Summary of SUNTRUST BANKS INC

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Important Cautionary Statement About Forward-Looking Statements

This report contains forward-looking statements. Statements regarding (i) future levels of net interest margin, net interest income, our efficiency ratio, mortgage repurchase demands and the mortgage repurchase reserve and related provision expense, interchange revenue, consulting and legal expenses, other real estate expense, net charge-offs and the trend in net charge-offs, risk-weighted assets, and capital ratios; (ii) our expectations regarding the adequacy or sufficiency of the ALLL, including increases in the ALLL related to the termination of the internal foreclosure review, the Consent Order, or to cover the estimated losses on loans sold to GSEs prior to 2009; (iii) the timing and impact of planned future asset sales, including sales of student loans, Ginnie Mae securities, non-performing residential and commercial loans, and affordable housing investments; (iv) the favorability of overall conditions in the mortgage market; (v) our expectations regarding our ability to mitigate the impact of card fees lost as a result of regulatory changes, and the timing of such actions; and (vi) our expectation that we will be able to fully use our DTAs; are forward looking statements. Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "initiatives," "potentially," "probably," "projects," "outlook" or similar expressions or future conditional verbs such as "may," "will," "should," "would," and "could." Such statements are based upon the current beliefs and expectations of management and on information currently available to management. Such statements speak as of the date hereof, and we do not assume any obligation to update the statements made herein or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events.
Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward-looking statements. Factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Part I, "Item 1A. Risk Factors" in this report and include risks discussed in this MD&A and in other periodic reports that we file with the SEC. Those factors include:
our framework for managing risks may not be effective in mitigating risk and loss to us; as one of the largest lenders in the Southeast and Mid-Atlantic U.S. and a provider of financial products and services to consumers and businesses across the U.S., our financial results have been, and may continue to be, materially affected by general economic conditions, particularly unemployment levels and home prices in the U.S., and a deterioration of economic conditions or of the financial markets may materially adversely affect our lending and other businesses and our financial results and condition; legislation and regulation, including the Dodd-Frank Act, as well as future legislation and/or regulation, could require us to change certain of our business practices, reduce our revenue, impose additional costs on us, or otherwise adversely affect our business operations and/or competitive position; we are subject to capital adequacy and liquidity guidelines and, if we fail to meet these guidelines, our financial condition would be adversely affected; loss of customer deposits and market illiquidity could increase our funding costs; we rely on the mortgage secondary market and GSEs for some of our liquidity; we are subject to credit risk; our ALLL may not be adequate to cover our eventual losses; we may have more credit risk and higher credit losses to the extent our loans are concentrated by loan type, industry segment, borrower type, or location of the borrower or collateral; we will realize future losses

