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 JUNE 30, 1999
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 July 31, 1999, 321,719,382 shares of the Registrant's Common Stock, $1.00 par
value were outstanding.
<PAGE>
TABLE OF CONTENTS
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 7-12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-26
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
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 six months ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the full year
1999.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
---------------------------- ------------------------------
(Dollars in thousands except per share data)(Unaudited) 1999 1998 1999 1998
------------ ------------- ------------ ---------------
<S> <C>
INTEREST INCOME
Interest and fees on loans $ 1,201,159 $ 1,188,785 $ 2,402,712 $ 2,339,932
Interest and dividends on securities available for sale
Taxable interest 208,012 193,584 405,596 379,888
Tax-exempt interest 7,871 9,100 15,807 18,372
Dividends (1) 15,906 13,503 31,542 27,536
Interest on funds sold 16,528 17,224 32,003 40,192
Interest on deposits in other banks 184 984 1,892 2,817
Other interest 2,876 2,358 4,954 4,624
------------ ------------ ------------ ------------
Total interest income 1,452,536 1,425,538 2,894,506 2,813,361
------------ ------------ ------------ ------------
INTEREST EXPENSE
Interest on deposits 391,627 416,304 785,766 826,426
Interest on funds purchased 172,391 155,154 341,688 301,240
Interest on other short-term borrowings 16,797 37,329 37,085 70,642
Interest on long-term debt 86,919 82,270 175,347 160,786
------------ ------------ ------------ ------------
Total interest expense 667,734 691,057 1,339,886 1,359,094
------------ ------------ ------------ ------------
NET INTEREST INCOME 784,802 734,481 1,554,620 1,454,267
Provision for loan losses 48,822 55,240 90,817 106,962
------------ ------------ ------------ ------------
Net interest income after provision for loan losses 735,980 679,241 1,463,803 1,347,305
------------ ------------ ------------ ------------
NONINTEREST INCOME
Trust income 126,285 116,297 252,605 229,497
Service charges on deposit accounts 107,067 97,609 213,181 192,844
Other charges and fees 95,937 89,474 189,056 173,517
Credit card fees 28,222 22,854 51,349 43,684
Retail investment services 26,001 18,491 49,516 33,334
Corporate and institutional investment services 16,310 12,223 34,990 21,761
Trading account profits and commissions 11,437 12,376 22,026 24,617
Securities (losses) gains 3,879 4,503 3,147 8,027
Other noninterest income 54,195 47,464 98,390 92,669
------------ ------------ ------------ ------------
Total noninterest income 469,333 421,291 914,260 819,950
------------ ------------ ------------ ------------
NONINTEREST EXPENSE
Salaries and other compensation 389,261 349,464 772,196 678,647
Employee benefits 41,535 46,157 95,918 96,925
Net occupancy expense 49,937 46,966 97,606 93,291
Equipment expense 49,799 43,949 95,088 88,118
Outside processing and software 38,749 34,602 73,523 67,762
Amortization of intangible assets 24,929 26,750 50,611 48,513
Marketing and customer development 23,875 25,638 45,665 49,714
Merger-related expenses 17,547 - 31,391 -
Other noninterest expense 116,673 114,570 231,205 225,512
------------ ------------ ------------ ------------
Total noninterest expense 752,305 688,096 1,493,203 1,348,482
------------ ------------ ------------ ------------
Income before provision for income taxes 453,008 412,436 884,860 818,773
Provision for income taxes 159,345 141,008 309,460 282,411
------------ ------------ ------------ ------------
NET INCOME $ 293,663 $ 271,428 $ 575,400 $ 536,362
============ ============ ============ ============
Average common shares - diluted 322,448,490 319,688,680 322,406,414 320,006,255
Average common shares - basic 318,315,379 314,998,914 318,203,347 315,336,552
Net income per average common share - diluted $ 0.91 $ 0.85 $ 1.78 $ 1.68
Net income per average common share - basic 0.92 0.86 1.81 1.70
Dividends declared per common share 0.345 0.250 0.690 0.500
(1) INCLUDES DIVIDENDS ON COMMON STOCK OF
THE COCA-COLA COMPANY 7,722 7,240 15,445 14,480
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30 December 31 June 30
(Dollars in thousands) (Unaudited) 1999 1998 1998
------------- ------------- -------------
<S> <C>
ASSETS
Cash and due from banks $ 3,786,251 $ 4,289,889 $ 3,975,179
Trading account 240,648 239,665 181,980
Securities available for sale (1) 18,384,169 17,559,043 17,583,668
Funds sold 1,417,290 1,786,945 2,038,349
Loans 65,331,095 65,089,201 59,778,685
Allowance for loan losses (941,444) (944,557) (908,908)
------------- ------------- -------------
Net loans 64,389,651 64,144,644 58,869,777
Premises and equipment 1,618,936 1,519,711 1,466,260
Intangible assets 819,020 797,045 747,887
Customers' acceptance liability 350,865 628,235 388,423
Other assets 2,213,051 2,204,755 2,233,682
------------- ------------- -------------
Total assets $ 93,219,881 $ 93,169,932 $ 87,485,205
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits $ 13,441,890 $ 14,065,720 $ 12,859,733
Interest-bearing deposits 46,918,195 44,967,563 42,016,470
------------- ------------- -------------
Total deposits 60,360,085 59,033,283 54,876,203
Funds purchased 13,558,897 13,295,833 11,250,181
Other short-term borrowings 1,761,156 2,636,986 3,533,654
Long-term debt 4,519,796 4,757,869 4,697,899
Guaranteed preferred beneficial interests in debentures 1,050,000 1,050,000 800,000
Acceptances outstanding 350,865 628,235 388,423
Other liabilities 3,426,415 3,589,082 3,770,474
------------- ------------- -------------
Total liabilities 85,027,214 84,991,288 79,316,834
------------- ------------- -------------
Preferred stock, no par value; 50,000,000 shares authorized; none issued - - -
Common stock, $1.00 par value 323,012 322,485 320,839
Additional paid in capital 1,303,609 1,293,011 1,228,116
Retained earnings 4,930,193 4,575,382 4,319,692
Treasury stock and other (93,762) (100,441) (326,058)
------------- ------------- -------------
Realized shareholders' equity 6,463,052 6,090,437 5,542,589
Accumulated other comprehensive income 1,729,615 2,088,207 2,625,782
------------- ------------- -------------
Total shareholders' equity 8,192,667 8,178,644 8,168,371
------------- ------------- -------------
Total liabilities and shareholders' equity $ 93,219,881 $ 93,169,932 $ 87,485,205
============= ============= =============
Common shares outstanding 321,632,977 321,124,134 316,444,515
Common shares authorized 500,000,000 500,000,000 500,000,000
Treasury shares of common stock 1,379,469 1,360,928 4,394,490
(1) Includes net unrealized gains on securities available for sale $ 2,805,074 $ 3,379,725 $ 4,252,600
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Six Months
Ended June 30
--------------------------
(Dollars in thousands) (Unaudited) 1999 1998
----------- -----------
<S> <C>
Cash flows from operating activities:
Net income $ 575,400 $ 536,362
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation, amortization and accretion 138,982 136,857
Provisions for loan losses and foreclosed property 92,972 107,946
Amortization of compensation element of restricted stock 6,741 5,155
Securities gains (3,147) (8,027)
Net (gain) loss on sales of assets (14,106) 4,511
Net decrease (increase) in loans held for sale 1,137,918 (1,433,751)
Net increase in accrued interest receivable,
prepaid expenses and other assets (194,446) (1,082,554)
Net increase in accrued interest payable, accrued
expenses and other liabilities 53,393 233,304
----------- -----------
Net cash provided by (used in) operating activities 1,793,707 (1,500,197)
----------- -----------
Cash flows from investing activities:
Proceeds from maturities of securities available for sale 2,286,636 1,960,467
Proceeds from sales of securities available for sale 1,839,713 3,225,550
Purchases of securities available for sale (5,522,642) (5,632,163)
Net increase in loans (1,429,064) (1,684,272)
Capital expenditures (166,306) (102,017)
Proceeds from the sale of assets 23,181 199,250
Net funds received in acquisitions - 13,420
Loan recoveries 35,045 38,785
----------- -----------
Net cash used in investing activities (2,933,437) (1,980,980)
----------- -----------
Cash flows from financing activities:
Net increase in deposits 1,326,802 295,419
Net (decrease) increase in funds purchased
and other short-term borrowings (612,766) 1,522,321
Proceeds from the issuance of long-term debt 90,272 1,835,468
Repayment of long-term debt (328,345) (347,927)
Proceeds from stock issuance 11,063 56,256
Proceeds used in the acquisition and retirement of stock - (303,540)
Dividends paid (220,589) (173,489)
----------- -----------
Net cash provided by financing activities 266,437 2,884,508
----------- -----------
Net decrease in cash and cash equivalents (873,293) (596,669)
Cash and cash equivalents at beginning of period 6,076,834 6,610,197
----------- -----------
Cash and cash equivalents at end of period $ 5,203,541 $ 6,013,528
=========== ===========
Supplemental Disclosure
Interest paid $ 1,363,341 $ 1,352,223
Income taxes paid 239,106 179,544
</TABLE>
See notes to consolidated financial statements
5
<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>
BALANCE, JANUARY 1, 1998 $ 318,571 $ 1,087,511 $ 3,967,359 $ (109,503) $ 2,048,153 $ 7,312,091
Net income - - 536,362 - - 536,362
Other comprehensive income:
Change in unrealized gains (losses) on
securities, net of taxes - - - - 577,629 577,629
Total comprehensive income - - - - - 1,113,991
Cash dividends declared, $0.500 per share - - (173,489) - - (173,489)
Exercise of stock options 319 (6,047) - 15,606 - 9,878
Acquisition and retirement of stock (190) - (10,540) (292,810) - (303,540)
Amortization of compensation element
of restricted stock - - - 5,155 - 5,155
Stock issued for acquisitions 1,500 109,268 - 47,139 - 157,907
Issuance of stock for employee benefit plans 639 37,384 - 8,355 - 46,378
--------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1998 $ 320,839 $ 1,228,116 $ 4,319,692 $ (326,058) $ 2,625,782 $ 8,168,371
======================================================================================
BALANCE, JANUARY 1, 1999 $ 322,485 $ 1,293,011 $ 4,575,382 $ (100,441) $ 2,088,207 $ 8,178,644
Net income - - 575,400 - - 575,400
Other comprehensive income:
Change in unrealized gains (losses) on
securities, net of taxes - - - - (358,592) (358,592)
Total comprehensive income - - - - - 216,808
Cash dividends declared, $0.690 per share - - (220,589) - - (220,589)
Exercise of stock options 470 6,714 - - - 7,184
Amortization of compensation element
of restricted stock - - - 6,741 - 6,741
Issuance of stock for employee benefit plans 57 3,884 - (62) - 3,879
--------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1999 $ 323,012 $ 1,303,609 $ 4,930,193 $ (93,762) $ 1,729,615 $ 8,192,667
======================================================================================
</TABLE>
* Balance at June 30, 1998 includes $264,532 for Treasury Stock and $61,526 for
Deferred Compensation.
