SunTrust Banks, Inc. today reported net income available to common shareholders of $563 million, or $1.06 per average common diluted share.  During the current quarter the Company recognized a $130 million tax benefit, or $0.25 per share, as a result of the completion of a tax authority examination.  Excluding the tax benefit and prior period 8-K items, adjusted earnings per share were $0.81 compared to $0.81 in the prior quarter and $0.66 in the third quarter of 2013.  For the first nine months of 2014, earnings per share were $2.51, and adjusted earnings per share were $2.35, 19% higher than the same period of 2013.  

The following table summarizes reported results and notable items impacting earnings per share during the periods discussed above (in addition, see Appendix A for reconcilement of non-GAAP measures):

"We delivered solid performance this quarter driven by increased client loan and deposit business, further efficiency improvements, and continued strong asset quality performance, which helped mitigate the impact of the continued challenging low rate environment," said William H. Rogers, Jr., chairman and chief executive officer of SunTrust Banks, Inc.  "We are creating positive momentum and are intensely focused on executing our core strategies, fulfilling more of our clients' needs, and delivering a more profitable and valuable company for all of our stakeholders."

Third Quarter 2014 Financial Highlights

Income Statement

• Net income available to common shareholders was $563 million, or $1.06 per average common diluted share; excluding the $130 million tax benefit in the current quarter, net income available to common shareholders was $433 million, or $0.81 per share.
  • On an adjusted basis, earnings per share were flat compared to the prior quarter and increased $0.15, or 23%, compared to the third quarter of 2013.
• Total revenue declined $170 million, compared to the prior quarter primarily driven by the $105 million gain on sale of RidgeWorth in the prior quarter and foregone RidgeWorth-related revenue, as well as a decline in investment banking income. 
• Compared to the third quarter of 2013, total revenue increased 6%. Excluding the $63 million incremental mortgage repurchase provision incurred in the third quarter of 2013, total revenue increased 2% driven primarily by higher mortgage servicing income. 
• Reported noninterest expense decreased $258 million compared to the prior quarter. Excluding the $179 million in specific legacy mortgage-related losses incurred in the prior quarter, noninterest expense declined $79 million, or 6%. 
• The efficiency and tangible efficiency ratios in the quarter were 62.0% and 61.7%, respectively.

Balance Sheet

• For the third quarter, total loans (on a period-end basis) increased 2% and 6% compared to June 30, 2014 and September 30, 2013, respectively, with the growth occurring in C&I, commercial real estate, and consumer loans, while residential mortgage loans continued to trend down.
  • Average performing loans were unchanged as growth in the commercial and consumer portfolios was offset by the $2 billion transfer of guaranteed residential mortgage loans to loans held for sale in the second quarter. The ultimate sale was subsequently completed in the third quarter.
• Average investment securities increased 6% sequentially and 7% compared to the third quarter of 2013 in anticipation of forthcoming liquidity-related regulatory requirements. 
• Average client deposits increased 1% sequentially and 4% compared to the third quarter of 2013, with the favorable mix shift toward lower-cost deposits continuing.

Capital

• Estimated capital ratios continued to be well above regulatory requirements. The Basel I Tier 1 common and Basel III common equity Tier 1 ratios were estimated to be 9.6% and 9.7%, respectively. 
• During the quarter, the Company repurchased $215 million of common shares. 
• Book value per share was $40.85 and tangible book value per common share was $29.21, both up 2% compared to June 30, 2014. The increase was primarily due to growth in retained earnings.

Asset Quality

• Asset quality continued to improve as nonperforming loans decreased 15% from the prior quarter and totaled 0.58% of total loans at September 30, 2014. 
• Annualized net charge-offs increased 4 basis points sequentially, representing 0.39% of average loans. 
• The provision for credit losses increased $20 million compared to the prior quarter primarily due to a modest increase in net charge-offs.

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

Revenue

Total revenue was $2.0 billion for the current quarter, a decline of $170 million, compared to the prior quarter.  Excluding the $105 million gain on sale of RidgeWorth in the prior quarter, total revenue declined $65 million, or 3%.  The decrease was primarily driven by a decline in investment banking income and foregone RidgeWorth-related revenue.  Compared to the third quarter of 2013, total revenue increased $111 million; however, the third quarter of 2013 included a $63 million incremental mortgage repurchase provision expense in conjunction with the settlement of Government Sponsored Entities ("GSE") repurchase claims.  The remaining increase was primarily driven by higher mortgage servicing income, gains on the sale of mortgage loans held for sale in the current quarter, higher retail investment services income and a slight increase in net interest income, partially offset by the foregone RidgeWorth revenue.  

