SUNTRUST BANKS INC FORM 10-K. (Annual Report) Filed 02/27/04 for the Period Ending 12/31/03

Transcription

1 SUNTRUST BANKS INC FORM 10-K (Annual Report) Filed 02/27/04 for the Period Ending 12/31/03 Address 303 PEACHTREE ST N E ATLANTA, GA Telephone CIK Symbol STI SIC Code National Commercial Banks Industry Regional Banks Sector Financial Fiscal Year 12/31 Copyright 2014, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

2 2003 FORM 10-K Securities and Exchange Commission Washington, DC Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 2003 Commission file number SunTrust Banks, Inc. Incorporated in the State of Georgia IRS Employer Identification Number Address: 303 Peachtree Street, NE, Atlanta, GA Telephone: (404) Securities Registered Pursuant to Section 12(b) of the Act: Common Stock $1.00 par value, which is registered on the New York Stock Exchange. As of January 31, 2004, SunTrust had 282,179,309 shares of common stock outstanding. SunTrust (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. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.) As of June 30, 2003, SunTrust had 281,392,725 shares of common stock outstanding. The aggregate market value of SunTrust common stock held by non-affiliates on June 30, 2003 was approximately $16.6 billion. Annual Report 2003 SunTrust Banks, Inc.

3 EXECUTIVE OFFICERS Name Business Experience Age L. Phillip Humann Chairman of the Board, President and Chief Executive Officer of the Company. He is a Director of Coca-Cola Enterprises Inc., Equifax Inc. and Haverty Furniture Companies, Inc. Mr. Humann has been a director of the Company since John W. Clay, Jr. Theodore J. Hoepner John W. Spiegel James M. Wells III Jorge Arrieta Charles T. Hill A Vice Chairman of the Company since August 2000 with management oversight of banking functions, including corporate and investment banking. From 1997 until August 2000 he was an Executive Vice President of the Company. Prior to 1997, he was Chief Executive Officer of the Company s Tennessee banking operations. A Vice Chairman of the Company since August 2000 with responsibility for the Company s asset quality, efficiency and quality initiatives, human resources and legal and regulatory affairs. Mr. Hoepner is also Chief Risk Officer, effective as of February 2003, to include responsibility for the Company s audit and internal control functions. From August 2000 until February 2003, Mr. Hoepner also had responsibility for the Company s technology and operations functions. From 1995 until August 2000 he was an Executive Vice President of the Company, with responsibility for the Company s Florida banking operations. From 1999 through August 2000 he also had responsibility for SunTrust Service Corporation, human resources and efficiency and quality initiatives. A Vice Chairman of the Company since August 2000 with responsibility for the Company s finance-related functions. Mr. Spiegel is also Chief Financial Officer, a position he has held for more than five years. Prior to August 2000 he was an Executive Vice President of the Company. A Vice Chairman of the Company since August 2000 with responsibility for oversight of the Company s commercial, retail, mortgage and private client services lines of business. He also has senior executive responsibility for the Company s marketing and corporate strategy units, and, as of February 2003, has responsibility for the Company s technology and operations functions. From January 2000 to August 2000 Mr. Wells served as President and Chief Executive Officer of the Company s Mid-Atlantic region. From 1988 to January 2000 he served as President of Crestar Financial Corporation and Crestar Bank. A Senior Vice President, Controller and Chief Accounting Officer of the Company. Prior to August 2002, Mr. Arrieta was a First Vice President in the Financial Accounting area. An Executive Vice President of the Company and, since January 2001, Chairman, President and Chief Executive Officer of the Mid-Atlantic banking operations. From August 2000 to January 2001, Mr. Hill was President and Chief Executive Officer of the Mid-Atlantic banking operations. Prior to August 2000, Mr. Hill was Executive Vice President, Commercial Banking, and Senior Credit Officer for the Mid-Atlantic region

4 Name Business Experience Age C. Eugene Kirby An Executive Vice President and Retail Banking Line of Business Head. Prior to 2002, Mr. Kirby was the Director of ebusiness for the Company and prior to that he was an Executive Vice President in the Retail Banking area. George W. Koehn Carl F. Mentzer William H. Rogers, Jr. An Executive Vice President of the Company and, since August 2000, Chairman and Chief Executive Officer of the Company s Florida banking operations. Prior to August 2000, Mr. Koehn was President of the Florida banking operations and Chairman and Chief Executive Officer of the Central Florida banking unit. An Executive Vice President of the Company and Commercial Line of Business Head. In May 1995, Mr. Mentzer was elected Chairman of the Board and Chief Executive Officer of SunTrust Bank, Tampa Bay and held that position until December 31, An Executive Vice President of the Company. Since October 2000 Mr. Rogers has had responsibility for trust, investment and private client services. Prior to October 2000, Mr. Rogers was head of Georgia community banking and the Georgia retail line of business. R. Charles Shufeldt An Executive Vice President and line of business head for the Company s Corporate and Investment Banking Unit since August Prior to that, Mr. Shufeldt served as Senior Vice President in the same unit. E. Jenner Wood, III Chairman, President and Chief Executive Officer of SunTrust Bank, Central Group since June 2002 and an Executive Vice President of the Company. Prior to June 2002, Mr. Wood was Chairman, President and CEO of SunTrust Bank, Georgia. Prior to April 2001, Mr. Wood was President of SunTrust Bank, Georgia since October 2000 and prior to that he was responsible for trust, investment and private client services February 23, 2004

5 Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K EXHIBIT INDEX Exhibit Description Sequential Page Number 3.1 Amended and Restated Articles of Incorporation of SunTrust Banks, Inc. ( Registrant ) effective as of November 14, 1989, and amendment effective as of April 24, 1998, incorporated by reference to Exhibit 3.1 to Registrant s 1998 Annual Report on Form 10-K. * 3.2 Amendment to Restated Articles of Incorporation of Registrant, effective April 18, 2000, incorporated by reference to Exhibit 3.1 of Registrant s Form 10-Q as of March 31, * 3.3 Bylaws of Registrant, amended effective as of April 16, 2002, incorporated by reference to Exhibit 3.3 to Registrant s Form 10-Q as of March 31, * 4.1 Indenture Agreement between Registrant and Morgan Guaranty Trust Company of New York, as Trustee, incorporated by reference to Exhibit 4(a) to Registration Statement No * 4.2 Indenture between Registrant and PNC, N.A., as Trustee, incorporated by reference to Exhibit 4(a) to Registration Statement No * 4.3 Indenture between Registrant and The First National Bank of Chicago, as Trustee, incorporated by reference to Exhibit 4(b) to Registration Statement No * 4.4 Form of Indenture to be used in connection with the issuance of Subordinated Debt Securities, incorporated by reference to Exhibit 4.4 to Registration Statement No * 4.5 Form of Indenture, dated as of February 1, 1985, between SunTrust Bank Holding Company (as successor in interest to Crestar Financial Corporation) and The Chase Manhattan Bank, as Trustee, incorporated by reference to Exhibit 4.3 to Registration Statement No * 4.6 Form of Indenture, dated as of September 1, 1993, between SunTrust Bank Holding Company (as successor in interest to Crestar Financial Corporation) and The Chase Manhattan Bank, as Trustee, incorporated by reference to Exhibit 4.1 to Registration Statement No * 4.7 Form of Third Supplemental Indenture (to Indenture dated as of February 1, 1985), dated as of July 1, 1992, between SunTrust Bank Holding Company (as successor in interest to Crestar Financial Corporation) and The Chase Manhattan Bank, as Trustee, incorporated by reference to Registration Statement No * 4.8 Form of resolutions of the Board of Directors of Crestar Financial Corporation (now known as SunTrust Bank Holding Company) approving issuance of $150 million of 8 3/4% Subordinated Notes Due 2004, incorporated by reference to Exhibit 4.6 to Registration Statement No *

6 4.9 Form of First Supplemental Indenture (to Indenture dated as of September 1, 1993), dated as of January 1, 1998, between SunTrust Bank Holding Company (as successor in interest to Crestar Financial Corporation) and The Chase Manhattan Bank, as Trustee, incorporated by reference to Exhibit 4.7 to Registration Statement No * Material Contracts and Executive Compensation Plans and Arrangements 10.1 SunTrust Banks, Inc. Supplemental Executive Retirement Plan effective as of January 1, 2001, and First Amendment and Second Amendment thereto, incorporated by reference to Exhibit 10.1 to Registrant s 2002 Annual Report on Form 10-K. * 10.2 SunTrust Banks, Inc. ERISA Excess Retirement Plan, effective as of August 13, 1996, and amendment effective as of November 10, 1998, incorporated by reference to Exhibit to Registrant s 1998 Annual Report on Form 10-K. * 10.3 SunTrust Banks, Inc. Performance Unit Plan, amended and restated as of August 11, 1998, incorporated by reference to Exhibit to Registrant s 1998 Annual Report on Form 10-K. * 10.4 SunTrust Banks, Inc. Management Incentive Plan, amended and restated as of February 8, 2000, incorporated by reference to Exhibit to Registrant s 1999 Annual Report on Form 10-K. * 10.5 SunTrust Banks, Inc. 401(k) Excess Plan Amended and Restated as of July 1, 1999, incorporated by reference to Exhibit to Registrant s 1999 Annual Report on Form 10-K. * 10.6 Amendment Number One dated December 1, 2001 to the SunTrust Banks, Inc. 401(k) Excess Plan Amended and Restated as of July 1, 1999, incorporated by reference to Exhibit 10.8 of Registrant s 2001 Annual Report on Form 10-K. * 10.7 Amendment Number Two dated December 31, 2002 to the SunTrust Banks, Inc. 401(k) Excess Plan Amended and Restated as of July 1, 1999, incorporated by reference to Exhibit 10.7 to Registrant s 2002 Annual Report on Form 10-K. * 10.8 SunTrust Banks, Inc. Executive Stock Plan, incorporated by reference to Exhibit to Registrant s 1998 Annual Report on Form 10-K. * 10.9 Amendment to SunTrust Banks, Inc Executive Stock Plan, effective February 10, 1998 (filed herewith) SunTrust Banks, Inc. Performance Stock Agreement, effective February 11, 1992, and First Amendment to Performance Stock Agreement effective February 10, 1998 (filed herewith) SunTrust Banks, Inc Executive Stock Plan, incorporated by reference to Exhibit to Registrant s 1999 Annual Report on Form 10-K. * Amendment to the SunTrust Banks, Inc Executive Stock Plan, effective as of August 11, 1998, incorporated by reference to Exhibit to Registrant s 1998 Annual Report on Form 10-K. * SunTrust Banks, Inc Stock Plan, effective February 8, 2000, incorporated by reference to Exhibit A to Registrant s 2000 Proxy Statement on Form 14A. *

7 10.14 SunTrust Banks, Inc. Deferred Compensation Plan, effective October 1, 1999 and Amendment Number One, effective October 31, 1999, incorporated by reference to Exhibit to Registrant s 1999 Annual Report on Form 10-K. * Amendment to Exhibit A to the SunTrust Banks, Inc. Deferred Compensation Plan, effective January 1, 2000, incorporated by reference to Exhibit of Registrant s 2000 Annual Report on Form 10-K. * Amendment to SunTrust Banks, Inc., Deferred Compensation Plan, effective as of January 1, 2004 (filed herewith) SunTrust Banks, Inc. Directors Deferred Compensation Plan effective as of January 1, 1994, incorporated by reference to Exhibit to Registrant s 1998 Annual Report on Form 10-K. * Crestar Financial Corporation Executive Life Insurance Plan, as amended and restated effective January 1, 1991, and amendments effective December 18, 1992, March 30, 1998, and December 30, 1998, incorporated by reference to Exhibit to Registrant s 1998 Annual Report on Form 10-K. * Stock Option Plan of Crestar Financial Corporation and Affiliated Corporations, as amended through January 24, 1997, incorporated by reference to Exhibit to Registrant s 1998 Annual Report on Form 10-K. * Change in Control Agreements between Registrant and various executives, incorporated by reference to Exhibits 10.1 through of Registrant s Form 10-Q and Form 10-QA as of March 31, * Change in Control Agreement dated April 15, 2002, between Registrant and Sandra W. Jansky, incorporated by reference to Exhibit 10.1 of Registrant s Form 10-Q as of June 30, * Change in Control Agreement dated September 3, 2002, between Registrant and Cecil Eugene Kirby, incorporated by reference to Exhibit 10.2 of Registrant s Form 10-Q as of September 30, * Change in Control Agreement dated August 30, 2002 between Registrant and Jorge Arrieta, incorporated by reference to Exhibit 10.1 of Registrant s Form 10-Q as of September 30, * Change in Control Agreement dated January 27, 2003 between Registrant and Richard G. Blumberg, incorporated by reference to Exhibit to Registrant s 2002 Annual Report on Form 10-K. * Change in Control Agreement dated January 24, 2003 between Registrant and Mark A. Chancy, incorporated by reference to Exhibit to Registrant s 2002 Annual Report on Form 10-K. * Change in Control Agreement dated January 17, 2003 between Registrant and Sterling Edmunds, Jr., incorporated by reference to Exhibit to Registrant s 2002 Annual Report on Form 10-K. * Change in Control Agreement dated January 28, 2003 between Registrant and Louis S. Tiller, Jr., incorporated by reference to Exhibit to Registrant s 2002 Annual Report on Form 10-K. *

8 10.28 Change in Control Agreement dated January 24, 2003 between Registrant and Edward M. Westerman, incorporated by reference to Exhibit to Registrant s 2002 Annual Report on Form 10-K. * Change in Control Agreement dated April 14, 2003 between Registrant and Douglas S. Phillips, incorporated by reference to Exhibit 10.1 to Registrant s Form 10-Q as of March 31, * Change in Control Agreement dated February 27, 2003 between Registrant and Timothy E. Sullivan, incorporated by reference to Exhibit 10.2 to Registrant s Form 10-Q as of March 31, * Employment Agreement between Registrant and James M. Wells III, effective as of December 31, 1998, incorporated by reference to Exhibit to Registrant s 1999 Annual Report on Form 10-K. * Crestar Financial Corporation Excess Benefit Plan, amended and restated effective December 26, 1990 and amendments thereto (effective December 18, 1992, March 30, 1998 and December 30, 1998), incorporated by reference to Exhibit to Registrant s 1998 Annual Report on Form 10-K. * United Virginia Bankshares Incorporated Deferred Compensation Program under Incentive Compensation Plan of United Virginia Bankshares Incorporated and Affiliated Corporation, amended and restated through December 7, 1983, incorporated by reference to Exhibit to Registrant s 1998 Annual Report on Form 10-K. * Amendments (effective January 1, 1987 and January 1, 1988) to United Virginia Bankshares Incorporated Deferred Compensation Program Under Incentive Compensation Plan of United Virginia Bankshares Incorporated and Affiliated Corporations, incorporated by reference to Exhibit of Registrant s 2000 Annual Report on Form 10-K. * Amendment (effective January 1, 1994) to Crestar Financial Corporation Deferred Compensation Program Under Incentive Compensation Plan of Crestar Financial Corporation and Affiliated Corporations, incorporated by reference to Exhibit to Registrant s 2000 Annual Report on Form 10-K. * Amendment (effective September 21, 1995) to Crestar Financial Corporation Deferred Compensation Program Under Incentive Compensation Plan of Crestar Financial Corporation and Affiliated Corporations, incorporated by reference to Exhibit to Registrant s 1998 Annual Report on Form 10-K. * Crestar Financial Corporation Deferred Compensation Plan for Outside Directors of Crestar Financial Corporation and Crestar Bank, amended and restated through December 13, 1983 and amendments thereto (effective January 1, 1985, April 24, 1991, December 31, 1993 and October 23, 1998), incorporated by reference to Exhibit to Registrant s 1998 Annual Report on Form 10-K. * Amendment (effective January 1, 1999) to Crestar Financial Corporation Deferred Compensation Plan for Outside Directors of Crestar Financial Corporation, incorporated by reference to Exhibit to Registrant s 1999 Annual Report on Form 10- K. *

9 10.39 Crestar Financial Corporation Additional Nonqualified Executive Plan, amended and restated effective December 26, 1990 and amendments thereto (effective December 18, 1992, March 30, 1998 and December 30, 1998), incorporated by reference to Exhibit to Registrant s 1998 Annual Report on Form 10-K. * Crestar Financial Corporation 1993 Stock Incentive Plan, as amended and restated effective February 28, 1997 (filed herewith) Amendments (effective December 19, 1997) to Crestar Financial Corporation 1993 Stock Incentive Plan, incorporated by reference to Exhibit to Registrant s 1998 Annual Report on Form 10-K. * Crestar Financial Corporation Supplemental Executive Retirement Plan, effective January 1, 1995, incorporated by reference to Exhibit to Registrant s 2000 Annual Report on Form 10-K. * Amendments (effective December 20, 1996) to the Crestar Financial Corporation Supplemental Executive Retirement Plan (filed herewith) Amendments (effective December 17, 1997) to Crestar Financial Corporation Supplemental Executive Retirement Plan (filed herewith) Amendments (effective December 19, 1997 and December 29, 1998) to the Crestar Financial Corporation Supplemental Executive Retirement Plan, incorporated by reference to Exhibit to Registrant s 1998 Annual Report on Form 10-K. * Crestar Financial Corporation Directors Equity Program, effective January 1, 1996, incorporated by reference to Exhibit of Registrant s 2001 Annual Report on Form 10-K. * Amendment (effective December 20, 1996) to Crestar Financial Corporation Directors Equity Program, incorporated by reference to Exhibit of Registrant s 2001 Annual Report on Form 10-K. * Amendment (effective September 26, 1997) to Crestar Financial Corporation Directors Equity Plan (filed herewith) Amendments (effective October 23, 1998) to Crestar Financial Corporation Directors Equity Program, incorporated by reference to Exhibit to Registrant s 1998 Annual Report on Form 10-K. * Amendment (effective October 23, 1998) to Crestar Financial Corporation Directors Equity Program, incorporated by reference to Exhibit to Registrant s 1999 Annual Report on Form 10-K. * Lighthouse Mortgage Corporation 1994 Stock Option Plan, incorporated by reference to Exhibit 4.1 to Registration Statement No * 11.1 Statement re computation of per share earnings (filed herewith) Ratio of Earnings to Fixed Changes (filed herewith).

