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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1998
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.)
303 Peachtree Street, N.E., Atlanta, Georgia 30308
(Address of principal executive offices) (Zip Code)
(404) 588-7711
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No _____
At October 31, 1998, 209,568,155 shares of the Registrant's Common Stock, $1.00
par value were outstanding.
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<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
PART I FINANCIAL INFORMATION Page
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Consolidated Statements of Shareholders' Equity 6
Notes to Consolidated Financial Statements 7-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-26
PART II OTHER INFORMATION
Item 1. Legal Proceedings 27
Item 2. Changes in Securities 27
Item 3. Defaults Upon Senior Securities 27
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 5. Other Information 27
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURES 27
</TABLE>
PART I - FINANCIAL INFORMATION
The following unaudited financial statements have been prepared in accordance
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and
accordingly do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
However, in the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the nine months ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the full year
1998.
<PAGE>
Consolidated Statements of Income
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
------------------------ -----------------------
(Dollars in thousands except per share data)(Unaudited) 1998 1997 1998 1997
----------- ----------- ---------- -----------
Interest Income
<S> <C> <C> <C> <C>
Interest and fees on loans $ 831,848 $ 775,471 $ 2,456,936 $ 2,239,149
Interest and dividends on securities available
for sale
Taxable interest 118,123 119,478 354,535 344,447
Tax-exempt interest 8,323 9,967 25,439 30,895
Dividends (1) 11,486 9,379 32,628 27,955
Interest on funds sold 13,162 16,511 43,678 43,766
Interest on deposits in other banks 150 211 441 628
Other interest 1,869 3,850 6,484 9,551
----------- ----------- ---------- -----------
Total interest income 984,961 934,867 2,920,141 2,696,391
----------- ----------- ---------- -----------
Interest Expense
Interest on deposits 282,944 295,893 851,251 862,791
Interest on funds purchased 116,178 87,019 323,919 242,464
Interest on other short-term borrowings 18,119 27,650 63,894 70,965
Interest on long-term debt 70,910 47,577 197,973 111,208
----------- ----------- ---------- -----------
Total interest expense 488,151 458,139 1,437,037 1,287,428
----------- ----------- ---------- -----------
Net Interest Income 496,810 476,728 1,483,104 1,408,963
Provision for loan losses 31,409 29,003 93,465 84,439
----------- ----------- ---------- -----------
Net interest income after provision
for loan 465,401 447,725 1,389,639 1,324,524
----------- ----------- ---------- -----------
Noninterest Income
Trust income 92,496 79,087 280,964 236,149
Service charges on deposit accounts 67,180 62,327 192,026 183,959
Credit card fees 20,631 17,515 62,819 54,704
Corporate and institutional investment income 15,909 8,629 40,156 18,199
Retail investment income 10,281 8,365 33,446 24,846
Trading account profits and commissions 6,904 3,965 28,793 12,782
Securities gains (losses) (1,819) 61 1,053 1,090
Other charges and fees 53,039 39,348 155,877 117,960
Other noninterest income 28,540 13,638 81,232 37,149
----------- ----------- ---------- -----------
Total noninterest income 293,161 232,935 876,366 686,838
----------- ----------- ---------- -----------
Noninterest Expense
Salaries and other compensation 262,388 214,430 747,007 622,579
Employee benefits 26,787 27,506 91,363 89,364
Net occupancy expense 33,422 30,896 99,449 95,854
Equipment expense 31,761 30,651 95,156 91,089
Outside processing and software 20,355 17,996 63,778 49,038
Marketing and customer development 15,604 15,924 51,449 49,576
Postage and delivery 10,658 10,093 32,006 31,886
Other noninterest expense 86,621 76,852 261,280 222,311
----------- ----------- ---------- -----------
Total noninterest expense 487,596 424,348 1,441,488 1,251,697
----------- ----------- ---------- -----------
Income before income taxes 270,966 256,312 824,517 759,665
Provision for income taxes 82,113 87,734 269,801 264,595
=========== =========== ========== ===========
Net Income $ 188,853 $ 168,578 $ 554,716 $ 495,070
=========== =========== ========== ===========
Average common shares - diluted 208,548,939 211,670,768 210,297,282 214,465,799
Average common shares - basic 205,584,123 208,391,415 207,109,974 211,289,132
Net income per average common share - diluted $ 0.91 $ 0.80 $ 2.64 $ 2.31
Net income per average common share - basic 0.92 0.81 2.68 2.34
Dividends declared per common share 0.250 0.225 0.750 0.675
(1) Includes dividends on common stock of
The Coca-Cola Company 7,240 6,757 21,720 20,272
</TABLE>
See notes to consolidated financial statements
<PAGE>
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30 December 31 September 30
(Dollars in thousands) (Unaudited) 1998 1997 1997
----------- ----------- -----------
Assets
<S> <C> <C> <C>
Cash and due from banks $ 2,190,913 $ 2,991,263 $ 2,638,422
Trading account 200,479 178,434 213,774
Securities available for sale (1) 11,455,372 11,729,298 11,346,407
Funds sold 1,333,582 1,012,000 856,994
Loans 42,889,478 40,135,505 38,475,470
Allowance for loan losses (666,146) (651,830) (647,077)
----------- ----------- -----------
Net loans 42,223,332 39,483,675 37,828,393
Premises and equipment 1,023,638 964,169 953,567
Intangible assets 442,077 292,370 285,765
Customers' acceptance liability 398,856 488,632 501,325
Other assets 1,573,069 942,895 929,544
=========== =========== ===========
Total assets $ 60,841,318 $58,082,736 $ 55,554,191
=========== =========== ===========
Liabilities and Shareholders' Equity
Noninterest-bearing deposits $ 8,314,365 $ 8,927,796 $ 7,840,994
Interest-bearing deposits 28,168,612 29,269,732 28,376,060
----------- ----------- -----------
Total deposits 36,482,977 38,197,528 36,217,054
Funds purchased 9,701,770 6,483,055 6,595,386
Other short-term borrowings 1,400,450 1,989,415 1,839,091
Long-term debt 3,755,319 2,571,832 2,426,245
Guaranteed preferred beneficial interests in
Company's debentures 850,000 600,000 600,000
Acceptances outstanding 398,856 488,632 501,325
Other liabilities 2,967,596 2,491,892 2,325,034
----------- ----------- -----------
Total liabilities 55,556,968 52,822,354 50,504,135
----------- ----------- -----------
Preferred stock, no par value; 50,000,000 shares
authorized; none issued - - -
Common stock, $1.00 par value; 500,000,000
shares authorized 213,108 211,608 216,608
Additional paid in capital 389,583 296,751 299,519
Retained earnings 3,210,549 2,812,645 2,972,637
Treasury stock and other (317,287) (109,503) (316,591)
----------- ----------- -----------
Realized shareholders' equity 3,495,953 3,211,501 3,172,173
Accumulated other comprehensive income 1,788,397 2,048,881 1,877,883
----------- ----------- -----------
Total shareholders' equity 5,284,350 5,260,382 5,050,056
=========== =========== ===========
Total liabilities and shareholders' equity $ 60,841,318 $58,082,736 $ 55,554,191
=========== =========== ===========
Common shares outstanding 208,931,856 209,909,204 211,105,817
Treasury shares of common stock 4,176,201 1,698,853 5,502,240
(1) Includes unrealized gains (losses) on securities
available for sale $ 2,891,168 $ 3,311,979 $ 3,035,624
</TABLE>
See notes to consolidated financial statements
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months
Ended September 30
--------------------------
(Dollars in thousands) (Unaudited) 1998 1997
------------ -----------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 554,716 $ 495,070
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Net depreciation, amortization and accretion 131,853 112,421
Provision for loan losses 93,465 84,439
Provision for losses on other real estate 1,707 1,964
Amortization of compensation element of restricted stock 9,566 7,099
Securities (gains) and losses, net (1,053) (1,090)
Net gain on sales of non-interest earning assets (18,692) (6,389)
Net increase in loans held for sale (459,414) (128,424)
Changes due to:
Trading account (22,045) (133,397)
Interest receivable (30,006) (41,419)
Prepaid expenses (50,907) (44,798)
Other assets (688,200) (24,918)
Taxes payable 84,404 56,965
Interest payable (34,605) 21,373
Other liabilities 586,232 256,572
------------ -----------
Net cash provided by operating activities 157,021 655,468
------------ -----------
Cash flows from investing activities:
Proceeds from maturities of securities available for sale 2,257,084 943,999
Proceeds from sales of securities available for sale 635,471 526,802
Purchases of securities available for sale (3,037,911) (1,816,914)
Net increase in loans (2,360,511) (2,942,875)
Capital expenditures (125,694) (269,979)
Proceeds from sales of non-interest earning assets 33,418 11,680
Net funds received in acquisitions 13,420 122,603
Loan recoveries 37,959 41,584
Other - (64,159)
------------ -----------
Net cash used in investing activities (2,546,764) (3,447,259)
------------ -----------
Cash flows from financing activities:
Net decrease in deposits (1,714,550) (795,938)
Net increase in funds purchased and other short-term borrowings 2,629,750 1,518,824
Proceeds from the issuance of long-term debt 1,693,153 1,647,819
Repayment of long-term debt (259,666) (186,915)
Proceeds from issuance of treasury stock 12,473 13,927
Payments to acquire treasury stock (293,373) (539,634)
Dividends paid (156,812) (143,491)
------------ -----------
Net cash provided by financing activities 1,910,975 1,514,592
------------ -----------
Net decrease in cash and cash equivalents (478,768) (1,277,199)
Cash and cash equivalents at beginning of period 4,003,263 4,772,615
------------ -----------
Cash and cash equivalents at end of period $ 3,524,495 $ 3,495,416
============ ===========
Supplemental Disclosure
