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<SEC-DOCUMENT>0000916641-02-000422.txt : 20020415
<SEC-HEADER>0000916641-02-000422.hdr.sgml : 20020415
ACCESSION NUMBER: 0000916641-02-000422
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 11
CONFORMED PERIOD OF REPORT: 20011231
FILED AS OF DATE: 20020315
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: SUNTRUST BANKS INC
CENTRAL INDEX KEY: 0000750556
STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021]
IRS NUMBER: 581575035
STATE OF INCORPORATION: GA
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-08918
FILM NUMBER: 02575599
BUSINESS ADDRESS:
STREET 1: 303 PEACHTREE ST N E
CITY: ATLANTA
STATE: GA
ZIP: 30308
BUSINESS PHONE: 4045887711
MAIL ADDRESS:
STREET 1: 303 PEACHTREE ST N E
CITY: ATLANTA
STATE: GA
ZIP: 30308
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>d10k.txt
<DESCRIPTION>FORM 10-K
<TEXT>
<PAGE>
74 SunTrust 2001 Annual Report
2001 FORM 10-K
- --------------------------------------------------------------------------------
Securities and Exchange Commission
Washington, DC 20549
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For the Fiscal Year Ended December 31, 2001
Commission file number 1-8918
SunTrust Banks, Inc.
Incorporated in the State of Georgia
IRS Employer Identification Number 58-1575035
Address: 303 Peachtree Street, NE, Atlanta, GA 30308
Telephone: (404) 588-7711
Securities Registered Pursuant to Section 12(b) of the Act: Common Stock-$1.00
par value, which is registered on the New York Stock Exchange.
As of January 31, 2002, SunTrust had 287,253,875 shares of common stock
outstanding. The aggregate market value of SunTrust common stock held by
non-affiliates on January 31, 2002 was approximately $17.5 billion.
SunTrust (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
Documents Incorporated By Reference
Part III information is incorporated herein by reference, pursuant to
Instruction G of Form 10-K, from SunTrust's Proxy Statement for its 2002 Annual
Shareholders' Meeting, which will be filed with the Commission by March 8, 2002.
Certain Part I and Part II information required by Form 10-K is incorporated by
reference from the SunTrust Annual Report to Shareholders as indicated below.
Except for parts of the SunTrust Annual Report to Shareholders expressly
incorporated herein by reference, this Annual Report is not to be deemed filed
with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
Part I Page
<S> <C>
Item 1 Business 2-41
Item 2 Properties 41
Item 3 Legal Proceedings 41
Item 4 Not Applicable
Part II
Item 5 Market for the Registrant's
Common Equity and Related
Stockholder Matters Inside front cover,
13, 35, 80
Item 6 Selected Financial Data 13
Item 7 Management's Discussion and
Analysis of Financial Condition
and Results of Operations 2-41
Item 7a Quantitative and Qualitative
Disclosures about Market Risk 30
Item 8 Financial Statements and
Supplementary Data 35-38, 42-73
Part III Page
Item 9 Not Applicable
Item 10 Directors and Executive
Officers of the Registrant Proxy Statement
Item 11 Executive Compensation Proxy Statement
Item 12 Security Ownership of
Certain Beneficial Owners
and Management Proxy Statement
Item 13 Certain Relationships and
Related Transactions Proxy Statement
Part IV
Item 14 Exhibits, Financial Statement
Schedules and Reports
on Form 8-K 75
</TABLE>
Certain statistical data required by the Securities and Exchange Commission are
included on pages 13-38.
<PAGE>
SunTrust 2001 Annual Report 75
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
Financial Statement Filed. See Index To Consolidated Financial Statements on
page 42 of this Annual Report and Form 10-K.
All financial statement schedules are omitted because the data is either
not applicable or is discussed in the financial statements or related footnotes.
The Company filed Form 8-K's dated October 11 and December 4, 2001 to file
certain exhibits to be incorporated by reference into the Registration
Statements on Form S-3.
The Company's principal banking subsidiary is owned by SunTrust Bank
Holding Company, a Florida corporation. A directory of the Company's principal
banking units and key subsidiaries are on pages 78-79 of this Annual Report and
Form 10-K. The Company's Articles of Incorporation, By-laws, certain instruments
defining the rights of securities holders, including designations of the terms
of outstanding indentures, constituent instruments relating to various employee
benefit plans and certain other documents are filed as Exhibits to this Report
or incorporated by reference herein pursuant to the Securities Exchange Act of
1934. Shareholders may obtain the list of such Exhibits and copies of such
documents upon request to Corporate Secretary, SunTrust Banks, Inc., Mail Code
643, P.O. Box 4418, Atlanta, Georgia, 30302. A copying fee will be charged for
the Exhibits.
Consent Of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation of our
report included in this Annual Report and Form 10-K into the Registrant's
previously filed Registration Statement Nos. 33-28250, 33-58723, 333-50719,
333-69331, 333-91519, 333-91521 and 333-43348 on Form S-8 and Registration
Statement No. 333-61583 on Form S-3.
Arthur Andersen LLP
Atlanta, GA
March 15, 2002
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf on February 12, 2002 by the undersigned, thereunto duly authorized.
SunTrust Banks, Inc. L. Phillip Humann
(Registrant) Chairman of the Board of Directors,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed on February 12, 2002 by the following persons on behalf of the
Registrant and in the capacities indicated.
L. Phillip Humann William P. O'Halloran
Chairman of the Board of Directors, Senior Vice President
President and Chief Executive Officer and Controller
John W. Spiegel
Vice Chairman and
Chief Financial Officer
All Directors of the Registrant listed on page 76.
<PAGE>
EXECUTIVE OFFICERS
------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Name Business Experience Age
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
John W. Clay, Jr. A Vice Chairman of the Company since August 2000 with management oversight 60
of banking functions, including corporate and investment banking. From
1997 until August 2000 he was an Executive Vice President of the Company.
Prior to 1997, he was Chief Executive Officer of the Company's Tennessee
banking operations.
- --------------------------------------------------------------------------------------------------------------------
Robert H. Coords An Executive Vice President of the Company and Chief Efficiency and Quality 59
Officer.
- --------------------------------------------------------------------------------------------------------------------
Donald S. Downing An Executive Vice President of the Company and Mortgage Line of Business 55
Head.
- --------------------------------------------------------------------------------------------------------------------
Samuel O. Franklin III An Executive Vice President of the Company and Chief Executive Officer of 58
the Company's Tennessee banking operations.
- --------------------------------------------------------------------------------------------------------------------
Charles T. Hill An Executive Vice President of the Company and, since January 2001, 51
Chairman, President and Chief Executive Officer of the Mid-Atlantic banking
operations. From August 2000 to January 2001, Mr. Hill was President and
Chief Executive Officer of the Mid-Atlantic banking operations. Prior to
August 2000, Mr. Hill was Executive Vice President, Commercial Banking, and
Senior Credit Officer for the Mid-Atlantic region.
- --------------------------------------------------------------------------------------------------------------------
Theodore J. Hoepner A Vice Chairman of the Company since August 2000 with responsibility for 60
the Company's technology and operations functions, asset quality,
efficiency and quality initiatives, human resources and legal and
regulatory affairs. From 1997 until August 2000 he was an Executive Vice
President of the Company, with responsibility for the Company's Florida
banking operations, SunTrust Service Corporation, Human Resources and
efficiency and quality initiatives.
- --------------------------------------------------------------------------------------------------------------------
L. Phillip Humann Chairman of the Board, President and Chief Executive Officer of the 56
Company. He is a Director of Coca-Cola Enterprises Inc., Equifax Inc. and
Haverty Furniture Companies, Inc. Mr. Humann has been a director of the
Company since 1991.
- --------------------------------------------------------------------------------------------------------------------
Craig J. Kelly An Executive Vice President of the Company and Marketing Director since 56
January 2000. From 1997 to 2000, Mr. Kelly served as Group Executive Vice
President at Crestar Bank responsible for Marketing. From 1987 to 1997, he
was Senior Vice President and Director of Marketing for Banc One
Corporation.
- --------------------------------------------------------------------------------------------------------------------
George W. Koehn An Executive Vice President of the Company and, since August 2000, Chairman 58
and Chief Executive Officer of the Company's Florida banking operations.
Prior to August 2000, Mr. Koehn was President of the Florida banking
operations and Chairman and Chief Executive Officer of the Central Florida
banking unit.
- --------------------------------------------------------------------------------------------------------------------
Carl F. Mentzer An Executive Vice President of the Company and Commercial Line of Business 56
Head. In May 1995, Mr. Mentzer was elected Chairman of the Board and Chief
Executive Officer of SunTrust Bank, Tampa Bay and held that position until
December 31, 1999.
- --------------------------------------------------------------------------------------------------------------------
William P. O'Halloran A Senior Vice President and Controller of the Company. 58
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Name Business Experience Age
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dennis M. Patterson An Executive Vice President of the Company and Retail Banking Line of 52
Business Head, which includes the branch system, small business banking,
private banking, consumer lending, insurance and credit card business.
Prior to this, Mr. Patterson served as the Company's Marketing Director,
with additional responsibility for corporate strategy development and
SunTrust's online subsidiary (telephone and Internet banking).
- --------------------------------------------------------------------------------------------------------------------
William H. Rogers, Jr. An Executive Vice President of the Company. Since October 2000 Mr. Rogers 44
has had responsibility for trust, investment and private client services.
Prior to October 2000, Mr. Rogers was head of Georgia community banking and
the Georgia retail line of business.
- --------------------------------------------------------------------------------------------------------------------
R. Charles Shufeldt An Executive Vice President and line of business head for the Company's 51
Corporate and Investment Banking Unit since August 2000. Prior to that,
Mr. Shufeldt served as Senior Vice President in the same unit.
- --------------------------------------------------------------------------------------------------------------------
John W. Spiegel A Vice Chairman of the Company since August 2000 with responsibility for 60
the Company's finance-related functions. Mr. Spiegel is also Chief
Financial Officer, a position he has held for more than five years. Prior
to August 2000 he was an Executive Vice President of the Company.
- --------------------------------------------------------------------------------------------------------------------
James M. Wells III A Vice Chairman of the Company since August 2000 with responsibility for 55
oversight of the Company's commercial, retail, mortgage and private client
services lines of business. He also has senior executive responsibility
for the Company's marketing and corporate strategy units, as well as
product management. From January 2000 to August 2000 Mr. Wells served as
President and Chief Executive Officer of the Company's Mid-Atlantic
region. From 1997 to January 2000 he served as President and Chief
Operating Officer of Crestar Financial Corporation and Crestar Bank.
- --------------------------------------------------------------------------------------------------------------------
Robert C. Whitehead An Executive Vice President of the Company and Chief Information Officer. 55
- --------------------------------------------------------------------------------------------------------------------
E. Jenner Wood, III Chairman, President and Chief Executive Officer of SunTrust Bank, Georgia 50
since April 2001 and an Executive Vice President of the Company. Prior to
April 2001, Mr. Wood was President of SunTrust Bank, Georgia since October
2000 and prior to that he was responsible for trust, investment and private
client services.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Page
Exhibit Description Number
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporation of SunTrust
Banks, Inc. ("Registrant") effective as of November 14, 1989,
and amendment effective as of April 24, 1998, incorporated by
reference to Exhibit 3.1 to Registrant's 1998 Annual Report on
Form 10-K.
*
3.2 Amendment to Restated Articles of Incorporation of Registrant,
effective April 18, 2000, incorporated by reference to Exhibit
3.1 of Registrant's Form 10-Q as of March 31, 2000. *
3.3 Bylaws of Registrant, amended effective as of February 13, 2001
(filed herewith).
4.1 Indenture Agreement between Registrant and Morgan Guaranty Trust
Company of New York, as Trustee, incorporated by reference to Exhibit
4(a) to Registration Statement No. 33-00084. *
4.2 Indenture between Registrant and PNC, N.A., as Trustee,
incorporated by reference to Exhibit 4(a) to Registration Statement
No. 33-62162. *
4.3 Indenture between Registrant and The First National Bank of Chicago,
as Trustee, incorporated by reference to Exhibit 4(b) to Registration
Statement No. 33-62162. *
4.4 Form of Indenture to be used in connection with the issuance of
Subordinated Debt Securities, incorporated by reference to Exhibit
4.4 to Registration Statement No. 333-25381. *
4.5 Form of Indenture, dated as of February 1, 1985, between
SunTrust Bank Holding Company (as successor in interest to
Crestar Financial Corporation) and The Chase Manhattan Bank, as
Trustee, incorporated by reference to Exhibit 4.3 to
Registration Statement No. 333-61583. *
4.6 Form of Indenture, dated as of September 1, 1993, between
SunTrust Bank Holding Company (as successor in interest to
Crestar Financial Corporation) and The Chase Manhattan Bank, as
Trustee, incorporated by reference to Exhibit 4.1 to Registration
Statement No. 333-50387. *
4.7 Form of Third Supplemental Indenture (to Indenture dated as of
February 1, 1985), dated as of July 1, 1992, between SunTrust
Bank Holding Company (as successor in interest to Crestar Financial
Corporation) and The Chase Manhattan Bank, as Trustee, incorporated
by reference to Registration Statement No. 333-61583. *
4.8 Form of resolutions of the Board of Directors of Crestar
Financial Corporation (now known as SunTrust Bank Holding
Company) approving issuance of $150 million of 8 3/4%
Subordinated Notes Due 2004, incorporated by reference to
Exhibit 4.6 to Registration Statement No. 333-61583.
*
4.9 Form of First Supplemental Indenture (to Indenture dated as of
September 1, 1993), dated as of January 1, 1998, between
SunTrust Bank Holding Company (as successor in interest to
Crestar Financial Corporation) and The Chase Manhattan Bank, as
Trustee, incorporated by reference to Exhibit 4.7 to
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Registration Statement No. 333-61583. *
Material Contracts and Executive Compensation Plans and Arrangements
10.1 SunTrust Banks, Inc. Supplemental Executive Retirement Plan
effective as of August 13, 1996, and amendment effective as of
November 10, 1998, incorporated by reference to Exhibit 10.9 to
Registrant's 1998 Annual Report on Form 10-K. *
10.2 Amendment to SunTrust Banks, Inc. Supplemental Executive
Retirement Plan effective as of February 10, 1998, incorporated
by reference to Exhibit 10.9 of Registrant's 2000 Annual Report
on Form 10-K. *
10.3 Summary of amendments to the SunTrust Banks, Inc. Supplemental
Executive Retirement Plan adopted February 14, 2001 (filed
herewith). The amended Agreement will be filed after it is
executed.
10.4 SunTrust Banks, Inc. ERISA Excess Retirement Plan, effective as
of August 13, 1996, and amendment effective as of November 10,
1998, incorporated by reference to Exhibit 10.10 to
Registrant's 1998 Annual Report on Form 10-K. *
10.5 SunTrust Banks, Inc. Performance Unit Plan, amended and
restated as of August 11, 1998, incorporated by reference to
Exhibit 10.11 to Registrant's 1998 Annual Report on Form 10-K. *
10.6 SunTrust Banks, Inc. Management Incentive Plan, amended and
restated as of February 8, 2000, incorporated by reference to
Exhibit 10.11 to Registrant's 1999 Annual Report on Form 10-K. *
10.7 SunTrust Banks, Inc. 401(k) Excess Plan Amended and Restated as of
July 1, 1999, incorporated by reference to Exhibit 10.12 to
Registrant's 1999 Annual Report on Form 10-K. *
10.8 Amendment Number One dated December 1, 2001 to the SunTrust Banks,
Inc. 401(k) Excess Plan Amended and Restated as of July 1, 1999
(filed herewith).
10.9 SunTrust Banks, Inc. Executive Stock Plan, incorporated by
reference to Exhibit 10.16 to Registrant's 1998 Annual Report
on Form 10-K. *
10.10 Amendment to SunTrust Banks, Inc. Executive Stock Plan, effective
February 10, 1998, incorporated by reference to Exhibit 10.8 to
Registrant's 1997 Annual Report on Form 10-K. *
10.11 SunTrust Banks, Inc. Performance Stock Agreement, effective
February 11, 1992, and First Amendment to Performance Stock
Agreement effective February 10, 1998, incorporated by reference
to Exhibit 10.9 to Registrant's 1997 Annual Report on Form 10-K. *
10.12 SunTrust Banks, Inc. 1995 Executive Stock Plan, incorporated by
reference to Exhibit 10.16 to Registrant's 1999 Annual Report on
Form 10-K. *
10.13 Amendment to the SunTrust Banks, Inc. 1995 Executive Stock Plan,
effective as of August 11, 1998, incorporated by reference to
Exhibit 10.20 to Registrant's 1998 Annual Report on Form 10-K. *
10.14 SunTrust Banks, Inc. 2000 Stock Plan, effective February 8, 2000,
incorporated by reference to Exhibit A to Registrant's 2000 Proxy
Statement on Form 14A. *
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10.15 SunTrust Banks, Inc. Deferred Compensation Plan, effective October
1, 1999 and Amendment Number One, effective October 31, 1999,
incorporated by reference to Exhibit 10.19 to Registrant's 1999
Annual Report on Form 10-K. *
10.16 Amendment to Exhibit A to the SunTrust Banks, Inc. Deferred
Compensation Plan, effective January 1, 2000, incorporated by
reference to Exhibit 10.21 of Registrant's 2000 Annual Report on
Form 10-K. *
10.17 SunTrust Banks, Inc. Directors Deferred Compensation Plan effective
as of January 1, 1994, incorporated by reference to Exhibit 10.21
to Registrant's 1998 Annual Report on Form 10-K. *
10.18 Crestar Financial Corporation Executive Life Insurance Plan, as
amended and restated effective January 1, 1991, and amendments
effective December 18, 1992, March 30, 1998, and December 30, 1998,
incorporated by reference to Exhibit 10.23 to Registrant's 1998
Annual Report on Form 10-K. *
10.19 1981 Stock Option Plan of Crestar Financial Corporation and
Affiliated Corporations, as amended through January 24, 1997,
incorporated by reference to Exhibit 10.24 to Registrant's 1998
Annual Report on Form 10-K. *
10.20 Change in Control Agreements between Registrant and various
executives, incorporated by reference to Exhibits 10.1 through
10.10 of Registrant's Form 10-Q and Form 10-QA as of March 31,
2001. *
10.21 Employment Agreement between Registrant and James M. Wells III,
effective as of December 31, 1998, incorporated by reference to
Exhibit 10.24 to Registrant's 1999 Annual Report on Form 10-K.
10.22 Crestar Financial Corporation Excess Benefit Plan, amended and
restated effective December 26, 1990 and amendments thereto
(effective December 18, 1992, March 30, 1998 and December 30,
1998), incorporated by reference to Exhibit 10.29 to Registrant's
1998 Annual Report on Form 10-K. *
10.23 United Virginia Bankshares Incorporated Deferred Compensation
Program under Incentive Compensation Plan of United Virginia
Bankshares Incorporated and Affiliated Corporation, amended and
restated through December 7, 1983, incorporated by reference to
Exhibit 10.30 to Registrant's 1998 Annual Report on Form 10-K. *
10.24 Amendments (effective January 1, 1987 and January 1, 1988) to
United Virginia Bankshares Incorporated Deferred Compensation
Program Under Incentive Compensation Plan of United Virginia
Bankshares Incorporated and Affiliated Corporation, incorporated by
reference to Exhibit 10.29 of Registrant's 2000 Annual Report on
Form 10-K. *
10.25 Amendment (effective January 1, 1994) to Crestar Financial
Corporation Deferred Compensation Program Under Incentive
Compensation Plan of Crestar Financial Corporation and Affiliated
Corporations, incorporated by reference to Exhibit 10.30 to
Registrant's 2000 Annual Report on Form 10-K. *
10.26 Amendment (effective September 21, 1995) to Crestar Financial
Corporation Deferred Compensation Program Under Incentive
Compensation Plan of Crestar Financial Corporation and Affiliated
Corporations, incorporated by reference to Exhibit 10.34 to
Registrant's 1998 Annual Report on Form 10-K. *
10.27 Crestar Financial Corporation Deferred Compensation Plan for
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Outside Directors of Crestar Financial Corporation and Crestar
Bank, amended and restated through December 13, 1983 and
amendments thereto (effective January 1, 1985, April 24, 1991,
December 31, 1993 and October 23, 1998), incorporated by
reference to Exhibit 10.35 to Registrant's 1998 Annual Report
on Form 10-K. *
10.28 Amendment (effective January 1, 1999) to Crestar Financial
Corporation Deferred Compensation Plan for Outside Directors of
Crestar Financial Corporation, incorporated by reference to
Exhibit 10.32 to Registrant's 1999 Annual Report on Form 10-K. *
10.29 Crestar Financial Corporation Additional Nonqualified Executive
Plan, amended and restated effective December 26, 1990 and
amendments thereto (effective December 18, 1992, March 30, 1998
and December 30, 1998), incorporated by reference to Exhibit 10.36
to Registrant's 1998 Annual Report on Form 10-K. *
10.30 Crestar Financial Corporation 1993 Stock Incentive Plan, as
amended and restated effective February 28, 1997, incorporated
by reference to Exhibit 10(af) to Crestar Financial Corporation's
1997 Annual Report on Form 10-K. *
10.31 Amendments (effective December 19, 1997) to Crestar Financial
Corporation 1993 Stock Incentive Plan, incorporated by
reference to Exhibit 10.38 to Registrant's 1998 Annual Report on
Form 10-K. *
10.32 Crestar Financial Corporation Supplemental Executive Retirement
Plan, effective January 1, 1995, incorporated by reference to
Exhibit 10.37 to Registrant's 2000 Annual Report on Form 10-K. *
10.33 Amendments (effective December 20, 1996) to the Crestar Financial
Corporation Supplemental Executive Retirement Plan, incorporated
by reference to Exhibit 10(aj) to Crestar Financial Corporation's
1997 Annual Report on Form 10-K. *
10.34 Amendments (effective December 17, 1997) to Crestar Financial
Corporation Supplemental Executive Retirement Plan, incorporated
by reference to Exhibit 10(al) to Crestar Financial Corporation's
1997 Annual Report on Form 10-K. *
10.35 Amendments (effective December 19, 1997 and December 29, 1998) to
the Crestar Financial Corporation Supplemental Executive
Retirement Plan, incorporated by reference to Exhibit 10.42 to
Registrant's 1998 Annual Report on Form 10-K. *
10.36 Crestar Financial Corporation Directors' Equity Program, effective
January 1, 1996 (filed herewith).
10.37 Amendment (effective December 20, 1996) to Crestar Financial
Corporation Directors' Equity Program (filed herewith).
10.38 Amendment (effective September 26, 1997) to Crestar Financial
Corporation Directors' Equity Program, incorporated by reference
to Exhibit 10(ao) to Crestar Financial Corporation's 1997 Annual
Report on Form 10-K. *
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10.39 Amendments (effective October 23, 1998) to Crestar Financial
Corporation Directors' Equity Program, incorporated by reference to
Exhibit 10.47 to Registrant's 1998 Annual Report on Form 10-K. *
10.40 Amendment (effective October 23, 1998) to Crestar Financial
Corporation Directors' Equity Program, incorporated by
reference to Exhibit 10.44 to Registrant's 1999 Annual Report on Form
10-K. *
11.1 Statement re computation of per share earnings (filed herewith).
12.1 Ratio of Earnings to Fixed Changes (filed herewith).
13.1 Registrant's 2001 Annual Report to Shareholders (filed herewith).
21.1 Registrant's Subsidiaries (filed herewith).
22.1 Registrant's Proxy Statement relating to the 2002 Annual Meeting of
Shareholders, dated March 1, 2002, filed on March 1, 2002.
23.1 Consent of Independent Public Accountants (filed herewith).
</TABLE>
Certain instruments defining rights of holders of long-term debt of
Registrant and its subsidiaries are not filed herewith pursuant to Item
601(b)(4)(iii) of Regulation S-K. At the Commission's request, Registrant agrees
to give the Commission a copy of any instrument with respect to long-term debt
of Registrant and its consolidated subsidiaries and any of its unconsolidated
subsidiaries for which financial statements are required to be filed under which
the total amount of debt securities authorized does not exceed ten percent of
the total assets of Registrant and its subsidiaries on a consolidated basis.
* Incorporated by reference.
Certain statistical data required by the Securities and Exchange Commission are
included on pages AR 13 thru AR 38.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf on February 12, 2002 by the undersigned, thereunto duly
authorized.
SUNTRUST BANKS, INC.
(Registrant)
By: /s/ L. Phillip Humann
------------------------------------------
L. Phillip Humann
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report
has been signed on February 12, 2002 by the following persons on behalf of the
Registrant and in the capacities indicated.
By: /s/ L. Phillip Humann
------------------------------------------
L. Phillip Humann
Chairman of the Board, President
and Chief Executive Officer
By: /s/ John W. Spiegel
------------------------------------------
John W. Spiegel
Vice Chairman and
Chief Financial Officer
By: /s/ William P. O'Halloran
------------------------------------------
William P. O'Halloran
Senior Vice President and Controller
(Chief Accounting Officer)
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints L. PHILLIP HUMANN, Chairman of the Board,
President, Chief Executive Officer and a Director of the Registrant, JOHN W.
SPIEGEL, Vice Chairman and Chief Financial Officer of the Registrant, RAYMOND D.
FORTIN, Senior Vice President and Secretary of the Registrant, or any one of
them, his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any amendments to this report, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
report has been signed on February 12, 2002 by the following persons on behalf
of the Registrant and in the capacities indicated.
/s/ J. Hyatt Brown Director
- -----------------------------------------------------
J. Hyatt Brown
/s/ Alston D. Correll Director
- -----------------------------------------------------
Alston D. Correll
/s/ Douglas N. Daft Director
- -----------------------------------------------------
Douglas N. Daft
/s/ A. W. Dahlberg Director
- -----------------------------------------------------
A. W. Dahlberg
/s/ Patricia C. Frist Director
- -----------------------------------------------------
Patricia C. Frist
/s/ David H. Hughes Director
- -----------------------------------------------------
David H. Hughes
/s/ M. Douglas Ivester Director
- -----------------------------------------------------
M. Douglas Ivester
/s/ Summerfield K. Johnston, Jr. Director
- -----------------------------------------------------
Summerfield K. Johnston, Jr.
<PAGE>
/s/ Joseph L. Lanier, Jr. Director
- --------------------------------------------
Joseph L. Lanier, Jr.
/s/ G. Gilmer Minor, III Director
- --------------------------------------------
G. Gilmer Minor, III
/s/ Larry L. Prince Director
- --------------------------------------------
Larry L. Prince
/s/ R. Randall Rollins Director
- --------------------------------------------
R. Randall Rollins
/s/ Frank S. Royal, M.D. Director
- --------------------------------------------
Frank S. Royal, M.D.
/s/ James B. Williams Director
- --------------------------------------------
James B. Williams
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.3
<SEQUENCE>3
<FILENAME>dex33.txt
<DESCRIPTION>EXHIBIT 3.3
<TEXT>
<PAGE>
Exhibit 3.3
SUNTRUST BANKS, INC.
BYLAWS
(As Amended February 13, 2001)
ARTICLE I
SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the shareholders for the
election of Directors and for the transaction of such other business as may
properly come before the meeting shall be held at such place, on such date and
at such time as the Board of Directors may by resolution provide. If the Board
of Directors fails to provide such date and time, then such meeting shall be
held at the corporate headquarters at 9:30 A.M. local time on the third Tuesday
in April of each year, or, if such date is a legal holiday, on the next
succeeding business day. The Board of Directors may specify by resolution prior
to any special meeting of shareholders held within the year that such meeting
shall be in lieu of the annual meeting.
SECTION 2. Special Meeting; Call of Meetings. Special meetings of the
shareholders may be called at any time by the Chairman of the Board or the
President. Special meetings of the shareholders may also be called at any time
by the Board of Directors or the holders of at least twenty-five percent (25%)
of the outstanding common stock of the Corporation. Such meetings shall be held
at such place as is stated in the call and notice thereof.
SECTION 3. Notice of Meetings. Written notice of each meeting of
shareholders, stating the place, day and hour of the meeting, and the purpose or
purposes for which the meeting is called if a special meeting, shall be mailed
to each shareholder entitled to vote at or to notice of such meeting at his
address shown on the books of the Corporation not less than ten (10) nor more
than sixty (60) days prior to such meeting unless such shareholder waives notice
of the meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the shareholder at his address
as it appears on the records of shareholders of the Corporation, with postage
thereon prepaid. Any shareholder may execute a waiver of notice, in person or by
proxy, either before or after any meeting, and shall be deemed to have waived
notice if he is present at such meeting in person or by proxy. Neither the
business transacted at, nor the purpose of, any meeting need be stated in a
waiver of notice of such meeting. Notice of any meeting may be given by the
Chairman of the Board, President, the Corporate Secretary or any Assistant
Secretary. No notice need be given of the time and place of reconvening of any
adjourned meeting, if the time and place to which the meeting is adjourned are
announced at the adjourned meeting.
SECTION 4. Quorum; Required Shareholder Vote. Each outstanding share of
common stock of the Corporation is entitled to one vote on each matter submitted
to a vote. A majority of the shares entitled to vote, represented in person or
by proxy, shall constitute a quorum at any meeting of the shareholders. If a
quorum is present, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on the subject matter shall be
the act of the shareholders, unless a different vote is required by law, the
Articles of Incorporation or these Bylaws, except in the case of elections for
Director, for which the vote of a plurality of the votes cast by the shares
entitled to vote for such election shall be the act of the shareholders. When a
quorum is once present to organize a meeting, the shareholders present may
continue to do business at the meeting or at any adjournment thereof (unless a
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new record date is or must be set for the adjourned meeting) notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, and the holders
of a majority of the voting shares present at such meeting shall be the act of
the shareholders unless a different vote is required by law, the Articles of
Incorporation or these Bylaws. The holders of a majority of the voting shares
represented at a meeting, whether or not a quorum is present, may adjourn such
meeting from time to time.
SECTION 5. Proxies. A shareholder may vote either in person or by proxy. A
shareholder may appoint a proxy: (i) by executing a written document, which may
be accomplished by any reasonable means, including facsimile transmission; (ii)
orally, which may be by telephone; or (iii) by any other form of electronic
communication. No proxy shall be valid for more than eleven (11) months after
the date of such appointment, unless, in the case of a written proxy, a longer
period is expressly provided for in the written document.
SECTION 6. Judges of Elections. At every meeting of shareholders, the vote
shall be conducted by two or more judges appointed for that purpose by the Board
of Directors or by the chairman of the meeting. All questions concerning the
qualification of voters, the validity of proxies, or the acceptance or rejection
of votes shall be decided by such judges.
ARTICLE II
DIRECTORS
SECTION 1. Board of Directors. The Board of Directors shall manage the
business and affairs of the Corporation and may exercise all of the powers of
the Corporation subject to any restrictions imposed by law.
SECTION 2. Composition of the Board. The Board of Directors of the
Corporation shall consist of not less than ten (10) nor more than twenty (20)
natural persons, the exact number to be set from time to time by the Board of
Directors. No decrease in the number of Directors shall shorten the term of an
incumbent Director. In the absence of the Board of Directors setting the number
of Directors, the number shall be twelve (12). The Directors of the Corporation
shall be divided into three classes, as nearly equal in size as practicable. The
term of each class shall be three years. Each Director shall hold office for the
term for which elected, which term shall end at the annual meeting of the
shareholders, and until his successor has been elected and qualified, or until
his earlier retirement, resignation, removal from office, or death.
SECTION 3. Election of Directors. Nominations for election to the Board of
Directors may be made by the Board of Directors, or by any shareholder of any
outstanding class of capital stock of the Corporation entitled to vote for the
election of Directors. Nominations shall specify the class of Directors to which
each person is nominated, and nominations, other than those made by the existing
Board of Directors, shall be made in writing and shall be delivered or mailed to
the Chairman of the Board not less than thirty (30) days nor more than
seventy-five (75) days prior to any meeting of the shareholders called for the
election of Directors; provided, however, that if less than thirty-five (35)
days notice of the meeting is given to shareholders such nomination shall be
mailed or delivered to the Chairman of the Board not later than the close of
business on the seventh day following the day on which the notice of meeting was
mailed. Such nomination and notification shall contain the following
information:
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(i) The names and addresses of the proposed nominee or nominees;
(ii) The principal occupation of each proposed nominee;
(iii) The total number of shares that, to the knowledge of the notifying
or nominating shareholder, will be voted for each of the proposed
nominees;
(iv) The name and residence address of each notifying or nominating
shareholder;
(v) The number of shares owned by the notifying or nominating
shareholder;
(vi) The total number of shares that, to the knowledge of the notifying
or nominating shareholder, are owned by the proposed nominee; and
(vii) The signed consent of the proposed nominee to serve, if elected.
Nominations not made in accordance herewith may, in his discretion, be
disregarded by the chairman of the meeting, and upon his instructions, the
judges of election shall disregard all votes cast for each such nomination.
SECTION 4. Vacancies. Subject to the rights of the holders of any series
of Preferred Stock then outstanding to fill director vacancies, vacancies
resulting from retirement, resignation, removal from office (with or without
cause), death or a vacancy resulting from an increase in the number of Directors
comprising the Board, shall be filled by the Board of Directors. Any Director so
elected shall hold office until the next annual meeting of shareholders. No
decrease in the number of Directors constituting the Board of Directors shall
shorten the term of any incumbent Director.
SECTION 5. Retirement. Each Director serving as an officer of the
Corporation or any of its direct or indirect subsidiaries shall cease to be a
Director on the date of the first to occur of (a) such Director's 65th birthday,
(b) the date of his termination of employment, (c) the date of his resignation
from employment, or (d) the date of his retirement from employment. The
foregoing shall not apply to any Director serving as an officer of the
Corporation who is the Chairman of the Executive Committee. Each Director who is
not an officer of the Corporation or any of its direct or indirect subsidiaries,
including any Director serving pursuant to the previous sentence, shall cease to
be a Director at the end of such Director's term coinciding with or following
such Director's 70th birthday.
SECTION 6. Removal. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any Director, or all Directors, may be removed
from office at any time with or without cause, but only by the same affirmative
vote of the shareholders required to amend this Article II as provided in the
Corporation's Articles of Incorporation.
SECTION 7. Resignations. Any Director of the Corporation may resign at any
time by giving written notice thereof to the Chairman of the Board, the
President, or the Corporate Secretary. Such resignation shall take effect when
delivered unless the notice specifies a later effective date; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
ARTICLE III
ACTION OF THE BOARD OF DIRECTORS; COMMITTEES
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SECTION 1. Quorum; Vote Requirement. A majority of the Directors holding
office shall constitute a quorum for the transaction of business; if a quorum is
present, a vote of a majority of the Directors present at such time shall be the
act of the Board of Directors, unless a greater vote is required by law, the
Articles of Incorporation, or by these Bylaws.
SECTION 2. Executive Committee. There is hereby established an Executive
Committee which shall consist of not less than four (4) Directors. The Board of
Directors shall at the Board of Directors' meeting immediately following the
Corporation's annual shareholders' meeting, and may at such other time as the
Board of Directors determines, elect the Directors who shall be members of the
Executive Committee. The Executive Committee shall have and may exercise all the
authority of the Board of Directors as permitted by law. The Board of Directors
shall elect the Chairman of the Executive Committee who shall preside at all
meetings of the Executive Committee and shall perform such other duties as may
be designated by the Executive Committee. The Board of Directors may also elect
one member of the Executive Committee as Vice Chairman of the Executive
Committee who shall preside at Executive Committee meetings in the absence of
the Chairman of the Executive Committee. The Executive Committee shall serve as
the Nominating Committee and shall have the power to recommend candidates for
election to the Board of Directors and shall consider other issues related to
the size and composition of the Board of Directors.
SECTION 3. Audit Committee. There is hereby established an Audit Committee
which shall consist of not less than four (4) Directors. No Director who is an
officer of the Corporation or any direct or indirect subsidiary of the
Corporation shall be a member of the Audit Committee. The Board of Directors
shall at the Board of Directors' meeting immediately following the Corporation's
annual shareholders' meeting, and may at such other time as the Board of
Directors determine, elect the members of the Audit Committee. The Audit
Committee shall require that an audit of the books and affairs of the
Corporation be made at such time or times as the members of the Audit Committee
shall choose. The Board of Directors shall elect the Chairman of the Audit
Committee who shall preside at all meetings of the Audit Committee and shall
perform such other duties as may be designated by the Audit Committee.
SECTION 4. Other Committees. The Board of Directors may designate from
among its members one or more other committees, each consisting of one (1) or
more Directors, and each of which, to the extent provided in the resolution
establishing such committee, shall have and may exercise all authority of the
Board of Directors to the extent permitted by law.
SECTION 5. Committee Meetings. Regular meetings of committees, of which no
notice shall be necessary, shall be held at such times and at such places as
shall be fixed, from time to time, by resolution adopted by such committees.
Special meetings of any committee may be called by the Chairman of the Board or
the President, or by the Chairman of such committee or by any other two members
of the committee, at any time. Notice of any special meeting of any committee
may be given in the manner provided in the Bylaws for giving notice of a special
meeting of the Board of Directors, but notice of any such meeting need not be
given to any member of the committee if waived by him before or after the
meeting, in writing (including telegram, cablegram, facsimile, or radiogram) or
if he shall be present at the meeting; and any meeting of any committee shall be
a legal meeting, without any notice thereof having been given, if all the
members shall be present thereat. A majority of any committee shall constitute a
quorum for the transaction of business, and the act of a majority of those
present at any meeting at which a quorum is present shall be the act of the
committee.
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SECTION 6. Committee Records. Each committee shall keep a record of its
acts and proceedings and shall report the same, from time to time, to the Board
of Directors.
SECTION 7. Alternate Members; Vacancies. The Board of Directors may
designate one or more Directors as alternate members of any committee, and such
alternate members may act in the place and stead of any absent member or members
at any meeting of such committee. The Board of Directors may fill any vacancy or
vacancies occurring in any committee.
SECTION 8. Place, Time, Notice and Call of Directors' Meetings. The annual
meeting of the Board of Directors for the purpose of electing officers and
transacting such other business as may be brought before the meeting shall be
held each year immediately following the annual meeting of shareholders or at
such other time and place as the Chairman of the Board may designate. Regular
meetings of the Board of Directors shall be held at such times as the Board of
Directors may determine from time to time. Regular meetings of the Board of
Directors may be held without notice. Special meetings of the Board of Directors
shall be held upon notice of the date, time and place of such special meetings
as shall be given to each Director orally, either by telephone or in person, or
in writing, either by personal delivery or by mail, telegram, facsimile, or
cablegram no later than the day before such meeting. Notice of a meeting of the
Board of Directors need not be given to any Director who signs and delivers to
the Corporation a waiver of notice either before or after the meeting.
Attendance of a Director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a Director states, at the beginning of the meeting (or promptly upon
his arrival), any such objection or objections to the transaction of business
and thereafter does not vote for or assent to action taken at the meeting.
Neither the business to be transacted at, nor the purpose of, any regular
or special meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting unless required by law or these Bylaws.
A majority of the Directors present, whether or not a quorum exists, may
adjourn any meeting of the Board of Directors to another time and place. No
notice of any adjourned meeting need be given.
Meetings of the Board of Directors may be called by the Chairman of the
Board, the President or any two Directors.
SECTION 9. Action by Directors Without a Meeting; Participation in Meeting
by Telephone. Except as limited by law, any action to be taken at a meeting of
the Board, or by any committee of the Board, may be taken without a meeting if
written consent, setting forth the action so taken, shall be signed by all the
members of the Board or such Committee and shall be filed with the minutes of
the proceedings of the Board or such committee. Such written consent shall have
the same force and effect as a unanimous vote of the Board or such committee and
any document executed on behalf of the Corporation may recite that the action
was duly taken at a meeting of the Board or such committee.
Members of the Board or any committee of the Board may participate in a
meeting of the Board or such committee by means of conference telephone or
similar communications equipment by which means all persons participating in the
meeting can hear each other, and participation in a meeting of the Board or such
committee by such means shall constitute personal presence at such meeting.
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SECTION 10. Directors' Compensation. The Board of Directors shall have
authority to determine from time to time the amount of compensation which shall
be paid to its members for attendance at meetings of, or services on, the Board
of Directors or any committee of the Board. The Board of Directors shall also
have the power to reimburse Directors for reasonable expenses of attendance at
Directors' meetings and committee meetings.
ARTICLE IV
OFFICERS
SECTION 1. Executive Structure. The Board of Directors shall elect the
following officers: Chairman of the Board, President, Chief Financial Officer,
Corporate Secretary, and Treasurer, and may elect one or more Vice Chairmen and
Executive Vice Presidents, as the Board of Directors may deem necessary. The
Board of Directors shall designate from among such elected officers a Chief
Executive Officer. The Chief Executive Officer may appoint such assistant
officers, whose duties shall consist of assisting one or more of the Officers in
the discharge of the duties of any such Officer, as may be specified from time
to time by the Chief Executive Officer, whose titles may include such
designations as the Chief Executive Officer shall deem appropriate. All Officers
(including assistant officers) shall be elected for a term of office running
until the meeting of the Board of Directors following the next annual meeting of
shareholders. All assistant officers shall be appointed for a term specified by
the Chief Executive Officer but not later than the meeting of the Board of
Directors following the next annual meeting of shareholders. Any two or more
offices may be held by the same person.
