Welcome to the SunTrust first quarter earnings conference call. (Operator Instructions) I'd now like to introduce Mr. Steve Shriner.

Good morning. Welcome to SunTrust's first quarter earnings conference. Thanks for joining us. In addition to the press release, we've also provided a presentation that covers the topics we plan to address during our call today. Slide 2 outlines the content which includes capital updates, an overview of our financial results and an in depth credit review. The press release, presentation and detailed financial schedules are available on our website, www.suntrust.com. This information can be accessed by going to the investor relations section of the web site. With me today among other members of our executive management team are Jim Wells, our CEO, Mark Chancy, our CFO and Tom Freeman, our Chief Risk Officer. Jim will start the call with an overview of the quarter. Mark will then discuss our financial performance and Tom will conclude with an in-depth review of asset quality. At the conclusion of the formal remarks, we'll open the session for questions. Before we get started, I need to 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 circumstance or events that occur after the date the forward-looking statements are made. We disclaim any responsibility to do so. During the call we will discuss non-GAAP financial measures when 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 guarantee the accuracy of our earnings teleconference transcripts provided by third parties. The only authorized live and archived webcast are located on our website at www.suntrust.com. With that, let me turn it over to Jim.

Good morning everybody. There are two clear messages that emerge from our first quarter results. First, we are still working through credit and earnings challenges as the weak economy continues to take a toll on performance. Second, there are some preliminary signs of improvement in several key areas including mortgage originations, consumer and commercial deposits and early stage delinquencies. This morning's results confirm that SunTrust remains financially strong with enhanced capital, high liquidity and bolstered reserves. In other words, we do have the resources necessary to continue to manage successfully through this cycle to withstand the impact of continued economic weakness and to emerge on the other side of this situation well positioned. In addition, we're doing a pretty good job of controlling what we can control and taking advantage of opportunities as was evident in the expected expense discipline and impressive deposit growth and strong mortgage revenue growth, all of which contributed to what I would describe as solid core results and have positive implications for future performance. Clearly this positive underlying picture is overshadowed by the impact of recession related pressure. That gets me back to our quarterly loss, what caused it and what it means. As you know we reported a total loss of $2.49 per share. However, the overwhelming majority of it was attributable to a non cash tax charge of $714.8 million or $2.03 per share related to the impairment of goodwill associated with our real estate lending businesses. It's important to note that the goodwill impairment charge was a direct result of continued real estate market and macro economic deterioration that put downward pressure on the fair value of our mortgage and commercial real estate related assets. It reflects the current cyclical downturn which resulted in depressed earnings in these businesses and a significant…

Good morning everyone. I'll begin my comments today on Slide 4, the earnings presentation with a brief discussion of our capital position. I'm pleased to report that all of our key capital ratios increased during the quarter. The Tier One capital ratio is estimated to be 11%, up 13 basis points from the fourth quarter level, and the total capital ratio increased 11 basis points. Importantly, all of our equity to asset ratios also increased, and specifically our total equity to total asset ratio increased nearly 130 basis points to 12.5% and our tangible common equity ratio increased 23 basis points to 5.82%. The primary driver was a $9.3 billion or 5% reduction in tangible assets with a $6 billion reduction in other assets due to the January settlement of the sales of mortgage backed securities at year end that we mentioned during last quarter's call. The remaining $3 billion was primarily related to a reduction in trading securities during the quarter. We view our regulatory and tangible equity ratios as very strong both on an absolute basis relative to our risk profile and comparatively to other financial institutions. In addition to the protection that our capital provides, SunTrust remained high liquid at quarter end. Core deposits increased to a record over $112 billion. We had nearly $6 billion in cash and no overnight borrowings as of March 31. As such, we believe this combination of strong capital and high liquidity positions us to meet the borrowing needs of our clients while maintaining an adequate buffer against further deterioration in the economy. Shifting to Slide 5 and the summary of the financial results, for the quarter we posted a loss of common shareholders of $875 million or $2.49 per share. Excluding the goodwill charge, the loss was $161 million or…

