Welcome to the SunTrust Second Quarter Earnings Conference Call. All parties will be in a listen-only mode. [Operator Instructions]. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to Greg Ketron, Director of Investor Relations. Thank you, sir, you may begin.

Good morning, and welcome to SunTrust Second Quarter 2007 Earnings Conference Call. Thanks for joining us this morning. In addition to the press release, we have also provided a presentation that covers the focus for our call today, updates on the progress for shareholder value initiatives including our efficiency and productivity program, the impact they had on the second quarter of earnings and a summary of key credit trends. The press release, presentation and the detailed financial schedules are available on our website SunTrust.com. This information can be accessed directly today by using the quick link on the SunTrust.com home page entitled Second Quarter Earnings Release or by going to the Investor Relations section of the website. With me today, among members of our executive Management team are Jim Wells, our Chief Executive Officer and Mark Chancy, our Chief Financial Officer. Jim will start the call with a discussion around our progress on the shareholder value initiatives. Mark will follow with details on the quarter's earnings and the impact the initiatives had on the company's financial performance and I will conclude with details around recent credit trends and how they impact our view on the credit picture for the remainder of this year. We will then open the session for questions. First, I will remind you that our comments today may include forward-looking statements. These statements are subject to risks and uncertainties and actual results could differ materially. We list the factors that might cause actual results to differ materially in our press release and SEC filings, which are available on our website. Further, we do not intend to update any forward-looking statements to reflect circumstances or events that occur after the date forward-looking statements are made, and we disclaim any responsibility to do so. During the call we will discuss some non-GAAP financial measures in talking about the Company's performance. You can find a reconciliation of these measures to the GAAP financial measures in our press release and on our website. Finally, SunTrust is not responsible for and does not edit or guarantee the accuracy of our earnings teleconference transcripts provided by third parties. The only authorized live and archived webcasts are located on our website. With that let me turn it over to Jim.

Thanks, and good morning, all. As you saw on our press release this morning we reported earnings per share for the second quarter of $1.89, which include a $0.41 per share benefit from the gain on the sale of the 4.5 million shares of Coca Cola stock. Excluding the gain, earnings per share was $1.48 for the quarter. Mark Chancy will be discussing the details of these results shortly, but in summary, excluding the impact of the Coke gain, the company generated strong revenue growth of nearly 14% over the first quarter on a linked annualized basis. Growth was driven by double-digit increases in net interest and fee income and that coupled with strong expense control, generated positive operating leverage for the quarter. It's helped to offset higher credit cost. Significant progress we made on the initiatives to drive shareholder value, which we announced in mid-May had of profound impact on the quarter's results. As you may recall, we announced in May that we have recently accelerated and expanded a number of strategies designed to enhance shareholder value. These are summarized on page two of the earnings presentation, as well as the progress we've made on each one of them. As we discuss the progress and the impact of each of these initiatives it's having on our financial performance, I think you will get a sense of the dedicated and detailed effort the company is making to ensure that we are successful in each of these areas and the commitment we have to drive higher shareholder value. Balance sheet management strategies along with investments in our high growth business helped by revenue growth in the quarter and our E-squared initiatives were largely responsible for keeping expense growth minimal. The positive operating leverage generated in the quarter helped offset the impact…

Excuse me. Thanks, Jim and good morning. As Jim noted in his outline on page seven of our earnings presentation, we reported earnings per share of $1.89 for the second quarter this morning which included a $0.41 benefit from the gain on sale of 4.5 million shares of stock. The after tax gain on the sale was a $146 million; so excluding the gain, earnings per share was $1.48. Jim has covered our progress on the cost savings front and the positive impact it is having on controlling expense growth. The purpose of my conversation will be centered on our other initiatives, namely the balance sheet management and capital optimization strategies, and the impact that they had on the quarter. I'll also highlight some of our other developments that occurred, which impacted our results. I'll start with the balance sheet management strategies that we executed in the first and second quarters. As you may recall we announced in our first quarter earnings call that we initiated a substantial balance sheet reposition. Given the challenging economic environment with no improvement in sight, the company intensified its balance sheet management efforts in the first quarter. A comprehensive review of the company's loan and investment portfolios was conducted in which we analyzed a number of portfolio characteristics, including size, liquidity, customer collateral needs, credit and interest rate exposure and capital consumption. The conclusion was that it would be advantageous to significantly reduce the overall size of the loan and investment portfolios, as well as modify the company's investment portfolio to reduce the amounts of securities with credit exposure, increase the use of short term government securities to satisfy those collateral needs, chip the [ph] portfolio of securities it will have lower risk ratings to consume less Tier 1 capital and increase the use…

