-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, AqEqQHdhKEA2ydjBQfk7BuqKLW16L0i7HcdIxctiJILscsrExCOfuPU/iSPi7sMD eRgTCC4iKc5mvq6YbL3cLg== 0000750556-95-000009.txt : 19950512 0000750556-95-000009.hdr.sgml : 19950512 ACCESSION NUMBER: 0000750556-95-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950511 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUNTRUST BANKS INC CENTRAL INDEX KEY: 0000750556 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 581575035 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08918 FILM NUMBER: 95536848 BUSINESS ADDRESS: STREET 1: P.O. BOX 4418 CENTER 633 CITY: ATLANTA STATE: GA ZIP: 30302 BUSINESS PHONE: 4045887711 MAIL ADDRESS: STREET 1: P.O. BOX 4418 CENTER 633 CITY: ATLANTA STATE: GA ZIP: 30302 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended March 31, 1995 Commission File Number 1-8918 SUNTRUST BANKS, INC. (Exact name of registrant as specified in its charter) Georgia 58-1575035 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 25 Park Place, N.E., Atlanta, Georgia 30303 (Address of principal executive offices) (Zip Code) (404) 588-7711 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____ At April 30, 1995, 115,048,853 shares of the Registrant's Common Stock, $1.00 par value were outstanding. Page 1 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Statement Description Page No. Consolidated Statements of Income Three months ended March 31, 1995 and 1994 4 Consolidated Balance Sheets March 31, 1995, December 31, 1994 and March 5 31, 1994 Consolidated Statements of Cash Flow Three months ended March 31, 1995 and 1994 6 Consolidated Statements of Shareholders' Equity Three months ended March 31, 1995 and 1994 7 The above mentioned financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and accordingly do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 1995 are not necessarily indicative of the results that may be expected for the full year 1995. Fully diluted per common share data have not been presented because there were no material differences between such amounts and the per common share data as presented. Earnings per common share were based on the weighted average common equivalent shares outstanding for the periods presented. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations MD&A of the Registrant is included on pages 9 through 20. Page 2 CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31 (Dollars in thousands except per share data) 1995 1994 Interest Income Interest and fees on loans $594,972 $451,714 Interest and dividends on investment securities Taxable interest 101,768 103,624 Tax-exempt interest 14,475 17,602 Dividends (1) 6,665 6,089 Interest on funds sold 7,656 3,052 Interest on deposits in other banks 305 4,006 Other interest 684 495 Total interest income 726,525 586,582 Interest Expense Interest on deposits 235,909 146,886 Interest on funds purchased 50,907 25,298 Interest on other short-term borrowings 11,438 10,214 Interest on long-term debt 16,394 14,799 Total interest expense 314,648 197,197 Net Interest Income 411,877 389,385 Provision for loan losses 25,469 33,917 Net interest income after provision for loan losses 386,408 355,468 Noninterest Income Trust income 65,130 63,861 Service charges on deposit accounts 53,844 56,175 Other charges and fees 28,228 31,681 Credit card fees 16,206 14,031 Securities gains (losses) (343) 2,757 Other noninterest income 13,818 12,046 Total noninterest income 176,883 180,551 Noninterest Expense Salaries and other compensation 162,419 160,790 Employee benefits 28,511 26,625 Net occupancy expense 31,467 31,117 Equipment expense 26,495 25,927 FDIC premiums 16,506 16,549 Marketing and community relations 13,952 12,415 Postage and delivery 9,466 8,725 Other noninterest expense 69,290 63,811 Total noninterest expense 358,106 345,959 Income before income taxes 205,185 190,060 Provision for income taxes 69,149 62,987 Net Income $136,036 $127,073 Average common equivalent shares 115,543,050 121,657,148 Net income per average common share $1.18 $1.04 Dividends declared per common share 0.36 0.32 (1) Includes dividends on common stock of The Coca-Cola Company 5,309 4,706 See notes to consolidated financial statements
Page 3 CONSOLIDATED BALANCE SHEETS
March 31 December 31 March 31 (Dollars in thousands) 1995 1994 1994 Assets Cash and due from banks $2,219,672 $2,595,071 $2,302,519 Interest-bearing deposits in other banks 11,074 56,040 441,008 Trading account 52,504 98,110 74,014 Investment securities (1) 9,410,153 9,318,521 10,266,321 Funds sold 646,443 940,656 312,738 Loans 29,234,686 28,548,887 25,903,934 Reserve for loan losses (660,985) (647,016) (588,055) Net loans 28,573,701 27,901,871 25,315,879 Premises and equipment 719,498 714,666 717,158 Intangible assets 232,646 237,416 249,990 Customers' acceptance liability 44,723 39,813 94,320 Other assets 849,732 806,921 802,283 Total assets $42,760,146 $42,709,085 $40,576,230 Liabilities Noninterest-bearing deposits $7,140,499 $7,653,776 $7,530,359 Interest-bearing deposits 24,133,572 24,564,640 23,330,084 Total deposits 31,274,071 32,218,416 30,860,443 Funds purchased 4,991,016 4,351,896 2,985,051 Other short-term borrowings 789,673 785,653 1,195,674 Long-term debt 930,142 930,447 953,930 Acceptances outstanding 44,723 39,813 94,320 Other liabilities 1,029,636 929,529 1,002,285 Total liabilities 39,059,261 39,255,754 37,091,703 Shareholders' Equity Preferred stock, no par value; 50,000,000 shares authorized; none issued Common stock, $1.00 par value; 350,000,000 shares authorized (2) 130,461 130,461 130,461 Additional paid in capital 437,621 438,309 442,220 Retained earnings 3,115,515 3,020,985 2,743,618 Treasury stock and other (3) (733,900) (706,499) (439,289) Realized shareholders' equity 2,949,697 2,883,256 2,877,010 Unrealized gains (losses) on investment securities, net of taxes 751,188 570,075 607,517 Total shareholders' equity 3,700,885 3,453,331 3,484,527 Total liabilities and shareholders' equity $42,760,146 $42,709,085 $40,576,230 (1) Includes unrealized gains (losses) on investment securities $1,211,713 $916,578 $981,587 (2) Common shares outstanding 115,322,830 115,679,426 121,247,679 (3) Treasury shares of common stock 15,137,814 14,781,218 9,212,965 See notes to consolidated financial statements.
