SUNTRUST BANKS INC (Form: 10-Q, Received: 08/06/2014 16:27:29)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-08918

SUNTRUST BANKS, INC.

(Exact name of registrant as specified in its charter)



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

303 Peachtree Street, N.E., Atlanta, Georgia 30308

(Address of principal executive offices) (Zip Code)

(404) 588-7711

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

ý Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act .



	Large accelerated filer x		Accelerated filer o
	Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No ý

At July 31, 2014 , 530,936,304 shares of the Registrant’s Common Stock, $1.00 par value, were outstanding.

TABLE OF CONTENTS



		Page
GLOSSARY OF DEFINED TERMS		i - iii

PART I FINANCIAL INFORMATION		1

Item 1:	Financial Statements (Unaudited).	2
	Consolidated Statements of Income .	2
	Consolidated Statements of Comprehensive Income /(Loss).	3
	Consolidated Balance Sheets .	4
	Consolidated Statements of Shareholders’ Equity .	5
	Consolidated Statements of Cash Flows .	6
	Notes to Consolidated Financial Statements (Unaudited).	7

Item 2:	Management's Discussion and Analysis of Financial Condition and Results of Operations .	78
Item 3:	Quantitative and Qualitative Disclosures About Market Risk .	122
Item 4:	Controls and Procedures .	123

PART II OTHER INFORMATION

Item 1:	Legal Proceedings .	123
Item 1A:	Risk Factors .	124
Item 2:	Unregistered Sale of Equity Securities and Use of Proceeds.	124
Item 3:	Default Upon Senior Securities.	124
Item 4:	Mine Safety Disclosures .	125
Item 5:	Other Information .	125
Item 6:	Exhibits.	125

SIGNATURE.		126

GLOSSARY OF DEFINED TERMS

ABS — Asset-backed securities.

ACH — Automated clearing house.

AFS — Available for sale.

Agreements — Equity forward agreements.

AIP — Annual Incentive Plan.

ALCO — Asset/Liability Management Committee.

ALM — Asset/Liability Management.

ALLL — Allowance for loan and lease losses.

AOCI — Accumulated other comprehensive income.

ASU — Accounting standards update.

ATE — Additional termination event.

ATM — Automated teller machine.

Bank — SunTrust Bank.

Basel III — The third Basel Accord developed by the BCBS to strengthen existing regulatory capital requirements.

BCBS — Basel Committee on Banking Supervision.

Board — The Company’s Board of Directors.

BPS — Basis points.

BRC — Board Risk Committee.

CCAR — Comprehensive Capital Analysis and Review.

CDO — Collateralized debt obligation.

CD — Certificate of deposit.

CDR — Conditional default rate.

CDS — Credit default swaps.

CET 1 — Common Equity Tier 1 Capital.

CEO — Chief Executive Officer.

CFO — Chief Financial Officer.

CIB — Corporate and Investment Banking.

C&I — Commercial and Industrial.

Class A shares — Visa Inc. Class A common stock.

Class B shares —Visa Inc. Class B common stock.

CLO — Collateralized loan obligation.

Company — SunTrust Banks, Inc.

CP — Commercial paper.

CPR — Conditional prepayment rate.

CRE — Commercial real estate.

CSA — Credit support annex.

DDA — Demand deposit account.

Dodd-Frank Act — The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

DOJ — Department of Justice.

DTA — Deferred tax asset.

EPS — Earnings per share.

ERISA — Employee Retirement Income Security Act of 1974.

Exchange Act — Securities Exchange Act of 1934.

Fannie Mae — The Federal National Mortgage Association.

Freddie Mac — The Federal Home Loan Mortgage Corporation.

FASB — Financial Accounting Standards Board.

FDIC — The Federal Deposit Insurance Corporation.

Federal Reserve — The Board of Governors of the Federal Reserve System.

Fed funds — Federal funds.

FHA — Federal Housing Administration.

FHLB — Federal Home Loan Bank.

FICO — Fair Isaac Corporation.

Fitch — Fitch Ratings Ltd.

Form 8-K and other legacy mortgage-related items — Items disclosed in Form 8-K that was filed with the SEC on July 3, 2014, and other legacy mortgage-related items.

FRB — Federal Reserve Board.

FTE — Fully taxable-equivalent.

FVO — Fair value option.

GenSpring — GenSpring Family Offices, LLC.

Ginnie Mae — The Government National Mortgage Association.

GSE — Government-sponsored enterprise.

HAMP — Home Affordable Modification Program.

HUD — U.S. Department of Housing and Urban Development.

IPO — Initial public offering.

IRLC — Interest rate lock commitment.

IRS — Internal Revenue Service.

ISDA — International Swaps and Derivatives Association.

LCR — Liquidity coverage ratio.

LGD — Loss given default.

LHFI — Loans held for investment.

LHFS — Loans held for sale.

LIBOR —London InterBank Offered Rate.

LOCOM – Lower of cost or market.

LTI — Long-term incentive.

LTV — Loan to value.

MBS — Mortgage-backed securities.

MD&A — Management’s Discussion and Analysis of Financial Condition and Results of Operations.

MI — Mortgage insurance.

Moody’s — Moody’s Investors Service.

MRA — Master Repurchase Agreement.

MRM — Market Risk Management.

MRMG — Model Risk Management Group.

MSR — Mortgage servicing right.

MVE — Market value of equity.

NCF — National Commerce Financial Corporation.

NOW — Negotiable order of withdrawal account.

NPA — Nonperforming asset.

NPL — Nonperforming loan.

OCC — Office of the Comptroller of the Currency.

OCI — Other comprehensive income.

OIG — Office of Inspector General.

OREO — Other real estate owned.

OTC — Over-the-counter.

OTTI — Other-than-temporary impairment.

Parent Company — SunTrust Banks, Inc., the parent Company of SunTrust Bank and other subsidiaries of SunTrust Banks, Inc.

PD — Probability of default.

QSPE — Qualifying special-purpose entity.

REIT — Real estate investment trust.

RidgeWorth — RidgeWorth Capital Management, Inc.

ROA — Return on average total assets.

ROE — Return on average common shareholders’ equity.

ROTCE — Return on average tangible common shareholders' equity.

RSU — Restricted stock unit.

RWA — Risk-weighted assets.

S&P — Standard and Poor’s.

SBA — Small Business Administration.

SCAP — Supervisory Capital Assessment Program.

SEC — U.S. Securities and Exchange Commission.

SERP — Supplemental Executive Retirement Plan.

SPE — Special purpose entity.

STIS — SunTrust Investment Services, Inc.

STM — SunTrust Mortgage, Inc.

STRH — SunTrust Robinson Humphrey, Inc.

SunTrust — SunTrust Banks, Inc.

SunTrust Community Capital — SunTrust Community Capital, LLC.

TDR — Troubled debt restructuring.

TRS — Total return swaps.

U.S. — United States.

U.S. GAAP — Generally Accepted Accounting Principles in the United States.

U.S. Treasury — The United States Department of the Treasury.

UPB — Unpaid principal balance.

UTB — Unrecognized tax benefit.

VA —Veterans Administration.

VAR —Value at risk.

VI — Variable interest.

VIE — Variable interest entity.

Visa —The Visa, U.S.A. Inc. card association or its affiliates, collectively.

Visa Counterparty — A financial institution which purchased the Company's Visa Class B shares.

iii

PART I - FINANCIAL INFORMATION

The following unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and accordingly do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. However, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary to comply with Regulation S-X have been included. Operating results for the three and six months ended June 30, 2014 , are not necessarily indicative of the results that may be expected for the full year ending December 31, 2014 .



Item 1.	FINANCIAL STATEMENTS (UNAUDITED)

SunTrust Banks, Inc.

Consolidated Statements of Income



	Three Months Ended June 30					Six Months Ended June 30
(Dollars in millions and shares in thousands, except per share data) (Unaudited)	2014			2013		2014			2013
Interest Income
Interest and fees on loans		$1,161			$1,157		$2,313			$2,326
Interest and fees on loans held for sale	17			29		32			60
Interest and dividends on securities available for sale	149			143		302			286
Trading account interest and other	19			18		36			34
Total interest income	1,346			1,347		2,683			2,706
Interest Expense
Interest on deposits	61			75		126			154
Interest on long-term debt	66			53		124			104
Interest on other borrowings	10			8		19			16
Total interest expense	137			136		269			274
Net interest income	1,209			1,211		2,414			2,432
Provision for credit losses	73			146		175			358
Net interest income after provision for credit losses	1,136			1,065		2,239			2,074
Noninterest Income
Service charges on deposit accounts	160			164		314			324
Other charges and fees	91			97		179			186
Card fees	82			78		158			154
Trust and investment management income	116			130		247			254
Retail investment services	76			69		147			130
Investment banking income	119			93		207			161
Trading income	47			49		96			91
Mortgage servicing related income	45			1		99			39
Mortgage production related income	52			133		95			292
Gain on sale of subsidiary	105			—		105			—
Net securities (losses)/gains ¹	(1		)	—		(2		)	2
Other noninterest income	65			44		103			88
Total noninterest income	957			858		1,748			1,721
Noninterest Expense
Employee compensation	659			635		1,319			1,246
Employee benefits	104			102		244			250
Outside processing and software	181			187		351			365
Operating losses	218			72		239			111
Net occupancy expense	83			86		169			175
Equipment expense	42			46		86			91
Regulatory assessments	40			41		80			95
Marketing and customer development	30			31		56			61
Credit and collection services	23			52		46			85
Amortization of intangible assets	4			6		7			12
Other noninterest expense ²	133			129		277			249
Total noninterest expense	1,517			1,387		2,874			2,740
Income before provision for income taxes	576			536		1,113			1,055
Provision for income taxes ²	173			156		298			317
Net income including income attributable to noncontrolling interest	403			380		815			738
Net income attributable to noncontrolling interest	4			3		11			9
Net income		$399			$377		$804			$729
Net income available to common shareholders		$387			$365		$780			$705
Net income per average common share:
Diluted		$0.72			$0.68		$1.45			$1.31
Basic	0.73			0.68		1.47			1.32
Dividends declared per common share	0.20			0.10		0.30			0.15
Average common shares - diluted	535,486			539,763		536,234			539,812
Average common shares - basic	529,764			535,172		530,459			535,425

¹ Total OTTI was $0 for the three months ended June 30, 2014 and 2013 . Of total OTTI, losses of $1 million and $0 were recognized in earnings, and gains of $1 million and $0 were recognized as non-credit-related OTTI in OCI for the three months ended June 30, 2014 and 2013 , respectively. Total OTTI was $0 for the six months ended June 30, 2014 and 2013 . Of total OTTI, losses of $1 million were recognized in earnings, and gains of $1 million were recognized as non-credit-related OTTI in OCI for both the six months ended June 30, 2014 and 2013 .

² Amortization expense related to qualified affordable housing investment costs is recognized in provision for income taxes for each of the periods presented as allowed by a recently adopted accounting standard. Prior to the first quarter of 2014, these amounts were recognized in other noninterest expense.

See Notes to Consolidated Financial Statements (unaudited).

SunTrust Banks, Inc.

Consolidated Statements of Comprehensive Income/(Loss)



	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions) (Unaudited)	2014			2013			2014			2013
Net income		$399			$377			$804			$729
Components of other comprehensive income/(loss):
Change in net unrealized gains/(losses) on securities, net of tax of $102, ($223), $165, and ($265), respectively	175			(382		)	284			(455		)
Change in net unrealized losses on derivatives, net of tax of ($21), ($54), ($50), and ($96), respectively	(36		)	(91		)	(86		)	(163		)
Change related to employee benefit plans, net of tax of $1, $3, $19, and $15, respectively	2			5			32			26
Total other comprehensive income/(loss)	141			(468		)	230			(592		)
Total comprehensive income/(loss)		$540			($91	)		$1,034			$137

See Notes to Consolidated Financial Statements (unaudited).

SunTrust Banks, Inc.

Consolidated Balance Sheets



	June 30,			December 31,
(Dollars in millions and shares in thousands, except per share data) (Unaudited)	2014			2013
Assets
Cash and due from banks		$5,681			$4,258
Federal funds sold and securities borrowed or purchased under agreements to resell	1,156			983
Interest-bearing deposits in other banks	22			22
Cash and cash equivalents	6,859			5,263
Trading assets and derivatives (includes encumbered securities pledged against repurchase agreements o f $814 and $731 at June 30, 2014 and December 31, 2013, respectively)	5,141			5,040
Securities available for sale	24,015			22,542
Loans held for sale ¹ ($1,353 and $1,378 at fair value at June 30, 2014 and December 31, 2013, respectively)	4,046			1,699
Loans ² ($292 and $302 at fair value at June 30, 2014 and December 31, 2013, respectively)	129,744			127,877
Allowance for loan and lease losses	(2,003		)	(2,044		)
Net loans	127,741			125,833
Premises and equipment	1,518			1,565
Goodwill	6,337			6,369
Other intangible assets (MSRs at fair value: $1,259 and $1,300 at June 30, 2014 and December 31, 2013, respectively)	1,277			1,334
Other real estate owned	136			170
Other assets	5,489			5,520
Total assets		$182,559			$175,335
Liabilities and Shareholders’ Equity
Noninterest-bearing deposits		$40,891			$38,800
Interest-bearing deposits (CDs at fair value: $240 and $764 at June 30, 2014 and December 31, 2013, respectively)	92,394			90,959
Total deposits	133,285			129,759
Funds purchased	1,053			1,192
Securities sold under agreements to repurchase	2,192			1,759
Other short-term borrowings	5,870			5,788
Long-term debt ³ ($1,311 and $1,556 at fair value at June 30, 2014 and December 31, 2013, respectively)	13,155			10,700
Trading liabilities and derivatives	1,190			1,181
Other liabilities	3,683			3,534
Total liabilities	160,428			153,913
Preferred stock, no par value	725			725
Common stock, $1.00 par value	550			550
Additional paid in capital	9,085			9,115
Retained earnings	12,560			11,936
Treasury stock, at cost, and other ⁴	(730		)	(615		)
Accumulated other comprehensive loss, net of tax	(59		)	(289		)
Total shareholders’ equity	22,131			21,422
Total liabilities and shareholders’ equity		$182,559			$175,335

Common shares outstanding	532,800			536,097
Common shares authorized	750,000			750,000
Preferred shares outstanding	7			7
Preferred shares authorized	50,000			50,000
Treasury shares of common stock	17,121			13,824
¹ Includes loans held for sale, at fair value, of consolidated VIEs		$—			$261
² Includes loans of consolidated VIEs	307			327
³ Includes debt of consolidated VIEs ($0 and $256 at fair value at June 30, 2014 and December 31, 2013, respectively)	322			597
⁴ Includes noncontrolling interest	107			119

See Notes to Consolidated Financial Statements (unaudited).

SunTrust Banks, Inc.

Consolidated Statements of Shareholders’ Equity



(Dollars and shares in millions, except per share data) (Unaudited)	Preferred Stock		Common Shares Outstanding		Common Stock		Additional Paid in Capital			Retained Earnings			Treasury Stock and Other ¹			Accumulated Other Comprehensive (Loss)/Income ²			Total
Balance, January 1, 2013		$725	539			$550		$9,174			$10,817			($590	)		$309			$20,985
Net income	—		—		—		—			729			—			—			729
Other comprehensive loss	—		—		—		—			—			—			(592		)	(592		)
Change in noncontrolling interest	—		—		—		—			—			1			—			1
Common stock dividends, $0.15 per share	—		—		—		—			(81		)	—			—			(81		)
Preferred stock dividends ³	—		—		—		—			(18		)	—			—			(18		)
Acquisition of treasury stock	—		(2	)	—		—			—			(50		)	—			(50		)
Exercise of stock options and stock compensation expense	—		1		—		(15		)	—			25			—			10
Restricted stock activity	—		1		—		(33		)	—			37			—			4
Amortization of restricted stock compensation	—		—		—		—			—			15			—			15
Issuance of stock for employee benefit plans and other	—		—		—		—			—			4			—			4
Balance, June 30, 2013		$725	539			$550		$9,126			$11,447			($558	)		($283	)		$21,007
Balance, January 1, 2014		$725	536			$550		$9,115			$11,936			($615	)		($289	)		$21,422
Net income	—		—		—		—			804			—			—			804
Other comprehensive income	—		—		—		—			—			—			230			230
Change in noncontrolling interest	—		—		—		—			—			4			—			4
Common stock dividends, $0.30 per share	—		—		—		—			(160		)	—			—			(160		)
Preferred stock dividends ³	—		—		—		—			(19		)	—			—			(19		)
Acquisition of treasury stock	—		(3	)	—		—			—			(133		)	—			(133		)
Exercise of stock options and stock compensation expense	—		—		—		(13		)	—			10			—			(3		)
Restricted stock activity	—		—		—		6			(1		)	3			—			8
Amortization of restricted stock compensation	—		—		—		—			—			14			—			14
Change in equity related to the sale of subsidiary	—		—		—		(23		)	—			(16		)	—			(39		)
Issuance of stock for employee benefit plans and other	—		—		—		—			—			3			—			3
Balance, June 30, 2014		$725	533			$550		$9,085			$12,560			($730	)		($59	)		$22,131

¹ At June 30, 2014 , includes ($802) million for treasury stock, ($35) million for compensation element of restricted stock, and $107 million for noncontrolling interest.

At June 30, 2013 , includes ($605) million for treasury stock, ($68) million for compensation element of restricted stock, and $115 million for noncontrolling interest.

² At June 30, 2014 , includes $206 million in unrealized net gains on AFS securities, $193 million in unrealized net gains on derivative financial instruments, and ($458) million related to employee benefit plans.

At June 30, 2013 , includes $65 million in unrealized net gains on AFS securities, $369 million in unrealized net gains on derivative financial instruments, and ($717) million related to employee benefit plans.

³ For the six months ended June 30, 2014 , dividends were $2,022 per share for both Perpetual Preferred Stock Series A and B and $2,938 per share for Perpetual Preferred Stock Series E.

For the six months ended June 30, 2013 , dividends were $2,022 per share for both Perpetual Preferred Stock Series A and B and $2,856 per share for Perpetual Preferred Stock Series E.

See Notes to Consolidated Financial Statements (unaudited).

SunTrust Banks, Inc. Consolidated Statements of Cash Flows

	Six Months Ended June 30
(Dollars in millions) (Unaudited)	2014			2013
Cash Flows from Operating Activities
Net income including income attributable to noncontrolling interest		$815			$738
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of subsidiary	(105		)	—
Depreciation, amortization, and accretion	328			365
Origination of mortgage servicing rights	(68		)	(203		)
Provisions for credit losses and foreclosed property	190			389
Mortgage repurchase provision	10			29
Stock option compensation and amortization of restricted stock compensation	6			16
Excess tax benefits from stock-based compensation	(4		)	—
Net securities losses/(gains)	2			(2		)
Net gain on sale of loans held for sale, loans, and other assets	(173		)	(350		)
Net decrease in loans held for sale	335			141
Net increase in other assets	(162		)	(274		)
Net decrease in other liabilities	(26		)	(125		)
Net cash provided by operating activities	1,148			724
Cash Flows from Investing Activities
Proceeds from maturities, calls, and paydowns of securities available for sale	1,730			3,233
Proceeds from sales of securities available for sale	69			497
Purchases of securities available for sale	(2,949		)	(5,828		)
Proceeds from sales of trading securities	59			—
Net increase in loans, including purchases of loans	(5,612		)	(1,855		)
Proceeds from sales of loans	651			630
Purchases of mortgage servicing rights	(76		)	—
Capital expenditures	(60		)	(43		)
Payments related to acquisitions, including contingent consideration	(8		)	—
Proceeds from sale of subsidiary	193			—
Proceeds from the sale of other real estate owned and other assets	187			249
Net cash used in investing activities	(5,816		)	(3,117		)
Cash Flows from Financing Activities
Net increase/(decrease) in total deposits	3,526			(4,697		)
Net increase in funds purchased, securities sold under agreements to repurchase, and other short-term borrowings	376			2,620
Proceeds from long-term debt	2,704			609
Repayments of long-term debt	(39		)	(99		)
Repurchase of common stock	(133		)	(50		)
Common and preferred dividends paid	(179		)	(99		)
Stock option activity	9			11
Net cash provided by/(used in) financing activities	6,264			(1,705		)
Net increase/(decrease) in cash and cash equivalents	1,596			(4,098		)
Cash and cash equivalents at beginning of period	5,263			8,257
Cash and cash equivalents at end of period		$6,859			$4,159

Supplemental Disclosures:
Loans transferred from loans held for sale to loans		$20			$17
Loans transferred from loans to loans held for sale	2,821			144
Loans transferred from loans and loans held for sale to other real estate owned	80			134
Non-cash impact of the deconsolidation of CLO	282			—

See Notes to Consolidated Financial Statements (unaudited).

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results of operations in these financial statements, have been made.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could vary from these estimates. Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

The Company evaluated subsequent events through the date its financial statements were issued.

These financial statements should be read in conjunction with the Company ’s 2013 Annual Report on Form 10-K. There have been no significant changes to the Company’s accounting policies as disclosed in the Company’s 2013 Annual Report on Form 10-K.

Accounting Policies Recently Adopted and Pending Accounting Pronouncements

In March 2013, the FASB issued ASU 2013-04, "Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (a consensus of the FASB Emerging Issues Task Force)." The ASU requires additional disclosures about joint and several liability arrangements and requires the Company to measure obligations resulting from joint and several liability arrangements as the sum of the amount the Company agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the Company expects to pay on behalf of its co-obligors. The ASU is effective for the fiscal years and interim periods beginning after December 15, 2013. The Company adopted the ASU at January 1, 2014 and the adoption did not have an impact on the Company 's financial position, results of operations, or EPS .

In June 2013, the FASB issued ASU 2013-08, "Financial Services—Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements." The ASU clarifies the characteristics of an investment company and requires an investment company to measure noncontrolling ownership interests in other investment companies at fair value rather than using the equity method of accounting. The ASU is effective for fiscal years and interim periods beginning after December 15, 2013. The Company adopted the ASU at January 1, 2014 and the adoption did not have an impact on the Company 's financial position, results of operations, or EPS .

In January 2014, the FASB issued ASU 2014-01, "Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects (a consensus of the FASB Emerging Issues Task Force)." The ASU allows for use of the proportional amortization method for investments in qualified affordable housing projects if certain conditions are met. Under the proportional amortization method, the initial cost of the investment is amortized in proportion to the tax credits and other tax benefits received and the net investment performance is recognized in the income statement as a component of income tax expense. The ASU provides for a practical expedient, which allows for amortization of the investment in proportion to only the tax credits if it produces a measurement that is substantially similar to the measurement that would result from using both tax credits and other tax benefits. The ASU is effective for fiscal years and interim periods beginning after December 15, 2014. As early adoption is permitted, the Company adopted this ASU effective January 1, 2014, utilizing the practical expedient method. During the three and six months ended June 30, 2014 , $14 million and $27 million , respectively, of investment amortization expense has been recognized on a net basis with tax credits received as a component of income tax expense. The standard is required to be applied retrospectively; therefore prior period amounts included in noninterest expense prior to adoption have been reclassified. During the three and six months ended June 30, 2013 , $10 million and $20 million , respectively, of investment amortization expense was included in other noninterest expense in the Consolidated Statements of Income which was reclassified to income tax expense upon adoption. There has been no other impact on the Company 's financial position, results of operations, or EPS .

Notes to Consolidated Financial Statements (Unaudited), continued

In January 2014, the FASB issued ASU 2014-04, "Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (a consensus of the FASB Emerging Issues Task Force)." The update clarifies that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The ASU is effective for fiscal years and interim periods beginning after December 15, 2014. The adoption of this ASU is not expected to have a significant impact on the Company 's financial position, results of operations, or EPS .

In April 2014, the FASB issued ASU 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." The update changes the requirements for reporting discontinued operations. The ASU is effective for fiscal years and interim periods beginning after December 15, 2014. Early adoption is permitted only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued. The Company adopted the ASU upon issuance for prospective transactions. The adoption did not have an impact on the Company 's financial position, results of operations, or EPS .

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)." The guidance in this update supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. The core principle of the ASU is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU is effective for fiscal years and interim periods beginning after December 15, 2016 and early adoption is not permitted. The Company is evaluating the impact of the ASU; however, it is not expected to have a significant impact on the Company's financial position, results of operations, or EPS .

In June 2014, the FASB issued ASU 2014-11, "Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures." The amendments in this update change the accounting for repurchase-to-maturity transactions to secured borrowing accounting. Also, for repurchase financing arrangements, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty, which will result in secured borrowing accounting for the repurchase agreement. Additional disclosures are required for all types of repurchase agreements. The ASU is effective for fiscal years and interim periods beginning after December 15, 2014 and early adoption is not permitted. The Company is evaluating the impact of the ASU ; however, it is not expected to have a significant impact on the Company's financial position, results of operations, or EPS .

In June 2014, the FASB issued ASU 2014-12, "Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” The amendments in this update require that a performance target that affects vesting and that could be achieved after the requisite service period shall be treated as a performance condition. Under existing guidance in Topic 718, a performance target that falls under the scope of this amendment should not be reflected in estimating the grant-date fair value of the award; but rather compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The ASU is effective for fiscal years and interim periods beginning after December 15, 2015. Early adoption is permitted. The Company is evaluating the impact of the ASU ; however, it is not expected to have a significant impact on the Company's financial position, results of operations, or EPS .

NOTE 2 - ACQUISITIONS/DISPOSITIONS




(Dollars in millions)	Date	Cash Received		Goodwill			Other Intangibles			Gain
2014
Sale of RidgeWorth	5/30/2014		$193		($40	)		($9	)		$105

On May 30, 2014, the Company completed the sale of RidgeWorth , its asset management subsidiary with approximately $49.1 billion in assets under management, to an investor group led by a private equity fund managed by Lightyear Capital LLC. The Company received cash proceeds of $193 million , removed $96 million in net assets and $23 million in noncontrolling interests, and recognized a pretax gain of $105 million in connection with the sale, net of transaction-related expenses.

Notes to Consolidated Financial Statements (Unaudited), continued

The Company’s results for the six months ended June 30, 2014, included income before provision for income taxes related to RidgeWorth , excluding the gain on sale, of $22 million , comprised of $81 million of revenue and $59 million of expense. Income before provision for income taxes related to RidgeWorth, excluding the gain on sale, included $20 million attributable to the Company and $2 million attributable to noncontrolling interests during the six months ended June 30, 2014.

The Company’s results for the six months ended June 30, 2013, included income before provision for income taxes related to RidgeWorth of $32 million , comprised of $96 million of revenue and $64 million of expense. For the year ended December 31, 2013 , the Company’s income before provision for income taxes included $64 million related to RidgeWorth, comprised of $194 million of revenue and $130 million of expense. In all periods presented, the financial results of RidgeWorth , including the gain on sale, are reflected in the Corporate Other segment.

There were no other material acquisitions or dispositions during the three and six months ended June 30, 2014 and 2013 .

NOTE 3 - FEDERAL FUNDS SOLD AND SECURITIES BORROWED OR PURCHASED UNDER AGREEMENTS TO RESELL AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Fed funds sold and securities borrowed or purchased under agreements to resell were as follows:



(Dollars in millions)	June 30, 2014		December 31, 2013
Fed funds sold		$103		$75
Securities borrowed or purchased	334		184
Resell agreements	719		724
Total fed funds sold and securities borrowed or purchased under agreements to resell		$1,156		$983

Securities purchased under agreements to resell are primarily collateralized by U.S. government or agency securities and are carried at the amounts at which securities will be subsequently resold. Securities borrowed are primarily collateralized by corporate securities. The Company takes possession of all securities purchased under agreements to resell and securities borrowed and performs the appropriate margin evaluation on the acquisition date based on market volatility, as necessary. It is the Company 's policy to obtain possession of collateral with a fair value between 95% to 110% of the principal amount loaned under resale and securities borrowing agreements. At June 30, 2014 and December 31, 2013 , the total market value of collateral held was $1.1 billion and $913 million , of which $227 million and $234 million was repledged, respectively.

At June 30, 2014 and December 31, 2013 , the Company had $814 million and $731 million of trading assets pledged to secure $819 million and $717 million of repurchase agreements, respectively.

Netting of Securities - Repurchase and Resell Agreements

The Company has various financial assets and financial liabilities that are subject to enforceable master netting agreements or similar agreements. The Company 's derivatives that are subject to enforceable master netting agreements or similar agreements are discussed in Note 12 , "Derivative Financial Instruments." Securities purchased under agreements to resell and securities sold under agreements to repurchase are governed by a MRA . Under the terms of the MRA , all transactions between the Company and the counterparty constitute a single business relationship such that in the event of default, the nondefaulting party is entitled to set off claims and apply property held by that party in respect of any transaction against obligations owed. Any payments, deliveries, or other transfers may be applied against each other and netted. These amounts are limited to the contract asset/liability balance, and accordingly, do not include excess collateral received/pledged.

Notes to Consolidated Financial Statements (Unaudited), continued

The following table presents the Company 's eligible securities borrowed or purchased under agreements to resell and securities sold under agreements to repurchase at June 30, 2014 and December 31, 2013 :



(Dollars in millions)	Gross Amount		Amount Offset		Net Amount Presented in Consolidated Balance Sheets			Held/Pledged Financial Instruments		Net Amount
June 30, 2014
Financial assets:
Securities borrowed or purchased under agreements to resell		$1,053		$—		$1,053	^1,2		$1,040		$13
Financial liabilities:
Securities sold under agreements to repurchase	2,192		—		2,192		¹	2,192		—

December 31, 2013
Financial assets:
Securities borrowed or purchased under agreements to resell		$908		$—		$908	^1,2		$899		$9
Financial liabilities:
Securities sold under agreements to repurchase	1,759		—		1,759		¹	1,759		—

¹ None of the Company 's repurchase and reverse repurchase transactions met the right of setoff criteria for net balance sheet presentation at June 30, 2014 and December 31, 2013 .

² Excludes $103 million and $75 million of Fed funds sold which are not subject to a master netting agreement at June 30, 2014 and December 31, 2013 , respectively.

NOTE 4 – SECURITIES AVAILABLE FOR SALE

Securities Portfolio Composition



	June 30, 2014
(Dollars in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities		$1,581		$10		$17		$1,574
Federal agency securities	1,005		17		32		990
U.S. states and political subdivisions	243		8		—		251
MBS - agency	19,692		555		182		20,065
MBS - private	136		4		—		140
ABS	20		2		—		22
Corporate and other debt securities	38		3		—		41
Other equity securities ¹	931		1		—		932
Total securities AFS		$23,646		$600		$231		$24,015

	December 31, 2013
(Dollars in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities		$1,334		$6		$47		$1,293
Federal agency securities	1,028		13		57		984
U.S. states and political subdivisions	232		7		2		237
MBS - agency	18,915		421		425		18,911
MBS - private	155		1		2		154
ABS	78		2		1		79
Corporate and other debt securities	39		3		—		42
Other equity securities ¹	841		1		—		842
Total securities AFS		$22,622		$454		$534		$22,542

¹ At June 30, 2014 , other equity securities comprised of the following: $376 million in FHLB of Atlanta stock, $402 million in Federal Reserve Bank stock, $153 million in mutual fund investments, and $1 million of other. At December 31, 2013 , other equity securities comprised of the following: $336 million in FHLB of Atlanta stock, $402 million in Federal Reserve Bank stock, $103 million in mutual fund investments, and $1 million of other.

Notes to Consolidated Financial Statements (Unaudited), continued

The following table presents interest and dividends on securities AFS :



	Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)	2014		2013		2014		2013
Taxable interest		$138		$133		$279		$265
Tax-exempt interest	2		3		5		5
Dividends	9		7		18		16
Total interest and dividends		$149		$143		$302		$286

Securities AFS pledged to secure public deposits, repurchase agreements, trusts, and other funds had a fair value of $10.8 billion and $11.0 billion at June 30, 2014 and December 31, 2013 , respectively. At June 30, 2014 , $625 million of securities AFS were pledged against repurchase arrangements under which the secured party has possession of the collateral and has the right to sell or repledge that collateral. At December 31, 2013 , there were no securities AFS pledged under secured borrowing arrangements under which the secured party has possession of the collateral and would customarily sell or repledge that collateral, other than in an event of default by the Company.

The amortized cost and fair value of investments in debt securities at June 30, 2014 , by estimated average life, are shown below. Actual cash flows may differ from estimated average lives and contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.



	Distribution of Maturities
(Dollars in millions)	1 Year or Less			1-5 Years			5-10 Years			After 10 Years			Total
Amortized Cost:
U.S. Treasury securities		$—			$892			$689			$—			$1,581
Federal agency securities	71			247			543			144			1,005
U.S. states and political subdivisions	65			53			102			23			243
MBS - agency	1,995			6,727			7,384			3,586			19,692
MBS - private	—			136			—			—			136
ABS	15			4			1			—			20
Corporate and other debt securities	2			20			16			—			38
Total debt securities		$2,148			$8,079			$8,735			$3,753			$22,715
Fair Value:
U.S. Treasury securities		$—			$900			$674			$—			$1,574
Federal agency securities	71			259			518			142			990
U.S. states and political subdivisions	66			56			104			25			251
MBS - agency	2,114			6,912			7,522			3,517			20,065
MBS - private	—			140			—			—			140
ABS	14			6			2			—			22
Corporate and other debt securities	2			22			17			—			41
Total debt securities		$2,267			$8,295			$8,837			$3,684			$23,083
Weighted average yield ¹	2.71		%	2.44		%	2.86		%	2.92		%	2.71		%

¹ Average yields are based on amortized cost and presented on a FTE basis.

Securities in an Unrealized Loss Position

The Company held certain investment securities where amortized cost exceeded fair market value, resulting in unrealized loss positions. Market changes in interest rates and credit spreads may result in temporary unrealized losses as the market price of securities fluctuates. At June 30, 2014 , the Company did not intend to sell these securities nor was it more-likely-than-not that the Company would be required to sell these securities before their anticipated recovery or maturity. The Company has reviewed its portfolio for OTTI in accordance with the accounting policies described in the Company 's 2013 Annual Report on Form 10-K.

Notes to Consolidated Financial Statements (Unaudited), continued



	June 30, 2014
	Less than twelve months				Twelve months or longer				Total
(Dollars in millions)	Fair Value		Unrealized Losses ²		Fair Value		Unrealized Losses ²		Fair Value		Unrealized Losses ²
Temporarily impaired securities:
U.S. Treasury securities		$99		$—		$575		$17		$674		$17
Federal agency securities	3		—		615		32		618		32
MBS - agency	819		4		5,946		178		6,765		182
ABS	—		—		14		—		14		—
Total temporarily impaired securities	921		4		7,150		227		8,071		231
OTTI securities ¹ :
MBS - private	—		—		46		—		46		—
Total OTTI securities	—		—		46		—		46		—
Total impaired securities		$921		$4		$7,196		$227		$8,117		$231



	December 31, 2013
	Less than twelve months				Twelve months or longer				Total
(Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Temporarily impaired securities:
U.S. Treasury securities		$1,036		$47		$—		$—		$1,036		$47
Federal agency securities	398		29		264		28		662		57
U.S. states and political subdivisions	12		—		20		2		32		2
MBS - agency	9,173		358		618		67		9,791		425
ABS	—		—		13		1		13		1
Total temporarily impaired securities	10,619		434		915		98		11,534		532
OTTI securities ¹ :
MBS - private	105		2		—		—		105		2
Total OTTI securities	105		2		—		—		105		2
Total impaired securities		$10,724		$436		$915		$98		$11,639		$534

¹ Includes OTTI securities for which credit losses have been recorded in earnings in current or prior periods.

² Securities with unrealized losses less than $0.5 million are shown as zero.

At June 30, 2014 , unrealized losses on securities that have been in a temporarily impaired position for longer than twelve months included U.S. Treasury securities, federal agency securities, agency MBS , and one ABS collateralized by 2004 vintage home equity loans. Unrealized losses on U.S. Treasury securities, federal agency securities, and agency MBS securities are due to an increase in market interest rates. The ABS continues to receive timely principal and interest payments, and is evaluated quarterly for credit impairment. Cash flow analysis shows that the underlying collateral can withstand highly stressed loss assumptions without incurring a credit loss.

The portion of unrealized losses on securities that have been OTTI that relates to factors other than credit is recorded in AOCI . Losses related to credit impairment on these securities are determined through estimated cash flow analyses and have been recorded in earnings in current and prior periods.

Realized Gains and Losses and Other-than-Temporarily Impaired Securities



	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions)	2014			2013			2014			2013
Gross realized gains		$—			$1			$—			$4
Gross realized losses	—			(1		)	(1		)	(1		)
OTTI	(1		)	—			(1		)	(1		)
Net securities(losses)/gains		($1	)		$—			($2	)		$2

Notes to Consolidated Financial Statements (Unaudited), continued

Credit impairment that is determined through the use of models is estimated using cash flows on security specific collateral and the transaction structure. Future expected credit losses are determined by using various assumptions, the most significant of which include default rates, prepayment rates, and loss severities. If, based on this analysis, the security is in an unrealized loss position and the Company does not expect to recover the entire amortized cost basis of the security, the expected cash flows are then discounted at the security’s initial effective interest rate to arrive at a present value amount. OTTI credit losses reflect the difference between the present value of cash flows expected to be collected and the amortized cost basis of these securities. During the three and six months ended June 30, 2014 , all OTTI recognized in earnings related to one private MBS that has underlying collateral of residential mortgage loans securitized in 2007.

The Company continues to reduce existing exposure primarily through paydowns. In certain instances, the amount of impairment losses recognized in earnings includes credit losses on debt securities that exceeds the total unrealized losses, and as a result, the securities may have unrealized gains in AOCI relating to factors other than credit.

The securities that gave rise to credit impairments recognized during the three and six months ended June 30, 2014 , consisted of private MBS with a fair value of approximately $19 million at June 30, 2014 . The securities that gave rise to credit impairments recognized during the three and six months ended June 30, 2013 , consisted of private MBS and ABS with a combined fair value of approximately $2 million at June 30, 2013 . Credit impairments recognized on securities during the three and six months ended June 30, 2014 and 2013 , are shown below.




	Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)	2014		2013		2014		2013
OTTI ¹		$—		$—		$—		$—
Portion of gains recognized in OCI (before taxes)	1		—		1		1
Net impairment losses recognized in earnings		$1		$—		$1		$1

¹ The initial OTTI amount represents the excess of the amortized cost over the fair value of AFS debt securities. For subsequent impairments of the same security, amount includes additional declines in the fair value subsequent to the previously recorded OTTI , if applicable, until such time the security is no longer in an unrealized loss position.

The following is a rollforward of credit losses recognized in earnings for the three and six months ended June 30, 2014 and 2013 , related to securities for which the Company does not intend to sell and it is not more-likely-than-not that the Company will be required to sell as of the end of each period presented. Subsequent credit losses may be recorded on securities without a corresponding further decline in fair value when there has been a decline in expected cash flows.



	Three Months Ended June 30					Six Months Ended June 30
(Dollars in millions)	2014			2013		2014			2013
Balance, beginning of period		$25			$32		$25			$31
Additions:
OTTI credit losses on previously impaired securities	1			—		1			1
Reductions:
Increases in expected cash flows recognized over the remaining life of the securities	(1		)	—		(1		)	—
Balance, end of period		$25			$32		$25			$32

The following table presents a summary of the significant inputs used in determining the measurement of credit losses recognized in earnings for private MBS and ABS for the six months ended June 30 :



	2014 ¹	2013
Default rate	2%	6 - 9%
Prepayment rate	16%	7 - 8%
Loss severity	46%	61 - 74%

¹ During the six months ended June 30, 2014 , all OTTI recognized in earnings related to one private MBS security.

Assumption ranges represent the lowest and highest lifetime average estimates of each security for which credit losses were recognized in earnings. Ranges may vary from period to period as the securities for which credit losses are recognized vary. Additionally, severity may vary widely when losses are few and large.

Notes to Consolidated Financial Statements (Unaudited), continued

NOTE 5 - LOANS

Composition of Loan Portfolio

The composition of the Company 's loan portfolio is shown in the following table:



(Dollars in millions)	June 30, 2014		December 31, 2013
Commercial loans:
C&I		$61,337		$57,974
CRE	6,105		5,481
Commercial construction	1,096		855
Total commercial loans	68,538		64,310
Residential loans:
Residential mortgages - guaranteed	661		3,416
Residential mortgages - nonguaranteed ¹	24,173		24,412
Home equity products	14,519		14,809
Residential construction	508		553
Total residential loans	39,861		43,190
Consumer loans:
Guaranteed student loans	5,420		5,545
Other direct	3,675		2,829
Indirect	11,501		11,272
Credit cards	749		731
Total consumer loans	21,345		20,377
LHFI		$129,744		$127,877
LHFS ²		$4,046		$1,699

¹ Includes $292 million and $302 million of loans carried at fair value at June 30, 2014 and December 31, 2013 , respectively.

² Includes $1.4 billion of LHFS carried at fair value at both June 30, 2014 and December 31, 2013 .

At June 30, 2014 and December 31, 2013 , the Company had $57.9 billion and $56.4 billion , respectively, of net eligible loan collateral pledged to the Federal Reserve Discount Window or the FHLB of Atlanta to support available borrowing capacity.

During the three months ended June 30, 2014 and 2013 , the Company transferred $2.7 billion and $87 million in LHFI to LHFS , and $3 million and $5 million in LHFS to LHFI , respectively. Specifically, $2.1 billion of guaranteed residential mortgages were transferred to LHFS during the three months ended June 30, 2014, in anticipation of the sale of these loans on a servicing retained basis in the third quarter. Additionally, during the three months ended June 30, 2014 and 2013 , the Company sold $534 million and $159 million in loans and leases for gains of $22 million and $3 million , respectively.

During the six months ended June 30, 2014 and 2013 , the Company transferred $2.8 billion and $144 million in LHFI to LHFS , and $20 million and $17 million in LHFS to LHFI , respectively. Additionally, during the six months ended June 30, 2014 and 2013 , the Company sold $619 million and $662 million in loans and leases for gains of $31 million and $7 million , respectively.

Credit Quality Evaluation

The Company evaluates the credit quality of its loan portfolio by employing a dual internal risk rating system, which assigns both PD and LGD ratings to derive expected losses. Assignment of PD and LGD ratings are predicated upon numerous factors, including consumer credit risk scores, rating agency information, borrower/guarantor financial capacity, LTV ratios, collateral type, debt service coverage ratios, collection experience, other internal metrics/analysis, and qualitative assessments.

For the commercial portfolio, the Company believes that the most appropriate credit quality indicator is an individual loan’s risk assessment expressed according to the broad regulatory agency classifications of Pass or Criticized. The Company 's risk rating system is granular, with multiple risk ratings in both the Pass and Criticized categories. Pass ratings reflect relatively low PD s; whereas, Criticized assets have a higher PD . The granularity in Pass ratings assists in the establishment of pricing, loan structures, approval requirements, reserves, and ongoing credit management requirements. The Company conforms to the following regulatory classifications for Criticized assets: Other Assets Especially Mentioned (or Special Mention), Adversely Classified, Doubtful, and Loss. However, for the purposes of disclosure, management believes the most meaningful distinction within the

Notes to Consolidated Financial Statements (Unaudited), continued

Criticized categories is between Accruing Criticized (which includes Special Mention and a portion of Adversely Classified) and Nonaccruing Criticized (which includes a portion of Adversely Classified and Doubtful and Loss). This distinction identifies those relatively higher risk loans for which there is a basis to believe that the Company will collect all amounts due from those where full collection is less certain.

Risk ratings are refreshed at least annually, or more frequently as appropriate, based upon considerations such as market conditions, loan characteristics, and portfolio trends. Additionally, management routinely reviews portfolio risk ratings, trends, and concentrations to support risk identification and mitigation activities.

For consumer and residential loans, the Company monitors credit risk based on indicators such as delinquencies and FICO scores. The Company believes that consumer credit risk, as assessed by the industry-wide FICO scoring method, is a relevant credit quality indicator. Borrower-specific FICO scores are obtained at origination as part of the Company ’s formal underwriting process, and refreshed FICO scores are obtained by the Company at least quarterly.

For government-guaranteed loans, the Company monitors the credit quality based primarily on delinquency status, as it is a more relevant indicator of credit quality due to the government guarantee. At June 30, 2014 and December 31, 2013 , 27% and 82% , respectively, of the guaranteed residential loan portfolio was current with respect to payments. The decline in the percentage of current loans in LHFI is solely due to approximately $2.1 billion in accruing current guaranteed residential loan which were transferred to LHFS in June, 2014. At June 30, 2014 and December 31, 2013 , 82% and 81% , respectively, of the guaranteed student loan portfolio was current with respect to payments. Loss exposure to the Company on these loans is mitigated by the government guarantee.

LHFI by credit quality indicator are shown in the tables below:



	Commercial Loans
	C&I				CRE				Commercial construction
(Dollars in millions)	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
Credit rating:
Pass		$59,854		$56,443		$5,902		$5,245		$1,059		$798
Criticized accruing	1,284		1,335		165		197		27		45
Criticized nonaccruing	199		196		38		39		10		12
Total		$61,337		$57,974		$6,105		$5,481		$1,096		$855



	Residential Loans ¹
	Residential mortgages - nonguaranteed				Home equity products				Residential construction
(Dollars in millions)	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
Current FICO score range:
700 and above		$19,038		$19,100		$11,558		$11,661		$385		$423
620 - 699	3,603		3,652		2,087		2,186		89		90
Below 620 ²	1,532		1,660		874		962		34		40
Total		$24,173		$24,412		$14,519		$14,809		$508		$553



	Consumer Loans ³
	Other direct				Indirect				Credit cards
(Dollars in millions)	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
Current FICO score range:
700 and above		$3,161		$2,370		$8,554		$8,420		$528		$512
620 - 699	453		397		2,316		2,228		178		176
Below 620 ²	61		62		631		624		43		43
Total		$3,675		$2,829		$11,501		$11,272		$749		$731

¹ Excludes $661 million and $3.4 billion at June 30, 2014 and December 31, 2013 , respectively, of guaranteed residential loans. At June 30, 2014 and December 31, 2013 , the majority of these loans had FICO scores of 700 and above.

² For substantially all loans with refreshed FICO scores below 620, the borrower’s FICO score at the time of origination exceeded 620 but has since deteriorated as the loan has seasoned.

³ Excludes $5.4 billion and $5.5 billion of guaranteed student loans at June 30, 2014 and December 31, 2013 , respectively.

Notes to Consolidated Financial Statements (Unaudited), continued

The payment status for the LHFI portfolio is shown in the tables below:



	June 30, 2014
(Dollars in millions)	Accruing Current		Accruing 30-89 Days Past Due		Accruing 90+ Days Past Due		Nonaccruing ²		Total
Commercial loans:
C&I		$61,085		$42		$11		$199		$61,337
CRE	6,063		4		—		38		6,105
Commercial construction	1,086		—		—		10		1,096
Total commercial loans	68,234		46		11		247		68,538
Residential loans:
Residential mortgages - guaranteed	181		35		445		—		661
Residential mortgages - nonguaranteed ¹	23,642		112		14		405		24,173
Home equity products	14,224		104		—		191		14,519
Residential construction	457		4		1		46		508
Total residential loans	38,504		255		460		642		39,861
Consumer loans:
Guaranteed student loans	4,430		424		566		—		5,420
Other direct	3,648		21		2		4		3,675
Indirect	11,432		62		1		6		11,501
Credit cards	738		6		5		—		749
Total consumer loans	20,248		513		574		10		21,345
Total LHFI		$126,986		$814		$1,045		$899		$129,744

¹ Includes $292 million of loans carried at fair value, the majority of which were accruing current.

² Nonaccruing loans past due 90 days or more totaled $567 million . Nonaccruing loans past due fewer than 90 days include modified nonaccrual loans reported as TDR s and performing second lien loans which are classified as nonaccrual when the first lien loan is nonperforming.



	December 31, 2013
(Dollars in millions)	Accruing Current		Accruing 30-89 Days Past Due		Accruing 90+ Days Past Due		Nonaccruing ²		Total
Commercial loans:
C&I		$57,713		$47		$18		$196		$57,974
CRE	5,430		5		7		39		5,481
Commercial construction	842		1		—		12		855
Total commercial loans	63,985		53		25		247		64,310
Residential loans:
Residential mortgages - guaranteed	2,787		58		571		—		3,416
Residential mortgages - nonguaranteed ¹	23,808		150		13		441		24,412
Home equity products	14,480		119		—		210		14,809
Residential construction	488		4		—		61		553
Total residential loans	41,563		331		584		712		43,190
Consumer loans:
Guaranteed student loans	4,475		461		609		—		5,545
Other direct	2,803		18		3		5		2,829
Indirect	11,189		75		1		7		11,272
Credit cards	718		7		6		—		731
Total consumer loans	19,185		561		619		12		20,377
Total LHFI		$124,733		$945		$1,228		$971		$127,877

¹ Includes $302 million of loans carried at fair value, the majority of which were accruing current.

² Nonaccruing loans past due 90 days or more totaled $653 million . Nonaccruing loans past due fewer than 90 days include modified nonaccrual loans reported as TDR s and performing second lien loans which are classified as nonaccrual when the first lien loan is nonperforming.

Notes to Consolidated Financial Statements (Unaudited), continued

Impaired Loans

A loan is considered impaired when it is probable that the Company will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the agreement. Commercial nonaccrual loans greater than $3 million and certain consumer, residential, and commercial loans whose terms have been modified in a TDR are individually evaluated for impairment. Smaller-balance homogeneous loans that are collectively evaluated for impairment are not included in the following tables. Additionally, the tables below exclude guaranteed student loans and guaranteed residential mortgages for which there was nominal risk of principal loss.



	June 30, 2014						December 31, 2013
(Dollars in millions)	Unpaid Principal Balance		Amortized Cost ¹		Related Allowance		Unpaid Principal Balance		Amortized Cost ¹		Related Allowance
Impaired loans with no related allowance recorded:
Commercial loans:
C&I		$87		$66		$—		$81		$56		$—
CRE	16		14		—		61		60		—
Total commercial loans	103		80		—		142		116		—
Residential mortgages - nonguaranteed	723		452		—		740		442		—
Impaired loans with an allowance recorded:
Commercial loans:
C&I	57		49		4		51		49		10
CRE	14		8		—		8		3		—
Commercial construction	6		2		—		6		3		—
Total commercial loans	77		59		4		65		55		10
Residential loans:
Residential mortgages - nonguaranteed	1,486		1,467		238		1,617		1,609		226
Home equity products	702		632		88		710		638		96
Residential construction	211		172		23		241		189		23
Total residential loans	2,399		2,271		349		2,568		2,436		345
Consumer loans:
Other direct	14		14		1		14		14		—
Indirect	97		97		5		83		83		5
Credit cards	10		10		2		13		13		3
Total consumer loans	121		121		8		110		110		8
Total impaired loans		$3,423		$2,983		$361		$3,625		$3,159		$363

¹ Amortized cost reflects charge-offs that have been recognized plus other amounts that have been applied to reduce the net book balance.

Included in the impaired loan balances above were $2.6 billion and $2.7 billion of accruing TDR s at amortized cost, at June 30, 2014 and December 31, 2013 , respectively, of which 96% were current. See Note 1 , “Significant Accounting Policies,” to the Company 's 2013 Annual Report on Form 10-K for further information regarding the Company ’s loan impairment policy.

Notes to Consolidated Financial Statements (Unaudited), continued



	Three Months Ended June 30								Six Months Ended June 30
	2014				2013				2014				2013
(Dollars in millions)	Average Amortized Cost		Interest Income Recognized ¹		Average Amortized Cost		Interest Income Recognized ¹		Average Amortized Cost		Interest Income Recognized ¹		Average Amortized Cost		Interest Income Recognized ¹
Impaired loans with no related allowance recorded:
Commercial loans:
C&I		$72		$—		$70		$1		$76		$1		$63		$1
CRE	15		—		9		—		15		—		8		—
Commercial construction	—		—		47		—		—		—		36		1
Total commercial loans	87		—		126		1		91		1		107		2
Residential mortgages - nonguaranteed	463		5		448		4		470		9		461		8
Impaired loans with an allowance recorded:
Commercial loans:
C&I	52		—		80		1		54		—		75		1
CRE	11		—		3		—		11		—		2		—
Commercial construction	3		—		8		—		3		—		7		—
Total commercial loans	66		—		91		1		68		—		84		1
Residential loans:
Residential mortgages - nonguaranteed	1,456		20		1,554		23		1,444		41		1,547		41
Home equity products	651		7		648		5		648		13		652		10
Residential construction	179		2		205		3		178		4		206		5
Total residential loans	2,286		29		2,407		31		2,270		58		2,405		56
Consumer loans:
Other direct	14		—		15		—		14		—		15		—
Indirect	105		1		72		1		103		3		74		2
Credit cards	11		—		17		1		11		—		19		1
Total consumer loans	130		1		104		2		128		3		108		3
Total impaired loans		$3,032		$35		$3,176		$39		$3,027		$71		$3,165		$70

¹ Of the interest income recognized during the three and six months ended June 30, 2014 , cash basis interest income was less than $1 million and $2 million , respectively.

Of the interest income recognized during the three and six months ended June 30, 2013 , cash basis interest income was $1 million and $6 million , respectively.

Notes to Consolidated Financial Statements (Unaudited), continued

NPA s are shown in the following table:



(Dollars in millions)	June 30, 2014		December 31, 2013
Nonaccrual/NPLs:
Commercial loans:
C&I		$199		$196
CRE	38		39
Commercial construction	10		12
Residential loans:
Residential mortgages - nonguaranteed	405		441
Home equity products	191		210
Residential construction	46		61
Consumer loans:
Other direct	4		5
Indirect	6		7
Total nonaccrual/NPLs ¹	899		971
OREO ²	136		170
Other repossessed assets	6		7
Nonperforming LHFS	—		17
Total NPAs		$1,041		$1,165

¹ Nonaccruing restructured loans are included in total nonaccrual/ NPL s.

² Does not include foreclosed real estate related to loans insured by the FHA or the VA . Proceeds due from the FHA and the VA are recorded as a receivable in other assets in the Consolidated Balance Sheets until the funds are received and the property is conveyed. The receivable amount related to proceeds due from the FHA or the VA totaled $79 million and $88 million at June 30, 2014 and December 31, 2013 , respectively.

Restructured Loans

TDR s are loans in which the borrower is experiencing financial difficulty and the Company has granted an economic concession to the borrower that the Company would not otherwise consider. When loans are modified under the terms of a TDR , the Company typically offers the borrower an extension of the loan maturity date and/or a reduction in the original contractual interest rate. In certain situations, the Company may offer to restructure a loan in a manner that ultimately results in the forgiveness of contractually specified principal balances.

At both June 30, 2014 and December 31, 2013 , the Company had $8 million in commitments to lend additional funds to debtors whose terms have been modified in a TDR .

Notes to Consolidated Financial Statements (Unaudited), continued

The number and amortized cost of loans modified under the terms of a TDR by type of modification are shown in the following tables:



	Three Months Ended June 30, 2014 ¹
(Dollars in millions)	Number of Loans Modified	Principal Forgiveness ²		Rate Modification ³		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	27		$—		$—		$12		$12
CRE	2	3		—		—		3
Residential loans:
Residential mortgages - nonguaranteed	365	1		43		11		55
Home equity products	471	—		2		20		22
Residential construction	4	—		1		—		1
Consumer loans:
Other direct	21	—		—		—		—
Indirect	712	—		—		14		14
Credit cards	130	—		—		—		—
Total TDRs	1,732		$4		$46		$57		$107



	Six Months Ended June 30, 2014 ¹
(Dollars in millions)	Number of Loans Modified	Principal Forgiveness ²		Rate Modification ³		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	43		$—		$—		$14		$14
CRE	4	3		—		3		6
Residential loans:
Residential mortgages - nonguaranteed	678	1		86		28		115
Home equity products	904	—		5		38		43
Residential construction	10	—		1		—		1
Consumer loans:
Other direct	38	—		—		1		1
Indirect	1,551	—		—		30		30
Credit cards	227	—		1		—		1
Total TDRs	3,455		$4		$93		$114		$211

¹ Includes loans modified under the terms of a TDR that were charged-off during the period.

² Restructured loans which had forgiveness of amounts contractually due under the terms of the loan typically have had multiple concessions including rate modifications and/or term extensions. The total amount of charge-offs associated with principal forgiveness during both the three and six months ended June 30, 2014 was immaterial.

³ Restructured loans which had a modification of the loan's contractual interest rate may also have had an extension of the loan's contractual maturity date and/or other concessions. The financial effect of modifying the interest rate on the loans modified as a TDR was immaterial to the financial statements during the three and six months ended June 30, 2014 .

Notes to Consolidated Financial Statements (Unaudited), continued



	Three Months Ended June 30, 2013 ¹
(Dollars in millions)	Number of Loans Modified	Principal Forgiveness ²		Rate Modification ³		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	29		$18		$—		$15		$33
CRE	1	—		—		—		—
Residential loans:
Residential mortgages - nonguaranteed	637	—		36		53		89
Home equity products	755	—		17		31		48
Residential construction	104	—		7		2		9
Consumer loans:
Other direct	32	—		—		1		1
Indirect	831	—		—		16		16
Credit cards	155	—		1		—		1
Total TDRs	2,544		$18		$61		$118		$197



	Six Months Ended June 30, 2013 ¹
(Dollars in millions)	Number of Loans Modified	Principal Forgiveness ²		Rate Modification ³		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	96		$18		$2		$49		$69
CRE	5	—		4		1		5
Residential loans:
Residential mortgages - nonguaranteed	913	—		61		70		131
Home equity products	1,438	—		36		48		84
Residential construction	217	—		18		4		22
Consumer loans:
Other direct	80	—		—		3		3
Indirect	1,734	—		—		33		33
Credit cards	386	—		2		—		2
Total TDRs	4,869		$18		$123		$208		$349

¹ Includes loans modified under the terms of a TDR that were charged-off during the period.

Notes to Consolidated Financial Statements (Unaudited), continued

For the three and six months ended June 30, 2014 , the table below represents defaults on loans that were first modified between the periods January 1, 2013 and June 30, 2014 that became 90 days or more delinquent or were charged-off during the period.



	Three Months Ended June 30, 2014			Six Months Ended June 30, 2014
(Dollars in millions)	Number of Loans	Amortized Cost		Number of Loans	Amortized Cost
Commercial loans:
C&I	22		$4	47		$5
Residential loans:
Residential mortgages	40	6		89	10
Home equity products	24	2		47	3
Residential construction	2	—		6	—
Consumer loans:
Other direct	—	—		5	—
Indirect	46	—		89	1
Credit cards	63	1		83	1
Total TDRs	197		$13	366		$20

For the three and six months ended June 30, 2013 , the table below represents defaults on loans that were first modified between the periods January 1, 2012 and June 30, 2013 that became 90 days or more delinquent or were charged-off during the period.



	Three Months Ended June 30, 2013			Six Months Ended June 30, 2013
(Dollars in millions)	Number of Loans	Amortized Cost		Number of Loans	Amortized Cost
Commercial loans:
C&I	19		$—	42		$—
CRE	3	—		4	3
Commercial construction	—	—		1	—
Residential loans:
Residential mortgages	80	6		156	10
Home equity products	52	3		101	6
Residential construction	10	—		16	2
Consumer loans:
Other direct	2	—		9	—
Indirect	49	1		88	1
Credit cards	35	—		79	1
Total TDRs	250		$10	496		$23

The majority of loans that were modified and subsequently became 90 days or more delinquent have remained on nonaccrual status since the time of modification.

Notes to Consolidated Financial Statements (Unaudited), continued

Concentrations of Credit Risk

The Company does not have a significant concentration of risk to any individual client except for the U.S. government and its agencies. However, a geographic concentration arises because the Company operates primarily in the Southeastern and Mid-Atlantic regions of the U.S. The Company engages in limited international banking activities. The Company ’s total cross-border outstanding loans were $1.2 billion and $1.0 billion at June 30, 2014 and December 31, 2013 , respectively.

The major concentrations of credit risk for the Company arise by collateral type in relation to loans and credit commitments. The only significant concentration that exists is in loans secured by residential real estate. At June 30, 2014 , the Company owned $39.9 billion in residential loans, representing 31% of total LHFI , and had $10.9 billion in commitments to extend credit on home equity lines and $3.4 billion in mortgage loan commitments. At December 31, 2013 , the Company owned $43.2 billion in residential loans, representing 34% of total LHFI , and had $11.2 billion in commitments to extend credit on home equity lines and $2.7 billion in mortgage loan commitments. Of the residential loans owned at June 30, 2014 and December 31, 2013 , 2% and 8% , respectively, were guaranteed by a federal agency or a GSE .

Included in the residential mortgage portfolio were $11.9 billion and $12.4 billion of mortgage loans at June 30, 2014 and December 31, 2013 , respectively, that included terms such as an interest only feature, a high original LTV ratio, or a second lien position that may increase the Company ’s exposure to credit risk and result in a concentration of credit risk. Of these mortgage loans, $4.7 billion and $5.5 billion , respectively, were interest only loans, primarily with a ten year interest only period. Approximately $1.0 billion and $1.1 billion of those interest only loans at June 30, 2014 and December 31, 2013 , respectively, were loans with no MI and were either first liens with combined original LTV ratios in excess of 80% or were second liens. Additionally, the Company owned approximately $7.3 billion and $6.9 billion of amortizing loans with no MI at June 30, 2014 and December 31, 2013 , respectively, comprised of first liens with combined original LTV ratios in excess of 80% and second liens. Despite changes in underwriting guidelines that have curtailed the origination of high LTV loans, the balances of such loans have increased due to lending to high credit quality clients.

NOTE 6 - ALLOWANCE FOR CREDIT LOSSES

The allowance for credit losses consists of the ALLL and the reserve for unfunded commitments. Activity in the allowance for credit losses is summarized in the table below:



	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions)	2014			2013			2014			2013
Balance at beginning of period		$2,086			$2,205			$2,094			$2,219
Provision for loan losses	76			152			182			356
(Benefit)/provision for unfunded commitments	(3		)	(6		)	(7		)	2
Loan charge-offs	(158		)	(233		)	(309		)	(506		)
Loan recoveries	45			54			86			101
Balance at end of period		$2,046			$2,172			$2,046			$2,172

Components:
ALLL								$2,003			$2,125
Unfunded commitments reserve ¹							43			47
Allowance for credit losses								$2,046			$2,172

¹ The unfunded commitments reserve is recorded in other liabilities in the Consolidated Balance Sheets.

Notes to Consolidated Financial Statements (Unaudited), continued

Activity in the ALLL by loan segment for the three months ended June 30, 2014 and 2013 is presented in the tables below:



	Three Months Ended June 30, 2014
(Dollars in millions)	Commercial			Residential			Consumer			Total
Balance at beginning of period		$966			$910			$164			$2,040
Provision for loan losses	18			32			26			76
Loan charge-offs	(38		)	(90		)	(30		)	(158		)
Loan recoveries	12			23			10			45
Balance at end of period		$958			$875			$170			$2,003

	Three Months Ended June 30, 2013
(Dollars in millions)	Commercial			Residential			Consumer			Total
Balance at beginning of period		$921			$1,087			$144			$2,152
Provision for loan losses	42			78			32			152
Loan charge-offs	(64		)	(143		)	(26		)	(233		)
Loan recoveries	20			24			10			54
Balance at end of period		$919			$1,046			$160			$2,125

	Six Months Ended June 30, 2014
(Dollars in millions)	Commercial			Residential			Consumer			Total
Balance at beginning of period		$946			$930			$168			$2,044
Provision for loan losses	57			80			45			182
Loan charge-offs	(71		)	(175		)	(63		)	(309		)
Loan recoveries	26			40			20			86
Balance at end of period		$958			$875			$170			$2,003

	Six Months Ended June 30, 2013
(Dollars in millions)	Commercial			Residential			Consumer			Total
Balance at beginning of period		$902			$1,131			$141			$2,174
Provision for loan losses	106			190			60			356
Loan charge-offs	(124		)	(321		)	(61		)	(506		)
Loan recoveries	35			46			20			101
Balance at end of period		$919			$1,046			$160			$2,125

As discussed in Note 1 , “Significant Accounting Policies,” to the Company 's 2013 Annual Report on Form 10-K, the ALLL is composed of both specific allowances for certain nonaccrual loans and TDR s and general allowances grouped into loan pools based on similar characteristics. No allowance is required for loans carried at fair value. Additionally, the Company records an immaterial allowance for loan products that are guaranteed by government agencies, as there is nominal risk of principal loss.

Notes to Consolidated Financial Statements (Unaudited), continued

The Company ’s LHFI portfolio and related ALLL is shown in the tables below:



	June 30, 2014
	Commercial				Residential				Consumer				Total
(Dollars in millions)	Carrying Value		Associated ALLL		Carrying Value		Associated ALLL		Carrying Value		Associated ALLL		Carrying Value		Associated ALLL
Individually evaluated		$139		$4		$2,723		$349		$121		$8		$2,983		$361
Collectively evaluated	68,399		954		36,846		526		21,224		162		126,469		1,642
Total evaluated	68,538		958		39,569		875		21,345		170		129,452		2,003
LHFI at fair value	—		—		292		—		—		—		292		—
Total LHFI		$68,538		$958		$39,861		$875		$21,345		$170		$129,744		$2,003



	December 31, 2013
	Commercial				Residential				Consumer				Total
(Dollars in millions)	Carrying Value		Associated ALLL		Carrying Value		Associated ALLL		Carrying Value		Associated ALLL		Carrying Value		Associated ALLL
Individually evaluated		$171		$10		$2,878		$345		$110		$8		$3,159		$363
Collectively evaluated	64,139		936		40,010		585		20,267		160		124,416		1,681
Total evaluated	64,310		946		42,888		930		20,377		168		127,575		2,044
LHFI at fair value	—		—		302		—		—		—		302		—
Total LHFI		$64,310		$946		$43,190		$930		$20,377		$168		$127,877		$2,044

NOTE 7 – GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Goodwill is required to be tested for impairment on an annual basis, which is performed by the Company as of September 30, 2014 , or as events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount or indicate that it is more likely than not that a goodwill impairment exists when the carrying amount of a reporting unit is zero or negative. The Company monitored events and circumstances during the first six months of 2014 and did not observe any factors that would more likely than not reduce the fair value of a reporting unit below its respective carrying value. Accordingly, goodwill was not tested for impairment during the six months ended June 30, 2014.

As discussed in Note 2 , "Acquisitions/Dispositions," the Company completed the sale of its asset management subsidiary, RidgeWorth, during the second quarter of 2014. Also, during the six months ended June 30, 2013 , branch-managed business banking clients were transferred from Wholesale Banking to Consumer Banking and Private Wealth Management, resulting in the reallocation of $300 million in goodwill. The changes in the carrying amount of goodwill by reportable segment for the six months ended June 30 are as follows:



(Dollars in millions)	Consumer Banking and Private Wealth Management		Wholesale Banking			Total
Balance, January 1, 2014		$4,262		$2,107			$6,369
Acquisition of Lantana Oil and Gas Partners, Inc.	—		8			8
Sale of RidgeWorth	—		(40		)	(40		)
Balance, June 30, 2014		$4,262		$2,075			$6,337
Balance, January 1, 2013		$3,962		$2,407			$6,369
Intersegment transfers	300		(300		)	—
Balance, June 30, 2013		$4,262		$2,107			$6,369

Notes to Consolidated Financial Statements (Unaudited), continued

Other Intangible Assets

Changes in the carrying amounts of other intangible assets for the six months ended June 30 are as follows:



(Dollars in millions)	Core Deposit Intangibles			MSRs - Fair Value			Other			Total
Balance, January 1, 2014		$4			$1,300			$30			$1,334
Amortization	(3		)	—			(4		)	(7		)
MSRs originated	—			68			—			68
MSRs purchased	—			76			—			76
Changes in fair value:
Due to changes in inputs and assumptions ¹	—			(107		)	—			(107		)
Other changes in fair value ²	—			(78		)	—			(78		)
Sale of RidgeWorth	—			—			(9		)	(9		)
Balance, June 30, 2014		$1			$1,259			$17			$1,277

Balance, January 1, 2013		$17			$899			$40			$956
Amortization	(7		)	—			(5		)	(12		)
MSRs originated	—			203			—			203
Changes in fair value:
Due to changes in inputs and assumptions ¹	—			250			—			250
Other changes in fair value ²	—			(152		)	—			(152		)
Sale of MSRs	—			(1		)	—			(1		)
Balance, June 30, 2013		$10			$1,199			$35			$1,244

¹ Primarily reflects changes in discount rates and prepayment speed assumptions, due to changes in interest rates.

² Represents changes due to the collection of expected cash flows, net of accretion, due to the passage of time.

Mortgage Servicing Rights

The Company retains MSR s from certain of its sales or securitizations of residential mortgage loans. MSR s on residential mortgage loans are the only servicing assets capitalized by the Company and are classified within intangible assets on the Company 's Consolidated Balance Sheets.

Income earned by the Company on its MSR s is derived primarily from contractually specified mortgage servicing fees and late fees, net of curtailment costs. Such income earned for the three and six months ended June 30, 2014 was $81 million and $160 million , respectively, and $77 million and $153 million for the three and six months ended June 30, 2013 , respectively. These amounts are reported in mortgage servicing related income in the Consolidated Statements of Income.

At June 30, 2014 and December 31, 2013 , the total UPB of mortgage loans serviced was $134.4 billion and $136.7 billion , respectively. Included in these amounts were $105.4 billion and $106.8 billion at June 30, 2014 and December 31, 2013 , respectively, of loans serviced for third parties. During the six months ended June 30, 2014 and 2013 , the Company sold MSR s, at a price approximating their fair value, on residential loans with a UPB of $439 million and $632 million , respectively. The Company purchased MSR s on residential loans with a UPB of $5.9 billion during the second quarter of 2014; however, only $460 million of these loans are reflected in the UPB amounts above as the transfer of servicing for the remainder is scheduled for the third quarter of 2014.

The Company determines the fair value of the MSR s using a valuation model that calculates the present value of the estimated future net servicing income. The model incorporates a number of assumptions as MSR s do not trade in an active and open market with readily observable prices. The Company determines fair value using market based prepayment rates, discount rates, and other assumptions that are compared to various sources of market data including independent third party valuations and industry surveys. Senior management and the STM Valuation Committee review all significant assumptions at least quarterly, since many factors can affect the fair value of MSR s. Changes to the valuation model inputs and assumptions are reflected in the periods' results.

Notes to Consolidated Financial Statements (Unaudited), continued

A summary of the key characteristics, inputs, and economic assumptions used to estimate the fair value of the Company ’s MSR s at June 30, 2014 and December 31, 2013 , and the sensitivity of the fair values to immediate 10% and 20% adverse changes in those assumptions are shown in the table below. The overall change in MSR s during the six months ended June 30, 2014 was primarily due to a decrease in prevailing interest rates during the period.



(Dollars in millions)	June 30, 2014			December 31, 2013
Fair value of retained MSRs		$1,259			$1,300
Prepayment rate assumption (annual)	9		%	8		%
Decline in fair value from 10% adverse change		$45			$38
Decline in fair value from 20% adverse change	88			74
Discount rate (annual)	11		%	12		%
Decline in fair value from 10% adverse change		$59			$66
Decline in fair value from 20% adverse change	114			126
Weighted-average life (in years)	7.0			7.7
Weighted-average coupon	4.3		%	4.4		%

The above sensitivities are hypothetical and should be used with caution. As the amounts indicate, changes in fair value based on variations in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities. Additionally, the sensitivities above do not include the effect of hedging activity undertaken by the Company to offset changes in the fair value of MSR s. See Note 12 , “Derivative Financial Instruments,” for further information regarding these hedging activities.

NOTE 8 - CERTAIN TRANSFERS OF FINANCIAL ASSETS AND VARIABLE INTEREST ENTITIES

Certain Transfers of Financial Assets and related Variable Interest Entities

As discussed in Note 10, "Certain Transfers of Financial Assets and Variable Interest Entities," to the Consolidated Financial Statements in the Company's 2013 Annual Report on Form 10-K, the Company has transferred loans and securities in sale or securitization transactions in which the Company has, or had, continuing involvement. Except as specifically noted herein, the Company is not required to provide additional financial support to any of the entities to which the Company has transferred financial assets, nor has the Company provided any support it was not otherwise obligated to provide. Further, during the six months ended June 30, 2014 , the Company evaluated whether any of its previous conclusions regarding whether it is the primary beneficiary of the VIEs described below should be changed based upon events occurring during the period. These evaluations did not result in changes to previous consolidation conclusions except for one CLO entity which is described in detail in the "Commercial and Corporate Loans" section of this footnote. No events occurred during the six months ended June 30, 2014 that changed the Company ’s sale accounting conclusion in regards to the residential mortgage loans, student loans, commercial and corporate loans, or CDO securities.

When evaluating transfers and other transactions with VIE s for consolidation, the Company first determines if it has a VI in the VIE . A VI is typically in the form of securities representing retained interests in the transferred assets and, at times, servicing rights and collateral manager fees. If the Company has a VI in the entity, it then evaluates whether or not it has both (1) the power to direct the activities that most significantly impact the economic performance of the VIE , and (2) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE to determine if the Company should consolidate the VIE .

Below is a summary of transfers of financial assets to VIEs for which the Company has retained some level of continuing involvement and supplements Note 10, "Certain Transfers of Financial Assets and Variable Interest Entities," to the Consolidated Financial Statements in the Company's 2013 Annual Report on Form 10-K.

Residential Mortgage Loans

The Company typically transfers first lien residential mortgage loans in conjunction with Ginnie Mae , Fannie Mae , and Freddie Mac securitization transactions whereby the loans are exchanged for cash or securities that are readily redeemable for cash proceeds and servicing rights. The Company sold residential mortgage loans to these entities, which resulted in pre-tax net gains of $61 million and $124 million , including servicing rights, for the three months ended June 30, 2014 and 2013 , respectively and $105 million and $281 million for the six months ended June 30,

Notes to Consolidated Financial Statements (Unaudited), continued

2014 and 2013 , respectively. These net gains are included within mortgage production related income in the Consolidated Statements of Income. These net gains include the change in value of the loans as a result of changes in interest rates from the time the related IRLC s were issued to the borrowers but do not include the results of hedging activities initiated by the Company to mitigate this market risk. See Note 12 , “Derivative Financial Instruments,” for further discussion of the Company ’s hedging activities. As seller, the Company has made certain representations and warranties with respect to the originally transferred loans, including those transferred under Ginnie Mae , Fannie Mae , and Freddie Mac programs, and those representations and warranties are discussed in Note 13 , “Guarantees.”

In a limited number of securitizations, the Company has received securities representing retained interests in the transferred loans in addition to cash and servicing rights in exchange for the transferred loans. The received securities are carried at fair value as either trading assets or securities AFS . At June 30, 2014 and December 31, 2013 , the fair value of securities received totaled $65 million and $71 million , respectively, and was valued using a third party pricing service.

The Company evaluated these securitization transactions for consolidation under the VIE consolidation guidance. As servicer of the underlying loans, the Company is generally deemed to have power over the securitization. However, if a single party, such as the issuer or the master servicer, effectively controls the servicing activities or has the unilateral ability to terminate the Company as servicer without cause, then that party is deemed to have power over the securitization. In almost all of its securitization transactions, the Company does not have power over the VIE as a result of these rights held by the master servicer. In certain transactions, the Company does have power as the servicer; however, the Company does not also have an obligation to absorb losses or the right to receive benefits that could potentially be significant to the securitization. The absorption of losses and the receipt of benefits would generally manifest itself through the retention of senior or subordinated interests. Total assets at June 30, 2014 and December 31, 2013 , of the unconsolidated trusts in which the Company has a VI are $316 million and $350 million , respectively.

The Company ’s maximum exposure to loss related to the unconsolidated VIE s in which it holds a VI is comprised of the loss of value of any interests it retains and any repurchase obligations it incurs as a result of a breach of its representations and warranties, discussed further in Note 13 , “Guarantees.”

Commercial and Corporate Loans

The Company has involvement with CLO entities that own commercial leveraged loans and bonds, certain of which were transferred by the Company to the CLO s. The Company currently holds certain securities issued by the CLO s and previously acted as collateral manager for these CLO s; however, upon the sale of RidgeWorth in May 2014, the Company is no longer the collateral manager. The Company previously determined that it was the primary beneficiary of, and thus, had consolidated one of these CLO s as it had both the power to direct the activities that most significantly impacted the entity’s economic performance and the obligation to absorb losses and the right to receive benefits from the entity that could potentially be significant to the CLO . The Company 's involvement with this CLO includes ownership in one of the senior interests in the CLO and certain preference shares of the CLO . Since the Company is no longer the collateral manager for the CLO , the Company no longer possesses the power to direct the activities that most significantly impact the economic performance of the VIE ; therefore, the Company is no longer the primary beneficiary of this CLO and in connection with the sale of RidgeWorth , the CLO was deconsolidated. At December 31, 2013 , the Company ’s Consolidated Balance Sheets reflected $261 million of loans held by the CLO and $256 million of debt issued by the CLO .

At June 30, 2014 , all CLO s that the Company has involvement with are considered to be VIE s and are unconsolidated. The Company has determined that it is not the primary beneficiary as it does not possess the power to direct the activities that most significantly impact the economic performance of the VIE . The Company 's preference share exposure was valued at $5 million and $3 million at June 30, 2014 and December 31, 2013 , respectively. The Company 's senior interest exposure was valued at $22 million and $26 million at June 30, 2014 and December 31, 2013 , respectively. At June 30, 2014 and December 31, 2013 , unconsolidated VIE s that the Company had involvement with had $780 million and $ 1.6 billion of estimated assets, respectively, and $730 million and $1.6 billion of estimated liabilities, respectively.

Student Loans

During 2006, the Company completed a securitization of government-guaranteed student loans through a transfer of loans to a securitization SPE , which previously qualified as a QSPE , and retained the related residual interest in the SPE . The Company concluded that this securitization of government-guaranteed student loans (the “Student Loan entity”) should be consolidated. At June 30, 2014 and December 31, 2013 , the Company ’s Consolidated Balance

Notes to Consolidated Financial Statements (Unaudited), continued

Sheets reflected $326 million and $344 million , respectively, of assets held by the Student Loan entity and $322 million and $341 million , respectively, of debt issued by the Student Loan entity.

Payments from the assets in the SPE must first be used to settle the obligations of the SPE , with any remaining payments remitted to the Company as the owner of the residual interest. To the extent that losses occur on the SPE ’s assets, the SPE has recourse to the federal government as the guarantor up to a maximum guarantee amount of 97% . Losses in excess of the government guarantee reduce the amount of available cash payable to the Company as the owner of the residual interest. To the extent that losses result from a breach of the master servicer’s servicing responsibilities, the SPE has recourse to the Company ; the SPE may require the Company to repurchase the loan from the SPE at par value. If the breach was caused by the subservicer, the Company has recourse to seek reimbursement from the subservicer up to the guaranteed amount. The Company ’s maximum exposure to loss related to the SPE is represented by the potential losses resulting from a breach of servicing responsibilities. To date, all loss claims filed with the guarantor that have been denied due to servicing errors have either been cured or reimbursement has been provided to the Company by the subservicer.

CDO Securities

The Company has transferred bank trust preferred securities in securitization transactions. The Company determined that it was not the primary beneficiary of any of these VIE s as the Company lacked the power to direct the significant activities of any of the VIE s. During the first quarter of 2014, the Company sold all remaining exposures to these VIEs. For further details on these VIEs refer to Note 10, "Certain Transfers of Financial Assets and Variable Interest Entities," to the Consolidated Financial Statements in the Company's 2013 Annual Report on Form 10-K.

The following tables present certain information related to the Company ’s asset transfers in which it has continuing economic involvement.



	Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)	2014		2013		2014		2013
Cash flows on interests held ¹ :
Residential Mortgage Loans ²		$7		$11		$10		$17
Commercial and Corporate Loans	—		—		—		1
CDO Securities	—		1		—		1
Total cash flows on interests held		$7		$12		$10		$19
Servicing or management fees ¹ :
Residential Mortgage Loans ²		$—		$1		$1		$1
Commercial and Corporate Loans	1		2		4		5
Total servicing or management fees		$1		$3		$5		$6

¹ The transfer activity is related to unconsolidated VIE s.

² Does not include GSE mortgage loan transfers

Notes to Consolidated Financial Statements (Unaudited), continued

Portfolio balances and delinquency balances based on accruing loans 90 days or more past due and all nonaccrual loans at June 30, 2014 and December 31, 2013 , and net charge-offs related to managed portfolio loans (both those that are owned or consolidated by the Company and those that have been transferred) for the three and six months ended June 30, 2014 and 2013 are as follows:



	Portfolio Balance ¹				Past Due and Nonaccrual ²						Net Charge-offs
	June 30, 2014		December 31, 2013		June 30, 2014			December 31, 2013			Three Months Ended June 30				Six Months Ended June 30
											Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)											2014		2013		2014		2013
Type of loan:
Commercial		$68,538		$64,310		$258			$272			$26		$44		$45		$89
Residential	39,861		43,190		1,102			1,296			67		119		135		275
Consumer	21,345		20,377		584			631			20		16		43		41
Total loan portfolio	129,744		127,877		1,944			2,199			113		179		223		405
Managed securitized loans:
Commercial	—		1,617		—			29			—		—		—		—
Residential	99,692		100,695		324		³	493		³	3		6		7		14
Total managed loans		$229,436		$230,189		$2,268			$2,721			$116		$185		$230		$419

¹ Excludes $4.0 billion and $1.7 billion of LHFS at June 30, 2014 and December 31, 2013 , respectively.

² Excludes $1 million and $17 million of past due LHFS at June 30, 2014 and December 31, 2013 , respectively.

³ Excludes loans that have completed the foreclosure or short sale process (i.e. involuntary prepayments).

Other Variable Interest Entities

In addition to the Company ’s involvement with certain VIE s related to transfers of financial assets, the Company also has involvement with VIE s from other business activities.

Total Return Swaps

The Company has involvement with various VIE s related to its TRS business. At June 30, 2014 and December 31, 2013 , the Company had $1.4 billion and $1.5 billion , respectively, in senior financing outstanding to VIE s, which was classified within trading assets and derivatives on the Consolidated Balance Sheets and carried at fair value. These VIE s had entered into TRS contracts with the Company with outstanding notional amounts of $1.4 billion and $1.5 billion at June 30, 2014 and December 31, 2013 , respectively, and the Company had entered into mirror TRS contracts with third parties with the same outstanding notional amounts. At June 30, 2014 , the fair values of these TRS assets and liabilities were $19 million and $16 million , respectively, and at December 31, 2013 , the fair values of these TRS assets and liabilities were $35 million and $31 million , respectively, reflecting the pass-through nature of these structures. The notional amounts of the TRS contracts with the VIE s represent the Company ’s maximum exposure to loss, although such exposure to loss has been mitigated via the TRS contracts with third parties. For additional information on the Company ’s TRS with these VIE s, see Note 12 , “Derivative Financial Instruments,” as well as Note 10, “Certain Transfers of Financial Assets and Variable Interest Entities,” to the Company's 2013 Annual Report on Form 10-K. There have been no changes to the Company's consolidation conclusions regarding the VIEs, as described in the Company's 2013 Annual Report on Form 10-K, since December 31, 2013.

Community Development Investments

As part of its community reinvestment initiatives, the Company invests primarily within its footprint in multi-family affordable housing developments and other community development entities as a limited and/or general partner and/or a debt provider. The Company receives tax credits for various investments. The Company has determined that the related partnerships are VIE s. For partnerships where the Company operates strictly as the general partner, the Company consolidates these partnerships on its Consolidated Balance Sheets. As the general partner, the Company typically guarantees the tax credits due to the limited partner and is responsible for funding construction and operating deficits. At June 30, 2014 and December 31, 2013 , total assets, which consist primarily of fixed assets and cash attributable to the consolidated entities, and total liabilities, were immaterial. While the obligations of the general partner are generally non-recourse to the Company , as the general partner, the Company may from time to time step in when needed to fund deficits. During the three and six months ended June 30, 2014 and 2013 , the Company did not provide any significant amount of funding as the general partner or to cover any deficits the partnerships may have generated.

For other partnerships, the Company acts only in a limited partnership capacity. The Company has determined that it is not the primary beneficiary of these partnerships and accounts for its interests in accordance with the accounting

Notes to Consolidated Financial Statements (Unaudited), continued

guidance for investments in affordable housing projects. The general partner or an affiliate of the general partner provides guarantees to the limited partner, which protects the Company from losses attributable to operating deficits, construction deficits, and tax credit allocation deficits. Partnership assets of $1.5 billion in these partnerships were not included in the Consolidated Balance Sheets at both June 30, 2014 and December 31, 2013 . The limited partner interests had carrying values of $270 million and $252 million at June 30, 2014 and December 31, 2013 , respectively, and are recorded in other assets in the Company ’s Consolidated Balance Sheets. The Company ’s maximum exposure to loss for these investments totaled $766 million and $697 million at June 30, 2014 and December 31, 2013 , respectively. The Company ’s maximum exposure to loss would be borne by the loss of the equity investments along with $346 million and $303 million of loans, interest-rate swaps, or letters of credit issued by the Company to the entities at June 30, 2014 and December 31, 2013 , respectively. The difference between the maximum exposure to loss and the investment and loan balances is primarily attributable to the unfunded equity commitments. Unfunded equity commitments are amounts that the Company has committed to the entities upon the entities meeting certain conditions. If these conditions are met, the Company will invest these additional amounts in the entities.

The Company adopted ASU 2014-01 in the first quarter of 2014, which allowed amortization of qualified affordable housing investments within the scope of the ASU to be presented net of the income tax credits in the provision for income taxes. During the three months ended June 30, 2014 and 2013 , the Company recognized $15 million of tax credits, and $14 million and $10 million of amortization expense, respectively. During the six months ended June 30, 2014 and 2013 , the Company recognized $30 million and $29 million of tax credits, respectively, and $27 million and $20 million of amortization expense, respectively, in the provision for income taxes. For community development investments not within the scope of ASU 2014-01, the Company continues to record amortization of the investment in noninterest expense.

Additionally, the Company owns noncontrolling interests in funds whose purpose is to invest in community developments. At June 30, 2014 and December 31, 2013 , the Company 's investment in these funds totaled $145 million and $138 million , respectively, and the Company 's maximum exposure to loss on its equity investments, which is comprised of its investments in the funds plus any additional unfunded equity commitments, was $234 million and $217 million , respectively.

When the Company owns both the limited partner and general partner interests or acts as the indemnifying party, the Company consolidates the entities. At June 30, 2014 and December 31, 2013 , total assets, which consist primarily of fixed assets and cash, attributable to the consolidated non- VIE partnerships were $108 million and $151 million , respectively, and total liabilities, excluding intercompany liabilities, primarily representing third party borrowings, were $56 million and $58 million , respectively.

The Company has designated certain consolidated affordable housing properties as held for sale, and accordingly recognizes them at the lower of their carrying value or estimated fair value less costs to sell. At June 30, 2014 , the carrying value of properties held for sale was $65 million . Disposition of these properties is targeted to be completed within the next nine months.

Notes to Consolidated Financial Statements (Unaudited), continued

NOTE 9 – NET INCOME PER COMMON SHARE

Equivalent shares of 16 million and 21 million related to common stock options and common stock warrants outstanding at June 30, 2014 and 2013, respectively, were excluded from the computations of diluted net income per average common share because they would have been anti-dilutive.

Reconciliations of net income to net income available to common shareholders and the difference between average basic common shares outstanding and average diluted common shares outstanding are included below.



	Three Months Ended June 30						Six Months Ended June 30
(In millions, except per share data)	2014			2013			2014			2013
Net income		$399			$377			$804			$729
Preferred dividends	(9		)	(9		)	(19		)	(18		)
Dividends and undistributed earnings allocated to unvested shares	(3		)	(3		)	(5		)	(6		)
Net income available to common shareholders		$387			$365			$780			$705
Average basic common shares	530			535			530			535
Effect of dilutive securities:
Stock options	1			2			2			2
Restricted stock and warrants	4			3			4			3
Average diluted common shares	535			540			536			540
Net income per average common share - diluted		$0.72			$0.68			$1.45			$1.31
Net income per average common share - basic		$0.73			$0.68			$1.47			$1.32

NOTE 10 - INCOME TAXES

The provision for income taxes was $173 million and $156 million for the three months ended June 30, 2014 and 2013 , respectively, representing effective tax rates of 30.2% and 29.3% , respectively. The provision for income taxes was $298 million and $317 million for the six months ended June 30, 2014 and 2013 , respectively, representing effective tax rates of 27.0% and 30.3% , respectively. The Company calculated the provision for income taxes for the three and six months ended June 30, 2014 and 2013 , by applying the estimated annual effective tax rate to year-to-date pre-tax income and adjusting for discrete items that occurred during the period.

The Company adopted accounting guidance effective January 1, 2014, which allowed amortization expense related to qualified affordable housing investments to be presented net of the income tax credits in the provision for income taxes. Prior to the first quarter of 2014, these amortization expenses were recognized in other noninterest expense. The standard is required to be applied retrospectively; therefore, prior periods have been restated in accordance with U.S. GAAP. See Note 1 , “Significant Accounting Policies,” for further information related to this new guidance.

The Company's liability for UTB s was $274 million and $291 million at June 30, 2014 and December 31, 2013, respectively. It is reasonably possible that the liability for UTB s could decrease by as much as $180 million during the next 12 months due to the completion of tax authority examinations and expiration of statutes of limitations. A portion of the decrease may favorably impact the effective tax rate.

Notes to Consolidated Financial Statements (Unaudited), continued

NOTE 11 - EMPLOYEE BENEFIT PLANS

The Company sponsors various short-term incentive plans and LTI plans for eligible employees, which may be delivered through various incentive programs, such as RSU s, restricted stock, and LTI cash. AIP is the Company 's short-term cash incentive plan for key employees that provides for potential annual cash awards based on the Company 's performance and/or the achievement of business unit and individual performance objectives. Awards under the LTI cash plan generally cliff vest over a period of three years from the date of the award and are paid in cash. All incentive awards are subject to clawback provisions. Compensation expense for incentive plans with cash payouts was $51 million and $39 million for the three months ended June 30, 2014 and 2013 , respectively and $96 million and $78 million for the six months ended June 30, 2014 and 2013 .

Stock-Based Compensation

The Company provides stock-based awards through the 2009 Stock Plan under which the Compensation Committee of the Board of Directors has the authority to grant stock options, stock appreciation rights, restricted stock, and RSU s to key employees of the Company . Some awards may have performance or other conditions, such as vesting tied to the Company 's total shareholder return relative to a peer group or vesting tied to the achievement of an absolute financial performance target.

In February 2014, the Compensation Committee and Board of Directors approved, subject to shareholder approval, an amendment to the 2009 Stock Plan to remove the sub-limit on shares available for grant that may be issued as restricted stock or RSU s. Following shareholder approval of the Plan amendment, which occurred on April 22, 2014, all of the 17 million remaining authorized shares previously under the Plan became available for grant as stock options, stock appreciation rights, restricted stock, or RSUs. Prior to the Plan amendment, only a portion of such shares were available to be granted as either restricted stock or RSU s. At June 30, 2014 , approximately 17 million shares remained available for grant.

