FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1996
Commission File Number 1-8918
SUNTRUST BANKS, INC.
(Exact name of registrant as specified in its charter)
Georgia 58-1575035
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
25 Park Place, N.E., Atlanta, Georgia 30303
(Address of principal executive offices) (Zip Code)
(404) 588-7711
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes __X__ No _____
At April 30, 1996, 112,526,906 shares of the Registrant's Common Stock, $1.00
par value were outstanding.
PAGE 1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statement Description Page No.
Consolidated Statements of Income
Three months ended March 31, 1996 and 1995 4
Consolidated Balance Sheets
March 31, 1996, December 31, 1995 and March 5
31, 1995
Consolidated Statements of Cash Flow
Three months ended March 31, 1996 and 1995 6
Consolidated Statements of Shareholders' Equity
Three months ended March 31, 1996 and 1995 7
The above mentioned financial statements have been prepared in accordance
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and
accordingly do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
However, in the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three months ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the full year
1996.
Fully diluted per common share data have not been presented because there
were no material differences between such amounts and the per common share
data as presented. Earnings per common share were based on the weighted
average common equivalent shares outstanding for the periods presented.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
MD&A of the Registrant is included on pages 9 through 20.
PAGE 2
CONSOLIDATED STATEMENTS OF INCOME
Three Months
Ended March 31
(Dollars in thousands except per share data)<F1> 1996 1995
Interest Income
Interest and fees on loans $ 646,405 $ 594,973
Interest and dividends on investment securities
Taxable interest 103,854 101,768
Tax-exempt interest 12,237 14,475
Dividends (1) 8,089 6,665
Interest on funds sold 8,970 7,655
Interest on deposits in other banks 261 305
Other interest 706 684
Total interest income 780,522 726,525
Interest Expense
Interest on deposits 267,880 235,908
Interest on funds purchased 55,884 50,908
Interest on other short-term borrowings 15,264 11,438
Interest on long-term debt 18,296 16,394
Total interest expense 357,324 314,648
Net Interest Income 423,198 411,877
Provision for loan losses 25,028 25,469
Net interest income after provision for loan losses 398,170 386,408
Noninterest Income
Trust income 70,672 65,130
Service charges on deposit accounts 55,705 53,844
Other charges and fees 38,110 28,228
Credit card fees 17,017 16,206
Securities gains (losses) 17,262 (343)
Other noninterest income 14,910 13,818
Total noninterest income 213,676 176,883
Noninterest Expense
Salaries and other compensation 180,830 162,419
Employee benefits 29,424 28,511
Net occupancy expense 33,683 31,467
Equipment expense 27,516 26,495
FDIC premiums 1,207 16,506
Marketing and community relations 15,245 13,952
Postage and delivery 10,019 9,466
Other noninterest expense 103,091 69,290
Total noninterest expense 401,015 358,106
Income before income taxes 210,831 205,185
Provision for income taxes 60,412 69,149
Net Income $ 150,419 $ 136,036
Average common equivalent shares 113,060,358 115,543,050
Net income per average common share $ 1.33 $ 1.18
Dividends declared per common share 0.40 0.36
(1) Includes dividends on common stock of
The Coca-Cola Company 6,033 5,309
<FN>
<F1>See notes to consolidated financial statements
PAGE 3
CONSOLIDATED BALANCE SHEETS
March 31 December 31 March 31
(Dollars in thousands)<F1> 1996 1995 1995
Assets
Cash and due from banks $ 2,362,603 $ 2,641,365 $ 2,219,672
Interest-bearing deposits in other banks 22,487 28,787 11,074
Trading account 78,305 96,613 52,504
Investment securities (1) 10,239,617 9,676,934 9,410,153
Funds sold 529,295 1,299,407 646,443
Loans 31,786,084 31,301,389 29,234,686
Reserve for loan losses (712,447) (698,864) (660,985)
Net loans 31,073,637 30,602,525 28,573,701
Premises and equipment 735,183 729,731 719,498
Intangible assets 280,011 271,926 232,646
Customers' acceptance liability 371,027 234,809 44,723
Other assets 893,234 889,375 849,732
Total assets $ 46,585,399 $ 46,471,472 $ 42,760,146
Liabilities
Noninterest-bearing deposits $ 7,362,086 $ 7,821,377 $ 7,140,499
Interest-bearing deposits 27,115,258 25,361,817 24,133,572
Total deposits 34,477,344 33,183,194 31,274,071
Funds purchased 3,897,189 5,483,751 4,991,016
Other short-term borrowings 823,922 894,470 789,673
Long-term debt 1,103,852 1,002,397 930,142
Acceptances outstanding 371,027 234,809 44,723
Other liabilities 1,496,832 1,403,270 1,029,636
Total liabilities 42,170,166 42,201,891 39,059,261
Shareholders' Equity
Preferred stock, no par value; 50,000,000 shares
authorized; none issued - - -
Common stock, $1.00 par value; 350,000,000
shares authorized (2) 130,461 130,461 130,461
Additional paid in capital 434,582 434,724 437,621
Retained earnings 3,523,040 3,417,801 3,115,515
Treasury stock and other (3) (922,469) (871,953) (733,900)
Realized shareholders' equity 3,165,614 3,111,033 2,949,697
Unrealized gains (losses) on investment
securities, net of taxes 1,249,619 1,158,548 751,188
Total shareholders' equity 4,415,233 4,269,581 3,700,885
Total liabilities and shareholders'
equity $ 46,585,399 $ 46,471,472 $ 42,760,146
(1) Includes unrealized gains (losses) on
investment securities $ 2,019,446 $ 1,873,141 $ 1,211,713
(2) Common shares outstanding 112,724,889 113,193,839 115,322,830
(3) Treasury shares of common stock 17,735,755 17,266,805 15,137,814
<FN>
<F1>See notes to consolidated financial statements.