10 13.1 Registrant s 2003 Annual Report to Shareholders (filed herewith) Registrant s Subsidiaries (filed herewith) Registrant s Proxy Statement relating to the 2004 Annual Meeting of Shareholders, dated March 1, 2004, which will be filed by March 8, Consent of Independent Public Accountants (filed herewith) 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 (filed herewith) 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 (filed herewith) 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 (filed herewith) 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 (filed herewith). Certain instruments defining rights of holders of long-term debt of Registrant and its subsidiaries are not filed herewith pursuant to Item 601(b)(4) (iii) of Regulation S-K. At the Commission s request, Registrant agrees to give the Commission a copy of any instrument with respect to long-term debt of Registrant and its consolidated subsidiaries and any of its unconsolidated subsidiaries for which financial statements are required to be filed under which the total amount of debt securities authorized does not exceed ten percent of the total assets of Registrant and its subsidiaries on a consolidated basis. * Incorporated by reference. Certain statistical data required by the Securities and Exchange Commission are included on pages AR 14 thru AR 50.

11 EXHIBIT 10.9 AMENDMENT TO 1986 EXECUTIVE STOCK PLAN COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS SUNTRUST BANKS, INC. February 10, 1998 The SunTrust Banks, Inc Executive Stock Plan (the Plan ), is hereby amended, effective as of February 10, 1998, as set forth below. Any term which is not defined below shall have the meaning set forth in the Plan. 1. Section 8.1 of the Plan is hereby amended by adding a paragraph at the end thereof as follows: The Committee shall also have the right to insert provisions in any Restricted or Performance Stock Agreement, either at the time such Restricted or Performance Stock Agreement is entered into or subsequent to such time, whereby the Restricted or Performance Stock (or a portion thereof) granted under such Restricted or Performance Stock Agreement may be converted into units, each of which will have a value equal at all times to a share of Stock (each such unit, a Phantom Stock Unit ). Phantom Stock Units shall be subject to such terms and conditions (including, but not limited to the payment of dividends or the crediting of dividend equivalents in respect of such Phantom Stock Units) not inconsistent with this Plan as the Committee may, in its sole discretion, determine. IN WITNESS WHEREOF, SunTrust Banks, Inc. has caused this Amendment to be executed by a duly authorized officer as of the day and year first above written. SUNTRUST BANKS, INC. By /s/ SunTrust Banks, Inc.

12 EXHIBIT PERFORMANCE STOCK AGREEMENT FIRST AMENDMENT EFFECTIVE FEBRUARY 10, 1998 The terms and conditions set forth in the SunTrust Banks, Inc. Performance Stock Agreement(s) (the Agreement(s) ) entered into with «FirstName» «LastName» under the Executive Stock Plan (the Plan ), are hereby amended, effective as of February 10, 1998, as set forth below. Performance Stock Granted in 1990 Grant #1 Award Grant #2 Award Grant #3 Award Grant #4 Award Grant #5 Award «A1Grant» Shares «A2Grant» Shares «A3Grant» Shares «A4Grant» Shares «A5Grant» Shares Performance Stock Granted in 1992 Grant #1 Award Grant #2 Award Grant #3 Award Grant #4 Award Any term which is not defined below shall have the meaning set forth in the Agreement(s). 1. The Agreement(s) is hereby amended by adding a Section 3.A thereto as follows: 3. A Phantom Stock Units. (a) «B1Grant» Shares «B2Grant» Shares «B3Grant» Shares «B4Grant» Shares As of February 10, 2000 (the Conversion Date ), an aggregate of «TotalShares» shares of Performance Stock previously awarded to the Grantee and with respect to which the relevant stock price condition set forth in 2 has been satisfied (such number of shares being set forth above and hereinafter referred to as the Converted Shares ) shall be converted into Phantom Stock Units (as described below) at the rate of one Phantom Stock Unit per Converted Share; provided, however, that no such conversion shall occur if, prior to the Conversion Date, (1) the Grantee s employment with

13 (b) (c) SunTrust and its Subsidiaries shall have terminated for any reason or (2) a Change in Control (as defined in 4) shall have occurred. The value of each Phantom Stock Unit shall at all times be equal to the value of a share of Stock. As of the Conversion Date, such Phantom Stock Units shall be fully vested and no longer subject to the conditions of 3 hereof. Payment in respect of such Phantom Stock Units shall be made to the Grantee in shares of Stock upon the earlier to occur of (1) the date on which the Grantee would otherwise have satisfied the conditions of 3(a) hereof with respect to the Converted Shares and (2) the date of occurrence of a Change in Control. Upon the payment of dividends with respect to shares of Stock, the Grantee will be entitled to receive, with respect to each Phantom Stock Unit held by such Grantee, a cash payment equal to the dividend the Grantee would have received had such Phantom Stock Unit been a share of Stock. SUNTRUST BANKS, INC. By: Authorized Officer ACKNOWLEDGEMENT I hereby approve the First Amendment to the Performance Stock Agreement(s) set forth under the Executive Stock Plan. Grantee Date

14 EXHIBIT 10.10a [GRAPHIC] PERFORMANCE STOCK AGREEMENT SunTrust Banks, Inc. ( SunTrust ), a Georgia corporation, pursuant to action of the Compensation Committee ( Committee ) of its Board of Directors and in accordance with the SunTrust Banks, Inc. Executive Stock Plan ( Plan ) has made the following 5 Performance Stock grants ( Grants ) to 1 - ( Grantee ) as an incentive for Grantee to promote the interest of SunTrust and its Subsidiaries: Grant 1 Grant 2 Grant 3 Grant 4 Grant 5 5~ Shares 5~ Shares 5~ Shares 5~ Shares 5~ Shares TOTAL 4~ Shares This Performance Stock Agreement evidences these Grants, and these Grants have been made subject to all the terms and conditions set forth on the reverse side of this Performance Stock Agreement and in the Plan. These Grants have been made as of February 11, 1992 ( Grant Date ). SUNTRUST BANKS, INC. ACKNOWLEDGMENT Grantee hereby acknowledges the receipt of this Performance Stock Agreement. Authorized Officer Grantee Date

15 TERMS AND CONDITIONS OF PERFORMANCE STOCK GRANTED ON FEBRUARY 11, Grants. All of the Grants have been made subject to all the terms and conditions set forth in the Plan and in this Performance Stock Agreement. 2. Average Stock Price Conditions. A grant shall be awarded under this Performance Stock Agreement on the first date (which comes before the earlier of the fifth anniversary of the Grant Date or the date the Grantee s employment terminates for any reason whatsoever) that the average closing price for a share of Stock (as accurately reported In The Wall Street Journal or any successor selected by the Committee) over 20 consecutive trading days (on the New York Stock Exchange or any successor exchange on which Stock is traded) equals or exceeds the average stock price condition for such grant as follows: Grants Average Stock Price Condition However, if a grant fails to satisfy the related average stock price condition before the earlier of the fifth anniversary of the Grant Date or the date the Grantee s employment terminates for any reason whatsoever, such grant automatically shall be forfeited as of the earlier of such fifth anniversary of the Grant Date or the date his employment terminates. If a grant is awarded to Grantee under this 2, he thereafter shall be eligible to receive the dividends, if any, paid with respect to the Stock subject to such grant and to vote such Stock (to the same extent he would have been entitled to receive such dividends and to vote such Stock if he had purchased such Stock on the date the underlying grant is awarded to him) in accordance with the terms and conditions set forth in the Plan (including any dividend deferral election available under the Plan) respecting dividends and voting until the date he either forfeits his interest in such grant under this Performance Stock Agreement or such shares of Stock are transferred to him under 3 or Service Conditions. (a) All of the Grants have been made subject to a service condition, and Grantee shall satisfy such condition with respect to each grant if he remains in the continuous employ of SunTrust and its Subsidiaries from the Grant Date through the earlier of the date he reaches age 64 or the 15th anniversary of the date such grant is awarded to him under 2 and, if he fails to satisfy such service condition with respect to any such grant, he shall forfeit his interest in such grant unless (1) the Committee waives this service condition at the time his employment actually terminates or (2) the Grantee s employment with SunTrust and its Subsidiaries terminates by reason of his death or his disability (as determined by the Committee using a standard which is no less rigorous than the stand for disability described in Section 22(a)(3) of the Code). (b) Any interest in a grant of Performance Stock which the Grantee does not forfeit under 2 or 3(a) shall be transferred to the Grantee free of any forfeiture conditions under the Plan as soon as practicable after the service condition under 3(a) no longer applies; provided, however, if the Committee at any time before such transfer reasonably determines that the Grantee might have violated any applicable civil or criminal law or did violate the written Code of Conduct or Code of Ethics for officers and employees of SunTrust and its Subsidiaries, the Committee shall have the right to completely forfeit Grantee s interest in the Stock underlying all his Grants of Performance Stock without regard to whether (i) the Grantee has satisfied the service condition set forth in 3(a) before the date the Committee makes such determination or (ii) the Grantee s employment is (or might have been) terminated as a result of such conduct. 4. Change in Control. Grant 1 $ Grant Grant Grant Grant (a) If the service condition set forth in 3 has not been satisfied by the Grantee on the date there is a change in control (as defined in 4(b)) of SunTrust, 3(a) shall cease to apply to the Grants on the date of such change in control, and any interest in a grant of Performance Stock which had been awarded to the Grantee under 2 on or before the date of such change in control shall be transferred to him as soon as practicable after such date and any interest in a grant of Performance Stock which thereafter is awarded to the Grantee under 2 shall be transferred to him as soon as practicable after the date such grant is awarded to him under 2. (b) The term change in control for purposes of this 4 shall mean a change in control of SunTrust of a nature that would be required to be reported in response to item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 ( 34 Act ) as in effect on February 11, 1992, provided that such a change in control shall be deemed to have occurred at such time as (i) any person (as that term is used in Sections 12(d) and 14(d)(2) of the 34 Act), is or becomes the beneficial owner (as defined in Rule 13d-3 under the 34 Act) directly or indirectly, of securities representing 20% or more of the combined voting power for election of directors of the then outstanding securities of SunTrust or any successor of SunTrust; (ii) during any period of two consecutive years or less, individuals who at the beginning of such period constituted the Board cease, for any reason, to constitute at least a majority of the Board, unless the election or nomination for election of each new director was approved by a vote of at least two-thirds of the directors then still in office or who were directors at the beginning of the period; (iii) the shareholders of SunTrust approved any merger, consolidation or share exchange as a result of which stock shall be changed, converted or exchanged (other than a merger with a wholly-owned subsidiary of SunTrust) or any liquidation of SunTrust or any sale or other disposition of 50% or more of the assets or business of SunTrust; or (iv) the shareholders of SunTrust approve any merger or consolidation to which SunTrust is a party or a share exchange in which SunTrust shall exchange its shares for shares of another corporation as a result of which the persons who were shareholders of SunTrust immediately prior to the effective date of the merger, consolidation or share exchange shall have beneficial ownership of less than 50% of the combined voting power for election of directors of the surviving corporation following the effective date of such merge, consolidation or share exchange; provided, however; and notwithstanding the occurrence of any of the events described above, that no change in control shall be deemed to have occurred under this 4 if, prior to such time as a change in control would otherwise be deemed to have occurred, the Board determines otherwise.

16 5. Withholding. The Committee shall have the right to reduce the number of shares of Stock actually transferred to the Grantee to satisfy the minimum applicable tax withholding requirements, and the Grantee shall have the right (absent any such action by the Committee and subject to satisfying the requirements, if any, under Rule 16b-3) to elect that the minimum applicable tax withholdings requirements be satisfied through a reduction in the number of share of Stock transferred to him. 6. Nontransferable. No rights granted under the Plan or this Performance Stock Agreement shall be transferable by the Grantee other than by will or by the laws of descent and distribution, and the person or persons to whom such rights are so transferred shall be treated as the Grantee under the Performance Stock Agreement. 7. Employment and Termination. Nothing in the Plan or this Performance Stock Agreement or any related material shall give the Grantee the right to continue in employment by SunTrust or by a Subsidiary or adversely affect the right of SunTrust or a Subsidiary to terminate the Grantee s employment with or without cause at any time. 8. Other Laws. SunTrust shall have the right to refuse to issue or transfer any Stock under this Performance Stock Agreement if SunTrust acting in its absolute discretion determines that the issuance or transfer of such Stock might violate any applicable law or regulation. 9. Securities Registration. The Grantee may be requested by SunTrust to hold any shares of Stock transferred to him under this Performance Stock Agreement for personal investment and not for purposes of resale or distribution to the public; and the Grantee shall, if so requested by SunTrust, deliver a certified statement to that effect to SunTrust as a condition to the transfer of such stock to the Grantee. 10. Miscellaneous. (a) A mere transfer of employment between SunTrust and a Subsidiary shall not be deemed a termination of employment under the Plan or this Performance Stock Agreement. (b) This Performance Stock Agreement shall be subject to all of the provisions, definitions, terms and conditions set forth in the Plan, all of which are incorporated by this reference in this Performance Stock Agreement except that under this agreement the term Performance Stock Agreement under the Plan shall mean Restricted Stock Agreement under the Plan and Performance Stock shall mean Restricted Stock. (c) The Plan and this Performance Stock Agreement shall be governed by the laws of the State of Georgia. (d) The Grantee s entire interest in the Performance Stock underlying the Grants shall (without regard to 2, 3 or 4) be available to satisfy the claims of SunTrust s creditors if SunTrust (on any date before such interests are actually transferred under 3(b) to the Grantee) is generally not paying its debts as such debts become due (other than debts that are the subject of a bona fide dispute) or if an order for relief is entered against SunTrust in a bankruptcy case commenced by or against it under the United States Bankruptcy Code, of if SunTrust is the debtor in any proceeding commenced under any other bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar debtor relief law in which SunTrust is alleged to be insolvent or otherwise unable to pay its debts as such debts become due, and the Grantee shall forfeit his interest in such Stock and such Grants as of such date.

17 Exhibit SUNTRUST BANKS, INC. DEFERRED COMPENSATION PLAN DEFERRAL COMMITTEE CERTIFICATION WHEREAS, SunTrust Banks, Inc. (the Corporation ) established the SunTrust Banks, Inc. Deferred Compensation Plan effective October 1, 1999 (the Deferral Plan ), a plan whereby participants in certain selected bonus and incentive programs sponsored may defer receipt of all or a portion of their future awards; and WHEREAS, paragraph 8.7 of the Deferral Plan authorizes the Deferral Committee to amend the Deferral Plan in any manner that is consistent with the Deferral Plan s purpose, except as to any matter that the Deferral Plan Committee determines may result in a material increased cost to the Corporation; and WHEREAS, on November 11, 2003, the Compensation Committee of the Board of Directors of the Corporation was asked to approve and it did approve certain changes to the Deferral Plan which were recommended on behalf of the Deferral Committee. NOW, THEREFORE, IN WITNESS HEREOF, the Deferral Committee, through its authorized delegate, certifies that the Compensation Committee has approved the following changes to the Deferral Plan, which are implemented effective as of the dates set forth below: First, effective for Plan Years beginning January 1, 2004 and later, Eligible Employee means for purposes of deferrals under the Deferral Plan for awards earned under the Corporation s Management Incentive Plan or Performance Unit Plan, an employee who is in grade 53 or higher. Second, effective February 1, 2004, the Deferral Plan includes the following investment funds: STI Classic Capital Appreciation Fund STI Classic Prime Quality Money Market STI Classic Investment Grade Bond Fund STI Classic Small Cap Growth Stock Fund STI Classic Mid-Cap Equity Fund STI Classic Growth and Income Fund STI Classic Value Income Stock Fund STI Classic Short-Term Fund SUNTRUST BANKS, INC. DEFERRAL PLAN COMMITTEE By: /s/ Mary S. Harrell Attest: /s/ Margaret U. Hodgson [Corporate Seal]

18 EXHIBIT CRESTAR FINANCIAL CORPORATION 1993 STOCK INCENTIVE PLAN As Amended and Restated Effective February 28, 1997

19 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS Acquiring Person Administrator Agreement Associate Board Change in Control Code Committee Common Stock Company Continuing Director Control Affiliate Control Change Date Corresponding SAR Disability Efficiency Ratio Exchange Act Fair Market Value Incentive Award Initial Value NIACC Option Participant Performance Shares Person Plan Related Entity Retirement SAR Stock Award Total Shareholder Return 6 ARTICLE II PURPOSES 7 ARTICLE III ADMINISTRATION 7 ARTICLE IV ELIGIBILITY 9

20 TABLE OF CONTENTS Page ARTICLE V ARTICLE VI ARTICLE VII ARTICLE VIII STOCK SUBJECT TO PLAN Shares Issued Aggregate Limit Reallocation of Shares 10 OPTIONS Award Option Price Maximum Option Period Nontransferability Transferable Options Employee Status Exercise Payment Change in Control Shareholder Rights Disposition of Stock 15 SARS Award Maximum SAR Period Nontransferability Transferable SARs Exercise Change in Control Employee Status Settlement Shareholder Rights 19 STOCK AWARDS Award Vesting Performance Objectives Employee Status Change in Control Shareholder Rights 21

21 TABLE OF CONTENTS Page ARTICLE IX ARTICLE X PERFORMANCE SHARE AWARDS Award Earning the Award Payment Shareholder Rights Nontransferability Transferable Performance Shares Employee Status Change In Control 24 INCENTIVE AWARDS Award Terms and Conditions Nontransferability Employee Status Change in Control Shareholder Rights 27 ARTICLE XI ADJUSTMENT UPON CHANGE IN COMMON STOCK 28 ARTICLE XII COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES 30 ARTICLE XIII GENERAL PROVISIONS Effect on Employment and Service Unfunded Plan Rules of Construction Tax Withholding Limitation on Benefits 32 ARTICLE XIV AMENDMENT 34 ARTICLE XV DURATION OF PLAN 35 ARTICLE XVII EFFECTIVE DATE OF PLAN 35

22 CRESTAR FINANCIAL CORPORATION 1993 STOCK INCENTIVE PLAN ARTICLE I DEFINITIONS Acquiring Person means that (a) a Person, considered alone or together with all Control Affiliates and Associates of that Person, becomes directly or indirectly the beneficial owner of securities representing at least thirty percent of the Company s then outstanding securities entitled to vote generally in the election of the Board, or (b) a person enters into an agreement that would result in that Person satisfying the conditions in subsection (a) or that would result in a Related Entity s failure to be a Related Entity Administrator means the Committee and any delegate of the Committee that is appointed in accordance with Article III Agreement means a written agreement (including any amendment or supplement thereto) between the Company and a Participant specifying the terms and conditions of an award of Performance Shares or a Stock Award, Option, SAR or Incentive Award granted to such Participant Associate, with respect to any Person, is defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as amended as of January 1, An Associate does not include the Company or a majority-owned subsidiary of the Company. -1-

