================================================================================
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, 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 October 31, 1999, 319,965,081 shares of the Registrant's Common Stock, $1.00
par value were outstanding.
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- --------------------------------------------------------------------------------
1
<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 nine months ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the full year
1999.
2
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Income
---------------------------------
Three Months Nine Months
Ended September 30 Ended September 30
----------------------------------- --------------------------------
(Dollars in thousands except per share data)(Unaudited) 1999 1998 1999 1998
---------------- ---------------- -------------- --------------
<S> <C>
Interest Income
Interest and fees on loans $ 1,236,018 $ 1,187,684 $ 3,638,730 $ 3,527,616
Interest and dividends on securities available for sale
Taxable interest 225,120 190,260 630,716 570,148
Tax-exempt interest 7,622 8,946 23,429 27,318
Dividends (1) 16,580 14,760 48,122 42,296
Interest on funds sold 17,928 14,496 49,931 54,688
Interest on deposits in other banks 448 1,578 2,340 4,395
Other interest 2,726 1,877 7,680 6,501
---------------- ---------------- -------------- --------------
Total interest income 1,506,442 1,419,601 4,400,948 4,232,962
---------------- ---------------- -------------- --------------
Interest Expense
Interest on deposits 413,039 417,279 1,198,805 1,243,705
Interest on funds purchased 188,651 160,583 530,339 461,823
Interest on other short-term borrowings 21,373 31,648 58,458 102,290
Interest on long-term debt 88,399 88,665 263,746 249,451
---------------- ---------------- -------------- --------------
Total interest expense 711,462 698,175 2,051,348 2,057,269
---------------- ---------------- -------------- --------------
Net Interest Income 794,980 721,426 2,349,600 2,175,693
Provision for loan losses 46,517 40,490 137,334 147,452
---------------- ---------------- -------------- --------------
Net interest income after provision for loan losses 748,463 680,936 2,212,266 2,028,241
---------------- ---------------- -------------- --------------
Noninterest Income
Trust income 126,376 112,948 378,981 342,445
Service charges on deposit accounts 111,644 102,548 324,825 295,392
Other charges and fees 48,976 45,475 144,886 133,475
Credit card fees 29,143 20,102 80,492 63,786
Mortgage production related income 26,697 64,818 127,861 183,839
Mortgage servicing related income 11,935 17,446 53,656 46,211
Retail investment services 23,854 16,020 73,370 49,354
Corporate and institutional investment services 13,174 13,803 48,164 35,564
Trading account profits and commissions 6,181 8,267 28,207 32,884
Securities (losses) gains 2,534 (871) 5,681 7,156
Other noninterest income 46,081 59,549 94,732 89,949
---------------- ---------------- -------------- --------------
Total noninterest income 446,595 460,105 1,360,855 1,280,055
---------------- ---------------- -------------- --------------
Noninterest Expense
Salaries and other compensation 369,355 378,983 1,141,551 1,057,630
Employee benefits 39,707 45,721 135,625 142,646
Net occupancy expense 49,796 49,150 147,402 142,441
Equipment expense 48,039 45,450 143,127 133,568
Outside processing and software 36,942 32,985 110,465 100,747
Marketing and customer development 24,685 22,647 70,350 72,361
Amortization of intangible assets 9,115 27,975 59,726 76,488
Merger-related expenses 7,116 - 38,507 -
Other noninterest expense 107,556 130,054 338,761 355,566
---------------- ---------------- -------------- --------------
Total noninterest expense 692,311 732,965 2,185,514 2,081,447
---------------- ---------------- -------------- --------------
Income before provision for income taxes 502,747 408,076 1,387,607 1,226,849
Provision for income taxes 181,341 131,316 490,801 413,727
================ ================ ============== ==============
Net Income $ 321,406 $ 276,760 $ 896,806 $ 813,122
================ ================ ============== ==============
Average common shares - diluted 322,222,668 317,919,790 322,344,492 319,297,337
Average common shares - basic 318,238,977 313,571,745 318,215,354 314,741,821
Net income per average common share - diluted $ 1.00 $ 0.87 $ 2.78 $ 2.55
Net income per average common share - basic 1.01 0.88 2.82 2.58
Dividends declared per common share 0.345 0.250 1.035 0.750
(1) Includes dividends on common stock of
The Coca-Cola Company 7,723 7,240 23,168 21,720
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
Consolidated Balance Sheets
---------------------------
<TABLE>
<CAPTION>
September 30 December 31 September 30
(Dollars in thousands) (Unaudited) 1999 1998 1998
---------------- --------------- ----------------
<S> <C>
Assets
Cash and due from banks $ 3,573,746 $ 4,289,889 $ 3,084,950
Trading account 164,820 239,665 209,490
Securities available for sale (1) 18,123,340 17,559,043 15,966,755
Funds sold 1,467,617 1,786,945 1,957,827
Loans 65,566,870 65,089,201 61,325,137
Allowance for loan losses (947,239) (944,557) (928,454)
---------------- --------------- ----------------
Net loans 64,619,631 64,144,644 60,396,683
Premises and equipment 1,632,184 1,519,711 1,498,386
Intangible assets 831,478 797,045 763,041
Customers' acceptance liability 361,114 628,235 405,681
Other assets 1,981,472 2,204,755 2,173,831
---------------- --------------- ----------------
Total assets $ 92,755,402 $ 93,169,932 $ 86,456,644
================ =============== ================
Liabilities and Shareholders' Equity
Noninterest-bearing deposits $ 13,128,979 $ 14,065,720 $ 11,881,443
Interest-bearing deposits 45,515,083 44,967,563 41,663,147
---------------- --------------- ----------------
Total deposits 58,644,062 59,033,283 53,544,590
Funds purchased 15,136,501 13,295,833 13,372,331
Other short-term borrowings 1,403,607 2,636,986 2,322,424
Long-term debt 5,275,178 4,757,869 4,684,298
Guaranteed preferred beneficial interests in debentures 1,050,000 1,050,000 1,050,000
Acceptances outstanding 361,114 628,235 405,681
Other liabilities 3,046,860 3,589,082 3,492,991
---------------- --------------- ----------------
Total liabilities 84,917,322 84,991,288 78,872,315
---------------- --------------- ----------------
Preferred stock, no par value; 50,000,000 shares authorized; none issued - - -
Common stock, $1.00 par value 323,171 322,485 321,246
Additional paid in capital 1,306,910 1,293,011 1,248,542
Retained earnings 5,140,985 4,575,382 4,507,556
Treasury stock and other (214,379) (100,441) (317,287)
---------------- --------------- ----------------
Realized shareholders' equity 6,556,687 6,090,437 5,760,057
Accumulated other comprehensive income 1,281,393 2,088,207 1,824,272
---------------- --------------- ----------------
Total shareholders' equity 7,838,080 8,178,644 7,584,329
---------------- --------------- ----------------
Total liabilities and shareholders' equity $ 92,755,402 $ 93,169,932 $ 86,456,644
================ =============== ================
Common shares outstanding 319,889,489 321,124,134 317,069,442
Common shares authorized 500,000,000 500,000,000 500,000,000
Treasury shares of common stock 3,281,942 1,360,928 4,176,201
(1) Includes net unrealized gains on securities available for sale $ 2,072,970 $ 3,379,725 $ 2,954,329
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
Consolidated Statements of Cash Flows
-------------------------------------
<TABLE>
<CAPTION>
Nine Months
Ended September 30
---------------------------------------
(Dollars in thousands) (Unaudited) 1999 1998
