-- the SunTrust fourth quarter earnings conference call. (Operator Instructions) I would now like to turn the call over to Mr. Steve Shriner, the Director of Investor Relations. Sir, you may begin.

Good morning. Welcome to SunTrust's fourth quarter 2007 earnings conference call. Thanks for joining us. In addition to the press release, we’ve also provided a presentation that covers the focus of our call today, an overview of financial results, including a detailed overview of market impacts, an update on our efficiency and productivity program, and a broad view of our credit picture. Press release, presentation, and detailed financial schedules are available on our website, www.suntrust.com. Information can be accessed directly today by using the quick link on the suntrust.com homepage entitled fourth 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 an overview of the quarter, including an update on progress in our efficiency and productivity initiatives. Mark will cover financial topics, including capital, impacts to earnings this quarter, and more detail on credit. We will then open the session for questions. First, I’ll remind you our comments today may include forward-looking statements. These statements are subject to risks and uncertainty 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. We’ve detailed the forward-looking statements made in conjunction with today’s earnings release in the appendix of our fourth quarter earnings presentation. During the call, we will discuss non-GAAP financial measures in talking about the company’s performance. You can find a reconciliation of these measures to 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.

Good morning, everyone. I am glad you’re with us this morning. As I embarked upon my tenure as SunTrust's Chief Executive Officer just over one year ago, I certainly could not have imagined the challenges the banking industry would face in the second half of the year, nor would I have considered that we’d be reporting barely positive earnings in the fourth quarter. Clearly not the news I had hoped to be delivering this morning, especially in light of the progress we’ve made over the year on the execution of our shareholder value initiatives. Be all that as it may, SunTrust was impacted by the rapid deterioration of the residential real estate market, the change in the credit cycle, and specifically consumer credit quality, and the resulting impact on liquidity in the financial markets. Convergence of these factors resulted in earnings of $0.01 per share in the fourth quarter. For the year, earnings per share was $4.55, down $1.27 or 22% under last year. There were numerous items affected by the broader market conditions and Mark Chancy will detail these impacts to you shortly. In the meantime, I’ll provide a high level overview of our results. Deliberate balance sheet restructuring we conducted in early 2007 slowed the growth in earning assets and the shift to deposit mix to higher cost products resulted in net interest income growing by only 1% over the same quarter of last year, despite an improvement in the margin over that timeframe of 19 basis points. The provision for loan losses in 2007 was significantly higher than the historically low 2006 provision, with the lion’s share of the increase coming in the fourth quarter. The sharp increase was driven primarily by consumer and residential real estate deterioration. Non-interest income was down versus the fourth quarter of…

Thanks, Jim and good morning, everyone. I’ll begin today with a discussion of our capital position. First, I want to be clear that we do not anticipate any issues in maintaining our dividend. As has been the standard practice over the years, our board of directors will consider our dividend policy when it meets in February. We have previously indicated that our tier one ratio target is 7.5%. At year-end, our estimated tier one ratio is about 50 basis points below that stated target. However, our tangible equity-to-assets ratio is about 6.3%. To help provide a clear picture of the drivers of the decline in the tier one capital, we’ve outlined the puts and takes from the third quarter level of about 7.44% on slide five of the presentation. Although 7% is below our target, the expected outcome of transactions relating to our common stock holdings of the Coca-Cola Company, potential issuance of capital securities and expected earnings will move us above our current target during 2008. More specifically regarding the Coke stock, as you know in May 2007 we announced a comprehensive evaluation of our ownership position which currently totals 43.6 million shares. We have completed that evaluation and the Board of Directors has authorized us to pursue certain transactions that accomplish the stated goals of both improving the tier one capital contribution from the holdings, as well as increasing shareholder value. Under any of the expected scenarios, tier one capital would increase by approximately $1 billion. We are currently sharing the approved strategy with the appropriate regulatory and other relevant parties and will announce the final decision and related actions following the completion of that review. Additionally, we are assessing the capital markets and may issue securities during the first quarter. Now, moving on to slide six and…

We’re ready to open it up for questions.

(Operator Instructions) Our first question is from Jennifer Thompson. You may ask your question and please state your company name.

A couple of questions; first, in the past you have given us net charge-off range guidance. Would you be willing to update that guidance for your best guess for 2008?

Jen, we provided some specific information in the forward-looking statements about our expectations of certain elements of the portfolio but we are not providing a specific range for 2008, given all the comments that we’ve made this morning.

