CORPORATE PROFILE
SunTrust Banks, Inc., a premier financial company based in the Southeastern
United States, operates 652 full-service banking offices in Florida, Georgia,
Tennessee and Alabama. It provides a wide range of financial services to a
growing customer base. SunTrust's primary businesses include traditional
deposit and credit services as well as trust and investment services. The
Company also provides mortgage banking, corporate finance, credit cards,
factoring, discount brokerage, credit-related insurance, and data processing
and information services. At year-end 1995, SunTrust had total assets of $46.5
billion, discretionary trust assets of $47.0 billion and a mortgage servicing
portfolio of $10.6 billion.
1
FINANCIAL HIGHLIGHTS
Year Ended December 31
(Dollars in millions except per share data) 1995 1994 1993
For the Year
Net income 565.5 $522.7 $473.7
Common dividends paid 168.7 157.1 144.8
Per Common Share
Net income 4.94 4.37 3.77
Dividends paid 1.48 1.32 1.16
Market price:
High 70 7/8 51 3/8 49 5/8
Low 47 1/4 43 1/2 41 3/8
Close 68 1/2 47 3/4 45
Book value 37.72 29.85 29.47
Financial Ratios
Return on average assets (ROA) 1.36 % 1.32 % 1.26 %
Return on average realized
shareholders' equity (ROE) 18.53 17.66 16.48
Net interest margin
(taxable-equivalent) 4.49 4.64 4.80
Selected Average Balances
Total assets $43,072.6 $40,489.2 $37,524.9
Earning assets 38,401.4 36,111.0 34,054.8
Loans 29,709.3 26,412.6 24,170.4
Deposits 31,808.8 30,877.8 29,683.3
Realized shareholders' equity 3,052.3 2,960.1 2,875.1
Total shareholders' equity 3,905.2 3,571.5 2,877.2
Common equivalent shares (thousands) 114,460 119,633 125,656
At December 31
Total assets $46,471.5 $42,709.1 $40,728.4
Earning assets 40,530.0 38,045.6 35,904.5
Loans 31,301.4 28,548.9 25,292.1
Reserve for loan losses 698.9 647.0 561.2
Deposits 33,183.2 32,218.4 30,485.8
Realized shareholders' equity 3,111.0 2,883.3 2,845.8
Total shareholders' equity 4,269.6 3,453.3 3,609.6
Common shares outstanding (thousands) 113,194 115,679 122,468
Market value of investment in common
stock of The Coca-Cola Company $1,792 $1,243 $1,077
In this report, for 1995, 1994 and 1993, investment securities, total assets
and total shareholders' equity include the net unrealized securities gain.
However, earnings assets exclude this gain as do the calculations of ROA, ROE
and the net interest margin because the gain is not included in income.
2
CONSISTENCY IN A DECADE OF CHANGE
On July 1, 1985, a merger that had been announced a year earlier was
consummated as reciprocal interstate banking laws between Florida and Georgia
became effective. With this new alliance came a commitment to provide
customers the best financial services and products available, with a constant
eye on increasing shareholder value. A decade later, this commitment has
produced a performance record that ranks among the best in the industry and
has created a reputation for the SunTrust name that is synonymous with a
strong, high-earning financial institution that continually rewards its
customers and shareholders alike. Now, as our subsidiary banking units have
all adopted the SunTrust name, our position as one of the premier financial
institutions in the Southeast has been strengthened even further to help
build upon a well-established tradition.
3
TO OUR SHAREHOLDERS
The past year marked the tenth anniversary of the creation of SunTrust
through the merger of Sun Banks, Inc. and Trust Company of Georgia. The
banking industry has seen many changes over the past decade and so has
SunTrust, growing from an institution with $16 billion in assets to one with
more than $46 billion in assets. Through the hard work of our employees and
the support of our customers and shareholders, earnings per share have
increased each year since 1985.
Net income for 1995 totaled $565.5 million or $4.94 per share, a 13.0%
increase in earnings per share from last year and an 11.5% average annual
increase from 1985. Loan growth, improved credit quality and an active stock
buy-back program were all major stimulants to our record earnings
performance. Our performance ratios were strong with an annualized return on
average assets (ROA) of 1.36% and an annualized return on average realized
common equity (ROE) of 18.53%, compared with the 1994 returns 1.32% and
17.66%, respectively.
Increased loan demand produced a modest increase in net interest income
and a 6.3% increase in average earning assets. The net interest margin
declined to 4.49%, but the impact of the decline was offset by the growth in
earning assets. Both noninterest income and noninterest expense were up
slightly in 1995. The increase in noninterest expense reflects our investment
in the future as we began to add personnel to implement our growth
initiatives.
Credit quality continued to strengthen. Nonperforming assets declined
for the fourth straight year and totaled $251.0 million at year-end, an 8.8%
improvement over 1994. Although loan losses were are at record levels, we
remained committed to maintaining a conservative loan loss reserve. During
1995 the provision for possible loan losses exceeded net loan charge-offs by
$45.6 million.
Prudent management of the Company's capital is key to the welfare of our
shareholders. We have used our string capital position to buy back stock,
repurchasing 3.5 million shares in 1995. At year-end there were 8.4 million
shares remaining unpurchased under a share repurchase plan approved by the
Board of Directors in April 1995. The indicated annual dividend rate was
raised to $1.60 from $1.44 per common share by the Board at its November
meeting.
It was not only a good year for earnings, but also a good year for
SunTrust shareholders. After closing at $47.75 per share in 1994, the stock
price rose steadily throughout 1995 closing the year at $68.50 per share. If
shareholders reinvested their dividends, the total return for 1995 was 47%,
the second best year in our history. If you bought an initial share of
SunTrust for $18.00 in 1985 and reinvested dividends, the average annual rate
of return would have been 17.0%.
As I mentioned in last year's letter, SunTrust has instituted growth
initiatives that offer an attractive return on the equity employed. We are
adding to our sales force, channels of distribution and technology in six
focus areas: trust and investment services, mortgages, credit cards,
commercial, corporate and personal markets. In the fall of 1995, all our
banks adopted the SunTrust name, providing customers with a clear connection
with our multi-state company. The growth initiatives coupled with a common
identity will help SunTrust remain one of the top financial services
companies in the nation.
4
We continue to depend on our employees, customers, shareholders and
directors to help us achieve these initiatives. Your contributions are
essential to the continued long-term success of our Company, and I appreciate
your ongoing support and dedication.
Sincerely
James B. Williams
Chairman of the Board and
Chief Executive Officer
February 13, 1996
5
The financial services industry, like any other, has its peaks and valleys.
That is why the ten-year performance of SunTrust conveys such a compelling
story in consistency. Throughout a decade riddled with problems arising from
debt to lesser developed countries, commercial real estate, bailouts of
savings and loan associations, and derivatives, as well as increasing
competition from nonbanking financial institutions, SunTrust has remained
constant - constant in its ability to reward its shareholders with increasing
earnings and dividends through a constant commitment to excellence in serving
customers.
The ability to maintain this high level of performance is the result of
a disciplined, well-executed strategy conceived with foresight and vision.
SunTrust was founded on these principles in 1985 through the combination of
institutions in Florida and Georgia that complemented each other. The
potential was great, but success was not guaranteed. Although the Southeast
proved to be the nation's most rapidly growing economic region, there were
still many pitfalls and distractions.
To help the Company stay focused on our objectives for shareholders and
customers, a vision statement was developed in 1986 that addressed our
mission, objectives, geographic coverage, target markets, services and
delivery systems. Nine years later, this document and its principles and
philosophy are just as pertinent as they were then. It continues to serve as
a blueprint for maintaining our focus.
In 1986, SunTrust entered the Tennessee marketplace which was also
attracting the attention of the automobile industry for manufacturing
facilities. Shortly thereafter, the area's real estate market experienced a
severe downturn. However, our quick action to confront this problem and the
benefit of our continuing strong performance in other markets demonstrated
our ability to continue to post record earnings and increased dividends
through adversity.
Throughout the years, SunTrust has made numerous strategic fill-in
acquisitions. Our strategy has never been to simply increase our asset size,
but rather to strengthen and complement our existing operations and increase
our shareholders' value. We continue to remain averse to any acquisitions
that would dilute this investment.
Internally, we have always adhered to a decentralized management
structure. Although all of our subsidiary banking units adopted the SunTrust
name this past year, we continue our commitment to a decentralized style of
management. Our ongoing performance reflects the benefits and success this
strategy has produced.
Over the years we have taken advantage of the opportunity to increase
our efficiency and effectiveness by carefully combining back office
operations. We have also consolidated our banking subsidiaries within natural
geographic markets from a high of 53 in 1989 to the present number of 29, but
only after we were convinced that these changes would provide the desired
benefits to us and our customers.
While we have continued to build upon our strengths in the traditional
lines of business in our industry, we have remained open to, and seized upon,
opportunities in new lines of business, such as mutual funds and increased
investment banking powers, to help diversify our sources of income. At
SunTrust, we are of the opinion that the leaders of this industry will
continue to be those that are flexible and willing to expand their operations
to provide customers with a broad base of services in a cost-effective
manner. Our recently initiated growth project continues this tradition of
meeting our customers' needs while increasing our shareholders' value.
6
Our greatest strength throughout the years and the foundation for our
success is the people that comprise SunTrust. Their capabilities, character
and commitment to a common goal have produced the results of which we are
proud. By providing them with the training and tools to anticipate and meet
the shifting demands of our customers and the marketplace, we help ensure
that this success continues. Now, our increased emphasis and focus on a sales-
oriented culture helps position us to be even more competitive and effective
in identifying opportunities regarding new and existing relationships. We
stay committed to providing our customers with the best people and service
the industry has to offer.
While past achievements are no guarantee for future successes, the
experience, character and stability that have been developed over the past
ten years are invaluable assets to draw upon. These intangibles will help
SunTrust continue to capitalize on the peaks in the industry and minimize the
impact of the valleys. Our consistency in a decade of change has produced a
reputation which we do not take lightly. We will continually look for
opportunities to build upon and strengthen that reputation even further.
HIGHLIGHTS
1985
SunTrust Banks, Inc. begins operation - initial trade on NYSE at $36 per
share (equivalent to $18 per current share).
Year-end stock market value totals $1.9 billion.
SunTrust's investment in common stock of The Coca-Cola Company has
a year-end market value of $170 million.
Total assets equal $19.4 billion at year-end.
Two acquisitions with total assets of $130 million are completed.
1986
Acquisition of the $5 billion Third National Corporation, based in
Nashville, Tennessee, is completed.
Two-for-one split of the Company's common stock is paid in the form of a
100% stock dividend.
"The SunTrust Vision," a concise statement of the principles and philosophy
by which the Company intends to operate its business, is developed.
In addition to Third National, one acquisition is completed with assets
totaling $51 million.
SunTrust Securities begins operation.
1987
SunTrust posts the highest earnings in the industry for the first half of
the year, helping earn the distinction as the "Top Performing Regional Bank
Holding Company" of the year by American Banker.
Florida becomes the nation's fourth most populous state, highlighting the
growing economic strength of the Southeast.
7
Discretionary trust assets reach $17 billion.
Three banks with total assets of $620 million join the Company.
1988
The Company is added to the Standard & Poor's 500 Composite Stock Price
Index.
Acquisition of two Florida trust subsidiaries of Mellon Bank Corporation is
completed, further strengthening SunTrust's position as the leading
provider of trust services in the Southeast.
Board of Directors authorizes repurchase of 5 million shares of common
stock.
Three acquisitions totaling $724 million are completed.
1989
In a bad year for banks, SunTrust earnings and dividends continue to
increase despite major concerns within the industry regarding real estate
and highly leveraged transactions.
The Company realizes a $10 million gain through the sale of common stock of
Columbia Pictures Entertainment, Inc. which was attained as a spin-off from
The Coca-Cola Company.
SunBank Capital Management is formed with $5 billion in assets under
management.
1990
With the banking industry continuing to experience numerous woes related to
real estate lending, the federal government mandates a significant increase
in deposit insurance premiums.
As the Company's first Chairman, Bob Strickland, approaches retirement, a
management succession plan is put into place with Joel Wells becoming
Chairman and Jimmy Williams named President and CEO.
Income from trust and investment management activities continues to post
strong gains with a 13.4% increase over the previous year.
One acquisition totaling $166 million is completed.
1991
Jimmy Williams is named Chairman in addition to his CEO position. Phil
Humann is named President.
SunTrust investors who reinvest their dividends have an 81% return for the
year.
Compound annual growth in earnings per share since 1985 equals 10.0%.
8
1992
The STI Classic family of funds is introduced with an initial group of six
mutual funds.
The value of the Company's investment in The Coca-Cola Company surpasses
the $1 billion mark.
Services are restored without serious disruptions as the Company responds
quickly to the challenges presented by Hurricane Andrew in South Florida.
One acquisition is completed with $386 million in assets.
1993
Euromoney magazine ranks SunTrust Banks, Inc. the 14th best bank in the
world based on criteria tied to performance and stability.
Four acquisitions totaling $2.2 billion are completed.
Board of Directors approves 12 million share stock repurchase plan.
1994
Several STI Classic funds receive national recognition for outstanding
performance within their fund categories. Eighteen funds are now available
to investors.
Initiatives to increase the Company's growth rate in revenue and core
earnings are developed.
Plans are formulated for all subsidiary banking units to adopt the SunTrust
name in 1995.
One bank with total assets of $437 million is acquired.
SunTrust Capital Markets is formed.
During the ten years of SunTrust's existence, there have been many
significant trends and changes affecting the financial services industry; but
none have had a more dramatic or profound impact than the technological
advances compressed into this time period.
At SunTrust, we have always realized the importance of closely
monitoring technology affecting our business. Equally important is the
ability to determine when it makes strategic and economic sense for both us
and our customers to implement new technology. Over the years, we have made
substantial investments in hardware and systems at the appropriate time to
support our business strategies and help maintain our position as a leading
provider of financial services. As a result, we have avoided the costly
mistakes of trying to implement technology where there was no payoff.
Some investments in technology directly affect the ways our services are
delivered to our customers, and others have a more indirect effect. In both
cases, there is the common goal of increasing the effectiveness and
efficiency of our operations - one of the key initiatives of our growth
project implemented in 1995 to significantly increase our growth rate in
revenue and core earnings.
9
In its most visible form, technology presents our retail customers with
greater convenience. For instance, in 1995, SunTrust introduced "PC Banking,"
a home banking service using personal computers. Through an agreement with
Intuit Inc., the maker of the personal financial software Quicken, customers
can integrate their bank account data with their Quicken program. Currently,
SunTrust is one of only two financial institutions in the Southeast that
offers this service.
Another initiative, in-store banking, will not only provide convenient
service to our customers, but will generate increased opportunities to cross-
sell our services and products and to increase our market share. Our Georgia
subsidiary signed an agreement with Publix Super Markets to open in-store
banking facilities throughout Georgia, and one of our Tennessee banks signed
an agreement with Winn-Dixie for in-store branches in the Chattanooga area.
These facilities will utilize enhanced technology to enable fast, efficient
service.
Other areas where we are planning to expand our existing retail delivery
capabilities include enhanced automatic teller machines that offer such self-
service functions as statement printing, coupon/stamp dispensing, and check
cashing in addition to traditional account services. Our Telebank Sales and
Service telephone banking centers continue to grow. A new system will be
implemented to increase capabilities of these facilities and expand the
opportunities for cross-selling. Upgraded systems will also help accelerate
our response time to customers' applications regarding services such as home
mortgages, credit cards, and personal and commercial loans.
All of these services complement our traditional branch system which
will continue to play a primary role in retail service delivery.
Technological enhancements affecting these facilities include a new platform
system that will replace three existing systems within SunTrust. This system
will be integrated with a new relationship and sales management system to
track sales activities and make electronic referrals.
To our commercial customers, the technology we implement must also help
them increase the effectiveness and efficiency of their operations. In early
1995, we implemented additional image-based cash management products. Through
this service, SunTrust became the first bank to offer corporate customers
information access through both CD-ROM and an on-line network.
New technology will also be applied to substantially upgrade our
wholesale lockbox service. New features will enable customers to request fax
copies of check images directly from a personal computer, select lockbox
reports, view check images on-line, and receive transmissions of check and
document images.
Often our utilization of technology is not visible to our customers but
allows us to streamline operations and reduce costs. For instance, we are
operating one of the first image-based systems in the country developed to
process damaged checks. And with the problem of check fraud increasing
nationwide, SunTrust and Antinori Software, Inc., co-developed an extremely
effective automated system that employs a number of different verification
tools to help identify fraudulent checks.
Technology also presents us with capabilities to manage our business
more efficiently and effectively. New applications enhance our decision-
making processes, providing a more comprehensive view of product, functional
and market segment needs and profitability.
As technological advances continue to change and shape our industry, we
are ever mindful that the effectiveness of any technology is dependent upon
the people responsible for its development, maintenance and utilization.
Therefore, we remain committed to hiring the most capable people to the
SunTrust team, and continue building strategic alliances with superior
outside resources. These measures will help ensure that we maintain our
position as an industry leader, delivering the best service and products to
our customers in the most efficient and effective means possible.
