SunTrust 2009 Annual Report Download - page 4

and credit quality. While Florida has been hard hit by the
current recession, we believe the state’s long-term prospects
are favorable and that it will continue to be an attractive
market for the same reasons it was before the recession.
Our relationship-based operating model allows us to
effectively meet the evolving needs of our clients. We
are building loyalty by understanding client preferences
and aligning our business to respond. We believe that
we have the optimal breadth and depth of products and
services to retain clients and attract new ones.
Strong Capital, Excellent Liquidity
We successfully completed capital actions that created
even stronger capitalization and complied with the new
rules established by the Federal Reserve under the
Supervisory Capital Assessment Program. While
disappointed that we were required to raise common
capital at arguably the deepest part of the recession with
depressed stock prices, the transactions were exceedingly
successful. Given our current capital and liquidity, we
are well positioned to repay TARP funds when regulatory
approval is received.
Regrettably, as we looked at all the ways necessary to
preserve capital in light of the recession, the uncertainty
created by it, and the related pressure on SunTrust’s
earnings and capital, we made the decision to reduce
our quarterly dividend to $0.01 per common share. This
decision was extremely diffi cult and made only after
signifi cant evaluation and deliberation. We did what
was necessary, and we believe prudent, to preserve and
generate the appropriate amount of capital. I can assure
you that we are looking forward to the time when we can
begin increasing the dividend.
With respect to liquidity, we have a diversifi ed funding
base with stable core deposits providing the majority of
SunTrust’s funding. We benefi ted from a sizeable increase
in deposits in 2009. Further, the composition of the
growth has been favorable with a large increase in lower
cost demand deposits. There are strong indications that
our efforts to grow deposit-based clients at a greater rate
than our competitors contributed to this outcome and that
it was not simply a function of broader economic forces.
Credit Quality
Despite the obvious—and in 2009, severe—credit
deterioration that comes with an economic downturn,
we believe that our mix of products, geographies
with solid long-term growth profi les, and historically
conservative underwriting are key elements in our relative
credit strength. The conservative nature of our portfolio
is evidenced, for example, by the fact that we have no
subprime or option ARM loans, a small credit card
portfolio, and low levels of unsecured loans to consumers
and small businesses.
Our loan portfolio is well diversifi ed by borrower type,
purpose, and collateral. The largest concentration is in
consumer loans and lines of credit secured by residential
real estate. This product concentration, coupled with our
Florida market share, has produced the majority of the
asset quality issues so far in this downturn. We remain
committed to this business though, obviously, adjustments
have been made. Not only has it historically been a profi t
driver for us, but it also provides opportunities to expand
and to deepen our relationships with clients.
We also have a conservative commercial loan portfolio
that has continued to perform relatively well throughout
this cycle. We have successfully reduced exposure to
higher risk loan categories, such as construction loans,
while continuing to experience stable performance in the
rest of the commercial portfolio.
Further, we maintain signifi cant loan loss reserves.
We continuously monitor the credit quality of our loan
portfolio and maintain an allowance for loan and lease
losses suffi cient to absorb current probable and estimable
losses inherent in our loan portfolio. We are committed to
the timely recognition of problem loans and to maintaining
an appropriate and adequate reserve against future losses.
GROWTH INITIATIVES
Building on the strong foundation outlined above, we
are actively implementing a variety of growth initiatives
to improve performance. Changes that we have already
implemented—from reducing expenses to more closely
aligning our service offerings with clients’ needs—have
not only given us an advantage in managing through
the current economy, but also provide a springboard for
moving forward. Specifi c programs of note are aimed
at further enhancing the client experience, improving
effi ciency, and optimizing the balance sheet and business
mix. All of this was built upon fundamental principles
such as a conservative risk posture.
Client Focus
We believe that enhanced client service, including making
it easier and more effi cient to do business with us, is critical
to driving revenue growth and improved shareholder
value. Over the past several years, we have undertaken
a deep look at our internal activities and processes
to identify new ways to improve our efficiency and
effectiveness in serving clients. Specifi c initiatives move
beyond quick fi xes to improve client satisfaction and get
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SUNTRUST 2009 ANNUAL REPORT