<PAGE>
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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 2000
-------------------------------------------------
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, 2000, 296,212,991 shares of the Registrant's Common Stock, $1.00
par value were outstanding.
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--------------------------------------------------------------------------------
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PART I FINANCIAL INFORMATION Page
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Consolidated Statements of Shareholders' Equity 6
Notes to Consolidated Financial Statements 7-12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-25
PART II OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 2. Changes in Securities 26
Item 3. Defaults Upon Senior Securities 26
Item 4. Submission of Matters to a Vote of Security Holders 26
Item 5. Other Information 26
Item 6. Exhibits and Reports on Form 8-K 26
SIGNATURES 26
</TABLE>
PART I - FINANCIAL INFORMATION
The following unaudited financial statements have been prepared in accordance
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and
accordingly do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
However, in the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the nine months ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the full year
2000.
2
<PAGE>
Consolidated Statements of Income
---------------------------------
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
---------------------------------- --------------------------------
(Dollars in thousands except per share data)(Unaudited) 2000 1999 2000 1999
--------------- --------------- -------------- --------------
Interest Income
<S> <C> <C> <C> <C>
Interest and fees on loans $ 1,455,601 $ 1,198,087 $4,129,504 $3,494,869
Interest and fees on loans held for sale 28,462 37,931 77,291 143,861
Interest and dividends on securities available for sale
Taxable interest 224,364 225,120 679,896 630,716
Tax-exempt interest 6,334 7,622 19,661 23,429
Dividends (1) 15,549 16,580 50,321 48,122
Interest on funds sold 26,636 17,928 70,479 49,931
Interest on deposits in other banks 138 448 705 2,340
Other interest 7,132 2,726 19,237 7,680
--------------- --------------- -------------- --------------
Total interest income 1,764,216 1,506,442 5,047,094 4,400,948
--------------- --------------- -------------- --------------
Interest Expense
Interest on deposits 651,536 413,039 1,796,753 1,198,805
Interest on funds purchased 176,278 188,651 473,672 530,339
Interest on other short-term borrowings 22,123 21,373 66,742 58,458
Interest on long-term debt 142,829 88,399 386,854 263,746
--------------- --------------- -------------- --------------
Total interest expense 992,766 711,462 2,724,021 2,051,348
--------------- --------------- -------------- --------------
Net Interest Income 771,450 794,980 2,323,073 2,349,600
Provision for loan losses 30,540 46,517 80,525 137,334
--------------- --------------- -------------- --------------
Net interest income after provision for loan losses 740,910 748,463 2,242,548 2,212,266
--------------- --------------- -------------- --------------
Noninterest Income
Trust income 121,803 126,376 377,442 378,981
Service charges on deposit accounts 116,875 111,644 340,730 324,825
Other charges and fees 54,672 48,976 150,896 144,886
Retail investment services 24,022 23,854 85,370 73,370
Credit card and other fees 24,250 29,143 70,719 80,492
Mortgage production related income 23,809 26,697 62,975 127,861
Mortgage servicing related income 7,906 11,408 23,319 19,541
Corporate and institutional investment services 35,972 13,174 90,964 48,164
Trading account profits and commissions 4,924 6,181 15,495 28,207
Other noninterest income 33,586 46,081 102,338 94,732
Securities gains (losses) (586) 2,534 7,807 5,681
--------------- --------------- -------------- --------------
Total noninterest income 447,233 446,068 1,328,055 1,326,740
--------------- --------------- -------------- --------------
Noninterest Expense
Salaries and other compensation 361,411 369,355 1,097,747 1,141,551
Employee benefits 39,488 39,707 137,823 135,625
Net occupancy expense 51,915 49,796 151,865 147,402
Equipment expense 47,191 48,039 149,496 143,127
Outside processing and software 42,385 36,942 128,384 110,465
Marketing and customer development 25,315 24,685 75,472 70,350
Merger-related expenses 8,255 7,116 40,071 38,507
Amortization of intangible assets 8,889 8,588 26,660 26,491
Other noninterest expense 121,721 107,556 323,151 337,881
--------------- --------------- -------------- --------------
Total noninterest expense 706,570 691,784 2,130,669 2,151,399
--------------- --------------- -------------- --------------
Income before provision for income taxes 481,573 502,747 1,439,934 1,387,607
Provision for income taxes 154,753 181,341 476,206 490,801
--------------- --------------- -------------- --------------
Net Income $ 326,820 $ 321,406 $ 963,728 $ 896,806
=============== =============== ============== ==============
Average common shares - diluted 298,558,479 322,222,668 302,464,897 322,344,492
Average common shares - basic 295,574,838 318,238,977 299,326,891 318,215,354
Net income per average common share - diluted $ 1.10 $ 1.00 $ 3.19 $ 2.78
Net income per average common share - basic 1.11 1.01 3.22 2.82
Dividends declared per common share 0.370 0.345 1.110 1.035
(1) Includes dividends on common stock of
The Coca-Cola Company 8,205 7,723 24,616 23,168
See notes to consolidated financial statements
</TABLE>
3
<PAGE>
Consolidated Balance Sheets
---------------------------
<TABLE>
<CAPTION>
September 30 December 31 September 30
(Dollars in thousands) (Unaudited) 2000 1999 1999
----------------- --------------- --------------
Assets
<S> <C> <C> <C>
Cash and due from banks $ 3,200,930 $ 3,909,687 $ 3,573,746
Interest-bearing deposits in other banks 10,410 22,237 41,519
Trading account 745,087 259,547 164,820
Securities available for sale (1) 17,098,832 18,317,297 18,123,340
Funds sold 1,427,318 1,587,442 1,426,098
Loans held for sale 1,495,836 1,531,787 1,377,560
Loans 72,113,649 66,002,831 64,189,310
Allowance for loan losses (874,490) (871,323) (947,239)
----------------- --------------- --------------
Net loans 71,239,159 65,131,508 63,242,071
Premises and equipment 1,618,907 1,636,484 1,632,184
Intangible assets 812,079 804,632 831,478
Customers' acceptance liability 177,504 192,045 361,114
Other assets 2,719,990 1,997,302 1,981,472
----------------- --------------- --------------
Total assets $ 100,546,052 $95,389,968 $92,755,402
================= =============== ==============
Liabilities and Shareholders' Equity
Noninterest-bearing deposits $ 13,060,887 $14,200,522 $13,128,979
Interest-bearing deposits 56,091,983 45,900,007 45,515,083
----------------- --------------- --------------
Total deposits 69,152,870 60,100,529 58,644,062
Funds purchased 9,301,754 15,911,917 15,136,501
Other short-term borrowings 2,019,907 2,259,010 1,403,607
Long-term debt 7,284,903 4,967,346 5,275,178
Guaranteed preferred beneficial interests in debentures 1,050,000 1,050,000 1,050,000
Acceptances outstanding 177,504 192,045 361,114
Other liabilities 3,861,311 3,282,259 3,046,860
----------------- --------------- --------------
Total liabilities 92,848,249 87,763,106 84,917,322
----------------- --------------- --------------
Preferred stock, no par value; 50,000,000 shares authorized; none issued - - -
Common stock, $1.00 par value 323,163 323,163 323,171
Additional paid in capital 1,269,792 1,293,387 1,306,910
Retained earnings 6,090,868 5,461,351 5,140,985
Treasury stock and other (1,551,714) (1,013,861) (214,379)
----------------- --------------- --------------
Realized shareholders' equity 6,132,109 6,064,040 6,556,687
Accumulated other comprehensive income 1,565,694 1,562,822 1,281,393
----------------- --------------- --------------
Total shareholders' equity 7,697,803 7,626,862 7,838,080
----------------- --------------- --------------
Total liabilities and shareholders' equity $ 100,546,052 $95,389,968 $92,755,402
================= =============== ==============
Common shares outstanding 297,791,574 308,353,207 319,889,489
Common shares authorized 750,000,000 500,000,000 500,000,000
Treasury shares of common stock 25,371,183 14,809,550 3,281,942
(1) Includes net unrealized gains on securities available for sale $ 2,461,858 $ 2,527,705 $ 2,072,970
See notes to consolidated financial statements
</TABLE>
4
<PAGE>
Consolidated Statements of Cash Flows
-------------------------------------
<TABLE>
<CAPTION>
Nine Months
Ended September 30
---------------------------------------------------
(Dollars in thousands) (Unaudited) 2000 1999
------------------------ --------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 963,728 $ 896,806
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and accretion 225,334 193,561
Provisions for loan losses and foreclosed property 80,812 140,574
Amortization of compensation element of restricted stock 6,654 11,699
Securities gains (7,807) (5,681)
Net gain on sale of non-interest earning assets (9,511) (25,251)
Net decrease in loans held for sale 35,950 2,169,046
Net (increase) decrease in accrued interest receivable,
prepaid expenses and other assets (1,361,522) 53,033
Net increase (decrease) in accrued interest payable,
accrued expenses and other liabilities 647,772 (42,281)
------------------------ --------------------
Net cash provided by operating activities 581,410 3,391,506
