ATLANTA, April 22, 2016 /PRNewswire/ -- SunTrust Banks, Inc. (NYSE: STI) reported net income available to common shareholders of $430 million, or $0.84 per average common diluted share.  This compares to $0.91 per share in the prior quarter, which was favorably impacted by discrete items totaling $0.03 per share, and $0.78 per share in the first quarter of 2015.  Earnings per share for the current quarter increased 8% compared to a year ago.

"We delivered solid revenue growth this quarter as we continued to meet more client needs across each of our businesses, benefiting from our diverse business model and consistent strategies," said William H. Rogers, Jr., chairman and CEO of SunTrust Banks, Inc. "This revenue performance, combined with continued expense discipline, resulted in a good start to the year with 8% earnings growth.  We remain highly focused on improving the financial well-being of our clients and communities and delivering increased value to our shareholders."

First Quarter 2016 Financial Highlights

Income Statement

• Net income available to common shareholders was $430 million, or $0.84 per average common diluted share, compared to $0.91 for the fourth quarter of 2015, which included $0.03 per share in discrete tax benefits.
  • Earnings per share for the current quarter increased 8% compared to the first quarter of 2015.
• Total revenue increased 3% compared to the prior quarter and 5% compared to the first quarter of 2015.
  • Sequential revenue growth was driven by a 3% increase in net interest income, as well as 2% growth in noninterest income.
  • Higher net interest income in the current quarter more than offset the 4% decline in noninterest income compared to the first quarter of 2015.
• Net interest margin was 3.04% in the current quarter, up 6 basis points and 21 basis points compared to the prior quarter and first quarter of 2015, respectively.
• Provision for credit losses increased, both sequentially and compared to the prior year, due to loan growth, higher energy-related reserves, and moderating asset quality improvements.
• Noninterest expense increased 2% sequentially, driven by seasonality in employee compensation and benefits costs. 
  • Noninterest expense increased 3% compared to the first quarter of 2015 largely due to higher marketing and outside processing costs associated with the expansion of our business.
• The efficiency and tangible efficiency ratios in the current quarter were 62.8% and 62.3%, respectively, which were generally stable compared to the prior quarter and much improved compared to the first quarter of 2015.

Balance Sheet

• Average loan balances increased 2% sequentially and 4% compared to the first quarter of 2015, with growth across most loan categories.
• Average consumer and commercial deposits increased 1% sequentially and 6% compared to the prior year.

Capital

• Estimated capital ratios continue to be well above regulatory requirements.  The Common Equity Tier 1 ratio was estimated to be 9.8% as of March 31, 2016, on a fully phased-in basis.
• During the quarter, the Company repurchased $175 million of common stock and common stock warrants in accordance with its 2015 capital plan.
• Book value per share was $44.97, and tangible book value per share was $32.90, up 3% and 5%, respectively, compared to December 31, 2015.

Asset Quality

• Nonperforming loans increased $303 million from the prior quarter and represented 0.70% of total loans at March 31, 2016.  The sequential increase was largely due to downgrades of certain energy-related loans.
• Net charge-offs for the current quarter were $85 million, or 0.25% of average loans on an annualized basis, relatively stable compared to the prior quarter and down $14 million compared to the first quarter of 2015.
• The provision for credit losses increased $50 million sequentially due loan growth, higher energy-related reserves, and moderating asset quality improvements.
• At March 31, 2016, the allowance for loan and lease losses (ALLL) to period-end loans ratio was 1.27%, 2 basis points lower than the prior quarter, as a higher ALLL for commercial loans was generally offset by a lower ALLL for residential loans.

Consolidated Financial Performance Details
(Presented on a fully taxable-equivalent basis unless otherwise noted)

Revenue

Total revenue was $2.1 billion for the current quarter, an increase of $53 million compared to the prior quarter.  The increase was primarily driven by higher net interest income as a result of loan growth and net interest margin expansion, as well as higher mortgage-related and capital markets revenue.  Compared to the first quarter of 2015, total revenue increased $107 million as higher net interest income was partially offset by lower noninterest income.

Net Interest Income
(Presented on a fully taxable-equivalent basis)

Net interest income was $1.3 billion for the current quarter, an increase of $37 million compared to the prior quarter.  The increase was primarily due to loan growth and higher loan yields due to the rise in short-term benchmark interest rates.  Compared to the first quarter of 2015, the $143 million increase in net interest income was driven by growth in average earning asset balances and yields, and a decline in interest-bearing liability rates.

