SUNTRUST BANKS 
By ATLANTA, April 21, 2014 /PRNewswire/ -- SunTrust Banks, Inc. (NYSE: STI) today reported net income available to common shareholders of $393 million, or $0.73 per average common diluted share, representing a 16% increase from the first quarter of 2013. Earnings per average common diluted share were $0.77 in the prior quarter.
"Our 16% earnings per share growth over the past year reflects progress in several key areas--expense management, credit quality improvement, and increased lending to clients," said William H. Rogers, Jr., Chairman and Chief Executive Officer of SunTrust Banks, Inc. "To deliver further profitable growth, we are focusing our efforts on meeting more of our clients' needs and expanding relationships in key growth areas, while continuing our expense management discipline."
First Quarter 2014 Financial Highlights
Income Statement
-- Net income available to common shareholders was $393 million, or $0.73
per average common diluted share, compared to $413 million, or $0.77 per
share, in the prior quarter. Both quarters' results included discrete
items that benefited the effective tax rate.
-- Total revenue decreased $31 million, or 2%, compared to the prior
quarter.
-- Net interest income declined slightly due to fewer days.
-- Noninterest income decreased $23 million compared to the prior
quarter driven by lower transaction-related fees and seasonally
lower investment banking income, partially offset by higher
mortgage-related income. Compared to the first quarter of 2013,
noninterest income increased across most categories, except for the
anticipated decline in mortgage production income due to lower
refinance activity.
-- Noninterest expense decreased $4 million sequentially.
-- Compensation and benefits costs increased $77 million compared to
the fourth quarter primarily due to the typical increase in
incentive and employee benefit-related costs recognized in the first
quarter. All other expense categories declined compared to the
prior quarter. Compared to the first quarter of 2013, expenses were
largely unchanged.
Balance Sheet
-- Average performing loans increased $2.9 billion sequentially, or 2%,
with growth concentrated in C&I, commercial real estate, and consumer
loans. Average performing loans increased $8.2 billion, or 7%, compared
to the first quarter of 2013 driven by broad-based growth.
-- Average client deposits increased 1% both sequentially and from the
first quarter of 2013 with the favorable mix shift toward lower-cost
deposits continuing.
Capital
-- Estimated capital ratios continued to be well above regulatory
requirements. The Basel I and Basel III Tier 1 common ratios were an
estimated 9.9% and 9.7%, respectively.
-- During the quarter, the Company announced capital plans, subject to the
approval of SunTrust's Board of Directors, that include:
-- The purchase of up to $450 million of its common shares between the
second quarter of 2014 and the first quarter of 2015.
-- An increase in the quarterly common stock dividend from $0.10 per
share to $0.20 per share.
-- Book value per share was $39.44 and tangible book value per common share
was $27.82, up 2% and 3%, respectively compared to December 31, 2013.
The increase was primarily due to retained earnings growth.
Asset Quality
-- Asset quality continued to improve as nonperforming loans decreased 5%
from the prior quarter and totaled 0.72% of total loans at March 31,
2014.
-- Annualized net charge-offs decreased to 0.35% of average loans compared
to 0.40% in the prior quarter, while the allowance for loan losses to
total loans ratio declined slightly to 1.58%.
-- The provision for credit losses was stable on a sequential quarter basis
and declined $110 million compared to the first quarter of 2013.
Income Statement (presented on a fully taxable-equivalent basis) 1Q 2013 4Q 2013 1Q 2014
(Dollars in millions, except per share data)
Net income available to common shareholders $340 $413 $393
Earnings per average common diluted share 0.63 0.77 0.73
Total revenue 2,114 2,061 2,030
Total revenue, excluding net securities gains/losses 2,112 2,060 2,031
Net interest income 1,251 1,247 1,239
Provision for credit losses 212 101 102
Noninterest income 863 814 791
Noninterest expense 1,353 1,361 1,357
Net interest margin 3.33% 3.20% 3.19%
Balance Sheet
(Dollars in billions)
Average loans $120.9 $125.6 $128.5
Average consumer and commercial deposits 127.7 127.5 128.4
Capital
Tier 1 capital ratio(1) 11.20% 10.81% 10.85%
Common equity Tier 1 ratio(1) 10.13% 9.82% 9.90%
Total average shareholders' equity to total average assets 12.29% 12.23% 12.28%
Asset Quality
Net charge-offs to average loans (annualized) 0.76% 0.40% 0.35%
Allowance for loan losses to period end loans 1.79% 1.60% 1.58%
Nonperforming loans to total loans 1.21% 0.76% 0.72%
(1) Current period Tier 1 capital and common equity Tier 1 ratios are estimated as of the date of this news release.
