STI
$58.17
Suntrust Banks
$.40
.69%
Earnings Details
3rd Quarter September 2017
Friday, October 20, 2017 6:00:00 AM
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Summary

Suntrust Banks Misses

Suntrust Banks (STI) reported 3rd Quarter September 2017 earnings of $1.06 per share on revenue of $2.5 billion. The consensus earnings estimate was $1.06 per share on revenue of $2.3 billion. The Earnings Whisper number was $1.08 per share. Revenue grew 6.0% 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
$1.06
Earnings Whisper
$1.08
Consensus Estimate
$1.06
Reported Revenue
$2.48 Bil
Revenue Estimate
$2.29 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

SunTrust Reports Third Quarter 2017 Results

SunTrust Banks, Inc. (STI) reported net income available to common shareholders of $512 million, or $1.06 per average common diluted share. This compares to $1.03 for the prior quarter and $0.91 for the third quarter of 2016.

Earnings per share increased 3% compared to the prior quarter and 16% compared to the third quarter of 2016. For the first nine months of 2017, earnings per share grew 11% compared to the same period a year ago.

"Our third quarter performance provides further validation of our successful execution against the Company’s strategies and purpose-oriented culture. Our Wholesale segment delivered another record quarter, evidence that our differentiated value proposition continues to resonate with clients. Our Consumer segment delivered strong loan growth and provided significant help to our clients in the wake of the recent catastrophic hurricanes in our markets," said William H. Rogers, Jr., chairman and CEO of SunTrust Banks, Inc. "Our opportunity set remains robust and I am confident in our ability to deliver further growth for our clients, communities, teammates, and ultimately, our owners."

Third Quarter 2017 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 and state income taxes, where applicable. 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 12 and 13.)

Income Statement

Net income available to common shareholders was $512 million, or $1.06 per average common diluted share, compared to $1.03 for the prior quarter and $0.91 for the third quarter of 2016.

Total revenue increased 2% compared to the prior quarter and 4% compared to the third quarter of 2016.

These increases were primarily driven by higher net interest income and strong investment banking performance.

Net interest margin was 3.15% in the current quarter, up 1 basis point sequentially and up 19 basis points compared to the prior year, driven by higher earning asset yields arising from higher benchmark interest rates and continued positive mix shift in the loans held for investment ("LHFI") portfolio.

Provision for credit losses increased $30 million sequentially and $23 million year-over-year due to anticipated losses from recent hurricanes.

Noninterest expense was stable sequentially and year-over-year. The current quarter’s noninterest expense level included accrual reversals related to the resolution of several legal matters which were mostly offset by charges related to ongoing efficiency initiatives.

The efficiency and tangible efficiency ratios in the current quarter were 60.1% and 59.2%, respectively, which represent improvements compared to both the prior quarter and prior year, driven primarily by ongoing expense management initiatives and solid revenue growth.

Balance Sheet

Average performing LHFI were stable sequentially and grew 2% year-over-year, driven primarily by growth in consumer lending.

Average consumer and commercial deposits increased modestly compared to the prior quarter and 3% compared to the third quarter of 2016, driven largely by growth in NOW and time deposit account balances.

Capital

Estimated capital ratios continue to be well above regulatory requirements. The Common Equity Tier 1 ("CET1") ratio was estimated to be 9.6% as of September 30, 2017, and 9.5% on a fully phased-in basis, generally stable compared to the prior quarter.

During the quarter, the Company repurchased $330 million of its outstanding common stock in accordance with its 2017 Capital Plan and increased its quarterly common stock dividend by 54%, from $0.26 per share in the prior quarter to $0.40 per share.

Book value per common share was $47.16 and tangible book value per common share was $34.34, up 1% and 2%, respectively, from June 30, 2017, driven primarily by growth in retained earnings.

Asset Quality

Nonperforming loans ("NPLs") decreased $57 million from the prior quarter and represented 0.48% of period-end LHFI at September 30, 2017. The sequential decrease was driven primarily by continued improvements in the energy and residential portfolios.

