SunTrust Banks, Inc. reported net income available to common shareholders of $697 million, or $1.49 per average common diluted share.

Diluted earnings per share increased 16% compared to the prior quarter and 45% compared to the second quarter of 2017. For the first half of 2018, earnings per average common diluted share grew 43% compared to the same period a year ago.

"Our performance continues to improve and this quarter was no exception, with earnings per share increasing by 45% year-over-year," said William H. Rogers, Jr., chairman and CEO of SunTrust Banks, Inc. "Importantly, our strategic consistency and improved execution is driving success across multiple fronts: solid revenue growth, improved efficiency, and increased capital returns. We have good momentum going into the second half of the year and I remain confident in our ability to continue to create value for our clients, teammates, communities, and shareholders."

Second Quarter 2018 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 21% marginal federal tax rate for all periods beginning on or after January 1, 2018 and 35% for all periods prior to January 1, 2018, as well as 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 and 13.)

Income Statement

• Net income available to common shareholders was $697 million, or $1.49 per average common diluted share, compared to $1.29 for the prior quarter and $1.03 for the second quarter of 2017.

• Total revenue increased 4% sequentially and 3% year-over-year. These increases were driven largely by higher net interest income as a result of net interest margin expansion. The sequential increase was also driven by growth in earnings assets.

• Net interest margin was 3.28% in the current quarter, up 4 basis points sequentially and up 14 basis points compared to the prior year. The sequential and year-over-year increases were driven primarily by higher earning asset yields arising from higher benchmark interest rates, positive mix shift in the LHFI portfolio, and higher securities yields.

• Provision for credit losses was relatively stable sequentially and decreased $58 million year-over-year due primarily to a lower allowance for loan and lease losses ("ALLL").

• Noninterest expense decreased 2% sequentially and remained stable year-over-year. The sequential decrease was driven primarily by a seasonal decline in employee benefits costs.

• The efficiency and tangible efficiency ratios for the current quarter were 59.4% and 58.7%, respectively, which reflect good improvements compared to the prior quarter and prior year, driven by ongoing expense management initiatives and strong revenue growth. The sequential improvement was also impacted by the seasonal decline in employee benefits costs.

Balance Sheet

• Average performing LHFI was up 1% compared to the prior quarter and relatively stable year-over-year. The sequential growth was driven by growth in C&I, CRE, and consumer direct loans.

• Average consumer and commercial deposits remained relatively stable compared to both the prior quarter and the second quarter of 2017.

Capital

• Estimated capital ratios continue to be well above regulatory requirements. The Common Equity Tier 1 ("CET1") ratio was estimated to be 9.7% as of June 30, 2018, slightly lower than the prior quarter, due to loan growth.

• During the quarter, the Company:

• Repurchased $330 million of its outstanding common stock, which completed its share repurchases under its 2017 Capital Plan.

• Announced its 2018 Capital Plan, which represents a combined 39% increase in total capital returns including:

• The purchase of up to $2.0 billion of its outstanding common stock between the third quarter of 2018 and the second quarter of 2019 (representing a 52% increase compared to the previous authorization).

• A 25% increase in the quarterly common stock dividend from $0.40 per common share to $0.50 per share, beginning in the third quarter of 2018, subject to approval by the Company's Board of Directors.

• Book value per common share was $47.70 and tangible book value per common share was $34.40, both up 1% from March 31, 2018, driven primarily by growth in retained earnings, offset by an increase in accumulated other comprehensive loss.

Asset Quality

• Nonperforming loans ("NPLs") increased $43 million from the prior quarter and represented 0.52% of period-end LHFI at June 30, 2018. The increase was driven primarily by the downgrade of one borrower.

• Net charge-offs for the current quarter were $73 million, or 0.20% of total average LHFI on an annualized basis, compared to 0.22% during the prior quarter and 0.20% during the second quarter of 2017.

• At June 30, 2018, the ALLL to period-end LHFI ratio was 1.14%, a 5 basis point decline compared to the prior quarter, driven by lower reserves for hurricane-related losses and continued improvements in asset quality.

• Provision for credit losses was relatively stable sequentially and decreased $58 million year-over-year due primarily to a lower ALLL.

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, an increase of $82 million compared to the prior quarter. Net interest income increased $49 million sequentially due to a higher net interest margin, a $1.7 billion increase in average earning assets, and one more day in the current quarter. Noninterest income increased $33 million sequentially due largely to higher capital markets-related income, offset partially by lower mortgage servicing related income and other noninterest income. Compared to the second quarter of 2017, total revenue increased by $73 million, driven by a $71 million increase in net interest income.

Net Interest Income

Net interest income was $1.5 billion for the current quarter, an increase of $49 million compared to the prior quarter due primarily to a 4 basis point expansion in the net interest margin, a $1.7 billion increase in average earning assets, and one more day in the current quarter. The $71 million increase relative to the prior year was driven largely by a 14 basis point expansion in the net interest margin.

