-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MqvaNNASXCKIVRWnQnRFYxKrG3ysowiO3OoUHkCuyF+OFkXvkaiy+5ap0CUctUhH y/EAedMTLrrZtJENczeLKA== 0000750556-96-000007.txt : 19960517 0000750556-96-000007.hdr.sgml : 19960517 ACCESSION NUMBER: 0000750556-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 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: 96567106 BUSINESS ADDRESS: STREET 1: 303 PEACHTREE STREET NE CITY: ATLANTA STATE: GA ZIP: 30308 BUSINESS PHONE: 4045887711 MAIL ADDRESS: STREET 1: 303 PEACHTREE STREET NE CITY: ATLANTA STATE: GA ZIP: 30308 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, 1996 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, 1996, 112,526,906 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, 1996 and 1995 4 Consolidated Balance Sheets March 31, 1996, December 31, 1995 and March 5 31, 1995 Consolidated Statements of Cash Flow Three months ended March 31, 1996 and 1995 6 Consolidated Statements of Shareholders' Equity Three months ended March 31, 1996 and 1995 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, 1996 are not necessarily indicative of the results that may be expected for the full year 1996. 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) 1996 1995 Interest Income Interest and fees on loans $ 646,405 $ 594,973 Interest and dividends on investment securities Taxable interest 103,854 101,768 Tax-exempt interest 12,237 14,475 Dividends (1) 8,089 6,665 Interest on funds sold 8,970 7,655 Interest on deposits in other banks 261 305 Other interest 706 684 Total interest income 780,522 726,525 Interest Expense Interest on deposits 267,880 235,908 Interest on funds purchased 55,884 50,908 Interest on other short-term borrowings 15,264 11,438 Interest on long-term debt 18,296 16,394 Total interest expense 357,324 314,648 Net Interest Income 423,198 411,877 Provision for loan losses 25,028 25,469 Net interest income after provision for loan losses 398,170 386,408 Noninterest Income Trust income 70,672 65,130 Service charges on deposit accounts 55,705 53,844 Other charges and fees 38,110 28,228 Credit card fees 17,017 16,206 Securities gains (losses) 17,262 (343) Other noninterest income 14,910 13,818 Total noninterest income 213,676 176,883 Noninterest Expense Salaries and other compensation 180,830 162,419 Employee benefits 29,424 28,511 Net occupancy expense 33,683 31,467 Equipment expense 27,516 26,495 FDIC premiums 1,207 16,506 Marketing and community relations 15,245 13,952 Postage and delivery 10,019 9,466 Other noninterest expense 103,091 69,290 Total noninterest expense 401,015 358,106 Income before income taxes 210,831 205,185 Provision for income taxes 60,412 69,149 Net Income $ 150,419 $ 136,036 Average common equivalent shares 113,060,358 115,543,050 Net income per average common share $ 1.33 $ 1.18 Dividends declared per common share 0.40 0.36 (1) Includes dividends on common stock of The Coca-Cola Company 6,033 5,309 See notes to consolidated financial statements
PAGE 3 CONSOLIDATED BALANCE SHEETS
March 31 December 31 March 31 (Dollars in thousands) 1996 1995 1995 Assets Cash and due from banks $ 2,362,603 $ 2,641,365 $ 2,219,672 Interest-bearing deposits in other banks 22,487 28,787 11,074 Trading account 78,305 96,613 52,504 Investment securities (1) 10,239,617 9,676,934 9,410,153 Funds sold 529,295 1,299,407 646,443 Loans 31,786,084 31,301,389 29,234,686 Reserve for loan losses (712,447) (698,864) (660,985) Net loans 31,073,637 30,602,525 28,573,701 Premises and equipment 735,183 729,731 719,498 Intangible assets 280,011 271,926 232,646 Customers' acceptance liability 371,027 234,809 44,723 Other assets 893,234 889,375 849,732 Total assets $ 46,585,399 $ 46,471,472 $ 42,760,146 Liabilities Noninterest-bearing deposits $ 7,362,086 $ 7,821,377 $ 7,140,499 Interest-bearing deposits 27,115,258 25,361,817 24,133,572 Total deposits 34,477,344 33,183,194 31,274,071 Funds purchased 3,897,189 5,483,751 4,991,016 Other short-term borrowings 823,922 894,470 789,673 Long-term debt 1,103,852 1,002,397 930,142 Acceptances outstanding 371,027 234,809 44,723 Other liabilities 1,496,832 1,403,270 1,029,636 Total liabilities 42,170,166 42,201,891 39,059,261 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 434,582 434,724 437,621 Retained earnings 3,523,040 3,417,801 3,115,515 Treasury stock and other (3) (922,469) (871,953) (733,900) Realized shareholders' equity 3,165,614 3,111,033 2,949,697 Unrealized gains (losses) on investment securities, net of taxes 1,249,619 1,158,548 751,188 Total shareholders' equity 4,415,233 4,269,581 3,700,885 Total liabilities and shareholders' equity $ 46,585,399 $ 46,471,472 $ 42,760,146 (1) Includes unrealized gains (losses) on investment securities $ 2,019,446 $ 1,873,141 $ 1,211,713 (2) Common shares outstanding 112,724,889 113,193,839 115,322,830 (3) Treasury shares of common stock 17,735,755 17,266,805 15,137,814 See notes to consolidated financial statements.
