Welcome to the SunTrust Second Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the meeting over to Mr. Steve Shriner, Director of Investor Relations. Sir, you may begin.

Good morning, everyone. Welcome to SunTrust Second Quarter Earnings Conference Call. Thanks for joining us. In addition to the press release, we've also provided a presentation that covers the topics we plan to address today. Slide 2 outlines the content, which includes an overview of the quarter, and then we'll have a financial results discussion and a credit review. The press release, presentation and detailed schedules are available on our website, www.suntrust.com. This information can be accessed by going to the Investor Relations section of the website. With me today, among other members of our executive team, are Jim Wells, our Chief Executive Officer; Mark Chancy, our Chief Financial Officer; and Tom Freeman, our Chief Risk Officer. Jim will start the call with an overview of the quarter. Mark will discuss financial performance, and Tom will conclude with a review of asset quality. At the conclusion of our formal remarks today, we'll open the session for questions. Before we get started, I need to remind you that 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 also 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 the forward-looking statements are made, and we disclaim any responsibility to do so. During the call, we may discuss non-GAAP financial measures in talking about our performance. You can find the 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 nor 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 out of the way, I'll turn it over to Jim.

Good morning again, everyone. I'm glad you're with us this morning. Our loss significantly narrowed to $0.11 this quarter versus a $0.46 per share loss last quarter, as our operating trends gained momentum. Specifically, asset quality continued to improve. We had substantial revenue growth over last quarter, and we maintained favorable deposit volumes and mix. Furthermore, the pace of the loan balance decline has clearly slowed. As we've been articulating for some time, we've been focused on positioning our businesses for growth as we come out of this cycle, and we're starting to see the benefits of those efforts. And though macro economic indicators are mixed, and there are uncertainty in our operating environment as it relates to financial regulation and the potential impact from the Gulf oil spill, we are increasingly encouraged by the operating trends that we're seeing. Revenue grew compared to last quarter with growth across our core fee income category. We find this broad-based growth positive and believe that while the operating environment remains challenging, some economic traction coupled with our client-focused strategies generated these favorable results. We also had some non-core gains related to the sale of securities and fair value adjustments that Mark will detail shortly. Net interest income and net interest margin were stable compared to last quarter but grew significantly compared to the prior year, up 8% and 39 basis points, respectively. The net interest margin increased due largely to the continued shifts in our funding mix to lower-cost deposits. Client deposit growth and improved mix enabled the reduction in higher-cost sources of funding and that, along with the lower rates pace, has had a significant impact on margin over the last year. Overall, we continue to make progress in our efforts to improve client satisfaction and our focus on the drivers…

Thanks, Jim, and good morning, everybody. I'll begin my comments today on Slide 5 of the earnings presentation with a summary income statement. For the quarter, we posted a loss to common shareholders of $56 million or $0.11 per share. The net effect of securities gains, debt extinguishment cost and mark-to-market gains on our debt contributed a positive $0.07 per share to the quarter. And even after adjusting for these items, the earnings per share loss narrowed significantly from the prior quarter and prior year levels of $0.46 and $0.41 per share, respectively. Also, the company did generate positive earnings before preferred dividends this quarter. As in prior quarters, the net earnings losses driven by the recessionary environment with elevated net charge-offs, high cyclical expenses and tepid loan demand. Despite these impacts, there were a number of positive trends that drove continued improvement in our financials. The recovering, albeit, uneven economy contributed to a portion of our improved results. This improvement was most notable in the $200 million decline in our provision expense from the first quarter, which was driven by continued favorable credit trends. Additionally, we also saw the positive benefits from actions that we have been taking to drive better performance. This improvement was especially evident in higher sequential fee income across a broad range of categories. We also saw continued favorable shifts in our deposit mix, which together with our proactive asset liability management actions, drove stable net interest income and margin on a sequential basis, as well as 8% net interest income growth and 39 basis points of margin expansion versus the prior year. With that brief summary of our second quarter results, I'll now shift to Slide 6, which provides a summary balance sheet. Average loan balances, excluding non-accruals, were down 1% and 10% as…

Thanks, Mark. Today, I'm going to review our asset quality beginning on Slide 14. As Mark and Jim noted earlier in the call, asset quality continued to improve this quarter. Charge-offs, provision expense, non-performing loans and non-performing assets all decreased significantly. Delinquencies and loan balances were stable to down, particularly in certain higher risk portfolio. Despite improved asset quality metrics in the current quarter, the Allowance for Loans and Lease Losses, as a percent of loans had been maintained at the prior quarter level in light of continued uncertainty regarding the strength of the economic recovery and trends in home values. Aggregate loan balances continued to decline in the face of lower loan demand and line usage, as well as targeted actions taken regarding higher risk portfolios such as Construction. This modest decline matched the amount of new loan originations in the portfolio, particularly in commercial lending. Through the first six months of 2010, we have originated $6.9 billion in new C&I loan commitments and leases, which is a 32% increase over the first six months of 2009. Early-stage delinquencies represent 1.26% of the portfolio, up from 1.19% in the first quarter. This increase was driven by higher delinquencies in Federally-guaranteed student loans. After removing portfolios with Federal government guarantees for both quarters, the ratio improved to 98 basis points from 104 basis points last quarter, a six basis points improvement. We believe that the pace of improvement in delinquencies in some portfolios may slow as they approach historic numbers. Other portfolios, such as Consumer and Commercial Real Estate are more closely aligned with the general economy and employment trends. We expect delinquencies in these portfolios to remain at elevated levels until conditions improve. Non-performing loans declined during the quarter by over $485 million, which represented the fourth consecutive quarterly…

Thank you, Tom. Before we take questions, I'd just like to remind you to limit your questions to one with one follow-up. And with that, operator, we're ready to take our first question.

