trigger

Search Site

SunTrust Reports Third Quarter 2019 Results

10/17/2019
Continued Loan Growth, Improved Deposit Growth, Diverse Fee Income, and Strong Credit Quality Highlight Third Quarter Results
Proposed Merger of Equals with BB&T on Track; Momentum Towards Truist is Building

ATLANTA, Oct. 17, 2019 /PRNewswire/ -- For the third quarter of 2019, SunTrust Banks, Inc. (NYSE: STI) reported net income available to common shareholders of $597 million, or $1.34 per average common diluted share, which includes $(0.06) per share of merger-related impacts associated with the Company's proposed merger of equals with BB&T Corporation. This compares to $1.48 for the prior quarter, which included $0.07 per share of discrete tax benefits and $(0.03) per share of merger-related impacts, and $1.56 for the third quarter of 2018, which included $0.14 per share of discrete tax benefits.

For the nine months ended September 30, 2019, earnings per average common diluted share were $4.06 which includes $(0.17) per share of merger-related impacts. This compares to $4.34 for the nine months ended September 30, 2018.

"We delivered solid third quarter results, marked by continued loan growth, improved deposit growth, diverse fee income, and strong credit quality. Our underlying strategic progress is strong, evidenced by 8% year-over-year growth in both loans and noninterest income, providing us with good momentum heading into our proposed merger of equals with BB&T," said William H. Rogers, Jr., chairman and CEO of SunTrust Banks, Inc. "I am confident that when SunTrust and BB&T come together to create Truist, we can deliver industry leading profitability, better capabilities for our clients, and enhanced benefits for both our teammates and our communities."

Third 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 $597 million, or $1.34 per average common diluted share, compared to $1.48 for the prior quarter and $1.56 for the third quarter of 2018.
    • Merger-related costs were $22 million in the third quarter of 2019, compared to $8 million in the second quarter of 2019. In addition to these costs, there were $11 million and $6 million of other merger-related expenses in the current and prior quarter, respectively, the majority of which were recorded in 'other noninterest expense'. Combined, the current quarter results included $33 million, or $(0.06) per share, of merger-related impacts.
  • Total revenue was down 8% sequentially and up 3% year-over-year. Excluding the $5 million and $205 million insurance settlement benefits related to financial crisis-era related claims recognized in the current and prior quarters, respectively, total revenue was stable sequentially and increased 2% year-over-year driven by higher noninterest income.
  • Net interest margin was 3.06% in the current quarter, reflecting declines of 10 and 21 basis points sequentially and year-over-year, respectively, driven primarily by declines in short-term and long-term interest rates (which negatively impacted earning asset yields). The year-over-year decline was also impacted by higher funding costs.
  • Provision for credit losses increased $5 million sequentially and $71 million year-over-year. The year-over-year increase reflects both higher net charge-offs in the current quarter and a release of loan loss reserves in the prior year quarter.
  • Noninterest expense decreased $164 million sequentially and increased $90 million year-over-year. Excluding the $205 million charitable contribution to the SunTrust Foundation in the prior quarter and the merger-related impacts of $33 million in the current quarter and $14 million in the prior quarter, noninterest expense increased $22 million sequentially and $57 million year-over-year due primarily to higher employee compensation and benefits.
  • The efficiency and tangible efficiency ratios for the current quarter were 62.1% and 61.2%, respectively. Excluding the charitable contribution in the prior quarter together with the insurance settlements and merger-related impacts in the current and prior quarter, the adjusted tangible efficiency ratio was 59.9% for the current quarter, compared to 59.0% for the prior quarter and 58.9% for the prior year.

Balance Sheet

  • Average performing loans held for investment ("LHFI") was up 1% compared to the prior quarter and up 8% year-over-year, driven primarily by growth in CRE, consumer direct, consumer indirect, and residential mortgages, offset partially by declines in commercial construction loans and residential home equity products. The year-over-year increase was also positively impacted by 8% growth in C&I loans.
  • Average consumer and commercial deposits increased 2% compared to both the prior quarter and the prior year. Sequential growth was driven primarily by increases in NOW accounts, money market accounts, and time deposits. Year-over-year growth was driven by increases in NOW accounts and time deposits, offset partially by declines in demand deposits and money market accounts.