23 1.05. Board means the Board of Directors of the Company Change in Control means that (a) the Company enters into any agreement with a Person that involves the transfer of ownership of the Company or of at least fifty percent of the Company s total assets on a consolidated basis, as reported in the Company s consolidated financial statements filed with the Securities and Exchange Commission (including an agreement for the acquisition of the Company by merger, consolidation, or statutory share exchange - regardless of whether the Company is intended to be the surviving or resulting entity after the merger, consolidation, or statutory share exchange - or for the sale of substantially all of the Company s assets to that Person), (b) any Person is or becomes an Acquiring Person, or (c) during any period of two consecutive calendar years, the Continuing Directors cease for any reason to constitute a majority of the Board Code means the Internal Revenue Code of 1986, and any amendments thereto Committee means the Human Resources and Compensation Committee of the Board Common Stock means the common stock of the Company Company means Crestar Financial Corporation Continuing Director means any member of the Board, while a member of the Board and (i) who was a member of the Board prior to the adoption of the Plan or -2-

24 (ii) whose subsequent nomination for election or election to the Board was recommended or approved by a majority of the Continuing Directors Control Affiliate with respect to any Person, means an affiliate as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as amended as of January 1, Control Change Date means the date on which a Change in Control occurs. If a Change in Control occurs on account of a series of transactions, the Control Change Date is the date of the last of such transactions Corresponding SAR means an SAR that is granted in relation to a particular Option and that can be exercised only upon the surrender to the Company, unexercised, of that portion of the Option to which the SAR relates Disability means that a Participant has satisfied the requirements for a benefit under the Crestar Financial Corporation Long Term Disability Benefits Plan Efficiency Ratio means the percentage determined by dividing (i) noninterest expense less nonrecurring expense by (ii) the sum of net interest income plus noninterest income, all as reported on the Company s financial statements Exchange Act means the Securities Exchange Act of 1934, as amended and as in effect on the date of this Agreement Fair Market Value means, on any given date, the average of the high and low prices of a share of Common Stock as reported on the New York Stock Exchange on such date, or if the Common Stock was not traded on the New York Stock Exchange -3-

25 on such day, then on the next preceding day that the Common Stock was traded on such exchange, all as reported by such source as the Administrator may select Incentive Award means an award under Article X which, subject to such terms and conditions as may be prescribed by the Administrator, entitles the Participant to receive a cash payment from the Company or a Related Entity Initial Value means, with respect to a Corresponding SAR, the option price per share of the related Option and, with respect to an SAR granted independently of an Option, the price per share of Common Stock as determined by the Administrator on the date of the grant; provided, however, that the price per share of Common Stock encompassed by the grant of an SAR shall not be less than the Fair Market Value on the date of grant NIACC means net income after a capital charge Option means a stock option that entitles the holder to purchase from the Company a stated number of shares of Common Stock at the price set forth in an Agreement Participant means an employee of the Company or a Related Entity, including an employee who is a member of the Board, who satisfies the requirements of Article IV and is selected by the Administrator to receive an award of Performance Shares, a Stock Award, an Option, an SAR, an Incentive Award or a combination thereof. -4-

26 1.24. Performance Shares means an award, in the amount determined by the Administrator and specified in an Agreement, stated with reference to a specified number of shares of Common Stock, that entitles the holder to receive a payment for each specified share equal to the Fair Market Value of Common Stock on the date of payment. In the discretion of the Administrator, a Performance Share award may include the right to receive an additional payment for the accumulated dividends that would have been paid on each specified share as if such dividends had been invested in Common Stock on the dividend payment date, from the date of grant to the date of payment Person means any human being, firm, corporation, partnership, or other entity. Person also includes any human being, firm, corporation, partnership, or other entity as defined in sections 13(d)(3) and 14(d)(2) of the Exchange Act, as amended as of January 1, For purposes of this Plan, the term Person does not include the Company or any Related Entity, and the term Person does not include any employee-benefit plan maintained by the Company or by any Related Entity, and any person or entity organized, appointed, or established by the Company or by any subsidiary for or pursuant to the terms of any such employee-benefit plan, unless the Board determines that such an employee-benefit plan or such person or entity is a Person Plan means the Crestar Financial Corporation 1993 Stock Incentive Plan. -5-

27 1.27. Related Entity means any entity that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company Retirement means a Participant s separation from service on or after his early, normal or delayed retirement date under the Retirement Plan for Employees of Crestar Financial Corporation and Affiliated Corporations SAR means a stock appreciation right that entitles the holder to receive, with respect to each share of Common Stock encompassed by the exercise of such SAR, the lesser of (a) the excess, if any, of the Fair Market Value at the time of exercise over the Initial Value, or (b) the Initial Value. References to SARs include both Corresponding SARs and SARs granted independently of Options, unless the context requires otherwise Stock Award means Common Stock awarded to a Participant under Article VIII Total Shareholder Return means, with respect to any period, the sum of (i) the excess, if any of the Fair Market Value on the first day of the period over the Fair Market Value on the last day of the period and (ii) the value of any dividends on Common Stock payable with respect to such period. -6-

28 ARTICLE II PURPOSES The Plan is intended to assist the Company and Related Entities in recruiting and retaining individuals with ability and initiative by enabling such persons to participate in the future success of the Company and the Related Entities and to associate their interests with those of the Company and its shareholders. The Plan is intended to permit the grant of both Options qualifying under Section 422 of the Code ( incentive stock options ) and Options not so qualifying, and the grant of SARs, Stock Awards, Performance Shares and Incentive Awards. No Option that is intended to be an incentive stock option shall be invalid for failure to qualify as an incentive stock option. The proceeds received by the Company from the sale of Common Stock pursuant to this Plan shall be used for general corporate purposes. ARTICLE III ADMINISTRATION The Plan shall be administered by the Administrator. The Administrator shall have authority to grant Stock Awards, Performance Shares, Incentive Awards, Options and SARs upon such terms (not inconsistent with the provisions of this Plan), as the Administrator may consider appropriate. Such terms may include conditions (in addition to those contained in this Plan), on the exercisability of all or any part of an -7-

29 Option or SAR or on the transferability or forfeitability of a Stock Award, an award of Performance Shares or an Incentive Award, including by way of example and not of limitation, conditions on which Participants may defer receipt of benefits under the Plan, requirements that the Participant complete a specified period of employment with the Company or a Related Entity, requirements that the Company achieve a specified level of financial performance or that the Company achieve a specified level of financial return. Notwithstanding any such conditions, the Administrator may, in its discretion, accelerate the time at which any Option or SAR may be exercised, or the time at which a Stock Award may become transferable or nonforfeitable or the time at which an Incentive Award or an award of Performance Shares may be settled. In addition, the Administrator shall have complete authority to interpret all provisions of this Plan; to prescribe the form of Agreements; to adopt, amend, and rescind rules and regulations pertaining to the administration of the Plan; and to make all other determinations necessary or advisable for the administration of this Plan. The express grant in the Plan of any specific power to the Administrator shall not be construed as limiting any power or authority of the Administrator. Any decision made, or action taken, by the Administrator or in connection with the administration of this Plan shall be final and conclusive. Neither the Administrator nor any member of the Committee shall be liable for any act done in good faith with respect to this Plan or any Agreement, Option, SAR, Stock Award or Incentive Award or award of Performance Shares. All -8-

30 expenses of administering this Plan shall be borne by the Company, a Related Entity or a combination thereof. The Committee, in its discretion, may delegate to one or more officers of the Company or the Executive Committee of the Board, all or part of the Committee s authority and duties with respect to grants and awards to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act. The Committee may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Committee s delegate or delegates that were consistent with the terms of the Plan. ARTICLE IV ELIGIBILITY Any employee of the Company or a Related Entity (including a corporation that becomes a Related Entity after the adoption of this Plan), is eligible to participate in this Plan if the Administrator, in its sole discretion, determines that such person has contributed significantly or can be expected to contribute significantly to the profits or growth of the Company or a Related Entity. Directors of the Company who are employees of the Company or a Related Entity may be selected to participate in this Plan. -9-

31 ARTICLE V STOCK SUBJECT TO PLAN Shares Issued. Upon the award of shares of Common Stock pursuant to a Stock Award or in settlement of an award of Performance Shares, the Company may issue shares of Common Stock from its authorized but unissued Common Stock. Upon the exercise of any Option or SAR the Company may deliver to the Participant (or the Participant s broker if the Participant so directs), shares of Common Stock from its authorized but unissued Common Stock Aggregate Limit. The maximum aggregate number of shares of Common Stock that may be issued under this Plan, pursuant to the exercise of SARs and Options and the grant of Stock Awards and the settlement of Performance Shares awarded on and after February 28, 1997, is 4,000,000 shares. The maximum aggregate number of shares that may be issued under this Plan as Stock Awards and in settlement of Performance Shares awarded on and after February 28, 1997, is 1,200,000 shares. The maximum aggregate number of shares that may be issued under this Plan and the maximum number of shares that may be issued as Stock Awards and in settlement of Performance Shares shall be subject to adjustment as provided in Article XI Reallocation of Shares. If an Option is terminated, in whole or in part, for any reason other than its exercise or the exercise of a Corresponding SAR that is settled with Common Stock, the number of shares of Common Stock allocated to the Option or portion thereof may be reallocated to other Options, SARs, Performance Shares and -10-

32 Stock Awards to be granted under this Plan. If an SAR is terminated, in whole or in part, for any reason other than its exercise that is settled with Common Stock or the exercise of a related Option, the number of shares of Common Stock allocated to the SAR or portion thereof may be reallocated to other Options, SARs, Performance Shares and Stock Awards to be granted under this Plan. If an award of Performance Shares is terminated, in whole or in part, for any reason other than its settlement with Common Stock, the number of shares of Common Stock allocated to the Performance Shares or portion thereof may be reallocated to other options, SARs, Performance Shares and Stock Awards to be granted under this Plan. If a Stock Award is forfeited, in whole or in part, for any reason, the number of shares of Common Stock allocated to the Stock Award or portion thereof may be reallocated to other Options, SARs, Performance Shares and Stock Awards to be granted under this Plan. ARTICLE VI OPTIONS Award. In accordance with the provisions of Article IV, the Administrator will designate each individual to whom an Option is to be granted and will specify the number of shares of Common Stock covered by each such award; provided, however, that no individual may be granted Options in any calendar year covering more than 100,000 shares of Common Stock. -11-

33 6.02. Option Price. The price per share for Common Stock purchased on the exercise of an Option shall be determined by the Administrator on the date of grant, but shall not be less than the Fair Market Value on the date the Option is granted Maximum Option Period. The maximum period in which an Option may be exercised shall be ten years from the date such Option was granted. The terms of any Option may provide that it is exercisable for a period less than such maximum period Nontransferability. Except as provided in Section 6.05, each Option granted under this Plan shall be nontransferable except by will or by the laws of descent and distribution. In the event of any transfer of an Option (by the Participant or his transferee), the Option and any Corresponding SAR that relates to such Option must be transferred to the same person or persons or entity or entities. Except as provided in Section 6.05, during the lifetime of the Participant to whom the Option is granted, the Option may be exercised only by the Participant. No right or interest of a Participant in any Option shall be liable for, or subject to, any lien, obligation, or liability of such Participant Transferable Options. Section 6.04 to the contrary notwithstanding, if the Agreement provides, an Option that is not an incentive stock option may be transferred by a Participant to the Participant s children, grandchildren, spouse, one or more trusts for the benefit of such family members or a partnership in which such family members are the only partners, on such terms and conditions as may be permitted under Securities Exchange Commission Rule 16b-3 as in effect from time to time. The -12-

34 holder of an Option transferred pursuant to this section shall be bound by the same terms and conditions that governed the Option during the period that it was held by the Participant; provided, however, that such transferee may not transfer the Option except by will or the laws of descent and distribution. In the event of any transfer of an Option (by the Participant or his transferee), the Option and any Corresponding SAR that relates to such Option must be transferred to the same person or persons or entity or entities Employee Status. For purposes of determining the applicability of Section 422 of the Code (relating to incentive stock options), or in the event that the terms of any Option provide that it may be exercised only during employment or within a specified period of time after termination of employment, the Administrator may decide to what extent leaves of absence for governmental or military service, illness, temporary disability, or other reasons shall not be deemed interruptions of continuous employment Exercise. Subject to the provisions of this Plan and the applicable Agreement, an Option may be exercised in whole at any time or in part from time to time at such times and in compliance with such requirements as the Administrator shall determine; provided, however, that incentive stock options (granted under the Plan and all plans of the Company and its Related Entities) may not be first exercisable in a calendar year for stock having a Fair Market (determined as of the date an Option is granted) exceeding the limit prescribed by Code section 422(d). An Option granted -13-

35 under this Plan may be exercised with respect to any number of whole shares less than the full number for which the Option could be exercised. A partial exercise of an Option shall not affect the right to exercise the Option from time to time in accordance with this Plan and the applicable Agreement with respect to the remaining shares subject to the Option. The exercise of an Option shall result in the termination of any Corresponding SAR to the extent of the number of shares with respect to which the Option is exercised Payment. Unless otherwise provided by the Agreement, payment of the Option price shall be made in cash or a cash equivalent acceptable to the Administrator. Subject to rules established by the Administrator, payment of all or part of the Option price may be made with shares of Common Stock which have been owned by the Participant for at least six months and which have not been used for another exercise during the prior six months. If Common Stock is used to pay all or part of the Option price, the sum of the cash and cash equivalent and the Fair Market Value (determined as of the day preceding the date of exercise) of such shares must not be less than the Option price of the shares for which the Option is being exercised Change in Control. Section 6.07 to the contrary notwithstanding, each outstanding Option shall be fully exercisable (in whole or in part at the discretion of the holder) on and after a Control Change Date and during the period (i) beginning on the first day after a tender offer or exchange offer for shares of Common Stock (other than -14-

36 an offer made by the Company); provided that shares are acquired pursuant to such offer and (ii) ending on the thirtieth day following the expiration of such offer Shareholder Rights. No Participant shall have any rights as a shareholder with respect to shares subject to his Option until the date of exercise of such Option Disposition of Stock. A Participant shall notify the Company of any sale or other disposition of Common Stock acquired pursuant to an Option that was an incentive stock option if such sale or disposition occurs (i) within two years of the grant of an Option or (ii) within one year of the issuance of the Common Stock to the Participant. Such notice shall be in writing and directed to the Secretary of the Company. -15-

37 ARTICLE VII SARS Award. In accordance with the provisions of Article IV, the Administrator will designate each individual to whom SARs are to be granted and will specify the number of shares covered by each such award; provided, however, that no individual may be granted SARs in any calendar year covering more than 100,000 shares. For purposes of the preceding sentence, an Option and Corresponding SAR shall be treated as a single award. In addition, no Participant may be granted Corresponding SARs (under all incentive stock option plans of the Company and its Affiliates) that are related to incentive stock options which are first exercisable in any calendar year for stock having an aggregate Fair Market Value (determined as of the date the related Option is granted) that exceeds the limit prescribed by Code section 422(d) Maximum SAR Period. The maximum period in which an SAR may be exercised shall be ten years from the date such SAR was granted. The terms of any SAR may provide that it has a term that is less than such maximum period. -16-

38 7.03. Nontransferability. Except as provided in Section 7.04, each SAR granted under this Plan shall be nontransferable except by will or by the laws of descent and distribution. In the event of any such transfer, a Corresponding SAR and the related Option must be transferred to the same person or persons or entity or entities. Except as provided in Section 7.04, during the lifetime of the Participant to whom the SAR is granted, the SAR may be exercised only by the Participant. No right or interest of a Participant in any SAR shall be liable for, or subject to, any lien, obligation, or liability of such Participant Transferable SARs. Section 7.03 to the contrary notwithstanding, if the Agreement provides, an SAR, other than a Corresponding SAR that is related to an incentive stock option, may be transferred by a Participant to the Participant s children, grandchildren, spouse, one or more trusts for the benefit of such family members or a partnership in which such family members are the only partners, on such terms and conditions as may be permitted under Securities Exchange Commission Rule 16b-3 as in effect from time to time. The holder of an SAR transferred pursuant to this section shall be bound by the same terms and conditions that governed the SAR during the period that it was held by the Participant; provided, however, that such transferee may not transfer the SAR except by will or the laws of descent and distribution. In the event of any transfer of a Corresponding SAR (by the Participant or his transferee), the Corresponding SAR and the related Option must be transferred to the same person or person or entity or entities. -17-

39 7.05. Exercise. Subject to the provisions of this Plan and the applicable Agreement, an SAR may be exercised in whole at any time or in part from time to time at such times and in compliance with such requirements as the Administrator shall determine; provided, however, that a Corresponding SAR that is related to an incentive stock option may be exercised only to the extent that the related Option is exercisable and only when the Fair Market Value exceeds the option price of the related Option. An SAR granted under this Plan may be exercised with respect to any number of whole shares less than the full number for which the SAR could be exercised. A partial exercise of an SAR shall not affect the right to exercise the SAR from time to time in accordance with this Plan and the applicable Agreement with respect to the remaining shares subject to the SAR. The exercise of a Corresponding SAR shall result in the termination of the related Option to the extent of the number of shares with respect to which the SAR is exercised Change in Control. Section 7.05 to the contrary notwithstanding, each outstanding SAR shall be fully exercisable (in whole or in part at the discretion of the holder) on and after a Control Change Date and during the period (i) beginning on the first day after any tender offer or exchange offer for shares of Common Stock (other than one made by the Company); provided that shares are acquired pursuant to such offer and (ii) ending on the thirtieth day following the expiration of such offer. -18-

40 7.07. Employee Status. If the terms of any SAR provide that it may be exercised only during employment or within a specified period of time after termination of employment, the Administrator may decide to what extent leaves of absence for governmental or military service, illness, temporary disability or other reasons shall not be deemed interruptions of continuous employment Settlement. At the Administrator s discretion, the amount payable as a result of the exercise of an SAR may be settled in cash, Common Stock, or a combination of cash and Common Stock. No fractional share will be deliverable upon the exercise of an SAR but a cash payment will be made in lieu thereof Shareholder Rights. No Participant shall, as a result of receiving an SAR, have any rights as a shareholder of the Company until the date that the SAR is exercised and then only to the extent that the SAR is settled by the issuance of Common Stock. ARTICLE VIII STOCK AWARDS Award. In accordance with the provisions of Article IV, the Administrator will designate each individual to whom a Stock Award is to be made and will specify the number of shares of Common Stock covered by each such award; provided, however, that no Participant may receive Stock Awards in any calendar year for more than 30,000 shares of Common Stock. -19-

