Welcome to the SunTrust Fourth Quarter Earnings Conference Call. [Operator Instructions] Today's call is being recorded. If you have any objections, please disconnect at this time. I would now like to introduce Kris Dickson, Director of Investor Relations. You may begin.

Thanks, Wendy, and good morning, everyone. 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. 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 management team, are Bill Rogers, our Chairman and Chief Executive Officer; Aleem Gillani, our Chief Financial Officer; and Tom Freeman, our Chief Risk Officer. Before we get started, I need to remind you that 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 the actual results to differ materially in our SEC filings, which are available on our website. 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 out of the way, I'll turn things over to Bill.

Okay. Thanks, Kris. I'm going to begin this morning with a brief overview of the year and quarter, then Aleem is going to give more details on the results, and I'll wrap up the call with some perspective on our line of business performance. SunTrust made significant progress during the year on several fronts. Our core performance improved, driven by higher revenue with stable expenses. We also took definitive action to strengthen our balance sheet and improve our risk profile. Credit quality has improved significantly, and credit-related expenses are abating. All of these translated into better bottom line performance and improvement in our efficiency ratio. The solid core performance trends and earnings momentum we established earlier in the year continued throughout the fourth quarter and these are summarized on Slide 3. Most notable this quarter was strong noninterest income, driven by record investment banking quarter and continued mortgage strength, reduced expenses and favorable deposit and credit trends. These items, along with the lower provision for credit losses and tax rate, contributed to earnings per share of $0.65. The diversity of our revenue stream continue to benefit us this quarter, as the strength in noninterest income more than offset a net interest income decline due to the impact of our previously announced loan sales. Adjusted expenses were lower from the prior quarter due to reduced compensation, along with the continued drop in credit-related expenses. Expenses were also down as compared to the fourth quarter of last year. Now taking a look at the balance sheet. Overall, average performing loans were down modestly from the third quarter due to loan sales, but growth in targeted categories, particularly C&I, continued. Compared to last year, performing loans were up $4 billion or 3%, again, due to targeted loan growth driven by C&I. The favorable deposit mix shift continued, with average DDA growth of 4% from the prior quarter and 16% from the prior year, while higher cost time deposits were down 5% and 18% respectively. From a credit perspective, nonperforming loans declined 11% from the last quarter, inclusive of the Chapter 7 bankruptcy related loan transfers that Aleem will detail shortly, and NPLs are down nearly 50% from last year. Our capital position continued to increase, but our Tier 1 common ratio -- equity ratio estimated at 10%, up about 20 basis points from last quarter. So overall, we made significant progress this year as we endeavored to improve our overall risk profile, capitalize on revenue opportunities and improve our efficiency. Now if you'll indulge me, I'd like to take a brief moment to thank the SunTrust teammates for all they did in 2012. We are united in our purpose of lighting the way to financial well being for our clients and communities, and our continued focus towards delivering upon our performance promise to our shareholders. So teammates, thank you. Now I'm going to turn it over to Aleem to walk you through the details and give you more clarity on the quarter's results.

Thanks, Bill. Good morning, everybody. Thank you for joining us this morning. I'll begin with a review of the summary income statement on Slide 4. First, you will recall that our third quarter earnings per share of $1.98 benefited by $1.40 per share from the actions we announced in September. Therefore, the sequential quarter comparisons are somewhat skewed by the September transactions. However, I will provide transparency regarding the core trends on subsequent slides. Looking at our bottom line, our earnings per share this quarter increased to $0.65, up from an adjusted $0.58 in the third quarter and continuing the increased core earnings trajectory that we've delivered in every quarter of 2012. As Bill noted, the highlights of this quarter included strength in noninterest income, continued credit quality improvements and lower noninterest expense. These positive trends drove a strong finish to the year despite the negative impact to this quarter's earnings from the reclassification of consumer loans discharged from Chapter 7 bankruptcy. Current quarter results also benefited from a low effective tax rate due to year end true-ups and audit settlements. For the full year, earnings per share were $3.59 or $2.19 after adjusting for the September announcement. This adjusted amount was still more than double our 2011 earnings level, driven by higher revenue, a lower provision as a result of improved credit quality and the reduction in preferred dividends due to the redemption of TARP. Let's begin a more detailed review of the quarterly trends, starting on Slide 5. Net interest income declined sequentially by $25 million or 2%, primarily due to a reduction in earning assets from the loan sales we announced last quarter. As a reminder, those sales included $500 million of nonperforming loans, which was substantially completed during the third quarter, as well as about $2.5…