PAGE 4 CONSOLIDATED STATEMENTS OF CASH FLOW
Three Months Ended March 31 (In thousands) 1996 1995 Cash flow from operating activities: Net income $ 150,419 $ 136,036 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 31,138 32,332 Provision for loan losses 25,030 25,470 Provision for losses on other real estate 1,033 847 Amortization of compensation element of restricted stock 2,111 1,522 Securities (gains) and losses, net (17,262) 344 (Gains) and losses on sale of equipment, other real estate and repossessed assets, net (5,112) (3,933) Recognition of unearned loan income (46,515) (20,334) Change in period-end balances of: Trading account 18,308 45,606 Interest receivable 2,741 358 Prepaid expenses (21,766) (21,738) Other assets 14,181 (25,333) Taxes payable 45,833 64,508 Interest payable (29,384) (5,589) Other accrued expenses 27,197 (64,799) Net cash provided by operating activities 197,952 165,297 Cash flow from investing activities: Proceeds from maturities of investment securities 519,494 278,462 Proceeds from sales of investment securities 54,224 79,348 Purchase of investment securities (962,424) (157,966) Net (increase) decrease in loans (379,640) (681,948) Capital expenditures (26,256) (29,178) Proceeds from sale of equipment, other real estate and repossessed assets 1,128 12,584 Net inflow (outflow) from bank acquisitions (1,207) 0 Other (5,921) (514) Net cash provided(used) by investing activities (800,602) (499,212) Cash flow from financing activities: Net increase (decrease) in deposits 1,215,771 (944,345) Net increase (decrease) in funds purchased and other short-term borrowings (1,660,017) 643,140 Proceeds from the issuance of long-term debt 200,355 2,040 Repayment of long-term debt (98,872) (2,345) Proceeds from the exercise of stock options 1,989 1,400 Payments to acquire treasury stock (66,599) (39,047) Dividends paid (45,151) (41,506) Net cash provided by financing activities (452,524) (380,663) Net decrease in cash and cash equivalents (1,055,174) (714,578) Cash and cash equivalents at beginning of period 3,969,559 3,591,767 Cash and cash equivalents at end of period $2,914,385 $2,877,189 Supplemental Disclosure Interest paid $ 327,940 $ 320,237 Taxes paid 15,709 12,413 See notes to consolidated financial statements.
PAGE 5 CONSOLIDATED STATEMENTS 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, 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 Balance, January 1, 1996 $ 130,461 $ 434,724 $ 3,417,801 $ (871,953) $ 1,158,548 $ 4,269,581 Net income - - 150,419 - - 150,419 Cash dividends declared on common stock, $0.40 per share - - (45,180) - - (45,180) Proceeds from exercise of stock options - (5,459) - 7,448 - 1,989 Acquisition of treasury stock - - - (66,599) - (66,599) Issuance of treasury stock for 401(k) - 1,794 - 4,411 - 6,205 Issuance, net of forfeitures, of treasury stock as restricted stock - 3,523 - 6,338 - 9,861 Issuance of treasury stock for acquisition - - - 5,636 - 5,636 Compensation element of restricted stock - - - (9,861) - (9,861) Amortization of compensation element of restricted stock - - - 2,111 - 2,111 Change in unrealized gains (losses) on securities, net of taxes - - - - 91,071 91,071 Balance, March 31, 1996 $ 130,461 $ 434,582 $ 3,523,040 $ (922,469) $ 1,249,619 $ 4,415,233 See notes to consolidated financial statements. * Balance at March 31, 1996 includes $873,767 for Treasury Stock and $48,702 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, 1995. PAGE 7 TABLE 1 - SELECTED QUARTERLY FINANCIAL DATA (Dollars in millions except per share data)
