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SunTrust Reports Fourth Quarter and Full Year 2018 Results

01/18/2019
7th Consecutive Year of Performance Improvement Continued Efficiency Improvements, Higher Capital Return, and Favorable Operating Environment Drive Strong Year-over-Year EPS Growth

ATLANTA, Jan. 18, 2019 /PRNewswire/ -- For the fourth quarter of 2018, SunTrust Banks, Inc. (NYSE: STI) reported net income available to common shareholders of $632 million, or $1.40 per average common diluted share, which includes a $(0.10) per share discrete charge associated with the settlement of a legacy pension plan.

For the full year, diluted earnings per share was $5.74, up 28% relative to 2017 diluted earnings per share and up 40% relative to 2017 adjusted earnings per share. 2017 diluted earnings per share was $4.47 and included $0.39 net discrete benefits from Form 8-K items announced on December 4, 2017 and other items related to tax reform.

"Our performance this quarter provided a good conclusion to a strong year for SunTrust. In 2018, we continued to deliver on the commitments we have made to our owners: we achieved our sub-60% adjusted tangible efficiency ratio target one year ahead of schedule, and we delivered our seventh consecutive year of improved earnings per share, efficiency, and capital returns," said William H. Rogers, Jr., chairman and CEO of SunTrust Banks, Inc. "Going into 2019, our diverse business mix, ongoing investments in growth and technology, and consistent underwriting discipline, give me confidence in our ability to continue to deliver long-term value for our owners."

Fourth Quarter 2018 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 for all periods beginning on or after January 1, 2018 and 35% for all periods prior to January 1, 2018, 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 $632 million, or $1.40 per average common diluted share, compared to $1.56 for the prior quarter and $1.48 for the fourth quarter of 2017.
    • The fourth quarter of 2018 included $(0.10) per average common share related to a discrete charge associated with the settlement of a legacy pension plan.
    • The prior quarter and prior year quarter included $0.14 per share and $0.39 per share of discrete benefits, respectively.
  • Total revenue was up 3% sequentially and 4% year-over-year. The sequential increase was driven by both higher net interest income and 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 10 basis points compared to the prior year. Compared to the prior quarter, the benefit of higher benchmark interest rates was generally offset by increased wholesale funding, given strong loan growth. 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 $26 million sequentially and $8 million year-over-year, driven by loan growth, partially offset by a lower allowance for loan and lease losses ("ALLL") to period-end LHFI ratio.
  • Noninterest expense increased $98 million sequentially and decreased $38 million year-over-year. The sequential increase was driven primarily by a $60 million pre-tax pension plan settlement charge recognized in the fourth quarter of 2018. The year-over-year decrease includes the impacts of the December 4, 2017 Form 8-K and tax reform-related items recognized during the fourth quarter of 2017. Excluding these discrete items, noninterest expense increased $38 million sequentially and $13 million year-over-year.
  • The efficiency and tangible efficiency ratios for the current quarter were 62.1% and 61.1%, respectively, which were unfavorably impacted by the legacy pension plan settlement charge. Excluding this item, the adjusted tangible efficiency ratio was 58.6% for the current quarter, compared to 58.9% for the prior quarter and 59.9% for the prior year quarter.

Balance Sheet

  • Average performing LHFI was up 3% compared to the prior quarter and up 4% year-over-year, driven by growth across most loan categories.
  • Average consumer and commercial deposits increased 1% compared to both the prior quarter and the prior year, driven primarily by growth in NOW accounts and time deposits, offset partially by declines in money market accounts and demand deposits.

Capital

  • Estimated capital ratios continue to be well above regulatory requirements. The Common Equity Tier 1 ("CET1") ratio was estimated to be 9.2% as of December 31, 2018, lower than the prior quarter due to loan growth and increased share repurchases.
  • During the quarter, the Company repurchased $750 million of its outstanding common stock. The Company has $750 million remaining authorization per its 2018 Capital Plan. The Company also issued $1.4 billion of long-term debt in the fourth quarter of 2018.
  • Book value per common share was $49.57 and tangible book value per common share was $35.73, both up from September 30, 2018, driven primarily by growth in retained earnings and a decrease in accumulated other comprehensive loss.

