STI
$54.46
Suntrust Banks
$.67
1.25%
Earnings Details
3rd Quarter September 2016
Friday, October 21, 2016 6:00:00 AM
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Summary

Suntrust Banks Reports In-line

Suntrust Banks (STI) reported 3rd Quarter September 2016 earnings of $0.91 per share on revenue of $2.3 billion. The consensus earnings estimate was $0.89 per share on revenue of $2.1 billion. The Earnings Whisper number was $0.91 per share. Revenue grew 9.1% on a year-over-year basis.

SunTrust Banks Inc is a bank holding company and a financial holding company with commercial banking organizations whose businesses provide financial services to consumer, business and corporate clients.

Results
Reported Earnings
$0.91
Earnings Whisper
$0.91
Consensus Estimate
$0.89
Reported Revenue
$2.34 Bil
Revenue Estimate
$2.14 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

SunTrust Reports Third Quarter 2016 Results

SunTrust Banks, Inc. (STI) reported net income available to common shareholders of $457 million, or $0.91 per average common diluted share. This compares to $0.94 for the prior quarter and $1.00 for the third quarter of 2015. The prior quarter and prior year quarter were favorably impacted by discrete benefits of $0.05 and $0.11, respectively. Excluding these benefits, earnings per share grew 2% sequentially and year-over-year.

"This quarter is another reflection of the success we are having in executing against our core strategies," said William H. Rogers, Jr., chairman and CEO of SunTrust Banks, Inc. "Year-to-date, revenue is up 7% and our efficiency ratio and tangible efficiency ratios have improved by 90 and 100 basis points, respectively. Looking ahead, I remain confident in our ability to drive further long-term value for our shareholders and help our clients and communities achieve financial confidence."

Third Quarter 2016 Financial Highlights

(Commentary is on a fully taxable-equivalent basis unless otherwise noted. Consistent with SEC guidance in Industry Guide 3 that contemplates the calculation of tax-exempt income on a tax equivalent basis, net interest income, net interest margin, total revenue, and efficiency ratios are provided on a fully taxable-equivalent basis, which generally assumes a 35% marginal federal tax rate. We provide unadjusted amounts in the table on page 3 of this news release and detailed reconciliations and additional information in Appendix A on pages 23 and 24.)

Income Statement

Net income available to common shareholders was $457 million, or $0.91 per average common diluted share, compared to $0.94 for the prior quarter and $1.00 for the third quarter of 2015.

The prior quarter and prior year quarter were favorably impacted by discrete benefits of $0.05 and $0.11, respectively. Excluding these benefits, earnings per share grew 2% sequentially and year-over-year.

Total revenue increased modestly compared to the prior quarter and 8% compared to the third quarter of 2015.

Sequential revenue growth was driven by a 1% increase in net interest income and strong capital markets-related income, offsetting net asset-related gains recognized in the prior quarter.

Compared to the third quarter of 2015, revenue growth was driven by an 8% increase in net interest income and 10% growth in noninterest income.

Net interest margin was 2.96% in the current quarter, down 3 basis points sequentially and up 2 basis points compared to the prior year quarter.

Provision for credit losses decreased $49 million sequentially due primarily to continued improvements in the asset quality of the residential loan portfolio, slower loan growth, and a lower energy-related provision. The $65 million increase compared to the third quarter of 2015 was primarily due to higher net charge-offs.

Noninterest expense increased 5% sequentially and 11% compared to the prior year quarter. The sequential increase was driven by higher regulatory and compliance costs, increased costs associated with improved business performance, and higher net occupancy costs.

Compared to the prior year quarter, the increase was driven by the same factors impacting the sequential increase in addition to approximately $30 million of discrete recoveries related to previous mortgage matters and approximately $30 million of lower incentive and benefit costs in the third quarter of 2015.

The efficiency and tangible efficiency ratios in the current quarter were 63.1% and 62.5%, respectively, and were 62.2% and 61.6%, respectively, on a year-to-date basis. The increase compared to the prior quarter and third quarter of 2015 was impacted by discrete benefits recognized in those quarters.

Year to date, compared to the same period a year ago, the efficiency ratio and tangible efficiency ratio improved by 103 and 119 basis points, respectively, driven by positive operating leverage.

Balance Sheet

Average loan balances increased 1% sequentially, due primarily to growth in consumer loans, and 7% compared to the third quarter of 2015, due to broad-based growth across most asset classes.

Average consumer and commercial deposits increased 1% sequentially and 7% compared to the third quarter of 2015, driven by growth in lower-cost deposits.

Capital

Estimated capital ratios continue to be well above regulatory requirements. The Common Equity Tier 1 ("CET1") ratio was estimated to be 9.8% as of September 30, 2016, and 9.7% on a fully phased-in basis.

During the quarter, the Company increased its quarterly common stock dividend from $0.24 per share to $0.26 per share and repurchased $240 million of its outstanding common stock in accordance with its 2016 capital plan.

Book value per common share was $46.63 and tangible book value per common share was $34.34, both up 1% from June 30, 2016.

Asset Quality

Nonperforming loans increased $5 million from the prior quarter and represented 0.67% of total loans at September 30, 2016.

Net charge-offs for the current quarter were $126 million, or 0.35% of average loans on an annualized basis, down $11 million compared to the prior quarter.

The provision for credit losses decreased $49 million sequentially due to continued improvements in the asset quality of the residential loan portfolio, slower loan growth, and a lower energy-related provision.

At September 30, 2016, the ALLL to period-end loans ratio declined 2 basis points from the prior quarter driven primarily by continued improvements in the asset quality of the residential loan portfolio.