Thanks Mark. The preview of the credit highlights for the second quarter is included on page 10 of the presentation. Although the companies credit picture continues to be solid, we did see credit losses continue to normalize in addition to the negative impact from the deterioration of certain segments of the consumer real estate market during the second quarter. Annualizing that charge-off to total loan increased from 21 basis points in the first quarter to 30 basis points in the second quarter and did exceed our expectations for the quarter. As a result, we have updated our net charge-off expectations for the year, which I will cover later. We have stated in our external discussions there over the past several quarters, we have been expecting normalization in credit loss levels and have seen that plateau over the past year. Trends in net charge-offs to total loan has been increasing from a historically unsustainable loss rates in the first half of 2006, when they were running in eight to 10 basis point range. The net charge-off level has suddenly increased from that point to the 30 basis point level we reported this morning. As I noted, the net charge-off ratio did exceed our expectations for the second quarter. Our expectation was that the net charge-off ratio for the quarter has grown somewhat above the high-end of our outlook range for 2007 of 20 basis points. The $6 billion in mortgage and corporate loans sold and/or designated for sale late in the first quarter resulted in a smaller average loan base for the second quarter, and had the effect of increasing the annualized net charge-off ratio one to two basis points. The remainder of the increase was driven by three areas, commercial, home equity loans and residential mortgages, most notably in Alt-A…

Thank you, we will now begin the question-and-answer session. [Operator Instructions] Thank you. Our first question comes from Jennifer Thompson. And please state your company name. Jennifer Thompson - Oppenheimer & Company: Good morning, Oppenheimer. I'm sorry if I missed this, but there were a lot of numbers being thrown around but could you give us the insurance levels you have right now on the 90% LTV portion of your home equity portfolio?

Hi Jen, this Greg Ketron. That wasn’t a number that we talked about. We talked about the insured levels we have in the second lien positions of Alt-A but I can tell you we have employed insurance on the loan to values of over 90% of the home equity loan portfolio. That’s the sort of path that we have been going down for a number of months now, and have been insuring portions of that portfolio. But it’s not something that we discussed this morning, that was more targeted on the Alt-A products. Jennifer Thompson - Oppenheimer & Company: Can you give us a number or even a ballpark, more than half, less than half?

It would be less than half. Now, I think what's important to note here is that the FICO scores in greater that 90% part of the portfolio, broadly are pretty strong. So, that is one element that the loan to value situation, it certainly has to be monitored. We're doing that very closely and that’s why we've decided to enter into insurance. To give you an example, in the second quarter, we have insured almost $900 million of 90% of the greater loan to values in the home equity loan portfolio.

Okay. Aside from the high LTV trends, are there any other trends that you are noticing either in home equity or residential, real estate whether that be geographic or other?

Yes, we find the deterioration that we have seen in this product to be non-geographic specific but really product specific. So, it really is the high loan to value product. And certain acquired portfolios through our merger and acquisition activity in pervious years. But the core portfolio of our core lending activity other than the Alt-A and the 90% plus portion of the home equity portfolio is still performing… we think in a pretty good way and better than industry numbers. Jennifer Thompson - Oppenheimer & Company: Okay. And just one last question. The reserve ratio has been pretty stable, can you give you give us your current thinking on… you saw the greater than expected deterioration in the net charge-off ratio this quarter. Just current thinking on the reserve levels?

Again, this is Tom Freeman. We believe our reserve levels… at current levels as we go through and take a look at forward loss content are more than adequately covered by our current reserve numbers. The two areas where we have been having some charge-off issues, we believe that the Alt-A product is reaching… it will be reaching it peak in terms of the amount of assets going into our non-performing portfolio within the third quarter. And we believe that we will see some emergence out of that relatively small portfolio of 90% plus second mortgage loans. And that’s more than adequately reserved for in our current provisions.

Jen, this is Mark. Just as an example at the annualized quarter, we still have about three times coverage of that annualized charge-off level. It’s about three and half times if you take a year-to-date number, just to put that 88 basis points in some perspective. Jennifer Thompson - Oppenheimer & Company: Great. Thanks very much, guys.

