-----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, AQdRZgAF00MNZvtrYWC0Cjs6iremI+DLqjmy1XsMNQEsjtZsKy1DNjyLmzEe6Gct +Xp6gzdN2eZcIxFdIGUzVQ== 0000916641-99-000861.txt : 19991115 0000916641-99-000861.hdr.sgml : 19991115 ACCESSION NUMBER: 0000916641-99-000861 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 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: 99747724 BUSINESS ADDRESS: STREET 1: 303 PEACHTREE ST N E CITY: ATLANTA STATE: GA ZIP: 30308 BUSINESS PHONE: 4045887711 MAIL ADDRESS: STREET 1: 303 PEACHTREE ST N E CITY: ATLANTA STATE: GA ZIP: 30308 10-Q 1 SUNTRUST ================================================================================ 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, 1999 ------------------------------------------------- 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, 1999, 319,965,081 shares of the Registrant's Common Stock, $1.00 par value were outstanding. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1 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 7-12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13-26 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, 1999 are not necessarily indicative of the results that may be expected for the full year 1999. 2
Consolidated Statements of Income --------------------------------- Three Months Nine Months Ended September 30 Ended September 30 ----------------------------------- -------------------------------- (Dollars in thousands except per share data)(Unaudited) 1999 1998 1999 1998 ---------------- ---------------- -------------- -------------- Interest Income Interest and fees on loans $ 1,236,018 $ 1,187,684 $ 3,638,730 $ 3,527,616 Interest and dividends on securities available for sale Taxable interest 225,120 190,260 630,716 570,148 Tax-exempt interest 7,622 8,946 23,429 27,318 Dividends (1) 16,580 14,760 48,122 42,296 Interest on funds sold 17,928 14,496 49,931 54,688 Interest on deposits in other banks 448 1,578 2,340 4,395 Other interest 2,726 1,877 7,680 6,501 ---------------- ---------------- -------------- -------------- Total interest income 1,506,442 1,419,601 4,400,948 4,232,962 ---------------- ---------------- -------------- -------------- Interest Expense Interest on deposits 413,039 417,279 1,198,805 1,243,705 Interest on funds purchased 188,651 160,583 530,339 461,823 Interest on other short-term borrowings 21,373 31,648 58,458 102,290 Interest on long-term debt 88,399 88,665 263,746 249,451 ---------------- ---------------- -------------- -------------- Total interest expense 711,462 698,175 2,051,348 2,057,269 ---------------- ---------------- -------------- -------------- Net Interest Income 794,980 721,426 2,349,600 2,175,693 Provision for loan losses 46,517 40,490 137,334 147,452 ---------------- ---------------- -------------- -------------- Net interest income after provision for loan losses 748,463 680,936 2,212,266 2,028,241 ---------------- ---------------- -------------- -------------- Noninterest Income Trust income 126,376 112,948 378,981 342,445 Service charges on deposit accounts 111,644 102,548 324,825 295,392 Other charges and fees 48,976 45,475 144,886 133,475 Credit card fees 29,143 20,102 80,492 63,786 Mortgage production related income 26,697 64,818 127,861 183,839 Mortgage servicing related income 11,935 17,446 53,656 46,211 Retail investment services 23,854 16,020 73,370 49,354 Corporate and institutional investment services 13,174 13,803 48,164 35,564 Trading account profits and commissions 6,181 8,267 28,207 32,884 Securities (losses) gains 2,534 (871) 5,681 7,156 Other noninterest income 46,081 59,549 94,732 89,949 ---------------- ---------------- -------------- -------------- Total noninterest income 446,595 460,105 1,360,855 1,280,055 ---------------- ---------------- -------------- -------------- Noninterest Expense Salaries and other compensation 369,355 378,983 1,141,551 1,057,630 Employee benefits 39,707 45,721 135,625 142,646 Net occupancy expense 49,796 49,150 147,402 142,441 Equipment expense 48,039 45,450 143,127 133,568 Outside processing and software 36,942 32,985 110,465 100,747 Marketing and customer development 24,685 22,647 70,350 72,361 Amortization of intangible assets 9,115 27,975 59,726 76,488 Merger-related expenses 7,116 - 38,507 - Other noninterest expense 107,556 130,054 338,761 355,566 ---------------- ---------------- -------------- -------------- Total noninterest expense 692,311 732,965 2,185,514 2,081,447 ---------------- ---------------- -------------- -------------- Income before provision for income taxes 502,747 408,076 1,387,607 1,226,849 Provision for income taxes 181,341 131,316 490,801 413,727 ================ ================ ============== ============== Net Income $ 321,406 $ 276,760 $ 896,806 $ 813,122 ================ ================ ============== ============== Average common shares - diluted 322,222,668 317,919,790 322,344,492 319,297,337 Average common shares - basic 318,238,977 313,571,745 318,215,354 314,741,821 Net income per average common share - diluted $ 1.00 $ 0.87 $ 2.78 $ 2.55 Net income per average common share - basic 1.01 0.88 2.82 2.58 Dividends declared per common share 0.345 0.250 1.035 0.750 (1) Includes dividends on common stock of The Coca-Cola Company 7,723 7,240 23,168 21,720
See notes to consolidated financial statements 3 Consolidated Balance Sheets ---------------------------
September 30 December 31 September 30 (Dollars in thousands) (Unaudited) 1999 1998 1998 ---------------- --------------- ---------------- Assets Cash and due from banks $ 3,573,746 $ 4,289,889 $ 3,084,950 Trading account 164,820 239,665 209,490 Securities available for sale (1) 18,123,340 17,559,043 15,966,755 Funds sold 1,467,617 1,786,945 1,957,827 Loans 65,566,870 65,089,201 61,325,137 Allowance for loan losses (947,239) (944,557) (928,454) ---------------- --------------- ---------------- Net loans 64,619,631 64,144,644 60,396,683 Premises and equipment 1,632,184 1,519,711 1,498,386 Intangible assets 831,478 797,045 763,041 Customers' acceptance liability 361,114 628,235 405,681 Other assets 1,981,472 2,204,755 2,173,831 ---------------- --------------- ---------------- Total assets $ 92,755,402 $ 93,169,932 $ 86,456,644 ================ =============== ================ Liabilities and Shareholders' Equity Noninterest-bearing deposits $ 13,128,979 $ 14,065,720 $ 11,881,443 Interest-bearing deposits 45,515,083 44,967,563 41,663,147 ---------------- --------------- ---------------- Total deposits 58,644,062 59,033,283 53,544,590 Funds purchased 15,136,501 13,295,833 13,372,331 Other short-term borrowings 1,403,607 2,636,986 2,322,424 Long-term debt 5,275,178 4,757,869 4,684,298 Guaranteed preferred beneficial interests in debentures 1,050,000 1,050,000 1,050,000 Acceptances outstanding 361,114 628,235 405,681 Other liabilities 3,046,860 3,589,082 3,492,991 ---------------- --------------- ---------------- Total liabilities 84,917,322 84,991,288 78,872,315 ---------------- --------------- ---------------- Preferred stock, no par value; 50,000,000 shares authorized; none issued - - - Common stock, $1.00 par value 323,171 322,485 321,246 Additional paid in capital 1,306,910 1,293,011 1,248,542 Retained earnings 5,140,985 4,575,382 4,507,556 Treasury stock and other (214,379) (100,441) (317,287) ---------------- --------------- ---------------- Realized shareholders' equity 6,556,687 6,090,437 5,760,057 Accumulated other comprehensive income 1,281,393 2,088,207 1,824,272 ---------------- --------------- ---------------- Total shareholders' equity 7,838,080 8,178,644 7,584,329 ---------------- --------------- ---------------- Total liabilities and shareholders' equity $ 92,755,402 $ 93,169,932 $ 86,456,644 ================ =============== ================ Common shares outstanding 319,889,489 321,124,134 317,069,442 Common shares authorized 500,000,000 500,000,000 500,000,000 Treasury shares of common stock 3,281,942 1,360,928 4,176,201 (1) Includes net unrealized gains on securities available for sale $ 2,072,970 $ 3,379,725 $ 2,954,329
See notes to consolidated financial statements 4 Consolidated Statements of Cash Flows -------------------------------------
Nine Months Ended September 30 --------------------------------------- (Dollars in thousands) (Unaudited) 1999 1998 ------------------- ---------------- Cash flows from operating activities: Net income $ 896,806 $ 813,122 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation, amortization and accretion 193,561 209,694 Provisions for loan losses and foreclosed property 140,574 148,317 Amortization of compensation element of restricted stock 11,699 9,566 Securities gains (5,681) (7,156) Net (gain) loss on sales of non-interest earning assets (25,251) 6,208 Net decrease (increase) in loans held for sale 2,169,046 (1,080,512) Net decrease (increase) in accrued interest receivable, prepaid expenses and other assets 53,033 (1,179,832) Net (decrease) increase in accrued interest payable, accrued expenses and other liabilities (42,281) 452,580 ------------------- ---------------- Net cash provided by (used in) operating activities 3,391,506 (628,013) ------------------- ---------------- Cash flows from investing activities: Proceeds from maturities of securities available for sale 3,383,067 3,049,312 Proceeds from sales of securities available for sale 3,180,276 4,474,782 Purchases of securities available for sale (8,429,871) (7,650,567) Net increase in loans (2,731,796) (3,584,880) Capital expenditures (208,936) (176,951) Proceeds from the sale of assets 36,206 243,629 Net funds received in acquisitions - 13,420 Loan recoveries 50,955 55,312 ------------------- ---------------- Net cash used in investing activities (4,720,099) (3,575,943) ------------------- ---------------- Cash flows from financing activities: Net decrease in deposits (389,221) (1,036,194) Net increase in funds purchased and other short-term borrowings 607,289 2,433,241 Proceeds from the issuance of long-term debt 1,100,961 2,090,333 Repayment of long-term debt (583,652) (366,393) Proceeds from stock issuance 17,980 82,037 Proceeds used in the acquisition of stock (128,508) (304,103) Restricted stock activity (524) Dividends paid (331,203) (262,385) ------------------- ---------------- Net cash provided by financing activities 293,122 2,636,536 ------------------- ---------------- Net decrease in cash and cash equivalents (1,035,471) (1,567,420) Cash and cash equivalents at beginning of period 6,076,834 6,610,197 ------------------- ---------------- Cash and cash equivalents at end of period $ 5,041,363 $ 5,042,777 =================== ================ Supplemental Disclosure Interest paid $ 2,081,129 $ 2,013,232 Income taxes paid 300,259 270,064
See notes to consolidated financial statements 5
