SunTrust Reports Record First Quarter 2006 Earnings18 April 2006
SunTrust Banks, Inc. (NYSE: STI) today reported record net income for the first quarter of 2006 of $531.5 million, up 8% from $492.3 million in the first quarter of 2005. Net income per diluted share was also a record $1.46, up 7% from $1.36 in the first quarter of 2005.
"Our first quarter results are evidence that we continue to build on the strong operating platform that we have established. We are pleased to report that the Company started out the new year with record results in net income and earnings per share despite a challenging environment. The continued execution of our business strategies across all lines of business drove another quarter of significant loan and revenue growth. This growth, coupled with continued improvement in credit quality, resulted in the strong earnings that we posted for the first quarter," L. Phillip Humann, chairman and CEO of SunTrust noted. Revenue growth was 9%, and excluding the net gain on sale of factoring assets in the first quarter of 2005 and securities gains and losses, revenue growth was 10% over the first quarter of 2005. Loan growth was 13% over this same time frame. Mr. Humann noted that credit quality trends continued to improve from the already low historical levels experienced over the past year, with key credit measures such as net charge-offs and nonperforming loans to total loans falling to cyclical lows in the first quarter of 2006.
First Quarter 2006 Consolidated Highlights
1st Quarter 1st Quarter Reported
2006 2005 % Change
Income Statement
(Dollars in millions except
per share data)
Net income $531.5 $492.3 8%
Net income per diluted share 1.46 1.36 7%
Revenue - fully
taxable-equivalent 2,050.9 1,883.0 9%
Revenue - fully
taxable-equivalent
excluding securities gains and
losses and net gain on sale of
factoring assets 2,050.8 1,868.8 10%
Noninterest income 851.5 753.8 13%
Noninterest income excluding
securities gains and losses
and net gain on sale of
factoring assets 851.4 739.6 15%
Balance Sheet
(Dollars in billions)
Average loans $116.3 $103.2 13%
Average consumer and commercial
deposits 95.3 91.0 5%
Asset Quality
Net charge-offs to average loans 0.08% 0.14%
Nonperforming loans to total loans 0.25% 0.34%
First Quarter 2006 Consolidated Highlights, continued
-- Net income increased 8% and net income per diluted share increased 7%
from the first quarter of 2005 driven by the strong revenue growth.
-- Total fully taxable-equivalent revenue increased 9% from the first
quarter of 2005 driven by noninterest income growth of 13% and fully
taxable-equivalent net interest income growth of 6%. Excluding
securities gains and losses and the net gain on the sale of factoring
assets, total fully taxable-equivalent revenue increased by 10% and
noninterest income increased by 15% from the first quarter of 2005.
-- Noninterest income growth was led by mortgage-related income, which was
driven by strong production levels as well as higher mortgage
servicing-related income.
-- Total average loans increased 13% and total average consumer and
commercial deposits increased 5% from the first quarter of 2005
reflecting the effectiveness of SunTrust's company-wide sales focus.
-- Net charge-offs were 0.08% of average loans, down from 0.14% of average
loans in the first quarter of 2005. Nonperforming loans to total loans
improved as well, dropping from 0.34% for the first quarter of 2005 to
0.25% for the first quarter in 2006, both reflecting exceptional credit
quality levels.
CONSOLIDATED FINANCIAL PERFORMANCE
Revenue
Fully taxable-equivalent revenue was $2,050.9 million for the first quarter of 2006, up 9% from the first quarter of 2005. Fully taxable- equivalent revenue, excluding securities gains and losses and the net gain on sale of factoring assets that occurred in the first quarter of 2005, increased 10% from the first quarter of 2005. Fully taxable-equivalent revenue growth was driven by strong increases in both fully taxable-equivalent net interest income and noninterest income. On a sequential annualized basis, fully- taxable-equivalent revenue increased 9% in the first quarter of 2006 from the fourth quarter of 2005.
Net Interest Income
Fully taxable-equivalent net interest income was $1,199.4 million in the first quarter of 2006, up 6% from the first quarter of 2005. The primary factor driving the fully taxable-equivalent net interest income growth year-over-year was strong loan growth. Loans grew 13% on average from the first quarter of 2005. The net interest margin of 3.10% for the first quarter of 2006 was unchanged from the fourth quarter of 2005.
Noninterest Income
Total noninterest income was $851.5 million for the first quarter of 2006, up a strong 13% from the first quarter of 2005. Excluding securities gains and losses and the net gain on sale of factoring assets recorded in the first quarter of 2005, total noninterest income grew 15%. A significant portion of the increase resulted from growth in mortgage related income, reflecting the continued strength in loan production-related income as well as an increase in mortgage servicing-related income. An increase in the level of loan sales as well as our continued sales efforts drove the increase in production-related income in the first quarter. The increase in servicing-related income experienced during the first quarter is an indication of the increased income created from the larger servicing portfolio, a reduction in the mortgage servicing amortization rate and the realization of the value embedded in the excess mortgage servicing rights through the securitization and subsequent sale of a portion of the excess servicing rights. Additionally, growth in card fees, investment banking income, trust and investment management income and service charges also contributed. On a sequential annualized basis, noninterest income increased 27% in the first quarter of 2006 from the fourth quarter of 2005, largely driven by the increase in mortgage-related income in the first quarter.
Noninterest Expense
Total noninterest expense in the first quarter of 2006 was $1,226.5 million, up 8% from the first quarter of 2005. The increase in expense reflects certain investments in revenue producing divisions of the Company, including the addition of offices and employees and investment in the infrastructure of the organization to gain greater efficiencies in the future. The increase in marketing and customer development expense reflects the Company's focus on customer acquisition. Offsetting these increases was the lack of merger-related expenses in the first quarter of 2006. On a sequential annualized basis, noninterest expense increased 6% in the first quarter of 2006 from the fourth quarter of 2005. Excluding the merger-related expenses in the fourth quarter of 2005 from total noninterest expense, the increase was 9%. The respective increases of 6% and 9% were mainly attributable to increases in certain employee benefit expenses that are seasonal, such as FICA expense.
