SunTrust Banks, Inc. (NYSE: STI) reported net income available to common shareholders of $467 million, or $0.91 per average common diluted share, which includes $0.03 per share in discrete tax benefits.  This compares to $1.00 per share in the prior quarter, which was favorably impacted by discrete items totaling $0.11 per share, and $0.72 per share in the fourth quarter of 2014, which was negatively impacted by legal matters totaling $0.17 per share.

For 2015, earnings increased 11% to $3.58 per share compared to $3.23 per share in 2014, driven by improved credit quality and efficiency.

"Our solid performance in the fourth quarter and strong 11 percent earnings growth for the year are the result of consistent execution of our strategies and the diversity of our business model," said William H. Rogers, Jr., chairman and chief executive officer of SunTrust Banks, Inc.  "Looking ahead, we will further advance our purpose of improving the financial well-being of our clients and communities, thus driving long-term value for our shareholders."

Fourth Quarter 2015 Financial Highlights

Income Statement

• Net income available to common shareholders was $467 million, or $0.91 per average common diluted share.
  • The current quarter included $0.03 per share in discrete tax benefits while the third quarter included $0.07 per share in discrete tax benefits and $0.04 per share in discrete recoveries related to the resolution of certain legacy mortgage matters. 
  • Excluding the $0.03 per share benefit in the current quarter and $0.11 per share combined benefit in the prior quarter, earnings per share were relatively stable sequentially.
• Total revenue declined slightly compared to the prior quarter.
  • Net interest income grew 3%, driven by 2% average loan growth and a 4 basis point increase in net interest margin. 
  • Noninterest income decreased, as asset disposition gains declined and wealth management-related revenue was negatively impacted by market conditions.
• Provision for credit losses increased due to a modest increase in net charge-offs. 
• Noninterest expense increased 2% sequentially, driven primarily by discrete benefits recognized in the prior quarter. 
• The efficiency and tangible efficiency ratios in the current quarter were 63.0% and 62.1%, respectively. For 2015, the efficiency and tangible efficiency ratio were 63.1% and 62.6%, respectively.

Balance Sheet

• Average loan balances increased 2% sequentially with growth across most loan categories. 
• Average consumer and commercial deposits increased 2% sequentially and 8% compared to the prior year.

Capital

• Estimated capital ratios continue to be well above regulatory requirements. The Common Equity Tier 1 and Tier 1 capital ratios were estimated to be 9.8% and 10.6%, respectively, as of December 31, 2015, on a fully phased-in basis. 
• During the quarter, the Company repurchased $214 million of common stock. 
• Book value per share was $43.66, and tangible book value per share was $31.65, up 5% and 6%, respectively, compared to December 31, 2014.

Asset Quality

• Nonperforming loans increased $209 million from the prior quarter and represented 0.49% of total loans at December 31, 2015. The sequential increase was due largely to additional downgrades of certain energy-related loans. 
• Net charge-offs for the current quarter were $83 million, representing 0.24% of average loans on an annualized basis, increasing from $71 million in the prior quarter and decreasing from $94 million in the fourth quarter of 2014. 
• The provision for credit losses increased $19 million compared to the prior quarter driven by increased net charge-offs, as well as a lower decline in the allowance for loan and lease losses, as a result of higher loan growth. 
• At December 31, 2015, the allowance for loan and lease losses to period-end loans ratio was 1.29%, 5 basis points lower than the prior quarter, as a result of further improvement in overall credit quality. Excluding government-guaranteed loans, the allowance for loan and lease losses to period-end loans ratio was 1.34%.

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 decrease of $12 million compared to the prior quarter.  The decline was driven primarily by lower wealth management-related revenue, as well as a reduction in asset disposition gains, partially offset by higher net interest income and mortgage-related revenue.  Compared to the fourth quarter of 2014, total revenue was relatively stable as higher net interest income was offset by lower noninterest income.

