For the first quarter of 2019, SunTrust Banks, Inc. reported net income available to common shareholders of $554 million, or $1.24 per average common diluted share, which includes $(0.09) per share of merger-related costs associated with the Company's previously announced proposed merger with BB&T Corporation. This compares to $1.40 for the prior quarter and $1.29 for the first quarter of 2018.

"Our performance continues to improve and this quarter was no exception, with earnings per share increasing by 3% year-over-year (excluding merger-related costs). Loan growth remains a bright spot, with average balances up 3% sequentially and 8% year-over-year, a reflection of the ongoing investments in our business and our clients' optimistic outlook on the economy," said William H. Rogers, Jr., chairman and CEO of SunTrust Banks, Inc. "More importantly, while our results this quarter highlight SunTrust's individual strength, we know that after merging with BB&T, we will be even better positioned to enhance shareholder value, improve the client experience, and invest in our teammates, associates, and communities."

First Quarter 2019 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 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 $554 million, or $1.24 per average common diluted share, compared to $1.40 for the prior quarter and $1.29 for the first quarter of 2018.

The first quarter of 2019 included $45 million, or $(0.09) per average common share of merger-related costs, comprised primarily of M&A advisory fees and legal costs associated with the Company's previously announced proposed merger with BB&T Corporation.

The prior quarter included a $(0.10) per share discrete charge associated with the settlement of a legacy pension plan.

Total revenue was down 2% sequentially and up 4% year-over-year. The sequential decrease was driven primarily by lower noninterest income, while the year-over-year increase was driven by higher net interest income.

Net interest margin was 3.27% in the current quarter, stable sequentially and up 3 basis points compared to the prior year quarter. The year-over-year increase was driven primarily by higher benchmark interest rates in addition to positive mix shift in the loans held for investment ("LHFI") portfolio, offset partially by higher funding costs.

Provision for credit losses increased $66 million sequentially and $125 million year-over-year, driven by strong loan growth and a stable allowance for loan and lease losses ("ALLL") to period-end LHFI ratio (compared to declines in prior quarters).

Noninterest expense increased $7 million sequentially and $72 million year-over-year. The current quarter included $45 million of aforementioned merger-related costs. The prior quarter included a $60 million pre-tax pension plan settlement charge. Excluding these discrete items, noninterest expense increased $22 million sequentially and $27 million year-over-year.

The efficiency and tangible efficiency ratios for the current quarter were 63.4% and 62.7%, respectively, which were unfavorably impacted by the $45 million of merger-related costs. Excluding these costs, the adjusted tangible efficiency ratio was 60.8% for the current quarter, compared to 58.6% for the prior quarter and 62.1% for the prior year quarter.

Balance Sheet

Average performing LHFI was up 3% compared to the prior quarter and up 8% year-over-year, driven by growth across most loan categories.

Average consumer and commercial deposits decreased 1% compared to the prior quarter and remained relatively stable year-over-year, driven primarily by declines in money market accounts and demand deposits, offset largely by growth in NOW accounts and time deposits.

Capital

Estimated capital ratios continue to be well above regulatory requirements. The Common Equity Tier 1 ("CET1") ratio was estimated to be 9.1% as of March 31, 2019, lower than the prior quarter due primarily to loan growth.

During the quarter, the Company repurchased $250 million of its outstanding common stock. The Company does not expect to utilize the $500 million remaining share repurchase authorization available under its 2018 Capital Plan in view of the proposed merger.

Book value per common share was $51.15 and tangible book value per common share was $37.22, up 3% and 4%, respectively, from December 31, 2018, driven primarily by growth in retained earnings and a decrease in accumulated other comprehensive loss.

Asset Quality

Nonperforming loans ("NPLs") decreased $4 million from the prior quarter and represented 0.34% of period-end LHFI at March 31, 2019, compared to 0.35% of period-end LHFI at December 31, 2018.

Net charge-offs for the current quarter were $97 million, or 0.26% of total average LHFI on an annualized basis, compared to 0.26% during the prior quarter and 0.22% during the first quarter of 2018.

At March 31, 2019, the ALLL to period-end LHFI ratio was 1.06%, stable compared to the prior quarter.

Provision for credit losses increased $66 million sequentially and $125 million year-over-year, driven by strong loan growth and a stable ALLL to period-end LHFI ratio (compared to declines in prior quarters).

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

Revenue

Total revenue was $2.4 billion for the current quarter, a decrease of $37 million, or 2%, compared to the prior quarter, driven by lower noninterest income. Noninterest income decreased $34 million sequentially due largely to lower commercial real estate-related income, investment banking income, and client transaction-related fees, offset partially by higher trading income and mortgage-related income. Compared to the first quarter of 2018, total revenue increased $94 million, or 4%, driven by a $106 million increase in net interest income as a result of net interest margin expansion and strong growth in average earning assets, offset partially by lower noninterest income.