Quarters 1996 1995 1 4 3 2 1 Summary of Operations Interest and dividend income $ 780.5 $ 782.4 $ 759.9 $ 758.4 $ 726.5 Interest expense 357.3 350.2 342.0 343.9 314.7 Net interest income 423.2 432.2 417.9 414.5 411.8 Provision for loan losses 25.0 31.3 29.1 26.2 25.5 Net interest income after provision for loan losses 398.2 400.9 388.8 388.3 386.3 Noninterest income 213.7 179.4 182.6 174.2 176.9 Noninterest expense 401.0 380.6 363.1 349.7 358.1 Income before provision for income taxes 210.9 199.7 208.3 212.8 205.1 Provision for income taxes 60.5 54.8 64.6 71.9 69.1 Net income $ 150.4 $ 144.9 $ 143.7 $ 140.9 $ 136.0 Per common share Net income $ 1.33 $ 1.28 $ 1.26 $ 1.22 $ 1.18 Dividends declared 0.40 0.40 0.36 0.36 0.36 Book value 39.17 37.72 35.81 34.76 32.09 Common stock market price High 76 7/8 70 7/8 67 3/4 59 7/8 55 3/8 Low 64 63 3/8 57 53 1/8 47 1/4 Close 70 68 1/2 66 1/8 58 1/4 53 1/2 Selected Average Balances Total assets $45,641.9 $44,616.4 $43,072.4 $42,762.2 $41,808.4 Earning assets 40,114.0 39,391.9 38,198.8 38,344.3 37,653.9 Loans 31,437.9 30,688.7 29,771.1 29,582.1 28,773.8 Total deposits 33,081.9 31,925.4 31,516.5 31,852.5 31,943.7 Realized shareholders' equity 3,206.8 3,081.8 3,092.9 3,043.8 2,989.1 Total shareholders' equity 4,405.3 4,163.4 4,090.3 3,797.4 3,561.2 Common equivalent shares (thousands) 113,060 113,149 114,088 115,090 115,543 Financial Ratios and Other ROA 1.38 % 1.34 % 1.38 % 1.36 % 1.35 % ROE 18.87 18.65 18.43 18.56 18.46 Net interest margin 4.35 4.47 4.47 4.47 4.58 Net interest income - taxable-equivalent $ 433.7 $ 443.9 $ 430.1 $ 427.1 $ 424.9 ROA, ROE and net interest margin are calculated excluding unrealized gains on investment securities because the unrealized gains are not included in income.
The following is an analysis of the financial performance of SunTrust Banks, Inc. (SunTrust or Company) for the first quarter of 1996 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, 1996 December 31, 1995 September 30, 1995 Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/ Balances Expense Rates Balances Expense Rates Balances Expense Rates Assets Loans Taxable $30,805.7 $637.4 8.32 % $30,033.9 $638.9 8.44 % $29,116.9 $622.5 8.48 % Tax-exempt 632.2 13.5 8.57 654.8 14.8 9.02 654.2 15.3 9.29 Total loans 31,437.9 650.9 8.33 30,688.7 653.7 8.45 29,771.1 637.8 8.50 Investment securities: Taxable 7,131.0 112.1 6.32 7,029.8 108.7 6.14 7,081.7 106.8 5.98 Tax-exempt 810.4 18.0 8.95 836.9 19.2 9.11 870.3 20.4 9.30 Total investment securities 7,941.4 130.1 6.59 7,866.7 127.9 6.45 7,952.0 127.2 6.35 Funds sold 668.7 9.0 5.40 735.9 11.0 5.88 422.0 6.3 5.96 Other short-term investments 66.0 1.0 6.00 100.6 1.5 5.61 53.7 0.8 5.57 Total earning assets 40,114.0 791.0 7.93 39,391.9 794.1 8.00 38,198.8 772.1 8.02 Reserve for loan losses (704.9) (695.8) (684.2) Cash and due from banks 2,216.2 2,221.3 2,033.7 Premises and equipment 732.6 722.9 724.3 Other assets 1,349.0 1,227.2 1,186.7 Unrealized gains(losses) on investment securities 1,935.0 1,748.9 1,613.1 Total assets $45,641.9 $44,616.4 $43,072.4 Liabilities and Shareholders' Equity Interest-bearing deposits: NOW/Money market accounts $10,056.4 $72.6 2.90 % $9,544.2 $64.1 2.66 % $9,329.7 $63.0 2.68 % Savings 4,705.7 44.1 3.77 3,469.9 22.1 2.54 3,552.2 23.0 2.57 Consumer time 7,719.8 101.4 5.28 8,007.2 109.4 5.42 8,078.0 111.0 5.45 Other time 3,557.7 49.8 5.63 3,824.6 54.0 5.61 3,792.9 54.4 5.69 Total interest-bearing deposits 26,039.6 267.9 4.14 24,845.9 249.6 3.99 24,752.8 251.4 4.03 Funds purchased 4,351.5 55.9 5.17 4,925.5 68.8 5.54 4,148.0 58.8 5.62 Other short-term borrowings 1,062.4 15.2 5.78 998.0 14.1 5.56 949.6 14.8 6.19 Long-term debt 1,063.0 18.3 6.92 1,010.1 17.7 6.97 957.1 17.0 7.06 Total interest-bearing liabilities 32,516.5 357.3 4.42 31,779.5 350.2 4.37 30,807.5 342.0 4.40 Noninterest-bearing deposits 7,042.3 7,079.5 6,763.7 Other liabilities 1,677.8 1,594.0 1,410.9 Realized shareholders' equity 3,206.8 3,081.8 3,092.9 Net unrealized gains(losses) on investment securities 1,198.5 1,081.6 997.4 Total liabilities and shareholders' equity $45,641.9 $44,616.4 $43,072.4 Interest Rate Spread 3.51 % 3.63 % 3.62 % Net Interest Income $433.7 $443.9 $430.1 Net Interest Margin 4.35 % 4.47 % 4.47 % Interest income includes loan fees of $21.8, $21.9, $22.9, $21.3 and $20.5 in the quarters ended March 31, 1996, and December 31, September 30, June 30, and March 31, 1995. Nonaccrual loans are included in average balances and income on such 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 $10.5, $11.7, $12.2, $12.6 and $13.1 in the quarters ended March 31, 1996, and December 31, September 30, June 30, and March 31, 1995. Interest rate swap transactions used to help balance the Company's interest-sensitivity position increased interest expense by $0.3 in the quarter ended March 31, 1996 and reduced interest expense by $1.2, $1.5, $3.0 and $4.4 in the quarters ended December 31, September 30, June 30, and March 31, 1995. Without these swaps, the rate on other time deposits and the net interest margin would have been 5.58% and 4.34%, 5.73% and 4.46%, 5.84% and 4.45%, 5.92% and 4.44%, and 5.61% and 4.53%, 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, 1995 March 31, 1995 Average Income/ Yields/ Average Income/ Yields/ Balances Expense Rates Balances Expense Rates Assets Loans Taxable $28,886.4 $615.8 8.55 % $28,052.5 $584.3 8.45 % Tax-exempt 695.7 15.2 8.76 721.3 16.5 9.26 Total loans 29,582.1 631.0 8.56 28,773.8 600.8 8.47 Investment securities: Taxable 7,185.0 107.8 6.02 7,379.5 108.6 5.97 Tax-exempt 875.0 21.6 9.90 913.5 21.5 9.54 Total investment securities 8,060.0 129.4 6.44 8,293.0 130.1 6.36 Funds sold 655.0 9.9 6.09 516.1 7.7 6.02 Other short-term investments 47.2 0.7 5.98 71.0 1.0 6.14 Total earning assets 38,344.3 771.0 8.07 37,653.9 739.6 7.97 Reserve for loan losses (668.2) (654.5) Cash and due from banks 2,078.0 2,124.4 Premises and equipment 720.7 718.1 Other assets 1,068.4 1,043.0 Unrealized gains(losses) on investment securities 1,219.0 923.5 Total assets $42,762.2 $41,808.4 Liabilities and Shareholders' Equity Interest-bearing deposits: NOW/Money market accounts $9,359.3 $65.5 2.81 % $9,467.4 $ 64.9 2.78 % Savings 3,637.3 24.4 2.70 3,822.5 25.7 2.73 Consumer time 7,927.4 105.5 5.33 7,479.6 90.5 4.91 Other time 4,018.2 56.3 5.62 4,283.5 54.8 5.19 Total interest-bearing deposits 24,942.2 251.7 4.05 25,053.0 235.9 3.82 Funds purchased 4,167.7 60.7 5.84 3,661.1 50.9 5.64 Other short-term borrowings 914.3 14.6 6.40 808.0 11.4 5.74 Long-term debt 943.0 16.9 7.21 930.1 16.4 7.15 Total interest-bearing liabilities 30,967.2 343.9 4.45 30,452.2 314.6 4.19 Noninterest-bearing deposits 6,910.3 6,890.7 Other liabilities 1,087.3 904.3 Realized shareholders' equity 3,043.8 2,989.1 Net unrealized gains(losses) on investment securities 753.6 572.1 Total liabilities and shareholders' equity $42,762.2 $41,808.4 Interest rate spread 3.62 % 3.78 % Net Interest Income $427.1 $425.0 Net Interest Margin 4.47 % 4.58 % 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 4.35% for the first quarter of 1996 was 23 and 12 basis points lower than the first quarter and fourth quarter of last year, respectively. The Company introduced a new money market deposit account in the first quarter of 1996 that carried a higher than market interest rate until April of 1996. This led to a 15 basis point increase in the cost of interest-bearing deposits compared to the fourth quarter of last year. Interest rate swaps also helped increase last year's net interest margin (see the discussion entitled "Derivitaves" on page 17). Interest income which the Company was unable to recognize on nonperforming loans in the first three months of 1996 had a negative impact of 3 basis points on the net interest margin as compared to 4 basis points in the first three months 1995. 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 1996, adjusted to exclude the effect of securities gains (losses), increased 10.8% from the comparable period a year ago. Trust income, the Company's largest source of noninterest income, increased 8.5% over the same period. Securities gains includes a $16 million gain on the sale of a long-held minority position in another bank. Other charges and fees were 35.0% higher in the first quarter of this year compared to the same period last year due to higher volume in our mortgage banking business. Credit card fees also increased 5.0%. TABLE 3 - NONINTEREST INCOME (In millions)