Stock options are granted at an exercise price that was no less than the fair market value of a share of SunTrust common stock on the grant date and were either tax-qualified incentive stock options or non-qualified stock options. Stock options typically vest pro-rata over three years and generally have a maximum contractual life of ten years. Upon exercise, shares are generally issued from treasury stock. No stock options were issued during the six months ended June 30, 2014 , consistent with the Company's decision to discontinue the issuance of stock options in 2014. The weighted average fair value of options granted during the first six months of 2013 was $7.37 per share. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model based on the following assumptions for the six months ended June 30, 2013 :



Dividend yield	1.28	%
Expected stock price volatility	30.98
Risk-free interest rate (weighted average)	1.02
Expected life of options	6 years

Stock-based compensation expense recognized in noninterest expense for the three and six months ended June 30, were as follows:



	Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)	2014		2013		2014		2013
Stock-based compensation expense:
Stock options		$—		$1		$1		$4
Restricted stock	6		8		14		15
RSUs	7		4		21		13
Total stock-based compensation expense		$13		$13		$36		$32

The recognized stock-based compensation tax benefit was $5 million for both the three months ended June 30, 2014 and 2013 , and $14 million and $12 million for the six months ended June 30, 2014 and 2013 , respectively.

Notes to Consolidated Financial Statements (Unaudited), continued

Retirement Plans

SunTrust did not contribute to either of its noncontributory qualified retirement plans ("Retirement Benefit Plans") during the six months ended June 30, 2014 . The expected long-term rates of return on plan assets net of administrative fees for the Retirement Benefit Plans are 7.0% for the SunTrust Retirement Plan and 6.5% for the NCF Retirement Plan for 2014 .

Anticipated employer contributions/benefit payments for 2014 are $7 million for the SERP . During the three and six months ended June 30, 2014 , the actual contributions/benefit payments were $1 million and $2 million , respectively.

SunTrust contributed less than $1 million to the Postretirement Welfare Plan during the three and six months ended June 30, 2014 . Additionally, SunTrust expects to receive a Medicare Part D Subsidy reimbursement for 2014 of less than $1 million . The expected pre-tax long-term rate of return on plan assets for the Postretirement Welfare Plan is 5.25% for 2014 .

Components of net periodic benefit for the three and six months ended June 30 , were as follows:



	Three Months Ended June 30
	2014							2013
(Dollars in millions)	Pension Benefits				Other Postretirement Benefits			Pension Benefits				Other Postretirement Benefits
Service cost		$1		¹		$—			$1		¹		$—
Interest cost	31				1			28				2
Expected return on plan assets	(50		)	¹	(1		)	(48		)	¹	(2		)
Amortization of prior service credit	—				(2		)	—				—
Recognized net actuarial loss	4				—			7				—
Net periodic benefit		($14	)			($2	)		($12	)			$—



	Six Months Ended June 30
	2014							2013
(Dollars in millions)	Pension Benefits				Other Postretirement Benefits			Pension Benefits				Other Postretirement Benefits
Service cost		$2		¹		$—			$2		¹		$—
Interest cost	62				2			56				3
Expected return on plan assets	(100		)	¹	(3		)	(95		)	¹	(3		)
Amortization of prior service credit	—				(3		)	—				—
Recognized net actuarial loss	8				—			13				—
Net periodic benefit		($28	)			($4	)		($24	)			$—

¹ Administrative fees are recognized in service cost for each of the periods presented. Prior to the second quarter of 2014, administrative fees were recognized in expected return on plan assets.

NOTE 12 - DERIVATIVE FINANCIAL INSTRUMENTS

The Company enters into various derivative financial instruments, both in a dealer capacity to facilitate client transactions and as an end user as a risk management tool. ALCO monitors all derivative activities. When derivatives have been entered into with clients, the Company generally manages the risk associated with these derivatives within the framework of its VAR approach that monitors total daily exposure and seeks to manage the exposure on an overall basis. Derivatives are also used as a risk management tool to hedge the Company ’s balance sheet exposure to changes in identified cash flow and fair value risks, either economically or in accordance with hedge accounting provisions. The Company ’s Corporate Treasury function is responsible for employing the various hedge accounting strategies to manage these objectives. Additionally, as a normal part of its operations, the Company enters into IRLC s on mortgage loans that are accounted for as freestanding derivatives and has certain contracts containing embedded derivatives that are carried, in their entirety, at fair value. All freestanding derivatives and any embedded derivatives that the Company bifurcates from the host contracts are carried at fair value in the Consolidated Balance Sheets in

Notes to Consolidated Financial Statements (Unaudited), continued

trading assets and derivatives and trading liabilities and derivatives. The associated gains and losses are either recognized in AOCI , net of tax, or within the Consolidated Statements of Income, depending upon the use and designation of the derivatives.

Credit and Market Risk Associated with Derivatives

Derivatives expose the Company to credit risk. The Company minimizes the credit risk of derivatives by entering into transactions with counterparties with defined exposure limits based on credit quality that are reviewed periodically by the Company ’s Credit Risk Management division. The Company ’s derivatives may also be governed by an ISDA or other master agreement, and depending on the nature of the derivative, bilateral collateral agreements are typically in place as well. In 2013, the Company became subject to OTC derivative clearing requirements as a registered swap dealer. As a result, certain derivatives are now required to be cleared through central clearing members in which the Company is required to post initial margin and, in addition, to further mitigate the risk of non-payment, variation margin is received or paid daily based on the net asset or liability position of the contracts. When the Company has more than one outstanding derivative transaction with a single counterparty and there exists a legal right of offset with that counterparty, the Company considers its exposure to the counterparty to be the net market value of its derivative positions with that counterparty if an asset, adjusted for held collateral. At June 30, 2014 , these net derivative asset positions were $1.0 billion , representing the $1.4 billion of derivative net gains adjusted for cash and other collateral of $0.4 billion that the Company held in relation to these gain positions. At December 31, 2013 , net derivative asset positions were $1.0 billion , representing $1.5 billion of derivative net gains, adjusted for cash and other collateral of $0.5 billion that the Company held in relation to these gain positions.

Derivatives also expose the Company to market risk. Market risk is the adverse effect that a change in market factors, such as interest rates, currency rates, equity prices, or implied volatility, has on the value of a derivative. The Company manages the market risk associated with its derivatives by establishing and monitoring limits on the types and degree of risk that may be undertaken. The Company continually measures this risk associated with its derivatives designated as trading instruments using a VAR methodology.

Derivative instruments are priced with observable market assumptions at a mid-market valuation point, with appropriate valuation adjustments for liquidity and credit risk. For purposes of valuation adjustments to its derivative positions, the Company has evaluated liquidity premiums that may be demanded by market participants, as well as the credit risk of its counterparties and its own credit. The Company has considered factors such as the likelihood of default by itself and its counterparties, its net exposures, and remaining maturities in determining the appropriate fair value adjustments to recognize. Generally, the expected loss of each counterparty is estimated using the Company ’s internal risk rating system. The risk rating system utilizes counterparty-specific PD and LGD estimates to derive the expected loss. For counterparties that are rated by national rating agencies, those ratings are also considered in estimating the credit risk. Additionally, counterparty exposure is evaluated by offsetting positions that are subject to master netting arrangements, as well as by considering the amount of marketable collateral securing the position. All counterparties and defined exposure limits are explicitly approved. Counterparties are regularly reviewed and appropriate business action is taken to adjust the exposure to certain counterparties, as necessary. This approach is also used by the Company to estimate its own credit risk on derivative liability positions. The Company adjusted the net fair value of its derivative contracts for estimates of net counterparty credit risk by approximately $14 million and $16 million at June 30, 2014 and December 31, 2013 , respectively.

Currently the majority of the Company ’s derivatives contain contingencies that relate to the creditworthiness of the Bank . These contingencies, which are contained in industry standard master netting agreements, may be considered events of default. Should the Bank be in default under any of these provisions, the Bank ’s counterparties would be permitted to close-out net at amounts that would approximate the then-fair values of the derivatives resulting in a single sum due by one party to the other. The counterparties would have the right to apply any collateral posted by the Bank against any net amount owed by the Bank . Additionally, certain of the Company ’s derivative liability positions, totaling $1.0 billion in fair value at June 30, 2014 and $0.9 billion at December 31, 2013 , contain provisions conditioned on downgrades of the Bank ’s credit rating. These provisions, if triggered, would either give rise to an ATE that permits the counterparties to close-out net and apply collateral or, where a CSA is present, require the Bank to post additional collateral. At June 30, 2014 , the Bank carried senior long-term debt ratings of A3/BBB+ from three of the major ratings agencies. At the current rating level, ATE s have been triggered for approximately $6 million in fair value liabilities at June 30, 2014 . For illustrative purposes, if the Bank were downgraded to BB+, ATE s would be triggered in derivative liability contracts that had a total fair value of $2 million at June 30, 2014 ; ATE s do not exist at lower ratings levels. At June 30, 2014 , $995 million in fair value of derivative liabilities were subject to CSA s, against which the Bank has posted $958 million in collateral, primarily in the form of cash. If requested by the counterparty pursuant to the terms of the CSA , the Bank would be required to post estimated additional collateral against these contracts at June 30, 2014 , of $7 million if the Bank were downgraded to Baa3/BBB-, and any further downgrades to Ba1/BB+ or below do not contain predetermined collateral posting levels.

Notes to Consolidated Financial Statements (Unaudited), continued

Notional and Fair Value of Derivative Positions

The following tables present the Company ’s derivative positions at June 30, 2014 and December 31, 2013 . The notional amounts in the tables are presented on a gross basis and have been classified within Asset Derivatives or Liability Derivatives based on the estimated fair value of the individual contract at June 30, 2014 and December 31, 2013 . Gross positive and gross negative fair value amounts associated with respective notional amounts are presented without consideration of any netting agreements, including collateral arrangements. Net fair value derivative amounts are adjusted on an aggregate basis, where applicable, to take into consideration the effects of legally enforceable master netting agreements, including any cash collateral received or paid, and are recognized in trading assets and derivatives or trading liabilities and derivatives on the Consolidated Balance Sheets. For contracts constituting a combination of options that contain a written option and a purchased option (such as a collar), the notional amount of each option is presented separately, with the purchased notional amount generally being presented as an Asset Derivative and the written notional amount being presented as a Liability Derivative. For contracts that contain a combination of options, the fair value is generally presented as a single value with the purchased notional amount if the combined fair value is positive, and with the written notional amount, if the combined fair value is negative.



	June 30, 2014
	Asset Derivatives						Liability Derivatives
(Dollars in millions)		Notional Amounts		Fair Value			Notional Amounts		Fair Value
Derivatives designated in cash flow hedging relationships ¹
Interest rate contracts hedging floating rate loans			$16,900		$323			$2,000		$1
Derivatives designated in fair value hedging relationships ²
Interest rate contracts covering fixed rate debt		1,000		35			300		3
Derivatives not designated as hedging instruments ³
Interest rate contracts covering:
Fixed rate debt		—		—			60		6
MSRs		10,032		82			1,768		36
LHFS, IRLCs ⁴		2,088		13			5,351		40
Trading activity ⁵		55,871		2,407			62,785		2,211
Foreign exchange rate contracts covering trading activity		2,766		56			3,146		53
Credit contracts covering:
Loans		—		—			448		4
Trading activity ⁶		1,408		19			1,422		16
Equity contracts - Trading activity ⁵		18,113		2,596			28,999		2,831
Other contracts:
IRLCs and other ⁷		2,461		29			85		8
Commodities		244		17			244		16
Total		92,983		5,219			104,308		5,221
Total derivatives			$110,883		$5,577			$106,608		$5,225
Total gross derivatives, before netting					$5,577					$5,225
Less: Legally enforceable master netting agreements				(3,889		)			(3,889		)
Less: Cash collateral received/paid				(355		)			(972		)
Total derivatives, after netting					$1,333					$364

¹ See “Cash Flow Hedges” in this Note for further discussion.

² See “Fair Value Hedges” in this Note for further discussion.

³ See “Economic Hedging and Trading Activities” in this Note for further discussion.

⁴ Amount includes $1.4 billion of notional amounts related to interest rate futures. These futures contracts settle in cash daily, one day in arrears. The derivative asset or liability associated with the one day lag is included in the fair value column of this table.

⁵ Amounts include $13.3 billion and $0.4 billion of notional related to interest rate futures and equity futures, respectively. These futures contracts settle in cash daily, one day in arrears. The derivative assets/liabilities associated with the one day lag are included in the fair value column of this table.

⁶ Asset and liability amounts each include $4 million , respectively, of notional from purchased and written credit risk participation agreements, respectively, whose notional is calculated as the notional of the derivative participated adjusted by the relevant RWA conversion factor.

⁷ Includes a notional amount that is based on the number of Visa Class B shares , 3.2 million , the conversion ratio from Class B shares to Class A shares , and the Class A share price at the derivative inception date of May 28, 2009. This derivative was established upon the sale of Class B shares in the second quarter of 2009 as discussed in Note 13 , “Guarantees.” The fair value of the derivative liability, which relates to a notional amount of $55 million , is immaterial and is recognized in trading assets and derivatives in the Consolidated Balance Sheets.

Notes to Consolidated Financial Statements (Unaudited), continued



	December 31, 2013
	Asset Derivatives						Liability Derivatives
(Dollars in millions)		Notional Amounts		Fair Value			Notional Amounts		Fair Value
Derivatives designated in cash flow hedging relationships ¹
Interest rate contracts hedging floating rate loans			$17,250		$471			$—		$—
Derivatives designated in fair value hedging relationships ²
Interest rate contracts covering fixed rate debt		2,000		52			900		24
Derivatives not designated as hedging instruments ³
Interest rate contracts covering:
Fixed rate debt		—		—			60		7
MSRs		1,425		27			6,898		79
LHFS, IRLCs ⁴		4,561		30			1,317		5
Trading activity ⁵		70,615		2,917			65,299		2,742
Foreign exchange rate contracts covering trading activity		2,449		61			2,624		57
Credit contracts covering:
Loans		—		—			427		5
Trading activity ⁶		1,568		37			1,579		34
Equity contracts - Trading activity ⁵		19,595		2,504			24,712		2,702
Other contracts:
IRLCs and other ⁷		1,114		12			755		4
Commodities		241		14			228		14
Total		101,568		5,602			103,899		5,649
Total derivatives			$120,818		$6,125			$104,799		$5,673
Total gross derivatives, before netting					$6,125					$5,673
Less: Legally enforceable master netting agreements				(4,284		)			(4,284		)
Less: Cash collateral received/paid				(457		)			(864		)
Total derivatives, after netting					$1,384					$525

¹ See “Cash Flow Hedges” in this Note for further discussion.

² See “Fair Value Hedges” in this Note for further discussion.

³ See “Economic Hedging and Trading Activities” in this Note for further discussion.

⁴ Amount includes $885 million of notional amounts related to interest rate futures. These futures contracts settle in cash daily, one day in arrears. The derivative liability associated with the one day lag is included in the fair value column of this table.

⁵ Amounts include $15.2 billion and $0.2 billion of notional related to interest rate futures and equity futures, respectively. These futures contracts settle in cash daily, one day in arrears. The derivative asset associated with the one day lag is included in the fair value column of this table.

⁶ Asset and liability amounts each include $4 million and $5 million of notional from purchased and written interest rate swap risk participation agreements, respectively, whose notional is calculated as the notional of the interest rate swap participated adjusted by the relevant RWA conversion factor.

⁷ Includes a notional amount that is based on the number of Visa Class B shares , 3.2 million , the conversion ratio from Class B shares to Class A shares , and the Class A share price at the derivative inception date of May 28, 2009. This derivative was established upon the sale of Class B shares in the second quarter of 2009 as discussed in Note 13 , “Guarantees.” The fair value of the derivative liability, which relates to a notional amount of $55 million , is immaterial and is recognized in other liabilities in the Consolidated Balance Sheets.

Notes to Consolidated Financial Statements (Unaudited), continued

Impact of Derivatives on the Consolidated Statements of Income and Shareholders’ Equity

The impacts of derivatives on the Consolidated Statements of Income and the Consolidated Statements of Shareholders’ Equity for the three and six months ended June 30, 2014 are presented below. The impacts are segregated between those derivatives that are designated in hedging relationships and those that are used for economic hedging or trading purposes, with further identification of the underlying risks in the derivatives and the hedged items, where appropriate. The tables do not disclose the financial impact of the activities that these derivative instruments are intended to hedge.

Three Months Ended June 30, 2014

Six Months Ended June 30, 2014

(Dollars in millions)

Amount of

pre-tax

gain
recognized in OCI on Derivatives
(Effective Portion)

Classification of gain/(loss)
reclassified

from AOCI into Income
(Effective Portion)

Amount of pre-tax

gain
reclassified from AOCI into Income
(Effective Portion)

Amount of

pre-tax gain
recognized in OCI on Derivatives
(Effective Portion)

Amount of

pre-tax gain
reclassified

from AOCI

into Income
(Effective Portion)

Derivatives in cash flow hedging relationships:

Interest rate contracts hedging floating rate loans ¹

Interest and fees on loans

$67

$149

¹ During the three and six months ended June 30, 2014 , the Company also reclassified $27 million and $54 million , respectively, pre-tax gains from AOCI into net interest income. These gains related to hedging relationships that have been previously terminated or de-designated and are reclassified into earnings in the same period in which the forecasted transaction occurs.



	Three Months Ended June 30, 2014							Six Months Ended June 30, 2014
(Dollars in millions)	Amount of gain on Derivatives recognized in Income		Amount of loss on related Hedged Items recognized in Income			Amount of gain recognized in Income on Hedges (Ineffective Portion)		Amount of gain on Derivatives recognized in Income		Amount of loss on related Hedged Items recognized in Income			Amount of gain recognized in Income on Hedges (Ineffective Portion)
Derivatives in fair value hedging relationships:
Interest rate contracts hedging fixed rate debt ¹		$8		($7	)		$1		$17		($16	)		$1

¹ Amounts are recognized in trading income in the Consolidated Statements of Income.



(Dollars in millions)	Classification of gain/(loss) recognized in Income on Derivatives	Amount of gain/(loss) recognized in Income on Derivatives during the Three Months Ended June 30, 2014			Amount of gain/(loss) recognized in Income on Derivatives during the Six Months Ended June 30, 2014
Derivatives not designated as hedging instruments:
Interest rate contracts covering:
Fixed rate debt	Trading income		($1	)		($1	)
MSRs	Mortgage servicing related income	66			120
LHFS, IRLCs	Mortgage production related income	(61		)	(95		)
Trading activity	Trading income	12			26
Foreign exchange rate contracts covering:
Trading activity	Trading income	(7		)	(1		)
Credit contracts covering:
Loans	Other noninterest income	—			(1		)
Trading activity	Trading income	4			9
Equity contracts - trading activity	Trading income	2			3
Other contracts - IRLCs	Mortgage production related income	78			138
Total			$93			$198

Notes to Consolidated Financial Statements (Unaudited), continued

The impacts of derivatives on the Consolidated Statements of Income and the Consolidated Statements of Shareholders' Equity for the three and six months ended June 30, 2013 , are presented below:



	Three Months Ended June 30, 2013						Six Months Ended June 30, 2013
(Dollars in millions)	Amount of pre-tax loss recognized in OCI on Derivatives (Effective Portion)			Classification of gain/(loss) reclassified from AOCI into Income (Effective Portion)	Amount of pre-tax gain reclassified from AOCI into Income (Effective Portion)		Amount of pre-tax loss recognized in OCI on Derivatives (Effective Portion)			Amount of pre-tax gain reclassified from AOCI into Income (Effective Portion)
Derivatives in cash flow hedging relationships:
Interest rate contracts hedging forecasted debt		($2	)	Interest on long-term debt		$—		($2	)		$—
Interest rate contracts hedging floating rate loans ¹	(43		)	Interest and fees on loans	79		(43		)	166
Total		($45	)			$79		($45	)		$166

¹ During the three and six months ended June 30, 2013 , the Company also reclassified $21 million and $48 million , respectively, pre-tax gains from AOCI into net interest income. These gains related to hedging relationships that have been previously terminated or de-designated and are reclassified into earnings in the same period in which the forecasted transaction occurs.



	Three Months Ended June 30, 2013							Six Months Ended June 30, 2013
(Dollars in millions)	Amount of loss on Derivatives recognized in Income			Amount of gain on related Hedged Items recognized in Income		Amount of gain/(loss) recognized in Income on Hedges (Ineffective Portion)		Amount of loss on Derivatives recognized in Income			Amount of gain on related Hedged Items recognized in Income		Amount of gain recognized in Income on Hedges (Ineffective Portion)
Derivatives in fair value hedging relationships:
Interest rate contracts hedging fixed rate debt ¹		($18	)		$18		$—		($23	)		$24		$1

¹ Amounts are recognized in trading income in the Consolidated Statements of Income.



(Dollars in millions)	Classification of gain/(loss) recognized in Income on Derivatives	Amount of gain/(loss) recognized in Income on Derivatives during the Three Months Ended June 30, 2013			Amount of gain/(loss) recognized in Income on Derivatives during the Six Months Ended June 30, 2013
Derivatives not designated as hedging instruments:
Interest rate contracts covering:
Fixed rate debt	Trading income		$2			$2
MSRs	Mortgage servicing related income	(158		)		($214	)
LHFS, IRLCs	Mortgage production related income	256			291
Trading activity	Trading income	18			26
Foreign exchange rate contracts covering:
Commercial loans	Trading income	(3		)	(1		)
Trading activity	Trading income	14			26
Credit contracts covering:
Loans	Other noninterest income	(1		)	(2		)
Trading activity	Trading income	5			10
Equity contracts - trading activity	Trading income	(16		)	(15		)
Other contracts - IRLCs	Mortgage production related income	(75		)	27
Total			$42			$150

Notes to Consolidated Financial Statements (Unaudited), continued

Netting of Derivatives

The Company has various financial assets and financial liabilities that are subject to enforceable master netting agreements or similar agreements. The Company 's securities borrowed or purchased under agreements to resell and securities sold under agreements to repurchase that are subject to enforceable master netting agreements or similar agreements are discussed in Note 3 , "Federal Funds Sold and Securities Borrowed or Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase." The Company enters into ISDA or other legally enforceable industry standard master netting arrangements with derivative counterparties. Under the terms of the master netting arrangements, all transactions between the Company and the counterparty constitute a single business relationship such that in the event of default, the nondefaulting party is entitled to set off claims and apply property held by that party in respect of any transaction against obligations owed. Any payments, deliveries, or other transfers may be applied against each other and netted.

The table below shows total gross derivative assets and liabilities which are adjusted on an aggregate basis, where applicable to take into consideration the effects of legally enforceable master netting agreements, including any cash collateral received or paid, for the net reported amount in the Consolidated Balance Sheets. Also included in the table is financial instrument collateral related to legally enforceable master netting agreements that represents securities collateral received or pledged and customer cash collateral held at third-party custodians. These amounts are not offset on the Consolidated Balance Sheets but are shown as a reduction to total derivative assets and liabilities in the table to derive net derivative assets and liabilities. These amounts are limited to the derivative asset/liability balance, and accordingly, do not include excess collateral received/pledged.

The following tables present the Company 's gross derivative financial assets and liabilities at June 30, 2014 and December 31, 2013 , and the related impact of enforceable master netting arrangements and cash collateral, where applicable:



(Dollars in millions)	Gross Amount		Amount Offset		Net Amount Presented in Consolidated Balance Sheets			Held/Pledged Financial Instruments		Net Amount
June 30, 2014
Derivative financial assets:
Derivatives subject to master netting arrangement or similar arrangement		$4,804		$3,773		$1,031			$53		$978
Derivatives not subject to master netting arrangement or similar arrangement	29		—		29			—		29
Exchange traded derivatives	744		471		273			—		273
Total derivative financial assets		$5,577		$4,244		$1,333	¹		$53		$1,280
Derivative financial liabilities:
Derivatives subject to master netting arrangement or similar arrangement		$4,572		$4,390		$182			$20		$162
Derivatives not subject to master netting arrangement or similar arrangement	182		—		182			—		182
Exchange traded derivatives	471		471		—			—		—
Total derivative financial liabilities		$5,225		$4,861		$364	²		$20		$344

December 31, 2013
Derivative financial assets:
Derivatives subject to master netting arrangement or similar arrangement		$5,285		$4,239		$1,046			$51		$995
Derivatives not subject to master netting arrangement or similar arrangement	12		—		12			—		12
Exchange traded derivatives	828		502		326			—		326
Total derivative financial assets		$6,125		$4,741		$1,384	¹		$51		$1,333
Derivative financial liabilities:
Derivatives subject to master netting arrangement or similar arrangement		$4,982		$4,646		$336			$13		$323
Derivatives not subject to master netting arrangement or similar arrangement	189		—		189			—		189
Exchange traded derivatives	502		502		—			—		—
Total derivative financial liabilities		$5,673		$5,148		$525	²		$13		$512

¹ At June 30, 2014 , $1.3 billion , net of $355 million offsetting cash collateral, is recognized in trading assets and derivatives within the Company 's Consolidated Balance Sheets. At December 31, 2013 , $1.4 billion , net of $457 million offsetting cash collateral, is recognized in trading assets and derivatives within the Company 's Consolidated Balance Sheets.

² At June 30, 2014 , $364 million , net of $972 million offsetting cash collateral, is recognized in trading liabilities and derivatives within the Company 's Consolidated Balance Sheets. At December 31, 2013 , $525 million , net of $864 million offsetting cash collateral, is recognized in trading liabilities and derivatives within the Company 's Consolidated Balance Sheets.

Notes to Consolidated Financial Statements (Unaudited), continued

Credit Derivatives

As part of its trading businesses, the Company enters into contracts that are, in form or substance, written guarantees: specifically, CDS , risk participations, and TRS . The Company accounts for these contracts as derivatives and, accordingly, recognizes these contracts at fair value, with changes in fair value recognized in trading income in the Consolidated Statements of Income.

The Company writes CDS , which are agreements under which the Company receives premium payments from its counterparty for protection against an event of default of a reference asset. In the event of default under the CDS , the Company would either net cash settle or make a cash payment to its counterparty and take delivery of the defaulted reference asset, from which the Company may recover all, a portion, or none of the credit loss, depending on the performance of the reference asset. Events of default, as defined in the CDS agreements, are generally triggered upon the failure to pay and similar events related to the issuer(s) of the reference asset. At June 30, 2014 and December 31, 2013 , all written CDS contracts reference single name corporate credits or corporate credit indices. When the Company has written CDS , it has generally entered into offsetting CDS for the underlying reference asset, under which the Company paid a premium to its counterparty for protection against an event of default on the reference asset. The counterparties to these purchased CDS are generally of high creditworthiness and typically have ISDA master netting agreements in place that subject the CDS to master netting provisions, thereby, mitigating the risk of non-payment to the Company . As such, at June 30, 2014 the Company did not have any material risk of making a non-recoverable payment on any written CDS . During 2014 and 2013 , the only instances of default on written CDS were driven by credit indices with constituent credit default. In all cases where the Company made resulting cash payments to settle, the Company collected like amounts from the counterparties to the offsetting purchased CDS . At June 30, 2014 , there were no written CDS positions outstanding. The fair values of written CDS were $3 million at December 31, 2013 . The maximum guarantees outstanding at December 31, 2013 , as measured by the gross notional amounts of written CDS , were $60 million . At June 30, 2014 and December 31, 2013 , the gross notional amounts of purchased CDS contracts, which represent benefits to, rather than obligations of, the Company , were $15 million and $70 million , respectively. The fair values of purchased CDS were less than $1 million and $3 million at June 30, 2014 and December 31, 2013 , respectively.

The Company has also entered into TRS contracts on loans. The Company ’s TRS business consists of matched trades, such that when the Company pays depreciation on one TRS , it receives the same amount on the matched TRS . To mitigate its credit risk, the Company typically receives initial cash collateral from the counterparty upon entering into the TRS and is entitled to additional collateral if the fair value of the underlying reference assets deteriorates. At June 30, 2014 and December 31, 2013 , there were $1.4 billion and $1.5 billion of outstanding and offsetting TRS notional balances, respectively. The fair values of the TRS derivative assets and liabilities at June 30, 2014 , were $19 million and $16 million , respectively, and related collateral held at June 30, 2014 , was $198 million . The fair values of the TRS derivative assets and liabilities at December 31, 2013 , were $35 million and $31 million , respectively, and related collateral held at December 31, 2013 , was $228 million .

The Company writes risk participations, which are credit derivatives, whereby the Company has guaranteed payment to a dealer counterparty in the event that the counterparty experiences a loss on a derivative, such as an interest rate swap, due to a failure to pay by the counterparty’s customer (the “obligor”) on that derivative. The Company monitors its payment risk on its risk participations by monitoring the creditworthiness of the obligors, which is based on the normal credit review process the Company would have performed had it entered into the derivatives directly with the obligors. The obligors are all corporations or partnerships. However, the Company continues to monitor the creditworthiness of its obligors and the likelihood of payment could change at any time due to unforeseen circumstances. To date, no material losses have been incurred related to the Company ’s written risk participations. At June 30, 2014 , the remaining terms on these risk participations generally ranged from less than one year to nine years, with a weighted average on the maximum estimated exposure of 5.2 years. The Company ’s maximum estimated exposure to written risk participations, as measured by projecting a maximum value of the guaranteed derivative instruments based on interest rate curve simulations and assuming 100% default by all obligors on the maximum values, was approximately $27 million and $33 million at June 30, 2014 and December 31, 2013 , respectively. The fair values of the written risk participations were less than $1 million at June 30, 2014 and December 31, 2013 . As part of its trading activities, the Company may enter into purchased risk participations to mitigate credit exposure to a derivative counterparty.

Cash Flow Hedges

The Company utilizes a comprehensive risk management strategy to monitor sensitivity of earnings to movements in interest rates. Specific types of funding and principal amounts hedged are determined based on prevailing market conditions and the shape of the yield curve. In conjunction with this strategy, the Company may employ various interest rate derivatives as risk management tools to hedge interest rate risk from recognized assets and liabilities or from forecasted transactions. The terms and notional amounts of derivatives are determined based on management’s assessment of future interest rates, as well as other factors.

Interest rate swaps have been designated as hedging the exposure to the benchmark interest rate risk associated with floating rate loans. At June 30, 2014 , the range of hedge maturities for hedges of floating rate loans was between less than one year and five years, with the weighted average being 1.7 years. Ineffectiveness on these hedges was less than $1 million during the three

Notes to Consolidated Financial Statements (Unaudited), continued

and six months ended June 30, 2014 and 2013 . At June 30, 2014 , $264 million of the deferred net gains on derivatives that are recognized in AOCI are expected to be reclassified to net interest income over the next twelve months in connection with the recognition of interest income on these hedged items. The amount to be reclassified into income includes both active and terminated or de-designated cash flow hedges. The Company may choose to terminate or de-designate a hedging relationship in this program due to a change in the risk management objective for that specific hedge item, which may arise in conjunction with an overall balance sheet management strategy.

Fair Value Hedges

The Company enters into interest rate swap agreements as part of the Company ’s risk management objectives for hedging its exposure to changes in fair value due to changes in interest rates. These hedging arrangements convert Company -issued fixed rate long-term debt to floating rates. Consistent with this objective, the Company reflects the accrued contractual interest on the hedged item and the related swaps as part of current period interest. There were no components of derivative gains or losses excluded in the Company ’s assessment of hedge effectiveness related to the fair value hedges.

Economic Hedging and Trading Activities

In addition to designated hedging relationships, the Company also enters into derivatives as an end user as a risk management tool to economically hedge risks associated with certain non-derivative and derivative instruments, along with entering into derivatives in a trading capacity with its clients.

The primary risks that the Company economically hedges are interest rate risk, foreign exchange risk, and credit risk. Economic hedging objectives are accomplished by entering into offsetting derivatives either on an individual basis or collectively on a macro basis and generally accomplish the Company ’s goal of mitigating the targeted risk. To the extent that specific derivatives are associated with specific hedged items, the notional amounts, fair values, and gains/(losses) on the derivatives are illustrated in the tables in this footnote.


•	The Company utilizes interest rate derivatives to mitigate exposures from various instruments.

◦

The Company is subject to interest rate risk on its fixed rate debt. As market interest rates move, the fair value of the Company ’s debt is affected. To protect against this risk on certain debt issuances that the Company has elected to carry at fair value, the Company has entered into pay variable-receive fixed interest rate swaps that decrease in value in a rising rate environment and increase in value in a declining rate environment.


◦	The Company is exposed to risk on the returns of certain of its brokered deposits that are carried at fair value. To hedge against this risk, the Company has entered into interest rate derivatives that mirror the risk profile of the returns on these instruments.


◦	The Company is exposed to interest rate risk associated with MSR s, which the Company hedges with a combination of mortgage and interest rate derivatives, including forward and option contracts, futures, and forward rate agreements.


◦	The Company enters into mortgage and interest rate derivatives, including forward contracts, futures, and option contracts to mitigate interest rate risk associated with IRLC s and mortgage LHFS .


•	The Company is exposed to foreign exchange rate risk associated with certain commercial loans.


•	The Company enters into CDS to hedge credit risk associated with certain loans held within its Wholesale Banking segment. The Company accounts for these contracts as derivatives and, accordingly, recognizes these contracts at fair value, with changes in fair value recognized in other noninterest income in the Consolidated Statements of Income.

•

Trading activity, as illustrated in the tables within this footnote, primarily includes interest rate swaps, equity derivatives, CDS , futures, options, foreign currency contracts, and commodities. These derivatives are entered into in a dealer capacity to facilitate client transactions or are utilized as a risk management tool by the Company as an end user in certain macro-hedging strategies. The macro-hedging strategies are focused on managing the Company ’s overall interest rate risk exposure that is not otherwise hedged by derivatives or in connection with specific hedges and, therefore, the Company does not specifically associate individual derivatives with specific assets or liabilities.

Notes to Consolidated Financial Statements (Unaudited), continued

NOTE 13 – GUARANTEES

The Company has undertaken certain guarantee obligations in the ordinary course of business. The issuance of a guarantee imposes an obligation for the Company to stand ready to perform and make future payments should certain triggering events occur. Payments may be in the form of cash, financial instruments, other assets, shares of stock, or provisions of the Company ’s services. The following is a discussion of the guarantees that the Company has issued at June 30, 2014 . The Company has also entered into certain contracts that are similar to guarantees, but that are accounted for as derivatives as discussed in Note 12 , “Derivative Financial Instruments.”

Letters of Credit

Letters of credit are conditional commitments issued by the Company , generally to guarantee the performance of a client to a third party in borrowing arrangements, such as CP , bond financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to clients and may be reduced by selling participations to third parties. The Company issues letters of credit that are classified as financial standby, performance standby, or commercial letters of credit.

At June 30, 2014 and December 31, 2013 , the maximum potential amount of the Company ’s obligation was $3.2 billion and $3.3 billion for issued financial and performance standby letters of credit, respectively. The Company ’s outstanding letters of credit generally have a term of less than one year but may extend longer. If a letter of credit is drawn upon, the Company may seek recourse through the client’s underlying obligation. If the client’s line of credit is also in default, the Company may take possession of the collateral securing the line of credit, where applicable. The Company monitors its credit exposure under standby letters of credit in the same manner as it monitors other extensions of credit in accordance with its credit policies. Some standby letters of credit are designed to be drawn upon and others are drawn upon only under circumstances of dispute or default in the underlying transaction to which the Company is not a party. In all cases, the Company holds the right to reimbursement from the applicant and may or may not also hold collateral to secure that right. An internal assessment of the PD and loss severity in the event of default is performed consistent with the methodologies used for all commercial borrowers. The management of credit risk regarding letters of credit leverages the risk rating process to focus higher visibility on the higher risk and/or higher dollar letters of credit. The associated reserve is a component of the unfunded commitments reserve recorded in other liabilities in the Consolidated Balance Sheets and included in the allowance for credit losses as disclosed in Note 6 , “Allowance for Credit Losses.” Additionally, unearned fees relating to letters of credit are recorded in other liabilities. The net carrying amount of unearned fees was immaterial at June 30, 2014 and December 31, 2013 .

Loan Sales

STM , a consolidated subsidiary of the Company , originates and purchases residential mortgage loans, a portion of which are sold to outside investors in the normal course of business, through a combination of whole loan sales to GSE s, Ginnie Mae , and non-agency investors. Prior to 2008, the Company also sold loans through a limited number of Company -sponsored securitizations. When mortgage loans are sold, representations and warranties regarding certain attributes of the loans sold are made to these third party purchasers. Subsequent to the sale, if a material underwriting deficiency or documentation defect is discovered, STM may be obligated to repurchase the mortgage loan or to reimburse the investor for losses incurred (make whole requests) if such deficiency or defect cannot be cured by STM within the specified period following discovery. Additionally, defects in the securitization process or breaches of underwriting and servicing representations and warranties can result in loan repurchases, as well as adversely affect the valuation of MSR s, servicing advances, or other mortgage loan-related exposures, such as OREO . These representations and warranties may extend through the life of the mortgage loan. STM ’s risk of loss under its representations and warranties is partially driven by borrower payment performance since investors will perform extensive reviews of delinquent loans as a means of mitigating losses.

Notes to Consolidated Financial Statements (Unaudited), continued

Loan repurchase requests generally arise from loans sold during the period from January 1, 2005 to June 30, 2014 , which totaled $301.4 billion at the time of sale, consisting of $235.6 billion and $35.5 billion of agency and non-agency loans, respectively, as well as $30.3 billion of loans sold to Ginnie Mae . The composition of the remaining outstanding balance by vintage and type of buyer at June 30, 2014 , is shown in the following table:



	Remaining Outstanding Balance by Year of Sale
(Dollars in billions)	2005		2006		2007		2008		2009		2010		2011		2012		2013		2014		Total
GSE ¹		$1.6		$1.8		$3.4		$3.2		$10.1		$6.7		$7.6		$16.8		$20.5		$4.7		$76.4
Ginnie Mae ¹	0.4		0.2		0.2		1.0		2.8		2.3		1.9		3.7		3.4		1.2		17.1
Non-agency	3.1		4.5		2.9		—		—		—		—		—		—		—		10.5
Total		$5.1		$6.5		$6.5		$4.2		$12.9		$9.0		$9.5		$20.5		$23.9		$5.9		$104.0

¹ Balances based on loans currently serviced by the Company and excludes loans serviced by others and certain loans in foreclosure.

Non-agency loan sales include whole loans and loans sold in private securitization transactions. While representations and warranties have been made related to these sales, they can differ in many cases from those made in connection with loans sold to the GSE s in that non-agency loans may not be required to meet the same underwriting standards and non-agency investors may be required to demonstrate that the alleged breach was material and caused the investors' loss. Loans sold to Ginnie Mae are insured by either the FHA or VA . As servicer, the Company may elect to repurchase delinquent loans in accordance with Ginnie Mae guidelines; however, the loans continue to be insured. The Company indemnifies the FHA and VA for losses related to loans not originated in accordance with their guidelines. See Note 15 , "Contingencies," for additional information on current legal matters related to representations and warranties made in connection with loan sales and the final settlement of HUD 's investigation of the Company's origination practices for FHA loans.

Repurchase requests from GSE s, Ginnie Mae , and non-agency investors, for all vintages, were $113 million during the six months ended June 30, 2014 , $1.5 billion during the year ended December 31, 2013 , and $1.7 billion during the years ended 2012 and 2011, respectively, and requests received since 2005 on a cumulative basis for all vintages totaled $8.5 billion . The majority of these requests were from GSE s, with a limited number of requests from non-agency investors. Repurchase requests from non-agency investors were less than $1 million during the six months ended June 30, 2014 , and were $18 million , $22 million , and $50 million during the years ended 2013, 2012 and 2011, respectively. Additionally, loans originated during 2006 - 2008 have consistently comprised the vast majority of total repurchase requests during the past three years. During the third quarter of 2013, the Company reached agreements with Freddie Mac and Fannie Mae under which they released the Company from certain existing and future repurchase obligations for loans funded by Freddie Mac between 2000 and 2008 and Fannie Mae between 2000 and 2012. The Company recorded $5 million and $10 million of mortgage repurchase provision expenses during the three and six months ended June 30, 2014 , respectively.

The repurchase and make whole requests received have been primarily due to alleged material breaches of representations related to compliance with the applicable underwriting standards, including borrower misrepresentation and appraisal issues. STM performs a loan by loan review of all requests and contests demands to the extent they are not considered valid.

At June 30, 2014 , the original UPB of loans related to unresolved requests previously received from investors was $52 million , comprised of $49 million from the GSE s and $3 million from non-agency investors. Comparable amounts at December 31, 2013 , were $126 million , comprised of $122 million from the GSE s and $4 million from non-agency investors.

A significant degree of judgment is used to estimate the mortgage repurchase liability as the estimation process is inherently uncertain and subject to imprecision. The Company believes that its reserve appropriately estimates incurred losses based on its current analysis and assumptions, inclusive of the Freddie Mac and Fannie Mae settlement agreements, GSE owned loans serviced by third party servicers, loans sold to private investors, and future indemnifications. At June 30, 2014 and December 31, 2013 , the Company 's estimate of the liability for incurred losses related to all vintages of mortgage loans sold totaled $77 million and $78 million , respectively. However, the 2013 agreements with Freddie Mac and Fannie Mae settling certain aspects of the Company 's repurchase obligations preserve their right to require repurchases arising from certain types of events, and that preservation of rights can impact future losses of the Company . While the repurchase reserve includes the estimated cost of settling claims related to required repurchases, the Company 's estimate of losses depends on its assumptions regarding GSE and other counterparty behavior, loan performance, home prices, and other factors. The liability is recorded in other liabilities in the Consolidated Balance Sheets, and the related repurchase provision is recognized as a contra-revenue item in mortgage production related income in the Consolidated Statements of Income.

Notes to Consolidated Financial Statements (Unaudited), continued

The following table summarizes the changes in the Company ’s reserve for mortgage loan repurchases:



	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions)	2014			2013			2014			2013
Balance at beginning of period		$83			$513			$78			$632
Repurchase provision	5			15			10			29
Charge-offs, net of recoveries	(11		)	(165		)	(11		)	(298		)
Balance at end of period		$77			$363			$77			$363

During the six months ended June 30, 2014 and 2013 , the Company repurchased or otherwise settled mortgages with original loan balances of $13 million and $571 million , respectively, related to investor demands. At June 30, 2014 , the carrying value of outstanding repurchased mortgage LHFI , net of any allowance for loan losses, was $327 million , of which $57 million were nonperforming. At December 31, 2013 , the carrying value of outstanding repurchased mortgage loans, net of any allowance for loan losses, was $339 million , comprised of $325 million LHFI and $14 million LHFS , respectively, of which $54 million LHFI and $14 million LHFS , were nonperforming.

The Company normally retains servicing rights when loans are transferred. As servicer, the Company makes representations and warranties that it will service the loans in accordance with investor servicing guidelines and standards which may include (i) collection and remittance of principal and interest, (ii) administration of escrow for taxes and insurance, (iii) advancing principal, interest, taxes, insurance, and collection expenses on delinquent accounts, (iv) loss mitigation strategies including loan modifications, and (v) foreclosures. The Company recognizes a liability for contingent losses when MSR s are sold, which totaled $26 million and $21 million at June 30, 2014 and December 31, 2013 , respectively.

Contingent Consideration

The Company has contingent payment obligations related to certain business combination transactions. Payments are calculated using certain post-acquisition performance criteria. The potential obligation and amount recorded as an other liability representing the fair value of the contingent payments was $27 million and $26 million at June 30, 2014 and December 31, 2013 , respectively. If required, these contingent payments will be payable within the next two years.

Visa

The Company issues credit and debit transactions through Visa and MasterCard International. The Company is a defendant, along with Visa and MasterCard International (the “Card Associations”), as well as several other banks, in one of several antitrust lawsuits challenging the practices of the Card Associations (the “Litigation”). The Company entered into judgment and loss sharing agreements with Visa and certain other banks in order to apportion financial responsibilities arising from any potential adverse judgment or negotiated settlements related to the Litigation. Additionally, in connection with Visa 's restructuring in 2007, a provision of the original Visa By-Laws, Section 2.05j, was restated in Visa 's certificate of incorporation. Section 2.05j contains a general indemnification provision between a Visa member and Visa , and explicitly provides that after the closing of the restructuring, each member's indemnification obligation is limited to losses arising from its own conduct and the specifically defined Litigation.

Agreements associated with Visa 's IPO have provisions that Visa will fund a litigation escrow account, established for the purpose of funding judgments in, or settlements of, the Litigation. Since inception of the escrow account, Visa has funded over $8.0 billion into the escrow account, approximately $7.0 billion of which has been paid out in Litigation settlements or into a settlement fund, with approximately $1.0 billion remaining in the escrow account. If the escrow account is insufficient to cover the Litigation losses, then Visa will issue additional Class A shares (“loss shares”). The proceeds from the sale of the loss shares would then be deposited in the escrow account. The issuance of the loss shares will cause a dilution of Visa 's Class B shares as a result of an adjustment to lower the conversion factor of the Class B shares to Class A shares . Visa U.S.A.'s members are responsible for any portion of the settlement or loss on the Litigation after the escrow account is depleted and the value of the Class B shares is fully-diluted. In May 2009, the Company sold its 3.2 million Class B shares to the Visa Counterparty and entered into a derivative with the Visa Counterparty . The Company received $112 million and recognized a gain of $112 million in connection with these transactions. Under the derivative, the Visa Counterparty is compensated by the Company for any decline in the conversion factor as a result of the outcome of the Litigation. Conversely, the Company is compensated by the Visa Counterparty for any increase in the conversion factor. The amount of payments made or received under the derivative is a function of the 3.2 million shares sold to the Visa Counterparty , the change in conversion rate, and Visa ’s share price. The Visa Counterparty , as a result of its ownership of the Class B shares , is impacted by dilutive adjustments to the conversion factor of the Class B shares caused by the Litigation losses. The conversion factor at the inception of the derivative in May 2009 was 0.6296 and at June 30, 2014 the conversion factor was 0.4206 due to Visa ’s funding of the litigation escrow account

Notes to Consolidated Financial Statements (Unaudited), continued

since 2009. There were no changes to the conversion factor during the six months ended June 30, 2014 and 2013 ; therefore, no payments were made by the Company to the Visa Counterparty , other than certain fixed payment charges which were approximately $1 million for the six months ended June 30, 2014 and 2013 .

During 2012, the Card Associations and defendants signed a memorandum of understanding to enter into a settlement agreement to resolve the plaintiffs' claims in the Litigation. Visa 's share of the claims represents approximately $4.4 billion , which was paid from the escrow account into a settlement fund during 2012. During 2013, various members of the putative class elected to opt out of the settlement which resulted in a proportional decrease in the amount of the settlement and a deposit of approximately $1.0 billion from the settlement fund back into the escrow account. The estimated fair value of the derivative liability was $8 million and $2 million at June 30, 2014 and December 31, 2013 , respectively; however, the ultimate impact to the Company could be significantly different if the settlement is not approved and/or based on the ultimate resolution with the plaintiffs that opted out of the settlement.

Tax Credit Investments Sold

SunTrust Community Capital , one of the Company 's subsidiaries, previously obtained state and federal tax credits through the construction and development of affordable housing properties and continues to obtain state and federal tax credits through investments in affordable housing developments. SunTrust Community Capital or its subsidiaries are limited and/or general partners in various partnerships established for the properties. Some of the investments that generate state tax credits may be sold to outside investors. At June 30, 2014 , SunTrust Community Capital has completed six sales containing guarantee provisions stating that SunTrust Community Capital will make payment to the outside investors if the tax credits become ineligible. SunTrust Community Capital also guarantees that the general partner under the transaction will perform on the delivery of the credits. The guarantees are expected to expire within a fifteen year period from inception. At June 30, 2014 , the maximum potential amount that SunTrust Community Capital could be obligated to pay under these guarantees is $19 million ; however, SunTrust Community Capital can seek recourse against the general partner. Additionally, SunTrust Community Capital can seek reimbursement from cash flow and residual values of the underlying affordable housing properties provided that the properties retain value. At June 30, 2014 and December 31, 2013 , $1 million was accrued for the remainder of tax credits to be delivered, and was recorded in other liabilities in the Consolidated Balance Sheets.

Notes to Consolidated Financial Statements (Unaudited), continued

NOTE 14 - FAIR VALUE ELECTION AND MEASUREMENT

The Company carries certain assets and liabilities at fair value on a recurring basis and appropriately classifies them as level 1, 2, or 3 within the fair value hierarchy. The Company ’s recurring fair value measurements are based on a requirement to carry such assets and liabilities at fair value or the Company ’s election to carry certain financial assets and liabilities at fair value. Assets and liabilities that are required to be carried at fair value on a recurring basis include trading securities, securities AFS , and derivative financial instruments. Assets and liabilities that the Company has elected to carry at fair value on a recurring basis include certain trading loans, LHFS and LHFI , MSR s, certain brokered time deposits, and certain issuances of fixed rate debt.

In certain circumstances, fair value enables a company to more accurately align its financial performance with the economic value of actively traded or hedged assets or liabilities. Fair value also enables a company to mitigate the non-economic earnings volatility caused from financial assets and liabilities being carried at different bases of accounting, as well as, to more accurately portray the active and dynamic management of a company’s balance sheet.

Depending on the nature of the asset or liability, the Company uses various valuation techniques and assumptions in estimating fair value. The assumptions used to estimate the value of an instrument have varying degrees of impact to the overall fair value of the asset or liability. This process involves the gathering of multiple sources of information, including broker quotes, values provided by pricing services, trading activity in other similar securities, market indices, pricing matrices along with employing various modeling techniques, such as discounted cash flow analyses, in arriving at the best estimate of fair value. All material models used to produce material financial reporting information are validated prior to use, and following any material change. Their performance is monitored quarterly, and any material deterioration in model performance is addressed. This review is performed by an internal group that separately reports to the Corporate Risk Function.

The Company has formal processes and controls in place to ensure the appropriateness of all fair value estimates. For fair values obtained from a third party or those that include certain trader estimates of fair value, there is an internal independent price validation function within the Finance organization that provides oversight for fair value estimates. For level 2 instruments and certain level 3 instruments, the validation generally involves evaluating pricing received from two or more other third party pricing sources that are widely used by market participants. The Company reviews pricing validation information from both a qualitative and quantitative perspective and determines whether pricing differences exceed acceptable thresholds. If the pricing differences exceed acceptable thresholds, then the Company reviews differences in valuation approaches used, which may include contacting a pricing service to gain further information on the valuation of a particular security or class of securities to determine the ultimate resolution of the pricing variance, which could include an adjustment to the price used for financial reporting purposes.

The Company classifies instruments as level 2 in the fair value hierarchy if it is able to determine that external pricing sources are using similar instruments trading in the markets as the basis for estimating fair value. One way the Company determines this is by the number of pricing services that will provide a quote on the instrument along with the range of values provided by those pricing services. A wide range of quoted values may indicate that significant adjustments to the trades in the market are being made by the pricing services.

The classification of an instrument as level 3 involves judgment and is based on a variety of subjective factors. These factors are used in the assessment of whether a market is inactive, resulting in the application of significant unobservable assumptions in the valuation of a financial instrument. A market is considered inactive if significant decreases in the volume and level of activity for the asset or liability have been observed. In determining whether a market is inactive, the Company evaluates such factors as the number of recent transactions in either the primary or secondary markets, whether price quotations are current, the nature of the market participants, the variability of price quotations, the significance of bid/ask spreads, declines in (or the absence of) new issuances, and the availability of public information. Inactive markets necessitate the use of additional judgment in valuing financial instruments, such as pricing matrices, cash flow modeling, and the selection of an appropriate discount rate. The assumptions used to estimate the value of an instrument where the market was inactive are based on the Company ’s assessment of the assumptions a market participant would use to value the instrument in an orderly transaction and includes consideration of illiquidity in the current market environment.

Notes to Consolidated Financial Statements (Unaudited), continued

Recurring Fair Value Measurements

The following tables present certain information regarding assets and liabilities measured at fair value on a recurring basis and the changes in fair value for those specific financial instruments in which fair value has been elected.



	June 30, 2014
	Fair Value Measurements
(Dollars in millions)	Level 1		Level 2		Level 3		Netting Adjustments ¹			Assets/Liabilities at Fair Value
Assets
Trading assets and derivatives:
U.S. Treasury securities		$170		$—		$—		$—			$170
Federal agency securities	—		405		—		—			405
U.S. states and political subdivisions	—		32		—		—			32
MBS - agency	—		481		—		—			481
CLO securities	—		5		—		—			5
Corporate and other debt securities	—		727		—		—			727
CP	—		141		—		—			141
Equity securities	58		—		—		—			58
Derivative contracts	744		4,804		29		(4,244		)	1,333
Trading loans	—		1,789		—		—			1,789
Total trading assets and derivatives	972		8,384		29		(4,244		)	5,141
Securities AFS:
U.S. Treasury securities	1,574		—		—		—			1,574
Federal agency securities	—		990		—		—			990
U.S. states and political subdivisions	—		239		12		—			251
MBS - agency	—		20,065		—		—			20,065
MBS - private	—		—		140		—			140
ABS	—		—		22		—			22
Corporate and other debt securities	—		36		5		—			41
Other equity securities ²	153		—		779		—			932
Total securities AFS	1,727		21,330		958		—			24,015
LHFS:
Residential loans	—		1,350		3		—			1,353
Total LHFS	—		1,350		3		—			1,353
LHFI	—		—		292		—			292
MSRs	—		—		1,259		—			1,259
Liabilities
Trading liabilities and derivatives:
U.S. Treasury securities	516		—		—		—			516
Corporate and other debt securities	—		310		—		—			310
Derivative contracts	471		4,746		8		(4,861		)	364
Total trading liabilities and derivatives	987		5,056		8		(4,861		)	1,190
Brokered time deposits	—		240		—		—			240
Long-term debt	—		1,311		—		—			1,311
Other liabilities ³	—		—		27		—			27

¹ Amounts represent offsetting cash collateral received from and paid to the same derivative counterparties and the impact of netting derivative assets and derivative liabilities when a legally enforceable master netting agreement or similar agreement exists.

² Includes $376 million of FHLB of Atlanta stock, $402 million of Federal Reserve Bank stock, $153 million in mutual fund investments, and $1 million of other.

³ Includes contingent consideration obligations related to acquisitions.

Notes to Consolidated Financial Statements (Unaudited), continued



	December 31, 2013
	Fair Value Measurements
(Dollars in millions)	Level 1		Level 2		Level 3		Netting Adjustments ¹			Assets/Liabilities at Fair Value
Assets
Trading assets and derivatives:
U.S. Treasury securities		$219		$—		$—		$—			$219
Federal agency securities	—		426		—		—			426
U.S. states and political subdivisions	—		65		—		—			65
MBS - agency	—		323		—		—			323
CDO/CLO securities	—		3		54		—			57
ABS	—		—		6		—			6
Corporate and other debt securities	—		534		—		—			534
CP	—		29		—		—			29
Equity securities	109		—		—		—			109
Derivative contracts	828		5,285		12		(4,741		)	1,384
Trading loans	—		1,888		—		—			1,888
Total trading assets and derivatives	1,156		8,553		72		(4,741		)	5,040
Securities AFS:
U.S. Treasury securities	1,293		—		—		—			1,293
Federal agency securities	—		984		—		—			984
U.S. states and political subdivisions	—		203		34		—			237
MBS - agency	—		18,911		—		—			18,911
MBS - private	—		—		154		—			154
ABS	—		58		21		—			79
Corporate and other debt securities	—		37		5		—			42
Other equity securities ²	103		—		739		—			842
Total securities AFS	1,396		20,193		953		—			22,542
LHFS:
Residential loans	—		1,114		3		—			1,117
Corporate and other loans	—		261		—		—			261
Total LHFS	—		1,375		3		—			1,378
LHFI	—		—		302		—			302
MSRs	—		—		1,300		—			1,300
Liabilities
Trading liabilities and derivatives:
U.S. Treasury securities	472		—		—		—			472
Corporate and other debt securities	—		179		—		—			179
Equity securities	5		—		—		—			5
Derivative contracts	502		5,167		4		(5,148		)	525
Total trading liabilities and derivatives	979		5,346		4		(5,148		)	1,181
Brokered time deposits	—		764		—		—			764
Long-term debt	—		1,556		—		—			1,556
Other liabilities ³	—		—		29		—			29

² Includes $336 million of FHLB of Atlanta stock, $402 million of Federal Reserve Bank stock, $103 million in mutual fund investments, and $1 million of other.

³ Includes contingent consideration obligations related to acquisitions, as well as the derivative associated with the Company 's sale of Visa shares during the year ended December 31, 2009.

Notes to Consolidated Financial Statements (Unaudited), continued

The following tables present the difference between the aggregate fair value and the UPB of trading loans, LHFS , LHFI , brokered time deposits, and long-term debt instruments for which the FVO has been elected. For LHFS and LHFI for which the FVO has been elected, the tables also include the difference between aggregate fair value and the UPB of loans that are 90 days or more past due, as well as loans in nonaccrual status.



(Dollars in millions)	Aggregate Fair Value at June 30, 2014		Aggregate Unpaid Principal Balance under FVO at June 30, 2014		Fair Value Over/(Under) Unpaid Principal
Assets:
Trading loans		$1,789		$1,739		$50
LHFS	1,353		1,296		57
LHFI	285		300		(15		)
Nonaccrual	7		10		(3		)
Liabilities:
Brokered time deposits	240		239		1
Long-term debt	1,311		1,176		135
(Dollars in millions)	Aggregate Fair Value at December 31, 2013		Aggregate Unpaid Principal Balance under FVO at December 31, 2013		Fair Value Over/(Under) Unpaid Principal
Assets:
Trading loans		$1,888		$1,858		$30
LHFS	1,375		1,359		16
Past due 90 days or more	1		2		(1		)
Nonaccrual	2		15		(13		)
LHFI	294		317		(23		)
Nonaccrual	8		12		(4		)
Liabilities:
Brokered time deposits	764		761		3
Long-term debt	1,556		1,432		124

Notes to Consolidated Financial Statements (Unaudited), continued

The following tables present the change in fair value during the three and six months ended June 30, 2014 and 2013 , of financial instruments for which the FVO has been elected, as well as MSR s. The tables do not reflect the change in fair value attributable to the related economic hedges the Company used to mitigate the market-related risks associated with the financial instruments. Generally, the changes in the fair value of economic hedges are also recognized in trading income, mortgage production related income, or mortgage servicing related income, as appropriate, and are designed to partially offset the change in fair value of the financial instruments referenced in the tables below. The Company ’s economic hedging activities are deployed at both the instrument and portfolio level.



	Fair Value Gain/(Loss) for the Three Months Ended June 30, 2014, for Items Measured at Fair Value Pursuant to Election of the FVO											Fair Value Gain/(Loss) for the Six Months Ended June 30, 2014, for Items Measured at Fair Value Pursuant to Election of the FVO
(Dollars in millions)	Trading Income		Mortgage Production Related Income ¹			Mortgage Servicing Related Income			Total Changes in Fair Values Included in Current Period Earnings ²			Trading Income			Mortgage Production Related Income ¹			Mortgage Servicing Related Income			Total Changes in Fair Values Included in Current Period Earnings ²
Assets:
Trading loans		$3		$—			$—			$3			$9			$—			$—			$9
LHFS	—		(28		)	—			(28		)	—			(29		)	—			(29		)
LHFI	—		4			—			4			—			8			—			8
MSRs	—		2			(104		)	(102		)	—			2			(185		)	(183		)
Liabilities:
Brokered time deposits	2		—			—			2			5			—			—			5
Long-term debt	5		—			—			5			(3		)	—			—			(3		)

¹ Income related to LHFS does not include income from IRLC s. For the three and six months ended June 30, 2014 , income related to MSR s includes mortgage servicing income recognized upon the sale of loans reported at LOCOM .

² Changes in fair value for the three and six months ended June 30, 2014 exclude accrued interest for the period then ended. Interest income or interest expense on trading loans, LHFS , LHFI , brokered time deposits, and long-term debt that have been elected to be carried at fair value are recognized in interest income or interest expense in the Consolidated Statements of Income.



	Fair Value Gain/(Loss) for the Three Months Ended June 30, 2013, for Items Measured at Fair Value Pursuant to Election of the FVO											Fair Value Gain/(Loss) for the Six Months Ended June 30, 2013, for Items Measured at Fair Value Pursuant to Election of the FVO
(Dollars in millions)	Trading Income			Mortgage Production Related Income ¹			Mortgage Servicing Related Income		Total Changes in Fair Values Included in Current Period Earnings ²			Trading Income		Mortgage Production Related Income ¹			Mortgage Servicing Related Income		Total Changes in Fair Values Included in Current Period Earnings ²
Assets:
Trading loans		$2			$—			$—		$2			$6		$—			$—		$6
LHFS	(1		)	(86		)	—		(87		)	1		(107		)	—		(106		)
LHFI	—			(6		)	—		(6		)	—		(9		)	—		(9		)
MSRs	—			1			81		82			—		2			98		100
Liabilities:
Brokered time deposits	2			—			—		2			4		—			—		4
Long-term debt	37			—			—		37			27		—			—		27

¹ Income related to LHFS does not include income from IRLC s. For the three and six months ended June 30, 2013 , income related to MSR s includes mortgage servicing income recognized upon the sale of loans reported at LOCOM .

² Changes in fair value for the three and six months ended June 30, 2013 exclude accrued interest for the period then ended. Interest income or interest expense on trading loans, LHFS , LHFI , brokered time deposits, and long-term debt that have been elected to be carried at fair value are recognized in interest income or interest expense in the Consolidated Statements of Income.

Notes to Consolidated Financial Statements (Unaudited), continued

The following is a discussion of the valuation techniques and inputs used in developing fair value measurements for assets and liabilities classified as level 2 or 3 that are measured at fair value on a recurring basis, based on the class of asset or liability as determined by the nature and risks of the instrument.

Trading Assets and Derivatives and Securities Available for Sale

Unless otherwise indicated, trading assets are priced by the trading desk and securities AFS are valued by an independent third party pricing service.

Federal agency securities

The Company includes in this classification securities issued by federal agencies and GSE s. Agency securities consist of debt obligations issued by HUD , FHLB , and other agencies or collateralized by loans that are guaranteed by the SBA and are, therefore, backed by the full faith and credit of the U.S. government. For SBA instruments, the Company estimated fair value based on pricing from observable trading activity for similar securities or obtained fair values from a third party pricing service; accordingly, the Company has classified these instruments as level 2.

U.S. states and political subdivisions

The Company ’s investments in U.S. states and political subdivisions (collectively “municipals”) include obligations of county and municipal authorities and agency bonds, which are general obligations of the municipality or are supported by a specified revenue source. Holdings were geographically dispersed, with no significant concentrations in any one state or municipality. Additionally, all but an immaterial amount of AFS municipal obligations classified as level 2 are highly rated or are otherwise collateralized by securities backed by the full faith and credit of the federal government.

Level 3 AFS municipal securities includes bonds that are only redeemable with the issuer at par and cannot be traded in the market. As such, no significant observable market data for these instruments is available.

MBS – agency

Agency MBS includes pass-through securities and collateralized mortgage obligations issued by GSE s and U.S. government agencies, such as Fannie Mae, Freddie Mac, and Ginnie Mae. Each security contains a guarantee by the issuing GSE or agency. For agency MBS , the Company estimated fair value based on pricing from observable trading activity for similar securities or obtained fair values from a third party pricing service; accordingly, the Company has classified these instruments as level 2.

MBS – private

Private MBS includes purchased interests in third party securitizations, as well as retained interests in Company -sponsored securitizations of 2006 and 2007 vintage residential mortgages; including both prime jumbo fixed rate collateral and floating rate collateral. At the time of purchase or origination, these securities had high investment grade ratings; however, through the credit crisis, they have experienced a deterioration in credit quality leading to downgrades to non-investment grade levels. Generally, the Company obtains pricing for its securities from an independent pricing service. The Company evaluates third party pricing to determine the reasonableness of the information relative to changes in market data, such as any recent trades, market information received from outside market participants and analysts, and/or changes in the underlying collateral performance. Even though third party pricing has been available, the Company continued to classify private MBS as level 3, as the Company believes that this third party pricing relies on significant unobservable assumptions, as evidenced by a persistently wide bid-ask price range and variability in pricing from the pricing services, particularly for the vintage and exposures held by the Company .

These securities that are classified as AFS are in an unrealized gain position at June 30, 2014 ; however, securities AFS that are in an unrealized loss position are included as part of the Company 's quarterly OTTI evaluation process to determine whether OTTI exists. See Note 4 , “Securities Available for Sale,” for details regarding assumptions used to assess impairment and impairment amounts recognized through earnings on private MBS .

CLO securities

The Company has CLO preference share exposure valued at $5 million at June 30, 2014 . The Company estimated fair value based on pricing from observable trading activity for similar securities. Accordingly, the Company has classified these instruments as level 2.

Asset-Backed Securities

ABS classified as securities AFS includes purchased interests in third party securitizations. These securities are classified as level 3, as the fair value is based on third party pricing with significant unobservable assumptions.

Notes to Consolidated Financial Statements (Unaudited), continued

Corporate and other debt securities

Corporate debt securities are predominantly comprised of senior and subordinate debt obligations of domestic corporations and are classified as level 2. Other debt securities in level 3 primarily include bonds that are redeemable with the issuer at par and cannot be traded in the market; as such, no significant observable market data for these instruments is available.

Commercial Paper

From time to time, the Company trades third party CP that is generally short-term in nature (less than 30 days) and highly rated. The Company estimates the fair value of this CP based on observable pricing from executed trades of similar instruments; thus, CP is classified as level 2.

Equity securities

Level 3 equity securities classified as securities AFS include FHLB stock and Federal Reserve Bank stock, which are redeemable with the issuer at cost and cannot be traded in the market. As such, no significant observable market data for these instruments is available. The Company accounts for the stock based on industry guidance that requires these investments be carried at cost and evaluated for impairment based on the ultimate recovery of cost.

Derivative contracts

The Company holds derivative instruments used for both trading purposes and risk management purposes.

Level 1 derivative contracts generally include exchange-traded futures or option contracts for which pricing is readily available. The Company ’s level 2 instruments are predominantly standard OTC swaps, options, and forwards, with underlying market variables of interest rates, foreign exchange, equity, and credit. Because fair values for OTC contracts are not readily available, the Company estimates fair values using internal, but standard, valuation models that incorporate market-observable inputs. The valuation model is driven by the type of contract: for option-based products, the Company uses an appropriate option pricing model, such as Black-Scholes; for forward-based products, the Company ’s valuation methodology is generally a discounted cash flow approach. The primary drivers of the fair values of derivative instruments are the underlying variables, such as interest rates, exchange rates, equity, or credit. As such, the Company uses market-based assumptions for all of its significant inputs, such as interest rate yield curves, quoted exchange rates and spot prices, market implied volatilities, and credit curves.

Level 2 derivative instruments are primarily transacted in the institutional dealer market and priced with observable market assumptions at a mid-market valuation point, with appropriate valuation adjustments for liquidity and credit risk. For purposes of valuation adjustments to its derivative positions, the Company has evaluated liquidity premiums that may be demanded by market participants, as well as the credit risk of its counterparties and its own credit. The Company has considered factors such as the likelihood of default by itself and its counterparties, its net exposures, and remaining maturities in determining the appropriate fair value adjustments to record. Generally, the expected loss of each counterparty is estimated using the Company 's proprietary internal risk rating system. The risk rating system utilizes counterparty-specific PD and LGD estimates to derive the expected loss. For counterparties that are rated by national rating agencies, those ratings are also considered in estimating the credit risk. In addition, counterparty exposure is evaluated by netting positions that are subject to master netting arrangements, as well as considering the amount of marketable collateral securing the position. Specifically approved counterparties and exposure limits are defined. Creditworthiness of the approved counterparties is regularly reviewed and appropriate business action is taken to adjust the exposure to certain counterparties, as necessary. This approach used to estimate exposures to counterparties is also used by the Company to estimate its own credit risk on derivative liability positions. See Note 12 , “Derivative Financial Instruments, ” for additional information on the Company 's derivative contracts.

The Company 's level 3 derivatives include IRLC s that satisfy the criteria to be treated as derivative financial instruments. The fair value of IRLC s on residential LHFS , while based on interest rates observable in the market, is highly dependent on the ultimate closing of the loans. These “pull-through” rates are based on the Company ’s historical data and reflect the Company ’s best estimate of the likelihood that a commitment will ultimately result in a closed loan. As pull-through rates increase, the fair value of IRLC s also increases. Servicing value is included in the fair value of IRLC s, and the fair value of servicing is determined by projecting cash flows, which are then discounted to estimate an expected fair value. The fair value of servicing is impacted by a variety of factors, including prepayment assumptions, discount rates, delinquency rates, contractually specified servicing fees, servicing costs, and underlying portfolio characteristics. Because these inputs are not transparent in market trades, IRLC s are considered to be level 3 assets. During the three and six months ended June 30, 2014 , the Company transferred $60 million and $118 million , respectively, of IRLC s out of level 3 as the associated loans were closed. During the three and six months ended June 30, 2013 , the Company transferred $72 million and $207 million , respectively, of IRLC s out of level 3 as the associated loans were closed.

Notes to Consolidated Financial Statements (Unaudited), continued

Trading loans

The Company engages in certain businesses whereby the election to carry loans at fair value for financial reporting aligns with the underlying business purpose. Specifically, the loans that are included within this classification are: (i) loans made or acquired in connection with the Company ’s TRS business (see Note 8 , "Certain Transfers of Financial Assets and Variable Interest Entities," and Note 12 , “Derivative Financial Instruments,” for further discussion of this business), (ii) loans backed by the SBA , and (iii) the loan sales and trading business within the Company ’s Wholesale Banking segment. All of these loans are classified as level 2, due to the market data that the Company uses in the estimate of fair value.

The loans made in connection with the Company ’s TRS business are short-term, demand loans, whereby the repayment is senior in priority and whose value is collateralized. While these loans do not trade in the market, the Company believes that the par amount of the loans approximates fair value and no unobservable assumptions are made by the Company to arrive at this conclusion. At June 30, 2014 and December 31, 2013 , the Company had outstanding $1.4 billion and $1.5 billion , respectively, of such short-term loans carried at fair value.

SBA loans are similar to SBA securities discussed herein under “Federal agency securities,” except for their legal form. In both cases, the Company trades instruments that are fully guaranteed by the U.S. government as to contractual principal and interest and there is sufficient observable trading activity upon which to base the estimate of fair value. As these SBA loans are fully guaranteed, the changes in fair value are attributable to factors other than instrument-specific credit risk.

The loans from the Company ’s sales and trading business are commercial and corporate leveraged loans that are either traded in the market or for which similar loans trade. The Company elected to carry these loans at fair value since they are actively traded. For the three and six months ended June 30, 2014 , and for the same periods in 2013 , the Company recognized fair value gains attributable to instrument-specific credit risk of less than $1 million and $2 million , respectively. The Company is able to obtain fair value estimates for substantially all of these loans through a third party valuation service that is broadly used by market participants. While most of the loans are traded in the market, the Company does not believe that trading activity qualifies the loans as level 1 instruments, as the volume and level of trading activity is subject to variability and the loans are not exchange-traded, such that the Company believes that level 2 is a more appropriate presentation of the underlying market activity for the loans. At June 30, 2014 and December 31, 2013 , $321 million and $313 million , respectively, of loans related to the Company ’s trading business were held in inventory.

Loans Held for Sale and Loans Held for Investment

Residential LHFS

The Company values certain newly-originated mortgage LHFS predominantly at fair value based upon defined product criteria. The Company chooses to fair value these mortgage LHFS to eliminate the complexities and inherent difficulties of achieving hedge accounting and to better align reported results with the underlying economic changes in value of the loans and related hedge instruments. Origination fees and costs are recognized in earnings when earned or incurred. The servicing value is included in the fair value of the loan and initially recognized at the time the Company enters into IRLC s with borrowers. The Company uses derivatives to economically hedge changes in interest rates and servicing value in the fair value of the loan. The mark-to-market adjustments related to LHFS and the associated economic hedges are captured in mortgage production related income.

Level 2 LHFS are primarily agency loans which trade in active secondary markets and are priced using current market pricing for similar securities adjusted for servicing, interest rate risk, and credit risk. Non-agency residential mortgages are also included in level 2 LHFS . Transfers of certain mortgage LHFS into level 3 during the three and six months ended June 30, 2014 and 2013 were not due to using alternative valuation approaches, but were largely due to borrower defaults or the identification of other loan defects impacting the marketability of the loans.

For residential loans that the Company has elected to carry at fair value, the Company considers the component of the fair value changes due to instrument-specific credit risk, which is intended to be an approximation of the fair value change attributable to changes in borrower-specific credit risk. For the three months ended June 30, 2014 , gains the Company recognized in the Consolidated Statements of Income due to changes in fair value attributable to borrower-specific credit risk were immaterial. For the six months ended June 30, 2014 , the Company recognized gains of $1 million in the Consolidated Statements of Income due to changes in fair value attributable to borrower-specific credit risk. For both the three and six months ended June 30, 2013 , the Company recognized losses of $2 million due to changes in fair value attributable to borrower-specific credit risk in the Consolidated Statements of Income. In addition to borrower-specific credit risk, there are other, more significant, variables that drive changes in the fair values of the loans, including interest rates and general conditions in the principal markets for the loans.

Notes to Consolidated Financial Statements (Unaudited), continued

Corporate and other LHFS

As discussed in Note 8 , “Certain Transfers of Financial Assets and Variable Interest Entities,” the Company was previously the primary beneficiary of a CLO vehicle, which resulted in the Company consolidating the loans of that vehicle. During the three months ended June 30, 2014, in connection with the sale of RidgeWorth, the Company determined it was no longer the primary beneficiary of the CLO , and accordingly, the CLO was deconsolidated. Prior to June 30, 2014, the Company elected to carry the loans of the CLO at fair value because the loans were sometimes traded by the CLO . For the three and six months ended June 30, 2014 , the Company recognized no gains or losses due to changes in fair value attributable to borrower-specific credit risk in the Consolidated Statements of Income, compared to losses of $1 million and gains of $1 million , for the same periods in 2013 , respectively.

LHFI

Level 3 LHFI predominantly includes mortgage loans that are deemed not marketable, largely due to the identification of loan defects. The Company values these loans using a discounted cash flow approach based on assumptions that are generally not observable in the current markets, such as prepayment speeds, default rates, loss severity rates, and discount rates. These assumptions have an inverse relationship to the overall fair value. Level 3 LHFI also includes mortgage loans that are valued using collateral based pricing. Changes in the applicable housing price index since the time of the loan origination are considered and applied to the loan's collateral value. An additional discount representing the return that a buyer would require is also considered in the overall fair value.

Other Intangible Assets

Other intangible assets that the Company records at fair value are the Company ’s MSR assets. The fair values of MSR s are determined by projecting cash flows, which are then discounted to estimate an expected fair value. The fair values of MSR s are impacted by a variety of factors, including prepayment assumptions, discount rates, delinquency rates, contractually specified servicing fees, servicing costs, and underlying portfolio characteristics. For additional information, see Note 7 , "Goodwill and Other Intangible Assets." The underlying assumptions and estimated values are corroborated by values received from independent third parties based on their review of the servicing portfolio. Because these inputs are not transparent in market trades, MSR s are considered to be level 3 assets.

Liabilities

Trading liabilities and derivatives

Trading liabilities are primarily comprised of derivative contracts, but also include various contracts involving U.S. Treasury securities, equity securities, and corporate and other debt securities that the Company uses in certain of its trading businesses. The Company employs the same valuation methodologies for these derivative contracts and securities as are discussed within the corresponding sections herein under “Trading Assets and Derivatives and Securities Available for Sale.”

During the second quarter of 2009, in connection with its sale of Visa Class B shares , the Company entered into a derivative contract whereby the ultimate cash payments received or paid, if any, under the contract are based on the ultimate resolution of litigation involving Visa . The value of the derivative was estimated based on the Company ’s expectations regarding the ultimate resolution of that litigation, which involved a high degree of judgment and subjectivity. Accordingly, the value of the derivative liability is classified as a level 3 instrument. See Note 13 , "Guarantees," for a discussion of the valuation assumptions.

Brokered time deposits

The Company has elected to measure certain CD s at fair value. These debt instruments include embedded derivatives that are generally based on underlying equity securities or equity indices, but may be based on other underlyings that may or may not be clearly and closely related to the host debt instrument. The Company elected to carry certain of these instruments at fair value to better align the economics of the CD s with the Company ’s risk management strategies. The Company evaluated, on an instrument by instrument basis, whether a new issuance would be carried at fair value.

The Company classified these CD s as level 2 instruments due to the Company ’s ability to reasonably measure all significant inputs based on observable market variables. The Company employs a discounted cash flow approach to the host debt component of the CD , based on observable market interest rates for the term of the CD and an estimate of the Bank ’s credit risk. For the embedded derivative features, the Company uses the same valuation methodologies as if the derivative were a standalone derivative, as discussed herein under “Derivative contracts.”

Notes to Consolidated Financial Statements (Unaudited), continued

For brokered time deposits carried at fair value, the Company estimated credit spreads above LIBOR , based on credit spreads from actual or estimated trading levels of the debt or other relevant market data. For the three and six months ended June 30, 2014 , and for the same periods in 2013 , the Company recognized an immaterial amount of losses due to changes in its own credit spread on its brokered time deposits carried at fair value.

Long-term debt

The Company has elected to carry at fair value certain fixed rate debt issuances of public debt which are valued by obtaining quotes from a third party pricing service and utilizing broker quotes to corroborate the reasonableness of those marks. Additionally, information from market data of recent observable trades and indications from buy side investors, if available, are taken into consideration as additional support for the value. Due to the availability of this information, the Company determined that the appropriate classification for the debt is level 2. The election to fair value the debt was made to align the accounting for the debt with the accounting for the derivatives without having to account for the debt under hedge accounting, thus avoiding the complex and time consuming fair value hedge accounting requirements.

The Company ’s public debt carried at fair value impacts earnings predominantly through changes in the Company ’s credit spreads as the Company has entered into derivative financial instruments that economically convert the interest rate on the debt from fixed to floating. The estimated earnings impact from changes in credit spreads above U.S. Treasury rates were losses of $11 million and $27 million for the three and six months ended June 30, 2014 , respectively, and losses of $1 million and $19 million for the three and six months ended June 30, 2013 , respectively.

At June 30, 2014 , the Company did not carry any issued securities of a CLO at fair value. Prior to June 30, 2014, the Company classified these types of securities as level 2, as the primary driver of their fair values were the loans owned by the CLO , which the Company also elected to carry at fair value prior to the deconsolidation of the CLO, as discussed herein under “Loans Held for Sale and Loans Held for Investment–Corporate and other LHFS .”

Other liabilities

The Company ’s other liabilities that are carried at fair value on a recurring basis include contingent consideration obligations related to acquisitions. Contingent consideration associated with acquisitions is adjusted to fair value until settled. As the assumptions used to measure fair value are based on internal metrics that are not market observable, the earn-out is considered a level 3 liability.

Notes to Consolidated Financial Statements (Unaudited), continued

The valuation technique and range, including weighted average, of the unobservable inputs associated with the Company 's level 3 assets and liabilities are as follows:



	Level 3 Significant Unobservable Input Assumptions
(Dollars in millions)	Fair value June 30, 2014	Valuation Technique	Unobservable Input ¹	Range (weighted average)
Assets
Trading assets and derivatives:
Derivative contracts, net ²	$21	Internal model	Pull through rate	8-100% (71%)
Derivative contracts, net ²	$21	Internal model	MSR value	43-212 bps (106 bps)
Securities AFS:
U.S. states and political subdivisions	12	Cost	N/A
MBS - private	140	Third party pricing	N/A
ABS	22	Third party pricing	N/A
Corporate and other debt securities	5	Cost	N/A
Other equity securities	779	Cost	N/A
Residential LHFS	3	Monte Carlo/Discounted cash flow	Option adjusted spread	145-165 bps (150 bps)
			Conditional prepayment rate	0-30 CPR (16.5 CPR)
			Conditional default rate	0-3 CDR (0.5 CDR)
LHFI	285	Monte Carlo/Discounted cash flow	Option adjusted spread	0-450 bps (290 bps)
			Conditional prepayment rate	2-30 CPR (11.5 CPR)
			Conditional default rate	0-7 CDR (1.75 CDR)
	7	Collateral based pricing	Appraised value	NM ³
MSRs	1,259	Discounted cash flow	Conditional prepayment rate	6-18 CPR (9 CPR)
MSRs	1,259	Discounted cash flow	Discount rate	8-24% (11%)
Liabilities
Other liabilities ⁴	24	Internal model	Loan production volume	0-150% (92%)
Other liabilities ⁴	3	Internal model	Revenue run rate	NM ³

¹ For certain assets and liabilities where the Company utilizes third party pricing, the unobservable inputs and their ranges are not reasonably available to the Company , and therefore, have been noted as not applicable, "N/A."

² Represents the net of IRLC assets and liabilities entered into by the Mortgage Banking business to hedge its interest rate risk.

³ Not meaningful.

⁴ Input assumptions relate to the Company 's contingent consideration obligations related to acquisitions. See Note 13 , "Guarantees," for additional information.

Notes to Consolidated Financial Statements (Unaudited), continued



	Level 3 Significant Unobservable Input Assumptions
(Dollars in millions)	Fair value December 31, 2013		Valuation Technique	Unobservable Input ¹	Range (weighted average)
Assets
Trading assets and derivatives:
CDO/CLO securities		$54	Matrix pricing/Discounted cash flow	Indicative pricing based on overcollateralization ratio	$50-$60 ($54)
CDO/CLO securities		$54	Matrix pricing/Discounted cash flow	Discount margin	4-6% (5%)
ABS	6		Matrix pricing	Indicative pricing	$55 ($55)
Derivative contracts, net ²	8		Internal model	Pull through rate	1-99% (74%)
Derivative contracts, net ²	8		Internal model	MSR value	42-222 bps (111 bps)
Securities AFS:
U.S. states and political subdivisions	34		Matrix pricing	Indicative pricing	$80-$111 ($95)
MBS - private	154		Third party pricing	N/A
ABS	21		Third party pricing	N/A
Corporate and other debt securities	5		Cost	N/A
Other equity securities	739		Cost	N/A
Residential LHFS	3		Monte Carlo/Discounted cash flow	Option adjusted spread	250-675 bps (277 bps)
				Conditional prepayment rate	2-10 CPR (7 CPR)
				Conditional default rate	0-4 CDR (0.5 CDR)
LHFI	292		Monte Carlo/Discounted cash flow	Option adjusted spread	0-675 bps (307 bps)
				Conditional prepayment rate	1-30 CPR (13 CPR)
				Conditional default rate	0-7 CDR (2.5 CDR)
	10		Collateral based pricing	Appraised value	NM ³
MSRs	1,300		Discounted cash flow	Conditional prepayment rate	4-25 CPR (8 CPR)
MSRs	1,300		Discounted cash flow	Discount rate	9-28% (12%)
Liabilities
Other liabilities ⁴	23		Internal model	Loan production volume	0-150% (92%)
Other liabilities ⁴	3		Internal model	Revenue run rate	NM ³

² Represents the net of IRLC assets and liabilities entered into by the Mortgage Banking segment to hedge its interest rate risk.

³ Not meaningful.

⁴ Input assumptions relate to the Company 's contingent consideration obligations related to acquisitions. Excludes $3 million of Other Liabilities. See Note 13 , "Guarantees," for additional information.

Notes to Consolidated Financial Statements (Unaudited), continued

The following tables present a reconciliation of the beginning and ending balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (other than MSR s which are disclosed in Note 7 , “Goodwill and Other Intangible Assets”). Transfers into and out of the fair value hierarchy levels are assumed to be as of the end of the quarter in which the transfer occurred. None of the transfers into or out of level 3 have been the result of using alternative valuation approaches to estimate fair values. There were no transfers between level 1 and 2 during the three and six months ended June 30, 2014 and 2013 .




	Fair Value Measurements Using Significant Unobservable Inputs
(Dollars in millions)	Beginning balance April 1, 2014		Included in earnings			OCI				Purchases		Sales			Settlements			Transfers to/from other balance sheet line items			Transfers into Level 3		Transfers out of Level 3			Fair value June 30, 2014		Included in earnings (held at June 30, 2014) ¹
Assets
Trading assets:
Derivative contracts, net		$11		$72	²		$—				$—		$—			($2	)		($60	)		$—		$—			$21		($6	)	²
Securities AFS:
U.S. states and political subdivisions	13		—			(1		)		—		—			—			—			—		—			12		—
MBS - private	149		—			2				—		—			(11		)	—			—		—			140		—
ABS	21		—			1				—		—			—			—			—		—			22		—
Corporate and other debt securities	5		—			—				—		—			—			—			—		—			5		—
Other equity securities	712		—			—				135		—			(68		)	—			—		—			779		—
Total securities AFS	900		—		⁴	2			⁵	135		—			(79		)	—			—		—			958		—

Residential LHFS	2		—			—				—		(2		)	—			(2		)	6		(1		)	3		—
LHFI	299		4		⁶	—				—		—			(12		)	1			—		—			292		2			⁶
Liabilities
Other liabilities	26		1		⁷	—				—		—			—			—			—		—			27		—

Notes to Consolidated Financial Statements (Unaudited), continued



	Fair Value Measurements Using Significant Unobservable Inputs
(Dollars in millions)	Beginning balance January 1, 2014		Included in earnings				OCI			Purchases		Sales			Settlements			Transfers to/from other balance sheet line items			Transfers into Level 3		Transfers out of Level 3			Fair value June 30, 2014		Included in earnings (held at June 30, 2014) ¹
Assets
Trading assets and derivatives:
CDO/CLO securities		$54		$11		³		$—			$—		($65	)		$—			$—			$—		$—			$—		$—
ABS	6		1			³	—			—		(7		)	—			—			—		—			—		—
Derivative contracts, net	8		133			²	—			—		—			1			(121		)	—		—			21		(6		)	²
Total trading assets and derivatives	68		145				—			—		(72		)	1			(121		)	—		—			21		(6		)
Securities AFS:
U.S. states and political subdivisions	34		(2		)		—			—		(20		)	—			—			—		—			12		—
MBS - private	154		—				5			—		—			(19		)	—			—		—			140		—
ABS	21		—				1			—		—			—			—			—		—			22		—
Corporate and other debt securities	5		—				—			—		—			—			—			—		—			5		—
Other equity securities	739		—				—			135		—			(95		)	—			—		—			779		—
Total securities AFS	953		(2		)	⁴	6		⁵	135		(20		)	(114		)	—			—		—			958		—

Residential LHFS	3		—				—			—		(4		)	—			(6		)	11		(1		)	3		—
LHFI	302		8			⁶	—			—		—			(23		)	5			—		—			292		5			⁶
Liabilities
Other liabilities	29		1			⁷	—			—		—						(3		)	—		—			27		—

¹ Change in unrealized gains/(losses) included in earnings during the period related to financial assets still held at June 30, 2014 .

² Amounts included in earnings are net of issuances, fair value changes, and expirations and are recognized in mortgage production related income.

³ Amounts included in earnings are recognized in trading income.

⁴ Amounts included in earnings are recognized in net securities (losses)/gains.

⁵ Amount recognized in OCI is recognized in change in unrealized gains/(losses) on AFS securities.

⁶ Amounts are generally included in mortgage production related income; however, the mark on certain fair value loans is included in trading income.

⁷ Amounts included in earnings are recognized in other noninterest expense

Notes to Consolidated Financial Statements (Unaudited), continued




	Fair Value Measurements Using Significant Unobservable Inputs
(Dollars in millions)	Beginning balance April 1, 2013		Included in earnings				OCI				Purchases		Sales			Settlements			Transfers to/from other balance sheet line items			Transfers into Level 3		Transfers out of Level 3			Fair value June 30, 2013			Included in earnings (held at June 30, 2013) ¹
Assets
Trading assets and derivatives:
CDO/CLO securities		$61		$2		³		$—				$—		$—			$—			$—			$—		$—			$63			$2		³
ABS	5		1			³	—				—		—			—			—			—		—			6			1			³
Derivative contracts, net	99		(76		)	²	—				—		—			1			(74		)	—		—			(50		)	1			²
Corporate and other debt securities	1		—				—				—		—			(1		)	—			—		—			—			—
Total trading assets and derivatives	166		(73		)		—				—		—			—			(74		)	—		—			19			4
Securities AFS:
U.S. states and political subdivisions	47		—				—				—		(6		)	(4		)	—			—		—			37			—
MBS - private	202		—				(6		)		—		—			(15		)	—			—		—			181			—
ABS	23		—				—				—		—			(1		)	—			—		—			22			—
Corporate and other debt securities	5		—				—				—		—			(3		)	—			—		—			2			—
Other equity securities	672		—				—				65		—			—			—			—		—			737			—
Total securities AFS	949		—				(6		)	⁵	65		(6		)	(23		)	—			—		—			979			—
Residential LHFS	6		(1		)	⁶	—				—		(3		)	—			(2		)	10		(2		)	8			(1		)	⁶
LHFI	360		(7		)	⁶	—				—		—			(15		)	1			—		—			339			(7		)	⁶
Liabilities
Other liabilities	31		—				—				—		—			—			(2		)	—		—			29			—

Notes to Consolidated Financial Statements (Unaudited), continued



	Fair Value Measurements Using Significant Unobservable Inputs
(Dollars in millions)	Beginning balance January 1, 2013		Included in earnings				OCI				Purchases		Sales			Settlements			Transfers to/from other balance sheet line items			Transfers into Level 3		Transfers out of Level 3			Fair value June 30, 2013			Included in earnings (held at June 30, 2013) ¹
Assets
Trading assets and derivatives:
CDO/CLO securities		$52		$11		³		$—				$—		$—			$—			$—			$—		$—			$63			$11		³
ABS	5		1			³	—				—		—			—			—			—		—			6			1			³
Derivative contracts, net	132		26			²	—				—		—			1			(209		)	—		—			(50		)	1			²
Corporate and other debt securities	1		—				—				—		—			(1		)	—			—		—			—			—
Total trading assets and derivatives	190		38				—				—		—			—			(209		)	—		—			19			13
Securities AFS:
U.S. states and political subdivisions	46		—				2				—		(7		)	(4		)	—			—		—			37			—
MBS - private	209		—				(3		)		—		—			(25		)	—			—		—			181			—
ABS	21		(1		)		3				—		—			(1		)	—			—		—			22			(1		)
Corporate and other debt securities	5		—				—				—		—			(3		)	—			—		—			2			—
Other equity securities	633		—				—				110		—			(6		)	—			—		—			737			—
Total securities AFS	914		(1		)	⁴	2			⁵	110		(7		)	(39		)	—			—		—			979			(1		)	⁴
Residential LHFS	8		(1		)	⁶	—				—		(13		)	—			(4		)	21		(3		)	8			(1		)	⁶
LHFI	379		(12		)	⁶	—				—		—			(31		)	3			—		—			339			(11		)	⁶
Liabilities
Other liabilities	31		—				—				—		—			—			(2		)	—		—			29			—

¹ Change in unrealized gains/(losses) included in earnings for the period related to financial assets still held at June 30, 2013 .

² Amounts included in earnings are net of issuances, fair value changes, and expirations and are recognized in mortgage production related income.

³ Amounts included in earnings are recognized in trading income.

⁴ Amounts included in earnings are recognized in net securities (losses)/gains.

⁵ Amounts recognized in OCI are recognized in change in unrealized gains/(losses) on AFS securities.

⁶ Amounts are generally included in mortgage production related income; however, the mark on certain fair value loans is included in trading income.

Notes to Consolidated Financial Statements (Unaudited), continued

Non-recurring Fair Value Measurements

The following tables present those assets measured at fair value on a non-recurring basis at June 30, 2014 and December 31, 2013 , as well as corresponding gains/(losses) recognized during the three and six months ended June 30, 2014 and the year ended December 31, 2013 . The changes in fair value when comparing balances at June 30, 2014 to those at December 31, 2013 , generally result from the application of LOCOM or through write-downs of individual assets. The table does not reflect the change in fair value attributable to any related economic hedges the Company may have used to mitigate the interest rate risk associated with LHFS and MSR s.



