-----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, WdaZRNVSzvImOvq6VDa8juXyiQXSbskkzB2ZxJ7Kh+ML2qCqBhf6pvlark520twz 6SS5GSVI8CsfouPPchW7Gw== 0000916641-98-001216.txt : 19981116 0000916641-98-001216.hdr.sgml : 19981116 ACCESSION NUMBER: 0000916641-98-001216 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUNTRUST BANKS INC CENTRAL INDEX KEY: 0000750556 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 581575035 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08918 FILM NUMBER: 98746476 BUSINESS ADDRESS: STREET 1: 25 PARK PLACE N E CITY: ATLANTA STATE: GA ZIP: 30313 BUSINESS PHONE: 4045887711 MAIL ADDRESS: STREET 1: 25 PARK PLACE N E CITY: ATLANTA STATE: GA ZIP: 30313 10-Q 1 THIRD QUARTER REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 September 30, 1998 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.) 303 Peachtree Street, N.E., Atlanta, Georgia 30308 (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 October 31, 1998, 209,568,155 shares of the Registrant's Common Stock, $1.00 par value were outstanding. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS PART I FINANCIAL INFORMATION Page Item 1. Financial Statements (Unaudited) Consolidated Statements of Income 3 Consolidated Balance Sheets 4 Consolidated Statements of Cash Flows 5 Consolidated Statements of Shareholders' Equity 6 Notes to Consolidated Financial Statements 7-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12-26 PART II OTHER INFORMATION Item 1. Legal Proceedings 27 Item 2. Changes in Securities 27 Item 3. Defaults Upon Senior Securities 27 Item 4. Submission of Matters to a Vote of Security Holders 27 Item 5. Other Information 27 Item 6. Exhibits and Reports on Form 8-K 27 SIGNATURES 27
PART I - FINANCIAL INFORMATION The following unaudited 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 nine months ended September 30, 1998 are not necessarily indicative of the results that may be expected for the full year 1998. Consolidated Statements of Income
Three Months Nine Months Ended September 30 Ended September 30 ------------------------ ----------------------- (Dollars in thousands except per share data)(Unaudited) 1998 1997 1998 1997 ----------- ----------- ---------- ----------- Interest Income Interest and fees on loans $ 831,848 $ 775,471 $ 2,456,936 $ 2,239,149 Interest and dividends on securities available for sale Taxable interest 118,123 119,478 354,535 344,447 Tax-exempt interest 8,323 9,967 25,439 30,895 Dividends (1) 11,486 9,379 32,628 27,955 Interest on funds sold 13,162 16,511 43,678 43,766 Interest on deposits in other banks 150 211 441 628 Other interest 1,869 3,850 6,484 9,551 ----------- ----------- ---------- ----------- Total interest income 984,961 934,867 2,920,141 2,696,391 ----------- ----------- ---------- ----------- Interest Expense Interest on deposits 282,944 295,893 851,251 862,791 Interest on funds purchased 116,178 87,019 323,919 242,464 Interest on other short-term borrowings 18,119 27,650 63,894 70,965 Interest on long-term debt 70,910 47,577 197,973 111,208 ----------- ----------- ---------- ----------- Total interest expense 488,151 458,139 1,437,037 1,287,428 ----------- ----------- ---------- ----------- Net Interest Income 496,810 476,728 1,483,104 1,408,963 Provision for loan losses 31,409 29,003 93,465 84,439 ----------- ----------- ---------- ----------- Net interest income after provision for loan 465,401 447,725 1,389,639 1,324,524 ----------- ----------- ---------- ----------- Noninterest Income Trust income 92,496 79,087 280,964 236,149 Service charges on deposit accounts 67,180 62,327 192,026 183,959 Credit card fees 20,631 17,515 62,819 54,704 Corporate and institutional investment income 15,909 8,629 40,156 18,199 Retail investment income 10,281 8,365 33,446 24,846 Trading account profits and commissions 6,904 3,965 28,793 12,782 Securities gains (losses) (1,819) 61 1,053 1,090 Other charges and fees 53,039 39,348 155,877 117,960 Other noninterest income 28,540 13,638 81,232 37,149 ----------- ----------- ---------- ----------- Total noninterest income 293,161 232,935 876,366 686,838 ----------- ----------- ---------- ----------- Noninterest Expense Salaries and other compensation 262,388 214,430 747,007 622,579 Employee benefits 26,787 27,506 91,363 89,364 Net occupancy expense 33,422 30,896 99,449 95,854 Equipment expense 31,761 30,651 95,156 91,089 Outside processing and software 20,355 17,996 63,778 49,038 Marketing and customer development 15,604 15,924 51,449 49,576 Postage and delivery 10,658 10,093 32,006 31,886 Other noninterest expense 86,621 76,852 261,280 222,311 ----------- ----------- ---------- ----------- Total noninterest expense 487,596 424,348 1,441,488 1,251,697 ----------- ----------- ---------- ----------- Income before income taxes 270,966 256,312 824,517 759,665 Provision for income taxes 82,113 87,734 269,801 264,595 =========== =========== ========== =========== Net Income $ 188,853 $ 168,578 $ 554,716 $ 495,070 =========== =========== ========== =========== Average common shares - diluted 208,548,939 211,670,768 210,297,282 214,465,799 Average common shares - basic 205,584,123 208,391,415 207,109,974 211,289,132 Net income per average common share - diluted $ 0.91 $ 0.80 $ 2.64 $ 2.31 Net income per average common share - basic 0.92 0.81 2.68 2.34 Dividends declared per common share 0.250 0.225 0.750 0.675 (1) Includes dividends on common stock of The Coca-Cola Company 7,240 6,757 21,720 20,272
See notes to consolidated financial statements Consolidated Balance Sheets
September 30 December 31 September 30 (Dollars in thousands) (Unaudited) 1998 1997 1997 ----------- ----------- ----------- Assets Cash and due from banks $ 2,190,913 $ 2,991,263 $ 2,638,422 Trading account 200,479 178,434 213,774 Securities available for sale (1) 11,455,372 11,729,298 11,346,407 Funds sold 1,333,582 1,012,000 856,994 Loans 42,889,478 40,135,505 38,475,470 Allowance for loan losses (666,146) (651,830) (647,077) ----------- ----------- ----------- Net loans 42,223,332 39,483,675 37,828,393 Premises and equipment 1,023,638 964,169 953,567 Intangible assets 442,077 292,370 285,765 Customers' acceptance liability 398,856 488,632 501,325 Other assets 1,573,069 942,895 929,544 =========== =========== =========== Total assets $ 60,841,318 $58,082,736 $ 55,554,191 =========== =========== =========== Liabilities and Shareholders' Equity Noninterest-bearing deposits $ 8,314,365 $ 8,927,796 $ 7,840,994 Interest-bearing deposits 28,168,612 29,269,732 28,376,060 ----------- ----------- ----------- Total deposits 36,482,977 38,197,528 36,217,054 Funds purchased 9,701,770 6,483,055 6,595,386 Other short-term borrowings 1,400,450 1,989,415 1,839,091 Long-term debt 3,755,319 2,571,832 2,426,245 Guaranteed preferred beneficial interests in Company's debentures 850,000 600,000 600,000 Acceptances outstanding 398,856 488,632 501,325 Other liabilities 2,967,596 2,491,892 2,325,034 ----------- ----------- ----------- Total liabilities 55,556,968 52,822,354 50,504,135 ----------- ----------- ----------- Preferred stock, no par value; 50,000,000 shares authorized; none issued - - - Common stock, $1.00 par value; 500,000,000 shares authorized 213,108 211,608 216,608 Additional paid in capital 389,583 296,751 299,519 Retained earnings 3,210,549 2,812,645 2,972,637 Treasury stock and other (317,287) (109,503) (316,591) ----------- ----------- ----------- Realized shareholders' equity 3,495,953 3,211,501 3,172,173 Accumulated other comprehensive income 1,788,397 2,048,881 1,877,883 ----------- ----------- ----------- Total shareholders' equity 5,284,350 5,260,382 5,050,056 =========== =========== =========== Total liabilities and shareholders' equity $ 60,841,318 $58,082,736 $ 55,554,191 =========== =========== =========== Common shares outstanding 208,931,856 209,909,204 211,105,817 Treasury shares of common stock 4,176,201 1,698,853 5,502,240 (1) Includes unrealized gains (losses) on securities available for sale $ 2,891,168 $ 3,311,979 $ 3,035,624
See notes to consolidated financial statements Consolidated Statements of Cash Flows
