DEF 14A 1 d472325ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. )

 

  Filed by the Registrant     Filed by a Party other than the Registrant

 

Check the appropriate box:

      

Preliminary Proxy Statement

      

CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2))

      

Definitive Proxy Statement

      

Definitive Additional Materials

      

Soliciting Material Under Rule 14a-12

SUNTRUST BANKS, INC.

(Name of Registrant as Specified In Its Charter) (Name of Person(s) Filing Proxy Statement, if Other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

       No fee required.

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LOGO

 

 

LOGO

March 9, 2018

Fellow Owners:

One of my most important obligations is to oversee the work that our company does to execute on its purpose of Lighting the Way to Financial Well-Being while also deploying our owners’ capital and delivering consistently improving financial results.

I am proud of the strong financial performance that SunTrust delivered in 2017 and the value we created for our owners. In 2017 we continued our focus on growing the earnings of the company, improving our efficiency and increasing our capital returns to owners. Our progress in these areas is the result of our consistent long-term strategy, which involves, among other things, three key points of emphasis: (1) growing and deepening client relationships, (2) improving efficiency, and (3) optimizing the balance sheet and enhancing returns.

At SunTrust, leadership starts with your Board of Directors, which remains very focused on the Company’s strategic initiatives to strengthen financial performance and in turn foster long-term sustainable growth for our clients and owners. We are extremely fortunate to benefit from their wisdom, experience, expertise and dedication. We elected two new directors in the past year—Agnes Bundy Scanlan and Steven C. Voorhees—each of whom brings fresh perspectives and valuable insight to our Board.

We will also bid farewell to one of our directors in 2018, Kyle Prechtl Legg, who has decided to retire from the Board at our annual meeting of shareholders. We deeply appreciate Kyle’s outstanding service over the past seven years and her wisdom and commitment to advancing the interests of all of the stakeholders of SunTrust at an important time in our history.

I hope to see you at our 2018 annual meeting of shareholders on Tuesday, April 24, 2018, in Atlanta. Whether or not you plan to attend the meeting, please vote as promptly as possible to make sure your vote is counted. Every shareholder vote is important.

Sincerely,

 

 

LOGO

William H. Rogers, Jr.

Chairman and Chief Executive Officer


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LOGO

To the Shareholders of SunTrust Banks, Inc.

The Annual Meeting of Shareholders of SunTrust Banks, Inc. will be held in Suite 105 on the Atrium level of SunTrust Plaza Garden Offices, 303 Peachtree Center Avenue, Atlanta, Georgia, 30308 on Tuesday, April 24, 2018, at 9:30 a.m. local time, for the following purposes:

 

1.

To elect 12 directors nominated by the Board of Directors to serve until the next annual meeting of shareholders and until their respective successors have been elected,

 

2.

To approve, on an advisory basis, the Company’s executive compensation,

 

3.

To approve the SunTrust Banks, Inc. 2018 Omnibus Incentive Compensation Plan, and

 

4.

To ratify the appointment of Ernst & Young LLP as our independent auditor for 2018.

Only shareholders of record at the close of business on February 14, 2018 will be entitled to notice of and to vote at the Annual Meeting or any adjournment thereof.

For your convenience, we will offer a listen-only, audio webcast of the meeting. To listen to the webcast, please go to investors.suntrust.com shortly before the meeting time and follow the instructions provided. If you miss the meeting, you may listen to a replay of the webcast on our Investor Relations website beginning the afternoon of April 24. Please note that you will not be able to vote your shares via the webcast. If you plan to listen to the webcast, please submit your vote using one of the methods described below prior to the meeting.

BY ORDER OF THE BOARD OF DIRECTORS

Ellen M. Fitzsimmons,

Corporate Secretary

March 9, 2018

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on April 24, 2018. The 2018 Proxy Statement and the 2017 Annual Report to Shareholders for the year ended December 31, 2017 are also available at www.proxydocs.com/sti.

IMPORTANT NOTICE: Whether or not you plan to attend the Annual Meeting, please vote your shares: (1) via a toll-free telephone call, (2) via the internet, or (3) if you received a paper copy of this proxy statement, by completing, signing, dating and returning the enclosed proxy card as soon as possible in the postage paid envelope provided. If you hold shares of common stock through a broker or other nominee, your broker or other nominee will vote your shares for you if you provide instructions on how to vote your shares. In the absence of instructions, your broker can only vote your shares on certain limited matters, but will not be able to vote your shares on other matters (including the election of directors). It is important that you provide voting instructions because brokers and other nominees do not generally have authority to vote your shares for the election of directors without instructions from you.

 

 

 

     Voting can be completed in one of four ways:

 

 

   

LOGO

 

 

online at www.investorvote.com/STI

 

 

LOGO

 

 

returning the proxy card BY MAIL

 

LOGO

 

 

calling toll-free from the United States,

U.S. territories and Canada at 1-800-652-VOTE (8683)

 

 

LOGO

 

 

or attending the meeting to vote IN PERSON


Table of Contents
Table of Contents   LOGO

 

PROXY SUMMARY      1  

 

    

 

 

NOMINEES FOR DIRECTORSHIP (ITEM 1)      4  

 

 

 

CORPORATE GOVERNANCE      9  

 

 

 

EXECUTIVE OFFICERS      16  
EXECUTIVE COMPENSATION      18  

 

 

 

ADVISORY VOTE ON EXECUTIVE COMPENSATION (ITEM 2)      42  
APPROVAL OF THE SUNTRUST BANKS, INC. 2018 OMNIBUS INCENTIVE COMPENSATION PLAN (ITEM 3)      43  
RATIFICATION OF INDEPENDENT AUDITOR (ITEM 4)      52  

 

 

 

STOCK OWNERSHIP OF DIRECTORS, MANAGEMENT AND PRINCIPAL SHAREHOLDERS      54  
OTHER INFORMATION      55  

 

 


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LOGO

SUNTRUST BANKS, INC.

303 PEACHTREE STREET, N.E.

ATLANTA, GEORGIA 30308

 

 

PROXY STATEMENT

 

 

 

2018 ANNUAL MEETING OF SHAREHOLDERS

 

The following summary is intended to provide a broad overview of the items that you will find elsewhere in this proxy statement. As this is only a summary, we encourage you to read the entire proxy statement for more information about these topics prior to voting.

 

Date and Time: April 24, 2018 at 9:30 AM

 

Place: SunTrust Plaza Garden Offices, 303 Peachtree Center Avenue, Suite 105, Atlanta, Georgia, 30308

 

Record Date: February 14, 2018

 

Audio Webcast: investors.suntrust.com

      

How to Vote:

 

      

LOGO

   online at www.investorvote.com/STI
      

LOGO

   calling toll-free from the United States, U.S. territories and Canada at 1-800-652-VOTE (8683)
      

LOGO

   returning the proxy card BY MAIL
      

LOGO

   or attending the meeting to vote IN PERSON

SunTrust at a Glance

 

 

General1    Governance    Compensation

 1,268 full-service branches

 

 $206 billion total assets

 

 24,324 teammates2

 

 NYSE: STI

  

 all independent directors other than CEO

 

 lead independent director

 

 all directors elected annually

 

 majority vote standard in bylaws

 

 9 of 11 independent director nominees joined since 2010.

 

 average director tenure is 5.7 years.

  

 strong clawback policies

 

 share ownership and retention requirements

 

 81% of NEO target compensation is at risk

 

 double-triggers required for Change-
in-Control severance

 

 no tax gross-ups

 

1

as of December 31, 2017.

 

2 

full-time and part-time employees

Proxy Statement and Solicitation

The enclosed proxy is solicited on behalf of the Board of Directors of SunTrust Banks, Inc. in connection with the Annual Meeting of Shareholders of SunTrust to be held in Suite 105 on the Atrium level of SunTrust Plaza Garden Offices, 303 Peachtree Center Avenue, Atlanta, Georgia, 30308, on Tuesday, April 24, 2018, at 9:30 a.m. local time. We are first mailing this proxy statement and the enclosed proxy to our shareholders on or about March 9, 2018. We will bear the cost of soliciting proxies. SunTrust has retained Georgeson LLC to assist in the solicitation of proxies for a fee of $10,000 plus expenses. Proxies may also be solicited by our employees. Proxies may be solicited in person, by physical and electronic mail, and by telephone call.

 

SunTrust Banks, Inc. - 2018 Proxy Statement           1


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Proxy Summary

 

Meeting Agenda and Voting Recommendation

 

 

    Proposal      Board’s
Recommendation
     Page
Reference

    1. Election of 12 Directors

     FOR EACH      4

    2. Advisory Vote To Approve Executive Compensation

     FOR      42

    3. Approval of 2018 Omnibus Incentive Compensation Plan

     FOR      43

    4. Ratification of Independent Auditor

     FOR      53

Director Nominees (Proposal No. 1, page 4)

 

Each director nominee is elected annually by a majority of votes cast. See pages 4-5 of this proxy statement for more information about the nominees.

 

  Director    Age      Since    Tenure    Independent      Committees

  Agnes Bundy Scanlan

   60      2017    1         GN, RC

  Dallas S. Clement

   52      2015    2         AC, GN

  Paul R. Garcia

   65      2014    3         AC, CC

  M. Douglas Ivester

   70      1998    19         EC, CC, GN

  Donna S. Morea

   63      2012    5         CC, RC

  David M. Ratcliffe

   69      2011    6         CC, EC, RC*

  William H. Rogers, Jr.

   60      2011    6    CEO      EC*

  Frank P. Scruggs, Jr.

   66      2013    4         CC, RC

  Bruce L. Tanner

   59      2015    2         GN, RC

  Steven C. Voorhees

   63      2018    0         GN, RC

  Thomas R. Watjen

   63      2010    7         AC,* EC, GN

  Dr. Phail Wynn, Jr.

   70      2004    13         AC, EC, GN*

 

AC

 

Audit Committee

  

EC

 

Executive Committee

CC

 

Compensation Committee

  

GN

 

Governance and Nominating Committee

*

 

Committee Chair

  

RC

 

Risk Committee

Advisory Vote to Approve Executive Compensation (Proposal No. 2, page 42)

 

Our shareholders have the opportunity to cast a non-binding advisory vote to approve our executive compensation. We recommend that you review our Compensation Discussion and Analysis, which begins on page 18, for a description of the actions and decisions of the Compensation Committee of the Board during 2017 regarding our compensation programs, as well as the accompanying compensation tables and related narrative. We are pleased that last year our shareholders approved executive compensation by more than 90% of votes cast.

The Board of Directors recommends a vote FOR the proposal.


 

2           SunTrust Banks, Inc. - 2018 Proxy Statement


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Proxy Summary

 

Approval of the 2018 Omnibus Incentive Compensation Plan (Proposal No. 3, page 43)

 

Shareholders are being asked to approve the adoption of the SunTrust Banks, Inc. 2018 Omnibus Incentive Compensation Plan (the “Plan”). If approved by shareholders, the Plan will replace the SunTrust Banks, Inc. 2009 Stock Plan and become our primary plan for providing long-term incentive compensation, including equity compensation, to our eligible employees and non-employee directors.

The Board of Directors recommends a vote FOR the proposal.

Ratification of the Independent Auditor

(Proposal No. 4, page 53)

 

Ernst & Young LLP has served as the Company’s independent registered public accounting firm since 2007. Shareholders are being asked to ratify the appointment of Ernst & Young by the Audit Committee for 2018.

The Board of Directors recommends a vote FOR the proposal.


 

SunTrust Banks, Inc. - 2018 Proxy Statement           3


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Nominees for Directorship (Item 1)

 

Nominees for Directorship (Item 1)

 

 

Upon the recommendation of its Governance and Nominating Committee, the Board nominated the following 12 persons for election as directors at the Annual Meeting in 2018: Agnes Bundy Scanlan, Dallas S. Clement, Paul R. Garcia, M. Douglas Ivester, Donna S. Morea, David M. Ratcliffe, William H. Rogers, Jr., Frank P. Scruggs, Jr., Bruce L. Tanner, Steven C. Voorhees, Thomas R. Watjen, and Phail Wynn, Jr. Each of the 12 persons nominated for election, if elected, is expected to serve until next year’s annual meeting of shareholders and until his or her successor is elected and qualified. If, at the time of the Annual Meeting, any of the nominees should be unable or decline to serve as a director, the proxies are authorized to be voted for such substitute nominee or nominees as the Board recommends. The Board has no reason to believe that any nominee will be unable or decline to serve as a director. The number of shares of common stock beneficially owned by each nominee for director is listed under the heading “Stock Ownership of Directors, Management and Principal Shareholders” on page 54.

Below is a description of each nominee, the director’s age, the year in which the person first became a director of SunTrust, and a brief description of the experience, attributes, and skills considered by the Governance and Nominating Committee and the Board. Except for Mr. Rogers, our CEO, none of the nominees is employed by SunTrust or any affiliate of SunTrust.

Agnes Bundy Scanlan, 60, has been a director since 2017. She is a senior adviser for Treliant Risk Advisors where she counsels financial services firms on regulatory, compliance, and risk management matters. She also served as a senior adviser at Treliant from 2012 to 2015. From 2015 to 2017, she served as the Northeast Regional Director of Supervision Examinations for the Consumer Financial Protection Bureau. Previously, she served as Chief Compliance Officer, Chief Privacy Officer, Regulatory Relations Executive, and Director of Corporate Community Development for, and as legal counsel to, a number of banks and financial services firms, and as legal counsel to the United States Senate Budget Committee. Ms. Bundy Scanlan holds a JD degree from Georgetown University Law Center.

Ms. Bundy Scanlan’s deep risk management, regulatory, compliance, and government affairs experience well qualify her to serve on our Board.

Dallas S. Clement, 52, has been a director since 2015. He is Executive Vice President and Chief Financial Officer of Cox Enterprises, responsible for its treasury, financial reporting and control, tax, audit and financial planning and analysis functions. Previously, he served as Executive Vice President and Chief Financial Officer for Cox Automotive, the largest automotive marketplace and leading provider of software solutions to auto dealers throughout the U.S. He previously served on the boards of Unwired Planet and BitAuto.

 


Mr. Clement’s financial and business experience, including service as a CFO of a large customer-facing company with significant technology operations, well qualifies him to serve on our Board.

Paul R. Garcia, 65, has been a director since 2014. Mr. Garcia is the retired Chairman and CEO of Global Payments Inc., a leading provider of credit card processing, check authorization and other electronic payment processing services. Mr. Garcia also serves as a director of The Dun & Bradstreet Corporation. Previously, he served on the boards of West Corporation, Global Payments Inc. and Mastercard International.

Mr. Garcia’s extensive knowledge of and experience in the payment services and financial services industries, and his service as a Chairman and CEO of a publicly-traded company, well qualify him to serve on our Board.

M. Douglas Ivester, 70, has been a director since 1998 and has been our Lead Director since 2009. He is President of Deer Run Investments, LLC. From 1997 until 2000, Mr. Ivester was Chairman of the Board and Chief Executive Officer of The Coca- Cola Company. Mr. Ivester spent more than 20 years with The Coca-Cola Company and held such positions as Chief Financial Officer and President and Chief Operating Officer, where he was responsible for running the company’s global business. Previously, he served as a director of S1 Corporation and Georgia-Pacific Corporation.

Mr. Ivester’s long and varied business career, including service as Chairman and CEO and deep financial and accounting experience gained while serving as a Chief Financial Officer, well qualify him to serve on our Board.

Donna S. Morea, 63, has been a director since 2012. Ms. Morea is a nationally recognized executive in IT professional services management with over 30 years of experience. From May 2004 until her retirement at the end of 2011, Ms. Morea served as President of CGI Technology and Solutions, Inc., a wholly-owned U.S. subsidiary of CGI Group, one of the largest independent information technology firms in North America. In that role, she led CGI’s IT and business process services in the US and India for large enterprises in financial services, healthcare, telecommunications and government. She previously served on CGI Group’s board of directors and presently serves on the board of Science Applications International Corporation, a publicly-traded firm which provides technical, engineering, and enterprise information technology services. She also served as the Chair of the Northern Virginia Technology Council, with over 1,000 member organizations.

Ms. Morea’s management experience and information technology expertise well qualify her to serve on our Board.

 

 


 

4           SunTrust Banks, Inc. - 2018 Proxy Statement


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Nominees for Directorship (Item 1)

 

David M. Ratcliffe, 69, has been a director since 2011. Mr. Ratcliffe retired in December 2010 as Chairman, President and Chief Executive Officer of Southern Company, one of America’s largest producers of electricity, a position he had held since 2004. From 1999 until 2004, Mr. Ratcliffe was President and CEO of Georgia Power, Southern Company’s largest subsidiary. Prior to becoming President and CEO of Georgia Power in 1999, Mr. Ratcliffe served as Executive Vice President, Treasurer and Chief Financial Officer. Mr. Ratcliffe previously served as a member of the board of CSX, a publicly-traded railroad company.

Mr. Ratcliffe’s experience as a director and chief executive officer of a highly-regulated, publicly-traded company well qualifies him to serve on our Board.

William H. Rogers, Jr., 60, has been a director since 2011 and has served as Chairman of our Board since January 1, 2012. He was named Chief Executive Officer in June 2011 after having served as our Chief Operating Officer since 2010 and President since 2008. Mr. Rogers began his career with SunTrust in 1980 and has served in a leadership capacity in all segments of the Company. Mr. Rogers previously served as a director of Books-a-Million, Inc. and presently serves on the Federal Reserve Board of Governors’ Federal Advisory Council as a representative of the Federal Reserve Bank of Atlanta.

Mr. Rogers’ long history with our company and industry well qualify him to serve on our Board.

Frank P. Scruggs, Jr., 66, has been a director since 2013. He has been a partner in the law firm of Berger Singerman LLP since 2007 where he represents companies and executives in employment law matters and litigates commercial disputes. Prior to joining Berger Singerman, he was an Executive Vice President for Office Depot, Inc. and was a shareholder of the law firm Greenberg Traurig LLC. He previously served as the Florida Secretary of Labor and Employment Security, as a member of the Florida Board of Regents, and on the board of directors of Office Depot, Inc.

Mr. Scruggs’ extensive governmental affairs, legal, and regulatory experience well qualify him to serve on our Board.

Bruce L. Tanner, 59, has been a director since 2015. He has served as Executive Vice President and Chief Financial Officer for Lockheed Martin Corporation since 2007. As Chief Financial Officer, he is responsible for all aspects of Lockheed’s financial strategies, processes, and operations.

 


Mr. Tanner’s financial and business experience, including service as a CFO of a highly-regulated, publicly-traded company with operations in substantial portions of our service territory, well qualifies him to serve on our Board.

Steven C. Voorhees, 63, has been a director since January 1, 2018. Since July 2015, Mr. Voorhees has served as the President and Chief Executive Officer and as a director of WestRock Company, an international provider of paper and packaging solutions. Prior to that he served as the Chief Executive Officer and as a director of a predecessor entity, RockTenn Company. Before becoming CEO, Mr. Voorhees held various executive leadership positions with RockTenn, including President and Chief Operating Officer, Executive Vice President and Chief Financial Officer, and Chief Administrative Officer. Before joining RockTenn, he was in operations and executive roles at Sonat Inc., a diversified energy company.

Mr. Voorhees’ extensive business, executive and financial experience, including serving as a director, chief executive officer and chief financial officer of a large, publicly-traded company, well qualify him to serve on our Board.

Thomas R. Watjen, 63, has been a director since 2010. In 2015, he retired as the President and Chief Executive Officer of Unum Group, a publicly-traded insurance holding company. He had served as the Chairman of its board from 2015 to 2017. He was employed by Unum or its predecessors since 1994, initially as its Chief Financial Officer. Prior to joining Unum, he served as a Managing Director of the insurance practice of the investment banking firm Morgan Stanley & Co. Mr. Watjen also serves as a member of the board of Prudential plc, a publicly-traded life insurance and financial services company.

Mr. Watjen’s experience as a director, chief executive officer, and chief financial officer of a publicly-traded company and executive experience with a regulated financial services company well qualify him to serve on our Board.

Phail Wynn, Jr., 70, has been a director since 2004. He has been the Vice President for Durham and Regional Affairs for Duke University since January 2008. Previously, he served as the President of Durham Technical Community College from 1980 to 2007. Dr. Wynn has served continuously as a director of one or more financial institutions since 1992. Dr. Wynn is also a director of North Carolina Mutual Life Insurance Company.

Dr. Wynn’s varied business and academic experiences, including his long service on the boards of financial institutions, well qualify him to serve on our Board.

 

 


 

SunTrust Banks, Inc. - 2018 Proxy Statement           5

The Board of Directors recommends a vote FOR all nominees.


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Nominees for Directorship (Item 1)

 

Board Committees and Attendance

The Board has created certain standing and ad hoc committees. These committees allow regular monitoring and deeper analysis of various matters. The committee structure also allows committees to be comprised exclusively of independent directors to address certain matters. Because of the complexity of our business and the depth and scope of matters reviewed by our Board, much of the Board’s work is delegated to its committees and then reported to and discussed with the full Board.

Regular meetings of the Board are held at least quarterly. During 2017, the Board held seven meetings, and various standing and ad hoc committees of the Board met another 54 times (including five joint meetings of our Audit and Risk Committees), for an aggregate of 61 meetings. Each committee and Board meeting generally includes a meeting of the independent

 


 

directors in executive session. All incumbent directors attended at least 75% of the aggregate number of Board meetings and meetings of the committees on which they served. In addition, all but one of our incumbent directors who were serving as directors at the time attended last year’s annual meeting of shareholders. We expect, but do not require, directors to attend the annual meeting of shareholders.

The Board reviews the membership of the committees from time to time. Specific committee assignments are proposed by the Governance and Nominating Committee in consultation with the chair of each committee and with the consent of the member, and are then submitted to the full Board for approval. The current membership of these committees, and the number of meetings each committee held in 2017, are as follows:

 

 


Membership by Director

 

      Audit            Compensation        Executive   

Governance &    

Nominating    

   Risk        
Number of Meetings Held:    131            9        6            5        131         

    Agnes Bundy Scanlan

                        

    Dallas S. Clement

                        

    Paul R. Garcia

   Vice Chair                     

    M. Douglas Ivester

                             

    Kyle Prechtl Legg2

           Chair                  

    Donna S. Morea

                    Vice Chair    

    David M. Ratcliffe

                         Chair    

    William H. Rogers, Jr.

         Chair          

    Frank P. Scruggs, Jr.

                        

    Bruce L. Tanner

                        

    Steven C. Voorhees

                        

    Thomas R. Watjen

   Chair                          

    Dr. Phail Wynn, Jr.

                        Chair         

Membership by Committee

 

Audit    Compensation    Executive    Governance &
Nominating
   Risk

    Mr. Watjen, Chair

   Ms. Legg, Chair2    Mr. Rogers, Chair    Dr. Wynn, Chair    Mr. Ratcliffe, Chair

    Mr. Garcia, Vice Chair

   Mr. Garcia    Mr. Ivester    Ms. Bundy Scanlan    Ms. Morea, Vice Chair

    Mr. Clement

   Mr. Ivester    Ms. Legg2    Mr. Clement    Ms. Bundy Scanlan

    Ms. Legg2

   Ms. Morea    Mr. Ratcliffe    Mr. Ivester    Mr. Scruggs

    Dr. Wynn

   Mr. Ratcliffe    Mr. Watjen    Mr. Tanner    Mr. Tanner
   Mr. Scruggs    Dr. Wynn    Mr. Voorhees    Mr. Voorhees
         Mr. Watjen   

 

1

Number of meetings does not include five joint sessions of the Audit and Risk Committees.

 

2

Ms. Legg has decided not to stand for reelection and will retire from the Board at our 2018 annual meeting of shareholders.

 


 

6           SunTrust Banks, Inc. - 2018 Proxy Statement


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Nominees for Directorship (Item 1)

 

The Audit Committee consists solely of members that are independent under our Corporate Governance Guidelines, the Securities Exchange Act of 1934 and applicable rules, and the rules of the New York Stock Exchange. Our Board has determined that Mr. Watjen, the Chair of the Audit Committee, meets the definition of “audit committee financial expert” as defined by the Securities and Exchange Commission’s rules and regulations. The Audit Committee:

 

 

appoints, compensates, retains, and directly oversees the work of our independent auditor (subject to shareholder ratification, if applicable).

