Suntrust Banks Inc. Business Information, Profile, and History

Company Perspectives:

SunTrust Banks Inc. is a leading provider of high-value financial services that are delivered through the decentralized management of individual banks and subsidiaries responsible for their local markets. Its mission is to initiate and strengthen relationships by meetings with high-quality services that provide a high return to its shareholders. The company's primary objective is to operate sound financial institutions that promote the economic well-being of its customers, employees, and their communities. It combines the advantages of strong, focused, and accountable decentralized local management with financial, technological, and capital markets strength to achieve its vision. Market recognition flows from its ability to remain sound while sustaining high performance over time. SunTrust seeks growth but will not sacrifice quality or profitability. Its goal is to achieve all three.

History of Sun Trust Banks Inc.

A holding company formed by Trust Company of Georgia in 1985, SunTrust Banks Inc. had total assets of $55.5 billion in 1997, making it the 19th largest bank in the United States. In a city that had seen its large financial institutions overtaken by NationsBank and Wachovia during the 1980s and 1990s, SunTrust remained the only major banking company with headquarters in Atlanta. With three principal subsidiaries in Georgia, the company has more than 695 combined banking locations and provides a variety of services that include traditional banking, trust and investment management, mortgage banking, credit cards, discount brokerage, credit-related insurance, data processing and information, and numerous other services. At the heart of the bank's stability are its 48.3 million shares of common stock in Atlanta's most famous commercial enterprise, Coca-Cola, a relationship that dates back to the company's origins.

A Century of Trust Company

SunTrust traces its roots to the Trust Company, a bank founded in Atlanta in 1891. Trust Company would remain a major institution in the city for the next century, though since the formation of SunTrust in 1985 and the full name change of all company institutions which went into effect in 1995, little remains of the old company's history.

At the time of Trust Company's founding in the last decade of the 19th century, Atlanta was already well on its way to becoming the leading commercial center that it would become by the 1990s. From the devastation wrought by the Civil War and Sherman's burning of the city, Atlanta had emerged much like its symbol, the phoenix, a bird which rejuvenates itself periodically through immersion in fire. By the 1890s, as Atlanta took on the nickname "The Gate City," a druggist named Asa Candler had developed a sweet brown carbonated drink destined to place the city squarely on the commercial map.

The drink, of course, was Coca-Cola, and in 1919 the Woodruff family would purchase the Candlers' interest in the company. The patriarch of the clan, Ernest Woodruff, had become president of Trust Company, in which capacity he served from 1904 to 1922. With the family's acquisition of the company, Woodruff in 1919 took Coca-Cola public, using Trust Company as underwriter. In return, Trust Company received $110,000 worth, in 1919 dollars, of Coca-Cola stock. This investment would form the heart of the company's fortunes over the century that followed.

Though Woodruff left his position as bank president in 1922, the link between Trust Company and Coke was formed. Ultimately Ernest's son Robert would take his place at the helm of Coca-Cola, a position he would hold into the 1980s. During his long career, Woodruff would leave a heavy imprint on Atlanta in the form of numerous donations by the foundation named for him. His family, however, had already made a strong and abiding mark on Trust Company: "From them evolved the bank's steady, glitz-eschewing philosophy," according to Rob Chambers of the Atlanta Journal and Constitution.

That philosophy, along with its mother lode of Coca-Cola stock, ensured steady growth for Trust Company through the ups and downs of the mid-20th century. By the 1970s, Trust Company had adopted as its logo a "big blue T," with an advertising campaign that centered around that nickname. From the image projected by the bank, the operative term in "Trust Company" was "Trust."

The company's stability would become a particularly noteworthy facet in years to come, as one by one its competitors were swallowed by the giants from North Carolina, NationsBank and Wachovia. The former absorbed Bank South and Citizens & Southern (C & S), while the latter took over First Atlanta. Georgia Federal, National Bank of Georgia, Fulton Federal, and numerous other former competitors likewise disappeared; only Trust Company remained apart. When Trust Company, too, ceased to exist, it would not be through acquisition, but through transformation from within.

The 1980s: Trust Company Plus SunBanks Equals SunTrust

In 1984, Trust Company announced its intention to merge with another bank. A year later, reciprocal interstate banking laws between Georgia and Florida became effective, and on July 1, 1985, Trust Company formally merged with Orlando-based SunBanks. It was an auspicious beginning; starting with $16 billion in assets, the new company ended the year with $19.4 billion.