Asset Quality

  • Nonperforming loans ("NPLs") decreased $169 million from the prior quarter and represented 0.35% of period-end LHFI at December 31, 2018. The decrease was driven primarily by payoffs and the resolution of certain commercial loans.
  • Net charge-offs for the current quarter were $97 million, or 0.26% of total average LHFI on an annualized basis, compared to 0.24% during the prior quarter and 0.29% during the fourth quarter of 2017.
  • At December 31, 2018, ALLL to period-end LHFI ratio was 1.06%, down 4 basis points compared to the prior quarter, driven by continued improvements in asset quality.
  • Provision for credit losses increased $26 million sequentially and $8 million year-over-year, driven primarily by loan growth, partially offset by a lower ALLL to period-end LHFI ratio.

 











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

4Q 2018


3Q 2018


2Q 2018


1Q 2018


4Q 2017

Net interest income

$1,547


$1,512


$1,488


$1,441


$1,434

Net interest income-FTE 1

1,570


1,534


1,510


1,461


1,472

Net interest margin

3.22%


3.22%


3.23%


3.20%


3.09%

Net interest margin-FTE 1

3.27


3.27


3.28


3.24


3.17

Noninterest income

$818


$782


$829


$796


$833

Total revenue

2,365


2,294


2,317


2,237


2,267

Total revenue-FTE 1

2,388


2,316


2,339


2,257


2,305

Noninterest expense

1,482


1,384


1,390


1,417


1,520

Provision for credit losses

87


61


32


28


79

Net income available to common shareholders

632


726


697


612


710

Earnings per average common diluted share

1.40


1.56


1.49


1.29


1.48











Balance Sheet   (Dollars in billions)










Average LHFI

$149.7


$146.0


$144.2


$142.9


$144.0

Average consumer and commercial deposits

161.6


159.3


159.0


159.2


160.7











Capital










Basel III capital ratios at period end 2 :










Tier 1 capital

10.30%


10.72%


10.86%


11.00%


11.15%

Common Equity Tier 1 ("CET1")

9.21


9.60


9.72


9.84


9.74

Total average shareholders' equity to total average assets

11.21


11.71


11.78


12.05


12.09











Asset Quality










Net charge-offs to total average LHFI (annualized)

0.26%


0.24%


0.20%


0.22%


0.29%

ALLL to period-end LHFI 3

1.06


1.10


1.14


1.19


1.21

NPLs to period-end LHFI

0.35


0.47


0.52


0.50


0.47


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 December 31, 2018 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, an increase of $72 million, or 3%, compared to the prior quarter, driven by higher net interest income and noninterest income. The sequential increase in net interest income was driven by growth in average earning assets. Noninterest income increased $36 million sequentially due largely to higher commercial real estate-related income, offset partially by lower capital markets-related income. Compared to the fourth quarter of 2017, total revenue increased $83 million, or 4%, driven by a $98 million increase in net interest income as a result of net interest margin expansion and growth in average earning assets, partially offset by lower mortgage-related income.

Net Interest Income

Net interest income was $1.6 billion for the fourth quarter of 2018, an increase of $36 million compared to the prior quarter due primarily to $4.4 billion growth in average earning assets. The $98 million increase relative to the prior year was driven by a 10 basis point expansion in the net interest margin and a $6.4 billion increase in average earning assets.

Net interest margin for the current quarter was 3.27%, stable compared to the prior quarter and 10 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.

For the year ended December 31, 2018, net interest income was $6.1 billion, a $297 million, or 5%, increase compared to the year ended December 31, 2017. The net interest margin for the full year of 2018 was 3.26%, a 12 basis point increase compared to the same period in 2017. The increases in both net interest income and net interest margin were driven by the same factors that impacted the prior year comparison above.

Noninterest Income

Noninterest income was $818 million for the current quarter, compared to $782 million for the prior quarter and $833 million for the fourth quarter of 2017. The $36 million sequential increase was due largely to higher commercial real estate-related income, offset partially by lower capital markets-related income. Compared to the prior year, noninterest income decreased $15 million driven primarily by lower mortgage production-related income.