Net interest margin for the current quarter was 3.04%, compared to 2.98% in the prior quarter and 2.83% in the first quarter of 2015.  When compared to the prior quarter, the 6 basis point increase was driven largely by higher loan yields, partially offset by slightly higher funding costs.  The 21 basis point increase compared to the first quarter of 2015 was due primarily to higher benchmark interest rates, improved loan mix, lower securities premium amortization, and an increase in commercial loan-related swap income, all of which contributed to a 19 basis point increase in earning asset yields.  Strong deposit growth enabled a 34% reduction in long-term debt, resulting in an improved funding mix and a 2 basis point decline in interest-bearing liability rates.

Noninterest Income

Noninterest income was $781 million for the current quarter, compared to $765 million for the prior quarter and $817 million for the first quarter of 2015.  The $16 million increase from the prior quarter was related primarily to higher mortgage-related and capital markets revenue, partially offset by declines in other noninterest income categories.  Compared to the first quarter of 2015, noninterest income decreased $36 million, driven by lower wealth management-related income in the current quarter and asset disposition gains in the prior year.

Investment banking income was $98 million for the current quarter, compared to $104 million in the prior quarter and $97 million in the first quarter of 2015.  The $6 million decrease from the prior quarter was largely driven by a decline in equity originations and M&A activity given market conditions in the first quarter of 2016.

Trading income was $55 million for the current quarter, compared to $42 million in the prior quarter and $55 million in the first quarter of 2015.  The $13 million sequential increase was driven primarily by mark-to-market valuation losses recognized in the fourth quarter of 2015 related to securities that were ultimately sold in the first quarter.

Mortgage production income for the current quarter was $60 million, compared to $53 million for the prior quarter and $83 million for the first quarter of 2015.  The $7 million increase from the prior quarter was primarily due to higher refinance activity and slightly higher gain-on-sale margins.  Mortgage application volume increased 37% compared to the fourth quarter of 2015.  The $23 million decrease compared to the first quarter of 2015 was driven primarily by a decline in gain-on-sale margins and reduced refinance activity.

Mortgage servicing income was $62 million for the current quarter, compared to $56 million in the prior quarter and $43 million in the first quarter of 2015.  The $6 million increase from the prior quarter was driven by improved net hedge performance combined with a decline in the servicing asset decay, partially offset by a seasonal reduction in servicing fees.  The $19 million increase compared to the first quarter of 2015 was also due to improved net hedge performance and a decline in the servicing asset decay, accompanied by higher servicing fees as a result of a larger portfolio.  The servicing portfolio was $149 billion at March 31, 2016, compared to $142 billion at March 31, 2015. The Company purchased MSRs on residential loans with a UPB of $8.1 billion during the three months ended March 31, 2016; however, only $1.8 billion of these loans are reflected in the aforementioned UPB amount as the transfer of servicing for the remainder is scheduled for the second quarter of 2016.

Trust and investment management income was $75 million for the current quarter, compared to $79 million in the prior quarter and $84 million in the first quarter of 2015.  The $9 million decrease compared to the prior year was due to a decline in assets under management.

Other noninterest income was $38 million for the current quarter, compared to $30 million in the prior quarter and $63 million in the first quarter of 2015.  The $8 million increase compared to the prior quarter was due to higher leasing-related income.  The $25 million decrease compared to the first quarter of 2015 was largely due to an $18 million gain on the sale of affordable housing investments and higher gains on the sale of loans during the first quarter of 2015.

Noninterest Expense

Noninterest expense was $1.3 billion in the current quarter, an increase of $30 million and $38 million compared to the prior quarter and the first quarter of 2015, respectively.  The sequential increase was primarily due to the seasonal increase in employee benefit costs while other expenses remained well controlled as a result of our ongoing expense discipline.  The increase compared to the first quarter of 2015 was largely due to higher outside processing costs and the increase in marketing and customer development expenses associated with our campaign to further advance the Company's purpose.

Employee compensation and benefits expense was $774 million in the current quarter, compared to $690 million in the prior quarter and $771 million in the first quarter of 2015.  The sequential increase of $84 million was due to the seasonal increase in employee benefits costs.

Operating losses were $24 million in the current quarter, compared to $22 million in the prior quarter and $14 million in the first quarter of 2015.  The $10 million increase compared to the prior year was primarily due to the recovery of previously recorded mortgage-related losses during the first quarter of 2015.

Outside processing and software expense was $198 million in the current quarter, compared to $222 million in the prior quarter and $189 million in the first quarter of 2015.  The sequential decrease of $24 million was due to the recognition of discrete costs in prior quarter and normal quarterly variability.  The increase from the first quarter of 2015 was driven by higher utilization of third-party services as a result of continued expansion of our businesses, in addition to higher compliance costs.