------------------------ --------------------
Cash flows from investing activities:
Proceeds from maturities of securities available for sale 1,760,361 3,383,067
Proceeds from sales of securities available for sale 857,153 3,180,276
Purchases of securities available for sale (1,470,717) (8,429,871)
Net increase in loans (6,183,700) (2,731,796)
Capital expenditures (96,677) (208,936)
Proceeds from the sale of assets 7,888 36,206
Loan recoveries 45,255 50,955
------------------------ --------------------
Net cash used in investing activities (5,080,437) (4,720,099)
------------------------ --------------------
Cash flows from financing activities:
Net increase (decrease) in deposits 9,052,341 (389,221)
Net (decrease) increase in funds purchased
and other short-term borrowings (6,849,266) 607,289
Proceeds from the issuance of long-term debt 3,440,444 1,100,961
Repayment of long-term debt (1,122,887) (583,652)
Proceeds from the exercise of stock options 8,584 -
Proceeds from stock issuance 18,579 17,980
Proceeds used in the acquisition of stock (595,265) (128,508)
Restricted stock activity - (524)
Dividends paid (334,211) (331,203)
------------------------ --------------------
Net cash provided by financing activities 3,618,319 293,122
------------------------ --------------------
Net decrease in cash and cash equivalents (880,708) (1,035,471)
Cash and cash equivalents at beginning of year 5,519,366 6,076,834
------------------------ --------------------
Cash and cash equivalents at end of period $ 4,638,658 $ 5,041,363
======================== ====================
Supplemental Disclosure
Interest paid $ 2,622,071 $ 2,081,129
Income taxes paid 432,938 300,259
See notes to consolidated financial statements
</TABLE>
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> <C> <C> <C> <C> <C>
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
======================================================================================
Balance, January 1, 2000 $323,163 $ 1,293,387 $5,461,351 $(1,013,861) $1,562,822 $ 7,626,862
Net income - - 963,728 - - 963,728
Other comprehensive income:
Change in unrealized gains (losses) on
securities, net of taxes - - - - 2,872 2,872
-----------------
Total comprehensive income 966,600
Cash dividends declared, $1.110 per share - - (334,211) - - (334,211)
Exercise of stock options - (17,487) - 26,071 - 8,584
Acquisition of treasury stock - - - (595,265) - (595,265)
Restricted stock activity - (682) - 682 - -
Amortization of compensation element
of restricted stock - - - 6,654 - 6,654
Issuance of stock for employee benefit plans - (5,426) - 24,005 - 18,579
--------------------------------------------------------------------------------------
Balance, September 30, 2000 $323,163 $ 1,269,792 $6,090,868 $(1,551,714) $1,565,694 $ 7,697,803
======================================================================================
* Balance at September 30, 1999 includes $153,980 for treasury stock and
$60,399 for compensation element of restricted stock. Balance at September
30, 2000 includes $1,504,501 for treasury stock and $47,213 for compensation
element of restricted stock.
See notes to consolidated financial statements
</TABLE>
6
<PAGE>
Notes to Consolidated Financial Statements (Unaudited)
------------------------------------------------------
Note 1 - Accounting Policies
The consolidated interim financial statements of SunTrust Banks, Inc.
("SunTrust" or "Company") are unaudited. All significant intercompany accounts
and transactions have been eliminated. These financial statements should be read
in conjunction with the Annual Report on Form 10-K for the year ended December
31, 1999. Certain reclassifications have been made to prior year amounts to
conform with the current year presentation.
Note 2 - Acquisitions
For the first nine months of 2000, $40.1 million of merger-related charges
related to the Crestar acquisition were recorded compared to $38.5 million in
1999. These charges included $0.9 million in accelerated depreciation and
amortization based upon estimates of systems integration timetables, $0.8
million in severance and $38.4 million in system integration costs.
Substantially all merger-related expenses have now been incurred.
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 such 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.
7
<PAGE>
Notes to Consolidated Financial Statements (Unaudited)
------------------------------------------------------
In September 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 certain 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 measures 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, which delays the effective date of
implementation until fiscal years beginning after June 15, 2000. In June of
2000, SFAS No. 133 was amended by SFAS 138, which addresses issues related to
implementation difficulties. SunTrust will adopt SFAS No. 133 effective January
1, 2001. SunTrust has completed an in-depth analysis to determine the effects of
the implementation and 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 of the issuing
company. 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 Company's obligations 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 the Company. 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
The Company's comprehensive income, which includes certain transactions and
other economic events that bypass the income statement, consists of net income
and unrealized gains and losses on securities available for sale, net of income
taxes.
Comprehensive income for the nine months ended September 30, 2000 and 1999 is
calculated as follows:
(In thousands)
<TABLE>
<CAPTION>
Before Net of
Income Tax Income Tax Income Tax
---------- ---------- ----------
Unrealized gain (loss), net, recognized in other comprehensive income:
Nine months ended September 30, 2000 $ (65,847) $ (68,719) $ 2,872
<S> <C> <C> <C>
Nine months ended September 30, 1999 (1,306,755) (499,941) (806,814)
2000 1999
------ ------
Amounts reported in net income:
Gain on sale of securities $ 7,807 $ 5,681
Net (accretion) amortization (7,343) 1,616
------------------- ---------------------
Reclassification adjustment 464 7,297
Income tax expense (484) (2,792)
------------------- ---------------------
Reclassification adjustment, net of tax $ (20) $ 4,505
=================== =====================
Amounts reported in other comprehensive income:
Unrealized gain (loss) arising during period, net of tax $ 2,852 $ (802,309)
Reclassification adjustment, net of tax 20 (4,505)
------------------- ---------------------
Net unrealized gain (loss) recognized in
other comprehensive income 2,872 (806,814)
Net income 963,728 896,806
------------------- ---------------------
Total comprehensive income $ 966,600 $ 89,992
=================== =====================
</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 nine months ended
September 30, 2000 and 1999 is included in the following table.
Computation of Per Share Earnings
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
------------------------------------------- ---------------------------------------------
2000 1999 2000 1999
---------------------- -------------------- ---------------------- ----------------------
Basic
<S> <C> <C> <C> <C>
Net income $ 326,820 $ 321,406 $ 963,728 $ 896,806
---------------------- -------------------- ---------------------- ----------------------
Average common shares 295,575 318,239 299,327 318,215
---------------------- -------------------- ---------------------- ----------------------
Earnings per common share - basic $ 1.11 $ 1.01 $ 3.22 $ 2.82
====================== ==================== ====================== ======================
Diluted
Net income $ 326,820 $ 321,406 $ 963,728 $ 896,806
---------------------- -------------------- ---------------------- ----------------------
Average common shares outstanding 295,575 318,239 299,327 318,215
Effect of dilutive securities:
Stock options 1,158 2,274 1,339 2,460
Performance restricted stock 1,825 1,710 1,799 1,669
---------------------- -------------------- ---------------------- ----------------------
Average diluted common shares 298,558 322,223 302,465 322,344
---------------------- -------------------- ---------------------- ----------------------
Earnings per common share - diluted $ 1.10 $ 1.00 $ 3.19 $ 2.78
====================== ==================== ====================== ======================
</TABLE>
10
<PAGE>
Notes to Consolidated Financial Statements (Unaudited) - continued
------------------------------------------------------------------
Note 7 - Segment Reporting
Effective January 1, 2000, the Company significantly modified management's
internal reporting system with the consolidation of its individual bank
charters. In prior periods, the Company's reportable segments were based on
legal entities that were aligned along geographic regions. With the
consolidation of the bank charters, SunTrust Bank is now one legal entity with
Florida, Georgia, Tennessee, Alabama and Mid-Atlantic regions (which includes
Virginia, Maryland and the District of Columbia). As a result of the changes to
the legal entity structure, as well as the changes made to management's internal
system used to evaluate operating segment performance, prior periods have not
been reported because it is not practical to restate prior period results to
conform to the current reporting methods or to present current year results
based on prior period reportable segments.
