SUNTRUST BANKS ATLANTA, Oct. 17, 2014 /PRNewswire/ -- SunTrust Banks, Inc. (NYSE: STI) today reported net income available to common shareholders of $563 million, or $1.06 per average common diluted share. During the current quarter the Company recognized a $130 million tax benefit, or $0.25 per share, as a result of the completion of a tax authority examination. Excluding the tax benefit and prior period 8-K items, adjusted earnings per share were $0.81 compared to $0.81 in the prior quarter and $0.66 in the third quarter of 2013. For the first nine months of 2014, earnings per share were $2.51, and adjusted earnings per share were $2.35, 19% higher than the same period of 2013.
The following table summarizes reported results and notable items impacting earnings per share during the periods discussed above (in addition, see Appendix A for reconcilement of non-GAAP measures):
Nine Months Ended
September 30
------------
3Q 2013 2Q 2014 3Q 2014 2013 2014
------- ------- ------- ---- ----
Earnings per average common diluted share $0.33 $0.72 $1.06 $1.64 $2.51
Impact of:
3Q 2013 Form 8-K items 0.33 0.33
2Q 2014 Form 8-K and other mortgage-related items 0.09 0.09
3Q 2014 income tax benefit (0.25) (0.25)
----- -----
Adjusted earnings per average common diluted share $0.66 $0.81 $0.81 $1.97 $2.35
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"We delivered solid performance this quarter driven by increased client loan and deposit business, further efficiency improvements, and continued strong asset quality performance, which helped mitigate the impact of the continued challenging low rate environment," said William H. Rogers, Jr., chairman and chief executive officer of SunTrust Banks, Inc. "We are creating positive momentum and are intensely focused on executing our core strategies, fulfilling more of our clients' needs, and delivering a more profitable and valuable company for all of our stakeholders."
Third Quarter 2014 Financial Highlights
Income Statement
-- Net income available to common shareholders was $563 million, or $1.06
per average common diluted share; excluding the $130 million tax benefit
in the current quarter, net income available to common shareholders was
$433 million, or $0.81 per share.
-- On an adjusted basis, earnings per share were flat compared to the
prior quarter and increased $0.15, or 23%, compared to the third
quarter of 2013.
-- Total revenue declined $170 million, compared to the prior quarter
primarily driven by the $105 million gain on sale of RidgeWorth in the
prior quarter and foregone RidgeWorth-related revenue, as well as a
decline in investment banking income.
-- Compared to the third quarter of 2013, total revenue increased 6%.
Excluding the $63 million incremental mortgage repurchase provision
incurred in the third quarter of 2013, total revenue increased 2% driven
primarily by higher mortgage servicing income.
-- Reported noninterest expense decreased $258 million compared to the
prior quarter. Excluding the $179 million in specific legacy
mortgage-related losses incurred in the prior quarter, noninterest
expense declined $79 million, or 6%.
-- The efficiency and tangible efficiency ratios in the quarter were 62.0%
and 61.7%, respectively.
Balance Sheet
-- For the third quarter, total loans (on a period-end basis) increased 2%
and 6% compared to June 30, 2014 and September 30, 2013, respectively,
with the growth occurring in C&I, commercial real estate, and consumer
loans, while residential mortgage loans continued to trend down.
-- Average performing loans were unchanged as growth in the commercial
and consumer portfolios was offset by the $2 billion transfer of
guaranteed residential mortgage loans to loans held for sale in the
second quarter. The ultimate sale was subsequently completed in the
third quarter.
-- Average investment securities increased 6% sequentially and 7% compared
to the third quarter of 2013 in anticipation of forthcoming
liquidity-related regulatory requirements.
-- Average client deposits increased 1% sequentially and 4% compared to the
third 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 estimated to be 9.6% and 9.7%, respectively.
-- During the quarter, the Company repurchased $215 million of common
shares.
-- Book value per share was $40.85 and tangible book value per common share
was $29.21, both up 2% compared to June 30, 2014. The increase was
primarily due to growth in retained earnings.
Asset Quality
-- Asset quality continued to improve as nonperforming loans decreased 15%
from the prior quarter and totaled 0.58% of total loans at September 30,
2014.
-- Annualized net charge-offs increased 4 basis points sequentially,
representing 0.39% of average loans.
-- The provision for credit losses increased $20 million compared to the
prior quarter primarily due to a modest increase in net charge-offs.