Client transaction-related fees (namely service charges on deposits, other charges and fees, and card fees) increased $13 million sequentially due primarily to a $7 million one-time charge related to changes in our process for recognizing card rewards expenses in the third quarter of 2018 (recorded as contra-revenue). The $8 million year-over-year decrease was due primarily to the impact of adopting the revenue recognition accounting standard during the first quarter of 2018, which resulted in the netting of certain expense items against card fees, other charges and fees, and service charges on deposit accounts.

Investment banking income was $146 million for the current quarter, compared to $150 million in the prior quarter and $122 million for the fourth quarter of 2017. The $4 million sequential decrease was due to lower transaction activity as a result of adverse market conditions during the fourth quarter of 2018. The year-over-year increase was due primarily to higher transaction activity in M&A and loan syndications, offset partially by lower transaction activity in high yield bond originations and equity offerings.

Trading income was $24 million for the current quarter, compared to $42 million in the prior quarter and $41 million in the prior year. The $18 million sequential and $17 million year-over-year decreases were due primarily to mark-to-market valuation losses resulting from adverse market conditions and higher counterparty credit valuation reserves in the fourth quarter of 2018.

Mortgage servicing-related income was $49 million for the current quarter compared to $43 million in both the prior quarter and fourth quarter of 2017. The sequential and year-over-year increases were due primarily to higher servicing fees, offset partially by lower net hedge performance. At December 31, 2018, the servicing portfolio totaled $171.4 billion, relatively stable compared to the prior quarter and a 4% increase compared to the prior year due to MSRs purchased in the first and third quarters of 2018.

Mortgage production-related income for the current quarter was $36 million, compared to $40 million for the prior quarter and $61 million for the fourth quarter of 2017. The $4 million sequential and $25 million year-over-year decreases were due to lower production volume, offset partially by a repurchase reserve release during the fourth quarter of 2018. The year-over-year decline was also impacted by lower gain-on-sale margins. Mortgage application volume decreased 28% sequentially and 23% compared to the fourth quarter of 2017. Closed loan volume decreased 20% sequentially and 22% year-over-year.

Trust and investment management income was $74 million for the current quarter, compared to $80 million for both the prior quarter and prior year. The $6 million sequential decrease was due primarily to seasonally higher trust fees recognized during the prior quarter. The $6 million year-over-year decrease was due to trust termination fees received during the fourth quarter of 2017.

Retail investment services income was $74 million for the current quarter, stable relative to the prior quarter and $4 million higher than the fourth quarter of 2017. The $4 million year-over-year increase was due primarily to higher assets under management.

Commercial real estate-related income was $68 million for the current quarter, compared to $24 million for the prior quarter and $62 million for the prior year. The increase compared to the prior quarter and prior year was driven primarily by increased client-driven structured real estate transactions. The sequential increase is also impacted by seasonality in SunTrust Community Capital (tax credit-related income) and the Company's agency lending business.

Net securities gains/(losses) totaled $0 for both the current quarter and prior quarter. In the fourth quarter of 2017, the Company recognized ($109) million of securities losses as a result of a securities AFS portfolio restructuring in response to tax reform.

Other noninterest income was $26 million for the current quarter, compared to $21 million in the prior quarter and $134 million in the fourth quarter of 2017. The $5 million sequential increase was due primarily to mark-to-market gains from credit default swap hedges, offset partially by mark-to-market losses on certain FinTech investments. The $108 million year-over-year decrease was due primarily to the $107 million pre-tax gain from the sale of Premium Assignment Corporation ("PAC") during the fourth quarter of 2017.

For the year ended December 31, 2018, noninterest income was $3.2 billion, compared to $3.4 billion for the year ended December 31, 2017. The $128 million decrease was driven by declines across most categories as a result of market conditions (which negatively impacted capital markets and mortgage-related income) as well as the impact of the adoption of revenue recognition accounting standards during the first quarter of 2018, offset partially by higher commercial real estate and wealth management-related income. For the year ended December 31, 2018, the adoption of the revenue recognition accounting standards resulted in a net reduction of $26 million to noninterest income and noninterest expense (prior periods were not restated).