Income Statement (Dollars in millions, except per share data) 3Q 2016
2Q 2016
1Q 2016
4Q 2015
3Q 2015
Net interest income
$1,308
$1,288
$1,282
$1,246
$1,211
Net interest income-FTE 2
1,342
1,323
1,318
1,281
1,247
Net interest margin
2.88
%
2.91
%
2.96
%
2.90
%
2.86
%
Net interest margin-FTE 2
2.96
2.99
3.04
2.98
2.94
Noninterest income
$889
$898
$781
$765
$811
Total revenue
2,197
2,186
2,063
2,011
2,022
Total revenue-FTE 2
2,231
2,221
2,099
2,046
2,058
Noninterest expense
1,409
1,345
1,318
1,288
1,264
Provision for credit losses
97
146
101
51
32
Net income available to common shareholders
457
475
430
467
519
Earnings per average common diluted share
0.91
0.94
0.84
0.91
1.00
Balance Sheet (Dollars in billions)
Average loans
$142.3
$141.2
$138.4
$135.2
$132.8
Average consumer and commercial deposits
155.3
154.2
149.2
148.2
145.2
Capital
Capital ratios at period end 1 :
Tier 1 capital (transitional)
10.49
%
10.57
%
10.63
%
10.80
%
10.90
%
Common Equity Tier 1 ("CET1") (transitional)
9.77
9.84
9.90
9.96
10.04
Common Equity Tier 1 ("CET1") (fully phased-in) 2
9.66
9.73
9.77
9.80
9.89
Total average shareholders’ equity to total average assets
12.12
12.11
12.33
12.43
12.42
Asset Quality
Net charge-offs to average loans (annualized)
0.35
%
0.39
%
0.25
%
0.24
%
0.21
%
Allowance for loan and lease losses to period-end loans
1.23
1.25
1.27
1.29
1.34
Nonperforming loans to total loans
0.67
0.67
0.70
0.49
0.35
1 Current period Tier 1 capital and CET1 ratios are estimated as of the date of this news release.
2 See Appendix A on page 23 for non-U.S. GAAP reconciliations and additional information.

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

Revenue

Total revenue was $2.2 billion for the current quarter, an increase of $10 million compared to the prior quarter. Net interest income increased $19 million due to growth in average earning assets and one additional day in the current quarter, while noninterest income decreased $9 million due to $44 million in net asset-related gains recognized in the prior quarter, which were substantially offset by growth in capital markets and mortgage production-related income. Compared to the third quarter of 2015, total revenue increased $173 million, or 8%, driven by a $95 million increase in net interest income and a $78 million increase in noninterest income due to growth in mortgage and capital markets-related income, which offset gains from the sale of securities, loans, and leases recognized in the prior year quarter.

For the nine months ended September 30, 2016, total revenue was $6.6 billion, an increase of $423 million, or 7%, compared to the first nine months of 2015. The increase was driven by the same factors that impacted the comparisons to the prior year quarter discussed above.

Net Interest Income

Net interest income was $1.3 billion for the current quarter, an increase of $19 million compared to the prior quarter due primarily to growth in average earning assets and one additional day in the current quarter, partially offset by an increase in average long-term debt. Compared to the third quarter of 2015, the $95 million increase in net interest income was driven by growth in average earning assets and higher earning asset yields, partially offset by higher funding costs.

Net interest margin for the current quarter was 2.96%, compared to 2.99% in the prior quarter and 2.94% in the third quarter of 2015. When compared to the prior quarter, the 3 basis point decrease was largely driven by lower residential mortgage loan and security yields. When compared to the prior year quarter, the 2 basis point increase was primarily due to higher benchmark interest rates in addition to continued positive mix shift within the portfolio, partially offset by higher funding costs.

For the nine months ended September 30, 2016, net interest income was $4.0 billion, a $357 million, or 10%, increase compared to the first nine months of 2015. The net interest margin was 2.99% for the first nine months of 2016, an 11 basis point increase compared to the same period in 2015. The increase in both net interest income and net interest margin were driven by earning asset growth and higher earning asset yields, due primarily to higher benchmark interest rates in addition to continued positive mix shift within the portfolio.

Noninterest Income

Noninterest income was $889 million for the current quarter, compared to $898 million for the prior quarter and $811 million for the third quarter of 2015. The $9 million sequential decrease was due to a decline in other noninterest income, which was positively impacted by $44 million in net asset-related gains recognized in the prior quarter; however, these declines were substantially offset by growth in capital markets and mortgage-related income. Compared to the third quarter of 2015, noninterest income increased $78 million, or 10%, driven by higher mortgage and capital markets-related income, partially offset by a decline in other noninterest income due to gains from the sale of loans and leases in the prior year quarter.

Investment banking income was $147 million for the current quarter, compared to $126 million in the prior quarter and $115 million in the third quarter of 2015. The sequential increase was due to strong deal flow activity across most product categories, particularly syndicated finance and M&A advisory services. Compared to the third quarter of 2015, the increase was due to the same factors impacting the sequential comparison in addition to the continued strength of equity offerings.

Trading income was $65 million for the current quarter, compared to $34 million in the prior quarter and $31 million in the third quarter of 2015. The sequential increase was driven by an increase in the counterparty credit valuation reserve in the prior quarter and higher core trading revenue in the third quarter, most notably fixed income sales and trading. The increase compared to the third quarter of 2015 was due to more favorable market conditions.