------------------- ----------------
<S> <C>
Cash flows from operating activities:
Net income $ 896,806 $ 813,122
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation, amortization and accretion 193,561 209,694
Provisions for loan losses and foreclosed property 140,574 148,317
Amortization of compensation element of restricted stock 11,699 9,566
Securities gains (5,681) (7,156)
Net (gain) loss on sales of non-interest earning assets (25,251) 6,208
Net decrease (increase) in loans held for sale 2,169,046 (1,080,512)
Net decrease (increase) in accrued interest receivable,
prepaid expenses and other assets 53,033 (1,179,832)
Net (decrease) increase in accrued interest payable,
accrued expenses and other liabilities (42,281) 452,580
------------------- ----------------
Net cash provided by (used in) operating activities 3,391,506 (628,013)
------------------- ----------------
Cash flows from investing activities:
Proceeds from maturities of securities available for sale 3,383,067 3,049,312
Proceeds from sales of securities available for sale 3,180,276 4,474,782
Purchases of securities available for sale (8,429,871) (7,650,567)
Net increase in loans (2,731,796) (3,584,880)
Capital expenditures (208,936) (176,951)
Proceeds from the sale of assets 36,206 243,629
Net funds received in acquisitions - 13,420
Loan recoveries 50,955 55,312
------------------- ----------------
Net cash used in investing activities (4,720,099) (3,575,943)
------------------- ----------------
Cash flows from financing activities:
Net decrease in deposits (389,221) (1,036,194)
Net increase in funds purchased
and other short-term borrowings 607,289 2,433,241
Proceeds from the issuance of long-term debt 1,100,961 2,090,333
Repayment of long-term debt (583,652) (366,393)
Proceeds from stock issuance 17,980 82,037
Proceeds used in the acquisition of stock (128,508) (304,103)
Restricted stock activity (524)
Dividends paid (331,203) (262,385)
------------------- ----------------
Net cash provided by financing activities 293,122 2,636,536
------------------- ----------------
Net decrease in cash and cash equivalents (1,035,471) (1,567,420)
Cash and cash equivalents at beginning of period 6,076,834 6,610,197
------------------- ----------------
Cash and cash equivalents at end of period $ 5,041,363 $ 5,042,777
=================== ================
Supplemental Disclosure
Interest paid $ 2,081,129 $ 2,013,232
Income taxes paid 300,259 270,064
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Shareholders' Equity
-----------------------------------------------
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 - - 813,122 - - 813,122
Other comprehensive income:
Change in unrealized gains (losses) on
securities, net of taxes - - - - (223,881) (223,881)
---------------
Total comprehensive income - - - - - 589,241
Cash dividends declared, $0.750 per share - - (262,385) - - (262,385)
Exercise of stock options 399 (7,654) - 20,665 - 13,410
Acquisition and retirement of stock (190) - (10,540) (293,373) - (304,103)
Restricted stock activity - 1,582 - (1,582) - -
Amortization of compensation element
of restricted stock - - - 9,566 - 9,566
Stock issued for acquisitions 1,500 109,268 - 47,114 - 157,882
Issuance of stock for employee benefit plans 966 57,835 - 9,826 - 68,627
----------------------------------------------------------------------------------------
Balance, September 30, 1998 $321,246 $ 1,248,542 $4,507,556 $(317,287) $1,824,272 $ 7,584,329
========================================================================================
Balance, January 1, 1999 $322,485 $ 1,293,011 $4,575,382 $(100,441) $2,088,207 $ 8,178,644
Net income - - 896,806 - - 896,806
Other comprehensive income:
Change in unrealized gains (losses) on
securities, net of taxes - - - - (806,814) (806,814)
---------------
Total comprehensive income - - - - - 89,992
Cash dividends declared, $1.035 per share - - (331,203) - - (331,203)
Exercise of stock options 575 6,483 - 2,552 - 9,610
Acquisition of treasury stock - - - (128,508) - (128,508)
Restricted stock activity 10 706 - (1,240) - (524)
Amortization of compensation element
of restricted stock - - - 11,699 - 11,699
Issuance of stock for employee benefit plans 101 6,710 - 1,559 - 8,370
----------------------------------------------------------------------------------------
Balance, September 30, 1999 $323,171 $ 1,306,910 $5,140,985 $(214,379) $1,281,393 $ 7,838,080
========================================================================================
</TABLE>
* Balance at September 30, 1998 includes $247,585 for Treasury Stock and $69,702
for Deferred Compensation.
Balance at September 30, 1999 includes $153,980 for Treasury Stock and $60,399
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 September 30, 1999.
<TABLE>
<CAPTION>
Merger-Related Charges Utilized Balance Utilized Balance
(In thousands) Pretax In 1998 December 31, 1998 In 1999 September 30, 1999
----------- ------------ ---------------------- ----------- --------------------
<S> <C>
Transaction costs $ 40,300 $ 6,858 $ 33,442 $ 33,442 -
Severance and termination accruals 38,900 - 38,900 24,640 $ 14,260
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 60,786 14,260
------------ -------------- ---------------------- ----------- ------------------
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 $ 60,786 $ 14,260
============ ============= ====================== =========== ===================
</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 nine
months of 1999, $38.5 million ($27.6 million after-tax) of these additional
merger-related charges were recorded. These charges included $12.4 million in
accelerated depreciation and amortization based upon estimates of systems
integration time tables, $11.6 million in severance and $14.5 million in
miscellaneous integration costs. SunTrust expects to record additional
merger-related charges of approximately $49.5 million through the year 2000.
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
------------------------------------------------------------------
NOTE 3 - DERIVATIVE FINANCIAL INSTRUMENTS
SunTrust uses 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 recognize all derivatives as either assets or liabilities on 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 nine months of 1999 and 1998 is calculated as
follows: (In thousands)
<TABLE>
<CAPTION>
Before Income Net of
Income Tax Tax (Benefit) Income Tax
---------- ------------- ----------
<S> <C>
Unrealized gains and losses (net) recognized in
other comprehensive income:
Nine months ended September 30, 1999 $ (1,306,755) $ (499,941) $ (806,814)
Nine months ended September 30, 1998 $ (366,614) $ (142,733) $ (223,881)
</TABLE>
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C>
Amounts reported in net income:
Gain on sale of securities $ 5,681 $ 7,156
Amortization and accretion, net 1,616 2,853
------------------ ----------------
Reclassification adjustment 7,297 10,009
Income tax expense (2,792) (3,897)
------------------ ----------------
Reclassification adjustment, net of tax $ 4,505 $ 6,112
================== ================
Amounts reported in other comprehensive income:
Unrealized (losses) gains arising during period, net of tax (802,309) (217,769)
Reclassification adjustment, net of tax (4,505) (6,112)
------------------ ----------------
Net unrealized (losses) gains recognized in
other comprehensive income (806,814) (223,881)
Net income 896,806 813,122
------------------ ----------------
Total comprehensive income $ 89,992 $ 589,241
================== ================
</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 September
30, 1999 and September 30, 1998 is included in the following table.