Quarters 1996 1995 1 4 3 2 1 Trust income $ 70.7 $ 64.6 $ 64.7 $ 65.3 $ 65.1 Service charges on deposit accounts 55.7 54.5 54.0 50.5 53.8 Mutual fund commissions 3.1 2.9 2.1 2.5 2.0 Other charges and fees 35.0 33.3 29.9 27.1 26.2 Credit card fees 17.0 15.6 15.1 15.7 16.2 Securities gains (losses) 17.3 (7.2) 1.0 (0.1) (0.3) Trading account profits and commissions 2.6 3.3 2.5 2.4 2.4 Other income 12.3 12.4 13.3 10.8 11.5 Total noninterest income $213.7 $179.4 $182.6 $174.2 $176.9
Noninterest Expense. Noninterest expense increased 12.0% in the first quarter of 1996 compared to the same period last year. Personnel expense, consisting of salaries, other compensation and employee benefits, increased 10.1% over the aforementioned period. Other noninterest expense increased substantially in the first quarter of 1996 due to expenditures made in connection with various projects to stimulate business growth and development. PAGE 11 TABLE 4 - NONINTEREST EXPENSE (In millions)
Quarters 1996 1995 1 4 3 2 1 Salaries $151.7 $149.7 $144.8 $143.1 $140.5 Other compensation 29.1 27.0 25.3 21.1 21.9 Employee benefits 29.4 27.2 25.1 24.8 28.5 Net occupancy expense 33.7 33.2 33.6 31.8 31.5 Equipment expense 27.5 26.4 25.7 26.5 26.5 FDIC premiums 1.2 3.9 (0.6) 16.6 16.5 Marketing and community relations 15.2 12.4 10.3 13.3 14.0 Postage and delivery 10.0 9.3 8.8 8.8 9.5 Operating supplies 9.7 8.5 8.1 7.7 7.9 Other real estate expense 0.8 (3.9) (1.1) (2.3) (1.7) Communications 7.7 6.6 7.3 7.1 6.7 Consulting and legal 5.1 5.0 5.5 5.5 4.8 Amortization of intangible assets 6.1 6.0 5.4 5.0 5.0 Other expense 73.8 69.3 64.9 40.7 46.5 Total noninterest expense $401.0 $380.6 $363.1 $349.7 $358.1 Efficiency ratio 62.0 % 61.1 % 59.3 % 58.2 % 59.5 %
Provision for Loan Losses. As a result of improving credit quality, the Company lowered its provision for loan losses in the first quarter of 1996 to $25.0 million from $25.5 million in the same period last year, yet the provision still exceeded net charge-offs by $12.3 million. Net loan charge- offs were $12.7 million in the first three months of this year, representing 0.16% of average loans. The comparable net charge-off amount in 1995 was $11.5 million or 0.16% of average loans. Consumer loan charge-offs increased slightly yet remain low compared to historical standards. 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 $712.4 million at March 31, 1996, which was 2.24% of quarter-end loans and 373.8% of total nonperforming loans. These ratios at December 31, 1995 were 2.23% and 363.6% and at March 31, 1995 were 2.26% and 355.0%. PAGE 12 TABLE 5 - SUMMARY OF LOAN LOSS EXPERIENCE (Dollars in millions)
Quarters 1996 1995 1 4 3 2 1 Reserve for Loan Losses Balances - beginning of quarter $698.9 $692.8 $676.9 $661.0 $647.0 Reserve of purchased banks 1.2 3.9 0.7 1.7 Provision for loan losses 25.0 31.3 29.1 26.2 25.5 Charge-offs: Domestic: Commercial (4.4) (13.1) (4.0) (5.0) (7.6) Real estate: Construction (0.1) (0.1) (0.1) (0.2) Mortgage, 1-4 family (1.4) (1.8) (2.3) (1.5) (1.5) Other (0.9) (6.3) (3.9) (4.0) (2.1) Lease financing (0.3) (0.3) (0.2) (0.2) (0.2) Credit card (9.0) (7.5) (6.8) (6.8) (6.6) Other consumer loans (10.5) (11.8) (10.0) (8.0) (8.9) International Total charge-offs (26.6) (40.9) (27.3) (25.7) (26.9) Recoveries: Domestic: Commercial 4.2 3.8 3.2 7.4 5.6 Real estate: Construction 0.1 0.3 1.9 (1.6) 0.2 Mortgage, 1-4 family 0.3 0.4 0.2 0.5 0.4 Other 2.7 1.0 1.4 1.5 1.6 Lease