net interest margin for the current quarter was 3.11%, a decline of 8 basis points from the prior quarter. This decline was primarily driven by a 7 basis point decline in loan yields while interest-bearing deposit costs remained stable.  The net interest margin decreased 14 basis points compared to the second quarter of 2013, primarily due to a 15 basis point decrease in earning asset yields, partially offset by a 2 basis point reduction in rates paid on interest-bearing liabilities.

For the six months ended June 30, 2014, net interest income was $2.5 billion, a $10 million decrease compared to the first six months of 2013.  The net interest margin was 3.15% for the first half of 2014, a 14 basis point reduction compared to the same period in 2013, largely driven by a decline in loan yields.

Noninterest Income

Noninterest income was $957 million for the current quarter compared to $791 million for the prior quarter and $858 million for the second quarter of 2013. Excluding the sale of RidgeWorth, noninterest income increased $61 million sequentially and declined $6 million compared to the prior year.  The sequential increase was due to growth in investment banking, a $19 million gain from the sale of government guaranteed residential mortgage loans, and broad-based increases in most other fee income categories.  These increases were partially offset by a decline in trust and investment management income as a result of the sale of RidgeWorth.  Compared to the prior year, the $6 milliondecline was primarily due to lower mortgage production income, partially offset by higher investment banking and mortgage servicing income. 

Mortgage production income for the current quarter was $52 million compared to $43 million for the prior quarter and $133 million for the second quarter of 2013. The $9 million sequential quarter increase was driven by a 31% increase in closed production volume, primarily related to increased purchase activity.  Compared to the second quarter of 2013, mortgage production income decreased $81 million, primarily due to a decline in refinance production volume and gain on sale margins.

Mortgage servicing income was $45 million in the current quarter compared to $54 million in the prior quarter and $1 million the second quarter of 2013. The $9 million decrease compared to the prior quarter was due to an increase in mortgage prepayment speeds. Compared to the second quarter of 2013, the $44 million increase was primarily due to a decline in loan prepayments, resulting in lower decay. The servicing portfolio was $134 billion at June 30, 2014 compared to $140 billion at June 30, 2013.

Investment banking income was $119 million for the current quarter compared to $88 million in the prior quarter and $93 million in the second quarter of 2013. The increase compared to both periods was primarily driven by higher client activity across most origination and advisory product categories.  Trading income was $47 million for the current quarter compared to $49 million for both the prior quarter and the second quarter of 2013.

Other noninterest income was $170 million for the current quarter compared to $38 million for the prior quarter and $44 million for the second quarter of 2013. The $132 million increase compared to the prior quarter was driven by the $105 million gain on the sale of RidgeWorth, a $19 million gain on the sale of government guaranteed residential mortgage loans, and higher leasing-related income.  The $126 million increase compared to the second quarter of 2013 was primarily driven by the same transactional gains impacting the sequential quarter comparison.

For the six months ended June 30, 2014, noninterest income was $1.7 billion, an increase of $27 million over the same period in 2013.  Excluding the sale of RidgeWorth, noninterest income declined$78 million, driven by lower mortgage production income, partially offset by higher investment banking and mortgage servicing income.

Noninterest Expense

Noninterest expense for the current quarter was $1.5 billion, which included the $179 million of specific legacy mortgage-related operating losses.  Excluding these operating losses and the $36 million legacy affordable housing impairment in the prior quarter, noninterest expense increased $17 millionsequentially.  Compared to the second quarter of 2013, and excluding the aforementioned operating losses, noninterest expense declined $49 million, primarily due to lower cyclical costs and the continued focus on expense management.

Employee compensation and benefits expense was $763 million in the current quarter compared to$800 million in the prior quarter and $737 million in the second quarter of 2013.  The sequential quarter decrease of $37 million was primarily the result of the seasonal decline in employee benefits and FICA taxes.  The $26 million increase from the second quarter of 2013 was due to higher salaries related to targeted hiring in certain revenue producing businesses and the impact of merit increases.

Operating losses were $218 million in the current quarter and included $179 million of net charges related to specific legacy mortgage-related matters.  Comparatively, operating losses were $21 millionin the prior quarter and $72 million in the second quarter of 2013, which included $45 million in accruals related to specific mortgage-related legal matters.

Outside processing and software expense was $181 million in the current quarter compared to $170 million in the prior quarter and $187 million in the second quarter of 2013.  The $11 million sequential quarter increase was primarily due to increased utilization of outside vendors.  The $6 million decrease compared to the second quarter of 2013 was primarily due to lower mortgage production volume.

Marketing and customer development expense was $30 million in the current quarter compared to $25 million in the prior quarter and $31 million in the second quarter of 2013.  The $5 million sequential quarter increase reflects seasonally lower advertising expenses during the first quarter.