(Dollars in millions)	June 30, 2014		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Losses for the Three Months Ended June 30, 2014			Gains/(Losses) for the Six Months Ended June 30, 2014
LHFS		$16		$—		$16		$—		$—			$1
LHFI	27		—		—		27		—			—
OREO	44		—		3		41		(6		)	(8		)
Affordable Housing	63		—		—		63		—			(36		)
Other Assets	85		—		79		6		(7		)	(13		)

(Dollars in millions)	December 31, 2013		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Losses for the Year Ended December 31, 2013
LHFS		$278		$—		$278		$—		($3	)
LHFI	75		—		—		75		—
OREO	49		—		1		48		(10		)
Affordable Housing	7		—		—		7		(3		)
Other Assets	171		—		158		13		(61		)

The following is a discussion of the valuation techniques and inputs used in developing fair value measurements for assets classified as level 2 or 3 that are measured at fair value on a non-recurring basis, as determined by the nature and risks of the instrument .

Loans Held for Sale

At June 30, 2014 and December 31, 2013 , level 2 LHFS consisted primarily of agency and non-agency residential mortgages, which were measured using observable collateral valuations, and corporate loans that are accounted for at LOCOM . These loans were valued consistent with the methodology discussed in the Recurring Fair Value Measurement section of this footnote.

During the six months ended June 30, 2014 , the Company sold $10 million of nonperforming LHFS and eliminated an additional $2 million of nonperforming LHFS resulting from the deconsolidation of the CLO. As discussed in Note 8 , “Certain Transfers of Financial Assets and Variable Interest Entities,” the Company was previously the primary beneficiary of a CLO vehicle, which resulted in the Company consolidating the loans of that vehicle. In connection with the sale of RidgeWorth during the three months ended June 30, 2014, the Company determined it was no longer the primary beneficiary of the CLO and deconsolidated it. During the six months ended June 30, 2013 , the Company transferred $22 million of residential mortgage NPL s to LHFS , as the Company elected to actively market these loans for sale. These loans were predominantly reported at amortized cost prior to transferring to LHFS ; however, a portion of the NPL s was carried at fair value. As a result of transferring the loans to LHFS , the Company recognized a $3 million charge-off to reflect the loans' estimated market value. These transferred NPL loans were sold at approximately their carrying value during the six months ended June 30, 2013. The Company also sold an additional $39 million of residential mortgage NPL s which had either been transferred to LHFS in a prior period or repurchased into LHFS directly. These additional loans were sold at a gain of approximately $5 million during the second quarter of 2013.

Loans Held for Investment

At June 30, 2014 and December 31, 2013 , LHFI consisted primarily of consumer and residential real estate loans discharged in Chapter 7 bankruptcy that had not been reaffirmed by the borrower, as well as nonperforming CRE loans for which specific reserves had been recognized. As these loans have been classified as nonperforming, cash proceeds from the sale of the underlying collateral is the expected source of repayment for a majority of these loans. Accordingly, the fair value of these loans is derived from the estimated fair value of the underlying collateral, incorporating market data if available. There were

Notes to Consolidated Financial Statements (Unaudited), continued

no gains or losses during the three and six months ended June 30, 2014 and 2013 as the charge-offs related to these loans are a component of the ALLL . Due to the lack of market data for similar assets, all of these loans are considered level 3.

OREO

OREO is measured at the lower of cost or its fair value less costs to sell. Level 2 OREO consists primarily of residential homes, commercial properties, and vacant lots and land for which binding purchase agreements exist. Level 3 OREO consists primarily of residential homes, commercial properties, and vacant lots and land for which initial valuations are based on property-specific appraisals, broker pricing opinions, or other available market information. Updated value estimates are received regularly on level 3 OREO .

Affordable Housing

The Company evaluates its consolidated affordable housing properties for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment is recognized if the carrying amount of the property exceeds its fair value. Fair value measurements for affordable housing properties are derived from internal analyses using market assumptions if available. Significant assumptions utilized in these analyses include cash flows, market capitalization rates, and tax credit market pricing. Due to the lack of comparable sales in the marketplace, these valuations are considered level 3. During the first quarter of 2014 , the Company decided to actively market for sale certain consolidated affordable housing properties, and accordingly, recognized an impairment charge of $36 million to adjust the carrying values of these properties to their estimated net realizable values obtained from a third party broker opinion. During the three months ended June 30, 2014, no further impairment was recognized on these properties as their carrying values were not in excess of the estimated net realizable values. The Company anticipates that the sale of these properties will occur within the next nine months. During the three and six months ended June 30, 2013, the Company recognized impairment charges of $2 million on affordable housing properties.

Other Assets

Other assets consist of private equity and other equity method investments, other repossessed assets, assets under operating leases where the Company is the lessor, and land held for sale.

Other repossessed assets consist of repossessed personal property that is measured at fair value less cost to sell. These assets are considered level 3 as their fair value is determined based on a variety of subjective unobservable factors. During the three and six months ended June 30, 2014 and 2013 , no losses were recognized by the Company on other repossessed assets as the impairment charges on repossessed personal property are a component of the ALLL .

The Company monitors the fair value of assets under operating leases where the Company is the lessor and recognizes impairment to the extent the carrying value is not recoverable and the fair value is less than its carrying value. Fair value is determined using collateral specific pricing digests, external appraisals, broker opinions, and recent sales data from industry equipment dealers as well as the discounted cash flows derived from the underlying lease agreement. As market data for similar assets and lease arrangements is available and used in the valuation, these assets are considered level 2. During the three and six months ended June 30, 2014 , the Company recognized impairment charges of $2 million and $8 million , respectively, attributable to the fair value of various personal property under operating leases. No impairment charges were recognized during the three months ended June 30, 2013 . During the six months ended June 30, 2013 , the Company recognized an immaterial amount of impairment charges attributable to the fair value of various personal property under operating leases.

Land held for sale is measured at the lesser of carrying value or fair value less cost to sell. Land held for sale is considered level 2 as its fair value is determined based on market comparables and broker opinions. The Company recognized $5 million in impairment charges during the three and six months ended June 30, 2014 . No impairment charges were recognized on land held for sale during the three and six months ended June 30, 2013 .

Notes to Consolidated Financial Statements (Unaudited), continued

Fair Value of Financial Instruments

The carrying amounts and fair values of the Company ’s financial instruments are as follows:



	June 30, 2014				Fair Value Measurement Using
(Dollars in millions)	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents		$6,859		$6,859		$6,859		$—		$—	(a)
Trading assets and derivatives	5,141		5,141		972		4,140		29		(b)
Securities AFS	24,015		24,015		1,727		21,330		958		(b)
LHFS	4,046		4,117		—		3,896		221		(c)
LHFI, net	127,741		123,778		—		575		123,203		(d)
Financial liabilities:
Deposits	133,285		133,286		—		133,286		—		(e)
Short-term borrowings	9,115		9,115		—		9,115		—		(f)
Long-term debt	13,155		13,261		—		12,537		724		(f)
Trading liabilities and derivatives	1,190		1,190		987		195		8		(b)



	December 31, 2013				Fair Value Measurement Using
(Dollars in millions)	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents		$5,263		$5,263		$5,263		$—		$—	(a)
Trading assets and derivatives	5,040		5,040		1,156		3,812		72		(b)
Securities AFS	22,542		22,542		1,396		20,193		953		(b)
LHFS	1,699		1,700		—		1,666		34		(c)
LHFI, net	125,833		121,341		—		2,860		118,481		(d)
Financial liabilities:
Deposits	129,759		129,801		—		129,801		—		(e)
Short-term borrowings	8,739		8,739		—		8,739		—		(f)
Long-term debt	10,700		10,678		—		10,086		592		(f)
Trading liabilities and derivatives	1,181		1,181		979		198		4		(b)

The following methods and assumptions were used by the Company in estimating the fair value of financial instruments:


(a)	Cash and cash equivalents are valued at their carrying amounts reported in the balance sheet, which are reasonable estimates of fair value due to the relatively short period to maturity of the instruments.


(b)	Securities AFS , trading assets and derivatives, and trading liabilities and derivatives that are classified as level 1 are valued based on quoted market prices. For those instruments classified as level 2 or 3, refer to the respective valuation discussions within this footnote.

(c)

LHFS are generally valued based on observable current market prices or, if quoted market prices are not available, on quoted market prices of similar instruments. Refer to the LHFS section within this footnote for further discussion of the LHFS carried at fair value. In instances for which significant valuation assumptions are not readily observable in the market, instruments are valued based on the best available data to approximate fair value. This data may be internally-developed and considers risk premiums that a market participant would require under then-current market conditions.

(d)

LHFI fair values are based on a hypothetical exit price, which does not represent the estimated intrinsic value of the loan if held for investment. The assumptions used are expected to approximate those that a market participant purchasing the loans would use to value the loans, including a market risk premium and liquidity discount. Estimating the fair value of the loan portfolio when loan sales and trading markets are illiquid, or for certain loan types, nonexistent, requires significant judgment. Therefore, the estimated fair value can vary significantly depending on a market

Notes to Consolidated Financial Statements (Unaudited), continued

participant’s ultimate considerations and assumptions. The final value yields a market participant’s expected return on investment that is indicative of the current market conditions, but it does not take into consideration the Company ’s estimated value from continuing to hold these loans or its lack of willingness to transact at these estimated values.

The Company generally estimated fair value for LHFI based on estimated future cash flows discounted, initially, at current origination rates for loans with similar terms and credit quality, which derived an estimated value of 100% and 99% on the loan portfolio’s net carrying value at June 30, 2014 and December 31, 2013 , respectively. The value derived from origination rates likely does not represent an exit price; therefore, an incremental market risk and liquidity discount was subtracted from the initial value at June 30, 2014 and December 31, 2013 . The discounted value is a function of a market participant’s required yield in the current environment and is not a reflection of the expected cumulative losses on the loans. Loan prepayments are used to adjust future cash flows based on historical experience and prepayment model forecasts. The value of related accrued interest on loans approximates fair value; however, it is not included in the carrying amount or fair value of loans. The value of long-term customer relationships is not permitted under current U.S. GAAP to be included in the estimated fair value.

(e)

Deposit liabilities with no defined maturity such as DDA s, NOW /money market accounts, and savings accounts have a fair value equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for CD s are estimated using a discounted cash flow measurement that applies current interest rates to a schedule of aggregated expected maturities. The assumptions used in the discounted cash flow analysis are expected to approximate those that market participants would use in valuing deposits. The value of long-term relationships with depositors is not taken into account in estimating fair values. For valuation of brokered time deposits that the Company carries at fair value as well as those that are carried at amortized cost, refer to the respective valuation section within this footnote.

(f)

Fair values for short-term borrowings and certain long-term debt are based on quoted market prices for similar instruments or estimated using discounted cash flow analysis and the Company ’s current incremental borrowing rates for similar types of instruments. For long-term debt that the Company carries at fair value, refer to the respective valuation section within this footnote. For level 3 debt, the terms are unique in nature or there are otherwise no similar instruments that can be used to value the instrument without using significant unobservable assumptions. In this situation, the Company reviews current borrowing rates along with the collateral levels that secure the debt in determining an appropriate fair value adjustment.

Unfunded loan commitments and letters of credit are not included in the table above. At June 30, 2014 and December 31, 2013 , the Company had $53.0 billion and $48.9 billion , respectively, of unfunded commercial loan commitments and letters of credit. A reasonable estimate of the fair value of these instruments is the carrying value of deferred fees plus the related unfunded commitments reserve, which was a combined $45 million and $53 million at June 30, 2014 and December 31, 2013 , respectively. No active trading market exists for these instruments, and the estimated fair value does not include any value associated with the borrower relationship. The Company does not estimate the fair values of consumer unfunded lending commitments which can generally be canceled by providing notice to the borrower.

NOTE 15 – CONTINGENCIES

Litigation and Regulatory Matters

In the ordinary course of business, the Company and its subsidiaries are parties to numerous civil claims and lawsuits and subject to regulatory examinations, investigations, and requests for information. Some of these matters involve claims for substantial amounts. The Company ’s experience has shown that the damages alleged by plaintiffs or claimants are often overstated, based on novel or unsubstantiated legal theories, unsupported by facts, and/or bear no relation to the ultimate award that a court might grant. Additionally, the outcome of litigation and regulatory matters and the timing of ultimate resolution are inherently difficult to predict. Because of these factors, the Company typically cannot provide a meaningful estimate of the range of reasonably possible outcomes of claims in the aggregate or by individual claim. However, on a case-by-case basis, reserves are established for those legal claims in which it is probable that a loss will be incurred and the amount of such loss can be reasonably estimated. The actual costs of resolving these claims may be substantially higher or lower than the amounts reserved.

For a limited number of legal matters in which the Company is involved, the Company is able to estimate a range of reasonably possible losses. For other matters for which a loss is probable or reasonably possible, such an estimate is not possible. For those matters where a loss is both estimable and reasonably possible, management currently estimates the aggregate range of reasonably possible losses as $0 to approximately $200 million in excess of the reserves, if any, related to those matters. This estimated range of reasonably possible losses represents the estimated possible losses over the life of such legal matters, which may span a currently indeterminable number of years, and is based on information available at June 30, 2014 . The matters

Notes to Consolidated Financial Statements (Unaudited), continued

underlying the estimated range will change from time to time, and actual results may vary significantly from this estimate. Those matters for which an estimate is not possible are not included within this estimated range; therefore, this estimated range does not represent the Company ’s maximum loss exposure. Based on current knowledge, it is the opinion of management that liabilities arising from legal claims in excess of the amounts currently reserved, if any, will not have a material impact on the Company ’s financial condition, results of operations, or cash flows. However, in light of the significant uncertainties involved in these matters and the large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to the Company ’s financial condition, results of operations, or cash flows for any given reporting period.

The following is a description of certain litigation and regulatory matters:

Card Association Antitrust Litigation

The Company is a defendant, along with Visa U.S.A. and MasterCard International, as well as several other banks, in several antitrust lawsuits challenging their practices. For a discussion regarding the Company ’s involvement in this litigation matter, see Note 13 , “Guarantees.”

Lehman Brothers Holdings, Inc. Litigation

Beginning in October 2008, STRH , along with other underwriters and individuals, were named as defendants in several individual and putative class action complaints filed in the U.S. District Court for the Southern District of New York and state and federal courts in Arkansas, California, Texas, and Washington. Plaintiffs alleged violations of Sections 11 and 12 of the Securities Act of 1933 and/or state law for allegedly false and misleading disclosures in connection with various debt and preferred stock offerings of Lehman Brothers Holdings, Inc. ("Lehman Brothers") and sought unspecified damages. All cases were transferred for coordination to the multi-district litigation captioned In re Lehman Brothers Equity/Debt Securities Litigation pending in the U.S. District Court for the Southern District of New York. Defendants filed a motion to dismiss all claims asserted in the class action. On July 27, 2011, the District Court granted in part and denied in part the motion to dismiss the claims against STRH and the other underwriter defendants in the class action. A settlement with the class plaintiffs was approved by the Court and the class settlement approval process was completed. A number of individual lawsuits and smaller putative class actions remained following the class settlement. STRH settled two such individual actions. The other individual lawsuits were dismissed. The appeal period for two of the individual actions will not expire until the plaintiffs' claims against a third party have been resolved.

Colonial BancGroup Securities Litigation

Beginning in July 2009, STRH , certain other underwriters, the Colonial BancGroup, Inc. (“Colonial BancGroup”) and certain officers and directors of Colonial BancGroup were named as defendants in a putative class action filed in the U.S. District Court for the Middle District of Alabama entitled In re Colonial BancGroup, Inc. Securities Litigation. The complaint was brought by purchasers of certain debt and equity securities of Colonial BancGroup and seeks unspecified damages. Plaintiffs allege violations of Sections 11 and 12 of the Securities Act of 1933 due to allegedly false and misleading disclosures in the relevant registration statement and prospectus relating to Colonial BancGroup’s goodwill impairment, mortgage underwriting standards, and credit quality. On August 28, 2009, the Colonial BancGroup filed for bankruptcy. The defendants’ motion to dismiss was denied in May 2010, but the Court subsequently ordered Plaintiffs to file an amended complaint. This amended complaint was filed and the defendants filed a motion to dismiss. In October 2013, the Court granted in part and denied in part this motion.

Bickerstaff v. SunTrust Bank

This case was filed in the Fulton County State Court on July 12, 2010, and an amended complaint was filed on August 9, 2010. Plaintiff asserts that all overdraft fees charged to his account which related to debit card and ATM transactions are actually interest charges and therefore subject to the usury laws of Georgia. Plaintiff has brought claims for violations of civil and criminal usury laws, conversion, and money had and received, and purports to bring the action on behalf of all Georgia citizens who have incurred such overdraft fees within the last four years where the overdraft fee resulted in an interest rate being charged in excess of the usury rate. SunTrust filed a motion to compel arbitration and on March 16, 2012, the Court entered an order holding that SunTrust 's arbitration provision is enforceable but that the named plaintiff in the case had opted out of that provision pursuant to its terms. The Court explicitly stated that it was not ruling at that time on the question of whether the named plaintiff could have opted out for the putative class members. SunTrust filed an appeal of this decision, but this appeal was dismissed based on a finding that the appeal was prematurely granted. On April 8, 2013, the plaintiff filed a motion for class certification and that motion was denied on February 19, 2014. Plaintiff appealed the denial of class certification on February 26, 2014.

Notes to Consolidated Financial Statements (Unaudited), continued

Putative ERISA Class Actions

Company Stock Class Action

Beginning in July 2008, the Company and certain officers, directors, and employees of the Company were named in a putative class action alleging that they breached their fiduciary duties under ERISA by offering the Company 's common stock as an investment option in the SunTrust Banks, Inc. 401(k) Plan (the “Plan”). The plaintiffs purport to represent all current and former Plan participants who held the Company stock in their Plan accounts from May 2007 to the present and seek to recover alleged losses these participants supposedly incurred as a result of their investment in Company stock.

The Company Stock Class Action was originally filed in the U.S. District Court for the Southern District of Florida but was transferred to the U.S. District Court for the Northern District of Georgia, Atlanta Division, (the “District Court”) in November 2008.

On October 26, 2009, an amended complaint was filed. On December 9, 2009, defendants filed a motion to dismiss the amended complaint. On October 25, 2010, the District Court granted in part and denied in part defendants' motion to dismiss the amended complaint. Defendants and plaintiffs filed separate motions for the District Court to certify its October 25, 2010 order for immediate interlocutory appeal. On January 3, 2011, the District Court granted both motions.

On January 13, 2011, defendants and plaintiffs filed separate petitions seeking permission to pursue interlocutory appeals with the U.S. Court of Appeals for the Eleventh Circuit (“the Circuit Court”). On April 14, 2011, the Circuit Court granted defendants and plaintiffs permission to pursue interlocutory review in separate appeals. The Circuit Court subsequently stayed these appeals pending decision of a separate appeal involving The Home Depot in which substantially similar issues are presented. On May 8, 2012, the Circuit Court decided this appeal in favor of The Home Depot. On March 5, 2013, the Circuit Court issued an order remanding the case to the District Court for further proceedings in light of its decision in The Home Depot case. On September 26, 2013, the District Court granted the defendants' motion to dismiss plaintiffs' claims. Plaintiffs have filed an appeal of this decision in the Circuit Court.

Mutual Funds Class Actions

On March 11, 2011, the Company and certain officers, directors, and employees of the Company were named in a putative class action alleging that they breached their fiduciary duties under ERISA by offering certain STI Classic Mutual Funds as investment options in the Plan. The plaintiff purports to represent all current and former Plan participants who held the STI Classic Mutual Funds in their Plan accounts from April 2002 through December 2010 and seeks to recover alleged losses these Plan participants supposedly incurred as a result of their investment in the STI Classic Mutual Funds. This action was pending in the U.S. District Court for the Northern District of Georgia, Atlanta Division (the “District Court”). On June 6, 2011, plaintiff filed an amended complaint, and, on June 20, 2011, defendants filed a motion to dismiss the amended complaint. On March 12, 2012, the Court granted in part and denied in part the motion to dismiss. The Company filed a subsequent motion to dismiss the remainder of the case on the ground that the Court lacked subject matter jurisdiction over the remaining claims. On October 30, 2012, the Court dismissed all claims in this action. Immediately thereafter, plaintiffs' counsel initiated a substantially similar lawsuit against the Company substituting two new plaintiffs and also filed an appeal of the dismissal with the U.S. Court of Appeals for the Eleventh Circuit. SunTrust filed a motion to dismiss in the new action and this motion was granted. On February 26, 2014, the U.S. Court of Appeals for the Eleventh Circuit upheld the District Court's dismissal. On March 18, 2014, the Plaintiff's counsel filed a motion for reconsideration with the Eleventh Circuit. This motion remains pending.

On June 27, 2014, the Company and certain current and former officers, directors, and employees of the Company were named in another putative class action alleging breach of fiduciary duties associated with the inclusion of STI Classic Mutual Funds as investment options in the Plan. This case, Brown, et al. v. SunTrust Banks, Inc., et al., was filed in the U.S. District Court for the District of Columbia.

Consent Order with the Federal Reserve

On April 13, 2011, SunTrust , SunTrust Bank, and STM entered into a Consent Order with the FRB in which SunTrust , SunTrust Bank, and STM agreed to strengthen oversight of, and improve risk management, internal audit, and compliance programs concerning, the residential mortgage loan servicing, loss mitigation, and foreclosure activities of STM . Under the terms of the Consent Order, SunTrust Bank and STM agreed, among other things, to: (a) strengthen the coordination of communications between borrowers and STM concerning ongoing loss mitigation and foreclosure activities; (b) submit a plan to enhance processes for oversight and management of third party vendors used in connection with residential mortgage servicing, loss mitigation and foreclosure activities; (c) enhance and strengthen the enterprise-wide compliance program with respect to oversight of residential mortgage loan servicing, loss mitigation and foreclosure activities; (d) ensure appropriate oversight of STM 's activities with respect to the Mortgage Electronic Registration System; (e) review and remediate, if necessary, STM 's management information systems for its residential mortgage loan servicing, loss mitigation, and foreclosure activities;

Notes to Consolidated Financial Statements (Unaudited), continued

(f) improve the training of STM officers and staff concerning applicable law, supervisory guidance and internal procedures concerning residential mortgage loan servicing, loss mitigation and foreclosure activities, including the single point of contact for foreclosure and loss mitigation; (g) retain an independent consultant to conduct a comprehensive assessment of STM 's risks, including, but not limited to, operational, compliance, transaction, legal, and reputational risks particularly in the areas of residential mortgage loan servicing, loss mitigation and foreclosure; (h) enhance and strengthen the enterprise-wide risk management program with respect to oversight of residential mortgage loan servicing, loss mitigation and foreclosure activities; and (i) enhance and strengthen the internal audit program with respect to residential loan servicing, loss mitigation and foreclosure activities. The comprehensive third party risk assessment was completed in August 2011, action plans designed to complete the above enhancements were accepted by the FRB , and the Company has implemented enhancements consistent with such plans. During the second quarter of 2013, an independent third party consultant approved by the FRB completed its review and submitted to the FRB a validation report with respect to compliance with the aspects of the Consent Order referenced above. The Company continues its implementation of the recommendations noted in this report.

Under the terms of the Consent Order, SunTrust Bank and STM also retained an independent foreclosure consultant approved by the FRB to conduct a review of residential foreclosure actions pending at any time during the period from January 1, 2009 through December 31, 2010, for loans serviced by STM , to identify any errors, misrepresentations, or deficiencies, determine whether any instances so identified resulted in financial injury, and prepare a written report detailing the findings. On January 7, 2013, the Company , as well as nine other mortgage servicers, entered into an amendment to the Consent Order with the OCC and the FRB to amend the 2011 Consent Order. This agreement ended the independent foreclosure review process created by the Consent Order, replacing it with an accelerated remediation program. As a result of the amendment, the Company is no longer incurring the consulting and legal costs of the independent third parties providing file review, borrower outreach, and legal services associated with the Consent Order foreclosure file review. Consistent with the provisions of the Consent Order, the Company satisfied its remaining financial commitments under the amendment to the Consent Order in April 2014 by making cash contributions to non-profit organizations focused on foreclosure prevention, borrower counseling and education, and neighborhood stabilization and revitalization, thereby satisfying its financial obligations under the amendment to the Consent Order. The Company's financial statements at June 30, 2014 reflect the costs of these cash contributions.

As a result of the FRB 's review of the Company 's residential mortgage loan servicing and foreclosure processing practices that preceded the Consent Order, on July 25, 2014 the FRB imposed a $160 million civil money penalty. The Company expects to satisfy this obligation by providing consumer relief and certain cash payments as contemplated by the settlement with the U.S. and the States Attorneys' General regarding certain mortgage servicing claims, which is discussed below at “United States Mortgage Servicing Settlement and HUD Investigation of Origination Practices ( FHA ).” The Company's financial statements at June 30, 2014 continued to reflect the Company's costs associated with this penalty.

United States Mortgage Servicing Settlement and HUD Investigation of Origination Practices ( FHA )

In January 2012, the Company commenced discussions related to a mortgage servicing settlement with the U.S. , through the DOJ , and Attorneys General for several states regarding various potential claims primarily relating to the Company 's mortgage servicing activities. Since that time, the parties continued discussions regarding potential resolution. In September 2013, the Company reached agreements in principle with the HUD and the DOJ to settle certain alleged civil claims regarding its mortgage servicing and origination practices as part of the National Mortgage Servicing Settlement.

Separately, on April 25, 2012, the Company was informed of the commencement of an investigation by the HUD OIG relating to STM 's origination practices for FHA loans. Since that time, STM has provided documents as part of the investigation. During the first quarter of 2013, the HUD OIG , together with the U.S. DOJ (collectively, the “Government”), advised STM of their preliminary investigation findings, including alleged violations of the False Claims Act. Throughout 2013, the Government and the Company engaged in discussions that accelerated in the third quarter and resulted in agreements in principle to resolve certain civil and administrative claims arising from FHA -insured mortgage loans originated by STM from January 1, 2006 through March 31, 2012.

On June 17, 2014, the parties reached a final settlement agreement related to the National Mortgage Servicing Settlement and HUD 's investigation of FHA origination practices, a copy of which is filed as Exhibit 10.3 to this report. Pursuant to the final settlements, the Company committed to provide $500 million of consumer relief, to make a $468 million cash payment, and to implement certain mortgage servicing standards. The financial statements at June 30, 2014 reflect the estimated cost of the anticipated requirements of fulfilling these commitments. Even with the settlements, the Company faces the risk of being unable to meet certain consumer relief commitments, which could result in increased costs to resolve this matter. The Company does not expect the consumer relief efforts or implementation of certain servicing standards associated with the settlements to have a material impact on its future financial results.

Notes to Consolidated Financial Statements (Unaudited), continued

DOJ Investigation of GSE Loan Origination Practices

In January 2014, the DOJ notified STM of an investigation regarding the origination and underwriting of single family residential mortgage loans sold by STM to Fannie Mae and Freddie Mac . STM continues to cooperate with the investigation. The DOJ and STM have not yet engaged in any material dialogue about how this matter may proceed and no allegations have been raised against STM .

Mortgage Modification Investigation

STM has been cooperating with the United States Attorney's Office for the Western District of Virginia and the Office of the Special Inspector General for the Troubled Asset Relief Program (collectively, the “Western District”) in their investigation of STM 's administration of HAMP . More specifically, the Western District's investigation focuses on whether, during 2009 and 2010, STM harmed borrowers and violated civil or criminal laws by failing to properly process applications for modifications of certain mortgages owned by the GSE s by devoting insufficient resources to its loss mitigation function and making misrepresentations to borrowers about timelines and other features associated with the HAMP modification process. On July 3, 2014, the parties reached an agreement to settle the claims at issue in the investigation, and a copy of the agreement is filed as Exhibit 10.4 to this report. STM's commitment under the agreement includes an estimated $179 million in consumer remediation (up to a maximum of $274 million ), $20 million to fund housing counseling for homeowners, $10 million paid toward restitution to Fannie Mae and Freddie Mac , and a cash payment of $16 million to the U.S. Treasury . The Company incurred a $204 million pre-tax charge in connection with this matter, which reflects STM's commitment under the agreement, including its estimate of the consumer remediation obligation. The financial statements at June 30, 2014 reflect the estimated cost of the anticipated requirements of fulfilling these commitments.

Residential Funding Company, LLC v. SunTrust Mortgage, Inc.

STM has been named as a defendant in a complaint filed December 17, 2013 in the Southern District of New York by Residential Funding Company, LLC. ("RFC"), a Chapter 11 debtor-affiliate of GMAC Mortgage, LLC, alleging breaches of representations and warranties made in connection with loan sales and seeking indemnification against losses allegedly suffered by RFC as a result of such alleged breaches. The Company filed a motion to dismiss, which is pending.

SunTrust Mortgage Lender Placed Insurance Class Actions

STM has been named in three putative class actions similar to those that other financial institutions are facing which allege that the Company acted improperly in connection with the practice of force placing homeowners’ insurance in certain instances. Generally, the plaintiffs in these actions allege that STM violated various duties by failing to properly negotiate pricing for force placed insurance and by receiving kickbacks or other improper benefits from the providers of such insurance. The first case, Timothy Smith v. SunTrust Mortgage, Inc. et al. , is pending in the United States District Court for the Central District of California. STM filed a motion to dismiss this case and this motion was granted in part and denied in part. The second case, Carina Hamilton v. SunTrust Mortgage, Inc. et al. , is pending in the U.S. District Court for the Southern District of Florida. The third case, Yaghoub Mahdavieh et al. v. SunTrust Mortgage, Inc. et al. , was filed in the U.S. District Court for the Northern District of Georgia. STM has filed a motion to dismiss and a motion to transfer the case. The Court granted the motion to transfer this case to the Southern District of Florida. STM has entered into an agreement to settle these cases in the context of a nationwide settlement class. This proposed settlement has been preliminarily approved by the Court and a hearing for the final approval of the settlement has been scheduled for October 17, 2014. STM’s anticipated liability in this settlement has been fully accrued and is reflected in the Company's financial statements at June 30, 2014 .

SunTrust Mortgage, Inc. v. United Guaranty Residential Insurance Company of North Carolina

STM filed suit in the Eastern District of Virginia in July 2009 against United Guaranty Residential Insurance Company of North Carolina (“UGRIC”) seeking payment of denied MI claims on second lien mortgages. STM 's claims were in two counts. Count One involved a common reason for denial of claims by UGRIC for a group of loans. Count Two involved a group of loans with individualized reasons for the claim denials asserted by UGRIC. UGRIC counterclaimed for declaratory relief involving interpretation of the insurance policy with respect to certain caps on the amount of claims covered and whether STM was obligated to continue to pay premiums after any caps were met. The Court granted STM 's motion for summary judgment as to liability on Count One and, after a trial on damages, awarded STM $34 million along with $6 million in prejudgment interest on August 19, 2011. The Court stayed Count Two pending final resolution of Count One. On September 13, 2011, the Court awarded an additional $5 million to the Count One judgment for fees on certain issues. On UGRIC's counterclaim, the Court agreed that UGRIC's interpretation was correct regarding STM 's continued obligations to pay premiums in the future after coverage caps are met. However, on August 19, 2011, the Court found for STM on its affirmative defense that UGRIC can no longer enforce the contract due to its prior breaches and, consequently, denied UGRIC's request for a declaration that it was entitled to continue to collect premiums after caps are met.

Notes to Consolidated Financial Statements (Unaudited), continued

On February 1, 2013, the Fourth Circuit Court of Appeals (i) upheld the judgment to STM of $45 million ( $34 million in claims, $6 million in interest, and $5 million in additional fees); and (ii) vacated the ruling in STM 's favor regarding the defense STM asserted to UGRIC's claim that STM owes continued premium after the caps are reached. On February 15, 2013, UGRIC filed a motion asking the Fourth Circuit Court of Appeals to re-hear its appeal. This request was denied on March 4, 2013. Upon return of the case, on March 13, 2014, the District Court denied UGRIC's counterclaim for a declaration that SunTrust continued to owe future premiums on the underlying insurance policy. UGRIC has filed an appeal of this decision in the Fourth Circuit Court of Appeals.

SunTrust Mortgage Reinsurance Class Actions

STM and Twin Rivers Insurance Company ("Twin Rivers") have been named as defendants in two putative class actions alleging that the companies entered into illegal “captive reinsurance” arrangements with private mortgage insurers. More specifically, plaintiffs allege that SunTrust ’s selection of private mortgage insurers who agree to reinsure loans referred to them by SunTrust with Twin Rivers results in illegal “kickbacks” in the form of the insurance premiums paid to Twin Rivers. Plaintiffs contend that this arrangement violates the Real Estate Settlement Procedures Act (“RESPA”) and results in unjust enrichment to the detriment of borrowers. The first of these cases, Thurmond, Christopher, et al. v. SunTrust Banks, Inc. et al. , was filed in February 2011 in the U.S. District Court for the Eastern District of Pennsylvania. This case was stayed by the Court pending the outcome of Edwards v. First American Financial Corporation , a captive reinsurance case that was pending before the U.S. Supreme Court at the time. The second of these cases, Acosta, Lemuel & Maria Ventrella et al. v. SunTrust Bank, SunTrust Mortgage, Inc., et al., was filed in the U.S. District Court for the Central District of California in December 2011. This case was stayed pending a decision in the Edwards case also. In June 2012, the U.S. Supreme Court withdrew its grant of certiorari in Edwards and, as a result, the stays in these cases were lifted. The plaintiffs in Acosta voluntarily dismissed this case. A motion to dismiss was filed in the Thurmond case. In June 2014, the Court granted the Motion to Dismiss in part and denied in part, allowing limited discovery surrounding the argument that the statute of limitations for certain claims should be equitably tolled.

United States Attorney’s Office for the Southern District of New York Foreclosure Expense Investigation

STM has been cooperating with the United States Attorney's Office for the Southern District of New York (the "Southern District") in a broader based industry investigation regarding claims for foreclosure-related expenses charged by law firms in connection with the foreclosure of loans guaranteed or insured by Fannie Mae , Freddie Mac , or FHA . The investigation relates to a private litigant qui tam lawsuit filed under seal and remains in early stages. The Southern District and STM engaged in dialogue regarding potential resolution of this matter as part of the National Mortgage Servicing Settlement, but were unable to reach agreement. The Southern District has not yet advised STM how it may proceed in this matter. The Company's financial statements at June 30, 2014 reflect the Company's current estimate of probable losses associated with the matter.

Intellectual Ventures II v. SunTrust Banks, Inc. and SunTrust Bank

This action was filed in the United States District Court for the Northern District of Georgia on July 24, 2013. Plaintiff alleges that SunTrust violates one or more of several patents held by Plaintiff in connection with SunTrust’s provision of online banking services and other systems and services. Plaintiff seeks damages for alleged patent infringement of an unspecified amount, as well as attorney’s fees and expenses. Discovery in the matter is ongoing.

NOTE 16 - BUSINESS SEGMENT REPORTING

The Company has three segments used to measure business activity: Consumer Banking and Private Wealth Management, Wholesale Banking, and Mortgage Banking, with the remainder in Corporate Other. The business segments are determined based on the products and services provided or the type of client served, and they reflect the manner in which financial information is evaluated by management. The following is a description of the segments and their composition, which reflects the transfer of branch-managed business banking clients.

The Consumer Banking and Private Wealth Management segment is made up of two primary businesses: Consumer Banking and Private Wealth Management.

•

Consumer Banking provides services to consumers and branch-managed small business clients through an extensive network of traditional and in-store branches, ATM s, the internet ( www.suntrust.com ), mobile banking, and telephone (1-800-SUNTRUST). Financial products and services offered to consumers and small business clients include deposits, home equity lines and loans, credit lines, indirect auto, student lending, bank card, other lending products, and various fee-based services. Consumer Banking also serves as an entry point for clients and provides services for other lines of business.

Notes to Consolidated Financial Statements (Unaudited), continued

•

Private Wealth Management provides a full array of wealth management products and professional services to both individual and institutional clients including loans, deposits, brokerage, professional investment management, and trust services to clients seeking active management of their financial resources. Institutional clients are served by the Institutional Investment Solutions business. Discount/online and full service brokerage products are offered to individual clients through STIS . Private Wealth Management also includes GenSpring , which provides family office solutions to ultra-high net worth individuals and their families. Utilizing teams of multi-disciplinary specialists with expertise in investments, tax, accounting, estate planning, and other wealth management disciplines, GenSpring helps families manage and sustain wealth across multiple generations.

The Wholesale Banking segment includes the following four businesses:

•

CIB delivers comprehensive capital markets, corporate and investment banking solutions, including advisory, capital raising, and financial risk management, to clients in the Wholesale Banking segment and Private Wealth Management business. Investment Banking and Corporate Banking teams within CIB serve clients across the nation, offering a full suite of traditional banking and investment banking products and services to companies with annual revenues typically greater than $150 million. Investment Banking serves select industry segments including consumer and retail, energy, financial services, healthcare, industrials, media and communications, real estate, and technology. Corporate Banking serves clients across diversified industry sectors based on size, complexity, and frequency of capital markets issuance. Also managed within CIB is the Equipment Finance Group, which provides lease financing solutions (through SunTrust Equipment Finance & Leasing).

•

Commercial & Business Banking offers an array of traditional banking products and investment banking services as needed by Commercial clients with annual revenues generally from $1 million to $150 million as well as the dealer services (financing dealer floor plan inventories) and not-for-profit and government sectors. Also managed within the Commercial Bank is the Premium Assignment Corporation, which create corporate insurance premium financing solutions.

•

Commercial Real Estate provides a full range of financial solutions for commercial real estate developers, owners and investors including construction, mini-perm, and permanent real estate financing as well as tailored financing and equity investment solutions via STRH primarily through the REIT group focused on Real Estate Investment Trusts. The Institutional Real Estate team targets relationships with institutional advisors, private funds, sovereign wealth funds, and insurance companies and the Regional team focuses on real estate owners and developers through a regional delivery structure. Commercial Real Estate also offers tailored financing and equity investment solutions for community development and affordable housing owners/developers projects through SunTrust Community Capital with special expertise in Low Income Housing Tax Credits and New Market Tax Credits.

•

Treasury & Payment Solutions provides all SunTrust business clients with services required to manage their payments and receipts combined with the ability to manage and optimize their deposits across all aspects of their business. Treasury & Payment Solutions operates all electronic and paper payment types, including card, wire transfer, ACH , check, and cash, plus provides clients the means to manage their accounts electronically online both domestically and internationally.

Mortgage Banking offers residential mortgage products nationally through its retail and correspondent channels, as well as via the internet ( www.suntrust.com ) and by telephone (1-800-SUNTRUST). These products are either sold in the secondary market, primarily with servicing rights retained, or held in the Company ’s loan portfolio. Mortgage Banking services loans for itself and for other investors and includes ValuTree Real Estate Services, LLC, a tax service subsidiary.

Corporate Other includes management of the Company ’s investment securities portfolio, long-term debt, end user derivative instruments, short-term liquidity and funding activities, balance sheet risk management, and most real estate assets. Additionally, it includes Enterprise Information Services, which is the primary information technology and operations group; Corporate Real Estate, Marketing, SunTrust Online, Human Resources, Finance, Corporate Risk Management, Legal and Compliance, Communications, Procurement, and Executive Management. In all periods presented, the financial results of RidgeWorth , including the gain on sale, are reflected in the Corporate Other segment. Prior to the sale of RidgeWorth , RidgeWorth 's financial performance was reported in the Wholesale Banking segment. See Note 2 , "Acquisitions/Dispositions," for additional information related to the sale of RidgeWorth .

Notes to Consolidated Financial Statements (Unaudited), continued

Because the business segment results are presented based on management accounting practices, the transition to the consolidated results, which are prepared under U.S. GAAP , creates certain differences which are reflected in Reconciling Items.

For business segment reporting purposes, the basis of presentation in the accompanying discussion includes the following:

•

Net interest income – Net interest income is presented on a FTE basis to make tax-exempt assets comparable to other taxable products. The segments have also been matched maturity funds transfer priced, generating credits or charges based on the economic value or cost created by the assets and liabilities of each segment. The mismatch between funds credits and funds charges at the segment level resides in Reconciling Items. The change in the matched maturity funds mismatch is generally attributable to corporate balance sheet management strategies.


•	Provision for credit losses – Represents net charge-offs by segment combined with an allocation to the segments of the provision attributable to each segment's quarterly change in the ALLL and unfunded commitment reserve balances.

•

Provision/(benefit) for income taxes – Calculated using a blended income tax rate for each segment. This calculation includes the impact of various income adjustments, such as the reversal of the FTE gross up on tax-exempt assets, tax adjustments, and credits that are unique to each segment. The difference between the calculated provision/(benefit) for income taxes at the segment level and the consolidated provision/(benefit) for income taxes is reported in Reconciling Items.

The segment’s financial performance is comprised of direct financial results, as well as various allocations that for internal management reporting purposes provide an enhanced view of analyzing the segment’s financial performance. The internal allocations include the following:


•	Operational Costs – Expenses are charged to the segments based on various statistical volumes multiplied by activity based cost rates. As a result of the activity based costing process, planned residual expenses are also allocated to the segments. The recoveries for the majority of these costs are in Corporate Other.


•	Support and Overhead Costs – Expenses not directly attributable to a specific segment are allocated based on various drivers (e.g., number of full-time equivalent employees and volume of loans and deposits). The recoveries for these allocations are in Corporate Other.


•	Sales and Referral Credits – Segments may compensate another segment for referring or selling certain products. The majority of the revenue resides in the segment where the product is ultimately managed.

The application and development of management reporting methodologies is a dynamic process and is subject to periodic enhancements. The implementation of these enhancements to the internal management reporting methodology may materially affect the results disclosed for each segment with no impact on consolidated results. Whenever significant changes to management reporting methodologies take place, the impact of these changes is quantified and prior period information is reclassified wherever practicable. Prior year results have been restated to reflect the new provision for credit losses methodology.

Notes to Consolidated Financial Statements (Unaudited), continued



	Three Months Ended June 30, 2014
(Dollars in millions)	Consumer Banking and Private Wealth Management		Wholesale Banking		Mortgage Banking			Corporate Other		Reconciling Items			Consolidated
Balance Sheets:
Average total assets		$47,204		$72,684		$31,251			$25,969		$2,712			$179,820
Average total liabilities	86,176		49,613		2,762			19,271		4			157,826
Average total equity	—		—		—			—		21,994			21,994

Statements of Income/(Loss):
Net interest income		$651		$415		$140			$72		($69	)		$1,209
FTE adjustment	—		34		—			1		—			35
Net interest income - FTE ¹	651		449		140			73		(69		)	1,244
Provision for credit losses ²	42		7		24			—		—			73
Net interest income after provision for credit losses	609		442		116			73		(69		)	1,171
Total noninterest income	381		312		119			150		(5		)	957
Total noninterest expense	734		385		367			34		(3		)	1,517
Income/(loss) before provision/(benefit) for income taxes	256		369		(132		)	189		(71		)	611
Provision/(benefit) for income taxes ³	94		124		(48		)	65		(27		)	208
Net income/(loss) including income attributable to noncontrolling interest	162		245		(84		)	124		(44		)	403
Net income attributable to noncontrolling interest	—		—		—			5		(1		)	4
Net income/(loss)		$162		$245		($84	)		$119		($43	)		$399



	Three Months Ended June 30, 2013
(Dollars in millions)	Consumer Banking and Private Wealth Management		Wholesale Banking		Mortgage Banking			Corporate Other		Reconciling Items			Consolidated
Balance Sheets:
Average total assets		$45,262		$65,776		$32,711			$27,352		$1,436			$172,537
Average total liabilities	85,102		45,906		4,429			15,953		(125		)	151,265
Average total equity	—		—		—			—		21,272			21,272

Statements of Income/(Loss):
Net interest income		$648		$395		$141			$74		($47	)		$1,211
FTE adjustment	—		30		—			1		—			31
Net interest income - FTE ¹	648		425		141			75		(47		)	1,242
Provision for credit losses ²	85		12		49			—		—			146
Net interest income after provision for credit losses	563		413		92			75		(47		)	1,096
Total noninterest income	370		288		131			72		(3		)	858
Total noninterest expense	692		359		340			1		(5		)	1,387
Income/(loss) before provision/(benefit) for income taxes	241		342		(117		)	146		(45		)	567
Provision/(benefit) for income taxes ³	89		114		(48		)	47		(15		)	187
Net income/(loss) including income attributable to noncontrolling interest	152		228		(69		)	99		(30		)	380
Net income attributable to noncontrolling interest	—		—		—			3		—			3
Net income/(loss)		$152		$228		($69	)		$96		($30	)		$377

¹ Presented on a matched maturity funds transfer price basis for the segments.

² Provision for credit losses represents net charge-offs by segment combined with an allocation to the segments of the provision attributable to quarterly changes in the allowance for loan and lease losses and unfunded commitment reserve balances.

³ Includes regular income tax provision/(benefit) and taxable-equivalent income adjustment reversal.

Notes to Consolidated Financial Statements (Unaudited), continued



	Six Months Ended June 30, 2014
(Dollars in millions)	Consumer Banking and Private Wealth Management		Wholesale Banking		Mortgage Banking			Corporate Other		Reconciling Items			Consolidated
Balance Sheets:
Average total assets		$47,076		$71,367		$31,400			$25,795		$2,766			$178,404
Average total liabilities	85,760		49,219		2,600			18,989		(25		)	156,543
Average total equity	—		—		—			—		21,861			21,861

Statements of Income/(Loss):
Net interest income		$1,296		$810		$274			$147		($113	)		$2,414
FTE adjustment	—		68		—			2		(1		)	69
Net interest income - FTE ¹	1,296		878		274			149		(114		)	2,483
Provision for credit losses ²	95		30		50			—		—			175
Net interest income after provision for credit losses	1,201		848		224			149		(114		)	2,308
Total noninterest income	743		586		219			209		(9		)	1,748
Total noninterest expense	1,446		802		556			77		(7		)	2,874
Income/(loss) before provision/(benefit) for income taxes	498		632		(113		)	281		(116		)	1,182
Provision/(benefit) for income taxes ³	183		209		(43		)	69		(51		)	367
Net income/(loss) including income attributable to noncontrolling interest	315		423		(70		)	212		(65		)	815
Net income attributable to noncontrolling interest	—		—		—			11		—			11
Net income/(loss)		$315		$423		($70	)		$201		($65	)		$804




	Six Months Ended June 30, 2013
(Dollars in millions)	Consumer Banking and Private Wealth Management		Wholesale Banking		Mortgage Banking			Corporate Other			Reconciling Items			Consolidated
Balance Sheets:
Average total assets		$45,319		$65,354		$32,946			$27,052			$1,504			$172,175
Average total liabilities	85,449		46,162		4,383			15,112			(126		)	150,980
Average total equity	—		—		—			—			21,195			21,195

Statements of Income/(Loss):
Net interest income		$1,297		$775		$268			$162			($70	)		$2,432
FTE adjustment	—		60		—			1			—			61
Net interest income - FTE ¹	1,297		835		268			163			(70		)	2,493
Provision/(benefit) for credit losses ²	177		68		113			(1		)	1			358
Net interest income after provision/(benefit) for credit losses	1,120		767		155			164			(71		)	2,135
Total noninterest income	727		547		329			122			(4		)	1,721
Total noninterest expense	1,397		703		609			35			(4		)	2,740
Income/(loss) before provision/(benefit) for income taxes	450		611		(125		)	251			(71		)	1,116
Provision/(benefit) for income taxes ³	165		202		(52		)	78			(15		)	378
Net income/(loss) including income attributable to noncontrolling interest	285		409		(73		)	173			(56		)	738
Net income attributable to noncontrolling interest	—		—		—			9			—			9
Net income/(loss)		$285		$409		($73	)		$164			($56	)		$729

¹ Presented on a matched maturity funds transfer price basis for the segments.

³ Includes regular income tax provision/(benefit) and taxable-equivalent income adjustment reversal.

Notes to Consolidated Financial Statements (Unaudited), continued

NOTE 17 - ACCUMULATED OTHER COMPREHENSIVE (LOSS)/INCOME

AOCI was calculated as follows:



	Three Months Ended June 30
	2014									2013
(Dollars in millions)	Pre-tax Amount			Income Tax (Expense)/ Benefit			After-tax Amount			Pre-tax Amount			Income Tax (Expense)/ Benefit			After-tax Amount
AOCI, beginning balance		($301	)		$101			($200	)		$310			($125	)		$185
Unrealized gains/(losses) on AFS securities:
Unrealized net gains/(losses)	276			(101		)	175			(605		)	223			(382		)
Less: Reclassification adjustment for realized net losses	1			(1		)	—			—			—			—
Unrealized gains/(losses) on cash flow hedges:
Unrealized net gains/(losses)	44			(16		)	28			(45		)	18			(27		)
Less: Reclassification adjustment for realized net gains	(101		)	37			(64		)	(100		)	36			(64		)
Change related to employee benefit plans	3			(1		)	2			8			(3		)	5
AOCI, ending balance		($78	)		$19			($59	)		($432	)		$149			($283	)



	Six Months Ended June 30
	2014									2013
(Dollars in millions)	Pre-tax Amount			Income Tax (Expense)/ Benefit			After-tax Amount			Pre-tax Amount			Income Tax (Expense)/Benefit			After-tax Amount
AOCI, beginning balance		($442	)		$153			($289	)		$506			($197	)		$309
Unrealized gains/(losses) on AFS securities:
Unrealized net gains/(losses)	447			(164		)	283			(718		)	264			(454		)
Less: Reclassification adjustment for realized net losses/(gains)	2			(1		)	1			(2		)	1			(1		)
Unrealized gains on cash flow hedges:
Unrealized net gains/(losses)	67			(25		)	42			(45		)	17			(28		)
Less: Reclassification adjustment for realized net gains	(203		)	75			(128		)	(214		)	79			(135		)
Change related to employee benefit plans	51			(19		)	32			41			(15		)	26
AOCI, ending balance		($78	)		$19			($59	)		($432	)		$149			($283	)

Notes to Consolidated Financial Statements (Unaudited), continued

The reclassification from AOCI consisted of the following:



(Dollars in millions)	Three Months Ended June 30						Six Months Ended June 30						Affected line item in the Consolidated Statements of Income
Details about AOCI components	2014			2013			2014			2013			Affected line item in the Consolidated Statements of Income
Realized losses/(gains) on AFS securities:
		$1			$—			$2			($2	)	Net securities (losses)/gains
	(1		)	—			(1		)	1			Provision for income taxes
		$—			$—			$1			($1	)
Gains on cash flow hedges:
		($101	)		($100	)		($203	)		($214	)	Interest and fees on loans
	37			36			75			79			Provision for income taxes
		($64	)		($64	)		($128	)		($135	)
Change related to employee benefit plans:
Amortization of actuarial losses		$3			$6			$5			$13		Employee benefits
	—			2			46			28			Other assets/other liabilities ¹
	3			8			51			41
	(1		)	(3		)	(19		)	(15		)	Provision for income taxes
		$2			$5			$32			$26

¹ This AOCI component is recognized as an adjustment to the funded status of employee benefit plans in the Company 's Consolidated Balance Sheets. (For additional information, see Note 15, "Employee Benefit Plans" to the Consolidated Financial Statements in the Company 's 2013 Annual Report on Form 10-K).



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

Important Cautionary Statement About Forward-Looking Statements

This report contains forward-looking statements. Statements regarding: (1) expected share repurchases; (2) future levels of net interest margin; interest income; swap income; asset sensitivity; NPLs; net charge-offs, including net charge-offs in the residential, commercial, and consumer portfolios; the ALLL; and REO gains; (3) future changes in cyclical costs; (4) future improvements to asset quality in the residential portfolio; (5) future drivers of early stage delinquencies; (6) expectations that the impact of consumer relief efforts and the implementation of certain servicing standards associated with the national mortgage servicing settlement; (7) the impact of Basel III regulatory capital rules on our total capital ratio; and (8) the future impact of required enhanced servicing standards, are forward looking statements. Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” “initiatives,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would,” and “could"; such statements are based upon the current beliefs and expectations of management and on information currently available to management. Such statements speak as of the date hereof, and we do not assume any obligation to update the statements made herein or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events.

Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward-looking statements. Factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Part I, " Item 1A. Risk Factors " in our 2013 Annual Report on Form 10-K and include risks discussed in this MD&A and in other periodic reports that we file with the SEC. Additional factors include: as one of the largest lenders in the Southeast and Mid-Atlantic U.S. and a provider of financial products and services to consumers and businesses across the U.S., our financial results have been, and may continue to be, materially affected by general economic conditions, particularly unemployment levels and home prices in the U.S., and a deterioration of economic conditions or of the financial markets may materially adversely affect our lending and other businesses and our financial results and condition; legislation and regulation, including the Dodd-Frank Act, as well as future legislation and/or regulation, could require us to change certain of our business practices, reduce our revenue, impose additional costs on us, or otherwise adversely affect our business operations and/or competitive position; we are subject to capital adequacy and liquidity guidelines and, if we fail to meet these guidelines, our financial condition would be adversely affected; loss of customer deposits and market illiquidity could increase our funding costs; we rely on the mortgage secondary market and GSEs for some of our liquidity; our framework for managing risks may not be effective in mitigating risk and loss to us; we are subject to credit risk; our ALLL may not be adequate to cover our eventual losses; we may have more credit risk and higher credit losses to the extent that our loans are concentrated by loan type, industry segment, borrower type, or location of the borrower or collateral; we will realize future losses if the proceeds we receive upon liquidation of NPAs are less than the carrying value of such assets; a downgrade in the U.S. government's sovereign credit rating, or in the credit ratings of instruments issued, insured or guaranteed by related institutions, agencies or instrumentalities, could result in risks to us and general economic conditions that we are not able to predict; weakness in the real estate market, including the secondary residential mortgage loan markets, has adversely affected us and may continue to adversely affect us; we are subject to certain risks related to originating and selling mortgages, and may be required to repurchase mortgage loans or indemnify mortgage loan purchasers as a result of breaches of representations and warranties, borrower fraud, or certain breaches of our servicing agreements, and this could harm our liquidity, results of operations, and financial condition; we face certain risks as a servicer of loans, and may be terminated as a servicer or master servicer, be required to repurchase a mortgage loan or reimburse investors for credit losses on a mortgage loan, or incur costs, liabilities, fines and other sanctions, if we fail to satisfy our servicing obligations, including our obligations with respect to mortgage loan foreclosure actions; financial difficulties or credit downgrades of mortgage and bond insurers may adversely affect our servicing and investment portfolios; we are subject to risks related to delays in the foreclosure process; we face risks related to recent mortgage settlements; we may continue to suffer increased losses in our loan portfolio despite enhancement of our underwriting policies and practices; our mortgage production and servicing revenue can be volatile; changes in market interest rates or capital markets could adversely affect our revenue and expense, the value of assets and obligations, and the availability and cost of capital and liquidity; changes in interest rates could also reduce the value of our MSRs and mortgages held for sale, reducing our earnings; the fiscal and monetary policies of the federal government and its agencies could have a material adverse effect on our earnings; clients could pursue alternatives to bank deposits, causing us to lose a relatively inexpensive source of funding; consumers may decide not to use banks to complete their financial transactions, which could affect net income; we have businesses other than banking which subject us to a variety of risks; hurricanes and other disasters may adversely affect loan portfolios and operations and increase the cost of doing business; negative public opinion could damage our reputation and adversely impact business and revenues; we rely on other companies to provide key components of our business infrastructure; a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors and other service providers,

including as a result of cyber-attacks, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses; the soundness of other financial institutions could adversely affect us; we depend on the accuracy and completeness of information about clients and counterparties; competition in the financial services industry is intense and could result in losing business or margin declines; maintaining or increasing market share depends on market acceptance and regulatory approval of new products and services; we might not pay dividends on our common stock; our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay dividends; disruptions in our ability to access global capital markets may adversely affect our capital resources and liquidity; any reduction in our credit rating could increase the cost of our funding from the capital markets; we have in the past and may in the future pursue acquisitions, which could affect costs and from which we may not be able to realize anticipated benefits; we are subject to certain litigation, and our expenses related to this litigation may adversely affect our results; we may incur fines, penalties and other negative consequences from regulatory violations, possibly even inadvertent or unintentional violations; we depend on the expertise of key personnel, and if these individuals leave or change their roles without effective replacements, operations may suffer; we may not be able to hire or retain additional qualified personnel and recruiting and compensation costs may increase as a result of turnover, both of which may increase costs and reduce profitability and may adversely impact our ability to implement our business strategies; our accounting policies and processes are critical to how we report our financial condition and results of operations, and require management to make estimates about matters that are uncertain; changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition; our stock price can be volatile; our disclosure controls and procedures may not prevent or detect all errors or acts of fraud; our financial instruments carried at fair value expose us to certain market risks; our revenues derived from our investment securities may be volatile and subject to a variety of risks; and we may enter into transactions with off-balance sheet affiliates or our subsidiaries.

INTRODUCTION

We are a leading provider of financial services, particularly in the Southeastern and Mid-Atlantic U.S. , and our headquarters is located in Atlanta, Georgia. Our principal banking subsidiary, SunTrust Bank, offers a full line of financial services for consumers and businesses both through its branches located primarily in Florida, Georgia, Maryland, North Carolina, South Carolina, Tennessee, Virginia, and the District of Columbia, and through other national delivery channels. We operate three business segments: Consumer Banking and Private Wealth Management, Wholesale Banking, and Mortgage Banking, with the remainder in Corporate Oth er. Within each of our businesses, we have growth strategies both within our Southeastern and Mid-Atlantic footprint and targeted national markets. See Note 16 , "Business Segment Reporting," to the Consolidated Financial Statements in this Form 10-Q for a description of our business segments. In addition to deposit, credit, mortgage banking, and trust and investment services offered by the Bank , our other subsidiaries provide asset management, securities brokerage, and capital market services.

This MD&A is intended to 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, Notes to the Consolidated Financial Statements, and other information contained in this document and our 2013 Annual Report on Form 10-K. When we refer to “ SunTrust ,” “the Company,” “we,” “our,” and “us” in this narrative, we mean SunTrust Banks, Inc. and subsidiaries (consolidated). In the MD&A , net interest income, net interest margin, total revenue, and efficiency ratios are presented on an FTE basis. The FTE basis adjusts for the tax-favored status of net interest income from certain loans and investments. We believe this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources. Additionally, we present certain non- U.S. GAAP metrics to assist investors in understanding management’s view of particular financial measures, as well as to align presentation of these financial measures with peers in the industry who may also provide a similar presentation. Reconcilements for all non- U.S. GAAP measures are provided in Table 1 .

EXECUTIVE OVERVIEW

Economic and regulatory

Moderate growth continued during the second quarter of 2014 as several key economic indicators continued to improve. Labor markets, stock markets, housing markets, corporate profits, and consumer confidence levels all displayed signs of improvement during the second quarter of 2014. While unemployment levels remained above historical averages, the overall unemployment rate continued to show improvement and was just above 6% at June 30, 2014, from just below 7% at March 31, 2014. Stock markets continued to rally, pushing indices towards all-time highs. The housing market that strengthened in 2013 continued to show sustainable signs of improvement in 2014. However, the modest rise in mortgage interest rates that began in the second quarter of 2013 resulted in the continued decline in refinancing activity. Corporate profits continued to improve as benefits from prior period operational rightsizing efforts were realized, but revenue growth remained constrained, consistent with the overall national Gross Domestic Product. Consumer confidence continued to improve as the Consumer Confidence Index in June was at its highest level since January 2008. Overall, the macroeconomic environment appears to be improving but the outlook remains somewhat unsettled with no clear consensus around the future strength of the U.S. economy in addition to increased uncertainty around the global economy.

The Federal Reserve continued to maintain a highly accommodative monetary policy and indicated that this policy would remain in effect for a considerable time after its asset purchase program ends and the economic recovery strengthens. In light of cumulative progress in unemployment and labor market conditions, the Federal Reserve again indicated that it would modestly reduce the monthly pace of Treasury and agency MBS purchases beginning in August 2014, and sequentially thereafter through October 2014, when the program would conclude. In addition, the Federal Reserve indicated that this further reduction of its asset purchases was against the backdrop of likely continued improving labor market and other economic indicators. The Federal Reserve indicated that, in its view, its sizable and still increasing holdings of longer-term government securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and foster more accommodative financial conditions. The Federal Reserve outlook continues to include economic growth that will strengthen from current levels with appropriate policy accommodation, a gradual decline in unemployment, and the expectation of gradually increasing longer-term inflation.

Capital

During the first quarter, we announced capital plans upon completion of the Federal Reserve 's review of and non-objection to our capital plan in conjunction with the 2014 CCAR . Accordingly, during the second quarter we increased the quarterly common stock dividend to $0.20 per common share, which reflects an increase of $0.10 per common share from the prior quarter. Additionally, we repurchased $83 million of our outstanding common stock during the second quarter, bringing our total repurchased common stock during the first six months of 2014 to $133 million. We currently expect to repurchase an additional $300 million to $350 million of outstanding common stock through the end of the first quarter of 2015. Our estimated repurchases are modestly lower than originally planned due to guidance that the industry received from the Federal Reserve in the second quarter related to the capital treatment of our forecast of certain share-based compensation, which was driven by a valuation adjustment to our noncontrolling interest in RidgeWorth and changes in employee option exercises. See additional details related to our common stock repurchases in the “Capital Resources” section of this MD&A.

Our capital position remained solid at June 30, 2014 as our capital ratios were well above the requirements to be considered “well capitalized” according to current and expected future regulatory standards. Our Tier 1 common equity ratio was 9.72% at June 30, 2014 , compared to 9.82% at December 31, 2013 . The decrease in the ratio compared to year end was primarily due to an increase in RWA as a result of growth in our loan portfolio and client lending commitments, partially offset by growth in retained earnings. Our Tier 1 capital and total capital ratios were 10.66% and 12.53% , respectively, at June 30, 2014 compared to 10.81% and 12.81% , respectively, at December 31, 2013 . See additional discussion of our capital in the “Capital Resources” section of this MD&A .

The Federal Reserve published final rules on October 11, 2013 related to capital adequacy requirements to implement the BCBS 's Basel III framework for financial institutions in the U.S. The final rules become effective for us on January 1, 2015. Based on our current and ongoing analysis of the final rules, we estimate our current Basel III CET 1 ratio at June 30, 2014, on a fully phased-in basis, to be approximately 9.7 %, well above the regulatory requirement. See the "Selected Quarterly Financial Data and Reconcilement of Non- U.S. GAAP Measures" section in this MD&A for a reconciliation of the current Basel I ratio to the estimated Basel III ratio. See additional discussion of Basel III in the "Capital Resources" section of this MD&A .

Financial performance

Net income available to common shareholders during the second quarter of 2014 was $387 million , or $0.72 per average diluted common share, compared to $365 million , or $0.68 per average common diluted share for the second quarter of 2013. During the six months ended June 30, 2014, our net income available to common shareholders was $780 million, or $1.45 per average common diluted share, compared to $705 million, or $1.31 per average common diluted share during the six months ended June 30, 2013. Both periods’ results in 2014 were negatively impacted by $49 million , or $0.09 per average diluted common share, related to items announced in our July 3, 2014 Form 8-K and other legacy mortgage-related matters impacting the current period. A summary of the Form 8-K and other legacy mortgage-related items that impacted our current periods' results are as follows:



	Three Months Ended			Six Months Ended
(Dollars in millions, except per share amounts)	June 30, 2014			June 30, 2014
Net income available to common shareholders		$387			$780
Form 8-K and other legacy mortgage-related items impacting the periods:
Operating losses related to settlement of HAMP ¹	204			204
Gain on sale of RidgeWorth ²	(105		)	(105		)
Other legacy mortgage-related adjustments	(25		)	(25		)
Tax benefit related to above items	(25		)	(25		)
Net income available to common shareholders, excluding Form 8-K and other legacy mortgage-related items impacting the periods		$436			$829
Net income per average common share, diluted		$0.72			$1.45
Net income per average common share, diluted, excluding Form 8-K and other legacy mortgage-related items impacting the periods		$0.81			$1.54

¹ See additional discussion related to HAMP in the "Nonperforming Assets" section in this MD&A and in Note 15 , “Contingencies,” to the Consolidated Financial Statements in this Form 10-Q.

² See Note 2 , "Acquisitions/Dispositions," to the Consolidated Financial Statements in this Form 10-Q for additional information.

The items noted above consist of operating losses related to the settlement of certain legal matters, further detailed in our Form 8-K that was filed with the SEC on July 3, 2014, partially offset by the gain on sale of RidgeWorth, our asset management subsidiary, as well as adjustments to other legacy mortgage-related matters during the quarter. When excluding these items from each period's results, our net income and diluted earnings per common share increased 19% and 18% during the three and six months ended June 30, 2014 compared to the same periods in 2013, respectively. The increase in EPS in the current year periods is a result of declines in the provision for credit losses and continued expense discipline, partially offset by a modest decline in total revenue and a return to a more normal effective tax rate in the second quarter of 2014 . See Table 1 , "Selected Quarterly Financial Data and Reconcilement of Non-U.S. GAAP Measures," in this MD&A for additional detail and resulting impacts of the Form 8-K and other legacy mortgage-related items.

Total revenue increased $101 million and $17 million during the three and six months ended June 30, 2014, compared to the same periods in 2013, respectively. During the three months ended June 30, 2014, total revenue, excluding the gain on sale of RidgeWorth , declined $4 million compared to the same period in 2013, as higher investment banking and mortgage servicing income were offset by a decline in mortgage production income resulting from a 55% decline in production volume, driven by lower refinance activity, as well as a decrease in gain on sale margins. During the six months ended June 30, 2014, total revenue, excluding the gain on sale of RidgeWorth , declined $88 million, or 2%, compared to the same period in 2013, as a result of a 1% decrease in net interest income, coupled with the same factors that affected the quarterly comparison. Total revenue, excluding the gain on sale of RidgeWorth, increased $66 million compared to the first quarter of 2014 driven by higher noninterest income due to higher investment banking income and broad-based fee income growth.

Net interest income remained stable compared to the second quarter of 2013 and declined $10 million compared to the first six months of 2013 as loan growth was offset by an overall 15 basis point and 16 basis point respective decline in earning asset yields. Net interest margin for the current quarter was 3.11% , a decline of 14 basis points compared to the second quarter of 2013, and was 3.15% for the six months ended June 30, 2014, a 14 basis point decline from the same period in 2013 . The decline in net interest margin was primarily due to a decline in loan yields. Net interest income remained relatively stable compared to the first quarter of 2014 due to higher average loan balances and one additional day, offset by a seven basis point decline in loan yields during the current quarter. Looking forward, we expect the net interest margin to decline further throughout 2014, primarily due to continued compression in loan yields and anticipated lower commercial loan swap income. We expect the overall full year decline in net interest margin during 2014 compared to 2013 to be slightly less than the 16 basis point decline during the full year of 2013 when compared to 2012. As our commercial loan swaps mature, we become more asset sensitive, which is part of our

balance sheet management strategy over the medium-term. See additional discussion related to revenue, net interest income and margin, and noninterest income in the "Net Interest Income/Margin" and "Noninterest Income" sections of this MD&A .

Noninterest expense during the second quarter was $1.5 billion, which included the $179 million of specific legacy mortgage-related operating losses. Excluding these operating losses, noninterest expense decreased $49 million, or 4%, compared to the prior quarter and $45 million, or 2%, compared to the six months ended June 30, 2013, primarily driven by lower cyclical costs and our continued focus on expense management, partially offset by higher personnel expenses, which is primarily the result of targeted hiring in revenue producing positions. Noninterest expense, excluding the specific legacy mortgage-related operating losses, decreased $19 million, or 1%, during the three months ended June 30, 2014 compared to the first quarter of 2014 due to the $36 million impairment of legacy affordable housing assets recognized in the first quarter of 2014 and the seasonal decline in employee compensation, partially offset by higher operating costs and other discrete charges recognized in the current quarter.

During the three and six months ended June 30, 2014, our efficiency ratio was 68.9% and 67.9%, respectively. Our tangible efficiency ratio during the three and six months ended June 30, 2014 was 68.8% and 67.8%, respectively, and when excluding the Form 8-K and other legacy mortgage-related items, our adjusted tangible efficiency ratio was 63.7% and 65.2%, respectively. We continue to target an adjusted tangible efficiency ratio of less than 64% for the full year of 2014, and our long-term tangible efficiency ratio target continues to be below 60%. See Table 1 , "Selected Quarterly Financial Data and Reconcilement of Non-U.S. GAAP Measures," in this MD&A for additional information regarding our tangible efficiency ratio.

Our asset quality metrics continued to improve during the second quarter and first six months of 2014 , though the pace of improvement in asset quality continues to moderate. Total NPL s declined 7% compared to December 31, 2013 , driven by reduced inflows into nonaccrual status and continuing resolution of problem loans, primarily in our residential loan portfolio. Reductions in OREO continued, declining 20% from year end to $136 million , the lowest level since 2006. We also sold $149 million of accruing TDRs during the second quarter to further enhance our asset quality position. The financial impact of the TDR sale included $10 million in net charge-offs and a $16 million reduction in the ALLL , which drove a $6 million reduction to the provision for loan losses during the second quarter of 2014. While the TDR sale will not materially change our reported asset quality metrics, it will have a modest benefit on certain rating agency and regulatory calculations. Early stage delinquencies, a leading indicator of asset quality, particularly for consumer loans, improved during the first half of 2014, both in total and when excluding government-guaranteed loan delinquencies.

At June 30, 2014 , the ALLL was 1.55% of total loans, a decline of five basis points compared to December 31, 2013 . The provision for loan losses decreased 50% and 49% and net charge-offs decreased 37% and 45% during the second quarter and first six months of 2014 compared to the same periods in 2013 , respectively. The declines during 2014 were the result of improved credit quality. Annualized net charge-offs to total average loans decreased to 0.35% during both the second quarter and first six months of 2014 compared to 0.59% and 0.67% during the second quarter and first six months of 2013, respectively, driven by improved asset quality that resulted in a decline in charge-offs. During the second quarter, the provision for credit losses declined $29 million, or 28%, while net charge-offs remained stable, compared to the first quarter of 2014. Going forward, we would expect continued, but modest improvements in NPL s, primarily driven by the residential portfolio. We also would expect net charge-offs in the residential portfolio to be modestly lower in the near-term; however, commercial and consumer net charge-offs are at or below normal levels and will, at some point, trend towards more normal levels. Over the near-term, we would expect the ALLL to remain generally stable, as any asset quality improvements may be offset by loan growth, and, as a result, the provision for loan losses should roughly approximate net charge-offs. See additional discussion of credit and asset quality in the “Loans,” “Allowance for Credit Losses,” and “Nonperforming Assets,” sections of this MD&A .

Average loans increased 2% during the quarter compared to the prior quarter and was primarily attributed to our C&I , CRE , and consumer direct portfolios. C&I growth was broad-based and driven by our commercial auto dealer group and other industry verticals. Growth in the CRE portfolio was driven by our institutional business, success in our REIT platform and a portfolio acquisition. This growth was partially offset by a $574 million, or 1%, decline in average residential loans due to certain balance sheet management actions executed during the quarter. Specifically, we sold $325 million in government guaranteed residential mortgages and $149 million of accruing restructured residential mortgages during the quarter. We also transferred $2.1 billion of guaranteed mortgages to LHFS in anticipation of the sale of these loans on a servicing retained basis in the third quarter. We expect to use the proceeds from the government guaranteed residential mortgage sale to fund our investment in high-quality liquid securities in anticipation of forthcoming regulatory requirements regarding liquidity ratios. Compared to the second quarter and first half of 2013, average loans increased 8% and 7%, respectively, with broad-based growth across most loan portfolios, most notably in CRE , C&I , and consumer. Overall, loan growth was solid this quarter as we continue to execute targeted growth initiatives and as economic indicators continue to improve.

Average consumer and commercial deposits increased 3% and 2% during the second quarter and first half of 2014, compared to the second quarter and first half of 2013, respectively, as solid growth in lower cost deposits was partially offset by declines in time deposits due to maturities. Specifically, average lower cost deposits increased $6.0 billion , or 5% , while average time deposits

declined $2.1 billion , or 15% , compared to the second quarter of 2013. Average lower cost deposits increased $4.3 billion, or 4%, while average time deposits declined $2.0 billion, or 14%, compared to the first half of 2013. The continued favorable shift in consumer and commercial deposit mix helped reduce interest-bearing deposit costs by six basis points compared to both the second quarter and first six months of 2013. Additionally, consumer and commercial deposits increased 2% compared to the first quarter of 2014, as the favorable shift in deposit mix also drove interest-bearing deposit costs down by two basis points. See additional discussion in the "Net Interest Income/Margin" section of this MD&A .

Business segments highlights

We achieved solid core operating momentum across each of our businesses, while maintaining improved asset quality and a strong capital position. In addition, we are firmly focusing our efforts on expanding and deepening our client relationships as a key driver to improving the profitability of the Company. Furthermore, we are continuing to make targeted investments in our businesses to drive growth in a challenging revenue environment.

Net income improved during the second quarter and first six months of 2014 in Consumer Banking and Private Wealth Management compared to the same periods in 2013 . The increase in net income was primarily driven by continued improvement in credit quality, most notably in our home equity portfolio, which resulted in a decline in the provision for credit losses. This meaningful reduction in the provision for credit losses, combined with a modest increase in noninterest income, more than offset higher expenses to drive the 7% and 11% increase in net income during the three and six month periods of 2014, respectively, compared to 2013. Revenue momentum in this segment is improving, driven by growth in wealth management income, as our premier bankers and branch managers are partnering well with our financial advisors to better serve the savings and investment needs of our branch-based clients, which has been partially offset by declines in service charges. Card fees were also up due to increased purchase volume related to clients' increased utilization of our credit card product. Furthermore, our continued focus on our consumer lending platform drove the 18% increase in consumer loan production compared to June 30, 2013, primarily driven by growth in our credit card and LightStream consumer online businesses, and other consumer direct lending products, which more than offset reductions in home equity and student lending production. Noninterest expense increased 6% and 4% compared to the second quarter and first six months of 2013, respectively, driven primarily by our targeted investments in revenue generating positions, particularly in wealth and investment management, in addition to some smaller discrete charges incurred in the current quarter. We continue to make solid progress in this segment through increased investment in digital capabilities to meet our clients' needs, and targeted investments in client-facing teammates primarily serving affluent and high net worth clients.

Wholesale Banking continued its strong overall performance during the second quarter and first six months of 2014 , driven by revenue growth and a reduction in the provision for credit losses, which led to increased net income compared to the same periods in 2013 . Continued improvement in credit quality during the second quarter and first six months of 2014, particularly in our CRE portfolio, drove a 42% and 56% decrease in the provision for credit losses, respectively, compared to the same periods in 2013 . Total revenue growth was 7% and 6% compared to the second quarter and first six months of 2013, respectively, due to increases in both net interest income and noninterest income. In particular, investment banking performance was particularly strong, reflective of the consistent investments we have made in this business over the past few years. The recent success can also be attributed to expanded product capabilities, as our M&A advisory and equity businesses were more accretive to our overall performance. Total noninterest expense increased 7% and 14% compared to the second quarter and first half of 2013, respectively, primarily due to the strategic decision to sell investments in legacy affordable housing assets in the first quarter of 2014, resulting in a $36 million impairment charge, along with an increase in employee compensation driven in part by a reduction to incentive compensation accruals in the first quarter of 2013. Additionally, staff expenses increased as we continued to make investments to better meet our clients’ needs and augment our capabilities. Loan and deposit growth drove the improvement in net interest income compared to the same periods in 2013, though continuing declines in loan yields partially offset this growth. Average loan growth was broad-based and grew 15% and 13% compared to the second quarter and first six months of 2013, respectively, led by further growth in commercial real estate, our commercial dealer group, our corporate banking national expansion initiatives, and asset securitization and energy practice groups. Deposit growth was also strong, with increases across each line of business. Our loan pipelines also increased this quarter, giving us confidence in continued loan growth prospects throughout the remainder of 2014; however, competition remains high, which may lead to ongoing pricing pressure. We continue to invest in the business to broaden our client base and better serve our clients’ needs and are optimistic about the growth and profitability outlook of our Wholesale business, as we better leverage the full platform of our product capabilities for our client base.

Mortgage Banking results were significantly impacted by the Form 8-K and other legacy mortgage-related items during the quarter. These items accounted for $115 million in after-tax charges during the three and six months ended June 30, 2014, which drove the net loss of $84 million and $70 million, respectively. Excluding these items, the segment would have realized modest net income during the current quarter and first half of 2014. The decrease in noninterest expense and provision for credit losses, excluding the Form 8-K and other legacy mortgage-related items during the second quarter and first six months of 2014 compared

to the same periods in 2013 , more than offset lower revenue and were the result of core expense reduction initiatives and continued lower credit-related costs, while the lower provision for credit losses was attributable to the ongoing improvement in credit quality of our residential mortgage portfolio. Revenue was lower compared to the second quarter and first six months of 2013, as a decline in noninterest income due to a decline in production volume and lower gain on sale margins was partially offset by higher servicing income. As expected, our refinance activity continued to decline in 2014, driving the lower production volume compared to the second quarter and first six months of 2013. With the resolution of additional legacy mortgage-related matters this quarter, we can further sharpen our focus on meeting more of our clients’ needs and generating sustained profitability in the Mortgage Banking segment.

Additional information related to our segments can be found in Note 16 , "Business Segment Reporting," to the Consolidated Financial Statements in this Form 10-Q, and further discussion of segment results for the second half of 2014 and 2013 , can be found in the "Business Segment Results" section of this MD&A .



SELECTED QUARTERLY FINANCIAL DATA AND RECONCILEMENT OF NON-U.S. GAAP MEASURES										Table 1
	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions, except per share data)	2014			2013			2014			2013
Summary of Operations:
Interest income		$1,346			$1,347			$2,683			$2,706
Interest expense	137			136			269			274
Net interest income	1,209			1,211			2,414			2,432
Provision for credit losses	73			146			175			358
Net interest income after provision for credit losses	1,136			1,065			2,239			2,074
Noninterest income	957			858			1,748			1,721
Noninterest expense ¹	1,517			1,387			2,874			2,740
Income before provision for income taxes	576			536			1,113			1,055
Provision for income taxes ¹	173			156			298			317
Net income attributable to noncontrolling interest	4			3			11			9
Net income		$399			$377			$804			$729
Net income available to common shareholders		$387			$365			$780			$705
Net income available to common shareholders, excluding Form 8-K and other legacy mortgage-related items ²		$436			$365			$829			$705
Net interest income - FTE ³		$1,244			$1,242			$2,483			$2,493
Total revenue - FTE ³	2,201			2,100			4,231			4,214
Total revenue - FTE, excluding gain on sale of RidgeWorth ^{3, 4}	2,096			2,100			4,126			4,214
Net income per average common share:
Diluted	0.72			0.68			1.45			1.31
Diluted, excluding Form 8-K and other legacy mortgage-related items ²	0.81			0.68			1.54			1.31
Basic	0.73			0.68			1.47			1.32
Dividends paid per average common share	0.20			0.10			0.30			0.15
Book value per common share							40.18			37.65
Tangible book value per common share ⁵							28.64			26.08
Selected Average Balances:
Total assets		$179,820			$172,537			$178,404			$172,175
Earning assets	160,373			153,495			158,866			152,986
Loans	130,734			121,372			129,635			121,128
Consumer and commercial deposits	130,472			126,579			129,440			127,114
Brokered time and foreign deposits	1,893			2,075			1,953			2,122
Total shareholders’ equity	21,994			21,272			21,861			21,195
Average common shares - diluted (thousands)	535,486			539,763			536,234			539,812
Average common shares - basic (thousands)	529,764			535,172			530,459			535,425
Financial Ratios (Annualized):
ROA	0.89		%	0.88		%	0.91		%	0.85		%
ROE	7.29			7.12			7.44			6.95
ROTCE ⁶	10.29			10.35			10.53			10.12
Net interest margin - FTE ³	3.11			3.25			3.15			3.29
Efficiency ratio ⁷	68.93			66.07			67.92			65.02
Tangible efficiency ratio ⁸	68.77			65.78			67.76			64.73
Tangible efficiency ratio, excluding Form 8-K and other legacy mortgage-related items ^2,8	63.69			65.78			65.15			64.73
Total average shareholders’ equity to total average assets	12.23			12.33			12.25			12.31
Tangible equity to tangible assets ⁹							9.07			8.95
Capital Adequacy:
Tier 1 common equity							9.72		%	10.19		%
Tier 1 capital							10.66			11.24
Total capital							12.53			13.43
Tier 1 leverage							9.56			9.40



SELECTED QUARTERLY FINANCIAL DATA AND RECONCILEMENT OF NON-U.S. GAAP MEASURES, continued
	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions, except per share data)	2014			2013			2014			2013
Reconcilement of Non-U.S. GAAP Measures:
Efficiency ratio ⁷	68.93		%	66.07		%	67.92		%	65.02		%
Impact of excluding amortization of intangible assets	(0.16		)	(0.29		)	(0.16		)	(0.29		)
Tangible efficiency ratio ⁸	68.77		%	65.78		%	67.76		%	64.73		%
Impact of excluding Form 8-K and other legacy mortgage-related items	(5.08		)	—			(2.61		)	—
Tangible efficiency ratio, excluding Form 8-K and other legacy mortgage-related items ^2,8	63.69		%	65.78		%	65.15		%	64.73		%
ROE	7.29		%	7.12		%	7.44		%	6.95		%
Impact of removing average intangible assets (net of deferred taxes), excluding MSRs, from average common shareholders' equity	3.00			3.23			3.09			3.17
ROTCE ⁶	10.29		%	10.35		%	10.53		%	10.12		%
Net interest income		$1,209			$1,211			$2,414			$2,432
Taxable-equivalent adjustment	35			31			69			61
Net interest income - FTE ³	1,244			1,242			2,483			2,493
Noninterest income	957			858			1,748			1,721
Total revenue - FTE ³	2,201			2,100			4,231			4,214
Gain on sale of RidgeWorth	(105		)	—			(105		)	—
Total revenue - FTE, excluding gain on sale of RidgeWorth ^{3, 4}		$2,096			$2,100			$4,126			$4,214
Noninterest income		$957			$858			$1,748			$1,721
Gain on sale of RidgeWorth	(105		)	—			(105		)	—
Noninterest income, excluding gain on sale of RidgeWorth ⁴		$852			$858			$1,643			$1,721

	June 30, 2014			June 30, 2013
Total shareholders’ equity		$22,131			$21,007
Goodwill, net of deferred taxes ¹⁰	(6,131		)	(6,195		)
Other intangible assets, net of deferred taxes, and MSRs ¹¹	(1,276		)	(1,240		)
MSRs	1,259			1,199
Tangible equity	15,983			14,771
Preferred stock	(725		)	(725		)
Tangible common equity		$15,258			$14,046

Total assets		$182,559			$171,546
Goodwill	(6,337		)	(6,369		)
Other intangible assets including MSRs	(1,277		)	(1,244		)
MSRs	1,259			1,199
Tangible assets		$176,204			$165,132
Tangible equity to tangible assets ⁹	9.07		%	8.95		%
Tangible book value per common share ⁵		$28.64			$26.08

Total loans		$129,744			$122,031
Government guaranteed loans	(6,081		)	(9,053		)
Loans held at fair value	(292		)	(339		)
Total loans, excluding government guaranteed and fair value loans		$123,371			$112,639
Allowance to total loans, excluding government guaranteed and fair value loans ¹²	1.62		%	1.89		%



SELECTED QUARTERLY FINANCIAL DATA AND RECONCILEMENT OF NON-U.S. GAAP MEASURES, continued
	As Reported										Excluding Form 8-K and other legacy mortgage-related items ²
(Dollars in millions, except per share data)	June 30, 2014										June 30, 2014
(Dollars in millions, except per share data)	Three Months Ended			Six Months Ended			Adjustments				Three Months Ended			Six Months Ended
Net interest income		$1,209			$2,414			$—				$1,209			$2,414
Provision for credit losses	73			175			—				73			175
Net interest income after provision for credit losses	1,136			2,239			—				1,136			2,239
Noninterest Income
Service charges on deposit accounts	160			314			—				160			314
Other charges and fees	91			179			—				91			179
Card fees	82			158			—				82			158
Trust and investment management income	116			247			—				116			247
Retail investment services	76			147			—				76			147
Investment banking income	119			207			—				119			207
Trading income	47			96			—				47			96
Mortgage production related income	52			95			—				52			95
Mortgage servicing related income	45			99			—				45			99
Gain on sale of subsidiary	105			105			105			¹³	—			—
Net securities (losses)/gains	(1		)	(2		)	—				(1		)	(2		)
Other noninterest income	65			103			—				65			103
Total noninterest income	957			1,748			105				852			1,643
Noninterest Expense
Employee compensation	659			1,319			—				659			1,319
Employee benefits	104			244			—				104			244
Operating losses	218			239			179			¹⁴	39			60
Outside processing and software	181			351			—				181			351
Net occupancy expense	83			169			—				83			169
Equipment expense	42			86			—				42			86
Regulatory assessments	40			80			—				40			80
Marketing and customer development	30			56			—				30			56
Credit and collection services	23			46			—				23			46
Amortization of intangible assets	4			7			—				4			7
Other noninterest expense	133			277			—				133			277
Total noninterest expense	1,517			2,874			179				1,338			2,695
Income before provision for income taxes	576			1,113			(74		)		650			1,187
Provision for income taxes	173			298			(25		)	¹⁵	198			323
Income including income attributable to noncontrolling interest	403			815			(49		)		452			864
Net income attributable to noncontrolling interest	4			11			—				4			11
Net income		$399			$804			($49	)			$448			$853
Net income available to common shareholders		$387			$780			($49	)			$436			$829
Net income per average common share - diluted		$0.72			$1.45			($0.09	)			$0.81			$1.54
Total Revenue - FTE ³		$2,201			$4,231			$105				$2,096			$4,126
Efficiency ratio ⁷	68.93		%	67.92		%					63.85		%	65.32		%
Tangible efficiency ratio ⁸	68.77			67.76							63.69			65.15
Effective tax rate	30.23			27.05							30.69			27.50



SELECTED QUARTERLY FINANCIAL DATA AND RECONCILEMENT OF NON-U.S. GAAP MEASURES, continued
(Dollars in billions)	June 30, 2014			December 31, 2013
Reconciliation of Common Equity Tier 1 Ratio:
Tier 1 Common Equity - Basel I		$15.2			$14.6
Adjustments from Basel I to Basel III ¹⁶	—			—
CET 1 - Basel III ¹⁷	15.2			14.6

RWA - Basel I	155.9			148.7
Adjustments from Basel I to Basel III ¹⁸	0.4			3.9
RWA - Basel III ¹⁷	156.3			152.6
Resulting regulatory capital ratios:
Basel I - Tier 1 common equity ratio	9.7		%	9.8		%
Basel III - CET 1 ratio ¹⁷	9.7			9.6

¹ Amortization expense related to qualified affordable housing investment costs is recognized in provision for income taxes for each of the periods presented as allowed by a recently adopted accounting standard. Prior to the first quarter of 2014, these amounts were recognized in other noninterest expense.

² We present certain income statement categories and also total revenue-FTE, net income per average common diluted share, net income, net income available to common shareholders, an efficiency ratio, a tangible efficiency ratio, and the effective tax rate, excluding Form 8-K items and other legacy mortgage-related items. We believe these measures are useful to investors because it removes the effect of material items impacting the periods' results allowing a more useful comparison to prior periods' results that did not have a similar impact and is more reflective of normalized operations as it reflects results that are primarily client relationship and client transaction driven. Removing these items also allows investors to compare our results to other companies in the industry that may not have had similar items impacting their results. Additional detail on certain of these items can be found in the Form 8-K filed with the SEC on July 3, 2014.

³ We present net interest income, net interest margin, total revenue, and total revenue excluding gain on sale of RidgeWorth on an FTE basis. Total Revenue is calculated as net interest income - FTE plus noninterest income. Net interest income - FTE adjusts for the tax-favored status of net interest income from certain loans and investments. We believe this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources.

⁴ We present total revenue - FTE excluding gain on sale of RidgeWorth and noninterest income excluding gain on sale of RidgeWorth . We believe revenue and noninterest income excluding the gain on sale of RidgeWorth is more indicative of our performance because it isolates income that is primarily client relationship and client transaction driven and is more indicative of normalized operations.

⁵ We present a tangible book value per common share that excludes the after-tax impact of purchase accounting intangible assets and also excludes preferred stock from tangible equity. We believe this measure is useful to investors because, by removing the effect of intangible assets that result from merger and acquisition activity as well as preferred stock (the level of which may vary from company to company), it allows investors to more easily compare our common stock book value to other companies in the industry.

⁶ We present ROTCE to exclude intangible assets (net of deferred taxes), except for MSR s, from average common shareholders' equity. We believe this measure is useful to investors because, by removing the effect of intangible assets, except for MSR s, (the level of which may vary from company to company), it allows investors to more easily compare our ROE to other companies in the industry who present a similar measure. We also believe that removing intangible assets (net of deferred taxes), except for MSR s, is a more relevant measure of the return on our common shareholders' equity.

⁷ Computed by dividing noninterest expense by total revenue - FTE . The FTE basis adjusts for the tax-favored status of net interest income from certain loans and investments. We believe this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources.

⁸ We present a tangible efficiency ratio which excludes the amortization of intangible assets. We believe this measure is useful to investors because, by removing the effect of these intangible asset costs (the level of which may vary from company to company), it allows investors to more easily compare our efficiency to other companies in the industry. This measure is utilized by us to assess our efficiency and that of our lines of business.

⁹ We present a tangible equity to tangible assets ratio that excludes the after-tax impact of purchase accounting intangible assets. We believe this measure is useful to investors because, by removing the effect of intangible assets that result from merger and acquisition activity (the level of which may vary from company to company), it allows investors to more easily compare our capital adequacy to other companies in the industry. This measure is used by us to analyze capital adequacy.

¹⁰ Net of deferred taxes of $206 million and $174 million at June 30, 2014 and 2013, respectively.

¹¹ Net of deferred taxes of $1 million and $4 million at June 30, 2014 and 2013, respectively.

¹² We present a ratio of allowance to total loans, excluding government guaranteed and fair value loans, to exclude loans from the calculation that are held at fair value with no related allowance and loans guaranteed by a government agency that do not have an associated allowance recorded due to nominal risk of principal loss.

¹³ Reflects the pre-tax gain on sale of asset management subsidiary that impacts the Corporate Other segment.

¹⁴ Reflects the pre-tax impact from the settlement of the mortgage modification investigation and other legacy mortgage-related items that impact the Mortgage Banking segment.

¹⁵ Reflects the income tax impact on above items.

¹⁶ Primarily relates to the improved treatment of mortgage servicing assets essentially offset by certain disallowed DTA s.

¹⁷ The Basel III calculations of CET 1, RWA, and the CET 1 ratio are based upon our current interpretation of the final Basel III rules published by the Federal Reserve during October 2013, on a fully phased in basis.

¹⁸ The largest differences between our RWA as calculated under Basel I compared to Basel III relate to the risk-weightings for certain commercial loans, derivatives, unfunded commitments, letters of credit, securitizations, and mortgage servicing assets.