Net charge-offs for the current quarter were $78 million, or 0.21% of total average LHFI on an annualized basis, up $8 million sequentially and down $48 million year-over-year. The year-over-year reduction was driven by overall asset quality improvements and lower energy-related charge-offs.

The provision for credit losses increased $30 million sequentially driven by anticipated losses from recent hurricanes.

At September 30, 2017, the allowance for loan and lease losses ("ALLL") to period-end LHFI ratio was 1.23%, a 3 basis point increase compared to the prior quarter.

Income Statement (Dollars in millions, except per share data) 3Q 2017
2Q 2017
1Q 2017
4Q 2016
3Q 2016
Net interest income
$1,430
$1,403
$1,366
$1,343
$1,308
Net interest income-FTE 2
1,467
1,439
1,400
1,377
1,342
Net interest margin
3.07%
3.06%
3.02%
2.93%
2.88%
Net interest margin-FTE 2
3.15
3.14
3.09
3.00
2.96
Noninterest income
$846
$827
$847
$815
$889
Total revenue
2,276
2,230
2,213
2,158
2,197
Total revenue-FTE 2
2,313
2,266
2,247
2,192
2,231
Noninterest expense
1,391
1,388
1,465
1,397
1,409
Provision for credit losses
120
90
119
101
97
Net income available to common shareholders
512
505
451
448
457
Earnings per average common diluted share
1.06
1.03
0.91
0.90
0.91
Balance Sheet (Dollars in billions)
Average LHFI
$144.7
$144.4
$143.7
$142.6
$142.3
Average consumer and commercial deposits
159.4
159.1
158.9
158.0
155.3
Capital
Capital ratios at period end 1 :
Tier 1 capital (transitional)
10.74%
10.81%
10.40%
10.28%
10.50%
Common Equity Tier 1 ("CET1") (transitional)
9.62
9.68
9.69
9.59
9.78
Common Equity Tier 1 ("CET1") (fully phased-in) 2
9.48
9.53
9.54
9.43
9.66
Total average shareholders’ equity to total average assets
11.94
11.80
11.59
11.84
12.12
Asset Quality
Net charge-offs to total average LHFI (annualized)
0.21%
0.20%
0.32%
0.38%
0.35%
ALLL to period-end LHFI 3
1.23
1.20
1.20
1.19
1.23
NPLs to period-end LHFI
0.48
0.52
0.55
0.59
0.67
1 Current period Tier 1 capital and CET1 ratios are estimated as of the date of this news release.
2 See Appendix A on pages 12 and 13 for non-U.S. GAAP reconciliations and additional information.
3 LHFI measured at fair value were excluded from period-end LHFI in the calculation as no allowance is recorded for loans measured at fair value.

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

Revenue

Total revenue was $2.3 billion for the current quarter, an increase of $47 million compared to the prior quarter. Net interest income increased $28 million sequentially due to a higher net interest margin, one additional day in the third quarter, and growth in average earning assets. Noninterest income increased $19 million sequentially, driven primarily by higher capital markets and mortgage-related income, offset partially by lower client transaction-related fees and commercial real estate related income. Compared to the third quarter of 2016, total revenue increased $82 million, or 4%, driven by a $125 million increase in net interest income, which was partially offset by a $43 million decrease in total noninterest income due to lower mortgage-related income.

Net Interest Income

Net interest income was $1.5 billion for the current quarter, an increase of $28 million compared to the prior quarter due primarily to higher earning asset yields, one additional day in the third quarter, and growth in average earning assets. Compared to the prior year, the $125 million increase was driven primarily by higher earning asset yields and growth in average earning assets.

Net interest margin for the current quarter was 3.15%, compared to 3.14% in the prior quarter and 2.96% in the third quarter of 2016. The 19 basis point increase relative to the prior year was driven primarily by higher earning asset yields arising from higher benchmark interest rates, lower premium amortization in the securities portfolio, and continued positive mix shift in the LHFI portfolio, partially offset by higher rates paid on interest-bearing liabilities.