Okay. In that case, you spoke about the increased frequency and severity of losses. Could you give us more color in terms of either the magnitude of the increases you saw through 4Q? Has that increase in frequency and severity continued into the first quarter of this year?

What has gone is we saw in the -- really in the fourth quarter an increase in roll rates and some fairly substantial movement, specifically on the residential side of the house. What we are beginning to see and what we’ve seen over the past couple of months is a leveling out of the entry into the roll [queues]. We believe we are starting to see some flattening, specifically in the Alt-A portfolio in terms of the rate of incidents of things entering the [queues]. I can’t say that it is coming down but it is no longer increasing and nowhere near -- the rate of increase is nowhere near what it was during last quarter.

Okay, but still increasing but not increasing as fast, is that the message?

That’s exactly correct.

Okay. Will you share with us what the average severity you are seeing on for the portfolio in general?

Can you ask the question a different way for me?

The average severity of losses say for the residential portfolio for the company?

It’s a really difficult question to answer because the severity is product specific and also geographic specific in terms of what’s going on. We’re seeing more severity in the declining markets than we are in the more stable markets and the level of severity in terms of the types of product has a lot to do with the loan-to-values and the quality of the underlying assets, and so that would be a range across the whole product set.

Okay, but the worst severities, would that be fair to say would be in Florida, as you discussed?

Actually, what we tried to do in the slides was walk you through where the severity is actually coming from. The severity is really coming out of the Alt-A portfolio and the high loan-to-value home equity portfolio and that is where you are seeing the severity, as well as in the brokered lines. If you take those out, actually Florida is performing just about what the rest of the portfolio is performing. It’s not geographic specific. It’s more product specific and channel specific.

Okay. Great, thanks very much.

Thank you. Our next question is from Mike Mayo. You may ask your question and please state your company name.

Good morning. First, the E-squared efficiency initiative, you are at a $300 million annualized rate in the fourth quarter and your target is 350 for ’08, so a deceleration in the savings or might you increase that goal?

Mike, there are additional savings to be had. We are not prepared to increase our number as yet. We’ll see what goes on in the first one or two quarters of the year, but the preponderance of the savings from certain of the activities have shown up and so we are dealing with not the whole portfolio of savings opportunities but rather a reduce portion, so hard to say at this point. I think we’ll stick with our 350 for now.

What it does, Mike, is it gives us a lot of confidence as we move into 2008 that the 350 is a very realistic goal and to the extent that it makes sense in the early part of the year to modify it, we’ll certainly share that with you.

And then a separate question on charge-offs; I know you don’t want to give guidance but what do you think of normalized charge-offs? Are they above where they are? Do you have a number?

Try and ask the question again, just a little differently, Mike. I’m trying to figure out what you are trying to get at.

Through a cycle, where do you think loan losses will be for SunTrust?

Over the whole cycle?

Yeah, if we were to think about normalized loan losses, clearly we were way below normal for a number of years and at some point we might be above, but if you were to take an average through cycles --

Mike, in the past what we’ve said is that our historical average over cycles has been in the 30 to 40 basis point range. We’ve clearly been at levels that are higher than what we recorded in the fourth quarter of 55 basis points, if you look back at various times of stress in the economy and in certain, particularly real estate, markets and we’ve also been as low as eight to 10 basis points. So I think it’s hard to generalize your question but in the past we have experienced in that 30 to 40 basis points on average through historical cycles.

And one other separate question; what is the impact of interest rates on SunTrust? The Fed cut by 75 basis points. Maybe they’ll cut again, so that certainly is a positive. On the other hand, funding costs for longer term debt for SunTrust and other banks has gone up. How does it all play out?

The short-term rate reduction helps as we are economically liability sensitive, although not significantly so. However, the shape of the interest rate curve has a significant impact, as you know, on whether or not it’s a benefit to us. A lower and flatter curve is not beneficial. A lower -- a steeper curve, particularly with a more normalized LIBOR to prime relationship, is a real positive to us. So if you’ve got a lower and steeper curve, we certainly should feel a benefit. I will caution, and we were very specific in the fourth quarter, that due to the liquidity issues generally in the financial services industry, and you can pick your example, the fact is that deposit rates did not move down on a competitive widespread basis in lock-step with the short-end of the curve and with LIBOR, as they have historically. And as a result, that was the primary issue as it relates to the margin decline that we realized five basis points during the fourth quarter. So I’ve given you a couple of data points that are all relevant as to whether or not the lower rates are beneficial to net interest income and specifically with deposit growth as well as a more normalized relationship between deposit pricing and short-term rates will be key components, as well as the shape of the curve, on whether or not it’s beneficial to net interest income in the short run.

