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8-K
SUNTRUST BANKS INC filed this Form 8-K on 10/10/2013
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8-K Body 10.10.13


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported):
 
October 10, 2013


SunTrust Banks, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)
 
 
 
Georgia
001-08918
58-1575035
(State or other jurisdiction
(Commission File Number)
(I.R.S. Employer
of incorporation)
 
Identification No.)
 
 
 
303 Peachtree Street, N.E., Atlanta, Georgia
 
30308
(Address of principal executive offices)
 
(Zip Code)

Registrant's telephone number, including area code
 
(404) 558-7711

 
 
Not Applicable
 
 
Former name or former address, if changed since last report


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))







Item 1.01 Entry Into a Material Definitive Agreement
Item 2.02 Results of Operations and Financial Condition.
Item 8.01 Other Events.
SunTrust Banks, Inc. and its affiliates (individually or collectively “SunTrust” or the “Company”) announced today that certain items, principally related to the resolution of specific legacy mortgage matters, will affect its third quarter 2013 financial results. In the aggregate, the items detailed below are expected to negatively impact SunTrust’s third quarter earnings by $179 million on an after-tax basis, or $0.33 per share.

Settlement of Certain Legal Matters
The Company and the United States Department of Housing and Urban Development and the United States Department of Justice (collectively, the “Government”) reached agreements in principle to settle (i) certain civil and administrative claims arising from FHA-insured mortgage loans originated by SunTrust Mortgage from January 1, 2006 through March 31, 2012 and (ii) certain alleged civil claims regarding SunTrust’s mortgage servicing and origination practices as part of the National Mortgage Servicing Settlement. Pursuant to the agreements in principle, SunTrust commits to $500 million of consumer relief, a $468 million cash payment, and the implementation of certain mortgage servicing standards. The Company has also reached an agreement in principle with the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) to impose a $160 million civil monetary penalty, in conjunction with the previously announced Consent Order between the Company and the Federal Reserve Board dated April 13, 2011. As permitted in the agreement with the Federal Reserve Board, the Company expects to satisfy the civil monetary penalty by providing consumer relief and certain cash payments as contemplated by the aforementioned agreements in principle with the Government.

SunTrust incurred a net $323 million of specific operating losses in the third of quarter of 2013, which were primarily driven by the agreements in principle with the Government. The Company does not expect the consumer relief efforts or implementation of certain servicing standards associated with the agreements to have a material impact on its future financial results.

Mortgage Repurchase Agreements with Freddie Mac and Fannie Mae
In the third quarter of 2013, SunTrust reached an agreement under which Freddie Mac released SunTrust from certain existing and future repurchase obligations for loans funded by Freddie Mac between 2000 and 2008, representing approximately 312,000 loans. The $65 million settlement agreement was adjusted for $25 million of credits related to certain prior repurchases, resulting in a one-time cash payment to Freddie Mac of $40 million.

Subsequently, SunTrust also reached an agreement in principle under which Fannie Mae released SunTrust from certain existing and future repurchase obligations for loans funded by Fannie Mae between 2000 and 2012, representing approximately 1.1 million loans. The $373 million settlement agreement will be adjusted for approximately $145 million of credits related to certain prior repurchases, which will reduce the one-time cash payment to Fannie Mae.
  
While the majority of both repurchase settlements was covered by SunTrust’s existing mortgage repurchase reserve, the Company incurred a combined $63 million incremental mortgage repurchase provision in the third quarter of 2013 related to these two settlements, as the population of loans included under the agreements was broader than the population of loans considered under SunTrust’s existing mortgage repurchase reserve. The agreements are subject to certain standard exclusions primarily related to agency charter and legal claims, as well as pending and future mortgage insurance related claims. The Company does not expect these exclusions to have a material impact on its future financial results.

Valuation of Servicing Advances
SunTrust recently completed an expanded review of its mortgage loan servicing practices for servicing advances. The Company’s review included invoice and claims management operational processes, recent loss experience, and the methodology employed in estimating the Company’s loss exposure in recovering advances from guarantors and borrowers.  Separately, the Company entered into an agreement to sell mortgage servicing rights (“MSR”) on approximately $1 billion of unpaid principal balance of predominantly delinquent mortgage loans. As a result of the aforementioned review of servicing advances and the MSR sale, the Company refined its loss estimates and valuation methodologies, resulting in a $96 million charge in the third quarter, primarily related to an increase in the allowance for unrecoverable advances.

Tax Items
As indicated in the Company’s Form 10-Q for the period ended June 30, 2013, SunTrust completed a taxable reorganization of certain subsidiaries during the third quarter of 2013 that resulted in the realization of a tax benefit. Partially offsetting this tax benefit is an increase in the valuation allowance related to deferred tax assets for state net operating losses within SunTrust Mortgage, as well as the impact of certain legal settlement accruals incurred by the Company this quarter. Collectively, these tax





matters are expected to positively impact SunTrust’s third quarter 2013 earnings by approximately $113 million on an after-tax basis.

SunTrust will release its third quarter earnings results on October 18, 2013.