PAGE 4
CONSOLIDATED STATEMENTS OF CASH FLOW
Three Months
Ended March 31
(In thousands)<F1> 1996 1995
Cash flow from operating activities:
Net income $ 150,419 $ 136,036
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 31,138 32,332
Provision for loan losses 25,030 25,470
Provision for losses on other real estate 1,033 847
Amortization of compensation element of
restricted stock 2,111 1,522
Securities (gains) and losses, net (17,262) 344
(Gains) and losses on sale of equipment, other
real estate and repossessed assets, net (5,112) (3,933)
Recognition of unearned loan income (46,515) (20,334)
Change in period-end balances of:
Trading account 18,308 45,606
Interest receivable 2,741 358
Prepaid expenses (21,766) (21,738)
Other assets 14,181 (25,333)
Taxes payable 45,833 64,508
Interest payable (29,384) (5,589)
Other accrued expenses 27,197 (64,799)
Net cash provided by operating activities 197,952 165,297
Cash flow from investing activities:
Proceeds from maturities of investment securities 519,494 278,462
Proceeds from sales of investment securities 54,224 79,348
Purchase of investment securities (962,424) (157,966)
Net (increase) decrease in loans (379,640) (681,948)
Capital expenditures (26,256) (29,178)
Proceeds from sale of equipment, other real estate
and repossessed assets 1,128 12,584
Net inflow (outflow) from bank acquisitions (1,207) 0
Other (5,921) (514)
Net cash provided(used) by investing activities (800,602) (499,212)
Cash flow from financing activities:
Net increase (decrease) in deposits 1,215,771 (944,345)
Net increase (decrease) in funds purchased and
other short-term borrowings (1,660,017) 643,140
Proceeds from the issuance of long-term debt 200,355 2,040
Repayment of long-term debt (98,872) (2,345)
Proceeds from the exercise of stock options 1,989 1,400
Payments to acquire treasury stock (66,599) (39,047)
Dividends paid (45,151) (41,506)
Net cash provided by financing activities (452,524) (380,663)
Net decrease in cash and cash equivalents (1,055,174) (714,578)
Cash and cash equivalents at beginning of period 3,969,559 3,591,767
Cash and cash equivalents at end of period $2,914,385 $2,877,189
Supplemental Disclosure
Interest paid $ 327,940 $ 320,237
Taxes paid 15,709 12,413
<FN>
<F1>See notes to consolidated financial statements.
PAGE 5
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Unrealized
Additional Treasury Gains (Losses)
Common Paid in Retained Stock and on Securities
(In thousands)<F1> Stock Capital Earnings Other<F2> Net of Taxes Total
Balance, January 1, 1995 $ 130,461 $ 438,309 $ 3,020,985 $ (706,499) $ 570,075 $ 3,453,331
Net income - - 136,036 - - 136,036
Cash dividends declared on common
stock, $0.36 per share - - (41,506) - - (41,506)
Proceeds from exercise of stock options - (2,584) - 3,984 - 1,400
Acquisition of treasury stock - - - (39,047) - (39,047)
Issuance of treasury stock for 401(k) - 722 - 7,314 - 8,036)
Issuance, net of forfeitures, of treasury
stock as restricted stock - 1,174 - 6,748 - 7,922
Compensation element of restricted stock - - - (7,922) - (7,922)
Amortization of compensation element
of restricted stock - - - 1,522 - 1,522
Change in unrealized gains (losses)
on securities, net of taxes - - - - 181,113 181,113
Balance, March 31, 1995 $ 130,461 $ 437,621 $ 3,115,515 $ (733,900) $ 751,188 $ 3,700,885
Balance, January 1, 1996 $ 130,461 $ 434,724 $ 3,417,801 $ (871,953) $ 1,158,548 $ 4,269,581
Net income - - 150,419 - - 150,419
Cash dividends declared on common
stock, $0.40 per share - - (45,180) - - (45,180)
Proceeds from exercise of stock options - (5,459) - 7,448 - 1,989
Acquisition of treasury stock - - - (66,599) - (66,599)
Issuance of treasury stock for 401(k) - 1,794 - 4,411 - 6,205
Issuance, net of forfeitures, of treasury
stock as restricted stock - 3,523 - 6,338 - 9,861
Issuance of treasury stock for acquisition - - - 5,636 - 5,636
Compensation element of restricted stock - - - (9,861) - (9,861)
Amortization of compensation element
of restricted stock - - - 2,111 - 2,111
Change in unrealized gains (losses)
on securities, net of taxes - - - - 91,071 91,071
Balance, March 31, 1996 $ 130,461 $ 434,582 $ 3,523,040 $ (922,469) $ 1,249,619 $ 4,415,233
<FN>
<F1>See notes to consolidated financial statements.
<F2>* Balance at March 31, 1996 includes $873,767 for Treasury Stock and $48,702 for Deferred Compensation.
PAGE 6
Notes to Consolidated Financial Statements
Note 1 - Accounting Policies
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated. These financial statements should be read in conjunction
with the Company's annual financial statements and related notes for the year
ended December 31, 1995.
