SunTrust Fourth Quarter Earnings Conference Call. [Operator Instructions] I'd like to introduce Mr. Kris Dickson. He is the Director of Investor Relations. Sir, you may begin.

Good morning, and welcome to SunTrust's Fourth 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 during our call today. Slide 2 outlines the content, which includes an overview of the quarter, financial results and a review of credit quality. 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 website. With me today, among other members of our executive team, are Jim Wells, our Chief Executive Officer; Bill Rogers, our President and Chief Operating 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 then discuss financial performance, and Tom will conclude with a review of asset quality. At the conclusion of the formal remarks, we'll open the session for questions. Before I get started, I need to remind you our comments today may include forward-looking statements. These statements are subject to risk 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 the forward-looking statements are made, and we disclaim any responsibility to do so. During the call, we will discuss non-GAAP financial measures in talking about the company's 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, I'll turn the call over to Jim.

Good morning, everybody, and I'm glad to have you with us this morning, and thank you, Kris. I think you have great skills displayed in the reading of the synopsis of the forward-looking statement declaration.

Thank you.

I'm impressed. Also would like to thank Steve Shriner, who I hope is on the phone this morning as well. He has accepted the position of Chief Retail Credit Officer in our Corporate Risk group. And I want to thank Steve for great work over the past few years. And before discussing the fourth quarter, I would like to take a moment to share a few accomplishments of SunTrust in 2010, as we finish the year on a much more positive note than it began. A few examples. We returned to profitability during the year and posted a full year profit before preferred dividends. Our low-cost deposits grew 10% over the course of the year and demonstrating our success in increasing client loyalty and growing market share. Revenue expanded and benefited from a 17 basis point expansion in the net interest margin, as well as from solid performance from several of our key businesses. Credit quality improved throughout the year with quarterly declines in net charge-offs, delinquencies and nonperforming loans. And our capital ratios remains strong and even expanded. Returning to the fourth quarter, our earnings of $114 million or $0.23 per share improved compared to last year, as well as last quarter, mostly driven by a lower provision, with the result of improved credit quality and solid revenue. We're pleased with the diversity of our revenue sources and continued to improvement in credit quality. Net charge-offs, nonperforming loans, nonperforming assets and early-stage delinquencies all declined compared to the third quarter and are significantly lower than the fourth quarter of 2009. While our financial performance is still not to the level that we or our shareholders desire, we did make additional progress in demonstrating improved results and in executing our strategies to drive longer-term growth. The operating environment unquestionably remains…

Thanks, Jim, and good morning, everybody. I'll begin my comments today with a review of the summary income statement on Slide 7. For the quarter, we posted net income to common shareholders of $114 million or $0.23 per share. This represents a $0.06 increase from the $0.17 per share that we reported in the third quarter. Results were driven by a decline in the provision due to improved credit quality, as well as stable revenue relative to the strong results that we reported last quarter. We'll discuss the quarter in more depth on subsequent slides. So for now, I'll just hit a few of the highlights. Net interest income increased 2% or $28 million relative to the third quarter and grew 7% or $89 million as compared to the fourth quarter of last year. This increase was driven by the continued favorable shift in the deposit mix and lower deposit pricing. We also saw a modest increase in loan balances in the quarter. The provision declined $103 million or 17% from the third quarter due to lower net charge-offs and a modest reduction in the allowance. Noninterest income declined sequentially by $5 million or about 1% as mortgage revenue was lower on the heels of the strong refinance activities that occurred in the third quarter. This decline was partially offset by higher trading income, as well as increases in other market-sensitive revenues. Noninterest expenses increased $49 million or 3% from the prior quarter due primarily to investments in the business, including technology, marketing and personnel, as well as higher incentive compensation in certain business lines. As we have done in the past, we adjust for several items, including securities and mark-to-market gains, when presenting our core revenue and expense figures. The total net adjustments this quarter contributed $88 million to…