 

 

is charged with monitoring the integrity of our financial statements, the independence and qualifications of our independent auditor, our system of internal controls, the performance of our internal audit process and independent auditor, and our compliance with laws, regulations and the codes of conduct.

 

 

also resolves any disagreements between management and the auditors regarding financial reporting.

 

 

pre-approves all audit services and permitted non-audit services provided to SunTrust by its independent auditor.

The Compensation Committee has only members that are independent under our Corporate Governance Guidelines and the rules of the New York Stock Exchange. It is responsible for:

 

 

approving our stated compensation strategies, goals and purposes.

 

 

ensuring that there is a strong link between the economic interests of management and shareholders.

 

 

ensuring that members of management are rewarded appropriately for their contributions to Company growth and profitability.

 

 

ensuring that the executive compensation strategy supports both our objectives and shareholder interests.

 

 

ensuring that the incentive compensation arrangements for the Company do not encourage employees to take risks that are beyond our ability to manage effectively.

 

 

administers the Incentive Compensation Recoupment Policy.

 

 

performs other related duties as defined in its written charter.

The Executive Committee:

 

 

reviews operational performance and monitors certain key financial performance indicators.

 

 

reviews certain capital matters, including quarterly dividends and share repurchases.

 

 

handles other matters assigned to it from time to time by the Chairman or Lead Director.

 


The Governance and Nominating Committee:

 

 

makes recommendations to the Board regarding the size and composition of the Board.

 

 

reviews the qualifications of candidates to the Board, and recommends nominees to the Board.

 

 

takes a leadership role in shaping our corporate governance.

 

 

develops and recommends to the Board a set of corporate governance guidelines, periodically reviews and assesses the adequacy of those principles, and recommends any proposed changes to the Board for approval.

 

 

leads the Board in its annual review of the Board’s performance.

 

 

addresses committee structure and operations, determines member qualifications and makes committee member appointments.

It has sole authority for retaining or terminating any search firm used to identify director candidates and determining such firm’s fees. Our Governance and Nominating Committee also performs other related duties as defined in its written charter. It has only members that are independent under our Corporate Governance Guidelines and the rules of the New York Stock Exchange.

Our Risk Committee has only members that are independent under our Corporate Governance Guidelines and the rules of the New York Stock Exchange and Federal Reserve Board. It:

 

 

reports to and assists the Board of Directors in overseeing enterprise risk management such as credit, operational, technology, compliance, market, liquidity, strategic, legal and reputational risk; enterprise capital adequacy; liquidity adequacy; and material regulatory matters.

 

 

oversees and reviews significant policies and practices employed to manage and assess credit risk, liquidity risk, market risk, operational risk (including technology and third party risk), compliance risk, legal risk, strategic risk and reputational risk.

 

 

oversees enterprise risk management appetite and tolerances, risk frameworks, and policies that reflect the Board’s risk management philosophies and principles or for which management oversight is mandated by law or regulation.

 

 

oversees liquidity risk management activities, including the structure and adequacy of liquidity in light of current or planned business activities, and in light of the requirements or expectations of statutes, regulations, management and the Board.

 

 

oversees capital management activities, including the structure and adequacy of capital in light of current or planned business activities, and management, Board and regulatory requirements or expectations.

 

 


 

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2017 Director Compensation

 

 

The Governance and Nominating Committee determines the amount and form of director compensation. The Governance and Nominating Committee reviews peer practices with the assistance of an independent compensation consultant and a review of market and peer data. In April 2017, the Governance and Nominating Committee made minor adjustments to the amount of director compensation based upon a review of market and peer practices with the assistance of an independent compensation consultant.

We pay each non-employee director an annual retainer of $75,000 in four installments. The Chairs of each of the Audit Committee and Risk Committee receive an additional retainer of $30,000. The Chairs of each of the Compensation Committee and Governance and Nominating Committee receive an additional retainer of $20,000. The Lead Director receives an additional retainer of $45,000. We pay each non-employee director a fee of $1,500 for each committee meeting attended. Non-employee directors serving on the Board following our annual meeting of shareholders receive a grant of either restricted stock or restricted stock units, at their election, having a value of $125,000 on the date of grant. The grant vests upon the earlier of one year from the date of grant or the next annual meeting.

The table below sets forth the compensation paid to all non-employee directors who served during the year ended December 31, 2017. Except as noted above, all of our non-employee directors are paid at the same rate. Directors who are also our employees are not compensated for their service as directors. In 2017, one of our directors, William H. Rogers, Jr., was also an employee, serving as Chairman and Chief Executive Officer. We discuss his compensation beginning at “Executive Compensation.”

Directors may defer either or both of their meeting and retainer fees under our Directors Deferred Compensation Plan. We determine the return on deferred amounts as if the funds had been invested in our common stock or at a floating interest rate equal to the prime interest rate in effect at SunTrust Bank computed on the last day of each quarter, at the election of the director.

 

    Name   

Fees

Earned
or Paid

In Cash

     Stock1
Awards
     NQDC
Earnings
     All Other
Compensation2
   Total

    Agnes Bundy Scanlan

     $ 65,666        $ 125,000      $0        $ 5,000   3      $ 195,666

    Dallas S. Clement

     $ 98,000        $ 125,000      $0        $ 5,000   3      $ 228,000

    Paul R. Garcia

     $ 107,000        $ 125,000      $0        $ 5,000   3      $ 237,000

    M. Douglas Ivester

     $ 138,500        $ 125,000      $0        $ 9,500   3, 4      $ 273,000

    Kyle Prechtl Legg

     $ 131,500        $ 125,000      $0        $ 5,000   3      $ 261,500

    Donna S. Morea

     $ 104,000        $ 125,000      $0        $ 5,000   3      $ 234,000

    David M. Ratcliffe

     $ 144,500        $ 125,000      $0        $ 5,000   3      $ 274,500

    Frank P. Scruggs, Jr.

     $ 107,000        $ 125,000      $0        $ 5,000   3      $ 237,000

    Bruce L. Tanner

     $ 99,500        $ 125,000      $0        $ 0      $ 224,500

    Thomas R. Watjen

     $ 137,000        $ 125,000      $0        $ 5,000   3      $ 267,000

    Phail Wynn, Jr.

     $ 128,500        $ 125,000      $0        $ 0      $ 253,500

 

1 

We made an annual equity grant with a grant date fair value of approximately $125,000 to each person who was serving as a director following our 2017 annual meeting of shareholders. In accordance with SEC regulations, we report in this column the aggregate grant date fair value of stock awards computed in accordance with FASB ASC Topic 718, but (pursuant to SEC regulations) without reduction for estimated forfeitures. Please refer to Note 15 to our financial statements in our annual report for the year ended December 31, 2017 for a discussion of the assumptions related to the calculation of such value. As of December 31, 2017, each director named in the table above held 2,186 shares of restricted stock or restricted stock units which vest on April 24, 2018, and none of our directors held any unexercised options (vested or unvested).

 

2 

No director received perquisites or personal benefits in 2017 in excess of $10,000.

 

3 

Reflects matching contributions paid to a charity identified by the director.

 

4 

Reflects $4,500 fee for service on local advisory boards of our subsidiaries.

 


 

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Corporate Governance

 

Corporate Governance

 

 

Majority Voting

Our Bylaws provide for the annual election of all directors. The Bylaws further provide that, in an election of directors in which the only nominees for election are persons nominated by the Board (an “uncontested election”), in order to be elected, each nominee must receive more votes cast for such nominee’s election than against such nominee’s election. If the director election is not an uncontested election, then directors are elected by a plurality of the votes cast. In connection with uncontested director elections, votes cast exclude abstentions with respect to a director’s election.

If a nominee who presently serves as a director does not receive the required vote for reelection in an uncontested election, Georgia law provides that such director will continue to serve on the Board as a “holdover” director. Georgia corporate law generally gives such unelected “holdover” directors all of the same powers as directors elected by a majority vote until such holdover-director’s successor is elected and qualified. A successor cannot be elected until there is another meeting of shareholders, and these typically occur only once a year unless we incur the time and expense of a special meeting of shareholders. To prevent holdover directors from remaining on our Board, and to better effectuate the intentions of our shareholders, our Corporate Governance Guidelines require such a director to tender his or her written resignation to the Chairman of the Board for consideration by the Governance and Nominating Committee (which we refer to in this section as the “Committee”) within five days following certification of the shareholder vote.

However, the resignation of a director may adversely affect us. For this reason, we do not make resignations tendered in such context automatically effective. Rather, after the director submits his or her mandatory resignation, the Committee will then consider the resignation and, within 45 days following the shareholders’ meeting at which the election occurred, make a recommendation to the Board concerning whether to accept or reject the resignation. In determining its recommendation, the Committee will consider all factors deemed relevant by the Committee members including, without limitation, any stated reason or reasons why shareholders did not vote for the director’s reelection, the qualifications of the director (including, for example, whether the director serves on the Audit Committee as an “audit committee financial expert” and whether there are one or more other directors qualified, eligible and available to serve on the Audit Committee in such capacity), and whether the director’s resignation from the Board would be in the best interest of SunTrust and our shareholders. The Committee also will consider a range of possible alternatives concerning the director’s tendered resignation as the members of the Committee deem

 


appropriate, including, without limitation, acceptance of the resignation, rejection of the resignation, or rejection of the resignation coupled with a commitment to seek to address and cure the underlying reasons reasonably believed by the Committee to have substantially resulted in the failure of the director to receive the necessary votes for reelection.

To constrain the Board’s discretion in considering such resignations, we have adopted specific procedural requirements in our Corporate Governance Guidelines. In addition to the 45-day deadline above, our Corporate Governance Guidelines require the Board to take formal action on the Committee’s recommendation no later than 75 days following the shareholders’ meeting at which the election occurred. In considering the Committee’s recommendation, the Board will consider the information, factors and alternatives considered by the Committee and such additional information, factors and alternatives as the Board deems relevant. Our Corporate Governance Guidelines require us to publicly disclose the Board’s decision in a Current Report (Form 8-K) filed with the Securities and Exchange Commission together with an explanation of the process by which the Board made its decision and, if applicable, the Board’s reason or reasons for rejecting the tendered resignation, within four business days after the Board makes its decision. No director who is required to tender his or her resignation may participate in the Committee’s deliberations or recommendation, and the Corporate Governance Guidelines contain provisions addressing how the determination of whether to accept or reject a resignation is made if a majority of the members of the Committee fails to receive the necessary vote for reelection. Generally, in such case, the determination will be made by independent directors who received the necessary vote for election or reelection. If the Board accepts a director’s resignation, then any resulting vacancy may be filled by the Board in accordance with the Bylaws, or the Board in its discretion may decrease the size of the Board pursuant to the Bylaws.

Corporate Governance and Director Independence

The Board has determined that all of our directors are independent, except for Mr. Rogers, who is our Chairman and CEO. Specifically, it determined that the following current directors are independent after applying the guidelines described below: Agnes Bundy Scanlan, Dallas S. Clement, Paul R. Garcia, M. Douglas Ivester, Kyle Prechtl Legg, Donna S. Morea, David M. Ratcliffe, Frank P. Scruggs, Jr., Bruce L. Tanner, Steven C. Voorhees, Thomas R. Watjen, and Phail Wynn, Jr. Additionally, each member of our Audit Committee, Compensation Committee, Governance and Nominating Committee, and Risk Committee is independent. There are no family relationships between any director, executive officer, or person nominated or chosen by us to become a director or executive officer.

 

 


 

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We include our independence standards in our Corporate Governance Guidelines. You can view these on our Investor Relations website, investors.suntrust.com, under the heading “Governance.” An independent director is one who is free of any relationship with SunTrust or its management that may impair the director’s ability to make independent judgments. In determining director independence, the Board broadly considers all relevant facts and circumstances, including the rules of the New York Stock Exchange. The Board considers the issue not merely from the standpoint of a director, but also from that of persons or organizations with which the director has an affiliation. The Board pays particular attention to whether a director is independent from management and to any credit relationships that may exist with a director or a related interest. In doing so, the Board considers, among other things, all extensions of credit between the Company and the director (including his or her related interests).

Generally, we do not consider independent any director who is an executive officer of a company that makes payments to us, or receives payments from us, for property or services in an amount which, in any fiscal year, is greater than $1 million or 2% of such director’s company’s consolidated gross revenues. We also do not consider independent any director to whom we have extended credit, or who is also an executive officer of a company to which we have extended credit, unless such credit meets the substantive requirements of Federal Reserve Regulation O. Regulation O requires that, when making loans to our executive officers and directors, we do so on substantially the same terms, including interest rates and collateral, and follow credit-underwriting procedures that are no less stringent than those prevailing at the time for comparable transactions by SunTrust with other persons not related to SunTrust. Such loans also may not involve more than the normal risk of collectability or present other unfavorable features. Additionally, no event of default may have occurred (that is, such loans are not rated as non-accrual, past due, restructured or potential problems). Our Board reviews any credit to a director or his or her related interests that has become impaired or criticized in order to determine the impact that such classification has on the director’s independence.

Codes of Ethics and Committee Charters

We have a Senior Financial Officers Code of Ethical Conduct that applies to our senior financial officers, including our principal executive officer, principal financial officer and principal accounting officer. We also have a Code of Conduct that applies to all employees and a Code of Business Conduct and Ethics for members of the Board. These three Codes of Conduct, as well as our Corporate Governance Guidelines, and the charters for each of the Audit, Compensation, Executive, Governance and Nominating, and Risk Committees of the Board can be found on our Investor Relations website, investors.suntrust.com, under the heading “Governance.

 


Board’s Role in the Risk Management Process

The Board oversees and monitors the Company’s risk management processes. The Board’s Risk Committee outlines our risk principles and management framework and sets high level strategy and risk tolerances. Our risk profile is managed by our Chief Risk Officer. The Chief Risk Officer is an executive officer appointed by and reporting to the Risk Committee and the CEO. The Chief Risk Officer meets at least quarterly with the Risk Committee of the Board. The Chair of the Risk Committee makes a full report of each Risk Committee meeting to the full Board at each Board meeting. In addition, the Chief Risk Officer also meets with the full Board at each meeting. The Board also meets regularly in executive session without management to discuss a variety of topics, including risk. In these ways, the full Board is able to monitor our risk profile and risk management activities on an on-going basis. Additionally, the Company has other risk-monitoring processes. For example, certain financial risks are also monitored by officers who report to the Chief Financial Officer. In turn, the Chief Financial Officer and appropriate financial risk personnel attend the meetings of the Audit and Risk Committees of the Board. As with the Risk Committee, the Chair of the Audit Committee makes a full report of each Audit Committee meeting to the full Board at each Board meeting and, when circumstances warrant, the Chief Financial Officer and other financial risk personnel meet with the full Board.

Management of Cyber and Operational Risk

We face ongoing and emerging risks and regulations related to the activities that surround the delivery of banking and financial products. Coupled with external influences such as market conditions, fraudulent activities, disasters, cyber-attacks and other security risks, country risk, vendor risk, and legal risk, the potential for operational and reputational loss remains elevated.

Our operations rely on computer systems, networks, the internet, digital applications, and the telecommunications and computer systems of third parties to perform business activities. The use of digital technologies introduces cyber-security risk that can manifest in the form of information theft, physical disruptions, criminal acts by individuals, groups or nation states, and a client’s inability to access online services. We use a wide array of techniques that are intended to secure our operations and proprietary information, such as Board approved policies and programs, network monitoring, access controls, dedicated security personnel, and defined insurance instruments, as well as consult with third-party data security experts.

To control cyber-security risk, we maintain an active information security program that is designed to conform to FFIEC guidance. This information security program is aligned with our operational risks and is overseen by executive management, the Board, and our independent audit function. It

 

 


 

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continually monitors and evaluates threats, events, and the performance of its business operations and continually adapts and modifies its risk reduction activities accordingly. We also have a cyber liability insurance policy that provides us with coverage against certain losses, expenses, and damages associated with cyber risk.

Further, we recognize our role in the overall national payments system, and we have adopted the National Institute of Standards and Technology Cyber Security Framework. We also fully participate in the federally recognized financial sector information sharing organization structure, known as the Financial Services Information Sharing and Analysis Center. Digital technology is constantly evolving, and new and unforeseen threats and actions by others may disrupt operations or result in losses beyond our risk control thresholds. Although we invest substantial time and resources to manage and reduce cyber risk, it is not possible to completely eliminate this risk.

Our exposure to cyber risk remains heightened because of, among other things, the evolving nature of these threats, our prominent size and scale, our role in the financial services industry, our plans to continue to implement our internet banking and mobile banking channel strategies and develop additional remote connectivity solutions to serve our clients, our expanded geographic footprint, the outsourcing of some of our business operations, and the continued uncertain global economic and political environment. As a result, cyber-security and the continued development and enhancement of our controls, processes, and practices designed to protect our systems, computers, software, data and networks from attack, damage, or unauthorized access remain a focus for us. As threats continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate information security vulnerabilities. There can be no assurance that we will not suffer material losses relating to cyber-attacks or other information security breaches in the future.

We believe that effective management of operational risk, defined as the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events, plays a major role in both the level and the stability of our profitability. Our Operational Risk Management function oversees an enterprise-wide framework intended to identify, assess, control, monitor, and report on operational risks Company-wide. These processes support our goals to minimize future operational losses and strengthen our performance by maintaining sufficient capital to absorb operational losses that are incurred.

The operational risk governance structure includes an operational risk manager and support staff within each business segment and corporate function. These risk managers are responsible for execution of risk management within their

 


areas in compliance with our policies and procedures. The Risk Committee of our board oversees our risk management and receives reports from the Chief Risk Officer and others.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and any persons who own beneficially more than 10% of our common stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission. To our knowledge, based solely on a review of the reports furnished to us and written representations from reporting persons that all reportable transactions were reported, we believe that during the fiscal year ended December 31, 2017, our officers, directors and greater than 10% owners timely filed all reports they were required to file under Section 16(a).

Compensation Committee Interlocks and Insider Participation

We have no compensation committee interlocks. Messrs. Garcia, Ivester, Ratcliffe and Scruggs, and Ms. Legg and Ms. Morea constitute all of the directors who served on our Compensation Committee at any time during 2017. Each is an independent, outside director, and none is a current or former officer or employee of SunTrust.

During 2017, our bank subsidiary engaged in customary banking transactions and had outstanding loans to certain of our directors, executive officers, members of the immediate families of certain directors and executive officers, and their associates. These loans were made in the ordinary course of business and were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not related to SunTrust. These loans do not involve more than the normal risk of collectability or present other unfavorable features.

Policies and Procedures for Approval of Related Party Transactions

We recognize that related party transactions have the potential to create conflicts of interest and the appearance that Company decisions are based on considerations other than the best interests of the Company and our shareholders. Therefore, our Board has adopted a formal, written policy with respect to related party transactions.

For the purpose of the policy, a “related party transaction” is a transaction in which we participate and in which any related party has a direct or indirect material interest, other than (1) transactions available to all employees or customers generally, (2) transactions involving less than $120,000 when aggregated with all similar transactions, or (3) loans made by SunTrust Bank in the ordinary course of business on

 

 


 

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substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to SunTrust Bank, and not involving more than the normal risk of collectability or presenting other unfavorable features.

Under the policy, any related party transaction must be reported to the General Counsel and may be consummated or may continue only if the Governance and Nominating Committee approves or ratifies such transaction and if the transaction is on terms comparable to those that could be obtained in arm’s-length dealings with an unrelated third party, and if the transaction involves compensation, the transaction has been approved by our Compensation Committee. The Governance and Nominating Committee may approve or ratify the related party transaction only if the Committee determines that, under all of the circumstances, the transaction is in the best interests of SunTrust.

Transactions with Related Persons, Promoters, and Certain Control Persons

We have no transactions with related parties other than normal, arm’s-length banking and other credit transactions that comply with Federal Reserve Regulation O. Our Board reviews these relationships, but for the reasons below, we do not view them as impairing a director’s independence.

We generally consider credit relationships with directors and/or their affiliates to be immaterial and as not impairing the director’s independence so long as the terms of the credit relationship are similar to those offered to other comparable borrowers. We use the following guidelines to determine the impact of a credit relationship on a director’s independence. We presume that extensions of credit which comply with Federal Reserve Regulation O are consistent with director independence. In other words, we do not consider normal, arm’s-length credit relationships entered into in the ordinary course of business to negate a director’s independence.

Regulation O requires such loans to be made on substantially the same terms, including interest rates and collateral, and to follow credit underwriting procedures that are no less stringent than those prevailing at the time for comparable transactions by SunTrust with other persons not related to SunTrust. Such loans also may not involve more than the normal risk of collectability or present other unfavorable features. Additionally, no event of default may have occurred (that is, such loans are not disclosed as non-accrual, past due, restructured or potential problems). Our Board must review any credit to a director or his or her related interests that has become impaired or criticized in order to determine the impact that such classification has on the director’s independence. Please refer to “Corporate Governance and Director Independence” above for additional information on director independence.

 


Executive Sessions

Each committee and Board meeting generally includes a meeting of the independent directors in executive session, and with respect to full Board meetings, such sessions are presided over by a Lead Director selected by a majority of independent directors. M. Douglas Ivester presently serves as the Lead Director.

CEO and Management Succession

The Board of Directors considers management evaluation and succession planning to be one of its most important responsibilities. Our Corporate Governance Guidelines specify that our Board is responsible for developing a succession plan for our CEO and other senior executive officers. Annually, the independent directors of the Board meet with the CEO to discuss his potential successors and related issues. After these meetings, the Board may update its CEO succession plan as appropriate. The CEO also periodically reviews with the independent directors the performance and any succession issues of other key members of the Company’s senior management.

Board Leadership Structure

Our Board is led by a Chairman selected by the Board from time to time. Presently, William H. Rogers, Jr., our CEO, is also Chairman of the Board. All of our other directors are independent. The Board has determined that selecting our CEO as Chairman is in our best interests because it promotes unity of vision for the Company and avoids potential conflict among directors. The Board is aware of the potential issues that may arise when an insider chairs the Board but believes these are more than offset by existing safeguards which include the designation of a Lead Director, regular meetings of the independent directors in executive session without the presence of insiders, the Board’s succession plan for incumbent management, the fact that management compensation is determined by a committee of independent directors who make extensive use of peer benchmarking, and the fact that much of our operations are highly regulated.

Lead Director

In 2009, the Board established the position of Lead Director and selected M. Douglas Ivester as Lead Director. The responsibilities and duties of the Lead Director include (i) presiding at meetings of the Board in the absence of the Chairman, including the executive sessions of the independent members of the Board; (ii) serving as a liaison between the independent directors and the Chairman of the Board; (iii) advising the Chairman as to an appropriate schedule of Board meetings and on the agenda and meeting schedules for meetings of the Board and its committees; and (iv) calling meetings of the non-employee directors and developing the agendas for and serving as Chairman of the executive sessions

 

 


 

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of the Board’s non-employee directors. A more complete description of this role is included in our Corporate Governance Guidelines, which we provide on our Investor Relations website, investors.suntrust.com, under the heading “Governance.” The Lead Director is appointed by a majority vote of the independent directors for a one-year term, subject to renewal for a maximum of five additional one-year terms, and will serve until the expiration of the term or until such Lead Director’s earlier resignation or retirement from the Board. Mr. Ivester’s term is scheduled to conclude in April 2018 and was previously extended by the Board (with the Corporate Governance Guidelines being amended to allow for such extension) because doing so was considered to be in the best interest of the functioning of the Board and in the best interest of shareholders.

Board Self-Assessment

Annually, the Board conducts a self-assessment, which our Governance and Nominating Committee reviews and discusses with the Board. In addition, each committee conducts an annual self-assessment of their performance. These assessments include both an evaluation of the effectiveness of the Board, each committee of the Board, and the annual assessment process itself.

Board Renewal

We believe it is important to continually refresh the composition of the Board. We have a policy requiring directors who change the job responsibility they held when they were elected to the Board to submit a letter of resignation to the Board. We also have a policy requiring directors to retire from the Board upon the first annual meeting following their 72nd birthday (65th birthday for employee-directors). If the director desires to continue to serve after he or she tenders his or her resignation pursuant to such policies, he or she may do so only after the Board, through its Governance and Nominating Committee, has made a determination that continued Board membership is appropriate. These policies have been effective in allowing us to refresh 9 of our 11 independent directors in the past 8 years.