<TABLE>
<CAPTION>
Computation of Per Share Earnings
(In thousands, except per share data)
Three Months Nine Months
Ended September 30 Ended September 30
------------------------------------- -----------------------------------
1999 1998 1999 1998
----------------- ---------------- --------------- ----------------
<S> <C>
Basic
- -----
Net income $ 321,406 $ 276,760 $ 896,806 $ 813,122
----------------- ---------------- --------------- -----------------
Average common shares 318,239 313,572 318,215 314,742
----------------- ---------------- --------------- -----------------
Earnings per common share - basic $ 1.01 $ 0.88 $ 2.82 $ 2.58
================= ================ =============== =================
Diluted
- -------
Net income $ 321,406 $ 276,760 $ 896,806 $ 813,122
----------------- ---------------- --------------- -----------------
Average common shares outstanding 318,239 313,572 318,215 314,742
Effect of dilutive securities:
Stock options 2,274 2,746 2,460 2,927
Performance restricted stock 1,710 1,602 1,669 1,628
----------------- ---------------- --------------- -----------------
Average diluted common shares 322,223 317,920 322,344 319,297
----------------- ---------------- --------------- -----------------
Earnings per common share - diluted $ 1.00 $ 0.87 $ 2.78 $ 2.55
================= ================ =============== =================
</TABLE>
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
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>
Nine Months Ended September 30, 1999
------------------------------------------------------------------------------------------------
(In thousands) Florida Georgia Tennessee Crestar All Other Eliminations Consolidated
------------------------------------------------------------------------------------------------
<S> <C>
Total interest income $ 1,476,235 $1,097,295 $ 440,972 $ 1,344,404 $ 338,263 $ (296,221) $ 4,400,948
Total interest expense 657,139 520,870 212,291 607,291 349,978 (296,221) 2,051,348
------------------------------------------------------------------------------------------------
Net interest income 819,096 576,425 228,681 737,113 (11,715) - 2,349,600
Provision for loan losses 29,303 18,081 6,532 42,003 41,415 - 137,334
------------------------------------------------------------------------------------------------
Net interest income after provision 789,793 558,344 222,149 695,110 (53,130) - 2,212,266
------------------------------------------------------------------------------------------------
Total noninterest income 422,836 304,362 113,918 410,520 845,865 (736,646) 1,360,855
Total noninterest expense 689,221 467,891 195,108 655,859 914,081 (736,646) 2,185,514
------------------------------------------------------------------------------------------------
Income before taxes 523,408 394,815 140,959 449,771 (121,346) - 1,387,607
Provision for income taxes 189,562 135,468 51,732 155,022 (40,983) - 490,801
------------------------------------------------------------------------------------------------
Net income $ 333,846 $ 259,347 $ 89,227 $ 294,749 $ (80,363) $ - $ 896,806
================================================================================================
Other Significant Items
Total assets $31,077,941 $26,058,374 $ 9,003,213 $26,208,190 $ 17,914,377 $(17,506,693) $92,755,402
Investment in subsidiaries 2,553,942 3,406,409 731,669 2,469,867 385,866 (9,547,753) -
Depreciation, amortization, and
accretion (net) 55,533 30,705 15,137 66,674 25,512 - 193,561
Total expenditures for long-lived
assets 59,553 13,195 6,641 34,485 95,062 - 208,936
Revenues from external customers
Total interest income $1,394,293 $1,036,187 $ 431,230 $ 1,329,284 $ 209,954 $ - $ 4,400,948
Total noninterest income 357,158 251,052 91,437 409,477 251,731 - 1,360,855
------------------------------------------------------------------------------------------------
Total income $1,751,451 $1,287,239 $ 522,667 $ 1,738,761 $ 461,685 $ - $ 5,761,803
================================================================================================
Revenues from affiliates
Total interest income $ 81,942 $ 61,108 $ 9,742 $ 15,120 $ 128,309 $ (296,221)
Total noninterest income 65,678 53,310 22,481 1,043 594,134 (736,646)
------------------------------------------------------------------------------------------------
Total income $ 147,620 $ 114,418 $ 32,223 $ 16,163 $ 722,443 $ (1,032,867)
================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
------------------------------------------------------------------------------------------------------
(In thousands) Florida Georgia Tennessee Crestar All Other Eliminations Consolidated
------------------------------------------------------------------------------------------------------
<S> <C>
Total interest income $ 1,446,024 $ 1,003,942 $ 432,708 $ 1,315,342 $ 337,666 $ (302,720) $ 4,232,962
Total interest expense 682,194 481,887 214,013 621,929 359,966 (302,720) 2,057,269
------------------------------------------------------------------------------------------------------
Net interest income 763,830 522,055 218,695 693,413 (22,300) - 2,175,693
Provision for loan losses 27,604 17,626 5,662 53,986 42,574 - 147,452
------------------------------------------------------------------------------------------------------
Net interest income after
provision 736,226 504,429 213,033 639,427 (64,874) - 2,028,241
------------------------------------------------------------------------------------------------------
Total noninterest income 377,206 269,335 104,599 439,276 727,427 (637,788) 1,280,055
Total noninterest expense 637,366 433,017 187,734 676,371 784,747 (637,788) 2,081,447
------------------------------------------------------------------------------------------------------
Income before taxes 476,066 340,747 129,898 402,332 (122,194) - 1,226,849
Provision for income taxes 174,217 114,592 46,723 143,926 (65,731) - 413,727
------------------------------------------------------------------------------------------------------
Net income $ 301,849 $ 226,155 $ 83,175 $ 258,406 $ (56,463) $ - $ 813,122
======================================================================================================
Other significant Items
Total assets $ 28,020,646 $ 23,687,334 $ 8,318,580 $ 25,615,081 $ 15,923,136 $ (15,108,133) $ 86,456,644
Investment in subsidiaries 2,414,304 3,646,491 683,895 2,299,979 379,516 (9,424,185) -
Depreciation, amortization,
and accretion (net) 73,140 37,348 18,928 76,604 3,674 - 209,694
Total expenditures for
long-lived assets 64,519 19,808 6,453 41,458 44,713 - 176,951
Revenues from external
customers
Total interest income $ 1,338,478 $ 949,242 $ 422,112 $ 1,315,342 $ 207,788 $ - $ 4,232,962
Total noninterest income 313,858 220,540 83,503 439,276 222,878 - 1,280,055
------------------------------------------------------------------------------------------------------
Total income $ 1,652,336 $ 1,169,782 $ 505,615 $ 1,754,618 $ 430,666 $ - $ 5,513,017
======================================================================================================
Revenues from affiliates
Total interest income $ 107,546 $ 54,700 $ 10,596 $ - $ 129,878 $ (302,720)
Total noninterest income 63,348 48,795 21,096 - 504,549 (637,788)
---------------------------------------------------------------------------------------
Total income $ 170,894 $ 103,495 $ 31,692 $ - $ 634,427 $ (940,508)
=======================================================================================
</TABLE>
NOTE 8 - SUBSEQUENT EVENT
On October 15, 1999, the Company announced an agreement to sell approximately
$1.4 billion of the consumer credit card portfolio to MBNA America Bank, N.A.
