Suntrust Banks 10-Q 2003 Q3 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2003

Commission File Number 1-8918

SUNTRUST BANKS, INC.

(Exact name of registrant as specified in its charter)

Georgia	58-1575035
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

303 Peachtree Street, N.E., Atlanta, Georgia	30308
(Address of principal executive offices)	(Zip Code)

(404) 588-7711

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx No¨

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Act.) Yesx No¨

At October 31, 2003, 281,530,014 shares of the Registrant’s Common Stock, $1.00 par value, were outstanding.

1

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Income	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Cash Flows	5
	Consolidated Statements of Shareholders’ Equity	6
	Notes to Consolidated Financial Statements	7-19
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20-49
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	50
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	50
Item 2.	Changes in Securities	50
Item 3.	Defaults Upon Senior Securities	50
Item 4.	Submission of Matters to a Vote of Security Holders	50
Item 5.	Other Information	50
Item 6.	Exhibits and Reports on Form 8-K	50
SIGNATURES		51

PART I - FINANCIAL INFORMATION

The following unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and accordingly do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair statement have been included. Operating results for the three and nine months ended September 30, 2003 are not necessarily indicative of the results that may be expected for the full year 2003.

2

Consolidated Statements of Income

(Dollars in thousands except per share data) (Unaudited)

	Three Months Ended September 30						Nine Months Ended September 30
	2003			2002			2003			2002
Interest Income
Interest and fees on loans	$	887,210		$	994,062		$	2,699,298		$	2,988,385
Interest and fees on loans held for sale		136,630			63,109			356,078			188,102
Interest and dividends on securities available for sale
Taxable interest		125,668			177,812			423,901			578,031
Tax-exempt interest		4,239			5,163			13,772			16,217
Dividends1		16,440			15,286			51,581			47,124
Interest on funds sold and securities purchased under agreements to resell		3,538			6,615			12,502			18,466
Interest on deposits in other banks		37			1,746			104			4,748
Other interest		3,983			6,924			12,670			19,185
Total interest income		1,177,745			1,270,717			3,569,906			3,860,258
Interest Expense
Interest on deposits		175,358			273,407			606,527			857,989
Interest on funds purchased and securities sold under agreements to repurchase		23,819			34,252			86,117			103,909
Interest on other short-term borrowings		14,853			3,478			18,729			11,620
Interest on long-term debt		130,915			154,466			403,750			470,132
Total interest expense		344,945			465,603			1,115,123			1,443,650
Net Interest Income		832,800			805,114			2,454,783			2,416,608
Provision for loan losses		79,799			98,699			243,264			373,292
Net interest income after provision for loan losses		753,001			706,415			2,211,519			2,043,316
Noninterest Income
Service charges on deposit accounts		162,030			156,955			477,805			456,722
Trust and investment management income		127,777			123,861			372,787			385,119
Retail investment services		38,657			35,087			118,116			103,704
Other charges and fees		86,090			76,578			246,935			222,524
Investment banking income		47,701			39,835			138,680			137,438
Trading account profits and commissions		26,822			23,553			87,198			73,444
Mortgage production		32,178			22,265			153,130			31,040
Mortgage servicing		(52,672	)		(36,476	)		(179,818	)		(42,001	)
Credit card and other fees		29,643			27,448			90,692			90,058
Other noninterest income		45,154			33,964			109,029			118,055
Securities gains		31,098			45,813			104,375			165,000
Total noninterest income		574,478			548,883			1,718,929			1,741,103
Noninterest Expense
Salaries and other compensation		391,637			363,149			1,153,083			1,126,912
Employee benefits		80,431			72,188			275,309			235,431
Net occupancy expense		60,459			57,578			176,744			167,515
Outside processing and software		65,402			59,941			183,478			168,199
Equipment expense		44,900			42,784			132,916			129,736
Marketing and customer development		24,988			15,713			75,450			59,152
Amortization of intangible assets		16,211			17,455			48,136			41,443
Merger-related expenses		—			—			—			15,998
Other noninterest expense		175,837			147,344			470,706			438,627
Total noninterest expense		859,865			776,152			2,515,822			2,383,013
Income before provision for income taxes		467,614			479,146			1,414,626			1,401,406
Provision for income taxes		136,031			136,153			424,836			409,847
Net Income	$	331,583		$	342,993		$	989,790		$	991,559
Average common shares - diluted		281,566,798			285,991,438			281,062,063			286,879,874
Average common shares - basic		278,296,460			282,309,551			278,107,032			283,212,739
Net income per average common share - diluted	$	1.18		$	1.20		$	3.52		$	3.46
Net income per average common share - basic		1.19			1.21			3.56			3.50
1Includes dividends on common stock of The Coca-Cola Company		10,619			9,653			31,856			28,960

See notes to consolidated financial statements

3

Consolidated Balance Sheets

(Dollars in thousands) (Unaudited)

	September 30 2003			December 31 2002
Assets
Cash and due from banks	$	3,720,378		$	4,455,776
Interest-bearing deposits in other banks		1,576			10,238
Funds sold and securities purchased under agreements to resell		1,007,018			1,092,281
Trading assets		2,026,798			1,717,774
Securities available for sale1		25,607,404			23,445,182
Loans held for sale		9,181,921			7,747,793
Loans		78,788,246			73,167,935
Allowance for loan losses		(941,423	)		(930,114	)
Net loans		77,846,823			72,237,821
Premises and equipment		1,577,885			1,607,200
Goodwill		1,077,198			963,761
Other intangible assets		613,231			612,158
Customers’ acceptance liability		57,351			45,594
Other assets		3,936,793			3,386,945
Total assets	$	126,654,376		$	117,322,523
Liabilities and Shareholders’ Equity
Noninterest-bearing consumer and commercial deposits	$	18,750,157		$	18,080,496
Interest-bearing consumer and commercial deposits		51,693,938			52,146,314
Total consumer and commercial deposits		70,444,095			70,226,810
Brokered deposits		3,648,447			3,169,826
Foreign deposits		6,374,675			6,309,992
Total deposits		80,467,217			79,706,628
Funds purchased and securities sold under agreements to repurchase		13,811,271			10,402,536
Other short-term borrowings		3,990,318			1,368,425
Long-term debt		11,273,985			10,229,820
Guaranteed preferred beneficial interests in debentures		1,650,000			1,650,000
Acceptances outstanding		57,351			45,594
Trading liabilities		1,007,403			930,645
Other liabilities		5,158,418			4,219,379
Total liabilities		117,415,963			108,553,027
Preferred stock, no par value; 50,000,000 shares authorized; none issued		—			—
Common stock, $1.00 par value		294,163			294,163
Additional paid in capital		1,288,164			1,276,110
Retained earnings		6,933,175			6,322,217
Treasury stock, at cost, and other		(695,909	)		(632,464	)
Realized shareholders’ equity		7,819,593			7,260,026
Accumulated other comprehensive income		1,418,820			1,509,470
Total shareholders’ equity		9,238,413			8,769,496
Total liabilities and shareholders’ equity	$	126,654,376		$	117,322,523
Common shares outstanding		281,410,181			282,504,571
Common shares authorized		750,000,000			750,000,000
Treasury shares of common stock		12,752,576			11,658,186
1 Includes net unrealized gains on securities available for sale	$	2,246,886		$	2,421,562

See notes to consolidated financial statements

4

Consolidated Statements of Cash Flows

(Dollars in thousands) (Unaudited)

	Nine Months Ended September 30
	2003			2002
Cash Flows from Operating Activities:
Net income	$	989,790		$	991,559
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion		719,782			407,629
Origination of mortgage servicing rights		(303,397	)		(195,804	)
Provisions for loan losses and foreclosed property		244,059			373,803
Amortization of compensation element of restricted stock		4,074			2,562
Securities gains		(104,375	)		(165,000	)
Net gain on sale of assets		(8,772	)		(12,187	)
Originated loans held for sale		(37,405,920	)		(18,339,857	)
Sales of loans held for sale		35,971,793			17,913,634
Net increase in other assets		(718,638	)		(1,710,784	)
Net increase in other liabilities		1,357,081			1,654,488
Net cash provided by operating activities		745,477			920,043
Cash Flows from Investing Activities:
Proceeds from maturities of securities available for sale		9,038,919			2,980,925
Proceeds from sales of securities available for sale		4,690,386			4,655,097
Purchases of securities available for sale		(15,550,671	)		(8,553,436	)
Net increase in loans		(3,282,090	)		(1,989,251	)
Proceeds from sale of loans		185,989			646,303
Capital expenditures		(97,419	)		(100,848	)
Proceeds from the sale of other assets		26,697			23,689
Net cash proceeds received from consolidation of affordable housing partnerships		13,932			—
Net cash proceeds (used for) received from acquisitions, net of cash acquired		(34,261	)		1,160,333
Net cash used in investing activities		(5,008,518	)		(1,177,188	)
Cash Flows from Financing Activities:
Net (decrease) increase in consumer and commercial deposits		(78,346	)		1,237,939
Net increase in foreign and brokered deposits		429,324			560,501
Net increase (decrease) in funds purchased and other short-term borrowings		2,996,550			(99,963	)
Proceeds from the issuance of long-term debt		709,506			951,245
Repayment of long-term debt		(113,130	)		(1,751,165	)
Proceeds from the exercise of stock options and stock compensation expense		14,761			10,384
Proceeds from stock issuance		36,037			32,884
Acquisition of treasury stock		(182,152	)		(179,798	)
Restricted stock activity		—			(2,605	)
Dividends paid		(378,832	)		(368,146	)
Net cash provided by financing activities		3,433,718			391,276
Net (decrease) increase in cash and cash equivalents		(829,323	)		134,131
Cash and cash equivalents at beginning of year		5,558,295			5,910,044
Cash and cash equivalents at end of period	$	4,728,972		$	6,044,175
Supplemental Disclosure
Interest paid	$	1,117,010		$	1,466,355
Income taxes paid		170,382			265,616
Non-cash impact to total assets as a result of consolidation of Three Pillars		2,857,316			—

See notes to consolidated financial statements.

5

Consolidated Statements of Shareholders’ Equity

(Dollars in thousands) (Unaudited)

	Common Stock		Additional Paid in Capital			Retained Earnings			Treasury Stock and Other*			Accumulated Other Comprehensive Income			Total
Balance, January 1, 2002	$	294,163	$	1,259,609		$	5,479,951		$	(329,408	)	$	1,655,253		$	8,359,568
Net income		—		—			991,559			—			—			991,559
Other comprehensive income:
Change in unrealized gains (losses) on derivatives, net of taxes		—		—			—			—			3,160			3,160
Change in unrealized gains (losses) on securities, net of taxes		—		—			—			—			(1,174	)		(1,174	)
Total comprehensive income		—		—			—			—			—			993,545
Cash dividends declared, $1.29 per share		—		—			(368,146	)		—			—			(368,146	)
Exercise of stock options		—		(5,997	)		—			16,381			—			10,384
Acquisition of treasury stock		—		—			—			(179,798	)		—			(179,798	)
Restricted stock activity		—		17,390			—			(19,995	)		—			(2,605	)
Amortization of compensation element of restricted stock		—		—			—			2,562			—			2,562
Issuance of stock for employee benefit plans		—		5,631			—			27,253			—			32,884
Balance, September 30, 2002	$	294,163	$	1,276,633		$	6,103,364		$	(483,005	)	$	1,657,239		$	8,848,394
Balance, January 1, 2003	$	294,163	$	1,276,110		$	6,322,217		$	(632,464	)	$	1,509,470		$	8,769,496
Net income		—		—			989,790			—			—			989,790
Other comprehensive income:
Change in unrealized gains (losses) on derivatives, net of taxes		—		—			—			—			23,545			23,545
Change in unrealized gains (losses) on securities, net of taxes		—		—			—			—			(123,951	)		(123,951	)
Accumulated other comprehensive income related to retirement plans		—		—			—			—			9,757			9,757
Total comprehensive income																899,141
Cash dividends declared, $1.35 per share		—		—			(378,832	)		—			—			(378,832	)
Exercise of stock options and stock compensation expense		—		(500	)		—			15,261			—			14,761
Acquisition of treasury stock		—		—			—			(182,152	)		—			(182,152	)
Acquisition of Lighthouse Financial Services, Inc.		—		11,745			—			64,144			(1	)		75,888
Restricted stock activity		—		(534	)		—			534			—			—
Amortization of compensation element of restricted stock		—		—			—			4,074			—			4,074
Issuance of stock for employee benefit plans		—		1,343			—			34,694			—			36,037
Balance, September 30, 2003	$	294,163	$	1,288,164		$	6,933,175		$	(695,909	)	$	1,418,820		$	9,238,413

* Balance at September 30, 2002 includes $451,880 for treasury stock and $31,125 for compensation element of restricted stock.

Balance at September 30, 2003 includes $663,702 for treasury stock and $32,207 for compensation element of restricted stock.

See notes to consolidated financial statements

6

Notes to Consolidated Financial Statements (Unaudited)

Note 1 - Accounting Policies

The consolidated interim financial statements of SunTrust Banks, Inc. (“SunTrust” or “Company”) are unaudited. All significant intercompany accounts and transactions have been eliminated. Certain reclassifications have been made to prior year amounts to conform with the current year presentation.

These financial statements should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2002. There have been no significant changes to the Company’s Accounting Policies as disclosed in the Annual Report on Form 10-K for the year ended December 31, 2002.

Note 2 – Acquisitions

SunTrust completed the acquisition of the Florida banking franchise of Huntington Bancshares, Inc. (“Huntington-Florida”) on February 15, 2002. The Company acquired approximately $4.7 billion in assets and liabilities. The transaction resulted in $528 million of goodwill, $255 million of core deposit intangibles and $13 million of other intangibles, all of which are deductible for tax purposes.

On June 2, 2003, SunTrust completed the acquisition of Lighthouse Financial Services, Inc. (“Lighthouse”) based in Hilton Head Island, South Carolina. The Company acquired approximately $637 million in assets, $567 million in loans, and $421 million in deposits. In addition, SunTrust paid $131 million in a combination of cash and SunTrust stock. The transaction resulted in $98 million of goodwill and $23 million of other intangible assets, which are not deductible for tax purposes. The acquisition did not have a material impact on SunTrust’s financial position or results of operations.

SunTrust completed the acquisition of Sun America Mortgage (“Sun America”), one of the top mortgage lenders in Metro Atlanta, on July 31, 2003. The transaction resulted in $10 million of goodwill and $9 million of other intangibles, all of which are deductible for tax purposes. The acquisition did not have a material impact on SunTrust’s financial position or results of operations.

7

Notes to Consolidated Financial Statements (Unaudited) – continued

Note 3 – Accounting Developments

Accounting Policies Adopted

In May 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections as of April 2002.” This Statement rescinded SFAS No. 4 and 64, “Reporting Gains and Losses from Extinguishment of Debt” and “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements,” respectively, and restricted the classification of early extinguishment of debt as an extraordinary item to the provisions of Accounting Practice Bulletin (“APB”) Opinion No. 30, “Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.” The Statement also rescinded SFAS No. 44, “Accounting for Intangible Assets of Motor Carriers,” which was no longer necessary because the transition to the provisions of the Motor Carrier Act of 1980 was complete. The Statement also amended SFAS No. 13, “Accounting for Leases,” to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. Finally, the Statement made various technical corrections to existing pronouncements which were not considered substantive.

The provisions of this Statement relating to the rescission of SFAS No. 4 and 64 were effective for fiscal years beginning after May 15, 2002. The provisions relating to amendments of SFAS No. 13 were effective for transactions initiated after May 15, 2002, and all other provisions were effective for financial statements issued after May 15, 2002. Additionally, there was retroactive application for any gain or loss on extinguishment of debt that was classified as extraordinary in a prior period that did not meet the criteria in APB Opinion No. 30, requiring reclassification of this gain or loss. As of January 1, 2003, the Company adopted all provisions of this Statement, and the adoption did not have a material impact on the Company’s financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 provided guidance on the recognition and measurement of liabilities for costs associated with exit or disposal activities. SFAS No. 146 was effective for exit or disposal activities initiated after December 31, 2002. The Company adopted this Statement as of January 1, 2003, and it did not have a material impact on the Company’s financial position or results of operations.

In November 2002, the FASB issued FASB Interpretation No. (“FIN”) 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FIN 34.” FIN 45 details the disclosures that should be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. The Interpretation also requires a company to record a liability for certain guarantees that have been issued. The disclosure provisions were effective for interim or annual periods ending after December 15, 2002. The recognition requirements of the Interpretation were effective for all guarantees issued or modified subsequent to December 31, 2002. The Company adopted the recognition requirements of FIN 45 on January 1, 2003, and they did not have a material impact on the Company’s financial position or results of operations. The required interim disclosures are included in Note 10 to the Consolidated Financial Statements.