Capital

  • Estimated capital ratios continue to be well above regulatory requirements. The Common Equity Tier 1 ("CET1") ratio was estimated to be 9.3% as of September 30, 2019, slightly higher relative to the prior quarter.
  • Book value per common share was $54.87 and tangible book value per common share was $40.58, both up 3% from June 30, 2019, driven primarily by growth in retained earnings and a decrease in accumulated other comprehensive loss.

Asset Quality

  • Nonperforming loans ("NPLs") increased $64 million from the prior quarter and represented 0.38% of period-end LHFI at September 30, 2019, compared to 0.34% of period-end LHFI at June 30, 2019.
  • Net charge-offs for the current quarter were $112 million, or 0.28% of total average LHFI on an annualized basis, compared to 0.22% during the prior quarter and 0.24% during the third quarter of 2018.
  • At September 30, 2019, the allowance for loan and lease losses ("ALLL") to period-end LHFI ratio was 1.07%, stable compared to the prior quarter and down 3 basis points relative to the prior year quarter.
  • Provision for credit losses increased $5 million sequentially and $71 million year-over-year. The sequential increase was driven primarily by higher net charge-offs. The year-over-year increase reflects both higher net charge-offs in the current quarter and a release of loan loss reserves in the prior year quarter.

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

3Q 2019


2Q 2019


1Q 2019


4Q 2018


3Q 2018

Net interest income

$1,510



$1,535



$1,544



$1,547



$1,512


Net interest income-FTE 1

1,532



1,557



1,567



1,570



1,534


Net interest margin

3.01

%


3.12

%


3.22

%


3.22

%


3.22

%

Net interest margin-FTE 1

3.06



3.16



3.27



3.27



3.27


Noninterest income

$843



$1,025



$784



$818



$782


Total revenue

2,353



2,560



2,328



2,365



2,294


Total revenue-FTE 1

2,375



2,582



2,351



2,388



2,316


Noninterest expense

1,474



1,638



1,489



1,482



1,384


Provision for credit losses

132



127



153



87



61


Net income available to common shareholders

597



663



554



632



726


Earnings per average common diluted share

1.34



1.48



1.24



1.40



1.56












Balance Sheet (Dollars in billions)










Average LHFI

$157.6



$156.2



$154.3



$149.7



$146.0


Average consumer and commercial deposits

162.5



159.9



159.9



161.6



159.3












Capital










Basel III capital ratios at period end 2 :










Tier 1 capital

10.38

%


10.24

%


10.15

%


10.30

%


10.72

%

Common Equity Tier 1 ("CET1")

9.33



9.19



9.09



9.21



9.60


Total average shareholders' equity to total average assets

11.67



11.42



11.25



11.21



11.71












Asset Quality










Net charge-offs to total average LHFI (annualized)

0.28

%


0.22

%


0.26

%


0.26

%


0.24

%

ALLL to period-end LHFI 3

1.07



1.07



1.06



1.06



1.10


NPLs to period-end LHFI

0.38



0.34



0.34



0.35



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. Capital ratios at September 30, 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 8% compared to the prior quarter and an increase of 3% from the prior year. Excluding the $5 million and $205 million insurance settlement benefits related to financial crisis-era related claims recognized in the current quarter and prior quarter, respectively, total revenue was stable sequentially and increased 2% year-over-year driven by higher noninterest income.

Net Interest Income

Net interest income was $1.5 billion for the third quarter of 2019, a decrease of $25 million compared to the prior quarter due primarily to lower earning asset yields, which drove a decline in the net interest margin, partially offset by a $1.4 billion, or 1%, increase in average performing LHFI. Net interest income was stable relative to the prior year as the decline in the net interest margin was offset by 8% growth in average performing LHFI and 2% growth in average client deposits.

