SUNTRUST BANKS ATLANTA, July 21, 2014 /PRNewswire/ -- SunTrust Banks, Inc. (NYSE: STI) today reported net income available to common shareholders of $387 million, or $0.72 per average common diluted share. The current quarter's results were negatively impacted by $0.09 per share related to specific items described below. Excluding these items, earnings per share in the current quarter were $0.81 compared to $0.73 in the prior quarter and $0.68 in the second quarter of 2013. For the first half of 2014, earnings per share were $1.45, and excluding the items described below, were $1.54 per share, 18% higher than the first half of 2013.
Summary of July 3, 2014 8-K and Other Legacy Mortgage-Related Matters:
-- SunTrust Mortgage entered into a settlement agreement regarding its
administration of the federal Home Affordable Modification Program that
resulted in a $204 million pre-tax charge.
-- The Company recorded a $105 million pre-tax gain pursuant to the
completion of the sale of its asset management subsidiary, RidgeWorth
Capital Management, Inc. ("RidgeWorth").
-- The progression of other legacy mortgage-related matters resulted in a
net $25 million accrual reversal.
-- In aggregate, the aforementioned items negatively impacted net income in
the current quarter by $49 million, or $0.09 per share.
"Favorable revenue trends, particularly growth in loans, deposits and fee income, coupled with continued expense discipline and further asset quality improvements led to solid core earnings growth this quarter," said William H. Rogers, Jr., Chairman and Chief Executive Officer of SunTrust Banks, Inc. "The sale of RidgeWorth and resolution of certain legacy mortgage matters enable us to further sharpen our efforts to deepen client relationships, expand key businesses, and improve efficiency to benefit our shareholders, clients and communities."
Second Quarter 2014 Financial Highlights
Income Statement
-- Net income available to common shareholders was $387 million, or $0.72
per average common diluted share; excluding the July 3, 2014 8-K and
other legacy mortgage-related matters, net income available to common
shareholders was $436 million, or $0.81 per share.
-- Net income available to common shareholders was $393 million, or
$0.73 per share, and $365 million, or $0.68 per share, in the prior
quarter and second quarter of 2013, respectively.
-- Total revenue increased $171 million, or 8%, compared to the prior
quarter. Excluding the sale of RidgeWorth, total revenue increased $66
million, or 3%, compared to the prior quarter.
-- Net interest income increased $5 million due to loan growth and one
additional day.
-- Excluding the sale of RidgeWorth, noninterest income increased $61
million compared to the prior quarter, driven by higher investment
banking income and broad-based fee income growth.
-- Reported noninterest expense increased $160 million compared to the
prior quarter. Excluding the $179 million in specific legacy
mortgage-related operating losses incurred in the second quarter and the
$36 million legacy affordable housing impairment in the first quarter,
noninterest expense increased $17 million sequentially.
Balance Sheet
-- Average performing loans increased $2.3 billion, or 2%, sequentially,
and $9.8 billion, or 8%, compared to the second quarter of 2013, driven
primarily by growth in the C&I, commercial real estate, and consumer
portfolios.
-- Average client deposits increased 2% sequentially and 3% compared to the
second 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 Tier 1 common and Basel III Common Equity Tier
1 ratios were both estimated to be 9.7%.
-- During the quarter, the Company increased its quarterly common stock
dividend from $0.10 per share to $0.20 per share and repurchased $83
million of its common shares.
-- Book value per share was $40.18 and tangible book value per common share
was $28.64, up 2% and 3%, respectively, compared to March 31, 2014. The
increase was primarily due to growth in retained earnings.
Asset Quality
-- Asset quality continued to improve as nonperforming loans decreased 3%
from the prior quarter and totaled 0.69% of total loans at June 30,
2014.
-- The provision for credit losses declined $29 million compared to the
prior quarter and $73 million compared to the second quarter of 2013.
-- Annualized net charge-offs were 0.35% of average loans and unchanged
relative to the prior quarter.