Consolidated Financial Performance Details
(Presented on a fully taxable-equivalent basis unless otherwise noted)
Revenue
Total revenue was $2.0 billion for the current quarter, a decrease of $31 million, or 2%, compared to the prior quarter. The decrease was primarily driven by modest declines in net interest income and noninterest income, driven by fewer days in the current quarter and seasonally lower investment banking income, partially offset by higher mortgage-related income. Compared to the first quarter of 2013, total revenue declined $84 million, or 4%, primarily driven by declines in mortgage production income and net interest income and partially offset by higher investment banking, mortgage servicing, and wealth management related income.
Net Interest Income
Net interest income was $1.2 billion for the current quarter, a decrease of $8 million from the prior quarter primarily driven by two fewer days in the current quarter and a one basis point decline in the net interest margin, which were partially offset by higher average loan balances. Compared to the first quarter of 2013, net interest income decreased $12 million primarily due to a 14 basis point decline in the net interest margin, which was partially offset by higher average loan balances.
Net interest margin for the current quarter was 3.19%, a decrease of one basis point from the prior quarter, as the yield on loans declined three basis points. This was partially offset by a one basis point decline in interest-bearing deposit costs. The net interest margin decreased 14 basis points compared to the first quarter of 2013 primarily due to a 17 basis point decrease in earning asset yields, partially offset by a four basis point reduction in interest-bearing liability rates.
Noninterest Income
Noninterest income was $791 million for the current quarter compared to $814 million for the prior quarter and $863 million for the first quarter of 2013. Compared to the prior quarter, the $23 million decrease was primarily due to seasonal declines in service charges and investment banking income; however, also contributing to the decline was higher mark-to-market valuation losses on the Company's fair value debt, as well as declines in other income. These declines were partially offset by an increase in mortgage-related income. Compared to the first quarter of 2013, the $72 million decrease was primarily due to reductions in mortgage production income, partially offset by increases in investment banking, mortgage servicing, and wealth management related income.
Mortgage production income for the current quarter was $43 million compared to $31 million for the prior quarter and $159 million for the first quarter of 2013. The $12 million sequential quarter increase was driven by a decline in the mortgage repurchase provision and higher mark-to-market valuation gains on certain loans carried at fair value, partially offset by a decline in origination fees. Mortgage production volume declined to $3.1 billion in the current quarter compared to $3.9 billion in the prior quarter primarily due to a reduction in refinance activity. Compared to the first quarter of 2013, mortgage production income decreased $116 million due to a 65% decline in production volume and a decline in gain on sale margins. The mortgage repurchase provision was $5 million during the current quarter and the mortgage repurchase reserve was $83 million at March 31, 2014.
Mortgage servicing income was $54 million in the current quarter compared to $38 million in both the prior quarter and the first quarter of 2013. The $16 million increase compared to the prior quarter was due to a slower pace of loan prepayments and improved net hedge performance, whereas the increase compared to the first quarter of 2013 was primarily due to a slower pace of loan prepayments. The servicing portfolio was $135 billion at March 31, 2014 compared to $142 billion at March 31, 2013.
Investment banking income was $88 million for the current quarter compared to $96 million in the prior quarter and $68 million in the first quarter of 2013. The $8 million sequential quarter decrease was driven by a seasonal decline in M&A advisory and equity offering fees, partially offset by higher loan syndication income. The $20 million increase compared to the first quarter of 2013 was due to growth in loan syndication, M&A advisory, and equity offering fees.
Trading income was $49 million for the current quarter compared to $57 million for the prior quarter and $42 million for the first quarter of 2013. The $8 million sequential quarter decrease was due to a $13 million increase in mark-to-market valuation losses on the Company's fair value debt, partially offset by a modest increase in other trading income. The $7 million increase compared to the first quarter of 2013 was primarily driven by a decline in mark-to-market valuation losses on the Company's fair value debt.
Other noninterest income was $38 million for the current quarter compared to $55 million for the prior quarter and $44 million for the first quarter of 2013. The $17 million sequential quarter decrease was partially driven by gains realized on certain asset sales in the fourth quarter of 2013.
Noninterest Expense
Noninterest expense for the current quarter was $1.4 billion which was stable compared to the prior quarter and the first quarter of 2013. The current quarter included seasonally higher employee compensation and benefits expense and a $36 million impairment of certain legacy affordable housing assets. Offsetting these cost increases in the current quarter were broad-based declines in almost all expense categories due to declines in cyclical costs and a continued focus on expense management.