For 2015, total revenue was $8.2 billion, a decline of $131 million compared to 2014.  The decline was largely driven by the $105 million gain on sale of RidgeWorth during 2014 (and associated foregone revenue in 2015) and lower net interest income, partially offset by growth in capital markets and mortgage-related revenue, in addition to higher securities gains.

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

Net interest income was $1.3 billion for the current quarter, an increase of $34 million compared to the prior quarter.  The increase was primarily due to solid loan growth, higher securities yields, and a reduction in average long-term debt.  Compared to the fourth quarter of 2014, the $33 million increase in net interest income was driven by growth in average earning assets and a decrease in long-term debt, partially offset by a slight decline in earning asset yields.

Net interest margin for the current quarter was 2.98%, compared to 2.94% in the prior quarter and 2.96% in the fourth quarter of 2014.  The 4 basis point increase compared to the prior quarter was largely driven by higher yields on the investment securities portfolio (as a result of slower prepayment speeds) and lower funding costs.  The 2 basis point increase in net interest margin compared to the fourth quarter of 2014 was due primarily to a shift towards lower-cost funding sources.

For 2015, net interest income was $4.9 billion, a $76 million decrease compared to 2014.  The net interest margin was 2.91% for 2015 compared to 3.07% for 2014.  The declines in both net interest income and net interest margin were driven by lower earning asset yields, largely due to a 15 basis point decline in loan yields, partially offset by strong deposit growth that enabled a decline in higher-cost long-term debt.

Noninterest Income

Noninterest income was $765 million for the current quarter, compared to $811 million for the prior quarter and $795 million for the fourth quarter of 2014.  The $46 million decrease from the prior quarter was primarily related to lower wealth management-related revenue, as well as a decline in asset disposition gains, partially offset by higher mortgage-related revenue.  Compared to the fourth quarter of 2014, noninterest income decreased $30 million, driven by many of the same factors impacting the sequential comparison.

Investment banking income was $104 million for the current quarter, compared to $115 million in the prior quarter and $109 million in the fourth quarter of 2014.  The $11 million decrease from the prior quarter was driven by a decline in debt origination activity stemming from challenging market conditions in the fourth quarter, partially offset by growth in equity originations.  Compared to the fourth quarter of 2014, the $5 million decrease was largely driven by the same trends impacting the sequential comparison.  For 2015, investment banking income increased 14% compared to 2014, driven by strong performances across most products and sectors.  

Trading income was $42 million for the current quarter, compared to $31 million in the prior quarter and $40 million in the fourth quarter of 2014.  The $11 million increase from the prior quarter was driven primarily by increased client-driven interest rate risk management activity.

Mortgage production-related income for the current quarter was $53 million, compared to $58 million for the prior quarter and $61 million for the fourth quarter of 2014.  The $5 million decrease from the prior quarter was primarily due to a decline in loan production.  The $8 million decrease compared to the fourth quarter of 2014 was driven by a modest decline in gain-on-sale margins.  Mortgage production volume declined 20% compared to the prior quarter, due to the typical seasonal decline in new purchase activity.

Mortgage servicing income was $56 million for the current quarter, compared to $40 million in the prior quarter and $53 million in the fourth quarter of 2014.  The $16 million increase from the prior quarter was driven by higher servicing fees, improved net hedge performance, and a decline in the servicing asset decay expense.  The $3 million increase compared to the fourth quarter of 2014 was due to higher servicing fees as a result of a larger servicing portfolio.  The servicing portfolio was $148 billion at December 31, 2015, compared to $142 billion at December 31, 2014, driven by portfolio acquisitions.

Trust and investment management income was $79 million for the current quarter, compared to $86 million in the prior quarter and $84 million in the fourth quarter of 2014.  The $7 million sequential decline was due to seasonal fees earned in the third quarter, as well as a decline in market value of assets under management impacting the fourth quarter. The $5 million decline compared to the prior year was largely due to a decline in assets under management.  