Income Statement
(presented on a
fully taxable-
equivalent basis) 2Q 2013 1Q 2014 2Q 2014
(Dollars in millions, except per share
data)
Net income available
to common
shareholders $365 $393 $387
Earnings per average
common diluted
share 0.68 0.73 0.72
Total revenue 2,100 2,030 2,201
Net interest income 1,242 1,239 1,244
Provision for credit
losses 146 102 73
Noninterest income 858 791 957
Noninterest expense 1,387 1,357 1,517
Net interest margin 3.25% 3.19% 3.11%
Balance Sheet
(Dollars in billions)
Average loans $121.4 $128.5 $130.7
Average consumer and
commercial deposits 126.6 128.4 130.5
Capital
Tier 1 capital
ratio(1) 11.24% 10.88% 10.65%
Tier 1 common
ratio(1) 10.19% 9.90% 9.70%
Total average
shareholders'
equity to total
average assets 12.33% 12.28% 12.23%
Asset Quality
Net charge-offs to
average loans
(annualized) 0.59% 0.35% 0.35%
Allowance for loan
and lease losses to
period end loans 1.75% 1.58% 1.55%
Nonperforming loans
to total loans 0.94% 0.72% 0.69%
(1) Current period Tier 1 capital and Tier 1 common 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 $2.2 billion for the current quarter, an increase of $171 million, or 8%, compared to the prior quarter. Excluding the sale of RidgeWorth, total revenue increased $66 million, or 3%, compared to the prior quarter. The sequential increase was primarily driven by broad-based growth across most noninterest income categories. Compared to the second quarter of 2013, total revenue, excluding the sale of RidgeWorth, declined $4 million as higher investment banking and mortgage servicing income was offset by a decline in mortgage production income.
For the six months ended June 30, 2014, total revenue was $4.2 billion, an increase of $17 million compared to the first six months of 2013. Excluding the sale of RidgeWorth, total revenue declined $88 million. The decline was primarily driven by lower mortgage production income, which was partially offset by increases in mortgage servicing, investment banking, and retail investment services.
Net Interest Income
Net interest income was $1.2 billion for the current quarter, an increase of $5 million from the prior quarter. The increase was primarily due to one additional day and higher average loan balances, partially offset by a 7 basis point decline in loan yields. Compared to the second quarter of 2013, net interest income increased $2 million primarily due to higher average loan balances, partially offset by a 15 basis point decline in earning asset yields.
Net interest margin for the current quarter was 3.11%, a decline of 8 basis points from the prior quarter. This decline was primarily driven by a 7 basis point decline in loan yields while interest-bearing deposit costs remained stable. The net interest margin decreased 14 basis points compared to the second quarter of 2013, primarily due to a 15 basis point decrease in earning asset yields, partially offset by a 2 basis point reduction in rates paid on interest-bearing liabilities.
For the six months ended June 30, 2014, net interest income was $2.5 billion, a $10 million decrease compared to the first six months of 2013. The net interest margin was 3.15% for the first half of 2014, a 14 basis point reduction compared to the same period in 2013, largely driven by a decline in loan yields.
Noninterest Income
Noninterest income was $957 million for the current quarter compared to $791 million for the prior quarter and $858 million for the second quarter of 2013. Excluding the sale of RidgeWorth, noninterest income increased $61 million sequentially and declined $6 million compared to the prior year. The sequential increase was due to growth in investment banking, a $19 million gain from the sale of government guaranteed residential mortgage loans, and broad-based increases in most other fee income categories. These increases were partially offset by a decline in trust and investment management income as a result of the sale of RidgeWorth. Compared to the prior year, the $6 million decline was primarily due to lower mortgage production income, partially offset by higher investment banking and mortgage servicing income.
Mortgage production income for the current quarter was $52 million compared to $43 million for the prior quarter and $133 million for the second quarter of 2013. The $9 million sequential quarter increase was driven by a 31% increase in closed production volume, primarily related to increased purchase activity. Compared to the second quarter of 2013, mortgage production income decreased $81 million, primarily due to a decline in refinance production volume and gain on sale margins.
Mortgage servicing income was $45 million in the current quarter compared to $54 million in the prior quarter and $1 million the second quarter of 2013. The $9 million decrease compared to the prior quarter was due to an increase in mortgage prepayment speeds. Compared to the second quarter of 2013, the $44 million increase was primarily due to a decline in loan prepayments, resulting in lower decay. The servicing portfolio was $134 billion at June 30, 2014 compared to $140 billion at June 30, 2013.
Investment banking income was $119 million for the current quarter compared to $88 million in the prior quarter and $93 million in the second quarter of 2013. The increase compared to both periods was primarily driven by higher client activity across most origination and advisory product categories. Trading income was $47 million for the current quarter compared to $49 million for both the prior quarter and the second quarter of 2013.