The Company's reportable segments as of September 30, 2000 are determined based
on management's internal reporting approach. The reportable segments are
comprised of the four regions of Florida, Georgia, Tennessee (which includes the
branches in Alabama) and Mid-Atlantic, in addition to Corporate and Investment
Banking and Parent/Other. Each geographic operating segment provides a wide
array of banking services to consumer and commercial customers and earns
interest income from loans made to customers. In addition, these geographic
segments recognize certain fees related to trust, deposit, lending and other
services provided to customers. The Corporate and Investment Banking segment
consists of corporate banking for the large corporate and identified industry
specialties, as well as SunTrust Equitable Securities and SunTrust Leasing. The
Parent/Other segment consists primarily of the Company's credit card bank and
nonbank subsidiaries as well as certain treasury and corporate expenses. The
Treasury/Reconciling Items Segment includes the net impact of transfer pricing
on loan and deposit balances, the cost of external debt, gains and losses on the
investment portfolio, income taxes and other amounts necessary to reconcile the
Company's internal management accounting practices described below to the
consolidated financial statements.
Unlike financial accounting, there is no comprehensive authoritative body of
guidance for management accounting equivalent to generally accepted accounting
principles. Therefore, the performance of the segments is not comparable with
SunTrust's consolidated results or with similar information presented by any
other financial institution. In addition, operating segment results may be
restated in the future as management's structure, information needs, and
reporting systems evolve.
The Company uses a transfer pricing process to aid in assessing operating
segment performance. This process involves matched maturity transfer pricing of
interest rates for assets and liabilities to determine a contribution to the net
interest margin on a segment basis. Currently, the Company does not allocate
corporate equity to the reportable segments. As a result, the difference between
the matched maturity transfer pricing and the consolidated net interest margin,
as well as the net interest margin benefit provided from equity are treated as
reconciling items. In addition, the Company uses a credit risk premium approach
to aid in assessing operating segment performance. This approach recognizes the
cost of the credit losses that SunTrust can expect over time on its loans
through a charge against earnings. The premium is judgmental but based on rates
derived from the Company's loss migration history for various loan categories as
well as the internal credit ratings of individual loans in certain of those loan
categories. The difference between the credit risk premium charged to the
segments and the Company's consolidated provision for loan losses is included as
a reconciling item within noninterest expense. The segment results also include
certain intercompany transactions that were recorded at cost. All intercompany
transactions have been eliminated to determine the consolidated balances. No
transactions with a single customer contributed 10% or more to the Company's
total revenue.
The following tables disclose selected financial information for SunTrust's
reportable business segments for the three months and nine months ended
September 30, 2000.
11
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended September 30, 2000
----------------------------------------------------------------------------------------------------------
Corporate & Treasury/
Investment Reconciling
(In thousands) Florida Georgia Tennessee Mid-Atlantic Banking Parent/Other Items
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 211,243 $ 129,454 $ 59,628 $ 170,261 $ 66,477 $ (969) $ 135,356 (1)
Noninterest income 135,643 91,059 38,479 86,746 33,713 360,344 19,472 (2)
Noninterest expense 200,480 128,491 60,226 157,041 46,317 349,070 113,708 (3)
----------------------------------------------------------------------------------------------------------
Income before taxes 146,406 92,022 37,881 99,966 53,873 10,305 41,120 -
Income tax expense - - - - - 71,690 83,063 (4)
----------------------------------------------------------------------------------------------------------
Net income $ 146,406 $ 92,022 $ 37,881 $ 99,966 $ 53,873 $ (61,385) $ (41,943)
==========================================================================================================
Average total assets $21,624,814 $12,226,794 $6,246,580 $12,938,351 $17,215,402 $34,133,223 $56,180,277
==========================================================================================================
Revenues from external
customers
Total net interest income $ 211,112 $ 129,387 $ 59,586 $ 170,261 $ 66,477 $ (729) $ 135,356
Total noninterest income 110,830 76,073 30,582 74,381 31,137 104,758 19,472
----------------------------------------------------------------------------------------------------------
Total income $ 321,942 $ 205,460 $ 90,168 $ 244,642 $ 97,614 $ 104,029 $ 154,828
==========================================================================================================
Revenues from affiliates
Total net interest income $ 131 $ 67 $ 42 $ - $ - $ (240) $ -
Total noninterest income 24,813 14,986 7,897 12,365 2,576 255,586 -
----------------------------------------------------------------------------------------------------------
Total income $ 24,944 $ 15,053 $ 7,939 $ 12,365 $ 2,576 $ 255,346 $ -
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended September 30, 2000
-------------------------------------
(In thousands) Eliminations Consolidated
------------------------------------
Net interest income $ - $ 771,450
<S> <C> <C>
Noninterest income (318,223) 447,233
Noninterest expense (318,223) 737,110
----------------------------------
Income before taxes - 481,573
Income tax expense - 154,753
----------------------------------
Net income $ - $ 326,820
==================================
Average total assets $ (61,173,261) $ 99,392,180
==================================
Revenues from external
customers
Total net interest income $ - $ 771,450
Total noninterest income - 447,233
----------------------------------
Total income $ - $ 1,218,683
==================================
Revenues from affiliates
Total net interest income $ - $ -
Total noninterest income (318,223) -
----------------------------------
Total income $ (318,223) $ -
==================================
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 2000
-------------------------------------------------------------------------------------------------
Corporate & Treasury/
Investment Reconciling
(In thousands) Florida Georgia Tennessee Mid-Atlantic Banking Parent/Other Items
-------------------------------------------------------------------------------------------------
Net interest income $ 630,068 $ 385,560 $ 176,872 $ 528,768 $ 193,255 $ 353 $ 408,198 (1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest income 406,968 264,316 113,301 280,036 96,649 1,106,161 19,145 (2)
Noninterest expense 609,733 386,046 179,624 487,380 129,912 1,112,627 264,392 (3)
-------------------------------------------------------------------------------------------------
Income before taxes 427,304 263,830 110,549 321,424 159,991 (6,113) 162,950
Income tax expense - - - - - 45,891 430,315 (4)
-------------------------------------------------------------------------------------------
Net income $ 427,304 $ 263,830 $ 110,549 $ 321,424 $ 159,991 $ (52,004) $ (267,365)
=================================================================================================
Average total assets $21,169,555 $11,884,008 $6,110,055 $12,896,545 $16,666,437 $31,220,592 $55,402,314
=================================================================================================
Revenues from external
customers
Total net interest income $ 629,712 $ 385,391 $ 176,758 $ 528,768 $ 193,255 $ 992 $ 408,198
Total noninterest income 329,978 219,590 89,581 233,020 93,215 343,526 19,145
-------------------------------------------------------------------------------------------------
Total income $ 959,691 $ 604,981 $ 266,338 $ 761,788 $ 286,470 $ 344,518 $ 427,343
=================================================================================================
Revenues from affiliates
Total net interest income $ 356 $ 169 $ 114 $ - $ - $ (639) $ -
Total noninterest income 76,990 44,726 23,720 47,016 3,434 762,635 -
-------------------------------------------------------------------------------------------------
Total income $ 77,346 $ 44,895 $ 23,834 $ 47,016 $ 3,434 $ 761,996 $ -
=================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 2000
--------------------------------------
(In thousands) Eliminations Consolidated
--------------------------------------
Net interest income $ - $ 2,323,073
<S> <C> <C>
Noninterest income (958,521) 1,328,055
Noninterest expense (958,521) 2,211,194
--------------------------------------
Income before taxes - 1,439,934
Income tax expense - 476,206
--------------------------------------
Net income $ - $ 963,728
======================================
Average total assets $ (57,908,087) $ 97,441,418
======================================
Revenues from external
customers
Total net interest income $ - $ 2,323,073
Total noninterest income - 1,328,055
--------------------------------------
Total income $ - $ 3,651,127
======================================
Revenues from affiliates
Total net interest income $ - $ -
Total noninterest income (958,521) -
--------------------------------------
Total income $ (958,521) $ -
======================================
</TABLE>
(1) The Company's reconciliation of total segment results to consolidated
results includes adjustments for funds transfer pricing credits and charges
related to funds provided and funds used, credits for loan loss reserves,
and credits for equity.
(2) Includes the effect of sales of securities, sales of fixed assets and other
items.
(3) Includes miscellaneous corporate expenses not allocated to the operating
segments.
(4) Reflects provision for income taxes that management does not include in its
internal reporting system.
12
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
SunTrust Banks, Inc. is a financial holding company with its headquarters in
Atlanta, Georgia. SunTrust's principal banking subsidiary, SunTrust Bank, offers
a full line of financial services for consumers and businesses through its
branches located primarily in Alabama, Florida, Georgia, Maryland, Tennessee,
Virginia and the District of Columbia. In addition to traditional deposit,
credit and trust and investment services offered by SunTrust Bank, other
SunTrust subsidiaries provide mortgage banking, commercial and auto leasing,
credit-related insurance, asset management, securities brokerage and investment
banking services.