Page 4 CONSOLIDATED STATEMENTS OF CASH FLOW
Three Months Ended March 31 (In thousands) 1995 1994 Cash flow from operating activities: Net income $136,036 $127,073 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 32,332 33,993 Provision for loan losses 25,470 33,917 Provision for losses on other real estate 847 2,731 Amortization of compensation element of restricted stock 1,522 - Securities (gains) and losses, net 344 (2,757) (Gains) and losses on sale of equipment, other real estate and repossessed assets, net (3,933) (4,865) Recognition of unearned loan income (20,334) (53,454) Change in period-end balances of: Trading account 45,606 38,508 Interest receivable 358 (4,345) Prepaid expenses (21,738) (21,682) Other assets (25,333) (90) Taxes payable 64,508 64,028 Interest payable (5,589) (6,699) Other accrued expenses (64,799) (14,757) Net cash provided by operating activities 165,297 191,601 Cash flow from investing activities: Proceeds from maturities of investment securities 278,462 1,047,220 Proceeds from sales of investment securities 79,348 1,122,176 Purchase of investment securities (157,966) (2,039,726) Net (increase) decrease in loans (681,948) (238,754) Capital expenditures (29,178) (26,999) Proceeds from sale of equipment, other real estate and repossessed assets 12,584 37,758 Net inflow (outflow) from bank acquisitions - (33,411) Other (514) 1,548 Net cash provided(used) by investing activities (499,212) (130,188) Cash flow from financing activities: Net increase (decrease) in deposits (944,345) 43,618 Net increase (decrease) in funds purchased and other short-term borrowings 643,140 (716,998) Proceeds from the issuance of long-term debt 2,040 318,884 Repayment of long-term debt (2,345) (264) Proceeds from the exercise of stock options 1,400 2,001 Payments to acquire treasury stock (39,047) (68,524) Dividends paid (41,506) (38,812) Net cash provided by financing activities (380,663) (460,095) Net decrease in cash and cash equivalents (714,578) (398,682) Cash and cash equivalents at beginning of period 3,591,767 3,454,947 Cash and cash equivalents at end of period $2,877,189 $3,056,265 Supplemental Disclosure Interest paid $320,237 $203,896 Taxes paid 12,413 6,891 See notes to consolidated financial statements.
Page 5 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Unrealized Additional Treasury Gains (Losses) Common Paid in Retained Stock and on Securities (In thousands) Stock Capital Earnings Other Net of Taxes Total Balance, January 1, 1994 $130,461 $444,941 $2,655,357 ($384,951) $763,775 $3,609,583 Net income - - 127,073 - - 127,073 Cash dividends declared on common stock, $0.32 per share - - (38,812) - - (38,812) Proceeds from exercise of stock options - (2,996) - 4,997 - 2,001 Conversion of convertible debentures - - - - - - Acquisition of treasury stock - - - (68,524) - (68,524) Issuance of treasury stock for 401(k) - 278 - 7,944 - 8,222 Issuance (net of forfeitures) of treasury stock as restricted stock - (3) - 3 - - Amortization of compensation element of restricted stock - - - 1,242 - 1,242 Change in unrealized gains (losses) on securities, net of taxes - - - - (156,258) (156,258) Balance, March 31, 1994 $130,461 $442,220 $2,743,618 ($439,289) $607,517 $3,484,527 Balance, January 1, 1995 $130,461 $438,309 $3,020,985 ($706,499) $570,075 $3,453,331 Net income - - 136,036 - - 136,036 Cash dividends declared on common stock, $0.36 per share - - (41,506) - - (41,506) Proceeds from exercise of stock options - (2,584) - 3,984 - 1,400 Acquisition of treasury stock - - - (39,047) - (39,047) Issuance of treasury stock for 401(k) - 722 - 7,314 - 8,036 Issuance (net of forfeitures) of treasury stock as restricted stock - 1,174 - 6,748 - 7,922 Compensation element of restricted stock - - - (7,922) - (7,922) Amortization of compensation element of restricted stock - - - 1,522 - 1,522 Change in unrealized gains (losses) on securities, net of taxes - - - - 181,113 181,113 Balance, March 31, 1995 $130,461 $437,621 $3,115,515 ($733,900) $751,188 $3,700,885 See notes to consolidated financial statements. Balance at March 31, 1995 includes $696,161 for Treasury Stock and $37,739 for Deferred Compensation.