For the nine months ended September 30, 2017, net interest income was $4.3 billion, a $324 million increase compared to the first nine months of 2016. The net interest margin was 3.13% for the first nine months of 2017, a 14 basis point increase compared to the same period in 2016. The increases in both net interest income and net interest margin were driven by the same factors that impacted the prior year comparison discussed above.

Noninterest Income

Noninterest income was $846 million for the current quarter, compared to $827 million for the prior quarter and $889 million for the third quarter of 2016. The $19 million sequential increase was due primarily to higher capital markets and mortgage-related income, offset partially by lower client transaction-related fees and commercial real estate related income. Compared to the third quarter of 2016, noninterest income decreased $43 million driven by reduced mortgage-related income, partially offset by higher investment banking income.

Investment banking income was $166 million for the current quarter, compared to $147 million in both the prior quarter and prior year. The $19 million increase compared to both periods was due to strong deal flow activity across most product categories, particularly equity offerings, M&A advisory, and syndicated finance.

Trading income was $51 million for the current quarter, compared to $46 million in the prior quarter and $65 million in the third quarter of 2016. The sequential increase was due to higher client-related interest rate hedging activity during the current quarter. The decrease compared to the third quarter of 2016 was driven by lower client trading activity and higher counterparty credit valuation reserves during the current quarter.

Mortgage production income for the current quarter was $61 million, compared to $56 million for the prior quarter and $118 million for the third quarter of 2016. The $5 million sequential increase was due to higher gain-on-sale margins. The $57 million decrease from the third quarter of 2016 was due to less refinancing activity and lower gain-on-sale margins. Mortgage application volume decreased 7% sequentially and 35% compared to the third quarter of 2016. Closed loan volume decreased 4% sequentially and 27% compared to the third quarter of 2016.

Mortgage servicing income was $46 million for the current quarter, compared to $44 million in the prior quarter and $49 million in the third quarter of 2016. The $2 million sequential increase was due to higher net hedge performance, offset partially by higher servicing asset decay. The $3 million decrease compared to the third quarter of 2016 was due to lower net hedge performance and higher servicing asset decay in the current quarter, offset partially by higher servicing fees. At September 30, 2017 and 2016, the servicing portfolio totaled $165.3 billion and $154.0 billion, respectively, and was $165.6 billion at June 30, 2017.

Retail investment services income was $69 million for the current quarter, compared to $70 million in the prior quarter and $71 million in the third quarter of 2016. The decrease compared to both prior periods was due primarily to reduced client transaction activity, partially offset by higher assets under management.

Trust and investment management income was $79 million for the current quarter, compared to $76 million for the prior quarter and $80 million for the third quarter of 2016. The $3 million sequential increase was primarily related to seasonally higher trust fees in the current quarter.

Client transaction-related fees (namely service charges on deposits, other charges and fees, and card fees) decreased $9 million sequentially due largely to higher bridge and commitment fees recognized in the prior quarter. Compared to the third quarter of 2016, client transaction-related fees decreased $6 million due to the impact of the enhanced posting order process instituted during the fourth quarter of 2016.

Commercial real estate related income was $17 million for the current quarter, compared to $24 million for the prior quarter and $8 million for the third quarter of 2016. The $7 million sequential decrease was due to lower production volume from Pillar & Cohen Financial ("Pillar") and lower structured real estate-related income. The $9 million increase compared to the third quarter of 2016 was attributable to revenue from Pillar, which the Company acquired in December 2016.

Other noninterest income was $25 million for the current quarter, compared to $22 million in the prior quarter and $13 million in the third quarter of 2016. The $3 million sequential increase was due primarily to investment income recognized in the current quarter. The $12 million increase compared to the prior year was due primarily to certain asset-related impairment charges recognized in the prior year.

For the nine months ended September 30, 2017, noninterest income was $2.5 billion, a decrease of $49 million compared to the first nine months of 2016 as higher capital markets and commercial real estate related income were offset by lower mortgage-related income and other noninterest income as well as reduced service charges on deposit accounts.

