SYS-CON MEDIA Authors: Roberto Medrano, Dmitriy Stepanov, Gilad Parann-Nissany, Srinivasan Sundara Rajan, Sean Houghton

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SunTrust Reports Fourth Quarter 2013 Results

Quarter Marked by Increased Earnings, Broad-Based Loan Growth, and Improved Revenue

ATLANTA, Jan. 17, 2014 /PRNewswire/ -- SunTrust Banks, Inc. (NYSE: STI) today reported net income available to common shareholders of $413 million, or $0.77 per average common diluted share, for the fourth quarter of 2013.  This compares to reported earnings per average common diluted share of $0.33 in the prior quarter, which was negatively impacted by $0.33 per share due to the impact of certain legacy mortgage matters.  Earnings per share increased 18% from $0.65 for the fourth quarter of last year. 

For 2013, SunTrust earned $2.41 per common diluted share, compared to $3.59 per common diluted share in 2012.  However, 2012 earnings were positively impacted by $1.40 per share related to actions undertaken by the Company to improve its risk profile and further strengthen its balance sheet. Excluding the $1.40 per share in 2012 and the aforementioned $0.33 per share in 2013, earnings per average common diluted share increased from $2.19 in 2012 to $2.74 in 2013, or 25%.

"Broad-based loan growth, increased revenue, and further credit quality improvement led to core earnings expansion over the prior quarter," said William H. Rogers, Jr., chairman and chief executive officer of SunTrust Banks, Inc. "We closed the year with 25% core annual earnings growth and substantial efficiency ratio improvement.  Our focus in 2014 will remain on meeting more of our clients' needs, driving profitable growth, and further improving the efficiency of the Company."

Fourth Quarter 2013 Financial Highlights

Income Statement

  • Net income available to common shareholders was $413 million, or $0.77 per average common diluted share compared to $0.66 in the prior quarter, excluding the aforementioned $0.33 per share impact.  Current quarter earnings benefited from a 22% effective tax rate.

  • Total revenue increased $141 million, or 7%, compared to the prior quarter.
    • Net interest income increased 1% relative to the previous quarter as average performing loans grew 3% and net interest margin increased one basis point to 3.20%.

    • Noninterest income increased compared to the prior quarter driven, in part, by higher mortgage servicing and trading income.  

  • Noninterest expense decreased $366 million sequentially due to the expenses associated with certain legacy mortgage matters in the prior quarter.  Excluding the impact of the $323 million in operating losses related to the legacy mortgage and other legal related matters and the $96 million increase in the mortgage servicing advance reserve incurred in the third quarter, noninterest expense increased $53 million sequentially, primarily due to higher employee compensation and benefits expense as a result of reduced incentive compensation in the third quarter, and increased operating losses.  

Balance Sheet

  • Average performing loans increased $3.1 billion sequentially with growth across nearly all loan portfolios. Average performing loans increased $4.7 billion compared to the fourth quarter of 2012 due to growth in C&I and commercial real estate loans.

  • Average client deposits increased $0.8 billion sequentially and decreased $0.4 billion from the fourth quarter of 2012, with the favorable mix shift toward lower-cost deposits continuing.

Capital

  • Estimated capital ratios continued to be well above regulatory requirements.  The Tier 1 common equity ratio was an estimated 9.80%.

  • In conjunction with its capital plans announced in the first quarter of 2013, the Company repurchased an additional $50 million of its common shares during the fourth quarter and paid a quarterly common stock dividend of $0.10 per share.

Asset Quality

  • The risk profile of the balance sheet continued to improve.  Nonperforming loans decreased 6% during the quarter and were 0.76% of total loans at December 31, 2013, compared to 0.83% at September 30, 2013 and 1.27% at December 31, 2012. 

  • Annualized net charge-offs decreased to 0.40% of average loans compared to 0.47% and 1.30% in the prior quarter and the fourth quarter of 2012, respectively.
  • Current quarter nonperforming loans and net charge-offs were at their lowest levels in more than six years.

  • Due to loan growth in the current quarter, the provision for credit losses increased 6% compared to the prior quarter, but declined 69% compared to the fourth quarter of 2012 due in part to overall improvement in asset quality.

 








Income Statement (presented on a fully taxable-equivalent basis)

4Q 2012


3Q 2013


4Q 2013

(Dollars in millions, except per share data)






Net income available to common shareholders

$350


$179


$413

Earnings per average common diluted share

0.65


0.33


0.77

Total revenue

2,291


1,920


2,061

Total revenue, excluding net securities gains/losses

2,290


1,920


2,060

Net interest income

1,276


1,240


1,247

Provision for credit losses

328


95


101

Noninterest income

1,015


680


814

Noninterest expense

1,510


1,743


1,377

Net interest margin

3.36%


3.19%


3.20%







Balance Sheet






(Dollars in billions)






Average loans

$121.6


$122.7


$125.6

Average consumer and commercial deposits

127.9


126.6


127.5







Capital






Tier 1 capital ratio(1)

11.13%


10.97%


10.80%

Tier 1 common equity ratio(1)

10.04%


9.94%


9.80%

Total average shareholders' equity to total average assets

11.82%


12.24%


12.23%







Asset Quality






Net charge-offs to average loans (annualized)

1.30%


0.47%


0.40%

Allowance for loan losses to period end loans

1.80%


1.67%


1.60%

Nonperforming loans to total loans

1.27%


0.83%


0.76%










(1) Current period Tier 1 capital and Tier 1 common equity ratios are estimated as of the date of this news release.