For the nine months ended September 30, 2014, total revenue was $6.3 billion, an increase of $128 million compared to the first nine months of 2013.  The increase was primarily driven by the gain on the sale of RidgeWorth (partially offset by the foregone associated wealth management revenue), gains on the sale of mortgage loans in 2014, and higher mortgage servicing, investment banking, and retail investment income.  These revenue increases were partially offset by significantly lower mortgage production income driven by a decline in loan production volume.

Net Interest Income

Net interest income was $1.3 billion for the current quarter, an increase of $7 million compared to the prior quarter.  The increase was primarily due to one additional day in the current quarter and higher average earning assets, partially offset by an 8 basis point decline in net interest margin.  Compared to the third quarter of 2013, net interest income increased $11 million primarily due to higher average loan balances, partially offset by a 16 basis point decline in net interest margin.

Net interest margin for the current quarter was 3.03%, a decline of 8 basis points from the prior quarter, primarily driven by a 7 basis point decline in loan yields and a 9 basis point decline in investment securities yields.  Compared to the third quarter of 2013, net interest margin declined 16 basis points due to a 21 basis point reduction in loan yields.

For the nine months ended September 30, 2014 and 2013, net interest income was virtually unchanged at $3.7 billion. The net interest margin was 3.11% for the first nine months of 2014, a 14 basis point decline compared to the same period in 2013.  The decline in net interest margin was primarily driven by lower loan yields.   

Noninterest Income

Noninterest income was $780 million for the current quarter, compared to $957 million for the prior quarter and $680 million for the third quarter of 2013.  Excluding the $105 milliongain on sale of RidgeWorth from the prior quarter, noninterest income declined $72 million sequentially.  The sequential quarter decrease was due to a $31 million decline in investment banking income, a $23 million decline in trust and investment management revenue as a result of the sale of RidgeWorth, the recognition of a $49 million impairment of lease financing assets, and a $9 million loss on the sale of investment securities.  These declines were partially offset by a $41 million gain related to the $2 billion guaranteed residential mortgage loan sale in the current quarter.  Compared to the third quarter of 2013, noninterest income increased $100 million of which $63 million related to aforementioned mortgage repurchase provision.  The remaining increase was primarily due to the aforementioned $41 million gain, higher mortgage servicing income, partially offset by the foregone RidgeWorth wealth management revenue.  Additionally, retail investment income, service charges on deposit accounts and other fee-based income increased modestly over the same period last year.

Mortgage production income for the current quarter was $45 million compared to $52 million for the prior quarter and a $10 million loss for the third quarter of 2013.  The $7 milliondecrease compared to the prior quarter was primarily driven by a decline in gain on sale margins.  Compared to the third quarter of 2013, mortgage production income increased $55 million.  This was primarily due to the aforementioned $63 million mortgage repurchase provision incurred last year.  Mortgage production volume declined 43% during the current quarter compared to the third quarter of 2013 largely attributable to the decline in refinance activity, while gain on sale margins improved compared to the same period last year. 

Mortgage servicing income was $44 million in the current quarter compared to $45 million in the prior quarter and $11 million the third quarter of 2013.  Compared to the third quarter of 2013, the $33 million increase was primarily due to a decline in loan prepayments, resulting in lower decay and improved net MSR hedge performance.  The servicing portfolio was $136 billion at September 30, 2014 compared to $140 billion at September 30, 2013.

Investment banking income was $88 million for the current quarter compared to $119 million in the prior quarter and $99 million in the third quarter of 2013.  The sequential quarter decrease was driven by the strong performance in the second quarter in addition to seasonally lower client activity levels.  Compared to the third quarter of 2013, the decline was largely attributable to lower M&A advisory revenues.  Trading income was $46 million for the current quarter compared to $47 million for the prior quarter and $33 million for the third quarter of 2013.  The $13 million increase compared to the third quarter of 2013 was partially driven by a $7 million improvement in mark-to-market valuations on the Company's debt carried at fair value and slightly higher core trading revenue.

Trust and investment management income was $93 million for the current quarter compared to $116 million in the prior quarter and $133 million in the third quarter of 2013.  The declines compared to both periods were due to the foregone revenue as a result of the sale of RidgeWorth.