Long-Term Business Strategy

Each year, the Board reviews management’s long-term business strategy. In November 2017, over the course of three days, it reviewed and approved the 2018-2020 strategic plan. In addition, the Board reviews management’s progress against key elements of its strategic plan at its regularly scheduled meetings throughout the year.

Director Qualifications and Selection Process

We maintain a standing Governance and Nominating Committee comprised solely of independent directors who are responsible for identifying individuals qualified to become Board members and recommending director nominees to the Board. The Governance and Nominating Committee periodically reviews the

 


size and composition of the Board and determines whether to add or replace directors. Under our Corporate Governance Guidelines, the Governance and Nominating Committee also periodically reviews with the Board the appropriate skills and characteristics required of Board members. You may access the Governance and Nominating Committee’s charter and our Corporate Governance Guidelines on our Investor Relations website, investors.suntrust.com, under the heading “Governance.

The Governance and Nominating Committee and the Board consider a variety of sources in evaluating candidates as potential Board members. The Governance and Nominating Committee has for the last several years used search firms to identify additional qualified nominees. Evaluations of potential candidates to serve as directors generally involve a review of the candidate’s background and credentials by the Governance and Nominating Committee, interviews with members of the Governance and Nominating Committee, the Governance and Nominating Committee as a whole, or one or more other Board members, and discussions by the Governance and Nominating Committee and the Board. The Governance and Nominating Committee then recommends director candidates to the full Board which, in turn, selects candidates to be nominated for election by the shareholders or to be appointed by the Board to fill a vacancy. Steven C. Voorhees was identified by a search firm retained by the Governance and Nominating Committee and was considered by the Governance and Nominating Committee and the Board in accordance with these procedures prior to being elected to the Board.

Director Qualifications. Directors are responsible for overseeing the Company’s business consistent with their fiduciary duty to shareholders. This significant responsibility requires highly-skilled individuals with various qualifications, attributes and professional experience. The Board believes that there are general requirements for service on the Board that are applicable to all directors and that there are other skills and experience that should be represented on the Board as a whole, but not necessarily by each director. The Board and the Governance and Nominating Committee consider the qualifications of directors and nominees individually and in the broader context of the Board’s overall composition and the Company’s current and future needs.

Qualifications for All Directors. In its assessment of each potential candidate, including those recommended by shareholders, the Governance and Nominating Committee requires that each director be a person of recognized high integrity with broad experience and outstanding achievement in their careers. The Board believes that each director should have, and expects nominees to have, the capacity to obtain an understanding of our principal operational and financial objectives, and business plans and strategies; our results of operations and financial condition; and our relative standing and that of our business segments in relation to our

 

 

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competitors. Further, each director and nominee should have the ability to make independent, analytical inquiries, possess an understanding of the business environment, and have the ability to devote the time and effort necessary to fulfill his or her responsibilities to the Company.

Specific Qualifications, Attributes, Skills and Experience to be Represented on the Board. The Board has identified the following particular qualifications, attributes, skills and experience that are important to be represented on the Board as a whole:

 

 

Independence, determined in accordance with our Corporate Governance Guidelines;

 

 

Financial industry knowledge, which is vital in understanding and reviewing our strategy, which could involve the acquisition of businesses that offer complementary products or services. This may include service on predecessor boards of directors, as well as specific experience at SunTrust as current or former executives, that gives directors specific insight into, and expertise that will foster active participation in, the development and implementation of our operating plan and business strategy;

 

 

Executive experience, which gives directors who have served in significant leadership positions strong abilities to motivate and manage others and to identify and develop leadership qualities in others;

 

 

Accounting and financial expertise, which enables directors to analyze our financial statements, capital structure and complex financial transactions and oversee our accounting and financial reporting processes; further, the Governance and Nominating Committee considers it essential that the Audit Committee have at least one member who qualifies as an “audit committee financial expert”;

 

 

Governmental affairs, regulatory and risk management experience, which contributes to our identification and management of possible areas of risk and helps to maintain an efficient and productive company; further, the Governance and Nominating Committee considers it essential that the Risk Committee have at least one member who qualifies as a “risk management expert”;

 

 

Public company board and corporate governance experience, which provides directors a solid understanding of their extensive and complex oversight responsibilities and furthers our goals of greater transparency, accountability for management and the Board, and protection of our shareholders’ interests;

 

 

Diversity, which provides a variety of points of view and which contributes to a more effective decision-making process; however, the Board does not have a specific diversity policy, but considers diversity of race, ethnicity, gender, age, cultural background and professional experiences in evaluating candidates for Board membership.

 


We highlight each director’s or nominee’s specific skills, knowledge, and experience that the Governance and Nominating Committee and Board relied upon when determining whether to nominate the individual for election in the biographies at pages 4-5. A particular nominee may possess other skills, knowledge or experience even though they are not indicated in the biographies at pages 4-5.

The Board believes that all of the director nominees are highly qualified. The director nominees have significant leadership experience, knowledge and skills that qualify them for service on our Board, and, as a group, represent diverse views, experiences and backgrounds. All director nominees satisfy the criteria set forth in our Corporate Governance Guidelines and possess the personal and professional characteristics that are essential for the proper and effective functioning of the Board. Each nominee’s biography at pages 4-5 contains additional information regarding his or her experiences, qualifications and skills.

Shareholder Recommendations and Nominations for Election to the Board

Any shareholder may recommend persons for election to the Board. The Governance and Nominating Committee will evaluate candidates proposed by shareholders by evaluating such candidates in the same manner and using the criteria described above. The recommendation should state how the proposed candidate meets the criteria described above and should include the information required by our Bylaws, described below.

In accordance with our Bylaws, direct shareholder nominations of a director must be made in writing and must be delivered to or mailed to and received by our Corporate Secretary not more than 150 days and not less than 120 days prior to the first anniversary of the date on which we first mailed our proxy materials for the preceding year’s annual meeting of shareholders. Nominations should also include a complete description of any material economic or other interest of the proposing shareholder, the nominee, and their respective affiliates and associates in order to satisfy the requirements of our Bylaws and to allow us to satisfy the requirements of SEC Regulation 14A. This Proxy Statement and the enclosed proxy are being first mailed to our shareholders on or about March 9, 2018. Therefore, shareholder nominations for election at next year’s annual meeting must be received on or after October 10, 2018 and no later than the close of business on November 9, 2018.

If you wish to nominate a director, our Bylaws require that you provide the following information: (i) the name, age, business and residence addresses of the nominee; (ii) the principal occupation or employment of the nominee and an explanation of how the nominee meets the criteria used by us for the selection of directors as set forth in the subsection “Director Qualifications and Selection Process;” (iii) the total number of shares of our common stock that, to your knowledge, will be voted for the proposed nominee; (iv) the total number of shares of our common stock that, to your knowledge, are owned by

 

 

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Corporate Governance

 

the nominee; (v) the signed consent of the nominee to serve, if elected; (vi) your name and residence address; (vii) the number of shares of our common stock owned by you and any affiliates (and their names and addresses); (viii) a complete description of all material economic or other interest of the proposed nominee and the person making the nomination, and of their affiliates and associates, consistent with the requirements of our Bylaws and SEC Regulation 14A, and (ix) any other information relating to the nominee that SEC Regulation 14A requires us to disclose in solicitations for proxies for the election of directors.

Communications with Directors

The Board has adopted a process to facilitate written correspondence by shareholders or other interested parties to the Board. Persons wishing to write to the Board or a specified director, including the Lead Director, the independent directors as a group, the chairman of a Board committee, or a committee of the Board, should send correspondence to the Corporate Secretary at SunTrust Banks, Inc., P.O. Box 4418, Mail Code 645, Atlanta, Georgia 30302. All communications so received from shareholders or other interested parties will be forwarded to the members of the Board or to the applicable director or directors if so designated by such person.

 


Communication with IR Department

Shareholders who wish to speak to a SunTrust representative regarding their investment in SunTrust may call 877-930-8971, write to SunTrust Banks, Inc., Attention: Investor Relations, P.O. Box 4418, Mail Code 645, Atlanta, Georgia 30302, or email ankur.vyas@suntrust.com. You can also view information and request documents at investors.suntrust.com.

Investor Outreach

We began a formal, annual shareholder outreach program in 2012. Since that time, members of our Investor Relations and Legal departments have spoken with most of our thirty-five largest shareholders, and many of them multiple times. During December 2017 to January 2018, we offered to schedule calls with all, and had discussions with several, of our 35 largest shareholders. Topics included board composition and refreshment, executive management, corporate governance and executive compensation. This process provides important information to us, and investor feedback is shared with our Board of Directors.

 

 

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Executive Officers

 

Executive Officers

 

The Board elects executive officers annually following the annual meeting of shareholders to serve until the meeting of the Board following the next annual meeting. The following table sets forth the name of each executive officer and the principal positions and offices he or she holds with SunTrust. As previously announced, Aleem Gillani will retire from his position as Corporate Executive Vice President and Chief Financial Officer effective as of March 31, 2018 and will be succeeded by L. Allison Dukes. For more information on this transition, please see our Current Report on Form 8-K filed with the SEC on February 14, 2018.

 

Name    Age    Officers

    William H. Rogers, Jr.

   60    Chairman of the Board and Chief Executive Officer

    Jorge Arrieta

   63    Corporate Executive Vice President and General Auditor

    Margaret Callihan

   62    Corporate Executive Vice President and Chief Human Resources Officer

    Scott Case

   47    Corporate Executive Vice President and Chief Information Officer

    Mark A. Chancy

   53    Vice Chairman, Co-Chief Operating Officer and Consumer Segment Executive

    Hugh S. Cummins, III

   55    Co-Chief Operating Officer and Wholesale Segment Executive

    Ellen M. Fitzsimmons

   57    Corporate Executive Vice President, General Counsel and Corporate Secretary

    Aleem Gillani

   55    Corporate Executive Vice President and Chief Financial Officer

    Jerome T. Lienhard, II

   61    Corporate Executive Vice President and Chief Risk Officer

William H. Rogers, Jr. Chairman and Chief Executive Officer. Mr. Rogers was named Chairman of the Board in 2012. He became Chief Executive Officer in 2011 after having served as Chief Operating Officer in 2010 and President since 2008. Mr. Rogers began his career with SunTrust in 1980. He has held roles reflecting an increasing set of responsibilities across all lines of business, corporate marketing, enterprise information services, finance and human resources. He presently serves on the Federal Reserve Board of Governors’ Federal Advisory Council as a representative of the Federal Reserve Bank of Atlanta and is an active member of the business and philanthropic communities.

Jorge Arrieta. Corporate Executive Vice President and General Auditor. Mr. Arrieta has served as the General Auditor and overseen the internal audit function since 2010. Mr. Arrieta joined SunTrust in 1991 and has held various positions in the Company, including Regulatory Liaison, Chief Financial Risk Officer and Controller, and Chief Accounting Officer.

Margaret Callihan. Corporate Executive Vice President and Chief Human Resources Officer since 2016. In this role, she oversees human resources strategy, organizational design, workforce planning, total rewards, talent acquisition, human resources systems, compliance, teammate relations, human resources policies, and training and development. Ms. Callihan previously served in a variety of commercial banking, retail banking and geographic leadership roles with SunTrust. She previously led the South Florida, Southwest Florida and Chattanooga regions, and served as retail line of business manager in Tennessee and Alabama. She serves on the board of Beall’s, Inc.

Scott Case. Corporate Executive Vice President and Chief Information Officer since February 2018. He is responsible for SunTrust’s Enterprise Information Services (EIS) division, the

organizational unit that provides the Company’s overall technology, operations and information-related support. Prior to re-joining SunTrust in 2018, Mr. Case was Chief Information Officer at Ciox Health. From 2015 to 2017, he served as the chief technology officer for the Consumer Segment of SunTrust. Before that, Mr. Case worked at Bank of America from 2013 to 2015 as a Senior Technology Executive where he was responsible for corporate functions technology platforms.

Mark A. Chancy. Vice Chairman, Co-Chief Operating Officer and Consumer Segment Executive since February 2018. From 2017 to February 2018, he was Vice Chairman and Consumer Segment Executive. He is responsible for SunTrust’s Consumer Banking, Consumer Lending, Private Wealth Management and Mortgage businesses and our Marketing and Data and Analytics functions. From 2011 to 2017, he served as Corporate Executive Vice President and Wholesale Banking Executive responsible for the Corporate & Investment Banking, Commercial & Business Banking, Treasury & Payment Solutions and Commercial Real Estate Banking lines of business. Prior to serving as Wholesale Banking Executive, Mr. Chancy served as SunTrust’s Chief Financial Officer for seven years. A 30-year financial services industry veteran, he joined SunTrust in 2001 as Corporate Treasurer through the Company’s acquisition of The Robinson-Humphrey Company, LLC, where he had served as Chief Financial Officer beginning in 1997. Mr. Chancy is a member of the board of SunTrust Robinson Humphrey, Inc. (STRH), the corporate and investment banking division of SunTrust Banks, Inc.

Hugh S. (“Beau”) Cummins, III. Co-Chief Operating Officer and Wholesale Segment Executive beginning in February 2018. From 2017 to February 2018, he was Corporate Executive Vice President and Wholesale Segment Executive. He is responsible

 

 

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Executive Officers

 

for the Corporate & Investment Banking, Commercial & Business Banking, Treasury & Payment Solutions and Commercial Real Estate Banking lines of business and the SunTrust Efficiency Office and Procurement function. From 2013 to 2017, he served as Commercial & Business Banking Executive responsible for SunTrust’s 22 division and region presidents. From 2007 to 2013, he served as Chairman, President & Chief Executive Officer of STRH and continues to serve on its board.

Ellen M. Fitzsimmons. Corporate Executive Vice President and General Counsel. Ms. Fitzsimmons joined SunTrust in January 2018 and is responsible for our legal affairs. She serves as Chair of the Disclosure Committee and as Corporate Secretary. Prior to joining SunTrust, Ms. Fitzsimmons was executive vice president of law and public affairs, general counsel and corporate secretary of CSX Corporation, a transportation company with 26,000 employees headquartered in Jacksonville, FL, from 2003 to 2017 where she directed the company’s legal affairs, government relations, corporate communications, security, environmental, audit, and corporate

social responsibilities functions. She also serves on the board of Ameren Corporation, a publicly traded power company.

 


Aleem Gillani. Corporate Executive Vice President and Chief Financial Officer since 2011. He is responsible for core finance functions, including Corporate Finance, Corporate Strategy, Corporate Tax, Investor Relations, Treasury and Corporate Real Estate and Workplace. Previously, Mr. Gillani served as Corporate Treasurer. Mr. Gillani joined SunTrust in 2007 and has worked in the global financial services industry for over 30 years.

Jerome T. Lienhard, II. Corporate Executive Vice President and Chief Risk Officer since 2015. He is responsible for the Company’s risk discipline, including market, operational, credit and compliance risk, and oversees the risk review assurance function and portfolio risk analytics and modeling. Mr. Lienhard served as President and Chief Executive Officer of SunTrust Mortgage, Inc. from 2011 until 2015. Previously, Mr. Lienhard served as Executive Vice President of Strategic Finance and Administration with responsibility for Strategic Sourcing, Corporate Real Estate, Strategic Finance and Performance Measurement. He joined the Company as Treasurer in 2006.

 

 

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Executive Compensation

 

Executive Compensation

 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Executive Summary

We welcome the opportunity to discuss in this Compensation Discussion and Analysis (CD&A) the material components of our executive compensation program. We also provide an overview of our executive compensation philosophy, compensation decisions and the factors we considered in making those decisions. This CD&A focuses on our Named Executive Officers (NEOs) for 2017 which included our CEO, CFO and our next three most highly-compensated executive officers:

 

 

William H. Rogers, Jr., Chairman and CEO,

 

 

Aleem Gillani, Chief Financial Officer,

 

 

Mark A. Chancy, Vice Chairman, Co-Chief Operating Officer and Consumer Segment Executive,

 

 

Hugh S. (“Beau”) Cummins, III, Co-Chief Operating Officer and Wholesale Segment Executive, and

 

 

Thomas E. Freeman, Corporate Executive Vice President and Efficiency & Strategic Partnerships Executive.1

2017 Business Highlights

We delivered strong performance in 2017, as we grew earnings per share and delivered higher capital return to our shareholders. These accomplishments reflect the consistency of our strategy since 2011 and the diversity of our business model, as each operating segment made strong contributions to the Company’s overall financial performance. Specifically:

 

 

SunTrust increased earnings per share, earning $4.47 on a GAAP basis, and $4.09 on an adjusted basis2, in 2017 compared to $3.60 per share in 2016.

 

 

We ended the year with an efficiency ratio of 64.1% and an adjusted tangible efficiency ratio (FTE)2 of 61.0%.

 

 

SunTrust increased its total payout ratio3 from 73% to 89%.

 

 

 


LOGO

 

LOGO

 

LOGO

 
1

As previously announced, Mr. Freeman retired from this position on February 13, 2018.

 

 

2

We provide a reconciliation from adjusted amounts to GAAP amounts in Appendix A on pages 57-59. GAAP EPS is the same as adjusted EPS except for 2012, 2013 and 2017.

 
3

Total Payout Ratio = (Common Stock Dividends and Share Repurchases) / Net Income Available to Common Shareholders.

 
 

 

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Executive Compensation

 

Executive Compensation Principles and 2017 Highlights

Compensation Principle 1. Pay Should Be Competitive With the Market. Our executive compensation programs target compensation at approximately the median of our competitive market. See “Market Competitiveness” below for more information on this practice. The elements of these 2017 programs, which include both fixed and variable compensation, are described below at “Components of Our Executive Compensation Program.”

Compensation Principle 2. A Substantial Portion of Pay Should Align With Performance. For 2017, 65% of target total direct compensation and 70% of our target long-term incentives for our NEOs were performance-based.

Our Annual Incentive Plan (AIP) is a performance-based plan that provides a potential payout based on achievement of performance goals for earnings per share (EPS), tangible efficiency ratio and pre-provision net revenue (PPNR). Long-term incentives include (i) performance-vested restricted stock units tied to both return on tangible common equity (ROTCE) relative to Company goals and peer companies with a potential adjustment based on total shareholder return (TSR) relative to peers, and (ii) time-vested restricted stock units.

Compensation Principle 3. A Substantial Portion of Pay Should Be at Risk to Align With Risk Taken By Our Shareholders. Our long-term incentive plans are aligned with the risk taken by our shareholders as award values vary with our stock price and corporate performance over time. The level of awards under the performance-based restricted stock unit plan is based on our (i) ROTCE on both an absolute basis and a relative basis compared to peer companies, and (ii) TSR relative to our peers. Our Share Ownership and Retention Policy requires our CEO to own stock with a value equal to at least six times his base salary, and our Co-Chief Operating Officers and Corporate Executive Vice Presidents to own stock with a value equal to at least three times their base salary. These executives are also required to retain 50% of net shares received under plan-based awards for a minimum of one year, ensuring longer-term alignment with shareholder risk. The one year retention requirement applies to vested restricted stock and vested restricted stock units, as well as shares obtained upon exercise of stock options. See “Share Ownership and Share Retention Requirements” below.

Compensation Principle 4. Compensation Must Comply With Regulatory Guidance. In 2010, the Federal Reserve published final guidelines on incentive compensation that apply to all U.S. financial institutions. In response to these guidelines, we made a number of enhancements to our executive and other incentive plans to reduce risk or to further risk-adjust the payouts, as well as strengthen our controls and governance processes, including the following:

 

 

implemented an anti-hedging and anti-pledging policy,

 


 

expanded our use of clawbacks,

 

 

expanded our use of performance metrics that incorporate risk measures,

 

 

intensified our risk review of incentive compensation features and limits in relation to the business risk environment, and

 

 

eliminated our use of stock options.

We discuss these enhancements in the section below at “Compensation Policies that Affect Risk Management” and in this CD&A at “Recoupment of Incentive Compensation (Clawbacks).”

2017 Compensation Governance Summary

We continuously review our compensation programs and practices to ensure a balance between the interests of shareholders, regulators and other interested parties, and also to ensure that we compensate executives and key management effectively and in a manner consistent with our stated compensation philosophy and objectives. Under the guidance of the Compensation Committee, we have taken the following actions in recent years to further strengthen governance of our compensation structure and practices:

 

 

Enhanced our existing policy governing our incentive compensation plans, including elevating that policy to one that is approved by the Compensation Committee.

 

 

Adopted a formal, stand-alone recoupment policy which covers all incentive plans and strengthened clawbacks to include detrimental conduct features. See “Recoupment of Incentive Compensation (Clawbacks).”

 

 

Implemented an anti-hedging and anti-pledging policy. See “Executive Compensation Decision-Making Processes—Anti-Hedging and Anti-Pledging Policies.”

 

 

Terminated grandfathered change-in-control agreements that included tax gross-up provisions.

 

 

Increased share ownership and retention requirements for executive officers and directors.

 

 

Included double-triggers on change in control payments.

 

 

Eliminated most perquisites.

 

 

Reviewed all of our incentive plans to ensure that the plans’ features and business controls met the Federal Reserve’s incentive compensation guidelines.

 

 

Refrained from providing employment agreements to NEOs and from guaranteeing NEOs employment for a specified term.

 

 

Institutionalized a periodic, comprehensive risk-review of all incentive plans. This review is described in greater detail at “Compensation Policies that Affect Risk Management” in the section which follows this CD&A.

 

 

Eliminated tax gross-ups.

 

 

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Executive Compensation

 

Components of Our Executive Compensation Program

The principal components of our NEO compensation program and a summary of 2017 actions with respect to each component are described in the following table:

 

Component   Description        Summary of 2017 Actions     

    Base Salary

 

Fixed cash component. Recognizes level of responsibility, experience and individual performance. Reviewed annually and adjusted if and when appropriate.

     

Increased salaries of Messrs. Chancy and Cummins based on expansion of roles and responsibilities, level of experience, and individual performance, and to better align with market practice.

   

    Annual Incentive Plan

    (AIP)

 

Variable cash compensation component. The AIP is a performance-based award opportunity paid in cash. Rewards the achievement of annual performance goals.

     

Awards were based on achievement of earnings per share (EPS), tangible efficiency ratio and pre-provision net revenue (PPNR) goals. Increased target opportunity for Messrs. Chancy and Rogers based on level of responsibility, experience and individual performance, and to better align with market practice. Decreased target opportunity for Mr. Cummins as part of adjustment to his overall pay mix based on change in his position relative to market practice.

   

    Long-Term Incentives

    (LTI)

 

Variable compensation component. Amount earned will vary based on stock price and corporate performance. LTI focuses attention on long-range objectives and future returns to shareholders.

     

The LTI grants consisted of performance-based restricted stock units (RSUs) and time-vested RSUs. Increased target opportunity for Messrs. Chancy and Cummins based on expansion of roles and responsibilities, level of experience, individual performance, and to better align with market practice.

 
   

– 70%Performance-based RSUs—payouts based on a return on tangible common equity (ROTCE) matrix, measuring both absolute ROTCE and ROTCE relative to peer companies, and a potential adjustment to the payout depending on our total shareholder return (TSR) relative to our peer group.

     

ROTCE maintains an overall profitability focus and a focus on building value. TSR aligns interests of executives with our shareholders by modifying awards based on an increase or decrease in our TSR relative to an industry peer group.

 
   

– 30% Time-vested RSUs

     

For retention and to align executives’ interests with those of shareholders.

 

    Retirement Plans

 

Intended to assist in attaining financial security during retirement.

     

Fixed compensation component. Plans were frozen after 2011.

   

    401(k) Plan and Deferred 

    Compensation

 

Fixed component of compensation. Qualified and nonqualified plans provide tax advantaged savings vehicles.

     

The Company matched employee 401(k) contributions up to 6%. The Company did not pay an additional discretionary contribution to employees in 2017.

   

    Perquisites

 

Most perquisites were eliminated in 2008.

     

No change.

   

 


Pay for Performance

Our executive compensation programs are designed to align a substantial portion of pay to Company performance. The table and charts below outline the percent of value for each element of target total direct compensation.