Mortgage production income for the current quarter was $118 million, compared to $111 million for the prior quarter and $58 million for the third quarter of 2015. The $7 million increase from the prior quarter was primarily due to higher production volume while the $60 million increase compared to the third quarter of 2015 was primarily due to higher production volume and an increase in gain-on-sale margins. Mortgage application volume increased 6% sequentially and 54% compared to the third quarter of 2015, and closed loan production volume increased 16% sequentially and 37% compared to the third quarter of 2015.

Mortgage servicing income was $49 million for the current quarter, compared to $52 million in the prior quarter and $40 million in the third quarter of 2015. The $3 million decrease from the prior quarter was driven primarily by higher servicing asset decay, arising from elevated refinance activity. The $9 million increase compared to the third quarter of 2015 was due largely to higher servicing fees and improved net hedge performance, partially offset by higher servicing asset decay in the current quarter. The servicing portfolio was $154.0 billion at September 30, 2016, compared to $149.2 billion at September 30, 2015.

Trust and investment management income was $80 million for the current quarter, compared to $75 million for the prior quarter and $86 million for the third quarter of 2015. The $5 million increase from the prior quarter was primarily related to seasonally higher tax-related trust fees in the current quarter. The $6 million decrease compared to the prior year quarter was primarily due to a mix shift in the portfolio and a decline in non-recurring revenue.

Client transaction-related fees (namely service charges on deposits, other charges and fees, and card fees) decreased $11 million compared to the prior quarter due to lower loan commitment fees. Compared to third quarter of 2015, client transaction-related fees were stable.

Retail investment income was $71 million for the current quarter, compared to $72 million in the prior quarter and $77 million in the third quarter of 2015. The $6 million decline compared to the prior year quarter was a result of reduced transactional activity, partially offset by an increase in retail brokerage managed assets.

Other noninterest income was $21 million for the current quarter, compared to $75 million in the prior quarter and $58 million in the third quarter of 2015. The $54 million decrease compared to the second quarter was due primarily to $44 million in net asset-related gains recognized during the prior quarter in addition to certain impairments recognized in the third quarter. The $37 million decrease compared to the third quarter of 2015 was due largely to lower gains related to loan and lease sales.

For the nine months ended September 30, 2016, noninterest income was $2.6 billion, an increase of $66 million compared to the first nine months of 2015 due to higher mortgage and capital markets-related income as well as higher client transaction-related fees, partially offset by a decline in wealth management-related income and a reduction in gains from the sale of securities, loans, and leases.

Noninterest Expense

Noninterest expense was $1.4 billion in the current quarter, an increase of $64 million and $145 million compared to the prior quarter and the third quarter of 2015, respectively. The sequential increase was primarily driven by higher regulatory and compliance costs, increased costs associated with improved business performance, and higher net occupancy costs. The year-over-year increase was driven by the same factors impacting the prior quarter in addition to approximately $30 million of discrete operating loss recoveries and approximately $30 million of lower incentive and benefits costs in the third quarter of 2015.

Employee compensation and benefits expense was $773 million in the current quarter, compared to $763 million in the prior quarter and $725 million in the third quarter of 2015. The sequential increase of $10 million was due to higher salaries and incentive compensation related to improved business performance, partially offset by a seasonal decline in FICA taxes and 401(k) costs. The $48 million increase from the third quarter of 2015 was primarily due to approximately $30 million of lower incentive and benefits costs in the prior year quarter.

Operating losses were $35 million in the current quarter, compared to $25 million in the prior quarter and $3 million in the third quarter of 2015. The sequential increase of $10 million was due to higher regulatory, compliance, and legal-related charges. The $32 million increase compared to the prior year was primarily due to the recognition of discrete recoveries in the third quarter of 2015 as a result of the resolution of previous mortgage matters.

Outside processing and software expense was $225 million in the current quarter, compared to $202 million in the prior quarter and $200 million in the third quarter of 2015. The sequential increase of $23 million and the year-over-year increase of $25 million were due to increased business activity levels, higher utilization of third party services, increased investments in technology to enable ongoing efficiency initiatives, and normal quarterly variability.

FDIC premium and regulatory expense was $47 million in the current quarter, compared to $44 million in the prior quarter and $32 million in the third quarter of 2015. The increase compared to the prior quarter was driven by the FDIC surcharge on large banks, which became effective during the third quarter, while the increase compared to the prior year quarter was due the aforementioned FDIC surcharge and higher FDIC assessment fees, as a result of deposit growth and higher assessment rates.

Marketing and customer development expense was $38 million in the current quarter, compared to $38 million in the prior quarter and $42 million in the third quarter of 2015. The year-over-year decrease of $4 million was due to lower advertising costs in the current quarter.

Net occupancy expense was $93 million in the current quarter, compared to $78 million in the prior quarter and $86 million in the third quarter of 2015. The sequential increase of $15 million was due to discrete benefits recognized in the prior quarter, in addition to a reduction in amortized gains from prior sale leaseback transactions. The $7 million increase compared to the prior year quarter was also due to a reduction in amortized gains from prior sale leaseback transactions.

Other noninterest expense was $140 million in the current quarter, compared to $142 million in the prior quarter and $126 million in the third quarter of 2015. The $14 million increase compared to the third quarter of 2015 was driven primarily by higher legal and consulting fees in response to regulatory and compliance initiatives, as well as higher credit-related expenses recognized in the current quarter.

For the nine months ended September 30, 2016, noninterest expense was $4.1 billion compared to $3.9 billion for the first nine months of 2015. The $200 million increase was generally related to increased revenue and business activity, increased investments in technology, and heightened regulatory and compliance costs, in addition to discrete benefits recognized in 2015.