Retail investment income was $71 million for the current quarter, compared to $77 million in the prior quarter and $73 million in the fourth quarter of 2014.  The $6 million sequential decline was both a result of lower assets under management and reduced transactional activity.

Other noninterest income was $30 million for the current quarter, compared to $58 million in the prior quarter and $42 million in the fourth quarter of 2014.  The decrease compared to the prior quarter was primarily due to a decline in leasing-related income and lower gains on loan sales, in addition to an impairment of loans held-for-sale recognized in the fourth quarter.  The decrease compared to the fourth quarter of 2014 was largely due to foregone income from the sale of affordable housing investments.

For 2015, noninterest income was $3.3 billion, a decrease of $55 million compared to 2014.  The decline was due to the gain on sale of RidgeWorth in 2014 (and associated foregone revenue) and lower service charges on deposits, partially offset by higher investment banking and mortgage-related revenue, as well as higher gains from the sale of securities.

Noninterest Expense

Noninterest expense was $1.3 billion in the current quarter, an increase of $24 million compared to the prior quarter and a decrease of $122 million compared to the fourth quarter of 2014.  The sequential increase was primarily due to discrete recoveries recognized in the prior quarter as a result of the resolution of previous mortgage matters.  The $122 million decline compared to a year ago was due primarily to the $145 million legal provision related to legacy mortgage matters in the fourth quarter of 2014.

Employee compensation and benefits expense was $690 million in the current quarter, compared to $725 million in the prior quarter and $670 million in the fourth quarter of 2014.  The sequential decrease of $35 million was due to lower employee benefit costs.  The $20 million increase compared to the fourth quarter of 2014 was due primarily to higher employee compensation expense, in part attributable to improved business performance, partially offset by a decrease in employee benefit costs.

Operating losses were $22 million in the current quarter, compared to $3 million in the prior quarter and $174 million in the fourth quarter of 2014.  The sequential increase was due primarily to discrete recoveries recognized in the prior quarter resulting from the resolution of previous mortgage matters.  The $152 million decline compared to a year ago was due primarily to the aforementioned $145 million mortgage-related legal provision in the fourth quarter of 2014.

Outside processing and software expense was $222 million in the current quarter, compared to $200 million in the prior quarter and $206 million in the fourth quarter of 2014.  The increase compared to both periods was due to higher utilization of third-party services, increased business activity, and certain discrete costs incurred in the current quarter.

Marketing and customer development expense was $48 million in the current quarter, compared to $42 million in the prior quarter and $43 million in the fourth quarter of 2014.  The increase over both the prior quarter and prior year was due largely to higher advertising and client development costs.

Other noninterest expense was $127 million and $126 million in the current and prior quarter, and $146 million in the fourth quarter of 2014.  The $19 million decrease compared to the fourth quarter of 2014 was largely due to lower credit and collections costs and lower consulting expenses.  Amortization expense increased compared to the prior quarter and the fourth quarter of 2014, driven by increased investments in low-income community development projects, also resulting in a similar increase in tax credits.

For 2015, noninterest expense was $5.2 billion compared to $5.5 billion for 2014.  The $383 million decrease was driven by a decline in mortgage-related operating losses and affordable housing impairment charges recognized in 2014, the decline in RidgeWorth-related expenses, and the continued focus on expense management.  These declines were partially offset by $24 million of debt extinguishment charges (net of related hedges) and higher outside processing costs during 2015.

Income Taxes

For the current quarter, the Company recorded an income tax provision of $185 million, compared to $187 million for the prior quarter and $128 million for the fourth quarter of 2014.  The effective tax rate for the current quarter was approximately 28%, compared to approximately 26% in the prior quarter and approximately 25% in the fourth quarter of 2014.  The effective tax rates in the current and prior quarter were favorably impacted by $17 million and $35 million in discrete income tax items, respectively. 

