STI 2018 Annual Report

71 Quarter Ended December 31, 2018 vs. Quarter Ended December 31, 2017 We reported net income available to common shareholders of $632 million in the fourth quarter of 2018, a decrease of $78 million, or 11%, compared to the same period in 2017. Earnings per average common diluted share were $1.40 for the fourth quarter of 2018, compared to $1.48 for the fourth quarter of 2017. The current quarter included $(0.10) per average common share related to the $60 million pre-tax NCF Retirement Plan settlement charge. The prior year quarter was favorably impacted by $0.39 per share of net discrete benefits in connection with Form 8-K and tax reform-related items. In the fourth quarter of 2018, net interest income was $1.6 billion, an increase of $98 million, or 7%, compared to the same period in 2017. The increase was driven by a 10 basis point expansion in net interest margin and a $6.4 billion increase in average earning assets. Net interest margin increased to 3.27%, driven primarily by higher earning asset yields, offset partially by higher funding costs. The provision for credit losses was $87 million in the fourth quarter of 2018, an increase of $8 million compared to the same period in 2017, due primarily to loan growth. Total noninterest income was $818 million in the fourth quarter of 2018, a decrease of $15 million compared to the same period in 2017, driven primarily by lower mortgage related income. Client transaction-related fee income, which includes service charges on deposit accounts, other charges and fees, and card fees, was $321 million in the fourth quarter of 2018, a decrease of $8 million compared to the same period in 2017. This decrease was due primarily to the impact of adopting the revenue recognition accounting standard, which resulted in the netting of certain expense items against this income. Investment banking income was $146 million in the fourth quarter of 2018, an increase of $24 million compared to the same period in 2017, due primarily to higher transaction activity in mergers and acquisitions and loan syndications, offset partially by lower transactional activity in high yield bond originations and equity offerings. Trading income was $24 million in the fourth quarter of 2018, a decrease of $17 million compared to the same period in 2017, due primarily to mark-to-market valuation losses resulting from adverse market conditions and higher counterparty credit valuation reserves in the current quarter. Mortgage related income was $85 million in the fourth quarter of 2018, a decrease of $19 million compared to the same period in 2017, driven by a $25 million decrease in mortgage production related income, offset partially by a $6 million increase in mortgage servicing related income. The decrease in mortgage production related incomewas due to lower production volume and lower gain on sale margins, offset partially by a repurchase reserve release during the current quarter. The increase in mortgage servicing related income was due primarily to higher servicing fees, offset partially by lower net hedge performance. Trust and investment management income was $74 million in the fourth quarter of 2018, a decrease of $6 million compared to the same period in 2017, due to trust termination fees received during the fourth quarter of 2017. Retail investment services income was $74 million in the fourth quarter of 2018, an increase of $4 million compared to the same period in 2017, due primarily to higher assets under management. Commercial real estate related income was $68 million in the fourth quarter of 2018, an increase of $6 million compared to the fourth quarter of 2017, driven primarily by higher client- driven structured real estate transactional activity during the current quarter. There were no net securities gains/(losses) recognized in the fourth quarter of 2018. In the fourth quarter of 2017, we recognized net securities losses of $109 million as a result of a restructuring of the securities AFS portfolio in response to the 2017 Tax Act. Gain on sale of subsidiary totaled $107million for the fourth quarter of 2017, resulting from our gain from the sale of PAC. See Note 3, "Acquisitions/Dispositions," to the Consolidated Financial Statements in this Form 10-K for additional information regarding the sale of PAC. Total noninterest expense was $1.5 billion in the fourth quarter of 2018, a decrease of $38 million compared to the same period in 2017. The decrease was due primarily to the net impact of $111 million related to Form 8-K and tax reform-related items recognized in the fourth quarter of 2017. Personnel expense was $857 million in the fourth quarter of 2018, an increase of $54 million compared to the same period in 2017, due primarily to the $60million pre-taxNCFRetirement Plan settlement charge recognized in the fourth quarter of 2018. Outside processing and software expense was $242 million in the fourth quarter of 2018, an increase of $28million compared to the same period in 2017, driven primarily by higher software- related costs resulting from the amortization of new and upgraded technology assets. Marketing and customer development expense was $49 million in the fourth quarter of 2018, a decrease of $55 million compared to the same period in 2017, due primarily to the $50 million tax reform-related charitable contribution in the fourth quarter of 2017 to support financial well-being initiatives. Regulatory assessments expensewas $7million in the fourth quarter of 2018, a decrease of $36 million compared to the same period in 2017. The decrease in regulatory assessments expense was driven by the cessation of the FDIC surcharge and a $9 million regulatory assessment credit in the current quarter. Operating losses totaled $39 million in the fourth quarter of 2018, an increase of $16 million compared to the same period in 2017, due primarily to higher legal and fraud-related expenses. Other staff expense was $14 million, a decrease of $32 million compared to the same period in 2017, driven primarily by higher severance costs recognized during the second half of 2017, largely in connection with the voluntary early retirement program announced in our December 4, 2017 Form 8-K. Other noninterest expense was $88 million in the fourth quarter of 2018, a decrease of $14 million compared to the same period in 2017. The decrease was driven primarily by lower branch and corporate real estate closure costs and lower software writedowns in the current quarter.