Interest paid $ 1,402,432 $ 1,308,801
Taxes paid 186,764 208,252
</TABLE>
See notes to consolidated financial statements
<PAGE>
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Accumulated
Additional Treasury Other
Common Paid in Retained Stock and Comprehensive
(Dollars in thousands) (Unaudited) Stock Capital Earnings Other* Income Total
-------- -------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 $ 225,608 $ 310,612 $ 3,033,900 $ (230,918) $ 1,601,778 $ 4,940,980
Net income - - 495,070 - - 495,070
Cash dividends declared on common
stock, $0.68 per share - - (143,491) - - (143,491)
Proceeds from exercise of stock options - (15,815) - 20,851 - 5,036
Acquisition of treasury stock - - - (539,634) - (539,634)
Retirement of treasury stock (9,000) - (412,842) 421,842 - -
Issuance of treasury stock for 401(k) - 1,378 - 7,513 - 8,891
Issuance, net of forfeitures, of treasury
stock as restricted stock - 3,344 - 14,428 - 17,772
Compensation element of restricted stock - - - (17,772) - (17,772)
Amortization of compensation element
of restricted stock - - - 7,099 - 7,099
Change in unrealized gains (losses)
on securities, net of taxes - - - - 276,105 276,105
======== ======== ========== ========= ========= =========
Balance, September 30, 1997 $ 216,608 $ 299,519 $ 2,972,637 $ (316,591) $ 1,877,883 $ 5,050,056
======== ======== ========== ========= ========= =========
Comprehensive Income - September 30, 1997 $ 771,175
Balance, January 1, 1998 $ 211,608 $ 296,751 $ 2,812,645 $ (109,503) $ 2,048,881 $ 5,260,382
Net income - - 554,716 - - 554,716
Cash dividends declared on common
stock, $0.75 per share - - (156,812) - - (156,812)
Proceeds from exercise of stock options - (18,102) - 20,665 - 2,563
Issuance of common stock
and treasury stock for acquisitions 1,500 109,268 - 47,114 - 157,882
Acquisition of treasury stock - - - (293,373) - (293,373)
Issuance of treasury stock for 401(k) - 84 - 9,826 - 9,910
Issuance, net of forfeitures, of treasury
stock as restricted stock - 1,582 - 19,645 - 21,227
Compensation element of restricted stock - - - (21,227) - (21,227)
Amortization of compensation element
of restricted stock - - - 9,566 - 9,566
Change in unrealized gains (losses)
on securities, net of taxes - - - - (260,484) (260,484)
======== ======== ========== ========= ========= =========
Balance, September 30, 1998 $ 213,108 $ 389,583 $3,210,549 $ (317,287) $ 1,788,397 $ 5,284,350
======== ======== ========== ========= ========= =========
Comprehensive Income - September 30, 1998 $ 294,232
</TABLE>
* Balance at September 30, 1997 includes $256,454 for Treasury Stock and
$60,137 for Deferred Compensation.
Balance at September 30, 1998 includes $247,585 for Treasury Stock and
$69,702 for Deferred Compensation.
See notes to consolidated financial statements
<PAGE>
Notes to Consolidated Financial Statements (Unaudited)
Note 1 - Accounting Policies
The consolidated interim financial statements of SunTrust Banks, Inc.
("SunTrust" or "The Company") are unaudited. All significant intercompany
accounts and transactions have been eliminated. Certain prior period amounts
have been restated to conform with the current year financial statement
presentation. These financial statements should be read in conjunction with the
Annual Report on Form 10-K/A for the year ended December 31, 1997.
Note 2 - Recent Accounting Developments
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information", which is effective for annual and interim
periods beginning after December 15, 1997. However, this statement is not
required in interim financial statements in the initial year of its application.
This statement establishes standards for the method that public entities use to
report information about operating segments in annual financial statements and
requires those enterprises to report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The anticipated disclosure, when fully
implemented, will provide required information by reportable operating segment
using the current internal management reporting system which is prepared on a
geographic basis.
During the first quarter of 1998, the American Institute to Certified Public
Accountants issued Statement of Position (SOP) 98-1, "Accounting for Costs of
Computer Software Developed or Obtained for Internal Use". SOP 98-1 requires
capitalization of computer software costs that meet certain criteria. The
statement is effective for fiscal years beginning after December 15, 1998.
Adoption of SOP 98-1 is not expected to have a material effect on the Company's
financial position or results of operations.
In April 1998, the Financial Accounting Standards Board issued Statement No.
132, "Employers' Disclosures about Pensions and Other Postretirement Benefits".
This statement only modifies the disclosures companies make about their pension
and nonpension benefit plans and does not alter the accounting for these plans.
The FASB's intention in modifying the disclosures for postretirement benefits is
to make the disclosures more uniform and to provide better information to
investors about the economics of these benefit plans rather than focusing on
current period cost. The provisions of the statement are effective for years
beginning after December 15, 1997. Adoption of Statement No. 132, when
implemented, will provide the required information as well as the restatement of
previous disclosures.
In October 1998, the Financial Accounting Standards Board issued Statement No.
134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise". This statement is effective for the first fiscal quarter beginning
after December 15, 1998. Adoption of Statement No. 134 will have no impact on
the Company's financial position or results of operations.
7
<PAGE>
Notes to Consolidated Financial Statements (Unaudited) - continued
Note 3 - Derivative Financial Instruments
Derivatives are used to hedge interest rate exposures by modifying the interest
rate characteristics of related balance sheet instruments. The specific criteria
required for derivatives used for such purposes are described below. Derivatives
that do not meet these criteria are carried at market value with changes in
value recognized in earnings in the current period. It is the Company's policy
not to hold derivatives unless they qualify as hedges.
Derivatives used as hedges must be effective at reducing the risk associated
with the exposure being hedged and must be designated as a hedge at the
inception of the derivative contract. Derivatives used for hedging purposes
include swaps, forwards, futures, and purchased options. The fair values of
derivative contracts are carried off-balance sheet and the unrealized gains and
losses on these contracts are generally deferred. The interest component is
recognized over the life of the contract in net interest income for derivatives
used as hedges or those used to modify the interest rate characteristics of
assets and liabilities. Upon contract settlement or termination, the cumulative
change in the market value of derivatives is recorded as an adjustment to the
carrying value of the underlying asset or liability and recognized in net
interest income over the expected remaining life of the related asset or
liability. If the underlying instrument is sold, the cumulative change in the
value of the associated derivative is recognized immediately in the earnings of
the underlying instrument.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. This statement could increase
volatility in earnings and other comprehensive income. This statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
Initial application of this statement should be as of the beginning of an
entity's fiscal quarter; on that date, hedging relationships must be
redesignated and documented pursuant to the provisions of this statement.
Earlier application of this statement is encouraged, but it is permitted only as
of the beginning of any fiscal quarter that begins after issuance of this
statement and should not be applied retroactively to financial statements of
prior periods. Adoption of Statement No. 133, when implemented, is not expected
to have a material impact on the Company's financial position or results of
operations.
Note 4 - Acquisitions
On September 26, 1997, the Company signed a definitive agreement to acquire
Equitable Securities Corporation, a Nashville, Tennessee-based investment
banking, securities brokerage and investment advisory firm. The merger, which
was accounted for as a purchase, was completed on January 2, 1998, and the new
subsidiary was renamed SunTrust Equitable Securities Corporation (SESC).
Consideration tendered, including contingently returnable shares, aggregated 2.3
million shares of the Company's common stock.
On June 4, 1998, the Company signed a definitive agreement to acquire Citizens
Bancorporation, Inc. a bank holding company based in Marianna, Florida with
assets of $183 million. The merger, which was accounted for as a purchase, was
completed on October 1, 1998. Citizens Bank and Gadsden State Bank merged into
SunTrust Bank, Tallahassee, N.A., a subsidiary of SunTrust Banks of Florida,
Inc., and
8
<PAGE>
Notes to Consolidated Financial Statements (Unaudited) - continued
SunTrust Banks, Inc. The Company issued 603,919 shares of the Company's common
stock and paid $39.2 million in cash. The transaction had no material impact on
SunTrust's earnings per share.
On July 20, 1998, SunTrust signed a definitive Agreement and Plan of Merger
providing for the merger of a wholly owned subsidiary of SunTrust with and into
Crestar Financial Corporation. Under terms of the agreement, Crestar
shareholders will receive, in a tax-free exchange, 0.96 shares of SunTrust's
common stock for each share of Crestar common stock. It is intended that the
merger will be accounted for as a pooling-of-interests. The merger is subject to
regulatory and shareholder approval of both companies and is expected to be
completed during the fourth quarter of 1998. In connection with the
announcement, the Board of Directors of SunTrust has rescinded its stock
repurchase authorization.