SunTrust has 1,164 full-service branches, including supermarket branches, and
continues to leverage technology to provide customers the convenience of banking
on the Internet, through 1,956 automated teller machines and via twenty-four
hour telebanking.
The following analysis of the financial performance of SunTrust for the third
quarter of 2000 should be read in conjunction with the financial statements,
notes and other information contained in this document. SunTrust has made, and
may continue to make, various forward-looking statements with respect to
financial and business matters. These forward-looking statements are subject to
numerous assumptions, risks and uncertainties, all of which may change over
time. The actual results that are achieved could differ significantly from the
forward-looking statements contained in this document.
The results of operations for the nine months ended September 30, 2000 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 $332.2 million and $989.8 million
for the third quarter and first nine months of 2000, an increase of 1.9% and
7.1% compared with $325.9 million and $924.3 million in the same periods of 1999
(excluding after-tax merger-related charges of $5.4 million, $26.1 million, $4.5
million and $27.5 million for the third quarter and the first nine months of
2000 and 1999, respectively). Diluted earnings per share, adjusted for merger
charges, grew 10.0% to $1.11 and 14.0% to $3.27 from $1.01 and $2.87 in the same
periods last year. Reported net income was $326.8 million, or $1.10 per diluted
share for the third quarter and $963.7 million, or $3.19 per diluted share for
the first nine months of 2000.
13
<PAGE>
<TABLE>
<CAPTION>
Selected Quarterly Financial Data Table 1
(Dollars in millions except per share data) Quarters
----------------------------------------------------------------------------
2000 1999
-------------------------------------------- ----------------------------
3 2 1 4 3
----------- ------------ ------------- ------------ ------------
Summary of Operations
<S> <C> <C> <C> <C> <C>
Interest and dividend income $ 1,764.2 $ 1,672.0 $ 1,610.8 $ 1,559.4 $ 1,506.4
Interest expense 992.8 903.0 828.2 763.4 711.4
----------- ------------ ------------- ------------ ------------
Net interest income 771.4 769.0 782.6 796.0 795.0
Provision for loan losses 30.5 27.7 22.3 33.1 46.5
----------- ------------ ------------- ------------ ------------
Net interest income after
provision for loan losses 740.9 741.3 760.3 762.9 748.5
Noninterest income(1) 447.2 444.0 436.9 299.2 446.1
Noninterest expense(2) 706.6 719.8 704.3 753.9 691.8
----------- ------------ ------------- ------------ ------------
Income before provision for income
taxes and extraordinary gain 481.5 465.5 492.8 308.2 502.8
Provision for income taxes 154.7 148.0 173.4 81.0 181.4
----------- ------------ ------------- ------------ ------------
Income before extraordinary gain 326.8 317.5 319.4 227.2 321.4
Extraordinary gain, net of taxes(3) - - - 202.6 -
----------- ------------ ------------- ------------ ------------
Net income $ 326.8 $ 317.5 $ 319.4 $ 429.8 $ 321.4
=========== ============ ============= ============ ============
Net interest income (taxable-equivalent) $ 781.5 $ 778.7 $ 792.1 $ 806.5 $ 805.4
Per common share
Diluted
Income before extraordinary gain $ 1.10 $ 1.05 $ 1.04 $ 0.71 $ 1.00
Extraordinary gain, net of taxes - - - 0.64 -
----------- ------------ ------------- ------------ ------------
Net income 1.10 1.05 1.04 1.35 1.00
Basic
Income before extraordinary gain 1.11 1.06 1.05 0.72 1.01
Extraordinary gain, net of taxes - - - 0.64 -
----------- ------------ ------------- ------------ ------------
Net income 1.11 1.06 1.05 1.36 1.01
Dividends declared 0.370 0.370 0.370 0.345 0.345
Book value 25.85 25.10 23.51 24.73 24.50
Market price
High 59.69 66.00 68.06 76.00 70.88
Low 45.63 45.06 46.81 64.19 61.56
Close 49.81 45.69 57.75 68.81 65.75
Selected Average Balances
Total assets $99,392.2 $ 97,497.3 $ 95,413.4 $ 94,804.6 $ 92,447.7
Earning assets 89,663.7 88,200.6 85,857.5 84,447.9 82,517.2
Loans 71,506.9 69,830.6 67,030.0 64,941.7 62,859.8
Total deposits(4) 67,158.2 66,866.4 65,550.3 58,284.0 58,423.6
Realized shareholders' equity 6,012.8 5,948.9 6,023.3 6,496.4 6,522.5
Total shareholders' equity 7,487.4 7,195.9 7,476.2 8,083.1 8,210.7
Common shares - diluted (thousands) 298,558 302,141 306,739 317,701 322,223
Common shares - basic (thousands) 295,575 298,986 303,461 313,706 318,239
Financial Ratios(5)
ROA 1.34 % 1.34 % 1.38 % 1.85 % 1.42 %
ROE 21.62 21.46 21.33 26.25 19.55
Net interest margin 3.47 3.55 3.71 3.79 3.87
</TABLE>
(1) Includes securities losses of $114.9 million for the fourth quarter of 1999
related to the securities portfolio repositioning.
(2) Includes merger-related expenses of $8.3 million, $18.2 million and $13.6
million for the third, second and first quarters of 2000 and $7.1 million,
$7.1 million, for the fourth and third quarters of 1999, respectively.
(3) Represents the gain on sale of the Company's consumer credit card portfolio
during the fourth quarter of 1999, net of $124.6 million in taxes.
(4) Includes brokered and foreign deposits of $13.5, $12.9 and $12.2 billion for
the third, second and first quarters of 2000 and $4.1 billion, $4.5 billion,
for the fourth and third quarters of 1999, respectively.
(5) Calculated excluding net unrealized gains on securities available for sale
because the net unrealized gains are not included in income.
14
<PAGE>
<TABLE>
<CAPTION>
Consolidated Daily Average Balances, Income/Expense
and Average Yields Earned and Rates Paid
(Dollars in millions; yields on taxable-equivalent basis)
Quarter Ended
---------------------------------------------------------------
September 30, 2000
---------------------------------------------------------------
Average Income/ Yields/
Balances Expense Rates
------------------- --------------------- -----------------
Assets
Loans:(1)
Taxable $ 70,427.3 $ 1,442.1 8.15 %
<S> <C> <C> <C> <C>
Tax-exempt(2) 1,079.6 21.1 7.79
---------------------------------------------------------------
Total loans 71,506.9 1,463.2 8.14
Securities available for sale:
Taxable 14,146.9 239.9 6.75
Tax-exempt(2) 456.5 8.7 7.59
---------------------------------------------------------------
Total securities available for sale 14,603.4 248.6 6.77
Funds sold 1,587.2 26.7 6.68
Loans held for sale 1,395.0 28.5 8.12
Other short-term investments(2) 571.1 7.3 5.11
---------------------------------------------------------------
Total earning assets 89,663.6 1,774.3 7.87
Allowance for loan losses (868.9)
Cash and due from banks 3,083.6
Premises and equipment 1,628.1
Other assets 3,520.7
Unrealized gains on securities
available for sale 2,365.1
---------------------------------------------------------------
Total assets $ 99,392.2
===============================================================
Liabilities and Shareholders' Equity
Interest-bearing deposits:
NOW/Money market accounts $ 19,904.4 $ 163.2 3.26 %
Savings 6,324.0 58.8 3.70
Consumer time 10,151.8 141.0 5.53
Other time 4,221.4 62.0 5.84
Brokered deposits 3,815.3 65.0 6.77
Foreign deposits 9,701.5 161.5 6.62
---------------------------------------------------------------
Total interest-bearing deposits 54,118.4 651.5 4.79
Funds purchased 11,050.9 176.3 6.35
Other short-term borrowings 1,365.8 22.1 6.44
Long-term debt 8,378.4 142.9 6.78
---------------------------------------------------------------
Total interest-bearing liabilities 74,913.5 992.8 5.27
Noninterest-bearing deposits 13,039.7
Other liabilities 3,951.6
Realized shareholders' equity 6,012.8
Accumulated other comprehensive income 1,474.6
---------------------------------------------------------------
Total liabilities and shareholders' equity $ 99,392.2
===============================================================
Interest rate spread 2.60 %
---------------------------------------------------------------
Net Interest Income $ 781.5
---------------------------------------------------------------
Net Interest Margin(3) 3.47 %
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------------------
June 30, 2000
--------------------------------------------------------
Average Income/ Yields/
Balances Expense Rates
---------------- ----------------- -----------------
Assets
Loans:(1)
<S> <C> <C> <C>
Taxable $68,789.8 $1,354.7 7.92 %
Tax-exempt(2) 1,040.8 19.8 7.65
--------------------------------------------------------
Total loans 69,830.6 1,374.5 7.92
Securities available for sale:
Taxable 14,483.6 242.7 6.74
Tax-exempt(2) 470.0 8.9 7.65
--------------------------------------------------------
Total securities available for sale 14,953.6 251.6 6.77
Funds sold 1,537.5 24.5 6.41
Loans held for sale 1,279.7 23.7 7.45
Other short-term investments(2) 599.2 7.4 4.95
--------------------------------------------------------
Total earning assets 88,200.6 1,681.7 7.67
Allowance for loan losses (873.8)
Cash and due from banks 3,322.7
Premises and equipment 1,627.5
Other assets 3,204.3
Unrealized gains on securities
available for sale 2,016.0
--------------------------------------------------------
Total assets $97,497.3
========================================================
Liabilities and Shareholders' Equity
Interest-bearing deposits:
NOW/Money market accounts $20,194.3 $ 155.7 3.10 %
Savings 6,449.1 55.1 3.43
Consumer time 10,023.1 129.4 5.19
Other time 4,024.7 58.1 5.80
Brokered deposits 2,760.9 43.9 6.40
Foreign deposits 10,162.9 148.0 5.86
--------------------------------------------------------
Total interest-bearing deposits 53,615.0 590.2 4.43
Funds purchased 10,268.0 154.6 6.05
Other short-term borrowings 1,546.9 25.7 6.67
Long-term debt 8,070.9 132.5 6.60
--------------------------------------------------------
Total interest-bearing liabilities 73,500.8 903.0 4.94
Noninterest-bearing deposits 13,251.5
Other liabilities 3,549.0
Realized shareholders' equity 5,948.9
Accumulated other comprehensive income 1,247.1
--------------------------------------------------------
Total liabilities and shareholders' equity $97,497.3
========================================================
Interest rate spread 2.73 %
--------------------------------------------------------
Net Interest Income $ 778.7
--------------------------------------------------------
Net Interest Margin(3) 3.55 %
--------------------------------------------------------
</TABLE>
(1) Interest income includes loan fees of $33.5, $32.8, and $36.1 in the
quarters ended September 30, June 30, 2000, and September 30,1999 and
$98.8 and $104.1 in the nine months ended September 30, 2000 and 1999.