Consolidated Daily Average Balances, Income/Expense, and Average Yields Earned/Rates Paid																		Table 2
	Three Months Ended														Increase/(Decrease)
	June 30, 2014							June 30, 2013							Increase/(Decrease)
(Dollars in millions; yields on taxable-equivalent basis)	Average Balances			Income/ Expense		Yields/ Rates		Average Balances			Income/ Expense		Yields/ Rates		Average Balances				Yields/ Rates
Assets
Loans: ¹
C&I - FTE ²		$60,141			$545	3.63	%		$54,490			$544	4.01	%		$5,651			(0.38	)
CRE	6,052			44		2.92		4,262			35		3.27		1,790				(0.35	)
Commercial construction	1,006			9		3.41		628			5		3.47		378				(0.06	)
Residential mortgages - guaranteed	2,994			27		3.62		3,768			27		2.86		(774		)		0.76
Residential mortgages - nonguaranteed	23,849			237		3.98		22,470			242		4.30		1,379				(0.32	)
Home equity products	14,394			128		3.58		14,358			131		3.65		36				(0.07	)
Residential construction	474			5		4.34		559			8		5.46		(85		)		(1.12	)
Guaranteed student loans	5,463			50		3.64		5,339			50		3.78		124				(0.14	)
Other direct	3,342			35		4.23		2,434			27		4.41		908				(0.18	)
Indirect	11,388			91		3.19		11,073			94		3.41		315				(0.22	)
Credit cards	732			18		9.63		617			15		9.80		115				(0.17	)
Nonaccrual ³	899			6		2.81		1,374			9		2.76		(475		)		0.05
Total loans	130,734			1,195		3.67		121,372			1,187		3.92		9,362				(0.25	)
Securities AFS:
Taxable	22,799			147		2.58		22,834			141		2.46		(35		)		0.12
Tax-exempt - FTE ²	263			3		5.26		263			3		5.18		—				0.08
Total securities AFS - FTE	23,062			150		2.61		23,097			144		2.49		(35		)		0.12
Fed funds sold and securities borrowed or purchased under agreements to resell	1,047			—		—		1,107			—		—		(60		)		—
LHFS	1,678			17		4.03		3,540			29		3.26		(1,862		)		0.77
Interest-bearing deposits	25			—		0.16		21			—		0.06		4				0.10
Interest earning trading assets	3,827			19		1.98		4,358			18		1.60		(531		)		0.38
Total earning assets	160,373			1,381		3.45		153,495			1,378		3.60		6,878				(0.15	)
ALLL	(2,023		)					(2,143		)					120
Cash and due from banks	5,412							4,453							959
Other assets	14,675							14,256							419
Noninterest earning trading assets and derivatives	1,155							1,789							(634		)
Unrealized gains on securities available for sale, net	228							687							(459		)
Total assets		$179,820							$172,537							$7,283
Liabilities and Shareholders’ Equity
Interest-bearing deposits:
NOW accounts		$29,198			$6	0.08	%		$26,015			$4	0.06	%		$3,183			0.02
Money market accounts	42,963			15		0.14		41,850			13		0.13		1,113				0.01
Savings	6,182			1		0.04		5,808			1		0.05		374				(0.01	)
Consumer time	7,701			17		0.89		9,163			26		1.15		(1,462		)		(0.26	)
Other time	4,398			12		1.07		5,036			17		1.34		(638		)		(0.27	)
Total interest-bearing consumer and commercial deposits	90,442			51		0.22		87,872			61		0.28		2,570				(0.06	)
Brokered time deposits	1,890			10		2.19		2,038			14		2.54		(148		)		(0.35	)
Foreign deposits	3			—		—		37			—		0.13		(34		)		(0.13	)
Total interest-bearing deposits	92,335			61		0.27		89,947			75		0.33		2,388				(0.06	)
Funds purchased	825			—		0.09		657			—		0.10		168				(0.01	)
Securities sold under agreements to repurchase	2,148			1		0.12		1,879			1		0.13		269				(0.01	)
Interest-bearing trading liabilities	783			6		2.83		751			4		2.29		32				0.54
Other short-term borrowings	5,796			3		0.23		5,422			3		0.24		374				(0.01	)
Long-term debt	12,014			66		2.21		9,700			53		2.19		2,314				0.02
Total interest-bearing liabilities	113,901			137		0.48		108,356			136		0.50		5,545				(0.02	)
Noninterest-bearing deposits	40,030							38,707							1,323
Other liabilities	3,599							3,637							(38		)
Noninterest-bearing trading liabilities and derivatives	296							565							(269		)
Shareholders’ equity	21,994							21,272							722
Total liabilities and shareholders’ equity		$179,820							$172,537							$7,283
Interest Rate Spread						2.97	%						3.10	%					(0.13	)
Net interest income - FTE ⁴					$1,244							$1,242
Net Interest Margin ⁵						3.11	%						3.25	%					(0.14	)

¹ Interest income includes loan fees of $48 million and $44 million for the three months ended June 30, 2014 and 2013 , respectively.

² Interest income includes the effects of taxable-equivalent adjustments using a federal income tax rate of 35% and, where applicable, state income taxes to increase tax-exempt interest income to a taxable-equivalent basis. The net taxable-equivalent adjustment amounts included in the above table aggregated $35 million and $31 million for the three months ended June 30, 2014 and 2013 , respectively.

³ Income on consumer and residential nonaccrual loans, if recognized, is recognized on a cash basis.

⁴ Derivative instruments that manage our interest-sensitivity position increased net interest income $110 million and $106 million for the three months ended June 30, 2014 and 2013 , respectively.

⁵ The net interest margin is calculated by dividing annualized net interest income – FTE by average total earning assets.



Consolidated Daily Average Balances, Income/Expense, and Average Yields Earned/Rates Paid (cont.)
	Six Months Ended														Increase/(Decrease)
	June 30, 2014							June 30, 2013							Increase/(Decrease)
(Dollars in millions; yields on taxable-equivalent basis)	Average Balances			Income/ Expense		Yields/ Rates		Average Balances			Income/ Expense		Yields/ Rates		Average Balances			Yields/ Rates
Assets
Loans: ¹
C&I - FTE ²		$59,219			$1,082	3.69	%		$54,129			$1,101	4.10	%		$5,090		(0.41	)
CRE	5,835			85		2.93		4,177			70		3.38		1,658			(0.45	)
Commercial construction	950			16		3.36		645			12		3.61		305			(0.25	)
Residential mortgages - guaranteed	3,171			57		3.62		3,922			54		2.73		(751		)	0.89
Residential mortgages - nonguaranteed	23,891			480		4.02		22,428			479		4.27		1,463			(0.25	)
Home equity products	14,455			257		3.59		14,361			260		3.64		94			(0.05	)
Residential construction	480			10		4.37		587			15		5.02		(107		)	(0.65	)
Guaranteed student loans	5,493			100		3.67		5,368			102		3.85		125			(0.18	)
Other direct	3,151			66		4.24		2,416			53		4.42		735			(0.18	)
Indirect	11,344			181		3.22		11,035			190		3.47		309			(0.25	)
Credit cards	724			35		9.59		617			30		9.66		107			(0.07	)
Nonaccrual ³	922			11		2.39		1,443			20		2.84		(521		)	(0.45	)
Total loans	129,635			2,380		3.70		121,128			2,386		3.97		8,507			(0.27	)
Securities AFS:
Taxable	22,612			297		2.63		22,524			280		2.50		88			0.13
Tax-exempt - FTE ²	263			7		5.26		278			7		5.20		(15		)	0.06
Total securities AFS - FTE	22,875			304		2.66		22,802			287		2.53		73			0.13
Fed funds sold and securities borrowed or purchased under agreements to resell	1,013			—		—		1,099			—		0.02		(86		)	(0.02	)
LHFS	1,565			32		4.04		3,646			60		3.28		(2,081		)	0.76
Interest-bearing deposits	24			—		0.14		21			—		0.09		3			0.05
Interest earning trading assets	3,754			36		1.93		4,290			34		1.57		(536		)	0.36
Total earning assets	158,866			2,752		3.49		152,986			2,767		3.65		5,880			(0.16	)
ALLL	(2,030		)					(2,160		)					130
Cash and due from banks	5,424							4,457							967
Other assets	14,754							14,344							410
Noninterest earning trading assets and derivatives	1,224							1,808							(584		)
Unrealized gains on securities available for sale, net	166							740							(574		)
Total assets		$178,404							$172,175							$6,229
Liabilities and Shareholders’ Equity
Interest-bearing deposits:
NOW accounts		$28,456			$11	0.07	%		$26,198			$9	0.07	%		$2,258		—
Money market accounts	42,859			28		0.13		42,419			29		0.14		440			(0.01	)
Savings	6,109			1		0.04		5,669			2		0.06		440			(0.02	)
Consumer time	8,008			39		0.99		9,291			53		1.15		(1,283		)	(0.16	)
Other time	4,466			25		1.13		5,140			34		1.35		(674		)	(0.22	)
Total interest-bearing consumer and commercial deposits	89,898			104		0.23		88,717			127		0.29		1,181			(0.06	)
Brokered time deposits	1,951			22		2.25		2,062			27		2.58		(111		)	(0.33	)
Foreign deposits	2			—		0.19		60			—		0.14		(58		)	0.05
Total interest-bearing deposits	91,851			126		0.28		90,839			154		0.34		1,012			(0.06	)
Funds purchased	907			—		0.09		686			—		0.10		221			(0.01	)
Securities sold under agreements to repurchase	2,175			1		0.11		1,793			2		0.16		382			(0.05	)
Interest-bearing trading liabilities	741			11		2.78		737			8		2.25		4			0.53
Other short-term borrowings	5,692			7		0.24		4,576			6		0.26		1,116			(0.02	)
Long-term debt	11,692			124		2.13		9,530			104		2.20		2,162			(0.07	)
Total interest-bearing liabilities	113,058			269		0.48		108,161			274		0.51		4,897			(0.03	)
Noninterest-bearing deposits	39,542							38,397							1,145
Other liabilities	3,566							3,874							(308		)
Noninterest-bearing trading liabilities and derivatives	377							548							(171		)
Shareholders’ equity	21,861							21,195							666
Total liabilities and shareholders’ equity		$178,404							$172,175							$6,229
Interest Rate Spread						3.01	%						3.14	%				(0.13	)
Net interest income - FTE ⁴					$2,483							$2,493
Net Interest Margin ⁵						3.15	%						3.29	%				(0.14	)

¹ Interest income includes loan fees of $93 million and $71 million for the six months ended June 30, 2014 and 2013 , respectively.

² Interest income includes the effects of taxable-equivalent adjustments using a federal income tax rate of 35% and, where applicable, state income taxes to increase tax-exempt interest income to a taxable-equivalent basis. The net taxable-equivalent adjustment amounts included in the above table aggregated $69 million and $61 million for the six months ended June 30, 2014 and 2013 , respectively.

³ Income on consumer and residential nonaccrual loans, if recognized, is recognized on a cash basis.

⁴ Derivative instruments that manage our interest-sensitivity position increased net interest income $220 million and $225 million for the six months ended June 30, 2014 and 2013 , respectively.

⁵ The net interest margin is calculated by dividing annualized net interest income – FTE by average total earning assets.

Net Interest Income/Margin

Second Quarter of 2014

Net interest income on an FTE basis was $ 1.2 billion during the second quarter of 2014 , which was consistent with the second quarter of 2013 . However, net interest margin decreased 14 basis points to 3.11% during the second quarter of 2014 , compared to 3.25% during the second quarter of 2013 , primarily due to a 15 basis point decline in earning asset yields as the low interest rate environment continued. The decline in earning asset yields was primarily concentrated in our loan portfolio, partially offset by improved yields in the LHFS and securities AFS portfolio and a two basis point decline in rates paid on interest-bearing liabilities.

Average earning assets increased $6.9 billion , or 4% , during the second quarter of 2014 compared to the second quarter of 2013 , primarily driven by an increase of $9.4 billion , or 8% , in average loans, partially offset by a $1.9 billion decline in average LHFS . The increase in average loans was broad-based across most loan categories, primarily driven by targeted growth in C&I loans of $5.7 billion , or 10% , CRE loans of $1.8 billion , or 42% , and nonguaranteed residential mortgages of $1.4 billion , or 6% , compared to the second quarter of 2013 . Average LHFS decreased due to lower mortgage production volume as mortgage interest rates have increased over the past year. Additionally, in the second quarter of 2014, we transferred $2.1 billion of government guaranteed residential mortgages, which yield approximately 3.25%, to LHFS, in anticipation of the sale of these loans in the third quarter on a servicing retained basis. We expect to invest the proceeds from this sale into high-quality liquid securities that yield approximately 3.20% in anticipation of forthcoming regulatory requirements regarding liquidity ratios. Average nonaccrual loans declined 35% , driven by the ongoing resolution of defaulted loans.

Yields on average earning assets declined 15 basis points to 3.45 % during the second quarter of 2014 , compared to 3.60 % during the second quarter of 2013 . The decline was driven by a decrease in the yield on our loan portfolio during the second quarter of 2014 to 3.67 %, a decrease of 25 basis points compared to the second quarter of 2013 . The decrease in the loan portfolio yield was broad-based, driven by the continued low interest rate environment and a shift in loan mix to C&I loans, where spread compression has occurred and competition in our markets remains high. A 12 basis point increase in the securities AFS portfolio yield partially offset the decline in loan yields, compared to the second quarter of 2013 . The securities AFS yield increase was primarily driven by lower pay-downs of MBS securities during the quarter and the resulting impact on MBS amortization.

We utilize interest rate swaps to manage interest rate risk. The largest notional position of these swaps are pay variable-receive fixed interest rate swaps that convert a portion of our commercial loan portfolio from floating rates, based on LIBOR , to fixed rates. At June 30, 2014 , the outstanding notional balance of active swaps that qualified as cash flow hedges on variable rate commercial loans was $18.9 billion , compared to $17.3 billion at December 31, 2013 . In addition to the income recognized from currently outstanding swaps, we also continue to recognize interest income over the original hedge period resulting from terminated or de-designated swaps that were previously designated as cash flow hedges on variable rate commercial loans. Interest income from our commercial loan swaps increased to $101 million during the second quarter of 2014 compared to $100 million during the second quarter of 2013 . As we manage our interest rate risk we may continue to purchase additional and/or terminate existing interest rate swaps. Active swaps began to mature during the second quarter of 2014 and remaining swaps have maturities through 2019. The average maturity of our active swap notional balances at June 30, 2014 was 1.7 years, and $14.3 billion of our active swap notional balances will mature by December 31, 2016. As the swap balances mature, the interest income from the swap balances is expected to decline and our overall asset sensitivity position is expected to increase, which is a part of our balance sheet management strategy over the medium term. For every $1.0 billion reduction in the average notional swap balance, our net interest income sensitivity would increase an additional 0.2% in a 100 basis points parallel rate increase. See Table 16 , "Net Interest Income Asset Sensitivity," in this MD&A for additional details on our net interest income sensitivity analysis.

The commercial loan swaps have a fixed rate of interest that is received, while the rate paid is based on LIBOR . The weighted average rate on the receive-fixed rate leg of the swap portfolio is 1.74%. Estimated income of these swaps is included in the table below and is based on the assumption of unchanged LIBOR rates relative to June 30, 2014 , which may be different than our assumption for future interest rates. Actual income from these swaps may vary from estimates, as the interest rate environment may change, we may purchase additional swaps, and/or we may terminate existing swaps.



			Table 3

	Ending Notional Balance of Active Swaps (in billions)		Estimated Net ¹ Interest Income Related to Swaps (in millions)
Third Quarter 2014		$18.9		$98
Fourth Quarter 2014	15.4		84
First Quarter 2015	11.9		46
Second Quarter 2015	9.9		36
Third Quarter 2015	9.5		34
Fourth Quarter 2015	9.5		33

¹ Includes estimated interest income related to active and terminated/de-designated swaps. See Note 12 , "Derivative Financial Instruments," to the Consolidated Financial Statements in this Form 10-Q for additional swap information.

Average interest-bearing liabilities increased $5.5 billion , or 5 %, during the second quarter of 2014 compared to the same period of 2013, and average rates paid on interest-bearing liabilities were 0.48 % during the second quarter of 2014 , a decrease of two basis points compared to the same period of 2013. Average interest-bearing liabilities increased primarily due to a $4.7 billion , or 6%, increase in average lower-cost deposits, and a $2.3 billion , or 24% , increase in average long-term debt. These increases were partially offset by a decrease of $2.1 billion, or 15%, in average time deposits. The increase in average long-term debt was primarily attributable to (i) the addition of a $1.0 billion long-term FHLB advance during the second quarter of 2014, (ii) the April 2014 issuance under our Global Bank Note program of $650 million of fixed rate senior notes, (iii) the first quarter of 2014 issuances under our Global Bank Note program of $250 million of floating rate senior notes and $600 million of fixed rate senior notes, and (iv) combined issuances of $1.4 billion of fixed rate senior notes in June and October of 2013. See additional information regarding long-term debt in the "Borrowings" section of this MD&A. Average noninterest-bearing deposits increased $1.3 billion , or 3%, compared to the second quarter of 2013 .

The two basis point reduction in average interest-bearing liability costs during the second quarter of 2014 was primarily due to a six basis point decline in rates paid on interest bearing deposits, partially offset by a two basis point increase in rates paid on long-term debt driven by the aforementioned issuances. The decline in the average rate paid on interest-bearing deposits was a result of the improved funding mix driven by the shift from time deposits to lower-cost deposit products, as well as a reduction in rates paid on time deposits as maturing CDs renew at lower rates.

During the second quarter of 2014 , the interest rate environment was characterized by a steepening in the yield curve compared to the same period in 2013 , as rates at the long end of the yield curve increased. More specifically, for the three months ended June 30, 2014 , benchmark rates were as follows compared to the same period in 2013 : one-month LIBOR averaged 0.15% , a decrease of five basis points, three-month LIBOR averaged 0.23% , a decrease of five basis points, five-year swaps averaged 1.74% , an increase of 66 basis points, and ten-year swaps averaged 2.72% , an increase of 57 basis points. During the second quarter of 2014 , the Fed funds target rate averaged 0.25% and the Prime rate averaged 3.25%, both unchanged from the second quarter of 2013 .

We expect net interest margin to decline further throughout 2014, primarily due to continued compression in loan yields and lower commercial loan swap income. Additionally, we continue to expect the overall full year decline in net interest margin during 2014 compared to 2013 to be slightly less than the 16 basis point decline during the full year of 2013 when compared to 2012. As our commercial loan swaps mature over the next several years, we become more asset sensitive, which is part of our balance sheet management strategy over the medium-term.

First Half of 2014

For the first six months of 2014, net interest income on a FTE basis was $2.5 billion , which was consistent with the first six months of 2013 . However, net interest margin decreased 14 basis points to 3.15% , compared to 3.29% during the first six months of 2013 , primarily due to a 16 basis point decline in earning asset yields. The earning asset yield decline was primarily driven by lower loan yields, partially offset by improved yields in the LHFS and securities AFS portfolio, and a three basis point reduction in interest bearing liability costs driven by interest-bearing deposits.

Yields on average earning assets declined 16 basis points to 3.49% for the six months ended June 30, 2014 , from 3.65% for the six months ended June 30, 2013 , driven primarily by a decline in loan yields. The yield on average loans was 3.70%, a decrease of 27 basis points compared to the six months ended June 30, 2013 , driven by broad-based declines across the loan portfolio, including an $11 million decline in swap interest income. Partially offsetting the decline in loan yields was a yield increase of 76 basis points in average LHFS and 13 basis points in average securities AFS when compared to the six months ended June 30, 2013 . Average rates paid on interest-bearing liabilities declined by three basis points compared to the six months ended June 30, 2013 . Primarily driving this decline was a six basis point decrease in rates paid on interest-bearing deposits as a result of the improved funding mix driven by the shift from time deposits to lower-cost deposit products, as well as a reduction in rates paid on time deposits as maturing CDs renew at lower rates.

Average earning assets increased $ 5.9 billion , or 4% . The increase was primarily driven by increases in average loans of $8.5 billion , or 7% , partially offset by decreases of $2.1 billion in average LHFS . The factors contributing to the year-over-year changes in average loans and LHFS were the same as those discussed above related to the second quarter of 2014 compared to the second quarter of 2013.

Average interest-bearing liabilities increased $4.9 billion , or 5% , compared to the six months ended June 30, 2013 . This change was primarily due to a $2.2 billion , or 23% , increase in long-term debt, a $1.2 billion , or 1% , increase in interest-bearing deposits, and an increase of $1.1 billion , or 24% , in other short-term borrowings. The factors contributing to the year-over-year increase in interest-bearing deposits and average long-term debt were the same as those discussed above related to the second quarter of 2014 compared to the second quarter of 2013. Average noninterest-bearing deposits increased $1.1 billion , or 3%, compared to the six months ended June 30, 2013 . The increase in average other short-term borrowings was primarily due to FHLB advances.

Foregone Interest

Foregone interest income from NPL s reduced the net interest margin by two basis points during the second quarter of both 2014 and 2013 , and by two and three basis points during the six months ended June 30, 2014 and 2013 , respectively, as average nonaccrual loans decreased by $475 million and $521 million during the three and six months ended June 30, 2014 , respectively, as compared to the same periods in 2013 . See additional discussion of our expectations of future credit quality in the “Loans,” “Allowance for Credit Losses,” and “Nonperforming Assets” sections of this MD&A . Table 2 contains more detailed information concerning average balances, yields earned, and rates paid.



NONINTEREST INCOME
													Table 4
	Three Months Ended June 30							Six Months Ended June 30
(Dollars in millions)	2014			2013		% Change ¹		2014			2013		% Change ¹
Service charges on deposit accounts		$160			$164	(2	)%		$314			$324	(3	)%
Other charges and fees	91			97		(6	)	179			186		(4	)
Card fees	82			78		5		158			154		3
Trust and investment management income	116			130		(11	)	247			254		(3	)
Retail investment services	76			69		10		147			130		13
Investment banking income	119			93		28		207			161		29
Trading income	47			49		(4	)	96			91		5
Mortgage servicing related income	45			1		NM		99			39		NM
Mortgage production related income	52			133		(61	)	95			292		(67	)
Gain on sale of subsidiary ²	105			—		NM		105			—		NM
Net securities (losses)/gains	(1		)	—		NM		(2		)	2		NM
Other noninterest income	65			44		48		103			88		17
Total noninterest income		$957			$858	12	%		$1,748			$1,721	2	%

Total noninterest income, excluding gain on sale of RidgeWorth ²		$852			$858	(1	)%		$1,643			$1,721	(5	)%

¹ "NM" - Not meaningful. Those changes over 100 percent were not considered to be meaningful.

² See Note 2 , "Acquisitions/Dispositions," to the Consolidated Financial Statements in this Form 10-Q for additional information related to the sale of RidgeWorth and Table 1 , "Selected Quarterly Financial Data and Reconcilement of Non-U.S. GAAP Measures," in this MD&A for a reconciliation of noninterest income, excluding the gain on sale of RidgeWorth.

Noninterest income increased $99 million , or 12% , compared to the second quarter of 2013 , and increased $27 million , or 2% , compared to the six months ended June 30, 2013 , driven primarily by the gain on sale of RidgeWorth , our asset management

subsidiary. For additional information related to the sale of RidgeWorth , see Note 2 , "Acquisitions/Dispositions," to the Consolidated Financial Statements in this Form 10-Q. Excluding the impact from the sale of RidgeWorth , noninterest income decreased $6 million , or 1% , compared to the second quarter of 2013 and decreased $78 million or 5% , compared to the six months ended June 30, 2013 . The decreases in both periods were driven by a decline in mortgage production revenue, partially offset by higher i nvestment banking and mortgage servicing income. See Table 1 , "Selected Quarterly Financial Data and Reconcilement of Non-U.S. GAAP Measures," in this MD&A for a reconciliation of noninterest income, excluding the gain on sale of RidgeWorth.

Trust and investment management income decreased $14 million , or 11% , compared to the second quarter of 2013 , and $7 million , or 3% , compared to the six months ended June 30, 2013 , driven entirely by the loss of RidgeWorth related revenue as a result of the May 30, 2014 sale. Retail investment services income increased $7 million , or 10% , compared to the second quarter of 2013 and $17 million , or 13% , compared to the six months ended June 30, 2013 . The increase in each period is a result of our ongoing focus on meeting more clients’ savings and investment needs.

Investment banking income increased $26 million , or 28% , compared to the second quarter of 2013 , and $46 million , or 29% , compared to the six months ended June 30, 2013 . The increase in both periods was primarily driven by higher client activity across most origination and advisory product categories.

Trading income decreased $2 million , or 4% , compared to the second quarter of 2013 , and increased $5 million , or 5% , compared to the six months ended June 30, 2013 . The decline compared to the second quarter of 2013 was primarily driven by a $15 million increase in mark-to-market valuation losses on the Company's fair value debt, partially offset by higher core trading income, which was impacted by the de-risking of certain trading positions in the second quarter of 2013 . The increase compared to the six months ended June 30, 2013 , was also largely driven by higher core trading income, partially offset by an $8 million increase in mark-to-market valuation losses on the Company’s fair value debt.

Mortgage servicing related income increased $44 million compared to the second quarter of 2013 and increased $60 million compared to the six months ended June 30, 2013 . The increase was primarily due to a slower pace of loan prepayments resulting in lower decay of the servicing asset. At June 30, 2014 , the servicing portfolio was $134.4 billion compared to $140.1 billion at June 30, 2013 .

Mortgage production related income decreased $81 million , or 61% , compared to the second quarter of 2013 and $197 million , or 67% , compared to the six months ended June 30, 2013 . The decreases were due to a decline in refinance production volume and lower gain on sale margins. Loan production volume decreased 55% and 60% compared to the three and six months ended June 30, 2013, respectively, and loan applications decreased 48% and 53% compared to the three and six months ended June 30, 2013 , respectively. The decline in refinance activity, primarily a result of an increase in mortgage interest rates during the past year, drove the decreases in production volume and applications. The decline in mortgage revenue was partially offset by a decrease in mortgage repurchase provision of $10 million , or 67%, compared to the second quarter of 2013 , and $19 million , or 66%, compared to the six months ended June 30, 2013 . The mortgage repurchase reserve was $77 million at June 30, 2014 , a decrease of $1 million from December 31, 2013 . For additional information on the mortgage repurchase reserve, see Note 13 , "Guarantees," to the Consolidated Financial Statements in this Form 10-Q.

Other noninterest income increased $21 million , or 48% , compared to second quarter of 2013 and increased $15 million , or 17% compared to the six months ended June 30, 2013 . The increase was primarily driven by a $19 million gain on the sale of government guaranteed mortgage loans and higher leasing-related income in the current quarter.



NONINTEREST EXPENSE
											Table 5
	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions)	2014		2013		% Change ¹		2014		2013		% Change ¹
Employee compensation		$659		$635	4	%		$1,319		$1,246	6	%
Employee benefits	104		102		2		244		250		(2	)
Personnel expenses	763		737		4		1,563		1,496		4
Outside processing and software	181		187		(3	)	351		365		(4	)
Operating losses	218		72		NM		239		111		NM
Net occupancy expense	83		86		(3	)	169		175		(3	)
Equipment expense	42		46		(9	)	86		91		(5	)
Regulatory assessments	40		41		(2	)	80		95		(16	)
Marketing and customer development	30		31		(3	)	56		61		(8	)
Credit and collection services	23		52		(56	)	46		85		(46	)
Amortization of intangible assets	4		6		(33	)	7		12		(42	)
Other noninterest expense	133		129		3		277		249		11
Total noninterest expense		$1,517		$1,387	9	%		$2,874		$2,740	5	%

Total noninterest expense, excluding Form 8-K and other legacy mortgage-related items ²		$1,338		$1,387	(4	)%		$2,695		$2,740	(2	)%

¹ "NM" - not meaningful. Those changes over 100 percent were not considered to be meaningful.

² See Table 1 , "Selected Quarterly Financial Data and Reconcilement of Non-U.S. GAAP Measures," in this MD&A for a reconciliation of noninterest expense, excluding Form 8-K and other legacy mortgage-related items .

Noninterest expense increased $130 million , or 9% , and $134 million , or 5% , during the three and six months ended June 30, 2014 compared to the same periods in 2013 , respectively, driven primarily by legacy mortgage-related operating losses during the second quarter of 2014 . Noninterest expense during the three and six months ended June 30, 2014 , excluding the impact of the Form 8-K and other legacy mortgage-related items from the second quarter of 2014 decreased $49 million , or 4% , and $45 million , or 2% , compared to the same periods in 2013 , respectively. The decline in expenses in both periods was primarily due to lower cyclical costs and the continued focus on expense management. Additionally, during the first quarter of 2014, we adopted new accounting guidance that resulted in the amortization expense of qualified affordable housing investments being recognized in the provision for income taxes rather than previously in noninterest expense. Prior periods have been restated in accordance with GAAP. See Note 1 , “Significant Accounting Policies,” to the Consolidated Financial Statements in this Form 10-Q for further information related to the new guidance.

Personnel expenses increased $26 million , or 4% , compared to the second quarter of 2013 , and $67 million , or 4% , compared to the six months ended June 30, 2013 . The increase for both periods was due to higher salaries related to hiring efforts in certain revenue producing businesses and the impact of merit increases.

Outside processing and software decreased $6 million , or 3% , compared to the second quarter of 2013 , and $14 million , or 4% , compared to the six months ended June 30, 2013 . The decrease for both periods was primarily due to lower mortgage production volume driving the reduction in processing cost.

Operating losses increased $146 million compared to the second quarter of 2013 , and $128 million compared to the six months ended June 30, 2013 . The increase for both periods was primarily due to legacy mortgage-related matters that were settled during the second quarter of 2014. Specifically, we entered into a settlement agreement regarding STM's administration of HAMP. This settlement resulted in a $204 million pre-tax charge that was partially offset by a net $25 million accrual reduction for other legacy mortgage matters that progressed during the second quarter of 2014. Additionally, the second quarter of 2013 included mortgage-related charges of $45 million. See additional discussion related to HAMP in Note 15 , “Contingencies,” to the Consolidated Financial Statements in this Form 10-Q.

Regulatory expenses decreased $15 million , or 16% , compared to the six months ended June 30, 2013 , due to declines in our FDIC insurance assessment rate, reflecting our reduced risk profile. Credit and collection services decreased $29 million , or 56% , compared to the second quarter of 2013 , and $39 million , or 46% , compared to the six months ended June 30, 2013 . The decrease for both periods was largely related to the continued improvement in credit quality. Excluding operating losses, we do not expect significant changes in cyclical costs going forward.

Other noninterest expense increased $28 million , or 11% , compared to the six months ended June 30, 2013 , due to discrete charges recognized in the current quarter and a $36 million charge in the first quarter of 2014 related to the impairment of

certain affordable housing assets. The planned sale of these assets is unrelated to our core affordable housing and community development business.

PROVISION FOR INCOME TAXES

The provision for income taxes includes both federal and state income taxes. For the three and six months ended June 30, 2014 , the provision for income taxes was $173 million and $298 million , resulting in effective tax rate of 30.2% and 27.0% , respectively. For the three and six months ended June 30, 2013 , the provision for income taxes was $156 million and $317 million , resulting in an effective tax rate of 29.3% and 30.3% , respectively. The decrease in the effective tax rate for the six months ended June 30, 2014 was primarily due to a decrease in the UTB s due to the receipt of favorable guidance from the IRS in the first quarter of 2014.

Excluding the Form 8-K and other legacy mortgage-related items impacting the second quarter of 2014 , the effective tax rate was 30.7% and 27.5% for the three and six months ended June 30, 2014 , respectively. See Table 1 , " Selected Quarterly Financial Data and Reconcilement of Non-U.S. GAAP Measures ," in this MD&A for a reconciliation of the effective tax rate excluding Form 8-K and other legacy mortgage-related items .

Additionally, the provision for income taxes differs from the provision using statutory rates primarily due to favorable permanent tax items such as income from lending to tax exempt entities and federal tax credits from community reinvestment activities. See Note 10 , “Income Taxes,” to the Consolidated Financial Statements in this Form 10-Q for further information related to the provision for income taxes.

LOANS

Our disclosures about the credit quality of our loan portfolio and the related credit reserves (i) describe the nature of credit risk inherent in our loan portfolio, (ii) provide information on how we analyze and assess credit risk in arriving at an adequate and appropriate ALLL , and (iii) explain the changes in the ALLL and reasons for those changes.

We report our loan portfolio in three segments: commercial, residential, and consumer. Loans are assigned to these segments based upon the type of borrower, purpose, collateral, and/or our underlying credit management processes. Additionally, within each segment, we have identified loan types, which further disaggregate loans based upon common risk characteristics.

Commercial

The C&I loan type includes loans to fund business operations or activities, corporate credit cards, loans secured by owner-occupied properties, and other wholesale lending activities. CRE and commercial construction loan types are based on investor exposures where repayment is largely dependent upon the operation, refinance, or sale of the underlying real estate. Commercial and construction loans secured by owner-occupied properties are classified as C&I loans, as the primary source of loan repayment for owner-occupied properties is business income and not real estate operations.

Residential

Residential mortgages consist of loans secured by 1-4 family homes, mostly prime first-lien loans, both government-guaranteed and nonguaranteed. Residential construction loans include owner-occupied residential lot loans and construction-to-perm loans. Home equity products consist of equity lines of credit and closed-end equity loans that may be in either a first lien or junior lien position. At June 30, 2014 , 39% of our home equity products were in a first lien position and 61% were in a junior lien position. For home equity products in a junior lien position, we own or service 30% of the loans that are senior to the home equity product.

Only a small percentage of home equity lines are scheduled to end their draw period and convert to an amortizing term loan during 2014, with 94% of home equity line balances scheduled to convert to amortization in 2015 or later and 64% in 2017 or later. Based on historical trends, within 12 months of the end of their draw period, approximately 74% of all accounts, and approximately 61% of accounts with a balance, are closed or refinanced into an amortizing loan or a new line of credit. We perform credit management activities on home equity accounts to limit our loss exposure. These activities may result in the suspension of available credit and curtailment of available draws of most home equity junior lien accounts when the first lien position is delinquent, including when the junior lien is still current. We monitor the delinquency status of first mortgages serviced by other parties. Additionally, we actively monitor refreshed credit bureau scores of borrowers with junior liens, as these scores are highly sensitive to first lien mortgage delinquency. At June 30, 2014 and December 31, 2013 , our home equity junior lien loss severity was approximately 84% and 87% , respectively. The average borrower FICO score related to loans in

our home equity portfolio was approximately 760 and the average outstanding loan size was approximately $48,000 at June 30, 2014 and December 31, 2013 .

Consumer

The loan types comprising our consumer loan segment include government-guaranteed student loans, other direct loans (consisting primarily of direct auto loans, loans secured by negotiable collateral, unsecured loans and private student loans), indirect loans (consisting of loans secured by automobiles, boats, or recreational vehicles), and consumer credit cards.

The composition of our loan portfolio is shown in the following table:



Loan Portfolio by Types of Loans					Table 6
(Dollars in millions)	June 30, 2014		December 31, 2013		% Change ³
Commercial loans:
C&I		$61,337		$57,974	6	%
CRE	6,105		5,481		11
Commercial construction	1,096		855		28
Total commercial loans	68,538		64,310		7
Residential loans:
Residential mortgages - guaranteed	661		3,416		(81	)
Residential mortgages - nonguaranteed ¹	24,173		24,412		(1	)
Home equity products	14,519		14,809		(2	)
Residential construction	508		553		(8	)
Total residential loans	39,861		43,190		(8	)
Consumer loans:
Guaranteed student loans	5,420		5,545		(2	)
Other direct	3,675		2,829		30
Indirect	11,501		11,272		2
Credit cards	749		731		2
Total consumer loans	21,345		20,377		5
LHFI		$129,744		$127,877	1	%
LHFS ²		$4,046		$1,699	NM

¹ Includes $292 million and $302 million of loans carried at fair value at June 30, 2014 and December 31, 2013 , respectively.

² Includes $1.4 billion of LHFS carried at fair value at both June 30, 2014 and December 31, 2013 .

³ "NM" - Not meaningful. Those changes over 100 percent were not considered to be meaningful.

We believe that our loan portfolio is well diversified by product, client, and geography. However, our loan portfolio may be exposed to certain concentrations of credit risk which exist in relation to individual borrowers or groups of borrowers, certain types of collateral, certain industries, certain loan products, or certain regions of the country. See Note 5 , “Loans,” to the Consolidated Financial Statements in this Form 10-Q for more information.

The following table shows the percentage breakdown of our LHFI portfolio by geographic region:



Loan Types by Geography											Table 7
	June 30, 2014
	Commercial				Residential				Consumer
(Dollars in millions)	Loans		% of total		Loans		% of total		Loans		% of total
Geography:
Florida		$11,757	17	%		$10,329	26	%		$3,769	18	%
Georgia	8,231		12		6,016		15		1,604		7
Virginia	7,060		10		5,755		14		1,623		8
Tennessee	4,485		7		2,302		6		765		4
North Carolina	3,712		5		3,675		9		1,448		7
Maryland	3,631		5		3,905		10		1,396		6
South Carolina	1,213		2		1,887		5		432		2
District of Columbia	1,291		2		703		2		96		—
Total banking region	41,380		60		34,572		87		11,133		52
California, Illinois, Pennsylvania, Texas, New Jersey, New York	13,268		20		3,146		8		5,513		26
All other states	13,890		20		2,143		5		4,699		22
Total outside banking region	27,158		40		5,289		13		10,212		48
Total		$68,538	100	%		$39,861	100	%		$21,345	100	%



	December 31, 2013
	Commercial				Residential				Consumer
(Dollars in millions)	Loans		% of total		Loans		% of total		Loans		% of total
Geography:
Florida		$12,003	19	%		$10,770	25	%		$3,683	18	%
Georgia	8,175		13		6,210		14		1,539		8
Virginia	7,052		11		6,312		15		1,633		8
Tennessee	4,689		7		2,489		6		738		4
North Carolina	3,583		5		3,902		9		1,464		7
Maryland	3,431		5		4,097		9		1,402		7
South Carolina	1,122		2		2,023		5		412		2
District of Columbia	1,066		2		727		2		95		—
Total banking region	41,121		64		36,530		85		10,966		54
California, Illinois, Pennsylvania, Texas, New Jersey, New York	12,131		19		3,811		9		5,043		25
All other states	11,058		17		2,849		6		4,368		21
Total outside banking region	23,189		36		6,660		15		9,411		46
Total		$64,310	100	%		$43,190	100	%		$20,377	100	%

Loans Held for Investment

LHFI were $129.7 billion at June 30, 2014 , an increase of 1% from December 31, 2013 . We continued to make progress in our loan portfolio diversification strategy, as we were successful in both growing targeted commercial and consumer balances and in reducing our exposure to certain real estate secured loans. Additionally, we have been successful in growing commercial and consumer loans through our national banking delivery channels, which provides us additional geographic loan diversity. Average loans during the first six months of 2014 totaled $129.6 billion . See the "Net Interest Income/Margin" section of this MD&A for more information regarding average loan balances. Overall economic indicators in our markets are improving, and organic loan production in C&I and other consumer loans has been solid.

Commercial loans increased $4.2 billion , or 7% , during the first six months of 2014 . Growth was primarily driven by C&I loans, encompassing a diverse array of large corporate and middle market borrowers, as well as growth in CRE loans. C&I loans increased $3.4 billion , or 6% , from December 31, 2013 , primarily driven by broad-based growth across the portfolio. The most notable increases were in the asset securitization and energy portfolios within our Wholesale Banking segment. CRE loans increased $624 million , or 11% , from December 31, 2013 , driven by the purchase of approximately $594 million in loans from a third-party during the first half of 2014.

Residential loans decreased $3.3 billion , or 8% , during the first six months of 2014 , primarily driven by a $2.8 billion , or 81% , decrease in government-guaranteed residential mortgages and a $290 million , or 2% , decrease in home equity products. The decrease in government-guaranteed loans was primarily due to the transfer of $2.1 billion of guaranteed mortgage loans to LHFS in the current quarter in anticipation of sale on a servicing retained basis in the third quarter of 2014. We currently plan to reinvest the proceeds from this sale into high-quality liquid securities in anticipation of forthcoming LCR requirements. Also, during the second quarter of 2014 we sold $325 million of government guaranteed residential mortgages, which resulted in a $19 million pre-tax gain, and sold $149 million of accruing TDR s to further enhance our asset quality position.

Consumer loans increased $968 million , or 5% , during the first six months of 2014 , primarily driven by an $846 million , or 30% , increase in other direct loans, which was largely related to high credit quality consumer loans through our LightStream online lending business, as well as other high credit quality home improvement loans. Indirect loans increased $229 million , or 2% , during the first six months of 2014 due to modest growth in indirect auto loan originations.

Loans Held for Sale

LHFS increased $2.3 billion from December 31, 2013 primarily due to the aforementioned transfer of guaranteed mortgage loans from LHFI.

Asset Quality

Our asset quality continued to trend favorably during the first six months of 2014 , driven by overall improvements in the economy, improved residential housing markets, resolution of existing NPA s, and lower inflows of NPL s. This was driven by positive trends in our residential portfolios due to lower delinquencies and loss severities, and higher prices upon disposition of foreclosed assets.

During the first six months of 2014 , NPL s decreased $72 million , or 7% , largely driven by residential mortgage NPLs. Since their peak in 2009, total NPL s have decreased $4.6 billion , or 84% . At June 30, 2014 , the percentage of NPL s to total loans was 0.69% , down seven basis points compared to December 31, 2013 . We expect further, but moderating, declines in NPL s during the second half of 2014, led by continuing improvements in residential mortgage portfolios.

For the second quarter of 2014 and 2013, net charge-offs were $113 million and $179 million , respectively, a decrease of $66 million , or 37% . Net charge-offs for the first six months of 2014 and 2013 were $223 million and $405 million , respectively, a decrease of $182 million , or 45% . The decline in net charge-offs was driven by both commercial and residential loan categories. During the second quarter and first six months of 2014 , the annualized net charge-off ratio declined to 0.35% , the lowest level in over six years, compared to 0.59% and 0.67% during the same periods in 2013, respectively. The financial impact of the aforementioned sale of $149 million of accruing TDRs included $10 million in net charge-offs in the second quarter of 2014. We expect net charge-offs in the residential portfolio to move modestly lower in the near-term; however, we do not expect further declines in commercial and consumer net charge-offs, which we believe are at or below normal levels. See Note 1 , "Significant Accounting Policies," to the Consolidated Financial Statements in our 2013 Annual Report on Form 10-K for additional policy information related to charge-offs.

Total early stage delinquencies decreased to 0.63% of total loans at June 30, 2014 , a decline of 11 basis points compared to December 31, 2013 . Early stage delinquencies, excluding government-guaranteed loans, improved to 0.29% of total loans at June 30, 2014 , compared to 0.36% at December 31, 2013 . At June 30, 2014 , all loan classes, except residential construction, showed improvement in early stage delinquencies compared to December 31, 2013 . We expect that further moderating improvement in early stage delinquencies will be driven by residential loans.

ALLOWANCE FOR CREDIT LOSSES

The allowance for credit losses consists of both the ALLL and the reserve for unfunded commitments. A rollforward of our allowance for credit losses, along with our summarized credit loss experience is shown in the table below. See Note 1 , "Significant Accounting Policies," to our 2013 Annual Report on Form 10-K, and Note 6 , "Allowance for Credit Losses," to the Consolidated Financial Statements in this Form 10-Q, as well as the "Allowance for Credit Losses" section within "Critical Accounting Policies" in our 2013 Annual Report on Form 10-K for further information regarding our ALLL accounting policy, determination, and allocation.



Summary of Credit Losses Experience															Table 8
	Three Months Ended June 30								Six Months Ended June 30
(Dollars in millions)	2014			2013			% Change		2014			2013			% Change ⁵
Allowance for Credit Losses
Balance - beginning of period		$2,086			$2,205		(5	)%		$2,094			$2,219		(6	)%
(Benefit)/provision for unfunded commitments	(3		)	(6		)	50		(7		)	2			NM
Provision for loan losses:
Commercial loans	18			42			(57	)	57			106			(46	)
Residential loans	32			78			(59	)	80			190			(58	)
Consumer loans	26			32			(19	)	45			60			(25	)
Total provision for loan losses	76			152			(50	)	182			356			(49	)
Charge-offs:
Commercial loans	(38		)	(64		)	(41	)	(71		)	(124		)	(43	)
Residential loans	(90		)	(143		)	(37	)	(175		)	(321		)	(45	)
Consumer loans	(30		)	(26		)	15		(63		)	(61		)	3
Total charge-offs	(158		)	(233		)	(32	)	(309		)	(506		)	(39	)
Recoveries:
Commercial loans	12			20			(40	)	26			35			(26	)
Residential loans	23			24			(4	)	40			46			(13	)
Consumer loans	10			10			—		20			20			—
Total recoveries	45			54			(17	)	86			101			(15	)
Net charge-offs	(113		)	(179		)	(37	)	(223		)	(405		)	(45	)
Balance - end of period		$2,046			$2,172		(6	)%		$2,046			$2,172		(6	)%
Components:
ALLL										$2,003			$2,125		(6	)%
Unfunded commitments reserve ¹									43			47			(9	)
Allowance for credit losses										$2,046			$2,172		(6	)%
Average loans		$130,734			$121,372		8	%		$129,635			$121,128		7	%
Period-end loans outstanding									129,744			122,031			6
Ratios:
ALLL to period-end loans ^2,3									1.55		%	1.75		%	(11	)%
ALLL to NPLs ⁴									225			188			20
ALLL to net charge-offs (annualized)									4.41x			2.97x			48
Net charge-offs to average loans (annualized)	0.35		%	0.59		%	(41	)%	0.35		%	0.67		%	(48	)%

¹ The unfunded commitments reserve is recorded in other liabilities in the Consolidated Balance Sheets.

² $292 million and $339 million of LHFI carried at fair value at June 30, 2014 and 2013 , respectively, were excluded from period-end loans in the calculation.

³ Excluding government-guaranteed loans of $6.1 billion and $9.1 billion , respectively, from period-end loans in the calculation results in ratios of 1.62% and 1.89% , respectively.

⁴ $7 million and $8 million of NPL s carried at fair value at June 30, 2014 and 2013 , respectively, were excluded from NPL s in the calculation.

⁵ "NM" - not meaningful. Those changes over 100 percent were not considered to be meaningful.

Provision for Credit Losses

The total provision for credit losses includes the provision for loan losses, as well as the provision for unfunded commitments. The provision for loan losses is the result of a detailed analysis performed to estimate an appropriate and adequate ALLL . During the second quarter of 2014 , the provision for loan losses decreased $76 million , or 50% , compared to the second quarter of 2013 . For the first six months of 2014 , the provision for loan losses decreased $174 million , or 49% , compared to the same period in 2013 . The decline in the provision for loan losses was largely attributable to improvements in credit quality

100

trends, particularly in our residential and CRE portfolios, and lower net charge-offs during the first half of 2014 compared to 2013, partially offset by the effects of loan growth in the commercial and consumer loan portfolios as well as a valuation adjustment in the first quarter of 2014 related to aircraft that were leased under arrangements that qualified as capital leases. Capital leases are categorized as loans on the Consolidated Balance Sheets and, accordingly, an adjustment to the ALLL was recognized. Positive loan growth may offset the benefits of future asset quality improvements and result in smaller declines or potential increases in the ALLL when compared to prior periods; however, the ultimate level of reserves will be determined based on our rigorous quarterly review processes.

ALLL and Reserve for Unfunded Commitments



Allowance for Loan Losses by Loan Segment				Table 9
(Dollars in millions)	June 30, 2014			December 31, 2013
ALLL
Commercial loans		$958			$946
Residential loans	875			930
Consumer loans	170			168
Total		$2,003			$2,044
Segment ALLL as a % of total ALLL
Commercial loans	48		%	46		%
Residential loans	44			46
Consumer loans	8			8
Total	100		%	100		%
Loan segment as a % of total loans
Commercial loans	53		%	50		%
Residential loans	31			34
Consumer loans	16			16
Total	100		%	100		%

The ALLL decreased $41 million , or 2% , during the first six months of 2014 , primarily driven by the improvements in credit conditions of the residential loan portfolio, and the sale of $149 million of accruing residential mortgage TDR s, which resulted in a $16 million decline in the allowance. The decrease was partially offset by the effects of loan growth in the commercial loan portfolio as well as the aforementioned leased asset reserves. At June 30, 2014 , the ALLL to period-end loans ratio of 1.55% decreased five basis points compared to 1.60% at December 31, 2013 . When excluding government-guaranteed loans, the ALLL to period-end loans ratio decreased 10 basis points from December 31, 2013 to 1.62% at June 30, 2014 . The decline was due to modest asset quality improvements in 2014 and the aforementioned sale of restructured loans. The ratio of the ALLL to total NPL s was 225% at June 30, 2014 , compared to 212% at December 31, 2013 . The increase in this ratio was primarily attributable to the $72 million decrease in NPL s. The appropriate ALLL level will continue to be determined by our detailed quarterly review process, which considers multiple credit quality indicators. See "Critical Accounting Policies," in our 2013 Annual Report on Form 10-K for additional information related to ALLL . Despite the steady improvement in certain credit quality metrics, the ALLL level is also impacted by leading indicators of credit risk associated with the portfolio. Factors that management considers when estimating the ALLL include: continued economic uncertainty and the strength of the economic recovery; sustainability in the housing recovery; and the increasing availability of credit and resultant higher levels of leverage for consumers and commercial borrowers.

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NONPERFORMING ASSETS

The following table presents our NPA s:



							Table 10
(Dollars in millions)	June 30, 2014			December 31, 2013			% Change ³
Nonaccrual/NPLs
Commercial loans:
C&I		$199			$196		2	%
CRE	38			39			(3	)
Commercial construction	10			12			(17	)
Total commercial NPLs	247			247			—
Residential loans:
Residential mortgages - nonguaranteed	405			441			(8	)
Home equity products	191			210			(9	)
Residential construction	46			61			(25	)
Total residential NPLs	642			712			(10	)
Consumer loans:
Other direct	4			5			(20	)
Indirect	6			7			(14	)
Total consumer NPLs	10			12			(17	)
Total nonaccrual/NPLs	899			971			(7	)
OREO ¹	136			170			(20	)
Other repossessed assets	6			7			(14	)
Nonperforming LHFS	—			17			(100	)
Total NPAs		$1,041			$1,165		(11	)%
Accruing loans past due 90 days or more		$1,045			$1,228		(15	)%
Accruing LHFS past due 90 days or more	1			—			NM
TDRs
Accruing restructured loans		$2,617			$2,749		(5	)%
Nonaccruing restructured loans ²	365			391			(7	)
Ratios
NPLs to total loans	0.69		%	0.76		%	(9	)%
Nonperforming assets to total loans plus OREO, other repossessed assets, and nonperforming LHFS	0.80			0.91			(12	)

¹ Does not include foreclosed real estate related to loans insured by the FHA or the VA . Proceeds due from the FHA and the VA are recorded as a receivable in other assets until the funds are received and the property is conveyed. The receivable amount related to proceeds due from FHA or the VA totaled $79 million and $88 million at June 30, 2014 and December 31, 2013 , respectively.

² Nonaccruing restructured loans are included in total nonaccrual/ NPL s.

³ "NM" - Not meaningful. Those changes over 100 percent were not considered to be meaningful.

NPA s decreased $124 million , or 11% , during the first six months of 2014 . The decrease was primarily attributable to a $72 million , or 7% , decrease in NPL s, and a $34 million , or 20% decline in OREO . All nonaccrual loan classes declined except C&I , which increased slightly compared to December 31, 2013 . Improved net charge-offs, foreclosures, and loan performance contributed to the decrease in NPL s. At June 30, 2014 , our ratio of NPL s to total loans was 0.69% , down from 0.76% at December 31, 2013 as a result of the decline in NPL s and the increase in total loans. We expect further, but moderating, declines in NPL s during the remainder of 2014, led by continuing improvements in residential loans.

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Real estate related loans comprise a significant portion of our overall NPA s as a result of the devaluation of U.S. housing during the past economic recession. The amount of time necessary to obtain control of residential real estate collateral in certain states, primarily Florida, has remained elevated due to delays in the foreclosure process. These delays may continue to impact the resolution of real estate related loans within the NPA portfolio.

Nonaccrual loans, loans over 90 days past due and still accruing, and TDR loans, are problem loans or loans with potential weaknesses that are disclosed in the NPA table above. Loans with known potential credit problems that may not otherwise be disclosed in this table include accruing criticized commercial loans, which are disclosed along with additional credit quality information in Note 5 , “Loans,” to the Consolidated Financial Statements in this Form 10-Q. At June 30, 2014 and December 31, 2013 , there were no known significant potential problem loans that are not otherwise disclosed.

Nonperforming Loans

Total nonperforming commercial loans were unchanged from December 31, 2013 . The slight increase in C&I NPL s of $3 million , or 2% was offset by a decrease in CRE and commercial construction loans.

Nonperforming residential loans were the largest driver of the overall decline in NPL s, decreasing $70 million , or 10% , during the first six months of 2014 . The reduction in nonguaranteed residential mortgage NPL s and residential construction NPL s accounted for $36 million and $15 million , respectively, of this decrease, and was primarily the result of net charge-offs and foreclosures, as well as pay-offs and improved loan performance.

Interest income on consumer and residential nonaccrual loans, if recognized, is recognized on a cash basis. Interest income on commercial nonaccrual loans is not generally recognized until after the principal has been reduced to zero. We recognized $6 million and $9 million of interest income related to nonaccrual loans during the second quarter of 2014 and 2013 , respectively, and $11 million and $20 million during the first six months of 2014 and 2013 , respectively. If all such loans had been accruing interest according to their original contractual terms, estimated interest income of $12 million and $20 million during the second quarter of 2014 and 2013 , respectively, and $25 million and $43 million during the first six months of 2014 and 2013 , respectively, would have been recognized.

Other Nonperforming Assets

OREO decreased $34 million , or 20% , during the first six months of 2014 as a result of net decreases of $15 million in residential homes, $11 million in commercial properties, and $8 million in residential construction related properties. Sales of OREO resulted in proceeds of $122 million and $205 million during the first six months of 2014 and 2013 , respectively, contributing to net gains on sales of OREO of $23 million and $41 million , respectively, inclusive of valuation reserves.

We would not expect net gains from the sale of OREO experienced during 2013 to continue at the same level during the remainder of 2014. Gains and losses on the sale of OREO are recorded in other noninterest expense in the Consolidated Statements of Income. Sales of OREO and the related gains or losses are highly dependent on our disposition strategy and buyer opportunities. See Note 14 , “Fair Value Election and Measurement,” to the Consolidated Financial Statements in this Form 10-Q for additional information.

Geographically, most of our OREO properties are located in Florida, Georgia, and North Carolina. Residential and commercial properties comprised 75% and 16% , respectively, of OREO at June 30, 2014 ; the remainder is related to land and other properties. Upon foreclosure, the values of these properties were reevaluated and, if necessary, written down to their then-current estimated value less estimated costs to sell. Any further decreases in values could result in additional losses on these properties as we periodically revalue them as further discussed in Note 14 , "Fair Value Election and Measurement," to the Consolidated Financial Statements in this Form 10-Q. We are actively managing and disposing of these foreclosed assets to minimize future losses.

At June 30, 2014 and December 31, 2013 , total accruing loans past due ninety days or more included LHFI and LHFS and totaled $1.0 billion and $1.2 billion , respectively, 97% and 96% of which were government guaranteed at June 30, 2014 and December 31, 2013 , respectively. Accruing LHFI past due ninety days or more decreased by $183 million , or 15% , during the first six months of 2014 , primarily driven by residential mortgages and student loans that are guaranteed by a federal agency.

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Restructured Loans

To maximize the collection of loan balances, we evaluate troubled loans on a case-by-case basis to determine if a loan modification would be appropriate. We pursue loan modifications when there is a reasonable chance that an appropriate modification would allow our client to continue servicing the debt. For loans secured by residential real estate, if the client demonstrates a loss of income such that the client cannot reasonably support a modified loan, we may pursue short sales and/or deed-in-lieu arrangements. For loans secured by income producing commercial properties, we perform an in-depth and ongoing programmatic review. We review a number of factors, including cash flows, loan structures, collateral values, and guarantees to identify loans within our income producing commercial loan portfolio that are most likely to experience distress. Based on our review of these factors and our assessment of overall risk, we evaluate the benefits of proactively initiating discussions with our clients to improve a loan’s risk profile. In some cases, we may renegotiate terms of their loans so that they have a higher likelihood of continuing to perform. To date, we have restructured loans in a variety of ways to help our clients service their debt and to mitigate the potential for additional losses. The primary restructuring methods being offered to our residential clients are reductions in interest rates and extensions of terms. For commercial loans, the primary restructuring method is the extension of terms.

Loans with modifications deemed to be economic concessions resulting from borrower financial difficulties are reported as TDR s. Accruing loans may retain accruing status at the time of restructure and the status is determined by, among other things, the nature of the restructure, the borrower's repayment history, and the borrower's repayment capacity. Nonaccruing loans that are modified and demonstrate a sustainable history of repayment performance, typically six months, in accordance with their modified terms are generally reclassified to accruing TDR status. Generally, once a residential loan becomes a TDR , we expect that the loan will continue to be reported as a TDR for its remaining life even after returning to accruing status unless the modified rates and terms at the time of modification were available in the market at the time of the modification. We note that some restructurings may not ultimately result in the complete collection of principal and interest (as modified by the terms of the restructuring), culminating in default, which could result in additional incremental losses. These potential incremental losses have been factored into our overall ALLL estimate through the use of loss forecasting methodologies. The level of re-defaults will likely be affected by future economic conditions. At June 30, 2014 and December 31, 2013 , specific reserves included in the ALLL for residential TDR s were $349 million and $345 million , respectively. See Note 5 , "Loans," to the Consolidated Financial Statements in this Form 10-Q for more information.

STM cooperated with the United States Attorney's Office for the Western District of Virginia and the Office of the Special Inspector General for the Troubled Asset Relief Program (collectively, the “Western District”) in their investigation of STM 's administration of HAMP . On July 3, 2014, the parties reached an agreement to settle the claims at issue in the investigation. STM 's commitment under the agreement includes an expected $179 million in consumer remediation (up to a maximum of $274 million), $20 million to fund housing counseling for homeowners, $10 million paid toward restitution to Fannie Mae and Freddie Mac , and a cash payment of $16 million to the U.S. Treasury . The financial statements at June 30, 2014 included a $204 million pre-tax charge related to the estimated cost of the anticipated requirements of fulfilling these commitments.

Separately, we have committed to provide $500 million in consumer relief pursuant to the National Mortgage Servicing Settlement agreement with certain parties. An expansion in the number and type of restructuring methods for consumer clients, including principal forgiveness, is being implemented as a result of these consumer relief commitments. Additionally, certain modification methods under consideration could be deemed to be economic concessions and result in additional modified loans being reported as TDR s. Our financial statements at June 30, 2014 reflect our estimated cost of the anticipated requirements of fulfilling our commitments. We do not expect the consumer relief efforts or implementation of certain servicing standards associated with the settlements to have a material impact on our future financial results. However, we face the risk of being unable to meet certain consumer relief commitments, resulting in increased costs to resolve this matter.

See additional discussion related to HAMP and the Mortgage Servicing Settlement in Note 15 , “Contingencies,” to the Consolidated Financial Statements in this Form 10-Q.

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The following tables display our residential real estate TDR portfolio by modification type and payment status. Guaranteed loans that have been repurchased from Ginnie Mae under an early buyout clause and subsequently modified have been excluded from the table. Such loans totaled approximately $54 million at June 30, 2014 and December 31, 2013 .



Selected Residential TDR Data											Table 11
	June 30, 2014
	Accruing TDRs						Nonaccruing TDRs
(Dollars in millions)	Current		Delinquent ¹		Total		Current		Delinquent ¹		Total
Rate reduction		$761		$74		$835		$19		$58		$77
Term extension	15		4		19		—		4		4
Rate reduction and term extension	1,277		113		1,390		37		109		146
Other ²	181		11		192		17		43		60
Total		$2,234		$202		$2,436		$73		$214		$287

	December 31, 2013
	Accruing TDRs						Nonaccruing TDRs
(Dollars in millions)	Current		Delinquent ¹		Total		Current		Delinquent ¹		Total
Rate reduction		$692		$90		$782		$27		$50		$77
Term extension	17		4		21		1		6		7
Rate reduction and term extension	1,439		135		1,574		27		127		154
Other ²	180		13		193		16		54		70
Total		$2,328		$242		$2,570		$71		$237		$308

¹ TDR s considered delinquent for purposes of this table were those at least thirty days past due.

² Primarily consists of extensions and deficiency notes.

At June 30, 2014 , our total TDR portfolio was $3.0 billion and was composed of $2.7 billion , or 91% , of residential loans (predominantly first and second lien residential mortgages and home equity lines of credit), $138 million , or 5% , of commercial loans (predominantly income-producing properties), and $121 million , or 4% , of consumer loans.

Total TDR s decreased $158 million from December 31, 2013, primarily driven by the sale of $149 million of residential mortgage TDR s in the second quarter of 2014. Accruing TDR s decreased $132 million , or 5% , and nonaccruing TDR s decreased $26 million , or 7% .

Generally, interest income on restructured loans that have met sustained performance criteria and have been returned to accruing status is recognized according to the terms of the restructuring. Such recognized interest income was $31 million and $30 million during the second quarter of 2014 and 2013 , respectively, and $63 million and $56 million for the first six months of 2014 and 2013 , respectively. If all such loans had been accruing interest according to their original contractual terms, estimated interest income of $39 million and $40 million during the second quarter of 2014 and 2013 , respectively, and $81 million and $76 million for the first six months of 2014 and 2013 , respectively, would have been recognized.

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SELECTED FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE

The following is a discussion of the more significant financial assets and financial liabilities that are currently carried at fair value on the Consolidated Balance Sheets at June 30, 2014 and December 31, 2013 . For a complete discussion of our financial instruments carried at fair value and the methodologies used to estimate the fair values of our financial instruments, see Note 14 , “Fair Value Election and Measurement,” to the Consolidated Financial Statements in this Form 10-Q.



Trading Assets and Liabilities and Derivatives			Table 12

(Dollars in millions)	June 30, 2014		December 31, 2013
Trading Assets and Derivatives:
U.S. Treasury securities		$170		$219
Federal agency securities	405		426
U.S. states and political subdivisions	32		65
MBS - agency	481		323
CDO/CLO securities	5		57
ABS	—		6
Corporate and other debt securities	727		534
CP	141		29
Equity securities	58		109
Derivatives ¹	1,333		1,384
Trading loans ²	1,789		1,888
Total trading assets and derivatives		$5,141		$5,040
Trading Liabilities and Derivatives:
U.S. Treasury securities		$516		$472
Corporate and other debt securities	310		179
Equity securities	—		5
Derivatives ¹	364		525
Total trading liabilities and derivatives		$1,190		$1,181

¹ Amounts include the impact of offsetting cash collateral received from and paid to the same derivative counterparties and the impact of netting derivative assets and derivative liabilities when a legally enforceable master netting agreement or similar agreement exists.

² Includes loans related to TRS .

Trading Assets and Liabilities and Derivatives

Trading assets and derivatives increased $101 million , or 2% , compared to December 31, 2013 , as a result of normal changes in the trading portfolio product mix, primarily due to increases in corporate and other debt securities, agency MBS, and CP. The increase was partially offset by decreases primarily related to trading loans and CDO/CLO securities due to the sale of investments during 2014. Trading liabilities and derivatives increased $9 million , or 1% , compared to December 31, 2013 as increases in corporate and other debt securities and U.S. Treasury securities were partially offset by a decrease in net derivatives as a result of normal business activity. See Note 12 , "Derivative Financial Instruments," to the Consolidated Financial Statements in this Form 10-Q for additional information on derivatives.

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Securities Available for Sale							Table 13
	June 30, 2014
(Dollars in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities		$1,581		$10		$17		$1,574
Federal agency securities	1,005		17		32		990
U.S. states and political subdivisions	243		8		—		251
MBS - agency	19,692		555		182		20,065
MBS - private	136		4		—		140
ABS	20		2		—		22
Corporate and other debt securities	38		3		—		41
Other equity securities ¹	931		1		—		932
Total securities AFS		$23,646		$600		$231		$24,015

¹ At June 30, 2014 , other equity securities included the following: $376 million in FHLB of Atlanta stock, $402 million in Federal Reserve Bank stock, $153 million in mutual fund investments, and $1 million of other.



	December 31, 2013
(Dollars in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities		$1,334		$6		$47		$1,293
Federal agency securities	1,028		13		57		984
U.S. states and political subdivisions	232		7		2		237
MBS - agency	18,915		421		425		18,911
MBS - private	155		1		2		154
ABS	78		2		1		79
Corporate and other debt securities	39		3		—		42
Other equity securities ¹	841		1		—		842
Total securities AFS		$22,622		$454		$534		$22,542

¹ At December 31, 2013 , other equity securities included the following: $336 million in FHLB of Atlanta stock, $402 million in Federal Reserve Bank stock, $103 million in mutual fund investments, and $1 million of other.

Securities Available for Sale

The securities AFS portfolio is managed as part of our overall liquidity management and ALM process to optimize income and portfolio value over an entire interest rate cycle while mitigating the associated risks. Changes in the size and composition of the portfolio during the first six months of 2014 reflect our efforts to maintain a high quality liquid portfolio while managing our interest rate risk profile. The amortized cost of the portfolio increased $1.0 billion during the first six months of 2014, primarily due to increased holdings of agency MBS and U.S. Treasury securities. Additionally, our holdings of ABS and private MBS declined due to maturities and payouts. The fair value of the portfolio increased $1.5 billion due to portfolio growth and a $449 million increase in market value due to a decline in market interest rates.

During the six months ended June 30, 2014 , we recorded $2 million in net realized losses related to the sale of securities AFS , compared to net realized gains of $2 million during the six months ended June 30, 2013 , including $1 million in OTTI recognized in earnings for both periods. For additional information on composition and valuation assumptions related to securities AFS , see Note 4 , "Securities Available for Sale," and the “Trading Assets and Derivatives and Securities Available for Sale” section of Note 14 , “Fair Value Election and Measurement,” to the Consolidated Financial Statements in this Form 10-Q.

For the second quarter of 2014, the average yield, on a FTE basis, for the securities AFS portfolio was 2.61% , compared to 2.49% for the second quarter of 2013. For the six months ended June 30, 2014 , the average yield on a FTE basis for the securities AFS portfolio was 2.66% , compared with 2.53% for the six months ended June 30, 2013 . The reduction of MBS premium amortization associated with lower cash flow due to higher mortgage interest rates drove the increase in yield on securities AFS .

Our total investment securities portfolio had an effective duration of 4.1 years at June 30, 2014 compared to 4.7 years at December 31, 2013 . The decrease in the effective duration is the result of faster prepayment assumptions associated with

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lower mortgage rates compared to year-end. Effective duration is a measure of price sensitivity of a bond portfolio to an immediate change in market interest rates, taking into consideration embedded options. An effective duration of 4.1 years suggests an expected price change of 4.1 % for a one percent instantaneous change in market interest rates.

The credit quality and liquidity profile of the securities portfolio remained strong at June 30, 2014 , and consequently, we have the flexibility to respond to changes in the economic environment and take actions as opportunities arise to manage our interest rate risk profile and balance liquidity against investment returns. Over the longer term, the size and composition of the investment portfolio will reflect balance sheet trends, our overall liquidity, and interest rate risk management objectives. Accordingly, the size and composition of the investment portfolio could change meaningfully over time. Additionally, we transferred $2.1 billion of government guaranteed residential mortgages, which yield approximately 3.25%, to LHFS in the second quarter, in anticipation of sale on a servicing retained basis in the third quarter of 2014. We currently plan on reinvesting the proceeds of this anticipated third quarter sale into high-quality liquid securities that yield approximately 3.20%, and are expected to qualify as high-quality liquid assets under the forthcoming LCR requirements.

Federal Home Loan Bank and Federal Reserve Bank Stock

We hold capital stock in the FHLB of Atlanta and in the Federal Reserve Bank. In order to be an FHLB member, we are required to purchase capital stock in the FHLB . In exchange, members take advantage of competitively priced advances as a wholesale funding source and access grants and low-cost loans for affordable housing and community-development projects, amongst other benefits. At June 30, 2014 , we held a total of $376 million of capital stock in the FHLB , an increase of $40 million compared to December 31, 2013 . During the three and six months ended June 30, 2014 , we recognized dividends related to FHLB capital stock of $3 million and $6 million , respectively, compared to $1 million and $3 million during the three and six months ended June 30, 2013 , respectively. In order to become a member of the Federal Reserve System, regulations require that we hold a certain amount of capital stock as either a percentage of the Bank ’s capital or as a percentage of total deposit liabilities. At June 30, 2014 , we held $402 million of Federal Reserve Bank stock, unchanged from December 31, 2013 . During the three and six months ended June 30, 2014 and 2013, we recognized dividends related to Federal Reserve Bank stock of $6 million and $12 million , respectively.



BORROWINGS

Short-Term Borrowings															Table 14
	June 30, 2014				Three Months Ended June 30, 2014						Six Months Ended June 30, 2014
	Balance		Rate		Daily Average				Maximum Outstanding at any Month-End		Daily Average				Maximum Outstanding at any Month-End
(Dollars in millions)	Balance		Rate		Balance		Rate		Maximum Outstanding at any Month-End		Balance		Rate		Maximum Outstanding at any Month-End
Funds purchased ¹		$1,053	0.09	%		$825	0.09	%		$1,078		$907	0.09	%		$1,375
Securities sold under agreements to repurchase ¹	2,192		0.14		2,148		0.12		2,192		2,175		0.11		2,228
Other short-term borrowings	5,870		0.24		5,796		0.23		6,395		5,692		0.24		6,395

	June 30, 2013				Three Months Ended June 30, 2013						Six Months Ended June 30, 2013
	Balance		Rate		Daily Average				Maximum Outstanding at any Month-End		Daily Average				Maximum Outstanding at any Month-End
(Dollars in millions)	Balance		Rate		Balance		Rate		Maximum Outstanding at any Month-End		Balance		Rate		Maximum Outstanding at any Month-End
Funds purchased ¹		$420	0.07	%		$657	0.10	%		$1,000		$686	0.10	%		$1,000
Securities sold under agreements to repurchase ¹	1,869		0.18		1,879		0.13		1,869		1,793		0.16		1,869
Other short-term borrowings	5,825		0.25		5,422		0.24		5,825		4,576		0.26		5,825

¹ Funds purchased and securities sold under agreements to repurchase mature overnight or at a fixed maturity generally not exceeding three months. Rates on overnight funds reflect current market rates. Rates on fixed maturity borrowings are set at the time of the borrowings.

Short-Term Borrowings

Our total period-end short-term borrowings increased $1.0 billion , or 12% , from June 30, 2013 , due to a $633 million increase in funds purchased and a $323 million increase in securities sold under agreements to repurchase.

During the three months ended June 30, 2014 , our total daily average short-term borrowings increased $811 million , or 10% , compared to the three months ended June 30, 2013 . The increase was primarily driven by increases in daily average balances

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for other short-term borrowings of $374 million and securities sold under agreements to repurchase of $269 million due to ordinary balance sheet management practices. The increase in daily average balances of other short-term borrowings was largely due to a $265 million increase in daily average balances for FHLB advances. During the six months ended June 30, 2014 , our total daily average short-term borrowings increased $1.7 billion , or 24% , compared to the six months ended June 30, 2013 . The increase was predominantly driven by the same factors as discussed above for the second quarter.

Our daily average balances for all short-term borrowings during the three and six months ended June 30, 2014 were lower than our period-end balances due to fluctuations resulting from normal balance sheet management practices. For the three and six months ended June 30, 2014 , our maximum monthly outstanding balances for other short-term borrowings was higher than our period-end balance as a result of increased short term FHLB borrowing during the second quarter of 2014. For the six months ended June 30, 2014 , our maximum monthly outstanding balance for funds purchased was higher than our period-end balance as a result of increased activity in funds purchased during the second quarter of 2014.

Long-Term Debt

During the six months ended June 30, 2014 , our long-term debt increased $2.5 billion , or 23% . The increase was due to the addition of a $1.0 billion long-term FHLB advance during the second quarter of 2014 and our senior note issuances totaling $1.5 billion during the first half of 2014. Specifically, during the first quarter we issued $250 million of 3-year floating rate senior notes and $600 million of 3-year fixed rate senior notes under our Global Bank Note program. Additionally, during the second quarter of 2014, we issued $650 million of 5-year fixed rate senior notes that pay a fixed annual coupon rate of 2.50% . We may call these notes beginning on April 1, 2019, and they will mature on May 1, 2019. These issuances allowed us to add to our funding sources at relatively low long-term borrowing rates.

Average long-term debt for the six months ended June 30, 2014 increased $2.2 billion , or 23% , compared to the average for the six months ended June 30, 2013 . The increase was predominantly driven by the same factors as discussed above related to senior note issuances and FHLB advance addition. There have been no other material changes in our long-term debt, as described in our 2013 Annual Report on Form 10-K, since December 31, 2013.

CAPITAL RESOURCES

Our primary federal regulator, the Federal Reserve , measures capital adequacy within a framework that makes capital requirements relative to the risk profiles of individual banking companies. The guidelines risk weight assets and off-balance sheet risk exposures according to predefined classifications, creating a base from which to compare capital levels. Tier 1 capital primarily includes realized equity and qualified preferred instruments, less purchase accounting intangibles such as goodwill and core deposit intangibles, and certain other regulatory deductions. Total capital consists of Tier 1 capital and Tier 2 capital, which includes qualifying portions of subordinated debt, ALLL up to a maximum of 1.25% of RWA , and 45% of the unrealized gain on equity securities. Additionally, mark-to-market adjustments related to our estimated credit spreads for debt and index linked CD s accounted for at fair value are excluded from regulatory capital.

Both the Company and the Bank are subject to minimum Tier 1 capital and Total capital ratios of 4% and 8%, respectively. To be considered “well-capitalized,” ratios of 6% and 10%, respectively, are required. Additionally, the Company and the Bank are subject to requirements for the Tier 1 leverage ratio, which measures Tier 1 capital against average total assets less certain deductions, as calculated in accordance with regulatory guidelines. The minimum and well-capitalized leverage ratios are 3% and 5%, respectively.

The concept of Tier 1 common equity, the portion of Tier 1 capital that is considered common equity, was first introduced in the 2009 SCAP , and represents the portion of Tier 1 capital that is attributable to common shareholders. Our primary regulator, rather than U.S. GAAP , defines Tier 1 common equity and the Tier 1 common equity ratio. As a result, our calculation of these measures may differ from those of other financial services companies that calculate them. However, Tier 1 common equity and the Tier 1 common equity ratio continue to be important factors which regulators examine in evaluating financial institutions; therefore, we present these measures to allow for evaluations of our capital. Further, on October 11, 2013, the Federal Reserve published final rules in the Federal Register related to required minimum capital ratios that become effective for us on January 1, 2015. See further discussion below under " Basel III ."

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Regulatory Capital Ratios				Table 15
(Dollars in millions)	June 30, 2014			December 31, 2013
Tier 1 capital		$16,614			$16,073
Total capital	19,537			19,052
RWA	155,875			148,746
Average total assets for leverage ratio	173,815			167,848
Tier 1 common equity:
Tier 1 capital		$16,614			$16,073
Less:
Qualifying trust preferred securities	627			627
Preferred stock	725			725
Allowable minority interest	107			119
Tier 1 common equity		$15,155			$14,602
Risk-based ratios:
Tier 1 common equity ¹	9.72		%	9.82		%
Tier 1 capital	10.66			10.81
Total capital	12.53			12.81
Tier 1 leverage ratio	9.56			9.58
Total shareholders’ equity to assets	12.12			12.22

¹ At June 30, 2014 our Basel III CET 1 ratio as calculated under the final Basel III capital rules was estimated to be 9.7% . See the " Selected Quarterly Financial Data and Reconcilement of Non-U.S. GAAP Measures " section in this MD&A for a reconciliation of the current Basel I ratio to the estimated Basel III ratio.

At June 30, 2014 , our capital ratios were well above current regulatory requirements. Tier 1 capital ratios decreased slightly during 2014 driven by an increase in our RWA from December 31, 2013 , primarily the result of loan growth and an increase in off-balance sheet unused lending commitments, partially offset by an increase in retained earnings.

During the six months ended June 30, 2014 , we declared and paid common dividends totaling $160 million , or $0.30 per common share, compared with $81 million , or $0.15 per common share during the six months ended June 30, 2013 . Additionally, we declared and paid $19 million and $18 million of preferred dividends during the six months ended June 30, 2014 and 2013 , respectively.

Substantially all of our retained earnings are undistributed earnings of the Bank , which are restricted by various regulations administered by federal and state bank regulatory authorities. At June 30, 2014 and December 31, 2013 , retained earnings of the Bank available for payment of cash dividends to the Parent Company under these regulations totaled approximately $2.3 billion and $2.6 billion, respectively.

During the first quarter of 2014, we announced capital plans upon completion of the Federal Reserve 's review of and non-objection to our capital plan in conjunction with the 2014 CCAR . Our capital plans include repurchase of common stock, an increase in the common stock dividend, and maintaining the current level of preferred stock dividends. Specifically, the Board has approved the repurchase of up to $450 million of our outstanding common stock between the second quarter of 2014 and the first quarter of 2015, as well as an increase of the quarterly common stock dividend to $0.20 per common share, which reflects an increase from $0.10 per common share. During the second quarter, we declared and paid a $0.20 common stock dividend and began repurchasing common shares outstanding under the 2014 capital plan. During the first quarter of 2014, we repurchased $50 million of our outstanding common stock, which completed our authorized share repurchases in conjunction with the 2013 capital plan. During the second quarter we repurchased $83 million of our outstanding common stock in conjunction with the 2014 capital plan.

During the second quarter, the Federal Reserve issued new industry guidance that limits a bank holding company’s ability to make capital distributions to the extent that its actual capital issuances, including employee share-based compensation, are less than the amount indicated in its submitted capital plan. Given this new guidance and our forecast for employee-related share-based compensation, our planned share repurchases through the first quarter of 2015 will be approximately $50 million lower than the $450 million maximum in our 2014 capital plan. The drivers of the lower than planned capital issuance include a valuation adjustment to our noncontrolling interest in RidgeWorth and changes in employee option exercises relative to forecast. The net share dilution impact from this change is immaterial.

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Basel III

The Dodd-Frank Act will impact the composition of our capital elements in at least two ways over the next several years. First, the Dodd-Frank Act authorizes the Federal Reserve to enact “prudential” capital requirements which require greater capital levels than presently required and which vary among financial institutions based on size, risk, complexity, and other factors. As expected, the Federal Reserve used this authority by publishing final rules on October 11, 2013. The rules require banking organizations such as us to meet revised minimum regulatory capital ratios beginning on January 1, 2015, and begin the transition period for the revised definitions of regulatory capital and the revised regulatory capital adjustments and deductions, as well as comply with the standardized approach for determining RWA s. Second, a portion of the Dodd-Frank Act , sometimes referred to as the Collins Amendment, directs the Federal Reserve to adopt new capital requirements for certain bank holding companies, including us, which are at least as stringent as those applicable to insured depository institutions. Furthermore, beginning January 1, 2016, these rules introduce a capital conservation buffer, which places restrictions on the amount of retained earnings that may be used for distributions or discretionary bonus payments as risk-based capital ratios approach their respective “adequately capitalized” minimums.

Under the final rules, the minimum capital requirements will be a CET 1 ratio of 4.5%; Tier 1 Capital ratio of 6%; Total Capital ratio of 8%; and U.S. Leverage ratio of 4%. The rules include a capital conservation buffer of 2.5% of RWA that is effectively layered on top of the minimum capital risk-based ratios. At June 30, 2014 , we believe each of our regulatory capital ratios exceeds their respective minimum capital ratio requirements under the final rules, as well as the 2.5% capital conservation buffer, when measured on a fully-phased-in basis.

Furthermore, the final Basel III capital rules require the phase out of non-qualifying Tier 1 Capital instruments such as trust preferred securities. As such, over a two year period beginning on January 1, 2015, approximately $627 million in principal amount of Parent Company trust preferred and other hybrid capital securities currently outstanding will no longer qualify for Tier 1 capital treatment, but instead will only qualify for Tier 2 capital treatment. Accordingly, we anticipate that, by January 1, 2016, all $627 million of our outstanding trust preferred securities will lose Tier 1 capital treatment, and will be reclassified as Tier 2 capital. We do not expect any impact to our total capital ratio as a result of this reclassification.

CRITICAL ACCOUNTING POLICIES

There have been no significant changes to our Critical Accounting Policies as described in our 2013 Annual Report on Form 10-K.

ENTERPRISE RISK MANAGEMENT

There have been no significant changes in our Enterprise Risk Management practices as described in our 2013 Annual Report on Form 10-K.

Credit Risk Management

There have been no significant changes in our Credit Risk Management practices as described in our 2013 Annual Report on Form 10-K.

Operational Risk Management

There have been no significant changes in our Operational Risk Management practices as described in our 2013 Annual Report on Form 10-K.

Market Risk Management

Market risk refers to potential losses arising from changes in interest rates, foreign exchange rates, equity prices, commodity prices, and other relevant market rates or prices. Interest rate risk, defined as the exposure of net interest income and MVE to adverse movements in interest rates, is our primary market risk and mainly arises from the structure of our balance sheet, which includes all loans. Variable rate loans, prior to any hedging related actions, are approximately 58% of total loans and after giving consideration to hedging related actions, are approximately 44% of total loans. We are also exposed to market risk in our trading instruments carried at fair value. ALCO meets regularly and is responsible for reviewing our open positions and establishing policies to monitor and limit exposure to market risk.

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Market Risk from Non-Trading Activities

The primary goal of interest rate risk management is to control exposure to interest rate risk, within policy limits approved by the Board . These limits and guidelines reflect our tolerance for interest rate risk over both short-term and long-term horizons. No limit breaches occurred during the first six months of 2014 .

The major sources of our non-trading interest rate risk are timing differences in the maturity and repricing characteristics of assets and liabilities, changes in the shape of the yield curve, and the potential exercise of explicit or embedded options. We measure these risks and their impact by identifying and quantifying exposures through the use of sophisticated simulation and valuation models, which, as described in additional detail below, are employed by management to understand net interest income at risk and MVE at risk. These measures show that our interest rate risk profile is modestly asset sensitive at June 30, 2014 .

MVE and net interest income sensitivity are complementary interest rate risk metrics and should be viewed together. Net interest income sensitivity captures asset and liability repricing mismatches for the first year inclusive of forecast balance sheet changes and is considered a shorter term measure, while MVE sensitivity captures mismatches within the period end balance sheets through the financial instruments' respective maturities and is considered a longer term measure.

A positive net interest income sensitivity in a rising rate environment indicates that over the forecast horizon of one year, asset based income will increase more quickly than liability based expense due to balance sheet composition. A negative MVE sensitivity in a rising rate environment indicates that the value of financial assets will decrease more than the value of financial liabilities.

One of the primary methods that we use to quantify and manage interest rate risk is simulation analysis, which we use to model net interest income from assets, liabilities, and derivative positions under various interest rate scenarios and balance sheet structures. This analysis measures the sensitivity of net interest income over a two year time horizon, which differs from the interest rate sensitivities in Table 16 , which are prescribed to be over a one year time horizon. Key assumptions in the simulation analysis (and in the valuation analysis discussed below) relate to the behavior of interest rates and spreads, the changes in product balances, and the behavior of loan and deposit clients in different rate environments. This analysis incorporates several assumptions, the most material of which relate to the repricing characteristics and balance fluctuations of deposits with indeterminate or non-contractual maturities.

As the future path of interest rates cannot be known, we use simulation analysis to project net interest income under various scenarios including implied forward and deliberately extreme and perhaps unlikely scenarios. The analyses may include rapid and gradual ramping of interest rates, rate shocks, basis risk analysis, and yield curve twists. Specific strategies are also analyzed to determine their impact on net interest income levels and sensitivities.

The sensitivity analysis included below is measured as a percentage change in net interest income due to instantaneous moves in benchmark interest rates. Estimated changes set forth below are dependent upon material assumptions such as those previously discussed.



Net Interest Income Asset Sensitivity		Table 16

	Estimated % Change in Net Interest Income Over 12 Months ¹
(Basis points)	June 30, 2014	December 31, 2013
Rate Change
+200	6.2%	1.8%
+100	3.2%	1.0%
-25	(0.6)%	(0.8)%

¹ Estimated % change of net interest income is reflected on a non-FTE basis.

The increase in net interest income asset sensitivity compared to December 31, 2013 is due to changes in balance sheet composition, particularly swap maturities and increased client deposits, which are expected to be accretive to net interest income in a rising rate environment. See additional discussion related to net interest income in the "Net Interest Income/Margin" section of this MD&A .

We also perform valuation analysis, which we use for discerning levels of risk present in the balance sheet and derivative positions that might not be taken into account in the net interest income simulation horizon. Whereas net interest income simulation highlights exposures over a relatively short time horizon, valuation analysis incorporates all cash flows over the estimated remaining life of all balance sheet and derivative positions. The valuation of the balance sheet, at a point in time, is defined as the discounted present value of asset cash flows and derivative cash flows minus the discounted present value

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of liability cash flows, the net of which is referred to as MVE . The sensitivity of MVE to changes in the level of interest rates is a measure of the longer-term repricing risk and options risk embedded in the balance sheet. Similar to the net interest income simulation, MVE uses instantaneous changes in rates. However, MVE values only the current balance sheet and does not incorporate the growth assumptions that are used in the net interest income simulation model. As with the net interest income simulation model, assumptions about the timing and variability of balance sheet cash flows are critical in the MVE analysis. Particularly important are the assumptions driving prepayments and the expected changes in balances and pricing of the indeterminate deposit portfolios. At June 30, 2014 , the MVE profile indicates a decline in net balance sheet value due to instantaneous upward changes in rates. MVE sensitivity is reported in both upward and downward rate shocks.



Market Value of Equity Sensitivity		Table 17

	Estimated % Change in MVE
(Basis points)	June 30, 2014	December 31, 2013
Rate Change
+200	(5.1)%	(8.0)%
+100	(2.1)%	(3.8)%
-25	0.2%	0.8%

The decrease in MVE sensitivity from December 31, 2013 is primarily due to an aging of interest rate swaps, fixed rate debt issuances, faster mortgage prepayments, and the annual assumption review of indeterminate maturity deposits. While an instantaneous and severe shift in interest rates was used in this analysis to provide an estimate of exposure under an extremely adverse scenario, we believe that a gradual shift in interest rates would have a much more modest impact. Since MVE measures the discounted present value of cash flows over the estimated lives of instruments, the change in MVE does not directly correlate to the degree that earnings would be impacted over a shorter time horizon (i.e., the current year). Further, MVE does not take into account factors such as future balance sheet growth, changes in product mix, changes in yield curve relationships, and changing product spreads that could mitigate the adverse impact of changes in interest rates. The net interest income simulation and valuation analyses do not include actions that management may undertake to manage this risk in response to anticipated changes in interest rates.

Market Risk from Trading Activities

Under established policies and procedures, we manage market risk associated with trading activities using a VAR approach that takes into account exposures resulting from interest rate risk, equity risk, foreign exchange risk, credit spread risk, and commodity risk. For trading portfolios, VAR measures the estimated maximum loss from a trading position, given a specified confidence level and time horizon. VAR results are monitored daily for each trading portfolio against established limits. For risk management purposes, our VAR calculation is based on a historical simulation and measures the potential trading losses using a one-day holding period at a one-tail, 99% confidence level. This means that, on average, trading losses are expected to exceed VAR one out of 100 trading days or two to three times per year. While VAR can be a useful risk management tool, it does have inherent limitations including the assumption that past market behavior is indicative of future market performance. As such, VAR is only one of several tools used to manage trading risk. Other tools used to actively manage trading risk include scenario analysis, stress testing, profit and loss attribution, and stop loss limits.

In addition to VAR , in accordance with the 2013 Market Risk Rule, we also calculate Stressed VAR , which is used as a component of the total market risk-based capital charge. We calculate the Stressed VAR risk measure using a ten-day holding period at a one-tail, 99% confidence level and employ a historical simulation approach based on a continuous twelve-month historical window that reflects a period of significant financial stress to our portfolio. As such, our Stressed VAR calculation uses the same methodology and models as regular VAR , which is a requirement under the Market Risk Rule.

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The following table presents VAR and Stressed VAR for the three and six months ended June 30 , as well as VAR by Risk Factor at June 30, 2014 and December 31, 2013 :



Value at Risk Profile							Table 18

	Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)	2014		2013		2014		2013
VAR (1-day holding period)
Ending		$2		$5		$2		$5
High	3		8		3		8
Low	2		3		2		3
Average	2		4		2		5

Stressed VAR (10-day holding period)
Ending		$37		$31		$37		$31
High	75		92		75		92
Low	22		25		18		12
Average	36		35		29		29

(Dollars in millions)					June 30, 2014		December 31, 2013
VAR by Risk Factor (1-day holding period)
Commodity price risk						$—		$—
Equity price risk					1		2
Foreign exchange risk					—		—
Interest rate risk					1		2
Credit spread risk					2		2
VAR (1-day diversified) total					2		3

The trading portfolio, measured in terms of VAR , is predominantly comprised of four material sub-portfolios of covered positions: Credit Trading, Fixed Income Securities, Interest Rate Derivatives, and Equity Derivatives. While there were no material changes in composition of the trading portfolio during the first six months of 2014 , risk reducing activities, primarily in our equity derivatives and fixed income business during the latter half of 2013 continued into the first quarter of 2014 and resulted in lower VAR at June 30, 2014 compared to June 30, 2013 . The trading portfolio of covered positions did not contain any correlation trading positions or on- or off-balance sheet securitization positions during the first six months of 2014 .

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In accordance with the Market Risk Rule, we evaluate the accuracy of our VAR model through daily backtesting by comparing daily trading gains and losses (excluding fees, commissions, reserves, net interest income, and intraday trading) with the corresponding daily VAR -based measures. As illustrated below for the twelve months ended June 30, 2014 , there were no instances where trading losses exceeded firmwide VAR .

We have valuation policies, procedures, and methodologies for all covered positions. Additionally, reporting of trading positions is in accordance with U.S. GAAP and is subject to independent price verification. See Note 12 , "Derivative Financial Instruments" and Note 14 , "Fair Value Election and Measurement" to the Consolidated Financial Statements in this Form 10-Q, as well as the "Critical Accounting Policies" section in our 2013 Annual Report on Form 10-K for discussion of valuation policies, procedures, and methodologies.

Model risk management: Our model risk management approach for validating and evaluating the accuracy of internal and vended models and associated processes includes developmental and implementation testing and on-going monitoring and maintenance performed by the various model owners. Our MRMG regularly performs independent model validations for the VAR and stressed VAR models. The validations include evaluation of all model-owner authored documentation and model-owner developed monitoring and maintenance plans and reports. In addition, the MRMG performs its own testing. Due to ongoing developments in financial markets, evolution in modeling approaches, and for purposes of model enhancement, we assess all VAR models regularly through the monitoring and maintenance process.

Stress testing: We use a comprehensive range of stress testing techniques to help monitor risks across trading desks and to augment standard daily VAR reporting. The stress testing framework is designed to quantify the impact of rare and extreme historical but plausible stress scenarios that could lead to large unexpected losses. In addition to performing firmwide stress testing of our aggregate trading portfolio, additional types of secondary stress tests including historical repeats and simulations using hypothetical risk factor shocks are also performed. Across our comprehensive stress testing framework, all trading positions across each applicable market risk category (interest rate risk, equity risk, foreign exchange risk, spread risk, and commodity risk) are included. We review stress testing scenarios on an ongoing basis and make updates as necessary to ensure that both current and potential emerging risks are appropriately captured.

Trading portfolio capital adequacy: We assess capital adequacy on a regular basis, based on estimates of our risk profile and capital positions under baseline and stressed scenarios. Scenarios consider material risks, including credit risk, market risk, and operational risk. Our assessment of capital adequacy arising from market risk also includes a review of risk arising from material portfolios of covered positions. See “Capital Resources” in this MD&A for additional discussion of capital adequacy.