Note 5 - Comprehensive Income
Under Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income", certain transactions and other economic events that
bypass the income statement must be displayed as other comprehensive income. The
Company's comprehensive income consists of net income and unrealized gains and
losses on securities available-for-sale, net of income taxes.
Comprehensive income for the first nine months of 1998 and 1997 is calculated as
follows:
(Dollars in thousands)
<TABLE>
<CAPTION>
Before Income Income Net of Income
Tax (Benefit) Tax (Benefit) Tax (Benefit)
------------- ------------- -------------
Unrealized gains and losses (net) recognized in
other comprehensive income:
<S> <C> <C> <C>
Nine months ended September 30, 1998 $ (426,324) $ (165,840) $ (260,484)
Nine months ended September 30, 1997 $ 451,890 $ 175,785 $ 276,105
1998 1997
Amounts reported in net income:
Gain on sale of securities $ 1,053 $ 1,090
Net amortization (accretion) 475 (670)
------------- -----------
Reclassification adjustment 1,528 420
Income tax expense (594) (163)
------------- -----------
Reclassification adjustment, net of tax 934 257
Amounts reported in other comprehensive income:
Unrealized (loss) gain arising during period,
net of tax (259,550) 276,362
Reclassification adjustment, net of tax (934) (257)
------------- -----------
Net unrealized (losses) gains recognized in
other comprehensive income (260,484) 276,105
Net income 554,716 495,070
------------- -----------
Total comprehensive income $ 294,232 $ 771,175
============= ===========
</TABLE>
9
<PAGE>
Notes to Consolidated Financial Statements (Unaudited) - continued
Note 6 - Earnings Per Share Reconciliation
In the calculation of basic and diluted EPS, net income is identical. Below is a
reconciliation for the periods ended September 30, 1998 and September 30, 1997
of the difference between average basic common shares outstanding and average
diluted common shares outstanding.
Computation of Per Share Earnings
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
------------------------- ------------------------
1998 1997 1998 1997
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Basic
Net income $ 188,853 $ 168,578 $ 554,716 $ 495,070
------------ ----------- ----------- -----------
Average common shares 205,584 208,391 207,110 211,289
------------ ----------- ----------- -----------
Earnings per common share - basic $ 0.92 $ 0.81 $ 2.68 $ 2.34
============ =========== =========== ===========
Diluted
Net income $ 188,853 $ 168,578 $ 554,716 $ 495,070
------------ ----------- ----------- -----------
Average common shares outstanding 205,584 208,391 207,110 211,289
Incremental shares outstanding (1) 2,965 3,279 3,187 3,177
------------ ----------- ----------- -----------
Average diluted common shares 208,549 211,670 210,297 214,466
------------ ----------- ----------- -----------
Earnings per common share - diluted $ 0.91 $ 0.80 $ 2.64 $ 2.31
============ =========== =========== ===========
Three Months Nine Months
Ended September 30 Ended September 30
------------------------- ------------------------
1998 1997 1998 1997
------------ ----------- ----------- -----------
Average common shares - basic 205,584 208,391 207,110 211,289
Effect of dilutive securities:
Stock options 1,363 1,636 1,559 1,524
Performance restricted stock 1,602 1,643 1,628 1,653
------------ ----------- ----------- -----------
Average common shares - diluted 208,549 211,670 210,297 214,466
============ =========== =========== ===========
</TABLE>
(1) Includes the incremental effect of stock options and restricted stock
outstanding computed under the treasury stock method.
10
<PAGE>
Notes to Consolidated Financial Statements (Unaudited) - continued
Note 7 - Trust Preferred Securities
In 1997, the Company established two separate special purpose trusts, which
collectively issued $600 million in trust preferred securities. In 1998, the
Company issued an additional $250 million in trust preferred securities through
a separate trust. The proceeds from such issuances, together with the proceeds
of the related issuances of common securities of the trusts, were invested in
junior subordinated deferrable interest debentures (debentures) of the Company.
The sole assets of these special purpose trusts are the debentures. These
debentures rank junior to the senior and subordinated debt issued by the
Company. The Company owns all of the common securities of the three trusts. The
preferred securities issued by the trusts rank senior to the common securities.
The obligations of the Company under the debentures, the indentures, the
relevant trust agreements and the guarantees, in the aggregate, constitute a
full and unconditional guarantee by the Company of the obligations of the trusts
under the trust preferred securities and rank subordinate and junior in right of
payment to all liabilities of the Company.
Listed below are the series of trust preferred securities of SunTrust Capital I,
SunTrust Capital II, and SunTrust Capital III issued at $1,000 per security.
SunTrust Capital I issued $350 million in trust preferred securities in May 1997
and concurrently used the proceeds to invest in $360.9 million of Subordinated
Debentures from the Company with a quarterly interest rate equal to 3-Month
LIBOR plus .67% and a maturity of May 15, 2027.
SunTrust Capital II issued $250 million in trust preferred securities in June
1997 and concurrently used the proceeds to invest in $257.8 million of
Subordinated Debentures from the Company with a semi-annual interest rate of
7.9% and a maturity of June 15, 2027.
SunTrust Capital III issued $250 million in trust preferred securities in March
1998 and concurrently used the proceeds to invest in $257.8 million of
Subordinated Debentures from the Company with a quarterly interest rate equal to
3-Month LIBOR plus .65% and a maturity of March 15, 2028.
The trust preferred securities are subject to mandatory redemption at the stated
maturity date of the debentures, upon repayment of the debentures or earlier,
pursuant to the terms of the Trust Agreement.
Note 8 - Restatement of certain prior years Financial Statements
In connection with the review by the staff of the Securities and Exchange
Commission of documents related to SunTrust's acquisition of Crestar Financial
Corporation and the staff's comments thereon, SunTrust has lowered its provision
for loan losses in 1996, 1995 and 1994 by $40 million, $35 million and $25
million respectively. The effect of this action was to increase net income in
these years by $24.4 million, $21.4 million and $15.3 million, respectively.
Further, as of December 31, 1997 and 1996, the allowance for loan losses has
been decreased by a total of $100 million and shareholders' equity has been
increased by a total of $61 million.
11
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
SunTrust Banks, Inc. is a multi-state bank holding company with its headquarters
in Atlanta, Georgia. The Company's principal banking subsidiaries are SunTrust
Banks of Florida, Inc., SunTrust Banks, of Georgia, Inc. and SunTrust Banks of
Tennessee, Inc., all of which are bank holding companies in their respective
states. Credit card services are provided through SunTrust BankCard, N.A. of
Orlando, Florida.
SunTrust has several wholly owned nonbanking subsidiaries that are engaged in
various businesses. They include SunTrust Mortgage, Inc., which originates and
services mortgage loans on both residential and income property, principally
throughout Florida, Georgia and Tennessee. SunTrust Insurance Company operates
as a reinsurer for credit life, accident and health insurance sold to loan
customers of SunTrust. SunTrust Securities, Inc. engages in securities brokerage
services and conducts incidental activities such as offering custodial and cash
management services. SunTrust Equitable Securities Corporation conducts various
business activities including investment banking, securities brokerage,
investment advisory services, raising equity capital, underwriting of debt
issues and selling investment securities to corporations, institutions and
government entities. SunTrust Personal 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.
The following analysis of the financial performance of SunTrust for the third
quarter of 1998 should be read in conjunction with the financial statements,
notes and other information contained in this document. SunTrust has made, and
may continue to make, various forward-looking statements with respect to
financial and business matters. These forward-looking statements are subject to
numerous assumptions, risks and uncertainties, all of which may change over
time. The actual results that are achieved could differ significantly from the
forward-looking statements contained in this document. The results of operations
for the nine months ended September 30, 1998 are not indicative of the results
that may be attained for any other period. In this discussion, net interest
income and the net interest margin are presented on a taxable-equivalent basis
and the ratios are presented on an annualized basis.
EARNINGS ANALYSIS
SunTrust reported record net income of $188.8 million and $554.7 million for the
third quarter and first nine months of 1998, an increase of 12.03% and 12.05%
compared with $168.6 million and $495.1 million in the same periods of 1997.
Diluted earnings per share grew 13.8% to $0.91 and 14.3% to $2.64 from $0.80 and
$2.31 in the same periods. The growth in net income resulted from increases in
noninterest income and continued strong loan demand.