SECTION 2. Chief Executive Officer. The Chief Executive Officer shall be
the most senior officer of the Corporation, and all other officers and agents of
the Corporation shall be subject to his direction. He shall be accountable to
the Board of Directors for the fulfillment of his duties and responsibilities
and, in the performance and exercise of all his duties, responsibilities and
powers, he shall be subject to the supervision and direction of, and any
limitations imposed by, the Board of Directors. The Chief Executive Officer
shall be responsible for interpretation and required implementation of the
policies of the Corporation as determined and specified from time to time by the
Board of Directors and he shall be responsible for the general management and
direction of the business and affairs of the Corporation. For the purpose of
fulfilling his duties and responsibilities, the Chief Executive Officer shall
have, subject to these Bylaws and the Board of Directors, plenary authorities
and powers, including general executive powers, the authority to delegate and
assign duties, responsibilities and authorities, and, in the name of the
Corporation and on its behalf, to negotiate and make any agreements, waivers or
commitments which do not require the express approval of the Board of Directors.
SECTION 3. Chairman of the Board. The Chairman of the Board shall be a
member of the Board of Directors and shall preside at all meetings of the
shareholders and Board of Directors.
SECTION 4. President. The President shall have such powers and perform
such duties as may be assigned by the Board of Directors, the Chairman of the
Board of Directors or the Chief Executive Officer.
SECTION 5. Vice Chairman. Any Vice Chairman elected shall have such duties
and authority as may be conferred upon him by the Board of Directors or
delegated to him by the Chief Executive Officer.
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SECTION 6. Chief Financial Officer. The Chief Financial Officer shall have
the care, custody, control and handling of the funds and assets of the
Corporation, and shall render a statement of the assets, liabilities and
operations of the Corporation to the Board of Directors at its regular meetings.
SECTION 7. Treasurer. The Treasurer shall perform such duties as may be
assigned to the Treasurer and shall report to the Chief Financial Officer or, in
the absence of the Chief Financial Officer, to the President.
SECTION 8. Corporate Secretary. Due notice of all meetings of the
shareholders and directors shall be given by the Corporate Secretary or the
person or persons calling such meeting. The Corporate Secretary shall report the
proceedings of all meetings in a book of minutes and shall perform all the
duties pertaining to his office including authentication of corporate documents
and shall have custody of the Seal of the Corporation. Each assistant Corporate
Secretary appointed by the Chief Executive Officer may perform all duties of the
Corporate Secretary.
SECTION 9. Other Duties and Authority. Each officer, employee and agent of
the Corporation shall have such other duties and authority as may be conferred
upon him by the Board of Directors or delegated to him by the Chief Executive
Officer.
SECTION 10. Removal of Officers. Any officer may be removed by the Board of
Directors with or without cause whenever in its judgment the best interests of
the Corporation will be served thereby. In addition, an officer of the
Corporation shall cease to be an officer upon ceasing to be an employee of the
Corporation or any of its subsidiaries.
ARTICLE V
STOCK
SECTION 1. Stock Certificates. The shares of stock of the Corporation
shall be represented by certificates in such form as may be approved by the
Board of Directors, which certificates shall be issued to the shareholders of
the Corporation and shall be signed by the Chairman of the Board, or the
President, together with the Corporate Secretary or an Assistant Secretary of
the Corporation; and which shall be sealed with the seal of the Corporation. The
signatures of such officers upon a certificate may be facsimile if the
certificate is countersigned by a transfer agent or registrar other than the
Corporation itself or an employee of the Corporation. No share certificates
shall be issued until consideration for the shares represented thereby has been
fully paid. In case any officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer at the date of issue.
SECTION 2. Transfer of Stock. Shares of stock of the Corporation shall be
transferred on the books of the Corporation only upon surrender to the
Corporation of the certificate or certificates representing the shares to be
transferred accompanied by an assignment in writing of such shares properly
executed by the shareholder of record or his duly authorized attorney-in-fact
and with all taxes on the transfer having been paid. The Corporation may refuse
any requested transfer until furnished evidence satisfactory to it that such
transfer is proper. Upon the surrender of a certificate for transfer of stock,
such certificate shall be marked on its face "Canceled". The Board of Directors
may make such additional rules concerning the issuance, transfer and
registration of stock and requirements regarding the establishment of
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lost, destroyed or wrongfully taken stock certificates (including any
requirement of an indemnity bond prior to issuance of any replacement
certificate and provision for appointment of a transfer agent and a registrar)
as it deems appropriate.
SECTION 3. Registered Shareholders. The Corporation may deem and treat the
holder of record of any stock as the absolute owner thereof for all purposes and
shall not be required to take any notice of any right or claim of right of any
other person.
SECTION 4. Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other purpose, the Board of
Directors of the Corporation may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than seventy (70) days and, in the case of a meeting of shareholders, not less
than ten (10) days prior to the date on which the particular action requiring
such determination of shareholders is to be taken.
ARTICLE VI
DEPOSITORIES, SIGNATURES AND SEAL
SECTION 1. Depositories. All funds of the Corporation shall be deposited
in the name of the Corporation in such bank, banks, or other financial
institutions as the Board of Directors may from time to time designate and shall
be drawn out on checks, drafts or other orders signed on behalf of the
Corporation by such person or persons as the Board of Directors may from time to
time designate.
SECTION 2. Seal. The seal of the Corporation shall be as follows:
[SEAL]
If the seal is affixed to a document, the signature of the Corporate
Secretary or an Assistant Secretary shall attest the seal. The seal and its
attestation may be lithographed or otherwise printed on any document and shall
have, to the extent permitted by law, the same force and effect as if it has
been affixed and attested manually.
SECTION 3. Execution of Instruments. All bills, notes, checks, and other
instruments for the payment of money, all agreements, indentures, mortgages,
deeds, conveyances, transfers, certificates, declarations, receipts, discharges,
releases, satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings, proxies and other instruments or documents may
be signed, executed, acknowledged, verified, delivered, or accepted on behalf of
the Corporation by the Chairman of the Board, the President, any Vice Chairman,
Executive Vice President, Senior Vice President or Vice President, the Secretary
or the Treasurer. Any such instruments may also be signed, executed,
acknowledged, verified, delivered or accepted on behalf of the Corporation in
such manner and by such other officers, employees
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or agents of the Corporation as the Board of Directors or Executive Committee
may from time to time direct.
ARTICLE VII
INDEMNIFICATION OF OFFICERS, DIRECTORS, AND EMPLOYEES
SECTION 1. Definitions. As used in this Article, the term:
(A) "Corporation" includes any domestic or foreign predecessor entity
of this Corporation in a merger or other transaction in which the predecessor's
existence ceased upon consummation of the transaction.
(B) "Director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the Corporation, is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan, or other entity. A "director" is
considered to be serving an employee benefit plan at the Corporation's request
if his duties to the Corporation also impose duties on, or otherwise involve
services by, him to the plan or to participants in or beneficiaries of the plan.
"Director" includes, unless the context requires otherwise, the estate or
personal representative of a director.
(C) "Disinterested director" means a director who at the time of a
vote referred to in Section 3(C) or a vote or selection referred to in Section
4(B), 4(C) or 7(A) is not: (i) a party to the proceeding; or (ii) an individual
who is a party to a proceeding having a familial, financial, professional, or
employment relationship with the director whose indemnification or advance for
expenses is the subject of the decision being made with respect to the
proceeding, which relationship would, in the circumstances, reasonably be
expected to exert an influence on the director's judgment when voting on the
decision being made.
(D) "Employee" means an individual who is or was an employee of the
Corporation or an individual who, while an employee of the Corporation, is or
was serving at the Corporation's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise.
An "Employee" is considered to be serving an employee benefit plan at the
Corporation's request if his duties to the Corporation also impose duties on, or
otherwise involve services by, him to the plan or to participants in or
beneficiaries of the plan. "Employee" includes, unless the context requires
otherwise, the estate or personal representative of an employee.
(E) "Expenses" includes counsel fees.
(F) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable expenses incurred with respect to a proceeding.
(G) "Officer" means an individual who is or was an officer of the
Corporation which for purposes of this Article VII shall include an assistant
officer, or an individual who, while an Officer of the Corporation, is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee,
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or agent of another foreign or domestic corporation, partnership, joint venture,
trust, employee benefit plan, or other entity. An "Officer" is considered to be
serving an employee benefit plan at the Corporation's request if his duties to
the Corporation also impose duties on, or otherwise involve services by, him to
the plan or to participants in or beneficiaries of the plan. "Officer" includes,
unless the context requires otherwise, the estate or personal representative of
an Officer.
(H) "Official capacity" means: (i) when used with respect to a
director, the office of a director in a corporation; and (ii) when used with
respect to an Officer, the office in a corporation held by the Officer. Official
capacity does not include service for any other domestic or foreign corporation
or any partnership, joint venture, trust, employee benefit plan, or other
entity.
(I) "Party" means an individual who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(J) "Proceeding" means any threatened, pending or completed action,
suit, or proceeding, whether civil, criminal, administrative, arbitrative or
investigative and whether formal or informal.
SECTION 2. Basic Indemnification Arrangement.
(A) Except as provided in subsections 2(D) and 2(E) below and, if
required by Section 4 below, upon a determination pursuant to Section 4 in the
specific case that such indemnification is permissible in the circumstances
under this subsection because the individual has met the standard of conduct set
forth in this subsection (A), the Corporation shall indemnify an individual who
is made a party to a proceeding because he is or was a director or Officer
against liability incurred by him in the proceeding if he conducted himself in
good faith and, in the case of conduct in his official capacity, he reasonably
believed such conduct was in the best interest of the Corporation, or in all
other cases, he reasonably believed such conduct was at least not opposed to the
best interests of the Corporation and, in the case of any criminal proceeding,
he had no reasonable cause to believe his conduct was unlawful.
(B) A person's conduct with respect to an employee benefit plan for a
purpose he believes in good faith to be in the interests of the participants in
and beneficiaries of the plan is conduct that satisfies the requirement of
subsection 2(A) above.
(C) The termination of a proceeding by judgment, order, settlement,
or conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the proposed indemnitee did not meet the standard of
conduct set forth in subsection 2(A) above.
(D) The Corporation shall not indemnify a person under this Article
in connection with (i) a proceeding by or in the right of the Corporation,
except for reasonable expenses incurred in connection with the proceeding if it
is determined that such person has met the relevant standard of conduct under
this section, or (ii) with respect to conduct for which such person was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity.
SECTION 3. Advances for Expenses.
(A) The Corporation may advance funds to pay for or reimburse the
reasonable expenses incurred by a director or Officer who is a party to a
proceeding because he is a director or Officer in advance of final disposition
of the proceeding if: (i) such person furnishes the Corporation a written
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affirmation of his good faith belief that he has met the relevant standard of
conduct set forth in subsection 2(A) above or that the proceeding involves
conduct for which liability has been eliminated under the Corporation's Articles
of Incorporation; and (ii) such person furnishes the Corporation a written
undertaking meeting the qualifications set forth below in subsection 3(B),
executed personally or on his behalf, to repay any funds advanced if it is
ultimately determined that he is not entitled to any indemnification under this
Article or otherwise.
(B) The undertaking required by subsection 3(A)(ii) above must be an
unlimited general obligation of the director or Officer but need not be secured
and shall be accepted without reference to financial ability to make repayment.
(C) Authorizations under this Section shall be made: (i) By the Board
of Directors: (a) when there are two or more disinterested directors, by a
majority vote of all disinterested directors (a majority of whom shall for such
purpose constitute a quorum) or by a majority of the members of a committee of
two or more disinterested directors appointed by such a vote; or (b) when there
are fewer than two disinterested directors, by a majority of the directors
present, in which authorization directors who do not qualify as disinterested
directors may participate; or (ii) by the shareholders, but shares owned or
voted under the control of a director who at the time does not qualify as a
disinterested director with respect to the proceeding may not be voted on the
authorization.
SECTION 4. Authorization of and Determination of Entitlement to
Indemnification.
(A) The Corporation shall not indemnify a director or Officer under
Section 2 above unless authorized thereunder and a determination has been made
for a specific proceeding that indemnification of such person is permissible in
the circumstances because he has met the relevant standard of conduct set forth
in subsection 2(A) above; provided, however, that regardless of the result or
absence of any such determination, to the extent that a director or Officer has
been wholly successful, on the merits or otherwise, in the defense of any
proceeding to which he was a party because he is or was a director or Officer,
the Corporation shall indemnify such person against reasonable expenses incurred
by him in connection therewith.
(B) The determination referred to in subsection 4(A) above shall be
made:
(i) If there are two or more disinterested directors, by the
board of directors by a majority vote of all the disinterested
directors (a majority of whom shall for such purpose constitute a
quorum) or by a majority of the members of a committee of two or more
disinterested directors appointed by such a vote;
(ii) by special legal counsel:
(1) selected by the Board of Directors or its committee in
the manner prescribed in subdivision (i); or
(2) If there are fewer than two disinterested directors,
selected by the Board of Directors (in which selection directors
who do not qualify as disinterested directors may participate);
or
11
<PAGE>
(iii) by the shareholders; but shares owned by or voted under the
control of a director who at the time does not qualify as a
disinterested director may not be voted on the determination.
(C) Authorization of indemnification or an obligation to indemnify
and evaluation as to reasonableness of expenses of a director or Officer in the
specific case shall be made in the same manner as the determination that
indemnification is permissible, as described in subsection 4(B) above, except
that if there are fewer than two disinterested directors or if the determination
is made by special legal counsel, authorization of indemnification and
evaluation as to reasonableness of expenses shall be made by those entitled
under subsection 4(B)(ii)(2) above to select counsel.
(D) The Board of Directors, a committee thereof, or special legal
counsel acting pursuant to subsection (B) above or Section 5 below, shall act
expeditiously upon an application for indemnification or advances, and cooperate
in the procedural steps required to obtain a judicial determination under
Section 5 below.
(E) The Corporation may, by a provision in its Articles of
Incorporation or Bylaws or in a resolution adopted or a contract approved by its
Board of Directors or shareholders, obligate itself in advance of the act or
omission giving rise to a proceeding to provide indemnification or advance funds
to pay for or reimburse expenses consistent with this part. Any such obligatory
provision shall be deemed to satisfy the requirements for authorization referred
to in Section 3(C) or Section 4(C).
SECTION 5. Court-Ordered Indemnification and Advances for Expenses. A
director or Officer who is a party to a proceeding because he is a director or
Officer may apply for indemnification or advances for expenses to the court
conducting the proceeding or to another court of competent jurisdiction. After
receipt of an application and after giving any notice it considers necessary,
the court shall order indemnification or advances for expenses if it determines
that:
(i) The director is entitled to indemnification under this part;
or
(ii) In view of all the relevant circumstances, it is fair and
reasonable to indemnify the director or Officer or to advance expenses
to the director or Officer, even if the director or Officer has not met
the relevant standard of conduct set forth in subsection 2(A) above,
failed to comply with Section 3, or was adjudged liable in a if
proceeding referred to in subsections (i) or (ii) of Section 2(D), but
the director or Officer was adjudged so liable, the indemnification
shall be limited to reasonable expenses incurred in connection with
the proceeding, unless the Articles of Incorporation of the Corporation
or a Bylaw, contract or resolution approved or ratified by shareholders
pursuant to Section 7 below provides otherwise.
If the court determines that the director or Officer is entitled to
indemnification or advance for expenses, it may also order the Corporation to
pay the director's or Officer's reasonable expenses to obtain court-ordered
indemnification or advance for expenses.
SECTION 6. Indemnification of Officers and Employees.
12
<PAGE>
(A) Unless the Corporation's Articles of Incorporation provide otherwise,
the Corporation shall indemnify and advance expenses under this Article to an
employee of the Corporation who is not a director or Officer to the same extent,
consistent with public policy, as to a director or Officer.
(B) The Corporation may indemnify and advance expenses under this Article
to an Officer of the Corporation who is a party to a proceeding because he is an
Officer of the Corporation: (i) to the same extent as a director; and (ii) if he
is not a director, to such further extent as may be provided by the Articles of
Incorporation, the Bylaws, a resolution of the Board of Directors, or contract
except for liability arising out of conduct that is enumerated in subsections
(A)(i) through (A)(iv) of Section 7.
The provisions of this Section shall also apply to an Officer who is also a
director if the sole basis on which he is made a party to the proceeding is an
act or omission solely as an Officer.
SECTION 7. Shareholder Approved Indemnification.
(A) If authorized by the Articles of Incorporation or a Bylaw, contract or
resolution approved or ratified by shareholders of the Corporation by a majority
of the votes entitled to be cast, the Corporation may indemnify or obligate
itself to indemnify a person made a party to a proceeding, including a
proceeding brought by or in the right of the Corporation, without regard to the
limitations in other sections of this Article, but shares owned or voted under
the control of a director who at the time does not qualify as a disinterested
director with respect to any existing or threatened proceeding that would be
covered by the authorization may not be voted on the authorization. The
Corporation shall not indemnify a person under this Section 7 for any liability
incurred in a proceeding in which the person is adjudged liable to the
Corporation or is subjected to injunctive relief in favor of the Corporation:
(i) for any appropriation, in violation of his duties, of any
business opportunity of the Corporation;
(ii) for acts or omissions which involve intentional misconduct or a
knowing violation of law;
(iii) for the types of liability set forth in Section 14-2-832 of the
Georgia Business Corporation Code; or
(iv) for any transaction from which he received an improper personal
benefit.
(B) Where approved or authorized in the manner described in subsection
7(A) above, the Corporation may advance or reimburse expenses incurred in
advance of final disposition of the proceeding only if:
(i) the proposed indemnitee furnishes the Corporation a written
affirmation of his good faith belief that his conduct does not constitute
behavior of the kind described in subsection 7(A)(i)-(iv) above; and
(ii) the proposed indemnitee furnishes the Corporation a written
undertaking, executed personally, or on his behalf, to repay any advances
if it is ultimately determined that he is not entitled to indemnification.
13
<PAGE>
SECTION 8. Liability Insurance. The Corporation may purchase and maintain
insurance on behalf of an individual who is a director, officer, employee, or
agent of the Corporation or who, while a director, officer, employee, or agent
of the Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan,
or other entity against liability asserted against or incurred by him in that
capacity or arising from his status as a director, officer, employee, or agent,
whether or not the Corporation would have power to indemnify him against the
same liability under Section 2 or Section 3 above.
SECTION 9. Witness Fees. Nothing in this Article shall limit the
Corporation's power to pay or reimburse expenses incurred by a person in
connection with his appearance as a witness in a proceeding at a time when he is
not a party.
SECTION 10. Report to Shareholders. If the Corporation indemnifies or
advances expenses to a director in connection with a proceeding by or in the
right of the Corporation, the Corporation shall report the indemnification or
advance, in writing, to shareholders with or before the notice of the next
shareholders' meeting.
SECTION 11. Severability. In the event that any of the provisions of this
Article (including any provision within a single section, subsection, division
or sentence) is held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable, the remaining provisions of this Article shall remain
enforceable to the fullest extent permitted by law.
SECTION 12. Indemnification Not Exclusive. The rights of indemnification
provided in this Article VII shall be in addition to any rights which any such
director, Officer, employee or other person may otherwise be entitled by
contract or as a matter of law.
ARTICLE VIII
AMENDMENTS OF BYLAWS
The Board of Directors shall have the power to alter, amend or repeal the
Bylaws or adopt new Bylaws, but any Bylaws adopted by the Board of Directors may
be altered, amended or repealed and new Bylaws adopted by the shareholders.
Action by the Directors with respect to the Bylaws shall be taken by an
affirmative vote of a majority of all of the Directors then elected and serving,
unless a greater vote is required by law, the Articles of Incorporation or these
Bylaws.
ARTICLE IX
EMERGENCY TRANSFER OF RESPONSIBILITY
SECTION 1. Emergency Defined. In the event of a national emergency
threatening national security or a major disaster declared by the President of
the United States or the person performing his functions, which directly or
severely affects the operations of the Corporation, the officers and employees
of this Corporation will continue to conduct the affairs of the Corporation
under such guidance from the
14
<PAGE>
Directors as may be available except as to matters which by law or regulation
require specific approval of the Board of Directors and subject to conformance
with any applicable laws, regulations, and governmental directives during the
emergency.
SECTION 2. Officers Pro Tempore. The Board of Directors shall have the
power, in the absence or disability of any officer, or upon the refusal of any
officer to act as a result of said national emergency directly and severely
affecting the operations of the Corporation, to delegate and prescribe such
officer's powers and duties to any other officer, or to any Director.
In the event of a national emergency or state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
this Corporation by its Directors and officers as contemplated by the Bylaws,
any two or more available members or alternate members of the then incumbent
Executive Committee shall constitute a quorum of such Committee for the full
conduct and management of the Corporation in accordance with the provisions of
Articles II and III of the Bylaws. If two members or alternate members of the
Executive Committee cannot be expeditiously located, then three available
Directors shall constitute the Executive Committee for the full conduct and
management of the affairs and business of the Corporation until the then
remaining Board can be convened. These provisions shall be subject to
implementation by resolutions of the Board of Directors passed from time to
time, and any provisions of the Bylaws (other than this Section) and any
resolutions which are contrary to the provisions of this Section or the
provisions of any such implementary resolutions shall be suspended until it
shall be determined by any such interim Executive Committee acting under this
Section that it shall be to the advantage of this Corporation to resume the
conduct and management of its affairs and business under all of the other
provisions of these Bylaws.
SECTION 3. Officer Succession. If, in the event of a national emergency or
disaster which directly and severely affects the operations of the Corporation,
the Chief Executive Officer cannot be located expeditiously or is unable to
assume or to continue normal duties, then the authority and duties of the office
shall be automatically assumed, without Board of Directors action, in order of
title, and subject only to willingness and ability to serve, by the Chairman of
the Board, President, Vice Chairman, Executive Vice President, Senior Vice
President, Vice President, Corporate Secretary or their successors in office at
the time of the emergency or disaster. Where two or more officers hold
equivalent titles and are willing and able to serve, seniority in title controls
initial appointment. If, in the same manner, the Corporate Secretary or
Treasurer cannot be located or is unable to assume or continue normal duties,
the responsibilities attached thereto shall, in like manner as described
immediately above, be assumed by any Executive Vice President, Senior Vice
President, or Vice President. Any officer assuming authority and position
hereunder shall continue to serve until the earlier of his resignation or the
elected officer or a more senior officer shall become available to perform the
duties of the position of Chief Executive Officer, Corporate Secretary, or
Treasurer.
SECTION 4. Certification of Authority. In the event of a national
emergency or disaster which directly and severely affects the operations of the
Corporation, anyone dealing with this Corporation shall accept a certification
by the Corporate Secretary or any three officers that a specified individual is
acting as Chairman of the Board, Chief Executive Officer, President, Corporate
Secretary, or Treasurer, in accordance with these Bylaws; and that anyone
accepting such certification shall continue to consider it in force until
notified in writing of a change, such notice of change to carry the signature of
the Corporate Secretary or three officers of the Corporation.
15
<PAGE>
SECTION 5. Alternative Locations. In the event of a national emergency or
disaster which destroys, demolishes, or renders the Corporation's offices or
facilities unserviceable, or which causes, or in the judgment of the Board of
Directors or the Executive Committee probably will cause, the occupancy or use
thereof to be a clear and imminent hazard to personal safety, the Corporation
shall temporarily lease or acquire sufficient facilities to carry on its
business as may be designated by the Board of Directors. Any temporarily
relocated place of business of this Corporation shall be returned to its legally
authorized location as soon as practicable and such temporary place of business
shall then be discontinued.
SECTION 6. Amendments to Article IX. At any meeting called in accordance
with Section 2 of this Article IX, the Board of Directors or Executive
Committee, as the case may be, may modify, amend or add to the provisions of
this Article IX so as to make any provision that may be practical or necessary
for the circumstances of the emergency.
ARTICLE X
BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS
All of the requirements of Article 11A of the Georgia Business Corporation
Code (currently codified in Sections 14-2-1131 through 14-2-1133 thereof), as
may be in effect from time to time (the "Business Combination Statute"), shall
apply to all "business combinations" (as defined in Section 14-2-1131 of the
Georgia Business Corporation Code) involving the Corporation. The requirements
of the Business Combination Statute shall be in addition to the requirements of
Article XI of the Corporation's Articles of Incorporation. Nothing contained in
the Business Combination Statute shall be deemed to limit the provisions
contained in Article XI of the Corporation's Articles of Incorporation, and
nothing contained in Article XI of the Corporation's Articles of Incorporation
shall be deemed to limit the provisions contained in the Business Combination
Statute.
ARTICLE XI
INSPECTION OF BOOKS AND RECORDS
The Board of Directors shall determine whether and to what extent the
accounts and books of the Corporation, or any of them, other than the share
records, shall be open to the inspection of shareholders, and no shareholder
shall have any right to inspect any account or books or document of the
Corporation except as conferred by law or by resolution of the shareholders or
the Board of Directors. Without prior approval of the Board of Directors in
their discretion, the right of inspection set forth in Section 14-2-1602(c) of
the Georgia Business Corporation Code shall not be available to any shareholder
owning two (2%) percent or less of the shares outstanding.
16
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>dex103.txt
<DESCRIPTION>EXHIBIT 10.3
<TEXT>
<PAGE>
Exhibit 10.3
February 14, 2001
- --------------------------------------------------------------------------------
SUNTRUST
SUMMARY OF MODIFICATIONS TO THE SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
- --------------------------------------------------------------------------------
The Compensation Committee of the Board of Directors of SunTrust Banks, Inc.
approved a recommendation presented by the Human Resources staff to amend the
SunTrust Supplemental Executive Retirement Plan (SERP). The purpose of the
amendment to the plan is to provide for a second tier SERP benefit targeted at
50% of a covered executive's final average covered compensation. The Committee
also approved a second recommendation to add 13 executives as participants in
the amended SERP at the second tier SERP benefit level. The Committee also
approved specific plan design features that are summarized below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PROVISION RECOMMENDATION COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Purpose . To deliver competitive retirement benefits that help The definition of covered compensation for the
attract and retain key talent and help mitigate the qualified retirement plan includes base pay only. More
erosion of retirement income benefits resulting from recently, a greater percentage of an executive's pay
statutory limitations is being delivered in the form of variable
. To provide a retirement benefit which more compensation that is directly linked to organization
appropriately takes into account the total cash and individual performance. Therefore, it is appropriate
compensation of covered executives to include variable pay in the definition of covered
compensation to ensure appropriate and competitive levels
of retirement income are being provided to covered
executives.
- ------------------------------------------------------------------------------------------------------------------------------------
Participation Add 13 participants. Other companies in our industry group of comparable
size would typically have 60+ participants.
Discretionary, but with strong consideration given to:
. Grades 52+ (midpoint $170,000) . 5 SunTrust executives currently in SERP
. Historically high contributors . Mr. Wells currently in SunTrust SERP per Merger
. Future senior level contribution anticipated Agreement
. Management level: primarily Management committee with . 13 Crestar executives are grandfathered participants
consideration also given to LOB heads, STI functional in Crestar SERP (5 have pulled chute including one
heads, Bank CEOs and key line managers of largest banks who is retiring soon)
. Additional 13 executives to be covered
Even with a total of 20-30 participants, SunTrust is
still conservative with respect to the total number of
covered executives when compared to our industry peer
group.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PROVISION RECOMMENDATION COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Covered Includes base pay and short term cash incentive The current SERP provisions include one year
Compensation awards. Covered compensation is the sum of the of PUP in the definition of covered compensation
participants' base pay plus the annual cash due to the historical compensation mix. Since we
incentive award for a calendar year. The annual have recently shifted some portion of compensation
cash incentive award is included in the calendar opportunity for PUP to MIP, it is appropriate to only
year during which the award was earned and not the include MIP for new participants on a prospective
calendar year during which it is paid. basis. Survey data indicates that PUP awards are
typically excluded from the definition of covered
compensation. If a FIP participant becomes a SERP
participant, should consider limiting the amount of a
FIP award that can be taken into consideration when
computing final average covered compensation.
- ------------------------------------------------------------------------------------------------------------------------------------
Final Final average compensation will be the sum of the The SERP will be amended to provide that the
Average three full calendar years of covered compensation definition of final average compensation will
Compensation out of the five full calendar years immediately apply to Tier I SERP participants also. However, the
preceding the executive's retirement, that will definition of covered compensation for Tier I SERP
produce the highest average. participants will not change. Should consider capping
the amount of a FIP award at equivalent MIP level if
a FIP particpant becomes a covered executive.
- ------------------------------------------------------------------------------------------------------------------------------------
Benefit 2% x years of creditable service not to exceed Credit given for all creditable SunTrust service
Accrual 25 years x covered compensation
Formula
- ------------------------------------------------------------------------------------------------------------------------------------
Target Benefit 50% of final average covered compensation Current SunTrust SERP target retirement benefit
Amount Offset by: is 60% of final average covered compensation.
(Income . Benefits payable from SunTrust Retirement Plan This was adopted in mid-eighties to be compatible
Replacement . Benefits payable from SunTrust ERISA Excess Plan with the qualified retirement plan for employees.
Ratio) . Benefits payable under any previous employer's This plan has since been changed. 55% is the
retirement plans (qualified and/or non-qualified) market median for a full-service executive with 30
. Benefits payable from Social Security years of service. Crestar uses 50% (but also
uses highest average comp in three years).
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PROVISION RECOMMENDATION COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Payment The normal form of payment would continue to be a single The grandfathered PBGC rate would not be available
lump sum distribution. Other payment options, as provided to new participants for purposes of calculating the
for in the retirement plan, would be available at the lump sum value of the accrued SERP benefit.
executive's election
.
- ------------------------------------------------------------------------------------------------------------------------------------
Vesting Age 60 with 10 years of service Current SERP specifies age 60. There have been no
external hires added to the SERP. Recently, as a
Immediate vesting as a result of death, disability, or in precautionary measure, all current SERP
the event of a change in control participants were vested to avoid the excise tax on
excess parachute attributable to accelerated vesting
in the event of a change in control.
Age 60 provides a "Golden Handcuff" until the
executive attains age 60, and helps avoid some of the
excise tax on excess parachute payments in the event of
a CIC.
If an external hire becomes a named participant in the
SERP, a determination could be made regarding the
appropriateness of this vesting schedule or whether, on
an individual basis, we designate a specific amount of
service or special vesting schedule as appropriate.
- ------------------------------------------------------------------------------------------------------------------------------------
Early Eligible at age 60 with 10 years of service Same early retirement reduction factors as qualified
Retirement pension plan.
SERP service factor (which acts as an early
retirement reduction) will not apply to new
participants.
- ------------------------------------------------------------------------------------------------------------------------------------
Survivor Pre-retirement: joint & 50% survivor annuity
Benefit Post-retirement: none (unless executive had elected a
joint and survivor payment option)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
PROVISION RECOMMENDATION COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Change in Control Continue with current CIC provisions: All SERP participants will also be provided
. Within 3 years of a change in control, if there is with a change in control agreement. Therefore,
involuntary termination or voluntary termination for it is possible that all change in control
good reason, SERP compensation is to be based on the protections, benefits enhancements and benefit
highest compensation for any 12 month period during continuation provisions can be addressed in the
the last five years; SERP service is to be increased change in control agreements and section 13 of
by the lesser of 36 full months or the number of the SERP can be deleted.
months between the normal retirement date and the
date of termination. The SERP distribution is to be
paid in a lump sum as soon as practical after a change
in control.
- ------------------------------------------------------------------------------------------------------------------------------------
Special Include consulting, non-compete, and
Provisions non-solicitation provisions both from a business
perspective as well as to minimize impact of the excise
tax on excess parachute payments in the event of a
change in control.
- ------------------------------------------------------------------------------------------------------------------------------------
Dispute Resolution . Require binding arbitration to resolve disputes
. Losing party pays attorneys fees
- ------------------------------------------------------------------------------------------------------------------------------------
Other Eligibility for an executive to receive benefits under the This has been an issue with a Crestar
SERP will not be construed to be "retirement" under the participant and we want this to be clearly
SunTrust Retirement Plan for purposes of establishing stated.
eligibility for other benefits.
- ------------------------------------------------------------------------------------------------------------------------------------
Cost Existing corporate owned life insurance
policies could potentially provide sufficient
underlying assets to offset the financial
statement expense and balance sheet
liabilities attributable to the emerging
benefit obligations associated with adding
participants to the SERP.
- ------------------------------------------------------------------------------------------------------------------------------------
Rabbi Trust Continue to have SERP secured by a Rabbi trust
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
SERP TIER 1
PURPOSE
The SunTrust Banks, Inc. Supplemental Executive Retirement Plan (SERP) is
designed to provide a targeted level of post retirement income to certain key
executives to supplement the benefits provided under the SunTrust Retirement and
ERISA Excess Plans. This Plan is intended to better enable the Company to
deliver more competitive levels of total retirement income to its senior
executives and to aid in the recruitment and retention of critical executive
talent.
PARTICIPANTS
Participation in the SERP is limited to a highly select group of key executives
who have significant impact upon the long-term growth and profitability of the
Company and who are designated as SERP Participants by the Compensation
Committee.
SERP BENEFIT
The SERP Benefit is an annual retirement income benefit equal to 60% of the
Participant's SERP Covered Compensation both earned and paid immediately prior
to retirement. The SERP Benefit is reduced by any benefits payable to the
Participant under the SunTrust Retirement Plan, Social Security, the SunTrust
ERISA Excess Plan and certain other executive retirement arrangements. The
benefit is calculated at the Participant's normal or early retirement date
followed by a one-time adjustment to occur in January after the Participant's
Management Incentive Plan (MIP) and Performance Unit Plan (PUP) awards are paid.
SERP COVERED COMPENSATION
SERP Covered Compensation is sum of the three full calendar years of a
Participant's base salary, annual MIP award and PUP award payment out of the
five full calendar years of a Participant's base salary, annual MIP award and
PUP award payment immediately preceding the Participant's normal or early
retirement date that will produce the highest average.
VESTING
A Participant becomes 100% vested in his/her accrued SERP Benefit after the
completion of 10 years of service and the attainment of age 60.
RETIREMENT DATES
The SERP Benefit becomes fully accrued and payable to a Participant if
retirement occurs at age 65 or later. Early retirement can occur at age 60 or
thereafter, with the Participant receiving the benefit accrued up to the date of
his/her early retirement actuarially adjusted for early commencement of payment.
The early retirement SERP Benefit is calculated by applying a SERP service
factor to the accrued SERP Benefit. The SERP service factor is derived by
dividing the Participant's actual months of service at the early retirement date
by his/her projected months of service had he/she remained with the Company
until the normal retirement date. This factor is applied to the accrued SERP
Benefit to obtain the early retirement SERP Benefit. No SERP benefit is payable
to a Participant if retirement or termination occurs prior to the attainment of
age 60.
<PAGE>
DISABILITY PROVISION
In the event a Participant becomes disabled prior to retirement, the
Participant will continue to accrue a SERP Benefit while disabled until the
Retirement Plan benefit is payable or recovery, whichever is earlier. SERP
Compensation during any period of disability when compensation is not
earned or paid will be assumed at the same rate in effect at the time
disability began. The benefit becomes payable under the SERP at age 65 or,
if early retirement is elected under the Retirement Plan, at the early
retirement date.
SURVIVOR BENEFIT
In the event of the death of a Participant prior to retirement, a survivor
benefit will be paid to the Participant's spouse, or if unmarried, the
named beneficiary under the SunTrust Retirement Plan. The SERP Survivor
Benefit is equal to the accrued benefit that would have been payable to the
Participant's spouse under a 100% joint and survivor annuity option if the
Participant had retired on the date immediately preceding his/her death.
The SERP Survivor Benefit will be paid in a lump sum as soon as practicable
following the Participant's death. The computation of the SERP Survivor
Benefit will be based on the survivor's annuity amount at the later of the
date the deceased Participant would have otherwise attained age 55 or the
actual date of the Participant's death. If the SERP Survivor Benefit is
paid before age 60, it is actuarially reduced in the same manner as
retirement payments under the SunTrust Retirement Plan.
PAYMENT OPTIONS
Upon retirement, the SERP Benefit will be paid from the general assets of the
Company in the form of a single lump sum distribution. A Participant may make a
written election to have his/her benefit paid in any form of benefit available
under the Retirement Plan provided this election is made at least one year
before the benefit is to be paid under this plan. For grandfathered participants
designated prior to 1994, lump sum payments will be calculated using the PBGC
interest rate (rather than the GATT interest rate used in the Retirement Plan).
At such time that the PBGC rate is no longer published, a phantom PBGC rate will
be used, as outlined in the plan document.
TAX CONSEQUENCES
The SERP is an unfunded, nonqualified deferred compensation plan. Distributions
are treated as ordinary income. Required federal income tax, state income tax
(if applicable) and FICA payroll taxes will be withheld according to the
withholding tables in effect at the time of retirement.
FORFEITURE AND NONCOMPETE
The Compensation Committee may require a Participant to execute a release and
waiver of claims form as a condition of receiving benefits under the SERP. The
Committee may also forfeit, suspend or seek to recover SERP Benefit payments for
a Participant's violation of applicable civil or criminal laws, corporate rules
of conduct or engaging in activity which the Committee determines is detrimental
to the interests of the Company. The release also serves as a non-compete
agreement between Participant and the Company stating that the Participant
agrees not to engage in any business with a direct competitor of the Company.
CHANGE IN CONTROL PROTECTION
In the event of a Change in Control and the constructive termination of the
---
Participant's employment within three years of the change in control date, the
Participant's SERP Benefit will vest automatically and will be calculated based
upon the following provisions:
. 36 months will be added to the SERP service factor (or if less the number of
months to the Participant's 65/th/ birth date)
. SERP Compensation will be calculated using the highest 12 months out of the
last 60 months.
. The benefit will be payable immediately with a reduction factor of 3% for
every year below age 60.
. The payment will automatically be made as a lump sum.
<PAGE>
Additionally, the Participant will continue to receive health, life and
disability benefit coverage for up to two years after termination.
The SERP Benefit is secured by a rabbi trust (grantor trust). The purpose of
this trust is to provide for the funding of the projected SERP Benefit in the
event of a change in control. In addition, the trust would provide protection
against a refusal to pay by future management. The trust would become
irrevocable upon a change in control. This trust does not provide protection
against insolvency or regulatory intervention.
***
This is a non-technical summary of the Plan. The Plan Document is the
authoritative source for all questions on the SERP. A copy of the Plan Document
can be obtained by calling Donna Daniel at (404) 827-6163. The Compensation
Committee administers the Plan and has the authority to amend it prospectively
or terminate the Plan at any time.
Revised February 15, 2001 (SERP Tier1)
<PAGE>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
SERP TIER 2
PURPOSE
The SunTrust Banks, Inc. Supplemental Executive Retirement Plan (SERP) is
designed to provide a targeted level of post retirement income to certain key
executives to supplement the benefits provided under the SunTrust Retirement and
ERISA Excess Plans. This Plan is intended to better enable the company to
deliver more competitive levels of total retirement income to its senior
executives and to aid in the recruitment and retention of critical executive
talent.
PARTICIPANTS
Participation in the SERP is limited to a highly select group of key executives
who have significant impact upon the long-term growth and profitability of the
Corporation and are designated as SERP Participants by the Compensation
Committee.
SERP BENEFIT
The SERP Benefit is an annual retirement income benefit equal to a service
related percentage of a Participant's SERP Covered Compensation. The SERP
benefit formula is 2% X a Participant's years of service up to 25 years X a
Participant's SERP Covered Compensation. Therefore, a SERP Participant with 25
or more years of service will have a SERP benefit factor of 50% (the target
benefit level). The SERP Benefit is reduced by any benefits payable to the
Participant under the SunTrust Retirement Plan, Social Security, the SunTrust
ERISA Excess Plan and certain other executive retirement arrangements.
SERP COVERED COMPENSATION
SERP Covered Compensation is defined as the sum of the three full calendar years
of a Participant's base salary and annual MIP award, out of the five full
calendar years of a Participant's base salary and annual MIP award immediately
preceding the Participant's normal or early retirement date, that will produce
the highest average. The annual MIP award is included in the Participant's
compensation for the year in which it is earned and not the year in which it is
paid.
VESTING
A Participant becomes 100% vested in his/her accrued SERP Benefit after
completion of 10 years of service and the attainment of age 60.
RETIREMENT DATES
The SERP Benefit becomes fully accrued and payable to a Participant if
retirement occurs at age 65 or later. Early retirement can occur at age 60 or
thereafter, with the Participant receiving the benefit accrued up to the date of
his/her early retirement actuarially adjusted for early commencement of payment.
The accrued SERP Benefit as of the early retirement date will be reduced by the
same factors used to calculate early retirement benefits under the Retirement
Plan. No SERP benefit is payable to a Participant if retirement or termination
occurs prior to the attainment of age 60.
DISABILITY PROVISION
In the event a Participant becomes disabled prior to retirement, the Participant
will continue to accrue a SERP Benefit while disabled until the Retirement Plan
benefit is payable or recovery, whichever is earlier. SERP Compensation during
any period of disability when compensation is not earned or paid will be assumed
at the same rate in effect at the time disability began. The benefit becomes
payable under the SERP at age 65 or, if early retirement is elected under the
Retirement Plan at the early retirement date.
<PAGE>
SURVIVOR BENEFIT
In the event of the death of a Participant prior to retirement, a survivor
benefit will be paid to the Participant's spouse, or if unmarried, the named
beneficiary under the SunTrust Retirement Plan. The SERP Survivor Benefit is
equal to the accrued benefit that would have been payable to the Participant's
spouse under a 50% joint and survivor annuity if the Participant had retired on
the date immediately preceding his/her death. The SERP Survivor Benefit will be
paid in a lump sum as soon as practicable after the Participant's death. The
computation of the SERP Survivor Benefit will be based on the survivor's annuity
amount at the later of the date the Participant would have otherwise attained
the age of 55 or the actual date of the Participant's death. If the SERP
Survivor Benefit is paid before age 60, it is actuarially reduced in the same
manner as retirement payments under the SunTrust Retirement Plan.