8

Notes to Consolidated Financial Statements (Unaudited) – continued

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure.” SFAS No. 148 amended SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide three alternative methods of transition to SFAS No. 123’s fair-value method of accounting for stock-based compensation. The Statement also amended the disclosure provisions of SFAS No. 123 and APB Opinion No. 28, “Interim Financial Reporting,” to require additional disclosures in annual and interim financial statements. The Statement was effective for fiscal years ending after December 15, 2002. The amendment of the disclosure requirements of Opinion No. 28 was effective for interim financial reports beginning after December 15, 2002. Effective January 1, 2002, the Company adopted the fair-value method using the prospective method of transition. The prospective method required the Company to apply the provisions of SFAS No. 123 to new stock awards granted from the beginning of the year of adoption and going forward. Note 5 includes the interim disclosures required by SFAS No. 148.

In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities.” FIN 46 is an Interpretation of Accounting Research Bulletin No. 51, “Consolidated Financial Statements” and addresses consolidation by business enterprises of variable interest entities (“VIEs”). The Interpretation is based on the concept that an enterprise controlling another entity through interests other than voting interests should consolidate the controlled entity. Business enterprises are required under the provisions of the Interpretation to identify VIEs, based on specified characteristics, and then determine whether they should be consolidated. An enterprise that holds a majority of the variable interests is considered the primary beneficiary which would consolidate the VIE. The primary beneficiary of a VIE is also required to include various disclosures in interim and annual financial statements. Additionally, an enterprise that holds a significant variable interest in a VIE, but that is not the primary beneficiary, is also required to make certain disclosures.

The Interpretation is effective immediately for all enterprises with variable interests in VIEs created after January 31, 2003. A public entity with variable interests in a VIE created before February 1, 2003 is required to apply the provisions of this Interpretation to that entity until the end of the first interim or annual reporting period ending after December 15, 2003; however, early adoption is permitted. As of July 1, 2003, the Company adopted the Interpretation and disclosures related to certain of the Company’s variable interests in VIEs, which are included in Note 9 to the Consolidated Financial Statements. On October 9, 2003, the FASB deferred the implementation date of FIN 46 until the fourth quarter pending additional interpretations which are anticipated prior to year end. SunTrust will continue to monitor and evaluate the impact of these additional interpretations.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”. SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. The Statement was effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of this Statement did not have a material impact on the Company’s financial position or results of operations.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 establishes guidelines on how instruments sharing the characteristics of both liabilities and equity should be classified and measured. Financial instruments falling within the scope of the Statement must be classified as liabilities. SFAS No.150 was effective for financial instruments entered into or modified after May 31, 2003 and otherwise was effective at the beginning of the first interim period beginning after June 15, 2003; however, in October 2003, the FASB decided to defer the provisions of SFAS No. 150 as they apply to certain mandatorily redeemable noncontrolling interests.

9

Notes to Consolidated Financial Statements (Unaudited) – continued

The deferral for this type of instrument is expected to remain in effect while these interests are addressed by the FASB. SunTrust will continue to monitor and evaluate the impact of the FASB’s decisions as they relate to the deferral provisions of SFAS No. 150. The adoption of the remainder of this Statement did not have a material impact on the Company’s financial position or results of operations.

Recently Issued Accounting Pronouncements

The Sarbanes-Oxley Act of 2002 no longer permits the American Institute of Certified Public Accountants (“AICPA”) to write accounting and auditing standards; however, upon ratification by the FASB, the AICPA is permitted to issue certain Statements of Position (“SOP”) that were in production prior to the issuance of the Sarbanes-Oxley Act. Two of the AICPA’s outstanding proposals will affect the banking industry. The first proposed SOP is “Accounting for Loans or Certain Debt Securities Acquired in a Transfer.” The proposal addresses accounting for differences arising between contractual cash flows and cash flows expected to be collected from an investor’s initial investment in loans or debt securities acquired in a transfer, if those differences relate to credit quality. The proposal also prohibits companies from “carrying over” or creating a valuation allowance in the initial accounting for loans acquired that meet the scope criteria of the Statement. In October 2003, the FASB approved the SOP for final issuance, with an effective date for loans acquired in fiscal years beginning after December 15, 2004.

In June 2003, the AICPA also issued an exposure draft of a proposed SOP, “Allowance for Credit Losses.” This SOP addresses the recognition and measurement by creditors of the allowance for credit losses related to all loans. The allowance should only consist of amounts recognized and measured under SFAS No. 5, “Accounting for Contingencies,” and SFAS No. 114, “Accounting by Creditors for Impairment of a Loan.” Components of the allowance should be measured using the present value of expected future cash flows. Each component should be estimated and supported by observable data relating to existing conditions, and creditors should not project changes in the observable data that may occur in the future. The provisions of this SOP were originally effective for fiscal years beginning after December 15, 2003; however, the AICPA has recently decided to delay the effective date. An effective date for the provisions of this SOP has not been set. SunTrust is in the process of analyzing the impact these proposed SOPs would have on the Company’s financial position and results of operations.

10

Notes to Consolidated Financial Statements (Unaudited) – continued

Note 4 – Intangible Assets

Under the provisions of SFAS No. 142, the Company completed its annual review of goodwill as of December 31, 2002, and determined there was no impairment of goodwill as of that date. The Company will review goodwill on an annual basis for impairment and as events occur or circumstances change that would more likely than not reduce fair value of a reporting unit below its carrying amount. The changes in the carrying amount of goodwill by reportable segment for the nine months ended September 30, 2002 and 2003 are as follows:

(Dollars in thousands) (Unaudited)	Retail			Commercial		Corporate and Investment Banking		Mortgage			Private Client Services		Corporate/ Other		Total
Balance, January 1, 2002	$	299,984		$	20,781	$	93,442	$	1,859		$	24,431	$	—	$	440,497
Huntington-Florida acquisition		395,412			68,730		—		14,650			44,902		—		523,694
Reallocation		744			—		—		(744	)		—		—		—
Purchase price adjustment		(9,526	)		15		1,410		—			—		—		(8,101	)
Balance, September 30, 2002	$	686,614		$	89,526	$	94,852	$	15,765		$	69,333	$	—	$	956,090
Balance, January 1, 2003	$	687,185		$	96,626	$	94,852	$	15,765		$	69,333	$	—	$	963,761
Purchase price adjustment		4,188			—		—		—			—		—		4,188
Lighthouse acquisition		36,044			36,271		—		26,076			—		—		98,391
Sun America acquisition		—			—		—		10,168			—		—		10,168
Other acquisitions		—			—		—		690			—		—		690
Balance, September 30, 2003	$	727,417		$	132,897	$	94,852	$	52,699		$	69,333	$	—	$	1,077,198

The changes in the carrying amounts of other intangible assets for the nine months ended September 30, 2002 and 2003 are as follows:

(Dollars in thousands) (Unaudited)	Core Deposit Intangible			Mortgage Servicing Rights			Other			Total
Balance, January 1, 2002	$	19,158		$	351,200		$	421		$	370,779
Amortization		(40,291	)		(143,342	)		(1,152	)		(184,785	)
Servicing rights originated		—			195,804			—			195,804
Huntington-Florida acquisition		254,959			—			12,600			267,559
Balance, September 30, 2002	$	233,826		$	403,662		$	11,869		$	649,357
Balance, January 1, 2003	$	216,855		$	383,918		$	11,385		$	612,158
Amortization		(46,065	)		(286,186	)		(2,073	)		(334,324	)
Servicing rights originated		—			303,397			—			303,397
Asset acquisition		—			—			402			402
Lighthouse acquisition		9,400			5,398			7,800			22,598
Sun America acquisition		—			—			9,000			9,000
Balance, September 30, 2003	$	180,190		$	406,527		$	26,514		$	613,231

11

Notes to Consolidated Financial Statements (Unaudited) – continued

The estimated amortization expense for intangible assets, excluding amortization of mortgage servicing rights, for the year 2003 and the subsequent four years is as follows:

(Dollars in thousands) (Unaudited)

	Core Deposit Intangible		Other		Total
2003		61,227		3,289		64,516
2004		52,208		4,848		57,056
2005		41,515		4,755		46,270
2006		31,975		4,191		36,166
2007		22,664		4,180		26,844
Thereafter		16,666		7,324		23,990
Total	$	226,255	$	28,587	$	254,842

Note 5 – Stock Options

Effective January 1, 2002, the Company adopted the fair-value recognition provision of SFAS No. 123 prospectively to all awards granted after January 1, 2002. The effect on net income and earnings per share if the fair-value based method had been applied to all outstanding awards for the three and nine months ended September 30, 2003 and 2002 is as follows:

(Dollars in thousands) (Unaudited)

	Three months Ended September 30						Nine months Ended September 30
	2003			2002			2003			2002
Net income, as reported	$	331,583		$	342,993		$	989,790		$	991,559
Stock-based employee compensation expense included in reported net income, net of related tax effects		1,362			—			3,849			—
Total stock-based employee compensation expense determined under fair-value-based method for all awards, net of related tax effects		(2,596	)		(5,161	)		(11,410	)		(15,505	)
Net income, pro forma	$	330,349		$	337,832		$	982,229		$	976,054
Earning per share:
Diluted - as reported	$	1.18		$	1.20		$	3.52		$	3.46
Diluted - pro forma		1.17			1.18			3.49			3.40
Basic - as reported		1.19			1.21			3.56			3.50
Basic - pro forma		1.18			1.20			3.53			3.45

12

Notes to Consolidated Financial Statements (Unaudited) – continued

Note 6 – Comprehensive Income

Comprehensive income for the nine months ended September 30, 2003 and 2002 is calculated as follows:

(Dollars in thousands) (Unaudited)

	2003			2002
Unrealized loss on available for sale securities, net, recognized in other comprehensive income:
Before income tax	$	(190,694	)	$	(1,806	)
Income tax		(66,743	)		(632	)
Net of income tax	$	(123,951	)	$	(1,174	)
Amounts reported in net income:
Gain on sale of securities	$	104,375		$	165,000
Net amortization		147,245			23,102
Reclassification adjustment		251,620			188,102
Income tax		(88,067	)		(65,836	)
Reclassification adjustment, net of tax	$	163,553		$	122,266
Unrealized gain on available for sale securities arising during period, net of tax	$	39,602		$	121,092
Reclassification adjustment, net of tax		(163,553	)		(122,266	)
Net unrealized loss on available for sale securities recognized in other comprehensive income	$	(123,951	)	$	(1,174	)
Unrealized gain on derivative financial instruments, net, recognized in other comprehensive income:
Before income tax	$	36,223		$	4,862
Income tax		(12,678	)		(1,702	)
Net of income tax	$	23,545		$	3,160
Reclassification of losses from other comprehensive income to earnings	$	—		$	4,343
Income tax		—			(1,520	)
Reclassification adjustment, net of tax	$	—		$	2,823
Unrealized gain on derivative financial instruments arising during period, net of tax	$	23,545		$	337
Reclassification adjustment, net of tax		—			2,823
Net unrealized gain on derivative instruments recognized in other comprehensive income	$	23,545		$	3,160
Accumulated other comprehensive income related to retirement plans:	$	9,757		$	—
Total unrealized (losses) gains recognized in other comprehensive income	$	(90,649	)	$	1,986
Net income		989,790			991,559
Total comprehensive income	$	899,141		$	993,545

13

Notes to Consolidated Financial Statements (Unaudited) - continued

Note 7 – Earnings Per Share Reconciliation

Net income is the same in the calculation of basic and diluted earnings per share (“EPS”). Shares of 11.0 million and 6.6 million for the periods ended September 30, 2003 and 2002, respectively, were excluded in the computation of diluted EPS because they would have been antidilutive. A reconciliation of the difference between average basic common shares outstanding and average diluted common shares outstanding for the three and nine months ended September 30, 2003 and 2002 is included in the following table:

	Three Months Ended September 30				Nine Months Ended September 30
(In thousands, except per share data) (Unaudited)	2003		2002		2003		2002
Diluted
Net income	$	331,583	$	342,993	$	989,790	$	991,559
Average common shares outstanding		278,296		282,310		278,107		283,213
Effect of dilutive securities:
Stock options		1,206		1,710		922		1,639
Performance restricted stock		2,065		1,971		2,033		2,028
Average diluted common shares		281,567		285,991		281,062		286,880
Earnings per common share - diluted:
Net income	$	1.18	$	1.20	$	3.52	$	3.46
Basic
Net income	$	331,583	$	342,993	$	989,790	$	991,559
Average common shares		278,296		282,310		278,107		283,213
Earnings per common share - basic:
Net income	$	1.19	$	1.21	$	3.56	$	3.50

Note 8 – Business Segment Reporting

The Company is currently in the process of making further enhancements to its internal management reporting system that are to be implemented throughout 2003 and beyond. Once complete, the items reported for each line of business segment are expected to include: assets, liabilities and attributed economic capital; matched maturity funds transfer priced net interest revenue, net of credit risk premiums; direct noninterest income; internal credit transfers between lines of business for supportive business services; and fully absorbed expenses. The internal management reporting system and the business segment disclosures for each line of business do not currently include attributed economic capital, nor fully absorbed expenses. Any amounts not currently reported in each line of business segment are reported in the Corporate/Other line of business segment. The implementation of these enhancements to the internal management reporting system is expected to materially affect the net income disclosed for each segment with no impact on consolidated amounts. Whenever significant changes to management reporting methodologies take place, the impact of these changes is quantified and prior period information is reclassified. The Company will reflect these reclassified changes immediately in the current period and in year to date historical comparisons, and will provide updated historical quarterly schedules in the Annual Report found on Form 10-K.

14

Notes to Consolidated Financial Statements (Unaudited) – continued

The tables below disclose selected financial information for SunTrust’s reportable business segments for the three and nine months ended September 30, 2003 and 2002.

(Dollars in thousands) (Unaudited)

	Three Months Ended September 30, 2003
	Retail		Commercial		Corporate and Investment Banking		Mortgage			Private Client Services		Corporate/Other			Consolidated
Average total assets	$	25,990,307	$	23,757,206	$	24,349,483	$	24,933,826		$	2,296,721	$	25,374,267		$	126,701,810
Average total liabilities		53,303,419		11,070,467		11,642,081		2,392,091			1,568,737		37,488,166			117,464,961
Average total equity		—		—		—		—			—		9,236,849			9,236,849
Net interest income (FTE)1		348,053		151,105		72,904		161,109			11,827		99,390			844,388
Provision for loan losses 2		38,890		12,287		28,028		1,752			567		(1,725	)		79,799
Net interest income after provision for loan losses		309,163		138,818		44,876		159,357			11,260		101,115			764,589
Noninterest income		186,913		87,583		133,301		(10,436	)		165,413		11,704			574,478
Noninterest expense		321,501		103,908		94,253		82,706			134,869		122,628			859,865
Total contribution before taxes		174,575		122,493		83,924		66,215			41,804		(9,809	)		479,202
Provision for income taxes3		—		—		—		—			—		147,619			147,619
Net Income	$	174,575	$	122,493	$	83,924	$	66,215		$	41,804	$	(157,428	)	$	331,583

	Three Months Ended September 30, 2002
	Retail		Commercial		Corporate and Investment Banking		Mortgage			Private Client Services		Corporate/Other			Consolidated
Average total assets	$	23,862,628	$	21,463,851	$	21,535,331	$	18,115,499		$	1,734,777	$	21,133,792		$	107,845,878
Average total liabilities		52,118,384		9,052,974		6,260,966		1,166,515			1,532,146		28,771,570			98,902,555
Average total equity		—		—		—		—			—		8,943,323			8,943,323
Net interest income (FTE)1		336,326		134,110		63,045		82,276			9,879		189,491			815,127
Provision for loan losses2		26,506		7,180		41,709		1,589			507		21,208			98,699
Net interest income after provision for loan losses		309,820		126,930		21,336		80,687			9,372		168,283			716,428
Noninterest income		182,499		53,656		126,794		(7,178	)		156,525		36,587			548,883
Noninterest expense		307,971		73,474		83,852		44,883			111,033		154,939			776,152
Total contribution before taxes		184,348		107,112		64,278		28,626			54,864		49,931			489,159
Provision for income taxes3		—		—		—		—			—		146,166			146,166
Net Income	$	184,348	$	107,112	$	64,278	$	28,626		$	54,864	$	(96,235	)	$	342,993

¹ Net interest income is fully taxable equivalent and is presented on a matched maturity funds transfer price basis for the line of business.

² Provision for loan losses includes a credit risk premium charge for the lines of business.

³ Includes income tax provision and taxable-equivalent income adjustment reversal of $11,588 and $10,013 for the three months ended September 30, 2003 and 2002, respectively.

