Employee Benefit Plans

9 Months Ended

Sep. 30, 2011

Employee Benefit Plans

NOTE 10 - EMPLOYEE BENEFIT PLANS

The Company sponsors various short-term incentive and LTI plans for eligible employees. The Company delivers LTIs through various incentive programs, including stock options, restricted stock, LTI cash, and salary shares. Compensation expense related to LTI cash was $9 million and $8 million for the three months ended September 30, 2011 and 2010, respectively, and $27 million and $22 million for the nine months ended September 30, 2011 and 2010, respectively.

TARP prohibited the payment of any bonus, incentive compensation or stock option award to our five NEOs and certain other highly compensated executives. As a result, until TARP repayment, SunTrust continued the use of salary shares in 2011 as defined in the U.S. Treasury’s Interim Final Rule on TARP Standards for Compensation and Corporate Governance. Specifically, the Company paid additional base salary amounts in the form of stock (salary shares) to the senior executive officers and some of the other employees who were among the next 20 most highly-compensated employees. The Company did this each pay period in the form of stock units under the SunTrust Banks, Inc. 2009 Stock Plan. The stock units did not include any rights to receive dividends or dividend equivalents. As required by The Emergency Economic Stabilization Act of 2008, each salary share was non-forfeitable upon grant but may not be sold or transferred until the expiration of a holding period (except as necessary to satisfy applicable withholding taxes). As a result, these individuals are at risk for the value of our stock price until the stock unit is settled. The stock units are settled in cash; for the 2010 salary shares, one half was settled on March 31, 2011 and one half will be settled on March 31, 2012, unless settled earlier due to the executive’s death. The 2011 salary shares were settled on the date of TARP repayment on March 30, 2011. The amount to be paid on settlement of the stock units will be equal to the value of a share of SunTrust common stock on the settlement date. Benefit plan determinations and limits were established to ensure that the salary shares were accounted for equitably within relevant benefit plans. As of September 30, 2011, the accrual related to salary shares was $3 million.

Following the repayment by SunTrust of the U.S. Treasury’s TARP investment in the Company, the Compensation Committee of the Board approved a revised compensation structure for the Company’s NEOs. Effective April 1, 2011, the compensation structure includes an annual incentive opportunity under the Company’s existing Management Incentive Plan. A new LTI arrangement was also implemented. The design of the LTI plan delivers 50% restricted stock units with vesting tied to the Company’s total shareholder return relative to a peer group consisting of the banks which comprise the KBW Bank Sector Index. The remaining 50% of the LTI plan will consist of approximately half restricted stock units, the vesting of which is tied to the achievement of a Tier 1 capital ratio target, and the other half in stock options.

Stock-Based Compensation

The Company granted 813,265 shares of stock options, 1,375,406 shares of restricted stock and 344,590 restricted stock units during the first nine months of 2011. The weighted average prices of these grants were $29.70, $31.44 and $37.57, respectively. The fair value of options granted during the first nine months of 2011 and 2010 were $10.51 and $12.78 per share, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

	Nine Months Ended September 30
	2011		2010
Dividend yield	0.75	%	0.17	%
Expected stock price volatility	34.87		56.09
Risk-free interest rate (weighted average)	2.48		2.80
Expected life of options	6 years		6 years

Stock-based compensation expense recognized in noninterest expense was as follows:

	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2011		2010		2011		2010
Stock-based compensation expense:
Stock options		$4		$4		$11		$11
Restricted stock	8		9		25		31
Restricted stock units	1		—		9		—
Total stock-based compensation expense		$13		$13		$45		$42

The recognized stock-based compensation tax benefit amounted to $5 million for both of the three months ended September 30, 2011 and 2010. For the nine months ended September 30, 2011 and 2010, the recognized stock-based compensation tax benefit was $17 million and $16 million, respectively.

Retirement Plans

SunTrust did not contribute to either of its noncontributory qualified retirement plans ("Retirement Benefits Plans") in the first nine months of 2011. The expected long-term rate of return on plan assets for the Retirement Benefit Plans is 7.75% for 2011.

Anticipated employer contributions/benefit payments for 2011 are $8 million for the SERP. For the three and nine months ended September 30, 2011, the actual contributions/benefit payments were $1 million and $6 million, respectively.

SunTrust contributed less than $1 million to the Postretirement Welfare Plan in the third quarter of 2011. Additionally, SunTrust expects to receive a Medicare Part D Subsidy reimbursement for 2011 in the amount of $3 million. The expected pre-tax long-term rate of return on plan assets for the Postretirement Welfare Plan is 6.75% for 2011.

	Three Months Ended September 30
	2011						2010
(Dollars in millions)	Retirement Benefits Plans			Other   Postretirement   Benefits			Retirement   Benefits Plans			Other   Postretirement   Benefits
Service cost		$18			$—			$17			$—
Interest cost	32			3			33			3
Expected return on plan assets	(47		)	(2		)	(46		)	(2		)
Amortization of prior service cost	(5		)	—			(3		)	—
Recognized net actuarial loss	11			—			16			—
Net periodic benefit cost		$9			$1			$17			$1
	Nine Months Ended September 30
	2011						2010
(Dollars in millions)	Retirement Benefits Plans			Other   Postretirement   Benefits			Retirement   Benefits Plans			Other   Postretirement   Benefits
Service cost		$53			$—			$52			$—
Interest cost	97			7			97			7
Expected return on plan assets	(142		)	(6		)	(137		)	(6		)
Amortization of prior service cost	(14		)	—			(9		)	—
Recognized net actuarial loss	32			1			46			1
Net periodic benefit cost		$26			$2			$49			$2