Nine Months Ended September 30 -------------------------- (Dollars in thousands) (Unaudited) 1998 1997 ------------ ----------- Cash flows from operating activities: Net income $ 554,716 $ 495,070 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Net depreciation, amortization and accretion 131,853 112,421 Provision for loan losses 93,465 84,439 Provision for losses on other real estate 1,707 1,964 Amortization of compensation element of restricted stock 9,566 7,099 Securities (gains) and losses, net (1,053) (1,090) Net gain on sales of non-interest earning assets (18,692) (6,389) Net increase in loans held for sale (459,414) (128,424) Changes due to: Trading account (22,045) (133,397) Interest receivable (30,006) (41,419) Prepaid expenses (50,907) (44,798) Other assets (688,200) (24,918) Taxes payable 84,404 56,965 Interest payable (34,605) 21,373 Other liabilities 586,232 256,572 ------------ ----------- Net cash provided by operating activities 157,021 655,468 ------------ ----------- Cash flows from investing activities: Proceeds from maturities of securities available for sale 2,257,084 943,999 Proceeds from sales of securities available for sale 635,471 526,802 Purchases of securities available for sale (3,037,911) (1,816,914) Net increase in loans (2,360,511) (2,942,875) Capital expenditures (125,694) (269,979) Proceeds from sales of non-interest earning assets 33,418 11,680 Net funds received in acquisitions 13,420 122,603 Loan recoveries 37,959 41,584 Other - (64,159) ------------ ----------- Net cash used in investing activities (2,546,764) (3,447,259) ------------ ----------- Cash flows from financing activities: Net decrease in deposits (1,714,550) (795,938) Net increase in funds purchased and other short-term borrowings 2,629,750 1,518,824 Proceeds from the issuance of long-term debt 1,693,153 1,647,819 Repayment of long-term debt (259,666) (186,915) Proceeds from issuance of treasury stock 12,473 13,927 Payments to acquire treasury stock (293,373) (539,634) Dividends paid (156,812) (143,491) ------------ ----------- Net cash provided by financing activities 1,910,975 1,514,592 ------------ ----------- Net decrease in cash and cash equivalents (478,768) (1,277,199) Cash and cash equivalents at beginning of period 4,003,263 4,772,615 ------------ ----------- Cash and cash equivalents at end of period $ 3,524,495 $ 3,495,416 ============ =========== Supplemental Disclosure Interest paid $ 1,402,432 $ 1,308,801 Taxes paid 186,764 208,252
See notes to consolidated financial statements Consolidated Statements of Shareholders' Equity
Accumulated Additional Treasury Other Common Paid in Retained Stock and Comprehensive (Dollars in thousands) (Unaudited) Stock Capital Earnings Other* Income Total -------- -------- ---------- --------- --------- --------- Balance, January 1, 1997 $ 225,608 $ 310,612 $ 3,033,900 $ (230,918) $ 1,601,778 $ 4,940,980 Net income - - 495,070 - - 495,070 Cash dividends declared on common stock, $0.68 per share - - (143,491) - - (143,491) Proceeds from exercise of stock options - (15,815) - 20,851 - 5,036 Acquisition of treasury stock - - - (539,634) - (539,634) Retirement of treasury stock (9,000) - (412,842) 421,842 - - Issuance of treasury stock for 401(k) - 1,378 - 7,513 - 8,891 Issuance, net of forfeitures, of treasury stock as restricted stock - 3,344 - 14,428 - 17,772 Compensation element of restricted stock - - - (17,772) - (17,772) Amortization of compensation element of restricted stock - - - 7,099 - 7,099 Change in unrealized gains (losses) on securities, net of taxes - - - - 276,105 276,105 ======== ======== ========== ========= ========= ========= Balance, September 30, 1997 $ 216,608 $ 299,519 $ 2,972,637 $ (316,591) $ 1,877,883 $ 5,050,056 ======== ======== ========== ========= ========= ========= Comprehensive Income - September 30, 1997 $ 771,175 Balance, January 1, 1998 $ 211,608 $ 296,751 $ 2,812,645 $ (109,503) $ 2,048,881 $ 5,260,382 Net income - - 554,716 - - 554,716 Cash dividends declared on common stock, $0.75 per share - - (156,812) - - (156,812) Proceeds from exercise of stock options - (18,102) - 20,665 - 2,563 Issuance of common stock and treasury stock for acquisitions 1,500 109,268 - 47,114 - 157,882 Acquisition of treasury stock - - - (293,373) - (293,373) Issuance of treasury stock for 401(k) - 84 - 9,826 - 9,910 Issuance, net of forfeitures, of treasury stock as restricted stock - 1,582 - 19,645 - 21,227 Compensation element of restricted stock - - - (21,227) - (21,227) Amortization of compensation element of restricted stock - - - 9,566 - 9,566 Change in unrealized gains (losses) on securities, net of taxes - - - - (260,484) (260,484) ======== ======== ========== ========= ========= ========= Balance, September 30, 1998 $ 213,108 $ 389,583 $3,210,549 $ (317,287) $ 1,788,397 $ 5,284,350 ======== ======== ========== ========= ========= ========= Comprehensive Income - September 30, 1998 $ 294,232
* Balance at September 30, 1997 includes $256,454 for Treasury Stock and $60,137 for Deferred Compensation. Balance at September 30, 1998 includes $247,585 for Treasury Stock and $69,702 for Deferred Compensation. See notes to consolidated financial statements Notes to Consolidated Financial Statements (Unaudited) Note 1 - Accounting Policies The consolidated interim financial statements of SunTrust Banks, Inc. ("SunTrust" or "The Company") are unaudited. All significant intercompany accounts and transactions have been eliminated. Certain prior period amounts have been restated to conform with the current year financial statement presentation. These financial statements should be read in conjunction with the Annual Report on Form 10-K/A for the year ended December 31, 1997. Note 2 - Recent Accounting Developments In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information", which is effective for annual and interim periods beginning after December 15, 1997. However, this statement is not required in interim financial statements in the initial year of its application. This statement establishes standards for the method that public entities use to report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The anticipated disclosure, when fully implemented, will provide required information by reportable operating segment using the current internal management reporting system which is prepared on a geographic basis. During the first quarter of 1998, the American Institute to Certified Public Accountants issued Statement of Position (SOP) 98-1, "Accounting for Costs of Computer Software Developed or Obtained for Internal Use". SOP 98-1 requires capitalization of computer software costs that meet certain criteria. The statement is effective for fiscal years beginning after December 15, 1998. Adoption of SOP 98-1 is not expected to have a material effect on the Company's financial position or results of operations. In April 1998, the Financial Accounting Standards Board issued Statement No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits". This statement only modifies the disclosures companies make about their pension and nonpension benefit plans and does not alter the accounting for these plans. The FASB's intention in modifying the disclosures for postretirement benefits is to make the disclosures more uniform and to provide better information to investors about the economics of these benefit plans rather than focusing on current period cost. The provisions of the statement are effective for years beginning after December 15, 1997. Adoption of Statement No. 132, when implemented, will provide the required information as well as the restatement of previous disclosures. In October 1998, the Financial Accounting Standards Board issued Statement No. 134, "Accounting for Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise". This statement is effective for the first fiscal quarter beginning after December 15, 1998. Adoption of Statement No. 134 will have no impact on the Company's financial position or results of operations. 7 Notes to Consolidated Financial Statements (Unaudited) - continued Note 3 - Derivative Financial Instruments Derivatives are used to hedge interest rate exposures by modifying the interest rate characteristics of related balance sheet instruments. The specific criteria required for derivatives used for such purposes are described below. Derivatives that do not meet these criteria are carried at market value with changes in value recognized in earnings in the current period. It is the Company's policy not to hold derivatives unless they qualify as hedges. Derivatives used as hedges must be effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the derivative contract. Derivatives used for hedging purposes include swaps, forwards, futures, and purchased options. The fair values of derivative contracts are carried off-balance sheet and the unrealized gains and losses on these contracts are generally deferred. The interest component is recognized over the life of the contract in net interest income for derivatives used as hedges or those used to modify the interest rate characteristics of assets and liabilities. Upon contract settlement or termination, the cumulative change in the market value of derivatives is recorded as an adjustment to the carrying value of the underlying asset or liability and recognized in net interest income over the expected remaining life of the related asset or liability. If the underlying instrument is sold, the cumulative change in the value of the associated derivative is recognized immediately in the earnings of the underlying instrument. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. This statement could increase volatility in earnings and other comprehensive income. This statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. Initial application of this statement should be as of the beginning of an entity's fiscal quarter; on that date, hedging relationships must be redesignated and documented pursuant to the provisions of this statement. Earlier application of this statement is encouraged, but it is permitted only as of the beginning of any fiscal quarter that begins after issuance of this statement and should not be applied retroactively to financial statements of prior periods. Adoption of Statement No. 133, when implemented, is not expected to have a material impact on the Company's financial position or results of operations. Note 4 - Acquisitions On September 26, 1997, the Company signed a definitive agreement to acquire Equitable Securities Corporation, a Nashville, Tennessee-based investment banking, securities brokerage and investment advisory firm. The merger, which was accounted for as a purchase, was completed on January 2, 1998, and the new subsidiary was renamed SunTrust Equitable Securities Corporation (SESC). Consideration tendered, including contingently returnable shares, aggregated 2.3 million shares of the Company's common stock. On June 4, 1998, the Company signed a definitive agreement to acquire Citizens Bancorporation, Inc. a bank holding company based in Marianna, Florida with assets of $183 million. The merger, which was accounted for as a purchase, was completed on October 1, 1998. Citizens Bank and Gadsden State Bank merged into SunTrust Bank, Tallahassee, N.A., a subsidiary of SunTrust Banks of Florida, Inc., and 8 Notes to Consolidated Financial Statements (Unaudited) - continued SunTrust Banks, Inc. The Company issued 603,919 shares of the Company's common stock and paid $39.2 million in cash. The transaction had no material impact on SunTrust's earnings per share. On July 20, 1998, SunTrust signed a definitive Agreement and Plan of Merger providing for the merger of a wholly owned subsidiary of SunTrust with and into Crestar Financial Corporation. Under terms of the agreement, Crestar shareholders will receive, in a tax-free exchange, 0.96 shares of SunTrust's common stock for each share of Crestar common stock. It is intended that the merger will be accounted for as a pooling-of-interests. The merger is subject to regulatory and shareholder approval of both companies and is expected to be completed during the fourth quarter of 1998. In connection with the announcement, the Board of Directors of SunTrust has rescinded its stock repurchase authorization. Note 5 - Comprehensive Income Under Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income", certain transactions and other economic events that bypass the income statement must be displayed as other comprehensive income. The Company's comprehensive income consists of net income and unrealized gains and losses on securities available-for-sale, net of income taxes. Comprehensive income for the first nine months of 1998 and 1997 is calculated as follows: (Dollars in thousands)
Before Income Income Net of Income Tax (Benefit) Tax (Benefit) Tax (Benefit) ------------- ------------- ------------- Unrealized gains and losses (net) recognized in other comprehensive income: Nine months ended September 30, 1998 $ (426,324) $ (165,840) $ (260,484) Nine months ended September 30, 1997 $ 451,890 $ 175,785 $ 276,105 1998 1997 Amounts reported in net income: Gain on sale of securities $ 1,053 $ 1,090 Net amortization (accretion) 475 (670) ------------- ----------- Reclassification adjustment 1,528 420 Income tax expense (594) (163) ------------- ----------- Reclassification adjustment, net of tax 934 257 Amounts reported in other comprehensive income: Unrealized (loss) gain arising during period, net of tax (259,550) 276,362 Reclassification adjustment, net of tax (934) (257) ------------- ----------- Net unrealized (losses) gains recognized in other comprehensive income (260,484) 276,105 Net income 554,716 495,070 ------------- ----------- Total comprehensive income $ 294,232 $ 771,175 ============= ===========
9 Notes to Consolidated Financial Statements (Unaudited) - continued Note 6 - Earnings Per Share Reconciliation In the calculation of basic and diluted EPS, net income is identical. Below is a reconciliation for the periods ended September 30, 1998 and September 30, 1997 of the difference between average basic common shares outstanding and average diluted common shares outstanding. Computation of Per Share Earnings (In thousands, except per share data)
Three Months Nine Months Ended September 30 Ended September 30 ------------------------- ------------------------ 1998 1997 1998 1997 ------------ ----------- ----------- ----------- Basic Net income $ 188,853 $ 168,578 $ 554,716 $ 495,070 ------------ ----------- ----------- ----------- Average common shares 205,584 208,391 207,110 211,289 ------------ ----------- ----------- ----------- Earnings per common share - basic $ 0.92 $ 0.81 $ 2.68 $ 2.34 ============ =========== =========== =========== Diluted Net income $ 188,853 $ 168,578 $ 554,716 $ 495,070 ------------ ----------- ----------- ----------- Average common shares outstanding 205,584 208,391 207,110 211,289 Incremental shares outstanding (1) 2,965 3,279 3,187 3,177 ------------ ----------- ----------- ----------- Average diluted common shares 208,549 211,670 210,297 214,466 ------------ ----------- ----------- ----------- Earnings per common share - diluted $ 0.91 $ 0.80 $ 2.64 $ 2.31 ============ =========== =========== =========== Three Months Nine Months Ended September 30 Ended September 30 ------------------------- ------------------------ 1998 1997 1998 1997 ------------ ----------- ----------- ----------- Average common shares - basic 205,584 208,391 207,110 211,289 Effect of dilutive securities: Stock options 1,363 1,636 1,559 1,524 Performance restricted stock 1,602 1,643 1,628 1,653 ------------ ----------- ----------- ----------- Average common shares - diluted 208,549 211,670 210,297 214,466 ============ =========== =========== ===========
(1) Includes the incremental effect of stock options and restricted stock outstanding computed under the treasury stock method. 10 Notes to Consolidated Financial Statements (Unaudited) - continued Note 7 - Trust Preferred Securities In 1997, the Company established two separate special purpose trusts, which collectively issued $600 million in trust preferred securities. In 1998, the Company issued an additional $250 million in trust preferred securities through a separate trust. The proceeds from such issuances, together with the proceeds of the related issuances of common securities of the trusts, were invested in junior subordinated deferrable interest debentures (debentures) of the Company. The sole assets of these special purpose trusts are the debentures. These debentures rank junior to the senior and subordinated debt issued by the Company. The Company owns all of the common securities of the three trusts. The preferred securities issued by the trusts rank senior to the common securities. The obligations of the Company under the debentures, the indentures, the relevant trust agreements and the guarantees, in the aggregate, constitute a full and unconditional guarantee by the Company of the obligations of the trusts under the trust preferred securities and rank subordinate and junior in right of payment to all liabilities of the Company. Listed below are the series of trust preferred securities of SunTrust Capital I, SunTrust Capital II, and SunTrust Capital III issued at $1,000 per security. SunTrust Capital I issued $350 million in trust preferred securities in May 1997 and concurrently used the proceeds to invest in $360.9 million of Subordinated Debentures from the Company with a quarterly interest rate equal to 3-Month LIBOR plus .67% and a maturity of May 15, 2027. SunTrust Capital II issued $250 million in trust preferred securities in June 1997 and concurrently used the proceeds to invest in $257.8 million of Subordinated Debentures from the Company with a semi-annual interest rate of 7.9% and a maturity of June 15, 2027. SunTrust Capital III issued $250 million in trust preferred securities in March 1998 and concurrently used the proceeds to invest in $257.8 million of Subordinated Debentures from the Company with a quarterly interest rate equal to 3-Month LIBOR plus .65% and a maturity of March 15, 2028. The trust preferred securities are subject to mandatory redemption at the stated maturity date of the debentures, upon repayment of the debentures or earlier, pursuant to the terms of the Trust Agreement. Note 8 - Restatement of certain prior years Financial Statements In connection with the review by the staff of the Securities and Exchange Commission of documents related to SunTrust's acquisition of Crestar Financial Corporation and the staff's comments thereon, SunTrust has lowered its provision for loan losses in 1996, 1995 and 1994 by $40 million, $35 million and $25 million respectively. The effect of this action was to increase net income in these years by $24.4 million, $21.4 million and $15.3 million, respectively. Further, as of December 31, 1997 and 1996, the allowance for loan losses has been decreased by a total of $100 million and shareholders' equity has been increased by a total of $61 million. 