15

Notes to Consolidated Financial Statements (Unaudited) – continued

(Dollars in thousands) (Unaudited)

	Nine Months Ended September 30, 2003
	Retail		Commercial		Corporate and Investment Banking		Mortgage		Private Client Services		Corporate/Other			Consolidated
Average total assets	$	25,390,643	$	23,243,586	$	22,695,171	$	22,459,545	$	2,122,979	$	25,594,286		$	121,506,210
Average total liabilities		52,805,593		10,560,551		8,994,473		1,916,332		1,518,825		36,746,292			112,542,066
Average total equity		—		—		—		—		—		8,964,144			8,964,144
Net interest income (FTE)1		974,852		431,646		203,854		416,180		31,317		429,967			2,487,816
Provision for loan losses 2		113,436		35,215		90,355		4,920		1,480		(2,142	)		243,264
Net interest income after provision for loan losses		861,416		396,431		113,499		411,260		29,837		432,109			2,244,552
Noninterest income		548,703		222,731		410,257		6,076		487,617		43,545			1,718,929
Noninterest expense		955,282		263,861		272,956		224,915		382,791		416,017			2,515,822
Total contribution before taxes		454,837		355,301		250,800		192,421		134,663		59,637			1,447,659
Provision for income taxes 3		—		—		—		—		—		457,869			457,869
Net Income	$	454,837	$	355,301	$	250,800	$	192,421	$	134,663	$	(398,232	)	$	989,790

	Nine Months Ended September 30, 2002
	Retail		Commercial		Corporate and Investment Banking		Mortgage		Private Client Services		Corporate/Other			Consolidated
Average total assets	$	22,998,173	$	21,019,935	$	21,519,187	$	18,321,882	$	1,735,328	$	20,794,656		$	106,389,161
Average total liabilities		51,338,065		8,562,194		6,013,057		1,165,178		1,553,099		29,064,746			97,696,339
Average total equity		—		—		—		—		—		8,692,822			8,692,822
Net interest income (FTE)1		1,032,690		395,017		205,084		262,486		30,168		520,445			2,445,890
Provision for loan losses 2		75,164		27,351		176,272		4,872		1,730		87,903			373,292
Net interest income after provision for loan losses		957,526		367,666		28,812		257,614		28,438		432,542			2,072,598
Noninterest income		531,037		172,662		395,546		8,962		481,495		151,401			1,741,103
Noninterest expense		959,133		241,459		285,049		159,926		355,057		382,389			2,383,013
Total contribution before taxes		529,430		298,869		139,309		106,650		154,876		201,554			1,430,688
Provision for income taxes 3		—		—		—		—		—		439,129			439,129
Net Income	$	529,430	$	298,869	$	139,309	$	106,650	$	154,876	$	(237,575	)	$	991,559

¹ Net interest income is fully taxable equivalent and is presented on a matched maturity funds transfer price basis for the line of business.

² Provision for loan losses includes a credit risk premium charge for the lines of business.

³ Includes income tax provision and taxable-equivalent income adjustment reversal of $33,033 and $29,282 for the nine months ended September 30, 2003 and 2002, respectively.

16

Notes to Consolidated Financial Statements (Unaudited) – continued

Note 9 – Variable Interest Entities and Off-Balance Sheet Arrangements

SunTrust Bank assists in providing liquidity to select corporate customers by directing them to a multi-seller commercial paper conduit. SunTrust’s conduit relationship is with Three Pillars Funding Corporation (“Three Pillars”). Three Pillars provides financing for or direct purchases of financial assets originated and serviced by SunTrust Bank’s corporate customers. Three Pillars finances this activity by issuing A-1/P-1 rated commercial paper. The result is a favorable funding arrangement for these SunTrust Bank customers.

In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities,” which addresses the criteria for the consolidation of off-balance sheet entities similar to Three Pillars. Under the provisions of FIN 46, SunTrust consolidated Three Pillars as of July 1, 2003. As of September 30, 2003, Three Pillars had assets and liabilities included on the Consolidated Balance Sheet, of approximately $2.9 billion, consisting of primarily secured loans, marketable asset-backed securities and short-term commercial paper liabilities. As of December 31, 2002, Three Pillars had assets and liabilities of approximately $2.8 billion which were not included on the Consolidated Balance Sheet.

For the quarters ended September 30, 2003 and 2002, activities related to the Three Pillars relationship generated approximately $5.6 million and $5.0 million, respectively, in fee revenue for SunTrust Bank. These activities include: client referrals and investment recommendations to Three Pillars; the issuing of a letter of credit, which provides partial credit protection to commercial paper holders; and providing a majority of the liquidity arrangements that would provide funding to Three Pillars in the event that it can no longer issue commercial paper or in certain other circumstances. As of September 30, 2003, the liquidity commitments and other credit enhancement SunTrust Bank had to Three Pillars totaled $4.7 billion and $407.4 million, respectively, which represent the Company’s maximum exposure to potential loss. The Company manages the credit risk associated with these commitments by subjecting them to the Company’s normal credit approval and monitoring processes. In 2003, SunTrust Bank funded approximately $30 million related to the liquidity arrangement with Three Pillars, resulting from a ratings downgrade of an asset backed security. The Company does not anticipate a credit loss as a result of the transaction.

As part of its community reinvestment initiatives, the Company invests in multi-family affordable housing throughout its footprint as a limited partner and/or general partner in various properties. The Company receives affordable housing federal and state tax credits for these limited partnership investments. The partnerships are considered variable interest entities under FIN 46 and therefore each partnership has been evaluated to determine the Company’s level of variable interests. As of September 30, 2003, approximately $666.9 million of assets are included in partnerships that are not included on the Consolidated Balance Sheet and the Company’s maximum potential exposure to these partnerships is $176.2 million, consisting of the limited partnership investments plus unfunded commitments. The investments in these partnerships represent a significant variable interest in the partnership and will continue to be accounted for under the equity method of accounting.

During the quarter ended September 30, 2003, the Company consolidated several affordable housing partnerships, for which it was a general partner. The assets consolidated totaled $361.6 million. In addition, the Company is also a general partner in a number of limited partnerships, which have been formed to provide investment opportunities for certain SunTrust customers. Assets under management, which are not included in the accompanying balance sheet, totaled $3.5 billion as of September 30, 2003. The application of FIN 46 did not require consolidation of these partnerships.

17

Notes to Consolidated Financial Statements (Unaudited) – continued

Note 10 - Guarantees

The Company has undertaken certain guarantee obligations in the ordinary course of business. In following the provisions of FIN 45, as addressed in Note 3, the Company must consider guarantees that have any of the following four characteristics (i) contracts that contingently require the guarantor to make payments to a guaranteed party based on changes in an underlying factor that is related to an asset, a liability, or an equity security of the guaranteed party; (ii) contracts that contingently require the guarantor to make payments to a guaranteed party based on another entity’s failure to perform under an obligating agreement; (iii) indemnification agreements that contingently require the indemnifying party to make payments to an indemnified party based on changes in an underlying factor that is related to an asset, a liability, or an equity security of the indemnified party; and (iv) indirect guarantees of the indebtedness of others. The issuance of a guarantee imposes an obligation to stand ready to perform, and should certain triggering events occur, it also imposes an obligation to make future payments. Payments may be in the form of cash, financial instruments, other assets, shares of its stock, or provisions of its services. The following is a discussion of the guarantees that the Company has issued as of September 30, 2003 which have characteristics as specified by FIN 45.

Letters of Credit

Letters of credit are conditional commitments issued by the Company generally to guarantee the performance of a customer to a third party in borrowing arrangements, such as commercial paper, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers and may be reduced by selling participations to third parties. The Company issues letters of credit that are classified as either financial standby, performance standby or commercial letters of credit. Commercial letters of credit are specifically excluded from the disclosure and recognition requirements of FIN 45.

As of September 30, 2003 and December 31, 2002, the maximum potential amount of the Company’s obligation was $9.7 billion and $9.2 billion, respectively, for financial and performance standby letters of credit. The Company has recorded $97.8 million in other liabilities for unearned fees related to these letters of credit as of September 30, 2003. The Company’s outstanding letters of credit generally have a term of less than one year. If a letter of credit is drawn upon, the Company may seek recourse through the customer’s underlying line of credit. If the customer’s line of credit is also in default, the Company may take possession of the collateral securing the line of credit.

Other

A third party investor holds Series B Preferred Stock in STB Real Estate Holdings (Atlanta), Inc. (“STBREH”), a subsidiary of SunTrust. The contract between STBREH and the third party investor contains an automatic exchange clause which, under certain circumstances, requires the Series B preferred shares to be automatically exchanged for guaranteed preferred beneficial interest in debentures of the Company. The guaranteed preferred beneficial interest in debentures are guaranteed to have a liquidation value equal to the sum of the issue price, $350 million, and an approximate yield of 8.5% per annum subject to reduction for any cash or property dividends paid to date. As of September 30, 2003 and December 31, 2002,

18

Notes to Consolidated Financial Statements (Unaudited) – continued

$403.7 million and $377.5 million was accrued in other liabilities for the principal and interest, respectively. This exchange agreement remains in effect as long as any shares of Series B Preferred Stock are owned by the third party investor, not to exceed 30 years.

SunTrust Securities, Inc. (“STS”) and SunTrust Capital Markets, Inc. (“STCM”), broker-dealer affiliates of SunTrust, use a common third party clearing broker to clear and execute their customers’ securities transactions and to hold customer accounts. Under their respective agreements, STS and STCM agree to indemnify the clearing broker for losses that result from a customer’s failure to fulfill its contractual obligations. As the clearing broker’s rights to charge STS and STCM have no maximum amount, the Company believes that the maximum potential obligation cannot be estimated. However, to mitigate exposure, the affiliate may seek recourse from the customer through cash or securities held in the defaulting customers’ account. For the quarter ended September 30, 2003, STS and STCM experienced minimal net losses as a result of the indemnity.

SunTrust Bank has guarantees associated with credit default swaps, an agreement in which the buyer of protection pays a premium to the seller of the credit default swap for protection against an event of default. Events constituting default under such agreements that would result in the Company making a guaranteed payment to a counterparty may include (i) default of the referenced asset; (ii) bankruptcy of the customer; or (iii) restructuring or reorganization by the customer. The notional amount outstanding at September 30, 2003 and December 31, 2002 is $225.0 million and $175.0 million, respectively. As of September 30, 2003, the notional amounts expire as follows: $30.0 million in 2003, $45.0 million in 2004, $30.0 million in 2005, $5.0 million in 2006, $20.0 million in 2007, and $95.0 million in 2008. In the event of default under the contract, the Company would make a cash payment to the holder of credit protection and would take delivery of the referenced asset from which the Company may recover a portion of the credit loss.

19

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

SunTrust Banks, Inc. (“SunTrust” or “the Company”), one of the nation’s largest commercial banking organizations, is a financial holding company with its headquarters in Atlanta, Georgia. SunTrust’s principal banking subsidiary, SunTrust Bank, offers a full line of financial services for consumers and businesses through its branches located primarily in Alabama, Florida, Georgia, Maryland, Tennessee, South Carolina, Virginia and the District of Columbia. In addition to traditional deposit, credit and trust and investment services offered by SunTrust Bank, other SunTrust subsidiaries provide mortgage banking, credit-related insurance, asset management, securities brokerage and capital market services.

SunTrust has 1,181 full-service branches, including supermarket branches, and continues to leverage technology to provide customers the convenience of banking on the Internet, through 2,229 automated teller machines and via twenty-four hour telebanking.

The following analysis of the financial performance of SunTrust for the third quarter and first nine months of 2003 should be read in conjunction with the financial statements, notes and other information contained in this document and the 2002 Annual Report found on Form 10-K. Certain reclassifications have been made to prior year financial statements and related information to conform them to the 2003 presentation. In Management’s Discussion, net interest income, net interest margin and the efficiency ratio are presented on a fully taxable-equivalent (“FTE”) basis and the ratios are presented on an annualized basis. The FTE basis adjusts for the tax-favored status of income from certain loans and investments. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts. Additionally, the Company presents a return on average realized shareholders’ equity, as well as a return on average total shareholders’ equity (“ROE”). The return on average realized shareholders’ equity excludes net unrealized security gains. The Company also presents a return on average assets less net unrealized gains on securities and a return on average total assets (“ROA”). Due to its ownership of approximately 48 million shares of common stock of The Coca-Cola Company resulting in an unrealized net gain of $2.1 billion as of September 30, 2003, the Company believes ROA and ROE excluding net unrealized gains from the Company’s securities portfolio is the more indicative performance measure when being compared to other companies.

The information provided herein may contain estimates of future operating results for SunTrust. These estimates constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) which involve significant risks and uncertainties. Actual results could differ materially from those contained in or implied by such statements for a variety of reasons including, but not limited to: changes in interest rates, changes in accounting principles, policies, or guidelines, significant changes in the economic scenario, significant changes in legislation or regulatory requirements, changes in business conditions or the banking competitive environment, significant changes in securities markets, and litigation risks. SunTrust does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

CRITICAL ACCOUNTING POLICIES

The Company’s accounting policies are integral to understanding the results reported. Accounting policies are described in detail in Note 1 to the Consolidated Financial Statements included in the Annual Report on Form 10-K. The Company’s most complex accounting policies require management’s judgment to ascertain

20

the valuation of assets, liabilities, commitments and contingencies. A variety of factors could affect the ultimate value that is obtained either when earning income, recognizing an expense, recovering an asset or relieving a liability. In many instances, the Company uses a discount factor to determine the present value of assets and liabilities. A change in the discount factor could increase or decrease the values of those assets and liabilities. That change could result in either a beneficial or adverse impact on the financial results. The Company has established detailed policies and control procedures that are intended to ensure valuation methods are well controlled and applied consistently from period to period. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. The following is a brief description of the Company’s current accounting policies involving significant management valuation judgments.

Allowance for Loan Losses.The allowance for loan losses represents management’s estimate of losses inherent in the existing loan portfolio. The allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged off, net of recoveries. The allowance for loan losses is determined based on management’s assessment of several factors: reviews and evaluations of specific loans, changes in the nature and volume of the loan portfolio, current economic conditions and the related impact on segments of the loan portfolio, historical loan loss experiences and the level of classified and nonperforming loans. Loans are considered impaired if, based on current information and events, it is probable that SunTrust will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. The measurement of impaired loans is based on either the fair value of the underlying collateral, the present value of the future cash flows discounted at the historical effective interest rate stipulated in the loan agreement, or the estimated market value of the loan. In measuring the fair value of the collateral, management uses assumptions (e.g., discount rate) and methodologies (e.g., comparison to the recent selling price of similar assets) consistent with those that would be utilized by unrelated third parties. Changes in the financial condition of individual borrowers, economic conditions, historical loss experience, or the condition of the various markets in which collateral may be sold may affect the required level of the allowance for loan losses and the associated provision for loan losses. Should cash flow assumptions or market conditions change, a different amount may be reported for the allowance for loan losses and the associated provision for loan losses.

Estimates of Fair Value.The estimation of fair value is significant to a number of SunTrust’s assets, including trading account assets, loans held for sale, available-for-sale investment securities, mortgage servicing rights (“MSRs”), other real estate owned, other repossessed assets, as well as assets and liabilities associated with derivative financial instruments. These are all recorded at either fair value or at the lower of cost or fair value. Fair values are volatile and may be influenced by a number of factors. Circumstances that could cause estimates of the fair value of certain assets and liabilities to change include a change in prepayment speeds, discount rates, or market interest rates. Fair values for trading account assets, most available-for-sale investment securities and most derivative financial instruments are based on quoted market prices. If quoted market prices are not available, fair values are based on the quoted prices of similar instruments. The fair values of loans held for sale are based on anticipated liquidation values, while the fair values of mortgage servicing rights are based on discounted cash flow analysis utilizing dealer consensus prepayment speeds and market discount rates. The fair values of other real estate owned are typically determined based on appraisals by third parties, less estimated costs to sell. Estimates of fair value are also required in performing an impairment analysis of goodwill. The Company reviews goodwill for impairment at least once annually and whenever events or circumstances indicate the carrying value may not be recoverable. An impairment would be indicated if the carrying value exceeds the fair value of a reporting unit.

21

EARNINGS ANALYSIS

SunTrust reported earnings of $331.6 million and $989.8 million for the third quarter and first nine months of 2003, respectively, a decrease of $11.4 million, or 3.3%, and $1.8 million, or 0.2%, compared to the same periods of the prior year. Reported diluted earnings per share were $1.18 and $1.20 for the three months ended September 30, 2003 and 2002, respectively, and $3.52 and $3.46 for the nine months ended September 30, 2003 and 2002, respectively. Net income in the first nine months of 2002 was reduced by $39.8 million, or $0.14 per share, for after-tax merger charges associated with the Company’s acquisition of Huntington-Florida. Additionally, in the third quarter of 2003, the Company consolidated its multi-seller commercial paper conduit, Three Pillars. As of September 30, 2003, Three Pillars had assets and liabilities included on the Consolidated Balance Sheet of approximately $2.9 billion, primarily consisting of secured loans, marketable asset-backed securities and short-term commercial paper liabilities.