The reported efficiency ratio was 59.80% for the first quarter of 2006 compared to 60.20% for the fourth quarter of 2005, an improvement of 40 basis points. Excluding the effect of merger-related expenses included in the fourth quarter of 2005, the efficiency ratio for that quarter was 59.87% and the improvement was 7 basis points.
Balance Sheet
As of March 31, 2006, SunTrust had total assets of $178.9 billion. Shareholders' equity of $17.2 billion as of March 31, 2006 represented 10% of total assets. Book value per share was $47.22 as of March 31, 2006, up from $46.65 as of December 31, 2005.
Loans
Average loans for the first quarter of 2006 were $116.3 billion, up 13% from the first quarter of 2005. On a sequential annualized basis, average loans grew 9% in the first quarter of 2006 from the fourth quarter of 2005. Areas of strongest growth in consumer lending were residential real estate and home equity lines. Although reported commercial loans grew 1%, the sequential annualized rate of growth excluding the impact of shorter-term corporate lending facilities, which are temporary and can fluctuate from quarter-to-quarter, was 9% in the first quarter of 2006 from the fourth quarter of 2005. Real estate construction also contributed to the overall loan growth.
Deposits
Average consumer and commercial deposits for the first quarter of 2006 were $95.3 billion, up 5% from the first quarter of 2005. The growth in deposits was driven mainly by growth in money market accounts and certificates of deposit. On a sequential annualized basis, average consumer and commercial deposits were flat compared to the fourth quarter of 2005. Seasonal declines in noninterest bearing, NOW and savings deposits, as well as the expected seasonal decline in mortgage escrow balances, were offset by strong certificate of deposit growth. Given market conditions and the higher rate environment, customer preference is for higher-yielding deposit products, which is reflected in the deposit mix shift from the fourth quarter to the first quarter. The Company continues to pursue deposit growth initiatives aimed at product promotions, as well as increasing our presence in specific markets within our footprint.
Asset Quality
The Company reached cyclical lows in several key credit measures in the first quarter of 2006 from the already exceptionally good levels in prior quarters. Net charge-offs in the first quarter of 2006 were 0.08% of average loans, down from 0.17% of average loans in the fourth quarter of 2005 and 0.14% of average loans in the first quarter of 2005. Net charge-offs were $22.3 million in the first quarter of 2006 compared to $49.9 million in the fourth quarter of 2005 and $36.8 million in the first quarter of 2005. Nonperforming assets were relatively stable in the first quarter of 2006 compared to the fourth quarter of 2005, and were down $58.0 million, or 15%, from the first quarter of 2005. Nonperforming assets were $334.3 million, or 0.28% of loans, other real estate owned and other repossessed assets as of March 31, 2006 compared to $334.2 million, or 0.29% of loans, other real estate owned and other repossessed assets as of December 31, 2005.
The allowance for loan and lease losses increased $11.1 million to $1,039.2 million as of March 31, 2006 from $1,028.1 million as of December 31, 2005 due to strong loan growth during the period. Provision expense decreased from $48.1 million in the fourth quarter of 2005 to $33.4 million in the first quarter of 2006. The allowance for loan and lease losses as of March 31, 2006 represented 0.88% of period-end loans, a slight decrease from 0.90% as of December 31, 2005. The allowance for loan and lease losses as of March 31, 2006 represented 358.7% of period-end nonperforming loans, an increase from 346.9% as of December 31, 2005.
LINE OF BUSINESS FINANCIAL PERFORMANCE
Retail
preliminary data 1st Quarter 1st Quarter
(in millions) 2006 2005 % Change
Net income $190.5 $141.6 35 %
Revenue - fully
taxable-equivalent 850.7 759.3 12 %
Average total loans 31,246.0 29,519.8 6 %
Average total deposits 67,158.1 63,527.4 6 %
Retail's net income for the first quarter of 2006 was $190.5 million, an increase of $48.9 million, or 35%, compared to the first quarter of 2005. The increase was primarily the result of higher fully taxable-equivalent net interest income, lower net charge-offs and higher noninterest income partially offset by higher noninterest expense.
Fully taxable-equivalent net interest income increased $71.0 million, or 14%, from the first quarter of 2005. The increase was attributable to loan and deposit growth and widening deposit spreads due to deposit rate increases that have been slower relative to market rate increases. Average loans increased $1.7 billion, or 6%, and average deposits increased $3.6 billion, or 6% from the first quarter of 2005. The loan growth was driven primarily by home equity lines, while the deposit growth was driven by certificates of deposit.
Provision for loan losses, which represents net charge-offs for the lines of business, decreased $12.9 million, or 40%, from the first quarter of 2005 primarily due to a decline in consumer indirect net charge-offs.
Total noninterest income increased $20.4 million, or 9%, from the first quarter of 2005. The increase was driven primarily by interchange income due to increased volumes, gains on sales of student loans and service charges on deposit accounts.
Total noninterest expense increased $29.2 million, or 6%, from the first quarter of 2005. The increase was driven primarily by increases in personnel expense and operation costs related to investments in the branch distribution network and technology.
Commercial
preliminary data 1st Quarter 1st Quarter
(in millions) 2006 2005 % Change
Net Income $106.8 $91.5 17 %
Revenue - fully
taxable-equivalent 300.7 267.4 13 %
Average Total Loans 31,508.4 29,949.6 5 %
Average Total Deposits 13,705.4 13,256.4 3 %
Commercial's net income for the first quarter of 2006 was $106.8 million, an increase of $15.2 million, or 17%, compared to the first quarter of 2005. The increase was driven by higher fully taxable-equivalent net interest income and noninterest income, partially offset by an increase in noninterest expense.
