trigger

Search Site

SunTrust Reports First Quarter 2019 Results

04/18/2019
Improved Profitability and Strong Loan Growth Highlight 1Q Results
Planned Merger with BB&T On Track

ATLANTA, April 18, 2019 /PRNewswire/ -- For the first quarter of 2019, SunTrust Banks, Inc. (NYSE: STI) reported net income available to common shareholders of $554 million, or $1.24 per average common diluted share, which includes $(0.09) per share of merger-related costs associated with the Company's previously announced proposed merger with BB&T Corporation. This compares to $1.40 for the prior quarter and $1.29 for the first quarter of 2018.

"Our performance continues to improve and this quarter was no exception, with earnings per share increasing by 3% year-over-year (excluding merger-related costs). Loan growth remains a bright spot, with average balances up 3% sequentially and 8% year-over-year, a reflection of the ongoing investments in our business and our clients' optimistic outlook on the economy," said William H. Rogers, Jr., chairman and CEO of SunTrust Banks, Inc. "More importantly, while our results this quarter highlight SunTrust's individual strength, we know that after merging with BB&T, we will be even better positioned to enhance shareholder value, improve the client experience, and invest in our teammates, associates, and communities."

First Quarter 2019 Financial Highlights

(Commentary is on a fully taxable-equivalent basis unless otherwise noted. Consistent with SEC guidance in Industry Guide 3 that contemplates the calculation of tax-exempt income on a tax equivalent basis, net interest income, net interest margin, total revenue, and efficiency ratios are provided on a fully taxable-equivalent basis, which generally assumes a 21% marginal federal tax rate as well as state income taxes, where applicable. We provide unadjusted amounts in the table on page 3 of this news release and detailed reconciliations and additional information in Appendix A on pages 12 and 13.)

Income Statement

  • Net income available to common shareholders was $554 million, or $1.24 per average common diluted share, compared to $1.40 for the prior quarter and $1.29 for the first quarter of 2018.
    • The first quarter of 2019 included $45 million, or $(0.09) per average common share of merger-related costs, comprised primarily of M&A advisory fees and legal costs associated with the Company's previously announced proposed merger with BB&T Corporation.
    • The prior quarter included a $(0.10) per share discrete charge associated with the settlement of a legacy pension plan.
  • Total revenue was down 2% sequentially and up 4% year-over-year. The sequential decrease was driven primarily by lower noninterest income, while the year-over-year increase was driven by higher net interest income.
  • Net interest margin was 3.27% in the current quarter, stable sequentially and up 3 basis points compared to the prior year quarter. The year-over-year increase was driven primarily by higher benchmark interest rates in addition to positive mix shift in the loans held for investment ("LHFI") portfolio, offset partially by higher funding costs.
  • Provision for credit losses increased $66 million sequentially and $125 million year-over-year, driven by strong loan growth and a stable allowance for loan and lease losses ("ALLL") to period-end LHFI ratio (compared to declines in prior quarters).
  • Noninterest expense increased $7 million sequentially and $72 million year-over-year. The current quarter included $45 million of aforementioned merger-related costs. The prior quarter included a $60 million pre-tax pension plan settlement charge. Excluding these discrete items, noninterest expense increased $22 million sequentially and $27 million year-over-year.
  • The efficiency and tangible efficiency ratios for the current quarter were 63.4% and 62.7%, respectively, which were unfavorably impacted by the $45 million of merger-related costs. Excluding these costs, the adjusted tangible efficiency ratio was 60.8% for the current quarter, compared to 58.6% for the prior quarter and 62.1% for the prior year quarter.

Balance Sheet

  • Average performing LHFI was up 3% compared to the prior quarter and up 8% year-over-year, driven by growth across most loan categories.
  • Average consumer and commercial deposits decreased 1% compared to the prior quarter and remained relatively stable year-over-year, driven primarily by declines in money market accounts and demand deposits, offset largely by growth in NOW accounts and time deposits.

Capital

  • Estimated capital ratios continue to be well above regulatory requirements. The Common Equity Tier 1 ("CET1") ratio was estimated to be 9.1% as of March 31, 2019, lower than the prior quarter due primarily to loan growth.
  • During the quarter, the Company repurchased $250 million of its outstanding common stock. The Company does not expect to utilize the $500 million remaining share repurchase authorization available under its 2018 Capital Plan in view of the proposed merger.
  • Book value per common share was $51.15 and tangible book value per common share was $37.22, up 3% and 4%, respectively, from December 31, 2018, driven primarily by growth in retained earnings and a decrease in accumulated other comprehensive loss.

Asset Quality

  • Nonperforming loans ("NPLs") decreased $4 million from the prior quarter and represented 0.34% of period-end LHFI at March 31, 2019, compared to 0.35% of period-end LHFI at December 31, 2018.
  • Net charge-offs for the current quarter were $97 million, or 0.26% of total average LHFI on an annualized basis, compared to 0.26% during the prior quarter and 0.22% during the first quarter of 2018.
  • At March 31, 2019, the ALLL to period-end LHFI ratio was 1.06%, stable compared to the prior quarter.
  • Provision for credit losses increased $66 million sequentially and $125 million year-over-year, driven by strong loan growth and a stable ALLL to period-end LHFI ratio (compared to declines in prior quarters).