Employee compensation and benefits expense was $800 million in the current quarter compared to $723 million in the prior quarter and $759 million in the first quarter of 2013. The sequential quarter increase of $77 million was primarily the result of the seasonal increase in employee benefits and FICA taxes. The $41 million increase from the first quarter of 2013 was due to an incentive accrual reversal recorded in the first quarter of 2013 and higher salaries related to targeted hiring in certain businesses.
Operating losses were $21 million in the current quarter compared to $42 million in the prior quarter and $39 million in the first quarter of 2013. The decrease compared to both prior periods was due to lower costs associated with legacy mortgage and other legal related matters.
Outside processing and software expense was $170 million in the current quarter compared to $191 million in the prior quarter and $178 million in the first quarter of 2013. The $21 million sequential quarter decrease was partially due to declines in vendor-related costs and lower utilization of third party services. The $8 million decrease compared to the first quarter of 2013 was primarily due to lower mortgage production volume.
Marketing and customer development expense was $25 million in the current quarter compared to $40 million in the prior quarter and $30 million in the first quarter of 2013. The $15 million decrease compared to the prior quarter was due to seasonally higher advertising expenses during the fourth quarter. FDIC insurance and regulatory expense was $40 million in the current quarter compared to $41 million in the prior quarter and $54 million in the first quarter of 2013. The $14 million decrease compared to the first quarter of 2013 was due to a decrease in the assessment rate, reflecting the Company's reduced risk profile.
Other noninterest expense was $168 million in the current quarter compared to $187 million in the prior quarter and $153 million in the first quarter of 2013. The $19 million sequential quarter decrease was primarily driven by declines in collection, credit services, legal, and consulting expenses, partially offset by the aforementioned $36 million legacy asset impairment. The $15 million increase from the first quarter of 2013 was primarily driven by the aforementioned impairment charge.
Income Taxes
For the current quarter, the Company recorded an income tax provision of $125 million compared to $138 million for the prior quarter and $161 million for the first quarter of 2013. The effective tax rate was 24% in the current quarter compared to 25% in the prior quarter and 31% in the first quarter of 2013. The effective tax rate in the current and prior quarter was favorably impacted by certain discrete items.
Also during the current quarter, the Company adopted recently issued accounting guidance that resulted in the amortization expense of investments in low income housing properties being classified in the income tax provision, whereas the amortization was previously recorded in noninterest expense. Prior periods have been restated to conform to this new accounting guidance, resulting in a reduction in noninterest expense and increase in income tax provision of $16 million and $10 million for the prior quarter and first quarter of 2013, respectively. The adoption of the recently issued accounting guidance had no impact on net income or earnings per share.
Balance Sheet
At March 31, 2014, the Company had total assets of $179.5 billion and shareholders' equity of $21.8 billion, representing 12% of total assets. Book value per share was $39.44 and tangible book value per common share was $27.82, up 2% and 3%, respectively compared to December 31, 2013. The increase was primarily due to retained earnings growth.
Loans
Average performing loans were $127.6 billion for the current quarter, an increase of $2.9 billion, or 2%, from the prior quarter driven by a $2.1 billion, or 4%, increase in C&I loans and a $545 million, or 11%, increase in commercial real estate loans. Compared to the first quarter of 2013, average performing loans increased $8.2 billion, or 7%, with broad-based growth across most portfolios.
Deposits
Average client deposits for the current quarter were $128.4 billion compared to $127.5 billion in the prior quarter and $127.7 billion in the first quarter of 2013. Average client deposits increased $936 million during the current quarter due to a $1.2 billion, or 5%, increase in NOW balances, which was partially offset by a decline in average time deposit balances. Compared to the first quarter of 2013, average client deposits increased $741 million. The growth was driven by increases of $1.3 billion in NOW account balances and $1.0 billion in demand deposits, and was partially offset by a $1.8 billion, or 12%, decrease in average time deposits.
Capital and Liquidity
The Company's estimated capital ratios are well above current regulatory requirements with Tier 1 capital and Tier 1 common ratios at an estimated 10.85% and 9.90%, respectively, at March 31, 2014. The ratios of total average equity to total average assets and tangible equity to tangible assets were 12.28% and 9.01%, respectively, at March 31, 2014, both slightly increased compared to the prior quarter. The Company continues to have substantial available liquidity provided in the form of its client deposit base, cash, its portfolio of high-quality government-backed securities, and other available funding sources.
During the first quarter, the Company declared a common stock dividend of $0.10 per common share, consistent with the prior quarter and up $0.05 per share from the first quarter of 2013. Additionally, during the current quarter, the Company repurchased $50 million of its common stock.