Noninterest Expense

Noninterest expense was $1.5 billion in the current quarter, up $98 million sequentially and down $38 million compared to the fourth quarter of 2017. The sequential increase was driven by the $60 million pre-tax legacy pension plan settlement charge recognized in the fourth quarter of 2018 as well as higher operating losses, net occupancy expense, and other noninterest expense, offset partially by lower regulatory assessment costs. The year-over-year decrease was due primarily to the $111 million of net expenses recognized in the fourth quarter of 2017 related to the December 4, 2017 Form 8-K and tax reform-related items. Excluding these discrete items, noninterest expense increased $38 million sequentially and $13 million year-over-year.

Employee compensation and benefits expense was $857 million in the current quarter, compared to $795 million in the prior quarter and $803 million in the fourth quarter of 2017. The $62 million sequential and $54 million year-over-year increases were due primarily to the $60 million of legacy pension plan settlement charge recognized during the fourth quarter of 2018.

Outside processing and software expense was $242 million in the current quarter, compared to $234 million in the prior quarter and $214 million in the fourth quarter of 2017. The $8 million sequential and $28 million year-over-year increases were 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, compared to $86 million in the prior quarter and $97 million in the prior year. The $16 million sequential increase was driven primarily by lease termination gains recognized during the prior quarter.

Marketing and customer development expense was $49 million in the current quarter, compared to $45 million in the prior quarter and $104 million in the fourth quarter of 2017. The $4 million sequential increase was driven by normal seasonal trends. The $55 million year-over-year decrease was driven primarily by the $50 million tax reform-related charitable contribution to support financial well-being initiatives during the fourth quarter of 2017.

Regulatory assessments expense was $7 million in the current quarter, compared to $39 million in the prior quarter and $43 million in the prior year. The sequential and year-over-year decrease was driven by the cessation of the FDIC Deposit Insurance Fund surcharge in the fourth quarter of 2018, in addition to a separate $9 million regulatory assessment credit in the fourth quarter of 2018.

Operating losses were $39 million in the current quarter, compared to $18 million in the prior quarter and $23 million in the fourth quarter of 2017. The sequential and year-over-year increases were due primarily to higher legal and fraud-related costs.

Other noninterest expense was $122 million in the current quarter, compared to $108 million in the prior quarter and $170 million in the fourth quarter of 2017. The $14 million sequential increase was driven primarily by costs associated with a vendor contract termination as well as higher consulting costs. The $48 million year-over-year decrease was driven primarily by certain efficiency actions taken during the fourth quarter of 2017, including severance costs in conjunction with the voluntary early retirement program, branch and corporate real estate closure costs, and software write-downs.

Noninterest expense for the year ended December 31, 2018 decreased $91 million compared to the year ended December 31, 2017. The 2% decrease was driven primarily by the $111 million of discrete charges in the fourth quarter of 2017, in addition to ongoing efficiency initiatives, offset partially by higher outside processing and software costs and the $60 million pre-tax legacy pension plan settlement charge recognized in the fourth quarter of 2018.

Income Taxes

For the fourth quarter of 2018, the Company recorded a provision for income taxes of $136 million compared to $95 million for the prior quarter and a benefit of $74 million for the fourth quarter of 2017. The effective tax rate for the current quarter was 17%, compared to 11% in the prior quarter and (11)% in the fourth quarter of 2017. The fourth quarter of 2018 included $10 million of discrete tax benefits. The prior quarter included $67 million of discrete tax benefits related to the finalization of the impact of tax reform and the completion of the merger of SunTrust Mortgage into SunTrust Bank. The prior year included a net $264 million tax benefit for the estimated impact of the re-measurement of the Company's estimated net deferred tax liabilities at December 31, 2017, due to tax reform, partially offset by certain discrete tax charges. The year-over-year change in the effective tax rate was also impacted by the reduction in the U.S. federal corporate income tax rate from 35% to 21%.