 

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

Revenue

Total revenue was $2.1 billion for the current quarter, an increase of $141 million, or 7%, compared to the prior quarter.  The increase was primarily driven by higher mortgage servicing and trading income, a decline in the impairment of certain lease financing assets, and a decline in the mortgage repurchase provision given the third quarter agency mortgage repurchase settlements.  The increases in revenue were partially offset by lower core mortgage production income.  Excluding the third quarter impact of the $63 million of incremental mortgage repurchase provision related to the agency mortgage repurchase settlements, total revenue increased sequentially by $78 million, or 4%.  Compared to the fourth quarter of 2012, total revenue declined $230 million, or 10%, primarily driven by lower net interest income and mortgage production income. 

Total revenue was $8.2 billion for 2013 and $10.6 billion for 2012. Revenue in 2012 included $2.0 billion of net securities gains primarily related to the Company's disposition of its remaining shares in The Coca-Cola Company.  Excluding net securities gains, total revenue decreased $432 million driven by lower net interest income and core mortgage-related revenues, partially offset by a significantly lower mortgage repurchase provision and an increase in investment banking and wealth management revenues.

Net Interest Income

Net interest income was $1.2 billion for the current quarter, an increase of $7 million from the prior quarter due to loan growth that was partially offset by a decline in loan yields.  Net interest income decreased $29 million compared to the fourth quarter of 2012 primarily due to lower earning asset yields.  The decline in earning asset yields was partially offset by higher average earning assets and lower interest expense driven by a favorable shift in deposit mix and an overall decline in deposit rates paid.

The net interest margin for the fourth quarter was 3.20%, an increase of one basis point from the prior quarter.  The yield on earning assets was stable on a sequential quarter basis, as a four basis point decline in loan yields was offset by an 18 basis point increase in the yield on the securities available for sale portfolio. The yield on the securities portfolio increased primarily due to the rise in market interest rates impacting MBS prepayment speeds, resulting in slower premium amortization.  Interest-bearing liability rates declined one basis point as a result of a modest decrease in deposit rates.  The net interest margin in the fourth quarter of 2012 was 3.36%.  The 16 basis point decrease in the net interest margin was primarily due to a 22 basis point decrease in earning asset yields, partially offset by a seven basis point reduction in interest-bearing liability rates, primarily related to a favorable shift in deposit mix.

For 2013, net interest income was $5.0 billion, a decrease of $245 million, or 5%, compared to 2012, and the net interest margin was 3.24% in 2013 compared to 3.40% in 2012.  The primary drivers of the decrease in net interest income and net interest margin were the continued low interest rate environment, the foregone dividend income related to the third quarter of 2012 sale of the Company's remaining shares in The Coca-Cola Company, and a decline in commercial loan-related swap income, partially offset by earning asset growth and a favorable shift in the mix of funding sources.

Noninterest Income

Total noninterest income was $814 million for the current quarter compared to $680 million for the prior quarter and $1.0 billion for the fourth quarter of 2012.  Compared to the prior quarter, the $134 million increase was primarily due to an increase in trading and mortgage servicing income, the $63 million provision associated with the third quarter agency mortgage repurchase settlements, and a reduction in lease financing asset impairments, partially offset by a decline in core mortgage production income.  Compared to the fourth quarter of 2012, the $201 million decrease was primarily due to reductions in mortgage production income, partially offset by lower valuation losses on the Company's fair value debt and losses on the sale of Ginnie Mae loans in the fourth quarter of 2012.

Mortgage production income for the current quarter was $31 million compared to a loss of $10 million for the prior quarter and income of $241 million for the fourth quarter of 2012.  The $41 million sequential quarter increase was driven by the $63 million provision associated with the third quarter agency mortgage repurchase settlements, partially offset by declines in applications and closed loan production volume.  Compared to the fourth quarter of 2012, mortgage production income decreased $210 million due to both a decline in production volume and gain on sale margins.  Closed loan production volume declined 51% compared to both the prior quarter and fourth quarter of 2012.  The mortgage repurchase provision was $12 million for the fourth quarter and the mortgage repurchase reserve was $78 million as of December 31, 2013. 

Mortgage servicing income was $38 million in the current quarter compared to $11 million in the prior quarter and $45 million in the fourth quarter of 2012.  The $27 million sequential quarter increase was largely due to a slower pace of loan prepayments.  The $7 million decrease compared to the fourth quarter of 2012 was primarily due to lower net hedge performance partially offset by the slower pace of loan prepayments.  At December 31, 2013, the servicing portfolio was $137 billion compared to $145 billion at December 31, 2012.

 Investment banking income was $96 million for the current quarter compared to $99 million in the prior quarter and $112 million in the fourth quarter of 2012.  The decrease compared to both periods was driven by a decline in fixed income origination revenue, partially offset by growth in M&A advisory and equity offering fees. 

Trading income was $57 million for the current quarter compared to $33 million for the prior quarter and $65 million for the fourth quarter of 2012.  The $24 million sequential quarter increase was due to a $14 million mark-to-market improvement and an increase in client-related trading revenues.  The $8 million decrease in trading income compared to the fourth quarter of 2012 was driven by a $25 million trading-related litigation reserve release that was recognized in the fourth quarter of 2012, partially offset by a $28 million mark-to-market improvement.  Client-related trading revenues were generally stable compared to the fourth quarter of 2012.

Other noninterest income was $55 million for the current quarter compared to $10 million for the prior quarter and $18 million for the fourth quarter of 2012.  The $45 million sequential quarter increase was primarily driven by the $37 million impairment of lease financing assets in the prior quarter.  The $37 million increase from the fourth quarter of 2012 was primarily due to $25 million of net losses related to the sale of Ginnie Mae loans in the fourth quarter of 2012.