Income Taxes

For the current quarter, the Company recorded an income tax provision of $215 million, compared to $201 million for the prior quarter and $187 million for the third quarter of 2015. The effective tax rate for the current quarter was 31%, compared to 29% in the prior quarter and 26% in the third quarter of 2015. The effective tax rate in the third quarter of 2015 was favorably impacted by $35 million in discrete tax benefits.

Balance Sheet

At September 30, 2016, the Company had total assets of $205.1 billion and total shareholders’ equity of $24.4 billion, representing 12% of total assets. Book value per common share was $46.63 and tangible book value per common share was $34.34, both up 1% from June 30, 2016, as growth in retained earnings offset a decrease in accumulated other comprehensive income.

Loans

Average performing loans were $141.3 billion for the current quarter, a 1% increase over the prior quarter and a 7% increase over the third quarter of 2015. The sequential growth was driven by consumer loans and nonguaranteed residential mortgages, up $1.3 billion and $614 million, respectively. This growth was partially offset by declines in average C&I loans and home equity products of $676 million and $389 million, respectively. The increase compared to the third quarter of 2015 was due to broad-based growth across most asset classes. The Company sold approximately $1.0 billion of indirect automobile loans in September of 2016 as part of its overall balance sheet optimization strategy.

Deposits

Average consumer and commercial deposits for the current quarter were $155.3 billion, an increase of 1% over the prior quarter and 7% over the third quarter of 2015. The sequential growth was due to a 2% increase in money market account balances and a 1% increase in demand deposits. The growth compared to the third quarter of 2015 was driven by increases in NOW, money market account balances, and demand deposits of $5.4 billion, $3.4 billion, and $1.5 billion, respectively, partially offset by a slight decline in time deposits.

Capital and Liquidity

The Company’s estimated capital ratios were well above current regulatory requirements with the Common Equity Tier 1 ratio estimated to be 9.8% at September 30, 2016, and 9.7% on a fully phased-in basis. The ratios of average total equity to average total assets and tangible common equity to tangible assets were 12.12% and 8.57%, respectively, at September 30, 2016. The Company continues to have substantial available liquidity in the form of cash, high-quality government-backed or government-sponsored securities, and other available contingency funding sources.

During the third quarter, the Company declared a common stock dividend of $0.26 per common share, an 8% increase from the prior quarter. Additionally, the Company repurchased $240 million of its outstanding common stock during the third quarter, and the Company expects to repurchase approximately $720 million of additional common stock over the next three quarters in accordance with its 2016 capital plan.

Asset Quality

Total nonperforming assets were $1.0 billion at September 30, 2016, up $18 million compared to the prior quarter and $487 million compared to the third quarter of 2015. Compared to the prior year, the increase was driven by increases in energy-related nonperforming C&I loans and nonperforming residential home equity products which coincide with changes to the Company’s home equity line workout program introduced during the first quarter of 2016. The ratio of nonperforming loans to total loans was 0.67%, 0.67%, and 0.35% at September 30, 2016, June 30, 2016, and September 30, 2015, respectively.

Net charge-offs were $126 million during the current quarter, a decrease of $11 million and an increase of $55 million compared to the prior quarter and the third quarter of 2015, respectively. The current quarter included $33 million in energy-related net charge-offs compared to $70 million recognized in the prior quarter. The ratio of annualized net charge-offs to total average loans was 0.35% during the current quarter, compared to 0.39% during the prior quarter and 0.21% during the third quarter of 2015. The provision for credit losses was $97 million in the current quarter, a decrease of $49 million and an increase of $65 million compared to the prior quarter and the third quarter of 2015, respectively. The sequential decrease in the provision for credit losses was due to continued improvements in the asset quality of the residential loan portfolio, slower loan growth, and a lower energy-related provision. The increase in the provision for credit losses compared to the third quarter of 2015 was driven primarily by higher net charge-offs.

At September 30, 2016, the allowance for loan and lease losses was $1.7 billion, which represented 1.23% of total loans, a decrease of $31 million from June 30, 2016, due primarily to continued improvement in the asset quality of the residential loan portfolio.

Early stage delinquencies increased 6 basis points from the prior quarter to 0.64% at September 30, 2016. Excluding government-guaranteed loans, early stage delinquencies were 0.25%, up 2 basis points from the prior quarter and down 6 basis points compared to a year ago.

Accruing restructured loans totaled $2.5 billion and nonaccruing restructured loans totaled $306 million at September 30, 2016, of which $2.6 billion were residential loans, $126 million were commercial loans, and $123 million were consumer loans. Nonaccruing restructured loans have increased $130 million relative to December 31, 2015, largely driven by the classification of certain modified home equity products to nonaccrual status in order to coincide with changes to our home equity line risk mitigation program during the first quarter of 2016. At September 30, 2016, substantially all of the nonaccruing restructured home equity loans modified in 2016 were current with respect to payments and many are expected to return to accruing status after the borrowers have demonstrated six months of consistent payment history.

OTHER INFORMATION

About SunTrust Banks, Inc.

SunTrust Banks, Inc. is a purpose-driven company dedicated to Lighting the Way to Financial Well-Being for the people, businesses, and communities it serves. Headquartered in Atlanta, the Company has three business segments: Consumer Banking and Private Wealth Management, Wholesale Banking, and Mortgage Banking. Its flagship subsidiary, SunTrust Bank, operates an extensive branch and ATM network throughout the high-growth Southeast and Mid-Atlantic states, along with 24-hour digital access. Certain business lines serve consumer, commercial, corporate, and institutional clients nationally. As of September 30, 2016, SunTrust had total assets of $205 billion and total deposits of $159 billion. The Company provides deposit, credit, trust, investment, mortgage, asset management, securities brokerage, and capital market services. SunTrust leads onUp, a national movement inspiring Americans to build financial confidence. Join the movement at onUp.com.