Page 6 Notes to Consolidated Financial Statements Note 1 - Accounting Policies The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. These financial statements should be read in conjunction with the Company's annual financial statements and related notes for the year ended December 31, 1994. Page 7 TABLE 1 - SELECTED QUARTERLY FINANCIAL DATA (Dollars in millions except per share data)
Quarters 1995 1994 1 4 3 2 1 Summary of Operations Interest and dividend income $726.5 $691.9 $652.7 $621.1 $586.6 Interest expense 314.7 274.2 244.9 216.2 197.2 Net interest income 411.8 417.7 407.8 404.9 389.4 Provision for loan losses 25.5 35.2 34.8 33.9 33.9 Net interest income after provision for loan losses 386.3 382.5 373.0 371.0 355.5 Noninterest income 176.9 169.0 173.1 177.2 180.6 Noninterest expense 358.1 353.6 349.0 351.4 346.0 Income before provision for income taxes 205.1 197.9 197.1 196.8 190.1 Provision for income taxes 69.1 65.6 65.2 65.4 63.0 Net income $136.0 $132.3 $131.9 $131.4 $127.1 Per common share Net income $1.18 $1.13 $1.11 $1.09 $1.04 Dividends declared 0.36 0.36 0.32 0.32 0.32 Book value 32.09 29.85 29.79 28.61 28.74 Common stock market price High 55 3/8 51 1/8 51 3/8 50 1/2 47 1/8 Low 47 1/4 46 3/8 47 1/8 43 1/2 44 1/4 Close 53 1/2 47 3/4 48 3/4 48 3/8 44 5/8 Selected Average Balances Total assets $41,808.4 $40,991.2 $40,391.4 $40,340.6 $40,226.5 Earning assets 37,653.9 36,790.8 36,161.2 35,941.1 35,536.6 Loans 28,773.8 27,614.0 26,746.4 25,991.6 25,269.1 Total deposits 31,943.7 31,338.2 31,338.4 30,755.0 30,060.4 Realized shareholders' equity 2,989.1 2,964.7 2,991.2 2,956.2 2,927.6 Total shareholders' equity 3,561.2 3,555.0 3,557.3 3,527.0 3,648.2 Common equivalent shares (thousands) 115,543 117,054 119,271 120,602 121,657 Financial Ratios and Other ROA 1.35 % 1.31 % 1.33 % 1.34 % 1.32 % ROE 18.46 17.71 17.49 17.84 17.60 Net interest margin 4.58 4.65 4.63 4.68 4.60 Net interest income - taxable-equivalent $424.9 $431.4 $421.7 $419.0 $403.5 ROA, ROE and net interest margin are calculated excluding unrealized gains on investment securities because the unrealized gains are not included in net income.
The following is an analysis of the financial performance of SunTrust Banks, Inc. (SunTrust or Company) for the first quarter of 1995 and provides comments on earlier periods. In this discussion net interest income and net interest margin are presented on a taxable-equivalent basis. Also all ratios are presented on an annualized basis. Page 8 TABLE 2A - CONSOLIDATED DAILY AVERAGE BALANCES, INCOME/EXPENSE AND AVERAGE YIELDS EARNED AND RATES PAID (Dollars in millions; yields on a taxable-equivalent basis)
Quarter Ended March 31, 1995 December 31, 1994 September 30, 1994 Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/ Balances Expense Rates Balances Expense Rates Balances Expense Rates Assets Loans Taxable $28,052.5 $584.3 8.45 % $26,887.1 $547.7 8.08 % $26,011.9 $510.8 7.79 % Tax-exempt 721.3 16.5 9.26 726.9 16.4 8.93 734.5 16.2 8.75 Total loans 28,773.8 600.8 8.47 27,614.0 564.1 8.11 26,746.4 527.0 7.82 Investment securities: Taxable 7,379.5 108.6 5.97 7,631.8 109.7 5.71 7,885.1 109.0 5.48 Tax-exempt 913.5 21.5 9.54 974.6 23.6 9.60 1,018.6 24.5 9.52 Total investment securities 8,293.0 130.1 6.36 8,606.4 133.3 6.15 8,903.7 133.5 5.94 Funds sold 516.1 7.7 6.02 469.2 6.7 5.69 315.8 3.7 4.66 Other short-term investments 71.0 1.0 6.14 101.2 1.5 5.78 195.3 2.4 4.74 Total earning assets 37,653.9 739.6 7.97 36,790.8 705.6 7.61 36,161.2 666.6 7.31 Reserve for loan losses (654.5) (640.3) (620.5) Cash and due from banks 2,124.4 2,155.6 2,190.1 Premises and equipment 718.1 712.4 712.2 Other assets 1,043.0 1,025.1 1,037.8 Unrealized gains(losses) on investment securities 923.5 947.6 910.6 Total assets $41,808.4 $40,991.2 $40,391.4 Liabilities and Shareholders' Equity Interest-bearing deposits: NOW/Money market accounts $9,467.4 $64.9 2.78 % $9,698.2 $62.6 2.56 % $9,692.6 $58.1 2.38 % Savings 3,822.5 25.7 2.73 4,123.0 26.9 2.58 4,320.0 26.9 2.48 Consumer time 7,479.6 90.5 4.91 6,833.8 76.2 4.43 6,655.2 69.3 4.13 Other time 4,283.5 54.8 5.19 3,585.0 39.7 4.40 3,708.3 36.2 3.87 Total interest-bearing deposits 25,053.0 235.9 3.82 24,240.0 205.4 3.36 24,376.1 190.5 3.10 Funds purchased 3,661.1 50.9 5.64 3,270.1 42.3 5.13 2,542.7 27.1 4.22 Other short-term borrowings 808.0 11.4 5.74 902.2 10.4 4.60 1,035.2 10.3 3.92 Long-term debt 930.1 16.4 7.15 919.1 16.1 6.96 975.5 17.0 6.93 Total interest-bearing liabilities 30,452.2 314.6 4.19 29,331.4 274.2 3.71 28,929.5 244.9 3.36 Noninterest-bearing deposits 6,890.7 7,098.2 6,962.3 Other liabilities 904.3 1,006.6 942.3 Realized shareholders' equity 2,989.1 2,964.7 2,991.2 Net unrealized gains(losses) on investment securities 572.1 590.3 566.1 Total liabilities and shareholders' equity $41,808.4 $40,991.2 $40,391.4 Interest rate spread 3.78 % 3.90 % 3.95 % Net Interest Income $425.0 $431.4 $421.7 Net Interest Margin 4.58 % 4.65 % 4.63 % Interest income includes loan fees of $20.5, $24.5, $23.2, $23.5 and $22.3 in the quarters ended March 31, 1995, and December 31, September 30, June 30, and March 31, 1994. Nonaccrual loans are included in average balances and income on such as loans, if recognized, is recorded on a cash basis. Interest income includes the effects of taxable-equivalent adjustments (reduced by the nondeductible portion of interest expense) using a federal income tax rate of 35% and, where applicable, state income taxes, to increase tax-exempt interest income to a taxable-equivalent basis. The net taxable-equivalent adjustment amounts included in the above table aggregated $13.1, $13.7, $13.9, $14.1 and $14.1 in the quarters ended March 31, 1995, and December 31, September 30, June 30, and March 31, 1994. Interest rate swap transactions used to help balance the Company's interest-sensitivity position reduced interest expense by $4.4, $4.9, $5.5, $9.2 and $11.0 in the quarters ended March 31, 1995, and December 31, September 30, June 30, and March 31, 1994. Without these swaps, the rate on other time deposits and the net interest margin would have been 5.61% and 4.53%, 4.94% and 4.60%, 4.46% and 4.57%, 4.10% and 4.57%, and 3.94% and 4.48%, respectively.