Net Interest Income

Net interest income was $1.6 billion for the first quarter of 2019, a decrease of $3 million compared to the prior quarter due primarily to fewer days during the current quarter, largely offset by strong loan growth. The $106 million increase relative to the prior year was driven by a 3 basis point expansion in the net interest margin and 6% growth in average earning assets.

Net interest margin for the current quarter was 3.27%, which was stable compared to the prior quarter and 3 basis points higher than the prior year. The year-over-year increase was driven primarily by higher earning asset yields, offset partially by higher funding costs.

Noninterest Income

Noninterest income was $784 million for the current quarter, compared to $818 million for the prior quarter and $796 million for the first quarter of 2018. The $34 million sequential decrease was due largely to lower commercial real estate-related income, investment banking income, and client transaction-related fees, offset partially by higher trading income and mortgage-related income. Compared to the prior year, noninterest income decreased $12 million driven primarily by lower other noninterest income, wealth-related income, and client transaction-related fees, offset partially by higher capital markets and mortgage-related income.

Client transaction-related fees (namely service charges on deposits, other charges and fees, and card fees) decreased $15 million sequentially and $6 million year-over-year due primarily to lower client transaction activity. The sequential decrease was also driven by fewer days during the current quarter.

Investment banking income was $130 million for the current quarter, compared to $146 million in the prior quarter and $133 million for the first quarter of 2018. The $16 million sequential decrease was due to lower syndicated finance and M&A activity.

Trading income was $60 million for the current quarter, compared to $24 million in the prior quarter and $42 million in the prior year. The $36 million sequential and $18 million year-over-year increases were due primarily to positive changes in mark-to-market valuations on corporate bond inventory in the current quarter in addition to increased client activity.

Mortgage-related income for the current quarter was $100 million, compared to $85 million for the prior quarter and $90 million for the first quarter of 2018. The $15 million sequential and $10 million year-over-year increases were driven primarily by higher servicing-related income attributable to favorable net hedge performance and lower decay. The year-over-year increase was also favorably impacted by higher core servicing fees. At March 31, 2019, the servicing portfolio totaled $169.3 billion, relatively stable compared to the prior quarter and a 3% increase year-over-year due to MSRs purchased in the first and third quarters of 2018.

Trust and investment management income was $71 million for the current quarter, compared to $74 million for the prior quarter and $75 million for the prior year quarter. The $3 million sequential and the $4 million year-over-year decreases were due primarily to lower fees arising from adverse market conditions, which led to reduced assets under management at the end of the fourth quarter of 2018.

Retail investment services income was $69 million for the current quarter, compared to $74 million for the prior quarter and $72 million for the prior year quarter. The $5 million sequential and $3 million year-over-year decreases were due primarily to reduced client transaction activity and adverse market conditions, which led to reduced assets under management at the end of the fourth quarter of 2018.

Commercial real estate-related income was $24 million for the current quarter, compared to $68 million for the prior quarter and $23 million for the prior year. The sequential decrease was driven primarily by seasonal declines in structured real estate, SunTrust Community Capital (tax credit-related income), and the Company's agency lending business.

Other noninterest income was $24 million for the current quarter, compared to $26 million in the prior quarter and $48 million in the first quarter of 2018. The $24 million year-over-year decrease was due primarily to a $23 million remeasurement gain on an equity investment in a fintech company during the first quarter of 2018.

Noninterest Expense

Noninterest expense was $1.5 billion in the current quarter, up $7 million sequentially and $72 million compared to the first quarter of 2018. The current quarter included $45 million in aforementioned merger-related costs. The prior quarter included a $60 million pre-tax pension plan settlement charge. Excluding these discrete items, noninterest expense increased $22 million sequentially and $27 million year-over-year. The sequential increase was driven primarily by seasonal increases in employee compensation and benefits, partially offset by lower operating losses. The year-over-year increase was driven by higher outside processing and software costs, offset partially by lower employee compensation and benefits and regulatory assessments.

Employee compensation and benefits expense was $824 million in the current quarter, compared to $857 million in the prior quarter and $853 million in the first quarter of 2018. The $33 million sequential decrease was driven primarily by the $60 million legacy pension plan settlement charge recognized in the fourth quarter of 2018, offset partially by the seasonal increase in employee benefit costs and FICA taxes. The $29 million year-over-year decrease was primarily driven by lower contract labor costs in the current quarter.

Outside processing and software expense was $238 million in the current quarter, compared to $242 million in the prior quarter and $206 million in the first quarter of 2018. The $32 million year-over-year increase was driven primarily by higher software-related costs resulting from the amortization of new and upgraded technology assets.

Net occupancy expense was $102 million in the current quarter, stable compared to the prior quarter and $8 million higher than the first quarter of 2018. The year-over-year increase was driven primarily by higher rent expense and the absence of amortization of deferred gains on sale leaseback transactions following the adoption of the lease accounting standard during the first quarter of 2019.