12
<PAGE>
<TABLE>
<CAPTION>
Selected Quarterly Financial Data
(Dollars in millions except per share data) Quarters
------------------------------------------------------
1998 1997
------------------------------------------------------
3 2 1 4 3
---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Summary of Operations
Interest and dividend income $ 984.8 $ 975.8 $ 959.5 $ 954.4 $ 934.9
Interest expense 488.1 478.9 470.0 469.0 458.1
---------- ---------- --------- --------- ---------
Net interest income 496.7 496.9 489.5 485.4 476.8
Provision for loan losses 31.4 33.5 28.6 32.6 29.0
---------- ---------- --------- --------- ---------
Net interest income after
provision for loan losses 465.3 463.4 460.9 452.8 447.8
Noninterest income 293.2 296.9 286.3 247.4 232.9
Noninterest expense 487.6 482.8 471.1 433.9 424.4
---------- ---------- --------- --------- ---------
Income before provision
for income taxes 270.9 277.5 276.1 266.3 256.3
Provision for income taxes 82.1 92.5 95.2 94.1 87.7
---------- ---------- --------- --------- ---------
Net income $ 188.8 $ 185.0 $ 180.9 $ 172.2 $ 168.6
========== ========== ========= ========= =========
Net interest income (taxable-equivalent) $ 504.4 $ 504.7 $ 497.5 $ 494.1 $ 485.7
Per common share
Net income - diluted $ 0.91 $ 0.88 $ 0.85 $ 0.82 $ 0.80
Net income - basic 0.92 0.89 0.87 0.83 0.81
Dividends declared 0.250 0.250 0.250 0.250 0.225
Book value 25.29 28.62 27.49 25.06 23.92
Common stock market price
High 87.75 83.44 77.44 75.25 70.44
Low 54.00 73.38 65.25 61.13 54.75
Close 62.00 81.31 75.38 71.38 67.94
Selected Average Balances
Total assets $ 60,496.8 $ 60,018.2 $58,468.4 $ 56,663.4 $ 55,160.2
Earning assets 51,757.2 51,143.1 50,089.7 48,970.5 47,672.1
Loans 42,115.9 41,452.1 40,526.4 39,230.0 37,898.9
Total deposits 36,580.0 36,470.9 36,316.3 35,940.2 36,115.7
Realized shareholders' equity 3,386.9 3,452.4 3,417.6 3,211.0 3,188.6
Total shareholders' equity 5,747.7 5,822.5 5,471.8 5,067.0 5,151.4
Common shares - diluted (thousands) 208,549 210,684 211,694 210,554 211,671
Common shares - basic (thousands) 205,584 207,335 208,442 207,138 208,391
Financial Ratios
ROA* 1.32% 1.32% 1.33% 1.27% 1.29%
ROE* 22.12 21.49 21.46 21.27 20.98
Net interest margin* 3.87 3.96 4.03 4.00 4.04
</TABLE>
* ROA, ROE and net interest margin are calculated excluding net unrealized gains
on securities available for sale because the net unrealized gains are not
included in income.
13
<PAGE>
Consolidated Daily Average Balances, Income/Expense
and Average Yields Earned and Rates Paid
(Dollars in millions; yields on taxable-equivalent basis)
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------------------------
September 30, 1998 June 30, 1998
----------------------------------- -----------------------------
Average Income/ Yields/ Average Income/ Yields/
Balances Expense Rates Balances Expense Rates
------------ --------- -------- -------------------- -----
<S> <C> <C> <C> <C> <C> <C>
Assets
Loans (1)
Taxable $ 41,437.5 $ 822.9 7.88% $ 40,773.3 812.1 7.99%
Tax-exempt (2) 678.4 12.8 7.45 678.8 12.5 7.42
------------ ---------- ----------- -------
Total loans 42,115.9 835.7 7.87 41,452.1 824.6 7.98
------------ ---------- ----------- -------
Securities available for sale:
Taxable 7,850.9 129.6 6.55 7,807.8 129.2 6.64
Tax-exempt (2) 582.1 12.1 8.22 597.7 12.4 8.31
------------ ---------- ----------- -------
Total securities available for sale 8,433.0 141.7 6.66 8,405.5 141.6 6.76
------------ ---------- ----------- -------
Funds sold 992.1 13.2 5.26 1,059.9 14.9 5.64
Other short-term investments (2) 216.2 1.9 3.78 225.6 2.5 4.48
------------ ---------- ----------- -------
Total earning assets 51,757.2 992.5 7.61 51,143.1 983.6 7.71
---------- -------
Allowance for loan losses (663.0) (659.6)
Cash and due from banks 2,341.9 2,299.0
Premises and equipment 1,007.4 979.2
Other assets 2,235.5 2,423.7
Unrealized gains (losses) on
investment securities 3,817.8 3,832.8
============ ===========
Total assets $ 60,496.8 $ 60,018.2
============ ===========
Liabilities and Shareholders' Equity
Interest-bearing deposits:
NOW/Money market accounts $ 11,404.6 $ 78.7 2.74 % $ 11,415.0 $ 78.2 2.75 %
Savings 5,240.4 47.4 3.59 5,164.4 46.2 3.59
Consumer time 6,664.4 87.6 5.21 6,759.8 88.3 5.24
Other time (3) 5,068.9 69.2 5.42 4,978.2 71.1 5.73
------------ ---------- ----------- -------
Total interest-bearing deposits 28,378.3 282.9 3.96 28,317.4 283.8 4.02
Funds purchased 8,671.1 116.2 5.32 8,085.7 107.1 5.32
Other short-term borrowings 1,290.4 18.1 5.57 1,587.1 22.3 5.62
Long-term debt 4,548.8 70.9 6.18 4,290.9 65.7 6.14
------------ ---------- ----------- -------
Total interest-bearing liabilities 42,888.6 488.1 4.52 42,281.1 478.9 4.54
---------- -------
Noninterest-bearing deposits 8,201.7 8,153.5
Other liabilities 3,658.8 3,761.1
Realized shareholders' equity 3,386.9 3,452.4
Other comprehensive income 2,360.8 2,370.1
============ ===========
Total liabilities and
shareholders' equity $ 60,496.8 $ 60,018.2
============ ===========
Interest rate spread 3.09% 3.17%
======= =====
Net Interest Income $ 504.4 504.7
========== =======
Net Interest Margin 3.87% 3.96%
======= =====
</TABLE>
(1) Interest income includes loan fees of $27.7, $26.4, and $26.5 in the
quarters ended September 30, June 30, 1998 and September 30, 1997 and
$79.9 and $73.8 in the nine months ended September 30, 1998 and 1997.
Nonaccrual loans are included in average balances and income on such
loans, if recognized, is recorded on a cash basis.
(2) 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 $7.7, $7.8, and $8.9, in the quarters ended
September 30, June 30, 1998 and September 30, 1997 and $23.5 and $27.9
in the nine months ended September 30, 1998 and 1997.
14
<PAGE>
Consolidated Daily Average Balances, Income/Expense
and Average Yields Earned and Rates Paid
(Dollars in millions; yields on taxable-equivalent basis)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
------------------------- ---------------------------------------------------------
September 30, 1997 September 30, 1998 September 30, 1997
------------------------- ----------------------------- -------------------------
Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/
Balances Expense Rates Balances Expense Rates Balances Expense Rates
--------- ------- ----- ---------- --------- ------ --------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Loans (1)
Taxable $ 37,205.4 $ 766.1 8.17% $ 40,687.9 $ 2,430.0 7.98% $ 36,239.3 $2,211.3 8.16%
Tax-exempt (2) 693.5 13.5 7.75 682.7 38.7 7.57 699.4 40.9 7.82
--------- ------- ---------- --------- --------- -------
Total loans 37,898.9 779.6 8.16 41,370.6 2,468.7 7.98 36,938.7 2,252.2 8.15
--------- ------- ---------- --------- --------- -------
Securities available for sale:
Taxable 7,679.8 128.8 6.66 7,768.3 387.2 6.66 7,457.5 372.4 6.68
Tax-exempt (2) 689.3 14.7 8.46 595.6 37.1 8.33 709.5 45.5 8.58
--------- ------- ---------- --------- --------- -------
Total securities available for sale 8,369.1 143.5 6.80 8,363.9 424.3 6.78 8,167.0 417.9 6.84
--------- ------- ---------- --------- --------- -------
Funds sold 1,139.9 16.6 5.75 1,052.4 43.7 5.55 985.5 43.9 5.94
Other short-term investments (2) 264.2 4.1 6.18 215.9 6.9 4.38 239.8 10.3 5.76
--------- ------- ---------- --------- --------- -------
Total earning assets 47,672.1 943.8 7.85 51,002.8 2,943.6 7.72 46,331.0 2,724.3 7.86
------- --------- -------
Allowance for loan losses (641.6) (657.9) (634.5)
Cash and due from banks 2,238.7 2,332.3 2,232.0
Premises and equipment 949.4 984.2 926.8
Other assets 1,766.9 2,347.6 1,737.2
Unrealized gains (losses) on
investment securities 3,174.7 3,659.5 3,007.4
========= ========== =========
Total assets $55,160.2 $ 59,668.5 $53,599.9
========= ========== =========
Liabilities and Shareholders' Equity
Interest-bearing deposits:
NOW/Money market accounts $ 10,424.8 $ 71.6 2.73% $ 11,244.5 $ 230.9 2.75% $ 10,469.4 $ 213.8 2.73%
Savings 5,202.2 47.1 3.59 5,214.9 140.4 3.60 5,300.3 142.3 3.59
Consumer time 6,946.6 91.2 5.21 6,766.6 264.8 5.23 7,003.9 271.3 5.18
Other time (3) 6,084.9 86.0 5.61 5,144.0 215.1 5.59 5,682.0 235.4 5.54
--------- ------- ---------- --------- --------- -------
Total interest-bearing deposits 28,658.5 295.9 4.10 28,370.0 851.2 4.01 28,455.6 862.8 4.05
Funds purchased 6,440.0 86.9 5.36 8,141.0 323.9 5.32 6,126.2 242.4 5.29
Other short-term borrowings 1,906.4 27.7 5.75 1,514.8 63.9 5.64 1,677.8 71.0 5.66
Long-term debt 2,826.0 47.6 6.68 4,248.5 198.0 6.23 2,229.8 111.2 6.67
--------- ------- ---------- --------- --------- -------
Total interest-bearing liabilities 39,830.9 458.1 4.56 42,274.3 1,437.0 4.54 38,489.4 1,287.4 4.47
------- --------- -------
Noninterest-bearing deposits 7,457.2 8,086.7 7,451.3
Other liabilities 2,720.7 3,625.8 2,576.1
Realized shareholders' equity 3,188.6 3,418.9 3,222.3
Other comprehensive income 1,962.8 2,262.8 1,860.8
========= ========== =========
Total liabilities and
shareholders' equity $ 55,160.2 $ 59,668.5 $ 53,599.9
========= ========== =========
Interest rate spread 3.29% 3.18 % 3.39%
===== ====== =====
Net Interest Income $ 485.7 $ 1,506.6 $ 1,436.9
======= ========= =======
Net Interest Margin 4.04% 3.95 % 4.15%
===== ====== =====
</TABLE>
(3) Interest rate swap transactions used to help balance the Company's
interest-sensitivity position decreased interest expense by $1.2, $0.5 and
increased interest expense by $1.2 in the quarters ended September 30,
1998, June 30, 1998 and September 30, 1997 and decreased interest income by
$2.5 and increased interest expense by $2.4 in the nine months ended
September 30, 1998 and September 30, 1997. Without these swaps, net
interest margin would have been 3.86%, 3.95% and 4.05%, in the quarters
ended September 30 and June 30, 1998 and September 30, 1997 and 3.96% and
4.15% in the nine months ended September 30, 1998 and 1997.