Page 9 TABLE 2b - CONSOLIDATED DAILY AVERAGE BALANCES, INCOME/EXPENSE AND AVERAGE YIELDS EARNED AND RATES PAID (Dollars in millions; yields on a taxable-equivalent basis)
Quarter Ended June 30, 1994 March 31, 1994 Average Income/ Yields/ Average Income/ Yields/ Balances Expense Rates Balances Expense Rates Assets Loans Taxable $25,262.1 $477.1 7.57 % $24,522.4 $444.0 7.34 % Tax-exempt 729.5 14.7 8.10 746.7 12.8 6.95 Total loans 25,991.6 491.8 7.59 25,269.1 456.8 7.33 Investment securities: Taxable 8,082.3 109.4 5.43 8,282.4 109.7 5.37 Tax-exempt 1,069.6 26.0 9.76 1,080.4 26.6 9.99 Total investment securities 9,151.9 135.4 5.94 9,362.8 136.3 5.90 Funds sold 362.2 3.6 4.00 376.1 3.0 3.29 Other short-term investments 435.4 4.4 4.04 528.6 4.6 3.50 Total earning assets 35,941.1 635.2 7.09 35,536.6 600.7 6.86 Reserve for loan losses (597.5) (572.8) Cash and due from banks 2,290.1 2,281.3 Premises and equipment 716.0 714.4 Other assets 1,072.6 1,106.0 Unrealized gains(losses) on investment securities 918.3 1,161.2 Total assets $40,340.6 $40,226.7 Liabilities and Shareholders' Equity Interest-bearing deposits: NOW/Money market accounts $9,907.5 $52.6 2.13 % $9,900.6 $50.4 2.06 % Savings 4,473.5 25.8 2.31 4,546.5 25.0 2.23 Consumer time 6,535.5 64.2 3.94 6,476.0 62.1 3.89 Other time 2,794.2 19.3 2.77 2,105.6 9.4 1.82 Total interest-bearing deposits 23,710.7 161.9 2.74 23,028.7 146.9 2.59 Funds purchased 2,977.8 27.4 3.70 3,416.7 25.3 3.00 Other short-term borrowings 1,230.9 11.6 3.79 1,168.1 10.2 3.55 Long-term debt 886.9 15.2 6.86 850.8 14.8 7.05 Total interest-bearing liabilities 28,806.3 216.1 3.01 28,464.3 197.2 2.81 Noninterest-bearing deposits 7,044.3 7,031.7 Other liabilities 963.0 1,082.5 Realized shareholders' equity 2,956.2 2,927.8 Net unrealized gains(losses) on investment securities 570.8 720.4 Total liabilities and shareholders' equity $40,340.6 $40,226.7 Interest rate spread 4.08 % 4.05 % Net Interest Income $419.1 $403.5 Net Interest Margin(4) 4.68 % 4.60 % See note on table 2A. See note on table 2A. See note on table 2A.
Page 10 Net Interest Income/Margins. The Company's net interest margin of 4.58% for the first quarter of 1995 was two basis points lower than the first quarter of last year. However, the rates on earning assets and interest-bearing liabilities have increased dramatically. The rate on earning assets increased 111 basis points, fueled by a 114 basis point increase in the yield on loans. At the same time, the rate on interest-bearing liabilities rose 138 basis points. As interest rates have risen, the benefit derived from the Company's receive-fixed interest rate swap transactions has fallen (see the discussion entitled "Derivitaves" on page 17). Had the Company received the same benefit from interest rate swaps in the first quarter of this year that it did in the first quarter of last year, the rate on interest-bearing liabilities would have been 15 basis points lower and the net interest margin 12 basis points higher. Interest income which the Company was unable to recognize on nonperforming loans had a negative impact of 4 basis points on the net interest margin in both the first three months of 1995 and 1994. Table 2 contains more detailed information concerning average balances and interest yields earned and rates paid. Noninterest Income. Noninterest income in the first three months of 1995, adjusted to exclude the effect of securities gains (losses), was virtually unchanged from the comparable period a year ago. Increases in trust income, the Company's largest source of noninterest income, and credit card fees were offset by decreases in service charges on deposit accounts and mutual fund commissions. TABLE 3 - NONINTEREST INCOME (In millions)
Quarters 1995 1994 1 4 3 2 1 Trust income $65.1 $61.4 $61.6 $63.4 $63.9 Service charges on deposit accounts 53.8 53.7 54.3 54.2 56.2 Mutual fund commissions 2.0 2.4 2.3 3.2 4.7 Other charges and fees 26.2 27.6 26.3 27.6 27.0 Credit card fees 16.2 14.5 14.0 14.7 14.0 Securities gains (losses) (0.3) (4.7) (0.9) 0.1 2.8 Trading account profits and commissions 2.4 2.3 1.8 1.8 2.1 Other income 11.5 11.8 13.7 12.2 9.9 Total noninterest income $176.9 $169.0 $173.1 $177.2 $180.6
Page 11 Noninterest Expense. Noninterest expense was up 3.5% in the first quarter of 1995 compared to the same period last year. Personnel expense, consisting of salaries, other compensation and employee benefits, increased 1.9% over the aforementioned period. Changes in other categories of noninterest expense were modest when comparing the first three months of 1995 to the same periods in 1994. TABLE 4 - NONINTEREST EXPENSE (In millions)
Quarters 1995 1994 1 4 3 2 1 Salaries $140.5 $138.1 $138.5 $137.5 $136.3 Other compensation 21.9 22.6 25.1 23.9 24.5 Employee benefits 28.5 26.9 23.6 23.6 26.6 Net occupancy expense 31.5 30.0 32.8 33.0 31.1 Equipment expense 26.5 25.9 25.7 25.8 25.9 FDIC premiums 16.5 16.6 16.8 16.7 16.5 Marketing and community relations 14.0 19.7 11.0 14.1 12.4 Postage and delivery 9.5 8.5 8.5 8.4 8.7 Operating supplies 7.9 7.2 7.0 7.7 7.5 Other real estate expense (1.7) (2.0) (0.9) 1.5 (0.8) Communications 6.7 6.3 6.7 6.7 6.4 Consulting and legal 4.8 5.7 4.7 8.0 4.2 Amortization of intangible assets 5.0 5.1 5.2 5.4 4.9 Other expense 46.5 43.0 44.3 39.1 41.8 Total noninterest expense $358.1 $353.6 $349.0 $351.4 $346.0 Efficiency ratio 59.5 % 58.9 % 58.7 % 58.9 % 59.2 %