This morning, I'm going to provide a review of our asset quality beginning on Slide 15 of the presentation. Credit quality weakened in the first quarter although there were some positive signs in certain portfolio segments. The trends are clearly evident on the schedules. Non performing assets and charge offs showed increased during the quarter while on the other hand, delinquencies improved from several consumer and mortgage asset classes. Non performing assets increased $790 million during the first quarter to $5.2 billion or 4.21% of loans and other repossessed assets. This change is about the same dollar increase as in the third and fourth quarters. The growth was largely comprised of residential mortgages and residential construction. Mark has already spoken about the classification change for borrower misrepresentation and claim denial related loan losses that contributed to our first quarter reserve build so we'll add to his comments on that point. In total, we added $384 million to the allowance in the first quarter which raised our reserves to loan coverage ratio to 2.21%. Growth in the allowance excluding the classification change was $211 million compared to $410 million in the fourth quarter. Please turn to Slide 16. Asset quality issues remain primarily residential real estate related. This includes residential mortgages, home equity products, residential construction and construction deferred. Given the current economic environment, our general C&I portfolio continues to perform reasonably well. While the effects of the recession can be seen in weaker business activity, for the most part stress have been limited to the cyclical industries that typically experience declines in revenues and cash flow through general business downturns. In particular, we are watching industries linked to residential and commercial construction and supply, auto dealers and other related auto, trucking and transportation and advertising based media companies. Our portfolio…

Before we open up the lines for calls, I'd like to remind you to please limit yourself to one question and one follow up. We're ready to take some questions.

(Operator Instructions) Your first call comes from Brian Foran – Goldman Sachs. Brian Foran – Goldman Sachs: I'm trying to think about your ability to earn your way through this cycle, and I think about it in two ways; first just implicitly the reserve to MPA ratio at 50% and second pre provision earnings in the $700 million to $800 million range this quarter versus MPA formation in four and when I say MPA formation, MPA growth plus charge offs in the quarter. I know everyone thinks about that a little different, but in both cases it would seem like 50% is a very important metric, i.e. the severities on problem loans are less than 50%, you're kind of okay because you can just earn your way through this and it will be painful, and if severities are more than 50% then it would be more problematic. So can you give us some data points around what you're seeing in actual dispositions, loan sales, some metrics to get comfortable that severities on the MPA book and the new MPA's that are forming are below 50% and therefore, you can earn your way through this and is that a fair way to think about it?

First of all as I believe we've talked about in previous quarters, we tried to show our charge off capability and how we're carrying our non performers and how closely those non performers are written down and our ability to continue to sell when we get hold of the properties at the values that we write down to. A majority of our loans that go on to non performing are secured by real estate either on the commercial side or primarily houses and coming out of construction loans, or they're single family mortgages, so they're well secured. And as you take a look, we provided you with I think a lot of detail on our charge off rates and our carrying rates in those mortgages. We're primarily secured and with that primary security we don't see charge off rates on the portfolios approaching the 50% rate. So I think your thought process around how much earnings potential we need to have to get through the charge offs is not a bad through process. I think our secured nature of almost all of the assets in the portfolio mitigates much of what your concern would be. And thirdly, I think we've been fairly successful in identifying the terminal value of the assets and disposing of the assets against the terminal values given that we write them off at 180 days at 85% of the then fair market value. And we continue to write them down where that's required. Brian Foran – Goldman Sachs: The mortgage re-insurances losses at about $250 million cycle to date, can you remind us what the maximum exposure is or just some metrics around exposure around that book so we can get potential future loss potential?

The re-insurance reserves we have been building over the course of the past three quarters. We have a combination of both premium income and incremental capital to be depleted if you will in terms of the incremental reserves through this cycle. We have only $20 million or so of incremental capital that can be consumed as a result of these re-insurance reserves but dependant on the level of premiums that we receive; those premiums are likely also to be consumed in terms of the expected losses that are coming from the trusts. So to try to give you the exact expense number is challenging but there will be a corresponding revenue item associated with those premiums and so the net effect if you will is approximately $20 million. But we basically built the reserve significantly over the course of the past several quarters almost to the full amount, is the bottom line.