Fully taxable-equivalent net interest income increased $22.5 million, or 11%, from the first quarter of 2005. The increase is attributable to increased loan volumes and deposit spreads. Average loans increased $1.6 billion, or 5%, from the first quarter of 2005 with the strongest growth in construction lending. Average deposits increased $449.1 million, or 3%, from the first quarter of 2005 driven by an increase in public funds and partially offset by a decrease in demand deposits.
Provision for loan losses, which represents net charge-offs for the lines of business, improved from a net recovery position of $0.4 million in the first quarter of 2005 to a net recovery position of $1.1 million in the first quarter of 2006.
Total noninterest income increased $10.8 million, or 19%, from the first quarter of 2005. The increase was primarily driven by increases in Affordable Housing revenue, sweep income and letter of credit fees.
Total noninterest expense increased $12.4 million, or 9%, from the first quarter of 2005. Investment in personnel and higher Affordable Housing expenses were the primary drivers.
Corporate & Investment Banking
preliminary data 1st Quarter 1st Quarter
(in millions) 2006 2005 % Change
Net Income $64.2 $72.5 (12)%
Impact of factoring asset divestiture (0.0) (14.5)
Net Income excluding impact of
factoring asset divestiture 64.2 58.0 11 %
Revenue - fully taxable-equivalent 225.4 236.4 (5)%
Impact of factoring asset divestiture (0.2) (27.9)
Revenue excluding impact of
factoring asset divestiture 225.2 208.5 8 %
Average Total Loans (including leases) 16,106.2 13,946.2 16 %
Average Total Deposits 3,693.2 3,133.5 18 %
Corporate and Investment Banking's net income for the first quarter of 2006 was $64.2 million, a decrease of $8.3 million, or 12%, compared to the first quarter of 2005. Growth in fully taxable-equivalent net interest and capital markets income in the first quarter of 2006 was offset by the divestiture of factoring assets in the first quarter of 2005. Adjusting net income and fully taxable-equivalent revenue for the impact from the March 2005 divestiture of factoring assets, net income increased 11%, and fully taxable- equivalent revenue increased 8% from the first quarter of 2005.
Fully taxable-equivalent net interest income increased $8.3 million, or 14%, from the first quarter of 2005. Average loans and leases increased $2.2 billion, or 16%, from the first quarter of 2005. Average deposits increased $559.7 million, or 18%, from the first quarter of 2005. Loan growth is due to increased corporate demand and merger and acquisition activity. Corporate demand for long-term CDs drove deposit growth.
Provision for loan losses, which represents net charge-offs for the lines of business, declined from a net recovery position of $0.7 million in the first quarter of 2005 to a net recovery position of $0.4 million in the first quarter of 2006.
Total noninterest income decreased $19.4 million, or 11%, from the first quarter of 2005 primarily driven by the divestiture of factoring assets in the first quarter of 2005. Also contributing to the decrease was weakness in merger and acquisition related fees and fixed income trading. This was partially offset by revenue growth related to securitizations, derivatives and syndicated loans.
Total noninterest expense increased $2.3 million, or 2%, from the first quarter of 2005. The majority of this change was due to increased compensation as a direct result of capital markets revenue growth. This was partially offset by the expense reduction from the factoring asset divestiture.
Mortgage
preliminary data 1st Quarter 1st Quarter
(in millions) 2006 2005 % Change
Net Income $79.7 $38.2 109 %
Revenue - fully taxable-equivalent 268.8 170.3 58 %
Average Total Loans 28,924.5 21,977.5 32 %
Average Total Deposits 1,443.9 1,298.4 11 %
Mortgage's net income for the first quarter of 2006 was $79.7 million, an increase of $41.5 million, or 109%, compared to the first quarter of 2005. Record loan sales to investors, gains from the securitization and sale of excess mortgage servicing rights and increased volumes drove the increase.
Fully taxable-equivalent net interest income increased by $23.0 million, or 18%, from the first quarter of 2005. Total average loans increased $6.9 billion, or 32%, from the first quarter of 2005 due to strong construction- permanent production and continued demand for portfolio loan products. The higher loan balances contributed $22.3 million to the increase in net interest income. Loans held for sale increased $3.3 billion, or 58%, to $9.1 billion from the first quarter of 2005. However, due to compressed spreads, income from loans held for sale decreased $3.5 million, or 8%, from the first quarter of 2005. Average deposits were up $145.6 million, or 11%, from the first quarter of 2005 due to increased escrow balances associated with higher servicing balances. The higher deposit balances combined with the benefit in a higher rate environment from this funding contributed an additional $4.6 million to net interest income.
Provision for loan losses, which represents net charge-offs for the lines of business, increased $1.7 million to $2.8 million from the first quarter of 2005, which was less than 0.01% of total average loans for the first quarter of 2006.
Total noninterest income was up $75.5 million, or 169%, from the first quarter of 2005. Production income increased $43.8 million, or 219%, from the first quarter of 2005 principally due to higher loan sales to investors. Loan sales were up $4.9 billion, or 92%, from the first quarter of 2005 to a record level of $10.3 billion. Increased loan production also contributed to higher noninterest income. Loan production was $11.6 billion, up $2.9 billion, or 34%, from the first quarter of 2005. Servicing income increased $32.3 million, or 274% compared with last year. The securitization and subsequent sale of excess mortgage servicing rights related to $12.8 billion in servicing balances resulted in income of $24.4 million. Additionally, fee income increased due to higher servicing balances. Total loans serviced as of March 31, 2006 were $112.2 billion compared to $83.6 billion as of March 31, 2005, an increase of $28.5 billion or 34%.
Total noninterest expense increased by $31.3 million, or 28%, from the first quarter of 2005. Increased volume and growth-related costs were the primary drivers of the higher expense.