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, 1998 $318,571 $ 1,087,511 $3,967,359 $(109,503) $2,048,153 $ 7,312,091 Net income - - 813,122 - - 813,122 Other comprehensive income: Change in unrealized gains (losses) on securities, net of taxes - - - - (223,881) (223,881) --------------- Total comprehensive income - - - - - 589,241 Cash dividends declared, $0.750 per share - - (262,385) - - (262,385) Exercise of stock options 399 (7,654) - 20,665 - 13,410 Acquisition and retirement of stock (190) - (10,540) (293,373) - (304,103) Restricted stock activity - 1,582 - (1,582) - - Amortization of compensation element of restricted stock - - - 9,566 - 9,566 Stock issued for acquisitions 1,500 109,268 - 47,114 - 157,882 Issuance of stock for employee benefit plans 966 57,835 - 9,826 - 68,627 ---------------------------------------------------------------------------------------- Balance, September 30, 1998 $321,246 $ 1,248,542 $4,507,556 $(317,287) $1,824,272 $ 7,584,329 ======================================================================================== Balance, January 1, 1999 $322,485 $ 1,293,011 $4,575,382 $(100,441) $2,088,207 $ 8,178,644 Net income - - 896,806 - - 896,806 Other comprehensive income: Change in unrealized gains (losses) on securities, net of taxes - - - - (806,814) (806,814) --------------- Total comprehensive income - - - - - 89,992 Cash dividends declared, $1.035 per share - - (331,203) - - (331,203) Exercise of stock options 575 6,483 - 2,552 - 9,610 Acquisition of treasury stock - - - (128,508) - (128,508) Restricted stock activity 10 706 - (1,240) - (524) Amortization of compensation element of restricted stock - - - 11,699 - 11,699 Issuance of stock for employee benefit plans 101 6,710 - 1,559 - 8,370 ---------------------------------------------------------------------------------------- Balance, September 30, 1999 $323,171 $ 1,306,910 $5,140,985 $(214,379) $1,281,393 $ 7,838,080 ========================================================================================
* Balance at September 30, 1998 includes $247,585 for Treasury Stock and $69,702 for Deferred Compensation. Balance at September 30, 1999 includes $153,980 for Treasury Stock and $60,399 for Deferred Compensation. See notes to consolidated financial statements 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ----------------------------------------------------- NOTE 1 - ACCOUNTING POLICIES The consolidated interim financial statements of SunTrust Banks, Inc. ("SunTrust") are unaudited. All significant intercompany accounts and transactions have been eliminated. All historical information for SunTrust has been restated to include Crestar historical information for all periods presented. These financial statements should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 1998. NOTE 2 - ACQUISITIONS On December 31, 1998, SunTrust merged with Crestar Financial Corporation (Crestar). Each outstanding share of Crestar common stock was exchanged for 0.96 shares of SunTrust common stock, resulting in the issuance of 108,696,877 shares of SunTrust common stock. The business combination was accounted for using the pooling-of-interests method of accounting. Accordingly, all historical financial information of SunTrust for all periods presented has been restated to include Crestar's financial information. Certain conforming adjustments and reclassifications have been made to Crestar's historical information to conform to SunTrust's accounting and financial reporting policies. These adjustments, which relate primarily to the accounting policies with respect to loan origination costs, did not have a material impact on the combined financial statements. During 1998, SunTrust recorded $161.9 million in pre-tax Crestar merger-related charges. The following table shows these merger-related charges and the remaining liability at September 30, 1999.
Merger-Related Charges Utilized Balance Utilized Balance (In thousands) Pretax In 1998 December 31, 1998 In 1999 September 30, 1999 ----------- ------------ ---------------------- ----------- -------------------- Transaction costs $ 40,300 $ 6,858 $ 33,442 $ 33,442 - Severance and termination accruals 38,900 - 38,900 24,640 $ 14,260 Adjustment to deferred compensation liabilities 11,319 11,319 - - - Litigation loss reserve 7,500 7,500 - - - Write-off of unrealizable assets 17,400 17,400 - - - Miscellaneous integration costs 4,000 1,296 2,704 2,704 - ------------ -------------- ---------------------- ----------- ------------------ Merger-related expenses 119,419 44,373 75,046 60,786 14,260 ------------ -------------- ---------------------- ----------- ------------------ Provision for loan losses 20,000 20,000 - - - Provision for taxes 22,500 22,500 - - - ------------ ------------- ---------------------- ----------- ------------------- Total merger-related charges $ 161,919 $ 86,873 $ 75,046 $ 60,786 $ 14,260 ============ ============= ====================== =========== ===================
At December 31, 1998, SunTrust expected to record approximately $88 million in additional merger-related charges primarily related to systems conversions and business line integration over the next 18 to 24 months. For the first nine months of 1999, $38.5 million ($27.6 million after-tax) of these additional merger-related charges were recorded. These charges included $12.4 million in accelerated depreciation and amortization based upon estimates of systems integration time tables, $11.6 million in severance and $14.5 million in miscellaneous integration costs. SunTrust expects to record additional merger-related charges of approximately $49.5 million through the year 2000. 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED ------------------------------------------------------------------ NOTE 3 - DERIVATIVE FINANCIAL INSTRUMENTS SunTrust uses derivatives to hedge interest rate exposures by modifying the interest rate characteristics of related balance sheet instruments. The specific criteria required for derivatives used as hedges are described below. Derivatives that do not meet these criteria are carried at market value with changes in value recognized currently in earnings. 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 may include swaps, forwards, futures and options. The interest component associated with derivatives used as hedges or to modify the interest rate characteristics of assets and liabilities is recognized over the life of the contract in net interest income. If a contract is cancelled prior to its termination date, the cumulative change in the market value of the 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. In instances where the underlying instrument is sold, the fair value of the associated derivative is recognized immediately in the component of earnings relating to the underlying instrument. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including derivative instruments embedded in other contracts and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value. This statement could increase volatility in earnings and other comprehensive income. In June of 1999, SFAS No. 133 was amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133". SFAS No. 137 delays the effective date of SFAS No. 133 for a year or for all fiscal years beginning after June 15, 2000. SunTrust will adopt SFAS No. 133 effective January 1, 2001 and although SunTrust has begun an in-depth analysis to determine the effects of the implementation, currently it is not expected to have a material impact on SunTrust's financial position or results of operations. NOTE 4 - GUARANTEED PREFERRED BENEFICIAL INTERESTS IN DEBENTURES SunTrust has established special purpose trusts, which collectively issued $1,050 million in trust preferred securities. The proceeds from these issuances, together with the proceeds of the related issuances of common securities of the trusts, were invested in junior subordinated deferrable interest debentures of SunTrust. The sole assets of these special purpose trusts are the debentures. These debentures rank junior to the senior and subordinated debt issued by SunTrust. SunTrust owns all of the common securities of the special purpose trusts. The preferred securities issued by the trusts rank senior to the trusts' common securities. The obligations of SunTrust under the debentures, the indentures, the relevant trust agreements and the guarantees, in the aggregate, constitute a full and unconditional guarantee by SunTrust of the obligations of the trusts under the trust preferred securities and rank subordinate and junior in right of payment to all liabilities of SunTrust. The trust preferred securities may be called prior to maturity at the option of SunTrust. 8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED ------------------------------------------------------------------ NOTE 5 - COMPREHENSIVE INCOME Under Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income", some transactions and other economic events that bypass the income statement must be displayed as other comprehensive income. SunTrust'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 nine months of 1999 and 1998 is calculated as follows: (In thousands)
Before Income Net of Income Tax Tax (Benefit) Income Tax ---------- ------------- ---------- Unrealized gains and losses (net) recognized in other comprehensive income: Nine months ended September 30, 1999 $ (1,306,755) $ (499,941) $ (806,814) Nine months ended September 30, 1998 $ (366,614) $ (142,733) $ (223,881)
1999 1998 ---- ---- Amounts reported in net income: Gain on sale of securities $ 5,681 $ 7,156 Amortization and accretion, net 1,616 2,853 ------------------ ---------------- Reclassification adjustment 7,297 10,009 Income tax expense (2,792) (3,897) ------------------ ---------------- Reclassification adjustment, net of tax $ 4,505 $ 6,112 ================== ================ Amounts reported in other comprehensive income: Unrealized (losses) gains arising during period, net of tax (802,309) (217,769) Reclassification adjustment, net of tax (4,505) (6,112) ------------------ ---------------- Net unrealized (losses) gains recognized in other comprehensive income (806,814) (223,881) Net income 896,806 813,122 ------------------ ---------------- Total comprehensive income $ 89,992 $ 589,241 ================== ================
9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED ------------------------------------------------------------------ NOTE 6 - EARNINGS PER SHARE RECONCILIATION Net income is the same in the calculation of basic and diluted EPS. A reconciliation of the difference between average basic common shares outstanding and average diluted common shares outstanding for the periods ended September 30, 1999 and September 30, 1998 is included in the following table.