11 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW SunTrust Banks, Inc. is a multi-state bank holding company with its headquarters in Atlanta, Georgia. The Company's principal banking subsidiaries are SunTrust Banks of Florida, Inc., SunTrust Banks, of Georgia, Inc. and SunTrust Banks of Tennessee, Inc., all of which are bank holding companies in their respective states. Credit card services are provided through SunTrust BankCard, N.A. of Orlando, Florida. SunTrust has several wholly owned nonbanking subsidiaries that are engaged in various businesses. They include SunTrust Mortgage, Inc., which originates and services mortgage loans on both residential and income property, principally throughout Florida, Georgia and Tennessee. SunTrust Insurance Company operates as a reinsurer for credit life, accident and health insurance sold to loan customers of SunTrust. SunTrust Securities, Inc. engages in securities brokerage services and conducts incidental activities such as offering custodial and cash management services. SunTrust Equitable Securities Corporation conducts various business activities including investment banking, securities brokerage, investment advisory services, raising equity capital, underwriting of debt issues and selling investment securities to corporations, institutions and government entities. SunTrust Personal 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. The following analysis of the financial performance of SunTrust for the third quarter of 1998 should be read in conjunction with the financial statements, notes and other information contained in this document. SunTrust has made, and may continue to make, various forward-looking statements with respect to financial and business matters. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, all of which may change over time. The actual results that are achieved could differ significantly from the forward-looking statements contained in this document. The results of operations for the nine months ended September 30, 1998 are not indicative of the results that may be attained for any other period. In this discussion, net interest income and the net interest margin are presented on a taxable-equivalent basis and the ratios are presented on an annualized basis. EARNINGS ANALYSIS SunTrust reported record net income of $188.8 million and $554.7 million for the third quarter and first nine months of 1998, an increase of 12.03% and 12.05% compared with $168.6 million and $495.1 million in the same periods of 1997. Diluted earnings per share grew 13.8% to $0.91 and 14.3% to $2.64 from $0.80 and $2.31 in the same periods. The growth in net income resulted from increases in noninterest income and continued strong loan demand. 12
Selected Quarterly Financial Data (Dollars in millions except per share data) Quarters ------------------------------------------------------ 1998 1997 ------------------------------------------------------ 3 2 1 4 3 ---------- ---------- --------- --------- --------- Summary of Operations Interest and dividend income $ 984.8 $ 975.8 $ 959.5 $ 954.4 $ 934.9 Interest expense 488.1 478.9 470.0 469.0 458.1 ---------- ---------- --------- --------- --------- Net interest income 496.7 496.9 489.5 485.4 476.8 Provision for loan losses 31.4 33.5 28.6 32.6 29.0 ---------- ---------- --------- --------- --------- Net interest income after provision for loan losses 465.3 463.4 460.9 452.8 447.8 Noninterest income 293.2 296.9 286.3 247.4 232.9 Noninterest expense 487.6 482.8 471.1 433.9 424.4 ---------- ---------- --------- --------- --------- Income before provision for income taxes 270.9 277.5 276.1 266.3 256.3 Provision for income taxes 82.1 92.5 95.2 94.1 87.7 ---------- ---------- --------- --------- --------- Net income $ 188.8 $ 185.0 $ 180.9 $ 172.2 $ 168.6 ========== ========== ========= ========= ========= Net interest income (taxable-equivalent) $ 504.4 $ 504.7 $ 497.5 $ 494.1 $ 485.7 Per common share Net income - diluted $ 0.91 $ 0.88 $ 0.85 $ 0.82 $ 0.80 Net income - basic 0.92 0.89 0.87 0.83 0.81 Dividends declared 0.250 0.250 0.250 0.250 0.225 Book value 25.29 28.62 27.49 25.06 23.92 Common stock market price High 87.75 83.44 77.44 75.25 70.44 Low 54.00 73.38 65.25 61.13 54.75 Close 62.00 81.31 75.38 71.38 67.94 Selected Average Balances Total assets $ 60,496.8 $ 60,018.2 $58,468.4 $ 56,663.4 $ 55,160.2 Earning assets 51,757.2 51,143.1 50,089.7 48,970.5 47,672.1 Loans 42,115.9 41,452.1 40,526.4 39,230.0 37,898.9 Total deposits 36,580.0 36,470.9 36,316.3 35,940.2 36,115.7 Realized shareholders' equity 3,386.9 3,452.4 3,417.6 3,211.0 3,188.6 Total shareholders' equity 5,747.7 5,822.5 5,471.8 5,067.0 5,151.4 Common shares - diluted (thousands) 208,549 210,684 211,694 210,554 211,671 Common shares - basic (thousands) 205,584 207,335 208,442 207,138 208,391 Financial Ratios ROA* 1.32% 1.32% 1.33% 1.27% 1.29% ROE* 22.12 21.49 21.46 21.27 20.98 Net interest margin* 3.87 3.96 4.03 4.00 4.04
* ROA, ROE and net interest margin are calculated excluding net unrealized gains on securities available for sale because the net unrealized gains are not included in income. 13 Consolidated Daily Average Balances, Income/Expense and Average Yields Earned and Rates Paid (Dollars in millions; yields on taxable-equivalent basis)
Quarter Ended ------------------------------------------------------------------- September 30, 1998 June 30, 1998 ----------------------------------- ----------------------------- Average Income/ Yields/ Average Income/ Yields/ Balances Expense Rates Balances Expense Rates ------------ --------- -------- -------------------- ----- Assets Loans (1) Taxable $ 41,437.5 $ 822.9 7.88% $ 40,773.3 812.1 7.99% Tax-exempt (2) 678.4 12.8 7.45 678.8 12.5 7.42 ------------ ---------- ----------- ------- Total loans 42,115.9 835.7 7.87 41,452.1 824.6 7.98 ------------ ---------- ----------- ------- Securities available for sale: Taxable 7,850.9 129.6 6.55 7,807.8 129.2 6.64 Tax-exempt (2) 582.1 12.1 8.22 597.7 12.4 8.31 ------------ ---------- ----------- ------- Total securities available for sale 8,433.0 141.7 6.66 8,405.5 141.6 6.76 ------------ ---------- ----------- ------- Funds sold 992.1 13.2 5.26 1,059.9 14.9 5.64 Other short-term investments (2) 216.2 1.9 3.78 225.6 2.5 4.48 ------------ ---------- ----------- ------- Total earning assets 51,757.2 992.5 7.61 51,143.1 983.6 7.71 ---------- ------- Allowance for loan losses (663.0) (659.6) Cash and due from banks 2,341.9 2,299.0 Premises and equipment 1,007.4 979.2 Other assets 2,235.5 2,423.7 Unrealized gains (losses) on investment securities 3,817.8 3,832.8 ============ =========== Total assets $ 60,496.8 $ 60,018.2 ============ =========== Liabilities and Shareholders' Equity Interest-bearing deposits: NOW/Money market accounts $ 11,404.6 $ 78.7 2.74 % $ 11,415.0 $ 78.2 2.75 % Savings 5,240.4 47.4 3.59 5,164.4 46.2 3.59 Consumer time 6,664.4 87.6 5.21 6,759.8 88.3 5.24 Other time (3) 5,068.9 69.2 5.42 4,978.2 71.1 5.73 ------------ ---------- ----------- ------- Total interest-bearing deposits 28,378.3 282.9 3.96 28,317.4 283.8 4.02 Funds purchased 8,671.1 116.2 5.32 8,085.7 107.1 5.32 Other short-term borrowings 1,290.4 18.1 5.57 1,587.1 22.3 5.62 Long-term debt 4,548.8 70.9 6.18 4,290.9 65.7 6.14 ------------ ---------- ----------- ------- Total interest-bearing liabilities 42,888.6 488.1 4.52 42,281.1 478.9 4.54 ---------- ------- Noninterest-bearing deposits 8,201.7 8,153.5 Other liabilities 3,658.8 3,761.1 Realized shareholders' equity 3,386.9 3,452.4 Other comprehensive income 2,360.8 2,370.1 ============ =========== Total liabilities and shareholders' equity $ 60,496.8 $ 60,018.2 ============ =========== Interest rate spread 3.09% 3.17% ======= ===== Net Interest Income $ 504.4 504.7 ========== ======= Net Interest Margin 3.87% 3.96% ======= =====
(1) Interest income includes loan fees of $27.7, $26.4, and $26.5 in the quarters ended September 30, June 30, 1998 and September 30, 1997 and $79.9 and $73.8 in the nine months ended September 30, 1998 and 1997. Nonaccrual loans are included in average balances and income on such loans, if recognized, is recorded on a cash basis. (2) 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 $7.7, $7.8, and $8.9, in the quarters ended September 30, June 30, 1998 and September 30, 1997 and $23.5 and $27.9 in the nine months ended September 30, 1998 and 1997. 14 Consolidated Daily Average Balances, Income/Expense and Average Yields Earned and Rates Paid (Dollars in millions; yields on taxable-equivalent basis)
