For the fourth quarter of 2017, SunTrust Banks, Inc. reported net income available to common shareholders of $710 million, or $1.48 per average common diluted share, which includes $0.39 per share of net discrete benefits from Form 8-K items announced on December 4, 2017 and the impacts of tax reform-related items summarized below.

For the full year, diluted earnings per share was $4.47, up 24% relative to 2016.  When excluding the impact of the aforementioned net discrete benefits, earnings per share was up 14% relative to 2016 as a result of strong revenue growth, improved profitability, and reduced shares outstanding.

"Our performance this quarter rounded out a very strong year for SunTrust where we continued to deliver on the commitments we have made to our owners," said William H. Rogers, Jr., chairman and CEO of SunTrust Banks, Inc. "Specifically, 2017 marked the sixth consecutive year in which we grew earnings per share, improved efficiency, and increased capital return.  We also took significant actions this quarter which better position the company for success and give me increased confidence that 2018 will be another great year for SunTrust."

Fourth Quarter 2017 Financial Highlights
(Commentary is on a fully taxable-equivalent basis unless otherwise noted. Consistent with SEC guidance in Industry Guide 3 that contemplates the calculation of tax-exempt income on a tax equivalent basis, net interest income, net interest margin, total revenue, and efficiency ratios are provided on a fully taxable-equivalent basis, which generally assumes a 35% marginal federal tax rate and state income taxes, where applicable.  We provide unadjusted amounts in the table on page 3 of this news release and detailed reconciliations and additional information in Appendix A on pages 12 through 13.)

Income Statement

• Net income available to common shareholders was $710 million, or $1.48 per average common diluted share, compared to $1.06 for the prior quarter and $0.90 for the fourth quarter of 2016.

• This quarter was favorably impacted by $0.39 per share of net discrete benefits in connection with the items announced in the December 4, 2017 Form 8-K and tax reform-related items.

• Total revenue was stable compared to the prior quarter and increased 5% compared to the fourth quarter of 2016.

• The year-over-year increase was driven primarily by higher net interest income and slightly higher noninterest income.

• Net interest margin was 3.17% in the current quarter, up 2 basis points sequentially and up 17 basis points compared to the prior year. The year-over-year increase was driven by higher earning asset yields arising from higher benchmark interest rates, positive mix shift in the loans held for investment ("LHFI") portfolio, and higher securities AFS yields given lower premium amortization expense. 

• Provision for credit losses decreased $41 million sequentially due to the prior quarter reserve build related to hurricanes, and decreased $22 million year-over-year due to lower net charge-offs.

• Noninterest expense increased 9% sequentially and year-over-year.

• The December 4, 2017 Form 8-K and tax reform-related items impacted noninterest expense by a net $111 million ($50 million charitable contribution to the SunTrust Foundation, $36 million net charges related to efficiency initiatives, and $25 million discretionary 401(k) contribution and other employee benefits). Excluding these discrete items, noninterest expense was relatively stable compared to the prior quarter and prior year. 

• The efficiency and tangible efficiency ratios for the current quarter were 65.9% and 64.8%, respectively, which were unfavorably impacted by the effect of Form 8-K and tax reform-related items presented in the table on page 1.  Excluding these items, the adjusted tangible efficiency ratio was 59.9% for the current quarter, compared to 59.2% for the prior quarter and 63.1% for the fourth quarter of 2016.

• For the full year, the efficiency and tangible efficiency ratios were 63.1% and 62.3%, respectively. The adjusted tangible efficiency ratio was 61.0%, down approximately 100 bps from 2016 as a result of positive operating leverage. 

Balance Sheet

• Average performing LHFI were stable sequentially and grew 1% year-over-year, driven primarily by growth in consumer lending.

• Average consumer and commercial deposits increased modestly compared to the prior quarter and 2% compared to the fourth quarter of 2016, driven largely by growth in NOW and time deposit account balances.

Capital

• Estimated capital ratios continue to be well above regulatory requirements. The Common Equity Tier 1 ("CET1") ratio was estimated to be 9.8% as of December 31, 2017, and 9.6% on a fully phased-in basis, slightly higher than the prior quarter.

• During the quarter, the Company repurchased $330 million of its outstanding common stock in accordance with its 2017 Capital Plan and issued $500 million of 5.125% noncumulative perpetual preferred stock, Series H.

• Book value per common share was $47.94 and tangible book value per common share was $34.82, up 2% and 1%, respectively, from September 30, 2017, driven primarily by growth in retained earnings.