[Operator Instructions] And our first question comes from Brian Foran with Goldman Sachs.

I appreciate the disclosure on the Panhandle, and I think one of the things people might have missed is you guys aren't that big there. As we think through the rest of Florida, as we move down the West Coast, it starts to become a much bigger exposure for you. How are you thinking about risk of some of the oil impact spreading, and maybe any color you're seeing realtime in places like Tampa and Sarasota moving down the coast or prices weakening or transactions weakening or things looking up?

Brian, this is Jim. The most recent official forecast that I've seen was put out by the National Oceanographic and Atmospheric Administration. I'm glad I got all that out, NOAA. And it basically said that the west coast of Florida as opposed to the Panhandle, had a 1% to 20% chance of some issues with the oil spill. And that in the last -- this is two- or three-week old data, so it's before the stopping of the leakage. Declining from 20, if it were 20, it tends to be going down. They have a belief that there are some issues that the loop current in the Gulf will feed into the Gulfstream and that there maybe some issues in South Florida. But as it goes on and as the Gulfstream separates from the North American continent, they predict much less, the farther the north you go. And our experience basically so far is not bad. Of course, the devastation right on the shoreline and some parts of our footprint, are less actually than if further west on the Gulf coast. So we are obviously concerned about it. Floridians are concerned about it. We haven't seen a meaningful economic impact on the west coast of the peninsula but obviously, the tourism issue and valuations and loss of tenant rental income and all those kinds of things in the Panhandle, particularly the western part of the Florida Panhandle are worst, if that's a useful update.

One follow-up on the mortgage repurchase trends. Are there any leading indicators, First Horizon mentioned, mortgage insurer rescission request because there was a lag between that going to the GSEs [government-sponsored enterprises] and ultimately back to the banks. Different banks have pointed to different things, but are there any leading indicators you found useful that investors can watch to try to get a sense of what the next couple of quarters might progress like?

This is Bill Rogers. Let me take a shot at that. It's hard to sort of look at, as Mark pointed out, leading indicators because of so much volatility, from literally month-to-month. I think for us, primarily looking at the improvement in the portfolio that's going to be subject to a rescission is probably the best litmus test for us. As it relates to the MI [mortgage insurer] rescinds, I think probably the question you really are asking and maybe should be asking is, are those accounted for in our reserve? And what we do is exactly that. I mean, we look at MI rescinds that have not yet resulted in a repurchase request, for example, and make sure that they're incorporated into the reserve by some calculation or estimation. Is that helpful?

That is.

And our next question comes from Nancy Bush with NAB Research.

Number one, on the loan-loss reserve. Jim, do you have any indications whether the regulators are going to be putting forth some guidance? I mean, we know we're going to get capital guidance probably in November, but is there going to be any guidance on reserve and/or reserve policy going forward?

I would hope so. But, Nancy, we're all well aware, I know you are of the issue between the SEC and the bank regulators in terms of reserve desirability levels and all that sort of thing. And while I'm sure, I don't know this, but I'm sure and confident that there are conversations going on. We received no particular indication about any of that. So I think at this point, it's a toss-up.

I noticed you had a step-up in marketing expenses during the quarter to kind of a new level. And I noticed the, and I'm sure you did as well, the Wall Street Journal a couple of days ago, about concentration in some of your markets. I think Orlando was the market that they had explored and it was somewhat startling, the degree to which three large banks are controlling that market now. How are you responding to this concentration issue in your markets. Is this step-up in marketing a result of that?

The interesting thing is that the word used in the article such as dominate, why you might have a relatively large concentration on the top three in any particular market, it's by far from being dominated. The reality is all of that markets are loaded with regional and smaller institutions that compete pretty aggressively, so that's a qualitative comment. Now, basically what we're doing is we're promoting our brand and we're promoting our operating model, and we're working hard on the delivery of service quality, such as that to our clients. And this advertising uptick started actually about two and half years ago. If you go back and look at the numbers, we are much more inclined to do that. It's been very well accepted. The brand positioning has been very well accepted. And to get to Orlando specifically, we're still number one share there. And Nancy, I think in our 20 or 25 metropolitan statistical areas, the top three banks have similar, maybe less than Orlando, as a number but similar. It's always the same banks and it always has been and there's actually nothing new about that.

And our last question comes from Greg Ketron with Citigroup.

I have a question, kind of longer term as we move our way out through the rest of this year and into next year. You're hearing other banks talk about prices on real estate firming up, and as you look at your NPA strategy going forward, how much do you see that play out? I mean, would you be delivering properties into the marketplace that maybe on accelerated pace, and we might see things like ROE expense stay elevated for a number of quarters? Or just really any thoughts around that as we move forward?

Greg, it's Tom. We've built a very efficient and substantial disposition machine in our OREO departments. They move through the properties we take on with some alacrity. Last quarter, you saw us go and do a disposition of some loans because we thought the market was really advantageous to a disposition activity. As the markets continue to firm and the secondary market for sale of assets or sale of loans were to be advantageous, we have the resources and capabilities to be able to do those sorts of a transaction, should we decide to. I think we will continue to work through this on a careful and thoughtful basis, very mindful of our shareholders and preserving those resources as we move it through. But if you look at the velocity of disposition over the past couple of years, we've done a pretty good job of when we get a hold of the properties, getting rid of them.

And would you expect ROE expense to maybe stay elevated for a number of quarters, or is it too difficult to predict?

No, I think we have a fairly good prediction on that stuff and really know what we've got much coming in, and I think that's exactly right. You're going to have elevated ORE (sic) [ROE] expenses over the next few quarters until we're through with the disposition portion of the cycle.

Thank you, everyone.

And that concludes today's call. Please disconnect your line at this time.