Quarter Ended Nine Months Ended ------------------------- --------------------------------------------------------- September 30, 1997 September 30, 1998 September 30, 1997 ------------------------- ----------------------------- ------------------------- Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/ Balances Expense Rates Balances Expense Rates Balances Expense Rates --------- ------- ----- ---------- --------- ------ --------- ------- ----- Assets Loans (1) Taxable $ 37,205.4 $ 766.1 8.17% $ 40,687.9 $ 2,430.0 7.98% $ 36,239.3 $2,211.3 8.16% Tax-exempt (2) 693.5 13.5 7.75 682.7 38.7 7.57 699.4 40.9 7.82 --------- ------- ---------- --------- --------- ------- Total loans 37,898.9 779.6 8.16 41,370.6 2,468.7 7.98 36,938.7 2,252.2 8.15 --------- ------- ---------- --------- --------- ------- Securities available for sale: Taxable 7,679.8 128.8 6.66 7,768.3 387.2 6.66 7,457.5 372.4 6.68 Tax-exempt (2) 689.3 14.7 8.46 595.6 37.1 8.33 709.5 45.5 8.58 --------- ------- ---------- --------- --------- ------- Total securities available for sale 8,369.1 143.5 6.80 8,363.9 424.3 6.78 8,167.0 417.9 6.84 --------- ------- ---------- --------- --------- ------- Funds sold 1,139.9 16.6 5.75 1,052.4 43.7 5.55 985.5 43.9 5.94 Other short-term investments (2) 264.2 4.1 6.18 215.9 6.9 4.38 239.8 10.3 5.76 --------- ------- ---------- --------- --------- ------- Total earning assets 47,672.1 943.8 7.85 51,002.8 2,943.6 7.72 46,331.0 2,724.3 7.86 ------- --------- ------- Allowance for loan losses (641.6) (657.9) (634.5) Cash and due from banks 2,238.7 2,332.3 2,232.0 Premises and equipment 949.4 984.2 926.8 Other assets 1,766.9 2,347.6 1,737.2 Unrealized gains (losses) on investment securities 3,174.7 3,659.5 3,007.4 ========= ========== ========= Total assets $55,160.2 $ 59,668.5 $53,599.9 ========= ========== ========= Liabilities and Shareholders' Equity Interest-bearing deposits: NOW/Money market accounts $ 10,424.8 $ 71.6 2.73% $ 11,244.5 $ 230.9 2.75% $ 10,469.4 $ 213.8 2.73% Savings 5,202.2 47.1 3.59 5,214.9 140.4 3.60 5,300.3 142.3 3.59 Consumer time 6,946.6 91.2 5.21 6,766.6 264.8 5.23 7,003.9 271.3 5.18 Other time (3) 6,084.9 86.0 5.61 5,144.0 215.1 5.59 5,682.0 235.4 5.54 --------- ------- ---------- --------- --------- ------- Total interest-bearing deposits 28,658.5 295.9 4.10 28,370.0 851.2 4.01 28,455.6 862.8 4.05 Funds purchased 6,440.0 86.9 5.36 8,141.0 323.9 5.32 6,126.2 242.4 5.29 Other short-term borrowings 1,906.4 27.7 5.75 1,514.8 63.9 5.64 1,677.8 71.0 5.66 Long-term debt 2,826.0 47.6 6.68 4,248.5 198.0 6.23 2,229.8 111.2 6.67 --------- ------- ---------- --------- --------- ------- Total interest-bearing liabilities 39,830.9 458.1 4.56 42,274.3 1,437.0 4.54 38,489.4 1,287.4 4.47 ------- --------- ------- Noninterest-bearing deposits 7,457.2 8,086.7 7,451.3 Other liabilities 2,720.7 3,625.8 2,576.1 Realized shareholders' equity 3,188.6 3,418.9 3,222.3 Other comprehensive income 1,962.8 2,262.8 1,860.8 ========= ========== ========= Total liabilities and shareholders' equity $ 55,160.2 $ 59,668.5 $ 53,599.9 ========= ========== ========= Interest rate spread 3.29% 3.18 % 3.39% ===== ====== ===== Net Interest Income $ 485.7 $ 1,506.6 $ 1,436.9 ======= ========= ======= Net Interest Margin 4.04% 3.95 % 4.15% ===== ====== =====
(3) Interest rate swap transactions used to help balance the Company's interest-sensitivity position decreased interest expense by $1.2, $0.5 and increased interest expense by $1.2 in the quarters ended September 30, 1998, June 30, 1998 and September 30, 1997 and decreased interest income by $2.5 and increased interest expense by $2.4 in the nine months ended September 30, 1998 and September 30, 1997. Without these swaps, net interest margin would have been 3.86%, 3.95% and 4.05%, in the quarters ended September 30 and June 30, 1998 and September 30, 1997 and 3.96% and 4.15% in the nine months ended September 30, 1998 and 1997. 15 Net Interest Income/Margins. The Company's net interest margin of 3.87% for the third quarter of 1998 was 17 basis points lower than the third quarter of last year. The rate on earning assets was 7.61% in the third quarter of 1998 and 7.85% in the third quarter of 1997. At the same time, the rate on interest bearing liabilities decreased 4 basis points due to the decrease in rates on other short-term borrowings and time deposits. Interest income, which the Company was unable to recognize on nonperforming loans, had a negative impact of 1 basis point on the net interest margin in the first nine months of both 1998 and 1997. Table 2 contains more detailed information concerning average balances and interest yields earned and rates paid. The Company has evaluated the interest rate risk assumptions contained in the annual report. Management continues to believe that our sensitivity to interest rates is relatively neutral. Noninterest Income. Noninterest income in the third quarter and the first nine months of 1998, adjusted to exclude the effect of securities gains (losses), increased $62.1 million, or 26.7%, and $189.6 million, or 27.6% from the comparable periods a year ago. SunTrust Equitable Securities Corporation (SESC), which was acquired on January 2, 1998, accounted for $9.3 million and $41.2 million of the increase in the third quarter and first nine months of this year. Trust income, the Company's largest source of noninterest income, increased $13.4 million, or 17.0%, and $44.8 million, or 19.0% over the same periods. Mortgage fees increased $6.9 million, or 56.2% and $23.3 million, or 72.1% over the same periods due to higher volume in our mortgage banking business. The increase in loan volume is due to the increase in new home sales and refinancing activity as long term interest rates have continued to decline in the past year. Noninterest Income (In millions)
Quarters ----------------------------------------------- 1998 1997 ----------------------------------------------- 3 2 1 4 3 -------- -------- ------- ------- -------- Trust income $ 92.5 $ 95.4 $ 93.1 $ 82.5 $ 79.0 Service charges on deposit accounts 67.2 62.7 62.1 63.8 62.4 Other charges and fees 34.1 33.7 32.6 28.0 27.2 Credit card fees 20.6 21.7 20.5 18.9 17.5 Mortgage fees 19.0 19.0 17.5 13.6 12.2 Corporate and institutional investment income 16.0 13.3 10.9 6.4 8.6 Retail investment income 10.2 12.8 10.4 8.4 8.3 Trading account profits and commissions 6.9 10.9 11.0 5.2 4.0 Securities gains (losses) (1.8) 2.0 0.9 0.4 0.1 Other income 28.5 25.4 27.3 20.2 13.6 ======== ======== ======= ======= ======== Total noninterest income $ 293.2 $ 296.9 $286.3 $ 247.4 $ 232.9 ======== ======== ======= ======= ========
16 Noninterest Expense. Noninterest expense increased $63.2 million, or 14.9% and $189.8 million, or 15.2% in the third quarter and first nine months of 1998 compared to the same periods last year. Personnel expense, consisting of salaries, other compensation and employee benefits, increased $47.3 million, or 19.5% and $126.4 million, or 17.8% over the third quarter and first nine months of last year. The SESC acquisition accounted for $11.7 million, or 18.5% of the total increase in noninterest expense in the third quarter. The increase in other noninterest expense in the third quarter and first nine months of 1998 from the same periods in 1997 of $0.8 million, or 2.4% and $17.1 million, or 13.4% is due to expenditures made in connection with various projects to stimulate business growth and development. The efficiency ratio increased from 59.1% in the third quarter of 1997 to 61.1% in the same quarter of this year. Various growth projects accounted for the increase with most of the change due to the acquisition of SESC. After adjusting for the purchase of SESC, the efficiency ratio would have been 59.9% for the third quarter of 1998. Noninterest Expense (In millions)
Quarters ----------------------------------------------- 1998 1997 ----------------------------------------------- 3 2 1 4 3 -------- -------- ------- ------- -------- Salaries $ 202.4 $ 193.1 $ 183.8 $ 178.7 $ 175.2 Other compensation 60.0 56.5 51.2 42.9 39.2 Employee benefits 26.8 30.2 34.4 22.0 27.5 Net occupancy expense 33.4 32.9 33.1 30.9 30.9 Equipment expense 31.8 31.4 32.0 29.6 30.7 Outside processing and software 20.4 21.4 22.0 19.4 18.0 Marketing and customer development 15.6 18.5 17.3 19.2 15.9 Amortization of intangible assets 15.3 13.7 11.2 10.0 8.3 Communications 10.8 10.4 9.9 8.7 8.9 Postage and delivery 10.7 10.5 10.8 10.7 10.1 Operating supplies 9.4 9.4 9.0 9.8 8.7 Consulting and legal 8.3 8.7 7.3 9.3 8.1 FDIC premiums 1.6 1.3 1.3 1.3 1.3 Other real estate expense (4.4) (2.7) (2.4) (5.8) (3.1) Other expense 45.5 47.5 50.2 47.2 44.7 ======== ======== ======= ======= ======== Total noninterest expense $ 487.6 $ 482.8 $ 471.1 $ 433.9 $ 424.4 ======== ======== ======= ======= ======== Efficiency ratio 61.1 % 60.2 % 60.1 % 58.5 % 59.1 %
Provision for Loan Losses. The Company increased the provision for loan losses in the third quarter of 1998 to $31.4 million from $29.0 million in the same period last year. The provision exceeded net charge-offs by $3.5 million. Net loan charge-offs were $79.2 million in the first nine months of this year, representing 0.26% of average loans. The comparable net charge-off amount in 1997 was $63.1 million or 0.23% of average loans. The Company's allowance for loan losses totaled $666.1 million at September 30, 1998, which was 1.55% of quarter-end loans and 472% of total nonperforming loans. On September 30, 1997 these ratios were 1.68% and 418%. 17 Summary of Loan Loss Experience (Dollars in millions)