Asset Quality

• Nonperforming loans ("NPLs") decreased $23 million from the prior quarter and represented 0.47% of period-end LHFI at December 31, 2017. The sequential decrease was driven primarily by continued improvements in the energy portfolio.

• Net charge-offs for the current quarter were $107 million, or 0.29% of total average LHFI on an annualized basis, up $29 million sequentially and down $29 million year-over-year. The sequential increase was driven by higher net charge-offs associated with C&I and consumer loans, while the year-over-year reduction was driven by overall asset quality improvements and lower energy-related charge-offs.

• The provision for credit losses decreased $41 million sequentially, due primarily to the prior quarter reserve build related to hurricanes that impacted the Company's footprint.

• At December 31, 2017, the allowance for loan and lease losses ("ALLL") to period-end LHFI ratio was 1.21%, a 2 basis point decline compared to the prior quarter, driven by continued improvements in asset quality.

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

Revenue

Total revenue was $2.3 billion for the current quarter, a decrease of $8 million compared to the prior quarter.  Net interest income increased $5 million sequentially due to a higher net interest margin.  Noninterest income decreased $13 million sequentially. The December 4, 2017 Form 8-K and tax reform-related items negatively impacted noninterest income by a net $7 million with the remaining $6 million of the $13 million sequential decrease driven by lower capital markets-related income, offset partially by higher commercial real estate-related income.  Compared to the fourth quarter of 2016, total revenue increased $113 million, or 5%, driven by a $95 million increase in net interest income (resulting from a higher net interest margin and growth in average earning assets) and an $18 million increase in total noninterest income. 

Net Interest Income

Net interest income was $1.5 billion for the current quarter, an increase of $5 million compared to the prior quarter due to higher earning asset yields. The $95 million increase relative to the prior year was driven by higher earning asset yields and growth of $1.8 billion in average earning assets.

Net interest margin for the current quarter was 3.17%, compared to 3.15% in the prior quarter and 3.00% in the fourth quarter of 2016.  The increase relative to the prior quarter and prior year was driven primarily by higher earning asset yields arising from higher benchmark interest rates, continued positive mix shift in the LHFI portfolio, and lower premium amortization in the securities AFS portfolio, partially offset by higher rates paid on interest-bearing liabilities.

Net interest income was $5.8 billion for 2017, a $419 million increase compared to the twelve months ended December 31, 2016.  The net interest margin for the full year 2017 was 3.14%, a 14 basis point increase compared to 2016.  The increases in both net interest income and net interest margin were driven by the same factors that impacted the prior year comparison discussed above.

Noninterest Income

Noninterest income was $833 million for the current quarter, compared to $846 million for the prior quarter and $815 million for the fourth quarter of 2016.  The discrete items outlined on page 1 resulted in a net $7 million negative impact to noninterest income ($107 million gain from the sale of PAC offset by $114 million of securities AFS and servicing rights losses) with the remaining $6 million of the $13 million sequential decrease driven by lower capital markets-related income, offset partially by higher commercial real estate related income.  Compared to the fourth quarter of 2016, noninterest income increased $18 million driven largely by higher commercial real estate related income and wealth management-related income.

Investment banking income was $119 million for the current quarter, compared to $166 million in the prior quarter and $122 million in the prior year.  The $47 million decrease compared to the sequential quarter was due to lower equity offerings and M&A advisory activity following strong investment banking performance in the prior quarter.

Trading income was $41 million for the current quarter, compared to $51 million in the prior quarter and $58 million in the fourth quarter of 2016.  The sequential and year-over-year decreases were due to lower core trading revenue during the current quarter. The decrease compared to the fourth quarter of 2016 was also driven by a higher counterparty credit valuation reserve in the current quarter.

Mortgage production income for the current quarter was $61 million, compared to $61 million for the prior quarter and $78 million for the fourth quarter of 2016.  The $17 million decrease from the fourth quarter of 2016 was due to lower production volume and a lower repurchase reserve release during the current quarter.  Mortgage application volume decreased 8% sequentially and 14% compared to the fourth quarter of 2016.  Closed loan volume increased 2% sequentially and decreased 27% compared to the fourth quarter of 2016.

