FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1995
Commission File Number 1-8918
SUNTRUST BANKS, INC.
(Exact name of registrant as specified in its charter)
Georgia 58-1575035
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
25 Park Place, N.E., Atlanta, Georgia 30303
(Address of principal executive offices) (Zip Code)
(404) 588-7711
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes __X__ No _____
At April 30, 1995, 115,048,853 shares of the Registrant's Common Stock, $1.00
par value were outstanding.
Page 1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statement Description Page No.
Consolidated Statements of Income
Three months ended March 31, 1995 and 1994 4
Consolidated Balance Sheets
March 31, 1995, December 31, 1994 and March 5
31, 1994
Consolidated Statements of Cash Flow
Three months ended March 31, 1995 and 1994 6
Consolidated Statements of Shareholders' Equity
Three months ended March 31, 1995 and 1994 7
The above mentioned financial statements have been prepared in accordance
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and
accordingly do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
However, in the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three months ended March 31, 1995 are not
necessarily indicative of the results that may be expected for the full year
1995.
Fully diluted per common share data have not been presented because there
were no material differences between such amounts and the per common share
data as presented. Earnings per common share were based on the weighted
average common equivalent shares outstanding for the periods presented.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
MD&A of the Registrant is included on pages 9 through 20.
Page 2
CONSOLIDATED STATEMENTS OF INCOME
Three Months
Ended March 31
(Dollars in thousands except per share data)<F1> 1995 1994
Interest Income
Interest and fees on loans $594,972 $451,714
Interest and dividends on investment securities
Taxable interest 101,768 103,624
Tax-exempt interest 14,475 17,602
Dividends (1) 6,665 6,089
Interest on funds sold 7,656 3,052
Interest on deposits in other banks 305 4,006
Other interest 684 495
Total interest income 726,525 586,582
Interest Expense
Interest on deposits 235,909 146,886
Interest on funds purchased 50,907 25,298
Interest on other short-term borrowings 11,438 10,214
Interest on long-term debt 16,394 14,799
Total interest expense 314,648 197,197
Net Interest Income 411,877 389,385
Provision for loan losses 25,469 33,917
Net interest income after provision for loan losses 386,408 355,468
Noninterest Income
Trust income 65,130 63,861
Service charges on deposit accounts 53,844 56,175
Other charges and fees 28,228 31,681
Credit card fees 16,206 14,031
Securities gains (losses) (343) 2,757
Other noninterest income 13,818 12,046
Total noninterest income 176,883 180,551
Noninterest Expense
Salaries and other compensation 162,419 160,790
Employee benefits 28,511 26,625
Net occupancy expense 31,467 31,117
Equipment expense 26,495 25,927
FDIC premiums 16,506 16,549
Marketing and community relations 13,952 12,415
Postage and delivery 9,466 8,725
Other noninterest expense 69,290 63,811
Total noninterest expense 358,106 345,959
Income before income taxes 205,185 190,060
Provision for income taxes 69,149 62,987
Net Income $136,036 $127,073
Average common equivalent shares 115,543,050 121,657,148
Net income per average common share $1.18 $1.04
Dividends declared per common share 0.36 0.32
(1) Includes dividends on common stock of
The Coca-Cola Company 5,309 4,706
<FN>
<F1>See notes to consolidated financial statements
Page 3
CONSOLIDATED BALANCE SHEETS
March 31 December 31 March 31
(Dollars in thousands)<F1> 1995 1994 1994
Assets
Cash and due from banks $2,219,672 $2,595,071 $2,302,519
Interest-bearing deposits in other banks 11,074 56,040 441,008
Trading account 52,504 98,110 74,014
Investment securities (1) 9,410,153 9,318,521 10,266,321
Funds sold 646,443 940,656 312,738
Loans 29,234,686 28,548,887 25,903,934
Reserve for loan losses (660,985) (647,016) (588,055)
Net loans 28,573,701 27,901,871 25,315,879
Premises and equipment 719,498 714,666 717,158
Intangible assets 232,646 237,416 249,990
Customers' acceptance liability 44,723 39,813 94,320
Other assets 849,732 806,921 802,283
Total assets $42,760,146 $42,709,085 $40,576,230
Liabilities
Noninterest-bearing deposits $7,140,499 $7,653,776 $7,530,359
Interest-bearing deposits 24,133,572 24,564,640 23,330,084
Total deposits 31,274,071 32,218,416 30,860,443
Funds purchased 4,991,016 4,351,896 2,985,051
Other short-term borrowings 789,673 785,653 1,195,674
Long-term debt 930,142 930,447 953,930
Acceptances outstanding 44,723 39,813 94,320
Other liabilities 1,029,636 929,529 1,002,285
Total liabilities 39,059,261 39,255,754 37,091,703
Shareholders' Equity
Preferred stock, no par value; 50,000,000 shares
authorized; none issued
Common stock, $1.00 par value; 350,000,000
shares authorized (2) 130,461 130,461 130,461
Additional paid in capital 437,621 438,309 442,220
Retained earnings 3,115,515 3,020,985 2,743,618
Treasury stock and other (3) (733,900) (706,499) (439,289)
Realized shareholders' equity 2,949,697 2,883,256 2,877,010
Unrealized gains (losses) on investment
securities, net of taxes 751,188 570,075 607,517
Total shareholders' equity 3,700,885 3,453,331 3,484,527
Total liabilities and shareholders' equity $42,760,146 $42,709,085 $40,576,230
(1) Includes unrealized gains (losses) on
investment securities $1,211,713 $916,578 $981,587
(2) Common shares outstanding 115,322,830 115,679,426 121,247,679
(3) Treasury shares of common stock 15,137,814 14,781,218 9,212,965
<FN>
<F1>See notes to consolidated financial statements.
