SunTrust 2007 Annual Report Download - page 80

Total noninterest income increased $13.5 million, or 5.0%, driven by increased miscellaneous income in the Affordable
Housing units, increased letter of credit income and higher referral revenues for mortgage originations and BankCard
products. These were partially offset by decreases in credit card services income, as well as lower referral revenues from
capital markets products and decreased trading account profits in the Affordable Housing unit.
Total noninterest expense increased $9.7 million, or 1.5%. The increase over 2005 was primarily driven by increased staff
expense, which was partially offset by decreased Affordable Housing-related expenses and lower shared corporate expenses.
Corporate and Investment Banking
Corporate and Investment Banking’s net income for the year ended December 31, 2006 was $190.2 million, a decrease of
$58.3 million, or 23.5%. The decrease was primarily driven by increased provision expense and decline in corporate loan
spreads offset in part by strong growth in Debt Capital Markets income. Further, the March 2005 divestiture of Receivables
Capital Management (“RCM”) factoring assets accounted for $16.2 million, or 5.4% of the decrease.
Fully taxable equivalent net interest income decreased $20.4 million, or 8.0% primarily due to narrowing of market spreads
on loans to the large corporate sector. Average loans increased $1.3 billion, or 8.3%, primarily in Financial Institutions,
Energy and US Diversified Groups. This increase was due to stronger corporate demand and revolver usage as well as strong
growth in our leasing products. Average deposits decreased $160.0 million, or 4.9%, led by a reduction in certain
bid-category products that the line of business elected not to bid on due to their high cost in relation to alternative funding
sources.
Provision for loan losses, which represents net charge-offs for the lines of business, increased $101.4 million to $113.9
million. The increase was primarily due to the charge-off recognized in the fourth quarter of 2006 associated with the
previously disclosed large commercial loan placed on nonperforming status in the third quarter of 2006.
Total noninterest income increased $31.2 million, or 4.9%. Adjusting for the divestiture of RCM, noninterest income grew
10.1%. Debt Capital Markets revenue increased $66.9 million, or 28.4%, mainly related to securitization, derivatives, and
structured leasing. Strong revenue performance in merchant banking and leasing further contributed to the increase.
Total noninterest expense increased $13.8 million, or 2.9%, primarily driven by increased compensation related to increased
capital markets revenue, as well as increased expense related to merchant banking activities.
Mortgage
Mortgage’s net income for the twelve months ended December 31, 2006 was $245.7 million, an increase of $65.8 million, or
36.6%, compared with the same period in 2005. The increase was driven primarily by income from sales of servicing assets,
higher income from loans and deposits, stronger secondary marketing performance and higher fee income, net of higher
related expense.
Net interest income in 2006 increased $48.6 million, or 8.8%, compared to 2005 primarily due to loan and deposit income
growth that was partially offset by lower income on loans held for sale and higher funding costs on MSRs. Total portfolio
loans, principally residential mortgage and residential construction loans, increased $7.0 billion, or 29.0%, and contributed
$84.9 million to the change in net interest income. Average deposits were up $0.2 billion, or 9.5%, due to escrow balances
associated with higher servicing balances. The higher balances at a higher funding rate, contributed $17.4 million to the
increase. Average loans held for sale grew $1.7 billion, or 22.7%. However, due to compressed spreads resulting from higher
short-term interest rates, net interest income on loans held for sale declined $43.6 million. Funding costs on higher MSRs
balances reduced net interest income $9.5 million.
Provision for loan losses increased $3.1 million driven by higher consumer mortgage charge-offs.
Total noninterest income increased $140.1 million, or 58.6%. Production income was up $54.3 million, or 37.0%, driven by
higher volumes. Production of $55.4 billion was up $7.7 billion, or 16.2%. Servicing income was up $80.0 million due to
gains from the sale of mortgage servicing assets and increased fees from higher servicing balances. Higher MSRs
amortization partially offset these increases. Total loans serviced were $130.0 billion at December 31, 2006, up $24.4 billion,
or 23.1%.
68