Wealth & Investment Management
preliminary data 1st Quarter 1st Quarter
(in millions) 2006 2005 % Change
Net Income $45.7 $42.7 7 %
Revenue - fully taxable-equivalent 331.2 310.1 7 %
Average Total Loans 8,149.1 7,574.3 8 %
Average Total Deposits 9,217.4 9,403.9 (2)%
Wealth and Investment Management's net income for the first quarter of 2006 was $45.7 million, an increase of $2.9 million, or 7%, compared to the first quarter of 2005. The growth was primarily driven by increased net interest income, partially offset by expenses related to the continued build-out of the business.
Fully taxable-equivalent net interest income increased $15.0 million, or 19%, from the first quarter of 2005 attributable to increased loan volume and deposit spreads. Average loans increased $574.7 million, or 8%, from the first quarter of 2005 driven by strong consumer mortgage, equity line and commercial real estate demand, partially offset by a decline in consumer direct installment loans. Average deposits decreased $186.4 million, or 2%, from the first quarter of 2005.
Provision for loan losses, which represents net charge-offs for the lines of business, decreased $0.1 million from the first quarter of 2005.
Total noninterest income increased $6.1 million, or 3%, from the first quarter of 2005 due to growth in trust income which resulted from higher assets under management. Assets under management increased approximately $7.8 billion, or 6%, from last year due to new business and an increase in equity market valuations. End of period assets under management were approximately $136.9 billion compared to $129.1 billion in the same period last year. Assets under management include individually managed assets, the STI Classic Funds, institutional assets managed by Trusco Capital Management and participant-directed retirement accounts. SunTrust's total assets under advisement were approximately $245.4 billion, which include $136.9 billion in assets under management, $45.5 billion in non-managed trust assets, $35.0 billion in retail brokerage assets and $28.0 billion in non-managed corporate trust assets.
Total noninterest expense increased $16.6 million, or 7%, from the first quarter of 2005. The growth was primarily driven by increased expenses paid to third parties, increased operations costs, and continued investments in the business.
Corporate Other and Treasury
preliminary data 1st Quarter 1st Quarter
(in millions) 2006 2005 % Change
Net Income $44.8 $105.8 (58)%
Securities Available for Sale 24,754.2 27,067.9 (9)%
Corporate Other and Treasury's net income for the first quarter of 2006 was $44.8 million, a decrease of $61.0 million, or 58%, compared to the same period in 2005 mainly due to a decrease in net interest income.
Fully taxable-equivalent net interest income decreased $69.7 million, or 52%, from the first quarter of 2005. The main drivers for the reduction in net interest income were a $2.3 billion decrease in securities available for sale, a decrease in income on receive fixed/pay floating interest rate swaps used to extend the duration of the commercial loan portfolio, and an increase in short-term borrowing costs due to an increase in the size of these borrowings needed to fund earning asset growth, as well as a significant rise in short-term interest rates over the past year.
Total average deposits increased $11.0 billion, or 80%, from last year mainly due to growth in brokered and foreign deposits of $11.2 billion. Additionally, other short-term borrowings and long-term debt declined $2.5 billion from the first quarter of 2005.
Provision for loan losses, which represents the difference between net charge-offs for the lines of business and total provision for loan losses, increased $34.5 million from the first quarter of 2005.
Total noninterest income increased $4.2 million, or 76%, from the first quarter of 2005. This was mainly due to net securities gains of $0.1 million in the first of 2006 compared to net securities losses of $6.4 million in the same period of 2005.
Total noninterest expense increased $0.8 million, or 6%, from the first quarter of 2005.
Corresponding Financial Tables and Information
To view the corresponding financial tables and information, please refer to the Investor Relations section located under "About SunTrust" on our Web site at http://www.suntrust.com. This information may also be directly accessed via the quick link entitled "1st Quarter Earnings Release" on the SunTrust homepage.
Conference Call
SunTrust management will host a conference call on April 17, 2006 at 8:00 a.m. (Eastern Time) to discuss the earnings results and business trends. Individuals are encouraged to call in beginning at 7:45 a.m. (Eastern Time) by dialing 1-888-972-7805 (Passcode: 1Q06; Leader: Greg Ketron). Individuals calling from outside the United States should dial 1-517-308-9091 (Passcode: 1Q06; Leader: Greg Ketron). A replay of the call will be available beginning April 17, 2006 and ending May 1, 2006 by dialing 1-866-498-5444 (domestic) or 1-203-369-1795 (international).
Alternatively, individuals may listen to the live webcast of the presentation by visiting the SunTrust Web site at http://www.suntrust.com. The webcast will be hosted under "Investor Relations" located under "About SunTrust" or may be accessed directly from the SunTrust home page by clicking on the earnings-related link, "1st Quarter Earnings Release." Beginning the afternoon of April 17, 2006, listeners may access an archived version of the webcast in the "Webcasts and Presentations" subsection found under "Investor Relations." This webcast will be archived and available for one year. A link to the Investor Relations page is also found in the footer of the SunTrust home page.
SunTrust Banks, Inc., headquartered in Atlanta, is one of the nation's largest banking organizations, serving a broad range of consumer, commercial, corporate and institutional clients. The Company operates an extensive branch and ATM network throughout the high-growth Southeast and Mid-Atlantic states and a full array of technology-based, 24-hour delivery channels. The Company also serves customers in selected markets nationally. Its primary businesses include deposit, credit, trust and investment services. Through various subsidiaries the Company provides credit cards, mortgage banking, insurance, brokerage, equipment leasing and capital markets services. SunTrust's Internet address is http://www.suntrust.com.