(Dollars in millions,
except per share
data)
Income Statement
(presented on a
fully taxable-
equivalent basis) 3Q 2013 2Q 2014 3Q 2014
Net income available
to common
shareholders $179 $387 $563
Earnings per average
common diluted share 0.33 0.72 1.06
Adjusted earnings per
average common
diluted share (1) 0.66 0.81 0.81
Total revenue 1,920 2,201 2,031
Net interest income 1,240 1,244 1,251
Provision for credit
losses 95 73 93
Noninterest income 680 957 780
Noninterest expense 1,730 1,517 1,259
Net interest margin 3.19% 3.11% 3.03%
Balance Sheet
(Dollars in billions)
Average loans $122.7 $130.7 $130.7
Average consumer and
commercial deposits 126.6 130.5 132.2
Capital
Tier 1 capital ratio
(2) 10.97% 10.66% 10.50%
Tier 1 common ratio
(2) 9.94% 9.72% 9.60%
Total average
shareholders' equity
to total average
assets 12.24% 12.23% 12.10%
Asset Quality
Net charge-offs to
average loans
(annualized) 0.47% 0.35% 0.39%
Allowance for loan
and lease losses to
period-end loans 1.67% 1.55% 1.49%
Nonperforming loans
to total loans 0.83% 0.69% 0.58%
(1) See page 24 for non-GAAP reconciliation
(2) 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 $2.0 billion for the current quarter, a decline of $170 million, compared to the prior quarter. Excluding the $105 million gain on sale of RidgeWorth in the prior quarter, total revenue declined $65 million, or 3%. The decrease was primarily driven by a decline in investment banking income and foregone RidgeWorth-related revenue. Compared to the third quarter of 2013, total revenue increased $111 million; however, the third quarter of 2013 included a $63 million incremental mortgage repurchase provision expense in conjunction with the settlement of Government Sponsored Entities ("GSE") repurchase claims. The remaining increase was primarily driven by higher mortgage servicing income, gains on the sale of mortgage loans held for sale in the current quarter, higher retail investment services income and a slight increase in net interest income, partially offset by the foregone RidgeWorth revenue.
For the nine months ended September 30, 2014, total revenue was $6.3 billion, an increase of $128 million compared to the first nine months of 2013. The increase was primarily driven by the gain on the sale of RidgeWorth (partially offset by the foregone associated wealth management revenue), gains on the sale of mortgage loans in 2014, and higher mortgage servicing, investment banking, and retail investment income. These revenue increases were partially offset by significantly lower mortgage production income driven by a decline in loan production volume.
Net Interest Income
Net interest income was $1.3 billion for the current quarter, an increase of $7 million compared to the prior quarter. The increase was primarily due to one additional day in the current quarter and higher average earning assets, partially offset by an 8 basis point decline in net interest margin. Compared to the third quarter of 2013, net interest income increased $11 million primarily due to higher average loan balances, partially offset by a 16 basis point decline in net interest margin.
Net interest margin for the current quarter was 3.03%, a decline of 8 basis points from the prior quarter, primarily driven by a 7 basis point decline in loan yields and a 9 basis point decline in investment securities yields. Compared to the third quarter of 2013, net interest margin declined 16 basis points due to a 21 basis point reduction in loan yields.
For the nine months ended September 30, 2014 and 2013, net interest income was virtually unchanged at $3.7 billion. The net interest margin was 3.11% for the first nine months of 2014, a 14 basis point decline compared to the same period in 2013. The decline in net interest margin was primarily driven by lower loan yields.
Noninterest Income
Noninterest income was $780 million for the current quarter, compared to $957 million for the prior quarter and $680 million for the third quarter of 2013. Excluding the $105 million gain on sale of RidgeWorth from the prior quarter, noninterest income declined $72 million sequentially. The sequential quarter decrease was due to a $31 million decline in investment banking income, a $23 million decline in trust and investment management revenue as a result of the sale of RidgeWorth, the recognition of a $49 million impairment of lease financing assets, and a $9 million loss on the sale of investment securities. These declines were partially offset by a $41 million gain related to the $2 billion guaranteed residential mortgage loan sale in the current quarter. Compared to the third quarter of 2013, noninterest income increased $100 million of which $63 million related to aforementioned mortgage repurchase provision. The remaining increase was primarily due to the aforementioned $41 million gain, higher mortgage servicing income, partially offset by the foregone RidgeWorth wealth management revenue. Additionally, retail investment income, service charges on deposit accounts and other fee-based income increased modestly over the same period last year.