10
SELECTED FINANCIAL DATA
Year Ended December 31
(Dollars in millions except per share data) 1995 1994 1993 1992 1991 1990
Summary of Operations
Interest and dividend income $3,027.2 $2,552.3 $2,362.3 $2,537.6 $2,856.4 $2,956.6
Interest expense 1,350.8 932.5 790.7 975.0 1,463.5 1,654.0
Net interest income 1,676.4 1,619.8 1,571.6 1,562.6 1,392.9 1,302.6
Provision for loan losses 112.1 137.8 189.1 234.2 209.6 201.6
Net interest income after provision for loan losses 1,564.3 1,482.0 1,382.5 1,328.4 1,183.3 1,101.0
Noninterest income 713.1 699.9 726.5 672.7 612.9 556.8
Noninterest expense 1,451.5 1,400.0 1,408.4 1,425.3 1,282.1 1,207.9
Income before provision for income taxes 825.9 781.9 700.6 575.8 514.1 449.9
Provision for income taxes 260.4 259.2 226.9 171.4 136.8 94.7
Net income $565.5 $522.7 $473.7 $404.4 $377.3 $355.2
Net interest income (taxable-equivalent) $1,726.0 $1,675.6 $1,634.4 $1,632.9 $1,470.5 $1,392.2
Per common share
Net income $4.94 $4.37 $3.77 $3.13 $2.88 $2.72
Dividends paid 1.48 1.32 1.16 1.03 0.94 0.86
Common dividend payout ratio 29.8% 30.1% 30.6% 32.7% 32.4% 31.3%
Market price:
High $70 7/8 $51 3/8 $49 5/8 $45 5/8 $40 $24 1/4
Low 47 1/4 43 1/2 41 3/8 33 1/2 20 1/2 16 1/2
Close 68 1/2 47 3/4 45 43 3/4 39 7/8 22 3/4
Selected Average Balances
Total assets $43,072.6 $40,489.2 $37,524.9 $35,356.5 $33,892.0 $31,935.0
Earning assets 38,401.4 36,111.0 34,054.8 32,008.6 30,544.4 28,671.2
Loans 29,709.3 26,412.6 24,170.4 22,489.1 22,144.6 22,058.4
Deposits 31,808.7 30,877.8 29,683.3 28,609.6 27,533.0 25,971.7
Realized shareholders' equity 3,052.3 2,960.1 2,875.1 2,697.9 2,509.5 2,266.9
Total shareholders' equity 3,905.2 3,571.5 2,877.2 2,697.9 2,509.5 2,266.9
At December 31
Total assets $46,471.5 $42,709.1 $40,728.4 $37,789.3 $35,682.6 $34,479.4
Earning assets 40,530.0 38,045.6 35,904.5 34,167.7 31,854.3 30,262.3
Loans 31,301.4 28,548.9 25,292.1 23,493.5 22,251.5 22,770.3
Reserve for loan losses 698.9 647.0 561.2 474.2 381.0 366.9
Deposits 33,183.2 32,218.4 30,485.8 29,883.0 29,011.5 27,787.9
Long-term debt 1,002.4 930.4 630.4 554.0 477.3 482.4
Realized shareholders' equity 3,111.0 2,883.3 2,845.8 2,769.7 2,622.8 2,377.1
Total shareholders' equity 4,269.6 3,453.3 3,609.6 2,769.7 2,622.8 2,377.1
Ratios and Other
ROA 1.36 % 1.32 % 1.26 % 1.14 % 1.11 % 1.11
ROE 18.53 17.66 16.48 14.99 15.04 15.67
Net interest margin 4.49 4.64 4.80 5.10 4.81 4.86
Total shareholders' equity to assets 9.19 8.09 8.86 7.33 7.35 6.90
Nonperforming assets to total loans plus
other real estate owned 0.80 0.96 1.61 2.30 3.07 2.70
Number of full-service banking offices 652 658 656 654 662 654
Number of full-time equivalent employees 19,415 19,408 19,532 19,539 19,703 20,339
Average common equivalent shares (thousands) 114,460 119,633 125,656 129,307 130,964 130,549
11
FINANCIAL REVIEW
The following analysis reviews important factors affecting the financial
condition and results of operations of SunTrust Banks, Inc. (SunTrust or
Company) for the periods shown. This review should be read in conjunction
with the consolidated financial statements and related notes. In the
Financial Review, net interest income and net interest margin are presented
on a taxable-equivalent (FTE) basis.
EARNINGS OVERVIEW
SunTrust's earnings per common share rose 13.0% in 1995 to $4.94, up from
$4.37 per common share in 1994. Net income of the Company amounted to $565.5
million, an increase of 8.2% over $522.7 million in 1994.
Operating results in 1995 reflected strong loan demand and steady
improvement in credit quality. Net interest income was $1,726.0 million in
1995, up $50.4 million from 1994. The net interest margin was 15 basis points
lower than last year but the decline was more than offset by a 6.3% increase
in average earning assets. Average loans increased 12.5% and average deposits
increased 3.0%. The 1995 loan loss provision of $112.1 million was 18.7%
lower than in 1994, and $45.6 million above 1995 net charge-offs. Noninterest
income increased 1.9% with trust fees up 3.8%. Noninterest expense was
$1,451.5 million for 1995, 3.7% more than in 1994. Total personnel expense
had the single largest increase in noninterest expense, up $31.8 million, or
4.3%, from 1994 levels while FDIC premiums had the largest decline, $30.2
million. Per share earnings were aided by the repurchase during 1995 of 3.5
million shares of the Company's common stock.
TABLE 1 - CONTRIBUTIONS TO NET INCOME
Year Ended December 31
1995 1994
(Dollars in millions) Contribution % of Total Contribution % of Total
Banking subsidiaries' net income <F1>:
Florida $300.5 53.1 % $279.5 53.5 %
Georgia 226.3 40.0 210.8 40.3
Tennessee/Alabama 88.5 15.6 81.5 15.6
Total banking subsidiaries' net income 615.3 108.7 571.8 109.4
Nonbanking net income (expense):
Nonbank subsidiaries 4.7 0.8 2.7 0.5
Parent Company (54.5) (9.5) (51.8) (9.9)
Total nonbanking net income (expense) (49.8) (8.7) (49.1) (9.4)
Net income $565.5 100.0 % $522.7 100.0 %
<FN>
<F1> Additional information on the performance of banking subsidiaries is found
on pages 32 and 33.
12
NET INTEREST INCOME/MARGIN
Net interest income for 1995 was $1,726.0 million or 3.0% higher than the
prior year. Average earning assets were up 6.3% and the net interest margin
was 4.49% in 1995 compared to 4.64% in 1994. For the last three quarters of
1995 the margin was constant at 4.47%. The average rate on earning assets
increased 79 basis points to 8.01% while the average rate on interest-bearing
liabilities climbed 113 basis points to 4.36%.
Interest income that the Company was unable to recognize on
nonperforming loans had a negative impact of two basis points on the net
interest margin, the same impact as in 1994. Table 5 contains more detailed
information concerning average balances, yields earned and rates paid.
TABLE 2 - ANALYSIS OF CHANGES IN NET INTEREST INCOME
1995 Compared to 1994 1994 Compared to 1993
Increase (Decrease) Due to Increase (Decrease) Due to
(In millions on a taxable-equivalent basis)<F1> Volume Rate Net Volume Rate Net
Interest Income
Loans:
Taxable $270.4 $211.5 $481.9 $181.0 $33.5 $214.5
Tax-exempt <F2> (4.5) 6.2 1.7 (5.2) 3.3 (1.9)
Investment securities:
Taxable (46.2) 40.2 (6.0) 6.9 (20.3) (13.4)
Tax-exempt <F2> (15.4) (2.5) (17.9) (9.2) (5.9) (15.1)
Funds sold 11.0 6.8 17.8 0.8 5.7 6.5
Other short-term investments <F2> (12.7) 3.9 (8.8) (10.4) 2.8 (7.6)
Total interest income 215.3 262.2 477.5 174.3 16.3 190.6
Interest Expense
NOW/Money market accounts (8.8) 42.6 33.8 3.2 8.7 11.9
Savings deposits (18.8) 9.5 (9.3) (3.7) (0.5) (4.2)
Consumer time deposits 56.9 87.7 144.6 (7.1) 2.1 (5.0)
Other time deposits 38.1 76.7 114.8 27.1 42.7 69.8
Funds purchased 56.6 60.4 117.0 (1.5) 35.7 34.2
Other short-term borrowings (7.2) 19.6 12.4 17.2 3.6 20.8
Long-term debt 3.7 1.3 5.0 21.3 (7.0) 14.3
Total interest expense 120.5 297.8 418.3 56.5 85.3 141.8
Net change in net interest income $94.8 ($35.6) $59.2 $117.8 ($69.0) $48.8
<FN>
<F1> Changes in net interest income are attributed to either changes in average
balances (volume change) or changes in average rates (rate change) for
earning assets and sources of funds on which interest is received or paid.
Volume change is calculated as change in volume times the previous rate while
rate change is change in rate times the previous volume. The rate/volume change,
change in rate times change in volume, is allocated between volume change
and rate change at the ratio each component bears to the absolute value
of their total.
<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% in 1995, 1994 and 1993 and 34% in prior years and,
where applicable, state income taxes, to increase tax-exempt interest income
to a taxable-equivalent basis.
13
PROVISION FOR LOAN LOSSES
As a result of improving credit quality, the Company lowered its provision
for loan losses in 1995 by $25.7 million to $112.1 million, yet, the
provision still exceeded net charge-offs by $45.6 million. Net loan charge-
offs were $66.5 million in 1995, representing 0.22% of average loans, which
is the lowest annual charge-off ratio since SunTrust was formed. The
comparable net charge-off amount for 1994 was $60.3 million or 0.23% of
average loans. As shown in Table 8, total charge-offs increased in several
categories in 1995 while recoveries remained relatively stable. Recoveries
were 44.9% of total charge-offs in 1995 compared with 47.0% in 1994. Both
numbers are above historical recovery ratios.
The Company's reserve for loan losses totaled $698.9 million at December
31, 1995, which was 2.23% of year-end loans and 363.6% of total nonperforming
loans. The comparable ratios at December 31, 1994 were 2.27% and 344.9%,
respectively.
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 and
other factors 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 knowledge 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.
NONINTEREST INCOME
Noninterest income increased $13.2 million, or 1.9% with trust income, our
largest source of noninterest income, up $9.4 million or 3.8%. The Company
experienced significant growth in credit card fees, up $5.4 million or 9.5%.
Also other charges and fees were up $4.9 million or 4.0% primarily as a
result of mortgage banking services. Service charges on deposit accounts were
down for the second straight year due to higher interest rates since these
charges are reduced by an earnings credit on collected balances based on a
market interest rate.
TABLE 3 - NONINTEREST INCOME
Year Ended December 31
(In millions) 1995 1994 1993 1992 1991 1990
Trust income $259.7 $250.3 $247.0 $226.1 $200.5 $177.6
Service charges on deposit accounts 212.8 218.4 225.9 215.6 201.7 174.1
Other charges and fees 126.0 121.1 142.1 121.9 106.9 100.5
Credit card fees 62.6 57.2 57.8 58.8 60.2 62.2
Securities gains (losses) (6.6) (2.7) 2.0 5.1 3.7 0.8
Trading account profits and commissions 10.6 8.0 11.3 8.2 10.3 4.7
Other income 48.0 47.6 40.4 37.0 29.6 36.9
Total noninterest income $713.1 $699.9 $726.5 $672.7 $612.9 $556.8
14
NONINTEREST EXPENSE
Noninterest expense increased 3.7% in 1995, yet the efficiency ratio stayed
below 60%. FDIC premiums were down $30.2 million reflecting a significant
rate reduction effective May, 1995 when the FDIC achieved its mandated ratio
of Bank Insurance Fund (BIF) reserves to insured deposits. Total personnel
expense increased 4.3% or $31.8 million. Most other areas of expense
approximated their 1994 levels. The exception was other expense which
increased $53.2 million related to various projects to stimulate business
growth and development.
TABLE 4 - NONINTEREST EXPENSE
Year Ended December 31
(In millions) 1995 1994 1993 1992 1991 1990
Salaries $578.1 $550.4 $529.1 $511.7 $491.3 $480.0
Other compensation 95.3 96.1 107.4 107.9 70.1 52.3
Employee benefits 105.6 100.7 98.5 92.8 82.4 76.6
Net occupancy expense 130.1 126.9 128.4 134.8 119.5 116.0
Equipment expense 105.1 103.3 103.1 102.9 98.1 92.7
FDIC premiums 36.4 66.6 66.2 64.5 56.6 30.5
Marketing and community relations 50.0 57.2 48.0 51.9 41.5 39.4
Postage and delivery 36.4 34.1 32.4 32.5 31.5 29.6
Operating supplies 32.2 29.4 30.5 30.6 30.5 31.6
Communications 27.7 26.1 26.3 25.8 24.9 23.7
Consulting and legal 20.8 22.6 20.2 27.7 25.9 26.8
Other real estate expense (9.0) (2.2) 16.7 36.0 21.9 29.4
Amortization of intangible assets 21.4 20.6 19.7 17.0 15.7 13.6
Other expense 221.4 168.2 181.9 189.2 172.2 165.7
Total noninterest expense $1,451.5 $1,400.0 $1,408.4 $1,425.3 $1,282.1 $1,207.9
Efficiency ratio 59.5 % 58.9 % 59.7 % 61.8 % 61.5 % 62.0 %
Table 6 - Summary of Loan Loss Experience
(Dollars in millions)
PROVISION FOR INCOME TAXES
The provision for income taxes covers federal and state income taxes. For
1995, the provision was $260.4 million, an increase of $1.2 million or 0.5%
from 1994. Higher taxable income was responsible for the increase. For
additional information see Note 9 of the Notes to Consolidated Financial
Statements on page 48.
15
TABLE 5A - CONSOLIDATED DAILY AVERAGE BALANCES, INCOME/EXPENSE AND AVERAGE
YIELDS EARNED AND RATES PAID
1995 1994 1993
(Dollars in millions; yields on Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/
taxable-equivalent basis) Balances Expense Rates Balances Expense Rates Balances Expense Rates
ASSETS
Loans:<F1>
Taxable $29,028.1 $2,461.5 8.48 % $25,678.3 $1,979.6 7.71 % $23,370.4 $1,765.1 7.55 %
Tax-exempt <F2> 681.2 61.8 9.08 734.3 60.1 8.18 800.0 62.0 7.75
Total loans 29,709.3 2,523.3 8.49 26,412.6 2,039.7 7.72 24,170.4 1,827.1 7.56
Investment securities:
Taxable 7,167.8 431.9 6.03 7,968.4 437.8 5.50 7,844.6 451.2 5.75
Tax-exempt <F2> 873.7 82.7 9.47 1,035.5 100.7 9.72 1,128.7 115.8 10.26
Total investment securities 8,041.5 514.6 6.40 9,003.9 538.5 5.98 8,973.3 567.0 6.32
Funds sold 582.4 34.9 5.98 380.9 17.1 4.49 334.4 10.6 3.17
Other short-term investments <F2> 68.2 4.0 5.80 313.6 12.8 4.07 576.8 20.4 3.53
Total earning assets 38,401.4 3,076.8 8.01 36,111.0 2,608.1 7.22 34,054.9 2,425.1 7.12
Reserve for loan losses (675.8) (608.0) (521.9)
Cash and due from banks 2,114.4 2,228.8 2,200.0
Premises and equipment 721.5 713.7 710.1
Other assets 1,132.1 1,060.1 1,078.4
Unrealized gains on
investment securities 1,379.0 983.6 3.4
Total assets $43,072.6 $40,489.2 $37,524.9
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits:
NOW/Money market accounts $9,425.2 $257.5 2.73 % $9,798.9 $223.7 2.28 % $9,655.0 $211.8 2.19 %
Savings 3,619.4 95.3 2.63 4,364.5 104.6 2.40 4,515.0 108.8 2.41
Consumer time 7,875.0 416.4 5.29 6,626.2 271.8 4.10 6,799.4 276.8 4.07
Other time <F4> 3,978.0 219.5 5.52 3,054.1 104.7 3.43 1,940.6 34.9 1.80
Total interest-bearing deposits 24,897.6 988.7 3.97 23,843.7 704.8 2.96 22,910.0 632.3 2.76
Funds purchased 4,228.8 239.1 5.65 3,050.0 122.1 4.00 3,102.7 87.9 2.83
Other short-term borrowings 918.1 54.9 5.97 1,083.2 42.5 3.93 632.0 21.7 3.42
Long-term debt 960.3 68.1 7.09 908.4 63.1 6.95 611.4 48.8 7.99
Total interest-bearing liabilities 31,004.8 1,350.8 4.36 28,885.3 932.5 3.23 27,256.1 790.7 2.90
Noninterest-bearing deposits 6,911.3 7,034.1 6,773.3
Other liabilities 1,251.4 998.3 618.3
Realized shareholders' equity 3,052.3 2,960.1 2,875.1
Net unrealized gains on
investment securities 852.9 611.4 2.1
Total liabilities and
shareholders' equity $43,072.7 $40,489.2 $37,524.9
Interest rate spread 3.65 % 3.99 % 4.22 %
NET INTEREST INCOME $1,726.0 $1,675.6 $1,634.4
NET INTEREST MARGIN <F4> 4.49 % 4.64 % 4.80 %
<FN>
<F1>Interest income includes loan fees of $86.5, $93.5, $88.6, $80.8, $72.4
and $74.6 in the six years ended December 31, 1995. Nonaccrual loans
are included in average balances and income on such loans, if
recognized, is recorded on a cash basis.
16
<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% for 1995, 1994 and 1993 and 34% in prior
years, 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 were $49.6, 55.8, $62.8,
$70.3, $77.6, and $89.6 in the six years ended December 31, 1995.
<F3>Stated rate is calculated after reducing interest income by $18.0 in
1992 representing earnings from investment in an employee benefit trust.
<F4>Interest rate swap transactions used to help balance the Company's
interest-sensitivity position reduced interest expense by $10.1, 30.6, $43.6
and $36.3 in 1995, 1994, 1993 and 1992. Without these swaps, the rate on other
time deposits and the net interest margin would have been 5.77% and 4.47%
in 1995, 4.43% and 4.56% in 1994, 4.04% and 4.67% in 1993 and 5.12% and 4.99%
in 1992, respectively.
17
TABLE 5B - CONSOLIDATED DAILY AVERAGE BALANCES, INCOME/EXPENSE AND AVERAGE
YIELDS EARNED AND RATES PAID
1992 1991 1990
(Dollars in millions; yields on Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/
taxable-equivalent basis) Balances Expense Rates Balances Expense Rates Balances Expense Rates
ASSETS
Loans:<F1>
Taxable $21,628.4 $1,821.5 8.42 % $21,190.7 $2,113.3 9.97 % $21,092.4 $2,306.0 10.93 %
Tax-exempt <F2> 860.7 69.7 8.10 953.9 92.7 9.72 966.0 111.0 11.49
Total loans 22,489.1 1,891.2 8.41 22,144.6 2,206.0 9.96 22,058.4 2,417.0 10.96
Investment securities:
Taxable 7,079.2 515.3 7.28 5,258.3 472.4 8.98 4,135.7 385.5 9.32
Tax-exempt <F2> 1,271.3 134.5 10.58 1,396.8 150.4 10.77 1,510.7 164.2 10.87
Total investment securities 8,350.5 649.8 7.78 6,655.1 622.8 9.36 5,646.4 549.7 9.74
Funds sold 439.9 16.8 3.83 797.3 44.7 5.61 570.9 46.4 8.13
Other short-term investments <F2> 729.1 50.1 4.40 <F3> 947.4 60.5 6.39 395.5 33.1 8.36
Total earning assets 32,008.6 2,607.9 8.15 30,544.4 2,934.0 9.61 28,671.2 3,046.2 10.62
Reserve for loan losses (421.6) (384.0) (360.4)
Cash and due from banks 2,007.0 1,974.3 2,029.4
Premises and equipment 693.0 692.2 687.1
Other assets 1,069.5 1,065.1 907.7
Unrealized gains on
investment securities
Total assets $35,356.5 $33,892.0 $31,935.0
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits:
NOW/Money market accounts $8,900.8 $246.2 2.77 % $7,710.2 $348.9 4.53 % $7,139.0 $381.2 5.34 %
Savings 4,316.1 130.4 3.02 3,632.7 180.4 4.97 2,739.6 159.9 5.83
Consumer time 7,350.0 382.8 5.21 8,448.8 584.8 6.92 8,074.9 636.6 7.88
Other time <F4> 2,132.8 73.0 3.42 2,518.9 156.3 6.21 2,928.4 232.2 7.93
Total interest-bearing deposits 22,699.7 832.4 3.67 22,310.6 1,270.4 5.69 20,881.9 1,409.9 6.75
Funds purchased 2,664.5 87.0 3.27 2,527.2 135.3 5.36 2,371.1 183.4 7.74
Other short-term borrowings 192.6 7.0 3.65 174.0 10.1 5.79 182.6 14.5 7.96
Long-term debt 534.5 48.6 9.09 480.1 47.7 9.93 485.7 46.2 9.51
Total interest-bearing liabilities 26,091.3 975.0 3.74 25,491.9 1,463.5 5.74 23,921.3 1,654.0 6.91
Noninterest-bearing deposits 5,909.9 5,222.4 5,089.8
Other liabilities 657.4 668.2 657.0
Realized shareholders' equity 2,697.9 2,509.5 2,266.9
Net unrealized gains on
investment securities
Total liabilities and
shareholders' equity $35,356.5 $33,892.0 $31,935.0
Interest rate spread 4.41 % 3.87 % 3.71 %
NET INTEREST INCOME $1,632.9 $1,470.5 $1,392.2
NET INTEREST MARGIN <F4> 5.10 % 4.81 % 4.86 %
<FN>
<F1>See footnote 1 in Table 3A.