PAGE 7
TABLE 1 - SELECTED QUARTERLY FINANCIAL DATA
(Dollars in millions except per share data)
Quarters
1996 1995
1 4 3 2 1
Summary of Operations
Interest and dividend income $ 780.5 $ 782.4 $ 759.9 $ 758.4 $ 726.5
Interest expense 357.3 350.2 342.0 343.9 314.7
Net interest income 423.2 432.2 417.9 414.5 411.8
Provision for loan losses 25.0 31.3 29.1 26.2 25.5
Net interest income after provision
for loan losses 398.2 400.9 388.8 388.3 386.3
Noninterest income 213.7 179.4 182.6 174.2 176.9
Noninterest expense 401.0 380.6 363.1 349.7 358.1
Income before provision for income taxes 210.9 199.7 208.3 212.8 205.1
Provision for income taxes 60.5 54.8 64.6 71.9 69.1
Net income $ 150.4 $ 144.9 $ 143.7 $ 140.9 $ 136.0
Per common share
Net income $ 1.33 $ 1.28 $ 1.26 $ 1.22 $ 1.18
Dividends declared 0.40 0.40 0.36 0.36 0.36
Book value 39.17 37.72 35.81 34.76 32.09
Common stock market price
High 76 7/8 70 7/8 67 3/4 59 7/8 55 3/8
Low 64 63 3/8 57 53 1/8 47 1/4
Close 70 68 1/2 66 1/8 58 1/4 53 1/2
Selected Average Balances
Total assets $45,641.9 $44,616.4 $43,072.4 $42,762.2 $41,808.4
Earning assets 40,114.0 39,391.9 38,198.8 38,344.3 37,653.9
Loans 31,437.9 30,688.7 29,771.1 29,582.1 28,773.8
Total deposits 33,081.9 31,925.4 31,516.5 31,852.5 31,943.7
Realized shareholders' equity 3,206.8 3,081.8 3,092.9 3,043.8 2,989.1
Total shareholders' equity 4,405.3 4,163.4 4,090.3 3,797.4 3,561.2
Common equivalent shares (thousands) 113,060 113,149 114,088 115,090 115,543
Financial Ratios and Other
ROA<F1> 1.38 % 1.34 % 1.38 % 1.36 % 1.35 %
ROE<F1> 18.87 18.65 18.43 18.56 18.46
Net interest margin<F1> 4.35 4.47 4.47 4.47 4.58
Net interest income - taxable-equivalent $ 433.7 $ 443.9 $ 430.1 $ 427.1 $ 424.9
<FN>
<F1>ROA, ROE and net interest margin are calculated excluding unrealized gains
on investment securities because the unrealized gains are not included in
income.
The following is an analysis of the financial performance of SunTrust Banks,
Inc. (SunTrust or Company) for the first quarter of 1996 and provides
comments on earlier periods. In this discussion net interest income and net
interest margin are presented on a taxable-equivalent basis. Also all ratios
are presented on an annualized basis.
PAGE 8
TABLE 2A - CONSOLIDATED DAILY AVERAGE BALANCES, INCOME/EXPENSE AND AVERAGE
YIELDS EARNED AND RATES PAID
(Dollars in millions; yields on a taxable-equivalent basis)
Quarter Ended
March 31, 1996 December 31, 1995 September 30, 1995
Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/
Balances Expense Rates Balances Expense Rates Balances Expense Rates
Assets
Loans<F1>
Taxable $30,805.7 $637.4 8.32 % $30,033.9 $638.9 8.44 % $29,116.9 $622.5 8.48 %
Tax-exempt<F2> 632.2 13.5 8.57 654.8 14.8 9.02 654.2 15.3 9.29
Total loans 31,437.9 650.9 8.33 30,688.7 653.7 8.45 29,771.1 637.8 8.50
Investment securities:
Taxable 7,131.0 112.1 6.32 7,029.8 108.7 6.14 7,081.7 106.8 5.98
Tax-exempt<F2> 810.4 18.0 8.95 836.9 19.2 9.11 870.3 20.4 9.30
Total investment securities 7,941.4 130.1 6.59 7,866.7 127.9 6.45 7,952.0 127.2 6.35
Funds sold 668.7 9.0 5.40 735.9 11.0 5.88 422.0 6.3 5.96
Other short-term investments<F2> 66.0 1.0 6.00 100.6 1.5 5.61 53.7 0.8 5.57
Total earning assets 40,114.0 791.0 7.93 39,391.9 794.1 8.00 38,198.8 772.1 8.02
Reserve for loan losses (704.9) (695.8) (684.2)
Cash and due from banks 2,216.2 2,221.3 2,033.7
Premises and equipment 732.6 722.9 724.3
Other assets 1,349.0 1,227.2 1,186.7
Unrealized gains(losses) on
investment securities 1,935.0 1,748.9 1,613.1
Total assets $45,641.9 $44,616.4 $43,072.4
Liabilities and Shareholders' Equity
Interest-bearing deposits:
NOW/Money market accounts $10,056.4 $72.6 2.90 % $9,544.2 $64.1 2.66 % $9,329.7 $63.0 2.68 %
Savings 4,705.7 44.1 3.77 3,469.9 22.1 2.54 3,552.2 23.0 2.57
Consumer time 7,719.8 101.4 5.28 8,007.2 109.4 5.42 8,078.0 111.0 5.45
Other time<F3> 3,557.7 49.8 5.63 3,824.6 54.0 5.61 3,792.9 54.4 5.69
Total interest-bearing deposits 26,039.6 267.9 4.14 24,845.9 249.6 3.99 24,752.8 251.4 4.03
Funds purchased 4,351.5 55.9 5.17 4,925.5 68.8 5.54 4,148.0 58.8 5.62
Other short-term borrowings 1,062.4 15.2 5.78 998.0 14.1 5.56 949.6 14.8 6.19
Long-term debt 1,063.0 18.3 6.92 1,010.1 17.7 6.97 957.1 17.0 7.06
Total interest-bearing liabilities 32,516.5 357.3 4.42 31,779.5 350.2 4.37 30,807.5 342.0 4.40
Noninterest-bearing deposits 7,042.3 7,079.5 6,763.7
Other liabilities 1,677.8 1,594.0 1,410.9
Realized shareholders' equity 3,206.8 3,081.8 3,092.9
Net unrealized gains(losses)
on investment securities 1,198.5 1,081.6 997.4
Total liabilities and
shareholders' equity $45,641.9 $44,616.4 $43,072.4
Interest Rate Spread 3.51 % 3.63 % 3.62 %
Net Interest Income $433.7 $443.9 $430.1
Net Interest Margin 4.35 % 4.47 % 4.47 %
<FN>
<F1>Interest income includes loan fees of $21.8, $21.9, $22.9, $21.3 and
$20.5 in the quarters ended March 31, 1996, and December 31, September 30,
June 30, and March 31, 1995. Nonaccrual loans are included in average
balances and income on such loans, if recognized, is recorded on a cash
basis.