41 8.02. Vesting. The Administrator, on the date of the award, may prescribe that a Participant s rights in a Stock Award shall be forfeitable or otherwise restricted for a period of time or subject to such conditions as may be set forth in the Agreement Performance Objectives. In accordance with Section 8.02, the Administrator may prescribe that Stock Awards will become vested or transferable or both based on objectives stated with respect to the Company s, a Related Entity s or an operating unit s return on equity, earnings per share, total earnings, earnings growth, return on assets, Fair Market Value, NIACC, Efficiency Ratio, Total Shareholder Return or such other measures as may be selected by the Administrator. If the Administrator, on the date of award, prescribes that a Stock Award shall become nonforfeitable and transferable only upon the attainment of performance objectives, the shares subject to such Stock Award shall become nonforfeitable and transferable only to the extent that the Administrator certifies that such objectives have been achieved Employee Status. In the event that the terms of any Stock Award provide that shares may become transferable and nonforfeitable thereunder only after completion of a specified period of employment, the Administrator may decide in each case to what extent leaves of absence for governmental or military service, illness, temporary disability, or other reasons shall not be deemed interruptions of continuous employment. -20-

42 8.05. Change in Control. Sections 8.02, 8.03 and 8.04 to the contrary notwithstanding, on and after a Control Change Date or the first day following a tender offer or exchange offer for shares of Common Stock (other than one made by the Company), provided that shares are acquired pursuant to such offer, each outstanding Stock Award shall be transferable and nonforfeitable as of the Control Change Date or the first day following such offer Shareholder Rights. Prior to their forfeiture (in accordance with the applicable Agreement and while the shares of Common Stock granted pursuant to the Stock Award may be forfeited or are nontransferable), a Participant will have all rights of a shareholder with respect to a Stock Award, including the right to receive dividends and vote the shares; provided, however, that during such period (i) a Participant may not sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of shares of Common Stock granted pursuant to a Stock Award, (ii) the Company shall retain custody of the certificates evidencing shares of Common Stock granted pursuant to a Stock Award, and (iii) the Participant will deliver to the Company a stock power, endorsed in blank, with respect to each Stock Award. The limitations set forth in the preceding sentence shall not apply after the shares of Common Stock granted under the Stock Award are transferable and are no longer forfeitable. -21-

43 ARTICLE IX PERFORMANCE SHARE AWARDS Award. In accordance with the provisions of Article IV, the Administrator will designate each individual to whom an award of Performance Shares is to be made and will specify the number of shares of Common Stock covered by each such award; provided, however, that the maximum number of shares of Common Stock that may be earned by a Participant under all Performance Share awards (whether settled in Common Stock, cash or a combination of Common Stock and cash) granted in a calendar year shall be the product of (i) 35,000 shares and (ii) the number of years (twelve consecutive months) during which one or more performance criteria is measured Earning the Award. The Administrator, on the date of the grant of an award, shall prescribe that the Performance Shares, or portion thereof, will be earned, and the Participant will be entitled to receive payment pursuant to the award of Performance Shares, only upon the satisfaction of performance objectives and such other criteria as may be prescribed by the Administrator during a performance measurement period of at least one year. The performance objectives may be stated with respect to the Company s, a Related Entity s or an operating unit s return on equity, earnings per share, total earnings, earnings growth, return on assets, Fair Market Value, NIACC, Efficiency Ratio, Total Shareholder Return or such other measures as may be selected by the Administrator. No payments will be made with respect to Performance Shares unless, and then only to the extent that, the Administrator certifies that such objectives have been achieved. -22-

44 9.03. Payment. In the discretion of the Administrator, the amount payable when an award of Performance Shares is earned may be settled in cash, by the issuance of Common Stock or a combination of cash and Common Stock. A fractional share shall not be deliverable when an award of Performance Shares is earned, but a cash payment will be made in lieu thereof Shareholder Rights. No Participant shall, as a result of receiving an award of Performance Shares, have any rights as a shareholder until and to the extent that the award of Performance Shares is earned and settled by the issuance of Common Stock. After an award of Performance Shares is earned, if settled completely or partially in Common Stock, a Participant will have all the rights of a shareholder with respect to such Common Stock Nontransferability. Except as provided in Section 9.06, Performance Shares granted under this Plan shall be nontransferable except by will or by the laws of descent and distribution. No right or interest of a Participant in any Performance Shares shall be liable for, or subject to, any lien, obligation, or liability of such Participant Transferable Performance Shares. Section 9.05 to the contrary notwithstanding, if the Agreement provides, an award of Performance Shares may be transferred by a Participant to the Participant s children, grandchildren, spouse, one or more trusts for the benefit of such family members or a partnership in which such family members are the only partners, on such terms and conditions as may be permitted under Securities Exchange Commission Rule 16b- 3 as in effect from time to -23-

45 time. The holder of Performance Shares transferred pursuant to this section shall be bound by the same terms and conditions that governed the Performance Shares during the period that they were held by the Participant; provided, however that such transferee may not transfer Performance Shares except by will or the laws of descent and distribution Employee Status. In the event that the terms of any Performance Share award provide that no payment will be made unless the Participant completes a stated period of employment, the Administrator may decide to what extent leaves of absence for government or military service, illness, temporary disability, or other reasons shall not be deemed interruptions of continuous employment Change In Control. Section 9.02 to the contrary notwithstanding, a pro rata amount of each outstanding Performance Share award shall be earned and settled in whole shares of Common Stock as of a Control Change Date that occurs at least three months after the first day of the measurement period or on the first day after a tender offer or exchange offer for shares of Common Stock (other than one made by the Company), provided that such day is at least three months after the first day of the measurement period and provided further that shares are acquired pursuant to such offer. Such Common Stock shall be nonforfeitable and transferable. The number of shares of Common Stock issuable under this Section 9.02 shall be determined by multiplying the target amount of shares (as prescribed by the applicable Agreement), by a fraction. The numerator shall be the number of days in the period beginning on the -24-

46 date of the first day of the measurement period and ending on the Control Change Date or the first day after the tender or exchange offer described in this Section The denominator is the number of days in the period, or the longest of such periods, during which performance is measured under the Performance Share award. ARTICLE X INCENTIVE AWARDS Award. The Administrator shall designate Participants to whom Incentive Awards are made. All Incentive Awards shall be finally determined exclusively by the Administrator under the procedures established by the Administrator; provided, however, that no Participant may receive an Incentive Award payment in any calendar year that exceeds the lesser of (i) $1,000,000 and (ii) 150% of the Participant s annual base salary (prior to any salary reduction or deferral elections) as of the date of grant of the Incentive Award Terms and Conditions. The Administrator, at the time an Incentive Award is made, shall specify the terms and conditions which govern the award. Such terms and conditions shall prescribe that the Incentive Award shall be earned only upon, and to the extent that, performance objectives are satisfied. The performance objectives may be stated with respect to the Company s, a Related Entity s or an operating unit s return on equity, earnings per share, total earnings, earnings growth, return on assets, Fair Market Value, NIACC, Efficiency Ratio, Total Shareholder Return or such other measures as may be selected by the Administrator. Such terms and conditions also -25-

47 may include other limitations on the payment of Incentive Awards including, by way of example and not of limitation, requirements that the Participant complete a specified period of employment with the Company or a Related Entity. The Administrator, at the time an Incentive Award is made, shall also specify when amounts shall be payable under the Incentive Award and whether amounts shall be payable in the event of the Participant s death, Disability, or Retirement. No payments will be made with respect to an Incentive Award unless, and then only to the extent that, the Administrator certifies that the performance objectives have been achieved Nontransferability. Incentive Awards granted under this Plan shall be nontransferable except by will or by the laws of descent and distribution and then only to the extent that the Administrator specified, at the time the Incentive Award was made, that amounts may be payable in the event of the Participant s death. No right or interest of a Participant in an Incentive Award shall be liable for, or subject to, any lien, obligation, or liability of such Participant Employee Status. If the terms of an Incentive Award provide that a payment will be made thereunder only if the Participant completes a stated period of employment, the Administrator may decide to what extent leaves of absence for governmental or military service, illness, temporary disability or other reasons shall not be deemed interruptions of continuous employment Change in Control. Section to the contrary notwithstanding, a pro rata amount of each Incentive Award shall be earned as of a Control Change Date that -26-

48 occurs at least three months after the first day of the measurement period or on the first day after a tender offer or exchange offer for shares of Common Stock (other than one made by the Company), provided that such day is at least three months after the first day of the measurement period and provided further that shares are acquired pursuant to such offer. The amount payable under this Section shall be determined by multiplying the target amount (as prescribed by the applicable Agreement), by a fraction. The numerator shall be the number of days in the period beginning on the first day of the measurement period and ending on the Control Change Date or the first day after the tender or exchange offer described in this Section The denominator shall be the number of days in the period, or the longest of such periods, during which performance is measured under the Incentive Award Shareholder Rights. No Participant shall, as a result of receiving an Incentive Award, have any rights as a shareholder of the Company or any Affiliate on account of such award. -27-

49 ARTICLE XI ADJUSTMENT UPON CHANGE IN COMMON STOCK The maximum number of shares as to which Options, SARs, Performance Shares and Stock Awards may be granted under this Plan, the terms of outstanding Stock Awards, Options, Performance Shares, Incentive Awards, and SARs, and the per individual limitations on the number of shares for which Options, SARs, Performance Shares, and Stock Awards may be granted shall be adjusted as the Committee shall determine to be equitably required in the event that (a) the Company (i) effects one or more stock dividends, stock split-ups, subdivisions or consolidations of shares or (ii) engages in a transaction to which Section 424 of the Code applies or (b) there occurs any other event which, in the judgment of the Committee necessitates such action. Any determination made under this Article XI by the Committee shall be final and conclusive. The issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the maximum number of shares as to which Options, SARs, Performance Shares and Stock Awards may be granted, the per individual limitations on the number of shares for which Options, SARs, Performance Shares and -28-

50 Stock Awards may be granted or the terms of outstanding Stock Awards, Options, Performance Shares, Incentive Awards or SARs. The Committee may make Stock Awards and may grant Options, SARs, Performance Shares, and Incentive Awards in substitution for performance shares, phantom shares, stock awards, stock options, stock appreciation rights, or similar awards held by an individual who becomes an employee of the Company or a Related Entity in connection with a transaction described in the first paragraph of this Article XI. Notwithstanding any provision of the Plan (other than the limitation of Section 5.02), the terms of such substituted Stock Awards or Option, SAR, Performance Shares or Incentive Award grants shall be as the Committee, in its discretion, determines is appropriate. -29-

51 ARTICLE XII COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES No Option or SAR shall be exercisable, no Common Stock shall be issued, no certificates for shares of Common Stock shall be delivered, and no payment shall be made under this Plan except in compliance with all applicable federal and state laws and regulations (including, without limitation, withholding tax requirements), any listing agreement to which the Company is a party, and the rules of all domestic stock exchanges on which the Company s shares may be listed. The Company shall have the right to rely on an opinion of its counsel as to such compliance. Any share certificate issued to evidence Common Stock when a Stock Award is granted, a Performance Share is settled or for which an Option or SAR is exercised may bear such legends and statements as the Administrator may deem advisable to assure compliance with federal and state laws and regulations. No Option or SAR shall be exercisable, no Stock Award or Performance Share shall be granted, no Common Stock shall be issued, no certificate for shares shall be delivered, and no payment shall be made under this Plan until the Company has obtained such consent or approval as the Administrator may deem advisable from regulatory bodies having jurisdiction over such matters. -30-

52 ARTICLE XIII GENERAL PROVISIONS Effect on Employment and Service. Neither the adoption of this Plan, its operation, nor any documents describing or referring to this Plan (or any part thereof), shall confer upon any individual any right to continue in the employ or service of the Company or a Related Entity or in any way affect any right and power of the Company or a Related Entity to terminate the employment or service of any individual at any time with or without assigning a reason therefor Unfunded Plan. The Plan, insofar as it provides for grants, shall be unfunded, and the Company shall not be required to segregate any assets that may at any time be represented by grants under this Plan. Any liability of the Company to any person with respect to any grant under this Plan shall be based solely upon any contractual obligations that may be created pursuant to this Plan. No such obligation of the Company shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company Rules of Construction. Headings are given to the articles and sections of this Plan solely as a convenience to facilitate reference. The reference to any statute, regulation, or other provision of law shall be construed to refer to any amendment to or successor of such provision of law Tax Withholding. Each Participant shall be responsible for satisfying any income and employment tax withholding obligation attributable to participation in this -31-

53 Plan. In accordance with procedures established by the Administrator, a Participant may surrender shares of Common Stock, or receive fewer shares of Common Stock than otherwise would be issuable, in satisfaction of all or part of that obligation Limitation on Benefits. (a) Despite any other provision of this Plan, if KPMG Peat Marwick (the Accounting Firm ) determines that receipt of benefits or payments under this Plan would subject a Participant to tax under Code section 4999, it must determine whether some amount of the benefits or payments would meet the definition of a Reduced Amount. If the Accounting Firm determines that there is a Reduced Amount, the total benefits and payments must be reduced to such Reduced Amount, but not below zero. (b) If the Accounting Firm determines that the benefits and payments should be reduced to the Reduced Amount, the Company must promptly notify the Participant of that determination, including a copy of the detailed calculations by the Accounting Firm. All determinations made by the Accounting Firm under this section are binding upon the Company and the Participant. (c) It is the intention of the Company and the Participant to reduce the benefits and payments under this Plan only if the aggregate Net After Tax Receipts to the Participant would thereby be increased. As a result of the uncertainty in the application of Code section 4999 at the time of the initial determination by the Accounting Firm under this section, however, it is possible that amounts will have been paid or distributed under the Plan to or for the benefit of a Participant which should not -32-

54 have been so paid or distributed ( Overpayment ) or that additional amounts which will not have been paid or distributed under the Plan to or for the benefit of a Participant could have been so paid or distributed ( Underpayment ) in each case, consistent with the calculation of the Reduced Amount. If the Accounting Firm, based either upon the assertion of a deficiency by the Internal Revenue Service against the Company or the Participant which the Accounting Firm believes has a high probability of success or controlling precedent or other substantial authority, determines that an Overpayment has been made, any such Overpayment must be treated for all purposes as a loan ab initio to which Participant must repay to the Company together with interest at the applicable federal rate under Code section 7872(f)(2); provided, however, that no such loan may be deemed to have been made and no amount shall be payable by Participant to the Company if and to the extent such deemed loan and payment would not either reduce the amount on which Participant is subject to tax under Code section 1 or 4999 or generate a refund of such taxes. If the Accounting Firm, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, the Accounting Firm must promptly notify the Administrator of the amount of the Underpayment. (d) For purposes of this section, (i) Net After Tax Receipt means the Present Value of a payment or benefit under this Plan net of all taxes imposed on Participant with respect thereto under Code sections 1 and 4999, determined by applying the highest marginal rate under Code section 1 which applied to the -33-

55 Participant s taxable income for the immediately preceding taxable year; (ii) Present Value means the value determined in accordance with Code section 280G(d)(4); and (iii) Reduced Amount means the smallest aggregate amount of all payments or benefit under this Plan which (a) is less than the sum of all payments or benefit under this Plan and (b) results in aggregate Net After Tax Receipts which are equal to or greater than the Net After Tax Receipts which would result if the aggregate payments or benefit under this Plan were any other amount less than the sum of all payments or benefit under this Plan. ARTICLE XIV AMENDMENT The Board may amend or terminate this Plan from time to time; provided, however, that no amendment may become effective until shareholder approval is obtained if (i) the amendment increases the aggregate number of shares of Common Stock that may be issued under the Plan (other than an adjustment pursuant to Article XI) or (ii) the amendment changes the class of individuals eligible to become Participants. No amendment shall, without a Participant s consent, adversely affect any rights of such Participant under any Stock Award, Performance Share award, Option, SAR or Incentive Award outstanding at the time such amendment is made. -34-

56 ARTICLE XV DURATION OF PLAN No Stock Award, Performance Share award, Option, SAR or Incentive Award may be granted under this Plan after February 27, Stock Awards, Performance Share awards, Options, SARs and Incentive Awards granted before that date shall remain valid in accordance with their terms. ARTICLE XVII EFFECTIVE DATE OF PLAN Options, SARs, Performance Shares and Incentive Awards may be granted under this Plan upon its adoption by the Board, provided that no Option, SAR, Performance Shares or Incentive Award granted on or after February 28, 1997, shall be effective or exercisable unless this amended and restated Plan is approved by a majority of the votes cast by the Company s shareholders, voting either in person or by proxy, at a duly held shareholders meeting at which a quorum is present. Stock Awards may be granted under this amended and restated Plan on or after February 28, 1997, upon the later of its adoption by the Board or its approval by shareholders in accordance with the preceding sentence. -35-

57 EXHIBIT CRESTAR FINANCIAL CORPORATION BOARD OF DIRECTORS MEETING Friday, December 20, 1996 RESOLUTIONS AMENDING THE SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AND THE 1993 STOCK INCENTIVE PLAN: RESOLVED, that the Board of Directors of Crestar Financial Corporation hereby amends Section 4.01 of the Crestar Financial Corporation Supplemental Executive Retirement Plan such that the benefit payable to the surviving spouse of a participant who dies before attaining age 55 shall be the greater of (i) the benefit payable under the current SERP formula or (ii) the benefit that would be payable under the SERP benefit formula taking into account the participant s base salary as in effect on the date of death and his prior year s bonus (if the participant completed less than six months service in the year of death) or his current bonus (if the participant completed at least six months service in the year of death). : FURTHER RESOLVED, that the Board of Directors of Crestar Financial Corporation hereby amends Section 7.03 of the Crestar Financial Corporation 1993 Stock Incentive Plan in the manner set forth on the attached Exhibit I. FINALLY RESOLVED, that the appropriate officers of the Corporation are authorized and directed to take such actions and to execute such documents as they may deem necessary or appropriate to implement the foregoing resolutions, all without the necessity of further action by this Board.

