FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 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 October 31, 1995, 113,160,351 shares of the Registrant's Common Stock,
$1.00 par value were outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statement Description Page No.
Consolidated Statements of Income
Nine months ended September 30, 1995 and 1994 4
Consolidated Balance Sheets
September 30, 1995, December 31, 1994 and 5
September 30, 1994
Consolidated Statements of Cash Flow
Nine months ended September 30, 1995 and 1994 6
Consolidated Statements of Shareholders' Equity
Nine months ended September 30, 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 nine months ended September 30, 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.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Nine Months
Ended September 30 Ended September 30
(Dollars in thousands except per share data)<F1> 1995 1994 1995 1994
Interest Income
Interest and fees on loans $632,416 $521,334 $1,852,988 $1,459,596
Interest and dividends on investment securities
Taxable interest 99,743 103,055 301,793 309,962
Tax-exempt interest 13,714 16,370 42,708 51,256
Dividends (1) 6,920 5,899 20,991 18,121
Interest on funds sold 6,345 3,711 23,941 10,376
Interest on deposits in other banks 280 1,494 780 9,224
Other interest 461 758 1,609 1,844
Total interest income 759,879 652,621 2,244,810 1,860,379
Interest Expense
Interest on deposits 251,368 190,520 738,976 499,408
Interest on funds purchased 58,749 27,036 170,330 79,777
Interest on other short-term borrowings 14,818 10,230 40,854 32,064
Interest on long-term debt 17,034 17,032 50,378 47,007
Total interest expense 341,969 244,818 1,000,538 658,256
Net Interest Income 417,910 407,803 1,244,272 1,202,123
Provision for loan losses 29,131 34,827 80,820 102,637
Net interest income after provision for loan losses 388,779 372,976 1,163,452 1,099,486
Noninterest Income
Trust income 64,762 61,606 195,123 188,889
Service charges on deposit accounts 54,054 54,272 158,305 164,652
Other charges and fees 32,056 28,615 89,833 91,073
Credit card fees 15,094 14,053 46,967 42,726
Securities gains (losses) 1,054 (882) 605 1,990
Other noninterest income 15,597 15,469 42,912 41,631
Total noninterest income 182,617 173,133 533,745 530,961
Noninterest Expense
Salaries and other compensation 170,079 163,573 496,675 485,775
Employee benefits 25,138 23,563 78,420 73,799
Net occupancy expense 33,637 32,737 96,925 96,874
Equipment expense 25,763 25,704 78,728 77,440
FDIC premiums (592) 16,777 32,492 50,026
Marketing and community relations 10,272 11,014 37,621 37,517
Postage and delivery 8,811 8,503 27,135 25,625
Other noninterest expense 89,972 67,102 222,908 199,363
Total noninterest expense 363,080 348,973 1,070,904 1,046,419
Income before income taxes 208,316 197,136 626,293 584,028
Provision for income taxes 64,616 65,252 205,681 193,600
Net Income $143,700 $131,884 $420,612 $390,428
Average common equivalent shares 114,087,510 119,270,688 114,901,681 120,501,322
Net income per average common share $1.26 $1.11 $3.66 $3.24
Dividends declared per common share 0.36 0.32 1.08 0.96
(1) Includes dividends on common stock of
The Coca-Cola Company 5,309 4,706 15,928 14,118
<FN>
<F1>See notes to consolidated financial statements
CONSOLIDATED BALANCE SHEETS
September 30 December 31 September 30
(Dollars in thousands)<F1> 1995 1994 1994
Assets
Cash and due from banks $1,995,426 $2,595,071 $2,211,042
Interest-bearing deposits in other banks 12,342 56,040 71,022
Trading account 34,354 98,110 136,102
Investment securities (1) 9,589,466 9,318,521 9,790,466
Funds sold 388,860 940,656 888,255
Loans 30,000,794 28,548,887 27,366,915
Reserve for loan losses (692,828) (647,016) (634,168)
Net loans 29,307,966 27,901,871 26,732,747
Premises and equipment 728,810 714,666 709,978
Intangible assets 257,131 237,416 242,450
Customers' acceptance liability 200,027 39,813 48,428
Other assets 842,745 806,921 796,236
Total assets $43,357,127 $42,709,085 $41,626,726
Liabilities
Noninterest-bearing deposits $6,835,552 $7,653,776 $7,315,778
Interest-bearing deposits 24,480,719 24,564,640 25,253,336
Total deposits 31,316,271 32,218,416 32,569,114
Funds purchased 4,503,980 4,351,896 2,602,128
Other short-term borrowings 939,325 785,653 946,790
Long-term debt 1,002,150 930,447 918,491
Acceptances outstanding 200,027 39,813 48,428
Other liabilities 1,328,531 929,529 1,014,942
Total liabilities 39,290,284 39,255,754 38,099,893
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 435,621 438,309 440,239
Retained earnings 3,317,985 3,020,985 2,930,543
Treasury stock and other (3) (848,838) (706,499) (574,310)