Computation of Per Share Earnings (In thousands, except per share data) Three Months Nine Months Ended September 30 Ended September 30 ------------------------------------- ----------------------------------- 1999 1998 1999 1998 ----------------- ---------------- --------------- ---------------- Basic - ----- Net income $ 321,406 $ 276,760 $ 896,806 $ 813,122 ----------------- ---------------- --------------- ----------------- Average common shares 318,239 313,572 318,215 314,742 ----------------- ---------------- --------------- ----------------- Earnings per common share - basic $ 1.01 $ 0.88 $ 2.82 $ 2.58 ================= ================ =============== ================= Diluted - ------- Net income $ 321,406 $ 276,760 $ 896,806 $ 813,122 ----------------- ---------------- --------------- ----------------- Average common shares outstanding 318,239 313,572 318,215 314,742 Effect of dilutive securities: Stock options 2,274 2,746 2,460 2,927 Performance restricted stock 1,710 1,602 1,669 1,628 ----------------- ---------------- --------------- ----------------- Average diluted common shares 322,223 317,920 322,344 319,297 ----------------- ---------------- --------------- ----------------- Earnings per common share - diluted $ 1.00 $ 0.87 $ 2.78 $ 2.55 ================= ================ =============== =================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED ------------------------------------------------------------------ NOTE 7 - SEGMENT REPORTING SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", requires disclosure of information related to SunTrust's reportable operating segments. The reportable segments were determined based on management's internal reporting approach, which is aligned along geographic regions. The reportable segments are comprised of each of the state bank holding companies of Florida, Georgia, Tennessee, and Crestar (which includes Virginia, Maryland and the District of Columbia). Each bank holding company provides a wide array of banking services to consumer and commercial customers and earns interest income from loans made to customers and investments in securities available for sale. Each bank holding company also recognizes fees related to trust, deposit, lending and other services provided to customers. The "all other" segment consists primarily of SunTrust's non-bank subsidiaries, including SunTrust's credit card bank. Most of the revenue earned by the non-bank subsidiaries is classified in noninterest income and consists primarily of retail, corporate, and institutional investment income. No transactions with a single customer contributed 10% or more to SunTrust's total revenue. The accounting policies for each segment are the same as those used by SunTrust. The segment results include overhead allocations and intercompany transactions that were recorded at estimated market prices. All intercompany transactions have been eliminated to determine the consolidated balances. The results for the four reportable segments and all other segments of SunTrust are included in the following table.
Nine Months Ended September 30, 1999 ------------------------------------------------------------------------------------------------ (In thousands) Florida Georgia Tennessee Crestar All Other Eliminations Consolidated ------------------------------------------------------------------------------------------------ Total interest income $ 1,476,235 $1,097,295 $ 440,972 $ 1,344,404 $ 338,263 $ (296,221) $ 4,400,948 Total interest expense 657,139 520,870 212,291 607,291 349,978 (296,221) 2,051,348 ------------------------------------------------------------------------------------------------ Net interest income 819,096 576,425 228,681 737,113 (11,715) - 2,349,600 Provision for loan losses 29,303 18,081 6,532 42,003 41,415 - 137,334 ------------------------------------------------------------------------------------------------ Net interest income after provision 789,793 558,344 222,149 695,110 (53,130) - 2,212,266 ------------------------------------------------------------------------------------------------ Total noninterest income 422,836 304,362 113,918 410,520 845,865 (736,646) 1,360,855 Total noninterest expense 689,221 467,891 195,108 655,859 914,081 (736,646) 2,185,514 ------------------------------------------------------------------------------------------------ Income before taxes 523,408 394,815 140,959 449,771 (121,346) - 1,387,607 Provision for income taxes 189,562 135,468 51,732 155,022 (40,983) - 490,801 ------------------------------------------------------------------------------------------------ Net income $ 333,846 $ 259,347 $ 89,227 $ 294,749 $ (80,363) $ - $ 896,806 ================================================================================================ Other Significant Items Total assets $31,077,941 $26,058,374 $ 9,003,213 $26,208,190 $ 17,914,377 $(17,506,693) $92,755,402 Investment in subsidiaries 2,553,942 3,406,409 731,669 2,469,867 385,866 (9,547,753) - Depreciation, amortization, and accretion (net) 55,533 30,705 15,137 66,674 25,512 - 193,561 Total expenditures for long-lived assets 59,553 13,195 6,641 34,485 95,062 - 208,936 Revenues from external customers Total interest income $1,394,293 $1,036,187 $ 431,230 $ 1,329,284 $ 209,954 $ - $ 4,400,948 Total noninterest income 357,158 251,052 91,437 409,477 251,731 - 1,360,855 ------------------------------------------------------------------------------------------------ Total income $1,751,451 $1,287,239 $ 522,667 $ 1,738,761 $ 461,685 $ - $ 5,761,803 ================================================================================================ Revenues from affiliates Total interest income $ 81,942 $ 61,108 $ 9,742 $ 15,120 $ 128,309 $ (296,221) Total noninterest income 65,678 53,310 22,481 1,043 594,134 (736,646) ------------------------------------------------------------------------------------------------ Total income $ 147,620 $ 114,418 $ 32,223 $ 16,163 $ 722,443 $ (1,032,867) ================================================================================================
Nine Months Ended September 30, 1998 ------------------------------------------------------------------------------------------------------ (In thousands) Florida Georgia Tennessee Crestar All Other Eliminations Consolidated ------------------------------------------------------------------------------------------------------ Total interest income $ 1,446,024 $ 1,003,942 $ 432,708 $ 1,315,342 $ 337,666 $ (302,720) $ 4,232,962 Total interest expense 682,194 481,887 214,013 621,929 359,966 (302,720) 2,057,269 ------------------------------------------------------------------------------------------------------ Net interest income 763,830 522,055 218,695 693,413 (22,300) - 2,175,693 Provision for loan losses 27,604 17,626 5,662 53,986 42,574 - 147,452 ------------------------------------------------------------------------------------------------------ Net interest income after provision 736,226 504,429 213,033 639,427 (64,874) - 2,028,241 ------------------------------------------------------------------------------------------------------ Total noninterest income 377,206 269,335 104,599 439,276 727,427 (637,788) 1,280,055 Total noninterest expense 637,366 433,017 187,734 676,371 784,747 (637,788) 2,081,447 ------------------------------------------------------------------------------------------------------ Income before taxes 476,066 340,747 129,898 402,332 (122,194) - 1,226,849 Provision for income taxes 174,217 114,592 46,723 143,926 (65,731) - 413,727 ------------------------------------------------------------------------------------------------------ Net income $ 301,849 $ 226,155 $ 83,175 $ 258,406 $ (56,463) $ - $ 813,122 ====================================================================================================== Other significant Items Total assets $ 28,020,646 $ 23,687,334 $ 8,318,580 $ 25,615,081 $ 15,923,136 $ (15,108,133) $ 86,456,644 Investment in subsidiaries 2,414,304 3,646,491 683,895 2,299,979 379,516 (9,424,185) - Depreciation, amortization, and accretion (net) 73,140 37,348 18,928 76,604 3,674 - 209,694 Total expenditures for long-lived assets 64,519 19,808 6,453 41,458 44,713 - 176,951 Revenues from external customers Total interest income $ 1,338,478 $ 949,242 $ 422,112 $ 1,315,342 $ 207,788 $ - $ 4,232,962 Total noninterest income 313,858 220,540 83,503 439,276 222,878 - 1,280,055 ------------------------------------------------------------------------------------------------------ Total income $ 1,652,336 $ 1,169,782 $ 505,615 $ 1,754,618 $ 430,666 $ - $ 5,513,017 ====================================================================================================== Revenues from affiliates Total interest income $ 107,546 $ 54,700 $ 10,596 $ - $ 129,878 $ (302,720) Total noninterest income 63,348 48,795 21,096 - 504,549 (637,788) --------------------------------------------------------------------------------------- Total income $ 170,894 $ 103,495 $ 31,692 $ - $ 634,427 $ (940,508) =======================================================================================