<F2>See footnote 2 in Table 3A.
<F3>See footnote 3 in Table 3A.
<F4>See footnote 4 in Table 3A.
18
TABLE 5C - CONSOLIDATED GROWTH RATE IN AVERAGE BALANCES
Growth Rate in
Average Balances
Five Year
One Year Annualized
(Dollars in millions; yields on 1995- 1995-
taxable-equivalent basis) 1994 1990
Assets
Loans
Taxable 13.0 % 6.6 %
Tax-exempt (7.2) (6.7)
Total loans 12.5 6.1
Investment securities:
Taxable (10.0) 11.6
Tax-exempt (15.6) (10.4)
Total investment securities (10.7) 7.3
Funds sold 52.9 0.4
Other short-term investments (78.3) (29.6)
Total earning assets 6.3 6.0
Reserve for loan losses 11.2 13.4
Cash and due from banks (5.1) 0.8
Premises and equipment 1.1 1.0
Other assets 6.8 4.5
Unrealized gains on
investment securities
Total assets 6.4 % 6.2 %
Liabilities and Shareholders' Equity
Interest-bearing deposits:
NOW/Money market accounts (3.8)% 5.7 %
Savings (17.1) 5.7
Consumer time 18.8 (0.5)
Other time 30.3 6.3
Total interest-bearing deposits 4.4 3.6
Funds purchased 38.7 12.3
Other short-term borrowings (15.2) 38.1
Long-term debt 5.7 14.6
Total interest-bearing liabilities 7.3 5.3
Noninterest-bearing deposits (1.7) 6.3
Other liabilities 25.3 13.8
Realized shareholders' equity 3.1 6.1
Net unrealized gains on
investment securities
Total liabilities and
shareholders' equity 6.4 % 6.2 %
19
LOANS
Loan demand was the strong in 1995 especially in the fourth quarter. Average
loans increased 12.5% over the prior year with growth of 10.2% in Florida,
15.0% in Georgia and 14.4% in Tennessee/Alabama. An increased emphasis by our
banks produced strong growth in adjustable-rate residential mortgage loans.
The Company's only significant concentration of credit at December 31, 1995
occurred in loans secured by real estate which totaled $15.4 billion.
However, this amount is not concentrated in any specific type of loan, except
for low-risk adjustable rate single-family mortgages, or geographic area. At
year-end 1995, real estate loans in Florida banks were $9.7 billion or 61% of
total loans, $3.5 billion in Georgia banks or 34%, and $2.1 billion or 43%,
in Tennessee/Alabama banks. Of the $9.7 billion in mortgage loans for 1-4
family dwellings, $602.8 million were home equity loans. The average loan-to-
deposit ratio increased to 93.4% in 1995 compared with 85.6% in 1994.
At December 31, 1995, international outstandings, which include loans,
acceptances, deposits in other banks, foreign guarantees and accrued
interest, net of write-downs, totaled $396.8 million, an increase of 20.7%
from $328.8 million at December 31, 1994. Most of the balances were temporary
investments and trade financing in Canada and Western Europe.
TABLE 6 - LOAN PORTFOLIO BY TYPES OF LOANS
(In millions) At December 31 1995 1994 1993 1992 1991 1990
Commercial:
Domestic $10,222.5 $9,279.2 $8,190.3 $7,933.4 $7,324.3 $7,656.6
International 337.5 273.2 197.8 167.3 119.4 79.3
Real estate:
Construction 1,216.6 1,151.1 1,083.2 1,034.7 1,121.7 1,367.3
Mortgage, 1-4 family 9,732.8 8,380.5 7,013.8 5,911.6 5,488.4 5,221.7
Other 4,477.7 4,516.3 4,456.8 4,495.5 4,161.8 3,912.3
Lease financing 561.2 411.0 328.1 355.4 363.7 383.3
Credit card 774.0 690.5 698.2 725.7 745.2 775.6
Other consumer loans 3,979.1 3,847.1 3,323.9 2,869.9 2,927.0 3,374.2
Loans $31,301.4 $28,548.9 $25,292.1 $23,493.5 $22,251.5 $22,770.3
20
TABLE 7 - RESERVE FOR LOAN LOSSES
At December 31
(Dollars in millions) 1995 1994 1993 1992 1991 1990
Allocation of Reserve for Loan Losses
by Loan Type
Commercial $137.7 $138.7 $139.4 $155.2 $147.1 $130.7
Real estate 167.0 200.6 189.6 164.0 105.2 106.6
Lease financing 5.4 2.8 2.8 2.6 4.4 6.5
Consumer loans 86.2 74.6 88.7 82.5 78.5 63.3
Unallocated 302.6 230.3 140.7 69.9 45.8 59.8
Total $698.9 $647.0 $561.2 $474.2 $381.0 $366.9
Allocation of Reserve for Loan Losses
as a Percent of Total Reserve
Commercial 19.7 % 21.4 % 24.8 % 32.7 % 38.6 % 35.5 %
Real estate 23.9 31.0 33.8 34.7 27.6 29.1
Lease financing 0.8 0.4 0.5 0.5 1.2 1.8
Consumer loans 12.3 11.5 16.0 17.4 20.6 17.3
Unallocated 43.3 35.7 24.9 14.7 12.0 16.3
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Year-end Loan Types as a Percent of
Total Loans
Commercial 33.7 % 33.5 % 33.1 % 34.3 % 33.2 % 33.7 %
Real estate 49.3 49.2 49.6 48.5 48.2 45.6
Lease financing 1.8 1.4 1.5 1.5 1.6 1.7
Consumer loans 15.2 15.9 15.8 15.7 17.0 19.0
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
21
TABLE 8 - SUMMARY OF LOAN LOSS EXPERIENCE
Year Ended December 31
(Dollars in millions) 1995 1994 1993 1992 1991 1990
Reserve for Loan Losses
Balance - beginning of year $647.0 $561.2 $474.2 $381.0 $366.9 $347.5
Reserve of purchased banks 6.3 8.3 8.0 6.4 0.4 1.0
Provision for loan losses 112.1 137.8 189.1 234.2 209.6 201.6
Charge-offs:
Domestic:
Commercial (29.7) (28.1) (47.8) (61.3) (96.1) (76.8)
Real estate:
Construction (0.4) (0.7) (7.6) (7.3) (7.9) (18.1)
Mortgage, 1-4 family (7.1) (7.3) (10.9) (10.3) (6.1) (2.6)
Other (16.3) (20.5) (35.1) (44.5) (26.2) (29.8)
Lease financing (0.9) (0.7) (1.0) (3.0) (6.5) (4.2)
Credit card (27.7) (26.3) (28.9) (33.6) (37.3) (28.1)
Other consumer loans (38.7) (30.1) (31.9) (42.0) (62.0) (66.2)
International - - - - - (0.1)
Total charge-offs (120.8) (113.7) (163.2) (202.0) (242.1) (225.9)
Recoveries:
Domestic:
Commercial 20.0 18.6 20.9 22.1 16.3 13.7
Real estate:
Construction 0.8 0.7 0.5 0.7 0.4 0.9
Mortgage, 1-4 family 1.5 1.5 1.3 1.1 0.9 0.5
Other 5.5 6.3 5.2 3.0 1.4 1.2
Lease financing 0.5 0.6 1.0 1.1 2.0 1.0
Credit card 7.3 7.3 5.7 6.8 6.1 5.4
Other consumer loans 18.1 18.3 18.4 19.5 17.6 18.0
International 0.6 0.1 0.1 0.3 1.5 2.0
Total recoveries 54.3 53.4 53.1 54.6 46.2 42.7
Net charge-offs (66.5) (60.3) (110.1) (147.4) (195.9) (183.2)
Balance - end of year $698.9 $647.0 $561.2 $474.2 $381.0 $366.9
Year-end loans outstanding:
Domestic $30,948.4 $28,260.3 $25,078.0 $23,326.2 $22,117.5 $22,687.8
International 353.0 288.6 214.1 167.3 134.0 82.5
Total $31,301.4 $28,548.9 $25,292.1 $23,493.5 $22,251.5 $22,770.3
Average loans $29,709.3 $26,435.1 $24,170.4 $22,489.1 $22,144.6 $22,058.4
Ratios
Reserve to year-end loans 2.23 % 2.27 % 2.22 % 2.02 % 1.71 % 1.61 %
Net charge-offs to average loans 0.22 0.23 0.46 0.66 0.89 0.84
Provision to average loans 0.38 0.52 0.78 1.04 0.95 0.91
Recoveries to total charge-offs 44.9 47.0 32.5 27.0 19.1 18.9
22
NONPERFORMING ASSETS
Nonperforming assets consist of nonaccrual loans, restructured loans and
other real estate owned. Nonperforming assets decreased $24.3 million, or
8.8%, from year-end 1994 although they increased $7.5 million during the
fourth quarter of 1995. Att year-end the ratio of nonperforming assets to
total loans plus other real estate owned was the lowest in the Company's
history. Most of the 1995 decline occurred in our Tennessee banks, cutting
their ratio of nonperforming assets to total loans plus other real estate
owned to 0.60% at December 31, 1995. Included in nonperforming loans are
loans aggregating $34.7 million that are current as to the payment of
principal and interest but have been placed in nonperforming status because
of uncertainty as to the borrower's ability to make future payments. In
management's opinion, all material potential problem loans are included in
Table 9.
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" were effective for fiscal years beginning after December 15,
1994. 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.
SunTrust adopted these standards in the first quarter of 1995. The adoption
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. When a loan is placed on nonaccrual, unpaid interest is reversed
against interest income if it was accrued in the current year and is charged
to reserve for loan losses if it was accrued in prior years. When a
nonaccrual loan is returned to accruing status, any unpaid interest is
recorded as interest income after all principal has been collected.
For the year 1995, the gross amount of interest income that would have
been recorded on nonaccrual loans and restructured loans at December 31,
1995, if all such loans had been accruing interest at the original
contractual rate, was $20.1 million. Interest payments recorded in 1995 as
interest income (excluding reversals of previously accrued interest) for all
such nonperforming loans at December 31, 1995, were $11.0 million.
23
TABLE 9 - NONPERFORMING ASSETS AND ACCRUING LOANS
PAST DUE 90 DAYS OR MORE
At December 31
(Dollars in millions) 1995 1994 1993 1992 1991 1990
Nonperforming Assets
Nonaccrual loans:
Commercial $28.3 $27.9 $41.3 $49.6 $83.7 $102.4
Real Estate:
Construction 4.9 16.0 29.9 45.4 60.0 48.7
Mortgage, 1-4 family 45.7 45.3 53.1 45.5 49.5 37.3
Other 99.3 82.0 116.8 160.2 207.1 159.4
Lease financing 0.1 0.2 0.1 0.9 2.7 3.2
Consumer loans 11.0 11.6 9.3 18.1 23.8 14.0
Total nonaccrual loans 189.3 183.0 250.5 319.7 426.8 365.0
Restructured loans 2.9 4.6 11.3 4.6 17.3 8.9
Total nonperforming loans 192.2 187.6 261.8 324.3 444.1 373.9
Other real estate owned 58.8 87.7 148.9 220.3 245.9 246.8
Total nonperforming assets $251.0 $275.3 $410.7 $544.6 $690.0 $620.7
Ratios
Nonperforming loans to total loans 0.61 % 0.66 % 1.03 % 1.38 % 2.00 % 1.64 %
Nonperforming assets to total loans
plus other real estate owned 0.80 0.96 1.61 2.30 3.07 2.70
Reserve to nonperforming loans 363.6 344.9 214.4 146.2 85.8 98.1
Accruing Loans Past Due 90 Days or More $24.3 $19.2 $24.4 $27.6 $30.4 $42.5
INVESTMENT SECURITIES
The investment portfolio is managed to maximize yield over an entire interest
rate cycle while providing liquidity and minimizing market risk. The
portfolio yield improved from an average of 5.98% in 1994 to 6.40% in 1995.
The improvement was principally a result of our adjustable rate mortgage-
backed securities becoming fully indexed, and fourth quarter sales of $835
million in bonds and reinvestment of the proceeds. The portfolio size declined
by $598.1 million from December 31, 1994 to December 31, 1995 as a portion of
maturities, primarily in the first half of 1995, were used to meet loan
demand. Portfolio turnover from sales totaled $1.2 billion in 1995,
representing approximately 15.0% of the average portfolio size. The sales
resulted in a pre-tax loss of $6.6 million but reinvesting at higher yields
will improve future income. The average life of the portfolio declined to
approximately 3.1 years at year-end 1995; however, adjustable-rate securities
in the portfolio reduced the average time to repricing to 2.1 years.
The Company classified all of its investment securities as "available-
for-sale" which is consistent with the Company's investment philosophy of
maintaining flexibility to manage the securities portfolio. The carrying
value of investment securities at December 31, 1995 reflected $1.9 billion in
unrealized gains, including a $1.8 billion unrealized gain on the Company's
investment in common stock of The Coca-Cola Company.
24
TABLE 10 - INVESTMENT SECURITIES BY CATEGORY
Amortized Fair Unrealized Unrealized
(In millions) At December 31 Cost Value Gains Losses
U.S. Treasury:
1994 $2,170.3 $2,182.4 $18.9 $6.8
1993 2,508.1 2,378.4 0.8 130.5
1992 2,952.7 2,985.8 34.0 0.9
U.S. government agencies and corporations:
1994 $1,116.4 $1,126.0 $13.6 $4.0
1993 1,067.3 1,007.8 0.4 59.9
1992 821.7 828.2 6.6 0.1
States and political subdidivions:
1994 $831.2 $865.8 $36.1 $1.5
1993 958.1 972.1 29.1 15.1
1992 1,080.3 1,157.6 78.0 0.7
Mortgage-backed securities:
1994 $3,508.4 $3,516.2 $26.4 $18.6
1993 3,661.9 3,500.7 3.4 164.6
1992 4,319.3 4,343.3 36.8 12.8
Common stock of The Coca-Cola Company:
1994 $0.1 $1,791.9 $1,791.8 -
1993 0.1 1,242.9 1,242.8 -
1992 0.1 1,076.9 1,076.8 -
Other securities:
1994 $177.4 $194.6 $18.3 $1.1
1993 206.4 216.8 12.4 2.0
1992 234.5 252.1 18.4 0.8
Total investment securities
1994 $7,803.8 $9,676.9 $1,905.1 $32.0
1993 8,401.9 9,318.7 1,288.9 372.1
1992 9,408.6 10,643.9 1,250.6 15.3
25
DEPOSITS
Average deposits increased 3.0% in 1995. Other time deposits (primarily
commercial time deposits over $100,000) posted the largest increase at 30.3%
and consumer time deposits were up 18.8%. Noninterest-bearing demand deposits
decreased 1.7%. Interest-bearing deposits comprised 78.3% of average total
deposits in 1995 and 77.2% in 1994.
TABLE 11 - COMPOSITION OF AVERAGE DEPOSITS
Year Ended December 31 Percent of Total
(Dollars in millions) 1995 1994 1993 1995 1994 1993
Noninterest-bearing $6,911.1 $7,034.1 $6,773.3 21.7 % 22.8 % 22.8 %
NOW/Money market accounts 9,425.2 9,798.9 9,655.0 29.6 31.7 32.5
Savings 3,619.4 4,364.5 4,515.0 11.4 14.1 15.2
Consumer time 7,875.0 6,626.2 6,799.4 24.8 21.5 23.0
Other time 3,978.0 3,054.1 1,940.6 12.5 9.9 6.5
Total $31,808.7 $30,877.8 $29,683.3 100.0 % 100.0 % 100.0 %
FUNDS PURCHASED
Average funds purchased, which are composed of federal funds purchased and
securities sold under agreements to repurchase, increased $1.2 billion or
38.7% in 1995. Also, average net purchased funds (average funds purchased
less average funds sold) increased $977.3 million in 1995. Average net
purchased funds were 9.5% of earning assets for 1995 compared to 7.4% in
1994.
TABLE 12 - FUNDS PURCHASED*
Maximum
Outstanding
At December 31 Daily Average at Any
(Dollars in millions) Balance Rate Balance Rate Month-end
1995 $5,483.8 5.08 % $4,228.8 5.65 % $5,483.8
1994 4,351.9 4.90 3,050.0 4.00 4,351.9
1993 3,795.4 2.65 3,102.7 2.83 3,795.4
* Consists of federal funds purchased and securities sold under agreements
to repurchase that mature either overnight or at a fixed maturity
generally not exceeding three months. Rates on overnight funds reflect
current market rates. Rates on fixed maturity borrowings are set at the
time of the borrowings.
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 13 presents capital ratios for the six most recent years.
26
Regulatory agencies measure capital adequacy within a framework that
makes capital requirements sensitive to the risk profiles of individual
banking companies. The guidelines define capital as either Tier 1 (primarily
shareholders' equity) or Tier 2 (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 a
minimum 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 that
measures the ratio of Tier 1 capital to average quarterly assets. Regulatory
agencies precludes banks from formally including FAS 115 unrecognized gains
and losses in calculating Tier 1 capital; therefore, the appreciation of $1.8
billion in the Company's 24,133,248 shares of common stock of The Coca-Cola
Company is not included in our risk-adjusted capital.
The Federal Deposit Insurance Corporation Improvement Act of 1992
(FDICIA) required 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 ratio of 10%, and a Tier 1 leverage
ratio of 5%.
During 1995 the Company completed the repurchase of 12,00,000 shares of
SunTrust common stock authorized in 1993 and the Board of Directors
authorized the Company to repurchase up to 10,000,000 additional shares. The
Company repurchased a total of 3,481,448 shares during 1995, of which
1,602,991 were from the recent authorization. The Company has unused
authorization to repurchase 8,397,009 shares of SunTrust common stock.
TABLE 13 - CAPITAL RATIOS
At December 31
(Dollars in millions) 1995 1994 1993 1992 1991 1990
Tier 1 capital:
Realized shareholders' equity $3,111.0 $2,883.3 $2,845.8 $2,769.7 $2,622.8 $2,377.1
Intangible assets other than
servicing rights (252.3) (222.2) (194.0) (174.6) (173.3) (163.9)
Total Tier 1 capital 2,858.7 2,661.1 2,651.8 2,595.1 2,449.5 2,213.2
Tier 2 capital:
Allowable reserve for loan losses 462.2 420.9 378.1 349.8 327.9 327.5
Allowable long-term debt 246.8 281.4 120.4 200.0 336.3 269.5
Total Tier 2 capital 709.0 702.3 498.5 549.8 664.2 597.0
Total capital 3,567.7 $3,363.4 $3,150.3 $3,144.9 $3,113.7 $2,810.2
Risk-weighted assets $36,742.0 $33,444.3 $29,871.4 $27,684.4 $26,005.7 $25,993.4
Risk-based ratios:
Tier 1 capital 7.78 % 7.95 % 8.88 % 9.37 % 9.42 % 8.51 %
Total capital 9.71 10.05 10.55 11.35 11.97 10.81
Tier 1 leverage ratio 6.71 6.68 6.82 7.27 7.14 6.97
Total shareholders' equity to assets 9.19 8.09 8.86 7.33 7.35 6.90
27
LIQUIDITY
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. Liquidity is enhanced by an investment portfolio structured to
provide liquidity as needed, which occurred in 1995 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.