Provision for Loan Losses. As a result of improving credit quality, the Company lowered its provision for loan losses in the first quarter of 1995 to $25.5 million from $33.9 million in the same period last year, yet the provision exceeded net charge-offs by $14.0 million. Net loan charge-offs were $11.5 million in the first three months of this year, representing 0.16% of average loans, which matches the lowest quarterly charge-off ratio since SunTrust was formed in 1985. The comparable net charge-off amount for 1994 was $15.3 million or 0.25% of average loans. The Company maintains a reserve for loan losses to absorb possible losses in the loan portfolio. The reserve consists of three elements; (i) reserves established on specific loans, (ii) reserves based on historical loan loss experience, and (iii) reserves based on economic conditions in the Company's individual markets. The specific reserve element is based on a regular analysis of all loans and commitments over a fixed dollar amount where the internal credit rating is at or below a pre-determined classification. The historical loan loss element represents a projection of future credit problems and is determined statistically using a loss migration analysis that examines loss experience and the related internal gradings of loans charged-off. The general economic condition element is determined by management at the individual subsidiary banks and is based on a subjective evaluation of specific economic factors in their markets that might affect the collectibility of loans. SunTrust is committed to the early recognition of possible problems and to a strong, conservative reserve. The Company's reserve for loan losses totaled $661.0 million at March 31, 1995, which was 2.26% of quarter-end loans and 355.0% of total nonperforming loans. These ratios at December 31, 1994 were 2.27% and 344.9% and at March 31, 1994 were 2.27% and 249.3%. Page 12 TABLE 5 - SUMMARY OF LOAN LOSS EXPERIENCE (Dollars in millions)
Quarters 1995 1994 1 4 3 2 1 Reserve for Loan Losses Balances - beginning of quarter $647.0 $634.2 $610.2 $588.1 $561.2 Reserve of purchased banks - - - - 8.3 Provision for loan losses 25.5 35.2 34.8 33.9 33.9 Charge-offs: Domestic: Commercial (7.6) (9.4) (6.9) (6.4) (5.4) Real estate: Construction - - (0.1) - (0.6) Mortgage, 1-4 family (1.5) (2.6) (1.5) (1.2) (2.0) Other (2.1) (6.3) (3.5) (3.1) (7.6) Lease financing (0.2) (0.2) (0.1) (0.2) (0.2) Credit card (6.6) (6.4) (6.6) (6.9) (6.4) Other consumer loans (8.9) (8.8) (7.1) (7.2) (7.0) International - - - - - Total charge-offs (26.9) (33.7) (25.8) (25.0) (29.2) Recoveries: Domestic: Commercial 5.6 3.2 4.9 4.6 5.9 Real estate: Construction 0.2 - - 0.6 0.1 Mortgage, 1-4 family 0.4 0.1 0.7 0.3 0.4 Other 1.6 1.7 2.5 0.9 1.2 Lease financing 0.1 0.2 0.1 0.2 0.1 Credit card 1.8 1.8 1.9 1.8 1.8 Other consumer loans 5.3 4.3 4.9 4.7 4.4 International 0.4 - - 0.1 - Total recoveries 15.4 11.3 15.0 13.2 13.9 Net charge-offs (11.5) (22.4) (10.8) (11.8) (15.3) Balance - end of quarter $661.0 $647.0 $634.2 $610.2 $588.1 Quarter-end loans outstanding: Domestic $28,976.0 $28,260.3 $27,106.1 $26,496.5 $25,693.3 International 258.7 288.6 260.8 252.5 210.6 Total $29,234.7 $28,548.9 $27,366.9 $26,749.0 $25,903.9 Ratio of reserve to quarter-end loans 2.26 % 2.27 % 2.32 % 2.28 % 2.27 % Average loans $28,773.8 $27,614.0 $26,746.4 $25,991.6 $25,269.1 Ratio of net charge-offs (annualized) to average loans 0.16 % 0.32 % 0.16 % 0.18 % 0.25 %
Page 13 TABLE 6 - NONPERFORMING ASSETS (Dollars in millions)
1995 1994 March 31 December 31 September 30 June 30 March 31 Nonperforming Assets Nonaccrual loans: Domestic: Commercial $31.4 $27.9 $37.1 $34.7 $35.6 Real Estate: Construction 13.9 16 15.6 14.3 22.3 Mortgage, 1-4 family 42.6 45.3 45.4 46.6 48.2 Other 83.1 82 97.4 110.4 116.7 Lease financing 0.2 0.2 0.1 - - Consumer loans 10.7 11.6 11.1 12.3 9.7 Total nonaccrual loans 181.9 183.0 206.7 218.3 232.5 Restructured loans 4.3 4.6 5.1 2.3 3.4 Total nonperforming loans 186.2 187.6 211.8 220.6 235.9 Other real estate owned 83.8 87.7 109.6 119.6 144.1 Total Nonperforming Assets $270.0 $275.3 $321.4 $340.2 $380.0 Ratios: Nonperforming loans to total loans 0.64 % 0.66 % 0.77 % 0.82 % 0.91 % Nonperforming assets to total loans plus other real estate owned 0.92 0.96 1.17 1.27 1.46 Reserve to nonperforming loans 354.95 344.91 299.36 276.63 249.31 Accruing Loans Past Due 90 Days or More $19.5 $19.2 $19.0 $19.3 $21.9