financing 0.1 0.1 0.2 0.1 0.1 Credit card 1.8 1.7 2.0 1.8 1.8 Other consumer loans 4.7 4.5 4.3 4.0 5.3 International 0.2 0.4 Total recoveries 13.9 11.8 13.4 13.7 15.4 Net charge-offs (12.7) (29.1) (13.9) (12.0) (11.5) Balance - end of quarter $712.4 $698.9 $692.8 $676.9 $661.0 Quarter-end loans outstanding: Domestic $31,517.2 $30,966.0 $29,702.6 $29,802.3 $28,981.4 International 268.9 335.4 298.2 277.6 253.3 Total $31,786.1 $31,301.4 $30,000.8 $30,079.9 $29,234.7 Ratio of reserve to quarter-end loan 2.24 % 2.23 % 2.31 % 2.25 % 2.26 % Average loans $31,437.9 $30,688.7 $29,771.1 $29,582.1 $28,773.8 Ratio of net charge-offs (annualized) to average loans 0.16 % 0.38 % 0.18 % 0.16 % 0.16 %
PAGE 13 TABLE 6 - NONPERFORMING ASSETS (Dollars in millions)
1996 1995 March 31 December 31 September 30 June 30 March 31 Nonperforming Assets Nonaccrual loans: Domestic: Commercial $36.0 $28.3 $27.6 $28.7 $31.4 Real Estate: Construction 4.7 4.9 6.9 11.3 13.9 Mortgage, 1-4 family 50.6 45.7 44.2 43.5 42.6 Other 86.9 99.3 84.0 85.3 83.1 Lease financing 0.2 0.1 - 0.2 0.2 Consumer loans 9.3 11.0 11.6 10.4 10.7 Total nonaccrual loans 187.7 189.3 174.3 179.4 181.9 Restructured loans 2.9 2.9 3.0 3.2 4.3 Total nonperforming loans 190.6 192.2 177.3 182.6 186.2 Other real estate owned 58.8 58.8 66.2 70.1 83.8 Total Nonperforming Assets $249.4 $251.0 $243.5 $252.7 $270.0 Ratios: Nonperforming loans to total loans 0.60 % 0.61 % 0.59 % 0.61 % 0.64 % Nonperforming assets to total loans plus other real estate owned 0.78 0.80 0.81 0.84 0.92 Reserve to nonperforming loans 373.78 363.60 390.78 370.61 354.95 Accruing Loans Past Due 90 Days or More $26.0 $24.3 $26.0 $19.0 $19.5
Nonperforming Assets. Nonperforming assets consist of nonaccrual and restructured loans and other real estate owned. Nonperforming assets have decreased $1.6 million since December 31, 1995 and $20.6 million since March 31, 1995. Included in nonperforming loans at March 31, 1996 are loans aggregating $24.4 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. Interest income on nonaccrual loans, if recognized, is recorded on a cash basis. During the first three months of 1996, the gross amount of interest income that would have been recorded on nonaccrual loans and restructured loans at March 31, 1996, if all such loans had been accruing interest at the original contractual rate, was $4.9 million. Interest income recognized in the three months ended March 31, 1996 on all such nonperforming loans at March 31, 1996, was $2.2 million. PAGE 14 Table 7 - Loan Portfolio by Types of Loans (in millions)
1996 1995 March 31 December 31 September 30 June 30 March 31 Commercial: Domestic $10,449.4 $10,222.5 $9,374.4 $9,931.3 $ 9,596.6 International 270.5 337.5 299.6 298.0 287.0 Real estate: Construction 1,239.3 1,216.6 1,176.6 1,151.0 1,115.5 Mortgage, 1-4 family 10,087.9 9,732.8 9,431.4 9,054.0 8,698.1 Other 4,526.9 4,477.7 4,567.4 4,579.3 4,557.9 Lease financing 565.2 561.2 507.6 487.5 459.6 Credit card 732.0 774.0 713.9 671.7 655.2 Other consumer loans 3,914.9 3,979.1 3,929.9 3,907.1 3,864.8 Loans $31,786.1 $31,301.4 $30,000.8 $30,079.9 $29,234.7
Loans. During the first three months of 1996, average loans increased 9.3% over the same period a year ago. Since December 31, 1995, the two loan categories experiencing significant growth were 1-4 family residential mortgage loans (most of which are variable rate loans) and domestic commercial loans. The average loan to deposit ratio was 95.0% in the first quarter of 1996 compared with 90.1% in the same period of 1995. At March 31, 1996, international outstandings, which include loans, acceptances, deposits in other banks, foreign guarantees and accrued interest, net of write-downs totaled $319.5 million, a decrease of 19.5% from $396.8 million at December 31, 1995. Income Taxes. The provision for income taxes was $60.5 million in the first quarter of 1996 compared to $69.1 million in the same period last year. 