First, a comment on the change in format of our Annual Report.We have moved away from colorful photos, creative themes andcostly graphics, and we use a comprehensive regulatory reportto convey details of the year’s financial results.This fresh approach reflects feedback from shareholders as wellas our own sense of efficiency. As we see it, spending extramoney on a glossy, paper-based annual report when so manypeople prefer electronically delivered information simply is notin our shareholders’ financial interest. If you would like to knowmore about SunTrust strategies, performance, products or services,please visit our Web site (suntrust.com) or contact us directly.
The interest rate environment presented a real challenge for theU.S. banking industry in 2006. At SunTrust, as at other banks,an inverted yield curve – the difference between short-term andlong-term interest rates – brought pressure to bear on our netinterest margin. This, in turn, meant less robust growth in overallnet income than we expected when the year began or that webelieve is indicative of our true longer-term earnings potential.Margin pressures notwithstanding, the Company posted recordnet income available to common shareholders for the year of$2.1 billion, which was up 6 percent over the prior year. Dilutedearnings per common share were $5.82, also up 6 percent overthe prior year. Reflected in this performance were gains in mostmajor earnings components, including:•Total revenue was $8.2 billion in 2006, up 5 percentfrom the prior year.•Net interest income was $4.7 billion, up 2 percentfrom a year earlier.•Noninterest income was $3.5 billion, up 10 percentfrom 2005.•Noninterest expense was $4.9 billion, up 4 percentfrom a year ago.•Average loans and consumer and commercial deposits grew,respectively, 10 percent and 4 percent over a year ago.In the credit quality arena, net charge-offs were 0.21 percentof average loans, a level that is better than the Company’shistorical average.Complete 2006 financial results, including each of the aboveitems, are discussed in considerable detail in the Form 10-Kwhich follows this letter. Included is a breakdown of the financialperformance of our primary lines of business.In February 2007, the Board of Directors approved a 20 percentincrease in the quarterly dividend on SunTrust common stock,a move consistent with the Company’s multi-year pattern ofannual dividend increases. The current indicated annualdividend is now $2.92 per share.
2006 WAS NOT AN EASY YEAR FOR THE U.S. BANKING INDUSTRY. SUNTRUST, LIKE OTHER LARGEBANKS, FELT THE IMPACT OF PRESSURES THAT CAME LARGELY FROM AN UNACCOMMODATINGINTEREST RATE ENVIRONMENT. THE GOOD NEWS IS THAT THE DISTINCTIVE STRENGTHS OF OURINSTITUTION—NOTABLY THE COMMITMENT OF OUR PEOPLE TO HELP OUR CLIENTS—PERMITTEDUS TO GROW EARNINGS WHILE CONTINUING TO INVEST FOR FUTURE GROWTH. IN THIS LETTER,WE WILL SHARE WITH YOU SOME PERSPECTIVES ON 2006. IMPORTANTLY, WE WILL ALSO TALKABOUT HOW WE ARE WORKING TO ENHANCE OUR FINANCIAL PERFORMANCE AS WE LOOK AHEAD.
To Our Shareholders