58 Exhibit I 7.03 Transferability. (a) Except as provided in Section 7.03(b), each Option and SAR granted under this Plan shall be nontransferable except by will or by the laws of descent and distribution. In the event of any such transfer, the Option and any Corresponding SAR that relates to such Option must be transferred to the same person or persons or entity or entities. Except as provided in Section 7.03(b), during the lifetime of the Participant to whom the Option or SAR is granted, the Option or SAR may be exercised only by he Participant. No right or interest of a Participant in any Option shall be liable for, or subject to, any lien, obligation, or liability of such Participant. (b) Section 7.03(a) to the contrary notwithstanding, if the Agreement provides, an Option that is not an incentive stock option and an SAR that is not related to an incentive stock option may be transferred by a Participant to the Participant s children, grandchildren, spouse, one or more trusts for the benefit of such family members or a partnership in which such family members are the only partners, on such terms and conditions as may be permitted under Securities Exchange Commission Rule 16-3 as in effect from time to time. The holder of an Option or SAR transferred pursuant to this Section 7.03 (b) shall be bound by the same terms and conditions that governed the Option or SAR during the period that it was held by the Participant; provided, however, that such transferee may not transfer the Option or SAR except by will or the laws of descent and distribution. In the event of any transfer of an Option or SAR (by the Participant or his transferee), the Option and any Corresponding SAR that relates to such Option must be transferred to the same person or persons or entity or entities.

59 EXHIBIT Compensation Committee Meeting 12/18/97 Supplemental Executive Retirement Plan Resolutions (Committee Approval Only) RESOLVED, That, based on studies and recommendations of the Committee s outside consultant, the Committee hereby approves the following amendments to the Supplemental Executive Retirement Plan, effective December 17, 1997: 1. The definition of Years of Service in Section 1.31 of the Plan is revised to read as follows: Years of Service means the total years of service as determined under the terms of the Retirement Plan for purposes of determining the Participant s vested or nonforfeitable interest in the Retirement Plan. For any Participant who is not in pay status as of December 17, 1997, Years of Service means two times the total years of service as determined under the terms of the Retirement Plan for purposes of determining the Participant s vested or nonforfeitable interest in the Retirement Plan plus five additional Years of Service for employment with any prior employer other than the Corporation or an Affiliate. In addition, Years of Service includes service with a successor corporation following a Change in Control to the extent that such service would be recognized for purposes of determining the Participant s vested or nonforfeitable interest in the Retirement Plan if such successor were the Corporation. In the event of a Change in Control, Years of Service shall also include two additional Years of Service if the Participant becomes entitled to payments under a severance agreement under the Crestar Financial Corporation Executive Severance Plan (the Executive Severance Plan ) that provides for a lump sum severance amount based on two times his base pay and bonus or three additional Years of Service if the Participant becomes entitled to payments under a severance agreement under the Executive Severance Plan that provides for a lump sum severance amount based on three times his base pay and bonus. To the extent approved by the Committee, Years of Service shall include additional service with a predecessor employer or entity acquired by the Corporation or an Affiliate. Except as provided in the second sentence of this Section 1.31, a period of service with the Corporation, an Affiliate, a predecessor employer or entity, a successor or any other period shall only be counted once in determining a Participant s Years of Service. Notwithstanding the foregoing, a Participant s Years of Service shall not be less than the number of years determined in accordance with the provisions of Exhibit I to the Plan as approved by the Committee from time to time and in all events the total Years of Service credited to a Participant under this Section 1.31 and Exhibit I in excess of twenty Years of Service shall be disregarded. 2. The definition of Offset Amount in Section 1.23 is amended by adding the following sentence to the end of that Section: Offset Amount shall also include for any Participant who is credited under Section 1.31 with five Years of Service for service with a prior employer or for any other service with an employer other than the Corporation or an Affiliate, the sum of the annual benefits, if any, payable to or on behalf of that Participant for his lifetime under any qualified or nonqualified defined benefit plan of a prior employer and assuming a benefit commencement date as of the date that benefits are scheduled to commence under Article III or IV.

60 EXHIBIT CRESTAR FINANCIAL CORPORATION BOARD OF DIRECTORS MEETING September 26, 1997 RESOLUTIONS AMENDING THE DIRECTORS EQUITY PROGRAM. RESOLVED, that the Board of Directors of Crestar Financial Corporation hereby amends Subsection 2(k) of the Directors Equity Program to read as follows: Director means a duly elected or appointed member of he Board who is not an employee of he Company or an affiliate or subsidiary of the Company, excluding any member of the Board who is required to transfer, assign or pay his or her benefits under the Plan to a the member s employer or firm. FURTHER RESOLVED, that the Board of Directors of Crestar Financial Corporation hereby ratifies and affirms all awards that have been made under the Directors Equity Program. FINALLY RESOLVED, that the appropriate officers of the Corporation are hereby are hereby authorized and directed to take such actions and to execute such documents as they may deem necessary or appropriate to implement the foregoing resolutions, all without the necessity of further action by this Board.

61 EXHIBIT 11.1 SunTrust Banks, Inc. Statement re: Computation of Per Share Earnings (In thousands, except per share data) Year Ended December Basic Income before extraordinary gain $ 1,332,297 $ 1,331,809 $ 1,375,537 $ 1,294,100 $ 1,123,952 $ 971,017 Extraordinary gain, net of taxes 202,648 Net income $ 1,332,297 $ 1,331,809 $ 1,375,537 $ 1,294,100 $ 1,326,600 $ 971,017 Average basic common shares 278, , , , , ,908 Income before extraordinary gain $ 4.79 $ 4.71 $ 4.78 $ 4.35 $ 3.54 $ 3.08 Extraordinary gain, net of taxes 0.64 Earnings per common share - basic $ 4.79 $ 4.71 $ 4.78 $ 4.35 $ 4.18 $ 3.08 Diluted Income before extraordinary gain $ 1,332,297 $ 1,331,809 $ 1,375,537 $ 1,294,100 $ 1,123,952 $ 971,017 Extraordinary gain, net of taxes 202,648 Net income $ 1,332,297 $ 1,331,809 $ 1,375,537 $ 1,294,100 $ 1,326,600 $ 971,017 Average common shares outstanding 278, , , , , ,908 Incremental shares outstanding (1) 3,139 3,557 3,882 3,122 4,095 4,803 Average diluted common shares 281, , , , , ,711 Income before extraordinary gain $ 4.73 $ 4.66 $ 4.72 $ 4.30 $ 3.50 $ 3.04 Extraordinary gain, net of taxes 0.63 Earnings per common share - diluted $ 4.73 $ 4.66 $ 4.72 $ 4.30 $ 4.13 $ 3.04 (1) Includes the incremental effect of stock options and restricted stock outstanding computed under the treasury stock method.

62 Exhibit 12.1 SunTrust Banks, Inc. Ratio of Earnings to Fixed Charges (In thousands) Year Ended December Ratio 1 - including deposit interest Earnings: Income before income taxes and extraordinary gain $ 1,909,138 $ 1,823,324 $ 2,029,440 $ 1,919,556 $ 1,695,657 $ 1,498,306 Fixed charges 1,490,092 1,932,209 3,065,973 3,775,173 2,852,180 2,784,251 Total $ 3,399,230 $ 3,755,533 $ 5,095,413 $ 5,694,729 $ 4,547,837 $ 4,282,557 Fixed charges: Interest on deposits $ 771,631 $ 1,117,296 $ 1,812,385 $ 2,452,919 $ 1,626,132 $ 1,644,229 Interest on funds purchased and securities sold under agreements to repurchase 106, , , , , ,086 Interest on other short-term borrowings 33,511 14,062 63,359 97,903 79, ,800 Interest on long-term debt 537, , , , , ,664 Portion of rents representative of the interest factor (1/3) of rental expense 41,553 40,721 38,999 38,192 37,428 37,472 Total $ 1,490,092 $ 1,932,209 $ 3,065,973 $ 3,775,173 $ 2,852,180 $ 2,784,251 Earnings to fixed charges 2.28 x 1.94 x 1.66 x 1.51 x 1.59 x 1.54 x Ratio 2 - excluding deposit interest Earnings: Income before income taxes and extraordinary gain $ 1,909,138 $ 1,823,324 $ 2,029,440 $ 1,919,556 $ 1,695,657 $ 1,498,306 Fixed charges 718, ,913 1,253,588 1,322,254 1,226,048 1,140,022 Total $ 2,627,599 $ 2,638,237 $ 3,283,028 $ 3,241,810 $ 2,921,705 $ 2,638,328 Fixed charges: Interest on funds purchased and securities sold under agreements to repurchase $ 106,174 $ 140,463 $ 412,218 $ 651,235 $ 749,561 $ 634,086 Interest on other short-term borrowings 33,511 14,062 63,359 97,903 79, ,800 Interest on long-term debt 537, , , , , ,664 Portion of rents representative of the interest factor (1/3) of rental expense 41,553 40,721 38,999 38,192 37,428 37,472 Total $ 718,461 $ 814,913 $ 1,253,588 $ 1,322,254 $ 1,226,048 $ 1,140,022 Earnings to fixed charges 3.66 x 3.24 x 2.62 x 2.45 x 2.38 x 2.31 x

63 S UN T RUST Throughout 2003, SunTrust people worked harder than ever. To expand our product range. Build up our distribution network. Intensify our sales focus. And do all the other things that add up to a financial services institution determined to serve its customers better than the competition and deliver the consistently strong financial performance shareholders expect. In turn, our people also provided a compelling answer to a timely question: Why SunTrust? SunTrust Banks, Inc Annual Report

64 ABOUT THE COMPANY SunTrust Banks, Inc., with year-end 2003 assets of $125.4 billion, is one of the nation s largest and strongest financial holding companies. Through its flagship subsidiary, SunTrust Bank, the Company provides deposit, credit and trust and investment services. Additional subsidiaries provide mortgage banking, insurance, asset management, brokerage and capital market services. SunTrust s customer base encompasses a broad range of individuals and families, high-net-worth clients, businesses and institutions. SunTrust enjoys leading market positions in some of the highest-growth markets in the United States and also serves customers in selected markets nationally. The Company s priorities include consistency in financial performance, quality in customer service and a strong commitment to all segments of the communities it serves. SunTrust s 1,201 retail and specialized service branches and 2,225 ATMs are located primarily in Florida, Georgia, Maryland, Tennessee, Virginia and the District of Columbia. In addition, SunTrust provides customers with a selection of technology-based banking channels, including Internet, PC and Telephone Banking. Our Internet address is As of December 31, 2003, SunTrust had total assets under advisement of $181 billion. This includes $159 billion in trust assets as well as $22 billion in retail brokerage assets. SunTrust s mortgage servicing portfolio grew to $69 billion at year-end. CONTENTS Letter to Shareholders 9 Selected Financial Data 14 Management s Discussion 15 Financial Statements 54 Board of Directors 96 Shareholder Information inside back cover

65 Why SunTrust? With enhancements to our delivery channels and product line-up as well as an intensified focus on sales and service, SunTrust delivers an extensive range of financial products with the individual customer focus typically associated with much smaller institutions. That s a question we are often asked by shareholders and by prospective shareholders in today s value-conscious investment environment. It is a question we welcome. Why, indeed, choose SunTrust? In part, the answer lies in a distinctive combination of strengths and competitive advantages that we believe differentiates SunTrust in a very positive way from other large financial services organizations. For one thing, our franchise is widely regarded as one of the most attractive in the United States given our strong positions in high-growth markets. We have the strategies, scope, technology and product capabilities needed to tap the opportunities our markets present and to sustain success in a changing industry. Our relationship-based operating model supports a relentless and profitable focus on the needs of our customers. Our people are smart. They re energized. And, we re told by customers, they re among the very best in the business. Thanks to these unique strengths, SunTrust can point to an impressive record of performance over the years. Our strengths paid off again in 2003 in business-driven financial results that were not only good when viewed on their own, but indicative of our ongoing earnings potential. In the following pages we talk about some 2003 developments that reflect SunTrust s current momentum and also underscore the Company s excellent growth prospects for 2004 and subsequent years. Annual Report 2003 SunTrust Banks, Inc. 1

66 The Right Place. The Right Business. One of SunTrust s biggest strengths is our Southeast and Mid-Atlantic regional franchise. Our geographic footprint is concentrated in some of the most economically vibrant and fastest-growing markets in the United States. Said another way, we think there s no better place to be in the domestic financial services business than exactly where we are. Of course, being in the right place doesn t automatically translate into consistent earnings growth. SunTrust also has built the right business mix to deliver consistently strong performance under different economic scenarios. We are a recognized leader in providing a broad array of financial services to consumers and businesses of all sizes through a multi-channel, 24/7 delivery network that emphasizes convenience to the customer and efficiency for us. We deliver highly competitive wealth management and investment-related services to high-net-worth clients ranging from affluent individuals to the very wealthy. We have the demonstrated capability to meet the full range of credit, capital markets and investment banking needs of corporate and institutional clients. HIGH-OPPORTUNITY MARKETS SunTrust s enviable growth prospects are in part attributable to the fact that population in our geographic footprint is expected to grow at a rate that far outpaces the projected national average of 4.8% over the next five years. This means strong demand for the financial services SunTrust provides. The projected growth rates for some of our most dynamic individual markets including those highlighted at left are especially encouraging. SunTrust s investments for the future are concentrated in high-opportunity markets like these. SunTrust Banks, Inc. 2 Annual Report 2003

67 An Outstanding Community Reinvestment Act (CRA) rating, broad-based community relations and philanthropic efforts and leadership in a variety of civic organizations reflect SunTrust s long-standing commitment to enhancing the economic and social vitality of the communities we serve. And our mortgage operation has grown into one of the largest and most successful in the United States. We also have the scope needed to be a meaningful player in our industry. We enjoy a leading position in virtually every market in which we operate. With assets of more than $125 billion, we are big enough to achieve the economies of scale that come with our size. And we can comfortably handle the critical investments in facilities, technology and people vital for future growth. Thinking Big. Acting Locally. What really sets SunTrust apart from other large, multi-state competitors is our business operating model. By that, we mean the way we re set up to deliver SunTrust s extensive resources our product range, our financial capabilities, our technologybased solutions with the personalized care and attention typically associated with smaller financial institutions, especially in the consumer and commercial markets. The key is true local orientation. To ensure a uniform customer experience throughout the SunTrust footprint, certain behind-the-scenes functions such as business strategy, marketing, product development and technology planning are handled on a consolidated basis at our corporate headquarters. But when it comes to issues that directly affect customers in the marketplace things like pricing, credit extension or problem resolution local SunTrust business managers have far greater decision-making latitude than is the case at our major competitors. During 2003, we instituted a series of operating model refinements, mostly invisible to customers and involving things like streamlining communication and coordination of key support functions. These changes help our customer-focused units, especially the more than 50 local banks that represent our primary face to our communities, meet client needs with increasing speed and responsiveness. Annual Report 2003 SunTrust Banks, Inc. 3

68 Underscoring the importance we place on community focus, we were particularly pleased in 2003 to receive an Outstanding Community Reinvestment Act (CRA) rating from the Federal Reserve Bank of Atlanta, the highest rating possible. SunTrust earned market recognition for a variety of strengths last year including outstanding call center effectiveness and creative employment practices. SunTrust was also named Best Financial Institution by the readers of Florida Monthly magazine. If We Build It, Customers Will Come. Although SunTrust s geographic franchise is already characterized by strong market-share positions, we continue to invest in high-growth markets and businesses. With the mid-2003 completion of our purchase of the former Lighthouse Financial Services, for example, the Company s footprint now includes the Hilton Head Island, SC area, one of our most demographically attractive markets. Asset Management Advisors (AMA), our family office, continues to reach out to some of the wealthiest families in the country those with more than $25 million in investable assets. New offices in Greenwich, CT and Charlotte, NC, along with existing offices in Palm Beach and Orlando, FL, Atlanta and Washington, DC reflect AMA s interest in being located where clients live. Our full-service brokerage serving corporate executives and highnet-worth investors, Alexander Key Investments, effectively doubled in size last year with new offices in Washington, DC, Orlando and Jacksonville, FL. THE PEOPLE EQUATION Through a comprehensive talent management process, SunTrust ensures continuity of leadership in key management positions, recognizing the diversity of our employee base. In addition, training and development programs are central to our priority of equipping all employees to meet the needs of clients in a rapidly changing business environment. SunTrust s increasing number of classroom-style offerings are complemented by cost-effective e-learning capabilities, which provide employees increased flexibility as they undertake career-enhancing classes. SunTrust Banks, Inc. 4 Annual Report 2003

69 SunTrust Mortgage expanded market share within the SunTrust footprint through the acquisition of Sun America Mortgage Corp. in Atlanta, and the opening of two new mortgage offices in Alpharetta and Peachtree City, GA. Additionally, with completion of the Lighthouse merger, SunTrust became the number-one mortgage lender in the Hilton Head market. Through joint-venture partnerships, the mortgage unit further expanded its presence in key markets such as Atlanta and Nashville, TN, as well as in select out-of-footprint markets such as Indianapolis, IN. As part of a continuing branch expansion effort, we opened 39 new retail branches in particularly fast-growing spots including Atlanta, Washington, DC, and Central and South Florida. Branch openings are based on intensive research on population growth and traffic patterns. This same research leads to the repositioning of less profitable branches. We want our branches in the best locations from a customer standpoint while also meeting our own financial performance standards. A new branch design creates a more inviting customer experience, better complements our sales and service efforts and provides a cost-effective platform to expand SunTrust s retail presence in a standardized fashion. A new branch prototype design helps pattern our branch expansion. The prototype establishes a more customer-friendly physical environment that complements our sales and service focus while providing us with an ongoing research and development capability. This new concept, coupled with more standardized construction processes and product delivery, helps shorten the time needed for new offices to achieve profitability. Looking beyond branches, we built an additional customer call center in Cookeville, TN. It replaces three older facilities and will efficiently accommodate anticipated growth in telephone sales and service volume. Each month our call centers handle more than 100,000 inbound sales calls half of which turn into Annual Report SunTrust Banks, Inc.