For 2013, noninterest income was $3.2 billion compared to $5.4 billion in 2012, which included $2.0 billion of net securities gains.  Excluding the $2 million and $2.0 billion of net securities gains in 2013 and 2012, respectively, noninterest income decreased $187 million compared to 2012. The decline was primarily due to lower core mortgage-related revenues, resulting from declines in production volume, gain on sale margins, and mortgage servicing income.  The declines in core mortgage-related revenues were offset by a lower mortgage repurchase provision, higher investment banking and wealth management revenue, as well as a reduction in mark-to-market valuation losses on the Company's fair value debt and losses from the sale of government guaranteed loans in 2012.


Noninterest Expense

Noninterest expense was $1.4 billion for the current quarter compared to $1.7 billion for the prior quarter and $1.5 billion for the fourth quarter of 2012.  The sequential quarter decrease of $366 million was due to the recognition of specific legacy mortgage and other legal related matters in the prior quarter, and was partially offset by higher employee compensation and benefits expenses and operating losses.  The $133 million, or 9%, decrease compared to the fourth quarter of 2012 was a result of declines in almost all noninterest expense categories due to improved expense management and declines in cyclical costs.   

Employee compensation and benefits expense was $723 million in the current quarter compared to $682 million in the prior quarter and $738 million in the fourth quarter of 2012.  The sequential quarter increase of $41 million was primarily the result of the $37 million incentive compensation reduction that occurred in the third quarter.  The $15 million decrease from the fourth quarter of 2012 was primarily due to lower incentive compensation and employee benefit costs.

Operating losses were $42 million in the current quarter compared to $350 million in the prior quarter and $77 million in the fourth quarter of 2012.  The decrease compared to the prior quarter was due to $323 million in legacy mortgage and other legal related matters that were recognized in the prior quarter.  Excluding these specific matters, operating losses increased $15 million as a result of certain regulatory and legal expenses incurred during the current quarter.  The decrease from the fourth quarter of 2012 was primarily due to the Company's recognition of its portion of the Consent Order related to the Independent Foreclosure Review, which was entered into in the fourth quarter of 2012.

Marketing and customer development expense was $40 million in the current quarter, $34 million in the prior quarter, and $50 million in the fourth quarter of 2012. The $6 million increase compared to the prior quarter was due to seasonally higher expenses during the current quarter, and the $10 million decrease compared to the fourth quarter of 2012 was due to reduced advertising in the current quarter. Compared to the prior quarter, FDIC insurance and regulatory expense was relatively flat, and compared to the fourth quarter of 2012, it decreased $13 million due to a decrease in the Company's FDIC insurance assessment rate, reflecting the Company's reduced risk profile.

Other noninterest expense was $203 million in the current quarter compared to $305 million in the prior quarter and $261 million in the fourth quarter of 2012.  The $102 million sequential decrease was primarily driven by higher collections expenses in the prior quarter related to the increase in the mortgage servicing advance reserve. The $58 million decrease from the fourth quarter of 2012 was primarily driven by declines in other real estate, consulting, and collections expenses due to declines in cyclical costs and the resolution of certain legacy mortgage items.

For 2013, noninterest expense was $5.9 billion compared to $6.3 billion in 2012.  The $443 million, or 7%, decrease was driven by declines across most expense categories due to improved expense management, lower personnel expenses given the decline in full-time equivalent employees and reductions in certain cyclical costs and legal and consulting expenses. The decrease was partially offset by the $323 million in operating losses recognized in the third quarter of 2013 in connection with certain legacy mortgage and other legal related matters; operating losses increased compared to 2012 by $226 million, but excluding the $323 million, operating losses would have declined $97 million compared to 2012.  Excluding the $323 million and $96 million related to the increase in the mortgage servicing advance reserve in 2013 and the $38 million related to the charitable contribution of The Coca-Cola Company shares and $96 million related to the impairment of Affordable Housing investments in 2012, noninterest expense declined 12% year-over-year. 

Income Taxes

For the current quarter, the Company recorded an income tax provision of $122 million compared to an income tax benefit of $146 million for the prior quarter and an income tax provision of $62 million in the fourth quarter of 2012. The tax benefit in the prior quarter was due to the impacts of the October 10, 2013 8-K items.  The effective tax rate was 22% in the fourth quarter of 2013 compared to 15% in the fourth quarter of 2012.   The fourth quarter 2012 and 2013 effective tax rates were favorably impacted by audit settlements, statute expirations and/or changes in tax rates. The increase in the effective tax rate from the fourth quarter of 2012 was primarily due to higher pre-tax earnings.


Balance Sheet

At December 31, 2013, the Company had total assets of $175 billion and shareholders' equity of $21 billion, representing 12% of total assets. Book value and tangible book value per common share increased compared to September 30, 2013, and were $38.61 and $27.01, respectively.  The increase was due to the decline in common shares as a result of the common share repurchases during the quarter and an increase in equity primarily due to net income.

Loans

Average performing loans were $124.7 billion for the current quarter, an increase of $3.1 billion, or 3%, from the prior quarter driven by growth in almost all loan categories, most notably a $1.5 billion, or 3%, increase in C&I loans, a $634 million, or 3%, increase in nonguaranteed residential mortgage loans, and a $456 million, or 10%, increase in commercial real estate loans. Average performing loans increased $4.7 billion, or 4%, compared to the fourth quarter of 2012.  The increase was due to C&I, nonguaranteed residential mortgage, and commercial real estate loans, which increased 7%, 4%, and 20%, respectively.  Partially offsetting the year-over-year increase was a decrease in guaranteed residential mortgage loans of $1.1 billion, or 25%, and guaranteed student loans of $261 million, or 5%, both primarily due to targeted loan sales in the fourth quarter of 2012 and the first quarter of 2013. 