Balance Sheet

At December 31, 2018, the Company had total assets of $215.5 billion and total shareholders' equity of $24.3 billion, representing 11% of total assets. Book value per common share was $49.57 and tangible book value per common share was $35.73, up 3% and 4%, respectively, compared to September 30, 2018, driven primarily by growth in retained earnings and a decrease in accumulated other comprehensive loss.

Loans and Deposits

Average performing LHFI totaled $149.1 billion for the current quarter, up 3% compared to the prior quarter and up 4% compared to the prior year driven by broad-based growth across most loan categories.

Average consumer and commercial deposits totaled $161.6 billion for the current quarter, up 1% compared to both the prior quarter and fourth quarter of 2017. The sequential and year-over-year increase was driven by growth in NOW accounts and time deposits, offset partially by declines in money market accounts and demand 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 9.2% at December 31, 2018. The ratios of average total equity to average total assets and tangible common equity to tangible assets were 11.2% and 7.6%, respectively, at December 31, 2018. 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 $750 million of its outstanding common stock in the fourth quarter of 2018. The Company has $750 million remaining authorization per its 2018 Capital Plan. Additionally, SunTrust Bank issued $600 million of 3-year fixed-to-floating rate senior notes, $500 million of 7-year fixed rate senior notes, and $300 million of 3-year floating rate senior notes in the fourth quarter of 2018.

Asset Quality

Overall asset quality performance continues to be strong. Nonperforming assets ("NPAs") totaled $589 million at December 31, 2018, down $165 million from the prior quarter and $152 million year-over-year. The ratio of NPLs to period-end LHFI was 0.35%, 0.47%, and 0.47% at December 31, 2018, September 30, 2018, and December 31, 2017, respectively. The decrease was driven primarily by payoffs and the resolution of certain nonaccruing commercial loans. In addition, residential mortgage nonperforming loans declined 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, an increase of $9 million compared to the prior quarter and a decrease of $10 million compared to the fourth quarter of 2017. The ratio of annualized net charge-offs to total average LHFI was 0.26% during the current quarter, compared to 0.24% during the prior quarter and 0.29% during the prior year.

The provision for credit losses was $87 million in the current quarter, a sequential increase of $26 million and a year-over-year increase of $8 million. These increases were driven primarily by loan growth, partially offset by a lower ALLL to period-end LHFI ratio. At December 31, 2018, the ALLL was $1.6 billion, which represented 1.06% of period-end loans, a 4 basis point decline relative to September 30, 2018, driven by continued improvements in asset quality.

Early stage delinquencies decreased 1 basis point from the prior quarter and 7 basis points from December 31, 2017 to 0.73% at December 31, 2018. Excluding government-guaranteed loans, early stage delinquencies were 0.27%, up 3 basis points compared to the prior quarter, given typical seasonal trends, and down 5 basis points compared to the fourth quarter of 2017.

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 December 31, 2018, SunTrust had total assets of $216 billion and total deposits of $163 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-K.

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-K. 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 January 18, 2019, at 8:00 a.m. (Eastern Time) to discuss the earnings results and business trends. Individuals may call in beginning at 7:30 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 January 18, 2019, and will remain available until February 18, 2019, by dialing 1-800-475-6701 (domestic) or 1-320-365-3844 (international) (Passcode: 461298). 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 January 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% for all periods beginning on or after January 1, 2018 and 35% for all periods prior to January 1, 2018, 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 result 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 the legacy pension plan settlement charge recognized in the fourth quarter of 2018 as well as Form 8-K items announced on December 4, 2017 and the impacts of tax reform-related items recognized in the fourth quarter of 2017 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 our ability to continue to deliver long-term value to our owners 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. Future dividends, and the amount of any such dividend, must be declared by our board of directors in their discretion. Also, future share repurchases and the timing of any such repurchases 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, 2017 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 December 31


 % 3


Year Ended December 31


%

2018


2017


 Change


2018


2017


 Change

EARNINGS & DIVIDENDS












Net income

$658


$740


(11)%


$2,775


$2,273


22%

Net income available to common shareholders

632


710


(11)