PAYMENT OPTIONS
Upon retirement, the SERP Benefit will be paid from the general assets of the
Company in the form of a single lump sum distribution. A Participant may make a
written election to have his/her benefit paid in any form of benefit available
under the Retirement Plan provided the election is made at least one year before
the benefit is to be paid under this plan.
TAX CONSEQUENCES
The SERP is an unfunded, nonqualified deferred compensation plan. Distributions
are treated as ordinary income. Federal income tax, state income tax (if
applicable) and FICA payroll taxes will be withheld according to withholding
tables in effect at the time of retirement.
FORFEITURE AND NONCOMPETE
The Compensation Committee may require a Participant to execute a release and
waiver of claims form as a condition of receiving benefits under the SERP. The
Committee may also forfeit, suspend or seek to recover SERP Benefit payments for
a Participant's violation of applicable civil or criminal laws, corporate rules
of conduct or engaging in activity which the Committee determines is detrimental
to the interests of the Company. The release also serves as a non-compete
agreement between Participant and the Company stating that the Participant
agrees not to engage in any business with a direct competitor of the Company.
CHANGE IN CONTROL PROTECTION
In the event of a Change in Control and the constructive termination of the
---
Participant's employment within two years of the change in control date, the
SERP Benefit will vest automatically. And, depending upon the age and service of
the Participant at the date of termination, the SERP Benefit will be calculated
in the same manner as an early retirement or vested terminated retirement
benefit under the Retirement Plan. The payment of the SERP Benefit will
automatically be made in the form of a single lump sum distribution.
The SERP Benefit is secured by a rabbi trust (grantor trust). The purpose of
this trust is to provide for the funding of the projected SERP benefit in the
event of a change in control. In addition, the trust would provide protection
against a refusal to pay by future management. The trust would become
irrevocable upon a change in control. This trust does not provide protection
against insolvency or regulatory intervention.
***
This is a non-technical summary of the Plan. The Plan Document is the
authoritative source for all questions on the SERP. A copy of the Plan Document
can be obtained by calling Donna Daniel at (404) 827-6163. The Compensation
Committee administers the Plan and has the authority to amend it prospectively
or terminate the Plan at any time.
Revised February 15, 2001
SERP Tier 2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.8
<SEQUENCE>5
<FILENAME>dex108.txt
<DESCRIPTION>EXHIBIT 10.8
<TEXT>
<PAGE>
Exhibit 10.8
SunTrust Banks, Inc.
Deferral Plan Committee
December 31, 2001
Amendment Number One to the
SunTrust Banks, Inc. 401(k) Excess Plan
Amended and Restated as of July 1, 1999
WHEREAS, SunTrust Banks, Inc. (the "Corporation") has adopted and currently
sponsors the SunTrust Banks, Inc. 401(k) Excess Plan, as amended and restated
effective July 1, 1999 (the "Excess Plan"); and
WHEREAS, the Compensation Committee of the Corporation's Board of Directors
has sole discretionary authority pursuant to Section 8.1 of the Excess Plan for
the operation, interpretation and administration of the Excess Plan and is
authorized and empowered pursuant to Section 9.8 to amend or terminate the
Excess Plan; and
WHEREAS, the Compensation Committee pursuant to paragraph 8.1.5 of the
Excess Plan has delegated authority to the Deferral Plan Committee serving under
the SunTrust Banks, Inc. Deferred Compensation Plan from time to time to handle
the day-to-day administration of the Excess Plan and to make such determinations
and to adopt such forms and rules and regulations as the Deferral Plan Committee
may deem necessary or appropriate to carry out the administrative duties of the
Compensation Committee; and
WHEREAS, the Deferral Plan Committee has determined that the Excess Plan
should be amended to reflect certain benefit administrative changes occurring in
2002.
NOW THEREFORE, BE IT RESOLVED That Amendment Number One to the Excess Plan,
as set forth in the attached Exhibit 1, is adopted effective January 1, 2002.
IN WITNESS WHEREOF, the Deferral Plan Committee has caused this Amendment
Number One to be executed by its duly authorized member.
EXECUTED this 31/st/ day of December, 2001.
DEFERRAL PLAN COMMITTEE ATTEST
By: /s/ Mary S. Harrell By: /s/ Margaret U. Hodgson
-------------------------------------- ----------------------------------
Title: First V. P., SunTrust Banks, Inc. Title: Assistant Corporate Secretary
----------------------------------- -------------------------------
<PAGE>
Exhibit 1
AMENDMENT NUMBER ONE TO THE
SUNTRUST BANKS, INC. 401(k) EXCESS PLAN
AS AMENDED AND RESTATED EFFECTIVE JULY 1, 1999
The SunTrust Banks, Inc. 401(k) Excess Plan, as amended and restated
effective July 1, 1999, is amended as set forth below, effective as of January
1, 2002.
1. The introductory paragraph of paragraph 2.1 is amended to read as follows
to reflect a change in the deferral rate for the Excess Plan:
2.1 Election. An Eligible Employee who wishes to become a Participant in
--------
this Excess Plan must file an initial Deferral Election Form on or
before the Election Date, designating the amount of elective
contribution to be made to his Account for the Plan Year, which shall
be expressed as a whole percentage of his Eligible Compensation
(between one percent (1%) and fifteen percent (15%) unless otherwise
----------------
announced by the Compensation Committee). If an Eligible Employee
fails to designate a contribution rate, his contribution rate
hereunder shall be the same rate he has elected under the 401(k) Plan
as of the Election Date.
2. Paragraph 3.5 is amended to read as follows:
3.5 Matching Contributions made after June 30, 1999. That portion of a
-----------------------------------------------
Participant's Account attributable to Employer matching contributions
made after June 30, 1999 shall be deemed at all times to be invested
in Employer Stock, except as provided in paragraph 4.3 for Employer
--------------------------------------------------
matching contributions that are tentatively credited to a
---------------------------------------------------------
Participant's Account.
---------------------
3. Paragraph 4.3 of the Excess Plan is amended to read as follows to reflect a
change in the matching contributions under the Excess Plan:
Matching Contributions. Subject to the compensation limits set forth
----------------------
in paragraph 2.3, each Participant's Account shall be credited with
Employer matching contributions based on the rate of Matching
Contribution in effect under the 401(k) Plan at the relevant time and
the amount of Eligible Compensation that is deferred under this Excess
Plan in accordance with the Participant's Deferral Election Form and
---
subject to adjustments by the Committee. Matching contributions under
---------------------------------------------------------------------
this Plan shall be credited to Participants' Accounts as of the dates
---------------------------------------------------------------------
that Matching Contributions are made to the 401(k) Plan or such other
---------------------------------------------------------------------
times as the Compensation Committee may determine in its sole
-------------------------------------------------------------
discretion. For any Plan Year beginning on and after January 1, 2002,
---------------------------------------------------------------------
the Committee may determine in its sole discretion that Employer
----------------------------------------------------------------
matching contributions for the Plan Year under this Plan shall be
-----------------------------------------------------------------
subject to a year-end or more frequent adjustment process. For any
------------------------------------------------------------------
such year in which the adjustment process is in effect, matching
----------------------------------------------------------------
contributions under this Plan shall be tentatively credited to
--------------------------------------------------------------
<PAGE>
Participants' Accounts and shall be deemed to be invested in a money
--------------------------------------------------------------------
market fund or other Investment Fund selected by the Committee that
-------------------------------------------------------------------
provides fixed earnings until the adjustment process is complete. At
--------------------------------------------------------------------
the end of the Plan Year or other more frequent adjustment interval,
--------------------------------------------------------------------
the Compensation Committee, in its sole and complete discretion, may
--------------------------------------------------------------------
reduce matching contributions for any Participant whose matching
----------------------------------------------------------------
contributions exceed the maximum permissible amount determined by the
---------------------------------------------------------------------
Committee for the Plan Year or other interval and may allocate
--------------------------------------------------------------
additional matching contributions to each Participant who does not
------------------------------------------------------------------
receive the maximum permissible amount of matching contribution under
---------------------------------------------------------------------
this Plan for the Plan Year or other interval. When the adjustment
------------------------------------------------------------------
process is complete, the matching contributions as adjusted (which
------------------------------------------------------------------
adjustment may be zero) shall be credited to Participants' Accounts
-------------------------------------------------------------------
and then deemed to be invested in Employer Stock. Any excess matching
---------------------------------------------------------------------
contributions shall be deemed a forfeiture.
-------------------------------------------
4. Paragraph 5.1 is amended to read as follows:
5.1 Generally. Except as provided in paragraph 4.3 with respect to excess
--------- ------------------------------------
matching contributions which are deemed a forfeiture and in paragraph
--------------------------------------------------------
5.2, a Participant's interest in his benefit under the Excess Plan is
one hundred percent (100%) vested and nonforfeitable at all times.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.36
<SEQUENCE>6
<FILENAME>dex1036.txt
<DESCRIPTION>EXHIBIT 10.36
<TEXT>
<PAGE>
Exhibit 10.36
CRESTAR FINANCIAL CORPORATION
DIRECTORS' EQUITY PROGRAM
Effective January 1, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. PURPOSE ...................................................... 1
2. DEFINITIONS .................................................. 1
3. EQUITY AWARDS ................................................ 4
4. DEFERRAL ELECTION ............................................ 4
5. VESTING ...................................................... 5
6. CREDITS TO ACCOUNTS .......................................... 6
7. DISTRIBUTION ................................................. 7
8. HARDSHIP DISTRIBUTIONS ....................................... 8
9. COMPANY'S OBLIGATION ......................................... 8
10. CONTROL BY PARTICIPANT ....................................... 9
11. CLAIMS AGAINST PARTICIPANT'S DEFERRED STOCK BENEFIT .......... 9
12. AMENDMENT OR TERMINATION ..................................... 9
13. NOTICES ...................................................... 10
14. WAIVER ....................................................... 10
15. CONSTRUCTION ................................................. 10
16. EFFECTIVENESS ................................................ 10
</TABLE>
<PAGE>
1. PURPOSE. The Crestar Financial Corporation Directors' Equity Program is
-------
intended to assist the Company in promoting a greater identity of interest
between the Company's non-employee directors and its shareholders and to
assist the Company in attracting and retaining non-employee directors by
affording Participants an opportunity to share in the future success of the
Company. The Plan is also intended to constitute a deferred compensation
program for corporate directors' fees.
2. DEFINITIONS. The following definitions apply to this Plan and to the
-----------
Deferral Election Forms.
(a) Account means that bookkeeping record established for each Participant
-------
and is the sum of the Participant's Equity Award Account and his
Elective Deferral Account. An Account is established only for purposes
of measuring a Deferred Stock Benefit and not to segregate assets or
to identify assets that may or must be used to satisfy a Deferred
Stock Benefit.
(b) Administrator means the Company's Director of Human Resources.
-------------
(c) Beneficiary or Beneficiaries means a person or persons or other entity
----------- -------------
designated on a Beneficiary Designation Form by a Participant as
allowed in subsection 7(c) to receive a Deferred Stock Benefit. If
there is no valid designation by the Participant, or if the designated
Beneficiary or Beneficiaries fail to survive the Participant or
otherwise fail to take the benefit, the Participant's Beneficiary is
the first of the following who survives the Participant: the
Participant's spouse (the person legally married to the Participant
when the Participant dies); the Participant's surviving issue, per
stirpes; the Participant's parents and the Participant's estate.
(d) Beneficiary Designation Form means a form acceptable to the
----------------------------
Administrator or his designee used by a Participant according to this
Plan to name his or her Beneficiary or Beneficiaries who will receive
the Participant's Deferred Stock Benefit under this Plan upon the
Participant's death.
(e) Board means the Board of Directors of the Company.
-----
(f) Company means Crestar Financial Corporation and any successor business
-------
by merger, purchase, or otherwise and any other business that
maintains the Plan.
(g) Compensation means a Director's Retainer Fee and Stock Award for the
------------
Deferral Year.
(h) Deferral Election Form means a document governed by the provisions of
----------------------
section 4 of this Plan, including the portion that is the Distribution
Election Form and the related Beneficiary Designation Form that
applies to all of that Participant's Deferred Stock Benefit under the
Plan.
(i) Deferral Year means a calendar year for which a Director has submitted
-------------
a Deferral
<PAGE>
-2-
Election Form that is acceptable to the Administrator.
(j) Deferred Stock Benefit means the benefit that a Participant is
----------------------
entitled to receive under this Plan.
(k) Director means a duly elected or appointed member of the Board who is
--------
not an employee of the Company, excluding any member of the Board who
is required to transfer, assign or pay his or her Retainer Fee to the
member's employer or firm.
(l) Distribution Election Form means a form used by a Participant
--------------------------
according to this Plan to establish the frequency of distributions
from his or her Elective Deferral Account. If a Participant has no
Distribution Election Form that is operative according to this Plan,
distribution of that Deferred Stock Benefit is governed by section 7
of this Plan.
(m) Effective Date means January 1, 1996.
--------------
(n) Election Date means the date established by this Plan as the date on
-------------
or before which a Director must submit a valid Deferral Election Form
to the Administrator. For each Deferral Year, the Election Date is
December 31 of the preceding calendar year. However, for an individual
who becomes a Director during a Deferral Year, the Election Date is
the thirtieth day following the date that he or she becomes a
Director. Despite the three preceding sentences, the Administrator may
set an earlier date as the Election Date for any Deferral Year.
(o) Elective Deferral Account means that bookkeeping record established
-------------------------
for each Participant who elects to defer his or her Retainer Fee,
Stock Award, or both for a Deferral Year. An Elective Deferral Account
is established only for purposes of measuring that portion of a
Deferred Stock Benefit attributable to deferred Retainer Fees, Stock
Awards, or both and not to segregate assets or to identify assets that
may or must be used to satisfy a Deferred Stock Benefit. An Elective
Deferral Account will be credited with the Participant's Compensation
deferred according to a Deferral Election Form and according to
section 6 of this Plan. An Elective Deferral Account will be credited
periodically with amounts determined under subsection 6(b) of this
Plan.
(p) Equity Award means an award stated with reference to a number of whole
------------
shares of Company common stock that is credited to a Participant's
Equity Award Account in accordance with section 3 of this Plan.
(q) Equity Award Account means that bookkeeping record established for
--------------------
each Participant. An Equity Award Account is established only for
purposes of
<PAGE>
-3-
measuring that portion of a Deferred Stock Benefit attributable to
awards according to section 3 of this Plan and not to segregate assets
or to identify assets that may or must be used to satisfy a Deferred
Stock Benefit. An Equity Award Account will be credited periodically
with amounts determined under subsection 6(b) of this Plan.
(r) Equity Award Date means the Effective Date and each January 1 that is
-----------------
a multiple of the fifth anniversary of the Effective Date. The initial
Equity Award Date of a Participant who becomes a Director after the
-----------------
Effective Date shall be the first day of the month coincident with or
next following the date that the individual becomes a Director.
(s) Fair Market Value means, on any given date, the average (rounded to
-----------------
the nearest one-eighth of a dollar) of the high and low prices of a
share of Company common stock as reported on the New York Stock
Exchange composite tape on such day or, if the Company common stock
was not traded on the New York Stock Exchange on such day, then the
next day that the Company common stock is traded on such exchange, all
as reported by such source as the Administrator may select. If shares
of Company common stock are not then traded on the New York Stock
Exchange, the Fair Market Value shall be determined by the
Administrator using any reasonable method in good faith.
(t) Participant means a member of the Board who is a Director on an Equity
-----------
Award Date or, with respect to any Deferral Year, has a Deferral
Election Form that is operative for that Deferral Year.
(u) Plan means the Crestar Financial Corporation Directors' Equity
----
Program.
(v) Retainer Fee means that portion of a Director's Compensation that is a
------------
fixed cash amount determined without regard to his or her attendance
at meetings.
(w) Stock Award means the number of shares of Company common stock that
-----------
would have been issuable to a Participant under the Crestar Financial
Corporation Directors' Stock Compensation Plan but for the
Participant's election to defer such award under this Plan.
(x) Terminate, Terminating, or Termination, with respect to a Participant,
--------- ----------- -----------
means cessation of his or her relationship with the Company as a
member of the Board whether by death, disability or severance for any
other reason.
(y) Year of Service means a period of twelve consecutive full months of
---------------
service as a member of the Board.
<PAGE>
-4-
3. EQUITY AWARDS. Equity Awards are governed by the provisions of this
-------------
section.
(a) As of the Effective Date and each subsequent Equity Award Date, the
Equity Award Account of each Participant who is then a Director will
be credited with an Equity Award. The Equity Award shall be stated
with respect to a number of whole shares of Company common stock that
has a Fair Market Value as of such date that most nearly equals
$40,000.
(b) The preceding subsection 3(a) to the contrary notwithstanding, the
initial Equity Award for a Director who becomes a Participant after
the Effective Date shall be governed by this subsection 3(b). The
initial Equity Award for a Participant described in the preceding
sentence shall be credited to such Participant's Equity Award Account
as of his or her first Equity Award Date and shall be stated with
respect to a number of whole shares of Company common stock. The
number of whole shares of Company common stock credited to the Equity
Award Account shall be the product of (i) that number of whole shares
of Company common stock that has a Fair Market Value as of such date
that most nearly equals $40,000 and (ii) a fraction, the numerator of
which is the number of whole months preceding the next Equity Award
Date under subsection 3(a) and the denominator of which is 60.
4. DEFERRAL ELECTION. A deferral election is valid when a Deferral Election
-----------------
Form, that is acceptable to the Administrator, is completed, signed by the
electing Director, and received by the Administrator no later than the
applicable Election Date. Deferral elections are governed by the provisions
of this section.
(a) A Director may submit a Deferral Election Form for any Deferral Year
if he or she is a Director at the beginning of that Deferral Year or
becomes a Director during that Deferral Year.
(b) Before each Deferral Year's Election Date, each Director will be
provided with a Deferral Election Form and a Beneficiary Designation
Form. Under the Deferral Election Form for a single Deferral Year, a
Director may elect on or before the Election Date to defer the receipt
of his or her Retainer Fee or his or her Stock Award or both for the
Deferral Year which will be earned and payable after the Election
Date.
(c) Each Distribution Election Form is part of the Deferral Election Form
on which it appears or to which it states that it is related. The
Administrator may allow a Participant to file one Distribution
Election Form for his or her entire Elective Deferral Account or
multiple Distribution Election Forms that each relate to Deferred
Stock Benefits credited to his or her Elective Deferral Account for
one or more Deferral Years. The provisions of section 7 of this Plan
apply to any Deferred Stock Benefit credited to his or her Elective
Deferral Account under this Plan if
<PAGE>
-5-
there is no operative Distribution Election Form for that
Deferred Stock Benefit.
(d) If he or she does so on or before the Election Date for the
Deferral Year, the Administrator may reject any Deferral
Election Form or any Distribution Election Form, or both, and
the Administrator is not required to state a reason for any
rejection. The Administrator may modify any Distribution
Election Form at any time to the extent necessary to comply
with any federal securities laws or regulations. However, the
Administrator's rejection of any Deferral Election Form or any
Distribution Election Form or the Administrator's modification
of any Distribution Election Form must be based upon action
taken without regard to any vote of the Director whose
Deferral Election Form or Distribution Election Form is under
consideration, and the Administrator's rejections must be made
on a uniform basis with respect to similarly situated
Directors. If the Administrator rejects a Deferral Election
Form, the Director must be paid the Compensation he or she
would have been entitled to receive if he or she had not
submitted the rejected Deferral Election Form.
(e) A Director may not revoke a Deferral Election Form after the
Deferral Year begins. Any revocation before the beginning of
the Deferral Year is the same as a failure to submit a
Deferral Election Form or a Distribution Election Form unless
the Director submits a new Deferral Election Form on or before
that Deferral Year's Election Date. Any writing signed by a
Director expressing an intention to revoke his or her Deferral
Election Form that is delivered to the Administrator before
the close of business on the relevant Election Date is a
revocation.
(f) A Director who has not submitted a valid Deferral Election
Form to the Administrator on or before the relevant Election
Date may not defer any part of his or her Compensation for
that Deferral Year under this Plan. The provisions of section
7 govern the distribution of amounts credited to the Elective
Deferral Account of a Director who submits a valid Deferral
Election Form but who fails to submit a valid Distribution
Election Form for that portion of his or her Deferred Stock
Benefit before the relevant Election Date or who otherwise has
no valid Distribution Election Form for that Deferred Stock
Benefit.
5. VESTING. A Participant's interest in his or her Elective Deferral
-------
Account is always 100% vested and nonforfeitable. A Participant whose
service as a member of the Board terminates on account of death or
disability (as determined by the Board in its discretion), shall have a
100% vested and nonforfeitable interest in his or her Equity Award
Account. A Participant whose service as a member of the Board
terminates for reasons other than death or disability shall have a
vested and nonforfeitable interest in his or her Equity Award Account
in accordance with the following schedule:
<PAGE>
-6-
Years of Service Vested Percentage
---------------- -----------------
Less than one 0%
One but less than two 20%
Two but less than three 40%
Three but less than four 60%
Four but less than five 80%
Five or more 100%
Each Participant's interest in his or her Equity Award Account shall be 100%
vested and nonforfeitable as of a Control Change Date (as such term is defined
in the Crestar Financial Corporation 1993 Stock Incentive Plan).
6. CREDITS TO ACCOUNTS.
-------------------
(a) An Equity Award Account and Elective Deferral Account will be
established for each Participant and shall be credited with
amounts determined under sections 3 and 4 and shall be further
credited with earnings in accordance with subsection 6(b). A
Deferred Stock Benefit attributable to a deferred Retainer Fee
will be credited to the Participant's Elective Deferral
Account as a number of whole and fractional shares of Company
common stock based on the Fair Market Value on the date that
the Retainer Fee would have been paid. A Deferred Stock
Benefit attributable to a deferred Stock Award will be
credited to the Participant's Elective Deferral Account as a
number of whole and fractional shares of Common Stock based on
the Fair Market Value on the date that the Stock Award would
have been issued.
(b) The basis for additional credits to Accounts (in whole and
fractional shares of Company common stock) will be variable
rates based on the value of dividends paid on Company common
stock and the Fair Market Value on the date that such
dividends are paid on Company common stock. The value of an
Account at any relevant time is determined as if the Equity
Awards made to, and the Compensation deferred by, the
Participant under the Plan and any additional credits under
this subsection had been used to purchase Company common stock
at the Fair Market Value on the date those amounts were
credited to the Account. Additional credits are accrued
through the end of the month preceding the distribution of a
Deferred Stock Benefit.
(c) If a trust is established under section 9 of this Plan, an
electing Participant may instruct the trustee under the
governing trust agreement how to vote shares of Company common
stock allocated to that Participant's separate account under
the trust according to this subsection and the provisions of
the governing trust agreement. Before each annual or special
meeting of the Company shareholders, the trustee under the
governing trust agreement must furnish each Participant with a
<PAGE>
-7-
copy of the proxy solicitation and other relevant material for
the meeting as furnished to the trustee by the Company, and a
form addressed to the trustee requesting the Participant's
confidential instructions on how to vote shares of Company
common stock allocated to his or her account as of the
valuation date established under the governing trust agreement
preceding the record date. Upon receipt of those instructions,
the trustee under the governing trust agreement must vote such
stock as instructed.
7. DISTRIBUTIONS.
--------------
(a) According to a Participant's Distribution Election Form, but
subject to Plan subsection 4(d), a Deferred Stock Benefit must
be distributed in shares of Company common stock equal to the
number of whole shares of Company common stock credited to the
Participant's Account on the last day of the month preceding
the month of distribution. However, cash must be paid in lieu
of a fractional share of Company common stock credited the
Participant's Deferred Stock Account on the last day of the
month preceding the month of distribution.
(b) Deferred Stock Benefits will be paid in a lump sum unless the
Participant's Distribution Election Form specifies annual
installment payments over a period of 5 years. A Deferred
Stock Benefit payable in installments will continue to accrue
additional credits under Plan subsection 6(b) on the unpaid
balance of the Account through the end of the month preceding
the distribution. Distribution of a Deferred Stock Benefit
attributable to a Participant's vested Equity Award Account
will be paid or begin on the February 15 of the year after his
or her Termination.
(c) Deferred Stock Benefits may not be assigned by a Participant
or Beneficiary. Unless the Administrator announces otherwise,
a Participant may use only one Beneficiary Designation Form to
designate one or more Beneficiaries for all of his or her
Deferred Stock Benefits under the Plan; such designations are
revocable. Each Beneficiary will receive his or her portion of
the Participant's Deferred Stock Benefit in a lump sum on
February 15 of the year following the year of the
Participant's death.
(d) Any Company common stock distributed pursuant to the Plan
shall have been acquired by an "agent independent of the
issuer" (i.e., the Company) within the meaning of 17 CFR
240.10b-18, as such regulation or any successor is in effect
from time to time. Such acquisitions may be effected in all
cases on the open market or, in the event that the Company
makes available newly issued common stock, directly from the
Company, provided that such common stock has been registered
with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, or any successor thereto
at the time such purchase is made or an exemption from such
registration requirement is, in the opinion of counsel to the
<PAGE>
-8-
Company, available.
(e) No Participant or Beneficiary shall have any rights as a
shareholder of the Company by virtue of having any interest
under this Plan until, and to the extent that, shares of
Company common stock are issued in satisfaction of a Deferred
Stock Benefit payable in accordance with this Plan.
8. HARDSHIP DISTRIBUTIONS.
----------------------
(a) At the Administrator's sole discretion and at the request of a
Participant before or after the Participant's Termination, or
at the request of any of the Participant's Beneficiaries after
the Participant's death, the Administrator may accelerate and
pay all or part of any amount attributable to a Participant's
vested Deferred Stock Benefits under this Plan. Accelerated
distributions may be allowed only in the event of a financial
emergency beyond the Participant's or Beneficiary's control
and only if disallowance of a distribution would create a
severe hardship for the Participant or Beneficiary. An
accelerated distribution must be limited to the amount
determined by the Administrator to be necessary to satisfy the
financial emergency.
(b) For purposes of an accelerated distribution under this
section, the value of a Deferred Stock Benefit is determined
by the value of the Participant's Account at the end of the
month preceding the date of distribution.
(c) A distribution under this section is in lieu of that portion
of the Deferred Stock Benefit that would have been paid
otherwise. A Deferred Stock Benefit is adjusted for a
distribution under this section by reducing the value of the
Participant's Account by the amount of the distribution.
9. COMPANY'S OBLIGATION.
--------------------
(a) The Plan is unfunded. A Deferred Stock Benefit is at all times
a mere contractual obligation of the Company. A Participant
and his or her Beneficiaries have no right, title, or interest
in the Deferred Stock Benefits or any claim against them other
than as general unsecured creditors of the Company. The
Company will not segregate any funds or assets for Deferred
Stock Benefits nor issue any notes or security for the payment
of any Deferred Stock Benefit.
(b) Subject to Plan subsection 9(c), the Company may establish a
grantor trust and transfer to that trust shares of Company
common stock or other assets. Trust assets must be invested in
Company common stock for the purpose of measuring the value of
Accounts under the Plan to be distributed as Deferred Stock
Benefits in the form of Company common stock, plus cash in
lieu of fractional shares. The governing trust agreement must
require a separate account to be established for each electing
<PAGE>
-9-
Participant. The governing trust agreement must also require that all
Company assets held in trust remain at all times subject to the
Company's creditors.
(c) The Company may only contribute to a trustee under a trust agreement
by transferring cash or assets with a fair market value equal to the
value (determined at the nearest month end) of the related Accounts if
the trust agreement contains provisions sufficient (in the opinion of
either the Internal Revenue Service or counsel selected by the
Company) to allow the Participants to defer income taxation on their
Deferred Stock Benefits until they are distributed according to this
Plan and provisions sufficient (in the opinion of counsel selected by
the Company) to exempt the Plan and the trust from sections 10(b) and
16(b) of the Securities Exchange Act of 1934 and applicable rules and
regulations. If the Internal Revenue Service refuses to give the
required opinion on such a trust, and if counsel selected by the
Company is the opinion that no such trust can be created, Plan
subsection 9(b) will not become effective.
10. CONTROL BY PARTICIPANT. A Participant has no control over Deferred Stock
----------------------
Benefits except according to his or her Deferral Election Forms, his or her
Distribution Election Forms, and his or her Beneficiary Designation Forms.
11. CLAIMS AGAINST PARTICIPANT'S DEFERRED STOCK BENEFIT. No Account under this
---------------------------------------------------
Plan is subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge, and any attempt to do so is
void. Deferred Stock Benefits are not subject to attachment or legal
process for a Participant's debts or other obligations. Nothing contained
in this Plan gives any Participant any interest, lien, or claim against any
specific asset of the Company. A Participant or his or her Beneficiary has
no rights to receive Deferred Stock Benefits other than as a general
creditor of the Company.
12. AMENDMENT OR TERMINATION. Except as otherwise provided in this section,
------------------------
this Plan may be altered, amended, suspended, or terminated at any time by
the Board. No amendment will become effective without the approval of the
Company's shareholders if the amendment (i) materially increases the number
of shares of Company common stock that may be issued under the Plan, (ii)
materially increases the benefits accruing to Participants, under the Plan,
or (iii) materially changes the class of individuals who may participate in
the Plan. The Plan may not be amended more than once in any six month
period other than to comply with changes in the Internal Revenue Code or
the Employee Retirement Income Security Act of 1974. Except for a
termination of the Plan caused by the determination of the Board that the
laws upon which the Plan is based have changed in a manner that negates the
Plan's objectives, the Board may not alter, amend, suspend, or terminate
this Plan without the majority consent of all Directors who are
Participants if that action would result either in a distribution of all
Deferred Stock Benefits in any manner other than as provided in this Plan
or that would result in immediate taxation of Deferred
<PAGE>
-10-
Stock Benefits to Participants. Notwithstanding the preceding sentence, if
any amendment to the Plan, subsequent to the date the Plan becomes
effective, adversely affects Deferred Stock Benefits hereunder, after the
effective date of any such amendment, and the Internal Revenue Service
declines to rule favorably on any such amendment or to rule favorably only
if the Board makes amendments to the Plan not acceptable to the Board, the
Board, in its sole discretion, may accelerate the distribution of part or
all amounts attributable to affected Deferred Stock Benefits due
Participants and Beneficiaries hereunder.
13. NOTICES. Notices and elections under this Plan must be in writing. A notice
-------
or election is deemed delivered if it is delivered personally or if it is
mailed by registered or certified mail to the person at his or her last
known business address.
14. WAIVER. The waiver of a breach of any provision in this Plan does not
------
operate as and may not be construed as a waiver of any later breach.
15. CONSTRUCTION. This Plan is created, adopted, and maintained according to
------------
the laws of the Commonwealth of Virginia (except its choice-of-law rules).
It is governed by those laws in all respects except to the extent that the
laws of the United States apply to the Plan. Headings and captions are only
for convenience; they do not have substantive meaning. If a provision of
this Plan is not valid or not enforceable, that fact in no way affects the
validity or enforceability of any other provision. Use of one gender
includes all, and the singular and plural include each other.
16. EFFECTIVENESS. The Board adopted this Plan subject to the approval of the
-------------
Company's shareholders at the 1996 annual meeting of the Company. If the
requisite shareholder approval is not obtained (i) this Plan shall be
deemed void ab initio, (ii) amounts credited to Participants' Accounts
-- ------
shall be forfeited and (iii) deferred Compensation (and any earnings
credited under subsection 6(b)) shall be paid to participants as soon as
practicable after such meeting or credited to Participants' accounts under
the Company's Deferred Compensation Plan for Outside Directors in
accordance with each Participant's written instructions delivered to the
Administrator before the Effective Date.
IN WITNESS WHEREOF, Crestar Financial Corporation has caused this
Plan to be executed by its duly authorized officer effective as of January 1,
1996.
CRESTAR FINANCIAL CORPORATION
By:______________________________
Title:_________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.37
<SEQUENCE>7
<FILENAME>dex1037.txt
<DESCRIPTION>EXHIBIT 10.37
<TEXT>
<PAGE>
Exhibit 10.37
CRESTAR FINANCIAL CORPORATION
BOARD OF DIRECTORS MEETING
Friday, December 20, 1996
RESOLUTIONS AMENDING THE DIRECTORS' EQUITY PROGRAM:
RESOLVED, that the Board of Directors of Crestar Financial Corporation
hereby amends Section 2(k) of the Crestar Financial Corporation Directors'
Equity Program to provide as follows:
Director means a duly elected or appointed member of the Board who is not
--------
an employee of the Company or an affiliate or subsidiary of the Company,
excluding any member of the Board who is required to transfer, assign or
pay his or her Retainer Fee to the member's employer or firm.
FINALLY RESOLVED, that the appropriate officers of the Corporation are
hereby authorized and directed to take such actions and to execute such
documents as they deem necessary or appropriate to implement the foregoing
resolution, all without the necessity of further action by this Board.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11.1
<SEQUENCE>8
<FILENAME>dex111.txt
<DESCRIPTION>EXHIBIT 11.1
<TEXT>
<PAGE>
EXHIBIT 11.1
SunTrust Banks, Inc.
Statement re: Computation of Per Share Earnings
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------------------------------------------------------
2001 2000 1999 1998 1997 1996
------------- ------------ ------------ ---------- ---------- ----------
<S> <C>
Basic
Income before extraordinary gain $ 1,369,219 $ 1,294,100 $ 1,123,952 $ 971,017 $ 975,923 $ 858,950
Extraordinary gain, net of taxes 6,318 - 202,648 - - -
------------- ------------ ------------ ---------- ---------- ----------
Net income $ 1,375,537 $ 1,294,100 $ 1,326,600 $ 971,017 $ 975,923 $ 858,950
------------- ------------ ------------ ---------- ---------- ----------
Average basic common shares 287,702 297,834 317,079 314,908 316,436 326,502
------------- ------------ ------------ ---------- ---------- ----------
Income before extraordinary gain $ 4.76 $ 4.35 $ 3.54 $ 3.08 $ 3.08 $ 2.63
Extraordinary gain, net of taxes 0.02 - 0.64 - - -
------------- ------------ ------------ ---------- ---------- ----------
Earnings per common share - basic $ 4.78 $ 4.35 $ 4.18 $ 3.08 $ 3.08 $ 2.63
============= ============ ============ ========== ========== ==========
Diluted
Income before extraordinary gain $ 1,369,219 $ 1,294,100 $ 1,123,952 $ 971,017 $ 975,923 $ 858,950
Extraordinary gain, net of taxes 6,318 - 202,648 - - -
------------- ------------ ------------ ---------- ---------- ----------
Net income $ 1,375,537 $ 1,294,100 $ 1,326,600 $ 971,017 $ 975,923 $ 858,950
------------- ------------ ------------ ---------- ---------- ----------
Average common shares outstanding 287,702 297,834 317,079 314,908 316,436 326,502
Incremental shares outstanding (1) 3,882 3,122 4,095 4,803 4,496 4,540
------------- ------------ ------------ ---------- ---------- ----------
Average diluted common shares 291,584 300,956 321,174 319,711 320,932 331,042
------------- ------------ ------------ ---------- ---------- ----------
Income before extraordinary gain $ 4.70 $ 4.30 $ 3.50 $ 3.04 $ 3.04 $ 2.59
Extraordinary gain, net of taxes 0.02 - 0.63 - - -
------------- ------------ ------------ ---------- ---------- ----------
Earnings per common share - diluted $ 4.72 $ 4.30 $ 4.13 $ 3.04 $ 3.04 $ 2.59
============= ============ ============ ========== ========== ==========
</TABLE>
(1) Includes the incremental effect of stock options and restricted stock
outstanding computed under the treasury stock method.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>9
<FILENAME>dex121.txt
<DESCRIPTION>EXHIBIT 12.1
<TEXT>
<PAGE>
Exhibit 12.1
SunTrust Banks, Inc.
Ratio of Earnings to Fixed Charges
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------------------------------------------------------
2001 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------
<S> <C>
Ratio 1 - including deposit interest
Earnings:
Income before income taxes
and extraordinary gain $2,019,720 $1,919,556 $1,695,657 $1,498,306 $1,499,599 $1,265,942
Fixed charges 3,065,973 3,775,173 2,852,180 2,784,251 2,489,432 2,193,744
--------------------------------------------------------------------------------------
Total $5,085,693 $5,694,729 $4,547,837 $4,282,557 $3,989,031 $3,459,686
======================================================================================
Fixed charges:
Interest on deposits $ 1,812,385 $ 2,452,919 $ 1,626,132 $ 1,644,229 $ 1,627,417 $ 1,585,707
Interest on funds purchased 412,218 651,235 749,561 634,086 461,724 356,879
Interest on other short-term
borrowings 63,359 97,903 79,521 127,800 133,814 81,683
Interest on long-term debt 739,012 534,924 359,538 340,664 230,509 134,530
Portion of rents representative of the
interest factor (1/3) of rental expense 38,999 38,192 37,428 37,472 35,968 34,945
--------------------------------------------------------------------------------------
Total $ 3,065,973 $ 3,775,173 $ 2,852,180 $ 2,784,251 $ 2,489,432 $ 2,193,744
======================================================================================
Earnings to fixed charges 1.66 x 1.51 x 1.59 x 1.54 x 1.60 x 1.58 x
Ratio 2 - excluding deposit interest
Earnings:
Income before income taxes and
extraordinary gain $2,019,720 $1,919,556 $1,695,657 $1,498,306 $1,499,599 $1,265,942
Fixed charges 1,253,588 1,322,254 1,226,048 1,140,022 862,015 608,037
--------------------------------------------------------------------------------------
Total $3,273,308 $3,241,810 $2,921,705 $2,638,328 $2,361,614 $1,873,979
======================================================================================
Fixed charges:
Interest on funds purchased $ 412,218 $ 651,235 $ 749,561 $ 634,086 $ 461,724 $ 356,879
Interest on other short-term borrowings 63,359 97,903 79,521 127,800 133,814 81,683
Interest on long-term debt 739,012 534,924 359,538 340,664 230,509 134,530
Portion of rents representative of the
interest factor (1/3) of rental expense 38,999 38,192 37,428 37,472 35,968 34,945
--------------------------------------------------------------------------------------
Total $ 1,253,588 $ 1,322,254 $ 1,226,048 $ 1,140,022 $ 862,015 $ 608,037
======================================================================================
Earnings to fixed charges 2.61 x 2.45 x 2.38 x 2.31 x 2.74 x 3.08 x
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>10
<FILENAME>dex13.txt
<DESCRIPTION>EXHIBIT 13
<TEXT>
<PAGE>
[SUNTRUST LOGO]
SunTrust Banks, Inc.
2001 Annual Report
[PHOTO]
2001 was another year of consistent, solid performance for SunTrust.
But that's not all. We're seeing real benefits from a quiet transformation
that's taken place at our Company in recent years under which our historical
competitive strengths were reaffirmed while some big changes were made
to ensure we're well positioned for the future.
<PAGE>
About The Company
SunTrust Banks, Inc., with year-end 2001 assets of
$104.7 billion, is one of the nation's largest and strongest financial
holding companies. Through its flagship subsidiary, SunTrust Bank, the
Company provides deposit, credit, trust and investment services to a broad range
of retail, business and institutional clients. Other subsidiaries provide
mortgage banking, credit-related insurance, asset management, brokerage and
capital market services. SunTrust enjoys leading market positions in some of the
highest-growth markets in the United States and also serves customers in
selected markets nationally. SunTrust's more than 1,100 retail branches and
1,990 ATMs are located in Alabama, Florida, Georgia, Maryland, Tennessee,
Virginia and the District of Columbia. In addition, SunTrust provides customers
with a full range of technology-based banking channels including Internet, PC
and Telephone Banking. As of December 31, 2001, SunTrust had total trust assets
of $128.8 billion. Discretionary trust assets under management--which include
$24 billion in the STI Classic Funds, one of the nation's top-ranked mutual fund
families--were $89.5 billion. SunTrust's mortgage servicing portfolio grew to
$47.6 billion at year end.
