STI 2018 Annual Report

42 Asset Quality Our asset quality metrics were strong during 2018, evidenced by our low net charge-offs to total average LHFI ratio and lowNPLs to period-end LHFI ratio. These low levels reflect the relative strength across our LHFI portfolio, particularly in C&I, CRE, residential mortgages, and home equity products, though we recognize that there could be normalization and variability moving forward. See the “Allowance for Credit Losses” and “Nonperforming Assets” sections of this MD&A for detailed information regarding our net charge-offs and NPLs. NPAs decreased $152 million, or 21%, during 2018, driven by charge-offs, paydowns, and the return to accrual status of certain C&I NPLs and nonperforming home equity products. At December 31, 2018 and December 31, 2017, the ratio of NPLs to period-end LHFI was 0.35% and 0.47%, respectively. Early stage delinquencies were 0.73% and 0.80% of total loans at December 31, 2018 and December 31, 2017, respectively. Early stage delinquencies, excluding government- guaranteed loans, were 0.27% and 0.32% at December 31, 2018 and December 31, 2017, respectively. The reductions in early stage delinquencies resulted primarily from improvements in consumer loans. For 2018 and 2017, net charge-offs totaled $338 million and $367 million, and the net charge-offs to total average LHFI ratio was 0.23% and 0.25%, respectively. The decline in net charge- offs compared to 2017 was driven primarily by overall asset quality improvements and lower commercial net charge-offs. Looking to 2019, we expect to operate within a net charge- offs to total average LHFI ratio of between 25 and 30 basis points. Additionally, we expect the ALLL to period-end LHFI ratio to generally stabilize, which would result in a provision for loan losses that modestly exceeds net charge-offs, given loan growth.