Business Segment Results

The Company has included its business segment financial tables as part of this release. All revenue in the business segment tables is reported on a fully taxable-equivalent basis. For the business segments, results include net interest income, which is computed using matched-maturity funds transfer pricing. Further, provision for credit losses represents net charge-offs by segment combined with an allocation to the segments of the provision attributable to quarterly changes in the allowance for loan and lease losses and unfunded commitment reserve balances. SunTrust also reports results for Corporate Other, which includes the Treasury department as well as the residual expense associated with operational and support expense allocations. The Corporate Other segment also includes differences created between internal management accounting practices and U.S. Generally Accepted Accounting Principles ("U.S. GAAP") and certain matched-maturity funds transfer pricing credits and charges. A detailed discussion of the business segment results will be included in the Company’s forthcoming Form 10-Q.

Corresponding Financial Tables and Information

Investors are encouraged to review the foregoing summary and discussion of SunTrust’s earnings and financial condition in conjunction with the detailed financial tables and information which SunTrust has also published today and SunTrust’s forthcoming Form 10-Q. Detailed financial tables and other information are also available at investors.suntrust.com. This information is also included in a current report on Form 8-K furnished with the SEC today.

Conference Call

SunTrust management will host a conference call on October 21, 2016, at 8:00 a.m. (Eastern Time) to discuss the earnings results and business trends. Individuals may call in beginning at 7:45 a.m. (Eastern Time) by dialing 1-888-972-7805 (Passcode: 3Q16). Individuals calling from outside the United States should dial 1-517-308-9091 (Passcode: 3Q16). A replay of the call will be available approximately one hour after the call ends on October 21, 2016, and will remain available until November 21, 2016, by dialing 1-888-568-0509 (domestic) or 1-203-369-3479 (international). Alternatively, individuals may listen to the live webcast of the presentation by visiting the SunTrust investor relations website at investors.suntrust.com. Beginning the afternoon of October 21, 2016, listeners may access an archived version of the webcast in the "Events & Presentations" section of the investor relations website. This webcast will be archived and available for one year.

Non-GAAP Financial Measures

This news release includes non-GAAP financial measures to describe SunTrust’s performance. The reconciliations of those measures to GAAP measures are provided within or in the appendix to this news release beginning at page 23.

In this news release, consistent with Securities and Exchange Commission Industry Guide 3, the Company presents total revenue, net interest income, net interest margin, and efficiency ratios on a fully taxable equivalent ("FTE") basis, and ratios on an annualized basis. The FTE basis adjusts for the tax-favored status of net interest income from certain loans and investments using a federal tax rate of 35% and state income taxes where applicable to increase tax-exempt interest income to a taxable-equivalent basis. The Company believes this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources. Total revenue-FTE equals net interest income-FTE plus noninterest income.

The Company presents the following additional non-GAAP measures because many investors find them useful. Specifically:

The Company presents the allowance for loan and lease losses excluding government-guaranteed loans and fair value loans, and early-stage delinquencies excluding government-guaranteed loans and fair value loans. The Company believes that the exclusion of loans that are held at fair value with no related allowance, and loans guaranteed by a government agency that do not have an associated allowance recorded due to nominal risk of principal loss, better depicts the allowance relative to loans the allowance is intended to cover.

The Company presents certain capital information on a tangible basis, including tangible equity, tangible common equity, the ratio of tangible equity to tangible assets, the ratio of tangible common equity to tangible assets, tangible book value per share, and the return on tangible common shareholders’ equity, which removes the after-tax impact of purchase accounting intangible assets from shareholders’ equity and removes related intangible asset amortization from net income available to common shareholders. The Company believes these measures are useful to investors because, by removing the amount of intangible assets that result from merger and acquisition activity and amortization expense (the level of which may vary from company to company), it allows investors to more easily compare the Company’s capital position and return on average tangible common shareholders’ equity to other companies in the industry who present similar measures. The Company also believes that removing these items provides a more relevant measure of the return on the Company’s common shareholders’ equity. These measures are utilized by management to assess the capital adequacy and profitability of the Company.

Similarly, the Company presents an efficiency ratio-FTE and a tangible efficiency ratio-FTE. The efficiency ratio is computed by dividing noninterest expense by total revenue. Efficiency ratio-FTE is computed by dividing noninterest expense by total revenue-FTE. The tangible efficiency ratio-FTE excludes the amortization related to intangible assets and certain tax credits. The Company believes this measure is useful to investors because, by removing the impact of amortization (the level of which may vary from company to company), it allows investors to more easily compare the Company’s efficiency to other companies in the industry. This measure is utilized by management to assess the efficiency of the Company and its lines of business.

The Company presents the Basel III Common Equity Tier 1 (CET1), on a fully-phased in basis. Fully phased-in ratios consider a 250% risk-weighting for MSRs and deduction from capital of certain carryforward DTAs, the overfunded pension asset, and other intangible assets. The Company believes this measure is useful to investors who wish to understand the Company’s current compliance with future regulatory requirements.

Important Cautionary Statement About Forward-Looking Statements

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

Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward looking statements. Future dividends, and the amount of any such dividend, must be declared by our board of directors in the future in their discretion. Also, future share repurchases and the timing of any such repurchase are subject to market conditions and management’s discretion. Additional factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015 and in other periodic reports that we file with the SEC.