Realized shareholders' equity 3,035,229 2,883,256 2,926,933
Unrealized gains (losses) on investment
securities, net of taxes 1,031,614 570,075 599,900
Total shareholders' equity 4,066,843 3,453,331 3,526,833
Total liabilities and shareholders' equity $43,357,127 $42,709,085 $41,626,726
(1) Includes unrealized gains (losses) on
investment securities $1,667,724 $916,578 $966,444
(2) Common shares outstanding 113,568,985 115,679,426 118,407,582
(3) Treasury shares of common stock 16,891,659 14,781,218 12,053,062
<FN>
<F1>See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOW
Nine Months
Ended September 30
(In thousands)<F1> 1995 1994
Cash flow from operating activities:
Net income $ 420,612 $ 390,42
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 100,359 100,336
Provision for loan losses 80,821 102,639
Provision for losses on other real estate 2,911 11,011
Amortization of compensation element of
restricted stock 4,185 3,853
Securities (gains) and losses, net (606) (1,990)
(Gains) and losses on sale of equipment, other
real estate and repossessed assets, net (14,287) (15,209)
Recognition of unearned loan income (85,516) (157,492)
Change in period-end balances of:
Trading account 63,756 (23,580)
Interest receivable (12,128) (25,844)
Prepaid expenses (16,526) (46,343)
Other assets (30,908) 16,233
Taxes payable 22,124 (6,821)
Interest payable 32,445 36,526
Other accrued expenses 64,212 35,122
Net cash provided by operating activities 631,454 418,869
Cash flow from investing activities:
Proceeds from maturities of investment securities 1,073,480 1,961,269
Proceeds from sales of investment securities 298,319 1,286,546
Purchase of investment securities (768,281) (2,668,399)
Net (increase) decrease in loans (1,338,213) (1,640,889)
Capital expenditures (93,641) (71,169)
Proceeds from sale of equipment, other real estate
and repossessed assets 92,213 99,767
Net inflow (outflow) from bank acquisitions (25,493) (33,411)
Other (5,455) 22,130
Net cash provided(used) by investing activities (767,071) (1,044,156)
Cash flow from financing activities:
Net increase (decrease) in deposits (1,132,788) 1,752,289
Net increase (decrease) in funds purchased and
other short-term borrowings 298,196 (1,348,805)
Proceeds from the issuance of long-term debt 106,495 563,441
Repayment of long-term debt (34,792) (302,847)
Proceeds from the exercise of stock options 4,043 3,212
Payments to acquire treasury stock (177,064) (211,389)
Dividends paid (123,612) (115,242)
Net cash provided by financing activities (1,059,522) 340,659
Net decrease in cash and cash equivalents (1,195,139) (284,628)
Cash and cash equivalents at beginning of period 3,591,767 3,454,947
Cash and cash equivalents at end of period $2,396,628 $3,170,319
Supplemental Disclosure
Interest paid $1,032,983 $ 621,730
Taxes paid 191,506 206,839
<FN>
<F1>See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS 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 - - 390,428 - - 390,428
Cash dividends declared on common
stock, $0.96 per share - - (115,242) - - (115,242)
Proceeds from exercise of stock options - (5,107) - 8,319 - 3,212
Conversion of convertible debentures - - - - - -
Acquisition of treasury stock - - - (211,389) - (211,389)
Issuance of treasury stock for 401(k) - 411 - 9,851 - 10,262
Issuance, net of forfeitures, of treasury
stock as restricted stock - (6) - 7 - 1
Amortization of compensation element
of restricted stock - - - 3,853 - 3,853
Change in unrealized gains (losses)
on securities, net of taxes - - - - (163,875) (163,875)
Balance, September 30, 1994 $130,461 $440,239 $2,930,543 ($574,310) $599,900 $3,526,833
Balance, January 1, 1995 $130,461 $438,309 $3,020,985 ($706,499) $570,075 $3,453,331
Net income - - 420,612 - - 420,612
Cash dividends declared on common
stock, $1.08 per share - - (123,612) - - (123,612)
Proceeds from exercise of stock options - (7,154) - 11,197 - 4,043
Acquisition of treasury stock - (177,064) - (177,064)
Issuance of treasury stock for 401(k) - 1,104 - 9,011 - 10,115
Issuance, net of forfeitures, of treasury
stock as restricted stock - 3,362 - 12,863 - 16,225
Issuance of treasury stock for acquisition - - - 13,695 - 13,695
Compensation element of restricted stock - - - (16,226) - (16,226)
Amortization of compensation element
of restricted stock - - - 4,185 - 4,185
Change in unrealized gains (losses)
on securities, net of taxes - - - - 461,539 461,539
Balance, September 30, 1995 $130,461 $435,621 $3,317,985 ($848,838) $1,031,614 $4,066,843
<FN>
<F1>See notes to consolidated financial statements.
<F2>* Balance at September 30, 1995 includes $805,458 for Treasury Stock and $43,380 for Deferred Compensation.