 

Element    CEO     

Other

NEOs

 

    Base Salary

     13      22

    Annual Incentive

     27      27

    LTI-Performance Vested RSUs

     42      36

    LTI-Time-Vested RSUs

     18      15
                   

    Total Performance-Based

     69 %       63 % 
                   

    Total At-Risk

     87 %       78 % 

Performance-based compensation includes the AIP and performance-based RSUs. At-risk compensation consists of the AIP, performance-based RSUs and time-vested RSUs.

LOGO

 

 

 

LOGO

 

 

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Executive Compensation

 

Below we explain how our 2017 annual incentive awards and long-term incentive grants are tied to current year and future performance.

Annual Incentive Plan (AIP). Payments to NEOs under our AIP generally are based on the achievement of corporate performance objectives, as well as individual performance. NEO AIP award levels in 2017 were based on annual results for earnings per share (EPS, 50% weighting), tangible efficiency ratio (25% weighting) and pre-provision net revenue (PPNR, 25% weighting).

 


Long-Term Incentives (LTI). Our 2017 annual grants of LTI consisted of 70% performance-based RSUs and 30% time-based RSUs. The performance-based RSUs will be earned based on the achievement of an absolute earnings per share hurdle, then based upon a matrix which combines performance goals for our ROTCE relative to a peer group and absolute ROTCE, in both cases measured over the three years 2017-2019, with potential adjustment to the payout based on total shareholder return (TSR) relative to our peer group.

 
Grant Value   Grant Description   Performance
Period
  Performance
Goals
  Vesting1
70%  

Performance-based RSUs

  2017–2019  

 Minimum EPS hurdle

 SunTrust ROTCE

 SunTrust TSR Rank Compared to Peer Group

 

Earned awards vest on February 14, 2020.

The Company imposes a mandatory one-year deferral on awards earned in excess of 130% of the target level.

30%   Time-vested RSUs   N/A  

N/A

  Vest ratably over 3 years on each anniversary of the grant date.

 

1 

NEOs are required to retain 50% of the net shares that vest for a minimum of one year as required by our Share Ownership and Share Retention Requirements.

Analysis of 2017 Compensation Compared to 2016 Compensation

In 2017, we maintained our policy to deliver total direct compensation at approximately the median of our peer group.

In February 2017, the Company announced that Messrs. Chancy and Cummins would be taking on expanded roles and responsibilities with Mr. Chancy becoming Vice Chairman and Consumer Segment Executive and Mr. Cummins becoming Corporate Executive Vice President and Wholesale Segment Executive. As a result, the Compensation Committee made various changes to their compensation as described below.

The Compensation Committee increased salaries in 2017 for Messrs. Chancy and Cummins relative to 2016 to better align with market practices, as well as to reflect the scope of their responsibilities, their experience, and their individual performance. Salaries for the other NEOs were not adjusted.

Actual 2017 non-equity incentive compensation delivered through our AIP reflects an increase over 2016 due largely to improved Company performance in 2017. Additionally, based on market practices relative to their roles and responsibilities, in 2017 the Compensation Committee increased the target award opportunities for Messrs. Chancy and Rogers, and decreased the target award opportunity for Mr. Cummins. The AIP payments for our NEOs were determined based on Company performance and the Compensation Committee’s assessment of their individual performance. We discuss AIP in greater detail below under “2. Annual Incentives.”

The grant date fair value of equity awards remained stable in 2017 compared to 2016. However, long-term equity award targets for Messrs. Chancy and Cummins were increased in 2017 based on their expanded responsibilities.

Finally, the change in net present value of future pension benefits for most NEOs increased in 2017 compared to 2016. This comparison is driven by the fact that in 2017 the present value of pension benefits increased due to decreases in discount rates. We discuss pension benefits in greater detail below in “4. Benefits” and “2017 Pension Benefits Table.”

Executive Compensation Program Overview

Our current executive compensation program has four parts:

 

1.

Salary.

 

2.

Annual Incentives.

 

3.

Long-Term Incentives, and

 

4.

Benefits.

The various components of 2017 NEO compensation are described below.

1. Salary

We pay salaries to attract and retain talented executives. We target the level of salary at approximately the median of our peer group to be competitive.

The Compensation Committee generally considers annual increases to base salary after considering an individual’s

 

 

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Executive Compensation

 

performance, changes in market compensation, experience level and/or changed responsibilities. In light of these factors, in 2017 the Compensation Committee increased Mr. Chancy’s salary 4% to $700,000, and the salary of Mr. Cummins 4% to $675,000. The base salaries of the other NEOs were not adjusted in 2017.

The size of the base salary indirectly affects the size of the potential payment under the Annual Incentive Plan and under the Executive Severance Plan, which are discussed below under “2. Annual Incentives” and “4. Benefits.”

2. Annual Incentives

The AIP is a short-term cash incentive program which rewards the achievement of annual performance goals, primarily annual financial goals. We designed the AIP to:

 

 

Support our strategic business objectives.

 

 

Promote the attainment of specific financial goals.

 

 

Reward achievement of specific performance objectives.

 

 

Reinforce a culture of risk awareness, risk management and risk mitigation.

 

 

Encourage teamwork.

All NEOs participate in the AIP. The amount paid to an executive under the AIP is a function of:

 

 

A target award amount expressed as a percentage of base salary.

 

 

The level of achievement of Company financial goals which were established by the Compensation Committee.

 

 

Payout amounts approved by the Compensation Committee which correspond to the Company’s actual level of performance as well as the executive’s influence on that performance.

We target our AIP opportunity to approximate the median of peer practice. In February of each year, the Compensation Committee determines the performance metrics which best support achievement of annual operating objectives and financial goals and establishes target performance goals based largely on management’s confidential business plan and corresponding budget for that year. The Compensation Committee considers multiple financial metrics with emphasis on revenue growth, expense management and profit improvement.

For the 2017 AIP, we used two of the same three corporate performance measures as in 2016: tangible efficiency ratio (25% weight) and pre-provision net revenue (PPNR, 25% weight). However, for 2017 AIP, we changed the third metric from net income available to common shareholders (NIACS) to earnings per share (EPS, 50% weight). Our tangible efficiency ratio is the ratio of our noninterest expense, excluding amortization expense, to our revenue. The Compensation

 


Committee chose the tangible efficiency ratio because it is an important measure used by investors to evaluate how well we are managing our organization. The lower the efficiency ratio, the better for our shareholders, as it means a greater percentage of each dollar of revenue is converted to profit. PPNR is the sum of net interest income and noninterest income, less noninterest expense. The Compensation Committee selected PPNR in order to drive growth in PPNR which will allow us to increase operating leverage by focusing on quality revenue. PPNR is also a measure used by our primary federal banking regulator in the capital planning process. The Compensation Committee changed the third component of the AIP measures from NIACS to EPS in 2017 because EPS is a more commonly referenced and discussed metric than NIACS, and it allows management to more effectively communicate, and teammates to better track, AIP performance throughout the year.

The Compensation Committee also sets minimum and maximum performance levels for each performance measure. Actual payouts under the AIP depend on the level at which we achieve each of the performance measures. The Compensation Committee approved the following performance targets for 2017:

 

    2017 Annual Incentive Plan
Objectives
     Minimum   Target   Maximum

  Earnings Per Share

  (50% weight)

  $3.55   $3.85   $4.00

  Tangible Efficiency

  Ratio* (25% weight)

  62.5%   61.5%   61.0%
       

  Pre-Provision Net

  Revenue* (25% weight)

 

$3.1

Billion

 

$3.325

Billion

 

$3.4

Billion

       

  Payout % of Target

  0%   100%   150%

 

*

We provide a reconciliation from adjusted financial measures to GAAP measures in our 2017 Annual Report on Form 10-K in Table 30, which begins on page 68.

These goals reflect a robust plan to grow the business and progress towards our medium-term tangible efficiency ratio target of below 60%.

For the NEOs, AIP payments generally are based on corporate, rather than individual, performance objectives because NEOs hold positions that have a substantial impact on the achievement of those measures. This approach also reflects an expectation that collective performance will result in improved business performance and favorably impact shareholder value. However, the Compensation Committee retains the discretion to adjust (up or down) actual awards to individual NEOs based upon individual performance.

 

 

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Executive Compensation

 

The Compensation Committee reviews actual performance relative to the pre-set goals which were established by reference to the Company’s confidential business plan and forecast. When evaluating whether those goals were achieved and determining final awards, the Compensation Committee has the discretion, pursuant to the terms of the AIP, to adjust GAAP earnings per share, tangible efficiency ratio and PPNR for extraordinary, unusual or non-recurring items, including charges or costs associated with restructurings of the Company, discontinued operations and the cumulative effects of accounting changes. The Compensation Committee does this when actual results are affected by factors outside of management’s control or which were materially different from the assumptions underlying the Company’s business plan. The Compensation Committee may make such adjustments to both increase and decrease the performance measures of the AIP.

In the fourth quarter of 2017, the Company’s financial performance was positively impacted by a gain from the sale of a subsidiary and the re-measurement of its net deferred tax liability resulting from the Tax Cuts and Jobs Act. A portion of these gains was offset by charges resulting from actions that the Company took to invest in its teammates and communities, as well as to restructure the Company’s securities portfolio and to implement initiatives around organizational efficiency, technology enhancements, and real estate that are designed to better position the Company for long-term success. The net benefit from these items was $188 million. Please see our Current Report on Form 8-K furnished to the SEC on January 19, 2018 and Appendix A to this Proxy Statement for more information on these items.

The Compensation Committee exercised discretion as provided in the AIP and elected to exclude this net benefit from the calculations of the three corporate performance measures used to determine annual short-term cash incentives under the AIP. The Compensation Committee believes that excluding these discrete items better measures the Company’s operating performance for 2017 relative to the AIP’s pre-set goals.

After the adjustments to our 2017 financial results described previously, the 2017 AIP for our NEOs was funded as follows:

 

     Weight    
Adjusted
Results*
    Measure
Funding
Level
    Blended
Corporate
Funding
Level
 
         
Earnings Per Share     50.0     $4.09       150.0%       139.8
Tangible Efficiency Ratio     25.0     61.0%       150.0%    
Pre-Provision Net Revenue     25.0    
$3.339
Billion

 
    109.0%    

 

*

We provide a reconciliation from adjusted financial measures to GAAP measures in our 2017 Annual Report on Form 10-K in Table 30, which begins on page 68.

 


Based on market practices and expansions in their roles during 2017, the Compensation Committee reviewed the overall pay mix and made adjustments to the target awards as a percent of base salary for Mr. Chancy, whose target opportunity was increased to 135%, and for Mr. Cummins, whose target opportunity was decreased to 135%. For more information on adjustments to the overall pay mix for Messrs. Chancy and Cummins, see “Analysis of 2017 Compensation Compared to 2016 Compensation” above. Based on market practices, his performance, and increasing experience in the role, the Compensation Committee increased the target opportunity for Mr. Rogers from 185% to 200%. Also, for 2017 the Compensation Committee considered a number of factors in determining AIP awards for our NEOs, including activities during the year, financial performance, recommendations of our CEO and other factors. The Compensation Committee exercised its discretion to make adjustments to the actual AIP awards for our NEOs. The funded and actual 2017 AIP awards for our NEOs are set forth in the table below:

 

     Target
as a % of
Base
Salary
    Target
Award
    Funded
Award
    Actual
Award
 

  Mr. Rogers

    200   $ 2,000,000     $ 2,796,000     $ 3,000,000  

  Mr. Gillani

    110   $ 699,000     $ 976,503     $ 1,113,213  

  Mr.  Chancy1

    135   $ 945,000     $ 1,285,398     $ 1,388,229  

  Mr.  Cummins1

    135   $ 911,000     $ 1,319,769     $ 1,339,566  

  Mr. Freeman

    110   $ 660,000     $ 922,680     $ 899,613  

 

1

The Compensation Committee adjusted the target AIP percentage on a prorated basis effective April 3, 2017 for Mr. Chancy and Mr. Cummins.

 

 

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3. Long-Term Incentives

 


 

A key objective of our long-term incentives is to reward management for effective long-term decision-making. These incentives focus attention on long-range objectives and future returns to shareholders. Long-term incentives also help achieve our objective of retaining top talent. The Compensation Committee ties the value of the long-term incentives for our

NEOs entirely to corporate performance or stock price rather than to individual performance because of the role these executives play in the Company’s success. Since 2008, the long-term incentives for NEOs have been paid entirely in equity with no cash component. We determine the amount of long-term incentives based primarily on a review of market practices.

 

In 2017, consistent with prior practice, we split the long term incentive into two types of awards. This allows us to measure and reward performance differently. Those awards were:

 

Award   2017   2018   2019   2020   2021
  RSUs–ROTCE and   TSR (70%)  

3-Year Performance Period

 

Hurdle: Minimum EPS

 

A determination of SunTrust ROTCE compared to pre-set absolute ROTCE goals as well as ROTCE relative to peers, then potentially adjusted based on relative TSR

  If earned, vests after the determination of results on Feb. 14, 2020  

Hold 50% of Net Shares for 1 Year minimum

 

Additional one-year holding period to the extent any earned awards exceeds 130% of target

  RSUs–Time

  Vested (30%)

 

Time vested

 

Equity ownership aligns executives with shareholders

  One-third vests Feb. 14, 2018   One-third vests Feb. 14, 2019   One-third vests Feb. 14, 2020   Hold 50% of Net Shares for 1 Year minimum

 


Changes from Prior Year. In 2017, we continued to use performance-based RSUs and time-vested RSUs. For our performance-based RSUs, we again used a minimum EPS hurdle and combined ROTCE in a matrix structure in order to balance both absolute and relative ROTCE performance, with a potential adjustment to the payout based on TSR relative to peers. In addition to meeting performance and service requirements, half of the net shares which vest under all awards are subject to a 1-year holding period under our Share Ownership and Share Retention Requirements. While the Compensation Committee may from time to time make special retention awards to our NEOs (as it did with two of our NEOs in 2016), no such special awards were made in 2017.

Performance-based RSUs—ROTCE and TSR. 70% of the annual long-term incentive was delivered via performance-based RSUs which require (1) the achievement of an earnings-per-share hurdle, (2) a determination of SunTrust absolute ROTCE, as well as ROTCE relative to a peer group, and (3) a determination of TSR performance relative to peers.

First, an EPS hurdle must be achieved to ensure that awards are consistent with banking safety and soundness. Second, provided that a cumulative $3.00 per share EPS target is achieved, a preliminary number of shares are earned based on a determination of SunTrust’s absolute ROTCE, as well as relative

ROTCE rank among peer banks measured over a 3-year performance period and based on a matrix, and then modified by TSR performance relative to the peer group, as follows:

 

      Payout Percentage  

 

  SunTrust’s
  ROTCE rank

 

   SunTrust Absolute ROTCE  
  

 

 

 

 

A

 

 

 

  

 

 

 

 

B

 

 

 

  

 

 

 

 

C

 

 

 

  

 

 

 

 

D

 

 

 

 

  Within top 3

 

  

 

 

 

 

120

 

 

 

  

 

 

 

 

130

 

 

 

  

 

 

 

 

140

 

 

 

  

 

 

 

 

150

 

 

 

 

  Second 3

 

  

 

 

 

 

100

 

 

 

  

 

 

 

 

120

 

 

 

  

 

 

 

 

130

 

 

 

  

 

 

 

 

140

 

 

 

 

  Third 3

 

  

 

 

 

 

50

 

 

 

  

 

 

 

 

100

 

 

 

  

 

 

 

 

120

 

 

 

  

 

 

 

 

130

 

 

 

 

  Bottom 3

 

  

 

 

 

 

0

 

 

 

  

 

 

 

 

50

 

 

 

  

 

 

 

 

100

 

 

 

  

 

 

 

 

120

 

 

 

There are three steps when determining the payout. First, SunTrust’s relative ROTCE rank among the peer group is determined and the appropriate row is selected. Next, the column corresponding to SunTrust’s absolute ROTCE is determined. The column headings “A%”, “B%”, “C%” and “D%” correspond to specific, absolute ROTCE targets set by the Compensation Committee based on the Company’s confidential business plan for the three-year performance period. Because these targets are based on the Company’s non-public business plan, the Company will not publicly disclose the actual target levels until the completion of the performance period.

 

 

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Third, the payout determined under the ROTCE matrix is further adjusted, if applicable, based on relative TSR as indicated below:

 

SunTrust TSR Rank—

Percentile

  Payout Adjustment

 

Above 75th

 

 

 

+ 20%

 

 

Between 25th and 75th

 

 

 

No Adjustment

 

 

Below 25th

 

 

 

- 20%

 

Awards are capped—a combination of ROTCE and TSR performance may never exceed 150% of target.

These performance levels were established by the Compensation Committee with the involvement of management after review of the Company’s business plan and multi-year forecasts, current operating results, and peer performance.

Finally, we impose an additional one-year holding period to the extent any earned award exceeds 130% of target.

Dividends will not be paid on unvested awards but instead will be accrued and reinvested in equivalent shares of common stock and then paid only if the underlying award vests. These awards are subject to our expanded recoupment (clawback) policy. Refer to “Recoupment of Incentive Compensation (Clawbacks)” below.

Time-Vested RSUs. 30% of the annual LTI awards was delivered in time-vested RSUs which vest annually over three years (i.e., one-third each year). We use time-vested RSUs instead of stock options to reduce the leverage to operating results, thereby reducing potential compensation risk, while continuing to align executives’ interests with shareholders through equity ownership.

Executives are required to retain 50% of net shares under both awards for a minimum of one year, ensuring longer-term alignment with shareholder risk. Time-vested awards are also subject to our expanded recoupment (clawback) policy. Refer to “Recoupment of Incentive Compensation (Clawbacks)” below.

Performance-Based Awards Granted in Prior Years.

Performance targets and actual results for the completed performance period for awards made in February 2015, which vested in February 2018, are described below. The underlying units were earned based on actual performance over a three-year measurement period compared to pre-established performance criteria.

2015 Performance-based Restricted Stock Units—Total Shareholder Return (TSR) and Return on Tangible Common Equity (ROTCE). In 2015, 70% of the long-term incentive was delivered via performance-based RSUs which required (1) the achievement of an earnings-per-share hurdle, (2) a determination of TSR performance relative to a peer group, and (3) a determination of ROTCE performance relative to pre-set goals.

 


First, an EPS hurdle had to be achieved to ensure that awards were consistent with banking safety and soundness. Provided that a cumulative $3.00 per share EPS target was achieved, a preliminary number of shares were earned based on SunTrust’s TSR rank relative to the applicable peer group at the time of the grant measured over a 3-year performance period as follows:

 

Performance       

  3-Year Relative             

  TSR Rank             

 

  Earned Award as a           

  Percent of Target           

  Maximum

  1                150%         
    2                140%         
    3                130%         
    4                120%         
    5                110%         

  Target

  6 (median)                100%         
    7                85%         
    8                70%         

  Threshold

  9                55%         
    10                0%         
    11                0%         

Next, this preliminary number of earned shares was scaled based upon SunTrust’s ROTCE measured over a 3-year performance period as follows:

 

Average ROTCE    Incentive Adjustment Factor

10.0%+

   100%

9.0% - 9.99%

   80%

8.0% - 8.99%

   60%

7.0% - 7.99%

   40%

6.0% - 6.99%

   20%

0.0% - 5.99%

   0%

These performance levels could not increase compensation but could act to reduce compensation where average ROTCE failed to reach 10%.

Awards were further subject to the following conditions. First, if our TSR was negative at the end of the performance period, then the payout would be capped at 100% of target even if our TSR exceeded the peer median. Second, we would impose a mandatory one-year deferral to the extent any earned award exceeded 130% of target.

The Compensation Committee determined that the 3-year cumulative EPS of $11.65 exceeded the $3.00 hurdle, and that our 3-year TSR of 67.95% was fourth among peers, and that 120% of the grant was earned based on our TSR rank. Further, the Compensation Committee determined that our average ROTCE for the 3-year performance period was 12.02%, resulting in an adjustment factor of 100% (that is, no adjustment). Combining these results, the Committee determined that 120% of the award vested on February 10, 2018.

 

 

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4. Benefits

401(k) Plan and Deferred Compensation Plan. We offer a qualified 401(k) Plan and a nonqualified deferred compensation plan to provide tax-advantaged savings vehicles. We make matching contributions to the 401(k) Plan and the Deferred Compensation Plan to encourage employees to save money for their retirement. These plans, and our contributions to them, enhance the range of benefits we offer to executives and enhance our ability to attract and retain employees.

Under the 401(k) Plan for 2017, employees may defer from 1% to 50% of their eligible pay (subject to Internal Revenue Service limits). We match the first 6% of eligible pay. We may also provide an annual discretionary contribution to all employees equal to a certain percentage of eligible pay. Company contributions are deposited into investment funds based on participants’ directions.

We also maintain a nonqualified deferred compensation plan in order to further assist NEOs and certain other executives in saving for retirement. Under the Deferred Compensation Plan, participants may defer from 6% to 50% of base salary and from 6% to 90% of incentive compensation. The Deferred Compensation Plan also provides for a Company matching contribution equal to 6% of the participant’s eligible earnings in excess of the IRS qualified plan compensation limit. For NEOs who did not participate in the SunTrust SERP or the SunTrust Restoration Plan, the Company matching contribution of 6% is limited to the participant’s eligible earnings in excess of the IRS qualified plan compensation limit but not exceeding eligible earnings in excess of twice that limit. The Company contribution in respect of any participant (not including any discretionary contribution) may not be greater than the participant’s actual deferrals under the Deferred Compensation Plan. Because the Deferred Compensation Plan is unfunded, we account for all participants’ deferrals plus our matching contributions in phantom investment units which are converted to cash upon payment of benefits. Participants’ investment choices in the Deferred Compensation Plan are essentially the same investment options offered in the 401(k) Plan.

Perquisites and Other Benefits. We eliminated most perquisites and personal benefits on January 1, 2008 with the exception of limited personal use of corporate aircraft. Certain use of our corporate aircraft may constitute a personal benefit, and we disclose this benefit when the incremental cost of providing this benefit, together with the aggregate incremental cost of all other perquisites and personal benefits, is at least $10,000. In 2017, perquisites and other benefits for each NEO were less than $10,000.

Post-Termination Compensation—Retirement Plans. We previously provided teammates with certain pension benefits. However, at the end of 2011, the Compensation Committee froze the Company’s retirement plans, including (i) our qualified defined benefit pension plan, (ii) the SunTrust Banks, Inc.

 


Supplemental Executive Retirement Plan (“SERP”), (iii) the SunTrust Banks, Inc. ERISA Excess Plan (“Excess Plan”), and (iv) the SunTrust Banks, Inc. Restoration Plan (“Restoration Plan”). As a result, the benefits provided under these plans were fixed and do not reflect subsequent salary increases or service credit. Additionally, pay credits under the cash balance formula provided by these plans (where applicable) ceased as of December 31, 2011. However, we continue to recognize service for vesting and eligibility requirements for early retirement, and interest credits under the cash balance formula will continue to accrue until benefits are distributed. Actual benefits vary for each NEO based on years of service, years remaining until retirement and compensation history. In lieu of traditional pension benefits, we increased the Company matching contribution opportunity under our defined contribution plans.

Post-Termination Compensation—Executive Severance Plan. None of our NEOs has an employment agreement which requires us to pay their salary or severance for any period of time. Instead, the Company has an Executive Severance Plan which replaced all legacy change in control (CIC) agreements. The Executive Severance Plan enhances our ability to attract and retain talented executives by providing severance benefits. The Executive Severance Plan also allows us to better standardize benefits among executives and to terminate all grandfathered CIC agreements which included tax gross-up provisions. All remaining CIC Agreements were terminated effective in 2016.

Under the Executive Severance Plan, executives will receive benefits upon termination of employment in connection with a change in control, and lesser severance benefits in connection with certain other terminations, such as a reduction in force. Specifically, NEOs other than the CEO will receive an amount equal to 1.5 times their base salary, and the CEO will receive an amount equal to 2 times his base salary, in connection with their involuntary termination of employment in connection with a reduction in force, job elimination, divestiture or changes to the NEO’s existing position where it is no longer an “equivalent position.” Also, NEOs including the CEO will receive an amount equal to 2 times their base salary and target bonus and a pro-rated portion of the annual bonus earned in the year of termination upon a termination of employment in connection with a change in control where the NEO’s employment is terminated without cause or where the NEO resigns for good reason during the 2-year period following a change in control.