Mortgage production income for the current quarter was $45 million compared to $52 million for the prior quarter and a $10 million loss for the third quarter of 2013. The $7 million decrease compared to the prior quarter was primarily driven by a decline in gain on sale margins. Compared to the third quarter of 2013, mortgage production income increased $55 million. This was primarily due to the aforementioned $63 million mortgage repurchase provision incurred last year. Mortgage production volume declined 43% during the current quarter compared to the third quarter of 2013 largely attributable to the decline in refinance activity, while gain on sale margins improved compared to the same period last year.
Mortgage servicing income was $44 million in the current quarter compared to $45 million in the prior quarter and $11 million the third quarter of 2013. Compared to the third quarter of 2013, the $33 million increase was primarily due to a decline in loan prepayments, resulting in lower decay and improved net MSR hedge performance. The servicing portfolio was $136 billion at September 30, 2014 compared to $140 billion at September 30, 2013.
Investment banking income was $88 million for the current quarter compared to $119 million in the prior quarter and $99 million in the third quarter of 2013. The sequential quarter decrease was driven by the strong performance in the second quarter in addition to seasonally lower client activity levels. Compared to the third quarter of 2013, the decline was largely attributable to lower M&A advisory revenues. Trading income was $46 million for the current quarter compared to $47 million for the prior quarter and $33 million for the third quarter of 2013. The $13 million increase compared to the third quarter of 2013 was partially driven by a $7 million improvement in mark-to-market valuations on the Company's debt carried at fair value and slightly higher core trading revenue.
Trust and investment management income was $93 million for the current quarter compared to $116 million in the prior quarter and $133 million in the third quarter of 2013. The declines compared to both periods were due to the foregone revenue as a result of the sale of RidgeWorth.
Other noninterest income was $52 million for the current quarter compared to $170 million for the prior quarter and $10 million for the third quarter of 2013. The $118 million decrease compared to the prior quarter was driven by the $105 million gain on sale of RidgeWorth in the prior quarter and a $49 million impairment of lease financing assets in the current quarter, partially offset by a $22 million increase in gains on the sale of government guaranteed residential mortgage loans over the prior quarter and higher leasing-related income. The $42 million increase compared to the third quarter of 2013 was primarily driven by the previously discussed $41 million loan sale gain.
For the nine months ended September 30, 2014, noninterest income was $2.5 billion, an increase of $127 million over the same period in 2013. Excluding the $105 million gain on sale of RidgeWorth, noninterest income increased $22 million, largely driven by higher mortgage servicing, investment banking, retail investment income, and gains related to the sale of mortgage loans. These increases were partially offset by declines in mortgage production income and foregone wealth management revenue related to the sale of RidgeWorth.
Noninterest Expense
Noninterest expense for the current quarter was $1.3 billion compared to $1.5 billion in the prior quarter and $1.7 billion in the third quarter of 2013. Both the prior quarter and third quarter of 2013 included charges of $179 million and $419 million, respectively, related to the resolution of certain legacy mortgage-related matters. Excluding these items from the prior quarters, noninterest expense declined $79 million on a sequential quarter basis and $52 million compared to the third quarter of 2013. The decline compared to both prior quarters was the result of our overall efficiency and expense management focus, the sale of RidgeWorth, and a decline in cyclical costs.
Employee compensation and benefits expense was $730 million in the current quarter compared to $763 million in the prior quarter and $682 million in the third quarter of 2013. The sequential quarter decrease of $33 million was primarily the result of the sale of RidgeWorth, a reduction in the number of full time-equivalent employees, and declines in payroll taxes and 401(k) and medical costs. The $48 million increase from the third quarter of 2013 was primarily due to a $37 million incentive accrual reduction recognized in the third quarter of 2013.
Operating losses were $29 million in the current quarter compared to $218 million in the prior quarter, which included $179 million of legacy mortgage-related expenses, and $350 million in the third quarter of 2013, which included $323 million of legacy mortgage-related expenses.
Outside processing and software expense was $184 million in the current quarter compared to $181 million in the prior quarter and $190 million in the third quarter of 2013. The $6 million decrease compared to the third quarter of 2013 was primarily due to lower mortgage production volume.