Noninterest Expense

Noninterest expense was $1.4 billion in the current quarter, representing a sequential increase of $3 million and a decrease of $18 million compared to the third quarter of 2016. The sequential increase was driven primarily by higher severance costs, software writedowns, and personnel costs, offset by the favorable resolution of several legal matters during the current quarter. The decrease relative to the prior year was driven primarily by aforementioned legal accrual reversals and reduced outside processing and software costs, offset partially by higher employee compensation costs and higher other noninterest expense (which was driven by elevated severance costs and software writedowns).

Employee compensation and benefits expense was $806 million in the current quarter, compared to $796 million in the prior quarter and $773 million in the third quarter of 2016. The sequential increase of $10 million was due to higher incentive compensation related to improved business performance, offset partially by a decline in FICA taxes and 401(k) costs. The $33 million increase compared to the third quarter of 2016 was due primarily to incremental compensation costs associated with improved business performance and the acquisition of Pillar.

Operating (gains)/losses were ($34) million in the current quarter, compared to $19 million in the prior quarter and $35 million in the third quarter of 2016. The decrease relative to both periods was driven by the favorable resolution of several legal matters, which aggregated to $58 million, during the current quarter.

Outside processing and software expense was $203 million in the current quarter, compared to $204 million in the prior quarter and $225 million in the third quarter of 2016. The decrease compared to the third quarter of 2016 was driven primarily by lower transaction volume, efficiencies generated with third party providers, and insourcing of certain activities, partially offset by higher software related investments.

Marketing and customer development expense was $45 million in the current quarter, compared to $42 million in the prior quarter and $38 million in the third quarter of 2016. The increase relative to both prior periods was driven by normal variability in advertising and client development costs.

Amortization expense increased $7 million sequentially, primarily due to an increase in amortizable community development investments. These investments generate tax credits which reduce the provision for income taxes over time.

Other noninterest expense was $168 million in the current quarter, compared to $126 million in the prior quarter and $140 million in the third quarter of 2016. The increase compared to both prior periods was due primarily to higher severance costs and software writedowns recognized in the current quarter (both of which are associated with ongoing efficiency initiatives).

For the nine months ended September 30, 2017, noninterest expense was $4.2 billion compared to $4.1 billion for the first nine months of 2016. The $171 million increase was driven largely by higher employee compensation expense (primarily related to higher revenue and the acquisition of Pillar), net occupancy costs (in part due to the reduction of amortized gains), other noninterest expense (related to higher severance costs and the aforementioned software writedowns in the current quarter), and higher FDIC premiums. These increases were offset partially by the aforementioned favorable resolution of several legal matters and lower outside processing costs.

Income Taxes

For the current quarter, the Company recorded an income tax provision of $225 million, compared to $222 million for the prior quarter and $215 million for the third quarter of 2016. The effective tax rate for the current quarter was 29%, compared to 30% in the prior quarter and 31% in the third quarter of 2016.

Balance Sheet

At September 30, 2017, the Company had total assets of $208.3 billion and total shareholders’ equity of $24.5 billion, representing 12% of total assets. Book value per common share was $47.16 and tangible book value per common share was $34.34, up 1% and 2%, respectively, compared to June 30, 2017, driven primarily by growth in retained earnings.

Loans

Average performing LHFI were $144.0 billion for the current quarter, relatively stable compared to the prior quarter and a 2% increase over the third quarter of 2016. The year-over-year growth was driven primarily by increases in consumer lending, offset partially by declines in home equity products and C&I loans.

Deposits

Average consumer and commercial deposits for the current quarter were $159.4 billion, a modest increase over the prior quarter and a 3% increase over the third quarter of 2016. The sequential growth was due largely to a 10% increase in time deposits, offset partially by declines in both money market and savings account balances. The year-over-year growth was driven primarily by increases in NOW and time deposit account balances.