Executive Compensation Decision-Making Processes

Participants in Decision-Making

The Compensation Committee of the Board makes decisions regarding the compensation of our executives. Specifically, the Compensation Committee has strategic and administrative responsibility for a broad range of issues. These include ensuring that we compensate executives and key management

 

 

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effectively and in a manner consistent with our stated compensation philosophy and objectives and the requirements of the appropriate regulatory bodies. The Compensation Committee also oversees the administration of executive compensation plans, including the design of, performance measures and targets for, and award opportunities under, the executive incentive programs and certain employee benefits.

The Compensation Committee reviews executive officer compensation at least annually to ensure that senior management compensation is consistent with our compensation philosophy, Company and individual performance, changes in market practices and changes in an individual’s responsibilities. The Compensation Committee has continued to consider individual performance, long-term potential and other individual factors in making promotions and setting base salaries. Among the elements of individual performance considered by the Compensation Committee are leadership, talent management, risk management and individual contributions to our improvement in financial performance, including growing the business, efficiency and productivity.

At the Compensation Committee’s February meeting, the Compensation Committee conducts a more specific review which focuses on performance relative to annual and long-term incentive award targets for the most recently-completed fiscal year or performance period. This review considers corporate and individual performance, changes in an NEO’s responsibilities, data regarding peer practices and other factors.

The Compensation Committee reviews and approves the compensation of the CEO, the Co-Chief Operating Officers, and the Corporate Executive Vice Presidents, which constitute the CEO and his direct reports and include the other NEOs. The CEO and members of our Human Resources function assist in the reviews of such direct reports. The Compensation Committee’s compensation consultant supports such reviews by providing data regarding market practices and making specific recommendations for changes to plan designs and policies consistent with our philosophies and objectives. With regard to senior officers other than the CEO, the Co-Chief Operating Officers, and the Corporate Executive Vice Presidents, compensation is determined in part on market data, and the Compensation Committee annually reviews the general components of such compensation. The CEO may also make recommendations to the Compensation Committee to adjust the amount paid to his direct reports based on performance relative to individual goals.

Compensation Consultant

To assist in efforts to meet the objectives outlined above, the Compensation Committee engages an independent executive compensation consulting firm to advise it on a regular basis on our executive compensation and benefit programs. The

 


Compensation Committee engaged the consultant to provide general executive compensation consulting services and to respond to any Compensation Committee member’s questions and to management’s need for advice and counsel. In addition, the consultant performs special executive compensation projects and consulting services from time to time as directed by the Compensation Committee. The consultant reports to the Compensation Committee Chair. Pursuant to the Compensation Committee’s charter, the Compensation Committee has the power to hire and terminate such consultant and engage other advisors.

The engagement of a compensation consultant raises the potential for a conflict of interest. To minimize the potential for conflicts of interest, we limit the use of the Compensation Committee’s consultant to only teammate compensation and benefits matters. Also, we report to the Compensation Committee the amount of fees paid to the compensation consultant and the types of matters on which the consultant advised. In 2017, Frederic W. Cook & Co., Inc. (“FW Cook”) performed services solely for the Compensation Committee or other committees of the SunTrust Board of Directors. The Compensation Committee determined that the work of FW Cook in 2017 did not raise any actual conflict of interest. Additionally, the Compensation Committee determined that FW Cook was independent of management after considering several factors, including (1) whether they provided any other services to the Company; (2) the amount of fees received from the Company by them as a percentage of their total revenue; (3) their policies and procedures that are designed to prevent conflicts of interest; (4) any business or personal relationship of the compensation consultant with a member of the Compensation Committee; (5) the amount of SunTrust stock owned by FW Cook and its employees who advise the Compensation Committee; and (6) any business or personal relationships between the executive officers of the Company and them.

Market Competitiveness

To ensure that we continue to offer competitive total compensation to our NEOs, annually the Compensation Committee reviews the marketplace in which we compete directly for executive talent. The Compensation Committee looks at the market primarily based on a select group of peer companies and, when applicable, as a broader financial services industry. From this review, the Compensation Committee generally positions target total compensation—salary, short-term incentives, and long-term incentives—at the peer median, with deviations to reflect individual circumstances. Total compensation, as well as each component of total compensation, is benchmarked separately.

In February 2017, the Compensation Committee reviewed the composition of the peer group. Based on the results of the review as well as recommendations from management and investor feedback, the Compensation Committee made select

 

 

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changes to the peer group. Specifically, it added Bank of America, Citizens Financial Group and Huntington Bancshares, and removed Capital One and Comerica. These changes increase the size of the peer group and better align the peer group to reflect companies with a business mix more similar to our own as well as the financial institutions with which we regularly compete in the marketplace. Accordingly, the peer group for compensation decisions currently consists of:

 

 Bank of America Corporation

 BB&T Corporation

 Citizens Financial Group, Inc.

 Fifth Third Bancorp

 Huntington Bancshares, Inc.

 KeyCorp

  

 M&T Bank Corporation

 PNC Financial Services Group Incorporated

 Regions Financial Corp

 U.S. Bancorp

 Wells Fargo & Company

  
  
  
  
  

The Compensation Committee reviews other peer data occasionally and monitors compensation actions occurring within our industry. This is important as we strive to attract, retain and motivate our executive talent. We review financial services industry compensation data from published third-party surveys of financial services companies of approximately the same asset size. The Compensation Committee uses this data, in addition to the peer group data, largely in its review of base salaries, but the Compensation Committee also uses it when making short-term and long-term incentive decisions. We do this because in some cases, the availability of relevant peer information is limited for specific executive positions. We also do this because we may compete for the same executive talent with all financial services companies. Additionally, we believe that the integrity of our executive compensation decisions improves with additional information.

Other Data

Members of our Human Resources function regularly provide the Compensation Committee with information regarding the value of prior equity grants made to the CEO, the Co-Chief Operating Officers, and the Corporate Executive Vice Presidents. This information includes accumulated gains, both realized and unrealized, under restricted stock, stock option and other equity grants. Additionally, we provide the Compensation Committee with information regarding potential payments to our NEOs under various termination events, including retirement, termination for cause and not for cause, and upon a change in control. We provide the Compensation Committee with both the dollar value of benefits that are enhanced as a result of the termination event and the total accumulated benefit. We provide similar information in the “2017 Potential Payments Upon Termination or Change in Control Table” below, except that in that table we report only the amount that is enhanced as a result of the termination event in order to not double-count compensation that we reported in previous years. By having this information, the Compensation Committee is informed of possible scenarios that involve compensation.

 


Investor Outreach and Say-on-Pay

We began a formal, annual shareholder outreach program in 2012. Since that time, members of our Investor Relations and Legal departments have spoken with most of our thirty-five largest shareholders. We provide more information about these discussions in this Proxy Statement at “Investor Outreach” above.

The Compensation Committee attempts to balance the interests of shareholders, regulators and other interested parties. In each of the last eight years, more than 90% of the votes cast were in favor of our executive compensation programs. We are proud of these results and believe our shareholders support our compensation policies and programs. Due to this consistent strong support, we did not make any material changes to our 2017 compensation policies as a result of the advisory vote on executive compensation.

Other Guidelines and Procedures Affecting Executive Compensation

Grants of Stock-Based Compensation. The Compensation Committee approves all grants of stock-based compensation to each executive officer. The Compensation Committee also approves the size of the pool of stock-based awards to be granted to other employees and delegates to the CEO the authority to make and approve specific grants to employees other than the Co-Chief Operating Officers and Corporate Executive Vice Presidents. The Compensation Committee reviews such grants and oversees the administration of the program.

Stock-Based Compensation—Procedures Regarding Timing and Pricing of Grants. Our policy is to make grants of equity-based compensation only at current market prices. Absent special circumstances, it is our policy to make most equity grants at the February meeting of our Board. However, we make a small percentage of grants at other times throughout the year, mostly on the date of regularly-scheduled meetings of the full Board in connection with specific circumstances, such as the hiring or promotion of a teammate, special retention circumstances, or merger and acquisition activity.

We try to make stock-based grants at times when they will not be influenced by scheduled releases of information. We do not otherwise time or plan the release of material, non-public information for the purpose of affecting the value of executive compensation. Instead, these grants primarily have grant dates corresponding to the date of the February Board meeting or the next pre-selected off-cycle grant date. We chose the February meeting of our Board because it is the first meeting of the Board after we have publicly announced financial results for the completed year. This date also allows time for performance reviews following the determination of corporate financial performance for the previous year. This allows us to make grants at a time when our financial results have already become

 

 

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public. We believe we minimize the influence of our disclosures of non-public information on these long-term incentives by selecting dates well in advance and which fall several days or weeks after we report our financial results, and by setting the vesting period at one year or longer. We follow the same procedures regarding the timing of grants to our executive officers as we do for all other participants.

Recoupment of Incentive Compensation (Clawbacks)

For several years, the Compensation Committee has made every incentive award agreement, both long and short-term, subject to stringent recoupment provisions. These provisions allow the Company to recoup or cause the forfeiture of compensation in the event of certain business unit or line of business losses, detrimental conduct or financial statement restatements, after taking into account the magnitude of the loss, the employee’s involvement in the loss, the employee’s performance and any other factors deemed appropriate.

SunTrust and the Board are committed to pursuing recoupment actions and other sanctions (including termination of employment) against current and former teammates believed to have acted unethically. We have a standing committee comprised of internal leaders who track significant events for possible recoupment and other appropriate sanctions. At least quarterly, the Compensation Committee reviews the status of matters tracked by this committee.

In July 2015, the SEC published proposed rules regarding the disclosure and administration of clawback policies. In November 2015, SunTrust early-adopted a formal, written recoupment policy that meets or exceeds the proposed SEC requirements. In addition, our policy memorializes SunTrust’s existing practice of including provisions authorizing the Company to clawback incentive compensation in essentially every incentive award agreement for essentially every employee. This includes both performance-vested and time-vested compensation. You can view the policy on our Investor Relations website, investors.suntrust.com, under the heading “Governance.

Share Ownership and Share Retention Requirements

Although our directors and executive officers already have a significant equity stake in our Company (as reflected in the beneficial ownership information contained in this Proxy Statement), we have adopted share ownership and retention requirements for directors and for senior management to formalize these important principles of share ownership and share retention. Our Share Ownership and Retention Policy was revised to increase the CEO ownership requirement from five

 


times to six times base salary. A summary of the requirements is provided below.

 

Position   Stock Ownership
Requirement
  Share Retention
Requirement

CEO

  6X Base
Salary
  50% retention requirement for one year and until ownership requirement is met

Co-Chief

Operating

Officers

and

Corporate

Executive

Vice

Presidents

  3X Base
Salary
  50% retention requirement for one year and until ownership requirement is met

Executives are also required to retain 50% of net shares (as defined below) for a minimum of one year, and thereafter such shares may be sold only to the extent they exceed the ownership requirement. This ensures longer-term alignment with shareholder risk. Net shares means shares acquired from Company-sponsored incentive plans after payment of transaction costs, including exercise prices and income taxes, whether or not shares are actually sold to pay these exercise costs.

We allow these officers five years to meet the ownership requirement from the date they became an executive officer. We count unvested time-based restricted stock and our common stock or its equivalent held in the 401(k) Plan and phantom shares held in nonqualified plans. We do not count unvested performance shares, or vested or unvested stock options. The CEO, our Co-Chief Operating Officers and each Corporate Executive Vice President met the requirements of this policy in 2017 as it applied to him or her.

We require non-employee members of our Board to own at least 15,000 shares of our common stock, which is approximately 8.5 times their annual equity retainer. We count unvested time-based restricted stock and restricted stock units and deferred or phantom stock towards this requirement. We allow members of the Board five years in which to meet this requirement. Presently, all Board members are in compliance with this requirement as it applies to them.

Anti-Hedging and Anti-Pledging Policies

We prohibit our executive officers and directors from hedging the risk of ownership of SunTrust stock. We also prohibit directors and executive officers from pledging shares of SunTrust stock. None of our executive officers or directors have hedged or pledged any of their shares.

 

 

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Tax Considerations

We consider the tax treatment of various forms of compensation and the potential for excise taxes to be imposed on our NEOs which might have the effect of hindering the purpose of such compensation. While we do not design our compensation programs solely for tax purposes, we design our plans to be tax efficient for us where possible and where the design does not add undue complexity to the plans or their administration. This requires us to consider several provisions of the Internal Revenue Code. While we endeavor to use tax-efficient compensation structures when feasible, the Compensation Committee has the discretion to deliver non-deductible forms of compensation.

Compensation Policies that Affect Risk Management

We maintain incentive compensation plans for a large number of employees in addition to our executive officers. In this section, we describe some of our policies regarding our use and management of our incentive compensation plans, and how we manage risks arising from our use of incentive compensation. We do not believe that the risks which may arise from our compensation policies and practices are reasonably likely to have a material adverse effect on the Company.

We Use Incentives Differently Based on Job Type. We have two primary annual incentive plans. Our NEOs, executive officers, most managers and certain key teammates participate in the AIP. These are teammates with broader, company-wide and/or strategic responsibilities. This includes headquarters executives as well as leaders in various functions, such as Finance, Enterprise Risk and Human Resources. The AIP provides an annual payout if performance exceeds pre-established corporate goals and/or if pre-established divisional and individual goals are achieved. For our executive officers, funding of these awards is based entirely or primarily on corporate performance. Awards for other employees generally are funded based 25% on corporate performance, 25% on line of business or functional area (e.g., Finance Department) performance and 50% on an individual funding component that is triggered by meeting a minimum threshold of net income available to common shareholders. In 2017, we used earnings per share (EPS), tangible efficiency ratio and pre-provision net revenue (PPNR) as the metrics for corporate performance.

Other executives and groups of teammates participate in annual incentive plans designed to support the business objectives of the line of business in which they reside. We refer to these as Functional Incentive Plans (FIPs). The primary purpose of FIPs is to drive teammate behavior in a direction consistent with the business objectives of the unit, line of business, and the Company. These incentive plans are generally used to encourage production consistent with effective sales and business practices and are a focal point for setting and measuring individual performance.

 


We Create Different Incentive Plans for Different Jobs. We use FIPs to link teammate compensation to the successful achievement of goals. We structure FIPs to drive behaviors that directly affect revenue or productivity and use FIPs as the method for determining payouts to individuals based on identified performance measures. In 2017, we used 40 separate FIPs. While our FIPs have many common features and plan terms, generally they are either a commission plan, incentive plan or a bonus plan. Commission plans pay based on production less a monthly draw. Incentive plans pay based on formulas tied to sales and revenue growth above a threshold. Bonus plans provide annual discretionary awards from a pool of dollars funded through business unit profit and/or revenue performance.

How We Manage Risks Arising From Incentive Compensation. We manage risks that may arise from our incentive compensation in several ways:

Balanced Risk-Taking Incentives. We balance incentive compensation arrangements with our financial results. We review our incentive plans regularly to ensure that they do not provide incentives to take excessive or unnecessary risks.

Controls and Risk Management. We use risk-management processes and internal controls to reinforce and support the development and maintenance of our incentive compensation arrangements.

Strong Corporate Governance. We reinforce our compensation practices with strong corporate governance. We describe the active role of the Compensation Committee of our Board in the “Board Committees and Attendance” section above and in this “Compensation Discussion and Analysis” section of this Proxy Statement. Compensation Committee governance includes a report by the Chief Risk Officer on the management of risk in our incentive plans. Additionally, senior leaders (Chief Executive Officer, Chief Financial Officer, Chief Risk Officer, Chief Human Resources Officer and Director of Total Rewards) regularly review the effectiveness of our incentive plans.

Use of Performance Measures that Include or Adjust for Risk. We assess the effect of risk on our incentives in several ways. Under the AIP, we use performance metrics which are closely correlated to shareholder return. These implicitly include an important risk focus. Under our FIPs, we use a variety of measures that either directly or indirectly include risk measures, including the use of discretion.

Management of Risk Realization. We also utilize a variety of techniques to address risks that we may realize.

Clawbacks and Forfeitures. We have expanded our clawback and forfeiture provisions for incentive compensation plans. We discuss these in greater detail in “Recoupment of Incentive Compensation (Clawbacks)” above.

Deferred Compensation. We standardized long-term mandatory deferred cash compensation arrangements, which

 

 

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are subject to new forfeiture provisions, for certain employee populations. We continue to monitor the use of deferred compensation from a competitive market perspective.

Qualified Production. Our incentive plans include language that reinforces our compliance and control policies. Examples include the exclusion of certain types of transactions or sales from commission calculations due to exceptions, the reduction in qualified production for certain types of higher risk products, and the potential to forfeit awards as a result of realized losses.

Other Changes. We began conducting comprehensive annual reviews of all of our incentive compensation plans, with an emphasis on risk-adjusted pay for performance, following the finalization by the Federal Reserve in 2010 of its “Guidance on Sound Incentive Compensation Policies.” These reviews generally confirmed the soundness of the design of our incentive plans but did identify some areas for improvement. As a result, during the last few years, we made several changes to our incentive compensation plans, the most significant of which were:

Reduced Sensitivity to Short-Term Performance. We “de-leveraged” total compensation in select positions by increasing base pay and reducing short-term incentives.

 


Senior Management Differentiation. We created a focus to distinguish senior leaders’ responsibility for profitability and influence on risk-taking, rather than on new production.

Expanded Use of Plan Limits. We expanded our use of plan features to limit compensation that otherwise might have been paid in inappropriate situations. These include the increased use of clawback and forfeiture provisions for incentive compensation plans, mandatory long-term deferrals and limiting payouts to qualified production.

Additionally, we added process enhancements which included:

Monitoring and Validation. For certain FIPs, we compare the incentives paid in recent years relative to specific financial performance metrics.

Integration of Risk and Finance Functions. Risk and Finance representatives partner with FIP developers in the ongoing planning, design and implementation of FIPs to incorporate risk measures.

Business and Sales Practices. We have established Enterprise and Segment business and sales practices committees that review the design of our incentive plans and provide governance activities that mitigate the risk of client harm and excessive risk taking.

 

Compensation Committee Report

The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis included in this Proxy Statement with management. Based on such review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

Submitted by the Compensation Committee of the Board of Directors.

Kyle Prechtl Legg, Chair

    

Paul R. Garcia

    

M. Douglas Ivester

Donna S. Morea

    

David M. Ratcliffe

    

Frank P. Scruggs, Jr.

 

 

February 12, 2018

 

 



 

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2017 SUMMARY COMPENSATION TABLE

 

  Name and

  Principal Position

  Year     Salary     Bonus    

Stock1, 2

Awards

   

Option1

Awards

   

Non-

Equity

Incentive

Plan

Comp.

   

Changes in

Pension Value
and

Nonqualified

Deferred

Compensation

Earnings

   

All3

Other

Comp.

    Total  

  William H. Rogers, Jr.

    2017     $ 1,000,000           $ 4,621,673           $ 3,000,000     $ 822,174     $ 148,215     $ 9,592,062  

Chairman and

    2016     $ 1,000,000           $ 4,392,043           $ 2,086,245     $ 474,942     $ 220,177     $ 8,173,407  

Chief Executive Officer

    2015     $ 925,000           $ 4,830,430           $ 2,053,500           $ 100,477     $ 7,909,407  

  Aleem Gillani

    2017     $ 635,000           $ 1,176,508           $ 1,113,213     $ 11,266     $ 91,771     $ 3,027,758  

Corporate Executive V.P.

    2016     $ 611,667           $ 1,173,922           $ 817,513     $ 9,995     $ 102,634     $ 2,715,731  

and Chief Financial Officer

    2015     $ 600,000           $ 1,229,623           $ 793,800           $ 97,241     $ 2,720,664  

  Mark A. Chancy

    2017     $ 693,750 6          $ 1,661,880       $ 1,388,229     $ 203,076     $ 106,826     $ 4,053,761  

Vice Chairman, Co-Chief

Operating Officer and

    2016     $ 658,333           $ 4,579,288           $ 976,119     $ 108,268     $ 112,903     $ 6,434,911  

Consumer Segment Executive

    2015     $ 625,000           $ 1,736,966           $ 862,500           $ 71,666     $ 3,296,132  

  Thomas E. Freeman

    2017     $ 600,000           $ 1,176,508           $ 899,613     $ 16,445     $ 82,796     $ 2,775,362  

Corporate Executive V.P. and

    2016     $ 600,000           $ 2,617,990           $ 702,933     $ 15,660     $ 70,206     $ 4,006,789  

Efficiency & Strategic

Partnerships  Executive4

    2015     $ 600,000           $ 1,229,623           $ 718,200           $ 67,106     $ 2,614,929  

  Hugh S. Cummins, III5

    2017     $ 668,750 6          $ 1,200,227           $ 1,339,566     $ 15,826     $ 20,820     $ 3,245,189  

Co-Chief Operating Officer

                 

and Wholesale Segment Executive

                                                                       

 

1

We report all equity awards at the full grant date fair value of each award calculated in accordance with FASB ASC Topic 718. Please refer to Note 15 to our financial statements in our annual reports for the years ended December 31, 2017, 2016, and 2015, respectively, for a discussion of the assumptions related to the calculation of such values.

 

2

For awards that are subject to performance conditions, we report the value at grant date based upon the probable outcome of such conditions consistent with our estimate of aggregate compensation cost to be recognized over the service period determined under FASB ASC Topic 718, excluding the effect of estimated forfeitures. The maximum number of 2017 performance-based RSU (ROTCE/TSR) awards that may be earned multiplied by the per unit accounting value for the grant of $61.79, are as follows: Mr. Rogers—$4,905,199; Mr. Gillani—$1,248,652; Mr. Chancy—$1,763,796; Mr. Freeman—$1,248,652; and Mr. Cummins—$1,273,863.

 

3

Total perquisites and other personal benefits for each NEO were less than $10,000 in 2017. The amount shown as “All Other Compensation” for 2017 includes the following: (a) 401(k) Company Match (includes our matching contributions to both the 401(k) Plan and the Deferred Compensation Plan) for Mr. Rogers—$141,375; Mr. Gillani—$87,151; Mr. Chancy—$100,192; Mr. Freeman—$78,176; and Mr. Cummins—$16,200; and (b) supplemental disability insurance premiums for Mr. Rogers—$6,840; Mr. Gillani—$4,620; Mr. Chancy—$6,634; Mr. Freeman—$4,620; and Mr. Cummins—$4,620.

 

4

As previously announced, Mr. Freeman retired from this position on February 13, 2018.

 

5

This is the first year that Mr. Cummins is a NEO.

 

6

For certain NEOs, reflects base salary adjustments which took effect April 3, 2017.

 

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2017 GRANTS OF PLAN-BASED AWARDS

In this table, we provide information concerning each grant of an award made to an NEO in the most recently completed year. This includes awards under the Annual Incentive Plan and performance-vested and time-vested restricted stock unit awards granted under the SunTrust Banks, Inc. 2009 Stock Plan, all of which are discussed in greater detail in this Proxy Statement at “Compensation Discussion and Analysis.” Half of the vested net shares awarded under the RSUs are subject to an additional one-year holding period under the Share Ownership and Share Retention Requirements, which ensures longer-term alignment with shareholder risk. These awards are also subject to our recoupment (clawback) policy. Refer to “Recoupment of Incentive Compensation (Clawbacks)” above.