Marketing and customer development expense was $35 million in the current quarter compared to $30 million in the prior quarter and $34 million in the third quarter of 2013. The $5 million sequential quarter increase was due to a seasonal increase in advertising expenses.
FDIC premium and regulatory costs were $29 million in the current quarter and reflected an $8 million refund received from the FDIC. FDIC premium and regulatory costs were $40 million in the prior quarter and $45 million in the third quarter of 2013. The decline related to both periods was due to a reduction in the FDIC insurance premium related to improvements in the Company's risk profile.
Other noninterest expense was $120 million in the current quarter compared to $156 million in the prior quarter and $292 million in the third quarter of 2013. The $36 million sequential quarter decrease was driven by certain discrete charges incurred in the prior quarter, an $8 million recovery during the third quarter of the market value of legacy affordable housing investments that were impaired in the first quarter of 2014, and a reduction in severance costs. The $172 million decrease from the prior year was driven by a $96 million increase in the mortgage servicing advance allowance in the third quarter of 2013 and lower credit and collections services expenses, severance costs, and real estate-related charges compared to 2013.
For the nine months ended September 30, 2014, noninterest expense was $4.1 billion compared to $4.5 billion in 2013. The $336 million decrease was due to lower legacy mortgage-related charges as described previously and broad-based declines in other operating expenses driven by the continued focus on expense management, which were partially offset by higher employee compensation costs.
Income Taxes
For the current quarter, the Company recorded an income tax provision of $67 million compared to $173 million for the prior quarter and a $133 million tax benefit for the third quarter of 2013. The current quarter tax provision included a $130 million tax benefit as a result of the completion of a tax authority examination. Excluding this benefit, the effective tax rate in the current quarter was 30.6%.
Balance Sheet
At September 30, 2014, the Company had total assets of $186.8 billion and shareholders' equity of $22.3 billion, representing 12% of total assets. Book value per share was $40.85 and tangible book value per common share was $29.21, both up 2% compared to June 30, 2014, driven by growth in retained earnings.
Loans
Average performing loans were $129.9 billion for the current quarter, relatively stable compared to the prior quarter; however, the current quarter was impacted by the transfer and subsequent sale of $2 billion of government guaranteed mortgage loans. The Company invested the proceeds of this sale into high-quality liquid securities in anticipation of forthcoming liquidity-related regulatory requirements. The decline in mortgage loans was offset by a $1.6 billion, or 3%, increase in C&I loans, a $334 million, or 6%, increase in commercial real estate loans, and a $534 million, or 16%, increase in consumer direct loans as targeted loan growth continued during the quarter. Compared to the third quarter of 2013, average performing loans increased $8.3 billion, or 7%, as growth occurred in most portfolios with the exception of residential-related loans.
Deposits
Average client deposits for the current quarter were $132.2 billion compared to $130.5 billion in the prior quarter and $126.6 billion in the third quarter of 2013. Average client deposits increased $1.7 billion, or 1%, during the current quarter due to a $0.9 billion, or 2%, increase in average demand deposits, along with a $2.6 billion, or 6%, increase in money market account balances. The growth in these deposit balances was partially offset by a $1.0 billion, or 3%, decline in NOW account balances and a $0.7 billion, or 6%, decline in time deposit balances. Compared to the third quarter of 2013, average client deposits increased $5.6 billion, or 4%. The growth was driven by increases in lower-cost deposits and was partially offset by a $2.4 billion, or 17%, 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 10.50%, 9.60%, and 9.70%, respectively, at September 30, 2014. The ratios of total average equity to total average assets and tangible equity to tangible assets were 12.10% and 8.94%, respectively, at September 30, 2014, and declined slightly compared to June 30, 2014 due to balance sheet growth. The Company continues to have substantial available liquidity in the form of its client deposit base, cash, high-quality government-backed securities, and other available funding sources.
During the third quarter, the Company declared a common stock dividend of $0.20 per common share. Additionally, during the current quarter, the Company repurchased $215 million of its common stock. The Company currently expects to repurchase approximately $230 million of additional common stock over the next two quarters.