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.
Note 2 - Mortgage Servicing Rights
SunTrust adopted Statements of Financial Accounting Standards No. 122
(FAS 122) "Accounting for Mortgage Servicing Rights" in the second quarter of
1995. The adoption of FAS 122 had no material effect on the earnings or
financial condition of the Company.
TABLE 1 - SELECTED QUARTERLY FINANCIAL DATA
(Dollars in millions except per share data)
Quarters
1995 1994
3 2 1 4 3
Summary of Operations
Interest and dividend income $759.9 $758.4 $726.5 $691.9 $652.7
Interest expense 342.0 343.9 314.7 274.2 244.9
Net interest income 417.9 414.5 411.8 417.7 407.8
Provision for loan losses 29.1 26.2 25.5 35.2 34.8
Net interest income after provision for loan losses 388.8 388.3 386.3 382.5 373.0
Noninterest income 182.6 174.2 176.9 169.0 173.1
Noninterest expense 363.1 349.7 358.1 353.6 349.0
Income before provision for income taxes 208.3 212.8 205.1 197.9 197.1
Provision for income taxes 64.6 71.9 69.1 65.6 65.2
Net income $143.7 $140.9 $136.0 $132.3 $131.9
Per common share
Net income $1.26 $1.22 $1.18 $1.13 $1.11
Dividends declared 0.36 0.36 0.36 0.36 0.32
Book value 35.81 34.76 32.09 29.85 29.79
Common stock market price
High 67 3/4 59 7/8 55 3/8 51 1/8 51 3/8
Low 57 53 1/8 47 1/4 46 3/8 47 1/8
Close 66 1/8 58 1/4 53 1/2 47 3/4 48 3/4
Selected Average Balances
Total assets $43,072.4 $42,762.2 $41,808.4 $40,991.2 $40,391.4
Earning assets 38,198.8 38,344.3 37,653.9 36,790.8 36,161.2
Loans 29,771.1 29,582.1 28,773.8 27,613.9 26,746.4
Total deposits 31,516.5 31,852.5 31,943.7 31,338.2 31,338.4
Realized shareholders' equity 3,092.9 3,043.8 2,989.1 2,964.7 2,991.1
Total shareholders' equity 4,090.3 3,797.4 3,561.2 3,555.0 3,557.3
Common equivalent shares (thousands) 114,088 115,090 115,543 117,054 119,271
Financial Ratios and Other
ROA<F1> 1.38 % 1.36 % 1.35 % 1.31 % 1.33 %
ROE<F1> 18.43 18.56 18.46 17.71 17.49
Net interest margin<F1> 4.47 4.47 4.58 4.65 4.63
Net interest income - taxable-equivalent $430.1 $427.1 $424.9 $431.5 $421.7
<F1> ROA, ROE and net interest margin are calculated excluding unrealized
gains on investment securities because the unrealized gains are not
included in income.
The following is an analysis of the financial performance of SunTrust Banks,
Inc. (SunTrust or Company) for the third 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.
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
September 30, 1995 June 30, 1995 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 $29,116.9 $622.5 8.48 % $28,886.4 $615.8 8.55 % $26,011.9 $510.8 7.79 %
Tax-exempt<F2> 654.2 15.3 9.29 695.7 15.2 8.76 734.5 16.2 8.75
Total loans 29,771.1 637.8 8.50 29,582.1 631.0 8.56 26,746.4 527.0 7.82
Investment securities:
Taxable 7,081.7 106.8 5.98 7,185.0 107.8 6.02 7,885.1 109.0 5.48
Tax-exempt<F2> 870.3 20.4 9.30 875.0 21.6 9.90 1,018.6 24.5 9.52
Total investment securities 7,952.0 127.2 6.35 8,060.0 129.4 6.44 8,903.7 133.5 5.94
Funds sold 422.0 6.3 5.96 655.0 9.9 6.09 315.8 3.7 4.66
Other short-term investments<F2> 53.7 0.8 5.57 47.2 0.7 5.98 195.3 2.4 4.74
Total earning assets 38,198.8 772.1 8.02 38,344.3 771.0 8.07 36,161.2 666.6 7.31
Reserve for loan losses (684.2) (668.2) (620.5)
Cash and due from banks 2,033.7 2,078.0 2,190.1
Premises and equipment 724.3 720.7 712.2
Other assets 1,186.7 1,068.4 1,037.8
Unrealized gains(losses) on
investment securities 1,613.1 1,219.0 910.6
Total assets $43,072.4 $42,762.2 $40,391.4
Liabilities and Shareholders' Equity
Interest-bearing deposits:
Money market accounts $9,329.7 $63.0 2.68 % $9,359.3 $65.5 2.81 % $9,692.6 $58.1 2.38 %
Savings 3,552.2 23.0 2.57 3,637.3 24.4 2.70 4,320.0 26.9 2.48
Consumer time 8,078.0 111.0 5.45 7,927.4 105.5 5.33 6,655.2 69.3 4.13
Other time<F3> 3,792.9 54.4 5.69 4,018.2 56.3 5.62 3,708.3 36.2 3.87
Total interest-bearing deposits 24,752.8 251.4 4.03 24,942.2 251.7 4.05 24,376.1 190.5 3.10
Funds purchased 4,148.0 58.8 5.62 4,167.7 60.7 5.84 2,542.7 27.1 4.22
Other short-term borrowings 949.6 14.8 6.19 914.3 14.6 6.40 1,035.2 10.3 3.92
Long-term debt 957.1 17.0 7.06 943.0 16.9 7.21 975.5 17.0 6.93
Total interest-bearing liabilities 30,807.5 342.0 4.40 30,967.2 343.9 4.45 28,929.5 244.9 3.36
Noninterest-bearing deposits 6,763.7 6,910.3 6,962.3