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Liquidity Risk Management

Liquidity risk is the risk of being unable, at a reasonable cost, to meet financial obligations as they come due. We manage liquidity risk utilizing three lines of defense as described below. These lines of defense are designed to mitigate our three primary liquidity risks: structural (“mismatch”) liquidity risk, market liquidity risk, and contingent liquidity risk. Structural liquidity risk arises from our maturity transformation activities and balance sheet structure, which may create mismatches in the timing of cash inflows and outflows. Market liquidity risk, which we also describe as refinancing or refunding risk, constitutes the risk that we could lose access to the financial markets or the cost of such access may rise to undesirable levels. Contingent liquidity risk arises from rare and severely adverse liquidity events; these events may be idiosyncratic or systemic.

We mitigate these risks utilizing a variety of tested liquidity management techniques in keeping with regulatory guidance and industry best practices. For example, we mitigate structural liquidity risk by structuring our balance sheet prudently so that we fund less liquid assets, such as loans, with stable funding sources, such as retail and wholesale deposits, long-term debt, and capital. We mitigate market liquidity risk by maintaining diverse borrowing resources to fund projected cash needs and structuring our liabilities to avoid maturity concentrations. We model contingent liquidity risk from a range of potential adverse circumstances in our contingency funding scenarios. These scenarios inform the amount of contingency liquidity sources we maintain as a buffer to ensure we can meet our obligations in a timely manner under adverse events.

Governance. We maintain a comprehensive liquidity risk governance structure in keeping with regulatory guidance and industry best practices. Our Board , through the BRC , oversees liquidity risk management and establishes our liquidity risk appetite via a set of cascading risk limits. The BRC reviews and approves risk policies to establish these limits and regularly reviews reports prepared by senior management to monitor compliance with these policies. The Board charges the CEO with determining corporate strategies in accordance with its risk appetite and the CEO is a member of our ALCO , which is the executive level committee with oversight of liquidity risk management. The ALCO regularly monitors our liquidity and compliance with liquidity risk limits, and also reviews and approves liquidity management strategies and tactics.

Management and Reporting Framework . We found our governance structure on and mitigate liquidity risk using three lines of defense. Corporate Treasury constitutes the first line of defense, managing consolidated liquidity risks we incur in the course of our business. Under the oversight of the ALCO , Corporate Treasury thereby assumes responsibility for identifying, measuring, monitoring, reporting, and managing our liquidity risks. In so doing, Corporate Treasury develops and implements short- and long-term liquidity management strategies, funding plans and liquidity stress tests. Corporate Treasury primarily monitors and manages liquidity risk at the Parent Company and Bank levels as the non-bank subsidiaries are relatively small and these subsidiaries ultimately rely upon the Parent Company as a source of liquidity in adverse environments. However, Corporate Treasury also monitors liquidity developments in and maintains a regular dialogue with other legal entities within SunTrust.

Our MRM group constitutes our second line of defense in liquidity risk management. MRM conducts independent oversight and governance of liquidity risk management activities. For example, MRM works with Corporate Treasury to ensure our liquidity risk management practices conform to applicable laws and regulations and evaluates key assumptions incorporated in our contingency funding scenarios.

Our internal audit function provides a third line of defense in liquidity risk management. The role of internal audit is to provide assurance through an independent assessment of the adequacy of internal controls in the first two lines of defense. These controls consist of procedural documentation, approval processes, reconciliations, and other mechanisms employed by the first two lines of defense in ensuring that liquidity risk is consistent with applicable policies, procedures, laws and regulations.

Uses of Funds. Our primary uses of funds include the extension of loans and credit, the purchase of investment securities, working capital, and debt and capital service. The Bank and the Parent Company borrow in the money markets using instruments such as Fed funds , Eurodollars, and CP . At June 30, 2014 , the Parent Company had no CP outstanding and the Bank retained a material cash position in its Federal Reserve account. The Parent Company also retains a material cash position, in accordance with our policies and risk limits, discussed in greater detail below.

We assess liquidity needs that may occur in both the normal course of business and times of unusual adverse events, considering both on and off-balance sheet arrangements and commitments that may impact liquidity in certain business environments. We have contingency funding scenarios and plans that assess liquidity needs that may arise from certain stress events such as severe economic recessions, financial market disruptions, and credit rating downgrades. Factors that affect our credit ratings include, but are not limited to, the credit risk profile of our assets, the adequacy of our ALLL , the level and stability of our earnings, the liquidity profile of both the Bank and the Parent Company , the economic environment, and the adequacy of our capital base. At June 30, 2014 , both S&P and Fitch maintained a "Positive" outlook on our credit ratings based on our improving overall risk profile and asset quality, solid liquidity profile, and sound capital position. Moody’s maintained a “Stable” outlook

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on our credit ratings at June 30, 2014 . Future credit rating downgrades are possible, although not currently anticipated given the "Positive" and “Stable” credit rating outlooks.



Debt Credit Ratings and Outlook			Table 19
	June 30, 2014
	Moody’s	S&P	Fitch
SunTrust Banks, Inc.
Short-term	P-2	A-2	F2
Senior long-term	Baa1	BBB	BBB+
SunTrust Bank
Short-term	P-2	A-2	F2
Senior long-term	A3	BBB+	BBB+
Outlook	Stable	Positive	Positive

Although the Bank’s investment portfolio is a use of funds, we manage that investment portfolio primarily as a store of liquidity, maintaining the super-majority (approximately 93 %) of its securities in liquid and high-grade asset classes such as agency MBS, agency debt, and U.S. Treasury securities; nearly all of those liquid, high-grade securities qualify as Level 1 or Level 2 high-quality liquid assets under the proposed rule to implement the LCR for U.S. banks. At June 30, 2014 , the Bank’s AFS investment portfolio contained $11.7 billion of unencumbered securities at book value.

Sources of Funds. Our primary source of funds is a large, stable retail deposit base. Core deposits, predominantly made up of consumer and commercial deposits originated primarily from our retail branch network, are our largest and most cost-effective source of funding. Core deposits increased to $131.8 billion at June 30, 2014 , from $127.7 billion at December 31, 2013 .

We also maintain access to diversified resources for both secured and unsecured wholesale funding. These uncommitted sources include Fed funds purchased from other banks, securities sold under agreements to repurchase, negotiable CD s, offshore deposits, FHLB advances, Global Bank Notes, and CP . Aggregate wholesale funding increased to $19.8 billion at June 30, 2014 from $17.3 billion at December 31, 2013 . Net short-term unsecured borrowings, which includes wholesale domestic and foreign deposits as well as Fed funds purchased, decreased to $4.3 billion at June 30, 2014 from $4.9 billion at December 31, 2013 .

As mentioned above, the Bank and Parent Company maintain programs to access the debt capital markets. The Parent Company maintains an SEC shelf registration from which it may issue senior or subordinated notes and various capital securities such as common or preferred stock. Our Board has authorized the issuance of up to $5.0 billion of such securities, of which approximately $2.9 billion of issuance capacity remained available at June 30, 2014 .

The Bank maintains a Global Bank Note program under which it may issue senior or subordinated debt with various terms. During the second quarter of 2014, the Parent Company issued $650 million of 5-year senior notes. The notes pay a fixed annual coupon rate of 2.50% and will mature on May 1, 2019. We may call the notes beginning on April 1, 2019. At June 30, 2014 , the Bank retained $35.4 billion of remaining capacity to issue notes under the Global Bank Note program.

Our issuance capacity under these Bank and Parent Company programs refers to authorization granted by our Board , which is formal program capacity and not a commitment to purchase by any investor. Debt and equity securities issued under these programs are designed to appeal primarily to domestic and international institutional investors. Institutional investor demand for these securities depends upon numerous factors, including but not limited to our credit ratings and investor perception of financial market conditions and the health of the banking sector. Therefore, our ability to access these markets in the future could be impaired for either systemic or idiosyncratic reasons.

As mentioned above, we maintain contingency funding scenarios to anticipate and manage the likely impact of impaired capital markets access and other adverse liquidity circumstances. Our contingency plans also provide for continuous monitoring of net borrowed funds dependence and available sources of contingency liquidity. These sources of contingency liquidity include available cash reserves; the ability to sell, pledge, or borrow against unencumbered securities in the Bank ’s investment portfolio; the capacity to borrow from the FHLB system; and the capacity to borrow at the Federal Reserve Discount Window.

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The following table presents period end and average balances from these four sources for the first six months of 2014 and 2013. We believe these contingency liquidity sources exceed any contingent liquidity needs measured in our contingency funding scenarios.



Contingency Liquidity Sources							Table 20
	June 30, 2014				June 30, 2013
(Dollars in billions)	As of		Average for the Six Months Ended ¹		As of		Average for the Six Months Ended ¹
Excess reserves		$2.8		$3.4		$—		$1.6
Free and liquid investment portfolio securities ²	11.7		11.6		12.5		12.1
FHLB borrowing capacity	14.5		14.2		12.8		13.6
Discount Window borrowing capacity	20.1		20.2		19.4		18.9
Total		$49.1		$49.4		$44.7		$46.2

¹ Average based upon month-end data, except excess reserves, which is based upon a daily average.

² Includes $376 million and $334 million of FHLB of Atlanta stock, respectively, and $402 million of Federal Reserve Bank stock at June 30, 2014 and 2013.

Parent Company Liquidity. Our primary measure of Parent Company liquidity is the length of time the Parent Company can meet its existing and certain forecasted obligations using its cash resources. We measure and manage this metric, "Months to Required Funding," using forecasts of both normal and adverse conditions. Under adverse conditions, we measure how long the Parent Company can meet its capital and debt service obligations after experiencing material attrition of short-term, unsecured funding and without the support of dividends from the Bank or access to the capital markets. At June 30, 2014 , the Parent's Months to Required Funding remained well in excess of current ALCO and Board limits. The BRC regularly reviews this and other liquidity risk metrics. In accordance with these risk limits established by ALCO and the Board , we manage the Parent Company ’s liquidity by structuring its net maturity schedule to minimize the amount of debt maturing within a short period of time. No Parent Company debt matured during 2013 and no material Parent Company debt is scheduled to mature in 2014 or 2015. A majority of the Parent Company ’s liabilities are long-term in nature, coming from the proceeds of issuances of our capital securities and long-term senior and subordinated notes.

We manage the Parent Company to maintain most of its liquid assets in cash and securities that it could quickly convert to cash. Unlike the Bank , it is not typical for the Parent Company to maintain a material investment portfolio of publicly traded securities. We manage the Parent Company cash balance to provide sufficient liquidity to fund all forecasted obligations (primarily debt and capital service) for an extended period of months in accordance with our risk limits.

The primary uses of Parent Company liquidity include debt service, dividends on capital instruments, the periodic purchase of investment securities, loans to our subsidiaries, and common share repurchases. See further details of the authorized common share repurchases in the "Capital Resources" section of this MD&A and in Part II, "Item 2. Unregistered Sales of Equity Securities and Use of Proceeds" in this Form 10-Q. We fund corporate dividends with Parent Company cash, the primary sources of which are dividends from our banking subsidiary and proceeds from the issuance of debt and capital securities. We are subject to both state and federal banking regulations that limit our ability to pay common stock dividends in certain circumstances.

Other Liquidity Considerations. Numerous legislative and regulatory proposals currently outstanding may have an effect on our liquidity if they become effective. For example, on October 24, 2013, the Federal Reserve published proposed rules to implement the LCR for U.S. banks. The LCR would require banks to hold unencumbered, high-quality, liquid assets sufficient to withstand projected cash outflows under a prescribed liquidity stress scenario. The LCR is proposed to be phased-in as a regulatory requirement beginning January 1, 2015. While the potential impact of this and other regulatory proposals cannot be fully quantified at present, we believe that our strong core banking franchise and prudent liquidity management practices will position us well to comply with the new standards as they become effective.

In 2011, the Federal Reserve published proposed measures to strengthen regulation and supervision of large bank holding companies and systemically important nonbank financial firms, pursuant to Sections 165 and 166 of the Dodd-Frank Act . In February 2014, the Federal Reserve approved final rules to implement these “enhanced prudential standards” under Regulation YY. These regulations include largely qualitative liquidity risk management practices, including internal liquidity stress testing. We believe that our liquidity risk management and stress testing practices will meet or exceed these new standards prior to the effective date of January 1, 2015.

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As presented below, we had an aggregate potential obligation of $69.8 billion to our clients in unused lines of credit at June 30, 2014 . Commitments to extend credit are arrangements to lend to clients who have complied with predetermined contractual obligations. We also had $3.3 billion in letters of credit at June 30, 2014 , most of which are standby letters of credit, which require that we provide funding if certain future events occur. Approximately $1.3 billion of these letters supported variable rate demand obligations at June 30, 2014 . Unused commercial lines of credit have increased since December 31, 2013 , as we continued to provide credit availability to our clients.



Unfunded Lending Commitments			Table 21
(Dollars in millions)	June 30, 2014		December 31, 2013
Unused lines of credit:
Commercial		$47,001		$43,444
Mortgage commitments ¹	3,401		2,722
Home equity lines	10,926		11,157
CRE	2,713		2,078
Credit card	5,718		4,708
Total unused lines of credit		$69,759		$64,109
Letters of credit:
Financial standby		$3,179		$3,256
Performance standby	61		57
Commercial	26		28
Total letters of credit		$3,266		$3,341

¹ Includes IRLC contracts with notional balances of $2.5 billion and $1.8 billion at June 30, 2014 and December 31, 2013 , respectively.

Other Market Risk

Except as discussed below, there have been no other significant changes to other market risk as described in our 2013 Annual Report on Form 10-K.

MSR s, which are carried at fair value, totaled $1.3 billion at June 30, 2014 and December 31, 2013 , are managed within established risk limits, and are monitored as part of various governance processes. We originated MSR s with fair values at the time of origination of $36 million and $68 million for t he three and six months ended June 30, 2014 , respective ly, and $93 million and $203 million for the three and six months ended June 30, 2013 , respectively. Additionally, we purchased servicing rights valued at approximately $76 million during the second quarter of 2014. We recognized mark-to-market decreases of $104 million and $185 million in the fair value of our MSR s for the three and six months ended June 30, 2014 , respectively, and increases of $82 million and $98 million in the fair value of our MSR s for the three and six months ended June 30, 2013 , respectively. Increases or decreases in fair value include the decay resulting from the realization of expected monthly net servicing cash flows. We recorded $36 million and $63 million of net losses during the three and six months ended June 30, 2014 , respectively, and $76 million and $115 million of net losses during the three and six months ended June 30, 2013 , respectively, inclusive of decay and related hedges. The decrease in net losses related to MSR s during the first six months of 2014 compared to 2013 was the result of lower decay, partially offset by a decline in hedge performance. Lower decay was driven by a decline in refinance activity due to higher mortgage interest rates while the decline in hedge performance was attributable to lower carry income.

OFF-BALANCE SHEET ARRANGEMENTS

See discussion of off-balance sheet arrangements in Note 8 , “Certain Transfers of Financial Assets and Variable Interest Entities,” and Note 13 , “Guarantees,” to the Consolidated Financial Statements in this Form 10-Q.

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CONTRACTUAL COMMITMENTS

In the normal course of business, we enter into certain contractual obligations, including obligations to make future payments on debt and lease arrangements, contractual commitments for capital expenditures, and service contracts. At June 30, 2014 , purchase obligations were $494 million, an increase of 27% from December 31, 2013 , due to an increase in commitments to two existing suppliers, as well a new agreement that took effect during the second quarter of 2014. Additionally, at June 30, 2014 , brokered time deposits were $1.5 billion, a decrease of $540 million, or 27%, from December 31, 2013. The decrease was due to the maturity of index-linked CDs during the second quarter. Except for the changes noted within the “Borrowings" section of this MD&A , there have been no other material changes in our Contractual Commitments as described in our 2013 Annual Report on Form 10−K.

BUSINESS SEGMENTS

The following table presents net income/(loss) for our reportable business segments:



Net Income/(Loss) by Segment										Table 22
	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions)	2014			2013			2014			2013
Consumer Banking and Private Wealth Management		$162			$152			$315			$285
Wholesale Banking	245			228			423			409
Mortgage Banking	(84		)	(69		)	(70		)	(73		)

Corporate Other	119			96			201			164
Reconciling Items ¹	(43		)	(30		)	(65		)	(56		)
Total Corporate Other	76			66			136			108
Consolidated net income		$399			$377			$804			$729

¹ Includes differences between net income/(loss) reported for each business segment using management accounting practices and U.S. GAAP . Prior period information has been restated to reflect changes in internal reporting methodology and inter-segment transfers. See additional information in Note 16 , "Business Segment Reporting," to the Consolidated Financial Statements in this Form 10-Q.

The following table presents average loans and average deposits for our reportable business segments:



Average Loans and Deposits by Segment								Table 23
	Three Months Ended June 30
	Average Loans				Average Consumer and Commercial Deposits
(Dollars in millions)	2014		2013		2014			2013
Consumer Banking and Private Wealth Management		$41,524		$40,238		$85,459			$84,228
Wholesale Banking	61,359		53,522		42,865			38,654
Mortgage Banking	27,803		27,574		2,220			3,742
Corporate Other	48		38		(72		)	(45		)



	Six Months Ended June 30
	Average Loans				Average Consumer and Commercial Deposits
(Dollars in millions)	2014		2013		2014			2013
Consumer Banking and Private Wealth Management		$41,395		$40,286		$84,990			$84,625
Wholesale Banking	60,152		53,010		42,498			38,876
Mortgage Banking	28,043		27,784		2,054			3,630
Corporate Other	45		48		(102		)	(17		)

See Note 16 , “Business Segment Reporting,” to the Consolidated Financial Statements in this Form 10-Q for discussion of our segment structure, basis of presentation, and internal management reporting methodologies, including the reclassification of RidgeWorth results from the Wholesale Banking segment to Corporate Other.

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BUSINESS SEGMENT RESULTS

Six Months Ended June 30, 2014 vs. 2013

Consumer Banking and Private Wealth Management

Consumer Banking and Private Wealth Management reported net income of $315 million for the six months ended June 30, 2014, an increase of $30 million, or 11%, compared to the same period in 2013. The increase in net income was primarily driven by continued improvement in credit quality resulting in a lower provision for credit losses and a modest increase in noninterest income, which in aggregate more than offset a 4% increase in expenses.

Net interest income was $1.3 billion, a decrease of $1 million compared to the same period in 2013. Increased average loan and deposit balances largely offset lower rates. The $1.1 billion, or 3%, increase in average loans was driven by growth in consumer loans, which more than offset home equity line paydowns, decreased CRE loans, as well as lower nonaccrual loans driven by a continued improving credit environment. The $365 million increase in average deposits was driven by increases across all account categories except time deposits, which decreased $1.8 billion driven by maturing higher rate CDs.

Provision for credit losses was $95 million, a decrease of $82 million, or 46%, compared to the same period in 2013. The decrease was driven by declines in net charge-offs of $46 million in home equity lines, $20 million in commercial loans, $9 million in consumer direct installment loans, and $8 million in consumer mortgage loans.

Total noninterest income was $743 million, an increase of $16 million, or 2%, compared to the same period in 2013, driven by an increase in wealth management related revenue, partially offset by a decrease in service charges on deposits.

Total noninterest expense was $1.4 billion, an increase of $49 million, or 4%, compared to the same period in 2013. This increase was driven by staff expenses related to investment in revenue generating positions, primarily in wealth management related businesses to help fulfill more of our clients’ wealth and investment management needs.

Wholesale Banking

Wholesale Banking reported net income of $423 million for the six months ended June 30, 2014, an increase of $14 million, or 3%, compared to the same period in 2013. The increase in net income was attributable to an increase in net interest income and noninterest income, and a decrease in provision for credit losses, partially offset by an increase in noninterest expense.

Net interest income was $878 million, a $43 million, or 5%, increase compared to the same period in 2013, driven by increases in average loan and deposit balances. Net interest income related to loans increased, as average loan balances grew $7.1 billion, or 13%, led by tax-exempt, C&I, and CRE loans. Net interest income related to client deposits increased as average deposit balances grew $3.6 billion, or 9%, compared to the same period in 2013. Lower cost demand deposits increased $1.7 billion, or 9%, and average combined interest-bearing transaction accounts and money market accounts increased $2.0 billion, or 11%, while average CD balances declined approximately $100 million.

Provision for credit losses was $30 million, a decrease of $38 million, or 56%, from the same period in 2013. The decline reflects the continued improvement in overall Wholesale Banking credit quality.

Total noninterest income was $586 million, an increase of $39 million, or 7%, from the same period in 2013, as higher investment banking revenue and trading income more than offset a decline in affordable housing partnership revenue associated with the sale of certain affordable housing properties.

Total noninterest expense was $802 million, an increase of $99 million, or 14% compared to the same period in 2013. The increase was primarily due to the strategic decision to sell investments in Affordable Housing partnerships in the first quarter of 2014 resulting in a $36 million impairment charge along with an increase in employee compensation driven in part by a reduction to incentive compensation accruals in the first quarter of 2013. Additionally, staff expenses increased as we continued to make investments to better meet the array of our clients’ needs and augment our capabilities.

Mortgage Banking

Mortgage Banking reported a net loss of $70 million for the six months ended June 30, 2014, compared to a net loss of $73 million for the same period in 2013. Excluding the second quarter Form 8-K and other legacy mortgage-related items of $179 million (pre-tax), net income would have been $45 million for the six months ended June 30, 2014. See Table 1 , "Selected Quarterly Financial Data and Reconcilement of Non-U.S. GAAP Measures," and the "Executive Overview" in this MD&A where Form 8-K and other legacy mortgage-related items are described.

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Net interest income was $274 million, an increase of $6 million, or 2%, predominantly due to higher net interest income on loans, partially offset by lower net interest income on LHFS and deposits. Net interest income on loans increased $35 million mainly due to increased loan spreads. Net interest income on LHFS decreased $18 million compared to the same period in 2013, due to a $1.8 billion, or 60%, decrease in average balances driven by lower production, which was partially offset by higher spreads. Net interest income on average deposits declined $10 million as higher spreads were offset by a $1.6 billion, or 43%, decline in average total deposit balances.

Provision for credit losses was $50 million, a decrease of $63 million, or 56%, compared to the same period in 2013. The improvement was largely attributable to improved credit quality.

Total noninterest income was $219 million, a decrease of $110 million, or 33%, compared to the same period in 2013. The decrease was predominantly driven by lower mortgage production income, partially offset by higher mortgage servicing income. Mortgage loan production income decreased $197 million due to a decline in gain on sale margin and lower production-related fee income, partially offset by a $19 million decline in the mortgage repurchase provision. Loan originations were $7.2 billion for the six months ended June 30, 2014, compared to $17.9 billion for the prior year, a decrease of $10.7 billion, or 60%. Mortgage servicing income of $99 million, increased $60 million, driven by lower decay and higher servicing fees, offset by less favorable net hedge performance. Total loans serviced were $134.4 billion at June 30, 2014 compared with $140.1 billion at June 30, 2013, down 4%.

Total noninterest expense was $556 million, a decline of $53 million, or 9%, compared to the same period in 2013. Total staff expense declined $79 million driven by lower staffing levels reflecting the decline in closed loan volumes and on-going efforts to right-size the mortgage business. In addition, lower mortgage production volumes resulted in declines in outside processing cost of $20 million and credit services of $16 million, while improved asset quality drove a decline in collection services of $20 million. Total allocated costs decreased $27 million. Operating losses increased $116 million driven by higher expenses for mortgage-related legal matters, namely the previously discussed HAMP-related charge.

Corporate Other

Corporate Other net income for the six months ended June 30, 2014 was $201 million, an increase of $37 million, or 23%, compared to the same period in 2013. The increase was primarily due to the gain on sale of RidgeWorth and tax benefits resulting from the recognition of discrete items in the current year. These increases to net income were partially offset by higher noninterest expense and lower net interest income.

Net interest income was $149 million, a decrease of $14 million, or 9%, compared to the same period in 2013. The decrease was primarily due to lower commercial loan related swap income. Additionally, average long-term debt increased by $2.1 billion, or 24%, and average short-term borrowing increased $1.8 billion, or 52%, compared to the same period of 2013 due to balance sheet management activities.

Total noninterest income was $209 million, an increase of $87 million, or 71% compared to the same period in 2013. The increase was primarily due to a $105 million gain on sale of RidgeWorth. The gain was partially offset by foregone trust and investment management income resulting from the sale of RidgeWorth, an increase in mark-to-market valuation losses on our public debt and index-linked CDs carried at fair value, and $4 million increase in securities losses in 2014 compared to the same period in 2013.

Total noninterest expenses increased $42 million compared to the same period in 2013. The increase was mainly due to higher severance cost and incentive compensation related to business performance, higher debt issuance costs and the lower recovery of allocated internal costs. Additionally, operating losses increased driven by an accrual reversal in the prior year. These increases were partially offset by a reduction in expenses due to sale of RidgeWorth.



Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See the “Enterprise Risk Management” section of the MD&A in this Form 10-Q, which is incorporated herein by reference.

122



Item 4.	CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company conducted an evaluation, under the supervision and with the participation of its CEO and CFO , of the effectiveness of the design and operation of the Company ’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act ) at June 30, 2014 . The Company ’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC , and that such information is accumulated and communicated to the Company ’s management, including its CEO and CFO , as appropriate, to allow timely decisions regarding required disclosure. Based upon the evaluation, the CEO and CFO concluded that the Company ’s disclosure controls and procedures were effective at June 30, 2014 .

Changes in Internal Control over Financial Reporting

There have been no changes to the Company ’s internal control over financial reporting that occurred during the six months ended June 30, 2014 , that have materially affected, or are reasonably likely to materially affect, the Company ’s internal control over financial reporting. The Company has begun implementation of the new Internal Control - Integrated Framework , issued in May 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. The Company will complete this implementation prior to the compliance deadline of December 2014.

PART II - OTHER INFORMATION


Item 1.	LEGAL PROCEEDINGS

As previously disclosed on June 17, 2014, STM and the U.S. DOJ , the HUD , certain other federal agencies, and the Attorneys General for forty-nine states and the District of Columbia (collectively, the “Government”), reached a definitive agreement to settle (i) certain civil and administrative claims arising from FHA-insured mortgage loans originated by STM from January 1, 2006 through March 31, 2012, and (ii) certain alleged civil claims regarding SunTrust ’s mortgage servicing and origination practices as part of its portion of the National Mortgage Servicing Settlement. Pursuant to the settlement agreement, and as previously disclosed on October 10, 2013, SunTrust will provide $500 million of consumer relief, make a $468 million cash payment, and implement certain mortgage servicing standards. In return, the Government released STM and SunTrust from most claims. A copy of the settlement agreement is filed as Exhibit 10.3 to this report and is incorporated herein by reference. The foregoing summary of the settlement is qualified in its entirety by reference to the full text of the agreement. The Company previously recorded the estimated cost of this settlement, including providing the contemplated consumer relief, in the third of quarter of 2013, at the time it announced the agreements in principle. The Company does not expect the consumer relief efforts or the implementation of servicing standards required by the settlement agreement to have a material impact on its future financial results.

On July 3, 2014, STM and the United States of America, represented by the United States Attorney for the Western District of Virginia reached an agreement to settle certain claims that arose from STM ’s administration of the federal HAMP primarily from March 2009 and through December 2010. Specifically, SunTrust's commitment under the agreement includes an estimated $179 million in consumer remediation (up to a maximum of $274 million), $20 million to fund housing counseling for homeowners, $10 million paid toward restitution to Fannie Mae and Freddie Mac, and a cash payment of $16 million to the U.S. Treasury . The Company incurred a $204 million pre-tax charge in the second quarter of 2014 in connection with this matter, which reflects STM 's commitment under the agreement, including its estimate of the consumer remediation obligation. A copy of the Restitution and Remediation Agreement is filed as Exhibit 10.4 to this report and is incorporated herein by reference. The foregoing summary of the Restitution and Remediation Agreement is qualified in its entirety by reference to the full text of the agreement.

In addition, the Company and its subsidiaries are parties to numerous claims and lawsuits arising in the normal course of its business activities, some of which involve claims for substantial amounts. Although the ultimate outcome of these suits cannot be ascertained at this time, it is the opinion of management that none of these matters, when resolved, will have a material effect on the Company ’s consolidated results of operations, cash flows, or financial condition. For additional information, see Note 15 , “Contingencies,” to the Consolidated Financial Statements in this Form 10-Q, which is incorporated into this Item 1 by reference.

123


Item 1A.	RISK FACTORS

The risks described in the Company's 2013 Annual Report on Form 10-K are not the only risks facing the Company . Additional risks and uncertainties not currently known or that the Company currently deems to be immaterial also may adversely affect the Company 's business, financial condition, or future results. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A., "Risk Factors" in the Company 's 2013 Annual Report on Form 10-K, which could materially affect the Company 's business, financial condition, or future results.



Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) None.

(b) None.



				Table 24
	Common Stock ¹
	Total number of shares purchased ²	Average price paid per share	Number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs ($ in millions)
January 1 - 31	1,354,345	$36.92	1,354,345	$—
February 1 - 28	—	—	—	—
March 1 - 31	17,940	37.36	—	—
Total during first quarter of 2014	1,372,285	$36.92	1,354,345	$—
April 1 - 30	2,009,900	$39.76	2,009,900	$370
May 1 - 31	79,000	37.96	79,000	367
June 1 - 30	—	—	—	367
Total during second quarter of 2014	2,088,900	$39.69	2,088,900	$367
Total year-to-date 2014	3,461,185	$38.60	3,443,245	$367

¹ On March 14, 2013, the Company announced that its Board had authorized the repurchase of up to $200 million in shares of the Company 's common stock. This authorization expires December 31, 2016. However, any share repurchase is subject to the approval of the Company 's primary banking regulator as part of the annual capital planning and stress testing process and therefore, this authority effectively expired on March 31, 2014. During the first quarter of 2014, the Company completed the repurchase of authorized shares as approved by the Board and the Federal Reserve in conjunction with the 2013 capital plan.

On March 26, 2014, the Company announced that the Federal Reserve had no objections to the repurchase of up to $450 million of the Company 's outstanding common stock to be completed between April 1, 2014 and March 31, 2015, as part of the Company 's capital plan submitted in connection with the 2014 CCAR . The repurchases are limited to the extent that the Company 's issuances of capital stock, including employee share-based compensation, are less than the amount indicated in the 2014 CCAR capital plan. During the second quarter of 2014, the Company repurchased approximately $83 million of its common stock at market value as part of this publicly announced plan. The Company expects to repurchase an additional $300 million to $350 million of outstanding common stock through the end of the first quarter of 2015.

² Includes shares repurchased pursuant to SunTrust 's employee stock option plans, pursuant to which participants may pay the exercise price upon exercise of SunTrust stock options by surrendering shares of SunTrust common stock which the participant already owns. SunTrust considers shares so surrendered by participants in SunTrust 's employee stock option plans to be repurchased pursuant to the authority and terms of the applicable stock option plan rather than pursuant to publicly announced share repurchase programs. During the second quarter of 2014, no shares of SunTrust common stock were surrendered by participants in SunTrust 's employee stock option plans.

At June 30, 2014 , the Company had authority from its Board to repurchase all of the 13.9 million outstanding stock purchase warrants. However, any such repurchase would be subject to the prior approval of the Federal Reserve .

SunTrust did not repurchase any shares of its Series A Preferred Stock Depositary Shares, Series B Preferred Stock, Series E Preferred Stock Depositary Shares, or warrants to purchase common stock during the first six months of 2014 , and there was no unused Board authority to repurchase any shares of Series A Preferred Stock Depositary Shares, Series B Preferred Stock, or the Series E Preferred Stock Depositary Shares.



Item 3.	DEFAULTS UPON SENIOR SECURITIES

None.

124


Item 4.	MINE SAFETY DISCLOSURES

Not applicable.



Item 5.	OTHER INFORMATION

None.



Item 6.	EXHIBITS



Exhibit	Description
3.1	Amended and Restated Articles of Incorporation of the Registrant, restated effective January 16, 2009, incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed January 22, 2009, as further amended by Articles of Amendment dated December 19, 2012, incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed December 20, 2012.	*

3.2	Bylaws of the Registrant, as amended and restated on August 8, 2011, incorporated by reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q filed August 9, 2011.	*

10.1	SunTrust Banks, Inc. Annual Incentive Plan, as amended and restated as of January 1, 2014, incorporated by reference to Appendix B to the Registrant’s Proxy Statement filed March 10, 2014.	*

10.2	SunTrust Banks, Inc. 2009 Stock Plan, as amended and restated as of April 22, 2014, incorporated by reference to Appendix A to the Registrant’s Proxy Statement filed March 10, 2014.	*

10.3	Consent Judgment between SunTrust Mortgage, Inc. (“SunTrust Mortgage”) on the one hand and the United States Department of Justice, the United States Department of Housing and Urban Development, certain other federal agencies, and the Attorneys General for forty-nine states and the District of Columbia dated as of June 17, 2014.	**

10.4	Restitution and Remediation Agreement dated as of July 3, 2014 between SunTrust Mortgage, Inc. and the United States of America, incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed July 3, 2014.	*

10.5	Executive Severance Plan, amended and restated as of July 24, 2014.	**

10.6	Revised Form of Restricted Stock Unit Agreement, 2014 Return on Tangible Common Equity, incorporated by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K filed on April 23, 2014.	*

10.7	Revised Form of Time-Vested Restricted Stock Unit Agreement, 2014 Type I, incorporated by reference to Exhibit 10.4 to the Registrant's Current Report on Form 8-K filed on April 23, 2014.	*

10.8	Revised Form of Time-Vested Restricted Stock Unit Agreement, 2014 Type II, incorporated by reference to Exhibit 10.5 to the Registrant's Current Report on Form 8-K filed on April 23, 2014.	*

31.1	Certification of Chairman and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	**

31.2	Certification of Corporate Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	**

32.1	Certification of Chairman and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	**

32.2	Certification of Corporate Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	**

101.1	Interactive Data File.	**



*	incorporated by reference
**	filed herewith

125

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	SunTrust Banks, Inc.
	(Registrant)



	/s/ Thomas E. Panther
	Thomas E. Panther, Senior Vice President and Director of Corporate Finance and Controller (on behalf of the Registrant and as Principal Accounting Officer)

Date: August 6, 2014 .

126

Exhibit 10.3

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA,

et al. ,

555 4th Street, NW Washington, D.C. 20530

Plaintiffs, v.

SUNTRUST MORTGAGE, INC.

901 Semmes Ave

Richmond, Virginia 23224 Defendant.

)

) Civil Action No.

)

CONSENT JUDGMENT

WHEREAS, Plaintiffs, the United States of America, the Consumer Financial Protection Bureau (the CFPB or Bureau) and the States of Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, West Virginia, Wisconsin, Wyoming, the Commonwealths of Kentucky, Massachusetts, Pennsylvania and Virginia, and the District of Columbia filed their complaint on June 17, 2014, alleging that SunTrust Mortgage, Inc. (“Defendant”) either itself or

through its affiliates or subsidiaries violated, among other laws, the Unfair and Deceptive Acts and Practices laws of the Plaintiff States, the Consumer Financial Protection Act of 2010, the False Claims Act, the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, and the Bankruptcy Code and Federal Rules of Bankruptcy Procedure;

WHEREAS, the parties have agreed to resolve their claims without the need for litigation;

WHEREAS, Defendant, by its attorneys, has consented to entry of this Consent Judgment without trial or adjudication of any issue of fact or law and to waive any appeal if the Consent Judgment is entered as submitted by the parties;

WHEREAS, Defendant, by entering into this Consent Judgment, does not admit any allegations other than those facts of the Complaint deemed necessary to the jurisdiction of this Court and the facts set forth in Attachment A to Exhibit J;

WHEREAS, the intention of the United States, the Bureau, and the States in effecting this settlement is to remediate harms allegedly resulting from the alleged unlawful conduct of the Defendant, either itself or through its affiliates or subsidiaries;

AND WHEREAS, Defendant has agreed to waive service of the complaint and summons and hereby acknowledges the same;

NOW THEREFORE, without trial or adjudication of issues of fact or law, without this Consent Judgment constituting evidence against Defendant except as otherwise noted, and upon consent of Defendant, the Court finds that there is good and sufficient cause to enter this Consent Judgment, and that it is therefore ORDERED, ADJUDGED, AND DECREED:


I.	JURISDICTION

1. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §§ 1331, 1345, 1355(a), and 1367, 12 U.S.C. § 5565(a)(1), and under 31 U.S.C. § 3732(a)

and (b), and over Defendant. The Complaint states a claim upon which relief may be granted

against Defendant. Venue is appropriate in this District pursuant to 28 U.S.C. § 1391(b)(2) and 31 U.S.C. § 3732(a).


II.	SERVICING STANDARDS

2. Defendant shall comply with the Servicing Standards, attached hereto as Exhibit A, in accordance with their terms and Section A of Exhibit E, attached hereto.


III.	FINANCIAL TERMS

3. Payment Settlement Amounts. Defendant shall pay or cause to be paid into an interest bearing escrow account to be established for this purpose the sum of fifty million dollars ($50,000,000), which shall be known as the “Direct Payment Settlement Amount” as specified in Exhibit F, and which shall be distributed in the manner and for the purposes specified in

Exhibit B. Defendant shall further pay to the United States Department of Justice the sum of four hundred and eighteen million dollars ($418,000,000), which shall be known as the “Exhibit J Settlement Amount” as specified in Exhibit J, plus simple interest on the Settlement Amount at a rate of 2.375% per annum accruing from March 5, 2014 through March 15, 2014, for a total of

$418,271,986, as described in Exhibit J. Defendant’s payment of the Direct Payment Settlement Amount shall be made by electronic funds transfer within ten days of receiving notice that the escrow account referenced in this Paragraph 3 is established or within ten days of the Effective Date of this Consent Judgment, whichever is later. Defendant's payment of the Exhibit J Settlement Amount shall be made by electronic funds transfer, pursuant to written instructions to be provided by the United States Department of Justice, within ten days of receiving the written instructions from the United States Department of Justice. After Defendant has made the required payments, Defendant shall no longer have any property right, title, interest or other legal claim in any funds held in escrow. The interest bearing escrow account established by this

Paragraph 3 is intended to be a Qualified Settlement Fund within the meaning of Treasury Regulation Section 1.468B-1 of the U.S. Internal Revenue Code of 1986, as amended. The Monitoring Committee established in Paragraph 8 shall, in its sole discretion, appoint an escrow agent (“Escrow Agent”) who shall hold and distribute funds as provided herein. All costs and expenses of the Escrow Agent, including taxes, if any, shall be paid from the funds under its control, including any interest earned on the funds.

4. Payments to Foreclosed Borrowers. In accordance with written instructions from the State members of the Monitoring Committee, for the purposes set forth in Exhibit C, the Escrow Agent shall transfer from the escrow account to the Administrator appointed under Exhibit C forty million dollars ($40,000,000) (the “Borrower Payment Amount”) to enable the Administrator to provide cash payments to borrowers whose homes were finally sold or taken in foreclosure by Defendant between and including January 1, 2008 and December 31, 2013; who submit claims allegedly arising from the Covered Conduct (as that term is defined in Exhibit G hereto); and who otherwise meet criteria set forth by the State members of the Monitoring Committee; and to pay the reasonable costs and expenses of a Settlement Administrator, including taxes and fees for tax counsel, if any. Defendant shall also pay or cause to be paid any additional amounts necessary to pay claims, if any, of borrowers whose data is provided to the Settlement Administrator by Defendant after Defendant warrants that the data is complete and accurate pursuant to Paragraph 3 of Exhibit C. The Borrower Payment Amount and any other funds provided to the Administrator for these purposes shall be administered in accordance with the terms set forth in Exhibit C.

5. Consumer Relief. Defendant itself and through its affiliates and subsidiaries, shall provide five hundred million dollars ($500,000,000) of relief to consumers who meet the eligibility criteria in the forms and amounts described in Paragraphs 1-9 of Exhibit D, as amended by Exhibit I, to remediate harms allegedly caused by the alleged unlawful conduct of

Defendant. Defendant shall receive credit towards such obligation as described in Exhibit D as amended by Exhibit I.


IV.	ENFORCEMENT

6. The Servicing Standards and Consumer Relief Requirements, attached as Exhibits A and D, are incorporated herein as the judgment of this Court and shall be enforced in accordance with the authorities provided in the Enforcement Terms, attached hereto as Exhibit E.

7. The Parties agree that Joseph A. Smith, Jr. shall be the Monitor and shall have the authorities and perform the duties described in the Enforcement Terms, attached hereto as Exhibit E.

V. The Parties agree that the Monitoring Committee established pursuant to certain Consent Judgments entered in United States, et al. v. Bank of America Corp., et al. , No. 12-civ- 00361-RMC (April 4, 2012) (Docket Nos. 10-14) and referenced specifically in paragraph 8 of those Consent Judgments, shall be designated as the committee responsible for performing the role of the Administration and Monitoring Committee, as described in the Enforcement Terms. References to the “Monitoring Committee” in this Consent Judgment and related documents shall be understood to refer to the same Monitoring Committee as that established in the Bank of America Corp. case referenced in the preceding sentence, with the addition of a CFPB Member, and the Monitoring Committee shall serve as the representative of the participating state and federal agencies in the administration of all aspects of this Consent Judgment and the monitoring of compliance with it by the Defendant.


VI.	RELEASES

9. The United States, the Bureau, and Defendant have agreed, in consideration for

the terms provided herein, for the release of certain claims, and remedies, as provided in the Federal Release, attached hereto as Exhibit F and in the Origination Release, attached hereto as Exhibit J. The United States, the Bureau, and Defendant have also agreed that certain claims and remedies are not released, as provided in Paragraph 11 of Exhibit F and as provided in paragraph 3 of Exhibit J. The releases contained in Exhibit F and Exhibit J shall become effective on the dates and pursuant to the terms provided in those documents.

10. The Department of Housing and Urban Development and Defendant have agreed, in consideration for the terms provided herein, for the release of certain claims, and remedies, as provided in the Administrative Release, attached hereto as Exhibit K. The release contained in Exhibit K shall become effective on the date and pursuant to the terms provided in that document.

11. The State Parties and Defendant have agreed, in consideration for the terms provided herein, for the release of certain claims and remedies, as provided in the State Release, attached hereto as Exhibit G. The State Parties and Defendant have also agreed that certain claims and remedies are not released, as provided in Part IV of Exhibit G. The releases contained in Exhibit G shall become effective upon payment of the Direct Payment Settlement Amount by Defendant.

VII. OTHER TERMS

12. In the event that the Defendant (a) does not complete certain consumer relief activities as set forth in Exhibit D, as amended by Exhibit I (“Consumer Relief Requirements”), and (b) does not make the Consumer Relief Payments (as that term is defined in Exhibit F (Federal Release)) and fails to cure such non-payment within thirty days of written notice by the party, the United States, the Bureau, and any State Party may withdraw from the Consent Judgment and declare it null and void with respect to the withdrawing party. Nothing in this

paragraph shall be interpreted to affect the releases in Exhibit J, or the release of civil and administrative claims, remedies, and penalties based on Covered Origination Conduct in Exhibit K.

13. This Court retains jurisdiction for the duration of this Consent Judgment to enforce its terms. The parties may jointly seek to modify the terms of this Consent Judgment, subject to the approval of this Court. This Consent Judgment may be modified only by order of this Court.

14. The Effective Date of this Consent Judgment shall be the date on which the Consent Judgment has been entered by the Court and has become final and non-appealable. An order entering the Consent Judgment shall be deemed final and non-appealable for this purpose if there is no party with a right to appeal the order on the day it is entered.

15. This Consent Judgment shall remain in full force and effect for three and one-half years from the date it is entered (“the Term”), at which time the Defendant’s obligations under the Consent Judgment shall expire, except that, pursuant to Exhibit E, Defendant shall submit a final Quarterly Report for the last quarter or portion thereof falling within the Term and cooperate with the Monitor's review of said report, which shall be concluded no later than six months after the end of the Term. The duration of the Servicer’s obligations under the Servicing Standards set forth in Exhibit A shall be reduced to a period of three years from the date of the entry of the Consent Judgment, if at the end of the third year, the Monitor’s two servicing standard compliance reports immediately prior to that date reflect that the Servicer had no Potential Violations during those reporting periods, or any Corrective Action Plans that the Monitor had not yet certified as completed. Defendant shall have no further obligations under this Consent Judgment six months after the expiration of the Term, but the Court shall retain jurisdiction for purposes of enforcing or remedying any outstanding violations that are identified

in the final Monitor Report and that have occurred but not been cured during the Term.

16. Except as otherwise agreed in Exhibit B, each party to this litigation will bear its own costs and attorneys’ fees associated with this litigation.

17. Nothing in this Consent Judgment shall relieve Defendant of their obligation to comply with applicable state and federal law.

18. The sum and substance of the parties’ agreement and of this Consent Judgment are reflected herein and in the Exhibits attached hereto. In the event of a conflict between the terms of the Exhibits and paragraphs 1-18 of this summary document, the terms of the Exhibits shall govern.

SO ORDERED this day of , 2014

UNITED STATES DISTRICT JUDGE

For the United States:

/s/ Tony West

TONY WEST

Associate Attorney General

U.S. Department of Justice 950 Pennsylvania Ave., N.W. Washington, DC 20530

Tel.: 202-514-9500

Fax: 202-514-0238

For the Department of Housing and Urban Development:

/s/ Damon Y. Smith

DAMON Y. SMITH

Acting General Counsel

U.S. Department of Housing and Urban Development 451 7 ^th Street, S.W.

Washington, DC 20410

Tel.: 202-402-5099

Fax: 202-708-3389

For the Consumer Financial Protection Bureau:

/s/ Rachel Rodman

LUCY E. MORRIS

Deputy Enforcement Director CARA PETERSEN

Assistant Litigation Deputy

RACHEL RODMAN

Enforcement Attorney

Consumer Financial Protection Bureau 1700 G Street, NW

Washington, DC 20552

Tel.: 202-435-7964

For the Executive Office for U.S. Trustees

/s/ Ramona D. Elliot

General Counsel

441 G St., N. W., Suite 6150

Washington, D.C. 20530

Tel.: 202-307-1399

Fax: 202-307-2397

For the Federal Trade Commission

(as to Exhibit F only):

/s/ Yaa Apori

Yaa Apori

Attorney

Federal Trade Commission 600 Pennsylvania Ave., NW CC-10232

Washington, DC 20058

Tel: 202-326-3796

Fax: 202-326-3768

For the Department of Treasury:

/s/ John Sturc by Erik Rosenfeld

JOHN H. STURC

Chief Counsel

Office of Financial Stability

U.S Department of the Treasury

1500 Pennsylvania Avenue, N.W.

Washington, D.C. 20020

Tel: 202-622-5451

For the State of Alaska:

/s/ Cynthia C. Drinkwater

Cynthia C. Drinkwater

Assistant Attorney General Alaska Attorney General's Office

1031 W. 4th Avenue, Ste. 200

Anchorage, AK 99501

Tel.: 907-269-5200

Fax: 907-264-8554

For the State of Alabama:

/s/ Noel Barnes

NOEL S. BARNES

Assistant Attorney General

Office of the Alabama Attorney General 501 Washington Avenue

Montgomery, AL 36130

Tel.: 334-242-7335

Fax: 334-242-2433

For the State of Arkansas:

/s/ James Depriest

JAMES B. DEPRIEST

Deputy Attorney General

Office of the Attorney General

323 Center Street, Suite 200

Little Rock, Arkansas 72201

Tel.: 501-682-5028

Fax: 501-682-8118

For the State of Arizona:

/s/ Jeremy Shorbe

THOMAS C. HORNE

By Jeremy T. Shorbe

Assistant Attorney General

400 W. Congress Street, Suite S315

Tucson, AZ 85701

Tel.: 520-628-6504

Fax: 520-628-6532

For the State of California:

KAMALA D. HARRIS

Attorney General

/s/ Tina Charoenpong

Tina Charoenpong

Deputy Attorney General

300 South Spring Street, Suite 1702

Los Angeles, CA 90013

Tel.: 213-897-2000

Fax: 213-897-4951

For the State of Colorado, ex. rel.

JOHN W. SUTHERS, Attorney General:

/s/ Jennifer Miner Dethmers

JENNIFER MINER DETHMERS

Assistant Attorney General

Consumer Protection Section

Colorado Attorney General's Office

1300 Broadway, 7 ^th Floor

Denver, Colorado 80203

Tel.: 720-508-6228

Fax: 720-508-6040

For the State of Connecticut:

/s/ Joseph J. Chambers

MATTHEW J. BUDZIK

JOSEPH J. CHAMBERS

Assistant Attorneys General

Office of the Connecticut Attorney General

55 Elm Street, P.O. Box 120

Hartford, CT 06141-0120

Tel: 860-808-5270

Fax: 860-808-5385

For the District of Columbia:

IRVIN B. NATHAN

Attorney General for the District of Columbia

ELLEN A. EFROS

Deputy Attorney General Public Interest Division

/s/ Bennett Rushkoff

BENNETT RUSHKOFF (D.C. Bar #386925)

Chief, Public Advocacy Section

GARY TAN (D.C. Bar #987796)

Assistant Attorney General

Office of the Attorney General

441 Fourth Street, N.W., Suite 600 South

Washington, DC 20001

Tel: 202-727-5173

Email: bennett.rushkoff@dc.gov; gary.tan@dc.gov

For the State of Delaware:

/s/ Matthew Lintner

MATTHEW LINTNER

Director, Fraud Division

Delaware Department of Justice

820 N. French Street, 5th Floor

Wilmington, DE 19801

Tel.: 302-577-8935

Fax: 302-577-6499

For the State of Florida:

PAMELA JO BONDI

Attorney General

PATRICIA A. CONNERS

Associate Deputy Attorney General

/s/ [illegible]

VICTORIA A. BUTLER

Assistant Attorney General

Bureau Chief, Consumer Protection Division

3507 E. Frontage Road

Suite 325

Tampa, FL 33607

Tel: 813-287-7950

Fax: 813-281-5515

For the State of Georgia:

/s/ Jeffrey W. Stump

JEFFREY W. STUMP

Assistant Attorney General

Georgia Department of Law

40 Capitol Square, S.W.

Atlanta, Georgia 30334

Tel.: 404-656-3337

Fax: 404-656-0677

For the State of Hawaii:

/s/ James C. Paige

JAMES C. PAIGE

Deputy Attorney General

Department of the Attorney General

425 Queen Street

Honolulu, Hawaii 96813

Tel: 808-586-1180

Fax: 808-586-1205

For the State of Idaho

LAWRENCE G. WASDEN, Attorney General:

/s/ Stephanie Guyon

STEPHANIE GUYON

Deputy Attorney General

Office of the Idaho Attorney General

954 W. Jefferson St., 2nd Fl.

P.O. Box 83720

Boise, ID 83720-00 10

Tel.: 208-334-2424

Fax: 208-334-4151

For the State of Illinois:

LISA MADIGAN

Attorney General

/s/ [illegible]

DEBORAH HAGAN

Chief, Consumer Protection Division SUSAN ELLIS

Chief, Consumer Fraud Bureau ANDREW DOUGHERTY

Assistant Attorney General Illinois Attorney General’s Office

100 W. Randolph, 12 ^th Floor

Chicago, IL, 60601

Tel.: 312-814-4982

Fax: 312-814-2593

For the State of Indiana:

/s/ Abigail Lawlis Kuzma

ABIGAIL LAWLIS KUZMA

Director and Chief Counsel

Consumer Protection Division

Indiana Office of Attorney General

302 West Washington St., IGCS 5 ^th Fl.

Indianapolis, Indiana 46204

Tel.: 317-234-6843

Fax: 317-233-4393

For the State of Iowa:

/s/ Patrick Madigan

PATRICK MADIGAN

Assistant Attorney General

Iowa’s Attorney General's Office

1305 East Walnut St.

Des Moines, IA 503 I 9

Patrick.Madigan@Iowa.gov

Tel: 515-281-5926

Fax: 515-281-6771

For the State of Kansas:

/s/ Meghan E. Stoppel

MEGHAN E. STOPPEL

Assistant Attorney General

Office of the Kansas Attorney General

120 SW 10th Avenue, 2nd Floor,

Topeka, KS 66612

Tel.: 785-296-3751

Fax: 785-291-3699

For the Commonwealth of Kentucky:

/s/ Jack Conway

JACK CONWAY

Attorney General

Commonwealth of Kentucky

State Capitol, Suite 118 700 Capital Avenue

Frankfort, Kentucky 40601-3449

Tel.: 502-696-5300

Fax: 502-564-2894

For the State of Louisiana:

/s/ James D. “Buddy” Caldwell

JAMES D. “BUDDY” CALDWELL

Attorney General

1885 N. Third Street

Baton Rouge, Louisiana 70804

Tel.: 225-326-6705

For The Commonwealth Of Massachusetts:

MARTHA COAKLEY

Attorney General

/s/ Lisa R. Dyen

LISA R. DYEN

Mass. BBO #676264

Assistant Attorney General

Public Protection and Advocacy Bureau

Consumer Protection Division

One Ashburton Place

Boston , MA 02108

Tel: 617-727-2200

For the State of Maine:

/s/ Janet T. Mills

JANET T. MILLS

Attorney General

Burton Cross Office Building, 6 ^th Floor

111 Seawall Street

6 State House Station

Augusta, Maine 04330

Tel.: 207-626-8800

Fax: 207-624-7730

For the State of Maryland:

DOUGLAS F. GANSLER

Attorney General

/s/ Lucy A. Cardwell

LUCY A. CARDWELL

Assistant Attorney General

Office of the Attorney General of Maryland

200 Saint Paul Place

Baltimore, MD 21202

Tel: 410-576-633 7

Fax: 410-576-6566

For the State of Minnesota:

LORI SWANSON

Attorney General, State of Minnesota

/s/ Nathan Brennaman

NATHAN BRENNAMAN

Deputy Attorney General

Minnesota Attorney General's Office

445 Minnesota Street, Suite 1200

St. Paul, MN 55101-2130

Tel.: 651-757-1415

Fax: 651-296-7438

For the State of Missouri:

CHRIS KOSTER

Attorney General

/s/ Ryan S. Asbridge

RYAN S. ASBRIDGE

Missouri Bar No. 61440

\Assistant Attorney General

Consumer Protection Division

PO Box 899

Jefferson City, MO 65102

Tel.: 573-751-7677

Fax: 573-751-2041

For the State of Mississippi:

JIM HOOD, ATTORNEY GENERAL

BY: /s/ Bridgette W. Wiggins

Bridgette W. Wiggins, MSB No. 9676

Special Assistant Attorneys General

Post Office Box 22947

Jackson, MS 39225

Telephone: 601-359-4279

Facsimile: 601-359-4231

For the State of Montana:

/s/ Chuck Munson

TIMOTHY C. FOX

Attorney General

CHUCK MUNSON

Assistant Attorney General

Montana Department of Justice

215 N. Sanders

Helena MT 59624

Tel.: 406-444-2026

Fax: 406-444-3549

For the Attorney General of North Carolina:

ROY COOPER

Attorney General

/s/ Phillip K. Wood

PHILLIP K. WOOD

Special Deputy Attorney General

N.C. Department of Justice

P.O. Box 629

Raleigh, NC 27602

Tel.: 919-716-6000

Fax: 919-716-6050

Email: pwoods@ncdoj.gov

For the State of North Dakota

WAYNE STENEHJEM

Attorney General

/s/ Parrell D. Grossman

PARRELL D. GROSSMAN

(ID No. 04684)

Assistant Attorney General

Director, Consumer Protection and Antitrust Division

Office of Attorney General

Gateway Professional Center

1050 E Interstate Ave, Ste. 200

Bismarck, ND 58503-5574

Tel: 701-328-5570

Fax: 701-328-5568

For the State of Nebraska:

JON BRUNING

Attorney General

/s/ Abigail M. Stempson

ABIGAIL M. STEMPSON

Assistant Attorney General

Office of the Attorney General

2115 State Capitol

Lincoln, NE 68509-8920

Tel.: 402-471-2811

Fax: 402-471-4725

For the State of New Hampshire:

/s/ Joseph A. Foster

JOSEPH A. FOSTER

Attorney General

N.H. Department of Justice 33 Capitol Street

Concord, New Hampshire 03301

Tel.: 603-271-3658

Fax: 603-271-2110

For the State of New Jersey:

JOHN J. HOFFMAN

ACTING ATTORNEY GENERAL OF NEW JERSEY

/s/ Lorraine K. Rak

LORRAINE K. RAK

Deputy Attorney General

Consumer Fraud Prosecution Section

Division of Law

124 Halsey Street- 5th Floor

P.O. Box 45029

Newark, New Jersey 07101

Tel.: 973-877-1280

Fax: 973-648-4887

For the State of New Mexico:

/s/ Gary K. King

GARY K. KING, Attorney General

KAREN J. MEYERS, Assistant Attorney General

Office of New Mexico Attorney General

PO Drawer 1508

Santa Fe, NM 87504-1508

Tel: 505-222-9100

Fax: 505-222-9033

For the State of New York:

/s/ Jane M. Azia

JANE M. AZIA

Bureau Chief

Bureau of Consumer Frauds & Protection

Office of the New York State Attorney General

120 Broadway

New York, NY 10271

Tel.: 212-416-8727

Fax: 212-416-8787

For the Ohio Attorney General

MIKE DEWINE

/s/ Matthew J. Lampke

MATTHEWE J. LAMPKE (0067973)

Mortgage Foreclosure Counsel

Ohio Attorney General

30 E. Broad St., 15 ^th Floor

Columbus, OH 43215

Tel.: 614-466-8569

Fax: 866-403-39879

For the State of Oregon,

Attorney General

ELLEN F. ROSENBLUM:

/s/ Simon Whang

SIMON WHANG

Assistant Attorney General

Oregon Department of Justice

Financial Fraud/Consumer Protection

1515 SW 5th Avenue, Ste. 410

Portland , OR 97201

Tel.: 971-673-1880

Fax: 971-673-1902

For the State of South Carolina:

/s/ John W. McIntosh

ALAN WILSON

Attorney General

JOHN W. MCINTOSH

Chief Deputy Attorney General

C.HAVIRD JONES, JR.

Senior Assistant Deputy Attorney General

JARED Q. LIBET

Assistant Deputy Attorney General

South Carolina Attorney General's Office

1000 Assembly Street, Room 519

Columbia, SC 29201

Tel.: 803-734-3970

Fax: 803-734-3677

For the State of South Dakota:

/s/ Philip D. Carlson

PHILIP D. CARLSON

Assistant Attorney General

South Dakota Attorney General's Office

Consumer Protection Division

1302 E. Highway 14, Suite 1

Pierre, SD 57501

Tel.: 605-773-3215

Fax: 605-773-4106

For the State of Tennessee:

/s/ Robert E. Cooper, Jr.

ROBERT E. COOPER , JR.

Attorney General and Reporter

Office of the Tennessee Attorney General

425 Fifth Avenue North

Nashville, TN 37243-3400

Tel.: 615-741-3491

Fax: 615-741-2009

For the State of Texas:

/s/ James A. Daross

JAMES A. DAROSS

State Bar No. 05391500

Assistant Attorney General

Consumer Protection Division

401 E. Franklin Avenue, Suite 530

El Paso, Texas 79901

Tel.: 915- 834-5800

Fax: 915-542-1546

For the State of Utah:

/s/ Susan D. Reyes

SUSAN D. REYES

Utah Attorney General

350 North State Street, #230

Salt Lake City, UT 84114-2320

Tel.: 801-538-1191

Fax: 801-538-1121

For The Commonwealth of Virginia,

ex rel. MARK R. HERRING,

Attorney General:

/s/ David B. Irvin

DAVID B. IRVIN (VSB #23927)

Senior Assistant Attorney General

MARK S. KUBIAK (VSB #73119)

Assistant Attorney General

Office of Virginia Attorney General 900 East Main Street

Richmond, Virginia 23219

Tel.: 804-786-4047

Fax: 804-786-0122

For the State of Vermont:

/s/ William H. Sorrell

WILLIAM H. SORRELL

Attorney General

109 State Street

Montpelier VT 05609-1001

(802) 828-3171

For the State of Washington:

ROBERT W. FERGUSON

Attorney General

/s/ David W. Huey

DAVID W. HUEY, WSBAN No. 31380

Senior Counsel

Consumer Protection Division

Office of the Attorney General

1250 Pacific Avenue, Suite 105

PO Box 2317

Tacoma, WA 98402-4411

Tel: (253) 593-5243

For the State of Wisconsin:

J.B. VAN HOLLEN

Attorney General

/s/ Holly C. Pomraning

HOLLY C. POMRANING

Assistant Attorney General

Wisconsin Department of Justice

Post Office Box 7857

Madison, Wisconsin 53707-7857

Tel: 608-266-5410

Fax: 608-267-8906

For the State of West Virginia:

/s/ Patrick Morrissey

PATRICK MORRISSEY

Attorney General

State Capitol, Room 26E

Charleston, WV 25305-0220

Tel.: 304-558-2021

Fax: 304-558-0140

For the State of Wyoming:

/s/ Peter K. Michael

PETER K. MICHAEL

Wyoming Attorney General

123 State Capitol Bldg

200 W. 24th Street

Cheyenne, WY 82002

Tel.: 307-777-7847

Fax: 307-777-3435

For SunTrust Mortgage, Inc.:

/s/ Jerome T. Lienhard, II

Jerome T. Lienhard, II

President and CEO

SunTrust Mortgage, Inc.

June 17, 2014

EXHIBIT A

Settlement Term Sheet

The provisions outlined below are intended to apply to loans secured by owner-occupied properties that serve as the primary residence of the borrower unless otherwise noted herein.


I.	FORECLOSURE AND BANKRUPTCY INFORMATION AND DOCUMENTATION.

Unless otherwise specified, these provisions shall apply to bankruptcy and foreclosures in all jurisdictions regardless of whether the jurisdiction has a judicial, non-judicial or quasi- judicial process for foreclosures and regardless of whether a statement is submitted during the foreclosure or bankruptcy process in the form of an affidavit, sworn statement or declarations under penalty of perjury (to the extent stated to be based on personal knowledge) (“Declaration”).


A.	Standards for Documents Used in Foreclosure and Bankruptcy Proceedings.

Servicer shall ensure that factual assertions made in pleadings (complaint, counterclaim, cross-claim, answer or similar pleadings), bankruptcy proofs of claim (including any facts provided by Servicer or based on information provided by the Servicer that are included in any attachment and submitted to establish the truth of such facts) (“POC”), Declarations, affidavits, and sworn statements filed by or on behalf of Servicer in judicial foreclosures or bankruptcy proceedings and notices of default, notices of sale and similar notices submitted by or on behalf of Servicer in non-judicial foreclosures are accurate and complete and are supported by competent and reliable evidence. Before a loan is referred to non-judicial foreclosure, Servicer shall ensure that it has reviewed competent and reliable evidence to substantiate the borrower’s default and the right to foreclose, including the borrower’s loan status and loan information.


2.	Servicer shall ensure that affidavits, sworn statements, and Declarations are based on personal knowledge, which may be based on the affiant’s review of Servicer’s books and records, in accordance with the evidentiary requirements of applicable state or federal law.

Servicer shall ensure that affidavits, sworn statements and Declarations executed by Servicer’s affiants are based on the affiant’s review and personal knowledge of the accuracy and completeness of the assertions in the affidavit, sworn statement or Declaration, set out facts that Servicer reasonably believes would be admissible in evidence, and show that the affiant is competent to testify on the matters stated. Affiants shall confirm that they have reviewed competent and reliable evidence to substantiate the borrower’s default and the right to foreclose, including the borrower’s loan status and required loan ownership information. If an affiant relies on a review of business records for the basis of its affidavit, the referenced business

record shall be attached if required by applicable state or federal law or court rule. This provision does not apply to affidavits, sworn statements and Declarations signed by counsel based solely on counsel’s personal knowledge (such as affidavits of counsel relating to service of process, extensions of time, or fee petitions) that are not based on a review of Servicer’s books and records. Separate affidavits, sworn statements or Declarations shall be used when one affiant does not have requisite personal knowledge of all required information.

Servicer shall have standards for qualifications, training and supervision of employees. Servicer shall train and supervise employees who regularly prepare or execute affidavits, sworn statements or Declarations. Each such employee shall sign a certification that he or she has received the training. Servicer shall oversee the training completion to ensure each required employee properly and timely completes such training. Servicer shall maintain written records confirming that each such employee has completed the training and the subjects covered by the training.

Servicer shall review and approve standardized forms of affidavits, standardized forms of sworn statements, and standardized forms of Declarations prepared by or signed by an employee or officer of Servicer, or executed by a third party using a power of attorney on behalf of Servicer, to ensure compliance with applicable law, rules, court procedure, and the terms of this Agreement (“the Agreement”).


6.	Affidavits, sworn statements and Declarations shall accurately identify the name of the affiant, the entity of which the affiant is an employee, and the affiant’s title.


7.	Affidavits, sworn statements and Declarations, including their notarization, shall fully comply with all applicable state law requirements.


8.	Affidavits, sworn statements and Declarations shall not contain information that is false or unsubstantiated. This requirement shall not preclude Declarations based on information and belief where so stated.


9.	Servicer shall assess and ensure that it has an adequate number of employees and that employees have reasonable time to prepare, verify, and execute pleadings, POCs, motions for relief from stay (“MRS”), affidavits, sworn statements and Declarations.


10.	Servicer shall not pay volume-based or other incentives to employees or third-party providers or trustees that encourage undue haste or lack of due diligence over quality.


11.	Affiants shall be individuals, not entities, and affidavits, sworn statements and Declarations shall be signed by hand signature of the affiant (except

for permitted electronic filings). For such documents, except for permitted electronic filings, signature stamps and any other means of electronic or mechanical signature are prohibited.


12.	At the time of execution, all information required by a form affidavit, sworn statement or Declaration shall be complete.


13.	Affiants shall date their signatures on affidavits, sworn statements or Declarations.


14.	Servicer shall maintain records that identify all notarizations of Servicer documents executed by each notary employed by Servicer.

15.

Servicer shall not file a POC in a bankruptcy proceeding which, when filed, contained materially inaccurate information. In cases in which such a POC may have been filed, Servicer shall not rely on such POC and shall (a) in active cases, at Servicer’s expense, take appropriate action, consistent with state and federal law and court procedure, to substitute such POC with an amended POC as promptly as reasonably practicable (and, in any event, not more than 30 days) after acquiring actual knowledge of such material inaccuracy and provide appropriate written notice to the borrower or borrower’s counsel; and (b) in other cases, at Servicer’s expense, take appropriate action after acquiring actual knowledge of such material inaccuracy.

16.

Servicer shall not rely on an affidavit of indebtedness or similar affidavit, sworn statement or Declaration filed in a pending pre-judgment judicial foreclosure or bankruptcy proceeding which (a) was required to be based on the affiant’s review and personal knowledge of its accuracy but was not, (b) was not, when so required, properly notarized, or (c) contained materially inaccurate information in order to obtain a judgment of foreclosure, order of sale, relief from the automatic stay or other relief in bankruptcy. In pending cases in which such affidavits, sworn statements or Declarations may have been filed, Servicer shall, at Servicer’s expense, take appropriate action, consistent with state and federal law and court procedure, to substitute such affidavits with new affidavits and provide appropriate written notice to the borrower or borrower’s counsel.

17.

In pending post-judgment, pre-sale cases in judicial foreclosure proceedings in which an affidavit or sworn statement was filed which was required to be based on the affiant’s review and personal knowledge of its accuracy but may not have been, or that may not have, when so required, been properly notarized, and such affidavit or sworn statement has not been re-filed, Servicer, unless prohibited by state or local law or court rule, will provide written notice to borrower at borrower’s address of record or borrower’s counsel prior to proceeding with a foreclosure sale or eviction proceeding.

18.

In all states, Servicer shall send borrowers a statement setting forth facts supporting Servicer’s or holder’s right to foreclose and containing the information required in paragraphs I.B.6 (items available upon borrower request), I.B.10 (account statement), I.C.2 and I.C.3 (ownership statement), and IV.B.13 (loss mitigation statement) herein. Servicer shall send this statement to the borrower in one or more communications no later than 14 days prior to referral to foreclosure attorney or foreclosure trustee. Servicer shall provide the Monitoring Committee with copies of proposed form statements for review before implementation.


B.	Requirements for Accuracy and Verification of Borrower’s Account Information.


1.	Servicer shall maintain procedures to ensure accuracy and timely updating of borrower’s account information, including posting of payments and imposition of fees. Servicer shall also maintain adequate documentation of borrower account information, which may be in either electronic or paper format.

For any loan on which interest is calculated based on a daily accrual or daily interest method and as to which any obligor is not a debtor in a bankruptcy proceeding without reaffirmation, Servicer shall promptly accept and apply all borrower payments, including cure payments (where authorized by law or contract), trial modification payments, as well as non- conforming payments, unless such application conflicts with contract provisions or prevailing law. Servicer shall ensure that properly identified payments shall be posted no more than two business days after receipt at the address specified by Servicer and credited as of the date received to borrower’s account. Each monthly payment shall be applied in the order specified in the loan documents.

For any loan on which interest is not calculated based on a daily accrual or daily interest method and as to which any obligor is not a debtor in a bankruptcy proceeding without reaffirmation, Servicer shall promptly accept and apply all borrower conforming payments, including cure payments (where authorized by law or contract), unless such application conflicts with contract provisions or prevailing law. Servicer shall continue to accept trial modification payments consistent with existing payment application practices. Servicer shall ensure that properly identified payments shall be posted no more than two business days after receipt at the address specified by Servicer. Each monthly payment shall be applied in the order specified in the loan documents.


a.	Servicer shall accept and apply at least two non-conforming payments from the borrower, in accordance with this subparagraph, when the payment, whether on its own or when combined with a payment made by another source, comes within

$50.00 of the scheduled payment, including principal and interest and, where applicable, taxes and insurance.


b.	Except for payments described in paragraph I.B.3.a, Servicer may post partial payments to a suspense or unapplied funds account,

provided that Servicer (1) discloses to the borrower the existence of and any activity in the suspense or unapplied funds account; (2) credits the borrower’s account with a full payment as of the date that the funds in the suspense or unapplied funds account are sufficient to cover such full payment; and (3) applies payments as required by the terms of the loan documents. Servicer shall not take funds from suspense or unapplied funds accounts to pay fees until all unpaid contractual interest, principal, and escrow amounts are paid and brought current or other final disposition of the loan.


4.	Notwithstanding the provisions above, Servicer shall not be required to accept payments which are insufficient to pay the full balance due after the borrower has been provided written notice that the contract has been declared in default and the remaining payments due under the contract have been accelerated.


5.	Servicer shall provide to borrowers (other than borrowers in bankruptcy or borrowers who have been referred to or are going through foreclosure) adequate information on monthly billing or other account statements to show in clear and conspicuous language:


a.	total amount due;


b.	allocation of payments, including a notation if any payment has been posted to a “suspense or unapplied funds account”;


c.	unpaid principal;


d.	fees and charges for the relevant time period;


e.	current escrow balance; and


f.	reasons for any payment changes, including an interest rate or escrow account adjustment, no later than 21 days before the new amount is due (except in the case of loans as to which interest accrues daily or the rate changes more frequently than once every 30 days);

Statements as described above are not required to be delivered with respect to any fixed rate residential mortgage loan as to which the borrower is provided a coupon book.


6.	In the statements described in paragraphs I.A.18 and III.B.1.a, Servicer shall notify borrowers that they may receive, upon written request:


a.	A copy of the borrower’s payment history since the borrower was last less than 60 days past due;


b.	A copy of the borrower’s note;


c.	If Servicer has commenced foreclosure or filed a POC, copies of any assignments of mortgage or deed of trust required to demonstrate the right to foreclose on the borrower’s note under applicable state law; and


d.	The name of the investor that holds the borrower’s loan.


7.	Servicer shall adopt enhanced billing dispute procedures, including for disputes regarding fees. These procedures will include:


a.	Establishing readily available methods for customers to lodge complaints and pose questions, such as by providing toll-free numbers and accepting disputes by email;


b.	Assessing and ensuring adequate and competent staff to answer and respond to consumer disputes promptly;


c.	Establishing a process for dispute escalation;


d.	Tracking the resolution of complaints; and


e.	Providing a toll-free number on monthly billing statements.


8.	Servicer shall take appropriate action to promptly remediate any inaccuracies in borrowers’ account information, including:


a.	Correcting the account information;


b.	Providing cash refunds or account credits; and


c.	Correcting inaccurate reports to consumer credit reporting agencies.


9.	Servicer’s systems to record account information shall be periodically independently reviewed for accuracy and completeness by an independent reviewer.


10.	As indicated in paragraph I.A.18, Servicer shall send the borrower an itemized plain language account summary setting forth each of the following items, to the extent applicable:


a.	The total amount needed to reinstate or bring the account current, and the amount of the principal obligation under the mortgage;


b.	The date through which the borrower’s obligation is paid;


c.	The date of the last full payment;


d.	The current interest rate in effect for the loan (if the rate is effective for at least 30 days);


e.	The date on which the interest rate may next reset or adjust (unless the rate changes more frequently than once every 30 days);


f.	The amount of any prepayment fee to be charged, if any;


g.	A description of any late payment fees;


h.	A telephone number or electronic mail address that may be used by the obligor to obtain information regarding the mortgage; and


i.	The names, addresses, telephone numbers, and Internet addresses of one or more counseling agencies or programs approved by HUD (http://ww w.hud.gov/offices/hsg/sfh/hcc/hcs.cfm ).


11.	In active chapter 13 cases, Servicer shall ensure that:


a.	prompt and proper application of payments is made on account of

(a) re-petition arrearage amounts and (b) post-petition payment amounts and posting thereof as of the successful consummation of the effective confirmed plan;


b.	the debtor is treated as being current so long as the debtor is making payments in accordance with the terms of the then-effective confirmed plan and any later effective payment change notices; and

as of the date of dismissal of a debtor’s bankruptcy case, entry of an order granting Servicer relief from the stay, or entry of an order granting the debtor a discharge, there is a reconciliation of payments received with respect to the debtor’s obligations during the case and appropriately update the Servicer’s systems of record. In connection with such reconciliation, Servicer shall reflect the waiver of any fee, expense or charge pursuant to paragraphs III.B.1.c.i or III.B.1.d.


C.	Documentation of Note, Holder Status and Chain of Assignment.


1.	Servicer shall implement processes to ensure that Servicer or the foreclosing entity has a documented enforceable interest in the promissory note and mortgage (or deed of trust) under applicable state law, or is otherwise a proper party to the foreclosure action.


2.	Servicer shall include a statement in a pleading, affidavit of indebtedness or similar affidavits in court foreclosure proceedings setting forth the basis for asserting that the foreclosing party has the right to foreclose.


3.	Servicer shall set forth the information establishing the party’s right to foreclose as set forth in I.C.2 in a communication to be sent to the borrower as indicated in I.A.18.

If the original note is lost or otherwise unavailable, Servicer shall comply with applicable law in an attempt to establish ownership of the note and the right to enforcement. Servicer shall ensure good faith efforts to obtain or locate a note lost while in the possession of Servicer or Servicer’s agent and shall ensure that Servicer and Servicer’s agents who are expected to have possession of notes or assignments of mortgage on behalf of Servicer adopt procedures that are designed to provide assurance that the Servicer or Servicer’s agent would locate a note or assignment of mortgage if it is in the possession or control of the Servicer or Servicer’s agent, as the case may be. In the event that Servicer prepares or causes to be prepared a lost note or lost assignment affidavit with respect to an original note or assignment lost while in Servicer’s control, Servicer shall use good faith

efforts to obtain or locate the note or assignment in accordance with its procedures. In the affidavit, sworn statement or other filing documenting the lost note or assignment, Servicer shall recite that Servicer has made a good faith effort in accordance with its procedures for locating the lost note or assignment.


5.	Servicer shall not intentionally destroy or dispose of original notes that are still in force.


6.	Servicer shall ensure that mortgage assignments executed by or on behalf of Servicer are executed with appropriate legal authority, accurately reflective of the completed transaction and properly acknowledged.


D.	Bankruptcy Documents.


1.	Proofs of Claim (“POC”) . Servicer shall ensure that POCs filed on behalf of Servicer are documented in accordance with the United States Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, and any applicable local rule or order (“bankruptcy law”). Unless not permitted by statute or rule, Servicer shall ensure that each POC is documented by attaching:


a.	The original or a duplicate of the note, including all indorsements; a copy of any mortgage or deed of trust securing the notes (including, if applicable, evidence of recordation in the applicable land records); and copies of any assignments of mortgage or deed

of trust required to demonstrate the right to foreclose on the borrower’s note under applicable state law (collectively, “Loan Documents”). If the note has been lost or destroyed, a lost note affidavit shall be submitted.

If, in addition to its principal amount, a claim includes interest, fees, expenses, or other charges incurred before the petition was filed, an itemized statement of the interest, fees, expenses, or charges shall be filed with the POC (including any expenses or charges based on an escrow analysis as of the date of filing) at least in the detail specified in the current draft of Official Form B 10 (effective December 2011) (“Official Form B 10” )

Attachment A.


c.	A statement of the amount necessary to cure any default as of the date of the petition shall be filed with the POC.


d.	If a security interest is claimed in property that is the debtor’s principal residence, the attachment prescribed by the appropriate Official Form shall be filed with the POC.


e.	Servicer shall include a statement in a POC setting forth the basis for asserting that the applicable party has the right to

foreclose.

The POC shall be signed (either by hand or by appropriate electronic signature) by the responsible person under penalty of perjury after reasonable investigation, stating that the information set forth in the POC is true and correct to the best of such responsible person’s knowledge, information, and reasonable belief, and clearly identify the responsible person’s employer and position or title with the employer.


2.	Motions for Relief from Stay (“MRS”) . Unless not permitted by bankruptcy law, Servicer shall ensure that each MRS in a chapter 13 proceeding is documented by attaching:


a.	To the extent not previously submitted with a POC, a copy of the Loan Documents; if such documents were previously submitted with a POC, a statement to that effect. If the promissory note has been lost or destroyed, a lost note affidavit shall be submitted;


b.	To the extent not previously submitted with a POC, Servicer shall include a statement in an MRS setting forth the basis for asserting that the applicable party has the right to foreclose.


c.	An affidavit, sworn statement or Declaration made by Servicer or based on information provided by Servicer (“MRS affidavit” (which term includes, without limitation, any facts provided by Servicer that are included in any attachment and submitted to establish the truth of such facts) setting forth:


i.	whether there has been a default in paying pre-petition arrearage or post-petition amounts (an “MRS delinquency”);

ii.

if there has been such a default, (a) the unpaid principal balance, (b) a description of any default with respect to the pre-petition arrearage, (c) a description of any default with respect to the post-petition amount (including, if applicable, any escrow shortage), (d) the amount of the pre-petition arrearage (if applicable), (e) the post-petition payment amount, (f) for the period since the date of the first post- petition or pre-petition default that is continuing and has not been cured, the date and amount of each payment made (including escrow payments) and the application of each such payment, and (g) the amount, date and description of each fee or charge applied to such pre-petition amount or post-petition amount since the later of the date of the petition or the preceding statement pursuant to paragraph III.B.1.a; and


iii.	all amounts claimed, including a statement of the amount necessary to cure any default on or about the date of the

MRS.


d.	All other attachments prescribed by statute, rule, or law.


e.	Servicer shall ensure that any MRS discloses the terms of any trial period or permanent loan modification plan pending at the time of filing of a MRS or whether the debtor is being evaluated for a loss mitigation option.


E.	Quality Assurance Systems Review.

Servicer shall conduct regular reviews, not less than quarterly, of a statistically valid sample of affidavits, sworn statements, Declarations filed by or on behalf of Servicer in judicial foreclosures or bankruptcy proceedings and notices of default, notices of sale and similar notices submitted in non-judicial foreclosures to ensure that the documents are accurate and comply with prevailing law and this Agreement.

The reviews shall also verify the accuracy of the statements in affidavits, sworn statements, Declarations and documents used to foreclose in non-judicial foreclosures, the account summary described in paragraph I.B.10, the ownership statement described in paragraph I.C.2, and the loss mitigation statement described in paragraph IV.B.13 by reviewing the underlying information. Servicer shall take appropriate remedial steps if deficiencies are identified, including appropriate remediation in individual cases.


b.	The reviews shall also verify the accuracy of the statements in affidavits, sworn statements and Declarations submitted in bankruptcy proceedings. Servicer shall take appropriate remedial steps if deficiencies are identified, including appropriate remediation in individual cases.


2.	The quality assurance steps set forth above shall be conducted by Servicer

employees who are separate and independent of employees who prepare foreclosure or bankruptcy affidavits, sworn statements, or other foreclosure or bankruptcy documents.

Servicer shall conduct regular pre-filing reviews of a statistically valid sample of POCs to ensure that the POCs are accurate and comply with prevailing law and this Agreement. The reviews shall also verify the accuracy of the statements in POCs. Servicer shall take appropriate remedial steps if deficiencies are identified, including appropriate remediation in individual cases. The pre-filing review shall be conducted by Servicer employees who are separate and independent of the persons who prepared the applicable POCs.


4.	Servicer shall regularly review and assess the adequacy of its internal controls and procedures with respect to its obligations under this Agreement, and implement appropriate procedures to address deficiencies.


II.	THIRD-PARTY PROVIDER OVERSIGHT.


A.	Oversight Duties Applicable to All Third-Party Providers.

Servicer shall adopt policies and processes to oversee and manage foreclosure firms, law firms, foreclosure trustees, subservicers and other agents, independent contractors, entities and third parties (including subsidiaries and affiliates) retained by or on behalf of Servicer that provide foreclosure, bankruptcy or mortgage servicing activities (including loss mitigation) (collectively, such activities are “Servicing Activities” and such providers are “Third-Party Providers”), including:


1.	Servicer shall perform appropriate due diligence of Third-Party Providers’ qualifications, expertise, capacity, reputation, complaints, information security, document custody practices, business continuity, and financial viability.


2.	Servicer shall amend agreements, engagement letters, or oversight policies, or enter into new agreements or engagement letters, with Third-Party Providers to require them to comply with Servicer’s applicable policies and procedures (which will incorporate any applicable aspects of this Agreement) and applicable state and federal laws and rules.


3.	Servicer shall ensure that agreements, contracts or oversight policies provide for adequate oversight, including measures to enforce Third-Party Provider contractual obligations, and to ensure timely action with respect to Third-Party Provider performance failures.


4.	Servicer shall ensure that foreclosure and bankruptcy counsel and foreclosure trustees have appropriate access to information from Servicer’s books and records necessary to perform their duties in preparing pleadings and other documents submitted in foreclosure and bankruptcy proceedings.


5.	Servicer shall ensure that all information provided by or on behalf of Servicer to Third-Party Providers in connection with providing Servicing Activities is accurate and complete.


6.	Servicer shall conduct periodic reviews of Third-Party Providers. These reviews shall include:


a.	A review of a sample of the foreclosure and bankruptcy documents prepared by the Third-Party Provider, to provide for compliance with applicable state and federal law and this Agreement in connection with the preparation of the documents, and the accuracy of the facts contained therein;


b.	A review of the fees and costs assessed by the Third-Party Provider to provide that only fees and costs that are lawful, reasonable and actually incurred are charged to borrowers and that no portion of any fees or charges incurred by any Third-Party Provider for technology usage, connectivity, or electronic invoice submission is charged as a cost to the borrower;


c.	A review of the Third-Party Provider’s processes to provide for compliance with the Servicer’s policies and procedures concerning Servicing Activities;


d.	A review of the security of original loan documents maintained by the Third-Party Provider;


e.	A requirement that the Third-Party Provider disclose to the Servicer any imposition of sanctions or professional disciplinary action taken against them for misconduct related to performance of Servicing Activities; and


f.	An assessment of whether bankruptcy attorneys comply with the best practice of determining whether a borrower has made a payment curing any MRS delinquency within two business days of the scheduled hearing date of the related MRS.

The quality assurance steps set forth above shall be conducted by Servicer employees who are separate and independent of employees who prepare foreclosure or bankruptcy affidavits, sworn documents, Declarations or other foreclosure or bankruptcy documents.


7.	Servicer shall take appropriate remedial steps if problems are identified through this review or otherwise, including, when appropriate, terminating its relationship with the Third-Party Provider.


8.	Servicer shall adopt processes for reviewing and appropriately addressing customer complaints it receives about Third-Party Provider services.


9.	Servicer shall regularly review and assess the adequacy of its internal controls and procedures with respect to its obligations under this Section, and take appropriate remedial steps if deficiencies are identified, including appropriate remediation in individual cases


B.	Additional Oversight of Activities by Third-Party Providers.


1.	Servicer shall require a certification process for law firms (and recertification of existing law firm providers) that provide residential mortgage foreclosure and bankruptcy services for Servicer, on a periodic basis, as qualified to serve as a Third-Party Provider to Servicer, including that attorneys have the experience and competence necessary to perform the services requested.


2.	Servicer shall ensure that attorneys are licensed to practice in the relevant jurisdiction, have the experience and competence necessary to perform the services requested, and that their services comply with applicable rules, regulations and applicable law (including state law prohibitions on fee splitting).


3.	Servicer shall ensure that foreclosure and bankruptcy counsel and foreclosure trustees have an appropriate Servicer contact to assist in legal proceedings and to facilitate loss mitigation questions on behalf of the borrower.


4.	Servicer shall adopt policies requiring Third-Party Providers to maintain records that identify all notarizations of Servicer documents executed by each notary employed by the Third-Party Provider.


III.	BANKRUPTCY.


A.	General.


1.	The provisions, conditions and obligations imposed herein are intended to be interpreted in accordance with applicable federal, state and local laws, rules and regulations. Nothing herein shall require a Servicer to do anything inconsistent with applicable state or federal law, including the applicable bankruptcy law or a court order in a bankruptcy case.


2.	Servicer shall ensure that employees who are regularly engaged in servicing mortgage loans as to which the borrower or mortgagor is in bankruptcy receive training specifically addressing bankruptcy issues.


B.	Chapter 13 Cases.


1.	In any chapter 13 case, Servicer shall ensure that:

So long as the debtor is in a chapter 13 case, within 180 days after the date on which the fees, expenses, or charges are incurred, file and serve on the debtor, debtor’s counsel, and the trustee a notice in a form consistent with Official Form B10 (Supplement 2) itemizing fees, expenses, or charges (1) that were incurred in connection with the claim after the bankruptcy case was filed, (2) that the holder asserts are recoverable against the debtor or against the debtor’s principal residence, and (3) that the holder intends to collect from the debtor.


b.	Servicer replies within time periods established under bankruptcy law to any notice that the debtor has completed all payments under the plan or otherwise paid in full the amount required to cure any pre-petition default.


c.	If the Servicer fails to provide information as required by paragraph III.B.1.a with respect to a fee, expense or charge within 180 days of the incurrence of such fee, expense, or charge, then,


i.	Except for independent charges (“Independent charge”) paid by the Servicer that is either (A) specifically authorized by the borrower or (B) consists of amounts advanced by Servicer in respect of taxes, homeowners association fees, liens or insurance, such fee, expense or charge shall be deemed waived and may not be collected from the borrower.


ii.	In the case of an Independent charge, the court may, after notice and hearing, take either or both of the following actions:


(a)	preclude the holder from presenting the omitted information, in any form, as evidence in any contested matter or adversary proceeding in the case, unless the court determines that the failure was substantially justified or is harmless; or


(b)	award other appropriate relief, including reasonable expenses and attorney’s fees caused by the failure.


d.	If the Servicer fails to provide information as required by paragraphs III.B.1.a or III.B.1.b and bankruptcy law with respect to a fee, expense or charge (other than an Independent Charge) incurred more than 45 days before the date of the reply referred to in paragraph III.B.1.b, then such fee, expense or charge shall be deemed waived and may not be collected from the borrower.

Servicer shall file and serve on the debtor, debtor’s counsel, and the trustee a notice in a form consistent with the current draft of Official Form B10 (Supplement 1) (effective December 2011) of any change in the payment amount, including any change that results from an interest rate or escrow account adjustment, no later than 21 days before a payment in the new amount is due. Servicer shall waive and not collect any late charge or other fees imposed solely as a result of the failure of the borrower timely to make a payment attributable to the failure of Servicer to give such notice timely.


IV.	LOSS MITIGATION.

These requirements are intended to apply to both government-sponsored and proprietary loss mitigation programs and shall apply to subservicers performing loss mitigation services on Servicer’s behalf.


A.	Loss Mitigation Requirements.

Servicer shall be required to notify potentially eligible borrowers of currently available loss mitigation options prior to foreclosure referral. Upon the timely receipt of a complete loan modification application, Servicer shall evaluate borrowers for all available loan modification options for which they are eligible prior to referring a borrower to foreclosure and shall facilitate the submission and review of loss mitigation applications. The foregoing notwithstanding, Servicer shall have no obligation to solicit borrowers who are in bankruptcy.


2.	Servicer shall offer and facilitate loan modifications for borrowers

rather than initiate foreclosure when such loan modifications for which they are eligible are net present value (NPV) positive and meet other investor, guarantor, insurer and program requirements.


3.	Servicer shall allow borrowers enrolled in a trial period plan under prior HAMP guidelines (where borrowers were not pre-qualified) and who made all required trial period payments, but were later denied a permanent modification, the opportunity to reapply for a HAMP or proprietary loan modification using current financial information.

Servicer shall promptly send a final modification agreement to borrowers who have enrolled in a trial period plan under current HAMP guidelines (or fully underwritten proprietary modification programs with a trial payment period) and who have made the required number of timely trial period payments, where the modification is underwritten prior to the trial period and has received any necessary investor, guarantor or insurer approvals. The borrower shall then be converted by Servicer to a permanent modification upon execution of the final modification documents, consistent with applicable program guidelines, absent evidence of fraud.


B.	Dual Track Restricted.

If a borrower has not already been referred to foreclosure, Servicer shall not refer an eligible borrower’s account to foreclosure while the borrower’s complete application for any loan modification program is pending if Servicer received (a) a complete loan modification application no later than day 120 of delinquency, or (b) a substantially complete loan modification application (missing only any required documentation of hardship) no later than day 120 of delinquency and Servicer receives any required hardship documentation no later than day 130 of delinquency. Servicer shall not make a referral to foreclosure of an eligible borrower who so provided an application until:


a.	Servicer determines (after the automatic review in paragraph IV.G.1) that the borrower is not eligible for a loan modification, or


b.	If borrower does not accept an offered foreclosure prevention alternative within 14 days of the evaluation notice, the earlier of (i) such 14 days, and (ii) borrower’s decline of the foreclosure prevention offer.

If borrower accepts the loan modification resulting from Servicer’s evaluation of the complete loan modification application referred to in paragraph IV.B.1 (verbally, in writing (including e-mail responses) or by submitting the first trial modification payment) within 14 days of Servicer’s offer of a loan modification, then the Servicer shall delay referral to foreclosure until (a) if the Servicer fails timely to receive the

first trial period payment, the last day for timely receiving the first trial period payment, and (b) if the Servicer timely receives the first trial period payment, after the borrower breaches the trial plan.


3.	If the loan modification requested by a borrower as described in paragraph IV.B.1 is denied, except when otherwise required by federal or state law or investor directives, if borrower is entitled to an appeal under paragraph IV.G.3, Servicer will not proceed to a foreclosure sale until the later of (if applicable):


a.	expiration of the 30-day appeal period; and


b.	if the borrower appeals the denial, until the later of (if applicable)

(i) if Servicer denies borrower’s appeal, 15 days after the letter denying the appeal, (ii) if the Servicer sends borrower a letter granting his or her appeal and offering a loan modification, 14 days after the date of such offer, (iii) if the borrower timely accepts the loan modification offer (verbally, in writing (including e-mail responses), or by making the first trial period payment), after the Servicer fails timely to receive the first trial period payment, and (iv) if the Servicer timely receives the first trial period payment, after the borrower breaches the trial plan.

