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of Atlanta is set to "garner a higher multiple and outperform peers going forward," according to FBR analyst Paul Miller.

SunTrust's shares closed at $29.05 Friday. The shares traded for 1.1 times their reported March 31 tangible book value of $26.33, and for 10.0 times the consensus 2014 earnings estimate of $2.90 a share, among analysts polled by Thomson Reuters. The consensus 2013 EPS estimate is $2.68.

Miller on Monday upgraded SunTrust to an "outperform" rating from a "market perform" rating and raised his price target for the shares to $37 from $30.00. The analyst said in a note to clients that the bank's "meaningful progress" in working through mortgage repurchase demands, resolution of credit problems and "strong fee income platform," should allow its share price to reflect a higher multiple to tangible book value.

Miller's price target for SunTrust equates to 1.3 times an estimated year-end 2013 tangible book value of $28.50.

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SunTrust reported first-quarter net income available to common shareholders of $340 million, or 63 cents a share, compared to $350 million, or 65 cents a share, in the fourth quarter, and $245 million, or 46 cents a share, in the first quarter of 2012. Please see


earnings coverage

for a detailed review of the company's financial results.

A great deal of coverage for regional banks this earnings season has centered around the decline in mortgage revenue from elevated fourth-quarter levels, as refinancing volume has declined, and rising long-term market rates have led to a decline on lenders' gains on the sale of new mortgage loans, mainly to

Fannie Mae



Freddie Mac


. SunTrust's mortgage production revenue in the first quarter was $159 million, declining from $241 million the previous quarter, but increasing from $63 million a year earlier.

The most positive developments for SunTrust were a continued decline in credit costs, and further signs that the company has put its risk of losses on legacy mortgage repurchase demands in the rear view mirror.

SunTrust's pretax income was directly boosted by a decline in the provision for credit losses to $212 million in the first quarter from $328 million in the fourth quarter and $317 million in the first quarter of 2012. The provision is the amount added to loan loss reserves each quarter, to cover anticipated losses.

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Nonperforming loans made up 1.21% of total loans as of March 31, improving from 1.27% the previous quarter and 2.6% a year earlier. Meanwhile loan losses continued to decline. The annualized ratio of net charge-offs to average loans for the first quarter was 0.76%, declining from 1.30% in the fourth quarter and 1.38% in the first quarter of 2012.

SunTrust in the third quarter took a major step to try and end significant further losses from investors' mortgage repurchase demands, for loans securitized before 2009. During the third quarter, the company added $371 million to its reserve for mortgage repurchases, taking the reserve "to a level that is expected to cover the estimated losses on loans sold to Government Sponsored Enterprises ("GSEs") prior to 2009 and negatively affected noninterest income."

Two quarters later, the plan seems to be working, as the company had $559 million in pending mortgage putback claims as of March 31, and its mortgage repurchase reserve stood at $513 million. SunTrust added just $14 million to its mortgage repurchase reserve during the first quarter.

During the company's earnings call on April 19, SunTrust CFO Aleem Gillani said that an increase in repurchase requests to $491 million in the first quarter from $384 million the previous quarter and $448 million a year earlier, "due to an increased pace by the GSEs, while the pending population declined due to even higher increased resolutions by the GSEs and SunTrust. Meanwhile, full file requests, which as you know are the precursors to future demands, declined by 20% from the fourth quarter."

The important thing for investors is that the company expects minimal further losses from mortgage putbacks. Miller agrees, writing that "we believe the company reps and warrants losses will likely be minimal in the near term."

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Miller also sees SunTrust's relatively high percentage of revenue from fees as a long-term advantage for the bank. Fee income -- including service charges on deposit accounts, trust and investment management income, investment services, investment banking, mortgage banking and card fees -- made up 41% of first-quarter operating revenue, according to Miller. "Although fee income fell quarter over quarter in 1Q13, we expect it to rebound going forward as investment banking income rises and mortgage banking continues to provide a tailwind to earnings," he wrote.

"Additionally, expenses fell significantly in the quarter, and we expect them to remain lower than in past quarters, further supporting earnings," Miller wrote.

SunTrust's shares have returned 3% year-to-date, following a 62% return in 2012. Following the completion of the completion of annual

Federal Reserve

stress tests in March, the company announced approval for share repurchases of up to $200 million through the first quarter of 2014. The company was also approved to raise its quarterly dividend on common shares to 10 cents from 5 cents, subject to board of directors approval.

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Interested in more on SunTrust? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.