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 9.6% at September 30, 2017, and 9.5% on a fully phased-in basis. The ratios of average total equity to average total assets and tangible common equity to tangible assets were 11.9% and 8.1%, respectively, at September 30, 2017. 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.

The Company declared a common stock dividend of $0.40 per common share in the third quarter of 2017, a 54% increase from the prior quarter. Additionally, the Company repurchased $330 million of its outstanding common stock in the third quarter of 2017, and the Company expects to repurchase approximately $1 billion of additional common stock over the next three quarters in accordance with its 2017 Capital Plan.

Asset Quality

Total nonperforming assets ("NPAs") were $792 million at September 30, 2017, down $29 million compared to the prior quarter and $227 million compared to the third quarter of 2016. The decrease in NPAs compared to both the prior quarter and the prior year was primarily driven by continued improvements in the energy and residential portfolios. The ratio of NPLs to period-end LHFI was 0.48%, 0.52%, and 0.67% at September 30, 2017, June 30, 2017, and September 30, 2016, respectively.

Net charge-offs were $78 million during the current quarter, an increase of $8 million compared to the prior quarter and a decrease of $48 million compared to the third quarter of 2016. The modest sequential increase was driven by higher net charge-offs associated with CRE and consumer indirect, while the year-over-year decrease was driven by overall asset quality improvements as well as lower energy-related net charge-offs. The ratio of annualized net charge-offs to total average LHFI was 0.21% during the current quarter, compared to 0.20% during the prior quarter and 0.35% during the third quarter of 2016. The provision for credit losses was $120 million in the current quarter, an increase of $30 million compared to the prior quarter and $23 million compared to the third quarter of 2016, in response to anticipated losses from the recent hurricanes.

At September 30, 2017, the ALLL was $1.8 billion, which represented 1.23% of period-end loans, a 3 basis point increase relative to June 30, 2017.

Early stage delinquencies increased 5 basis points from the prior quarter to 0.71% at September 30, 2017. Excluding government-guaranteed loans which account for 0.42%, early stage delinquencies were 0.29%, up 7 basis points compared to the prior quarter and up 4 basis points from a year ago, primarily resulting from impacts associated with the recent hurricanes.

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 two business segments: Consumer and Wholesale. 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, 2017, SunTrust had total assets of $208 billion and total deposits of $163 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. Revenue and income amounts labeled "FTE" in the business segment tables are reported on a fully taxable-equivalent basis. In the second quarter of 2017, the Company realigned its business segment structure from three segments to two segments in conjunction with the Company-wide organizational changes that were announced during the first quarter of 2017. Specifically, the Company retained the previous composition of the Wholesale Banking segment and changed the basis of presentation of the Consumer Banking and Private Wealth Management segment and Mortgage Banking segment such that those segments were combined into a single Consumer segment. In conjunction with this business segment structure realignment, the Company made certain adjustments to its internal funds transfer pricing methodology. Information for periods prior to the second quarter of 2017 was revised to conform to the new business segment structure and the updated internal funds transfer pricing methodology.

For the business segments, net interest income is computed using matched-maturity funds transfer pricing and noninterest income includes federal and state tax credits that are grossed-up on a pre-tax equivalent basis. Further, provision/(benefit) for credit losses represents net charge-offs by segment combined with an allocation to the segments of the provision/(benefit) attributable to each segment’s quarterly change in the allowance for loan and lease losses ("ALLL") and unfunded commitments 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 20, 2017, 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 1-877-209-9920 (Passcode: SunTrust). Individuals calling from outside the United States should dial 1-612-332-1210 (Passcode: SunTrust). A replay of the call will be available approximately one hour after the call ends on October 20, 2017, and will remain available until November 20, 2017, by dialing 1-800-475-6701 (domestic) or 1-320-365-3844 (international) (Passcode: 430305). 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 20, 2017, 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 in the appendix to this news release beginning at page 12.

