SunTrust 2013 Annual Report Download - page 109

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Total noninterest expense was $1.8 billion during 2012, a decrease of $64 million, or 3%, compared to 2011, driven by favorable
settlement of litigation claims and continued declines in other real estate related expense and staff expense. Noninterest expense
included impairment charges of $96 million related to the planned disposition of affordable housing partnership investments,
announced in September 2012. Sales of the partnership investments were substantially completed during 2013.
Mortgage Banking
Mortgage Banking reported a net loss of $696 million during the year ended December 31, 2012, an improvement of $21
million, or 3%, compared to 2011. The improvement was driven by higher gains on sale of loans and improved net MSR
hedge performance that was largely offset by higher provision for mortgage repurchases, provision for credit losses, and
noninterest expenses. During 2012, strategic actions were taken to improve the risk profile and strengthen the balance
sheet. Those actions included additional provision for mortgage repurchases expected to cover pre-2009 GSE demands, higher
provision for loan losses associated with charge-offs related to NPL sales, and market valuation losses associated with the
transfer to LHFS and subsequent sale of Ginnie Mae loans.
Net interest income was $512 million during 2012, an increase of $41 million, or 9%, compared to 2011. The increase was
predominantly due to higher net interest income on loans and LHFS and reduced funding costs on lower MSR balances.
Average residential mortgage loans increased $1.6 billion, or 6%, resulting in an increase in net interest income of $21 million.
Net interest income on LHFS increased $14 million due to a $964 million increase in average balances, partially offset by
lower loan spreads.
Provision for credit losses was $770 million during 2012, an increase of $77 million, or 11%, compared to 2011. The increase
was driven by charge-offs of $193 million related to NPL sales during 2012 compared with $10 million of charge-offs related
to NPL sales during 2011. Additionally, policy changes related to second lien home equity loans and discharged Chapter 7
bankruptcy loans added $70 million in net charge-offs during 2012. Excluding the incremental charge-offs associated with
NPL sales and policy changes, net charge-offs declined during 2012.
Noninterest income was $502 million during 2012, an increase of $261 million, compared to 2011 driven by higher mortgage
production related and servicing income, partially offset by higher losses on the sale of Ginnie Mae loans during 2012. Total
mortgage production related income during the year was $341 million, an increase of $361 million compared to the prior year.
Loan production volume was $32.1 billion in 2012, an increase of $9.0 billion, or 39%, from the prior year resulting in higher
gain on sale and fee income. Additionally, the mortgage loan repurchase provision increased $211 million over the prior year,
largely due to a provision in 2012 to cover expected losses on pre-2009 GSE demands.
Mortgage servicing income was $260 million during 2012, an increase of $36 million, or 16%, compared to 2011 due to
favorable net MSR hedge performance, partially offset by higher decay and lower fee income. Additionally, 2011 included a
$38 million reduction of servicing income due to an increase in prepayment assumptions attributable to anticipated refinancing
activity arising from the HARP 2.0 program. Total loans serviced were $144.9 billion at December 31, 2012 compared with
$157.8 billion at December 31, 2011, down 8%.
Total noninterest expense was $1.4 billion during 2012, an increase of $179 million, or 15% compared to 2011. The higher
expenses were attributable to a $79 million increase in operating losses due to compliance-related costs, largely associated
with mortgage servicing and litigation expenses. Additionally, consulting expenses increased $44 million, predominantly due
to costs associated with the Federal Reserve Consent Order and other business initiatives. Total allocated costs increased $70
million and staff expenses increased $48 million, driven by costs associated with higher production volumes. These increases
were partially offset by lower agency compensatory fees and lower OREO expenses.
Corporate Other
Corporate Other net income during the year ended December 31, 2012 was $1.5 billion, an increase of $1.1 billion, compared
to 2011. The increase was predominantly due to securities gains as a result of the sale of Coke stock, partially offset by lower
interest income as a result of maturing interest rate swaps utilized to manage interest rate risk, lower gains from the sale of
other securities AFS, and a higher charitable contributions expense.