Your next question comes from [Kevin St. Pierre – Sanford Berstein] [Kevin St. Pierre – Sanford Berstein]: Just following up on the reserve adequacy, I thank you for the disclosure on Slide 26 about the non accruals and residential mortgages. I think it would help us evaluate the reserve adequacy for the entire portfolios of non accruals would be something like this for the total amount of accruals, so could you tell us what percentage of total non accruals are carried at expected recoverable value and what the cumulative write down is.

The C&I portion of our non performing loans, which is what I think the question is. [Kevin St. Pierre – Sanford Berstein]: For residential construction as well, we would want to know what the mark down to non accruals has been and they flow into non accrual status.

Those would come in through the residential real estate portfolio line so those have already been marked down in about the 20% to 24% range in terms of what we've been marking those things down on the construction lines.

One of the ways to look at that is we take the write down on those commercial type residential loans at the time of foreclosure, so the write down for those is primarily still in the reserve and if they're larger loans, it's in the specific cap loan by loan reserve as opposed to having been written down. So it's not an apples to apples comparison which is one of the reasons why we have not provided that detail on the commercial portfolios since they're fundamentally not accounted for under the same as the consumer real estate secured loans.

A follow up portion to that question would be we have a relatively substantial element of 114 reserves. The 114 reserves on the commercial side of the portfolio is, we build the reserves for every one of the loans over $4 million in the portfolio on a net cash flow basis and fully reserve for those losses within the loan loss reserve. [Kevin St. Pierre – Sanford Berstein]: So for hypothetically for a large residential construction credit that would come in the amount reflected in non accrual is the outstanding principal balance.

That is correct. Within the reserve there is a specific reserve against that loan if we believe the cash flows are the value of the assets are insufficient to repay the loan.

Your next question is from Mike Mayo – CLSA. Mike Mayo – CLSA: The simple question is where do you expect MPA's and charge offs to go in the second quarter and the sub question would be, you mentioned seasonality, what did you mean by that? REO, how do we know that marks the level or how do you know it's marked at the right level, and you said 30 days delinquencies are good predictors to make you feel better, but it didn't seem to be a good predictor last year because it didn't go up so much and yet charge offs and MPA's still went up. I'm really just trying to get where you think your problem assets go in the next quarter or two.

First of all, we're not providing specific guidance as it relates to MPA's and charge offs. We did however end the presentation this morning talking about a specific increase that we do expect relative to the current run rate which relates to the reclassification of the borrower and his representation of fraud losses into charge offs which we believe will be approximately $100 million increase to the run rate that we currently are experiencing in over all charge offs. Mike Mayo – CLSA: That would be a permanent step up?

No, not a permanent step up. It's just based on our current volume of losses coming from loans that had historically been characterized as operating losses because they had some level of misrepresentation. We're just giving you some detail on that category as it moves from the income statement and the operating loss segment over to provision expense. Mike Mayo – CLSA: If you had done that this quarter, what would the impact have been?

I don't have that number. Let me grab that for you while Tom's commenting on MPA's and we'll get back to you at the end of the comment.

Can you give me the elements of your one question again? Mike Mayo – CLSA: Just 30 day delinquencies were not a good predictor of the loan problems last year so I guess I wondering if that really is such a good predictor for future MPA's or future charge offs because it wasn't a good predictor last year.

30 day delinquencies on the consumer side of the portfolio I think are probably the best predictor of what's going on within the rules and account of the number of mortgages or other consumer products that would go on. The billed and non performers as the 30 day delinquencies continue to build during the period of time came upon us specifically in the fourth quarter with a rush in the fourth quarter. What we're seeing is a mitigation across all products and all vintages up to about 150 days. We've seen some real improvement around that. First quarter has historically be for consumer products a time when you have an improvement in delinquencies. We were not expecting a substantial improvement in delinquencies given the general degradation in the economy so we're somewhat surprised by the improvement during the quarter. If in fact this improvement keeps up, the number of loans moving into delinquent status and therefore our ultimate charge offs will fall later in the year and so while we haven't yet rolled through our forecasting models and the rest of it, these improvements, they're relatively, we can see some improvement in the second half of the year if the second quarter looks anything like the first quarter.