Page 4
CONSOLIDATED STATEMENTS OF CASH FLOW
Three Months
Ended March 31
(In thousands)<F1> 1995 1994
Cash flow from operating activities:
Net income $136,036 $127,073
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 32,332 33,993
Provision for loan losses 25,470 33,917
Provision for losses on other real estate 847 2,731
Amortization of compensation element of
restricted stock 1,522 -
Securities (gains) and losses, net 344 (2,757)
(Gains) and losses on sale of equipment, other
real estate and repossessed assets, net (3,933) (4,865)
Recognition of unearned loan income (20,334) (53,454)
Change in period-end balances of:
Trading account 45,606 38,508
Interest receivable 358 (4,345)
Prepaid expenses (21,738) (21,682)
Other assets (25,333) (90)
Taxes payable 64,508 64,028
Interest payable (5,589) (6,699)
Other accrued expenses (64,799) (14,757)
Net cash provided by operating activities 165,297 191,601
Cash flow from investing activities:
Proceeds from maturities of investment securities 278,462 1,047,220
Proceeds from sales of investment securities 79,348 1,122,176
Purchase of investment securities (157,966) (2,039,726)
Net (increase) decrease in loans (681,948) (238,754)
Capital expenditures (29,178) (26,999)
Proceeds from sale of equipment, other real estate
and repossessed assets 12,584 37,758
Net inflow (outflow) from bank acquisitions - (33,411)
Other (514) 1,548
Net cash provided(used) by investing activities (499,212) (130,188)
Cash flow from financing activities:
Net increase (decrease) in deposits (944,345) 43,618
Net increase (decrease) in funds purchased and
other short-term borrowings 643,140 (716,998)
Proceeds from the issuance of long-term debt 2,040 318,884
Repayment of long-term debt (2,345) (264)
Proceeds from the exercise of stock options 1,400 2,001
Payments to acquire treasury stock (39,047) (68,524)
Dividends paid (41,506) (38,812)
Net cash provided by financing activities (380,663) (460,095)
Net decrease in cash and cash equivalents (714,578) (398,682)
Cash and cash equivalents at beginning of period 3,591,767 3,454,947
Cash and cash equivalents at end of period $2,877,189 $3,056,265
Supplemental Disclosure
Interest paid $320,237 $203,896
Taxes paid 12,413 6,891
<FN>
<F1>See notes to consolidated financial statements.
Page 5
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Unrealized
Additional Treasury Gains (Losses)
Common Paid in Retained Stock and on Securities
(In thousands)<F1> Stock Capital Earnings Other<F2> Net of Taxes Total
Balance, January 1, 1994 $130,461 $444,941 $2,655,357 ($384,951) $763,775 $3,609,583
Net income - - 127,073 - - 127,073
Cash dividends declared on common
stock, $0.32 per share - - (38,812) - - (38,812)
Proceeds from exercise of stock options - (2,996) - 4,997 - 2,001
Conversion of convertible debentures - - - - - -
Acquisition of treasury stock - - - (68,524) - (68,524)
Issuance of treasury stock for 401(k) - 278 - 7,944 - 8,222
Issuance (net of forfeitures) of treasury
stock as restricted stock - (3) - 3 - -
Amortization of compensation element
of restricted stock - - - 1,242 - 1,242
Change in unrealized gains (losses)
on securities, net of taxes - - - - (156,258) (156,258)
Balance, March 31, 1994 $130,461 $442,220 $2,743,618 ($439,289) $607,517 $3,484,527
Balance, January 1, 1995 $130,461 $438,309 $3,020,985 ($706,499) $570,075 $3,453,331
Net income - - 136,036 - - 136,036
Cash dividends declared on common
stock, $0.36 per share - - (41,506) - - (41,506)
Proceeds from exercise of stock options - (2,584) - 3,984 - 1,400
Acquisition of treasury stock - - - (39,047) - (39,047)
Issuance of treasury stock for 401(k) - 722 - 7,314 - 8,036
Issuance (net of forfeitures) of treasury
stock as restricted stock - 1,174 - 6,748 - 7,922
Compensation element of restricted stock - - - (7,922) - (7,922)
Amortization of compensation element
of restricted stock - - - 1,522 - 1,522
Change in unrealized gains (losses)
on securities, net of taxes - - - - 181,113 181,113
Balance, March 31, 1995 $130,461 $437,621 $3,115,515 ($733,900) $751,188 $3,700,885
<FN>
<F1>See notes to consolidated financial statements.
<F2>Balance at March 31, 1995 includes $696,161 for Treasury Stock and $37,739 for Deferred Compensation.
Page 6
Notes to Consolidated Financial Statements
Note 1 - Accounting Policies
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated. These financial statements should be read in conjunction
with the Company's annual financial statements and related notes for the year
ended December 31, 1994.