Other liabilities 1,410.9 1,087.3 942.3
Realized shareholders' equity 3,092.9 3,043.8 2,991.2
Net unrealized gains(losses)
on investment securities 997.4 753.6 566.1
Total liabilities and
shareholders' equity $43,072.4 $42,762.2 $40,391.4
Interest rate spread 3.62 % 3.62 % 3.95 %
Net Interest Income $430.1 $427.1 $421.7
Net Interest Margin 4.47 % 4.47 % 4.63 %
<FN>
<F1> Interest income includes loan fees of $22.9, $21.3, and $23.2 in
the quarters ended September 30, and June 30, 1995 and September
30, 1994 and $64.6 and $69.0 in the nine months ended September 30,
1995 and 1994. Nonaccrual loans are included in average balances
and income on such 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 $12.2,
$12.6 and $13.9 in the quarters ended September 30 and June 30,
1995 and September 30, 1994 and $37.9 and $42.1 in the nine months
ended September 30, 1995 and 1994.
<F3> Interest rate swap transactions used to help balance the
Company's interest-sensitivity position reduced interest expense by
$1.5, $3.0, and $5.5 in the quarters ended September 30 and June
30, 1995 and September 30, 1994 and $8.9 and $25.7 in the nine
months ended September 30, 1995 and 1994. Without these swaps, the
rate on other time deposits and the net interest margin would have
been 5.84% and 4.45%, 5.92% and 4.44%, and 4.46% and 4.57% in the
quarters ended September 30 and June 30, 1995 and September 30,
1994 and 5.79% and 4.47%, and 4.22% and 4.54% in the nine months
ended September 30, 1995 and 1994.
TABLE 2b - CONSOLIDATED DAILY AVERAGE BALANCES, INCOME/EXPENSE AND AVERAGE
YIELDS EARNED AND RATES PAID
(Dollars in millions; yields on a taxable-equivalent basis)
Nine Months Ended
September 30, 1995 September 30, 1994
Average Income/ Yields/ Average Income/ Yields/
Balances Expense Rates Balances Expense Rates
Assets
Loans<F1>
Taxable $28,689.1 $1,822.6 8.49 % $25,270.9 $1,431.9 7.58 %
Tax-exempt<F2> 690.2 47.0 9.10 736.8 43.7 7.94
Total loans 29,379.3 1,869.6 8.51 26,007.7 1,475.6 7.59
Investment securities:
Taxable 7,214.3 323.2 5.99 8,081.8 328.1 5.43
Tax-exempt<F2> 886.1 63.5 9.58 1,056.0 77.1 9.76
Total investment securities 8,100.4 386.7 6.38 9,137.8 405.2 5.93
Funds sold 530.7 23.9 6.03 351.2 10.4 3.95
Other short-term investments<F2> 57.2 2.5 5.92 385.2 11.3 3.91
Total earning assets 38,067.6 2,282.7 8.02 35,881.9 1,902.5 7.09
Reserve for loan losses (669.1) (597.1)
Cash and due from banks 2,078.4 2,253.5
Premises and equipment 721.1 714.2
Other assets 1,099.9 1,071.9
Unrealized gains(losses) on
investment securities 1,254.4 995.8
Total assets $42,552.3 $40,320.2
Liabilities and Shareholders' Equity
Interest-bearing deposits:
NOW/Money market accounts $9,385.0 $193.4 2.75 % $9,832.8 $161.1 2.19 %
Savings 3,669.7 73.2 2.67 4,445.8 77.7 2.34
Consumer time 7,830.5 306.9 5.24 6,556.2 195.6 3.99
Other time<F3> 4,029.7 165.5 5.49 2,875.3 65.0 3.02
Total interest-bearing deposits 24,914.9 739.0 3.97 23,710.1 499.4 2.82
Funds purchased 3,994.1 170.3 5.70 2,975.8 79.8 3.58
Other short-term borrowings 891.1 40.8 6.13 1,144.2 32.1 3.75
Long-term debt 943.5 50.4 7.14 904.9 47.0 6.95
Total interest-bearing liabilities 30,743.6 1,000.5 4.35 28,735.0 658.3 3.06
Noninterest-bearing deposits 6,854.4 7,012.5
Other liabilities 1,136.1 995.5
Realized shareholders' equity 3,042.3 2,958.6
Net unrealized gains(losses)
on investment securities 775.9 618.6
Total liabilities and
shareholders' equity $42,552.3 $40,320.2
Interest rate spread 3.67 % 4.03 %
Net Interest Income $1,282.2 $1,244.2
Net Interest Margin 4.50 % 4.64 %
<FN>
<F1> See note F1 on Table 2A
<F2> See note F2 on Table 2A
<F3> See note F3 on Table 2A
Net Interest Income/Margins. The Company's net interest margin of 4.47% for
the third quarter of 1995 was 16 basis points lower than the third quarter of
last year. The rates on earning assets and interest-bearing liabilities both
increased substantially. The rate on earning assets increased 71 basis points,
fueled by a 68 basis point increase in the yield on loans. At the same time,
the rate on interest-bearing liabilities rose 104 basis points. Interest rate
swaps also helped increase last year's net interest margin (see the discussion
entitled "Derivitaves" on page 17).