TABLE 14 - LOAN MATURITY
Remaining Maturities of Selected Loans
Within 1-5 After
(In millions) At December 31, 1995 Total 1 Year Years 5 Years
Loan Maturity
Commercial $10,560.0 $6,206.4 $3,334.9 $1,018.7
Real estate - construction 1,216.6 962.4 249.0 5.2
Total $47,106.4 $33,283.0 $79,361.5 $56,321.5
Interest Rate Sensitivity
Selected loans with:
Predetermined interest rates $2,017.5 $179.6
Floating or adjustable interest rates 1,566.4 844.3
Total $22,528.3 $14,848.3
28
TABLE 15 - MATURITY DISTRIBUTION OF INVESTMENT SECURITIES
At December 31, 1995
Average
1 Year 1-5 5-10 After 10 Maturity
(Dollars in millions) or Less Years Years Years Total in Years
Distribution of Maturities:
Amortized Cost
U.S. Treasury and other U.S. government
agencies and corporations 893.4 $2,386.2 $7.1 - $3,286.7 2.4
States and political subdivisions 140.3 477.8 185.8 27.3 831.2 3.6
Mortgage-backed securities <F1> 258.2 2,698.7 509.5 42.0 3,508.4 3.7
Total debt securities $1,291.9 $5,562.7 $702.4 $69.3 $7,626.3 3.1
Fair Value
U.S. Treasury and other U.S. government
agencies and corporations 894.0 2,406.8 7.6 - 3,308.4
States and political subdivisions 142.7 495.0 198.6 29.5 865.8
Mortgage-backed securities <F1> 257.4 2,702.7 514.4 41.7 3,516.2
Total debt securities $1,294.1 $5,604.5 $720.6 $71.2 $7,690.4
Weighted average yield(FTE):
U.S. Treasury and other U.S. government
agencies and corporations 5.62 % 5.74 % 6.80 % % 5.71 %
States and political subdivisions 8.84 8.52 9.37 9.15 8.79
Mortgage-backed securities <F1> 5.55 6.40 5.99 6.32 6.27
Total debt securities 6.15 6.24 6.89 7.42 6.30
<FN>
<F1> Distribution of maturities is based on expected cash flows which may be different
from the contractual terms.
TABLE 16 - MATURITY OF CERTIFICATES OF DEPOSIT AND OTHER
TIME DEPOSITS IN AMOUNTS OF $100,000 OR MORE
Other
Certificates Time
of Deposit Deposits Total
(In millions) At December 31, 1995
Months to maturity:
3 or less $1,061.7 $1,649.7 $2,711.4
Over 3 through 6 598.6 11.1 609.7
Over 6 through 12 506.9 13.5 520.4
Over 12 391.1 36.5 427.6
Total $2,558.3 $1,710.8 $4,269.1
29
TABLE 17 - INTEREST RATE SENSITIVITY ANALYSIS
Repricing Within<F1>
0-30 31-90 91-180 181-365 Over 1
At December 31, 1995 Days Days Days Days Year Total
EARNING ASSETS
Loans <F2> $12,804.2 $2,423.2 $2,346.8 $4,158.1 $9,223.2 $30,955.5
Investment securities <F3> 404.2 292.8 413.9 1,040.7 5,635.6 7,787.2
Interest-bearing deposits 4.3 22.5 0.1 0.2 1.7 28.8
Funds sold 1,176.2 - - - - 1,176.2
Total earning assets 14,388.9 2,738.5 2,760.8 5,199.0 14,860.5 39,947.7
INTEREST-BEARING LIABILITIES
Interest-bearing deposits <F4> 16,384.4 1,791.1 2,315.9 2,581.6 2,288.8 25,361.8
Funds purchased 5,716.6 - - - - 5,716.6
Other short-term borrowings 449.2 375.0 60.0 7.7 2.6 894.5
Long-term debt 27.5 76.3 3.2 28.4 867.0 1,002.4
Total interest-bearing liabilities 22,577.7 2,242.4 2,379.1 2,617.7 3,158.4 32,975.3
Off-balance sheet financial instruments (26.7) 31.9 72.0 55.1 (132.3) -
Interest-sensitivity gap ($8,215.5) $528.0 $453.7 $2,636.4 $11,569.8 $6,972.4
Cumulative gap ($8,215.5) ($7,687.5) ($7,233.8) ($4,597.4) $6,972.4
Ratio of cumulative gap to total earning assets 20.6 % 19.2 % 18.1 % 11.5 % 17.5 %
Ratio of interest-sensitive assets to
interest-sensitive liabilities 63.7 122.1 116.0 198.6 470.5
Cumulative gap at December 31, 1994 ($8,997.6) ($8,802.1) ($8,277.8) ($5,407.9) $6,969.4
Cumulative gap at December 31, 1993 (7,570.7) (5,881.7) (5,296.6) (2,466.2) 7,280.5
<FN>
<F1> The repricing dates (which may differ from maturity dates) for various
assets and liabilities do not consider external factors that might
affect the interest rate sensitivity of assets and liabilities.
<F2> Excludes nonaccrual loans.
<F3> Includes trading account, does not include mark-to-market net unrealized gain of $1,873.1
<F4> Savings, NOW and money market accounts can be repriced at any time, therefore
all such balances have been included in 0-30 days. Consumer time and other
time deposit balances are classified according to their remaining maturities.
30
INTEREST RATE SENSITIVITY
The SunTrust asset/liability management process is charged with managing the
balance sheet structure of the Company to optimize net interest income while
minimizing the effect of interest rate changes on the net interest margin.
SunTrust's objective is to maintain a neutral position relative to changes in
interest rates. Simulation modeling is used by SunTrust to evaluate its level
of interest rate sensitivity, as well as to analyze balance sheet strategies.
Table 17 represents a snapshot of the balance sheet structure as of year-end,
but does not fully reflect the complexities of the interest sensitivity of
the Company as reflected in its simulation modeling process. SunTrust
utilizes interest rate swap transactions in a very limited extent in the
overall management of its interest sensitivity position. Table 19 contains
summary information about these swap transactions.
TABLE 18 - OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
At December 31, 1995 At December 31, 1994
Contract or Notional Amount Contract or Notional Amount
Credit Credit
For Risk For Risk
(In millions) End User Customers Amount End User Customers Amount
Derivatives contracts:
Interest rate contracts:
Swaps $349 $855 $29 $1,838 $888 $53
Futures and forwards - - - - - -
Options written - 431 - - 370 -
Options purchased - 393 - - 360 -
Total interest rate contracts 349 1,679 29 1,838 1,618 53
Foreign exchange rate contracts 164 - 2 170 - 22
Total derivatives contracts $513 $1,679 $31 $2,008 $1,618 75
Credit-related arrangements:
Commitments to extend credit $13,649 $13,649 $12,670 $12,670
Standby letters of credit and similar
arrangements 2,905 2,905 2,618 2,618
Total credit-related arrangements $16,554 $16,554 $15,288 $15,288
When-issued securities:
Commitments to sell $190 - $16 -
Commitments to purchase 9 - 6 -
Total credit risk amount $16,585 $15,363
31
OFF-BALANCE SHEET INSTRUMENTS
The Company uses off-balance sheet financial instruments in managing interest
rate and other market risks. Certain instruments are also created as a
service to customers. The Company controls the credit risk of these off-
balance sheet instruments by limiting the total amount of arrangements
outstanding by individual counterparty; by monitoring the size and maturity
structure of the portfolio; by obtaining collateral based on management's
credit assessment of the counterparty; and by applying uniform credit
standards maintained for all activities with credit risk. Collateral held
varies but may include accounts receivable, inventory, property, plant and
equipment, and income-producing commercial properties. In addition, the
Company enters into master netting agreements which incorporate the right to
net settlements of covered contracts with the same counterparty in the event
of default or other termination of the agreement. The two major classes of
instruments are derivative instruments and credit-related arrangements.
Derivative Instruments
Derivative financial instruments, such as interest rate swaps, options,
futures and forward contracts, are an important component of the Company's
risk management profile. The Company also enters into such instruments as a
service to corporate banking customers. Where contracts have been created for
customers, the Company enters into offsetting positions to eliminate its
exposure to interest rate risk.
The Company monitors its sensitivity to changes in interest rates and
uses interest rate swap contracts to limit the volatility of net interest
income. The Company records all swap income and expense in the interest
expense category. The total reduction of interest expense for 1995, 1994 and
1993 related to interest rate swaps was $10.1 million, $30.6 million and
$43.6 million. Included in those amounts is $0.5 million, $0.4 million and
$0.5 million representing income from swaps entered into for customers. For
interest rate swaps entered into by the Company as an end user, the following
table shows the weighted average rate received and weighted average rate paid
by maturity and corresponding notional amounts at December 31, 1995.
TABLE 19 - INTEREST RATE SWAPS
Average Average Average
(Dollars in millions) Notional Fair Maturity Rate Rate
At December 31, 1995 Value Value In Months Paid Received
Gain position:
Receive fixed $93.8 $7.0 44.7 5.78 % 6.15 %
Pay fixed 4.7 0.1 91.3 5.88 5.97
Total gain position 98.5 7.1
Loss position:
Receive fixed - - - - -
Pay fixed 250.5 (3.6) 55.2 6.32 5.26
Total loss position 250.5 (3.6)
Total $349.0 $3.5
32
Credit-Related Arrangements
In meeting the financing needs of its customers, the Company issues
commitments to extend credit, standby and other letters of credit and
guarantees, and also provides securities lending services. For these
instruments, the contractual amount of the financial instrument represents
the maximum potential credit risk if the counterparty does not perform
according to the terms of the contract. A large majority of these contracts
expire without being drawn upon. As a result, total contractual amounts do
not represent future credit exposure or liquidity requirements.
Unfunded commitments to extend credit are agreements to lend to a
customer who has complied with predetermined contractual conditions.
Commitments generally have fixed expiration dates.
Standby letters of credit and guarantees are conditional commitments
issued by the Company generally to guarantee the performance of a customer to
a third party in borrowing arrangements, such as commercial paper, bond
financing, construction and similar transactions. The credit risk involved in
issuing standby letters of credit is essentially the same as that involved in
extending loan facilities to customers and may be reduced by selling
participations to third parties. The Company holds collateral to support
those standby letters of credit and guarantees for which collateral is deemed
necessary.
EARNINGS AND BALANCE SHEET ANALYSIS 1994 VS. 1993
Net income was $522.7 million in 1994 compared with $473.7 million in 1993.
This increase amounted to $49.0 million or 10.3%. Earnings per common share
in 1994 were $4.37, a 15.9% increase over the preceding year.
Net interest income, at $1,675.6 million for 1994, was only slightly
higher than the $1,634.4 million in 1993 primarily because of a 6.1% growth
in average assets. The Company's net interest margin declined from 4.80% in
1993 to 4.64% in 1994.
The provision for loan losses decreased $51.3 million from $189.1
million to $137.8 million while the reserve for loan losses as a percentage
of loans increased from 2.22% to 2.27%. Net charge-offs were 0.23% of loans
in 1994 versus 0.46% in 1993. Nonperforming assets decreased $135.4 million
from $410.7 million at December 31, 1993 to $275.3 million at December 31,
1994.
Noninterest income in decreased $26.6 million from $726.5 million in
1993 to $699.9 million in 1993. The rising rate environment experienced
during this period reduced sales of mutual funds and drastically curtailed
the refinancing of mortgages. Additionally, rising rates produced poor
performance for fixed income securities retarding growth in trust fees.
Service charges collected on commercial deposit accounts were also negatively
impacted by rising rates since these charges are reduced by an earnings
credit on collected balances based on a market interest rate. Noninterest
expense was down for the second straight year, reducing the efficiency ratio
to a Company-record 58.9%.
Loans at December 31, 1994, were $28.5 billion or 12.9% greater than at
year-end 1993. At December 31, 1994, deposits were $32.2 billion, an increase
of $1.7 billion or 5.7% from 1993 year-end.
33
FOURTH QUARTER RESULTS
Net income per common share for the fourth quarter of 1995 was $1.28, an
increase of 13.3% from $1.13 per share in the fourth quarter of 1994. Net
income increased from $132.3 million in the 1994 fourth quarter to $144.9
million in the 1995 fourth quarter.
The 1995 provision for loan losses of $31.3 million was $3.9 million lower
than the $35.2 million in 1994. Net loan charge-offs for the current
period were higher at $29.1 million versus $22.4 million in the 1994
fourth quarter.
Average earning assets were $39.4 billion in the 1995 fourth quarter, 7.1%
higher than in 1994. This gain, offset somewhat by an 18 basis point
decline in the net interest margin, produced an increase of $12.5 million
in net interest income on a taxable-equivalent basis.
Noninterest income increased by $10.4 million in the 1995 fourth quarter
compared to the fourth quarter of 1994. Trust income was up $3.2 million
or 5.2% over the 1994 fourth quarter, and credit card fees were up $1.1
million or 8.2% over the same periods.
Noninterest expense increased 7.6% from year-ago levels. The primary
reasons for the increase were increased personnel costs associated with
growth initiatives and an $11.6 million write-down of a company-owned
building. FDIC premiums were $3.9 million or 76.3% lower in the fourth
quarter of 1995 compared to the same period in 1994 due to the insurance
premium rate reduction discussed earlier.
The provision for income taxes of $54.8 million was $10.8 million lower in
the fourth quarter of 1995 than in the 1994 fourth quarter.
34
TABLE 20 - QUARTERLY FINANCIAL DATA
(Dollars in millions) except per share data 1995 1994
4 3 2 1 4 3 2 1
SUMMARY OF OPERATIONS
Interest and dividend income $782.4 $759.9 $758.4 $726.5 $691.9 $652.7 $621.1 $586.6
Interest expense 350.2 342.0 343.9 314.7 274.2 244.9 216.2 197.2
Net interest income 432.2 417.9 414.5 411.8 417.7 407.8 404.9 389.4
Provision for loan losses 31.3 29.1 26.2 25.5 35.2 34.8 33.9 33.9
Net interest income after
provision for loan losses 400.9 388.8 388.3 386.3 382.5 373.0 371.0 355.5
Noninterest income 179.4 182.6 174.2 176.9 169.0 173.1 177.2 180.6
Noninterest expense 380.6 363.1 349.7 358.1 353.6 349.0 351.4 346.0
Income before provision
for income taxes 199.7 208.3 212.8 205.1 197.9 197.1 196.8 190.1
Provision for income taxes 54.8 64.6 71.9 69.1 65.6 65.2 65.4 63.0
Net income $144.9 $143.7 $140.9 $136.0 $132.3 $131.9 $131.4 $127.1
Net interest income,
(taxable-equivalent) $443.9 $430.1 $427.1 $424.9 $431.4 $421.7 $419.1 $403.5
PER COMMON SHARE
Net income $1.28 $1.26 $1.22 $1.18 $1.13 $1.11 $1.09 $1.04
Dividends declared 0.40 0.36 0.36 0.36 0.36 0.32 0.32 0.32
Book value 37.72 35.81 34.76 32.09 29.85 29.79 28.61 28.74
Market Price:
High $70 7/8 $67 3/4 $59 7/8 $55 3/8 $51 1/8 $51 3/8 $50 1/2 $47 1/8
Low 63 3/8 57 53 1/8 47 1/4 46 3/8 47 1/8 43 1/2 44 1/4
Close 68 1/2 66 1/8 58 1/4 53 1/2 47 3/4 48 3/4 48 3/8 44 5/8
SELECTED AVERAGE BALANCES
Total assets $44,616.4 $43,072.4 $42,762.2 $41,808.4 $40,991.2 $40,391.4 $40,340.6 $40,226.5
Earning assets 39,391.9 38,198.8 38,344.3 37,653.9 36,880.0 36,161.2 35,941.1 35,536.5
Loans 30,688.7 29,771.1 29,582.1 28,773.8 27,703.3 26,746.4 25,991.6 25,269.1
Total deposits 31,926.1 31,516.5 31,852.5 31,943.7 31,338.2 31,338.4 30,755.0 30,060.4
Realized shareholders' equity 3,081.8 3,092.9 3,043.8 2,989.1 2,964.7 2,991.2 2,956.2 2,927.6
Total shareholders' equity 4,163.4 4,090.3 3,797.4 3,561.2 3,555.0 3,557.3 3,527.0 3,648.2
Common equivalent shares (thousands) 113,149 114,088 115,090 115,543 117,054 119,271 120,602 121,657
Ratios (Annualized)
ROA 1.34 % 1.38 % 1.36 % 1.35 % 1.31 % 1.33 % 1.34 % 1.32 %
ROE 18.65 18.43 18.56 18.46 17.71 17.49 17.84 17.60
Net interest margin 4.47 4.47 4.47 4.58 4.64 4.63 4.68 4.60
35
TABLE 21 - CONSOLIDATED DAILY AVERAGE BALANCES, INCOME/EXPENSE
AND AVERAGE YIELDS EARNED AND RATES PAID
Quarter Ended
December 31, 1995 December 31, 1994
(Dollars in millions; yields on Average Income/ Yields/ Average Income/ Yields/
taxable-equivalent basis) Balances Expense Rates Balances Expense Rates
Assets
Loans: <F1>
Taxable $30,033.9 $638.9 8.44 % $26,887.1 $547.7 8.08 %
Tax-exempt <F2> 654.8 14.8 9.02 726.9 16.4 8.93
Total loans 30,688.7 653.7 8.45 27,614.0 564.1 8.11
Investment securities:
Taxable 7,029.8 108.7 6.14 7,631.8 109.7 5.71
Tax-exempt <F2> 836.9 19.2 9.11 974.6 23.6 9.60
Total investment securities 7,866.7 127.9 6.45 8,606.4 133.3 6.15
Funds sold 735.9 11.0 5.88 469.2 6.7 5.69
Other short-term investments <F2> 100.6 1.5 5.61 101.2 1.5 5.78
Total earning assets 39,391.9 794.1 8.00 36,790.8 705.6 7.61
Reserve for loan losses (695.8) (640.3)
Cash and due from banks 2,221.3 2,155.6
Premises and equipment 722.9 712.4
Other assets 1,227.2 1,025.1
Unrealized gains(losses) on
investment securities 1,748.9 947.6
Total assets $44,616.4 $40,991.2
Liabilities and Shareholders' Equity
Interest-bearing deposits:
NOW/Money market accounts $9,544.2 $64.1 2.66 % $9,698.2 $62.6 2.56 %
Savings 3,469.9 22.1 2.54 4,123.0 26.9 2.58
Consumer time 8,007.2 109.4 5.42 6,833.8 76.2 4.43
Other time <F3> 3,824.6 54.0 5.61 3,585.0 39.7 4.40
Total interest-bearing deposits 24,845.9 249.6 3.99 24,240.0 205.4 3.36
Funds purchased 4,925.5 68.8 5.54 3,270.1 42.3 5.13
Other short-term borrowings 998.0 14.1 5.56 902.2 10.4 4.60
Long-term debt 1,010.1 17.7 6.97 919.1 16.1 6.96
Total interest-bearing liabilities 31,779.5 350.2 4.37 29,331.4 274.2 3.71
Noninterest-bearing deposits 7,080.1 7,098.2
Other liabilities 1,593.4 1,006.6
Shareholders' equity 3,081.8 2,964.7
Net unrealized gains(losses) on
investment securities 1,081.6 590.3
Total liabilities and shareholders' equity $44,616.4 $40,991.2
Interest rate spread 3.63 % 3.90 %
Net Interest Income $443.9 $431.4
Net Interest Margin <F3> 4.47 % 4.65 %
<FN>
<F1> Interest income includes loan fees of $21.9 and $24.5 in the quarters
ended December 31, 1995 and 1994. Nonaccrual loans are included in average
balances and income on such loans, if recognized, is recorded on a cash
basis.