NOTE 8 - SUBSEQUENT EVENT On October 15, 1999, the Company announced an agreement to sell approximately $1.4 billion of the consumer credit card portfolio to MBNA America Bank, N.A. The sale is expected to result in a gain of approximately $205 million on an after-tax basis. The transaction is expected to close in the fourth quarter of 1999. The business, corporate and purchasing card portfolios were not part of the sale and will continue to be maintained by SunTrust as will the merchant services line of business. 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. SunTrust's principal banking subsidiaries are SunTrust Banks of Florida, Inc., SunTrust Banks of Georgia, Inc., SunTrust Banks of Tennessee, Inc. and Crestar Financial Corporation, all of which are bank holding companies. SunTrust provides a full line of consumer and commercial banking services in Alabama, Florida, Georgia, Maryland, Tennessee, Virginia and the District of Columbia. Our primary businesses include traditional deposit and credit services as well as trust and investment services. Through various subsidiaries, we provide credit cards, mortgage banking, credit-related insurance, leasing services, data processing and information services, securities brokerage, investment advisory services and investment banking services. Other nonbank subsidiaries primarily support SunTrust's banking operations, providing data processing and other services. The following analysis of the financial performance of SunTrust for the third quarter of 1999 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. In the third quarter of 1999, SunTrust announced it will consolidate its 26 separate bank charters into a single state charter effective January 1, 2000. The results of operations for the nine months ended September 30, 1999 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 operating earnings of $325.9 million and $924.3 million for the third quarter and first nine months of 1999, an increase of 17.8% and 13.7% compared with $276.7 million and $813.1 million in the same periods of 1998 (excluding after-tax charges related to the Crestar merger of $4.5 million for the third quarter and $27.5 for the first nine months of 1999). Diluted earnings per share, adjusted for merger charges, grew 16.1% to $1.01 and 12.6% to $2.87 from $0.87 and $2.55 in the same periods last year. Reported net income was $321.4 million, or $1.00 per diluted share for the third quarter and $896.8 million, or $2.78 per diluted share for the first nine months of 1999. The growth in net income resulted from strong loan demand compared to the same period last year. 13
Selected Quarterly Financial Data Table 1 (Dollars in millions except per share data) Quarters -------------------------------------------------------------------------------- 1999 1998 ----------------------------------------------- ----------------------------- 3 2 1 4 3 -------------- -------------- ------------- ------------- -------------- Summary of Operations Interest and dividend income $ 1,506.4 $ 1,452.5 $ 1,442.0 $ 1,443.0 $ 1,419.5 Interest expense 711.4 667.8 672.2 689.5 698.2 -------------- -------------- ------------- -------------- -------------- Net interest income 795.0 784.7 769.8 753.5 721.3 Provision for loan losses 46.5 48.8 42.0 67.1 40.5 -------------- -------------- ------------- -------------- -------------- Net interest income after provision for loan losses 748.5 735.9 727.8 686.4 680.8 Noninterest income 446.6 469.3 444.9 436.1 460.1 Noninterest expense 692.3 752.3 740.9 851.0 732.9 -------------- -------------- ------------- -------------- -------------- Income before provision for income taxes 502.8 452.9 431.8 271.5 408.0 Provision for income taxes 181.4 159.2 150.1 113.6 131.3 -------------- -------------- ------------- -------------- -------------- Net income $ 321.4 $ 293.7 $ 281.7 $ 157.9 $ 276.7 ============== ============== ============= ============== ============== Net interest income (taxable-equivalent) $ 805.4 $ 795.4 $ 780.7 $ 764.6 $ 732.4 Per common share Net income - diluted $ 1.00 $ 0.91 $ 0.87 $ 0.49 $ 0.87 Net income - basic 1.01 0.92 0.89 0.50 0.88 Dividends declared 0.345 0.345 0.345 0.250 0.250 Book value 24.50 25.47 25.32 25.47 23.92 Market price High 70.88 73.00 79.44 80.63 87.75 Low 61.56 63.06 60.44 55.06 54.00 Close 65.75 69.44 62.25 76.50 62.00 Selected Average Balances Total assets $ 92,447.7 $ 92,304.2 $ 91,696.6 $ 89,283.1 $ 85,372.1 Earning assets 82,517.2 81,329.1 80,684.8 78,224.4 74,731.7 Loans 65,060.0 64,733.1 64,854.0 63,134.0 60,039.5 Total deposits 58,423.6 57,743.7 56,895.4 54,828.4 53,658.3 Realized shareholders' equity 6,522.5 6,328.2 6,120.2 5,898.6 5,618.9 Total shareholders' equity 8,210.7 8,322.5 8,146.9 7,947.6 7,990.8 Common shares - diluted (thousands) 322,223 322,448 322,364 320,224 317,920 Common shares - basic (thousands) 318,239 318,315 318,090 315,403 313,572 Financial Ratios ROA* 1.42 % 1.32 % 1.29 % 0.73 % 1.35 % ROE* 19.55 18.61 18.67 10.62 19.54 Net interest margin* 3.87 3.92 3.92 3.88 3.89
* 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. 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, 1999 June 30, 1999 ----------------------------------------------- ----------------------------------------- Average Income/ Yields/ Average Income/ Yields/ Balances Expense Rates Balances Expense Rates --------------- ------------------ ---------- -------------- ------------ ----------- Assets Loans:(1) Taxable $ 64,032.3 $ 1,223.5 7.58 % $63,596.4 $1,187.7 7.49 % Tax-exempt(2) 1,027.7 19.1 7.36 1,136.7 20.0 7.07 ----------------------------------------------- ----------------------------------------- Total loans 65,060.0 1,242.6 7.58 64,733.1 1,207.7 7.48 Securities available for sale: Taxable 15,357.3 242.1 6.25 14,415.3 224.4 6.24 Tax-exempt(2) 555.3 11.0 7.91 566.2 11.5 8.10 ----------------------------------------------- ----------------------------------------- Total securities available for sale 15,912.6 253.1 6.31 14,981.5 235.9 6.31 Funds sold 1,274.5 17.9 5.58 1,321.8 16.5 5.02 Other short-term investments(2) 270.1 3.2 4.71 292.7 3.1 4.26 ----------------------------------------------- ----------------------------------------- Total earning assets 82,517.2 1,516.8 7.29 81,329.1 1,463.2 7.22 Allowance for loan losses (949.0) (949.1) Cash and due from banks 3,505.4 3,599.7 Premises and equipment 1,622.9 1,598.1 Other assets 3,014.3 3,502.5 Unrealized gains on securities available for sale 2,736.9 3,223.9 ----------------------------------------------- ----------------------------------------- Total assets $ 92,447.7 $92,304.2 =============================================== ========================================= Liabilities and Shareholders' Equity Interest-bearing deposits: NOW/Money market