And as it relates to SunTrust, are you going more to the deposit market away from the wholesale markets, given --

You can see a dramatic reduction in our wholesale funding during the course of 2007. Specifically, in the first half of the year with a reduction in our deleveraging balance sheet strategies that were implemented. We had a significant reduction in wholesale funding and certainly in our strategy and our My Cause campaign and other deposit related initiatives, not only in retail but in wealth and investment management and our corporate lending businesses are all very focused on driving a core -- checking account relationships, core deposits. We noted some incremental advertising to support some successful campaigns that we’ve been running -- all of those are initiatives designed to drive core deposit relationships and reduce the company’s reliance on wholesale funding and we anticipate continuing to evaluate further steps that we could take to reduce our reliance on that wholesale funding.

All right. Thank you.

Thank you. Our next question is from Ed Najarian. You may ask your question and please state your company name.

A quick question with respect to reserves; obviously a reserve build this quarter but it still looks like your reserve ratios are meaningfully below peer levels. I think I heard you say that you expect -- and correct me if I’m wrong about this -- a $250 million gain from more sale leaseback transactions in the first quarter. Without linking to --

Let me stop you there. What we said is that we --

We also see a potential for additional reserve build in the first quarter to sort of use up that gain, if you will, and come more in line with your peers on the reserving side.

Ed, let me clarify one piece; what Jim said was that we sold $750 million worth of real estate and booked $119 million gain in the fourth quarter. We are also under contract to sell $250 million of additional real estate assets in the first quarter. That will have a marginal gain associated with it but it is not a $250 million gain. That’s the notional amount of the real estate.

Okay. Thank you. That was my mistake. Sorry about that.

So as it relates to the adequacy of the allowance, as you know in the industry on a quarterly basis, you go through and you evaluate the credit statistics and you create an allowance that is consistent with both the current information and what it indicates to you as you look out into future periods as it relates to the losses that you have embedded in your portfolio. And so we will do that as normal course at the end of each quarter and I won’t speculate at this point as to whether or not 105 will increase or decrease from its current level as we move through the course of the year. I will tell you that we are going through a rigorous review process trying, as we mentioned earlier, to evaluate the new information as it becomes available. We did that in detail in November and December and we made the adjustment that you see in the fourth quarter. We will continue that rigorous review as the landscape continues to evolve.

Any initial estimate or range as to what that gain on the sale leaseback will be in the first quarter? If you are under contract, I would expect that you would have a pretty good idea.

We do. We haven’t released that information publicly. It’s not a significant number as it relates to SunTrust quarterly results, so I would put it in the very nice but not significant category.

Okay, and then last question; what are your thoughts on repurchasing any stocks this year, selling Coke stock to repurchase stock?

As I mentioned, notwithstanding the fact that our tier one capital is at 7%, we feel good about our capital position. We feel very good about our liquidity position as an institution. As it relates to capital, we have a number of initiatives underway that would put us well above our 7.5% target. The $1 billion reference in tier one related to the Coke transaction is a good example. We obviously have the opportunity to access the public markets if we deem it appropriate, as well as earnings in the first half of the year. So we are confident that we will be at or above our target as we move through the course of 2008 and I would say in the short run, you should not expect any significant repurchases of shares but as we implement these strategies and get ourselves back above target, we will come back and communicate to you as to those expectations looking forward. But I would say in the next couple of quarters, you should not expect significant repurchases.

Okay. Thank you very much.

Thank you. Our next question is from John Mcdonald. You may ask your question and please state your company name.

Mark, just following up on that last comment on the capital, can you comment on your capacity to issue hybrids? Are there any restrictions on that? And is that part of the factors that you’ll go through in thinking about capital?

Yes, we still have hybrid capacity and we are evaluating that marketplace. There’s been a lot of both public and private capital issuance that you are aware of and so given the fact that we feel that we are well-capitalized and we are in the process of finalizing our Coke transaction, we felt no compulsion to access the markets during the very difficult and volatile environment here over the past several months. We do have hybrid capacity though and that is part of the evaluation as we move forward into 2008.

Okay, thanks. And could you comment on any exposure you might have to the bond insurers?