Nonperforming Assets. Nonperforming assets consist of nonaccrual and restructured loans and other real estate owned. Nonperforming assets have decreased $5.3 million since December 31, 1994 and $110 million since March 31, 1994. Since December 31, 1994, nonperforming assets increased $4.4 million in Florida banks, decreased $2.8 million in Georgia banks, and decreased $7.0 million in Tennessee banks. Included in nonperforming loans at March 31, 1995 are loans aggregating $44.5 million which are current as to the payment of principal and interest but have been placed in nonperforming status because of uncertainty over the borrowers' ability to make future payments. In management's opinion, all material potential problem loans are included in Table 6. SunTrust adopted Statements of Financial Accounting Standards No. 114 (FAS 114) "Accounting by Creditors for Impairment of a Loan" and No. 118 (FAS 118) "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures" in the first quarter of 1995. FAS 114 and FAS 118 address the accounting by creditors for impairment of a loan and loans that are restructured in a troubled debt restructuring. The adoption of these statements had no material effect on the earnings or financial condition of the Company. Interest income on nonaccrual loans, if recognized, is recorded on a cash basis. During the first three months of 1995, the gross amount of interest income that would have been recorded on nonaccrual loans and restructured loans at March 31, 1995, if all such loans had been accruing interest at the original contractual rate, was $5.1 million. Interest income recognized in the three months ended March 31, 1995 on all such nonperforming loans at March 31, 1995, was $0.9 million. Page 14 Table 7 - Loan Portfolio by Types of Loans (in millions)
1995 1994 March 31 December 31 September 30 June 30 March 31 Commercial: Domestic $9,596.6 $9,279.2 $8,651.7 $8,480.9 $8,240.1 International 287.0 273.2 280.6 247.9 194.0 Real estate: Construction 1,115.5 1,151.1 1,129.7 1,148.1 1,136.6 Mortgage, 1-4 family 8,698.1 8,380.5 8,016.1 7,712.9 7,366.9 Other 4,557.9 4,516.3 4,489.5 4,503.7 4,484.0 Lease financing 459.6 411.0 383.4 374.0 362.9 Credit card 655.2 690.5 646.6 639.1 647.6 Other consumer loans 3,864.8 3,847.1 3,769.3 3,642.4 3,471.8 Loans $29,234.7 $28,548.9 $27,366.9 $26,749.0 $25,903.9
Loans. During the first three months of 1995, average loans increased 13.9% over the same period a year ago. Since December 31, 1994, 1-4 family residential mortgage loans (most of which are variable rate loans) have increased 3.8%. Other consumer loans were up .5% from year-end 1994. The average loan to deposit ratio was 90.1% in the first quarter of 1995 compared with 84.1% in the same period of 1994. At March 31, 1995, international outstandings, which include loans, acceptances, deposits in other banks, foreign guarantees and accrued interest, totaled $333.9 million, an increase of 1.6% from $328.8 million at December 31, 1994. Income Taxes. The provision for income taxes was $69.1 million in the first quarter of 1995 compared to $63.0 in the same period last year. Higher taxable income in 1995 was primarily responsible for the increase. Investment Securities. The investment portfolio continues to be managed to maximize yield over an entire interest rate cycle while providing liquidity and minimizing risk. The portfolio yield increased from an average of 5.90% in the first quarter of 1994 to 6.36% in the first quarter of this year. The portfolio size declined by $1.1 billion from March 31, 1994 to March 31, 1995 as a portion of maturities were used to meet loan demand. The average life of the portfolio was approximately 3.4 years at March 31, 1995; however, adjustable-rate securities in the portfolio reduced the average time to repricing to 2.3 years. At March 31, 1995, approximately 31.4% of the portfolio consisted of U.S. Treasury securities, 13.1% U.S. government agency securities, 43.6% mortgage-backed securities, 11.1% municipal securities, and 0.8% in other securities (calculated as a percent of total par value). All of the Company's holdings in mortgage-backed securities are backed by U.S. government or federal agency guarantees limiting the credit risk associated with the mortgage loans. At March 31, 1995, the carrying value of the securities portfolio was $1.2 billion over its amortized cost, including a $1.4 billion gain on the Company's investment in common stock of The Coca- Cola Company. Page 15 Liquidity Management. Liquidity is managed to ensure there is sufficient cash flow to satisfy demand for credit, deposit withdrawals and other attractive market opportunities. A large, stable core deposit base, strong capital position and excellent credit ratings are the solid foundation for the Company's liquidity position. It is enhanced by an investment portfolio structured to provide liquidity as needed, which occurred in 1994 when loan demand exceeded deposit growth. It is also strengthened by ready access to regional and national wholesale funding sources including fed funds purchased, securities sold under agreements to repurchase, negotiable certificates of deposit and offshore deposits, as well as an active bank deposit note program, commercial paper issuance by the Parent Company, and Federal Home Loan Bank (FHLB) advances for several subsidiary banks who are FHLB members. Average total deposits for the first three months of 1995 increased 6.3 % over the same periods a year ago. In the first quarter of 1995, average net purchased funds (average funds purchased less