accounts $ 19,920.5 $ 132.0 2.63 % $19,833.1 $ 126.5 2.56 % Savings 6,922.6 50.7 2.90 7,003.4 49.9 2.86 Consumer time 9,794.8 115.8 4.69 9,815.2 116.2 4.75 Other time 8,931.5 114.5 5.08 8,186.0 99.1 4.86 ----------------------------------------------- ----------------------------------------- Total interest-bearing deposits 45,569.4 413.0 3.60 44,837.7 391.7 3.50 Funds purchased 14,817.9 188.6 5.05 14,849.3 172.4 4.66 Other short-term borrowings 1,632.3 21.4 5.19 1,448.1 16.8 4.65 Long-term debt 5,782.6 88.4 6.06 5,741.4 86.9 6.07 ----------------------------------------------- ----------------------------------------- Total interest-bearing liabilities 67,802.2 711.4 4.16 66,876.5 667.8 4.00 Noninterest-bearing deposits 12,854.2 12,906.0 Other liabilities 3,580.6 4,199.2 Realized shareholders' equity 6,522.5 6,328.2 Accumulated other comprehensive income 1,688.2 1,994.3 ----------------------------------------------- ----------------------------------------- Total liabilities and shareholders' equity $ 92,447.7 $92,304.2 =============================================== ========================================= Interest rate spread 3.13 % 3.22 % ----------------------------------------------- ----------------------------------------- Net Interest Income $ 805.4 $ 795.4 ----------------------------------------------- ----------------------------------------- Net Interest Margin(3) 3.87 % 3.92 % ----------------------------------------------- -----------------------------------------
(1) Interest income includes loan fees of $36.1, $34.7 and $30.3 in the quarters ended September 30 and June 30, 1999 and September 30, 1998 and $104.1 and $87.9 in the nine months ended September 30, 1999 and 1998. 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 $10.4, $10.7 and $11.1 in the quarters ended September 30 and June 30, 1999 and September 30, 1998 and $31.9 and $33.3 in the nine months ended September 30, 1999 and 1998. NET INTEREST INCOME/MARGIN. SunTrust's net interest margin was 3.91% for the first nine months of 1999, a decrease of 9 basis points from the first nine months of 1998. The rate on earning assets declined 46 basis points to 7.27% and the rate on interest bearing liabilities decreased 43 basis points to 4.08% due to the decrease in rates on time deposits. 15
Table 2 Quarter Ended Nine Months Ended - ----------------------------------------------------------------------------------------------------------------------------------- September 30, 1998 September 30, 1999 September 30, 1998 - ------------------------------------------ ------------------------------------------ ----------------------------------------- Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/ Balances Expense Rates Balances Expense Rates Balances Expense Rates - --------------- ------------- ---------- --------------- ------------- ---------- -------------- ------------- ---------- $58,997.5 $1,173.8 7.89 % $ 63,767.1 $ 3,598.4 7.54 % $57,920.7 $3,486.2 8.05% 1,042.0 20.4 7.79 1,116.0 60.3 7.22 1,030.1 60.7 7.88 - ------------------------------------------ ------------------------------------------ ----------------------------------------- 60,039.5 1,194.2 7.89 64,883.1 3,658.7 7.54 58,950.8 3,546.9 8.04 12,652.8 205.4 6.44 14,487.7 680.1 6.28 12,534.9 613.5 6.54 627.9 13.0 8.22 565.0 34.0 8.05 641.8 40.0 8.32 - ------------------------------------------ ------------------------------------------ ----------------------------------------- 13,280.7 218.4 6.52 15,052.7 714.1 6.34 13,176.7 653.5 6.63 1,084.3 14.5 5.30 1,280.2 49.9 5.21 1,310.5 54.7 5.58 327.2 3.5 4.25 301.0 10.1 4.50 316.2 11.1 4.67 - ------------------------------------------ ------------------------------------------ ----------------------------------------- 74,731.7 1,430.6 7.60 81,517.0 4,432.8 7.27 73,754.2 4,266.2 7.73 (931.1) (949.3) (935.5) 3,194.6 3,564.3 3,208.0 1,487.3 1,583.9 1,473.7 3,045.8 3,359.6 3,098.6 3,843.8 3,076.8 3,675.5 - ------------------------------------------ ------------------------------------------ ----------------------------------------- $85,372.1 $ 92,152.3 $84,274.5 ========================================== ========================================== ========================================= $18,408.9 $ 136.2 2.94 % $ 19,776.6 $ 385.7 2.61 % $18,000.9 $ 393.0 2.92% 6,613.5 55.4 3.32 6,961.8 151.2 2.90 6,622.8 164.7 3.33 10,294.4 133.9 5.16 9,874.5 353.3 4.78 10,476.5 404.6 5.16 6,665.0 91.7 5.46 8,336.3 308.6 4.95 6,728.7 281.4 5.59 - ------------------------------------------ ------------------------------------------ ----------------------------------------- 41,981.8 417.2 3.94 44,949.2 1,198.8 3.57 41,828.9 1,243.7 3.98 11,875.2 160.6 5.36 14,817.7 530.3 4.79 11,490.2 461.8 5.37 2,307.3 31.7 5.44 1,618.6 58.5 4.83 2,513.2 102.3 5.44 5,565.7 88.7 6.32 5,770.4 263.7 6.11 5,207.3 249.5 6.40 - ------------------------------------------ ------------------------------------------ ----------------------------------------- 61,730.0 698.2 4.49 67,155.9 2,051.3 4.08 61,039.6 2,057.3 4.51 11,676.5 12,744.0 11,524.7 3,974.8 4,025.5 3,888.4 5,618.9 6,325.1 5,554.7 2,371.9 1,901.8 2,267.1 - ------------------------------------------ ------------------------------------------ ----------------------------------------- $85,372.1 $ 92,152.3 $84,274.5 ========================================== ========================================== ========================================= 3.11 % 3.19 % 3.22% - ------------------------------------------ ------------------------------------------ ----------------------------------------- $ 732.4 $ 2,381.5 $2,208.9 - ------------------------------------------ ------------------------------------------ ----------------------------------------- 3.89 % 3.91 % 4.00% - ------------------------------------------ ------------------------------------------ -----------------------------------------
(3) Derivative instruments used to help balance SunTrust's interest-sensitivity position increased net interest income by $4.3, $5.8 and $1.0 in the quarters ended September 30 and June 30, 1999 and September 30, 1998 and increased net interest income by $15.0 and $4.3 in the nine months ended September 30, 1999 and September 30, 1998. Without these swaps, the net interest margin would have been 3.85%, 3.89%, and 3.88%, in the quarters ended September 30 and June 30, 1999, and September 30, 1998 and 3.88% and 4.00% in the nine months ended September 30, 1999 and September 30, 1998. Interest income, which SunTrust 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 1999 and had no impact on the net interest margin in the same period last year. Table 2 contains more detailed information concerning average balances and interest yields earned and rates paid. SunTrust periodically evaluates the interest rate risk assumptions contained in the annual report. Management continues to believe that our sensitivity to interest rates is relatively neutral. 16 NONINTEREST INCOME. Noninterest income in the third quarter and first nine months of 1999, adjusted to exclude the effect of securities gains and losses, decreased $16.9 million, or 3.7% and increased 82.3 million, or 6.5%, from the comparable periods last year. Trust income, SunTrust's largest source of noninterest income, increased $13.4 million, or 11.9% and $36.5 million, or 10.7% over the same periods. Other income in the third quarter of 1999 includes a $6.8 million pre-tax gain on the sale of student loans. The second quarter of 1999 includes a $8.5 million pre-tax gain on the sale of student loans and the third quarter of 1998 includes a $54.0 million pre-tax gain on the sale of credit card loans. During the third quarter of 1999, SunTrust began to record amortization expense for mortgage-servicing rights as a reduction in noninterest income, in conforming to industry practice. The $15.9 million of amortization expense recorded in the third quarter had previously been charged to noninterest expense.