Okay. Thanks, Aleem, and before we move into Q&A, I want to point out some of the highlights from a segment perspective and that will start on Slide 13. In Consumer Banking and Private Wealth Management, loan production was up 13% over the prior year, and that was driven by good mix from home equity, consumer direct and indirect auto. Furthermore, their favorable deposit trends continued, as DDA grew 20% from the prior year. Additionally, we maintained our industry-leading loyalty and service in our branches, which provides the path to help deepen our client relationships and meet more client needs. We're also committed to operating more efficiently, while expanding our penetration of existing relationships. The fact that clients are increasingly utilizing self-service channels has provided the opportunity to make some changes to both our staffing model and retail branch network without compromising service levels. Our wholesale business overall had a really strong year, hitting record net income levels. Net income is double what it was a year ago, reflective of both improved operating performance and credit improvement. Revenue was up 8% to $3.4 billion. Capital markets revenue was up by more than 20%, led by several corporate investment banking, industry verticals, notably energy, media and communications, but also, as well as by leveraging our CIB product base and expertise to meet more needs of our core commercial clients. Wholesale's year-over-year revenue growth was also driven by higher net interest income due to loan and deposit growth, which were both up 7% year-over-year. This revenue growth, coupled with a year-over-year 4% decline in total expenses, led a significant improvement from an efficiency standpoint, with this segment's efficiency ratio declining from 65.3 in 2011 to 57.5 in 2012. Furthermore, strong performance drove the fourth quarter efficiency ratio slightly under 50%. While mortgage…

Thanks, Bill. Wendy, we're ready to begin the Q&A portion of the call. [Operator Instructions]

[Operator Instructions] Our first question today is from Kevin St. Pierre with Bernstein. Kevin J. St. Pierre - Sanford C. Bernstein & Co., LLC., Research Division: Question on the credit-related expenses, Slide 25 in the appendix, if I look at those, you had -- if we look at operating losses excluding your settlement charge, seem to be down significantly to, say, $45 million, a big decline in OREO expenses in the quarter. Is that -- can we use that, adjust for the settlement charge and make that a new base and expect a continued decline? Or how do we think about those expenses going forward?

Kevin, yes, I think that this -- take a look at this number, and we do expect to see continued improvement in this quarter as we get improvement over the year as we go through 2013. If you look at the total, you'll recall what we've been saying for a while is that we think 2011 was the peak in these costs at about $800 million per year. And prior to going into the financial crisis, we were running more like $200 million or $250 million a year. After peaking at $800 million this year, we're now down to $650 million. I don't think we'll actually go back to that run rate of $200 million to $250 million before the financial crisis, but we're headed down toward a much lower number from $650 million, and we think we'll see some of those benefits in '13 again. Kevin J. St. Pierre - Sanford C. Bernstein & Co., LLC., Research Division: Great. And then the actual net charge-offs have been bouncing around a bit based on the NPL sales and change in policy. Your guidance or outlook for stable to down net charge-offs next quarter, kind of sticking in this 90 basis point to 1% range, any reason we shouldn't expect that those trend down significantly over 2013?

Well, that depends a little bit on the economy and how the economy goes in 2013. But if you'll think about net charge-offs as sort of an adjusted number, about $280 million last quarter and this quarter, 3 and 4. I think if you take that $280 million as the base of looking to Q1, you'd expect that number to be stable to down some.

Yes, it's Tom Freeman. I think as you continue to see delinquencies improve and the overall credit quality organization improve, I think you're establishing a base now at the number Aleem was talking about. And as long as delinquencies continue to improve, I think you'll see charge-offs continue to improve over an extended period of time.

Our next question is from Paul Miller with FBR. Paul J. Miller - FBR Capital Markets & Co., Research Division: C&I lending, we saw a lot of your competitors have released on a national basis, more so on a regional basis, see some very strong broad-based C&I lending. Just wondering, is it -- are you seeing more activity in your markets on that front?