Income Statement (Dollars in millions, except per share data)

1Q 2019


4Q 2018


3Q 2018


2Q 2018


1Q 2018

Net interest income

$1,544


$1,547


$1,512


$1,488


$1,441

Net interest income-FTE 1

1,567


1,570


1,534


1,510


1,461

Net interest margin

3.22%


3.22%


3.22%


3.23%


3.20%

Net interest margin-FTE 1

3.27


3.27


3.27


3.28


3.24

Noninterest income

$784


$818


$782


$829


$796

Total revenue

2,328


2,365


2,294


2,317


2,237

Total revenue-FTE 1

2,351


2,388


2,316


2,339


2,257

Noninterest expense

1,489


1,482


1,384


1,390


1,417

Provision for credit losses

153


87


61


32


28

Net income available to common shareholders

554


632


726


697


612

Earnings per average common diluted share

1.24


1.40


1.56


1.49


1.29











Balance Sheet   (Dollars in billions)










Average LHFI

$154.3


$149.7


$146.0


$144.2


$142.9

Average consumer and commercial deposits

159.9


161.6


159.3


159.0


159.2











Capital










Basel III capital ratios at period end 2 :










Tier 1 capital

10.16%


10.30%


10.72%


10.86%


11.00%

Common Equity Tier 1 ("CET1")

9.09


9.21


9.60


9.72


9.84

Total average shareholders' equity to total average assets

11.25


11.21


11.71


11.78


12.05











Asset Quality










Net charge-offs to total average LHFI (annualized)

0.26%


0.26%


0.24%


0.20%


0.22%

ALLL to period-end LHFI 3

1.06


1.06


1.10


1.14


1.19

NPLs to period-end LHFI

0.34


0.35


0.47


0.52


0.50



1

See Appendix A on pages 12 and 13 for non-U.S. GAAP reconciliations and additional information.

2

Basel III capital ratios are calculated under the standardized approach using regulatory capital methodology applicable to the Company for each period presented, including the phase-in of transition provisions through January 1, 2018. Capital ratios at March 31, 2019 are estimated as of the date of this document.

3

LHFI measured at fair value were excluded from period-end LHFI in the calculation as no allowance is recorded for loans measured at fair value.

Consolidated Financial Performance Details
(Commentary is on a fully taxable-equivalent basis unless otherwise noted)

Revenue

Total revenue was $2.4 billion for the current quarter, a decrease of $37 million, or 2%, compared to the prior quarter, driven by lower noninterest income. Noninterest income decreased $34 million sequentially due largely to lower commercial real estate-related income, investment banking income, and client transaction-related fees, offset partially by higher trading income and mortgage-related income. Compared to the first quarter of 2018, total revenue increased $94 million, or 4%, driven by a $106 million increase in net interest income as a result of net interest margin expansion and strong growth in average earning assets, offset partially by lower noninterest income.

Net Interest Income

Net interest income was $1.6 billion for the first quarter of 2019, a decrease of $3 million compared to the prior quarter due primarily to fewer days during the current quarter, largely offset by strong loan growth. The $106 million increase relative to the prior year was driven by a 3 basis point expansion in the net interest margin and 6% growth in average earning assets.

Net interest margin for the current quarter was 3.27%, which was stable compared to the prior quarter and 3 basis points higher than the prior year. The year-over-year increase was driven primarily by higher earning asset yields, offset partially by higher funding costs.

Noninterest Income

Noninterest income was $784 million for the current quarter, compared to $818 million for the prior quarter and $796 million for the first quarter of 2018. The $34 million sequential decrease was due largely to lower commercial real estate-related income, investment banking income, and client transaction-related fees, offset partially by higher trading income and mortgage-related income. Compared to the prior year, noninterest income decreased $12 million driven primarily by lower other noninterest income, wealth-related income, and client transaction-related fees, offset partially by higher capital markets and mortgage-related income.

Client transaction-related fees (namely service charges on deposits, other charges and fees, and card fees) decreased $15 million sequentially and $6 million year-over-year due primarily to lower client transaction activity. The sequential decrease was also driven by fewer days during the current quarter.

Investment banking income was $130 million for the current quarter, compared to $146 million in the prior quarter and $133 million for the first quarter of 2018. The $16 million sequential decrease was due to lower syndicated finance and M&A activity.

Trading income was $60 million for the current quarter, compared to $24 million in the prior quarter and $42 million in the prior year. The $36 million sequential and $18 million year-over-year increases were due primarily to positive changes in mark-to-market valuations on corporate bond inventory in the current quarter in addition to increased client activity.

Mortgage-related income for the current quarter was $100 million, compared to $85 million for the prior quarter and $90 million for the first quarter of 2018. The $15 million sequential and $10 million year-over-year increases were driven primarily by higher servicing-related income attributable to favorable net hedge performance and lower decay. The year-over-year increase was also favorably impacted by higher core servicing fees. At March 31, 2019, the servicing portfolio totaled $169.3 billion, relatively stable compared to the prior quarter and a 3% increase year-over-year due to MSRs purchased in the first and third quarters of 2018.