Forward Looking Statements
This press release contains forward-looking statements, including statements about future prospects of the Company and credit quality. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements. These statements often include the words "may," "could," "would," "should," "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions. Such statements are based upon the current beliefs and expectations of SunTrust's management and are subject to significant risks and uncertainties. Do not unduly rely on forward-looking statements. Actual results may differ materially from those set forth in the forward-looking statements. Factors that could cause SunTrust's results to differ materially from those described in the forward-looking statements can be found in the Company's 2005 Annual Report on Form 10-K, in the Quarterly Reports on Form 10-Q and in the Current Reports filed on Form 8-K with the Securities and Exchange Commission and available at the Securities and Exchange Commission's internet site (http://www.sec.gov). Those factors include (1) as a financial services company, adverse changes in general business or economic conditions could have a material adverse effect on our financial condition and results of operations; (2) changes in market interest rates or capital markets could adversely affect our revenues and expenses, the value of assets and obligations, costs of capital, or liquidity; (3) the fiscal and monetary policies of the federal government and its agencies could have a material adverse effect on our earnings; (4) a decrease in the market for residential real estate could harm our revenue and profitability; (5) clients could pursue alternatives to bank deposits, causing us to lose a relatively inexpensive source of funding; (6) consumers may decide not to use banks to complete their financial transactions, which could affect our net income; (7) we have businesses other than banking which subjects the Company to a variety of risks; (8) hurricanes and other natural disasters may adversely affect loan portfolios and operations and increase the cost of doing business; (9) negative public opinion could damage our reputation and adversely impact business and revenues; (10) we rely on other companies to provide key components of our business infrastructure; (11) we depend on the accuracy and completeness of information about clients and counterparties; (12) regulation by federal and state agencies could adversely affect the business, revenue and profit margins; (13) competition in the financial services industry is intense and could result in losing business or reducing margins; (14) future legislation could harm our competitive position; (15) maintaining or increasing market share depends on market acceptance and regulatory approval of new products and services; (16) the Company's ability to receive dividends form its subsidiaries accounts for most of its revenue and could affect its liquidity and ability to pay dividends; (17) we have in the past and may in the future pursue acquisitions, which could affect costs and from which we may not be able to realize anticipated benefits; (18) we depend on the expertise of key personnel, and if these individuals leave or change their roles without effective replacements then operations could suffer; (19) we may not be able to hire or retain additional qualified personnel and recruiting costs may increase as a result of turnover, both of which may increase costs and reduce profitability and may adversely impact our ability to implement the business strategy; (20) our accounting policies and methods are key to how we report financial condition and results of operations, and may require management to make estimates about matters that are uncertain; (21) our stock price can be volatile; and (22) our disclosure controls and procedures may not prevent or detect all errors or acts of fraud. The forward-looking statements in this press release speak only as of the date of the filing, and SunTrust does not assume any obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements.
This press release contains certain non-GAAP financial measures to describe our Company's performance. The reconciliation of those measures to the most directly comparable GAAP financial measures, and the reasons why SunTrust believes such financial measures may be useful to investors, can be found in the financial information contained in the appendices of this press release.
SunTrust Banks, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
(Dollars in millions, except per share data) (Unaudited)
Three Months Ended
March 31 %
2006 2005 Change
EARNINGS & DIVIDENDS
Net income $531.5 $492.3 8.0 %
Total revenue - FTE (2) 2,050.9 1,883.0 8.9
Total revenue - FTE excluding
securities gains and losses
and net gain on sale of RCM assets(1) 2,050.8 1,868.8 9.7
Net income per average common share
Diluted 1.46 1.36 7.4
Basic 1.48 1.37 8.0
Dividends paid per average common share 0.61 0.55 10.9
CONDENSED BALANCE SHEETS
Selected Average Balances
Total assets $177,618 $161,218 10.2 %
Earning assets 156,714 140,853 11.3
Loans 116,263 103,216 12.6
Consumer and commercial deposits 95,292 90,968 4.8
Brokered and foreign deposits 24,652 13,424 83.6
Shareholders' equity 17,052 16,119 5.8
As of
Total assets 178,876 164,811 8.5
Earning assets 157,448 143,678 9.6
Loans 118,130 104,761 12.8
Allowance for loan and lease losses 1,039 1,024 1.5
Consumer and commercial deposits 97,940 93,035 5.3
Brokered and foreign deposits 23,836 14,499 64.4
Shareholders' equity 17,157 16,104 6.5
FINANCIAL RATIOS & OTHER DATA
Return on average total assets 1.21 % 1.24 % (2.4)%
Return on average assets less net
unrealized securities gains (1) 1.19 1.23 (3.3)
Return on average total equity 12.64 12.39 2.0
Return on average realized
shareholders' equity (1) 13.06 13.23 (1.3)
Net interest margin (2) 3.10 3.25 (4.6)
Efficiency ratio (2) 59.80 60.22 (0.7)
Tangible efficiency ratio (1) 58.47 58.56 (0.2)
Effective tax rate 31.03 31.71 (2.1)
Full-time equivalent employees 33,697 33,139 1.7
Number of ATMs 2,786 2,804 (0.6)
Full service banking offices 1,677 1,693 (0.9)
Traditional 1,332 1,346 (1.0)
In-store 345 347 (0.6)
Tier 1 capital ratio 7.10 %(3) 7.07 % 0.3 %
Total capital ratio 10.70 (3) 10.44 2.5
Tier 1 leverage ratio 6.70 (3) 6.61 1.4
Total average shareholders' equity to
total average assets 9.60 10.00 (4.0)
Tangible equity to tangible assets (1) 5.72 5.52 3.6
Book value per share 47.22 44.59 5.9
Market price:
High 76.75 74.18 3.5
Low 69.68 69.00 1.0
Close 72.76 72.07 1.0
Market capitalization 26,437 26,030 1.6
Average common shares outstanding
(000s)
Diluted 363,437 363,138 0.1
Basic 359,934 358,253 0.5
(1) See Appendix A for a reconcilement of non-GAAP performance measures.
"RCM" refers to Receivables Capital Management.