70 customer applications. In a 2003 industry survey on telephone sales and service, SunTrust outranked other large banks as well as some well-known national retailers. We also launched specialized Client Care centers to step up service to targeted clients within our Commercial Banking, Business Banking and Private Banking areas. Available to clients via telephone and the Internet, each center provides 24/7 client access and automated services, plus sales and service advisors specifically trained to meet the specialized needs of these clients. Products: Looking Beyond Today s Needs. In addition to expanding our physical reach, we looked hard during 2003 at our product set. It s part of making sure we are not only serving client needs today, but also thinking ahead to what they will need in the future. A suite of highly competitive personal and business checking account products was introduced late in the year with great success. Checking accounts represent the cornerstone product with the majority of our 3.8 million client households and provide a starting point from which we can sell additional products and services. Another example, this time in the commercial market: In a move to expand our Purchasing Card program, SunTrust became one of the first banks in the U.S. to offer the industry-leading Card Manager and Payment Manager solutions from Works, Inc. These Web-based tools allow commercial clients to decrease costs by automating their payment processes and administering card programs online, while also helping us achieve revenue growth targets. For retirement plan sponsors, another targeted SunTrust market, our BenePay product provides a secure, on-line mechanism to manage plan distributions as well as more efficiently track participant distributions and payment information. Personalized service means more than face-to-face and telephone interactions. SunTrust was among the first banks to use online chat to offer immediate assistance to visitors surfing our Web site. SunTrust Banks, Inc. 6 Annual Report 2003

71 The early 2004 inauguration of a new, state-of-the-art data center caps a multi-year investment program that has provided SunTrust an industry-leading technology and information infrastructure. The return on this investment is increased availability of business systems, improved efficiency and more effective linkages within the Company all of which ultimately enhances the customer experience. SunTrust Securities, our broker-dealer subsidiary serving retail clients, broadened its appeal with an expanded life insurance product set that now includes long-term care, disability and other advanced insurance solutions. Meanwhile in its core business, SunTrust Securities account assets increased 20% to approximately $18 billion. The appeal of our highly regarded Internet Banking service was enhanced by adding online statements and check images, upgrading electronic bill presentment and payment features and improving self-service features. We also expanded online chat, an innovative feature, to encompass most consumer products. Now, sales representatives can electronically reach out to someone surfing our Web site and offer personal assistance in selecting the right product or in completing an application. Ninety-four percent of chat users tell us they would use the service again. S 3 +E 2 : A Formula for Success During 2003, a single-minded focus on customer relationships took center stage among SunTrust s institutional priorities. To serve as a quick reference point, we unveiled S 3 +E 2, a shorthand expression of what we see as the central elements of success in a business like ours: relentlessly Selling, Serving and Sustaining customer relationships through Excellence in Execution. Under the S 3 +E 2 banner, we implemented a variety of related initiatives, promotions and sales management processes that cut across all geographic units and business lines. Specific programs were put in place to focus on things like cross-business line referrals and client retention. And we upgraded reporting, tracking and goal-setting mechanisms. Annual Report SunTrust Banks, Inc.

72 SunTrust s formula for success, Selling, Serving and Sustaining client relationships, with Excellence in Execution, highlights SunTrust s commitment to retaining and building client relationships. As one example of S 3 +E 2 in action, we adopted a structured approach to improve sales effectiveness in our more than 1,200 branches. This new approach, which has been out system-wide, calls for individual sales plans for all employees, enhanced training, a lobby management program and customer access to investment professionals in every office. S 3 +E 2 is an evolving effort, but it is already contributing to results. Some highlights: In Retail Banking, 2003 sales per day by each employee exceeded the 2002 average by 38%, and more than 63,000 new clients were introduced to our SunTrust Securities brokers. Sales of home equity lines and loans exceeded the prior year by $7.3 billion, or 18%. In Commercial Banking, a newly installed sales process and supporting systems contributed to a 21% deposit balance increase and a 10% increase in loan balances. In Private Client Services, retail investment sales, heavily driven by branch introductions, were up 25% for the year. In our Mortgage business, closing volumes were up 42% over last year resulting in more than $43 billion in production. And a restructured and enhanced cross-sell program resulted in more than 95,000 other targeted products and services sold last year. In Corporate & Investment Banking, an intensified focus on developing mutually beneficial relationships with clients and a handful of new products contributed to a 19% increase in debt capital markets fees. As we see it, providing customers the products and services they need is central to fostering the mutually rewarding customer relationships upon which SunTrust s long-term success is based. S 3 +E 2 is how we re making that happen. Mortgage lending has evolved into a key national business with SunTrust Mortgage originating loans through 135 locations in SunTrust markets and adjacent states, maintaining correspondent and broker relationships in 48 states, and servicing loans in all 50 states and the District of Columbia. SunTrust Banks, Inc. 8 Annual Report 2003

73 L. Phillip Humann Chairman, President and Chief Executive Officer To Our Shareholders Just as we expected, SunTrust s performance picture brightened during 2003 as various performance-oriented investments and programs we put in place in recent years paid off with an increasingly positive impact. By the end of 2003, against the backdrop of an improving economy, earnings trends were strong and considerably more promising than they were when the year began. For the full year, net income was a solid $1.3 billion, or $4.73 per fully diluted share, a modest improvement over the prior year. Return on average assets was 1.09% and return on common equity was 14.67%. From an investment perspective, SunTrust share price improved some 25% over the course of the year. This gain notwithstanding, we see room for further share price appreciation over time as SunTrust s overall performance continues to improve as we believe it will. In addition, the Board of Directors in February 2004 approved an 11% increase in the dividend on SunTrust common stock, bringing the annual dividend to $2.00 per share. Annual Report SunTrust Banks, Inc.

74 FINANCIAL HIGHLIGHTS SunTrust Banks, Inc. Year Ended December 31 (Dollars in millions except per share data) For the Year Net income $ 1,332.3 $ 1,331.8 $ 1,375.5 Total revenue 1 5, , ,345.2 Common dividends paid Per Common Share Net income diluted $ 4.73 $ 4.66 $ 4.72 Dividends declared Common stock closing price Book value Financial Ratios Return on average total assets 1.09 % 1.23 % 1.34 % Return on average total assets less net unrealized gains on securities Return on average total shareholders equity Return on average realized shareholders equity Net interest margin Efficiency ratio Tier 1 capital ratio Total capital ratio Selected Average Balances Total assets $ 122,325.4 $ 108,516.1 $ 102,884.2 Earning assets 109, , ,034.1 Loans 76, , ,023.0 Deposits 80, , ,568.7 Realized shareholders equity 7, , ,328.0 Total shareholders equity 9, , ,073.8 Common shares diluted (thousands) 281, , ,584 At December 31 Total assets $ 125,393.2 $ 117,322.5 $ 104,740.6 Earning assets 112, , ,327.5 Loans 80, , ,959.2 Allowance for loan losses Deposits 81, , ,536.4 Realized shareholders equity 8, , ,704.3 Total shareholders equity 9, , ,359.6 Common shares outstanding (thousands) 281, , ,602 Market value of investment in common stock of The Coca-Cola Company (48,266,496 shares) $ 2,450 $ 2,111 $ 2,276 1 Total revenue is comprised of net interest income (taxable-equivalent) and noninterest income. 2 In this report, SunTrust presents a return on average assets less net unrealized gains on securities and a return on average realized equity. The foregoing numbers reflect adjustments to remove the effects of the ownership by the Company of 48.3 million shares of The Coca-Cola Company. The Company uses this information internally to gauge its actual performance in the industry. The Company believes that the return on average assets less the net unrealized gains on the securities portfolio is more indicative of the Company s return on assets because it more accurately reflects the return on the assets that are related to the Company s core businesses. The Company also believes that the return on average realized equity is more indicative of the Company s return on equity because the excluded equity relates primarily to a long-term holding of a specific security. 3 The net interest margin and efficiency ratios are presented on a fully taxable-equivalent (FTE) and 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 relative comparison between taxable and non-taxable amounts. SunTrust Banks, Inc. 10 Annual Report 2003

75 Financial Results The year s financial results are reviewed in great detail in the Management Discussion & Analysis that begins on page 15. In the spirit of openness in financial reporting, I invite you to review it carefully. For purposes of this letter, though, a quick overview of 2003 financial highlights is in order. In general, our earnings improvement was based on solid, revenue-driven gains in our major lines of business, with particularly strong growth in sales-related revenues. We saw year-over-year improvement in net interest income and, in particular, in fee income where there was noticeable pick-up in fees related to improving equity markets. Because of investments we made in market-driven businesses, such as wealth management and capital markets services, SunTrust is particularly well positioned to benefit from a stronger stock market. Improved Credit Quality The credit quality picture got progressively better during the year. SunTrust continued to be well-served by our traditionally conservative risk posture and careful credit management. We are proud that during an economic cycle when other large U.S. banks were hit by serious credit problems, SunTrust s credit quality remained best in class compared with both peer institutions and industry averages. On a less positive note, loan demand in one important market segment, the large corporate market, was weak in This overshadowed quite healthy loan growth in other areas such as consumer, mortgage and commercial lending. With our balance sheet positioned for rising interest rates, historically low rates had a dampening effect on our net interest margin, and thus on net interest income and earnings overall, especially during the first half of The good news is that this negative impact began to diminish and in fact turned around in the second half of the year. Signs were pointing to continued improvement as 2004 began. Focus on Efficiency Although we did a respectable job of keeping core operating expenses in check in 2003, further improving efficiency remains a critical corporate priority. To Annual Report SunTrust Banks, Inc.

76 this end, we have a variety of efficiency-related programs in place and are confident they will yield increasingly tangible results. SunTrust today is a much more cost-conscious operation than it was just a few years ago. Driving this point home is the fact that even as our assets have grown by 35% over the past five years, our total staff level has dropped by more than 9%. We accomplished this reduction through technology improvements and a disciplined approach to personnel management, not broad-scale layoffs that can affect employee morale and customer service. Positive View of the Future Looking ahead, although uncertainty is a fact of life in our industry, we at SunTrust are firmly focused on the future and feeling very good about it. As in the past, we are fortunate to be able to draw on the resources of an experienced and active Board of Directors. We note with appreciation the service of A.W. Dahlberg, who retired from the Board in And we welcome as a director J. Hicks Lanier, Chairman and Chief Executive Officer of Oxford Industries, Inc. Mr. Lanier joined the Board in November It is also appropriate to express appreciation to our shareholders for your confidence in our Company. A special word to shareholders who are not yet SunTrust customers: Please give us a chance to win your business. To shareholders that already are customers, and to other customers, we are pleased you have selected us to serve your financial needs. We will work hard to exceed your expectations. Finally, my thanks goes to all our employees for a job well done in In the end, they really are the answer to the question: Why SunTrust? /s/ L. Phillip Humann L. Phillip Humann Chairman, President and Chief Executive Officer SunTrust Banks, Inc. 12 Annual Report 2003

77 2003 FINANCIAL REPORT 14 SELECTED FINANCIAL DATA 15 MANAGEMENT S DISCUSSION 56 CONSOLIDATED STATEMENTS OF INCOME 57 CONSOLIDATED BALANCE SHEETS 58 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY 59 CONSOLIDATED STATEMENTS OF CASH FLOW 60 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 96 BOARD OF DIRECTORS IBC GENERAL INFORMATION Annual Report SunTrust Banks, Inc.

78 SELECTED FINANCIAL DATA Year Ended December 31 (Dollars in millions except per share and other data) Summary of Operations Interest and dividend income $ 4,768.8 $ 5,135.2 $ 6,279.6 $ 6,845.4 $ 5,960.2 $ 5,675.9 Interest expense 1, , , , , ,746.8 Net interest income 3, , , , , ,929.1 Provision for loan losses Net interest income after provision for loan losses 3, , , , , ,714.5 Noninterest income 1 2, , , , , ,653.9 Noninterest expense 2, 3 3, , , , , ,870.1 Income before provision for income taxes and extraordinary gain 1, , , , , ,498.3 Provision for income taxes Income before extraordinary gain 1, , , , , Extraordinary gain, net of taxes Net income $ 1,332.3 $ 1,331.8 $ 1,375.5 $ 1,294.1 $ 1,326.6 $ Total revenue $ 5,668.3 $ 5,552.1 $ 5,345.2 $ 4,922.1 $ 4,813.9 $ 4,627.4 Net interest income FTE 3, , , , , ,973.5 Per Common Share Diluted Income before extraordinary gain $ 4.73 $ 4.66 $ 4.72 $ 4.30 $ 3.50 $ 3.04 Extraordinary gain 0.63 Net income Basic Income before extraordinary gain Extraordinary gain 0.64 Net income Dividends declared Market price: High Low Close Selected Average Balances Total assets $ 122,325.4 $ 108,516.1 $ 102,884.2 $ 98,397.8 $ 92,820.8 $ 85,536.9 Earning assets 109, , , , , ,880.9 Loans 76, , , , , ,590.5 Deposits 80, , , , , ,725.3 Realized shareholders equity 7, , , , , ,641.4 Total shareholders equity 9, , , , , ,853.6 At December 31 Total assets $ 125,393.2 $ 117,322.5 $ 104,740.6 $ 103,660.4 $ 95,390.0 $ 93,169.9 Earning assets 112, , , , , ,295.1 Loans 80, , , , , ,540.6 Allowance for loan losses Deposits 81, , , , , ,033.3 Long-term debt 15, , , , , ,807.9 Realized shareholders equity 8, , , , , ,090.4 Total shareholders equity 9, , , , , ,178.6 Ratios and Other Data Return on average total assets 1.09 % 1.23 % 1.34 % 1.32 % 1.43 % 1.14 % Return on average assets less net unrealized gains on securities Return on average total shareholders equity Return on average realized shareholders equity Net interest margin Efficiency ratio Total average shareholders equity to total average assets Allowance to year-end loans Nonperforming assets to total loans plus OREO and other repossessed assets

79 Common dividend payout ratio Full-service banking offices 1,183 1,184 1,128 1,129 1,114 1,079 ATMs 2,225 2,286 1,944 1,991 1,968 1,839 Full-time equivalent employees 27,578 27,622 28,391 28,268 30,222 30,452 Average common shares diluted (thousands) 281, , , , , ,711 Average common shares basic (thousands) 278, , , , , ,908 Reconcilement of Non-GAAP Measures Return on average total assets 1.09 % 1.23 % 1.34 % 1.32 % 1.43 % 1.14 % Impact of excluding net unrealized securities gains Return on average assets less net unrealized gains on securities 1.11 % 1.26 % 1.37 % 1.35 % 1.48 % 1.18 % Return on average total shareholders equity % % % % % % Impact of excluding net unrealized securities gains Return on average realized shareholders equity % % % % % % Net interest income $ 3,320.3 $ 3,243.7 $ 3,252.6 $ 3,108.5 $ 3,145.5 $ 2,929.1 FTE Adjustment Net interest income FTE $ 3,365.3 $ 3,283.2 $ 3,293.4 $ 3,148.4 $ 3,188.0 $ 2, Includes an additional $52.9 million security gain in 2001 on the sale of STAR Systems, Inc. 2 Includes merger-related expenses of $16.0 million in 2002 related to the acquisition of the Florida franchise of Huntington Bancshares, Inc. and $42.4 million in 2000, $45.6 million in 1999 and $119.4 million in 1998 related to the acquisition of Crestar. 3 Includes expenses of $32.0 million from the proposal to acquire the former Wachovia Corporation in Represents the gain on sale of the Company s consumer credit card portfolio in 1999, net of $124.6 million in taxes. SunTrust Banks, Inc. 14 Annual Report 2003

80 MANAGEMENT S DISCUSSION This narrative will assist readers in their analysis of the accompanying Consolidated Financial Statements and supplemental financial information. It should be read in conjunction with the Consolidated Financial Statements and Notes on pages 54 through 92. In Management s Discussion, net interest income, net interest margin and the efficiency ratio are presented on a fully taxable-equivalent (FTE) basis, which is adjusted 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. Certain reclassifications have been made to prior year financial statements and related information to conform them to the 2003 presentation. SunTrust has made, and may continue to make, various forward-looking statements with respect to financial and business matters. The following discussion contains forward-looking statements that involve inherent risks and uncertainties. Actual results may differ materially from those contained in these forward-looking statements. For additional information regarding forward-looking statements, see A Warning About Forward-Looking Information on pages 51 through 52 of this Annual Report. In addition, the preparation of the financial statements, upon which this Management s Discussion is based, requires management to make estimates which impact these financial statements. Included in the Notes to the Consolidated Financial Statements, which start on page 60, are the most significant accounting policies used in the preparation of these statements as required by generally accepted accounting principles. These Notes should be read in conjunction with the reader s review of SunTrust s financial statements and results of operations. INTRODUCTION Prior to 2003, SunTrust s geographic footprint extended throughout Alabama, Florida, Georgia, Maryland, Tennessee, Virginia, and the District of Columbia. In June 2003, SunTrust expanded its footprint into South Carolina by acquiring Lighthouse Financial Services, Inc. (Lighthouse) based on Hilton Head Island. Within the geographic footprint, SunTrust strategically operates under six business segments. These business segments are: Retail, Commercial, Corporate and Investment Banking (CIB), Private Client Services (PCS), Mortgage and Corporate/ Other. For a complete description of each line of business, please see pages 17 through 18. From an earnings perspective, 2003 was a challenging year for SunTrust. On the positive side, credit quality retained best in class distinction and improved throughout the year, mortgage production reached record levels, the Company s wealth management business continued to expand, debt capital markets produced strong results and middle market commercial loan growth was solid. On the negative side, the weak economy continued to negatively impact large corporate commercial loan demand and continued margin compression into the first half of 2003 constrained revenue growth. The Company ended the year with earnings per diluted share increasing 1.5% from 2002 to $4.73 per diluted share. Net interest income for 2003 was $3.4 billion, an increase of 2.5% compared to Net interest income began to show signs of improvement in the latter half of 2003, signaling that the balance sheet was less vulnerable to low interest rates, while still positioned favorably for anticipated rate increases. The increased net interest income was partially attributed to higher volumes in both the loan and securities portfolios, which were able to offset the adverse impact of the low rate environment. Positively impacting net interest income, most notably in the latter half of the year, was the decline in mortgage prepayments along with the steepening of the yield curve. To combat the negative effects of the low rate environment, the Company was continually managing its cost of funding versus the yields on both loans and other earning assets by funding this growth through more cost effective means, such as wholesale funding. SunTrust expects net interest income results in the first half of 2004 to be consistent with the fourth quarter of 2003, with the possibility of slight growth occurring in the latter part of 2004, when the Federal Reserve may begin to increase interest rates. Compression of the net interest margin, which the Company experienced throughout much of 2003, slowed in the second half of the year and the margin began to expand in the fourth quarter compared to the third quarter. Also, the first half of 2003 saw high levels of mortgage prepayments caused by the low rate environment contributing to the decline in the margin. However, in the latter part of the year, the margin began to stabilize as prepayments slowed, causing a reduction in securities premium amortization amounts. Somewhat offsetting these prepayments was an increase in the Company s loans held for sale, which remained at record levels for much of the year. The Company expects mortgage loans held for sale to return to normal historical levels in Noninterest income was $2.3 billion in 2003, an increase of 1.5% from The increase was attributed to strong, customer-driven fee income in areas such as the Company s wealth management and capital market businesses. The wealth management business performed well in 2003 due to good sales momentum, strong net asset flows and stable customer retention rates. Continued improvement of performance for this business is dependent on cooperation from the stock market and continued economic recovery. SunTrust s capital market revenues benefited from strong growth in debt capital markets. In certain business areas that appeared to be stagnant, such as corporate lending, the Company benefited from extensive cross line of business referrals generated by the teamwork between business specialists. This is a good example of how the Company s approach of selling, servicing and sustaining client relationships from a team perspective has produced positive results. Credit quality improved in 2003, as evidenced by significant declines in the provision for loan losses, nonperforming assets and net charge-offs compared to Nonperforming assets, particularly those related to commercial loans, showed significant improvement from the prior year. The decrease in nonperforming assets was attributed to a decline in new additions to large corporate nonaccrual loans, increased loan sales activity, improvement in credit quality and client repayment. Net Annual Report SunTrust Banks, Inc.