36
<F2> Interest income includes the effects of taxable-equivalent adjustments
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 $11.7 and $13.7 in the quarters ended December 31, 1994 and
1993.
<F3> Interest rate swap transactions used to help balance the Company's
interest-sensitivity position reduced interest expense by $1.2 and $4.9 in
the fourth quarter of 1995 and 1994, respectively. Without these swaps,
the rate on Other time deposits and the net interest margin would have been
5.73% and 4.46% in 1995 and 4.94% and 4.60% in 1994.
TABLE 22 - QUARTERLY NONINTEREST INCOME AND EXPENSE
Quarters
1995 1994
(In millions) 4 3 2 1 4 3 2 1
Noninterest Income
Trust income $64.6 $64.7 $65.3 $65.1 $61.4 $61.6 $63.4 $63.9
Service charges on deposit accounts 54.5 54.0 50.5 53.8 53.7 54.3 54.2 56.2
Other charges and fees 33.3 29.9 27.1 26.2 27.6 26.3 27.6 27.0
Credit card fees 15.6 15.1 15.7 16.2 14.5 14.0 14.7 14.0
Securities gains (losses) (7.2) 1.0 (0.1) (0.3) (4.7) (0.9) 0.1 2.8
Trading account profits and commissions 3.3 2.5 2.4 2.4 2.3 1.8 1.8 2.1
Other income 12.4 13.3 10.8 11.5 11.8 13.7 12.2 9.9
Total noninterest income $176.5 $180.5 $171.7 $174.9 $166.6 $170.8 $174.0 $175.9
Noninterest Expense
Salaries $149.7 $144.8 $143.1 $140.5 $138.1 $138.5 $137.5 $136.3
Other compensation 27.0 25.3 21.1 21.9 22.6 25.1 23.9 24.5
Employee benefits 27.2 25.1 24.8 28.5 26.9 23.6 23.6 26.6
Net occupancy expense 33.2 33.6 31.8 31.5 30.0 32.8 33.0 31.1
Equipment expense 26.4 25.7 26.5 26.5 25.9 25.7 25.8 25.9
FDIC premiums 3.9 (0.6) 16.6 16.5 16.6 16.8 16.7 16.5
Marketing and community relations 12.4 10.3 13.3 14.0 19.7 11.0 14.1 12.4
Postage and delivery 9.3 8.8 8.8 9.5 8.5 8.5 8.4 8.7
Operating supplies 8.5 8.1 7.7 7.9 7.2 7.0 7.7 7.5
Other real estate expense (3.9) (1.1) (2.3) (1.7) (2.0) (0.9) 1.5 (0.8)
Communications 6.6 7.3 7.1 6.7 6.3 6.7 6.7 6.4
Consulting and legal 5.0 5.5 5.5 4.8 5.7 4.7 8.0 4.2
Amortization of intangible assets 6.0 5.4 5.0 5.0 5.1 5.2 5.4 4.9
Other expense 69.3 64.9 40.7 46.5 43.0 44.3 39.1 41.8
Total noninterest expense $380.6 $363.1 $349.7 $358.1 $353.6 $349.0 $351.4 $346.0
37
TABLE 23 - SUMMARY OF LOAN LOSS EXPERIENCE, NONPERFORMING ASSETS AND
ACCRUING LOANS PAST DUE 90 DAYS OR MORE (DOLLARS IN MILLIONS)
Quarters
1995 1994
4 3 2 1 4 3 2 1
RESERVE FOR LOAN LOSSES
Balance - Beginning of quarter $692.8 $676.9 $661.0 $647.0 $634.2 $610.2 $588.1 $561.2
Reserve of purchased bank 3.9 0.7 1.7 - - - - 8.3
Provision for loan losses 31.3 29.1 26.2 25.5 35.2 34.8 33.9 33.9
Charge-offs (40.9) (27.3) (25.7) (26.9) (33.7) (25.8) (25.0) (29.2)
Recoveries 11.8 13.4 13.7 15.4 11.3 15.0 13.2 13.9
Balance - End of quarter $698.9 $692.8 $676.9 $661.0 $647.0 $634.2 $610.2 $588.1
RATIOS
Reserve to loans outstanding - Quarter end 2.23 % 2.31 % 2.25 % 2.26 % 2.27 % 2.32 % 2.28 % 2.27 %
Net loan charge-offs (annualized)
to average loans 0.38 0.18 0.16 0.16 0.32 0.16 0.18 0.25
Provision to average loans (annualized) 0.40 0.39 0.36 0.36 0.49 0.52 0.52 0.54
NONPERFORMING ASSETS
Nonaccrual loans $189.3 $174.3 $179.4 $181.9 $183.0 $206.7 $218.3 $232.5
Restructured loans 2.9 3.0 3.2 4.3 4.6 5.1 2.3 3.4
Total nonperforming loans 192.2 177.3 182.6 186.2 187.6 211.8 220.6 235.9
Other real estate owned 58.8 66.2 70.1 83.8 87.7 109.6 119.6 144.1
Total nonperforming assets $251.0 $243.5 $252.7 $270.0 $275.3 $321.4 $340.2 $380.0
RATIOS
Nonperforming loans to total loans 0.61 % 0.59 % 0.61 % 0.64 % 0.66 % 0.77 % 0.82 % 0.91 %
Nonperforming assets to total loans
plus other real estate owned 0.80 0.81 0.84 0.92 0.96 1.17 1.27 1.46
Reserve to nonperforming loans 363.6 390.8 370.6 355.0 344.9 299.4 276.6 249.3
Accruing Loans Past Due 90 Days or More $24.3 $26.0 $19.0 $19.5 $19.2 $19.0 $19.3 $21.9
38
BANKING INCOME
Florida
Net income for SunTrust Banks of Florida, Inc. increased 7.5% to $300.5
million in 1995. ROA in 1995 was 1.41%, 4 basis points higher than 1994.
Major factors in improved earnings were an increase in loan demand which
helped produce a $29.6 million increase in net interest income. Average loans
grew 10.2% in 1995. The seven banks in Florida with more than $1 billion in
assets contributed 82% of the net income of SunTrust Banks of Florida, Inc.
Net Income ROA
(Dollars in millions) 1995 1994 % Change 1995 1994
SunTrust Bank, Central Florida, N.A. (Orlando) $79.3 $72.5 9.3 % 1.51 % 1.47 %
SunTrust Bank, South Florida, N.A. (Fort Lauderdale) 45.4 42.0 8.0 1.57 1.48
SunTrust Bank, Miami, N.A. 33.6 30.1 11.6 1.37 1.26
SunTrust Bank, Tampa Bay 29.7 27.0 10.0 1.55 1.44
SunTrust Bank, Gulf Coast (Sarasota) 15.7 13.1 19.9 0.91 0.77
SunTrust Bank, Nature Coast (Brooksville) 14.5 12.9 12.3 1.27 1.24
SunTrust Bank, Southwest Florida (Fort Myers) 14.5 13.5 7.4 1.48 1.44
SunTrust Bank, East Central Florida (Daytona Beach) 14.1 14.0 0.2 1.36 1.38
Georgia
SunTrust Banks of Georgia, Inc., continued its long history of excellent
returns with an ROA of 1.67%. Net income rose 7.3% to $226.3 million in 1995.
The 24.0% decline in the provision for loan losses was a major factor in the
earnings improvement as was the $7.4 million increase in trust income.
Average loans grew 15.0% in 1995.
Net Income ROA
(Dollars in millions) 1995 1994 % Change 1995 1994
SunTrust Bank, Atlanta $162.5 $159.0 2.2 % 1.60 % 1.63 %
Tennessee/Alabama
SunTrust Banks of Tennessee, Inc.'s earnings were up in 1995, with net income
increasing 8.5% to $88.5 million. ROA in 1995 was 1.35% compared to 1.29% in
1994. A $10.3 million increase in net interest income in 1995 was the major
contributor to the increase in net income. Average loans grew 14.4% in 1995.
Net Income ROA
(Dollars in millions) 1995 1994 % Change 1995 1994
SunTrust Bank, Nashville $43.0 $35.6 20.7 % 1.36 % 1.19 %
SunTrust Bank, Chattanooga 19.4 18.8 3.4 1.41 1.36
SunTrust Bank, East Tennessee (Knoxville) 14.2 13.1 8.3 1.34 1.37
39
TABLE 24 - FINANCIAL HIGHLIGHTS OF BANKING SUBSIDIARIES
(Dollars in Millions)
SunTrust Banks of SunTrust Banks of SunTrust Banks of
Florida, Inc. Georgia, Inc. Tennessee, Inc.
1995 1994 1995 1994 1995 1994
Summary of Operations
Net interest income (FTE) $934.6 $905.0 $575.1 $552.2 $278.3 $268.0
Provision for loan losses 69.7 82.0 30.0 39.4 12.1 15.9
Trust income 137.9 136.2 89.3 81.9 32.5 32.2
Other noninterest income 228.0 216.4 147.1 151.0 64.8 66.9
Personnel expense 296.3 296.2 181.7 176.9 95.0 94.6
Other noninterest expense 451.2 431.1 248.8 242.3 124.5 122.9
Net income $483.3 $448.3 $351.0 $326.5 $144.0 $133.7
Selected Average Balances
Total assets 21,309 20,352 15,005 14,060 6,552 6,306
Earning assets 19,987 18,881 12,478 12,012 6,250 5,911
Loans 15,364 13,943 9,715 8,450 4,573 3,997
Total deposits 17,034 16,746 9,693 9,139 5,132 5,065
Realized shareholders' equity 1,863 1,735 1,211 1,113 543 522
At December 31
Total assets 22,567 21,006 16,854 14,880 6,776 6,605
Earning assets 20,818 19,646 13,528 12,473 6,464 6,213
Loans 16,024 14,963 10,316 9,260 4,824 4,299
Reserve for loan losses 381 343 199 188 119 115
Total deposits 17,794 16,774 10,185 10,219 5,240 5,231
Realized shareholders' equity 1,931 1,809 1,302 1,173 553 524
Total shareholders' equity 1,952 1,702 2,419 1,879 561 488
Credit Quality
Net loan charge-offs 34.3 40.8 23.4 15.7 8.5 3.4
Nonperforming loans<F1> 125.1 113.5 56.0 56.6 10.9 17.0
Other real estate owned<F1> 32.7 40.3 8.0 13.7 18.1 33.8
Ratios
ROA 1.41 % 1.37 % 1.67 % 1.62 % 1.35 % 1.29 %
ROE 16.13 16.11 18.68 18.94 16.30 15.61
Net interest margin 4.68 4.79 4.61 4.60 4.45 4.53
Efficiency ratio 57.48 57.84 53.05 53.39 58.43 59.25
Total shareholders' equity/assets<F1> 8.65 8.10 14.35 12.63 8.28 7.39
Net loan charge-offs to average loans 0.22 0.29 0.24 0.19 0.19 0.09
Nonperforming loans to total loans<F1> 0.78 0.76 0.54 0.61 0.23 0.39
Nonperforming assets to total loans plus
other real estate owned<F1> 0.98 1.02 0.62 0.76 0.60 1.17
Reserve to loans<F1> 2.37 2.29 1.92 2.03 2.46 2.68
Reserve to nonperforming loans<F1> 304.3 302.0 354.5 332.1 1,094.9 679.5
<FN>
<F1>At December 31.
40
SUPERVISION AND REGULATION
As a bank holding company, the Company is subject to the regulation and
supervision of the Federal Reserve Board. The Company's subsidiary banks (the
"Subsidiary Banks") are subject to supervision and regulation by applicable
state and federal banking agencies, including the Federal Reserve Board, the
Office of the Comptroller of the Currency (the "Comptroller") and the Federal
Deposit Insurance Corporation (the "FDIC"). The Subsidiary Banks are also
subject to various requirements and restrictions under federal and state law,
including requirements to maintain reserves against deposits, restrictions on
the types and amounts of loans that may be granted and the interest that may
be charged thereon, and limitations on the types of investments that may be
made and the types of services that may be offered. Various consumer laws and
regulations also affect the operations of the Subsidiary Banks. In addition
to the impact of regulation, commercial banks are affected significantly by
the actions of the Federal Reserve Board as it attempts to control be money
supply and credit availability in order to influence the economy.
The Bank Holding Company Act previously prohibited the Federal Reserve
Board from approving an application from a bank holding company to acquire
shares of a bank located outside the state in which the operations of the
holding company's banking subsidiaries were principally conducted, unless
such an acquisition was specifically authorized by statute of the state in
which the bank whose shares were to be acquired is located. However, under
recently enacted federal legislation, the restriction on interstate
acquisitions has been abolished effective September 1995, and now, bank
holding companies from any state may acquire banks and bank holding companies
located in any other state, subject to certain conditions, including
nationwide and state imposed concentration limits. Banks also will be able to
branch across state lines by acquisition, merger or de novo, effective June
1, 1997 (unless state law would permit such interstate branching at an
earlier date), providing certain conditions are met including that applicable
state law must expressly permit de novo interstate branching and branch
acquisitions.
There are a number of obligations and restrictions imposed on bank
holding companies and their depository institution subsidiaries by federal
law and regulatory policy that are designed to reduce potential loss exposure
to the depositors of such depository institutions and to the FDIC insurance
fund in the event the depository institution becomes in danger of default or
is in default. For example, under a policy of the Federal Reserve Board with
respect to bank holding company operations, a bank holding company is
required to serve as a source of financial strength to its subsidiary
depository institutions and commit resources to support such institutions in
circumstances where it might not do so absent such policy, In addition, the
"cross-guarantee" provisions of federal law require insured depository
institutions under common control to reimburse the FDIC for any loss suffered
or reasonably anticipated as a result of the default of a commonly controlled
insured depository institution or for any assistance provided by the FDIC to
a commonly controlled insured depository institution in danger of default.
The federal banking agencies have broad powers under current federal law
to take prompt corrective action to resolve problems of insured depository
institutions. The extent of these powers depends upon whether the
institutions in question are "well capitalized," "adequately capitalized," or
"significantly undercapitalized" as such terms are defined under uniform
regulations defining such capital levels issued by each of the federal
banking agencies.
There are various legal and regulatory limits on the extent to which the
Company's subsidiary banks may pay dividends or otherwise supply funds to the
Company. In addition, federal and state regulatory agencies also have the
authority to prevent a bank or bank holding company from paying a dividend or
engaging in any other activity that, in the opinion of the agency, would
constitute an unsafe or unsound practice.
41
There have been a number of legislative and regulatory proposals that
would have an impact on the operation of bank holding companies and their
banks. It is impossible to predict whether or in what form these proposals
may be adopted in the future and, if adopted, what their effect will be on
the Company.
FDIC regulations require that management report on its institution's
responsibility for preparing financial statements, and establishing and
maintaining an internal control structure and procedures for financial
reporting and compliance with designated laws and regulations concerning
safety and soundness; and that independent auditors attest to and report
assertions in management's reports concerning compliance with such laws and
regulations, using FDIC-approved audit procedures.
SunTrust Securities, Inc. is a broker-dealer registered with the
Securities and Exchange Commission and is a member of the National
Association of Securities Dealers, Inc. Trusco Capital Management, Inc. is
registered with the Securities and Exchange Commission and is an investment
adviser pursuant to the Investment Advisers Act of 1940, as amended.
SunTrust Capital Markets, Inc. (STCM) is a broker-dealer registered with
the Securities and Exchange Commission and is a member of the National
Association of Securities Dealers, Inc. and the Securities Investor
Protection Corporation. It serves as the investment banking arm of SunTrust
Banks, Inc. The business activities of STCM include public finance, corporate
finance and the sale of investment securities to corporations, institutions
and governmental entities.
COMMUNITY REINVESTMENT
Our banks have prospered by operating on the philosophy - "Build your
community, and you build your bank." This commitment to our communities
includes efforts to serve the credit needs of low- and moderate-income, and
other disadvantaged communities as well as small businesses. SunTrust bankers
make thousands of calls in our communities each year. Our banks advertise in
minority and non-English media to reach potential customers who may not be
reached by more traditional marketing efforts. We participate, and often play
a leading role, in lending consortia, community development corporations and
other cooperative efforts with other financial institutions, local
governments and non-profit organizations to help make credit available where
it may be impossible to extend traditional loans.
Our performance in 1995 shows a strong commitment to our communities.
SunTrust's banks in 1995 approved more than 2,000 mortgage loans totaling
$115 million to residents of low- and moderate-income neighborhoods. SunTrust
also made approximately 21,000 consumer loans totaling $405 million to
residents of these areas, and we made approximately 32,000 small business
loans under $100,000, totaling over $1 billion. We continue to seek ways to
serve these markets profitably and prudently, and to ensure that all
qualified applicants receive the loans they need.
LEGAL PROCEEDINGS
The Company and its subsidiaries are parties to numerous claims and lawsuits
arising in the course of their normal business activities, some of which
involve claims for substantial amounts. Although the ultimate outcome of
these suits cannot be ascertained at this time, it is the opinion of
management that none of these matters, when resolved, will have a material
effect on the Company's consolidated results of operations or financial
position.
42
COMPETITION
All aspects of the Company's business are highly competitive. The Company
faces aggressive competition from other domestic and foreign lending
institutions and from numerous other providers of financial services.
The ability of nonbanking financial institutions to provide services
previously reserved for commercial banks has intensified competition. Because
nonbanking financial institutions are not subject to the same regulatory
restrictions as banks and bank holding companies, they can often operate with
greater flexibility.
Properties
The Company's headquarters and the main offices of SunTrust Banks of Georgia,
Inc., and SunTrust Bank, Atlanta, are located in Atlanta, Georgia. As of
December 31, 1995, bank subsidiaries of the Company owned 466 of their 652
full-service banking offices, and leased the remaining banking offices. See
Notes 6 and 15 of the Notes to Consolidated Financial Statements.