In March, the Company announced that the Federal Reserve had completed its review of the Company's capital plan and did not object to the Company's capital plan. The Company plans to repurchase up to $450 million of its common stock between the second quarter of 2014 and the first quarter of 2015. Additionally, subject to Board approval, the Company intends to increase its quarterly common stock dividend to $0.20 per common share from the current $0.10 per common share, and maintain the current level of dividend payments on its preferred stock.
Asset Quality
Asset quality continued to improve as total nonperforming assets were $1.1 billion at March 31, 2014, declining 6% compared to the prior quarter. Nonperforming loans totaled $925 million at March 31, 2014, a decrease of 5% relative to the prior quarter. At March 31, 2014, the percentage of nonperforming loans to total loans was 0.72%, a decrease from 0.76% and 1.21% at December 31, 2013 and March 31, 2013, respectively. Other real estate owned totaled $151 million at March 31, 2014, an 11% decrease from the prior quarter and a decrease of 32% from the prior year.
Net charge-offs were $110 million during the current quarter compared to $128 million for the prior quarter and $226 million during the first quarter of 2013. The decrease in net charge-offs compared to the prior quarter and first quarter of 2013 was primarily driven by lower residential and commercial loan net charge-offs. The ratio of annualized net charge-offs to total average loans was 0.35% during the current quarter compared to 0.40% during the prior quarter and 0.76% during the first quarter of 2013. The provision for credit losses was $102 million, which was relatively stable compared to the prior quarter as improvements in asset quality were offset by loan growth. The provision for credit losses declined $110 million from the first quarter of 2013 as the improvement in asset quality more than offset the impact of loan growth on the allowance for loan losses.
At March 31, 2014, the allowance for loan losses was $2.0 billion and represented 1.58% of total loans, a $4 million and two basis point decrease, respectively from December 31, 2013. The slight decline in the allowance to total loans ratio was due to modest asset quality improvements in the first quarter.
Early stage delinquencies decreased seven basis points from the prior quarter to 0.67% at March 31, 2014. The decline was primarily due to consumer and mortgage loans. Excluding government-guaranteed loans, early stage delinquencies were 0.32%, down four basis points from the prior quarter.
Accruing restructured loans totaled $2.8 billion, and nonaccruing restructured loans totaled $0.4 billion at March 31, 2014, of which $2.9 billion of restructured loans related to residential loans, $0.1 billion were commercial loans, and $0.1 billion related to consumer loans.
BUSINESS SEGMENT FINANCIAL PERFORMANCE
Business Segment Results
The Company has included business segment financial tables as part of this release on the Investor Relations portion of its website at www.suntrust.com/investorrelations. The Company's business segments include: Consumer Banking and Private Wealth Management, Wholesale Banking, and Mortgage Banking. All revenue in the business segment tables is reported on a fully taxable-equivalent basis. For the business segments, results include net interest income, which is computed using matched-maturity funds transfer pricing. Further, 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. SunTrust also reports results for Corporate Other, which includes the Treasury department as well as the residual expense associated with operational and support expense allocations. The Corporate Other segment also includes differences created between internal management accounting practices and generally accepted accounting principles ("GAAP"), certain matched-maturity funds transfer pricing credits and charges, as well as equity and its related impact. A detailed discussion of the business segment results will be included in the Company's forthcoming Form 10-Q.
Corresponding Financial Tables and Information
Investors are encouraged to review the foregoing summary and discussion of SunTrust's earnings and financial condition in conjunction with the detailed financial tables and information which SunTrust has also published today and SunTrust's forthcoming Form 10-Q. Detailed financial tables and other information are also available on the Investor Relations portion of the Company's website at www.suntrust.com/investorrelations. This information is also included in a current report on Form 8-K furnished with the SEC today.
Conference Call
SunTrust management will host a conference call on April 21, 2014, at 8:00 a.m. (Eastern Time) to discuss the earnings results and business trends. Individuals may call in beginning at 7:45 a.m. (Eastern Time) by dialing 1-888-972-7805 (Passcode: 1Q14). Individuals calling from outside the United States should dial 1-517-308-9091 (Passcode: 1Q14). A replay of the call will be available approximately one hour after the call ends on April 21, 2014, and will remain available until May 21, 2014, by dialing 1-866-470-7047 (domestic) or 1-203-369-1481 (international). Alternatively, individuals may listen to the live webcast of the presentation by visiting the SunTrust investor relations website at www.suntrust.com/investorrelations. Beginning the afternoon of April 21, 2014, listeners may access an archived version of the webcast in the "Recent Earnings and Conference Presentations" subsection found on the investor relations webpage. This webcast will be archived and available for one year. A link to the Investor Relations page is also found in the footer of the SunTrust home page.