Interest income which the Company was unable to recognize on nonperforming
loans had a negative impact of 3 basis points in the net interest margin in
the first nine months of both 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 third quarter and the first
nine months of 1995, adjusted to exclude the effect of securities gains
(losses), increased 4.3% and 0.8% from the comparable periods a year ago.
Trust income, the Company's largest source of noninterest income, increased
5.1% and 3.3% over the same periods. Other charges and fees were 14.0% higher
in the third quarter of this year compared to the same period last year due
to higher volume in our mortgage banking business. Credit card fees also
increased 7.4% and 9.9%.
TABLE 3 - NONINTEREST INCOME
(In millions)
Quarters
1995 1994
3 2 1 4 3
Trust income $64.7 $65.3 $65.1 $61.4 $61.6
Service charges on deposit accounts 54.0 50.5 53.8 53.7 54.3
Mutual fund commissions 2.1 2.5 2.0 2.4 2.3
Other charges and fees 29.9 27.1 26.2 27.6 26.3
Credit card fees 15.1 15.7 16.2 14.5 14.0
Securities gains (losses) 1.0 (0.1) (0.3) (4.7) (0.9)
Trading account profits and commissions 2.5 2.4 2.4 2.3 1.8
Other income 13.3 10.8 11.5 11.8 13.7
Total noninterest income $182.6 $174.2 $176.9 $169.0 $173.1
Noninterest Expense. Noninterest expense increased 4.0% and 2.3% in the third
quarter and first nine months of 1995 compared to the same periods last year.
Personnel expense, consisting of salaries, other compensation and employee
benefits, increased 4.3% and 2.8% over the aforementioned periods. FDIC
premiums in the third quarter of 1995 were negative as the Company recorded a
refund from the FDIC in connection with the recent retroactive deposit
insurance rate reduction. Other noninterest expense increased substantially
in the third quarter of this year due to expenditures made in connection with
various projects to stimulate business growth and development.
TABLE 4 - NONINTEREST EXPENSE
(In millions)
Quarters
1995 1994
3 2 1 4 3
Salaries $144.8 $143.1 $140.5 $138.1 $138.5
Other compensation 25.3 21.1 21.9 22.6 25.1
Employee benefits 25.1 24.8 28.5 26.9 23.6
Net occupancy expense 33.6 31.8 31.5 30.0 32.8
Equipment expense 25.7 26.5 26.5 25.9 25.7
FDIC premiums (0.6) 16.6 16.5 16.6 16.8
Marketing and community relations 10.3 13.3 14.0 19.7 11.0
Postage and delivery 8.8 8.8 9.5 8.5 8.5
Operating supplies 8.1 7.7 7.9 7.2 7.0
Other real estate expense (1.1) (2.3) (1.7) (2.0) (0.9)
Communications 7.3 7.1 6.7 6.3 6.7
Consulting and legal 5.5 5.5 4.8 5.7 4.7
Amortization of intangible assets 5.4 5.0 5.0 5.1 5.2
Other expense 64.9 40.7 46.5 43.0 44.3
Total noninterest expense $363.1 $349.7 $358.1 $353.6 $349.0
Efficiency ratio 59.3 % 58.2 % 59.5 % 58.9 % 58.7 %
Provision for Loan Losses. As a result of improving credit quality, the
Company lowered its provision for loan losses in the third quarter of 1995 to
$29.1 million from $34.8 million in the same period last year, yet the
provision still exceeded net charge-offs by $15.2 million. Net loan
charge-offs were $37.4 million in the first nine months of this year,
representing 0.17% of average loans. The comparable net charge-off amount for
1994 was $37.9 million or 0.20% of average loans. Consumer loan charge-offs
increased slightly yet remain low compared to historical standards.
Recoveries, as a percent of gross charge-offs for consumer loans remain well
above 40%.