Table Of Contents
Financial Highlights - 1
Letter To Shareholders - 2
Management's Discussion And Analysis Of
Operations And Financial Condition - 14
Consolidated Financial Statements - 42
2001 Form 10-K - 74
Board Of Directors - 76
Management Committee - 77
General Information - 80
[SUNTRUST LOGO]
<PAGE>
SunTrust 2001 Annual Report 1
Financial Highlights
- -------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
(Dollars in millions except per share data) 2001 2000 1999
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
For the Year
Income before extraordinary gain $ 1,369.2 $ 1,294.1 $ 1,124.0
Extraordinary gain, net of taxes 6.3 -- 202.6
- ------------------------------------------------------------------------------------------------------
Net income 1,375.5 1,294.1 1,326.6
======================================================================================================
Common dividends paid 463.5 443.4 440.6
Per Common Share
Income - diluted before extraordinary gain $ 4.70 $ 4.30 $ 3.50
Extraordinary gain 0.02 -- 0.63
- ------------------------------------------------------------------------------------------------------
Net income - diluted 4.72 4.30 4.13
======================================================================================================
Dividends declared 1.60 1.48 1.38
Common stock closing price 62.70 63.00 68.81
Book value 28.97 27.81 24.73
- ------------------------------------------------------------------------------------------------------
Financial Ratios
Return on average assets (ROA) 1.37% 1.35% 1.48%
Return on average realized
shareholders' equity 21.74 21.46 20.83
Return on average total shareholders' equity 17.04 17.25 16.20
Net interest margin (taxable-equivalent) 3.58 3.55 3.88
Efficiency ratio 56.96 57.47 60.35
Tier 1 capital ratio 8.02 7.09 7.48
Total capital ratio 12.18 10.85 11.31
- ------------------------------------------------------------------------------------------------------
Selected Average Balances
Total assets $ 102,884.2 $ 98,397.8 $ 92,820.8
Earning assets 92,034.1 88,609.0 82,255.7
Loans 70,023.0 70,044.3 62,749.4
Deposits 64,568.7 66,691.9 57,842.1
Realized shareholders' equity 6,328.0 6,031.6 6,368.3
Total shareholders' equity 8,073.8 7,501.9 8,190.7
Common shares - diluted (thousands) 291,584 300,956 321,174
- ------------------------------------------------------------------------------------------------------
At December 31
Total assets $ 104,740.6 $ 103,660.4 $ 95,390.0
Earning assets 93,327.5 92,147.8 85,193.4
Loans 68,959.2 72,239.8 66,002.8
Allowance for loan losses 867.1 874.5 871.3
Deposits 67,536.4 69,533.3 60,100.5
Realized shareholders' equity 6,704.3 6,296.4 6,064.0
Total shareholders' equity 8,359.6 8,239.2 7,626.9
Common shares outstanding (thousands) 288,602 296,266 308,353
Market value of investment in common
stock of The Coca-Cola Company
(48,266,496 shares) $ 2,276 $ 2,941 $ 2,812
======================================================================================================
</TABLE>
In this report, SunTrust presents a return on average realized shareholders'
equity, as well as a return on average total shareholders' equity. The return on
average realized shareholders' equity excludes net unrealized security gains.
Due to its ownership of 48 million shares of common stock of The Coca-Cola
Company resulting in an unrealized net gain of $2.3 billion, the Company
believes that this measure is more indicative of its return on average
shareholders' equity when comparing performance to other companies.
Earnings Per Share Before Extraordinary Gain
5 Year Compounded Growth Rate 12.7%
($ per diluted common share)
[GRAPH]
<TABLE>
<S> <C>
1996 2.59
1997 3.04
1998 3.04
1999 3.50
2000 4.30
2001 4.70
</TABLE>
Dividends Declared
5 Year Compounded Growth Rate 14.0%
($ per common share)
[GRAPH]
<TABLE>
<S> <C>
1996 .83
1997 .93
1998 1.00
1999 1.38
2000 1.48
2001 1.60
</TABLE>
Cash Basis and Operating Earnings Per Share
Cash Basis EPS 5 Year Compounded Growth Rate 12.4%
Operating EPS 5 Year Compounded Growth Rate 13.0%
($ per diluted common share)
[GRAPH]
<TABLE>
<CAPTION>
Year Cash Basis EPS Operating EPS
<S> <C> <C>
1996 2.70 2.59
1997 3.15 3.04
1998 3.16 3.28
1999 4.23 3.59
2000 4.41 4.39
2001 4.85 4.79
</TABLE>
<PAGE>
2 SunTrust 2001 Annual Report
To Our Shareholders
Any discussion of 2001 at SunTrust would be incomplete without first noting
that for the men and women of our Company, as for all Americans, the year
was one whose haunting images and sobering realities have been seared in
our memories. While no SunTrust facilities were affected directly by the
September 11 terrorist attacks, shareholders can be proud of the way we
reached out to support those in need--and demonstrated our commitment to
reaffirming America's enduring positive spirit. Specifically, our Company,
along with our employees, retirees and directors, contributed more than $1
million to the American Red Cross to assist in its September 11-related
relief efforts.
From a business perspective, September 11 removed any doubt as to the
fragility of the U.S. economy. It turned out that the economy, which had
been steadily weakening, actually slipped into recession in the first
quarter of 2001. For banks, the state of the economy is a major factor in
the outlook for our business. SunTrust is as well positioned as anyone for
economic adversity. But we, like our customers, began 2002 under the cloud
of an uncertain operating environment.
Earnings Consistency
Despite the economic slowdown, 2001 was another year of consistent earnings
growth for SunTrust Banks, Inc. Strong operating earnings were based on
good, solid revenue gains. We're doing an increasingly effective job on
expense discipline. And credit quality measures, although reflecting the
impact of a sluggish economy, continued to compare very well with industry
standards.
[LOGO]
SUNTRUST
<PAGE>
SunTrust 2001 Annual Report 3
In general, 2001 results reflect SunTrust's success in positioning our
balance sheet to permit the generation of consistent earnings under different
economic and interest rate scenarios.
We are particularly proud that 2001 represented SunTrust's 26th consecutive
year of growth in operating earnings. In terms of reported net income per share,
there has never been a year in which we earned less than in the prior year. Our
track record of consistency in earnings growth is matched by only a handful of
well-known U.S. banking organizations.
[PHOTO]
SunTrust
L. Phillip Humann
Chairman, President and Chief Executive Officer
A detailed discussion of the year's earnings performance and other financial
considerations is included in the "Management Discussion and Analysis" section
of this report. It begins on page 14.
Financial highlights of 2001 include:
. Operating earnings were $1.40 billion, a record level and up 6 percent
from the prior year. Operating income per diluted share was $4.79, an increase
of 9 percent from 2000.
. Reported net income, which included certain non-recurring charges in both
2001 and 2000, was $1.38 billion in 2001, up 6 percent from a year earlier. Net
income per diluted share was $4.72, a 10 percent increase from the full year
2000.
. Non-interest income, which accounts for a healthy 40 percent of total
revenue, was up 22 percent over the prior year as we stepped up sales of
fee-generating products and services. Increasing the portion of earnings
attributable to fee income has been a priority in recent years.
<PAGE>
4 SunTrust 2001 Annual Report
. Growth in net interest income was attributable in part to the success of
a Company-wide drive to increase core deposits. Core deposits were up $5.6
billion, or almost 10 percent from the prior year end. This impressive growth
went a long way toward offsetting the less-than-robust loan demand typical at
this stage of the business cycle.
For the stock market in general, and for investors in bank stocks, 2001 was
not a good year. SunTrust stock outperformed that of most large banks. Still,
our share price did not display the growth pattern we would have liked--and the
growth we think is warranted given the strengths of our Company and our
performance relative to our peers.
Looking ahead, we believe we are well positioned to meet the expectations
of both customers and shareholders. We also remain confident that, over time,
our share price will more accurately reflect SunTrust's solid performance and
prospects, especially as the economy turns around.
In the meantime, we are pleased to report that the Board of Directors in
February 2002 voted to increase the cash dividend paid on the Company's common
stock by 7.5 percent, bringing the annual dividend per share to $1.72.
Credit Quality
SunTrust has historically maintained a record of credit quality among the
best of all major U.S. banks. Our loan portfolio is well diversified. And on
both the consumer and commercial sides, we seek to avoid concentrated exposure
to high-risk loan categories, industries and borrowers.
<PAGE>
SunTrust 2001 Annual Report 5
[PHOTO]
During periods of economic weakness--such as we experienced in
2001--superior credit quality is particularly important. As borrowers come under
pressure, bank credit quality predictably suffers. SunTrust was by no means
insulated from this industry trend last year. Nonperforming assets (NPAs)
increased by roughly a third, a sizeable increase although not out of line with
what might be expected in this kind of economy.
It is important to note that despite the year-over-year increase in the
absolute level of NPAs, SunTrust's ratio of nonperforming assets to total loans
and foreclosed properties -- perhaps the most relevant measure of credit
quality--remains one of the lowest among all large banks. Our charge-off
experience was also among the lowest in our peer group. And our reserve coverage
remains strong.
So while certain measures of credit quality have deteriorated somewhat from
the unsustainably high levels enjoyed in recent years, we continue to maintain a
record in this area that compares very favorably with peer banks. We are
confident that will remain the case.
E F F I C I E N C Y & S T A N D A R D I Z A T I O N
SunTrust's intensified focus on efficiency and was reflected in 2001 results
with the promise of further gains in 2002 and beyond. The Company's efficiency
ratio dropped to below 57 percent in 2001, a meaningful improvement compared
with an efficiency ratio of more than 60 percent in 1999. That is when we
launched a formal, Company-wide effort to reduce expense levels at SunTrust
while maintaining the customer service for which we're recognized in the
marketplace.
[PHOTO]
<PAGE>
6 SunTrust 2001 Annual Report
As one example of how this works, core employment at SunTrust at year-end
2001 was down nearly 10 percent (or 2,900 full-time-equivalent positions) from
1999. This reduction was accomplished without the broad-scale employee layoffs
that can hurt morale and impact customer service.
Also in 2001, we made significant progress in implementing what we call our
"One-Bank" initiatives. These are a series of inter-related systems
consolidation and operations standardization moves. They are designed to achieve
maximum efficiencies from SunTrust's 1999 decision to move away from its
historical multi-bank legal structure to a more streamlined model.
We estimate that SunTrust's annual operating efficiency will improve
significantly from these changes. The resulting savings help support continued
investment in product development, new technology--and the talented
people--necessary to maintain a competitive advantage in the future. For
customers, the One-Bank effort has practical benefits today; it's now much
easier to conduct a wide range of banking transactions at any SunTrust location.
We can also more quickly implement change to meet future customer needs.
S E L E C T I V E A C Q U I S I T I O N S
SunTrust's approach to mergers and acquisitions is very deliberate and highly
selective. As a $100 billion-plus institution whose geographic footprint already
covers some of the best markets in the United States, we don't need to grow for
the sake of growth alone. As a rule, we only pursue acquisition opportunities
that meet high standards for financial return while enhancing our geographic
franchise or extending business line capabilities consistent with our strategic
goals.
Three transactions in 2001 illustrate our deliberate approach to mergers.
In April, we
<PAGE>
SunTrust 2001 Annual Report 7
[PHOTO] [PHOTO]
acquired Asset Management Advisors (AMA), a specialized wealth management firm
in Jupiter, Florida. Expansion of AMA, which operates as a SunTrust unit under
its own well-regarded name, is now a key element in our overall strategy to
serve the high-net-worth market. AMA is uniquely positioned to provide what is
known in the industry as "family office" services to high-net-worth clients. AMA
investment and other professionals utilize a variety of sophisticated financial
products and tools to provide a comprehensive approach to multi-generational
wealth management. As part of SunTrust, additional AMA offices have opened in
Orlando and Atlanta.
In May, we announced the purchase of the institutional business of The
Robinson-Humphrey Company, LLC from Citigroup's Salomon Smith Barney unit. The
acquisition of Robinson-Humphrey's investment banking and capital markets
divisions, along with associated areas such as equity research, significantly
enhanced SunTrust's equity capital markets-related capabilities. The
establishment of SunTrust Robinson-Humphrey complements our already-strong debt
capital markets business to create a powerful combination with excellent growth
potential, especially as equity markets improve.
Four months later, we signed an agreement to acquire the very attractive
Florida banking franchise of Huntington Bancshares, Inc. Included are
Huntington's retail, small business, commercial, treasury management and
investment related businesses. The acquisition, which closed in early 2002,
added 57 branches, approximately $4.6 billion in deposits and some 1,000
employees to SunTrust's Florida banking organization. In addition to bolstering
our historically strong position in
<PAGE>
8 SunTrust 2001 Annual Report
the State overall, the Huntington move propels us into the number one
position in the high-growth Orlando and Lakeland/Winter Haven markets.
Elsewhere in the merger-related arena, SunTrust made news during
2001 when we unveiled a proposal to acquire the former North
Carolina-based Wachovia Corporation. Our proposal led to a highly
visible proxy solicitation effort over the course of the summer.
We perceived a SunTrust-Wachovia combination as attractive...but
only at a price we considered consistent with our own shareholders'
interests. When it became clear that a higher price would likely be
required, we elected not to increase it. Wachovia shareholders chose
another merger partner.
Business Momentum
Each of our major lines of business--Retail Banking, Commercial Banking,
Corporate and Investment Banking, Mortgage Banking and Private Client
Services--contributed to our earnings in 2001.
Equally important, momentum displayed within our business units suggests
how we are positioned to capitalize on a rebound in economic activity.
Some business highlights of the past year with positive
implications for future performance include:
. Measurable success in building a sales culture at SunTrust.
More than 5,000 retail employees
[PHOTO]
<PAGE>
SunTrust 2001 Annual Report 9
[PHOTO]
participated in a targeted training program to equip them to provide
"needs-based" products and services to clients. Simultaneously,
standardized sales management practices were instituted across the
Company. The sharp jump in deposits in 2001 is one illustration of how
an intensified sales focus pays off. Another is SunTrust Online (STOLI),
our telephone and internet banking channel. STOLI sales were up more
than 66 percent over 2000 and now account for roughly 20 percent of all
new consumer loans and equity credit lines.
. Enhanced capabilities to meet the needs of our corporate and
commercial clients for investment banking, capital markets, treasury
management and other services that go beyond the traditional extension
of credit. A substantial increase in debt capital market revenues, up 46
percent over the prior year, reflects our success in providing clients
access to debt capital at a time when equity markets were challenging.
In line with our intensified emphasis on the commercial, or "middle
market," a separate capital markets origination team focuses on
businesses with up to $250 million in annual revenues. In addition, to
leverage the investment banking capabilities we acquired with
Robinson-Humphrey, we created in late 2001 SunTrust R-H Advisors, a
merger and acquisition advisory unit focused solely on our commercial
client base.
. A record year in mortgage production as we benefited from a
lower interest rate environment that spurred refinancing activity.
Mortgage production volume for 2001 was $24.2 billion, up more than 80
percent from the prior year. SunTrust Mortgage Corporation has evolved
into one of the nation's leading bank-affiliated mortgage operations,
consistently ranking among the top 20 of all mortgage lenders
nationally. SunTrust Mortgage originates loans directly within the
SunTrust market area and nationally through a variety of channels.
Cross-selling bank products to mortgage customers is also
<PAGE>
10 SunTrust 2001 Annual Report
a high priority for the organization; during 2001, over 40,000
additional products were sold by teams focused on this particular
opportunity.
. The sagging stock market took its toll on SunTrust's Private
Client Services business last year as it did on virtually the entire
securities industry. Despite a decline in our stock market-driven
revenues, performance of the STI Classic Mutual Funds, which was
recognized as the nation's third best performing mutual fund family by
Barron's, improved substantially in 2001. Additionally, Trusco Capital
Management's investment performance again outpaced the market. These
accomplishments helped spur sales of investment products and
significantly reduce client attrition. In addition, the development in
late 2001 of a new, full-service brokerage operation called "Alexander
Key," plus the additional capabilities afforded by Asset Management
Advisors, represent significant steps to position us for improved
performance as markets rebound.
. Enhancement of eBusiness capabilities with the redesign of
www.suntrust.com, our popular web site, and the launch of some
innovative new services. One example is "Online Treasury Manager," which
offers commercial and corporate clients a full suite of web-based
treasury management tools. Another new service provides web-based access
to asset and transaction information for trust, portfolio management and
custody account customers.
. Introduction of a distinctive SunTrust "brand" in the
marketplace that provides a unifying theme for advertising and other
marketing efforts. Based on extensive customer research, the new brand
picks up on SunTrust's track record of providing superior customer
service and revolves around the question: "How can we help you?"
. Launching a comprehensive Corporate Quality Initiative to ensure
that we consistently apply the principles of exceptional quality and
service to the overall management of our business. Specific quality
standards are being set within every unit of the Company on dimensions
of service that matter most to clients, and processes for monitoring
client satisfaction and identifying and correcting deficiencies in
service delivery are being implemented.
<PAGE>
SunTrust 2001 Annual Report 11
. Increased focus on Diversity as a corporate initiative with real business
potential. A senior-level Corporate Diversity Council serves as the focal point
for a variety of programs in areas such as marketing, hiring and promotion,
corporate contributions and procurement. They're all aimed at increasing
awareness and confirming Diversity as a business imperative at SunTrust.
Quiet Transformation
As 2001 unfolded, we began seeing more and more benefits from a transformation
process that's quietly taken place at SunTrust over the past few years. Through
this process which was initiated in 1998, we identified-and then
validated-SunTrust's historical competitive strengths. These include things
like superior credit quality, our focus on high-growth geographic markets, our
emphasis on deepening customer relationships and our reliance on strong local
management teams.
At the same time, we instituted a series of fairly major changes aimed at
streamlining our organizational structure, improving our operating efficiency
and beefing up our infrastructure. In short, we enhanced the capacity of our
organization to continue to deliver sustainable and consistent earnings growth
in the years ahead.
[PHOTO]
<PAGE>
12 SunTrust 2001 Annual Report
[PHOTO]
Looking back on 2001, one distinct message begins to emerge: today's
SunTrust is more focused on performance...more efficient...more
sales-oriented...and better able to meet the needs of a demanding customer base
than at any point in our recent history. In large measure, that is what our
"quiet transformation" process has been all about.
This process is not finished. We believe we have a winning formula today
and excellent prospects for the future. Yet we are always looking for ways to
fine-tune our approach to our business, our organization, our markets and our
customers. This is as it should be. Shareholders expect us to keep pace with a
changing, performance-driven world. We are committed to doing so.
Much has changed at SunTrust in recent years. Yet one thing remains the
same: our employees work extraordinarily hard, every day, to deliver customer
service and financial results that positively differentiate us from the -
competition. I trust that shareholders will therefore agree it is appropriate to
close this letter with a salute to SunTrust's employees for their
accomplishments in 2001.
The business outlook for financial services is, as always, characterized by
uncertainty. But given the strengths of our institution and the capabilities of
our people, we approach the year ahead with confidence it will be a good one for
SunTrust Banks, Inc.
Thank you for your investment in SunTrust-and for permitting us to serve
your banking needs.
L. Phillip Humann
Chairman, President and
Chief Executive Officer
February 12, 2002
<PAGE>
SunTrust 2001 Annual Report 13
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
====================================================================================================================================
Year Ended December 31
(In millions except per share and other data) 2001 2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Summary of Operations
Interest and dividend income $ 6,279.6 $ 6,845.4 $ 5,960.2 $ 5,675.9 $ 5,238.2 $ 4,818.5
Interest expense 3,027.0 3,736.9 2,814.7 2,746.8 2,453.5 2,158.8
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income 3,252.6 3,108.5 3,145.5 2,929.1 2,784.7 2,659.7
Provision for loan losses 275.2 134.0 170.4 214.6 225.1 171.8
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 2,977.4 2,974.5 2,975.1 2,714.5 2,559.6 2,487.9
Noninterest income/1/ 2,155.8 1,773.6 1,625.9 1,653.9 1,329.2 1,146.1
Noninterest expense/2,3/ 3,113.5 2,828.5 2,905.3 2,870.1 2,389.2 2,368.0
- ------------------------------------------------------------------------------------------------------------------------------------
Income before provision for income
taxes and extraordinary gain 2,019.7 1,919.6 1,695.7 1,498.3 1,499.6 1,266.0
Provision for income taxes 650.5 625.5 571.7 527.3 523.7 407.0
- ------------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary gain 1,369.2 1,294.1 1,124.0 971.0 975.9 859.0
Extraordinary gain, net of taxes/4/ 6.3 -- 202.6 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 1,375.5 $ 1,294.1 $ 1,326.6 $ 971.0 $ 975.9 $ 859.0
====================================================================================================================================
Net interest income (taxable-equivalent) $ 3,293.4 $ 3,148.4 $ 3,188.0 $ 2,973.5 $ 2,832.6 $ 2,709.7
Per Common Share
Diluted
Income before extraordinary gain $ 4.70 $ 4.30 $ 3.50 $ 3.04 $ 3.04 $ 2.59
Extraordinary gain 0.02 -- 0.63 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income 4.72 4.30 4.13 3.04 3.04 2.59
Basic
Income before extraordinary gain 4.76 4.35 3.54 3.08 3.08 2.63
Extraordinary gain 0.02 -- 0.64 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income 4.78 4.35 4.18 3.08 3.08 2.63
Dividends declared 1.60 1.48 1.38 1.00 0.925 0.825
Market price:
High 72.35 68.06 79.81 87.75 75.25 52.50
Low 57.29 41.63 60.44 54.00 44.13 32.00
Close 62.70 63.00 68.81 76.50 71.38 49.25
Selected Average Balances
Total assets $ 102,884.2 $ 98,397.8 $ 92,820.8 $ 85,536.9 $ 76,017.3 $ 69,252.0
Earning assets 92,034.1 88,609.0 82,255.7 74,880.9 66,944.0 61,644.4
Loans 70,023.0 70,044.3 62,749.4 57,590.5 51,788.1 46,338.4
Deposits 64,568.7 66,691.9 57,842.1 53,725.3 51,673.7 50,317.6
Realized shareholders' equity 6,328.0 6,031.6 6,368.3 5,641.4 5,116.7 5,101.3
Total shareholders' equity 8,073.8 7,501.9 8,190.7 7,853.6 6,953.4 6,434.3
At December 31
Total assets $ 104,740.6 $ 103,660.4 $ 95,390.0 $ 93,169.9 $ 82,840.8 $ 75,264.2
Earning assets 93,327.5 92,147.8 85,193.4 81,295.1 72,258.9 65,921.8
Loans 68,959.2 72,239.8 66,002.8 61,540.6 55,476.4 49,301.4
Allowance for loan losses 867.1 874.5 871.3 944.6 933.5 897.0
Deposits 67,536.4 69,533.3 60,100.5 59,033.3 54,580.8 52,577.1
Long-term debt 12,660.6 8,945.4 6,017.3 5,807.9 4,010.4 2,427.7
Realized shareholders' equity 6,704.3 6,296.4 6,064.0 6,090.4 5,263.9 5,133.1
Total shareholders' equity 8,359.6 8,239.2 7,626.9 8,178.6 7,312.1 6,713.6
Ratios and Other Data
Return on average assets 1.37% 1.35% 1.48% 1.18% 1.34% 1.28%
Return on average realized shareholders' equity 21.74 21.46 20.83 17.21 19.07 16.84
Return on average total shareholders' equity 17.04 17.25 16.20 12.36 14.04 13.35
Net interest margin 3.58 3.55 3.88 3.97 4.23 4.40
Efficiency ratio 56.96 57.47 60.35 62.02 57.41 61.41
Total shareholders' equity to assets 7.98 7.95 8.00 8.78 8.83 8.92
Allowance to year-end loans 1.26 1.21 1.32 1.53 1.68 1.82
Nonperforming assets to total loans
plus other real estate owned 0.84 0.59 0.42 0.39 0.43 0.74
Common dividend payout ratio 33.7 34.3 33.4 32.9 30.4 31.9
Full-service banking offices 1,128 1,129 1,114 1,079 1,072 1,073
ATMs 1,994 1,991 1,968 1,839 1,691 1,394
Full-time equivalent employees 28,391 28,268 30,222 30,452 29,442 29,583
Average common shares - diluted
(thousands) 291,584 300,956 321,174 319,711 320,932 331,042
Average common shares - basic (thousands) 287,702 297,834 317,079 314,908 316,436 326,502
====================================================================================================================================
</TABLE>
/1/ Includes securities gains of $100.2 million and securities losses of $114.9
million related to the securities portfolio repositioning in 2001 and 1999,
respectively. An additional $52.9 million security gain was recorded in 2001
on the sale of Star Systems, Inc.
/2/ Includes merger-related expenses of $42.4 million in 2000, $45.6 million in
1999 and $119.4 million in 1998 related to the acquisition of Crestar in the
fourth quarter of 1998.
/3/ Includes expenses of $32.0 million from the proposal to acquire the former
Wachovia Corporation in 2001.
/4/ Represents the gain on the early extinguishment of long-term debt in 2001,
net of $3.4 million in taxes, and the gain on sale of the Company's consumer
credit card portfolio in 1999, net of $124.6 million in taxes.
<PAGE>
14 SunTrust 2001 Annual Report
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
This narrative will assist readers in their analysis of the accompanying
consolidated financial statements and supplemental financial information. It
should be read in conjunction with the Consolidated Financial Statements and
Notes on pages 42 through 73. In Management's Discussion, net interest income,
net interest margin and the efficiency ratio are presented on a fully
taxable-equivalent (FTE) basis, which is adjusted for the tax-favored status of
income from certain loans and investments.
On December 31, 1998, SunTrust Banks, Inc. ("SunTrust" or "Company")
completed its merger with Crestar Financial Corporation ("Crestar"), a $27.6
billion asset bank holding company headquartered in Richmond, Virginia. The
merger was accounted for as a pooling-of-interests business combination.
Accordingly, the accompanying consolidated financial information reflects the
results of operations of both SunTrust and Crestar, on a combined basis, for all
periods presented. Certain reclassifications have been made to prior year
financial statements and related information to conform them to the 2001
presentation.
SunTrust has made, and may continue to make, various forward-looking
statements with respect to financial and business matters. The following
discussion contains forward-looking statements that involve inherent risks and
uncertainties. Actual results may differ materially from those contained in
these forward-looking statements. For additional information regarding
forward-looking statements, see "A Warning About Forward-Looking Information" on
pages 39 through 40 of this Annual Report. In addition, the preparation of the
financial statements, upon which this Management's Discussion is based, requires
Management to make estimates which impact these financial statements. Included
in the Notes to the Consolidated Financial Statements, which start on page 48,
are the most significant accounting policies used in the preparation of these
statements as required by Generally Accepted Accounting Principles. These Notes
should be read in conjunction with the reader's review of SunTrust's financial
statements and results of operations.
<PAGE>
SunTrust 2001 Annual Report 15
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Earnings Overview
SunTrust's net income for 2001 totaled $1,375.5 million, or $4.72 per diluted
share, up 6.3% from the net income of $1,294.1 million, or $4.30 per diluted
share, earned in 2000. Results included the following unusual items:
. Extraordinary gain of $24.1 million, net of tax, or $0.08 per diluted share,
offset by an extraordinary loss of $17.8 million, net of tax, or $0.06 per
diluted share, for the early extinguishments of long-term debt in the fourth
and second quarters of 2001, respectively.
. Net of tax securities gains of $65.1 million, or $0.22 per diluted share,
related to the balance sheet repositioning during 2001.
. After-tax non-recurring expenses totaling $20.2 million, or $0.07 per diluted
share, associated with the Company's proposal to acquire the former Wachovia
Corporation in 2001.
. One Bank initiative costs of $35.5 million, net of tax, or $0.12 per diluted
share, for the Company's enhancements during 2001 to customer based systems
that are expected to yield further operating efficiencies in the future.
. Merger related charges for 2000 of $27.6 million, net of tax, or $0.09 per
diluted share.
Operating results for 2001 were impacted by a slowing economy causing
increased charge-offs and nonperforming assets resulting in a $141.2 million
increase in the provision for loan losses. Net interest income increased $145.0
million to $3,293.4 million and the net interest margin increased 3 basis points
in 2001. The declining rate environment coupled with sluggish loan growth
impacted the Company's net interest margin throughout 2001.
Net charge-offs were $272.4 million, or .39% of average loans for 2001,
compared to $130.8 million, or .19% of average loans for 2000. The 2001 loan
loss provision of $275.2 million was 105.4% higher than the $134.0 million
recorded in 2000. These increases were primarily due to the continued economic
slowdown that resulted in deterioration in some large corporate credits.
Noninterest income, excluding securities gains and losses, was $2,002.7
million, a 13.3% increase compared to 2000. This increase was driven by a $64.0
million, or 201.4%, growth in trading account profits and commissions as the
Company benefited from increased customer derivative transaction fees due to the
lower interest rate environment. Also positively impacting non-interest income
was a $96.1 million, or 106.7%, increase in mortgage production related income
as the low rate environment led to significant refinancing activity during 2001.
Negatively impacting noninterest income was a $38.9 million, or 118.5%, decrease
in mortgage servicing related income due to accelerated amortization of mortgage
servicing rights resulting from increased prepayments.
Noninterest expense, excluding merger-related expenses, increased $327.4
million or 11.8% compared to 2000. Personnel expenses increased $137.4 million,
or 8.4%, primarily attributable to increased incentive payments related to
mortgage production, bonus payments from the acquisition of the institutional
business of The Robinson-Humphrey Company, LLC and expenditures for the One Bank
initiative. Other expenses in 2001 included $32.0 million associated with the
Company's proposal to acquire the former Wachovia Corporation. Also contributing
to the increase was a $10.8 million, or 30.5%, increase in amortization of
intangible assets due to the write-off of the remaining $12.7 million of
goodwill associated with the sale of the assets and liabilities of SunTrust
Credit Corporation during 2001.
<TABLE>
<CAPTION>
Net Income Before
Extraordinary Gain Return On Average
5 Year Compounded Growth Rate 9.8% Realized Equity
($ per common share) (percent)
<S> <C>
'96 '97 '98 '99 '00 '01 '96 '97 '98 '99 '00 '01
859.0 975.9 971.0 1,124.0 1,294.1 1,369.2 16.84 19.07 17.21 20.83 21.46 21.74
</TABLE>
<PAGE>
16 SunTrust 2001 Annual Report
MANAGEMENT'S DISCUSSION
================================================================================
Cash Basis Financial Data
Effective January 1, 2002, in accordance with the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets," SunTrust will no longer amortize goodwill.
See "Recent Accounting Developments" on page 50 of the Notes to the Consolidated
Financial Statements for further information. Table 1 presents financial data
excluding the impact of the after-tax amortization of goodwill and core deposit
intangibles.
Table 1 Cash Basis Selected Financial Data
<TABLE>
<CAPTION>
Year Ended December 31
(In millions except per share data) 2001 2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Noninterest expense $ 3,057.7 $ 2,793.3 $ 2,869.5 $ 2,828.3 $ 2,351.9 $2,331.5
Net income 1,414.8 1,325.8 1,358.8 1,009.4 1,010.4 892.8
Per Common Share
Diluted
Income before extraordinary gain $ 4.83 $ 4.41 $ 3.60 $ 3.16 $ 3.15 $ 2.70
Extraordinary gain 0.02 -- 0.63 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 4.85 4.41 4.23 3.16 3.15 2.70
Average common shares - diluted (thousands) 291,584 300,956 321,174 319,711 320,932 331,042
Performance Ratios
Return on average assets 1.42% 1.39% 1.52% 1.24% 1.39% 1.34%
Return on average realized shareholders'equity 24.23 24.02 23.32 19.80 21.47 19.12
Return on average total shareholders' equity 18.65 18.97 17.77 13.81 15.44 14.88
Efficiency ratio 56.96 56.75 55.82 61.12 56.53 60.49
Goodwill and Core Deposit Intangibles (CDI)
Goodwill average balance $ 469.8 $ 488.9 $ 511.5 $ 524.9 $ 389.0 409.2
CDI average balance 19.8 23.7 30.3 19.4 21.7 24.0
Goodwill amortization (after tax) 36.1 27.9 27.8 34.2 30.6 30.1
CDI amortization (after tax) 3.1 3.8 4.5 4.2 3.9 3.7
===================================================================================================================================
</TABLE>
<PAGE>
SunTrust 2001 Annual Report 17
MANAGEMENT'S DISCUSSION
================================================================================
Table 2 Analysis Of Changes In Net Interest Income/1/
<TABLE>
<CAPTION>
2001 Compared to 2000 2000 Compared to 1999
Increase (Decrease) Due to Increase (Decrease) Due to
(In millions on a ---------------------------- -----------------------------
taxable-equivalent basis) Volume Rate Net Volume Rate Net
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Loans
Taxable $ (6.0) $ (683.7) $ (689.7) $ 579.2 $ 282.0 $ 861.2
Tax-exempt/2/ 4.1 (8.7) (4.6) (1.9) 4.8 2.9
Securities available for sale
Taxable 86.6 (34.1) 52.5 (8.6) 62.4 53.8
Tax-exempt/2/ (1.6) 1.9 0.3 (6.8) (2.4) (9.2)
Funds sold (11.0) (30.6) (41.6) 5.9 13.5 19.4
Loans held for sale 107.8 (6.9) 100.9 (83.2) 21.6 (61.6)
Other short-term investments/2/ 30.1 (12.7) 17.4 14.8 1.3 16.1
- -----------------------------------------------------------------------------------------------------------
Total interest income 210.0 (774.8) (564.8) 499.4 383.2 882.6
- -----------------------------------------------------------------------------------------------------------
Interest Expense
NOW/Money market accounts 118.4 (123.9) (5.5) 5.4 102.0 107.4
Savings deposits (12.5) (44.5) (57.0) (14.9) 39.6 24.7
Consumer time deposits (44.1) (15.6) (59.7) 5.3 54.6 59.9
Brokered deposits (39.3) (61.3) (100.6) 215.4 0.1 215.5
Foreign deposits (229.5) (152.7) (382.2) 341.7 55.9 397.6
Other time deposits (14.5) (20.9) (35.4) (9.9) 31.6 21.7
Funds purchased 30.8 (269.8) (239.0) (248.9) 150.5 (98.4)
Other short-term borrowings 2.6 (37.1) (34.5) (7.0) 25.4 18.4
Long-term debt 269.9 (65.8) 204.1 142.8 32.6 175.4
- -----------------------------------------------------------------------------------------------------------
Total interest expense 81.8 (791.6) (709.8) 429.9 492.3 922.2
- -----------------------------------------------------------------------------------------------------------
Net change in net interest income $ 128.2 $ 16.8 $ 145.0 $ 69.5 $ (109.1) $ (39.6)
===========================================================================================================
</TABLE>
/1/ Changes in net interest income are attributed to either changes in average
balances (volume change) or changes in average rates (rate change) for
earning assets and sources of funds on which interest is received or paid.
Volume change is calculated as change in volume times the previous rate
while rate change is change in rate times the previous volume. The
rate/volume change, change in rate times change in volume, is allocated
between volume change and rate change at the ratio each component bears to
the absolute value of their total.
/2/ Interest income includes the effects of taxable-equivalent adjustments
(reduced by the nondeductible portion of interest expense) using a federal
income tax rate of 35% and, where applicable, state income taxes to increase
tax-exempt interest income to a taxable-equivalent basis.
Table 3 Loan Portfolio By Types Of Loans
<TABLE>
<CAPTION>
At December 31
(In millions) 2001 2000 1999 1998 1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial $ 28,945.9 $ 30,781.1 $ 26,933.5 $ 24,589.6 $ 19,043.7 $ 15,761.4
Real estate
Construction 3,627.3 2,966.1 2,457.1 2,085.0 1,809.8 1,686.6
Residential mortgages 17,297.1 19,953.0 19,619.3 16,880.9 17,297.2 15,629.5
Other 8,152.0 8,121.4 7,794.9 8,254.3 7,457.6 6,455.0
Credit card 92.0 76.8 77.4 1,563.5 2,195.6 2,367.4
Consumer loans 10,844.9 10,341.4 9,120.6 8,167.3 7,672.5 7,401.5
- --------------------------------------------------------------------------------------------------------
Total loans $ 68,959.2 $ 72,239.8 $ 66,002.8 $ 61,540.6 $ 55,476.4 $ 49,301.4
========================================================================================================
</TABLE>
<PAGE>
18 SunTrust 2001 Annual Report
MANAGEMENT'S DISCUSSION
- -------------------------------------------------------------------------------
Table 4 Consolidated Daily Average Balances, Income/Expense And Average Yields
Earned And Rates Paid
<TABLE>
<CAPTION>
2001 2000 1999
------------------------------- -------------------------------- -------------------------------
(Dollars in millions; yields Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/
on taxable-equivalent basis) Balances Expense Rates Balances Expense Rates Balances Expense Rates
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Loans:/1/
Taxable $ 68,892.8 $4,862.7 7.06% $ 68,968.8 $ 5,552.4 8.05% $ 61,648.3 $4,691.2 7.61%
Tax-exempt/2/ 1,130.2 78.4 6.94 1,075.5 83.0 7.72 1,101.1 80.1 7.27
- -----------------------------------------------------------------------------------------------------------------------------------
Total loans 70,023.0 4,941.1 7.06 70,044.3 5,635.4 8.05 62,749.4 4,771.3 7.60
Securities available for sale
Taxable 15,904.8 1,033.9 6.50 14,593.7 981.4 6.73 14,728.7 927.6 6.30
Tax-exempt/2/ 448.7 35.7 7.95 469.7 35.4 7.54 558.2 44.6 7.99
- -----------------------------------------------------------------------------------------------------------------------------------
Total securities available
for sale 16,353.5 1,069.6 6.54 15,063.4 1,016.8 6.75 15,286.9 972.2 6.36
Funds sold 1,250.3 51.2 4.09 1,439.8 92.8 6.44 1,338.0 73.4 5.48
Loans held for sale 2,949.9 211.5 7.17 1,451.1 110.6 7.62 2,577.1 172.2 6.68
Other short-term investments/2/ 1,457.4 47.1 3.23 610.4 29.7 4.87 304.3 13.6 4.48
- -----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 92,034.1 6,320.5 6.87 88,609.0 6,885.3 7.77 82,255.7 6,002.7 7.30
Allowance for loan losses (876.3) (869.0) (942.1)
Cash and due from banks 3,383.4 3,316.4 3,630.3
Premises and equipment 1,599.7 1,625.4 1,596.3
Other assets 4,043.3 3,362.2 3,332.5
Unrealized gains on securities
available for sale 2,700.0 2,353.8 2,948.1
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $102,884.2 $ 98,397.8 $ 92,820.8
===================================================================================================================================
Liabilities and
Shareholders' Equity
Interest-bearing deposits
NOW/Money market
accounts $ 24,301.4 $ 628.8 2.59% $ 20,129.0 $ 634.3 3.15% $ 19,926.0 $ 527.0 2.64%
Savings 6,066.6 171.5 2.83 6,434.2 228.5 3.55 6,918.8 203.8 2.95
Consumer time 9,092.6 468.8 5.16 9,935.5 528.5 5.32 9,824.3 468.6 4.77
Other time 3,823.9 200.6 5.25 4,085.3 236.0 5.78 4,275.0 214.3 5.01
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
consumer and
commercial deposits 43,284.5 1,469.7 3.40 40,584.0 1,627.3 4.01 40,944.1 1,413.7 3.45
Brokered Deposits 2,617.7 115.3 4.40 3,308.7 215.9 6.52 7.0 0.4 5.27
Foreign Deposits 5,175.4 227.5 4.39 9,621.7 609.7 6.34 4,087.8 212.0 5.19
- --------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
deposits 51,077.6 1,812.5 3.55 53,514.4 2,452.9 4.58 45,038.9 1,626.1 3.61
Funds purchased 11,283.6 412.2 3.65 10,754.4 651.2 6.06 15,220.8 749.6 4.92
Other short-term borrowings 1,593.8 63.4 3.98 1,550.6 97.9 6.31 1,689.9 79.5 4.71
Long-term debt 12,497.2 739.0 5.91 8,034.6 534.9 6.66 5,858.6 359.5 6.14
- --------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 76,452.2 3,027.1 3.96 73,854.0 3,736.9 5.06 67,808.2 2,814.7 4.15
Noninterest-bearing deposits 13,491.1 13,177.5 12,803.2
Other liabilities 4,867.1 3,864.4 4,018.7
Realized shareholders' equity 6,328.0 6,031.6 6,368.3
Accumulated other
comprehensive income 1,745.8 1,470.3 1,822.4
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $102,884.2 $ 98,397.8 $ 92,820.8
================================================================================================================================
Interest Rate Spread 2.91% 2.71% 3.15%
- --------------------------------------------------------------------------------------------------------------------------------
Net Interest Income $3,293.4 $ 3,148.4 $3,188.0
- ---------------------------------------------------------------------------------------------------------------------------------
Net Interest Margin/3/ 3.58% 3.55% 3.88%
=================================================================================================================================
</TABLE>
/1/ Interest income includes loan fees of $148.7, $135.6, $142.3, $118.4,
$108.5, and $102.1 million in the six years ended December 31, 2001.
Nonaccrual loans are included in average balances and income on such loans,
if recognized, is recorded on a cash basis.
/2/ Interest income includes the effects of taxable-equivalent adjustments
(reduced by the nondeductible portion of interest expense) using a federal
income tax rate of 35% for all years reported and where applicable, state
income taxes, to increase tax-exempt interest income to a taxable-equivalent
basis. The net taxable-equivalent adjustment amounts included in the above
table were $40.8, $39.9, $42.5, $44.4, $47.9, and $50.0 million in the six
years ended December 31, 2001.