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 $10.1, $9.6, and $10.4 in the quarters ended September 30, June
30, 2000 and September 30, 1999 and $29.3 and $31.9 in the nine months
ended September 30, 2000 and September 30, 1999.
15
<PAGE>
<TABLE>
<CAPTION>
Table 2
Quarter Ended
----------------------------------------------------------
September 30, 1999
----------------------------------------------------------
Average Income/ Yields/
Balances Expense Rates
------------------- ---------------- ----------------
Assets
Loans:(1)
<S> <C> <C> <C>
Taxable $61,832.1 $1,185.5 7.61 %
Tax-exempt(2) 1,027.7 19.1 7.36
----------------------------------------------------------
Total loans 62,859.8 1,204.6 7.60
Securities available for sale:
Taxable 15,357.3 242.1 6.25
Tax-exempt(2) 555.3 11.0 7.91
----------------------------------------------------------
Total securities available for sale 15,912.6 253.1 6.31
Funds sold 1,274.5 17.9 5.58
Loans held for sale 2,200.2 38.0 6.84
Other short-term investments(2) 270.1 3.2 4.71
----------------------------------------------------------
Total earning assets 82,517.2 1,516.8 7.29
Allowance for loan losses (949.0)
Cash and due from banks 3,505.4
Premises and equipment 1,622.9
Other assets 3,014.3
Unrealized gains on securities
available for sale 2,736.9
----------------------------------------------------------
Total assets $92,447.7
==========================================================
Liabilities and Shareholders' Equity
Interest-bearing deposits:
NOW/Money market accounts $19,920.5 $ 132.0 2.63 %
Savings 6,922.6 50.7 2.90
Consumer time 9,794.8 115.8 4.69
Other time 4,480.4 56.6 4.99
Brokered deposits 9.3 - 5.29
Foreign deposits 4,441.8 57.9 5.17
----------------------------------------------------------
Total interest-bearing deposits 45,569.4 413.0 3.60
Funds purchased 14,817.9 188.6 5.05
Other short-term borrowings 1,632.3 21.4 5.19
Long-term debt 5,782.6 88.4 6.06
----------------------------------------------------------
Total interest-bearing liabilities 67,802.2 711.4 4.16
Noninterest-bearing deposits 12,854.2
Other liabilities 3,580.6
Realized shareholders' equity 6,522.5
Accumulated other comprehensive income 1,688.2
----------------------------------------------------------
Total liabilities and shareholders' equity $92,447.7
==========================================================
Interest rate spread 3.13 %
----------------------------------------------------------
Net Interest Income $ 805.4
----------------------------------------------------------
Net Interest Margin(3) 3.87 %
----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------------------------------
September 30, 2000
----------------------------------------------------------
Average Income/ Yields/
Balances Expense Rates
------------------ ----------------- -----------------
Assets
Loans:(1)
<S> <C> <C> <C>
Taxable $68,405.0 $4,090.7 7.99 %
Tax-exempt(2) 1,058.3 60.5 7.64
----------------------------------------------------------
Total loans 69,463.3 4,151.2 7.98
Securities available for sale:
Taxable 14,552.8 730.2 6.70
Tax-exempt(2) 478.3 27.0 7.55
----------------------------------------------------------
Total securities available for sale 15,031.1 757.2 6.73
Funds sold 1,478.5 70.5 6.37
Loans held for sale 1,370.7 77.3 7.53
Other short-term investments(2) 570.1 20.1 4.71
----------------------------------------------------------
Total earning assets 87,913.7 5,076.3 7.71
Allowance for loan losses (872.5)
Cash and due from banks 3,266.5
Premises and equipment 1,627.8
Other assets 3,262.0
Unrealized gains on securities
available for sale 2,243.9
----------------------------------------------------------
Total assets $97,441.4
==========================================================
Liabilities and Shareholders' Equity
Interest-bearing deposits:
NOW/Money market accounts $20,164.5 $ 465.0 3.08 %
Savings 6,477.0 167.7 3.46
Consumer time 9,925.8 387.0 5.21
Other time 4,001.5 169.5 5.66
Brokered deposits 3,056.5 147.3 6.44
Foreign deposits 9,822.7 460.2 6.26
----------------------------------------------------------
Total interest-bearing deposits 53,448.0 1,796.7 4.49
Funds purchased 10,596.4 473.7 5.97
Other short-term borrowings 1,438.0 66.7 6.20
Long-term debt 7,802.8 386.9 6.62
----------------------------------------------------------
Total interest-bearing liabilities 73,285.2 2,724.0 4.97
Noninterest-bearing deposits 13,079.3
Other liabilities 3,690.0
Realized shareholders' equity 5,995.1
Accumulated other comprehensive income 1,391.8
----------------------------------------------------------
Total liabilities and shareholders' equity $97,441.4
==========================================================
Interest rate spread 2.74 %
----------------------------------------------------------
Net Interest Income $2,352.3
----------------------------------------------------------
Net Interest Margin(3) 3.57 %
----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------------------------------
September 30, 1999
----------------------------------------------------------
Average Income/ Yields/
Balances Expense Rates
------------------- ----------------- ----------------
Assets
Loans:(1)
<S> <C> <C> <C>
Taxable $60,894.7 $3,454.5 7.58 %
Tax-exempt(2) 1,116.0 60.3 7.22
----------------------------------------------------------
Total loans 62,010.7 3,514.8 7.58
Securities available for sale:
Taxable 14,487.7 680.1 6.28
Tax-exempt(2) 565.0 34.0 8.05
----------------------------------------------------------
Total securities available for sale 15,052.7 714.1 6.34
Funds sold 1,280.2 49.9 5.21
Loans held for sale 2,872.4 143.9 6.70
Other short-term investments(2) 301.0 10.1 4.50
----------------------------------------------------------
Total earning assets 81,517.0 4,432.8 7.27
Allowance for loan losses (949.3)
Cash and due from banks 3,564.3
Premises and equipment 1,583.9
Other assets 3,359.6
Unrealized gains on securities
available for sale 3,076.8
----------------------------------------------------------
Total assets $92,152.3
==========================================================
Liabilities and Shareholders' Equity
Interest-bearing deposits:
NOW/Money market accounts $19,776.6 $ 385.7 2.61 %
Savings 6,961.8 151.2 2.90
Consumer time 9,874.5 353.3 4.78
Other time 4,242.3 157.2 4.95
Brokered deposits 4.2 0.2 -
Foreign deposits 4,089.8 151.2 4.94
----------------------------------------------------------
Total interest-bearing deposits 44,949.2 1,198.8 3.57
Funds purchased 14,817.7 530.3 4.79
Other short-term borrowings 1,618.6 58.5 4.83
Long-term debt 5,770.4 263.7 6.11
----------------------------------------------------------
Total interest-bearing liabilities 67,155.9 2,051.3 4.08
Noninterest-bearing deposits 12,744.0
Other liabilities 4,025.5
Realized shareholders' equity 6,325.1
Accumulated other comprehensive income 1,901.8
----------------------------------------------------------
Total liabilities and shareholders' equity $92,152.3
==========================================================
Interest rate spread 3.19 %
----------------------------------------------------------
Net Interest Income $2,381.5
----------------------------------------------------------
Net Interest Margin(3) 3.91 %
----------------------------------------------------------
</TABLE>
(3) Derivative instruments used to help balance SunTrust's interest-sensitivity
position decreased net interest income $0.7 and increased net interest
income $0.8, $4.3 in the quarters ended September 30, 2000 and June 30, 2000
and September 30, 1999, and decreased net interest income $0.6 and increased
net interest income $15.0 in the nine months ended September 30, 2000 and
September 30, 1999, respectively. Without these swaps, the net interest
margin would have been 3.47%, 3.55%, and 3.85% in the quarters ended
September 30 and June 30, 2000, and September 30, 1999,and 3.58% and 3.88%
for the nine months ended September 30, 2000 and September 30, 1999.