Yes, this is Bill, and I think Aleem also pointed out what we really started seeing is actually that's building up a little bit towards the end of the quarter. If you look at sort of our core commercial, November was a lot better than October and December was a lot better than November. So we started seeing some build there towards the end of the quarter. So I'm pretty bullish on C&I, again, sort of seeing the trends that we're looking at, looking at the pipelines. All that being said, there is a little pull of uncertainty. So while the pipelines continue to be strong, our pull-through rates continue to be a little bit better. Our drawdown rates actually have gone -- have been a little bit improved this quarter, and that's actually different than actually the several prior 8 quarters. I think if we can get a little relief for the safety valve, we'll see C&I take off fairly well. Paul J. Miller - FBR Capital Markets & Co., Research Division: And just a really quick follow-up, on your mortgage banking side, can -- do you disclose how much of your HARP is -- your production is HARP-related?

Well, it's 15% in the fourth quarter.

Paul, just as a follow-up, we've been running on HARP of the 75% of refi. About 25% of the 75% has been HARP. Paul J. Miller - FBR Capital Markets & Co., Research Division: And is that declining or staying relatively stable because I know some people have mentioned that they burned through the most of their HARP eligible loans?

Yes -- no, the -- I mean, every cloud has a silver lining. I mean, we have a HARP eligible environment in which we operate. Ours has been fairly stable in that sort of 15% to 17% range here in the last couple of quarters. And if you look out, I mean, we talked about this at the end of the quarter, I mean, we've got sort of 5x our quarterly run rate in terms of eligibility. That can change, housing prices increase, eligibility changes and those kinds of things, but we see a multi-quarter run rate still for us in HARP. As a matter of fact, we're intensifying our efforts on HARP.

Our next question is from Ryan Nash with Goldman Sachs.

Bill, can you provide some more commentary just on your outlook for the mortgage business, particularly the past gain on sale spreads and just given how much HARP volume you still have that you alluded to? And I guess just secondly on the mortgage business, are you seeing capacity coming back into the market and how are you expecting this to evolve over the next few quarters?

Okay, I'll try to get them all there, Ryan. If I miss one, come back to me. But in sort of how we look at the business overall, I think if you think about for us specifically in terms of opportunity, we're seeing our housing markets recover. We have been, I think, doing the right things in keeping a lot of purchase capacity into our business. You sort of think about a quarter of our business is purchase. We've had a good history of that. So as we start to see that market rebound, we'll start to see more activity from there. And as I've said before, we've got 4x to 5x our quarterly run rate in HARP opportunity. So I think we have more run rate there. We're building more capacity, I can say that. So we're building more capacity into our system, and we're also becoming a heck a lot of more efficient as I talk about. So while we'll see -- yet we see some margin decline, I'll talk about that in a minute. Some of it's going to be offset by just the efficiency of our own operation. That has a lot to do with channel selectivity and productivity and other things that we've been doing over the last year. In terms of gain-on-sale margin, the third quarter for us was really unusually high. I mean, we really reached some rarified air on gain on sale margin in the fourth quarter. It was down probably about 15% or so. Will we see continued gain on sale margin to be under a little bit of pressure, I think so. If I look at the first 2 weeks or 2.5 weeks of the year, things are looking pretty good. I mean, our add volume really sort of jumped back up pretty significantly in January. It fell off a lot in the last 2 weeks of the year, which I think has a seasonal impact, but jumped back pretty significantly. So certainly, for this -- what I can see in the short term, I'm still pretty optimistic about our other opportunities in mortgage.

And just as a follow-up, as we think about later in the year or maybe even -- or as we move into 2014, can you talk about how much of the expense base in the mortgage business is variable? So if we were to get 15%, say, 15% to 20% decline in applications at some point, what do you think the change in expenses would look like?