Deposits

Average client deposits for the current quarter were $127.5 billion compared to $126.6 billion in the prior quarter and $127.9 billion in the fourth quarter of 2012.  Average deposits increased $842 million during the current quarter due to a $1.1 billion, or 4%, increase in NOW balances and a $497 million, or 1%, increase in noninterest bearing deposits, which was partially offset by declines in time deposits.  The $447 million decrease compared to the fourth quarter of 2012 was driven by a decrease of $2.0 billion, or 13%, in time deposits, partially offset by $1.5 billion, or 1%, of growth in lower-cost deposits.          

Capital and Liquidity

The Company's estimated capital ratios are well above current regulatory requirements with Tier 1 capital and Tier 1 common ratios at an estimated 10.80% and 9.80%, respectively, at December 31, 2013.  The capital ratios decreased slightly from the fourth quarter of 2012 and the prior quarter due to loan growth offsetting an increase in retained earnings. Changes in the capital ratios from the prior year were also impacted by the Company's refinement to the risk weighting of certain unused lending commitments in the third quarter of 2013.  The ratios of total average equity to total average assets and tangible equity to tangible assets were 12.23% and 9.00%, respectively, at December 31, 2013, both stable to the prior quarter and higher than the fourth quarter of 2012.  The Company continues to have substantial available liquidity provided in the form of its client deposit base, cash, its portfolio of high-quality government-backed securities, and other available funding sources. 

During the current quarter, the Company declared a common stock dividend of $0.10 per common share, consistent with the prior quarter and up $0.05 per share from the fourth quarter of 2012.  Additionally, during the current quarter, the Company repurchased $50 million of common stock, bringing the total repurchased in 2013 to $150 million with plans to repurchase up to an additional $50 million of common stock during the first quarter of 2014, pursuant to the Company's 2013 capital plan. 

Asset Quality

Asset quality continued to improve, including further decreases in nonperforming loans and nonperforming assets, both of which reached their lowest levels since the second quarter of 2007.  Nonperforming loans totaled $971 million at December 31, 2013, a decrease of $66 million, or 6%, relative to the prior quarter, led by declines in C&I, residential mortgage, and construction loans.  Compared to a year ago, nonperforming loans decreased $576 million, or 37%, with reductions across all loan categories, most significantly in residential mortgage and home equity loans.  At December 31, 2013, the percentage of nonperforming loans to total loans was 0.76%, a decrease from 0.83% and 1.27% at the end of the prior quarter and fourth quarter of 2012, respectively.  Other real estate owned totaled $170 million at the end of the current quarter, a decrease of 13% from the prior quarter and a decrease of 36% from a year ago.   

Net charge-offs were $128 million during the current quarter compared to $146 million for the prior quarter and $398 million for the fourth quarter of 2012.  The decrease in net charge-offs from the prior quarter and fourth quarter of 2012 was primarily driven by lower commercial and residential loan charge-offs.  The decline from the prior year was further driven by $118 million in charge-offs recognized in the fourth quarter of 2012 related to sales of nonperforming residential mortgage and commercial real estate loans, as well as the reclassification of certain loans that were discharged in Chapter 7 bankruptcy to nonperforming status.

The ratio of annualized net charge-offs to total average loans was 0.40% for the current quarter, 0.47% for the prior quarter, and 1.30% for the fourth quarter of 2012.  The prior year ratio was affected by the aforementioned nonperforming loan sales and Chapter 7 bankruptcy loan reclassification.  The net charge-off ratio in the current quarter was at the lowest level since the third quarter of 2007.  The provision for credit losses was $101 million, which increased $6 million from the prior quarter and decreased $227 million from the fourth quarter of 2012.  The current quarter increase was driven by growth in the loan portfolio partially offset by improvements in asset quality, while the decrease from the prior year period was due to continued improvement in asset quality.  For 2013, the provision for credit losses was $553 million, a decline of $842 million compared to 2012.

At December 31, 2013, the allowance for loan losses was $2.0 billion and represented 1.60% of total loans, a seven basis point decrease from September 30, 2013.  The $27 million decrease in the allowance for loan losses during the current quarter was reflective of the continued improvement in asset quality, partially offset by loan growth.

Early stage delinquencies increased nine basis points from the prior quarter to 0.74% at December 31, 2013.  The increase was primarily due to government-guaranteed student and mortgage loans.  Excluding government-guaranteed loans, early stage delinquencies were 0.36%, essentially stable to the prior quarter.

Accruing restructured loans totaled $2.7 billion, and nonaccruing restructured loans totaled $0.4 billion at December 31, 2013.  $2.9 billion of restructured loans related to residential loans, $0.1 billion were commercial loans, and $0.1 billion related to consumer loans.


BUSINESS SEGMENT FINANCIAL PERFORMANCE

Business Segment Results

The Company has included business segment financial tables as part of this release on the Investor Relations portion of its website at www.suntrust.com/investorrelations. The Company's business segments include: Consumer Banking and Private Wealth Management, Wholesale Banking, and Mortgage Banking. All revenue in the business segment tables is reported on a fully taxable-equivalent basis. For the business segments, results include net interest income, which is computed using matched-maturity funds transfer pricing. Further, provision for credit losses is represented by net charge-offs. SunTrust also reports results for Corporate Other, which includes the Treasury department as well as the residual expense associated with operational and support expense allocations. The Corporate Other segment also includes differences created between internal management accounting practices and generally accepted accounting principles ("GAAP"), certain matched-maturity funds transfer pricing credits and charges, differences in provision for credit losses compared to net charge-offs, as well as equity and its related impact. A detailed discussion of the business segment results will be included in the Company's forthcoming Form 10-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 and information which SunTrust has also published today and SunTrust's forthcoming Form 10-K. Detailed financial tables and other information are also available on the Investor Relations portion of the Company's website at www.suntrust.com/investorrelations. This information is also included in a current report on Form 8-K furnished with the SEC today.