The sale is expected to result in a gain of approximately $205 million on an
after-tax basis. The transaction is expected to close in the fourth quarter of
1999. The business, corporate and purchasing card portfolios were not part of
the sale and will continue to be maintained by SunTrust as will the merchant
services line of business.
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 third
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.
In the third quarter of 1999, SunTrust announced it will consolidate its 26
separate bank charters into a single state charter effective January 1, 2000.
The results of operations for the nine months ended September 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 $325.9 million and $924.3 million
for the third quarter and first nine months of 1999, an increase of 17.8% and
13.7% compared with $276.7 million and $813.1 million in the same periods of
1998 (excluding after-tax charges related to the Crestar merger of $4.5 million
for the third quarter and $27.5 for the first nine months of 1999). Diluted
earnings per share, adjusted for merger charges, grew 16.1% to $1.01 and 12.6%
to $2.87 from $0.87 and $2.55 in the same periods last year. Reported net income
was $321.4 million, or $1.00 per diluted share for the third quarter and $896.8
million, or $2.78 per diluted share for the first nine months of 1999. The
growth in net income resulted from strong loan demand compared to the same
period last year.
13
<PAGE>
<TABLE>
<CAPTION>
Selected Quarterly Financial Data Table 1
(Dollars in millions except per share data) Quarters
--------------------------------------------------------------------------------
1999 1998
----------------------------------------------- -----------------------------
3 2 1 4 3
-------------- -------------- ------------- ------------- --------------
<S> <C>
Summary of Operations
Interest and dividend income $ 1,506.4 $ 1,452.5 $ 1,442.0 $ 1,443.0 $ 1,419.5
Interest expense 711.4 667.8 672.2 689.5 698.2
-------------- -------------- ------------- -------------- --------------
Net interest income 795.0 784.7 769.8 753.5 721.3
Provision for loan losses 46.5 48.8 42.0 67.1 40.5
-------------- -------------- ------------- -------------- --------------
Net interest income after
provision for loan losses 748.5 735.9 727.8 686.4 680.8
Noninterest income 446.6 469.3 444.9 436.1 460.1
Noninterest expense 692.3 752.3 740.9 851.0 732.9
-------------- -------------- ------------- -------------- --------------
Income before provision
for income taxes 502.8 452.9 431.8 271.5 408.0
Provision for income taxes 181.4 159.2 150.1 113.6 131.3
-------------- -------------- ------------- -------------- --------------
Net income $ 321.4 $ 293.7 $ 281.7 $ 157.9 $ 276.7
============== ============== ============= ============== ==============
Net interest income (taxable-equivalent) $ 805.4 $ 795.4 $ 780.7 $ 764.6 $ 732.4
Per common share
Net income - diluted $ 1.00 $ 0.91 $ 0.87 $ 0.49 $ 0.87
Net income - basic 1.01 0.92 0.89 0.50 0.88
Dividends declared 0.345 0.345 0.345 0.250 0.250
Book value 24.50 25.47 25.32 25.47 23.92
Market price
High 70.88 73.00 79.44 80.63 87.75
Low 61.56 63.06 60.44 55.06 54.00
Close 65.75 69.44 62.25 76.50 62.00
Selected Average Balances
Total assets $ 92,447.7 $ 92,304.2 $ 91,696.6 $ 89,283.1 $ 85,372.1
Earning assets 82,517.2 81,329.1 80,684.8 78,224.4 74,731.7
Loans 65,060.0 64,733.1 64,854.0 63,134.0 60,039.5
Total deposits 58,423.6 57,743.7 56,895.4 54,828.4 53,658.3
Realized shareholders' equity 6,522.5 6,328.2 6,120.2 5,898.6 5,618.9
Total shareholders' equity 8,210.7 8,322.5 8,146.9 7,947.6 7,990.8
Common shares - diluted (thousands) 322,223 322,448 322,364 320,224 317,920
Common shares - basic (thousands) 318,239 318,315 318,090 315,403 313,572
Financial Ratios
ROA* 1.42 % 1.32 % 1.29 % 0.73 % 1.35 %
ROE* 19.55 18.61 18.67 10.62 19.54
Net interest margin* 3.87 3.92 3.92 3.88 3.89
</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.
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, 1999 June 30, 1999
----------------------------------------------- -----------------------------------------
Average Income/ Yields/ Average Income/ Yields/
Balances Expense Rates Balances Expense Rates
--------------- ------------------ ---------- -------------- ------------ -----------
<S> <C>
Assets
Loans:(1)
Taxable $ 64,032.3 $ 1,223.5 7.58 % $63,596.4 $1,187.7 7.49 %
Tax-exempt(2) 1,027.7 19.1 7.36 1,136.7 20.0 7.07
----------------------------------------------- -----------------------------------------
Total loans 65,060.0 1,242.6 7.58 64,733.1 1,207.7 7.48
Securities available for sale:
Taxable 15,357.3 242.1 6.25 14,415.3 224.4 6.24
Tax-exempt(2) 555.3 11.0 7.91 566.2 11.5 8.10
----------------------------------------------- -----------------------------------------
Total securities available for sale 15,912.6 253.1 6.31 14,981.5 235.9 6.31
Funds sold 1,274.5 17.9 5.58 1,321.8 16.5 5.02
Other short-term investments(2) 270.1 3.2 4.71 292.7 3.1 4.26
----------------------------------------------- -----------------------------------------
Total earning assets 82,517.2 1,516.8 7.29 81,329.1 1,463.2 7.22
Allowance for loan losses (949.0) (949.1)
Cash and due from banks 3,505.4 3,599.7
Premises and equipment 1,622.9 1,598.1
Other assets 3,014.3 3,502.5
Unrealized gains on securities
available for sale 2,736.9 3,223.9
----------------------------------------------- -----------------------------------------
Total assets $ 92,447.7 $92,304.2
=============================================== =========================================
Liabilities and Shareholders' Equity
Interest-bearing deposits:
NOW/Money market accounts $ 19,920.5 $ 132.0 2.63 % $19,833.1 $ 126.5 2.56 %
Savings 6,922.6 50.7 2.90 7,003.4 49.9 2.86
Consumer time 9,794.8 115.8 4.69 9,815.2 116.2 4.75
Other time 8,931.5 114.5 5.08 8,186.0 99.1 4.86
----------------------------------------------- -----------------------------------------
Total interest-bearing deposits 45,569.4 413.0 3.60 44,837.7 391.7 3.50
Funds purchased 14,817.9 188.6 5.05 14,849.3 172.4 4.66
Other short-term borrowings 1,632.3 21.4 5.19 1,448.1 16.8 4.65
Long-term debt 5,782.6 88.4 6.06 5,741.4 86.9 6.07
----------------------------------------------- -----------------------------------------
Total interest-bearing liabilities 67,802.2 711.4 4.16 66,876.5 667.8 4.00
Noninterest-bearing deposits 12,854.2 12,906.0
Other liabilities 3,580.6 4,199.2
Realized shareholders' equity 6,522.5 6,328.2
Accumulated other comprehensive income 1,688.2 1,994.3
----------------------------------------------- -----------------------------------------
Total liabilities and shareholders'
equity $ 92,447.7 $92,304.2
=============================================== =========================================
Interest rate spread 3.13 % 3.22 %
----------------------------------------------- -----------------------------------------
Net Interest Income $ 805.4 $ 795.4
----------------------------------------------- -----------------------------------------
Net Interest Margin(3) 3.87 % 3.92 %
----------------------------------------------- -----------------------------------------
</TABLE>
(1) Interest income includes loan fees of $36.1, $34.7 and $30.3 in the
quarters ended September 30 and June 30, 1999 and September 30, 1998
and $104.1 and $87.9 in the nine months ended September 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 $10.4, $10.7 and $11.1 in the quarters ended
September 30 and June 30, 1999 and September 30, 1998 and $31.9 and
$33.3 in the nine months ended September 30, 1999 and 1998.