16
<PAGE>
Interest Rate Risk. The normal course of business activity exposes SunTrust to
interest rate risk. Fluctuations in interest rates may result in changes in the
fair market value of the Company's financial instruments, cash flows and net
interest income. SunTrust's asset/liability management process manages the
Company's interest rate risk position. The objective of this process is the
optimization of the Company's financial position, liquidity and net interest
income, while limiting the volatility to net interest income from changes in
interest rates.
SunTrust uses a simulation modeling process to measure interest rate risk and
evaluate potential strategies. These simulations incorporate assumptions
regarding balance sheet growth and mix, pricing, and the repricing and maturity
characteristics of the existing and projected balance sheet. Other
interest-rate-related risks such as prepayment, basis and option risk are also
considered. Simulation results quantify interest rate risk under various
interest rate scenarios. Senior management regularly reviews the overall
interest rate risk position and develops and implements strategies to manage the
risk.
Management estimates the Company's net interest income for the next twelve
months would decline 1.0% under a gradual increase in interest rates of 100
basis points, versus the projection under stable rates. Net interest income
would increase by 1.0% under a gradual decrease in interest rates of 100 basis
points, versus the projection under stable rates.
The projections of interest rate risk do not necessarily include certain actions
that management may undertake to manage this risk in response to anticipated
changes in interest rates.
Net Interest Income/Margin. SunTrust's net interest margin was 3.57% for the
first nine months of 2000, a decrease of 34 basis points from the first nine
months of 1999, primarily attributable to the rising rate environment, the sale
of the Company's $1.5 billion higher yielding consumer credit card portfolio in
the fourth quarter of 1999 and additional interest expense to fund purchases
under the SunTrust stock repurchase program. Compared to the first nine months
of 1999, the rate on earning assets increased 44 basis points to 7.71% in the
first nine months of 2000 and the rate on interest bearing liabilities increased
89 basis points to 4.97% primarily due to the rising rates on purchased
liabilities and continued increased reliance on purchased liabilities to fund
growth. SunTrust expects that this reliance on purchased deposits to fund
balance sheet growth will continue through 2000; however, management is taking
steps to obtain alternative lower costing funding sources.
Interest income that 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 2000 and 1999.
Noninterest Income. Noninterest income in the third quarter and first nine
months of 2000, adjusted to exclude the effect of securities gains and losses,
increased $4.3 million, or 1.0% and decreased $0.8 million, or 0.1%, from the
comparable periods last year. The decrease primarily relates to mortgage
production income which decreased $64.9 million, or 50.7% for the first nine
months of 2000, due to a drop in refinancing activities resulting from the
rising rate environment after the first half of 1999. Included in credit card
and other fees is debit card interchange income of $14.9 million and $42.8
million for third quarter and the first nine months of 2000 compared to $19.9
million and $53.7 million in the same periods of 1999. Trust income, SunTrust's
largest source of noninterest income, decreased $1.5 million, or 0.4% for the
first nine months of 2000 compared to the same period last year. Net new
business in 2000 has not grown as much as the same period in 1999. The Company
expects that these two trends will negatively impact the growth in trust fee
income in future periods. The market value of trust assets under management is
up to $91.7 billion in September 2000, from $85.1 billion in September 1999,
however they are lower than historical levels and lower than June 2000
quarter-end.
Other income in the third quarter of 2000 includes $3.8 million in net gains on
the sale of mortgage and student loans. The third quarter of 1999 includes a
$6.8 million gain on the sale of student loans. The second quarter of
17
<PAGE>
1999 includes an $8.5 million gain on the sale of student loans. In addition,
the Company incurred securities losses of $114.9 million during the fourth
quarter of 1999 primarily related to a portfolio repositioning program
undertaken by the Company.
<TABLE>
<CAPTION>
Noninterest Income Table 3
(In millions)
Quarters
------------------------------------------------------
2000 1999
-------------------------------- --------------------
3 2 1 4 3
----------- -------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Trust income $ 121.8 $ 125.3 $ 130.3 $ 123.8 $ 126.4
Service charges on deposit accounts 116.9 112.6 111.3 113.3 111.6
Miscellaneous charges and fees 54.7 48.8 47.4 48.1 49.0
Credit card and other fees 24.2 24.4 22.1 25.7 29.2
Retail investment services 24.0 30.5 30.8 24.0 23.9
Mortgage production related income 23.8 20.5 18.7 25.2 26.7
Mortgage servicing related income 7.9 7.7 7.7 7.5 11.5
Corporate and institutional investment services 36.0 35.3 19.7 19.6 13.2
Trading account profits and commissions 4.9 (1.4) 12.0 6.9 6.2
Other income 33.6 38.8 30.0 20.0 45.8
Securities gains (losses) (0.6) 1.5 6.9 (114.9) 2.6
----------- -------- ------- ---------- ---------
Total noninterest income $ 447.2 $ 444.0 $ 436.9 $ 299.2 $ 446.1
=========== ======== ======= ========== =========
</TABLE>
Noninterest Expense. Noninterest expense increased $14.8 million, or 2.1% and
decreased $20.7 million, or 1.0% in the third quarter and first nine months of
2000 compared to the same periods last year. Personnel expenses, consisting of
salaries, other compensation and employee benefits, decreased $8.2 million, or
2.0% and $41.6 million, or 3.3% from the earlier periods. The efficiency ratio
in the third quarter of 2000 was 57.5%, an increase from 55.3% in the third
quarter of 1999. In 1999, merger-related expenses included additional severance,
accelerated depreciation and system conversion costs. In the third quarter of
2000, these merger-related expenses primarily related to accelerated
depreciation and miscellaneous integration costs.
Noninterest Expense Table 4
(In millions)
<TABLE>
<CAPTION>
Quarters
---------------------------------------------------------
2000 1999
---------------------------------- ----------------------
3 2 1 4 3
------------ -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Salaries $ 278.5 $ 292.1 $ 287.3 $ 287.1 $ 288.5
Other compensation 82.9 73.1 83.8 93.9 80.9
Employee benefits 39.5 41.4 56.9 40.2 39.7
Net occupancy expense 51.9 49.9 50.1 50.0 49.8
Equipment expense 47.2 50.7 51.6 55.4 48.0
Outside processing and software 42.4 44.4 41.6 39.8 37.0
Marketing and customer development 25.3 27.9 22.3 35.0 24.7
Consulting and legal 16.4 18.2 11.8 18.5 13.0
Postage and delivery 15.4 16.3 16.7 17.3 16.3
Communications 15.0 15.4 15.2 16.1 16.5
Credit and collection services 14.2 16.0 14.3 15.1 17.8
Operating supplies 11.3 12.6 12.2 13.6 10.7
Amortization of intangible assets 8.9 8.8 9.0 6.3 8.6
Merger-related expenses 8.3 18.2 13.6 7.1 7.1
Other expense 49.4 34.8 17.9 58.5 33.2
------------ -------- --------- ----------- ---------
Total noninterest expense $ 706.6 $ 719.8 $ 704.3 $ 753.9 $ 691.8
============ ======== ========= =========== =========
Efficiency ratio 57.5 % 58.9 % 57.3 % 68.2 % 55.3
</TABLE>
18
<PAGE>
Provision for Loan Losses. The SunTrust Allowance for Loan Losses Committee
meets at least quarterly to affirm the allowance methodology, analyze provision
and charge-off trends and assess the adequacy of the Allowance. The allowance
analysis is based on specifically analyzed loans, historical loss rates and
other internal and external factors that affect credit risk. These other factors
consider variables such as the higher interest rate environment, increasing
consumer debt levels, recent volatility in the financial markets, and known
current events that affect the Company's primary market area. These factors are
key elements in the assessment of the adequacy of the allowance because of their
impact on borrowers' repayment capacity.