<F2>Interest income includes the effects of taxable-equivalent adjustments
(reduced by the nondeductible portion of interest expense) using a federal
income tax rate of 35%, and, where applicable, state income taxes, to
increase tax-exempt interest income to a taxable-equivalent basis. The net
taxable-equivalent adjustment amounts included in the above table
aggregated $10.5, $11.7, $12.2, $12.6 and $13.1 in the quarters ended
March 31, 1996, and December 31, September 30, June 30, and March 31,
1995.
<F3>Interest rate swap transactions used to help balance the Company's
interest-sensitivity position increased interest expense by $0.3 in the
quarter ended March 31, 1996 and reduced interest expense by $1.2, $1.5,
$3.0 and $4.4 in the quarters ended December 31, September 30, June 30,
and March 31, 1995. Without these swaps, the rate on other time deposits
and the net interest margin would have been 5.58% and 4.34%, 5.73% and
4.46%, 5.84% and 4.45%, 5.92% and 4.44%, and 5.61% and 4.53%,
respectively.
PAGE 9
TABLE 2b - CONSOLIDATED DAILY AVERAGE BALANCES, INCOME/EXPENSE AND AVERAGE
YIELDS EARNED AND RATES PAID
(Dollars in millions; yields on a taxable-equivalent basis)
Quarter Ended
June 30, 1995 March 31, 1995
Average Income/ Yields/ Average Income/ Yields/
Balances Expense Rates Balances Expense Rates
Assets
Loans<F1>
Taxable $28,886.4 $615.8 8.55 % $28,052.5 $584.3 8.45 %
Tax-exempt<F2> 695.7 15.2 8.76 721.3 16.5 9.26
Total loans 29,582.1 631.0 8.56 28,773.8 600.8 8.47
Investment securities:
Taxable 7,185.0 107.8 6.02 7,379.5 108.6 5.97
Tax-exempt<F2> 875.0 21.6 9.90 913.5 21.5 9.54
Total investment securities 8,060.0 129.4 6.44 8,293.0 130.1 6.36
Funds sold 655.0 9.9 6.09 516.1 7.7 6.02
Other short-term investments<F2> 47.2 0.7 5.98 71.0 1.0 6.14
Total earning assets 38,344.3 771.0 8.07 37,653.9 739.6 7.97
Reserve for loan losses (668.2) (654.5)
Cash and due from banks 2,078.0 2,124.4
Premises and equipment 720.7 718.1
Other assets 1,068.4 1,043.0
Unrealized gains(losses) on
investment securities 1,219.0 923.5
Total assets $42,762.2 $41,808.4
Liabilities and Shareholders' Equity
Interest-bearing deposits:
NOW/Money market accounts $9,359.3 $65.5 2.81 % $9,467.4 $ 64.9 2.78 %
Savings 3,637.3 24.4 2.70 3,822.5 25.7 2.73
Consumer time 7,927.4 105.5 5.33 7,479.6 90.5 4.91
Other time<F3> 4,018.2 56.3 5.62 4,283.5 54.8 5.19
Total interest-bearing deposits 24,942.2 251.7 4.05 25,053.0 235.9 3.82
Funds purchased 4,167.7 60.7 5.84 3,661.1 50.9 5.64
Other short-term borrowings 914.3 14.6 6.40 808.0 11.4 5.74
Long-term debt 943.0 16.9 7.21 930.1 16.4 7.15
Total interest-bearing liabilities 30,967.2 343.9 4.45 30,452.2 314.6 4.19
Noninterest-bearing deposits 6,910.3 6,890.7
Other liabilities 1,087.3 904.3
Realized shareholders' equity 3,043.8 2,989.1
Net unrealized gains(losses)
on investment securities 753.6 572.1
Total liabilities and
shareholders' equity $42,762.2 $41,808.4
Interest rate spread 3.62 % 3.78 %
Net Interest Income $427.1 $425.0
Net Interest Margin 4.47 % 4.58 %
<FN>
<F1>See note <F1> on table 2A.
<F2>See note <F2> on table 2A.
<F3>See note <F3> on table 2A.
PAGE 10
Net Interest Income/Margins. The Company's net interest margin of 4.35% for
the first quarter of 1996 was 23 and 12 basis points lower than the first
quarter and fourth quarter of last year, respectively. The Company
introduced a new money market deposit account in the first quarter of 1996
that carried a higher than market interest rate until April of 1996. This led
to a 15 basis point increase in the cost of interest-bearing deposits
compared to the fourth quarter of last year. Interest rate swaps also helped
increase last year's net interest margin (see the discussion entitled
"Derivitaves" on page 17).
Interest income which the Company was unable to recognize on nonperforming
loans in the first three months of 1996 had a negative impact of 3 basis
points on the net interest margin as compared to 4 basis points in the first
three months 1995. Table 2 contains more detailed information concerning
average balances and interest yields earned and rates paid.
Noninterest Income. Noninterest income in the first three months of 1996,
adjusted to exclude the effect of securities gains (losses), increased 10.8%
from the comparable period a year ago. Trust income, the Company's largest
source of noninterest income, increased 8.5% over the same period. Securities
gains includes a $16 million gain on the sale of a long-held minority
position in another bank. Other charges and fees were 35.0% higher in the
first quarter of this year compared to the same period last year due to
higher volume in our mortgage banking business. Credit card fees also
increased 5.0%.