Balance Sheet

At December 31, 2015, the Company had total assets of $190.8 billion and total shareholders' equity of $23.4 billion, representing 12% of total assets.  Book value per share was $43.66 and tangible book value per share was $31.65, relatively stable compared to September 30, 2015, as growth in retained earnings was offset by a decline in accumulated other comprehensive income (AOCI).

Loans

Average performing loans were $134.7 billion for the current quarter, a 2% increase over both the prior quarter and fourth quarter of 2014.  Sequential growth in average C&I loans, consumer loans, and commercial construction loans of $1.1 billion, $814 million, and $327 million, respectively, was offset by a $220 million decline in home equity products.  Compared to the fourth quarter of 2014, growth was concentrated in C&I loans, consumer direct loans, and nonguaranteed residential mortgages.  This growth was partially offset by a decline in consumer indirect loans, primarily due to the $1 billionindirect auto loan securitization in the second quarter of 2015, as well as a decline in home equity products.  

Deposits

Average consumer and commercial deposits for the current quarter were $148.2 billion, a 2% increase over the prior quarter and 8% compared to the prior year.  The sequential increase was driven by a 4% increase in NOW account balances and a 2% increase in money market account balances.  Slightly offsetting this growth in lower-cost deposits was a 1% decline in time deposits and a 2% decline in savings account balances.  Compared to the fourth quarter of 2014, average client deposits increased 8%, driven by increases in lower-cost deposits, partially offset by an 11% 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 and Tier 1 capital ratios at an estimated 9.8% and 10.6%, respectively, at December 31, 2015, on a fully phased-in basis.  The ratios of average total equity to average total assets and tangible equity to tangible assets were 12.43% and 9.39%, respectively, at December 31, 2015.  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 $175 million of its outstanding common stock in the fourth quarter.  In addition, the Company repurchased an incremental $39 million of common stock in the fourth quarter.  Consistent with its capital plan, the Company currently expects to repurchase approximately $350 millionof additional common stock in the first half of 2016.

Asset Quality

Total nonperforming assets were $735 million at December 31, 2015, up $203 million compared to the prior quarter and down $45 million compared to the fourth quarter of 2014.  The sequential increase was primarily due to downgrades of certain energy-related loans during the fourth quarter of 2015.  At December 31, 2015, the percentage of nonperforming loans to total loans was 0.49%, compared to 0.35% at September 30, 2015, and 0.48% at December 31, 2014.  Other real estate owned totaled $56 million, a 10% decrease from the prior quarter and a 43% decrease from the fourth quarter of 2014.

Net charge-offs were $83 million during the current quarter, an increase of $12 million and a decrease of $11 million compared to the prior quarter and the fourth quarter of 2014, respectively.  The ratio of annualized net charge-offs to total average loans was 0.24% during the current quarter, compared to 0.21% during the prior quarter and 0.28% during the fourth quarter of 2014.  The provision for credit losses was $51 million in the current quarter, an increase of $19 million from the prior quarter due to higher net charge-offs and a reduction in the decline in the allowance for loan and lease losses, as a result of higher loan growth.  The provision for credit losses decreased $23 million compared to the fourth quarter of 2014, driven by the overall improvement in asset quality, in addition to lower net charge-offs.

At December 31, 2015, the allowance for loan and lease losses was $1.8 billion, which represented 1.29% of total loans, a decline of $34 million, or 5 basis points, from September 30, 2015.  Excluding government-guaranteed loans, the allowance for loan and lease losses to period-end loans ratio was 1.34% as of December 31, 2015.

Early stage delinquencies increased 9 basis points from the prior quarter to 0.70% at December 31, 2015.  Excluding government-guaranteed loans, early stage delinquencies were 0.30%, down 1 basis point from the prior quarter.

Accruing restructured loans totaled $2.6 billion and nonaccruing restructured loans totaled $176 million at December 31, 2015, of which $2.6 billion were residential loans, $131 million were consumer loans, and $74 million were commercial loans.