At the third quarter Allowance Committee meeting, the committee reaffirmed the
Company's allowance methodology and thoroughly reviewed the allowance analysis.
The third quarter analysis noted negative shifts in credit quality, including
the downgrade of a few large shared national credits to nonperforming status and
an upward trend in the charge-off ratio. The Committee discussed the effects of
the slowing economy on business performance and predicted that increases in both
nonperforming loans and charge-offs would likely continue in the fourth quarter.
Despite these adverse trends, Management concluded that the Allowance was within
an acceptable and prudent range and remained adequate to support losses inherent
in the loan portfolio as of September 30, 2000. However, SunTrust continues to
monitor the credit quality of its loan portfolio, and Management is prepared to
add to the Allowance at any time as warranted by sudden shifts or continued
trends in asset quality.
Third quarter charge-offs were lower than in the same period last year, mainly
due to the sale of the consumer credit card portfolio. The Company anticipates
that higher levels of problem loans in the corporate market, particularly in the
industry segments referenced below, will lead to higher net charge-offs during
the rest of 2000. Nonperforming loans increased from September 30, 1999, due
primarily to structural changes in the healthcare industry. Other industry
sectors, mainly Entertainment (movie theatres), Textiles, Agribusiness and
Retail, also contributed to increases during the period. Although SunTrust does
not have significant remaining exposure in the above-mentioned industries, the
majority of the largest non-performers at quarter end are within these
industries. The overall slowing of the economy and the higher interest rate
environment leads SunTrust to anticipate further increases in nonperforming
loans during the remainder of the year.
Provision for loan losses totaled $80.5MM in the first nine months of 2000,
compared to $137.3 million in the same period last year. This reduction in the
provision is almost entirely due to the sale of the Company's consumer credit
card portfolio in November 1999. The credit card portfolio previously accounted
for up to $20 million in net charge-offs and provision expense each quarter.
The ratio of net charge-offs to average loans dropped to .17% from .26% one year
ago. Total provision exceeded year-to-date net charge-offs by $3.2 million.
At September 30, 2000, SunTrust's allowance for loan losses totaled $874.5
million which was 1.21% of period loans and 229.6% of total nonperforming loans.
Both ratios decreased from the third quarter of 1999. As of September 30, 1999,
the allowance totaled $947.2 million, or 1.48% of period loans and 398.6% of
total nonperforming loans. These decreases are primarily attributable to the
sale of the consumer credit card portfolio, which had a relatively high level of
allowance for loan losses due to higher charge-off levels and no nonperforming
loans.
19
<PAGE>
Summary of Loan Loss Experience Table 5
(Dollars in millions)
<TABLE>
<CAPTION>
Quarters
------------------------------------------------------------------------
2000 1999
------------------------------------------ ----------------------------
3 2 1 4 3
------------ ------------ ------------- ------------- -------------
Allowance for Loan Losses
<S> <C> <C> <C> <C> <C>
Balances - beginning of quarter $ 874.5 $ 874.0 $ 871.3 $ 947.2 $ 941.4
Allowance from acquisitions and
other activity - net - - - - 0.1
Provision for loan losses 30.5 27.7 22.3 33.1 46.5
Charge-offs:
Commercial (28.7) (23.5) (16.3) (84.4) (21.4)
Real estate:
Construction - (0.1) - (0.3) (1.1)
Residential mortgages (1.6) (2.2) (2.2) (4.8) (3.5)
Other (1.2) (0.9) (0.3) (1.1) (0.9)
Credit card (1.7) (0.9) (1.2) (18.6) (18.2)
Other consumer loans (13.9) (12.6) (15.3) (14.6) (11.6)
------------ ------------ ------------- ------------- -------------
Total charge-offs (47.1) (40.2) (35.3) (123.8) (56.7)
------------ ------------ ------------- ------------- -------------
Recoveries:
Commercial 8.5 4.6 4.6 3.7 3.8
Real estate:
Construction 0.3 - 0.1 - 0.1
Residential mortgages 0.9 0.7 0.6 0.2 1.6
Other 0.6 0.2 1.8 1.6 0.6
Credit card 0.5 0.6 1.5 2.7 2.7
Other consumer loans 5.8 6.9 7.1 6.6 7.1
------------ ------------ ------------- ------------- -------------
Total recoveries 16.6 13.0 15.7 14.8 15.9
------------ ------------ ------------- ------------- -------------
Net charge-offs (30.5) (27.2) (19.6) (109.0) (40.8)
------------ ------------ ------------- ------------- -------------
Balance - end of quarter $ 874.5 $ 874.5 $ 874.0 $ 871.3 $ 947.2
============ ============ ============= ============= =============
Quarter-end loans outstanding $ 72,113.6 $ 71,450.4 $ 68,614.4 $ 66,002.8 $ 64,189.3
Average loans 71,506.9 69,830.6 67,030.0 64,941.7 62,859.8
Allowance to quarter-end loans 1.21 % 1.22 % 1.27 % 1.32 % 1.48 %
Allowance to nonperforming loans 229.6 309.6 306.8 350.0 398.6
Net charge-offs to average loans
(annualized) 0.17 0.16 0.12 0.67 0.26
Provision to average loans (annualized) 0.17 0.16 0.13 0.20 0.29
Recoveries to total charge-offs 35.2 32.3 44.5 12.0 28.0
</TABLE>
20
<PAGE>
Nonperforming Assets Table 6
(Dollars in millions)
<TABLE>
<CAPTION>
2000 1999
-----------------------------------------------------------------------------------------
September 30 June 30 March 31 December 31 September 30
------------- ---------------- ---------------- ----------------- -----------------
Nonperforming Assets
Nonaccrual loans:
<S> <C> <C> <C> <C> <C>
Commercial $ 270.4 $ 149.1 $ 129.6 $ 105.0 $ 82.3
Real Estate:
Construction 2.5 1.8 4.7 9.0 11.8
Residential mortgages 65.1 75.6 84.0 82.6 85.9
Other 23.9 27.4 37.8 34.9 45.8
Consumer loans 19.0 28.6 28.8 17.4 11.8
------------- ---------------- ---------------- ----------------- -----------------
Total nonaccrual loans 380.9 282.5 284.9 248.9 237.6
Restructured loans - - - - 0.1
------------- ---------------- ---------------- ----------------- -----------------
Total nonperforming loans 380.9 282.5 284.9 248.9 237.7
Other real estate owned 23.6 23.2 27.0 26.8 24.2
------------- ---------------- ---------------- ----------------- -----------------
Total nonperforming assets $ 404.5 $ 305.7 $ 311.9 $ 275.7 $ 261.9
============= ================ ================ ================= =================
Ratios:
Nonperforming loans to total loans 0.53 % 0.40 % 0.42 % 0.38 % 0.37 %
Nonperforming assets to total loans
plus other real estate owned 0.56 0.43 0.45 0.42 0.41
Accruing Loans Past Due
90 Days or More $ 150.8 $ 189.4 $ 160.1 $ 117.4 $ 113.1
</TABLE>
Nonperforming Assets. Nonperforming assets consist of nonaccrual loans,
restructured loans and other real estate owned. Nonperforming assets grew 46.7%,
or $128.8 million since December 31, 1999 and 54.5%, or $142.6 million since
September 30, 1999. Much of the increase since September 30, 1999 occurred in
healthcare credits, an industry sector that continues to experience structural
change and intense market pressures. Other industries that contributed to this
increase were Entertainment (movie theatres), Textiles, Agribusiness and Retail.
Interest income on nonaccrual loans, if recognized, is recorded using the cash
basis method of accounting. During the first nine months of 2000, this amounted
to $12.5 million. An additional $11.6 million of interest income would have been
recorded if all nonaccrual and restructured loans had been accruing interest
according to their original contract terms.