15
<PAGE>
Net Interest Income/Margins. The Company's net interest margin of 3.87% for the
third quarter of 1998 was 17 basis points lower than the third quarter of last
year. The rate on earning assets was 7.61% in the third quarter of 1998 and
7.85% in the third quarter of 1997. At the same time, the rate on interest
bearing liabilities decreased 4 basis points due to the decrease in rates on
other short-term borrowings and time deposits.
Interest income, which the Company was unable to recognize on nonperforming
loans, had a negative impact of 1 basis point on the net interest margin in the
first nine months of both 1998 and 1997. Table 2 contains more detailed
information concerning average balances and interest yields earned and rates
paid.
The Company has evaluated the interest rate risk assumptions contained in the
annual report. Management continues to believe that our sensitivity to interest
rates is relatively neutral.
Noninterest Income. Noninterest income in the third quarter and the first nine
months of 1998, adjusted to exclude the effect of securities gains (losses),
increased $62.1 million, or 26.7%, and $189.6 million, or 27.6% from the
comparable periods a year ago. SunTrust Equitable Securities Corporation (SESC),
which was acquired on January 2, 1998, accounted for $9.3 million and $41.2
million of the increase in the third quarter and first nine months of this year.
Trust income, the Company's largest source of noninterest income, increased
$13.4 million, or 17.0%, and $44.8 million, or 19.0% over the same periods.
Mortgage fees increased $6.9 million, or 56.2% and $23.3 million, or 72.1% over
the same periods due to higher volume in our mortgage banking business. The
increase in loan volume is due to the increase in new home sales and refinancing
activity as long term interest rates have continued to decline in the past year.
Noninterest Income
(In millions)
<TABLE>
<CAPTION>
Quarters
-----------------------------------------------
1998 1997
-----------------------------------------------
3 2 1 4 3
-------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Trust income $ 92.5 $ 95.4 $ 93.1 $ 82.5 $ 79.0
Service charges on deposit accounts 67.2 62.7 62.1 63.8 62.4
Other charges and fees 34.1 33.7 32.6 28.0 27.2
Credit card fees 20.6 21.7 20.5 18.9 17.5
Mortgage fees 19.0 19.0 17.5 13.6 12.2
Corporate and institutional investment income 16.0 13.3 10.9 6.4 8.6
Retail investment income 10.2 12.8 10.4 8.4 8.3
Trading account profits and commissions 6.9 10.9 11.0 5.2 4.0
Securities gains (losses) (1.8) 2.0 0.9 0.4 0.1
Other income 28.5 25.4 27.3 20.2 13.6
======== ======== ======= ======= ========
Total noninterest income $ 293.2 $ 296.9 $286.3 $ 247.4 $ 232.9
======== ======== ======= ======= ========
</TABLE>
16
<PAGE>
Noninterest Expense. Noninterest expense increased $63.2 million, or 14.9% and
$189.8 million, or 15.2% in the third quarter and first nine months of 1998
compared to the same periods last year. Personnel expense, consisting of
salaries, other compensation and employee benefits, increased $47.3 million, or
19.5% and $126.4 million, or 17.8% over the third quarter and first nine months
of last year. The SESC acquisition accounted for $11.7 million, or 18.5% of the
total increase in noninterest expense in the third quarter. The increase in
other noninterest expense in the third quarter and first nine months of 1998
from the same periods in 1997 of $0.8 million, or 2.4% and $17.1 million, or
13.4% is due to expenditures made in connection with various projects to
stimulate business growth and development. The efficiency ratio increased from
59.1% in the third quarter of 1997 to 61.1% in the same quarter of this year.
Various growth projects accounted for the increase with most of the change due
to the acquisition of SESC. After adjusting for the purchase of SESC, the
efficiency ratio would have been 59.9% for the third quarter of 1998.
Noninterest Expense
(In millions)
<TABLE>
<CAPTION>
Quarters
-----------------------------------------------
1998 1997
-----------------------------------------------
3 2 1 4 3
-------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Salaries $ 202.4 $ 193.1 $ 183.8 $ 178.7 $ 175.2
Other compensation 60.0 56.5 51.2 42.9 39.2
Employee benefits 26.8 30.2 34.4 22.0 27.5
Net occupancy expense 33.4 32.9 33.1 30.9 30.9
Equipment expense 31.8 31.4 32.0 29.6 30.7
Outside processing and software 20.4 21.4 22.0 19.4 18.0
Marketing and customer development 15.6 18.5 17.3 19.2 15.9
Amortization of intangible assets 15.3 13.7 11.2 10.0 8.3
Communications 10.8 10.4 9.9 8.7 8.9
Postage and delivery 10.7 10.5 10.8 10.7 10.1
Operating supplies 9.4 9.4 9.0 9.8 8.7
Consulting and legal 8.3 8.7 7.3 9.3 8.1
FDIC premiums 1.6 1.3 1.3 1.3 1.3
Other real estate expense (4.4) (2.7) (2.4) (5.8) (3.1)
Other expense 45.5 47.5 50.2 47.2 44.7
======== ======== ======= ======= ========
Total noninterest expense $ 487.6 $ 482.8 $ 471.1 $ 433.9 $ 424.4
======== ======== ======= ======= ========
Efficiency ratio 61.1 % 60.2 % 60.1 % 58.5 % 59.1 %
</TABLE>
Provision for Loan Losses. The Company increased the provision for loan losses
in the third quarter of 1998 to $31.4 million from $29.0 million in the same
period last year. The provision exceeded net charge-offs by $3.5 million. Net
loan charge-offs were $79.2 million in the first nine months of this year,
representing 0.26% of average loans. The comparable net charge-off amount in
1997 was $63.1 million or 0.23% of average loans.
The Company's allowance for loan losses totaled $666.1 million at September 30,
1998, which was 1.55% of quarter-end loans and 472% of total nonperforming
loans. On September 30, 1997 these ratios were 1.68% and 418%.