Mortgage servicing income was $43 million for the current quarter, compared to $46 million in the prior quarter and $25 million in the fourth quarter of 2016.  The $3 million sequential decrease was due to the aforementioned $5 million loss on sale of servicing rights, offset partially by higher servicing fee income during the current quarter.  The $18 million increase compared to the fourth quarter of 2016 was due to higher net hedge performance, lower servicing asset decay, and higher servicing fees during the current quarter.  At December 31, 2017 and 2016, the servicing portfolio totaled $165.5 billion and $160.2 billion, respectively, and was $165.3 billion at September 30, 2017.

Trust and investment management income was $80 million for the current quarter, compared to $79 million for the prior quarter and $73 million for the fourth quarter of 2016. The $7 million increase compared to the prior year quarter was due to an increase in trust and institutional assets under management as well as trust termination fees received during the current quarter.

Commercial real estate related income was $62 million for the current quarter, compared to $17 million for the prior quarter and $33 million for the fourth quarter of 2016.  The $45 million sequential increase was driven primarily by higher structured real estate and tax credit-related income, as well as higher production volume from the Pillar & Cohen Financial businesses ("Pillar").  The $29 million increase compared to the fourth quarter of 2016 was driven by revenue from Pillar, which the Company acquired in December 2016, in addition to higher structured real estate and tax credit-related income earned during the current quarter.

Client transaction-related fees (namely service charges on deposits, other charges and fees, and card fees) were stable sequentially.  Compared to the fourth quarter of 2016, client transaction-related fees increased $4 million due to higher client-related transaction activity, offset partially by the impact of the enhanced posting order process instituted during the fourth quarter of 2016.

Net securities (losses)/gains was ($109) million for the current quarter compared to no net securities (losses)/gains in both the prior quarter and prior year quarter. The current quarter losses were due to the aforementioned restructuring of the securities AFS portfolio as a result of tax reform.

Other noninterest income was $134 million for the current quarter, compared to $25 million in the prior quarter and $29 million in the fourth quarter of 2016.  The increase compared to both periods was due primarily to the $107 million pre-tax gain from the sale of PAC during the fourth quarter of 2017.

For the year ended December 31, 2017, noninterest income was $3.4 billion, a decrease of $29 million compared to 2016 as lower mortgage-related income was offset partially by higher capital markets and commercial real estate related income.

Noninterest Expense

Noninterest expense was $1.5 billion in the current quarter, representing increases of $129 million sequentially and $123 million compared to the fourth quarter of 2016.  The December 4, 2017 Form 8-K and tax reform-related items impacted noninterest expense by a net $111 million ($50 million charitable contribution to the SunTrust Foundation, $36 million net charges related to efficiency initiatives, and $25 million discretionary 401(k) contribution and other employee benefits). Excluding these discrete items, noninterest expense was relatively stable compared to the prior quarter and prior year. 

Employee compensation and benefits expense was $803 million in the current quarter, compared to $806 million in the prior quarter and $762 million in the fourth quarter of 2016. The $41 million increase compared to the fourth quarter of 2016 was due primarily to the tax reform-related 401(k) discretionary contribution and the Pillar acquisition.

Operating (gains)/losses were $23 million in the current quarter, compared to ($34) million in the prior quarter and $23 million in the fourth quarter of 2016.  The increase relative to the sequential quarter was driven by the favorable resolution of several legal matters during the prior quarter.

Outside processing and software expense was $214 million in the current quarter, compared to $203 million in the prior quarter and $209 million in the fourth quarter of 2016. The increase compared to the prior quarter was driven primarily by higher transaction volume and the timing of third party services. The increase relative to the prior year was due to a benefit recognized during the fourth quarter of 2016 resulting from a contract renegotiation with a key vendor.

Marketing and customer development expense was $104 million in the current quarter, compared to $45 million in the prior quarter and $52 million in the fourth quarter of 2016.  The increase relative to both prior periods was primarily due to the $50 million tax reform-related contribution to the SunTrust Foundation to support financial well-being initiatives.

Amortization expense was $25 million in the current quarter, compared to $22 million in the prior quarter and $14 million in the fourth quarter of 2016.  The increase relative to both prior periods was primarily due to an increase in amortizable community development investments.  These investments generate tax credits that reduce the provision for income taxes over time.

Other noninterest expense was $170 million in the current quarter, compared to $168 million in the prior quarter and $154 million in the fourth quarter of 2016. The increase relative to the prior year was driven primarily by the aforementioned net $36 million charge related to efficiency actions, including severance costs in connection with the voluntary early retirement program, branch and corporate real estate closure costs, and software write-downs.