(2) Revenue, net interest margin, and efficiency ratios are presented on a
fully taxable-equivalent ("FTE") basis. The FTE basis adjusts for the
tax-favored status of income from certain loans and investments. The
Company believes this measure to be the preferred industry measurement
of net interest income and provides relevant comparison between
taxable and non-taxable amounts. Revenue - FTE equals net interest
income - FTE plus noninterest income.
(3) Current period tier 1 capital, total capital and tier 1 leverage
ratios are estimated as of the press release date.
SunTrust Banks, Inc. and Subsidiaries
FIVE QUARTER FINANCIAL HIGHLIGHTS
(Dollars in millions, except per share data) (Unaudited)
Three Months Ended
March 31 Dec. 31 Sept. 30 June 30 March 31
2006 2005 2005 2005 2005
EARNINGS & DIVIDENDS
Net income $531.5 $518.5 $510.8 $465.7 $492.3
Total revenue - FTE (2) 2,050.9 2,005.0 2,008.1 1,913.3 1,883.0
Total revenue - FTE
excluding securities
gains and losses and
net gain on sale of
RCM assets(1) 2,050.8 2,004.4 2,006.7 1,913.4 1,868.8
Net income per average
common share
Diluted 1.46 1.43 1.40 1.28 1.36
Basic 1.48 1.44 1.42 1.30 1.37
Dividends paid per average
common share 0.61 0.55 0.55 0.55 0.55
CONDENSED BALANCE SHEETS
Selected Average Balances
Total assets $177,618 $175,769 $169,934 $165,254 $161,218
Earning assets 156,714 154,380 149,282 145,058 140,853
Loans 116,263 113,828 110,818 106,967 103,216
Consumer and commercial
deposits 95,292 95,257 94,076 93,065 90,968
Brokered and foreign
deposits 24,652 21,010 17,969 15,709 13,424
Shareholders' equity 17,052 16,876 16,823 16,276 16,119
As of
Total assets 178,876 179,713 172,416 168,953 164,811
Earning assets 157,448 157,661 151,469 147,996 143,678
Loans 118,130 114,555 112,411 109,594 104,761
Allowance for loan and
lease losses 1,039 1,028 1,030 1,036 1,024
Consumer and commercial
deposits 97,940 97,572 94,465 93,814 93,035
Brokered and foreign
deposits 23,836 24,481 19,265 15,763 14,499
Shareholders' equity 17,157 16,887 16,718 16,646 16,104
FINANCIAL RATIOS & OTHER DATA
Return on average total
assets 1.21 % 1.17 % 1.19 % 1.13 % 1.24 %
Return on average assets
less net unrealized
securities gains(1) 1.19 1.15 1.18 1.11 1.23
Return on average total
equity 12.64 12.19 12.05 11.48 12.39
Return on average realized
shareholders' equity(1) 13.06 12.75 12.81 12.02 13.23
Net interest margin(2) 3.10 3.10 3.12 3.16 3.25
Efficiency ratio(2) 59.80 60.20 58.62 61.30 60.22
Tangible efficiency
ratio(1) 58.47 58.79 57.13 59.74 58.56
Effective tax rate 31.03 28.97 31.12 30.90 31.71
Full-time equivalent
employees 33,697 33,406 33,013 32,751 33,139
Number of ATMs 2,786 2,782 2,769 2,761 2,804
Full service banking
offices 1,677 1,657 1,647 1,642 1,693
Traditional 1,332 1,325 1,319 1,319 1,346
In-store 345 332 328 323 347
Tier 1 capital ratio 7.10%(3) 7.01 % 7.03 % 7.04 % 7.07 %
Total capital ratio 10.70 (3) 10.57 0.66 10.25 10.44
Tier 1 leverage ratio 6.70 (3) 6.65 6.64 6.65 6.61
Total average shareholders'
equity to total
average assets 9.60 9.60 9.90 9.85 10.00
Tangible equity to tangible
assets(1) 5.72 5.56 5.68 5.72 5.52
Book value per share 47.22 46.65 46.28 45.96 44.59
Market price:
High 76.75 75.46 75.77 75.00 74.18
Low 69.68 65.32 68.85 69.60 69.00
Close 72.76 72.76 69.45 72.24 72.07
Market capitalization 26,437 26,338 25,089 26,162 26,030
Average common shares
outstanding (000s)
Diluted 363,437 363,175 363,854 363,642 363,138
Basic 359,934 359,203 359,702 359,090 358,253
(1) See Appendix A for a reconcilement of non-GAAP performance measures.
"RCM" refers to Receivables Capital Management.
(2) Revenue, net interest margin, and efficiency ratios are presented on a
fully taxable-equivalent ("FTE") basis. The FTE basis adjusts for the
tax-favored status of income from certain loans and investments. The
Company believes this measure to be the preferred industry measurement
of net interest income and provides relevant comparison between
taxable and non-taxable amounts.
Revenue - FTE equals net interest income - FTE plus noninterest
income.
(3) Current period tier 1 capital, total capital and tier 1 leverage
ratios are estimated as of the press release date.