Balance at June 30, 1999 includes $29,493 for Treasury Stock and $64,269 for
Deferred Compensation.
See notes to consolidated financial statements
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - ACCOUNTING POLICIES
The consolidated interim financial statements of SunTrust Banks, Inc.
("SunTrust") are unaudited. All significant intercompany accounts and
transactions have been eliminated. All historical information for SunTrust has
been restated to include Crestar historical information for all periods
presented. These financial statements should be read in conjunction with the
Annual Report on Form 10-K for the year ended December 31, 1998.
NOTE 2 - ACQUISITIONS
On December 31, 1998, SunTrust merged with Crestar Financial Corporation
(Crestar). Each outstanding share of Crestar common stock was exchanged for 0.96
shares of SunTrust common stock, resulting in the issuance of 108,696,877 shares
of SunTrust common stock. The business combination was accounted for using the
pooling-of-interests method of accounting. Accordingly, all historical financial
information of SunTrust for all periods presented has been restated to include
Crestar's financial information. Certain conforming adjustments and
reclassifications have been made to Crestar's historical information to conform
to SunTrust's accounting and financial reporting policies. These adjustments,
which relate primarily to the accounting policies with respect to loan
origination costs, did not have a material impact on the combined financial
statements. During 1998, SunTrust recorded $161.9 million in pre-tax Crestar
merger-related charges. The following table shows these merger-related charges
and the remaining liability at June 30, 1999.
<TABLE>
<CAPTION>
Merger-Related Charges Utilized Balance Utilized Balance
(In thousands) Pretax In 1998 December 31, 1998 In 1999 June 30, 1999
--------- ------------- ---------------------- ----------- ---------------
<S> <C>
Transaction costs $ 40,300 $ 6,858 $ 33,442 $ 33,442 $ -
Severance and termination accruals 38,900 - 38,900 21,938 16,962
Adjustment to deferred compensation liabilities 11,319 11,319 - - -
Litigation loss reserve 7,500 7,500 - - -
Write-off of unrealizable assets 17,400 17,400 - - -
Miscellaneous integration costs 4,000 1,296 2,704 2,704 -
-------- -------- -------- -------- --------
Merger-related expenses 119,419 44,373 75,046 58,084 16,962
-------- -------- -------- -------- --------
Provision for loan losses 20,000 20,000 - - -
Provision for taxes 22,500 22,500 - - -
======== ======== ======== ======== ========
Total merger-related charges $161,919 $ 86,873 $ 75,046 $ 58,084 $ 16,962
======== ======== ======== ======== ========
</TABLE>
At December 31, 1998, SunTrust expected to record approximately $88 million in
additional merger-related charges primarily related to systems conversions and
business line integration over the next 18 to 24 months. For the first six
months of 1999, $31.4 million ($23.0 million after-tax) of these additional
merger-related charges were recorded. These charges included $13.6 million in
accelerated depreciation and amortization based upon estimates of systems
integration time tables, $10.8 million in severance and $7.0 million in
miscellaneous integration costs. SunTrust expects to record additional
merger-related charges of approximately $57.0 million through the year 2000.
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
NOTE 3 - DERIVATIVE FINANCIAL INSTRUMENTS
SunTrust used derivatives to hedge interest rate exposures by modifying the
interest rate characteristics of related balance sheet instruments. The specific
criteria required for derivatives used as hedges are described below.
Derivatives that do not meet these criteria are carried at market value with
changes in value recognized currently in earnings.
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 may
include swaps, forwards, futures and options. The interest component associated
with derivatives used as hedges or to modify the interest rate characteristics
of assets and liabilities is recognized over the life of the contract in net
interest income. If a contract is cancelled prior to its termination date, the
cumulative change in the market value of the 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. In instances where the underlying instrument is
sold, the fair value of the associated derivative is recognized immediately in
the component of earnings relating to the underlying instrument.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including derivative instruments
embedded in other contracts and for hedging activities. It requires that an
entity recognizes 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. In June of 1999, SFAS No.
133 was amended by SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133".
SFAS No. 137 delays the effective date of SFAS No. 133 for a year or for all
fiscal years beginning after June 15, 2000. SunTrust will adopt SFAS No. 133
effective January 1, 2001 and although SunTrust has begun an in-depth analysis
to determine the effects of the implementation, currently it is not expected to
have a material impact on SunTrust's financial position or results of
operations.
NOTE 4 - GUARANTEED PREFERRED BENEFICIAL INTERESTS IN DEBENTURES
SunTrust has established special purpose trusts, which collectively issued
$1,050 million in trust preferred securities. The proceeds from these issuances,
together with the proceeds of the related issuances of common securities of the
trusts, were invested in junior subordinated deferrable interest debentures of
SunTrust. The sole assets of these special purpose trusts are the debentures.
These debentures rank junior to the senior and subordinated debt issued by
SunTrust. SunTrust owns all of the common securities of the special purpose
trusts. The preferred securities issued by the trusts rank senior to the trusts'
common securities. The obligations of SunTrust under the debentures, the
indentures, the relevant trust agreements and the guarantees, in the aggregate,
constitute a full and unconditional guarantee by SunTrust of the obligations of
the trusts under the trust preferred securities and rank subordinate and junior
in right of payment to all liabilities of SunTrust. The trust preferred
securities may be called prior to maturity at the option of SunTrust.
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
NOTE 5 - COMPREHENSIVE INCOME
Under Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income", some transactions and other economic events that bypass
the income statement must be displayed as other comprehensive income. SunTrust'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 six months of 1999 and 1998 is calculated as
follows:
(In thousands)
<TABLE>
<CAPTION>
Before Income Income Net of Income
Tax (Benefit) Tax (Benefit) Tax (Benefit)
------------- ------------ --------------
<S> <C>
Unrealized gains and losses (net) recognized in other comprehensive income:
Six months ended June 30, 1999 $ (574,651) $ (216,059) $ (358,592)
Six months ended June 30, 1998 $ 931,657 $ 354,028 $ 577,629
1999 1998
---- ----
Amounts reported in net income:
Gain on sale of securities $ 3,147 $ 8,027
Amortization and accretion, net 2,999 1,967
------------- ------------
Reclassification adjustment 6,146 9,994
Income tax expense (2,311) (3,798)
------------- ------------
Reclassification adjustment, net of tax $ 3,835 $ 6,196
============= ============
Amounts reported in other comprehensive income:
Unrealized (losses) gains arising during period, net of tax (354,757) 583,825
Reclassification adjustment, net of tax (3,835) (6,196)
------------- ------------
Net unrealized (losses) gains recognized in
other comprehensive income (358,592) 577,629
Net income 575,400 536,362
------------- ------------
Total comprehensive income $ 216,808 $1,113,991
============= ============
</TABLE>
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
NOTE 6 - EARNINGS PER SHARE RECONCILIATION
Net income is the same in the calculation of basic and diluted EPS. A
reconciliation of the difference between average basic common shares outstanding
and average diluted common shares outstanding for the periods ended June 30,
1999 and June 30, 1998 is included in the following table.