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 $692.8 million at
September 30, 1995, which was 2.31% of quarter-end loans and 390.8% of total
nonperforming loans. These ratios at December 31, 1994 were 2.27% and 344.9%
and at September 30, 1994 were 2.32% and 299.4%.
TABLE 5 - SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in millions)
Quarters
1995 1994
3 2 1 4 3
Reserve for Loan Losses
Balances - beginning of quarter $676.9 $661.0 $647.0 $634.2 $610.2
Reserve of purchased banks 0.7 1.7 - - -
Provision for loan losses 29.1 26.2 25.5 35.2 34.8
Charge-offs:
Domestic:
Commercial (4.0) (5.0) (7.6) (9.4) (6.9)
Real estate:
Construction (0.1) (0.2) - - (0.1)
Mortgage, 1-4 family (2.3) (1.5) (1.5) (2.6) (1.5)
Other (3.9) (4.0) (2.1) (6.3) (3.5)
Lease financing (0.2) (0.2) (0.2) (0.2) (0.1)
Credit card (6.8) (6.8) (6.6) (6.4) (6.6)
Other consumer loans (10.0) (8.0) (8.9) (8.8) (7.1)
International - - - - -
Total charge-offs (27.3) (25.7) (26.9) (33.7) (25.8)
Recoveries:
Domestic:
Commercial 3.2 7.4 5.6 3.2 4.9
Real estate:
Construction 1.9 (1.6) 0.2 - -
Mortgage, 1-4 family 0.2 0.5 0.4 0.1 0.7
Other 1.4 1.5 1.6 1.7 2.5
Lease financing 0.2 0.1 0.1 0.2 0.1
Credit card 2.0 1.8 1.8 1.8 1.9
Other consumer loans 4.3 4.0 5.3 4.3 4.9
International 0.2 - 0.4 - -
Total recoveries 13.4 13.7 15.4 11.3 15.0
Net charge-offs (13.9) (12.0) (11.5) (22.4) (10.8)
Balance - end of quarter $692.8 $676.9 $661.0 $647.0 $634.2
Quarter-end loans outstanding:
Domestic $29,702.6 $29,802.3 $28,975.8 $28,300.4 $27,106.1
International 298.2 277.6 258.9 248.5 260.8
Total $30,000.8 $30,079.9 $29,234.7 $28,548.9 $27,366.9
Ratio of reserve to quarter-end loans 2.31 % 2.25 % 2.26 % 2.27 % 2.32 %
Average loans $29,771.1 $29,582.1 $28,773.8 $27,613.9 $26,746.4
Ratio of net charge-offs (annualized)
to average loans 0.18 % 0.16 % 0.16 % 0.32 % 0.16 %
TABLE 6 - NONPERFORMING ASSETS
(Dollars in millions)
1995 1994
September 30 June 30 March 31 December 31 September 30
Nonperforming Assets
Nonaccrual loans:
Domestic:
Commercial $27.6 $28.7 $31.4 $27.9 $37.1
Real Estate:
Construction 6.9 11.3 13.9 16.0 15.6
Mortgage, 1-4 family 44.2 43.5 42.6 45.3 45.4
Other 84.0 85.3 83.1 82.0 97.4
Lease financing - 0.2 0.2 0.2 0.1
Consumer loans 11.6 10.4 10.7 11.6 11.1
Total nonaccrual loans 174.3 179.4 181.9 183.0 206.7
Restructured loans 3.0 3.2 4.3 4.6 5.1
Total nonperforming loans 177.3 182.6 186.2 187.6 211.8
Other real estate owned 66.2 70.1 83.8 87.7 109.6
Total Nonperforming Assets $243.5 $252.7 $270.0 $275.3 $321.4
Ratios:
Nonperforming loans to total loans 0.59 % 0.61 % 0.64 % 0.66 % 0.77 %
Nonperforming assets to total loans
plus other real estate owned 0.81 0.84 0.92 0.96 1.17
Reserve to nonperforming loans 390.78 370.61 354.95 344.91 299.36
Accruing Loans Past Due 90 Days or More $26.0 $19.0 $19.5 $19.2 $19.0
Nonperforming Assets. Nonperforming assets consist of nonaccrual and
restructured loans and other real estate owned. Nonperforming assets have
decreased $31.8 million since December 31, 1994 and $77.9 million since
September 30, 1994. Since December 31, 1994, nonperforming assets decreased
$4.0 million in Florida banks, $8.4 million in Georgia banks, and $19.3
million in Tennessee banks. Included in nonperforming loans at September 30,
1995 are loans aggregating $34.3 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 nine months of 1995, the gross amount of
interest income that would have been recorded on nonaccrual loans and
restructured loans at September 30, 1995, if all such loans had been accruing
interest at the original contractual rate, was $13.6 million. Interest income
recognized in the nine months ended September 30, 1995 on all such
nonperforming loans at September 30, 1995, was $6.1 million.