SunTrust Banks, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
(Dollars in millions and shares in thousands, except per share data) (Unaudited) Three Months Ended September 30
%
Nine Months Ended September 30
%
2016
2015
Change
2016
2015
Change
EARNINGS & DIVIDENDS
Net income
$474
$537
(12)%
$1,413
$1,449
(2)%
Net income available to common shareholders
457
519
(12)
1,363
1,396
(2)
Total revenue
2,197
2,022
9
6,446
6,021
7
Total revenue-FTE 1
2,231
2,058
8
6,551
6,128
7
Net income per average common share:
Diluted
0.91
1.00
(9)
2.70
2.67
1
Basic
0.92
1.01
(9)
2.72
2.70
1
Dividends paid per common share
0.26
0.24
8
0.74
0.68
9
CONDENSED BALANCE SHEETS
Selected Average Balances:
Total assets
$201,476
$188,341
7
%
$197,613
$188,635
5
%
Earning assets
180,523
168,334
7
177,600
168,325
6
Loans
142,257
132,837
7
140,628
133,000
6
Intangible assets including mortgage servicing rights ("MSRs")
7,415
7,711
(4)
7,509
7,596
(1)
MSRs
1,065
1,352
(21)
1,157
1,243
(7)
Consumer and commercial deposits
155,313
145,226
7
152,911
142,869
7
Total shareholders’ equity
24,410
23,384
4
24,076
23,266
3
Preferred stock
1,225
1,225
--
1,225
1,225
--
Period End Balances:
Total assets
205,091
187,036
10
Earning assets
181,341
168,555
8
Loans
141,532
133,560
6
Allowance for loan and lease losses ("ALLL")
1,743
1,786
(2)
Consumer and commercial deposits
157,592
145,337
8
Total shareholders’ equity
24,449
23,664
3
FINANCIAL RATIOS & OTHER DATA
Return on average total assets
0.94
%
1.13
%
(17)%
0.96
%
1.03
%
(7)%
Return on average common shareholders’ equity 2
7.89
9.34
(16)
8.01
8.51
(6)
Return on average tangible common shareholders’ equity 1, 2
10.73
12.95
(17)
10.95
11.84
(8)
Net interest margin
2.88
2.86
1
2.92
2.79
5
Net interest margin-FTE 1
2.96
2.94
1
2.99
2.88
4
Efficiency ratio
64.13
62.51
3
63.17
64.31
(2)
Efficiency ratio-FTE 1
63.14
61.44
3
62.16
63.19
(2)
Tangible efficiency ratio-FTE 1
62.54
60.99
3
61.63
62.82
(2)
Effective tax rate
31
26
19
30
29
3
Basel III capital ratios at period end (transitional) 3:
Common Equity Tier 1 ("CET1")
9.77
10.04
(3)
Tier 1 capital
10.49
10.90
(4)
Total capital
12.56
12.72
(1)
Leverage
9.27
9.68
(4)
Basel III fully phased-in CET1 ratio 1, 3
9.66
9.89
(2)
Total average shareholders’ equity to total average assets
12.12
%
12.42
%
(2)%
12.18
12.33
(1)
Tangible equity to tangible assets 1
9.24
9.72
(5)
Tangible common equity to tangible assets 1
8.57
8.98
(5)
Book value per common share 2
$46.63
$43.44
7
Tangible book value per common share 1, 2
34.34
31.56
9
Market capitalization
21,722
19,659
10
Average common shares outstanding:
Diluted
500,885
518,677
(3)
505,619
522,634
(3)
Basic
496,304
513,010
(3)
501,036
516,970
(3)
Full-time equivalent employees
23,854
24,124
(1)
Number of ATMs
2,163
2,142
1
Full service banking offices
1,369
1,406
(3)
1 See Appendix A for additional information and reconcilements of non-U.S. GAAP performance measures.
2 Beginning January 1, 2016, noncontrolling interest was removed from common shareholders’ equity in the calculation to provide a more accurate measure of the Company’s return on common equity. Accordingly, amounts for periods prior to January 1, 2016 have been updated for consistent presentation.
3 Current period capital ratios are estimated as of the earnings release date.
SunTrust Banks, Inc. and Subsidiaries
FIVE QUARTER FINANCIAL HIGHLIGHTS
Three Months Ended
September 30
June 30
March 31
December 31 September 30
(Dollars in millions and shares in thousands, except per share data) (Unaudited) 2016
2016
2016
2015
2015
EARNINGS & DIVIDENDS
Net income
$474
$492
$447
$484
$537
Net income available to common shareholders
457
475
430
467
519
Total revenue
2,197
2,186
2,063
2,011
2,022
Total revenue-FTE 1
2,231
2,221
2,099
2,046
2,058
Net income per average common share:
Diluted
0.91
0.94
0.84
0.91
1.00
Basic
0.92
0.95
0.85
0.92
1.01
Dividends paid per common share
0.26
0.24
0.24
0.24
0.24
CONDENSED BALANCE SHEETS
Selected Average Balances:
Total assets
$201,476
$198,305
$193,014
$189,656
$188,341
Earning assets
180,523
178,055
174,189
170,262
168,334
Loans
142,257
141,238
138,372
135,214
132,837
Intangible assets including MSRs
7,415
7,543
7,569
7,629
7,711
MSRs
1,065
1,192
1,215
1,273
1,352
Consumer and commercial deposits
155,313
154,166
149,229
148,163
145,226
Total shareholders’ equity
24,410
24,018
23,797
23,583
23,384
Preferred stock
1,225
1,225
1,225
1,225
1,225
Period End Balances:
Total assets
205,091
198,892
194,158
190,817
187,036
Earning assets
181,341
178,852
175,710
172,114
168,555
Loans
141,532
141,656
139,746
136,442
133,560
ALLL
1,743
1,774
1,770
1,752
1,786
Consumer and commercial deposits
157,592
151,779
151,264
148,921
145,337
Total shareholders’ equity
24,449
24,464
24,053
23,437
23,664
FINANCIAL RATIOS & OTHER DATA
Return on average total assets
0.94
%
1.00
%
0.93
%
1.01
%
1.13
%
Return on average common shareholders’ equity 2
7.89
8.43
7.71
8.32
9.34
Return on average tangible common shareholders’ equity 1, 2
10.73
11.54