17
<PAGE>
Summary of Loan Loss Experience
(Dollars in millions)
<TABLE>
<CAPTION>
Quarters
--------------------------------------------------------
1998 1997
--------------------------------------------------------
3 2 1 4 3
--------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for Loan Losses
Balances - beginning of quarter $ 662.6 $ 658.5 $ 651.8 $ 647.1 $ 639.8
Provision for loan losses 31.4 33.5 28.6 32.6 29.0
Charge-offs:
Commercial (10.9) (10.0) (4.8) (7.2) (6.8)
Real estate:
Construction - - (0.1) (0.4) (1.3)
Residential mortgages (2.0) (2.1) (1.6) (2.6) (2.0)
Other (0.3) (0.9) (0.9) (2.5) (1.3)
Lease financing (0.4) (0.4) (1.1) (0.6) (0.4)
Credit card (15.5) (17.6) (15.1) (13.4) (13.2)
Other consumer loans (9.9) (11.3) (12.3) (14.8) (12.4)
--------- --------- ---------- --------- ---------
Total charge-offs (39.0) (42.3) (35.9) (41.5) (37.4)
--------- --------- ---------- --------- ---------
Recoveries:
Commercial 2.8 2.8 3.9 4.9 4.3
Real estate:
Construction 0.1 0.1 0.1 0.7 1.0
Residential mortgages 0.3 0.7 0.3 0.4 0.2
Other 0.7 1.3 2.2 1.0 2.6
Lease financing 0.1 0.2 0.2 0.1 0.2
Credit card 1.6 2.4 1.8 1.6 2.0
Other consumer loans 5.4 5.4 5.5 4.9 5.4
--------- --------- ---------- --------- ---------
Total recoveries 11.1 12.9 14.0 13.6 15.7
--------- --------- ---------- --------- ---------
Net charge-offs (27.9) (29.4) (21.9) (27.9) (21.7)
--------- --------- ---------- --------- ---------
Balance - end of quarter $ 666.1 $ 662.6 $ 658.5 $ 651.8 $ 647.1
========= ========= ========== ========= =========
Quarter-end loans outstanding:
Domestic $ 42,548.7 $ 41,306.3 $ 41,001.9 $39,875.7 $ 38,185.3
International 340.8 341.0 262.1 259.8 290.2
========= ========= ========== ========= =========
Total $ 42,889.5 $ 41,647.3 $ 41,264.0 $40,135.5 $ 38,475.5
========= ========= ========== ========= =========
Ratio of allowance to quarter-end loans 1.55% 1.59% 1.60% 1.62% 1.68%
Average loans $ 42,115.9 $ 41,452.1 $ 40,526.4 $39,230.1 $ 37,898.9
Ratio of net charge-offs (annualized)
to average loans 0.26% 0.28% 0.22% 0.28% 0.23%
</TABLE>
18
<PAGE>
Nonperforming Assets
(Dollars in millions)
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------------------
September 30 June 30 March 31 December 31 September 30
------------ --------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Nonperforming Assets
Nonaccrual loans:
Commercial $ 37.4 $ 38.1 $ 20.6 $ 20.9 $ 35.2
Real Estate:
Construction 2.8 3.3 2.9 1.8 2.8
Residential mortgages 52.9 47.9 52.0 49.7 57.8
Other 39.2 38.8 42.6 41.2 47.1
Lease financing 1.9 2.1 2.3 3.0 0.7
Consumer loans 6.5 6.5 7.6 8.8 8.7
---------
--------- --------- --------- ----------
Total nonaccrual loans 140.7 136.7 128.0 125.4 152.3
Restructured loans 0.6 - 2.7 2.7 2.7
--------- --------- --------- --------- ----------
Total nonperforming loans 141.3 136.7 130.7 128.1 155.0
Other real estate owned 16.4 26.7 31.4 22.5 35.7
--------- --------- --------- --------- ----------
Total nonperforming assets $ 157.7 $ 163.4 $ 162.1 $ 150.6 $ 190.7
========= ========= ========= ========= ==========
Ratios:
Nonperforming loans to total loans 0.33% 0.33% 0.32% 0.32% 0.40%
Nonperforming assets to total loans
plus other real estate owned 0.37 0.39 0.39 0.37 0.50
Allowance to nonperforming loans 471.5 484.7 503.9 508.9 417.5
Accruing Loans Past Due
90 Days or More $ 38.7 $ 38.7 $ 43.3 $ 40.8 $ 41.4
</TABLE>
Nonperforming Assets. Nonperforming assets consist of nonaccrual loans,
restructured loans and other real estate owned. Nonperforming assets have
increased 4.7%, or $7.1 million since December 31, 1997 and decreased 17.3%, or
$33.0 million since September 30, 1997. Included in nonperforming loans at
September 30, 1998 are loans aggregating $14.2 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.
Interest income on nonaccrual loans, if recognized, is recorded on a cash basis.
During the first nine months of 1998, the gross amount of interest income that
would have been recorded on nonaccrual loans and restructured loans at September
30, 1998, if all such loans had been accruing interest at the original
contractual rate, was $9.2 million. Interest income recognized in the nine
months ended September 30, 1998 on all such nonperforming loans at September 30,
1998, was $5.0 million.
19
<PAGE>
Loan Portfolio by Types of Loans
(In millions)
<TABLE>
<CAPTION>
1998 1997
-----------------------------------------------------------
September 30 June 30 March 31 December 31 September 30
------------ --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Commercial:
Domestic $ 16,431.2 $ 15,428.1 $ 15,165.7 $ 14,139.9 $ 12,968.2
International 321.1 320.5 249.6 247.4 278.0
Real estate:
Construction 1,585.4 1,532.2 1,451.8 1,442.6 1,400.7
Residential mortgages 13,076.7 13,092.7 13,195.2 12,992.9 12,726.3
Other 4,972.0 4,887.3 4,820.5 4,778.7 4,766.4
Lease financing 855.0 825.9 783.1 725.7 663.6
Credit card 962.5 958.8 982.7 1,041.3 1,022.5
Other consumer loans 4,685.6 4,601.8 4,615.4 4,767.0 4,649.8
========== ========= ========== ========== ==========
Total loans $ 42,889.5 $ 41,647.3 $ 41,264.0 $ 40,135.5 $ 38,475.5
========== ========= ========== ========== ==========
</TABLE>
Loans. During the third quarter and first nine months of 1998, average loans
increased 11.1% and 12.0% over the same periods a year ago. Since December 31,
1997 domestic commercial loans increased $2.3 billion or 16.2%. The average loan
to deposit ratio was 115.1% and 113.5% in the third quarter and first nine
months of 1998 compared with 104.9% and 102.9% in the same periods of 1997.
At September 30, 1998, international outstandings, which include loans,
acceptances, deposits in other banks, foreign guarantees and accrued interest,
net of write-downs totaled $347.2 million, an increase of 21.2% from $286.4
million at December 31, 1997.
Income Taxes. The provision for income taxes was $82.1 million and $269.8
million in the third quarter and first nine months of 1998 compared to $87.7
million and $264.6 million in the same period last year. This represented a 30%
and 33% effective tax rate in the third quarter and first nine months of 1998
and an effective tax rate of 34% and 35% in the same periods last year. The
reduction in the effective tax rate for the third quarter and nine months ended
September 30, 1998 was the result of the favorable settlement of a Federal tax
examination for prior years.
Securities available for sale. Securities in the investment portfolio 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 shareholder's equity. 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
decreased from an average of 6.80% in the third quarter of 1997 to 6.66% in the
third quarter of this year. The portfolio size (measured at amortized cost)
increased by $3 million during the third quarter to $8.3 billion at quarter end.
The average life of the portfolio was approximately 1.7 years at September 30,
1998. At September 30, 1998, approximately 15% of the portfolio consisted of
U.S. Treasury securities, 8% U.S. government agency securities, 60%
mortgage-backed securities, 10% trust preferred securities and 7% municipal
securities (calculated as a percent of total par value). All of the Company's
holdings in mortgage-backed securities are backed by U.S. government or federal
agency guarantees limiting the credit risk associated with the mortgage loans.
At September 30, 1998, the carrying value of the securities portfolio was $2.9
billion over its amortized cost, consisting mostly of a $2.8 billion unrealized
gain on the Company's investment in common stock of The Coca-Cola Company.
20
<PAGE>
Liquidity Management. Liquidity is managed to ensure there is sufficient cash
flow to satisfy demand for credit, deposit withdrawals and attractive investment
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. 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 note program, commercial paper
issuance by the Parent Company, and Federal Home Loan Bank (FHLB) advances for
subsidiary banks who are FHLB members.
Average total deposits for the third quarter and first nine months of 1998
increased $0.5 billion, or 1.3%, and $0.5 billion, or 1.5% over the same periods
a year ago. Interest-bearing deposits represented 77.6% and 77.8% of average
deposits for the third quarter and first nine months of 1998, compared to 79.4%
and 79.3% for the same periods in 1997. In the third quarter of 1998, average
net purchased funds (average funds purchased less average funds sold) increased
$2.4 billion and $1.9 billion over the same periods in 1997. Net purchased funds
were 14.8% and 13.9% of average earning assets for the third quarter and first
nine months of 1998 as compared to 11.1% in the same periods a year ago.
Derivatives. The Company enters into various derivative 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 the Company's exposure to interest rate 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. Interest rate futures contracts are also
used but on a much more limited basis. The Company also monitors its sensitivity
to changes in interest rates and uses interest rate swap contracts to limit the
volatility of net interest income. Table 8 details interest rate swaps as of
September 30, 1998 used for managing interest rate sensitivity.
Interest Rate Swaps
(Dollars in millions)
<TABLE>
<CAPTION>
Average Maturity Average Average
Notional Value Fair Value In Months Rate Paid Rate Received
--------------- ----------------- ----------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Gain position:
Receive fixed $ 1,251.9 $ 87.7 56.9 5.63 % 6.44 %
Pay fixed 18.8 0.1 0.7 4.76 4.59
Basis swaps 250.0 0.8 6.7 4.49 4.60
--------------- -----------------
Total gain position 1,520.7 88.6
--------------- -----------------
Loss position:
Receive fixed - - - - -
Pay fixed 945.5 (43.0) 64.8 6.30 5.52
Basis swaps 750.0 (2.7) 37.8 4.76 4.86
--------------- -----------------
Total loss position 1,695.5 (45.7)
--------------- -----------------
Total $ 3,216.2 $ 42.9
=============== =================
</TABLE>
The swaps are designated as hedges on investments, deposits and other
interest-bearing liabilities. During the nine months ended September 30, 1998,
hedge swaps decreased net interest income by $2.5 million, compared with a $2.4
million decrease in the corresponding 1997 period.