Noninterest Income Table 3 (In millions) Quarters ---------------------------------------------------------------------- 1999 1998 ------------------------------------------ ------------------------- 3 2 1 4 3 ------------- ---------- ----------- ----------- ----------- Trust income $ 126.4 $ 126.3 $ 126.3 $ 117.7 $ 112.9 Service charges on deposit accounts 111.6 107.1 106.1 105.7 102.6 Other charges and fees 49.0 49.3 46.5 50.8 45.4 Credit card fees 29.2 28.2 23.1 23.5 20.1 Mortgage production related income 26.7 47.6 53.5 58.5 64.9 Mortgage servicing related income 12.0 21.5 20.2 18.9 17.4 Retail investment services 23.9 26.0 23.5 15.2 16.1 Corporate and institutional investment services 13.2 16.3 18.7 20.2 13.8 Trading account profits and commissions 6.2 11.4 10.6 11.7 8.3 Securities gains (losses) 2.6 3.9 (0.7) 1.0 (0.8) Other income 45.8 31.7 17.1 12.9 59.4 ------------- ---------- ----------- ----------- ----------- Total noninterest income $ 446.6 $ 469.3 $ 444.9 $ 436.1 $ 460.1 ============= ========== =========== =========== ===========
NONINTEREST EXPENSE. Noninterest expense decreased $40.7 million, or 5.5% and increased $104.1 million, or 5.0% in the third quarter and first nine months of 1999 compared to the same periods last year. Personnel expenses, consisting of salaries, other compensation and employee benefits, decreased $15.6 million, or 3.7% and increased $76.9 million, or 6.4% over the earlier periods. The efficiency ratio in the third quarter of 1999 was 54.7% (excluding the Crestar merger-related charges), a decrease from 61.5% in the third quarter of 1998. Noninterest expense includes Crestar merger-related expenses of $7.1 million, $17.6 million and $13.8 million in the third, second and first quarters of 1999 and $119.4 million in the fourth quarter of 1998. Mortgage servicing rights amortization of $15.9 million was recorded as a reduction of other income beginning with the third quarter of 1999. 17 NONINTEREST EXPENSE TABLE 4 (In millions)
Quarters ---------------------------------------------------------------------- 1999 1998 ------------------------------------------ ------------------------- 3 2 1 4 3 ------------- ----------- ----------- ----------- ----------- Salaries $ 288.5 300.4 $ 298.5 $ 289.9 $ 278.1 Other compensation 80.9 88.9 84.4 86.2 100.8 Employee benefits 39.7 41.5 54.4 39.2 45.7 Net occupancy expense 49.8 49.9 47.7 49.8 49.1 Equipment expense 48.0 49.8 45.3 45.2 45.5 Outside processing and software 37.0 38.7 34.8 37.7 32.9 Marketing and customer development 24.7 23.9 21.8 34.7 22.7 Credit and collection services 17.8 19.2 16.6 18.9 17.8 Communications 16.5 17.6 16.1 15.8 15.8 Postage and delivery 16.3 17.4 17.1 16.1 15.9 Consulting and legal 13.0 15.6 15.4 19.6 19.6 Operating supplies 10.7 14.3 13.3 14.3 13.2 Amortization of intangible assets 9.1 24.9 25.7 28.9 28.0 Merger-related expenses 7.1 17.6 13.8 119.4 - FDIC premiums 1.8 2.1 2.0 2.3 2.3 Other real estate expense 0.2 (2.7) (1.1) (1.0) (4.0) Other expense 31.2 33.2 35.1 34.0 49.5 ------------- ----------- ----------- ----------- ----------- Total noninterest expense $ 692.3 $ 752.3 $ 740.9 $ 851.0 $ 732.9 ============= =========== =========== =========== =========== Efficiency ratio (1) 54.7 % 58.1 % 59.3 % 60.9 % 61.5 %
(1) Excludes merger-related expenses. Provision for Loan Losses. The SunTrust Allowance for Loan and Lease Losses Review Committee meets on a quarterly basis in order to assess the adequacy of the allowance, analyze provision and charge-off trends and to affirm allowance methodology. As a result of this review process, the Committee deemed the allowance at the end of the third quarter of 1999 to be adequate in order to cover losses inherent in the loan portfolio. The adequacy of the allowance is assessed based on historical loss rates, specifically analyzed loans and other risk factors. In the third quarter of 1999, SunTrust continued to address deterioration in the loan portfolio related to the healthcare industry and emerging concerns in some sectors of the textile industry brought about as a result of increased competition overseas. The level of commercial charge-offs this year as well as the increase in nonaccrual loans in the third quarter is primarily due to this deterioration. Other risk factors, including continuing high consumer bankruptcy rates and high consumer debt levels, as well as, global economic risk factors such as Asian competition, continue to influence the assessment of the adequacy of the allowance. During the third quarter of 1999, Hurricane Floyd and several other tropical storms had a negative impact on portions of our market. The effects included damage to households and businesses, resulting in general business disruption and an economic impact caused by the loss of tourism both during the storms and from subsequent cancellations. SunTrust increased the provision for loan losses in the third quarter of 1999 to $46.5 million from $40.5 million in the same period last year. Net charge-offs to average loans declined to .25% in the third quarter of this year from .28% in the third quarter of 1998. Net charge-offs declined to $40.8 million from $42.8 in the third quarter of 1998. Total provision exceeded net charge-offs by $5.8 million. Approximately $86 million of the allowance for loan losses was allocated to the $1.4 billion credit card portfolio that will be sold. 18 SunTrust's allowance for loan losses totaled $947.2 million at September 30, 1999, which was 1.44% of period loans and 398.6% of total nonperforming loans, with both ratios having decreased from the third quarter 1998. As of September 30, 1998 the allowance for loan losses was $928.5 million, or 1.51% of quarter-end loans and 468.3% of total nonperforming loans. SUMMARY OF LOAN LOSS EXPERIENCE TABLE 5 (Dollars in millions)
Quarters ----------------------------------------------------------------------------------- 1999 1998 ------------------------------------------------ ------------------------------- 3 2 1 4 3 -------------- -------------- ------------- -------------- -------------- Allowance for Loan Losses Balances - beginning of quarter $ 941.4 $ 952.6 $ 944.6 $ 928.5 $ 908.9 Allowance from acquisitions and other activity - net 0.1 (13.4) - 1.5 21.9 Provision for loan losses 46.5 48.8 42.0 67.1 40.5 Charge-offs: Commercial (21.4) (24.0) (12.2) (19.2) (11.9) Real estate: Construction (1.1) (0.1) (0.7) (1.7) (1.0) Residential mortgages (3.5) (3.6) (3.1) (2.9) (3.6) Other (0.9) (2.6) (0.6) (1.6) (1.6) Credit card (18.2) (19.4) (22.7) (26.1) (27.1) Other consumer loans (11.6) (13.7) (12.9) (16.3) (14.3) -------------- -------------- ------------- -------------- -------------- Total charge-offs (56.7) (63.4) (52.2) (67.8) (59.5) -------------- -------------- ------------- -------------- -------------- Recoveries: Commercial 3.8 4.0 4.0 2.6 3.8 Real estate: Construction 0.1 0.4 0.2 - - Residential mortgages 1.6 0.8 0.8 0.9 0.3 Other 0.6 1.3 2.6 2.2 1.4 Credit card 2.7 3.3 3.2 2.7 3.5 Other consumer loans 7.1 7.0 7.4 6.9 7.7 -------------- -------------- ------------- -------------- -------------- Total recoveries 15.9 16.8 18.2 15.3 16.7 -------------- -------------- ------------- -------------- -------------- Net charge-offs (40.8) (46.6) (34.0) (52.5) (42.8) -------------- -------------- ------------- -------------- -------------- Balance - end of quarter $ 947.2 $ 941.4 $ 952.6 $ 944.6 $ 928.5 ============== ============== ============= ============== ============== Quarter-end loans outstanding $ 65,566.9 $ 65,331.1 $ 64,274.1 $ 65,089.2 $ 61,325.1 Average loans 65,060.0 64,733.1 64,854.0 63,134.0 60,039.5 Allowance to quarter-end loans 1.44 % 1.44 % 1.48 % 1.45 % 1.51 % Allowance to nonperforming loans 398.6 392.9 481.5 456.0 468.3 Net charge-offs to average loans (annualized) 0.25 0.29 0.21 0.33 0.28
19 NONPERFORMING ASSETS TABLE 6 (Dollars in millions)
1999 1998 ----------------------------------------------- ------------------------------- September 30 June 30 March 31 December 31 September 30 -------------- ------------ -------------- -------------- --------------- Nonperforming Assets Nonaccrual loans: Commercial $ 82.3 $ 85.4 $ 47.7 $ 50.1 $ 48.3 Real Estate: Construction 11.8 14.0 14.8 13.5 14.8 Residential mortgages 85.9 80.7 80.7 83.9 77.7 Other 45.8 48.0 41.6 46.6 43.5 Consumer loans 11.8 11.5 13.0 12.5 13.4 ------------- -------------- ------------- -------------- ------------- Total nonaccrual loans 237.6 239.6 197.8 206.6 197.7 Restructured loans 0.1 - 0.1 0.6 0.5 ------------- -------------- ------------- -------------- ------------- Total nonperforming loans 237.7 239.6 197.9 207.2 198.2 Other real estate owned 24.2 28.2 36.1 34.9 33.1 ------------- -------------- ------------- -------------- ------------- Total nonperforming assets $ 261.9 $ 267.8 $ 234.0 $ 242.1 $ 231.3 ============= ============== ============= ============== ============= Ratios: Nonperforming loans to total loans 0.36 % 0.37 % 0.31 % 0.32 % 0.32 % Nonperforming assets to total loans plus other real estate owned 0.40 0.41 0.36 0.37 0.38 Accruing Loans Past Due 90 Days or More $ 113.1 $ 101.7 $ 103.8 $ 108.2 $ 89.8