Yes, there certainly are variable costs. They tend to lag by a quarter or so, sort of depending on whether it's purchased or depending on whether it's refinanced in terms of the length of pull through rate, and so I'm confident certainly based upon what we've done in the past and our ability to regulate our variable cost. Ours is going to be unique also and that our fixed costs are coming down. Our fixed costs on the credit side are actually coming down fairly significantly as well. So if the market changes out in end of '13, end '14, I'm fairly confident we can react from a variable standpoint, but you're also going to be seeing some of the fixed cost come down.

Our next question is from Matt O'Connor with Deutsche Bank.

Maybe you could just provide a little more thoughts on the NIM kind of looking out for the rest of year. I think you talked about mid-single-digit decline in the first quarter and there's always some seasonal quarks there. But just as you think about the rest of the year, maybe loan growth picking up a little bit, how does all that kind of filter through into the net interest margin?

Matt, well, we do expect to see some modest NIM compression throughout the full year, as long as rates stay where they are. So if we do stay in this for the long low-rate environment, of course, our maturing fixed-rate assets will be reinvested at lower rates and there is less capacity now for us to reprice on the liability side. So we've actually been pretty successful until now on being able to reprice liabilities both in terms of long-term debt, as well as deposits with the recent quarter, us being able to match the 8 basis point decline in asset yields, with an 8 basis point decline in liability cost. I think that as we look out to '13, there will be less capacity for us to do that on the liability side as we're getting toward terminally low rates on liabilities. If you look at year-over-year, '12 relative to '11, our NIM was down 10 basis points, full year to full year. And as I think about '13, I don't see any reason or a substantial change from that.

Okay, that's helpful. And then just separately, I know there was some moving pieces in the loan buckets with some loan sales, nonperforming sales, but if we look at period end loan growth, it was in aggregate just up a little bit. Any thoughts on -- I mean, commercial is good, but net-net, was up just a little bit. Any thoughts on just loan growth this year and what it might take to get a pickup?

Well, I would expect loan growth to actually be positive this year. As Bill pointed out, we did see some nice increase in loan growth toward the end of 2012, and we're pretty optimistic about '13. As you know, we've clearly got the capacity. We've got the capital to go. We've got the liquidity to go, and we're happy to service our client needs. So any chance that we can get to deliver appropriate services to our clients, we're going to be ready to be there for them, and I do expect to see some loan growth from us in '13, and we'll need to do that to offset some of those NII declines that we'd be expecting otherwise.

And you're starting to see, Matt, some of the headwinds for us start to run off. I mean, think about sort of our high-risk portfolio, which has been a headwind, it's been coming down by sort of $0.5 billion a quarter. Take CRE sort of like specifically, maybe this will be a little bit of a microcosm as our outstandings were down $1 billion over the course of the year. That was primarily, well, almost exclusively, from our sad part of our business. Our production was about double that. The current outstandings in that set are about $600 million. So they're not going to run -- they're not going to have as much of that headwind, going forward, and we'll start to see the impacts of the production. Same thing is true with home equity and I've talked with the production there. So a lot of the headwinds we're starting to see now behind us, and I think we'll start seeing more the benefits of the production.

Our next question is from John Pancari with Evercore.

Can you give us a little more color on the decline in the comp expense in the quarter? How much -- what was the size of that deferred comp impact? And then, also, the $40 million seasonal increase in comp expense you expect for the first quarter, is that going to be off of this lower base in the comp expense line coming out of this quarter?

So the third quarter impact you're talking about was a $13 million item. That was a vesting of accelerated benefits for a particular business line. As we look forward now from here, I do expect overall comp to be going down. If you look at our total cost base, half of it comes from comp, and so that's in an area on which we're intensely focused, and we're doing a lot to make sure that we align comp with performance in every one of our segments in every one of our functions. I would expect, as you look to '13, that overall comp is going to look better. Particularly, if you look at it less from a line item basis and more from an efficiency ratio perspective, if we have the ability to add comp, but at the same time add revenue, we're always going to take that alternative. So while we are focused on comp, we're also more focused on the efficiency ratio and trying to get whatever benefits that we can get to deliver more to the bottom line that way.

Okay. So that $40 million in seasonality you expect for the first quarter of '13 should come off of this low base, coming out of this quarter?

Yes, that $40 million is -- that's sort of a one quarter item, first quarter of every year, as FICA numbers go back up, 401(k) plans all reset and the company contributes to our teammates' 401(k) plan primarily in the first quarter of every year. But from then on, yes that ought to reset that.