Asset Quality
Total nonperforming assets were $934 million at September 30, 2014, down 10% compared to the prior quarter and 28% compared to third quarter of 2013. During the current quarter the Company transferred $53 million of nonperforming mortgage loans to held for sale and recognized a $9 million charge-off upon transfer. At September 30, 2014, the percentage of nonperforming loans to total loans was 0.58% compared to 0.69% at June 30, 2014. Other real estate owned totaled $112 million, an 18% decrease from the prior quarter.
The provision for credit losses was $93 million, compared to $73 million for the prior quarter, as net charge-offs increased modestly, while positive loan growth was offset by improvements in asset quality. The provision for credit losses was essentially stable compared to the third quarter of 2013. Net charge-offs were $128 million during the current quarter, a $15 million increase that was partially driven by the aforementioned charge-off related to the transfer of nonperforming mortgage loans to held for sale. Compared to the third quarter 2013, net charge-offs declined $18 million mostly attributable to C&I loans and the home equity portfolio. The ratio of annualized net charge-offs to total average loans was 0.39% during the current quarter compared to 0.35% during the prior quarter and 0.47% during the third quarter of 2013.
At September 30, 2014, the allowance for loan and lease losses was $2.0 billion and represented 1.49% of total loans, a $35 million and six basis point decrease from June 30, 2014. The decline in the allowance for loan and lease losses and the allowance to total loans ratio was due to asset quality improvements during the quarter.
Early stage delinquencies declined 4 basis points from the prior quarter to 0.59% at September 30, 2014. Excluding government-guaranteed loans, early stage delinquencies were 0.30%, generally stable to the prior quarter.
Accruing restructured loans totaled $2.6 billion, and nonaccruing restructured loans totaled $0.3 billion at September 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.
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") and certain matched-maturity funds transfer pricing credits and charges. 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 at investors.suntrust.com. 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 October 17, 2014, at 9:00 a.m. (Eastern Time) to discuss the earnings results and business trends. Individuals may call in beginning at 8:45 a.m. (Eastern Time) by dialing 1-888-972-7805 (Passcode: 3Q14). Individuals calling from outside the United States should dial 1-517-308-9091 (Passcode: 3Q14). A replay of the call will be available approximately one hour after the call ends on October 17, 2014, and will remain available until November 17, 2014, by dialing 1-800-873-2056 (domestic) or 1-402-220-5373 (international). Alternatively, individuals may listen to the live webcast of the presentation by visiting the SunTrust investor relations website at investors.suntrust.com. Beginning the afternoon of October 17, 2014, listeners may access an archived version of the webcast in the "Events & Presentations" section of the investor relations website. 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 and shares in thousands, except per share data) (Unaudited)
Three Months Ended Nine Months Ended
September 30 % September 30 %
------------ ------------
2014 2013 Change 5 2014 2013 Change
---- ---- -------- ---- ---- ------
EARNINGS & DIVIDENDS
Net income $576 $189 NM $1,380 $918 50%
Net income available to common shareholders 563 179 NM 1,343 884 52%
Net income available to common shareholders, excluding the 433 358 21% 1,262 1,063 19%
impact of Form 8-K and other legacy mortgage-related items (1)
Total revenue - FTE 1, 2 2,031 1,920 6% 6,262 6,134 2%
Total revenue - FTE excluding gain on sale of asset management subsidiary 1, 2 2,031 1,920 6% 6,157 6,134 0%