average funds sold) increased $104.4 million over the same period in 1994. Net purchased funds were 8.4% of average earning assets for the first quarter of 1995 as compared to 8.6% in the same period a year ago. Derivatives. The Company enters into various derivatives contracts in a dealer capacity for customers and in managing its own interest rate risk. Where contracts have been created for customers, the Company enters into offsetting positions to eliminate its exposure to market risk. The principal derivative contract used by the Company is the interest rate swap. Interest rate swaps are contracts in which a series of interest rate flows, based on a specific notional amount and a fixed and floating interest rate, are exchanged over a prescribed period. The Company also monitors its sensitivity to changes in interest rates and uses interest rate swap contracts to limit the volatility of net interest income. Table 8 details interest rate swaps as of March 31, 1995 used for managing interest rate sensitivity. TABLE 8 - INTEREST RATE SWAPS
Average Average Average (Dollars in millions) Notional Fair Maturity Rate Rate At March 31, 1995 Value Value In Months Paid Received Gain position: Receive fixed $860.0 $9.8 8.7 6.12 % 8.37 % Pay fixed 132.7 6.2 60.6 5.96 6.54 Total gain position 992.7 16.0 Loss position: Receive fixed 455.0 (3.4) 25.7 7.84 6.81 Pay fixed 11.0 (0.2) 51.6 7.93 6.52 Total loss position 466.0 (3.6) Total $1,458.7 $12.4
The majority of the swaps are designated as hedges on deposits and other interest-bearing liabilities. The Company receives payments based on fixed interest rates and makes payments based on a floating money market rate. During the three months ended March 31, 1995, hedge swaps benefited net interest income by $4.4, compared with $11.0 in the corresponding 1994 period. In April 1995, the Company closed out swap positions with a notional value of $800 million for a net gain of $4.3 million and an additional $250 million matured. Page 16 TABLE 9 - CAPITAL RATIOS (dollars in millions)
1995 1994 March 31 December 31 September 30 June 30 March 31 Tier 1 capital: Realized shareholders' equity $2,949.7 $2,883.3 $2,926.9 $2,899.8 $2,877.0 Intangible assets other than servicing rights (218.1) (222.2) (229.5) (233.7) (238.8) Total Tier 1 capital 2,731.6 2,661.1 2,697.4 2,666.1 2,638.2 Tier 2 capital: Allowable reserve for loan losses 426.2 420.9 405.1 398.5 383.5 Allowable long-term debt 247.6 281.4 282.2 285.5 87.9 Total Tier 2 capital 673.8 702.3 687.3 684.0 471.4 Total capital $3,405.4 $3,363.4 $3,384.7 $3,350.1 $3,109.6 Risk-weighted assets $33,861.6 $33,444.3 $32,180.6 $31,667.2 $30,475.5 Risk-based ratios: Tier 1 capital 8.07 % 7.95 % 8.38 % 8.42 % 8.66 % Total capital 10.06 10.05 10.52 10.58 10.20 Tier 1 leverage ratio 6.72 6.68 6.87 6.80 6.79 Total shareholders' equity to assets 8.66 8.09 8.47 8.39 8.59
Capital Resources. Consistent with the objective of operating a sound financial organization, SunTrust maintains capital ratios well above regulatory requirements. The rate of internal capital generation has been more than adequate to support asset growth. Table 9 presents capital ratios for the five most recent quarters. Regulatory agencies measure capital adequacy with a framework that makes capital requirements sensitive to the risk profiles of individual banking companies. The guidelines define capital as either Tier 1 (primarily shareholders' equity excluding unrealized gains and losses on investment securities) or Tier 2 (certain debt instruments and a portion of the reserve for loan losses). The Company and its subsidiary banks are subject to a minimum Tier 1 capital to risk-weighted assets ratio of 4% and total capital (Tier 1 plus Tier 2) to risk-weighted assets ratio of 8%. The Federal Reserve Board (Board) has also established an additional capital adequacy guideline referred to as the Tier 1 leverage ratio which measures the ratio of Tier 1 capital to average quarterly assets. The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) requires the establishment of a capital-based supervisory system of prompt corrective action for all depository institutions. The Board's implementation of FDICIA defines "well capitalized" institutions as those whose capital ratios equal or exceed the following minimum ratios: Tier 1 capital ratio of 6%, total risk-based capital ratio of 10%, and a Tier 1 leverage ratio of 5%. At March 31, 1995, the Company's Tier 1 capital, total risk-based capital and Tier 1 leverage ratios were 8.07%, 10.06% and 6.72%, respectively. In 1993, the Board of Directors authorized the Company to repurchase up to 12,000,000 shares of SunTrust common stock. Under this authorization, the Company has repurchased 10,883,899 shares as of March 31, 1995, and an additional 1,116,101 shares of SunTrust common stock may be repurchased under this authorization. In April 1995, the Board of Directors authorized the repurchase of up to another 10,000,000 shares of SunTrust common stock. Page 17 Nonbanking Subsidiaries. SunTrust Mortgage, Inc. originates and services mortgage loans on both residential and income property, principally