Trust and investment management income was $71 million for the current quarter, compared to $74 million for the prior quarter and $75 million for the prior year quarter. The $3 million sequential and the $4 million year-over-year decreases were due primarily to lower fees arising from adverse market conditions, which led to reduced assets under management at the end of the fourth quarter of 2018.

Retail investment services income was $69 million for the current quarter, compared to $74 million for the prior quarter and $72 million for the prior year quarter. The $5 million sequential and $3 million year-over-year decreases were due primarily to reduced client transaction activity and adverse market conditions, which led to reduced assets under management at the end of the fourth quarter of 2018.

Commercial real estate-related income was $24 million for the current quarter, compared to $68 million for the prior quarter and $23 million for the prior year. The sequential decrease was driven primarily by seasonal declines in structured real estate, SunTrust Community Capital (tax credit-related income), and the Company's agency lending business.

Other noninterest income was $24 million for the current quarter, compared to $26 million in the prior quarter and $48 million in the first quarter of 2018. The $24 million year-over-year decrease was due primarily to a $23 million remeasurement gain on an equity investment in a fintech company during the first quarter of 2018.

Noninterest Expense

Noninterest expense was $1.5 billion in the current quarter, up $7 million sequentially and $72 million compared to the first quarter of 2018. The current quarter included $45 million in aforementioned merger-related costs. The prior quarter included a $60 million pre-tax pension plan settlement charge. Excluding these discrete items, noninterest expense increased $22 million sequentially and $27 million year-over-year. The sequential increase was driven primarily by seasonal increases in employee compensation and benefits, partially offset by lower operating losses. The year-over-year increase was driven by higher outside processing and software costs, offset partially by lower employee compensation and benefits and regulatory assessments.

Employee compensation and benefits expense was $824 million in the current quarter, compared to $857 million in the prior quarter and $853 million in the first quarter of 2018. The $33 million sequential decrease was driven primarily by the $60 million legacy pension plan settlement charge recognized in the fourth quarter of 2018, offset partially by the seasonal increase in employee benefit costs and FICA taxes. The $29 million year-over-year decrease was primarily driven by lower contract labor costs in the current quarter.

Outside processing and software expense was $238 million in the current quarter, compared to $242 million in the prior quarter and $206 million in the first quarter of 2018. The $32 million year-over-year increase was driven primarily by higher software-related costs resulting from the amortization of new and upgraded technology assets.

Net occupancy expense was $102 million in the current quarter, stable compared to the prior quarter and $8 million higher than the first quarter of 2018. The year-over-year increase was driven primarily by higher rent expense and the absence of amortization of deferred gains on sale leaseback transactions following the adoption of the lease accounting standard during the first quarter of 2019.

Merger-related costs totaled $45 million for the current quarter. This represents a new income statement line item introduced to capture merger-related expenses associated with the Company's proposed merger with BB&T Corporation as announced on February 7, 2019. The current quarter costs were driven by M&A advisory fees and legal costs.

Marketing and customer development expense was $41 million in the current quarter, compared to $49 million in the prior quarter and $41 million in the first quarter of 2018. The $8 million sequential decrease was driven by normal seasonality in advertising and client development costs.

Operating losses were $22 million in the current quarter, compared to $39 million in the prior quarter and $6 million in the first quarter of 2018. The sequential decrease was driven primarily by higher legal and fraud-related costs recognized during the fourth quarter of 2018. The year-over-year increase was driven primarily by a $10 million net benefit from the progression of certain legal matters during the first quarter of 2018.

Regulatory assessments expense was $19 million in the current quarter, compared to $7 million in the prior quarter and $41 million in the prior year. The sequential increase was driven primarily by a $9 million regulatory assessment credit recognized during the fourth quarter of 2018. The year-over-year decrease was driven by the cessation of the FDIC Deposit Insurance Fund surcharge in the fourth quarter of 2018.

Other noninterest expense was $141 million in the current quarter, compared to $122 million in the prior quarter and $121 million in the first quarter of 2018. The $19 million sequential and $20 million year-over-year increases were driven primarily by higher branch closure-related costs.

Income Taxes

For the first quarter of 2019, the Company recorded a provision for income taxes of $104 million compared to $136 million for the prior quarter and $147 million for the first quarter of 2018. The effective tax rate for the current quarter was 15%, compared to 17% in the prior quarter and 19% in the first quarter of 2018. The first quarter of 2019 included $17 million of discrete tax benefits primarily related to the typical seasonal impact from stock-based compensation.

Balance Sheet

At March 31, 2019, the Company had total assets of $220.4 billion and total shareholders' equity of $24.8 billion, representing 11% of total assets. Book value per common share was $51.15 and tangible book value per common share was $37.22, up 3% and 4%, respectively, compared to December 31, 2018, driven primarily by growth in retained earnings and a decrease in accumulated other comprehensive loss.

Loans and Deposits

Average performing LHFI totaled $153.7 billion for the current quarter, up 3% compared to the prior quarter and up 8% compared to the prior year driven by broad-based growth across most loan categories, with the exception of commercial construction, residential home equity products, and residential construction.

Average consumer and commercial deposits totaled $159.9 billion for the current quarter, down 1% compared to the prior quarter and relatively stable compared to the first quarter of 2018. These sequential and year-over-year changes were driven by declines in money market accounts and demand deposits, offset by growth in NOW accounts and time deposits.