<PAGE>
SunTrust 2001 Annual Report 19
MANAGEMENT'S DISCUSSION
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Compounded
Growth Rate in
Average Balances
1998 1997 1996 One Year Five Year
--------------------------------- --------------------------------- ------------------------------ ------------------------
Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/ 2001- 2001-
Balances Expense Rates Balances Expense Rates Balances Expense Rates 2000 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 56,537.1 $ 4,499.6 7.96% $50,813.7 $4,198.8 8.26% $45,472.0 $3,798.5 8.35% (0.1)% 8.7%
1,053.4 81.9 7.78 974.4 79.2 8.13 866.4 74.0 8.54 5.1 5.5
- ----------------------------------------------------------------------------------------------------------------------------
57,590.5 4,581.5 7.96 51,788.1 4,278.0 8.26 46,338.4 3,872.5 8.36 -- 8.6
12,618.9 819.7 6.50 11,882.4 779.9 6.56 12,297.7 778.8 6.33 9.0 5.3
633.8 52.2 8.23 749.8 64.0 8.53 850.9 75.8 8.90 (4.5) (12.0)
- ----------------------------------------------------------------------------------------------------------------------------
13,252.7 871.9 6.58 12,632.2 843.9 6.68 13,148.6 854.6 6.50 8.6 4.5
1,306.2 71.6 5.48 1,378.5 80.4 5.83 1,044.0 56.5 5.41 (13.2) 3.7
2,414.7 180.4 7.47 865.4 70.0 8.09 984.4 77.9 7.91 103.3 24.5
316.8 14.9 4.70 279.8 13.8 4.94 129.0 7.0 5.44 138.8 62.4
- ----------------------------------------------------------------------------------------------------------------------------
74,880.9 5,720.3 7.64 66,944.0 5,286.1 7.90 61,644.4 4,868.5 7.90 3.9 8.3
(940.5) (913.3) (923.8) 0.8 (1.1)
3,306.9 3,156.7 3,186.2 2.0 1.2
1,486.6 1,395.1 1,164.7 (1.6) 6.6
3,219.1 2,459.3 2,025.1 20.3 14.8
3,583.9 2,975.5 2,155.4 14.7 4.6
- ----------------------------------------------------------------------------------------------------------------------------
$ 85,536.9 $76,017.3 $ 69,252.0 4.6 8.2
============================================================================================================================
$ 18,253.6 $ 524.5 2.87% $16,360.5 $ 462.2 2.82% $ 16,110.3 $ 457.4 2.84% 20.7% 8.6%
6,645.9 216.9 3.26 6,810.1 227.5 3.34 7,065.7 240.5 3.40 (5.7) (3.0)
10,390.4 534.4 5.14 11,032.1 562.4 5.10 12,049.4 625.4 5.19 (8.5) (5.5)
4,423.9 244.4 5.53 4,082.2 227.6 5.57 3,080.1 168.7 5.48 (6.4) 4.4
- ----------------------------------------------------------------------------------------------------------------------------
39,713.8 1,520.2 3.86 38,284.9 1,479.7 3.83 38,305.5 1,492.0 3.90 6.7 2.5
394.0 21.6 5.47 108.1 6.1 5.64 71.5 3.7 5.18 -- 121.8
1,906.2 102.4 5.37 2,574.7 141.7 5.50 1,670.5 90.0 5.39 (46.2) 25.4
- ----------------------------------------------------------------------------------------------------------------------------
42,014.0 1,644.2 3.91 40,967.7 1,627.5 3.97 40,047.5 1,585.7 3.96 (4.6) 5.0
12,164.9 634.1 5.21 8,641.9 461.7 5.34 6,965.8 356.9 5.12 4.9 10.1
2,391.8 127.8 5.34 2,591.9 133.8 5.16 1,501.4 81.7 5.44 2.8 1.2
5,368.0 340.7 6.35 3,275.4 230.5 7.04 1,961.8 134.5 6.86 55.5 44.8
- ----------------------------------------------------------------------------------------------------------------------------
61,938.7 2,746.8 4.43 55,476.9 2,453.5 4.42 50,476.5 2,158.8 4.28 3.5 8.7
11,711.3 10,706.0 10,270.1 2.4 5.6
4,033.3 2,881.0 2,071.1 25.9 18.6
5,641.4 5,116.7 5,101.3 4.9 4.4
2,212.2 1,836.7 1,333.0 18.7 5.5
- ----------------------------------------------------------------------------------------------------------------------------
$ 85,536.9 $76,017.3 $ 69,252.0 4.6 8.2
============================================================================================================================
3.21% 3.48% 3.62%
- ----------------------------------------------------------------------------------------------------------------------------
$ 2,973.5 $2,832.6 $2,709.7
- ----------------------------------------------------------------------------------------------------------------------------
3.97% 4.23% 4.40%
============================================================================================================================
</TABLE>
/3/ Derivative instruments used to help balance the Company's interest-
sensitivity position decreased net interest income by $37.4 and $0.5
million in 2001 and 2000, respectively, increased net interest income by
$16.3 million and $0.7 million in 1999 and 1998, decreased net interest
income by $7.7 million in 1997 and increased net interest income by $0.1
million in 1996. Without these derivative instruments, the net interest
margin would have been 3.62% in 2001,3.55% in 2000, 3.86% in 1999, 3.97% in
1998, 4.24% in 1997, and 4.40% in 1996.
<PAGE>
20 SunTrust 2001 Annual Report
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Net Interest Income/Margin
Net interest income for 2001 was $3,293.4 million or 4.6% higher than the prior
year. The increase was primarily due to decreasing interest rates in 2001 and
strong retail deposit growth. The Federal Reserve Bank lowered the fed funds
rate and SunTrust concurrently lowered its prime rate 475 basis points
throughout 2001. Additionally, SunTrust was successful in its initiative to grow
retail deposits and reduce its reliance on higher interest bearing wholesale
funding. As a result, average consumer and commercial deposits increased 5.6%
and brokered and foreign deposits decreased 39.7%. In addition, the Company took
advantage of the low interest rate environment to secure long-term funding
resulting in an increase in average long-term debt of 55.5% during 2001.
Average earning assets were up 3.9%, average loans adjusted for
securitizations increased 3.4% and the net interest margin was 3.58% in 2001
compared to 3.55% in 2000. Lower cost consumer and commercial deposit growth
funded a significant portion of the earning asset growth, which helped improve
the margin. The average rate on earning assets decreased 90 basis points to
6.87% and the average rate on interest-bearing liabilities decreased 110 basis
points to 3.96%. These decreases were primarily due to the falling rates and a
liability sensitive balance sheet structure through the third quarter of 2001
that provided for liabilities to be repriced to a greater degree than assets.
SunTrust continually restructured the balance sheet throughout the year to a
slightly asset sensitive position by the end of 2001, which is discussed in
greater detail under "Interest Rate and Market Risk."
As part of its on-going balance sheet management, the Company continues to
take steps to obtain alternative lower cost funding sources such as developing
initiatives to grow retail deposits to maximize net interest income. During the
first quarter of 2001, the Company initiated a campaign to attract money market
accounts. As a result, average money market accounts have grown 30.9% during
2001.
Interest income that the Company was unable to recognize on nonperforming
loans had a negative impact of three and two basis points on the net interest
margin for 2001 and 2000, respectively. Table 4 contains more detailed
information concerning average balances, yields earned and rates paid.
Provision For Loan Losses
The provision for loan losses charged to expense is based upon credit loss
experience and the results of a detailed analysis estimating an appropriate and
adequate allowance for loan and lease losses. The analysis includes the
evaluation of impaired loans as prescribed under Statement of Financial
Accounting Standards (SFAS) No.'s 114 and 118, pooled loans as prescribed under
SFAS No. 5 and economic and other risk factors as outlined in various Joint
Interagency Statements issued by the bank regulatory agencies. The 2001 loan
loss provision of $275.2 million was 105.4% higher than the $134.0 million
recorded in 2000. The increase in the provision for loan losses was primarily
due to deterioration in large corporate credits (national and large business
clients generally with total annual revenue in excess of $250 million) in
various industries due to the economic downturn that led to higher nonperforming
loans and net charge-offs. Large corporate net charge offs totaled about $142
million in 2001, compared to $58 million in 2000.
<PAGE>
SunTrust 2001 Annual Report 21
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Average Earning Asset Mix
($ in millions)
[GRAPH]
Loans 70,023.0 76.08%
Securities Available for Sale 16,353.5 17.77%
Loans Held for Sale 2,949.9 3.21%
Trading Account 1,289.8 1.40%
Funds Sold 1,250.3 1.36%
Interest Bearing Deposits in Other Banks 167.6 0.18%
Loan Mix
($ in millions)
[GRAPH]
Commercial 28,945.9 41.98%
Residential Mortgage 17,297.1 25.08%
Consumer Loans 10,844.9 15.73%
Other Real Estate 8,152.0 11.82%
Construction 3,627.3 5.26%
Business Credit Card 92.0 0.13%
Efficiency Ratio
(percent)
1996 61.41
1997 57.41
1998 62.02
1999 60.35
2000 57.47
2001 56.96
Loans
Loan demand was modest in 2001 as average loans, adjusted for securitizations,
increased 3.4% over the prior year. Compared to the prior year-end, the
Company's portfolio of commercial loans declined 6.0%, real estate loans
declined 6.3% and consumer lending grew 4.9%.
The loan portfolio continues to be well diversified from both a product and
industry concentration standpoint. The product mix remained relatively constant
from year-end 2000 to 2001, with real estate loans accounting for the largest
loan segment (42.2% of total loans). Residential real estate represented 25.1%
of total loans at year-end, including $14.5 billion in home mortgages and $2.8
billion in home equity lines. During 2001 and 2000, in order to improve
liquidity, the Company securitized $1,903.5 and $925.4 million, respectively,
in residential mortgages. Approximately $1,667.5 million of securitized
mortgages were carried on the Consolidated Balance Sheet as "Securities
Available for Sale" at December 31, 2001. As a part of its on-going balance
sheet management, the Company may securitize additional residential mortgages
and other loans during 2002. Commercial loans and consumer loans comprised 42.0%
and 15.7% of the total loans at year-end, respectively, compared to 42.6% and
14.3% in 2000. From an industry concentration perspective, the Financial
services, Manufacturing and Business services sectors are the only areas that
represent more than 5% of year-end loans outstanding.
<PAGE>
22 SunTrust 2001 Annual Report
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Table 5 Noninterest Income
<TABLE>
<CAPTION>
Year Ended December 31
(In millions) 2001 2000 1999 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts $ 510.2 $ 459.7 $ 438.1 $ 401.1 $ 374.1 $ 346.9
Trust and investment management income 486.1 493.9 495.6 453.4 387.3 339.4
Other charges and fees 240.3 210.8 200.1 191.0 166.9 143.4
Mortgage production related income 186.1 90.0 153.0 238.3 97.0 70.5
Mortgage servicing related income (6.1) 32.8 27.1 2.8 20.8 25.7
Securities gains (losses) 153.1 6.6 (109.1) 8.2 6.9 17.6
Credit card and other fees 113.6 95.7 106.2 87.3 81.1 59.3
Investment banking income 108.5 111.3 67.8 55.8 16.8 12.2
Trading account profits and commissions 95.7 31.7 35.1 44.6 22.7 18.2
Retail investment services 107.8 108.2 97.4 64.6 51.5 37.7
Other income 160.5 132.9 114.6 106.8 104.1 75.2
- -------------------------------------------------------------------------------------------------------------
Total noninterest income $2,155.8 $1,773.6 $ 1,625.9 $1,653.9 $1,329.2 $1,146.1
=============================================================================================================
</TABLE>
Noninterest Income
The Company continues to make significant progress in the diversification of its
sources of income. Noninterest income has grown to comprise 40% of total
revenues compared with 30% in 1996. Noninterest income, excluding securities
gains and losses, was $2,002.7 million in 2001, an increase of $235.7 million or
13.3% compared to 2000.
Trust and investment management income declined $7.8 million or 1.6%
compared to 2000. The market value of SunTrust's assets under management and
associated fee income was adversely impacted by the 16% average year-to-date
decline in the S&P 500. As of December 31, 2001, SunTrust's total managed and
non-managed trust assets were $128.8 billion, which excluded $41.8 billion in
non-managed assets held in corporate trust accounts. Included in total trust
assets were $89.5 billion of discretionary assets under management, which
included the STI Classic Funds, institutional assets managed by Trusco Capital
Management and participant-directed retirement accounts. As of December 31,
2000, discretionary assets under management were $91.6 billion. The
market-related decline in assets under management was offset by strong net new
business in 2001. Total trust and investment management sales increased 9% over
prior year, and the client retention rate improved significantly compared to
2000. The contributing factors to the net new business results were improved
client retention, new business initiatives and client management which were
aided by the favorable investment performance of the STI Classic Funds and
Trusco Capital Management. Management expects these positive trends will
continue in 2002 leading to improved performance, provided the market
environment improves.
Retail investment income was unchanged on a year-to-date basis, which was
favorable relative to industry results. Additionally, retail investment income
compared to the prior and comparable quarters was up significantly indicating
positive momentum heading into year-end. Total brokerage assets which consist of
client assets held in brokerage accounts in which SunTrust serves as an advisor
but does not possess discretionary authority were $14.5 billion as of December
31, 2001 compared to $13.1 billion as of December 31, 2000.
Service charges on deposit accounts increased $50.5 million or 11.0%
compared to 2000. Increased usage of products and services, a more consistent
pricing strategy and lower earnings credit rate contributed to the increase in
this line item. Trading account profits and commissions increased $64.0 million,
or 201.4%, as the Company benefited from increased customer derivative
transaction fees due to the lower interest rate environment. Mortgage production
related income increased by $96.1 million or 106.7%, due primarily to an
increase in refinancing activity resulting from the declining rate environment.
Total mortgage production for 2001 was $24.2 billion, an 81.7% increase from
$13.3 billion in 2000. Also associated with the high volume of refinancing
activity, mortgage servicing related income decreased $38.9 million or 118.5%,
due to accelerated amortization of mortgage servicing rights related to
increased prepayments. As a result of SunTrust's conservative capitalization
policy, no valuation allowance was required for mortgage servicing rights as of
December 31, 2001 and 2000. Additionally, there were no impairment charges
related to mortgage servicing rights during 2001 and 2000. Other charges and
fees were up $29.5 million or 14.0%, as a result of increased loan commitment
fee income and line-of-credit fees.
Credit card and other fees increased $17.9 million or 18.8%. Debit card
interchange income of $59.3 million for 2001 compared to $47.3 million for 2000
is included in credit card fees. The increase in debit card income is as a
result of increased acceptance and utilization of this product by customers. The
Company incurred net securities gains during 2001 of $153.1 million com-
<PAGE>
SunTrust 2001 Annual Report 23
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Table 6 Noninterest Expense
<TABLE>
<CAPTION>
Year Ended December 31
(In millions) 2001 2000 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Salaries $ 1,166.4 $ 1,139.9 $ 1,174.5 $ 1,095.5 $ 977.9 $ 924.1
Other compensation 422.0 329.1 348.1 338.2 218.1 198.5
Employee benefits 193.0 175.0 175.8 181.8 176.9 169.5
- ----------------------------------------------------------------------------------------------------------------
Total personnel expense 1,781.4 1,644.0 1,698.4 1,615.5 1,372.9 1,292.1
Net occupancy expense 210.4 202.6 197.4 192.2 187.2 203.0
Outside processing and software 199.1 172.3 150.3 138.4 112.7 103.8
Equipment expense 189.8 193.7 198.5 178.8 167.7 158.6
Marketing and customer development 104.0 106.2 105.4 107.1 95.4 104.6
Consulting and legal 87.7 59.6 62.5 67.5 51.7 55.0
Credit and collection services 74.6 56.9 68.7 70.4 59.5 54.1
Postage and delivery 64.0 63.3 68.1 64.4 64.1 63.3
Communications 59.2 59.8 66.3 62.1 52.7 50.7
Other staff expense 58.5 51.5 50.1 47.8 40.3 39.5
Operating supplies 48.3 47.3 51.9 54.0 50.0 52.9
Amortization of intangible assets 46.3 35.5 32.8 43.1 38.5 37.4
FDIC premiums 10.9 11.2 7.9 8.4 8.5 59.3
Merger-related expenses -- 42.4 45.6 119.4 -- --
Other real estate (income) expense (4.2) (3.8) (4.8) (9.8) (8.6) 8.2
Other expense 183.5 86.0 106.2 110.8 96.6 85.5
- ----------------------------------------------------------------------------------------------------------------
Total noninterest expense $ 3,113.5 $ 2,828.5 $ 2,905.3 $ 2,870.1 $ 2,389.2 $ 2,368.0
================================================================================================================
Efficiency ratio 56.96% 57.47% 60.35% 62.02% 57.41% 61.41%
================================================================================================================
</TABLE>
pared to $6.6 million in 2000. The 2001 net securities gains included a gain of
$100.2 million due to the Company repositioning its securities portfolio by
shortening its average life and a gain of $52.9 million on the sale of Star
Systems Inc. representing a historical ownership in the ATM network. Other
income included net gains on the sale of mortgage and student loans of $5.6
million, $11.4 million, and $15.3 million in 2001, 2000, and 1999, respectively.
Noninterest Expense
Noninterest expense increased 10.1% in 2001. During 2001, total personnel
expense increased $137.4 million or 8.4% primarily because of increased
incentive payments related to mortgage production, bonus payments in conjunction
with the acquisition of the institutional business of The Robinson-Humphrey
Company, LLC and the One Bank initiative. The One Bank initiative represents
enhancements to customer based systems across the Company's geographic footprint
and is expected to yield operating efficiencies in the future. Other expense
increased $104.5 million or 76.0% in 2001. In addition to on-going miscellaneous
expenses, other expense in 2001 included $44.7 million related to the Wachovia
proposal, the acquisition of the institutional business of The Robinson-Humphrey
Company, LLC and the sale of SunTrust Credit Corporation. Amortization of
intangible assets increased $10.8 million or 30.4% as a result of the write-off
of the remaining $12.7 million of goodwill associated with SunTrust Credit
Corporation, due to the sale of the assets and liabilities of the company.
Consulting and legal increased $28.1 million or 47.2% due to data processing and
consulting fees related to the One Bank initiative. Credit and collection
services increased $17.7 million or 31.1% due to increased loan closing expense
associated with mortgage production. The efficiency ratio for 2001 was 57.0%, an
improvement from 57.5% for 2000.
Provision For Income Taxes
The provision for income taxes covers federal and state income taxes. In 2001,
the provision was $653.9 million, compared to $625.5 million in 2000. Included
in the 2001 provision, the Company recorded $3.4 million in income tax expense
related to the early extinguishment of long-term debt. The provision represents
an effective tax rate of 32.2% for 2001 compared to 32.6% for 2000. The
extraordinary gain on the consolidated financial statements is shown net of
taxes.
Allowance For Loan Losses
SunTrust maintains an allowance for loan losses sufficient to absorb inherent
losses in the loan portfolio. The Company is committed to the early recognition
of problem loans and to a conservative allowance. The Company believes the
current allowance is appropriate and adequate to cover such inherent losses. At
year-end 2001,
<PAGE>
24 SunTrust 2001 Annual Report
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
the Company's total allowance was $867.1 million, which represented 1.26% of
period-end loans.
The Company prepares a comprehensive analysis of its allowance for loan
losses at least quarterly and conducts a peer review of allowance levels of
other large banks. In addition, the SunTrust Allowance for Loan Losses Review
Committee has the responsibility of affirming the allowance methodology and
assessing the general and specific allowance factors in relation to estimated
and actual net charge-off trends. This committee meets at least quarterly and is
also responsible for assessing the appropriateness of the allowance for loan
losses for each loan category for the Company.
The allowance for loan losses consists of three elements: (i) specific
allowances for individual loans (per SFAS No.'s 114 and 118), (ii) general
allowances for loan pools (per SFAS No. 5) based on historical loan loss
experience and current trends, and (iii) allowances based on economic conditions
and other risk factors in the Company's individual markets (per various Joint
Interagency Statements issued by the bank regulatory agencies).
The first element -- specific allowance -- is based on a regular analysis
of classified loans where the internal risk ratings are below a predetermined
classification. This analysis is performed by the relationship manager for those
loans with total credit exposure of $0.5 million or greater. The specific
allowance established for these classified loans is based on a careful analysis
of probable and potential sources of repayment, including cash flow, collateral
value and guarantor capacity (if applicable). As of December 31, 2001 and 2000,
the specific allowance was $254 million and $152 million, respectively.
The second element -- general allowance -- is determined by the mix of loan
products within the portfolio, an internal loan grading process and associated
allowance factors. These general allowance factors are updated at least annually
and are based on a statistical loss migration analysis and current loan
charge-off trends. The loss migration analysis examines loss experience for
commercial credits in relation to internal loan grades. Charge-off trends are
analyzed for homogeneous loan categories (e.g., residential real estate, open-
and closed-end consumer loans, etc.). While formal loss migration and charge-off
trend analyses are conducted annually, the Company continually monitors credit
quality in all portfolio segments and may revise the general allowance factors
whenever necessary in order to address improving or deteriorating credit quality
trends or specific risks associated with a given loan category. As of December
31, 2001 and 2000, the general allowance was $425 million and $448 million,
respectively.
The third element -- economic conditions, concentrations and other risk
factors -- is based on national and local marketplace conditions and/or events
that may affect loan repayment in the near-term. This element requires a high
degree of management judgement to anticipate the impact that economic trends,
legislative or governmental actions or other unique market and/or portfolio
issues will have on credit losses. Consideration of other risk factors typically
includes such issues as recent loss experience in specific portfolio segments,
trends in loan quality, changes in account acquisition strategy or market focus
and concentrations of credit, together with any internal administrative risk
components. These factors are based on the influence of current external
variables on portfolio risk, so there will typically be some movement between
this element and the specific allowance component during various stages of the
economic cycle. Because of their subjective characteristics, these risk factors
are carefully reviewed by management and are revised as conditions indicate. As
of December 31, 2001 and 2000, the allowance for economic conditions,
concentrations and other risk factors was $179 million and $275 million,
respectively.
Concentrations of credit risk, discussed in Note 16 to the consolidated
financial statements, may affect the Company's analysis of other risks and,
ultimately, the level of the allowance. Concentrations typically involve a group
of borrowers whose loans are supported by the same type of collateral, borrowers
engaged in or dependent upon the same industry, or loans to one borrower or an
affiliated group of borrowers. SunTrust has a significant concentration of
credit in loans secured by residential real estate. At December 31, 2001, the
Company had $17.3 billion in loans secured by residential real estate,
representing 25.1% of total loans, down from 27.6% at December 31, 2000. In
addition, the Company is subject to a geographic concentration of credit because
it operates primarily in the Southeastern and Mid-Atlantic regions of the United
States. Although not material enough to constitute a significant credit
concentration, the Company has meaningful credit exposure to various industry
sectors, including manufacturing, financial services and business services.
Levels of exposure to these and other industry groups, together with an
assessment of current trends and expected future financial performance are
carefully analyzed for each industry in order to determine an adequate allowance
level.
SunTrust engages in limited international banking activities. The Company's
total cross border outstandings were $308 million as of December 31, 2001. Only
minor exposure exists in areas of concern in Latin America, South America and
Asia.
The Company's provision for loan losses in 2001 was $275.2 million, which
exceeded net charge-offs of $272.4 million by $2.8 million. The comparable
provision and net charge-off amounts for 2000 were $134.0 million and $130.8
million, respectively. Provision
<PAGE>
SunTrust 2001 Annual Report 25
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
expense increased from 2000 to 2001 due to continued deterioration in large
corporate credits.
The SunTrust charge-off policy is consistent with regulatory standards,
although a somewhat more conservative policy governs the unsecured consumer loan
portfolio. Losses on unsecured consumer loans are recognized at 90 days past
due, compared to the regulatory loss criteria of 120 days. Secured installment
loans are typically charged off at 120 days past due if repayment from all
sources has been determined to be improbable, or at the occurrence of a loss
confirming event (i.e., bankruptcy or repossession). Net charge-offs for 2001
represented .39% of average loans, compared to .19% of average loans for 2000.
Actual recoveries in 2001 were slightly lower than in 2000, and the ratio of
recoveries to total charge-offs decreased to 16.4% from 31.1% due to higher
gross charge-offs. The allowance at year-end represented 3.18 years coverage of
2001 net charge-offs.
Nonperforming assets increased to $578.8 million at December 31, 2001 from
$428.3 million at December 31, 2000 (See "Nonperforming Assets" and Table 10 for
further discussion). Many of the nonperforming loans are of the size where the
Company's allowance for loan loss methodology requires that they be specifically
analyzed by a relationship manager as previously described. These analyses
establish specific allowances and will typically cause a shift of overall
reserves from the general, economic or other risk categories to the specific
category. The ratio of the allowance for loan losses to total nonper-forming
loans (excluding other real estate owned) decreased to 155.4% at December 31,
2001 from 215.8% at December 31, 2000.
Table 7 Loans By Industry
At December 31, 2001
(Dollars in millions) Loans % of Total Loans
- -----------------------------------------------------------------------
Manufacturing $ 4,825.3 7.0
Financial services 4,146.8 6.0
Business services 3,545.6 5.1
Construction/Contractors 3,120.1 4.5
Transportation 2,846.3 4.1
Investment services 2,684.1 3.9
Real estate investors 2,487.3 3.6
Healthcare 2,035.2 3.0
Wholesale trade 1,856.2 2.7
Hospitality/Entertainment 1,729.7 2.5
Textiles 1,270.8 1.8
Telecommunications 1,169.3 1.7
Retail trade 1,070.8 1.6
=======================================================================
Table 8 Allowance For Loan Losses
<TABLE>
<CAPTION>
At December 31
(Dollars in millions) 2001 2000 1999 1998 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allocation by Loan Type
Commercial $ 435.8 $ 389.0 $ 286.7 $ 251.4 $ 247.8 $ 229.9
Real estate 145.5 190.2 208.0 229.8 229.3 262.8
Consumer loans 251.3 252.3 339.3 420.9 406.9 350.5
Unallocated 34.5 43.0 37.3 42.5 49.5 53.8
- -------------------------------------------------------------------------------------------------------
Total $ 867.1 $ 874.5 $ 871.3 $ 944.6 $ 933.5 $ 897.0
=======================================================================================================
Allocation as a Percent of Total Allowance
Commercial 50.2% 44.5% 32.9% 26.6% 26.5% 25.6%
Real estate 16.8 21.7 23.9 24.3 24.6 29.3
Consumer loans 29.0 28.9 38.9 44.6 43.6 39.1
Unallocated 4.0 4.9 4.3 4.5 5.3 6.0
- -------------------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
=======================================================================================================
Year-end Loan Types as a Percent of Total Loans
Commercial 42.0% 42.6% 40.8% 40.0% 34.3% 32.0%
Real estate 42.3 43.0 45.3 44.2 47.9 48.2
Consumer loans 15.7 14.4 13.9 15.8 17.8 19.8
- -------------------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
=======================================================================================================
</TABLE>
<PAGE>
26 SunTrust 2001 Annual Report
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Table 9 Summary Of Loan Loss Experience
<TABLE>
<CAPTION>
Year Ended December 31
(Dollars in millions) 2001 2000 1999 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allowance for Loan Losses
Balance - beginning of year $ 874.5 $ 871.3 $ 944.6 $ 933.5 $ 897.0 $ 915.8
Allowance from acquisitions and
other activity - net (10.2) -- (13.3) (10.0) 2.2 0.3
Provision for loan losses 275.2 134.0 170.4 214.6 225.1 171.8
Charge-offs
Commercial (217.3) (115.6) (142.0) (49.0) (30.0) (44.5)
Real estate
Construction (0.3) (0.2) (2.2) (3.2) (4.0) (4.0)
Residential mortgages (10.8) (7.8) (15.0) (13.8) (11.8) (10.1)
Other (5.9) (3.3) (5.2) (5.2) (6.9) (11.3)
Credit card (2.7) (5.4) (78.9) (129.5) (143.2) (129.6)
Consumer loans (89.0) (57.5) (52.8) (63.6) (79.3) (74.8)
- --------------------------------------------------------------------------------------------------------------
Total charge-offs (326.0) (189.8) (296.1) (264.3) (275.2) (274.3)
Recoveries
Commercial 23.8 22.7 15.5 14.8 22.0 24.2
Real estate
Construction 0.4 0.3 0.7 0.3 2.5 2.3
Residential mortgages 2.2 3.3 3.4 2.7 2.8 2.3
Other 1.8 3.9 6.1 8.4 8.9 12.7
Credit card 1.6 3.1 11.9 14.9 17.7 13.5
Consumer loans 23.8 25.7 28.1 29.7 30.5 28.4
- --------------------------------------------------------------------------------------------------------------
Total recoveries 53.6 59.0 65.7 70.8 84.4 83.4
- --------------------------------------------------------------------------------------------------------------
Net charge-offs (272.4) (130.8) (230.4) (193.5) (190.8) (190.9)
- --------------------------------------------------------------------------------------------------------------
Balance - end of year $ 867.1 $ 874.5 $ 871.3 $ 944.6 $ 933.5 $ 897.0
==============================================================================================================
Total loans outstanding at
year end $68,959.2 $72,239.8 $66,002.8 $61,540.6 $55,476.4 $49,301.4
- --------------------------------------------------------------------------------------------------------------
Average loans $70,023.0 $70,044.3 $62,749.4 $57,590.5 $51,788.1 $46,338.4
Ratios
Allowance to year-end loans 1.26% 1.21% 1.32% 1.53% 1.68% 1.82%
Allowance to nonperforming loans 155.4 215.8 350.0 456.0 494.6 305.5
Net charge-offs to average loans 0.39 0.19 0.37 0.34 0.37 0.41
Provision to average loans 0.39 0.19 0.27 0.37 0.43 0.37
Recoveries to total charge-offs 16.4 31.1 22.2 26.8 30.7 30.4
==============================================================================================================
</TABLE>
Commercial loans and real estate loans are typically placed on nonaccrual
when principal or interest is past due for 90 days or more, unless the loan is
both secured by collateral having realizable value sufficient to discharge the
debt in full and the loan is in the legal process of collection. Once a loan has
been classified as nonaccrual, it also meets the criteria for an impaired loan.
Accordingly, secured loans may be charged down to the estimated value of the
collateral and previously accrued unpaid interest is reversed. Subsequent
charge-offs may be required as a result of changes in the market value of
collateral or other repayment prospects.
Nonperforming Assets
Nonperforming assets were $578.8 million at December 31, 2001, increasing 35.1%
from December 31, 2000. At year-end, the ratio of nonperforming assets to total
loans plus other real estate owned was .84% compared to .59% at December 31,
2000.
The increase in nonperforming assets was driven by large corporate
bankruptcies in multiple industry sectors. The energy sector accounted for a
significant amount of the 2001 net increase. Other industry segments
contributing to the rise in nonperforming assets included textiles,
agribusiness, fast foods and retail. The Company expects nonperforming assets to
remain manageable with moderate increases during 2002.
<PAGE>
SunTrust 2001 Annual Report 27
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Table 10 Nonperforming Assets And Accruing Loans Past Due 90 Days Or More
<TABLE>
<CAPTION>
At December 31
(Dollars in millions) 2001 2000 1999 1998 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Nonperforming Assets
Nonaccrual loans
Commercial $377.6 $273.6 $105.0 $ 50.1 $ 35.1 $ 68.2
Real estate
Construction 4.0 2.2 9.0 13.5 16.0 23.7
Residential mortgages 79.9 81.8 82.6 83.9 75.2 74.7
Other 62.8 29.0 34.9 46.6 47.6 103.7
Consumer loans 33.8 18.7 17.4 12.5 12.1 13.4
- ---------------------------------------------------------------------------------------------
Total nonaccrual loans 558.1 405.3 248.9 206.6 186.0 283.7
Restructured loans -- -- -- 0.6 2.7 9.9
- ---------------------------------------------------------------------------------------------
Total nonperforming loans 558.1 405.3 248.9 207.2 188.7 293.6
Other real estate owned 20.7 23.0 26.8 34.9 48.2 71.1
- ---------------------------------------------------------------------------------------------
Total nonperforming assets $578.8 $428.3 $275.7 $242.1 $236.9 $364.7
=============================================================================================
Ratios
Nonperforming loans to total loans 0.81% 0.56% 0.38% 0.34% 0.34% 0.60%
Nonperforming assets to total loans
plus other real estate owned 0.84 0.59 0.42 0.39 0.43 0.74
Accruing Loans Past Due 90 Days or More $185.5 $181.2 $117.4 $108.2 $109.0 $106.1
=============================================================================================
</TABLE>
Interest income on nonaccrual loans, if recognized, is recorded using the
cash basis method of accounting. When a loan is placed on nonaccrual, unpaid
interest is reversed against interest income if it was accrued in the current
year and is charged to the allowance for loan losses if it was accrued in prior
years. When a nonac-crual loan is returned to accruing status, any unpaid
interest is recorded as interest income only after all principal has been
collected.
For the year 2001, the gross amount of interest income that would have been
recorded on nonaccrual loans and restructured loans at December 31, 2001, if all
such loans had been accruing interest at the original contractual rate, was
$45.6 million. Interest payments recorded in 2001 as interest income (excluding
reversals of previously accrued interest) for all such nonperforming loans at
December 31, 2001, were $15.8 million.
Securities Available For Sale
The investment portfolio is managed as part of the overall asset and
liability management process to optimize income and market performance over an
entire interest rate cycle while mitigating risk. As interest rates declined to
their lowest levels in over forty years and are forecasted to begin rising in
2002, the Company shifted its interest rate sensitivity position to being
slightly asset sensitive to benefit from rising rates. In conjunction with
interest rate risk management, the portfolio was repositioned during 2001 to
shorten its average life and shift its mix toward more floating rate assets. The
average life shortened from 5.6 years to 4.0 years and the percentage of
floating rate securities increased from 6% to 17% of the total portfolio. The
portfolio yield decreased from 6.75% in 2000 to 6.54% in 2001, primarily from
purchasing shorter term securities at lower market rates. Net securities gains
of $100.2 million were realized in 2001 from selling longer term, fixed rate
securities as part of the repositioning. An additional $52.9 million security
gain was recorded in 2001 on the sale of Star Systems, Inc. Portfolio turnover
from sales totaled $5.4 billion in 2001, representing 28.4% of the average
portfolio size.
The average portfolio size increased $1.3 billion for the year on an
amortized cost basis. Most of the increase was from the retention of
mortgage-backed securities created from securitizing single-family mortgage
loans in the fourth quarter of 2000 and first quarter of 2001.
The carrying value of the investment portfolio, all of which is classified
as "securities available for sale," reflected $2.6 billion in net unrealized
gains at December 31, 2001, including a $2.3 billion unrealized gain on the
Company's investment in common stock of The Coca-Cola Company. The market value
of this common stock investment decreased $665 million while the unrealized gain
on the remainder of the portfolio increased $249 million during 2001. These
changes in market value did not affect the net income of SunTrust, but were
included in comprehensive income.
<PAGE>
28 SunTrust 2001 Annual Report
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Table 11 Securities Available For Sale
<TABLE>
<CAPTION>
At December 31
-------------------------------------------------
Amortized Fair Unrealized Unrealized
(In millions) Cost Value Gains Losses
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S. government
agencies and corporations
2001 $ 2,229.5 $ 2,340.2 $ 111.2 $ 0.5
2000 2,763.5 2,845.3 82.3 0.5
1999 2,543.5 2,510.3 2.5 35.7
States and political subdivisions
2001 434.1 443.7 11.1 1.5
2000 449.3 455.6 8.0 1.7
1999 530.3 528.6 5.9 7.6
Asset-backed securities
2001 3,508.4 3,544.1 45.5 9.8
2000 1,865.1 1,887.7 24.3 1.7
1999 2,135.3 2,091.7 -- 43.6
Mortgage-backed securities
2001 8,142.5 8,291.7 163.2 14.0
2000 7,651.4 7,679.5 62.5 34.4
1999 7,769.3 7,620.4 9.0 157.9
Corporate bonds
2001 1,969.5 1,983.5 62.6 48.6
2000 2,362.2 2,300.8 37.0 98.4
1999 1,920.2 1,848.3 -- 71.9
Other securities/1/
2001 740.1 3,053.2 2,313.1 --
2000 670.5 3,641.4 2,970.9 --
1999 891.0 3,718.0 2,829.4 2.4
- ---------------------------------------------------------------------------------------------
Total securities available for sale
2001 $ 17,024.1 $ 19,656.4 $ 2,706.7 $ 74.4
2000 15,762.0 18,810.3 3,185.0 136.7
1999 15,789.6 18,317.3 2,846.8 319.1
=============================================================================================
</TABLE>
/1/ Includes the Company's investment in 48,266,496 shares of common stock of
The Coca-Cola Company.
Liquidity
Liquidity is managed to ensure there is sufficient funding to satisfy demand for
credit, deposit withdrawals and attractive investment opportunities. A large,
stable core deposit base, strong capital position and excellent credit ratings
are the solid foundation for the Company's liquidity position.
Funding sources primarily include customer-based core deposits, but also
include borrowed funds and cash flows from operations. Customer-based core
deposits, the Company's largest and most cost-effective source of funding,
accounted for 63% of the funding base on average for 2001 compared to 62% in
2000. The increase is attributable to strong consumer and commercial deposit
growth in 2001; these deposits grew 5.6% on average in 2001. Net borrowed funds,
which primarily include short term funds purchased and sold, wholesale domestic
and foreign deposits, other short term borrowings and long term debt, were $28.2
billion at December 31, 2001, compared with $33.2 billion at December 31, 2000.
Cash flows from operations are also a significant source of liquidity. Net cash
from operations primarily results from net income adjusted for noncash items
such as depreciation and amortization, provision for loan losses, and deferred
tax items.
Liquidity is strengthened by ready access to a diversified base of
wholesale funding sources. These sources include fed funds purchased, securities
sold under agreements to repurchase, negotiable certificates of deposit,
offshore deposits, Federal Home Loan Bank advances, Global Bank Note issuance
(see below), and commercial paper issuance by the Company. Liquidity is also
available through unpledged securities in the investment portfolio and capacity
to securitize some loans, including single-family mortgage loans. The Company
securitized $925.4 and $1,903.5 million of single-family mortgage loans in the
fourth quarter of 2000 and first quarter of 2001, respectively.
<PAGE>
SunTrust 2001 Annual Report 29
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Average Funding Mix
($ in millions)
[GRAPH]
Average for 2001 % of Total
---------------- ----------
Interest-bearing Consumer and Commercial Deposits 43,284.5 48.12%
Noninterest Bearing Deposits 13,491.1 15.00%
Long-term Debt 12,497.2 13.90%
Funds Purchased 11,283.6 12.55%
Foreign Deposits 5,175.4 5.75%
Brokered Deposits 2,617.7 2.91%
Other Short-term Borrowings 1,593.8 1.77%
Average Deposit Mix
($ in millions)
[GRAPH]
Average for 2001 % of Total
---------------- ----------
NOW/Money market accounts 24,301.4 37.64%
Noninterest Bearing Deposits 13,491.1 20.89%
Consumer Time 9,092.6 14.08%
Savings 6,066.6 9.40%
Foreign Deposits 5,175.4 8.02%
Other Time 3,823.9 5.92%
Brokered Deposits 2,617.7 4.05%
A $10 billion Senior and Subordinated Global Bank Note program was
established in November of 2000 to expand the funding and capital sources to
include both domestic and international investors. This program was designed to
provide structural flexibility with maturities from 7 days to 30 years, and
increase the bank's ability to access a wider investor base. SunTrust Bank
issued $1 billion of subordinated debt under the program as of December 31,
2001. The Company also issued $600 million of Trust Preferred Securities in
2001.
As is common in the Financial Services Industry, SunTrust Bank assists in
providing liquidity to select corporate customers by directing them to a third
party owned commercial paper conduit. SunTrust's conduit relationship is with
Three Pillars Funding Corporation (Three Pillars). Three Pillars provides
financing for or direct purchases of financial assets originated and serviced by
SunTrust Bank's corporate customers. Three Pillars finances this activity by
issuing A-1/P-1 rated commercial paper. The result is a favorable funding
arrangement for these SunTrust Bank customers.
Three Pillars had assets and liabilities, not included in the Consolidated
Balance Sheet, of approximately $2.2 billion as of December 31, 2001, which
primarily consisted of secured loans, marketable asset-backed securities and
short-term commercial paper liabilities. Activities related to the Three Pillars
relationship generated approximately $8 million in fee revenue for SunTrust
Bank. These activities include: client referrals and investment recommendations
to Three Pillars; the issuing of a letter-of-credit, which provides partial
credit protection to commercial paper holders; and providing a majority of the
temporary liquidity arrangements that would provide funding to Three Pillars in
the event that it can no longer issue commercial paper. SunTrust Bank has never
had to fund under either the liquidity arrangements or credit enhancement to
Three Pillars.
In addition, as part of its CRA initiatives, the Company invests in multi-
family low income housing throughout its footprint as a limited partner in
various properties which are not included in the Consolidated Financial
Statements. During development, the properties obtain financing first through
construction loans of which many are obtained from SunTrust Bank. After the
property is completed, permanent financing is primarily obtained from third
parties.
Collateral for these loans is limited to the assets of the partnerships. As
of December 31, 2001, the amount of the Company's investment in limited
partnerships included in other assets totaled $169.5 million.
The Company has a contingency funding plan that stress tests liquidity
needs that may arise from certain events such as rapid loan growth or
significant deposit runoff. The plan also provides for continual monitoring of
net borrowed funds dependence and available sources of liquidity. Management
believes the Company has the funding capacity to meet the liquidity needs
arising from such potential events.
<PAGE>
30 SunTrust 2001 Annual Report
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Table 12 Composition Of Average Deposits
<TABLE>
<CAPTION>
Year Ended December 31 Percent of Total
--------------------------------------- ---------------------------
(Dollars in millions) 2001 2000 1999 2001 2000 1999
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing $ 13,491.1 $ 13,177.5 $ 12,803.2 20.9% 19.8% 22.1%
NOW/Money market accounts 24,301.4 20,129.0 19,926.0 37.6 30.2 34.4
Savings 6,066.6 6,434.2 6,918.8 9.4 9.6 12.0
Consumer time 9,092.6 9,935.5 9,824.3 14.1 14.9 17.0
Other time 3,823.9 4,085.3 4,275.0 5.9 6.1 7.4
- -------------------------------------------------------------------------------------------------------
Total consumer and commercial
deposits 56,775.6 53,761.5 53,747.3 87.9 80.6 92.9
Brokered deposits 2,617.7 3,308.7 7.0 4.1 5.0 0.0
Foreign deposits 5,175.4 9,621.7 4,087.8 8.0 14.4 7.1
- -------------------------------------------------------------------------------------------------------
Total deposits $ 64,568.7 $ 66,691.9 $ 57,842.1 100.0% 100.0% 100.0%
=======================================================================================================
</TABLE>
Funds Purchased
Average funds purchased increased $529.2 million or 4.9% in 2001 as the Company
benefited from lower interest rates.