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 6.36% in the first quarter of 1995 to 6.59% in the first quarter of this year. The portfolio size (measured at cost) held steady at $8.2 billion while the growth in liabilities was used to fund loan growth. The average life of the portfolio was approximately 2.8 years at March 31, 1996; however, adjustable- rate securities in the portfolio reduced the average time to repricing to 1.9 years. At March 31, 1996, approximately 31.9% of the portfolio consisted of U.S. Treasury securities, 10.7% U.S. government agency securities, 46.8% mortgage-backed securities, 10.0% municipal securities, and 0.6% 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, 1996, the carrying value of the securities portfolio was $2.0 billion over its amortized cost, consisting entirely of a $2.0 billion unrealized 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 and 1995 when loan demand exceeded deposit growth. Liquidity 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 1996 increased 3.6% over the same period a year ago. Interest-bearing deposits represented 78.7% of average deposits for the first three months of 1996, compared to 78.4% for the same period in 1995. In the first quarter of 1996, average net purchased funds (average funds purchased less average funds sold) increased $0.5 billion over the same period in 1995. Net purchased funds were 9.2% of average earning assets for the first three months of 1996 as compared to 8.4% 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, 1996 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, 1996 Value Value In Months Paid Received Gain position: Receive fixed $ 18.0 $ 0.3 7.2 5.66 % 7.78 % Pay fixed 192.2 3.6 65.7 6.19 5.54 Total gain position 210.2 3.9 Loss position: Receive fixed 1,474.3 (14.4) 26.7 0.27 5.47 Pay fixed 67.0 (2.6) 29.1 6.79 5.51 Total loss position 1,541.3 (17.0) Total $1,751.5 ($13.1)
The majority of the swaps are designated as hedges on deposits and other interest-bearing liabilities. During the three months ended March 31, 1996, hedge swaps decreased net interest income by $0.3, compared with a $4.4 benefit in the corresponding 1995 period. PAGE 16 TABLE 9 - CAPITAL RATIOS (Dollars in millions)
1996 1995 March 31 December 31 September 30 June 30 March 31 Tier 1 capital: Realized shareholders' equity $ 3,165.6 $ 3,111.0 $ 3,035.2 $ 3,035.7 $ 2,949.7 Intangible assets other than servicing rights (255.7) (252.3) (239.5) (225.1) (218.1) Total Tier 1 capital 2,909.9 2,858.7 2,795.7 2,810.6 2,731.6 Tier 2 capital: Allowable reserve for loan losses 461.8 462.2 437.6 437.5 422.6 Allowable long-term debt 554.2 246.8 247.6 247.6 247.6 Total Tier 2 capital 1,016.0 709.0 685.2 685.1 670.2 Total capital $ 3,925.9 $ 3,567.7 $ 3,480.9 $ 3,495.7 $ 3,401.8 Risk-weighted assets $36,694.7 $36,742.0 $34,756.2 $34,759.9 $33,571.7 Risk-based ratios: Tier 1 capital 7.93 % 7.78 % 8.04 % 8.09 % 8.07 % Total capital 10.70 9.71 10.02 10.06 10.06 Tier 1 leverage ratio 6.70 6.71 6.78 6.80 6.72 Total shareholders' equity to assets 9.48 9.19 9.38 9.04 8.66
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, 1996, the Company's Tier 1 capital, total risk-based capital and Tier 1 leverage ratios were 7.93%, 16.70% and 6.70%, respectively. In 1995, the Board of Directors authorized the Company to repurchase up to 10,000,000 shares of SunTrust common stock. Under this authorization, the Company has repurchased 2,534,691 shares as of March 31, 1996, leaving an additional 7,465,309 shares of SunTrust common stock that may be repurchased. 