Net interest income increased $29.3 million, or 3.6%, from the third quarter of 2002 to the third quarter of 2003 and $41.9 million, or 1.7%, from the first nine months of 2002 to the first nine months of 2003. Higher earning assets levels helped offset the adverse impact of a declining margin. Average earning assets increased $16.8 billion, or 17.5%, from the third quarter of 2002 to the third quarter of 2003 and $13.6 billion, or 14.4%, from the first nine months of 2002 to the first nine months of 2003. Average earning assets for the third quarter and first nine months of 2003 related to Three Pillars were $2.5 billion and $841.8 million, respectively. The margin declined 40 basis points to 2.98% for the third quarter of 2003 and 38 basis points to 3.08% for the nine months ended September 30, 2003 when compared to the same periods of the prior year as the decline in rates negatively impacted spreads. The consolidation of Three Pillars caused net interest margin to decline 6 basis points for the third quarter of 2003 and 2 basis points for the nine months ended September 30, 2003. The consolidation of certain affordable housing partnerships also caused a decline of 2 basis points to the net interest margin for the third quarter of 2003 and had minimal impact for the nine months ended September 30, 2003.

Provision for loan losses was $79.8 million in the third quarter of 2003, a decrease of $18.9 million, or 19.1%, from the same period last year. Provision for loan losses for the nine months ended September 30, 2003 was $243.3 million, a decrease of $130.0 million, or 34.8%. Contributing to the decline in the provision was a decrease of $89.9 million in commercial net charge-offs from the first nine months of 2002 to the first nine months of 2003. Commercial charge-offs in the first nine months of 2002 included $74.9 million related to the bankruptcy of a large corporate energy company. Additionally, the first nine months of 2002 included $45.3 million of provision to conform the Huntington-Florida loan portfolio to SunTrust’s credit standards.

Total noninterest income was $574.5 million and $1,718.9 million for the third quarter and first nine months of 2003, respectively, up $25.6 million, or 4.7%, from the third quarter of 2002 and down $22.2 million, or 1.3%, from the first nine months of 2002. Results for the third quarter and year to date were positively impacted by increases in service charges on deposit accounts, investment banking and trading income, and other charges and fees. Additionally, noninterest income increased $16.6 million in the third quarter and year to date as a result of the consolidation of certain affordable housing partnerships. Negatively impacting noninterest income was combined mortgage production and servicing income declining $6.3 million, or 44.2%, and $15.7 million, or 143.5%, compared to the third quarter and first nine months of 2002, respectively. Record mortgage production for the third quarter of 2003 was more than offset by the decline in mortgage servicing income. The decline in mortgage servicing income was due to accelerated amortization of mortgage servicing rights resulting from increased prepayments in the low interest rate environment, which existed at the beginning of the third quarter. Long-term rates were in a relatively higher trending range during the second half of the quarter and should result in lower prepayments and MSR amortization in the future. Security gains also declined $14.7 million, or 32.1%, and $60.6 million, or 36.7%, compared to the third quarter and first nine months of 2003, respectively.

22

Total noninterest expense increased $83.7 million, or 10.8%, over the third quarter of 2002 and $132.8 million, or 5.6%, over the first nine months of 2002. Personnel expenses in the third quarter and first nine months increased $36.7 million, or 8.4%, and $66.0 million, or 4.8%, respectively, from prior year periods. The increase was primarily due to incentive and commission payments related to higher business volumes, particularly in the mortgage line of business, and record levels of closings. Pension expense increased $12.3 million from the third quarter of 2002 to the third quarter of 2003 and $36.2 million from the first nine months of 2002 to the first nine months of 2003 due to a reduced expected long term rate of return on plan assets and a lower discount rate for measuring pension liabilities. The expected long-term rate of return for 2003 is 8.75%, compared to 9.50% in 2002, and the discount rate used for 2003 is 6.75%, compared to 7.25% in 2002. Marketing and customer development expenses increased $9.3 million, or 59.0%, and $16.3 million, or 27.6%, compared to the third quarter and first nine months of 2002 as the Company continues its aggressive 2003 marketing strategy. Noninterest expense included $6.1 million and $7.4 million for the third quarter and first nine months of 2003 related to the Lighthouse franchise, which the Company acquired in the second quarter of 2003. Additionally, noninterest expense increased $14.1 million for the third quarter and year to date 2003 as a result of the consolidation of certain affordable housing partnerships. The first nine months of 2002 included $16.0 million of merger-related charges for operations and systems integration related to the acquisition of Huntington-Florida. The first nine months of 2002 also included One Bank expenses of $44.5 million. The One Bank initiative was completed in the fourth quarter of 2002.

23

Selected Quarterly Financial Data Table 1

(Dollars in millions except per share data) (Unaudited)

	Quarters
	2003									2002
	3			2			1			4			3
Summary of Operations
Interest and dividend income	$	1,177.7		$	1,174.0		$	1,218.1		$	1,274.9		$	1,270.7
Interest expense		344.9			374.5			395.6			447.8			465.6
Net interest income		832.8			799.5			822.5			827.1			805.1
Provision for loan losses		79.8			82.7			80.8			96.5			98.7
Net interest income after provision for loan losses		753.0			716.8			741.7			730.6			706.4
Noninterest income		574.5			596.8			547.6			527.7			548.9
Noninterest expense		859.9			837.7			818.2			836.4			776.1
Income before provision for income taxes		467.6			475.9			471.1			421.9			479.2
Provision for income taxes		136.0			145.5			143.3			81.6			136.2
Net income	$	331.6		$	330.4		$	327.8		$	340.3		$	343.0
Net interest income (taxable-equivalent)	$	844.4		$	810.4		$	833.0		$	837.3		$	815.1
Per Common Share
Diluted	$	1.18		$	1.17		$	1.17		$	1.20		$	1.20
Basic		1.19			1.19			1.18			1.21			1.21
Dividends declared		0.45			0.45			0.45			0.43			0.43
Book value		32.83			32.62			31.06			31.04			31.04
Market price:
High		63.00			61.98			59.95			63.25			69.12
Low		58.00			51.44			51.73			51.48			55.90
Close		60.37			59.34			52.65			56.92			61.48
Selected Average Balances
Total assets	$	126,701.8		$	119,448.0		$	118,276.2		$	114,827.5		$	107,845.9
Earning assets		112,328.6			106,606.4			105,249.0			101,895.5			95,562.2
Loans		77,733.2			74,311.5			73,049.8			72,668.8			71,695.6
Consumer and commercial deposits		70,851.5			69,097.1			67,466.7			67,829.7			66,141.3
Brokered and foreign deposits		10,521.1			10,707.2			10,379.9			7,329.4			4,956.7
Realized shareholders’ equity		7,710.4			7,413.7			7,323.1			7,204.8			7,095.9
Total shareholders’ equity		9,236.8			8,864.1			8,786.6			8,823.3			8,943.3
Common shares - diluted (thousands)		281,567			280,287			281,330			283,595			285,991
Common shares - basic (thousands)		278,296			277,397			278,631			280,364			282,310
Financial Ratios (Annualized)
Return on average total assets		1.04	%		1.11	%		1.12	%		1.18	%		1.26	%
Return on average assets less net unrealized gains on securities		1.06			1.13			1.15			1.20			1.30
Return on average total shareholders’ equity		14.24			14.95			15.13			15.30			15.22
Return on average realized shareholders’ equity		17.06			17.87			18.16			18.74			19.18
Net interest margin		2.98			3.05			3.21			3.26			3.38
Reconcilement of Non-GAAP Measures
Return on average total assets		1.04	%		1.11	%		1.12	%		1.18	%		1.26	%
Impact of excluding net unrealized securities gains		0.02			0.02			0.03			0.02			0.04
Return on average assets less net unrealized gains on securities		1.06			1.13			1.15			1.20			1.30
Return on average total shareholders’ equity		14.24			14.95			15.13			15.30			15.22
Impact of excluding net unrealized securities gains		2.82			2.92			3.03			3.44			3.96
Return on average realized shareholders’ equity		17.06			17.87			18.16			18.74			19.18
Net interest income	$	832.8		$	799.5		$	822.5		$	827.1		$	805.1
FTE Adjustment		11.6			10.9			10.5			10.2			10.0
Net interest income - FTE	$	844.4		$	810.4		$	833.0		$	837.3		$	815.1

24

Consolidated Daily Average Balances, Income/Expense

and Average Yields Earned and Rates Paid

(Dollars in millions; yields on taxable-equivalent basis) (Unaudited)

	Quarter Ended
	September 30, 2003							June 30, 2003
	Average Balances			Income/ Expense		Yields/ Rates		Average Balances			Income/ Expense		Yields/ Rates
Assets
Loans:1
Taxable	$	75,961.3		$	876.8	4.58	%	$	72,708.3		$	889.9	4.91	%
Tax-exempt2		1,771.9			20.5	4.60			1,603.2			19.2	4.80
Total loans		77,733.2			897.3	4.58			74,311.5			909.1	4.91
Securities available for sale:
Taxable		20,261.1			142.1	2.81			20,276.8			152.1	3.00
Tax-exempt2		362.0			5.8	6.38			381.4			6.2	6.53
Total securities available for sale		20,623.1			147.9	2.87			20,658.2			158.3	3.07
Funds sold and securities purchased under agreements to resell		1,420.5			3.4	0.97			1,476.2			4.3	1.17
Loans held for sale		10,833.0			136.6	5.04			8,255.4			108.4	5.25
Interest-bearing deposits		6.6			0.1	2.22			10.7			0.1	1.27
Trading assets		1,712.2			4.0	0.92			1,894.4			4.7	0.99
Total earning assets		112,328.6			1,189.3	4.20			106,606.4			1,184.9	4.46
Allowance for loan losses		(954.8	)						(952.0	)
Cash and due from banks		3,459.8							3,300.5
Premises and equipment		1,578.3							1,582.1
Other assets		7,888.0							6,617.6
Unrealized gains on securities available for sale		2,401.9							2,293.4
Total assets	$	126,701.8						$	119,448.0
Liabilities and Shareholders’ Equity
Interest-bearing deposits:
NOW accounts	$	11,792.8		$	11.1	0.37	%	$	11,576.8		$	13.6	0.47	%
Money Market accounts		22,452.7			43.8	0.77			22,284.1			57.0	1.03
Savings		6,315.7			10.5	0.66			6,253.3			12.7	0.82
Consumer time		7,837.4			47.2	2.39			8,039.4			51.7	2.58
Other time		3,506.1			20.2	2.28			3,395.4			23.1	2.73
Total interest-bearing consumer and commercial deposits		51,904.7			132.8	1.02			51,549.0			158.1	1.23
Brokered deposits		3,410.6			24.5	2.82			3,573.5			30.7	3.40
Foreign deposits		7,110.5			18.0	0.99			7,133.7			22.2	1.23
Total interest-bearing deposits		62,425.8			175.3	1.11			62,256.2			211.0	1.36
Funds purchased and securities sold under agreements to repurchase		11,852.5			23.8	0.79			11,694.4			29.8	1.01
Other short-term borrowings		3,696.7			14.9	1.59			603.2			1.8	1.17
Long-term debt		12,488.7			130.9	4.16			11,860.1			131.9	4.46
Total interest-bearing liabilities		90,463.7			344.9	1.51			86,413.9			374.5	1.74
Noninterest-bearing deposits		18,946.8							17,548.1
Other liabilities		8,054.5							6,621.9
Realized shareholders’ equity		7,710.4							7,413.7
Accumulated other comprehensive income		1,526.4							1,450.4
Total liabilities and shareholders’ equity	$	126,701.8						$	119,448.0
Interest rate spread						2.69	%						2.72	%
Net Interest Income				$	844.4						$	810.4
Net Interest Margin3						2.98	%						3.05	%

¹ Interest income includes net loan fees of $29.1, $30.1 and $29.3 million in the quarters ended September 30 and June 30, 2003 and September 30, 2002, respectively, and $90.8 and $90.5 million for the nine months ended September 30, 2003 and 2002, respectively. Nonaccrual loans are included in average balances and income on such loans, if recognized, is recorded on a cash basis.

² Interest income includes the effects of taxable-equivalent adjustments (reduced by the nondeductible portion of interest expense) using a federal income tax rate of 35% and, where applicable, state income taxes, to increase tax-exempt interest income to a taxable-equivalent basis. The net taxable-equivalent adjustment amounts included in the above table were $11.6, $10.9 and $10.0 million in the quarters ended September 30 and June 30, 2003 and September 30, 2002, respectively, and $33.0 and $29.3 million for the nine months ended September 30, 2003 and 2002, respectively.

25

Table 2

Quarter Ended					Nine Months Ended
September 30, 2002					September 30, 2003							September 30, 2002
Average Balances	Income/ Expense		Yields/ Rates		Average Balances			Income/ Expense		Yields/ Rates		Average Balances			Income/ Expense		Yields Rates
$70,399.5	$	984.6	5.55	%	$	73,440.4		$	2,669.4	4.86	%	$	69,544.1		$	2,959.7	5.69	%
1,296.1		17.8	5.44			1,608.2			58.2	4.84			1,255.0			52.7	5.61
71,695.6		1,002.4	5.55			75,048.6			2,727.6	4.86			70,799.1			3,012.4	5.69
16,163.8		193.1	4.78			20,363.0			475.5	3.11			16,215.9			625.2	5.14
396.2		6.8	6.86			377.7			18.4	6.50			411.3			21.3	6.91
16,560.0		199.9	4.83			20,740.7			493.9	3.17			16,627.2			646.5	5.18
1,439.5		6.6	1.80			1,456.4			12.5	1.13			1,357.6			18.5	1.79
3,858.1		63.1	6.54			9,054.6			356.1	5.24			3,798.2			188.1	6.60
377.5		1.7	1.83			9.6			0.1	1.45			353.1			4.7	1.80
1,631.5		7.0	1.69			1,777.4			12.7	0.96			1,573.8			19.3	1.64
95,562.2		1,280.7	5.32			108,087.3			3,602.9	4.46			94,509.0			3,889.5	5.50
(935.1)						(949.6	)						(922.3	)
3,255.9						3,411.9							3,270.6
1,631.3						1,587.8							1,622.6
5,427.5						7,032.8							5,117.2
2,904.1						2,336.0							2,792.1
$107,845.9					$	121,506.2						$	106,389.2
$10,431.6	$	19.0	0.72	%	$	11,567.1		$	39.5	0.46	%	$	10,080.6		$	55.9	0.74	%
20,843.0		83.0	1.58			22,199.8			161.2	0.97			20,140.5			251.2	1.67
6,301.3		20.6	1.30			6,262.9			37.2	0.79			6,336.8			67.4	1.42
9,481.9		85.3	3.57			8,101.8			159.9	2.64			9,403.5			268.9	3.82
3,846.4		24.3	2.51			3,448.2			59.2	2.30			3,715.2			80.0	2.88
50,904.2		232.2	1.81			51,579.8			457.0	1.18			49,676.6			723.4	1.95
2,394.8		29.9	4.89			3,631.0			89.3	3.24			2,477.9			99.3	5.28
2,561.9		11.3	1.73			6,905.6			60.2	1.15			2,710.0			35.3	1.72
55,860.9		273.4	1.94			62,116.4			606.5	1.31			54,864.5			858.0	2.09
9,597.1		34.2	1.40			12,061.0			86.1	0.94			9,834.0			103.9	1.39
867.0		3.5	1.59			1,693.2			18.7	1.48			970.5			11.6	1.60
11,950.0		154.5	5.13			12,046.5			403.8	4.48			12,036.5			470.1	5.22
78,275.0		465.6	2.36			87,917.1			1,115.1	1.70			77,705.5			1,443.6	2.48
15,237.1						17,571.0							14,944.2
5,390.5						7,054.0							5,046.7
7,095.9						7,483.8							6,910.4
1,847.4						1,480.3							1,782.4
$107,845.9					$	121,506.2						$	106,389.2
			2.96	%						2.76	%						3.02	%
	$	815.1						$	2,487.8						$	2,445.9
			3.38	%						3.08	%						3.46	%

³ Derivative instruments used to help manage SunTrust’s interest-sensitivity position increased net interest income $25.0 and $10.6 million and decreased net interest income $11.5 million in the quarters ended September 30 and June 30, 2003 and September 30, 2002, respectively, and increased net interest income $35.0 million and decreased net interest income $44.5 million for the nine months ended September 30, 2003 and 2002, respectively.