Other noninterest income was $170 million for the current quarter compared to $38 million for the prior quarter and $44 million for the second quarter of 2013. The $132 million increase compared to the prior quarter was driven by the $105 million gain on the sale of RidgeWorth, a $19 million gain on the sale of government guaranteed residential mortgage loans, and higher leasing-related income. The $126 million increase compared to the second quarter of 2013 was primarily driven by the same transactional gains impacting the sequential quarter comparison.
For the six months ended June 30, 2014, noninterest income was $1.7 billion, an increase of $27 million over the same period in 2013. Excluding the sale of RidgeWorth, noninterest income declined $78 million, driven by lower mortgage production income, partially offset by higher investment banking and mortgage servicing income.
Noninterest Expense
Noninterest expense for the current quarter was $1.5 billion, which included the $179 million of specific legacy mortgage-related operating losses. Excluding these operating losses and the $36 million legacy affordable housing impairment in the prior quarter, noninterest expense increased $17 million sequentially. Compared to the second quarter of 2013, and excluding the aforementioned operating losses, noninterest expense declined $49 million, primarily due to lower cyclical costs and the continued focus on expense management.
Employee compensation and benefits expense was $763 million in the current quarter compared to $800 million in the prior quarter and $737 million in the second quarter of 2013. The sequential quarter decrease of $37 million was primarily the result of the seasonal decline in employee benefits and FICA taxes. The $26 million increase from the second quarter of 2013 was due to higher salaries related to targeted hiring in certain revenue producing businesses and the impact of merit increases.
Operating losses were $218 million in the current quarter and included $179 million of net charges related to specific legacy mortgage-related matters. Comparatively, operating losses were $21 million in the prior quarter and $72 million in the second quarter of 2013, which included $45 million in accruals related to specific mortgage-related legal matters.
Outside processing and software expense was $181 million in the current quarter compared to $170 million in the prior quarter and $187 million in the second quarter of 2013. The $11 million sequential quarter increase was primarily due to increased utilization of outside vendors. The $6 million decrease compared to the second quarter of 2013 was primarily due to lower mortgage production volume.
Marketing and customer development expense was $30 million in the current quarter compared to $25 million in the prior quarter and $31 million in the second quarter of 2013. The $5 million sequential quarter increase reflects seasonally lower advertising expenses during the first quarter.
Other noninterest expense was $156 million in the current quarter compared to $168 million in the prior quarter and $181 million in the second quarter of 2013. The $12 million sequential quarter decrease was primarily driven by the $36 million legacy affordable housing impairment recognized in the prior quarter, partially offset by increases in legal, consulting, and other operating expenses. The $25 million decrease from the second quarter of 2013 was primarily related to lower credit and collections services expenses, which reflects the decline in nonperforming assets.
For the six months ended June 30, 2014, noninterest expense was $2.9 billion compared to $2.7 billion in 2013. The $135 million increase was due to the $179 million of specific legacy mortgage-related operating losses incurred in the second quarter of 2014 and higher employee compensation, partially offset by broad-based reductions in other operating expenses. Excluding the $179 million of operating losses in the second quarter of 2014 and $36 million legacy affordable housing impairment in the first quarter of 2014, noninterest expense declined $80 million from the six months ended June 30, 2013 to the six months ended June 30, 2014.
Income Taxes
For the current quarter, the Company recorded an income tax provision of $173 million compared to $125 million for the prior quarter and $156 million for the second quarter of 2013. The effective tax rate was 30% in the current quarter compared to 24% in the prior quarter and 29% in the second quarter of 2013. The sequential increase in the effective tax rate was primarily due to favorable discrete items that were recognized in the prior quarter. The effective tax rate increased slightly compared to the second quarter of 2013, primarily due to higher pre-tax earnings in the current quarter.
In the first quarter of 2014, the Company adopted 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 $10 million and $20 million for the second quarter of 2013 and the first six months of 2013, respectively. The adoption of the accounting guidance had no impact on net income or earnings per share.
Balance Sheet
At June 30, 2014, the Company had total assets of $182.6 billion and shareholders' equity of $22.1 billion, representing 12% of total assets. Book value per share was $40.18 and tangible book value per common share was $28.64, up 2% and 3%, respectively, compared to March 31, 2014, driven by growth in retained earnings and higher accumulated other comprehensive income.