Page 7
TABLE 1 - SELECTED QUARTERLY FINANCIAL DATA
(Dollars in millions except per share data)
Quarters
1995 1994
1 4 3 2 1
Summary of Operations
Interest and dividend income $726.5 $691.9 $652.7 $621.1 $586.6
Interest expense 314.7 274.2 244.9 216.2 197.2
Net interest income 411.8 417.7 407.8 404.9 389.4
Provision for loan losses 25.5 35.2 34.8 33.9 33.9
Net interest income after provision for loan losses 386.3 382.5 373.0 371.0 355.5
Noninterest income 176.9 169.0 173.1 177.2 180.6
Noninterest expense 358.1 353.6 349.0 351.4 346.0
Income before provision for income taxes 205.1 197.9 197.1 196.8 190.1
Provision for income taxes 69.1 65.6 65.2 65.4 63.0
Net income $136.0 $132.3 $131.9 $131.4 $127.1
Per common share
Net income $1.18 $1.13 $1.11 $1.09 $1.04
Dividends declared 0.36 0.36 0.32 0.32 0.32
Book value 32.09 29.85 29.79 28.61 28.74
Common stock market price
High 55 3/8 51 1/8 51 3/8 50 1/2 47 1/8
Low 47 1/4 46 3/8 47 1/8 43 1/2 44 1/4
Close 53 1/2 47 3/4 48 3/4 48 3/8 44 5/8
Selected Average Balances
Total assets $41,808.4 $40,991.2 $40,391.4 $40,340.6 $40,226.5
Earning assets 37,653.9 36,790.8 36,161.2 35,941.1 35,536.6
Loans 28,773.8 27,614.0 26,746.4 25,991.6 25,269.1
Total deposits 31,943.7 31,338.2 31,338.4 30,755.0 30,060.4
Realized shareholders' equity 2,989.1 2,964.7 2,991.2 2,956.2 2,927.6
Total shareholders' equity 3,561.2 3,555.0 3,557.3 3,527.0 3,648.2
Common equivalent shares (thousands) 115,543 117,054 119,271 120,602 121,657
Financial Ratios and Other
ROA<F1> 1.35 % 1.31 % 1.33 % 1.34 % 1.32 %
ROE<F1> 18.46 17.71 17.49 17.84 17.60
Net interest margin<F1> 4.58 4.65 4.63 4.68 4.60
Net interest income - taxable-equivalent $424.9 $431.4 $421.7 $419.0 $403.5
<FN>
<F1>ROA, ROE and net interest margin are calculated excluding unrealized gains
on investment securities because the unrealized gains are not included in
net income.
The following is an analysis of the financial performance of SunTrust Banks,
Inc. (SunTrust or Company) for the first quarter of 1995 and provides
comments on earlier periods. In this discussion net interest income and net
interest margin are presented on a taxable-equivalent basis. Also all ratios
are presented on an annualized basis.
Page 8
TABLE 2A - CONSOLIDATED DAILY AVERAGE BALANCES, INCOME/EXPENSE AND AVERAGE
YIELDS EARNED AND RATES PAID
(Dollars in millions; yields on a taxable-equivalent basis)
Quarter Ended
March 31, 1995 December 31, 1994 September 30, 1994
Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/
Balances Expense Rates Balances Expense Rates Balances Expense Rates
Assets
Loans<F1>
Taxable $28,052.5 $584.3 8.45 % $26,887.1 $547.7 8.08 % $26,011.9 $510.8 7.79 %
Tax-exempt<F2> 721.3 16.5 9.26 726.9 16.4 8.93 734.5 16.2 8.75
Total loans 28,773.8 600.8 8.47 27,614.0 564.1 8.11 26,746.4 527.0 7.82
Investment securities:
Taxable 7,379.5 108.6 5.97 7,631.8 109.7 5.71 7,885.1 109.0 5.48
Tax-exempt<F2> 913.5 21.5 9.54 974.6 23.6 9.60 1,018.6 24.5 9.52
Total investment securities 8,293.0 130.1 6.36 8,606.4 133.3 6.15 8,903.7 133.5 5.94
Funds sold 516.1 7.7 6.02 469.2 6.7 5.69 315.8 3.7 4.66
Other short-term investments<F2> 71.0 1.0 6.14 101.2 1.5 5.78 195.3 2.4 4.74
Total earning assets 37,653.9 739.6 7.97 36,790.8 705.6 7.61 36,161.2 666.6 7.31
Reserve for loan losses (654.5) (640.3) (620.5)
Cash and due from banks 2,124.4 2,155.6 2,190.1
Premises and equipment 718.1 712.4 712.2
Other assets 1,043.0 1,025.1 1,037.8
Unrealized gains(losses) on
investment securities 923.5 947.6 910.6
Total assets $41,808.4 $40,991.2 $40,391.4
Liabilities and Shareholders' Equity
Interest-bearing deposits:
NOW/Money market accounts $9,467.4 $64.9 2.78 % $9,698.2 $62.6 2.56 % $9,692.6 $58.1 2.38 %
Savings 3,822.5 25.7 2.73 4,123.0 26.9 2.58 4,320.0 26.9 2.48
Consumer time 7,479.6 90.5 4.91 6,833.8 76.2 4.43 6,655.2 69.3 4.13
Other time<F3> 4,283.5 54.8 5.19 3,585.0 39.7 4.40 3,708.3 36.2 3.87
Total interest-bearing deposits 25,053.0 235.9 3.82 24,240.0 205.4 3.36 24,376.1 190.5 3.10
Funds purchased 3,661.1 50.9 5.64 3,270.1 42.3 5.13 2,542.7 27.1 4.22
Other short-term borrowings 808.0 11.4 5.74 902.2 10.4 4.60 1,035.2 10.3 3.92
Long-term debt 930.1 16.4 7.15 919.1 16.1 6.96 975.5 17.0 6.93
Total interest-bearing liabilities 30,452.2 314.6 4.19 29,331.4 274.2 3.71 28,929.5 244.9 3.36
Noninterest-bearing deposits 6,890.7 7,098.2 6,962.3
Other liabilities 904.3 1,006.6 942.3
Realized shareholders' equity 2,989.1 2,964.7 2,991.2
Net unrealized gains(losses)
on investment securities 572.1 590.3 566.1
Total liabilities and
shareholders' equity $41,808.4 $40,991.2 $40,391.4
Interest rate spread 3.78 % 3.90 % 3.95 %
Net Interest Income $425.0 $431.4 $421.7
Net Interest Margin<F4> 4.58 % 4.65 % 4.63 %
<FN>
<F1>Interest income includes loan fees of $20.5, $24.5, $23.2, $23.5 and
$22.3 in the quarters ended March 31, 1995, and December 31, September 30,
June 30, and March 31, 1994. Nonaccrual loans are included in average
balances and income on such as loans, if recognized, is recorded on a cash
basis.