In 1985, SunTrust also acquired two banks with total assets of $130 million. It would continue to make such acquisitions, some smaller and some larger--for instance, four acquisitions in 1993 totalled $2.2 billion--throughout the coming years. However, as of 1998 its only merger, other than the initial one that created the company, came in 1986. In that year, SunTrust took on the $5 billion Third National Corporation of Nashville. Now the bank had offices in a wide swath from Miami to the mountains of Tennessee, as well as a tiny foothold in Alabama through Third National, which became SunTrust Banks of Tennessee Inc.

The year 1986 was also pivotal in that it saw the formation of the subsidiary SunTrust Securities. In addition, the company created "The SunTrust Vision," a statement of principles which would remain in effect for years to come. As the mid-1980s became the late 1980s, the company's reputation grew. During the first half of 1987, SunTrust posted the highest earnings in the industry, and later that year American Banker named it "Top Performing Regional Bank Holding Company." In 1988, it acquired two Mellon Bank trust subsidiaries in Florida and was added to the Standard & Poor 500 Index.

In the energetic, sometimes volatile, business climate of the 1980s, the bank faced serious challenges as well. When it entered the Tennessee market in 1986, the area had seemed a promising one, particularly since Saturn and other automakers had begun moving production facilities there. Yet the local real estate market experienced a sudden and severe downturn, which according to SunTrust's own literature might have had an extremely adverse effect on the company if not for its "quick action to confront this problem." With spreading repercussions from the crisis in savings and loan institutions, 1989 was not a good year for banking. The increased leveraging of companies in preceding years became a matter of concern, as did real estate lending practices. In 1990, the federal government required substantial increases in deposit insurance premiums.

Again, however, SunTrust's foundation--its Coca-Cola stock and its conservative principles--stood it in good stead. The company had obtained stock in Columbia Pictures Entertainment during Coke's short-lived ownership of that entertainment company, and in 1989 SunTrust realized a $10 million windfall from the sale of Columbia common stock. Also in that year, it began consolidating its regional banking subsidiaries from a high of 53; within six years, the company had reduced this number to just 29.

With the approaching retirement of its first chairman, Bob Strickland, the company in 1990 instituted a plan of succession. Joel Wells became chairman and James B. "Jimmy" Williams became president and CEO. In 1991 Williams became chairman while remaining CEO, and Phil Humann was named to the position of president.

New Name, Same Bank in the 1990s

In 1992, the year the company's investment in Coca-Cola passed the $1 billion mark, SunTrust introduced an initial group of six mutual funds as the STI Classic family of funds. The next year, Euromoney magazine rated SunTrust Banks Inc. the 14th best bank in the world on the basis of its stability and solid performance. Likewise in 1994 several STI Classic Funds earned national recognition for their strong performances. By that point, STI had made available to the public a total of 18 different funds. Also in 1994, the company formed SunTrust Capital Markets and inaugurated a series of growth initiatives to increase revenue and core earnings.

In 1994 and 1995, the company took steps to consolidate all subsidiaries under the SunTrust brand name. Up until then, for instance, the Georgia subsidiary had continued to operate under the Trust Company name with the "big blue T" logo. In Florida, moreover, where a number of local bankers took pride in the fact that the 1992 devastation wrought by Hurricane Andrew had not presented a major setback to SunBanks, the sun was finally setting.

In a bittersweet 1996 profile, the Wall Street Journal reported on one tangible consequence of SunTrust's decision to bring all its banks together under one brand-name, which went into full effect in 1995. With the end of SunBanks came the removal of a major Miami landmark, the large orange sign, 12 feet high and 88 feet across, on the bank's Brickell Avenue tower. According to the bank's marketing manager, Karen Dorscher, "Every time they'd shoot a movie in Miami, we'd see the orange sign," which had appeared most recently in True Lies with Arnold Schwarzenegger and the Sylvester Stallone movie The Specialist. Bank officials arranged to have more than 100 small cubes cut from the big orange "S," and they sent these&mdash-graved with the inscription "a piece of history"&mdashø local leaders and journalists. With more pieces left over from the "S," Dorscher told the Journal, "I took the leftovers to my son's day care, and they built things with it."

Focus on the Information Age for the Future

SunTrust Banks was likewise in a building mode, with a heightened focus on technology. In 1995, it instituted "PC Banking," a personal computer-based home banking service. Offered through an agreement with Intuit Inc., makers of Quicken, a popular financial management software package, PC Banking made SunTrust only the second financial institution in the Southeast to offer on-line banking. The company also made steps in the area of in-store banking. SunTrust's Georgia subsidiary in 1995 entered into an agreement with Publix Super Markets to offer in-store banking facilities throughout the state. The bank's Chattanooga affiliate, part of the Tennessee subsidiary, signed a similar agreement with Winn Dixie stores.