Net interest margin for the current quarter was 3.06%, compared to 3.16% and 3.27% in the prior quarter and prior year, respectively, driven primarily by declines in short-term and long-term interest rates (which negatively impacted earning asset yields). The year-over-year decline was also impacted by higher funding costs.

For the nine months ended September 30, 2019, net interest income was $4.7 billion, a $150 million, or 3%, increase compared to the nine months ended September 30, 2018. The net interest margin was 3.16% for the first nine months of 2019, a 10 basis point decrease compared to the same period in 2018. The decrease in net interest margin was driven primarily by a 45 basis point increase in rate paid on average interest-bearing liabilities, which was offset partially by a 27 basis point increase in earning asset yields.

Noninterest Income

Noninterest income was $843 million for the current quarter, compared to $1.0 billion for the prior quarter and $782 million for the third quarter of 2018. Excluding the $5 million and $205 million insurance settlement benefits related to financial crisis-era related claims recognized in the current and prior quarters, respectively, noninterest income increased $18 million sequentially and $56 million year-over-year. The sequential increase was driven largely by higher mortgage-related income and investment banking income. The year-over-year increase was driven by increases across most categories, most notably a $23 million increase in mortgage-related income.

Client transaction-related fees (namely service charges on deposits, other charges and fees, and card fees) increased $5 million sequentially and $6 million year-over-year. The sequential increase was driven by one more day during the current quarter, while the year-over-year increase was driven primarily by certain discrete impacts (recorded as contra-revenue) recognized in card fees in the third quarter of 2018.

Investment banking income was $159 million for the current quarter, compared to $142 million in the prior quarter and $150 million for the third quarter of 2018. The $17 million sequential increase was due primarily to higher syndicated finance and M&A activity, while the year-over-year increase was driven by higher syndicated finance and investment grade bond origination activity, partially offset by a decline in equity capital markets.

Mortgage-related income for the current quarter was $106 million, compared to $86 million for the prior quarter and $83 million for the third quarter of 2018. The sequential and year-over-year increases were driven primarily by higher production-related income due to increased refinance and purchase volumes, partially offset by higher decay expense which negatively impacted servicing income. At September 30, 2019, the servicing portfolio totaled $165.6 billion, down 1% compared to the prior quarter and 3% year-over-year.

Trading income was $29 million for the current quarter, compared to $55 million for the prior quarter and $42 million for the prior year. The sequential and year-over-year decreases were largely driven by an increase in counterparty credit valuation reserves in the current quarter. The sequential decrease was also impacted by lower fixed income sales and trading revenue.

Commercial real estate-related income was $32 million for the current quarter, compared to $50 million for the prior quarter and $24 million for the prior year. The sequential decline was primarily attributable to lower structured real estate related income, while the year-over-year increase was driven by higher structured real estate related income and higher commercial mortgage production and servicing income from the Company's agency lending business.

Net securities gains/(losses) totaled gains of $4 million for the current quarter compared to losses of ($42) million in the prior quarter that arose from a repositioning of the Company's securities AFS portfolio. There were no net securities gains/(losses) in the prior year quarter.

Other noninterest income was $40 million for the current quarter, compared to $72 million in the prior quarter and $21 million in the third quarter of 2018. The sequential decrease was due primarily to a $44 million gain on the sale of accruing TDRs during the second quarter of 2019. The year-over-year increase was due primarily to $10 million in net remeasurement gains on equity investments recognized during the current quarter.

For the nine months ended September 30, 2019, noninterest income was $2.7 billion, compared to $2.4 billion for the nine months ended September 30, 2018. The $245 million increase compared to the prior year was driven primarily by the insurance settlement benefits recognized in the current and prior quarter as well as higher commercial real estate-related and mortgage-related income.