Merger-related costs totaled $45 million for the current quarter. This represents a new income statement line item introduced to capture merger-related expenses associated with the Company's proposed merger with BB&T Corporation as announced on February 7, 2019. The current quarter costs were driven by M&A advisory fees and legal costs.

Marketing and customer development expense was $41 million in the current quarter, compared to $49 million in the prior quarter and $41 million in the first quarter of 2018. The $8 million sequential decrease was driven by normal seasonality in advertising and client development costs.

Operating losses were $22 million in the current quarter, compared to $39 million in the prior quarter and $6 million in the first quarter of 2018. The sequential decrease was driven primarily by higher legal and fraud-related costs recognized during the fourth quarter of 2018. The year-over-year increase was driven primarily by a $10 million net benefit from the progression of certain legal matters during the first quarter of 2018.

Regulatory assessments expense was $19 million in the current quarter, compared to $7 million in the prior quarter and $41 million in the prior year. The sequential increase was driven primarily by a $9 million regulatory assessment credit recognized during the fourth quarter of 2018. The year-over-year decrease was driven by the cessation of the FDIC Deposit Insurance Fund surcharge in the fourth quarter of 2018.

Other noninterest expense was $141 million in the current quarter, compared to $122 million in the prior quarter and $121 million in the first quarter of 2018. The $19 million sequential and $20 million year-over-year increases were driven primarily by higher branch closure-related costs.

Income Taxes

For the first quarter of 2019, the Company recorded a provision for income taxes of $104 million compared to $136 million for the prior quarter and $147 million for the first quarter of 2018. The effective tax rate for the current quarter was 15%, compared to 17% in the prior quarter and 19% in the first quarter of 2018. The first quarter of 2019 included $17 million of discrete tax benefits primarily related to the typical seasonal impact from stock-based compensation.

Balance Sheet

At March 31, 2019, the Company had total assets of $220.4 billion and total shareholders' equity of $24.8 billion, representing 11% of total assets. Book value per common share was $51.15 and tangible book value per common share was $37.22, up 3% and 4%, respectively, compared to December 31, 2018, driven primarily by growth in retained earnings and a decrease in accumulated other comprehensive loss.

Loans and Deposits

Average performing LHFI totaled $153.7 billion for the current quarter, up 3% compared to the prior quarter and up 8% compared to the prior year driven by broad-based growth across most loan categories, with the exception of commercial construction, residential home equity products, and residential construction.

Average consumer and commercial deposits totaled $159.9 billion for the current quarter, down 1% compared to the prior quarter and relatively stable compared to the first quarter of 2018. These sequential and year-over-year changes were driven by declines in money market accounts and demand deposits, offset by growth in NOW accounts and 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 9.1% at March 31, 2019. The ratios of average total equity to average total assets and tangible common equity to tangible assets were 11.3% and 7.7%, respectively, at March 31, 2019. 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 $0.50 per common share and repurchased $250 million of its outstanding common stock in the first quarter of 2019. The Company does not expect to utilize the $500 million remaining share repurchase authorization available under its 2018 Capital Plan in view of the proposed merger with BB&T Corporation.

Asset Quality

Overall asset quality performance continues to be strong. Nonperforming assets ("NPAs") totaled $648 million at March 31, 2019, up $59 million from the prior quarter and down $130 million year-over-year. The ratio of NPLs to period-end LHFI was 0.34%, 0.35%, and 0.50% at March 31, 2019, December 31, 2018, and March 31, 2018, respectively. The year-over-year decrease was driven primarily by lower residential mortgage nonperforming loans due to loans transitioning from non-accruing (as a result of forbearance relief provided after hurricanes) back to accruing status.

Net charge-offs totaled $97 million during the current quarter, stable compared to the prior quarter and an increase of $18 million compared to the first quarter of 2018. The ratio of annualized net charge-offs to total average LHFI was 0.26% during the current quarter, compared to 0.26% during the prior quarter and 0.22% during the prior year quarter.

The provision for credit losses was $153 million in the current quarter, an increase of $66 million sequentially and $125 million year-over-year, driven by strong loan growth and a stable ALLL to period-end LHFI ratio (compared to declines in prior quarters). At March 31, 2019, the ALLL was $1.6 billion, which represented 1.06% of period-end loans, stable relative to December 31, 2018 and a 13 basis point decline relative to March 31, 2018, driven by continued improvements in asset quality.

Early stage delinquencies decreased 9 basis points from the prior quarter and 4 basis points from March 31, 2018 to 0.64% at March 31, 2019. Excluding government-guaranteed loans, early stage delinquencies were 0.21%, down 6 basis points compared to the prior quarter and down 1 basis point compared to the first quarter of 2018.

In the current quarter, the Company transferred $465 million of accruing residential troubled debt restructured ("TDR") loans from LHFI to loans held for sale ("LHFS"), in anticipation of a sale in the second quarter of 2019. This resulted in a transfer of $31 million of the associated allowance transferring into the carrying value in LHFS. This transaction had no impact on the provision for loan losses in the first quarter.