NET INTEREST INCOME/MARGIN. SunTrust's net interest margin was 3.91% for the
first nine months of 1999, a decrease of 9 basis points from the first nine
months of 1998. The rate on earning assets declined 46 basis points to 7.27% and
the rate on interest bearing liabilities decreased 43 basis points to 4.08% due
to the decrease in rates on time deposits.
15
<PAGE>
<TABLE>
<CAPTION>
Table 2
Quarter Ended Nine Months Ended
- -----------------------------------------------------------------------------------------------------------------------------------
September 30, 1998 September 30, 1999 September 30, 1998
- ------------------------------------------ ------------------------------------------ -----------------------------------------
Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/
Balances Expense Rates Balances Expense Rates Balances Expense Rates
- --------------- ------------- ---------- --------------- ------------- ---------- -------------- ------------- ----------
<S> <C>
$58,997.5 $1,173.8 7.89 % $ 63,767.1 $ 3,598.4 7.54 % $57,920.7 $3,486.2 8.05%
1,042.0 20.4 7.79 1,116.0 60.3 7.22 1,030.1 60.7 7.88
- ------------------------------------------ ------------------------------------------ -----------------------------------------
60,039.5 1,194.2 7.89 64,883.1 3,658.7 7.54 58,950.8 3,546.9 8.04
12,652.8 205.4 6.44 14,487.7 680.1 6.28 12,534.9 613.5 6.54
627.9 13.0 8.22 565.0 34.0 8.05 641.8 40.0 8.32
- ------------------------------------------ ------------------------------------------ -----------------------------------------
13,280.7 218.4 6.52 15,052.7 714.1 6.34 13,176.7 653.5 6.63
1,084.3 14.5 5.30 1,280.2 49.9 5.21 1,310.5 54.7 5.58
327.2 3.5 4.25 301.0 10.1 4.50 316.2 11.1 4.67
- ------------------------------------------ ------------------------------------------ -----------------------------------------
74,731.7 1,430.6 7.60 81,517.0 4,432.8 7.27 73,754.2 4,266.2 7.73
(931.1) (949.3) (935.5)
3,194.6 3,564.3 3,208.0
1,487.3 1,583.9 1,473.7
3,045.8 3,359.6 3,098.6
3,843.8 3,076.8 3,675.5
- ------------------------------------------ ------------------------------------------ -----------------------------------------
$85,372.1 $ 92,152.3 $84,274.5
========================================== ========================================== =========================================
$18,408.9 $ 136.2 2.94 % $ 19,776.6 $ 385.7 2.61 % $18,000.9 $ 393.0 2.92%
6,613.5 55.4 3.32 6,961.8 151.2 2.90 6,622.8 164.7 3.33
10,294.4 133.9 5.16 9,874.5 353.3 4.78 10,476.5 404.6 5.16
6,665.0 91.7 5.46 8,336.3 308.6 4.95 6,728.7 281.4 5.59
- ------------------------------------------ ------------------------------------------ -----------------------------------------
41,981.8 417.2 3.94 44,949.2 1,198.8 3.57 41,828.9 1,243.7 3.98
11,875.2 160.6 5.36 14,817.7 530.3 4.79 11,490.2 461.8 5.37
2,307.3 31.7 5.44 1,618.6 58.5 4.83 2,513.2 102.3 5.44
5,565.7 88.7 6.32 5,770.4 263.7 6.11 5,207.3 249.5 6.40
- ------------------------------------------ ------------------------------------------ -----------------------------------------
61,730.0 698.2 4.49 67,155.9 2,051.3 4.08 61,039.6 2,057.3 4.51
11,676.5 12,744.0 11,524.7
3,974.8 4,025.5 3,888.4
5,618.9 6,325.1 5,554.7
2,371.9 1,901.8 2,267.1
- ------------------------------------------ ------------------------------------------ -----------------------------------------
$85,372.1 $ 92,152.3 $84,274.5
========================================== ========================================== =========================================
3.11 % 3.19 % 3.22%
- ------------------------------------------ ------------------------------------------ -----------------------------------------
$ 732.4 $ 2,381.5 $2,208.9
- ------------------------------------------ ------------------------------------------ -----------------------------------------
3.89 % 3.91 % 4.00%
- ------------------------------------------ ------------------------------------------ -----------------------------------------
</TABLE>
(3) Derivative instruments used to help balance SunTrust's interest-sensitivity
position increased net interest income by $4.3, $5.8 and $1.0 in the
quarters ended September 30 and June 30, 1999 and September 30, 1998 and
increased net interest income by $15.0 and $4.3 in the nine months ended
September 30, 1999 and September 30, 1998. Without these swaps, the net
interest margin would have been 3.85%, 3.89%, and 3.88%, in the quarters
<PAGE>
ended September 30 and June 30, 1999, and September 30, 1998 and 3.88% and
4.00% in the nine months ended September 30, 1999 and September 30, 1998.
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
nine months of 1999 and had no impact on the net interest margin in the same
period last year. Table 2 contains more detailed information concerning average
balances and interest yields earned and rates paid.
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.
16
<PAGE>
NONINTEREST INCOME. Noninterest income in the third quarter and first nine
months of 1999, adjusted to exclude the effect of securities gains and losses,
decreased $16.9 million, or 3.7% and increased 82.3 million, or 6.5%, from the
comparable periods last year. Trust income, SunTrust's largest source of
noninterest income, increased $13.4 million, or 11.9% and $36.5 million, or
10.7% over the same periods. Other income in the third quarter of 1999 includes
a $6.8 million pre-tax gain on the sale of student loans. 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.
During the third quarter of 1999, SunTrust began to record amortization expense
for mortgage-servicing rights as a reduction in noninterest income, in
conforming to industry practice. The $15.9 million of amortization expense
recorded in the third quarter had previously been charged to noninterest
expense.