Other noninterest income was $52 million for the current quarter compared to $170 million for the prior quarter and $10 million for the third quarter of 2013.  The $118 million decrease compared to the prior quarter was driven by the $105 million gain on sale of RidgeWorth in the prior quarter and a $49 million impairment of lease financing assets in the current quarter, partially offset by a $22 million increase in gains on the sale of government guaranteed residential mortgage loans over the prior quarter and higher leasing-related income.  The $42 million increase compared to the third quarter of 2013 was primarily driven by the previously discussed $41 million loan sale gain.

For the nine months ended September 30, 2014, noninterest income was $2.5 billion, an increase of $127 million over the same period in 2013.  Excluding the $105 million gain on sale of RidgeWorth, noninterest income increased $22 million, largely driven by higher mortgage servicing, investment banking, retail investment income, and gains related to the sale of mortgage loans.  These increases were partially offset by declines in mortgage production income and foregone wealth management revenue related to the sale of RidgeWorth.

Noninterest Expense

Noninterest expense for the current quarter was $1.3 billion compared to $1.5 billion in the prior quarter and $1.7 billion in the third quarter of 2013.  Both the prior quarter and third quarter of 2013 included charges of $179 million and $419 million, respectively, related to the resolution of certain legacy mortgage-related matters.  Excluding these items from the prior quarters, noninterest expense declined $79 million on a sequential quarter basis and $52 million compared to the third quarter of 2013.  The decline compared to both prior quarters was the result of our overall efficiency and expense management focus, the sale of RidgeWorth, and a decline in cyclical costs. 

Employee compensation and benefits expense was $730 million in the current quarter compared to $763 million in the prior quarter and $682 million in the third quarter of 2013.  The sequential quarter decrease of $33 million was primarily the result of the sale of RidgeWorth, a reduction in the number of full time-equivalent employees, and declines in payroll taxes and 401(k) and medical costs.  The $48 million increase from the third quarter of 2013 was primarily due to a $37 million incentive accrual reduction recognized in the third quarter of 2013.

Operating losses were $29 million in the current quarter compared to $218 million in the prior quarter, which included $179 million of legacy mortgage-related expenses, and $350 million in the third quarter of 2013, which included $323 million of legacy mortgage-related expenses.

Outside processing and software expense was $184 million in the current quarter compared to $181 million in the prior quarter and $190 million in the third quarter of 2013.  The $6 million decrease compared to the third quarter of 2013 was primarily due to lower mortgage production volume.

Marketing and customer development expense was $35 million in the current quarter compared to $30 million in the prior quarter and $34 million in the third quarter of 2013.  The $5 million sequential quarter increase was due to a seasonal increase in advertising expenses.

FDIC premium and regulatory costs were $29 million in the current quarter and reflected an $8 million refund  received from the FDIC.  FDIC premium and regulatory costs were $40 million in the prior quarter and $45 million in the third quarter of 2013.  The decline related to both periods was due to a reduction in the FDIC insurance premium related to improvements in the Company's risk profile.

Other noninterest expense was $120 million in the current quarter compared to $156 million in the prior quarter and $292 million in the third quarter of 2013.  The $36 millionsequential quarter decrease was driven by certain discrete charges incurred in the prior quarter, an $8 million recovery during the third quarter of the market value of legacy affordable housing investments that were impaired in the first quarter of 2014, and a reduction in severance costs. The $172 million decrease from the prior year was driven by a $96 millionincrease in the mortgage servicing advance allowance in the third quarter of 2013 and lower credit and collections services expenses, severance costs, and real estate-related charges compared to 2013.

For the nine months ended September 30, 2014, noninterest expense was $4.1 billion compared to $4.5 billion in 2013.  The $336 million decrease was due to lower legacy mortgage-related charges as described previously and broad-based declines in other operating expenses driven by the continued focus on expense management, which were partially offset by higher employee compensation costs.

Income Taxes

For the current quarter, the Company recorded an income tax provision of $67 million compared to $173 million for the prior quarter and a $133 million tax benefit for the third quarter of 2013.  The current quarter tax provision included a $130 million tax benefit as a result of the completion of a tax authority examination.  Excluding this benefit, the effective tax rate in the current quarter was 30.6%.

Balance Sheet

At September 30, 2014, the Company had total assets of $186.8 billion and shareholders' equity of $22.3 billion, representing 12% of total assets.  Book value per share was $40.85 and tangible book value per common share was $29.21, both up 2% compared to June 30, 2014, driven by growth in retained earnings.