Conference Call

SunTrust management will host a conference call on January 17, 2014, at 8:00 a.m. (Eastern Time) to discuss the earnings results and business trends. Individuals may call in beginning at 7:45 a.m. (Eastern Time) by dialing 1-888-972-7805 (Passcode: 4Q13). Individuals calling from outside the United States should dial 1-517-308-9091 (Passcode: 4Q13). A replay of the call will be available approximately one hour after the call ends on January 17, 2014, and will remain available until February 17, 2014, by dialing 1-888-566-0398 (domestic) or 1-402-998-0588 (international). Alternatively, individuals may listen to the live webcast of the presentation by visiting the SunTrust investor relations website at www.suntrust.com/investorrelations. Beginning the afternoon of January 17, 2014, listeners may access an archived version of the webcast in the "Recent Earnings and Conference Presentations" subsection found on the investor relations webpage. This webcast will be archived and available for one year. A link to the Investor Relations page is also found in the footer of the SunTrust home page.

SunTrust Banks, Inc., headquartered in Atlanta, is one of the nation's largest banking organizations, serving a broad range of consumer, commercial, corporate and institutional clients. The Company operates an extensive branch and ATM network throughout the Southeast and Mid-Atlantic States and a full array of technology-based, 24-hour delivery channels. The Company also serves clients in selected markets nationally. Its primary businesses include deposit, credit, and trust and investment management services. Through various subsidiaries, the Company provides mortgage banking, insurance, brokerage, equipment leasing, and capital markets services. SunTrust's Internet address is www.suntrust.com.

Important Cautionary Statement About Forward-Looking Statements

This news release includes non-GAAP financial measures to describe SunTrust's performance. The reconciliations of those measures to GAAP measures are provided within or in the appendix to this news release. In this news release, the Company presents net interest income and net interest margin on a fully taxable-equivalent ("FTE") basis, and ratios on an annualized basis. The FTE basis adjusts for the tax-favored status of income from certain loans and investments. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts.

This news release contains forward-looking statements. Statements regarding estimates of the after-tax financial impact of various legal and regulatory matters, potential future share repurchases, and future expected dividends are forward-looking statements. Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words "believes," "expects," "anticipates," "estimates," "intends," "plans," "forecast," "goals," "targets," "initiatives," "focus," "potentially," "probably," "projects," "outlook" or similar expressions or future conditional verbs such as "may," "will," "should," "would," and "could." Forward-looking statements are based upon the current beliefs and expectations of management and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events.

Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward looking statements. The estimated financial impact of these legal and regulatory matters depends upon (1) the successful negotiation, execution, and delivery of definitive agreements in several matters, (2) the ultimate resolution of certain legal matters which are not yet complete, (3) management's assumptions about the extent to which such amounts may be deducted for tax purposes, (4) the agreement of other necessary parties, and (5) our assumptions about the extent to which we can provide consumer relief to satisfy our financial obligations as contemplated by the agreements in principle with regulators. Future dividends, and the amount of any such dividend, must be declared by our board of directors in the future in their discretion. Also, future share repurchases and the timing of any such repurchase are subject to market conditions and management's discretion. Additional factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2012 and in other periodic reports that we file with the SEC.

 

SunTrust Banks, Inc. and Subsidiaries













FINANCIAL HIGHLIGHTS













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



























Three Months Ended




Twelve Months Ended





December 31


%


December 31


%



2013


2012


Change 4


2013


2012


Change 4


EARNINGS & DIVIDENDS













Net income

$426


$356


20 %


$1,344


$1,958


(31)%


Net income available to common shareholders

413


350


18 %


1,297


1,931


(33)%


Net income available to common shareholders excluding the
impact of Form 8-K items from the third quarters of 2013 and 20121

413


350


18 %


1,476


1,178


25 %


Total revenue - FTE 1, 2                              

2,061


2,291


(10)%


8,194


10,598


(23)%


Total revenue - FTE excluding securities gains, net 1, 2

2,060


2,290


(10)%


8,192


8,624


(5)%


Net income per average common share               













Diluted 

0.77


0.65


18 %


2.41


3.59


(33)%


Diluted, excluding the impact of Form 8-K
items from the third quarters of 2013 and 2012 1