43
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS Annual Report Page #
Consolidated Statements of Income 45
Consolidated Balance Sheets 46
Consolidated Statements of Shareholders' Equity 47
Consolidated Statements of Cash Flow 48
Notes to Consolidated Financial Statements 49-68
Report of Independent Public Accountants 69
MANAGEMENT'S STATEMENT OF RESPONSIBILITY FOR FINANCIAL INFORMATION
Financial statements and information in this Annual Report were prepared in
conformity with generally accepted accounting principles. Management is
responsible for the integrity and objectivity of the financial statements and
related information. Accordingly, it maintains an extensive system of
internal controls and accounting policies and procedures to provide
reasonable assurance of the accountability and safeguarding of Company
assets, and of the accuracy of financial information. These procedures
include management evaluations of asset quality and the impact of economic
events, organizational arrangements that provide an appropriate division of
responsibility, and a program of internal audits to evaluate independently
the adequacy and application of financial and operating controls and
compliance with Company policies and procedures.
The Company's independent public accountants, Arthur Andersen LLP,
express their opinion as to the fairness of the financial statements
presented. Their opinion is based on an audit conducted in accordance with
generally accepted auditing standards as described in the second paragraph
of their report.
The Board of Directors, through its Audit Committee, is responsible for
ensuring that both management and the independent public accountants fulfill
their respective responsibilities with regard to the financial statements.
The Audit Committee, composed entirely of directors who are not officers or
employees of the Company, meets periodically with both management and the
independent public accountants to ensure that each is carrying out its
responsibilities. The independent public accountants have full and free
access to the Audit Committee and meet with it, with and without management
present, to discuss auditing and financial reporting matters.
The Company assessed its internal control system as of December 31,
1995, in relation to criteria for effective internal control over financial
reporting described in "Internal Control - Integrated Framework" issued by
the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this assessment, the Company believes that, as of December 31, 1995,
its system of internal controls over financial reporting met those criteria.
James B. Williams John W. Spiegel William P. O'Halloran
Chairman of the Board Executive Vice Senior Vice President
of Directors President and Controller
and Chief Executive and Chief Financial
Officer Officer
ABBREVIATIONS
Within the consolidated financial statements and the notes thereto, the
following references will be used:
SunTrust Banks, Inc. - Company or SunTrust
SunTrust Banks of Florida, Inc. - STB of Florida
SunTrust Banks of Georgia, Inc. - STB of Georgia
SunTrust Banks of Tennessee, Inc. - STB of Tennessee
SunTrust Banks, Inc. Parent Company - Parent Company
44
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31
(Dollars in thousands except per share data)<F1> 1995 1994 1993
INTEREST INCOME
Interest and fees on loans $2,501,536 $2,017,969 $1,804,814
Interest and dividends on investment securities:
Taxable interest 403,133 412,728 430,470
Tax-exempt interest 55,611 66,984 75,948
Dividends(1) 28,292 25,137 20,727
Interest on funds sold 34,857 17,098 10,589
Interest on deposits in other banks 1,053 9,805 16,038
Other interest 2,722 2,656 3,781
Total interest income 3,027,204 2,552,377 2,362,367
INTEREST EXPENSE
Interest on deposits 988,725 704,804 632,307
Interest on funds purchased 239,080 122,054 87,900
Interest on other short-term borrowings 54,843 42,519 21,623
Interest on long-term debt 68,114 63,119 48,839
Total interest expense 1,350,762 932,496 790,669
NET INTEREST INCOME 1,676,442 1,619,881 1,571,698
Provision for loan losses - Note 5 112,108 137,841 189,064
Net interest income after provision for loan losses 1,564,334 1,482,040 1,382,634
NONINTEREST INCOME
Trust income 259,742 250,296 246,963
Service charges on deposit accounts 212,798 218,420 225,900
Other charges and fees 126,020 121,137 142,108
Credit card fees 62,572 57,154 57,835
Securities gains(losses) - Note 3 (6,649) (2,692) 2,001
Other noninterest income 58,587 55,612 51,649
Total noninterest income 713,070 699,927 726,456
NONINTEREST EXPENSE
Salaries and other compensation - Notes 10 and 11 673,417 646,529 636,444
Employee benefits - Note 10 105,573 100,660 98,516
Net occupancy expense 130,124 126,855 128,355
Equipment expense 105,122 103,342 103,082
FDIC premiums 36,432 66,635 66,231
Marketing and community relations 49,966 57,210 48,042
Postage and delivery 36,392 34,129 32,402
Operating supplies 32,157 29,421 30,539
Other noninterest expense 282,296 235,221 264,817
Total noninterest expense 1,451,479 1,400,002 1,408,428
Income before provision for income taxes 825,925 781,965 700,662
Provision for income taxes - Note 9 260,449 259,221 226,933
NET INCOME $565,476 $522,744 $473,729
Average common equivalent shares 114,459,878 119,632,524 125,656,064
Net income per average common share $4.94 $4.37 $3.77
Dividends paid per common share 1.48 1.32 1.16
(1) Includes dividends on common stock of
The Coca-Cola Company 21,237 18,824 16,411
<FN>
<F1> See notes to consolidated financial statements.
45
CONSOLIDATED BALANCE SHEETS
At December 31
(Dollars in thousands) <F1> 1995 1994
ASSETS
Cash and due from banks $2,641,365 $2,595,071
Interest-bearing deposits in other banks 28,787 56,040
Trading account 96,613 98,110
Investment securities(1) - Note 3 9,676,934 9,318,521
Funds sold 1,299,407 940,656
Loans - Notes 4,12 and 13 31,301,389 28,548,887
Reserve for loan losses - Note 5 (698,864) (647,016)
Net loans 30,602,525 27,901,871
Premises and equipment - Note 6 729,731 714,666
Intangible assets 271,926 237,416
Customers' acceptance liability 234,809 39,813
Other assets - Note 10 889,375 806,921
Total assets $46,471,472 $42,709,085
LIABILITIES
Noninterest-bearing deposits $7,821,377 $7,653,776
Interest-bearing deposits 25,361,817 24,564,640
Total deposits 33,183,194 32,218,416
Funds purchased 5,483,751 4,351,896
Other short-term borrowings - Note 7 894,470 785,653
Long-term debt - Note 8 1,002,397 930,447
Acceptances outstanding 234,809 39,813
Other liabilities - Notes 9 and 10 1,403,270 929,529
Total liabilities 42,201,891 39,255,754
Commitments and contingencies - Notes 2, 8, 11, 12, 15 and 16
SHAREHOLDERS' EQUITY - Note 11
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
Additional paid in capital 434,724 438,309
Retained earnings 3,417,801 3,020,985
Treasury stock and other(3) (871,953) (706,499)
Realized shareholders' equity 3,111,033 2,883,256
Unrealized gains on investment securities,net of
taxes - Note 3 1,158,548 570,075
Total shareholders' equity 4,269,581 3,453,331
Total liabilities and shareholders' equity $46,471,472 $42,709,085
(1) Includes unrealized gains on investment securities $1,873,141 $916,578
(2) Common shares outstanding 113,193,839 115,679,426
(3) Treasury shares of common stock 17,266,805 14,781,218
<FN>
<F1> See notes to consolidated financial statements.
46
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Unrealized
Additional Treasury Gains on
Common Paid in Retained Stock and Securities,
(In thousands) Stock Capital Earnings Other <F1> Net of Taxes Total
BALANCE, JANUARY 1, 1993 $130,402 $444,846 $2,326,395 ($131,940) - $2,769,703
Net income - - 473,729 - - 473,729
Cash dividends paid on common stock, $1.16 per share - - (144,767) - - (144,767)
Proceeds from exercise of stock options 32 (4,393) - 8,863 - 4,502
Conversion of debentures 27 643 - - - 670
Acquisition of treasury stock - - - (285,669) - (285,669)
Issuance of treasury stock for 401(k) - 2,238 - 19,770 - 22,008
Issuance (net of forfeitures) of treasury
stock as restricted stock - 1,607 - 5,775 - 7,382
Compensation element from issuance of
restricted stock - - - (7,382) - (7,382)
Amortization of compensation element
of restricted stock - - - 5,632 - 5,632
Change in unrealized gains(losses) on securities,
net of taxes - - - - 763,775 763,775
BALANCE, DECEMBER 31, 1993 130,461 444,941 2,655,357 (384,951) 763,775 3,609,583
Net income - - 522,744 - - 522,744
Cash dividends paid on common stock, $1.32 per share - - (157,116) - - (157,116)
Proceeds from exercise of stock options - (7,092) - 11,115 - 4,023
Acquisition of treasury stock - - - (348,540) - (348,540)
Issuance of treasury stock for 401(k) - 466 - 10,809 - 11,275
Issuance (net of forfeitures) of treasury
stock as restricted stock - (6) - (1,023) - (1,029)
Compensation element from issuance of
restricted stock - - - 1,029 - 1,029
Amortization of compensation element
of restricted stock - - - 5,062 - 5,062
Change in unrealized gains(losses) on securities,
net of taxes - - - - (193,700) (193,700)
BALANCE, DECEMBER 31, 1994 130,461 438,309 3,020,985 (706,499) 570,075 3,453,331
Net income - - 565,476 - - 565,476
Cash dividends paid on common stock, $1.48 per share - - (168,660) - - (168,660)
Proceeds from exercise of stock options - (8,332) - 13,146 - 4,814
Acquisition of treasury stock - - - (204,824) - (204,824)
Issuance of treasury stock for acquisitions - - - 13,695 - 13,695
Issuance of treasury stock for 401(k) - 1,385 - 9,759 - 11,144
Issuance (net of forfeitures) of treasury
stock as restricted stock - 3,362 - 13,518 - 16,880
Compensation element from issuance of
restricted stock - - - (16,880) - (16,880)
Amortization of compensation element
of restricted stock - - - 6,132 - 6,132
Change in unrealized gains(losses) on securities,
net of taxes - - - - 588,473 588,473
BALANCE, DECEMBER 31, 1995 $130,461 $434,724 $3,417,801 ($871,953) $1,158,548 $4,269,581
<FN>
<F1> Balance at December 31, 1995 includes $831,001 for treasury stock and
$40,952 for compensation element of restricted stock.
<F2> See notes to consolidated financial statements.
47
CONSOLIDATED STATEMENTS OF CASH FLOW
Year Ended Ended December 31
(In thousands)<F1> 1995 1994 1993
CASH FLOW FROM OPERATING ACTIVITIES
Net income $565,476 $522,744 $473,729
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 133,771 133,018 140,170
Provision for loan losses 112,108 137,841 189,064
Provision for losses on other real estate 3,870 14,138 19,534
Deferred income tax benefit (19,918) (4,716) (11,402)
Amortization of compensation element of
restricted stock 6,132 5,062 5,632
Securities (gains) losses, net 6,649 2,692 (2,001)
(Gains) losses on sale of loans, equipment, other
real estate and repossessed assets, net (13,385) (21,556) (9,821)
Recognition of unearned loan income (127,440) (195,978) (198,273)
Origination of loans for sale (822,054) (509,702) (1,124,544)
Proceeds from sale of loans 667,216 600,909 1,107,561
Change in period-end balances of:
Trading account 1,497 14,412 175,351
Interest receivable (14,359) (38,163) 19,315
Prepaid expenses (11,545) (51,129) (24,904)
Other assets (87,556) (842) 9,098
Taxes payable 5,605 (8,123) 21,549
Interest payable 43,802 31,999 (7,179)
Other accrued expenses 81,086 (18,713) 35,458
Net cash provided by operating activities 530,955 613,893 818,337
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from maturities of investment securities 1,482,138 2,400,350 3,684,592
Proceeds from sales of investment securities 1,206,904 1,422,078 266,348
Purchases of investment securities (1,977,136) (2,826,867) (4,389,985)
Net (increase) decrease in loans (2,334,133) (2,900,890) (1,173,242)
Capital expenditures (133,292) (105,420) (118,391)
Proceeds from sale of equipment, other real estate
and repossessed assets 103,248 131,538 195,303
Net funds (paid) received in acquisitions (57,939) (33,411) 102,617
Other (9,480) 23,215 (24,980)
Net cash used by investing activities (1,719,690) (1,889,407) (1,457,738)
CASH FLOW FROM FINANCING ACTIVITIES
Net increase in deposits 734,135 1,401,591 (329,376)
Net increase (decrease) in funds purchased
and other short-term borrowings 1,129,112 239,826 838,179
Proceeds from issuance of long-term debt 160,936 580,572 42,865
Repayment of long-term debt (88,987) (308,022) (54,494)
Proceeds from the exercise of stock options 4,815 4,023 4,502
Payments to acquire treasury stock (204,824) (348,540) (285,669)
Dividends paid (168,660) (157,116) (144,767)
Net cash provided by financing activities 1,566,527 1,412,334 71,240
Net increase (decrease) in cash and cash equivalents 377,792 136,820 (568,161)
Cash and cash equivalents at beginning of year 3,591,767 3,454,947 4,023,108
Cash and cash equivalents at end of year $3,969,559 $3,591,767 $3,454,947
SUPPLEMENTAL DISCLOSURE
Interest paid $1,356,351 $900,497 $797,359
Income taxes paid 261,997 275,465 255,273
<FN>
<F1> See notes to consolidated financial statements.
48
Notes to Consolidated Financial Statements
Note 1 - Accounting Policies
Accounting policies that significantly affect the determination of results of
operations, financial position, and cash flow are summarized below.
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated. Results of
operations of companies purchased are included from the dates of acquisition.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could vary from these estimates;
however, in the opinion of management, such variances would not be material.
Purchase Accounting: Following the purchase method of accounting, the assets
and liabilities of purchased banks are stated at estimated fair values at the
date of acquisition.
Securities: Investment securities are classified as available-for-sale and
are carried at market value with unrealized gains and losses, net of any tax
effect, added to or deducted from realized shareholders' equity to determine
total shareholders' equity. Trading account securities are carried at market
value with the gains and losses, determined using the specific identification
method, recognized currently in the statement of income.
Loans: Interest income on all classifications of loans is accrued based upon
the outstanding principal amounts except those classified as nonaccrual
loans. Interest accrual is discontinued when it appears that future
collection of principal or interest according to the contractual terms may be
doubtful. Interest income on nonaccrual loans is recognized on a cash basis,
if there is no doubt of future collection of principal. Fees and incremental
direct costs associated with the loan origination and pricing process are
deferred and amortized as level yield adjustments over the respective loan
terms. Fees received for providing loan commitments and letters of credit
facilities are deferred until the loan is advanced and then recognized over
the term of the loan as an adjustment of the yield. Fees on commitments and
letters of credit that are not expected to be funded are amortized into
noninterest income by the straight-line method over the commitment period.
Statements of Financial Accounting Standards No. 114 (FAS 114)
"Accounting by Creditors for Impairment of a Loan" requires that all
creditors value all specifically reviewed loans for which it is probable that
the creditor will be unable to collect all amounts due according to the terms
of the loan agreement at the present value of expected cash flows, market
price of the loan, if available, or value of the underlying collateral;
whereas, No. 118 (FAS 118), "Accounting by Creditors for Impairment of a Loan
- -- Income Recognition and Disclosures," amends FAS 114 to allow a creditor to
use existing methods for recognizing interest income on an impaired loan and
to require additional disclosures about how a creditor recognizes interest
income related to impaired loans were effective for fiscal years beginning
after December 15, 1994.
49
SunTrust adopted these standards in the first quarter of 1995 and the
adoption required no increase to the allowance for loan losses and had no
impact on net income for the year ended December 31, 1995. The impact to
historical and current amounts related to in-substance foreclosures was not
material, and accordingly, historical amounts have not been reclassified.
Reserve for Loan Losses: The reserve is that amount considered adequate to
absorb possible losses in the portfolio based on management's evaluation of
the size and current risk characteristics of the loan portfolio, the fair
value of underlying collateral and prior loan loss experience as well as the
impact of current economic conditions. A provision for loan losses is charged
to operations based on management's periodic evaluation of these risks.
Long-lived Assets: Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation has been calculated
primarily using the straight-line method over the assets' estimated useful
lives. Certain leases are capitalized as assets for financial reporting
purposes. Such capitalized assets are amortized, using the straight-line
method, over the terms of the leases. Maintenance and repairs are charged to
expense and betterments are capitalized.
Intangible assets consist primarily of goodwill and mortgage servicing
rights. Goodwill associated with purchased banks is being amortized on the
straight-line method over various periods ranging from fifteen to forty
years. Mortgage servicing rights, including those purchased as well as
originated, are amortized in proportion to and over the estimated period of
the related net servicing revenues. The Company adopted Statement of
Financial Accounting Standards No. 122 (FAS 122), "Accounting for Mortgage
Servicing Rights" in the second quarter of 1995. The adoption of FAS 122 did
not have a significant impact on the financial condition or results of
operations of the Company.
Long-lived assets are evaluated regularly for other-than-temporary
impairment. If circumstances suggest that their value may be impaired and the
write-down would be material, an assessment of recoverability is performed
prior to any write-down of the asset. Statement of Financial Accounting
Standards No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" must be adopted on or
before January 1, 1996. The Company adopted the standard on January 1, 1996
and it did not have a significant impact on the financial condition or
results of operations of the Company.
Income Taxes: Deferred income tax assets and liabilities result from
temporary differences between the tax basis of assets and liabilities and
their reported amounts in the financial statements that will result in
taxable or deductible amounts in future years.
Earnings per Share: Earnings per common share are based on the weighted
average number of common shares outstanding during each period, plus common
shares calculated for stock options and restricted stock outstanding using
the treasury stock method. Fully diluted per common share data are not
materially different than the primary per common share data presented.
Cash Flow: For purposes of reporting cash flow, cash and cash equivalents
include only those items with an original maturity of three months or less
which includes cash and due from banks, interest-bearing deposits in other
banks and funds sold.
50
Interest Rate Contracts: Amounts receivable or payable under interest rate
contracts used to manage interest rate risks arising from the Company's
financial assets and financial liabilities are accounted for on the accrual
basis of accounting and recognized as an adjustment to interest income or
expense depending on the specific instrument being hedged. Gains and losses
on early terminations of contracts are included in the carrying amount of the
related asset or liability and amortized as yield adjustments over their
remaining terms.
Note 2 - Acquisitions
On August 11, 1995, the Company purchased all the issued and outstanding
stock of Key Biscayne Bankcorp, Inc. ("Key Biscayne") located in Key
Biscayne, Florida in exchange for approximately $29.6 million in cash. At the
date of purchase Key Biscayne had total assets of $152.0 million. The
acquisition was accounted for as a purchase. The results of operations of Key
Biscayne from the date of acquisition are included in the Company's financial
statements.
On May 11, 1995, the Company purchased all the issued and outstanding
stock of Peoples State Bank ("Peoples") located in New Port Richey, Florida
in exchange for approximately $3 million in cash and 245,099 shares of
SunTrust common stock. At the date of purchase Peoples had total assets of
$126.6 million. The acquisition was accounted for as a purchase. The results
of operations of Peoples from the date of acquisition are included in the
Company's financial statements.
On February 17, 1994, the Company purchased all the issued and
outstanding stock of Regional Investment Corporation ("RIC"), the parent of
Andrew Jackson Savings Bank located in Tallahassee, Florida for approximately
$65.1 million in cash. At the date of purchase RIC had total assets of $436.8
million. The acquisition was accounted for as a purchase. The results of
operations of RIC from the date of acquisition are included in the Company's
financial statements.