Loans
Average performing loans were $129.8 billion for the current quarter, an increase of $2.3 billion, or 2%, from the prior quarter driven by a $1.9 billion, or 3%, increase in C&I loans, a $436 million, or 8%, increase in commercial real estate loans, and a $383 million, or 12%, increase in consumer direct loans, reflecting the breadth of our loan growth. Partially offsetting the loan growth was a $574 million, or 1%, decline in average residential real estate-related loans, due to certain balance sheet management actions the Company undertook during the second quarter. Specifically, the Company sold $325 million in government guaranteed residential mortgage loans and $149 million of accruing restructured residential mortgage loans. The Company also transferred $2.1 billion of government guaranteed residential mortgage loans to loans held for sale in anticipation of the sale of these loans in the third quarter. The Company currently anticipates investing the proceeds of the government guaranteed residential mortgage loan sales into high-quality liquid securities in anticipation of forthcoming regulatory requirements regarding liquidity ratios. Compared to the second quarter of 2013, average performing loans increased $9.8 billion, or 8%, with broad-based growth across most portfolios.
Deposits
Average client deposits for the current quarter were $130.5 billion compared to $128.4 billion in the prior quarter and $126.6 billion in the second quarter of 2013. Average client deposits increased $2.1 billion during the current quarter due to a $1.8 billion, or 2%, increase in combined NOW, money market, and savings account balances and a $1.0 billion increase in demand deposits, which were partially offset by a $0.8 billion, or 6%, decline in time deposit balances. Compared to the second quarter of 2013, average client deposits increased $3.9 billion, or 3%. The growth was driven by increases of $3.2 billion and $1.1 billion in NOW and money market account balances, respectively, and $1.3 billion in demand deposits. The growth in lower cost deposits was partially offset by a $2.1 billion, or 15%, decrease in time deposits.
Capital and Liquidity
The Company's estimated capital ratios are well above current regulatory requirements with Basel I Tier 1 capital, Basel I Tier 1 common, and Basel III Common Equity Tier 1 ratios at an estimated 10.65%, 9.70%, and 9.70%, respectively, at June 30, 2014. The ratios of total average equity to total average assets and tangible equity to tangible assets were 12.23% and 9.07%, respectively, at June 30, 2014. Both metrics were relatively stable to prior quarter, as an increase in retained earnings and accumulated other comprehensive income was offset by balance sheet growth. The Company continues to have substantial available liquidity in the form of its client deposit base, cash, its portfolio of high-quality government-backed securities, and other available funding sources.
During the second quarter, the Company declared a common stock dividend of $0.20 per common share, an increase of $0.10 per share from the prior quarter and the second quarter of 2013. Additionally, during the second quarter, the Company repurchased $83 million of its common stock. Based on guidance issued during the second quarter by the Federal Reserve, the Company's repurchase activity was, and will be, modestly constrained due to a reduction in its forecast of share based issuances, primarily related to employees and minority interest shareholders. The Company currently expects to repurchase between $300 million to $350 million of additional common stock over the next three quarters.
Asset Quality
Total nonperforming assets were $1.0 billion at June 30, 2014, declining 5% compared to the prior quarter and 25% compared to the prior year. Nonperforming loans totaled $899 million at June 30, 2014, a decrease of 3% compared to the prior quarter and 21% compared to the prior year. At June 30, 2014, the percentage of nonperforming loans to total loans was 0.69%. Other real estate owned totaled $136 million, a 10% decrease from the prior quarter.
Net charge-offs were $113 million during the current quarter, relatively stable compared to the prior quarter and down $66 million compared to the second quarter of 2013. The decline in net charge-offs compared to the second 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 both the current quarter and the prior quarter compared to 0.59% during the second quarter of 2013. The provision for credit losses was $73 million, compared to $102 million during the prior quarter, as asset quality continued to improve. The provision for credit losses declined $73 million from the second quarter of 2013 as the improvement in asset quality more than offset the impact of loan growth.
At June 30, 2014, the allowance for loan and lease losses was $2.0 billion and represented 1.55% of total loans, a $37 million and three basis point decrease from March 31, 2014. The decline in the allowance for loan and lease losses and the allowance to total loans ratio was due to modest asset quality improvements in the current quarter and the sale of $149 million of accruing restructured residential mortgage loans, which reduced the allowance by $16 million.