TABLE 3 - NONINTEREST INCOME
(In millions)
Quarters
1996 1995
1 4 3 2 1
Trust income $ 70.7 $ 64.6 $ 64.7 $ 65.3 $ 65.1
Service charges on deposit accounts 55.7 54.5 54.0 50.5 53.8
Mutual fund commissions 3.1 2.9 2.1 2.5 2.0
Other charges and fees 35.0 33.3 29.9 27.1 26.2
Credit card fees 17.0 15.6 15.1 15.7 16.2
Securities gains (losses) 17.3 (7.2) 1.0 (0.1) (0.3)
Trading account profits and commissions 2.6 3.3 2.5 2.4 2.4
Other income 12.3 12.4 13.3 10.8 11.5
Total noninterest income $213.7 $179.4 $182.6 $174.2 $176.9
Noninterest Expense. Noninterest expense increased 12.0% in the first
quarter of 1996 compared to the same period last year. Personnel expense,
consisting of salaries, other compensation and employee benefits, increased
10.1% over the aforementioned period. Other noninterest expense increased
substantially in the first quarter of 1996 due to expenditures made in
connection with various projects to stimulate business growth and
development.
PAGE 11
TABLE 4 - NONINTEREST EXPENSE
(In millions)
Quarters
1996 1995
1 4 3 2 1
Salaries $151.7 $149.7 $144.8 $143.1 $140.5
Other compensation 29.1 27.0 25.3 21.1 21.9
Employee benefits 29.4 27.2 25.1 24.8 28.5
Net occupancy expense 33.7 33.2 33.6 31.8 31.5
Equipment expense 27.5 26.4 25.7 26.5 26.5
FDIC premiums 1.2 3.9 (0.6) 16.6 16.5
Marketing and community relations 15.2 12.4 10.3 13.3 14.0
Postage and delivery 10.0 9.3 8.8 8.8 9.5
Operating supplies 9.7 8.5 8.1 7.7 7.9
Other real estate expense 0.8 (3.9) (1.1) (2.3) (1.7)
Communications 7.7 6.6 7.3 7.1 6.7
Consulting and legal 5.1 5.0 5.5 5.5 4.8
Amortization of intangible assets 6.1 6.0 5.4 5.0 5.0
Other expense 73.8 69.3 64.9 40.7 46.5
Total noninterest expense $401.0 $380.6 $363.1 $349.7 $358.1
Efficiency ratio 62.0 % 61.1 % 59.3 % 58.2 % 59.5 %
Provision for Loan Losses. As a result of improving credit quality, the
Company lowered its provision for loan losses in the first quarter of 1996 to
$25.0 million from $25.5 million in the same period last year, yet the
provision still exceeded net charge-offs by $12.3 million. Net loan charge-
offs were $12.7 million in the first three months of this year, representing
0.16% of average loans. The comparable net charge-off amount in 1995 was
$11.5 million or 0.16% of average loans. Consumer loan charge-offs increased
slightly yet remain low compared to historical standards.
The Company maintains a reserve for loan losses to absorb possible
losses in the loan portfolio. The reserve consists of three elements; (i)
reserves established on specific loans, (ii) reserves based on historical
loan loss experience, and (iii) reserves based on economic conditions in the
Company's individual markets. The specific reserve element is based on a
regular analysis of all loans and commitments over a fixed dollar amount
where the internal credit rating is at or below a pre-determined
classification. The historical loan loss element represents a projection of
future credit problems and is determined statistically using a loss migration
analysis that examines loss experience and the related internal gradings of
loans charged-off. The general economic condition element is determined by
management at the individual subsidiary banks and is based on a subjective
evaluation of specific economic factors in their markets that might affect
the collectibility of loans. SunTrust is committed to the early recognition
of possible problems and to a strong, conservative reserve.
The Company's reserve for loan losses totaled $712.4 million at March
31, 1996, which was 2.24% of quarter-end loans and 373.8% of total
nonperforming loans. These ratios at December 31, 1995 were 2.23% and 363.6%
and at March 31, 1995 were 2.26% and 355.0%.