<F2>Interest income includes the effects of taxable-equivalent adjustments
(reduced by the nondeductible portion of interest expense) using a
federal income tax rate of 35% and, where applicable, state income taxes,
to increase tax-exempt interest income to a taxable-equivalent basis.
The net taxable-equivalent adjustment amounts included in the above table
aggregated $13.1, $13.7, $13.9, $14.1 and $14.1 in the quarters ended
March 31, 1995, and December 31, September 30, June 30, and March 31, 1994.
<F3>Interest rate swap transactions used to help balance the Company's
interest-sensitivity position reduced interest expense by $4.4, $4.9,
$5.5, $9.2 and $11.0 in the quarters ended March 31, 1995, and
December 31, September 30, June 30, and March 31, 1994. Without these
swaps, the rate on other time deposits and the net interest margin
would have been 5.61% and 4.53%, 4.94% and 4.60%, 4.46% and 4.57%, 4.10%
and 4.57%, and 3.94% and 4.48%, respectively.
Page 9
TABLE 2b - CONSOLIDATED DAILY AVERAGE BALANCES, INCOME/EXPENSE AND AVERAGE
YIELDS EARNED AND RATES PAID
(Dollars in millions; yields on a taxable-equivalent basis)
Quarter Ended
June 30, 1994 March 31, 1994
Average Income/ Yields/ Average Income/ Yields/
Balances Expense Rates Balances Expense Rates
Assets
Loans<F1>
Taxable $25,262.1 $477.1 7.57 % $24,522.4 $444.0 7.34 %
Tax-exempt<F2> 729.5 14.7 8.10 746.7 12.8 6.95
Total loans 25,991.6 491.8 7.59 25,269.1 456.8 7.33
Investment securities:
Taxable 8,082.3 109.4 5.43 8,282.4 109.7 5.37
Tax-exempt<F2> 1,069.6 26.0 9.76 1,080.4 26.6 9.99
Total investment securities 9,151.9 135.4 5.94 9,362.8 136.3 5.90
Funds sold 362.2 3.6 4.00 376.1 3.0 3.29
Other short-term investments<F2> 435.4 4.4 4.04 528.6 4.6 3.50
Total earning assets 35,941.1 635.2 7.09 35,536.6 600.7 6.86
Reserve for loan losses (597.5) (572.8)
Cash and due from banks 2,290.1 2,281.3
Premises and equipment 716.0 714.4
Other assets 1,072.6 1,106.0
Unrealized gains(losses) on
investment securities 918.3 1,161.2
Total assets $40,340.6 $40,226.7
Liabilities and Shareholders' Equity
Interest-bearing deposits:
NOW/Money market accounts $9,907.5 $52.6 2.13 % $9,900.6 $50.4 2.06 %
Savings 4,473.5 25.8 2.31 4,546.5 25.0 2.23
Consumer time 6,535.5 64.2 3.94 6,476.0 62.1 3.89
Other time<F3> 2,794.2 19.3 2.77 2,105.6 9.4 1.82
Total interest-bearing deposits 23,710.7 161.9 2.74 23,028.7 146.9 2.59
Funds purchased 2,977.8 27.4 3.70 3,416.7 25.3 3.00
Other short-term borrowings 1,230.9 11.6 3.79 1,168.1 10.2 3.55
Long-term debt 886.9 15.2 6.86 850.8 14.8 7.05
Total interest-bearing liabilities 28,806.3 216.1 3.01 28,464.3 197.2 2.81
Noninterest-bearing deposits 7,044.3 7,031.7
Other liabilities 963.0 1,082.5
Realized shareholders' equity 2,956.2 2,927.8
Net unrealized gains(losses)
on investment securities 570.8 720.4
Total liabilities and
shareholders' equity $40,340.6 $40,226.7
Interest rate spread 4.08 % 4.05 %
Net Interest Income $419.1 $403.5
Net Interest Margin(4) 4.68 % 4.60 %
<FN>
<F1>See note <F1> on table 2A.
<F2>See note <F2> on table 2A.
<F3>See note <F3> on table 2A.
Page 10
Net Interest Income/Margins. The Company's net interest margin of 4.58% for
the first quarter of 1995 was two basis points lower than the first quarter
of last year. However, the rates on earning assets and interest-bearing
liabilities have increased dramatically. The rate on earning assets increased
111 basis points, fueled by a 114 basis point increase in the yield on loans.
At the same time, the rate on interest-bearing liabilities rose 138 basis
points. As interest rates have risen, the benefit derived from the Company's
receive-fixed interest rate swap transactions has fallen (see the discussion
entitled "Derivitaves" on page 17). Had the Company received the same benefit
from interest rate swaps in the first quarter of this year that it did in the
first quarter of last year, the rate on interest-bearing liabilities would
have been 15 basis points lower and the net interest margin 12 basis points
higher.
Interest income which the Company was unable to recognize on
nonperforming loans had a negative impact of 4 basis points on the net
interest margin in both the first three months of 1995 and 1994. Table 2
contains more detailed information concerning average balances and interest
yields earned and rates paid.
Noninterest Income. Noninterest income in the first three months of 1995,
adjusted to exclude the effect of securities gains (losses), was virtually
unchanged from the comparable period a year ago. Increases in trust income,
the Company's largest source of noninterest income, and credit card fees were
offset by decreases in service charges on deposit accounts and mutual fund
commissions.