Net income per average common share
Diluted 1.06 0.33 NM 2.51 1.64 53%
Diluted, excluding the impact of Form 8-K and other 0.81 0.66 23% 2.35 1.97 19%
legacy mortgage-related items (1)
Basic 1.07 0.33 NM 2.54 1.65 54%
Dividends paid per common share 0.20 0.10 100% 0.50 0.25 100%
CONDENSED BALANCE SHEETS
Selected Average Balances
-------------------------
Total assets $183,433 $171,838 7% $180,098 $172,061 5%
Earning assets 163,688 154,235 6% 160,491 153,412 5%
Loans 130,747 122,672 7% 130,010 121,649 7%
Intangible assets including MSRs 7,615 7,643 0% 7,632 7,493 2%
MSRs 1,262 1,232 2% 1,249 1,077 16%
Consumer and commercial deposits 132,195 126,618 4% 130,369 126,947 3%
Brokered time and foreign deposits 1,624 2,007 -19% 1,841 2,083 -12%
Total shareholders' equity 22,191 21,027 6% 21,972 21,138 4%
Preferred stock 725 725 0% 725 725 0%
As of
-----
Total assets 186,818 171,777 9%
Earning assets 165,434 154,802 7%
Loans 132,151 124,340 6%
Allowance for loan and lease losses 1,968 2,071 -5%
Consumer and commercial deposits 135,077 126,861 6%
Brokered time and foreign deposits 1,430 2,022 -29%
Total shareholders' equity 22,269 21,070 6%
FINANCIAL RATIOS & OTHER DATA
Return on average total assets 1.25% 0.44% NM 1.02% 0.71% 44%
Return on average common shareholders' equity 10.41 3.49 NM 8.45 5.79 46%
Return on average tangible common shareholders' equity (1) 14.59 5.10 NM 11.92 8.44 41%
Net interest margin (2) 3.03 3.19 -5% 3.11 3.25 -4%
Efficiency ratio 2, 3 62.03 90.13 -31% 66.01 72.88 -9%
Tangible efficiency ratio 1, 2, 3 61.69 89.82 -31% 65.79 72.58 -9%
Effective tax rate 3, 5 10.37 NM NM 20.90 16.67 25%
Tier 1 common 4 9.60 9.94 -3%
Tier 1 capital 4 10.50 10.97 -4%
Total capital 4 12.30 13.04 -6%
Tier 1 leverage 4 9.50 9.46 0%
Total average shareholders' equity to total average assets 12.10 12.24 -1% 12.20 12.29 -1%
Tangible equity to tangible assets 1 8.94 8.98 0%
Book value per common share $40.85 $37.85 8%
Tangible book value per common share (1) 29.21 26.27 11%
Market price:
High 40.86 36.29 13% 41.26 36.29 14%
Low 36.42 31.59 15% 36.23 26.93 35%
Close 38.03 32.42 17%
Market capitalization 20,055 17,427 15%
Average common shares outstanding
Diluted 533,230 538,850 -1% 535,222 539,488 -1%
Basic 527,402 533,829 -1% 529,429 534,887 -1%
Full-time equivalent employees 25,074 26,409 -5%
Number of ATMs 2,192 2,846 -23%
Full service banking offices 1,454 1,508 -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.
4Current 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. Those changes and calculated percentages over 100 percent were not considered to be meaningful.
SunTrust Banks, Inc. and Subsidiaries
FIVE QUARTER FINANCIAL HIGHLIGHTS
(Dollars in millions and shares in thousands, except per share data) (Unaudited)
Three Months Ended
------------------
September 30 June 30 March 31 December 31 September 30
2014 2014 2014 2013 2013
---- ---- ---- ---- ----
EARNINGS & DIVIDENDS
Net income $576 $399 $405 $426 $189
Net income available to common shareholders 563 387 393 413 179
Net income available to common shareholders, excluding 433 436 393 413 358
the impact of Form 8-K and other legacy mortgage-related items (1)
Total revenue - FTE 1, 2 2,031 2,201 2,030 2,061 1,920
Total revenue - FTE excluding gain on sale of asset management subsidiary 1, 2 2,031 2,096 2,030 2,061 1,920
Net income per average common share
Diluted 1.06 0.72 0.73 0.77 0.33
Diluted, excluding the impact of Form 0.81 0.81 0.73 0.77 0.66
8-K and other legacy mortgage-related items (1)
Basic 1.07 0.73 0.74 0.78 0.33
Dividends paid per common share 0.20 0.20 0.10 0.10 0.10
CONDENSED BALANCE SHEETS
Selected Average Balances
-------------------------
Total assets $183,433 $179,820 $176,971 $173,791 $171,838
Earning assets 163,688 160,373 157,343 154,567 154,235
Loans 130,747 130,734 128,525 125,649 122,672