On October 11, 1995, the Company completed the acquisition of Stephens
Diversified Leasing ("Stephens") a company engaged principally in providing
franchise and office equipment financing programs. The acquisition was
accounted for as a purchase. The results of operations of Stephens from the
date of acquisition are included in the Company's financial statements.
At December 31, 1995, the Company had an agreement to purchase all the
issued and outstanding stock of Ponte Vedra Banking Corporation ("Ponte
Vedra") located in Ponte Vedra Beach, Florida. At December 31, 1995, Ponte
Vedra had total assets of $90.5 million. The acquisition will be accounted
for as a purchase.
51
Note 3 - Investment Securities
Investment securities were as follows at December 31:
1995
Amortized Fair Unrealized Unrealized
(In thousands) Cost Value Gains Losses
U.S. Treasury and other U.S.
government agencies and
corporations $3,286,640 $3,308,434 $32,609 $10,815
States and political subdivisions 831,218 865,832 36,070 1,456
Mortgage-backed securities 3,508,409 3,516,150 26,368 18,627
Common stock of
The Coca-Cola Company 110 1,791,894 1,791,784 -
Other securities 177,416 194,624 18,314 1,106
Total investment securities $7,803,793 $9,676,934 $1,905,145 $32,004
1994
Amortized Fair Unrealized Unrealized
(In thousands) Cost Value Gains Losses
U.S. Treasury and other U.S.
government agencies and
corporations $3,575,391 $3,386,107 $1,153 $190,437
States and political subdivisions 958,201 972,181 29,090 15,110
Mortgage-backed securities 3,661,832 3,500,596 3,366 164,602
Common stock of
The Coca-Cola Company 110 1,242,862 1,242,752 -
Other securities 206,409 216,775 12,374 2,008
Total investment securities $8,401,943 $9,318,521 $1,288,735 $372,157
The amortized cost and fair value of debt securities at December 31,
1995, by contractual maturities are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Amortized Fair
(In thousands) Cost Value
Due in one year or less $467,299 $469,229
Due in one year through five years 3,430,347 3,469,416
Due after five years through ten years 192,906 206,158
After ten years 27,306 29,463
Mortgage-backed securities 3,508,409 3,516,150
Total $7,626,267 $7,690,416
Proceeds from sale of investments in debt securities were $1,206.9
million, $1,422.1 million and $266.3 million in 1995, 1994 and 1993. Gross
realized gains were $1.4 million, $4.6 million and $2.1 million and gross
realized losses on such sales were $8.0 million, $7.3 million and $0.1
million in 1995, 1994 and 1993.
The fair value of investment securities pledged to secure public
deposits, trust and other funds was $4.5 billion at December 31, 1995 and
1994.
52
Note 4 - Loans
The composition of the Company's loan portfolio at December 31, 1995 and 1994
was as follows:
(In thousands) 1995 1994
Commercial, financial and agricultural:
Domestic $10,222,511 $9,279,163
International 337,508 273,235
Real estate:
Construction 1,216,578 1,151,114
Mortgage, 1-4 family 9,732,801 8,380,510
Other 4,477,659 4,516,304
Lease financing 561,243 411,001
Credit card 774,013 690,462
Other consumer loans 3,979,076 3,847,098
Loans $31,301,389 $28,548,887
The gross amount of interest income that would have been recorded in
1995, 1994, and 1993 on nonaccrual and restructured loans at December 31 of
each year, if all such loans had been accruing interest at the contractual
rate, was $20.1, $18.5, and $23.8 million, while interest income actually
recognized was $11.0, $10.5, and $10.7 million. Total nonaccrual and
restructured loans at December 31, 1995 and 1994 were $192.2 and $187.6
million, respectively.
In the normal course of business, the Company's banking subsidiaries
have made loans at prevailing interest rates and terms to directors and
executive officers of the Company and its subsidiaries, and to their
affiliates. The aggregate dollar amount of these loans, as defined, was $73.6
million at December 31, 1995 and $70.1 million at December 31, 1994. During
1995, $139.0 million of such loans were made and repayments totaled $135.5
million. None of these loans has been restructured, nor were any related
party loans charged off during 1994 and 1995.
Note 5 - Reserve for Loan Losses
Activity in the reserve for loan losses is summarized as follows:
(In thousands) 1995 1994 1993
Balance at beginning of year $647,016 $561,191 $474,179
Reserve of purchased banks 6,336 8,274 7,995
Provision charged to operating expense 112,108 137,841 189,064
Loan charge-offs (120,766) (113,677) (163,149)
Loan recoveries 54,170 53,387 53,102
Balance at end of year $698,864 $647,016 $561,191
It is the opinion of management that the reserve was adequate at
December 31, 1995, based on conditions reasonably known to management;
however, the reserve may be increased or decreased based on loan growth,
changes in internally generated credit quality ratings of the loan portfolio,
or changes in general economic conditions.
53
Note 6 - Premises and Equipment
Premises and equipment at December 31, 1995 and 1994 were as follows:
(In thousands) Useful Life 1995 1994
Land $201,807 $206,125
Buildings and improvements 3-55 years 551,584 547,203
Leasehold improvements 5-30 years 105,018 104,588
Furniture and equipment 3-20 years 573,981 571,704
Construction in progress 41,725 19,057
1,474,115 1,448,677
Less accumulated depreciation
and amortization 744,384 734,011
Total $729,731 $714,666
Net premises and equipment include $22.6 million and $23.8 million at
December 31, 1995 and 1994, respectively, related to capital leases. The
carrying amount of premises and equipment subject to mortgage indebtedness
(included in long-term debt) was $2.4 million at December 31, 1994.
Note 7 - Other Short-Term Borrowings
Other short-term borrowings at December 31, 1995 and 1994 consisted of the
following:
(In thousands) 1995 1994
Commercial paper, 1995 interest rates
from 5.592% to 6.014% $215,110 $202,072
Bank notes, 1995 interest rate - 6.50% 200,000 250,000
Federal funds purchased maturing in over one day,
1995 interest rates from 5.688% to 5.813% 135,000 30,000
Short-term borrowing facility, interest rates
from 5.95% to 6.02% 100,000 -
Other 244,360 303,581
Total $894,470 $785,653
At December 31, 1995, $240.0 million of unused borrowings under
unsecured lines of credit from non-affiliated banks were available to the
Parent Company to support the outstanding commercial paper and provide for
general liquidity needs.
54
Note 8 - Long-Term Debt
A summary of long-term debt at December 31, 1995 and 1994 is as follows:
(In thousands) 1995 1994
PARENT COMPANY
8.375% notes due 1996 $74,500 $74,500
8.875% notes due 1998 94,500 94,500
Floating rate notes due 1999 200,000 200,000
7.375% notes due 2002 200,000 200,000
7.50% debentures due 2002 11,373 12,168
6.125% notes due 2004 200,000 200,000
Payment agreement due 2001 40,753 -
Capital lease obligation 6,217 6,568
Total Parent Company 827,343 787,736
SUBSIDIARIES
Capital lease obligations 23,319 23,992
FHLB advances and other 151,735 118,719
Total subsidiaries 175,054 142,711
Total long-term debt $1,002,397 $930,447
Principal amounts due for the next five years on long-term debt at
December 31, 1995 are: 1996 - $124.4 million; 1997 - $48.2 million; 1998 -
$122.6 million; 1999 - $219.8 million; 2000 - $38.2 million.
The 7.50% debentures can be redeemed in varying amounts prior to their
scheduled maturity dates, subject to payment of redemption premiums in
certain cases.
Restrictive provisions of several long-term debt agreements prevent the
Company from creating liens on, disposing of, or issuing (except to related
parties) voting stock of subsidiaries. Further, there are restrictions on
mergers, consolidations, certain leases, sales or transfers of assets,
minimum shareholders' equity and maximum borrowings by the Company. As of
December 31, 1995 the Company was in compliance with all covenants and
provisions of long-term debt agreements.
STB of Tennessee is subject to certain debt agreements for which the
outstanding amounts are shown under "Parent Company" above. Under the most
restrictive covenants of these agreements, approximately $331.8 million was
available for dividend payments at December 31, 1995, by STB of Tennessee to
SunTrust. STB of Florida and STB of Georgia have no restrictive debt
covenants.
In the summary table of long-term debt, $246.8 million in 1995 and
$281.4 million in 1994 qualify as Tier 2 capital as currently defined by
Federal bank regulators. At December 31, 1995 the Company's capital exceeded
all minimum regulatory requirements. Substantially all the Company's retained
earnings are undistributed earnings of its banking subsidiaries, which are
restricted by various regulations administered by Federal and state bank
regulatory authorities. Retained earnings of bank subsidiaries available for
payment of cash dividends to STB of Florida, STB of Georgia and STB of
Tennessee under these regulations were approximately $392.6 million at
December 31, 1995. In addition, banks and bank holding companies are subject
to minimum regulatory capital levels. SunTrust and each of its subsidiary
banks are in compliance with all capital requirements.
55
Note 9 - Income Taxes
The provision for income taxes for the three years ended December 31, 1995
consisted of the following:
(In thousands) 1995 1994 1993
Provision for federal income taxes:
Current $268,718 $252,287 $226,447
Prepaid (41,857) (23,565) (22,494)
Total provision for federal income taxes 226,861 228,722 203,953
Provision for state income taxes:
Current 11,649 11,650 11,888
Deferred 21,939 18,849 11,092
Total provision for state income taxes 33,588 30,499 22,980
Total $260,449 $259,221 $226,933
The Company's income before provision for income taxes from international
operations was not significant.
The Company's provision for income taxes for the three years ended
December 31, 1995 differs from the amount computed by applying the statutory
federal income tax rate of 35% to income before income taxes. A
reconciliation of this difference is as follows:
(In thousands) 1995 1994 1993
Tax provision at federal statutory rate $289,074 $273,689 $245,232
Increase (decrease) resulting from:
Tax-exempt interest (33,017) (36,997) (41,704)
Disallowed interest deduction 3,857 3,183 3,061
Income tax credits (1,533) (1,409) (970)
State income taxes, net of federal benefit 21,847 19,796 14,937
Dividend exclusion (5,517) (5,154) (4,341)
Favorable tax settlement (20,177) - -
Other 5,915 6,113 10,718
Provision for income taxes $260,449 $259,221 $226,933
Temporary differences create deferred tax assets and liabilities which are
detailed below for December 31, 1995 and 1994:
Deferred Tax
Assets (Liabilities)
(In thousands) 1995 1994
Loan loss reserve $266,403 $243,585
Depreciation (13,345) (14,967)
Employee benefits (62,559) (54,568)
Unrealized gains on investment securities (714,593) (346,503)
Leasing (86,915) (78,609)
Other real estate 16,956 19,949
Other (12,703) (16,166)
Total deferred tax liability ($606,756) ($247,279)
56
SunTrust and its subsidiaries file consolidated income tax returns where
permissible. Each subsidiary remits current taxes to or receives current
refunds from the Parent Company based on what would be required had the
subsidiary filed an income tax return as a separate entity. The Company's
federal and state income tax returns are subject to review and examination by
government authorities. Various such examinations are now in progress
covering SunTrust's consolidated income tax returns for certain prior years.
In the opinion of management, any adjustments which may result from these
examinations will not have a material effect on the Company's consolidated
financial statements.
Note 10 - Retirement Plans and Employee Benefits
SunTrust maintains a noncontributory qualified retirement plan (Plan)
covering all employees meeting certain age and service requirements. The Plan
provides benefits based on salary and years of service. The Company funds the
Plan with at least the minimum amount required by ERISA. At December 31,
1995, the Plan assets consisted of listed common stocks, U.S. government and
agency securities and units of certain trust funds administered by subsidiary
banks of the Company. No shares of SunTrust common stock were included in the
assets of the Plan. The Plan's net periodic expense is summarized as follows:
Year Ended December 31
(In thousands) 1995 1994 1993
Service cost - benefits earned
during the period $21,286 $21,754 $19,401
Interest cost on projected
benefit obligations 25,364 21,860 19,670
Actual return on Plan assets (89,162) 11,053 (31,515)
Net amortization and deferral 47,556 (48,184) (1,873)
Net periodic retirement Plan expense $5,044 $6,483 $5,683
Actuarial Assumptions:
Weighted average discount rate 7.50% 8.25% 7.50%
Rate of increase in future compensation levels 4.00% 4.50% 4.50%
Long-term weighted average rate of return 9.25% 9.25% 9.00%
The funded status of the Plan at December 31 was as follows:
(In thousands) 1995 1994
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $258,104 in 1995 and $220,122 in 1994 $(296,707) $(255,874)
Projected benefit obligation for service
rendered to date $(345,536) $(292,672)
Plan assets at fair value 437,576 347,408
Plan assets in excess of projected benefit obligation 92,040 54,736
Unrecognized net (gain)loss since transition 67,831 80,986
Unrecognized prior service cost (17,188) (20,488)
Unrecognized net asset at transition being
amortized over 14 years (21,589) (25,797)
Prepaid pension expense included in other assets $121,094 $89,437
57
SunTrust also has a nonqualified defined benefit plan that covers key
executives of the Company for which cost is accrued but is unfunded. At
December 31, 1995 and 1994, the projected benefit obligation for this plan
was $14.7 million and $13.1 million. Included in other liabilities at
December 31, 1995 and 1994, is $12.1 million and $10.0 million representing
accumulated benefit obligations. The expense of the nonqualified plan was
$3.5 million, $3.2 million, and $2.6 million in 1995, 1994 and 1993.
Although not under contractual obligation, SunTrust provides certain
health care and life insurance benefits to current and retired employees. As
currently structured, substantially all employees become eligible for
benefits upon full-time employment and, at the option of SunTrust, may
continue them if they reach retirement age while working for the Company.
Certain benefits are prefunded in taxable and tax-exempt trusts.
The Retiree Health Plan provides medical benefits for retirees and
eligible dependents under indemnity and managed care arrangements with costs
shared by SunTrust and the retiree. For employees who retired on or prior to
January 1, 1993, it is anticipated that future cost increases will be shared
by SunTrust and these retirees through increased deductibles, co-insurance,
and retiree contributions. For employees who retire after January 1, 1993,
SunTrust's cost sharing will remain fixed at the 1993 level and future cost
increases will be paid solely by these retirees.
The Retiree Life Plan provides a fixed life insurance amount to eligible
current retirees and current active employees who reach retirement age while
working for the Company. The cost of this benefit is entirely paid for by the
Company.
The Retiree Health and Life benefits are prefunded in a Voluntary
Employees' Beneficiary Association (VEBA). As of December 31, 1995, these
Plan assets consist of common trust funds, U.S. government securities,
corporate bonds and notes and a cash equivalent cash reserve fund. The
Retiree Health and Life Plans' net periodic expense for the three years ended
December 31 were as follows:
(In thousands) 1995 1994 1993
Service cost - benefits earned
during the period $1,277 $1,809 $1,302
Interest cost on projected benefit obligations 5,730 5,239 4,887
Actual return on plan assets (16,128) 3,110 (5,589)
Deferral of asset gain (loss) 10,688 (9,047) 71
Amortization of transition obligation 2,892 2,892 2,892
Net cost $4,459 $4,003 $3,563
Actuarial Assumptions:
Weighted average discount rate 7.50% 8.25% 7.50%
Health care cost trend rate:
Pre-medicare (for 1995, equal adjustments
until leveling out at 5.5% in 2004) 12.00% 12.00% 14.00%
Post-medicare (for 1995, equal adjustments
until leveling out at 5.5% in 2006) 11.00% 11.00% 11.50%
Long-term weighted average rate of return 6.50% 6.50% 6.50%
58
The funded status of the Retiree Health and Life Plan at December 31 was as
follows:
(In thousands) 1995 1994
Accumulated postretirement benefit obligation (APBO):
Fully eligible actives ($9,258) ($8,881)
Other actives (14,894) (11,512)
Retirees (50,948) (47,214)
Total APBO (75,100) (67,607)
Plan assets at fair value 103,382 93,063
Plan assets in excess of APBO 28,282 25,456
Unrecognized net (gain) or loss 9,638 14,031
Unrecognized prior service cost - -
Unrecognized net transition obligation 49,174 52,066
Prepaid postretirement benefit expense included
in other assets $87,094 $91,553
Incremental effect of 1% increase in the health
care trend rate on APBO ($4,134) ($3,375)
Under various plans, SunTrust provides profit sharing or incentive
compensation to eligible participating employees. Award amounts are based on
eligible compensation and earnings performance. The expense under these
plans, classified as salaries and other compensation, was $30.6 million for
1995, $34.1 million for 1994 and $42.8 million for 1993.
In addition SunTrust has a Management Incentive Plan for key executives
that provides for annual cash awards, if any, based on eligible compensation
and earnings performance. SunTrust also has a Performance Unit Plan for key
executives for which awards, if any, are based on multi-year earnings
performance in relation to earnings goals as established by the Compensation
Committee of the SunTrust Board of Directors. SunTrust's expenses under these
plans, classified as salaries and other compensation, were $15.9 million for
1995, $16.1 million for 1994 and $17.5 million for 1993.
Note 11 - Executive Stock Plan
The Company has an Executive Stock Plan (Stock Plan) under which the
Compensation Committee (Committee) of the Board of Directors has the
authority to grant stock options and restricted stock to key employees of the
Company. Eight million shares of common stock are reserved for issuance under
the Stock Plan of which no more than three million shares may be issued as
restricted stock. Options granted are at no less than the fair market value
of a share of stock on the grant date and may be either tax qualified
incentive stock options or nonqualified options.
The SunTrust Banks, Inc. 1995 Executive Stock Plan (the 1995 Stock Plan)
was adopted by the Board of Directors of the Company on November 8, 1994 and
approved by the shareholders at the 1995 Annual Meeting.
59
The following table presents information on stock options:
Total Exercisable Option
Option Option Price
(In thousands) Shares Shares Range
Options outstanding at January 1, 1993 2,018,190 1,849,290 $13.50 - 40.75
Granted 97,600 - 43.25
Options which became exercisable - 108,900 22.375 - 40.75
Exercised (245,026) (245,026) 13.50 - 40.75
Cancelled or expired (38) (38) 16.45
Options outstanding at December 31, 1993 1,870,726 1,713,126 13.625 - 43.25
Granted 162,600 - 47.125-49.375
Options which became exercisable - 227,400 22.375-49.375
Exercised (347,130) (347,130) 13.625-43.25
Cancelled or expired (1,000) (1,000) 43.25
Options outstanding at December 31, 1994 1,685,196 1,592,396 16.375 - 49.375
Granted 583,750 - 60.50-66.375
Options which became exercisable - 92,600 22.375-60.50
Exercised (377,393) (377,393) 16.375-49.375
Cancelled or expired (3,500) (3,500) 23.00-23.25
Options outstanding at December 31, 1995 1,888,053 1,304,103 $16.375-66.375
There was no expense recorded as a result of the grant or exercise of any of
the stock options referred to above.