21
<PAGE>
Capital Ratios
(Dollars in millions)
<TABLE>
<CAPTION>
1998 1997
------------------------------------ -------------------------
September 30 June 30 March 31 December 31 September 30
------------ ------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Tier 1 capital:
Realized shareholders' equity $ 3,496.0 $ 3,353.3 $ 3,443.2 $ 3,211.5 $ 3,172.2
Trust preferred securities 850.0 850.0 850.0 600.0 600.0
Intangible assets other than
servicing rights (345.0) (351.5) (357.9) (292.6) (286.2)
----------- ----------- ---------- ---------- ----------
Total Tier 1 capital 4,001.0 3,851.8 3,935.3 3,518.9 3,486.0
----------- ----------- ---------- ---------- ----------
Tier 2 capital:
Allowable allowance for
loan losses 652.2 639.8 633.9 600.1 566.0
Allowable long-term debt 950.0 950.0 950.0 950.0 1,055.1
Regulatory adjustment 1,251.6 1,857.0 1,119.4 965.6 -
----------- ----------- ---------- ---------- ----------
Total Tier 2 capital 2,853.8 3,446.8 2,703.3 2,515.7 1,621.1
----------- ----------- ---------- ---------- ----------
Total capital $ 6,854.8 $ 7,298.6 $ 6,638.6 $ 6,034.6 $ 5,107.1
=========== =========== ========== ========== ==========
Risk-weighted assets $ 53,416.1 $ 53,019.3 $51,805.4 $ 48,922.3 $ 45,201.7
Risk-based ratios:
Tier 1 capital 7.49% 7.26% 7.59% 7.19% 7.71%
Total capital 12.83 13.76 12.81 12.33 11.29
Tier 1 leverage ratio 7.10 6.89 7.16 6.59 6.74
Total shareholders' equity to assets 8.69 9.71 9.69 9.06 9.09
</TABLE>
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) or
Tier 2 (certain debt instruments and a portion of the allowance for loan
losses). The Company and its subsidiary banks are subject to a minimum Tier 1
capital ratio (Tier 1 capital to risk-weighted assets) of 4%, total capital
ratio (Tier 1 plus Tier 2 to risk-weighted assets) of 8% and Tier 1 leverage
ratio (Tier 1 to average quarterly assets) of 3%.
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 Regulator'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%. Forty-five percent of the unrealized gains on equity securities of The
Coca-Cola Company are included in the Tier 2 capital calculation. At September
30, 1998, the Company's Tier 1 capital, total risk-based capital and Tier 1
leverage ratios were 7.49%, 12.83% and 7.10%, respectively. SunTrust is
committed to maintaining well capitalized banks.
In April 1997, the Board of Directors authorized the Company to repurchase up to
15,000,000 shares of SunTrust common stock. As reported in the Form 8-K filed on
July 21, 1998, the Company ceased its share repurchase program in anticipation
of the merger with Crestar Financial Corporation. The total number of shares
repurchased under this program was 5,710,306.
22
<PAGE>
Year 2000. The Year 2000 issue is the result of computer programs using a
two-digit format, as opposed to four-digits, to indicate the year. These
computer systems will be unable to interpret dates beyond the year 1999, which
could cause a system failure or other computer errors, leading to disruptions in
operations. In addition, many software programs and automated systems will fail
to recognize the year 2000 as a leap year. The problem is not limited to
computer systems, or any particular industry or field. Year 2000 issues will
potentially affect every system that has an embedded microchip containing this
flaw, such as alarm systems, vaults and elevators.
SunTrust is committed to addressing the Year 2000 challenges in a prompt and
responsible manner. It has dedicated resources to do so with the goal that
systems and services will not be compromised or otherwise negatively impacted by
computer-based entries and record keeping related to the century date change.
The SunTrust Year 2000 Project Oversight Program (the "Year 2000 Program") has
been active since 1996. Each of 28 banks and 15 non-bank subsidiaries in the
SunTrust system has a Year 2000 Project Manager who reports directly to a
central Project Director at SunTrust, who is coordinating the Year 2000 Program.
The Project Director reports on a monthly basis to the Chief Financial Officer,
who reports on a quarterly basis to the SunTrust Board of Directors. SunTrust
prepared a compliance manual in conjunction with an outside Year 2000 expert,
which is used by the Project Director and all Project Managers to ensure that
the Year 2000 Program is implemented in a uniform manner. In addition, all
SunTrust entities use uniform status reporting in connection with the Year 2000
Program. Furthermore, additional committees have been established throughout
SunTrust to identify, address and mitigate key Year 2000 risks in the
organization.
Within SunTrust, each business unit is responsible for renovation and testing of
the systems within their control, such as personal computers, facilities, and
locally used forms. SunTrust Service Corporation, SunTrust's central operations
and information technology group, provides services for certain business units
within the SunTrust system, and is responsible for renovation and testing of
systems relating to those services. SunTrust's Year 2000 Program has four
phases: inventory, assessment, remediation and testing. The inventory phase, in
which SunTrust determined all areas with potential Year 2000 issues, was
completed in early 1997. This included SunTrust's information technology systems
as well as equipment such as elevators, bank alarms, vault locks, etc. that may
contain embedded microprocessors. The assessment phase, in which SunTrust made a
determination as to the method of remediation, was substantially completed in
February, 1998. The remediation and testing phases are currently in progress.
Wherever practical, SunTrust is making remediation a normal part of business
practice. SunTrust has over 1400 computer based applications, and decisions on
remediation are made on an individual case-by-case basis. The testing phase has
two components: readiness testing and enterprise testing. Enterprise testing is
subdivided into three phases, with the first two phases covering substantially
all the mission-critical applications, and the third phase covering the less
critical applications. A final phase may be scheduled which would provide an
opportunity to retest critical applications that were tested in the previous
phases. A technical quality assurance group evaluates the progress of test
results, while SunTrust's Internal Audit and Risk Management departments provide
continuous independent oversight.
In accordance with standards established by the Federal Financial Institution's
Examination Counsel (FFIEC), SunTrust will be substantially complete with
remediation and testing of mission-critical applications by December 31, 1998.
SunTrust expects to be substantially complete with non-mission-critical
applications at the end of the first quarter of 1999. SunTrust uses dedicated
test equipment in order to minimize risk to current operations. That equipment
will be used for ongoing operations at the end of the testing phase.
23
<PAGE>
The standards established by the FFIEC on Year 2000 matters for financial
institutions cover a variety of topics, including guidance on testing, customer
risk assessment and contingency planning. SunTrust is engaged in a regular
dialogue with the regulatory agencies and discloses its status, at a minimum, on
a quarterly basis. The FFIEC guidelines are available to the public on the
Internet at www.ffiec.gov.
SunTrust's operations, like those of many other companies, are intertwined with
the operations of certain of its business partners. Accordingly, SunTrust's
operations could be materially affected if the operations of those companies who
provide SunTrust with mission-critical applications, systems and services are
materially affected. For example, SunTrust depends on service providers and
vendors who provide equipment, technology and software to it in connection with
its business operations. Failure of these parties to achieve Year 2000 readiness
could substantially affect SunTrust's operations. In response to this concern,
SunTrust is in constant dialogue with key service providers and is performing
due diligence over their remediation and testing efforts. Service providers are
required to inform SunTrust in writing of their expected Year 2000 compliance
date. The majority of service providers have reported that they will be Year
2000 compliant by December 31, 1998. SunTrust also monitors the progress of
vendors in their remediation efforts and has made case-by-case decisions as to
whether to continue the relationship with the vendor or to replace the product
or service with one from another vendor. All mission-critical vendors have
informed SunTrust that they will be Year 2000 compliant by December 31, 1998.
The inability of SunTrust or its material suppliers to effectuate solutions to
their respective Year 2000 issues on a timely and cost-effective basis may have
a material adverse effect on SunTrust.
SunTrust has completed its Year 2000 contingency planning strategy document, and
this document has been distributed to each Project Manager. Contingency plans
incorporate a review of Year 2000 risk and normal business risk. Should Year
2000 compliance not be achieved by the specific deadlines, SunTrust has
developed a contingency plan for each system or service. The contingency plans
document the action SunTrust will take for each such non-compliant system. Since
the worst case scenarios are difficult or even impossible to predict at this
time, these contingency plans are particularly challenging. SunTrust intends to
revise them as necessary on an ongoing basis until all problems are confronted
and resolved.
It is possible that SunTrust's automated systems, such as alarm systems, vaults,
elevators and phone services, could be disrupted through the loss of utilities,
such as electricity, water, telephone and other occurrences outside of
SunTrust's control. SunTrust is in contact with its outside providers of
services on an ongoing basis to evaluate their progress in addressing the Year
2000 problem. To the extent possible, SunTrust's contingency plans will
incorporate these risks into current business recovery plans.