Thank you, Mark. I'll begin today's review of our asset quality on Slide 15. As you heard from Mark and Jim, the overall theme of our credit message this morning is that asset quality continued to improve during the fourth quarter. Net charge-offs, provision expense, nonperforming loans, nonperforming assets and early-stage delinquencies all decreased. In fact, as you can see on the right-hand side of the slide, every key credit quality metric on the slide improved for the second quarter in a row. Net charge-offs declined 10% from the third quarter to $621 million, and the corresponding annualized charge-off rate declined to 2.14%. Provision expense declined primarily as a result of lower charge-offs, driven by improving credit quality. As a result of current quarter asset quality trends and an outlook for continued improvement, the allowance for loan losses was reduced by a $112 million. This compares to a $70 million reduction in reserves in the third quarter. The allowance-to-loan ratio ended the quarter at a healthy 2.58% of loans. Loan loss reserves declined on both an absolute and a relative basis for three reasons: First, as Mark noted earlier, high-risk portfolio balances continued to decline; second, charge-offs associated with some of these higher risk portfolios, such as construction, absorbed some of the reserves; third, emerging risk moderated. The loan production that replaced this run-off and is generating net portfolio growth is higher-quality commercial and consumer loans and federally guaranteed student mortgage loans. Nonperforming loans and nonperforming assets declined during the quarter by $263 million and $300 million, respectively or by 6%. This is the sixth consecutive quarter of declining nonperforming loans. Ongoing resolution of problem assets continued to drive declines in nonperforming loans. In addition, owned real estate assets are moderating as we continue to aggressively dispose of properties once…

Thanks, Tom. Operator, we're ready to take questions.

[Operator Instructions] Chris Gamaitoni from Compass Point.

Given home prices in Florida have generally fallen looking at -- Casular [ph] metrics or CoreLogic indices, and foreclosure timelines have extended, I was just wondering how you impact or how that impacted your allowance and fair value marks on OREO, as well as how that corresponds with your commentary that severity should be mitigating? I understand the default percentage mitigating, but how does severity to go down with those circumstances?

I think what we're indicating is that the continued fall in housing prices has mitigated substantially. I mean, it's not falling by 10%, 12% a year. And in fact, it's falling in those areas of the Florida portfolio, basically in southern Florida where you're still seeing weakness in home prices. But the vast majority of the portfolio outside of Florida, northern Florida, Virginia and the rest of it, are showing more stability in housing prices and really flat-to-increasing values in those portfolios.

And then on the non-agency side, for repurchase requests, I know it's not a big deal. I was just wondering generally where are those are coming from? Are those private wholesale investors? Or are those bond investors?

This is Mark Chancy. I'll take a stab at that, and then Bill Rogers may pile on. As we mentioned before we've got about $17 billion for the non-agency loans. Those were either sold into our own securitizations, which was about 15% to 20% of the total. And then the remainder were either whole loans and/or sold to third parties who then securitized the loans. So what I would say is that it's a mixture of those three different categories. It's a relatively small dollar amount, as we mentioned, of repurchase requests and pending demands. But I would say that we have received some from the various components that I just mentioned.

Nothing to add to that other than just it's a highly diversified portfolio, which is, we think, the strength of that non-agency exposure in addition to being small.

And two quick questions. Just how much allowance do you have on the TDRs currently?

That's just not something that we have broken out in our disclosure. So I'll refrain from answering that question. We do have a very specific reserve process for the TDRs that we incorporate into our overall allowance framework. It's just not broken out separately.

And then on a more broader kind of commentary, could you just talk about the competitive landscape in the Southeast market, especially now that Wells has fully integrated Wachovia and some of the larger multinational banks have talked about increasing competition there?

This is Bill Rogers. Let me start with a general comment that competition isn't new to the Southeast. I mean, this has been a highly competitive market for a very, very long time and continues to be a highly competitive market. We think we are extremely well positioned in our markets, enjoying market shares of second and third position in most of our markets. So it has been, is and will continue to be highly competitive.

[Operator Instructions]

We're not showing any further questions at this time. We appreciate you all joining us. That concludes our conference call.