Table 13 Funds Purchased/1/
Maximum
At December 31 Daily Average Outstanding
------------------ ------------------ at Any
(Dollars in millions) Balance Rate Balance Rate Month-End
- --------------------------------------------------------------------------------
2001 $10,104.3 4.08% $11,283.6 3.65% $13,546.6
2000 10,895.9 5.04 10,754.4 6.06 12,451.4
1999 15,911.9 4.69 15,220.8 4.92 16,982.3
================================================================================
/1/ Consists of federal funds purchased and securities sold under agreements to
repurchase that mature either overnight or at a fixed maturity generally not
exceeding three months. Rates on overnight funds reflect current market
rates. Rates on fixed maturity borrowings are set at the time of borrowings.
Deposits
Average consumer and commercial deposits increased $3,014.1 million, or 5.6%, in
2001 and comprised 87.9%, 80.6% and 92.9% of average total deposits in 2001,
2000 and 1999, respectively. In order to reduce its reliance on higher priced
wholesale funding, the Company initiated a campaign to attract retail deposits,
specifically money market accounts. As a result, average money market accounts
increased by 30.9% and brokered and foreign deposits decreased 39.7% compared to
2000.
Capital Resources
Regulatory agencies measure capital adequacy within a framework that makes
capital requirements sensitive to the risk profiles of individual banking
companies. The guidelines define capital as either Tier 1 (primarily common
shareholders' equity, as defined to include certain debt obligations) or Tier 2
(to include certain other debt obligations and a portion of the allowance for
loan losses and since 1998, 45% of the unrealized gains on equity securities).
The Company is subject to a minimum Tier 1 capital ratio (Tier 1 capital to
risk-weighted assets) of 4%, total capital ratio (Tier 1 plus Tier 2 to
risk-weighted assets) of 8% and Tier 1 leverage ratio (Tier 1 to average
quarterly assets) of 3%. To be considered a "well capitalized" institution, the
Tier 1 capital ratio, the total capital ratio, and the Tier 1 leverage ratio
must equal or exceed 6%, 10% and 5%, respectively. SunTrust is committed to
remaining well capitalized.
SunTrust Bank raised an additional $1.0 billion of regulatory capital
through its initial issuance under the Global Bank Note program in 2001. The
Company also raised $600 million of regulatory capital through the issuance of
Trust Preferred Securities during 2001.
The Company purchased 8.2 million shares of its common stock during 2001.
As of December 31, 2001, the Company was authorized to purchase up to 5.2
million shares under current Board resolutions.
Interest Rate And Market Risk
The normal course of business activity exposes SunTrust to interest rate risk.
Fluctuations in interest rates may result in changes in the fair market value of
the Company's financial instruments, cash flows and net interest income.
SunTrust's asset/liability management
<PAGE>
SunTrust 2001 Annual Report 31
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Table 14 Capital Ratios
<TABLE>
<CAPTION>
At December 31
(Dollars in millions) 2001 2000 1999 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tier 1 capital/1/ $ 7,994.2 $ 6,850.6 $ 6,579.6 $ 6,586.5 $ 5,587.2 $ 4,920.6
Total capital 12,144.2 10,488.9 9,939.1 10,307.9 8,608.2 6,807.9
Risk-weighted assets 100,651.8 96,656.7 87,866.1 80,586.4 69,503.3 58,112.8
Risk-based ratios
Tier 1 capital 8.02% 7.09% 7.48% 8.17% 8.04% 8.47%
Total capital 12.18 10.85 11.31 12.79 12.39 11.71
Tier 1 leverage ratio 7.94 6.98 7.17 7.68 7.70 7.12
Total shareholders' equity to assets 7.98 7.95 8.00 8.78 8.83 8.92
====================================================================================================================
</TABLE>
/1/ Tier 1 capital includes trust preferred obligations of $1,050 million at the
end of 2000, 1999 and 1998, respectively and $100 million of preferred
shares issued by a real estate investment trust subsidiary during 2000.
Table 15 Loan Maturity
<TABLE>
<CAPTION>
At December 31, 2001
Remaining Maturities of Selected Loans
-------------------------------------------------------
Within 1-5 After
(In millions) Total 1 Year Years 5 Years
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loan Maturity
Commercial/1/ $ 26,019.0 $ 9,760.4 $ 11,593.9 $ 4,664.7
Real estate - construction 3,627.3 1,888.5 850.7 888.1
- ---------------------------------------------------------------------------------------------
Total $ 29,646.3 $ 11,648.9 $ 12,444.6 $ 5,552.8
=============================================================================================
Interest Rate Sensitivity
Selected loans with
Predetermined interest rates $ 1,933.6 $ 2,703.2
Floating or adjustable interest rates 10,511.0 2,849.6
- ---------------------------------------------------------------------------------------------
Total $ 12,444.6 $ 5,552.8
=============================================================================================
</TABLE>
/1/ Excludes $2,926.9 million in lease financing.
process manages the Company's interest rate risk position. The objective of this
process is the optimization of the Company's financial position, liquidity and
net interest income, while limiting the volatility to net interest income from
changes in interest rates.
SunTrust uses a simulation modeling process to measure interest rate risk
and evaluate potential strategies. These simulations incorporate assumptions
regarding balance sheet growth and mix, pricing, and the repricing and maturity
characteristics of the existing and projected balance sheet. Other
interest-rate-related risks such as prepayment, basis and option risk are also
considered. Simulation results quantify interest rate risk under various
interest rate scenarios. Senior management regularly reviews the overall
interest rate risk position and develops and implements appropriate strategies
to manage the risk. Management estimates the Company's net interest income for
the next twelve months would increase 0.3% under a gradual increase in interest
rates of 100 basis points, versus the projection under stable rates. Net
interest income would decrease 0.4% under a gradual decrease in interest rates
of 100 basis points, versus the projection under stable rates.
A fair market value analysis of the Company's on and off balance sheet
positions calculated under an instantaneous 100 basis point increase in rates
over December 31, 2001 estimates a 0.8% decrease in net market value as a
percent of assets compared to a 0.9% decrease at December 31, 2000. SunTrust
estimates a like decrease in rates from December 31, 2001 would increase net
market value 0.6% compared to an increase of 0.6% based on 2000 year-end
balances.
The computations of interest rate risk do not necessarily include certain
actions that management may undertake to manage this risk in response to
anticipated changes in interest rates.
Throughout 2001, SunTrust took advantage of the rapidly declining interest
rate environment and restructured the balance sheet to shift interest rate risk
from a liability sensitive position to a slightly asset sensitive position by
the end of 2001. The restructuring was concentrated in the investment and debt
portfolios. The restructuring in the investment portfolio is described in
greater detail under the Securities Available for Sale section of Management's
Discussion. The restructuring in the debt portfolio consisted of retiring higher
rate,
<PAGE>
32 SunTrust 2001 Annual Report
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Table 16 Maturity Distribution Of Securities Available For Sale
<TABLE>
<CAPTION>
At December 31, 2001
--------------------------------------------------------------------------------
Average
1 Year 1-5 5-10 After 10 Maturity
(Dollars in millions) or Less Years Years Years Total in Years
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Distribution of Maturities:
Amortized Cost
U.S. Treasury and other U.S. government
agencies and corporations $ 267.4 $ 1,944.1 $ 14.4 $ 3.6 $ 2,229.5 2.4
States and political subdivisions 63.3 182.7 120.6 67.5 434.1 5.4
Asset-backed securities/1/ 214.1 2,904.2 378.1 12.0 3,508.4 3.1
Mortgage-backed securities/1/ 804.7 6,856.4 355.4 126.0 8,142.5 2.6
Corporate bonds 6.9 985.7 167.2 809.7 1,969.5 12.7
- ------------------------------------------------------------------------------------------------------------
Total debt securities $1,356.4 $12,873.1 $1,035.7 $1,018.8 $16,284.0 4.0
==========================================================================================================================
Fair Value
U.S. Treasury and other U.S. government
agencies and corporations $ 270.9 $ 2,050.9 $ 14.5 $ 3.9 $ 2,340.2
States and political subdivisions 63.9 188.4 122.9 68.5 443.7
Asset-backed securities/1/ 217.8 2,938.7 374.9 12.7 3,544.1
Mortgage-backed securities/1/ 808.2 6,993.9 365.0 124.6 8,291.7
Corporate bonds 7.0 1,023.0 168.4 785.1 1,983.5
- ------------------------------------------------------------------------------------------------------------
Total debt securities $1,367.8 $13,194.9 $1,045.7 $ 994.8 $16,603.2
==========================================================================================================================
Weighted Average Yield (FTE)
U.S. Treasury and other U.S. government
agencies and corporations 6.17% 6.04% 5.14% 7.64% 6.05%
States and political subdivisions 7.24 7.30 7.08 7.05 7.18
Asset-backed securities/1/ 5.55 3.82 5.75 7.38 4.15
Mortgage-backed securities/1/ 4.42 6.04 6.39 5.28 5.89
Corporate bonds 5.22 6.54 6.60 5.59 6.15
- ------------------------------------------------------------------------------------------------------------
Total debt securities 5.08% 5.60% 6.30% 5.68% 5.61%
==========================================================================================================================
</TABLE>
/1/ Distribution of maturities is based on the expected average life of the
asset.
Table 17 Maturity Of Consumer Time And Other Time Deposits In Amounts Of
$100,000 Or More
<TABLE>
<CAPTION>
At December 31, 2001
--------------------------------------------------------------------------------
Consumer Brokered Foreign Other
(In millions) Time Time Time Time Total
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Months to maturity
3 or less $1,256.1 $ 434.7 $2,425.5 $58.1 $4,174.4
Over 3 through 6 578.1 -- -- -- 578.1
Over 6 through 12 579.9 50.0 -- -- 629.9
Over 12 868.8 2,345.0 -- -- 3,213.8
- --------------------------------------------------------------------------------------------------------------------------
Total $3,282.9 $2,829.7 $2,425.5 $58.1 $8,596.2
==========================================================================================================================
</TABLE>
shorter-term borrowings from the Federal Home Loan Bank and replacing the
retired debt with lower rate, longer-term fixed rate advances. In addition to
the debt restructuring, SunTrust added fixed rate, longer-term debt in 2001. The
net effect of the debt restructuring and additional borrowings extended the
weighted average life of the debt portfolio.
The Company is also subject to risk from changes in equity prices. SunTrust
owns 48,266,496 shares of common stock of The Coca-Cola Company which had a
carrying value of $2.3 billion at December 31, 2001. A 10% decrease in share
price of The Coca-Cola Company at December 31, 2001 would result in a decrease,
net of deferred taxes, of approximately $145 million in total shareholders'
equity.
<PAGE>
SunTrust 2001 Annual Report 33
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Derivative Instruments
Derivative financial instruments, such as interest rate swaps, options, caps,
floors, futures, forward contracts and equity collars are components of the
Company's risk management profile. The Company also enters into derivative
instruments as a service to banking customers. Where contracts have been created
for customers, the Company generally enters into offsetting positions to
eliminate the Company's exposure to market risk.
The Company monitors its sensitivity to changes in interest rates and may
use derivative instruments to limit the volatility of net interest income.
Derivative instruments decreased net interest income in 2001 and 2000 by $37.4
million and $0.5 million, respectively and increased net interest income by
$16.3 million in 1999.
The Company adopted SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities," as amended, on January 1, 2001. In accordance with the
transition provisions of SFAS No. 133, the following net-of-tax effect on
earnings and equity was recorded in January 2001:
Earnings increased $1.6 million
. $16.6 million gain for the fair value adjustment on fair-value hedging
instruments
. $16.6 million loss for the fair value adjustment on related hedged assets and
liabilities
. $0.4 million gain for the fair value on the mortgage pipeline
. $1.2 million gain for the derecognition of a previously deferred gain
Equity (Other Comprehensive Income)
. $10.6 million loss from cash flow hedging instruments
For a detailed discussion of the impact of SFAS No. 133 on Accumulated
Other Comprehensive Income see "Note 20 Comprehensive Income."
The following table summarizes the derivative instruments entered into by
the Company as an end-user. See "Note 15 Derivatives and Off-Balance Sheet
Financial Instruments" for a complete description of the derivative instruments
and activity for 2001.
Table 18 Derivative Instruments
<TABLE>
<CAPTION>
As of December 31, 2001
--------------------------------------------------------------------------------------------
Weighted Estimated Fair Value
Average Average ---------------------------------------------
Notional Maturity Received Average Carrying Unrealized Unrealized
(Dollars in millions) Balance In Months Rate Pay Rate Amount/2/ Gains Losses Net
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage Lending
Commitments
Forward Contracts $ 5,834.0 2 -- -- $ -- $ 80.5 $ -- $ 80.5
Interest Rate Lock
Commitments 2,522.1 2 -- -- -- 0.6 (37.2) (36.6)
Option Contracts 90.0 1 5.00%/1/ -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total Mortgage Related
Derivatives 8,446.1 -- -- -- -- 81.1 (37.2) 43.9
Foreign Currency
Forward Contracts 1,167.2 5 -- -- -- 15.7 (16.7) (1.0)
Interest Rate Swaps/
Caps/Floors 4,892.0 43 3.02%/1/ 4.81% (6.5) 95.8 (101.7) (12.4)
Other Derivatives 1,111.1 13 -- -- -- 0.9 (17.6) (16.7)
- -------------------------------------------------------------------------------------------------------------------------------
Total Derivatives $15,616.4 $(6.5) $193.5 $(173.2) $ 13.8
===============================================================================================================================
</TABLE>
/1/ Average option strike price.
/2/ Carrying amount includes net interest payable.
<PAGE>
34 SunTrust 2001 Annual Report
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Earnings And Balance Sheet Analysis 2000 vs. 1999
Net income was $1,294.1 million in 2000 compared with $1,326.6 million in 1999,
a decrease of 2.4%. Diluted earnings per common share were $4.30 in 2000 and
$4.13 in 1999. Excluding after-tax merger-related charges in both periods, net
income was $1,321.7 million in 2000, a 2.7% decrease from 1999, and diluted
earnings per share were $4.39, a 3.8% increase over 1999. In addition to the
merger costs, two other unusual items effected the 1999 results. An
extraordinary gain of $202.6 million, net of tax, or $0.63 per diluted share
related to the sale of the Company's $1.5 billion consumer credit card portfolio
was recorded during the fourth quarter of 1999. Additionally, the Company
incurred securities losses of $70.2 million, net of tax, or $0.22 per diluted
share related to the securities portfolio repositioning during the fourth
quarter of 1999.
Operating results for 2000 were impacted by rising interest rates, moderate
fee income growth and reduced expenses including a $36.4 million decrease in the
provision for loan losses. Net interest income was $3,148.4 million in 2000,
down $39.6 million from 1999. The Company's net interest margin declined from
3.88% in 1999 to 3.55% in 2000, but the impact of the decline was more than
offset by a 7.7% increase in average earning assets. The provision for loan
losses decreased 21.4% from $170.4 million in 1999 to $134.0 million in 2000
primarily due to the Company's sale of its consumer credit card portfolio in the
fourth quarter of 1999. The allowance for loan losses as a percentage of loans
decreased from 1.32% to 1.21%. Net charge-offs to average loans were 0.19% in
2000 versus 0.37% in 1999. Nonperforming assets increased 55.4% from $275.7
million at December 31, 1999 to $428.3 million at December 31, 2000.
Noninterest income, excluding securities gains and losses, was $1,767.0
million, a 1.8% increase compared to 1999. The increase was driven by a $43.5
million, or 64.2%, increase in corporate and institutional investment services
income, a $21.6 million, or 4.9%, increase in service charges on deposit
accounts and an $18.3 million, or 16.0% increase in other income.
Noninterest expense, excluding merger-related expenses, was $2,786.1 million in
2000, a decrease of $73.6 million, or 2.6%, from 1999. Contributing to the
decline was a $54.4 million, or 3.2%, decrease in personnel expense and an $18.8
million, or 12.0% decrease in other expenses. The lower personnel costs
reflected a reduction of 1,954 positions across the Company during 2000.
Partially offsetting these declines was a $22.0 million, or 14.6%, increase in
outside processing and software expense. Loans at December 31, 2000 were $72.2
billion, an increase of 9.4%. At December 31, 2000, deposits were $69.5 billion,
an increase of $9.4 billion, or 15.7%, from December 31, 1999.
Fourth Quarter Results
SunTrust's net income for the fourth quarter of 2001 totaled $356.7 million, or
$1.24 per diluted share, compared with $330.4 million, or $1.11 per diluted
share, for the fourth quarter of 2000. Results included the following unusual
items:
. Extraordinary gain of $24.1 million, net of tax, or $0.08 per diluted share,
for the early extinguishment of long-term debt in the fourth quarter of 2001.
. Merger related charges of $1.5 million, net of tax, or $0.01 per diluted
share for 2000.
Operating results for the fourth quarter of 2001 were also impacted by the
following:
. Fully taxable net interest income increased $34.0 million, or 4.3%, and the
net interest margin increased 7 basis points from the fourth quarter of 2000
to the fourth quarter of 2001. These increases are primarily due to the lower
interest rate environment in 2001 and strong retail deposit growth. Average
consumer and commercial deposits increased $5.0 billion, or 9.2%, compared to
the fourth quarter of 2000. The increase in consumer and commercial deposits
enabled the Company to be less reliant on higher priced wholesale funding.
. Consistent with the slowing economy, the Company's charge-offs and provision
for loan loss levels rose during the fourth quarter as the Company
experienced deterioration in some large corporate credits. Net loan
charge-offs for the fourth quarter of 2001 were at $87.4 million, $34.0
million, or 63.7%, more than in the same period last year. The 2001 fourth
quarter provision for loan losses of $88.1 million was $34.6 million, or
64.8%, higher than the $53.5 million in 2000.
. Noninterest income, excluding securities gains and losses, increased by $78.9
million, or 17.7%, in the 2001 fourth quarter compared to the fourth quarter
of 2000. The increase was partially due to a $31.3 million, or 115.5%,
increase in mortgage production related income as the low rate environment
led to significant refinancing activity in 2001. Mortgage production in the
fourth quarter of 2001 was $7.3 billion, a 119.3% increase from $3.3 billion
in the fourth quarter of 2000. Also contributing to the growth in
nonin-terest income were increases in investment banking income, loan fee
income and fixed annuity income. Negatively impacting noninterest income was
a $20.5 million, or 215.0%, decrease in mortgage servicing income due to
accelerated amortization of mortgage servicing rights resulting from
increased prepayments.
. Noninterest expense, excluding merger-related charges, increased $134.7
million, or 19.4%, from the fourth quarter of 2000. Personnel expense was up
$61.0 million, or 14.9%, primarily due to increased bonus payments from the
acquisition of the institutional business of The Robinson-Humphrey Company,
LLC, mortgage production incentives and expenditures from the One Bank
initiative. Also contributing were increases in equipment expense and outside
processing and software.
<PAGE>
SunTrust 2001 Annual Report 35
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Table 19 Quarterly Financial Data
<TABLE>
<CAPTION>
(Dollars in millions
except per share data) 2001 2000
------------------------------------------------ ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations 4 3 2 1 4 3 2 1
Interest and dividend income $ 1,391.1 $ 1,509.9 $ 1,634.7 $ 1,743.9 $ 1,798.3 $ 1,764.2 $ 1,672.0 $ 1,610.8
Interest expense 571.1 706.1 810.8 939.0 1,012.9 992.8 903.0 828.2
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income 820.0 803.8 823.9 804.9 785.4 771.4 769.0 782.6
Provision for loan losses 88.1 80.2 39.6 67.3 53.5 30.5 27.7 22.3
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 731.9 723.6 784.3 737.6 731.9 740.9 741.3 760.3
Noninterest income/1/ 557.7 550.4 521.8 525.9 445.6 447.2 444.0 436.9
Noninterest expense/2,3,4/ 830.2 776.8 763.8 742.7 697.9 706.6 719.8 704.2
- -----------------------------------------------------------------------------------------------------------------------------------
Income before provision for income
taxes and extraordinary items 459.4 497.2 542.3 520.8 479.6 481.5 465.5 493.0
Provision for income taxes 126.8 163.1 177.3 183.3 149.2 154.7 148.0 173.6
- -----------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary items 332.6 334.1 365.0 337.5 330.4 326.8 317.5 319.4
Extraordinary gain (loss),
net of taxes/5/ 24.1 -- (17.8) -- -- -- -- --
Net income $ 356.7 $ 334.1 $ 347.2 $ 337.5 $ 330.4 $ 326.8 $ 317.5 $ 319.4
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income
(taxable-equivalent) $ 830.1 $ 813.9 $ 834.1 $ 815.2 $ 796.1 $ 781.5 $ 778.7 $ 792.1
Per Common Share
Diluted
Income before extraordinary
items $ 1.16 $ 1.15 $ 1.25 $ 1.14 $ 1.11 $ 1.10 $ 1.05 $ 1.04
Extraordinary gain (loss),
net of taxes 0.08 -- (0.06) -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 1.24 1.15 1.19 1.14 1.11 1.10 1.05 1.04
Basic
Income before extraordinary
items 1.17 1.17 1.27 1.16 1.13 1.11 1.06 1.05
Extraordinary gain (loss),
net of taxes 0.08 -- (0.06) -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 1.25 1.17 1.21 1.16 1.13 1.11 1.06 1.05
Dividends declared 0.40 0.40 0.40 0.40 0.37 0.37 0.37 0.37
Book value 28.97 28.40 27.29 26.83 27.81 25.85 25.10 23.51
Market Price
High 67.93 72.35 66.38 68.07 64.38 54.19 66.00 68.06
Low 58.10 60.10 59.25 57.29 41.63 45.63 45.06 46.81
Close 62.70 66.60 64.78 64.80 63.00 49.88 45.69 57.75
Selected Average Balances
Total assets $103,882.0 $101,246.0 $103,194.2 $103,225.4 $101,246.0 $99,392.2 $97,497.3 $95,413.4
Earning assets 92,440.9 90,588.0 92,570.8 92,553.9 90,679.6 89,663.7 88,200.6 85,857.5
Loans 69,547.1 69,024.0 69,900.5 71,654.4 71,774.6 71,506.9 69,830.6 67,030.0
Consumer and commercial
deposits 59,085.8 57,081.1 56,343.6 54,538.6 54,099.2 53,641.4 55,942.5 53,360.3
Brokered and foreign deposits 6,268.1 6,086.6 8,017.1 10,870.0 13,082.7 13,516.8 12,923.9 12,190.0
Realized shareholders' equity 6,530.6 6,305.4 6,208.8 6,264.6 6,140.5 6,012.8 5,948.9 6,023.3
Total shareholders' equity 8,334.5 7,996.1 7,873.4 8,089.2 7,844.4 7,487.4 7,195.9 7,476.2
Common shares
-diluted (thousands) 289,319 289,601 291,677 295,832 296,461 298,558 302,141 306,739
Common shares
-basic (thousands) 285,645 285,570 287,878 291,805 293,390 295,575 298,986 303,461
Financial Ratios (Annualized)
Return on average assets 1.40% 1.34% 1.38% 1.36% 1.33% 1.34% 1.34% 1.38%
Return on average realized
shareholders' equity 21.67 21.02 22.43 21.85 21.40 21.62 21.46 21.33
Return on average total
shareholders' equity 16.98 16.58 17.68 16.92 16.75 17.36 17.74 17.18
Net interest margin 3.56 3.56 3.61 3.57 3.49 3.47 3.55 3.71
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Includes securities gains of $32.1, $36.2, $27.7 and $4.2 million for the
fourth, third, second and first quarters of 2001, respectively, related to
the Company's securities portfolio repositioning. An additional $52.9
million security gain was recorded in the first quarter of 2001 on the sale
of Star Systems, Inc.
/2/ Includes enhancements to customer-based systems of $15.5, $17.5, $14.7 and
$7.0 million for the fourth, third, second and first quarters of 2001,
respectively, related to the One Bank initiative.
/3/ Includes merger-related expenses of $2.4, $8.3, $18.2 and $13.6 million for
the fourth, third, second, and first quarters of 2000, respectively, related
to the acquisition of Crestar.
/4/ Includes Wachovia proposal expenses of $32.0 million for the third quarter
of 2001.
/5/ Represents the gain on the Company's early extinguishment of long-term
debt during the fourth quarter of 2001, net of $13.0 million in taxes, and
the loss on the Company's early extinguishment of long-term debt during the
second quarter of 2001, net of $9.6 million in taxes.
<PAGE>
36 SunTrust 2001 Annual Report
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Table 20 Consolidated Daily Average Balances, Income/Expense And Average Yields
Earned And Rates Paid
<TABLE>
<CAPTION>
Quarters Ended
------------------------------------------------------------------------------------
December 31, 2001 December 31, 2000
------------------------------------- ---------------------------------------
(Dollars in millions; Average Income/ Yields/ Average Income/ Yields/
yields on taxable-equivalent basis) Balances Expense Rates Balances Expense Rates
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Loans/1/
Taxable $ 68,348.8 $ 1,057.0 6.14% $ 70,647.7 $ 1,461.7 8.23%
Tax-exempt/2/ 1,198.3 18.6 6.16 1,126.9 22.5 7.93
- ----------------------------------------------------------------------------------------------------------------------------------
Total loans 69,547.1 1,075.6 6.14 71,774.6 1,484.2 8.23
Securities available for sale
Taxable 15,798.9 236.8 5.95 14,715.5 251.2 6.79
Tax-exempt/2/ 441.7 7.8 6.99 444.0 8.4 7.53
- ----------------------------------------------------------------------------------------------------------------------------------
Total securities available for sale 16,240.6 244.6 5.98 15,159.5 259.6 6.81
Funds sold 1,193.8 7.3 2.41 1,324.4 22.3 6.70
Loans held for sale 3,777.0 65.5 6.88 1,690.7 33.3 7.83
Other short-term investments/2/ 1,682.4 8.2 1.94 730.4 9.6 5.24
- ----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 92,440.9 1,401.2 6.01 90,679.6 1,809.0 7.94
Allowance for loan losses (867.0) (858.6)
Cash and due from banks 3,521.6 3,464.7
Premises and equipment 1,586.4 1,618.2
Other assets 4,430.0 3,661.1
Unrealized gains on securities
available for sale 2,770.1 2,681.0
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $103,882.0 $101,246.0
==================================================================================================================================
Liabilities and Shareholders' Equity
Interest-bearing deposits
NOW/Money market accounts $ 26,925.1 $ 121.8 1.80% $ 20,023.3 $ 169.3 3.36%
Savings 5,989.3 28.4 1.88 6,306.9 60.8 3.84
Consumer time 8,556.8 97.6 4.53 9,964.6 141.5 5.65
Other time 3,457.0 38.5 4.42 4,334.7 66.4 6.09
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing consumer and
commercial deposits 44,928.2 286.3 2.53 40,629.5 438.0 4.29
Brokered deposits 2,910.8 21.3 2.90 4,059.7 68.6 6.72
Foreign deposits 3,357.3 18.3 2.16 9,023.0 149.6 6.60
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest bearing deposits 51,196.3 325.9 2.53 53,712.2 656.2 4.86
Funds purchased 10,339.0 47.1 1.81 11,225.2 177.5 6.29
Other short-term borrowings 1,582.2 8.8 2.19 1,885.9 31.2 6.57
Long-term debt 12,870.5 189.3 5.84 8,725.0 148.0 6.75
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 75,988.0 571.1 2.98 75,548.3 1,012.9 5.33
Noninterest-bearing deposits 14,157.6 13,469.7
Other liabilities 5,401.9 4,383.6
Realized shareholders' equity 6,530.6 6,140.5
Accumulated other comprehensive income 1,803.9 1,703.9
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $103,882.0 $101,246.0
==================================================================================================================================
Interest Rate Spread 3.03% 2.61%
- ----------------------------------------------------------------------------------------------------------------------------------
Net Interest Income $ 830.1 $ 796.1
- ----------------------------------------------------------------------------------------------------------------------------------
Net Interest Margin/3/ 3.56% 3.49%
==================================================================================================================================
</TABLE>
/1/ Interest income includes loan fees of $40.2 million and $36.8 million in the
quarters ended December 31, 2001 and 2000, respectively. Nonaccrual loans
are included in average balances and income on such loans, if recognized, is
recorded on a cash basis.
/2/ Interest income includes the effects of taxable-equivalent adjustments using
a federal income tax rate of 35% and, where applicable, state income taxes
to increase tax-exempt interest income to a taxable-equivalent basis. The
net taxable-equivalent adjustment amounts included in the above table
aggregated $10.1 million and $10.7 million in the quarters ended December
31, 2001 and 2000, respectively.
/3/ Derivative instruments used to help balance the Company's
interest-sensitivity position decreased net interest income by $16.8 million
in the fourth quarter of 2001 and increased net interest income by $0.1
million in the fourth quarter of 2000. Without these derivative instruments,
the net interest margin would have been 3.49% in 2000.
<PAGE>
SunTrust 2001 Annual Report 37
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Table 21 Quarterly Noninterest Income And Expense
<TABLE>
<CAPTION>
Quarters
--------------------------------------------------------------------
2001 2000
--------------------------------- ---------------------------------
(In millions) 4 3 2 1 4 3 2 1
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest Income
Trust and investment
management income $117.2 $119.8 $124.8 $124.3 $121.4 $120.2 $123.7 $128.6
Service charges on
deposit accounts 135.5 129.1 125.6 120.0 118.9 116.9 112.6 111.3
Other charges and fees 65.9 61.3 57.5 55.6 55.1 56.3 50.4 49.1
Mortgage production
related income 58.4 43.1 53.0 31.7 27.1 23.8 20.5 18.7
Mortgage servicing
related income (10.9) 0.8 (2.7) 6.7 9.5 7.9 7.7 7.7
Investment banking income 41.6 33.4 19.4 14.1 20.3 36.0 35.3 19.7
Trading account profits (losses)
and commissions 11.0 30.0 24.9 29.7 16.3 4.9 (1.4) 12.0
Securities gains (losses)/1,2/ 32.1 36.2 27.7 57.1 (1.2) (0.6) 1.5 6.9
Credit card and other fees 29.4 28.7 30.0 25.6 24.9 24.2 24.4 22.1
Retail investment services 28.9 26.8 27.3 24.8 22.8 24.0 30.5 30.8
Other income 48.6 41.2 34.3 36.3 30.5 33.6 38.8 30.0
- ---------------------------------------------------------------------------------------------------------
Total noninterest income $557.7 $550.4 $521.8 $525.9 $445.6 $447.2 $444.0 $436.9
=========================================================================================================
Noninterest Expense
Salaries $301.3 $293.3 $285.8 $286.0 $282.0 $278.5 $292.1 $287.3
Other compensation 125.8 108.5 97.3 90.3 89.3 82.9 73.1 83.8
Employee benefits 42.4 45.5 48.4 56.7 37.2 39.5 41.4 56.9
- ---------------------------------------------------------------------------------------------------------
Total personnel expense 469.5 447.3 431.5 433.0 408.5 400.9 406.6 428.0
Net occupancy expense 53.6 55.1 51.8 50.0 50.7 51.9 49.9 50.1
Outside processing and software 57.0 51.6 45.3 45.1 43.9 42.4 44.4 41.6
Equipment expense 51.0 49.9 44.3 44.5 44.2 47.2 50.7 51.6
Marketing and customer development 32.7 25.3 23.0 23.0 30.7 25.3 27.9 22.3
Consulting and legal 32.4 25.0 20.6 9.7 13.2 16.4 18.2 11.8
Credit and collection services 22.4 20.6 18.0 13.6 12.4 14.2 16.0 14.3
Other staff expense 17.4 15.3 15.0 10.8 11.0 15.5 13.8 11.2
Communications 16.8 15.0 14.1 13.3 14.2 15.0 15.4 15.2
Postage and delivery 16.7 15.3 15.8 16.2 14.9 15.4 16.3 16.7
Operating supplies 13.3 12.3 11.4 11.3 11.2 11.3 12.6 12.2
Amortization of intangible assets 8.6 8.4 21.0 8.3 8.8 8.9 8.8 9.0
FDIC premiums 2.7 2.6 2.8 2.8 2.8 2.8 2.8 2.8
Other real estate (income) expense (0.4) 0.1 (3.1) (0.7) (2.3) (0.4) (0.3) (0.8)
Merger-related expenses -- -- -- -- 2.4 8.3 18.2 13.6
Other expense/3/ 36.5 33.0 52.3 61.8 31.3 31.5 18.5 4.7
- ---------------------------------------------------------------------------------------------------------
Total noninterest expense $830.2 $776.8 $763.8 $742.7 $697.9 $706.6 $719.8 $704.3
=========================================================================================================
</TABLE>
/1/ Includes $52.9 million gain on the sale of Star Systems, Inc. in the first
quarter of 2001.
/2/ Includes securities gains of $32.1, $36.2, $27.7 and $4.2 million in the
fourth, third, second and first quarters of 2001, respectively, related to
the securities portfolio repositioning.
/3/ Includes expenses of $32.0 million in the third quarter of 2001 for the
proposal to acquire the former Wachovia Corporation.
<PAGE>
38 SunTrust 2001 Annual Report
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Table 22 Summary Of Loan Loss Experience, Nonperforming Assets And Accruing
Loans Past Due 90 Days Or More
<TABLE>
<CAPTION>
Quarters
-------------------------------------------------------------------------------------------
2001 2000
-------------------------------------------- --------------------------------------------
(Dollars in millions) 4 3 2 1 4 3 2 1
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Allowance for Loan Losses
Balance - beginning of quarter $ 866.4 $ 866.1 $ 872.0 $ 874.5 $ 874.5 $ 874.5 $ 874.0 $ 871.3
Allowance from acquisitions and
other activity - net -- -- (6.7) (3.5) (0.1) -- -- --
Provision for loan losses 88.1 80.2 39.6 67.3 53.5 30.5 27.7 22.3
Charge-offs (101.5) (92.0) (53.2) (79.4) (67.1) (47.1) (40.2) (35.3)
Recoveries 14.1 12.1 14.4 13.1 13.7 16.6 13.0 15.7
- -----------------------------------------------------------------------------------------------------------------------------------
Balance - end of quarter $ 867.1 $ 866.4 $ 866.1 $ 872.0 $ 874.5 $ 874.5 $ 874.5 $ 874.0
===================================================================================================================================
Ratios
Allowance to quarter-end loans 1.26% 1.24% 1.26% 1.24% 1.21% 1.21% 1.22% 1.27%
Allowance to nonperforming loans 155.4 176.7 210.6 250.1 215.8 229.6 309.6 306.8
Net loan charge-offs to average
loans (annualized) 0.50 0.46 0.22 0.38 0.30 0.17 0.16 0.12
Provision to average loans
(annualized) 0.50 0.46 0.23 0.38 0.30 0.17 0.16 0.13
Nonperforming Assets
Nonperforming loans $ 558.1 $ 490.2 $ 411.1 $ 348.7 $ 405.3 $ 380.9 $ 282.5 $ 284.9
Other real estate owned 20.7 18.9 20.3 20.6 23.0 23.6 23.2 27.0
- -----------------------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $ 578.8 $ 509.1 $ 431.4 $ 369.3 $ 428.3 $ 404.5 $ 305.7 $ 311.9
===================================================================================================================================
Ratios
Nonperforming loans to
total loans 0.81% 0.70% 0.60% 0.50% 0.56% 0.53% 0.40% 0.42%
Nonperforming assets to total loans
plus other real estate owned 0.84 0.73 0.63 0.52 0.59 0.56 0.43 0.45
Accruing Loans Past Due
90 Days or More $ 185.5 $ 177.0 $ 211.8 $ 223.7 $ 181.2 $ 150.8 $ 189.4 $ 160.1
===================================================================================================================================
</TABLE>
Supervision And Regulation
As a bank holding company and a financial holding company, the Company is
subject to the regulation and supervision of the Board of Governors of the
Federal Reserve System (the "Federal Reserve"). As of December 31, 1999, the
Company had 29 bank subsidiaries which were subject to supervision and
regulation by applicable state and federal banking agencies, including the
Federal Reserve, the Office of the Comptroller of the Currency (the
"Comptroller") and the Federal Deposit Insurance Corporation (the "FDIC").
Effective January 1, 2000, 27 of these bank subsidiaries merged into SunTrust
Bank, Atlanta, which changed its name to SunTrust Bank. SunTrust Bank (the
"Bank") is a Georgia state bank which now has branches in Georgia, Florida,
Tennessee, Alabama, Virginia, Maryland, and the District of Columbia. The Bank
is a member of the Federal Reserve System, and is regulated by the Federal
Reserve and the Georgia Department of Banking and Finance.
The Bank is subject to various requirements and restrictions under federal
and state law, including requirements to maintain reserves against deposits,
restrictions on the types and amounts of loans that may be made and the interest
that may be charged thereon, and limitations on the types of investments that
may be made and the types of services that may be offered. Various consumer laws
and regulations also affect the operations of the Bank. In addition to the
impact of regulation, commercial banks are affected significantly by the actions
of the Federal Reserve as it attempts to control the money supply and credit
availability in order to influence the economy.
<PAGE>
SunTrust 2001 Annual Report 39
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994, bank holding companies from any state may acquire banks located in any
other state, subject to certain conditions, including concentration limits. In
addition, a bank may establish branches across state lines by merging with a
bank in another state, subject to certain restrictions.
There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by federal law and
regulatory policy that are designed to reduce potential loss exposure to the
depositors of such depository institutions and to the FDIC insurance fund in the
event the depository institution becomes in danger of default or is in default.
For example, under a policy of the Federal Reserve with respect to bank holding
company operations, a bank holding company is required to serve as a source of
financial strength to its subsidiary depository institutions and commit
resources to support such institutions in circumstances where it might not do so
absent such policy. In addition, the "cross-guarantee" provisions of federal law
require insured depository institutions under common control to reimburse the
FDIC for any loss suffered or reasonably anticipated as a result of the default
of a commonly controlled insured depository institution or for any assistance
provided by the FDIC to a commonly controlled insured depository institution in
danger of default.
The federal banking agencies have broad powers under current federal law to
take prompt corrective action to resolve problems of insured depository
institutions. The extent of these powers depends upon whether the institutions
in question are "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapi-talized" or "critically
undercapitalized" as such terms are defined under regulations issued by each of
the federal banking agencies.
There are various legal and regulatory limits on the extent to which the
Bank may pay dividends or otherwise supply funds to the Company. In addition,
federal and state bank regulatory agencies also have the authority to prevent a
bank or bank holding company from paying a dividend or engaging in any other
activity that, in the opinion of the agency, would constitute an unsafe or
unsound practice.
FDIC regulations require that management report annually on its
responsibility for preparing its institution's financial statements, and
establishing and maintaining an internal control structure and procedures for
financial reporting, and compliance with designated laws and regulations
concerning safety and soundness.
The Company's nonbanking subsidiaries are regulated and supervised by
various regulatory bodies. For example, SunTrust Capital Markets, Inc. is a
broker-dealer and investment adviser registered with the Securities and Exchange
Commission ("SEC") and a member of the New York Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. ("NASD"). SunTrust Securities,
Inc. is also a broker-dealer and investment adviser registered with the SEC and
a member of the NASD. Trusco Capital Management, Inc. is an investment adviser
registered with the SEC. The Company also has one limited purpose national bank
subsidiary, SunTrust BankCard, N.A., which is regulated by the Comptroller.
On November 12, 1999, financial modernization legislation known as the
Gramm-Leach-Bliley Act (the "Act") was signed into law. The Act creates a new
type of financial services company called a financial holding company. A bank
holding company which elects to become a financial holding company may engage in
expanded securities activities, insurance sales and underwriting activities, and
other financial activities, and may also acquire securities firms and insurance
companies, subject in each case to certain conditions. Securities firms and
insurance companies may also choose to become financial holding companies and
acquire banks, subject to certain conditions. The Company has elected to become
a financial holding company under the Act.
In addition to the Act, there have been a number of legislative and
regulatory proposals that would have an impact on the operation of
bank/financial holding companies and their bank and nonbank subsidiaries. It is
impossible to predict whether or in what form these proposals may be adopted in
the future and, if adopted, what their effect will be on the Company.
A Warning About Forward-Looking Information
This Annual Report contains forward-looking statements. The Company may also
make written forward-looking statements in periodic reports to the Securities
and Exchange Commission, proxy statements, offering circulars and prospectuses,
press releases and other written materials and oral statements made by
SunTrust's officers, directors or employees to third parties. Statements that
are not historical facts, including statements about the Company's beliefs and
expectations, are forward-looking statements. These statements are based on
beliefs and assumptions of SunTrust's management, and on information currently
available to such management. Forward-looking statements include statements
<PAGE>
40 SunTrust 2001 Annual Report
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
preceded by, followed by or that include the words "believes," "expects,"
"anticipates," "plans," "estimates" or similar expressions. Forward-looking
statements speak only as of the date they are made, and the Company undertakes
no obligation to update publicly any of them in light of new information or
future events.
Forward-looking statements involve inherent risks and uncertainties.
Management cautions the readers that a number of important factors could cause
actual results to differ materially from those contained in any forward-looking
statement. Such factors include, but are not limited to, the following: (i)
competitive pressures among depository and other financial institutions may
increase significantly; (ii) changes in the interest rate environment may reduce
margins; (iii) general economic or business conditions in the geographic regions
and industries in which SunTrust operates, including the impact of the events of
September 11, 2001 and the energy crisis, as well as the risk of domestic or
international military or terrorist activities or conflicts, may lead to a
deterioration in credit quality or a reduced demand for credit; (iv) legislative
or regulatory changes, including changes in accounting standards, may adversely
affect the business in which SunTrust is engaged; (v) changes may occur in the
securities markets; and (vi) competitors of SunTrust may have greater financial
resources and develop products that enable such competitors to compete more
successfully than SunTrust.