For the twelve months ended December 31, 2017, noninterest expense was $5.8 billion compared to $5.5 billion for 2016.  The $296 million increase was driven largely by the aforementioned discrete charges recognized in the fourth quarter of 2017, in addition to higher employee compensation expense (primarily related to higher revenue and the acquisition of Pillar which closed in December 2016) and higher net occupancy costs (in part due to the reduction of amortized gains from previous sale leaseback transactions). These increases were offset partially by the aforementioned favorable resolution of several legal matters in the third quarter of 2017.

Income Taxes

For the current quarter, the Company recorded an income tax benefit of ($74) million compared to income tax provisions of $225 million for the prior quarter and $193 million for the fourth quarter of 2016.  The tax provision for the current quarter includes a $303 million tax benefit for the estimated impact of the re-measurement of the Company's estimated net deferred tax liabilities at December 31, 2017 due to tax reform, a $27 million discrete expense related to the increase in STM's state NOL valuation allowance, and a $12 million tax expense related to other discrete tax items. The effective tax rate for the current quarter was (11)%, compared to 29% in both the prior quarter and the fourth quarter of 2016. Excluding the impacts from actions highlighted in the December 4^th 8-K and tax reform-related items (see table on page 1 for more information), the Company's effective tax rate was 30% for the current quarter.

Balance Sheet

At December 31, 2017, the Company had total assets of $206.0 billion and total shareholders' equity of $25.2 billion, representing 12% of total assets.  Book value per common share was $47.94 and tangible book value per common share was $34.82, up 2% and 1%, respectively, compared to September 30, 2017, driven primarily by growth in retained earnings.

Loans

Average performing LHFI totaled $143.4 billion for the current quarter, relatively stable compared to the prior quarter and a 1% increase over the fourth quarter of 2016.  The year-over-year growth was driven primarily by increases in consumer lending, offset partially by declines in home equity products and C&I loans.

Deposits

Average consumer and commercial deposits for the current quarter were $160.7 billion, a 1% increase over the prior quarter and a 2% increase over the fourth quarter of 2016.  The sequential growth was due largely to a 6% increase in time deposits and a 4% increase in NOW account balances, offset partially by a decline in money market account balances.  The year-over-year growth was driven primarily by increases in NOW and time deposit account balances, offset partially by a decline in money market account balances.

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 December 31, 2017, and 9.6% on a fully phased-in basis.  The ratios of average total equity to average total assets and tangible common equity to tangible assets were 12.1% and 8.2%, respectively, at December 31, 2017.  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.

The Company declared a common stock dividend of $0.40 per common share and repurchased $330 million of its outstanding common stock in the fourth quarter of 2017. The Company currently expects to repurchase approximately $660 million of additional common stock over the next two quarters in accordance with its 2017 Capital Plan.  Additionally, the Company issued $500 million of 5.125% noncumulative perpetual preferred stock, Series H, in November 2017.

Asset Quality

Total nonperforming assets ("NPAs") were $741 million at December 31, 2017, down $51 million compared to the prior quarter and $178 million compared to the fourth quarter of 2016.  The decrease in NPAs compared to both the prior quarter and the prior year was driven primarily by continued improvements in the energy portfolio.  The ratio of NPLs to period-end LHFI was 0.47%, 0.48%, and 0.59% at December 31, 2017, September 30, 2017, and December 31, 2016, respectively.

Net charge-offs were $107 million during the current quarter, an increase of $29 million compared to the prior quarter and a decrease of $29 million compared to the fourth quarter of 2016.  The sequential increase was driven by higher net charge-offs associated with C&I and consumer loans, while the year-over-year decrease was driven by overall asset quality improvements as well as lower energy-related net charge-offs.  The ratio of annualized net charge-offs to total average LHFI was 0.29% during the current quarter, compared to 0.21% during the prior quarter and 0.38% during the fourth quarter of 2016.  The provision for credit losses was $79 million in the current quarter, a sequential decrease of $41 million due primarily to the prior quarter reserve build related to hurricanes, and a decrease of $22 million compared to the fourth quarter of 2016 due to lower net charge-offs.

At December 31, 2017, the ALLL was $1.7 billion, which represented 1.21% of period-end loans, a 2 basis point decline relative to September 30, 2017.

Early stage delinquencies increased 9 basis points from the prior quarter to 0.80% at December 31, 2017.  Excluding government-guaranteed loans which account for 0.48%, early stage delinquencies were 0.32%, up 3 basis points compared to the prior quarter and up 5 basis points from a year ago, primarily resulting from impacts associated with the recent hurricanes.