21
<PAGE>
Loan Portfolio by Types of Loans Table 7
(In millions)
<TABLE>
<CAPTION>
2000 1999
------------------------------- ------------------------------------------------
September 30 June 30 March 31 December 31 September 30
---------------- -------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Commercial $ 30,821.6 $ 30,209.5 $ 29,639.6 $ 26,933.5 $ 24,918.3
Real estate:
Construction 2,884.3 2,647.2 2,600.8 2,457.1 2,348.0
Residential mortgages 20,557.4 20,295.0 19,643.1 19,619.3 18,696.6
Other 7,960.6 7,851.5 7,937.4 7,794.9 7,656.1
Credit card 79.3 75.4 98.7 77.4 1,497.2
Other consumer loans 9,810.4 10,371.8 8,694.8 9,120.6 9,073.1
---------------- -------------- -------------- ---------------- ----------------
Total loans $ 72,113.6 $ 71,450.4 $ 68,614.4 $ 66,002.8 $ 64,189.3
================ ============== ============== ================ ================
</TABLE>
Loans. Total loans at September 30, 2000 were $72.1 billion, an increase of $7.9
billion or 12.3% from September 30, 1999. The Company recorded significant loan
growth in commercial loans, up 23.7% from September 30, 1999, while continuing
to realize steady growth in its residential mortgage portfolio, up 10.0%, as
customers shifted from fixed rate to adjustable rate mortgages. Of the $20.6
billion in residential mortgages at September 30, 2000, $2.2 billion were home
equity loans, which also demonstrated significant growth of 14.9% in the last
twelve months. The drop in credit card loans from September 30, 1999 reflects
the sale of the Company's $1.5 billion consumer credit card portfolio during the
fourth quarter of 1999.
Income Taxes. The provision for income taxes was $154.7 million and $476.2 in
the third quarter and first nine months of 2000 compared to $181.3 million and
$490.8 in the same periods last year. This represents a 33% effective tax rate
for the nine months ended September 30, 2000, compared to 35% for the same
period last year. The drop in the effective tax rate is due to the recognition
of tax benefits on certain capital losses resulting from the sale of a
subsidiary's preferred stock. Additional tax benefits from capital losses may be
realized in future quarters.
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, included in accumulated other
comprehensive income and added to or deducted from realized shareholders' equity
to determine total shareholders' equity. The investment portfolio continues to
be proactively managed to optimize yield over an entire interest rate cycle
while providing liquidity and managing market risk. The portfolio yield
increased from an average of 6.31% in the third quarter of 1999 to 6.77% in the
third quarter of 2000 primarily due to the repositioning of the securities
portfolio during the fourth quarter of 1999 to take advantage of higher market
rates.
At September 30, 2000 the portfolio size (measured at amortized cost) decreased
by $1.2 billion from December 31, 1999 due to strong loan demand during 2000. At
September 30, 2000, approximately 2% of the portfolio consisted of U.S. Treasury
securities, 16% U.S. government agency securities, 46% mortgage-backed
securities, 14% asset-backed securities, 15% corporate bonds, 3% municipal
securities and 4% other securities. 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, 2000, the carrying value of the securities portfolio was $2.5
billion over amortized cost, consisting of a $2.7 billion unrealized gain on
SunTrust's investment in common stock of The Coca-Cola Company and other
unrealized net losses. The market value of this common stock investment
decreased $111.6 million during the third quarter of 2000, which did not affect
the net income of SunTrust, but was included in comprehensive income.
22
<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 a diversified
base of regional and national wholesale funding sources including fed funds
purchased, securities sold under agreements to repurchase, negotiable
certificates of deposit and offshore deposits, commercial paper issuance by the
Company, and Federal Home Loan Bank advances.
Total deposits consist of consumer deposits, commercial deposits and purchased
deposits. The purchased deposits include foreign and brokered deposits. Total
deposits as of September 30, 2000 grew $10.5 billion, or 17.9%, from September
30, 1999. Consumer and commercial deposits decreased $332.3 million, or 0.6%
while purchased deposits grew $10.8 billion, or 225.7%. Consumer and commercial
deposits represented 79.9% of average deposits for the third quarter of 2000
compared to 92.4% for the same period of 1999. In future periods, the Company
expects to put additional focus on attracting a higher level of consumer and
commercial deposits in relation to its total funding source mix.
Net borrowed funds, which primarily include short term funds purchased and sold,
purchased deposits, other short term borrowings and long term debt, were $32.7
billion for the third quarter of 2000 compared with $25.4 billion for the same
period in 1999. The increase is primarily due to the Company's increased use of
purchased deposits and long term debt. Net borrowed funds were 36.5% of average
earning assets for the third quarter of 2000 as compared to 30.8% in the same
period a year ago.
23
<PAGE>
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. These 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,
2000 are shown in Table 8.
Derivative Instruments Table 8
(Dollars in thousands)
<TABLE>
<CAPTION>
Estimated Fair Value
------------------------------------------
Weighted
Average Average
Notional Maturity Received Average Carrying Unrealized Unrealized
Balance In Months Rate Pay Rate amount(1) Gain Losses Net
----------------------------------------------------------------------------------------------
Hedges on Lending Commitments
<S> <C> <C> <C> <C> <C> <C>
Forward Contracts $ 1,941,194 2 - % - % $ - $ 1,021 $ (7,646) $ (6,625)
Hedges on Foreign Currency
Forward Contracts 748,892 3 - - - 22,300 (17,994) 4,306
Interest Rate Swaps 2,353,666 39 6.52 6.59 269 20,333 (9,534) 11,068
Interest Rate Caps/Floors 750,000 27 5.23 (2) - (2,524) 700 - (1,824)
Futures Contracts 970,000 14 - - - 653 (466) 187
Options on Lending Commitments
Option Contracts 40,000 2 5.75 (2) - - - - -
Options - Euro Dollar Futures
Option Contracts 1,500,000 5 6.75 (2) 6.50 - 363 (350) 13
----------
Total Derivatives $ 7,125
==========
</TABLE>
(1) Carrying amount includes accrued interest receivable or payable and
unamortized premiums.
(2) Average option strike price.
Derivative contracts used in the management of interest rate volatility and
trading activities decreased net interest income by $0.7 million and $0.6
million in the third quarter and first nine months of 2000.
Capital Ratios Table 9
(Dollars in millions)
<TABLE>
<CAPTION>
2000 1999
------------------------------------------------------ --------------------------------
September 30 June 30 March 31 December 31 September 30
----------------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Tier 1 capital $6,677.4 $ 6,648.7 $ 6,484.3 $ 6,579.6 $ 7,065.0
Total capital 10,216.1 10,342.7 9,754.8 9,939.1 10,314.7
Risk-weighted assets 95,183.9 95,571.5 88,973.4 87,866.1 84,458.9
Risk-based ratios:
Tier 1 capital 7.02 % 6.95 % 7.28 % 7.48 % 8.36 %
Total capital 10.73 10.82 10.96 11.31 12.21
Tier 1 leverage ratio 6.92 7.00 7.00 7.17 7.91
Total shareholders' equity to assets 7.66 7.60 7.40 8.00 8.45
</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 adequate to
support asset growth. However, the Company's capital ratios have experienced a
decline over the last five quarters primarily resulting from additional
purchases under the SunTrust stock repurchase program and a decline in the
market value of SunTrust's investment in common stock of The Coca-Cola Company.
Table 9 presents capital ratios for the five most recent quarters.
24
<PAGE>
Regulatory agencies measure capital adequacy within a framework that makes
capital requirements sensitive to the risk profiles of individual banking
companies. The guidelines define capital as either Tier 1 (primarily
shareholders' equity, as defined to include certain debt obligations) or Tier 2
(to include certain other debt obligations and a portion of the allowance for
loan losses, and 45% of the unrealized gains on equity securities). SunTrust is
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%. To
be considered a "well capitalized" institution, the Tier 1 capital ratio, the
total capital ratio, and the Tier 1 leverage ratio must equal or exceed 6%, 10%
and 5%, respectively. SunTrust is committed to remaining well capitalized.
On August 10, 1999, the Board of Directors authorized the purchase of up to 15
million shares of SunTrust common stock. In 2000, SunTrust purchased 1,159,200
shares of SunTrust common stock to complete the August 10, 1999 authorization.
On February 8, 2000, the Board of Directors authorized the purchase of up to 12
million shares of SunTrust common stock; SunTrust purchased 10,105,542 shares of
common stock under this authorization. On August 8, 2000, the Board of Directors
authorized the purchase of up to 10 million shares of SunTrust common stock of
the Company, including 1,894,458 shares remaining under the authorization to
purchase shares of February 8, 2000. At October 31, 2000, the Company had
8,371,600 shares remaining to be purchased under the August 8, 2000
authorization.
25
<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
20, 2000. The purpose of this report was to file as an exhibit
the press release reporting September 30, 2000 quarterly results.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized this 13th day of November, 2000.
SunTrust Banks, Inc.
(Registrant)
---------------------
William P. O'Halloran
Senior Vice President and Controller
(Chief Accounting Officer)
26
