This summary is based on the first quarter fiscal 2007 earnings call conducted by SunTrust Banks (STI: chart) on April 17, 2007.

Key Investors Issues

- Earnings per share fell 1% to $1.44, versus the year ago period.
- Quarterly revenue rose 1% to $2.067 billion, versus the year ago period.
- Underlying flat to low single digit loan growth is anticipated on a full year average basis for fiscal 2007.

First Quarter Fiscal 2007 Financial Highlights

Net income available to common shareholders fell 3% to $513.9 million, versus $531.5 million in the year ago period.

Earnings per share fell 1% to $1.44, versus $1.46 in the year ago period. For the prior quarter, net income was $506.3 millions and earnings per share were $1.47. Non GAAP net income available to common shareholders excluding net securities gains or losses and The Coca-Cola Company dividend was $499.341 million, versus $518.146 million in the year ago period.

Net income fell over the year ago period, due mainly to a higher provision for loan losses. Fully taxable-equivalent revenue growth outpaced expense growth, but was not enough to offset the increase in the provision for loan losses.

The company-wide focus on (E2) E squared efficiency and productivity initiatives, coupled with the substantive effect from ongoing balance sheet management strategies led to the first quarter results. E2 produced $28.6 million in cost saves for the first quarter.

SunTrust announced its adoption of the fair value standards, SFAS 157 and SFAS 159. As a result of these adoptions, the significant impacts to the balance sheet were that certain fixed-rate debt and mortgage loans were moved to fair value and certain investment securities were reclassified as trading assets. The adoption of the fair value standards had a net positive after-tax impact of approximately $37 million on the first quarter earnings. The cumulative reduction to opening retained earnings from adopting these standards was approximately $400 million.

Seasonal employee benefit expense had a quarterly estimated pretax impact of $43.8 million or 8 cents per share. Quarterly gain on sale upon merger of Lighthouse Partners was $32.3 million or 6 cents per share. Initial implementation expense associated with E squared initiative for the quarter was $13.8 million or 2 cents per share. Sale of Alternative A (Alt A) loans had a negative impact of $26.6 million or 5 cents per share during the quarter.

Quarterly revenue rose 1% to $2.067 billion, versus $2.05 billion in the year ago period. Revenue for the prior quarter was $2.067 billion.

Non interest income rose 3% to $878.9 million, versus $851.5 million in the year ago period.

- This more than offset the 1% decline in fully taxable-equivalent net interest income. Non interest income growth included the impact of adopting the fair value standards SFAS 157 and SFAS 159 in the quarter. The adoption had a positive impact on trading income but a negative impact on mortgage production related income. Growth in retail investment services income, trust and investment management income, and card fees contributed to the increase.
- On a sequential annualized basis, non interest income decreased 2% from the prior quarter. Beyond the impact of adopting the fair value standards and the gain on sale upon merger of Lighthouse Partners, investment banking income was down from its strong prior quarter level, and other non interest income was down as well. The fourth quarter of 2006 also included a $35.4 million net securities gain.

Fully taxable-equivalent net interest income was $1.188 billion, down 1% from the prior year period.

- The lack of growth was mainly the result of the effects from the flat to inverted yield curve that has persisted over this timeframe, as well as the continued shift in deposit mix away from lower-cost deposit products to higher-cost consumer and other time deposits.
- On a sequential annualized basis, fully taxable-equivalent net interest income increased 1% from the fourth quarter of 2006. Net interest margin increased 8 basis points from the prior quarter to 3.02%. The increase in the net interest margin reflects the impact from the balance sheet management activities undertaken in the first quarter. The full effect these strategies will have on net interest margin will take place as they are completed in the second quarter and beyond. Partially offsetting this impact was the continued shift in deposit mix and the negative impact the flat to inverted yield curve has had on the spread between incremental earning asset growth and the cost of funding the growth.

Non interest expense rose 1% to $1.236 billion, versus $1.226 billion in the year ago period.

- This resulted primarily from the cost saves realized through the E2 initiatives. Quarterly non interest expense also included initial implementation costs associated with E2, totaling $13.8 million. There were $4 million of initial implementation costs associated with the initiatives in the first quarter of 2006. Taking these initial implementation costs into account, non interest expense was basically unchanged from the first quarter of 2006.
- On a sequential annualized basis, the impact of the cost saves generated by the E2 initiatives held expense growth to only 1% from the fourth quarter of 2006, despite the significant seasonal increase in employee benefit expenses in the first quarter of 2007.

Performance Analysis by Segments

Retail Business

- Total FTE (fully taxable equivalent) revenue was $835.259 million, up 0.3% versus $832.967 million in the year ago period.
- Net income fell 7.5% to $161.315 million, versus $174.374 million in the year ago period.
- Income before provision for income taxes fell 7.7% to $253.669 million, versus $274.916 million in the year ago period.
- Provision for income taxes fell 8.2% to $92.318 million, versus $100.52 million in the year ago period.
- FTE net interest income was $576.297 million, up 0.1% versus $575.454 million in the year ago period.