 

                

Estimated Future Payouts

Under Non-Equity

Incentive Plan Awards

          

Estimated Future Payouts

Under Equity

Incentive Plan Awards

     All other stock
awards: Number
of shares of
stock or units(#)
     Grant Date
Fair Value of
Stock Award
 
  Name         

Grant

Date

    

Threshold

($)

    

Target

($)

    

Maximum

($)

            Threshold
(#)
    

Target

(#)

     Maximum
(#)
       

  Rogers

   AIP1      1/1/2017               2,000,000        3,500,000                   
   RSU2      2/14/2017                   26,462        52,923        79,385         $ 3,270,112  
     RSU3      2/14/2017                                                                      22,681      $ 1,351,561  

  Gillani

   AIP1      1/1/2017               698,500        1,464,755                   
   RSU2      2/14/2017                   6,736        13,472        20,208         $ 832,435  
     RSU3      2/14/2017                                                                      5,774      $ 344,073  

  Chancy

   AIP1      1/1/2017               919,455        1,928,097                   
   RSU2      2/14/2017                   9,515        19,030        28,545         $ 1,175,864  
     RSU3      2/14/2017                                                                      8,156      $ 486,016  

  Freeman

   AIP1      1/1/2017               660,000        1,384,020                   
   RSU2      2/14/2017                   6,736        13,472        20,208         $ 832,435  
     RSU3      2/14/2017                                                                      5,774      $ 344,073  

  Cummins

   AIP1      1/1/2017               944,041        1,979,654                   
   RSU2      2/14/2017                   6,872        13,744        20,616         $ 849,242  
     RSU3      2/14/2017                                                                      5,890      $ 350,985  

 

1

Annual Incentive Plan. Represents award opportunity under the Annual Incentive Plan (AIP). Subject to minimum performance. Maximum awards are limited to the lesser of 150% of the funded target amount or $3,500,000 pursuant to the terms of the Company’s Umbrella Plan. Refer to the “Compensation Discussion and Analysis” for additional information. Amounts actually earned for 2017 are reported in the Summary Compensation Table in the column, “Non-Equity Incentive Plan Compensation.”

 

2

Performance-Vested RSUs-ROTCE and TSR. Performance-vested restricted stock units granted under the SunTrust Banks, Inc. 2009 Stock Plan. The grant cliff-vests after three years (performance period is 2017-2019; i.e., award does not vest at all until after three years) provided (1) an earnings-per-share hurdle is achieved, and then to the extent of (2) ROTCE both on an absolute basis and relative to our peer group, and (3) further modified by TSR performance relative to our peer group. Awards will be denominated in and settled in shares of SunTrust common stock. Dividends will not be paid on unvested awards but instead will be accrued and reinvested in equivalent shares of SunTrust common stock and paid if and when the underlying award vests.

 

3

Time-Vested RSUs. Time-vested restricted stock units granted under the SunTrust Banks, Inc. 2009 Stock Plan. Awards vest pro rata annually over three years (i.e., one-third each year). Awards will be denominated in and settled in shares of SunTrust common stock. Dividends will not be paid on unvested awards but instead will be accrued and reinvested in equivalent shares of SunTrust common stock and paid if and when the underlying award vests.

 

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OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2017

 

    Option Awards          

Stock Awards

 
  Name  

Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable

   

Number of

Securities

Underlying

Unexercised

Options

(#)

Unexercisable

   

Option

Exercise

Price

   

Option

Expiration

Date

          

Vesting

Date

   

Number

of Shares
of

Stock That

Have Not

Vested

   

Market1

Value of
Shares of
Stock That

Have Not

Vested

   

Equity

Incentive

Plan

Awards:

Number of

Unearned

Shares of

Stock That

Have Not

Vested

   

Equity1

Incentive Plan

Awards:

Market Value
of Unearned

Shares of

Stock That

Have Not

Vested

 

  William H. Rogers, Jr.

    88,800       $ 64.58       2/12/2018              
    116,600       $ 9.06       2/10/2019              
    84,439       $ 29.20       4/1/2021              
    136,200       $ 21.67       2/14/2022              
    110,121       $ 27.41       2/26/2023              
              2/9/2018       13,586     $ 877,520      
              2/10/2018       97,769     $ 6,314,900      
              2/14/2018       7,560     $ 488,300      
              2/9/2019       13,586     $ 877,520       95,104     $ 6,142,767  
              2/14/2019       7,560     $ 488,300      
                                              2/14/2020       7,561     $ 488,365       52,923     $ 3,418,297  

  Aleem Gillani

              2/9/2018       3,631     $ 234,526      
              2/10/2018       24,888     $ 1,607,516      
              2/14/2018       1,925     $ 124,336      
              2/9/2019       3,631     $ 234,526       25,420     $ 1,641,878  
              2/14/2019       1,925     $ 124,336      
                                              2/14/2020       1,925     $ 124,336       13,472     $ 870,156  

  Mark A. Chancy

    115,000       $ 64.58       2/12/2018              
    35,000       $ 9.06       2/10/2019              
    27,716       $ 29.20       4/1/2021              
    55,400       $ 21.67       2/14/2022              
    44,846       $ 27.41       2/26/2023              
              2/9/2018       4,885     $ 315,522      
              2/10/2018       35,157     $ 2,270,791      
              2/14/2018       2,719     $ 175,620      
              2/9/2019       50,120     $ 3,237,251       34,198     $ 2,208,849  
              2/14/2019       2,719     $ 175,620      
              2/9/2020       45,235     $ 2,921,729      
                                              2/14/2020       2,718     $ 175,556       19,030     $ 1,229,148  

  Thomas E. Freeman

    81,400       $ 64.58       2/12/2018              
              2/9/2018       26,076     $ 1,684,249      
              2/10/2018       24,888     $ 1,607,516      
              2/14/2018       1,925     $ 124,336      
              2/9/2019       26,075     $ 1,684,184       24,209     $ 1,563,659  
              2/14/2019       1,925     $ 124,336      
                                              2/14/2020       1,924     $ 124,271       13,472     $ 870,156  

  Hugh S. Cummins, III

    45,600       $ 21.67       2/14/2022              
    43,185       $ 27.41       2/26/2023              
              2/9/2018       3,528     $ 227,874      
              2/10/2018       25,391     $ 1,640,005      
              2/14/2018       1,964     $ 126,855      
              2/9/2019       48,763     $ 3,149,602       24,698     $ 1,595,244  
              2/14/2019       1,963     $ 126,790      
              2/9/2020       45,235     $ 2,921,729      
                                              2/14/2020       1,963     $ 126,790       13,744     $ 887,725  

 

1

Market value of unearned shares that have not vested is based on the closing market price of SunTrust common stock on December 31, 2017 ($64.59 per share).

 

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2017 PENSION BENEFITS TABLE

 

 

 

SunTrust previously provided its teammates with certain pension benefits. These benefits were frozen at the end of 2011. As a result, beginning on January 1, 2012, pension benefits do not increase to reflect salary increases or service after December 31, 2011. Service will continue to be recognized only for the purposes of vesting and eligibility requirements for early retirement, and unvested participants may continue to accumulate service towards vesting in their frozen benefits. The net present value of the frozen benefit changes from year to year as a result of increased age and changed mortality assumptions, changed interest rates and, with respect to cash balance plans, interest credits.

Personal Pension Accounts. We amended pension benefits to provide for a cash-balance formula effective January 1, 2008 (the “Personal Pension Account”). Participants with at least 20 years of service elected either (i) to continue to accrue benefits under a traditional pension formula at a lower accrual rate, or (ii) to participate in a new cash balance personal pension account (PPA). The only NEO who met these criteria was Mr. Rogers. Participants with less than 20 years of service will receive their frozen accrued benefit under the traditional pension formula as of December 31, 2007 plus their account balance under the PPA. New participants after 2007 participated only in the PPA. On January 1, 2012, compensation credits under the PPAs ceased, although balances under the PPAs continue to accrue interest until benefits are distributed, and service will continue to be recognized for vesting and eligibility requirements for early retirement.

Policies on Age and Service Credit. Because our plans are frozen, age and service have less relevance. In the past, as a general rule, we did not grant extra years of service under our qualified or nonqualified plans, and we did not grant any NEO extra years of service under our qualified or nonqualified plans.

 


However, our Supplemental Executive Retirement Plan (“SERP”), which normally has cliff vesting after attainment of age 60 with 10 years of service, provides automatic vesting (regardless of age or service) following a change of control and upon a participant’s termination of employment for good reason or our termination of the executive’s employment without cause following our change in control (double trigger).

Benefits Available Upon Early Retirement. Most of our pension plans provide for a reduced benefit upon early retirement (retirement prior to “normal retirement age”). Normal retirement age under the SunTrust Retirement Plan and the SunTrust ERISA Excess Plan is age 65 with at least five years of service. Normal retirement age under the SunTrust SERP is age 65 with at least ten years of service. These early retirement reductions apply to accrued benefits that were frozen as of December 31, 2007 in connection with the retirement plan changes and to those who were eligible to continue accruing benefits under a traditional pension formula. Benefits under the SunTrust Retirement Plan, the SunTrust ERISA Excess Plan and the SunTrust SERP are reduced 5% per year for each year that an individual retires prior to age 65 (unless hired by SunTrust prior to July 1, 1990, in which case the reduction applies only for retirement prior to age 60).

Form of Benefits. The normal form of benefit under the SunTrust Retirement Plan is a life annuity for an unmarried participant and a 50% joint and survivor annuity for a married participant, and a lump sum under the nonqualified plans (the SunTrust Banks, Inc. Restoration Plan, the SunTrust ERISA Excess Plan and the SunTrust SERP). Payment of benefits accrued and vested after 2004 from the nonqualified retirement plans may be delayed for up to six months after a participant’s separation from service because of restrictions under Section 409A of the Internal Revenue Code.

 

 

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  Name    Plan Name   Status   Number of
Years
Credited Service
 

Present Value1

of Accumulated
Benefit

    Payments
During Last
Fiscal Year

  William H. Rogers, Jr.

   SunTrust Retirement Plan2   vested   31.5   $ 1,336,215    
   SunTrust ERISA Excess Plan3   vested   31.5   $ 1,191,563    
     SunTrust SERP4   vested   31.5   $ 6,318,366    

  Aleem Gillani

   SunTrust Retirement Plan2   vested   4.7   $ 73,383    
   SunTrust ERISA Excess Plan3   vested   4.7   $ 57,987    
     SunTrust Restoration Plan5   not vested   4.7   $ 10,897    

  Mark A. Chancy

   SunTrust Retirement Plan2   vested   10.5   $ 196,331    
   SunTrust ERISA Excess Plan3   vested   10.5   $ 150,117    
     SunTrust SERP4   not vested   10.5   $ 1,196,632    

  Thomas E. Freeman

   SunTrust Retirement Plan2   vested   6.0   $ 125,411    
   SunTrust ERISA Excess Plan3   vested   6.0   $ 108,358    
     SunTrust SERP4   vested   6.0   $ 577,478    

  Hugh S. Cummins, III

   SunTrust Retirement Plan2   vested   6.7   $ 112,181    
     SunTrust ERISA Excess Plan3   vested   6.7   $ 41,831    

 

1

Present values are based on assumptions used in the financial disclosures for the year ended December 31, 2017, except that no pre-retirement death, termination, or disability is assumed. These results are based on the lump sum value of each benefit payable at the earliest unreduced retirement age for the Plan. Lump sum payments are based on the assumptions used for year-end 2017 financial disclosures, including a discount rate of 3.54% for the Tier 2 SERP, ERISA Excess Plan and SunTrust Restoration Plan, and 3.63% for the Retirement Plan, and the RP-2014 HA/EE (adjusted to 2006, projected using MP-2017, unisex) mortality table.

 

  

Where applicable, Personal Pension Account (PPA) balances are included. PPA balances are accumulated with interest credits to the earliest unreduced retirement age and then discounted to December 31, 2017 based on the interest crediting rate (3.00% as of December 31, 2017) and discount rate assumptions used for financial reporting purposes as of December 31, 2017 mentioned above.

 

  

Generally, benefits are assumed to commence at the Plan’s earliest unreduced retirement age, or the current age if later. For the ERISA Excess Plan, Restoration Plan, Tier 2 SERP, and SunTrust Retirement Plan, the earliest unreduced retirement age is either 65 (Messrs. Chancy, Cummins, Freeman, and Gillani) or 60 (Mr. Rogers). The present value at the expected retirement age is discounted back to December 31, 2017 with interest only, using the discount rates mentioned above.

 

2

The SunTrust Retirement Plan is a defined benefit pension plan. It is a tax-qualified, broad-based plan generally available to almost all of our common law employees as of the date the plan was frozen. Benefits vest after three years of service.

 

3

The purpose of the SunTrust ERISA Excess Plan is to provide benefits that would have been provided under the SunTrust Retirement Plan if the Internal Revenue Code did not place annual limits on compensation and benefits. Participation in this plan was limited to executives at certain grade levels who were designated as eligible by the Compensation Committee. The ERISA Excess Plan generally operates in the same manner as the SunTrust Retirement Plan and uses the same benefit formulas based on actual service and base salary (but limited under the ERISA Excess Plan to two times the annual compensation limit under the Internal Revenue Code, which was two times $245,000, resulting in a base salary limit of $490,000 for 2011, the last year of benefit accruals under the plan). Benefits vest after three years of service.

 

4

The SunTrust Supplemental Executive Retirement Plan (SERP) was designed to provide a targeted level of post-retirement income to a highly select group of key executives who have a significant impact on our long-term growth and profitability. The SERP benefit supplements the retirement benefits provided under the SunTrust Retirement Plan and the ERISA Excess Plan. The SERP delivers more competitive levels of total retirement income to our executives and aids in the retention of critical executive talent. Benefits vest at age 60 plus 10 years of service. As with the Retirement Plan and the ERISA Excess Plan, benefits under the SERP were frozen as of January 1, 2012.

 

5

On December 31, 2010, the Company adopted the SunTrust Restoration Plan effective January 1, 2011. The SunTrust Restoration Plan is a nonqualified defined benefit cash balance plan designed to restore benefits to certain employees that are limited under provisions of the Internal Revenue Code which are not otherwise provided for under the ERISA Excess Plan. Participation in this plan was limited to executives at certain grade levels who were designated as eligible by the Compensation Committee. The benefit formula under the SunTrust Restoration Plan is the same as the PPA under the Retirement Plan. Benefits vest at age 60 plus 10 years of service. As with the Retirement Plan and the ERISA Excess Plan, benefits under the Restoration Plan were frozen as of January 1, 2012.

 

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Executive Compensation

 

2017 NONQUALIFIED DEFERRED COMPENSATION TABLE

 

  Name    Executive
Contributions
in Last FY
     Registrant
Contributions
in Last FY
     Aggregate
Earnings
in Last FY
     Aggregate
Withdrawals/
Distributions
     Aggregate
Balance at
Last FYE
 

  William H. Rogers, Jr.

   $ 125,175      $ 125,175      $ 531,118             $ 3,015,569  

  Aleem Gillani

   $ 160,727      $ 70,951      $ 487,164        168,934      $ 2,774,943  

  Mark A. Chancy

   $ 100,192      $ 83,992      $ 211,278             $ 1,943,987  

  Thomas E. Freeman

   $ 78,176      $ 61,976      $ 141,035             $ 1,462,880  

  Hugh S. Cummins, III

   $      $      $ 139,392             $ 975,587  

The table above provides information with respect to the SunTrust Deferred Compensation Plan. The Deferred Compensation Plan allows participants to defer up to 50% of their eligible salary and up to 90% of certain bonuses, including the AIP (but excluding most long-term incentives). A hypothetical account is established for each participant who elects to defer, and the participant selects investment fund options which generally are the same funds available to 401(k) Plan participants. Earnings and losses on each account are determined based on the performance of the investment funds selected by the participant. The normal form of payment is a lump sum, payable in the first quarter of the year following a participant’s termination of employment. Installment distributions may be elected provided that the participant complies with the election and timing rules of Section 409A of the Internal Revenue Code. Hardship withdrawals are allowed for an extreme financial hardship, subject to the approval of the plan administrator.

Participant deferrals to the Deferred Compensation Plan are matched at the same rate as provided in the 401(k) Plan. The matching contributions are made on eligible salary and bonus that exceed the federal limit of $270,000 in 2017. Participants will vest in the match after two years of service. Participants will also be eligible to receive a discretionary contribution following the end of each plan year. We did not make such a discretionary contribution in 2017.

The Deferred Compensation Plan also has frozen account balances attributable to similar plans previously maintained by SunTrust and its predecessors. Amounts in frozen accounts

and in matching accounts that are invested in phantom shares of our common stock may be moved to other funds. Benefits may be distributed to active teammates only in the event of a hardship. Benefits are otherwise distributable in the first quarter of the calendar year following retirement, death or other termination of employment.

The column “Executive Contributions in Last FY” reflects the aggregate amount of pay deferred to such plans by each NEO during 2017.

The column “Registrant Contributions in Last FY” reflects the Company’s contributions on behalf of each NEO during 2017. This amount generally is limited to our contributions related to participant salary and AIP deferrals to the Deferred Compensation Plan, plus any discretionary contribution. We also make matching contributions to the 401(k) Plan, but we do not include our contributions to it in this table because that plan is tax qualified. We include our matches for all plans in the “All Other Compensation” column of the Summary Compensation Table. Note that our contributions occasionally exceed the contributions of a particular executive in any given year due to the timing of matching and discretionary contributions.

The column “Aggregate Balance at Last FYE” reflects the total balance of all of the executive’s nonqualified account balances as of December 31, 2017. This number includes the following amounts that each NEO has deferred which we also report in the Summary Compensation Table for 2017 or a prior year: Mr. Rogers—$781,064; Mr. Gillani—$812,982; Mr. Chancy—$759,456; Mr. Freeman—$590,911; and Mr. Cummins—$0.

 

 

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Executive Compensation

 

2017 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

The following table summarizes the estimated payments to be made under each contract, agreement, plan or arrangement which provides for payments to an NEO at, following or in connection with any termination of employment, including by resignation, retirement, death, disability, constructive termination, termination following a change in control or a change in an NEO’s responsibilities. Such amounts are estimates to be paid under hypothetical circumstances and under the terms of the plans as they now exist. As required by the SEC, we have assumed that employment terminated on December 31, 2017 and that the price per share of our common stock is the closing market price as of that date, which was $64.59. Actual payments in such circumstances may differ for a variety of reasons. The amounts reported below do not include amounts to be provided to an NEO under any arrangement which does not discriminate in scope, terms or operation in favor of our executive officers and which is available generally to all salaried employees. Also, the table below does not include amounts reported in the pension benefits table, the deferred compensation table or the outstanding equity awards at year-end table, except to the extent that the amount payable to the NEO would be enhanced by the termination event.

Salary. None of our NEOs has an employment agreement which guarantees them employment for any period of time. Therefore, we would only make post-termination payments of salary or severance to an NEO under our Executive Severance Plan.

Severance. Under the Executive Severance Plan, executives will receive benefits upon termination of employment in connection with a change in control, and lesser severance benefits in connection with certain other terminations such as a reduction in force. Specifically, NEOs other than the CEO will receive an amount equal to 1.5 times their base salary, and the CEO will receive an amount equal to 2 times his base salary, in connection with their involuntary termination of employment in connection with a reduction in force, job elimination, consolidation, divestiture or changes to the NEO’s existing position where it is no longer an “equivalent position.” Also, NEOs including the CEO will receive an amount equal to 2 times their base salary and target bonus and a pro-rated portion of the annual bonus earned in the year of termination upon a termination of employment in connection with a change in control where the NEO’s employment is terminated without cause or where the NEO resigns for good reason during the 2-year period following the change in control.

Accelerated Vesting of Annual Incentives. The AIP has an annual performance measurement period which ends on the last day of our fiscal year. SEC regulations require us to assume that a change in control occurs on the last day of our most recently completed fiscal year. As a result, AIP would pay out based on the achievement of AIP goals for the completed

 


year, and we would not enhance such payment regardless of the circumstances of the termination of the executive. Upon a change in control that occurred on a date other than the last day of our fiscal year, generally we would make only a pro rata payment to AIP participants for the partial year up to the date of a change in control.

Accelerated Vesting of Long-Term Incentives. We have provided long-term incentives to our NEOs through performance and time-vested restricted stock units and stock options. Terms of accelerated vesting for long-term incentives upon various termination scenarios are described below. Long-term incentive awards made in certain years to retirement-eligible individuals may continue to vest after retirement but remain subject to forfeiture during the normal vesting and/or performance period set forth in the award that occurs after retirement if the participant fails to perform covenants included within each award agreement relating to non-competition, non-solicitation of customers and clients, non-disclosure and non-disparagement.

Time Vested Restricted Stock Units (RSUs). Time based RSUs generally vest annually pro rata over three years (i.e., one-third on each anniversary of the grant date), provided the executive has remained an active teammate from the grant date through the vesting date. Unvested RSU grants vest in full upon an NEO’s termination of employment by reason of death or disability. Upon a termination of the executive’s employment by us “without cause” or by the executive for “good reason” in connection with a change in control (i.e., double-trigger), these grants will vest in full. They also vest pro rata if we terminate the executive by a reduction-in-force prior to the vesting date. Upon retirement, the grants continue to vest into retirement and will be distributed on the specified dates as indicated in the grant agreements. Upon termination of employment under any other circumstances, the executive forfeits the RSUs. We calculated the value of RSUs which vest upon termination using our closing stock price on December 31, 2017 of $64.59.

Performance Vested RSUs. Generally, following a termination of employment in connection with a change in control (i.e., double-trigger), performance vested RSU awards will no longer be subject to forfeiture. Because actual performance following the change in control can no longer be determined, a prorated amount will be paid for the portion of the award from the beginning of the performance cycle to the date of the change in control based on actual performance up to the date of the change in control, and a second prorated amount will be paid for the portion of the award from the date of the change in control until the end of the performance period based on target performance. Upon an NEO’s termination of employment by reason of death or disability, unvested performance-vested RSUs will vest based on actual performance through the date of death or disability.

 

 

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Retirement Plans. Benefits under the Retirement Plan and ERISA Excess Plan vest after three years of service, and under the Restoration Plan and the SunTrust SERP at age 60 with ten years of service. Once vested, employees are entitled to pension benefits upon termination of employment. All of our NEOs are vested in their SunTrust Retirement Plan and ERISA Excess Plan benefits. The benefits under these plans are not enhanced upon any termination.

The only enhancement to retirement benefits occurs under the SERP for unvested participants in the event of a change in control. Mr. Chancy is not vested in his SERP benefits. We froze the SERP to new participants before Mr. Gillani and

 


Mr. Cummins were eligible to participate. Following a change in control, if we terminate without cause, an NEO who participates in the SERP and who is not already vested in the SERP (Mr. Chancy) would immediately vest in his SunTrust SERP.

In the event that an NEO becomes disabled on a long-term basis, his employment would not necessarily terminate. Therefore, we do not disclose any amount in the table below for the retirement plans upon a disability. However, once disabled, the executive officer may continue to accrue service (vesting) credit under these plans, and we report the net present value of such enhancements as of the end of our most recently completed fiscal year in the footnotes to the table below.

 

2017 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE

 

Executive Benefits and
Payments upon
Termination
   Voluntary      Involuntary
Not for
Cause
     For Cause      Involuntary
or Good
Reason (CIC)
     Death      Disability  

  William H. Rogers, Jr.

                 

  Severance

          $ 2,000,000             $ 6,000,000                

  Long-Term Incentives

       1     $ 9,886,946   2            $ 21,334,582      $ 23,633,264   3     $ 23,633,264   3 

  Retirement Plans4

                        $ 5,236,527                 5 

  Aleem Gillani

                 

  Severance

          $ 952,500             $ 2,667,000                

  Long-Term Incentives

       1     $ 2,535,145   2            $ 5,542,382      $ 6,142,469   3     $ 6,142,469   3 

  Retirement Plans4

                                          5 

  Mark A. Chancy

                 

  Severance

          $ 1,050,000             $ 3,290,000                

  Long-Term Incentives

          $ 3,555,124   2            $ 13,515,064      $ 14,612,815   3     $ 14,612,815   3 

  Retirement Plans4

                        $ 1,087,294                 5 

  Thomas E. Freeman

                 

  Severance

          $ 900,000             $ 2,520,000                

  Long-Term Incentives

       1     $ 2,516,607   2            $ 8,352,593      $ 9,073,213   3     $ 9,073,213   3 

  Retirement Plans4

                        $ 209,444                 5 

  Hugh S. Cummins, III

                 

  Severance

          $ 1,012,500             $ 3,172,500                

  Long-Term Incentives

       1     $ 2,567,607   2            $ 11,383,977      $ 12,252,219   3     $ 12,252,219   3 

  Retirement Plans4

                                          5 

 

1

Messrs. Rogers, Gillani, Freeman and Cummins were retirement eligible on December 31, 2017. If they had retired on such date, their outstanding awards would not have automatically vested. Therefore, we report zero value in the table above. However, their awards would continue to vest in accordance with the terms of the awards if they performed certain non-competition, non-solicitation, non-disclosure and non-disparagement covenants following their retirement through the end of the respective vesting periods. The values of such awards at December 31, 2017 were $26,154,795, $6,804,040, $6,657,775 and $6,792,284 respectively, assuming eventual payout of performance awards based on the maximum performance level.