If, after an eligible borrower has been referred to foreclosure, the Servicer receives a complete application from the borrower within 30 days after the Post Referral to Foreclosure Solicitation Letter, then while such loan modification application is pending, Servicer shall not move for foreclosure judgment or order of sale (or, if a motion has already been filed, shall take reasonable steps to avoid a ruling on such motion), or seek a foreclosure sale. If Servicer offers the borrower a loan modification, Servicer shall not move for judgment or order of sale, (or, if a motion has already been filed, shall take reasonable steps to avoid a ruling on such motion), or seek a foreclosure sale until the earlier of (a) 14 days after the date of the related offer of a loan modification, and (b) the date the borrower declines the loan modification offer. If the borrower accepts the loan modification offer (verbally, in writing (including e-mail responses) or by submitting the first trial modification payment) within 14 days after the date of the related offer of loan modification, Servicer shall continue this delay until the later of (if applicable) (A) the failure by the Servicer timely to receive the first trial period payment, and (B) if the Servicer timely receives the first trial period payment, after the borrower breaches the trial plan.


5.	If the loan modification requested by a borrower described in paragraph IV.B.4 is denied, then, except when otherwise required by federal or state law or investor directives, if borrower is entitled to an appeal under

paragraph IV.G.3, Servicer will not proceed to a foreclosure sale until the later of (if applicable):


a.	expiration of the 30-day appeal period; and


b.	if the borrower appeals the denial, until the later of (if applicable)

(i) if Servicer denies borrower’s appeal, 15 days after the letter denying the appeal, (ii) if the Servicer sends borrower a letter granting his or her appeal and offering a loan modification, 14 days after the date of such offer, (iii) if the borrower timely accepts the loan modification offer (verbally, in writing (including e-mail responses), or by making the first trial period payment), after the failure of the Servicer timely to receive the first trial period payment, and (iv) if the Servicer timely receives the first trial period payment, after the borrower breaches the trial plan.

If, after an eligible borrower has been referred to foreclosure, Servicer receives a complete loan modification application more than 30 days after the Post Referral to Foreclosure Solicitation Letter, but more than 37 days before a foreclosure sale is scheduled, then while such loan modification application is pending, Servicer shall not proceed with the foreclosure sale. If Servicer offers a loan modification, then Servicer shall delay the foreclosure sale until the earlier of (i) 14 days after the date of the related offer of loan modification, and (ii) the date the borrower declines the loan modification offer. If the borrower accepts the loan modification offer (verbally, in writing (including e-mail responses) or by submitting the first trial modification payment) within 14 days, Servicer shall delay the foreclosure sale until the later of (if applicable) (A) the failure by the Servicer timely to receive the first trial period payment, and (B) if the Servicer timely receives the first trial period payment, after the borrower breaches the trial plan.

If the loan modification requested by a borrower described in paragraph IV.B.6 is denied and it is reasonable to believe that more than 90 days remains until a scheduled foreclosure date or the first date on which a sale could reasonably be expected to be scheduled and occur, then, except when otherwise required by federal or state law or investor directives, if borrower is entitled to an appeal under paragraph IV.G.3.a, Servicer will not proceed to a foreclosure sale until the later of (if applicable):


a.	expiration of the 30-day appeal period; and


b.	if the borrower appeals the denial, until the later of (if applicable)

e-mail responses), or by making the first trial period payment), after the Servicer fails timely to receive the first trial period payment, and (iv) if the Servicer timely receives the first trial period payment, after the borrower breaches the trial plan.

If, after an eligible borrower has been referred to foreclosure, Servicer receives a complete loan modification application more than 30 days after the Post Referral to Foreclosure Solicitation Letter, but within 37 to 15 days before a foreclosure sale is scheduled, then Servicer shall conduct an expedited review of the borrower and, if the borrower is extended a loan modification offer, Servicer shall postpone any foreclosure sale until the earlier of (a) 14 days after the date of the related evaluation notice, and (b) the date the borrower declines the loan modification offer. If the borrower timely accepts the loan modification offer (either in writing or by submitting the first trial modification payment), Servicer shall delay the foreclosure sale until the later of (if applicable) (A) the failure by the Servicer timely to receive the first trial period payment, and (B) if the Servicer timely receives the first trial period payment, after the borrower breaches the trial plan.

If, after an eligible borrower has been referred to foreclosure, the Servicer receives a complete loan modification application more than 30 days after the Post Referral to Foreclosure Solicitation Letter and less than 15 days before a scheduled foreclosure sale, Servicer must notify the borrower before the foreclosure sale date as to Servicer’s determination (if its review was completed) or inability to complete its review of the loan modification application. If Servicer makes a loan modification offer to the borrower, then Servicer shall postpone any sale until the earlier of (a) 14 days after the date of the related evaluation notice, and (b) the date the borrower declines the loan modification offer. If the borrower timely accepts a loan modification offer (either in writing or by submitting the first trial modification payment), Servicer shall delay the foreclosure sale until the later of (if applicable) (A) the failure by the Servicer timely to receive the first trial period payment, and (B) if the Servicer timely receives the first trial period payment, after the borrower breaches the trial plan.


10.	For purposes of this section IV.B, Servicer shall not be responsible for failing to obtain a delay in a ruling on a judgment or failing to delay a foreclosure sale if Servicer made a request for such delay, pursuant to any state or local law, court rule or customary practice, and such request was not approved.


11.	Servicer shall not move to judgment or order of sale or proceed with a foreclosure sale under any of the following circumstances:


a.	The borrower is in compliance with the terms of a trial

loan modification, forbearance, or repayment plan; or


b.	A short sale or deed-in-lieu of foreclosure has been approved by all parties (including, for example, first lien investor, junior lien holder and mortgage insurer, as applicable), and proof of funds or financing has been provided to Servicer.


12.	If a foreclosure or trustee’s sale is continued (rather than cancelled) to provide time to evaluate loss mitigation options, Servicer shall promptly notify borrower in writing of the new date of sale (without delaying any related foreclosure sale).

13.

As indicated in paragraph I.A.18, Servicer shall send a statement to the borrower outlining loss mitigation efforts undertaken with respect to the borrower prior to foreclosure referral. If no loss mitigation efforts were offered or undertaken, Servicer shall state whether it contacted or attempted to contact the borrower and, if applicable, why the borrower was ineligible for a loan modification or other loss mitigation options.


14.	Servicer shall ensure timely and accurate communication of or access to relevant loss mitigation status and changes in status to its foreclosure attorneys, bankruptcy attorneys and foreclosure trustees and, where applicable, to court-mandated mediators.


C.	Single Point of Contact.


1.	Servicer shall establish an easily accessible and reliable single point of contact (“SPOC”) for each potentially-eligible first lien mortgage borrower so that the borrower has access to an employee of Servicer to obtain information throughout the loss mitigation, loan modification and foreclosure processes.

Servicer shall initially identify the SPOC to the borrower promptly after a potentially-eligible borrower requests loss mitigation assistance. Servicer shall provide one or more direct means of communication with the SPOC on loss mitigation-related correspondence with the borrower. Servicer shall promptly provide updated contact information to the borrower if the designated SPOC is reassigned, no longer employed by Servicer, or otherwise not able to act as the primary point of contact.


a.	Servicer shall ensure that debtors in bankruptcy are assigned to a SPOC specially trained in bankruptcy issues.


3.	The SPOC shall have primary responsibility for:


a.	Communicating the options available to the borrower, the actions the borrower must take to be considered for these options and the status of Servicer’s evaluation of the borrower for these options;


b.	Coordinating receipt of all documents associated with loan modification or loss mitigation activities;


c.	Being knowledgeable about the borrower’s situation and current

status in the delinquency/imminent default resolution process; and


d.	Ensuring that a borrower who is not eligible for MHA programs is considered for proprietary or other investor loss mitigation options.


4.	The SPOC shall, at a minimum, provide the following services to borrowers:


a.	Contact borrower and introduce himself/herself as the borrower’s SPOC;


b.	Explain programs for which the borrower is eligible;


c.	Explain the requirements of the programs for which the borrower is eligible;


d.	Explain program documentation requirements;


e.	Provide basic information about the status of borrower’s account, including pending loan modification applications, other loss mitigation alternatives, and foreclosure activity;


f.	Notify borrower of missing documents and provide an address or electronic means for submission of documents by borrower in order to complete the loan modification application;


g.	Communicate Servicer’s decision regarding loan modification applications and other loss mitigation alternatives to borrower in writing;


h.	Assist the borrower in pursuing alternative non-foreclosure options upon denial of a loan modification;


i.	If a loan modification is approved, call borrower to explain the program;


j.	Provide information regarding credit counseling where necessary;


k.	Help to clear for borrower any internal processing requirements; and


l.	Have access to individuals with the ability to stop foreclosure proceedings when necessary to comply with the MHA Program or this Agreement.


5.	The SPOC shall remain assigned to borrower’s account and available to borrower until such time as Servicer determines in good faith that all loss mitigation options have been exhausted, borrower’s account becomes current or, in the case of a borrower in bankruptcy, the borrower has exhausted all loss mitigation options for which the borrower is potentially eligible and has applied


6.	Servicer shall ensure that a SPOC can refer and transfer a borrower to an appropriate supervisor upon request of the borrower.


7.	Servicer shall ensure that relevant records relating to borrower’s account are promptly available to the borrower’s SPOC, so that the SPOC can timely, adequately and accurately inform the borrower of the current status of loss mitigation, loan modification, and foreclosure activities.

Servicer shall designate one or more management level employees to be the primary contact for the Attorneys General, state financial regulators, the Executive Office of U.S. Trustee, each regional office of the U.S. Trustee, and federal regulators for communication regarding complaints and inquiries from individual borrowers who are in default and/or have applied for loan modifications. Servicer shall provide a written acknowledgment to all such inquiries within 10 business days. Servicer shall provide a substantive written response to all such inquiries within 30 days. Servicer shall provide relevant loan information to borrower and to Attorneys General, state financial regulators, federal regulators, the Executive Office of the U.S. Trustee, and each U.S. Trustee upon written request and if properly authorized. A written complaint filed by a borrower and forwarded by a state Attorney General or financial regulatory agency to Servicer shall be deemed to have proper authorization.


9.	Servicer shall establish and make available to Chapter 13 trustees a toll- free number staffed by persons trained in bankruptcy to respond to inquiries from Chapter 13 trustees.


D.	Loss Mitigation Communications with Borrowers.

Servicer shall commence outreach efforts to communicate loss mitigation options for first lien mortgage loans to all potentially eligible delinquent borrowers (other than those in bankruptcy) beginning on timelines that are in accordance with HAMP borrower solicitation guidelines set forth in the MHA Handbook version 3.2, Chapter II, Section 2.2, regardless of whether the borrower is eligible for a HAMP modification. Servicer shall provide borrowers with notices that include contact information for national or state foreclosure assistance hotlines and state housing counseling resources, as appropriate. The use by Servicer of nothing more than prerecorded automatic messages in loss mitigation communications with borrowers shall not be sufficient in those instances in which it fails to result in contact between the borrower and one of Servicer’s loss mitigation specialists. Servicer shall conduct affirmative outreach efforts to inform delinquent second lien borrowers (other than those in bankruptcy about the availability of payment reduction options. The foregoing notwithstanding, Servicer shall have no obligation to solicit borrowers who are in bankruptcy.


2.	Servicer shall disclose and provide accurate information to borrowers relating to the qualification process and eligibility factors for loss mitigation programs.


3.	Servicer shall communicate, at the written request of the borrower, with

the borrower’s authorized representatives, including housing counselors. Servicer shall communicate with representatives from state Attorneys General and financial regulatory agencies acting upon a written complaint filed by the borrower and forwarded by the state Attorney General or financial regulatory agency to Servicer. When responding to the borrower regarding such complaint, Servicer shall include the applicable state Attorney General on all correspondence with the borrower regarding such complaint.

Servicer shall cease all collection efforts while the borrower (i) is making timely payments under a trial loan modification or (ii) has submitted a complete loan modification application, and a modification decision is pending. Notwithstanding the above, Servicer reserves the right to contact a borrower to gather required loss mitigation documentation or to assist a borrower with performance under a trial loan modification plan.


5.	Servicer shall consider partnering with third parties, including national chain retailers, and shall consider the use of select bank branches affiliated with Servicer, to set up programs to allow borrowers to copy, fax, scan, transmit by overnight delivery, or mail or email documents to Servicer free of charge.


6.	Within five business days after referral to foreclosure, the Servicer (including any attorney (or trustee) conducting foreclosure proceedings at the direction of the Servicer) shall send a written communication (“Post Referral to Foreclosure Solicitation Letter”) to the borrower that includes clear language that:


a.	The Servicer may have sent to the borrower one or more borrower solicitation communications;


b.	The borrower can still be evaluated for alternatives to foreclosure even if he or she had previously shown no interest;


c.	The borrower should contact the Servicer to obtain a loss mitigation application package;


d.	The borrower must submit a loan modification application to the Servicer to request consideration for available foreclosure prevention alternatives;


e.	Provides the Servicer’s contact information for submitting a complete loan modification application, including the Servicer’s toll-free number; and

Unless the form of letter is otherwise specified by investor directive or state law or the borrower is not eligible for an appeal under paragraph IV.G.3.a, states that if the borrower is contemplating or has pending an appeal of an earlier denial of a loan modification application, that he or she may submit a loan modification application in lieu of his or her appeal within 30 days after the Post Referral to Foreclosure Solicitation Letter.


E.	Development of Loan Portals.


1.	Servicer shall develop or contract with a third-party vendor to develop an online portal linked to Servicer’s primary servicing system where borrowers can check, at no cost, the status of their first lien loan modifications.


2.	Servicer shall design portals that may, among other things:


a.	Enable borrowers to submit documents electronically;


b.	Provide an electronic receipt for any documents submitted;


c.	Provide information and eligibility factors for proprietary loan modification and other loss mitigation programs; and


d.	Permit Servicer to communicate with borrowers to satisfy any written communications required to be provided by Servicer, if borrowers submit documents electronically.


3.	Servicer shall participate in the development and implementation of a neutral, nationwide loan portal system linked to Servicer’s primary servicing system, such as Hope LoanPort to enhance communications with housing counselors, including using the technology used for the Borrower Portal, and containing similar features to the Borrower Portal.


4.	Servicer shall update the status of each pending loan modification on these portals at least every 10 business days and ensure that each portal is updated on such a schedule as to maintain consistency.


F.	Loan Modification Timelines.


1.	Servicer shall provide written acknowledgement of the receipt of documentation submitted by the borrower in connection with a first lien loan modification application within 3 business days. In its initial acknowledgment, Servicer shall briefly describe the loan modification process and identify deadlines and expiration dates for submitted documents.


2.	Servicer shall notify borrower of any known deficiency in borrower’s initial submission of information, no later than 5 business days after receipt, including any missing information or documentation required for the loan modification to be considered complete.


3.	Subject to section IV.B, Servicer shall afford borrower 30 days from the date of Servicer’s notification of any missing information or documentation to supplement borrower’s submission of information prior to making a determination on whether or not to grant an initial loan modification.


4.	Servicer shall review the complete first lien loan modification application submitted by borrower and shall determine the disposition of borrower’s

trial or preliminary loan modification request no later than 30 days after receipt of the complete loan modification application, absent compelling circumstances beyond Servicer’s control.

Servicer shall implement processes to ensure that second lien loan modification requests are evaluated on a timely basis. When a borrower qualifies for a second lien loan modification after a first lien loan modification in accordance with Section 2.c.i of the General Framework for Consumer Relief Provisions, the Servicer of the second lien loan shall (absent compelling circumstances beyond Servicer’s control) send loan modification documents to borrower no later than 45 days after the Servicer receives official notification of the successful completion of the related first lien loan modification and the essential terms.


6.	For all proprietary first lien loan modification programs, Servicer shall allow properly submitted borrower financials to be used for 90 days from the date the documents are received, unless Servicer learns that there has been a material change in circumstances or unless investor requirements mandate a shorter time frame.


7.	Servicer shall notify borrowers of the final denial of any first lien loan modification request within 10 business days of the denial decision. The notification shall be in the form of the non-approval notice required in paragraph IV.G.1 below.


G.	Independent Evaluation of First Lien Loan Modification Denials.

Except when evaluated as provided in paragraphs IV.B.8 or IV.B.9, Servicer’s initial denial of an eligible borrower’s request for first lien loan modification following the submission of complete loan modification application shall be subject to an independent evaluation. Such evaluation shall be performed by an independent entity or a different employee who has not been involved with the particular loan modification.


2.	Denial Notice.


a.	When a first lien loan modification is denied after independent review, Servicer shall send a written non-approval notice to the borrower identifying the reasons for denial and the factual information considered. The notice shall inform the borrower that he or she has 30 days from the date of the denial letter declination to provide evidence that the eligibility determination was in error.


b.	If the first lien modification is denied because disallowed by investor, Servicer shall disclose in the written non-approval notice the name of the investor and summarize the reasons for investor denial.


c.	For those cases where a first lien loan modification denial is the result of an NPV calculation, Servicer shall provide in the written

non-approval notice the monthly gross income and property value used in the calculation.


3.	Appeal Process.


a.	After the automatic review in paragraph IV.G.1 has been completed and Servicer has issued the written non-approval notice, in the circumstances described in the first sentences

of paragraphs IV.B.3, IV.B.5 or IV.B.7, except when otherwise

required by federal or state law or investor directives, borrowers shall have 30 days to request an appeal and obtain an independent review of the first lien loan modification denial in accordance with the terms of this Agreement. Servicer shall ensure that the borrower has 30 days from the date of the written non-approval notice to provide information as to why Servicer’s determination of eligibility for a loan modification was in error, unless the reason for non-approval is (1) ineligible mortgage, (2) ineligible property,

(3) offer not accepted by borrower or request withdrawn, or (4) the loan was previously modified.

For those cases in which the first lien loan modification denial is the result of an NPV calculation, if a borrower disagrees with the property value used by Servicer in the NPV test, the borrower can request that a full appraisal be conducted of the property by an independent licensed appraiser (at borrower expense) consistent with HAMP directive 10-15. Servicer shall comply with the process set forth in HAMP directive 10-15, including using such value in the NPV calculation.


c.	Servicer shall review the information submitted by borrower and use its best efforts to communicate the disposition of borrower’s appeal to borrower no later than 30 days after receipt of the information.


d.	If Servicer denies borrower’s appeal, Servicer’s appeal denial letter shall include a description of other available loss mitigation, including short sales and deeds in lieu of foreclosure.


H.	General Loss Mitigation Requirements.


1.	Servicer shall maintain adequate staffing and systems for tracking borrower documents and information that are relevant to foreclosure, loss mitigation, and other Servicer operations. Servicer shall make periodic assessments to ensure that its staffing and systems are adequate.


2.	Servicer shall maintain adequate staffing and caseload limits for SPOCs and employees responsible for handling foreclosure, loss mitigation and related communications with borrowers and housing counselors. Servicer shall make periodic assessments to ensure that its staffing and systems are adequate.


3.	Servicer shall establish reasonable minimum experience, educational and training requirements for loss mitigation staff.


4.	Servicer shall document electronically key actions taken on a foreclosure, loan modification, bankruptcy, or other servicing file, including communications with the borrower.


5.	Servicer shall not adopt compensation arrangements for its employees that encourage foreclosure over loss mitigation alternatives.

Servicer shall not make inaccurate payment delinquency reports to credit reporting agencies when the borrower is making timely reduced payments pursuant to a trial or other loan modification agreement. Servicer shall provide the borrower, prior to entering into a trial loan modification, with clear and conspicuous written information that adverse credit reporting consequences may result from the borrower making reduced payments during the trial period.


7.	Where Servicer grants a loan modification, Servicer shall provide borrower with a copy of the fully executed loan modification agreement within 45 days of receipt of the executed copy from the borrower. If the modification is not in writing, Servicer shall provide the borrower with a written summary of its terms, as promptly as possible, within 45 days of the approval of the modification.


8.	Servicer shall not instruct, advise or recommend that borrowers go into default in order to qualify for loss mitigation relief.


9.	Servicer shall not discourage borrowers from working or communicating with legitimate non-profit housing counseling services.

10.

Servicer shall not, in the ordinary course, require a borrower to waive or release claims and defenses as a condition of approval for a loan modification program or other loss mitigation relief. However, nothing herein shall preclude Servicer from requiring a waiver or release of claims and defenses with respect to a loan modification offered in connection with the resolution of a contested claim, when the borrower would not otherwise be qualified for the loan modification under existing Servicer programs.


11.	Servicer shall not charge borrower an application fee in connection with a request for a loan modification. Servicer shall provide borrower with a pre-paid overnight envelope or pre-paid address label for return of a loan modification application.

12.

Notwithstanding any other provision of this Agreement, and to minimize the risk of borrowers submitting multiple loss mitigation requests for the purpose of delay, Servicer shall not be obligated to evaluate requests for loss mitigation options from (a) borrowers who have already been evaluated or afforded a fair opportunity to be evaluated consistent with the requirements of HAMP or proprietary modification programs, or (b) borrowers who were evaluated after the date of implementation of this

Agreement, consistent with this Agreement, unless there has been a material change in the borrower’s financial circumstances that is documented by borrower and submitted to Servicer.


I.	Proprietary First Lien Loan Modifications.


1.	Servicer shall make publicly available information on its qualification processes, all required documentation and information necessary for a complete first lien loan modification application, and key eligibility factors for all proprietary loan modifications.


2.	Servicer shall design proprietary first lien loan modification programs that are intended to produce sustainable modifications according to investor guidelines and previous results. Servicer shall design these programs with the intent of providing affordable payments for borrowers needing longer term or permanent assistance.


3.	Servicer shall track outcomes and maintain records regarding characteristics and performance of proprietary first lien loan modifications. Servicer shall provide a description of modification waterfalls, eligibility criteria, and modification terms, on a publicly- available website.


4.	Servicer shall not charge any application or processing fees for proprietary first lien loan modifications.


J.	Proprietary Second Lien Loan Modifications.


1.	Servicer shall make publicly available information on its qualification processes, all required documentation and information necessary for a complete second lien modification application.


2.	Servicer shall design second lien modification programs with the intent of providing affordable payments for borrowers needing longer term or permanent assistance.


3.	Servicer shall not charge any application or processing fees for second lien modifications.


4.	When an eligible borrower with a second lien submits all required information for a second lien loan modification and the modification request is denied, Servicer shall promptly send a written non-approval notice to the borrower.


K.	Short Sales.


1.	Servicer shall make publicly available information on general requirements for the short sale process.


2.	Servicer shall consider appropriate monetary incentives to underwater borrowers to facilitate short sale options.


3.	Servicer shall develop a cooperative short sale process which allows the borrower the opportunity to engage with Servicer to pursue a short sale evaluation prior to putting home on the market.


4.	Servicer shall send written confirmation of the borrower’s first request for

a short sale to the borrower or his or her agent within 10 business days of receipt of the request and proper written authorization from the borrower allowing Servicer to communicate with the borrower’s agent. The confirmation shall include basic information about the short sale process and Servicer’s requirements, and will state clearly and conspicuously that the Servicer may demand a deficiency payment if such deficiency claim is permitted by applicable law.


5.	Servicer shall send borrower at borrower’s address of record or to borrower’s agent timely written notice of any missing required documents for consideration of short sale within 30 days of receiving borrower’s request for a short sale.


6.	Servicer shall review the short sale request submitted by borrower and communicate the disposition of borrower’s request no later than 30 days after receipt of all required information and third-party consents.

If the short sale request is accepted, Servicer shall contemporaneously notify the borrower whether Servicer or investor will demand a deficiency payment or related cash contribution and the approximate amount of that deficiency, if such deficiency obligation is permitted by applicable law. If the short sale request is denied, Servicer shall provide reasons for the denial in the written notice. If Servicer waives a deficiency claim, it shall not sell or transfer such claim to a third-party debt collector or debt buyer for collection.


L.	Loss Mitigation During Bankruptcy.


1.	Servicer may not deny any loss mitigation option to eligible borrowers on the basis that the borrower is a debtor in bankruptcy so long as borrower and any trustee cooperates in obtaining any appropriate approvals or consents.

Servicer shall, to the extent reasonable, extend trial period loan modification plans as necessary to accommodate delays in obtaining bankruptcy court approvals or receiving full remittance of debtor’s trial period payments that have been made to a chapter 13 trustee. In the event of a trial period extension, the debtor must make a trial period payment for each month of the trial period, including any extension month.


3.	When the debtor is in compliance with a trial period or permanent loan modification plan, Servicer will not object to confirmation of the debtor’s chapter 13 plan, move to dismiss the pending bankruptcy case, or file a MRS solely on the basis that the debtor paid only the amounts due under the trial period or permanent loan modification plan, as opposed to the non-modified mortgage payments.


M.	Transfer of Servicing of Loans Pending for Permanent Loan Modification.


1.	Ordinary Transfer of Servicing from Servicer to Successor

Servicer or Subservicer.


a.	At time of transfer or sale, Servicer shall inform successor servicer (including a subservicer) whether a loan modification is pending.


b.	Any contract for the transfer or sale of servicing rights shall obligate the successor servicer to accept and continue processing pending loan modification requests.


c.	Any contract for the transfer or sale of servicing rights shall obligate the successor servicer to honor trial and permanent loan modification agreements entered into by prior servicer.


d.	Any contract for transfer or sale of servicing rights shall designate that borrowers are third party beneficiaries under paragraphs IV.M.1.b and IV.M.1.c, above.


2.	Transfer of Servicing to Servicer. When Servicer acquires servicing rights from another servicer, Servicer shall ensure that it will accept and continue to process pending loan modification requests from the prior servicer, and that it will honor trial and permanent loan modification agreements entered into by the prior servicer.


V.	PROTECTIONS FOR MILITARY PERSONNEL.


A.	Servicer shall comply with all applicable provisions of the Servicemembers Civil Relief Act (SCRA), 50 U.S.C. Appx. § 501 et seq ., and any applicable state law offering protections to servicemembers.

When a borrower states that he or she is or was within the preceding 9 months (or the then applicable statutory period under the SCRA) in active military service or has received and is subject to military orders requiring him or her to commence active military service, Lender shall determine whether the borrower may be eligible for the protections of the SCRA or for the protections of the provisions of paragraph V.F. If Servicer determines the borrower is so eligible, Servicer shall, until Servicer determines that such customer is no longer protected by the SCRA,


1.	if such borrower is not entitled to a SPOC, route such customers to employees who have been specially trained about the protections of the SCRA to respond to such borrower’s questions, or


2.	if such borrower is entitled to a SPOC, designate as a SPOC for such

borrower a person who has been specially trained about the protections of the SCRA (Servicemember SPOC).


C.	Servicer shall, in addition to any other reviews it may perform to assess eligibility under the SCRA, (i) before referring a loan for foreclosure, (ii) within seven days before a foreclosure sale, and (iii) the later of (A) promptly after a foreclosure sale and (B) within three days before the regularly scheduled end of any

redemption period, determine whether the secured property is owned by a servicemember covered under SCRA by searching the Defense Manpower Data Center (DMDC) for evidence of SCRA eligibility by either (a) last name and social security number, or (b) last name and date of birth.

When a servicemember provides written notice requesting protection under the SCRA relating to interest rate relief, but does not provide the documentation required by Section 207(b)(1) of the SCRA (50 USC Appx. § 527(b)(1)), Servicer shall accept, in lieu of the documentation required by Section 207(b)(1) of the SCRA, a letter on official letterhead from the servicemember’s commanding officer including a contact telephone number for confirmation:


1.	Addressed in such a way as to signify that the commanding officer recognizes that the letter will be relied on by creditors of the servicemember (a statement that the letter is intended to be relied upon by the Servicemember’s creditors would satisfy this requirement);


2.	Setting forth the full name (including middle initial, if any), Social Security number and date of birth of the servicemember;


3.	Setting forth the home address of the servicemember; and


4.	Setting forth the date of the military orders marking the beginning of the period of military service of the servicemember and, as may be applicable, that the military service of the servicemember is continuing or the date on which the military service of the servicemember ended.

Servicer shall notify customers who are 45 days delinquent that, if they are a servicemember, (a) they may be entitled to certain protections under the SCRA regarding the servicemember’s interest rate and the risk of foreclosure, and (b) counseling for covered servicemembers is available at agencies such as Military OneSource, Armed Forces Legal Assistance, and a HUD-certified housing counselor. Such notice shall include a toll-free number that servicemembers may call to be connected to a person who has been specially trained about the protections of the SCRA to respond to such borrower’s questions. Such telephone number shall either connect directly to such a person or afford a caller the ability to identify him- or herself as an eligible servicemember and be routed to such persons. Servicers hereby confirm that they intend to take reasonable steps to ensure the dissemination of such toll-free number to customers who may be

eligible servicemembers.

Irrespective of whether a mortgage obligation was originated before or during the period of a servicemember’s military service, if, based on the determination described in the last sentence and subject to Applicable Requirements, a servicemember’s military orders (or any letter complying with paragraph V.D), together with any other documentation satisfactory to the Servicer, reflects that the servicemember is (a) eligible for Hostile Fire/Imminent Danger Pay and (b) serving at a location (i) more than 750 miles from the location of the secured property or (ii) outside of the United States, then to the extent consistent with Applicable Requirements, the Servicer shall not sell, foreclose, or seize a property for a breach of an obligation on real property owned by a servicemember that is

secured by mortgage, deed of trust, or other security in the nature of a mortgage, during, or within 9 months after, the period in which the servicemember is eligible for Hostile Fire/Imminent Danger Pay, unless either (i) Servicer has obtained a court order granted before such sale, foreclosure, or seizure with a return made and approved by the court, or (ii) if made pursuant to an agreement as provided in section 107 of the SCRA (50 U.S.C. Appx. § 517). Unless a servicemember's eligibility for the protection under this paragraph can be fully determined by a proper search of the DMDC website, Servicer shall only be obligated under this provision if it is able to determine, based on a servicemember’s military orders (or any letter complying with paragraph V.D), together with any other documentation provided by or on behalf of the servicemember that is satisfactory to the Servicer, that the servicemember is (a) eligible for Hostile Fire/Imminent Danger Pay and

(b) serving at a location (i) more than 750 miles from the location of the secured property or (ii) outside of the United States.

Servicer shall not require a servicemember to be delinquent to qualify for a short sale, loan modification, or other loss mitigation relief if the servicemember is suffering financial hardship and is otherwise eligible for such loss mitigation. Subject to Applicable Requirements, for purposes of assessing financial hardship in relation to (i) a short sale or deed in lieu transaction, Servicer will take into account whether the servicemember is, as a result of a permanent change of station order, required to relocate even if such servicemember’s income has not been decreased, so long as the servicemember does not have sufficient liquid assets to make his or her monthly mortgage payments, or (ii) a loan modification, Servicer will take into account whether the servicemember is, as a result of his or her under military orders required to relocate to a new duty station at least seventy five mile from his or her residence/secured property or to reside at a location other than the residence/secured property, and accordingly is unable personally to occupy the residence and (a) the residence will continue to be occupied by his or her dependents, or (b) the residence is the only residential property owned by the servicemember.


H.	Servicer shall not make inaccurate reports to credit reporting agencies when a servicemember, who has not defaulted before relocating under military orders to a new duty station, obtains a short sale, loan modification, or other loss mitigation relief.


VI.	RESTRICTIONS ON SERVICING FEES.


A.	General Requirements.


1.	All default, foreclosure and bankruptcy-related service fees, including third-party fees, collected from the borrower by Servicer shall be bona fide, reasonable in amount, and disclosed in detail to the borrower as provided in paragraphs I.B.10 and VI.B.1.


B.	Specific Fee Provisions.


1.	Schedule of Fees. Servicer shall maintain and keep current a schedule of common non-state specific fees or ranges of fees that may be charged to borrowers by or on behalf of Servicer. Servicer

shall make this schedule available on its website and to the borrower or borrower’s authorized representative upon request. The schedule shall identify each fee, provide a plain language explanation of the fee, and state the maximum amount of the fee or how the fee is calculated or determined.


2.	Servicer may collect a default-related fee only if the fee is for reasonable and appropriate services actually rendered and one of the following conditions is met:


a.	the fee is expressly or generally authorized by the loan instruments and not prohibited by law or this Agreement;


b.	the fee is permitted by law and not prohibited by the loan instruments or this Agreement; or


c.	the fee is not prohibited by law, this Agreement or the loan instruments and is a reasonable fee for a specific service requested by the borrower that is collected only after clear and conspicuous disclosure of the fee is made available to the borrower.

Attorneys’ Fees. In addition to the limitations in paragraph VI.B.2 above, attorneys’ fees charged in connection with a foreclosure action or bankruptcy proceeding shall only be for work actually performed and shall not exceed reasonable and customary fees for such work. In the event a foreclosure action is terminated prior to the final judgment and/or sale for a loss mitigation option, a reinstatement, or payment in full, the borrower shall be liable only for reasonable and customary fees for work actually performed.


4.	Late Fees.


a.	Servicer shall not collect any late fee or delinquency charge when the only delinquency is attributable to late fees or delinquency charges assessed on an earlier payment, and the payment is otherwise a full payment for the applicable period and is paid on or before its due date or within any applicable grace period.


b.	Servicer shall not collect late fees (i) based on an amount greater than the past due amount; (ii) collected from the escrow account or from escrow surplus without the approval of the borrower; or (iii) deducted from any regular payment.


c.	Servicer shall not collect any late fees for periods during which

(i) a complete loan modification application is under consideration;

(ii) the borrower is making timely trial modification payments; or

(iii) a short sale offer is being evaluated by Servicer.


C.	Third-Party Fees.


1.	Servicer shall not impose unnecessary or duplicative property inspection, property preservation or valuation fees on the borrower, including, but not limited to, the following:

No property preservation fees shall be imposed on eligible borrowers who have a pending application with Servicer for loss mitigation relief or are performing under a loss mitigation program, unless Servicer has a reasonable basis to believe that property preservation is necessary for the maintenance of the property, such as when the property is vacant or listed on a violation notice from a local jurisdiction;


b.	No property inspection fee shall be imposed on a borrower any more frequently than the timeframes allowed under GSE or HUD guidelines unless Servicer has identified specific circumstances supporting the need for further property inspections; and


c.	Servicer shall be limited to imposing property valuation fees ( e.g. , BPO) to once every 12 months, unless other valuations are requested by the borrower to facilitate a short sale or to support a loan modification as outlined in paragraph IV.G.3.a, or required as part of the default or foreclosure valuation process.


2.	Default, foreclosure and bankruptcy-related services performed by third parties shall be at reasonable market value.

Servicer shall not collect any fee for default, foreclosure or bankruptcy- related services by an affiliate unless the amount of the fee does not exceed the lesser of (a) any fee limitation or allowable amount for the service under applicable state law, and (b) the market rate for the service. To determine the market rate, Servicer shall obtain annual market reviews of its affiliates’ pricing for such default and foreclosure-related services; such market reviews shall be performed by a qualified, objective, independent third-party professional using procedures and standards generally accepted in the industry to yield accurate and reliable results. The independent third-party professional shall determine in its market survey the price actually charged by third-party affiliates and by independent third party vendors.


4.	Servicer shall be prohibited from collecting any unearned fee, or giving or accepting referral fees in relation to third-party default or foreclosure- related services.


5.	Servicer shall not impose its own mark-ups on Servicer initiated third-party default or foreclosure-related services.


D.	Certain Bankruptcy Related Fees.


1.	Servicer must not collect any attorney’s fees or other charges with respect to the preparation or submission of a POC or MRS document that is withdrawn or denied, or any amendment thereto that is required, as a result of a substantial misstatement by Servicer of the amount due.


2.	Servicer shall not collect late fees due to delays in receiving full remittance of debtor’s payments, including trial period or permanent modification payments as well as post-petition conduit payments in accordance with 11 U.S.C. § 1322(b)(5), that debtor has timely (as defined by the underlying Chapter 13 plan) made to a chapter 13 trustee.


VII.	FORCE-PLACED INSURANCE .


A.	General Requirements for Force-Placed Insurance.

Servicer shall not obtain force-placed insurance unless there is a reasonable basis to believe the borrower has failed to comply with the loan contract’s requirements to maintain property insurance. For escrowed accounts, Servicer shall continue to advance payments for the homeowner’s existing policy, unless the borrower or insurance company cancels the existing policy. For purposes of this section VII, the term “force-placed insurance” means hazard insurance coverage obtained by Servicer when the borrower has failed to maintain or renew hazard or wind insurance on such property as required of the borrower under the terms of the mortgage.


2.	Servicer shall not be construed as having a reasonable basis for obtaining force-placed insurance unless the requirements of this section VII have been met.


3.	Servicer shall not impose any charge on any borrower for force-placed insurance with respect to any property securing a federally related mortgage unless:


a.	Servicer has sent, by first-class mail, a written notice to the borrower containing:


i.	A reminder of the borrower’s obligation to maintain hazard insurance on the property securing the federally related mortgage;


ii.	A statement that Servicer does not have evidence of insurance coverage of such property;


iii.	A clear and conspicuous statement of the procedures by which the borrower may demonstrate that the borrower already has insurance coverage;


iv.	A statement that Servicer may obtain such coverage at

the borrower’s expense if the borrower does not provide such demonstration of the borrower’s existing coverage in a timely manner;


v.	A statement that the cost of such coverage may be

significantly higher than the cost of the homeowner’s current coverage;

vi.

For first lien loans on Servicer’s primary servicing system, a statement that, if the borrower desires to maintain his or her voluntary policy, Servicer will offer an escrow account and advance the premium due on the voluntary policy if the borrower: (a) accepts the offer of the escrow account; (b) provides a copy of the invoice from the voluntary carrier; agrees in writing to reimburse the escrow advances through regular escrow payments; (d) agrees to escrow to both repay the advanced premium and to pay for the future premiums necessary to maintain any required insurance policy; and (e) agrees Servicer shall manage the escrow account in accordance with the loan documents and with state and federal law; and


vii.	A statement, in the case of single interest coverage, that the coverage may only protect the mortgage holder’s interest and not the homeowner’s interest.


b.	Servicer has sent, by first-class mail, a second written notice, at least 30 days after the mailing of the notice under paragraph

VII.A.3.a that contains all the information described in each clause of such paragraph.


c.	Servicer has not received from the borrower written confirmation of hazard insurance coverage for the property securing the mortgage by the end of the 15-day period beginning on the date the notice under paragraph VII.A.3.b was sent by Servicer.


4.	Servicer shall accept any reasonable form of written confirmation from a borrower or the borrower’s insurance agent of existing insurance coverage, which shall include the existing insurance policy number along with the identity of, and contact information for, the insurance company or agent.


5.	Servicer shall not place hazard or wind insurance on a mortgaged property, or require a borrower to obtain or maintain such insurance, in excess of the greater of replacement value, last-known amount of coverage or the outstanding loan balance, unless required by Applicable Requirements, or requested by borrower in writing.


6.	Within 15 days of the receipt by Servicer of evidence of a borrower’s existing insurance coverage, Servicer shall:


a.	Terminate the force-placed insurance; and


b.	Refund to the consumer all force-placed insurance premiums paid by the borrower during any period during which the borrower’s insurance coverage and the force placed insurance coverage were each in effect, and any related fees charged to the consumer’s account with respect to the force-placed insurance during such period.


7.	Servicer shall make reasonable efforts to work with the borrower to

continue or reestablish the existing homeowner’s policy if there is a lapse in payment and the borrower’s payments are escrowed.


8.	Any force-placed insurance policy must be purchased for a commercially reasonable price.


9.	No provision of this section VII shall be construed as prohibiting Servicer from providing simultaneous or concurrent notice of a lack of flood insurance pursuant to section 102(e) of the Flood Disaster Protection Act of 1973.


VIII.	GENERAL SERVICER DUTIES AND PROHIBITIONS.


A.	Measures to Deter Community Blight.


1.	Servicer shall develop and implement policies and procedures to ensure that REO properties do not become blighted.


2.	Servicer shall develop and implement policies and procedures to enhance participation and coordination with state and local land bank programs, neighborhood stabilization programs, nonprofit redevelopment programs, and other anti-blight programs, including those that facilitate discount sale or donation of low-value REO properties so that they can be demolished or salvaged for productive use.

As indicated in I.A.18, Servicer shall (a) inform borrower that if the borrower continues to occupy the property, he or she has responsibility to maintain the property, and an obligation to continue to pay taxes owed, until a sale or other title transfer action occurs; and (b) request that if the borrower wishes to abandon the property, he or she contact Servicer to discuss alternatives to foreclosure under which borrower can surrender the property to Servicer in exchange for compensation.


4.	When the Servicer makes a determination not to pursue foreclosure action on a property with respect to a first lien mortgage loan, Servicer shall:


a.	Notify the borrower of Servicer’s decision to release the lien

and not pursue foreclosure, and inform borrower about his or her right to occupy the property until a sale or other title transfer action occurs; and


b.	Notify local authorities, such as tax authorities, courts, or code enforcement departments, when Servicer decides to release the lien and not pursue foreclosure.


B.	Tenants’ Rights.


1.	Servicer shall comply with all applicable state and federal laws governing the rights of tenants living in foreclosed residential properties.


2.	Servicer shall develop and implement written policies and procedures to ensure compliance with such laws.


IX.	GENERAL PROVISIONS, DEFINITIONS, AND IMPLEMENTATION.


A.	Applicable Requirements.

The servicing standards and any modifications or other actions taken in accordance with the servicing standards are expressly subject to, and shall be interpreted in accordance with, (a) applicable federal, state and local laws, rules and regulations, including, but not limited to, any requirements of the federal banking regulators, (b) the terms of the applicable mortgage loan documents, (c) Section 201 of the Helping Families Save Their Homes Act of 2009, and (d) the terms and provisions of the Servicer Participation Agreement with the Department of Treasury, any servicing agreement, subservicing agreement under which Servicer services for others, special servicing agreement, mortgage or bond insurance policy or related agreement or requirements to which Servicer is a party and by which it or its servicing is bound pertaining to the servicing or ownership of the mortgage loans, including without limitation the requirements, binding directions, or investor guidelines of the applicable investor (such as Fannie Mae or Freddie Mac), mortgage or bond insurer, or credit enhancer (collectively, the “Applicable Requirements”).

In the event of a conflict between the requirements of the Agreement and the Applicable Requirements with respect to any provision of this Agreement such that the Servicer cannot comply without violating Applicable Requirements or being subject to adverse action, including fines and penalties, Servicer shall document such conflicts and notify the Monitor and the Monitoring Committee that it intends to comply with the Applicable Requirements to the extent necessary to eliminate the conflict. Any associated Metric provided for in the Enforcement Terms will be adjusted accordingly.


B.	Definitions.


1.	In each instance in this Agreement in which Servicer is required to ensure adherence to, or undertake to perform certain obligations, it is intended to mean that Servicer shall: (a) authorize and adopt such

actions on behalf of Servicer as may be necessary for Servicer to perform such obligations and undertakings; (b) follow up on any material non-compliance with such actions in a timely and appropriate manner; and (c) require corrective action be taken in a timely manner of any material non-compliance with such obligations.

References to Servicer shall mean SunTrust Mortgage, Inc. and shall include Servicer’s successors and assignees in the event of a sale of all or substantially all of the assets of Servicer or of Servicer’s division(s) or major business unit(s) that are engaged as a primary business in customer- facing servicing of residential mortgages on owner-occupied properties. The provisions of this Agreement shall not apply to those divisions or major business units of Servicer that are not engaged as a primary business in customer-facing servicing of residential mortgages on owner-occupied one-to-four family properties on its own behalf or on behalf of investors.

EXHIBIT B

DISTRIBUTION OF FUNDS

1. The Exhibit J Federal Settlement Amount . Consistent with the agreement and instructions in Exhibit J, SunTrust Mortgage, Inc. will pay, or cause to be paid,

$418,000,000.00, plus simple interest on the Settlement Amount at a rate of 2.375% per annum accruing from March 5, 2014 through March 15, 2014, for a total of $418,271,986, to the United States for the release of FHA origination claims.

2. Federal Payment Settlement Amount. The Escrow Agent shall distribute ten million dollars ($10,000,000.00) (the “Federal Payment Settlement Amount”) of the Direct Payment Settlement Amount to the United States in accordance with instructions to be provided by the United States. That amount will be deposited for losses incurred into Federal Housing Administration’s Capital Reserve Account, the Veterans Housing Benefit Program Fund Financing Account (pursuant to 38 U.S.C. § 3722(c)(3), as being incident to housing loan operations) or as otherwise directed by the Department of Veterans Affairs, and as directed by Rural Housing Service, Department of Agriculture, in accordance with instructions from the United States. The United States intends that such deposits conform with the Miscellaneous Receipts Act and other law.

3. State Payment Settlement Amount: In accordance with written instructions from the State members of the Monitoring Committee, the Escrow Agent shall make forty million dollars ($40,000,000.00) of the Direct Payment Settlement available to the Administrator to provide cash payments to borrowers whose homes were finally sold or taken in foreclosure by Defendant between and including January 1, 2008 and December 31, 2013; who submit claims arising from the Covered Conduct; and who otherwise meet criteria set forth by the State members of the Monitoring Committee. Any amounts made

available hereunder remain a part of the Qualified Settlement Fund until distributed to borrowers and shall be administered in accordance with the terms set forth in Exhibit C.

4. Any interest earned on funds held by the Escrow Agent may be used, at the discretion of the State members of the Monitoring Committee, to pay the costs and expenses of the escrow or the costs and expenses of administration, including taxes, or for any other housing related purpose.

EXHIBIT C

BORROWER PAYMENT AMOUNT

1. The Borrower Payment Amount shall be administered under the direction and control of the State members of the Monitoring Committee in the following manner.

2. Within ninety (90) days of the Effective Date of this Consent Judgment, the State members of the Monitoring Committee shall choose and retain a Settlement Administrator (“the Administrator”) to administer the distribution of cash payments to individual borrowers under this Consent Judgment. All costs and expenses of the Administrator, including taxes, shall be paid from the Borrower Payment Amount.

3. Defendant shall provide to the Administrator all information already in its possession and readily available that is reasonably necessary for the administration of this Consent Judgment, within a reasonable time after receipt of the request for information. Defendant is ordered herein to provide such information under 15 U.S.C. § 6802(e)(1)(A), (5) and (8) of the Gramm-Leach-Bliley Act. Such information pertaining to individual eligible Borrowers, including names and other identifying information, may be provided to individual states, but only if the information is used solely for the purpose of contacting eligible Borrowers, responding to inquiries from Borrowers regarding their eligibility or concerning the award of borrower payments under this Consent Judgment, and/or complying with tax reporting and withholding obligations, if any. The Administrator shall utilize appropriate information security protocols to ensure the privacy of Borrower information and otherwise comply with all applicable privacy laws. After the completion of the Borrower Payment process, the Administrator shall provide a report to Defendant identifying which borrowers have received payment. In addition, Defendant may request from the Administrator such interim reports as may be deemed reasonable by the State Members of the Monitoring Committee and such agreement, consent, or approval shall not be unreasonably withheld. Interim reports necessary to insure that Borrowers will not receive duplicate payments by virtue of litigation,

the foreclosure payments required by federal banking agencies or otherwise hereby are deemed reasonable. Defendant shall warrant to the State Members of the Monitoring Committee at the time of supplying information to the Administrator that the information is complete and accurate to the best of its knowledge and capability. Defendant’s duty to supply complete and accurate information, to the best of its knowledge and capability, regarding eligible borrowers shall continue throughout the administration process.

4. The Administrator shall permit reasonable onsite inspection by the State members of the Monitoring Committee on the premises of the Administrator to monitor administration of this Consent Judgment.

5. As a condition to receipt of any payments pursuant to this process, borrowers must agree that such payment shall offset and operate to reduce any other obligation Defendant or Defendant's affiliates or subsidiaries has to the borrowers to provide compensation or other payments. However, borrowers shall not be required to release or waive any other right or legal claim as a condition of receiving such payments.

6. Any cash payment to individual borrowers awarded under the terms of this Consent Judgment is not and shall not be considered as forgiven debt.

7. The purposes of the payments described in this Exhibit C are remedial and relate to the reduction in the proceeds deemed realized by borrowers for tax purposes from the foreclosure sale of residential properties owned by the borrowers allegedly resulting from the allegedly unlawful conduct of the Defendant.

EXHIBIT D

Consumer Relief Requirements

Any Servicer as defined in the Servicing Standards set forth in Exhibit A to this Consent Judgment (hereinafter “Servicer” or “Participating Servicer”) agrees that it will not implement any of the Consumer Relief Requirements described herein through policies that are intended to (i) disfavor a specific geography within or among states that are a party to the Consent Judgment or (ii) discriminate against any protected class of borrowers. This provision shall not preclude the implementation of pilot programs in particular geographic areas.

Any discussion of property in these Consumer Relief Requirements, including any discussion in Table 1 or other documents attached hereto, refers to a 1-4 unit single- family property (hereinafter, “Property” or collectively, “Properties”).

Any consumer relief guidelines or requirements that are found in Table 1 or other documents attached hereto, are hereby incorporated into these Consumer Relief Requirements and shall be afforded the same deference as if they were written in the text below.

For the avoidance of doubt, subject to the Consumer Relief Requirements described below, Servicer shall receive credit for consumer relief activities with respect to loans insured or guaranteed by the U.S. Department of Housing and Urban Development, U.S. Department of Veterans Affairs, or the U.S. Department of Agriculture in accordance with the terms and conditions herein, provided that nothing herein shall be deemed to in any way relieve Servicer of the obligation to comply with the requirements of the U.S. Department of Housing and Urban Development, U.S. Department of Veterans Affairs, and the U.S. Department of Agriculture with respect to the servicing of such loans.

Servicer shall not, in the ordinary course, require a borrower to waive or release legal claims and defenses as a condition of approval for loss mitigation activities under these Consumer Relief Requirements. However, nothing herein shall preclude Servicer from requiring a waiver or release of legal claims and defenses with respect to a Consumer Relief activity offered in connection with the resolution of a contested claim, when the borrower would not otherwise have received as favorable terms or when the borrower receives additional consideration.

Programmatic exceptions to the crediting available for the Consumer Relief Requirements listed below may be granted by the Monitoring Committee on a case-by- case basis.

To the extent a Servicer is responsible for the servicing of a mortgage loan to which these Consumer Relief Requirements may apply, the Servicer shall receive credit for all consumer relief and refinancing activities undertaken in connection with such mortgage loan by any of its subservicers to the same extent as if Servicer had undertaken such activities itself.*


1.	First Lien Mortgage Modifications


a.	Servicer will receive credit under Table 1, Section 1, for first-lien

mortgage loan modifications made in accordance with the guidelines set forth in this Section 1.


b.	First liens on occupied1 Properties with an unpaid principal balance (“UPB”) prior to capitalization at or below the highest GSE conforming loan limit cap as of January 1, 2010 shall constitute at least 85% of the eligible credits for first liens (the “Applicable Limits”).


c.	Eligible borrowers must be at least 30 days delinquent or otherwise qualify as being at imminent risk of default due to borrower’s financial situation.


d.	Eligible borrowers’ pre-modification loan-to-value ratio (“LTV”) is greater than 100%.


e.	Post-modification payment should target a debt-to-income ratio (“DTI”)2 of 31% (or an affordability measurement consistent with HAMP guidelines) and a modified LTV3 of no greater than 120%, provided that eligible borrowers receive a modification that meets the following terms:


i.	Payment of principal and interest must be reduced by at least 10%.


ii.	Where LTV exceeds 120% at a DTI of 31%, principal shall be reduced to a LTV of 120%, subject to a minimum DTI of 25% (which minimum may be waived by Servicer at Servicer’s sole

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*If a Servicer holds a mortgage loan but does not service or control the servicing rights for such loan (either through its own servicing operations or a subservicer), then no credit shall be granted to that Servicer for consumer relief and refinancing activities related to that loan.


1	Servicer may rely on a borrower’s statement, at the time of the modification evaluation, that a Property is occupied or that the borrower intends to rent or re- occupy the property.


2	Consistent with HAMP, DTI is based on first-lien mortgage debt only. For non- owner-occupied properties, Servicer shall consider other appropriate measures of affordability.


3	For the purposes of these guidelines, LTV may be determined in accordance with HAMP PRA.

discretion), provided that for investor-owned loans, the LTV and DTI need not be reduced to a level that would convert the modification to net present value (“NPV”) negative.


f.	DTI requirements may be waived for first lien mortgages that are 180 days or more delinquent as long as payment of principal and interest is reduced by at least 20% and LTV is reduced to at least 120%.


g.	Servicer shall also be entitled to credit for any amounts of principal reduction which lower LTV below 120%.

When Servicer reduces principal on a first lien mortgage via its proprietary modification process, and a Participating Servicer owns the second lien mortgage, the second lien shall be modified by the second lien owning Participating Servicer in accordance with Section 2.c.i below, provided that any Participating Servicer other than the five largest servicers shall be given a reasonable amount of time, as determined by the Monitor, after that Participating Servicer’s Start Date to make system changes necessary to participate in and implement this requirement.

Credit for such second lien mortgage write-downs shall be credited in accordance with the second lien percentages and cap described in Table 1, Section 2.

In the event that, in the first 6 months after Servicer’s Start Date (as defined below), Servicer temporarily provides forbearance or conditional forgiveness to an eligible borrower as the Servicer ramps up use of principal reduction, Servicer shall receive credit for principal reduction on such modifications provided that (i) Servicer may not receive credit for both the forbearance and the subsequent principal reduction and (ii) Servicer will only receive the credit for the principal reduction once the principal is actually forgiven in accordance with these Consumer Relief Requirements and Table 1.


j.	Eligible modifications include any modification that is made on or after Servicer’s Start Date, including:


i.	Write-offs made to allow for refinancing under the FHA Short Refinance Program;

ii.

Modifications under the Making Home Affordable Program (including the Home Affordable Modification Program (“HAMP”) Tier 1 or Tier 2) or the Housing Finance Agency Hardest Hit Fund (“HFA Hardest Hit Fund”) (or any other federal program) where principal is forgiven, except to the extent that state or federal funds paid to Servicer in its capacity as an investor are the source of a Servicer’s credit claim.


iii.	Modifications under other proprietary or other government modification programs, provided that such modifications meet the guidelines set forth herein.4


2.	Second Lien Portfolio Modifications


a.	Servicer is required to adhere to these guidelines in order to receive credit under Table 1, Section 2.

A write-down of a second lien mortgage will be creditable where such write-down facilitates either (a) a first lien modification that involves an occupied Property for which the borrower is 30 days delinquent or otherwise at imminent risk of default due to the borrower’s financial situation; or (b) a second lien modification that involves an occupied Property with a second lien which is at least 30 days delinquent or otherwise at imminent risk of default due to the borrower’s financial situation.

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Two examples are hereby provided. Example 1: on a mortgage loan at 175% LTV, when a Servicer (in its capacity as an investor) extinguishes $75 of principal through the HAMP Principal Reduction Alternative (“PRA”) modification in order to bring the LTV down to 100%, if the Servicer receives $28.10 in PRA principal reduction incentive payments from the U.S. Department of the Treasury for that extinguishment, then the Servicer may claim $46.90 of principal reduction for credit under these Consumer Relief Requirements:



LTV Reduction Band:	HAMP-PRA Incentive Amount Received:	Allowable Settlement Credit:
175% LTV to 140% LTV	$10.50 (35% LTV * $0.30)	$24.50 ((35% LTV-$10.50) * $1.00)
140% LTV to 115% LTV	$11.30 (25% LTV * $0.45)	$13.70 ((25% LTV-$11.30) * $1.00)
115% LTV to 105% LTV	$6.30 (10% LTV * $0.63)	$3.70 ((10% LTV-$6.30) * $1.00)
105% LTV to 100% LTV	None (no credit below 105% LTV)	$5.00 (5% LTV * $1.00)
Total:	$28.10	$46.90

Example 2: on a mortgage loan at 200% LTV, when a Servicer (in its capacity as an investor) extinguishes $100 of principal through a HAMP-PRA modification in order to bring the LTV down to 100%, if the Servicer receives $35.60 in PRA principal reduction incentive payments from Treasury for that extinguishment, then although the Servicer would have funded $64.40 in principal reduction on that loan, the Servicer may claim $55.70 of principal reduction for credit under these Consumer Relief Requirements:



LTV Reduction Band:	HAMP-PRA Incentive Amount Received:	Allowable Settlement Credit:
200% LTV to 175% LTV	$7.50 (25% LTV * $0.30)	$8.80 ((25% LTV-$7.50) * $0.50)
175% LTV to 140% LTV	$10.50 (35% LTV * $0.30)	$24.50 ((35% LTV-$10.50) * $1.00)
140% LTV to 115% LTV	$11.30 (25% LTV * $0.45)	$13.70 ((25% LTV-$11.30) * $1.00)
115% LTV to 105% LTV	$6.30 (10% LTV * $0.63)	$3.70 ((10% LTV-$6.30) * $1.00)
105% LTV to 100% LTV	None (no credit below 105% LTV)	$5.00 (5% LTV * $1.00)
Total:	$35.60	$55.70


c.	Required Second Lien Modifications:


i.	Servicer agrees that it must write down second liens consistent with the following program until its Consumer Relief Requirement credits are fulfilled:


1.	A write-down of a second lien mortgage will be creditable where a successful first lien modification is completed by a Participating Servicer via a servicer’s proprietary, non- HAMP modification process, in accordance with Section 1, with the first lien modification meeting the following criteria:


a.	Minimum 10% payment reduction (principal and interest);


b.	Income verified;


c.	A UPB at or below the Applicable Limits; and


d.	Post-modification DTI5 between 25% and 31%.


2.	If a Participating Servicer has completed a successful proprietary first lien modification and the second lien loan amount is greater than $5,000 UPB and the current monthly payment is greater than $100, then:


a.	Servicer shall extinguish and receive credit in accordance with Table 1, Section 2.iii on any second lien that is greater than 180 days delinquent.


b.	Otherwise, Servicer shall solve for a second lien payment utilizing the HAMP Second Lien Modification Program (“2MP”) logic used as of January 26, 2012.


c.	Servicer shall use the following payment waterfall:


i.	Forgiveness equal to the lesser of (a) achieving 115% combined loan-to-value ratio (“CLTV”) or (b) 30% UPB (subject to minimum forgiveness level); then


ii.	Reduce rate until the 2MP payment required by 2MP logic as of January 26, 2012; then


5	Consistent with HAMP, DTI is based on first-lien mortgage debt only. For non- owner-occupied properties, Servicer shall consider other appropriate measures of affordability.


iii.	Extend term to “2MP Term” (greater of modified first or remaining second).


d.	Servicer shall maintain an I/O product option consistent with 2MP protocols.


d.	Eligible second lien modifications include any modification that is made on or after Servicer’s Start Date, including:


i.	Principal reduction or extinguishments through the Making Home Affordable Program (including 2MP), the FHA Short Refinance Second Lien (“FHA2LP”) Program or the HFA Hardest Hit Fund (or any other federal program), except (to the extent) that state or federal funds are the source of a Servicer’s credit claim.


ii.	Second lien write-downs or extinguishments completed under proprietary modification programs, are eligible, provided that such write-downs or extinguishments meet the guidelines as set forth herein.


e.	Extinguishing balances of second liens to support the future ability of individuals to become homeowners will be credited based on applicable credits in Table 1.


3.	Enhanced Borrower Transitional Funds

Servicer may receive credit, as described in Table 1, Section 3, for providing additional transitional funds to homeowners in connection with a short sale or deed-in-lieu of foreclosure to homeowners for the amount above $1,500.


4.	Short Sales


a.	As described in the preceding paragraph, Servicer may receive credit for providing incentive payments for borrowers on or after Servicer’s Start Date who are eligible and amenable to accepting such payments in return for a dignified exit from a Property via short sale or similar program. Credit shall be provided in accordance with Table 1, Section 3.i.


b.	To facilitate such short sales, Servicer may receive credit for extinguishing second liens on or after Servicer’s Start Date under Table 1, Section 4.


c.	Short sales through the Home Affordable Foreclosure Alternatives (HAFA) Program or any HFA Hardest Hit Fund program or proprietary programs closed on or after Servicer’s Start Date are eligible.

Servicer shall be required to extinguish a second lien owned by Servicer behind a successful short sale/deed-in-lieu conducted by a Participating Servicer (provided that any Participating Servicer other than the five largest servicers shall be given a reasonable amount of time, as determined by the Monitor, after their Start Date to make system changes necessary to participate in and implement this requirement) where the first lien is greater than 100% LTV and has a UPB at or below the Applicable Limits, until Servicer’s Consumer Relief Requirement credits are fulfilled. The first lien holder would pay to the second lien holder 8% of UPB, subject to a $2,000 floor and an $8,500 ceiling. The second lien holder would then release the note or lien and waive the balance.


5.	Deficiency Waivers


a.	Servicer may receive credit for waiving deficiency balances if not eligible for credit under some other provision, subject to the cap provided in the Table 1, Section 5.i.


b.	Credit for such waivers of any deficiency is only available where Servicer has a valid deficiency claim, meaning where Servicer can evidence to the Monitor that it had the ability to pursue a deficiency against the borrower but waived its right to do so after completion of the foreclosure sale.


6.	Forbearance for Unemployed Borrowers


a.	Servicer may receive credit for forgiveness of payment of arrearages on behalf of an unemployed borrower in accordance with Table 1, Section 6.i.


b.	Servicer may receive credit under Table 1, Section 6.ii., for funds expended to finance principal forbearance solutions for unemployed borrowers as a means of keeping them in their homes until such time as the borrower can resume payments. Credit will only be provided beginning in the 7th month of the forbearance under Table 1, Section 6.ii.


7.	Anti-Blight Provisions


a.	Servicer may receive credit for certain anti-blight activities in accordance with and subject to caps contained in Table 1, Section 7.


b.	Any Property value used to calculate credits for this provision shall have a property evaluation meeting the standards acceptable under the Making Home Affordable programs received within 3 months of the transaction.


8.	Benefits for Servicemembers


a.	Short Sales


i.	Servicer shall, with respect to owned portfolio first liens, provide servicemembers who qualify for SCRA benefits (“Eligible

Servicemembers”) a short sale agreement containing a predetermined minimum net proceeds amount (“Minimum Net Proceeds”) that Servicer will accept for short sale transaction upon receipt of the listing agreement and all required third-party approvals. The Minimum Net Proceeds may be expressed as a fixed dollar amount, as a percentage of the current market value of the property, or as a percentage of the list price as approved by Servicer. After providing the Minimum Net Proceeds, Servicer may not increase the minimum net requirements above the Minimum Net Proceeds amount until the initial short sale agreement termination date is reached (not less than 120 calendar days from the date of the initial short sale agreement). Servicer must document subsequent changes to the Minimum Net Proceeds when the short sale agreement is extended.

ii.

Eligible Servicemembers shall be eligible for this short sale program if: (a) they are an active duty full-time status Eligible Servicemember; (b) the property securing the mortgage is not vacant or condemned; (c) the property securing the mortgage is the Eligible Servicemember’s primary residence (or, the property was his or her principal residence immediately before he or she moved pursuant to a Permanent Change of Station (“PCS”) order dated on or after October 1, 2010; (d) the Eligible Servicemember

purchased the subject primary residence on or after July 1, 2006 and before December 31, 2008; and (e) the Eligible Servicemember relocates or has relocated from the subject

property not more than 12 months prior to the date of the short sale agreement to a new duty station or home port outside a 50-mile radius of the Eligible Servicemember’s former duty station or home port under a PCS. Eligible Servicemembers who have relocated may be eligible if the Eligible Servicemember provides documentation that the property was their principal residence prior to relocation or during the 12-month period prior to the date of the short sale agreement.


b.	Short Sale Waivers


i.	If an Eligible Servicemember qualifies for a short sale hereunder and sells his or her principal residence in a short sale conducted in accordance with Servicer’s then customary short sale process,

Servicer shall, in the case of an owned portfolio first lien, waive

the additional amount owed by the Eligible Servicemember so long as it is less than $250,000.


ii.	Servicer shall receive credit under Table 1, Section 4, for mandatory waivers of amounts under this Section 8.b.


c.	With respect to the refinancing program described in Section 9 below, Servicer shall use reasonable efforts to identify active servicemembers in its owned portfolio who would qualify and to solicit those individuals for the refinancing program.


9.	Refinancing Program


a.	Servicer shall create a refinancing program for current borrowers.

Servicer shall provide notification to eligible borrowers indicating that they may refinance under the program described herein. The minimum occupied Property eligibility criteria for such a program shall be:


i.	The program shall apply only to Servicer-owned first lien mortgage loans.


ii.	Loan must be current with no delinquencies in past 12 months.


iii.	Fixed rate loans, ARMS, or I/Os are eligible if they have an initial period of 5 years or more.


iv.	Current LTV is greater than 100%.


v.	Loans must have been originated prior to January 1, 2009.


vi.	Loan must not have received any modification in the past 24 months.


vii.	Loan must have a current interest rate of at least 5.25 % or PMMS

+ 100 basis points, whichever is greater.


viii.	The minimum difference between the current interest rate and the offered interest rate under this program must be at least 25 basis points or there must be at least a $100 reduction in monthly payment.


ix.	Maximum UPB will be an amount at or below the Applicable Limits.


x.	The following types of loans are excluded from the program eligibility:


1.	FHA/VA


2.	Property outside the 50 States, DC, and Puerto Rico


3.	Loans on Manufactured Homes


4.	Loans for borrowers who have been in bankruptcy anytime

within the prior 24 months


5.	Loans that have been in foreclosure within the prior 24 months

The refinancing program shall be made available to all borrowers fitting the minimum eligibility criteria described above in 9.a. Servicer will be free to extend the program to other customers beyond the minimum eligibility criteria provided above and will receive credit under this Agreement for such refinancings, provided that such customers have an LTV of over 80%, and would not have qualified for a refinance under Servicer’s generally-available refinance programs as of September 30, 2011. Notwithstanding the foregoing, Servicer shall not be required to solicit or refinance borrowers who do not satisfy the eligibility criteria under 9.a above. In addition, Servicer shall not be required to refinance a loan under circumstances that, in the reasonable judgment of the Servicer, would result in Troubled Debt Restructuring (“TDR”) treatment. A letter to the United States Securities and Exchange Commission regarding TDR treatment, dated November 22, 2011, shall be provided to the Monitor for review.


c.	The structure of the refinanced loans shall be as follows:


i.	Servicer may offer refinanced loans with reduced rates either:


1.	For the life of the loan;


2.	For loans with current interest rates above 5.25% or PMMS

+ 100 basis points, whichever is greater, the interest rate may be reduced for 5 years. After the 5 year fixed interest rate period, the rate will return to the preexisting rate subject to a maximum rate increase of 0.5% annually; or


3.	For loans with an interest rate below 5.25% or PMMS + 100 basis points, whichever is greater, the interest rate may be reduced to obtain at least a 25 basis point interest rate reduction or $100 payment reduction in monthly payment, for a period of 5 years, followed by 0.5% annual interest rate increases with a maximum ending interest rate of 5.25% or PMMS + 100 basis points.


ii.	The original term of the loan may be changed.


iii.	Rate reduction could be done through a modification of the existing loan terms or refinance into a new loan.


iv.	New term of the loan has to be a fully amortizing product.


v.	The new interest rate will be capped at 100 basis points over the

PMMS rate or 5.25%, whichever is greater, during the initial rate reduction period.


d.	Banks fees and expenses shall not exceed the amount of fees charged by Banks under the current Home Affordable Refinance Program (“HARP”) guidelines.


e.	The program shall be credited under these Consumer Relief Requirements as follows:


i.	Credit will be calculated as the difference between the preexisting interest rate and the offered interest rate times UPB times a multiplier.


ii.	The multiplier shall be as follows:


1.	If the new rate applies for the life of the loan, the multiplier shall be 8 for loans with a remaining term greater than 15 years, 6 for loans with a remaining term between 10 and 15 years and 5 for loans with a remaining term less than 10 years.


2.	If the new rate applies for 5 years, the multiplier shall be 5.


f.	Additional dollars spent by each Servicer on the refinancing program beyond that Servicer’s required commitment shall be credited 25% against that Servicer’s first lien principal reduction obligation and 75% against that Servicer’s second lien principal reduction obligation, up to the limits set forth in Table 1.


10.	Timing, Incentives, and Payments


a.	For the consumer relief and refinancing activities imposed by this Agreement, Servicer shall be entitled to receive credit against Servicer’s outstanding settlement commitments for activities taken on or after Servicer’s start date, March 1, 2012 (such date, the “Start Date”).


b.	Servicer shall receive an additional 25% credit against Servicer’s outstanding settlement commitments for any first or second lien principal reduction and any amounts credited pursuant to the refinancing program within 12 months of Servicer’s Start Date (e.g., a $1.00 credit for Servicer activity would count as $1.25).


c.	Servicer shall complete 75% of its Consumer Relief Requirement credits within two years of the Servicer’s Start Date.


d.	If Servicer fails to meet the commitment set forth in these Consumer Relief Requirements within three years of Servicer’s Start Date, Servicer

shall pay an amount equal to 125% of the unmet commitment amount; except that if Servicer fails to meet the two year commitment noted above,

and then fails to meet the three year commitment, the Servicer shall pay an amount equal to 140% of the unmet three-year commitment amount; provided, however, that if Servicer must pay any Participating State for failure to meet the obligations of a state-specific commitment to provide Consumer Relief pursuant to the terms of that commitment, then

Servicer’s obligation to pay under this provision shall be reduced by the amount that such a Participating State would have received under this provision and the Federal portion of the payment attributable to that Participating State. The purpose of the 125% and 140% amounts is to encourage Servicer to meet its commitments set forth in these Consumer Relief Requirements.


11.	Applicable Requirements

The provision of consumer relief by the Servicer in accordance with this Agreement in connection with any residential mortgage loan is expressly subject to, and shall be interpreted in accordance with, as applicable, the terms and provisions of the Servicer Participation Agreement with the U.S. Department of Treasury, any servicing agreement, subservicing agreement under which Servicer services for others, special servicing agreement, mortgage or bond insurance policy or related agreement or requirements to which Servicer is a party and by which it or its servicing affiliates are bound pertaining to the servicing or ownership of the mortgage loans, including without limitation the requirements, binding directions, or investor guidelines of the applicable investor (such as Fannie Mae or Freddie Mac), mortgage or bond insurer, or credit enhancer, provided, however, that the inability of a Servicer to offer a type, form or feature of the consumer relief payments by virtue of an Applicable Requirement shall not relieve the Servicer of its aggregate consumer relief obligations imposed by this Agreement, i.e., the Servicer must satisfy such obligations through the offer of other types, forms or features of consumer relief payments that are not limited by such Applicable Requirement.

EXHIBIT D-1

Table 1 ¹



Menu Item	Credit Towards Settlement	Credit Cap
Consumer Relief Funds

First Lien Mortgage Modification ²		Minimum 30% for First Lien Mods 3 (which can be reduced by 2.5% of overall consumer relief funds for excess refinancing program credits above the minimum amount required)
PORTFOLIO LOANS
i. First lien principal forgiveness modification	LTV </= 175%; $1.00 Write-down = $1.00 Credit LTV > 175%; $1.00 Write-down = $.50 Credit (for only the portion of principal forgiven over 175%)
ii. Forgiveness of forbearance amounts on existing modifications	$1.00 Write-down = $0.40 Credit modifications	Max 12.5
iii. Earned forgiveness over a period of no greater than 3 years - provided consistent with PRA	LTV </= 175%: $1.00 Write-down = $.85 Credit LTV > 175%: $1.00 Write-down = $0.45 Credit (for only the portion of principal forgiven over 175%)

SERVICEFOROTHERS
iv. First lien principal forgiveness modification on investor loans (forgiveness by investor)	$1.00 Write-own = $0.45 Credit

v. Earned forgiveness over a period of no greater than 3 years - provided consistent with PRA	LTV </= 175%: $1.00 Write-down = $.40 Credit LTV > 175%: $1.00 Write-down = $0.20 Credit (for only the portion of principal forgiven over 175%)



Menu Item	Credit Towards Settlement	Credit Cap
Second Lien Portfolio Modifications		Minimum of 60% for 1st and 2nd Lien Mods (which can be reduced by 10% of overall consumer relief funds for excess refinancing program credits above the minimum amounts required)
i. Performing Second Liens (0-90 days delinquent)	$1.00 Write-down = $0.90 Credit
ii. Seriously Delinquent Second Liens (>90-179 days delinquent)	$1.00 Write-down = $0.50 Credit
iii. Non-Performing Second Liens (180 or more days delinquent)	$1.00 Write-down = $0.10 Credit
Enhanced Borrower Transitional Funds		Max 5%
i. Servicer Makes Payment	$1.00 Payment = $1.00 Credit (for the amount over $1,500)
ii. Investor Makes Payment (non-GSE)	$1.00 Payment = 0.45 Credit (for the amount over the $1,500 average payment established by Fannie Mae and Freddie Mac)
4. Short Sales/Deeds in Lieu
i. Servicer makes payment to unrelated 2nd lien holder for release of 2nd lien	$1.00 Payment = $1.00 Credit
ii. Servicer forgives deficiency and releases lien on 1st lien Portfolio Loans	$1.00 Write-down = $0.45 Credit
iii. Investor forgives deficiency and releases lien on 1st Lien investor loans	$1.00 Write-down = 0.20 Credit
iv. Forgiveness of deficiency balance and release of lien on Portfolio Second Liens Performing Second Liens (0-90 days delinquent)	$1.00 Write-down = $0.90 Credit
Seriously Delinquent Second Liens (>90-179 days delinquent)	$1.00 Write-down = $0.50 Credit
Non-Performing Second Liens (180 or more days delinquent)	$1.00 Write-down = $0.10 Credit
5. Deficiency Waivers		Max 10%
i. Deficiency waived on 1st and 2nd liens loans	$1.00 Write-down = $0.10 Credit



Menu Item	Credit Towards Settlement	Credit Cap
6. Forbearance for unemployment of homeowners
i. Servicer forgives payment arrearages on behalf of borrower	$1.00 new forgiveness = $1.00 Credit
ii. Servicer facilitates traditional forbearance program	$1.00 new forbearance = $0.05 Credit
7. Anti-Blight Provisions		Max 12%
i. Forgiveness of principal associated with a property where Servicer does not pursue foreclosure	$1.00 property value = $0.50 Credit
ii. Cash costs paid by Servicer for demolition of property	$1.00 payment = $1.00 Credit
iii. REO properties donated to accepting municipalities or non- profits or to disabled servicemembers or relatives of deceased servicemembers	$1.00 property value = $1.00 Credit

_______________________________

1. Where applicable, the number of days of delinquency will be determined by the number of days a loan is delinquent at the start of the earlier of the first or second lien modification process. For example, if a borrower applies for a first lien principal reduction on February 1, 2012, then any delinquency determination for a later second lien modification made pursuant to the terms of this Agreement will be based on the number of days the second lien was delinquent as of February 1, 2012.

2. Credit for all modifications is determined from the date the modification is approved or communicated to the borrower. However, no credits shall be credited unless the payments on the modification are current as of 90 days following the implementation of the modification, including any trial period, except if the failure to make payments on the modification within the 90 day period is due to unemployment or reduced hours, in which case Servicer shall receive credit provided that Servicer has reduced the principal balance on the loan. Eligible Modifications will include any modification that is completed on or after the Start Date, as long as the loan is current 90 days after the modification is implemented.

3. All minimum and maximum percentages refer to a percentage of total consumer relief funds.

Exhibit E

Enforcement Terms

Implementation Timeline. Servicer anticipates that it will phase in the implementation of the Servicing Standards using a grid approach that prioritizes implementation based upon: (i) the importance of the Servicing Standard to the borrower; and (ii) the difficulty of implementing the Servicing Standard. In addition to the Servicing Standards that have been implemented upon entry of this Consent Judgment, the periods for implementation will be: (a) within 60 days of entry of this Consent Judgment; (b) within 90 days of entry of this Consent Judgment; and (c) within 180 days of entry of this Consent Judgment. Servicer will agree with the Monitor chosen pursuant to Section C, below, on the timetable in which the Servicing Standards will be implemented. In the event that Servicer, using reasonable efforts, is unable to implement certain of the standards on the specified timetable, Servicer may apply to the Monitor for a reasonable extension of time to implement those standards or requirements.

Monitoring Committee. The Monitoring Committee established pursuant to certain Consent Judgments entered in United States, et al. v. Bank of America Corp., et al. , No. 12-civ-00361-RMC (April 4, 2012) (Docket Nos. 10-14) and referenced specifically in paragraph 8 of those Consent Judgments, shall monitor Servicer’s compliance with this Consent Judgment (the “Monitoring Committee”). References to the “Monitoring Committee” in this Exhibit and related documents shall be understood to refer to the same Monitoring Committee as that established in the Bank of America Corp. case referenced in the preceding sentence with the addition of a CFPB member, and the Monitoring Committee shall serve as the representative of the participating state and federal agencies in the administration of all aspects of this and all similar Consent Judgments and the monitoring of compliance with it by the Defendant. The Monitoring Committee may substitute representation, as necessary. Subject to Section F, the Monitoring Committee may share all Monitor Reports, as that term is defined in Section D.3 below, with any releasing party.


C.	Monitor

Retention and Qualifications and Standard of Conduct


1.	Pursuant to an agreement of the parties, Joseph A. Smith Jr. is appointed to the position of Monitor under this Consent Judgment. If the Monitor is at any time unable to complete his or her duties under this Consent Judgment, Servicer and the Monitoring Committee shall mutually agree upon a replacement in accordance with the processes and standards set forth in Section C of Exhibit E.


2.	Such Monitor shall be highly competent and highly respected, with a reputation that will garner public confidence in his or her ability to perform

the tasks required under this Consent Judgment. The Monitor shall have the right to employ an accounting firm or firms or other firm(s) with similar capabilities to support the Monitor in carrying out his or her duties under this Consent Judgment. Monitor and Servicer shall agree on the selection of a “Primary Professional Firm” or “Firm,” which must have adequate capacity and resources to perform the work required under this agreement. The Monitor shall also have the right to engage one or more attorneys or other professional persons to represent or assist the Monitor in carrying out the Monitor’s duties under this Consent Judgment (each such individual, along with each individual deployed to the engagement by the Primary Professional Firm, shall be defined as a “Professional”). The Monitor and Professionals will collectively possess expertise in the areas of mortgage servicing, loss mitigation, business operations, compliance, internal controls, accounting, and foreclosure and bankruptcy law and practice. The Monitor and Professionals shall at all times act in good faith and with integrity and fairness towards all the Parties.


3.	The Monitor and Professionals shall not have any prior relationships with the Parties that would undermine public confidence in the objectivity of their work and, subject to Section C.3(e), below, shall not have any conflicts of interest with any Party.


(a)	The Monitor and Professionals will disclose, and will make a reasonable inquiry to discover, any known current or prior relationships to, or conflicts with, any Party, any Party’s holding company, any subsidiaries of the Party or its holding company, directors, officers, and law firms.


(b)	The Monitor and Professionals shall make a reasonable inquiry to determine whether there are any facts that a reasonable individual would consider likely to create a conflict of interest for the Monitor or Professionals. The Monitor and Professionals shall disclose any conflict of interest with respect to any Party.


(c)	The duty to disclose a conflict of interest or relationship pursuant to this Section C.3 shall remain ongoing throughout the course of the Monitor’s and Professionals’ work in connection with this Consent Judgment.


(d)	All Professionals shall comply with all applicable standards of professional conduct, including ethics rules and rules pertaining to conflicts of interest.


(e)	To the extent permitted under prevailing professional standards, a Professional’s conflict of interest may be waived by written agreement of the Monitor and Servicer.


(f)	Servicer or the Monitoring Committee may move the Court for an order disqualifying any Professional on the grounds that such Professional has a conflict of interest that has inhibited or could inhibit the Professional’s ability to act in good faith and with integrity and fairness toward all Parties.

The Monitor must agree not to be retained by any Party, or its successors or assigns, for a period of two years after the conclusion of the terms of the engagement. Any Professionals who work on the engagement must agree not to work on behalf of Servicer, or its successor or assigns, for a period of 1 year after the conclusion of the term of the engagement (the “Professional Exclusion Period”). Any Firm that performs work with respect to Servicer on the engagement must agree not to perform work on behalf of Servicer, or its successor or assigns, that consists of advising Servicer on a response to the Monitor’s review during the engagement and for a period of six months after the conclusion of the term of the engagement (the “Firm Exclusion Period”). The Professional Exclusion Period, Firm Exclusion Period, and terms of exclusion may be altered on a case-by-case basis upon written agreement of Servicer and the Monitor. The Monitor shall organize the work of any Firms so as to minimize the potential for any appearance of, or actual, conflicts.

Monitor’s Responsibilities


5.	It shall be the responsibility of the Monitor to determine whether Servicer is in compliance with the Servicing Standards and whether Servicer has satisfied the Consumer Relief Requirements in accordance with the authorities provided herein and to report his or her findings as provided in Section D.3, below.


6.	The manner in which the Monitor will carry out his or her compliance responsibilities under this Consent Judgment and, where applicable, the methodologies to be utilized shall be set forth in a work plan agreed upon by Servicer and the Monitor, and not objected to by the Monitoring Committee (the “Work Plan”).

Internal Review Group

Servicer will designate an internal quality control group that is independent from the line of business whose performance is being measured (the “Internal Review Group”) to perform compliance reviews each calendar quarter (“Quarter”) in accordance with the terms and conditions of the Work Plan (the “Compliance Reviews”) and satisfaction of the Consumer Relief Requirements after the (A) end of each calendar year (and, in the discretion of the Servicer, any Quarter) and (B) earlier of the Servicer assertion that it has satisfied its obligations thereunder and the third anniversary of the Effective Date (the “Satisfaction Review”). For the purposes of this provision,

a group that is independent from the line of business shall be one that does not perform operational work on mortgage servicing, and ultimately reports to a Chief Risk Officer, Chief Audit Executive, Chief Compliance Officer, or another employee or manager who has no direct operational responsibility for mortgage servicing.


8.	The Internal Review Group shall have the appropriate authority, privileges, and knowledge to effectively implement and conduct the reviews and metric assessments contemplated herein and under the terms and conditions of the Work Plan.


9.	The Internal Review Group shall have personnel skilled at evaluating and validating processes, decisions, and documentation utilized through the implementation of the Servicing Standards. The Internal Review Group may include non-employee consultants or contractors working at Servicer’s direction.


10.	The qualifications and performance of the Internal Review Group will be subject to ongoing review by the Monitor. Servicer will appropriately remediate the reasonable concerns of the Monitor as to the qualifications or performance of the Internal Review Group.

Work Plan

11.

Servicer’s compliance with the Servicing Standards shall be assessed via metrics identified and defined in Schedule E-1 hereto (as supplemented from time to time in accordance with Section C.22, below, the “Metrics”). The threshold error rates for the Metrics are set forth in Schedule E-1 (as supplemented from time to time in accordance with Section C.22, below, the “Threshold Error Rates”). The Internal Review Group shall perform test work to compute the Metrics each Quarter, and report the results of that analysis via the Compliance Reviews. The Internal Review Group shall perform test work to assess the satisfaction of the Consumer Relief Requirements within 45 days after the (A) end of each calendar year (and, in the discretion of the Servicer, any Quarter) and (B) earlier of (i) the end of the Quarter in which Servicer asserts that it has satisfied its obligations under the Consumer Relief Provisions and (ii) the Quarter during which the third anniversary of the Effective Date occurs, and report that analysis via the Satisfaction Review.

12.

Servicer and the Monitor shall reach agreement on the terms of the Work Plan within 90 days of the Monitor’s appointment, which time can be extended for good cause by agreement of Servicer and the Monitor. If such Work Plan is not objected to by the Monitoring Committee within 20 days, the Monitor shall proceed to implement the Work Plan. In the event that Servicer and the Monitor cannot agree on the terms of the Work Plan within 90 days or the agreed upon terms are not acceptable to the Monitoring Committee, Servicer and Monitoring Committee or the Monitor shall jointly

petition the Court to resolve any disputes. If the Court does not resolve such disputes, then the Parties shall submit all remaining disputes to binding arbitration before a panel of three arbitrators. Each of Servicer and the Monitoring Committee shall appoint one arbitrator, and those two arbitrators shall appoint a third.


13.	The Work Plan may be modified from time to time by agreement of the Monitor and Servicer. If such amendment to the Work Plan is not objected to by the Monitoring Committee within 20 days, the Monitor shall proceed to implement the amendment to the Work Plan. To the extent possible, the Monitor shall endeavor to apply the Servicing Standards uniformly across all Servicers.


14.	The following general principles shall provide a framework for the formulation of the Work Plan:


(a)	The Work Plan will set forth the testing methods and agreed procedures that will be used by the Internal Review Group to perform the test work and compute the Metrics for each Quarter.


(b)	The Work Plan will set forth the testing methods and agreed procedures that will be used by Servicer to report on its compliance with the Consumer Relief Requirements of this Consent Judgment, including, incidental to any other testing, confirmation of state-identifying information used by Servicer to compile state-level Consumer Relief information as required by Section D.2.


(c)	The Work Plan will set forth the testing methods and procedures that the Monitor will use to assess Servicer’s reporting on its compliance with the Consumer Relief Requirements of this Consent Judgment.


(d)	The Work Plan will set forth the methodology and procedures the Monitor will utilize to review the testing work performed by the Internal Review Group.


(e)	The Compliance Reviews and the Satisfaction Review may include a variety of audit techniques that are based on an appropriate sampling process and random and risk-based selection criteria, as appropriate and as set forth in the Work Plan.


(f)	In formulating, implementing, and amending the Work Plan, Servicer and the Monitor may consider any relevant information relating to patterns in complaints by borrowers, issues or deficiencies reported to the Monitor with respect to the Servicing Standards, and the results of prior Compliance Reviews.


(g)	The Work Plan should ensure that Compliance Reviews are

commensurate with the size, complexity, and risk associated with the Servicing Standard being evaluated by the Metric.


(h)	Following implementation of the Work Plan, Servicer shall be required to compile each Metric beginning in the first full Quarter after the period for implementing the Servicing Standards associated with the Metric, or any extension approved by the Monitor in accordance with Section A, has run.

Monitor’s Access to Information

15.

So that the Monitor may determine whether Servicer is in compliance with the Servicing Standards, Servicer shall provide the Monitor with its regularly prepared business reports analyzing Executive Office servicing complaints (or the equivalent); access to all Executive Office servicing complaints (or the equivalent) (with appropriate redactions of borrower information other than borrower name and contact information to comply with privacy requirements); and, if Servicer tracks additional servicing complaints, quarterly information identifying the three most common servicing complaints received outside of the Executive Office complaint process (or the equivalent). In the event that Servicer substantially changes its escalation standards or process for receiving Executive Office servicing complaints (or the equivalent), Servicer shall ensure that the Monitor has access to comparable information.


16.	So that the Monitor may determine whether Servicer is in compliance with the Servicing Standards, Servicer shall notify the Monitor promptly if Servicer becomes aware of reliable information indicating Servicer is engaged in a significant pattern or practice of noncompliance with a material aspect of the Servicing Standards.


17.	Servicer shall provide the Monitor with access to all work papers prepared by the Internal Review Group in connection with determining compliance with the Metrics or satisfaction of the Consumer Relief Requirements in accordance with the Work Plan.


18.	If the Monitor becomes aware of facts or information that lead the Monitor to reasonably conclude that Servicer may be engaged in a pattern of noncompliance with a material term of the Servicing Standards that is reasonably likely to cause harm to borrowers, the Monitor shall engage Servicer in a review to determine if the facts are accurate or the information is correct.


19.	Where reasonably necessary in fulfilling the Monitor’s responsibilities under the Work Plan to assess compliance with the Metrics or the satisfaction of the Consumer Relief Requirements, the Monitor may request information from Servicer in addition to that provided under Sections C.15-18. Servicer

shall provide the requested information in a format agreed upon between Servicer and the Monitor.

20.

Where reasonably necessary in fulfilling the Monitor’s responsibilities under the Work Plan to assess compliance with the Metrics or the satisfaction of the Consumer Relief Requirements, the Monitor may interview Servicer’s employees and agents, provided that the interviews shall be limited to matters related to Servicer’s compliance with the Metrics or the Consumer Relief Requirements, and that Servicer shall be given reasonable notice of such interviews.

Monitor’s Powers

21.

Where the Monitor reasonably determines that the Internal Review Group’s work cannot be relied upon or that the Internal Review Group did not correctly implement the Work Plan in some material respect, the Monitor may direct that the work on the Metrics (or parts thereof) be reviewed by Professionals or a third party other than the Internal Review Group, and that supplemental work be performed as necessary.

22.

If the Monitor becomes aware of facts or information that lead the Monitor to reasonably conclude that Servicer may be engaged in a pattern of noncompliance with a material term of the Servicing Standards that is reasonably likely to cause harm to borrowers or tenants residing in foreclosed properties, the Monitor shall engage Servicer in a review to determine if the facts are accurate or the information is correct. If after that review, the Monitor reasonably concludes that such a pattern exists and is reasonably likely to cause material harm to borrowers or tenants residing in foreclosed properties, the Monitor may propose an additional Metric and associated Threshold Error Rate relating to Servicer’s compliance with the associated term or requirement. Any additional Metrics and associated Threshold Error Rates (a) must be similar to the Metrics and associated Threshold Error Rates contained in Schedule E-1, (b) must relate to material terms of the Servicing Standards, (c) must either (i) be outcome based or (ii) require the existence of policies and procedures required by the Servicing Standards, in a manner similar to Metrics 5.B-E, and (d) must be distinct from, and not overlap with, any other Metric or Metrics. Notwithstanding the foregoing, the Monitor may add a Metric that satisfies (a)-(c) but does not satisfy (d) of the preceding sentence if the Monitor first asks the Servicer to propose, and then implement, a Corrective Action Plan, as defined below, for the material term of the Servicing Standards with which there is a pattern of noncompliance and that is reasonably likely to cause material harm to borrowers or tenants residing in foreclosed properties, and the Servicer fails to implement the Corrective Action Plan according to the timeline agreed to with the Monitor.


23.	If Monitor proposes an additional Metric and associated Threshold Error Rate pursuant to Section C.22, above, Monitor, the Monitoring Committee,

and Servicer shall agree on amendments to Schedule E-1 to include the additional Metrics and Threshold Error Rates provided for in Section C.22, above, and an appropriate timeline for implementation of the Metric. If Servicer does not timely agree to such additions, any associated amendments to the Work Plan, or the implementation schedule, the Monitor may petition the court for such additions.

24.

Any additional Metric proposed by the Monitor pursuant to the processes in Sections C.22 or C.23 and relating to provision VIII.B.1 of the Servicing Standards shall be limited to Servicer’s performance of its obligations to comply with (1) the federal Protecting Tenants at Foreclosure Act and state laws that provide comparable protections to tenants of foreclosed properties; (2) state laws that govern relocation assistance payments to tenants (“cash for keys”); and (3) state laws that govern the return of security deposits to tenants.


D.	Reporting

Quarterly Reports

Following the end of each Quarter, Servicer will report the results of its Compliance Reviews for that Quarter (the “Quarterly Report”). The Quarterly Report shall include: (i) the Metrics for that Quarter; (ii) Servicer’s progress toward meeting its payment obligations under this Consent Judgment; and (iii) general statistical data on Servicer’s overall servicing performance described in Schedule Y. Except where an extension is granted by the Monitor, Quarterly Reports shall be due no later than 45 days following the end of the Quarter and shall be provided to: (1) the Monitor and (2) the Board of Servicer or a committee of the Board designated by Servicer. The first Quarterly Report shall cover the first full Quarter after this Consent Judgment is entered.