Quarters -------------------------------------------------------- 1998 1997 -------------------------------------------------------- 3 2 1 4 3 --------- --------- ---------- --------- --------- Allowance for Loan Losses Balances - beginning of quarter $ 662.6 $ 658.5 $ 651.8 $ 647.1 $ 639.8 Provision for loan losses 31.4 33.5 28.6 32.6 29.0 Charge-offs: Commercial (10.9) (10.0) (4.8) (7.2) (6.8) Real estate: Construction - - (0.1) (0.4) (1.3) Residential mortgages (2.0) (2.1) (1.6) (2.6) (2.0) Other (0.3) (0.9) (0.9) (2.5) (1.3) Lease financing (0.4) (0.4) (1.1) (0.6) (0.4) Credit card (15.5) (17.6) (15.1) (13.4) (13.2) Other consumer loans (9.9) (11.3) (12.3) (14.8) (12.4) --------- --------- ---------- --------- --------- Total charge-offs (39.0) (42.3) (35.9) (41.5) (37.4) --------- --------- ---------- --------- --------- Recoveries: Commercial 2.8 2.8 3.9 4.9 4.3 Real estate: Construction 0.1 0.1 0.1 0.7 1.0 Residential mortgages 0.3 0.7 0.3 0.4 0.2 Other 0.7 1.3 2.2 1.0 2.6 Lease financing 0.1 0.2 0.2 0.1 0.2 Credit card 1.6 2.4 1.8 1.6 2.0 Other consumer loans 5.4 5.4 5.5 4.9 5.4 --------- --------- ---------- --------- --------- Total recoveries 11.1 12.9 14.0 13.6 15.7 --------- --------- ---------- --------- --------- Net charge-offs (27.9) (29.4) (21.9) (27.9) (21.7) --------- --------- ---------- --------- --------- Balance - end of quarter $ 666.1 $ 662.6 $ 658.5 $ 651.8 $ 647.1 ========= ========= ========== ========= ========= Quarter-end loans outstanding: Domestic $ 42,548.7 $ 41,306.3 $ 41,001.9 $39,875.7 $ 38,185.3 International 340.8 341.0 262.1 259.8 290.2 ========= ========= ========== ========= ========= Total $ 42,889.5 $ 41,647.3 $ 41,264.0 $40,135.5 $ 38,475.5 ========= ========= ========== ========= ========= Ratio of allowance to quarter-end loans 1.55% 1.59% 1.60% 1.62% 1.68% Average loans $ 42,115.9 $ 41,452.1 $ 40,526.4 $39,230.1 $ 37,898.9 Ratio of net charge-offs (annualized) to average loans 0.26% 0.28% 0.22% 0.28% 0.23%
18 Nonperforming Assets (Dollars in millions)
1998 1997 ------------------------------------------------------- September 30 June 30 March 31 December 31 September 30 ------------ --------- -------- ----------- ------------ Nonperforming Assets Nonaccrual loans: Commercial $ 37.4 $ 38.1 $ 20.6 $ 20.9 $ 35.2 Real Estate: Construction 2.8 3.3 2.9 1.8 2.8 Residential mortgages 52.9 47.9 52.0 49.7 57.8 Other 39.2 38.8 42.6 41.2 47.1 Lease financing 1.9 2.1 2.3 3.0 0.7 Consumer loans 6.5 6.5 7.6 8.8 8.7 --------- --------- --------- --------- ---------- Total nonaccrual loans 140.7 136.7 128.0 125.4 152.3 Restructured loans 0.6 - 2.7 2.7 2.7 --------- --------- --------- --------- ---------- Total nonperforming loans 141.3 136.7 130.7 128.1 155.0 Other real estate owned 16.4 26.7 31.4 22.5 35.7 --------- --------- --------- --------- ---------- Total nonperforming assets $ 157.7 $ 163.4 $ 162.1 $ 150.6 $ 190.7 ========= ========= ========= ========= ========== Ratios: Nonperforming loans to total loans 0.33% 0.33% 0.32% 0.32% 0.40% Nonperforming assets to total loans plus other real estate owned 0.37 0.39 0.39 0.37 0.50 Allowance to nonperforming loans 471.5 484.7 503.9 508.9 417.5 Accruing Loans Past Due 90 Days or More $ 38.7 $ 38.7 $ 43.3 $ 40.8 $ 41.4
Nonperforming Assets. Nonperforming assets consist of nonaccrual loans, restructured loans and other real estate owned. Nonperforming assets have increased 4.7%, or $7.1 million since December 31, 1997 and decreased 17.3%, or $33.0 million since September 30, 1997. Included in nonperforming loans at September 30, 1998 are loans aggregating $14.2 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. Interest income on nonaccrual loans, if recognized, is recorded on a cash basis. During the first nine months of 1998, the gross amount of interest income that would have been recorded on nonaccrual loans and restructured loans at September 30, 1998, if all such loans had been accruing interest at the original contractual rate, was $9.2 million. Interest income recognized in the nine months ended September 30, 1998 on all such nonperforming loans at September 30, 1998, was $5.0 million. 19 Loan Portfolio by Types of Loans (In millions)
1998 1997 ----------------------------------------------------------- September 30 June 30 March 31 December 31 September 30 ------------ --------- ---------- ----------- ------------ Commercial: Domestic $ 16,431.2 $ 15,428.1 $ 15,165.7 $ 14,139.9 $ 12,968.2 International 321.1 320.5 249.6 247.4 278.0 Real estate: Construction 1,585.4 1,532.2 1,451.8 1,442.6 1,400.7 Residential mortgages 13,076.7 13,092.7 13,195.2 12,992.9 12,726.3 Other 4,972.0 4,887.3 4,820.5 4,778.7 4,766.4 Lease financing 855.0 825.9 783.1 725.7 663.6 Credit card 962.5 958.8 982.7 1,041.3 1,022.5 Other consumer loans 4,685.6 4,601.8 4,615.4 4,767.0 4,649.8 ========== ========= ========== ========== ========== Total loans $ 42,889.5 $ 41,647.3 $ 41,264.0 $ 40,135.5 $ 38,475.5 ========== ========= ========== ========== ==========
Loans. During the third quarter and first nine months of 1998, average loans increased 11.1% and 12.0% over the same periods a year ago. Since December 31, 1997 domestic commercial loans increased $2.3 billion or 16.2%. The average loan to deposit ratio was 115.1% and 113.5% in the third quarter and first nine months of 1998 compared with 104.9% and 102.9% in the same periods of 1997. At September 30, 1998, international outstandings, which include loans, acceptances, deposits in other banks, foreign guarantees and accrued interest, net of write-downs totaled $347.2 million, an increase of 21.2% from $286.4 million at December 31, 1997. Income Taxes. The provision for income taxes was $82.1 million and $269.8 million in the third quarter and first nine months of 1998 compared to $87.7 million and $264.6 million in the same period last year. This represented a 30% and 33% effective tax rate in the third quarter and first nine months of 1998 and an effective tax rate of 34% and 35% in the same periods last year. The reduction in the effective tax rate for the third quarter and nine months ended September 30, 1998 was the result of the favorable settlement of a Federal tax examination for prior years. Securities available for sale. Securities in the investment portfolio are classified as available-for-sale and are carried at market value with unrealized gains and losses, net of any tax effect, added to or deducted from realized shareholders' equity to determine total shareholder's equity. 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 decreased from an average of 6.80% in the third quarter of 1997 to 6.66% in the third quarter of this year. The portfolio size (measured at amortized cost) increased by $3 million during the third quarter to $8.3 billion at quarter end. The average life of the portfolio was approximately 1.7 years at September 30, 1998. At September 30, 1998, approximately 15% of the portfolio consisted of U.S. Treasury securities, 8% U.S. government agency securities, 60% mortgage-backed securities, 10% trust preferred securities and 7% municipal 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 September 30, 1998, the carrying value of the securities portfolio was $2.9 billion over its amortized cost, consisting mostly of a $2.8 billion unrealized gain on the Company's investment in common stock of The Coca-Cola Company. 20 Liquidity Management. Liquidity is managed to ensure there is sufficient cash flow to satisfy demand for credit, deposit withdrawals and attractive investment opportunities. A large, stable core deposit base, strong capital position and excellent credit ratings are the solid foundation for the Company's liquidity position. Liquidity is enhanced by an investment portfolio structured to provide liquidity as needed. 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 note program, commercial paper issuance by the Parent Company, and Federal Home Loan Bank (FHLB) advances for subsidiary banks who are FHLB members. Average total deposits for the third quarter and first nine months of 1998 increased $0.5 billion, or 1.3%, and $0.5 billion, or 1.5% over the same periods a year ago. Interest-bearing deposits represented 77.6% and 77.8% of average deposits for the third quarter and first nine months of 1998, compared to 79.4% and 79.3% for the same periods in 1997. In the third quarter of 1998, average net purchased funds (average funds purchased less average funds sold) increased $2.4 billion and $1.9 billion over the same periods in 1997. Net purchased funds were 14.8% and 13.9% of average earning assets for the third quarter and first nine months of 1998 as compared to 11.1% in the same periods a year ago. Derivatives. The Company enters into various derivative 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 the Company's exposure to interest rate 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. Interest rate futures contracts are also used but on a much more limited basis. 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 September 30, 1998 used for managing interest rate sensitivity. Interest Rate Swaps (Dollars in millions)
Average Maturity Average Average Notional Value Fair Value In Months Rate Paid Rate Received --------------- ----------------- ----------------- ---------- ------------- Gain position: Receive fixed $ 1,251.9 $ 87.7 56.9 5.63 % 6.44 % Pay fixed 18.8 0.1 0.7 4.76 4.59 Basis swaps 250.0 0.8 6.7 4.49 4.60 --------------- ----------------- Total gain position 1,520.7 88.6 --------------- ----------------- Loss position: Receive fixed - - - - - Pay fixed 945.5 (43.0) 64.8 6.30 5.52 Basis swaps 750.0 (2.7) 37.8 4.76 4.86 --------------- ----------------- Total loss position 1,695.5 (45.7) --------------- ----------------- Total $ 3,216.2 $ 42.9 =============== =================