Important Cautionary Statement
This report contains forward-looking statements. Statements regarding estimates of the after-tax financial impact of various legal and regulatory matters are forward-looking statements. Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward-looking statements. Forward-looking statements are based upon the current beliefs and expectations of management and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events. The estimated financial impact of these legal and regulatory matters depends upon (1) the successful negotiation, execution, and delivery of definitive agreements in several matters, (2) the ultimate resolution of certain legal matters which are not yet complete, (3) management’s assumptions about the extent to which such amounts may be deducted for tax purposes, (4) the agreement of other necessary parties and (5) our assumptions about the extent to which we can provide consumer relief to satisfy our financial obligations as contemplated by the agreements in principle with the Government. Additional factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012 and in other periodic reports that we file with the SEC.

Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1
 
News release dated October 10, 2013.

SIGNATURE
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.                                                                     
 
 
 
SUNTRUST BANKS, INC.
 
 
 
 
(Registrant)
 
 
 
 
 
 
 
 
 
 
 
 
Date:
October 10, 2013
 
By: /s/ Thomas E. Panther
 
 
 
Thomas E. Panther,

 
 
 
 
Senior Vice President, Director of Corporate Finance and Controller
 
        



NewsRelease101013vFINAL

                    



News Release


Contact:     Investors        Media
Ankur Vyas        Mike McCoy
(404) 827-6714        (404) 588-7230
For Immediate Release
October 10, 2013

SunTrust Announces Resolution of Key Mortgage Matters
Includes Settlements Related to Outstanding Legal Matters and Agency Mortgage Repurchase Claims

ATLANTA -- SunTrust Banks, Inc. (NYSE: STI) today announced the resolution of certain legacy mortgage matters, including the settlement of specific legal matters and agency mortgage repurchase claims. The company’s third quarter results will be impacted by these matters, as well as other discrete items outlined below. In aggregate, these items will have a negative after-tax impact of $179 million, or $0.33 per share, on the company’s third quarter earnings results.
“SunTrust is pleased to have resolved a number of legacy mortgage matters. These settlements reduce uncertainty, further improve our risk profile, and enhance our ability to focus on future growth,” said William H. Rogers, Jr., chairman and chief executive officer of SunTrust Banks, Inc.
The following is a summary of the items that will impact third quarter 2013 earnings results. Please refer to the company’s October 10, 2013, Form 8-K filing for additional details. SunTrust’s third quarter earnings results will be announced on October 18, 2013.

Settlement of Certain Legal Matters
SunTrust reached agreements in principle with the United States Department of Housing and Urban Development and the United States Department of Justice (collectively, the “Government”) to settle (i) certain claims related to SunTrust’s origination of FHA-insured mortgage loans and (ii) its portion of the National Mortgage Servicing Settlement, which pertains to mortgage servicing and origination practices. SunTrust’s commitment under the

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agreements in principle includes consumer relief of $500 million and a cash payment of $468 million.
In total, SunTrust incurred a $323 million charge in the third quarter of 2013, primarily related to these agreements.

Resolution of Agency Mortgage Repurchase Claims
SunTrust also reached agreements with Fannie Mae and Freddie Mac to resolve outstanding and potential repurchase obligations.
In the third quarter, the company reserved an additional $63 million, inclusive of the previously disclosed charge of approximately $15 million pertaining to Freddie Mac, as these settlements cover a broader population of loans than considered in the company’s existing repurchase reserve.

Valuation of Servicing Advances
In the third quarter, SunTrust completed an expanded review of its servicing advance practices. Separately, SunTrust entered into an agreement to sell mortgage servicing rights (“MSR”) on approximately $1 billion of unpaid principal balance of predominantly delinquent mortgage loans. As a result of the review and the MSR sale, SunTrust refined its loss estimates and valuation methodologies for servicing advances, resulting in a $96 million charge to third quarter earnings.

Tax Items
SunTrust completed its previously disclosed taxable reorganization of certain subsidiaries, and in doing so, realized a tax benefit. This benefit was partially offset by other less significant items impacting the company’s income tax provision, resulting in an expected $113 million positive after-tax impact to third quarter earnings.

Additional detail on the above items may be found in the company’s Form 8-K filing posted on its website at www.suntrust.com/investorrelations.

About SunTrust Banks, Inc.
SunTrust Banks, Inc., headquartered in Atlanta, is one of the nation’s largest banking organizations, serving a broad range of consumer, commercial, corporate and institutional clients. Its primary businesses include deposit, credit, and trust and investment management services. Through various subsidiaries, the company provides mortgage banking, insurance, brokerage, equipment leasing, and

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capital markets services. The company operates an extensive branch and ATM network throughout the Southeast and Mid-Atlantic states and a full array of technology-based, 24-hour delivery channels. The company also serves clients in selected markets nationally. SunTrust’s Internet address is www.suntrust.com.

Important Cautionary Statement About Forward-Looking Statements
This news release contains forward-looking statements. Statements regarding estimates of the after-tax financial impact of various legal and regulatory matters are forward-looking statements. Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward-looking statements. Forward-looking statements are based upon the current beliefs and expectations of management and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events. The estimated financial impact of these legal and regulatory matters depends upon (1) the successful negotiation, execution, and delivery of definitive agreements in several matters, (2) the ultimate resolution of certain legal matters which are not yet complete, (3) management’s assumptions about the extent to which such amounts may be deducted for tax purposes, (4) the agreement of other necessary parties and (5) our assumptions about the extent to which we can provide consumer relief to satisfy our financial obligations as contemplated by the agreements in principle with the Government. Additional factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012 and in other periodic reports that we file with the SEC.





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