Capital and Liquidity

The Company's estimated capital ratios were well above current regulatory requirements with the Common Equity Tier 1 ratio estimated to be 9.1% at March 31, 2019. The ratios of average total equity to average total assets and tangible common equity to tangible assets were 11.3% and 7.7%, respectively, at March 31, 2019. The Company continues to have substantial available liquidity in the form of cash, high-quality government-backed or government-sponsored securities, and other available contingency funding sources.

The Company declared a common stock dividend of $0.50 per common share and repurchased $250 million of its outstanding common stock in the first quarter of 2019. The Company does not expect to utilize the $500 million remaining share repurchase authorization available under its 2018 Capital Plan in view of the proposed merger with BB&T Corporation.

Asset Quality

Overall asset quality performance continues to be strong. Nonperforming assets ("NPAs") totaled $648 million at March 31, 2019, up $59 million from the prior quarter and down $130 million year-over-year. The ratio of NPLs to period-end LHFI was 0.34%, 0.35%, and 0.50% at March 31, 2019, December 31, 2018, and March 31, 2018, respectively. The year-over-year decrease was driven primarily by lower residential mortgage nonperforming loans due to loans transitioning from non-accruing (as a result of forbearance relief provided after hurricanes) back to accruing status.

Net charge-offs totaled $97 million during the current quarter, stable compared to the prior quarter and an increase of $18 million compared to the first quarter of 2018. The ratio of annualized net charge-offs to total average LHFI was 0.26% during the current quarter, compared to 0.26% during the prior quarter and 0.22% during the prior year quarter.

The provision for credit losses was $153 million in the current quarter, an increase of $66 million sequentially and $125 million year-over-year, driven by strong loan growth and a stable ALLL to period-end LHFI ratio (compared to declines in prior quarters). At March 31, 2019, the ALLL was $1.6 billion, which represented 1.06% of period-end loans, stable relative to December 31, 2018 and a 13 basis point decline relative to March 31, 2018, driven by continued improvements in asset quality.

Early stage delinquencies decreased 9 basis points from the prior quarter and 4 basis points from March 31, 2018 to 0.64% at March 31, 2019. Excluding government-guaranteed loans, early stage delinquencies were 0.21%, down 6 basis points compared to the prior quarter and down 1 basis point compared to the first quarter of 2018.

In the current quarter, the Company transferred $465 million of accruing residential troubled debt restructured ("TDR") loans from LHFI to loans held for sale ("LHFS"), in anticipation of a sale in the second quarter of 2019. This resulted in a transfer of $31 million of the associated allowance transferring into the carrying value in LHFS. This transaction had no impact on the provision for loan losses in the first quarter.

OTHER INFORMATION

About SunTrust Banks, Inc.
SunTrust Banks, Inc. (NYSE: STI) is a purpose-driven company dedicated to Lighting the Way to Financial Well-Being for the people, businesses, and communities it serves. SunTrust leads onUp, a national movement inspiring Americans to build financial confidence. Headquartered in Atlanta, the Company has two business segments: Consumer and Wholesale. Its flagship subsidiary, SunTrust Bank, operates an extensive branch and ATM network throughout the high-growth Southeast and Mid-Atlantic states, along with 24-hour digital access. Certain business lines serve consumer, commercial, corporate, and institutional clients nationally. As of March 31, 2019, SunTrust had total assets of $220 billion and total deposits of $162 billion. The Company provides deposit, credit, trust, investment, mortgage, asset management, securities brokerage, and capital market services. Learn more at suntrust.com.

Business Segment Results
The Company has included its business segment financial tables as part of this release. Revenue and income amounts labeled "FTE" in the business segment tables are reported on a fully taxable-equivalent basis. For the business segments, net interest income is computed using matched-maturity funds transfer pricing and noninterest income includes federal and state tax credits that are grossed-up on a pre-tax equivalent basis. Further, provision/(benefit) for credit losses represents net charge-offs by segment combined with an allocation to the segments of the provision/(benefit) attributable to each segment's quarterly change in the allowance for loan and lease losses ("ALLL") and unfunded commitments 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 Total Corporate Other results presented in this document also include Reconciling Items, which are comprised of differences created between internal management accounting practices and U.S. Generally Accepted Accounting Principles ("U.S. 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 included in this release and the earnings presentation which SunTrust has also published today and SunTrust's forthcoming Form 10-Q. Detailed financial tables and the earnings presentation 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 April 18, 2019, at 11:00 a.m. (Eastern Time) to discuss the earnings results and business trends. Individuals may call in beginning at 10:30 a.m. (Eastern Time) by dialing 1-877-209-9920 (Passcode: SunTrust). Individuals calling from outside the United States should dial 1-612-332-1210 (Passcode: SunTrust). A replay of the call will be available approximately one hour after the call ends on April 18, 2019, and will remain available until May 18, 2019, by dialing 1-800-475-6701 (domestic) or 1-320-365-3844 (international) (Passcode: 445929). 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 April 18, 2019, individuals may access an archived version of the webcast in the "Events & Presentations" section of the SunTrust investor relations website. This webcast will be archived and available for one year.