Early stage delinquencies declined 4 basis points from the prior quarter to 0.63% at June 30, 2014. The decline was primarily due to residential and commercial loans. Excluding government-guaranteed loans, early stage delinquencies were 0.29%, down 3 basis points from the prior quarter.
Accruing restructured loans totaled $2.6 billion and nonaccruing restructured loans totaled $0.4 billion at June 30, 2014, of which $2.7 billion of restructured loans related to residential loans, $0.1 billion were commercial loans, and $0.1 billion related to consumer loans. The decline in accruing restructured loans was primarily driven by the aforementioned sale.
BUSINESS SEGMENT FINANCIAL PERFORMANCE
Business Segment Results
The Company has included business segment financial tables as part of this release. 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 July 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: 2Q14). Individuals calling from outside the United States should dial 1-517-308-9091 (Passcode: 2Q14). A replay of the call will be available approximately one hour after the call ends on July 21, 2014, and will remain available until August 21, 2014, by dialing 1-888-437-4650 (domestic) or 1-402-998-1324 (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 July 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.
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 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. 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 Six Months Ended
June 30 % June 30 %
------- -------
2014 2013 Change 2014 2013 Change
---- ---- ------ ---- ---- ------
EARNINGS & DIVIDENDS
Net income $399 $377 6% $804 $729 10%
Net income available to common shareholders 387 365 6% 780 705 11%
Net income available to common shareholders, 436 365 19% 829 705 18%
excluding the impact of Form 8-K and other legacy
mortgage-related items from the second quarter of 2014 (1)
Total revenue - FTE 1, 2 2,201 2,100 5% 4,231 4,214 0%
Total revenue - FTE excluding gain on sale of asset management subsidiary 1, 2 2,096 2,100 0% 4,126 4,214 -2%
Net income per average common share
Diluted 0.72 0.68 6% 1.45 1.31 11%
Diluted, excluding the impact of Form 8-K and other legacy mortgage-related items from the second quarter of 2014 (1) 0.81 0.68 19% 1.54 1.31 18%
Basic 0.73 0.68 7% 1.47 1.32 11%
Dividends paid per common share 0.20 0.10 100% 0.30 0.15 100%
CONDENSED BALANCE SHEETS
Selected Average Balances
-------------------------
Total assets $179,820 $172,537 4% $178,404 $172,175 4%
Earning assets 160,373 153,495 4% 158,866 152,986 4%
Loans 130,734 121,372 8% 129,635 121,128 7%
Intangible assets including MSRs 7,614 7,455 2% 7,640 7,417 3%
MSRs 1,220 1,039 17% 1,242 998 24%
Consumer and commercial deposits 130,472 126,579 3% 129,440 127,114 2%
Brokered time and foreign deposits 1,893 2,075 -9% 1,953 2,122 -8%
Total shareholders' equity 21,994 21,272 3% 21,861 21,195 3%
Preferred stock 725 725 0% 725 725 0%
As of
-----
Total assets 182,559 171,546 6%
Earning assets 162,422 154,426 5%
Loans 129,744 122,031 6%
Allowance for loan and lease losses 2,003 2,125 -6%
Consumer and commercial deposits 131,792 125,588 5%
Brokered time and foreign deposits 1,493 2,031 -26%
Total shareholders' equity 22,131 21,007 5%
FINANCIAL RATIOS & OTHER DATA
Return on average total assets 0.89% 0.88% 1% 0.91% 0.85% 7%
Return on average common shareholders' equity 7.29 7.12 2% 7.44 6.95 7%
Return on average tangible common shareholders' equity (1) 10.29 10.35 -1% 10.53 10.12 4%
Net interest margin (2) 3.11 3.25 -4% 3.15 3.29 -4%
Efficiency ratio 2, 3 68.93 66.07 4% 67.92 65.02 4%
Tangible efficiency ratio 1, 2, 3 68.77 65.78 5% 67.76 64.73 5%
Effective tax rate (3) 30.23 29.27 3% 27.05 30.33 -11%
Tier 1 common 4 9.70 10.19 -5%
Tier 1 capital 4 10.65 11.24 -5%
Total capital 4 12.50 13.43 -7%
Tier 1 leverage 4 9.56 9.40 2%
Total average shareholders' equity to total average assets 12.23 12.33 -1% 12.25 12.31 0%
Tangible equity to tangible assets 1 9.07 8.95 1%
Book value per common share $40.18 $37.65 7%
Tangible book value per common share (1) 28.64 26.08 10%
Market price:
High $40.84 $32.84 24% 41.26 32.84 26%
Low 36.82 26.97 37% 36.23 26.93 35%
Close 40.06 31.57 27%
Market capitalization 21,344 17,005 26%
Average common shares outstanding (000s)
Diluted 535,486 539,763 -1% 536,234 539,812 -1%
Basic 529,764 535,172 -1% 530,459 535,425 -1%
Full-time equivalent employees 25,841 26,199 -1%
Number of ATMs 2,212 2,874 -23%
Full service banking offices 1,473 1,539 -4%
(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) Amounts for periods prior to the first quarter of 2014 have been recalculated as a result of the Company's early adoption of ASU 2014-01, which required retrospective application.