Net interest margin for the current quarter was 3.28%, compared to 3.24% in the prior quarter and 3.14% in the second quarter of 2017. The 4 and 14 basis point increases relative to the prior quarter and prior year were driven primarily by higher earning asset yields arising from higher benchmark interest rates, positive mix shift in the loan portfolio, and higher securities yields, offset partially by higher deposit costs and higher levels of wholesale funding.

For the six months ended June 30, 2018, net interest income was $3.0 billion, a $132 million increase compared to the six months ended June 30, 2017. The net interest margin was 3.26% for the first half of 2018, a 15 basis point increase compared to the same period in 2017. The increases in both net interest income and net interest margin were driven by the same factors that impacted the sequential and year-over-year comparisons discussed above.

Noninterest Income

Noninterest income was $829 million for the current quarter, compared to $796 million for the prior quarter and $827 million for the second quarter of 2017. The $33 million sequential increase is due primarily to higher capital markets-related income as well as higher client transaction-related fees, offset partially by lower other noninterest income, mortgage servicing related income and commercial real estate related income. Compared to the second quarter of 2017, noninterest income was stable as higher capital markets-related income and other noninterest income was offset by lower mortgage-related income, client transaction-related fees, and commercial real estate related income.

Client transaction-related fees (namely service charges on deposits, other charges and fees, and card fees) increased $8 million sequentially due to an increase in client-related transactional activity. The $19 million year-over-year decrease is due primarily to lower transactional activity and the impact of adopting the revenue recognition accounting standard during the first quarter of 2018, which resulted in the netting of certain expense items against card fees, other charges and fees, and service charges on deposit accounts.

Investment banking income was $167 million for the current quarter, compared to $131 million in the prior quarter and $147 million in the prior year. The $36 million sequential and $20 million year-over-year increases reflected strong deal flow activity across most product categories, led by syndicated finance and equity capital markets.

Trading income was $53 million for the current quarter, compared to $42 million in the prior quarter and $46 million in the second quarter of 2017. The $11 million sequential and $7 million year-over-year increases were due primarily to higher client-related interest rate hedging activity.

Mortgage servicing income was $40 million for the current quarter, compared to $54 million in the prior quarter and $44 million in the second quarter of 2017. The $14 million sequential decrease was due primarily to higher servicing asset decay, arising from seasonally elevated payoffs. The $4 million decrease compared to the second quarter of 2017 was due to higher servicing asset decay and lower net hedge performance, offset partially by higher servicing fee income. At June 30, 2018, the servicing portfolio totaled $170.5 billion, an increase compared to both the prior quarter and prior year due to MSRs purchased in the first quarter of 2018 which transferred in the second quarter.

Mortgage production income for the current quarter was $43 million, compared to $36 million for the prior quarter and $56 million for the second quarter of 2017. The $7 million sequential increase was due primarily to the seasonal increase in purchase volume. The $13 million year-over-year decrease was due largely to lower gain on sale margins and less favorable channel mix. Mortgage application volume increased 18% sequentially and remained stable compared to the second quarter of 2017. Closed loan volume increased 22% sequentially and decreased 3% year-over-year.

Commercial real estate-related income was $18 million for the current quarter, compared to $23 million for the prior quarter and $24 million for the second quarter of 2017. The sequential and year-over-year decreases were driven primarily by lower transactional activity.

Other noninterest income was $38 million for the current quarter, compared to $48 million in the prior quarter and $22 million in the second quarter of 2017. The sequential decrease was due primarily to the recognition of a $23 million remeasurement gain on an equity investment in a fintech company during the prior quarter, offset partially by a $12 million remeasurement gain on an equity investment in GreenSky, Inc. (a financial technology company with which the Company partners) recognized during the current quarter. The $16 million year-over-year increase was due primarily to the aforementioned gain during the current quarter.

For the six months ended June 30, 2018, noninterest income was $1.6 billion, compared to $1.7 billion for the six months ended June 30, 2017. The $48 million decrease compared to the prior year was driven by lower mortgage-related income, client transaction-related fees, and capital markets-related income, offset partially by an increase in other noninterest income driven by the aforementioned remeasurement gains during the first half of 2018.

Noninterest Expense

Noninterest expense was $1.4 billion in the current quarter, down $27 million sequentially and up $2 million compared to the second quarter of 2017. The sequential decrease was driven largely by the seasonal decline in employee benefit costs, offset partially by higher outside processing and software expense and higher operating losses.

Employee compensation and benefits expense was $802 million in the current quarter, compared to $853 million in the prior quarter and $796 million in the second quarter of 2017. The $51 million sequential decrease was due to the seasonal decline in employee benefit costs and FICA taxes. The $6 million year-over-year increase was due primarily to higher compensation costs associated with revenue growth.

Operating losses were $17 million in the current quarter, compared to $6 million in the prior quarter and $19 million in the second quarter of 2017. The sequential increase was due primarily to a $10 million net benefit recognized in the prior quarter related to the progression of certain legal developments.