Non-GAAP Financial Measures
This news release includes non-GAAP financial measures to describe SunTrust's performance. Additional information and reconciliations of those measures to GAAP measures are provided in the appendix to this news release beginning at page 12.

In this news release, consistent with SEC Industry Guide 3, the Company presents total revenue, net interest income, net interest margin, and efficiency ratios on a fully taxable equivalent ("FTE") basis, and ratios on an annualized basis. The FTE basis adjusts for the tax-favored status of net interest income from certain loans and investments using a federal tax rate of 21%, as well as state income taxes, where applicable, to increase tax-exempt interest income to a taxable-equivalent basis. 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-FTE plus noninterest income.

The Company presents the following additional non-GAAP measures because many investors find them useful. Specifically:

  • The Company presents certain capital information on a tangible basis, including Tangible equity, Tangible common equity, the ratio of Tangible equity to tangible assets, the ratio of Tangible common equity to tangible assets, Tangible book value per share, and the Return on tangible common shareholders' equity, which removes the after-tax impact of purchase accounting intangible assets from shareholders' equity and removes related intangible asset amortization from Net income available to common shareholders. The Company believes these measures are useful to investors because, by removing the amount of intangible assets that results from merger and acquisition activity and amortization expense (the level of which may vary from company to company), they allow investors to more easily compare the Company's capital position and return on average tangible common shareholders' equity to other companies in the industry who present similar measures. The Company also believes that removing these items provides a more relevant measure of the return on the Company's common shareholders' equity. These measures are utilized by management to assess capital adequacy and profitability of the Company.
  • Similarly, the Company presents Efficiency ratio-FTE, Tangible efficiency ratio-FTE, and Adjusted tangible efficiency ratio-FTE. The efficiency ratio is computed by dividing Noninterest expense by Total revenue. Efficiency ratio-FTE is computed by dividing Noninterest expense by Total revenue-FTE. Tangible efficiency ratio-FTE excludes the amortization related to intangible assets and certain tax credits. The Company believes this measure is useful to investors because, by removing the impact of amortization (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. Adjusted tangible efficiency ratio-FTE removes the pre-tax impact of merger-related costs recognized in the first quarter of 2019 as well as the pre-tax impact of the legacy pension plan settlement charge recognized in the fourth quarter of 2018 from the calculation of Tangible efficiency ratio-FTE. See slide 21 in the earnings presentation (Exhibit 99.2) as well as Appendix A in this news release for more details on these items. The Company believes this measure (adjusted tangible efficiency ratio-FTE) is useful to investors because it is more reflective of normalized operations as it reflects results that are primarily client relationship and client transaction driven. This measure is utilized by management to assess the efficiency of the Company and its lines of business.

Important Cautionary Statement About Forward-Looking Statements
This news release contains forward-looking statements. Statements regarding the utilization of the Company's share repurchase authorization under its 2018 Capital Plan, its proposed merger with BB&T, including the benefits thereof, and the availability of liquidity to the Company 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," "opportunity," "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. 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, 2018 and in other periodic reports that we file with the SEC.

Additional Information about the Merger and Where to Find It
In connection with the Company's proposed merger with BB&T, BB&T has filed with the SEC a registration statement on Form S-4 to register the shares of BB&T's capital stock to be issued in connection with the merger. The registration statement includes a joint proxy statement/prospectus, which will be sent to the shareholders of BB&T and SunTrust seeking their approval of the proposed transaction.

INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT ON FORM S-4, THE JOINT PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATEMENT ON FORM S-4 AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION BECAUSE THESE DOCUMENTS DO AND WILL CONTAIN IMPORTANT INFORMATION ABOUT BB&T, SUNTRUST, AND THE PROPOSED TRANSACTION.

Investors and security holders may obtain copies of these documents free of charge through the website maintained by the SEC at www.sec.gov or from BB&T at its website, www.bbt.com, or from SunTrust at its website, www.suntrust.com. Documents filed with the SEC by BB&T will be available free of charge by accessing BB&T's website at http://bbt.com/ under the tab "About BB&T" and then under the heading "Investor Relations" or, alternatively, by directing a request by telephone or mail to BB&T Corporation, 200 West Second Street, Winston-Salem, North Carolina 27101, (336) 733-3065, and documents filed with the SEC by SunTrust will be available free of charge by accessing SunTrust's website at http://suntrust.com/ under the tab "Investor Relations," and then under the heading "Regulatory & Legal" or, alternatively, by directing a request by telephone or mail to SunTrust Banks, Inc., 303 Peachtree Street, N.E., Atlanta, Georgia 30308, (877) 930-8971.

Participants in the Solicitation
BB&T, SunTrust and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of BB&T and SunTrust in connection with the proposed transaction under the rules of the SEC. Certain information regarding the interests of these participants and a description of their direct and indirect interests, by security holdings or otherwise, are included in the joint proxy statement/prospectus regarding the proposed transaction and will be included in other relevant materials to be filed with the SEC when they become available. Additional information about BB&T, and its directors and executive officers, may be found in the definitive proxy statement of BB&T relating to its 2019 Annual Meeting of Shareholders filed with the SEC, and other documents filed by BB&T with the SEC. Additional information about SunTrust, and its directors and executive officers, may be found in the definitive proxy statement of SunTrust relating to its 2019 Annual Meeting of Shareholders filed with the SEC, and other documents filed by SunTrust with the SEC. These documents can be obtained free of charge from the sources described above.