Other noninterest expense was $156 million in the current quarter compared to $168 million in the prior quarter and $181 million in the second quarter of 2013.  The $12 million sequential quarter decrease was primarily driven by the $36 million legacy affordable housing impairment recognized in the prior quarter, partially offset by increases in legal, consulting, and other operating expenses.  The $25 milliondecrease from the second quarter of 2013 was primarily related to lower credit and collections services expenses, which reflects the decline in nonperforming assets.

For the six months ended June 30, 2014, noninterest expense was $2.9 billion compared to $2.7 billionin 2013.    The $135 million increase was due to the $179 million of specific legacy mortgage-related operating losses incurred in the second quarter of 2014 and higher employee compensation, partially offset by broad-based reductions in other operating expenses. Excluding the $179 million of operating losses in the second quarter of 2014 and $36 million legacy affordable housing impairment in the first quarter of 2014, noninterest expense declined $80 million from the six months ended June 30, 2013 to the six months ended June 30, 2014.

Income Taxes

For the current quarter, the Company recorded an income tax provision of $173 million compared to$125 million for the prior quarter and $156 million for the second quarter of 2013.  The effective tax rate was 30% in the current quarter compared to 24% in the prior quarter and 29% in the second quarter of 2013.  The sequential increase in the effective tax rate was primarily due to favorable discrete items that were recognized in the prior quarter.  The effective tax rate increased slightly compared to the second quarter of 2013, primarily due to higher pre-tax earnings in the current quarter.

In the first quarter of 2014, the Company adopted accounting guidance that resulted in the amortization expense of investments in low income housing properties being classified in the income tax provision, whereas the amortization was previously recorded in noninterest expense.  Prior periods have been restated to conform to this new accounting guidance, resulting in a reduction in noninterest expense and increase in income tax provision of $10 million and $20 million for the second quarter of 2013 and the first six months of 2013, respectively.  The adoption of the accounting guidance had no impact on net income or earnings per share.

Balance Sheet

At June 30, 2014, the Company had total assets of $182.6 billion and shareholders' equity of $22.1 billion, representing 12% of total assets.  Book value per share was $40.18 and tangible book value per common share was $28.64, up 2% and 3%, respectively, compared to March 31, 2014, driven by growth in retained earnings and higher accumulated other comprehensive income.

Loans

Average performing loans were $129.8 billion for the current quarter, an increase of $2.3 billion, or 2%, from the prior quarter driven by a $1.9 billion, or 3%, increase in C&I loans, a $436 million, or 8%, increase in commercial real estate loans, and a $383 million, or 12%, increase in consumer direct loans, reflecting the breadth of our loan growth.  Partially offsetting the loan growth was a $574 million, or 1%, decline in average residential real estate-related loans, due to certain balance sheet management actions the Company undertook during the second quarter.  Specifically, the Company sold $325 million in government guaranteed residential mortgage loans and $149 million of accruing restructured residential mortgage loans. The Company also transferred $2.1 billion of government guaranteed residential mortgage loans to loans held for sale in anticipation of the sale of these loans in the third quarter. The Company currently anticipates investing the proceeds of the government guaranteed residential mortgage loan sales into high-quality liquid securities in anticipation of forthcoming regulatory requirements regarding liquidity ratios.  Compared to the second quarter of 2013, average performing loans increased $9.8 billion, or 8%, with broad-based growth across most portfolios. 

Deposits

Average client deposits for the current quarter were $130.5 billion compared to $128.4 billion in the prior quarter and $126.6 billion in the second quarter of 2013.  Average client deposits increased $2.1 billion during the current quarter due to a $1.8 billion, or 2%, increase in combined NOW, money market, and savings account balances and a $1.0 billion increase in demand deposits, which were partially offset by a $0.8 billion, or 6%, decline in time deposit balances.  Compared to the second quarter of 2013, average client deposits increased $3.9 billion, or 3%.  The growth was driven by increases of $3.2 billion and $1.1 billion in NOW and money market account balances, respectively, and $1.3 billion in demand deposits.  The growth in lower cost deposits was partially offset by a $2.1 billion, or 15%, decrease in time deposits.          

Capital and Liquidity

The Company's estimated capital ratios are well above current regulatory requirements with Basel I Tier 1 capital, Basel I Tier 1 common, and Basel III Common Equity Tier 1 ratios at an estimated 10.65%, 9.70%, and 9.70%,  respectively, at June 30, 2014.  The ratios of total average equity to total average assets and tangible equity to tangible assets were 12.23% and 9.07%, respectively, at June 30, 2014. Both metrics were relatively stable to prior quarter, as an increase in retained earnings and accumulated other comprehensive income was offset by balance sheet growth.  The Company continues to have substantial available liquidity in the form of its client deposit base, cash, its portfolio of high-quality government-backed securities, and other available funding sources. 