Loans

Average performing loans were $129.9 billion for the current quarter, relatively stable compared to the prior quarter; however, the current quarter was impacted by the transfer and subsequent sale of $2 billion of government guaranteed mortgage loans.  The Company invested the proceeds of this sale into high-quality liquid securities in anticipation of forthcoming liquidity-related regulatory requirements.  The decline in mortgage loans was offset by a $1.6 billion, or 3%, increase in C&I loans, a $334 million, or 6%, increase in commercial real estate loans, and a $534 million, or 16%, increase in consumer direct loans as targeted loan growth continued during the quarter.  Compared to the third quarter of 2013, average performing loans increased $8.3 billion, or 7%, as growth occurred in most portfolios with the exception of residential-related loans.  

Deposits

Average client deposits for the current quarter were $132.2 billion compared to $130.5 billion in the prior quarter and $126.6 billion in the third quarter of 2013.  Average client deposits increased $1.7 billion, or 1%, during the current quarter due to a $0.9 billion, or 2%, increase in average demand deposits, along with a $2.6 billion, or 6%, increase in money market account balances.  The growth in these deposit balances was partially offset by a $1.0 billion, or 3%, decline in NOW account balances and a $0.7 billion, or 6%, decline in time deposit balances.  Compared to the third quarter of 2013, average client deposits increased $5.6 billion, or 4%.  The growth was driven by increases in lower-cost deposits and was partially offset by a $2.4 billion, or 17%, decrease in time deposits.           

Capital and Liquidity

The Company's estimated capital ratios are well above current regulatory requirements with Basel I Tier 1 capital, Basel I Tier 1 common, and Basel III common equity Tier 1 ratios at an estimated 10.50%, 9.60%, and 9.70%, respectively, at September 30, 2014.  The ratios of total average equity to total average assets and tangible equity to tangible assets were 12.10% and 8.94%, respectively, at September 30, 2014, and declined slightly compared to June 30, 2014 due to balance sheet growth.  The Company continues to have substantial available liquidity in the form of its client deposit base, cash, high-quality government-backed securities, and other available funding sources.  

During the third quarter, the Company declared a common stock dividend of $0.20 per common share.  Additionally, during the current quarter, the Company repurchased $215 million of its common stock.  The Company currently expects to repurchase approximately $230 million of additional common stock over the next two quarters.

Asset Quality

Total nonperforming assets were $934 million at September 30, 2014, down 10% compared to the prior quarter and 28% compared to third quarter of 2013.  During the current quarter the Company transferred $53 million of nonperforming mortgage loans to held for sale and recognized a $9 million charge-off upon transfer.  At September 30, 2014, the percentage of nonperforming loans to total loans was 0.58% compared to 0.69% at June 30, 2014.  Other real estate owned totaled $112 million, an 18% decrease from the prior quarter.

The provision for credit losses was $93 million, compared to $73 million for the prior quarter, as net charge-offs increased modestly, while positive loan growth was offset by improvements in asset quality.  The provision for credit losses was essentially stable compared to the third quarter of 2013.  Net charge-offs were $128 million during the current quarter, a $15 million increase that was partially driven by the aforementioned charge-off related to the transfer of nonperforming mortgage loans to held for sale.  Compared to the third quarter 2013, net charge-offs declined $18 million mostly attributable to C&I loans and the home equity portfolio.  The ratio of annualized net charge-offs to total average loans was 0.39% during the current quarter compared to 0.35% during the prior quarter and 0.47% during the third quarter of 2013.  

At September 30, 2014, the allowance for loan and lease losses was $2.0 billion and represented 1.49% of total loans, a $35 million and six basis point decrease from June 30, 2014.  The decline in the allowance for loan and lease losses and the allowance to total loans ratio was due to asset quality improvements during the quarter.

Early stage delinquencies declined 4 basis points from the prior quarter to 0.59% at September 30, 2014.  Excluding government-guaranteed loans, early stage delinquencies were 0.30%, generally stable to the prior quarter.

Accruing restructured loans totaled $2.6 billion, and nonaccruing restructured loans totaled $0.3 billion at September 30, 2014, of which $2.7 billion of restructured loans related to residential loans, $0.1 billion were commercial loans, and $0.1 billion related to consumer loans. 

BUSINESS SEGMENT FINANCIAL PERFORMANCE

Business Segment Results

The Company has included business segment financial tables as part of this release. The Company's business segments include: Consumer Banking and Private Wealth Management, Wholesale Banking, and Mortgage Banking. 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 generally accepted accounting principles ("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.