2,668


2,179


22

Total revenue

2,365


2,267


4


9,213


8,987


3

Total revenue-FTE 1

2,388


2,305


4


9,301


9,132


2

Net income per average common share:












Diluted

$1.40


$1.48


(5)%


$5.74


$4.47


28%

Basic

1.41


1.50

0.40


(6)


5.79


4.53


28

Dividends declared per common share

0.50



25


1.80


1.32


36

CONDENSED BALANCE SHEETS












Selected Average Balances:












Total assets

$212,934


$205,219


4%


$207,277


$204,931


1%

Earning assets

190,742


184,306


3


186,154


184,212


1

Loans held for investment ("LHFI")

149,708


144,039


4


145,714


144,216


1

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

8,491


8,077


5


8,372


8,034


4

Residential MSRs

2,083


1,662


25


1,963


1,615


22

Consumer and commercial deposits

161,573


160,745


1


159,768


159,549


Total shareholders' equity

23,873


24,806


(4)


24,210


24,301


Preferred stock

2,025


2,236


(9)


2,115


1,792


18

Period End Balances:












Total assets







$215,543


$205,962


5%

Earning assets







192,497


182,710


5

LHFI







151,839


143,181


6

Allowance for loan and lease losses ("ALLL")







1,615


1,735


(7)

Consumer and commercial deposits







161,544


159,795


1

Total shareholders' equity







24,280


25,154


(3)

FINANCIAL RATIOS & OTHER DATA












Return on average total assets

1.23%


1.43%


(14)%


1.34%


1.11%


21%

Return on average common shareholders' equity

11.54


12.54


(8)


12.13


9.72


25

Return on average tangible common shareholders' equity 1

16.13


17.24


(6)


16.89


13.39


26

Net interest margin

3.22


3.09

3.17


4


3.22


3.06


5

Net interest margin-FTE 1

3.27



3


3.26


3.14


4

Efficiency ratio

62.66


67.03


(7)


61.58


64.14


(4)

Efficiency ratio-FTE 1

62.06


65.94


(6)


60.99


63.12


(3)

Tangible efficiency ratio-FTE 1

61.13


64.84


(6)


60.21


62.30


(3)

Adjusted tangible efficiency ratio-FTE 1

58.63


59.85


(2)


59.56


61.04


(2)

Effective tax rate

17


(11)


NM


16


19


(16)

Basel III capital ratios at period end 2:












Common Equity Tier 1 ("CET1")







9.21%


9.74%


(5)%

Tier 1 capital







10.30


11.15


(8)

Total capital







12.02


13.09


(8)

Leverage







9.26


9.80


(6)

Total average shareholders' equity to total average assets

11.21%


12.09%


(7)%


11.68


11.86


(2)

Tangible equity to tangible assets 1







8.65


9.50


(9)

Tangible common equity to tangible assets 1







7.63


8.21


(7)

Book value per common share







$49.57


$47.94


3

Tangible book value per common share 1







35.73


34.82


3

Market capitalization







22,541


30,417


(26)

Average common shares outstanding:












Diluted

452,957


480,359


(6)


464,961


486,954


(5)

Basic

449,404


474,300


(5)


460,922


481,339


(4)

Full-time equivalent employees







22,899


23,785


(4)

Number of ATMs







2,082


2,116


(2)

Full service banking offices







1,218


1,268


(4)














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 December 31, 2018 are estimated as of the date of this release.

3 "NM" - Not meaningful. Those changes over 100 percent were not considered to be meaningful.