Marketing and customer development expense was $44 million in the current quarter, compared to $48 million in the prior quarter and $27 million in the first quarter of 2015.  The increase over the first quarter of 2015 was due largely to the aforementioned marketing campaign.

Other noninterest expense was $107 million in the current quarter, compared to $127 million in the prior quarter, and $111 million in the first quarter of 2015.  The $20 million decline compared to the prior quarter was driven by lower consulting and credit-related expenses.  Amortization expense decreased $7 million sequentially due to increased investments in low-income community development projects in the fourth quarter.

Income Taxes

For the current quarter, the Company recorded an income tax provision of $195 million, compared to $185 million for the prior quarter and $191 million for the first quarter of 2015.  The effective tax rate for the current quarter was 30%, compared to 28% in the prior quarter and 31% in the first quarter of 2015.  The effective tax rate in the prior quarter was favorably impacted by $17 million in discrete income tax items.

Balance Sheet

At March 31, 2016, the Company had total assets of $194.2 billion and total shareholders' equity of $24.1 billion, representing 12% of total assets.  Book value per share was $44.97 and tangible book value per share was $32.90, up 3% and 5%, respectively, compared to December 31, 2015, driven by growth in retained earnings and an increase in accumulated other comprehensive income driven by the decline in long-term interest rates.

Loans

Average performing loans were $137.6 billion for the current quarter, a 2% increase over the prior quarter and a 4% increase over the first quarter of 2015.  Sequentially, growth in average C&I loans, consumer loans, nonguaranteed residential mortgages, and commercial construction loans of $1.7 billion, $896 million, $387 million, and $296 million, respectively, was partially offset by a $312 million decline in home equity products.

Compared to the first quarter of 2015, growth was concentrated in C&I loans, nonguaranteed residential mortgages, consumer direct loans, and commercial construction loans.  This growth was partially offset by declines in home equity products and commercial real estate loans, as well as consumer indirect loans due to the $1 billion indirect auto loan securitization in the second quarter of 2015.

Deposits

Average consumer and commercial deposits for the current quarter were $149.2 billion, a 1% increase over the prior quarter and a 6% increase compared to the first quarter of 2015.  The sequential increase was driven by a 2% increase in both NOW and money market account balances, partially offset by a 1% decline in noninterest-bearing deposits.  Compared to the first quarter of 2015, the increase was driven by growth in lower-cost deposits, primarily NOW and money market account balances, partially offset by an 8% decline in time deposits.

Capital and Liquidity

The Company's estimated capital ratios were well above current regulatory requirements with the Common Equity Tier 1 ratio estimated to be 9.8% at March 31, 2016, on a fully phased-in basis.  The ratios of average total equity to average total assets and tangible equity to tangible assets were 12.33% and 9.56%, respectively, at March 31, 2016.  The Company continues to have substantial available liquidity in the form of cash, high-quality government-backed or government-sponsored securities, and other available contingency funding sources.

Per its 2015 capital plan, the Company declared a common stock dividend of $0.24 per common share and repurchased $151 million of its outstanding common stock and $24 million of its common stock warrants in the first quarter of 2016.  The Company will repurchase $175 million of common stock in the second quarter of 2016 to complete its 2015 capital plan.

Asset Quality

Total nonperforming assets were $1.0 billion at March 31, 2016, up $300 million and $339 million compared to the prior quarter and the first quarter of 2015, respectively.  These increases were primarily due to downgrades of certain energy-related loans. At March 31, 2016, the percentage of nonperforming loans to total loans was 0.70%, compared to 0.49% at December 31, 2015, and 0.46% at March 31, 2015.  Other real estate owned totaled $52 million, a 7% decrease from the prior quarter and a 34% decrease from the first quarter of 2015.

Net charge-offs were $85 million during the current quarter, relatively stable compared to the prior quarter and a decrease of $14 million compared to the first quarter of 2015.  The ratio of annualized net charge-offs to total average loans was 0.25% during the current quarter, compared to 0.24% during the prior quarter and 0.30% during the first quarter of 2015.  The provision for credit losses was $101 million in the current quarter, an increase of $50 million and $46 million compared to the prior quarter and the first quarter of 2015, respectively.  The increase in the provision for credit losses was due loan growth, higher energy-related reserves, and moderating asset quality improvements.

At March 31, 2016, the allowance for loan and lease losses was $1.8 billion, which represented 1.27% of total loans, an increase of $18 million from December 31, 2015.  Excluding government-guaranteed and fair value loans, the allowance for loan and lease losses to period-end loans ratio was 1.32% as of March 31, 2016.