Thanks Jen.

Thank you. And our next question comes from Christopher Marinac. Your line is open, please state your company name.

Hi, Fig Partners in Atlanta. Guys, I was just curious about the residential losses and in just in terms of… with this loss rate necessarily get higher or do you think this might prove to be a peak level that we saw annualized in the second quarter?

It's Tom Freeman again. We believe in the Alt-A portion of the portfolio, we are about reaching peak levels and believe that we will begin to see those numbers turn down in the third and fourth quarters, and we will have digested most of that in terms of both the loss profile in the third and fourth quarters of this year. I don’t think we have reached quite peak levels yet in some of these smaller home equity positions. We will get some emergence out of that we think in the next two quarters, but don’t believe that in terms of the size of the portfolio, it will be a hugely a significantly number.

Hey, Chris, this is Greg. One way to look at it too in terms of… we talked about the Alt-A product in detail and that 50% of the losses are coming from that Alt-A product, if you kill that off, the net charge-offs and you consider we've got $1.4 billion in our mortgage portfolio that is Alt-A, the residual net charge-off levels are in the 10, 12, 13 basis points range. So, that’s accounting for half of that 23, 24 basis points charge-off level that we are seeing in the second quarter.

Okay, great. That’s helpful. Thank you.

Thank you. Our next question comes from Jefferson Harralson. Your line is open and please state your company name. Jefferson Harralson - Keefe, Bruyette & Woods: Thanks, it’s KBW. I want to ask you about the EPS impact of the accounting change on the mortgage revenue line this quarter. You guys accelerated recognition of fees and the value of the servicing. And you laid out I think to expense impact, but did you also break out the revenue impact and I may missed it. But what was the revenue impact of the accounting change?

Jefferson, this Greg. We didn’t give a specific number. What's different about this quarter versus what we saw with the fair value adoption in the last quarter… and if you remember in our presentation, we exhaustively laid out the EPS impact the fair value impact had because lot of those were non-recurring in nature. In this case, this is a change in the way that we're accounting for the warehouse. And the reason we didn’t point it out necessarily in terms of dollar amount, because there is an ongoing situation here. It's not just going to be a second quarter pick up, it’s not going to be there in future period necessarily. Jefferson Harralson - Keefe, Bruyette & Woods: Okay. And of the $0.02 that the mortgage profits the last quarter, to $0.12, so, maybe it's asking the same question different way, but of that $0.02 to $0.12 increase, can you break out the things that you can break out on gains on loan sold. Or the different areas of profit in the business that you can break out?

Jefferson, this is Mark. Would you mind rephrasing your question? I didn’t quite understand it. Jefferson Harralson - Keefe, Bruyette & Woods: Last quarter you guys had $0.02 of profit in the mortgage business on a business line basis. This quarter you had $0.12 and I was hoping you guys could maybe discuss that $0.10 increase and where the $0.10 came from.

Jefferson, a big piece of that $0.02 last quarter is we had approximately pretax a negative $44 million hit when we put the interest rate block in that amounts [ph] at fair value, that was about $38 million or so. Than we had another hit associated with loan that were designated to held for sale. You know that alone reversed off in the second quarter.

We also noted in the comments that we had a significant increase in our production, income related to the record mortgage production of $18 billion we had in the quarter which is up 20%. We also had some positive benefit related to the $3 billion in the portfolio loans that were held for sale and ultimately sold. That’s $3 billion of the $4.1 billion that we moved to fair value that we noted for you last quarter, as well as the acceleration of income that’s associated with the fair value election on the mortgage warehouse. And to Greg's point, when you… there are lots of puts and takes that related to market value adjustments Greg noted, for example, the market value adjustments as well as the other costs associated with Alt-A production and mark-to-market during the course of the quarter. There was a pick up that was related to the mortgage business as it relates to fair value election but it’s also dependent upon future production levels as to whether or not that level of income continues to grow and/or moderate slightly. So, we feel like the overall production levels are indicative of the company’s future performance, and we continue to gain a market share and feel strongly that our mortgage business is well positioned as we move forward. Jefferson Harralson - Keefe, Bruyette & Woods: All right. Thank you.