Yes, that is not evident to change in our strategy or trajectory.

Okay, all right. And then secondly, on the investment banking revenue, can you just give us a little color what drove it again, if you can give some indicated syndications? But also, how sustainable, more importantly, that item should be in the coming quarters?

The good news is it came from a lot of places. I mean, we talk about syndications, but it also came from high-yield and high-grade. It came from M&A. It came from our asset securitization parts of our business. So the growth in the quarter really was the fact that a lot of cylinders hit versus one cylinder hit really well. So I think it's a sustainable question. Every quarter is going to be a little more volatile. First quarter investment banking is typically not your best quarter. But based upon sort of what we've seen, the momentum we've built, if you look at us on a multi-quarter basis, I mean, this has got really good momentum, and it's very diverse and very deep.

John, I wouldn't be surprised if we a saw slight decline in Q1, as we think maybe some of our Q1 business might have been pulled forward a little bit into Q4, as our clients tried to get ahead of year end on some transactions. But outside that, this is a business where we're growing substantially and we're growing market share well. So overall, I think this is a sustainable and growing and scalable business.

Our next question is from Ken Usdin with Jefferies. Kenneth M. Usdin - Jefferies & Company, Inc., Research Division: I just wanted to follow-up on just -- on the expense topic again. So a quick confirmation, when you guys are talking about expenses in the first quarter being no different than flat, that's just the reported number, $1.51 billion, correct?

That is exactly correct. So you know we're expecting a $40 million increase in one line item, but there are going to be enough offsets throughout, but I think our total number will not go up. Kenneth M. Usdin - Jefferies & Company, Inc., Research Division: Right. Well, certainly, you've got the $32 million settlement in there as well. And that was going to be my second question is what else comes out of the run rate as you look forward? How much were you spending on quarterly consent order costs underneath the one-time settlement?

We have been spending on the order of $10 million to $15 million on those consulting costs per quarter. That number -- at least some of that will still exist in the first quarter. It won't all come out, but I think as you look out from partially Q1 and then all of it starting Q2 onward. Kenneth M. Usdin - Jefferies & Company, Inc., Research Division: Okay. And then just -- then to continue the conversation about environmental expenses and the trajectory post the first quarter, what kind of line of sight can you give us on ongoing improvement environmental expenses and as well as progress you can make on your prior comments about taking -- moving the efficiency ratio?

I think our efficiency ratio improvements, we're working on improving that from sort of several line items, not just that one. Comp is obviously one. Real estate cost is another. We're working to become more efficient in the way we handle our real estate footprint. We're working with several of our vendors and supplier partners to rationalize our use of some of their services and pricing there. So I think there's several different types of line items that we're working on to try and bring our efficiency ratio down. One of those areas will be some of these credit-related costs and after seeing that $150 million reduction in '12 versus '11, I think we ought to see in '13 a further reduction in that number and I wouldn't be surprised if that's an additional 8-figure reduction. Kenneth M. Usdin - Jefferies & Company, Inc., Research Division: Okay. And then so if you put all that together, is it fair to say that even after the first quarter kind of keeping it flat that we should see expenses continue to track down directionally just even if there's some underlying spending to the points you're making about how much tighter you're being on finding more costs to take out?

I think the answer to that's yes, but as -- obviously, but as it gets to the credit related, it's just as you get down to these numbers quarter-by-quarter, it's just hard to make a commitment because -- and you've seen that trend while they're trending $800 million to $650 million, and we think clearly at a lower run rate in '13. It's just hard to commit quarter-by-quarter.

Our next question is from Jeffrey Harralson with KBW. Jefferson Harralson - Keefe, Bruyette, & Woods, Inc., Research Division: Just want to do one quick follow-up on that expense line, just to make sure I'm thinking about it right. The -- you take the $1.51 billion and take out the 40, for ongoing quarters, you're at $1.47 billion, you have probably, I don't know, at some point anyway $60 million a quarter at least coming out in environmental types of costs, and all that's probably offset by some core growth in there. So maybe the base is, I don't know, if you want to think about $1.4 billion being a base, but that's sort of the base that we're working off of, x credit-related costs, is that -- am I thinking about that generally correctly?