26

Business Segments.Prior to 2001, the Company’s segment disclosures were aligned with its geographic regions as defined by its former multiple bank charters. During 2000, as a result of the consolidation of its multiple bank charters into a single legal entity, the Company began to redefine its operating model and created a line of business management structure to overlay its former multiple bank management structure. In January 2001, the Company began implementing significant changes to its internal management reporting system to measure and manage certain business activities by line of business. For more financial details on business segment disclosures, please see Note 8 - Business Segment Reporting in the Notes to the Financial Statements. The lines of business are defined as follows:

Retail

The Retail line of business includes loans, deposits, and other fee based services for consumer and private banking clients, as well as business clients with less than $5 million in sales. Retail serves clients through an extensive network of traditional and in-store branches, ATMs, the Internet (www.SunTrust.com) and the telephone (1-800-SUNTRUST). In addition to serving the retail market, the Retail line of business serves as an entry point for other lines of business. When client needs change and expand, Retail refers clients to the Private Client Services, Mortgage and Commercial lines of business.

Commercial

The Commercial line of business provides enterprises with a full array of financial solutions including traditional commercial lending, treasury management, financial risk management products and corporate card services. The primary customer segments served by this line of business include “Commercial” ($5 million to $50 million in annual revenues), “Middle Market” ($50 million to $250 million in annual revenues), “Commercial Real Estate” (entities that specialize in Commercial Real Estate activities), and “Government/Not-for-Profit” entities. Also included in this segment are specialty groups that operate both within and outside of the SunTrust footprint such as Affordable Housing (tax credits related to community development) and Premium Assignment Corporation (insurance premium financing).

Corporate and Investment Banking

Corporate and Investment Banking (“CIB”) is comprised of the following businesses: corporate banking, investment banking, capital market businesses, commercial leasing, receivables capital management and merchant banking. The corporate banking strategy is focused on companies with sales in excess of $250 million and is organized along industry specialty and geographic lines, providing along with credit, a full array of traditional bank services, capital markets capabilities, and investment banking. The investment banking strategy is focused on small and mid cap growth companies and is organized along industry specialty lines, raising public and private equity and providing merger and acquisition advisory services. The debt and equity capital markets businesses support both the corporate banking and investment banking relationships as well as the smaller commercial clients who are covered by our Commercial line of business and wealthy individuals who are served by our PCS line of business. Our equity research coverage universe includes companies from all of the client bases mentioned above. Commercial leasing provides equipment leasing and finance primarily to corporate and commercial clients of SunTrust. Receivables Capital Management provides traditional factoring services as well as other value-added receivables management services.

Private Client Services

Private Client Services (“PCS”) provides a full array of wealth management products and professional services to both individual and institutional clients. PCS’ primary segments include brokerage, individual

27

wealth management, and institutional investment management and administration. SunTrust Securities, Inc. operates across the Company’s footprint and offers discount/online and full service brokerage services to individual clients. Alexander Key offers full service brokerage services to affluent and wealthy clients who generally do not have a pre-existing relationship with the Company. Alexander Key is currently located in Atlanta, Nashville, Washington D.C., Jacksonville, Orlando, and Richmond with plans to expand into additional high opportunity markets. PCS also offers professional investment management and trust services to clients seeking active management of their financial resources. The ultra high net worth segment of these clients is serviced by Asset Management Advisors (“AMA”). AMA provides “family office” services to high net worth clients. Acting in this capacity, AMA investment professionals utilize sophisticated financial products and wealth management tools to provide a holistic approach to multi-generational wealth management. AMA is currently located in Atlanta, Orlando, West Palm Beach, Washington D.C., and Greenwich, Connecticut. Institutional investment management and administration is comprised of Trusco Capital Management, Inc. (“Trusco”), Retirement Services, Endowment & Foundation Services, Corporate Trust, and Stock Transfer. Retirement Services provides administration and custody services for 401(k) and employee defined benefit plans. Endowment & Foundation Services provides administration and custody services to non-profit organizations, including government agencies, colleges and universities, community charities and foundations, and hospitals. Corporate Trust targets issuers of tax-exempt and corporate debt and asset-based securities, as well as corporations and attorneys requiring escrow and custodial services. Trusco is a registered investment advisor that acts as the investment manager for PCS’ clients and the STI Classic Funds.

Mortgage

The Mortgage line of business originates mortgage loans through retail, broker and correspondent channels. These loans are securitized and sold in the secondary market with servicing rights retained or held in the Company’s residential loan portfolio. The line of business services loans for its own residential mortgage portfolio as well as for others.

Corporate/Other

Corporate/Other (“Other”) includes the investment securities portfolio, long-term debt, capital, derivative instruments, short-term liquidity and funding activities, balance sheet risk management, office premises and certain support activities not currently allocated to the aforementioned lines of business. The major components of the Other line of business include Enterprise Information Services, which is the primary data processing and operations group; the Corporate Real Estate group, which manages the company’s facilities; Marketing, which handles advertising, product management and customer information functions; SunTrust Online, which handles customer phone inquiries and phone sales and manages the internet banking function; Human Resources, which includes the recruiting, training and employee benefit administration functions; Finance, which includes accounting, budgeting, planning, tax and treasury. Other functions included in the Other line of business are credit risk management, credit review, audit, internal control, legal and compliance, branch operations, corporate strategies development and the executive management group. The Other line of business also contains certain expenses that have not been allocated to the primary lines of business, eliminations, and the residual offsets derived from matched-maturity funds transfer pricing and provision for loan losses/credit risk premium allocations.

28

The following table for SunTrust’s reportable business segments compares total contribution before taxes for the three and nine months ended September 30, 2003 to the same period last year:

Total Contribution Before Taxes				Table 3
(Dollars in thousands) (Unaudited)
	Three Months Ended
	September 30, 2003			September 30, 2002
Retail	$	174,575		$	184,348
Commercial		122,493			107,112
Corporate and Investment Banking		83,924			64,278
Mortgage		66,215			28,626
Private Client Services		41,804			54,864
Corporate/Other		(9,809	)		49,931
	Nine Months Ended
	September 30, 2003			September 30, 2002
Retail	$	454,837		$	529,430
Commercial		355,301			298,869
Corporate and Investment Banking		250,800			139,309
Mortgage		192,421			106,650
Private Client Services		134,663			154,876
Corporate/Other		59,637			201,554

The following table for SunTrust’s reportable business segments compares average loans and average deposits for the three and nine months ended September 30, 2003 to the same period last year:

Table 4

(Dollars in thousands) (Unaudited)

	Three Months Ended
	September 30, 2003				September 30, 2002
Lines of Business	Average loans		Average deposits		Average loans		Average deposits
Retail	$	23,803,759	$	53,156,316	$	22,357,863	$	51,900,424
Commercial		21,846,511		10,837,061		19,778,774		8,933,786
Corporate and Investment Banking		16,560,063		2,968,759		15,910,075		2,513,589
Mortgage		13,390,028		2,210,756		12,000,609		1,017,615
Private Client Services		2,117,486		1,533,016		1,604,651		1,507,760
	Nine Months Ended
	September 30, 2003				September 30, 2002
Lines of Business	Average loans		Average deposits		Average loans		Average deposits
Retail	$	23,150,814	$	52,650,817	$	21,379,010	$	51,126,295
Commercial		21,436,820		10,382,092		19,372,431		8,469,548
Corporate and Investment Banking		15,788,263		2,898,492		16,228,828		2,402,131
Mortgage		12,693,520		1,742,986		12,057,847		880,131
Private Client Services		1,953,712		1,487,807		1,566,795		1,529,090

29

The following analysis details the operating results for each line of business for the three and nine months ended September 30, 2003 and 2002:

Retail

Retail’s contribution before taxes for the nine months ended September 30, 2003 was $454.8 million, declining $74.6 million, or 14.1 %, compared to the same nine months of 2002. The year to date decrease in the contribution before taxes was primarily attributable to a decrease in net interest income. Net interest income for deposits declined as the lower interest rate environment depressed funds transfer credit rates on deposits. Deposit margin compression, or the inability to reduce interest rates paid on deposits as much as the drop in the funds transfer pricing credit, also contributed to the decline in net interest income. Lower noninterest expense and higher noninterest income partially offset the impact of the lower net interest income. Expense reduction programs succeeded in cutting noninterest expenses $3.9 million, or 0.4%, on a year to date basis. Noninterest income increased $17.7 million, or 3.3%, compared to the nine months ended September 30, 2002.

Contribution before taxes for the third quarter of 2003 declined $9.8 million, or 5.3%, compared to the third quarter of 2002. The decline was attributable to a $13.5 million, or 4.4%, increase in noninterest expense over the third quarter of 2002, which was partially offset by an increase of $4.4 million, or 2.4%, in noninterest income when compared to the third quarter of 2002.

Balance sheet growth continued with average loan growth of $1.8 billion, or 8.3%, on a year to date basis. Average loan balances grew $1.4 billion, or 6.5%, compared to the third quarter of 2002. Average deposit balances increased $1.5 billion, or 3.0%, on a year to date basis and $1.3 billion, or 2.4%, compared to the third quarter of 2002. The Lighthouse acquisition did not have a material impact on the balance sheet growth.

Commercial

The Commercial line of business’ contribution before taxes for the third quarter of 2003 was $122.5 million, an increase of $15.4 million, or 14.4%, compared to the third quarter of 2002. Contribution before taxes for the nine months ended September 30, 2003 was $355.3 million, an increase of $56.4 million, or 18.9%, compared to the same nine months of 2002. The growth for both periods was driven by a combination of increased net interest income on loans and higher noninterest income.

Net interest income increased $36.6 million, or 9.3%, for the comparable nine month periods, driven by a $2.1 billion, or 10.7%, increase in average loans. Deposit volumes also increased $1.9 billion, or 22.6%, on a year to date basis. Increased loan volumes were largely the result of robust sales while higher deposit volume resulted primarily from increased market liquidity. SunTrust’s acquisition of Lighthouse Financial Services resulted in comparable year to date and quarter to quarter loan growth of $205 million, or 1.1%, and $430 million, or 2.2%, respectively. Net interest income for the third quarter of 2003 increased $17.0 million, or 12.7%, compared to the third quarter of 2002 driven by greater volumes.

Total noninterest income increased $50.1 million, or 29.0%, for the comparable nine month periods. The consolidation of SunTrust’s affordable housing partnerships resulted in $16.6 million, or 33.1%, of this growth. Remaining noninterest income growth resulted from increased deposit service charges, credit card income and loan fees. Third quarter 2002 to third quarter 2003 growth was $33.9 million, or 63.2%, and the consolidation of the affordable housing partnerships accounted for 49.0% of the increase.

30

Total noninterest expense increased $22.4 million, or 9.3%, for the comparable nine month periods. Compared to the third quarter of 2002, noninterest expense increased $30.4 million, or 41.4%. The consolidation of SunTrust’s affordable housing partnerships resulted in $14.1 million of noninterest expense in the third quarter of 2003 and is the primary reason for the year and quarter to date increases.

Corporate and Investment Banking

Corporate and Investment Banking’s contribution before taxes increased $111.5 million, or 80.0%, for the nine months ended September 30, 2003 compared to the same period in 2002. The biggest factor in the improvement was an $85.9 million decrease in the provision for loan losses. The decline was primarily due to $74.9 million in charge-offs related to the bankruptcy of a large corporate energy company in the first nine months of 2002. The remaining $25.6 million was primarily due to improvements of $14.7 million in noninterest income and $12.1 million in noninterest expense.

Corporate and Investment Banking’s contribution before taxes increased $19.6 million, or 30.6%, for the quarter ended September 30, 2003, compared to the same quarter of 2002. The provision for loan losses decreased $13.7 million, net interest income increased $9.9 million, and noninterest income increased $6.5 million. These improvements were partially offset by an increase of $10.4 million in noninterest expense, the bulk of which were primarily personnel related.

To comply with FIN 46, Three Pillars Funding Corp., a multi-seller commercial paper conduit with approximately $2.9 billion in assets, was consolidated in the third quarter of 2003. Excluding the effect of this consolidation, average loans declined approximately $1.1 billion, or 6.8%, on a comparable year-to-date basis. Loan demand continues to be soft primarily due to refinancings in the public markets as customers restructure their balance sheets, taking advantage of historic low interest rates. Average deposit balances increased $496.4 million, or 20.7%, benefiting primarily from increased liquidity in the market place. Noninterest income increased 3.7%, benefiting largely from the restructurings, particularly with debt capital markets products. The 4.2% decline in noninterest expense is due to the continued aggressive management of these expenses in a difficult operating environment and the realization of benefits from prior cost reduction strategies.

Private Client Services

Private Client Services’ contribution before taxes decreased $13.1 million, or 23.8%, for the quarter ended September 30, 2003 and $20.2 million, or 13.1%, for the nine months ended September 30, 2003 compared to the same periods of 2002.

Total noninterest income increased $8.9 million, or 5.7%, for the quarter ended September 30, 2003 and $6.1 million, or 1.3%, for the nine months ended September 30, 2003 compared to the same periods of 2002.

Trust and investment management income increased $3.9 million, or 3.2%, compared to the third quarter of 2002 and decreased $12.3 million, or 3.2%, compared to the nine months ended September 30, 2002. As of September 30, 2003 and 2002, assets under management were approximately $97.8 billion and $88.3 billion, respectively. Assets under management increased 10.8% due to an appreciation in the financial markets and net new business. Lost business was slightly improved compared to prior periods, while new business maintained its momentum. Average assets under management for the quarters ended September 30, 2003 and 2002 were approximately $97 billion and $91 billion, respectively, and approximately $94 billion and $93 billion for the nine months ended September 30, 2003 and 2002, respectively. The growth in trust and investment management income was reduced by less non-recurring revenue, primarily related to estate fees. Assets under management include individually managed assets, the STI Classic Funds, institutional assets managed by Trusco Capital Management, and participant-directed retirement accounts. SunTrust’s total

31

assets under advisement were approximately $172 billion, which included $22 billion in non-managed corporate trust assets, $32 billion in non-managed trust assets, and $20 billion in retail brokerage assets. The retail brokerage accounts include $2 billion related to Alexander Key.

Retail investment income increased $3.2 million, or 9.2%, compared to the third quarter of 2002 and $13.5 million, or 13.4%, compared to the nine months ended September 30, 2002. The increase in retail investment income was primarily due to an increase in broker production, the number of brokers, and increased revenue generated from Alexander Key. Retail investment sales increased 11.9% and 18.2%, respectively, compared to the third quarter and nine months ended September 30, 2002. This increase was greater than the increase in retail investment income due to fee based products that are sensitive to market volatility. As of September 30, 2003, brokerage assets increased 28.7% compared to September 30, 2002.

The remainder of the increase in total revenue was attributable to increases in net interest income, insurance, income, and other miscellaneous income. The increase in net interest income was primarily attributable to a 24.7% increase in average loans on a year to date basis.

Noninterest expense increased $23.8 million, or 21.5%, for the quarter ended September 30, 2003 and $27.7 million, or 7.8%, for the nine months ended September 30, 2003 compared to the same periods of 2002. The expense increases were primarily due to additional personnel and occupancy expense associated with PCS’ business-related investments. PCS continues to invest in the core business, new product capabilities, and new distribution channels and has partially offset these costs with various efficiency initiatives.

Mortgage

The Mortgage line of business’ contribution before taxes of $192.4 million for the nine months ended September 30, 2003, was up 80.4% over the same period of 2002. Contribution before taxes for third quarter of 2003 of $66.2 million was more than double the third quarter of 2002. Net interest income of $416.2 million and $161.1 million for the nine months and third quarter of 2003 was up 58.6% and 95.8%, respectively. Higher income from mortgage loans held for sale was the primary driver of the increase in net interest income. Noninterest income for the first nine months of 2003 was $6.1 million compared with $9.0 million in the same period of 2002. Third quarter of 2003 noninterest income was down $3.3 million from the third quarter of 2002. For both periods, higher income from record production was more than offset by lower servicing income, primarily due to higher mortgage servicing rights amortization expense that resulted from high loan prepayments. Noninterest expense for the first nine months of 2003 was $65.0 million higher than 2002 and $37.8 million higher in third quarter 2003 when compared with third quarter 2003, primarily due to increases in volume-related expenses.

Average total assets increased $4.1 billion and $6.8 billion for the nine months and quarter ended September 30, 2003, respectively. Mortgage loans held for sale was the primary driver of the growth. Average total liabilities were up $751.2 million over prior year to date and up $1.2 billion over third quarter 2002. Growth in deposits from higher loan payout levels was the principal reason. Loan production was $37.4 billion and $13.8 billion for the 2003 year to date and third quarter 2003 periods, respectively. This compared with $19.5 billion and $8.1 billion for the 2002 year to date and quarterly periods. Total loans serviced were $67.7 billion and $53.4 billion at September 30, 2003 and September 30, 2002, respectively.

Corporate/Other

The Corporate/Other line of business’ contribution before taxes decreased from $49.9 million for the third quarter of 2002 to a loss of $9.8 million for the third quarter of 2003. For the nine months ended September 30, 2003 compared to the same period in 2002, contribution before taxes declined $141.9 million, or 70.4%.

32

Net interest income decreased $90.1 million and $90.5 million for the third quarter and nine months ended September 30, 2003, respectively, compared to the same periods of 2002. The primary causes were lower interest rates compressing the margin earned on liabilities and capital and lower margins earned on the investment portfolio.