One other element, Jefferson I would point out is the MSR gain that we had at the second quarter. That was the other piece that drove servicing income to a higher level. Jefferson Harralson - Keefe, Bruyette & Woods: All right. Thanks a lot. I appreciate it.

Just to clarify in that point that the MSR gain which was about $12 million during the course of the quarter relative to prior year, that number was $17 million. So, it was actually down $5 million on a year-over-year basis. And we noted that it was the first gain that we have taken in the asset this year given the Verizon rates which are $66 million in total last year and it's something that we are going to continue to evaluate as we move forward given the fact that that servicing portfolio has increased in size so significantly and the embedded market value gain that we have in the out of footprint MSRs, specifically. Jefferson Harralson - Keefe, Bruyette & Woods: Thanks a lot, guys.

Thank you. Our next question comes from Matthew O'Connor. Your line open and please state your company name.

UBS, thank you. There is obviously been a lot of changes on the way boosting efficiency, better managing your expense space and I think just a general inclusive urgency on all fronts. But, obviously we are in the transition period as all these initiatives are underway. Core earnings have been relatively flat. When we do see a gap up in earnings, in these initiatives and how meaningful can it be?

Matt, as you were mentioning, we've got a number of core initiatives that are already showing progress. We're going to further accelerate those initiatives including our organizational review efforts which we indicated in our release that we would announce in greater detail at the end of August. One of the keys clearly is for the credit environment to moderate some. It’s grown significantly; we had a $50 million increase in provision on a quarter-over-quarter basis. We are pleased that the Company is able to through that. Relatively speaking, we also need to get additional core customer deposit growth, to fuel from a funding standpoint, a further increase in our margins to complement the balance sheet management strategies that we have implemented. So, I would say if you wanted to focus on three things that are keys, one would be the further implementation of our expense and E-Squared initiatives. Second would be seeing the rapid rise in the charge-off level and mirror it some. And then third, getting some good base, low cost deposit growth. And we have a number of key initiatives that we talked about in prior quarters. I can tell you those initiatives are accelerating within the Company including the fall promotions that we referred to earlier that will be beginning year shortly and hopefully we will be positive impacts in the third and fourth quarters. But those would be the three areas, I would point you to.

Matt, this is Jim. I know you would understand this but for the sake if clarity the… even though we have insulated the revenue producing side from our organizational design efforts of others, there is obviously some effect on focus at certain levels of the organization. And we have begun aggressively on the assumption that, and the belief that and I think proof of this point that the E squared initiatives will go quite well, we will achieve what we have set out to achieve, if not better. We have turned our focus to more aggressive operations of the market on the revenue generation side. So, I think that Mark has answered your question exactly right, but I thought might give you a tone that says E squared is going well. It's now… I wouldn’t say it’s on automatic but it's certainly going well. And we are refocusing our attention totally on the revenue generation side. New client generation is still positive, average balances in deposit accounts are still smaller than they used to be but we think we've got a very fine chance and opportunity inside the market to pursue more aggressive deposit generation. Don’t know how that will go. There is a war for deposits out there. We will have to see how that goes. But the revenue side of the bank is in the nurturing mode and refocused. For example, that’s specifically why we did the geographic part of organizational design, first and it is now essentially over. Just thought you might be interested in just a little color on something.

No, that’s helpful. I mean I definitely agree that there has been signs of progress in the initiatives. And I guess we are all trying to get our arms around how much of the cost savings might be given away on sort of like credit deterioration and sort of like revenue give up. And what will the bottom-line impact? And as you look all these initiatives underway, how will you evaluate whether or not this is successful in combination, and I assume there is sort of bottom-line target we are trying to get to.

Well, I think we still say that our longer… from the Investor Day June of a year ago, we still held with our longer-term objectives. The one difference will be a change in the credit thing but for this year in terms of the outlook. But other than that we are still holding our ground, we believe that in fact when some of these what I would call maybe cyclical or abnormal matters change that we will achieve those and we have every reason to believe we shall.

Okay. Thank you.

Thank you. Your next question comes from John Pandtle. Your line is open and please state your company name.

Good morning. Raymond James. I had a couple of questions. I was wondering if you could share some color on the pretension levels at the branch and on the commercial lending side of the bank. And then separately, I think a lot of people would agree that the stock appears to have a fairly meaningful acquisition premium built in which in some way gives you a currency advantage. And I'm wondering if you can talk about strategically how you are looking at potential acquisition opportunities, as you move forward.