SunTrust Banks, Inc. and Subsidiaries

FINANCIAL HIGHLIGHTS


(Dollars in millions and shares in thousands, except per share data) (Unaudited)

Three Months Ended March 31


%

2019


2018


 Change

EARNINGS & DIVIDENDS






Net income

$580


$643


(10)%

Net income available to common shareholders

554


612


(9)

Total revenue

2,328


2,237


4

Total revenue-FTE 1

2,351


2,257


4

Net income per average common share:






Diluted

$1.24


$1.29


(4)%

Basic

1.25


1.31


(5)

Dividends declared per common share

0.50


0.40


25

CONDENSED BALANCE SHEETS






Selected Average Balances:






Total assets

$217,403


$204,132


7%

Earning assets

194,385


182,874


6

Loans held for investment ("LHFI")

154,258


142,920


8

Intangible assets including residential mortgage servicing rights ("MSRs")

8,394


8,244


2

Residential MSRs

1,984


1,833


8

Consumer and commercial deposits

159,921


159,169


Total shareholders' equity

24,466


24,605


(1)

Preferred stock

2,025


2,390


(15)

Period End Balances:






Total assets

$220,425


$204,885


8%

Earning assets

196,316


182,913


7

LHFI

155,233


142,618


9

Allowance for loan and lease losses ("ALLL")

1,643


1,694


(3)

Consumer and commercial deposits

161,092


161,357


Total shareholders' equity

24,823


24,269


2

FINANCIAL RATIOS & OTHER DATA






Return on average total assets

1.08%


1.28%


(16)%

Return on average common shareholders' equity

10.06


11.23


(10)

Return on average tangible common shareholders' equity 1

13.91


15.60


(11)

Net interest margin

3.22


3.20


1

Net interest margin-FTE 1

3.27


3.24


1

Efficiency ratio

63.97


63.35


1

Efficiency ratio-FTE 1

63.35


62.77


1

Tangible efficiency ratio-FTE 1

62.70


62.11


1

Adjusted tangible efficiency ratio-FTE 1

60.78


62.11


(2)

Effective tax rate

15


19


(21)

Basel III capital ratios at period end 2:






Common Equity Tier 1 ("CET1")

9.09%


9.84%


(8)%

Tier 1 capital

10.16


11.00


(8)

Total capital

11.84


12.90


(8)

Leverage

9.15


9.75


(6)

Total average shareholders' equity to total average assets

11.25


12.05


(7)

Tangible equity to tangible assets 1

8.71


9.11


(4)

Tangible common equity to tangible assets 1

7.71


8.04


(4)

Book value per common share

$51.15


$47.14


9

Tangible book value per common share 1

37.22


33.97


10

Market capitalization

26,290


31,959


(18)

Average common shares outstanding:






Diluted

446,662


473,620


(6)

Basic

443,566


468,723


(5)

Full-time equivalent employees

22,626


23,208


(3)

Number of ATMs

2,030


2,075


(2)

Full service banking offices

1,152


1,236


(7)




1

See Appendix A for additional information and reconcilements of non-U.S. GAAP performance measures.

2

Basel III capital ratios are calculated under the standardized approach using regulatory capital methodology applicable to the Company for each period presented, including the phase-in of transition provisions through January 1, 2018. Capital ratios at March 31, 2019 are estimated as of the date of this release.

 

 

SunTrust Banks, Inc. and Subsidiaries

FIVE QUARTER FINANCIAL HIGHLIGHTS



Three Months Ended


March 31


December 31


September 30


June 30


March 31

(Dollars in millions and shares in thousands, except per share data) (Unaudited)

2019


2018


2018


2018


2018

EARNINGS & DIVIDENDS










Net income

$580


$658


$752


$722


$643

Net income available to common shareholders

554


632


726


697


612

Total revenue

2,328


2,365


2,294


2,317


2,237

Total revenue-FTE 1

2,351


2,388


2,316


2,339


2,257

Net income per average common share:










Diluted

$1.24


$1.40


$1.56


$1.49


$1.29

Basic

1.25


1.41


1.58


1.50


1.31

Dividends declared per common share

0.50


0.50


0.50


0.40


0.40

CONDENSED BALANCE SHEETS










Selected Average Balances:










Total assets

$217,403


$212,934


$207,395


$204,548


$204,132

Earning assets

194,385


190,742


186,344


184,566


182,874

LHFI

154,258


149,708


145,995


144,156


142,920

Intangible assets including residential MSRs

8,394


8,491


8,396


8,355


8,244

Residential MSRs

1,984


2,083


1,987


1,944


1,833

Consumer and commercial deposits

159,921


161,573


159,348


158,957


159,169

Total shareholders' equity

24,466


23,873


24,275


24,095


24,605

Preferred stock

2,025


2,025


2,025


2,025


2,390

Period End Balances:










Total assets

$220,425


$215,543


$211,276


$207,505


$204,885

Earning assets

196,316


192,497


188,141


185,304


182,913

LHFI

155,233


151,839


147,215


144,935


142,618

ALLL

1,643


1,615


1,623


1,650


1,694

Consumer and commercial deposits

161,092


161,544


159,332


160,410


161,357

Total shareholders' equity

24,823


24,280


24,139


24,316


24,269

FINANCIAL RATIOS & OTHER DATA










Return on average total assets

1.08%


1.23%


1.44%


1.42%


1.28%

Return on average common shareholders' equity

10.06


11.54


13.01


12.73


11.23

Return on average tangible common shareholders' equity 1

13.91


16.13


18.06


17.74


15.60

Net interest margin

3.22


3.22


3.22


3.23


3.20

Net interest margin-FTE 1

3.27


3.27


3.27


3.28


3.24

Efficiency ratio

63.97


62.66


60.34


59.98


63.35

Efficiency ratio-FTE 1

63.35


62.06


59.76


59.41


62.77

Tangible efficiency ratio-FTE 1

62.70


61.13


58.94


58.69


62.11

Adjusted tangible efficiency ratio-FTE 1

60.78


58.63


58.94


58.69


62.11

Effective tax rate

15


17


11


19


19

Basel III capital ratios at period end 2:










CET1

9.09%


9.21%


9.60%


9.72%


9.84%

Tier 1 capital

10.16


10.30


10.72


10.86


11.00

Total capital

11.84


12.02


12.47


12.67


12.90

Leverage

9.15


9.26


9.66


9.82


9.75

Total average shareholders' equity to total average assets

11.25


11.21


11.71


11.78


12.05

Tangible equity to tangible assets 1

8.71


8.65


8.76


9.01


9.11

Tangible common equity to tangible assets 1

7.71


7.63


7.72


7.96


8.04

Book value per common share

$51.15


$49.57


$48.00


$47.70


$47.14

Tangible book value per common share 1

37.22


35.73


34.51


34.40


33.97

Market capitalization

26,290


22,541


30,632


30,712


31,959

Average common shares outstanding:










Diluted

446,662


452,957


464,164


469,339


473,620

Basic

443,566


449,404


460,252


465,529


468,723

Full-time equivalent employees

22,626


22,899


22,839


23,199


23,208

Number of ATMs

2,030


2,082


2,053


2,062


2,075

Full service banking offices

1,152


1,218


1,217


1,222


1,236




1

See Appendix A for additional information and reconcilements of non-U.S. GAAP performance measures.

Basel III capital ratios are calculated under the standardized approach using regulatory capital methodology applicable to the Company for each period presented, including the phase-in of transition provisions through January 1, 2018. Capital ratios at March 31, 2019 are estimated as of the date of this release.

 

 

SunTrust Banks, Inc. and Subsidiaries

APPENDIX A TO THE EARNINGS RELEASE - RECONCILEMENT OF NON-U.S. GAAP MEASURES 1




Three Months Ended


March 31


December 31


September 30


June 30


March 31

(Dollars in millions) (Unaudited)

2019


2018


2018


2018


2018

Net interest income

$1,544


$1,547


$1,512


$1,488


$1,441

Fully taxable-equivalent ("FTE") adjustment

23


23


22


22


20

Net interest income-FTE 2

1,567


1,570


1,534


1,510


1,461

Noninterest income

784


818


782


829


796

Total revenue-FTE 2

$2,351


$2,388


$2,316


$2,339


$2,257











Return on average common shareholders' equity

10.06%


11.54%


13.01%


12.73%


11.23%

Impact of removing average intangible assets and related pre-tax 
     amortization, other than residential MSRs and other servicing rights

3.85


4.59


5.05


5.01


4.37

Return on average tangible common shareholders' equity 3

13.91%


16.13%


18.06%


17.74%


15.60%











Net interest margin

3.22%


3.22%


3.22%


3.23%


3.20%

Impact of FTE adjustment

0.05


0.05


0.05


0.05


0.04

Net interest margin-FTE 2

3.27%


3.27%


3.27%


3.28%


3.24%











Noninterest expense

$1,489


$1,482


$1,384


$1,390


$1,417

Total revenue

2,328


2,365


2,294


2,317


2,237

Efficiency ratio 4

63.97%


62.66%


60.34%


59.98%


63.35%

Impact of FTE adjustment

(0.62)


(0.60)


(0.58)


(0.57)


(0.58)

Efficiency ratio-FTE 2, 4

63.35


62.06


59.76


59.41


62.77

Impact of excluding amortization related to intangible assets and certain 
     tax credits

(0.65)


(0.93)


(0.82)


(0.72)


(0.66)

Tangible efficiency ratio-FTE 2, 5

62.70


61.13


58.94


58.69


62.11

Impact of excluding merger-related costs as well as the legacy pension 
     plan settlement charge

(1.92)


(2.50)




Adjusted tangible efficiency ratio-FTE 2, 5, 6

60.78%


58.63%


58.94%


58.69%


62.11%













1

Certain amounts in this schedule are presented net of applicable income taxes, calculated based on each subsidiary's federal and state tax rates and are adjusted for any permanent differences.