SunTrust Banks, Inc., headquartered in Atlanta, is one of the nation's largest banking organizations, serving a broad range of consumer, commercial, corporate and institutional clients. The Company operates an extensive branch and ATM network throughout the Southeast and Mid-Atlantic States and a full array of technology-based, 24-hour delivery channels. The Company also serves clients in selected markets nationally. Its primary businesses include deposit, credit, and trust and investment management services. Through various subsidiaries, the Company provides mortgage banking, insurance, brokerage, equipment leasing, and capital markets services. SunTrust's Internet address is www.suntrust.com.
Important Cautionary Statement About Forward-Looking Statements
This news release includes non-GAAP financial measures to describe SunTrust's performance. The reconciliations of those measures to GAAP measures are provided within or in the appendix to this news release. In this news release, the Company presents net interest income and net interest margin on a fully taxable-equivalent ("FTE") basis, and ratios on an annualized basis. The FTE basis adjusts for the tax-favored status of income from certain loans and investments. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts.
This news release contains forward-looking statements. Statements regarding estimates of the after-tax financial impact of various legal and regulatory matters, potential future share repurchases, and future expected dividends 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," "forecast," "goals," "targets," "initiatives," "focus," "potentially," "probably," "projects," "outlook" or similar expressions or future conditional verbs such as "may," "will," "should," "would," and "could." Forward-looking statements are based upon the current beliefs and expectations of management and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements 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. The estimated financial impact of these legal and regulatory matters depends upon (1) the successful negotiation, execution, and delivery of definitive agreements in several matters, (2) the ultimate resolution of certain legal matters which are not yet complete, (3) management's assumptions about the extent to which such amounts may be deducted for tax purposes, (4) the agreement of other necessary parties, and (5) our assumptions about the extent to which we can provide consumer relief to satisfy our financial obligations as contemplated by the agreements in principle with regulators. Future dividends, and the amount of any such dividend, must be declared by our board of directors in the future in their discretion. Also, future share repurchases and the timing of any such repurchase are subject to market conditions and management's discretion. Additional 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 Annual Report on Form 10-K for the year ended December 31, 2013 and in other periodic reports that we file with the SEC.
SunTrust Banks, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
(Dollars in millions, except per share data) (Unaudited)
Three Months Ended
March 31 %
--------
2014 2013 Change
---- ---- ------
EARNINGS & DIVIDENDS
Net income $405 $352 15%
Net income available to common shareholders 393 340 16%
Total revenue - FTE 1, 2 2,030 2,114 -4%
Total revenue - FTE excluding securities (losses)/gains, net 1, 2 2,031 2,112 -4%
Net income per average common share
Diluted 0.73 0.63 16%
Basic 0.74 0.64 16%
Dividends paid per common share 0.10 0.05 100%
CONDENSED BALANCE SHEETS
Selected Average Balances
-------------------------
Total assets $176,971 $171,808 3%
Earning assets 157,343 152,471 3%
Loans 128,525 120,882 6%
Intangible assets including MSRs 7,666 7,379 4%
MSRs 1,265 957 32%
Consumer and commercial deposits 128,396 127,655 1%
Brokered time and foreign deposits 2,013 2,170 -7%
Total shareholders' equity 21,727 21,117 3%
Preferred stock 725 725 0%
As of
-----
Total assets 179,542 172,435 4%
Earning assets 158,487 152,783 4%
Loans 129,196 120,804 7%
Allowance for loan and lease losses 2,040 2,152 -5%
Consumer and commercial deposits 130,933 127,735 3%
Brokered time and foreign deposits 2,023 2,180 -7%
Total shareholders' equity 21,817 21,194 3%
FINANCIAL RATIOS & OTHER DATA
Return on average total assets 0.93% 0.83% 12%
Return on average common shareholders' equity 7.59 6.77 12%
Return on average tangible common shareholders' equity (1) 10.78 9.88 9%
Net interest margin (2) 3.19 3.33 -4%
Efficiency ratio 2,4 66.83 63.97 4%
Tangible efficiency ratio 1, 2, 4 66.65 63.68 5%
Effective tax rate 4 23.61 31.43 -25%
Tier 1 common (3) 9.90 10.13 -2%
Tier 1 capital (3) 10.85 11.20 -3%
Total capital (3) 12.80 13.45 -5%
Tier 1 leverage (3) 9.55 9.26 3%
Total average shareholders' equity to total average assets 12.28 12.29 0%
Tangible equity to tangible assets 1 9.01 9.00 0%
Book value per common share $39.44 $37.89 4%
Tangible book value per common share (1) 27.82 26.33 6%
Market price:
High 41.26 29.98 38%
Low 36.23 26.93 35%
Close 39.79 28.81 38%
Market capitalization 21,279 15,563 37%
Average common shares outstanding (000s)
Diluted 536,992 539,862 -1%
Basic 531,162 535,680 -1%
Full-time equivalent employees 25,925 26,238 -1%
Number of ATMs 2,243 2,882 -22%
Full service banking offices 1,501 1,574 -5%
(1)See Appendix A for reconcilements of non-GAAP performance measures.