Computation of Per Share Earnings
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C>
BASIC
Net income $293,663 $271,428 $575,400 $536,362
-------- -------- -------- --------
Average common shares 318,315 314,999 318,203 315,337
-------- -------- -------- --------
Earnings per common share - basic $ 0.92 $ 0.86 $ 1.81 $ 1.70
======== ======== ======== ========
DILUTED
Net income $293,663 $271,428 $575,400 $536,362
-------- -------- -------- --------
Average common shares outstanding 318,315 314,999 318,203 315,337
Effect of dilutive securities:
Stock options 2,467 3,024 2,554 3,028
Performance restricted stock 1,666 1,666 1,649 1,641
-------- -------- -------- --------
Average diluted common shares 322,448 319,689 322,406 320,006
-------- -------- -------- --------
Earnings per common share - diluted $ 0.91 $ 0.85 $ 1.78 $ 1.68
======== ======== ======== ========
</TABLE>
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
NOTE 7 - SEGMENT REPORTING
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", requires disclosure of information related to SunTrust's
reportable operating segments. The reportable segments were determined based on
management's internal reporting approach, which is aligned along geographic
regions. The reportable segments are comprised of each of the state bank holding
companies of Florida, Georgia, Tennessee, and Crestar (which includes Virginia,
Maryland and the District of Columbia). Each bank holding company provides a
wide array of banking services to consumer and commercial customers and earns
interest income from loans made to customers and investments in securities
available for sale. Each bank holding company also recognizes fees related to
trust, deposit, lending and other services provided to customers. The "all
other" segment consists primarily of SunTrust's non-bank subsidiaries, including
SunTrust's credit card bank. Most of the revenue earned by the non-bank
subsidiaries is classified in noninterest income and consists primarily of
mortgage banking fees and retail, corporate, and institutional investment
income. No transactions with a single customer contributed 10% or more to
SunTrust's total revenue. The accounting policies for each segment are the same
as those used by SunTrust. The segment results include overhead allocations and
intercompany transactions that were recorded at estimated market prices. All
intercompany transactions have been eliminated to determine the consolidated
balances. The results for the four reportable segments and all other segments of
SunTrust are included in the following table.
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
----------------------------------------------------------
(In thousands) Florida Georgia Tennessee Crestar
----------------------------------------------------------
<S> <C>
Total interest income $ 964,651 $ 713,889 $ 290,126 $ 893,355
Total interest expense 422,048 337,029 138,964 402,606
-----------------------------------------------------------
Net interest income 542,603 376,860 151,162 490,749
Provision for loan losses 19,553 11,577 5,300 26,503
-----------------------------------------------------------
Net interest income after provision 523,050 365,283 145,862 464,246
-----------------------------------------------------------
Total noninterest income 280,672 202,807 75,762 284,156
Total noninterest expense 460,098 310,316 128,882 454,452
-----------------------------------------------------------
Income before taxes 343,624 257,774 92,742 293,950
Provision for income taxes 124,166 87,764 33,994 99,508
-----------------------------------------------------------
Net income $ 219,458 $ 170,010 $ 58,748 $ 194,442
===========================================================
Other Significant Items
Total assets $ 30,564,522 $ 26,031,171 $ 8,942,662 $ 26,558,135
Investment in subsidiaries 2,509,419 3,769,767 714,568 2,417,598
Depreciation, amortization, and
accretion (net) 40,843 22,865 11,125 51,187
Total expenditures for long-lived assets 73,182 7,896 7,349 16,552
Revenues from external customers
Total interest income $ 909,755 $ 674,841 $ 283,823 $ 887,552
Total noninterest income 234,224 165,197 60,133 284,156
-----------------------------------------------------------
Total income $ 1,143,979 $ 840,038 $ 343,956 $ 1,171,708
===========================================================
Revenues from affiliates
Total interest income $ 54,896 $ 39,048 $ 6,303 $ 5,803
Total noninterest income 46,448 37,610 15,629 -
-----------------------------------------------------------
Total income $ 101,344 $ 76,658 $ 21,932 $ 5,803
===========================================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
-----------------------------------------------
(In thousands) All Other Eliminations Consolidated
-----------------------------------------------
<S> <C>
Total interest income $ 225,058 $ (192,573) $ 2,894,506
Total interest expense 231,812 (192,573) 1,339,886
----------------------------------------------
Net interest income (6,754) - 1,554,620
Provision for loan losses 27,884 - 90,817
----------------------------------------------
Net interest income after provision (34,638) - 1,463,803
----------------------------------------------
Total noninterest income 566,585 (495,722) 914,260
Total noninterest expense 635,177 (495,722) 1,493,203
----------------------------------------------
Income before taxes (103,230) - 884,860
Provision for income taxes (35,972) - 309,460
----------------------------------------------
Net income $ (67,258) $ - $ 575,400
==============================================
Other Significant Items
Total assets $ 18,825,220 $(17,701,829) $ 93,219,881
Investment in subsidiaries 388,904 (9,800,256) -
Depreciation, amortization, and
accretion (net) 12,962 - 138,982
Total expenditures for long-lived assets 61,327 - 166,306
Revenues from external customers
Total interest income $ 138,535 $ - $ 2,894,506
Total noninterest income 170,550 - 914,260
----------------------------------------------
Total income $ 309,085 $ - $ 3,808,766
==============================================
Revenues from affiliates
Total interest income $ 86,523 $ (192,573)
Total noninterest income 396,035 (495,722)
----------------------------------------------
Total income $ 482,558 $ (688,295)
==============================================
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1998
----------------------------------------------------------
(In thousands) Florida Georgia Tennessee Crestar
----------------------------------------------------------
<S> <C>
Total interest income $ 960,388 $ 660,565 $ 286,309 $ 938,228
Total interest expense 452,481 317,860 141,013 468,681
-----------------------------------------------------------
Net interest income 507,907 342,705 145,296 469,547
Provision for loan losses 18,120 11,580 3,718 44,906
-----------------------------------------------------------
Net interest income after provision 489,787 331,125 141,578 424,641
-----------------------------------------------------------
Total noninterest income 252,218 177,112 69,605 266,517
Total noninterest expense 425,405 285,053 124,547 425,936
-----------------------------------------------------------
Income before taxes 316,600 223,184 86,636 265,222
Provision for income taxes 115,995 74,825 31,085 94,723
-----------------------------------------------------------
Net income $ 200,605 $ 148,359 $ 55,551 $ 170,499
===========================================================
Other significant Items
Total assets $ 27,681,686 $ 24,189,564 $ 8,328,382 $ 25,989,321
Investment in subsidiaries 2,336,207 4,410,968 669,413 2,195,742
Depreciation, amortization, and
accretion (net) 48,475 24,600 12,539 49,730
Total expenditures for long-lived assets 22,215 17,049 4,368 30,395
Revenues from external customers
Total interest income $ 888,339 $ 625,116 $ 279,441 $ 938,228
Total noninterest income 209,718 145,214 55,580 266,517
-----------------------------------------------------------
Total income $ 1,098,057 $ 770,330 $ 335,021 $ 1,204,745
===========================================================
Revenues from affiliates
Total interest income $ 72,049 $ 35,449 $ 6,868 $ -
Total noninterest income 42,500 31,898 14,025 -
-----------------------------------------------------------
Total income $ 114,549 $ 67,347 $ 20,893 $ -
===========================================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1998
----------------------------------------------
(In thousands) All Other Eliminations Consolidated
----------------------------------------------
<S> <C>
Total interest income $ 220,709 $ (252,838) $ 2,813,361
Total interest expense 231,897 (252,838) 1,359,094
----------------------------------------------
Net interest income (11,188) - 1,454,267
Provision for loan losses 28,638 - 106,962
----------------------------------------------
Net interest income after provision (39,826) - 1,347,305
----------------------------------------------
Total noninterest income 481,473 (426,975) 819,950
Total noninterest expense 514,516 (426,975) 1,348,482
----------------------------------------------
Income before taxes (72,869) - 818,773
Provision for income taxes (34,217) - 282,411
----------------------------------------------
Net income $ (38,652) $ - $ 536,362
==============================================
Other significant Items
Total assets $ 15,932,899 $(14,636,647) $ 87,485,205
Investment in subsidiaries 394,119 (10,006,449) -
Depreciation, amortization, and
accretion (net) 1,513 - 136,857
Total expenditures for long-lived assets 27,990 - 102,017
Revenues from external customers
Total interest income $ 82,237 $ - $ 2,813,361
Total noninterest income 142,921 - 819,950
----------------------------------------------
Total income $ 225,158 $ - $ 3,633,311
==============================================
Revenues from affiliates
Total interest income $ 138,472 $ (252,838)
Total noninterest income 338,552 (426,975)
----------------------------------------------
Total income $ 477,024 $ (679,813)
==============================================
</TABLE>
NOTE 8 - SUBSEQUENT EVENT
On August 10, 1999, SunTrust issued a press release announcing that the Board of
Directors, today, authorized the purchase of up to 15 million shares of SunTrust
common stock. Management anticipates that these purchases will occur over an
extended period of time.