Noninterest Expense

Noninterest expense was $1.5 billion in the current quarter, down $164 million sequentially and an increase of $90 million compared to the third quarter of 2018. Excluding the $205 million charitable contribution to the SunTrust Foundation in the prior quarter and the merger-related impacts of $33 million in the current quarter and $14 million in the prior quarter, noninterest expense increased $22 million sequentially and $57 million year-over-year. The $22 million sequential increase was driven primarily by higher employee compensation and benefits costs and higher operating losses. The $57 million year-over-year increase was driven by higher employee compensation and benefits, net occupancy expense, and ongoing investments in technology.

Employee compensation and benefits expense was $841 million in the current quarter, compared to $828 million in the prior quarter and $795 million in the third quarter of 2018. The $13 million sequential increase was driven primarily by higher salary costs (due to one additional day in the quarter) and higher contract programming costs. The $46 million year-over-year increase was driven primarily by higher salary and benefits costs in the current quarter.

Outside processing and software expense was $241 million in both the current and prior quarter, $7 million higher than the third quarter of 2018. The 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 $16 million higher than the third quarter of 2018. The year-over-year increase was driven primarily by lease termination gains recognized in the prior year quarter and higher rent expense in the current quarter.

Merger-related costs are expenses associated with the Company's proposed merger of equals with BB&T Corporation as announced on February 7, 2019. Current quarter costs totaled $22 million and were primarily comprised of legal and professional services and write-offs of certain technology development projects in progress. In addition to these costs, there were $11 million of other merger-related expenses (consulting fees and retention payments) that were primarily recorded in 'other noninterest expense'.

Operating losses were $23 million in the current quarter, compared to $14 million in the prior quarter and $18 million in the third quarter of 2018. The sequential and year-over-year increases were driven primarily by higher fraud costs recognized during the current quarter.

Regulatory assessments expense was $17 million in both the current and prior quarter, $22 million lower than the prior year. 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 $127 million in the current quarter, compared to $124 million in the prior quarter and $108 million in the third quarter of 2018. The $19 million year-over-year increase was driven primarily by merger-related impacts in the current quarter (primarily consulting fees).

For the nine months ended September 30, 2019, noninterest expense was $4.6 billion compared to $4.2 billion for the nine months ended September 30, 2018. The $411 million increase was driven largely by the $205 million charitable contribution and $92 million in merger-related impacts. Excluding these, expenses were up 3% driven by a $53 million increase in outside processing and software, a $42 million increase in employee compensation and benefits, and a $35 million increase in net occupancy expense.

Income Taxes

For the third quarter of 2019, the Company recorded a provision for income taxes of $122 million compared to $105 million for the prior quarter and $95 million for the third quarter of 2018. The effective tax rate for the current quarter was 16%, compared to 13% in the prior quarter and 11% in the third quarter of 2018. The prior quarter included $32 million of discrete tax benefits related primarily to the resolution of certain tax matters, while the third quarter of 2018 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.

Balance Sheet

At September 30, 2019, the Company had total assets of $227.4 billion and total shareholders' equity of $26.5 billion, representing 12% of total assets. Book value per common share was $54.87 and tangible book value per common share was $40.58, both up 3% compared to June 30, 2019, driven primarily by growth in retained earnings and a decrease in accumulated other comprehensive loss.

Loans and Deposits

Average performing LHFI totaled $157.1 billion for the current quarter, up 1% compared to the prior quarter and up 8% compared to the prior year. The sequential growth was driven primarily by increases in CRE, consumer direct, consumer indirect loans, and residential mortgages, offset partially by declines in commercial construction loans and residential home equity products. The year-over-year increase was also positively impacted by 8% growth in C&I loans.

Average consumer and commercial deposits totaled $162.5 billion for the current quarter, a 2% increase compared to both the prior quarter and the third quarter of 2018. Sequential growth was driven primarily by increases in NOW accounts, money market accounts, and time deposits. Year-over-year growth was driven by increases in NOW accounts and time deposits, offset partially by declines in demand deposits and money market accounts.