(2)Total revenue, net interest margin, and efficiency ratios are presented on a fully taxable-equivalent ("FTE") basis. The FTE basis adjusts for the tax-favored status of net interest income from certain loans and
investments. The Company believes 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. Total
revenue - FTE equals net interest income on a FTE basis plus noninterest income.
(3)Current period tier 1 common, tier 1 capital, total capital and tier 1 leverage ratios are estimated as of the earnings release date.
4Prior period amounts have been recalculated as a result of the Company's early adoption of ASU 2014-01, which required retrospective application.
SunTrust Banks, Inc. and Subsidiaries
FIVE QUARTER FINANCIAL HIGHLIGHTS
(Dollars in millions, except per share data) (Unaudited)
Three Months Ended
------------------
March 31 December 31 September 30 June 30 March 31
2014 2013 2013 2013 2013
---- ---- ---- ---- ----
EARNINGS & DIVIDENDS
Net income $405 $426 $189 $377 $352
Net income available to common shareholders 393 413 179 365 340
Net income available to common shareholders excluding 393 413 358 365 340
the impact of Form 8-K items from the third quarter of 2013 (1)
Total revenue - FTE 1, 2 2,030 2,061 1,920 2,100 2,114
Total revenue - FTE excluding securities (losses)/gains, net 1, 2 2,031 2,060 1,920 2,100 2,112
Net income per average common share
Diluted 0.73 0.77 0.33 0.68 0.63
Diluted, excluding the impact of Form 8-K items from the third quarter of 2013 (1) 0.73 0.77 0.66 0.68 0.63
Basic 0.74 0.78 0.33 0.68 0.64
Dividends paid per common share 0.10 0.10 0.10 0.10 0.05
CONDENSED BALANCE SHEETS
Selected Average Balances
-------------------------
Total assets $176,971 $173,791 $171,838 $172,537 $171,808
Earning assets 157,343 154,567 154,235 153,495 152,471
Loans 128,525 125,649 122,672 121,372 120,882
Intangible assets including MSRs 7,666 7,658 7,643 7,455 7,379
MSRs 1,265 1,253 1,232 1,039 957
Consumer and commercial deposits 128,396 127,460 126,618 126,579 127,655
Brokered time and foreign deposits 2,013 2,010 2,007 2,075 2,170
Total shareholders' equity 21,727 21,251 21,027 21,272 21,117
Preferred stock 725 725 725 725 725
As of
-----
Total assets 179,542 175,335 171,777 171,546 172,435
Earning assets 158,487 156,856 154,802 154,426 152,783
Loans 129,196 127,877 124,340 122,031 120,804
Allowance for loan and lease losses 2,040 2,044 2,071 2,125 2,152
Consumer and commercial deposits 130,933 127,735 126,861 125,588 127,735
Brokered time and foreign deposits 2,023 2,024 2,022 2,031 2,180
Total shareholders' equity 21,817 21,422 21,070 21,007 21,194
FINANCIAL RATIOS & OTHER DATA
Return on average total assets 0.93% 0.97% 0.44% 0.88% 0.83%
Return on average common shareholders' equity 7.59 7.99 3.49 7.12 6.77
Return on average tangible common shareholders' equity (1) 10.78 11.61 5.10 10.35 9.88
Net interest margin(2) 3.19 3.20 3.19 3.25 3.33
Efficiency ratio 2, 4 66.83 66.05 90.13 66.07 63.97
Tangible efficiency ratio 1, 2, 4 66.65 65.84 89.82 65.78 63.68
Effective tax rate 4, 5 23.61 24.50 NM 29.27 31.43
Tier 1 common (3) 9.90 9.82 9.94 10.19 10.13
Tier 1 capital (3) 10.85 10.81 10.97 11.24 11.20
Total capital (3) 12.80 12.81 13.04 13.43 13.45
Tier 1 leverage (3) 9.55 9.58 9.46 9.40 9.26
Total average shareholders' equity to total average assets 12.28 12.23 12.24 12.33 12.29
Tangible equity to tangible assets 1 9.01 9.00 8.98 8.95 9.00
Book value per common share $39.44 $38.61 $37.85 $37.65 $37.89
Tangible book value per common share (1) 27.82 27.01 26.27 26.08 26.33
Market price:
High 41.26 36.99 36.29 32.84 29.98
Low 36.23 31.97 31.59 26.97 26.93
Close 39.79 36.81 32.42 31.57 28.81
Market capitalization 21,279 19,734 17,427 17,005 15,563
Average common shares outstanding (000s)
Diluted 536,992 537,921 538,850 539,763 539,862
Basic 531,162 532,492 533,829 535,172 535,680
Full-time equivalent employees 25,925 26,281 26,409 26,199 26,238
Number of ATMs 2,243 2,243 2,846 2,874 2,882
Full service banking offices 1,501 1,497 1,508 1,539 1,574
(1)See Appendix A for reconcilements of non-GAAP performance measures.