12
<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. SunTrust's principal banking subsidiaries are SunTrust
Banks of Florida, Inc., SunTrust Banks of Georgia, Inc., SunTrust Banks of
Tennessee, Inc. and Crestar Financial Corporation, all of which are bank holding
companies.
SunTrust provides a full line of consumer and commercial banking services in
Alabama, Florida, Georgia, Maryland, Tennessee, Virginia and the District of
Columbia. Our primary businesses include traditional deposit and credit services
as well as trust and investment services. Through various subsidiaries, we
provide credit cards, mortgage banking, credit-related insurance, leasing
services, data processing and information services, securities brokerage,
investment advisory services and investment banking services. Other nonbank
subsidiaries primarily support SunTrust's banking operations, providing data
processing and other services.
The following analysis of the financial performance of SunTrust for the second
quarter of 1999 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 six months ended June 30, 1999 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 operating earnings of $308.5 million and $600.6 million
for the second quarter and first six months of 1999, an increase of 13.6% and
12.0% compared with $271.4 million and $536.4 million in the same periods of
1998 (excluding after-tax charges related to the Crestar merger of $14.8 million
for the second quarter and $25.2 for the first six months of 1999). Diluted
earnings per share, adjusted for merger charges, grew 12.9% to $0.96 and 10.7%
to $1.86 from $0.85 and $1.68 in the same periods last year. Reported net income
was $293.7 million, or $0.91 per diluted share for the second quarter and $575.4
million, or $1.78 per diluted share for the first six months of 1999. The growth
in net income resulted from increases in noninterest income and strong loan
demand compared to the same period last year.
13
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA TABLE 1
(Dollars in millions except per share data)
<TABLE>
<CAPTION>
Quarters
--------------------------------------------------------------------------------
1999 1998
--------------------------------------------------------------------------------
2 1 4 3 2
-------------- -------------- ------------- -------------- --------------
<S> <C>
SUMMARY OF OPERATIONS
Interest and dividend income $ 1,452.5 $ 1,442.0 $ 1,443.0 $ 1,419.5 $ 1,425.6
Interest expense 667.8 672.2 689.5 698.2 691.1
-------------- -------------- ------------- -------------- --------------
Net interest income 784.7 769.8 753.5 721.3 734.5
Provision for loan losses 48.8 42.0 67.1 40.5 55.3
-------------- -------------- ------------- -------------- --------------
Net interest income after
provision for loan losses 735.9 727.8 686.4 680.8 679.2
Noninterest income 469.3 444.9 436.1 460.1 421.3
Noninterest expense 752.3 740.9 851.0 732.9 688.1
-------------- -------------- ------------- -------------- --------------
Income before provision
for income taxes 452.9 431.8 271.5 408.0 412.4
Provision for income taxes 159.2 150.1 113.6 131.3 141.0
-------------- -------------- ------------- -------------- --------------
Net income $ 293.7 $ 281.7 $ 157.9 $ 276.7 $ 271.4
============== ============== ============= ============== ==============
Net interest income (taxable-equivalent) $ 795.4 $ 780.7 $ 764.6 $ 732.4 $ 745.6
PER COMMON SHARE
Net income - diluted $ 0.91 $ 0.87 $ 0.49 $ 0.87 $ 0.85
Net income - basic 0.92 0.89 0.50 0.88 0.86
Dividends declared 0.345 0.345 0.250 0.250 0.250
Book value 25.47 25.32 25.47 23.92 25.81
Market price
High 73.00 79.44 80.63 87.75 83.44
Low 63.06 60.44 55.06 54.00 73.38
Close 69.44 62.25 76.50 62.00 81.31
SELECTED AVERAGE BALANCES
Total assets $92,304.2 $91,696.6 $89,283.1 $85,372.1 $85,087.5
Earning assets 81,329.1 80,684.8 78,224.4 74,731.7 74,372.8
Loans 64,733.1 64,854.0 63,134.0 60,039.5 59,441.9
Total deposits 57,743.7 56,895.4 54,828.4 53,658.3 53,607.5
Realized shareholders' equity 6,328.2 6,120.2 5,898.6 5,618.9 5,568.9
Total shareholders' equity 8,322.5 8,146.9 7,947.6 7,990.8 7,937.1
Common shares - diluted (thousands) 322,448 322,364 320,224 317,920 319,689
Common shares - basic (thousands) 318,315 318,090 315,403 313,572 314,999
FINANCIAL RATIOS
ROA* 1.32% 1.29% 0.73% 1.35% 1.34%
ROE* 18.61 18.67 10.62 19.54 19.55
Net interest margin* 3.92 3.92 3.88 3.89 4.02
</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.
14
<PAGE>
CONSOLIDATED DAILY AVERAGE BALANCES, INCOME/EXPENSE TABLE 2
AND AVERAGE YIELDS EARNED AND RATES PAID
(Dollars in millions; yields on taxable-equivalent basis)
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------------------
June 30, 1999 March 31, 1999
----------------------------------- --------------------------------
Average Income/ Yields/ Average Income/ Yields/
Balances Expense Rates Balances Expense Rates
----------- ---------- ------- --------- -------- -------
<S> <C>
ASSETS
Loans:(1)
Taxable $ 63,596.4 $ 1,187.7 7.49 % $63,668.8 $1,187.2 7.56 %
Tax-exempt(2) 1,136.7 20.0 7.07 1,185.2 21.2 7.25
---------------------------------- ------------------------------
Total loans 64,733.1 1,207.7 7.48 64,854.0 1,208.4 7.56
Securities available for sale:
Taxable 14,415.3 224.4 6.24 13,672.0 213.6 6.34
Tax-exempt(2) 566.2 11.5 8.10 573.6 11.5 8.15
---------------------------------- ------------------------------
Total securities available for sale 14,981.5 235.9 6.31 14,245.6 225.1 6.41
Funds sold 1,321.8 16.5 5.02 1,244.2 15.5 5.04
Other short-term investments(2) 292.7 3.1 4.26 341.0 3.8 4.53
---------------------------------- ------------------------------
Total earning assets 81,329.1 1,463.2 7.22 80,684.8 1,452.8 7.30
Allowance for loan losses (949.1) (950.0)
Cash and due from banks 3,599.7 3,588.8
Premises and equipment 1,598.1 1,529.5
Other assets 3,502.5 3,568.0
Unrealized gains on securities
available for sale 3,223.9 3,275.5
---------------------------------- ------------------------------
Total assets $ 92,304.2 $91,696.6
=================================== ==============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits:
NOW/Money market accounts $ 19,833.1 $ 126.5 2.56 % $19,572.1 $ 127.2 2.64 %
Savings 7,003.4 49.9 2.86 6,959.7 50.6 2.95
Consumer time 9,815.2 116.2 4.75 10,016.0 121.3 4.91
Other time 8,186.0 99.1 4.86 7,880.0 95.0 4.89
---------------------------------- ------------------------------
Total interest-bearing deposits 44,837.7 391.7 3.50 44,427.8 394.1 3.60
Funds purchased 14,849.3 172.4 4.66 14,785.4 169.3 4.64
Other short-term borrowings 1,448.1 16.8 4.65 1,777.1 20.3 4.63
Long-term debt 5,741.4 86.9 6.07 5,787.1 88.4 6.20
---------------------------------- ------------------------------
Total interest-bearing liabilities 66,876.5 667.8 4.00 66,777.4 672.1 4.08
Noninterest-bearing deposits 12,906.0 12,467.6
Other liabilities 4,199.2 4,304.7
Realized shareholders' equity 6,328.2 6,120.2
Accumulated other comprehensive income 1,994.3 2,026.7
---------------------------------- ------------------------------
Total liabilities and shareholders' equity $ 92,304.2 $91,696.6
=================================== ==============================
Interest rate spread 3.22 % 3.22 %
---------------------------------- ------------------------------
NET INTEREST INCOME $ 795.4 $ 780.7
---------------------------------- ------------------------------
NET INTEREST MARGIN(3) 3.92 % 3.92
---------------------------------- ------------------------------
</TABLE>
(1) Interest income includes loan fees of $34.7, $32.6, and $28.9, in the
quarters ended June 30, and March 31, 1999, and June 30, 1998 and $68.1,
and $57.6 in the six months ended June 30, 1999 and 1998. 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 $10.7, $10.9, $11.1 in the quarters ended June 30 and March 31,
1999 and June 30, 1998 and $21.5 and $22.2 in the six months ended June
30, 1999 and 1998.