<TABLE>
<CAPTION>
Noninterest Income Table 3
(In millions)
Quarters
----------------------------------------------------------------------
1999 1998
------------------------------------------ -------------------------
3 2 1 4 3
------------- ---------- ----------- ----------- -----------
<S> <C>
Trust income $ 126.4 $ 126.3 $ 126.3 $ 117.7 $ 112.9
Service charges on deposit accounts 111.6 107.1 106.1 105.7 102.6
Other charges and fees 49.0 49.3 46.5 50.8 45.4
Credit card fees 29.2 28.2 23.1 23.5 20.1
Mortgage production related income 26.7 47.6 53.5 58.5 64.9
Mortgage servicing related income 12.0 21.5 20.2 18.9 17.4
Retail investment services 23.9 26.0 23.5 15.2 16.1
Corporate and institutional investment services 13.2 16.3 18.7 20.2 13.8
Trading account profits and commissions 6.2 11.4 10.6 11.7 8.3
Securities gains (losses) 2.6 3.9 (0.7) 1.0 (0.8)
Other income 45.8 31.7 17.1 12.9 59.4
------------- ---------- ----------- ----------- -----------
Total noninterest income $ 446.6 $ 469.3 $ 444.9 $ 436.1 $ 460.1
============= ========== =========== =========== ===========
</TABLE>
NONINTEREST EXPENSE. Noninterest expense decreased $40.7 million, or 5.5% and
increased $104.1 million, or 5.0% in the third quarter and first nine months of
1999 compared to the same periods last year. Personnel expenses, consisting of
salaries, other compensation and employee benefits, decreased $15.6 million, or
3.7% and increased $76.9 million, or 6.4% over the earlier periods. The
efficiency ratio in the third quarter of 1999 was 54.7% (excluding the Crestar
merger-related charges), a decrease from 61.5% in the third quarter of 1998.
Noninterest expense includes Crestar merger-related expenses of $7.1 million,
$17.6 million and $13.8 million in the third, second and first quarters of 1999
and $119.4 million in the fourth quarter of 1998. Mortgage servicing rights
amortization of $15.9 million was recorded as a reduction of other income
beginning with the third quarter of 1999.
17
<PAGE>
NONINTEREST EXPENSE TABLE 4
(In millions)
<TABLE>
<CAPTION>
Quarters
----------------------------------------------------------------------
1999 1998
------------------------------------------ -------------------------
3 2 1 4 3
------------- ----------- ----------- ----------- -----------
<S> <C>
Salaries $ 288.5 300.4 $ 298.5 $ 289.9 $ 278.1
Other compensation 80.9 88.9 84.4 86.2 100.8
Employee benefits 39.7 41.5 54.4 39.2 45.7
Net occupancy expense 49.8 49.9 47.7 49.8 49.1
Equipment expense 48.0 49.8 45.3 45.2 45.5
Outside processing and software 37.0 38.7 34.8 37.7 32.9
Marketing and customer development 24.7 23.9 21.8 34.7 22.7
Credit and collection services 17.8 19.2 16.6 18.9 17.8
Communications 16.5 17.6 16.1 15.8 15.8
Postage and delivery 16.3 17.4 17.1 16.1 15.9
Consulting and legal 13.0 15.6 15.4 19.6 19.6
Operating supplies 10.7 14.3 13.3 14.3 13.2
Amortization of intangible assets 9.1 24.9 25.7 28.9 28.0
Merger-related expenses 7.1 17.6 13.8 119.4 -
FDIC premiums 1.8 2.1 2.0 2.3 2.3
Other real estate expense 0.2 (2.7) (1.1) (1.0) (4.0)
Other expense 31.2 33.2 35.1 34.0 49.5
------------- ----------- ----------- ----------- -----------
Total noninterest expense $ 692.3 $ 752.3 $ 740.9 $ 851.0 $ 732.9
============= =========== =========== =========== ===========
Efficiency ratio (1) 54.7 % 58.1 % 59.3 % 60.9 % 61.5 %
</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 third 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 third quarter of 1999, SunTrust continued to address
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 level of commercial charge-offs
this year as well as the increase in nonaccrual loans in the third 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. During the third quarter of 1999,
Hurricane Floyd and several other tropical storms had a negative impact on
portions of our market. The effects included damage to households and
businesses, resulting in general business disruption and an economic impact
caused by the loss of tourism both during the storms and from subsequent
cancellations.
SunTrust increased the provision for loan losses in the third quarter of 1999 to
$46.5 million from $40.5 million in the same period last year. Net charge-offs
to average loans declined to .25% in the third quarter of this year from .28% in
the third quarter of 1998. Net charge-offs declined to $40.8 million from $42.8
in the third quarter of 1998. Total provision exceeded net charge-offs by $5.8
million. Approximately $86 million of the allowance for loan losses was
allocated to the $1.4 billion credit card portfolio that will be sold.
18
<PAGE>
SunTrust's allowance for loan losses totaled $947.2 million at September 30,
1999, which was 1.44% of period loans and 398.6% of total nonperforming loans,
with both ratios having decreased from the third quarter 1998. As of September
30, 1998 the allowance for loan losses was $928.5 million, or 1.51% of
quarter-end loans and 468.3% of total nonperforming loans.
SUMMARY OF LOAN LOSS EXPERIENCE TABLE 5
(Dollars in millions)
<TABLE>
<CAPTION>
Quarters
-----------------------------------------------------------------------------------
1999 1998
------------------------------------------------ -------------------------------
3 2 1 4 3
-------------- -------------- ------------- -------------- --------------
<S> <C>
Allowance for Loan Losses
Balances - beginning of quarter $ 941.4 $ 952.6 $ 944.6 $ 928.5 $ 908.9
Allowance from acquisitions and
other activity - net 0.1 (13.4) - 1.5 21.9
Provision for loan losses 46.5 48.8 42.0 67.1 40.5
Charge-offs:
Commercial (21.4) (24.0) (12.2) (19.2) (11.9)
Real estate:
Construction (1.1) (0.1) (0.7) (1.7) (1.0)
Residential mortgages (3.5) (3.6) (3.1) (2.9) (3.6)
Other (0.9) (2.6) (0.6) (1.6) (1.6)
Credit card (18.2) (19.4) (22.7) (26.1) (27.1)
Other consumer loans (11.6) (13.7) (12.9) (16.3) (14.3)
-------------- -------------- ------------- -------------- --------------
Total charge-offs (56.7) (63.4) (52.2) (67.8) (59.5)
-------------- -------------- ------------- -------------- --------------
Recoveries:
Commercial 3.8 4.0 4.0 2.6 3.8
Real estate:
Construction 0.1 0.4 0.2 - -
Residential mortgages 1.6 0.8 0.8 0.9 0.3
Other 0.6 1.3 2.6 2.2 1.4
Credit card 2.7 3.3 3.2 2.7 3.5
Other consumer loans 7.1 7.0 7.4 6.9 7.7
-------------- -------------- ------------- -------------- --------------
Total recoveries 15.9 16.8 18.2 15.3 16.7
-------------- -------------- ------------- -------------- --------------
Net charge-offs (40.8) (46.6) (34.0) (52.5) (42.8)
-------------- -------------- ------------- -------------- --------------
Balance - end of quarter $ 947.2 $ 941.4 $ 952.6 $ 944.6 $ 928.5
============== ============== ============= ============== ==============
Quarter-end loans outstanding $ 65,566.9 $ 65,331.1 $ 64,274.1 $ 65,089.2 $ 61,325.1
Average loans 65,060.0 64,733.1 64,854.0 63,134.0 60,039.5
Allowance to quarter-end loans 1.44 % 1.44 % 1.48 % 1.45 % 1.51 %
Allowance to nonperforming loans 398.6 392.9 481.5 456.0 468.3
Net charge-offs to average loans
(annualized) 0.25 0.29 0.21 0.33 0.28
</TABLE>
19
<PAGE>
NONPERFORMING ASSETS TABLE 6
(Dollars in millions)
<TABLE>
<CAPTION>
1999 1998
----------------------------------------------- -------------------------------
September 30 June 30 March 31 December 31 September 30
-------------- ------------ -------------- -------------- ---------------
<S> <C>
Nonperforming Assets
Nonaccrual loans:
Commercial $ 82.3 $ 85.4 $ 47.7 $ 50.1 $ 48.3
Real Estate:
Construction 11.8 14.0 14.8 13.5 14.8
Residential mortgages 85.9 80.7 80.7 83.9 77.7
Other 45.8 48.0 41.6 46.6 43.5
Consumer loans 11.8 11.5 13.0 12.5 13.4
------------- -------------- ------------- -------------- -------------
Total nonaccrual loans 237.6 239.6 197.8 206.6 197.7
Restructured loans 0.1 - 0.1 0.6 0.5
------------- -------------- ------------- -------------- -------------
Total nonperforming loans 237.7 239.6 197.9 207.2 198.2
Other real estate owned 24.2 28.2 36.1 34.9 33.1
------------- -------------- ------------- -------------- -------------
Total nonperforming assets $ 261.9 $ 267.8 $ 234.0 $ 242.1 $ 231.3
============= ============== ============= ============== =============
Ratios:
Nonperforming loans to total loans 0.36 % 0.37 % 0.31 % 0.32 % 0.32 %
Nonperforming assets to total loans
plus other real estate owned 0.40 0.41 0.36 0.37 0.38
Accruing Loans Past Due
90 Days or More $ 113.1 $ 101.7 $ 103.8 $ 108.2 $ 89.8
</TABLE>
Nonperforming Assets. Nonperforming assets consist of nonaccrual loans,
restructured loans and other real estate owned. Nonperforming assets have
increased 8.2%, or $19.8 million since December 31, 1998 and increased 13.2%, or
$30.6 million since September 30, 1998.