0.77


0.65


18 %


2.74


2.19


25 %


Basic

0.78


0.66


18 %


2.43


3.62


(33)%


Dividends paid per common share           

0.10


0.05


100 %


0.35


0.20


75 %


CONDENSED BALANCE SHEETS 













Selected Average Balances













Total assets

$173,791


$174,510


—%


$172,497


$176,134


(2)%


Earning assets

154,664


151,225


2 %


153,728


153,479


—%


Loans

125,649


121,587


3 %


122,657


122,893


—%


Intangible assets including MSRs

7,658


7,278


5 %


7,535


7,322


3 %


MSRs

1,253


848


48 %


1,121


887


26 %


Consumer and commercial deposits

127,460


127,907


—%


127,076


126,249


1 %


Brokered time and foreign deposits

2,010


2,266


(11)%


2,065


2,255


(8)%


Total shareholders' equity

21,251


20,630


3 %


21,167


20,495


3 %


Preferred stock

725


334


NM


725


290


NM


As of













Total assets

175,335


173,442


1 %








Earning assets

156,978


151,223


4 %








Loans

127,877


121,470


5 %








Allowance for loan and lease losses

2,044


2,174


(6)%








Consumer and commercial deposits

127,735


130,180


(2)%








Brokered time deposits

2,024


2,136


(5)%








Total shareholders' equity

21,422


20,985


2 %








FINANCIAL RATIOS & OTHER DATA













Return on average total assets

0.97%


0.81%


20 %


0.78%


1.11%


(30)%


Return on average common shareholders' equity

7.99


6.86


16 %


6.34


9.56


(34)%


Return on average tangible common shareholders' equity 1

11.61


10.04


16 %


9.25


14.02


(34)%


Net interest margin 2

3.20


3.36


(5)%


3.24


3.40


(5)%


Efficiency ratio 2

66.82


65.93


1 %


71.75


59.67


20 %


Tangible efficiency ratio 1, 2                    

66.61


65.63


1 %


71.48


59.24


21 %


Effective tax rate 

22.30


14.86


50 %


16.89


28.29


(40)%


Tier 1 common equity 3

9.80


10.04


(2)%








Tier 1 capital 3

10.80


11.13


(3)%








Total capital 3

12.80


13.48


(5)%








Tier 1 leverage 3

9.55


8.91


7 %








Total average shareholders' equity to total average assets

12.23


11.82


3 %


12.27


11.64


5 %


Tangible equity to tangible assets 1                              

9.00


8.82


2 %





















Book value per common share

$38.61


$37.59


3 %








Tangible book value per common share 1

27.01


25.98


4 %








Market price:













High

36.99


30.64


21 %


36.99


30.79


20 %


Low

31.97


25.30


26 %


26.93


18.07


49 %


Close

36.81


28.35


30 %








Market capitalization

19,734


15,279


29 %








Average common shares outstanding (000s)













Diluted 

537,921


539,618


—%


539,093


538,061


—%


Basic

532,492


535,012


—%


534,283


534,149


—%


Full-time equivalent employees

26,281


26,778


(2)%








Number of ATMs

2,243


2,923


(23)%








Full service banking offices

1,497


1,616


(7)%


































1 See Appendix A for reconcilements of non-GAAP performance measures. 












2 Total revenue, net interest margin, and efficiency ratios are presented on a fully taxable-equivalent ("FTE") basis. The FTE basis adjusts for the tax-favored status of net interest income from certain loans and investments. The Company believes this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources. Total revenue - FTE equals net interest income on a FTE basis plus noninterest income.


3 Current period tier 1 common equity, tier 1 capital, total capital, and tier 1 leverage ratios are estimated as of the earnings release date.          






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








 

SunTrust Banks, Inc. and Subsidiaries










FIVE QUARTER FINANCIAL HIGHLIGHTS










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





















Three Months Ended


December 31


September 30


June 30


March 31


December 31


2013


2013


2013


2013


2012

EARNINGS & DIVIDENDS










Net income

$426


$189


$377


$352


$356

Net income available to common shareholders

413


179


365


340


350

Net income available to common shareholders excluding
the impact of Form 8-K items from the third quarter of 2013 1

413


358


365


340


350

Total revenue - FTE 1, 2

2,061


1,920


2,100


2,114


2,291

Total revenue - FTE excluding securities gains, net 1, 2

2,060


1,920


2,100


2,112


2,290

Net income per average common share










Diluted

0.77


0.33


0.68


0.63


0.65

Diluted, excluding the impact of Form 8-K items from the third quarter of 2013 1

0.77


0.66


0.68


0.63


0.65

Basic

0.78


0.33


0.68


0.64


0.66

Dividends paid per common share

0.10


0.10


0.10


0.05


0.05

CONDENSED BALANCE SHEETS










Selected Average Balances










Total assets

$173,791


$171,838


$172,537


$171,808


$174,510

Earning assets

154,664


154,250


153,495


152,471


151,225

Loans

125,649


122,672


121,372


120,882


121,587

Intangible assets including MSRs

7,658


7,643


7,455


7,379


7,278

MSRs

1,253


1,232


1,039


957


848

Consumer and commercial deposits

127,460


126,618


126,579


127,655


127,907

Brokered time and foreign deposits

2,010


2,007


2,075


2,170


2,266

Total shareholders' equity

21,251


21,027


21,272


21,117


20,630

Preferred stock

725


725


725


725


334

As of










Total assets

175,335


171,777


171,546


172,435


173,442

Earning assets

156,978


154,849


154,430


152,783


151,223

Loans

127,877


124,340


122,031


120,804


121,470

Allowance for loan and lease losses

2,044


2,071


2,125


2,152


2,174

Consumer and commercial deposits

127,735


126,861


125,588


127,735


130,180

Brokered time and foreign deposits

2,024


2,022


2,031


2,180


2,136

Total shareholders' equity

21,422


21,070


21,007


21,194


20,985

FINANCIAL RATIOS & OTHER DATA










Return on average total assets

0.97%


0.44%


0.88%


0.83%


0.81%

Return on average common shareholders' equity

7.99


3.49


7.12


6.77


6.86

Return on average tangible common shareholders' equity 1

11.61


5.10


10.35


9.88


10.04

Net interest margin 2

3.20


3.19


3.25


3.33


3.36

Efficiency ratio 2

66.82


90.77


66.56


64.46


65.93

Tangible efficiency ratio 1, 2

66.61


90.46


66.27


64.17


65.63

Effective tax rate 4

22.30


NM


27.89


30.04


14.86

Tier 1 common equity 3

9.80


9.94


10.19


10.13


10.04

Tier 1 capital 3

10.80


10.97


11.24


11.20


11.13

Total capital 3

12.80


13.04


13.43


13.45


13.48

Tier 1 leverage 3

9.55


9.46


9.40


9.26


8.91

Total average shareholders' equity to total average assets

12.23


12.24


12.33


12.29


11.82

Tangible equity to tangible assets 1

9.00


8.98


8.95


9.00


8.82











Book value per common share

$38.61


$37.85


$37.65


$37.89


$37.59

Tangible book value per common share 1

27.01


26.27


26.08


26.33


25.98

Market price:










High

36.99


36.29


32.84


29.98


30.64

Low

31.97


31.59


26.97


26.93


25.30

Close

36.81


32.42


31.57


28.81


28.35

Market capitalization

19,734


17,427


17,005


15,563


15,279

Average common shares outstanding (000s)










Diluted

537,921


538,850


539,763


539,862


539,618

Basic

532,492


533,829


535,172


535,680


535,012

Full-time equivalent employees

26,281


26,409


26,199


26,238


26,778

Number of ATMs

2,243


2,846


2,874


2,882


2,923

Full service banking offices

1,497


1,508


1,539


1,574


1,616





















1 See Appendix A for reconcilements of non-GAAP performance measures.









2 Total revenue, net interest margin, and efficiency ratios are presented on a fully taxable-equivalent ("FTE") basis. The FTE basis adjusts for the tax-favored status of net interest income from certain loans and investments. The Company believes this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources. Total revenue - FTE equals net interest income on a FTE basis plus noninterest income.

3 Current period tier 1 common equity, tier 1 capital, total capital, and tier 1 leverage ratios are estimated as of the earnings release date.





4 "NM" - Not meaningful. Calculated rate was not considered to be meaningful.










 

 

SunTrust Banks, Inc. and Subsidiaries                                                          














RECONCILEMENT OF NON-GAAP MEASURES                                        














APPENDIX A TO THE EARNINGS RELEASE                                              














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





























Three Months Ended


Twelve Months Ended
December 31


December 31


September 30


June 30


March 31


December 31



2013


2013


2013


2013


2012


2013


2012

NON-GAAP MEASURES PRESENTED IN THE EARNINGS RELEASE 1  













Net interest income                    

$1,213


$1,208


$1,211


$1,221


$1,246


$4,853


$5,102

Taxable-equivalent adjustment                  

34


32


31


30


30


127


123

Net interest income - FTE                

1,247


1,240


1,242


1,251


1,276


4,980


5,225

Noninterest income                    

814


680


858


863


1,015


3,214


5,373

Total revenue - FTE              

2,061


1,920


2,100


2,114


2,291


8,194


10,598

Securities gains, net

(1)


-


-


(2)


(1)


(2)


(1,974)

Total revenue - FTE excluding net securities gains 2

$2,060


$1,920


$2,100


$2,112


$2,290


$8,192


$8,624

Noninterest income                    

$814


$680


$858


$863


$1,015


$3,214


$5,373

Securities gains, net

(1)


-


-


(2)


(1)


(2)


(1,974)

Noninterest income excluding net securities gains 2

$813


$680


$858


$861


$1,014


$3,212


$3,399

Return on average common shareholders' equity

7.99%


3.49%


7.12%


6.77%


6.86%


6.34%


9.56%

Effect of removing average intangible assets, excluding MSRs

3.62%


1.61%


3.23%


3.11%


3.18%


2.91%


4.46%

Return on average tangible common shareholders' equity 3

11.61%


5.10%


10.35%


9.88%


10.04%


9.25%


14.02%

Efficiency ratio 4                    

66.82%


90.77%


66.56%


64.46%


65.93%


71.75%


59.67%

Impact of excluding amortization/impairment of
intangible assets/goodwill              

(0.21)%


(0.31)%


(0.29)%


(0.29)%


(0.30)%


(0.27)%


(0.43)%

Tangible efficiency ratio 5                       

66.61%


90.46%


66.27%


64.17%


65.63%


71.48%


59.24%
















December 31


September 30


June 30


March 31


December 31






2013


2013


2013


2013


2012





Total shareholders' equity                

$21,422


$21,070


$21,007


$21,194


$20,985





Goodwill, net of deferred taxes of $186 million, $180 million,
$174 million, $169 million, and $163 million, respectively

(6,183)


(6,189)


(6,195)


(6,200)


(6,206)





Other intangible assets, net of deferred taxes of $2 million,
$2 million, $4 million, $5 million, and $7 million, respectively,
and MSRs

(1,332)


(1,285)


(1,240)


(1,071)


(949)





MSRs

1,300


1,248


1,199


1,025


899





Tangible equity              

15,207


14,844


14,771


14,948


14,729





Preferred stock

(725)


(725)


(725)


(725)


(725)





Tangible common equity

$14,482


$14,119


$14,046


$14,223


$14,004





Total assets                 

$175,335


$171,777


$171,546


$172,435


$173,442





Goodwill                

(6,369)


(6,369)


(6,369)


(6,369)


(6,369)





Other intangible assets including MSRs                 

(1,334)


(1,287)


(1,244)


(1,076)


(956)





MSRs

1,300


1,248


1,199


1,025


899





Tangible assets                 

$168,932


$165,369


$165,132


$166,015


$167,016





Tangible equity to tangible assets 6           

9.00%


8.98%


8.95%


9.00%


8.82%





Tangible book value per common share 7

$27.01


$26.27


$26.08


$26.33


$25.98



















Total loans

$127,877


$124,340


$122,031


$120,804


$121,470





Government guaranteed loans

(8,961)


(9,016)


(9,053)


(9,205)


(9,609)





Loans held at fair value

(302)


(316)


(339)