 

2

Reflects vesting of outstanding awards pro rata through the date of termination.

 

3

Time-vested RSUs vest in full upon an NEO’s termination of employment by reason of death or disability. Similarly, performance vested RSUs generally vest upon an NEO’s termination of employment by reason of death or disability based on actual performance through the date of death or disability, which for purposes of this table is assumed to be December 31, 2017.

 

4

Except where indicated, the NEOs would not receive any enhanced payments under the retirement plans as a result of the circumstances of termination. We disclose the amounts related to the retirement plans and the plans in which each NEO participates in the 2017 Pension Benefits and the 2017 Nonqualified Deferred Compensation Tables and accompanying narratives and notes.

 

5

Had any of our NEOs become disabled on December 31, 2017, they would not have been eligible for a benefit to commence immediately. However, they would be eligible to maintain disability leave employment and could eventually vest into any unvested benefits shown in the 2017 Pension Benefits Table.

 

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Executive Compensation

 

Option Exercises and Stock Vested in 2017

The following table provides information concerning exercises of stock options and the vesting of restricted stock and time and performance vested restricted stock units during the most recently completed year for each of the NEOs on an aggregate basis. Because we no longer grant restricted stock, the value realized on vesting was entirely attributable to the vesting of restricted stock units.

 

     Option Awards      Stock Awards  
  Name   

Number of

Shares
Acquired

on

Exercise

    

Value

Realized

on Exercise1

    

Number of

Shares
Acquired

on Vesting

    

Value

Realized
on Vesting

 

  William H. Rogers, Jr.

     116,700      $ 4,502,230        171,227      $ 10,183,086  

  Aleem Gillani

           43,763      $ 2,602,361  

  Mark A. Chancy

     40,000      $ 1,842,523        67,346      $ 4,006,966  

  Thomas E. Freeman

           47,218      $ 2,809,261  

  Hugh S. Cummins, III

                       44,467      $ 2,644,504  

 

1

Calculated by multiplying (i) the excess of the market value per share at the time of exercise over the exercise price per share, by (ii) the number of shares for which the option was exercised.

 

 

Equity Compensation Plans

The following table provides information as of December 31, 2017 with respect to the shares of our common stock that may be issued under our existing equity compensation plans.

 

  Plan Category   

Number of
Securities
to be Issued

Upon Exercise

of Outstanding

Options, Warrants
and Rights

    

Weighted Average
Exercise Price of
Outstanding
Options, Warrants

and Rights

     Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
 

  Equity Compensation Plans Approved by Shareholders1

     5,813,024   2     $ 35.33   3       15,856,216   4 

  Equity Compensation Plans Not Approved by Shareholders

                    

  Total

     5,813,024   2     $ 35.33   3       15,856,216   4 

 

1

Consists of the 2004 Stock Plan and the 2009 Stock Plan, as well as other plans assumed by SunTrust in connection with certain corporate mergers. Please refer to Note 15 to our financial statements in our annual report for the year ended December 31, 2017 for a discussion of the material features of these plans.

 

2

Includes 1,659,305 exercisable options outstanding and 4,153,719 outstanding restricted stock units that will be settled in common stock upon vesting.

 

3

The weighted average exercise price applies only to exercisable options outstanding and does not include outstanding restricted stock units. The weighted average remaining term of the outstanding options is 2.45 years.

 

4

Any shares of stock subject to an option which remain unissued after the cancellation, expiration or exchange of such option, and any restricted shares which are forfeited, will be available again for grant under the 2009 Stock Plan.

 

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Executive Compensation

 

2017 CEO PAY RATIO DISCLOSURE

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our teammates and the annual total compensation of Mr. Rogers, our CEO. The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.

For 2017, our last completed fiscal year:

 

 

the median of the annual total compensation of all teammates of SunTrust (other than our CEO) was $60,477; and

 

 

the annual total compensation of our CEO, as reported in the Summary Compensation Table included in this Proxy Statement, was $9,592,062.

Based on this information, for 2017 the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all teammates was 159 to 1.

To identify the median of the annual total compensation of all of our teammates, as well as to determine the annual total compensation of our median teammate and our CEO, we took the following steps:

 

1.

We determined that, as of December 31, 2017, our teammate population consisted of 24,324 individuals with all of these individuals located in the United States. This population consisted of our full-time and part-time teammates.

 

2.

To identify the “median teammate” from our teammate population, we compared the amount of salary, wages, overtime pay and annual and long-term incentive compensation of our teammates as reflected in our payroll records as reported to the Internal Revenue Service in Box 1

 

on Form W-2 for 2017. Because all of our teammates are located in the United States, including our CEO, we did not make any cost-of-living adjustments in identifying the “median teammate.”

 

3.

We identified our “median teammate” using the compensation elements identified above, which were consistently applied to all of our teammates included in the calculation, and determined that our “median teammate” was a full-time salaried teammate with income taxable wages for 2017 in the amount of $53,020.

 

4.

Once we identified our “median teammate”, we combined all of the elements of such teammate’s compensation for 2017 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $60,477. The difference between such teammate’s income taxable wages for 2017 as reported in Box 1 on Form W-2 and the teammate’s annual total compensation represents (i) the median teammate’s pre-tax deductions for health insurance premiums and contributions to his or her 401(k) Plan account, (ii) the Company’s matching contributions to the median teammate’s 401(k) Plan account, and (iii) changes in the value of the median teammate’s pension benefits.

 

5.

With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2017 Summary Compensation Table included in this Proxy Statement.

The SEC rules for identifying the median teammate and calculating the pay ratio allow companies to apply various methodologies and assumptions and, as a result, the pay ratio reported by SunTrust may not be comparable to the pay ratio reported by other companies.

 

 

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Advisory Vote on Executive Compensation (Item 2)

 

 

RESOLVED, that the holders of common stock of SunTrust Banks, Inc. approve the compensation paid to the Company’s Named Executive Officers as described in the Compensation Discussion and Analysis (beginning on page 18 of this Proxy Statement), the Summary Compensation Table (on page 32 of this Proxy Statement), and in the other executive compensation tables and related narrative disclosures (which appear on pages 33-40 of this Proxy Statement).

We believe that our compensation policies and procedures are competitive and, to the extent permitted by banking regulations, are focused on pay for performance principles and are strongly aligned with the long-term interests of our shareholders. We also believe that both the Company and its shareholders benefit from responsive corporate governance policies and constructive and consistent dialogue. The resolution described above, commonly known as a “Say-on-Pay” proposal, gives you as a shareholder the opportunity to endorse or not endorse the compensation we pay to our Named Executive Officers by voting to approve or not approve such compensation as described in this Proxy Statement.

We encourage you to closely review our Compensation Discussion and Analysis and the tabular and narrative disclosures which follow it. We organized the Compensation Discussion and Analysis to discuss each element of compensation, beginning with direct compensation (base salary, annual incentives and long-term incentives) and ending with indirect, long-term compensation (retirement benefits). In that section, we also discuss our policies and other factors, such as financial and regulatory constraints, which affect our decisions or those of our Compensation Committee.

In many cases, we are required to disclose in the executive compensation tables accounting or other non-cash estimates of future compensation. Because of this, we encourage you to read the footnotes and narratives which accompany each table in order to understand any non-cash items.

We believe our NEO compensation is aligned with our shareholders because:

 

 

We generally pay at the median of peer practice. We benchmark total direct compensation as well as each component of total direct compensation.

 

 

We attempt to tie compensation to performance. In 2017,

 

   

87% and 78% of CEO and NEO target total direct compensation was at risk, and

 

   

69% and 63% of CEO and NEO target total direct compensation was performance-based.

Refer to our discussion of “Pay for Performance” on pages 20-21.

 

 

We generally use objective criteria and attempt to use performance metrics which relate to our business priorities. For example, we have used metrics such as earnings per share (EPS), tangible efficiency ratio, return on tangible common equity (ROTCE) and pre-provision net revenue (PPNR) with our AIP (Annual Incentive Plan) and/or LTI (Long-Term Incentives) in recent years. In addition, we include relative TSR (Total Shareholder Return) as a metric in our LTI, which aligns management compensation to shareholder returns.

 

 

SunTrust has outperformed the median of its peer group1 in total shareholder return in five of the past six years (2017, 2016, 2015, 2014, and 2012).

Your vote is advisory and will not be binding upon our Board. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements, and our current intention is to provide such an advisory vote annually. This advisory vote is provided pursuant to the Securities Exchange Act of 1934.

The Board of Directors recommends that the shareholders vote FOR the approval of the compensation of the Named Executive Officers.

 

1 

From 2012-2016 peer group consisted of BBT, CMA, COF, FITB, KEY, MTB, PNC, RF, USB, and WFC. In 2017 peer group consisted of BAC, BBT, CFG, FITB, HBAN, KEY, MTB, PNC, RF, USB, and WFC.

 

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Approval of the SunTrust Banks, Inc. 2018 Omnibus Incentive Compensation Plan (Item 3)

 

The SunTrust Banks, Inc. 2018 Omnibus Incentive Compensation Plan (the “2018 Plan”) was adopted on February 13, 2018 by the Board of Directors of SunTrust, subject to the approval of the shareholders of SunTrust. The purpose of the 2018 Plan is to (i) attract, retain, motivate and reward employees and non-employee directors and to promote their ownership in SunTrust, so as to align their interests more closely with the interests of the shareholders of SunTrust, (ii) provide cash and equity incentive opportunities competitive with peer corporations, (iii) optimize the profitability and growth of SunTrust through cash and equity based incentives consistent with SunTrust’s financial goals, and (iv) promote teamwork among employees and non-employee directors. We are asking our shareholders to approve the 2018 Plan at the annual shareholders’ meeting to be held on April 24, 2018. Our current equity plans, the SunTrust Banks, Inc. 2009 Stock Plan and the SunTrust Banks, Inc. 2004 Stock Plan (collectively the “Pre-Existing Plans”) need to be modernized, and the available shares for issuance thereunder increased, to support our intended compensation programs. If the shareholders do not approve the 2018 Plan, the Pre-Existing Plans, and the lesser number of shares of common stock reserved for issuance thereunder, will not be appropriate to achieve our incentive, recruiting and retention objectives, making it more difficult to meet our recruiting and retention needs.

If the 2018 Plan is approved by our shareholders, the 2018 Plan will become effective as of the date of such approval by our shareholders, and the 2018 Plan will remain in effect, subject to the right of the Board of Directors to amend or terminate the 2018 Plan, until the earlier of February 12, 2028 or the date that all of the shares of our common stock subject to the 2018 Plan have been issued and are no longer subject to any risk of forfeiture. No awards may be granted under the 2018 Plan unless and until our shareholders approve the 2018 Plan. No further awards will be granted under the Pre-Existing Plans on and after the date our shareholders approve the 2018 Plan.

The 2018 Plan Provides the Additional Shares Needed to Meet Our Forecasted Needs

In determining the number of shares of our common stock to be reserved for issuance under the 2018 Plan, our Board of Directors and its Compensation Committee (the “Committee”) considered the following:

 

 

Desire to Remain Competitive. Our Board of Directors and the Committee considered the importance of maintaining an equity incentive program to attract, retain and reward our employees and non-employee directors.

 

 

Number of Shares Available Under the Pre-Existing Plans. As of December 31, 2017, an aggregate of 15,856,216 shares of

 


   

our common stock remained available for issuance under the Pre-Existing Plans. Upon approval of the 2018 Plan, the number of shares of common stock available for issuance will equal 16,700,000 shares of our common stock. Therefore, the 2018 Plan will result in a net increase of only 843,784 shares to potentially be issued under our equity compensation plans. Shares of common stock underlying, or otherwise delivered pursuant to, any grants made under the Pre-Existing Plans after December 31, 2017 will be counted against and deducted from the number of shares available for issuance under the 2018 Plan. Shares subject to outstanding awards previously granted under the Pre-Existing Plans that would have returned to the Pre-Existing Plans in the future as the result of the forfeiture of the awards without the issuance of the underlying shares of common stock will return to the 2018 Plan. As of December 31, 2017, 5,821,768 shares of our common stock were subject to outstanding awards under the Pre-Existing Plans. If the 2018 Plan is not approved, we will continue to grant awards under the Pre-Existing Plans until the earlier of their expiration or the issuance of all shares reserved for issuance under the Pre-Existing Plans. After that time, we will not have any mechanism for issuing shares of our common stock to achieve our incentive, recruiting and retention objectives.

Shares Available for Future Grant if the 2018 Plan is Approved

 

     As of December 31,
2017
  As of April 24,
2018

  2018 Plan*

  —     16,700,000

  Pre-Existing Plans

  15,856,216    

 

*

Shares of common stock underlying, or otherwise delivered pursuant to, any grants made under the Pre-Existing Plans after December 31, 2017 will be counted against and deducted from the number of shares available for issuance under the 2018 Plan.

 

 

Overhang. Overhang measures the potential dilution to which our existing shareholders are exposed due to outstanding equity awards. As of December 31, 2017, options to purchase 1,659,305 shares of our common stock with a weighted average exercise price of $35.33 per share and a weighted average remaining term of 2.45 years, 8,744 shares of restricted stock, and awards other than options, stock appreciation rights and restricted stock covering 4,153,719 shares, were outstanding under the Pre-Existing Plans. The 5,821,768 shares subject to outstanding awards, or overhang, represent approximately 1.24% of our 470,869,334 outstanding shares as of December 31, 2017.

 

 

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Shares Outstanding as of December 31, 2017

 

     Outstanding
as of
12/31/2017
  Weighted
Avg.
Exercise
Price
  Weighted
Avg.
Remaining
Term
  Stock Options       1,659,305   $35.33     2.45  
  Full Value Awards       4,162,463   —     —  

  Common Shares

  Outstanding

  470,869,334   —     —  

 

 

Historical Burn Rate. Our annual burn rate for each of the years 2017, 2016 and 2015 is 0.40%, 0.51% and 0.33%, respectively, and our three-year average burn rate for such years is 0.41%. We calculate burn rate by dividing (1) the sum of the number of stock options and full-value awards granted during the year (counting performance-based share awards at target as of the date of grant) by (2) the weighted average common shares outstanding for such year. Our burn rates are consistent with those of our peer corporations and competitive market practices.

Good Compensation and Governance Practices

The 2018 Plan includes provisions that are considered best practices for compensation and governance purposes.

 

 

No Evergreen Provisions. The 2018 Plan does not contain an evergreen provision that automatically increases the number of shares of common stock available for issuance. As a result, future increases in the number of shares reserved for issuance under the 2018 Plan will require shareholder approval.

 

 

Administration. The 2018 Plan will be administered by the Committee, which consists entirely of independent non-employee directors.

 

 

Prohibits Repricings Without Shareholder Approval. The 2018 Plan prohibits the repricing of awards without shareholder approval.

 

 

No Discount Options or Stock Appreciation Rights. The 2018 Plan requires that stock options and stock appreciation rights issued under the 2018 Plan must have an exercise price equal at least to the fair market value of the underlying shares of common stock on the date the award is granted, except in certain instances in which SunTrust is assuming or replacing awards granted by another company we are acquiring.

 

 

Limited Transferability. In general, awards may not be sold, assigned, transferred, pledged or otherwise encumbered, either voluntarily or by operation of law.

 

 

Annual Limits on Awards. The 2018 Plan sets reasonable limits as to the awards any employee or non-employee director may receive in any calendar year.

 


 

No Tax Gross-Ups. The 2018 Plan does not provide for any tax gross-ups.

 

 

One-Year Minimum Vesting for 95% of Available Awards. The 2018 Plan requires at least 95% of the shares of common stock attributable to awards granted under the 2018 Plan to have a minimum vesting or performance period as of the date of grant of at least one year so as to provide an additional safeguard to shareholders that awards generally are intended to constitute long-term compensation, except that awards granted to non-employee directors may vest earlier (but not sooner than 50 weeks from the date of the annual meeting of shareholders at which such awards were granted; otherwise, such awards count against the 5% exception to the requirement that awards have a minimum one year vesting period).

 

 

No Reload or Automatic Grants. The 2018 Plan does not provide for “reload” or other automatic grants to eligible participants.

 

 

No Single Trigger on Change in Control. The 2018 Plan does not provide for automatic vesting of outstanding awards upon a change in control.

 

 

No Dividends on Unvested Awards. The 2018 Plan provides that awards will not earn or provide for payment of dividends or dividend equivalents prior to vesting of the underlying award. The dividends or dividend equivalents will be subject to the same restrictions and risk of forfeiture as the related award itself.

 

 

No Liberal Change in Control Definition. The 2018 Plan does not contain a liberal change in control definition.

 

 

Compensation Recoupment Policies. Awards granted under the 2018 Plan and any shares of our common stock acquired under such awards will be subject to any compensation recoupment policy that SunTrust may adopt. See “Recoupment of Incentive Compensation (Clawbacks)” above.

General Description of the 2018 Plan

The following description of the 2018 Plan is a summary, does not purport to be a complete description of the 2018 Plan and is qualified in its entirety by the full text of the 2018 Plan. SunTrust’s shareholders are encouraged to read the 2018 Plan in its entirety, which is set forth in Appendix B to this Proxy Statement.

The 2018 Plan covers the grant of awards to employees (including officers) and non-employee directors of SunTrust and its affiliates, except that (i) incentive stock options may only be granted to employees (including officers) of SunTrust and its subsidiaries and (ii) awards granted to non-employee directors must be approved by our Board of Directors. While all of our employees are technically eligible to receive awards under the

 

 

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2018 Plan, the Committee typically grants awards to employees whose performance, in the judgment of the Committee, is directly or indirectly material to the success of SunTrust. We expect that the Committee will continue this practice under the 2018 Plan. As of December 31, 2017, (i) there were approximately 1,288 employees with outstanding awards under the Pre-Existing Plans, and (ii) there were eleven non-employee directors eligible to receive awards.

Under the terms of the 2018 Plan, an aggregate of 16,700,000 shares of the common stock of SunTrust, $1.00 par value per share, will be authorized for delivery in settlement of awards, less the number of shares of common stock underlying, or otherwise delivered pursuant to, any grants made under the Pre-Existing Plans after December 31, 2017, plus that number of shares of common stock subject to awards granted under the Pre-Existing Plans that again become available for grants as described below after December 31, 2017; provided, however, that the total number of shares of common stock that may be delivered pursuant to the exercise of incentive stock options granted under the 2018 Plan will not exceed 16,700,000 shares.

SunTrust will bear all expenses of administering the 2018 Plan. The Committee will administer the 2018 Plan. The Committee has the authority to grant awards to such employees and non-employee directors and upon such terms and conditions (not inconsistent with the provisions of the 2018 Plan) as it may consider appropriate. The Committee may delegate any or all of its administrative authority to our Chief Executive Officer or to a management committee except with respect to awards to executive officers who are subject to Section 16 of the Securities Exchange Act of 1934.

Shares of SunTrust common stock covered by an award will only be counted as used to the extent actually used. A share of SunTrust common stock issued in connection with an award under the 2018 Plan will reduce the total number of shares of SunTrust common stock available for issuance under the 2018 Plan by one; provided, however, that, upon settlement of a stock appreciation right, the number of shares underlying the portion of the stock appreciation right that is exercised will be treated as having been delivered for purposes of determining the maximum number of shares available for grant under the Plan and will not again be treated as available for grant.

If any award under the 2018 Plan, or any award under the Pre-Existing Plans that is outstanding after December 31, 2017, terminates without the delivery of shares, whether by lapse, forfeiture, cancellation or otherwise, the shares subject to such award, to the extent of any such termination, will again be available for grant under the 2018 Plan. Notwithstanding the foregoing, upon the exercise of any award granted in tandem with any other award, the related award will be cancelled to the extent of the number of shares of SunTrust common stock as

 


to which the award granted in tandem with the related award is exercised, and such number of shares covered under the related award will not be available for awards under the 2018 Plan. Subject to applicable law, if any shares subject to an option, stock appreciation right or other award in the nature of purchase rights granted under the 2018 Plan, or any such award under the Pre-Existing Plans that is outstanding after December 31, 2017, are withheld or applied as payment in connection with the exercise of the award or the withholding or payment of taxes related thereto or separately surrendered by the participant for any such purpose, such returned shares will be treated as having been delivered for purposes of determining the maximum number of shares available for grant under the 2018 Plan and will not again be treated as available for grant. However, subject to applicable law, if any shares subject to a full value award (meaning an award other than an option, stock appreciation right or other award in the nature of purchase rights) granted under the 2018 Plan, or any such award under the Pre-Existing Plans that is outstanding after December 31, 2017, are withheld or applied as payment in connection with any withholdings or payments of taxes related thereto or separately surrendered by the participant for any such purpose, such returned shares will be treated as available for grant under the 2018 Plan. The number of shares available for issuance under the 2018 Plan may not be increased through the purchase of shares on the open market with the proceeds obtained from the exercise of any options granted under the 2018 Plan. In the case of any substitute award granted in assumption of or in substitution for an award previously made by an entity acquired by SunTrust, shares delivered or deliverable in connection with such substitute award will not be counted against the number of shares reserved under the 2018 Plan (to the extent permitted by applicable stock exchange rules), and available shares of stock under a shareholder-approved plan of an acquired entity (as appropriately adjusted to reflect the transaction) also may be used for awards under the 2018 Plan, which will not reduce the number of shares otherwise available under the 2018 Plan (subject to applicable stock exchange requirements).

If a dividend or other distribution (whether in cash, shares or other property), recapitalization, forward or reverse stock split, subdivision, consolidation or reduction of capital, reorganization, merger, consolidation, scheme of arrangement, split-up, spin-off or combination involving us or repurchase or exchange of our shares or other securities, or other rights to purchase shares of our securities or other similar transaction or event affects our shares such that the Committee determines that an adjustment is appropriate in order to prevent dilution or enlargement of the benefits (or potential benefits) provided to grantees under the 2018 Plan, the Committee will make an equitable change or adjustment as it deems appropriate in the number and kind of securities that may be issued pursuant to awards under the 2018 Plan, the per individual limits on the

 

 

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awards that can be granted in any calendar year and any outstanding awards and the related exercise price relating to such an award, if any.

The maximum number of shares that may be subject to awards (denoted as of the date of grant in shares and regardless of whether the award is to be settled in shares, cash or other property) granted to any employee in a single calendar year may not exceed 500,000 shares (twice that limit for awards that are granted to an eligible employee in the calendar year in which the eligible employee first commences employment) (based on the highest level of performance resulting in the maximum payout). In addition, the maximum dollar value of all awards (denoted as of the date of grant in cash or property other than shares and regardless of whether the award is to be settled in shares, cash or other property) (valued as of the date of grant) that may be granted to any employee in a single calendar year may not exceed $7,500,000 (twice that limit for awards that are granted to an eligible employee in the calendar year in which the eligible employee first commences employment) (based on the highest level of performance resulting in the maximum payout). The maximum number of shares that may be subject to awards granted to any non-employee director in a single calendar year, taken together with any cash fees paid to the non-employee director during such calendar year in respect of service on the Board of Directors, may not exceed $750,000 in total value (calculating the value of the award based on its fair value for accounting purposes) (twice that limit for a non-executive chair of the Board of Directors or, in extraordinary circumstances, for any non-employee director as the Board of Directors may determine). These limitations apply to the calendar year in which the awards are granted and not the year in which such awards settle. Such annual limitations apply to dividend equivalents only if such dividend equivalents are granted separately from and not as a feature of another award.

Types of Awards

The 2018 Plan permits the grant of any or all of the following types of awards to grantees:

 

 

stock options, including incentive stock options, or ISOs;

 

 

stock appreciation rights, or SARs;

 

 

restricted stock;

 

 

restricted stock units;

 

 

dividend equivalents;

 

 

phantom stock;

 

 

bonus shares;

 

 

cash incentive awards; and

 

 

other stock-based awards.