Interest income on nonaccrual loans, if recognized, is recorded using the cash
basis method of accounting. During the first nine months of 1999, $18.9 million
of interest income would have been recorded if all nonaccrual and restructured
loans had been accruing interest according to their original contract terms.
Interest income recognized on nonperforming loans using the cash basis in the
first nine months of 1999 was $11.2 million.
20
<PAGE>
Loan Portfolio by Types of Loans TABLE 7
(In millions)
<TABLE>
<CAPTION>
1999 1998
--------------------------------------------------- ---------------------------------
September 30 June 30 March 31 December 31 September 30
-------------- -------------- --------------- --------------- ---------------
<S> <C>
Commercial $ 24,918.3 $ 24,772.2 $ 24,058.1 $ 24,589.6 $ 21,652.7
Real estate:
Construction 2,348.0 2,240.8 2,180.2 2,085.0 1,995.5
Residential mortgages 20,074.2 20,645.8 20,563.7 20,429.5 21,056.5
Other 7,656.1 7,523.5 7,403.5 8,254.3 7,045.8
Credit card 1,497.2 1,476.6 1,522.3 1,563.5 1,526.2
Other consumer loans 9,073.1 8,672.2 8,546.3 8,167.3 8,048.4
-------------- -------------- --------------- --------------- ---------------
Total loans $ 65,566.9 $ 65,331.1 $ 64,274.1 $ 65,089.2 $ 61,325.1
============== ============== =============== =============== ===============
</TABLE>
Loans. Total loans at September 30, 1999 were $65.6 billion, an increase of $4.2
billion or 6.9% from September 30, 1998. The average loan to deposit ratio was
111.4% and 112.5% in the third quarter and first nine months of 1999 compared
with 111.9% and 110.5% in the same periods of 1998. Loans held for sale at
September 30, 1999 were $1.4 billion, a decrease of $2.2 billion from December
31, 1998 due to a higher level of secondary market sales coupled with lower
levels of originations compared to 1998.
Income Taxes. The provision for income taxes was $181.3 million and $490.8
million in the third quarter and first nine months of 1999 compared to $131.3
million and $413.7 million in the same periods last year. This represents a 36%
and 35% effective tax rate in the third quarter and first nine months of 1999
and a 32% and 34% effective tax rate in the same periods last year. The lower
effective 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 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 6.52% in the third quarter of 1998 to 6.31% in the
third quarter of this year. The portfolio size (measured at amortized cost)
increased by $0.5 billion during the third quarter to $16.1 billion as of
September 30, 1999. At September 30, 1999, approximately 4% of the portfolio
consisted of U.S. Treasury securities, 11% U.S. government agency securities,
58% mortgage-backed securities, 19% asset-backed securities, 5% trust preferred
securities and 3% 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 September 30, 1999 the carrying value of the
securities portfolio was $2.1 billion over amortized cost, consisting of a $2.3
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 third quarter and first nine months of 1999
increased $4.8 billion, or 8.9% and 4.3 billion, or 8.1% over the same periods a
year ago. Interest-bearing deposits represented 78.0% and 77.9% of average
deposits for the third quarter and first nine months of 1999, compared to 78.2%
and 78.4% for the same periods in 1998. In the first nine months of 1999,
average net purchased funds (average funds purchased less average funds sold)
increased $3.4 billion over the same period in 1998. Net purchased funds were
16.6% of average earning assets for the first nine months of 1999 as compared to
13.8% 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 bank's interest rate sensitivity and
the generation of revenue through its trading activities as of September 30,
1999 is shown in Table 8.
Derivative Instruments
(Dollars in thousands)
TABLE 8
<TABLE>
<CAPTION>
Estimated Fair Value
-----------------------------------------------
Weighted
Average Average
Notional Maturity Received Average Carrying Unrealized Unrealized
Balance In Months Rate Pay Rate amount (1) Gains Losses Net
----------------------------------------------------------------------------------------------------
<S> <C>
Hedges on Lending Commitments
Forward Contracts $ 1,957,323 2 - - - $ 1,401 $ (19,709) $ (18,308)
Hedges on Foreign Currency
Forward Contracts 530,570 3 - - - 4,161 (7,182) (3,021)
Interest Rate Swaps
Interest rate swaps 3,791,768 43 6.03% 5.50% $ (4,319) 48,617 (6,023) 38,275
Interest Rate Caps/floors
Interest rate caps/floors 4,317,247 17 6.67 - (12,976) 9,385 - (3,591)
Options
Option Contracts 2,200,000 3 5.84 - - 47 (5) 42
Futures
Future Contracts 920,000 10 - - - 821 (15) 806
------------
Total Derivatives $14,203
============
</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 $4.3 million and $15.0
million in the third quarter and first nine months of 1999.