81 MANAGEMENT S DISCUSSION continued charge-offs decreased primarily due to a reduction in commercial net charge-offs. Controlling noninterest expense continued to be a focus for SunTrust in Although the Company benefited from numerous cost savings initiatives, increased performance based incentive payments and bonus payouts more than offset expense reduction efforts. Total noninterest expense increased 5.6% from Personnel expense continued to be the largest component of noninterest expense for SunTrust. Most of the increase in personnel expense related to incentive payments resulting from business growth, higher production volumes, and higher revenue in the PCS, CIB and Mortgage lines of business. SunTrust experienced moderate loan growth four consecutive quarters in Residential mortgage loans increased significantly from 2002 to 2003 partially due to the improvement in adjustable rate mortgage production during Commercial middle market produced strong loan growth in 2003, especially given the economic environment. However, the growth in commercial middle market was masked by shrinkage in large corporate loans. Average loans within the Commercial line of business increased 9.9% while average loans in the CIB line of business decreased 1.7%. The Company anticipates gradual pick up in the large corporate loan category as the economy continues to strengthen. As previously mentioned, the Company took advantage of wholesale funding sources during 2003 to fund a part of the earning asset growth. SunTrust also experienced significant growth in average consumer and commercial deposits which increased 6.1% over The following discussions will provide further insight on the 2003 performance of SunTrust. 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. The Company s most complex accounting policies require management s judgment to ascertain 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 reducing a liability. In instances where required by generally accepted accounting principles, 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 experience and the level of classified and nonperforming loans. SunTrust Banks, Inc. 16 Annual Report 2003

82 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 according to the contractual terms of the loan agreement. When a loan is deemed impaired, impairment is measured by using the fair value of the underlying collateral, the present value of the future cash flows discounted at the 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 recorded for the allowance for loan losses and the associated provision for loan losses. For additional discussion of the allowance for loan losses see pages 27 through 30. ESTIMATES OF FAIR VALUE The estimation of fair value is significant to a number of SunTrust s assets, including trading assets, loans held for sale, available-for-sale investment securities, mortgage servicing rights (MSRs), other real estate owned (OREO), 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 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 selling costs. 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. RECENT ACCOUNTING DEVELOPMENTS The Company adopted the provisions of several new accounting pronouncements in the current year, including Statement of Financial Accounting Standards (SFAS) Nos. 146, 149, 150 and the recognition and requirements of Financial Accounting Standards Board Interpretation (FIN) Nos. 45 and 46. The provisions of these pronouncements and the related impact to the Company are discussed in the Accounting Policies Adopted section of Note 1 to the Consolidated Financial Statements beginning on page 62. BUSINESS SEGMENTS Beginning in January 2001, the Company implemented significant changes to its internal management reporting system to begin to measure and manage certain business activities by line of business. For more financial details on business segment disclosures, please see Note 22 Business Segment Reporting in the Notes to the Financial Statements. The lines of business which are the Company s segments 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 ( 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 clients 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 revenue), Middle Market ($50 million to $250 million in annual revenue), 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). Annual Report SunTrust Banks, Inc.

83 MANAGEMENT S DISCUSSION continued CORPORATE AND INVESTMENT BANKING Corporate and Investment Banking (CIB) is comprised of the following businesses: corporate banking, investment banking, capital markets 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 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. Through its wholly-owned subsidiary, SunTrust Leasing Corp., the Company provides equipment financing to various corporate customers. Receivables capital management provides traditional factoring services as well as other value added receivables management services. MORTGAGE The Mortgage line of business offers residential mortgage products nationally through its retail, broker and correspondent channels. These products are held in the Company s residential loan portfolio or are securitized and sold in the secondary market with servicing rights retained. This line of business services loans for its own residential mortgage portfolio as well as for others. 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 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 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., Charlotte, 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 taxexempt 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. CORPORATE/OTHER Corporate/Other (Other) includes the investment securities portfolio, long-term debt, capital, short-term liquidity and funding activities, balance sheet risk management including derivative hedging activities, 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 matchedmaturity funds transfer pricing and provision for loan losses/credit risk premium allocations. SunTrust Banks, Inc. 18 Annual Report 2003

84 The following table for SunTrust s reportable business segments compares total income before taxes for the twelve months ended December 31, 2003 to the same period last year: TABLE 1 TOTAL CONTRIBUTION BEFORE TAXES (Dollars in millions) Retail $ $ Commercial Corporate and Investment Banking Mortgage Private Client Services Corporate/Other The following table for SunTrust s reportable business segments compares average loans and average deposits for the twelve months ended December 31, 2003 to the same period last year: TABLE 2 AVERAGE LOANS AND DEPOSITS (Dollars in millions) Average loans Average deposits Average loans Average deposits Retail $ 23,476.2 $ 52,828.5 $ 21,669.0 $ 51,425.4 Commercial 21, , , ,780.2 Corporate and Investment Banking 15, , , ,480.7 Mortgage 13, , , ,011.0 Private Client Services 2, , , ,531.1 RETAIL The following analysis details the operating results for each line of business for the twelve months ended December 31, 2003 and Retail s contribution before taxes was $642.1 million for 2003, a decline of $76.7 million, or 10.7%, compared to Net interest income declined $26.1 million, or 1.9%, primarily the result of the lower interest rate environment and deposit margin compression. Net interest income on loans increased $67.2 million, or 11.5%, overcoming lower interest rates through an increase in average loans. Net interest income for deposits declined $93.3 million, or 12.0%, due to margin compression, or the inability to reduce interest rates paid on deposits as much as the drop in the funds transfer pricing credit. Provision for loan losses increased $49.9 million, or 48.6%, as a result of growth in the loan portfolio and changes in risk factors. Noninterest income increased $30.0 million, or 4.2%, compared to Of the increase, $26.8 million was attributable to higher deposit service charges. Noninterest expense grew by $30.8 million, or 2.5%. While personnel expense declined $6.7 million, investment in the Retail distribution network and improved technology drove the 2.5% increase in noninterest expense. Average loan balances grew $1.8 billion, an 8.3% increase over Growth in consumer equity lines and indirect installment lending drove the overall loan portfolio growth. Average deposit balances increased $1.4 billion, or 2.7%, compared to Demand deposits, NOW accounts and money market accounts were the primary drivers of the deposit growth. The Lighthouse acquisition did not have a significant impact on the balance sheet growth. COMMERCIAL Commercial s contribution before taxes increased $107.7 million, or 28.0%, from 2002 to The growth was driven by a combination of increased net interest income on loans and higher noninterest revenue. During 2003, the Commercial line of business consolidated certain affordable housing limited partnerships. Income and expenses related to these partnerships were not included in the 2002 results. The growth in contribution before taxes included $52.3 million related to the affordable housing unit. Net interest income increased $52.0 million, or 9.8%. The change was driven by a $1.9 billion, or 9.9%, increase in average loans. Increased loan volumes were largely the result of robust sales. Loan quality remained good as the net charge-off ratio was 0.10% in 2003 compared to 0.06% in SunTrust s acquisition of Lighthouse Financial Services contributed $234.1 million to the loan growth in Average deposit balances rose $1.8 billion, or 20.9%, which also contributed to the rise in net interest income. This increase was a result of improved sales efforts and market liquidity. Annual Report SunTrust Banks, Inc.

85 MANAGEMENT S DISCUSSION continued Total noninterest income grew $78.5 million, or 34.4%. Noninterest income for 2003 included $61.6 million related to the affordable housing unit of which $25.3 million was associated with limited partnership income resulting from the consolidation of certain affordable housing partnerships. An additional $38.8 million was attributable to higher tax-effected revenue generated by SunTrust s Community Development Corporation, which was transferred from the Corporate/Other line of business. The remaining noninterest income growth resulted from increased deposit service charges, credit card income and loan fees. Total noninterest expense grew $19.6 million, or 5.8%. The increase in noninterest expense included $7.3 million related to the affordable housing unit, with the remainder of the expense growth related to increased volumes. CORPORATE AND INVESTMENT BANKING Corporate and Investment Banking s contribution before taxes increased $149.2 million, or 73.6%, for 2003 as compared with The biggest factor in the improvement was a $119.8 million decrease in the provision for loan losses. The remaining $29.4 million increase was primarily due to improvements of $20.9 million, or 4.0%, in noninterest income and $11.4 million, or 4.2%, in net interest income offset by an increase in noninterest expense of $2.8 million, or 0.8%. To comply with FIN 46, Three Pillars Funding LLC (Three Pillars), a multi-seller commercial paper conduit with $3.2 billion in assets at December 31, 2003, was consolidated in the third quarter of Including the effect of this consolidation, which added $1.1 billion in average loan balances in 2003, average loans declined $279.0 million, or 1.7%. Despite the decline in outstanding loan balances, total commitments during 2003 were essentially unchanged from the prior year, but total binding commitment usage declined to an approximate average of 30.1% in 2003 from 33.9% in The increase in noninterest income was driven largely by a substantial increase in debt capital markets products. MORTGAGE Driven by higher mortgage loan production resulting from record low interest rates, Mortgage s 2003 contribution before taxes of $246.3 million was up $88.6 million, or 56.2%, compared to Mortgage loan production of $43.7 billion in 2003 represented another record year and was up 41.9% over the prior record year. Net interest income was up $171.3 million, or 45.7%, over Record production pushed average mortgage loans held for sale balances up $3.6 billion, or 83.0%. The higher balances were the primary reason for the net interest income increase. Additionally, residential portfolio loans were up $1.2 billion, or 10.4%, and combined with wider spreads, contributed to the increase in net interest income. Credit quality has remained high even with the significant increase in the residential loan portfolio. Net charge-offs were $2.5 million in 2003 compared to $2.0 million in Due to high loan payoff levels, average deposit volume grew $623.4 million, or 61.7%, compared to However, due to the low rate environment in both years, the effect on net interest income was minimal. Total noninterest income increased $1.3 million, or 9.3%, in 2003 compared with Higher production-related income resulting from record production and other noninterest income was substantially offset by higher mortgage servicing rights amortization expense. The higher mortgage servicing rights expense resulted from record loan payoffs and amortization of existing serviced loans. At December 31, 2003, loans serviced totaled $69.0 billion compared with $57.1 billion at December 31, 2002, a 20.8% increase. As production volume and related income grew in 2003, noninterest expense also increased. Noninterest expense was up $83.5 million, or 37.3%, principally due to volume-related expenses such as commission-based compensation, overtime, temporary employees and other lending-related expenses that vary with loan production. PRIVATE CLIENT SERVICES Private Client Services contribution before taxes decreased $6.5 million, or 3.3%, for the year ended December 31, 2003 compared to Total noninterest income increased $30.6 million, or 4.9%, for the year ended December 31, 2003 compared to Average assets under management increased 4.1% compared to Trust and investment management income decreased $1.9 million, or 0.4%, for the year ended December 31, 2003 compared to As of December 31, 2003 and 2002, assets under management were approximately $101.0 billion and $89.6 billion, respectively. Assets under management increased 12.8% due to appreciation in the equity markets and net new business. Lost business moderately improved compared to prior periods, while new business maintained its momentum. 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 $180.9 billion, which included $21.8 billion in non-managed corporate trust assets, $35.9 billion in non-managed trust assets, and $22.2 billion in retail brokerage assets. The retail brokerage accounts include $2.5 billion related to Alexander Key. As of December 31, 2003, brokerage assets increased 30.6% compared to December 31, Retail investment income increased $24.0 million, or 18.0%, for the year ended December 31, 2003 compared to The increase in retail investment income was primarily due to an increase in broker production, an increase in the number of brokers, and increased revenue generated from Alexander Key. Noninterest expense increased $41.0 million, or 8.7%, for the year ended December 31, 2003 compared to The expense increases were primarily due to additional personnel and occupancy expense associated with PCS business-related initiatives. PCS continues to invest in the core business, new product capabilities, and new distribution channels. SunTrust Banks, Inc. 20 Annual Report 2003

86 CORPORATE/OTHER The Corporate/Other line of business contribution before taxes decreased from $205.2 million in 2002 to $34.1 million in 2003, a decline of $171.0 million, or 83.4%. Net interest income decreased from $706.1 million in 2002 to $575.9 million in 2003, a reduction of $130.2 million, or 18.4%. 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 $162.7 million in 2002 to $35.6 million in 2003, a reduction of $127.1 million, or 78.1%. The decline was the result of lower security gains and higher transfers to the Commercial line of business for tax credits generated by SunTrust s Community Development Corporation. Noninterest expense was essentially unchanged. Average total assets increased $4.3 billion, or 19.9%, in 2003 compared to The growth was primarily the result of an increase in the investment portfolio. Average total liabilities increased $6.9 billion, or 23.0%. This rise was primarily fueled by growth in wholesale deposits. NET INTEREST INCOME/MARGIN Net interest income for 2003 was $3,365.3 million, an increase of $82.1 million, or 2.5%, compared to For the year the benefit from higher balance sheet volumes more than offset the adverse impact of the lower rate environment on net interest income. Also helping the year over year increase was the steeper yield curve in the latter part of 2003 and its impact on slowing prepayments and increasing the spreads on incremental asset growth. The net interest margin declined 33 basis points from 3.41% in 2002 to 3.08% in The Company consolidated Three Pillars, a multi-seller commercial paper conduit, to comply with FIN 46 in July This consolidation accounted for three basis points of the net interest margin decline for In addition to the consolidation of Three Pillars, SunTrust consolidated certain affordable housing partnerships, which had a TABLE 3 ANALYSIS OF CHANGES IN NET INTEREST INCOME Compared to 2002 Increase (Decrease) Due to 2002 Compared to 2001 Increase (Decrease) Due to (Dollars in millions on a taxable-equivalent basis) Volume Rate Net Volume Rate Net Interest Income Loans Taxable $ $ (607.8) $ (367.8) $ 75.9 $ (1,017.7) $ (941.8) Tax-exempt (10.1) (17.7) (7.5) Securities available for sale Taxable (313.7) (142.5) 60.7 (276.0) (215.3) Tax-exempt 2 (2.3) (1.5) (3.8) (3.0) (4.7) (7.7) Funds sold and securities purchased under agreements to resell (0.1) (8.7) (8.8) 5.2 (31.9) (26.7) Loans held for sale (57.8) (26.1) 68.9 Interest-bearing deposits (5.7) (1.2) (6.9) 5.2 (3.9) 1.3 Trading assets 2.4 (10.0) (7.6) 8.2 (25.0) (16.8) Total interest income (1,010.8 ) (360.9 ) (1,403.0 ) (1,145.6 ) Interest Expense NOW accounts 9.0 (32.7) (23.7) 19.2 (46.0) (26.8) Money Market accounts 25.9 (149.2) (123.3) (325.9) (200.8) Savings deposits (0.7) (37.7) (38.4) 6.6 (93.0) (86.4) Consumer time deposits (45.6) (99.8) (145.4) 12.6 (134.2) (121.6) Brokered deposits 45.4 (64.3) (18.9) (3.7) Foreign deposits 46.0 (19.8) 26.2 (66.5) (109.3) (175.8) Other time deposits (6.8) (15.3) (22.1) (5.2) (93.3) (98.5) Funds purchased and securities sold under agreements to repurchase 15.7 (50.0) (34.3) (30.8) (241.0) (271.8) Other short-term borrowings (19.9) (29.4) (49.3) Long-term debt 34.6 (117.1) (82.5) (30.8) (88.5) (119.3) Total interest expense (585.9 ) (443.0 ) 6.6 (1,142.1 ) (1,135.5 ) Net change in net interest income $ $ (424.9 ) $ 82.1 $ $ (260.9 ) $ (10.1 ) 1 Changes in net interest income are attributed to either changes in average balances (volume change) or changes in average rates (rate change) for earning assets and sources of funds on which interest is received or paid. Volume change is calculated as change in volume times the previous rate, while rate change is change in rate times the previous volume. The rate/volume change, change in rate times change in volume, is allocated between volume change and rate change at the ratio each component bears to the absolute value of their total. 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. Annual Report SunTrust Banks, Inc.

87 MANAGEMENT S DISCUSSION continued TABLE 4 CONSOLIDATED DAILY AVERAGE BALANCES, INCOME/EXPENSE AND AVERAGE YIELDS EARNED AND RATES PAID (Dollars in millions; yields on taxable-equivalent basis) Average Balances Income/ Expense Yields/ Rates Average Balances Income/ Expense Yields/ Rates Average Balances Income/ Expense Yields/ Rates Assets Loans: 1 Taxable $ 74,476.7 $ 3, % $ 69,981.0 $ 3, % $ 68,892.8 $ 4, % Tax-exempt 2 1, , , Total loans 76, , , , , , Securities available for sale Taxable 20, , , , Tax-exempt Total securities available for sale 21, , , , Funds sold and securities purchased under agreements to resell 1, , , Loans held for sale 8, , , Interest-bearing deposits Trading assets 1, , , Total earning assets 109, , , , , , Allowance for loan losses (950.8) (924.3) (876.3) Cash and due from banks 3, , ,383.4 Premises and equipment 1, , ,599.7 Other assets 6, , ,043.3 Unrealized gains on securities available for sale 2, , ,700.0 Total assets $ 122,325.4 $ 108,516.1 $ 102,884.2 Liabilities and Shareholders Equity NOW accounts $ 11,702.0 $ % $ 10,315.4 $ % $ 8,471.3 $ % Money Market accounts 22, , , Savings 6, , , Consumer time 7, , , Other time 3, , , Total interest-bearing consumer and commercial deposits 51, , , , Brokered deposits 3, , , Foreign deposits 6, , , Total interest-bearing deposits 62, , , , , Funds purchased and securities sold under agreements to repurchase 11, , , Other short-term borrowings 2, , Long-term debt 12, , , Total interest-bearing liabilities 88, , , , , , Noninterest-bearing deposits 17, , ,491.1 Other liabilities 6, , ,867.1 Realized shareholders equity 7, , ,328.0 Accumulated other comprehensive income 1, , ,745.8 Total liabilities and shareholders equity $ 122,325.4 $ 108,516.1 $ 102,884.2 Interest Rate Spread 2.78 % 2.98 % 2.91 % Net Interest Income 3 $ 3,365.3 $ 3,283.2 $ 3,293.4 Net Interest Margin 3.08 % 3.41 % 3.58 % 1 Interest income includes loan fees of $123.8, $122.6, $148.7, $135.6, $142.3, and $118.4 million for each of the six years ended December 31, Nonaccrual loans are included in average balances and income on such loans, if recognized, is recorded on a cash basis.