10.60
11.49
12.95
Net interest margin
2.88
2.91
2.96
2.90
2.86
Net interest margin-FTE 1
2.96
2.99
3.04
2.98
2.94
Efficiency ratio
64.13
61.53
63.89
64.05
62.51
Efficiency ratio-FTE 1
63.14
60.56
62.81
62.96
61.44
Tangible efficiency ratio-FTE 1
62.54
60.05
62.33
62.11
60.99
Effective tax rate
31
29
30
28
26
Basel III capital ratios at period end (transitional) 3:
CET1
9.77
9.84
9.90
9.96
10.04
Tier 1 capital
10.49
10.57
10.63
10.80
10.90
Total capital
12.56
12.68
12.39
12.54
12.72
Leverage
9.27
9.35
9.50
9.69
9.68
Basel III fully phased-in CET1 ratio 1, 3
9.66
9.73
9.77
9.80
9.89
Total average shareholders’ equity to total average assets
12.12
12.11
12.33
12.43
12.42
Tangible equity to tangible assets 1
9.24
9.53
9.56
9.40
9.72
Tangible common equity to tangible assets 1
8.57
8.85
8.85
8.67
8.98
Book value per common share 2
$46.63
$46.14
$44.97
$43.45
$43.44
Tangible book value per common share 1, 2
34.34
33.98
32.90
31.45
31.56
Market capitalization
21,722
20,598
18,236
21,793
19,659
Average common shares outstanding:
Diluted
500,885
505,633
509,931
514,507
518,677
Basic
496,304
501,374
505,482
508,536
513,010
Full-time equivalent employees
23,854
23,940
23,945
24,043
24,124
Number of ATMs
2,163
2,144
2,153
2,160
2,142
Full service banking offices
1,369
1,389
1,397
1,401
1,406
1 See Appendix A for additional information and reconcilements of non-U.S. GAAP performance measures.
2 Beginning January 1, 2016, noncontrolling interest was removed from common shareholders’ equity in the calculation to provide a more accurate measure of the Company’s return on common equity. Accordingly, amounts for periods prior to January 1, 2016 have been updated for consistent presentation.
3 Current period capital ratios are estimated as of the earnings release date.
SunTrust Banks, Inc. and Subsidiaries
APPENDIX A TO THE EARNINGS RELEASE - RECONCILEMENT OF NON-U.S. GAAP MEASURES 1
Three Months Ended
Nine Months Ended
September 30
June 30
March 31
December 31
September 30
September 30
(Dollars in millions) (Unaudited)
2016
2016
2016
2015
2015
2016
2015
Net interest income
$1,308
$1,288
$1,282
$1,246
$1,211
$3,877
$3,518
Fully taxable-equivalent ("FTE") adjustment
34
35
36
35
36
105
107
Net interest income-FTE 2
1,342
1,323
1,318
1,281
1,247
3,982
3,625
Noninterest income
889
898
781
765
811
2,569
2,503
Total revenue-FTE 2
$2,231
$2,221
$2,099
$2,046
$2,058
$6,551
$6,128
Return on average common shareholders’ equity 3
7.89
%
8.43
%
7.71
%
8.32
%
9.34
%
8.01
%
8.51
%
Impact of removing average intangible assets and related
2.84
3.11
2.89
3.17
3.61
2.94
3.33
amortization, other than MSRs and other servicing rights
Return on average tangible common shareholders’ equity 4
10.73
%
11.54
%
10.60
%
11.49
%
12.95
%
10.95
%
11.84
%
Net interest margin
2.88
%
2.91
%
2.96
%
2.90
%
2.86
%
2.92
%
2.79
%
Impact of FTE adjustment
0.08
0.08
0.08
0.08
0.08
0.07
0.09
Net interest margin-FTE 2
2.96
%
2.99
%
3.04
%
2.98
%
2.94
%
2.99
%
2.88
%
Noninterest expense
$1,409
$1,345
$1,318
$1,288
$1,264
$4,072
$3,872
Total revenue
2,197
2,186
2,063
2,011
2,022
6,446
6,021
Efficiency ratio 5
64.13
%
61.53
%
63.89
%
64.05
%
62.51
%
63.17
%
64.31
%
Impact of FTE adjustment
(0.99)
(0.97)
(1.08)
(1.09)
(1.07)
(1.01)
(1.12)
Efficiency ratio-FTE 2, 5
63.14
60.56
62.81
62.96
61.44
62.16
63.19
Impact of excluding amortization related to intangible assets
(0.60)
(0.51)
(0.48)
(0.85)
(0.45)
(0.53)
(0.37)
and certain tax credits
Tangible efficiency ratio-FTE 2, 6
62.54
%
60.05
%
62.33
%
62.11
%
60.99
%
61.63
%
62.82
%
Basel III Common Equity Tier 1 ("CET1") ratio (transitional) 7 9.77
%
9.84
%
9.90
%
9.96
%
10.04
%
Impact of MSRs and other under fully phased-in approach
(0.11)
(0.11)
(0.13)
(0.16)
(0.15)
Basel III fully phased-in CET1 ratio 7
9.66
%
9.73
%
9.77
%
9.80
%
9.89
%
1 Certain amounts in this schedule are presented net of applicable income taxes, calculated based on each subsidiary’s federal and state tax rates and are adjusted for any
permanent differences.
2 The Company presents net interest income-FTE, total revenue-FTE, net interest margin-FTE, efficiency ratio-FTE, and tangible efficiency ratio-FTE on a fully taxable-equivalent ("FTE") basis. The FTE basis adjusts for the tax-favored status of net interest income from certain loans and investments using a federal tax rate of 35% and state income taxes where applicable to increase tax-exempt interest income to a taxable-equivalent basis. The Company believes this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources. Total revenue-FTE equals net interest income-FTE plus noninterest income.
3 Beginning January 1, 2016, noncontrolling interest was removed from common shareholders’ equity in the calculation to provide a more accurate measure of the Company’s return on common equity. Accordingly, amounts for periods prior to January 1, 2016 have been updated for consistent presentation.