SunTrust Banks, Inc. and Subsidiaries
RECONCILEMENT OF NON-GAAP MEASURES
APPENDIX A TO THE PRESS RELEASE
(Dollars in thousands) (Unaudited)
Three Months Ended
March 31 December 31
2006 2005
NON-GAAP MEASURES PRESENTED IN THE PRESS RELEASE
Net income $531,527 $518,471
Securities (gains)/losses, net of tax (64) (372)
Net income excluding securities gains
and losses 531,463 518,099
The Coca-Cola Company dividend, net of tax (13,317) (12,027)
Net income excluding securities
(gains)/losses and The Coca-Cola
Company dividend $518,146 $506,072
Total average assets $177,618,283 $175,769,140
Average net unrealized securities gains (1,612,808) (1,871,230)
Average assets less net unrealized
securities gains $176,005,475 $173,897,910
Total average equity $17,051,805 $16,875,645
Average accumulated other
comprehensive income (963,683) (1,126,701)
Total average realized equity $16,088,122 $15,748,944
Return on average total assets 1.21% 1.17%
Impact of excluding net realized and
unrealized securities
gains/losses and The Coca-Cola
Company dividend (0.02) (0.02)
Return on average total assets less
net unrealized securities gains(1) 1.19% 1.15%
Return on average total shareholders' equity 12.64% 12.19%
Impact of excluding net realized and
unrealized securities gains/
losses and The Coca-Cola Company dividend 0.42 0.56
Return on average realized
shareholders' equity(2) 13.06% 12.75%
Efficiency ratio(3) 59.80% 60.20%
Impact of excluding amortization of
intangible assets (1.33) (1.41)
Tangible efficiency ratio(4) 58.47% 58.79%
Total shareholders' equity $17,157,448 $16,887,395
Goodwill (6,897,105) (6,835,168)
Other intangible assets including
mortgage servicing rights ("MSRs") (1,123,463) (1,122,967)
Mortgage servicing rights 680,837 657,604
Tangible equity $9,817,717 $9,586,864
Total assets $178,876,476 $179,712,841
Goodwill (6,897,105) (6,835,168)
Other intangible assets including MSRs (1,123,463) (1,122,967)
Mortgage servicing rights 680,837 657,604
Tangible assets $171,536,745 $172,412,310
Tangible equity to tangible assets(5) 5.72% 5.56%
Noninterest income $851,506 $797,923
Securities (gains)/losses (104) (600)
Gain on sale of RCM assets, net of related
expenses - -
Total noninterest income excluding
securities (gains)/losses and net
gain on sale of RCM assets(6) $851,402 $797,323
Net interest income $1,179,041 $1,187,036
Taxable-equivalent adjustment 20,338 20,025
Net interest income - FTE 1,199,379 1,207,061
Noninterest income 851,506 797,923
Total revenue - FTE 2,050,885 2,004,984
Securities (gains)/losses (104) (600)
Gain on sale of RCM assets, net of
related expenses - -
Total revenue - FTE excluding
securities (gains)/losses and net gain
on sale of RCM assets(6) $2,050,781 $2,004,384
Three Months Ended
September 30 June 30 March 31
2005 2005 2005
NON-GAAP MEASURES PRESENTED IN THE PRESS
RELEASE
Net income $510,774 $465,700 $492,294
Securities (gains)/losses,
net of tax 1,283 17 3,509
Net income excluding
securities gains and losses 512,057 465,717 495,803
The Coca-Cola Company
dividend, net of tax (12,028) (12,027) (12,028)
Net income excluding
securities (gains)/losses
and The Coca-Cola Company
dividend $500,029 $453,690 $483,775
Total average assets $169,933,960 $165,253,589 $161,218,222
Average net unrealized
securities gains (2,102,257) (1,791,566) (2,032,787)
Average assets less net
unrealized securities
gains $167,831,703 $163,462,023 $159,185,435
Total average equity $16,822,919 $16,275,567 $16,119,430
Average accumulated other
comprehensive income (1,331,103) (1,139,477) (1,285,278)
Total average realized
equity $15,491,816 $15,136,090 $14,834,152
Return on average total assets 1.19% 1.13% 1.24%
Impact of excluding net
realized and unrealized
securities gains/losses
and The Coca-Cola Company
dividend (0.01) (0.02) (0.01)
Return on average total
assets less net unrealized
securities gains(1) 1.18% 1.11% 1.23%
Return on average total
shareholders' equity 12.05% 11.48% 12.39%
Impact of excluding net
realized and unrealized
securities gains/
losses and The Coca-Cola
Company dividend 0.76 0.54 0.84
Return on average realized
shareholders' equity(2) 12.81% 12.02% 13.23%
Efficiency ratio(3) 58.62% 61.30% 60.22%
Impact of excluding
amortization of
intangible assets (1.49) (1.56) (1.66)
Tangible efficiency ratio(4) 57.13% 59.74% 58.56%
Total shareholders' equity $16,717,750 $16,646,196 $16,104,259
Goodwill (6,841,631) (6,873,111) (6,861,721)
Other intangible assets
including mortgage
servicing rights ("MSRs") (1,112,873) (1,094,803) (1,073,154)
Mortgage servicing rights 613,467 565,660 514,193
Tangible equity $9,376,713 $9,243,942 $8,683,577
Total assets $172,416,096 $168,952,575 $164,810,954
Goodwill (6,841,631) (6,873,111) (6,861,721)
Other intangible assets
including MSRs (1,112,873) (1,094,803) (1,073,154)
Mortgage servicing rights 613,467 565,660 514,193
Tangible assets $165,075,059 $161,550,321 $157,390,272
Tangible equity to
tangible assets(5) 5.68% 5.72% 5.52%
Noninterest income $832,398 $770,909 $753,814
Securities (gains)/losses 2,069 27 5,659
Gain on sale of RCM
assets, net of related
expenses (3,508) - (19,874)
Total noninterest income
excluding securities
(gains)/losses and net
gain on sale of
RCM assets (6) $830,959 $770,936 $739,599
Net interest income $1,156,661 $1,123,709 $1,111,560
Taxable-equivalent
adjustment 19,081 18,720 17,666
Net interest income - FTE 1,175,742 1,142,429 1,129,226
Noninterest income 832,398 770,909 753,814
Total revenue - FTE 2,008,140 1,913,338 1,883,040
Securities (gains)/losses 2,069 27 5,659
Gain on sale of RCM
assets, net of related
expenses (3,508) - (19,874)
Total revenue - FTE
excluding securities
(gains)/losses and
net gain on sale of
RCM assets (6) $2,006,701 $1,913,365 $1,868,825
Three Months Ended
March 31 December 31 % (7) March 31 March 31 %
2006 2005 Change 2006 2005 Change
AVERAGE LOW COST CONSUMER AND
COMMERCIAL DEPOSIT RECONCILEMENT
Noninterest
bearing
deposits $23,898,646 $24,693,026 (3.2) $23,898,646 $23,723,080 0.7
NOW accounts 16,999,971 17,011,346 (0.1) 16,999,971 17,479,848 (2.7)
Savings 5,291,229 5,472,928 (3.3) 5,291,229 7,506,923 (29.5)
Total average
low cost
consumer and
commercial
deposits $46,189,846 $47,177,300 (2.1) $46,189,846 $48,709,851 (5.2)
(1) SunTrust presents a return on average assets less net unrealized gains
on securities. The foregoing numbers reflect primarily adjustments to
remove the effects of the Company's securities portfolio which
includes the ownership by the Company of 48.3 million shares of The
Coca-Cola Company. The Company uses this information internally to
gauge its actual performance in the industry. The Company believes
that the return on average assets less the net unrealized securities
gains is more indicative of the Company's return on assets because it
more accurately reflects the return on the assets that are related to
the Company's core businesses which are primarily customer
relationship and customer transaction driven. The return on average
assets less net unrealized gains on securities is computed by dividing
annualized net income, excluding securities gains/losses and The Coca-
Cola Company dividend, by average assets less net unrealized
securities gains.