Other factors that may cause actual results to differ from the
forward-looking statements include the following: (i) the timely development of
competitive new products and services by the Company and the acceptance of such
products and services by customers; (ii) changes in consumer spending and saving
habits; (iii) the effects of competitors' pricing policies; (iv) the Company's
success in managing the costs associated with the expansion of existing
distribution channels and developing new ones, and in realizing increased
revenues from such distribution channels, including cross-selling initiatives
and electronic commerce-based efforts; and (v) the effect of corporate
restructurings, mergers, acquisitions and/or dispositions and their integration
into the Company, the actual restructuring and other charges related thereto and
management's ability to manage these and other risks, including achieving the
expected revenue growth and/or expense savings from such corporate
restructurings, mergers, acquisitions and/or dispositions.
Management of SunTrust believes these forward-looking statements are
reasonable; however, undue reliance should not be placed on such forward-looking
statements, which are based on current expectations. SunTrust cautions that the
foregoing list of important factors is not inclusive.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and shareholder values
of SunTrust may differ materially from those expressed in the forward-looking
statements contained in this annual report. Many of the factors that will
determine these results and values are beyond SunTrust's ability to control or
predict.
Community Reinvestment
As SunTrust continues to consolidate functions and create uniform products,
it has maintained its community focus. "Build your community and you build your
bank" has always been and remains the operating philosophy of SunTrust.
The SunTrust market area is extremely diverse, ranging from major
metropolitan areas to small rural communities, and SunTrust recognizes that each
community has unique needs and resources. SunTrust's community reinvestment
program emphasizes local management's accountability for achieving lending,
investment and service goals, with support, coordination and strategic direction
from the corporate level. In each market, the local CEO is charged to oversee
SunTrust's community activities and ensure that the Company is doing its part. A
senior level CRA Committee, consisting of line-of-business heads and state-level
executives and led by Senior Management, provides policy direction and oversight
to the Company's community reinvestment efforts. This approach ensures that even
as the One Bank operating model is implemented, SunTrust's traditional
commitment to its local communities remains unchanged.
SunTrust provides financial support to community building efforts through
its extensive corporate contributions, investments and lending activities. In
2001, SunTrust approved 17,742 loans totaling approximately $1.8 billion to
provide housing in low- to moderate-income areas. Additionally, 43,463 loans
totaling $3.6 billion have been approved for families classified as low-to
moderate-income to purchase or rehabilitate their homes. These figures represent
continued growth in the
<PAGE>
SunTrust 2001 Annual Report 41
MANAGEMENT'S DISCUSSION
- --------------------------------------------------------------------------------
volume of SunTrust's housing-related lending to low- and moderate-income
communities. Businesses in these communities received 40,807 loans from SunTrust
totaling almost $5 billion. Of these loans 29,760, or 73%, had an original
principal balance of $100,000 or less. Also in 2001, SunTrust made 23,805 loans
totaling over $1.8 billion to small businesses with annual revenues of $1
million or less. In rural markets, small farms also received support in the form
of 1,398 loans totaling almost $100 million. Seventy-eight percent of these
loans were for $100,000 or less. In addition, SunTrust made $667 million in
community development loans during 2001. Through membership in the Federal Home
Loan Bank (FHLB), SunTrust has provided funding for affordable housing projects
under the FHLB's Affordable Housing Program and Community Reinvestment Program.
SunTrust's two community development corporations and its Regency Housing
Group subsidiary have become significant developers of affordable housing for
low- and moderate-income families. Since Regency became part of SunTrust, it has
developed more than 4,500 units of affordable housing in communities from
Virginia to Florida. Through its investments in low income housing tax credits,
SunTrust has now provided equity capital for more than 18,000 affordable housing
units across the southeast.
SunTrust supports its communities through a variety of investments and
contributions such as low-income housing tax credits, funding for local and
regional groups engaging in providing affordable housing or promoting small
business development and targeted mortgage-backed securities. By participating
in the public finance efforts of state, county and municipal governments,
SunTrust has financed activities such as school construction, public housing and
environmental cleanup and protection programs. The Company's combined investment
in community development projects and organizations now totals more than $500
million.
Legal Proceedings
The Company and its subsidiaries are parties to numerous claims and lawsuits
arising in the course of their normal business activities, some of which involve
claims for substantial amounts. Although the ultimate outcome of these suits
cannot be ascertained at this time, it is the opinion of management that none of
these matters, when resolved, will have a material effect on the Company's
consolidated results of operations or financial position.
Competition
All aspects of the Company's business are highly competitive. The Company faces
aggressive competition from other domestic and foreign lending institutions and
from numerous other providers of financial services. The ability of nonbanking
financial institutions to provide services previously reserved for commercial
banks has intensified competition. Because nonbanking financial institutions are
not subject to the same regulatory restrictions as banks and bank holding
companies, they can often operate with greater flexibility and lower cost
structures. Securities firms and insurance companies that elect to become
financial holding companies may acquire banks and other financial institutions.
This may significantly change the competitive environment in which the Company
and its subsidiaries conduct business.
Properties
The Company's headquarters are located in Atlanta, Georgia. As of December 31,
2001, SunTrust Bank owned 684 of its 1,128 full-service banking offices, and
leased the remaining banking offices. (See Note 8 to the Consolidated Financial
Statements.)
<PAGE>
42 SunTrust 2001 Annual Report
MANAGEMENT'S STATEMENT OF RESPONSIBILITY FOR FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
Financial statements and information in this Annual Report were prepared in
conformity with generally accepted accounting principles. Management is
responsible for the integrity and objectivity of the financial statements and
related information. Accordingly, it maintains an extensive system of internal
controls and accounting policies and procedures to provide reasonable assurance
of the accountability and safeguarding of Company assets, and of the accuracy of
financial information. These procedures include management evaluations of asset
quality and the impact of economic events, organizational arrangements that
provide an appropriate division of responsibility and a program of internal
audits to evaluate independently the adequacy and application of financial and
operating controls and compliance with Company policies and procedures.
The Company's independent public accountants, Arthur Andersen LLP, express
their opinion as to the fairness of the financial statements presented. Their
opinion is based on an audit conducted in accordance with generally accepted
auditing standards as described in the second paragraph of their report.
The Board of Directors, through its Audit Committee, is responsible for
ensuring that both management and the independent public accountants fulfill
their respective responsibilities with regard to the financial statements. The
Audit Committee, composed entirely of directors who are not officers or
employees of the Company, meets periodically with both management and the
independent public accountants to ensure that each is carrying out its
responsibilities. The independent public accountants have full and free access
to the Audit Committee and meet with it, with and without management present, to
discuss auditing and financial reporting matters.
The Company assessed its internal control system as of December 31, 2001,
in relation to criteria for effective internal control over consolidated
financial reporting described in "Internal Control -- Integrated Framework"
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this assessment, the Company believes that, as of December 31, 2001,
its system of internal controls over consolidated financial reporting met those
criteria.
L. Phillip Humann
Chairman of the Board of Directors,
President and Chief Executive Officer
John W. Spiegel
Vice Chairman
and Chief Financial Officer
William P. O'Halloran
Senior Vice President
and Controller
Abbreviations
Within the consolidated financial statements and the notes thereto, the
following references will be used:
SunTrust Banks, Inc. - Company or SunTrust
SunTrust Bank Holding Company - Bank Parent Company
SunTrust Bank - Bank
Index To Consolidated Financial Statements
Page
Consolidated Statements Of Income 44
Consolidated Balance Sheets 45
Consolidated Statements Of Shareholders' Equity 46
Consolidated Statements Of Cash Flow 47
Notes To Consolidated Financial Statements 48
<PAGE>
SunTrust 2001 Annual Report 43
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To SunTrust Banks, Inc.
We have audited the accompanying consolidated balance sheets of SunTrust Banks,
Inc. (a Georgia corporation) and subsidiaries as of December 31, 2001 and 2000
and the related consolidated statements of income, comprehensive income,
shareholders' equity and cash flow for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SunTrust
Banks, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results
of their operations and their cash flow for each of the three years in the
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States.
Atlanta, Georgia
February 12, 2002
Arthur Andersen LLP
<PAGE>
44 SunTrust 2001 Annual Report
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
(Dollars in thousands except per share data) 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income
Interest and fees on loans $ 4,908,775 $ 5,605,320 $ 4,744,609
Interest and fees on loans held for sale 211,471 110,563 172,153
Interest and dividends on securities available for sale
Taxable interest 965,694 916,573 859,002
Tax-exempt interest 27,669 25,794 30,682
Dividends/1/ 68,207 64,885 66,906
Interest on funds sold 51,164 92,782 73,382
Interest on deposits in other banks 5,743 865 2,665
Other interest 40,851 28,637 10,809
- ----------------------------------------------------------------------------------------------------------
Total interest income 6,279,574 6,845,419 5,960,208
- ----------------------------------------------------------------------------------------------------------
Interest Expense
Interest on deposits 1,812,385 2,452,919 1,626,132
Interest on funds purchased 412,218 651,235 749,561
Interest on other short-term borrowings 63,359 97,903 79,521
Interest on long-term debt 739,012 534,924 359,538
- ----------------------------------------------------------------------------------------------------------
Total interest expense 3,026,974 3,736,981 2,814,752
- ----------------------------------------------------------------------------------------------------------
Net Interest Income 3,252,600 3,108,438 3,145,456
Provision for loan losses - Note 7 275,165 133,974 170,437
- ----------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 2,977,435 2,974,464 2,975,019
- ----------------------------------------------------------------------------------------------------------
Noninterest Income
Trust and investment management income 486,116 493,929 495,613
Other charges and fees 570,168 525,920 471,486
Service charges on deposit accounts 510,249 459,653 438,107
Mortgage production related income 186,114 90,061 153,055
Mortgage servicing related income (6,073) 32,832 27,056
Other noninterest income - Note 21 256,169 164,614 149,675
Securities gains (losses) - Note 5 153,080 6,616 (109,076)
- ----------------------------------------------------------------------------------------------------------
Total noninterest income 2,155,823 1,773,625 1,625,916
- ----------------------------------------------------------------------------------------------------------
Noninterest Expense
Salaries and other compensation - Note 14 1,588,431 1,468,967 1,522,570
Employee benefits - Note 14 192,969 175,035 175,801
Equipment expense 189,763 193,709 198,464
Net occupancy expense 210,436 202,608 197,439
Marketing and customer development 103,998 106,215 105,429
Merger-related expenses -- 42,444 45,556
Other noninterest expense - Note 22 827,941 639,555 660,019
- ----------------------------------------------------------------------------------------------------------
Total noninterest expense 3,113,538 2,828,533 2,905,278
- ----------------------------------------------------------------------------------------------------------
Income before provision for income taxes and extraordinary gain 2,019,720 1,919,556 1,695,657
Provision for income taxes - Note 13 650,501 625,456 571,705
- ----------------------------------------------------------------------------------------------------------
Income before extraordinary gain 1,369,219 1,294,100 1,123,952
Extraordinary gain, net of taxes - Notes 3 and 13 6,318 -- 202,648
- ----------------------------------------------------------------------------------------------------------
Net Income $ 1,375,537 $ 1,294,100 $ 1,326,600
==========================================================================================================
Net income per average common share - Note 12:
Diluted
Income before extraordinary gain $ 4.70 $ 4.30 $ 3.50
Extraordinary gain 0.02 -- 0.63
- ----------------------------------------------------------------------------------------------------------
Net income $ 4.72 $ 4.30 $ 4.13
==========================================================================================================
Basic
Income before extraordinary gain $ 4.76 $ 4.35 $ 3.54
Extraordinary gain 0.02 -- 0.64
- ----------------------------------------------------------------------------------------------------------
Net income $ 4.78 $ 4.35 $ 4.18
==========================================================================================================
Dividends declared per common share $ 1.60 $ 1.48 $ 1.38
Average common shares - diluted 291,584 300,956 321,174
Average common shares - basic 287,702 297,834 317,079
/1/Includes dividends on 48,266,496 shares of common stock
of The Coca-Cola Company $ 34,752 $ 32,821 $ 30,891
==========================================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
SunTrust 2001 Annual Report 45
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
At December 31
(Dollars in thousands) 2001 2000
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks $ 4,229,074 $ 4,110,489
Interest-bearing deposits in other banks 185,861 13,835
Funds sold - Note 4 1,495,109 1,267,028
Trading account 1,343,602 1,105,848
Securities available for sale/1/ - Note 5 19,656,391 18,810,311
Loans held for sale 4,319,594 1,759,281
Loans - Notes 6, 15 and 16 68,959,222 72,239,820
Allowance for loan losses - Note 7 (867,059) (874,547)
- ------------------------------------------------------------------------------------------------------------
Net loans 68,092,163 71,365,273
Premises and equipment - Note 8 1,584,869 1,629,071
Intangible assets 811,276 810,860
Customers' acceptance liability 55,171 184,157
Other assets - Note 14 2,967,534 2,604,221
- ------------------------------------------------------------------------------------------------------------
Total assets $104,740,644 $103,660,374
============================================================================================================
Liabilities and Shareholders' Equity - Notes 12 and 14
Noninterest-bearing consumer and commercial deposits $ 16,369,823 $ 15,064,017
Interest-bearing consumer and commercial deposits 45,911,419 41,572,310
- ------------------------------------------------------------------------------------------------------------
Total consumer and commercial deposits 62,281,242 56,636,327
Brokered deposits 2,829,687 3,179,100
Foreign deposits 2,425,493 9,717,910
- ------------------------------------------------------------------------------------------------------------
Total deposits 67,536,422 69,533,337
Funds purchased 10,104,287 10,895,944
Other short-term borrowings - Note 9 1,651,639 1,761,985
Long-term debt - Note 11 11,010,580 7,895,430
Guaranteed preferred beneficial interests in debentures - Note 11 1,650,000 1,050,000
Acceptances outstanding 55,171 184,157
Other liabilities - Note 13 4,372,977 4,100,313
- ------------------------------------------------------------------------------------------------------------
Total liabilities 96,381,076 95,421,166
- ------------------------------------------------------------------------------------------------------------
Commitments and contingencies - Notes 8, 11, 15 and 18
Preferred stock, no par value; 50,000,000 shares authorized; none issued -- --
Common stock, $1.00 par value 294,163 323,163
Additional paid in capital 1,259,609 1,274,416
Retained earnings 5,479,951 6,312,044
Treasury stock and other (329,408) (1,613,189)
- ------------------------------------------------------------------------------------------------------------
Realized shareholders' equity 6,704,315 6,296,434
Accumulated other comprehensive income - Notes 5 and 20 1,655,253 1,942,774
- ------------------------------------------------------------------------------------------------------------
Total shareholders' equity 8,359,568 8,239,208
- ------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $104,740,644 $103,660,374
============================================================================================================
Common shares outstanding 288,601,607 296,266,329
Common shares authorized 750,000,000 750,000,000
Treasury shares of common stock 5,561,150 26,896,428
/1/ Includes net unrealized gains on securities available for sale $ 2,632,266 $ 3,048,313
============================================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
46 SunTrust 2001 Annual Report
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Additional Treasury Other Com-
Common Paid in Retained Stock and prehensive
(In thousands) Stock Capital Earnings Other/1/ Income Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999 $ 322,485 $ 1,293,011 $ 4,575,382 $ (100,441) $ 2,088,207 $ 8,178,644
Net income -- -- 1,326,600 -- -- 1,326,600
Other comprehensive income:
Change in unrealized gains (losses) on
securities, net of taxes -- -- -- -- (525,385) (525,385)
-------------
Total comprehensive income 801,215
Cash dividends declared, $1.38 per share -- -- (440,631) -- -- (440,631)
Exercise of stock options 575 (8,661) -- 23,116 -- 15,030
Acquisition of stock -- -- -- (954,642) -- (954,642)
Restricted stock activity 11 735 -- (746) -- --
Amortization of compensation element
of restricted stock -- -- -- 15,557 -- 15,557
Issuance of stock for employee
benefit plans 92 8,302 -- 3,295 -- 11,689
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 323,163 1,293,387 5,461,351 (1,013,861) 1,562,822 7,626,862
Net income -- -- 1,294,100 -- -- 1,294,100
Other comprehensive income:
Change in unrealized gains (losses) on
securities, net of taxes -- -- -- -- 379,952 379,952
-------------
Total comprehensive income 1,674,052
Cash dividends declared, $1.48 per share -- -- (443,407) -- -- (443,407)
Exercise of stock options -- (11,767) -- 29,672 -- 17,905
Acquisition of stock -- -- -- (668,391) -- (668,391)
Restricted stock activity -- (795) -- 795 -- --
Amortization of compensation element of
restricted stock -- -- -- 9,408 -- 9,408
Issuance of stock for employee
benefit plans -- (6,409) -- 29,188 -- 22,779
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000 323,163 1,274,416 6,312,044 (1,613,189) 1,942,774 8,239,208
Net income -- -- 1,375,537 -- -- 1,375,537
Other comprehensive income:
Adoption of SFAS No. 133 -- -- -- -- (10,560) (10,560)
Change in unrealized gains (losses) on
derivatives, net of taxes -- -- -- -- (45,169) (45,169)
Change in unrealized gains (losses) on
securities, net of taxes -- -- -- -- (231,792) (231,792)
-------------
Total comprehensive income 1,088,016
Cash dividends declared, $1.60 per share -- -- (463,529) -- -- (463,529)
Exercise of stock options -- (15,771) -- 34,784 -- 19,013
Acquisition of treasury stock -- -- -- (551,485) -- (551,485)
Retirement of treasury stock (29,000) -- (1,744,101) 1,773,101 -- --
Restricted stock activity -- 103 -- (103) -- --
Amortization of compensation element of
restricted stock -- -- -- 6,110 -- 6,110
Issuance of stock for employee
benefit plans -- 861 -- 21,374 -- 22,235
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001 $ 294,163 $ 1,259,609 $ 5,479,951 $ (329,408) $ 1,655,253 $ 8,359,568
===================================================================================================================================
</TABLE>
/1/ Balance at December 31, 2001 includes $291,891 for treasury stock and
$37,517 for compensation element of restricted stock.
See notes to consolidated financial statements.
<PAGE>
SunTrust 2001 Annual Report 47
CONSOLIDATED STATEMENTS OF CASH FLOW
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
(Dollars in thousands) 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income $ 1,375,537 $ 1,294,100 $ 1,326,600
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Extraordinary gain, net of taxes (6,318) -- (202,648)
Depreciation, amortization and accretion 357,371 299,957 284,993
Provisions for loan losses and foreclosed property 275,541 134,353 173,789
Deferred income tax provision 42,035 190,103 183,842
Amortization of compensation element of restricted stock 6,110 9,408 15,557
Securities (gains) losses (153,080) (6,616) 109,076
Net gain on sale of assets (8,467) (9,777) (28,887)
Originated loans held for sale (21,455,760) (9,947,904) (9,407,592)
Sales of loans held for sale 18,895,447 9,720,410 11,424,360
Net increase in accrued interest receivable,
prepaid expenses and other assets (978,362) (1,525,061) (108,769)
Net increase (decrease) in accrued interest payable,
accrued expenses and other liabilities 359,155 323,302 (164,030)
- -----------------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (1,290,791) 482,275 3,606,291
- -----------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Proceeds from maturities of securities available for sale 3,114,827 2,195,575 3,668,622
Proceeds from sales of securities available for sale 5,419,095 1,365,509 5,857,310
Purchases of securities available for sale (7,754,258) (2,620,549) (11,249,089)
Net decrease (increase) in loans 418,389 (7,567,454) (5,024,748)
Proceeds from sale of loans 762,405 286,527 569,821
Capital expenditures (89,224) (145,821) (257,179)
Proceeds from the sale of other assets 35,889 40,234 59,577
Loan recoveries 53,576 58,910 65,650
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 1,960,699 (6,387,069) (6,310,036)
- -----------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Net increase in consumer and commercial deposits 5,644,915 983,457 482,854
Net (decrease) increase in foreign and brokered deposits (7,641,830) 8,449,351 584,392
Net (decrease) increase in funds purchased
and other short-term borrowings (902,003) (5,512,998) 2,238,108
Proceeds from the issuance of long-term debt 7,114,068 4,191,114 1,095,872
Repayment of long-term debt (3,392,600) (1,263,030) (886,395)
Proceeds from the exercise of stock options 19,013 17,905 15,030
Proceeds from stock issuance 22,235 22,779 11,689
Proceeds used in the acquisition of stock (551,485) (668,391) (954,642)
Dividends paid (463,529) (443,407) (440,631)
- -----------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (151,216) 5,776,780 2,146,277
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 518,692 (128,014) (557,468)
Cash and cash equivalents at beginning of year 5,391,352 5,519,366 6,076,834
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 5,910,044 $ 5,391,352 $ 5,519,366
===========================================================================================================
Supplemental Disclosure
Interest paid $ 3,118,383 $ 3,618,302 $ 2,812,819
Income taxes paid 446,814 540,212 530,786
Non-cash impact of securitizing loans 1,903,518 925,380 --
Non-cash impact of STAR Systems Inc. sale 52,919 -- --
===========================================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
48 SunTrust 2001 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1 Accounting Policies
General
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated. Results of operations of companies purchased are included from
the dates of acquisition. Assets and liabilities of purchased companies are
stated at estimated fair values at the date of acquisition.
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could vary from these estimates;
however, in the opinion of management, such variances would not be material.
Certain reclassifications have been made to prior year amounts to conform with
the 2001 presentation.
Securities
Securities in the investment portfolio are classified as securities available
for sale and are carried at market value with unrealized gains and losses, net
of any tax effect, included in accumulated other comprehensive income and added
to or deducted from realized shareholders' equity to determine total
shareholders' equity.
Trading account securities are carried at market value with the gains and
losses, determined using the specific identification method, recognized
currently in the statements of income. Included in noninterest income are
realized and unrealized gains and losses resulting from such market value
adjustments of trading account securities and from recording the results of
sales.
Loans Held For Sale
Loans held for sale, that are not documented as the hedged item in a fair value
hedge, are carried at the lower of aggregate cost or market value. Adjustments
to reflect market value and realized gains and losses upon ultimate sale of the
loans are classified as other noninter-est income.
Loans held for sale, that are documented as the hedged item in a fair value
hedge, are carried at fair value. Fair value is based on the contract prices at
which the mortgage loans will be sold, or if the loans are not committed for
sale, the current market price.
The Company classifies only residential mortgage loans as Loans Held for
Sale. Upon transfer to Loans Held for Sale, any losses are recorded through the
Allowance for Loan Losses with subsequent losses recorded as a component of
noninterest expense.
Loans
Interest income on all types of loans is accrued based upon the outstanding
principal amounts except those classified as nonaccrual loans. Interest accrual
is discontinued when it appears that future collection of principal or interest
according to the contractual terms may be doubtful. Interest income on
nonaccrual loans is recognized on a cash basis if there is no doubt of future
collection of principal. Loans classified as nonaccrual, except for smaller
balance homogenous loans, which include consumer and residential loans, meet the
criteria to be considered impaired loans. The Company classifies a loan as
nonaccrual with the occurrence of one of the following events: (i) interest or
principal has been in default 90 days or more, unless the loan is well secured
and in the process of collection; (ii) collection of recorded interest or
principal is not anticipated; or (iii) income for the loan is recognized on a
cash basis due to the deterioration in the financial condition of the debtor.
Consumer and residential real estate loans are typically placed on nonaccrual
when payments have been in default for 90 days or more.
SunTrust measures the impairment of a loan in accordance with Statement of
Financial Accounting Standards ("SFAS") No.'s 114 and 118 by using either the
present value of expected future cash flows discounted at the loan's effective
interest rate, the estimated fair value of the collateral or the market value of
the loan itself. If the value indicated by the most appropriate of these
valuation methods is less than the recorded investments in the loans (principal,
accrued interest, net deferred loan fees or costs, and unamortized premium or
discount), SunTrust includes this deficiency in evaluating the overall adequacy
of the allowance for loan losses.
Fees and incremental direct costs associated with the loan origination and
pricing process are deferred and amortized as level yield adjustments over the
respective loan terms. Fees received for providing loan commitments and letter
of credit facilities that result in loans are deferred and then recognized over
the term of the loan as an adjustment of the yield. Fees on commitments and
letters of credit that are not expected to be funded are amortized into
noninterest income by the straight-line method over the commitment period.
Allowance For Loan Losses
The Company's allowance for loan losses is that amount considered adequate to
absorb inherent losses in the portfolio based on management's evaluations of the
size
<PAGE>
SunTrust 2001 Annual Report 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
and current risk characteristics of the loan portfolio. Such evaluations
consider the level of problem loans and prior loan loss experience as well as
the impact of current economic conditions and other risk factors. Specific
allowances for loan losses are established for impaired loans based on a
comparison of the recorded carrying value of the loan to either the present
value of the loan's expected cash flow, the loan's estimated market price or the
estimated fair value of the underlying collateral. Prior loss experience is
based on a statistical loss migration analysis that examines loss experience and
the related internal risk ratings of loans charged-off. The general economic
conditions and other risk elements are based on local and national economic
factors that are impacting borrowers in SunTrust markets and that could affect
the collectibility of loans.
Long-lived Assets
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation has been calculated primarily using the straight-line
method over the assets' estimated useful lives. Certain leases are capitalized
as assets for financial reporting purposes. Such capitalized assets are
amortized, using the straight-line method, over the terms of the leases.
Maintenance and repairs are charged to expense and betterments are capitalized.
Intangible assets consist primarily of goodwill and mortgage servicing
rights. Goodwill associated with purchased companies was amortized on the
straight-line method over various periods ranging from 25 to 40 years through
December 31, 2001. Beginning January 1, 2002, goodwill is no longer amortized
under the rules of SFAS No. 142.
The Company recognizes as assets the rights to service mortgage loans for
others whether the servicing rights are acquired through purchase or loan
origination. Purchased mortgage servicing rights are capitalized at cost. For
loans originated and sold where the servicing rights have been retained, the
Company allocates the cost of the loan and the servicing rights based on their
relative fair market values. Mortgage servicing rights are amortized over the
estimated period of the related net servicing revenues.
Long-lived assets are evaluated regularly for other-than-temporary
impairment under SFAS No. 121, which has been superceded by SFAS No. 144. If
circumstances suggest that their value may be impaired and the write-down would
be material, an assessment of recoverability is performed prior to any
write-down of the asset.
Impairment on intangibles is evaluated at each balance sheet date or whenever
events or changes in circumstances indicate that the carrying amount should be
assessed. Impairment for mortgage servicing rights is determined based on the
fair value of the rights stratified according to interest rate and type of
related loan. Impairment, if any, is recognized through a valuation allowance
with a corresponding charge recorded in the income statement.
Loan Sales and Securitizations
The Company sells residential mortgages and other loans and has securitized
mortgage loans. Retained interests in securitized assets, including debt
securities, are initially recorded at their allocated carrying amounts based on
the relative fair value of assets sold and retained. Retained interests are
subsequently carried at fair value, which is generally estimated based on the
present value of expected cash flows calculated using management's best
estimates of key assumptions, including credit losses, loan repayment speeds and
discount rates commensurate with the risks involved. Gains or losses on sales
and servicing fees are recorded in noninterest income.
Income Taxes
Deferred income tax assets and liabilities result from temporary differences
between the tax bases of assets and liabilities and their reported amounts in
the financial statements that will result in taxable or deductible amounts in
future years.
Earnings Per Share
Basic earnings per share are based on the weighted average number of common
shares outstanding during each period. Diluted earnings per share are based on
the weighted average number of common shares outstanding during each period,
plus common shares calculated for stock options and performance restricted stock
outstanding using the treasury stock method.
Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include cash and
due from banks, interest-bearing deposits in other banks and funds sold (only
those items with an original maturity of three months or less).
Derivative Financial Instruments
It is the policy of the Company to record all derivative financial instruments
at fair value in the financial statements. SunTrust uses derivative instruments
to hedge interest rate exposure by modifying the characteristics of the related
balance sheet instruments. Derivatives that
<PAGE>
50 SunTrust 2001 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
do not qualify as hedges are carried at their current market value on the
balance sheet and changes in their fair value are recorded as trading income in
the current period. The specific criteria required for derivatives used as
hedges are described below.
The Company adopted SFAS No. 133 on January 1, 2001. Accordingly, all
derivatives were recognized on the balance sheet at their fair value on this
date. In accordance with the transition provisions of SFAS No. 133, the Company
recorded certain transition adjustments. The impact of such transition
adjustments to net income was a gain of $1.6 million and a net transition loss
of $10.6 million included in Other Comprehensive Income on January 1, 2001.
Under the provisions of SFAS No. 133, on the date that a derivative contract is
entered into, the Company designates the derivative as (1) a hedge of the fair
value of a recognized asset or liability or of an unrecognized firm commitment
("fair value" hedge), (2) a hedge of a forecasted transaction or of the
variability of cash flows to be received or paid related to a recognized asset
or liability ("cash flow" hedge), (3) a foreign-currency fair-value or cash-flow
hedge ("foreign currency" hedge) or (4) held for trading ("trading
instruments"). Changes in the fair value of a derivative that is highly
effective, and that has been designated and qualifies as a fair-value hedge,
along with the loss or gain on the hedged asset or liability that is
attributable to the hedged risk (including losses or gains on firm commitments),
are recorded in the current period earnings. Changes in the fair value of a
derivative that is highly effective, and that is designated and qualifies as a
cash flow hedge are recorded in either current-period earnings, if the hedged
item is an over hedge, or in other comprehensive income. Changes in the fair
value of derivative trading instruments are reported in current-period earnings.
The Company formally documents all relationships between hedging
instruments and hedged items, including the risk management objective for the
hedge and an assessment that the derivatives are expected to be highly effective
in offsetting changes in the fair values or cash flows of hedged items. This
process includes linking all derivatives that are designated as fair value, cash
flow or foreign currency hedges to specific assets and liabilities on the
balance sheet or to specific firm commitments or forecasted transactions.
Recent Accounting Developments
In July of 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations," and No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 establishes accounting and reporting standards for
business combinations. This Statement eliminates the use of the
pooling-of-interest method of accounting for business combinations, requiring
future business combinations to be accounted for using the purchase method of
accounting. Additionally, SFAS No. 141 enhances the disclosures related to
business combinations and requires that all intangible assets acquired in a
business combination be reported separately from goodwill. These intangible
assets must then be assigned to a specifically identified reporting unit and
assigned a useful life. The provisions of this Statement apply to all business
combinations initiated after June 30, 2001. This Statement also applies to all
business combinations accounted for using the purchase method for which the date
of acquisition is July 1, 2001 or later. The adoption of this Statement did not
have a material impact on the Company's financial position or results of
operations.
SFAS No. 142 establishes accounting and reporting standards for goodwill
and other intangible assets. With the adoption of this Statement, goodwill is no
longer subject to amortization over its estimated useful life. Year-to-date
December 31, 2001 earnings included net-of-tax amortization of goodwill totaling
$36.1 million. Goodwill will be subject to, at least, an annual assessment for
impairment by applying a two step fair-value based test. Additionally, SFAS No.
142 enhances the disclosures related to goodwill and intangible assets. SunTrust
adopted SFAS No. 142, in its entirety, effective January 1, 2002. Goodwill
currently carried on the balance sheet was subject to an initial assessment for
impairment. The Company completed its initial assessment review and determined
that there was no impairment of goodwill as of December 31, 2001. With the
exception of no longer amortizing goodwill, the adoption of this statement did
not have a material impact on the Company's financial position or results of
operations.
In August of 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." This Statement amends SFAS No. 19, "Financial
Accounting and Reporting by Oil and Gas Producing Companies." SFAS No. 143
applies to all entities and addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. Because all asset retirement obligations that
fall within the scope of this Statement and their related asset retirement cost
will be accounted for consistently, financial statements of different entities
will be more comparable. This Statement is effective for financial statements
issued for fiscal years beginning after June 15, 2002; however, earlier
application is encouraged. The Company will adopt SFAS No. 143 on January 1,
2003. The adoption of this statement is not expected to have a material impact
on the Company's financial position or results of operations.
<PAGE>
SunTrust 2001 Annual Report 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets," was issued during the fourth quarter of 2001. SFAS No. 144 supercedes
both SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," which previously governed impairment of
long-lived assets, and APB Opinion No. 30, "Reporting the Results of Operations
- -- Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions,"
which addressed the disposal of a business segment. This Statement improves
financial reporting by requiring one accounting model be used for long-lived
assets to be disposed of by sale and by broadening the presentation of
discontinued operations to include more disposal transactions. The Company
adopted SFAS No. 144 effective January 1, 2002 and it did not have a material
impact on the Company's financial position or results of operations.
Note 2 Acquisitions
On September 25, 2001, SunTrust entered into a purchase agreement with
Huntington Bancshares Incorporated to acquire the Florida banking franchise of
Huntington National Bank. The Company will acquire Huntington's retail, small
business, commercial, treasury management and investment-related businesses and
plans to integrate the franchise into its existing Florida banking organization.
It is anticipated that the Company will acquire approximately $4.6 billion in
assets and liabilities related to this transaction. In addition, the agreement
calls for a payment equal to 15% of deposits acquired (as defined in the
agreement) for the franchise value acquired. This transaction is expected to
close in the first quarter of 2002, at which time the final purchase price will
be determined and will be accounted for in accordance with SFAS No. 141.
On May 14, 2001, SunTrust announced a proposal to acquire the former
Wachovia Corporation and subsequently engaged in a related proxy solicitation
effort. On August 3, 2001, Wachovia shareholders voted to approve a merger with
First Union Corporation. During the third quarter of 2001, SunTrust recorded
$20.2 million of net-of-tax expenses, or $.07 per diluted share, related to the
proposed Wachovia merger.
During the three-year period ended December 31, 2001, the Company has
consummated the following acquisitions that were accounted for as purchases and
individually did not have a material effect on the consolidated financial
statements.
<TABLE>
<CAPTION>
Date Entity Consideration Assets Acquired
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
7/01 The institutional business of The $10.4 million in cash $25.4 million
Robinson-Humphrey Co., LLC
(Atlanta, Georgia)
3/01 AMA Holdings, Inc. $22.0 million in cash $2.5 million
(Jupiter, Florida)
</TABLE>
Note 3 Extraordinary Gain
During 2001, the Company recorded an extraordinary gain of $9.7 million, before
taxes of $3.4 million, for the early extinguishment of $2.3 billion in long-term
debt. During 1999, the Company recorded an extraordinary gain of $327.2 million,
before taxes of $124.6 million, for the sale of the Company's $1.5 billion
consumer credit card portfolio to MBNA America Bank, N.A.
Note 4 Funds Sold
Funds sold at December 31 were as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 2001 2000
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Federal funds $ 324,100 $ 230,175
Repurchase agreements 1,171,009 1,036,853
- -----------------------------------------------------------------------------------------------
Total funds sold $1,495,109 $1,267,028
===============================================================================================
</TABLE>
<PAGE>
52 SunTrust 2001 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Securities purchased under agreement to resell are collateralized by U.S.
government or agency securities and are carried at the amounts at which
securities will be subsequently resold. The Company takes possession of all
securities purchased under agreements to resell and performs the appropriate
margin evaluation on the acquisition date based on market volatility, as
necessary. The Company requires collateral between 100% to 105% of the
underlying securities. The total market value of the collateral held was
$1,194.2 million at December 31, 2001, of which $715.2 million was repledged.
Note 5 Securities Available For Sale
Securities available for sale at December 31 were as follows:
<TABLE>
<CAPTION>
2001
-----------------------------------------------------
Amortized Fair Unrealized Unrealized
(In thousands) Cost Value Gains Losses
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S. government
agencies and corporations $ 2,229,547 $ 2,340,245 $ 111,242 $ 544
States and political subdivisions 434,053 443,690 11,074 1,437
Asset-backed securities 3,508,416 3,544,101 45,455 9,770
Mortgage-backed securities 8,142,467 8,291,643 163,220 14,044
Corporate bonds 1,969,544 1,983,489 62,612 48,667
Common stock of The Coca-Cola Company 110 2,275,765 2,275,655 --
Other securities 739,988 777,458 37,470 --
- -----------------------------------------------------------------------------------------------
Total securities available for sale $17,024,125 $19,656,391 $ 2,706,728 $ 74,462
===============================================================================================
<CAPTION>
2000
-----------------------------------------------------
Amortized Fair Unrealized Unrealized
(In thousands) Cost Value Gains Losses
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S. government
agencies and corporations $ 2,763,479 $ 2,845,283 $ 82,327 $ 523
States and political subdivisions 449,268 455,640 8,025 1,653
Asset-backed securities 1,865,080 1,887,726 24,297 1,651
Mortgage-backed securities 7,651,405 7,679,466 62,459 34,398
Corporate bonds 2,362,238 2,300,800 36,943 98,381
Common stock of The Coca-Cola Company 110 2,941,240 2,941,130 --
Other securities 670,418 700,156 29,786 48
- -----------------------------------------------------------------------------------------------
Total securities available for sale $15,761,998 $18,810,311 $ 3,184,967 $ 136,654
===============================================================================================
</TABLE>
The amortized cost and fair value of investments in debt securities at
December 31, 2001 by contractual maturities are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Amortized Fair
(In thousands) Cost Value
- --------------------------------------------------------------------------------
Due in one year or less $ 339,804 $ 344,063
Due in one year through five years 3,917,581 4,095,250
Due after five years through ten years 1,806,240 1,840,737
After ten years 10,220,402 10,323,118
- --------------------------------------------------------------------------------
Total $16,284,027 $16,603,168
================================================================================
Proceeds from the sales of investments in debt securities were $5.4, $1.4
and $5.9 billion in 2001, 2000 and 1999, respectively. Gross realized gains were
$166.8, $63.0 and $10.9 million and gross realized losses on such sales were
$13.7, $56.4 and $117.2 million in 2001, 2000 and 1999, respectively.
Securities available for sale that were pledged to secure public deposits,
trust and other funds had fair values of $12.9, $12.2 and $11.7 billion at
December 31, 2001, 2000 and 1999, respectively.
<PAGE>
SunTrust 2001 Annual Report 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 6 Loans
The composition of the Company's loan portfolio at December 31 is shown in the
following table:
(In thousands) 2001 2000
- -------------------------------------------------------------------------------
Commercial $28,945,880 $30,781,090
Real estate
Construction 3,627,312 2,966,087
Residential mortgages 17,297,055 19,953,027
Other 8,152,029 8,121,441
Business credit card 91,996 76,747
Consumer loans 10,844,950 10,341,428
- -------------------------------------------------------------------------------
Total loans $68,959,222 $72,239,820
===============================================================================
Total nonaccrual and restructured loans at December 31, 2001 and 2000 were
$558.1 and $405.3 million, respectively. The gross amounts of interest income
that would have been recorded in 2001, 2000 and 1999 on nonaccrual and
restructured loans at December 31 of each year, if all such loans had been
accruing interest at their contractual rates, were $45.6, $35.9 and $25.9
million, while interest income actually recognized totaled $15.8, $17.8 and
$16.5 million, respectively.
In the normal course of business, the Company's banking subsidiaries have
made loans at prevailing interest rates and terms to directors and executive
officers of the Company and its subsidiaries, and to their related interests.
The aggregate dollar amounts were $874.6 million at December 31, 2001 and
$1,147.6 million at December 31, 2000. During 2001, $2,409.9 million of such
loans were made and repayments totaled $2,682.9 million. None of these loans has
been restructured in accordance with SFAS No. 15 "Accounting by Debtors and
Creditors for Troubled Debt Restructurings," nor were any related party loans
charged off during 2001 and 2000.
At December 31, 2001 and 2000, impaired loans amounted to $444.4 million
and $304.8 million, respectively. Included in the allowance for loan losses was
$147.8 million related to $444.4 million of impaired loans at December 31, 2001,
and $63.0 million related to $304.8 million of impaired loans at December 31,
2000. For the years ended December 31, 2001 and 2000, the average recorded
investment in impaired loans was $342.6 million and $206.9 million,
respectively; and $12.2 million and $13.3 million, respectively, of interest
income was recognized on loans while they were impaired.
Note 7 Allowance For Loan Losses
Activity in the allowance for loan losses is summarized in the table below:
(In thousands) 2001 2000 1999
- -------------------------------------------------------------------------------
Balance at beginning of year $ 874,547 $ 871,323 $ 944,557
Allowance from acquisitions and other
activity - net (10,210) -- (13,331)
Provision 275,165 133,974 170,437
Loan charge-offs (326,019) (189,706) (295,990)
Loan recoveries 53,576 58,956 65,650
- -------------------------------------------------------------------------------
Balance at end of year $ 867,059 $ 874,547 $ 871,323
===============================================================================
It is the opinion of management that the allowance was adequate at December
31, 2001, based on conditions reasonably known to management; however, the
allowance may be increased or decreased in the future based on loan balances
outstanding, changes in internally generated credit quality ratings of the loan
portfolio, trends in credit losses, changes in general economic conditions or
other risk factors.
<PAGE>
54 SunTrust 2001 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 8 Premises And Equipment
Premises and equipment at December 31 were as follows:
<TABLE>
<CAPTION>
(In thousands) Useful Life 2001 2000
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Land $ 348,220 $ 344,116
Buildings and improvements 5 - 40 years 1,343,242 1,243,640
Leasehold improvements 5 - 20 years 256,136 235,921
Furniture and equipment 3 - 20 years 1,143,017 1,089,107
Construction in progress 88,972 161,186
- -------------------------------------------------------------------------------------------------------------------
3,179,587 3,073,970
Less accumulated depreciation and amortization 1,594,718 1,444,899
- -------------------------------------------------------------------------------------------------------------------
Total premises and equipment $ 1,584,869 $ 1,629,071
===================================================================================================================
</TABLE>
The carrying amounts of premises and equipment subject to mortgage indebtedness
(included in long-term debt) were not significant at December 31, 2001 and 2000.