PAGE 12
TABLE 5 - SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in millions)
Quarters
1996 1995
1 4 3 2 1
Reserve for Loan Losses
Balances - beginning of quarter $698.9 $692.8 $676.9 $661.0 $647.0
Reserve of purchased banks 1.2 3.9 0.7 1.7
Provision for loan losses 25.0 31.3 29.1 26.2 25.5
Charge-offs:
Domestic:
Commercial (4.4) (13.1) (4.0) (5.0) (7.6)
Real estate:
Construction (0.1) (0.1) (0.1) (0.2)
Mortgage, 1-4 family (1.4) (1.8) (2.3) (1.5) (1.5)
Other (0.9) (6.3) (3.9) (4.0) (2.1)
Lease financing (0.3) (0.3) (0.2) (0.2) (0.2)
Credit card (9.0) (7.5) (6.8) (6.8) (6.6)
Other consumer loans (10.5) (11.8) (10.0) (8.0) (8.9)
International
Total charge-offs (26.6) (40.9) (27.3) (25.7) (26.9)
Recoveries:
Domestic:
Commercial 4.2 3.8 3.2 7.4 5.6
Real estate:
Construction 0.1 0.3 1.9 (1.6) 0.2
Mortgage, 1-4 family 0.3 0.4 0.2 0.5 0.4
Other 2.7 1.0 1.4 1.5 1.6
Lease financing 0.1 0.1 0.2 0.1 0.1
Credit card 1.8 1.7 2.0 1.8 1.8
Other consumer loans 4.7 4.5 4.3 4.0 5.3
International 0.2 0.4
Total recoveries 13.9 11.8 13.4 13.7 15.4
Net charge-offs (12.7) (29.1) (13.9) (12.0) (11.5)
Balance - end of quarter $712.4 $698.9 $692.8 $676.9 $661.0
Quarter-end loans outstanding:
Domestic $31,517.2 $30,966.0 $29,702.6 $29,802.3 $28,981.4
International 268.9 335.4 298.2 277.6 253.3
Total $31,786.1 $31,301.4 $30,000.8 $30,079.9 $29,234.7
Ratio of reserve to quarter-end loan 2.24 % 2.23 % 2.31 % 2.25 % 2.26 %
Average loans $31,437.9 $30,688.7 $29,771.1 $29,582.1 $28,773.8
Ratio of net charge-offs (annualized)
to average loans 0.16 % 0.38 % 0.18 % 0.16 % 0.16 %
PAGE 13
TABLE 6 - NONPERFORMING ASSETS
(Dollars in millions)
1996 1995
March 31 December 31 September 30 June 30 March 31
Nonperforming Assets
Nonaccrual loans:
Domestic:
Commercial $36.0 $28.3 $27.6 $28.7 $31.4
Real Estate:
Construction 4.7 4.9 6.9 11.3 13.9
Mortgage, 1-4 family 50.6 45.7 44.2 43.5 42.6
Other 86.9 99.3 84.0 85.3 83.1
Lease financing 0.2 0.1 - 0.2 0.2
Consumer loans 9.3 11.0 11.6 10.4 10.7
Total nonaccrual loans 187.7 189.3 174.3 179.4 181.9
Restructured loans 2.9 2.9 3.0 3.2 4.3
Total nonperforming loans 190.6 192.2 177.3 182.6 186.2
Other real estate owned 58.8 58.8 66.2 70.1 83.8
Total Nonperforming Assets $249.4 $251.0 $243.5 $252.7 $270.0
Ratios:
Nonperforming loans to total loans 0.60 % 0.61 % 0.59 % 0.61 % 0.64 %
Nonperforming assets to total loans
plus other real estate owned 0.78 0.80 0.81 0.84 0.92
Reserve to nonperforming loans 373.78 363.60 390.78 370.61 354.95
Accruing Loans Past Due 90 Days or More $26.0 $24.3 $26.0 $19.0 $19.5
Nonperforming Assets. Nonperforming assets consist of nonaccrual and
restructured loans and other real estate owned. Nonperforming assets have
decreased $1.6 million since December 31, 1995 and $20.6 million since March
31, 1995. Included in nonperforming loans at March 31, 1996 are loans
aggregating $24.4 million which are current as to the payment of principal
and interest but have been placed in nonperforming status because of
uncertainty over the borrowers' ability to make future payments. In
management's opinion, all material potential problem loans are included in
Table 6.
Interest income on nonaccrual loans, if recognized, is recorded on a cash
basis. During the first three months of 1996, the gross amount of interest
income that would have been recorded on nonaccrual loans and restructured
loans at March 31, 1996, if all such loans had been accruing interest at the
original contractual rate, was $4.9 million. Interest income recognized in
the three months ended March 31, 1996 on all such nonperforming loans at
March 31, 1996, was $2.2 million.
PAGE 14
Table 7 - Loan Portfolio by Types of Loans (in millions)
1996 1995
March 31 December 31 September 30 June 30 March 31
Commercial:
Domestic $10,449.4 $10,222.5 $9,374.4 $9,931.3 $ 9,596.6
International 270.5 337.5 299.6 298.0 287.0
Real estate:
Construction 1,239.3 1,216.6 1,176.6 1,151.0 1,115.5
Mortgage, 1-4 family 10,087.9 9,732.8 9,431.4 9,054.0 8,698.1
Other 4,526.9 4,477.7 4,567.4 4,579.3 4,557.9
Lease financing 565.2 561.2 507.6 487.5 459.6
Credit card 732.0 774.0 713.9 671.7 655.2
Other consumer loans 3,914.9 3,979.1 3,929.9 3,907.1 3,864.8
Loans $31,786.1 $31,301.4 $30,000.8 $30,079.9 $29,234.7
Loans. During the first three months of 1996, average loans increased 9.3%
over the same period a year ago. Since December 31, 1995, the two loan
categories experiencing significant growth were 1-4 family residential
mortgage loans (most of which are variable rate loans) and domestic
commercial loans. The average loan to deposit ratio was 95.0% in the first
quarter of 1996 compared with 90.1% in the same period of 1995.
At March 31, 1996, international outstandings, which include loans,
acceptances, deposits in other banks, foreign guarantees and accrued
interest, net of write-downs totaled $319.5 million, a decrease of 19.5% from
$396.8 million at December 31, 1995.
Income Taxes. The provision for income taxes was $60.5 million in the first
quarter of 1996 compared to $69.1 million in the same period last year.
Investment Securities. The investment portfolio continues to be managed to
maximize yield over an entire interest rate cycle while providing liquidity
and minimizing risk. The portfolio yield increased from an average of 6.36%
in the first quarter of 1995 to 6.59% in the first quarter of this year. The
portfolio size (measured at cost) held steady at $8.2 billion while the
growth in liabilities was used to fund loan growth. The average life of the
portfolio was approximately 2.8 years at March 31, 1996; however, adjustable-
rate securities in the portfolio reduced the average time to repricing to 1.9
years. At March 31, 1996, approximately 31.9% of the portfolio consisted of
U.S. Treasury securities, 10.7% U.S. government agency securities, 46.8%
mortgage-backed securities, 10.0% municipal securities, and 0.6% in other
securities (calculated as a percent of total par value). All of the Company's
holdings in mortgage-backed securities are backed by U.S. government or
federal agency guarantees limiting the credit risk associated with the
mortgage loans. At March 31, 1996, the carrying value of the securities
portfolio was $2.0 billion over its amortized cost, consisting entirely of a
$2.0 billion unrealized gain on the Company's investment in common stock of
The Coca-Cola Company.