The swaps are designated as hedges on investments, deposits and other interest-bearing liabilities. During the nine months ended September 30, 1998, hedge swaps decreased net interest income by $2.5 million, compared with a $2.4 million decrease in the corresponding 1997 period. 21 Capital Ratios (Dollars in millions)
1998 1997 ------------------------------------ ------------------------- September 30 June 30 March 31 December 31 September 30 ------------ ------- ---------- ----------- ------------ Tier 1 capital: Realized shareholders' equity $ 3,496.0 $ 3,353.3 $ 3,443.2 $ 3,211.5 $ 3,172.2 Trust preferred securities 850.0 850.0 850.0 600.0 600.0 Intangible assets other than servicing rights (345.0) (351.5) (357.9) (292.6) (286.2) ----------- ----------- ---------- ---------- ---------- Total Tier 1 capital 4,001.0 3,851.8 3,935.3 3,518.9 3,486.0 ----------- ----------- ---------- ---------- ---------- Tier 2 capital: Allowable allowance for loan losses 652.2 639.8 633.9 600.1 566.0 Allowable long-term debt 950.0 950.0 950.0 950.0 1,055.1 Regulatory adjustment 1,251.6 1,857.0 1,119.4 965.6 - ----------- ----------- ---------- ---------- ---------- Total Tier 2 capital 2,853.8 3,446.8 2,703.3 2,515.7 1,621.1 ----------- ----------- ---------- ---------- ---------- Total capital $ 6,854.8 $ 7,298.6 $ 6,638.6 $ 6,034.6 $ 5,107.1 =========== =========== ========== ========== ========== Risk-weighted assets $ 53,416.1 $ 53,019.3 $51,805.4 $ 48,922.3 $ 45,201.7 Risk-based ratios: Tier 1 capital 7.49% 7.26% 7.59% 7.19% 7.71% Total capital 12.83 13.76 12.81 12.33 11.29 Tier 1 leverage ratio 7.10 6.89 7.16 6.59 6.74 Total shareholders' equity to assets 8.69 9.71 9.69 9.06 9.09
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) or Tier 2 (certain debt instruments and a portion of the allowance for loan losses). The Company and its subsidiary banks are subject to a minimum Tier 1 capital ratio (Tier 1 capital to risk-weighted assets) of 4%, total capital ratio (Tier 1 plus Tier 2 to risk-weighted assets) of 8% and Tier 1 leverage ratio (Tier 1 to average quarterly assets) of 3%. 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 Regulator'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%. Forty-five percent of the unrealized gains on equity securities of The Coca-Cola Company are included in the Tier 2 capital calculation. At September 30, 1998, the Company's Tier 1 capital, total risk-based capital and Tier 1 leverage ratios were 7.49%, 12.83% and 7.10%, respectively. SunTrust is committed to maintaining well capitalized banks. In April 1997, the Board of Directors authorized the Company to repurchase up to 15,000,000 shares of SunTrust common stock. As reported in the Form 8-K filed on July 21, 1998, the Company ceased its share repurchase program in anticipation of the merger with Crestar Financial Corporation. The total number of shares repurchased under this program was 5,710,306. 22 Year 2000. The Year 2000 issue is the result of computer programs using a two-digit format, as opposed to four-digits, to indicate the year. These computer systems will be unable to interpret dates beyond the year 1999, which could cause a system failure or other computer errors, leading to disruptions in operations. In addition, many software programs and automated systems will fail to recognize the year 2000 as a leap year. The problem is not limited to computer systems, or any particular industry or field. Year 2000 issues will potentially affect every system that has an embedded microchip containing this flaw, such as alarm systems, vaults and elevators. SunTrust is committed to addressing the Year 2000 challenges in a prompt and responsible manner. It has dedicated resources to do so with the goal that systems and services will not be compromised or otherwise negatively impacted by computer-based entries and record keeping related to the century date change. The SunTrust Year 2000 Project Oversight Program (the "Year 2000 Program") has been active since 1996. Each of 28 banks and 15 non-bank subsidiaries in the SunTrust system has a Year 2000 Project Manager who reports directly to a central Project Director at SunTrust, who is coordinating the Year 2000 Program. The Project Director reports on a monthly basis to the Chief Financial Officer, who reports on a quarterly basis to the SunTrust Board of Directors. SunTrust prepared a compliance manual in conjunction with an outside Year 2000 expert, which is used by the Project Director and all Project Managers to ensure that the Year 2000 Program is implemented in a uniform manner. In addition, all SunTrust entities use uniform status reporting in connection with the Year 2000 Program. Furthermore, additional committees have been established throughout SunTrust to identify, address and mitigate key Year 2000 risks in the organization. Within SunTrust, each business unit is responsible for renovation and testing of the systems within their control, such as personal computers, facilities, and locally used forms. SunTrust Service Corporation, SunTrust's central operations and information technology group, provides services for certain business units within the SunTrust system, and is responsible for renovation and testing of systems relating to those services. SunTrust's Year 2000 Program has four phases: inventory, assessment, remediation and testing. The inventory phase, in which SunTrust determined all areas with potential Year 2000 issues, was completed in early 1997. This included SunTrust's information technology systems as well as equipment such as elevators, bank alarms, vault locks, etc. that may contain embedded microprocessors. The assessment phase, in which SunTrust made a determination as to the method of remediation, was substantially completed in February, 1998. The remediation and testing phases are currently in progress. Wherever practical, SunTrust is making remediation a normal part of business practice. SunTrust has over 1400 computer based applications, and decisions on remediation are made on an individual case-by-case basis. The testing phase has two components: readiness testing and enterprise testing. Enterprise testing is subdivided into three phases, with the first two phases covering substantially all the mission-critical applications, and the third phase covering the less critical applications. A final phase may be scheduled which would provide an opportunity to retest critical applications that were tested in the previous phases. A technical quality assurance group evaluates the progress of test results, while SunTrust's Internal Audit and Risk Management departments provide continuous independent oversight. In accordance with standards established by the Federal Financial Institution's Examination Counsel (FFIEC), SunTrust will be substantially complete with remediation and testing of mission-critical applications by December 31, 1998. SunTrust expects to be substantially complete with non-mission-critical applications at the end of the first quarter of 1999. SunTrust uses dedicated test equipment in order to minimize risk to current operations. That equipment will be used for ongoing operations at the end of the testing phase. 23 The standards established by the FFIEC on Year 2000 matters for financial institutions cover a variety of topics, including guidance on testing, customer risk assessment and contingency planning. SunTrust is engaged in a regular dialogue with the regulatory agencies and discloses its status, at a minimum, on a quarterly basis. The FFIEC guidelines are available to the public on the Internet at www.ffiec.gov. SunTrust's operations, like those of many other companies, are intertwined with the operations of certain of its business partners. Accordingly, SunTrust's operations could be materially affected if the operations of those companies who provide SunTrust with mission-critical applications, systems and services are materially affected. For example, SunTrust depends on service providers and vendors who provide equipment, technology and software to it in connection with its business operations. Failure of these parties to achieve Year 2000 readiness could substantially affect SunTrust's operations. In response to this concern, SunTrust is in constant dialogue with key service providers and is performing due diligence over their remediation and testing efforts. Service providers are required to inform SunTrust in writing of their expected Year 2000 compliance date. The majority of service providers have reported that they will be Year 2000 compliant by December 31, 1998. SunTrust also monitors the progress of vendors in their remediation efforts and has made case-by-case decisions as to whether to continue the relationship with the vendor or to replace the product or service with one from another vendor. All mission-critical vendors have informed SunTrust that they will be Year 2000 compliant by December 31, 1998. The inability of SunTrust or its material suppliers to effectuate solutions to their respective Year 2000 issues on a timely and