Table 7 - Loan Portfolio by Types of Loans (in millions)
1995 1994
September 30 June 30 March 31 December 31 September 30
Commercial:
Domestic $9,374.4 $9,931.3 $9,596.6 $9,279.2 $8,651.7
International 299.6 298.0 287.0 273.2 280.6
Real estate:
Construction 1,176.6 1,151.0 1,115.5 1,151.1 1,129.7
Mortgage, 1-4 family 9,431.4 9,054.0 8,698.1 8,380.5 8,016.1
Other 4,567.4 4,579.3 4,557.9 4,516.3 4,489.5
Lease financing 507.6 487.5 459.6 411.0 383.4
Credit card 713.9 671.7 655.2 690.5 646.6
Other consumer loans 3,929.9 3,907.1 3,864.8 3,847.1 3,769.3
Loans $30,000.8 $30,079.9 $29,234.7 $28,548.9 $27,366.9
Loans. During the third quarter and first nine months of 1995, average loans
increased 11.3% and 13.0% over the same periods a year ago, however, loan
growth slowed during the third quarter. Since December 31, 1994, the two loan
categories experiencing significant growth were 1-4 family residential
mortgage loans (most of which are variable rate loans) and domestic commercial
loans. The average loan to deposit ratios were 94.5% and 92.5% in the third
quarter and first nine months of 1995 compared with 85.3% and 84.7% in the
same periods of 1994.
At September 30, 1995, international outstandings, which include loans,
acceptances, deposits in other banks, foreign guarantees and accrued interest,
totaled $348.5 million, an increase of 5.5% from $328.8 million at December
31, 1994.
Income Taxes. The provision for income taxes was $64.6 and $205.7 million in
the third quarter and first nine months of 1995 compared to $65.2 and $193.6
million in the same periods last year. Higher taxable income for the first
nine months of 1995 was primarily responsible for the increase in the
provision.
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 5.94%
in the third quarter of 1994 to 6.34% in the third quarter of this year. The
portfolio size declined by $0.9 billion from September 30, 1994 to September
30, 1995 as a portion of maturities were used to meet loan demand. The average
life of the portfolio was approximately 3.1 years at September 30, 1995;
however, adjustable-rate securities in the portfolio reduced the average time
to repricing to 2.0 years. At September 30, 1995, approximately 30.3% of the
portfolio consisted of U.S. Treasury securities, 13.9% U.S. government agency
securities, 44.0% mortgage-backed securities, 11.1% municipal securities, and
0.7% 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 September 30, 1995, the carrying value of the
securities portfolio was $1.7 billion over its amortized cost, consisting
entirely of a $1.7 billion unrealized gain on the Company's investment in
common stock of The Coca-Cola Company.
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 and 1995
when loan demand exceeded deposit growth. Liquidity 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 third quarter and first nine months of 1995
increased 0.6% and 3.4% over the same periods a year ago. Interest-bearing
deposits represented 78.5% and 78.4% of average deposits for the third quarter
and first nine months of 1995, compared to 77.8% and 77.2% for the same
periods in 1994. In the third quarter of 1995, average net purchased funds
(average funds purchased less average funds sold) increased $1.5 billion over
the same period in 1994. Net purchased funds were 9.8% and 9.1% of average
earning assets for the third quarter and first nine months of 1995 as compared
to 6.2% and 7.3% in the same periods 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 September
30, 1995 used for managing interest rate sensitivity.
TABLE 8 - INTEREST RATE SWAPS
Average Average Average
(Dollars in millions) Notional Fair Maturity Rate Rate
At September 30, 1995 Value Value In Months Paid Received
Gain position:
Receive fixed $18.0 $0.3 13.3 6.13 % 7.78 %
Pay fixed 199.5 3.3 60.1 6.01 6.01
Total gain position 217.5 3.6
Loss position:
Receive fixed 55.0 (0.7) 22.0 5.88 5.07
Pay fixed 62.4 (1.3) 31.0 6.86 5.93
Total loss position 117.4 (2.0)
Total $334.9 $1.6
The majority of the swaps are designated as hedges on deposits and other
interest-bearing liabilities. During the nine months ended September 30, 1995,
hedge swaps benefited net interest income by $8.9, compared with $25.7 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 which is
being amortized over the remaining life of the swaps closed out.