Nonperforming Assets. Nonperforming assets consist of nonaccrual loans, restructured loans and other real estate owned. Nonperforming assets have increased 8.2%, or $19.8 million since December 31, 1998 and increased 13.2%, or $30.6 million since September 30, 1998. Interest income on nonaccrual loans, if recognized, is recorded using the cash basis method of accounting. During the first nine months of 1999, $18.9 million of interest income would have been recorded if all nonaccrual and restructured loans had been accruing interest according to their original contract terms. Interest income recognized on nonperforming loans using the cash basis in the first nine months of 1999 was $11.2 million. 20 Loan Portfolio by Types of Loans TABLE 7 (In millions)
1999 1998 --------------------------------------------------- --------------------------------- September 30 June 30 March 31 December 31 September 30 -------------- -------------- --------------- --------------- --------------- Commercial $ 24,918.3 $ 24,772.2 $ 24,058.1 $ 24,589.6 $ 21,652.7 Real estate: Construction 2,348.0 2,240.8 2,180.2 2,085.0 1,995.5 Residential mortgages 20,074.2 20,645.8 20,563.7 20,429.5 21,056.5 Other 7,656.1 7,523.5 7,403.5 8,254.3 7,045.8 Credit card 1,497.2 1,476.6 1,522.3 1,563.5 1,526.2 Other consumer loans 9,073.1 8,672.2 8,546.3 8,167.3 8,048.4 -------------- -------------- --------------- --------------- --------------- Total loans $ 65,566.9 $ 65,331.1 $ 64,274.1 $ 65,089.2 $ 61,325.1 ============== ============== =============== =============== ===============
Loans. Total loans at September 30, 1999 were $65.6 billion, an increase of $4.2 billion or 6.9% from September 30, 1998. The average loan to deposit ratio was 111.4% and 112.5% in the third quarter and first nine months of 1999 compared with 111.9% and 110.5% in the same periods of 1998. Loans held for sale at September 30, 1999 were $1.4 billion, a decrease of $2.2 billion from December 31, 1998 due to a higher level of secondary market sales coupled with lower levels of originations compared to 1998. Income Taxes. The provision for income taxes was $181.3 million and $490.8 million in the third quarter and first nine months of 1999 compared to $131.3 million and $413.7 million in the same periods last year. This represents a 36% and 35% effective tax rate in the third quarter and first nine months of 1999 and a 32% and 34% effective tax rate in the same periods last year. The lower effective 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 shareholders' equity. The investment portfolio continues to be managed to optimize yield over an entire interest rate cycle while providing liquidity and managing market risk. The portfolio yield decreased from an average of 6.52% in the third quarter of 1998 to 6.31% in the third quarter of this year. The portfolio size (measured at amortized cost) increased by $0.5 billion during the third quarter to $16.1 billion as of September 30, 1999. At September 30, 1999, approximately 4% of the portfolio consisted of U.S. Treasury securities, 11% U.S. government agency securities, 58% mortgage-backed securities, 19% asset-backed securities, 5% trust preferred securities and 3% municipal securities (calculated as a percent of total par value). Most of SunTrust'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, 1999 the carrying value of the securities portfolio was $2.1 billion over amortized cost, consisting of a $2.3 billion unrealized gain on SunTrust's investment in common stock of The Coca-Cola Company and other unrealized net losses. 21 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 SunTrust'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 1999 increased $4.8 billion, or 8.9% and 4.3 billion, or 8.1% over the same periods a year ago. Interest-bearing deposits represented 78.0% and 77.9% of average deposits for the third quarter and first nine months of 1999, compared to 78.2% and 78.4% for the same periods in 1998. In the first nine months of 1999, average net purchased funds (average funds purchased less average funds sold) increased $3.4 billion over the same period in 1998. Net purchased funds were 16.6% of average earning assets for the first nine months of 1999 as compared to 13.8% in the same period a year ago. Derivatives. SunTrust enters into various derivative contracts to meet the financial needs of its customers, generate revenue through trading activities, and to manage interest rate sensitivity for the bank subsidiaries. Derivative instruments include futures and forward contracts, interest rate swaps, options, interest rate caps and floors, and swaptions. When acting in a dealer capacity for customers, SunTrust will enter into offsetting positions to eliminate exposure to interest rate and market risk. Derivative instruments used to manage the bank's interest rate sensitivity and the generation of revenue through its trading activities as of September 30, 1999 is shown in Table 8. Derivative Instruments (Dollars in thousands) TABLE 8
Estimated Fair Value ----------------------------------------------- Weighted Average Average Notional Maturity Received Average Carrying Unrealized Unrealized Balance In Months Rate Pay Rate amount (1) Gains Losses Net ---------------------------------------------------------------------------------------------------- Hedges on Lending Commitments Forward Contracts $ 1,957,323 2 - - - $ 1,401 $ (19,709) $ (18,308) Hedges on Foreign Currency Forward Contracts 530,570 3 - - - 4,161 (7,182) (3,021) Interest Rate Swaps Interest rate swaps 3,791,768 43 6.03% 5.50% $ (4,319) 48,617 (6,023) 38,275 Interest Rate Caps/floors Interest rate caps/floors 4,317,247 17 6.67 - (12,976) 9,385 - (3,591) Options Option Contracts 2,200,000 3 5.84 - - 47 (5) 42 Futures Future Contracts 920,000 10 - - - 821 (15) 806 ------------ Total Derivatives $14,203 ============
(1) Carrying amount includes accrued interest receivable or payable and unamortized premiums. Derivative contracts used in the management of interest rate volatility and trading activities increased net interest income by $4.3 million and $15.0 million in the third quarter and first nine months of 1999. 22 Capital Ratios TABLE 9 (Dollars in millions)
1999 1998 ---------------------------------------------------- ------------------------------- September 30 June 30 March 31 December 31 September 30 --------------- ---------------- -------------- -------------- -------------- Tier 1 capital $ 7,065.0 $ 6,973.2 $ 6,773.7 $ 6,586.5 $ 6,284.9 Total capital 10,314.7 10,543.1 10,341.1 10,307.9 9,784.5 Risk-weighted assets 84,458.9 83,192.0 80,838.6 80,586.4 75,320.5 Risk-based ratios: Tier 1 capital 8.36% 8.38 % 8.37 % 8.17 % 8.34 % Total capital 12.21 12.67 12.79 12.79 12.99 Tier 1 leverage ratio 7.91 7.86 7.69 7.68 7.72 Total shareholders' equity to assets 8.45 8.79 8.93 8.78 8.77
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 (debt instruments and a portion of the allowance for loan losses). SunTrust 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%. Beginning in the second quarter of 1998, forty-five percent of the unrealized gains on equity securities of The Coca-Cola Company were included in the calculation of total capital. At September 30, 1999, SunTrust's Tier 1 capital, total capital and Tier 1 leverage ratios were 8.36%, 12.21% and 7.91%, respectively. SunTrust is committed to maintaining well-capitalized banks. On August 10, 1999, the Board of Directors authorized the purchase of up to 15 million shares of SunTrust common stock. As of October 31, 1999, 2.1 million shares have been purchased. Management anticipates that additional purchases will occur over an extended period of time. Year 2000. The Year 2000 issue is the result of computer programs and components using a two-digit format, as opposed to four digits, to indicate the year. These computer systems may 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 may 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 could potentially affect any device that has an embedded microchip containing this flaw. Prior to their merger, SunTrust and Crestar had each established programs to deal with the Year 2000 issue and were well along in executing those programs. Because most SunTrust and Crestar computer systems will not be integrated until after year-end 1999, SunTrust decided to complete both Year 2000 programs as separate projects. Both programs are based on very detailed guidance issued by the Federal Financial Institutions Examination Council (FFIEC), and while the programs have differences in terminology and structure, the basic processes are very similar. The following discussion applies to both programs. While separate Project Offices oversee each program, SunTrust has appointed one group of senior managers to oversee both programs. 