TABLE 3 - NONINTEREST INCOME
(In millions)
Quarters
1995 1994
1 4 3 2 1
Trust income $65.1 $61.4 $61.6 $63.4 $63.9
Service charges on deposit accounts 53.8 53.7 54.3 54.2 56.2
Mutual fund commissions 2.0 2.4 2.3 3.2 4.7
Other charges and fees 26.2 27.6 26.3 27.6 27.0
Credit card fees 16.2 14.5 14.0 14.7 14.0
Securities gains (losses) (0.3) (4.7) (0.9) 0.1 2.8
Trading account profits and commissions 2.4 2.3 1.8 1.8 2.1
Other income 11.5 11.8 13.7 12.2 9.9
Total noninterest income $176.9 $169.0 $173.1 $177.2 $180.6
Page 11
Noninterest Expense. Noninterest expense was up 3.5% in the first quarter of
1995 compared to the same period last year. Personnel expense, consisting of
salaries, other compensation and employee benefits, increased 1.9% over the
aforementioned period. Changes in other categories of noninterest expense
were modest when comparing the first three months of 1995 to the same periods
in 1994.
TABLE 4 - NONINTEREST EXPENSE
(In millions)
Quarters
1995 1994
1 4 3 2 1
Salaries $140.5 $138.1 $138.5 $137.5 $136.3
Other compensation 21.9 22.6 25.1 23.9 24.5
Employee benefits 28.5 26.9 23.6 23.6 26.6
Net occupancy expense 31.5 30.0 32.8 33.0 31.1
Equipment expense 26.5 25.9 25.7 25.8 25.9
FDIC premiums 16.5 16.6 16.8 16.7 16.5
Marketing and community relations 14.0 19.7 11.0 14.1 12.4
Postage and delivery 9.5 8.5 8.5 8.4 8.7
Operating supplies 7.9 7.2 7.0 7.7 7.5
Other real estate expense (1.7) (2.0) (0.9) 1.5 (0.8)
Communications 6.7 6.3 6.7 6.7 6.4
Consulting and legal 4.8 5.7 4.7 8.0 4.2
Amortization of intangible assets 5.0 5.1 5.2 5.4 4.9
Other expense 46.5 43.0 44.3 39.1 41.8
Total noninterest expense $358.1 $353.6 $349.0 $351.4 $346.0
Efficiency ratio 59.5 % 58.9 % 58.7 % 58.9 % 59.2 %
Provision for Loan Losses. As a result of improving credit quality, the
Company lowered its provision for loan losses in the first quarter of 1995 to
$25.5 million from $33.9 million in the same period last year, yet the
provision exceeded net charge-offs by $14.0 million. Net loan charge-offs
were $11.5 million in the first three months of this year, representing 0.16%
of average loans, which matches the lowest quarterly charge-off ratio since
SunTrust was formed in 1985. The comparable net charge-off amount for 1994
was $15.3 million or 0.25% of average loans.
The Company maintains a reserve for loan losses to absorb possible
losses in the loan portfolio. The reserve consists of three elements; (i)
reserves established on specific loans, (ii) reserves based on historical
loan loss experience, and (iii) reserves based on economic conditions in the
Company's individual markets. The specific reserve element is based on a
regular analysis of all loans and commitments over a fixed dollar amount
where the internal credit rating is at or below a pre-determined
classification. The historical loan loss element represents a projection of
future credit problems and is determined statistically using a loss migration
analysis that examines loss experience and the related internal gradings of
loans charged-off. The general economic condition element is determined by
management at the individual subsidiary banks and is based on a subjective
evaluation of specific economic factors in their markets that might affect
the collectibility of loans. SunTrust is committed to the early recognition
of possible problems and to a strong, conservative reserve.
The Company's reserve for loan losses totaled $661.0 million at March
31, 1995, which was 2.26% of quarter-end loans and 355.0% of total
nonperforming loans. These ratios at December 31, 1994 were 2.27% and 344.9%
and at March 31, 1994 were 2.27% and 249.3%.
Page 12
TABLE 5 - SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in millions)
Quarters
1995 1994
1 4 3 2 1
Reserve for Loan Losses
Balances - beginning of quarter $647.0 $634.2 $610.2 $588.1 $561.2
Reserve of purchased banks - - - - 8.3
Provision for loan losses 25.5 35.2 34.8 33.9 33.9
Charge-offs:
Domestic:
Commercial (7.6) (9.4) (6.9) (6.4) (5.4)
Real estate:
Construction - - (0.1) - (0.6)
Mortgage, 1-4 family (1.5) (2.6) (1.5) (1.2) (2.0)
Other (2.1) (6.3) (3.5) (3.1) (7.6)
Lease financing (0.2) (0.2) (0.1) (0.2) (0.2)
Credit card (6.6) (6.4) (6.6) (6.9) (6.4)
Other consumer loans (8.9) (8.8) (7.1) (7.2) (7.0)
International - - - - -
Total charge-offs (26.9) (33.7) (25.8) (25.0) (29.2)
Recoveries:
Domestic:
Commercial 5.6 3.2 4.9 4.6 5.9
Real estate:
Construction 0.2 - - 0.6 0.1
Mortgage, 1-4 family 0.4 0.1 0.7 0.3 0.4
Other 1.6 1.7 2.5 0.9 1.2
Lease financing 0.1 0.2 0.1 0.2 0.1
Credit card 1.8 1.8 1.9 1.8 1.8
Other consumer loans 5.3 4.3 4.9 4.7 4.4
International 0.4 - - 0.1 -
Total recoveries 15.4 11.3 15.0 13.2 13.9