 

SunTrust Banks, Inc. and Subsidiaries

FIVE QUARTER FINANCIAL HIGHLIGHTS


Three Months Ended


December 31


September 30


June 30


March 31


December 31

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

2018


2018


2018


2018


2017

EARNINGS & DIVIDENDS










Net income

$658


$752


$722


$643


$740

Net income available to common shareholders

632


726


697


612


710

Total revenue

2,365


2,294


2,317


2,237


2,267

Total revenue-FTE 1

2,388


2,316


2,339


2,257


2,305

Net income per average common share:










Diluted

$1.40


$1.56


$1.49


$1.29


$1.48

Basic

1.41


1.58


1.50


1.31


1.50

Dividends declared per common share

0.50


0.50


0.40


0.40


0.40

CONDENSED BALANCE SHEETS










Selected Average Balances:










Total assets

$212,934


$207,395


$204,548


$204,132


$205,219

Earning assets

190,742


186,344


184,566


182,874


184,306

LHFI

149,708


145,995


144,156


142,920


144,039

Intangible assets including residential MSRs

8,491


8,396


8,355


8,244


8,077

Residential MSRs

2,083


1,987


1,944


1,833


1,662

Consumer and commercial deposits

161,573


159,348


158,957


159,169


160,745

Total shareholders' equity

23,873


24,275


24,095


24,605


24,806

Preferred stock

2,025


2,025


2,025


2,390


2,236

Period End Balances:










Total assets

$215,543


$211,276


$207,505


$204,885


$205,962

Earning assets

192,497


188,141


185,304


182,913


182,710

LHFI

151,839


147,215


144,935


142,618


143,181

ALLL

1,615


1,623


1,650


1,694


1,735

Consumer and commercial deposits

161,544


159,332


160,410


161,357


159,795

Total shareholders' equity

24,280


24,139


24,316


24,269


25,154

FINANCIAL RATIOS & OTHER DATA










Return on average total assets

1.23%


1.44%


1.42%


1.28%


1.43%

Return on average common shareholders' equity

11.54


13.01


12.73

17.74


11.23


12.54

Return on average tangible common shareholders' equity 1

16.13


18.06



15.60


17.24

3.09

Net interest margin

3.22


3.22


3.23


3.20


Net interest margin-FTE 1

3.27


3.27


3.28


3.24


3.17

Efficiency ratio

62.66


60.34


59.98


63.35


67.03

Efficiency ratio-FTE 1

62.06


59.76


59.41


62.77


65.94

Tangible efficiency ratio-FTE 1

61.13


58.94


58.69


62.11


64.84

Adjusted tangible efficiency ratio-FTE 1

58.63


58.94


58.69


62.11


59.85

Effective tax rate

17


11


19


19


(11)

Basel III capital ratios at period end 2:










CET1

9.21%


9.60%


9.72%


9.84%


9.74%

Tier 1 capital

10.30


10.72


10.86


11.00


11.15

Total capital

12.02


12.47


12.67


12.90


13.09

Leverage

9.26


9.66


9.82


9.75


9.80

Total average shareholders' equity to total average assets

11.21


11.71


11.78


12.05


12.09

Tangible equity to tangible assets 1

8.65


8.76


9.01


9.11


9.50

Tangible common equity to tangible assets 1

7.63


7.72


7.96


8.04


8.21

Book value per common share

$49.57


$48.00


$47.70


$47.14


$47.94

Tangible book value per common share 1

35.73


34.51


34.40


33.97


34.82

Market capitalization

22,541


30,632


30,712


31,959


30,417

Average common shares outstanding:










Diluted

452,957


464,164


469,339


473,620


480,359

Basic

449,404


460,252


465,529


468,723


474,300

Full-time equivalent employees

22,899


22,839


23,199


23,208


23,785

Number of ATMs

2,082


2,053


2,062


2,075


2,116

Full service banking offices

1,218


1,217


1,222


1,236


1,268












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 December 31, 2018 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


Year Ended


December 31


September 30


June 30


March 31


December 31


December 31

(Dollars in millions) (Unaudited)