4 Current period tier 1 common, tier 1 capital, total capital and tier 1 leverage ratios are estimated as of the earnings release date.
SunTrust Banks, Inc. and Subsidiaries
FIVE QUARTER FINANCIAL HIGHLIGHTS
(Dollars in millions, except per share data) (Unaudited)
Three Months Ended
------------------
June 30 March 31 December 31 September 30 June 30
2014 2014 2013 2013 2013
---- ---- ---- ---- ----
EARNINGS & DIVIDENDS
Net income $399 $405 $426 $189 $377
Net income available to common shareholders 387 393 413 179 365
Net income available to common shareholders, excluding 436 393 413 358 365
the impact of Form 8-K and other legacy mortgage-related
items from the second quarter of 2014 and Form 8-K items from the third quarter of 2013 (1)
Total revenue - FTE 1, 2 2,201 2,030 2,061 1,920 2,100
Total revenue - FTE excluding gain on sale of asset management subsidiary 1, 2 2,096 2,030 2,061 1,920 2,100
Net income per average common share
Diluted 0.72 0.73 0.77 0.33 0.68
Diluted, excluding the impact of Form 8-K and other legacy mortgage- 0.81 0.73 0.77 0.66 0.68
related items from the second quarter of 2014 and Form 8-K items from the third
quarter of 2013 (1)
Basic 0.73 0.74 0.78 0.33 0.68
Dividends paid per common share 0.20 0.10 0.10 0.10 0.10
CONDENSED BALANCE SHEETS
Selected Average Balances
-------------------------
Total assets $179,820 $176,971 $173,791 $171,838 $172,537
Earning assets 160,373 157,343 154,567 154,235 153,495
Loans 130,734 128,525 125,649 122,672 121,372
Intangible assets including MSRs 7,614 7,666 7,658 7,643 7,455
MSRs 1,220 1,265 1,253 1,232 1,039
Consumer and commercial deposits 130,472 128,396 127,460 126,618 126,579
Brokered time and foreign deposits 1,893 2,013 2,010 2,007 2,075
Total shareholders' equity 21,994 21,727 21,251 21,027 21,272
Preferred stock 725 725 725 725 725
As of
-----
Total assets 182,559 179,542 175,335 171,777 171,546
Earning assets 162,422 158,487 156,856 154,802 154,426
Loans 129,744 129,196 127,877 124,340 122,031
Allowance for loan and lease losses 2,003 2,040 2,044 2,071 2,125
Consumer and commercial deposits 131,792 130,933 127,735 126,861 125,588
Brokered time and foreign deposits 1,493 2,023 2,024 2,022 2,031
Total shareholders' equity 22,131 21,817 21,422 21,070 21,007
FINANCIAL RATIOS & OTHER DATA
Return on average total assets 0.89% 0.93% 0.97% 0.44% 0.88%
Return on average common shareholders' equity 7.29 7.59 7.99 3.49 7.12
Return on average tangible common shareholders' equity (1) 10.29 10.78 11.61 5.10 10.35
Net interest margin (2) 3.11 3.19 3.20 3.19 3.25
Efficiency ratio 2, 3 68.93 66.83 66.05 90.13 66.07
Tangible efficiency ratio 1, 2, 3 68.77 66.65 65.84 89.82 65.78
Effective tax rate 3, 5 30.23 23.61 24.50 NM 29.27
Tier 1 common 4 9.70 9.90 9.82 9.94 10.19
Tier 1 capital 4 10.65 10.88 10.81 10.97 11.24
Total capital 4 12.50 12.81 12.81 13.04 13.43
Tier 1 leverage 4 9.56 9.57 9.58 9.46 9.40
Total average shareholders' equity to total average assets 12.23 12.28 12.23 12.24 12.33
Tangible equity to tangible assets 1 9.07 9.01 9.00 8.98 8.95
Book value per common share $40.18 $39.44 $38.61 $37.85 $37.65
Tangible book value per common share (1) 28.64 27.82 27.01 26.27 26.08
Market price:
High 40.84 41.26 36.99 36.29 32.84
Low 36.82 36.23 31.97 31.59 26.97
Close 40.06 39.79 36.81 32.42 31.57
Market capitalization 21,344 21,279 19,734 17,427 17,005
Average common shares outstanding (000s)
Diluted 535,486 536,992 537,921 538,850 539,763
Basic 529,764 531,162 532,492 533,829 535,172
Full-time equivalent employees 25,841 25,925 26,281 26,409 26,199