Net charge-offs (11.5) (22.4) (10.8) (11.8) (15.3)
Balance - end of quarter $661.0 $647.0 $634.2 $610.2 $588.1
Quarter-end loans outstanding:
Domestic $28,976.0 $28,260.3 $27,106.1 $26,496.5 $25,693.3
International 258.7 288.6 260.8 252.5 210.6
Total $29,234.7 $28,548.9 $27,366.9 $26,749.0 $25,903.9
Ratio of reserve to quarter-end loans 2.26 % 2.27 % 2.32 % 2.28 % 2.27 %
Average loans $28,773.8 $27,614.0 $26,746.4 $25,991.6 $25,269.1
Ratio of net charge-offs (annualized)
to average loans 0.16 % 0.32 % 0.16 % 0.18 % 0.25 %
Page 13
TABLE 6 - NONPERFORMING ASSETS
(Dollars in millions)
1995 1994
March 31 December 31 September 30 June 30 March 31
Nonperforming Assets
Nonaccrual loans:
Domestic:
Commercial $31.4 $27.9 $37.1 $34.7 $35.6
Real Estate:
Construction 13.9 16 15.6 14.3 22.3
Mortgage, 1-4 family 42.6 45.3 45.4 46.6 48.2
Other 83.1 82 97.4 110.4 116.7
Lease financing 0.2 0.2 0.1 - -
Consumer loans 10.7 11.6 11.1 12.3 9.7
Total nonaccrual loans 181.9 183.0 206.7 218.3 232.5
Restructured loans 4.3 4.6 5.1 2.3 3.4
Total nonperforming loans 186.2 187.6 211.8 220.6 235.9
Other real estate owned 83.8 87.7 109.6 119.6 144.1
Total Nonperforming Assets $270.0 $275.3 $321.4 $340.2 $380.0
Ratios:
Nonperforming loans to total loans 0.64 % 0.66 % 0.77 % 0.82 % 0.91 %
Nonperforming assets to total loans
plus other real estate owned 0.92 0.96 1.17 1.27 1.46
Reserve to nonperforming loans 354.95 344.91 299.36 276.63 249.31
Accruing Loans Past Due 90 Days or More $19.5 $19.2 $19.0 $19.3 $21.9
Nonperforming Assets. Nonperforming assets consist of nonaccrual and
restructured loans and other real estate owned. Nonperforming assets have
decreased $5.3 million since December 31, 1994 and $110 million since March
31, 1994. Since December 31, 1994, nonperforming assets increased $4.4
million in Florida banks, decreased $2.8 million in Georgia banks, and
decreased $7.0 million in Tennessee banks. Included in nonperforming loans at
March 31, 1995 are loans aggregating $44.5 million which are current as to
the payment of principal and interest but have been placed in nonperforming
status because of uncertainty over the borrowers' ability to make future
payments. In management's opinion, all material potential problem loans are
included in Table 6.
SunTrust adopted Statements of Financial Accounting Standards No. 114
(FAS 114) "Accounting by Creditors for Impairment of a Loan" and No. 118 (FAS
118) "Accounting by Creditors for Impairment of a Loan - Income Recognition
and Disclosures" in the first quarter of 1995. FAS 114 and FAS 118 address
the accounting by creditors for impairment of a loan and loans that are
restructured in a troubled debt restructuring. The adoption of these
statements had no material effect on the earnings or financial condition of
the Company.
Interest income on nonaccrual loans, if recognized, is recorded on a
cash basis. During the first three months of 1995, the gross amount of
interest income that would have been recorded on nonaccrual loans and
restructured loans at March 31, 1995, if all such loans had been accruing
interest at the original contractual rate, was $5.1 million. Interest income
recognized in the three months ended March 31, 1995 on all such nonperforming
loans at March 31, 1995, was $0.9 million.
Page 14
Table 7 - Loan Portfolio by Types of Loans (in millions)
1995 1994
March 31 December 31 September 30 June 30 March 31
Commercial:
Domestic $9,596.6 $9,279.2 $8,651.7 $8,480.9 $8,240.1
International 287.0 273.2 280.6 247.9 194.0
Real estate:
Construction 1,115.5 1,151.1 1,129.7 1,148.1 1,136.6
Mortgage, 1-4 family 8,698.1 8,380.5 8,016.1 7,712.9 7,366.9
Other 4,557.9 4,516.3 4,489.5 4,503.7 4,484.0
Lease financing 459.6 411.0 383.4 374.0 362.9
Credit card 655.2 690.5 646.6 639.1 647.6
Other consumer loans 3,864.8 3,847.1 3,769.3 3,642.4 3,471.8
Loans $29,234.7 $28,548.9 $27,366.9 $26,749.0 $25,903.9
Loans. During the first three months of 1995, average loans increased 13.9%
over the same period a year ago. Since December 31, 1994, 1-4 family
residential mortgage loans (most of which are variable rate loans) have
increased 3.8%. Other consumer loans were up .5% from year-end 1994. The
average loan to deposit ratio was 90.1% in the first quarter of 1995 compared
with 84.1% in the same period of 1994.
At March 31, 1995, international outstandings, which include loans,
acceptances, deposits in other banks, foreign guarantees and accrued
interest, totaled $333.9 million, an increase of 1.6% from $328.8 million at
December 31, 1994.
Income Taxes. The provision for income taxes was $69.1 million in the first
quarter of 1995 compared to $63.0 in the same period last year. Higher
taxable income in 1995 was primarily responsible for the increase.