2018


2018


2018


2018


2017


2018


2017

Net interest income

$1,547


$1,512


$1,488


$1,441


$1,434


$5,987


$5,633

Fully taxable-equivalent ("FTE") adjustment

23


22


22


20


38


88


145

Net interest income-FTE 2

1,570


1,534


1,510


1,461


1,472


6,075


5,778

Noninterest income

818


782


829


796


833


3,226


3,354

Total revenue-FTE 2

$2,388


$2,316


$2,339


$2,257


$2,305


$9,301


$9,132















Return on average common shareholders' equity

11.54%


13.01%


12.73%


11.23%


12.54%


12.13%


9.72%

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

4.59


5.05


5.01


4.37


4.70


4.76


3.67

Return on average tangible common shareholders' equity 3

16.13%


18.06%


17.74%


15.60%


17.24%


16.89%


13.39%















Net interest margin

3.22%


3.22%


3.23%


3.20%


3.09%


3.22%


3.06%

Impact of FTE adjustment

0.05


0.05


0.05


0.04


0.08


0.04


0.08

Net interest margin-FTE 2

3.27%


3.27%


3.28%


3.24%


3.17%


3.26%


3.14%















Noninterest expense

$1,482


$1,384


$1,390


$1,417


$1,520


$5,673


$5,764

Total revenue

2,365


2,294


2,317


2,237


2,267


9,213


8,987

Efficiency ratio 4

62.66%


60.34%


59.98%


63.35%


67.03%


61.58%


64.14%

Impact of FTE adjustment

(0.60)


(0.58)


(0.57)


(0.58)


(1.09)


(0.59)


(1.02)

Efficiency ratio-FTE 2, 4

62.06


59.76


59.41


62.77


65.94


60.99


63.12

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

(0.93)


(0.82)


(0.72)


(0.66)


(1.10)


(0.78)


(0.82)

Tangible efficiency ratio-FTE 2, 5

61.13


58.94


58.69


62.11


64.84


60.21


62.30

Impact of excluding legacy pension plan settlement charge 
     as well as Form 8-K and other tax reform-related items

(2.50)





(4.99)


(0.65)


(1.26)

Adjusted tangible efficiency ratio-FTE 2, 5, 6

58.63%


58.94%


58.69%


62.11%


59.85%


59.56%


61.04%
















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% for all periods beginning on or after January 1, 2018 and 35% for all periods prior to January 1, 2018, 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 $60 million pre-tax impact of the legacy National Commerce Financial Corporation ("NCF") pension
   plan settlement charge recognized in the fourth quarter of 2018, as well as Form 8-K and other tax reform-related items recognized in the fourth quarter of 2017 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 these items can be found in the Company's Quarterly Report on Form 10-Q for the period ended
   September 30, 2018 and in its Form 8-K furnished with the SEC on January 19, 2018.

 

SunTrust Banks, Inc. and Subsidiaries

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




December 31


September 30


June 30


March 31


December 31

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

2018


2018


2018


2018


2017

Total shareholders' equity

$24,280


$24,139


$24,316


$24,269


$25,154

(6,168)

Goodwill, net of deferred taxes of $161 million, $160 million, $159 million, $159 
     million, and $163 million, respectively

(6,170)


(6,171)


(6,172)


(6,172)


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

(2,063)


(2,140)


(2,036)

2,022


(1,996)


(1,791)

1,776

Residential MSRs and other servicing rights

2,049


2,126



1,981


Tangible equity 2

18,096


17,954


18,130


18,082


18,971

Noncontrolling interest

(103)


(101)


(103)


(101)


(103)

Preferred stock

(2,025)


(2,025)


(2,025)


(2,025)


(2,475)

Tangible common equity 2

$15,968


$15,828


$16,002


$15,956


$16,393











Total assets

$215,543


$211,276


$207,505


$204,885


$205,962

Goodwill

(6,331)


(6,331)


(6,331)


(6,331)


(6,331)

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

(2,062)


(2,140)


(2,036)


(1,996)


(1,791)

Residential MSRs and other servicing rights

2,049


2,126


2,022


1,981


1,776

Tangible assets

$209,199


$204,931


$201,160


$198,539


$199,616

Tangible equity to tangible assets 2

8.65%


8.76%


9.01%


9.11%


9.50%

Tangible common equity to tangible assets 2

7.63


7.72


7.96


8.04


8.21

Tangible book value per common share 3

$35.73


$34.51


$34.40


$33.97


$34.82












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-fourth-quarter-and-full-year-2018-results-300780660.html

SOURCE SunTrust Banks, Inc.

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