PAGE 15
Liquidity Management. Liquidity is managed to ensure there is sufficient
cash flow to satisfy demand for credit, deposit withdrawals and other
attractive market opportunities. A large, stable core deposit base, strong
capital position and excellent credit ratings are the solid foundation for
the Company's liquidity position. It is enhanced by an investment portfolio
structured to provide liquidity as needed, which occurred in 1994 and 1995
when loan demand exceeded deposit growth. Liquidity is also strengthened by
ready access to regional and national wholesale funding sources including fed
funds purchased, securities sold under agreements to repurchase, negotiable
certificates of deposit and offshore deposits, as well as an active bank
deposit note program, commercial paper issuance by the Parent Company, and
Federal Home Loan Bank (FHLB) advances for several subsidiary banks who are
FHLB members.
Average total deposits for the first three months of 1996 increased 3.6%
over the same period a year ago. Interest-bearing deposits represented 78.7%
of average deposits for the first three months of 1996, compared to 78.4% for
the same period in 1995. In the first quarter of 1996, average net purchased
funds (average funds purchased less average funds sold) increased $0.5
billion over the same period in 1995. Net purchased funds were 9.2% of
average earning assets for the first three months of 1996 as compared to 8.4%
in the same period a year ago.
Derivatives. The Company enters into various derivatives contracts in a
dealer capacity for customers and in managing its own interest rate risk.
Where contracts have been created for customers, the Company enters into
offsetting positions to eliminate its exposure to market risk. The principal
derivative contract used by the Company is the interest rate swap. Interest
rate swaps are contracts in which a series of interest rate flows, based on a
specific notional amount and a fixed and floating interest rate, are
exchanged over a prescribed period. The Company also monitors its sensitivity
to changes in interest rates and uses interest rate swap contracts to limit
the volatility of net interest income. Table 8 details interest rate swaps as
of March 31, 1996 used for managing interest rate sensitivity.
TABLE 8 - INTEREST RATE SWAPS
Average Average Average
(Dollars in millions) Notional Fair Maturity Rate Rate
At March 31, 1996 Value Value In Months Paid Received
Gain position:
Receive fixed $ 18.0 $ 0.3 7.2 5.66 % 7.78 %
Pay fixed 192.2 3.6 65.7 6.19 5.54
Total gain position 210.2 3.9
Loss position:
Receive fixed 1,474.3 (14.4) 26.7 0.27 5.47
Pay fixed 67.0 (2.6) 29.1 6.79 5.51
Total loss position 1,541.3 (17.0)
Total $1,751.5 ($13.1)
The majority of the swaps are designated as hedges on deposits and other
interest-bearing liabilities. During the three months ended March 31, 1996,
hedge swaps decreased net interest income by $0.3, compared with a $4.4
benefit in the corresponding 1995 period.
PAGE 16
TABLE 9 - CAPITAL RATIOS
(Dollars in millions)
1996 1995
March 31 December 31 September 30 June 30 March 31
Tier 1 capital:
Realized shareholders' equity $ 3,165.6 $ 3,111.0 $ 3,035.2 $ 3,035.7 $ 2,949.7
Intangible assets other than servicing rights (255.7) (252.3) (239.5) (225.1) (218.1)
Total Tier 1 capital 2,909.9 2,858.7 2,795.7 2,810.6 2,731.6
Tier 2 capital:
Allowable reserve for loan losses 461.8 462.2 437.6 437.5 422.6
Allowable long-term debt 554.2 246.8 247.6 247.6 247.6
Total Tier 2 capital 1,016.0 709.0 685.2 685.1 670.2
Total capital $ 3,925.9 $ 3,567.7 $ 3,480.9 $ 3,495.7 $ 3,401.8
Risk-weighted assets $36,694.7 $36,742.0 $34,756.2 $34,759.9 $33,571.7
Risk-based ratios:
Tier 1 capital 7.93 % 7.78 % 8.04 % 8.09 % 8.07 %
Total capital 10.70 9.71 10.02 10.06 10.06
Tier 1 leverage ratio 6.70 6.71 6.78 6.80 6.72
Total shareholders' equity to assets 9.48 9.19 9.38 9.04 8.66
Capital Resources. Consistent with the objective of operating a sound
financial organization, SunTrust maintains capital ratios well above
regulatory requirements. The rate of internal capital generation has been
more than adequate to support asset growth. Table 9 presents capital ratios
for the five most recent quarters.
Regulatory agencies measure capital adequacy with a framework that makes
capital requirements sensitive to the risk profiles of individual banking
companies. The guidelines define capital as either Tier 1 (primarily
shareholders' equity excluding unrealized gains and losses on investment
securities) or Tier 2 (certain debt instruments and a portion of the reserve
for loan losses). The Company and its subsidiary banks are subject to a
minimum Tier 1 capital to risk-weighted assets ratio of 4% and total capital
(Tier 1 plus Tier 2) to risk-weighted assets ratio of 8%. The Federal Reserve
Board (Board) has also established an additional capital adequacy guideline
referred to as the Tier 1 leverage ratio which measures the ratio of Tier 1
capital to average quarterly assets.
The Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA) requires the establishment of a capital-based supervisory system of
prompt corrective action for all depository institutions. The Board's
implementation of FDICIA defines "well capitalized" institutions as those
whose capital ratios equal or exceed the following minimum ratios: Tier 1
capital ratio of 6%, total risk-based capital ratio of 10%, and a Tier 1
leverage ratio of 5%. At March 31, 1996, the Company's Tier 1 capital, total
risk-based capital and Tier 1 leverage ratios were 7.93%, 16.70% and 6.70%,
respectively.