Number of ATMs 2,212 2,243 2,243 2,846 2,874
Full service banking offices 1,473 1,501 1,497 1,508 1,539
(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) Amounts for periods prior to the first quarter of 2014 have been recalculated as a result of the Company's early adoption of ASU 2014-01, which required retrospective application.
4 Current period tier 1 common, tier 1 capital, total capital and tier 1 leverage ratios are estimated as of the earnings release date.
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 Six Months Ended
------------------ -----------------
June 30 March 31 December 31 September 30 June 30 June 30 June 30
2014 2014 2013 2013 2013 2014 2013
---- ---- ---- ---- ---- ---- ----
NON-GAAP MEASURES PRESENTED IN THE EARNINGS RELEASE (1)
------------------------------------------------------
Net interest income $1,209 $1,204 $1,213 $1,208 $1,211 $2,414 $2,432
Taxable-equivalent adjustment 35 35 34 32 31 69 61
--- --- --- --- --- --- ---
Net interest income - FTE 1,244 1,239 1,247 1,240 1,242 2,483 2,493
Noninterest income 957 791 814 680 858 1,748 1,721
--- --- --- --- --- ----- -----
Total revenue - FTE 2,201 2,030 2,061 1,920 2,100 4,231 4,214
Gain on sale of asset management subsidiary (105) 0 0 0 0 (105) 0
---- --- --- --- --- ---- ---
Total revenue - FTE excluding gain on sale of asset management subsidiary (2) $2,096 $2,030 $2,061 $1,920 $2,100 $4,126 $4,214
====== ====== ====== ====== ====== ====== ======
Noninterest income $957 $791 $814 $680 $858 $1,748 $1,721
Gain on sale of asset management subsidiary (105) 0 0 0 0 (105) 0
---- --- --- --- --- ---- ---
Noninterest income excluding gain on sale of asset management subsidiary (2) $852 $791 $814 $680 $858 $1,643 $1,721
==== ==== ==== ==== ==== ====== ======
Return on average common shareholders' equity 7.29% 7.59% 7.99% 3.49% 7.12% 7.44% 6.95%
Effect of removing average intangibles, excluding MSRs 3.00% 3.19% 3.62% 1.61% 3.23% 3.09% 3.17%
Return on average tangible common shareholders' equity (3) 10.29% 10.78% 11.61% 5.10% 10.35% 10.53% 10.12%
===== ===== ===== ==== ===== ===== =====
Efficiency ratio 4, 5 68.93% 66.83% 66.05% 90.13% 66.07% 67.92% 65.02%
Impact of excluding amortization of intangible assets -0.16% -0.18% -0.21% -0.31% -0.29% -0.16% -0.29%
Tangible efficiency ratio 5, 6 68.77% 66.65% 65.84% 89.82% 65.78% 67.76% 64.73%
===== ===== ===== ===== ===== ===== =====
June 30 March 31 December 31 September 30 June 30
2014 2014 2013 2013 2013
---- ---- ---- ---- ----
Total shareholders' equity $22,131 $21,817 $21,422 $21,070 $21,007
Goodwill, net of deferred taxes of $206 million, $193 million, $186 million, $180 million, and (6,131) (6,184) (6,183) (6,189) (6,195)
$174 million, respectively
Other intangible assets, net of deferred taxes of $1 million, $1 million, $2 million, $2 million, (1,276) (1,281) (1,332) (1,285) (1,240)
and $4 million respectively, and MSRs
MSRs 1,259 1,251 1,300 1,248 1,199
Tangible equity 15,983 15,603 15,207 14,844 14,771
Preferred stock (725) (725) (725) (725) (725)
---- ---- ---- ---- ----
Tangible common equity 15,258 $14,878 $14,482 $14,119 $14,046
====== ======= ======= ======= =======
Total assets $182,559 $179,542 $175,335 $171,777 $171,546
Goodwill (6,337) (6,377) (6,369) (6,369) (6,369)
Other intangible assets including MSRs (1,277) (1,282) (1,334) (1,287) (1,244)
MSRs 1,259 1,251 1,300 1,248 1,199
Tangible assets $176,204 $173,134 $168,932 $165,369 $165,132
======== ======== ======== ======== ========
Tangible equity to tangible assets 7 9.07% 9.01% 9.00% 8.98% 8.95%