(2)Total revenue, net interest margin, and efficiency ratios are presented on a fully taxable-equivalent ("FTE") basis. The FTE basis adjusts for the tax-favored status of net interest income from certain loans and investments. The Company believes 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. Total revenue - FTE equals net interest income on a FTE basis plus noninterest income.
(3)Current period tier 1 common, tier 1 capital, total capital and tier 1 leverage ratios are estimated as of the earnings release date.
4Prior period amounts have been recalculated as a result of the Company's early adoption of ASU 2014-01, which required retrospective application.
5"NM" - Not meaningful. Calculated rate was not considered to be meaningful.
SunTrust Banks, Inc. and Subsidiaries
RECONCILEMENT OF NON-GAAP MEASURES
APPENDIX A TO THE EARNINGS RELEASE
(Dollars in millions, except per share data) (Unaudited)
Three Months Ended
------------------
March 31 December 31 September 30 June 30 March 31
2014 2013 2013 2013 2013
---- ---- ---- ---- ----
NON-GAAP MEASURES PRESENTED IN THE EARNINGS RELEASE 1
-----------------------------------------------------
$1,204 $1,213 $1,208 $1,211 $1,221
Net interest income
Taxable-equivalent adjustment 35 34 32 31 30
--- --- --- --- ---
Net interest income - FTE 1,239 1,247 1,240 1,242 1,251
Noninterest income 791 814 680 858 863
--- --- --- --- ---
Total revenue - FTE 2,030 2,061 1,920 2,100 2,114
Securities losses/(gains), net 1 (1) 0 0 (2)
--- --- --- --- ---
Total revenue - FTE excluding net securities (losses)/gains (2) $2,031 $2,060 $1,920 $2,100 $2,112
====== ====== ====== ====== ======
791 814 680 858 863
Noninterest income
Securities losses/(gains), net 1 (1) 0 0 (2)
--- --- --- --- ---
Noninterest income excluding net securities (losses)/gains (2) $792 $813 $680 $858 $861
==== ==== ==== ==== ====
7.59% 7.99% 3.49% 7.12% 6.77%
Return on average common shareholders' equity
Effect of removing average intangibles excluding MSRs 3.19% 3.62% 1.61% 3.23% 3.11%
Return on average tangible common shareholders' equity (3) 10.78% 11.61% 5.10% 10.35% 9.88%
===== ===== ==== ===== ====
66.83% 66.05% 90.13% 66.07% 63.97%
Efficiency ratio 4, 10
Impact of excluding amortization of intangible assets -0.18% -0.21% -0.31% -0.29% -0.29%
Tangible efficiency ratio 5, 10 66.65% 65.84% 89.82% 65.78% 63.68%
===== ===== ===== ===== =====
March 31 December 31 September 30 June 30 March 31
2014 2013 2013 2013 2013
---- ---- ---- ---- ----
Total shareholders' equity $21,817 $21,422 $21,070 $21,007 $21,194
Goodwill, net of deferred taxes of $193 million, $186 million, $180 million, $174 million, (6,184) (6,183) (6,189) (6,195) (6,200)
and $169 million, respectively
Other intangible assets, net of deferred taxes of $1million, $2 million, $2 million, $4 (1,281) (1,332) (1,285) (1,240) (1,071)
million, and $5 million, respectively, and MSRs
MSRs 1,251 1,300 1,248 1,199 1,025
Tangible equity 15,603 15,207 14,844 14,771 14,948
Preferred stock (725) (725) (725) (725) (725)
---- ---- ---- ---- ----
Tangible common equity $14,878 $14,482 $14,119 $14,046 $14,223
======= ======= ======= ======= =======
Total assets $179,542 $175,335 $171,777 $171,546 $172,435
Goodwill (6,377) (6,369) (6,369) (6,369) (6,369)
Other intangible assets including MSRs (1,282) (1,334) (1,287) (1,244) (1,076)
MSRs 1,251 1,300 1,248 1,199 1,025
Tangible assets $173,134 $168,932 $165,369 $165,132 $166,015
======== ======== ======== ======== ========
9.01% 9.00% 8.98% 8.95% 9.00%
Tangible equity to tangible assets 6
Tangible book value per common share 7 $27.82 $27.01 $26.27 $26.08 $26.33
Total loans $129,196 $127,877 $124,340 $122,031 $120,804
Government guaranteed loans (8,828) (8,961) (9,016) (9,053) (9,205)
Loans held at fair value (299) (302) (316) (339) (360)
Total loans, excluding government guaranteed and fair value loans $120,069 $118,614 $115,008 $112,639 $111,239
======== ======== ======== ======== ========
Allowance to total loans, excluding government guaranteed and fair value loans 8 1.70% 1.72% 1.80% 1.89% 1.93%
SunTrust Banks, Inc. and Subsidiaries
RECONCILEMENT OF NON-GAAP MEASURES
APPENDIX A TO THE EARNINGS RELEASE, continued
(Dollars in millions, except per share data) (Unaudited)
-------------------------------------------------------
Three Months Ended
------------------
March 31 December 31 September 30 June 30 March 31
2014 2013 2013 2013 2013
---- ---- ---- ---- ----
NON-GAAP MEASURES PRESENTED IN THE EARNINGS RELEASE (1)
------------------------------------------------------