Noninterest income decreased from $36.6 million in the third quarter of 2002 to $11.7 million in the third quarter of 2003. For the nine months ended September 30, 2003 compared to the same period of 2002, noninterest income declined $107.9 million, or 71.2%. The decline for both periods was the result of higher transfers to the Commercial line of business for tax credits generated by SunTrust’s affordable housing businesses and lower securities gains.

Noninterest expense decreased $32.3 million in the third quarter of 2003 compared to the same quarter in the prior year. The decrease was primarily the result of lower salaries, incentives and employee benefit expenses and a higher recovery of occupancy expense from expense allocations. For the nine months ended September 30, 2003 compared to the same period of 2002, noninterest expense grew 8.8%, from $382.4 million to $416.0 million. This increase was primarily caused by increased employee benefit expense for pension and medical insurance and increased advertising expense.

Average total assets increased $4.2 billion, or 20.1%, in the third quarter of 2003 compared to the third quarter of 2002, and $4.8 billion, or 23.1%, on a year to date basis. The growth was primarily the result of an increase in the investment portfolio. Average total liabilities increased $8.7 billion, or 30.3%, compared to the third quarter of 2002 and $7.7 billion, or 26.4%, on a year to date basis. This rise was primarily fueled by growth in foreign and brokered deposits.

Market Risk Management.Market risk refers to potential losses arising from changes in interest rates, foreign exchange rates, equity prices, commodity prices and other relevant market rates or prices. Interest rate risk, defined as the exposure of net interest income and Economic Value of Equity (“EVE”) to adverse movements in interest rates, is SunTrust’s primary market risk, and mainly arises from the structure of the balance sheet (non-trading activities). SunTrust is also exposed to market risk in its trading activities, mortgage servicing rights, mortgage warehouse and pipeline, and equity holdings of The Coca-Cola Company common stock. The Asset/Liability Management Committee (“ALCO”) meets regularly and is responsible for reviewing the interest-rate sensitivity position of the Company and establishing policies to monitor and limit exposure to interest rate risk. The policies established by ALCO are reviewed and approved by the Company’s Board of Directors.

Market Risk from Non-Trading Activities

The primary goal of interest rate risk management is to control exposure to interest rate risk, both within policy limits approved by ALCO and the Board and within narrower guidelines established by ALCO. These limits and guidelines reflect SunTrust’s tolerance for interest rate risk over both short-term and long-term horizons.

The major sources of the Company’s non-trading interest rate risk are timing differences in the maturity and repricing characteristics of assets and liabilities, changes in relationships between rate indices (basis risk), changes in the shape of the yield curve, and the potential exercise of explicit or embedded options. SunTrust measures these risks and their impact by identifying and quantifying exposures through use of sophisticated simulation and valuation models, as well as duration gap analysis.

The primary method that SunTrust uses to quantify and manage interest rate risk is simulation analysis, which is used to model net interest income from assets, liabilities, and derivative positions over a specified time period under various interest rate scenarios and balance sheet structures. This analysis measures the

33

sensitivity of net interest income over a relatively short time horizon (two years). Key assumptions in the simulation analysis (and in the valuation analysis discussed below) relate to the behavior of interest rates and spreads, the changes in product balances and the behavior of loan and deposit customers in different rate environments. Material assumptions include the repricing characteristics and balance fluctuations of indeterminate, or non-contractual, deposits.

As the future path of interest rates cannot be known in advance, management uses simulation analysis to project net interest income under various interest rate scenarios including expected, or “most likely”, as well as deliberately extreme and perhaps unlikely scenarios. The analyses may include rapid ramping of interest rates, gradual ramping of interest rates, spread narrowing and widening, and yield curve twists. Usually, each analysis incorporates what management believes to be the most appropriate assumptions about customer behavior in an interest rate scenario, but in some analyses, assumptions are deliberately changed to test the Company’s exposure to a specified event or set of events. Specific strategies are also analyzed to determine their impact on net interest income levels and sensitivities.

The following table reflects the estimated change in net interest income as a percent of net interest income forecasted under stable rates for the next twelve months due to a gradual change in interest rates (25 bps per quarter). Rates are ramped down only 75 basis points due to the absolute low level of rates. The Fed Funds rate declined to 1.00% in late June 2003 and for net interest income simulation purposes taking the Fed Funds rate to 0.00% would be a low probability. Estimated changes set forth below are dependent on material assumptions such as those previously discussed.

Rate Change (Basis Points)	Estimated % Change in Net Interest Income Over 12 Months
	September 30, 2003	June 30, 2003
+ 100	0.3%	0.4%
- 75	-0.7%	-0.8%

As indicated, a gradual decrease in interest rates would reduce net interest income, but by an amount that is within the policy limits. A gradual increase would tend to enhance net interest income. Thus, the Company’s interest rate sensitivity position is modestly asset-sensitive. While simulations of more rapid changes in interest rates indicate more adverse changes in net interest income, the Company is still within the policy limits.

SunTrust also performs valuation analysis, which is used for discerning levels of risk present in the balance sheet and derivative positions that might not be taken into account in the net interest income simulation analysis. Whereas net interest income simulation highlights exposures over a relatively short time horizon, valuation analysis incorporates all cash flows over the estimated remaining life of all balance sheet and derivative positions. The valuation of the balance sheet, at a point in time, is defined as the discounted present value of asset cash flows and derivative cash flows minus the discounted value of liability cash flows, the net of which is referred to as the EVE. The sensitivity of EVE to changes in the level of interest rates is a measure of the longer-term repricing risk and options risk embedded in the balance sheet. In contrast to the net interest income simulation, which assumes interest rates will change over a period of time (ramp), EVE uses instantaneous changes in rates (shock). EVE values only the current balance sheet, and does not incorporate the growth assumptions that are used in the net interest income simulation model. As with the net interest income simulation model, assumptions about the timing and variability of balance sheet cash flows are critical in the EVE analysis. Particularly important are the assumptions driving prepayments and the expected changes in balances and pricing of the indeterminate deposit portfolios. As of September

34

30, 2003, an instantaneous 100 basis point increase in rates is estimated to increase EVE 3.3% versus EVE in a stable rate environment. An instantaneous 100 basis point decrease in rates is estimated to decrease EVE 5.3% versus EVE in a stable rate environment. These changes are within the established policy limits.

While an instantaneous and severe shift in interest rates is used in this analysis to provide an estimate of exposure under an extremely adverse scenario, management believes that a gradual shift in interest rates would have a much more modest impact. Since EVE measures the discounted present value of cash flows over the estimated lives of instruments, the change in EVE does not directly correlate to the degree that earnings would be impacted over a shorter time horizon (i.e., the current fiscal year). Further, EVE does not take into account factors such as future balance sheet growth, changes in product mix, changes in yield curve relationships, and changing product spreads that could mitigate the adverse impact of changes in interest rates.

The net interest income simulation and valuation analyses (EVE) do not necessarily include certain actions that management may undertake to manage this risk in response to anticipated changes in interest rates.

Trading Activities

Most of the Company’s trading activities are designed to provide capital markets services to customers and not to position the Company’s portfolio for gains from market movements. In order to accommodate customers, an inventory of securities is carried and access to market liquidity is maintained by making bid-offer prices to other market makers. Trading activities are confined to financial instruments and derivatives. The Company participates in derivatives and foreign exchange trading, as well as underwriting and market making in equity securities as an accommodation to customers. Cash instruments are bought and sold to satisfy customer investment needs. Derivative contracts are initially entered into to meet the customer risk management needs. The Company enters into subsequent transactions to manage the level of risk in accordance with approved limits.

The Company has developed policies and procedures to manage market risk associated with trading, capital markets and foreign exchange activities using a value-at-risk (“VaR”) approach that combines interest rate risk, equity risk, foreign exchange risk, spread risk and volatility risk. For trading portfolios, VaR measures the maximum fair value the Company could lose on a trading position, given a specified confidence level and time horizon. VaR limits and exposures are monitored daily for each significant trading portfolio. The Company’s VaR calculation measures the potential losses in fair value using a 99% confidence level. This equates to 2.33 standard deviations from the mean under a normal distribution. This means that, on average, daily profits and losses are expected to exceed VaR one out of every 100 overnight trading days. The VaR methodology includes holding periods for each position based upon an assessment of relative trading market liquidity. For the Foreign Exchange and Derivatives desks, the Company estimates VaR by applying the Monte Carlo simulation platform as designed by RiskMetrics^™, and for the estimate of the Fixed Income and Equity desks’ VaR, the Company uses Bloomberg^™ analytics. The Company uses internally developed methodology to estimate VaR for the Credit Derivatives and Loan Trading Desks.

The estimated combined period-end Undiversified VaR (Undiversified VaR represents a simple summation of the VaR calculated across each Desk) was $1.5 million at September 30, 2003 and $1.4 million at December 31, 2002. The trading account net asset balance was $1.0 billion as of September 30, 2003 and $787.1 million as of December 31, 2002.

Other Market Risk

Other sources of market risk include MSRs and the risk associated with holding mortgage loans prior to selling them (mortgage warehouse) into the secondary market, and commitments to customers to make

35

mortgage loans (mortgage pipeline) that will be sold to the secondary market. The value of the MSRs asset is dependent upon the assumed prepayment speed of the mortgage portfolio. Future expected net cash flows from servicing a loan in the servicing portfolio would not be realized if the loan pays off earlier than anticipated. MSRs are the discounted present value of future net cash flows that are expected to be received from the servicing portfolio. Accordingly, prepayment risk subjects the MSRs to impairment risk. The Company does not specifically hedge the MSRs asset for the potential impairment risk; it does however employ a balanced business strategy using the natural counter-cyclicality of servicing and production to mitigate impairment risk.

The Company hedges the risks associated with the mortgage warehouse and pipeline. The mortgage warehouse and pipeline consist primarily of fixed and adjustable-rate single family residential real estate loans. The risk associated with the mortgage warehouse and pipeline is the potential change in interest rates between the time the customer locks in the rate on the loan and the time the loan is sold. This period is usually 90-150 days. To hedge this risk, forward sales agreements and option contracts are executed. The Company has set exposure limits on the risk associated with the changes in market value of the mortgage warehouse and pipeline. The limit is based on a percentage of the aggregate mortgage warehouse and pipeline for price movements within two standard deviations.

The Company is also subject to risk from changes in equity prices that arise from owning The Coca-Cola Company common stock. SunTrust owns 48,266,496 shares of common stock of The Coca-Cola Company, which had a carrying value of $2.1 billion at September 30, 2003. A 10% decrease in share price of The Coca-Cola Company common stock at September 30, 2003 would result in a decrease, net of deferred taxes, of approximately $135 million in accumulated other comprehensive income.

Net Interest Income/Margin.Net interest income for the first nine months of 2003 was $2,487.8 million, an increase of $41.9 million or 1.7% from the first nine months of 2002. Net interest income was $844.4 million for the third quarter of 2003, an increase of $29.3 million or 3.6%, from the prior year. For the nine month period and for the third quarter 2003, the benefit from higher balance sheet volumes more than offset the adverse impact of the lower rate environment on net interest income.

The net interest margin declined 38 basis points and 40 basis points, respectively, from 3.46% in the first nine months of 2002 to 3.08% in the first nine months of 2003 and from 3.38% in the third quarter of 2002 to 2.98% in the third quarter of 2003. The Company consolidated “Three Pillars Funding Corp.”, a multi-seller commercial paper conduit, to comply with FIN 46 in July 2003. This consolidation accounted for 2 basis points and 6 basis points of the net interest margin change for the first nine months and the third quarter of 2003 compared to the same periods last year. In addition to the consolidation of Three Pillars, SunTrust consolidated its affordable housing partnerships, which had minimal impact on net interest margin for the first nine months of 2003 and a negative 2 basis point impact on net interest margin for the third quarter of 2003. The earning asset yield for the first nine months and third quarter of 2003 declined 104 basis points and 112 basis points, respectively, from the first nine months and third quarter of 2002. For the first nine months and third quarter of 2003, loan yields decreased 83 basis points and 97 basis points and securities available for sale yields declined 201 basis points and 196 basis points, respectively, from the comparable prior year periods. In the first nine months and third quarter of 2003, the total interest-bearing liability costs declined 78 basis points and 85 basis points, respectively, from the first nine months and third quarter of 2002. The larger decrease in earning asset yield versus the decrease in liability cost resulted in the overall net interest margin declining on a quarterly and year to date basis.

The decrease in the margin was due to a number of factors. The shift in the Company’s balance sheet structure in 2001 and 2002 to a slightly asset-sensitive position in anticipation of rising rates has not produced the expected margin benefit since rates did not materially rise until late in the third quarter of 2003. The yield curve remained relatively flat throughout the latter part of 2002 and the first half of 2003,

36

although it has steepened since June 2003. STI prime rate averaged 4.16% for the first nine months and 4.00% for the third quarter of 2003, a decline of approximately 59 basis points from the first nine months of 2002 and 75 basis points below the third quarter of 2002. The Federal Reserve Bank Fed Funds rate averaged 1.16% for the first nine months and 1.00% for the third quarter of 2003, approximately 59 basis points below the first nine months of 2002 and 75 basis points below the third quarter 2002 average. The lower rates and flattening of the yield curve in the latter part of 2002 and the first half of 2003 created an acceleration of prepayments in the mortgage industry. As prepayments accelerated, higher yielding assets were replaced by lower yielding assets, which reduced the yield on the residential mortgage loan and the mortgage-backed securities portfolios. The Company’s repositioning of its investment portfolio during 2001 and 2002 shortened the duration of the portfolio and contributed to the decrease in the portfolio yield. Net free funding sources, comprised of demand deposits, equity and other liabilities, net of other assets, are worth less in a low/declining rate environment, contributing to compression of the net interest margin.

Average earning assets were up 14.4% and 17.5% and average interest-bearing liabilities increased 13.1% and 15.6% for the first nine months and third quarter of 2003, respectively, versus the first nine months and third quarter of 2002. Adjusting for Three Pillars, average earning assets increased 13.5% and 14.9% and interest-bearing liabilities rose 12.0% and 12.4% for the first nine months and third quarter of 2003, respectively. Average loans rose $4.2 billion and $6.0 billion, securities available for sale increased $4.1 billion and $4.1 billion, and loans held for sale increased $5.3 billion and $7.0 billion in the first nine months and third quarter of 2003, respectively. Loans held for sale increased due to increased mortgage refinancing activity.

The Company continues to take steps to obtain alternative lower cost funding sources, such as developing initiatives to grow retail deposits. Campaigns to attract consumer deposits were implemented in 2002 and 2003. The Company believes that deposit growth has also benefited from the volatility in the financial markets. Average money market deposits grew 10.2% and 7.7%, NOW accounts increased 14.7% and 13.0% and demand deposits increased 17.6% and 24.3% in the first nine months and third quarter of 2003, respectively, over the first nine months and third quarter of 2002.

Interest income that the Company was unable to recognize on nonperforming loans had a negative impact of two basis points for the first nine months of 2003 and three basis points for the first nine months of 2002. Table 2 contains more detailed information concerning average loans, yields and rates paid.

Noninterest Income.Noninterest income increased $25.6 million, or 4.7%, from the third quarter of 2002 to the third quarter of 2003 and decreased $22.2 million, or 1.3%, from the first nine months of 2002 to the first nine months of 2003. Positively impacting noninterest income were increases in service charges on deposit accounts, investment banking and trading income, and other charges and fees. Service charges on deposit accounts increased $5.1 million and $21.1 million compared to the third quarter and first nine months of 2002 primarily due to increased NSF/stop payment volumes. Combined trading account profits and commissions and investment banking income, SunTrust’s capital market revenue sources, increased $11.1 million and $15.0 million in the third quarter and first nine months of 2003, respectively, compared to the same periods of the prior year due to strong growth in the debt capital markets. Other charges and fees increased $9.5 million compared to the third quarter of 2002 and $24.4 million year to date due primarily to an increase in insurance revenues and increased letters of credit fees. Additionally, noninterest income increased $16.6 million in the third quarter and year to date as a result of the consolidation of certain affordable housing partnerships.

Negatively impacting noninterest income was combined mortgage production and servicing income declining $6.3 million, or 44.2%, and $15.7 million, or 143.5%, compared to the third quarter and first nine months of 2002, respectively. Record mortgage production for the third quarter of 2003 was more than offset by the decline in mortgage servicing income. Mortgage production for the third quarter and year to

37

date 2003 was $13.8 billion and $37.4 billion compared to $8.1 billion and $19.5 billion for the same periods of 2002. The decline in mortgage servicing income was due to accelerated amortization of mortgage servicing rights resulting from increased prepayments in the low interest rate environment, which existed at the beginning of the third quarter. Long-term rates were in a relatively higher trending range during the second half of the quarter and should result in lower prepayments and MSR amortization in the future. Security gains also declined $14.7 million, or 32.1%, and $60.6 million, or 36.7%, compared to the third quarter and first nine months of 2003, respectively.