Well, let's see there were three questions in there. We will try to take them maybe out of order but we will get… this is Gay Abbott.

Good morning. On the commercial side of the bank, we are seeing a slight uptick in turnover from the commercial banker side but nowhere near turnover ratios that we might have seen two to three years ago.

When you mean retention, you're talking about human beings or clients?

Well, I was really talking about the vendors, the employees.

Good, so Gay has answered the right question, good.

Well, so we are well within industry standards, we track that every month, that’s something very important to us. So, we feel pretty good about where we are in the commercial side.

On the retail side, John. This is Greg. The retention levels we measure it closely and we do all the mystery shopping and do all the stuff [ph] that we do throughout our retail network. The retention levels have remained good, I mean, we have compared ourselves against peers, I mean, they continue to run higher there certainly are areas that we always identify that we would like to improve them across the company, it's not… doesn’t run… the higher level you expect company-wide, but I would say on a average, our retention levels have continued to track very well with peers.

Now with regard to the M&A question, we have stated that we will continue to evaluate opportunities that are presented to us as you would expect us to. We have talked for many years about the fact that we enjoy an outstanding footprint and we don’t want to through acquisition deteriorate that to any significant degree. We have also told you that there are certain markets that are higher growth markets in the southeast, where we could enhance our branch network and particularly in those markets if there were opportunities that became available, we would certainly be remiss if we didn’t evaluate them. The stock price goes up and down, and so we are looking at the long term strategy of the bank and the fundamentals from an evaluation standpoint. But I do want to make sure you are clear, we are going to continue to evaluate opportunities that we find attractive that will help the long-term franchise value as well as the growth of our earnings over the next foreseeable future.

Okay. And, but Mark with the currency being less than it’s been in years, do you have a greater sense of urgency to take advantage of that?

Well let me… let me… this is Jim. Let me take that one. I think our strategy about our footprint as well other as other places, types of transactions we might consider doing has not really changed with the effect on currency. Obviously, it would make it easier in some cases. Prices are still quite elevated in our judgment. So I think you will see us do the same sensible sort of analysis of these transactions or potential transactions we have done in the past. And to reiterate to what Mark said, there are some places where we are thinner than I would like us to be and we would consider doing something, not of a large nature. And while it is nice thing and we are happy with what the stock has been doing, it is up and down and we tend not to change our strategic view of things based on current prices.

Okay, very good thank you.

I think we have time for one more question.

Thank you. Our next question, our final question comes from Kevin Fitzsimmons. Your line is open, and please state your company name.

Sandler O'Neill. Good morning, everyone.

Hi, good morning Kevin.

I apologize, I know you did go over this before, but I just didn't get the number down. if you could go over the share buybacks, what you did this quarter, what you are looking out at in terms of. You mentioned the accelerated repurchase plan in August. So what… what kind of you are looking out for over the back half of the year? Thank you.

Sure. In connection with the balance sheet management activities what I mentioned was that our Tier 1 capital level was inching up on about 8% and we had already announced that we intended a $750 million to a $1 billion or so share repurchase in the second half of the year. To execute that we conducted about $50 million in repurchases during the second quarter prior to entering into an accelerated share repurchase in early June. Those repurchases, as you know… well the ultimate number of shares would be predicated on the share price that occurs during the course of that share repurchase period which is June through August. And as result we've repurchased and removed about 8 million shares from the share count in early June and up to 1.7 million shares will be acquired additionally during now to that end of that program. The combination of those two transactions or series of transactions is about $850 million in shares that were repurchased during the course of the second quarter. And we will continue to evaluate our capital position through the remainder of the year and dependant upon additional balance sheet strategies and/or the ultimate resolution of our stock holdings, we may be in a position to add to that share repurchase level. We'd indicated before that our long term goal of return of share… of earnings through the combination of dividends and repurchases was in that 70% to 80% range. We were north of 90% last year and we're likely to be in that same kind of range this year. And so we'll continue to evaluate as we move forward but that's what we've conducted today.

Okay. Thanks very much.

Thank you.

Thanks for joining us on the call today. Please call me if should you have any additional questions.

Thank you. That concludes today's conference call. Thank you for your participation .You may disconnect at this time.