SunTrust has performed an assessment of Year 2000 readiness with funds providers
and funds takers. SunTrust is undertaking a comprehensive due diligence process
in order to address the potential for fiduciary risks associated with computer
malfunctions at customers' locations and businesses whose stock or assets are
held in trust by SunTrust. These processes are ongoing and will continue into
1999.
Management believes it has taken all reasonable steps to minimize the
operational, regulatory and legal risks associated with the century date change.
In spite of all efforts being made to rectify these problems, SunTrust could be
subject to formal supervisory or enforcement actions relating to Year 2000
issues. Furthermore, SunTrust, like other commercial banks, may experience a
contraction in the deposit base if a significant amount of deposited funds are
withdrawn by customers prior to the year 2000. This potential deposit
contraction could make it necessary for SunTrust to change funding sources and
increase the cost of funding in general. SunTrust has a committee specifically
addressing Year 2000 liquidity issues. This committee has determined that there
are no high-risk funds providers in its portfolio.
24
<PAGE>
It is impossible to determine what impact, if any, Year 2000 will have on the
loan payment performance of SunTrust's borrowers. Borrowers may suffer Year 2000
related difficulties making them unable to repay their loans according to the
agreed upon terms. SunTrust is assessing this risk and has implemented new
procedures, including additional loan documentation to identify Year 2000
related issues. This information is summarized and reported to the Board of
Directors on a periodic basis. None of SunTrust's borrowers has reported the
expectation of material adverse impacts as a result of Year 2000.
All companies with stock traded on a national stock exchange, including
SunTrust, could experience a drop in stock price as investors change their
investment portfolios or sell stock prior to the millennium. At this time, it is
impossible to predict whether or not this will be the case with respect to
SunTrust stock.
Due to the extensive nature of changes made in preparation for year 2000,
certain data processing projects have been deferred. These projects will be
implemented upon completion of Year 2000 related project activities. At this
time, management does not foresee any financial impact from these decisions.
SunTrust estimates that the total cost of the extraordinary, one time expenses
associated with Year 2000 issues will be approximately $45 million, on a pre-tax
basis. SunTrust is funding this out of current revenues. All Year 2000 costs
will continue to be expensed as incurred. $29.6 million of these expenses have
already been incurred since the inception of the program, which represents 65%
of the projected expenditures. Included in this are expenses for replacement of
non-compliant software and personnel costs associated with programming, testing
and implementing software. At this time, management does not believe these
expenses will have a material effect on the operations or financial performance
of SunTrust.
The above discussion of Year 2000 issues includes numerous forward-looking
statements reflecting management's current assessment and estimates with respect
to SunTrust's Year 2000 compliance efforts and the impact of Year 2000 issues on
SunTrust's business and operations. These statements are based on information
currently available to management. Various factors could cause actual results to
differ materially from those contemplated by such assessment, estimates and
forward-looking statements, including many factors that are beyond the control
of SunTrust. These factors include, but are not limited to: (a) the success of
SunTrust in identifying systems and programs that are not Year 2000 compliant,
(b) the continuing availability of experienced consultants and information
technology personnel, (c) the nature and amount of programming required to
upgrade or replace each of the affected programs, (d) the ability of third
parties to complete their own Year 2000 remediations on a timely basis, and (e)
the ability of SunTrust to implement contingency plans.
25
<PAGE>
Financial Highlights - Banking Subsidiaries
(Dollars in millions)
<TABLE>
<CAPTION>
SunTrust Banks SunTrust Banks SunTrust Banks
of Florida, Inc. of Georgia, Inc. of Tennessee, Inc.
-------------------- -------------------- --------------------
1998 1997 1998 1997 1998 1997
---------- -------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Summary of Operations (1)
Net interest income (FTE) $ 774.6 $ 751.9 $ 529.8 $ 490.8 $ 223.5 $ 219.9
Provision for loan losses 27.6 31.0 17.6 15.6 5.7 6.6
Trust income 130.5 115.6 101.7 85.3 32.9 28.6
Other noninterest income 283.0 228.9 172.2 149.4 74.8 64.9
Personnel expense 278.9 258.1 184.0 170.9 87.6 82.9
Other noninterest expense 394.8 370.3 253.6 219.1 103.3 93.4
Net income 301.8 268.3 226.2 208.2 83.2 80.6
Selected Average Balances (1)
Total assets 27,586 25,270 22,919 21,122 8,070 7,518
Earning assets 25,984 23,822 17,907 16,542 7,742 7,235
Loans 19,815 17,954 14,883 13,151 6,097 5,624
Total deposits 19,017 18,364 11,508 11,838 6,021 5,766
Realized shareholders' equity 2,227 2,078 1,647 1,493 641 600
At September 30
Total assets 28,021 26,055 23,687 21,440 8,319 7,723
Earning assets 26,448 24,368 19,345 16,887 8,012 7,345
Loans 20,338 18,550 15,682 13,780 6,295 5,763
Allowance for loan losses 388 385 206 202 110 113
Total deposits 19,049 18,372 11,718 11,908 5,843 5,957
Realized shareholders' equity 2,359 2,150 1,815 1,634 664 627
Total shareholders' equity 2,386 2,170 3,553 3,465 674 635
Credit Quality
Net loan charge-offs (1) 18.9 15.1 12.5 9.0 5.1 7.8
Nonperforming loans (2) 87.9 90.5 38.7 49.2 14.1 14.9
Other real estate owned (2) 9.5 21.8 2.2 3.2 4.8 10.4
Ratios
ROA (3) 1.46% 1.42% 1.56% 1.53% 1.38% 1.43%
ROE (3) 18.12 17.27 18.36 18.65 17.36 17.95
Net interest margin (3) 3.99 4.22 3.96 3.97 3.86 4.06
Efficiency ratio (3) 56.70 57.31 54.44 53.75 57.62 56.23
Total shareholder's equity/assets (2) 8.51 8.33 15.00 16.16 8.10 8.22
Net loan charge-offs to average loans (3) 0.13 0.12 0.11 0.09 0.12 0.19
Nonperforming loans to total loans (2) 0.44 0.50 0.25 0.36 0.23 0.26
Nonperforming assets to total loans plus
other real estate owned (2) 0.49 0.62 0.26 0.39 0.31 0.45
Allowance to loans (2) 1.95 2.13 1.33 1.49 1.79 2.00
Allowance to nonperforming loans (2) 441.5 425.9 533.2 410.8 779.9 757.4
</TABLE>
(1) For the nine month period ended September 30.
(2) At September 30.
(3) Annualized for the first nine months.
26
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
None
B. Reports on Form 8-K
The Registrant filed a Current Report on Form 8-K dated
July 21, 1998 reporting that the Registrant and Crestar
Financial Corporation had entered into a definitive
agreement and plan of merger providing for the merger of
a wholly owned subsidiary of the Registrant with and
into Crestar.
The Registrant filed a Current Report on Form 8-K dated
August 13, 1998. The purpose of this report was to file
as an exhibit certain financial statements for Crestar
Financial Corporation.
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 13th day of November, 1998.
SunTrust Banks, Inc.
--------------------
(Registrant)
/s/ W.P. O'Halloran
-------------------
William P. O'Halloran
Senior Vice President and Controller
(Chief Accounting Officer)
27
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,190,913
<INT-BEARING-DEPOSITS> 28,168,612
<FED-FUNDS-SOLD> 1,333,582
<TRADING-ASSETS> 200,479
<INVESTMENTS-HELD-FOR-SALE> 11,455,372
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 42,889,478
<ALLOWANCE> 666,146
<TOTAL-ASSETS> 60,841,318
<DEPOSITS> 36,482,977
<SHORT-TERM> 11,102,220
<LIABILITIES-OTHER> 3,366,452
<LONG-TERM> 4,605,319
213,108
0
<COMMON> 0
<OTHER-SE> 5,071,242
<TOTAL-LIABILITIES-AND-EQUITY> 60,841,318
<INTEREST-LOAN> 2,456,936
<INTEREST-INVEST> 412,602
<INTEREST-OTHER> 50,603
<INTEREST-TOTAL> 2,920,141
<INTEREST-DEPOSIT> 851,251
<INTEREST-EXPENSE> 1,437,037
<INTEREST-INCOME-NET> 1,483,104
<LOAN-LOSSES> 93,465
<SECURITIES-GAINS> 2,872
<EXPENSE-OTHER> 1,441,488
<INCOME-PRETAX> 824,517
<INCOME-PRE-EXTRAORDINARY> 554,716
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 554,716
<EPS-PRIMARY> 2.68
<EPS-DILUTED> 2.64
<YIELD-ACTUAL> 3.95
<LOANS-NON> 141,300
<LOANS-PAST> 38,700
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 651,830
<CHARGE-OFFS> 117,103
<RECOVERIES> 37,959
<ALLOWANCE-CLOSE> 666,146
<ALLOWANCE-DOMESTIC> 666,146
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 432,995
</TABLE>