With respect to Performance Restricted Stock (Performance Stock), shares
must be granted, awarded and vested before participants take full title to
the Performance Stock. After Performance Stock is granted by the Committee,
specified portions are awarded based on increases in the average market value
of SunTrust common stock from the initial price specified by the Committee.
Awards vest on the earlier of: (i) fifteen years after the date shares are
awarded to participants; (ii) attaining age 64; (iii) death or disability of
a participant; or (iv) a change in control of the Company as defined in the
Stock Plan. Dividends are paid on awarded and unvested Performance Stock and
participants may exercise voting privileges on such shares. The compensation
element for Performance Stock is equal to the fair market value of the shares
at the date of award and is being amortized to compensation expense over the
period from the award date to age 64 or the 15th anniversary of the award
date, whichever comes first.
Amortization of the compensation element is included in salaries and
other compensation and the unamortized deferred compensation element is
included in treasury stock and other as a reduction of shareholders' equity.
60
The following table presents information on restricted stock:
Restricted Deferred
(Dollars in thousands) Shares Compensation
Balance at January 1, 1993 1,394,000 $35,680
Granted 154,400 7,508
Forfeited (4,000) (126)
Vested (32,600) -
Amortization of compensation element - (5,632)
Balance at December 31, 1993 1,511,800 37,430
Forfeited (31,000) (1,029)
Vested (60,200) -
Amortization of compensation element - (5,062)
Balance at December 31, 1994 1,420,600 31,339
Granted 289,000 16,879
Forfeited (30,400) (1,134)
Vested (40,200) -
Amortization of compensation element - (6,132)
Balance at December 31, 1995 1,639,000 $40,952
Note 12 - Off-Balance Sheet Financial Instruments
In the normal course of business, the Company utilizes various financial
instruments to meet the needs of customers and to manage the Company's
exposure to interest rate and other market risks. These financial
instruments, which consist of derivatives contracts and credit-related
arrangements, involve, to varying degrees, elements of credit and market risk
in excess of the amount recorded on the balance sheet in accordance with
generally accepted accounting principles.
Credit risk represents the potential loss that may occur because a party
to a transaction fails to perform according to the terms of the contract.
Market risk is the possibility that a change in interest or currency exchange
rates will cause the value of a financial instrument to decrease or become
more costly to settle. The contract/notional amounts of financial
instruments, which are not included in the consolidated balance sheet, do not
necessarily represent credit or market risk. However, they can be used to
measure the extent of involvement in various types of financial instruments.
The Company controls the credit risk of its off-balance sheet portfolio
by limiting the total amount of arrangements outstanding by individual
counterparty; by monitoring the size and maturity structure of the portfolio;
by obtaining collateral based on management's credit assessment of the
counterparty; and by applying uniform credit standards maintained for all
activities with credit risk. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment, and income-producing
commercial properties. In addition, the Company enters into master netting
agreements which incorporate the right of set-off to provide for the net
settlement of covered contracts with the same counterparty in the event of
default or other termination of the agreement.
61
At December 31, 1995 At December 31, 1994
Contract or Notional Amount Contract or Notional Amount
Credit Credit
For Risk For Risk
(In millions) End User Customers Amount End User Customers Amount
Derivatives contracts:
Interest rate contracts:
Swaps $349 $855 $29 $1,838 $888 $53
Futures and forwards - - - - - -
Options written - 431 - - 370 -
Options purchased - 393 - - 360 -
Total interest rate contracts 349 1,679 29 1,838 1,618 53
Foreign exchange rate contracts 164 - 2 170 - 22
Total derivatives contracts $513 $1,679 31 $2,008 $1,618 $75
Credit-related arrangements:
Commitments to extend credit $13,649 $13,649 $12,670 $12,670
Standby letters of credit and similar
arrangements 2,905 2,905 2,618 2,618
Total credit-related arrangements $16,554 $16,554 $15,288 $15,288
When-issued securities:
Commitments to sell $190 $0 $16 $0
Commitments to purchase 9 0 6 0
Total credit risk amount $16,585 $15,363
Derivatives
The Company enters into various derivatives contracts in managing its
own interest rate risk and in a dealer capacity as a service for customers.
Where contracts have been created for customers, the Company enters into
offsetting positions to eliminate its exposure to market risk.
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. Interest rate options, which
include caps and floors, are contracts which transfer, modify, or reduce
interest rate risk in exchange for the payment of a premium when the contract
is issued. The notional or contract amount of interest rate contracts is not
a measure of credit risk. The true measure of credit exposure is the
replacement cost of contracts which have become favorable to the Company, the
mark-to-market exposure amount.
The Company monitors its sensitivity to changes in interest rates and
uses interest rate swap contracts to limit the volatility of net interest
income. At December 31, 1995 and 1994 there were no deferred gains or losses
relating to terminated interest rate swap contracts. The Company records all
swap income and expense in the interest expense category. The total reduction
of interest expense for 1995, 1994 and 1993 related to interest rate swaps
was $10.1 million, $30.6 million, and $43.6 million. Included in those
amounts are $0.5 million, $0.4 million, and $0.5 million representing income
from swaps entered into for customers.
62
Futures and forwards are contracts for the delayed delivery of
securities or money market instruments in which the seller agrees to deliver
on a specified future date, a specified instrument, at a specified price or
yield. The credit risk inherent in futures is the risk that the exchange may
default. Futures contracts settle in cash daily; therefore, there is minimal
credit risk to the Company. The credit risk inherent in forwards arises from
the potential inability of counterparties to meet the terms of their
contracts. Both futures and forwards are also subject to the risk of
movements in interest rates or the value of the underlying securities or
instruments.
The Company also enters into transactions involving "when-issued
securities". When-issued securities are commitments to purchase or sell
securities authorized for issuance but not yet actually issued. Accordingly,
they are not recorded on the balance sheet until issued. The credit risk in
commitments to purchase is represented by the contract amount since the
underlying instrument that the Company is obligated to buy is subject to
credit risk.
Credit-Related Arrangements
In meeting the financing needs of its customers, the Company issues
commitments to extend credit, standby and other letters of credit and
guarantees, and also provides securities lending services. For these
instruments, the contractual amount of the financial instrument represents
the maximum potential credit risk if the counterparty does not perform
according to the terms of the contract. A large majority of these contracts
expire without being drawn upon. As a result, total contractual amounts do
not represent future credit exposure or liquidity requirements.
Unfunded commitments to extend credit are agreements to lend to a
customer who has complied with predetermined contractual conditions.
Commitments generally have fixed expiration dates.
Standby letters of credit and guarantees are conditional commitments
issued by the Company generally to guarantee the performance of a customer to
a third party in borrowing arrangements, such as commercial paper, bond
financing, construction and similar transactions. The credit risk involved in
issuing standby letters of credit is essentially the same as that involved in
extending loan facilities to customers and may be reduced by selling
participations to third parties. The Company holds collateral to support
those standby letters of credit and guarantees for which collateral is deemed
necessary.
Note 13 - Concentrations of Credit Risk
Credit risk represents the maximum accounting loss that would be
recognized at the reporting date if counterparties failed completely to
perform as contracted and any collateral or security proved to be of no
value. Concentrations of credit risk (whether on or off-balance sheet)
arising from financial instruments exist in relation to certain groups of
customers. A group concentration arises when a number of counterparties have
similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic or
other conditions. The Company does not have a significant concentration to
any individual customer or counterparty. The major concentrations of credit
risk for the company arise by collateral type in relation to loans and credit
commitments. The only significant concentration that exists is in loans
secured by real estate. At December 31, 1995 the Company had $15.4 billion in
loans and an additional $1.9 billion in commitments to extend credit for
loans secured by real estate. A geographic concentration arises because the
Company operates primarily in the southeastern region of the United States.
63
Note 14 - Fair Values of Financial Instruments
The following table presents the carrying amounts and fair values of the
Company's financial instruments at December 31, 1995 and 1994:
1995 1994
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
Financial assets:
Cash and short-term investments $3,969,559 $3,969,559 $3,591,767 $3,591,767
Trading account 96,613 96,613 98,110 98,110
Investment securities 9,676,934 9,676,934 9,318,521 9,318,521
Loans 31,301,389 31,937,748 28,548,887 28,317,927
Financial liabilities:
Deposits 33,183,194 33,245,721 32,218,416 32,193,724
Short-term borrowings 6,378,221 6,378,221 5,137,549 5,137,549
Long-term debt 1,002,397 1,022,962 930,447 890,041
Off-balance sheet financial instruments:
Interest rate swaps:
In a net receivable position 7,170 18,125
In a net payable position (6,806) (16,383)
Commitments to extend credit 8,758 6,837
Standby letters of credit 1,295 1,238
Other 2 22
The following methods and assumptions were used by the Company in
estimating the fair value of financial instruments.
Short-term financial instruments are valued at their carrying amounts
reported in the balance sheet, which are reasonable estimates of fair value
due to the relatively short period to maturity of the instruments. This
approach applies to cash and short-term investments, trading account assets,
short-term borrowings and certain other liabilities.
Investment securities and trading account assets are valued at quoted
market prices where available. If quoted market prices are not available,
fair values are based on quoted market prices of comparable instruments
except in the case of certain options and swaps where pricing models are
used.
Loans are valued on the basis of estimated future receipts of principal
and interest, discounted at rates currently being offered for loans with
similar terms and credit quality. Loan prepayments are assumed to occur at
the same rate as in previous periods when interest rates were at levels
similar to current levels. The fair values for certain mortgage loans and
credit card loans are based on quoted market prices of similar loans sold
in conjunction with securitization transactions, adjusted for differences
in loan characteristics. The carrying amount of accrued interest
approximates its fair value.
64
Deposit liabilities with no defined maturity such as demand deposits,
NOW/money market accounts and savings accounts have a fair value equal to
the amount payable on demand at the reporting date, i.e., their carrying
amounts. Fair values for certificates of deposit are estimated using a
discounted cash flow calculation that applies current interest rates to a
schedule of aggregated expected maturities. The intangible value of long-
term relationships with depositors is not taken into account in estimating
the fair values disclosed.
Fair values for long-term debt are based on quoted market prices for
similar instruments or estimated using discounted cash flow analyses and the
Company's current incremental borrowing rates for similar types of
instruments.
Fair values for off-balance-sheet instruments (futures, swaps, forwards,
options, guarantees, and lending commitments) are based on quoted market
prices, current settlement values, or pricing models or other formulas.
Note 15 - Lease Commitments
Minimum payments, by year and in aggregate, under capital leases and
noncancelable operating leases with initial or remaining terms in excess of
one year as of December 31, 1995 were as follows:
Capital Operating
Leases Leases
1996 $4,288 $45,441
1997 4,457 42,911
1998 4,474 41,016
1999 4,475 39,348
2000 4,220 31,572
Thereafter 51,795 189,265
Total minimum lease payments 73,709 $389,553
Amounts representing interest (44,173)
Present value of net minimum lease payments $29,536
Rental expense for all operating leases (including contingent rental expense
and reduced by sublease rental income, both of which were not significant)
amounted to $40.4 million, $41.5 million and $38.4 million for 1995, 1994 and
1993.
Note 16 - Contingencies
The Company and its subsidiaries are parties to numerous claims and lawsuits
arising in the course of their normal business activities, some of which
involve claims for substantial amounts. Although the ultimate outcome of
these suits cannot be ascertained at this time, it is the opinion of
management that none of these matters, when resolved, will have a material
effect on the Company's consolidated results of operations or financial
position.
The Company has $2.1 billion of deposits resulting from thrift
acquisitions that are insured through the Savings Association Insurance Fund
(SAIF). In 1996 these deposits maintain their $0.23 per $100 assessment,
though legislation has been proposed which would reduce the SAIF assessment
from $0.23 to $0.04 for well-capitalized institutions. The current
legislation, if enacted, would result in a one-time assessment of
approximately 80 basis points to be charged on 80% of SAIF deposits. Any
assessment will depend on enactment of final legislation.
65
Note 17 - SunTrust Banks, Inc. (Parent Company Only) Financial Information
Statements of Income
Year Ended December 31
(In thousands) 1995 1994 1993
OPERATING INCOME
From subsidiaries:
Dividends - substantially all from
banking subsidiaries $417,255 $330,318 $336,250
Service fees 46,649 41,327 41,263
Interest on loans 13,218 8,088 4,162
Other income 128 162 176
Other income 1,291 7,966 2,106
Total operating income 478,541 387,861 383,957
OPERATING EXPENSE
Interest on short-term borrowings 22,727 9,913 8,340
Interest on long-term debt 56,866 53,101 42,018
Salaries and employee benefits 39,972 27,957 26,358
Amortization of intangible assets 7,660 7,686 7,712
Service fees to subsidiaries 14,130 7,769 5,308
Other operating expense 30,758 26,404 11,952
Total operating expense 172,113 132,830 101,688
Income before income taxes and equity in
undistributed income of subsidiaries 306,428 255,031 282,269
Income tax benefit 56,365 23,499 9,174
Income before equity in undistributed income
of subsidiaries 362,793 278,530 291,443
Equity in undistributed income of subsidiaries 202,683 244,214 182,286
NET INCOME $565,476 $522,744 $473,729
66
BALANCE SHEETS
December 31
(Dollars in thousands) 1995 1994
ASSETS
Cash in subsidiary banks $12,777 $258
Interest-bearing deposits in banks 29,186 6,525
Loans to subsidiaries 268,390 171,135
Investment in capital stock of subsidiaries
stated on the basis of the Company's equity
in subsidiaries' capital accounts:
Banking subsidiaries 4,375,941 3,676,584
Nonbanking and holding company subsidiaries 658,304 480,520
Premises and equipment 21,648 14,530
Intangible assets 122,471 130,131
Other assets - Note 10 264,520 247,086
Total Assets $5,753,237 $4,726,769
LIABILITIES
Short-term borrowings from:
Subsidiaries $3,600 $8,582
Non-affiliated companies - Note 7 398,610 252,897
Long-term debt - Note 8 827,343 787,736
Other liabilities - Notes 9 and 10 254,103 224,223
Total Liabilities 1,483,656 1,273,438
SHAREHOLDERS' EQUITY - Note 11
Preferred stock, no par value; 50,000,000 shares
authorized; none issued - -
Common stock, $1.00 par value; 350,000,000
shares authorized(1) 130,461 130,461
Additional paid in capital 434,724 438,309
Retained earnings 3,417,801 3,020,985
Treasury stock and other(2) (871,953) (706,499)
Realized Shareholders' Equity 3,111,033 2,883,256
Unrealized gains on investment securities,
net of taxes 1,158,548 570,075
Total Shareholders' Equity 4,269,581 3,453,331
Total Liabilities and Shareholders' Equity $5,753,237 $4,726,769
(1) Common shares outstanding 113,193,839 115,679,426
(2) Treasury shares of common stock 17,266,805 14,781,218
67
STATEMENTS OF CASH FLOW
Year Ended December 31
(In thousands) 1995 1994 1993
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $565,476 $522,744 $473,729
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed income of subsidiaries (202,683) (251,532) (182,286)
Depreciation and amortization 10,658 9,869 15,225
Bond portfolio securities gains - (3) -
Deferred income tax benefit 19,918 4,917 11,012
Changes in period end balances of:
Prepaid expenses (31,511) (29,744) (26,936)
Other assets 468 (11,340) 413
Taxes payable 12,439 (8,732) 48,841
Interest payable (1,079) 1,387 202
Other accrued expenses 27,410 39,198 (16,178)
Net cash provided by operating activities 401,096 276,764 324,022
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of
investment securities 6,000 71 118,924
Purchase of investment securities (9) (111) (104,171)
Net change in loans to subsidiaries (97,255) 15,708 (72,381)
Proceeds from sale of premises and equipment - - 8
Net funds paid in acquisitions - - (69,827)
Capital expenditures (11,229) (6,758) (1,521)
Capital contributions to subsidiaries (90,355) (120,094) (6,198)
Other, net 15,264 87,100 (3,857)
Net cash used in investing activities (177,584) (24,084) (139,023)
CASH FLOW FROM FINANCING ACTIVITIES:
Net change in short-term borrowings 140,731 (40,292) 180,891
Proceeds from issuance of long-term debt 42,330 400,000 -
Repayment of long-term debt (2,723) (106,625) (22,570)
Proceeds from the exercise of stock options 4,814 4,023 4,502
Payments to acquire treasury stock (204,824) (348,540) (285,669)
Dividends paid (168,660) (157,116) (144,767)
Net cash used in financing activities (188,332) (248,550) (267,613)
Net increase (decrease) in cash and cash equivalents 35,180 4,130 (82,614)
Cash and cash equivalents at beginning of year 6,783 2,653 85,267
Cash and cash equivalents at end of year $41,963 $6,783 $2,653
SUPPLEMENTAL DISCLOSURE
Income taxes received from subsidiaries $322,440 $288,394 $266,695
Income taxes paid by Parent Company (253,228) (266,064) (250,170)
Net income taxes received by Parent Company $69,212 $22,330 $16,525
Interest paid $80,077 $60,993 $49,667
68
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of SunTrust Banks, Inc.
We have audited the accompanying consolidated balance sheets of SunTrust
Banks, Inc. (a Georgia corporation) and subsidiaries as of December 31,
1995 and 1994 and the related consolidated statements of income,
shareholders' equity and cash flow for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SunTrust
Banks, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flow for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 3 to the consolidated financial statements,
effective December 31, 1993, the Company changed its method of accounting
for investment securities.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 2, 1996
69
Corporate Headquarters Stock Trading
SunTrust Banks, Inc. SunTrust Banks, Inc. common stock is
303 Peachtree Street, N.E. traded on the New York Stock
Atlanta, Georgia 30308 Exchange under the symbol "STI".
(404) 588-7711
Shareholders of Record
Corporate Mailing Address SunTrust had 28,552 shareholders of
SunTrust Banks, Inc. record as of December 31, 1994.
P.O. Box 4418
Atlanta, Georgia 30302-4418 Financial Information
Analysts, investors, news media and
Notice of Annual Meeting others seeking financial information
The Annual Meeting of Shareholders should contact:
will be held on Tuesday, April 16,
1996, at 9:30 a.m. in Room 10 of James C. Armstrong
the SunTrust Bank, Atlanta Tower (404) 588-7425
at 25 Park Place, Atlanta or
Margaret L. Fisher
Shareholder Services (404) 586-6416
Shareholders desiring to change the
name, address, or ownership of stock, Independent Public Accountants
to report lost certificates, or to Arthur Andersen & Co.
consolidate accounts, should Atlanta, Georgia
contact the Transfer Agent:
Corporate Counsel
SunTrust Bank, Atlanta King & Spalding
P. O. Box 4625 Atlanta, Georgia
Atlanta, Georgia 30302-4625
(404) 588-7815
(800) 568-3476 SunTrust and its subsidiaries are
Equal Opportunity Employers.
Dividend Reinvestment
SunTrust offers a Dividend Banks in the SunTrust group are
Reinvestment Plan for automatic members of the Federal Deposit
reinvestment of dividends in the Insurance Corporation.
stock of the Company. For details of
the Plan, including an authorization
form, call (404) 588-7822 or
(404) 588-7822 or write to:
Corporate Trust Department
SunTrust Bank Atlanta
P.O. Box 4625
Atlanta, Georgia 30302-4625
70