if the proceeds we receive upon liquidation of nonperforming assets are less than the carrying value of such assets; a downgrade in the U.S. government's sovereign credit rating, or in the credit ratings of instruments issued, insured or guaranteed by related institutions, agencies or instrumentalities, could result in risks to us and general economic conditions that we are not able to predict; the failure of the European Union to stabilize the fiscal condition and creditworthiness of its weaker member economies could have international implications potentially impacting global financial institutions, the financial markets, and the economic recovery underway in the U.S.; weakness in the real estate market, including the secondary residential mortgage loan markets, has adversely affected us and may continue to adversely affect us; we are subject to certain risks related to originating and selling mortgages, and may be required to repurchase mortgage loans or indemnify mortgage loan purchasers as a result of breaches of representations and warranties, borrower fraud, or as a result of certain breaches of our servicing agreements, and this could harm our liquidity, results of operations, and financial condition; financial difficulties or credit downgrades of mortgage and bond insurers may adversely affect our servicing and investment portfolios; we may face certain risks as a servicer of loans, or also may be terminated as a servicer or master servicer, be required to repurchase a mortgage loan or reimburse investors for credit losses on a mortgage loan, or incur costs, liabilities, fines and other sanctions if we fail to satisfy our servicing obligations, including our obligations with respect to mortgage loan foreclosure actions; we are subject to risks related to delays in the foreclosure process; we may continue to suffer increased losses in our loan portfolio despite enhancement of our underwriting policies and practices; our mortgage production and servicing revenue can be volatile; as a financial services company, changes in general business or economic conditions could have a material adverse effect on our financial condition and results of operations; changes in market interest rates or capital markets could adversely affect our revenue and expense, the value of assets and obligations, and the availability and cost of capital and liquidity; changes in interest rates could also reduce the value of our MSRs and mortgages held for sale, reducing our earnings; changes which are being considered in the method for determining LIBOR may affect the value of debt securities and other financial obligations held or issued by SunTrust that are linked to LIBOR, or may affect the Company's financial condition or results of operations; the fiscal and monetary policies of the federal government and its agencies could have a material adverse effect on our earnings; depressed market values for our stock may require us to write down goodwill; clients could pursue alternatives to bank deposits, causing us to lose a relatively inexpensive source of funding; consumers may decide not to use banks to complete their financial transactions, which could affect net income; we have businesses other than banking which subject us to a variety of risks; hurricanes and other disasters may adversely affect loan portfolios and operations and increase the cost of doing business; negative public opinion could damage our reputation and adversely impact business and revenues; we rely on other companies to provide key components of our business infrastructure; a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors and other service providers, including as a result of cyber attacks, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses; the soundness of other financial institutions could adversely affect us; we depend on the accuracy and completeness of information about clients and counterparties; regulation by federal and state agencies could adversely affect the business, revenue, and profit margins; competition in the financial services industry is intense and could result in losing business or margin declines; maintaining or increasing market share depends on market acceptance and regulatory approval of new products and services; we might not pay dividends on your common stock; our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay dividends; disruptions in our ability to access global capital markets may adversely affect our capital resources and liquidity; any reduction in our credit rating could increase the cost of our funding from the capital markets; we have in the past and may in the future pursue acquisitions, which could affect costs and from which we may not be able to realize anticipated benefits; we are subject to certain litigation, and our expenses related to this litigation may adversely affect our results; we may incur fines, penalties and other negative consequences from regulatory violations, possibly even from inadvertent or unintentional violations; we depend on the expertise of key personnel, and if these individuals leave or change their roles without effective replacements, operations may suffer; we may not be able to hire or retain additional qualified personnel and recruiting and compensation costs may increase as a result of turnover, both of which may increase costs and reduce profitability and may adversely impact our ability to implement our business strategies; our accounting policies and processes are critical to how we report our financial condition and results of operations, and they require management to make estimates about matters that are uncertain; changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition; our stock price can be volatile; our disclosure controls and procedures may not prevent or detect all errors or acts of fraud; our financial instruments carried at fair value expose us to certain market risks; our revenues derived from our investment securities may be volatile and subject to a variety of risks; and we may enter into transactions with off-balance sheet affiliates or our subsidiaries.

INTRODUCTION
We are one of the nation's largest commercial banking organizations and our headquarters is located in Atlanta, Georgia. Our principal banking subsidiary, SunTrust Bank, offers a full line of financial services for consumers and businesses through its branches located primarily in Florida, Georgia, Maryland, North Carolina, South Carolina, Tennessee, Virginia, and the District of Columbia. Within our geographic footprint, we operate under three business segments: Consumer Banking and Private Wealth Management, Wholesale Banking, and Mortgage Banking, with the remainder in Corporate Other. See Note 20, "Business Segment

Reporting," to the Consolidated Financial Statements in this Form 10-K for a description of our business segments and a discussion of the change in our segment reporting structure during 2012. In addition to deposit, credit, and trust and investment services offered by the Bank, our other subsidiaries provide mortgage banking, asset management, securities brokerage, and capital market services.
This MD&A is intended to assist readers in their analysis of the accompanying consolidated financial statements and supplemental financial information. It should be read in conjunction with the Consolidated Financial Statements and Notes in Item 8 of this Form 10-K. When we refer to "SunTrust," "the Company," "we," "our" and "us" in this narrative, we mean SunTrust Banks, Inc. and subsidiaries (consolidated). In the MD&A, net interest income, net interest margin, and efficiency ratios are presented on an FTE basis. The FTE basis adjusts for the tax-favored status of net interest income from certain loans and investments. We believe this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources. Additionally, we present certain non-U.S. GAAP metrics to assist investors in understanding management's view of particular financial measures, as well as, to align presentation of these financial measures with peers in the industry who may also provide a similar presentation. Reconcilements for all non-U.S. GAAP measures are provided in Tables 39 and 40.