We have no direct credit exposure whatsoever to the bond insurers. We do have some municipal securities where we do have some wraps from that. Our practice has always been to directly underwrite the municipalities. It’s primarily a single A to double A wrap portfolio. We think we are in very good shape with the portfolio and don’t anticipate any problems coming out of this.

Okay. Thanks, Tom.

I would note that certain of the securities that were acquired in connection with our Trust Co. purchase, Three Pillars purchase, et cetera, do have the insurance wrap so we are subject to some market volatility associated with that insurance but as Tom mentioned, we do not have direct exposure to any of the insurance companies and we are, as you would expect us to, managing that risk actively as we move forward.

Okay. My last thing was any strategically changes to your capital markets business? And also, could you comment on your mortgage strategy going forward, how you are approaching the mortgage business as we go into ’08 here?

Let me start with mortgage and we have representatives from that area here with us if they’d like to pile on. Mortgage is an important product for us. We think the mortgage is a core aspect of the consumer relationship and we work closely with our retail line of business, our wealth investment line of business, to leverage that household to the benefit of SunTrust shareholders. We think that this is an opportunity for SunTrust to improve our long-term position in the mortgage industry. As we’ve talked at length, we have pulled back in certain product areas. We have tightened underwriting standards and we have modified our approach to certain elements of the marketplace. But with that said, we have been adding originators through this period, adding to our long-term market share goal, as well as the profitability that we can generate out of that mortgage production despite a narrowing of spreads on that production income in the short run. So I would tell you that our approach to the business is not waning in any way. We are focused on a long-term basis with the caveats that I mentioned, where we are cutting back on certain product areas as appropriate in this environment. Bill Rogers, if you have anything to add to that.

I’ll take the CIB part of that question. We late third quarter decided to exit the principal part of the CDO and RMBS business and you can see the evidence of that in what Mark has talked about in the warehousing, so you know we essentially have sort of zero warehouses in those businesses and we won’t be in the principal part of that business.

John, one of the things that was overshadowed, rightfully so, is that many of the areas of our capital markets business had a very strong year in 2007. As Bill mentioned, we are paring back and/or eliminating certain activities but the debt capital markets, equity capital markets business and how we leverage our corporate and commercial customer base, wealth and investment management customer base, continues to be an important business for us as we move forward.

Okay, thanks.

Operator, we’re out of time. Let’s take one more question, please.

Thank you. Jefferson Harralson, you may ask your question and please state your company name. Jefferson Harralson - Keefe, Bruyette & Woods: Can you guys talk about the Florida and Atlanta markets and help give us some context to forecast loss rates for the residential construction portfolio?

Why don’t we talk about Atlanta to start with? The Atlanta marketplace is -- while it’s seen a fall-off in housing starts and sale of housings remains very strong within the perimeter. In some of the surrounding communities, you are seeing some weakness and fall-off in sales activity. Inventories, however, in Atlanta, have been showing signs of reduction and people reacting to some softness in the underlying marketplace. The high-end activity, the custom built home business still seems to be holding up very well. The lower end of the market is showing real softness and that would be Atlanta. We’re not heavily positioned, I would say, in the low-end of the market. We do substantially more mid- to higher-end custom build activity here. The regional builders here are beginning to adjust inventory in a moderate to aggressive manner. There’s still positive job formation here and still positive sales activity going on within the Atlanta marketplace. In Florida, it’s a tale of three or four markets. The West Coast, specifically the southern West Coast, we’re seeing falling housing prices. In some instances in some of the communities, some rollbacks in prices which would look to be 5% to 10% rollbacks in those pricing activities. Very narrow volume, not a lot of buyers within the southwest Florida marketplace. The northern market around Orlando is holding up moderately well. Still positive job formation there, although rollback in some of the housing prices, nothing like the significant rollback you see in southwestern Florida. The pan-handle is showing signs of weakness. We have very little concentration throughout the pan-handle area in Florida. Jefferson Harralson - Keefe, Bruyette & Woods: Do you think that Florida deteriorates all year or do you think Florida is in a recession now?

I couldn’t define what “in a recession now” means. We’re watching housing prices. They are trying to get some stability around that and I can’t -- I just can’t forecast what’s going to happen in the residential markets in Florida. Jefferson Harralson - Keefe, Bruyette & Woods: All right. Thanks a lot.

Thank you. This concludes today’s conference. Thank you for participating. You may disconnect at this time.