(2) The Company also believes that the return on average realized equity
is more indicative of the Company's return on equity because the
excluded equity relates primarily to a long term holding of a specific
security. The return on average realized shareholders' equity is
computed by dividing annualized net income, excluding securities
gains/losses and The Coca-Cola Company dividend, by average realized
shareholders' equity.
(3) Computed by dividing noninterest expense by total revenue - FTE. The
efficiency ratios are presented on an FTE basis. The FTE basis
adjusts for the tax-favored status of income from certain loans and
investments. The Company believes this measure to be the preferred
industry measurement of net interest income and provides relevant
comparison between taxable and non-taxable amounts.
(4) SunTrust presents a tangible efficiency ratio which excludes the cost
of intangible assets. The Company believes this measure is useful to
investors because, by removing the effect of intangible asset costs
(the level of which may vary from company to company) it allows
investors to more easily compare the Company's efficiency to other
companies in the industry. This measure is utilized by management to
assess the efficiency of the Company and its lines of business.
(5) SunTrust presents a tangible equity to tangible assets ratio that
excludes the impact of purchase accounting intangible assets. The
Company believes this measure is useful to investors because, by
removing the effect of intangible assets that result from merger and
acquisition activity (the level of which may vary from company to
company) it allows investors to more easily compare the Company's
capital adequacy to other companies in the industry. This measure is
used by management to analyze capital adequacy.
(6) SunTrust presents total noninterest income and total revenue excluding
realized securities gains/losses and the net gain on the sale of RCM
assets. The Company believes total noninterest income and total
revenue without securities gains/losses is more indicative of the
Company's performance because it isolates income that is primarily
customer relationship and customer transaction driven. SunTrust
further excludes the net gain on the sale of RCM assets because the
Company believes the exclusion of the net gain is more indicative of
normalized operations.
(7) Multiply by 4 to calculate sequential annualized growth or reductions
discussed in the earnings call.
SunTrust Banks, Inc. and Subsidiaries
RECONCILEMENT OF NON-GAAP MEASURES
APPENDIX A TO THE PRESS RELEASE, continued
(Dollars in thousands) (Unaudited)
Three Months Ended
March 31 December 31
2006 2005
SELECTED NON-GAAP MEASURES PRESENTED IN
THE PRESS RELEASE(1)
Net income $531,527 $518,471
Merger expense, net of tax - 4,053
Net income excluding merger expense 531,527 522,524
Net gain on sale of RCM assets, net
of tax - -
Net income excluding merger expense
and net gain on sale of RCM assets $531,527 $522,524
Diluted earnings per share $1.46 $1.43
Impact of excluding merger expense - 0.01
Diluted earnings per share
excluding merger expense 1.46 1.44
Impact of net gain on sale of RCM assets - -
Diluted earnings per share
excluding merger expense and net
gain on sale of RCM assets $1.46 $1.44
Total revenue - FTE $2,050,885 $2,004,984
Securities (gains)/losses (104) (600)
Net gain on sale of RCM assets - -
Total revenue excluding securities
(gains)/losses and net gain on
sale of RCM assets $2,050,781 $2,004,384
Noninterest income $851,506 $797,923
Net gain on sale of RCM assets - -
Noninterest income excluding net
gain on sale of RCM assets $851,506 $797,923
Noninterest expense $1,226,491 $1,206,927
Merger expense - (6,538)
Noninterest expense excluding
merger expense $1,226,491 $1,200,389
Noninterest expense $1,226,491 $1,206,927
Amortization of intangible assets (27,245) (28,192)
Noninterest expense excluding
amortization of intangible assets $1,199,246 $1,178,735
Return on average total assets 1.21% 1.17%
Impact of excluding merger expense - 0.01
Return on average total assets
excluding merger expense(2) 1.21% 1.18%
Return on average total
shareholders' equity 12.64% 12.19%
Impact of excluding merger expense - 0.09
Return on average total
shareholders' equity excluding
merger expense(3) 12.64% 12.28%
Efficiency ratio(4) 59.80% 60.20%
Impact of excluding merger expense - (0.33)
Efficiency ratio excluding merger expense 59.80 59.87
Impact of net gain on sale of RCM assets - -
Efficiency ratio excluding merger
expense and net gain on sale of RCM assets 59.80% 59.87%
Tangible efficiency ratio(5) 58.47% 58.79%
Impact of excluding merger expense - (0.33)
Tangible efficiency ratio
Source: prnewswire
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