Various Company facilities and equipment are leased under both capital and
noncancelable operating leases with initial remaining terms in excess of one
year. Minimum payments, by year and in aggregate, as of December 31, 2001 were
as follows:
<TABLE>
<CAPTION>
Operating Capital
(In thousands) Leases Leases
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
2002 $ 90,700 $ 3,927
2003 79,403 3,873
2004 70,136 3,769
2005 52,946 2,993
2006 43,452 2,414
Thereafter 127,359 25,651
- -------------------------------------------------------------------------------------------------------------------
Total minimum lease payments 463,996 42,627
- -------------------------------------------------------------------------------------------------------------------
Amounts representing interest 23,186
- -------------------------------------------------------------------------------------------------------------------
Present value of net minimum lease payments $ 19,441
===================================================================================================================
</TABLE>
Net premises and equipment include $13.5 and $14.5 million at December 31,
2001 and 2000, respectively, related to capital leases.
Aggregate rent expense for all operating leases (including contingent
rental expense) amounted to $117.0, $120.4 and $118.9 million for 2001, 2000 and
1999, respectively.
Note 9 Other Short-Term Borrowings
Other short-term borrowings at December 31 includes:
<TABLE>
<CAPTION>
2001 2000
------------------------- -------------------------------
(In thousands) Balance Rates Balance Rates
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial paper $ -- -- $ 545,800 6.51% - 6.57%
Federal funds purchased maturing in over one day -- -- 226,000 6.20% - 6.62%
Master notes 340,929 1.20% 357,258 5.70%
U.S. Treasury demand notes 1,249,996 1.40% 593,425 5.16%
Other 60,714 various 39,502 various
- -------------------------------------------------------------------------------------------------------------------
Total other short-term borrowings $ 1,651,639 $ 1,761,985
===================================================================================================================
</TABLE>
At December 31, 2001, $290.0 million of unused borrowings under unsecured
lines of credit from non-affiliated banks were available to the Parent Company
to support outstanding commercial paper and provide for general liquidity needs.
The average balances of short-term borrowings for the years ended December 31,
2001, 2000 and 1999, were $1.6, $1.6 and $1.7 billion, respectively, while the
maximum amount outstanding at any month-end during the years ended December 31,
2001, 2000 and 1999, were $2.9, $2.0 and $2.3 billion, respectively.
<PAGE>
SunTrust 2001 Annual Report 55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 10 Loan Servicing
The following is an analysis of capitalized mortgage servicing rights included
in intangible assets in the Consolidated Balance Sheets:
<TABLE>
<CAPTION>
(In thousands) 2001 2000 1999
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 314,996 $ 273,526 $ 235,691
Rights acquired 36,308 33,826 50,534
Rights originated 122,970 71,785 43,620
Rights sold -- (15,677) --
Change in provision for valuation allowance -- -- 6,384
Amortization (123,074) (48,464) (62,703)
- ------------------------------------------------------------------------------------------------------
Balance at end of year $ 351,200 $ 314,996 $ 273,526
======================================================================================================
</TABLE>
No valuation allowances were required at December 31, 2001, 2000 and 1999
for the Company's mortgage servicing rights.
During 2001, the Company transferred a total of $1,903 million of single
family mortgages to securities available for sale in two securitization
transactions. These securities, less securities sold, are maintained in the
Company's available for sale securities portfolio.
The first securitization of $468 million was recorded in February 2001. The
securitization was guaranteed by Fannie Mae with the Company maintaining
one-percent recourse on the losses incurred in the securitized loan portfolio. A
second securitization of $1,435 million was recorded in March 2001. This was a
private securitiza-tion with SunTrust maintaining full recourse on the losses
incurred in the securitized loan portfolio.
A reserve of $3.6 million has been established on the balance sheet in
other liabilities representing Management's estimate of recourse exposure on
securi-tized loans. The reserves were established based on Management's
evaluation of the size and risk characteristics of the securitized loan
portfolio. The reserve is periodically evaluated by management for adequacy,
with consideration given to the balance of problem loans, prior loan loss
experience, current economic conditions, value of collateral and other risk
factors.
SunTrust retained the servicing rights for all of the securitized
single-family mortgages. The carrying value of the retained servicing rights is
maintained on the balance sheet in intangible assets. Key economic assumptions
used to measure total mortgage servicing rights as of December 31, 2001 were as
follows:
2001
- -------------------------------------------------------------------------------
Payment rate 12.7% annual
Weighted average life 7.25 years
Discount rate 10.3%
===============================================================================
At December 31, 2001, key economic assumptions and the sensitivity of the
current fair value on retained servicing rights to immediate 10% and 20% adverse
changes in those assumptions follow:
(Dollars in millions)
- --------------------------------------------------------------------------------
Fair value of retained servicing rights $ 426.9
Weighted-average life (in years) 7.25
- --------------------------------------------------------------------------------
Prepayment speed assumption (annual rate) 12.7%
Decline in fair value of 10% adverse change $ 21.5
Decline in fair value of 20% adverse change 41.0
Residual cash flows discount rate (annual rate) 10.3%
Decline in fair value of 10% adverse change $ 14.8
Decline in fair value of 20% adverse change 28.5
================================================================================
These sensitivities are hypothetical and should be used with caution. As the
figures indicate, changes in fair value based on a 10% variation in assumptions
generally cannot be extrapolated because the relationship of the change in
assumption to the change in fair value may not be linear. Also, the effect of a
variation in a particular assumption on the fair value of the retained servicing
right is calculated without changing any other assumption; in reality, changes
in one factor may result in changes in another (for example, increases in market
interest rates may result in lower prepayments and increased credit losses),
which might magnify or counteract the sensitivities.
<PAGE>
56 SunTrust 2001 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Sensitivity analyses were not performed on the retained securities or the
retained reserve for probable recourse exposure. The securities, less securities
sold, resulting from the securitizations had a market and book value of $1.7
billion as of December 31, 2001. If quoted market prices were to increase 10
percent, then there would be an exact corresponding effect on the value of those
securities. The total reserve representing Management's estimate of recourse
exposure on securi-tized loans had a balance of $3.6 million as of December 31,
2001.
Quantitative information about delinquencies, net credit losses, and
components of securitized residential mortgage loans at December 31 is as
follows:
<TABLE>
<CAPTION>
(In thousands) 2001 2000
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Securitized mortgage loans held for investment $ 1,667,525 $ 910,264
Securitized mortgage loans past due 60 days 3,630 44
Securitized Mortgage loan net charge-offs -- --
===================================================================================================================
</TABLE>
Note 11 Long-Term Debt And Guaranteed Preferred Beneficial Interests In
Debentures
Long-term debt and guaranteed preferred beneficial interests in debentures at
December 31 consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 2001 2000
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Parent Company Only
Floating rate notes due 2002 $ 250,000 $ 250,000
7.375% notes due 2002 200,000 200,000
6.125% notes due 2004 200,000 200,000
7.375% notes due 2006 200,000 200,000
6.25% notes due 2008 297,250 297,250
7.75% notes due 2010 300,000 300,000
Floating rate notes due 2019 50,563 50,563
6.0% notes due 2026 200,000 200,000
SunTrust Capital I, floating rate due 2027 350,000 350,000
SunTrust Capital II, 7.9% notes due 2027 250,000 250,000
SunTrust Capital III, floating rate due 2028 250,000 250,000
6.0% notes due 2028 219,925 219,925
SunTrust Capital IV, 7.125% 2031 300,000 --
SunTrust Capital V, 7.05% 2031 300,000 --
Capital lease obligations 2,770 3,497
Payment agreement due 2001 -- 7,843
Other (4,680) --
- -------------------------------------------------------------------------------------------------------------------
Total Parent Company (excluding intercompany
of $154,235 in 2001 and $163,146 in 2000) 3,365,828 2,779,078
- -------------------------------------------------------------------------------------------------------------------
Subsidiaries
8.25% notes due 2002 125,000 125,000
8.75% notes due 2004 149,888 149,849
7.25% notes due 2006 249,401 250,000
6.9% notes due 2007 99,603 100,000
6.375% notes due 2011 1,001,205 --
6.5% notes due 2018 141,667 141,942
Crestar Capital Trust I, 8.16% notes due 2026 200,000 200,000
Capital lease obligations 16,671 17,970
FHLB advances (2001: 0.50 - 8.79%, 2000: 0.50 - 8.79%) 7,211,556 5,177,661
Other 99,761 3,930
- -------------------------------------------------------------------------------------------------------------------
Total subsidiaries 9,294,752 6,166,352
- -------------------------------------------------------------------------------------------------------------------
Total long-term debt and guaranteed preferred beneficial interest in debentures $12,660,580 $8,945,430
===================================================================================================================
</TABLE>
<PAGE>
SunTrust 2001 Annual Report 57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Principal amounts due for the next five years on long-term debt at December
31, 2001 are: 2002 -$1,660.7 million; 2003 - $198.4 million; 2004 -$375.3
million; 2005 - $3.2 million and 2006 -$451.8 million.
Parent Company Only other long-term debt includes an adjustment of $4.7
million related to hedging activities. This amount includes $24.2 million in
unrealized gains on fair value hedges and $19.5 million as an adjustment to the
carrying value of long-term debt.
Subsidiaries other long-term debt includes an adjustment of $3.4 million
related to hedging activities. This amount includes $24.1 million in unrealized
gains on fair valued hedges and $27.5 million as an adjustment to the carrying
value of long-term debt.
Subsidiaries other long-term debt also includes a derivative market value
adjustment for the unrealized loss related to cash flow hedges of $100.2
million. This adjustment includes $14.5 million recorded as interest payable and
$85.7 million which is recorded in other comprehensive income (see Note 20).
Restrictive provisions of several long-term debt agreements prevent the
Company from creating liens on, disposing of, or issuing (except to related
parties) voting stock of subsidiaries. Further, there are restrictions on
mergers, consolidations, certain leases, sales or transfers of assets, minimum
shareholders' equity, and maximum borrowings by the Company. As of December 31,
2001, the Company was in compliance with all covenants and provisions of
long-term debt agreements.
In 2001 and 2000, $1,650.0 and $1,050.0 million of long-term debt qualifies
as Tier 1 capital, respectively. As currently defined by Federal bank
regulators, $2,242.0 million in 2001 and $1,426.9 million in 2000 qualifies as
Tier 2 capital.
SunTrust has established special purpose trusts, which have collectively
issued $1,650.0 million in trust preferred securities. The proceeds from these
issuances, together with the proceeds of the related issuances of common
securities of the trusts, were invested in junior subordinated deferrable
interest debentures of the Parent Company and Bank Parent Company. The sole
assets of these special purpose trusts are the debentures. These debentures rank
junior to the senior and subordinated debt of the issuing company. The Parent
Company and Bank Parent Company own all of the common securities of the special
purpose trusts. The preferred securities issued by the trusts rank senior to the
trusts' common securities. The obligations of the Parent Company and Bank Parent
Company under the debentures, the indentures, the relevant trust agreements and
the guarantees, in the aggregate, constitute a full and unconditional guarantee
by the Parent Company and Bank Parent Company of the obligations of the trusts
under the trust preferred securities and rank subordinate and junior in right of
payment to all liabilities of the Parent Company and Bank Parent Company. The
trust preferred securities may be called prior to maturity at the option of the
Parent Company or Bank Parent Company.
Note 12 Capital
The Company is subject to various regulatory capital requirements which involve
quantitative measures of the Company's assets, liabilities and certain
off-balance sheet items. The Company's capital requirements and classification
are ultimately subject to qualitative judgments by the regulators about
components, risk weightings and other factors. The Company and its subsidiary
banks are subject to a minimum Tier 1 capital ratio (Tier 1 capital to
risk-weighted assets) of 4%, total capital ratio (Tier 1 plus Tier 2 to
risk-weighted assets) of 8% and Tier 1 leverage ratio (Tier 1 to average
quarterly assets) of 3%. To be considered a "well capitalized" institution, the
Tier 1 capital ratio, the total capital ratio, and the Tier 1 leverage ratio
must equal or exceed 6%, 10% and 5%, respectively. SunTrust is committed to
remaining well capitalized. Management believes, as of December 31, 2001, that
the Company meets all capital adequacy requirements to which it is subject.
A summary of Tier 1 and Total capital and the Tier 1 leverage ratio for the
Company and its principal subsidiaries as of December 31 is as follows:
<TABLE>
<CAPTION>
2001 2000
--------------------- --------------------
(Dollars in millions) Amount Ratio Amount Ratio
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SunTrust Banks, Inc.
Tier 1 capital $ 7,994 8.02% $ 6,851 7.09%
Total capital 12,144 12.18 10,489 10.85
Tier 1 leverage 7.94 6.98
SunTrust Bank
Tier 1 capital 7,654 7.83 7,546 8.08
Total capital 10,752 11.00 9,969 10.68
Tier 1 leverage 7.81 7.85
===============================================================================
</TABLE>
<PAGE>
SunTrust 2001 Annual Report 58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Substantially all the Company's retained earnings are undistributed
earnings of the Bank, which is restricted by various regulations administered by
federal and state bank regulatory authorities. Retained earnings of the Bank
available for payment of cash dividends to the Bank Parent Company under these
regulations totaled approximately $672.9 million at December 31, 2001.
In the calculation of basic and diluted EPS, net income is identical.
Shares of 6.6 million and 3.8 million for the years ended December 31, 2001 and
2000, respectively were excluded in the computation of average shares because
they would have been antidilutive. Below is a reconciliation for the three years
ended December 31, 2001, of the difference between average basic common shares
outstanding and average diluted common shares outstanding.
<TABLE>
<CAPTION>
(In thousands) 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Average common shares - basic 287,702 297,834 317,079
Effect of dilutive securities
Stock options 1,971 1,312 2,396
Performance restricted stock 1,911 1,810 1,699
- ------------------------------------------------------------------------------------------------------------
Average common shares - diluted 291,584 300,956 321,174
============================================================================================================
</TABLE>
Note 13 Income Taxes
The provision for income taxes for the three years ended December 31, 2001
consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision for federal income taxes
Current $ 579,773 $ 400,679 $ 399,097
Deferred 41,741 182,312 175,742
- ------------------------------------------------------------------------------------------------------------
Provision for federal income taxes 621,514 582,991 574,839
Provision (benefit) for state income taxes
Current 28,693 34,674 (11,234)
Deferred 294 7,791 8,100
- ------------------------------------------------------------------------------------------------------------
Provision (benefit) for state income taxes 28,987 42,465 (3,134)
- ------------------------------------------------------------------------------------------------------------
Provision for income taxes 650,501 625,456 571,705
- ------------------------------------------------------------------------------------------------------------
Current provision for federal income taxes on extraordinary gain 3,112 -- 109,118
Current provision for state income taxes on extraordinary gain 290 -- 15,463
- ------------------------------------------------------------------------------------------------------------
Provision for income taxes on extraordinary gain 3,402 -- 124,581
- ------------------------------------------------------------------------------------------------------------
Total provision for income taxes $ 653,903 $ 625,456 $ 696,286
============================================================================================================
</TABLE>
The Company's income, before provision for income taxes, from international
operations was not significant.
<PAGE>
SunTrust 2001 Annual Report 59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company's provisions for income taxes for the three years ended
December 31, 2001, which exclude the effects of the extraordinary gain, differ
from the amounts computed by applying the statutory federal income tax rate of
35% to income before income taxes. A reconciliation of this difference is as
follows:
<TABLE>
<CAPTION>
(In thousands) 2001 2000 1999
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax provision at federal statutory rate $ 706,902 $ 671,845 $ 593,480
Increase (decrease) resulting from
Tax-exempt interest (29,848) (30,087) (29,198)
Disallowed interest deduction 5,165 7,657 8,599
Income tax credits (net) (17,320) (18,126) (4,341)
State income taxes, net of federal benefit 13,943 27,602 (2,037)
Dividend exclusion (8,942) (9,282) (9,085)
Goodwill 8,981 8,814 8,778
Disposition of minority interest -- (44,613) --
Other (28,380) 11,646 5,509
- -----------------------------------------------------------------------------------------------------
Provision for income taxes $ 650,501 $ 625,456 $ 571,705
=====================================================================================================
</TABLE>
Temporary differences create deferred tax assets and liabilities that are
detailed below as of December 31, 2001 and 2000:
<TABLE>
<CAPTION>
Deferred Tax Assets (Liabilities)
(In thousands) 2001 2000
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Allowance for loan losses $ 325,065 $ 305,032
Intangible assets 5,182 4,974
Employee benefits (96,761) (83,130)
Fixed assets (7,540) (17,876)
Securities 8,050 (15,033)
Loans (21,282) (16,963)
Mortgage (94,068) (104,622)
Leasing (435,289) (320,982)
Other real estate 6,783 7,174
Unrealized gains on securities available for sale (891,264) (1,105,551)
Other 143,458 38,398
- -----------------------------------------------------------------------------------------------------
Total deferred tax liability $(1,057,666) $(1,308,579)
=====================================================================================================
</TABLE>
SunTrust and its subsidiaries file consolidated income tax returns where
permissible. Each subsidiary remits current taxes to or receives current refunds
from the Parent Company based on what would be required had the subsidiary filed
an income tax return as a separate entity. The Company's federal and state
income tax returns are subject to review and examination by government
authorities. Various such examinations are now in progress. In the opinion of
management, any adjustments which may result from these examinations will not
have a material effect on the Company's consolidated financial statements.
<PAGE>
60 Suntrust 2001 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 14 Employee Benefit Plans
SunTrust sponsors various incentive plans for eligible employees. The
nonqualified Performance Bonus Plan has the broadest participation among
employees. This plan rewards employees based on the employees' compensation and
the Company's earnings performance. The Company provides a match of 50% of
eligible employees' pretax contributions up to 6% for all employees who have one
year of service and participate in the 401(k) plan. The Management Incentive
Plan for key executives provides for annual cash awards, if any, based on four
measures: net income performance; revenue growth; leadership goals; and
achievement of corporate, business unit and individual performance objectives.
The Performance Unit Plan for key executives provides awards, if any, based on
multi-year earnings performance in relation to earnings goals established by the
Compensation Committee (Committee) of the Company's Board of Directors.
The Company also sponsors a Stock Plan under which the Committee has the
authority to grant stock options, Restricted Stock and Performance based
Restricted Stock (Performance Stock) to key employees of the Company. The
Company has 14 million shares of common stock reserved for issuance under the
plan, of which no more than 4 million shares may be issued as Restricted Stock.
Options granted are at no less than the fair market value of a share of stock on
the grant date and may be either tax-qualified incentive stock options or
nonqualified options. The Company does not record expense as a result of the
grant or exercise of any of the stock options.
With respect to Performance Stock, shares must be granted, awarded and
vested before participants take full title. After Performance Stock is granted
by the Committee, specified portions are awarded based on increases in the
average market value of SunTrust common stock from the initial price specified
by the Committee. Awards are distributed on the earliest of (i) fifteen years
after the date shares are awarded to participants; (ii) the participant
attaining age 64; (iii) death or disability of a participant; or (iv) a change
in control of the Company as defined in the Stock Plan. Dividends are paid on
awarded but unvested Performance Stock, and participants may exercise voting
privileges on such shares.
The compensation element for Performance Stock (which is deferred and shown
as a reduction of shareholder's equity) is equal to the fair market value of the
shares at the date of the award and is amortized to compensation expense over
the period from the award date to age 64 or the 15th anniversary of the award
date whichever comes first. Approximately 40% of Performance Stock fully vested
on February 10, 2000 and is no longer subject to the forfeiture condition set
forth in the agreements. This early vested Performance Stock was converted into
an equal number of "Phantom Stock Units" as of that date. Payment of Phantom
Stock Units will be made to participants in shares of SunTrust stock upon the
earlier to occur of (1) the date on which the participant would have vested in
his or her Performance Stock or (2) the date of a change in control. Dividend
equivalents will be paid at the same rate as the shares of Performance Stock;
however, these units will not carry voting privileges.
Compensation expense related to the incentive plans for the three years
ended December 31 were as follows:
<TABLE>
<CAPTION>
(In thousands) 2001 2000 1999
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
401(k) Plan, Performance Bonus Plan, and Thrift Plan $ 52,184 $ 47,184 $ 52,553
Management Incentive Plan and Performance Unit Plan 28,618 13,047 31,580
Performance Stock 6,110 9,408 15,557
=========================================================================================
</TABLE>
<PAGE>
SunTrust 2001 Annual Report 61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following table presents information on Stock Options and Performance Stock:
<TABLE>
<CAPTION>
Stock Options Performance Stock
---------------------------------------------------- -------------------------
Weighted
(Dollars in thousands Price Average Deferred
except per share data) Shares Range Exercise Price Shares Compensation
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1999 6,624,070 $ 3.46 - 76.50 $ 39.90 3,269,200 $ 71,761
Granted 2,654,680 62.87 - 73.06 71.71 13,980 958
Exercised/Vested (1,025,930) 3.46 - 70.81 20.21 (10,000) --
Cancelled, Expired/Forfeited (148,032) 33.19 - 71.94 64.27 (14,400) (713)
Amortization of compensation
for Performance Stock (15,557)
- --------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 8,104,788 3.46 - 76.50 52.54 3,258,780 56,449
Granted 2,849,425 48.56 - 56.13 51.12 18,220 1,023
Exercised/Vested (507,866) 3.46 - 58.11 24.20 (67,326) --
Cancelled/Expired/Forfeited (444,694) 46.63 - 73.06 69.34 (81,200) (3,667)
Amortization of compensation
for Performance Stock (9,408)
- --------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000 10,001,653 3.46 - 76.50 52.83 3,128,474 44,397
Granted 3,231,025 64.40 - 69.38 64.59 49,896 3,436
Exercised/Vested (627,840) 9.23 - 70.81 28.96 (105,399) --
Cancelled/Expired/Forfeited (474,542) 17.88 - 73.06 64.46 (101,374) (4,206)
Amortization of compensation
for Performance Stock (6,110)
- --------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001 12,130,296 $ 11.13 - 76.50 $ 56.70 2,971,597 $ 37,517
====================================================================================================================
</TABLE>
The Company does not recognize compensation cost in accounting for its
stock option plans. If the Company had elected to recognize compensation cost
for options granted in 2001, 2000 and 1999 based on the fair value of the
options granted at the grant date, net income and earnings per share would have
been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
(In millions except per share amounts) 2001 2000 1999
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income - as reported $ 1,375.5 $ 1,294.1 $ 1,326.6
Net income - pro forma 1,361.0 1,281.2 1,312.5
Diluted earnings per share - as reported 4.72 4.30 4.13
Diluted earnings per share - pro forma 4.67 4.26 4.10
Basic earnings per share - as reported 4.78 4.35 4.18
Basic earnings per share - pro forma 4.73 4.30 4.15
====================================================================================================================
</TABLE>
<PAGE>
62 SunTrust 2001 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The weighted average fair values of options granted during 2001, 2000 and
1999 were $7.96, $7.51, and $13.16 per share, respectively. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
2001 2000 1999
- -------------------------------------------------------------------------------
Expected dividend yield 2.48% 2.90% 1.92%
Expected stock price volatility 10.05% 10.52% 10.76%
Risk-free interest rate 4.42% 5.76% 5.77%
Expected life of options 5 years 5 years 5 years
================================================================================
At December 31, 2001, options for 4,625,806 shares were exercisable with a
weighted average exercise price of $48.80. The weighted average remaining
contractual life of all options at December 31, 2001 was 7.6 years.
SunTrust maintains a noncontributory qualified retirement plan covering all
employees meeting certain service requirements. The plan provides benefits based
on salary and years of service. The Company funds the Plans with at least the
minimum amount required by federal regulations. The SunTrust benefits plan
committee establishes investment policies and strategies and regularly monitors
the performance of the funds and portfolio managers. As of December 31, 2001,
the Plan's assets included 58,789 shares of SunTrust Banks, Inc. common stock.
SunTrust also maintains nonqualified supplemental retirement plans that cover
key executives of the Company.
Although not under contractual obligation, SunTrust provides certain
healthcare and life insurance benefits to retired employees ("Other
Postretirement Benefits" in the table below). At the option of SunTrust,
retirees may continue certain health and life insurance benefits if they meet
age and service requirements for postretirement welfare benefits while working
for the Company. Retirees are required to share the cost of retiree health
coverage, while the cost of the retiree life insurance benefits currently are
paid by the Company. Certain retiree health benefits are funded in an Employee
Benefit Trust. In addition, certain retiree life insurance benefits are funded
in a Voluntary Employees' Beneficiary Association (VEBA). As of December 31,
2001, the assets of both Trusts consist of common trust funds, mutual funds,
municipal and corporate bonds and a cash equivalent cash reserve fund.
Components of the net periodic benefit cost for the various plans are as
follows:
<TABLE>
<CAPTION>
Supplemental Other
Retirement Benefits Retirement Plans Postretirement Benefits
--------------------------------- ---------------------------- -----------------------------
(In thousands) 2001 2000 1999 2001 2000 1999 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service cost $ 39,506 $ 36,243 $ 41,997 $ 773 $ 755 $ 710 $ 3,905 $ 3,795 $ 3,205
Interest cost 62,976 56,156 51,954 4,678 4,396 3,779 11,643 11,146 10,905
Expected return on
assets (103,451) (96,845) (91,466) -- -- -- (9,124) (7,089) (7,541)
Prior service cost
amortization (1,422) (4,429) (2,562) 2,446 1,462 1,431 -- 173 163
Actuarial (gain)/loss -- -- (307) 2,581 2,522 3,020 2,443 982 875
Transition amount
amortization (510) (4,917) (4,940) 275 417 417 3,809 3,963 4,603
- -----------------------------------------------------------------------------------------------------------------------------
Net periodic benefit
(income) cost $ (2,901) $(13,792) $ (5,324) $10,753 $ 9,552 $9,357 $12,676 $12,970 $12,210
=============================================================================================================================
</TABLE>
Assumed healthcare cost trend rates have a significant effect on the
amounts reported for the healthcare plans. A one-percentage point change in
assumed healthcare cost trend rates would have the following effects:
<TABLE>
<CAPTION>
(In thousands) 1% Increase 1% Decrease
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total of service and interest cost components $ 623 $ (544)
Effect on postretirement benefit obligation 9,138 (7,959)
=============================================================================================================================
</TABLE>
<PAGE>
SunTrust 2001 Annual Report 63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The funded status of the plans at December 31 were as follows:
<TABLE>
<CAPTION>
Other
Retirement Benefits Postretirement Benefits
-------------------------- ---------------------------
(Dollars in thousands) 2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in Benefit Obligation
Benefit obligation $ 780,035 $ 702,188 $151,608 $142,142
Service cost 39,506 36,243 3,905 3,795
Interest cost 62,976 56,156 11,643 11,146
Plan participants' contributions -- -- 6,993 2,899
Plan amendments 5,210 (1,074) -- (5,966)
Actuarial loss 75,886 31,682 11,542 18,546
Benefits paid (49,523) (45,160) (21,636) (20,954)
- -----------------------------------------------------------------------------------------------
Benefit obligation $ 914,090 $ 780,035 $164,055 $151,608
- -----------------------------------------------------------------------------------------------
Change in Plan Assets
Fair value of plan assets $1,072,576 $1,010,390 $135,399 $113,124
Actual return on plan assets 17,404 66,171 (1,711) 4,779
Company contribution 56,421 41,175 3,749 35,551
Plan participants' contributions -- -- 6,993 2,899
Benefits paid (49,523) (45,160) (21,636) (20,954)
- -----------------------------------------------------------------------------------------------
Fair value of plan assets $1,096,878 $1,072,576 $122,794 $135,399
- -----------------------------------------------------------------------------------------------
Funded status of plan $ 182,788 $ 292,541 $(41,261) $(16,209)
Unrecognized actuarial loss 224,034 62,100 56,839 38,499
Unrecognized prior service cost 1,765 (4,867) -- --
Unrecognized net transition obligation -- (510) 41,898 45,706
- -----------------------------------------------------------------------------------------------
Net amount recognized $ 408,587 $ 349,264 $ 57,476 $ 67,996
===============================================================================================
Weighted-average Assumptions:
Discount rate 7.25% 7.50% 7.25% 7.50%
Expected return on plan assets 9.50% 9.50% 7.00% 6.50%
Rate of compensation increase 4.00% 4.00% 4.00% 4.00%
===============================================================================================
</TABLE>
The supplemental retirement plans cover key executives of the Company, for
which the cost is accrued but may be unfunded. At December 31, 2001 and 2000,
the projected benefit obligation for these plans was $64.7 million and $60.4
million. Included in other liabilities at December 31, 2001 and 2000 are $53.0
million and $52.9 million representing accumulated benefit obligations.
Note 15 Derivatives And Off-Balance Sheet Financial Instruments
In the normal course of business, the Company utilizes various financial
instruments to meet the needs of customers and to manage the Company's exposure
to interest rate and other market risks. These financial instruments, which
consist of derivatives contracts and credit-related arrangements, involve, to
varying degrees, elements of credit and market risk in excess of the amount
recorded on the balance sheet in accordance with generally accepted accounting
principles.
Credit risk represents the potential loss that may occur because a party to
a transaction fails to perform according to the terms of the contract. Market
risk is the possibility that a change in market prices may cause the value of a
financial instrument to decrease or become more costly to settle. The
contract/notional amounts of financial instruments, which are not included in
the consolidated balance sheet, do not necessarily represent credit or market
risk. However, they can be used to measure the extent of involvement in various
types of financial instruments.
The Company manages the credit risk of its derivatives and unfunded
commitments by limiting the total amount of arrangements outstanding by
individual counterparty; by monitoring the size and maturity structure of the
portfolio; by obtaining collateral based on management's credit assessment of
the counterparty; and by applying uniform credit standards maintained for all
activities with credit risk. Collateral held varies but may include marketable
securities, accounts receivable, inventory, property, plant and equipment, and
income-producing commercial properties. Collateral may cover the entire expected
exposure for transactions or may be called for when credit exposure exceeds
defined thresholds or credit risk. In addition, the Company enters into master
netting agreements which incorporate the right of set-off to provide for the net
settlement of covered contracts with the same counterparty in the event of
default or other termination of the agreement.
<PAGE>
64 SunTrust 2001 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
At December 31, 2001 At December 31, 2000
----------------------------------- ----------------------------------
Contract or Contract or
Notional Amount Notional Amount
-------------------- --------------------
For Credit Risk For Credit Risk
(In millions) End User Customers Amount End User Customers Amount
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Derivatives Contracts
Interest rate contracts
Swaps $ 4,392 $ 31,339 $ 271 $ 2,880 $ 20,071 $ 176
Futures and forwards 6,339 7,020 3,362 4,485 --
Caps/Floors 500 6,889 750 6,079 --
- -------------------------------------------------------------------------------------------------------------------
Total interest rate contracts 11,231 45,248 271 6,992 30,635 176
Foreign exchange rate contracts 1,167 1,588 41 420 632 36
Interest rate lock commitments 2,522 -- -- -- -- --
Commodity and other contracts 696 24 38 40 32 33
- -------------------------------------------------------------------------------------------------------------------
Total derivatives contracts $ 15,616 $ 46,860 $ 350 $ 7,452 $ 31,299 $ 245
- -------------------------------------------------------------------------------------------------------------------
Credit-related Arrangements
Commitments to extend credit $ 45,312 $ 45,312 $ 46,151 $ 46,151
Standby letters of credit and
similar arrangements 7,798 7,798 6,727 6,727
- -------------------------------------------------------------------------------------------------------------------
Total credit-related arrangements $ 53,110 $ 53,110 $ 52,878 $ 52,878
- -------------------------------------------------------------------------------------------------------------------
Total Credit Risk Amount $ 53,460 $ 53,123
===================================================================================================================
</TABLE>
Derivatives
The Company enters into various derivative contracts to manage interest rate
risk. The objective is to manage interest rate sensitivity by modifying the
characteristics of certain assets and liabilities to reduce the adverse effect
of changes in interest rates. The Company also enters into certain derivative
contracts in a dealer capacity as a service for customers. Where contracts have
been created for customers, the Company generally enters into offsetting
positions to eliminate the risk exposure.
Interest rate swaps are contracts in which a series of interest rate cash
flows,based on a specific notional amount and a fixed and floating interest rate
are exchanged over a prescribed period. Caps and floors are contracts that
transfer, modify or reduce interest rate risk in exchange for the payment of a
premium when the contract is issued. The true measure of credit exposure is the
replacement cost of contracts that have become favorable to the Company.
Futures and forwards are contracts for the delayed delivery of securities
or money market instruments in which the seller agrees to deliver on a specified
future date, a specified instrument, at a specified price or yield. The credit
risk inherent in futures is the risk that the exchange party may default.Futures
contracts settle in cash daily; therefore, there is minimal credit risk to the
Company. The credit risk inherent in forwards arises from the potential
inability of counterparties to meet the terms of their contracts. Both futures
and forwards are also subject to the risk of movements in interest rates or the
value of the underlying securities or instruments.
Foreign exchange derivative contracts are accounted for as trading
activities entered into for risk management purposes. They reduce exposure,
often on a macro basis, to changes in the market value of SunTrust positions.
The Company also provides foreign exchange derivatives as a service to
customers.
The Company enters into transactions involving "when-issued securities."
When-issued securities are commitments to purchase or sell securities authorized
for issuance but not yet actually issued. Accordingly, they are not recorded on
the balance sheet until issued. Risks arise from the possible inability of
counterparties to meet the terms of their contracts and from movements in
securities values and interest rates.
Derivative instruments expose the Company to credit and market risk. If the
counterparty fails to perform, the credit risk is equal to the fair value gain
of the derivative. When the fair value of a derivative contract is positive,
this indicates the counterparty owes the Company, and therefore, creates a
repayment risk for the Company. When the fair value of a derivative contract is
negative, the Company owes the counterparty and has no repayment risk. The
Company minimizes the credit or repayment risk in derivative instruments by
entering into transactions with high quality counterparties that are reviewed
periodically by the Company's credit committee. The Company also maintains a
policy of requiring that all
<PAGE>
Sun Trust 2001 Annual Report 65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
derivative contracts be governed by an International Swaps and Derivatives
Associations Master Agreement; depending on the nature of the derivative
transactions, bilateral collateral agreements may be required as well. When the
Company has more than one outstanding derivative transaction with a single
counterparty, and there exists a legally enforceable master netting agreement
with the counterparty, the mark to market exposure is the net of the positive
and negative exposures with the same counterparty. When there is a net negative
exposure, the Company considers its exposure to the counter-party to be zero.
The net mark to market position with a particular counterparty represents a
reasonable measure of credit risk when there is a legally enforceable master
netting agreement, including a legal right of setoff of receivable and payable
derivative contracts between the Company and a counterparty.
Market risk is the adverse effect that a change in interest rates, currency
or implied volatility rates has on the value of a financial instrument. The
Company manages the market risk associated with interest rate and foreign
exchange contracts by establishing and monitoring limits on the types and degree
of risk that may be undertaken. The Company continually measures this risk by
using a value at risk methodology.
Fair Value Hedges
The Company enters into interest rate swaps to convert its commercial loan and
fixed rate funding exposure to a floating rate. For the year ended December 31,
2001, the Company recognized additional income in the net interest margin of
$13.4 million related to cash payments from net settlements and income accrued
for interest rate swaps accounted for as fair value hedges. The initial
assessment of hedge effectiveness was based on the expected change in fair value
of the hedged asset or liability caused by changes in the benchmark interest
rate. Each of these hedges qualified for the short cut method of accounting as
described in SFAS No. 133. Therefore, no ineffectiveness was recorded in
earnings and periodic effectiveness tests are not required.
The Company maintains a risk management program to protect and manage
interest rate risk and pricing risk associated with its mortgage loan inventory
and pipeline. The following derivative instruments are recorded in the financial
statements at fair value and are used to offset changes in value of the mortgage
inventory due to changes in market interest rates: forward contracts, interest
rate lock commitments and option contracts. A portion of the forward contracts
have been documented as fair value hedges of specific pools of loans that meet
the Similar Assets Test as described in SFAS No. 133. The pools of hedged loans
are recorded in the financial statements at their fair value, resulting in a
partial offset of the market value adjustments on the forward contracts.
Complete documentation is maintained regarding the identification of each loan
in each pool of hedged loans. The pools of loans are matched with a certain
portion of a forward contract so that the expected changes in market value will
inversely offset within a range of 80% to 125%. This hedging strategy resulted
in $2.3 million in ineffectiveness being recorded in the financial statements at
December 31, 2001.
The Company did not hedge any firm commitments in 2001.
Cash Flow Hedges
The Company uses various types of interest rate swaps to convert floating rate
funding to fixed rates. Specific types of funding and principal amounts hedged
were determined based on prevailing market conditions and the current shape of
the yield curve. The terms and notional amounts of the swaps are determined
based on management's assessment of future interest rates, as well as on other
factors. The initial assessment of hedge effectiveness was based on the expected
change in cash flows of the hedged liability caused by changes in the benchmark
interest rate. Each of these hedges qualified for the short cut method of
accounting as described in SFAS No. 133. Therefore, no ineffectiveness was
recorded in earnings and periodic effectiveness tests are not required.
For the year ended December 31, 2001, the Company recognized expense in the
net interest margin of $50.9 million related to cash payments and expense
accrued for interest rate swaps accounted for as cash flow hedges.
Gains and losses on derivative contracts that are reclassified from
accumulated other comprehensive income, to current period earnings, are included
as an adjustment to the cost of funding in the net interest margin. As of
December 31, 2001, $54.4 million of the deferred net losses on derivative
instruments that are recorded in accumulated other comprehensive income are
expected to be reclassified to funding expense in the next twelve months as
derivatives mature or as payments are made.
Trading Activities
The Company enters into various foreign exchange derivative contracts as part of
its other trading activities. These contracts are used to manage the Company's
foreign currency exchange risk and to provide derivative products to customers.
The Company does not have any hedges of foreign currency exposure within the
guidelines of SFAS No. 133. The Company began buying and selling credit
protection to customers using Credit Default
<PAGE>
66 SunTrust 2001 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Swaps in 2001. These derivative instruments allow the Company to pay or receive
a stream of payments in return for receiving or providing protection in the
event of default. These derivatives are accounted for as trading assets and any
gain or loss in market value is recorded in trading income. As of December 31,
2001, the outstanding credit exposure under these agreements totaled $150
million.
Credit-Related Arrangements
In meeting the financing needs of its customers, the Company issues commitments
to extend credit, standby and other letters of credit and guarantees. The
Company also provides securities lending services. For these instruments, the
contractual amount of the financial instrument represents the maximum potential
credit risk if the counterparty does not perform according to the terms of the
contract. A large majority of these contracts expire without being drawn upon.
As a result, total contractual amounts do not represent actual future credit
exposure or liquidity requirements.
Commitments to extend credit are agreements to lend to a customer who has
complied with predetermined contractual conditions. Commitments generally have
fixed expiration dates and are subjected to the Company's credit policy
standards. As of December 31, 2001, the Company had outstanding commitments to
extend credit to its customers totaling $45.3 billion.
Standby letters of credit and guarantees are conditional commitments issued
by the Company generally to guarantee the performance of a customer to a third
party in borrowing arrangements, such as commercial paper, bond financing and
similar transactions. The credit risk involved in issuing standby letters of
credit is essentially the same as that involved in extending loan facilities to
customers and may be reduced by selling participations to third parties. The
Company holds collateral to support those standby letters of credit and
guarantees for which collateral is deemed necessary. As of December 31, 2001,
the Company had outstanding standby letters of credit and guarantees totaling
$9.7 billion.
The Company services mortgage loans other than those included in the
accompanying consolidated financial statements and, in some cases, accepts a
recourse liability on the serviced loans. The Company's exposure to credit loss
in the event of nonperformance by the other party to these recourse loans is
approximately $3.5 billion. In addition to the value of the property serving as
collateral, approximately $2.4 billion of the balance of these loans serviced
with recourse as of December 31, 2001, is insured by governmental agencies and
private mortgage insurance firms.
Other Off-Balance Sheet Arrangements
As is common in the Financial Services Industry, SunTrust Bank assists in
providing liquidity to select corporate customers by directing them to a third
party owned commercial paper conduit. SunTrust's conduit relationship is with
Three Pillars Funding Corporation (Three Pillars). Three Pillars provides
financing for or direct purchases of financial assets originated and serviced by
SunTrust Bank's corporate customers. Three Pillars finances this activity by
issuing A-1/P-1 rated commercial paper. The result is a favorable funding
arrangement for these SunTrust Bank customers.
Three Pillars had assets and liabilities, not included in the Consolidated
Balance Sheet, of approximately $2.2 billion as of December 31, 2001, which
primarily consisted of secured loans, marketable asset-backed securities and
short-term commercial paper liabilities. Activities related to the Three Pillars
relationship generated approximately $8 million in fee revenue for SunTrust
Bank. These activities include: client referrals and investment recommendations
to Three Pillars; the issuing of a letter-of-credit, which provides partial
credit protection to commercial paper holders; and providing a majority of the
temporary liquidity arrangements that would provide funding to Three Pillars in
the event that it can no longer issue commercial paper. SunTrust Bank has never
had to fund under either the liquidity arrangements or credit enhancement to
Three Pillars.
Note 16 Concentrations Of Credit Risk
Credit risk represents the maximum accounting loss that would be recogn