15
<PAGE>
TABLE 2
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
--------------------------------- ------------------------------------
June 30, 1998 June 30, 1999
---------------------------------- ------------------------------------
Average Income/ Yields/ Average Income/ Yields/
Balances Expense Rates Balances Expense Rates
------------- ---------- -------- ------------- ---------- --------
<S> <C>
ASSETS
Loans:(1)
Taxable $58,416.1 $1,175.3 8.07 % $ 63,632.4 $ 2,374.9 7.53 %
Tax-exempt(2) 1,025.8 19.9 7.75 1,160.8 41.2 7.16
---------------------------------- ------------------------------------
Total loans 59,441.9 1,195.2 8.06 64,793.2 2,416.1 7.52
Securities available for sale:
Taxable 12,767.9 207.5 6.52 14,045.7 438.0 6.29
Tax-exempt(2) 643.8 13.4 8.31 569.9 23.0 8.13
---------------------------------- ------------------------------------
Total securities available for sale 13,411.7 220.9 6.60 14,615.6 461.0 6.36
Funds sold 1,222.3 17.2 5.65 1,283.2 32.0 5.03
Other short-term investments(2) 296.9 3.4 4.58 316.7 6.9 4.41
---------------------------------- ------------------------------------
Total earning assets 74,372.8 1,436.7 7.75 81,008.7 2,916.0 7.26
Allowance for loan losses (943.6) (949.5)
Cash and due from banks 3,170.0 3,594.3
Premises and equipment 1,473.6 1,564.0
Other assets 3,175.5 3,535.0
Unrealized gains on securities
available for sale 3,839.2 3,249.6
---------------------------------- ------------------------------------
Total assets $85,087.5 $ 92,002.1
=================================== =====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits:
NOW/Money market accounts $18,243.9 $ 133.0 2.92 % $ 19,703.4 $ 253.7 2.60 %
Savings 6,582.5 54.4 3.31 6,981.7 100.5 2.90
Consumer time 10,438.8 134.5 5.17 9,915.0 237.5 4.83
Other time 6,663.8 94.5 5.69 8,033.8 194.1 4.87
---------------------------------- ------------------------------------
Total interest-bearing deposits 41,929.0 416.4 3.98 44,633.9 785.8 3.55
Funds purchased 11,589.2 155.1 5.37 14,817.5 341.7 4.65
Other short-term borrowings 2,732.2 37.3 5.48 1,611.7 37.1 4.64
Long-term debt 5,217.2 82.3 6.32 5,764.2 175.3 6.13
---------------------------------- ------------------------------------
Total interest-bearing liabilities 61,467.6 691.1 4.51 66,827.3 1,339.9 4.04
Noninterest-bearing deposits 11,678.5 12,688.0
Other liabilities 4,004.3 4,251.7
Realized shareholders' equity 5,568.9 6,224.7
Accumulated other comprehensive income 2,368.2 2,010.4
---------------------------------- ------------------------------------
Total liabilities and shareholders' equity $85,087.5 $ 92,002.1
=================================== ====================================
Interest rate spread 3.24 % 3.22 %
---------------------------------- ------------------------------------
NET INTEREST INCOME $ 745.6 $ 1,576.1
---------------------------------- ------------------------------------
NET INTEREST MARGIN(3) 4.02 % 3.92 %
---------------------------------- ------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
----------------------------------------
June 30, 1998
Average Income/ Yields/
Balances Expense Rates
--------- --------- ---------
<S> <C>
ASSETS
Loans:(1)
Taxable $57,373.4 $2,312.4 8.13 %
Tax-exempt(2) 1,024.0 40.3 7.93
----------------------------------------
Total loans 58,397.4 2,352.7 8.12
Securities available for sale:
Taxable 12,474.9 408.1 6.60
Tax-exempt(2) 648.9 27.0 8.38
----------------------------------------
Total securities available for sale 13,123.8 435.1 6.69
Funds sold 1,425.5 40.2 5.69
Other short-term investments(2) 310.6 7.6 4.90
----------------------------------------
Total earning assets 73,257.3 2,835.6 7.81
Allowance for loan losses (937.8)
Cash and due from banks 3,214.9
Premises and equipment 1,466.9
Other assets 3,125.3
Unrealized gains on securities
available for sale 3,590.0
----------------------------------------
Total assets $83,716.6
========================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits:
NOW/Money market accounts $17,793.4 $ 256.8 2.91 %
Savings 6,627.6 109.3 3.33
Consumer time 10,569.0 270.7 5.17
Other time 6,761.2 189.7 5.66
----------------------------------------
Total interest-bearing deposits 41,751.2 826.5 3.99
Funds purchased 11,294.6 301.2 5.38
Other short-term borrowings 2,617.8 70.6 5.44
Long-term debt 5,025.1 160.8 6.45
----------------------------------------
Total interest-bearing liabilities 60,688.7 1,359.1 4.52
Noninterest-bearing deposits 11,447.5
Other liabilities 3,844.4
Realized shareholders' equity 5,522.1
Accumulated other comprehensive income 2,213.9
----------------------------------------
Total liabilities and shareholders' equity $83,716.6
========================================
Interest rate spread 3.29 %
----------------------------------------
NET INTEREST INCOME $1,476.5
----------------------------------------
NET INTEREST MARGIN(3) 4.06 %
----------------------------------------
</TABLE>
(3) Derivative instruments used to help balance SunTrust's
interest-sensitivity position increased net interest income by $5.8, $4.9
and $0.8 in the quarters ended June 30 and March 31, 1999 and June 30,
1998 and increased net interest income by $10.7 and $3.3 in the six months
ended June 30, 1999 and June 30, 1998. Without these swaps, the net
interest margin would have been 3.89%, 3.90%, and 4.02%, in the quarters
ended June 30, March 31, 1999, and June 30, 1998 and 3.90% and 4.06% in
the six months ended June 30, 1999 and June 30, 1998.
NET INTEREST INCOME/MARGIN. SunTrust's net interest margin was 3.92% for the
first six months of 1999, a decrease of 14 basis points from the first six
months of 1998. The rate on earning assets declined 55 basis points to 7.26% and
the rate on interest bearing liabilities decreased 48 basis points to 4.04% due
to the decrease in rates on time deposits.
Interest income, which SunTrust was unable to recognize on nonperforming loans,
had a negative impact of 1 basis point on the net interest margin in the first
six months of 1999 and 1998. Table 2 contains more detailed information
concerning average balances and interest yields earned and rates paid.
16
<PAGE>
SunTrust periodically evaluates 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 second quarter and first six
months of 1999, adjusted to exclude the effect of securities gains and losses,
increased $48.7 million, or 11.7% and $99.2 million, or 12.2%, from the
comparable periods last year. Trust income, SunTrust's largest source of
noninterest income, increased $10.0 million, or 8.6% and $23.1 million, or 10.0%
over the same periods. Other income in the second quarter of 1999 includes a
$8.5 million pre-tax gain on the sale of student loans and the third quarter of
1998 includes a $54.0 million pre-tax gain on the sale of credit card loans.
NONINTEREST INCOME TABLE 3
(In millions)
<TABLE>
<CAPTION>
Quarters
----------------------------------------------------------------------
1999 1998
----------------------------------------------------------------------
2 1 4 3 2
------------- ---------- ----------- ----------- -----------
<S> <C>
Trust income $ 126.3 $ 126.3 $ 117.7 $ 112.9 $ 116.3
Service charges on deposit accounts 107.1 106.1 105.7 102.6 97.6
Miscellaneous charges and fees 49.3 46.5 50.8 45.4 45.9
Mortgage fees 46.6 46.6 49.7 45.4 43.6
Mortgage servicing rights income 31.7 41.4 32.5 34.6 34.9
Credit card fees 28.2 23.1 23.5 20.1 22.9
Retail investment services 26.0 23.5 15.2 16.1 18.5
Corporate and institutional investment services 16.3 18.7 20.2 13.8 12.3
Trading account profits and commissions 11.4 10.6 11.7 8.3 12.4
Securities gains (losses) 3.9 (0.7) 1.0 (0.8) 4.5
Other income 22.5 2.8 8.1 61.7 12.4
============= ========== =========== =========== ===========
Total noninterest income $ 469.3 $ 444.9 $ 436.1 $ 460.1 $ 421.3
============= ========== =========== =========== ===========
</TABLE>
NONINTEREST EXPENSE. Noninterest expense increased $64.2 million, or 9.3% and
$144.7 million, or 10.7% in the second quarter and first six months of 1999
compared to the same periods last year. Personnel expenses, consisting of
salaries, other compensation and employee benefits, increased $35.2 million, or
8.9% and $92.5 million, or 11.9% over the earlier periods. Most of the remaining
increase in noninterest expense was due to $17.6 million and $31.4 million in
Crestar merger-related expenses in the second quarter and first six months of
1999. The efficiency ratio in the second quarter of 1999 was 58.1% (excluding
the Crestar merger-related charges), a slight decrease from 59.0% in the second
quarter of 1998. The fourth quarter of 1998 noninterest expense includes $119.4
million in Crestar merger-related expenses.