EXECUTIVE OVERVIEW
Economic and regulatory
Economic indicators generally improved during 2012 after remaining relatively unchanged during 2011. During 2012, unemployment declined, consumer confidence improved, and the housing markets began to show some signs of improvement, but remained uneven in their recovery. The unemployment rate, which was just below 9% at December 31, 2011, continued to decline during 2012, settling at just below 8% at December 31, 2012. Consumer confidence improved moderately during 2012, as consumer spending increased amidst improving labor market conditions and subdued consumer price inflation. However, consumer confidence remained depressed overall when compared to pre-recession levels as a result of a continued sluggish economic recovery in the U.S., continued concerns over the economic health of the European Union, and reports of slowing growth in other emerging economies. While some actions were taken during 2012 to ease the European sovereign debt crisis, uncertainty in the direction of the financial markets continues to exist as European consumer confidence continued to decline during the year. As of December 31, 2012, we had no direct exposure to sovereign debt of European countries experiencing significant economic, fiscal, and/or political strains. See additional discussion of European debt exposure in "Other Market Risk" in this MD&A. The U.S. housing market continued to be weak as evidenced by the large inventory of foreclosed or distressed properties, and, while home prices rose modestly during 2012, home values remained under pressure and many borrowers continued to owe more on their mortgage than the current market value of their home.
Amidst the somewhat stagnant economic conditions seen during 2012, the Federal Reserve indicated that highly accommodative monetary policy will remain for a considerable time after the economic recovery strengthens. Accordingly, it anticipates maintaining key interest rates at exceptionally low levels, at least as long as the unemployment rate remains above 6.5% and its long-term inflation goals are not met. As a result of employing its monetary policy, the Federal Reserve continues to maintain large portfolios of U.S. Treasury notes and bonds and agency MBS with plans to continue adding Treasuries and agency MBS to the portfolio in 2013. The Federal Reserve outlook remains for moderate economic growth over coming quarters, a relatively high unemployment rate, and the expectation of stable longer-term inflation. These monetary policy actions may result in a persistent low interest rate environment that may adversely affect the interest income we earn on loans and investments.
Regulatory and financial reform efforts continued during 2012, as regulatory agencies proposed and worked to finalize numerous rules. These rules covered a wide array of regulatory topics, the most significant of which was the Federal Reserve and other U.S. banking regulators' NPR issued during 2012 related to capital adequacy rules to implement the BCBS's Basel III framework for financial institutions in the U.S. Much of the NPR was consistent with the BCBS's Basel III framework. However, we have noted some substantial differences from the original framework. As currently proposed, we believe that our risk-weighted assets would increase primarily due to increased risk-weightings for residential mortgages, home equity loans, and commercial real estate, resulting in a decline in our capital ratios. Under current rules (Basel I), our Tier 1 common equity ratio was 10.04% at December 31, 2012. Under the proposed rules, we estimate our current Basel III Tier 1 common ratio, on a fully phased-in basis, would be approximately 8.2%, which would be in compliance with the proposed requirements. See the "Reconcilement of Non-U.S. GAAP Measures - Annual" section in this MD&A for a reconciliation of the current Basel I ratio to the proposed Basel III ratio. The agencies are expected to consider the feedback received during the comment period that ended in October 2012, and draft a final rule, which could take several quarters to complete. Accordingly, the final rule may differ from the current NPR. Further, the NPR indicates a phase-in for the new capital rules with the proposed risk-weightings requirement not becoming effective until 2015. Notwithstanding the uncertainty surrounding the timing and content of the final rule, our current Basel III Tier 1 common ratio estimate that we calculated using our interpretation of the NPR assumptions does not include the effect of any mitigating actions we may undertake to offset some of the anticipated impact of the proposed capital changes. We continue to dedicate the appropriate

resources to the implementation of regulatory rules as they become finalized and effective. See additional discussion in the "Capital Resources" section of this MD&A.