Following the end of each Quarter, Servicer will transmit to each state a report (the “State Report”) including general statistical data on Servicer’s servicing performance, such as aggregate and state-specific information regarding the number of borrowers assisted and credited activities conducted pursuant to the Consumer Relief Requirements, as described in Schedule Y. The State Report will be delivered simultaneously with the submission of the Quarterly Report to the Monitor. Servicer shall provide copies of such State Reports to the Monitor and Monitoring Committee.

Monitor Reports


3.	The Monitor shall report on Servicer’s compliance with this Consent Judgment in periodic reports setting forth his or her findings (the “Monitor Reports”). The first three Monitor Reports will each cover at least two Quarterly Reports. The first Monitor's Report may, at the Monitor's discretion,

include more than two Quarterly Reports but shall not exceed three Quarterly Reports. If the first three Monitor Reports do not find Potential Violations (as defined in Section E.1, below), each successive Monitor Report will cover four Quarterly Reports, unless and until a Quarterly Report reveals a Potential Violation (as defined in Section E.1, below). In the case of a Potential Violation, the Monitor may (but retains the discretion not to) submit a Monitor Report after the filing of each of the next two Quarterly Reports, provided, however, that such additional Monitor Report(s) shall be limited in scope to the Metric or Metrics as to which a Potential Violation has occurred.

Prior to issuing any Monitor Report, the Monitor shall confer with Servicer and the Monitoring Committee regarding its preliminary findings and the reasons for those findings. Servicer shall have the right to submit written comments to the Monitor, which shall be appended to the final version of the Monitor Report. Final versions of each Monitor Report shall be provided simultaneously to the Monitoring Committee and Servicer within a reasonable time after conferring regarding the Monitor’s findings. The Monitor Reports shall be filed with the Court overseeing this Consent Judgment and shall also be provided to the Board of Servicer or a committee of the Board designated by Servicer.

The Monitor Report shall: (i) describe the work performed by the Monitor and any findings made by the Monitor during the relevant period, (ii) list the Metrics and Threshold Error Rates, (iii) list the Metrics, if any, where the Threshold Error Rates have been exceeded, (iv) state whether a Potential Violation has occurred and explain the nature of the Potential Violation, and (v) state whether any Potential Violation has been cured. In addition, following each Satisfaction Review, the Monitor Report shall report on the Servicer’s satisfaction of the Consumer Relief Requirements, including regarding the number of borrowers assisted and credited activities conducted pursuant to the Consumer Relief Requirements, and identify any material inaccuracies identified in prior State Reports. Except as otherwise provided herein, the Monitor Report may be used in any court hearing, trial, or other proceeding brought pursuant to this Consent Judgment pursuant to Section J, below, and shall be admissible in evidence in a proceeding brought under this Consent Judgment pursuant to Section J, below. Such admissibility shall not prejudice Servicer’s right and ability to challenge the findings and/or the statements in the Monitor Report as flawed, lacking in probative value or otherwise. The Monitor Report with respect to a particular Potential Violation shall not be admissible or used for any purpose if Servicer cures the Potential Violation pursuant to Section E, below.

Satisfaction of Payment Obligations


6.	Upon the satisfaction of any category of payment obligation under this Consent Judgment, Servicer, at its discretion, may request that the Monitor certify that Servicer has discharged such obligation. Provided that the

Monitor is satisfied that Servicer has met the obligation, the Monitor may not withhold and must provide the requested certification. Any subsequent Monitor Report shall not include a review of Servicer’s compliance with that category of payment obligation.

Compensation

Within 120 days of entry of this Consent Judgment, the Monitor shall, in consultation with the Monitoring Committee and Servicer, prepare and present to Monitoring Committee and Servicer an annual budget providing its reasonable best estimate of all fees and expenses of the Monitor to be incurred during the first year of the term of this Consent Judgment, including the fees and expenses of Professionals and support staff (the “Monitoring Budget”). On a yearly basis thereafter, the Monitor shall prepare an updated Monitoring Budget providing its reasonable best estimate of all fees and expenses to be incurred during that year. The Monitor, at his discretion, may alter the timing of the budgeting process so that Servicer may be incorporated into the same billing cycle as signatories to the Consent Judgments filed in the Bank of America Corp case referenced above. Absent an objection within 20 days, a Monitoring Budget or updated Monitoring Budget shall be implemented. Consistent with the Monitoring Budget, Servicer shall pay all fees and expenses of the Monitor, including the fees and expenses of Professionals and support staff. The fees, expenses, and costs of the Monitor, Professionals, and support staff shall be reasonable. Servicer may apply to the Court to reduce or disallow fees, expenses, or costs that are unreasonable.


E.	Potential Violations and Right to Cure


1.	A “Potential Violation” of this Consent Judgment occurs if the Servicer has exceeded the Threshold Error Rate set for a Metric in a given Quarter. In the event of a Potential Violation, Servicer shall meet and confer with the Monitoring Committee within 15 days of the Quarterly Report or Monitor Report indicating such Potential Violation.


2.	Servicer shall have a right to cure any Potential Violation.

Subject to Section E.4, a Potential Violation is cured if (a) a corrective action plan approved by the Monitor (the “Corrective Action Plan”) is determined by the Monitor to have been satisfactorily completed in accordance with the terms thereof; and (b) a Quarterly Report covering the Cure Period (as defined herein) reflects that the Threshold Error Rate has not been exceeded with respect to the same Metric and the Monitor confirms the accuracy of said report using his or her ordinary testing procedures. The Cure Period shall be the first full quarter after completion of the Corrective Action Plan or, if the completion of the Corrective Action Plan occurs within the first month of a Quarter and if the Monitor determines that there is sufficient time remaining, the period between completion of the Corrective Action Plan and the end of

that Quarter (the “Cure Period”).


4.	If after Servicer cures a Potential Violation pursuant to the previous section, another violation occurs with respect to the same Metric, then the second Potential Violation shall immediately constitute an uncured violation for purposes of Section J.3, provided, however, that such second Potential Violation occurs in either the Cure Period or the quarter immediately following the Cure Period.

In addition to the Servicer’s obligation to cure a Potential Violation through the Corrective Action Plan, Servicer must remediate any material harm to particular borrowers identified through work conducted under the Work Plan. In the event that a Servicer has a Potential Violation that so far exceeds the Threshold Error Rate for a metric that the Monitor concludes that the error is widespread, Servicer shall, under the supervision of the Monitor, identify other borrowers who may have been harmed by such noncompliance and remediate all such harms to the extent that the harm has not been otherwise remediated.


6.	In the event a Potential Violation is cured as provided in Sections E.3, above, then no Party shall have any remedy under this Consent Judgment (other than the remedies in Section E.5) with respect to such Potential Violation.


F.	Confidentiality

These provisions shall govern the use and disclosure of any and all information designated as “CONFIDENTIAL,” as set forth below, in documents (including email), magnetic media, or other tangible things provided by the Servicer to the Monitor in this case, including the subsequent disclosure by the Monitor to the Monitoring Committee of such information. In addition, it shall also govern the use and disclosure of such information when and if provided to the participating state parties or the participating agency or department of the United States whose claims are released through this settlement (“participating state or federal agency whose claims are released through this settlement”).

The Monitor may, at his discretion, provide to the Monitoring Committee or to a participating state or federal agency whose claims are released through this settlement any documents or information received from the Servicer related to a Potential Violation or related to the review described in Section C.18; provided, however, that any such documents or information so provided shall be subject to the terms and conditions of these provisions. Nothing herein shall be construed to prevent the Monitor from providing documents received from the Servicer and not designated as “CONFIDENTIAL” to a participating state or federal agency whose claims are released through this settlement.

The Servicer shall designate as “CONFIDENTIAL” that information, document or portion of a document or other tangible thing provided by the Servicer to the Monitor, the Monitoring Committee or to any other participating state or federal agency whose claims are released through this settlement that Servicer believes contains a trade secret or confidential research, development, or commercial information subject to protection under applicable state or federal laws (collectively, “Confidential Information”). These provisions shall apply to the treatment of Confidential Information so designated.


4.	Except as provided by these provisions, all information designated as “CONFIDENTIAL” shall not be shown, disclosed or distributed to any person or entity other than those authorized by these provisions. Participating states and federal agencies whose claims are released through this settlement agree to protect Confidential Information to the extent permitted by law.

This agreement shall not prevent or in any way limit the ability of a participating state or federal agency whose claims are released through this settlement to comply with any subpoena, Congressional demand for documents or information, court order, request under the Right of Financial Privacy Act, or a state or federal public records or state or federal freedom of information act request; provided, however, that in the event that a participating state or federal agency whose claims are released through this settlement receives such a subpoena, Congressional demand, court order or other request for the production of any Confidential Information covered by this Order, the state or federal agency shall, unless prohibited under applicable law or unless the state or federal agency would violate or be in contempt of the subpoena, Congressional demand, or court order, (1) notify the Servicer of such request as soon as practicable and in no event more than ten (10) calendar days of its receipt or three calendar days before the return date of the request, whichever is sooner, and (2) allow the Servicer ten (10) calendar days from the receipt of the notice to obtain a protective order or stay of production for the documents or information sought, or to otherwise resolve the issue, before the state or federal agency discloses such documents or information. In all cases covered by this Section, the state or federal agency shall inform the requesting party that the documents or information sought were produced subject to the terms of these provisions.

Dispute Resolution Procedures. Servicer, the Monitor, and the Monitoring Committee will engage in good faith efforts to reach agreement on the proper resolution of any dispute concerning any issue arising under this Consent Judgment, including any dispute or disagreement related to the withholding of consent, the exercise of discretion, or the denial of any application. Subject to Section J, below, in the event that a dispute cannot be resolved, Servicer, the Monitor, or the Monitoring Committee may petition the Court for resolution of the dispute. Where a provision of this agreement requires agreement, consent of, or approval of any application or

action by a Party or the Monitor, such agreement, consent or approval shall not be unreasonably withheld.

Consumer Complaints. Nothing in this Consent Judgment shall be deemed to interfere with existing consumer complaint resolution processes, and the Parties are free to bring consumer complaints to the attention of Servicer for resolution outside the monitoring process. In addition, Servicer will continue to respond in good faith to individual consumer complaints provided to it by State Attorneys General or State Financial Regulators in accordance with the routine and practice existing prior to the entry of this Consent Judgment, whether or not such complaints relate to Covered Conduct released herein.

Relationship to Other Enforcement Actions. Nothing in this Consent Judgment shall affect requirements imposed on the Servicer pursuant to Consent Orders issued by the appropriate Federal Banking Agency (FBA), as defined in 12 U.S.C. § 1813(q), against the Servicer. In conducting their activities under this Consent Judgment, the Monitor and Monitoring Committee shall not impede or otherwise interfere with the Servicer’s compliance with the requirements imposed pursuant to such Orders or with oversight and enforcement of such compliance by the FBA.


J.	Enforcement

Consent Judgment. This Consent Judgment shall be filed in the U.S. District Court for the District of Columbia (the “Court”) and shall be enforceable therein. Servicer and the Releasing Parties shall waive their rights to seek judicial review or otherwise challenge or contest in any court the validity or effectiveness of this Consent Judgment. Servicer and the Releasing Parties agree not to contest any jurisdictional facts, including the Court’s authority to enter this Consent Judgment.

Enforcing Authorities. Servicer’s obligations under this Consent Judgment shall be enforceable solely in the U.S. District Court for the District of Columbia. An enforcement action under this Consent Judgment may be brought by any Party to this Consent Judgment or the Monitoring Committee. Monitor Report(s) and Quarterly Report(s) shall not be admissible into evidence by a Party to this Consent Judgment except in an action in the Court to enforce this Consent Judgment. In addition, unless immediate action is necessary in order to prevent irreparable and immediate harm, prior to commencing any enforcement action, a Party must provide notice to the Monitoring Committee of its intent to bring an action to enforce this Consent Judgment. The members of the Monitoring Committee shall have no more than 21 days to determine whether to bring an enforcement action. If the members of the Monitoring Committee decline to bring an enforcement action, the Party must wait 21 additional days after such a determination by the members of the Monitoring Committee before commencing an enforcement action.


3.	Enforcement Action. In the event of an action to enforce the obligations of Servicer and to seek remedies for an uncured Potential Violation for which Servicer’s time to cure has expired, the sole relief available in such an action will be:


(a)	Equitable Relief. An order directing non-monetary equitable relief, including injunctive relief, directing specific performance under the terms of this Consent Judgment, or other non-monetary corrective action.

(b)

Civil Penalties. The Court may award as civil penalties an amount not more than $1 million per uncured Potential Violation; or, in the event of a second uncured Potential Violation of Metrics 1.a, 1.b, or 2.a ( i.e. , a Servicer fails the specific Metric in a Quarter, then fails to cure that Potential Violation, and then in subsequent Quarters, fails the same Metric again in a Quarter and fails to cure that Potential Violation again in a subsequent Quarter), where the final uncured Potential Violation involves widespread noncompliance with that Metric, the Court may award as civil penalties an amount not more than $5 million for the second uncured Potential Violation.

Nothing in this Section shall limit the availability of remedial compensation to harmed borrowers as provided in Section E.5.


(c)	Any penalty or payment owed by Servicer pursuant to the Consent Judgment shall be paid to the clerk of the Court or as otherwise agreed by the Monitor and the Servicer and distributed by the Monitor as follows:


1.	In the event of a penalty based on a violation of a term of the Servicing Standards that is not specifically related to conduct in bankruptcy, the penalty shall be allocated, first, to cover the costs incurred by any state or states in prosecuting the violation, and second, among the participating states according to the same allocation as the State Payment Settlement Amount.


2.	In the event of a penalty based on a violation of a term of the Servicing Standards that is specifically related to conduct in bankruptcy, the penalty shall be allocated to the United States or as otherwise directed by the Director of the United States Trustee Program.


3.	In the event of a payment due under Paragraph 10.d of the Consumer Relief requirements, 50% of the payment shall be allocated to the United States, and 50% shall be allocated to the State Parties to the Consent Judgment, divided among

them in a manner consistent with the allocation in Exhibit B of the Consent Judgment.

Sunset. This Consent Judgment and all Exhibits shall retain full force and effect for three and one-half years from the date it is entered (the “Term”), unless otherwise specified in the Exhibit. The duration of the Servicer’s obligations under the Servicing Standards set forth in Exhibit A shall be reduced to a period of three years from the date of the entry of the Consent Judgment, if at the end of the third year, the Monitor’s two servicing standard compliance reports immediately prior to that date reflect that the Servicer had no Potential Violations during those reporting periods, or any Corrective Action Plans that the Monitor had not yet certified as completed. Servicer shall submit a final Quarterly Report for the last quarter or portion thereof falling within the Term, and shall cooperate with the Monitor’s review of said report, which shall be concluded no later than six months following the end of the Term, after which time Servicer shall have no further obligations under this Consent Judgment.

EXHIBIT F

FEDERAL RELEASE

This Federal Release (“Release”) is entered into among the United States of America, its agencies, and departments (collectively, “the United States”), acting through the United States Department of Justice, the Consumer Financial Protection Bureau (“Bureau” or “CFPB”) and SunTrust Mortgage, Inc. on behalf of itself and its affiliated entities . (“collectively SunTrust”) (the United States, the CFPB, and SunTrust are collectively referred to as (“the Parties”)).

RECITALS

A. SunTrust Banks, Inc. is a registered bank holding company headquartered in Atlanta, Georgia. SunTrust Banks, Inc. wholly owns and controls SunTrust Bank, a Georgia State chartered bank headquartered in Atlanta Georgia, which in turn wholly owns SunTrust Mortgage, Inc., a mortgage lender and servicer with its principal place of business in Richmond, Virginia.

B. SunTrust originates and services residential mortgage loans. SunTrust, either through its own operations or through the operations of its subsidiaries and affiliates, serves, and during the relevant period served: (1) as a participant in the Direct Endorsement Lender program of the Federal Housing Administration (FHA) within the United States Department of Housing and Urban Development (HUD); (2) as a mortgagee or servicer for mortgages insured or guaranteed by federal mortgage programs administered by agencies that include FHA, the United States Department of Veterans Affairs (VA), and the United States Department of Agriculture Rural Development; (3) as a servicer for loans owned by other institutions participating in the Making Home Affordable Program (MHA) (including MHA's component

program, the Home Affordable Modification Program (HAMP)) of the United States Department of the Treasury (Treasury) and HUD, and as a participant in various state programs of the Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (HHF); and (4) as an entity that litigates single-family residential mortgage issues in U.S. Bankruptcy Courts and in related U.S. District Court proceedings in capacities that include commencing and pursuing or supporting litigation commenced against mortgagors and other debtors.

C. The United States and the Bureau contend that they have certain civil claims against SunTrust based on SunTrust’s conduct in servicing of mortgage loans (the “Covered Servicing Conduct”). Such Covered Servicing Conduct encompasses all activities of SunTrust, of any affiliated entity during or prior to such time as it was an affiliated entity, and all of the current or former officers, directors, employees and agents of any of the foregoing, directed toward servicing (including subservicing and master servicing), whether for their own account or for the account of others, of mortgage loans for single-family residential homeowners (which includes loans secured by one- to four-family residential properties, whether used for investor or consumer purposes), whether in the form of a mortgage, deed of trust or other security instrument creating a lien upon such property or any other property described therein that secures the related mortgage loan (“single-family residential mortgage loans”) from and after the closing of a borrower’s mortgage loan and includes, but is not limited to, the following conduct:

(1) Deficiencies in performing loan modification and other loss mitigation activities, including extensions, forbearances, short sales and deeds in lieu of foreclosure, setting the qualifying criteria for any of the foregoing and/or setting the terms and conditions for any of the foregoing;

(2) Deficiencies in foreclosing on single-family residential mortgage loans or acquiring title in lieu of foreclosure, including the designation and identity of the foreclosing party, the timing of foreclosures, transfer of legal or beneficial ownership to the mortgage loan and/or the related servicing rights or obligations, the charging of any fees, the preparation, contents, execution, notarization or presentation of any documents filed with or submitted to a court or any government agency, or otherwise used as part of the foreclosure process (including, but not limited to, affidavits, declarations, certifications, substitutions of trustees, and assignments) and dual-tracking foreclosure and loan modification activities, and communications with borrowers in respect of foreclosure;

(3) Other deficiencies in servicing single-family residential mortgage loans relating to:

(a) Collections activity, including all contact with borrowers (e.g., telephone calls, letters, and in-person visits) in respect of such activities;

(b) Practices relating to paying or failing to pay taxes (including property taxes), hazard insurance, force-placed insurance, and homeowner association dues or other items provided for in a mortgage loan escrow arrangement (including making or failing to make such payments), including obtaining or maintaining insurance and advancing funds to pay therefor and the creation and maintenance of such escrow accounts;

(c) Use or supervision of vendors, agents and contract employees, and their activities in connection with creation and recording of assignments,

servicing, foreclosure, and loss mitigation activities, including subservicers, foreclosure and bankruptcy attorneys, and other default service providers, and pursuit of claims against vendors and other third parties for failure of such third parties to comply with contractual or other obligations;

(d) Activities related to the executing, notarizing, transferring or recording of mortgages; the obtaining, executing, notarizing, transferring or recording of assignments; or activities related to the use of any mortgage registry system, including MERS, and including the transferring of mortgages or assignments using MERS;

(e) Account statements, disclosures, and/or other communications to borrowers; unintentional reporting errors, and unintentional remittance errors that are cured;

(f) Maintenance and placement of loan-level and pool-level mortgage insurance and guarantees, hazard insurance, flood insurance, title insurance, and other insurance related to mortgage loans and related properties, including claims activity;

(g) Handling and resolution of inquiries, disputes and complaints by or on behalf of borrowers and frequency and adequacy of communications with borrowers;

(h) Securing, inspecting, repairing, maintaining, or preserving properties both before and after foreclosure or other acquisition of title;

(i) Adequacy of staffing, training, systems and processes,

including maintenance and security of access to records relating to servicing, foreclosure, bankruptcy, property sale and management and activities related or ancillary thereto;

(j) Determinations in respect of the appropriate actions of obtaining value for mortgage loans, including whether to pursue foreclosure on properties, whether to assert or abandon liens and other claims and actions taken in respect thereof, and whether to pursue a loan modification or any particular loan modification or other form of loss mitigation;

(k) Acceptance, rejection, application, or reporting of payments made by or on behalf of borrowers, including the assessment of any fees and placement of the payment(s) in a suspense account;

(l) Obtaining, securing, updating, transferring, or providing promissory notes or endorsements of promissory notes through allonges or otherwise;

(m) Licensing or registration of employees, agents, or contractors, or designation of employees as agents for another entity, through corporate resolutions or Powers of Attorney or otherwise;

(n) Pursuing claims post foreclosure, including seeking deficiency judgments;

(o) Eviction notices, registrations of vacant properties, and any activity relating to the sale or disposition of foreclosed or acquired properties (including Real Estate Owned properties), including management of such properties

and proceedings related to such properties;

(p) Executing, notarizing, or recording any documents related to the sale of acquired properties, including the warranty deeds and closing documents;

(q) Custodial and trustee functions related to the Covered Servicing Conduct;

(r) Quality control, quality assurance or compliance or audit testing or oversight related to the Covered Servicing Conduct; for avoidance of doubt, quality control or compliance reviews associated with the origination, sale, or securitization of mortgage loans does not constitute Covered Servicing Conduct;

(s) Reporting, certification or registration requirements related to any of the Covered Servicing Conduct; and

(t) Communications with borrowers with respect to the Covered Servicing Conduct.

(4) Deficiencies in SunTrust’s or any of its affiliates’ participation in various state programs of the Hardest Hit Fund Program and servicing of loans owned by another institution participating in the Making Home Affordable Program, including all of its component programs (e.g., HAMP, 2MP, HAFA, UP, PRA-HAMP, FHA-HAMP, FHA2LP, and RD- HAMP).

D. The United States and the Bureau further contend that they have certain civil claims against SunTrust based on SunTrust’s conduct in originating mortgage loans (the “Covered Origination Conduct”). Such Covered Origination Conduct consists of all activities of SunTrust, of any affiliated entity during or prior to such time as it was an affiliated entity, and all

of the current or former officers, directors, employees, and agents of any of the foregoing,

directed toward directly or indirectly originating, assisting in the origination of, or purchasing single-family residential mortgage loans and excludes conduct occurring following the closing of the borrower’s mortgage loan that is otherwise covered as the Covered Servicing Conduct. Such Covered Origination Conduct includes, but is not limited to, the following conduct:

(1) Submitting loans for insurance endorsement and claims for insurance benefits for FHA loans that SunTrust or any affiliated entity during or prior to such time as it was an affiliated entity endorsed or underwrote as a participant in the FHA’s Direct Endorsement Program that failed to meet any applicable underwriting requirements, including those set forth in the applicable version of the HUD Handbook 4155.1, as supplemented by relevant mortgagee letters, all as of the time of origination;

(2) Submitting loans for insurance endorsement or claims for insurance benefits for FHA loans that SunTrust or any affiliated entity during or prior to such time as it was an affiliated entity endorsed or underwrote as a participant in the FHA’s Direct Endorsement Program while failing to implement applicable quality control measures;

(3) Other deficiencies in originating single-family residential mortgage loans relating to:

(a) Processing, underwriting, closing, or funding of loans and the terms and conditions of such loans;

(b) Taking, approving or denying loan applications;

the charging and splitting of any fee or discount points;

(d) Recommendations of particular types of loan products, loan features or terms and conditions of any loan;

(e) Valuing the properties used as collateral for such loans, including use of employee, independent and vendor management appraisers and alternative valuation methods such as AVMs and BPOs;

(f) Use of vendors, including vendor management companies and other providers of real estate settlement services, whether affiliated or unaffiliated;

(g) Payment of fees or other things of value in connection with the making or receiving of referrals of settlement and other services;

(h) Conduct of any vendors used in connection with the origination of loans, including, but not limited to, closing agents, appraisers, real estate agents, title review, flood inspection, and mortgage brokers;

(i) Drafting of loan documents and loan disclosures and the provision of such disclosures;

(j) Obtaining and recording of collateral documents relating to loans, including, but not limited to, use of trustees or designees on mortgages or deeds of trust;

(k) Advertising of loans and solicitation of borrowers;

(l) Licensing, registration, qualifications or approvals of employees in connection with the Covered Origination Conduct; and

(m) Quality control, quality assurance or compliance or audit testing or oversight related to the Covered Origination Conduct.

E. The United States further contends that it has certain civil claims against SunTrust based on SunTrust’s servicing, including servicing by any affiliated entity during or prior to such time as it was an affiliated entity, and by any of SunTrust’s or such affiliated entities’ current or former officers, directors, employees, and agents, of loans of borrowers in bankruptcy (the “Covered Bankruptcy Conduct”). Such Covered Bankruptcy Conduct includes, but is not limited to, the following conduct:

(1) Deficiencies in servicing residential mortgage loans for borrowers in bankruptcy relating to:

(a) The preparation, prosecution, documentation, substantiation, or filing of proofs of claim (and related attachments, exhibits and supplements), motions seeking relief from the automatic stay, objections to plan confirmation, motions to dismiss bankruptcy cases, and affidavits, declarations, and other mortgage-related documents in bankruptcy courts and related district court proceedings;

(b) Charging and timing of fees and expenses, including any fees or expenses assessed to the borrower due to delay while the bankruptcy court reviews a pending request for loan modification or delay by the Chapter 13 trustee to timely remit the borrower’s payments;

(c) Use, analysis, accounting, or disclosure of escrow accounts, including any advances on borrower’s behalf, as evidenced in proofs of claim (and

related attachments, exhibits and supplements), motions seeking relief from the automatic stay, objections to plan confirmation, motions to dismiss bankruptcy cases, and affidavits, declarations, and other mortgage-related documents in bankruptcy courts and district courts;

(d) Account statements, disclosures, and/or other communications to borrowers, including: (i) assessing, imposing, posting, or collecting fees and charges; (ii) disclosure of fees and charges assessed, imposed or posted during the bankruptcy case; and (iii) collection of undisclosed post-petition fees and charges after the borrower receives a discharge, SunTrust obtains relief from the automatic stay, or the bankruptcy case is dismissed;

(e) Adequacy of staffing, training, systems, and processes relating to administering and servicing loans for borrowers in bankruptcy;

(f) Use or supervision of vendors and contract employees, including Lender Processing Services, Inc., bankruptcy attorneys and other default service providers;

(g) Pursuit of or failure to pursue claims against vendors and other third parties for failure of such third parties to comply with contractual or other obligations;

(h) Compliance with the privacy protection and public access provisions of the United States Bankruptcy Code, Federal Rules of Bankruptcy Procedure, and any applicable local rule or order in proofs of claim, motions seeking relief from the automatic stay, objections to plan confirmation, motions to dismiss

bankruptcy cases, and affidavits, declarations, and other mortgage-related documents

in bankruptcy courts, including, but not limited to 11 U.S.C. § 107 and Fed. R. Bankr.


P.	9037; and

(i) Handling and resolution of inquiries, disputes or complaints by or on behalf of borrowers, and frequency and adequacy of communications with borrowers in bankruptcy.

(2) Deficiencies in accounting for, processing, approving and administering loan modifications for borrowers in bankruptcy relating to:

(a) Charging late fees or seeking arrearages while a trial period modification plan or permanent loan modification plan is in place and borrower is timely making payments under the terms of the loan modification plan;

(b) Seeking relief from the automatic stay when SunTrust has approved a trial period or permanent loan modification plan and borrower is timely making payments under the terms of the loan modification plan; and

(c) Delays in approving or finalizing the documentation necessary to the approval of loan modifications for borrowers in bankruptcy.

F. This Release is neither an admission of liability by SunTrust of the allegations of the Complaint or in cases settled pursuant to this Consent Judgment, nor a concession by the United States or the Bureau that its claims are not well-founded.

To avoid the delay, uncertainty, inconvenience, and expense of protracted litigation of the above claims, and in consideration of the mutual promises and obligations of the Consent Judgment, the Parties agree and covenant as follows:

TERMS AND CONDITIONS

(1) SunTrust shall pay or cause to be paid, for the purposes specified in the Consent Judgment, the amount specified in Paragraph 3 of the Consent Judgment (“Direct Payment Settlement Amount”) by electronic funds transfer within ten days of receiving notice that the escrow account referenced in Paragraph 3 of the Consent Judgment is established or within ten days after the United States District Court for the District of Columbia enters the final non-appealable Consent Judgment (the “Effective Date of the Consent Judgment”), whichever is later, pursuant to written instructions to be provided by the United States Department of Justice. SunTrust, itself and through its affiliates, shall also undertake, for the purposes specified in the Consent Judgment, certain consumer relief activities as set forth in Exhibit D, as amended in Exhibit I, to such Consent Judgment (“Consumer Relief Requirements”) and will be obligated to make certain payments (the “Consumer Relief Payments”) in the event that it does not complete the Consumer Relief Requirements set forth in Exhibit D to the Consent Judgment. The releases contained in this Release shall become effective upon payment of the Direct Payment Settlement Amount. In the event that SunTrust does not complete the Consumer Relief Requirements, and does not make the Consumer Relief Payments required under the Consent Judgment and fails to cure such non-payment within thirty days of written notice by the United States, the United States may declare this Release null and void with respect to the United States.

(2)

(a) Subject to the exceptions in Paragraph 11 (concerning excluded claims) below, the United States fully and finally releases SunTrust and any affiliated entity and any of their respective successors or assigns, as well as any current or former

director, current or former officer, and current or former employee of any of the foregoing, individually and collectively, from any civil or administrative claims the United States has or may have, and from any civil or administrative remedies or penalties (expressly including punitive or exemplary damages) it may seek or impose, based on the Covered Servicing Conduct that has taken place as of 11:59 p.m., Eastern Daylight Time, on June 17, 2014 (and, for the avoidance of doubt, with respect to FHA-insured loans, whether or not a claim for mortgage insurance benefits has been or is in the future submitted), under the Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”), the False Claims Act, the Racketeer Influenced and Corrupt Organizations Act (“RICO”), the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Truth in Lending Act, the Interstate Land Sales Full Disclosure Act, 15 U.S.C. § 1691(d) (“Reason for Adverse Action”) or § 1691(e) (“Copies Furnished to Applicants”) of the Equal Credit Opportunity Act, sections 502 through 509 (15 U.S.C. § 6802-6809) of the Gramm- Leach Bliley Act except for section 505 (15 U.S.C. § 6805) as it applies to section 501(b) (15 U.S.C. § 6801(b), or that the Civil Division of the United States Department of Justice has actual and present authority to assert and compromise pursuant to 28 C.F.R. § 0.45.

(b) Subject to the exceptions in Paragraph 11 (concerning excluded claims) below, the United States fully and finally releases SunTrust and any affiliated entity, and any of their respective successors or assigns, as well as any current or former director, current or former officer, or current or former employee of any of the foregoing, individually and collectively, from any civil or administrative claims the United States

has or may have, and from any civil or administrative remedies or penalties (expressly including punitive or exemplary damages) it may seek or impose, based on the Covered Origination Conduct that has taken place as of 11:59 p.m., Eastern Daylight Time, on June 17, 2014, under the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, the Truth in Lending Act, 15 U.S.C. § 1691(d) (“Reason for Adverse Action”) or § 1691(e) (“Copies Furnished to Applicants”) of the Equal Credit Opportunity Act, or the Interstate Land Sales Full Disclosure Act.

(c) Subject to the exceptions in Paragraph 11 (concerning excluded claims) below, the United States fully and finally releases SunTrust and any affiliated entity, and any of their respective successors or assigns, as well as any current or former director, current or former officer, and current or former employee of any of the foregoing, individually and collectively, from any civil or administrative claims the United States has or may have, and from any civil or administrative remedies or penalties (expressly including punitive or exemplary damages) it may seek to impose under FIRREA based on the Covered Origination Conduct only to the extent that:

(i) such claim is (A) based upon false, misleading or fraudulent representations (or a scheme to defraud consisting solely of such a false, misleading or fraudulent representation) made by SunTrust or affiliated entity as of 11:59 p.m., Eastern Daylight Time, on June 17, 2014, to a borrower in connection with SunTrust’s or affiliated entity’s making of a residential mortgage loan to such borrower; or (B) an action pursuant to 12 U.S.C. 1833a(c)(2) in which the action is consisting solely of the allegation that SunTrust or one of its affiliated entities made a

false, misleading or fraudulent statement or misrepresentation (or engaged in a scheme to defraud based solely upon such a false, misleading or fraudulent statement or misrepresentation) to SunTrust or another affiliated entity, as of 11:59 p.m., Eastern Daylight Time, on June 17, 2014, in connection with SunTrust’s or an affiliated entity’s making of a residential mortgage loan to a borrower; and

(ii) (A) the only federally insured financial institution that was affected by the statement or misrepresentation (or scheme), or by actions based on, incorporating, or omitting the statement or misrepresentation (or scheme) was SunTrust or an affiliated entity; (B) the false statement or misrepresentation (or scheme) was not part of a scheme to defraud any person or entity other than or in addition to the borrower and/or SunTrust or an affiliated entity, including, but not limited to, any other financial institution (as defined in 18 U.S.C. § 20), investors, and governmental entities; (C) the false statement or misrepresentation (or scheme), or actions based on, incorporating, or omitting the statement or misrepresentation (or scheme) did not harm any other financial institution (as defined in 18 U.S.C. § 20), investors, governmental entities, or any other entities other than SunTrust or an affiliated entity; and (D) there was no material monetary effect on an agency of the United States.

(3)

(a) Subject to the exceptions in Paragraph 11 (concerning excluded claims) below, and in addition to the releases provided in Exhibits J and K, the United States fully and finally releases SunTrust and any affiliated entity, and any of their

respective successors or assigns, as well as any current or former director, current or former officer, and current or former employee of any of the foregoing, individually and collectively, from any civil or administrative claims it has or may have and from any civil or administrative remedies or penalties (expressly including punitive or exemplary damages) it may seek or impose under FIRREA, the False Claims Act, RICO and the Program Fraud Civil Remedies Act where the sole basis for such claim or claims is that SunTrust or any affiliated entity or any of their respective successors or assigns, submitted to HUD-FHA prior to11:59 p.m., Eastern Daylight Time, on June 17, 2014, a false or fraudulent annual certification that the mortgagee had “conform[ed] to all HUD-FHA regulations necessary to maintain its HUD-FHA approval” (including, but not limited to, the requirement that the mortgagee implement and maintain a quality control program that conforms to HUD-FHA requirements), or “complied with and agree[d] to continue to comply with HUD-FHA regulations, handbooks, Mortgagee Letters, Title I Letters, policies, and terms of any agreements entered into with the Department under HUD’s Direct Endorsement Program.” For avoidance of doubt, this Paragraph means that the United States is barred from asserting that a false annual certification renders SunTrust liable under the False Claims Act and the other laws cited above for loans endorsed by SunTrust for FHA insurance during the period of time applicable to the annual certification without regard to whether any such loans contain material violations of HUD-FHA requirements, or that a false individual loan certification that “this mortgage is eligible for HUD mortgage insurance under the Direct Endorsement program” renders SunTrust liable under the False Claims Act for any individual loan that does not contain a

material violation of HUD-FHA requirements. However, this Paragraph does not (i) release, bar or otherwise preclude the right of the United States to pursue any civil or administrative claims or remedies it has or may have, or release or preclude under res judicata or collateral estoppel theories any civil or administrative remedies or penalties it may seek or impose, against SunTrust, any affiliated entity, and any of their respective successors or assigns, for conduct with respect to the insurance of residential mortgage loans that violates any laws, regulations or other HUD-FHA requirements applicable to the insurance of residential mortgage loans by HUD, including, but not limited to, material violations of any applicable HUD-FHA requirements with respect to an individual loan or loans, except if and to the extent such claim, remedy or penalty is based solely on such entity’s failure to provide HUD with an accurate annual certification as described above; (ii) release or otherwise bar the United States from introducing evidence of any alleged failure to comply with applicable HUD-FHA requirements, including, but not limited to, sufficient quality control, underwriting or due diligence programs, in any way (including, but not limited to, for the purpose of proving intent) in connection with any claim that there was a material violation(s) of applicable HUD-FHA requirements with respect to an individual loan or loans that would subject SunTrust to liability under the False Claims Act or any other federal statutory or common law administrative or judicial claim or permit SunTrust or its affiliates to offset or otherwise reduce any potential liability for such claims or remedies by any amount paid under the Consent Judgment. The parties agree that the issue of whether and to what extent the United States may use statistical sampling of individual loans or similar techniques for calculating damages or proving

material violations of HUD-FHA underwriting requirements with respect to a pool of loans is not addressed by the Consent Judgment and shall be governed by the law of the relevant administrative or judicial forum of any future dispute. Notwithstanding the foregoing, in no instance shall this Release relieve SunTrust from the obligation to remedy, upon identification, defects of title or such other problems caused by SunTrust acts or omissions that may preclude FHA from accepting assignment or paying a claim for which FHA lacks statutory authority pursuant to 12 § 1707(a) and § 1710(a)(1)(B) , in which case FHA shall reconvey the property back to SunTrust to remedy the defect in title or such other problem and SunTrust shall convey the property back to FHA once the defect or problem is cured.

(4) Subject to the exceptions in Paragraph 11 (concerning excluded claims) below, for loans that closed before 11:59 p.m., Eastern Daylight Time, on June 17, 2014, and are guaranteed by the Department of Veterans Affairs (VA), the United States fully and finally releases SunTrust and any current or former affiliated entity (to the extent SunTrust retains liabilities associated with such former affiliated entity), and any of their respective successors or assigns, as well as any current or former director, current or former officer, and current or former employee of any of the foregoing, individually and collectively, from any civil or administrative claims it has or may have against SunTrust or any affiliated entity based on Covered Origination Conduct that arises under FIRREA, the False Claims Act, RICO or the Program Fraud Civil Remedies Act to the extent that they are based on any failure by SunTrust or any affiliated entity and any of their respective successors or assigns, as well as any current or former director, current or former officer, and current or former employee of any of the foregoing, individually

and collectively, to conform to all VA regulations necessary to maintain the authority of SunTrust or any affiliated entity to close VA-guaranteed loans on an automatic basis. Nothing in the foregoing shall be interpreted to release the right of the United States to pursue any civil or administrative claims it has or may have, or to release any civil or administrative remedies or penalties it may seek or impose, against SunTrust, any affiliated entity , and any of their respective successors or assigns, based on Covered Origination Conduct that violates the laws or regulations applicable to the guaranty of residential mortgage loans by VA with respect to any residential mortgage loan or loans, except if and to the extent such claim, remedy or penalty is based solely on such entity’s failure to provide VA with an accurate general program compliance certification, to implement an effective quality control plan, or to conform to all VA regulations necessary to maintain the authority of SunTrust or any affiliated entity to close VA-guaranteed loans on an automatic basis.

(5) Subject to the exceptions in Paragraph 11 (concerning excluded claims) below, for loans that closed before 11:59 p.m., Eastern Daylight Time, on June 17, 2014, and are guaranteed by the Department of Agriculture (USDA), the United States fully and finally releases SunTrust and any affiliated entity , and any of their respective successors or assigns, as well as any current or former director, current or former officer, and current or former employee of any of the foregoing, individually and collectively, from any civil or administrative claims it has or may have against SunTrust and any of its respective successors or assigns, as well as any current or former director, current or former officer, and current or former employee of any of the foregoing, individually and collectively, based on Covered Origination Conduct that arises under FIRREA, the False Claims Act, RICO or the Program Fraud Civil Remedies Act to the

extent that they are based on statements made in SunTrust’s or affiliated entity’s application for approved lender status in the Single Family Housing Guaranteed Loan Program. Nothing in the foregoing shall be interpreted to release the right of the United States to pursue any civil or administrative claims it has or may have, or to release any civil or administrative remedies or penalties it may seek or impose, against SunTrust, any affiliated entity , and any of their respective successors or assigns, based on Covered Origination Conduct that violates the laws or regulations applicable to the guaranty of residential mortgage loans by USDA with respect to any residential mortgage loan or loans, except if and to the extent such claim, remedy or penalty is based solely on such entity’s failure to provide USDA with an accurate general program compliance certification, to implement an effective quality control plan, or on statements made in SunTrust’s or affiliated entity’s application for approved lender status in the Single Family Housing Guaranteed Loan Program.

(6) Subject to the exceptions described in this Paragraph 6 and in Paragraph 11 (concerning excluded claims) below, the United States Department of the Treasury (“Treasury”) fully and finally releases SunTrust and any affiliated entity, and any of their respective successors or assigns, as well as any current or former director, current or former officer, and current or former employee of any of the foregoing, individually and collectively, and will refrain from instituting, directing, or maintaining any civil or administrative claims the Treasury has or may have, and from any civil remedies or penalties (expressly including punitive or exemplary damages) it may seek or impose against SunTrust and any affiliated entity, and any of their respective successors or assigns, as well as any current or former director, current or former officer, and current or former employee of any of the foregoing,

individually and collectively, based on the Covered Servicing Conduct that has taken place as of 11:59 p.m., Eastern Daylight Time, on June 17, 2014. Notwithstanding the foregoing, Treasury, in connection with the Making Home Affordable Program, reserves the right to continue to perform compliance reviews on SunTrust’s Making Home Affordable Program activities occurring prior to June 17, 2014, to require non-financial remedies with respect to such activities, and to publicly release servicer assessments with respect thereto. In addition, with respect to instances of noncompliance that occur after June 17, 2014, Treasury reserves the right to exercise all available remedies, both financial and non-financial, under the Assignment and Assumption Agreement, dated February 28, 2011, between SunTrust Mortgage, Inc. as assignee and Wells Fargo Bank, N.A as assignor of all of its rights and obligations under the Making Home Affordable Program Commitment to Purchase Financial Instrument and Servicer Participation Agreement, as amended, between Treasury and Wells Fargo Bank, N.A.

(7) Subject to the exceptions in Paragraph 11 (concerning excluded claims) below, the CFPB fully and finally releases SunTrust and any current or former affiliated entity (to the extent SunTrust retains liabilities associated with such former affiliated entity), and any of their respective successors or assigns as well as any current or former director, current or former officer, and current or former employee of any of the foregoing, individually and collectively, and will refrain from instituting, directing, or maintaining any civil or administrative claims the CFPB has or may have, and from imposing any civil or administrative remedies or penalties (expressly including, punitive or exemplary damages) against SunTrust and any affiliated entity , and any of their respective successors or assigns, as well as any current or former director,

current or former officer, or current or former employee of any of the foregoing, individually and collectively, based on Covered Servicing Conduct or Covered Origination Conduct that has taken place as of 11:59 p.m. Eastern Daylight Time, on December 31, 2013. For avoidance of doubt, the CFPB agrees that Covered Servicing Conduct includes the servicing of loans of borrowers in bankruptcy.

(8) Subject to the exceptions in Paragraph 11 (concerning excluded claims) below, and conditioned upon SunTrust full payment of the Direct Payment Settlement Amount, the Federal Trade Commission fully and finally releases SunTrust and any affiliated entity , and any of their respective successors or assigns, as well as any current or former director, current or former officer, and current or former employee of any of the foregoing, individually and collectively, from any civil or administrative claim the Federal Trade Commission has or may have, and from any civil or administrative remedies or penalties (expressly including punitive or exemplary damages) it may seek or impose, based on the Covered Origination Conduct that has taken place as of 11:59 p.m., Eastern Daylight Time, on June 17, 2014, or based on the Covered Servicing Conduct that has taken place as of 11:59 p.m., Eastern Daylight Time, on June 17, 2014, provided, however, that nothing in this Paragraph or Release shall be interpreted to release any liability to the Federal Trade Commission relating to the Covered Servicing Conduct or Covered Origination Conduct of any affiliated entity that SunTrust has acquired on or after June 17, 2014, or, notwithstanding Section C.3.i of this Release, any conduct or claims involving the privacy, security, or confidentiality of consumer information.

(9) Subject to the exceptions in Paragraph 11 (concerning excluded claims) below:

(a) Upon the Effective Date of the Consent Judgment, the Executive Office for United States Trustees (“EOUST”) and the United States Trustees and Acting United States Trustees for Regions 1 through 21 (collectively, with the EOUST, “the United States Trustees”) will consent to and agree to take such steps as may be reasonably necessary to fully and finally withdraw or facilitate the dismissal with prejudice of pending objections and other actions by the United States Trustees, including all related discovery requests, whether formal or informal, and requests for examination under Fed. R. Bankr. P. 2004 (collectively, “the Discovery Requests”) and subpoenas or subpoenas duces tecum (collectively, “the Subpoenas”), directed to or filed against SunTrust , its affiliated entities, and directors, employees and officers of SunTrust and its affiliated entities, pertaining to SunTrust’s or its affiliated entities’ mortgage-related claims filed in a bankruptcy case prior to 11:59 p.m., Eastern Daylight Time, on June 17, 2014, and based on the Covered Bankruptcy Conduct. The United States Trustees further agree not to take any action to obtain discovery from SunTrust pursuant to any court order granting such Discovery Requests or with respect to enforcing related Subpoenas pending as of 11:59 p.m., Eastern Daylight Time, on June 17, 2014. Upon the Effective Date of the Consent Judgment, the United States Trustees further agree to take such steps as may be reasonably necessary to fully and finally withdraw or facilitate the dismissal with prejudice of Discovery Requests and Subpoenas directed to or filed against any other party where the discovery was sought for the purpose of obtaining relief against SunTrust, its affiliated entities, or directors, employees and officers of SunTrust or its

affiliates, and pertains to SunTrust’s or its affiliated entities’ mortgage-related claims filed in a bankruptcy case prior to 11:59 p.m., Eastern Daylight Time, on June 17, 2014, and based on the Covered Bankruptcy Conduct, except that nothing in this Paragraph requires the United States Trustee to withdraw or facilitate the dismissal of Discovery Requests and Subpoenas to the extent that relief against another party, other than SunTrust, its affiliated entities, or directors, employees and officers of SunTrust’s or its affiliated entities, is the purpose of such discovery. The parties agree that any such action taken inadvertently by either party will not be considered a violation of this agreement.

(b) Upon the Effective Date of the Consent Judgment, SunTrust will consent to and agrees to take such steps as may be reasonably necessary to fully and finally withdraw or facilitate the dismissal with prejudice of pending adversary proceedings, contested matters, appeals, and other actions filed by SunTrust or its affiliated entities, including all Discovery Requests and Subpoenas directed to or filed against any United States Trustee, relating to objections and other actions by the United States Trustees, including Discovery Requests and Subpoenas, directed to or filed against SunTrust, its affiliated entities, or directors, employees and officers of SunTrust or its affiliated entities pertaining to SunTrust’s or its affiliated entities’ mortgage-related claims filed in a bankruptcy case prior to 11:59 p.m., Eastern Daylight Time, on June 17, 2014, and based on the Covered Bankruptcy Conduct. SunTrust further agrees not to take any action to obtain discovery from the United States Trustees pursuant to any court order granting such Discovery Requests or with

respect to enforcing related Subpoenas pending as of 11:59 p.m., Eastern Daylight Time, on June 17, 2014. The parties agree that any such action taken inadvertently by either party will not be considered a violation of this agreement.

(c) The United States Trustees fully and finally release any claims, and will refrain from instituting, directing or maintaining any action or participating in any action by a third party (except that the United States Trustees may participate in an action to the extent ordered by a court provided that the United States Trustees may not seek such a court order formally or informally), against SunTrust and any affiliated entity , and any of their respective successors or assigns, as well as any current or former director, current or former officer, and current or former employee of any of the foregoing, individually and collectively, pertaining to SunTrust’s or its affiliated entities’ mortgage-related claims filed in a bankruptcy case prior to 11:59 p.m., Eastern Daylight Time, on June 17, 2014, and based on the Covered Bankruptcy Conduct. The United States Trustees shall refrain from sharing information obtained via the Discovery Requests and Subpoenas outside the federal government (unless required to do so under applicable law or pursuant to a court order) in support of any action, against SunTrust, or any affiliated entity , and any of their respective successors or assigns, as well as any current or former director, current or former officer, and current or former employee of any of the foregoing, individually and collectively, pertaining to SunTrust’s or its affiliated entities’ mortgage-related claims filed in a bankruptcy case prior to 11:59 p.m., Eastern Daylight Time, on and based on the Covered Bankruptcy Conduct. Except as otherwise provided in the Enforcement

Terms in Exhibit E of the Consent Judgment, the United States Trustees further agree to refrain from seeking to invalidate SunTrust’s or its affiliated entities’ lien on residential real property, including in an adversary proceeding pursuant to Fed. R. Bank. P. 7001(2) and 11 U.S.C. § 506, or to impose monetary sanctions or other punitive relief against SunTrust, and any affiliated entity, and any of their respective successors or assigns, as well as any current or former director, current or former officer, and current or former employee of any of the foregoing, individually and collectively, pertaining to SunTrust’s or its affiliated entities’ mortgage-related claims filed in a bankruptcy case after 11:59 p.m., Eastern Daylight Time, on June 17, 2014, and based on the Covered Bankruptcy Conduct where the Covered Bankruptcy Conduct occurred before 11:59 p.m., Eastern Daylight Time, on June 17, 2014.

(d) Notwithstanding the foregoing, nothing in this Paragraph shall be construed to be (1) a waiver of any defenses or claims of SunTrust, its affiliated entities, or directors, employees and officers of SunTrust or its affiliated entities, against any other party, or a dismissal of any pending adversary proceedings, contested matters, appeals, and other actions filed by SunTrust, its affiliated entities, or directors, employees and officers of SunTrust or its affiliated entities, against any other party, wherein the United States Trustee is a party or otherwise involved; (2) a waiver of any defenses or claims of the United States Trustee against any other party, or a dismissal of any pending adversary proceedings, contested matters, appeals, and other actions filed by the United States Trustee against any other party wherein SunTrust, its affiliated entities, or directors, employees and officers of SunTrust or its

affiliated entities, is a party or otherwise involved; or (3) a waiver of, or restriction or prohibition on, the United States Trustees’ ability, to the extent permitted by law, informally or formally, in individual bankruptcy cases, to seek a cure of material inaccuracies in SunTrust’s or its affiliated entities’ mortgage-related claims filed in a bankruptcy case and based on the Covered Bankruptcy Conduct, but not to impose monetary sanctions or other punitive relief against SunTrust or its affiliated entities in addition to such cure; provided, however, that this provision shall not constitute a waiver of, or restriction or prohibition on, SunTrust’s or its affiliated entities’ ability to dispute whether the United States Trustees have authority or ability to seek such a cure.

(10) For the purposes of this Release, the terms “affiliated entity,” “affiliated entities,” or “affiliate” shall mean entities that are directly or indirectly controlled by, or control, or are under common control with, SunTrust as of or prior to 11:59 p.m., Eastern Daylight Time, on June 17, 2014, and entities that were formerly directly or indirectly controlled by, or controlled, or are under common control with, SunTrust to the extent SunTrust currently retains liabilities associated with such former entity for activities prior to 11:59 p.m., Eastern Daylight Time, on June 17, 2014. The term “control” with respect to an entity means the beneficial ownership (as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of 50 percent or more of the voting interest in such entity.

(11) Notwithstanding any other term of this Release, the following claims of the United States and the CFPB to the extent applicable are specifically reserved and are not released, and nothing in this Paragraph operates as a waiver of any defense SunTrust may assert

to any such claims, including but not limited to any statute of limitations or other time-related defense.:

(a) Any liability arising under Title 26, United States Code (Internal Revenue Code);

(b) Any liability of individuals (including current or former directors, officers, and employees of SunTrust) who, based on the Covered Servicing Conduct, the Covered Origination Conduct, or the Covered Bankruptcy Conduct (collectively, the “Covered Conduct”), have received or receive in the future notification that they are the target of a criminal investigation (as defined in the United States Attorneys’ Manual); have been or are indicted or charged; or have entered or in the future enter into a plea agreement;

(d) Any liability to the United States for any conduct other than the Covered Conduct, or any liability for any Covered Conduct that is not expressly released herein or in Exhibits H or J to the Consent Judgment;

(e) Any and all claims whether legal or equitable, in connection with investors or purchasers in or of securities or based on the sale, transfer or assignment of any interest in a loan, mortgage, or security to, into, or for the benefit of a mortgage-backed security, trust, special purpose entity, financial institution, investor, or other entity, including but not limited to in the context of a mortgage securitization or whole loan sale to such entities (“Securitization/

Investment Claims”). Securitization/Investment Claims include, but are not limited to, claims based on the following, all in connection with investors or purchasers in or of securities or in connection with a sale, transfer, or assignment of any interest in loan, mortgage or security to, into, or for the benefit of a mortgage-backed security, trust, special purpose entity, financial institution, investor, or other entity:

(i) The United States’ capacity as an owner, purchaser, or holder of whole loans, securities, derivatives, or other similar investments, including without limitation, mortgage backed securities, collateralized debt obligations, or structured investment vehicles.

(ii) The creation, formation, solicitation, marketing, assignment, transfer, valuation, appraisal, underwriting, offer, sale, substitution, of or issuance of any interest in such whole loans, mortgages, securities, derivatives, or other similar investments.

(iii) Claims that SunTrust or an affiliated entity made false or misleading statements or omissions, or engaged in other misconduct in connection with the sale, transfer or assignment of any interest in a loan, mortgage, or security or in connection with investors or purchasers in or of such loans, mortgages, or securities, including but not limited to any such conduct that (a) affected a federally insured financial institution or violated a legal duty to a mortgage-backed security, trust, special purpose entity, financial institution, or investor (including the United States), or governmental agency and/or (b) that subjects SunTrust or an affiliated entity to a civil penalty or other remedy under 12 U.S.C. § 1833a.

(iv) Representations, warranties, certifications, statements, or claims made regarding such whole loans, securities, derivatives or other similar investments, including representations, warranties, certifications or claims regarding the eligibility, characteristics, or quality of mortgages or mortgagors;

(v) Activities related to the executing, notarizing, transferring or recording of mortgages; the endorsement or transfer of a loan; and the obtaining, executing, notarizing, transferring or recording of assignments;

(vi) Obtaining, securing, updating, transferring, or providing promissory notes or endorsements of promissory notes through allonges or otherwise;

(vii) Custodial and trustee functions;

(viii) Intentional or fraudulent failure to pay investors sums owed with respect to any security, derivatives, or similar investment;

(ix) Contractual covenants, agreements, obligations and legal duties to a mortgage-backed security, trust, special purpose entity, financial institution, investor, or other entity (including the United States);

(x) Covered Origination Conduct (except to the extent such conduct is released in Paragraphs 3, 4, 5, 7 or 8); and

(xi) Covered Servicing Conduct to the extent SunTrust or any affiliated entity engaged in the Covered Servicing Conduct in question not its capacity as servicer, subservicer or master servicer, but in its capacity as the originator of a mortgage loan or as seller, depositor, guarantor, sponsor,

securitization trustee, securities underwriter, document custodian or any other capacity.

The exclusions set forth above in this subparagraph 11(e) shall not apply to Securitization/Investment Claims based on the following conduct, and such claims are included in what is being released:

Securitization/Investment Claims based on Covered Servicing Conduct by SunTrust or any affiliated entity where: (1) such conduct was performed by SunTrust or any affiliated entity in its capacity as the loan servicer, master servicer or subservicer, whether conducted for its own account or pursuant to a third party servicing agreement or similar agreement, and not in its capacity as loan originator, seller, depositor, guarantor, sponsor, securitization trustee, securities underwriter, or any other capacity; and (2) such conduct was not in connection with (x) the creation, formation, solicitation, marketing, sale, assignment, transfer, offer, sale, substitution, underwriting, or issuance of any interest in securities, derivatives or other similar investments or (y) the sale or transfer of mortgage loans. The claims addressed in this sub-paragraph include, without limitation, Securitization and Investment Claims that the party seeking to enforce a mortgage loan against a borrower and homeowner in respect of that borrower’s default did not have a documented enforceable interest in the promissory note and mortgage or deed of trust under applicable state law or is otherwise not a proper party to the foreclosure or bankruptcy action or claims based on such party’s attempts to obtain such a documented enforceable interest or become such a proper party.

(f) Any liability arising under Section 8 of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2607, relating to private mortgage insurance, with respect to claims brought by the CFPB;

(g) Except with respect to claims related to the delivery of initial or annual privacy notices, requirements with respect to the communication of non-public personal information to non-affiliated third parties, or other conduct required by Sections 502 through 509 of the Gramm-Leach-Bliley Act (15 U.S.C. §§ 6802-6809), any claims or conduct involving the obligation of a financial institution under Section 501(b) of the Gramm-Leach-Bliley Act (15 U.S.C. s. 6801(b)) and its implementing regulations to maintain administrative, technical, and physical information security safeguards;

(h) Any liability arising under the Fair Housing Act; any provision of the Equal Credit Opportunity Act that is not expressly released in Paragraph 2 of this Release, including any provision prohibiting discriminatory conduct; the Home Mortgage Disclosure Act; or any other statute or law that prohibits discrimination of

persons based on race, color, national origin, gender, disability, or any other protected status;

(i) Administrative claims, proceedings, or actions brought by HUD against any current or former director, officer, or employee for suspension, debarment or exclusion from any HUD program;

(j) Any liability arising under the federal environmental laws;

(k) Any liability to or claims brought by (i) the Federal Housing Finance Agency; (ii) any Government Sponsored Enterprise, including the Federal

National Mortgage Association and the Federal Home Loan Mortgage Corporation (except where the Government Sponsored Enterprise seeks to impose such liability or pursue such claims in its capacity as an administrator of the Making Home Affordable Program of Treasury); (iii) the Federal Deposit Insurance Corporation (whether in its capacity as a Corporation, Receiver, or Conservator); (iv) the Government National Mortgage Association (“Ginnie Mae”) arising out of SunTrust’s contractual obligations related to serving as Master Subservicer on defaulted Ginnie Mae portfolios, including claims for breach of such obligations; (v) the CFPB with respect to claims within its authority that are not expressly released in Paragraph 7; (vi) the National Credit Union Administration, whether in its capacity as a Federal agency, Liquidating Agent, or Conservator; (vii) the Securities and Exchange Commission; (viii) the Federal Reserve Board and its member institutions; (ix) Maiden Lane LLC, Maiden Lane II LLC, Maiden Lane III LLC, entities that are consolidated for accounting purposes on the financial statements of the Federal Reserve Bank of New York, and the Federal Reserve Bank of New York; (x) the Office of the Comptroller of the Currency; (xi) the USDA (except to the extent claims are released in Paragraph 5; (xii) the VA (except to the extent claims are released in Paragraph 4; (xiii) the Commodity Futures Trading Commission; and (xvi) the Inspectors General of such entities;

(l) Any liability to the United States based on the claims and conduct alleged in the First Amended Complaint in U.S. ex rel. [Sealed] v. [Sealed], 12-civ-7199 (S.D.N.Y.) [UNDER SEAL], including but not limited to, any false or fraudulent statements, claims, and/or certifications to HUD and/or the GSEs in connection with the

reimbursement of costs or expenses incurred in connection with foreclosure-related proceedings anywhere in the United States (including foreclosure proceedings or other proceedings, such as bankruptcy or eviction proceedings, involving claims or issues relating to foreclosure), any failure to comply with, or any false or fraudulent statements, claims, and/or certifications to HUD and/or the GSEs concerning compliance with, quality control and/or monitoring requirements applicable to such costs or expenses; and no setoff related to amounts paid under this agreement shall be applied to any recovery in connection with that action..

(m) Any action that may be taken by the appropriate Federal Banking Agency (FBA), as defined in 12 U.S.C. § 1813(q), against SunTrust, any of its affiliated entities, and/or any institution-affiliated party of SunTrust, as defined in 12 U.S.C. § 1813(u), pursuant to 12 U.S.C. § 1818, and any action by the FBA to enforce the Consent Order issued against SunTrust by the FBA on April 13, 2011;


(n)	Any liability based upon obligations created by this Consent

Judgment;

(o) Any liability under FIRREA for any conduct, statements or omissions that are:

(i) Made or undertaken in connection with either (a) the creation, formation, transfer, sale, conveyance, or securitization of mortgage- backed securities, derivatives, collateralized debt obligations and credit default

swaps, or other similar securities or (b) the sale or transfer of mortgage loans

(ii) Made or undertaken by SunTrust or an affiliated entity in its capacity as loan originator, seller, depositor, guarantor, sponsor, securitization trustee, securities underwriter, or any capacity other than as loan servicer, master servicer or subservicer, in connection with the origination (including Covered Origination Conduct), underwriting, due diligence, quality control, valuation, appraisal, pledging, substitution, recording, assignment, or securitization of mortgages, whole loans, mortgage-backed securities, derivatives, collateralized debt obligations and credit default swaps, or other similar securities (except to the extent such conduct is released in Paragraphs 2.c, 3, 4 or 5 and not excluded from this Release in Subsections (a)-(n) of this Paragraph 11);

(iii) Made to or directed at federal governmental entities (except to the extent such conduct is released in Paragraphs 2.a, 3, 4 or 5 and not excluded from this Release in Subsections (a)-(n) of this Paragraph 11); or

(iv) Based on (A) the failure by SunTrust or affiliated entity to pay investors or trustees any sums received by SunTrust or affiliated entity and owed to the investors and trustees with respect to any security, derivatives, or similar investment; (B) the failure by SunTrust or affiliated entity to disclose that it failed to pay investors or trustees any sums received by SunTrust or affiliated entity and owed to investors or trustees with respect to any security, derivatives, or similar investment; (C) the collection by SunTrust or affiliated entity of money or other consideration from loan sellers with respect to loans that SunTrust or an affiliated entity had sold to others or packaged into

a security for sale to others; or (D) the failure by SunTrust or affiliated entity to repurchase loans to the extent that it had a contractual obligation to repurchase.

To the extent that the reservation of FIRREA claims in this subparagraph 11(o) is inconsistent with any other provision of this Release (not including Exhibit J), the reservation of FIRREA claims in this subparagraph 11(o) shall control. This reservation of FIRREA Claims shall not be construed to otherwise limit any other claim that the United States has against SunTrust, to alter the requirements of FIRREA, or to waive any defense available to SunTrust under existing law.

(12) For avoidance of doubt, this Release shall not preclude a claim by any private individual or entity for harm to that private individual or entity, except for a claim asserted by a private individual or entity under 31 U.S.C. § 3730(b) or 12 U.S.C. § 4207 that is subject to this Release and not excluded by Paragraph 11.

(13) SunTrust waives and shall not assert any defenses SunTrust may have to any criminal prosecution or administrative action based on the Covered Conduct that may be based in whole or in part on a contention that, under the Double Jeopardy Clause in the Fifth Amendment of the Constitution or under the Excessive Fines Clause in the Eighth Amendment of the Constitution, this Release bars a remedy sought in such criminal prosecution or administrative action. Nothing in this Paragraph or any other provision of this Consent Judgment constitutes an agreement by the United States concerning the characterization of the Federal Settlement Amount for purposes of Title 26, United States Code (Internal Revenue Code).

(14) SunTrust and any current or former affiliated entity, as well as any current or former director, current or former officer, or current or former employee of any of the

foregoing, but only to the extent that SunTrust and any current or former affiliated entity possesses the ability to release claims on behalf of such individuals or entities, fully and finally releases the United States, the CFPB, and their employees from any claims based on the Covered Conduct to the extent, and only to the extent, that such individual or entity is released from claims based on that Covered Conduct under Paragraphs 2 through 9 of this Release and such claim is not excluded under Paragraph 11 of this Release (including, for the avoidance of doubt, claims by the entities listed in Paragraph 11(k)), as well as claims under the Equal Access to Justice Act, 28 U.S.C. § 2412 based on the United States’ and CFPB’s investigation and prosecution of the foregoing released claims. Nothing herein is intended to release claims for mortgage insurance or mortgage guaranty payments or claims for payment for goods and services, such as incentive payments under HAMP.

(15)

(a) Unallowable Costs Defined: All costs (as defined in the Federal Acquisition Regulations, 48 C.F.R. § 31.205-47) incurred by or on behalf of SunTrust and any current or former affiliated entity (to the extent SunTrust retains liabilities associated with such former affiliated entity), any successor or assign, as well as any current or former director, current or former officer, and current or former employee of any of the foregoing, individually and collectively, in connection with:


(1)	the matters covered by the Consent Judgment;


(2)	the United States’ audits and civil investigations of the

matters covered by the Consent Judgment;


(3)	SunTrust’s investigation, defense, and corrective actions undertaken in response to the United States’ audit(s) and civil investigation(s) in connection with the matters covered by the Consent Judgment (including attorney’s fees);


(4)	the negotiation and performance of the Consent Judgment; and


(5)	the payments SunTrust makes to the United States or others pursuant to the Consent Judgment,


(6)	are unallowable costs for government contracting purposes (“Unallowable Costs”).

(b) Future Treatment of Unallowable Costs: Unallowable Costs will be separately determined and accounted for by SunTrust, and SunTrust shall not charge such Unallowable Costs directly or indirectly to any contract with the United States.

(c) Treatment of Unallowable Costs Previously Submitted for Payment: Within 90 days of the Effective Date of the Consent Judgment, SunTrust shall identify and repay by adjustment to future claims for payment or otherwise any Unallowable Costs included in payments previously sought by SunTrust or any of its affiliated entities from the United States. SunTrust agrees that the United States, at a minimum, shall be entitled to recoup from any overpayment plus applicable interest

and penalties as a result of the inclusion of such Unallowable Costs on previously- submitted requests for payment. The United States reserves its rights to audit, examine, or re-examine SunTrust’s books and records and to disagree with any calculations submitted by SunTrust or any of its affiliated entities regarding any Unallowable Costs included in payments previously sought by SunTrust, or the effect of any such Unallowable Costs on the amount of such payments.

(16) SunTrust agrees to cooperate fully and truthfully with the United States’ and the CFPB’s investigation of individuals and entities not released in this Release. Upon reasonable notice, SunTrust shall encourage, and agrees not to impair, the reasonable cooperation of its directors, officers and employees, and shall use its reasonable efforts to make available and encourage the cooperation of former directors, officers, and employees for interviews and testimony, consistent with the rights and privileges of such individuals.

(17) This Release is intended to be and shall be for the benefit only of the Parties and entities and individuals identified in this Release, and no other party or entity shall have any rights or benefits hereunder.

(18) Each party shall bear its own legal and other costs incurred in connection with this matter, including the preparation and performance of this Consent Judgment.

(19) Each party and signatory to this Consent Judgment represents that it freely and voluntarily enters into the Consent Judgment without any degree of duress or compulsion.

(20) This Release is governed by the laws of the United States. The exclusive jurisdiction and venue for any dispute arising out of matters covered by this Release is the United States District Court for the District of Columbia. For purposes of construing this

Release, this Release shall be deemed to have been drafted by all the Parties and shall not, therefore, be construed against any party for that reason in any subsequent dispute.

(21) The Consent Judgment constitutes the complete agreement between the Parties as to the matters addressed herein. The Consent Judgment may not be amended except by written consent of the Parties.

(22) The undersigned represent and warrant that they are fully authorized to execute the Consent Judgment on behalf of the Parties indicated below.

(23) The Consent Judgment may be executed in counterparts, each of which constitutes an original and all of which constitute one and the same Consent Judgment.

(24) This Release is binding on, and inures to the benefit of, SunTrust’s successors, heirs, and assigns.

(25) The Parties may disclose this Release, and information about this Release, to the public at their discretion.

(26) Facsimiles of signatures shall constitute acceptable, binding signatures for purposes of this Release.

(27) Whenever the words “include,” “includes,” or “including” are used in this Release, they shall be deemed to be followed by the words “without limitation.”

EXHIBIT G

STATE RELEASE


I.	Covered Conduct

For purposes of this Release, the term “Covered Conduct” means residential mortgage loan servicing, residential mortgage loan origination services, and residential mortgage foreclosure services, as defined below. For the purposes of this Release, Released Parties shall include SunTrust Mortgage, Inc. (“SunTrust”), including SunTrust’s current and former parent corporations or other forms of legal entities, direct and indirect subsidiaries, brother or sister corporations or other forms of legal entities, divisions or affiliates, and the predecessors, successors, and assigns of any of them, as well as the current and former directors, officers, and employees of any of the foregoing.

For purposes of this Section I only, the term Released Parties includes agents (including, without limitation, third party vendors) of the Released Parties and the Released Parties are released from liability for the covered conduct acts of their agents (including, without limitation, third-party vendors). This Release does not release the agents (including, without limitation, third-party vendors) themselves for any of their conduct. For purposes of this Release, the term “residential mortgage loans” means loans secured by one- to four- family residential properties, irrespective of usage, whether in the form of a mortgage, deed of trust, or other security interest creating a lien upon such property or any other property described therein that secures the related mortgage note.

For purposes of this Release, the term “residential mortgage loan servicing” means all actions, errors or omissions of the Released Parties, arising out of or relating to servicing (including subservicing and master servicing) of residential mortgage loans from and after

the closing of such loans, whether for the Released Parties’ account or for the account of others, including, but not limited to, the following: (1) Loan modification and other loss mitigation activities, including, without limitation, extensions, forbearances, payment plans, short sales and deeds in lieu of foreclosure, and evaluation, approval, denial, and implementation of the terms and conditions of any of the foregoing; (2) Communications with borrowers relating to borrower accounts, including, without limitation, account statements and disclosures provided to borrowers; (3) Handling and resolution of inquiries, disputes or complaints by or on behalf of borrowers; (4) Collection activity related to delinquent borrower accounts; (5) Acceptance, rejection, application or posting of payments made by or on behalf of borrowers, including, without limitation, assessment and collection of fees or charges, placement of payments in suspense accounts and credit reporting; (6) Maintenance, placement or payment (or failure to make payment) of any type of insurance or insurance premiums, or claims activity with respect to any such insurance; (7) Payment of taxes, homeowner association dues, or other borrower obligations, and creation and maintenance of any escrow accounts; (8) Use, conduct or supervision of vendors, agents and contract employees, whether affiliated or unaffiliated, including, without limitation, subservicers and foreclosure and bankruptcy attorneys, in connection with servicing, loss mitigation, and foreclosure activities; (9) Adequacy of staffing, training, systems, data integrity or security of data that is related to the servicing of residential mortgage loans, foreclosure, bankruptcy, and property sale and management services; (10) Securing, inspecting, repairing, maintaining, or preserving properties before and after foreclosure or acquisition or transfer of title; (11) Servicing of residential mortgage loans involved in

bankruptcy proceedings; (12) Obtaining, executing, notarizing, endorsing, recording, providing, maintaining, registering (including in a registry system), and transferring promissory notes, mortgages, or mortgage assignments or other similar documents, or transferring interests in such documents among and between servicers and owners, and custodial functions or appointment of officers relating to such documents; (13) Decisions on disposition of residential mortgage loans, including, without limitation, whether to pursue foreclosure on properties, whether to assert or abandon liens and other claims and actions taken in respect thereof, and whether to pursue any particular loan modification or other form of loss mitigation; (14) Servicing of residential mortgage loans of borrowers who are covered by federal or state protections due to military status; (15) Licensing or registration of employees, agents, vendors or contractors, or designation of employees as agents of another entity; (16) Quality control, quality assurance, compliance, audit testing, oversight, reporting, or certification or registration requirements related to the foregoing; and (17) Trustee functions related to the servicing of residential mortgage loans.

For purposes of this Release, the term “residential mortgage foreclosure services” means all actions, errors or omissions of the Released Parties arising out of or relating to foreclosures on residential mortgage loans, whether for the Released Parties’ own account or for the account of others, including, but not limited to, the following: (1) Evaluation of accounts for modification or foreclosure referral; (2) Maintenance, assignment, recovery and preparation of documents that have been filed or otherwise used to initiate or pursue foreclosures, and custodial actions related thereto; (3) Drafting, review, execution and notarization of documents (including, but not limited to, affidavits, notices, certificates, substitutions of trustees, and assignments)

prepared or filed in connection with foreclosures or sales of acquired properties, or in connection with remediation of improperly filed documents; (4) Commencement, advancement and finality of foreclosures, including, without limitation, any issues relating to standing, fees, or notices; (5) Acquisition of title post-foreclosure or in lieu of foreclosure; (6) Pursuit of pre- and post-foreclosure claims by the Released Parties, including, without limitation, the seeking of deficiency judgments when permitted by law, acts or omissions regarding lien releases, and evictions and eviction proceedings; (7) Management, maintenance, and disposition of properties in default or properties owned or controlled by the Released Parties, whether prior to or during the foreclosure process or after foreclosure, and executing, notarizing, or recording any documents related to the sale of acquired properties; (8) Quality control, quality assurance, compliance, audit testing, oversight, reporting, or certification or registration requirements related to the foregoing; and (9) Trustee functions related to the foreclosure of residential mortgage loans.

For purposes of this Release, the term “residential mortgage loan origination services” means all actions, errors or omissions of the Released Parties arising out of or relating to the origination of, or the assistance in the origination of, residential mortgage loans, or the purchasing of residential mortgage whole loans, including, but not limited to, the following: (1) Advertising, solicitation, disclosure, processing, review, underwriting, closing and funding of borrower residential mortgage loans or lending services, including, without limitation, the charges, terms, pricing, and conditions of such loans or lending services; (2) Approving or denying loan applications; (3) Recommendation, offering or provision of loan products, including, without limitation, whether such products’ features or terms and conditions were

appropriate for a particular borrower; (4) Valuation of the properties used as collateral for such loans, including, without limitation, use of employees, independent and vendor management appraisers, and alternative valuation methods such as AVMs and BPOs; (5) Use, referral, conduct or supervision of, or payment of fees or other forms of consideration to, vendors, agents or contract employees, whether affiliated or unaffiliated, and whether retained by the Bank, borrower or otherwise, including, without limitation, closing agents, appraisers, real estate agents, mortgage brokers, and providers of real estate settlement services; (6) Drafting and execution of residential mortgage loan documents and disclosures and the provision of such disclosures; (7) Obtaining or recording of collateral documents relating to the origination of residential mortgage loans, including, without limitation, use of trustees or designees on mortgages or deeds of trust; (8) Licensing and registration of employees in connection with origination of residential mortgage loans; (9) Quality control, quality assurance, or compliance audit testing, or oversight related to the foregoing; and (10) Communications with borrowers related to the origination of residential mortgage loans.


II.	Release of Covered Conduct

By their execution of this Consent Judgment, the Attorneys General that are parties to this Consent Judgment release and forever discharge the Released Parties from the following: any civil or administrative claim, of any kind whatsoever, direct or indirect, that an Attorney General has or may have or assert, including, without limitation, claims for damages, fines, injunctive relief, remedies, sanctions, or penalties of any kind whatsoever based on, arising out of, or resulting from the Covered Conduct on or before the Effective Date, except for claims and

the other actions set forth in Section IV below (collectively, the “Released Claims”).

This Release does not release any claims against any entity other than the Released Parties as defined in Section I above.


III.	Covenants by SunTrust

1. SunTrust waives and shall not assert any defenses SunTrust may have to any criminal prosecution based on the Covered Conduct that may be based in whole or in part on a contention that, under the Double Jeopardy Clause in the Fifth Amendment of the Constitution or under the Excessive Fines Clause in the Eighth Amendment of the Constitution, this Release bars a remedy sought in such criminal prosecution.

2. SunTrust agrees to cooperate with an Attorney General’s criminal investigation of individuals and entities not released in this Release. For purposes of this covenant, cooperation shall not include any requirement that SunTrust waive the attorney-client privilege or any other applicable privileges or protection, included but not limited to the attorney work product doctrine. Upon reasonable notice, SunTrust agrees not to impair the reasonable cooperation of its directors, officers and employees, and shall use its reasonable efforts to make available and encourage the cooperation of former directors, officers, and employees for interviews and testimony, consistent with the rights and privileges of such individuals.


IV.	Claims and Other Actions Exempted from Release

Notwithstanding the foregoing and any other term of this Consent Judgment, the following claims are hereby not released and are specifically reserved:

1. Securities and securitization claims based on the offer, sale, or purchase of securities, or other conduct in connection with investors or purchasers in or of securities, regardless of the factual basis of the claim, including such claims of the state or state entities as an owner, purchaser, or holder of whole loans, securities, derivatives or similar investments, including, without limitation, mortgage backed securities, collateralized debt obligations, or structured investment vehicles, and including, but not limited to, such claims based on the following:

a. the creation, formation, solicitation, marketing, assignment, transfer, offer, sale or substitution of securities, derivatives, or other similar investments, including, without limitation, mortgage backed securities, collateralized debt obligations, collateralized loan obligations, or structured investment vehicles;

b. representations, warranties, certifications, or claims made regarding such securities or investments, such as representations, warranties, certifications or claims regarding origination, funding, and underwriting activities, and including the eligibility, characteristics, or quality of the mortgages or the mortgagors;

c. the transfer, sale, conveyance, or assignment of mortgage loans to, and the purchase and acquisition of such mortgage loans by, the entity creating, forming and issuing the securities, derivatives or other similar investments relating to such mortgage loans;

d. all servicing-, foreclosure-, and origination-related conduct, but solely to the extent that such claims are based on the offer, sale, or purchase of securities,

or other conduct in connection with investors or purchasers in or of securities; and

e. all Covered Conduct, but solely to the extent that such claims are based on the offer, sale, or purchase of securities, or other conduct in connection with investors or purchasers in or of securities.

For avoidance of doubt, securities and securitization claims based on the offer, sale, or purchase of securities, or other conduct in connection with investors or purchasers in or of securities, that are based on any source of law, including, but not limited to, false claims acts or equivalent laws, securities laws, and common law breach of fiduciary duty, are not released.

2. Claims against a trustee or custodian or an agent thereof based on or arising out of the conduct of the trustee, custodian or such agent related to the pooling of residential mortgage loans in trusts, mortgage backed securities, collateralized debt obligations, collateralized loan obligations, or structured investment vehicles, including, but not limited to, the performance of trustee or custodial functions in such conduct.

3. Liability based on SunTrust’s obligations created by this Consent Judgment.

4. Claims against Mortgage Electronic Registration Systems, Inc. or MERSCORP, INC.

5. Claims arising out of alleged violations of fair lending laws that relate to discriminatory conduct in lending.

6. Claims of state, county and local pension or other governmental funds as investors (whether those claims would be brought directly by those pension or other governmental funds or by the Office of the Attorney General as attorneys representing the

pension or other governmental funds).

7. Tax claims, including, but not limited to, claims relating to real estate transfer taxes.

8. Claims of county and local governments and claims or disciplinary proceedings of state regulatory agencies having specific regulatory jurisdiction that is separate and independent from the regulatory and enforcement jurisdiction of the Attorney General.

9. Criminal enforcement of state criminal laws.

10. Claims of county recorders, city recorders, town recorders or other local government officers or agencies (or, for Hawaii only, where a statewide recording system is applicable and operated by the state, claims by Hawaii; and for Maryland, where the recording system is the joint responsibility of the counties or Baltimore City and the state, claims of the counties or Baltimore City and the state), for fees relating to the recordation or registration process of mortgages or deeds of trust, including assignments, transfers, and conveyances, regardless of whether those claims would be brought directly by such local government officers or agencies or through the Office of the Attorney General as attorneys representing such local government officers or agencies.

11. Claims and defenses asserted by third parties, including individual mortgage loan borrowers on an individual or class basis.

12. Claims seeking injunctive or declaratory relief to clear a cloud on title where the Covered Conduct has resulted in a cloud on title to real property under state law; provided, however, that the Attorneys General shall not otherwise take actions seeking to invalidate past mortgage assignments or foreclosures in connection with loans serviced and/or owned by the

Released Parties. For the avoidance of doubt, nothing in this paragraph 12 releases, waives or bars any legal or factual argument related to the validity of past mortgage assignments or foreclosures that could be made in support of claims not released herein, including, without limitation, all claims preserved under paragraphs 1 through 13 of Section IV of this Release.

13. Authority to resolve consumer complaints brought to the attention of SunTrust for resolution outside of the monitoring process, as described in Section H of the Enforcement Terms (Exhibit E).

EXHIBIT H

[RESERVED]

EXHIBIT I

This Exhibit I is an Addendum to Exhibits D and D-1

The Federal Parties, the State Parties, and Defendant, have agreed to enter into the Consent Judgment. Capitalized terms used herein but not defined herein have the meanings assigned to them in the relevant portion of or exhibit to the Consent Judgment.

In addition to the terms agreed elsewhere in the Consent Judgment, the Parties agree to the following:

This Exhibit I amends and modifies the terms and provisions of Exhibits D and D-1. For clarity, the terms agreed to in this Exhibit are in addition to, and not in lieu of terms agreed elsewhere in the Consent Judgment and its exhibits. To the extent that this Exhibit I and Exhibits D or D-1 or other provisions of the Consent Judgment have inconsistent or conflicting terms and provisions, this Exhibit I shall be controlling and shall govern the agreement among the Parties. Whenever Exhibits D or D-1 are referenced in this Exhibit I or elsewhere in the Consent Judgment and exhibits, it shall mean Exhibits D or D-1 as amended and modified by this Exhibit I. References to Servicer in Exhibits D, D-1, and I shall mean SunTrust Banks, Inc. including its affiliates and subsidiaries (“Servicer” or “SunTrust”).


2.	Pursuant to Paragraph 3 of the Consent Judgment, Defendant shall pay a Direct Payment Settlement Amount of $50,000,000, by electronic funds transfer within ten days of receiving notice that the escrow account referenced in Paragraph 3 of the Consent Judgment is established or within ten days after the entry of the Consent Judgment (“Effective Date”), whichever is later.


3.	Defendant shall be responsible for $500,000,000 in consumer relief as set forth in Exhibit D and credited pursuant to the terms of Exhibits D and D-1.


a.	The Servicer’s $500,000,000 consumer relief obligation will be allocated as follows:


i.	The Servicer will provide a minimum of $187,500,000 in creditable relief to consumers who meet the eligibility criteria in the forms and amounts described in Paragraphs 1 or 2 of Exhibit D and/or Paragraph 6 of Exhibit I (“1st/2nd Lien Principal Reduction Obligation”). No less than

$93,750,000 of the 1st/2nd Lien Principal Reduction Obligation will come from consumers who meet the eligibility criteria described in Paragraph 1 of Exhibit D (“1st Lien Principal Reduction Obligation”).


ii.	The Servicer will provide a minimum of $25,000,000 in creditable relief to consumers who meet the eligibility criteria in the forms and amounts described in Paragraph 9 of Exhibit D and/or in Paragraph 5 of Exhibit I

(“Refinancing Obligation”).


iii.	The Servicer may not receive credit of more than $100,000,000 for relief provided to consumers who meet the eligibility criteria in the forms and amounts described in Paragraph 4 of Exhibit I (“Lending Cap”).


b.	Notwithstanding anything to the contrary in the Consent Judgment or the Exhibits thereto, Defendant will be obligated to make the payments specified in Paragraph 10.d of Exhibit D in the event and to the extent that Servicer or its successors in interest do not complete the Consumer Relief Requirements set forth in Exhibit D.

The releases contained in Exhibits F and G of the Consent Judgment shall become effective upon payment of the Direct Payment Settlement Amount by Defendant. The United States and any State Party may withdraw from the Consent Judgment and declare it null and void with respect to that party and all released entities if the Consumer Relief Requirements (as that term is defined in Exhibit F (Federal Release)) required under this Consent Judgment are not completed within the time specified and any payment required under Paragraph 10.d of Exhibit D is not made within thirty days of written notice by the party. However, the United States may not void the terms and releases set forth in Exhibits J and K.


4.	Low to Moderate Income and Hardest Hit Area Lending Program (“Lending Program”).

The Servicer may establish mortgage origination programs satisfying the conditions set forth below, and will receive credit against its Lending Cap in the manner and form set forth below.


a.	Eligibility Criteria. The Eligibility Criteria for the Lending Program are the following:

Purchase-money mortgages originated after January 1, 2014 to credit- worthy borrowers whose income is no greater than 80% of the area median income (“AMI”) as calculated in accordance with the parameters used by the U.S. Department of Housing and Urban Development and who (1) are first time homebuyers or (2) who are buying homes in hardest hit areas as set forth in Appendix A (“Hardest Hit Areas”) or (3) who have previously lost a home to foreclosure or short sale; and


ii.	The borrower intends to occupy the home. The Servicer may rely on the borrower’s stated intent to occupy the home when evidencing the borrower’s intent to occupy.


b.	Crediting. Credits for relief provided under this program will be calculated according to the following terms:


i.	The Servicer will receive a $10,000 credit against Defendant's consumer relief obligation for each eligible mortgage loan originated by the Servicer.


ii.	The Servicer will receive an additional 25% credit for any eligible mortgage loan made by the Servicer to a borrower who is purchasing a home in the Hardest Hit Areas.


iii.	The Servicer will receive an additional 25% credit for any eligible mortgage loan made by the Servicer to a borrower between January 1, 2014 and January 1, 2015


c.	Borrower Outreach Program in Hardest Hit Areas.

The Servicer will in good faith take steps substantially similar to some of the examples described below to increase borrower awareness of the Lending Program and principal reduction loss mitigation options available pursuant to this Agreement in Hardest Hit Areas. The following are illustrative examples of the steps the Servicer may take to satisfy this requirement: partner and/or co-brand with reputable housing assistance or non-profit consumer or housing counseling agencies of its choosing to increase borrower awareness of the Lending Program; sponsor borrower outreach events targeted at Hardest Hit Areas; provide information and/or training regarding the Lending Program to the Servicer’s origination agents who are active in Hardest Hit Areas; provide information and/or training regarding the Lending Program and principal reduction loss mitigation options to reputable housing assistance or non-profit consumer or housing counseling agencies that are active in Hardest Hit Areas; and/or increase the Servicer’s advertising efforts targeted to reach potential borrowers living in or considering home purchase financing in Hardest Hit Areas.

ii.

The Servicer must employ one or more activities in satisfaction of the requirement in Paragraph 4.c.i., above, on a scheduled and sustained basis unless and until it (1) reports to the Monitor that it has fulfilled its total consumer relief obligation, or (2) informs the Monitor in writing that it no longer intends to seek credit for activities under the Lending Program or for bonus credit associated with 1st and 2nd lien principal reduction modifications in Hardest Hit Areas. The Servicer may not receive credit under the Lending Program or receive the bonus associated with 1st and 2nd lien principal reduction modifications in Hardest Hit Areas for any activity initiated after the date on which it informs the Monitor of its intention to no longer seek credit for activities under the Lending Program.

iii.

The Monitor will evaluate and certify the Servicer’s compliance with paragraph 4.c.i. above using a methodology similar to the methodology employed to determine the Servicers’ compliance with the Mandatory Relief Requirements set forth in Exhibit E to the Consent Judgment entered in United States, et al. v. Bank of America Corp., et al., No. 12- civ-00361-RMC (April 4, 2012) (Docket Nos. 10-14).

Additional Rate Reduction Programs. The Servicer may establish programs satisfying the conditions set forth below, and rate relief provided through these programs will receive credit against its Refinancing Obligation in the manner as described below. Except where specified below, the calculation of credit for these programs will be consistent with Paragraph 9 of Exhibit D. In accordance with Paragraph 9.b of Exhibit D, Servicer will not be required to solicit or offer Rate Reduction Program relief on loans under circumstances that, in the reasonable judgment of the Servicer, would result in TDR treatment.


a.	Rate Relief Program.


i.	Eligibility Criteria. The Eligibility Criteria for the Rate Relief Program are the following:


A.	The borrower’s LTV is greater than 100%, or is greater than 80% if the borrower would not have qualified for a refinance under the Servicer’s generally-available refinance programs as of June 30, 2013;


B.	The loan to be modified is a first lien and was originated prior to January 1, 2009;


C.	The borrower is current on the loan, and has not had more than one delinquency of at most 30 days within the prior 12 months; and


D.	The current interest rate on the loan is at least 5.25%, including but not limited to interest-only loans.


E.	Borrowers need not have underwriting based on income.


ii.	Relief. Borrowers meeting the Eligibility Criteria will be offered the following:


A.	A new fixed rate mortgage at or below current conforming rates (as indicated by the Primary Mortgage Market Survey Rate (“PMMS”) at the time the modification or refinance is evaluated);


B.	Minimum payment relief of $100/month; and


C.	No future interest rate increases, changes in term, or additional costs to the borrower.


D.	Relief may be provided through a modification or refinance.


b.	Payment Shock Relief Program.


i.	Eligibility Criteria. The same eligibility criteria in Paragraph 9.a of Exhibit D, shall

be the Eligibility Criteria for the Payment Shock Relief Program, except as follows:


A.	The subject loan is a first lien that is at imminent risk of default, consistent with Paragraph 1.c. of Exhibit D, due to being an interest- only loan or other high-risk mortgage product that may reset, resulting in a payment shock to the borrower.


B.	The current interest rate may be at or below the greater of 5.25% or PMMS plus 100 basis points.


C.	Borrowers need not have underwriting based on income.


ii.	Relief. Borrowers meeting the Eligibility Criteria for this program will be offered the following:


A.	A fully amortizing 30-year loan with a fixed interest rate no greater than PMMS plus 75 basis points; or a fully amortizing 30-year, 1- year LIBOR ARM at a 175 basis point margin.


B.	Relief may be provided through a modification or refinance.


iii.	For purposes of calculating credit under Paragraph 9 of Exhibit D:


A.	Permanent margin reductions for post-modification 30-year ARMs will be treated consistent with Paragraph 9.e of Exhibit D.


c.	Second Lien Rate Reduction Program


i.	Eligibility Criteria. The same eligibility criteria in Paragraph 9.a of Exhibit D, applied to second liens, shall be the Eligibility Criteria for the Second Lien Reduction Program, except as follows:


A.	The program shall apply to Servicer owned second lien mortgage loans;


B.	The combined LTV must be greater than 100%;


C.	The current interest rate is at least 5.25%.


ii.	Relief. Borrowers meeting the Eligibility Criteria for this program will be offered a modification or refinance that meets the requirements set forth in Paragraphs 9.c and 9.d of Exhibit D, as applied to second liens, except that the Servicer will reduce the borrower’s rate by at least 200 basis points. However, the Servicer will not be obligated to reduce the borrower’s rate to below 4%.


iii.	Credit. Credits for relief provided under this program will be calculated at 90% of the calculation set forth in Paragraph 9.e of Exhibit D. The amount of credit

available under this program will be capped at $5 million of the total Refinancing Obligation.


d.	Notwithstanding the success or failure of a Refinancing Program in putting borrowers in sustainable mortgages, the Servicer shall be obligated to satisfy the commitment set forth in Paragraph 3 above; failure to satisfy the commitment set forth in Paragraph 3 shall result in an additional payment as set forth in Paragraph 10 of the Consumer Relief Requirements contained in Exhibit D.


6.	Second Lien Principal Modification Program


a.	Eligibility Criteria. For purposes of crediting second lien principal reduction modifications under Paragraph 2 of Exhibit D, the eligibility criteria may also include:


i.	A current second lien that is at imminent risk of default due to being, among other things, an interest-only loan, delinquent senior lien, or other high-risk mortgage product that may reset, resulting in a payment shock to the borrower. Servicer need not require income verification for these borrowers.


b.	Provided a second lien modification is otherwise creditable under this Paragraph 6, the Servicer will receive credit for modifications to loans where personal liability has been discharged in Chapter 7 bankruptcy, the borrower continues to occupy the property, the borrower remains current on payments post-discharge, and the underlying lien has not been extinguished.


c.	Relief. Borrowers may receive 100% principal forgiveness on their second liens except for situations where the Servicer owns or services the first lien loan on the same property and knows the first lien is to be foreclosed on or is subject to a foreclosure sale in the next 30 days.


d.	Credit. Credits for relief provided under this program will be calculated in accordance with the provisions set forth in Paragraph 2 of Exhibit D, and in accordance with the crediting formula set forth in Paragraph 2.i of Exhibit D-1.