17
<PAGE>
NONINTEREST EXPENSE TABLE 4
(In millions)
<TABLE>
<CAPTION>
Quarters
----------------------------------------------------------------------
1999 1998
----------------------------------------------------------------------
2 1 4 3 2
------------- ----------- ----------- ----------- -----------
<S> <C>
Salaries $ 300.4 298.5 $ 289.9 $ 278.1 $ 269.2
Other compensation 88.9 84.4 86.2 100.8 80.3
Employee benefits 41.5 54.4 39.2 45.7 46.1
Net occupancy expense 49.9 47.7 49.8 49.1 47.0
Equipment expense 49.8 45.3 45.2 45.5 43.9
Outside processing and software 38.7 34.8 37.7 32.9 34.6
Amortization of intangible assets 24.9 25.7 28.9 28.0 26.7
Marketing and customer development 23.9 21.8 34.7 22.7 25.6
Credit and collection services 19.2 16.6 18.9 17.8 17.5
Communications 17.6 16.1 15.8 15.8 15.6
Merger-related expenses 17.6 13.8 119.4 - -
Postage and delivery 17.4 17.1 16.1 15.9 16.0
Consulting and legal 15.6 15.4 19.6 19.6 15.1
Operating supplies 14.3 13.3 14.3 13.2 13.3
FDIC premiums 2.1 2.0 2.3 2.3 2.1
Other real estate expense (2.7) (1.1) (1.0) (4.0) (1.8)
Other expense 33.2 35.1 34.0 49.5 36.9
============= =========== =========== =========== ===========
Total noninterest expense $ 752.3 $ 740.9 $ 851.0 $ 732.9 $ 688.1
============= =========== =========== =========== ===========
Efficiency ratio (1) 58.1 % 59.3 % 60.9 % 61.5 % 59.0 %
</TABLE>
(1) Excludes merger-related expenses.
PROVISION FOR LOAN LOSSES. The SunTrust Allowance for Loan and Lease Losses
Review Committee meets on a quarterly basis in order to assess the adequacy of
the allowance, analyze provision and charge-off trends and to affirm allowance
methodology. As a result of this review process, the Committee deemed the
allowance at the end of the second quarter of 1999 to be adequate in order to
cover losses inherent in the loan portfolio. The adequacy of the allowance is
assessed based on historical loss rates, specifically analyzed loans and other
risk factors. In the second quarter of 1999, SunTrust has confirmed further
deterioration in the loan portfolio related to the healthcare industry and
emerging concerns in some sectors of the textile industry brought about as a
result of increased competition overseas. The increase in commercial charge-offs
as well as nonaccrual loans in the second quarter is primarily due to this
deterioration. Other risk factors, including continuing high consumer bankruptcy
rates and high consumer debt levels, as well as, global economic risk factors
such as Asian competition, continue to influence the assessment of the adequacy
of the allowance.
SunTrust decreased the provision for loan losses in the second quarter of 1999
to $48.8 million from $55.3 million in the same period last year. Net
charge-offs to average loans declined to .29% in the second quarter of this year
from .35% in the second quarter of 1998 as net charge-offs declined to $46.6
million from $51.3 in the second quarter a year ago. Total provision exceeded
net charge-offs by $2.2 million and $13.4 million was transferred from the
allowance, mostly related to the final disposition of the sale of credit card
receivables.
SunTrust's allowance for loan losses totaled $941.4 million at June 30, 1999,
which was 1.44% of period loans and 392.9% of total nonperforming loans. As of
June 30, 1998 the allowance for loan losses was $908.9 million, or 1.52% of
quarter-end loans and 462.6% of total nonperforming loans.
18
<PAGE>
SUMMARY OF LOAN LOSS EXPERIENCE TABLE 5
(Dollars in millions)
<TABLE>
<CAPTION>
Quarters
-----------------------------------------------------------------------------------
1999 1998
-----------------------------------------------------------------------------------
2 1 4 3 2
-------------- -------------- ------------- -------------- --------------
<S> <C>
Allowance for Loan Losses
Balances - beginning of quarter $ 952.6 $ 944.6 $ 928.5 $ 908.9 $ 939.8
Allowance from acquisitions and
other activity - net (13.4) - 1.5 21.9 (34.9)
Provision for loan losses 48.8 42.0 67.1 40.5 55.3
Charge-offs:
Commercial (24.0) (12.2) (19.2) (11.9) (11.4)
Real estate:
Construction (0.1) (0.7) (1.7) (1.0) -
Residential mortgages (3.6) (3.1) (2.9) (3.6) (4.3)
Other (2.6) (0.6) (1.6) (1.6) (0.9)
Credit card (19.4) (22.7) (26.1) (27.1) (38.6)
Other consumer loans (13.7) (12.9) (16.3) (14.3) (14.6)
-------------- -------------- ------------- -------------- --------------
Total charge-offs (63.4) (52.2) (67.8) (59.5) (69.8)
-------------- -------------- ------------- -------------- --------------
Recoveries:
Commercial 4.0 4.0 2.6 3.8 3.8
Real estate:
Construction 0.4 0.2 - - 0.1
Residential mortgages 0.8 0.8 0.9 0.3 1.0
Other 1.3 2.6 2.2 1.4 2.0
Credit card 3.3 3.2 2.7 3.5 4.5
Other consumer loans 7.0 7.4 6.9 7.7 7.1
-------------- -------------- ------------- -------------- --------------
Total recoveries 16.8 18.2 15.3 16.7 18.5
-------------- -------------- ------------- -------------- --------------
Net charge-offs (46.6) (34.0) (52.5) (42.8) (51.3)
-------------- -------------- ------------- -------------- --------------
Balance - end of quarter $ 941.4 $ 952.6 $ 944.6 $ 928.5 $ 908.9
============== ============== ============= ============== ==============
Quarter-end loans outstanding $ 65,331.1 $ 64,274.1 $ 65,089.2 $ 61,325.1 $ 59,778.7
Average loans $ 64,733.1 $ 64,854.0 $ 63,134.0 $ 60,039.5 $ 59,441.9
Allowance to quarter-end loans 1.44 % 1.48 % 1.45 % 1.51 % 1.52 %
Allowance to nonperforming loans 392.9 481.5 456.0 468.3 462.6
Net charge-offs to average loans
(annualized) 0.29 % 0.21 % 0.33 % 0.28 % 0.35 %
</TABLE>
19
<PAGE>
NONPERFORMING ASSETS TABLE 6
(Dollars in millions)
<TABLE>
<CAPTION>
1999 1998
-------------------------------------------------------------------------------
JUNE 30 March 31 December 31 September 30 June 30
------------- -------------- ----------------------------------------------
<S> <C>
Nonperforming Assets
Nonaccrual loans:
Commercial $ 85.4 $ 47.7 $ 50.1 $ 48.3 $ 50.1
Real Estate:
Construction 14.0 14.8 13.5 14.8 16.5
Residential mortgages 80.7 80.7 83.9 77.7 69.2
Other 48.0 41.6 46.6 43.5 48.6
Consumer loans 11.5 13.0 12.5 13.4 12.1
------------- -------------- ------------- -------------- -------------
Total nonaccrual loans 239.6 197.8 206.6 197.7 196.5
Restructured loans - 0.1 0.6 0.5 -
------------- -------------- ------------- -------------- -------------
Total nonperforming loans 239.6 197.9 207.2 198.2 196.5
Other real estate owned 28.2 36.1 34.9 33.1 43.4
------------- -------------- ------------- -------------- -------------
Total nonperforming assets $ 267.8 $ 234.0 $ 242.1 $ 231.3 $ 239.9
============= ============== ============= ============== =============
Ratios:
Nonperforming loans to total loans 0.37 % 0.31 % 0.32 % 0.32 % 0.33 %
Nonperforming assets to total loans
plus other real estate owned 0.41 0.36 0.37 0.38 0.40
Accruing Loans Past Due
90 Days or More $ 101.7 $ 103.8 $ 108.2 $ 89.8 $ 101.5
</TABLE>
NONPERFORMING ASSETS. Nonperforming assets consist of nonaccrual loans,
restructured loans and other real estate owned. Nonperforming assets have
increased 10.6%, or $25.7 million since December 31, 1998 and increased 11.6%,
or $27.9 million since June 30, 1998.
Interest income on nonaccrual loans, if recognized, is recorded on a cash basis.
During the first six months of 1999, $13.3 million of interest income would have
been recorded if all nonaccrual and restructured loans had been accruing
interest at their original contractual rates. Interest income recognized on a
cash basis in the first six months of 1999 on nonperforming loans was $7.7
million.