In 2011, the Federal Reserve conducted a horizontal review of the nation's largest mortgage loan servicers, including us. Following this review, we and other servicers entered into a Consent Order with the Federal Reserve. We describe the Consent Order in Note 19, "Contingencies," to the Consolidated Financial Statements in this Form 10-K and "Nonperforming Assets" in this MD&A. The Consent Order required us to improve certain mortgage servicing and foreclosure processes and to retain an independent foreclosure consultant to conduct a review of residential foreclosure actions pending during 2009 and 2010 to identify any errors, misrepresentations or deficiencies, determine whether any instances so identified resulted in financial injury, and prepare a written report detailing the findings. On January 7, 2013, we, along with nine other mortgage servicers, entered into an Acceleration and Remediation Agreement with the OCC and the Federal Reserve to amend the 2011 Consent Order. This agreement ends the independent foreclosure review process created by the Consent Order, replacing it with an accelerated remediation program. Pursuant to the agreement, we will make a cash payment of $63 million to fund lump-sum payments to borrowers who faced a foreclosure action on their primary residence between January 1, 2009 and December 31, 2010, and will commit $100 million to affect loss mitigation or other foreclosure prevention actions. The impact of the cash payment is included in our consolidated financial results at December 31, 2012, and we expect that our existing ALLL or other activities will be sufficient to provide for the loss mitigation or other foreclosure prevention actions. Lump-sum payments to borrowers will be administered by an independent agent approved by the Federal Reserve. The amount of payment to a borrower will be determined pursuant to a Financial Remediation Framework jointly established by the OCC and the Federal Reserve based on circumstances surrounding the foreclosure activity. As a result of the agreement, we will no longer be required to incur the consulting and legal costs of the independent third parties providing file review, borrower outreach, and legal services associated with the Consent Order foreclosure file review. We continue to work on compliance with remaining aspects of the Federal Reserve's Consent Order. We also continue with settlement discussions with the U.S. and States Attorneys General related to mortgage servicing claims as discussed in Note 19, "Contingencies" to the Consolidated Financial Statements in this Form 10-K. We have accrued for the anticipated cost of resolving these and other potential claims in our financial results.
Capital

Our capital remained strong at December 31, 2012, as earnings drove our Tier 1 common equity ratio to 10.04% compared to 9.22% at December 31, 2011. Our Tier 1 capital and total capital ratios were 11.13% and 13.48%, respectively, compared to 10.90% and 13.67%, respectively, at December 31, 2011. The decline in total capital from prior year was primarily due to the redemption of trust preferred securities. In addition to strong earnings, our capital was further strengthened due to the issuance of $450 million of additional preferred stock. Overall, our capital remains strong and well above the requirements to be considered "well capitalized" according to current and proposed regulatory standards. See additional discussion of our capital and liquidity position in the "Capital Resources" and "Liquidity Risk" sections of this MD&A. Financial performance
Our core performance continued to steadily improve during 2012 and marked a continuation of the momentum that we built during 2011. Our results in 2012 were driven by increased revenue, notably in fee income, and also by ongoing credit improvement. Specifically, the year ended December 31, 2012 included improved net interest income and mortgage origination income, as well as continued favorable trends in loans, deposits, capital, and credit quality. During the third quarter of 2012, we took strategic actions that significantly impacted net income, improved our risk profile, and strengthened our balance sheet. The strategic actions included the following:
� The acceleration of the termination of agreements regarding shares owned in Coke and the sale and charitable contribution of Coke shares resulted in a net pre-tax securities gain of $1.9 billion.

� The mortgage repurchase provision of $371 million increased the mortgage repurchase reserve to a level that is expected to cover the estimated losses on pre-2009 GSE loans sales.

� The sale of $0.5 billion of nonperforming mortgage and commercial real estate loans increased charge-offs and the loan loss provision by $172 million and the movement of $1.4 billion of delinquent and current student loans and $0.5 billion of delinquent Ginnie Mae loans to loans held for sale decreased noninterest income by $92 million. See the discussion of all loan sales during 2012 in the "Loans", "Allowance for Credit Losses", and "Nonperforming Assets" sections of this MD&A and Note 6, "Loans" in the Consolidated Financial Statements in this Form 10-K.