TABLE 9 - CAPITAL RATIOS
(Dollars in millions)
1995 1994
September 30 June 30 March 31 December 31 September 30
Tier 1 capital:
Realized shareholders' equity $3,035.2 $3,035.7 $2,949.7 $2,883.3 $2,926.9
Intangible assets other than servicing rights (239.5) (225.1) (218.1) (222.1) (229.6)
Total Tier 1 capital 2,795.7 2,810.6 2,731.6 2,661.2 2,697.3
Tier 2 capital:
Allowable reserve for loan losses 437.6 437.5 426.2 420.9 405.1
Allowable long-term debt 247.6 247.6 247.6 281.4 282.2
Total Tier 2 capital 685.2 685.1 673.8 702.3 687.3
Total capital $3,480.9 $3,495.7 $3,405.4 $3,363.5 $3,384.6
Risk-weighted assets $34,756.2 $34,759.9 $33,861.6 $33,444.3 $32,180.6
Risk-based ratios:
Tier 1 capital 8.04 % 8.09 % 8.07 % 7.95 % 8.38 %
Total capital 10.02 10.06 10.06 10.05 10.52
Tier 1 leverage ratio 6.78 6.80 6.72 6.68 6.87
Total shareholders' equity to assets 9.38 9.04 8.66 8.09 8.47
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 September 30, 1995, the Company's Tier 1 capital, total risk-based capital
and Tier 1 leverage ratios were 8.04%, 10.02% and 6.78%, respectively.
In 1995, the Board of Directors authorized the Company to repurchase up
to 10,000,000 shares of SunTrust common stock. Under this authorization, the
Company has repurchased 1,186,691 shares as of September 30, 1995, leaving an
additional 8,813,309 shares of SunTrust common stock that may be repurchased.
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 September 30, 1995, the servicing portfolio
was $10.4 billion, which includes $6.1 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. SunTrust Capital Markets, Inc. serves as the
investment banking arm of SunTrust. It's business activities include public
finance, corporate finance and the sale of investment securities to
corporations, institutions and government entities. 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, SunTrust Banks of Florida, Inc., SunTrust Banks of Georgia, Inc.
and SunTrust Banks of Tennessee, Inc., 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.
TABLE 10 - FINANCIAL HIGHLIGHTS - BANKING SUBSIDIARIES
(Dollars in Millions)
SunTrust Banks SunTrust Banks SunTrust Banks
of Florida, Inc. of Georgia, Inc of Tennessee, Inc.
1995 1994 1995 1994 1995 1994
Summary of Operations<F1>
Net interest income (FTE) $694.0 $672.3 $427.3 $408.4 $207.9 $199.3
Provision for loan losses 49.2 60.7 22.2 29.6 9.1 11.9
Trust income 104.1 102.9 66.7 61.6 24.4 24.5
Other noninterest income 171.2 165.2 110.3 115.0 48.7 51.3
Personnel expense 221.3 223.9 135.6 133.4 71.2 70.6
Other noninterest expense 344.4 329.0 190.7 185.3 93.8 92.8
Net income 220.3 203.7 165.2 152.8 65.1 60.8
Selected Average Balances<F2>
Total assets 21,131 20,221 14,714 14,039 6,521 6,286
Earning assets 19,847 18,684 12,332 12,015 6,217 5,868
Loans 15,246 13,723 9,573 8,294 4,518 3,939
Total deposits 16,978 16,768 9,729 8,990 5,120 5,035
Realized shareholders' equity 1,851 1,723 1,193 1,102 542 518
At September 30
Total assets 21,500 20,606 15,181 15,466 6,590 6,485
Earning assets 20,162 19,345 12,410 13,241 6,254 6,108
Loans 15,525 14,342 9,739 8,844 4,663 4,156
Reserve for loan losses 372 336 200 184 120 114
Total deposits 17,079 16,590 9,108 10,842 5,143 5,147
Realized shareholders' equity 1,943 1,802 1,241 1,151 554 530
Total shareholders' equity 1,937 1,734 2,267 1,834 556 506
Credit Quality
Net loan charge-offs<F1> 22.3 26.5 10.1 10.1 4.6 1.0
Nonperforming loans<F2> 113.5 130.3 51.6 66.5 11.9 14.5
Other real estate owned<F2> 36.3 49.1 10.3 22.2 19.6 38.2
Ratios
ROA<F3> 1.39 % 1.35 % 1.65 % 1.57 % 1.33 % 1.29 %
ROE<F3> 15.91 15.81 18.51 18.54 16.07 15.70
Net interest margin<F3> 4.68 4.81 4.63 4.54 4.47 4.54
Efficiency ratio<F3> 58.36 58.80 54.00 54.48 58.71 59.38
Total shareholders' equity/assets<F2> 9.01 8.42 14.93 11.86 8.43 7.81
Net loan charge-offs to average loans<F3> 0.20 0.26 0.14 0.16 0.14 0.03
Nonperforming loans to total loans<F2> 0.73 0.91 0.53 0.75 0.26 0.35
Nonperforming assets to total loans plus
other real estate owned<F2> 0.96 1.25 0.63 1.00 0.67 1.26
Reserve to loans<F2> 2.40 2.34 2.05 2.08 2.57 2.74
Reserve to nonperforming loans<F2> 327.7 257.6 387.8 276.6 1,007.0 782.4
<FN>
<F1>For the nine month period ended September 30.
<F2>At September 30.
<F3>Annualized for the first nine 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 third
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 9th day of November,
1995.
SunTrust Banks, Inc.
(Registrant)
/s/ W.P. O'Halloran
William P. O'Halloran
Senior Vice President and Controller
(Chief Accounting Officer)