20
<PAGE>
LOAN PORTFOLIO BY TYPES OF LOANS TABLE 7
(In millions)
<TABLE>
<CAPTION>
1999 1998
---------------------------------------------------------------------------------------
JUNE 30 March 31 December 31 September 30 June 30
-------------- -------------- --------------- --------------- ---------------
<S> <C>
Commercial $ 24,772.2 $ 24,058.1 $ 24,589.6 $ 21,652.7 $ 20,571.1
Real estate:
Construction 2,240.8 2,180.2 2,085.0 1,995.5 1,931.0
Residential mortgages 20,645.8 20,563.7 20,429.5 21,056.5 20,336.0
Other 7,523.5 7,403.5 8,254.3 7,045.8 6,999.9
Credit card 1,476.6 1,522.3 1,563.5 1,526.2 2,094.1
Other consumer loans 8,672.2 8,546.3 8,167.3 8,048.4 7,846.6
-------------- -------------- --------------- --------------- ---------------
Total loans $ 65,331.1 $ 64,274.1 $ 65,089.2 $ 61,325.1 $ 59,778.7
============== ============== =============== =============== ===============
</TABLE>
LOANS. Total loans at June 30, 1999 were $65.3 billion, an increase of $5.6
billion or 9.3% from June 30, 1998. The average loan to deposit ratio was 112.1%
and 113.0% in the second quarter and first six months of 1999 compared with
110.9% and 109.8% in the same periods of 1998. Loans held for sale at June 30,
1999 were $2.4 billion, a decrease of $1.1 billion from December 31, 1998 due to
a higher level of secondary market sales coupled with lower levels of
originations compared to 1998. During the second quarter, SunTrust tightened
slightly the credit policy requirements for our indirect installment automobile
loan portfolio, following an analysis of growth and credit quality issues.
INCOME TAXES. The provision for income taxes was $159.3 million and $309.5
million in the second quarter and first six months of 1999 compared to $141.0
million and $282.4 million in the same periods last year. This represents a 35%
effective tax rate in the second quarter and first six months of 1999 and a 34%
effective tax rate in the same periods last year.
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 shareholders' equity. The investment
portfolio continues to be managed to optimize yield over an entire interest rate
cycle while providing liquidity and managing market risk. The portfolio yield
decreased from an average of 6.60% in the second quarter of 1998 to 6.31% in the
second quarter of this year. The portfolio size (measured at amortized cost)
increased by $0.7 billion during the second quarter to $15.6 billion as of June
30, 1999. At June 30, 1999, approximately 5% of the portfolio consisted of U.S.
Treasury securities, 12% U.S. government agency securities, 67% mortgage-backed
securities, 5% asset-backed securities, 7% trust preferred securities and 4%
municipal securities (calculated as a percent of total par value). Most of
SunTrust'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 June 30, 1999 the carrying value of the securities portfolio
was $2.8 billion over amortized cost, consisting of a $3.0 billion unrealized
gain on SunTrust's investment in common stock of The Coca-Cola Company and other
unrealized net losses.
21
<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 SunTrust'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 second quarter and first six months of 1999
increased $4.1 billion, or 7.7% and $4.1 billion, or 7.8% over the same periods
a year ago. Interest-bearing deposits represented 77.7% and 77.9% of average
deposits for the second quarter and first six months of 1999, compared to 78.2%
and 78.5% for the same periods in 1998. In the first six months of 1999, average
net purchased funds (average funds purchased less average funds sold) increased
$3.7 billion over the same period in 1998. Net purchased funds were 16.7% of
average earning assets for the first six months of 1999 as compared to 13.5% in
the same period a year ago.
DERIVATIVES. SunTrust enters into various derivative contracts to meet the
financial needs of its customers, generate revenue through trading activities,
and to manage interest rate sensitivity for the bank subsidiaries. Derivative
instruments include futures and forward contracts, interest rate swaps, options,
interest rate caps and floors, and swaptions.
When acting in a dealer capacity for customers, SunTrust will enter into
offsetting positions to eliminate exposure to interest rate and market risk.
Derivative instruments used to manage the banks interest rate sensitivity and
the generation of revenue through its trading activities as of June 30, 1999 is
shown in Table 8.
DERIVATIVE INSTRUMENTS TABLE 8
(Dollars in thousands)
<TABLE>
<CAPTION>
Estimated Fair Value
-----------------------------------------------
Weighted
Average Average
Notional Maturity In Received Average Carrying Unrealized Unrealized
Balance Months Rate Pay Rate amount (1) Gains Losses Net
----------- ------------ ---------- --------- ------------ ----------- ---------- ---------
<S> <C>
HEDGES ON LENDING COMMITMENTS
Forward Contracts $ 2,527,977 1 - - - $38,840 $ (577) $ 38,263
INTEREST RATE SWAPS
Interest rate swaps 4,391,815 42 5.80% 5.25% $ 8,327 49,200 (6,644) 50,883
INTEREST RATE CAPS/FLOORS
Interest rate caps/floors 4,457,330 19 - - (13,306) 11,900 - (1,406)
OPTIONS
Option Contracts 20,000 2 - - - 9 (2) 7
FUTURES
Future Contracts 395,000 23 - - - 757 (5) 752
----------
$ 88,499
==========
</TABLE>
(1) Carrying amount includes accrued interest receivable or payable and
unamortized premiums.
Derivative contracts used in the management of interest rate volatility and
trading activities increased net interest income by $5.8 million and $4.9
million in the second and first quarters of 1999, respectively.
22
<PAGE>
CAPITAL RATIOS TABLE 9
(Dollars in millions)
<TABLE>
<CAPTION>
1999 1998
------------------------------- -------------------------------------------------
JUNE 30 March 31 December 31 September 30 June 30
--------------- ------------- -------------- -------------- ---------------
<S> <C>
Tier 1 capital $ 6,973.2 $ 6,773.7 $ 6,586.5 $ 6,284.9 $ 6,055.0
Total capital 10,543.1 10,341.1 10,307.9 9,784.5 10,147.6
Risk-weighted assets 83,192.0 80,838.6 80,586.4 75,320.5 74,729.5
Risk-based ratios:
Tier 1 capital 8.38 % 8.37 % 8.17 8.34 % 8.10 %
Total capital 12.67 12.79 12.79 12.99 13.58
Tier 1 leverage ratio 7.86 7.69 7.68 7.72 7.49
Total shareholders' equity to assets 8.79 8.93 8.78 8.77 9.34
</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 (debt instruments and a portion of the allowance for loan losses).
SunTrust 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%. Beginning in the second quarter of 1998, forty-five percent of the
unrealized gains on equity securities of The Coca-Cola Company were included in
the calculation of Total capital. At June 30, 1999, SunTrust's Tier 1 capital,
total capital and Tier 1 leverage ratios were 8.38%, 12.67% and 7.86%,
respectively. SunTrust is committed to maintaining well-capitalized banks.
YEAR 2000. The Year 2000 issue is the result of computer programs and components
using a two-digit format, as opposed to four digits, to indicate the year. These
computer systems may 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 may 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 could
potentially affect any device that has an embedded microchip containing this
flaw.
Prior to their merger, SunTrust and Crestar had each established programs to
deal with the Year 2000 issue and were well along in executing those programs.
Because most SunTrust and Crestar computer systems will not be integrated until
after year-end 1999, SunTrust decided to complete both Year 2000 programs as
separate projects. Both programs are based on very detailed guidance issued by
the Federal Financial Institutions Examination Council (FFIEC), and while the
programs have differences in terminology and structure, the basic processes are
very similar. The following discussion applies to both programs. While separate
Project Offices oversee each program, SunTrust has appointed one group of senior
managers to oversee both programs.
23
<PAGE>
SunTrust's Year 2000 Program has four phases: inventory of areas potentially
impacted, assessment to identify problems, remediation to fix those problems,
and testing of remediated systems. The inventory and assessment phases were
completed in 1997 and early 1998 and covered both internal and vendor
applications, as well as hardware, networks, packaged software and
non-information technology systems that contain microprocessors. Examples of the
latter are elevators, bank alarms and vault locks. The remediation and testing
phases are nearing completion.
Remediation includes both correcting internal systems and managing corrections
to vendor-supplied systems and applications. Testing verifies that the system
performs properly after modification ("Compliance Testing") and also interacts
properly with other systems in an operating environment ("Enterprise Testing").
These latter tests use dedicated equipment that has been "fast-forwarded" to
simulate the date change from 1999 to 2000. All test results are reviewed and
accepted by personnel who regularly use these systems. All SunTrust
mission-critical applications have completed this process. Crestar Enterprise
Testing was completed in April 1999. The completion of the Year 2000 process for
other non critical systems are on target for completion throughout 1999.
Following Compliance Testing, remediated systems are put into current
production, so remediated systems are currently operating.
SunTrust's operations are also dependent on outside vendors and service
providers, and SunTrust could be materially impacted should they experience Year
2000 problems. SunTrust maintains a dialogue with mission-critical vendors and
suppliers, virtually all of which reported they were Year 2000 compliant by
December 31, 1998. Those who were not are being monitored closely; contingency
plans, including alternate vendors, have been identified wherever possible.
SunTrust is also supplementing its normal contingency plans to encompass
specific Year 2000 concerns. These contingency plans are designed to provide for
ongoing operations or early business resumption should there be problems such as
a mainframe system or network "crash"; a localized disruption that might occur
due to a hurricane or tornado; or the loss of services from a mission-critical
vendor. In this respect, they will be very applicable to Year 2000 concerns. In
a worst-case scenario for the Year 2000, however, it is possible that the basic
utilities SunTrust depends on (such as electricity, telephone and water) would
not be available for an extended period of time. Should this unlikely event
occur, SunTrust might not be able to provide services until the utilities are
returned.
Management believes that it has taken the reasonable and necessary steps to
minimize the operational, regulatory and legal risks associated with Year 2000.