 


Generally, awards under the 2018 Plan are granted for no consideration other than prior and/or future services. Awards granted under the 2018 Plan may, in the discretion of the Committee, be granted alone or in addition to, in tandem with or in substitution for, any other award under the 2018 Plan or other plan of ours (subject to the prohibitions on repricings); provided, however, that if a SAR is granted in tandem with an ISO, the SAR and ISO must have the same grant date and term, and the exercise price of the SAR may not be less than the exercise price of the ISO. The material terms of each award will be set forth in a written award agreement between the grantee and us. The written agreements will specify when the award may become vested, exercisable or payable. No right or interest of a participant in any award will be subject to any lien, obligation or liability of the participant. The laws of the State of Georgia govern the 2018 Plan. The 2018 Plan is unfunded, and SunTrust will not segregate any assets for grants of awards under the 2018 Plan.

No award may be granted under the 2018 Plan (other than awards excluded from the minimum vesting requirement as described herein) with vesting conditions that relate exclusively to the passage of time and continued employment or other service of less than 12 months. If the vesting condition for any award granted under the 2018 Plan relates to the attainment of specified performance goals, such award (other than awards excluded from the minimum vesting requirement as described herein) will be granted with a vesting performance period of at least one year. Notwithstanding the foregoing, (i) awards that result in the issuance of an aggregate of up to 5% of the shares available under the 2018 Plan may be granted without regard to such minimum vesting requirements (the “5% Exception Limit”), and (ii) awards to non-employee directors may vest earlier than one year but not sooner than fifty weeks from the date of the annual meeting of the Company’s shareholders at which such awards were granted. If awards to non-employee directors vest as of a date that is earlier than both the first anniversary of the date the awards are granted and fifty weeks from the date of the annual meeting of the Company’s shareholders at which such awards were granted, such awards will count against the 5% Exception Limit.

Stock Options and SARs

The Committee is authorized to grant SARs and stock options (including ISOs except that an ISO may only be granted to an employee of ours or one of our subsidiary corporations). A stock option allows a grantee to purchase a specified number of our shares at a predetermined price per share (the “exercise price”) during a fixed period measured from the date of grant. A SAR entitles the grantee to receive the excess of the fair market value of a specified number of shares on the date of exercise over a predetermined exercise price per share. The exercise price of an option or a SAR will be determined by the Committee and set forth in the award agreement but the

 

 

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exercise price may not be less than the fair market value of a share on the grant date (110 percent of the fair market value in the case of certain incentive stock options). The term of each option or SAR is determined by the Committee and set forth in the award agreement, except that the term may not exceed 10 years (five years in the case of certain incentive stock options). Options may be exercised by payment of the purchase price through one or more of the following means: payment in cash (including personal check or wire transfer), or, with the approval of the Committee, by delivering shares previously owned by the grantee, by delivery of shares to be acquired upon the exercise of such option or by delivering restricted shares. The Committee may also permit a grantee to pay the exercise price of an option through the sale of shares acquired upon exercise of the option through a broker-dealer to whom the grantee has delivered irrevocable instructions to deliver sales proceeds sufficient to pay the purchase price to us. In the case of ISOs, the aggregate fair market value (determined as of the date of grant) of SunTrust common stock with respect to which an ISO may become exercisable for the first time during any calendar year cannot exceed $100,000; and if this limitation is exceeded, the ISOs which cause the limitation to be exceeded will be treated as nonqualified options. No participant may be granted SARs in tandem with ISOs which are first exercisable in any calendar year for shares of SunTrust common stock having an aggregate fair market value (determined as of the date of grant) that exceeds $100,000.

Restricted Shares

The Committee may award restricted shares consisting of shares which remain subject to a risk of forfeiture and may not be disposed of by grantees until certain restrictions established by the Committee lapse. The vesting conditions may be service-based (i.e., requiring continuous service for a specified period) or performance-based (i.e., requiring achievement of certain specified performance objectives) or both. Unless the award agreement eliminates such rights, a grantee receiving restricted shares will have the right to vote the restricted shares and to receive any dividends payable on such restricted shares only if and at the time the restricted shares vest (such dividends to either be deemed reinvested into additional restricted shares subject to the same terms as the restricted shares to which such dividends relate or accumulated and paid in cash when the restricted shares vest). Upon termination of the grantee’s affiliation with us during the restriction period (or, if applicable, upon the failure to satisfy the specified performance objectives during the restriction period), the restricted shares will be forfeited as provided in the award agreement.

Restricted Stock Units

The Committee may also grant restricted stock unit awards. A restricted stock unit award is the grant of a right to receive a specified number of our shares upon lapse of a specified

 


forfeiture condition (such as completion of a specified period of service or achievement of certain specified performance objectives). If the service condition and/or specified performance objectives are not satisfied during the restriction period, the award will lapse without the issuance of the shares underlying such award.

Restricted stock units carry no voting or other rights associated with stock ownership. Unless the award agreement eliminates such rights, grantees will receive dividend equivalents with respect to restricted stock units, which dividend equivalents will either be deemed to be reinvested in additional shares of restricted stock units subject to the same terms as the shares of restricted stock units to which such dividend equivalents relate or accumulated and paid in cash only if the related restricted stock units become vested and payable.

Dividend Equivalents

The Committee is authorized to grant dividend equivalents which provide the grantee the right to receive payment equal to the dividends paid on a specified number of our shares. Dividend equivalents may be paid directly to grantees upon vesting or may be deferred for later delivery under the 2018 Plan. If deferred, such dividend equivalents may be credited with interest or may be deemed to be invested in our shares, other awards or in other property. No dividend equivalents may be granted in conjunction with any grant of stock options or SARs.

Phantom Stock

The Committee may grant phantom stock under the 2018 Plan. Phantom stock is the grant of a right to receive an amount of cash equal to the fair market value of a specified number of our shares upon lapse of a specified forfeiture condition (such as completion of a specified period of service or achievement of certain specified performance conditions). If the service condition and/or specified performance objectives are not satisfied during the restriction period, the award will lapse without payment of the cash value thereof.

Phantom stock carries no voting or other rights associated with stock ownership. Unless the award agreement eliminates such rights, grantees will receive dividend equivalents with respect to phantom stock, which dividend equivalents will either be deemed reinvested in additional shares of phantom stock subject to the same terms as the phantom stock to which such dividend equivalents relate or accumulated and paid in cash only if the related shares of phantom stock become vested and payable.

Bonus Shares

The Committee may grant fully vested shares as bonus shares (if available under the 5% Exception Limit to the one-year minimum vesting rule) or shares subject to such terms and conditions as are specified in the award agreement.

 

 

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Cash Incentive Awards

The Committee may grant cash incentive awards to any eligible person in such amounts and upon such terms, including the achievement of specific performance goals during the applicable performance period, as the Committee may determine. An eligible person may have more than one cash incentive award outstanding at any time. For instance, the Committee may grant an eligible employee one cash incentive award with a calendar year performance period as an annual incentive bonus and a separate cash incentive award with a multi-year performance period as a long-term cash incentive bonus.

The Committee may establish performance goals applicable to each cash incentive award in its discretion and the amount that will be paid to the grantee pursuant to such cash incentive award if the applicable performance goals for the performance period are met. If an eligible person earns the right to receive a payment with respect to a cash incentive award, such payment will be made in cash in accordance with the terms of the award agreement. If the award agreement does not specify a payment date with respect to a cash incentive award, payment of the cash incentive award will be made no later than the 15th day of the third month following the end of the taxable year of the grantee or our fiscal year during which the performance period ends or the award otherwise becomes vested.

Other Stock-Based Awards

In order to enable us to respond to material developments in the area of taxes and other legislation and regulations and interpretations thereof, and to trends in executive compensation practices, the 2018 Plan authorizes the Committee to grant awards that are valued in whole or in part by reference to or otherwise based on shares of our common stock. The Committee determines the terms and conditions of such awards, including consideration paid for awards granted as share purchase rights and whether awards are paid in shares or cash.

Performance-Based Awards

The Committee may require satisfaction of pre-established performance goals, consisting of one or more business criteria and targeted performance levels with respect to such criteria, as a condition of awards being granted or becoming exercisable or payable under the 2018 Plan, or as a condition to accelerating the timing of such events.

Those types of awards may be based on any one or more financial performance measures the Committee may determine, including without limitation, one or more of the following: (i) return over capital costs, (ii) total earnings, (iii) consolidated earnings, (iv) earnings per share, (v) net earnings, (vi) earnings before interest expense, taxes, depreciation, amortization and other non-cash items, (vii) earnings before interest and taxes,

 


(viii) consolidated net income, (ix) the market capitalization of SunTrust stock, (x) SunTrust stock price, (xi) return on assets, (xii) total shareholder return, (xiii) expenses or the reduction of expenses, (xiv) revenue growth, (xv) efficiency ratios, (xvi) economic value added, (xvii) return on equity, (xviii) return on tangible equity, (xix) cash return on equity, (xx) cash return on tangible equity, (xxi) net income available to common shareholders, (xxii) book value per share, (xxiii) pre-tax income or growth, (xxiv) operating earnings per share of SunTrust stock or growth (excluding one-time, non-core items), (xxv) cash earnings per share of SunTrust stock or growth, (xxvi) cash operating earnings per share of SunTrust stock or growth (excluding one-time, non-core items), (xxvii) cash return on assets (xxviii) operating leverage, (xxix) net interest margin, (xxx) Tier 1 capital, (xxxi) risk-adjusted net interest margin, (xxxii) total risk-based capital ratio, (xxxiii) tangible equity and tangible assets, (xxxiv) tangible common equity and tangible assets, (xxxv) tangible book value per share, (xxxvi) loan balances or growth, (xxxvii) deposit balances or growth, (xxxviii) low cost deposit balances or growth, (xxxix) common equity Tier 1, (xl) value at risk, (xli) market value of equity, (xlii) price to earnings ratio, (xliii) loan to deposit ratio, (xliv) net charge-off ratio, (xlv) allowance for loan losses to total loans ratio, (xlvi) allowance to nonperforming loan ratio, (xlvii) delinquent loans to total loans ratio, (xlviii) leverage ratio, (xlix) liquidity coverage ratio, (l) dividend payout ratio, (li) credit ratings (lii) net interest income sensitivity, (liii) pre-provision net revenue, (liv) return on tangible common equity, (lv) any financial metric required to be reported under Basel III, including but not limited to common equity Tier 1 and risk-weighted assets, (lvi) growth or change in any of the foregoing over a specified period of time, (lvii) any measure or ratio calculated using any combination of the foregoing or (lviii) peer group comparisons of any of the aforementioned performance conditions. Any performance measures that are financial metrics may be determined in accordance with United States Generally Accepted Accounting Principles (“GAAP”) or may be adjusted when established or at any time thereafter to include or exclude any items otherwise includable or excludable under GAAP. Any applicable performance measure may be applied on a pre- or post-tax basis.

The Committee shall, on the grant date of an award or at any other time thereafter, provide that, when determining whether the performance measure(s) for an award have been achieved, the Committee shall include or exclude various items of revenue, income, cost or expense as the Committee determines is equitable and appropriate, including, without limitation, losses from discontinued operations, extraordinary gains or losses, the cumulative effect of accounting changes, acquisitions or divestitures, foreign exchange impacts and any unusual, nonrecurring gain or loss that results in an inequitable enlargement or dilution of the participant’s rights under the award. The levels of performance required with respect to performance measures may be expressed in absolute or

 

 

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relative levels and may be based upon a set increase, set positive result, maintenance of the status quo, set decrease or set negative result. Performance measures may differ for awards to different grantees. The Committee shall specify the weighting (which may be the same or different for multiple objectives) to be given to each performance objective for purposes of determining the final amount payable with respect to any such award. Any one or more of the performance measures may apply to the grantee, a department, unit, division or function within SunTrust or any one or more of its affiliates; and may apply either alone or relative to the performance of other businesses or individuals (including industry or general market indices).

Awards generally may be settled in cash, shares, other awards or other property, in the discretion of the Committee.

Change of Control

If there is a merger or consolidation of us with or into another corporation or a sale of all or substantially all of our shares or assets (a “Corporate Transaction”) that results in a Change in Control (as defined in the 2018 Plan), and the outstanding awards are not assumed by the surviving company (or its parent company) or replaced with economically equivalent awards granted by the surviving company (or its parent company), the Committee will cancel any outstanding awards that are not vested and nonforfeitable as of the consummation of such Corporate Transaction (unless the Committee accelerates the vesting of any such awards) and with respect to any vested and nonforfeitable awards, the Committee may either (i) allow all grantees to exercise options and SARs within a reasonable period prior to the consummation of the Corporate Transaction and cancel any outstanding options or SARs that remain unexercised upon consummation of the Corporate Transaction, or (ii) cancel any or all of such outstanding awards (including options and SARs) in exchange for a payment (in cash, or in securities or other property) in an amount equal to the amount that the grantee would have received (net of the exercise price with respect to any options or SARs) if the vested awards were settled or distributed or such vested options and SARs were exercised immediately prior to the consummation of the Corporate Transaction. If the exercise price of the option or SAR exceeds the fair market value of our shares and the option or SAR is not assumed or replaced by the surviving company (or its parent company), such options and SARs may be cancelled without any payment to the grantee. If any other award is not vested immediately prior to the consummation of the Corporate Transaction, such award may be cancelled without any payment to the grantee.

Amendment to and Termination of the 2018 Plan

The 2018 Plan may be amended, altered, suspended, discontinued or terminated by our Board of Directors without further shareholder approval, unless such approval of an

 


amendment or alteration is required by law or regulation or by the rules of any stock exchange or automated quotation system on which our shares of common stock are then listed or quoted. Thus, shareholder approval will not necessarily be required for all amendments to the 2018 Plan. An amendment will be contingent on approval of the Company’s shareholders, to the extent required by law, by the rules of any stock exchange on which the Company’s securities are then traded or if the amendment would (i) increase the benefits accruing to participants under the 2018 Plan, including without limitation, any amendment to the 2018 Plan or any award agreement to permit a repricing or decrease in the exercise price of any outstanding awards, (ii) increase the aggregate number of shares of common stock that may be issued under the 2018 Plan, or (iii) modify the requirements as to eligibility for participation in the 2018 Plan.

In addition, subject to the terms of the 2018 Plan, no amendment or termination of the 2018 Plan may materially and adversely affect the right of a grantee under any outstanding award granted under the 2018 Plan without the participant’s consent.

Unless earlier terminated by our Board of Directors, the 2018 Plan will terminate when no shares remain reserved and available for issuance or, if earlier, at the end of the day on February 12, 2028.

Shareholder Rights

No participant will have any rights as a shareholder of SunTrust until such award is settled by the issuance of SunTrust common stock (other than awards for which certain voting and dividend rights or dividend equivalents may be granted).

Transferability

Generally, an award is non-transferable except by will or the laws of descent and distribution, and during the lifetime of the participant to whom the award is granted, the award may only be exercised by, or payable to, the participant. However, the award agreement may provide that awards other than ISOs or a corresponding SAR that is related to an ISO may be transferred by a participant, without consideration, to any member of the immediate family of such participant, any trust of which all of the primary beneficiaries are such participant or members of his or her immediate family, or any partnership (including limited liability companies and similar entities) of which all of the partners or members are such participant or members of his or her immediate family. The “immediate family” of a participant means the participant’s spouse, any person sharing the participant’s household (other than a tenant or employee), and the participant’s children, stepchildren, grandchildren, parents, stepparents, siblings, grandparents, nieces and nephews.

 

 

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Approval of the SunTrust Banks, Inc. 2018 Omnibus Incentive Compensation Plan (Item 3)

 

No Repricing

Notwithstanding any other provision of the 2018 Plan, no option or SAR may be amended to reduce the exercise or grant price nor cancelled in exchange for other options or SARs with a lower exercise or grant price or shares or cash, without shareholder approval.

Compliance with Applicable Law

No award will be exercisable, vested or payable except in compliance with all applicable federal and state laws and regulations (including, without limitation, tax and securities laws), any listing agreement with any stock exchange to which SunTrust is a party, and the rules of all domestic stock exchanges on which SunTrust’s shares may be listed.

No Employment Rights

Awards do not confer upon any individual any right to continue in the employ or service of SunTrust or any affiliate.

Miscellaneous

Each participant in the 2018 Plan remains subject to the securities trading policies adopted by the Company from time to time with respect to the exercise of options, SARs or the sale of shares of Company stock acquired pursuant to awards granted under the 2018 Plan. A grantee will forfeit any and all rights under an award upon notice of termination of employment by the Company for “Cause” as such term is defined in the 2018 Plan or an employment agreement, if applicable. Award agreements will contain such other terms and conditions as the Committee may determine in its sole discretion (to the extent not inconsistent with the 2018 Plan). Awards granted to participants and shares acquired pursuant to awards are subject to (i) any share ownership or retention requirements in effect or subsequently adopted by SunTrust, and (ii) the terms of any compensation recoupment policy in effect or subsequently adopted by SunTrust.

U.S. Federal Income Tax Consequences

The grant of an option or SAR will create no tax consequences for the participant or us at the time of the grant. A participant will have no taxable income upon exercise of an incentive stock option except that a participant must recognize income equal to the fair market value of the shares acquired minus the exercise price for alternative minimum tax purposes. Upon exercise of an option (other than an incentive stock option) or a SAR, a participant generally must recognize ordinary income equal to the fair market value of the shares acquired minus the exercise or grant price. Upon a disposition of shares acquired by exercise of an incentive stock option on or before the earlier of the second anniversary of the grant of such incentive stock option or the first anniversary of the exercise of such option, the participant generally must recognize ordinary income equal

 


to the lesser of (1) the fair market value of the shares at the date of exercise minus the exercise price, or (2) the amount realized upon the disposition of the incentive stock option shares minus the exercise price. Otherwise, a participant’s disposition of shares acquired upon the exercise of an option (including an incentive stock option for which the incentive stock option holding periods are met) generally will result in only capital gain or loss. Other awards under the 2018 Plan, including restricted stock, restricted stock units, dividend equivalents, phantom stock, bonus shares and cash incentive awards, will generally result in ordinary income to the participant equal to the cash or the fair market value of the shares or other property received (minus the amount, if any, paid by the participant for such shares or other property) at the time such cash, shares or other property is received by the participant or, if later, the time that the substantial risk of forfeiture of such shares or other property lapses.

We are generally entitled to claim a tax deduction with respect to an award granted under the 2018 Plan when the participant recognizes ordinary income with respect to the award in an amount equal to the ordinary income that is recognized by the participant. We are not entitled to claim any tax deduction for any amount recognized by a participant as capital gains.

We are permitted to withhold from any award granted under the 2018 Plan any required withholding taxes. Payment of withholding taxes may be made through one or more of the following means: payment in cash (including personal check or wire transfer), or, with the approval of the Committee, by delivering shares previously owned by the grantee or by delivery of shares acquired or to be acquired under the award.

Section 83(b) of the Code

A participant may elect under Section 83(b) of the Code to be taxed at the time of grant of restricted stock or other restricted property on the fair market value of the shares or other property at that time rather than to be taxed when the risk of forfeiture lapses on the value of the property at that time, and we would have a deduction available at the same time and in the same amount as the participant recognizes income. If a participant files an election under Section 83(b) of the Code and the participant subsequently forfeits the restricted shares or other restricted property, he or she would not be entitled to any tax deduction, including as a capital loss, for the value of the shares or property on which he or she previously paid tax. Except as discussed below, we generally will be entitled to a tax deduction at the time and equal to the amount recognized as ordinary income by the participant in connection with an option, stock appreciation right, or other award, but will be entitled to no tax deduction relating to amounts that represent a capital gain to a participant. Thus, we will not be entitled to any tax deduction with respect to an incentive stock option if the participant holds the shares for the incentive stock option holding periods.

 

 

50           SunTrust Banks, Inc. - 2018 Proxy Statement


Table of Contents

Approval of the SunTrust Banks, Inc. 2018 Omnibus Incentive Compensation Plan (Item 3)

 

Section 162(m) of the Code

Section 162(m) of the Code limits the amount of compensation we may deduct with respect to our Chief Executive Officer, Chief Financial Officer and each of the other three highest paid named executive officers (or anyone who previously qualified as such after 2016) to $1 million per year. This deduction limit generally applies to companies that have any class of equity securities that is publicly held. Prior to this year, this limitation did not apply to qualified performance-based compensation that satisfied certain requirements, including approval of the material terms of the plan by the company’s shareholders. A transition rule continues to apply to any such awards that are outstanding as of November 2, 2017, or granted pursuant to a legally binding contract outstanding as of November 2, 2017, to the extent they are not materially modified thereafter. To the extent the Committee grants an award under the 2018 Plan in substitution of an award eligible for the transition rule, the 2018 Plan will require such award to continue to be administered so as to retain the award’s eligibility for the transition rule. Notwithstanding any other provisions herein, we reserve the right to grant awards under the 2018 Plan that may not be deductible because of Section 162(m) of the Code as the Committee in the exercise of its business judgment determines appropriate to meet our compensation objectives.

Section 409A of the Code

It is intended that awards granted under the 2018 Plan generally will be exempt from treatment as “deferred compensation” subject to Section 409A of the Code. Some restricted stock units, phantom stock, cash incentive awards and other awards subject to deferral features, however, may be

 


subject to Section 409A of the Code, which regulates deferred compensation arrangements. In such cases, the timing of the settlement of the award would have to meet certain restrictions in order for the participant not to be subject to accelerated tax and a tax penalty at the time of vesting rather than at the time of settlement. One significant restriction would be a requirement that the timing of the settlement not be controlled by the participant’s exercise of discretion. If the participant is subject to tax at the time of vesting (instead of the time of settlement), our deduction would also be accelerated. If we grant awards under the 2018 Plan that constitute deferred compensation within the meaning of Section 409A of the Code, such awards generally are intended to be structured to comply with the applicable requirements imposed under Section 409A, although we make no guarantee as to such tax consequences.

Benefits to Executive Officers and Directors

The 2018 Plan is a new plan, and no awards have been made under the 2018 Plan to date. Because the awards that will be made to the executive officers and directors pursuant to the 2018 Plan are within the discretion of the Committee, it is not possible to determine the benefits that will be received by executive officers and directors if the 2018 Plan is approved by our shareholders.

Required Vote; Board Recommendation

The 2018 Plan will only become effective if a quorum is present and the number of votes cast at the annual meeting of shareholders “for” the proposal exceeds the number of votes cast “against” it.

 

 

SunTrust Banks, Inc. - 2018 Proxy Statement           51

The Board recommends a vote FOR the approval of the SunTrust Banks, Inc. 2018 Omnibus Incentive Compensation Plan.


Table of Contents

Ratification of Independent Auditor (Item 4)

 

AUDIT FEES AND RELATED MATTERS

Audit and Non-Audit Fees

The following table presents fees for professional audit services rendered by Ernst & Young LLP for the years ended December 31, 2017 and 2016, respectively, and fees billed for other services it rendered during those periods.

 

  Year Ended December 31 ($ in millions)    2017     

Percent of

Total

            2016     

Percent of

Total

 

  Audit Fees1

   $ 9.98        86.1      $ 9.33        79.3

  Audit Related Fees2

   $ 1.60        13.8      $ 1.78        15.1

  Tax Fees3

   $ 0.00        0      $ 0.22        1.9

  All Other Fees4

   $ 0.00        0            $ 0.44        3.7

  Total

   $ 11.59        100.0            $ 11.77        100.0

 

1 

Audit Fees consist of fees billed for professional services rendered in connection with the audit of our annual consolidated financial statements and internal control over financial reporting, review of periodic reports and other documents filed with the SEC, including the quarterly financial statements included in Forms 10-Q, statutory audits or financial audits of subsidiaries, and services that are normally provided in connection with statutory or regulatory filings or engagements.

 

2 

Audit Related Fees consist of assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. This category includes fees related to the performance of audits and attest services not required by statute or regulations, service organization control reports, and audits of certain investment funds advised by SunTrust subsidiaries.

 

3 

Tax Fees consist of the aggregate fees billed for professional services rendered by the auditor for tax advice and tax planning.

 

4 

All Other Fees consists of costs related to advisory services for regulatory reporting, business process improvement and data governance.

The Audit Committee has concluded that the provision of the non-audit services listed above was compatible with maintaining the independence of Ernst & Young LLP.