23 SunTrust's Year 2000 Program has four phases: inventory of areas potentially impacted, assessment to identify problems, remediation to fix those problems, and testing of remediated systems. The inventory and assessment phases were completed in 1997 and early 1998 and covered both internal and vendor applications, as well as hardware, networks, packaged software and non-information technology systems that contain microprocessors. Examples of the latter are elevators, bank alarms and vault locks. The remediation and testing phases are nearing completion. Remediation includes both correcting internal systems and managing corrections to vendor-supplied systems and applications. Testing verifies that the system performs properly after modification ("Compliance Testing") and also interacts properly with other systems in an operating environment ("Enterprise Testing"). These latter tests use dedicated equipment that has been "fast-forwarded" to simulate the date change from 1999 to 2000. All test results are reviewed and accepted by personnel who regularly use these systems. SunTrust Enterprise Testing was completed in March 1999. Crestar Enterprise Testing was completed in April 1999. All SunTrust mission-critical systems were renovated and tested by July 31, 1999. The completion of the Year 2000 process for other non critical systems are on target for completion throughout 1999. Following Compliance Testing, remediated systems are put into current production, so remediated systems are currently operating. SunTrust's operations are also dependent on outside vendors and service providers, and SunTrust could be materially impacted should they experience Year 2000 problems. SunTrust maintains a dialogue with mission-critical vendors and suppliers, virtually all of which reported they were Year 2000 compliant by December 31, 1998. Those who were not are being monitored closely; contingency plans, including alternate vendors, have been identified wherever possible. SunTrust is also supplementing its normal contingency plans to encompass specific Year 2000 concerns. These contingency plans are designed to provide for ongoing operations or early business resumption should there be problems such as a mainframe system or network "crash"; a localized disruption that might occur due to a hurricane or tornado; or the loss of services from a mission-critical vendor. In this respect, they will be very applicable to Year 2000 concerns. In a worst-case scenario for the Year 2000, however, it is possible that the basic utilities SunTrust depends on (such as electricity, telephone and water) would not be available for an extended period of time. Should this unlikely event occur, SunTrust might not be able to provide services until the utilities are returned. Management believes that it has taken the reasonable and necessary steps to minimize the operational, regulatory and legal risks associated with Year 2000. Despite these efforts, SunTrust could still experience Year 2000 problems, some of which could have a material impact on SunTrust's results of operations and financial condition. While this is not anticipated, the following discusses several major risks and SunTrust's efforts to mitigate them. It is possible that the public's desire to hold cash going into Year 2000 could precipitate unusual withdrawals of deposits. SunTrust is planning in conjunction with the Federal Reserve to have additional supplies of cash available and has developed plans for alternative funding sources should a panic create a temporary liquidity shortage for SunTrust. A significant financial impact on SunTrust could result from customer Year 2000 difficulties resulting in customers' inabilities to repay their loans. SunTrust has implemented special Year 2000 risk assessments for all large borrowers and considers Year 2000 risks when renewing or making loans. Some observers have predicted irrational panic selling of investment portfolios late in 1999. Should this occur, asset values would drop dramatically, and SunTrust's fees based on asset values, primarily asset management, would drop proportionally. 24 To make resources available for Year 2000 efforts, some discretionary data processing projects have been deferred. These projects will be implemented as resources again become available. There have been no material negative financial impacts from these deferrals. SunTrust estimates that the total pre-tax cost of one-time expenses associated with Year 2000 will approximate $85 million, an increase of $3.0 million from the estimate in the second quarter of 1999. These expenses are being recognized as they are incurred. Through September 30, 1999, SunTrust recognized $81.8 million, or 96%, of the total projected expense. Of this amount, $7.9 million was incurred in the third quarter of 1999 and $28.2 million was incurred in the first nine months of 1999. Management does not believe that future Year 2000 expenses will have a material effect on the results of operations or financial condition of SunTrust. As mentioned above, the FFIEC has established extensive guidelines on Year 2000 matters that apply to all financial institutions. These guidelines are available to the public on the Internet at www.FFIEC.gov. In addition, SunTrust is engaged in a regular dialogue with the regulatory agencies and has received additional guidance from them. The previous 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 effort 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 any assessments, 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. The foregoing statements regarding Year 2000 matters are "Year 2000 readiness disclosures" under the Year 2000 Information and Readiness Disclosure Act. 25 Financial Highlights - Banking Subsidiaries TABLE 10 (Dollars in millions)
SunTrust Banks SunTrust Banks SunTrust Banks Crestar Financial of Florida, Inc. of Georgia, Inc. of Tennessee, Inc. Corporation --------------------- ---------------------- ------------------- ------------------ 1999 1998 1999 1998 1999 1998 1999 1998 --------- ---------- ----------- --------- --------- -------- -------- ------- Summary of Operations (1) Net interest income (FTE) $ 828.2 $ 774.6 $ 582.5 $ 529.8 $ 232.6 $ 223.5 $ 749.8 $ 703.3 Provision for loan losses 29.3 27.6 18.1 17.6 6.5 5.7 42.0 54.0 Trust income 146.2 130.5 110.0 101.7 35.6 32.9 67.4 61.5 Other noninterest income 276.6 246.7 194.3 167.6 78.3 71.7 343.2 377.7 Personnel expense 291.8 278.9 182.7 184.0 84.4 87.6 358.0 361.9 Other noninterest expense 397.4 358.5 285.2 249.0 110.7 100.2 297.8 314.5 Net income 333.8 301.8 259.3 226.2 89.2 83.2 294.7 258.4 Selected Average Balances (1) Total assets 30,119 27,586 25,777 22,919 8,746 8,070 26,596 24,606 Earning assets 28,279 25,984 21,093 17,907 8,420 7,742 24,564 22,754 Loans 21,248 19,815 17,145 14,883 6,618 6,097 19,653 17,581 Total deposits 20,280 19,017 13,898 11,508 6,221 6,021 17,407 16,902 Realized shareholders' equity 2,485 2,227 1,784 1,647 700 641 2,390 2,136 At September 30 Total assets 31,078 28,021 26,058 23,687 9,003 8,319 26,208 25,615 Earning assets 29,227 26,448 22,245 19,345 8,695 8,012 24,167 23,513 Loans 22,116 20,338 17,801 15,682 6,818 6,295 19,070 18,435 Allowance for loan losses 312 388 201 206 97 110 275 262 Total deposits 20,270 19,049 14,848 11,718 6,160 5,843 17,484 17,076 Realized shareholders' equity 2,573 2,359 1,883 1,815 732 664 2,531 2,264 Total shareholders' equity 2,526 2,386 3,308 3,553 720 674 2,470 2,300 Credit Quality Net loan charge-offs (1) 26.9 18.9 20.7 12.5 1.8 5.1 34.2 61.9 Nonperforming loans (2) 98.6 87.9 56.4 38.7 14.1 14.1 68.5 57.0 Other real estate owned (2) 8.7 9.5 1.2 2.2 2.6 4.8 11.8 16.6 RATIOS ROA (3) 1.48 % 1.46 % 1.53 % 1.56 % 1.36 % 1.38 % 1.48 % 1.41 % ROE (3) 17.96 18.12 19.44 18.36 17.04 17.36 16.49 16.17 Net interest margin (3) 3.92 3.99 3.69 3.96 3.69 3.86 4.08 4.13 Efficiency ratio (3) 55.09 55.34 52.76 54.18 56.31 57.22 56.52 59.20 Total shareholder's equity/assets (2) 8.13 8.51 12.70 15.00 8.00 8.10 9.42 8.98 Net loan charge-offs to average loans (3) 0.17 0.13 0.16 0.11 0.04 0.12 0.24 0.47 Nonperforming loans to total loans (2) 0.45 0.44 0.32 0.25 0.21 0.23 0.37 0.31 Nonperforming assets to total loans plus other real estate owned (2) 0.49 0.49 0.33 0.26 0.25 0.31 0.44 0.40 Allowance to loans (2) 1.44 1.95 1.14 1.33 1.45 1.79 1.49 1.42 Allowance to nonperforming loans (2) 316.2 441.5 356.5 533.2 686.2 779.9 401.2 460.4
(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 B. Reports on Form 8-K The Registrant filed a Current Report on Form 8-K dated October 18, 1999 announcing an agreement to sell a portion of the consumer credit card portfolio to MBNA America Bank, N.A. 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 9th day of November, 1999. 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 - FDS
9 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 3,573,746 41,519 1,426,098 164,820 18,123,340 0 0 65,566,870 947,239 92,755,402 58,644,062 16,540,108 3,407,974 6,325,178 0 0 323,171 7,514,909 92,755,402 3,638,730 702,267 59,951 4,400,948 1,198,805 2,051,348 2,349,600 137,334 5,681 2,185,514 1,387,607 896,806 0 0 896,806 2.82 2.78 3.92 237,645 113,106 8 0 944,557 172,183 50,862 947,239 947,239 0 947,239
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