Another area of technological development for SunTrust in the mid-1990s was enhanced automatic teller machines (ATM) service. Now the company offered statement printing, coupon and stamp dispensing, and check cashing at its ATMs. For some time SunTrust had its Telebank 24 service in place, a 24-hour automated banking system available by phone, and it expanded its offerings through this system to include investment information and other types of services. At the level of the client/server systems connecting its branches and subsidiaries, until 1995 SunTrust had three platforms in operation; in that year, it introduced a single platform to link its intranet.

Technological advancements also allowed the company to present its commercial customers with a number of services. SunTrust in 1995 became the first bank in the U.S. to offer its corporate customers information access by means of both CD-ROM and an on-line connection. SunTrust also applied new technologies to an upgrade of its wholesale lockbox service and to assisting customers in receiving fax copies of check images directly through a PC. This would in turn introduce heightened levels of security. In conjunction with Antinori Software Inc., SunTrust developed an automated system to safeguard against fraudulent checks. It also began offering one of the nation's first image-based systems designed to assist in processing damaged checks.

As SunTrust approached a new millennium as the 19th-largest bank in the United States, aspects of its operation would have been unrecognizable to the bank's founders from the 1890s. But two themes remained constant: the significance of its relationship with Coca-Cola, and the conservative attitude of stable, managed growth instilled by the Woodruff family.

Noting that James B. Williams sat on the Coca-Cola board and that Coke chairman Roberto Goizueta (who died in the summer of 1997) sat on the SunTrust board, the Atlanta Journal and Constitution in June 1997 profiled the strong bond between the bank and the soft-drink maker. A large portion of the "trust and other business" at the bank, according to market analyst John W. Mason, "stems from wealthy officers and shareholders of Coca-Cola.... Most of the public and the media doesn't understand that seventy-five to 100 percent of the bank's business comes from thirty percent, even twenty percent of its customers."

A central facet of SunTrust's financial picture is its Coca-Cola shares. By 1997, nearly eight decades after Ernest Woodruff paid the bank's underwriting fee in Coke stock, the original $110,000 had grown to a value of $3.3 billion. The shares, now numbering 48.3 million, had grown by $2 billion since the beginning of 1992, and with earnings per share at $74, the Coke dividend accounted for a whopping 11 cents, or nearly 15 percent.

This sizeable nest egg, the Atlanta paper noted, "helps keep the bank stock pricey and beyond reach of unwanted suitors except those with the deepest of pockets." In other words, one key factor underlying SunTrust's continued independence from the North Carolina superbanks--which made it by 1997 the sole Atlanta-based financial institution--is its stock in Coca-Cola. Furthermore, in the four years since 1993, SunTrust had bought back more than 39 million of its own shares at a cost in excess of $1 billion and had plans to buy more of the 216 million shares still outstanding. This further decreased its potential vulnerability to takeover and increased earnings per share.

Less tangible but no less real is the cautious mentality which has governed SunTrust from its origins. On March 21, 1998, Williams retired and President Phillip Humann assumed his role as chairman and CEO, but the Journal and Constitution predicted no significant change of direction. Of Williams and Humann, Summerfield K. Johnston--Goizueta's successor as chairman of Coke and a director at SunTrust--said, "They're not the same people, but they've been in lock-step for a number of years. They're both conservative, thorough bankers."

The bank's slow-growth strategies, however, could be a liability in a climate increasingly governed by the most aggressive competitors. According to the Atlanta paper, Wall Street analysts "continued to express concern that SunTrust Banks is becoming a lost lamb as a relentless round of acquisitions is creating ever-larger wolves in the banking industry." The article noted that SunTrust had purchased Nashville-based Equitable Securities in September 1997, "but hasn't acquired a bank of consequential size since its purchase of Third National ... in 1986."

Still, Williams and Humann appeared to be in agreement in their refusal to let the strategies of competitors such as NationsBank determine their own response to events. Jon R. Burke of Brown, of Burke Capital Partners observed, "They've been miraculously good at not being reactive.... And they've retained a community focus."

Principal Subsidiaries: SunTrust Banks of Florida Inc.; SunTrust Banks of Georgia Inc.; SunTrust Banks of Tennessee Inc.