cost-effective basis may have a material adverse effect on SunTrust. SunTrust has completed its Year 2000 contingency planning strategy document, and this document has been distributed to each Project Manager. Contingency plans incorporate a review of Year 2000 risk and normal business risk. Should Year 2000 compliance not be achieved by the specific deadlines, SunTrust has developed a contingency plan for each system or service. The contingency plans document the action SunTrust will take for each such non-compliant system. Since the worst case scenarios are difficult or even impossible to predict at this time, these contingency plans are particularly challenging. SunTrust intends to revise them as necessary on an ongoing basis until all problems are confronted and resolved. It is possible that SunTrust's automated systems, such as alarm systems, vaults, elevators and phone services, could be disrupted through the loss of utilities, such as electricity, water, telephone and other occurrences outside of SunTrust's control. SunTrust is in contact with its outside providers of services on an ongoing basis to evaluate their progress in addressing the Year 2000 problem. To the extent possible, SunTrust's contingency plans will incorporate these risks into current business recovery plans. SunTrust has performed an assessment of Year 2000 readiness with funds providers and funds takers. SunTrust is undertaking a comprehensive due diligence process in order to address the potential for fiduciary risks associated with computer malfunctions at customers' locations and businesses whose stock or assets are held in trust by SunTrust. These processes are ongoing and will continue into 1999. Management believes it has taken all reasonable steps to minimize the operational, regulatory and legal risks associated with the century date change. In spite of all efforts being made to rectify these problems, SunTrust could be subject to formal supervisory or enforcement actions relating to Year 2000 issues. Furthermore, SunTrust, like other commercial banks, may experience a contraction in the deposit base if a significant amount of deposited funds are withdrawn by customers prior to the year 2000. This potential deposit contraction could make it necessary for SunTrust to change funding sources and increase the cost of funding in general. SunTrust has a committee specifically addressing Year 2000 liquidity issues. This committee has determined that there are no high-risk funds providers in its portfolio. 24 It is impossible to determine what impact, if any, Year 2000 will have on the loan payment performance of SunTrust's borrowers. Borrowers may suffer Year 2000 related difficulties making them unable to repay their loans according to the agreed upon terms. SunTrust is assessing this risk and has implemented new procedures, including additional loan documentation to identify Year 2000 related issues. This information is summarized and reported to the Board of Directors on a periodic basis. None of SunTrust's borrowers has reported the expectation of material adverse impacts as a result of Year 2000. All companies with stock traded on a national stock exchange, including SunTrust, could experience a drop in stock price as investors change their investment portfolios or sell stock prior to the millennium. At this time, it is impossible to predict whether or not this will be the case with respect to SunTrust stock. Due to the extensive nature of changes made in preparation for year 2000, certain data processing projects have been deferred. These projects will be implemented upon completion of Year 2000 related project activities. At this time, management does not foresee any financial impact from these decisions. SunTrust estimates that the total cost of the extraordinary, one time expenses associated with Year 2000 issues will be approximately $45 million, on a pre-tax basis. SunTrust is funding this out of current revenues. All Year 2000 costs will continue to be expensed as incurred. $29.6 million of these expenses have already been incurred since the inception of the program, which represents 65% of the projected expenditures. Included in this are expenses for replacement of non-compliant software and personnel costs associated with programming, testing and implementing software. At this time, management does not believe these expenses will have a material effect on the operations or financial performance of SunTrust. The above discussion of Year 2000 issues includes numerous forward-looking statements reflecting management's current assessment and estimates with respect to SunTrust's Year 2000 compliance efforts and the impact of Year 2000 issues on SunTrust's business and operations. These statements are based on information currently available to management. Various factors could cause actual results to differ materially from those contemplated by such assessment, estimates and forward-looking statements, including many factors that are beyond the control of SunTrust. These factors include, but are not limited to: (a) the success of SunTrust in identifying systems and programs that are not Year 2000 compliant, (b) the continuing availability of experienced consultants and information technology personnel, (c) the nature and amount of programming required to upgrade or replace each of the affected programs, (d) the ability of third parties to complete their own Year 2000 remediations on a timely basis, and (e) the ability of SunTrust to implement contingency plans. 25 Financial Highlights - Banking Subsidiaries (Dollars in millions)
SunTrust Banks SunTrust Banks SunTrust Banks of Florida, Inc. of Georgia, Inc. of Tennessee, Inc. -------------------- -------------------- -------------------- 1998 1997 1998 1997 1998 1997 ---------- -------- ------- -------- --------- --------- Summary of Operations (1) Net interest income (FTE) $ 774.6 $ 751.9 $ 529.8 $ 490.8 $ 223.5 $ 219.9 Provision for loan losses 27.6 31.0 17.6 15.6 5.7 6.6 Trust income 130.5 115.6 101.7 85.3 32.9 28.6 Other noninterest income 283.0 228.9 172.2 149.4 74.8 64.9 Personnel expense 278.9 258.1 184.0 170.9 87.6 82.9 Other noninterest expense 394.8 370.3 253.6 219.1 103.3 93.4 Net income 301.8 268.3 226.2 208.2 83.2 80.6 Selected Average Balances (1) Total assets 27,586 25,270 22,919 21,122 8,070 7,518 Earning assets 25,984 23,822 17,907 16,542 7,742 7,235 Loans 19,815 17,954 14,883 13,151 6,097 5,624 Total deposits 19,017 18,364 11,508 11,838 6,021 5,766 Realized shareholders' equity 2,227 2,078 1,647 1,493 641 600 At September 30 Total assets 28,021 26,055 23,687 21,440 8,319 7,723 Earning assets 26,448 24,368 19,345 16,887 8,012 7,345 Loans 20,338 18,550 15,682 13,780 6,295 5,763 Allowance for loan losses 388 385 206 202 110 113 Total deposits 19,049 18,372 11,718 11,908 5,843 5,957 Realized shareholders' equity 2,359 2,150 1,815 1,634 664 627 Total shareholders' equity 2,386 2,170 3,553 3,465 674 635 Credit Quality Net loan charge-offs (1) 18.9 15.1 12.5 9.0 5.1 7.8 Nonperforming loans (2) 87.9 90.5 38.7 49.2 14.1 14.9 Other real estate owned (2) 9.5 21.8 2.2 3.2 4.8 10.4 Ratios ROA (3) 1.46% 1.42% 1.56% 1.53% 1.38% 1.43% ROE (3) 18.12 17.27 18.36 18.65 17.36 17.95 Net interest margin (3) 3.99 4.22 3.96 3.97 3.86 4.06 Efficiency ratio (3) 56.70 57.31 54.44 53.75 57.62 56.23 Total shareholder's equity/assets (2) 8.51 8.33 15.00 16.16 8.10 8.22 Net loan charge-offs to average loans (3) 0.13 0.12 0.11 0.09 0.12 0.19 Nonperforming loans to total loans (2) 0.44 0.50 0.25 0.36 0.23 0.26 Nonperforming assets to total loans plus other real estate owned (2) 0.49 0.62 0.26 0.39 0.31 0.45 Allowance to loans (2) 1.95 2.13 1.33 1.49 1.79 2.00 Allowance to nonperforming loans (2) 441.5 425.9 533.2 410.8 779.9 757.4
(1) For the nine month period ended September 30. (2) At September 30. (3) Annualized for the first nine months. 26 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits None B. Reports on Form 8-K The Registrant filed a Current Report on Form 8-K dated July 21, 1998 reporting that the Registrant and Crestar Financial Corporation had entered into a definitive agreement and plan of merger providing for the merger of a wholly owned subsidiary of the Registrant with and into Crestar. The Registrant filed a Current Report on Form 8-K dated August 13, 1998. The purpose of this report was to file as an exhibit certain financial statements for Crestar Financial Corporation. 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 13th day of November, 1998. SunTrust Banks, Inc. -------------------- (Registrant) /s/ W.P. O'Halloran ------------------- William P. O'Halloran Senior Vice President and Controller (Chief Accounting Officer) 27 EX-27 2 EXHIBIT 27
9 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 2,190,913 28,168,612 1,333,582 200,479 11,455,372 0 0 42,889,478 666,146 60,841,318 36,482,977 11,102,220 3,366,452 4,605,319 213,108 0 0 5,071,242 60,841,318 2,456,936 412,602 50,603 2,920,141 851,251 1,437,037 1,483,104 93,465 2,872 1,441,488 824,517 554,716 0 0 554,716 2.68 2.64 3.95 141,300 38,700 0 0 651,830 117,103 37,959 666,146 666,146 0 432,995
-----END PRIVACY-ENHANCED MESSAGE-----