That's your model, Jeff. I think that's an interesting one. You might want to talk with Kris about how he sees that.

Our next question is from Erika Penala with Bank of America Merrill Lynch.

I just had a quick question. Aleem, you mentioned that you expect about 10 basis points of compression over the next 4 quarters. So after the 5 basis points this quarter, obviously, it implies that it's pretty flat for the remaining of the year. Does that include the impact of the swap continuing to roll off on the commercial book?

Erika, maybe I wasn't clear on that 10 basis points. I was looking at that as a year-over-year number, not a fourth quarter run rate number. From '11 to '12, our overall NIM dropped 10 basis points and what I'm thinking is from '12 to '13, we might see that type of decline again as long as rates stay where they are. If you look at the swap book, we do have some swaps rolling off in Q2 and Q3 this year. And as they roll off, we're not able to replace those swap deals, that might be in addition to the NIM decline we just talked about.

Got it. And could you give us a sense of how much that would impact if you can't replace those swaps?

I think the amount of NII rolling off in Q2 and Q3 from the swaps, Erika, is on the order of about $25 million or $30 million.

Okay. And just wanted to sneak one last one as a follow-up to Ryan's question. You mentioned that your production volume on the mortgage side continues to be quite strong, but you're seeing a little bit of softening, as is everybody on the gain on sale margin. If your mortgage banking revenues are trickling down because of gain on sale, not because of production, how much variable cost can come out in that scenario?

Well, I think when you look at our variable cost in that segment, I think they're pretty similar to what I'm seeing around the rest of the industry. Our variable costs are arranged somewhere between 25% and 40% of the total cost base in mortgage. I'd look at that, but I'd also remake Bill's point. We're -- that mortgage segment for us is becoming increasingly efficient. We're just running it better. We're operating it better. And as we're doing that, our fixed costs are also declining as we're working through the set of improvements we're making.

Our final question is from Brian Foran with Autonomous.

Since I get 1 question, it will have 7 parts. Housing, I was wondering if you could just touch on some of the trends you're seeing by market, particularly in Georgia, since it seems pretty clear Florida has already turned, unless you disagree with that. And then two, if you think there's any meaningful impact from the new CFPB rules around servicing or if they're just codifying what you and others are already doing?

Let me take housing first. I think you said it, I mean, clearly, Florida, we're really seeing nice improvement and when I was asked this question 3 or 4 quarters ago, we would have talked by zip code. Then we would have talked by county, and now we're really talking by markets and by state. So we're really starting to see sort of a universal improvement. And in some places like South Florida, it's actually sort of fairly dramatic in terms of what we're seeing. Georgia, I think, Atlanta being the primary part of Georgia, we're starting to see again some improvement. It's starting to ease back up. Atlanta, in fairness, was lagging a little bit, but now we're starting to see some of that increase. It now is like by description more of a county by county kind of increase, and I would assume that it would follow the same kind of trend that I talked about before. Now the rest of the state is okay. Pockets are better than others, but the rest of the state's okay. Some places, Savannah and those kind of places, are doing pretty well. Other places are -- didn't go down as far, and they won't come back as far. As it relates to the CFPB and the servicing, I think it really does and I think what you said is really right. I mean, we've been obviously anticipating this for quite a while and have put, I think, a lot of the infrastructure in place to make sure that we respond. Might there be some small marginal expense related to that? Maybe. But I think that's more of a small issue in that it really just does solidify some of the discussion. And fortunately, the investments we've been making have been extremely consistent with that announcement. And just a quick comment before we wrap up the call today. I really believe we've built a strong foundation from which we'll be able to continue to grow and leverage the momentum we've generated. Our team is engaged. We're starting to see meaningful progress in their efforts. We're building a more effective and efficient company. The intensity across this organization is real and it's coupled with the right focus, and I think you're starting to see the real bottom line improvements. And I look very forward to updating you on our progress in 2013, and thank you.

Thanks, everybody, for joining us. If you have any further questions, feel free to give the IR Department a call.

This does conclude today's conference. Thank you very much for joining. You may disconnect at this time.