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 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) ratio, on a fully phased-in basis. The fully phased-in ratio considers 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 and the provision for income taxes 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," "opportunity," "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, 2016 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) Three Months Ended September 30
%
Nine Months Ended September 30
%
(Unaudited)
2017
2016
Change
2017
2016
Change
EARNINGS & DIVIDENDS
Net income
$538
$474
14%
$1,533
$1,413
8%
Net income available to common shareholders
512
457
12
1,468
1,363
8
Total revenue
2,276
2,197
4
6,719
6,446
4
Total revenue-FTE 1
2,313
2,231
4
6,826
6,551
4
Net income per average common share:
Diluted
$1.06
$0.91
16%
$3.00
$2.70
11%
Basic
1.07
0.92
16
3.04
2.72
12
Dividends paid per common share
0.40
0.26
54
0.92
0.74
24
CONDENSED BALANCE SHEETS
Selected Average Balances:
Total assets
$205,738
$201,476
2%
$204,833
$197,613
4%
Earning assets
184,861
180,523
2
184,180
177,600
4
Loans held for investment ("LHFI")
144,706
142,257
2
144,276
140,628
3
Intangible assets including mortgage servicing rights ("MSRs")
8,009
7,415
8
8,019
7,509
7
MSRs
1,589
1,065
49
1,599
1,157
38
Consumer and commercial deposits
159,419
155,313
3
159,145
152,911
4
Total shareholders’ equity
24,573
24,410
1
24,131
24,076
--
Preferred stock
1,975
1,225
61
1,643
1,225
34
Period End Balances:
Total assets
$208,252
$205,091
2%
Earning assets
185,071
181,341
2
LHFI
144,264
141,532
2
Allowance for loan and lease losses ("ALLL")
1,772
1,743
2
Consumer and commercial deposits
161,778
157,592
3
Total shareholders’ equity
24,522
24,449
--
FINANCIAL RATIOS & OTHER DATA
Return on average total assets
1.04%
0.94%
11%
1.00%
0.96%
4%
Return on average common shareholders’ equity
9.03
7.89
14
8.77
8.01
9
Return on average tangible common shareholders’ equity 1
12.45
10.73
16
12.09
10.96
10
Net interest margin
3.07
2.88
7
3.05
2.92
4
Net interest margin-FTE 1
3.15
2.96
6
3.13
2.99
5
Efficiency ratio
61.12
64.13
(5)
63.16
63.17
--
Efficiency ratio-FTE 1
60.14
63.14
(5)
62.17
62.16
--
Tangible efficiency ratio-FTE 1
59.21
62.54
(5)
61.44
61.63
--
Effective tax rate
29
31
(6)
28
30
(7)
Basel III capital ratios at period end (transitional) 2:
Common Equity Tier 1 ("CET1")
9.62%
9.78%
(2)%
Tier 1 capital
10.74
10.50
2
Total capital
12.69
12.57
1
Leverage
9.50
9.28
2
Basel III fully phased-in CET1 ratio 1, 2
9.48
9.66
(2)
Total average shareholders’ equity to total average assets
11.94%
12.12%
(1)%
11.78
12.18
(3)
Tangible equity to tangible assets 1
9.12
9.23
(1)
Tangible common equity to tangible assets 1
8.10
8.57
(5)
Book value per common share
$47.16
$46.63
1
Tangible book value per common share 1
34.34
34.33
--
Market capitalization
28,451
21,722
31
Average common shares outstanding:
Diluted
483,640
500,885
(3)
489,176
505,619
(3)
Basic
478,258
496,304
(4)
483,711
501,036
(3)
Full-time equivalent employees
24,215
23,854
2
Number of ATMs
2,108
2,163
(3)
Full service banking offices
1,275
1,369
(7)
1
See Appendix A for additional information and reconcilements of non-U.S. GAAP performance measures.