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, 1996, the servicing portfolio was $11.2 billion, which includes $6.6 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. SunTrust Capital Markets, Inc. serves as the investment banking arm of SunTrust. It's business activities include public finance, corporate finance and the sale of investment securities to corporations, institutions and government entities. Personal Express Loans, Inc. operates as a consumer finance company. STI Credit Corporation operates as a leasing subsidiary, primarily for commercial customers. 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, SunTrust Banks of Florida, Inc., SunTrust Banks of Georgia, Inc. and SunTrust Banks of Tennessee, Inc., 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 (including SunTrust BankCard, N.A. which holds all the credit card balances of the company.) It is also before elimination of certain intercompany accounts and balances. PAGE 18 TABLE 10 - FINANCIAL HIGHLIGHTS - BANKING SUBSIDIARIES (Dollars in Millions)
SunTrust Banks SunTrust Banks SunTrust Banks of Florida, Inc. of Georgia, Inc. of Tennessee, Inc. 1996 1995 1996 1995 1996 1995 Summary of Operations Net interest income (FTE) $228.6 $229.9 $140.3 $141.5 $65.8 $68.4 Provision for loan losses 10.4 14.8 5.0 7.4 2.4 3.1 Trust income 35.8 34.4 25.5 22.3 9.2 8.3 Other noninterest income 65.3 57.6 42.8 34.9 18.4 14.9 Personnel expense 78.6 73.3 49.3 45.7 25.0 23.7 Other noninterest expense 109.8 117.2 61.4 63.6 27.6 30.8 Net income 80.0 72.5 60.1 53.2 23.5 20.6 Selected Average Balances Total assets 22,680 20,957 16,218 14,282 6,710 6,476 Earning assets 21,095 19,719 13,097 12,171 6,415 6,177 Loans 16,002 15,061 10,458 9,311 4,796 4,390 Total deposits 18,124 16,866 9,625 9,987 5,374 5,146 Realized shareholders' equity 1,934 1,808 1,312 1,170 552 532 At March 31 Total assets 23,285 21,222 16,495 14,671 6,831 6,585 Earning assets 21,650 19,849 13,006 12,275 6,546 6,235 Loans 16,077 15,268 10,578 9,471 4,881 4,474 Reserve for loan losses 370 349 195 193 117 118 Total deposits 19,082 17,061 9,849 9,018 5,582 5,204 Realized shareholders' equity 1,973 1,837 1,341 1,196 563 533 Total shareholders' equity 1,976 1,783 2,578 2,007 565 518 Credit Quality Net loan charge-offs 3.0 9.1 2.1 2.1 0.4 0.3 Nonperforming loans 125.7 116.0 54.2 53.8 10.4 16.0 Other real estate owned 33.8 42.2 7.8 13.6 17.2 27.9 Ratios ROA 1.42 % 1.39 % 1.69 % 1.64 % 1.41 % 1.28 % ROE 16.64 16.27 18.44 18.43 17.08 15.74 Net interest margin 4.36 4.73 4.31 4.72 4.12 4.49 Efficiency ratio 57.16 59.16 53.02 54.94 56.39 59.52 Total shareholders' equity/assets 8.48 8.40 15.63 13.68 8.27 7.86 Net loan charge-offs to average loans 0.80 0.76 0.52 0.57 0.22 0.36 Nonperforming assets to total loans plus other real estate owned 1.01 1.03 0.60 0.71 0.58 0.97 Reserve to loans 2.36 2.28 1.87 2.04 2.45 2.64 Reserve to nonperforming loans 294.33 300.56 359.50 358.98 1,125.66 742.97 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 1996. 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, 1996. 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 1996 1995 Primary Net income $150,419 $136,036 Average common shares outstanding 111,556 114,174 Average common share equivalents outstanding 1,504 1,369 Average primary common shares 113,060 115,543 Earnings per common share - Primary $ 1.33 $ 1.18 Fully Diluted Net income $150,419 $136,036 Average common shares outstanding 111,556 114,174 Average common share equivalents outstanding 1,520 1,389 Average fully diluted common shares 113,076 115,563 Earnings per common share - Fully Diluted $ 1.33 $ 1.18 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-31-1996 JAN-01-1996 MAR-31-1996 2,362,603 22,487 529,295 78,305 10,239,617 0 0 31,786,084 712,447 46,585,399 34,477,344 4,721,111 1,867,859 1,103,852 130,461 0 0 4,284,772 46,585,399 646,405 124,180 9,937 780,522 267,880 357,324 423,198 25,028 17,262 401,015 210,831 150,419 0 0 150,419 1.33 1.33 4.35 187,735 26,022 2,871 0 698,864 26,621 13,933 712,447 0 0 712,447
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