Early stage delinquencies declined 3 basis points from the prior quarter to 0.67% at March 31, 2016.  Excluding government-guaranteed loans, early stage delinquencies were 0.29%, down 1 basis point from the prior quarter.

Accruing restructured loans totaled $2.6 billion and nonaccruing restructured loans totaled $233 million at March 31, 2016, of which $2.6 billion were residential loans, $131 million were consumer loans, and $69 million were commercial loans.

OTHER INFORMATION

About SunTrust Banks, Inc.

SunTrust Banks, Inc. is a purpose-driven company dedicated to Lighting the Way to Financial Well-Being for the people, businesses, and communities it serves. Headquartered in Atlanta, the Company has three business segments: Consumer Banking and Private Wealth Management, Wholesale Banking, and Mortgage Banking. Its flagship subsidiary, SunTrust Bank, operates an extensive branch and ATM network throughout the high-growth Southeast and Mid-Atlantic states, along with 24-hour digital access. Certain business lines serve consumer, commercial, corporate, and institutional clients nationally. As of March 31, 2016, SunTrust had total assets of $194 billion and total deposits of $152 billion. The Company provides deposit, credit, trust, investment, mortgage, asset management, securities brokerage, and capital market services. SunTrust leads onUp, a national movement inspiring Americans to build financial confidence. Join the movement at onUp.com.

Business Segment Results

The Company has included its business segment financial tables as part of this release. All revenue in the business segment tables is reported on a fully taxable-equivalent basis. For the business segments, results include net interest income, which is computed using matched-maturity funds transfer pricing. Further, provision for credit losses represents net charge-offs by segment combined with an allocation to the segments of the provision attributable to quarterly changes in the allowance for loan and lease losses and unfunded commitment reserve balances. SunTrust also reports results for Corporate Other, which includes the Treasury department as well as the residual expense associated with operational and support expense allocations. The Corporate Other segment also includes differences created between internal management accounting practices and U.S. Generally Accepted Accounting Principles ("U.S. GAAP") and certain matched-maturity funds transfer pricing credits and charges. A detailed discussion of the business segment results will be included in the Company's forthcoming Form 10-Q.

Corresponding Financial Tables and Information

Investors are encouraged to review the foregoing summary and discussion of SunTrust's earnings and financial condition in conjunction with the detailed financial tables and information which SunTrust has also published today and SunTrust's forthcoming Form 10-Q. Detailed financial tables and other information are also available at investors.suntrust.com.  This information is also included in a current report on Form 8-K furnished with the SEC today.

Conference Call

SunTrust management will host a conference call on April 22, 2016, at 8:00 a.m. (Eastern Time) to discuss the earnings results and business trends. Individuals may call in beginning at 7:45 a.m. (Eastern Time) by dialing 1-888-972-7805 (Passcode: 1Q16). Individuals calling from outside the United States should dial 1-517-308-9091 (Passcode: 1Q16).  A replay of the call will be available approximately one hour after the call ends on April 22, 2016, and will remain available until May 22, 2016, by dialing 1-866-402-3772 (domestic) or 1-203-369-0559 (international).  Alternatively, individuals may listen to the live webcast of the presentation by visiting the SunTrust investor relations website at investors.suntrust.com.  Beginning the afternoon of April 22, 2016, listeners may access an archived version of the webcast in the "Events & Presentations" section of the investor relations website. This webcast will be archived and available for one year.

Important Cautionary Statement About Forward-Looking Statements

This news release includes non-GAAP financial measures to describe SunTrust's performance. The reconciliations of those measures to GAAP measures are provided within or in the appendix to this news release. In this news release, the Company presents net interest income and net interest margin on a fully taxable-equivalent ("FTE") basis, and ratios on an annualized 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.

This news release contains forward-looking statements. Statements regarding potential future share repurchases and future expected dividends are forward-looking statements. Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words "believes," "expects," "anticipates," "estimates," "intends," "plans," "forecast," "goals," "targets," "initiatives," "focus," "potentially," "probably," "projects," "outlook" or similar expressions or future conditional verbs such as "may," "will," "should," "would," and "could." Forward-looking statements are based upon the current beliefs and expectations of management and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events.

Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward looking statements. Future dividends, and the amount of any such dividend, must be declared by our board of directors in the future in their discretion. Also, future share repurchases and the timing of any such repurchase are subject to market conditions and management's discretion. Additional factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015 and in other periodic reports that we file with the SEC.

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SOURCE SunTrust Banks, Inc.