Intangible assets including MSRs 7,615 7,614 7,666 7,658 7,643
MSRs 1,262 1,220 1,265 1,253 1,232
Consumer and commercial deposits 132,195 130,472 128,396 127,460 126,618
Brokered time and foreign deposits 1,624 1,893 2,013 2,010 2,007
Total shareholders' equity 22,191 21,994 21,727 21,251 21,027
Preferred stock 725 725 725 725 725
As of
-----
Total assets 186,818 182,559 179,542 175,335 171,777
Earning assets 165,434 162,422 158,487 156,856 154,802
Loans 132,151 129,744 129,196 127,877 124,340
Allowance for loan and lease losses 1,968 2,003 2,040 2,044 2,071
Consumer and commercial deposits 135,077 131,792 130,933 127,735 126,861
Brokered time and foreign deposits 1,430 1,493 2,023 2,024 2,022
Total shareholders' equity 22,269 22,131 21,817 21,422 21,070
FINANCIAL RATIOS & OTHER DATA
Return on average total assets 1.25% 0.89% 0.93% 0.97% 0.44%
Return on average common shareholders' equity 10.41 7.29 7.59 7.99 3.49
Return on average tangible common shareholders' equity (1) 14.59 10.29 10.78 11.61 5.10
Net interest margin(2) 3.03 3.11 3.19 3.20 3.19
Efficiency ratio 2, 3 62.03 68.93 66.83 66.05 90.13
Tangible efficiency ratio 1, 2, 3 61.69 68.77 66.65 65.84 89.82
Effective tax rate 3, 5 10.37 30.23 23.61 24.50 NM
Tier 1 common 4 9.60 9.72 9.90 9.82 9.94
Tier 1 capital 4 10.50 10.66 10.88 10.81 10.97
Total capital 4 12.30 12.53 12.81 12.81 13.04
Tier 1 leverage 4 9.50 9.56 9.57 9.58 9.46
Total average shareholders' equity to total average assets 12.10 12.23 12.28 12.23 12.24
Tangible equity to tangible assets 1 8.94 9.07 9.01 9.00 8.98
Book value per common share $40.85 $40.18 $39.44 $38.61 $37.85
Tangible book value per common share (1) 29.21 28.64 27.82 27.01 26.27
Market price:
High 40.86 40.84 41.26 36.99 36.29
Low 36.42 36.82 36.23 31.97 31.59
Close 38.03 40.06 39.79 36.81 32.42
Market capitalization 20,055 21,344 21,279 19,734 17,427
Average common shares outstanding
Diluted 533,230 535,486 536,992 537,921 538,850
Basic 527,402 529,764 531,162 532,492 533,829
Full-time equivalent employees 25,074 25,841 25,925 26,281 26,409
Number of ATMs 2,192 2,212 2,243 2,243 2,846
Full service banking offices 1,454 1,473 1,501 1,497 1,508
(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.
4Current 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 Nine Months Ended
September 30
------------
September 30 June 30 March 31 December 31 September 30
2014 2014 2014 2013 2013 2014 2013
---- ---- ---- ---- ---- ---- ----
NON-GAAP MEASURES PRESENTED IN THE EARNINGS RELEASE 1
-----------------------------------------------------
$1,215 $1,209 $1,204 $1,213 $1,208 $3,629 $3,640
Net interest income
Taxable-equivalent adjustment 36 35 35 34 32 105 93
--- --- --- --- --- --- ---
Net interest income - FTE 1,251 1,244 1,239 1,247 1,240 3,734 3,733
Noninterest income 780 957 791 814 680 2,528 2,401
--- --- --- --- --- ----- -----
Total revenue - FTE 2,031 2,201 2,030 2,061 1,920 6,262 6,134
Gain on sale of asset management subsidiary 0 (105) 0 0 0 (105) 0
--- ---- --- --- --- ---- ---
Total revenue - FTE excluding gain on sale of asset management subsidiary (2) $2,031 $2,096 $2,030 $2,061 $1,920 6,157 $6,134
====== ====== ====== ====== ====== ===== ======
$780 $957 $791 $814 $680 $2,528 $2,401
Noninterest income
Gain on sale of asset management subsidiary 0 (105) 0 0 0 (105) 0
--- ---- --- --- --- ---- ---
Noninterest income excluding gain on sale of asset management subsidiary (2) $780 $852 $791 $814 $680 $2,423 $2,401
==== ==== ==== ==== ==== ====== ======
10.41% 7.29% 7.59% 7.99% 3.49% 8.45% 5.79%
Return on average common shareholders' equity
Effect of removing average intangible assets excluding MSRs 4.18% 3.00% 3.19% 3.62% 1.61% 3.47% 2.65%
Return on average tangible common shareholders' equity (3) 14.59% 10.29% 10.78% 11.61% 5.10% 11.92% 8.44%
===== ===== ===== ===== ==== ===== ====
62.03% 68.93% 66.83% 66.05% 90.13% 66.01% 72.88%
Efficiency ratio 4, 5