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 9.3% at September 30, 2019. The ratios of average total equity to average total assets and tangible common equity to tangible assets were 11.7% and 8.2%, respectively, at September 30, 2019. Additionally, the Company declared a common stock dividend of $0.56 per common share in the third quarter of 2019, up 12% compared to both the prior quarter and the third quarter of 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.

Asset Quality

Overall asset quality performance continues to be strong. Nonperforming assets ("NPAs") totaled $661 million at September 30, 2019, up $63 million from the prior quarter and down $93 million year-over-year. The ratio of NPLs to period-end LHFI was 0.38%, 0.34%, and 0.47% at September 30, 2019, June 30, 2019, and September 30, 2018, respectively. The year-over-year decrease was driven primarily by lower residential mortgage NPLs due to loans transitioning from non-accruing status (as a result of forbearance relief provided after hurricanes) back to accruing status.

Net charge-offs totaled $112 million during the current quarter, an increase of $27 million compared to the prior quarter and $24 million compared to the third quarter of 2018. The ratio of annualized net charge-offs to total average LHFI was 0.28% for the current quarter, compared to 0.22% for the prior quarter and 0.24% for the prior year.

The provision for credit losses was $132 million in the current quarter, an increase of $5 million sequentially and $71 million year-over-year. The sequential increase was driven primarily by higher net charge-offs. The year-over-year increase reflects both higher net charge-offs and a release of loan loss reserves in the prior year quarter. At September 30, 2019, the ALLL was $1.7 billion, which represented 1.07% of period-end loans, stable relative to June 30, 2019 and a 3 basis point decline relative to September 30, 2018, the latter of which was driven by improved asset quality.

Early stage delinquencies decreased 1 basis point from the prior quarter and 16 basis points from September 30, 2018 to 0.58% at September 30, 2019. Excluding government-guaranteed loans, early stage delinquencies were 0.23%, which was stable compared to the prior quarter and down 1 basis point compared to the third quarter of 2018.

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 September 30, 2019, SunTrust had total assets of $227 billion and total deposits of $168 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 October 17, 2019, at 10:00 a.m. (Eastern Time) to discuss the earnings results and business trends. Individuals may call in beginning at 9:45 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 October 17, 2019, and will remain available until November 17, 2019, by dialing 1-800-475-6701 (domestic) or 1-320-365-3844 (international) (Passcode: 472691). Alternatively, individuals may listen to the live webcast of the presentation by visiting the SunTrust investor relations website at investors.suntrust.com. Beginning the afternoon of October 17, 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 unusual or infrequent items from the calculation of Tangible efficiency ratio-FTE. These items include merger-related impacts recognized in the first, second, and third quarters of 2019, insurance settlement benefits related to financial crisis-era related claims recognized in the second and third quarters of 2019, the charitable contribution to the SunTrust Foundation recognized in the second quarter of 2019, and the legacy National Commerce Financial Corporation ("NCF") pension plan settlement charge recognized in the fourth quarter of 2018. See slide 20 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 Company's proposed merger with BB&T, including the benefits and effects 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.

SunTrust Banks, Inc. and Subsidiaries

FINANCIAL HIGHLIGHTS


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

Three Months Ended September 30


%


Nine Months Ended September 30


%

2019


2018


Change


2019


2018


Change

EARNINGS & DIVIDENDS












Net income

$623



$752



(17)

%


$1,891



$2,117



(11)

%

Net income available to common shareholders

597



726



(18)



1,814



2,036



(11)


Total revenue

2,353



2,294



3



7,242



6,848



6


Total revenue-FTE 1

2,375



2,316



3



7,308



6,913



6


Net income per average common share:












Diluted

$1.34



$1.56



(14)

%


$4.06



$4.34



(6)

%

Basic

1.35



1.58



(15)



4.09



4.38



(7)


Dividends declared per common share

0.56



0.50



12



1.56



1.30



20


CONDENSED BALANCE SHEETS












Selected Average Balances:












Total assets

$224,747



$207,395



8

%


$221,019



$205,370



8

%

Earning assets

198,878



186,344



7



196,902



184,607



7


Loans held for investment ("LHFI")

157,612



145,995



8



156,044



144,368



8


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

8,044



8,396



(4)



8,235



8,332



(1)


Residential MSRs

1,632



1,987



(18)



1,824



1,922



(5)


Consumer and commercial deposits

162,533



159,348



2



160,779



159,159



1


Total shareholders' equity

26,226



24,275



8



25,307



24,324



4


Preferred stock

2,025



2,025





2,025



2,145



(6)


Period End Balances:












Total assets







$227,368



$211,276



8

%

Earning assets







198,510



188,141



6


LHFI







158,455



147,215



8


Allowance for loan and lease losses ("ALLL")







1,699



1,623



5


Consumer and commercial deposits







166,126



159,332



4


Total shareholders' equity







26,489



24,139



10


FINANCIAL RATIOS & OTHER DATA












Return on average total assets

1.10

%


1.44

%


(24)

%


1.14

%


1.38

%


(17)

%

Return on average common shareholders' equity

9.83



13.01



(24)



10.46



12.33



(15)


Return on average tangible common shareholders' equity 1

13.23



18.06



(27)



14.27



17.14



(17)


Net interest margin

3.01



3.22



(7)



3.12



3.22



(3)


Net interest margin-FTE 1

3.06



3.27



(6)



3.16



3.26



(3)


Efficiency ratio

62.63



60.34



4



63.55



61.20



4


Efficiency ratio-FTE 1

62.06



59.76



4



62.97



60.62



4


Tangible efficiency ratio-FTE 1

61.17



58.94



4



62.23



59.89



4


Adjusted tangible efficiency ratio-FTE 1

59.91



58.94



2



59.89



59.89




Effective tax rate

16



11



45



15



16



(6)


Basel III capital ratios at period end 2:












Common Equity Tier 1 ("CET1")







9.33

%


9.60

%


(3)

%

Tier 1 capital







10.38



10.72



(3)


Total capital







12.06



12.47



(3)


Leverage







9.28



9.66



(4)


Total average shareholders' equity to total average assets

11.67

%


11.71

%


%


11.45



11.84



(3)


Tangible equity to tangible assets 1







9.19



8.76



5


Tangible common equity to tangible assets 1







8.23



7.72



7


Book value per common share







$54.87



$48.00



14


Tangible book value per common share 1







40.58



34.51



18


Market capitalization







30,549



30,632




Average common shares outstanding:












Diluted

446,962



464,164



(4)

%


446,673



469,006



(5)

%

Basic

443,960



460,252



(4)



443,779



464,804



(5)


Full-time equivalent employees







22,709



22,839



(1)


Number of ATMs







2,036



2,053



(1)


Full service banking offices







1,149



1,217



(6)














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. Capital ratios at September 30, 2019 are estimated as of the date of this release.

 

SunTrust Banks, Inc. and Subsidiaries

FIVE QUARTER FINANCIAL HIGHLIGHTS



Three Months Ended


September 30


June 30


March 31


December 31


September 30

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

2019


2019


2019


2018


2018

EARNINGS & DIVIDENDS










Net income

$623



$688



$580



$658



$752


Net income available to common shareholders

597



663



554



632



726


Total revenue

2,353



2,560



2,328



2,365



2,294


Total revenue-FTE 1

2,375



2,582



2,351



2,388



2,316


Net income per average common share:










Diluted

$1.34



$1.48



$1.24



$1.40



$1.56


Basic

1.35



1.49



1.25



1.41



1.58


Dividends declared per common share

0.56



0.50



0.50



0.50



0.50


CONDENSED BALANCE SHEETS










Selected Average Balances:










Total assets

$224,747



$220,827



$217,403



$212,934



$207,395


Earning assets

198,878



197,395



194,385



190,742



186,344


LHFI

157,612



156,224



154,258



149,708



145,995


Intangible assets including residential MSRs

8,044



8,271



8,394



8,491



8,396


Residential MSRs

1,632



1,860



1,984



2,083



1,987


Consumer and commercial deposits

162,533



159,854



159,921



161,573



159,348


Total shareholders' equity

26,226



25,209



24,466



23,873



24,275


Preferred stock

2,025



2,025



2,025



2,025



2,025


Period End Balances:










Total assets

$227,368



$222,288



$220,425



$215,543



$211,276


Earning assets

198,510



198,065



196,316



192,497



188,141


LHFI

158,455



156,589



155,233



151,839



147,215


ALLL

1,699



1,681



1,643



1,615



1,623


Consumer and commercial deposits

166,126



159,719



161,092



161,544



159,332


Total shareholders' equity

26,489



25,862



24,823



24,280



24,139


FINANCIAL RATIOS & OTHER DATA










Return on average total assets

1.10

%


1.25

%


1.08

%


1.23

%


1.44

%

Return on average common shareholders' equity

9.83



11.51



10.06



11.54



13.01


Return on average tangible common shareholders' equity 1

13.23



15.73



13.91



16.13



18.06


Net interest margin

3.01



3.12



3.22



3.22



3.22


Net interest margin-FTE 1

3.06



3.16



3.27



3.27



3.27


Efficiency ratio

62.63



64.00



63.97



62.66



60.34


Efficiency ratio-FTE 1

62.06



63.45



63.35



62.06



59.76


Tangible efficiency ratio-FTE 1

61.17



62.77



62.70



61.13



58.94


Adjusted tangible efficiency ratio-FTE 1

59.91



58.99



60.78



58.63



58.94


Effective tax rate

16



13



15



17



11


Basel III capital ratios at period end 2:










CET1

9.33

%


9.19

%


9.09

%


9.21

%


9.60

%

Tier 1 capital

10.38



10.24



10.15



10.30



10.72


Total capital

12.06



11.93



11.85



12.02



12.47


Leverage

9.28



9.25



9.15



9.26



9.66


Total average shareholders' equity to total average assets

11.67



11.42



11.25



11.21



11.71


Tangible equity to tangible assets 1

9.19



9.11



8.71



8.65



8.76


Tangible common equity to tangible assets 1

8.23



8.13



7.71



7.63



7.72


Book value per common share

$54.87



$53.47



$51.15



$49.57



$48.00


Tangible book value per common share 1

40.58



39.54



37.22



35.73



34.51


Market capitalization

30,549



27,896



26,290



22,541



30,632


Average common shares outstanding:










Diluted

446,962



446,391



446,662



452,957



464,164


Basic

443,960



443,806



443,566



449,404



460,252


Full-time equivalent employees

22,709



22,726



22,626



22,899



22,839


Number of ATMs

2,036



2,024



2,030



2,082



2,053


Full service banking offices

1,149



1,149



1,152



1,218



1,217












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. Capital ratios at September 30, 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


Nine Months Ended


September 30


June 30


March 31


December 31


September 30


September 30

(Dollars in millions) (Unaudited)