During the second quarter, the Company declared a common stock dividend of $0.20 per common share, an increase of $0.10 per share from the prior quarter and the second quarter of 2013.  Additionally, during the second quarter, the Company repurchased $83 million of its common stock.  Based on guidance issued during the second quarter by the Federal Reserve, the Company's repurchase activity was, and will be, modestly constrained due to a reduction in its forecast of share based issuances, primarily related to employees and minority interest shareholders. The Company currently expects to repurchase between $300 million to $350 million of additional common stock over the next three quarters.

Asset Quality

Total nonperforming assets were $1.0 billion at June 30, 2014, declining 5% compared to the prior quarter and 25% compared to the prior year. Nonperforming loans totaled $899 million at June 30, 2014, a decrease of 3% compared  to the prior quarter and 21% compared to the prior year. At June 30, 2014, the percentage of nonperforming loans to total loans was 0.69%.  Other real estate owned totaled $136 million, a 10% decrease from the prior quarter.

Net charge-offs were $113 million during the current quarter, relatively stable compared to the prior quarter and down $66 million compared to the second quarter of 2013.  The decline in net charge-offs compared to the second quarter of 2013 was primarily driven by lower residential and commercial loan net charge-offs.  The ratio of annualized net charge-offs to total average loans was 0.35% during both the current quarter and the prior quarter compared to 0.59% during the second quarter of 2013.  The provision for credit losses was $73 million, compared to $102 million during the prior quarter, as asset quality continued to improve.  The provision for credit losses declined $73 million from the second quarter of 2013 as the improvement in asset quality more than offset the impact of loan growth.

At June 30, 2014, the allowance for loan and lease losses was $2.0 billion and represented 1.55% of total loans, a $37 million and three basis point decrease from March 31, 2014.  The decline in the allowance for loan and lease losses and the allowance to total loans ratio was due to modest asset quality improvements in the current quarter and the sale of $149 million of accruing restructured residential mortgage loans, which reduced the allowance by $16 million.

Early stage delinquencies declined 4 basis points from the prior quarter to 0.63% at June 30, 2014.  The decline was primarily due to residential and commercial loans.  Excluding government-guaranteed loans, early stage delinquencies were 0.29%, down 3 basis points from the prior quarter.

Accruing restructured loans totaled $2.6 billion and nonaccruing restructured loans totaled $0.4 billionat June 30, 2014, of which $2.7 billion of restructured loans related to residential loans, $0.1 billionwere commercial loans, and $0.1 billion related to consumer loans.  The decline in accruing restructured loans was primarily driven by the aforementioned sale.

BUSINESS SEGMENT FINANCIAL PERFORMANCE

Business Segment Results

The Company has included business segment financial tables as part of this release. The Company's business segments include: Consumer Banking and Private Wealth Management, Wholesale Banking, and Mortgage Banking. All revenue in the business segment tables is reported on a fully taxable-equivalent basis. For the business segments, results include net interest income, which is computed using matched-maturity funds transfer pricing. Further, provision for credit losses represents net charge-offs by segment combined with an allocation to the segments of the provision attributable to quarterly changes in the allowance for loan and lease losses and unfunded commitment reserve balances. SunTrust also reports results for Corporate Other, which includes the Treasury department as well as the residual expense associated with operational and support expense allocations. The Corporate Other segment also includes differences created between internal management accounting practices and generally accepted accounting principles ("GAAP"), certain matched-maturity funds transfer pricing credits and charges, as well as equity and its related impact. A detailed discussion of the business segment results will be included in the Company's forthcoming Form 10-Q.

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 Form 10-Q. Detailed financial tables and other information are also available on the Investor Relations portion of the Company's website atwww.suntrust.com/investorrelations. This information is also included in a current report on Form 8-K furnished with the SEC today.

Conference Call

SunTrust management will host a conference call on July 21, 2014, 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: 2Q14). Individuals calling from outside the United States should dial 1-517-308-9091 (Passcode: 2Q14). A replay of the call will be available approximately one hour after the call ends on July 21, 2014, and will remain available until August 21, 2014, by dialing 1-888-437-4650 (domestic) or 1-402-998-1324 (international). Alternatively, individuals may listen to the live webcast of the presentation by visiting the SunTrust investor relations website atwww.suntrust.com/investorrelations. Beginning the afternoon of July 21, 2014, listeners may access an archived version of the webcast in the "Recent Earnings and Conference Presentations" subsection found on the investor relations webpage. This webcast will be archived and available for one year.

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 iswww.suntrust.com.