In 1995, the Board of Directors authorized the Company to repurchase up
to 10,000,000 shares of SunTrust common stock. Under this authorization, the
Company has repurchased 2,534,691 shares as of March 31, 1996, leaving an
additional 7,465,309 shares of SunTrust common stock that may be repurchased.
PAGE 17
Nonbanking Subsidiaries. SunTrust Mortgage, Inc. originates and services
mortgage loans on both residential and income property, principally
throughout Florida, Georgia and Tennessee. SunTrust Mortgage is primarily a
mortgage banker selling to the secondary market and representing
institutional investors. SunTrust Mortgage also assists various SunTrust
banks in their origination of mortgage loans for sale in the secondary market
and for retention in their portfolio. At March 31, 1996, the servicing
portfolio was $11.2 billion, which includes $6.6 billion in loans serviced
for subsidiary banks of SunTrust. SunTrust Insurance Company operates as a
reinsurer for credit life and accident and health insurance sold to loan
customers of SunTrust. SunTrust Securities engages in securities brokerage
services and conducts incidental activities such as offering custodial and
cash management services. SunTrust Capital Markets, Inc. serves as the
investment banking arm of SunTrust. It's business activities include public
finance, corporate finance and the sale of investment securities to
corporations, institutions and government entities. Personal Express Loans,
Inc. operates as a consumer finance company. STI Credit Corporation operates
as a leasing subsidiary, primarily for commercial customers. Other nonbank
subsidiaries primarily support the Company's banking operations, providing
data processing and other services.
State Summary. SunTrust Banks, Inc. operates through three principal
subsidiaries, SunTrust Banks of Florida, Inc., SunTrust Banks of Georgia,
Inc. and SunTrust Banks of Tennessee, Inc., all well-established bank holding
companies within their respective states. Data in Table 10 does not include
financial results of SunTrust's Parent Company and certain other non-bank
subsidiaries (including SunTrust BankCard, N.A. which holds all the credit
card balances of the company.) It is also before elimination of certain
intercompany accounts and balances.
PAGE 18
TABLE 10 - FINANCIAL HIGHLIGHTS - BANKING SUBSIDIARIES
(Dollars in Millions)
SunTrust Banks SunTrust Banks SunTrust Banks
of Florida, Inc. of Georgia, Inc. of Tennessee, Inc.
1996 1995 1996 1995 1996 1995
Summary of Operations<F1>
Net interest income (FTE) $228.6 $229.9 $140.3 $141.5 $65.8 $68.4
Provision for loan losses 10.4 14.8 5.0 7.4 2.4 3.1
Trust income 35.8 34.4 25.5 22.3 9.2 8.3
Other noninterest income 65.3 57.6 42.8 34.9 18.4 14.9
Personnel expense 78.6 73.3 49.3 45.7 25.0 23.7
Other noninterest expense 109.8 117.2 61.4 63.6 27.6 30.8
Net income 80.0 72.5 60.1 53.2 23.5 20.6
Selected Average Balances<F2>
Total assets 22,680 20,957 16,218 14,282 6,710 6,476
Earning assets 21,095 19,719 13,097 12,171 6,415 6,177
Loans 16,002 15,061 10,458 9,311 4,796 4,390
Total deposits 18,124 16,866 9,625 9,987 5,374 5,146
Realized shareholders' equity 1,934 1,808 1,312 1,170 552 532
At March 31
Total assets 23,285 21,222 16,495 14,671 6,831 6,585
Earning assets 21,650 19,849 13,006 12,275 6,546 6,235
Loans 16,077 15,268 10,578 9,471 4,881 4,474
Reserve for loan losses 370 349 195 193 117 118
Total deposits 19,082 17,061 9,849 9,018 5,582 5,204
Realized shareholders' equity 1,973 1,837 1,341 1,196 563 533
Total shareholders' equity 1,976 1,783 2,578 2,007 565 518
Credit Quality
Net loan charge-offs<F1> 3.0 9.1 2.1 2.1 0.4 0.3
Nonperforming loans<F2> 125.7 116.0 54.2 53.8 10.4 16.0
Other real estate owned<F2> 33.8 42.2 7.8 13.6 17.2 27.9
Ratios
ROA<F3> 1.42 % 1.39 % 1.69 % 1.64 % 1.41 % 1.28 %
ROE<F3> 16.64 16.27 18.44 18.43 17.08 15.74
Net interest margin<F3> 4.36 4.73 4.31 4.72 4.12 4.49
Efficiency ratio<F3> 57.16 59.16 53.02 54.94 56.39 59.52
Total shareholders' equity/assets<F2> 8.48 8.40 15.63 13.68 8.27 7.86
Net loan charge-offs to average loans<F3 0.08 0.24 0.08 0.09 0.03 0.02
Nonperforming loans to total loans<F2> 0.80 0.76 0.52 0.57 0.22 0.36
Nonperforming assets to total loans plus
other real estate owned<F2> 1.01 1.03 0.60 0.71 0.58 0.97
Reserve to loans<F2> 2.36 2.28 1.87 2.04 2.45 2.64
Reserve to nonperforming loans<F2> 294.33 300.56 359.50 358.98 1,125.66 742.97
<FN>
<F1>For the three month period ended March 31.
<F2>At March 31.
<F3>Annualized for the first three months.
PAGE 19
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index:
Exhibit Exhibit No. Page No.
Statement re: Computation of Per Share Earnings 11 22
(b) SunTrust did not file any reports on Form 8-K during the first quarter of
1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized this 10th day of May, 1996.
SunTrust Banks, Inc.
(Registrant)
/s/ W.P. O'Halloran
William P. O'Halloran
Senior Vice President and Controller
(Chief Accounting Officer)
PAGE 20