2019


2019


2019


2018


2018


2019


2018

Net interest income

$1,510



$1,535



$1,544



$1,547



$1,512



$4,589



$4,440


Fully taxable-equivalent ("FTE") adjustment

22



22



23



23



22



66



65


Net interest income-FTE 2

1,532



1,557



1,567



1,570



1,534



4,655



4,505


Noninterest income

843



1,025



784



818



782



2,653



2,408


Total revenue-FTE 2

$2,375



$2,582



$2,351



$2,388



$2,316



$7,308



$6,913
















Return on average common shareholders' equity

9.83

%


11.51

%


10.06

%


11.54

%


13.01

%


10.46

%


12.33

%

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

3.40



4.22



3.85



4.59



5.05



3.81



4.81


Return on average tangible common shareholders' equity 3

13.23

%


15.73

%


13.91

%


16.13

%


18.06

%


14.27

%


17.14

%















Net interest margin

3.01

%


3.12

%


3.22

%


3.22

%


3.22

%


3.12

%


3.22

%

Impact of FTE adjustment

0.05



0.04



0.05



0.05



0.05



0.04



0.04


Net interest margin-FTE 2

3.06

%


3.16

%


3.27

%


3.27

%


3.27

%


3.16

%


3.26

%















Noninterest expense

$1,474



$1,638



$1,489



$1,482



$1,384



$4,602



$4,191


Total revenue

2,353



2,560



2,328



2,365



2,294



7,242



6,848


Efficiency ratio 4

62.63

%


64.00

%


63.97

%


62.66

%


60.34

%


63.55

%


61.20

%

Impact of FTE adjustment

(0.57)



(0.55)



(0.62)



(0.60)



(0.58)



(0.58)



(0.58)


Efficiency ratio-FTE 2, 4

62.06



63.45



63.35



62.06



59.76



62.97



60.62


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

(0.89)



(0.68)



(0.65)



(0.93)



(0.82)



(0.74)



(0.73)


Tangible efficiency ratio-FTE 2, 5

61.17



62.77



62.70



61.13



58.94



62.23



59.89


Impact of excluding unusual or infrequent items

(1.26)



(3.78)



(1.92)



(2.50)





(2.34)




Adjusted tangible efficiency ratio-FTE 2, 5, 6

59.91

%


58.99

%


60.78

%


58.63

%


58.94

%


59.89

%


59.89

%















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 pre-tax impact of unusual or infrequent items from the calculation of Tangible efficiency ratio-FTE. These unusual or infrequent items include (i) $45 million, $14 million, and $33 million of merger-related impacts recognized in the first, second, and third quarter of 2019, respectively, (ii) $205 million and $5 million of insurance settlement benefits related to financial crisis-era related claims recognized in the second and third quarter of 2019, respectively, (iii) the $205 million charitable contribution to the SunTrust Foundation recognized in the second quarter of 2019, and (iv) the $60 million legacy National Commerce Financial Corporation ("NCF") pension plan settlement charge recognized in the fourth quarter of 2018. 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




September 30


June 30


March 31


December 31


September 30

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

2019


2019


2019


2018


2018

Total shareholders' equity

$26,489



$25,862



$24,823



$24,280



$24,139


Goodwill, net of deferred taxes of $163 million, $163 million, $162 million, $160 
     million, and $160 million, respectively

(6,168)



(6,168)



(6,169)



(6,171)



(6,171)


Other intangible assets (including residential and commercial MSRs)

(1,648)



(1,796)



(1,963)



(2,062)



(2,140)


Residential and commercial MSRs

1,636



1,783



1,949



2,049



2,126


Tangible equity 2

20,309



19,681



18,640



18,096



17,954


Noncontrolling interest

(101)



(103)



(101)



(103)



(101)


Preferred stock

(2,025)



(2,025)



(2,025)



(2,025)



(2,025)


Tangible common equity 2

$18,183



$17,553



$16,514



$15,968



$15,828












Total assets

$227,368



$222,288



$220,425



$215,543



$211,276


Goodwill

(6,331)



(6,331)



(6,331)



(6,331)



(6,331)


Other intangible assets (including residential and commercial MSRs)

(1,648)



(1,796)



(1,963)



(2,062)



(2,140)


Residential and commercial MSRs

1,636



1,783



1,949



2,049



2,126


Tangible assets

$221,025



$215,944



$214,080



$209,199



$204,931


Tangible equity to tangible assets 2

9.19

%


9.11

%


8.71

%


8.65

%


8.76

%

Tangible common equity to tangible assets 2

8.23



8.13



7.71



7.63



7.72


Tangible book value per common share 3

$40.58



$39.54



$37.22



$35.73



$34.51












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-third-quarter-2019-results-300940139.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