throughout Florida, Georgia and Tennessee. SunTrust Mortgage is primarily a mortgage banker selling to the secondary market and representing institutional investors. SunTrust Mortgage also assists various SunTrust banks in their origination of mortgage loans for sale in the secondary market and for retention in their portfolio. At March 31, 1995, the servicing portfolio was $9.7 billion, which includes $5.6 billion in loans serviced for subsidiary banks of SunTrust. SunTrust Insurance Company operates as a reinsurer for credit life and accident and health insurance sold to loan customers of SunTrust. SunTrust Securities engages in securities brokerage services and conducts incidental activities such as offering custodial and cash management services. Other nonbank subsidiaries primarily support the Company's banking operations, providing data processing and other services. State Summary. SunTrust Banks, Inc. operates through three principal subsidiaries, SunBanks, Inc. (in Florida), Trust Company of Georgia and Third National Corporation (in Tennessee), all well-established bank holding companies within their respective states. Data in Table 10 does not include financial results of SunTrust's Parent Company and certain other non-bank subsidiaries and is also before elimination of certain intercompany accounts and balances. Page 18 TABLE 10 - FINANCIAL HIGHLIGHTS - BANKING SUBSIDIARIES (Dollars in Millions)
Trust Company Third National SunBanks, Inc. of Georgia Corporation 1995 1994 1995 1994 1995 1994 Summary of Operations Net interest income (FTE) $229.9 $217.4 $141.5 $131.2 $68.4 $65.1 Provision for loan losses 14.8 19.9 7.4 10.0 3.1 4.0 Trust income 34.4 35.8 22.3 20.1 8.3 8.0 Other noninterest income 57.6 58.8 34.9 39.3 14.9 17.9 Personnel expense 73.3 75.1 45.7 44.6 23.7 23.7 Other noninterest expense 117.2 111.5 63.6 62.3 30.8 30.9 Net income 72.5 65.9 53.2 47.5 20.6 19.7 Selected Average Balances Total assets 20,957 20,122 14,282 13,856 6,476 6,314 Earning assets 19,719 18,436 12,171 11,759 6,177 5,854 Loans 15,061 13,340 9,311 7,970 4,390 3,881 Total deposits 16,866 16,822 9,987 8,265 5,146 5,047 Realized shareholders' equity 1,808 1,660 1,170 1,076 532 507 At March 31 Total assets 21,222 20,312 14,671 13,779 6,585 6,261 Earning assets 19,849 18,629 12,275 11,804 6,235 5,833 Loans 15,268 13,603 9,471 8,346 4,474 3,874 Reserve for loan losses 349 310 193 171 118 107 Total deposits 17,061 17,065 9,018 8,713 5,204 5,078 Realized shareholders' equity 1,837 1,719 1,196 1,097 533 509 Total shareholders' equity 1,783 1,718 2,007 1,696 518 509 Credit Quality Net loan charge-offs 9.1 11.5 2.1 3.7 0.3 0.2 Nonperforming loans 116.0 152.3 53.8 67.4 16.0 15.7 Other real estate owned 42.2 61.7 13.6 28.2 27.9 54.2 Ratios ROA 1.39 % 1.33 % 1.64 % 1.51 % 1.28 % 1.27 % ROE 16.27 16.10 18.43 17.90 15.74 15.79 Net interest margin 4.73 4.78 4.72 4.53 4.49 4.51 Efficiency ratio 59.2 59.8 54.9 56.1 59.5 60.0 Total shareholders' equity/assets 8.40 8.46 13.68 12.31 7.86 8.14 Net loan charge-offs to average loans 0.24 0.35 0.09 0.19 0.02 0.02 Nonperforming loans to total loans 0.76 1.12 0.57 0.81 0.36 0.41 Nonperforming assets to total loans plus other real estate owned 1.03 1.57 0.71 1.14 0.97 1.78 Reserve to loans 2.28 2.28 2.04 2.04 2.64 2.75 Reserve to nonperforming loans 300.6 203.6 359.0 253.2 743.0 679.4 For the three month period ended March 31. At March 31. Annualized for the first three months.
Page 19 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibit Index: Exhibit Exhibit No. Page No. Statement re: Computation of Per Share Earnings 11 22 (b) SunTrust did not file any reports on Form 8-K during the first quarter of 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized this 10th day of May, 1995. SunTrust Banks, Inc. (Registrant) /s/ W.P. O'Halloran William P. O'Halloran Senior Vice President and Controller (Chief Accounting Officer) Page 20 EX-11 2 EXHIBIT 11 Statement re: Computation of Per Share Earnings (In thousands, except per share data)
Three Months Ended March 31 1995 1994 Primary Net income $136,036 $127,073 Average common shares outstanding 114,174 120,297 Average common share equivalents outstanding 1,369 1,360 Average primary common shares 115,543 121,657 Earnings per common share - Primary $1.18 $1.04 Fully Diluted Net income $136,036 $127,073 Average common shares outstanding 114,174 120,297 Average common share equivalents outstanding 1,389 1,366 Average fully diluted common shares 115,563 121,663 Earnings per common share - Fully Diluted $1.18 $1.04 Includes the incremental effect of stock options and restricted stock outstanding computed under the treasury stock method.
EX-27 3 ARTICLE 9 FDS FOR 10Q
9 1,000 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 2,219,672 11,074 646,443 52,504 9,410,153 0 0 29,234,686 660,985 42,760,146 31,274,071 5,780,689 1,074,359 930,142 130,461 0 0 3,570,424 42,760,146 594,972 122,908 8,645 726,525 235,909 314,648 411,877 25,469 (343) 358,106 205,185 136,036 0 0 136,036 1.18 1.18 4.58 181,880 19,471 4,339 0 647,016 26,990 15,490 660,985 0 0 660,985
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