7.	Borrower Solicitation. The Servicer will solicit all borrowers in its loan portfolio who are eligible for the Rate Relief Program as of the Effective Date (“Eligible Borrowers”). The Servicer will solicit as follows:

Such solicitation shall commence as soon as reasonably practicable following the Effective Date and solicitations shall be sent to Eligible Borrowers in accordance with the timeline set forth in the Servicer’s work plan until the Servicer reports to the Monitor that it has satisfied its Refinancing Obligation. Any borrower who accepts an offer made under a Rate Relief Program within 3 months from the date the Servicer sends the borrower a refinance or modification agreement (which shall be the first calendar day

of the month following the date the refinance or modification agreement is first sent pursuant to Paragraph 7.c.i below) will receive the relief. Further, any borrower who accepts a modification offer made under the Rate Relief Program within 180 days of the offer being made shall, unless the SunTrust has, as of the date of the offer, exceeded their obligations under Paragraph 3 by $60,000,000, receive the modification. The minimum solicitation period for an offer made under a Rate Relief Program shall be 3 months from the date the solicitation commences (which shall be the first calendar day of the month following the date written communication is first sent pursuant to Paragraph 7.c.i below). Upon commencement of this solicitation of any individual Eligible Borrower, the Servicer shall complete all of the solicitation requirements described below until the earlier of the following occurs: (a) exhaustion of relevant solicitation steps described in Paragraph 7.c below, without success, or (b) proper acceptance or denial of an Eligible Borrower for a Rate Relief Program (the “Borrower Solicitation Period”).

The Borrower Solicitation Requirements shall not apply to solicitations for modification programs other than Rate Relief Program (which may be conducted contemporaneously), to solicitations to a particular Eligible Borrower that occur after that particular Eligible Borrower has been previously solicited, in compliance with this agreement, to Eligible Borrowers under the Rate Relief Program who (1) accepted another home retention option after the Effective Date of this Consent Judgment, or (2) who accepted a non-home retention option prior to the date the Servicer made a final determination that the borrower was an Eligible Borrower provided that the borrower was informed about and offered a modification under the Rate Reduction Program. Additionally, the Servicer is not required to solicit Eligible Borrowers whose loans are no longer serviced by the Servicer at the time the Servicer identifies the Eligible Borrower for solicitation.


c.	Requirements for solicitations under this paragraph shall include:

The Servicer will issue an initial proactive correspondence letter to borrowers advising them they are eligible for the Rate Relief Program (“Proactive Correspondence”). If the borrower expresses an interest in the Rate Relief Program, Servicer shall send the pre-approved refinance or modification agreement (as appropriate) to the borrower for execution. These packages will be sent via overnight delivery services ( e.g. , Federal Express) with return receipt/delivery confirmation.


ii.	If the borrower does not return the agreement after being sent the package, the Servicer will call the Eligible Borrower.


iii.	If the Servicer is not successful in communicating with the borrower following the initial Proactive Correspondence, the Servicer will send a second Proactive Correspondence on or about 30 days after the mailing of the initial Proactive Correspondence.


iv.	The Servicer, as part of any contact with borrowers, whether by telephone, mail or otherwise, shall (1) advise borrowers that they may be eligible for a Rate Relief

Program; and (2) clearly describe the Rate Relief Program being offered as well as the documents required to be submitted by the borrower and state what other information, if any, the Servicer needs to complete the analysis.


8.	Other Matters.


a.	Menu Items. With respect to Exhibit D and D-1 Table 1 “Credit Towards Settlement,” the following modification and amendments shall apply:

i. Exhibit D, Paragraph 1.b is amended by replacing “85%” with “65%”.

ii. Exhibit D, Paragraph 1.d is amended by replacing “100%” with “90%”. iii.Exhibit D, Paragraphs 1.e, 1.f, and 1.g are amended as follows:


A.	By replacing all references to LTV of 120% with LTV of 110%; and


iv.	Exhibit D, Paragraph 1.e is amended as follows: By adding a subparagraph 1.e.iii, which shall read: “When the borrower’s pre-modification LTV ratio is below 100%, then the borrower’s post-modification LTV shall not be lower than 80%.”


v.	Exhibit D, Paragraph 1.f applies to the following categories of loans:


A.	Regardless of delinquency, modifications made to borrowers in an active bankruptcy; or for borrowers who have received Chapter 7 bankruptcy discharges of personal liability for the loans, who continue to occupy the properties, who remain current on payments, and where the underlying lien has not been extinguished;


B.	Regardless of delinquency, modifications made to borrowers involved in active litigation;


C.	Modifications made to borrowers who are current (less than 30 days delinquent) on a mortgage modification made prior to the terms of this Agreement or that does not meet the terms set forth in this Agreement.

vi.

Exhibit D, Paragraph 1.h is amended to read as follows: “Following Servicer’s Effective Date, Servicer will modify a second lien mortgage loan consistent with the treatment waterfall described below, and as modified by Exhibit I, within a reasonable time to facilitate a Participating Servicer’s modification of a first lien mortgage owned by the Participating Servicer, provided that the Participating Servicer who owns the first lien mortgage contacts Servicer regarding the second lien mortgage loan that Servicer owns and provides reasonably satisfactory documentation of the first lien mortgage actively being considered for modification. Credit for such second lien mortgage loan write

downs shall be credited in accordance with the second lien percentages and cap described in Table 1, Section 2, as amended by Exhibit I. Additionally, Servicer will receive credit for modified first lien mortgages that qualify for its proprietary modification processes regardless of whether the owner of the second lien mortgage loan modifies the second lien.”

vii.

Exhibit D Paragraph 9.c is amended as follows by adding subparagraph 9.c.i.4: For loans with current interest rates above 5.25% or PMMS +100 basis points, whichever is greater, the interest rate may be reduced for 7 years. After the 7 year fixed interest rate period, the rate will be set at the then-current 1-year LIBOR plus 175 basis points, subject to a maximum rate increase of 2% in the first year (the maximum rate is based off of the fixed rate that applied during the 7-year term), 2% in any year following the first year, and a maximum 5% total increase for the life of the loan (the maximum rate is based off of the fixed rate that applied during the 7-year term). The relief described herein may also be offered in Exhibit I Paragraphs 5.a.ii.A, 5.b.ii.A, and 5.c.ii.

viii.

Exhibit D Paragraph 9.c is amended as follows by adding subparagraph 9.c.i.5: For loans with current interest rates below 5.25% or PMMS +100 basis points, the interest rate may be reduced to obtain at least a 25 basis point interest rate reduction or $100 payment reduction in monthly payment, for a period of 7 years. After the 7 year fixed interest rate period, the rate will be set at the then-current 1-year LIBOR plus 175 basis point, subject to a maximum rate increase of 2% in the first year (the maximum rate is based off of the fixed rate that applied during the 7-year term), 2% in any year following the first year, and a 5% total increase for the life of the loan (the maximum rate is based off of the fixed rate that applied during the 7-year term). The relief described herein may also be offered in Exhibit I Paragraph 5.b.ii.A.


ix.	Exhibit D Paragraph 9.e is amended as follows by adding Paragraph 9.e.3: If the new rate applies for 7 years, the multiplier shall be 6.

Exhibit D, Paragraph 9.f is amended to read as follows: “Additional dollars spent by Servicer on the refinancing program beyond Servicer's required commitment shall be credited against Servicer's overall consumer relief obligation, provided that any such credit shall not reduce or count against Servicer's minimum 1st Lien Principal Reduction Obligation or “1st/2nd Lien Principal Reduction Obligation.”.

xi.

The Servicer will receive credit for activities set forth in Paragraph 9 of Exhibit D and Paragraph 5 of Exhibit I for loans discharged in Chapter 7 bankruptcy provided the Servicer maintains a valid lien on the property, the borrower remains in the home, the borrower remains current on payments post-discharge, and the loss mitigation activity is otherwise creditable under Paragraph 9 of Exhibit D or Paragraph 5 of Exhibit I.

xii.

Exhibit D, Paragraph 10.a is amended to read as follows: “For the consumer relief and refinancing activities imposed by this Agreement, Servicer shall be entitled to receive credit against Servicer’s outstanding settlement commitments for activities taken on or after Servicer's start date, July 1, 2013 (such date, the “Start Date”), including without limitation any creditable activity that occurred before the completion and approval of any Work Plan.”

xiii.

Exhibit D, Paragraph 10.b is amended to read as follows: “Servicer shall receive an additional 25% credit against Servicer’s outstanding settlement commitments for any first or second lien principal reduction, any amounts credited pursuant to the refinancing program, and any amounts credited pursuant to the Lending Program between January 1, 2014 and January 1, 2015. This early incentive credit is cumulative with other credits (including Hardest Hit).”


xiv.	Exhibit D, Paragraph 10.c is amended to read as follows: “Servicer shall complete 75% of its Consumer Relief Requirement credits within two years of the Effective Date.”

xv.

Exhibit D, Paragraph 10.d is amended to read as follows: “If Servicer fails to meet the commitment set forth in these Consumer Relief Requiremenst within three years of the Effective Date, Servicer shall pay an amount equal to 125% of the unmet commitment amount; except that if Servicer fails to meet the two year commitment noted above, and then fails to meet the three year commitment, the Servicer shall pay an amount equal to 140% of the unmet three-year commitment amount; provided, however, that if Servicer must pay any Participating State for failure to meet the obligations of a state- specific commitment to provide Consumer Relief pursuant to the terms of that commitment, then Servicer's obligation to pay under this provision shall be reduced by the amount that such a Participating State would have received under this provision and the Federal portion of the payment attributable to that Participating State. The purpose of the 125% and 140% amount is to encourage Servicer to meet its commitments set forth in these Consumer Relief Requirements.”


xvi.	Exhibit D-1, Paragraphs 1 and 2 Credit Caps are deleted, except that the cap on “forgiveness of forbearance amounts on existing modification” will remain 12.5%.


xvii.	Exhibit D-1, Paragraph 3 Credit Cap is amended by replacing “5%” with “10”.


xviii.	Exhibit D-1, Footnote 2 is amended to read as follows: “Credit for all modifications is determined from the date the modification is approved (the date on which the Servicer decides to offer the modification to the borrower) or communicated to the borrower. No credits will be credited unless the payments on the modification are current as of 90 days following the

implementation of the modification, including any trial period, or unless the borrower is not current at day 90 but subsequently becomes current prior to day 180. However, if the failure to make payments on the modification within the 90 day period is due to unemployment or reduced hours, the Servicer will receive credit provided that Servicer has reduced the principal balance on the loan. Eligible Modifications will include any modification that is completed on or after the Start Date, as long as the loan meets the criteria set forth in the preceding sentences of footnote 2.”


xix.	The Servicer will receive an additional 25% credit for any first or second lien principal reduction modifications made, pursuant to Paragraphs 1 and 2 of Exhibit D and Paragraph 6 of Exhibit I, to borrowers in Hardest Hit Areas. This credit is conditioned on Servicer’s satisfaction of the outreach requirements as set forth in Paragraph 4.C.iii

Exhibit J

EXHIBIT J – RELEASE WITH RESPECT TO CERTAIN CLAIMS ARISING FROM SUNTRUST’S FHA ORIGINATION, UNDERWRITING AND QUALITY CONTROL OF FEDERAL HOUSING ADMINISTRATION (FHA)-INSURED MORTGAGES

In addition to the terms set forth in Exhibit F, the United States of America, acting through the United States Department of Justice and on behalf of the Department of Housing and Urban Development (“HUD”) (collectively the "United States") and SunTrust Mortgage, Inc. on behalf of itself and its affiliated entities1 (“SunTrust”) (hereafter collectively referred to as "the Parties"), through their authorized representatives, agree upon the following additional terms (Exhibit J Agreement).

TERMS AND CONDITIONS

1. SunTrust shall pay to the United States $418,000,000 (the “Exhibit J Settlement Amount”), plus simple interest on the Settlement Amount at a rate of 2.375% per annum accruing from March 5, 2014 through March 15, 2014, for a total of

$418,271,986, by electronic funds transfer pursuant to written instructions to be provided by the Civil Division of the Department of Justice. Payment of the Exhibit J Settlement Amount shall be no later than 10 days after the Effective Date of this Agreement.

__________

1 The term “affiliated entities” as used here is defined in paragraph 10 of Exhibit F.

2. Subject to the exceptions in Paragraph 3 (concerning excluded claims) below, and conditioned upon SunTrust’s full payment of the Exhibit J Settlement Amount plus the accrued interest, the United States, on behalf of its officers, agencies, and departments (including HUD), releases SunTrust, together with its current and former parent corporations, direct and indirect subsidiaries, divisions, and affiliates agents, attorneys and assigns, as well as any current or former director, current or former officer, and current or former employee of any of the foregoing, individually and collectively, from any civil or administrative monetary claim the United States has under the False Claims Act, 31 U.S.C. §§ 3729-3733; the Financial Institutions Recovery, Reform, and Enforcement Act of 1989, 12 U.S.C. § 1833a; the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812; or the common law theories of breach of contract, payment by mistake, unjust enrichment, and fraud, or any other statute or common law cause of action for civil damages or civil penalties that the Civil Division of the United States Department of Justice has actual and present authority to assert and compromise pursuant to 28 C.F.R. § 0.45(d), for the conduct set forth in Attachment A in connection with its origination, underwriting, quality control, and endorsement of single- family residential mortgage loans insured by the FHA between January 1, 2006 and March 30, 2012 that resulted in claims submitted to HUD on or before September 30, 2013. SunTrust agrees that it engaged in the conduct set forth in Attachment A.

3. Notwithstanding the release given in paragraph 2 of this Release, or any other term of this Exhibit J Agreement, the following claims of the United States are not released by this Exhibit J Agreement.


a.	Any liability arising under Title 26, U.S. Code (Internal Revenue

Code);


b.	Any criminal liability;


c.	Except as explicitly stated in this Release, any administrative liability, including the suspension and debarment rights of any federal agency;


d.	Any liability to the United States (or its agencies) for any conduct other than the conduct set forth in Attachment A;


e.	Any liability based upon obligations created by this Release;


f.	Any liability for personal injury or property damage or for other consequential damages arising from the conduct set forth in Attachment A;

g. Any liability of individuals (including current or former directors, officers, employees, agents, or attorneys of SunTrust) who receive written notification that they are the target of a criminal investigation (as defined in the United States Attorneys’ Manual), are indicted or charged, or who enter into a plea agreement, related to the conduct set forth in Attachment A.

h. Any liability arising from SunTrust’s origination or underwriting of Home Equity Conversion Mortgages under 12 U.S.C. § 1715z-20 or Streamlined Refinances under 12 U.S.C. § 1715n(a)(7);

i. Any liability arising from any claims submitted to HUD on or after October 1, 2013, or from any mortgages endorsed for FHA insurance on or after April 1, 2012;

j. Any liability to the United States arising from, and no setoff

related to amounts paid under this Release shall be applied to any recovery for, false statements, claims, and/or certifications related to unlawful or excessive costs or expenses charged or claimed in connection with foreclosure-related litigation (including foreclosure, bankruptcy, and eviction proceedings), including but not limited to liability arising from inadequate quality control and/or monitoring of such costs or expenses; or

k. Any liability to the United States for the claims and conduct alleged in the following qui tam action and no setoff related to amounts paid under this Release shall be applied to any recovery in connection with that action:

(i) U.S. ex rel. [Sealed] v. [Sealed] ; 12-civ-7199 (S.D.N.Y.) [UNDER SEAL] .

4. SunTrust fully and finally releases the United States, its agencies, officers, agents, employees, and servants, from any claims (including attorney’s fees, costs, and expenses of every kind and however denominated) that SunTrust has asserted, could have asserted, or may assert in the future against the United States, its agencies, officers, agents, employees, and servants, related to the conduct set forth in Attachment A and the United States’ investigation and prosecution thereof.

5. Paragraphs 13, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, and 26 of Exhibit F are incorporated herein by reference into this Exhibit J Agreement and govern the Parties’ rights and obligations with respect to this Release.

Attachment A

Exhibit J

ATTACHMENT A

1. Between January 2006 and March 2012, SunTrust Mortgage, Inc. (SunTrust) was a Direct Endorsement Lender approved by the Federal Housing Administration (FHA) and U.S. Department of Housing and Urban Development (HUD). As a Direct Endorsement Lender, SunTrust was authorized by HUD to originate and underwrite mortgage loans on HUD’s behalf, including determining a borrower’s creditworthiness and whether the proposed loan met all applicable HUD requirements. As a Direct Endorsement Lender, SunTrust was authorized to endorse mortgage loans for HUD insurance without any review of the mortgage application by HUD.

2. In originating, underwriting, and endorsing mortgage loans for FHA insurance, Direct Endorsement Lenders such as SunTrust were required to follow applicable HUD requirements, including those set out in HUD’s Handbooks and Mortgagee Letters.1 With respect to creditworthiness of the proposed borrower, Direct Endorsement Lenders such as SunTrust were required to follow HUD Handbook 4155.1. At a general level, HUD Handbook 4155.1 required Direct Endorsement Lenders such as SunTrust to: (1) evaluate the borrower’s credit history; (2) analyze the borrower’s liabilities; (3) not accept or use certain documentation transmitted by interested parties;

(4) determine the authenticity of faxed documents and portions of certain printouts downloaded from the internet; (5) in some situations, document reasons for approving a mortgage when the borrower has collections accounts or judgments, determine the purpose of recent debts, and/or require sufficient written explanation from the borrower for major indications of derogatory credit; (6) verify certain employment history of the borrower(s); (7) determine the income stability of the borrower(s) and whether the

borrowers’ income level can be reasonably expected to continue for a certain period of time; (8) verify that the borrower has funds to cover the required minimum down payment; (9) document the source of funds used for the required minimum down payment, as well as any closing costs and fees; and (10) if applicable, calculate certain debt and income ratios and compare those ratios to the fixed ratios set by HUD including, as necessary, any compensating factors that might permit deviation from the fixed ratios.

3. Direct Endorsement Lenders such as SunTrust were required to submit certain proposed FHA originations through a HUD-approved Automated Underwriting System (AUS) in conjunction with a tool known as Technology Open to Approved Lenders (TOTAL). According to the FHA’s TOTAL Mortgage Scorecard User Guide, TOTAL evaluated the overall creditworthiness of the applicants based on a number of credit variables. TOTAL also either: (1) approved the mortgage subject to certain conditions, including conditions that the lender validate the information that formed the basis for TOTAL’s determination; or (2) referred the mortgage back to the lender for manual underwriting in accordance with HUD requirements. SunTrust understood that TOTAL’s determination was based on the integrity of the data supplied by the lender. HUD has promulgated requirements regarding how to calculate each data point used by TOTAL.

4. To maintain Direct Endorsement Lender status, Direct Endorsement Lenders such as SunTrust were required to implement and maintain a quality control program in accordance with HUD Handbook requirements for FHA loans. As a Direct Endorsement Lender, SunTrust’s FHA quality control function was required to be

independent of its FHA mortgage origination and underwriting functions. In carrying out

quality control programs, Direct Endorsement Lenders such as SunTrust were required to perform a review of a sample of FHA mortgage loan files and also to review each FHA mortgage loan that went into default within the first six payments, which HUD defines as “early payment defaults” or EPDs. In performing these quality control reviews, Direct Endorsement Lenders such as SunTrust were required to review the mortgage loan file, re-verify certain information, review the soundness of underwriting judgments, document its review and any findings in a quality control review report, and retain the quality control review report for two years.

5. Direct Endorsement Lenders such as SunTrust were required to self-report to HUD all findings that FHA mortgage loans constituted “material violations of FHA or mortgagee requirements and represent an unacceptable level of risk” and all findings of “fraud or other serious violations.” Direct Endorsement Lenders such as SunTrust were also required to take “prompt action to deal appropriately with any material findings.”

6. In the forms HUD-92001-A, Application for FHA Lender Approval, Direct Endorsement Lenders such as SunTrust were required to certify as follows:

I certify that, upon the submission of this application, and with its submission of each loan for insurance or request for insurance benefits, [SunTrust] has and will comply with the requirements of the Secretary of Housing and Urban Development, which include, but are not limited to, the National Housing Act (12 U.S.C. § 1702 et seq. ) and HUD’s regulations, FHA handbooks, mortgagee letters, and Title I letters and policies with regard to using and maintaining its FHA lender approval.

7. Additionally, Direct Endorsement Lenders such as SunTrust were required to submit an Annual Certification stating:

I know, or am in a position to know, whether the operations of [SunTrust] conform to HUD-FHA regulations, handbooks, and policies. I certify that to the best of my knowledge, [SunTrust] conforms to all HUD-FHA regulations necessary to maintain its HUD-FHA approval, and that [SunTrust] is fully responsible for all actions of its employees including those of its HUD-FHA approved branch offices.

or submit a statement to HUD that it was unable to so certify.

8. With respect to each mortgage loan endorsed by SunTrust for FHA insurance, either a SunTrust mortgagee representative or a SunTrust direct endorsement underwriter was required to certify that the mortgage “is eligible for HUD mortgage insurance under the Direct Endorsement program.” For each loan that was approved using an AUS, a SunTrust mortgagee representative was required to certify to “the integrity of the data supplied by [SunTrust] used to determine the quality of the loan [and] that a Direct Endorsement Underwriter reviewed the appraisal.” For each FHA loan that SunTrust approved using manual underwriting, a SunTrust direct endorsement underwriter was required to certify that he or she “personally reviewed the appraisal report (if applicable), credit application, and all associated documents and ha[s] used due diligence in underwriting th[e] mortgage.”

9. For every mortgage loan SunTrust endorsed for FHA insurance, whether through manual underwriting or the use of an AUS, a SunTrust direct endorsement underwriter was required to certify that:

“I, the undersigned, as authorized representative of [SunTrust] at this time of closing of this mortgage loan, certify that I have personally reviewed the mortgage loan documents, closing statements, application for insurance endorsement, and all

accompanying documents. I hereby make all certifications required for this mortgage as set forth in HUD Handbook 4000.4.”

10. Additionally, for each mortgage loan endorsed, a SunTrust direct endorsement underwriter was required to certify, to the best of his or her knowledge, that the information in the loan application was true and correct, that the conditions listed in HUD Form 92900-A or appearing in any outstanding commitment issued under the loan’s case number have been satisfied, that the information used to validate the borrower’s employment, income, and assets was transmitted directly to the lender and did not pass through any third party, and that the proposed loan met the applicable HUD requirements.

11. When a borrower defaults on an FHA-insured loan underwritten and endorsed by a Direct Endorsement Lender such as SunTrust, SunTrust (or, if SunTrust transferred the mortgage or servicing rights after closing, the mortgage holder or servicer) has the option of submitting a claim to HUD to compensate the lender for any loss the lender sustained as a result of the default. As such, once a mortgage loan is endorsed for FHA insurance, HUD bears the risk of the borrower defaulting on that mortgage, which is realized if an insurance claim is submitted.

12. The Department of Justice has investigated SunTrust with regard to its origination, underwriting, quality control and endorsement practices, as well as its submission of certifications, related to certain FHA-insured mortgage loans secured by single-family residential mortgage loans originated between January 1, 2006 and March 31, 2012, and for which claims for FHA insurance benefits had been submitted by September 30, 2013 (the “Released Loans”). The following statements apply to the Released Loans

only.

13. Between January 1, 2006 and March 31, 2012, SunTrust endorsed for FHA mortgage insurance pursuant to the Direct Endorsement Lender Program certain Released Loans that did not meet underwriting requirements contained in HUD’s handbooks and mortgagee letters, and therefore were not eligible for FHA mortgage insurance under the Direct Endorsement Lender Program. As a result of SunTrust’s conduct, HUD-FHA insured certain Released Loans endorsed by SunTrust that were not eligible for FHA mortgage insurance and that HUD-FHA would not otherwise have insured; and HUD consequently incurred losses when it paid insurance claims on those SunTrust-endorsed Released Loans.

14. SunTrust self-reported fewer Released Loans than were required to be reported. Between January 2009 and March 2012, SunTrust’s internal quality control report documented 256 FHA mortgage loans originated by SunTrust with a Level 1 risk grade, which captured material underwriting issues broader than the self-reporting standard set forth in the HUD-FHA guidelines. During this same time period, SunTrust self-reported as materially deficient 11 mortgages to HUD.

15. In October 2009, an internal presentation regarding “broken loans” stated in part that SunTrust underwriters received “less training than those at other mortgage companies.” The presentation also stated that with respect to FHA loans, these “loans are more complicated to underwrite and will likely continue to be scrutinized given the overall reserve situation.”

16. In December 2009, a SunTrust internal presentation listed top causes for broken loans, some of which applied to FHA loans. These included: (1) “Income

Calculation,” described as “[i]ncorrect treatment of different income types (commission, bonus, overtime, alimony) per guidelines”; (2) “AUS Data Integrity,” regarding “key data elements”; (3) failure to condition or properly clear conditions; (4) “Appraisal Issues,” described to include “[f]ield reviews after close showing declining values”; (5) “Asset Documentation” for “gift funds” and “earnest money deposit”; (6) “Credit Policy Clarifications,” related to “Verbal [verification of employment]” and the “FHA [requirement for] 12 consecutive on-time [mortgage] payments; and

(7) Misrepresentations” described as relating to “[f]alsified bank statements,” “W2s/tax returns,” employment status, and the borrower’s intent to occupy the property. The presentation noted, among other things, that it “does not represent a formal data driven root cause analysis, but rather a [subject matter expert] interview methodology to quickly draw directionally correct solutions around root causes and solution accordingly.” The presentation also noted that SunTrust management had designed solutions to correct these problems but failed to complete them “due to multiple demands and shifting priorities.”

17. An internal SunTrust audit report from 2009 that reflects that it was distributed to certain SunTrust management stated, to the extent applicable to SunTrust’s FHA origination and underwriting, that “the system of internal control is ineffective.” The report also stated in part:

Three significant control weaknesses impair the overall system of internal control. The first significant issue is the lack of consistent performance reviews on each underwriter to assess their performance and the quality of underwriting decisions. The second significant issue is the lack of standards over the timing of when loan approval conditions must be cleared (e.g., prior to close vs. at close) and which conditions or tasks must be performed by

the underwriter. The third significant issue is insufficient loan origination/underwriting training due to the lack of instructor-led curriculum, case studies, and annual refresher training. SunTrust Audit Services believes these three control weaknesses are key

catalysts to the high level of errors and loan defects identified in 2009 by the SunTrust Mortgage Quality Control Team.

Regarding the lack of consistent performance reviews on underwriters, the “Management Action Plan” portion of the report stated in part that “[m]anagement agrees with this finding and recognized this weakness mid-2009 when volume prevented Group Underwriting Managers from consistently performing this function. It should be noted that the Group Managers have been performing this type of performance review, but there has been no consistency, no documented policy, and no control to escalate to senior management when resources prevented the activity from occurring.” It further stated that SunTrust would implement “a process control function to ensure appropriate testing is performed.” Management also agreed with the audit finding regarding closing conditions and noted that it had “recently implemented revised documentation and standards for conditioning, and implemented an automated tool to assist with improved consistency and standardization.” With regard to the training issue, the “Management Action Plan” stated that SunTrust was working “to define and build a formal new hire training program for Underwriters, Processors, and Closers” and anticipated completing the program by August 2010, but that “very good, customized training programs take a long time to develop,” and that, therefore, “additional customization of the program is anticipated in 2011.”

18. A July 19, 2010 internal SunTrust presentation stated, to the extent applicable to SunTrust-originated FHA mortgages, that the quality control “error rate is at

an unacceptable level,” with the rate of material errors within target range and significant errors above target range. The presentation further stated that “following a large improvement in 2009, there has been minimal improvement in [the quality control] error

rate in 2010,” that “[s]pecific actions are in development to aggressively address this issue,” and that “stronger focus needs to be placed on [FHA] loans.” To the extent applicable to FHA mortgages, the presentation also stated, in part, that prior to July 2010, the “sampling size and methodology” in SunTrust’s quality control process had been “severely flawed.” The presentation also stated in part that, to the extent applicable to FHA mortgages, the “error rate has been misleading” because the “[c]uring of QC errors was allowed, deflating error rates,” that “[t]his curing is not realistic in a normal population when error detection would occur years later,” that the “classification of Material and Significant is thought to be overly generous with some of the Material errors classified as Significant,” and that SunTrust lacked “a definitive list and pre-established categorization of Material and Significant errors.” The presentation further stated that, to the extent applicable to FHA mortgages, “the effectiveness and work product of the QC team needs to be significantly improved,” and that SunTrust had “corrected” some of the QC issues.

19. A 2010 SunTrust internal audit report of SunTrust’s quality control process, which reflects that it was distributed to certain SunTrust management, stated, to the extent applicable to FHA mortgages, that SunTrust’s “controls need improvement.” The report further stated, to the extent applicable to FHA mortgages, that “[a]lthough Material and Significant defects have been reported at elevated levels for the past several years, the actual volume of defects has been underreported, unclearly defined,

and inconsistently applied.” The report further found, to the extent applicable to FHA mortgages, that SunTrust’s quality control reviews failed to adequately control for “non- sampling error . . . introduced by inconsistent interpretation among QC Analysts, faulty

definitions, misunderstanding, and processing errors.” The report further identified “the lack of sufficient documentation to evidence compliance with . . . HUD quality control requirements.” The management response portion of the report stated, among other things, that SunTrust had been “working to improve the QC process in 2010” and had “implemented several enhancements in recent months.”

20. Another 2010 SunTrust internal audit report that reflects that it was distributed to certain SunTrust management, stated, to the extent applicable to SunTrust’s FHA mortgage origination and underwriting, that “[t]he overall system of internal control

. . . is ineffective,” and further “identified pervasive weaknesses in many controls that . . . impair continuity and consistency of operations and management’s ability to generate high-quality loans.”

21. A 2011 SunTrust internal audit report of SunTrust’s origination and underwriting, which reflects that it was distributed to certain SunTrust management, to the extent applicable to SunTrust’s FHA mortgages, stated, in part, that:

Based on the results of this review, the overall system of internal controls is ineffective. Controls over mortgage origination continue to be weak. Over the past year, there has been an increase in the volume of origination errors and the current level of errors is unacceptable. Since July 2011, the Quality Control (QC) function has reported total error rates on monthly loan production of 36% to 59%. Excessive errors have been identified in appraisals, assets, AUS (automated underwriting system), and VVOE (verbal verification of employment).

The report further found, to the extent applicable to FHA mortgages, that “[e]rror rates in loan originations remain at elevated levels due to significant process changes, insufficient controls, unclear roles and responsibilities, new staff, [and] poor incentive payment administration[,]” and that “QC reviews for February 2012 continue to show no material

improvement[.]” The report included a “Management Action Plan” section in which SunTrust management described the actions that it planned to take in response to the issues raised by the audit report.

22. A SunTrust internal audit report from June 2011, related to the Government Insuring (GI) department, which reflects that it was distributed to certain SunTrust management, stated that the GI department “manages the insuring process on [FHA] loans originated by the Retail and Broker channels.” In the “Overall Evaluation of Controls” section of the report, the report stated that the system of internal control around the insuring of FHA-insured mortgages “needs improvement.” The report further stated, in part, that:

The volume of technical defects, procedural errors, and noncompliance with underwriting rules is excessive. Half of the [FHA] loans submitted by the origination channels contained documentation irregularities (called “pends”) that must be addressed or corrected by [Government Insuring]. However [Government Insuring] has been unable to correct all deficiencies. From June 2010 to March 2011, Production Quality Control randomly sampled 519 [FHA]-insured mortgages and found errors or exceptions in 41% . . . [T]hese high error rates result from weak loan origination processes that cause half of the loan files submitted to [Government Insuring] to contain document irregularities that must be addressed before the loan can be insured. While [Government Insuring] processes and controls catch and correct many of these errors and irregularities, they do not catch enough to keep rescission and indemnification exposure to a tolerable level . . . [FHA] require[s] SunTrust to certify that the loan is eligible for government insurance in conformance with

[FHA] requirements. Lenders who submit false certifications and claims may be subject to penalties or lawsuits under the False Claims Act (31 U.S.C. § 3729).

The report stated that the errors included “missing documents, missing paystubs, appraisal issues, incorrect debt-to-income ratio, document errors, et cetera.”

23. A 2011 internal audit report of SunTrust’s quality control process that reflects that it was distributed to certain SunTrust management, stated, to the extent applicable to FHA mortgages, that “[w]hile [SunTrust worked to improve the [quality control] process throughout 2010, additional improvements and corrections are needed . .

. [g]iven [among other things] the ongoing high volume of loan production errors[.]” The audit report stated, in part, that “employment and deposit reverifications on FHA” mortgages “do not consistently comply with standards,” and “that the QC process for documenting employment and asset” re-verifications was “restricted by the limitations of a manual (Excel) environment. In April [2011], QC took steps to improve this process by defining business requirements for the automated capture, tracking, and reporting of required reverification information.”

24. A 2012 SunTrust audit report regarding SunTrust’s government insuring department, which reflects that it was distributed to certain SunTrust management, stated, in part, that:

The volume of technical defects, procedural errors, and noncompliance with standards remains excessive. Missing documents, errors, and other pend items continue to plague many of the [FHA] loan files submitted by the origination channels and the [Government Insuring] department has insufficient ability or resources to identify and correct all problems. There has been no improvement in processes and controls since the last audit (audit report dated June 14, 2011) as this report reflects repeat issues. Production Quality Control continues to identify an excessive level

of loan file exceptions ([up to] 56% [or greater] defect rate on [FHA] loans originated from January to March 2012)[.] . . . Management should take immediate action to install gatekeepers in the loan origination process to ensure [FHA] loan files contain all required documentation and that each document is accurate and complete[.] . . . Management should also expand managerial oversight of the pre-insurance review process.

The report noted two “significant” issues, “Broken Loan Origination Process” and “Deficient Government Insuring Process.” The “Broken Loan Origination Process” issue noted that:

Loan production processes are broken as origination channels submit an excessive number of [FHA] loan files that contain documentation irregularities that must be corrected or addressed by the Government Insuring team. The excessive number of documentation irregularities increases the risk of impaired loans that do not meet FHA standards. Half ([up to] 51% [or more]) of all [FHA] loan files submitted to Government Insuring were missing documents or contained documentation irregularities. Missing documents and other documentation irregularities (collectively called ‘pends’) preclude the loan from being insured until pended items can be corrected. [SunTrust Audit Services] notes that the excessive level of pended loans (51% as of March 2012) is essentially the same level of error observed in the last audit dated June 14, 2011. . . . For loans originated from January to March 2012, approximately 90% of pends were on simple matters such as missing entire documents, missing pages on documents, or blanks on data fields, signature lines, and date fields.”

The “Deficient Government Insuring Process” issue noted that:

The [government insuring] department is not meeting its quality standards as an excessive number of loans processed and insured by the department contain errors or defects (e.g., missing or incomplete documentation . . . Moreover, the [SunTrust Mortgage] Quality Control team has identified a[n up to] 56% [or greater] defect rate on [FHA] loans originated from January to March 2012.

The report also included management action plans to address the issues noted in the audit.

25. In March 2012, two SunTrust managers made a presentation regarding SunTrust’s portfolio. Their presentation noted that, over the three

months analyzed, (November 2011-January 2012), SunTrust’s retail FHA mortgages evidenced a 55.8% error rate.

26. The statements herein apply only to certain mortgages which are the subject of the release in this Agreement. This document is not an admission as to any conduct related to any mortgage not released in this Agreement, nor is it an admission of any legal liability. SunTrust reserves the right to contest the use and/or application of this document in any future litigation.

EXHIBIT K

HUD ADMINISTRATIVE RELEASE

This Administrative Release (“Administrative Release”) is entered into among the United States Department of Housing and Urban Development (HUD), acting through the United States Department of Justice, and SunTrust Mortgage, Inc. on behalf of itself and its affiliated entities ¹ (collectively “SunTrust”) (HUD and SunTrust are collectively referred to as “the Parties”).

TERMS AND CONDITIONS

(1) Subject to the exceptions in Paragraph 2 below, HUD fully and finally releases SunTrust and any of its respective successors or assigns, as well as any current or former director, current or former officer, and current or former employee of any of the foregoing, individually and collectively, from any civil or administrative claims it has or may have, and from any civil or administrative remedies or penalties (expressly including punitive or exemplary damages) it may seek or impose, based on the Covered Servicing Conduct, ² the Covered Origination Conduct ³ and/or the conduct described in Attachment A to Exhibit J with respect to FHA loans that has taken place as of 11:59 p.m., Eastern Daylight Time, on June 17, 2014. Provided, however, that, for all FHA mortgage loans originated by SunTrust and/or approved by a SunTrust FHA direct endorsement underwriter from January 1, 2006, through March 31, 2012, and for which a claim for FHA insurance benefits has not been submitted for payment on or before June 17, 2014 ("Future Claims"), HUD does not release its rights to demand

_____________


1	The term “affiliated entities” as used here is defined in paragraph 10 of Exhibit F.


2	The term “Covered Servicing Conduct” as used here is defined in paragraph C of Exhibit F.


3	The term “Covered Origination Conduct” as used here is defined in paragraph D of Exhibit F.

indemnification administratively (i.e., for single damages, but not for double damages, treble damages, or penalties) pursuant to the procedures set forth below:

(a) HUD may demand that SunTrust provide electronic copies of FHA case binders to facilitate its review of the Future Claims. SunTrust will produce such FHA case binders within thirty (30) days of HUD's request or such other time period agreed to by SunTrust and HUD.

(b) HUD may demand indemnification from SunTrust on Future Claims, where HUD has identified one or more material deficiencies in the origination and/or underwriting of these loans.

(c) HUD will notify SunTrust in writing of the material deficiency or deficiencies, and will provide a description of the material deficiency or deficiencies, in any Future Claims within six (6) years of the submission of the claim for insurance benefits.

(d) SunTrust will indemnify HUD for HUD's losses in connection with the Future Claims within 60 days of HUD's transmission of its request for indemnification, unless a greater time is agreed to by SunTrust and HUD within that 60-day period, or SunTrust will satisfy HUD, through the dispute resolution process described herein, that indemnification is not warranted.

(e) The referenced dispute resolution process shall be restricted to the following, and will not afford, and SunTrust agrees that it will not seek, judicial, quasi-judicial, or any other review or appeal, legal or administrative or otherwise, or any other challenge of any kind:

(i) SunTrust will have the right to respond in writing to HUD's request for indemnification, provided that such response by SunTrust is made within 60 days of HUD's request for indemnification, or within such further time as HUD's Associate General Counsel for Program Enforcement or his designee (provided such designee is not a person making a determination at any other level of this escalation review process) ("Associate General Counsel") permits in response to a reasonable request by SunTrust for an extension of time that is received by HUD's Associate General Counsel within that 60-day period;

(ii) SunTrust's timely response will be reviewed by the Associate General Counsel, who will decide whether indemnification is warranted, and will notify SunTrust in writing of his conclusion;

(iii) SunTrust will pay the amount of indemnification specified pursuant to paragraph 1(e)(ii) (above), within 30 days of the Associate General Counsel's transmission of his conclusion, or request further review by HUD's General Counsel or his designee (provided such designee is not a person making a determination at any other level of this escalation review process) ("HUD's General Counsel") by submitting a written request for such review to the Associate General Counsel within 30 days of the Associate General Counsel's notice that indemnification is warranted;

(iv) SunTrust's timely request pursuant to paragraph 1(e)(iii) (above) will be reviewed by HUD's General Counsel, who will decide whether indemnification is warranted and will notify SunTrust in writing of his conclusion;

(v) SunTrust will pay the amount of indemnification specified pursuant to paragraph 1(e)(iv) (above) within 30 days of the HUD General Counsel's transmission of his conclusion, or request further review by the Secretary of the Department of HUD or his designee (provided such designee is not a person making a determination at any other level of this escalation review process) (the "Secretary") by submitting a written request for such review to the Associate General Counsel within 30 days of the HUD General Counsel's notice that indemnification is warranted;

(vi) SunTrust's timely request pursuant to paragraph 1(e)(v) (above) will be reviewed by the Secretary, who will decide whether indemnification is warranted and will notify SunTrust in writing of his conclusion; and

(vii) To the extent the Secretary concludes that indemnification is warranted, SunTrust shall have 14 days from HUD's transmission of the Secretary's notice to pay HUD the amount of indemnification specified pursuant to paragraph 1(e)(vi) (above).

Notwithstanding the foregoing, in no instance shall this Administrative Release relieve SunTrust of any obligation to remedy, upon identification, defects of title or such other problems caused by SunTrust’s acts or omissions that may preclude FHA from accepting assignment or paying a claim for which FHA lacks statutory authority pursuant to 12 U.S.C. § 1707(a) and § 1710(a)(1)(B), in which case FHA shall notify SunTrust and SunTrust shall have 60 days from the notification (or such further time as the Secretary may approve in writing) to correct the

defect in title. Further, nothing in this Administrative Release shall relieve SunTrust of any obligation to provide FHA with any and all mortgage insurance premium payments that have been or should have been collected, plus interest, if any. Notwithstanding any other provision of

this Administrative Release, FHA shall calculate the payment of insurance benefits for any insured mortgage in accordance with its regulations.

(2) Notwithstanding any other term of this Administrative Release, the following claims of HUD are specifically reserved and are not released:

(a) Any liability to HUD for any conduct other than the Covered Origination Conduct and/or Covered Servicing Conduct, or any liability for any conduct that is not expressly released herein or in Exhibit J to the Consent Judgment;

(b) Any liability to or claims brought by the Government National Mortgage Association (“Ginnie Mae”);

(c) Any liability arising under the Fair Housing Act; any provision of the Equal Credit Opportunity Act that is not expressly released in Exhibit F or Paragraph 1 of this Administrative Release, including any provision prohibiting discriminatory conduct; the Home Mortgage Disclosure Act; or any other statute or law that prohibits discrimination of persons based on race, color, national origin, gender, disability, or any other protected status.

(d) Administrative claims, proceedings, or actions brought by HUD against any current or former director, officer, or employee for suspension, debarment or exclusion from any HUD programs.

As of July 24, 2014

Includes 1 ^st Amendment

Exhibit 10.5

SUNTRUST BANKS, INC.

EXECUTIVE SEVERANCE PAY PLAN

EFFECTIVE April 22, 2014

TABLE OF CONTENTS

ARTICLE 1 INTRODUCTION 1

ARTICLE 2 DEFINITIONS 2

2.1 “Affiliate” 2

2.2 “AIP” 2

2.3 “Base Salary” 2

2.4 “Board” 2

2.5 “Cause” 2

2.6 “Change in Control” 3

2.7 “Change in Control Agreement” 4

2.8 “Change in Control Termination” 4

2.9 “Code” 4

2.10 “Committee” 4

2.11 “Disability” 4

2.12 “Effective Date” 4

2.13 “Equivalent Position” 4

2.14 “ERISA” 5

2.15 “Exchange Act” 5

2.16 “Executive” 5

2.17 “Executive Leadership Team” 5

2.18 “FIP” 5

2.19 “Good Reason” 5

2.20 “Key Employee” 7

2.21 “Key Employee Delay” 8

2.22 “Plan” 8

2.23 “Plan Administrator” 8

2.24 “Plan Year” 8

2.25 “Protection Period” 8

2.26 “Qualifying Termination” 8

2.27 “Separation from Service” or “Separates from Service” 9

TABLE OF CONTENTS

2.28 “Severance Amount” 9

2.29 “SunTrust” 9

2.30 “Target Bonus Percentage” 9

ARTICLE 3 PARTICIPATION 10

3.1 Eligible Executives. 10

3.2 Revocation of Participation. 10

3.3 Termination of Participation. 10

3.4 Committee Actions. 10

ARTICLE 4 PAYMENT UPON QUALIFYING TERMINATION 11

4.1 Eligibility for Benefits. 11

4.2 Determination of Severance Amount. 11

4.3 Repayment. 11

4.4 Manner of Payment. 12

4.5 Committee Actions. 12

ARTICLE 5 PAYMENT UPON A CHANGE IN CONTROL TERMINATION 13

5.1 Eligibility for Benefits. 13

5.2 Determination of Severance Amount. 13

5.3 Manner of Payment. 13

5.4 Termination in Anticipation of Change in Control. 15

5.5 Change in Control Agreements/No Duplication of Benefits. 15

5.6 Limitation on Payments under Certain Circumstances. 15

ARTICLE 6 LIMITATIONS/RELEASE 17

6.1 Restrictive Covenant Agreement. 17

6.2 Release. 19

6.3 Timing of Release. 19

6.4 Taxes. 19

6.5 No Increase in Other Benefits; No Other Severance Pay. 19

6.6 No Severance Pay upon Death or Disability. 20

ARTICLE 7 SOURCE OF BENEFITS 21

TABLE OF CONTENTS

ARTICLE 8 CLAIMS 22

8.1 Claims. 22

8.2 No Estoppel of Plan. 22

ARTICLE 9 ADMINISTRATION 24

9.1 Administration. 24

9.2 Discretionary Authority. 24

9.3 Designees. 24

9.4 Service as Fiduciary. 24

ARTICLE 10 INDEMNIFICATION 25

ARTICLE 11 AMENDMENT AND TERMINATION 26

11.1 Amendment. 26

11.2 Termination. 26

11.3 Amendment or Termination on or after a Potential Change in Control or a Change in Control. 26

11.4 Compliance with Laws. 26

ARTICLE 12 MISCELLANEOUS 27

12.1 Spendthrift Clause. 27

12.2 Legally Incompetent. 27

12.3 Reporting and Disclosure. 27

12.4 Plan Not an Employment Contract. 27

12.5 Errors and Omissions. 27

12.6 Nonvested Benefits. 27

12.7 Construction. 28

SUNTRUST BANKS, INC.

EXECUTIVE SEVERANCE PAY PLAN

EFFECTIVE AS OF APRIL 22, 2014

ARTICLE 1

INTRODUCTION

SunTrust Banks, Inc. (“SunTrust”) hereby adopts this SunTrust Banks, Inc. Executive Severance Pay Plan (the “Plan”), effective as of April 22, 2014. The purpose of the Plan is to provide eligible employees with severance benefits in the event the employee’s employment is terminated under circumstances as further set forth herein. The Plan is an unfunded welfare benefit plan for purposes of ERISA and a severance pay plan within the meaning of United States Department of Labor Regulation Section 2510.3-2(b). Except for Executives who are parties to Change in Control Agreements, this Plan supersedes all prior policies and practices of the Company with respect to severance or separation pay for Executives whose employment is terminated on or after the Effective Date. An Executive who is party to a Change in Control Agreement will not be eligible for benefits under Article 5 until such Change in Control Agreement expires in accordance with its terms.

ARTICLE 2

DEFINITIONS

When the following terms are used in this Plan with an initial capital letter, they shall have the meanings set forth opposite those terms in this Article 2.


2.1	“Affiliate” means for any Plan Year any organization that is a member of a controlled group of businesses within the meaning of Code Sections 414(b), (c) and (m) of which SunTrust is a member and any other entity which is considered to be a single employer with SunTrust under Code Section 414(o).

2.2

“AIP” means the SunTrust Banks, Inc. Annual Incentive Plan or, if there is any material change in the terms, operation or administration of such plan following a Change in Control, any successor to such plan in which the Executive is eligible to participate and which provides an opportunity for a short-term bonus for the Executive which is comparable to the opportunity which the Executive had under such plan before such Change in Control or, if the Executive reasonably determines that there is no such plan in which the Executive is eligible to participate but SunTrust or a parent corporation maintains a short term bonus plan for the benefit of senior executives which provides for such an opportunity, such other plan as agreed to by the Executive and (1) with respect to the Chief Executive Officer and the Plan Administrator if the Plan Administrator is an Executive, the Compensation Committee and (2) with respect to all other Executives, the Plan Administrator.


2.3	“Base Salary” means the Executive’s highest annual base salary from SunTrust and any Affiliate which (but for any salary deferral election) is in effect at any time during the one-year period which ends on the date the Executive’s employment with SunTrust or an Affiliate terminates under the circumstances described in Articles 4 and 5.


2.4	“Board” means the Board of Directors of SunTrust.


2.5	“Cause” means:


a.	The willful and continued failure by the Executive to perform satisfactorily the duties of the Executive’s job;


b.	The Executive is convicted of a felony or has engaged in a dishonest act, misappropriation of funds, embezzlement, criminal conduct or common law fraud;


c.	The Executive has engaged in a material violation of the SunTrust Code of Business Conduct and Ethics or the Code of Conduct of a SunTrust Affiliate; or


d.	The Executive has engaged in any willful act that materially damages or materially prejudices SunTrust or an Affiliate or has engaged in conduct or activities materially damaging to the property, business or reputation of SunTrust or an Affiliate; provided, however,

With respect to the Chief Executive Officer and the Plan Administrator if the Plan Administrator is an Executive, no such act, omission or event shall be treated as “Cause” unless (i) the Executive has been provided a detailed, written statement of the basis for SunTrust’s belief that such act, omission or event constitutes “Cause” and, if the allegation is under Section 2.5(a), has had at least a thirty (30) day period to take corrective action and (ii) the Committee, after the end of such thirty (30) day correction period (if applicable), determines reasonably and in good faith and by the affirmative vote of at least two-thirds of the members of the Committee then in office at a meeting called and held for such purpose that “Cause” does exist.

With respect to all other Executives, no such act, omission or event shall be treated as “Cause” unless (i) the Executive has been provided a detailed, written statement of the basis for SunTrust’s belief that such act, omission or event constitutes “Cause” and, if the allegation is under Section 2.5(a), has had at least a thirty (30) day period to take corrective action and (ii) the Plan Administrator, after the end of such thirty (30) day correction period (if applicable), determines reasonably and in good faith “Cause” does exist.

2.6

“Change in Control” means 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 Exchange Act as in effect at the time of such “change in control”, 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 13(d) and 14(d)(2) of the Exchange Act), is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange 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 constitute 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 who were directors at the beginning of the period; (iii) there is a consummation of any reorganization, merger, consolidation or share exchange as a result of which the common stock of SunTrust shall be changed, converted or exchanged into or for securities of another corporation (other than a merger with a wholly-owned subsidiary of SunTrust) or any dissolution or liquidation of SunTrust or any sale or the disposition of 50% or more of the assets or business of SunTrust; or (iv) there is a consummation of any reorganization, merger, consolidation or share exchange unless (A) the persons who were the beneficial owners of the

outstanding shares of the common stock of SunTrust immediately before the consummation of such transaction beneficially own more than 65% of the outstanding shares of the common stock of the successor or survivor corporation in such transaction immediately following the consummation of such transaction and (B) the number of shares of the common stock of such successor or survivor corporation beneficially owned by the persons described in Section 2.6(iv)(A) immediately following the consummation of such transaction is beneficially owned by each such person in substantially the same proportion that each such person had beneficially owned shares of SunTrust common stock immediately before the consummation of such transaction, provided (C) the percentage described in Section 2.6(iv)(A) of the beneficially owned shares of the successor or survivor corporation and the number described in Section 2.6 (iv)(B) of the beneficially owned shares of the successor or survivor corporation shall be determined exclusively by reference to the shares of the successor or survivor corporation which result from the beneficial ownership of shares of common stock of SunTrust by the persons described in Section 2.6(iv)(A) immediately before the consummation of such transaction.


2.7	“Change in Control Agreement” means a change in control agreement by and between SunTrust and an Executive.


2.8	“Change in Control Termination” means an Executive’s Separation from Service due to an involuntary termination of employment without Cause or resignation for Good Reason during an Executive’s Protection Period.


2.9	“Code” means the Internal Revenue Code of 1986, as amended.


2.10	“Committee” means the Compensation Committee of the Board.

2.11

“Disability” means the Executive is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Executive’s employer and, in addition, has begun to receive benefits under SunTrust’s Long-Term Disability Plan.


2.12	“Effective Date” means the effective date of this Plan, which is April 22, 2014. The Plan was approved by the Committee on January 9, 2014.

2.13

“Equivalent Position” means a job that will not result in a “material negative change” to the existing employment relationship of the Executive with SunTrust or an Affiliate, within the meaning of Treas. Reg. §1.409A-1(n)(2)(i). For purposes of this definition, a job will not result in a material negative change to the Executive when compared to his existing employment relationship if such job meets all of the following requirements:

It does not require significantly more business-related travel on an ongoing basis than the Executive’s present position. Business-related travel means travel for or on behalf of the Company or an Affiliate , which requires the Executive to stay overnight away from the Executive’s residence. Unless the Plan Administrator announces otherwise, an anticipated increase of 33% or more in required business-related travel for the new position is treated as significant provided, however, if the anticipated travel increase for the new position is three (3) or fewer nights per month, this increase will not be considered significant, regardless of the percentage increase .


b.	It is at the same location, or at a location requiring an additional commute (one-way) of no more than 25 additional miles from the Executive’s current residence to the Executive’s new work location.


c.	It has an annual base salary that is at least 90% of the Executive’s current annual base salary.

The Plan Administrator may modify the rules and adopt new rules for determining the comparability of positions. The Plan Administrator has sole and complete discretion to determine whether a particular job is an Equivalent Position and the Plan Administrator’s decision shall be binding on all persons, and there is no right of appeal except as provided in this Plan’s claims procedures.


2.14	“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.


2.15	“Exchange Act” means the Securities Exchange Act of 1934, as amended.


2.16	“Executive” means, for purposes of the Plan: (1) members of the Executive Leadership Team and (2) all other Enterprise Level Executives not included in (1) above.


2.17	“ Executive Leadership Team” m eans the Chief Executive Officer, all direct reports to the CEO and such other Enterprise Level Executives as designated by the CEO.


2.18	“FIP” means a functional incentive plan which provides a short-term bonus or commissions to certain Executives that are not eligible to participate in the AIP.


2.19	“Good Reason” means:


a.	Without the Executive’s express written consent, SunTrust or any Affiliate after a Change in Control but before the end of Executive’s Protection Period:


i.	reduces the Executive’s base salary or opportunity to receive comparable incentive compensation or bonuses;


ii.	reduces the scope of the Executive’s principal or primary duties, responsibilities or authority;

iii.

transfers the Executive’s primary work site from the Executive’s primary work site on the date of such Change in Control or, if the Executive subsequently consents in writing to such a transfer, from the primary work site which was the subject of such consent, to a new primary work site which is outside the “standard metropolitan statistical area” which then includes the Executive’s then-current primary work site unless such new primary work site is closer to the Executive’s primary residence than the Executive’s then-current primary work site; or


iv.	fails to continue to provide to the Executive health and welfare benefits, deferred compensation and retirement benefits, stock option and restricted stock grants that are in the aggregate comparable to those provided to the Executive immediately prior to the Change in Control.


b.	Notwithstanding Section 2.19(a), no such act or omission shall be treated as “Good Reason” under the Plan unless:

(1) With respect to the Chief Executive Officer and the Plan Administrator if the Plan Administrator is an Executive, the Executive delivers to the Committee a detailed, written statement of the basis for the Executive’s belief that such act or omission constitutes Good Reason, (2) the Executive delivers such statement before the later of (A) the end of the ninety (90) day period which starts on the date there is an act or omission which forms the basis for the Executive’s belief that Good Reason exists or (B) the end of the period mutually agreed upon for purposes of this Section 2.19(b)(i)(1) in writing by the Executive and the Chairman of the Committee, (3) the Executive gives the Committee a thirty (30) day period after the delivery of such statement to cure the basis for such belief and (4) the Executive actually submits his or her written resignation to the Committee during the sixty (60) day period which begins immediately after the end of such thirty (30) day period if the Executive reasonably and in good faith determines that Good Reason continues to exist after the end of such thirty (30) day period, or

ii.

(1) With respect to all other Executives, the Executive delivers to the Plan Administrator a detailed, written statement of the basis for the Executive’s belief that such act or omission constitutes Good Reason, (2) the Executive delivers such statement before the end of the ninety (90) day period which starts on the date there is an act or omission which forms the basis for the Executive’s belief that Good Reason exists, (3) the Executive gives the Plan Administrator a thirty (30) day

period after the delivery of such statement to cure the basis for such belief and (4) the Executive actually submits his or her written resignation to the Plan Administrator during the sixty (60) day period which begins immediately after the end of such thirty (30) day period if the Executive reasonably and in good faith determines that Good Reason continues to exist after the end of such thirty (30) day period, or


iii.	SunTrust states in writing to the Executive that the Executive has the right to treat such act or omission as Good Reason under the Plan and the Executive resigns during the sixty (60) day period which starts on the date such statement is actually delivered to the Executive;

If (1) the Executive gives the Committee or the Plan Administrator the statement described in Section 2.18(b)(i)(1) or 2.18(b)(ii)(1) before the end of the thirty (30) day period which immediately follows the end of the Protection Period and the Executive thereafter resigns within the period described in Section 2.18(b)(i) or 2.18(b)(ii), or (2) SunTrust provides the statement to the Executive described in Section 2.18(b)(iii) before the end of the thirty (30) day period which immediately follows the end of the Protection Period and the Executive thereafter resigns within the period described in Section 2.18(b)(iii); then (3) such resignation shall be treated under this Plan as if made in the Executive’s Protection Period; and

If the Executive consents in writing to any reduction described in Sections 2.18(a)(i) or 2.18(a)(ii), to any transfer described in Section 2.18(a)(iii) or to any failure described in Section 2.18(a)(iv) in lieu of exercising the Executive’s right to resign for Good Reason and delivers such consent to SunTrust, the date such consent is delivered to SunTrust thereafter shall be treated under this definition as the date of a Change in Control for purposes of determining whether the Executive subsequently has Good Reason under this Plan to resign as a result of any subsequent reduction described in Sections 2.18(a)(i) or 2.18(a)(ii), any subsequent transfer described in Section 2.18(a)(iii) or any subsequent failure described in Section 2.18(a)(iv).

2.20

“Key Employee” means an employee treated as a “specified employee” (as defined under Code Section 409A(a)(2)(B)(i)) of SunTrust or any Affiliate as of his Separation from Service if SunTrust or any Affiliate’s common stock is publicly traded on an established securities market or otherwise (i.e., a key employee (as defined in Code Section 416(i) without regard to paragraph (5) thereof)). Key Employees shall be determined in accordance with Code Section 409A using a December 31 identification date. A listing of Key Employees as of an identification date shall be effective for the 12-month period beginning on the April 1 following the identification date.

2.21 “Key Employee Delay” means the period of delay defined in Section 4.4(a).


2.22	“Plan” means this SunTrust Banks, Inc. Executive Severance Pay Plan as set forth in this document and any related exhibits and attachments and all amendments to this document and any related exhibits and attachments.


2.23	“Plan Administrator” means an entity (including an Affiliate), a committee or an individual who is appointed in writing by the Committee to serve as Plan Administrator for the Plan. If there is no such appointment, SunTrust shall serve as the Plan Administrator and its administrative duties are carried out under the direction of SunTrust’s Chief Human Resource Officer.


2.24	“Plan Year” means the calendar year.


2.25	“Protection Period” means the two (2) year period which begins on a Change in Control.

2.26

“Qualifying Termination” means an Executive’s involuntary Separation from Service with SunTrust and all Affiliates, other than during an Executive’s Protection Period, because of a reduction-in-force (RIF); job elimination; consolidation, merger or divestiture; or a job evaluation that results in changes to the Executive’s existing position such that the existing and the new positions are not Equivalent Positions. A Qualifying Termination does not include a termination of an Executive’s employment due to any of the following reasons:


a.	An involuntary termination of employment for any reason not listed above;


b.	A voluntary termination of employment by the Executive;


c.	A voluntary transfer to a position within the SunTrust controlled group;


d.	An offer of an Equivalent Position by SunTrust or an Affiliate or a transfer to an Equivalent Position with SunTrust or an Affiliate;


e.	A demotion, transfer or termination resulting from disciplinary action, poor job performance or for Cause;


f.	A transfer of employment or job reassignment in connection with a sale of assets or stock, or a merger, or other means of acquisition or divestiture of any SunTrust entity or an Affiliate (including but not limited to, an Affiliate, a Company or a division, unit, subsidiary or other part of SunTrust, a Company or an Affiliate);


g.	A continuation of employment with a SunTrust entity after it ceases to be part of the SunTrust controlled group as a result of a corporate transaction;


h.	A transfer of employment or job reassignment to an entity outside the SunTrust controlled group in connection with an outsourcing, leasing, subcontracting, secondment, or similar transaction; or


i.	Acceptance of any position with SunTrust or an Affiliate, regardless of whether such position is an Equivalent Position.

The Plan Administrator has sole and full discretion and is directly responsible for determining whether an Executive’s Separation from Service is a Qualifying Termination.


2.27	“Separation from Service” or “Separates from Service” means a “separation from service” within the meaning of Code Section 409A.


2.28	“Severance Amount” means the applicable lump sum severance payment described in Section 4.2 and 5.2 herein.


2.29	“SunTrust” means SunTrust Banks, Inc. and any successor to SunTrust.


2.30	“Target Bonus Percentage” means


a.	If an Executive participates in the AIP at the time of his Separation from Service during the Protection Period, the Target Bonus Percentage means the target bonus percentage determined under the AIP.

If an Executive was not eligible to participate in the AIP but participates in a FIP at the time of his Separation from Service during the Protection Period, the amount described in this Target Bonus Percentage shall mean the average of the Executive’s payments under the FIP for the three (3) complete Plan Years immediately preceding Separation from Service expressed as a percent of the Executive’s Base Salary.


c.	In the event an Executive was not eligible to participate in the AIP or any FIP at Separation from Service during the Protection Period, the amount described in this Section 2.29 shall be the average of the Executive’s annual bonus for the three (3) complete Plan Years immediately preceding Separation from Service expressed as a percent of the Executive’s Base Salary.

ARTICLE 3

PARTICIPATION

3.1

Eligible Executives . The Executives eligible to participate in the Plan shall be designated by the Plan Administrator. Executives shall be notified in writing of their selection to participate in the Plan. Notwithstanding anything to the contrary, an Executive who is party to Change in Control Agreement will not be eligible for benefits under Article 5 until such Change in Control Agreement expires in accordance with its terms.


3.2	Revocation of Participation. The Plan Administrator in its absolute discretion may revoke an Executive’s right to participate in the Plan at any time except as set forth in Section 11.1.


3.3	Termination of Participation . An individual’s status as an Executive shall terminate and the Executive shall cease eligibility for benefits under the Plan on the earliest to occur of the following events:


a.	The date, prior to a Change in Control, on which the Executive separates from service with a Company for any reason that is not a Qualifying Termination or the Executive otherwise loses eligibility status (e.g., transfer to an ineligible job classification);


b.	The date after a Change in Control on which the Executive separates from Service due to Termination for Cause or voluntary termination other than for Good Reason;


c.	The date the Plan Administrator revokes the Executive’s right to participate in the Plan pursuant to Section 3.2 above; or


d.	The date on which the Plan terminates or the effective date of a Plan amendment that excludes the Executive from eligibility.

3.4 Committee Actions. Notwithstanding anything in this Article 3 to the contrary, any actions with respect to participation or termination of participation in connection with the Chief Executive Officer or the Plan Administrator if the Plan Administrator is an Executive, shall be taken by the Committee.

3.5

ARTICLE 4

PAYMENT UPON QUALIFYING TERMINATION


4.1	Eligibility for Benefits . If an Executive has a Qualifying Termination and satisfies all of the following requirements through the date of his Qualifying Termination, SunTrust shall pay or provide to the Executive the payments and benefits set forth in this Article 4.

The Executive must continue working through the date designated as his Qualifying Termination date. With the consent of the Plan Administrator, the Executive’s manager may, in his or her discretion, decide that the Executive has performed all transitional and other duties required and may release the Executive early from the obligation to perform further duties through the date of his scheduled Qualifying Termination.


b.	The Executive must continue to perform all responsibilities assigned to him at a satisfactory level including maintaining at least a 2 In Balance rating as determined by the Plan Administrator through his termination date (or his release date, if earlier).


c.	The Executive must conduct himself in a manner consistent with the high standards expected of all SunTrust employees and in accordance with the SunTrust Code of Business Conduct and Ethics.


d.	The Executive must not decline an offer of an Equivalent Position with a Company, prior to the Executive’s designated Qualifying Termination date, even if his or her manager has released the Executive earlier than such designated date.


4.2	Determination of Severance Amount . The Severance Amount payable in accordance with this Article 4 is an amount equal to the following:


a.	With respect to the Chief Executive Officer, an amount equal to one-hundred and four (104) weeks of Base Salary.


b.	With respect to the Executive Leadership Team (excluding the Chief Executive Officer), an amount equal to seventy-eight (78) weeks of Base Salary.


c.	With respect to Other Enterprise Level Executives, an amount equal to fifty-two (52) weeks of Base Salary.


4.3	Repayment . If an Executive receives a benefit under this Plan and is subsequently rehired by SunTrust or an Affiliate, the Executive will be required to repay any severance amount corresponding to the period from the date of rehire to the end of the period for which the Executive was paid the Severance Amount.


4.4	Manner of Payment .

Form and Timing . The Severance Amount described in Section 4.2 shall be paid in cash to the Executive in a single lump sum sixty (60) days after the Executive’s Separation from Service. Notwithstanding the foregoing, if the Executive is a Key Employee, the Severance Amount shall be paid in a lump sum on the first day of the seventh month following the date on which the Executive Separates from Service (or, if earlier, the first day of the month after the Executive’s death) (the period of delay prior to payment shall be referred to hereafter as the “Key Employee Delay” ). During the Key Employee Delay, interest shall accrue on the Severance Amount at the “prime rate” as reported by SunTrust Bank or its successor on the date the Executive Separates from Service or, if such rate is not reported on such date, such rate as so reported on the last business day before the Executive’s Separation from Service.

Earned but Unpaid Salary, Bonus and Vacation . SunTrust shall promptly pay the Executive any earned but unpaid base salary and bonus, shall promptly pay the Executive for any earned but untaken vacation and shall promptly reimburse the Executive for any incurred but unreimbursed expenses which are otherwise reimbursable under SunTrust’s expense reimbursement policy as in effect for senior executives immediately before the Executive’s employment so terminates.

Other Benefits . Any other employee benefits or incentive compensation plans for which an Executive is eligible will be provided in accordance with the terms of the applicable employee benefit or incentive compensation plan. In addition, the Plan Administrator may offer reasonable outplacement services to any Executive who is determined to be eligible for severance pay under this Plan, at the level and for the period determined by the Plan Administrator, to assist the Executive in his or her new job search. In no event, however, shall expenses related to such outplacement services be incurred beyond the last day of the second year following the year in which the Separation from Service occurs and such expenses must be paid/reimbursed on or before the end of the third year following the year in which the Separation from Service occurs.

4.5 Committee Actions. Notwithstanding anything in this Article 4 to the contrary, any actions with respect to participation or termination of participation in connection with the

Chief Executive Officer or the Plan Administrator if the Plan Administrator is an Executive, shall be taken by the Committee.

ARTICLE 5

PAYMENT UPON A CHANGE IN CONTROL TERMINATION


5.1	Eligibility for Benefits . Except as set forth in Section 5.5 below), if an Executive has a Change in Control Termination, SunTrust shall pay or provide to the Executive the payments and benefits set forth in this Article 5.


5.2	Determination of Severance Amount . The Severance Amount payable in accordance with this Article 5 is an amount equal to the following:


a.	With respect to the Chief Executive Officer, an amount equal to one-hundred and four (104) weeks of Base Salary plus an amount equal to two (2) times the Executive’s Target Bonus Percentage multiplied by Base Salary.


b.	With respect to the Executive Leadership Team (excluding the Chief Executive Officer), an amount equal to one-hundred and four (104) weeks of Base Salary plus an amount equal to two (2) times the Executive’s Target Bonus Percentage multiplied by Base Salary.


c.	With respect to Other Enterprise Level Executives, an amount equal to fifty-two (52) weeks of Base Salary plus an amount equal to one (1) times the Executive’s Target Bonus Percentage multiplied by Base Salary.


5.3	Manner of Payment .

Form and Timing . The Severance Amount described in Section 5.2 shall be paid in cash to the Executive in a single lump sum sixty (60) days after the Executive’s Separation from Service. Notwithstanding the foregoing, if the Executive is a Key Employee, the Severance Amount shall be paid in a lump sum on the first day of the month following Key Employee Delay. During the Key Employee Delay, interest shall accrue on the Severance Amount at the “prime rate” as reported by SunTrust Bank or its successor on the date the Executive Separates from Service or, if such rate is not reported on such date, such rate as so reported on the last business day before the Executive’s Separation from Service.


c.	Other Benefits .

Stock Options . Notwithstanding the terms of any plan or agreement under which an option was granted, each outstanding stock option granted to the Executive by SunTrust shall immediately become fully vested and exercisable on the date of the Executive’s termination of employment. For purposes of determining when the Executive’s right to exercise each such option expires, the Executive shall be deemed to continue to be employed by SunTrust for the number of weeks of Base Salary the Executive is eligible to receive under Section 5.2; provided, however, in no event shall the Executive’s right to exercise the option extend beyond the earlier of (i) the latest date upon which the option could have expired by its original terms under any circumstances; or (ii) the tenth (10 ^th ) anniversary of the original date of grant.


ii.	Restricted Stock and Restricted Stock Units . Restrictions on any outstanding restricted stock grants or restricted stock unit awards, if any, to the Executive by SunTrust shall immediately expire and the Executive’s right to such stock or stock units shall be non-forfeitable in accordance with the Change in Control provisions of the agreement under which such grants or awards were made.


iii.	Performance Stock and Performance Stock Units . Outstanding performance stock grants or performance stock unit awards, if any, to the Executive by SunTrust shall vest in accordance with the Change in Control provisions of the agreement under which such grants or awards were made.

iv.

Bonus Award . Payments under this Section 5.3(c)(iv) shall reduce any amounts otherwise payable pursuant to the terms of the AIP or FIP, as applicable, at the end of the calendar year in which the Executive terminates employment. Notwithstanding anything herein to the contrary, any portion of the amounts set forth below that have been elected or scheduled to be deferred and credited under the SunTrust Banks, Inc. Deferred Compensation Plan or any other nonqualified plan maintained by SunTrust or an Affiliate shall not be paid under this Section 5.3(c)(iv).


(A)	AIP . If the Executive participates in the AIP, SunTrust shall pay the Executive sixty (60) days after the Executive’s Separation from Service, a portion of the Executive’s target bonus or, if greater, the Executive’s projected bonus under the AIP for the calendar year in which the Executive’s

employment terminates, where the Executive’s projected bonus shall be no less than the bonus which would have been projected under the AIP on the date of the Change in Control, and such portion shall be determined by multiplying such target bonus or, if greater, such projected bonus by a fraction, the numerator of which shall be the number of days the Executive is employed in such calendar year and the denominator of which shall be the number of days in such calendar year.

(B)

FIP . If the Executive was not eligible to participate in the AIP, but participates in a FIP, SunTrust shall pay the Executive sixty (60) days after the Executive’s Separation From Service an amount equal to the average of the Executive’s payments under the FIP for the three (3) complete Plan Years immediately preceding Separation from Service, multiplied by a fraction, the numerator of which shall be the number of days the Executive is employed in such calendar year and the denominator of which shall be the number of days in such calendar year.

5.4

Termination in Anticipation of Change in Control . The Executive shall be treated under Section 5.1 as if the Executive’s employment had been terminated without Cause or the Executive had resigned for Good Reason during the Executive’s Protection Period if (1)(A) the Executive’s employment is terminated by SunTrust or an Affiliate without Cause on or after the date the shareholders of SunTrust approve any transaction described in Section 2.6(iii) or Section 2.6(iv) but before the Change in Control which results from such approval, or (B) the Executive resigns for Good Reason on or after the date the shareholders of SunTrust approve any transaction described in Section 2.6(iii) or Section 2.6(iv) but before the Change in Control which results from such approval; and (2) there is a Change in Control which results from such shareholder approval. The Executive shall receive the Severance Amount described in Section 5.2 in a single lump sum following the later of: (x) the Executive’s Separation from Service (with payment in accordance with Section 5.3(a), or (y) the date of the Change in Control. If the date of the Change in Control is the later event, payment shall be treated as made upon the lapse of a substantial risk of forfeiture under Treas. Reg. § 1.409A-3(i)(1)(i) and treated as paid on the date of such Change in Control.


5.5	Change in Control Agreements/No Duplication of Benefits . An Executive who is a party to a Change in Control Agreement shall not be eligible for any Severance Amount or other benefits or payments under this Article 5 until the Change in Control Agreement expires in accordance with its terms.

5.6

Limitation on Payments under Certain Circumstances . If SunTrust or SunTrust’s independent accountants determine that any payments and benefits called for under this Plan, solely because of a Change in Control, together with any other payments and benefits made available to the Executive by SunTrust or an Affiliate (each, a “Payment”) will result in any portion of such Payments being subject to an excise tax under Code Section 4999 or any like or successor section thereto (the “Excise Tax”), then the Payments shall be reduced (but not below zero) so that the amount of the Payments (after reduction) shall be one dollar ($1.00) less than the amount which would cause the Payments to be subject to the Excise Tax (the “Reduced Amount”); provided that such Payments shall not be reduced if, without such reduction, the Executive would receive and retain, on a net after-tax basis (taking into account all applicable taxes payable by Executive, including any Excise Tax), an amount of the Payments which is greater than the amount, on a net after-tax basis, that the Executive would be entitled to retain upon receipt of the Reduced Amount.

To the extent a reduction is required under this Section 5.6, SunTrust shall reduce or eliminate the Payments in accordance with this Section 5.6 and in a manner consistent with the requirements of Code Section 409A. Any reduction in Payments shall occur first with respect to amounts that are not subject to Code Section 409A in the following order: (a) reduction of cash payments, beginning with payments scheduled for the latest distribution date; (b) reduction of vesting acceleration of equity awards; and (c) reduction of other benefits paid or provided to the Executive. If, after the reduction to zero of the amounts described above, further reductions are required under this Section 5.6, SunTrust shall reduce all Payments subject to Code Section 409A on a pro rata basis (but not below zero). This Section 5.6 shall take precedence over the provisions of any other plan, arrangement or agreement governing the Executive’s rights and entitlements to any payments or benefits.

Any determination under this Section 5.6 by SunTrust or SunTrust’s independent accountants shall be made at SunTrust’s expense and in accordance with Code Section 280G and any applicable related regulations (whether proposed, temporary or final) and any related Internal Revenue Service rulings and any related case law.

ARTICLE 6

LIMITATIONS/RELEASE


6.1	Restrictive Covenant Agreement . As a condition of becoming a participant and receiving any payments or benefits under the Plan, each Executive will be required to provide a written acknowledgement of his participation in the Plan and shall be subject to the covenants described in this Section 6.1.

No Solicitation of Customers or Clients . The Executive shall not during the Restricted Period, directly or indirectly, for himself or on behalf of any Business Entity other than SunTrust or an Affiliate, solicit or attempt to solicit any Customer for the purpose of marketing, providing, servicing, or selling, any product or service then marketed, provided, serviced, or sold by SunTrust or any Affiliate in any line of business in connection with which Executive had Material Contact with such Customer. Nothing contained in this Section 6.1(a) will prohibit public advertising or public solicitations (such as television advertisements directed to the general public) of Customers, potential customers or clients of SunTrust or any Affiliate in general so long as the advertising and solicitations are not specifically directed to Customers, potential customers or clients of SunTrust or any Affiliate.

Anti-pirating of Employees . Absent the Plan Administrator’s written consent, an Executive will not during the Restricted Period solicit to employ on the Executive’s own behalf or on behalf of any other person, firm or corporation, any person who was employed by SunTrust or an Affiliate during the term of the Executive’s employment by SunTrust or an Affiliate (whether or not such employee would commit a breach of contract), and who has not ceased to be employed by SunTrust or an Affiliate for a period of at least one (1) year. Nothing contained in this Section 3 will prohibit public advertising or public solicitations (such as want-ads directed to the general public) of any person employed during such period by SunTrust or an Affiliate in general so long as the advertising and solicitations are not specifically directed to any employee or former employee of SunTrust or an Affiliate.


c.	Trade Secrets and Confidential Information . By participating in this Plan, the Executive agrees that:


i.	the Executive will hold in a fiduciary capacity for the benefit of SunTrust and each Affiliate, and will not directly or indirectly use or disclose, any Trade Secret that Executive may have acquired during the term of the Executive’s employment by SunTrust or an Affiliate for so long as such information remains a Trade Secret; and

ii.

during the Restricted Period, the Executive will hold in a fiduciary capacity for the benefit of SunTrust and each Affiliate, and will not directly or indirectly use or disclose, any Confidential or Proprietary Information that the Executive may have acquired (whether or not developed or compiled by the Executive and whether or not the Executive was authorized to have access to such information) during the term of, in the course of, or as a result of the Executive’s employment by SunTrust or an Affiliate.


d.	Definitions


i.	“Business Entity” means any individual, partnership, association, corporation, trust, limited liability company, unincorporated organization, or any other business entity or enterprise.


ii.	“Confidential or Proprietary Information” means any secret, confidential, or proprietary information of SunTrust or a SunTrust Affiliate (not otherwise included in the definition of Trade Secret below) that has not become generally available to the public by the act of one who has the right to disclose such information without violating any right of SunTrust or an Affiliate.


iii.	“Customer” means any Business Entity to whom SunTrust or any SunTrust Affiliate provides any product or service, and with whom the Executive had Material Contact.


iv.	“Material Contact” means any interaction between the Executive and any Business Entity that takes place in an effort to establish, maintain, or further a business relationship on behalf of SunTrust or any SunTrust Affiliate.


v.	“ Restricted Period” means the period during which Executive is employed by SunTrust or any Affiliate and the two year period following Executive’s termination of employment, regardless of the reason for the termination.


vi.	“Trade Secret” means information, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers that:


(A)	derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by

proper means by, other persons who can obtain economic value from its disclosure or use, and


(B)	is the subject of reasonable efforts by SunTrust or an Affiliate to maintain its secrecy.

Reasonable and Necessary Restrictions. The Executive acknowledges that the restrictions, prohibitions and other provisions set forth in these Restrictive Covenants, including without limitation the Restricted Period, are reasonable, fair and equitable in scope, terms and duration; are necessary to protect the legitimate business interests of SunTrust; and are a material inducement to SunTrust to provide the benefits under the Plan. The Executive covenants that he will not challenge the enforceability of this these Restrictive Covenants nor will he raise any equitable defense to its enforcement. If any provision of these Restrictive Covenants ever is deemed to be unenforceable or to exceed the time, scope, or geographic limitations permitted by applicable law, then such provision(s) shall be reformed to the maximum limitations permitted by law. If any such provision(s) cannot be so reformed, then such provision shall be severed from the other Restrictive Covenants and shall not adversely affect the legality, validity, or enforceability of any of the remaining provisions.

6.2

Release . As a condition of payment under the Plan, the Executive must sign a release, satisfactory to the Plan Administrator, waiving all rights to file any claim against SunTrust, any Affiliate, directors, officers, employees, or agents relating to the Executive’s employment or separation from service or against the Plan and its fiduciaries and agreeing to such confidentiality provisions and such other restrictions as the Committee deems appropriate.

6.3 SunTrust shall provide the release to the Executive at the time the Executive is notified of his or her Qualifying Termination or Change in Control Termination. Such notification shall occur no less than thirty (30) days prior to the Executive’s Separation from Service. Such release and covenant not to sue must be executed and all revocation periods shall have expired in accordance with its terms, no later than sixty (60) days after Separation from Service. If the Executive fails to execute a timely release, payments under the Plan shall be forfeited.


6.4	Taxes . All required federal, state and local taxes will be withheld from the cash lump sum severance payment. In addition, any financial obligations the Executive has to SunTrust or an Affiliate will be deducted from the lump sum severance payment.


6.5	No Increase in Other Benefits; No Other Severance Pay . Severance Amounts payable under Article 4 or Article 5 shall not be taken into account to increase the benefits otherwise payable to, or on behalf of, the Executive under any employee benefit plan,

policy or program, whether qualified or nonqualified, maintained by SunTrust or an Affiliate (e.g., there will be no increase in the Executive’s life insurance because of compensation the Executive receives under this Plan) and, further, the Executive has no right to any payment of severance pay and severance benefits under the SunTrust Banks, Inc. Severance Pay Plan or any other severance pay plan, policy or program maintained by SunTrust or an Affiliate or under any individual severance agreement or employment agreement subject to the condition that SunTrust not be relieved of any of its obligations under any Change in Control Agreement until such time as such Change in Control Agreement expires in accordance with its terms.


6.6	No Severance Pay upon Death or Disability . SunTrust will have no obligations to the Executive under this Plan if the Executive’s employment terminates exclusively as a result of the Executive’s death or the Executive is no longer actively at work due to Disability.

6.7

ARTICLE 7

SOURCE OF BENEFITS

Benefits payable under this Plan shall be paid from the general assets of SunTrust.

ARTICLE 8

CLAIMS

8.1

Claims . All claims for benefits under this Plan shall be made, reviewed, processed, paid or denied and appealed in accordance with the terms and conditions of the provisions of the claims procedures as set forth in the Plan’s summary plan description. Before an Executive or his representative files a lawsuit claiming benefits under this Plan, the Executive must exhaust his right under the Plan’s claim procedures, and all or part of the Executive’s claim must be initially denied and then denied on appeal. Notwithstanding any other provision of the Plan or the summary plan description to the contrary, all claims for payment of severance benefits under this Plan must be filed with the Plan Administrator within 12 months after the earlier of the date the Executive separates from service or the date of the event that the Executive claims is the triggering event that gives rise to his entitlement to severance benefits under this Plan. Any such claim submitted after the applicable 12-month period will not be considered for payment under this Plan. If an Executive wishes to bring a lawsuit related to a claim for benefits under this Plan, the lawsuit must be filed no later than 24 months after the date on which such Executive’s claim is denied on appeal. In the event an Executive is incapacitated, the Executive’s personal representative may file a claim on the Executive’s behalf as long as it is filed within a reasonable time after the end of the applicable 12-month period for filing claims. The preceding restrictions on the time for filing claims under the Plan’s claims procedures and the time for filing a lawsuit shall not apply to any claim for breach of fiduciary duty, which shall be governed by the time periods set forth in ERISA section 413.

8.2

No Estoppel of Plan . No person is entitled to any benefit under this Plan except and to the extent expressly provided under this Plan. The fact that payments have been made from this Plan in connection with any claim for benefits under this Plan does not (i) establish the validity of the claim, (ii) provide any right to have such benefits continue for any period of time, or (iii) prevent this Plan from recovering the benefits paid to the extent that SunTrust or the Plan Administrator determines that there was no right to payment of the benefits under this Plan. Thus, if a benefit is paid under this Plan and it is thereafter determined by SunTrust or the Plan Administrator that such benefit should not have been paid (whether or not attributable to an error by the Executive, SunTrust, the Plan Administrator, or any other person), then SunTrust or the Plan Administrator may take such action as SunTrust or the Plan Administrator deems necessary or appropriate under the circumstances, including without limitation, (i) deducting the amount of any such overpayment theretofore made to or on behalf of such Executive from any succeeding payments to or on behalf of such Executive under this Plan or from any amounts due or owing to such Executive by SunTrust or any Affiliate or under any other plan, program or arrangement benefiting the employees or former employees of SunTrust or any Affiliate, or (ii) otherwise recovering such overpayment from whoever has benefited from it.


8.3	If SunTrust or the Plan Administrator determines that an underpayment of benefits has been made, SunTrust or the Plan Administrator shall take such action as it deems necessary or appropriate under the circumstances to remedy such situation. However, in no event shall interest be paid on the amount of any underpayment.

ARTICLE 9

ADMINISTRATION

9.1

Administration . The Plan Administrator is the named fiduciary of the Plan. The Plan Administrator may appoint, as it deems necessary or advisable, an individual or committee to act as its representative in matters affecting the Plan. The Plan Administrator shall have authority to control and manage the operation and administration of the Plan in good faith, and may adopt rules and regulations consistent with the terms of the Plan and necessary or advisable to administer the Plan properly and efficiently.

9.2

Discretionary Authority . The Plan Administrator shall have the exclusive responsibility and complete discretionary authority to control the operation and administration of the Plan, with all powers necessary to enable it to properly carry out its responsibilities under the Plan, including, but not limited to, the power to define and construe the terms of this Plan, to determine status, coverage and eligibility for benefits, to resolve all interpretative, equitable and other questions that arise in the operation and administration of this Plan, to adopt and implement rules to carry out the administration of the Plan, and to settle any and all disputed claims that may arise. The grant of such sole and complete discretionary authority to the Plan Administrator in the exercise of all its powers and duties is intended to invoke the arbitrary-and-capricious standard of review as opposed to the de novo standard.

9.3

Designees . The Plan Administrator may delegate all or any portion of its authority under the Plan to any other person(s). Any other person designated as named fiduciary or a Plan Administrator designated as responsible for a particular aspect of the control, management or administration of this Plan shall have the exclusive responsibility and complete discretionary authority to control those aspects of the operation and administration of the Plan with respect to which such designation is made, including, but not limited to, the power to determine benefits payable, to resolve all interpretative equitable and other questions that shall arise in the operation and administration of the particular aspect of the Plan over which such person has such discretionary authority, and to settle any and all disputed claims that may arise with respect to such aspect of the Plan.

9.4

Service as Fiduciary . A person may serve in more than one fiduciary capacity (as defined in ERISA) with respect to this Plan, and a fiduciary may be an Executive provided such person otherwise satisfies the requirements for participation under this Plan and he or she does not participate in any decisions that affect him or her specifically as an individual executive. All actions or determinations of SunTrust, the Committee, any person designated as a named fiduciary or a Plan Administrator on all matters within the scope of their authority under this Plan shall be final, conclusive

and binding on all persons and there is no right of appeal except as provided under the Plan’s claims procedures.

ARTICLE 10

INDEMNIFICATION

SunTrust and its Affiliates (to the extent permissible under law and consistent with their charters and bylaws) shall indemnify and hold harmless any employee, including any member of the Committee if acting as Plan Administrator or in any fiduciary capacity with respect to the Plan, for any liability, loss, expense, assessment or other cost of any kind or description whatsoever, including legal fees and expenses, which such employee may actually incur for his or her acts and omissions in the administration of the Plan.

ARTICLE 11

AMENDMENT AND TERMINATION

11.1

Amendment . Except as set forth in Section 11.3 below, SunTrust reserves the right, through action of the Committee at any time and from time to time, to amend this Plan in any respect whatsoever. An amendment may be made retroactively but a retroactive amendment may not affect any benefits for which an Executive is entitled due to a Qualifying Termination or a Change in Control Termination prior to the adoption of such amendment. An amendment may affect the payment of benefits under the Plan if necessary to cause the Plan to meet the applicable qualification requirements of the Code or ERISA.


11.2	Termination . Except as set forth in Section 11.3 below, SunTrust, through action of the Committee, reserves the right at any time to terminate the Plan. After such termination, SunTrust and the Affiliates shall have no obligation or duty whatsoever to pay or to fund benefits or to pay expenses of this Plan except for those expenses of this Plan accrued through the date of such termination.

11.3 Amendment or Termination on or after a Potential Change in Control or a Change in Control . No amendment adverse to the interest of the Executives may be adopted nor may the Plan be terminated (1) during the period commencing with a Potential Change in Control and ending on the second anniversary of the resulting Change in Control or (2) during the period commencing with the Change in Control and ending on the second anniversary of the Change in Control. For purposes of this Section 11.3, a “Potential Change in Control” is deemed to have occurred on the date the shareholders of SunTrust approve any transaction described in Section 2.6(iii) or Section 2.6(iv) and there is a Change in Control which results from such shareholder approval.

11.4

Compliance with Laws . Notwithstanding any other provision of the Plan or the summary plan description, SunTrust, through action of the Plan Administrator, may delay any benefit payment under the Plan and may refuse to pay any benefit otherwise due under the Plan, if the Plan Administrator, in its sole discretion, believes that any such payment may violate any law, ruling or regulation that applies to SunTrust or any of its Affiliates or any Executive. To the extent applicable, the Plan is intended to comply with Code Section 409A and official guidance issued thereunder and shall be interpreted, operated and administered in a manner consistent with this intention.

ARTICLE 12

MISCELLANEOUS

12.1

Spendthrift Clause . Except to the extent permitted by law, no benefit, payment or distribution under this Plan shall be subject to the claim of any creditor of an Executive or to any legal process by any creditor of an Executive, and no Executive shall have any right to alienate, commute, anticipate, or assign all or any portion of any benefit, payment or distribution under this Plan except to the extent expressly provided in this Plan. Notwithstanding the foregoing, this Section 12.1 shall not preclude the enforcement of a federal tax levy made pursuant to Code Section 6331 or the collection of an unpaid tax judgment. SunTrust and its Affiliates shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to benefits under this Plan.

12.2

Legally Incompetent . SunTrust may in its discretion direct payment due to an incompetent or disabled person, whether because of minority or mental or physical disability, or to the guardian of such person, or to the person having custody of such person, without further liability either on the part of SunTrust and its Affiliates, their officers, directors, employees or agents for the amount of such payment to the person on whose account such payment is made.


12.3	Reporting and Disclosure . SunTrust, acting through the corporate benefits area, shall act as the Plan Administrator for purposes of satisfying any reporting and disclosure requirements applicable to this Plan unless SunTrust, in its discretion, appoints another person or entity to satisfy such requirements.


12.4	Plan Not an Employment Contract . This Plan is not a contract of employment and participation in this Plan shall not give any Executive the right to be retained in the employ of SunTrust or any Affiliate.

12.5

Errors and Omissions . Individuals and entities charged with the administration of the Plan must see that it is administered in accordance with its terms as long as it is not in conflict with any other particular provision of applicable law with which it is intended to comply. If an innocent error or omission is discovered in the Plan’s operation or administration, and if SunTrust determines that it would cost more to correct the error than is warranted, and if SunTrust determines that the error did not result in discrimination prohibited by this Plan, then, to the extent that an adjustment will not, in SunTrust’s judgment, result in discrimination prohibited by the Plan, SunTrust may authorize any equitable adjustment it deems necessary or desirable to correct the error or omission.


12.6	Nonvested Benefits . Nothing in this Plan shall be construed as creating any vested rights to benefits in favor of any Executive.

12.7

Construction . The headings and subheadings in this Plan have been set forth for convenience of reference only and have no substantive effect whatsoever. Unless the context clearly indicates otherwise, references to the singular shall include the plural, references to the plural shall include the singular, references to the masculine gender shall include the feminine and references to any section shall be to a section in this Plan unless otherwise indicated. This Plan shall be construed, enforced and administered in accordance with the laws of the State of Georgia (excluding its choice-of-law rules) to the extent that such laws are not preempted by federal law.

(Signature Page Follows)

IN WITNESS WHEREOF, SunTrust Banks, Inc. has caused this Plan document, effective as of ________, to be executed and attested by its duly authorized officers on this ___________ day of ______________, 2014.

SUNTRUST BANKS, INC. ATTEST

By: By:

Title: _____________________________ Title:

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

SEC RELEASE NO. 33-8124

I, William H. Rogers, Jr., certify that:


(1)	I have reviewed this quarterly report on Form 10-Q of SunTrust Banks, Inc.;


(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


(4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


(5)	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2014 .

/s/ William H. Rogers, Jr.

William H. Rogers, Jr.,

Chairman and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

SEC RELEASE NO. 33-8124

I, Aleem Gillani, certify that:


(1)	I have reviewed this quarterly report on Form 10-Q of SunTrust Banks, Inc.;


(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


(4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


(5)	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2014 .

/s/ Aleem Gillani

Aleem Gillani, Corporate Executive

Vice President and Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of SunTrust Banks, Inc. (the “Company”) for the quarter ended June 30, 2014 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William H. Rogers, Jr., Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 6, 2014 .

/s/ William H. Rogers, Jr.

William H. Rogers, Jr.,

Chairman and Chief Executive Officer

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of SunTrust Banks, Inc. (the “Company”) for the quarter ended June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Aleem Gillani, Corporate Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 6, 2014 .

/s/ Aleem Gillani

Aleem Gillani, Corporate Executive

Vice President and Chief Financial Officer