88 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% for all years reported and where applicable, state income taxes, to increase tax-exempt interest income to a taxableequivalent basis. The net taxable-equivalent adjustment amounts included in the above table were $45.0, $39.5, $40.8, $39.9, $42.5, and $44.4 million for each of the six years ended December 31, SunTrust Banks, Inc. 22 Annual Report 2003

89 Average Balances Income/ Expense Yields/ Rates Average Balances Income/ Expense Yields/ Rates Average Balances Income/ Expense Yields/ Rates $ 68,968.8 $ 5, % $ 61,648.3 $ 4, % $ 56,537.1 $ 4, % 1, , , , , , , , , , , , , , , , , , , , , , , , , , , , (869.0) (942.1) (940.5) 3, , , , , , , , , , , ,583.9 $ 98,397.8 $ 92,820.8 $ 85,536.9 $ 8,035.4 $ % $ 7,736.3 $ % $ 7,149.5 $ % 12, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,212.2 $ 98,397.8 $ 92,820.8 $ 85, % 3.15 % 3.21 % $ 3,148.4 $ 3,188.0 $ 2, % 3.88 % 3.97 % 3 Derivative instruments used to help balance the Company s interest-sensitivity position increased net interest income $64.0 million in 2003, decreased net interest income $50.4 million in 2002, $37.4 million in 2001, and $0.5 million in 2000, and increased net interest income $16.3 million and $0.7 million in 1999 and 1998, respectively. Annual Report SunTrust Banks, Inc.

90 MANAGEMENT S DISCUSSION continued negative one basis point impact on net interest margin for The earning asset yield for 2003 declined 96 basis points from For 2003, loan yields decreased 83 basis points and securities available for sale yields declined 161 basis points compared to In 2003, total interest-bearing liability costs declined 76 basis points from The larger decrease in earning asset yield versus the decrease in liability cost resulted in the overall net interest margin decline. 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 assetsensitive position in anticipation of rising rates did not produce the expected margin benefit. This was due to rates continuing to trend lower during the first half of After the Fed reduced the Fed Funds rate mid-year to 1.00%, the yield curve finally began to steepen late in the third quarter and into the fourth quarter, helping the fourth quarter margin. SunTrust s prime rate averaged 4.12% for 2003, a decline of approximately 55 basis points from The Federal Reserve Bank Fed Funds rate averaged 1.12% for the year, 55 basis points below the 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 mortgagebacked 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. During 2003, the Company began to moderately increase the duration of the securities portfolio from 1.3 to 2.7 at December 31, 2002 and 2003, respectively. This moderate increase began to help the margin in the second half of Duration is a measure of price sensitivity of a bond portfolio to an immediate change in interest rates. A duration of 2.7 suggests an expected price change of approximately 2.7% for a one percent change in interest rates, without considering any embedded call or prepayment options. Average earning assets were up 13.4% and average interest-bearing liabilities increased 12.1% compared to Average earning assets and average interest-bearing liabilities each included $1.3 billion related to Three Pillars for Average loans rose $4.9 billion, securities available for sale increased $4.1 billion, and loans held for sale increased $4.2 billion in Loans held for sale increased due to increased mortgage refinancing activity. The Company continued to take steps to obtain alternative lower cost funding sources, such as developing initiatives to grow customer deposits. Campaigns to attract customer deposits were implemented in 2002 and The Company believes that deposit growth has also benefited from the volatility in the financial markets. Average money market deposits grew 8.5%, NOW accounts increased 13.4% and demand deposits increased 16.8% in Interest income that the Company was unable to recognize on nonperforming loans had a negative impact of two basis points for 2003 and three basis points for Table 4 contains more detailed information concerning average loans, yields and rates paid. PROVISION FOR LOAN LOSSES The provision for loan losses charged to expense is based upon credit loss experience and the results of a detailed analysis estimating an appropriate and adequate allowance for loan losses. The analysis includes the evaluation of impaired loans as prescribed under SFAS Nos. 114 and 118, pooled loans as prescribed under SFAS No. 5 and economic and other risk factors as outlined in various Joint Interagency Statements issued by the bank regulatory agencies. For the year ended December 31, 2003, the provision for loan losses was $313.6 million, a decline of $156.2 million, or 33.3%, compared to The decline was primarily due to improvement in credit quality during The 2002 provision for loan losses also included an additional $45.3 million to bring the acquired Huntington-Florida loan portfolio into compliance with SunTrust s credit standards. Net charge-offs for 2003 were $311.1 million, a decrease of $111.2 million, or 26.3%, from The decline was due to a $111.6 million, or 41.8%, reduction in commercial net charge-offs. Commercial charge-offs in 2002 included $74.9 million related to the bankruptcy of a large corporate energy company. Net charge-offs related to large corporate loans, generally national and large business clients with total annual revenues in excess of $250 million, totaled $115.0 million in 2003, compared to $241.5 million in Net charge-offs related to the other portfolios totaled $196.1 million in 2003 and $180.8 million in NONINTEREST INCOME Noninterest income has grown to comprise 41% of total revenues compared with 36% in Noninterest income for 2003 was $2,303.0 million, an increase of 1.5% compared to Trust and investment management income decreased $2.1 million, or 0.4%, compared to As of December 31, 2003 and 2002, assets under management were approximately $101.0 billion and $89.6 billion, respectively. Assets under management increased 12.8% due to appreciation in the equity markets and net new business. Lost business moderately improved compared to prior periods, while new business maintained its momentum. Average assets under management increased 4.1% compared to The growth in trust and investment management income was offset by less nonrecurring revenue, primarily 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 SunTrust Banks, Inc. 24 Annual Report 2003

91 TABLE 5 NONINTEREST INCOME Year Ended December 31 (Dollars in millions) Service charges on deposit accounts $ $ $ $ $ $ Trust and investment management income Retail investment services Other charges and fees Investment banking income Trading account profits and commissions Mortgage production Mortgage servicing (177.5) (110.1) (6.1) Credit card and other fees Other income Total noninterest income before securities gains (losses) 2, , , , , ,645.7 Securities gains (losses) (109.1) 8.2 Total noninterest income $ 2,303.0 $ 2,268.8 $ 2,051.9 $ 1,773.6 $ 1,625.9 $ 1,653.9 Year over year growth rate in noninterest income before securities gains (losses) 5.6 % 8.7 % 7.5 % 1.8 % 5.4 % advisement were approximately $180.9 billion, which included $21.8 billion in non-managed corporate trust assets, $35.9 billion in non-managed trust assets, and $22.2 billion in retail brokerage assets. The retail brokerage accounts include $2.5 billion related to Alexander Key. Total assets under advisement are up $18.3 billion compared to last year due to strong net new business growth and improved equity markets. Retail investment services income increased $25.1 million, or 18.4%, compared to the prior year. The increase in retail investment income was primarily due to an increase in broker production, an increase in the number of brokers, and increased revenue generated from Alexander Key. Retail investment sales, including annuities, increased 25.2% compared to 2002, which was greater than the increase in retail investment income due to fee based products that are sensitive to market volatility. As of December 31, 2003, retail brokerage assets increased 30.6% compared to December 31, Service charges on deposit accounts increased $30.2 million, or 4.9%, compared to Increased NSF/stop payment volumes, increased pricing and other revenue enhancement Annual Report SunTrust Banks, Inc.

92 MANAGEMENT S DISCUSSION continued TABLE 6 NONINTEREST EXPENSE Year Ended December 31 (Dollars in millions) Employee compensation $ 1,585.9 $ 1,512.1 $ 1,484.5 $ 1,469.0 $ 1,522.6 $ 1,433.7 Employee benefits Total personnel expense 1, , , , , ,615.5 Net occupancy expense Outside processing and software Equipment expense Marketing and customer development Credit and collection services Postage and delivery Amortization of intangible assets Communications Other staff expense Consulting and legal Operating supplies FDIC premiums Merger-related expense Other real estate income (2.0) (0.1) (4.2) (3.8) (4.8) (9.8) Other expense Total noninterest expense $ 3,400.6 $ 3,219.4 $ 2,999.9 $ 2,828.5 $ 2,905.3 $ 2,870.1 Year over year growth rate 5.6 % 7.3 % 6.1 % (2.6 %) 1.2 % Efficiency ratio % % % % % % initiatives contributed to the increase in this line item. Combined mortgage production and servicing income decreased $9.6 million, or 54.0%, compared to Record mortgage production for 2003 was more than offset by the decline in mortgage servicing income. Mortgage production for 2003 was $43.7 billion compared to $30.8 billion for 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. Although the combined mortgage noninterest income components declined, revenue for the Mortgage line of business increased benefiting from higher interest income from mortgage loans held for sale and mortgage loans retained in the Company s portfolio. Other charges and fees were up $29.5 million, or 9.9%, as a result of increased letter of credit fees and insurance revenues. The increase in letter of credit fees was due to increased volumes. The increase in insurance revenues was due to increased sales volume and the acquisition of an insurance subsidiary of Lighthouse. Combined trading account profits and commissions and investment banking income, SunTrust s capital market revenue sources, increased $22.2 million, or 7.9%, compared to the prior year. The increase was primarily due to strong growth in debt capital markets businesses. Other noninterest income increased $20.0 million compared to 2002 primarily due to the consolidation of certain affordable housing partnerships in The Company incurred net securities gains during 2003 of $123.9 million compared to $204.5 million in 2002 as the Company continued to manage the securities portfolio to take advantage of market yield opportunities. NONINTEREST EXPENSE Noninterest expense increased $181.2 million, or 5.6%, in Compared to 2002, total personnel expense increased $126.0 million, or 6.9%, primarily due to increases in pension and incentive costs. Pension expense increased $47.7 million, or 315.2%, due to a reduced expected long-term rate of return on plan assets and a lower discount rate for measuring pension liabilities. The Company expects to reduce its expected long-term rate of return in 2004 by an additional 25 basis points to 8.5%. The increase in incentives was primarily due to an increase in commission and performance based incentive plans. This increase was primarily attributed to the Mortgage line of business due to the record production volumes during Additionally, incentive cost increases were recorded in the CIB (primarily due to the performance of debt capital markets) and PCS (primarily due to stronger financial markets and new business volumes) lines of business. Marketing and customer development expense increased $20.3 million, or 25.4%, due to the Company s expanded 2003 marketing strategy and sales focus. Campaigns and promotions for 2003 included the Giant Truckload Sale (primarily deposit accounts) the Mini Cooper Campaign (home equity lines) and the With the Works Campaign (deposit and home equity lines). Noninterest expense increased $13.5 million due to the acquisition of Lighthouse. Additionally, the consolidation of certain affordable housing partnerships in 2003 increased non-interest expense $28.7 million most of which was recorded in other expense. SunTrust Banks, Inc. 26 Annual Report 2003

93 TABLE 7 LOAN PORTFOLIO BY TYPES OF LOANS At December 31 (Dollars in millions) Commercial $ 30,681.9 $ 28,693.6 $ 28,945.9 $ 30,781.1 $ 26,933.5 $ 24,589.6 Real estate Construction 4, , , , , ,085.0 Residential mortgages 24, , , , , ,880.9 Other 9, , , , , ,254.3 Credit card ,563.5 Consumer loans 11, , , , , ,167.3 Total loans $ 80,732.3 $ 73,167.9 $ 68,959.2 $ 72,239.8 $ 66,002.8 $ 61,540.6 In 2002, the One Bank initiative resulted in $56.2 million of noninterest expense. The One Bank initiative represented enhancements to customerbased systems across the Company s geographic footprint in an effort to yield operating efficiencies and was completed in the fourth quarter of The efficiency ratio for 2003 was 60.0%, an increase from 58.0% for PROVISION FOR INCOME TAXES The provision for income taxes covers federal and state income taxes. In 2003, the provision was $576.8 million, compared to $491.5 million in The provision represents an effective tax rate of 30.2% for 2003 compared to 27.0% for The 2003 effective tax rate was representative of the Company s long-term normalized tax rate of 30 31%. The 2002 effective tax rate was lower than historical levels due to several factors. In the first quarter, the Company realized a tax benefit upon the reversal of a deferred liability, which resulted from the change in status of a subsidiary to a real estate investment trust (REIT). A tax benefit was also realized when the Company standardized the recognition of low income housing tax credits during the fourth quarter of LOANS The Company s loan portfolio increased $7.6 billion, or 10.3%, from December 31, 2002 to December 31, 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. Commercial loans related to Three Pillars were $2.8 billion at December 31, Compared to the prior year-end, the Company s portfolio of commercial loans, which included Three Pillars, increased 6.9%, real estate loans grew 16.7% and consumer loans grew 1.0%. The loan portfolio continues to be well diversified from both a product and industry concentration standpoint. The product mix remained relatively constant from year-end 2002 to 2003, with real estate loans accounting for the largest segment (47.0% of total loans). Residential real estate represented 29.9% of total loans at year-end, including $17.3 billion in home mortgages and $6.9 billion in home equity lines. The increase of $1.7 billion in home equity lines was due to the Company s marketing campaigns, appreciation in the housing market, and the favorable interest rate environment. The Lighthouse acquisition added $567.4 million of loans to the portfolio as of the June 2003 acquisition date. ALLOWANCE FOR LOAN LOSSES SunTrust continuously reviews its loan portfolio and maintains an allowance for loan losses sufficient to absorb losses inherent in the portfolio. The Company is committed to the early recognition of problem loans and to an appropriate and adequate level of allowance. At year-end 2003, the Company s total allowance was $941.9 million, which represented 1.17% of period-end loans. In addition to the review of credit quality through ongoing credit review processes, the Company constructs an independent and comprehensive allowance analysis for its loan portfolios on a quarterly basis. The analysis includes three basic elements: specific allowances for individual loans, general allowances for loan pools and allowances based on economic conditions and other risk factors. The SunTrust Allowance for Loan Losses Review Committee has the responsibility of affirming the allowance methodology and assessing all of the risk elements in order to determine the appropriate level of allowance for the inherent losses in the loan portfolio at the point in time being reviewed. The first element of the allowance for loan losses analysis involves the calculation of specific allowances for individual impaired loans as required by SFAS Nos. 114 and 118. In this process, specific allowances are established for nonaccrual loans greater than $0.5 million based on a thorough analysis of the most probable sources of repayment, including discounted future cash flows, liquidation of collateral or the market value of the loan itself. As of December 31, 2003 and 2002, the specific allowance related to SFAS No. 114 and 118 prescribed calculations totaled $29 million and $117 million, respectively. The decrease between these two periods was primarily due to the substantial decline in the level of nonperforming loans and an overall improvement in credit quality. The second element the general allowance for loan pools is determined per SFAS No. 5 by applying loan loss allowance factors to groups of loans within the portfolio that have similar characteristics. The general allowance factors are based upon the results of an annual statistical loss migration analysis and other analyses of recent and historical charge-off experience and are typically applied to the portfolio in terms of Annual Report SunTrust Banks, Inc.

94 MANAGEMENT S DISCUSSION continued loan type and internal risk rating. The loss migration analysis provides the basis for factors applied to the commercial and commercial real estate loan portfolios by examining recent twelve month loss experience in relation to internal credit risk ratings over time. Historical loss analyses provide the basis for factors used for more homogenous pools of smaller loans, such as residential real estate and other consumer loan categories. While these analyses that establish the general allowance factors are formally prepared annually, the Company continuously monitors credit quality in all portfolio segments and may revise the general factors whenever necessary in order to address improving or deteriorating credit quality trends or specific risks associated with any given loan category. As of December 31, 2003 and 2002, the general allowance calculations totaled $565 million and $537 million, respectively. The increase between the periods was primarily the result of the increase in the overall pooled loan population. The third element is based on the guidance of various Joint Interagency Statements issued by bank regulatory agencies and includes environmental and unallocated components that are not otherwise evaluated in the first two elements. The environmental component includes assessments of economic, concentration, administrative and country transfer risks. The economic risk assessment considers periodic changes in several widely publicized U.S. economic indicators. This process was enhanced during 2003 after an analysis of the relationship between specific economic indicators and historical charge-off levels. The concentration risk methodology considers credit exposure when grouped by borrower, collateral type, region and industry, and estimates the incremental risks (see Note 19 for additional details of credit concentration and Table 8 for Loans by Selected Industries). Administrative risks are related to specific changes in the organization or loan portfolio, such as reorganization or centralization efforts and acquisitions, along with changes in credit policy or client selection criteria. The unallocated component of the allowance reflects the margin for imprecisions in data and analytics inherent in most estimation processes. SunTrust Banks, Inc. 28 Annual Report 2003

95 TABLE 8 LOANS BY SELECTED INDUSTRIES 1 At December 31, 2003 (Dollars in millions) Loans % of Total Loans Manufacturing $ 3, Construction 3, Real estate 3, Retail trade 3, Business services & nonprofits 3, Wholesale trade 2, Health & social assistance 2, Finance & insurance 2, Public administration 1, Professional, scientific & technical services 1, Accommodation & food 1, Information 1, Transportation & warehousing 1, Industry groupings are loans in aggregate greater than $1 billion based on the North American Industry Classification System (NAICS). The Company converted from Standard Industrial Classification codes to NAICS during TABLE 9 ALLOWANCE FOR LOAN LOSSES At December 31 (Dollars in millions) Allocation by Loan Type Commercial $ $ $ $ $ $ Real estate Consumer loans Unallocated Total $ $ $ $ $ $ Allocation as a Percent of Total Allowance Commercial 39.2 % 43.9 % 50.2 % 44.5 % 32.9 % 26.6 % Real estate Consumer loans Unallocated Total % % % % % % Year-end Loan Types as a Percent of Total Loans Commercial 38.2 % 39.4 % 42.0 % 42.6 % 40.8 % 40.0 % Real estate Consumer loans Total % % % % % %