Impact of excluding amortization of intangible assets -0.34% -0.16% -0.18% -0.21% -0.31% -0.22% -0.30%
Tangible efficiency ratio 5, 6 61.69% 68.77% 66.65% 65.84% 89.82% 65.79% 72.58%
===== ===== ===== ===== ===== ===== =====
September 30 June 30 March 31 December 31 September 30
2014 2014 2014 2013 2013
---- ---- ---- ---- ----
Total shareholders' equity $22,269 $22,131 $21,817 $21,422 $21,070
Goodwill, net of deferred taxes of $210 million, $206 million, $193 million, $186 million, and $180 million, respectively (6,127) (6,131) (6,184) (6,183) (6,189)
Other intangible assets, net of deferred taxes of $0, $1million, $1million, $2 million, and $2 million, respectively, and MSRs (1,320) (1,276) (1,281) (1,332) (1,285)
MSRs 1,305 1,259 1,251 1,300 1,248
Tangible equity 16,127 15,983 15,603 15,207 14,844
Preferred stock (725) (725) (725) (725) (725)
---- ---- ---- ---- ----
Tangible common equity $15,402 $15,258 $14,878 $14,482 $14,119
======= ======= ======= ======= =======
$186,818 $182,559 $179,542 $175,335 $171,777
Total assets
Goodwill (6,337) (6,337) (6,377) (6,369) (6,369)
Other intangible assets including MSRs (1,320) (1,277) (1,282) (1,334) (1,287)
MSRs 1,305 1,259 1,251 1,300 1,248
Tangible assets $180,466 $176,204 $173,134 $168,932 $165,369
======== ======== ======== ======== ========
Tangible equity to tangible assets 7 8.94% 9.07% 9.01% 9.00% 8.98%
Tangible book value per common share 8 $29.21 $28.64 $27.82 $27.01 $26.27
Total loans $132,151 $129,744 $129,196 $127,877 $124,340
Government guaranteed loans (5,965) (6,081) (8,828) (8,961) (9,016)
Loans held at fair value (284) (292) (299) (302) (316)
Total loans, excluding government guaranteed and fair value loans $125,902 $123,371 $120,069 $118,614 $115,008
======== ======== ======== ======== ========
Allowance to total loans, excluding government guaranteed and fair value loans 9 1.56% 1.62% 1.70% 1.72% 1.80%
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 Nine Months Ended
September 30
------------
September 30 June 30 March 31 December 31 September 30
2014 2014 2014 2013 2013 2014 2013
---- ---- ---- ---- ---- ---- ----
NON-GAAP MEASURES PRESENTED IN THE EARNINGS RELEASE (1)
------------------------------------------------------
Net income available to common shareholders $563 $387 $393 $413 $179 $1,343 $884
Form 8-K and other legacy mortgage-related items:
Operating losses related to settlement of certain legal matters 0 204 0 0 323 204 323
Mortgage repurchase provision related to repurchase settlements 0 0 0 0 63 0 63
Provision for unrecoverable servicing advances 0 0 0 0 96 0 96
Gain on sale of asset management subsidiary 0 (105) 0 0 0 (105) 0
Other legacy mortgage-related adjustments 0 (25) 0 0 0 (25) 0
Tax benefit related to above items 0 (25) 0 0 (190) (25) (190)
Tax benefit related to completion of tax authority exam (130) 0 0 0 0 (130) 0
Net tax benefit related to subsidiary reorganization and other 0 0 0 0 (113) 0 (113)
Total Form 8-K and other legacy mortgage-related items (130) 49 0 0 179 (81) 179
---- --- --- --- --- --- ---
$433 $436 $393 $413 $358 $1,262 $1,063
Net income available to common shareholders, excluding
the impact of Form 8-K and other legacy mortgage-related items 10
===
Net income per average common share, diluted $1.06 $0.72 $0.73 $0.77 $0.33 $2.51 $1.64
Impact of Form 8-K and other legacy mortgage-related items (0.25) 0.09 0.00 0.00 0.33 (0.16) 0.33
Net income per average common diluted share, excluding the $0.81 $0.81 $0.73 $0.77 $0.66 $2.35 $1.97
impact of Form 8-K and other legacy 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 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.
5 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.
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 September 9, 2014, July 3, 2014, and October 10, 2013, 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 periods' 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.