To go back to the question, if you look at Slide 13 under operating loss written off, you see the credit there, the $164.6 million in reduction. That's the reserve release related to those, so that's what would have flowed through charge offs, but as Mark also mentioned, we charged off a backlog of disputed claim denials which is why we provided the additional statement that we really only expected to go about $100 million in the next quarter because there was some work through of those disputed claims.

You had one more element to your question. Mike Mayo – CLSA: Just the REO prices, you're hearing that a lot of properties aren't selling. You have $594 million or REO. How do we as investors know that that's marked down to the right level and how do you know that that's been marked down to the right level if there aren't a lot of transactions in certain categories?

I think the control structure around that is basically on a monthly basis. We take a look at the REO balance to charge off amounts and ensure that we're holding the REO balance against the charge off amounts and we're required not only for our controllers group and our internal audit group, but also for our outside auditors to verify that we are in fact have a fair holding value for the assets.

And the disposal on the assets themselves when they're disposed has been elongated but they're very close to the carrying value at that time so the net gain or loss is relatively modest.

Your next question comes from Scott Valentin- Fdr Capital Markets.

A question on national credits, there was a west coast bank that had some problems this quarter in their portfolio and I was wondering if you could remind us how big your national shared credit portfolio is, the current performance, geographic exposure, maybe any industry concentrations.

I don't have those specific numbers in front of me in terms of the shared national credit. We are just beginning the shared national credit exposure at the moment. Much of large corporate exposure in within the shared national credit umbrella. In terms of the number of lead credits where we have where we would be exposed to criticism by the regulatory agencies is a relatively small amount. We independently review rates and determine performance within each one of those credit going forward. We're not anticipating a big movement coming out the shared national credit.

If you look at last quarter's presentation, there was a pie chart in the S&I slide that showed you the geographic breakdown of our credit. There was a national portion of that and that would include the portion of the large corporate loans and sub set of that would be the book.

In terms of loan modification both on C&I and commercial real estate, has there been a pick up in borrower contacts trying to modify loans given where commercial real estate prices are and how do you feel if a borrower came to you, properties cash flowing with the LTV now is much higher. What are the options in that situation?

Our mitigation activity continues apace. We're doing I think a very good job for our clients. We're doing many thousands of modifications on a quarterly basis on the consumer side. On the commercial side, we're not having to do substantial amounts of modifications on the commercial real estate side other than within the home builder portfolio. We generally work with our clients. We support them where required. If they continue to have the capability to make their loan payment, we'll continue to support them in an appropriate manner. We don't have a big problem in our commercial real estate book.

Your next question comes from Jefferson Harralson – KBW. Jefferson Harralson – KBW: I had a question on Page 13. It looks like the total expense this quarter was $213 million and I think I hear you saying that the normalized number is $10 million to $20 million and you're saying you expect expense to be $100 million next quarter. Is that hearing the comments correctly?

Not quite. Basically what we said is the top box is operating loss expense and you see a $22.6 number, you should be thinking of operating losses in the $10 million $25 million range going forward assuming no high volatility. And then of the $173 million of what we added to the reserve, the portion that we would expect to write off in charge offs next quarter was roughly the $100 million number that Mark mentioned. Jefferson Harralson – KBW: So that's why you had overall reserve build there.

Correct. Jefferson Harralson – KBW: Let me ask you about the cap programs. I know we're on the eve of you receiving information about the stress tests, do you think the cap program has an interesting six month insurance policy or is it just kind of government interference you don't want or is it something else?

As soon as we are through the federal examination that the stress tests are, we would know the answers to all of that, and until we do, we don't know. And we'll just have to see how it goes.

This concludes today's conference.