2
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) 2017
2017
2017
2016
2016
EARNINGS & DIVIDENDS
Net income
$538
$528
$468
$465
$474
Net income available to common shareholders
512
505
451
448
457
Total revenue
2,276
2,230
2,213
2,158
2,197
Total revenue-FTE 1
2,313
2,266
2,247
2,192
2,231
Net income per average common share:
Diluted
$1.06
$1.03
$0.91
$0.90
$0.91
Basic
1.07
1.05
0.92
0.91
0.92
Dividends paid per common share
0.40
0.26
0.26
0.26
0.26
CONDENSED BALANCE SHEETS
Selected Average Balances:
Total assets
$205,738
$204,494
$204,252
$203,146
$201,476
Earning assets
184,861
184,057
183,606
182,475
180,523
LHFI
144,706
144,440
143,670
142,578
142,257
Intangible assets including MSRs
8,009
8,024
8,026
7,654
7,415
MSRs
1,589
1,603
1,604
1,291
1,065
Consumer and commercial deposits
159,419
159,136
158,874
157,996
155,313
Total shareholders’ equity
24,573
24,139
23,671
24,044
24,410
Preferred stock
1,975
1,720
1,225
1,225
1,225
Period End Balances:
Total assets
$208,252
$207,223
$205,642
$204,875
$205,091
Earning assets
185,071
184,518
183,279
184,610
181,341
LHFI
144,264
144,268
143,529
143,298
141,532
ALLL
1,772
1,731
1,714
1,709
1,743
Consumer and commercial deposits
161,778
158,319
161,531
158,864
157,592
Total shareholders’ equity
24,522
24,477
23,484
23,618
24,449
FINANCIAL RATIOS & OTHER DATA
Return on average total assets
1.04%
1.03%
0.93%
0.91%
0.94%
Return on average common shareholders’ equity
9.03
9.08
8.19
7.85
7.89
Return on average tangible common shareholders’ equity 1
12.45
12.51
11.28
10.76
10.73
Net interest margin
3.07
3.06
3.02
2.93
2.88
Net interest margin-FTE 1
3.15
3.14
3.09
3.00
2.96
Efficiency ratio
61.12
62.24
66.20
64.74
64.13
Efficiency ratio-FTE 1
60.14
61.24
65.19
63.73
63.14
Tangible efficiency ratio-FTE 1
59.21
60.59
64.60
63.08
62.54
Effective tax rate
29
30
25
29
31
Basel III capital ratios at period end (transitional) 2:
CET1
9.62%
9.68%
9.69%
9.59%
9.78%
Tier 1 capital
10.74
10.81
10.40
10.28
10.50
Total capital
12.69
12.75
12.37
12.26
12.57
Leverage
9.50
9.55
9.08
9.22
9.28
Basel III fully phased-in CET1 ratio 1, 2
9.48
9.53
9.54
9.43
9.66
Total average shareholders’ equity to total average assets
11.94
11.80
11.59
11.84
12.12
Tangible equity to tangible assets 1
9.12
9.15
8.72
8.82
9.23
Tangible common equity to tangible assets 1
8.10
8.11
8.06
8.15
8.57
Book value per common share
$47.16
$46.51
$45.62
$45.38
$46.63
Tangible book value per common share 1
34.34
33.83
33.05
32.95
34.33
Market capitalization
28,451
27,319
26,860
26,942
21,722
Average common shares outstanding:
Diluted
483,640
488,020
496,002
497,055
500,885
Basic
478,258
482,913
490,091
491,497
496,304
Full-time equivalent employees
24,215
24,278
24,215
24,375
23,854
Number of ATMs
2,108
2,104
2,132
2,165
2,163
Full service banking offices
1,275
1,281
1,316
1,367
1,369
1
See Appendix A for additional information and reconcilements of non-U.S. GAAP performance measures.
2
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)
2017
2017
2017
2016
2016
2017
2016
Net interest income
$1,430
$1,403
$1,366
$1,343
$1,308
$4,199
$3,877
Fully taxable-equivalent ("FTE") adjustment
37
36
34
34
34
107
105
Net interest income-FTE 2
1,467
1,439
1,400
1,377
1,342
4,306
3,982