2

The Company presents Net interest income-FTE, Total revenue-FTE, Net interest margin-FTE, Efficiency ratio-FTE, Tangible efficiency ratio-FTE, and Adjusted tangible efficiency ratio-FTE 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 using a federal tax rate of 21%, as well as state income taxes where applicable to increase tax-exempt interest income to a taxable-equivalent basis. 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-FTE plus Noninterest income.

3

The Company presents Return on average tangible common shareholders' equity, which removes the after-tax impact of purchase accounting intangible assets from average common shareholders' equity and removes related intangible asset amortization from Net income available to common shareholders. The Company believes this measure is useful to investors because, by removing the amount of intangible assets and related pre-tax amortization expense (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. The Company also believes that removing these items provides a more relevant measure of the return on the Company's common shareholders' equity. This measure is utilized by management to assess the profitability of the Company.

4

Efficiency ratio is computed by dividing Noninterest expense by Total revenue. Efficiency ratio-FTE is computed by dividing Noninterest expense by Total revenue-FTE.

5

The Company presents Tangible efficiency ratio-FTE and Adjusted tangible efficiency ratio-FTE, which remove the amortization related to intangible assets and certain tax credits from the calculation of Efficiency ratio-FTE. The Company believes these measures are useful to investors because, by removing the impact of amortization (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. These measures are utilized by management to assess the efficiency of the Company and its lines of business.

6

The Company presents Adjusted tangible efficiency ratio-FTE, which removes the $45 million pre-tax impact of merger-related costs recognized in the first quarter of 2019 as well as the $60 million pre-tax impact of the legacy National Commerce Financial Corporation ("NCF") pension plan settlement charge recognized in the fourth quarter of 2018 from the calculation of Tangible efficiency ratio-FTE. The Company believes this measure is useful to investors because it is more reflective of normalized operations as it reflects results that are primarily client relationship and client transaction driven. Removing these items also allows investors to more easily compare the Company's tangible efficiency to other companies in the industry that may not have had similar items impacting their results. Additional detail on the Company's merger agreement with BB&T Corporation and the NCF pension plan settlement charge can be found in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.

 

 

SunTrust Banks, Inc. and Subsidiaries

APPENDIX A TO THE EARNINGS RELEASE - RECONCILEMENT OF NON-U.S. GAAP MEASURES, continued 1




March 31


December 31


September 30


June 30


March 31

(Dollars in millions, except per share data) (Unaudited)

2019


2018


2018


2018


2018

Total shareholders' equity

$24,823


$24,280


$24,139


$24,316


$24,269

Goodwill, net of deferred taxes of $162 million, $160 million, $160 million, $159 
     million, and $159 million, respectively

(6,169)


(6,171)


(6,171)


(6,172)


(6,172)

Other intangible assets (including residential MSRs and other servicing rights)

(1,963)


(2,062)


(2,140)


(2,036)


(1,996)

Residential MSRs and other servicing rights

1,949


2,049


2,126


2,022


1,981

Tangible equity 2

18,640


18,096


17,954


18,130


18,082

Noncontrolling interest

(101)


(103)


(101)


(103)


(101)

Preferred stock

(2,025)


(2,025)


(2,025)


(2,025)


(2,025)

Tangible common equity 2

$16,514


$15,968


$15,828


$16,002


$15,956











Total assets

$220,425


$215,543


$211,276


$207,505


$204,885

Goodwill

(6,331)


(6,331)


(6,331)


(6,331)


(6,331)

Other intangible assets (including residential MSRs and other servicing rights)

(1,963)


(2,062)


(2,140)


(2,036)


(1,996)

Residential MSRs and other servicing rights

1,949


2,049


2,126


2,022


1,981

Tangible assets

$214,080


$209,199


$204,931


$201,160


$198,539

Tangible equity to tangible assets 2

8.71%


8.65%


8.76%


9.01%


9.11

Tangible common equity to tangible assets 2

7.71


7.63


7.72


7.96


8.04

Tangible book value per common share 3

$37.22


$35.73


$34.51


$34.40


$33.97




1

Certain amounts in this schedule are presented net of applicable income taxes, calculated based on each subsidiary's federal and state tax rates and are adjusted for any permanent differences.

2

The Company presents certain capital information on a tangible basis, including Tangible equity, Tangible common equity, the ratio of Tangible equity to tangible assets, and the ratio of Tangible common equity to tangible assets, which remove the after-tax impact of purchase accounting intangible assets from shareholders' equity. The Company believes these measures are useful to investors because, by removing the amount 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. These measures are used by management to analyze capital adequacy and these measures are more consistent with regulatory capital definitions and calculations.

3

The Company presents Tangible book value per common share, which excludes the after-tax impact of purchase accounting intangible assets and also excludes Noncontrolling interest and Preferred stock from shareholders' equity. The Company believes this measure is useful to investors because, by removing the amount of intangible assets, noncontrolling interest, and preferred stock (the levels of which may vary from company to company), it allows investors to more easily compare the Company's book value of common stock to other companies in the industry.

 

 

Cision View original content:http://www.prnewswire.com/news-releases/suntrust-reports-first-quarter-2019-results-300834328.html

SOURCE SunTrust Banks, Inc.

Select the types of updates you would like to receive
Email Address *
Mailing Lists *

 
Enter the code shown above.

* excludes Form 4s
E-mail

1.877.930.8971