(360)


(379)





Total loans, excluding government guaranteed
and fair value loans

$118,614


$115,008


$112,639


$111,239


$111,482





Allowance to total loans, excluding
government guaranteed and fair value loans 8

1.72%


1.80%


1.89%


1.93%


1.95%



















 

SunTrust Banks, Inc. and Subsidiaries
RECONCILEMENT OF NON-GAAP MEASURES
APPENDIX A TO THE EARNINGS RELEASE, continued
(Dollars in millions, except per share data) (Unaudited)















Three Months Ended


Twelve Months Ended
December 31


December 31


September 30


June 30


March 31


December 31



2013


2013


2013


2013


2012


2013


2012

NON-GAAP MEASURES PRESENTED IN THE EARNINGS RELEASE 1

Net income available to common shareholders

$413


$179


$365


$340


$350


$1,297


$1,931

Form 8-K items from the third quarters of 2013 and 2012:














Operating losses related to settlement of certain legal matters

-


323


-


-


-


323


-

Mortgage repurchase provision related to repurchase settlements

-


63


-


-


-


63


-

Provision for unrecoverable servicing advances

-


96


-


-


-


96


-

Securities gains related to sale of The Coca-Cola Company stock

-


-


-


-


-


-


(1,938)

Mortgage repurchase provision

-


-


-


-


-


-


371

Charitable expense related to The Coca-Cola Company stock contribution

-


-


-


-


-


-


38

Provision for credit losses related to nonperforming loan sales

-


-


-


-


-


-


172

Losses on sale of guaranteed loans

-


-


-


-


-


-


92

Valuation losses related to planned sale of Affordable Housing investments

-


-


-


-


-


-


96

Tax (benefit)/expense related to above items

-


(190)


-


-


-


(190)


416

Net tax benefit related to subsidiary reorganization and other

-


(113)


-


-


-


(113)


-

Net income available to common shareholders, excluding the
impact of Form 8-K items from the third quarters of 2013 and 2012 9

$413


$358


$365


$340


$350


$1,476


$1,178















Net income per average common share, diluted

$0.77


$0.33


$0.68


$0.63


$0.65


$2.41


$3.59

Impact of Form 8-K items from the third quarters of 2013 and 2012

-


0.33


-


-


-


0.33


(1.40)

Net income per average common diluted share, excluding the
impact of Form 8-K items from the third quarters of 2013 and 2012 9

$0.77


$0.66


$0.68


$0.63


$0.65


$2.74


$2.19















1 Certain amounts in this schedule are presented net of applicable income taxes, which are calculated based on each subsidiary's federal and state tax rates and laws.  In general, the federal marginal tax rate is 35%, but the state marginal tax rates range from 1% to 8% in accordance with the subsidiary's income tax filing requirements with various tax authorities.  In addition, the effective tax rate may differ from the federal and state marginal tax rates in certain cases where a permanent difference exists.

2 SunTrust presents total revenue - FTE excluding net securities gains and noninterest income excluding net securities gains.  The Company believes noninterest income without net securities gains is more indicative of the Company's performance because it isolates income that is primarily client relationship and client transaction driven and is more indicative of normalized operations.

3 SunTrust presents return on average tangible common shareholders' equity to exclude intangible assets, except for MSRs. The Company believes this measure is useful to investors because, by removing the effect of intangible assets, except for MSRs, (the level of which may vary from company to company), it allows investors to more easily compare the Company's return on average common shareholders' equity to other companies in the industry who present a similar measure. The Company also believes that removing intangible assets, except for MSRs, is a more relevant measure of the return on the Company's common shareholders' equity. 

4 Computed by dividing noninterest expense by total revenue - FTE.  The FTE basis adjusts for the tax-favored status of net interest income from certain loans and investments.  The Company believes this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources.

5 SunTrust presents a tangible efficiency ratio which excludes the amortization of intangible assets.  The Company believes this measure is useful to investors because, by removing the effect of these intangible asset costs (the level of which may vary from company to company), it allows investors to more easily compare the Company's efficiency to other companies in the industry.  This measure is utilized by management to assess the efficiency of the Company and its lines of business.  

6 SunTrust presents a tangible equity to tangible assets ratio that excludes the after-tax impact of purchase accounting intangible assets.   The Company believes this measure is useful to investors because, by removing the effect of intangible assets that result from merger and acquisition activity (the level of which may vary from company to company), it allows investors to more easily compare the Company's capital adequacy to other companies in the industry.  This measure is used by management to analyze capital adequacy. 

7 SunTrust presents a tangible book value per common share that excludes the after-tax impact of purchase accounting intangible assets and also excludes preferred stock from tangible equity.  The Company believes this measure is useful to investors because, by removing the effect of intangible assets that result from merger and acquisition activity as well as preferred stock (the level of which may vary from company to company), it allows investors to more easily compare the Company's book value on common stock to other companies in the industry.  

8 SunTrust presents a ratio of allowance to total loans, excluding government guaranteed and fair value loans.  The Company believes that the exclusion of loans that are held at fair value with no related allowance and loans guaranteed by a government agency that do not have an associated allowance recorded due to nominal risk of principal loss better depicts the allowance relative to loans that are covered by it.

9 SunTrust presents net income available to common shareholders and net income per average common diluted share excluding items previously announced on Form 8-Ks filed with the SEC on October 10, 2013 and September 6, 2012.  The Company believes this measure is useful to investors because it removes the effect of material items impacting current and prior years' results, allowing a more useful view of normalized operations. Removing these items also allows investors to compare the Company's results to other companies in the industry that may not have had similar items impacting their results.  















SOURCE SunTrust Banks, Inc.

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