� The planned sale of $0.2 billion of affordable housing investments resulted in a $96 million valuation loss recognized in other noninterest expense.

Net income available to common shareholders during the year ended December 31, 2012, was $1.9 billion, or $3.59 per average diluted common share, compared to $495 million, or $0.94 per average diluted common share for the year ended December 31, 2011. The year ended December 30, 2010 was a net loss available to common shareholders of $87 million, or a loss of $0.18 per

average diluted common share. Results in 2012 compared to 2011 were driven by the strategic actions in 2012 noted above, which added approximately $750 million, after tax, to net income available to common shareholders, or $1.40 per average diluted common share. Earnings were also positively impacted during 2012 by improvements in net interest income and mortgage origination income. Additionally, 2012 did not include preferred dividends paid to the U.S. Treasury, while 2011 results included those dividends, as well as a non-cash charge related to the accelerated accretion associated with repayment of the U.S. government's TARP investment in March 2011. To a lesser extent, results were impacted by an improvement in the provision for credit losses of 8% during 2012 compared to 2011. As credit quality continues to improve, the impact to net income available to common shareholders due to lower provisions for credit losses is expected to be less substantial in future periods. Also positively impacting earnings in 2012 was a 28% reduction in credit-related expenses and operating losses, driven by credit quality improvement in 2012. We believe these expenses continue to be elevated at current levels and as such, believe that 2013 earnings will be positively impacted by further declines as credit quality and the economy continue to improve. Additionally, we expect continued net interest margin compression in 2013 due to the continued low interest rate environment, as well as some abatement in the future of mortgage loan refinance activity, which benefited us in 2012.

We made significant progress in our PPG expense initiative, surpassing the goal of realizing $300 million in annualized savings through this program a year ahead of schedule. Since we began our efforts in mid-2011 to drive efficiency improvements through reducing expenses and growing revenues, our core revenue has increased, expenses moderated slightly during the latter part of 2012, and our efficiency ratio has improved. While the PPG program is complete, we expect to continue our efforts to become a more efficient organization and we continue to focus on revenue and expense initiatives in pursuit of our long-term efficiency ratio target of below 60%.
Our asset quality metrics improved significantly in 2012, driven in part by the strategic actions executed primarily during the second half of the year specifically designed to improve our risk profile, as well as through improved core credit quality trends. Total NPLs continued the downward trend that began in 2010, with a decline of 47% from December 31, 2011, driven by NPL sales, reduced inflows into nonaccrual, and problem loan resolution efforts. Declines in NPLs were experienced in all categories, with the largest declines coming from the residential and commercial portfolios, despite some inflows as a result of regulatory guidance issued during the year. OREO declined 45% compared to the prior year, totaling less than 0.2% of total assets at December 31, 2012, which was the result of continued disposition of properties once we had clear title, coupled with a moderation of inflows. Our restructured loan portfolio declined 13% compared to December 31, 2011, with decreases in both the nonaccruing and accruing loan populations. Further, the accruing restructured portfolio continued to exhibit strong payment performance with 95% current on principal and interest payments at December 31, 2012. Early stage delinquencies, a leading indicator of asset quality, particularly for consumer loans, declined during 2012, both in total and when excluding government-guaranteed loan delinquencies. This decline was a result of our ongoing efforts to reduce risk in the portfolio as evidenced by declines in certain higher-risk loans and strategic loan sales. At December 31, 2012, the ALLL ratio was 1.80% of total loans, a decline of 21 basis points compared to December 31, 2011, due to decreases in the ALLL primarily as a result of improving core credit quality trends despite the additions to NPLs during the year related to policy changes. The provision for loan losses decreased 8% and net charge-offs decreased 18% for the year ended December 31, 2012 compared to the same period in 2011, both as a result of improved credit quality. Charge-offs declined during the year despite charge-off increases related to the strategic loan sales and policy changes. See additional discussion of the policy changes and credit and asset quality in the "Loans," "Allowance for Credit Losses," "Nonperforming Assets," and "Restructured Loans," sections of this MD&A.
Average loans increased 6% during 2012 compared to 2011, led by an increase in . . .