Noninterest income
846
827
847
815
889
2,520
2,569
Total revenue-FTE 2
$2,313
$2,266
$2,247
$2,192
$2,231
$6,826
$6,551
Return on average common shareholders’ equity
9.03%
9.08%
8.19%
7.85%
7.89%
8.77%
8.01%
Impact of removing average intangible assets and related pre-
3.42
3.43
3.09
2.91
2.84
3.32
2.95
tax amortization, other than MSRs and other servicing rights
Return on average tangible common shareholders’ equity 3
12.45%
12.51%
11.28%
10.76%
10.73%
12.09%
10.96%
Net interest margin
3.07%
3.06%
3.02%
2.93%
2.88%
3.05%
2.92%
Impact of FTE adjustment
0.08
0.08
0.07
0.07
0.08
0.08
0.07
Net interest margin-FTE 2
3.15%
3.14%
3.09%
3.00%
2.96%
3.13%
2.99%
Noninterest expense
$1,391
$1,388
$1,465
$1,397
$1,409
$4,243
$4,072
Total revenue
2,276
2,230
2,213
2,158
2,197
6,719
6,446
Efficiency ratio 4
61.12%
62.24%
66.20%
64.74%
64.13%
63.16%
63.17%
Impact of FTE adjustment
(0.98)
(1.00)
(1.01)
(1.01)
(0.99)
(0.99)
(1.01)
Efficiency ratio-FTE 2, 4
60.14
61.24
65.19
63.73
63.14
62.17
62.16
Impact of excluding amortization related to intangible assets
(0.93)
(0.65)
(0.59)
(0.65)
(0.60)
(0.73)
(0.53)
and certain tax credits
Tangible efficiency ratio-FTE 2, 5
59.21%
60.59%
64.60%
63.08%
62.54%
61.44%
61.63%
Basel III Common Equity Tier 1 ("CET1") ratio (transitional) 6 9.62%
9.68%
9.69%
9.59%
9.78%
Impact of MSRs and other under fully phased-in approach
(0.14)
(0.15)
(0.15)
(0.16)
(0.12)
Basel III fully phased-in CET1 ratio 6
9.48%
9.53%
9.54%
9.43%
9.66%
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 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 related pre-tax 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.
4 Efficiency ratio is computed by dividing noninterest expense by total revenue. Efficiency ratio-FTE is computed by dividing noninterest expense by total revenue-FTE.
5 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.
6 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)
2017
2017
2017
2016
2016
Total shareholders’ equity
$24,522
$24,477
$23,484
$23,618
$24,449
Goodwill, net of deferred taxes of $254 million, $253 million, $252 million, $251 million, (6,084)
(6,085)
(6,086)
(6,086)
(6,089)
and $248 million, respectively
Other intangible assets (including MSRs and other servicing rights)
(1,706)
(1,689)
(1,729)
(1,657)
(1,131)
MSRs and other servicing rights
1,690
1,671
1,711
1,638
1,124
Tangible equity 2
18,422
18,374
17,380
17,513
18,353
Noncontrolling interest
(101)
(103)
(101)
(103)
(101)
Preferred stock
(1,975)
(1,975)
(1,225)
(1,225)
(1,225)
Tangible common equity 2
$16,346
$16,296
$16,054
$16,185
$17,027
Total assets
$208,252
$207,223
$205,642
$204,875
$205,091
Goodwill
(6,338)
(6,338)
(6,338)
(6,337)
(6,337)
Other intangible assets (including MSRs and other servicing rights)
(1,706)
(1,689)
(1,729)
(1,657)
(1,131)
MSRs and other servicing rights
1,690
1,671
1,711
1,638
1,124
Tangible assets
$201,898
$200,867
$199,286
$198,519
$198,747
Tangible equity to tangible assets 2
9.12%
9.15%
8.72%
8.82%
9.23%
Tangible common equity to tangible assets 2
8.10
8.11
8.06
8.15
8.57
Tangible book value per common share 3
$34.34
$33.83
$33.05
$32.95
$34.33
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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