SunTrust 2014 Annual Report Download - page 92

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credit losses and a decline in noninterest expense, which in
aggregate, more than offset a decline in revenue.
Net interest income was $2.6 billion during 2013, a decrease
of $122 million, or 4%, compared to 2012. The decrease was
driven by lower deposit spreads and lower average loan balances.
Net interest income related to loans decreased $41 million, or
4%, driven by $1.3 billion, or 3%, decline in average loan
balances, and a two basis point decrease in loan spreads. The
decline in average loans was driven by the $2.0 billion student
loan sale executed in the fourth quarter of 2012 and home equity
line paydowns during 2013. These declines were partially offset
by increases in other consumer loan categories as a result of
higher consumer loan production. Net interest income related to
deposits decreased $107 million, or 6%, as deposit spreads
decreased 14 basis points. Average deposit balances were
essentially flat; however, favorable deposit mix trends continued
as lower cost average deposit balances increased, offsetting a
$2.4 billion, or 16%, decline in average time deposits. Other
funding costs related to other assets improved by $29 million,
driven primarily by a decline in funding rates.
Provision for credit losses was $261 million during 2013, a
decrease of $322 million, or 55%, compared to 2012. The
decrease was driven by declines in net charge-offs of $211
million in home equity lines and $41 million in consumer
mortgage loans. Net charge-offs during 2012 included $43
million related to a change in policy which accelerated the timing
for charging-off junior lien loans and $31 million related to a
change in policy regarding loans discharged in Chapter 7
bankruptcy. The decrease was also partially attributable to a
higher credit for allocated provision expense.
Total noninterest income was $1.5 billion during 2013, a
decrease of $17 million, or 1%, compared to 2012. The decrease
was largely driven by lower service charges on deposits of $17
million and lower card services revenue of $9 million, which
were partially offset by increases in wealth management revenue.
The decrease in card services revenue was driven by an
accounting treatment change in the third quarter of 2012 for card
reward costs in which expenses were reclassified to contra-
revenue, to offset related revenue.
Total noninterest expense was $2.8 billion during 2013, a
decrease of $281 million, or 9%, compared to 2012. The decrease
was driven by reductions in staff expense, other operating
expenses, and overhead costs. These declines were partially the
result of a more efficient branch network and staffing model
resulting from reducing the number of branches by 7% during
2013, as progress was made in efforts to better align distribution
channels with evolving client preferences.
Wholesale Banking
Wholesale Banking reported net income of $822 million for the
year ended December 31, 2013, an increase of $103 million, or
14%, compared to 2012. The increase in net income was
attributable to decreases in provision for credit losses and
noninterest expense and an increase in net interest income,
partially offset by a decrease in noninterest income.
Net interest income was $1.7 billion, a $40 million, or 2%,
increase compared to 2012, driven by an increase in average loan
and deposit balances. Net interest income related to loans
increased, as average loan balances increased $3.4 billion, or
7%, driven by increases in tax-exempt, C&I, and dealer floor
plans loans. Average deposit balances increased $865 million,
or 2%, compared to the same period in 2012. Favorable trends
in deposit mix continued as lower cost demand deposits
increased $319 million, or 2%, average combined interest-
bearing transaction accounts and money market accounts
increased $751 million, or 4%, and time deposits decreased $202
million, or 18%.
Provision for credit losses was $124 million, a decrease of
$69 million, or 36%, from 2012. The decrease was driven by
declines in CRE, commercial, and residential mortgage loan net
charge-offs.
Total noninterest income was $1.1 billion, a decrease of $119
million, or 10%, from the same period in 2012, driven by lower
trading revenue and the higher impairment charges related to
aircraft leases incurred during 2013. These declines were
partially offset by gains on the disposition of affordable housing
partnership assets held for sale and higher investment banking
fees.Total noninterest expense was $1.5 billion, a decrease of
$177 million, or 11%, compared to 2012 driven by continued
declines in other real estate related expense and other credit
related expense. These declines in expenses were partially offset
by increased operating losses as 2012 included the impact of the
favorable settlement of litigation claims. Additionally, 2012
included a $96 million impairment charge related to the planned
dispositions of affordable housing partnership assets that were
substantially completed during 2013.
Mortgage Banking
Mortgage Banking reported a net loss of $527 million for the
year ended December 31, 2013, an improvement of $78 million,
or 13%, compared to 2012. The improvement was driven by a
lower provision for mortgage repurchases and lower provision
for credit losses. These improvements were partially offset by a
decrease in mortgage production related and servicing income
and an increase in noninterest expense primarily attributable to
the recognition of certain legacy mortgage matters.
Net interest income was $539 million during 2013, an
increase of $28 million, or 5%, compared to 2012. The increase
was predominantly due to higher net interest income on loans
that was partially offset by lower deposit and LHFS net interest
income. Net interest income on loans increased $46 million, or
14%, due to improved spreads on residential mortgages, as well
as nonaccrual and restructured loans. However, average
residential mortgage loans decreased $1.5 billion, or 6%, which
partially offset the improved spreads. Net interest income on
deposits decreased $11 million due to a $432 million decrease,
or 12%, in total average deposits. Net interest income on LHFS
decreased $9 million due to lower loan spreads, coupled with a
$207 million decrease in average balances.
Provision for credit losses was $170 million during 2013, a
decrease of $448 million, or 72%, compared to 2012. The
improvement was driven by a decline in net charge-offs, partially
attributable to the $193 million in net charge-offs related to the
transfer of loans to LHFS and subsequent sale of nonperforming
residential mortgage loans during 2012. Additionally, policy
changes related to second lien home equity loans and discharged
Chapter 7 bankruptcy loans added $70 million in aggregate net
charge-offs during 2012.