Trust and investment management income increased $3.9 million, or 3.2%, compared to the third quarter of 2002 and decreased $12.3 million, or 3.2%, year to date. As of September 30, 2003 and 2002, assets under management were approximately $97.8 billion and $88.3 billion, respectively. Assets under management increased 10.8% due to appreciation in the equity and bond markets and net new business. Lost business was slightly improved compared to prior periods, while new business maintained its momentum. Average assets under management for the three month periods ended September 30, 2003 and 2002 were approximately $97 billion and $91 billion, respectively, and approximately $94 billion and $93 billion for the nine months ended September 30, 2003 and 2002, respectively. The growth in trust and investment management income was offset by less non-recurring revenue, primarily related to estate fees. Assets under management include individually managed assets, the STI Classic Funds, institutional assets managed by Trusco Capital Management, and participant-directed retirement accounts. SunTrust’s total assets under advisement were approximately $172 billion, which included $22 billion in non-managed corporate trust assets, $32 billion in non-managed trust assets, and $20 billion in retail brokerage assets. The retail brokerage accounts include $2 billion related to Alexander Key.

Retail investment income increased $3.6 million, or 10.2%, compared to the third quarter of 2002 and $14.4 million, or 13.9%, year to date. The increase in retail investment income was primarily due to an increase in broker production, the number of brokers, and increased revenue generated from Alexander Key. Retail investment sales increased 11.9% and 18.2%, respectively, compared to the third quarter 2002 and year to date, which was greater than the increase in retail investment income due to fee based products that are sensitive to market volatility. As of September 30, 2003, brokerage assets increased 28.7% compared to September 30, 2002.

In May 2003, Visa agreed to lower the fees they charge retailers for processing certain debit card transactions through year-end 2003. Beginning in August 2003, this lower fee structure will result in a reduction of debit card income recorded by banks. SunTrust expects this agreement will reduce debit card income approximately $1.3 million per month through the remainder of 2003 compared to the same months in 2002. The Company is continuing to assess the impact on periods beyond 2003.

38

Noninterest Income	Table 5
(Dollars in millions) (Unaudited)

	Quarters
	2003									2002
	3			2			1			4			3
Service charges on deposit accounts	$	162.0		$	158.0		$	157.8		$	156.2		$	157.0
Trust and investment management income		127.8			124.2			120.8			119.4			123.9
Retail investment services		38.7			42.0			37.5			33.0			35.1
Other charges and fees		86.1			82.6			78.3			74.3			76.6
Investment banking income		47.7			57.2			33.8			39.5			39.8
Trading account profits and commissions		26.8			29.6			30.8			29.7			23.6
Mortgage production		32.2			82.1			38.8			61.3			22.3
Mortgage servicing		(52.7	)		(80.1	)		(47.0	)		(68.1	)		(36.5	)
Credit card and other fees		29.6			32.4			28.6			29.9			27.4
Securities gains		31.1			31.2			42.0			39.5			45.8
Other income		45.2			37.6			26.2			13.0			33.9
Total noninterest income	$	574.5		$	596.8		$	547.6		$	527.7		$	548.9

Noninterest Expense. Noninterest expense increased $83.7 million, or 10.8%, and $132.8 million, or 5.6%, in the third quarter and first nine months of 2003 compared to the same periods of the prior year. Noninterest expense included $6.1 million and $7.4 million for the third quarter and first nine months of 2003 related to the Lighthouse franchise, which the Company acquired in the second quarter of 2003. Additionally, noninterest expense increased $14.1 million for the third quarter and year to date 2003 as a result of the consolidation of certain affordable housing partnerships, which were consolidated in the third quarter of 2003.

The first nine months of 2002 included $16.0 million of merger related charges for operations and systems integration related to the acquisition of Huntington-Florida. The third quarter and first nine months of 2002 also included One Bank expenses of $18.3 million and $44.5 million. The One Bank initiative was completed in the fourth quarter of 2002.

Personnel expense increased $36.7 million, or 8.4%, from the third quarter of 2002 to the third quarter of 2003 and $66.0 million, or 4.8%, from the first nine months of 2002 to the first nine months of 2003. The increase in personnel expense was mainly attributable to incentive and commission payments related to higher business volumes particularly in the mortgage line of business, which experienced record levels of production. Pension expense increased $12.3 million from the third quarter of 2002 to the third quarter of 2003 and $36.2 million from the first nine months of 2002 to the first nine months of 2003 due to a reduced expected long term rate of return on plan assets and a lower discount rate for measuring pension liabilities.

Marketing and customer development expenses increased $9.3 million, or 59.0%, and $16.3 million, or 27.6%, compared to the third quarter and first nine months of 2002 as the Company continues its aggressive 2003 marketing strategy and sales focus. Campaigns and promotions for 2003 include the Giant Truckload Sale, the Mini Cooper Campaign, and the Company’s new partnership with the Atlanta Falcons.

39

Noninterest Expense	Table 6
(Dollars in millions) (Unaudited)

	Quarters
	2003									2002
	3			2			1			4			3
Salaries	$	262.5		$	261.8		$	272.8		$	270.5		$	276.1
Other compensation		129.2			124.6			102.2			114.7			87.1
Employee benefits		80.4			96.2			98.7			71.0			72.2
Total personnel expense		472.1			482.6			473.7			456.2			435.4
Outside processing and software		65.4			61.0			57.1			57.0			59.9
Net occupancy expense		60.5			58.6			57.7			61.7			57.6
Equipment expense		44.9			44.5			43.5			45.1			42.8
Marketing and customer development		25.0			25.6			24.9			20.8			15.7
Credit and collection services		19.3			19.2			16.1			15.9			14.2
Postage and delivery		17.4			17.1			17.5			18.3			17.0
Amortization of intangible assets		16.2			15.2			16.7			17.5			17.5
Communications		16.1			15.4			14.9			14.1			16.6
Other staff expense		15.0			15.8			10.6			13.8			12.2
Consulting and legal		14.2			14.6			12.7			25.0			21.6
Operating supplies		10.8			8.5			9.7			11.2			10.3
FDIC premiums		4.7			4.8			4.1			4.2			4.4
Other real estate (income) expense		(0.3	)		(0.8	)		—			0.3			(0.1	)
Other expense		78.6			55.6			59.0			75.3			51.0
Total noninterest expense	$	859.9		$	837.7		$	818.2		$	836.4		$	776.1
Efficiency ratio		60.6	%		59.5	%		59.3	%		61.3	%		56.9	%

Provision for Loan Losses and Allowance for Loan Losses.Provision for loan losses totaled $79.8 million in the third quarter of 2003, a decrease of $18.9 million, or 19.1%, from the third quarter of 2002. Net charge-offs for the third quarter of 2003 were $79.3 million, a decline of $19.0 million, or 19.4%, from the same period of the prior year.

Provision for loan losses totaled $243.3 million in the first nine months of 2003, a decrease of $130.0 million, or 34.8%, compared to the same period of 2002. Net charge-offs for the nine months ended September 30, 2003 were $241.3 million, a decrease of $85.3 million, or 26.1%, from the nine months ended September 30, 2002. The decline was due to an $89.9 million reduction in commercial net charge-offs. Commercial charge-offs in the first nine months of 2002 included $74.9 million related to the bankruptcy of a large corporate energy company.

The SunTrust Allowance for Loan Losses Committee meets at least quarterly to affirm the allowance methodology, analyze provision and charge-off trends and assess the appropriateness of the allowance. The allowance analysis is based on accounting and regulatory guidance concerning pooled loans and specifically analyzed loans, along with other internal and external factors that affect credit losses. These other factors consider variables such as the economic environment, concentrations of credit exposure and administrative risks. During the third quarter, SunTrust implemented improved automation tools for several credit data gathering functions. In addition, the Company adjusted its threshold for loans individually reviewed for impairment under SFAS No. 114 and updated its impairment testing template. It also enhanced its economic risk component based on an analysis of observable economic data to historical losses. These revisions did not result in material changes to the overall allowance.

At September 30, 2003, SunTrust’s allowance for loan losses totaled $941.4 million, or 1.19% of total loans, compared to $930.1 million, or 1.27% of total loans at December 31, 2002. The consolidation of Three

40

Pillars reduced the September 30, 2003, allowance to total loan ratio four basis points. The allowance as a percentage of total nonperforming loans increased from 182.0% at December 31, 2002 to 217.6% at September 30, 2003. The allowance as a percentage of annualized quarterly net charge-offs increased from 245.0% at December 31, 2002 to 299.4% at September 30, 2003, due to comparatively lower charge-offs in the first nine months of 2003.

Summary of Loan Loss Experience	Table 7
(Dollars in millions) (Unaudited)

	Quarters
	2003									2002
	3			2			1			4			3
Allowance for Loan Losses
Balances - beginning of quarter	$	940.9		$	931.1		$	930.1		$	929.3		$	928.9
Allowance from acquisitions and other activity - net		—			9.3			—			—			—
Provision for loan losses		79.8			82.7			80.8			96.5			98.7
Charge-offs:
Commercial		(55.5	)		(59.7	)		(50.2	)		(49.8	)		(73.1	)
Real estate:
Construction		—			(0.6	)		(0.1	)		(0.1	)		(0.3	)
Residential mortgages		(5.8	)		(4.4	)		(3.9	)		(7.2	)		(3.7	)
Other		(1.3	)		(1.1	)		(0.2	)		(0.4	)		(1.0	)
Commercial credit card		(0.8	)		(0.7	)		(0.6	)		(0.8	)		(0.3	)
Consumer loans		(40.2	)		(33.8	)		(44.9	)		(56.9	)		(36.1	)
Total charge-offs		(103.6	)		(100.3	)		(99.9	)		(115.2	)		(114.5	)
Recoveries:
Commercial		13.5			7.4			9.1			8.1			6.6
Real estate:
Construction		—			0.2			0.2			0.3			—
Residential mortgages		1.2			1.1			1.3			0.9			1.1
Other		0.7			0.2			0.3			1.5			1.0
Commercial credit card		0.1			0.1			—			0.2			0.2
Consumer loans		8.8			9.1			9.2			8.5			7.3
Total recoveries		24.3			18.1			20.1			19.5			16.2
Net charge-offs		(79.3	)		(82.2	)		(79.8	)		(95.7	)		(98.3	)
Balance - end of quarter	$	941.4		$	940.9		$	931.1		$	930.1		$	929.3
Quarter-end loans outstanding	$	78,788.2		$	75,261.8		$	73,849.8		$	73,167.9		$	72,604.9
Average loans		77,733.2			74,311.5			73,049.8			72,668.8			71,695.6
Allowance to quarter-end loans		1.19	%		1.25	%		1.26	%		1.27	%		1.28	%
Allowance to nonperforming loans		217.6			194.8			179.0			182.0			167.8
Net charge-offs to average loans
(annualized)		0.40			0.44			0.44			0.52			0.54
Recoveries to total charge-offs		23.5			18.0			20.1			16.9			14.2

41

Nonperforming Assets	Table 8
(Dollars in millions) (Unaudited)

	2003									2002
	September 30			June 30			March 31			December 31			September 30
Nonperforming Assets
Nonaccrual loans:
Commercial	$	259.5		$	304.6		$	345.1		$	351.3		$	393.0
Real Estate:
Construction		7.0			8.4			11.9			10.0			11.1
Residential mortgages		79.7			81.3			82.6			82.5			81.1
Other		40.2			47.6			46.2			38.0			42.6
Consumer loans		36.9			38.7			34.3			29.2			26.0
Total nonaccrual loans		423.3			480.6			520.1			511.0			553.8
Restructured loans		9.2			2.5			—			—			—
Total nonperforming loans		432.5			483.1			520.1			511.0			553.8
Other real estate owned (OREO)		19.6			20.9			18.0			18.0			15.0
Other repossessed assets		11.7			11.4			10.3			13.0			25.9
Total nonperforming assets	$	463.8		$	515.4		$	548.4		$	542.0		$	594.7
Ratios:
Nonperforming loans to total loans		0.55	%		0.64	%		0.70	%		0.70	%		0.76	%
Nonperforming assets to total loans plus OREO and other repossessed assets		0.59			0.68			0.74			0.74			0.82
Accruing Loans Past Due 90 Days or More	$	228.2		$	157.1		$	165.3		$	177.9		$	185.8

Loan Portfolio by Types of Loans	Table 9
(Dollars in millions) (Unaudited)

	2003						2002
	September 30		June 30		March 31		December 31		September 30
Commercial	$	30,319.8	$	28,273.2	$	28,557.2	$	28,693.6	$	28,823.9
Real estate:
Construction		4,366.7		4,281.4		4,040.2		4,002.4		3,936.7
Residential mortgages		22,839.5		21,284.6		20,302.4		19,443.4		19,187.5
Other		9,301.0		9,324.6		9,181.4		9,101.8		8,881.4
Commercial credit card		135.5		132.1		127.9		111.3		115.6
Consumer loans		11,825.7		11,965.9		11,640.7		11,815.4		11,659.8
Total loans	$	78,788.2	$	75,261.8	$	73,849.8	$	73,167.9	$	72,604.9

Nonperforming Assets.Nonperforming assets totaled $463.8 million at September 30, 2003, a decrease of $78.2 million, or 14.4%, from December 31, 2002. The decrease was primarily due to a $78.4 million, or 15.3%, drop in nonperforming loans and resulted in a decline in the ratio of nonperforming assets to total loans plus other real estate owned (“OREO”) and other repossessed assets to 0.59% at September 30, 2003 from 0.74% at December 31, 2002. Nonperforming loans at September 30, 2003 include $423.3 million of nonaccrual loans and $9.2 million of restructured loans, the latter of which represents a select group of consumer workout loans.

42

Interest income on nonperforming loans, if recognized, is recorded using the cash basis method of accounting. During the first nine months of 2003 and 2002, this amounted to $10.2 million and $10.3 million, respectively. For the nine months ended September 30, 2003 and 2002, interest income of $27.1 million and $34.2 million, respectively, would have been recorded if all nonperforming loans had been accruing interest according to their original contract terms.

Accruing loans past due ninety days or more increased $71.1 million from June 30, 2003 to September 30, 2003. The increase was primarily related to a shared national credit borrower in bankruptcy whose note has matured, but on which interest is current. Full repayment is expected as a result of the sale of the business. The sale has been affirmed by the bankruptcy court with full pay-off anticipated in the fourth quarter.

Loans.Total loans at September 30, 2003, were $78.8 billion, an increase of $5.6 billion, or 7.7%, from December 31, 2002. The increase was primarily due to an increase in residential mortgages, the acquisition of Lighthouse, and the consolidation in the third quarter of 2003 of SunTrust’s multi-seller commercial paper conduit, Three Pillars. Residential mortgages, which include home equity lines, increased $3.4 billion, or 17.5%, compared to December 31, 2002. This increase was primarily due to a $1.3 billion, or 25.7%, increase in home equity lines and a $2.2 billion, or 17.9%, increase in retained first mortgages. The Company retains in its loan portfolio predominately mortgage loans with variable interest rates. The increase in home equity lines is attributable to the Company’s “Giant Truckload” marketing campaign, appreciation in the housing market, and the favorable interest rate environment. The Lighthouse acquisition added $360.9 million of loans to the portfolio as of September 30, 2003, including $115.7 million in residential mortgages and $209.9 million in construction loans. Commercial loans increased $1.6 billion, or 5.7%, due to the consolidation of Three Pillars. As of September 30, 2003, commercial loans related to Three Pillars were $2.0 billion.

Income Taxes.The provision for income taxes was $136.0 million and $424.8 million for the third quarter and first nine months of 2003, compared to $136.2 million and $409.8 million for the same prior year periods. This represents an approximate 29% and 30% effective tax rate for the third quarter and first nine months of 2003 compared to 28% and 29% for the same prior year periods.

Securities Available for Sale.The investment portfolio is managed as part of the overall asset and liability management process to optimize income and market performance over an entire interest rate cycle while mitigating risk. As part of its asset and liability management strategy in the third quarter of 2003, the Company took advantage of an increase in interest rates and a steeper yield curve to increase the size and improve the yield of the investment portfolio. The portfolio size was $23.4 billion on an amortized cost basis at September 30, 2003 compared with $19.7 billion at June 30, 2003 and $21.0 billion at December 31, 2002. The average life was 3.8 years as of September 30, 2003, an increase from 2.7 years at June 30, 2003 and 2.8 years at December 31, 2002. Floating rate securities comprised 15% of the total portfolio at quarter-end, down from 20% at June 30, 2003 and 21% at December 31, 2002. The average duration of the portfolio, a measure of price sensitivity, was 2.3% at September 30, 2003, an increase from a 1.4% duration as of June 30, 2003 and a 1.3% duration as of December 31, 2002. The increase in duration of the overall portfolio was impacted by slower prepayment speeds of mortgage-backed securities and the reduction in the mix of floating rate securities. While the portfolio yield decreased from 3.07% in the second quarter to 2.87% in the third quarter of 2003, additional purchases at higher interest rates toward the end of the quarter caused the yield to improve to 3.10% at September 30, 2003. Net securities gains of $31.1 million and $104.4 million were realized in the third quarter and first nine months of 2003, respectively, to take advantage of market opportunities while implementing the Company’s asset and liability management strategy.