22
<PAGE>
Capital Ratios TABLE 9
(Dollars in millions)
<TABLE>
<CAPTION>
1999 1998
---------------------------------------------------- -------------------------------
September 30 June 30 March 31 December 31 September 30
--------------- ---------------- -------------- -------------- --------------
<S> <C>
Tier 1 capital $ 7,065.0 $ 6,973.2 $ 6,773.7 $ 6,586.5 $ 6,284.9
Total capital 10,314.7 10,543.1 10,341.1 10,307.9 9,784.5
Risk-weighted assets 84,458.9 83,192.0 80,838.6 80,586.4 75,320.5
Risk-based ratios:
Tier 1 capital 8.36% 8.38 % 8.37 % 8.17 % 8.34 %
Total capital 12.21 12.67 12.79 12.79 12.99
Tier 1 leverage ratio 7.91 7.86 7.69 7.68 7.72
Total shareholders' equity to assets 8.45 8.79 8.93 8.78 8.77
</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 September 30, 1999, SunTrust's Tier 1
capital, total capital and Tier 1 leverage ratios were 8.36%, 12.21% and 7.91%,
respectively. SunTrust is committed to maintaining well-capitalized banks.
On August 10, 1999, the Board of Directors authorized the purchase of up to 15
million shares of SunTrust common stock. As of October 31, 1999, 2.1 million
shares have been purchased. Management anticipates that additional purchases
will occur over an extended period of time.
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. SunTrust Enterprise
Testing was completed in March 1999. Crestar Enterprise Testing was completed in
April 1999. All SunTrust mission-critical systems were renovated and tested by
July 31, 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 $85 million, an increase of $3.0 million from
the estimate in the second quarter of 1999. These expenses are being recognized
as they are incurred. Through September 30, 1999, SunTrust recognized $81.8
million, or 96%, of the total projected expense. Of this amount, $7.9 million
was incurred in the third quarter of 1999 and $28.2 million was incurred in the
first nine months of 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 SunTrust Banks Crestar Financial
of Florida, Inc. of Georgia, Inc. of Tennessee, Inc. Corporation
--------------------- ---------------------- ------------------- ------------------
1999 1998 1999 1998 1999 1998 1999 1998
--------- ---------- ----------- --------- --------- -------- -------- -------
<S> <C>
Summary of Operations (1)
Net interest income (FTE) $ 828.2 $ 774.6 $ 582.5 $ 529.8 $ 232.6 $ 223.5 $ 749.8 $ 703.3
Provision for loan losses 29.3 27.6 18.1 17.6 6.5 5.7 42.0 54.0
Trust income 146.2 130.5 110.0 101.7 35.6 32.9 67.4 61.5
Other noninterest income 276.6 246.7 194.3 167.6 78.3 71.7 343.2 377.7
Personnel expense 291.8 278.9 182.7 184.0 84.4 87.6 358.0 361.9
Other noninterest expense 397.4 358.5 285.2 249.0 110.7 100.2 297.8 314.5
Net income 333.8 301.8 259.3 226.2 89.2 83.2 294.7 258.4
Selected Average Balances (1)
Total assets 30,119 27,586 25,777 22,919 8,746 8,070 26,596 24,606
Earning assets 28,279 25,984 21,093 17,907 8,420 7,742 24,564 22,754
Loans 21,248 19,815 17,145 14,883 6,618 6,097 19,653 17,581
Total deposits 20,280 19,017 13,898 11,508 6,221 6,021 17,407 16,902
Realized shareholders' equity 2,485 2,227 1,784 1,647 700 641 2,390 2,136
At September 30
Total assets 31,078 28,021 26,058 23,687 9,003 8,319 26,208 25,615
Earning assets 29,227 26,448 22,245 19,345 8,695 8,012 24,167 23,513
Loans 22,116 20,338 17,801 15,682 6,818 6,295 19,070 18,435
Allowance for loan losses 312 388 201 206 97 110 275 262
Total deposits 20,270 19,049 14,848 11,718 6,160 5,843 17,484 17,076
Realized shareholders' equity 2,573 2,359 1,883 1,815 732 664 2,531 2,264
Total shareholders' equity 2,526 2,386 3,308 3,553 720 674 2,470 2,300
Credit Quality
Net loan charge-offs (1) 26.9 18.9 20.7 12.5 1.8 5.1 34.2 61.9
Nonperforming loans (2) 98.6 87.9 56.4 38.7 14.1 14.1 68.5 57.0
Other real estate owned (2) 8.7 9.5 1.2 2.2 2.6 4.8 11.8 16.6
RATIOS
ROA (3) 1.48 % 1.46 % 1.53 % 1.56 % 1.36 % 1.38 % 1.48 % 1.41 %
ROE (3) 17.96 18.12 19.44 18.36 17.04 17.36 16.49 16.17
Net interest margin (3) 3.92 3.99 3.69 3.96 3.69 3.86 4.08 4.13
Efficiency ratio (3) 55.09 55.34 52.76 54.18 56.31 57.22 56.52 59.20
Total shareholder's equity/assets (2) 8.13 8.51 12.70 15.00 8.00 8.10 9.42 8.98
Net loan charge-offs to average loans (3) 0.17 0.13 0.16 0.11 0.04 0.12 0.24 0.47
Nonperforming loans to total loans (2) 0.45 0.44 0.32 0.25 0.21 0.23 0.37 0.31
Nonperforming assets to total loans plus
other real estate owned (2) 0.49 0.49 0.33 0.26 0.25 0.31 0.44 0.40
Allowance to loans (2) 1.44 1.95 1.14 1.33 1.45 1.79 1.49 1.42
Allowance to nonperforming loans (2) 316.2 441.5 356.5 533.2 686.2 779.9 401.2 460.4
</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
B. Reports on Form 8-K
The Registrant filed a Current Report on Form 8-K dated October
18, 1999 announcing an agreement to sell a portion of the consumer
credit card portfolio to MBNA America Bank, N.A.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized this 9th day of November, 1999.
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
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,573,746
<INT-BEARING-DEPOSITS> 41,519
<FED-FUNDS-SOLD> 1,426,098
<TRADING-ASSETS> 164,820
<INVESTMENTS-HELD-FOR-SALE> 18,123,340
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 65,566,870
<ALLOWANCE> 947,239
<TOTAL-ASSETS> 92,755,402
<DEPOSITS> 58,644,062
<SHORT-TERM> 16,540,108
<LIABILITIES-OTHER> 3,407,974
<LONG-TERM> 6,325,178
0
0
<COMMON> 323,171
<OTHER-SE> 7,514,909
<TOTAL-LIABILITIES-AND-EQUITY> 92,755,402
<INTEREST-LOAN> 3,638,730
<INTEREST-INVEST> 702,267
<INTEREST-OTHER> 59,951
<INTEREST-TOTAL> 4,400,948
<INTEREST-DEPOSIT> 1,198,805
<INTEREST-EXPENSE> 2,051,348
<INTEREST-INCOME-NET> 2,349,600
<LOAN-LOSSES> 137,334
<SECURITIES-GAINS> 5,681
<EXPENSE-OTHER> 2,185,514
<INCOME-PRETAX> 1,387,607
<INCOME-PRE-EXTRAORDINARY> 896,806
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 896,806
<EPS-BASIC> 2.82
<EPS-DILUTED> 2.78
<YIELD-ACTUAL> 3.92
<LOANS-NON> 237,645
<LOANS-PAST> 113,106
<LOANS-TROUBLED> 8
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 944,557
<CHARGE-OFFS> 172,183
<RECOVERIES> 50,862
<ALLOWANCE-CLOSE> 947,239
<ALLOWANCE-DOMESTIC> 947,239
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 947,239
</TABLE>