4 The Company presents return on average tangible common shareholders’ equity, which removes the after-tax impact of purchase accounting intangible assets from average common shareholders’ equity and removes related intangible asset amortization from net income available to common shareholders. The Company believes this measure is useful to investors because, by removing the amount of intangible assets and amortization expense (the level of which may vary from company to company), it allows investors to more easily compare the Company’s return on average common shareholders’ equity to other companies in the industry. The Company also believes that removing these items provides a more relevant measure of the return on the Company’s common shareholders’ equity. This measure is utilized by management to assess the profitability of the Company.
5 Efficiency ratio is computed by dividing noninterest expense by total revenue. Efficiency ratio-FTE is computed by dividing noninterest expense by total revenue-FTE.
6 The Company presents a tangible efficiency ratio, which excludes the amortization related to intangible assets and certain tax credits. The Company believes this measure is useful to investors because, by removing the impact of amortization (the level of which may vary from company to company), it allows investors to more easily compare the Company’s efficiency to other companies in the industry. This measure is utilized by management to assess the efficiency of the Company and its lines of business.
7 Current period Basel III capital ratios are estimated as of the earnings release date. Fully phased-in ratios consider a 250% risk-weighting for MSRs and deduction from capital of certain carryforward DTAs, the overfunded pension asset, and other intangible assets. The Company believes these measures may be useful to investors who wish to understand the Company’s current compliance with future regulatory requirements.
SunTrust Banks, Inc. and Subsidiaries
APPENDIX A TO THE EARNINGS RELEASE - RECONCILEMENT OF NON-U.S. GAAP MEASURES, continued 1
September 30
June 30
March 31
December 31 September 30
(Dollars in millions, except per share data) (Unaudited)
2016
2016
2016
2015
2015
Total shareholders’ equity
$24,449
$24,464
$24,053
$23,437
$23,664
Goodwill, net of deferred taxes of $248 million, $246 million, $243 million, $240 million, (6,089)
(6,091)
(6,094)
(6,097)
(6,100)
and $237 million, respectively
Other intangible assets (including MSRs and other servicing rights), net of deferred taxes (1,129)
(1,073)
(1,195)
(1,322)
(1,279)
of $2 million, $2 million, $3 million, $3 million, and $4 million, respectively
MSRs and other servicing rights
1,124
1,067
1,189
1,316
1,272
Tangible equity
18,355
18,367
17,953
17,334
17,557
Noncontrolling interest
(101)
(103)
(101)
(108)
(106)
Preferred stock
(1,225)
(1,225)
(1,225)
(1,225)
(1,225)
Tangible common equity
$17,029
$17,039
$16,627
$16,001
$16,226
Total assets
$205,091
$198,892
$194,158
$190,817
$187,036
Goodwill
(6,337)
(6,337)
(6,337)
(6,337)
(6,337)
Other intangible assets (including MSRs and other servicing rights)
(1,131)
(1,075)
(1,198)
(1,325)
(1,282)
MSRs and other servicing rights
1,124
1,067
1,189
1,316
1,272
Tangible assets
$198,747
$192,547
$187,812
$184,471
$180,689
Tangible equity to tangible assets 2
9.24
%
9.53
%
9.56
%
9.40
%
9.72
%
Tangible common equity to tangible assets 2
8.57
8.85
8.85
8.67
8.98
Tangible book value per common share 3
$34.34
$33.98
$32.90
$31.45
$31.56
1 Certain amounts in this schedule are presented net of applicable income taxes, calculated based on each subsidiary’s federal and state tax rates and are adjusted for any
permanent differences.
2 The Company presents certain capital information on a tangible basis, including tangible equity, tangible common equity, the ratio of tangible equity to tangible assets, and the ratio of tangible common equity to tangible assets, which remove the after-tax impact of purchase accounting intangible assets from shareholders’ equity. The Company believes these measures are useful to investors because, by removing the amount of intangible assets that result from merger and acquisition activity (the level of which may vary from company to company), it allows investors to more easily compare the Company’s capital adequacy to other companies in the industry. These measures are used by management to analyze capital adequacy.
3 The Company presents tangible book value per common share, which excludes the after-tax impact of purchase accounting intangible assets and also excludes noncontrolling interest and preferred stock from shareholders’ equity. The Company believes this measure is useful to investors because, by removing the amount of intangible assets, noncontrolling interest, and preferred stock (the levels of which may vary from company to company), it allows investors to more easily compare the Company’s book value of common stock to other companies in the industry.

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SOURCE SunTrust Banks, Inc.

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