Outside processing and software expense was $227 million in the current quarter, compared to $206 million in the prior quarter and $204 million in the second quarter of 2017. The increase compared to the prior quarter and prior year was driven primarily by higher software-related costs, related to ongoing investments in technology.

Regulatory assessments expense was $39 million in the current quarter, compared to $41 million in the prior quarter and $49 million in the second quarter of 2017. The year-over-year decrease was driven by a reduced FDIC assessment rate resulting primarily from a lower risk profile.

Other noninterest expense was $114 million in the current quarter, compared to $121 million in the prior quarter and $126 million in the second quarter of 2017. The sequential decrease was driven primarily by the gain on sale of certain real estate assets recognized in the current quarter (recorded as a contra expense), in addition to certain asset impairment-related charges and legal and consulting expenses recognized in the prior quarter. The year-over-year decrease was driven primarily by the aforementioned gain on sale of certain real estate assets in the current quarter, in addition to lower legal and consulting expenses.

For the six months ended June 30, 2018, noninterest expense was $2.8 billion compared to $2.9 billion for the six months ended June 30, 2017. The $46 million decrease was driven largely by lower other noninterest expense, operating losses, and regulatory assessments, offset partially by higher outside processing and software expenses.

Income Taxes

For the current quarter, the Company recorded a provision for income taxes of $171 million compared to $147 million for the prior quarter and $222 million for the second quarter of 2017. The effective tax rate for the current quarter was 19%, compared to 19% in the prior quarter and 30% in the second quarter of 2017. The year-over-year decrease in the effective tax rate was due primarily to the reduction in the U.S. federal corporate income tax rate from 35% to 21%.

Balance Sheet

At June 30, 2018, the Company had total assets of $207.5 billion and total shareholders' equity of $24.3 billion, representing 12% of total assets. Book value per common share was $47.70 and tangible book value per common share was $34.40, both up 1% compared to March 31, 2018, driven primarily by growth in retained earnings, offset partially by an increase in accumulated other comprehensive loss.

Loans

Average performing LHFI totaled $143.4 billion for the current quarter, up 1% compared to the prior quarter and relatively stable compared to the second quarter of 2017. The sequential growth was driven primarily by increases in C&I, CRE, and consumer direct loans, offset partially by declines in home equity products, consumer indirect, and commercial construction loans.

Deposits

Average consumer and commercial deposits for the current quarter were $159.0 billion, relatively stable compared to the prior quarter and the second quarter of 2017. Sequentially, declines in NOW and money market account balances were offset by growth in time deposits and savings account balances. Year-over-year, declines in money market accounts and demand deposits were offset by increases in time deposits, savings, and NOW 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 9.7% at June 30, 2018. The ratios of average total equity to average total assets and tangible common equity to tangible assets were 11.8% and 8.0%, respectively, at June 30, 2018. 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 second quarter of 2018, which completed its 2017 Capital Plan. Additionally, the Company issued $850 million of 7-year parent company senior notes at a fixed annual coupon rate of 4.00% in the second quarter of 2018.

In June 2018, the Company announced that the Federal Reserve had no objections to its 2018 Capital Plan. This plan includes the repurchase of up to $2.0 billion of the Company's outstanding common stock between the third quarter of 2018 and the second quarter of 2019. Additionally, subject to Board approval, the Company intends to increase its quarterly common stock dividend 25% to $0.50 per common share beginning in the third quarter of 2018 and to maintain the current level of dividend payments on its preferred stock.

Asset Quality

Total nonperforming assets ("NPAs") were $814 million at June 30, 2018, up $36 million from the prior quarter and down $7 million year-over-year. The ratio of NPLs to period-end LHFI was 0.52%, 0.50%, and 0.52% at June 30, 2018, March 31, 2018, and June 30, 2017, respectively.

Net charge-offs were $73 million during the current quarter, a decrease of $6 million compared to the prior quarter and an increase of $3 million compared to the second quarter of 2017. The ratio of annualized net charge-offs to total average LHFI was 0.20% during the current quarter, compared to 0.22% during the prior quarter and 0.20% during the second quarter of 2017.

The provision for credit losses was $32 million in the current quarter, a sequential increase of $4 million and a year-over-year decrease of $58 million. The decrease compared to the prior year was driven by a lower ALLL.

At June 30, 2018, the ALLL was $1.7 billion, which represented 1.14% of period-end loans, a 5 basis point decline relative to March 31, 2018, driven by lower reserves for hurricane-related losses and continued improvements in asset quality.

Early stage delinquencies increased 4 basis points from the prior quarter and 6 basis points from June 30, 2017 to 0.72% at June 30, 2018. Excluding government-guaranteed loans which accounted for 0.50% at June 30, 2018, early stage delinquencies were 0.22%, stable compared to the prior quarter and compared to the second quarter of 2017.