Investment Securities. The investment portfolio continues to be managed to
maximize yield over an entire interest rate cycle while providing liquidity
and minimizing risk. The portfolio yield increased from an average of 5.90%
in the first quarter of 1994 to 6.36% in the first quarter of this year. The
portfolio size declined by $1.1 billion from March 31, 1994 to March 31, 1995
as a portion of maturities were used to meet loan demand. The average life of
the portfolio was approximately 3.4 years at March 31, 1995; however,
adjustable-rate securities in the portfolio reduced the average time to
repricing to 2.3 years. At March 31, 1995, approximately 31.4% of the
portfolio consisted of U.S. Treasury securities, 13.1% U.S. government agency
securities, 43.6% mortgage-backed securities, 11.1% municipal securities, and
0.8% in other securities (calculated as a percent of total par value). All of
the Company's holdings in mortgage-backed securities are backed by U.S.
government or federal agency guarantees limiting the credit risk associated
with the mortgage loans. At March 31, 1995, the carrying value of the
securities portfolio was $1.2 billion over its amortized cost, including a
$1.4 billion gain on the Company's investment in common stock of The Coca-
Cola Company.
Page 15
Liquidity Management. Liquidity is managed to ensure there is sufficient
cash flow to satisfy demand for credit, deposit withdrawals and other
attractive market opportunities. A large, stable core deposit base, strong
capital position and excellent credit ratings are the solid foundation for
the Company's liquidity position. It is enhanced by an investment portfolio
structured to provide liquidity as needed, which occurred in 1994 when loan
demand exceeded deposit growth. It is also strengthened by ready access to
regional and national wholesale funding sources including fed funds
purchased, securities sold under agreements to repurchase, negotiable
certificates of deposit and offshore deposits, as well as an active bank
deposit note program, commercial paper issuance by the Parent Company, and
Federal Home Loan Bank (FHLB) advances for several subsidiary banks who are
FHLB members.
Average total deposits for the first three months of 1995 increased 6.3
% over the same periods a year ago. In the first quarter of 1995, average net
purchased funds (average funds purchased less average funds sold) increased
$104.4 million over the same period in 1994. Net purchased funds were 8.4% of
average earning assets for the first quarter of 1995 as compared to 8.6% in
the same period a year ago.
Derivatives. The Company enters into various derivatives contracts in a
dealer capacity for customers and in managing its own interest rate risk.
Where contracts have been created for customers, the Company enters into
offsetting positions to eliminate its exposure to market risk. The principal
derivative contract used by the Company is the interest rate swap. Interest
rate swaps are contracts in which a series of interest rate flows, based on a
specific notional amount and a fixed and floating interest rate, are
exchanged over a prescribed period. The Company also monitors its sensitivity
to changes in interest rates and uses interest rate swap contracts to limit
the volatility of net interest income. Table 8 details interest rate swaps as
of March 31, 1995 used for managing interest rate sensitivity.
TABLE 8 - INTEREST RATE SWAPS
Average Average Average
(Dollars in millions) Notional Fair Maturity Rate Rate
At March 31, 1995 Value Value In Months Paid Received
Gain position:
Receive fixed $860.0 $9.8 8.7 6.12 % 8.37 %
Pay fixed 132.7 6.2 60.6 5.96 6.54
Total gain position 992.7 16.0
Loss position:
Receive fixed 455.0 (3.4) 25.7 7.84 6.81
Pay fixed 11.0 (0.2) 51.6 7.93 6.52
Total loss position 466.0 (3.6)
Total $1,458.7 $12.4
The majority of the swaps are designated as hedges on deposits and other
interest-bearing liabilities. The Company receives payments based on fixed
interest rates and makes payments based on a floating money market rate.
During the three months ended March 31, 1995, hedge swaps benefited net
interest income by $4.4, compared with $11.0 in the corresponding 1994
period. In April 1995, the Company closed out swap positions with a notional
value of $800 million for a net gain of $4.3 million and an additional $250
million matured.
Page 16
TABLE 9 - CAPITAL RATIOS
(dollars in millions)
1995 1994
March 31 December 31 September 30 June 30 March 31
Tier 1 capital:
Realized shareholders' equity $2,949.7 $2,883.3 $2,926.9 $2,899.8 $2,877.0
Intangible assets other than servicing rights (218.1) (222.2) (229.5) (233.7) (238.8)
Total Tier 1 capital 2,731.6 2,661.1 2,697.4 2,666.1 2,638.2
Tier 2 capital:
Allowable reserve for loan losses 426.2 420.9 405.1 398.5 383.5
Allowable long-term debt 247.6 281.4 282.2 285.5 87.9
Total Tier 2 capital 673.8 702.3 687.3 684.0 471.4
Total capital $3,405.4 $3,363.4 $3,384.7 $3,350.1 $3,109.6
Risk-weighted assets $33,861.6 $33,444.3 $32,180.6 $31,667.2 $30,475.5
Risk-based ratios:
Tier 1 capital 8.07 % 7.95 % 8.38 % 8.42 % 8.66 %
Total capital 10.06 10.05 10.52 10.58 10.20
Tier 1 leverage ratio 6.72 6.68 6.87 6.80 6.79
Total shareholders' equity to assets 8.66 8.09 8.47 8.39 8.59
Capital Resources. Consistent with the objective of operating a sound
financial organization, SunTrust maintains capital ratios well above
regulatory requirements. The rate of internal capital generation has been
more than adequate to support asset growth. Table 9 presents capital ratios
for the five most recent quarters.
Regulatory agencies measure capital adequacy with a framework that makes
capital requirements sensitive to the risk profiles of individual banking
companies. The guidelines define capital as either Tier 1 (primarily
shareholders' equity excluding unrealized gains and losses on investment
securities) or Tier 2 (certain debt instruments and a portion of the reserve
for loan losses). The Company and its subsidiary banks are subject to a
minimum Tier 1 capital to risk-weighted assets ratio of 4% and total capital
(Tier 1 plus Tier 2) to risk-weighted assets ratio of 8%. The Federal Reserve
Board (Board) has also established an additional capital adequacy guideline
referred to as the Tier 1 leverage ratio which measures the ratio of Tier 1
capital to average quarterly assets.
The Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA) requires the establishment of a capital-based supervisory system of
prompt corrective action for all depository institutions. The Board's
implementation of FDICIA defines "well capitalized" institutions as those
whose capital ratios equal or exceed the following minimum ratios: Tier 1
capital ratio of 6%, total risk-based capital ratio of 10%, and a Tier 1
leverage ratio of 5%. At March 31, 1995, the Company's Tier 1 capital, total
risk-based capital and Tier 1 leverage ratios were 8.07%, 10.06% and 6.72%,
respectively.
In 1993, the Board of Directors authorized the Company to repurchase up
to 12,000,000 shares of SunTrust common stock. Under this authorization, the
Company has repurchased 10,883,899 shares as of March 31, 1995, and an
additional 1,116,101 shares of SunTrust common stock may be repurchased under
this authorization. In April 1995, the Board of Directors authorized the
repurchase of up to another 10,000,000 shares of SunTrust common stock.
Page 17
Nonbanking Subsidiaries. SunTrust Mortgage, Inc. originates and services
mortgage loans on both residential and income property, principally
throughout Florida, Georgia and Tennessee. SunTrust Mortgage is primarily a
mortgage banker selling to the secondary market and representing
institutional investors. SunTrust Mortgage also assists various SunTrust
banks in their origination of mortgage loans for sale in the secondary market
and for retention in their portfolio. At March 31, 1995, the servicing
portfolio was $9.7 billion, which includes $5.6 billion in loans serviced for
subsidiary banks of SunTrust. SunTrust Insurance Company operates as a
reinsurer for credit life and accident and health insurance sold to loan
customers of SunTrust. SunTrust Securities engages in securities brokerage
services and conducts incidental activities such as offering custodial and
cash management services. Other nonbank subsidiaries primarily support the
Company's banking operations, providing data processing and other services.
State Summary. SunTrust Banks, Inc. operates through three principal
subsidiaries, SunBanks, Inc. (in Florida), Trust Company of Georgia and Third
National Corporation (in Tennessee), all well-established bank holding
companies within their respective states. Data in Table 10 does not include
financial results of SunTrust's Parent Company and certain other non-bank
subsidiaries and is also before elimination of certain intercompany accounts
and balances.
Page 18
TABLE 10 - FINANCIAL HIGHLIGHTS - BANKING SUBSIDIARIES
(Dollars in Millions)
Trust Company Third National
SunBanks, Inc. of Georgia Corporation
1995 1994 1995 1994 1995 1994
Summary of Operations<F2>
Net interest income (FTE) $229.9 $217.4 $141.5 $131.2 $68.4 $65.1
Provision for loan losses 14.8 19.9 7.4 10.0 3.1 4.0
Trust income 34.4 35.8 22.3 20.1 8.3 8.0
Other noninterest income 57.6 58.8 34.9 39.3 14.9 17.9
Personnel expense 73.3 75.1 45.7 44.6 23.7 23.7
Other noninterest expense 117.2 111.5 63.6 62.3 30.8 30.9
Net income 72.5 65.9 53.2 47.5 20.6 19.7
Selected Average Balances<F2>
Total assets 20,957 20,122 14,282 13,856 6,476 6,314
Earning assets 19,719 18,436 12,171 11,759 6,177 5,854
Loans 15,061 13,340 9,311 7,970 4,390 3,881
Total deposits 16,866 16,822 9,987 8,265 5,146 5,047
Realized shareholders' equity 1,808 1,660 1,170 1,076 532 507
At March 31
Total assets 21,222 20,312 14,671 13,779 6,585 6,261
Earning assets 19,849 18,629 12,275 11,804 6,235 5,833
Loans 15,268 13,603 9,471 8,346 4,474 3,874
Reserve for loan losses 349 310 193 171 118 107
Total deposits 17,061 17,065 9,018 8,713 5,204 5,078
Realized shareholders' equity 1,837 1,719 1,196 1,097 533 509
Total shareholders' equity 1,783 1,718 2,007 1,696 518 509
Credit Quality
Net loan charge-offs<F1> 9.1 11.5 2.1 3.7 0.3 0.2
Nonperforming loans<F2> 116.0 152.3 53.8 67.4 16.0 15.7
Other real estate owned<F2> 42.2 61.7 13.6 28.2 27.9 54.2
Ratios
ROA<F3> 1.39 % 1.33 % 1.64 % 1.51 % 1.28 % 1.27 %
ROE<F3> 16.27 16.10 18.43 17.90 15.74 15.79
Net interest margin<F3> 4.73 4.78 4.72 4.53 4.49 4.51
Efficiency ratio<F3> 59.2 59.8 54.9 56.1 59.5 60.0
Total shareholders' equity/assets<F2> 8.40 8.46 13.68 12.31 7.86 8.14
Net loan charge-offs to average loans<F3> 0.24 0.35 0.09 0.19 0.02 0.02
Nonperforming loans to total loans<F2> 0.76 1.12 0.57 0.81 0.36 0.41
Nonperforming assets to total loans plus
other real estate owned<F2> 1.03 1.57 0.71 1.14 0.97 1.78
Reserve to loans<F2> 2.28 2.28 2.04 2.04 2.64 2.75
Reserve to nonperforming loans<F2> 300.6 203.6 359.0 253.2 743.0 679.4
<FN>
<F1>For the three month period ended March 31.
<F2>At March 31.
<F3>Annualized for the first three months.
Page 19
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index:
Exhibit Exhibit No. Page No.
Statement re: Computation of Per Share Earnings 11
22
(b) SunTrust did not file any reports on Form 8-K during the first quarter of
1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized this 10th day of May, 1995.
SunTrust Banks, Inc.
(Registrant)
/s/ W.P. O'Halloran
William P. O'Halloran
Senior Vice President and Controller
(Chief Accounting Officer)
Page 20