Tangible book value per common share 8 $28.64 $27.82 $27.01 $26.27 $26.08
Total loans $129,744 $129,196 $127,877 $124,340 $122,031
Government guaranteed loans (6,081) (8,828) (8,961) (9,016) (9,053)
Loans held at fair value (292) (299) (302) (316) (339)
Total loans, excluding government guaranteed and fair value loans $123,371 $120,069 $118,614 $115,008 $112,639
======== ======== ======== ======== ========
Allowance to total loans, excluding government guaranteed and fair value loans 9 1.62% 1.70% 1.72% 1.80% 1.89%
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 Six Months Ended June 30
------------------ ------------------------
June 30 March 31 December 31 September 30 June 30
2014 2014 2013 2013 2013 2014 2013
---- ---- ---- ---- ---- ---- ----
NON-GAAP MEASURES PRESENTED IN THE EARNINGS RELEASE (1)
------------------------------------------------------
Net income available to common shareholders $387 $393 $413 $179 $365 $780 $705
Form 8-K and other legacy mortgage-related items from the second
quarter of 2014 and the third quarter of 2013:
Operating losses related to settlement of certain legal matters 204 0 0 323 0 204 0
Mortgage repurchase provision related to repurchase settlements 0 0 0 63 0 0 0
Provision for unrecoverable servicing advances 0 0 0 96 0 0 0
Net tax benefit related to subsidiary reorganization and other 0 0 0 (113) 0 0 0
Gain on sale of asset management subsidiary (105) 0 0 0 0 (105) 0
Other legacy mortgage related adjustments (25) 0 0 0 0 (25) 0
Tax benefit related to above items (25) 0 0 (190) 0 (25) 0
Net income available to common shareholders, excluding the $436 $393 $413 $358 $365 $829 $705
impact of Form 8-K and other legacy mortgage-related items 10
===
Net income per average common share, diluted $0.72 $0.73 $0.77 $0.33 $0.68 $1.45 $1.31
Impact of Form 8-K and other legacy mortgage-related items 0.09 0.00 0.00 0.33 0.00 0.09 0.00
Net income per average common diluted share, excluding the $0.81 $0.73 $0.77 $0.66 $0.68 $1.54 $1.31
impact of Form 8-K and other mortgage-related items 10
===
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 gain on sale of asset management subsidiary and noninterest income excluding gain on sale of asset management subsidiary. The Company believes revenue and noninterest income excluding the gain on sale of the asset management subsidiary is more indicative of the Company's performance because it isolates income that is
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.
4 Amounts for periods prior to the first quarter of 2014 have been recalculated as a result of the Company's early adoption of ASU 2014-01, which required retrospective application.
5 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. 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.
6 SunTrust 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.
7 SunTrust 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.
8 SunTrust 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.
9 SunTrust 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.
10 SunTrust presents net income available to common shareholders and net income per average common diluted share excluding items previously announced on Form 8-Ks filed with the SEC on October 10, 2013 and July 3, 2014, as well as other legacy mortgage-related items. The Company believes this measure is useful to investors because it removes the effect of material items
impacting current and prior 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.
SOURCE SunTrust Banks, Inc.