The carrying value of the investment portfolio reflected $2.2 billion in net unrealized gains at September 30, 2003, including a $2.1 billion unrealized gain on the Company’s investment in common stock of The

43

Coca-Cola Company. The market value of this common stock investment decreased $37.2 million, while the net unrealized gain on the remainder of the portfolio decreased $137.5 million compared to December 31, 2002. These changes in market value did not affect the net income of SunTrust, but were included in other comprehensive income.

Off-Balance Sheet Lending Related Commitments Table 10

(Dollars in Millions) (Unaudited)	At September 30, 2003
Lines of credit
Home equity lines	$	6,735.4
Commercial credit card		519.3
Commercial real estate		2,567.5
Mortgage commitments1		12,831.6
Commercial paper conduit		4,357.2
Commercial		32,819.0
Total lines of credit	$	59,830.0
Letters of credit	$	9,888.6

¹ Includes $4,172.4 million in interest rate locks accounted for as derivatives.

Liquidity Management. Liquidity risk is the risk of being unable to timely meet obligations as they come due at reasonable cost. SunTrust manages this risk by maintaining borrowing resources to fund increases in assets and replace maturing obligations or deposit withdrawals, both in the normal course of business and in times of unusual events. ALCO sets the policies and reviews adherence to these policies.

The Company’s sources of funds include a large, stable deposit base, secured advances from the Federal Home Loan Bank, and access to the capital markets. The Company structures its balance sheet so that illiquid assets, such as loans, are funded through customer deposits, long term debt, other liabilities and capital. The Company utilizes short-term unsecured borrowings to the extent there is adequate pledgable or marketable securities and other secured borrowing sources, excluding Three Pillars. The commercial paper borrowings of Three Pillars are included in short-term borrowings, which were $2.9 billion as of September 30, 2003.

Customer-based core deposits, the Company’s largest and most cost-effective source of funding, accounted for 65% of the funding base on average in the third quarter of 2003, compared to 66% in the second quarter of 2003 and 71% in the third quarter of 2002. The decrease compared to 2002 is attributable primarily to growth in the investment portfolio and loans held for sale, which have largely been financed through wholesale funding sources. Increases in rates, economic activity and confidence in the financial markets may lead to a reduction of deposits, which may need to be replaced with higher cost borrowings.

Net short-term unsecured borrowed funds, including wholesale domestic and international deposits and Fed Funds, totaled $18.4 billion at September 30, 2003 compared to $14.7 billion at December 31, 2002 and $9.7 billion at September 30, 2002. As noted above, the increase is primarily attributable to the growth in the investment portfolio and loans held for sale. Total net wholesale funding, including short-term unsecured borrowings, secured wholesale borrowings and long-term debt, totaled $39.7 billion at September 30, 2003 versus $32.0 billion at December 31, 2002 and $28.0 billion at September 30, 2002. The Company manages reliance on short-term unsecured borrowings as well as total wholesale funding through policy limits reviewed at ALCO.

The Company maintains access to a diversified base of wholesale funding sources. These sources include Fed Funds purchased, securities sold under agreements to repurchase, negotiable certificates of deposit,

44

eurodollar deposits, Federal Home Loan Bank advances, Global Bank Note issuance, and commercial paper issuance. Liquidity is also available through unpledged securities in the investment portfolio and capacity to securitize loans, including single-family mortgage loans. The Company’s credit ratings are important to its access to unsecured wholesale borrowings. Significant changes in these ratings could change the cost and availability of these sources.

The low rate environment has created heavy refinance activity and the amount of mortgage loans originated by the Company. The Company sells most of these loans into the secondary market and such loans are included in loans held for sale. Delivery of these mortgages into the secondary market has not kept pace with production, leading to unusually large balances in this account. For the first nine months of 2003, the Company originated $37.4 billion in loans held for sale compared to $18.3 billion for the first nine months of 2002. As of September 30, 2003, the balance of loans held for sale was $9.2 billion compared to $7.7 billion on December 31, 2002. SunTrust has been able to fund this increase in balances in the normal course of business and anticipates being able to do so in the future. As production decreases, the balance of this account should decline as delivery of mortgages surpasses production.

As is common in the financial services industry, SunTrust Bank assists in providing liquidity to select corporate customers by directing them to a third party owned commercial paper conduit. SunTrust’s conduit relationship is with Three Pillars Funding Corporation (“Three Pillars”). Three Pillars provides financing for or direct purchases of financial assets originated and serviced by SunTrust Bank’s corporate customers. Three Pillars finances this activity by issuing A-1/P-1 rated commercial paper. The result is a favorable funding arrangement for these SunTrust Bank customers.

As of September 30, 2003, Three Pillars had assets and liabilities included on the Consolidated Balance Sheet of approximately $2.9 billion, consisting of primarily secured loans, marketable asset-backed securities and short-term commercial paper liabilities. For the quarters ended September 30, 2003 and 2002, activities related to the Three Pillars relationship generated approximately $5.6 million and $5.0 million in fee revenue for SunTrust Bank. These activities include: making client referrals and investment recommendations to Three Pillars; issuing a letter of credit, which provides partial credit protection to commercial paper holders; and providing a majority of the liquidity arrangements that would provide funding to Three Pillars in the event that it can no longer issue commercial paper or in certain other circumstances. As of September 30, 2003, the liquidity commitments and other credit enhancement SunTrust Bank had to Three Pillars totaled $4.7 billion and $407.4 million, respectively, which represent the Company’s maximum exposure to potential loss. The Company manages the credit risk associated with these commitments by subjecting them to the Company’s normal credit approval and monitoring processes. In 2003, SunTrust Bank funded approximately $30 million related to the liquidity arrangement with Three Pillars, resulting from a ratings downgrade of an asset backed security. The Company does not anticipate a credit loss as a result of the transaction. The Company had $35.4 billion in corporate and commercial real estate commitments, in addition to the amounts described above for Three Pillars. The Company also had $9.9 billion in letters of credit, most of which are standby letters of credit that provide that the Bank fund if certain future events occur. Of this, approximately $5.4 billion support variable rate demand obligations (“VRDOs”) remarketed by SunTrust and other agents. VRDOs are municipal securities which are remarketed by the agent on a regular basis, usually weekly. In the event that the securities are unable to be remarketed, SunTrust Bank would fund under the letters of credit.

The Company has a contingency funding plan that stress tests liquidity needs that may arise from certain events such as agency rating downgrades, rapid loan growth, or significant deposit runoff. The plan also provides for continual monitoring of net borrowed funds dependence and available sources of liquidity. Management believes the Company has the funding capacity to meet the liquidity needs arising from potential events. Liquidity is measured and monitored for the bank and holding company. The Company reviews the parent holding company’s net short-term mismatch. This measures the ability of the holding

45

company to meet obligations through the sale or pledging of assets should access to Bank dividends be constrained.

Certain provisions of long-term debt agreements and holding company lines of credit prevent the Company from creating liens on, disposing of, or issuing (except to related parties) voting stock of subsidiaries. Further, there are restrictions on mergers, consolidations, certain leases, sales or transfers of assets, and minimum shareholders’ equity ratios. As of September 30, 2003, the Company was in compliance with all covenants and provisions of these agreements.

Subsequent to September 30, 2003, the Company issued $1.55 billion in long-term senior notes under its Global Bank Note program for general corporate needs and balance sheet management purposes. Taking this issuance into account, there is $6.95 billion remaining under the program to issue senior or subordinated debt.

Derivatives.Derivative financial instruments are components of the Company’s risk management profile. These instruments include interest rate swaps, options, futures, forward contracts and credit default swaps. The Company also enters into derivative instruments as a service to banking customers. In the normal course of business, the Company monitors and offsets its market risk exposure with dealers.

The Company monitors its sensitivity to changes in interest rates and may use derivative instruments to hedge this risk. On January 1, 2001, the Company adopted SFAS No. 133. Accordingly, all derivatives are recorded in the financial statements at fair value.

46

The following table shows the derivative instruments entered into by the Company as an end-user:

Risk Management Derivative Financial Instruments1								Table 11
(Dollars in thousands)(Unaudited)
	As of September 30, 2003
	Notional Amount		Gross Unrealized6					Equity7			Average Maturity in Yrs
			Gains		Losses
Asset Hedges
Fair value hedges
Interest rate swaps2	$	25,000	$	—	$	(789	)	$	—		1.07
Forward Contracts3		7,187,846		—		(139,800	)		—		0.05
Total asset hedges	$	7,212,846	$	—	$	(140,589	)	$	—		0.05
Liability Hedges
Cash flow hedges
Interest rate swaps4	$	2,595,000	$	—	$	(25,718	)	$	(16,716	)	1.33
Fair value hedges
Interest rate swaps5		5,066,750		104,811		—			—		9.04
Total liability hedges	$	7,661,750	$	104,811	$	(25,718	)	$	(16,716	)	6.43

¹ Includes only derivative financial instruments which are qualifying hedges under FAS 133. All of the company’s other derivative instruments are classified as trading. All interest rate swaps have variable LIBOR resets of six months or less, and are the pay or receive rates in effect at September 30, 2003.

² Interest rate swaps are designated as fair value hedges of fixed rate loans.

³ Forward contracts are designated as fair value hedges of mortgage loans in the warehouse.

⁴ Represents interest rate swaps designated as cash flow hedges of floating rate certificates of deposit and other variable rate debt.

⁵ Interest rate swaps designated as fair value hedges of trust preferred securities, subordinated notes, FHLB Advances and other fixed rate debt.

⁶ Represents the fair value of derivative financial instruments less accrued interest receivable or payable.

⁷ At September 30, 2003, the net unrealized loss on derivatives included in accumulated other comprehensive income, which is a component of stockholders’ equity, was $16.7 million, net of tax, that represents the effective portion of the net gains and losses on derivatives that qualify as cashflow hedges. Gains or losses on hedges of interest rate risk will be classified into interest income or expense as a yield adjustment of the hedged item in the same period that the hedged cash flows impact earnings. As of September 30, 2003, $16.7 million of net losses, net of income taxes recorded in accumulated other comprehensive income are expected to be reclassified as interest expense or other income during the next twelve months.

Capital Ratios													Table 12
(Dollars in millions) (Unaudited)
	2003									2002
	September 30			June 30			March 31			December 31			September 30
Tier 1 capital	$	8,670.5		$	8,426.4		$	8,203.5		$	8,106.1		$	7,973.0
Total capital		12,965.4			12,885.5			12,617.5			12,609.8			12,125.7
Risk-weighted assets		113,686.5			113,194.8			110,903.3			108,501.1			105,441.2
Risk-based ratios:
Tier 1 capital		7.63	%		7.44	%		7.40	%		7.47	%		7.56	%
Total capital		11.40			11.38			11.38			11.62			11.50
Tier 1 leverage ratio		7.05			7.27			7.15			7.30			7.69
Total shareholders’ equity to assets		7.29			7.59			7.24			7.47			7.87

47

Capital Resources.SunTrust’s primary regulator, the Federal Reserve, measures capital adequacy within a framework that makes capital requirements sensitive to the risk profiles of individual banking companies. The guidelines weight assets and off balance sheet risk exposures (risk weighted assets) according to predefined classifications, creating a base from which to compare capital levels. Tier 1 Capital primarily includes realized equity and qualified preferred instruments, less purchase accounting intangibles such as goodwill and core deposit intangibles. Total Capital consists of Tier 1 Capital and Tier 2 Capital, which includes qualifying portions of subordinated debt, allowance for loan loss up to a maximum of 1.25% of risk weighted assets, and 45% of the unrealized gain on equity securities.

The Company and subsidiary banks are subject to a minimum Tier 1 Risk-Based Capital and Total Capital ratios of 4% and 8%, respectively, of risk weighted assets. To be considered “well capitalized” ratios of 6% and 10%, respectively, are needed. Additionally, the Company and the Banks are subject to Tier 1 Leverage ratio requirements, which measures Tier 1 Capital against average assets for the quarter. The minimum and well-capitalized ratios are 3% and 5%, respectively. As of September 30, 2003, SunTrust Banks, Inc. had Tier 1, Total Capital, and Tier 1 Leverage ratios of 7.63%, 11.40% and 7.05%, respectively. SunTrust is committed to remaining well capitalized.

The Company raises subordinated debt as part of managing the Total Capital regulatory ratios. SunTrust Bank issued $500 million in subordinated debt in 2002 under its Global Bank Note program. SunTrust Bank has $6.95 billion remaining under its Global Bank Note program to issue senior or subordinated debt, taking into account the $1.55 billion in senior notes issued subsequent to September 30, 2003. SunTrust Banks, Inc. has $1 billion remaining on its current shelf registration for senior or subordinated debt. In 2002, the Company raised $350 million of regulatory capital through the sale of preferred shares issued by a real estate investment trust subsidiary. This amount is reflected in other liabilities and totals $403.7 million including accrued interest as of September 30, 2003.

48

SunTrust manages capital through dividends and share repurchases authorized by the Company’s Board of Directors. The Company’s capital needs are assessed based on expected growth and the current economic climate. During the first nine months of 2003, share repurchases were as follows:

Share Repurchases						Table 13
(Unaudited)
	Total number of shares purchased	Average price paid per share		Broker-dealer used to effect purchases	Number of shares purchased as part of publicly announced plans or programs1	Maximum number of shares that may yet be purchased under the plans or programs
January	300,000	$	55.9189	SunTrust Robinson Humphrey	300,000	9,202,796
February	1,243,000		56.0153	SunTrust Robinson Humphrey	1,243,000	7,959,796
March	1,460,000		54.4486	SunTrust Robinson Humphrey	1,460,000	6,499,796
April	—		—	—	—	6,499,796
May	—		—	—	—	6,499,796
June	—		—	—	—	6,499,796
July	—		—	—	—	6,499,796
August	257,000		59.3601	SunTrust Robinson Humphrey	257,000	6,242,796
September	15,000		60.0000	SunTrust Robinson Humphrey	15,000	6,227,796
Total	3,275,000	$	55.5888		3,275,000

¹ On November 12, 2002, the Board of Directors authorized to purchase 10 million shares of SunTrust common stock in addition to 2,796 shares which were remaining from a June 13, 2001 authorization. There is no expiration date for this authorization.

Prior to quarter end, the Regulatory Agencies issued an interim rule allowing sponsoring banking organizations to remove Asset Backed Commercial Paper (ABCP) program assets consolidated under FIN 46, “Consolidation of Variable Interest Entities” from their risk-weighted asset bases for purposes of calculating risk-based capital ratios. This interim rule does not affect the average assets used in the calculation of Tier 1 Leverage. This provision, unless otherwise amended or modified, expires after March 31, 2004. Without the interim rule, Tier 1 Risk-Based Capital and Total Risk-Based Capital would be negatively impacted by 17 basis points and 25 basis points, respectively.

The Regulatory Agencies concurrently issued for comment proposals on the risk-based treatment of ABCP conduits by sponsoring organizations, regardless of their consolidation under FIN 46. The proposal provides for a 20% credit conversion factor on the liquidity facilities supporting the underlying assets of the program. The new proposal would negatively impact the Tier 1 Risk-Based Capital and Total Risk-Based Capital ratios by 5 basis points and 8 basis points, respectively.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of market risk on pages 33-36.

49

Item 4. CONTROLS AND PROCEDURES

A review and evaluation was performed by the Company’s management, including the Company’s Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) or 15(d)-15(e)) as of the end of the period covered by this quarterly report. Based on that review and evaluation, the CEO and CFO have concluded that the Company’s current disclosure controls and procedures, as designed and implemented, were effective.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 2. CHANGES IN SECURITIES

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

• Exhibit 31.1 – Certification of Chairman of the Board, President and CEO, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

• Exhibit 31.2 – Certification of Chief Financial Officer and Vice Chairman, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

• Exhibit 32.1 – Certification of Chairman of the Board, President and CEO, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

• Exhibit 32.2 – Certification of Chief Financial Officer and Vice Chairman, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

• The Company filed a Form 8-K on September 5, 2003, to file a notification that certain previously disclosed line of business items may be restated in an investor presentation on September 9, 2003.

• The Company filed a Form 8-K on October 9, 2003, to file a news release announcing financial results for the third quarter of 2003.

50

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized this 12th day of November, 2003.

SunTrust Banks, Inc.

(Registrant)

/S/ Jorge Arrieta

Jorge Arrieta

Senior Vice President and Controller

(Chief Accounting Officer)

51