SunTrust 2008 Annual Report Download - page 86

certain mortgage loans at fair value beginning in May 2007. The increase in loan production income was partially offset by
increased reserves for the repurchase of loans. Loan production of $36.4 billion was down $21.9 billion, or 37.6%. Mortgage
servicing related income declined $426.3 million from $193.6 million in 2007, to a net loss of $232.7 million in 2008. The
decline was driven by $370.0 million in impairment of MSRs that were carried at amortized cost, as well as lower gains from
the sale of MSRs. The MSRs impairment was offset by $410.7 million of net gains from the sale of available for sale
securities that were held in conjunction with our risk management strategies associated with economically hedging the value
of MSRs.
Total noninterest expense increased $509.1 million, or 61.8%, driven by increased credit-related expenses. Operating losses
were up $266.9 million driven by fraud losses and reserves primarily related to borrower misrepresentation and insurance
claim denials. Reserves for mortgage reinsurance losses increased $179.8 million while other real estate expense and
collection services expense increased $95.9 million. Additionally, the recognition of loan origination costs resulting from our
election to record certain mortgage loans at fair value beginning in May 2007 increased noninterest expense compared with
the prior year, offsetting significant reductions in staff and commissions expense related to lower loan production.
Wealth and Investment Management
Wealth and Investment Management’s net income for the twelve months ended December 31, 2008 was $186.9 million, an
increase of $98.6 million compared to same period in 2007. The following transactions represented $141.7 million of the
year-over-year increase:
• $39.4 million decrease due to the after-tax impact of the market valuation loss on Lehman Brothers bonds
purchased from our RidgeWorth subsidiary in the third quarter of 2008.
• $18.4 million increase due to the after-tax gain on the sale of First Mercantile in the second quarter of 2008.
• $27.9 million decrease due to the after-tax impairment charge on a client-based intangible asset in the second
quarter of 2008.
• $55.4 million increase due to the after-tax gain on sale of a minority interest in Lighthouse Investment Partners in
the first quarter of 2008.
• $155.3 million increase due to the after-tax impact of the market valuation losses in the fourth quarter of 2007 on
securities purchased from our RidgeWorth funds.
• $20.1 million decrease due to the after-tax gain resulting from the sale upon merger of Lighthouse Partners into
Lighthouse Investment Partners in the first quarter of 2007.
Net interest income decreased $20.3 million, or 5.8%, primarily due to a decline in deposit-related net interest income.
Average deposits were down $0.2 billion, or 2.2%, while net interest income on deposits declined $14.4 million, or 6.5%,
due to the decreased average balance, as well as a lower credit for funds on demand deposits. Average loans increased $0.1
billion, or 1.8%, while net interest income declined $5.0 million driven by growth in commercial loans in the professional
specialty lending units at compressed spreads.
Provision for loan losses increased $18.4 million driven by higher home equity lines, personal credit lines, and consumer
mortgage net charge-offs.
Total noninterest income increased $138.6 million, or 17.1%, compared to the twelve months ended December 31, 2007
driven by a decrease in market valuation losses. Additionally, gains on the sale of non-strategic businesses were offset by the
corresponding loss of revenue and lower market valuations on managed equity assets. Trading gains and losses increased
$168.4 million primarily due to a $250.5 million market valuation loss in 2007 related to securities purchased from our
RidgeWorth funds as compared to a $63.8 million market valuation loss in 2008 related to Lehman Brothers bonds purchased
from our RidgeWorth funds. A $29.6 million gain on sale of First Mercantile in 2008 and $24.1 million of incremental
noninterest income from the sale of our Lighthouse Partners investment also increased income. Retail investment income
increased $6.8 million, or 2.5%, due to higher annuity sales and higher recurring managed account fees. Trust income
decreased $91.1 million, or 13.4%, primarily due to the aforementioned sales of Lighthouse Partners and First Mercantile,
which resulted in a $49.1 million decline in trust income as well as lower market valuations on managed equity assets.
As of December 31, 2008, assets under management were approximately $113.1 billion compared to $142.8 billion as of
December 31, 2007. Assets under management include individually managed assets, the RidgeWorth Funds, managed
institutional assets, and participant-directed retirement accounts. Our total assets under advisement were approximately
$192.0 billion, which includes $113.1 billion in assets under management, $45.7 billion in non-managed trust assets, $31.2
billion in retail brokerage assets, and $2.0 billion in non-managed corporate trust assets.
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