Net income available to common shareholders $393 $413 $179 $365 $340
Form 8-K items from the third quarters of 2013:
Operating losses related to settlement of certain legal matters 0 0 323 0 0
Mortgage repurchase provision related to repurchase settlements 0 0 63 0 0
Provision for unrecoverable servicing advances 0 0 96 0 0
Tax benefit related to above items 0 0 (190) 0 0
Net tax benefit related to subsidiary reorganization and other 0 0 (113) 0 0
Net income available to common shareholders, excluding the $393 $413 $358 $365 $340
impact of Form 8-K items from the third quarters of 2013 9
Net income per average common share, diluted $0.73 $0.77 $0.33 $0.68 $0.63
Impact of Form 8-K items from the third quarters of 2013 0.00 0.00 0.33 0.00 0.00
Net income per average common diluted share, excluding the $0.73 $0.77 $0.66 $0.68 $0.63
impact of Form 8-K items from the third quarters of 2013 9
1 Certain amounts in this schedule are presented net of applicable income taxes, which are calculated based on each subsidiary's federal and state tax rates and laws. In general, the federal marginal tax rate is 35%, but the state marginal tax rates range from 1% to 8% in accordance with the
subsidiary's income tax filing requirements with various tax authorities. Additionally, the effective tax rate may differ from the federal and state marginal tax rates in certain cases where a permanent difference exists.
(2)SunTrust presents total revenue -FTE excluding net securities gains/losses and noninterest income excluding net securities gains/losses. The Company believes revenue and noninterest income without net securities gains and losses is more indicative of the Company's performance because it
isolates income and losses that are primarily client relationship and client transaction driven and is more indicative of normalized operations.
(3)SunTrust presents return on average tangible common shareholders' equity to exclude intangible assets, except for MSRs. The Company believes this measure is useful to investors because, by removing the effect of intangible assets, except for MSRs, (the level of which may vary from company to
company), it allows investors to more easily compare the Company's return on average common shareholders' equity to other companies in the industry who present a similar measure. The Company also believes that removing intangible assets, except for MSRs, is a more relevant measure of the
return on the Company's common shareholders' equity.
4Computed 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. The Company believes 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.
5SunTrust presents a tangible efficiency ratio which excludes the amortization of intangible assets. The Company believes 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 the Company's efficiency to other companies in the industry. This measure is utilized by management to assess the efficiency of the Company and its lines of business.
6SunTrust presents a tangible equity to tangible assets ratio that excludes the after-tax impact of purchase accounting intangible assets. The Company believes 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 the Company's capital adequacy to other companies in the industry. This measure is used by management to analyze capital adequacy.
7SunTrust presents 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. The Company believes 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 the Company's book value on common stock to other companies in the industry.
8SunTrust presents a ratio of allowance to total loans, excluding government guaranteed and fair value loans. The Company believes that the exclusion of loans 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 better depicts the allowance relative to loans that are covered by it.
9SunTrust presents net income available to common shareholders and net income per average common diluted share excluding items previously announced on Form 8-K filed with SEC on October 10, 2013. The Company believes this measure is useful to investors because it removes the effect of material
items impacting current years' results, allowing a more useful view of normalized operations. Removing these items also allows investors to compare the Company's results to other companies in the industry that may not have had similar items impacting their results.
10Prior period amounts have been recalculated as a result of the Company's early adoption of ASU 2014-01, which required retrospective application.
SOURCE SunTrust Banks, Inc.