Despite these efforts, SunTrust could still experience Year 2000 problems, some
of which could have a material impact on SunTrust's results of operations and
financial condition. While this is not anticipated, the following discusses
several major risks and SunTrust's efforts to mitigate them.
It is possible that the public's desire to hold cash going into Year 2000 could
precipitate unusual withdrawals of deposits. SunTrust is planning in conjunction
with the Federal Reserve to have additional supplies of cash available and has
developed plans for alternative funding sources should a panic create a
temporary liquidity shortage for SunTrust. A significant financial impact on
SunTrust could result from customer Year 2000 difficulties resulting in
customers' inabilities to repay their loans. SunTrust has implemented special
Year 2000 risk assessments for all large borrowers and considers Year 2000 risks
when renewing or making loans. Some observers have predicted irrational panic
selling of investment portfolios late in 1999. Should this occur, asset values
would drop dramatically, and SunTrust's fees based on asset values, primarily
asset management, would drop proportionally.
24
<PAGE>
To make resources available for Year 2000 efforts, some discretionary data
processing projects have been deferred. These projects will be implemented as
resources again become available. There have been no material negative financial
impacts from these deferrals.
SunTrust estimates that the total pre-tax cost of one-time expenses associated
with Year 2000 will approximate $82 million. These expenses are being recognized
as they are incurred. Through June 30, 1999, SunTrust recognized $73.9 million,
or 90%, of the total projected expense. Of this amount, $9.1 million was
incurred in the second quarter of 1999 and $20.3 million was incurred in the six
months ended June 30, 1999. Management does not believe that future Year 2000
expenses will have a material effect on the results of operations or financial
condition of SunTrust.
As mentioned above, the FFIEC has established extensive guidelines on Year 2000
matters that apply to all financial institutions. These guidelines are available
to the public on the Internet at www.FFIEC.gov. In addition, SunTrust is engaged
in a regular dialogue with the regulatory agencies and has received additional
guidance from them.
The previous 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 effort 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 any assessments, 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.
The foregoing statements regarding Year 2000 matters are "Year 2000 readiness
disclosures" under the Year 2000 Information and Readiness Disclosure Act.
25
<PAGE>
FINANCIAL HIGHLIGHTS - BANKING SUBSIDIARIES TABLE 10
(Dollars in millions)
<TABLE>
<CAPTION>
SunTrust Banks SunTrust Banks
of Florida, Inc. of Georgia, Inc.
---------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------- ------------- -------------
<S> <C>
SUMMARY OF OPERATIONS (1)
Net interest income (FTE) $ 548.7 $ 515.2 $ 381.3 $ 347.9
Provision for loan losses 19.6 18.1 11.6 11.6
Trust income 97.0 87.6 73.9 68.1
Other noninterest income 183.7 164.6 128.9 109.0
Personnel expense 195.3 184.3 121.8 120.4
Other noninterest expense 264.8 241.1 188.5 164.7
Net income 219.5 200.6 170.0 148.4
SELECTED AVERAGE BALANCES (1)
Total assets 29,725 27,493 25,647 22,569
Earning assets 27,866 25,892 20,865 17,652
Loans 20,991 19,723 17,020 14,669
Total deposits 20,294 18,964 13,624 11,478
Realized shareholders' equity 2,467 2,195 1,760 1,584
AT JUNE 30
Total assets 30,565 27,682 26,031 24,190
Earning assets 28,758 25,928 21,240 18,148
Loans 21,538 19,863 17,172 14,958
Allowance for loan losses 312 387 202 204
Total deposits 20,302 19,271 15,323 11,856
Realized shareholders' equity 2,517 2,290 1,831 1,768
Total shareholders' equity 2,481 2,308 3,672 4,333
CREDIT QUALITY
Net loan charge-offs (1) 17.2 10.9 12.9 8.3
Nonperforming loans (2) 98.1 88.0 56.5 36.7
Other real estate owned (2) 10.9 10.0 1.3 2.5
RATIOS
ROA (3) 1.49 % 1.47 % 1.53 % 1.57 %
ROE (3) 17.94 18.43 19.48 18.89
Net interest margin (3) 3.97 4.01 3.69 3.97
Efficiency ratio (3) 55.48 55.43 53.13 54.30
Total shareholder's equity/assets (2) 8.12 8.34 14.11 17.91
Net loan charge-offs to average loans (3) 0.17 0.11 0.16 0.12
Nonperforming loans to total loans (2) 0.47 0.45 0.33 0.25
Nonperforming assets to total loans plus
other real estate owned (2) 0.52 0.50 0.34 0.27
Allowance to loans (2) 1.48 1.99 1.19 1.39
Allowance to nonperforming loans (2) 317.6 439.5 357.9 557.3
</TABLE>
<TABLE>
<CAPTION>
SunTrust Banks Crestar Financial
of Tennessee, Inc. Corporation
---------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ -------------
<S> <C>
SUMMARY OF OPERATIONS (1)
Net interest income (FTE) $ 153.9 $ 148.6 $ 499.0 $ 475.9
Provision for loan losses 5.3 3.7 26.5 44.9
Trust income 23.7 22.4 45.8 41.1
Other noninterest income 52.0 47.2 238.4 225.5
Personnel expense 57.3 57.5 245.5 226.4
Other noninterest expense 71.6 67.1 208.9 199.6
Net income 58.7 55.6 194.4 170.5
SELECTED AVERAGE BALANCES (1)
Total assets 8,708 8,023 26,733 24,469
Earning assets 8,370 7,692 24,625 22,642
Loans 6,576 6,053 19,805 17,407
Total deposits 6,213 6,036 17,287 16,810
Realized shareholders' equity 692 635 2,360 2,087
AT JUNE 30
Total assets 8,943 8,328 26,558 25,989
Earning assets 8,621 7,934 24,539 23,795
Loans 6,810 6,185 19,776 18,136
Allowance for loan losses 97 110 270 246
Total deposits 6,250 5,861 18,593 17,894
Realized shareholders' equity 714 652 2,474 2,189
Total shareholders' equity 704 660 2,418 2,196
CREDIT QUALITY
Net loan charge-offs (1) 1.0 3.5 23.5 46.8
Nonperforming loans (2) 10.9 11.6 72.6 59.8
Other real estate owned (2) 2.6 14.2 13.4 16.7
RATIOS
ROA (3) 1.36 % 1.40 % 1.47 % 1.41 %
ROE (3) 17.12 17.65 16.61 16.47
Net interest margin (3) 3.71 3.90 4.09 4.24
Efficiency ratio (3) 56.13 57.08 58.03 57.37
Total shareholder's equity/assets (2) 7.87 7.92 9.10 8.45
Net loan charge-offs to average loans (3) 0.03 0.12 0.24 0.54
Nonperforming loans to total loans (2) 0.16 0.19 0.38 0.33
Nonperforming assets to total loans plus
other real estate owned (2) 0.20 0.43 0.45 0.42
Allowance to loans (2) 1.45 1.82 1.41 1.36
Allowance to nonperforming loans (2) 886.1 949.3 371.9 411.8
</TABLE>
(1) For the six month period ended june 30.
(2) At june 30.
(3) Annualized for the first six 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
None
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 12th day of August, 1999.
SUNTRUST BANKS, INC.
--------------------
(Registrant)
/s/ W.P. O'Halloran
---------------------
William P. O'Halloran
Senior Vice President and Controller
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,786,251
<INT-BEARING-DEPOSITS> 20,777
<FED-FUNDS-SOLD> 1,396,513
<TRADING-ASSETS> 240,648
<INVESTMENTS-HELD-FOR-SALE> 18,384,169
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 65,331,095
<ALLOWANCE> 941,444
<TOTAL-ASSETS> 93,219,881
<DEPOSITS> 60,360,085
<SHORT-TERM> 15,320,053
<LIABILITIES-OTHER> 3,777,280
<LONG-TERM> 5,569,796
0
0
<COMMON> 323,012
<OTHER-SE> 7,869,655
<TOTAL-LIABILITIES-AND-EQUITY> 93,219,881
<INTEREST-LOAN> 1,201,159
<INTEREST-INVEST> 231,789
<INTEREST-OTHER> 19,588
<INTEREST-TOTAL> 1,452,536
<INTEREST-DEPOSIT> 391,627
<INTEREST-EXPENSE> 667,734
<INTEREST-INCOME-NET> 784,802
<LOAN-LOSSES> 48,822
<SECURITIES-GAINS> 3,879
<EXPENSE-OTHER> 752,305
<INCOME-PRETAX> 453,008
<INCOME-PRE-EXTRAORDINARY> 293,663
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 293,663
<EPS-BASIC> 0.92
<EPS-DILUTED> 0.91
<YIELD-ACTUAL> 3.92
<LOANS-NON> 239,605
<LOANS-PAST> 101,686
<LOANS-TROUBLED> 6
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 944,557
<CHARGE-OFFS> 115,564
<RECOVERIES> 34,993
<ALLOWANCE-CLOSE> 941,444
<ALLOWANCE-DOMESTIC> 941,444
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 941,444
</TABLE>
